Petsmart 2009 Annual Report Download - page 73

Revolving Credit Facility also gives us the ability to issue letters of credit, which reduce the amount available under
the Revolving Credit Facility. Letter of credit issuances under the Revolving Credit Facility are subject to interest
payable to the lenders and bear interest of 0.875% to 1.25% for standby letters of credit or 0.438% to 0.625% for
commercial letters of credit. As of January 31, 2010, we had no borrowings and $35.7 million in stand-by letter of
credit issuances under our $350.0 million five-year revolving credit facility. As of February 1, 2009, we had no
borrowings and $91.3 million in stand-by letter of credit issuances under our Revolving Credit Facility.
We also have a $100.0 million stand-alone letter of credit facility, or “Stand-alone Letter of Credit Facility,”
that expires August 15, 2012. We are subject to fees payable to the lender each quarter at an annual rate of 0.45% of
the average daily face amount of the letters of credit outstanding during the preceding calendar quarter. In addition,
we are required to maintain a cash deposit with the lender equal to the amount of outstanding letters of credit or we
may use other approved investments as collateral. If we use other approved investments as collateral, we must have
an amount on deposit which, when multiplied by the advance rate of 85%, is equal to the amount of the outstanding
letters of credit under the Stand-alone Letter of Credit Facility. As of January 31, 2010, we had $48.2 million in
outstanding letters of credit under the Stand-alone Letter of Credit Facility and $48.2 million in restricted cash on
deposit with the lender. As of February 1, 2009, we had no outstanding letters of credit under the Stand-alone Letter
of Credit Facility, no restricted cash or short-term investments on deposit with the lender, and no other investments
related to the Stand-alone Letter of Credit Facility.
We issue letters of credit for guarantees provided for insurance programs.
The Revolving Credit Facility and Stand-alone Letter of Credit Facility permit the payment of dividends, if we
are not in default and the payment of dividends would not result in default of the Revolving Credit Facility and
Stand-alone Letter of Credit Facility. As of January 31, 2010, we were in compliance with the terms and covenants
of our Revolving Credit Facility and Stand-alone Letter of Credit Facility. The Revolving Credit Facility and Stand-
alone Letter of Credit Facility are secured by substantially all our personal property assets, our wholly owned
subsidiaries and certain real property.
Operating and Capital Leases
We lease substantially all our stores, distribution centers and corporate offices under noncancelable leases. The
terms of the store leases generally range from 10 to 15 years and typically allow us to renew for one to three
additional five-year terms. Store leases, excluding renewal options, expire at various dates through 2025. 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. We also lease certain equipment under
operating leases and capital leases. Total operating lease expense incurred, net of sublease income, during 2009,
2008 and 2007 was $296.0 million, $275.1 million and $245.9 million, respectively. Additional rent included in
those amounts was not material.
F-25
PetSmart, Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)