UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------------- --------------------
Commission file number: 0-23574
--------------------------------------------
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below:
PETCO ANIMAL SUPPLIES 401(k) PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Petco Animal Supplies, Inc.
9125 Rehco Road
San Diego, CA 92121
<PAGE>
PETCO ANIMAL SUPPLIES 401(k) PLAN
Financial Statements
December 31, 1998 and 1997
(With Independent Auditors' Report Thereon)
<PAGE>
PETCO ANIMAL SUPPLIES 401(k) PLAN
Table of Contents
Page
Independent Auditors' Report 1
Statement of Net Assets Available for Benefits with Fund
Information as of December 31, 1998 2
Statement of Net Assets Available for Benefits with Fund
Information as of December 31, 1997 3
Statement of Changes in Net Assets Available for Benefits with
Fund Information for the year ended December 31, 1998 4
Statement of Changes in Net Assets Available for Benefits with
Fund Information for the year ended December 31, 1997 6
Notes to Financial Statements 8
Schedules
1 Schedule of Assets Held for Investment Purposes as of
December 31, 1998 12
2 Schedule of Reportable Transactions for the year ended
December 31, 1998 13
<PAGE>
Independent Auditors' Report
The Administrative Committee
Petco Animal Supplies 401(k) Plan:
We have audited the accompanying statements of net assets available for benefits
of Petco Animal Supplies 401(k) Plan (Plan) as of December 31, 1998 and 1997,
and the related statements of changes in net assets available for benefits for
each of the years in the two-year period ended December 31, 1998. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 1998 and 1997, and the changes in net assets available for benefits
for each of the years in the two-year period then ended, in conformity with
generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules 1 and 2 are
presented for the purpose of additional analysis and are not a required part of
the basic financial statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. These supplemental
schedules are the responsibility of the Plan's management. The fund information
in the statements of net assets available for benefits and the statements of
changes in net assets available for benefits is presented for purposes of
additional analysis rather than to present the net assets available for plan
benefits and changes in net assets available for plan benefits of each fund. The
supplemental schedules and fund information have been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, are fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
KPMG LLP
San Diego, California
June 21, 1999
<PAGE>
<TABLE>
PETCO ANIMAL SUPPLIES 401(k) PLAN
Statement of Net Assets Available for Benefits with Fund Information
December 31, 1998
<CAPTION>
Participant Directed
--------------------------------------------------------------------------------------------------------
Prudential
Governmental
Securities Prudential
Trust Prudential Prudential Global
Money Prudential Prudential Allocation Government Natural Petco
Market Utility Equity Balanced Income Resources Common
Assets Fund Fund Fund Fund Fund Fund Stock
------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investments, at fair value:
Mutual funds $ -- 677,440 1,619,534 479,298 195,354 108,741 --
Common stock -- -- -- -- -- -- 363,905
Money market funds 294,774 -- -- -- -- -- --
Participant loans -- -- -- -- -- -- --
------------- ------------- ------------- ------------- ------------- ------------- -------------
Total assets 294,774 677,440 1,619,534 479,298 195,354 108,741 363,905
Liabilities
Excess contributions due to
participants (Note 5) 8,506 17,422 54,167 4,728 3,142 3,348 776
------------- ------------- ------------- ------------- ------------- ------------- -------------
Net assets
available for
benefits $ 286,268 660,018 1,565,367 474,570 192,212 105,393 363,129
============= ============= ============= ============= ============= ============= =============
Participant Directed Nonparticipant Directed
---------------------------- ----------------------------
Fidelity
Advisor Putnam Prudential Prudential
Equity OTC Special Government
Portfolio Emerging Money Money
Growth Growth Market Market Loans to
Assets Fund Fund Fund B Fund Participants Total
------------- ------------- ------------- ------------- ------------- -------------
Investments, at fair value:
Mutual funds $ 952,026 476,833 -- -- -- 4,509,226
Common stock -- -- -- -- -- 363,905
Money market funds -- -- 158 11,243 -- 306,175
Participant loans -- -- -- -- 29,433 29,433
------------- ------------- ------------- ------------- ------------- -------------
