Petsmart 2004 Annual Report Download - page 69

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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 and professional services for the lifetime needs of pets. As of January 30,
2005, the Company operated 726 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 pet services, which includes professional grooming, pet
training, boarding and day camp. PETsMART is a leading mail order catalog and e-commerce retailer of pet
and equine products and supplies. The Company makes full-service veterinary care available in approximately
430 of the Company's stores through the Company's strategic relationship with BanÑeld, The Pet Hospital,
operating under the registered trademark of BanÑeld.
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.
The Company has no investments in which it has the ability to exercise signiÑcant inÖuence over the
investee. 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 January 30, 2005 and February 1, 2004, 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 2004, 2003 and 2002 each
included 52 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, tax contingencies, 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 January 30, 2005 and February 1, 2004, bank overdrafts of approximately $42,955,000 and $49,677,000,
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 at purchase to
be cash equivalents.
F-7