Description
Financial Statements We have audited the accompanying financial statements of PetSmart Charities, Inc., which comprise the statements of financial position as of February 1, 2015, and the related statements of activities and changes in net assets, functional expenses, and cash flows for the year then ended, and the related notes to the financial statements.
Financial Statements
February 1, 2015
PetSmart Charities, Inc.
www. ei debai l l y. com
PetSmart Charities, Inc.
Table of Contents
February 1, 2015
(With Summarized Comparative Totals for the Year Ended February 2, 2014)
Independent Auditor’s Report .................................................................................................................................... 1
Financial Statements .................................................................................................................................................. 3
Statement of Financial Position ............................................................................................................................. 3
Statement of Activities and Changes in Net Assets ............................................................................................... 4
Statement of Functional Expenses ......................................................................................................................... 5
Statement of Cash Flows ....................................................................................................................................... 6
Notes to Financial Statements ................................................................................................................................ 7
Independent Auditor’s Report
To the Board of Directors
PetSmart Charities, Inc.
Phoenix, Arizona
Report on the Financial Statements
We have audited the accompanying financial statements of PetSmart Charities, Inc., which comprise the
statements of financial position as of February 1, 2015, and the related statements of activities and
changes in net assets, functional expenses, and cash flows for the year then ended, and the related notes to
the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or
error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We
conducted our audits in accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. Accordingly, we express no such opinion. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of significant accounting estimates
made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of PetSmart Charities, Inc. as of February 1, 2015, and the changes in its net assets and
its cash flows for the years then ended in accordance with accounting principles generally accepted in the
United States of America.
1
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1850 N. Central Ave., Ste. 400 | Phoenix, AZ 85004-4624 | T 602.264.5844 | F 602.277.4845 | EOE
Report on Summarized Comparative Information
The 2014 financial statements of PetSmart Charities, Inc. were audited by other auditors whose report
dated J une 16, 2014, expressed an unmodified audit opinion on those audited financial statements. In our
opinion, the summarized comparative information presented herein as of and for the year ended February
2, 2014 is consistent, in all material respects, with the audited financial statements from which it has been
derived.
Phoenix, Arizona
J uly 09, 2015
2
PetSmart Charities, Inc.
Statement of Financial Position
February 1, 2015
(With Summarized Comparative Totals for the Year Ended February 2, 2014)
February 1, February 2,
2015 2014
Assets
Cash and cash equivalents 3,410,781 $ 1,469,757 $
Investments 31,921,448 33,314,455
Receivable from PetSmart, Inc. 2,931,986 3,018,160
Receivable from PetSmart Charities of Canada 82,476 61,129
Other receivables 219,835 224,761
Other assets 269,679 224,041
Total current assets 38,836,205 38,312,303
Property and equipment, net 5,038,712 4,126,800
Total assets 43,874,917 $ 42,439,103 $
Liabilities and Net Assets
Liabilities
Accounts payable and accrued expenses 3,567,423 $ 3,055,543 $
Due to PetSmart, Inc. 731,482 626,926
Due to PetSmart Charities of Canada 11,324 1,155
Deferred revenue 12,500 -
Total current liabilities 4,322,729 3,683,624
Net Assets
Unrestricted 39,002,919 38,249,553
Temporarily restricted 549,269 505,926
Total net assets 39,552,188 38,755,479
Total liabilities and net assets 43,874,917 $ 42,439,103 $
See Notes to Financial Statements 3
PetSmart Charities, Inc.
Statement of Activities and Changes in Net Assets
Year Ended February 1, 2015
(With Summarized Comparative Totals for the Year Ended February 2, 2014)
Temporarily February 1, February 2,
Unrestricted Restricted 2015 2014
Revenue, Public Support and Gains:
Individual contributions 40,526,460 $ 57,000 $ 40,583,460 $ 39,876,081 $
PetSmart, Inc. contributions (including
contributed rent, goods and services,
royalty income, and sponsorships) 17,395,670 - 17,395,670 16,377,240
Corporate, foundations, and vendor
contributions 3,384,377 595,136 3,979,513 2,210,344
Investment income, net 2,019,615 - 2,019,615 2,375,299
Revenue, public support and gains 63,326,122 652,136 63,978,258 60,838,964
Special events:
Special events revenue 1,460,975 - 1,460,975 1,575,963
Less costs of direct donor benefits (263,239) - (263,239) (363,407)
Gross profit on special events 1,197,736 - 1,197,736 1,212,556
Net assets released from restrictions 608,793 (608,793) - -
Total revenue, public support and gains 65,132,651 43,343 65,175,994 62,051,520
Expenses:
Program services:
Adoptions 30,311,792 - 30,311,792 25,262,852
Spay/neuter 19,579,248 - 19,579,248 24,381,773
Rescue Waggin'®program 5,781,430 - 5,781,430 5,066,684
Emergency relief and other 3,313,387 - 3,313,387 4,337,116
Total program services 58,985,857 - 58,985,857 59,048,425
Supporting services:
Fundraising 3,216,437 - 3,216,437 3,219,575
Management and general 2,176,991 - 2,176,991 2,302,578
Total support services 5,393,428 - 5,393,428 5,522,153
Total expenses 64,379,285 - 64,379,285 64,570,578
Change in Net Assets 753,366 43,343 796,709 (2,519,058)
Net Assets, Beginning of Year 38,249,553 505,926 38,755,479 41,274,537
Net Assets, End of Year 39,002,919 $ 549,269 $ 39,552,188 $ 38,755,479 $
Totals
See Notes to Financial Statements 4
PetSmart Charities, Inc.
Statement of Functional Expenses
Year Ended February 1, 2015
(With Summarized Comparative Totals for the Year Ended February 2, 2014)
Emergency
Rescue Relief and Management February 1, February 2,
Adoptions Spay/Neuter Waggin'® Other Total Fundraising and General Total 2015 2014
Grants and allocations 11,400,081 $ 17,354,273 $ 1,201,379 $ 1,379,006 $ 31,334,739 $ - $ - $ - $ 31,334,739 $ 32,658,587 $
Donated services 11,487,415 712,421 684,976 470,054 13,354,866 940,930 1,097,686 2,038,616 15,393,482 14,109,411
Management services 2,451,153 1,162,457 1,067,777 578,598 5,259,985 374,121 398,355 772,476 6,032,461 5,580,105
Advertising 3,367,414 101,407 272,041 151,783 3,892,645 136,605 - 136,605 4,029,250 4,734,369
Other professional services - - 2,137,503 - 2,137,503 - - - 2,137,503 1,974,394
Consulting 330,205 114,315 76,162 406,628 927,310 458,325 209,740 668,065 1,595,375 1,229,107
Depreciation 992,874 17,800 63,899 16,018 1,090,591 6,187 44,925 51,112 1,141,703 885,414
Bank fees - - - - - 486,178 - 486,178 486,178 485,968
Conferences, conventions and meetings 11,153 5,289 175,471 173,602 365,515 13,319 56,547 69,866 435,381 212,830
Printing and publications - - - - - 390,147 - 390,147 390,147 778,448
Travel 105,729 50,142 46,058 24,957 226,886 25,349 43,401 68,750 295,636 318,895
Information technology 88,674 42,054 38,629 20,932 190,289 96,134 6,808 102,942 293,231 461,143
Postageand shipping - - - 20,656 20,656 239,908 - 239,908 260,564 490,745
Officeexpenses 40,253 19,090 17,535 9,500 86,378 20,706 116,451 137,157 223,535 197,491
Legal fees - - - - - - 163,005 163,005 163,005 169,197
Equipment rental and maintenance 10,706 - - 61,653 72,359 - - - 72,359 185,296
Accounting fees - - - - - - 40,073 40,073 40,073 33,171
Special events costs - - - - - 291,767 - 291,767 291,767 403,040
Supplies 26,135 - - - 26,135 - - - 26,135 -
Professional fundraising fees - - - - - - - - - 26,374
Total expenses 30,311,792 19,579,248 5,781,430 3,313,387 58,985,857 3,479,676 2,176,991 5,656,667 64,642,524 64,933,985
Less expenses included with revenues on
thestatement of activities
Special events - - - - - (263,239) - (263,239) (263,239) (363,407)
Total expenses included in theexpense
section on thestatement of activities 30,311,792 $ 19,579,248 $ 5,781,430 $ 3,313,387 $ 58,985,857 $ 3,216,437 $ 2,176,991 $ 5,393,428 $ 64,379,285 $ 64,570,578 $
ProgramServices Supporting Services Total
See Notes to Financial Statements 5
PetSmart Charities, Inc.
