Petsmart 2003 Annual Report Download - page 71

PETsMART, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
On August 5, 2002, the Company completed the sale of 1,317,416 shares of common stock for $13.40 per
share, resulting in proceeds, net of underwriting fees, of approximately $16,859,000. On August 12, 2002, the
underwriters exercised the over-allotment option and purchased 2,175,000 additional shares of common stock
for $13.40 per share, resulting in proceeds, net of underwriting fees, of approximately $27,833,000. Costs
associated with the oÅering were approximately $767,000 and were accounted for as a reduction of the
proceeds.
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%. 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. On November 21, 2003, the Company further amended its credit facility to reduce the
available commitment to $125,000,000, extend the maturity by two years to April 30, 2008, amend certain
covenants, and the fee payable to the lenders each quarter was reduced to an annual rate of 0.25% from
0.375% of the unused amount of the credit facility. The credit facility permits the payment of dividends, so
long as the Company is not in default and the payment of dividends would not result in default of the facility.
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 1, 2004, and February 2, 2003, there were
no borrowings outstanding on this credit arrangement.
Letters of Credit
The Company issues letters of credit for guarantees provided for insurance programs, capital leases, and
utilities. As of February 1, 2004, approximately $22,727,000 was outstanding under 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 generally range from 10 to
25 years and typically allow the Company to renew for three to Ñve additional Ñve-year terms. Store leases,
excluding renewal options, expire at various dates through 2021. 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. In addition, certain leases provide for rent increases based on changes in
the Consumer Price Index. Total operating lease rent expense incurred, net of sublease income, during Ñscal
2003, 2002, and 2001 was $174,341,000, $170,842,000, and $195,107,000, respectively. Additional rent
included in those amounts during Ñscal 2003, 2002, and 2001 was $131,000, $75,000, and $12,000,
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 has no future material commitments regarding the sale of these
properties. The Company also leases certain Ñxtures and equipment, computer hardware, and software under
capital leases.
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