Petsmart 2009 Annual Report Download - page 38

restricted cash. The primary differences between 2008 and 2007 were cash received from the sale of Banfield stock
during 2007, cash used to purchase the Canadian store locations during 2007, no purchases of short-term
investments during 2008, and less cash used to purchase property and equipment during 2008.
Net cash used in financing activities was $229.4 million for 2009, $113.8 million for 2008 and $293.7 million
for 2007. The net cash used in 2009 consisted primarily of the purchase of treasury stock, payments on capital lease
obligations, and payments of cash dividends. The primary differences between 2009 and 2008 were increased
purchases of treasury stock and no short-term debt borrowings. The primary differences between 2008 and 2007
were lower purchases of treasury stock in 2008, lower proceeds from common stock issued under stock incentive
plans, and lower tax deductions in excess of the compensation cost recognized.
Free Cash Flow
Free cash flow is considered a non-GAAP financial measure under the SEC’s rules. Management believes,
however, that free cash flow is an important financial measure for use in evaluating the Company’s financial
performance, which measures our ability to generate additional cash from our business operations. Free cash flow
should be considered in addition to, rather than as a substitute for net income as a measure of our performance and
net cash provided by operating activities as a measure of our liquidity.
Although other companies report their free cash flow, numerous methods may exist for calculating free cash
flow. As a result, the method used by our management to calculate free cash flow may differ from the methods other
companies use to calculate their free cash flow. We urge you to understand the methods used by another company to
calculate free cash flow before comparing our free cash flow to that of such other company.
We define free cash flow as net cash provided by operating activities minus cash paid for property and
equipment, and payments of capital lease obligations. We generated free cash flow of $415.6 million, $148.7 mil-
lion, and $11.8 million for 2009, 2008, and 2007, respectively. The increase in our free cash flow is primarily due to
a decrease in capital spending as a result of the slowdown in store openings.
The following table reconciles net cash provided by operating activities, a GAAP measure, to free cash flow, a
non-GAAP measure (in thousands).
January 31,
2010
February 1,
2009
February 3,
2008
(52 weeks) (52 weeks) (53 weeks)
Year Ended
Net cash provided by operating activities ............... $566,943 $ 420,700 $ 332,716
Cash paid for property and equipment .................. (112,920) (238,188) (294,437)
Payments of capital lease obligations .................. (38,439) (33,853) (26,483)
Free cash flow ................................... $415,584 $ 148,659 $ 11,796
Common Stock Purchase Program
In August 2006, the Board of Directors increased the amount remaining under the June 2005 share purchase
program by $141.7 million, to bring the share purchase capacity to $250.0 million and extend the term of the
program to August 9, 2007. During 2007, we purchased 2.8 million shares of our common stock for $89.9 million,
completing the $250.0 million program.
In August 2007, the Board of Directors approved a share purchase program authorizing the purchase of up to
$300.0 million of our common stock through August 2, 2009. On August 19, 2007, we entered into a $225.0 million
ASR agreement. The ASR contained provisions that established the minimum and maximum number of shares
purchased during its term. Pursuant to the terms of the ASR, on August 20, 2007, we paid $225.0 million to the ASR
counterparty. The ASR was initially funded with $125.0 million in cash and $100.0 million in borrowings under our
new credit facility. We received 7.0 million shares of common stock between August 20, 2007 and January 31, 2008
which were recorded as treasury stock in the Consolidated Balance Sheets, completing the ASR. We purchased
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