8-K

UNITED STATES

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 16, 2006

PETCO ANIMAL SUPPLIES, INC.

(Exact name of registrant as specified in its charter)

Delaware	000-23574	20-2148979
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

9125 Rehco Road

San Diego, California 92121

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (858) 453-7845

Not Applicable

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

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

On March 16, 2006, PETCO Animal Supplies, Inc. (the “Company”) issued a press release regarding its financial results for the fourth fiscal quarter and fiscal year 2005 ended January 28, 2006. A copy of the press release is attached hereto as Exhibit 99.1.

In accordance with General Instruction B.2 of Form 8-K, the information contained in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such information shall not be incorporated by reference in any filing of the company, 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.

Item 8.01. Other Events.

On March 16, 2006, the Company also announced that its Board of Directors approved a share repurchase program under which it may purchase up to $100 million of its outstanding common stock. A copy of the press release is attached hereto as Exhibit 99.2.

Item 9.01. Financial Statements and Exhibits.

Exhibit No.	Description
99.1	Press release issued by PETCO Animal Supplies, Inc. on March 16, 2006 regarding quarterly and fiscal year financial results.
99.2	Press release issued by PETCO Animal Supplies, Inc. on March 16, 2006 regarding share repurchase program.

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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, thereunto duly authorized.

Dated: March 16, 2006	PETCO ANIMAL SUPPLIES, INC.
	By:	/s/ RODNEY CARTER
		Rodney Carter Senior Vice President and Chief Financial Officer

3

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press release issued by PETCO Animal Supplies, Inc. on March 16, 2006 regarding quarterly and fiscal year financial results.
99.2	Press release issued by PETCO Animal Supplies, Inc. on March 16, 2006 regarding share repurchase program.

4

EX-99.1

Exhibit 99. 1

FOR IMMEDIATE RELEASE CONTACT: Rodney Carter, Senior Vice President and Chief Financial Officer Phone: (858) 202-7848

PETCO Reports Results for the Fourth Quarter and Fiscal Year 2005

• Fourth-Quarter Net Sales Grow 10% to $541 million

• Services Sales Increase 23%

• Fourth-Quarter Net Earnings Increase to $0.46 per Diluted Share

• $100 Million Share Repurchase Program Authorized

SAN DIEGO—March 16, 2006—PETCO Animal Supplies, Inc. (NASDAQ: PETC) today reported unaudited financial results for the fourth quarter and fiscal year 2005 ended January 28, 2006. The Company also provided its guidance for the first quarter and full fiscal year 2006.

In addition, PETCO today announced that its Board of Directors has authorized a new $100 million share repurchase program.

Fourth-Quarter Results

Net sales in the fourth quarter of fiscal 2005 were $541.5 million, an increase of 10.0% over the fourth quarter of 2004. Comparable store net sales for the period increased 2.0%, on top of a 5.1% increase in the prior-year’s fourth quarter. Sales in the Company’s services business in the fourth quarter increased 23% over the same period last year.

Net earnings for the fourth quarter were $26.8 million, or $0.46 per diluted share. These results compared to net earnings of $26.3 million, or $0.45 per diluted share, in the prior-year fourth quarter. Fourth-quarter 2004 net earnings included an after-tax charge of $4.1 million for debt retirement costs, an after-tax charge of $0.8 million for the cumulative correction of lease accounting matters, and an income tax benefit of $2.3 million, reflecting a non-recurring favorable adjustment of an income tax accrual. Combined, these factors reduced fourth-quarter 2004 net earnings by approximately $0.04 per diluted share. Overall, pro forma net earnings for the fourth-quarter 2004 were $28.9 million, or $0.49 per diluted share.

“In the fourth quarter, we began to return to more normal patterns for our business, with improvement in comp sales and other important performance metrics as we moved through the quarter,” said PETCO Chief Executive Officer James M. Myers. “The return of healthy operating conditions once again demonstrates the strength and resilience of the pet specialty category in general – and PETCO’s business model in particular – as well as the fundamental power of the human-animal bond.”

