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Press release from Business Wire

PetSmart Reports Results for the Third Quarter 2011

<p class='bwalignc'> <b>Q3 Earnings up 32% to $0.50 per Share; Comp Sales of 6.1%; Total Sales up 8%; Comp Transactions of 2.2%</b> </p>

Wednesday, November 16, 2011

PetSmart Reports Results for the Third Quarter 201116:02 EST Wednesday, November 16, 2011 PHOENIX (Business Wire) -- PetSmart, Inc. (NASDAQ: PETM) today reported earnings of $0.50 per share, up 32% compared to $0.38 per share in the third quarter of 2010. Net income totaled $56 million in the third quarter of 2011, compared to $46 million in the third quarter of 2010. Total sales for the third quarter of 2011 increased 8% to $1.5 billion. The increase in sales was partially impacted by $3 million in favorable foreign currency fluctuations. Comparable store sales, or sales in stores open at least a year, grew 6.1%, benefiting from comparable transactions growth of 2.2%. Services sales, which are included in total sales, grew 9% to $161 million. During the third quarter, the company generated $124 million in operating cash flow, spent $28 million in capital expenditures, distributed $16 million in dividends, and repurchased $70 million of PetSmart stock. The company ended the quarter with $333 million in cash, cash equivalents and restricted cash and zero borrowings on its credit facility. “The favorable momentum that we experienced during the quarter validates the work that we are doing, and continues to move us forward on our journey to becoming a best-in-class specialty retailer,” said Bob Moran, President and Chief Executive Officer. “For the full year, we expect comparable store sales growth of mid-single digits. We are raising our earnings per share guidance from a previous range of $2.46 to $2.52 to our current expectations of $2.50 to $2.54,” said Chip Molloy, Senior Vice President and Chief Financial Officer. “For the fourth quarter of 2011, we are expecting comparable store sales growth in the low- to mid-single digit range, and earnings per share between $0.85 and $0.89.” Conference call information PetSmart management has scheduled a teleconference for 4:30 p.m. EST on November 16, 2011 to discuss results for the third quarter 2011. 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 fourth quarter of 2011. In addition, you can listen to the call live by dialing 866-219-5885 (within the United States and Canada) or 703-639-1124 (for international callers), code 1556760. A phone replay will be available through December 16, 2011, 11:59 p.m. EST, at 888-266-2081 in the United States and Canada, or at 703-925-2533 for international callers, code 1556760. About PetSmart PetSmart, Inc. (NASDAQ: PETM) is the largest specialty pet retailer of services and solutions for the lifetime needs of pets. The company employs approximately 50,000 associates and operates more than 1,210 pet stores in the United States, Canada and Puerto Rico, over 189 in-store PetSmart® PetsHotel® dog and cat 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 dog training, pet grooming, pet boarding, PetSmart Doggie Day Camp SM 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 $134 million in grants and programs benefiting animal welfare organizations. Through its in-store pet adoption partnership with PetSmart Charities®, PetSmart has helped save the lives of more than 4.7 million pets. Forward-looking statements This news release contains forward-looking statements concerning our expectations for future performance, including the statements comprising our 2011 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/PetSmartTLCFind PetSmart on Facebook www.facebook.com/PetSmart                   PetSmart, Inc. and SubsidiariesCondensed Consolidated Balance Sheets (In thousands, except par value) (Unaudited)   October 30,January 30,October 31,201120112010   Assets Cash and cash equivalents $ 271,252 $ 291,949 $ 235,407 Short-term investments 19,555 9,708 - Restricted cash 61,439 61,439 46,515 Receivables, net 65,709 53,971 43,108 Merchandise inventories 707,997 615,841 687,825 Deferred income taxes 44,999 44,999 36,805 Prepaid