Statement of Cash Flows
Year Ended February 1, 2015
(With Summarized Comparative Totals for the Year Ended February 2, 2014)
February 1, February 2,
2015 2014
Cash flows from operating activities:
Change in net assets 796,709 $ (2,519,058) $
Adjustments to reconcile change in net assets to net cash
(used in) provided by operating activities
Stock donation (12,715) (198,340)
Proceeds from sale of stock donation 12,538 199,812
Realized gains on investments (469,196) (1,685,238)
Unrealized (gains) losses on investments (886,568) 135,134
Depreciation 1,141,703 885,414
Loss on disposal of assets 9,367 18,750
Changes in operating assets and liabilities:
Decrease (increase) in:
Receivable from PetSmart, Inc. 86,174 605,473
Receivable from PetSmart Charities of Canada (21,347) (29,841)
Other receivables 4,926 (134,985)
Other assets (45,638) (94,938)
Increase (decrease) in:
Accounts payable and accrued expenses 511,880 588,815
Due to PetSmart, Inc. 104,556 (311,347)
Due to PetSmart Charities of Canada 10,169 (290)
Deferred revenue 12,500 (250,836)
Net cash from (used for) operating activities 1,255,058 (2,791,475)
Cash flows from investing activities
Proceeds from sale of investments 13,552,171 16,306,602
Purchase of investments (10,803,223) (12,843,211)
Purchase of property and equipment (2,062,982) (2,233,935)
Net cash from investing activities 685,966 1,229,456
Net increase (decrease) in cash 1,941,024 (1,562,019)
Cash, beginning of year 1,469,757 3,031,776
Cash, end of year 3,410,781 $ 1,469,757 $
Non-cash transactions
Contributed rent, goods and services 17,395,670 $ 14,737,750 $
See Notes to Financial Statements 6
PetSmart Charities, Inc.
Notes to Financial Statements
February 1, 2015
(With Summarized Comparative Totals for the Year Ended February 2, 2014)
Note 1 - Nature of Operations
PetSmart Charities, Inc. (“PetSmart Charities” or “Organization”) is a nonprofit animal welfare organization that
saves the lives of homeless pets. Founded in 1994, the Organization envisions a world in which every pet has a
lifelong, loving home. The Organization’s mission is proactively end pet homelessness through programs that
empower communities to make measurable and lasting change.
More than 400,000 dogs and cats find homes each year through the Organization’s adoption program in most of
the 1,300 plus PetSmart®stores (the PetSmart stores are owned and operated by PetSmart, Inc. (“PetSmart”), a
retailer of pet food, pet supplies, accessories and professional pet services throughout North America), and
sponsored adoption events. PetSmart Charities grants more money to directly help pets in need than any other
animal welfare group in North America, with a focus on funding spay/neuter services that help communities solve
pet overpopulation. PetSmart Charities is a 501(c)(3) organization, independent from PetSmart, Inc.
The Organization’s major program areas include:
• Adoptions - PetSmart Charities is a leader in pet adoptions. Most of the 1,300 plus PetSmart stores host
PetSmart Charities Cat Adoption Centers and more than twenty stores have PetSmart Charities
Everyday Dog and Cat Adoption Centers. PetSmart Charities also sponsors events like National
Adoption Weekend and community-wide adoption fairs.
• Spay/Neuter - PetSmart Charities provides millions of dollars in grants annually that help spay/neuter
clinics and animal welfare groups to perform more surgeries and educate communities.
• Rescue Waggin’® Program - PetSmart Charities’ Rescue Waggin’®program saves thousands of lives
every year by relocating homeless pets from shelters in overpopulated communities to adoption centers
in areas where dogs and puppies are in high demand.
• Emergency Relief - PetSmart Charities’ Emergency Relief program delivers much-needed supplies to
animal rescue groups saving pets from large-scale man-made and natural disasters.
Note 2 - Summary of Significant Accounting Policies
The Financial Accounting Standards Board (the “FASB”) sets generally accepted accounting principles in the
United States of America (“GAAP”) to ensure consistent reporting. References to GAAP issued by the FASB in
the accompanying footnotes are to the FASB Accounting Standards Codification (the “ASC”).
Basis of Presentation
The accompanying financial statements are presented in accordance with FASB ASC 958, Not-For-Profit
Organizations. Under FASB ASC 958-205, the Organization is required to report information regarding its
financial position and activities according to three classes of net assets: unrestricted net assets, temporarily
restricted net assets, and permanently restricted net assets. All contributions are considered to be available for
unrestricted use unless specifically restricted by the donor. Temporarily restricted net assets are those whose use
by the Organization has been limited by donors to a specific time period or purpose. Permanently restricted net
assets are restricted by donors to be maintained by the Organization in perpetuity. There were no permanently
restricted net assets at February 1, 2015 and February 2, 2014.
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PetSmart Charities, Inc.
Notes to Financial Statements
February 1, 2015
(With Summarized Comparative Totals for the Year Ended February 2, 2014)
Prior-Year Summarized Information
The accompanying financial statements include certain prior-year summarized comparative information in total,
but not by net asset class. Such information does not include sufficient detail to constitute a presentation in
conformity with GAAP. Accordingly, such information should be read in conjunction with the Organization’s
financial statements for the year ended February 2, 2014, from which the summarized information was derived.
Fiscal Year
The Organization’s fiscal year ends on the Sunday nearest J anuary 31st. The fiscal years ended in 2015 and 2014
comprised of 52 weeks.
Management’s Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Estimates also affect the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
Cash and Cash Equivalents
Cash includes cash deposits in banks. The Organization considers all highly liquid debt instruments with an
original maturity of three months or less to be cash equivalents. Deposits at each financial institution are insured
in limited amounts by the Federal Deposit Insurance Corporation (“FDIC”). There was approximately $3,439,412
of uninsured deposits as of February 1, 2015. The Organization’s cash accounts were placed with high credit
quality financial institutions, and accordingly, the Organization does not expect to experience non-performance.
Other Receivables
Other receivables consist of a qualified sponsorship and accrued interest on investments. Other receivables are
stated at the amount management expects to collect. Management provides for probable uncollectible amounts
through a charge to earnings and a credit to a valuation allowance based on its assessment of the current status of
individual balances. Management considers other receivables to be fully collectible, and accordingly, an
allowance for doubtful accounts is not considered necessary at February 1, 2015 and February 2, 2014.
Property and Equipment and Related Depreciation
Purchased property and equipment is recorded at cost. Donated property and equipment is recorded at fair value at
the date of contribution to the Organization. Maintenance and repairs are charged to operations when incurred.
Betterments or renewals in excess of $3,000 and which have a useful life greater than one year are capitalized.
When property and equipment is sold or otherwise disposed of, the asset and related accumulated depreciation
accounts are relieved, and any gain or loss is included in operations. Depreciation is computed using the straight-
line method over the following estimated useful lives:
Estimated
Useful Lives
Store fixtures 3 - 7 years
Software 3 years
Computers 3 years
Leasehold improvements 3 - 14 years
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PetSmart Charities, Inc.
