-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HFJgjTAUHOHWMjn8AlIm6ZpTPijw9XgDymSCuEAKAWy9UcswoN90YXh2f+ydD8WZ n8ITu6K0pEtHo2l+VlFLkw== 0000888455-97-000009.txt : 19970617 0000888455-97-000009.hdr.sgml : 19970617 ACCESSION NUMBER: 0000888455-97-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970503 FILED AS OF DATE: 19970616 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PETCO ANIMAL SUPPLIES INC CENTRAL INDEX KEY: 0000888455 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-RETAIL STORES, NEC [5990] IRS NUMBER: 330479906 STATE OF INCORPORATION: DE FISCAL YEAR END: 0128 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-23574 FILM NUMBER: 97624713 BUSINESS ADDRESS: STREET 1: 9125 REHCO RD CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 6194537845 MAIL ADDRESS: STREET 1: 9125 REHCO RD CITY: SAN DIEGO STATE: CA ZIP: 92121 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended May 3, 1997 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to __________ Commission file number: 0-23574 PETCO ANIMAL SUPPLIES, INC. (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Delaware 33-0479906 9125 Rehco Road San Diego, CA 92121 (619) 453-7845 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Title Date Outstanding Common Stock, $.0001 Par Value June 12, 1997 18,659,034 PETCO Animal Supplies Inc. Index Part I Financial Information Page Item 1. Consolidated Financial Statements Consolidated Balance Sheets at February 1, 1997 and May 3, 1997 3 Consolidated Statements of Operations for the thirteen weeks ended May 4, 1996 and May 3, 1997 4 Consolidated Statements of Cash Flows for the thirteen weeks ended May 4, 1996 and May 3, 1997 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Item 3. Quantitative and Qualitative Disclosures About Market Risk 10 Part II Other Information Item 6. Exhibits and Reports on Form 8-K 10 Signatures 11 PETCO ANIMAL SUPPLIES, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except shares) February 1, May 3, 1997 1997 ASSETS (unaudited) Current assets: Cash and cash equivalents $ 42,932 $ 18,577 Receivables 7,212 8,990 Inventories 68,498 76,075 Other current assets 1,976 2,076 Total current assets 120,618 105,718 Fixed assets, net 96,374 103,800 Goodwill 42,408 41,643 Deferred tax assets 19,071 19,071 Other assets 1,877 1,825 $280,348 $272,057 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 36,090 $ 29,224 Accrued expenses 17,067 14,879 Accrued salaries and employee benefits 9,096 8,555 Revolving credit facility -- -- Current portion of capital lease and other obligations 4,575 4,652 Total current liabilities 66,828 57,310 Capital lease and other obligations, excluding current portion 14,102 13,036 Accrued store closing costs 8,691 8,046 Deferred rent 6,103 6,601 Stockholders' equity: Common Stock, $.0001 par value, 100,000,000 shares authorized, 18,609,978 and 18,618,988 shares issued and outstanding, respectively 2 2 Additional paid-in capital 236,766 236,868 Accumulated deficit (52,144) (49,806) Total stockholders' equity 184,624 187,064 Commitments and contingencies $280,348 $272,057
See accompanying notes to consolidated financial statements PETCO ANIMAL SUPPLIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited, in thousands, except share data) Thirteen weeks ended May 4, May 3, 1996 1997 x Net sales $ 111,103 $ 143,422 Cost of sales and occupancy costs 83,939 107,596 Gross profit 27,164 35,826 Selling, general, and administrative expenses 24,438 31,860 Operating income 2,726 3,966 Interest expense, net 284 37 Earnings before income taxes 2,442 3,929 Income taxes 909 1,591 Net earnings $ 1,533 $ 2,338 Net earnings per common and common equivalent share $ 0.10 $ 0.13 Weighted average number of common and common equivalent shares outstanding 15,809,147 18,613,747
See accompanying notes to consolidated financial statements. PETCO ANIMAL SUPPLIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands) Thirteen weeks ended x May 4, May 3, 1996 1997 x Cash flows from operating activities: Net earnings $ 1,533 $ 2,338 Depreciation and amortization 3,281 4,663 Deferred taxes 34 -- Changes in assets and liabilities: Receivables 1,352 (1,778) Inventories (8,546) (7,577) Other assets (752) (58) Accounts payable (1,739) (6,866) Accrued expenses (656) (2,188) Accrued salaries and employee benefits 35 (541) Accrued store closing costs (3,311) (645) Deferred rent 473 498 Other -- 312 Net cash used in operating activities (8,296) (11,842) Cash flows from investing activities: Additions to fixed assets (6,521) (11,626) Net cash invested in acquisitions of businesses (7,788) -- Net cash used in investing activities (14,309) (11,626) Cash flows from financing activities: Borrowings under other obligations 523 -- Repayment of capital lease and other obligations (905) (989) Proceeds from the issuance of common stock 69,950 102 Distributions to shareholders (510) -- Net cash provided by (used in) financing activities 69,058 (887) Net increase (decrease) in cash and cash equivalents 46,453 (24,355) Cash and cash equivalents at beginning of year 15,740 42,932 Cash and cash equivalents at end of period $ 62,193 $ 18,577
