Petsmart 2002 Annual Report Download - page 36

forward distribution center in June 2002, the majority of our store base is being served by forward distribution
centers. Approximately 69% of our stores are operating under the new store format.
Our primary long-term capital requirements consist of opening new stores, reformatting existing stores to
our new store format, and expenditures associated with the equipment and computer software in support of our
system initiatives. For 2002, we incurred $163.7 million in capital expenditures, compared with $105.1 million
for 2001. The increase in spending was primarily due to the store reformatting initiatives, lease buyouts, and
equipment and computer software in support of our systems initiatives.
In January 2002, we acquired all the remaining shares held by PETsMART.com minority stockholders
for approximately $9.5 million. The approximately $9.5 million was actually paid during 2002. In June 2001,
we purchased 1,020,789 shares of PETsMART.com's convertible voting preferred stock from minority
shareholders for approximately $0.7 million.
Net cash provided by Ñnancing activities for 2002 increased $85.9 million primarily as a result of the
$71.1 million in proceeds from the issuance of common stock, which is comprised of $43.9 million in proceeds
from the oÅering, as discussed in the section entitled ""Common Stock OÅering'' below, and the $27.2 million
in proceeds from the issuance of common stock as a result of stock option exercises and the employee stock
purchase program.
Common Stock and Notes Repurchase Program
In April 2000, our Board of Directors approved the purchase of up to $25.0 million of common stock or
Notes annually for each of the next three years. In 2001, we used $6.4 million to purchase our Notes with a
face value of $7.8 million. In February and March 2002, the remaining balance of $173.5 million of Notes was
called for redemption, resulting in the repurchase of Notes for approximately $0.3 million in cash and the
conversion of the remainder into approximately 19,800,000 shares of common stock at a conversion price of
$8.75 per share.
In March 2003, our Board of Directors approved the purchase of up to $35.0 million of common stock,
annually for each of the next three years, ending March 2006.
Common Stock OÅering
In July 2002, we Ñled a registration statement on Form S-3 for a public oÅering of 14,500,000 shares of
our common stock, plus an over-allotment option of 2,175,000 shares. Of these shares, 13,182,584 were oÅered
by entities aÇliated with Carrefour SA, and we oÅered 1,317,416 shares, plus the shares in the over-allotment
option.
On August 5, 2002, we completed the sale of the 1,317,416 shares of common stock for $13.40 per share,
resulting in proceeds, net of underwriting fees, of approximately $16.9 million. On August 12, 2002, the
underwriters exercised the over-allotment option and purchased 2,175,000 additional shares for $13.40 per
share, resulting in proceeds, net of underwriting fees, of approximately $27.8 million. We incurred costs
associated with the oÅering of approximately $0.8 million.
Operating Capital and Capital Expenditure Requirements
All our stores are leased facilities. We opened 27 new stores, closed four stores, and reformatted
approximately 230 stores in 2002. Each new store requires capital expenditures of approximately $0.8 million
for Ñxtures, equipment and leasehold improvements, approximately $0.3 million for inventory, and approxi-
mately $0.1 million for preopening costs. In the Ñrst year, we expect a new store to generate approximately
$3.2 million in sales. We expect new stores to generate comparable store sales growth in the range of 17% to
19% in year two, 12% to 13% in year three, 7% to 8% in year four, and 5% to 6% in year Ñve. To convert a store
to our new store format costs approximately $0.2 million per store. Based on our current plan for
approximately 60 net new stores and approximately 140 reformatted stores during 2003, as well as our planned
investment in the development of our information systems, we expect capital spending to be approximately
$165.0 to $175.0 million for 2003.
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