Notes to Financial Statements
February 1, 2015
(With Summarized Comparative Totals for the Year Ended February 2, 2014)
Impairment of Long-Lived Assets
The Organization accounts for long-lived assets in accordance with the provisions of FASB ASC 360, Property,
Plant and Equipment. FASB ASC 360 requires that long-lived assets be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to
future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets
exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or
fair value less costs to sell. No impairment charges were recorded in fiscal years ended February 1, 2015 and
February 2, 2014.
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. GAAP has established a framework for
measuring fair value and established a fair value hierarchy based on the inputs used to measure fair value. This
framework maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring
that the observable inputs be used when available.
Observable inputs are inputs that market participants would use in pricing the asset or liability based on market
data obtained from independent sources. Unobservable inputs reflect assumptions that market participants would
use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy is
broken down into three levels based on the transparency of inputs as follows:
Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the report date. A
quoted price for an identical asset or liability in an active market provides the most reliable fair value
measurement because it is directly observable to the market.
Level 2 - Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly
observable as of the report date. The nature of these securities include investments for which quoted prices are
available but traded less frequently and investments that are fair valued using other securities, the parameters
of which can be directly observed.
Level 3 - Securities that have little to no pricing observability as of the report date. These securities are
measured using management’s best estimate of fair value, where the inputs into the determination of fair
value are not observable and require significant management judgment or estimation.
Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market
participants use to make valuation decisions, including assumptions about risk. Inputs may include price
information, volatility statistics, specific and broad credit data, liquidity statistics and other factors.
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PetSmart Charities, Inc.
Notes to Financial Statements
February 1, 2015
(With Summarized Comparative Totals for the Year Ended February 2, 2014)
Contributions
The Organization accounts for contributions in accordance with FASB ASC 958-605, Not-for-Profit Entities –
Revenue Recognition. All contributions are considered to be available for unrestricted use unless specifically
restricted by the donor. Contributions with temporary restrictions that are received and used within the year are
included in unrestricted activities. When a restriction expires (that is, when a stipulated time restriction ends or
purpose restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and
reported in the accompanying statement of activities and changes in net assets as net assets released from
restrictions.
The Organization also accepts assets from a donor where it agrees to use those assets on behalf of another
specified beneficiary. These transactions do not impact the Organization’s recognition of revenues or expenses
unless it has variance power or is financially interrelated to the specified beneficiary. Therefore, these assets are
not recognized as a contribution but as a liability until remitted to the specified beneficiary. For the years ended
February 1, 2015 and February 2, 2014, the Organization remitted $244,376 and $397,383, respectively, to other
specified beneficiaries for which it did not recognize a contribution or expense in its financial statements. As of
February 1, 2015 and February 2, 2014, the Organization held $82,928 and $111,997 respectively, recorded in
accounts payable and accrued expenses.
Administrative Services Agreement
Contributed materials and store space that would otherwise have to be purchased is recognized in accordance with
FASB ASC 958-605 as revenue and a corresponding expense. Contributed services are recognized as
contributions in accordance with FASB ASC 958-605 if the services (a) create or enhance nonfinancial assets, or
(b) require specialized skills, are performed by people with those skills, and would otherwise be purchased. For
the years ended February 1, 2015 and February 2, 2014, the Organization recorded contributed rent, goods and
services of $15,042,059 and $14,088,156 from PetSmart Inc. respectively.
Contributed Goods and Services
For the years ended February 1, 2015 and February 2, 2014, the Organization received goods and services of
$2,065,893 and $21,253, respectively, and primarily relates to pet food supplies and advertising for National
Adoption Weekends, everyday adoption centers, and awareness. Contributed goods are reported as contributions
in the financial statements at their estimated fair value at date of receipt. Contributed services are reported in the
financial statements at the fair value of the services received. The contribution of services is recognized if the
service received creates or enhances nonfinancial assets or requires specialized skills that are provided by
individuals possessing those skills that would typically need to be purchased if not provided by donation.
Special Events Revenue
The Organization conducts special events in which a portion of the gross proceeds paid by the participant
represents payment for the direct cost of the benefits received by the participant at the event. Unless a verifiable,
objective means exists to demonstrate otherwise, the fair value of meals and entertainment provided at special
events is measured at the actual cost to the Organization. The direct costs of the special events, which ultimately
benefit the donor rather than the Organization, are recorded as costs of direct donor benefits in the accompanying
statement of activities and changes in net assets. At February 1, 2015, the Organization had received various
sponsorship monies for special events, which were scheduled to occur in future fiscal years, and at February 2,
2014, the Organization had received no sponsorship monies for the special event. The amounts of these
sponsorships have been recorded as deferred revenue in the accompanying statement of financial position.
10
PetSmart Charities, Inc.
Notes to Financial Statements
February 1, 2015
(With Summarized Comparative Totals for the Year Ended February 2, 2014)
Royalty Revenue
The Organization earns royalty income from certain campaigns in which intellectual property of the Organization
is licensed.
Functional Expenses
The costs of providing the various programs and other activities of the organization have been summarized on a
functional basis in the accompanying statement of activities and changes in net assets.
Reclassifications
Certain previously reported amounts have been reclassified to conform to the current-year presentation. The
principle reclassification is associated with Rescue Waggin’ program being a standalone program service.
Advertising
Advertising costs are charged to operations when incurred. Advertising expense charged to operations was
$4,029,250 and 4,734,369 for fiscal years ended February 1, 2015 and February 2, 2014, respectively.
Income Tax Status
The Organization has been recognized by the Internal Revenue Services as a not-for-profit corporation as
described in Section 501(c)(3) of the Internal Revenue Code (the “Code”) and is exempt from federal and state
income taxes. In addition, the Organization qualifies for the charitable contribution deduction under Section 170
of the Code and has been recognized by the Internal Revenue Service as an organization that is not a private
foundation. Income determined to be unrelated business income (“UBI”) would be taxable.
The Organization evaluates its uncertain tax positions, if any, on a continual basis through review of its policies
and procedures, review of its regular tax filings, and discussions with outside experts. Management must also
assess whether uncertain tax positions could result in the recognition of a liability for possible interest and
penalties if any. The Organization’s policy is to include interest and penalties related to uncertain tax positions in
management and general expense. As of February 1, 2015 and February 2, 2014, there were no uncertain tax
positions, and the Organization does not anticipate a change in its tax position in the 12 months following
February 1, 2015.
Note 3 - Investments
The Organization accounts for its investments in accordance with FASB ASC 958-320, Not-for-Profit Entities –
Investments – Debt and Equity Securities. Under FASB ASC 958-320, the Organization reports investments in
equity securities that have readily determinable fair values, and all investments in debt securities, at fair value.
The fair values are based on quoted market prices. The Organization recorded investments gross of pending trades
as the net impact of pending trades was not material. At February 1, 2015, pending purchases were $425,145 and
pending sales were $237,858. There were no material differences in these amounts at the settlement date.
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PetSmart Charities, Inc.
Notes to Financial Statements
February 1, 2015
(With Summarized Comparative Totals for the Year Ended February 2, 2014)
Investments consist of:
February 1,
2015
February 2,
2014
Equities:
Large cap 7,432,369 $ 6,846,471 $
Dividend value 4,294,830 3,909,988
Small/Mid - 149,625
Mutual funds 5,847,610 5,314,652
Corporate bonds 3,109,373 2,884,035
US Treasuries 5,506,985 5,219,927
US agency mortgage pass-through 2,974,630 3,755,511
Multi-strategy fund - 2,847,078
Investments subtotal 29,165,797 30,927,287
Money market fund 2,755,651 2,387,168
Total investments 31,921,448 $ 33,314,455 $
Investment income consists of:
February 1,
2015
February 2,
2014
Unrealized gains (losses) on investments 886,568 $ (135,134) $
Realized gains on investments 469,196 1,685,238
Interest and dividend income 893,416 1,065,043
Investment fees (229,565) (239,848)
Total investment income, net 2,019,615 $ 2,375,299 $
Investments are exposed to various risks, such as interest rate, market, and credit risks. Due to the level of risk
associated with certain investment securities, it is at least reasonably possible that changes in the values of
investment securities will occur in the near term and that such change could materially affect amounts reported in
the accompanying financial statements.
