<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED:
AUGUST 1, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM __________ TO ___________
Commission file number: 0-21888
PETsMART, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-3024325
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
19601 N. 27th AVENUE
PHOENIX, ARIZONA 85027
(Address of principal executive offices, including Zip Code)
(623) 580-6100
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
(1) Yes (X) No ( )
(2) Yes (X) No ( )
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date:
COMMON STOCK, $.0001 PAR VALUE, 117,260,131 SHARES AT SEPTEMBER 8, 1999
1
<PAGE> 2
PETsMART, INC.
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
Part I. Financial Information
Item 1. Unaudited Financial Statements
Consolidated Balance Sheets at August 1, 1999
and January 31, 1999 3
Consolidated Statements of Operations
for the thirteen and twenty-six weeks ended
August 1, 1999 and August 2, 1998 4
Consolidated Statements of Cash Flows
for the twenty-six weeks ended
August 1, 1999 and August 2, 1998 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 10
Part II. Other Information
Item 1. Legal Proceedings 18
Item 4. Submission of Matters to a Vote of
Security Holders 18
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
</TABLE>
2
<PAGE> 3
PETsMART, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
Unaudited
<TABLE>
<CAPTION>
AUGUST 1, JANUARY 31,
1999 1999
--------- ---------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 76,605 $ 153,336
Receivables 34,798 49,235
Merchandise inventories 359,029 336,058
Prepaid expenses and other current assets 33,465 27,943
--------- ---------
Total current assets 503,897 566,572
Property held for sale and leaseback 10,204 9,395
Property and equipment, net 295,270 270,332
Other assets, net 97,559 85,700
--------- ---------
Total assets $ 906,930 $ 931,999
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 124,477 $ 148,915
Accrued payroll and employee benefits 28,398 24,799
Accrued occupancy expense 18,078 15,580
Accrued merger, business integration and restructuring costs 12,447 19,833
Other accrued expenses 49,834 44,704
Current maturities of capital lease obligations 15,110 16,434
--------- ---------
Total current liabilities 248,344 270,265
6 3/4% Subordinated Convertible Notes 200,000 200,000
Capital lease obligations 71,973 79,771
Deferred rents 16,984 16,656
Other liabilities 502 489
--------- ---------
Total liabilities 537,803 567,181
--------- ---------
Stockholders' equity:
Preferred stock; $.0001 par value, 10,000 shares
authorized, none outstanding -- --
Common stock; $.0001 par value; 250,000 shares
authorized, 117,222 and 116,461 shares issued and outstanding 12 12
Additional paid-in capital 396,995 394,799
Deferred compensation (2,203) (2,503)
Accumulated deficit (19,261) (24,857)
Accumulated other comprehensive loss (5,128) (2,633)
Less: treasury stock at cost, 150 shares at August 1, 1999 (1,288) --
--------- ---------
Total stockholders' equity 369,127 364,818
--------- ---------
Total liabilities and stockholders' equity $ 906,930 $ 931,999
========= =========
</TABLE>
The accompanying notes are an integral part of these unaudited financial
statements.
3
<PAGE> 4
PETsMART, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Unaudited
<TABLE>
<CAPTION>
FOR THE 13 WEEKS ENDED FOR THE 26 WEEKS ENDED
---------------------------- ---------------------------
AUG. 1, AUG. 2, AUG. 1, AUG. 2,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 564,537 $ 509,846 $ 1,128,649 $ 1,006,410
Cost of sales 420,643 388,252 842,777 762,675
----------- ----------- ----------- -----------
Gross profit 143,894 121,594 285,872 243,735
Store operating expenses 114,118 96,579 224,503 194,626
Store preopening expenses 2,730 3,276 4,799 7,534
General and administrative expenses 15,713 19,637 33,736 34,443
----------- ----------- ----------- -----------
Operating income 11,333 2,102 22,834 7,132
Interest income 712 1,138 2,021 1,620
Interest expense (5,906) (5,969) (11,858) (11,233)
----------- ----------- ----------- -----------
Income (loss) before equity in earnings (loss) of PETsMART.com,
income tax expense (benefit) and cumulative effect of a
change in accounting principle 6,139 (2,729) 12,997 (2,481)
Equity in earnings (loss) of PETsMART.com (1,402) -- (1,402) --
----------- ----------- ----------- -----------
Income (loss) before income tax expense (benefit) and
cumulative effect of a change in accounting principle 4,737 (2,729) 11,595 (2,481)
Income tax expense (benefit) 2,694 (1,051) 5,471 (956)
----------- ----------- ----------- -----------
Income (loss) before cumulative effect of
a change in accounting principle 2,043 (1,678) 6,124 (1,525)
Cumulative effect of a change in accounting
principle, net of tax -- -- (528) --
----------- ----------- ----------- -----------
Net income (loss) 2,043 (1,678) 5,596 (1,525)
----------- ----------- ----------- -----------
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments (1,531) (2,539) (2,495) (1,509)
----------- ----------- ----------- -----------
Comprehensive income (loss) $ 512 $ (4,217) $ 3,101 $ (3,034)
=========== =========== =========== ===========
Earnings per common share - basic:
Income (loss) before cumulative effect of a change
in accounting principle $ 0.02 $ (0.01) $ 0.05 $ (0.01)
Cumulative effect of a change in accounting
principle, net of tax -- -- -- --
----------- ----------- ----------- -----------
Net income (loss) $ 0.02 $ (0.01) $ 0.05 $ (0.01)
=========== =========== =========== ===========
Earnings per common share - assuming dilution:
Income (loss) before cumulative effect of a change $ 0.02 $ (0.01) $ 0.05 $ (0.01)
in accounting principle
Cumulative effect of a change in accounting
principle, net of tax -- -- -- --
----------- ----------- ----------- -----------
Net income (loss) $ 0.02 $ (0.01) $ 0.05 $ (0.01)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these unaudited financial
statements.
