8-K

As furnished to the Securities and Exchange Commission on March 11, 2004.

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 11, 2004

PETCO Animal Supplies, Inc.

(Exact Name of Registrant as Specified in Charter)

Delaware	000-23574	33-0479906
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

9125 Rehco Road

San Diego, California 92121

(Address of Principal Executive Offices, including zip code)

(858) 453-7845

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.

(c) Exhibits.

Exhibit Number	Description of Exhibit
99.1	Press release issued by PETCO Animal Supplies, Inc. on March 11, 2004.

ITEM 12. Results of Operations and Financial Condition.

On March 11, 2004, PETCO Animal Supplies, Inc. issued a press release regarding its financial results for the fourth quarter and fiscal year ended January 31, 2004. A copy of the press release is attached hereto as Exhibit 99.1.

In accordance with General Instruction B.6. of Form 8-K, the information contained in this Current Report on Form 8-K, including Exhibit 99.1, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Such information shall not be incorporated by reference in any filing of PETCO Animal Supplies, Inc., whether made before or after the date hereof, regardless of any general incorporation language in such filing, except as otherwise expressly set forth by specific reference in such a filing.

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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 hereunto duly authorized.

Date: March 11, 2004	PETCO ANIMAL SUPPLIES, INC.
	By:	/s/    JAMES M. MYERS
	Name:	James M. Myers
	Title:	Chief Executive Officer

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EXHIBIT INDEX

Exhibit No.	Description of Exhibit
99.1	Press release issued by PETCO Animal Supplies, Inc. on March 11, 2004.

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EX-99.1

EXHIBIT 99.1

FOR IMMEDIATE RELEASE	Contact:	Rodney Carter, Senior Vice President
		and Chief Financial Officer (858) 453-7845 Option #2

PETCO Reports Results for the Fourth Quarter

and Fiscal Year 2003

• Pro Forma Net Earnings, Excluding Debt Retirement Costs, Increase 29% to $0.47 Per Diluted Share

• Net Earnings, Including Debt Retirement Costs, Increase 7.7% to $0.36 Per Diluted Share

• Comparable Store Sales Up 5.6% on Top of 6.0% Increase in Prior-Year Period

• Strong Operating Cashflows Internally Fund $96 Million of Growth-Focused Capital Investments, While Reducing Debt by More Than $100 Million

SAN DIEGO—March 11, 2004—PETCO Animal Supplies, Inc. (Nasdaq: PETC) today reported financial results for the fourth quarter and fiscal year 2003 ended January 31, 2004. The Company also provided its guidance for the first quarter and full fiscal year 2004.

Fourth Quarter Results

Net sales in the fourth quarter of 2003 were $455.7 million with a comparable store net sales increase of 5.6%. The comparable store net sales increase in the period comes on top of a 6.0% increase in the prior year’s fourth quarter. Overall, net sales increased 12.4% over the fourth quarter of fiscal 2002.

Net earnings for the fourth quarter were $20.9 million, or $0.36 per diluted share, including a charge of $10.6 million, or $0.11 per diluted share, for debt retirement costs associated with the successful tender offer for $50 million in principal amount of the Company’s 10 ¾% senior subordinated notes, compared with net earnings of $19.4 million, or $0.33 per diluted share, in the prior-year fourth quarter. The fourth quarter of fiscal 2002 included a charge of $3.5 million related to a litigation settlement.

Excluding the previously mentioned items and related tax effects, pro forma net earnings for the fourth quarter of fiscal 2003 increased 29% to $27.4 million, or $0.47 per diluted share, compared to pro forma net earnings for the fourth quarter of fiscal 2002 of $21.3 million, or $0.37 per diluted share.

Commenting on PETCO’s fourth quarter performance, Brian K. Devine, Chairman of the Board, said: “The 5.6% comparable store net sales increase we achieved in the fourth quarter again illustrates the exceptional and consistent growth PETCO has achieved for more than a decade. We are also pleased to report a 29% increase to pro forma net earnings for the period, or $0.47 per diluted share. Strong operating performance and cash flows funded over $96 million in capital expenditures during fiscal 2003 to continue growing the business while reducing debt by over $100 million. We enjoy significant financial flexibility to take advantage of opportunities as they arise.”

