Petsmart 2010 Annual Report Download - page 43

Foreign Currency Risk
Our Canadian subsidiary operates 69 stores and uses the Canadian dollar as the functional currency and the
United States dollar as the reporting currency. We have certain exposures to foreign currency risk. Net sales in
Canada, denominated in United States dollars, were $296.7 million, or 5.2%, of our consolidated net sales for 2010.
Transaction gains and losses denominated in the United States dollar are recorded in cost of sales or operating,
general and administrative expenses in the Consolidated Statements of Income and Comprehensive Income
depending on the nature of the underlying transaction.
The transaction (gain)/loss included in net income was $(0.7) million, $(1.3) million and $3.4 million for 2010,
2009 and 2008, respectively.
From time to time we enter into foreign currency forward contracts, or “Foreign Exchange Contracts,” as a way
to manage the impact of foreign currency exchange rate fluctuations related to certain balance sheet accounts,
primarily to mitigate risk related to non-functional currency exposures. These Foreign Exchange Contracts are not
designated as hedges, and therefore, are recorded at fair value through earnings using quoted prices for similar
assets or liabilities in active markets. The loss included in net income was $0.4 million for 2010. We did not enter
into Foreign Exchange Contracts during 2009 or 2008.
Item 8. Financial Statements and Supplementary Data
The information required by this Item is attached as Appendix F.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that
information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, or the
Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules
and forms, and that such information is accumulated and communicated to our management, including our Chief
Executive Officer, or CEO, and Chief Financial Officer, or CFO, as appropriate, to allow timely decisions regarding
required disclosure.
As required by Rule 13a-15(b) under the Exchange Act, our management conducted an evaluation (under the
supervision and with the participation of our CEO and our CFO) as of the end of the period covered by this report, of
the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act. In
performing this evaluation, our CEO and CFO concluded that, as of January 30, 2011, our disclosure controls and
procedures were designed to meet the objective at the reasonable assurance level and were effective at the
reasonable assurance level.
Management’s Report on Internal Control Over Financial Reporting
We are responsible for the preparation and integrity of the consolidated financial statements appearing in our
Annual Report on Form 10-K. The consolidated financial statements were prepared in conformity with accounting
principles generally accepted in the United States of America and, accordingly, include certain amounts based on
our best judgments and estimates. Financial information in this Annual Report on Form 10-K is consistent with that
in the consolidated financial statements.
We are responsible for establishing and maintaining adequate internal control over financial reporting as such
term is defined in Rules 13a-15(f) under the Exchange Act. Our internal controls over financial reporting are
designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the
consolidated financial statements. Our internal control over financial reporting is supported by a program of internal
audits and appropriate reviews by management, written policies and guidelines, careful selection and training of
qualified personnel and a written Code of Business Conduct adopted by our Board of Directors, applicable to all our
35