Total assets 952,026 476,833 158 11,243 29,433 5,208,739
Liabilities
Excess contributions due to
participants (Note 5) 41,240 16,222 -- -- -- 149,551
------------- ------------- ------------- ------------- ------------- -------------
Net assets
available for
benefits $ 910,786 460,611 158 11,243 29,433 5,059,188
============= ============= ============= ============= ============= =============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
PETCO ANIMAL SUPPLIES 401(k) PLAN
Statement of Net Assets Available for Benefits with Fund Information
December 31, 1997
<CAPTION>
Participant Directed
--------------------------------------------------------------------------------------------------------
Prudential
Governmental
Securities Prudential
Trust Prudential Prudential Global
Money Prudential Prudential Allocation Government Natural Petco
Market Utility Equity Balanced Income Resources Common
Assets Fund Fund Fund Fund Fund Fund Stock
------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investments, at fair value:
Mutual funds $ -- 503,707 1,001,092 350,463 119,975 94,418 --
Common stock -- -- -- -- -- -- 157,565
Money market funds 181,562 -- -- -- -- -- --
Participant loans -- -- -- -- -- -- --
------------- ------------- ------------- ------------- ------------- ------------- -------------
Total assets 181,562 503,770 1,001,092 350,463 119,975 94,418 157,565
Liabilities
Excess contributions due to
participants (Note 5) 6,002 16,299 37,975 2,798 73 1,442 174
------------- ------------- ------------- ------------- ------------- ------------- -------------
Net assets
available for
benefits $ 175,560 487,408 963,117 347,665 119,902 92,976 157,391
============= ============= ============= ============= ============= ============= =============
Participant Directed Nonparticipant Directed
---------------------------- ----------------------------
Fidelity
Advisor Putnam Prudential Prudential
Equity OTC Special Government
Portfolio Emerging Money Money
Growth Growth Market Market Loans to
Assets Fund Fund Fund B Fund Participants Total
------------- ------------- ------------- ------------- ------------- -------------
Investments, at fair value:
Mutual funds $ 237,476 174,779 -- -- -- 2,481,910
Common stock -- -- -- -- -- 157,565
Money market funds -- -- 151 10,857 -- 192,570
Participant loans -- -- -- -- 31,397 31,397
------------- ------------- ------------- ------------- ------------- -------------
Total assets 237,476 174,779 151 10,857 31,397 2,863,442
Liabilities
Excess contributions due to
participants (Note 5) 6,272 3,991 -- -- -- 75,026
------------- ------------- ------------- ------------- ------------- -------------
Net assets
available for
benefits $ 231,204 170,788 151 10,857 31,397 2,788,416
============= ============= ============= ============= ============= =============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
PETCO ANIMAL SUPPLIES 401(k) PLAN
Statement of Changes in Net Assets Available for Benefits with Fund Information
For the year ended December 31, 1998
<CAPTION>
Participant Directed
--------------------------------------------------------------------------------------------------------
Prudential
Governmental
Securities Prudential
Trust Prudential Prudential Global
Money Prudential Prudential Prudential Allocation Government Natural
Market Utility Equity Allocation Balanced Income Resources
Fund Fund Fund Fund Fund Fund Fund
------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Additions to net assets
attributed to:
Investment income:
Net appreciation
(depreciation) in
fair value of
investments $ -- (15,503) (23,149) -- (6,388) 3,549 (22,571)
Interest -- -- -- -- -- -- --
Dividends 9,650 60,336 122,647 -- 40,938 8,949 5,284
Investment expenses (135) (117) (315) -- (139) (43) (60)
------------- ------------- ------------- ------------- ------------- ------------- -------------
9,515 44,716 99,183 -- 34,411 12,455 (17,347)
------------- ------------- ------------- ------------- ------------- ------------- -------------
Contributions:
Employee 94,191 122,583 449,184 -- 141,736 59,383 49,319
Employer 53,388 43,421 127,252 -- 35,052 17,319 13,056
------------- ------------- ------------- ------------- ------------- ------------- -------------
147,579 166,004 576,436 -- 176,788 76,702 62,375
------------- ------------- ------------- ------------- ------------- ------------- -------------
Total additions 157,094 210,720 675,619 -- 211,199 89,157 45,028
Deductions from net assets
attributed to - benefits paid
to participants 20,648 42,632 82,512 -- 58,795 12,266 11,030
------------- ------------- ------------- ------------- ------------- ------------- -------------
Net increase
(decrease) prior
to interfund
