Petsmart 2012 Annual Report Download - page 67

F-21
The following assumptions were used to value stock option grants:
Year Ended
February 3, 2013 January 29, 2012 January 30, 2011
Dividend yield .................................................................................. 1.20% 1.40% 1.66%
Expected volatility............................................................................ 28.8% 31.6% 31.0%
Risk-free interest rate........................................................................ 1.70% 1.24% 1.31%
Forfeiture rate ................................................................................... 13.8% 14.3% 14.8%
Expected lives................................................................................... 5.6 years 5.1 years 5.1 years
Vesting periods.................................................................................. 4.0 years 4.0 years 4.0 years
Term.................................................................................................. 7.0 years 7.0 years 7.0 years
Weighted average fair value............................................................. $ 14.54 $ 10.76 $ 8.10
Restricted stock expense reflects the fair market value on the date of the grant, net of forfeitures, and is amortized on a straight-
line basis by a charge to income over the requisite service period.
PSU expense, net of forfeitures, is recognized on a straight-line basis over the requisite service period based upon the fair
market value on the date of grant, adjusted for the anticipated or actual achievement against the established performance goal.
Compensation expense, net of forfeitures, for MEUs is recognized on a straight-line basis over the requisite service period
and is evaluated quarterly based upon the current market value of our common stock.
Note 10 — Employee Benefit Plans
We have a defined contribution plan, or the “Plan,” pursuant to Section 401(k) of the Internal Revenue Code. The Plan covers
all employees that meet certain service requirements. We match employee contributions, up to specified percentages of those
contributions, as approved by the Board of Directors. In addition, certain employees can elect to defer receipt of certain salary
and cash bonus payments pursuant to our Non-Qualified Deferred Compensation Plan. We match employee contributions up to
certain amounts as defined in the Non-Qualified Deferred Compensation Plan documents. During 2012, 2011 and 2010, we
recognized expense related to matching contributions under these Plans of $8.5 million, $7.1 million, and $6.3 million, respectively.
Note 11 — Financing Arrangements and Lease Obligations
Credit Facilities
On March 23, 2012, we entered into a new $100.0 million revolving credit facility agreement, or “Revolving Credit Facility,”
which replaced our former revolving credit facility agreement, or “Former Revolving Credit Facility.” The Revolving Credit
Facility expires on March 23, 2017. Borrowings under this Revolving Credit Facility are subject to a borrowing base and bear
interest, at our option, at LIBOR plus 1.25% or Base Rate plus 0.25%. The Base Rate is defined as the highest of the following
rates: the Federal Funds Rate plus 0.5%, the Adjusted LIBOR plus 1.0%, or the Prime Rate.
We are subject to fees payable each month at an annual rate of 0.20% of the unused amount of the Revolving Credit Facility.
The 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 and bear
interest of 0.625% for standby letters of credit and commercial letters of credit.
As of February 3, 2013, we had no borrowings and $17.9 million in stand-by letter of credit issuances under our Revolving
Credit Facility. As of January 29, 2012, we had no borrowings under our Former Revolving Credit Facility and $24.4 million in
stand-by letter of credit issuances.
On March 23, 2012, we also entered into a new $100.0 million stand-alone letter of credit facility agreement, or “Stand-alone
Letter of Credit Facility,” which replaced our former stand-alone letter of credit facility, or “Former Stand-alone Letter of Credit
Facility.” The Stand-alone Letter of Credit Facility expires on March 23, 2017. We are subject to fees payable each month at an
annual rate of 0.175% of the average daily face amount of the letters of credit outstanding during the preceding month. In addition,
we are required to maintain a cash deposit with the lender equal to 103% of the amount of outstanding letters of credit.
PetSmart, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)