4
<PAGE> 5
PETsMART, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Unaudited
<TABLE>
<CAPTION>
FOR THE 26 WEEKS ENDED
----------------------
AUG. 1, AUG. 2,
1999 1998
--------- ---------
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ 5,596 $ (1,525)
Adjustments to reconcile net income (loss) to net cash
from (used in) operating activities -
Depreciation and amortization 22,741 21,222
Loss on disposal of property and equipment 250 808
Tax benefit resulting from exercise of stock options 68 427
Changes in assets and liabilities:
Receivables 3,748 (14,650)
Merchandise inventories (26,047) 7,951
Prepaid expenses and other current assets (5,522) (2,467)
Other assets (3,879) (2,592)
Accounts payable (3,672) (677)
Accrued payroll and employee benefits 2,944 647
Accrued occupancy expense 2,498 5,623
Accrued merger and integration charges (7,386) (6,873)
Other accrued expenses 5,130 (3,065)
Deferred rents 328 (295)
Other liabilities 13 --
--------- ---------
Net cash from (used in) operating activities (3,190) 4,534
--------- ---------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Purchases of leaseholds, fixtures and equipment (42,063) (21,305)
Purchases of property held for sale and leaseback (809) (3,063)
Proceeds from sales of property 473 11,742
--------- ---------
Net cash used in investing activities (42,399) (12,626)
--------- ---------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Net proceeds from issuance of common stock 2,128 4,673
Purchase of treasury stock (1,288) --
Increase (decrease) in bank overdraft (20,766) 7,477
Payment on capital lease obligations (8,721) (7,465)
--------- ---------
Net cash from (used in) financing activities (28,647) 4,685
--------- ---------
FOREIGN CURRENCY TRANSLATION LOSSES (2,495) (1,509)
--------- ---------
DECREASE IN CASH
AND CASH EQUIVALENTS (76,731) (4,916)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 153,336 125,082
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 76,605 $ 120,166
========= =========
</TABLE>
The accompanying notes are an integral part of these unaudited financial
statements.
5
<PAGE> 6
PETsMART, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THIRTEEN AND TWENTY-SIX WEEKS ENDED AUGUST 1, 1999 AND AUGUST 2, 1998
NOTE 1 - GENERAL:
The accompanying unaudited consolidated financial statements of
PETsMART, Inc. and Subsidiaries ("PETsMART" or "Company") have been
prepared in accordance with generally accepted accounting principles
for interim financial information. Accordingly, they do not include all
of the information and footnotes required by generally accepted
accounting principles for financial statements. In the opinion of
management, all adjustments considered necessary for a fair
presentation have been included.
Because of the seasonal nature of the Company's business, the results
of operations for the thirteen weeks and twenty-six weeks ended August
1, 1999 and August 2, 1998 are not necessarily indicative of the
results to be expected for the full year. For further information,
refer to the financial statements and footnotes thereto for the fiscal
year ended January 31, 1999, included in the Company's Annual Report on
Form 10-K (File No. 0-21888) filed with the Securities and Exchange
Commission on April 26, 1999.
NOTE 2 - TREASURY STOCK:
On June 1, 1999, the Company announced that its Board of Directors had
approved a program to repurchase up to an aggregate of $25,000,000 of
its Common Stock. The repurchases may be made from time to time on the
open market at prevailing market prices or in negotiated transactions
off the market. As of August 1, 1999, approximately $1.3 million had
been used to repurchase an aggregate of 150,000 shares of the Company's
Common Stock under this program. Treasury stock is presented in the
Company's Consolidated Balance Sheets, at cost, as a reduction of
stockholders' equity.
NOTE 3 - EQUITY IN PETSMART.COM:
During the second quarter of fiscal 1999, the Company made an
investment in PETsMART.com, an electronic commerce pet product
retailer, resulting in 49.9% equity ownership in that entity. The
investment is accounted for under the equity method under APB 18. The
Company's proportionate share of earnings (loss) from PETsMART.com,
which began operations in June 1999, was a $1.4 million loss for the
second quarter of 1999.
NOTE 4 - CHANGE IN ACCOUNTING PRINCIPLE:
In April 1998, the AICPA issued Statement of Position 98-5, "Reporting
on the Costs of Start-up Activities" ("SOP-98-5"). SOP 98-5 is
effective for financial statements for fiscal years beginning after
December 15, 1998. Under the provisions of SOP 98-5, costs of start-up
activities, including organization costs, should be expensed as
incurred. The Company adopted SOP 98-5 at the beginning of the first
quarter of fiscal 1999. Prior to its adoption of SOP 98-5, the Company
expensed its store preopening costs in the month in which the store
opened. The charge against earnings during the first quarter of fiscal
1999 related to this change in accounting principle was $888,000,
before taxes, and was recorded as a cumulative effect of a change in
accounting principle.
NOTE 5 - COMPREHENSIVE INCOME (LOSS):
The income tax benefit related to items of other comprehensive income
(loss) was approximately $1,368,000 and $1,589,000 for second quarter
1999 and 1998, respectively. For the twenty-six weeks ended August 1,
1999 and August 2, 1998, the income tax benefit related to items of
other comprehensive income (loss) was approximately $2,229,000 and
$945,000, respectively.
6
<PAGE> 7
PETsMART, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THIRTEEN AND TWENTY-SIX WEEKS ENDED AUGUST 1, 1999 AND AUGUST 2, 1998
NOTE 6 - EARNINGS PER SHARE:
Basic earnings per share is computed by dividing net income (loss) by
the weighted average of common shares outstanding during each period.
Diluted earnings per share is computed by dividing net income (loss) by
the weighted average number of common shares outstanding during the
period after giving effect to dilutive stock options and adjusted for
dilutive common shares assumed to be issued on conversion of PETsMART's
subordinated convertible notes.