transfers 136,446 168,088 593,107 -- 152,404 76,891 33,998
Interfund transfers (25,738) 4,522 9,143 -- (25,499) (4,581) (21,581)
------------- ------------- ------------- ------------- ------------- ------------- -------------
Net increase
(decrease) 110,708 172,610 602,250 -- 126,905 72,310 12,417
Net assets available for
benefits:
Beginning of year 175,560 487,408 963,117 -- 347,665 119,902 92,976
------------- ------------- ------------- ------------- ------------- ------------- -------------
End of year $ 286,268 660,018 1,565,367 -- 474,570 192,212 105,393
============= ============= ============= ============= ============= ============= =============
</TABLE>
<PAGE>
<TABLE>
PETCO ANIMAL SUPPLIES 401(k) PLAN
Statement of Changes in Net Assets Available for Benefits with Fund Information
For the year ended December 31, 1998
<CAPTION>
Participant Directed Nonparticipant Directed
----------------------------------------- ----------------------------
Fidelity
Advisor Putnam Prudential Prudential
Equity OTC Special Government
Petco Portfolio Emerging Money Money
Common Growth Growth Market Market Loans to
Stock Fund Fund Fund B Fund Participants Total
------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Additions to net assets
attributed to:
Investment income:
Net appreciation
(depreciation) in
fair value of
investments $ (108,117) 101,587 39,807 -- (5) -- (30,790)
Interest -- -- -- -- -- 3,199 3,199
Dividends -- 90,268 14,066 7 524 -- 352,669
Investment expenses -- (92) (146) -- -- -- (1,047)
------------- ------------- ------------- ------------- ------------- ------------- -------------
(108,117) 191,763 53,727 7 519 3,199 324,031
------------- ------------- ------------- ------------- ------------- ------------- -------------
Contributions:
Employee 262,608 394,070 211,319 -- -- -- 1,784,393
Employer 69,007 101,279 58,810 -- -- -- 518,584
------------- ------------- ------------- ------------- ------------- ------------- -------------
331,615 495,349 270,129 -- -- -- 2,302,977
------------- ------------- ------------- ------------- ------------- ------------- -------------
Total additions 223,498 687,112 323,856 7 519 3,199 2,627,008
Deductions from net assets
attributed to - benefits paid
to participants 20,421 54,518 39,177 -- 22 14,215 356,236
------------- ------------- ------------- ------------- ------------- ------------- -------------
Net increase
(decrease) prior
to interfund
transfers 203,077 632,594 284,679 7 497 (11,016) 2,270,772
Interfund transfers 2,661 46,988 5,144 -- (111) 9,052 --
------------- ------------- ------------- ------------- ------------- ------------- -------------
Net increase
(decrease) 205,738 679,582 289,823 7 386 (1,964) 2,270,772
Net assets available for
benefits:
Beginning of year 157,391 231,204 170,788 151 10,857 31,397 2,788,416
------------- ------------- ------------- ------------- ------------- ------------- -------------
End of year $ 363,129 910,786 460,611 158 11,243 29,433 5,059,188
============= ============= ============= ============= ============= ============= =============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
PETCO ANIMAL SUPPLIES 401(k) PLAN
Statement of Changes in Net Assets Available for Benefits with Fund Information
For the year ended December 31, 1997
<CAPTION>
Participant Directed
--------------------------------------------------------------------------------------------------------
Prudential
Governmental
Securities Prudential
Trust Prudential Prudential Global
Money Prudential Prudential Prudential Allocation Government Natural
Market Utility Equity Allocation Balanced Income Resources
Fund Fund Fund Fund Fund Fund Fund
------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Additions to net assets
attributed to:
Investment income:
Net appreciation
(depreciation) in
fair value of
investments $ (1) 56,720 101,738 (1,402) (37,652) 2,693 (22,809)
Interest 5,225 -- -- -- -- -- --
Dividends -- 49,455 64,368 39,614 43,829 5,197 12,349
Investment expenses -- -- (15) -- -- -- --
------------- ------------- ------------- ------------- ------------- ------------- -------------
5,224 106,175 166,091 38,212 6,177 7,890 (10,460)
------------- ------------- ------------- ------------- ------------- ------------- -------------
Contributions:
Employee 69,834 112,461 224,784 50,351 37,458 40,555 54,321
Employer 19,581 22,031 46,096 6,454 10,130 5,876 10,361
------------- ------------- ------------- ------------- ------------- ------------- -------------
89,415 134,492 270,880 56,805 47,588 46,431 64,682
------------- ------------- ------------- ------------- ------------- ------------- -------------
Transfer of assets from
Pet Food Warehouse, Inc.