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PetSmart Charities, Inc.
Notes to Financial Statements
February 1, 2015
(With Summarized Comparative Totals for the Year Ended February 2, 2014)
The following table summarizes the valuation of the Organization's financial instruments by the categories
described in Note 2 as of February 1, 2015:
Level 1 Level 2 Level 3 Total
Equities:
Large cap 7,432,369 $ - $ - $ 7,432,369 $
Dividend value 4,294,830 - - 4,294,830
Mutual funds 5,847,610 - - 5,847,610
Corporate bonds 3,109,373 - - 3,109,373
US Treasuries 5,506,985 - - 5,506,985
US agency mortgage pass through 2,974,630 - - 2,974,630
Money market fund 2,755,651 - - 2,755,651
Total 31,921,448 $ - $ - $ 31,921,448 $
The following table summarizes the valuation of the Organization's financial instruments by the categories
described in Note 2 as of February 2, 2014:
Level 1 Level 2 Level 3 Total
Equities:
Large cap 6,846,471 $ - $ - $ 6,846,471 $
Dividend value 3,909,988 - - 3,909,988
Small/Mid 149,625 - - 149,625
Mutual funds 5,314,652 - - 5,314,652
Corporate bonds 2,884,035 - - 2,884,035
US Treasuries 5,219,927 - - 5,219,927
US agency mortgage pass-through 3,755,511 - - 3,755,511
Multi-strategy fund - 2,847,078 2,847,078
Money market fund 2,387,168 - - 2,387,168
Total 30,467,377 $ 2,847,078 $ - $ 33,314,455 $
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is
significant to the fair value measurement. However, the determination of what constitutes “observable” requires
significant judgment by the Organization. The Organization considers observable data to be that market data that
is readily available, regularly distributed or updated, reliable and verifiable, not proprietary and provided by
independent sources that are actively involved in the relevant market. The categorization of a financial instrument
within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond
to the Organization’s perceived risk of that instrument.
Management determined the valuation inputs for investments in active markets are its quoted prices and therefore,
classified these investments as Level 1 within the fair value hierarchy. The Organization sold all remaining
alternative investments (multi-strategy fund) in August 2014.
13
PetSmart Charities, Inc.
Notes to Financial Statements
February 1, 2015
(With Summarized Comparative Totals for the Year Ended February 2, 2014)
The preceding methods may produce a fair value calculation that may not be indicative of net realizable value or
reflective of future fair values. Furthermore, although management believes the valuation methods are appropriate
and consistent with other market participants, the use of different methodologies or assumptions to determine the
fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
Note 4 - Property and Equipment
Property and equipment consists of:
February 1,
2015
February 2,
2014
Cost or donated value:
Store fixtures 536,704 $ 414,522 $
Software 749,360 692,359
Computers 46,118 46,118
Leasehold improvements 7,144,085 5,285,667
Total cost or donated value 8,476,267 6,438,666
Less - accumulated depreciation (3,437,555) (2,311,866)
Property and equipment, net 5,038,712 $ 4,126,800 $
The increase in leasehold improvements are attributed to the build-out of Everyday Dog and Cat Adoption
Centers within certain PetSmart stores.
Depreciation expense charged to operations was $1,141,703 for the year ended February 1, 2015 and $885,414 for
the year ended February 2, 2014.
Note 5 - Transactions with PetSmart, Inc. and PetSmart Charities of Canada
The following amounts have been contributed by PetSmart. The revenue amounts are included in revenue, public
support and gains in the accompanying statement of activities and changes in net assets. Contributed rent, goods
and services are included in functional expenses under donated services and grants.
February 1,
2015
February 2,
2014
Contributed rent, goods and services for adoption centers,
supplies, office space, utilities, and management personnel 15,042,059 $ 14,088,156 $
Emergency relief grant supplies 300,890 628,340
Royalties 2,052,721 1,660,744
17,395,670 $ 16,377,240 $
14
PetSmart Charities, Inc.
Notes to Financial Statements
February 1, 2015
(With Summarized Comparative Totals for the Year Ended February 2, 2014)
The Organization is highly dependent upon the viability of PetSmart as this is the primary source of donated
revenue received in the stores from customers and from PetSmart employees. Royalty income is generated on
specific campaigns where the Organization receives a percentage of the purchase price on selected merchandise
items sold in PetSmart stores that bear its trademark during a certain timeframe. Emergency Relief grant supplies
revenue is the difference of fair market value and cost of goods purchased from PetSmart and then granted to
animal welfare groups. Receivables from PetSmart of $2,931,986 and $3,018,160 at February 1, 2015 and
February 2, 2014, respectively, represent cash contributions received from PetSmart customers and PetSmart
employees not yet remitted in cash to the Organization as of the fiscal year-end dates.
The Organization entered into a management services agreement with PetSmart to cost-effectively outsource
certain business and administrative management services. The fees paid to PetSmart are capped annually and the
value of contributed rent, services, products and supplies received by the Organization under the agreement
overwhelmingly exceeds the payments made to PetSmart.
The Organization incurred approximately $6,200,000 and $5,700,000 of expenses under the management services
agreement for the years ended February 1, 2015 and February 2, 2014, respectively. At February 1, 2015 and
February 2, 2014, the Organization had $731,482 and $626,926, respectively, due to PetSmart for reimbursable
expenses and management services.
In addition to providing space, supplies and labor in the adoption centers in the stores, PetSmart also supplies the
Organization with items such as office supplies, postage and travel services, which are reimbursed by the
Organization on a monthly basis.
The Organization entered into a formal management services agreement with PetSmart Charities of Canada
(“PCC”) consistent with prior years’ practice of providing business management, finance, strategy and other
services. Receivables from PCC of $82,476 at February 1, 2015 and $61,129 at February 2, 2014, respectively,
represent management fees billed quarterly and miscellaneous reimbursable costs.
At February 1, 2015 and February 2, 2014, the Organization had $11,324 and $1,155, respectively, due to PCC
for reimbursable revenue and other items.
Management provides for probable uncollectible receivables through a charge to earnings and a credit to a
valuation allowance based on its assessment of the current status of individual balances. Balances that are still
outstanding after management has used reasonable collection efforts are written off through a charge to the
valuation allowance and a credit to receivables. Management considers the PetSmart, Inc. and the PetSmart
Charities of Canada receivables to be fully collectible as of February 1, 2015 and February 2, 2014, and
accordingly, an allowance for doubtful accounts is not considered necessary.
15
PetSmart Charities, Inc.
Notes to Financial Statements
February 1, 2015
(With Summarized Comparative Totals for the Year Ended February 2, 2014)
Note 6 - Temporarily Restricted Net Assets
Temporarily restricted net assets consist of purpose-restricted contributions from donors as follows:
February 1,
2015
February 2,
2014
Alliance for Companion Animals of Maricopa County 536,269 $ 505,926 $
Rescue Waggin’®Program Heartworm Treatment Fund 13,000 -
549,269 $ 505,926 $
These amounts are included within cash in the accompanying statement of financial position.
Note 7 - Commitments and Contingencies
The Organization makes commitments to certain charitable organizations for future grants, which are contingent
future installments of a current grant. The grants are contingent upon the continued fulfillment of the original
conditions in the grant request. As of February 1, 2015, the Organization has approximately $3,990,000 in
commitments for future contingent grants.
Note 8 - Subsequent Events
The Organization has evaluated subsequent events through J uly 09, 2015, which is the date these financial
statements were available to be issued. Management is not aware of any events that have occurred subsequent to
the statement of financial position date that would require adjustment to, or disclosure in, the accompanying
financial statements.