A reconciliation of the basic and diluted earnings per share
computations for the thirteen weeks and twenty-six weeks ended August
1, 1999 and August 2, 1998 are as follows:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
--------------------------------------------------------------------------------
AUGUST 1, 1999 AUGUST 2, 1998
-------------------------------------- ---------------------------------------
WEIGHTED WEIGHTED
AVERAGE PER SHARE AVERAGE PER SHARE
INCOME (LOSS) SHARES AMOUNT INCOME (LOSS) SHARES AMOUNT
------------- ------ ------ ------------- ------ ------
Earnings (loss) per common
<S> <C> <C> <C> <C> <C> <C>
share - basic $ 2,043 117,135 $ 0.02 $(1,678) 116,104 $ (0.01)
Effect of dilutive securities:
Options -- 1,348 -- -- -- --
------- ------- ------- ------- ------- -------
Earnings (loss) per common
share - diluted $ 2,043 118,483 $ 0.02 $(1,678) 116,104 $ (0.01)
======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
-------------------------------------------------------------------------------
AUGUST 1, 1999 AUGUST 2, 1998
-------------------------------------- ---------------------------------------
WEIGHTED WEIGHTED
AVERAGE PER SHARE AVERAGE PER SHARE
INCOME(LOSS) SHARES AMOUNT INCOME(LOSS) SHARES AMOUNT
------------ ------ ------ ------------ ------ ------
Net income (loss) before cumulative
<S> <C> <C> <C> <C> <C> <C>
effect of an accounting change $ 6,124 116,995 $ 0.05 $(1,525) 115,984 $ (0.01)
Cumulative effect of an accounting
change (528) 116,995 (0.00) -- 115,984 --
------- ------- ------- ------- ------- -------
Earnings (loss) per common
share - basic 5,596 116,995 0.05 (1,525) 115,984 (0.01)
Effect of dilutive securities:
Options -- 1,159 -- -- -- --
------- ------- ------- ------- ------- -------
Earnings (loss) per common
share - diluted $ 5,596 118,154 $ 0.05 $(1,525) 115,984 $ (0.01)
======= ======= ======= ======= ======= =======
</TABLE>
At August 1, 1999, no shares of common stock had been issued upon
conversion of the subordinated convertible notes issued in November
1997. These notes are convertible into an aggregate of approximately
22.8 million shares of common stock. These shares were not included in
the calculation of diluted earnings per share for the thirteen and
twenty-six weeks ended August 1, 1999, or August 2, 1998, due to the
anti-dilutive effect they would have on earnings per share if
converted.
7
<PAGE> 8
PETsMART, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THIRTEEN AND TWENTY-SIX WEEKS ENDED AUGUST 1, 1999 AND AUGUST 2, 1998
NOTE 7 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 is effective
for financial statements for fiscal years beginning after June 15,
2000. This statement establishes the accounting and reporting standards
for derivative instruments and hedging activities, requiring that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure them at fair value. It also
provides for matching of the timing of gain or loss recognition on the
hedging instrument with the recognition of (i) the changes in the fair
value of the hedged asset or liability related to the hedged risk or
(ii) the hedged forecasted transaction earnings effect. The Company
will adopt SFAS 133 in the first quarter of fiscal 2001 and does not
expect a material effect on its financial statements as a result of
adoption.
NOTE 8 - FINANCIAL INFORMATION BY BUSINESS SEGMENT:
The Company operates three reportable business segments. PETsMART North
American operations, the largest segment, includes all retail stores in
the United States and Canada, including veterinary services, along with
the warehousing and corporate functions that support them. The PETsMART
U.K. segment includes all retail stores in the United Kingdom,
including the warehousing and corporate functions specific to the U.K.
operations. The PETsMART DIRECT segment represents the Company's direct
marketing operations, including its separate corporate and warehousing
functions. This segmentation is consistent with the format reviewed by
the Company's management.
Operating results and other financial data by business segment for the
thirteen and twenty-six weeks ended August 1, 1999 and August 2, 1998,
were as follows:
<TABLE>
<CAPTION>
FOR THE 13 WEEKS ENDED FOR THE 26 WEEKS ENDED
------------------------------ ------------------------------
AUG. 1, AUG. 2, AUG. 1, AUG. 2,
1999 1998 1999 1998
----------- ----------- ----------- -----------
(in thousands) (in thousands)
Net sales:
<S> <C> <C> <C> <C>
PETsMART North America $ 490,197 $ 436,085 $ 976,969 $ 858,378
PETsMART U.K 48,942 48,384 100,174 96,952
PETsMART DIRECT - External customers 25,398 25,377 51,506 51,080
PETsMART DIRECT - Intersegment 4,975 3,785 8,867 6,273
Eliminations (4,975) (3,785) (8,867) (6,273)
----------- ----------- ----------- -----------
Total net sales $ 564,537 $ 509,846 $ 1,128,649 $ 1,006,410
=========== =========== =========== ===========
Operating income (loss):
PETsMART North America $ 15,514 $ 4,058 $ 30,568 $ 11,972
PETsMART U.K (4,369) (3,422) (8,788) (7,086)
PETsMART DIRECT 188 1,466 1,054 2,246
----------- ----------- ----------- -----------
Operating income 11,333 2,102 22,834 7,132
Interest income 712 1,138 2,021 1,620
Interest expense (5,906) (5,969) (11,858) (11,233)
----------- ----------- ----------- -----------
Income (loss) before equity in earnings (loss)
of PETsMART.com and income tax
expense (benefit) $ 6,139 $ (2,729) $ 12,997 $ (2,481)
=========== =========== =========== ===========
</TABLE>
8
<PAGE> 9
PETsMART, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THIRTEEN AND TWENTY-SIX WEEKS ENDED AUGUST 1, 1999 AND AUGUST 2, 1998
Total assets by business segment as of August 1, 1999, and January 31,
1999, were as follows:
<TABLE>
<CAPTION>
AUG. 1, JAN. 31,
1999 1999
---------- ----------
(in thousands)
<S> <C> <C>
PETsMART North America $ 768,441 $ 787,667
PETsMART U.K. 97,378 99,720
PETsMART DIRECT 41,111 44,612
---------- ----------
Total assets $ 906,930 $ 931,999
========== ==========
</TABLE>
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Except for the historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could materially differ from those
discussed here. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in this section, as well as in
the sections entitled Distribution, Information Systems, Competition, and
Business Risks included in the Company's Form 10-K for the year ended January
31, 1999.
