Petsmart 2006 Annual Report Download - page 70

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In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines fair
value, establishes a framework and provides guidance regarding the methods used for measuring fair value, and
expands disclosures about fair value measurements. SFAS No. 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company is
currently evaluating SFAS No. 157 to determine its impact on the Company’s consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial
Liabilities,” which expands opportunities to use fair value measurements in financial reporting and permits entities
to choose to measure many financial instruments and certain other items at fair value. SFAS No. 159 is effective for
fiscal years beginning after November 15, 2007. The Company is currently evaluating SFAS No. 159 to determine
its impact on the Company’s consolidated financial statements.
Reclassifications
For comparative purposes, certain prior year amounts have been reclassified to conform to the current year
presentation.
Note 2 — Investments
The Company has an investment in MMI Holdings, Inc., a provider of veterinary and other pet-related services.
MMI Holdings, Inc., through a wholly-owned subsidiary, Medical Management International, Inc., collectively
referred to as MMIH, operates full-service veterinary hospitals inside 596 of the Company’s stores, under the
registered trademark of Banfield, The Pet Hospital. Philip L. Francis, PetSmart’s Chairman and Chief Executive
Officer, and Robert F. Moran, PetSmart’s President and Chief Operating Officer, are members of the board of
directors of MMIH. The Company’s investment consists of common and convertible preferred stock. During fiscal
2006, the Company purchased an additional $4,398,000 of MMIH capital stock from certain MMIH shareholders.
The Company’s ownership interest in the stock of MMIH was as follows:
Cost Shares
Ownership
Percentage Cost Shares
Ownership
Percentage
January 28, 2007 January 29, 2006
(Dollars and shares in thousands)
Voting common and convertible
preferred .................. $10,549 2,855 17.8% $ 6,151 2,721 17.1%
Nonvoting common and
convertible preferred ......... 27,516 5,235 97.6% 27,516 5,235 97.8%
Total investment .............. $38,065 8,090 37.2% $33,667 7,956 37.0%
Of the 2,855,195 shares of voting stock of MMIH held by the Company:
(a) 1,070,772 are shares of voting convertible preferred stock that may be converted into voting common
stock at any time at the option of the Company; and
(b) 1,784,423 are shares of voting common stock.
Of the 5,234,837 shares of non-voting stock held by the Company:
(a) 4,821,679 shares of convertible preferred stock are not convertible into voting common stock until the
earliest of:
(i) June 1, 2011;
(ii) an acquisition of MMIH; or
(iii) an initial public offering of shares of common stock of MMIH;
F-14
PetSmart, Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)