16
doc_106556073.pdf
Financial Statements We have audited the accompanying financial statements of PetSmart Charities, Inc., which comprise the statements of financial position as of February 1, 2015, and the related statements of activities and changes in net assets, functional expenses, and cash flows for the year then ended, and the related notes to the financial statements.
Financial Statements
February 1, 2015
PetSmart Charities, Inc.
www. ei debai l l y. com
PetSmart Charities, Inc.
Table of Contents
February 1, 2015
(With Summarized Comparative Totals for the Year Ended February 2, 2014)
Independent Auditor’s Report .................................................................................................................................... 1
Financial Statements .................................................................................................................................................. 3
Statement of Financial Position ............................................................................................................................. 3
Statement of Activities and Changes in Net Assets ............................................................................................... 4
Statement of Functional Expenses ......................................................................................................................... 5
Statement of Cash Flows ....................................................................................................................................... 6
Notes to Financial Statements ................................................................................................................................ 7
Independent Auditor’s Report
To the Board of Directors
PetSmart Charities, Inc.
Phoenix, Arizona
Report on the Financial Statements
We have audited the accompanying financial statements of PetSmart Charities, Inc., which comprise the
statements of financial position as of February 1, 2015, and the related statements of activities and
changes in net assets, functional expenses, and cash flows for the year then ended, and the related notes to
the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or
error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We
conducted our audits in accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. Accordingly, we express no such opinion. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of significant accounting estimates
made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of PetSmart Charities, Inc. as of February 1, 2015, and the changes in its net assets and
its cash flows for the years then ended in accordance with accounting principles generally accepted in the
United States of America.
1
www. ei debai l l y. com
1850 N. Central Ave., Ste. 400 | Phoenix, AZ 85004-4624 | T 602.264.5844 | F 602.277.4845 | EOE
Report on Summarized Comparative Information
The 2014 financial statements of PetSmart Charities, Inc. were audited by other auditors whose report
dated J une 16, 2014, expressed an unmodified audit opinion on those audited financial statements. In our
opinion, the summarized comparative information presented herein as of and for the year ended February
2, 2014 is consistent, in all material respects, with the audited financial statements from which it has been
derived.
Phoenix, Arizona
J uly 09, 2015
2
PetSmart Charities, Inc.
Statement of Financial Position
February 1, 2015
(With Summarized Comparative Totals for the Year Ended February 2, 2014)
February 1, February 2,
2015 2014
Assets
Cash and cash equivalents 3,410,781 $ 1,469,757 $
Investments 31,921,448 33,314,455
Receivable from PetSmart, Inc. 2,931,986 3,018,160
Receivable from PetSmart Charities of Canada 82,476 61,129
Other receivables 219,835 224,761
Other assets 269,679 224,041
Total current assets 38,836,205 38,312,303
Property and equipment, net 5,038,712 4,126,800
Total assets 43,874,917 $ 42,439,103 $
Liabilities and Net Assets
Liabilities
Accounts payable and accrued expenses 3,567,423 $ 3,055,543 $
Due to PetSmart, Inc. 731,482 626,926
Due to PetSmart Charities of Canada 11,324 1,155
Deferred revenue 12,500 -
Total current liabilities 4,322,729 3,683,624
Net Assets
Unrestricted 39,002,919 38,249,553
Temporarily restricted 549,269 505,926
Total net assets 39,552,188 38,755,479
Total liabilities and net assets 43,874,917 $ 42,439,103 $
See Notes to Financial Statements 3
PetSmart Charities, Inc.
Statement of Activities and Changes in Net Assets
Year Ended February 1, 2015
(With Summarized Comparative Totals for the Year Ended February 2, 2014)
Temporarily February 1, February 2,
Unrestricted Restricted 2015 2014
Revenue, Public Support and Gains:
Individual contributions 40,526,460 $ 57,000 $ 40,583,460 $ 39,876,081 $
PetSmart, Inc. contributions (including
contributed rent, goods and services,
royalty income, and sponsorships) 17,395,670 - 17,395,670 16,377,240
Corporate, foundations, and vendor
contributions 3,384,377 595,136 3,979,513 2,210,344
Investment income, net 2,019,615 - 2,019,615 2,375,299
Revenue, public support and gains 63,326,122 652,136 63,978,258 60,838,964
Special events:
Special events revenue 1,460,975 - 1,460,975 1,575,963
Less costs of direct donor benefits (263,239) - (263,239) (363,407)
Gross profit on special events 1,197,736 - 1,197,736 1,212,556
Net assets released from restrictions 608,793 (608,793) - -
Total revenue, public support and gains 65,132,651 43,343 65,175,994 62,051,520
Expenses:
Program services:
Adoptions 30,311,792 - 30,311,792 25,262,852
Spay/neuter 19,579,248 - 19,579,248 24,381,773
Rescue Waggin'®program 5,781,430 - 5,781,430 5,066,684
Emergency relief and other 3,313,387 - 3,313,387 4,337,116
Total program services 58,985,857 - 58,985,857 59,048,425
Supporting services:
Fundraising 3,216,437 - 3,216,437 3,219,575
Management and general 2,176,991 - 2,176,991 2,302,578
Total support services 5,393,428 - 5,393,428 5,522,153
Total expenses 64,379,285 - 64,379,285 64,570,578
Change in Net Assets 753,366 43,343 796,709 (2,519,058)
Net Assets, Beginning of Year 38,249,553 505,926 38,755,479 41,274,537
Net Assets, End of Year 39,002,919 $ 549,269 $ 39,552,188 $ 38,755,479 $
Totals
See Notes to Financial Statements 4
PetSmart Charities, Inc.
Statement of Functional Expenses
Year Ended February 1, 2015
(With Summarized Comparative Totals for the Year Ended February 2, 2014)
Emergency
Rescue Relief and Management February 1, February 2,
Adoptions Spay/Neuter Waggin'® Other Total Fundraising and General Total 2015 2014
Grants and allocations 11,400,081 $ 17,354,273 $ 1,201,379 $ 1,379,006 $ 31,334,739 $ - $ - $ - $ 31,334,739 $ 32,658,587 $
Donated services 11,487,415 712,421 684,976 470,054 13,354,866 940,930 1,097,686 2,038,616 15,393,482 14,109,411
Management services 2,451,153 1,162,457 1,067,777 578,598 5,259,985 374,121 398,355 772,476 6,032,461 5,580,105
Advertising 3,367,414 101,407 272,041 151,783 3,892,645 136,605 - 136,605 4,029,250 4,734,369
Other professional services - - 2,137,503 - 2,137,503 - - - 2,137,503 1,974,394
Consulting 330,205 114,315 76,162 406,628 927,310 458,325 209,740 668,065 1,595,375 1,229,107
Depreciation 992,874 17,800 63,899 16,018 1,090,591 6,187 44,925 51,112 1,141,703 885,414
Bank fees - - - - - 486,178 - 486,178 486,178 485,968
Conferences, conventions and meetings 11,153 5,289 175,471 173,602 365,515 13,319 56,547 69,866 435,381 212,830
Printing and publications - - - - - 390,147 - 390,147 390,147 778,448
Travel 105,729 50,142 46,058 24,957 226,886 25,349 43,401 68,750 295,636 318,895
Information technology 88,674 42,054 38,629 20,932 190,289 96,134 6,808 102,942 293,231 461,143
Postageand shipping - - - 20,656 20,656 239,908 - 239,908 260,564 490,745
Officeexpenses 40,253 19,090 17,535 9,500 86,378 20,706 116,451 137,157 223,535 197,491
Legal fees - - - - - - 163,005 163,005 163,005 169,197
Equipment rental and maintenance 10,706 - - 61,653 72,359 - - - 72,359 185,296
Accounting fees - - - - - - 40,073 40,073 40,073 33,171
Special events costs - - - - - 291,767 - 291,767 291,767 403,040
Supplies 26,135 - - - 26,135 - - - 26,135 -
Professional fundraising fees - - - - - - - - - 26,374
Total expenses 30,311,792 19,579,248 5,781,430 3,313,387 58,985,857 3,479,676 2,176,991 5,656,667 64,642,524 64,933,985
Less expenses included with revenues on
thestatement of activities
Special events - - - - - (263,239) - (263,239) (263,239) (363,407)
Total expenses included in theexpense
section on thestatement of activities 30,311,792 $ 19,579,248 $ 5,781,430 $ 3,313,387 $ 58,985,857 $ 3,216,437 $ 2,176,991 $ 5,393,428 $ 64,379,285 $ 64,570,578 $
ProgramServices Supporting Services Total
See Notes to Financial Statements 5
PetSmart Charities, Inc.