OVERVIEW
PETsMART is the largest operator of superstores specializing in pet
food, supplies and services in North America and the United Kingdom. At August
1, 1999, the Company operated 571 superstores, consisting of 456 superstores in
the United States, 95 superstores in the United Kingdom, and 20 superstores in
Canada. PETsMART's store base has grown rapidly since the Company's inception in
1986 through the opening of new stores and through the acquisitions of PETZAZZ
in March 1994, Petstuff in June 1995, Pet Food Giant in September 1995, and Pet
City in December 1996. The Company also acquired two leading catalog retailers,
Sporting Dog in May 1995 and State Line Tack in January 1996. All of these
transactions were accounted for as poolings of interest. Effective July 5, 1999,
the Company transferred operational control of the United States veterinary
clinics owned by PETsMART Veterinary Services, Inc. to its third-party operator,
Medical Management International, Inc.
The Company expects that future increases in net sales and net income,
if any, will be dependent on the opening of additional superstores and the
improved performance of new and existing superstores. In view of the increasing
maturity of its superstore base, as well as the planned opening of additional
superstores in existing markets and single-store markets, the Company's
comparable store sales increases may be lower in future periods. As a result of
its expansion plans, the Company anticipates the timing of new superstore
openings, and related preopening expenses, and the amount of revenue contributed
by new and existing superstores may cause the Company's quarterly results of
operations to fluctuate. The Company has achieved less favorable operating
results in certain North American geographic regions it recently entered than it
has achieved historically in other regions. In addition, because new superstores
have higher payroll, advertising and other store level expenses as a percentage
of sales than mature superstores, the impact of new superstore openings will
also contribute to lower store operating margins until they become established.
Commencing with the first quarter of fiscal 1999, the Company charges preopening
costs associated with each new superstore to earnings as the costs are incurred.
Therefore, the Company expects that the opening of large numbers of new
superstores in a given quarter will adversely impact its quarterly results of
operations for that period.
10
<PAGE> 11
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship to net sales
of certain items included in the Company's Consolidated Statement of Operations:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
--------------------- ----------------------
AUG. 1, AUG. 2, AUG. 1, AUG. 2,
1999 1998 1999 1998
------ ------ ------ ------
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 74.5 76.2 74.7 75.8
------ ------ ------ ------
Gross profit 25.5 23.8 25.3 24.2
Store operating expenses 20.2 18.9 19.9 19.3
Store preopening expenses 0.5 0.6 0.4 0.7
General and administrative expenses 2.8 3.9 3.0 3.4
------ ------ ------ ------
Operating income 2.0 0.4 2.0 0.7
Interest income 0.1 0.2 0.2 0.2
Interest expense 1.0 1.2 1.1 1.1
------ ------ ------ ------
Income (loss) before equity in earnings (loss) of PETsMART.com, income tax
expense (benefit) and cumulative effect of a
change in accounting principle 1.1 (0.5) 1.2 (0.2)
Equity in earnings (loss) of PETsMART.com (0.2) -- (0.1) --
------ ------ ------ ------
Income (loss) before income tax expense (benefit) and
cumulative effect of a change in accounting principle 0.8 (0.5) 1.0 (0.2)
Income tax expense (benefit) 0.5 (0.2) 0.5 (0.1)
------ ------ ------ ------
Income (loss) before cumulative effect of
a change in accounting principle 0.4 (0.3) 0.5 (0.2)
Cumulative effect of a change in accounting principle -- -- 0.0 --
------ ------ ------ ------
Net income (loss) 0.4% (0.3)% 0.5% (0.2)%
====== ====== ====== ======
</TABLE>
SECOND QUARTER FISCAL 1999 COMPARED TO SECOND QUARTER FISCAL 1998
Net sales increased 10.7% to approximately $564.5 million for the
thirteen weeks ended August 1, 1999, from $509.8 million for the thirteen weeks
ended August 2, 1998. Comparable North American store sales increased 5.2% for
the quarter, and comparable United Kingdom store sales decreased 0.5%. During
second quarter 1999, the Company opened 18 new superstores, including three
replacement stores, and closed two stores in North America and opened one store
and closed one store in the United Kingdom. The Company had 571 superstores in
operation at August 1, 1999 compared to 521 superstores open at August 2, 1998.
Gross profit, defined as net sales less cost of sales, including
distribution costs and store occupancy costs, increased as a percentage of net
sales from 23.8% for second quarter 1998 to 25.5% in second quarter 1999. This
result principally reflected improved product margins and sales mix changes,
offset by increased warehouse and distribution costs.
Store operating expenses, which includes payroll and benefits,
advertising and other store level expenses, increased as a percentage of net
sales to 20.2% for second quarter 1999 from 18.9% for second quarter 1998. The
increase reflected a planned increase in North American advertising expenses.
11
<PAGE> 12
Store preopening expenses as a percentage of net sales decreased to
0.5% for second quarter 1999, compared to 0.6% for second quarter 1998. For the
stores that opened during the second quarter of 1999, the average preopening
expense incurred was approximately $95,000 per store, which is consistent with
the Company's prior experience. Including three North American replacement
stores and one new United Kingdom store, 19 stores were opened during the second
quarter of 1999, versus 29 stores opened worldwide in second quarter 1998.
General and administrative expenses as a percentage of sales were 2.8%
for second quarter 1999, as compared to 3.9% for second quarter 1998. Excluding
$4.7 million of nonrecurring legal and settlement costs and executive severance,
general and administrative expenses as a percentage of sales were 2.9% for
second quarter 1998. Excluding approximately $4.0 million of expenses related to
professional fees incurred in connection with the Company's evaluation of
strategic alternatives for its U.K. operations, closure of two under-performing
U.K. stores and executive severance costs, G&A expenses for second quarter 1999
declined to approximately 2.1% of sales. This decrease is due primarily to lower
U.K. general and administrative costs and lower North American closed store
expenses versus the comparable prior year period.
