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Press release from Business Wire

PetSmart Reports Results for the Second Quarter 2012

<p class='bwalignc'> <b>Q2 Earnings up 31% to $0.71 per Share; Comp Sales of 7.0%; Total Sales up 9%; Comp Transactions up 2.9%</b> </p>

Wednesday, August 15, 2012

PetSmart Reports Results for the Second Quarter 201216:02 EDT Wednesday, August 15, 2012 PHOENIX (Business Wire) -- PetSmart, Inc. (NASDAQ: PETM) today reported earnings of $0.71 per share, up 31% compared to $0.54 per share in the second quarter of 2011. Net income totaled $79 million in the second quarter of 2012, compared to $61 million in the second quarter of 2011. Total sales for the second quarter of 2012 increased 9% to $1.6 billion. The increase in net sales was partially impacted by $4 million in unfavorable foreign currency fluctuations. Comparable store sales, or sales in stores open at least a year, grew 7.0%, benefitting from comparable transactions growth of 2.9%. Services sales, which are included in total sales, grew 7% to $191 million. During the second quarter, the company generated $104 million in operating cash flow, spent $35 million in capital expenditures, distributed $15 million in dividends, and repurchased $47 million of PetSmart stock. The company ended the quarter with $354 million in cash, cash equivalents and restricted cash and zero borrowings on its credit facility. “Our performance in the second quarter was due to strength across all three merchandising categories, as well as across services,” said Bob Moran, Chairman and Chief Executive Officer. “We've built a culture of innovation and differentiation, showing our customers how we're different from the competition, and how we offer the best choice.” “As a reminder, 2012 contains a 53rd week. For all of 2012, we anticipate comparable store sales growth in the mid-single digit range, and total sales growth in the 10% to 11% range. We are raising our earnings per share guidance from a previous range of $3.19 to $3.31, to our current expectations of $3.30 to $3.40. The impact of the extra week is estimated to be $120 million in sales and $0.16 in EPS,” said Chip Molloy, Executive Vice President and Chief Financial Officer. "For the third quarter of 2012, we are expecting comparable store sales growth in the mid-single digit range, and earnings per share between $0.59 to $0.63.” Conference call information PetSmart management has scheduled a teleconference for 4:30 p.m. EDT on August 15, 2012 to discuss results for the second quarter 2012. 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 2012. In addition, you can listen to the call live by dialing 866-206-7202 (within the United States and Canada) or 703-639-1112 (for international callers), code 1586814. A phone replay will be available through September 15, 2012, 11:59 p.m. EDT, at 888-266-2081 in the United States and Canada, or at 703-925-2533 for international callers, code 1586814. 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 1,249 pet stores in the United States, Canada and Puerto Rico, over 194 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 $165 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 5 million pets. Forward-looking statements This news release contains forward-looking statements concerning our expectations for future performance, including the statements comprising our 2012 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 July 29, 2012     % of Sales July 31, 2011     % of Sales July 29, 2012     % of Sales July 31, 2011     % of Sales   Merchandise sales $ 1,419,383 87.6 % $ 1,300,473 87.4 % $ 2,858,942 88.0 % $ 2,614,822 87.8 % Services sales 190,867 11.8 % 177,945 12.0 % 371,881 11.4 % 345,041 11.6 % Other revenue   9,417       0.6 %   9,135       0.6 %   18,737       0.6 %   18,056       0.6 %   Net sales   1,619,667       100.0 %   1,487,553       100.0 %   3,249,560       100.0 %   2,977,919       100.0 %   Cost of merchandise sales 986,885 60.9 % 916,736 61.6 % 1,981,393 61.0 % 1,836,212 61.7 % Cost of services sales 134,550 8.3 % 124,698 8.4 % 263,241 8.1 % 245,252 8.2 % Cost of other revenue   9,417       0.6 %   9,135       0.6 %   18,737       0.6 %   18,056       0.6 %   Total cost of sales   1,130,852       69.8 %       1,050,569       70.6 %   2,263,371       69.7 %       2,099,520       70.5 %   Gross profit 488,815 30.2 % 436,984 29.4 % 986,189 30.3 % 878,399 29.5 %   Operating, general and administrative expenses   352,755       21.8 %   326,708       22.0 %   695,778       21.4 %   646,440       21.7 %   Operating income 136,060 8.4 % 110,276 7.4 % 290,411 8.9 % 231,959 7.8 %   Interest expense, net   (13,550 )     -0.8 %   (14,255 )     -1.0 %   (27,679 )     -0.9 %   (28,702 )     -1.0 %   Income before income tax expense and equity in income from Banfield 122,510 7.6 % 96,021 6.5 % 262,732 8.1 % 203,257 6.8 %   Income tax expense (48,333 ) -3.0 % (37,624 ) -2.5 % (96,505 ) -3.0 % (76,530 ) -2.6 %   Equity in income from Banfield   4,343       0.3 %   2,783       0.2 %   6,976       0.2 %   5,358       0.2 %   Net income $ 78,520       4.8 % $ 61,180       4.1 % $ 173,203       5.3 % $ 132,085       4.4 %   Earnings per common share: Basic $ 0.73   $ 0.54   $ 1.59   $ 1.17   Diluted $ 0.71   $ 0.54   $ 1.57   $ 1.15     Weighted average shares outstanding: Basic 108,260 112,396 108,595 112,972 Diluted 109,934 114,341 110,507 115,039                                   Stores open at beginning of each period 1,241 1,192 1,232 1,187 Stores opened during each period 11 8 25 13 Stores closed during each period   (3 )   (3 )   (8 )   (3 ) Stores open at end of each period     1,249           1,197           1,249           1,197         PetSmart, Inc. and SubsidiariesCondensed Consolidated Balance Sheets (In thousands, except par value) (Unaudited)       July 29,January 29,July 31,201220122011   Assets Cash and cash equivalents $ 282,011 $ 342,892 $ 259,180 Short-term investments 16,730 20,311 11,833 Restricted cash 71,916 70,189 61,439 Receivables, net 56,358 53,899 63,991 Merchandise inventories 691,820 644,864 638,294 Deferred income taxes 51,381 51,381 44,999 Prepaid expenses and other current assets   131,521     80,352     84,177     Total current assets 1,301,737 1,263,888 1,163,913   Property and equipment, net 1,016,359 1,067,028 1,072,269 Equity investment in Banfield 30,940 37,824 32,256 Deferred income taxes 84,288 93,485 92,198 Goodwill 44,043 44,084 45,428 Other noncurrent assets   44,115     37,775     37,553     Total assets $ 2,521,482   $ 2,544,084   $ 2,443,617     Liabilities and Stockholders' Equity Accounts payable and bank overdraft $ 248,072 $ 199,177 $ 189,959 Accrued payroll, bonus and employee benefits 140,607 158,079 123,557 Accrued occupancy expenses and deferred rents 71,543 68,584 65,704 Current maturities of capital lease obligations 58,152 54,219 49,362 Other current liabilities   188,978     201,247     142,081   Total current liabilities 707,352 681,306 570,663   Capital lease obligations 482,099 505,273 514,724 Deferred rents 77,992 81,403 83,675 Other noncurrent liabilities   117,272     122,273     118,620     Total liabilities   1,384,715     1,390,255     1,287,682     Stockholders' Equity: Preferred stock; $.0001 par value - - - Common stock; $.0001 par value 17 16 16 Additional paid-in capital 1,377,678 1,312,996 1,268,297 Retained earnings 1,647,088 1,507,054 1,379,937 Accumulated other comprehensive income 5,322 5,490 7,964 Less: Treasury stock   (1,893,338 )   (1,671,727 )   (1,500,279 )   Total stockholders' equity   1,136,767     1,153,829     1,155,935     Total liabilities and stockholders' equity $ 2,521,482   $ 2,544,084   $ 2,443,617   PetSmart, Inc.Investor Relations, 623-587-2025