Petsmart 2013 Annual Report Download - page 37

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net sales, which included sales from the extra week of $126.0 million and an unfavorable impact from
foreign currency fluctuations of $1.9 million.
• Comparable store sales, or sales in stores open at least one year, including internet sales, increased 2.7%
during 2013 compared to a 6.3% increase during 2012.
• Services sales increased 3.4% to $766.0 million, or 11.1% of net sales, for 2013 compared to $740.5 million,
or 11.0% of net sales, during 2012. The impact of the additional week in 2012 was $12.8 million.
• As of February 2, 2014, we had $285.6 million in cash and cash equivalents and $71.2 million in restricted
cash. We did not borrow against our revolving credit facility during 2013.
• We purchased 6.6 million shares of our common stock for $464.1 million during 2013, and 7.2 million
shares of our common stock for $456.6 million during 2012.
• We added 55 net new stores during 2013, and operated 1,333 stores at the end of the year.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based on our consolidated
financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated
financial statements requires us to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues, and expenses. On an ongoing basis, we evaluate our estimates for inventory valuation reserves,
asset impairments, reserves for closed stores, insurance liabilities and reserves, and income tax reserves. We base
our estimates on historical experience and on various other assumptions we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Although we believe that the judgments and estimates
discussed herein are reasonable, actual results may deviate from our expectations under different assumptions or
conditions, which could expose us to material gains or losses.
Unless specifically indicated below, we have not significantly changed accounting methodologies or
assumptions applied in calculating our estimates during the last three years. We do not believe there are any specific
sensitivities of our estimates and assumptions that are reasonably likely to cause a material difference between
expected results and actual results.
We determined that the following accounting policies and estimates require significant judgment, and are
critical in preparing our consolidated financial statements.
Inventory Valuation Reserves
Merchandise inventories represent finished goods and are recorded at the lower of cost or market. Cost is
determined by the moving average cost method and includes inbound freight, as well as certain procurement and
distribution costs related to the processing of merchandise.
We have established reserves for estimated inventory shrinkage between physical inventories. Physical
inventory counts are taken on a regular basis, and inventory is adjusted accordingly. Distribution centers perform
cycle counts using a velocity based system that determines whether the inventory should be counted every 30, 90,
180, or 365 days. Stores generally perform physical inventories at least once per year, and count certain inventory
items between physical inventories. For each reporting period presented, we estimate the inventory shrinkage based
on a two-year historical trend analysis. Changes in shrink results or market conditions could cause actual results
to vary from estimates used to establish the reserves.