The Company's operating income increased to $11.3 million for second
quarter 1999 from $2.1 million for second quarter 1998. Operating income as a
percentage of net sales increased from 0.4% for second quarter 1998 to 2.0% for
second quarter 1999. This increase was primarily due to increased gross profit
and lower general and administrative expenses as described above.
Interest income decreased to $0.7 million for second quarter 1999 from
$1.1 million for second quarter 1998 principally due to the decrease in average
cash balances during second quarter 1999 as compared to second quarter 1998.
Interest expense decreased slightly to $5.9 million for the second quarter 1999
from $6.0 million for second quarter 1998.
Equity in the loss of PETsMART.com, in which the Company has a 49.9%
equity investment, represents the Company's proportionate share of earnings
(loss) from PETsMART.com, which began operations in June 1999. The Company's
portion of PETsMART.com's losses for the second quarter of 1999 was $1.4
million.
For second quarter 1999, income taxes were provided at an annual
effective rate of 47.2%, compared to 38.5% for second quarter 1998. The increase
in the effective tax rate is a result of the exclusion of the Company's equity
in the earnings (loss) of PETsMART.com in taxable income. As PETsMART.com's
earnings or losses will be excluded from the Company's consolidated income tax
return, the Company's effective income tax rate will be impacted. Therefore,
excluding the $1.4 million loss from PETsMART.com incurred in second quarter
1999, the Company's effective tax rate would have been 41%. The fluctuation
in this rate as compared to the 38.5% for the prior year comparable period
was caused by changes in foreign tax rates and mix of foreign and domestic
taxable income or loss. The 1999 effective tax rate also incorporates
projected 1999 losses from the Company's investment in PETsMART.com,
the tax benefit related to such is not available to the Company.
As a result of the foregoing, the Company reported a net income of $2.0
million (or $0.02 per share - diluted) for second quarter 1999 compared to a net
loss of $1.7 million (or $0.01 per share - diluted) for the second quarter 1998.
TWENTY-SIX WEEKS ENDED AUGUST 1, 1999 COMPARED TO TWENTY-SIX WEEKS ENDED AUGUST
2, 1998
Net sales increased 12.1% to approximately $1.13 billion for the
twenty-six weeks ended August 1, 1999 from $1.01 billion for the twenty-six
weeks ended August 2, 1998. Comparable North American store sales increased 4.7%
for the period, and comparable United Kingdom store sales increased 0.5%. During
the twenty-six weeks ended August 1, 1999, the Company opened 44 new
superstores, including four replacement stores, and closed nine stores in North
America and opened three stores and closed one store in the United Kingdom.
Gross profit, defined as net sales less cost of sales, including
distribution costs and store occupancy costs, increased as a percentage of net
sales to 25.3% for the twenty-six week period ended August 1, 1999 from 24.2%
for the same period in 1998. This result principally reflected improved product
margins and sales mix changes offset partially by increased warehouse and
distribution costs.
Store operating expenses, which includes payroll and benefits,
advertising and other store level expenses, increased as a percentage of net
sales to 19.9% for the twenty-six weeks ended August 1, 1999 from 19.3% for the
twenty-six weeks ended August 2, 1998. This increase was principally due to a
planned increase in advertising expenses during the first half of fiscal 1999 as
compared to the same period in fiscal 1998.
12
<PAGE> 13
Store preopening expenses as a percentage of net sales decreased to
0.4% for the twenty-six weeks ended August 1, 1999, compared to 0.7% for the
twenty-six weeks ended August 2, 1998. A portion of first quarter 1999's
preopening expenses were recorded as a cumulative effect of a change in
accounting principle, which affected the year-over-year comparability of the
store preopening expense component of the Company's Consolidated Statements of
Operations. For the stores that opened during the first twenty-six weeks of
fiscal 1999, the average preopening expense incurred was approximately $95,000
per store, which is consistent with the Company's prior experience.
General and administrative expenses as a percentage of sales were 3.0%
of sales for the twenty-six weeks ended August 1, 1999, as compared to 3.4% for
the twenty-six weeks ended August 2, 1998. Excluding legal and severance costs,
general and administrative costs as a percentage of sales were 3.0% for the
first twenty-six weeks of fiscal 1998. Excluding approximately $4.0 million of
expenses related to professional fees incurred in connection with the Company's
evaluation of strategic alternatives for its U.K. operations, closure of two
under-performing U.K. stores and executive severance costs, G&A expenses
declined to approximately 2.6% of sales. This decrease is due primarily to lower
U.K. general and administrative costs and lower North American closed store
expenses versus the comparable prior year period.
The Company's operating income increased to $22.8 million for the
twenty-six weeks ended August 1, 1999 from $7.1 million for the twenty-six weeks
ended August 2, 1998. This increase was primarily due to increased gross profit
and decreased general and administrative expenses as described above.
Interest income increased to $2.0 million for the twenty-six weeks
ended August 1, 1999 from $1.6 million for the same fiscal period in 1998.
Interest expense increased to $11.9 million for the twenty-six weeks ended
August 1, 1999 from $11.2 million for the twenty-six weeks ended August 2, 1998.
Equity in the loss of PETsMART.com, in which the Company has a 49.9%
equity investment, represents the Company's proportionate share of earnings
(loss) from PETsMART.com, which began operations in June 1999. The Company's
portion of PETsMART.com's losses for the second quarter of 1999 was $1.4
million.
