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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

Commission file number: 0-21888

PETsMART, INC.

Delaware (State or other jurisdiction of incorporation or organization)				94-3024325 (I.R.S. Employer Identification No.)

19601 N. 27th Avenue

(623) 580-6100

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.

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date:

Common Stock, $.0001 Par Value, 137,840,617 Shares at September 9, 2002

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PETsMART, Inc.

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PETsMART, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these consolidated financial statements.

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PETsMART, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of these consolidated financial statements.

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PETsMART, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these consolidated financial statements.

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PETsMART, Inc. and Subsidiaries

NOTE 1 — GENERAL:

         PETsMART, Inc., including subsidiaries (the “Company” or “PETsMART”), is the leading provider of food, supplies, accessories and professional services for the lifetime needs of pets in North America. As of August 4, 2002, the Company operated 570 retail stores. The Company offers a broad line of products for all the life stages of pets and is the nation’s largest provider of high-quality grooming and pet training services. Through its strategic relationship with Banfield, The Pet Hospital^TM, PETsMART makes full-service veterinary care available in approximately half of its stores. Through its direct marketing channels, PETsMART also is a leading mail order catalog and e-commerce retailer of pet and equine products and supplies.

         PETsMART’s accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for annual financial statements. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments (which are of a normal recurring nature), necessary for a fair statement of the results of the interim periods presented. Certain reclassifications have been made to prior period financial statements to present them on a basis comparable with the current period’s presentation.

         Because of the seasonal nature of the Company’s business, the results of operations for the thirteen and twenty-six weeks ended August 4, 2002, are not necessarily indicative of the results to be expected for the full year. The Company’s fiscal year ends on the Sunday nearest January 31.

         For further information, refer to the financial statements and related footnotes for the fiscal year ended February 3, 2002, included in the Company’s Form 8-K (File No. 0-21888), filed with the Securities and Exchange Commission on June 25, 2002, as amended on July 18, 2002.

NOTE 2 – SUBORDINATED CONVERTIBLE NOTES:

         In November 1997, the Company sold 6 3/4% Subordinated Convertible Notes due 2004 (the “Notes”) with an aggregate principal amount of $200,000,000. The remaining principal outstanding as of February 3, 2002, was $173,500,000. The outstanding Notes were convertible to the Company’s common stock at any time prior to maturity at a conversion price of $8.75 per share, subject to adjustment under certain conditions. During February and March 2002, the remaining balance of the Notes was called for redemption, resulting in the repurchase of Notes for approximately $275,000 in cash and the conversion of the remainder into approximately 19,800,000 shares of common stock. As a result of the redemption, unamortized debt issue costs of $2,357,000 and accrued interest of $3,902,000 were reclassified to stockholders’ equity, resulting in a net increase of $1,545,000.

         During the thirteen and twenty-six weeks ended July 29, 2001, the Company purchased Notes with a face value of $5,250,000 and $7,750,000, at a discounted price of $4,638,000 and $6,382,000, respectively. The unamortized deferred financing costs related to the purchase of the Notes of $121,000 and $178,000, respectively, were written off and included in the determination of the gain on early extinguishment of debt. The Company recorded a gain on early extinguishment of debt for the thirteen and twenty-six weeks ended July 29, 2001 of $491,000 and $1,190,000, respectively, as a reduction to general and administrative expenses. The Company also reclassified the related income tax expense for the thirteen and twenty-six weeks ended July 29, 2001 of $196,000 and $476,000, respectively, to income tax expense (benefit). See Note 9.

NOTE 3 – NOTES RECEIVABLE FROM OFFICERS:

         During fiscal 2000, the Company began providing full-recourse loans to certain officers to be used solely for the purpose of purchasing shares of the Company’s common stock on the open market. These loans mature five years after they are issued and accrue interest at 7.75% per annum, with principal and interest due at maturity. The officers are required to hold the common stock for a minimum of 18 months. The loans are collateralized by the Company’s common stock purchased by the officers. The loans must be repaid in full, including accrued interest, upon the earlier of the scheduled maturity date or an event of default, which could include, among other things, the sale of the underlying common stock or the officers’ termination of employment. The Company recorded $495,000 of new officer loans under this program in the first quarter of fiscal 2002. There were no new loans provided in the second quarter of fiscal 2002, and the Company will not make any new loans to its officers under this program in the future.

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PETsMART, Inc. and Subsidiaries

NOTE 4 – SPECIAL CHARGES:

         During the fourth quarter of fiscal 2001, the Company approved a plan to move administrative functions, during fiscal 2002, of PETsMART Direct, Inc., (“PETsMART Direct”) and PETsMART.com, Inc., (“PETsMART.com”) to the Company’s administrative office located in Phoenix, Arizona. As a result of the reorganization of these functions, the Company identified 90 positions for elimination, all of which had been eliminated as of August 4, 2002, and recorded severance charges of approximately $1,410,000 in the fourth quarter of fiscal 2001. Also as part of the plan, the Company closed five small neighborhood PetWise retail stores located in upstate New York, and recorded a reserve in the fourth quarter of fiscal 2001 of approximately $778,000 for the remaining offices and retail store lease obligations.

         The Company classified the accrued severance as a component of other accrued expenses. During the thirteen and twenty-six weeks ended August 4, 2002, the Company paid $621,000 and $1,254,000, respectively, of such severance, and the remaining liability as of August 4, 2002 was $156,000, which the Company expects to be paid by the end of fiscal 2002.

         Since 1996, the Company has incurred costs related to merger, integration, store closure, and other business restructuring costs in connection with certain acquisitions. The activity related to the 1996 closed store reserve, as well as the remaining lease obligations for the closed stores and administrative offices associated with the PETsMART Direct and PETsMART.com reorganization is as follows (in thousands):