Petsmart 2002 Annual Report Download - page 72

PETsMART, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
Note 12 Ì Financing Arrangements and Lease Obligations
Bank Credit Facility
On April 30, 2001, the Company entered into a new credit arrangement with a group of lenders that
provides for borrowings of up to $250,000,000, including a sublimit of up to $150,000,000 for letters of credit,
and was to expire on April 30, 2004. Borrowings and letter of credit issuances under the facility are subject to a
borrowing base and bear interest, at the Company's option, at either a bank's prime rate plus 0% to 0.50% or
LIBOR plus 2.00% to 2.50%, at the Company's option. Due to the Company's desire for greater Öexibility in
the Ñnancial covenants and the historically limited use of the credit facility, the credit facility was amended on
June 20, 2002 to reduce the available commitment to $200,000,000, extend the maturity by two years to
April 30, 2006, and amend certain covenants. The credit facility restricts the payment of dividends. The
arrangement is secured by substantially all personal property assets of the Company and its domestic
subsidiaries and certain real property of the Company. At February 2, 2003, there were no borrowings
outstanding on this credit arrangement.
Letters of Credit
We issue letters of credit for guarantees provided for the structured lease facilities, insurance programs,
import purchases and utilities. As of February 2, 2003, $47.4 million was outstanding under our letters of
credit.
Operating and Capital Leases
The Company leases substantially all of its stores, retail distribution centers, corporate oÇces, and certain
equipment under noncancellable operating leases. The terms of the store leases, other than leases under the
structured lease facilities, described below, generally range from 10 to 25 years and typically allow us to renew
for three to Ñve additional Ñve-year terms. Store leases, excluding renewal options, expire at various dates
through 2020. Certain leases require payment of property taxes, utilities, common area maintenance,
insurance and, if annual sales at certain stores exceed speciÑed amounts, provide for additional rents. To date,
the Company has paid minimal additional rent. In addition, certain leases provide for variable rent payments
based on prevailing interest rates. Total operating lease rent expense incurred, net of sublease income, during
Ñscal 2002, 2001 and 2000 was $170,842,000, $195,107,000, and $184,317,000, respectively.
The Company has entered into sale and leaseback transactions for several of its store locations, which
included buildings and underlying land. Such assets were sold at cost and were leased back at terms similar to
those of other leased stores. The Company also leases certain Ñxtures and equipment, computer hardware and
software under capital leases.
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