Statement of Cash Flows
Year Ended February 1, 2015
(With Summarized Comparative Totals for the Year Ended February 2, 2014)
February 1, February 2,
2015 2014
Cash flows from operating activities:
Change in net assets 796,709 $ (2,519,058) $
Adjustments to reconcile change in net assets to net cash
(used in) provided by operating activities
Stock donation (12,715) (198,340)
Proceeds from sale of stock donation 12,538 199,812
Realized gains on investments (469,196) (1,685,238)
Unrealized (gains) losses on investments (886,568) 135,134
Depreciation 1,141,703 885,414
Loss on disposal of assets 9,367 18,750
Changes in operating assets and liabilities:
Decrease (increase) in:
Receivable from PetSmart, Inc. 86,174 605,473
Receivable from PetSmart Charities of Canada (21,347) (29,841)
Other receivables 4,926 (134,985)
Other assets (45,638) (94,938)
Increase (decrease) in:
Accounts payable and accrued expenses 511,880 588,815
Due to PetSmart, Inc. 104,556 (311,347)
Due to PetSmart Charities of Canada 10,169 (290)
Deferred revenue 12,500 (250,836)
Net cash from (used for) operating activities 1,255,058 (2,791,475)
Cash flows from investing activities
Proceeds from sale of investments 13,552,171 16,306,602
Purchase of investments (10,803,223) (12,843,211)
Purchase of property and equipment (2,062,982) (2,233,935)
Net cash from investing activities 685,966 1,229,456
Net increase (decrease) in cash 1,941,024 (1,562,019)
Cash, beginning of year 1,469,757 3,031,776
Cash, end of year 3,410,781 $ 1,469,757 $
Non-cash transactions
Contributed rent, goods and services 17,395,670 $ 14,737,750 $
See Notes to Financial Statements 6
PetSmart Charities, Inc.
Notes to Financial Statements
February 1, 2015
(With Summarized Comparative Totals for the Year Ended February 2, 2014)
Note 1 - Nature of Operations
PetSmart Charities, Inc. (“PetSmart Charities” or “Organization”) is a nonprofit animal welfare organization that
saves the lives of homeless pets. Founded in 1994, the Organization envisions a world in which every pet has a
lifelong, loving home. The Organization’s mission is proactively end pet homelessness through programs that
empower communities to make measurable and lasting change.
More than 400,000 dogs and cats find homes each year through the Organization’s adoption program in most of
the 1,300 plus PetSmart®stores (the PetSmart stores are owned and operated by PetSmart, Inc. (“PetSmart”), a
retailer of pet food, pet supplies, accessories and professional pet services throughout North America), and
sponsored adoption events. PetSmart Charities grants more money to directly help pets in need than any other
animal welfare group in North America, with a focus on funding spay/neuter services that help communities solve
pet overpopulation. PetSmart Charities is a 501(c)(3) organization, independent from PetSmart, Inc.
The Organization’s major program areas include:
• Adoptions - PetSmart Charities is a leader in pet adoptions. Most of the 1,300 plus PetSmart stores host
PetSmart Charities Cat Adoption Centers and more than twenty stores have PetSmart Charities
Everyday Dog and Cat Adoption Centers. PetSmart Charities also sponsors events like National
Adoption Weekend and community-wide adoption fairs.
• Spay/Neuter - PetSmart Charities provides millions of dollars in grants annually that help spay/neuter
clinics and animal welfare groups to perform more surgeries and educate communities.
• Rescue Waggin’® Program - PetSmart Charities’ Rescue Waggin’®program saves thousands of lives
every year by relocating homeless pets from shelters in overpopulated communities to adoption centers
in areas where dogs and puppies are in high demand.
• Emergency Relief - PetSmart Charities’ Emergency Relief program delivers much-needed supplies to
animal rescue groups saving pets from large-scale man-made and natural disasters.
Note 2 - Summary of Significant Accounting Policies
The Financial Accounting Standards Board (the “FASB”) sets generally accepted accounting principles in the
United States of America (“GAAP”) to ensure consistent reporting. References to GAAP issued by the FASB in
the accompanying footnotes are to the FASB Accounting Standards Codification (the “ASC”).
Basis of Presentation
The accompanying financial statements are presented in accordance with FASB ASC 958, Not-For-Profit
Organizations. Under FASB ASC 958-205, the Organization is required to report information regarding its
financial position and activities according to three classes of net assets: unrestricted net assets, temporarily
restricted net assets, and permanently restricted net assets. All contributions are considered to be available for
unrestricted use unless specifically restricted by the donor. Temporarily restricted net assets are those whose use
by the Organization has been limited by donors to a specific time period or purpose. Permanently restricted net
assets are restricted by donors to be maintained by the Organization in perpetuity. There were no permanently
restricted net assets at February 1, 2015 and February 2, 2014.
7
PetSmart Charities, Inc.
Notes to Financial Statements
February 1, 2015
(With Summarized Comparative Totals for the Year Ended February 2, 2014)
Prior-Year Summarized Information
The accompanying financial statements include certain prior-year summarized comparative information in total,
but not by net asset class. Such information does not include sufficient detail to constitute a presentation in
conformity with GAAP. Accordingly, such information should be read in conjunction with the Organization’s
financial statements for the year ended February 2, 2014, from which the summarized information was derived.
Fiscal Year
The Organization’s fiscal year ends on the Sunday nearest J anuary 31st. The fiscal years ended in 2015 and 2014
comprised of 52 weeks.
Management’s Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Estimates also affect the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
Cash and Cash Equivalents
Cash includes cash deposits in banks. The Organization considers all highly liquid debt instruments with an
original maturity of three months or less to be cash equivalents. Deposits at each financial institution are insured
in limited amounts by the Federal Deposit Insurance Corporation (“FDIC”). There was approximately $3,439,412
of uninsured deposits as of February 1, 2015. The Organization’s cash accounts were placed with high credit
quality financial institutions, and accordingly, the Organization does not expect to experience non-performance.
Other Receivables
Other receivables consist of a qualified sponsorship and accrued interest on investments. Other receivables are
stated at the amount management expects to collect. Management provides for probable uncollectible amounts
through a charge to earnings and a credit to a valuation allowance based on its assessment of the current status of
individual balances. Management considers other receivables to be fully collectible, and accordingly, an
allowance for doubtful accounts is not considered necessary at February 1, 2015 and February 2, 2014.
Property and Equipment and Related Depreciation
Purchased property and equipment is recorded at cost. Donated property and equipment is recorded at fair value at
the date of contribution to the Organization. Maintenance and repairs are charged to operations when incurred.
Betterments or renewals in excess of $3,000 and which have a useful life greater than one year are capitalized.
When property and equipment is sold or otherwise disposed of, the asset and related accumulated depreciation
accounts are relieved, and any gain or loss is included in operations. Depreciation is computed using the straight-
line method over the following estimated useful lives:
Estimated
Useful Lives
Store fixtures 3 - 7 years
Software 3 years
Computers 3 years
Leasehold improvements 3 - 14 years
8
PetSmart Charities, Inc.
