Petsmart 2012 Annual Report Download - page 39

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Lease and Other Commitments
Operating and Capital Lease Commitments and Other Obligations
The following table summarizes our contractual obligations, net of estimated sublease income, at February 3, 2013, and the
effect that such obligations are expected to have on our liquidity and cash flows in future periods (in thousands):
Contractual Obligation 2013 2014 & 2015 2016 & 2017 2018 and Beyond Other Total
Operating lease obligations (1).................. $ 316,216 $ 610,506 $ 456,792 $ 459,864 $ — $1,843,378
Capital lease obligations (1)(2).................. 112,089 229,494 188,802 232,064 — 762,449
Purchase obligations (3)............................. 89,305 25,000 — — — 114,305
Uncertain tax positions (4)......................... — — — — 15,679 15,679
Insurance obligations (5)............................ 33,138 — — — 74,045 107,183
Total........................................................... $ 550,748 $ 865,000 $ 645,594 $ 691,928 $ 89,724 $2,842,994
Less: Sublease income............................... 3,367 6,170 3,772 2,256 — 15,565
Net Total..................................................... $ 547,381 $ 858,830 $ 641,822 $ 689,672 $ 89,724 $2,827,429
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(1) In addition to the commitments scheduled above, we have executed operating and capital lease agreements with total minimum
lease payments of $167.1 million, which includes $66.9 million related to the new distribution center in Bethel, Pennsylvania.
The lease term for the new distribution center in Bethel, Pennsylvania is 15 years, otherwise, the typical lease term for these
agreements is 10 years. We do not have the right to control the use of the property under these leases as of February 3, 2013,
because we have not taken physical possession of the property.
(2) Includes $236.3 million in interest.
(3) Represents purchase obligations for product and advertising commitments.
(4) Unrecognized tax benefits, as shown in “Other,” have been recorded as liabilities, and we are uncertain as to if or when such
amounts may be settled.
(5) Insurance obligations included in “Other,” have been classified as noncurrent liabilities. We are unable to estimate the specific
year to which the obligations will relate beyond 2013.
Letters of Credit
We issue letters of credit for guarantees provided for insurance programs. As of February 3, 2013, we had $87.7 million
outstanding under our letters of credit.
Off-Balance Sheet Arrangements
Other than executed operating leases, we do not have any off-balance sheet financing that has, or is reasonably likely to have,
a material current or future impact on our financial condition, cash flows, results of operations, liquidity, capital expenditures or
capital resources.
Related Party Transactions
We have an investment in Banfield, who through a wholly owned subsidiary, Medical Management International, Inc., operates
full-service veterinary hospitals in 809 of our stores. Our investment consists of common and preferred stock. As of February 3,
2013, and January 29, 2012, we owned 21.4% of the voting stock and 21.0% of the combined voting and non-voting stock of
Banfield. Two members of our management team are members of the Banfield Board of Directors. Our equity income from our
investment in Banfield, which is recorded one month in arrears under the equity method of accounting, was $16.0 million, $10.9
million, and $10.4 million for 2012, 2011 and 2010, respectively.
We recognized license fees and reimbursements for specific operating expenses from Banfield of $38.2 million, $36.7 million
and $34.2 million during 2012, 2011 and 2010, respectively, in other revenue in the Consolidated Statements of Income and
Comprehensive Income. The related costs are included in cost of other revenue in the Consolidated Statements of Income and
Comprehensive Income. Receivables from Banfield totaled $3.2 million and $3.1 million at February 3, 2013, and January 29,
2012, respectively, and were included in receivables, net in the Consolidated Balance Sheets.