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PetSmart Reports Results for the Fourth Quarter and Fiscal Year 2013

Fourth Quarter Earnings per Share of $1.28; Fiscal Year Earnings per Share of $4.02; Fourth consecutive year of double-digit Earnings per Share growth

PHOENIX--(BUSINESS WIRE)--Mar. 5, 2014-- PetSmart, Inc. (NASDAQ: PETM) today announced financial results for the fourth quarter and fiscal year 2013, and provided guidance for 2014. Fourth quarter 2013 was a 13-week quarter, and fiscal year 2013 was a 52-week year. Fourth quarter 2012 was a 14-week quarter, and fiscal year 2012 was a 53-week year. In 2012, the extra week represented an additional $126 million in net sales, $48 million in gross margin, $18 million in OG&A, $30 million in earnings before tax, and $0.17 in earnings per share. For comparative purposes, the fourth quarter and fiscal year results are discussed on an equivalent 13-week and 52-week basis, respectively.

Fourth Quarter Results (13 weeks versus 13 weeks)

Earnings of $1.28 per share were up 19.6% compared to $1.07 per share in the fourth quarter of 2012. Net income increased 14.0% to $132 million in the fourth quarter of 2013, compared to $115 million in the fourth quarter of 2012.

Net sales for the fourth quarter of 2013 increased 2.9% to $1.8 billion. Comparable store sales, or sales in stores open at least one year plus internet sales, grew 1.2%. Services sales, which are included in net sales, grew 2.6% to $186 million.

Fiscal Year Results (52 weeks versus 52 weeks)

For the year, the company delivered earnings per share of $4.02, up 18.9% compared to $3.38 last year. Comparable store sales grew 2.7%. Net sales for the year were $6.9 billion, up 4.3%.

The company generated $615 million in cash flows from operating activities, spent $147 million in capital expenditures, distributed $54 million in dividends, and repurchased $464 million of PetSmart stock. The company ended the quarter with $357 million in cash, cash equivalents and restricted cash and zero borrowings on its credit facility.

“We are pleased to report our results for fiscal year 2013, marking the fourth consecutive year of double-digit earnings per share growth,” said David Lenhardt, Chief Executive Officer. “I would like to thank our associates for their hard work and caring for our customers and communities.”

Guidance

Fiscal year 2014

  • Comparable store sales growth of 2% to 4%
  • Net sales growth of 4% to 6%
  • Earnings per share between $4.42 to $4.54
  • Capital expenditures of $150 million to $160 million

First quarter 2014

  • Comparable store sales growth of low-single digits
  • Earnings per share between $0.99 to $1.03

Conference call information

PetSmart management has scheduled a teleconference for 10:00 a.m. EST on March 5, 2014 to discuss results for the fourth quarter and fiscal year 2013. This teleconference will be webcast live for all investors at www.petm.com. The webcast will be available until the company announces results for the first quarter of 2014. In addition, you can listen to the call live by dialing 866-814-1933 (within the United States and Canada) or 703-639-1365 (for international callers), code 1633721.

A phone replay will be available through April 5, 2014, 11:59 p.m. EDT, at 888-266-2081 in the United States and Canada, or at 703-925-2533 for international callers, code 1633721.

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 53,000 associates and operates more than 1,333 pet stores in the United States, Canada and Puerto Rico, over 199 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 CampSM day care services and pet adoption services. Through its in-store pet adoption partnership with PetSmart Charities® and PetSmart Charities® of Canada, PetSmart has helped save the lives of more than 5.7 million pets since 1994. PetSmart Charities, Inc. and PetSmart Charities of Canada (collectively “PetSmart Charities”) are independent, nonprofit organizations that save the lives of homeless pets and reduce shelter intake through spay and neuter efforts. In 2013, nearly 440,000 dogs and cats found homes through PetSmart Charities’ adoption centers in all PetSmart stores and by sponsoring community adoption events. PetSmart Charities is the leader in granting money to help pets in need, with more than $34 million given in 2013 throughout North America.

