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Press release from Business Wire

PetSmart Reports Results for the Second Quarter 2010

<p class=' bwtextaligncenter'> <b>Q2 Earnings up 32% to $0.41 per Share; Comp Sales Growth of 4.6 Percent; Raising 2010 Annual EPS Guidance</b> </p>

Wednesday, August 18, 2010

PetSmart Reports Results for the Second Quarter 201016:02 EDT Wednesday, August 18, 2010 PHOENIX (Business Wire) -- PetSmart, Inc. (NASDAQ: PETM) today reported earnings of $0.41 per share, up 32% compared to $0.31 per share in the second quarter of 2009. Net income totaled $48.4 million in the second quarter of 2010, compared to $39.0 million in the second quarter of 2009. Total sales for the second quarter of 2010 increased 6.2% to $1.4 billion. The increase in net sales was partially impacted by $5.8 million in favorable foreign currency fluctuations. Comparable store sales, or sales in stores open at least a year, grew 4.6% in the second quarter. Services sales, which are included in total sales, grew 7.2% to $165 million. “We are pleased to report that in the second quarter, we continued to execute on our strategic priorities, and delivered another quarter of consistent, quality earnings growth,” said Bob Moran, Chief Executive Officer and President. “Our results for the second quarter have exceeded our goals, and demonstrate our ability to drive and deliver solid earnings growth, while continuing to invest in innovative product offerings and strengthening our brand.” “We are very pleased with our performance for the second quarter in delivering strong operating results while also maintaining a healthy balance sheet,” said Chip Molloy, Senior Vice President and Chief Financial Officer. “For the full year, we are maintaining our comparable store sales expectations of low- to mid-single digits and raising our earnings per share guidance from $1.91 to $1.99. For the third quarter, we anticipate comparable store sales in the mid-single digits and earnings per share of $0.35 to $0.39.” Conference call information PetSmart management has scheduled a teleconference for 4:30 p.m. EDT today to discuss results for the second quarter 2010. This teleconference will be webcast live for all investors at www.petm.com or www.streetevents.com. The webcast will be available until the company announces results for the third quarter of 2010. In addition, you can listen to the call live by dialing (866) 793-1342 (within the United States and Canada) or (703) 639-1313 (for international callers), code 1474047. A phone replay will be available through September 18, 2010, 11:59 p.m. EDT, at (888) 266-2081 in the United States and Canada, or at (703) 925-2533 for international callers, code 1474047. About PetSmart PetSmart, Inc. is the largest specialty pet retailer of services and solutions for the lifetime needs of pets. The company employs approximately 45,000 associates and operates more than 1,164 pet stores in the United States and Canada, 168 in-store PetSmart PetsHotel(R) cat and dog boarding facilities, and is a leading online provider of pet supplies and pet care information (http://www.petsmart.com). PetSmart provides a broad range of competitively priced pet food and pet products; and offers complete pet training, pet grooming, pet boarding, PetSmart(R) Doggie Day Camp(SM) pet day care services and pet adoption services. Since 1994, PetSmart Charities, Inc., an independent 501(c)(3) non-profit animal welfare organization and the largest funder of animal welfare efforts in North America, has provided more than $110 million in grants and programs benefiting animal welfare organizations. Through its in-store pet adoption partnership with PetSmart Charities(R), PetSmart has helped save the lives of more than 4 million pets. Forward-looking statements This news release contains forward-looking statements concerning our expectations for future performance, including the statements comprising our 2010 guidance. These "forward-looking statements" are based on currently available information, operating plans and projections about future events and trends. They inherently involve risks and uncertainties that could cause actual results to differ materially from those predicted in such forward-looking statements. Such risks and uncertainties include, but are not limited to: changes in general economic conditions; conditions affecting customer transactions and average ticket including, but not limited to, weather conditions or other seasonal events; our ability to compete effectively; disruption of our supply chain; our ability to effectively manage our growth and operations; changes in our cost structure; and changes in the legal or regulatory environment. Undue reliance should not be placed on such forward-looking