Petsmart 2003 Annual Report Download - page 55

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 1, 2004, the Company operated 643 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, operating under the registered trademark of
BanÑeld, full-service veterinary care is available in more than half the Company's 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.
All investments in which the Company has the ability to exercise signiÑcant inÖuence over the investee,
but less than a controlling voting interest, are accounted for under the equity method of accounting. Under the
equity method of accounting, the Company's share of the investee's earnings or loss is included in consolidated
operating results. Other investments, for which the Company does not have the ability to exercise signiÑcant
inÖuence and for which there is not a readily determinable market value, are accounted for under the cost
method of accounting. The Company periodically evaluates the carrying value of its investments accounted for
under the cost method of accounting and as of February 1, 2004, and February 2, 2003, such investments were
recorded at the lower of cost or estimated net realizable value.
Fiscal Year
The Company's Ñscal year ends on the Sunday nearest January 31. Fiscal 2003 and Ñscal 2002 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
sublease income, reserves against deferred tax assets, inventory shrinkage, insurance reserves, and 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 1, 2004, and February 2, 2003, bank overdrafts of approximately $49,677,000 and $39,961,000,
respectively, were included in accounts payable and bank overdraft in the accompanying consolidated balance
sheets. The Company considers any liquid investments with a maturity of three months or less to be cash
equivalents.
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