Forward-looking statements

This news release contains forward-looking statements concerning our expectations for future performance, including the statements comprising our 2014 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.

PetSmart, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share and store data)
(Unaudited)
                       
Thirteen Weeks Ended Fourteen Weeks Ended Fifty-Two Weeks Ended Fifty-Three Weeks Ended
February 2, 2014 % of Sales February 3, 2013 % of Sales February 2, 2014 % of Sales February 3, 2013 % of Sales
 
Merchandise sales $ 1,609,430 89.2 % $ 1,675,979 89.2 % $ 6,111,702 88.3 % $ 5,979,604 88.4 %
Services sales 185,532 10.3 % 193,572 10.3 % 766,006 11.1 % 740,471 11.0 %
Other revenue   9,904     0.5 %   9,615     0.5 %   38,919     0.6 %   38,162     0.6 %
 
Net sales   1,804,866     100.0 %   1,879,166     100.0 %   6,916,627     100.0 %   6,758,237     100.0 %
 
Cost of merchandise sales 1,098,871 60.9 % 1,134,761 60.4 % 4,222,542 61.0 % 4,124,432 61.0 %
Cost of services sales 130,093 7.2 % 141,352 7.5 % 539,229 7.8 % 533,504 7.9 %
Cost of other revenue   9,904     0.5 %   9,615     0.5 %   38,919     0.6 %   38,162     0.6 %
 
Total cost of sales   1,238,868     68.6 %   1,285,728     68.4 %   4,800,690     69.4 %   4,696,098     69.5 %
 
Gross profit 565,998 31.4 % 593,438 31.6 % 2,115,937 30.6 % 2,062,139 30.5 %
 
Operating, general, and administrative expenses   349,417     19.4 %   372,186     19.8 %   1,422,619     20.6 %   1,410,922     20.9 %
 
Operating income 216,581 12.0 % 221,252 11.8 % 693,318 10.0 % 651,217 9.6 %
 
Interest expense, net   (12,853 )   -0.7 %   (13,275 )   -0.7 %   (51,779 )   -0.7 %   (54,329 )   -0.8 %
 
Income before income tax expense

and equity income from Banfield

203,728 11.3 % 207,977 11.1 % 641,539 9.3 % 596,888 8.8 %
 
Income tax expense (78,350 ) -4.3 % (78,489 ) -4.2 % (239,444 ) -3.5 % (223,329 ) -3.3 %
 
Equity income from Banfield   6,138     0.3 %   4,522     0.2 %   17,425     0.3 %   15,970     0.2 %
 
Net income $ 131,516     7.3 % $ 134,010     7.1 % $ 419,520     6.1 % $ 389,529     5.7 %
 
Earnings per common share:
Basic $ 1.29   $ 1.26   $ 4.06   $ 3.61  
Diluted $ 1.28   $ 1.24   $ 4.02   $ 3.55  
 
Weighted average shares outstanding:
Basic 102,076 106,470 103,203 107,819
Diluted 102,992 108,071 104,316 109,611
                                         
Stores open at beginning of each period 1,314 1,269 1,278 1,232
Stores opened during each period 19 11 60 60
Stores closed during each period   -     (2 )   (5 )   (14 )
Stores open at end of each period       1,333             1,278             1,333             1,278      
 
 
PetSmart, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except par value)
(Unaudited)
       
February 2, February 3,
2014 2013
 
Assets
Cash and cash equivalents $ 285,622 $ 335,155
Short-term investments - 9,150
Restricted cash 71,226 71,916
Receivables, net 72,685 72,198
Merchandise inventories 740,302 679,090
Deferred income taxes 71,945 62,859
Prepaid expenses and other current assets   76,463     86,768  
 
Total current assets 1,318,243 1,317,136
 
Property and equipment, net 952,955 985,707
Equity investment in Banfield 33,577 39,934
Deferred income taxes 110,408 102,992
Goodwill 41,140 44,242
Other noncurrent assets   65,645     46,970  
 
