Petsmart 2002 Annual Report Download - page 67

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PETsMART, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
The activity related to the 1996 closed store reserve, as well as the remaining lease obligations for closed
stores and oÇce associated with the PETsMART Direct and PETsMART.com reorganization was as follows
(in thousands):
Fiscal Year Ended
February 2, February 3, January 28,
2003 2002 2001
Opening balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 3,357 $ 4,822 $10,410
(Adjustments)/charges Ì 1996 closed stores ÏÏÏÏÏÏÏÏÏÏÏÏÏ (156) 2,931 Ì
Charges Ì reorganization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 778 Ì
Cash payments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,333) (5,174) (5,588)
Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1,868 $ 3,357 $ 4,822
The activity related to the loss on sale of subsidiary, Ñxed asset write downs, and severance associated
with the reorganization of PETsMART Direct and PETsMART.com for Ñscal 2002 and 2001 was as follows
(in thousands):
Fiscal 2002 Activity
February 3, Cash Non-cash February 2,
2002 Charges Payments Activity 2003
Severance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,410 $Ì $(1,410) $Ì $Ì
$1,410 $Ì $(1,410) $Ì $Ì
Fiscal 2001 Activity
January 28, Cash Non-cash February 3,
2001 Charges Payments Activity 2002
Loss on sale of subsidiary ÏÏÏÏÏÏÏÏÏÏÏÏ $Ì $ 506 $Ì $ (506) $ Ì
Fixed asset write downs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 580 Ì (580) Ì
Severance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 1,410 Ì Ì 1,410
$Ì $2,496 $Ì $(1,086) $1,410
In Ñscal 2001, accrued severance was classiÑed as a component of other accrued expenses.
Impairment of Long-Lived Assets and Asset Write-Downs
During Ñscal 2001, the Company recorded an impairment charge of approximately $6,927,000, a write-
down of inventory of approximately $2,100,000, and a charge of approximately $720,000 for other asset write-
downs and reserves.
As a result of continued losses incurred at its PETsMART Direct subsidiary, and an analysis of the
current business model, the Company performed an impairment analysis in accordance with SFAS No. 121,
""Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of ''. The
analysis indicated an impairment of $6,927,000 associated with PETsMART Direct's building, Ñxtures,
equipment, software, and goodwill, which was recorded in general and administrative expenses. The fair value
of such assets was determined based on market appraisals and analysis of expected future discounted cash
Öows. Also in Ñscal 2001, the Company analyzed the inventory at PETsMART Direct and decided to discount
or dispose of certain items, resulting in a $2,100,000 charge to cost of sales to record the inventory at its
estimated net realizable value. The Company can make no assurances that additional charges will not be
required based on continued evaluation of the PETsMART Direct business model.
F-19