401(k) Plan (note 6) 21,345 6,641 21,015 -- 7,178 3,519 9,341
------------- ------------- ------------- ------------- ------------- ------------- -------------
Total additions 115,984 247,308 457,986 95,017 60,943 57,840 63,563
Deductions from net assets
attributed to - benefits paid
to participants 14,678 102,155 133,474 10,481 39,044 1,587 12,015
------------- ------------- ------------- ------------- ------------- ------------- -------------
Net increase
(decrease) prior
to interfund
transfers 101,306 145,153 324,512 84,536 21,899 56,253 51,548
Interfund transfers (145) (10,804) 21,104 (359,277) 325,766 2,101 (11,162)
------------- ------------- ------------- ------------- ------------- ------------- -------------
Net increase
(decrease) 101,161 134,349 345,616 (274,741) 347,665 58,354 40,386
Net assets available for
benefits:
Beginning of year 74,399 353,059 617,501 274,741 -- 61,548 52,590
------------- ------------- ------------- ------------- ------------- ------------- -------------
End of year $ 175,560 487,408 963,117 -- 347,665 119,902 92,976
============= ============= ============= ============= ============= ============= =============
</TABLE>
<PAGE>
<TABLE>
PETCO ANIMAL SUPPLIES 401(k) PLAN
Statement of Changes in Net Assets Available for Benefits with Fund Information
For the year ended December 31, 1997
<CAPTION>
Participant Directed Nonparticipant Directed
-------------------------------------------- ----------------------------
Fidelity
Advisor Putnam Prudential Prudential
Equity OTC Special Government
Petco Portfolio Emerging Money Money
Common Growth Growth Market Market Loans to
Stock Fund Fund Fund B Fund Participants Total
------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Additions to net assets
attributed to:
Investment income:
Net appreciation
(depreciation) in
fair value of
investments $ (2,077) (3,708) 16,147 -- -- -- 109,649
Interest -- -- -- 5 330 2,632 8,192
Dividends -- 23,594 -- -- -- -- 238,406
Investment expenses -- -- -- -- -- -- (15)
------------- ------------- ------------- ------------- ------------- ------------- -------------
(2,077) 19,886 16,147 5 330 2,632 356,232
------------- ------------- ------------- ------------- ------------- ------------- -------------
Contributions:
Employee 94,150 155,118 101,676 105 10 -- 940,823
Employer 20,989 23,823 17,929 32 3 -- 183,305
------------- ------------- ------------- ------------- ------------- ------------- -------------
115,139 178,941 119,605 137 13 -- 1,124,128
------------- ------------- ------------- ------------- ------------- ------------- -------------
Transfer of assets from
Pet Food Warehouse, Inc.
401(k) Plan (note 6) 14,572 14,932 20,219 -- -- -- 118,762
------------- ------------- ------------- ------------- ------------- ------------- -------------
Total additions 127,634 213,759 155,971 142 343 2,632 1,599,122
Deductions from net assets
attributed to - benefits paid
to participants 11,145 10,014 10,804 -- -- 15,588 360,985
------------- ------------- ------------- ------------- ------------- ------------- -------------
Net increase
(decrease) prior
to interfund
transfers 116,489 203,745 145,167 142 343 (12,956) 1,238,137
Interfund transfers (2,522) 2,848 (5,566) -- 10,504 27,153 --
------------- ------------- ------------- ------------- ------------- ------------- -------------
Net increase
(decrease) 113,967 206,593 139,601 142 10,847 14,197 1,238,137
Net assets available for
benefits:
Beginning of year 43,424 24,611 31,187 9 10 17,200 1,550,279
------------- ------------- ------------- ------------- ------------- ------------- -------------
End of year $ 157,391 231,204 170,788 151 10,857 31,397 2,788,416
============= ============= ============= ============= ============= ============= =============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PETCO ANIMAL SUPPLIES 401(k) PLAN
Notes to Financial Statements
December 31, 1998 and 1997
(1) Description of Plan
The following description of the Petco Animal Supplies 401(k) Plan (the
Plan) is provided for general information purposes only. Participants
should refer to the Plan document for a more complete description of the
Plan's provisions.
