Petsmart 2002 Annual Report Download - page 73

PETsMART, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
At February 2, 2003, the future minimum annual rental commitments under all noncancelable leases
were as follows (in thousands):
Operating Capital
Leases Leases
2003 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 174,328 $ 23,745
2004 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 204,455 20,452
2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 168,035 19,809
2006 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 163,324 19,928
2007 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 160,406 20,464
Thereafter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,055,400 242,387
Total minimum rental commitments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,925,948 346,785
Less: amounts representing interest ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 179,778
Present value of obligations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 167,007
Less: current portionÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,564
Long-term obligationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $159,443
The operating lease payment schedule above is shown net of sublease income. Sublease income for
operating and capital leases is as follows: 2003: $2,641,000; 2004: $2,457,000; 2005: $2,502,000;
2006: $2,558,000; 2007: $2,580,000, and thereafter, $12,013,000. The store operating leases represent those for
open stores, closed stores, and stores to be opened in 2003 that have a lease agreement.
In the fourth quarter of Ñscal 2002, the Company entered into a purchase agreement for an aircraft that
will require a Ñnal payment of approximately $18.5 million in the Ñrst quarter of Ñscal 2003.
The Company receives licensing fees from MMI for the space in the Company's retail stores occupied by
veterinary services, which is recorded as income from leased departments within cost of sales in the
accompanying consolidated statements of operations. Licensing fees are determined by Ñxed costs per square
foot, adjusted for the number of days the hospitals are open and sales volumes achieved. Income of
approximately $8,293,000, $6,727,000 and $6,853,000 was recognized during Ñscal years 2002, 2001, and 2000,
respectively. Additionally, licensing fees receivable from MMI totaled $2,882,000 and $2,182,000 as of
February 2, 2003 and February 3, 2002, respectively, and was included in receivables in the accompanying
consolidated balance sheets.
Structured Lease Facilities
The Company has entered into lease agreements for certain stores as part of structured lease Ñnancing.
The structured lease Ñnancing facilities provide a special purpose entity, not aÇliated with the Company, with
the necessary Ñnancing to complete the acquisition and construction of new stores. Once construction has been
completed, another special purpose entity, also not aÇliated with the Company, leases the completed stores to
the Company for a four-year term. After the four-year term has expired, the Company is required to pay oÅ
the balance of the Ñnancing, provide for the sale of the properties to a third party, or pay a guaranteed residual
amount. During Ñscal 2001, two leasing terms expired, and as a result, the Company paid the Ñnancing
remaining on one distribution center and twenty-six stores, and concurrently sold these properties to a third
party and entered into lease agreements with expiration dates through 2021.
The Company has one outstanding special purpose entity lease remaining as of February 2, 2003, which
encompasses seven stores and two properties. Included in the operating leases for 2004 is the Ñnal payment of
approximately $27,713,000. The lease is supported by a letter of credit issued under our revolving credit
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