expenses and other current assets   88,908     46,022     91,822     Total current assets 1,259,859 1,123,929 1,141,482   Property and equipment, net 1,064,993 1,132,435 1,150,286 Equity investment in Banfield 35,082 42,858 38,691 Deferred income taxes 95,426 96,215 86,199 Goodwill 44,266 44,111 43,555 Other noncurrent assets   34,336     30,672     29,140     Total assets $ 2,533,962   $ 2,470,220   $ 2,489,353     Liabilities and Stockholders' Equity Accounts payable and bank overdraft $ 228,431 $ 168,776 $ 201,564 Accrued payroll, bonus and employee benefits 149,032 139,359 125,563 Accrued occupancy expenses and deferred rents 72,563 64,328 67,606 Current maturities of capital lease obligations 52,446 45,277 43,503 Other current liabilities   169,733     156,065     155,655     Total current liabilities 672,205 573,805 593,891   Capital lease obligations 511,984 521,552 528,270 Deferred rents 82,565 86,027 87,479 Other noncurrent liabilities   121,068     118,194     107,078     Total liabilities   1,387,822     1,299,578     1,316,718     Stockholders' Equity: Preferred stock; $.0001 par value - - - Common stock; $.0001 par value 16 16 16 Additional paid-in capital 1,290,152 1,222,340 1,201,158 Retained earnings 1,420,471 1,277,803 1,201,957 Accumulated other comprehensive income 5,731 5,380 4,478 Less: Treasury stock   (1,570,230 )   (1,334,897 )   (1,234,974 )   Total stockholders' equity   1,146,140     1,170,642     1,172,635     Total liabilities and stockholders' equity $ 2,533,962   $ 2,470,220   $ 2,489,353                                               PetSmart, Inc. and SubsidiariesCondensed Consolidated Statements of Income (in thousands, except per share and store data) (Unaudited)   Thirteen Weeks Ended Thirteen Weeks Ended Thirty-Nine Weeks Ended Thirty-Nine Weeks Ended October 30, 2011     % of Sales October 31, 2010     % of Sales October 30, 2011     % of Sales October 31, 2010     % of Sales   Merchandise sales $ 1,326,819 88.6 % $ 1,230,911 88.7 % $ 3,941,641 88.1 % $ 3,681,188 88.2 % Services sales 161,339 10.8 % 148,282 10.7 % 506,380 11.3 % 466,874 11.2 % Other revenue   9,399       0.6 %   8,877       0.6 %   27,455       0.6 %   25,701       0.6 %   Net sales   1,497,557       100.0 %   1,388,070       100.0 %   4,475,476       100.0 %   4,173,763       100.0 %   Cost of merchandise sales 940,960 62.8 % 880,556 63.4 % 2,777,172 62.1 % 2,619,624 62.8 % Cost of services sales 119,038 8.0 % 109,652 7.9 % 364,290 8.1 % 338,866 8.1 % Cost of other revenue   9,399       0.6 %   8,877       0.6 %   27,455       0.6 %   25,701       0.6 %   Total cost of sales   1,069,397       71.4 %     999,085       72.0 %   3,168,917       70.8 %     2,984,191       71.5 %   Gross profit 428,160 28.6 % 388,985 28.0 % 1,306,559 29.2 % 1,189,572 28.5 %   Operating, general and administrative expenses   326,964       21.8 %   305,345       22.0 %   973,404       21.7 %   910,664       21.8 %   Operating income 101,196 6.8 % 83,640 6.0 % 333,155 7.4 % 278,908 6.7 %   Interest expense, net   (14,038 )     -0.9 %   (14,289 )     -1.0 %   (42,740 )     -1.0 %   (44,222 )     -1.1 %   Income before income tax expense and equity in income from Banfield 87,158 5.8 % 69,351 5.0 % 290,415 6.5 % 234,686 5.6 %   Income tax expense (33,826 ) -2.3 % (26,386 ) -1.9 % (110,356 ) -2.5 % (91,300 ) -2.2 %   Equity in income from Banfield   2,826       0.2 %   2,648       0.2 %   8,184       0.2 %   6,205       0.1 %   Net income $ 56,158       3.7 % $ 45,613       3.3 % $ 188,243       4.2 % $ 149,591       3.6 %   Earnings per common share: Basic $ 0.50   $ 0.39   $ 1.67   $ 1.27   Diluted $ 0.50   $ 0.38   $ 1.65   $ 1.25     Weighted average shares outstanding: Basic 111,330 116,943 112,425 117,333 Diluted 113,081 119,360 114,399 119,771                                                           Stores open at beginning of each period 1,197 1,164 1,187 1,149 Stores opened during each period 15 10 28 29 Stores closed during each period   (2 )   (2 )   (5 )   (6 ) Stores open at end of each period         1,210                 1,172                 1,210                 1,172         PetSmart, Inc.Investor Relations, 623-587-2025