(a) General
The Plan was established on January 1, 1992, was amended and
restated on January 1, 1994, October 1, 1996 and September 1,
1998, and is a defined contribution plan available to all eligible
employees of Petco Animal Supplies, Inc. (the Company). Prudential
Bank and Trust Company is the Plan trustee and custodian of the
Plan's assets.
Certain administrative functions are performed by officers or
employees of the Company. No such officer or employee receives
compensation from the Plan. Certain investment and administrative
expenses of the Plan are paid directly by the Company. All
employees who are at least 21 years of age and have completed one
year of service with a minimum of 1,000 hours worked are eligible
to participate in the Plan. The Plan entry dates are on the first
day of a calendar quarter coinciding with or following the date
employees satisfy the eligibility requirements. The Plan is
subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA).
(b) Contributions
Each Plan year, participants may elect to make a pre-tax
contribution to the Plan ranging from 1% to 15% of their gross
salary. The Company, as plan sponsor, may make discretionary
matching contributions on the participants' behalf to the Plan and
additional discretionary contributions. Additional discretionary
contributions are allocated to participants, in proportion to
their compensation, as a percentage of the compensation of all
participants. Contributions are subject to certain limitations.
All employer contributions vest at the rate of 20% for each year
of service by the participant or upon attainment of age 65,
retirement due to disability, death or termination of the Plan.
For the Plan years ended December 31, 1998 and 1997, the Company
made discretionary matching contributions of $518,584 and
$183,305, respectively.
(c) Participant Accounts
Each participant's account is credited with the participant's
contributions and an allocation of (a) the Company's discretionary
contributions, (b) fund earnings and (c) forfeitures incurred
prior to September 1, 1998 (Note 1(i)). Allocations are based upon
the participant's pro rata share of the beginning of the month's
investment account balance. The benefit to which a participant is
entitled is the benefit that can be provided from the
participant's vested account.
(d) Investment Options
The Plan provides for participant-directed accounts which allow
participants to allocate their account balance among the following
investment funds:
<PAGE>
<TABLE>
<CAPTION>
Name of Mutual Fund Type of Investment
-------------------------------------------------- -----------------------------------------------------------
<S> <C>
Prudential Governmental Securities Trust Money Invests in a diversified portfolio of short-term money
Market Fund market instruments issued by the U.S. government or its
agencies.
Prudential Utility Fund Invests in equity and debt securities of utility
companies.
Prudential Equity Fund Invests in a portfolio of common stocks of major,
well-established corporations.
Prudential Allocation Balanced Fund Invests in equities, debt and cash.
Prudential Government Income Fund Invests at least 65% of the total fund assets in U.S.
government securities.
Prudential Global Natural Resources Fund Invests in securities of foreign and domestic companies
that own, explore, mine, process or provide goods and
services with respect to natural resources and securities.
Petco Common Stock Company common stock quoted on the NASDAQ national market.
Fidelity Advisor Equity Portfolio Growth Fund Invests in growth stocks of small, medium, and large
companies that demonstrate the potential for above
average earnings or sales growth.
Putnam OTC Emerging Growth Fund Invests in securities of companies with market
capitalizations between $50 million and $2 billion that
have a rapid growth rate and a dominant industry position.
The Plan also holds nonparticipant directed accounts which are invested in the following investment funds:
Prudential Special Money Market Fund B Invests in a diversified portfolio of U.S.
dollar-denominated money market instruments from domestic
and foreign issuers.
Prudential Government Money Market Fund Invests in a diversified portfolio of U.S.
dollar-denominated money market instruments from the U.S.
government.
</TABLE>
<PAGE>
(e) Payment of Benefits
On termination of service due to death, disability or retirement,
a participant's vested account balance is paid in a lump sum
distribution or as an annuity. The Plan also provides for hardship
withdrawals subject to U.S. Department of Labor regulations.
(f) In-Service Withdrawals
While the Plan is designed to be a retirement income supplement,
it provides flexibility for participants greater than 59-1/2 years
of age in cases where funds are needed prior to retirement.
