Petsmart 2004 Annual Report Download - page 78

Download and view the complete annual report

Please find page 78 of the 2004 Petsmart annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 102

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102

PETsMART, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
Leasehold improvement amortization
When accounting for leases with renewal options, the Company had historically depreciated certain assets
over a period that, in some instances, extended beyond the initial lease term and into one or more option
periods. Amortization for these assets should have been recognized over the initial lease term unless the
renewal of an option period had been determined to be ""reasonably assured'' as that term is contemplated by
SFAS No. 13, ""Accounting for Leases.'' The primary eÅect of the leasehold improvement correction is to
accelerate the recognition of leasehold improvement amortization.
Tenant improvement allowances
The Company had historically accounted for tenant improvement allowances as reductions in the related
leasehold improvement asset in the consolidated balance sheets and as a reduction in capital expenditures in
investing activities in the consolidated statements of cash Öows. Management has now determined that FASB
Technical Bulletin No. 88-1, ""Issues Relating to Accounting for Leases,'' requires these allowances to be
recorded as deferred rent in the consolidated balance sheets and as a component of operating activities in the
consolidated statements of cash Öows.
In addition to the lease corrections outlined above, and as a result of its lease accounting review, the
Company corrected the classiÑcation of certain items, including the amortization of leasehold improvements
and expenses related to capitalized leases, in its balance sheets and statements of operations to conform with
GAAP.
ClassiÑcation of Auction Rate Securities (""ARS'')
The Company has determined that investments in auction rate securities should be classiÑed as short-
term investments. Previously, such investments had been classiÑed as cash and cash equivalents. ARS
generally have long-term maturities; however, these investments have characteristics similar to short-term
investments because at predetermined intervals, generally every 28 to 49 days, there is a new auction process.
The Company recorded investments in ARS as of January 30, 2005 as short-term investments and reclassiÑed
ARS as of February 1, 2004 that were previously included in cash and cash equivalents to short-term
investments.
Following is a summary of the eÅects of the corrections described above (in thousands, except per share
data):
Consolidated Statements of Operations and
Comprehensive Income
As Previously
Fiscal Year Ended February 1, 2004 Reported Adjustments As Restated
Cost of sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2,083,181 $ 11,983 $2,095,164
Gross proÑt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 909,934 (11,983) 897,951
Operating, general and administrative expenses ÏÏÏÏÏÏÏÏ 666,006 (5,034) 660,972
Operating income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 243,928 (6,949) 236,979
Interest expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 19,454 (204) 19,250
Earnings before income tax expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 227,832 (6,745) 221,087
Income tax expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 88,283 (2,598) 85,685
Net income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 139,549 (4,147) 135,402
Comprehensive income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 142,809 (4,147) 138,662
Basic earnings per common share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.99 $ (0.03) $ 0.96
Diluted earnings per common shareÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.95 $ (0.03) $ 0.92
F-16