Petsmart 2000 Annual Report Download - page 28

leasehold improvements. Approximately $375,000 is required for store fixtures and equipment, which is also
typically financed through leases.
Based upon the Company’ s current plan to open approximately 55 new North American stores during fiscal
2000, approximately $28.9 million will be needed to finance these openings. The C ompany may also expend
additional funds to take advantage of opportunities that arise from time to time for the acquisition of businesses or
lease rights from tenants occupying retail space that is suitable for a PETsMART superstore.
PETsMART completed its implementation of an integrated North America information system, which
features a common set of applications, during second quarter 1999. The Company estimates that its total costs in
connection with the original and continued development and implementation of the system and subsequent
enhancements, before giving consideration to any lease financing that may be available, will be approximately $70
million from the inception of the project through the end of fiscal 2000. The C ompany continues to replace and
upgrade its existing point- of- sale equipment. This project was completed in all N orth American stores in the
middle of the fiscal fourth quarter of 1999. Total expenditures for hardware and software related to the POS
project were approximately $8 million, and was financed through a lease transaction.
Capital expenditures, net of construction allowances, were approximately $60.3 million during fiscal 1999.
Such expenditures were used primarily for the opening of new superstores in North America, the development
and implementation of the Company’ s new information system and the remodel and maintenance of the
Company’ s existing superstores.
On April 13, 2000, the Company renewed its revolving credit agreement (see Footnotes 8 and 15 of the
Consolidated Notes to the Financial Statements). As a result, the capacity of the revolving credit agreement
increased to $70 million for the revolver and $40 million for real estate commitments. The Company may also
obtain additional financing or debt outside of the revolving credit agreement up to $40 million. Borrowings under
the agreement bear interest at the Company’ s option, of either Prime Rate plus 0.25% to 0.50% or LIBOR plus
1.75% to 2.25%. The agreement expires on April 13, 2003. The line is secured by the inventory of the
U.S. store operations. The collateral is released if the Company can meet specific financial hurdles for
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three consecutive quarters. The restrictive covenants remain the same as the previous revolving credit agreement.
The new agreement also allows the C ompany $25 million annually to be used for the repurchase of stock or
subordinated debt.
On April 13, 2000, the Company’ s Board of Director’ s approved the purchase of an aggregate of $25
million of its common stock or its convertible debentures annually for each of the next three fiscal years. The
Company’ s policy on the repurchase of stock or subordinated debt is to make market purchases when the price
is advantageous and as cash flow allows to maintain appropriate liquidity.
Management believes that its existing cash and cash equivalents, together with cash flow from operations,
borrowing capacity under its bank credit facility and available lease financing will provide adequate funds for the
Company’ s foreseeable working capital needs, planned capital expenditures and debt service obligations. The
Company’ s ability to fund its operations and to make planned capital expenditures, scheduled debt payments,
refinance indebtedness, purchase outstanding equity and subordinated debt and to remain in compliance with all
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