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, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
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Commission file number: 0-23574
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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, 1999 and 1998
(With Independent Auditors' Report Thereon)
<PAGE>
PETCO ANIMAL SUPPLIES 401(k) PLAN
Table of Contents
Page
Independent Auditors' Report 1
Statements of Net Assets Available for Benefits as of December 31, 1999
and 1998 2
Statements of Changes in Net Assets Available for Benefits for the years
ended December 31, 1999 and 1998 3
Notes to Financial Statements 4
Schedule
1 Schedule of Assets Held for Investment Purposes at End of Year as
of December 31, 1999 10
<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 (the Plan) as of December 31, 1999 and
1998, 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, 1999. 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, 1999 and 1998, and the changes in net assets available for benefits
for each of the years in the two-year period ended December 31, 1999, 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 schedule of assets held
for investment purposes at end of year is presented for the purpose of
additional analysis and is not a required part of the basic financial statements
but is 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. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated, in all material respects, in relation to the basic
financial statements taken as a whole.
KPMG LLP
San Diego, California
June 20, 2000
<PAGE>
PETCO ANIMAL SUPPLIES 401(k) PLAN
Statements of Net Assets Available for Benefits
December 31, 1999 and 1998
<TABLE>
<CAPTION>
Assets 1999 1998
------------------ ------------------
<S> <C> <C>
Investments (Note 3) $ 9,118,155 5,208,739
------------------ ------------------
Receivables:
Employer contribution 11,558 --
Participant contributions 24,093 --
------------------ ------------------
Total receivables 35,651 --
------------------ ------------------
Total assets 9,153,806 5,208,739
Liabilities
Excess contributions due to participants (Note 6) 115,861 149,551
------------------ ------------------
Net assets available for benefits $ 9,037,945 5,059,188
================== ==================
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
PETCO ANIMAL SUPPLIES 401(k) PLAN
Statements of Changes in Net Assets Available for Benefits
Years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------------ ------------------
<S> <C> <C>
Additions to net assets attributed to:
Investment income:
Net appreciation (depreciation) in fair value
of investments $ 1,194,963 (30,790)
Interest 7,837 3,199
Dividends 643,317 352,669
Investment expenses (2,807) (1,047)
------------------ ------------------
1,843,310 324,031
------------------ ------------------
Contributions:
Participant 2,206,063 1,784,393
Employer 854,401 518,584
------------------ ------------------
3,060,464 2,302,977
------------------ ------------------
Total additions 4,903,774 2,627,008
Deductions from net assets attributed to benefits paid
to participants 925,017 356,236
------------------ ------------------
Net increase 3,978,757 2,270,772
Net assets available for benefits:
Beginning of year 5,059,188 2,788,416
------------------ ------------------
End of year $ 9,037,945 5,059,188
================== ==================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
PETCO ANIMAL SUPPLIES 401(k) PLAN
Notes to Financial Statements
December 31, 1999 and 1998
(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
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 pretax
contribution to the Plan ranging from 1% to 15% of their gross
salary subject to Internal Revenue Service limits of $10,000 in
1999 and 1998. 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,
1999 and 1998, the Company made discretionary matching
contributions of $854,401 and $518,584, respectively.
(c) Participant Accounts
Each participant's account is credited with the participant's
contributions and an allocation of (a) the Company's discretionary
matching 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.
4 (Continued)
<PAGE>
PETCO ANIMAL SUPPLIES 401(k) PLAN
Notes to Financial Statements
December 31, 1999 and 1998
(d) Investment Options
The Plan provides for participant-directed accounts which allow
participants to allocate their account balance among the following
investment funds:
<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 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 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.
Fidelity Advisor Equity 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.
Petco Common Stock Company common stock quoted on the NASDAQ national market.
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>
5 (Continued)
<PAGE>
PETCO ANIMAL SUPPLIES 401(k) PLAN
Notes to Financial Statements
December 31, 1999 and 1998
(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%. Participant loans outstanding at December
31, 1999 and 1998 were $117,702 and $29,433, respectively. The
prime rate at December 31, 1999 and 1998 was 8.50% and 7.75%,
respectively. Loan terms range from one to five years or up to ten
years for the purchase of a primary residence. Principal and
interest, calculated using the effective-interest method, are paid
monthly or semimonthly through payroll deductions.
(i) Forfeitures
Forfeitures are used to reduce future employer contributions.
During the year ended December 31, 1999, forfeitures totaled
$58,924 and investment income on unallocated forfeitures was
$2,601. At December 31, 1999 and 1998, forfeited nonvested
accounts totaled $86,239 and $24,714, respectively and are
invested in the Prudential Governmental Securities Trust Money
Market Fund.
(j) Administrative Costs
Certain costs and expenses related to the administration of the
Plan are paid by the Company.
6 (Continued)
<PAGE>
PETCO ANIMAL SUPPLIES 401(k) PLAN
Notes to Financial Statements
December 31, 1999 and 1998
(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.