Notes to Financial Statements
February 1, 2015
(With Summarized Comparative Totals for the Year Ended February 2, 2014)
Impairment of Long-Lived Assets
The Organization accounts for long-lived assets in accordance with the provisions of FASB ASC 360, Property,
Plant and Equipment. FASB ASC 360 requires that long-lived assets be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to
future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets
exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or
fair value less costs to sell. No impairment charges were recorded in fiscal years ended February 1, 2015 and
February 2, 2014.
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. GAAP has established a framework for
measuring fair value and established a fair value hierarchy based on the inputs used to measure fair value. This
framework maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring
that the observable inputs be used when available.
Observable inputs are inputs that market participants would use in pricing the asset or liability based on market
data obtained from independent sources. Unobservable inputs reflect assumptions that market participants would
use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy is
broken down into three levels based on the transparency of inputs as follows:
Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the report date. A
quoted price for an identical asset or liability in an active market provides the most reliable fair value
measurement because it is directly observable to the market.
Level 2 - Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly
observable as of the report date. The nature of these securities include investments for which quoted prices are
available but traded less frequently and investments that are fair valued using other securities, the parameters
of which can be directly observed.
Level 3 - Securities that have little to no pricing observability as of the report date. These securities are
measured using management’s best estimate of fair value, where the inputs into the determination of fair
value are not observable and require significant management judgment or estimation.
Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market
participants use to make valuation decisions, including assumptions about risk. Inputs may include price
information, volatility statistics, specific and broad credit data, liquidity statistics and other factors.
9
PetSmart Charities, Inc.
Notes to Financial Statements
February 1, 2015
(With Summarized Comparative Totals for the Year Ended February 2, 2014)
Contributions
The Organization accounts for contributions in accordance with FASB ASC 958-605, Not-for-Profit Entities –
Revenue Recognition. All contributions are considered to be available for unrestricted use unless specifically
restricted by the donor. Contributions with temporary restrictions that are received and used within the year are
included in unrestricted activities. When a restriction expires (that is, when a stipulated time restriction ends or
purpose restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and
reported in the accompanying statement of activities and changes in net assets as net assets released from
restrictions.
The Organization also accepts assets from a donor where it agrees to use those assets on behalf of another
specified beneficiary. These transactions do not impact the Organization’s recognition of revenues or expenses
unless it has variance power or is financially interrelated to the specified beneficiary. Therefore, these assets are
not recognized as a contribution but as a liability until remitted to the specified beneficiary. For the years ended
February 1, 2015 and February 2, 2014, the Organization remitted $244,376 and $397,383, respectively, to other
specified beneficiaries for which it did not recognize a contribution or expense in its financial statements. As of
February 1, 2015 and February 2, 2014, the Organization held $82,928 and $111,997 respectively, recorded in
accounts payable and accrued expenses.
Administrative Services Agreement
Contributed materials and store space that would otherwise have to be purchased is recognized in accordance with
FASB ASC 958-605 as revenue and a corresponding expense. Contributed services are recognized as
contributions in accordance with FASB ASC 958-605 if the services (a) create or enhance nonfinancial assets, or
(b) require specialized skills, are performed by people with those skills, and would otherwise be purchased. For
the years ended February 1, 2015 and February 2, 2014, the Organization recorded contributed rent, goods and
services of $15,042,059 and $14,088,156 from PetSmart Inc. respectively.
Contributed Goods and Services
For the years ended February 1, 2015 and February 2, 2014, the Organization received goods and services of
$2,065,893 and $21,253, respectively, and primarily relates to pet food supplies and advertising for National
Adoption Weekends, everyday adoption centers, and awareness. Contributed goods are reported as contributions
in the financial statements at their estimated fair value at date of receipt. Contributed services are reported in the
financial statements at the fair value of the services received. The contribution of services is recognized if the
service received creates or enhances nonfinancial assets or requires specialized skills that are provided by
individuals possessing those skills that would typically need to be purchased if not provided by donation.
Special Events Revenue
The Organization conducts special events in which a portion of the gross proceeds paid by the participant
represents payment for the direct cost of the benefits received by the participant at the event. Unless a verifiable,
objective means exists to demonstrate otherwise, the fair value of meals and entertainment provided at special
events is measured at the actual cost to the Organization. The direct costs of the special events, which ultimately
benefit the donor rather than the Organization, are recorded as costs of direct donor benefits in the accompanying
statement of activities and changes in net assets. At February 1, 2015, the Organization had received various
sponsorship monies for special events, which were scheduled to occur in future fiscal years, and at February 2,
2014, the Organization had received no sponsorship monies for the special event. The amounts of these
sponsorships have been recorded as deferred revenue in the accompanying statement of financial position.
10
PetSmart Charities, Inc.
Notes to Financial Statements
February 1, 2015
(With Summarized Comparative Totals for the Year Ended February 2, 2014)
Royalty Revenue
The Organization earns royalty income from certain campaigns in which intellectual property of the Organization
is licensed.
Functional Expenses
The costs of providing the various programs and other activities of the organization have been summarized on a
functional basis in the accompanying statement of activities and changes in net assets.
Reclassifications
Certain previously reported amounts have been reclassified to conform to the current-year presentation. The
principle reclassification is associated with Rescue Waggin’ program being a standalone program service.
Advertising
Advertising costs are charged to operations when incurred. Advertising expense charged to operations was
$4,029,250 and 4,734,369 for fiscal years ended February 1, 2015 and February 2, 2014, respectively.
Income Tax Status
The Organization has been recognized by the Internal Revenue Services as a not-for-profit corporation as
described in Section 501(c)(3) of the Internal Revenue Code (the “Code”) and is exempt from federal and state
income taxes. In addition, the Organization qualifies for the charitable contribution deduction under Section 170
of the Code and has been recognized by the Internal Revenue Service as an organization that is not a private
foundation. Income determined to be unrelated business income (“UBI”) would be taxable.
The Organization evaluates its uncertain tax positions, if any, on a continual basis through review of its policies
and procedures, review of its regular tax filings, and discussions with outside experts. Management must also
assess whether uncertain tax positions could result in the recognition of a liability for possible interest and
penalties if any. The Organization’s policy is to include interest and penalties related to uncertain tax positions in
management and general expense. As of February 1, 2015 and February 2, 2014, there were no uncertain tax
positions, and the Organization does not anticipate a change in its tax position in the 12 months following
February 1, 2015.
Note 3 - Investments
The Organization accounts for its investments in accordance with FASB ASC 958-320, Not-for-Profit Entities –
Investments – Debt and Equity Securities. Under FASB ASC 958-320, the Organization reports investments in
equity securities that have readily determinable fair values, and all investments in debt securities, at fair value.
The fair values are based on quoted market prices. The Organization recorded investments gross of pending trades
as the net impact of pending trades was not material. At February 1, 2015, pending purchases were $425,145 and
pending sales were $237,858. There were no material differences in these amounts at the settlement date.
11
PetSmart Charities, Inc.
Notes to Financial Statements
February 1, 2015
(With Summarized Comparative Totals for the Year Ended February 2, 2014)
Investments consist of:
February 1,
2015
February 2,
2014
Equities:
Large cap 7,432,369 $ 6,846,471 $
Dividend value 4,294,830 3,909,988
Small/Mid - 149,625
Mutual funds 5,847,610 5,314,652
Corporate bonds 3,109,373 2,884,035
US Treasuries 5,506,985 5,219,927
US agency mortgage pass-through 2,974,630 3,755,511
Multi-strategy fund - 2,847,078
Investments subtotal 29,165,797 30,927,287
Money market fund 2,755,651 2,387,168
Total investments 31,921,448 $ 33,314,455 $
Investment income consists of:
February 1,
2015
February 2,
2014
Unrealized gains (losses) on investments 886,568 $ (135,134) $
Realized gains on investments 469,196 1,685,238
Interest and dividend income 893,416 1,065,043
Investment fees (229,565) (239,848)
Total investment income, net 2,019,615 $ 2,375,299 $
Investments are exposed to various risks, such as interest rate, market, and credit risks. Due to the level of risk
associated with certain investment securities, it is at least reasonably possible that changes in the values of
investment securities will occur in the near term and that such change could materially affect amounts reported in
the accompanying financial statements.