For the twenty-six weeks ended August 1, 1999, income taxes were
provided at an annual effective rate of 47.2%, compared to 38.5% for the same
period in 1998. The increase in the effective tax rate is a result of the
exclusion of the Company's equity in the earnings (loss) of PETsMART.com in
taxable income. As PETsMART.com's earnings or losses will be excluded from the
Company's consolidated income tax return, the Company's effective income tax
rate will be impacted. Therefore, excluding the $1.4 million loss from
PETsMART.com incurred in second quarter 1999, the Company's effective tax rate
would have been 41%. The fluctuation in this rate as compared to the 38.5% for
the comparable period in the prior year was caused by changes in foreign tax
rates and mix of foreign and domestic taxable income or loss. The 1999 effective
tax rate also incorporates projected 1999 losses from the Company's investment
in PETsMART.com, the tax benefit related to such is not available to the
Company.
In April 1998, the AICPA issued Statement of Position 98-5, "Reporting
on the Costs of Start-up Activities" ("SOP-98-5"). SOP 98-5 is effective for
financial statements for fiscal years beginning after December 15, 1998. Under
the provisions of SOP 98-5, costs of start-up activities, including organization
costs, should be expensed as incurred. The Company adopted SOP 98-5 at the
beginning of the first quarter of fiscal 1999. Prior to its adoption of SOP
98-5, the Company expensed its store preopening costs in the month in which the
store opened. The charge against earnings during the first quarter of fiscal
1999 related to this change in accounting principle was $0.9 million, before
taxes, and was recorded as a cumulative effect of a change in accounting
principle ($0.5 million after tax).
As a result of the foregoing, the Company reported net income of $5.6
million (or $0.05 per share - diluted) for the twenty-six weeks ended August 1,
1999 compared to a net loss of $1.5 million (or ($0.01) per share - diluted) for
the same period in fiscal 1998. The inclusion of equity in loss of PETsMART.com
in the 1999 results, and the related effect on the Company's effective tax rate,
reduced net income per common share on a diluted basis by $0.02.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations and expansion program to date
principally through cash flows from operations, the sale of equity and debt
securities, lease financing and borrowings under its credit facility. Additional
sources of financing have included vendor terms on inventory purchases.
In November 1997, $200,000,000 of 6-3/4% Subordinated Convertible Notes
(the "Notes") were issued by the Company and sold to "qualified institutional
buyers" as defined in Rule 144A of the Securities Act of 1933, as amended (the
"Securities Act") in transactions exempt from registration under the Securities
Act, and in sales outside the United States within the meaning of Regulation S
under the Securities Act. The net proceeds to PETsMART from the sale of the
Notes were approximately $193,250,000.
13
<PAGE> 14
On June 1, 1999, the Company announced that its Board of Directors had
approved a program to repurchase up to an aggregate of $25,000,000 of its Common
Stock. The repurchases may be made from time to time on the open market at
prevailing market prices or in negotiated transactions off the market. As of
August 1, 1999, approximately $1.3 million had been used to repurchase an
aggregate of 150,000 shares of the Company's Common Stock under this program.
The repurchase program is expected to continue through the end of the 1999
fiscal year unless extended or shortened by the Company's Board of Directors.
At August 1, 1999, total assets were $906.9 million, of which $503.9
million were current assets. Cash and cash equivalents were $76.6 million.
Cash used in operations was $3.2 million for the twenty-six weeks ended
August 1, 1999, compared to cash provided by operations of $4.5 million for the
same period of the prior year. The increase in cash used from operations for the
first half of fiscal 1999 is a direct result of the Company's planned increase
in inventories, and corresponding accelerated payment of related invoices to
maximize cash discounts, during the period of conversion of the Company's
management information systems (see below). Merchandise accounts payable
leveraging (the percentage of merchandise inventory financed by vendor credit
terms, e.g., accounts payable divided by merchandise inventory), decreased to
34.7% at August 1, 1999, compared to 44.3% at January 31, 1999. Inventory
balances were approximately $359.0 million at August 1, 1999, and $336.1 million
at February 1, 1998. Average North American store inventory, which excludes the
inventory of PETsMART DIRECT, decreased to $658,000 per store at August 1, 1999,
from approximately $660,000 at January 31, 1999.
The Company uses cash in investing activities to purchase leaseholds,
fixtures and equipment for new superstores and, to a lesser extent, to purchase
equipment and computer software in support of its systems initiatives. The
Company also uses cash to purchase superstores for sale and leaseback. Net cash
used in investing activities was $42.4 million for the twenty-six weeks ended
August 1, 1999, compared to $12.6 million used in the same period in the prior
year.
Net cash flow used in financing activities, primarily the change in the
Company's bank overdraft, payment on capital lease obligations, and proceeds
from the exercise of employee stock options, was $28.6 million for the
twenty-six weeks ended August 1, 1999. Net cash of $5.1 million was provided by
these activities, net, during the twenty-six weeks ended August 2, 1998.
The Company's primary long-term capital requirements are for opening
new superstores, the costs of closing redundant or inadequate superstores,
corporate investment, including costs associated with the continued development
and implementation of system enhancements to the Company's new information
system, and for working capital.
All of the Company's superstores are leased facilities. The Company
estimates that the cash requirements after lease financing to open each new U.S.
prototype superstore, including store fixtures and equipment, leasehold
improvements, preopening costs and inventory is approximately $975,000. This
amount will typically include an average of approximately $50,000 for leasehold
improvements (an average of approximately $400,000 if the superstore site is a
rehabilitated unit), approximately $100,000 for preopening costs, and
approximately $375,000 for inventory, net of accounts payable. Approximately
$450,000 is required for store fixtures and equipment, which is typically
leased.
The Company has begun to open 19,000 square foot superstore locations,
primarily in single-store markets and as fill-in locations in existing markets.
The Company expects that these smaller stores will comprise a growing percentage
of its new store locations in future years as the Company's real estate strategy
matures. These locations are generally leased facilities and cash requirements
for these locations will typically include approximately $325,000 for inventory,
net of accounts payable, approximately $100,000 for preopening costs, and an
average of approximately $50,000 for leasehold improvements. Approximately
$375,000 is required for store fixtures and equipment, which is typically
financed through leasing.