See accompanying notes to consolidated financial statements PETCO ANIMAL SUPPLIES, INC. Notes to Consolidated Financial Statements Note 1 - General In the opinion of management of Petco Animal Supplies, Inc. (the "Company" or "PETCO"), the unaudited consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, necessary to present the financial position, results of operations and cash flows as of May 3, 1997 and for the periods ended May 4, 1996 and May 3, 1997. Because of the seasonal nature of the Company's business, the results of operations for the thirteen weeks ended May 4, 1996 and May 3, 1997, are not necessarily indicative of the results to be expected for the full year. The Company's fiscal year ends on the Saturday closest to January 31, resulting in years of either 52 or 53 weeks. All references to a fiscal year refer to the fiscal year ending on the Saturday closest to January 31 of the following year. For example, references to fiscal 1996 refer to the fiscal year beginning on February 4, 1996 and ending on February 1, 1997. For further information, refer to the consolidated financial statements and footnotes thereto for fiscal 1996 included in the Company's Form 10-K Annual Report (File No. 0-23574) filed with the Securities and Exchange Commission on April 30, 1997. Note 2 - Acquisitions In March 1996, the Company assumed lease obligations and purchased all tangible personal property and inventory used in connection with eight pet food and supply stores located in Maryland and Virginia and operated under the trade name P.T. Moran ("P.T. Moran"). The transaction was accounted for as a purchase with the fair market value of assets acquired of $7.6 million and the excess of the cost over the fair market value of net assets recorded as goodwill and amortized over fifteen years. The consolidated financial statements include the operating results from the closing date. The Company also acquired eight Pet Nosh stores in July 1996, four PETS USA stores in October 1996 and thirty-two Pet Food Warehouse stores in December 1996, (collectively, the "Pooled Companies") all of which were accounted for as poolings of interests and, therefore, all prior period financial statements have been restated. A reconciliation reflecting the combination of the previously reported results of the Company with the results of the Pooled Companies follows (in thousands): Pooled PETCO Companies Combined Thirteen weeks ended May 4, 1996 Net sales $ 86,956 $ 24,147 $ 111,103 Net earnings 1,332 201 1,533
Distributions to shareholders reflected in the accompanying Consolidated Statements of Cash Flows are related to activities of the Pooled Companies. Note 3 - Net Earnings Per Share Net earnings per common and common equivalent share are computed by dividing net earnings by the weighted average number of common and common equivalent shares outstanding during the period. For the thirteen weeks ended May 4, 1996 and May 3, 1997, common equivalent shares were not included as their effects would not be materially dilutive. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations General The Company currently utilizes both superstore and traditional store formats and follows a strategy of converting and expanding its store base from a traditional store format to a superstore format. As a result of this strategy, the Company has opened and acquired superstores, has expanded, remodeled, and relocated traditional stores into superstores, collectively referred to as conversions, and has closed underperforming stores. At May 3, 1997, the Company operated 341 stores, including 285 superstores, in 22 states and the District of Columbia. At May 4, 1996, the Company operated 299 stores, of which 227 were superstores. As a result of the Company's plan to open approximately 40 to 50 superstores this year, including conversions of existing traditional stores into superstore formats and excluding