Petsmart 2003 Annual Report Download - page 40

development of our information systems, we expect capital spending to be approximately $180.0 to $185.0 million
for 2004.
We believe our existing cash and cash equivalents, together with cash Öows from operations, borrowing
capacity under our bank credit facility and available lease Ñnancing, will provide adequate funds for our foreseeable
working capital needs, planned capital expenditures and debt service obligations. Our ability to fund our operations,
make planned capital expenditures, scheduled debt payments, and reÑnance indebtedness, depends on our future
operating performance and cash Öow, which are subject to prevailing economic conditions and to Ñnancial, business
and other factors, some of which are beyond our control.
Any future increases in net sales and net income will depend on the opening of additional stores and the
improved performance of existing stores. In view of the increasing maturity of our store base (an average age of
approximately six years as of February 1, 2004), as well as the planned opening of additional stores in existing
markets, which may diminish sales of existing stores, we anticipate that comparable store sales increases may be
lower in future periods. As a result of our expansion plans, we anticipate the timing of new store openings, related
preopening costs, and the amount of revenue contributed by new and existing stores may cause our quarterly results
of operations to Öuctuate. In addition, because new stores tend to experience higher payroll, advertising, and other
store level expenses as a percentage of sales than mature stores, the impact of new store openings will also contribute
to lower store operating margins until they become established. We charge preopening costs associated with each
new location to expense as the costs are incurred.
Lease and Other Commitments
Operating and Capital Lease Commitments
The following table summarizes our contractual obligations, net of estimated sublease income, at February 1,
2004, and the eÅect that such obligations are expected to have on our liquidity and cash Öows in future periods
(in thousands):
Payments Due in Fiscal Year
2005 & 2007 & 2009 and
Contractual Obligation(1) 2004 2006 2008 Beyond Total
Operating lease obligations ÏÏÏÏÏÏÏÏÏÏ $195,525 $383,188 $368,619 $1,135,286 $2,082,618
Capital lease obligations(2) ÏÏÏÏÏÏÏÏÏ 21,755 42,349 43,643 235,132 342,879
TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $217,280 $425,537 $412,262 $1,370,418 $2,425,497
(1) At February 1, 2004, we had no long-term debt or purchase obligations.
(2) Includes $172.2 million in interest.
The operating lease payment schedule above is shown net of estimated sublease income. Sublease income for
operating and capital leases is as follows (in thousands):
Sublease Income
2004 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 3,697
2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,810
2006 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,763
2007 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,622
2008 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,374
Thereafter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,780
$32,046
Letters of Credit
We issue letters of credit for guarantees provided for insurance programs, capital leases and utilities. As of
February 1, 2004, $22.7 million was outstanding under our letters of credit.
22