Petsmart 2012 Annual Report Download - page 68

F-22
As of February 3, 2013, we had $69.8 million in outstanding letters of credit, issued for guarantees provided for insurance
programs, under our Stand-alone Letter of Credit Facility and $71.9 million in restricted cash on deposit with the lender. As of
January 29, 2012, we had $70.2 million in outstanding letters of credit, issued for guarantees provided for insurance programs,
under our Former Stand-alone Letter of Credit Facility and $70.2 million in restricted cash on deposit with the Former Stand-
alone Letter of Credit Facility lender.
Our Revolving Credit Facility and Stand-alone Letter of Credit Facility permit the payment of dividends if we are not in
default and payment conditions as defined in the agreement are satisfied. As of February 3, 2013, 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 financial assets.
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 2 to 4 additional 5-year terms. Store leases,
excluding renewal options, expire at various dates through 2027. 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 2012, 2011 and 2010 was $325.4 million, $319.9 million and $302.4 million, respectively. Additional rent included
in those amounts was not material.
At February 3, 2013, the future minimum annual rental commitments under all noncancelable leases were as follows (in
thousands):
Operating
Leases Capital Leases
2013................................................................................................................................................ $ 316,216 $ 112,089
2014................................................................................................................................................ 323,187 117,891
2015................................................................................................................................................ 287,319 111,603
2016................................................................................................................................................ 247,983 99,227
2017................................................................................................................................................ 208,809 89,575
Thereafter ....................................................................................................................................... 459,864 232,064
Total minimum rental commitments.............................................................................................. $ 1,843,378 762,449
Less: amounts representing interest ............................................................................................... (236,290)
Present value of minimum lease payments .................................................................................... 526,159
Less: current portion....................................................................................................................... (61,581)
Long-term obligations.................................................................................................................... $ 464,578
The rental commitments schedule includes all locations for which we have the right to control the use of the property and
includes open stores, closed stores, stores to be opened in the future, distribution centers and corporate offices. We have recorded
accrued rent of $0.7 million and $1.0 million in the Consolidated Balance Sheets as of February 3, 2013, and January 29, 2012,
respectively. In addition to the commitments scheduled above, we have executed lease agreements with total minimum lease
payments of $167.1 million, which includes payments for the new distribution center discussed below. 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.
In July 2012, we entered into a build-to-suit lease for a new distribution center in Bethel, Pennsylvania. The commitment for
the initial fifteen-year lease term is $66.9 million. Lease payments are expected to commence in 2014. Once the construction of
the Bethel location is completed, we will vacate two smaller distribution centers located in Gahanna, Ohio and Hagerstown,
Maryland, both of which are nearing capacity.
PetSmart, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)