Petsmart 2005 Annual Report Download - page 48

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make planned capital expenditures, scheduled debt payments and refinance indebtedness depends on our future
operating performance and cash flow, which are subject to prevailing economic conditions and to financial, business
and other factors, some of which are beyond our control.
Lease and Other Commitments
Operating and Capital Lease Commitments and Purchase Obligations
The following table summarizes our contractual obligations, net of estimated sublease income, and including
obligations for executed agreements for which we do not yet have the right to control the use of the property at
January 29, 2006, and the effect that such obligations are expected to have on our liquidity and cash flows in future
periods (in thousands):
Contractual Obligation(1) 2006
2007 &
2008
2009 &
2010
2011 and
Beyond Total
Payments Due in Fiscal Year
Operating lease obligations . ..... $221,947 $449,562 $415,474 $1,020,906 $2,107,889
Capital lease obligations(2) . ..... 55,863 123,447 125,312 490,812 795,434
Purchase obligations(3) ......... 6,690 — — — 6,690
Total .................... $284,500 $573,009 $540,786 $1,511,718 $2,910,013
(1) At January 29, 2006, we had no long-term debt other than capital lease obligations.
(2) Includes $298.0 million in interest.
(3) Represents purchase obligation for advertising.
The operating and capital lease commitment payment schedule above is shown net of estimated sublease
income. Sublease income for operating and capital leases at January 29, 2006 is as follows (in thousands):
Sublease
Income
2006 ................................................................ 4,815
2007 ................................................................ 4,735
2008 ................................................................ 4,638
2009 ................................................................ 4,074
2010 ................................................................ 3,482
Thereafter ............................................................ 16,968
$38,712
Letters of Credit
We issue letters of credit for guarantees provided for insurance programs, capital lease agreements and
utilities. As of January 29, 2006, $41.7 million was outstanding under our letters of credit.
Related Party Transactions
We have an investment in MMI Holdings, Inc., or MMIH, a provider of veterinary and other pet-related
services. MMIH, through a wholly owned subsidiary, Medical Management International, Inc., or MMI, operates
full-service veterinary hospitals inside 513 of our stores, under the registered trademark of Banfield, The Pet
Hospital. Philip L. Francis, our Chairman and Chief Executive Officer, and Robert F. Moran, our President and
Chief Operating Officer, are members of the board of directors of MMIH. Our investment consists of common and
convertible preferred stock. During the second quarter of 2004, we purchased an additional $0.8 million of MMIH
capital stock from certain MMIH stockholders, and as of January 29, 2006, we owned approximately 17.1% of the
voting stock and approximately 37.0% of the combined voting and non-voting stock of MMIH. We charge MMI
licensing fees for the space used by the veterinary hospitals, and we treat this income as a reduction of the retail
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