Petsmart 2004 Annual Report Download - page 82

Download and view the complete annual report

Please find page 82 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)
Note 7 Ì 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 future 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.
The activity related to the closed store reserve was as follows (in thousands):
Fiscal Year Ended
January 30, February 1, February 2,
2005 2004 2003
Opening balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 14,762 $ 9,261 $12,452
Charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,798 11,179 2,086
Cash payments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (10,419) (5,678) (5,277)
Ending balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 9,141 $14,762 $ 9,261
The current portion of the closed store reserve is recorded in other current liabilities, and the noncurrent
portion of the reserve is recorded in deferred rents and other noncurrent liabilities.
The costs for future rental payments associated with closed stores were calculated 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. Approximately $4,524,000 was recorded in Ñscal 2003 as a charge to the reserve due to a
lease termination, changes in sublease assumptions and an increase in real property tax assessments. The
adjustments and charges were recorded in operating, general and administrative expenses in the consolidated
statements of operations. Approximately $4,000,000 was included in Ñscal 2004 payments for the buyout of a
previously reserved lease obligation. The Company can make no assurances that additional charges related to
these closed stores will not be required based on the changing real estate environment.
Note 8 Ì Impairment of Long-Lived Assets and Asset Write-Downs
During Ñscal 2004, the Company recorded approximately $4,100,000 in expense primarily for the
retirement of assets and additional amortization related to store lighting replacements. During Ñscal 2004 and
2003, the Company recognized expense of approximately $1,500,000 and $1,300,000, respectively, which
represented the net book value of assets at closed stores. These charges were recorded as cost of goods sold or
operating, general and administrative expenses, depending on asset classiÑcation, in the consolidated
statements of operations.
Note 9 Ì Income Taxes
Income (loss) before income tax expense is as follows (in thousands):
Fiscal Year Ended
January 30, February 1, February 2,
2005 2004 2003
United StatesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $258,825 $218,966 $148,507
Foreign ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,619 2,121 (317)
$264,444 $221,087 $148,190
F-20