“We are encouraged by the overall market trends, and we are executing strategic initiatives that we believe set the stage for improved performance from PETCO in fiscal 2006 – especially in the second half of the year.”

Fiscal 2005 Results

Net sales in fiscal 2005 were $2.0 billion, an increase of 10.2% from 2004. Comparable store net sales increased 2.7%, on top of a 6.2% increase in 2004.

Net earnings were $75.2 million, or $1.28 per diluted share, compared to net earnings of $82.4 million, or $1.41 per diluted share, in 2004.

Fiscal 2005 results include an after-tax charge of $1.5 million, or approximately $0.03 per diluted share, for debt retirement costs in the first quarter. Fiscal 2004 results included an after-tax charge of $4.1 million for debt retirement costs, an after-tax charge of $0.8 million for the cumulative correction of lease accounting matters, and an income tax benefit of $2.3 million, reflecting a one-time favorable adjustment of an income tax accrual. Combined, these factors reduced fiscal 2004 net earnings by approximately $0.04 per diluted share.

Excluding the previously mentioned items, pro forma net earnings for fiscal 2005 were $76.6 million, or $1.31 per diluted share, versus $84.9 million, or $1.45 per diluted share, in the prior year.

The Company generated operating cash flow of $164 million during fiscal 2005, allowing it to fund $124 million of capital expenditures in the business.

Fourth-Quarter Operating Margin

Gross margin for the fourth quarter was 34.8%, compared to 35.2% in the pro forma fourth-quarter 2004 results. Modest increases in comparable store net sales resulted in de-leveraging of fixed costs, such as occupancy. The return of a strong positive mix shift led to gains in initial margin, which were offset principally by realizing lower levels of vendor support due to lower sales and purchases during the year.

SG&A expenses as a percentage of sales were 25.9%, compared to 24.6% in the prior-year period. Planned increases in store payroll and advertising expenses contributed to most of the change.

Operating income for the fourth quarter was $47.9 million, or 8.8% of net sales, compared with pro forma operating income $52.1 million in the prior-year period.

Store Expansion Program

PETCO opened 14 new stores during the fourth quarter of fiscal 2005. The addition of eight new stores during the period, net of relocations and closings, increased the store base to 779 locations. PETCO continued its ongoing program to refresh its stores, remodeling three stores into its Pisces format in the fourth quarter.

The Company opened 89 new stores during fiscal 2005, or 63 new stores net of relocations and closings, and remodeled 53 stores into its Pisces format. The Company now has more than 475 stores in its latest store formats.

PETCO will continue to advance its national presence in 2006 by opening approximately 90 new stores, or approximately 75 new stores net of relocations and closings, while continuing with its strategic initiative of remodeling approximately 35 existing stores.

Fiscal 2006 Outlook

The Company currently expects a comparable store net sales increase in the low single digits, or approximately 1% to 3%, for the first quarter of fiscal 2006. This increase in comparable store net sales would come on top of the 5.2% increase achieved in the first quarter of 2005. The Company currently expects earnings per diluted share in the range of $0.23 to $0.25 for the first quarter of fiscal 2006, excluding the effect of accounting for equity-based compensation upon the adoption of Statement of Financial Accounting Standards No. 123(R) – Share-based Payment (FAS 123(R)), described below.

For the fiscal year 2006, the Company currently expects a comparable store net sales increase in the low-to-mid single digits, or approximately 2% to 4%, and earnings per diluted share in the range of $1.48 to $1.52, excluding the adoption of FAS 123(R).

Beginning in the first quarter of fiscal 2006, the Company will adopt FAS 123(R), the new accounting standard requiring companies to expense equity-based compensation. The Company anticipates utilizing the modified-prospective adoption method, under which no changes will be made to prior-year financial statements.

