Petsmart 2005 Annual Report Download - page 81

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Operating and Capital Leases
The Company leases substantially all of its stores, distribution centers and corporate offices under noncan-
celable leases. The terms of the store leases generally range from 10 to 25 years and typically allow the Company to
renew for three to five additional five-year terms. Store leases, excluding renewal options, expire at various dates
through 2023. Generally, the leases require payment of property taxes, utilities, common area maintenance,
insurance and, if annual sales at certain stores exceed specified amounts, provide for additional rents. The Company
also leases certain equipment under operating leases. Total operating lease expense incurred, net of sublease
income, during fiscal 2005, 2004 and 2003 was $199,593,000, $194,675,000 and $179,102,000, respectively.
Additional rent included in those amounts was not material.
The Company has entered into sale and leaseback transactions for several of its store locations, which included
buildings and underlying land. Such assets were sold at cost and were leased back at terms similar to those of other
leased stores. The Company has no material future commitments regarding the sale of these properties.
At January 29, 2006, the future minimum annual rental commitments under all noncancelable leases were as
follows (in thousands):
Operating
Leases
Capital
Leases
2006 .................................................... $ 219,446 $ 50,837
2007 .................................................... 216,029 51,273
2008 .................................................... 210,620 51,409
2009 .................................................... 200,574 51,527
2010 .................................................... 189,206 52,375
Thereafter. . ............................................... 911,202 404,730
Total minimum rental commitments ............................. $1,947,077 662,151
Less: amounts representing interest .............................. 298,028
Present value of minimum lease payments ......................... 364,123
Less: current portion . . . ...................................... 12,559
Long-term obligations. . ...................................... $351,564
The rental commitments schedule is comprised of all locations and equipment for which the Company has the
right to control the use of the property and includes open stores, closed stores, stores to be opened in the future,
distribution locations and corporate offices. The Company has recorded rent payable of $2,043,000 and $3,481,000
in accrued occupancy in the Consolidated Balance Sheets as of January 29, 2006 and January 30, 2005 respectively.
In addition to the commitments scheduled above, the Company has executed lease agreements for future store
openings with total minimum lease payments of $332,807,000. The typical lease term for these agreements is 10 to
15 years. The Company does not have the right to control the use of the property under these leases at January 29,
2006.
F-22
PetSmart, Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)