Full Year 2003 Results

Net sales in fiscal 2003 were $1.65 billion with a comparable store net sales increase of 5.6%. The comparable store net sales increase comes on top of an 8.0% increase in the prior-year period. Overall, net sales increased 12% over fiscal 2002.

Net earnings available to common stockholders in fiscal 2003 were $64.7 million, or $1.11 per diluted share, compared with $11.7 million, or $0.20 per diluted share, in the prior-year. Fiscal 2003 includes a charge of $12.2 million, or $0.07 per diluted share, for debt retirement costs associated with the successful tender offer for $50 million in principal amount of the Company’s 10 ¾% senior subordinated notes and the early retirement of $50 million of long-term debt. In the first quarter of fiscal 2002, PETCO completed an initial public offering, and the 2002 results include the following items that were recorded in the first quarter: $12.8 million in management fees and termination costs related to the termination in February 2002 of a management services agreement that was entered in conjunction with the Company’s leveraged recapitalization; $8.4 million in stock-based compensation expense and other primarily financing and legal costs of $1.2 million related to the Company’s initial public offering; debt retirement costs of $3.3 million related to the early repurchase of senior subordinated notes with proceeds of the offering; and, an increase in the carrying amount and premium on redemption of previously outstanding preferred stock of $20.5 million. Additionally, the results for the fourth quarter of fiscal 2002 include a charge of $3.5 million related to a litigation settlement.

Excluding the previously mentioned items and related tax effects, pro forma net earnings for fiscal 2003 increased to $68.8 million, or $1.18 per diluted share, a 32% increase over the $52.0 million, or $0.90 per diluted share, in the prior year.

Improved Gross Profit Margins

Gross profit margin improved 290 basis points to 35.9% in the fourth quarter of 2003 compared to 33.0% for the fourth quarter of 2002. The gross profit improvement was driven by the continuing change in mix from lower margin pet food sales to higher margin categories, such as pet accessories, supplies and services which accounted for 90 basis points of the improvement. The balance of the improvement is a result of the adoption of Emerging Issues Task Force Consensus No. 02-16 (“EITF 02-16”), an accounting change related to the treatment of vendor consideration. As a percentage of net sales, the net benefit consisted of the initial reclassification of 250 basis points from selling, general and administrative expenses, before the deferral of 50 basis points to inventory.

Store Expansion Program

PETCO opened 63 new stores during fiscal 2003. The addition of approximately 50 new stores, net of relocations and closings, during the period has increased the store base to 654 stores. With 65-70 new stores, or approximately 55-60 new stores net of relocations and closings, planned for 2004, PETCO will continue to advance its national brand presence.

In addition to its new store openings in fiscal 2003, PETCO completed 50 remodels of existing stores to its latest store format. In fiscal 2004, the Company plans to maintain its commitment to this initiative by remodeling up to an additional 75 existing stores to the latest store format.

Outlook

The Company currently expects a comparable store net sales increase of approximately 5% - 6% in the first quarter of fiscal 2004. This increase in comparable store net sales would come on top of the 4.6% increase achieved in the first quarter of fiscal 2003. Accordingly, the Company currently expects first quarter earnings per diluted share in the range of $0.24 - $0.25, which would represent an increase of more than 25% over the $0.19 per diluted share reported in the first quarter of fiscal 2003.

For fiscal 2004, the Company currently expects a comparable store net sales increase of approximately 5% - 6%. Including additional expansion costs associated with its planned store openings and remodels, the Company currently expects diluted earnings per common share in the range of $1.45 - $1.46 for the full fiscal year 2004, an increase of more than 20% over the pro forma net earnings of $1.18 per common share which the Company is reporting today for the full fiscal year 2003.