The Company anticipates the effect of adopting FAS 123(R) in fiscal 2006 will be approximately $0.16 per diluted share. The expense that would have been reflected for 2005 was $0.12 per diluted share, had equity-based compensation been expensed in the financial statements. This expense would have represented only two full years of equity grants in the Company’s post-IPO period. Starting with fiscal 2006, this expense will represent three full years of equity grants, which is the Company’s standard vesting period for this program.

In the first quarter, the Company anticipates the adoption of FAS 123(R) to be approximately $0.06 per diluted share, compared to $0.03 per diluted share in the first quarter of 2005 had the Company expensed equity-based compensation. This expense is weighted more heavily to the first quarter primarily due to the impact of accelerated recognition of compensation expense associated with the treatment of equity grantees who are retirement-eligible under FAS 123(R).

Including the effect of adopting FAS 123(R), the Company expects net earnings for the first quarter of fiscal 2006 to be $0.17 to $0.19 per diluted share and $1.32 to $1.36 per diluted share for the full fiscal year 2006.

Share Repurchase Program

“PETCO’s strong operating cash flow provides it with significant strategic financial flexibility to fund its growth plans, as well as to return value to shareholders through opportunistic share repurchases,” said Rodney Carter, Senior Vice President and Chief Financial Officer. “Based on this factor, as well as its confidence in the Company’s longer-term prospects, the Board of Directors has authorized a new share repurchase program that will allow for the purchase of up to $100 million in PETCO shares.”

The number of shares to be purchased in the new program and the timing of those purchases will be based on several factors, including the price of PETCO’s stock, general business and market conditions, and other investment opportunities. The repurchase program may be suspended or discontinued at any time.

Methodology for Calculating Comparable Store Net Sales Percentage Change

Following two full years of reporting net sales under EITF 03-10, the Company has refined its methodology for calculating its comparable store net sales percentage change. Beginning with PETCO’s report of results for the first quarter of fiscal 2006, the calculation will exclude non point-of-sale, PETCO-specific vendor sales incentives. The Company noted that the change will not impact reported revenue, earnings or cash flow.

Under the refined methodology, comparable store net sales for the full fiscal year 2005 would have increased 2.9% on top of a 6.1% increase in 2004. The overall impact of this change is minor, as comparable store net sales increase in fiscal 2005 would have been 0.2% higher and in fiscal 2004 would have been 0.1% lower, under this methodology. For fiscal 2006, the Company expects the refined methodology to lower the increase in comparable store net sales by less than 0.1%.

About PETCO Animal Supplies, Inc.

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 $2 billion in fiscal 2005. It operates 779 stores in 49 states and the District of Columbia, as well as a leading destination for online 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 $28 million in support of more than 3,300 non-profit grassroots animal welfare organizations around the nation.

Forward-Looking Statements

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. Forward-looking statements typically are identified by the use of terms such as “may,” “should,” “might,” “believe,” “expect,” “anticipate,” “estimate” and similar words, although some may be expressed differently. Forward-looking statements in this release include, but are not limited to, statements as to comparable store net sales, expected earnings per share, the effect of investments in the business as well as other efforts to improve business metrics and attributes, the effect of growth and expansion strategies, the implementation of a stock repurchase program, and management’s assessment of that program, and the ability to achieve operational efficiencies. 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 include 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, remediation of any internal control deficiencies, outcome of existing litigation, dependence on senior management, the ability to repurchase shares at prices deemed appropriate by management, and ability to realize on investments made in the business. Certain of these factors, as well as various additional factors, 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 January 29, 2005. PETCO disclaims any intent or obligation to update these forward-looking statements.

PETCO Animal Supplies, Inc.

Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except per share data)

	As Reported				Pro Forma
	Quarter Ended 1/28/2006		Quarter Ended 1/29/2005		Quarter Ended 1/28/2006		Quarter Ended 1/29/2005
Net sales	$	541,468	$	492,313	$	541,468	$	492,313
Cost of sales and occupancy costs		353,131		320,469		353,131		319,129
Gross profit		188,337		171,844		188,337		173,184
Selling, general and administrative expenses		140,435		121,124		140,435		121,124
Operating income		47,902		50,720		47,902		52,060
Interest expense, net		4,151		4,589		4,151		4,589
Debt retirement costs		—		6,754		—		—
Earnings before income taxes		43,751		39,377		43,751		47,471
Income taxes		17,000		13,070		17,000		18,591
Net earnings	$	26,751	$	26,307	$	26,751	$	28,880
Net earnings per share, basic	$	0.46	$	0.46	$	0.46	$	0.50
Net earnings per share, diluted	$	0.46	$	0.45	$	0.46	$	0.49
Basic weighted average number of shares		57,871		57,631		57,871		57,631
Diluted weighted average number of shares		58,301		58,725		58,301		58,725

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 reconciliations set forth below are provided in accordance with Regulation G and reconcile the pro forma financial measure with the most directly comparable GAAP-based financial measure.

PETCO Animal Supplies, Inc.

Reconciliation of GAAP Financial Measures to Pro Forma Financial Measures

(Unaudited, in thousands, except per share data)

	Quarter Ended 1/28/2006		Quarter Ended 1/29/2005
Reconciliation of GAAP to Pro Forma Gross Profit
GAAP gross profit	$	188,337	$	171,844
Adjustments:
Lease accounting adjustment		—		1,340
Pro forma gross profit	$	188,337	$	173,184
Reconciliation of GAAP to Pro Forma Operating Income
GAAP operating income	$	47,902	$	50,720
Adjustments:
Lease accounting adjustment		—		1,340
Pro forma operating income	$	47,902	$	52,060
Reconciliation of GAAP to Pro Forma Net Earnings
GAAP net earnings	$	26,751	$	26,307
Adjustments:
Lease accounting adjustment		—		1,340
Debt retirement costs		—		6,754
Tax effect of adjustments		—		(3,188	)
Resolution of income tax accrual		—		(2,333	)
Pro forma net earnings	$	26,751	$	28,880
GAAP net earnings per common share, diluted	$	0.46	$	0.45
Pro forma net earnings per common share, diluted	$	0.46	$	0.49
Diluted weighted average number of shares (GAAP and Pro forma)		58,301		58,725

PETCO Animal Supplies, Inc.

Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except per share data)

	As Reported				Pro Forma
	Year Ended 1/28/2006		Year Ended 1/29/2005		Year Ended 1/28/2006		Year Ended 1/29/2005
Net sales	$	1,996,089	$	1,812,145	$	1,996,089	$	1,812,145
Cost of sales and occupancy costs		1,330,054		1,181,354		1,330,054		1,180,014
Gross profit		666,035		630,791		666,035		632,131
Selling, general and administrative expenses		524,566		472,780		524,566		472,780
Operating income		141,469		158,011		141,469		159,351
Interest expense, net		14,974		19,337		14,974		19,337
Debt retirement costs		2,447		6,754		—		—
Earnings before income taxes		124,048		131,920		126,495		140,014
Income taxes		48,878		49,547		49,850		55,068
Net earnings	$	75,170	$	82,373	$	76,645	$	84,946
Net earnings per share, basic	$	1.30	$	1.43	$	1.33	$	1.48
Net earnings per share, diluted	$	1.28	$	1.41	$	1.31	$	1.45
Basic weighted average number of shares		57,802		57,542		57,802		57,542
Diluted weighted average number of shares		58,543		58,511		58,543		58,511

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 reconciliations set forth below are provided in accordance with Regulation G and reconcile the pro forma financial measure with the most directly comparable GAAP-based financial measure.

PETCO Animal Supplies, Inc.