Accordingly, employees may withdraw funds before retirement up to
the maximum vested account balance adjusted for amounts
attributable to before tax contributions, as outlined in the Plan.
(g) Vesting
Participants are immediately vested in their contributions plus
actual earnings thereon. Company contributions vest at the rate of
20% for each year of service by the participant or upon attainment
of age 65, retirement due to disability, death or termination of
the Plan.
(h) Participant Loans
Participants may borrow from their fund accounts a minimum of
$1,000 up to a maximum equal to the lesser of $50,000 or 50% of
their account balance. Loan transactions are treated as a transfer
to (from) the investment fund from (to) the participant loan fund,
using the same allocation method as contributions. The loans are
secured by the balance in the participant's account and bear
interest equal to the prime rate established by the Plan's
administrator plus 1%. The prime rate at December 31, 1998 and
1997 was 7.75% and 8.50%, respectively. Loan terms range from one
to five years or up to 15 years for the purchase of a primary
residence. Principal and interest, calculated using the effective
interest method, are paid monthly or semi-monthly through payroll
deductions.
(i) Forfeitures
Forfeitures are used to reduce future employer contributions.
Prior to September 1, 1998, forfeitures were to be allocated to
participant accounts in the Plan year in which a participant
terminates service. The allocation of forfeitures was based on the
ratio between a participant's salary and total salaries of all
participants as defined in the Plan document. Such allocation was
made only to participants in the Plan as of the last day of the
fiscal year. At December 31, 1998 and 1997, forfeited nonvested
accounts totaled $24,714 and $4,838, respectively.
(j) Administrative Costs
Certain costs and expenses related to the administration of the
Plan are paid by the Company.
(2) Significant Accounting Policies
(a) Basis of Accounting
The accompanying financial statements of the Plan are presented
using the accrual method of accounting and have been prepared in
accordance with generally accepted accounting principles.
<PAGE>
(b) Investment Valuation
The Plan's investments in common stocks, mutual funds and money
market funds are stated at fair value, which is determined by
quoted market prices. Investment purchases and sales are recorded
on a trade date basis.
(c) Use of Estimates
The Company has made a number of estimates and assumptions
relating to the reporting of net assets available for benefits and
changes in net assets available for benefits to prepare these
financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those
estimates.
(3) Tax Status
The adopted Plan document is a standardized profit sharing plan developed
by the trustee. The Company has received a favorable determination letter
dated July 31, 1995 regarding tax exempt status under the provisions of
the Internal Revenue Code. The Plan has been amended since the
determination letter has been received. However, the Company and the
Company's tax counsel believe that the Plan is currently designed and
being operated in compliance with the applicable requirements of the
Internal Revenue Code. Therefore, the Company believes that the Plan is
qualified and the related trust was tax-exempt as of December 31, 1998
and 1997.
(4) Plan Termination
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at anytime and to
terminate the Plan, subject to the provisions of ERISA. In the event of
Plan termination, participants will become 100% vested in their accounts.
(5) Excess Contributions Returned to Participants
The Plan initially failed to meet certain nondiscrimination tests for the
year ended December 31, 1998 and $147,240 was returned in 1999 to certain
participants in order to meet the nondiscrimination tests. In addition,
certain participants contributed amounts in excess of $10,000, the
maximum deferral amount as directed by the Internal Revenue Service, and
excess deferrals of $2,311 were returned to plan participants in 1999.
These amounts have been recorded in the accompanying financial statements
as liabilities of the Plan as of December 31, 1998.
The Plan initially failed to meet certain nondiscrimination tests for the
year ended December 31, 1997 and $46,990 was returned in 1998 to certain
participants in order to meet the nondiscrimination tests. In addition,
certain participants contributed amounts in excess of $9,500, the maximum
deferral amount as determined by the Internal Revenue Service, and excess
deferrals of $28,036 were returned to plan participants in 1998. These
amounts have been recorded in the accompanying financial statements as
liabilities of the Plan as of December 31, 1997.
(6) Transfer of Assets from Pet Food Warehouse, Inc. 401(k) Plan
In connection with the Company's December 31, 1996 acquisition of Pet
Food Warehouse, Inc., the Pet Food Warehouse, Inc. 401(k) Plan was merged
with the Plan on December 1, 1997. This resulted in a transfer of
$118,762 of net assets into the Plan, during the year ended December 31,
1997.