About PETCO Animal Supplies

PETCO is a leading specialty retailer of premium pet food, supplies and services. PETCO’s vision is to best promote, through its people, the highest level of well-being for companion animals, and to support the human-animal bond. PETCO generated net sales of $1.65 billion in fiscal 2003. It operates 654 stores in 43 states and the District of Columbia, as well as a leading destination for on-line pet food and supplies at www.petco.com. Since its inception in 1999, The PETCO Foundation, PETCO’s non-profit organization, has raised more than $15 million in support of more than 1,900 non-profit grassroots animal welfare organizations around the nation.

Certain statements in this news release that are not historical fact constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Stockholders and other readers are cautioned not to place undue reliance on these forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results of PETCO to be materially different from historical results or from any results expressed or implied by such forward-looking statements. These factors, such as performance of new stores, ability to execute expansion strategy and sustain growth, debt levels, reliance on vendors and exclusive distribution arrangements, competition, integration of operations as a result of acquisitions, compliance with various state and local regulations and dependence on senior management, are discussed from time to time in the reports filed by PETCO with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the fiscal year ended February 1, 2003.

PETCO Animal Supplies, Inc.

Consolidated Statements of Operations

(Unaudited, in thousands, except per share data)

	As Reported				Pro Forma
	Quarter Ended 01/31/2004		Quarter Ended 02/01/2003		Quarter Ended 01/31/2004		Quarter Ended 02/01/2003
Net sales	$	455,651	$	405,423	$	455,651	$	405,423
Cost of sales and occupancy costs		292,113		271,438		292,113		271,438
Gross profit		163,538		133,985		163,538		133,985
Selling, general and administrative expenses		113,122		91,412		113,122		91,412
Stock based compensation and other costs		—		212		—		212
Litigation Settlement		—		3,497		—		—
Operating income		50,416		38,864		50,416		42,361
Interest expense, net		6,073		7,398		6,073		7,398
Debt retirement costs		10,617		—		—		—
Earnings before income taxes		33,726		31,466		44,343		34,963
Income taxes		12,779		12,034		16,920		13,636
Net earnings	$	20,947	$	19,432	$	27,423	$	21,327
Net earnings per common share, basic	$	0.36	$	0.34	$	0.48	$	0.37
Net earnings per common share, diluted	$	0.36	$	0.33	$	0.47	$	0.37
Basic weighted average number of common shares		57,454		57,373		57,454		57,373
Diluted weighted average number of common shares		58,496		58,007		58,496		58,007

This earnings release includes information presented on a pro forma basis. These pro forma financial measures are considered “non-GAAP” financial measures within the meaning of SEC Regulation G. The Company believes that this presentation of pro forma results provides useful information to both management and investors by excluding specific costs and expenses that we believe are not indicative of core operating results. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with generally accepted accounting principles. The reconciliation set forth below is provided in accordance with Regulation G and reconciles the pro forma financial measure with the most directly comparable GAAP-based financial measure.

PETCO Animal Supplies, Inc.

Reconciliation of GAAP to Pro Forma Net Earnings per Common Share

(Unaudited, in thousands, except per share data)

	Quarter Ended 01/31/2004			Quarter Ended 02/01/2003
GAAP net earnings available to common stockholders	$	20,947		$	19,432
Adjustments:
Litigation Settlement		—			3,497
Debt retirement costs		10,617			—
Tax effect (Note 1)		(4,141	)		(1,602	)
Pro forma net earnings available to common stockholders	$	27,423		$	21,327
GAAP net earnings per common share, diluted	$	0.36		$	0.33
Pro forma net earnings per common share, diluted	$	0.47		$	0.37
GAAP diluted weighted average number of shares		58,496			58,007

Note 1 - The Company used a standard tax rate of 39% for pro forma purposes in the current year.

PETCO Animal Supplies, Inc.