acquisitions, the Company anticipates certain costs to increase as a percentage of sales in the near term. In addition, the timing of new superstore openings and related preopening expenses and the amount of revenue contributed by new and existing superstores may cause the Company's quarterly results of operations to fluctuate. The Company expects continued downward pressure on its gross profit as a percentage of sales from higher occupancy costs in new stores and increased competitive pressures in certain markets. This trend should be offset, however, by increased sales from maturing stores and the benefit of expanded merchandise assortments in existing stores. Increased payroll, advertising and other store level expenses as a percentage of sales in new stores should also contribute to lower store operating margins. In addition, the Company charges preopening costs associated with each new superstore to earnings as incurred. Therefore, the Company expects that the opening of a large number of new superstores in a given quarter may adversely impact its quarterly results of operations for that quarter. In March 1996, the Company assumed lease obligations and purchased all tangible personal property and inventory used in connection with eight pet food and supply stores operated under the trade name P.T. Moran. The Company also acquired eight Pet Nosh stores in July 1996, four PETS USA stores in October 1996 and thirty-two Pet Food Warehouse stores in December 1996, all of which were accounted for as poolings of interests and, therefore, all prior period financial statements have been restated. Although the Company does not expect the results of these stores to be dilutive on fiscal 1997 operating results, there can be no assurances these stores can achieve their anticipated profitability. The Company's business is also subject to some seasonal fluctuations. Historically, the Company has realized a higher portion of its net sales during the fourth quarter and a lower portion of its net sales in the third quarter. Results of Operations First Quarter 1997 Compared to First Quarter 1996 Net sales increased 29.1% to $143.4 million for the thirteen weeks ended May 3, 1997, ("first quarter 1997") from $111.1 million for the thirteen weeks ended May 4, 1996, ("first quarter 1996"). The increase in net sales in first quarter 1997 resulted primarily from the addition of 66 superstores, including the conversion of 19 traditional stores into superstores, partially offset by the closing of 24 stores in the past year, and a comparable store net sales increase of 14.0%. The comparable store net sales increase was attributable to maturing superstores, increased advertising and expanded merchandise assortments in existing stores. The net increase in the Company's store base accounted for approximately $20.4 million, or 63.2% of the net sales increase, and $11.9 million, or 36.8% of the net sales increase, was attributable to the increase in comparable store net sales. Gross profit, defined as net sales less cost of sales including occupancy costs, increased to $35.8 million in first quarter 1997 from $27.2 million in first quarter 1996. As a percentage of sales, gross profit increased to 25.0% in first quarter 1997 from 24.5% in first quarter 1996. This increase reflects a better sales mix, increased occupancy leverage and lowered distribution expenses related to the more efficient operation of the Company's central distribution facility during the current period. Selling, general and administrative expenses increased $7.5 million to $31.9 million in first quarter 1997 from $24.4 million in the same period last year. Selling, general and administrative expenses increased primarily as a result of higher personnel and related costs associated with new store openings and acquisitions. As a percentage of net sales, these expenses increased to 22.2% in first quarter 1997 from 22.0% in first quarter 1996 primarily due to increased operating costs of larger and more immature superstores in the store base. Operating income in first quarter 1997 increased 48.1% to $4.0 million compared to $2.7 million in first quarter 1996 and increased as a percentage of net sales to 2.8% in first quarter 1997 from 2.4% in first quarter 1996. Income taxes were $1.6 million in first quarter 1997, compared to $0.9 million in first quarter 1996. Net earnings increased 53.3% to $2.3 million, or $0.13 per share, for the first quarter 1997 from $1.5 million, or $0.10 per share, for the same period last year. Liquidity