<PAGE>
<TABLE>
Schedule 1
PETCO ANIMAL SUPPLIES 401(K) PLAN
Line 27a - Schedule of Assets Held for Investment Purposes
December 31, 1998
<CAPTION>
(e) Current
(a) (b) Issuer (c) Description of investment (d) Cost value
- ------- --------------------------- --------------------------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Money market funds:
* Prudential Governmental Securities Trust
Money Market Fund $ 294,774 294,774
* Prudential Special Money Market Fund B 158 158
* Prudential Government Money Market Fund 11,243 11,243
-------------------- --------------------
306,175 306,175
-------------------- --------------------
Mutual funds:
* Prudential Utility Fund 628,063 677,440
* Prudential Equity Fund 1,520,608 1,619,534
* Prudential Allocation Balanced Fund 518,011 479,298
* Prudential Government Income Fund 190,119 195,354
* Prudential Global Natural Resources Fund 145,317 108,741
Fidelity Advisor Equity Portfolio Growth
Fund 860,470 952,026
Putnam OTC Emerging Growth Fund 430,041 476,833
-------------------- --------------------
4,292,629 4,509,226
-------------------- --------------------
* Petco Petco common stock 470,312 363,905
* Loans to Participants Interest rate, 9.0% - 9.5% 29,433 29,433
-------------------- --------------------
Total investments $ 5,098,549 5,208,739
==================== ====================
* Party in interest.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Schedule 2
PETCO ANIMAL SUPPLIES 401(K) PLAN
Line 27d - Schedule of Reportable Transactions
Year ended December 31, 1998
<CAPTION>
(h) Current
(a) Identity value of asset
of party (b) Description (c) Purchase (d) Selling (f) Cost on transaction (i) Net
involved of asset price price of asset date gain (loss)
- --------------- ---------------- ---------------------------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Prudential Utility Fund $ 292,757 -- -- 292,757 --
-- 64,687 55,847 64,687 8,840
Prudential Equity Fund 834,322 -- -- 834,322 --
-- 130,901 114,230 130,901 16,671
Petco Common Stock 337,442 -- -- 337,442 --
-- 22,985 35,897 22,985 (12,912)
Fidelity Advisor Equity 686,893 -- -- 686,893 --
Portfolio -- 73,931 68,786 73,931 5,145
Growth Fund
Putnam OTC Emerging 329,380 -- -- 329,380 --
Growth Fund -- 67,132 59,531 67,132 7,601
Prudential Government 148,922 -- -- 148,922 --
Money Market -- 55,585 55,585 55,585 --
Fund
Prudential Allocation 250,858 -- -- 250,858 --
Balanced -- 71,896 75,928 71,896 (4,032)
Fund
See accompanying notes to financial statements.
</TABLE>
<PAGE>
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of
1934, the trustees (or other persons who administer the employee benefit plan)
have duly caused this annual report to be signed on its behalf of the
undersigned hereunto duly authorized.
June 30, 1999
PETCO Animal Supplies 401(k) Plan
BY: Plan Administrative Committee
/s/ Brian K. Devine
---------------------------------------
Brian K. Devine
/s/ Bruce C. Hall
---------------------------------------
Bruce C. Hall
/s/ Janet D. Mitchell
---------------------------------------
Janet D. Mitchell
/s/ James M. Myers
---------------------------------------
James M. Myers
/s/ William M. Woodard
---------------------------------------
William M. Woodard
<PAGE>
Consent of Independent Accountants
The Board of Directors
Petco Animal Supplies, Inc.:
We consent to incorporation by reference in the registration statement (No.
33-95352) on Form S-8 of Petco Animal Supplies, Inc. of our report dated June
21, 1999, relating to the statements of net assets available for benefits with
fund information of the Petco Animal Supplies 401(k) Plan as of December 31,
1998 and 1997, and the related statements of changes in net assets available for
benefits with fund information for each of the years in the two-year period
ended December 31, 1998, and all related schedules, which report appears in the
December 31, 1998 annual report on Form 11-K of Petco Animal Supplies 401(k)
Plan.
KPMG LLP
San Diego, California
June 30, 1999