statements as they speak only as of the date hereof, and we undertake no obligation to update these statements to reflect subsequent events or circumstances except as may be required by law. For additional information on these and other factors that arise when investing in PetSmart, please see our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K. Follow PetSmart on Twitter www.twitter.com/PetSmartTLC Find PetSmart on Facebook www.facebook.com/PetSmart                 PetSmart, Inc. and SubsidiariesCondensed Consolidated Statements of Operations (in thousands, except per share and store data) (Unaudited)   Thirteen Weeks Ended Thirteen Weeks Ended Twenty-Six Weeks Ended Twenty-Six Weeks Ended August 1, 2010   % of Sales August 2, 2009   % of Sales August 1, 2010   % of Sales August 2, 2009   % of Sales   Merchandise sales $ 1,216,682 87.5 % $ 1,154,593 88.2 % $ 2,450,277 88.0 % $ 2,339,348 88.7 % Services sales 165,305 11.9 % 154,192 11.8 % 318,592 11.4 % 297,011 11.3 % Other revenue   8,553     0.6 %   -     0.0 %   16,824     0.6 %   -     0.0 %   Net sales   1,390,540     100.0 %   1,308,785     100.0 %   2,785,693     100.0 %   2,636,359     100.0 %   Cost of merchandise sales 869,226 62.5 % 830,629 63.5 % 1,739,068 62.4 % 1,678,503 63.7 % Cost of services sales 116,466 8.4 % 108,744 8.3 % 229,214 8.2 % 211,192 8.0 % Cost of other revenue   8,553     0.6 %   -     0.0 %   16,824     0.6 %   -     0.0 %   Total cost of sales   994,245     71.5 %     939,373     71.8 %   1,985,106     71.3 %   1,889,695     71.7 %   Gross profit 396,295 28.5 % 369,412 28.2 % 800,587 28.7 % 746,664 28.3 %   Operating, general and administrative expenses   304,288     21.9 %   295,623     22.6 %   605,319     21.7 %   583,006     22.1 %   Operating income 92,007 6.6 % 73,789 5.6 % 195,268 7.0 % 163,658 6.2 %   Interest expense, net   (14,590 )   -1.0 %   (14,970 )   -1.1 %   (29,933 )   -1.1 %   (29,944 )   -1.1 %   Income before income tax expense and equity in income from investee 77,417 5.6 % 58,819 4.5 % 165,335 5.9 % 133,714 5.1 %   Income tax expense (31,150 ) -2.2 % (21,392 ) -1.6 % (64,914 ) -2.3 % (51,141 ) -1.9 %   Equity in income from investee   2,119     0.2 %   1,537     0.1 %   3,557     0.1 %   2,653     0.1 %   Net income $ 48,386     3.5 % $ 38,964     3.0 % $ 103,978     3.7 % $ 85,226     3.2 %   Earnings per common share: Basic $ 0.41   $ 0.32   $ 0.88   $ 0.69   Diluted $ 0.41   $ 0.31   $ 0.87   $ 0.68     Weighted average shares outstanding: Basic 117,079 123,474 117,528 123,914 Diluted 119,423 125,504 119,917 126,102                                   Stores open at beginning of each period 1,160 1,137 1,149 1,112 Stores opened during each period 5 10 19 36 Stores closed during each period (1 ) (2 ) (4 ) (3 ) Stores open at end of each period     1,164           1,145           1,164           1,145             PetSmart, Inc. and SubsidiariesCondensed Consolidated Balance Sheets (In thousands, except par value) (Unaudited)   August 1,January 31,August 2,201020102009   Assets Cash and cash equivalents $ 239,413 $ 308,360 $ 180,656 Restricted cash 46,515 48,172 55,250 Receivables, net 54,042 52,232 58,729 Merchandise inventories 622,483 563,389 574,985 Deferred income taxes 36,805 36,805 29,334 Prepaid expenses and other current assets   92,585     57,652     89,680     Total current assets 1,091,843 1,066,610 988,634   Property and equipment, net 1,158,509 1,201,857 1,262,458 Equity investment in affiliate 36,043 32,486 28,591 Deferred income taxes 87,561 94,901 84,829 Goodwill 43,323 42,200 41,989 Other noncurrent assets   26,566     23,932     24,257     Total assets $ 2,443,845   $ 2,461,986   $ 2,430,758     Liabilities and Stockholders' Equity Accounts payable and bank overdraft $ 198,093 $ 212,121 $ 189,242 Accrued payroll, bonus and employee benefits 107,203 105,162 92,879 Accrued occupancy expenses and deferred rents 62,046 63,142 60,404 Current maturities of capital lease obligations 41,147 37,839 34,930 Other current liabilities   128,807     146,965     130,075     Total current liabilities 537,296 565,229 507,530   Capital lease obligations 534,928 533,635 553,960 Deferred rents 88,279 91,030 92,587 Other noncurrent liabilities   105,223     99,377     98,241     Total liabilities   1,265,726     1,289,271     1,252,318     Stockholders' Equity: Preferred stock; $.0001 par value - - - Common stock; $.0001 par value 16 16 16 Additional paid-in capital 1,181,647 1,148,228 1,127,947 Retained earnings 1,171,039 1,093,708 1,005,050 Accumulated other comprehensive income 4,091 2,369 2,178 Treasury stock   (1,178,674 )   (1,071,606 )   (956,751 )   Total stockholders' equity   1,178,119     1,172,715     1,178,440     Total liabilities and stockholders' equity $ 2,443,845   $ 2,461,986   $ 2,430,758