Petsmart 2002 Annual Report Download - page 56

PETsMART, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Ì The Company and its SigniÑcant Accounting Policies
Business
PETsMART, Inc., and subsidiaries (the ""Company'' or ""PETsMART''), is North America's leading
provider of food, supplies, accessories, live pets and professional services for the lifetime needs of pets. As of
February 2, 2003, the Company operated 583 retail stores. The Company oÅers a broad line of products for all
the life stages of pets and is the nation's largest provider of high-quality grooming and pet training services.
Through its strategic relationship with BanÑeld, The Pet Hospital
TM
, PETsMART makes full-service
veterinary care available in approximately 300 of its stores. Through its direct marketing channels,
PETsMART is also a leading mail order catalog and e-commerce retailer of pet and equine products and
supplies.
Principles of Consolidation
The consolidated Ñnancial statements include the accounts of the Company and its wholly and majority-
owned subsidiaries. All intercompany accounts and transactions are eliminated in consolidation.
Fiscal Year
The Company's Ñscal year ends on the Sunday nearest January 31. Fiscal 2002 and Ñscal 2000 each
comprised 52 weeks, and Ñscal 2001 comprised 53 weeks.
Use of Estimates
The preparation of Ñnancial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that aÅect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Ñnancial
statements and the reported amounts of revenues and expenses during the reporting period. Policies related to
estimates of sublease income, reserves against deferred tax assets, inventory shrinkage, insurance reserves, and
estimated cash Öows in analyses for impairment of long-lived assets and goodwill require signiÑcant estimates.
Actual results could diÅer from those estimates.
Cash and Cash Equivalents
Under the Company's cash management system, a bank overdraft balance exists for the Company's
primary disbursement accounts. This overdraft represents uncleared checks in excess of cash balances in the
related bank accounts. The Company's funds are transferred on an as-needed basis to pay for clearing checks.
As of February 2, 2003, and February 3, 2002, bank overdrafts of approximately $39,961,000 and $36,564,000,
respectively, were included in accounts payable and bank overdraft in the accompanying consolidated balance
sheets. The Company considers any liquid investments with an original maturity of three months or less to be
cash equivalents.
Vendor Rebates and Promotions
The Company receives income from certain merchandise suppliers in the form of rebates and promotions.
Agreements are made with each individual supplier and income is earned as buying levels are met and/or
cooperative advertising is placed. Rebate income is recorded as a reduction of cost of sales, and cooperative
promotional income is recorded as a reduction of operating expenses. The uncollected amounts of vendor
rebate and promotional income remaining in receivables in the accompanying consolidated balance sheets as
of February 2, 2003, and February 3, 2002 were approximately $1,263,000 and $2,754,000, respectively.
Unearned rebates recorded as a reduction of inventory in the accompanying consolidated balance sheets were
approximately $962,000 and $377,000 as of February 2, 2003, and February 3, 2002, respectively.
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