12
PetSmart Charities, Inc.
Notes to Financial Statements
February 1, 2015
(With Summarized Comparative Totals for the Year Ended February 2, 2014)
The following table summarizes the valuation of the Organization's financial instruments by the categories
described in Note 2 as of February 1, 2015:
Level 1 Level 2 Level 3 Total
Equities:
Large cap 7,432,369 $ - $ - $ 7,432,369 $
Dividend value 4,294,830 - - 4,294,830
Mutual funds 5,847,610 - - 5,847,610
Corporate bonds 3,109,373 - - 3,109,373
US Treasuries 5,506,985 - - 5,506,985
US agency mortgage pass through 2,974,630 - - 2,974,630
Money market fund 2,755,651 - - 2,755,651
Total 31,921,448 $ - $ - $ 31,921,448 $
The following table summarizes the valuation of the Organization's financial instruments by the categories
described in Note 2 as of February 2, 2014:
Level 1 Level 2 Level 3 Total
Equities:
Large cap 6,846,471 $ - $ - $ 6,846,471 $
Dividend value 3,909,988 - - 3,909,988
Small/Mid 149,625 - - 149,625
Mutual funds 5,314,652 - - 5,314,652
Corporate bonds 2,884,035 - - 2,884,035
US Treasuries 5,219,927 - - 5,219,927
US agency mortgage pass-through 3,755,511 - - 3,755,511
Multi-strategy fund - 2,847,078 2,847,078
Money market fund 2,387,168 - - 2,387,168
Total 30,467,377 $ 2,847,078 $ - $ 33,314,455 $
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is
significant to the fair value measurement. However, the determination of what constitutes “observable” requires
significant judgment by the Organization. The Organization considers observable data to be that market data that
is readily available, regularly distributed or updated, reliable and verifiable, not proprietary and provided by
independent sources that are actively involved in the relevant market. The categorization of a financial instrument
within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond
to the Organization’s perceived risk of that instrument.
Management determined the valuation inputs for investments in active markets are its quoted prices and therefore,
classified these investments as Level 1 within the fair value hierarchy. The Organization sold all remaining
alternative investments (multi-strategy fund) in August 2014.
13
PetSmart Charities, Inc.
Notes to Financial Statements
February 1, 2015
(With Summarized Comparative Totals for the Year Ended February 2, 2014)
The preceding methods may produce a fair value calculation that may not be indicative of net realizable value or
reflective of future fair values. Furthermore, although management believes the valuation methods are appropriate
and consistent with other market participants, the use of different methodologies or assumptions to determine the
fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
Note 4 - Property and Equipment
Property and equipment consists of:
February 1,
2015
February 2,
2014
Cost or donated value:
Store fixtures 536,704 $ 414,522 $
Software 749,360 692,359
Computers 46,118 46,118
Leasehold improvements 7,144,085 5,285,667
Total cost or donated value 8,476,267 6,438,666
Less - accumulated depreciation (3,437,555) (2,311,866)
Property and equipment, net 5,038,712 $ 4,126,800 $
The increase in leasehold improvements are attributed to the build-out of Everyday Dog and Cat Adoption
Centers within certain PetSmart stores.
Depreciation expense charged to operations was $1,141,703 for the year ended February 1, 2015 and $885,414 for
the year ended February 2, 2014.
Note 5 - Transactions with PetSmart, Inc. and PetSmart Charities of Canada
The following amounts have been contributed by PetSmart. The revenue amounts are included in revenue, public
support and gains in the accompanying statement of activities and changes in net assets. Contributed rent, goods
and services are included in functional expenses under donated services and grants.
February 1,
2015
February 2,
2014
Contributed rent, goods and services for adoption centers,
supplies, office space, utilities, and management personnel 15,042,059 $ 14,088,156 $
Emergency relief grant supplies 300,890 628,340
Royalties 2,052,721 1,660,744
17,395,670 $ 16,377,240 $
14
PetSmart Charities, Inc.
Notes to Financial Statements
February 1, 2015
(With Summarized Comparative Totals for the Year Ended February 2, 2014)
The Organization is highly dependent upon the viability of PetSmart as this is the primary source of donated
revenue received in the stores from customers and from PetSmart employees. Royalty income is generated on
specific campaigns where the Organization receives a percentage of the purchase price on selected merchandise
items sold in PetSmart stores that bear its trademark during a certain timeframe. Emergency Relief grant supplies
revenue is the difference of fair market value and cost of goods purchased from PetSmart and then granted to
animal welfare groups. Receivables from PetSmart of $2,931,986 and $3,018,160 at February 1, 2015 and
February 2, 2014, respectively, represent cash contributions received from PetSmart customers and PetSmart
employees not yet remitted in cash to the Organization as of the fiscal year-end dates.
The Organization entered into a management services agreement with PetSmart to cost-effectively outsource
certain business and administrative management services. The fees paid to PetSmart are capped annually and the
value of contributed rent, services, products and supplies received by the Organization under the agreement
overwhelmingly exceeds the payments made to PetSmart.
The Organization incurred approximately $6,200,000 and $5,700,000 of expenses under the management services
agreement for the years ended February 1, 2015 and February 2, 2014, respectively. At February 1, 2015 and
February 2, 2014, the Organization had $731,482 and $626,926, respectively, due to PetSmart for reimbursable
expenses and management services.
In addition to providing space, supplies and labor in the adoption centers in the stores, PetSmart also supplies the
Organization with items such as office supplies, postage and travel services, which are reimbursed by the
Organization on a monthly basis.
The Organization entered into a formal management services agreement with PetSmart Charities of Canada
(“PCC”) consistent with prior years’ practice of providing business management, finance, strategy and other
services. Receivables from PCC of $82,476 at February 1, 2015 and $61,129 at February 2, 2014, respectively,
represent management fees billed quarterly and miscellaneous reimbursable costs.
At February 1, 2015 and February 2, 2014, the Organization had $11,324 and $1,155, respectively, due to PCC
for reimbursable revenue and other items.
Management provides for probable uncollectible receivables through a charge to earnings and a credit to a
valuation allowance based on its assessment of the current status of individual balances. Balances that are still
outstanding after management has used reasonable collection efforts are written off through a charge to the
valuation allowance and a credit to receivables. Management considers the PetSmart, Inc. and the PetSmart
Charities of Canada receivables to be fully collectible as of February 1, 2015 and February 2, 2014, and
accordingly, an allowance for doubtful accounts is not considered necessary.
15
PetSmart Charities, Inc.
Notes to Financial Statements
February 1, 2015
(With Summarized Comparative Totals for the Year Ended February 2, 2014)
Note 6 - Temporarily Restricted Net Assets
Temporarily restricted net assets consist of purpose-restricted contributions from donors as follows:
February 1,
2015
February 2,
2014
Alliance for Companion Animals of Maricopa County 536,269 $ 505,926 $
Rescue Waggin’®Program Heartworm Treatment Fund 13,000 -
549,269 $ 505,926 $
These amounts are included within cash in the accompanying statement of financial position.
Note 7 - Commitments and Contingencies
The Organization makes commitments to certain charitable organizations for future grants, which are contingent
future installments of a current grant. The grants are contingent upon the continued fulfillment of the original
conditions in the grant request. As of February 1, 2015, the Organization has approximately $3,990,000 in
commitments for future contingent grants.
Note 8 - Subsequent Events
The Organization has evaluated subsequent events through J uly 09, 2015, which is the date these financial
statements were available to be issued. Management is not aware of any events that have occurred subsequent to
the statement of financial position date that would require adjustment to, or disclosure in, the accompanying
financial statements.
16
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