Petsmart 2004 Annual Report Download - page 81

PETsMART, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
oÅering of shares of common stock of MMIH, and 163,000 shares of non-voting convertible preferred stock
are convertible into voting common stock at any time at the option of the Company. In addition, the Company
holds 250,000 shares of MMIH non-voting common stock that is only convertible into voting common stock in
the event of an initial public oÅering of shares of common stock of MMIH. As of January 30, 2005 and
February 1, 2004, all shares of voting and non-voting convertible preferred stock are convertible into voting
common stock on a one-for-one basis, subject to the restrictions previously discussed.
The Company receives licensing fees from MMI for the space in the Company's retail stores occupied by
veterinary services, which is recorded as a reduction of cost of sales in the accompanying consolidated
statements of operations. Licensing fees are determined by Ñxed costs per square foot, adjusted for the number
of days the hospitals are open and sales volumes achieved. Licensing fees of approximately $13,144,000,
$10,466,000 and $8,293,000 were recognized during Ñscal years 2004, 2003 and 2002, respectively. Addition-
ally, licensing fees receivable from MMI totaled $5,358,000 and $4,371,000 at January 30, 2005 and
February 1, 2004, respectively, and were included in receivables in the accompanying consolidated balance
sheets.
Note 5 Ì Property and Equipment
Property and equipment consists of the following (in thousands):
January 30, February 1,
2005 2004
LandÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 2,991 $ 3,251
Buildings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,776 8,776
Furniture, Ñxtures and equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 372,333 299,330
Leasehold improvements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 333,160 296,846
Computer software ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 66,429 51,270
Buildings, equipment and computer software under capital leases ÏÏÏÏÏÏ 307,145 223,799
1,090,834 883,272
Less: accumulated depreciation and amortization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 433,683 345,251
657,151 538,021
Construction in progress ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 42,111 44,012
$ 699,262 $582,033
Accumulated amortization of computer software and buildings under capital leases approximated
$83,036,000 and $69,191,000 as of January 30, 2005 and February 1, 2004, respectively.
The Company recognizes capitalized interest in accordance with SFAS No. 34, ""Capitalization of
Interest Cost.'' Capitalized interest primarily consists of interest expense incurred during the construction
period for new stores. Capitalized interest approximated $1,021,000 in Ñscal 2004. There was no capitalized
interest recorded in Ñscal 2003 and 2002. Capitalized interest is included in property and equipment in the
consolidated balance sheets.
Note 6 Ì Notes Receivable from OÇcers
During Ñscal 2000, the Company provided loans to certain oÇcers to be used only for the purpose of
purchasing shares of the Company's common stock on the open market. As of February 2, 2003, the notes had
been repaid in full, and the Company will not make any new loans to its oÇcers under this program in the
future.
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