Reconciliation of GAAP Financial Measures to Pro Forma Financial Measures

(Unaudited, in thousands, except per share data)

	Year Ended 1/28/2006			Year Ended 1/29/2005
Reconciliation of GAAP to Pro Forma Gross Profit
GAAP gross profit	$	666,035		$	630,791
Adjustments:
Lease accounting adjustment		—			1,340
Pro forma gross profit	$	666,035		$	632,131
Reconciliation of GAAP to Pro Forma Operating Income
GAAP operating income	$	141,469		$	158,011
Adjustments:
Lease accounting adjustment		—			1,340
Pro forma operating income	$	141,469		$	159,351
Reconciliation of GAAP to Pro Forma Net Earnings
GAAP net earnings	$	75,170		$	82,373
Adjustments:
Lease accounting adjustment		—			1,340
Debt retirement costs		2,447			6,754
Tax effect of adjustments		(972	)		(3,188	)
Resolution of income tax accrual		—			(2,333	)
Pro forma net earnings	$	76,645		$	84,946
GAAP net earnings per common share, diluted	$	1.28		$	1.41
Pro forma net earnings per common share, diluted	$	1.31		$	1.45
Diluted weighted average number of shares (GAAP and Pro forma)		58,543			58,511

PETCO Animal Supplies, Inc.

Condensed Consolidated Balance Sheets

(Unaudited, In thousands)

	January 28, 2006		January 29, 2005
ASSETS
Cash and cash equivalents	$	39,524	$	36,815
Receivables		20,422		17,875
Merchandise inventories		183,336		167,038
Other current assets		30,609		28,596
Total current assets		273,891		250,324
Fixed assets, net		377,394		333,300
Goodwill		40,227		40,179
Other assets		18,163		16,650
	$	709,675	$	640,453
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	90,834	$	82,142
Accrued expenses and other current liabilities		158,694		141,044
Current portion of long-term debt		1,755		353
Total current liabilities		251,283		223,539
Senior credit facility		60,000		85,000
Senior subordinated notes payable		89,267		103,982
Deferred rent and other liabilities		92,287		90,637
Total liabilities		492,837		503,158
Stockholders’ equity		216,838		137,295
	$	709,675	$	640,453

EX-99.2

Exhibit 99.2

FOR IMMEDIATE RELEASE CONTACT: S. Chaith Kondragunta, Director of Investor Relations Phone: (858) 202 7846

PETCO ANNOUNCES SHARE REPURCHASE PROGRAM

San Diego—March 16, 2006 — PETCO Animal Supplies, Inc. (Nasdaq: PETC) today announced that its Board of Directors has approved a share repurchase program under which it may begin purchasing up to $100 million of its outstanding common stock.

Under the program, the Company may purchase shares of common stock from time to time through open market and privately negotiated transactions at prices deemed appropriate by management. The number of shares to be purchased and the timing of purchases will be based on several factors, including the price of PETCO’s stock, general business and market conditions, and other investment opportunities. The repurchase program may be suspended or discontinued at any time.

James M. Myers, Chief Executive Officer of PETCO, said, “PETCO’s strong operating cash flow provides it with financial flexibility to fund its growth plans as well as to return value to shareholders through opportunistic share repurchases. We believe that the repurchase of PETCO shares represents an attractive investment opportunity that will benefit the Company and our shareholders.”

As of January 28, 2006, the Company had approximately 57.9 million shares of common stock outstanding.

About PETCO Animal Supplies, Inc.

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 $2 billion in 2005. It operates 779 stores in 49 states and the District of Columbia, as well as a leading destination for online 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 $28 million in support of more than 3,300 non-profit grassroots animal welfare organizations around the nation.

Forward-Looking Statements

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. Forward-looking statements typically are identified by the use of terms such as “may,” “should,” “might,” “believe,” “expect,” “anticipate,” “estimate” and similar words, although some may be expressed differently. Forward-looking statements in this release include, but are not limited to, statements regarding implementation of a stock repurchase program and management’s assessment of that program. 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 include the ability to repurchase shares at prices deemed appropriate by management, 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, remediation of any internal control deficiencies, outcome of existing litigation, dependence on senior management, and ability to realize on investments made in the business. Certain of these factors, as well as various additional factors, 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 January 29, 2005. PETCO disclaims any intent or obligation to update these forward-looking statements.