Petsmart 2002 Annual Report Download - page 62

PETsMART, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
Financial Instruments
The Company's Ñnancial instruments consist primarily of cash and cash equivalents. These balances, as
presented in the consolidated Ñnancial statements at February 2, 2003 and February 3, 2002 approximate their
fair value. As of February 3, 2002 the fair market value of the Notes, approximated $222,080,000 based upon
information provided by a broker dealer that makes a market in the Notes. During February and March 2002,
the entire balance of the Notes was retired for approximately $275,000 in cash and approximately 19,800,000
common shares.
Recently Issued Accounting Pronouncements
In August 2001, the Financial Accounting Standards Board (""FASB'') issued Statement of Financial
Accounting Standard (""SFAS'') No. 144, ""Accounting for the Impairment or Disposal of Long-Lived
Assets,'' which supercedes SFAS No. 121, ""Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of'' and amends Accounting Principles Board Opinion (""APB'') No. 30,
""Reporting the Results of Operations Ì Reporting the EÅects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions.'' The new rules apply to the
classiÑcation and impairment analyses conducted on long-lived assets other than certain intangible assets. The
new rules also resolve conÖicting treatment of the impairment of long-lived assets and provide implementation
guidance regarding impairment calculations. SFAS No. 144 also expands the deÑnition of discontinued
operations to include all distinguishable components of an entity that will be eliminated from ongoing
operations in a disposal transaction. The Company adopted SFAS No. 144 in 2002, and the adoption did not
have a signiÑcant impact on our Ñnancial position or results of operations.
In May 2002, the FASB issued SFAS No. 145, ""Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical Corrections as of April 2002,'' that among other
things, rescinded SFAS No. 4, ""Reporting Gains and Losses from Extinguishment of Debt.'' With the
rescission of SFAS No. 4, companies generally will no longer classify early extinguishment of debt as an
extraordinary item. The provision is eÅective for Ñscal years beginning after May 15, 2002, and early
application is encouraged. The Company adopted the statement as of August 4, 2002, and as a result,
reclassiÑed the gain on early extinguishment of debt of $1,190,000 and $4,688,000 for Ñscal 2001 and 2000,
respectively, as a reduction to general and administrative expenses. The Company also reclassiÑed the related
income tax expense of $476,000 and $1,876,000 for Ñscal 2001 and 2000, respectively, to income tax expense.
In July 2002, the FASB issued SFAS No. 146, ""Accounting for Costs Associated with Exit or Disposal
Activities,'' which replaces Emerging Issues Task Force Issue No. 94-3, ""Liability Recognition for Certain
Employee Termination BeneÑts and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring).'' The new standard requires companies to recognize costs associated with exit or disposal
activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. The
statement is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. The
adoption did not have a signiÑcant impact on our Ñnancial position or results of operations.
In December 2002, the FASB issued SFAS No. 148, ""Accounting for Stock-Based Compensation Ì
Transition and Disclosure Ìan amendment of SFAS No. 123.'' This statement provides alternative methods
of transition for a voluntary change to the fair value based method of accounting for stock-based employee
compensation. This statement also amends the disclosure requirements of SFAS No. 123 and ABP No. 28,
""Interim Financial Reporting,'' to require prominent disclosures in both annual and interim Ñnancial
statements about the method of accounting for stock-based employee compensation and eÅect of the method
used on reported results. The Company has implemented the disclosure requirements of SFAS No. 148 for
Ñscal 2002 reporting, and eÅective February 2, 2003 regarding disclosure requirements for condensed Ñnancial
statements for interim periods. The Company will continue to account for stock-based compensation under
APB Opinion No. 25, ""Accounting for Stock Issued to Employee.''
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