Based upon the Company's current plan to open approximately 12 new
North American superstores during the remainder of fiscal 1999, approximately
$11.7 million will be needed to finance these openings. The Company may also
expend additional funds to take advantage of opportunities that arise from time
to time for the acquisition of businesses or lease rights from tenants occupying
retail space that is suitable for a PETsMART superstore.
PETsMART completed its implementation of an integrated North America
information system, which features a common set of applications, during second
quarter 1999. The Company estimates that its costs in connection with the
continued development and implementation of system enhancements, before giving
consideration to any lease financing that may be available, will be up to $20
million annually through fiscal 2000. The Company continues to replace and
upgrade its existing point-of-sale equipment. This project is anticipated to be
complete in all North American stores by the end of third quarter 1999. Total
expenditures for hardware and software related to the POS project are estimated
to be $7 million to $9 million, and will be financed through a lease
transaction.
14
<PAGE> 15
Capital expenditures, net of construction allowances, were
approximately $42.1 million during the twenty-six weeks ended August 1, 1999.
Such expenditures were used primarily for the opening of new superstores in
North America and the United Kingdom, the development and implementation of the
Company's new information system and the remodel and maintenance of the
Company's existing superstores.
Management believes that its existing cash and cash equivalents,
together with cash flow from operations, borrowing capacity under its bank
credit facility and available lease financing will provide adequate funds for
the Company's foreseeable working capital needs, planned capital expenditures
and debt service obligations. The Company's ability to fund its operations and
to make planned capital expenditures and scheduled debt payments, to refinance
indebtedness and to remain in compliance with all of the financial covenants
under its debt agreements depends on its future operating performance and cash
flow, which in turn are subject to prevailing economic conditions and to
financial, business and other factors, some of which are beyond the Company's
control.
15
<PAGE> 16
SEASONALITY AND INFLATION
The Company's business is subject to some seasonal fluctuation and it
typically realizes a substantial portion of its net sales and operating profits
during the fourth fiscal quarter. In addition, sales of certain of the Company's
products and services designed to address pet health needs, such as flea and
tick problems, have been and may continue to be negatively impacted by the
introduction of alternative treatments, as well as by variations in weather
conditions. In addition, because PETsMART's superstores typically draw customers
from a large trade area, sales may be impacted by adverse weather or travel
conditions.
The Company's results of operations and financial position are
presented based upon historical cost. Although the Company cannot accurately
anticipate the effect of inflation on its operations, it does not believe
inflation is likely to have a material adverse effect on its net sales or
results of operations.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 is effective for
financial statements for fiscal years beginning after June 15, 2000. This
statement establishes the accounting and reporting standards for derivative
instruments and hedging activities, requiring that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure them at fair value. It also provides for matching of the
timing of gain or loss recognition on the hedging instrument with the
recognition of (i) the changes in the fair value of the hedged asset or
liability related to the hedged risk or (ii) the hedged forecasted transaction
earnings effect. The Company will adopt SFAS 133 in the first quarter of fiscal
2001 and does not expect a material effect on its financial statements as a
result of adoption.
YEAR 2000 READINESS
The Year 2000 systems processing problem, as it is commonly known, is
caused by currently utilized computer systems, including several used by the
Company, being coded to only accept two-digit codes for the year field in a date
set of data. Beginning in the year 2000, these date fields must be able to
accept four-digit entries to distinguish 1900 base-year dates from 2000
base-year dates. The Company is and has been addressing the Year 2000 systems
issue through various initiatives, all of which are in progress. A new
integrated North American information system, which is Year 2000 compliant, was
implemented during the second quarter of fiscal 1999. Other initiatives in place
include issue awareness programs, inventory and identification of all Year
2000-sensitive components (including hardware, software, and
telecommunications), requesting of compliance status statements from Company
business partners, suppliers, and vendors, and testing of all new and existing
systems. Year 2000 compliance activities are expected to be complete by October
1999. The Company estimates that its costs in connection with the continued
enhancement of the new information system, before giving consideration to any
lease financing that may be available, will be up to $20 million annually
through fiscal year 2000, plus maintenance and upkeep costs which are not
expected to be material. Similar Year 2000 readiness programs are in place in
the Company's United Kingdom and Catalog operational segments, with costs to
address those segment's Year 2000 issues not expected to be material.
There can be no assurance, however, that the new North American
information system will deliver the desired operational benefits. Nor can there
be assurance that the initiatives put in place to address the Year 2000 issues
will identify and remove all potential operational impacts. While significant
economic detriment from Year 2000 issues is not expected, there can be no
assurance that there will not be operational difficulties in the Company's
stores, warehouses, or corporate offices, the financial magnitude of which is
not currently estimable. The Year 2000 initiatives being conducted by the
Company are expected to significantly reduce the Company's level of uncertainty
about the Year 2000 problem, including the Year 2000 compliance and readiness of
external partners. The Company believes that, with the implementation of new
North American business systems and the completion of its Year 2000 initiatives
as scheduled, the possibility of significant interruptions of normal operations
will be reduced. Although the Company believes contingency plans will not need
to be utilized based on progress to date, contingency plans have been developed
for each critical system. The specifics of the contingency plans vary depending
on the system and assessed risk of non-compliance and such plans are modified
periodically based on review and testing. The plans are comprised of activities
such as upgrading existing systems, reallocating internal resources, obtaining
additional external resources, and implementing temporary manual processes.
16
<PAGE> 17
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company is subject to the risk of fluctuating interest rates in the
ordinary course of business on certain assets including cash and cash
equivalents, and on borrowings under its revolving credit arrangement. The
Company has entered into interest rate swaps to lower its funding costs and
reduce its exposure to changes in short-term interest rates. Under these
arrangements, the Company may convert variable rate lease payments and
borrowings at a fixed rate of approximately 6.6%. The Company does not expect
changes in fair value of the arrangements to have a significant effect on the
Company's operations, cash flow or financial position.