and Capital Resources The Company has financed its operations and expansion program through internal cash flow, external borrowings and the sale of equity securities. At May 3, 1997, total assets were $272.1 million, of which $105.7 million were current assets. Net cash used in operating activities was $11.8 million for the first quarter 1997 and $8.3 million for the same period of the prior year. The Company's sales are substantially on a cash basis, therefore cash flow generated from operating stores provides a significant source of liquidity to the Company. The principal use of operating cash is for the purchase of merchandise inventories. A portion of the Company's inventory purchases is financed through vendor credit terms. The Company uses cash in investing activities to acquire stores, purchase fixed assets for new and converted stores and, to a lesser extent, to purchase warehouse and office fixtures, equipment and computer hardware and software in support of its distribution and administrative functions. During the first quarter 1996 the Company acquired one retailer of pet food and supplies with net cash of $7.8 million invested in the acquisition of this business. Cash used in investing activities was $11.6 million for the first quarter 1997 and $14.3 million for the same period of the prior year. The Company also finances some of its purchases of equipment and fixtures through capital leases and other obligations. Purchases of $1.8 million of fixed assets were financed in this manner during the first quarter 1996. The Company believes that additional sources of capital lease and other financing are available on a cost-effective basis and plans to use them, as necessary, in connection with its expansion program. The Company's primary long-term capital requirement is funding for the opening or acquisition of superstores and the conversion of traditional stores into superstores. During the first quarter 1996, net proceeds of $70.0 million were obtained from a public offering of common stock to provide funds for the Company's expansion program, the acquisition of related businesses and for working capital requirements. The Company has a Revolving Credit Facility with a commitment of up to $40.0 million which expires December 6, 1998. Borrowings under this facility are unsecured and bear interest, at the Company's option, at either the bank's reference rate or LIBOR plus 0.375% based on the Company's leverage ratio at May 3, 1997. At May 3, 1997 the Company had no outstanding borrowings under this facility. The Revolving Credit Facility contains certain affirmative and negative covenants related to debt, interest and fixed charges coverage and consolidated net worth. As of February 1, 1997, the Company had available net operating loss carryforwards of $14.9 million for federal income tax purposes, which begin expiring in 2004, and $8.9 million for state income tax purposes, which begin expiring in 1997. The Company anticipates that funds generated by operations, funds available under the Revolving Credit Facility, currently available vendor financing and capital lease and other obligation financing will be sufficient to finance its continued operations and planned store openings for at least the next twelve months. Certain Cautionary Statements Certain statements in this Quarterly Report on Form 10-Q that are not historical fact constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results of the Company to be materially different from historical results or from any results expressed or implied by such forward-looking statements. These factors are discussed under the caption "Certain Cautionary Statements" in the Company's Annual Report on Form 10-K for the year ended February 1, 1997. Item 3. Quantitative and Qualitative Disclosures About Market Risk Not applicable. Part II. Other Information None Item 6. Exhibits and Reports on Form 8-K 1. Exhibits (a) 27.1 Financial Data Schedule (filed electronically only) 2. Reports on Form 8-K (a) The Company filed no reports on Form 8-K during the thirteen weeks ended May 3, 199 Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PETCO ANIMAL SUPPLIES, INC. By: /s/ James M. Myers James M. Myers Senior Vice President Finance and Chief Accounting Officer Date: June 16, 1997 EX-27 2
5 3-MOS JAN-31-1998 MAY-03-1997 18,577 0 8,990 0 76,075 105,718 103,800 0 272,057 57,310 0 0 0 2 187,062 272,057 143,422 143,422 107,596 107,596 31,860 0 37 3,929 1,591 2,338 0 0 0 2,338 0.13 0.13
-----END PRIVACY-ENHANCED MESSAGE-----