Petsmart 2003 Annual Report Download - page 65

PETsMART, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
store State Line Tack departments, and manages customer service for all direct marketing operations. Also, as
part of the plan, the Company closed Ñve small neighborhood PetWise retail stores located in upstate
New York, and recorded a reserve in the fourth quarter of Ñscal 2001 of approximately $698,000 for the
remaining oÇces and retail store lease obligations. In Ñscal 2001, the Company also sold a subsidiary of
PETsMART Direct for approximately $800,000, which resulted in a loss of approximately $906,000. Included
in the loss on sale of subsidiary is a $400,000 reserve against a note received as part of the purchase price,
which is classiÑed in long-term other assets, and is not part of the restructure reserve liability.
In January 2002, the Company acquired all of the remaining shares held by PETsMART.com minority
stockholders for approximately $9,500,000. In Ñscal 2002, the Pasadena, California-based operations moved
its administrative functions to the Company's oÇce in Phoenix, Arizona. As a result of the reorganization of
these functions, the Company eliminated 46 positions during Ñscal 2002, and recorded severance charges of
approximately $979,000 in Ñscal 2001. The Company also recorded a reserve of $80,000 in Ñscal 2001 for the
remaining lease obligations associated with the PETsMART.com oÇce space in Pasadena, California.
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 subsidiaryÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 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
Reserve for Closed Stores
The Company continuously evaluates the performance of its retail stores and periodically closes those
that are under-performing. Reserves for future rental payments on closed stores and terminated subleases are
established in the period the store is closed, in accordance with SFAS No. 146, ""Accounting for Costs
Associated with Exit or Disposal Activities.'' The costs for further rental payments associated with closed
stores are calculated by using the net present value method, at a credit-adjusted risk-free interest rate, over the
remaining life of the lease, net of expected sublease income.
In 1996, the Company recorded a restructuring charge associated with closing certain stores. In addition,
in 2001, the Company recorded a restructuring charge associated with closing certain administrative oÇces
and restructuring the Company's direct marketing channels, which included PETsMART.com and two
branded catalogs. The Company has combined these reserves with its other store closing reserves for purposes
of the reconciliation shown below.
F-17