Petsmart 2001 Annual Report Download - page 18

Sale of Subsidiary
The Company completed the sale of its U.K. subsidiary (the ""U.K. Transaction'') to an unrelated third
party on December 15, 1999. The U.K. Transaction was structured as a stock sale. The Company sold 100% of
the stock in its subsidiary in exchange for cash of approximately $48.9 million, less debt of approximately $7.0
million. In connection with the sale, the Company recorded a net loss of $31.1 million, including $23.6 million
related to the diÅerence between net book value and cash consideration and transaction fees of approximately
$7.5 million. Additionally, the Company has reÖected the subsidiary's $14.6 million loss from operations,
excluding the related tax eÅects, for Ñscal 1999 through the date of the U.K. Transaction, as a loss on disposal
of subsidiary in the accompanying consolidated statement of operations.
Bank Credit Facility
At January 28, 2001, the Company was not in compliance with certain Ñnancial covenants under its
revolving credit agreement (see Note 10 of the Notes to Consolidated Financial Statements). A waiver was
granted by the Ñnancial institution, valid through May 19, 2001, which placed certain additional restrictions on
the Company. The Company replaced its revolving credit agreement with a new credit agreement discussed
below on April 30, 2001.
On April 30, 2001, the Company entered into a new credit arrangement with a Ñnancial institution
providing for borrowings of up to $250,000,000, including a sublimit of up to $150,000,000 for letters of credit
and expiring on April 30, 2004. Borrowings and letter of credit issuances under the facility will be subject to a
borrowing base and will bear interest, at the Company's option, at either a bank's prime rate or LIBOR, plus
applicable margins to be determined based on certain Ñnancial tests. The new arrangement is secured by
substantially all personal property assets of the Company and its domestic subsidiaries and certain real
property of the Company. In addition, the Company obtained Ñnancing for up to $132,300,000 to reÑnance
certain Ñnancing arrangements related to properties leased by the Company under structured lease facilities.
Results of Operations
The following table presents the percent to net sales of certain items included in the Company's
consolidated statements of operations, unless otherwise indicated:
Fiscal Year Ended
Jan. 28, Jan. 30, Jan. 31,
2001 2000 1999
Statement of Operations Data:
Net salesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 100.0% 100.0% 100.0%
Cost of sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 75.0 72.9 75.0
Gross proÑtÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25.0 27.1 25.0
Store operating expensesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20.1 19.7 19.0
Store preopening expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.2 0.3 0.4
General and administrative expensesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3.8 3.0 2.9
Loss on disposal of subsidiary ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 2.2 Ì
Restructuring beneÑts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì (0.1)
Operating incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.9 1.9 2.8
Interest income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.1 0.1 0.1
Interest expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1.0) (1.0) (1.1)
Income (loss) before equity loss in PETsMART.com, income tax
expense, minority interest, extraordinary item, and cumulative
eÅect of a change in accounting principle ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 1.1 1.8
Equity loss in PETsMART.com ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1.5) (1.4) Ì
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