Total assets $ 2,521,968   $ 2,536,981  
 
Liabilities and Stockholders' Equity
Accounts payable and bank overdraft $ 255,251 $ 202,122
Accrued payroll, bonus, and employee benefits 160,008 176,082
Accrued occupancy expenses and deferred rents 81,867 70,671
Current maturities of capital lease obligations 66,887 61,581
Other current liabilities   230,332     244,436  
 
Total current liabilities 794,345 754,892
 
Capital lease obligations 451,597 464,578
Deferred rents 65,932 73,855
Other noncurrent liabilities   116,312     120,064  
 
Total liabilities   1,428,186     1,413,389  
 
Stockholders' Equity:
Preferred stock; $.0001 par value - -
Common stock; $.0001 par value 17 17
Additional paid-in capital 1,515,333 1,418,411
Retained earnings 2,173,005 1,827,996
Accumulated other comprehensive (loss) income (2,159 ) 5,506
Less: Treasury stock   (2,592,414 )   (2,128,338 )
 
Total stockholders' equity   1,093,782     1,123,592  
 
Total liabilities and stockholders' equity $ 2,521,968   $ 2,536,981  
 
 
                         
PetSmart, Inc. and Subsidiaries
Non-GAAP Reconciliation: Impact of Extra Week in 2012 on Comparative Results of Operations
(in thousands, except per share amounts and % change)
(Unaudited)
           
Quarter Ended      
February 2, 2014 February 3, 2013 January 27, 2013 % Change
13 As Reported Less Proforma 13 vs. 14 Weeks 13 vs. 13 Weeks
Weeks 14 Weeks 14th Week 13 Weeks    
Services sales $ 185,532 $ 193,572 $

(12,814

)

$ 180,758 -4.2 % 2.6 %
Net sales $ 1,804,866 $ 1,879,166 $

(125,952

)

$ 1,753,214 -4.0 % 2.9 %
Gross profit $ 565,998 $ 593,438 $

(48,253

)

$ 545,185 -4.6 % 3.8 %
Operating, general, and administrative expenses $ 349,417 $ 372,186 $

(18,327

)

$ 353,859 -6.1 % -1.3 %
Income before income tax expense and equity income from Banfield $ 203,728 $ 207,977 $

(29,934

)

$ 178,043 -2.0 % 14.4 %
Net Income $ 131,516 $ 134,010 $

(18,639

)

$ 115,371 -1.9 % 14.0 %
Diluted Earnings per common share $ 1.28 $ 1.24 $

(0.17

)

$ 1.07 3.2 % 19.6 %
                         
 
Year Ended      
February 2, 2014 February 3, 2013 January 27, 2013 % Change
52 As Reported Less Proforma 52 vs. 53 Weeks 52 vs. 52 Weeks
Weeks 53 Weeks 53rd Week 52 Weeks    
Services sales $ 766,006 $ 740,471 $

(12,814

)

$ 727,657 3.4 % 5.3 %
Net sales $ 6,916,627 $ 6,758,237 $

(125,952

)

$ 6,632,285 2.3 % 4.3 %
Gross profit $ 2,115,937 $ 2,062,139 $

(48,253

)

$ 2,013,886 2.6 % 5.1 %
Operating, general, and administrative expenses $ 1,422,619 $ 1,410,922 $

(18,327

)

$ 1,392,595 0.8 % 2.2 %
Income before income tax expense and equity income from Banfield $ 641,539 $ 596,888 $

(29,934

)

$ 566,954 7.5 % 13.2 %
Net Income $ 419,520 $ 389,529 $

(18,639

)

$ 370,890 7.7 % 13.1 %
Diluted Earnings per common share   $ 4.02   $ 3.55   $

(0.17

)

  $ 3.38   13.2 %   18.9 %

Source: PetSmart, Inc.

PetSmart, Inc.
Investor Relations, 623-587-2025

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