Consolidated Statements of Operations

(Unaudited, in thousands, except per share data)

	As Reported					Pro Forma
	Year Ended 01/31/2004		Year Ended 02/01/2003			Year Ended 01/31/2004		Year Ended 02/01/2003
Net sales	$	1,654,138	$	1,476,634		$	1,654,138	$	1,476,634
Cost of sales and occupancy costs		1,104,649		1,016,249			1,104,649		1,014,789
Gross profit		549,489		460,385			549,489		461,845
Selling, general and administrative expenses		411,816		343,752			411,816		343,752
Management fees and termination costs		—		12,760			—		—
Stock based compensation and other costs		—		8,388			—		212
Litigation settlement		—		3,497			—		—
Operating income		137,673		91,988			137,673		117,881
Interest expense, net		26,115		32,666			26,115		32,666
Debt retirement costs		12,189		3,336			—		—
Earnings before income taxes		99,369		55,986			111,558		85,215
Income taxes		34,656		23,845			42,782		33,234
Net earnings		64,713		32,141			68,776		51,981
Increase in carrying amount and premium on redemption of preferred stock		—		(20,487	)		—		—
Net earnings available to common stockholders	$	64,713	$	11,654		$	68,776	$	51,981
Net earnings per common share, basic	$	1.13	$	0.21		$	1.20	$	0.91
Net earnings per common share, diluted	$	1.11	$	0.20		$	1.18	$	0.90
Basic weighted average number of common shares		57,422		56,094			57,422		57,298
Diluted weighted average number of common shares		58,299		56,906			58,299		57,985

This earnings release includes information presented on a pro forma basis. These pro forma financial measures are considered “non-GAAP” financial measures within the meaning of SEC Regulation G. The Company believes that this presentation of pro forma results provides useful information to both management and investors by excluding specific costs and expenses that we believe are not indicative of core operating results. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with generally accepted accounting principles. The reconciliation set forth below is provided in accordance with Regulation G and reconciles the pro forma financial measure with the most directly comparable GAAP-based financial measure.

PETCO Animal Supplies, Inc.

Reconciliation of GAAP to Pro Forma Net Earnings per Common Share

(Unaudited, in thousands, except per share data)

	Year Ended 01/31/2004			Year Ended 02/01/2003
GAAP net earnings available to common stockholders	$	64,713		$	11,654
Adjustments:
Management fees and termination costs		—			12,760
Stock based compensation and other costs (including 0 and $1,460, respectively, in cost of sales and occupancy costs)		—			13,133
Debt retirement costs		12,189			3,336
Increase in carrying amount and premium on redemption of
preferred stock		—			20,487
Resolution of income tax accrual		(3,372	)		—
Tax effect (Note 1)		(4,754	)		(9,389	)
Pro forma net earnings available to common stockholders	$	68,776		$	51,981
GAAP net earnings per common share, diluted	$	1.11		$	0.20
Pro forma net earnings per common share, diluted	$	1.18		$	0.90
GAAP diluted weighted average number of shares		58,299			56,906
Incremental shares from assumed conversion of stock options and warrants		—			1,079
Pro forma diluted weighted average number of common shares		58,299			57,985

Note 1 – The Company used a standard tax rate of 39% for pro forma purposes in the current year.

PETCO Animal Supplies, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

	January 31, 2004 (Unaudited)		February 1, 2003
ASSETS
Cash and cash equivalents	$	62,201	$	108,937
Receivables		12,514		14,303
Inventories		139,513		138,410
Deferred tax assets		12,047		14,492
Other current assets		12,907		7,459
Total current assets		239,182		283,601
Fixed assets, net		256,347		218,442
Goodwill		40,289		40,644
Other assets		16,044		12,168
	$	551,862	$	554,855
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Accounts payable	$	63,773	$	61,308
Accrued expenses & other liabilities		126,403		109,242
Total current liabilities		190,176		170,550
Long-term debt, excluding current portion		139,370		190,500
Senior subordinated notes payable		120,000		170,000
Deferred rent and other liabilities		49,183		34,888
Total liabilities		498,729		565,938
Stockholders’ equity (deficit)		53,133		(11,083	)
	$	551,862	$	554,855