(b) Investment Valuation
The Plan's investments in mutual funds, money market funds and
common stock are stated at fair value, which is determined by
quoted market prices. Investment purchases and sales are recorded
on a trade-date basis. All receivables and liabilities and
participant loans are valued at cost, which approximates fair
value.
(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.
(d) Accounting Standard Adopted
In September 1999, the American Institute of Certified Public
Accountants issued Statement of Position 99-3, Accounting for and
Reporting of Certain Defined Contribution Plan Investments and
Other Disclosure Matters (SOP 99-3). SOP 99-3 simplifies the
disclosure for certain investments and is effective for plan years
ending after December 15, 1999 with earlier application
encouraged. The Plan adopted SOP 99-3 during the Plan year ended
December 31, 1999. Accordingly, information previously required to
be disclosed about participant-directed fund investment programs
is not presented in the Plan's 1999 financial statements. The
Plan's 1998 financial statements have been reclassified to conform
with the current year's presentation.
7 (Continued)
<PAGE>
PETCO ANIMAL SUPPLIES 401(k) PLAN
Notes to Financial Statements
December 31, 1999 and 1998
(3) Investments
The following presents investments that represent 5% or more of the
Plan's net assets.
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1999 1998
-------------------- ------------------
<S> <C> <C>
Prudential Governmental Securities Trust Money Market Fund,
490,567 and 294,774 shares, respectively $ 490,567 294,774
Prudential Utility Fund, 66,519 and 56,225 shares,
respectively 735,035 677,440
Prudential Equity Fund, 105,995 and 81,972 shares,
respectively 2,044,493 1,619,534
Prudential Balanced Fund, 56,628 and 39,352 shares,
respectively 702,096 479,298
Fidelity Advisor Equity Growth Fund, 28,588 and 16,682
shares, respectively 2,047,221 952,026
Putnam OTC Emerging Growth Fund, 43,423 and 27,642 shares,
respectively 1,607,082 476,833
Petco Common Stock, 62,507 and 36,164 shares, respectively 871,092 363,905
</TABLE>
During 1999 and 1998, the Plan's investments (including gains and losses
on investments bought and sold, as well as held during the year)
appreciated (depreciated) in value, as follows:
<TABLE>
<CAPTION>
1999 1998
------------------- -------------------
<S> <C> <C>
Mutual funds $ 1,011,461 77,332
Money market funds (18) (5)
Common stock 183,520 (108,117)
------------------- -------------------
$ 1,194,963 (30,790)
=================== ===================
</TABLE>
(4) 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, 1999
and 1998.
8 (Continued)
<PAGE>
PETCO ANIMAL SUPPLIES 401(k) PLAN
Notes to Financial Statements
December 31, 1999 and 1998
(5) 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 any time 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.
(6) Excess Contributions Due to Participants
The Plan initially failed to meet certain nondiscrimination tests for the
years ended December 31, 1999 and 1998, and $115,861 and $147,240,
respectively was returned to certain participants in order to meet the
nondiscrimination tests. In addition, for the year ended December 31,
1998, certain participants contributed amounts in excess of $10,000, the
maximum deferral amount as determined 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, 1999 and 1998.
9
<PAGE>
<TABLE>
<CAPTION>
Schedule 1
PETCO ANIMAL SUPPLIES 401(k) PLAN
Schedule of Assets Held for Investment Purposes at End of Year
December 31, 1999
(b)
Identity of issue, (e)
borrower, lessor (c) (d) Current
(a) or similar party Description of investment Cost value
------ ------------------------ ------------------------------------- -------------------- --------------------
Money market funds:
<S> <C> <C> <C> <C>
* Prudential Governmental Securities Trust
Money Market Fund $ 490,595 490,567
* Prudential Special Money Market Fund B 166 166
* Prudential Government Money Market Fund 11,870 11,870
-------------------- --------------------
502,631 502,603
-------------------- --------------------
Mutual funds:
* Prudential Utility Fund 752,564 735,035
* Prudential Equity Fund 2,040,222 2,044,493
* Prudential Balanced Fund 722,966 702,096
* Prudential Government Income Fund 306,791 290,558
* Prudential Natural Resources Fund 180,059 200,273
Fidelity Advisor Equity Growth Fund 1,686,935 2,047,221
Putnam OTC Emerging Growth Fund 826,951 1,607,082
-------------------- --------------------
6,516,488 7,626,758
-------------------- --------------------
* Petco Petco Common Stock 778,090 871,092
* Participant Loans Interest rates ranging from
8.75% to 9.5% -- 117,702
-------------------- ---------------------
Total investments $ 7,797,209 9,118,155
==================== =====================
</TABLE>
* Party in interest.
See accompanying independent auditors' report
10
<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 28, 2000
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
20, 2000, relating to the statements of net assets available for benefits of the
Petco Animal Supplies 401(k) Plan as of December 31, 1999 and 1998, 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, 1999, and the related
schedule, which report appears in the December 31, 1999 annual report on Form
11-K of Petco Animal Supplies 401(k) Plan.
KPMG LLP
San Diego, California
June 28, 2000
<PAGE>