17
<PAGE> 18
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On January 6, 1998, the Company was served with a complaint entitled Miller v.
Parker, et al in the Federal District Court for the District of Arizona, Phoenix
Division by a putative class of investors in PETsMART, Inc. securities. The
lawsuit alleges, among other things, that the Company and its officers and
directors issued materially false financial statements about the Company's flea
and tick product inventory, financial condition, sales and use tax obligations,
and results of operations. Several additional complaints by putative class
representatives alleging substantially the same allegations have been filed in
the District of Arizona. On May 18, 1998, the District Court entered an order
consolidating the securities class action litigation into a single action
entitled In Re PETsMART, Inc. Securities Litigation, CIV-98-20-PHX-ROS (JBM),
and appointing lead counsel. On July 21, 1998, Plaintiff filed a consolidated
amended complaint in the District Court. The Company and the individual
defendants filed a motion to dismiss the consolidated amended complaint, and on
June 3, 1999, the Court entered an order granting the motion to dismiss.
Plaintiff's were given 60 days to amend the complaint but did not do so. The
Company filed a request that the case be dismissed and an order dismissing the
case with prejudice was entered on September 3, 1999. The Plaintiffs will have
30 days to file a notice of appeal. In the event of an appeal, the Company
intends to oppose it vigorously.
In addition, certain former Pet City affiliates have retained counsel and made
allegations claiming that the Company misled the shareholders of Pet City at the
time of the acquisition of Pet City concerning PETsMART's business, finances and
prospects. On September 30, 1997, shortly after the receipt of the allegations
by PETsMART, Richard Northcott, the former Chairman of Pet City, resigned as a
director of the Company. No litigation has been filed with respect to this
matter, and the Company believes that the allegations are without merit.
Nevertheless, there can be no assurance that one or more former Pet City
affiliates will not initiate litigation seeking monetary damages or an equitable
remedy.
On March 28, 1998, a lawsuit was filed in Federal District Court in the Middle
District of Florida entitled Cavucci et al v PETsMART, Inc. (Case No 98-CV-340).
This class-action complaint alleges unspecified damages based on various alleged
violations of the Fair Labor Standards Act (FLSA), including alleged failures to
pay overtime premiums. On May 12, 1998, the Company answered the complaint
denying all material allegations. The court entered an order of procedure and
schedule for trial on July 20, 1998, which outlines all discovery and trial
dates. On November 30, 1998, PETsMART filed four motions for partial summary
judgment on Plaintiffs claim that four in-store management positions were
improperly classified as exempt under FLSA. These motions were denied. On or
about July 30, 1999, Plaintiffs filed a motion seeking Class Certification and
Court-Supervised Notice to Potential Collective Action Members. The Company
opposed the motion and the Court has the matter under review. Trial on this
matter is currently scheduled for December 1, 1999, and the Company intends to
continue to defend itself vigorously.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Registrant's Annual Meeting of Stockholders (Annual Meeting) was held on
June 24, 1999. At the Annual Meeting, the stockholders of the registrant (i)
elected each of the persons below to serve as a director of the Registrant until
the specific Annual Meeting of Stockholders listed below or until his or her
successor is elected; and (ii) ratified the selection of Deloitte & Touche LLP
as the Registrant's Independent Accountants for the fiscal year ending January
30, 2000.
The registrant had 116,748,592 shares of Common Stock outstanding as of May 3,
1999, the record date for the Annual Meeting. At the Annual Meeting, holders of
a total of 104,115,010 shares of Common Stock were present in person or
represented by Proxy. The following sets forth information regarding the results
of the voting at the Annual Meeting:
PROPOSAL 1 - ELECTION OF DIRECTORS
<TABLE>
<CAPTION>
Director To Serve Through
- -------- ----------------
<S> <C>
Lawrence A. Del Santo 2002 Annual Meeting
Philip L. Francis 2002 Annual Meeting
Richard K. Lochridge 2002 Annual Meeting
</TABLE>
18
<PAGE> 19
<TABLE>
<S> <C>
Votes in Favor 103,745,855
Votes Against 15,321
Abstentions 353,834
</TABLE>
19
<PAGE> 20
PROPOSAL 2 - RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
<TABLE>
<S> <C>
Votes in Favor 103,307,224
Votes Against 612,264
Abstentions 195,522
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule (EDGAR only)
(b) Reports on Form 8-K
During the thirteen weeks ended August 1, 1999 the Company filed no
reports on Form 8-K.
20
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, on September 13, 1999.
PETsMART, INC.
(Registrant)
/s/ Neil T. Watanabe
---------------------------------
Neil T. Watanabe
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
21
<PAGE> 22
Exhibit Index
Exhibit No. Description
----------- -----------
Exhibit 27 Financial Data Schedule (EDGAR only)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 3 AND 4 OF THE COMPANY'S FORM 10-Q FOR THE YEAR TO DATE AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-30-2000
<PERIOD-START> FEB-01-1999
<PERIOD-END> AUG-01-1999
<EXCHANGE-RATE> 1
<CASH> 76,605
<SECURITIES> 0
<RECEIVABLES> 34,798
<ALLOWANCES> 0
<INVENTORY> 359,029
<CURRENT-ASSETS> 503,897
<PP&E> 465,148
<DEPRECIATION> 169,878
<TOTAL-ASSETS> 906,930
<CURRENT-LIABILITIES> 248,344
<BONDS> 271,973
0
0
<COMMON> 12
<OTHER-SE> 369,115
<TOTAL-LIABILITY-AND-EQUITY> 906,930
<SALES> 1,128,649
<TOTAL-REVENUES> 1,128,649
<CGS> 842,777
<TOTAL-COSTS> 842,777
<OTHER-EXPENSES> 263,038
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,858
<INCOME-PRETAX> 11,595
<INCOME-TAX> 5,471
<INCOME-CONTINUING> 6,124
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 528
<NET-INCOME> 5,596
<EPS-BASIC> 0.05
<EPS-DILUTED> 0.05
</TABLE>
