UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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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:
(Exact Name of Registrant as Specified in its Charter)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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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 by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐
The number of shares of Registrant’s Class A Common Stock outstanding as of June 8, 2021 was
The number of shares of Registrant’s Class B-1 Common Stock outstanding as of June 8, 2021 was
The number of shares of Registrant’s Class B-2 Common Stock outstanding as of June 8, 2021 was
Table of Contents
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Page |
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PART I. |
2 |
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Item 1. |
2 |
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2 |
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3 |
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4 |
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5 |
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6 |
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7 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
15 |
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Item 3. |
24 |
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Item 4. |
24 |
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PART II. |
25 |
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Item 1. |
25 |
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Item 1A. |
25 |
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Item 2. |
28 |
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Item 3. |
28 |
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Item 4. |
28 |
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Item 5. |
28 |
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Item 6. |
29 |
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30 |
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1
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
PETCO HEALTH AND WELLNESS COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
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May 1, 2021 |
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January 30, 2021 |
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(Unaudited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Receivables, less allowance for credit losses ($ |
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Merchandise inventories, net |
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Prepaid expenses |
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Other current assets |
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Total current assets |
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Fixed assets |
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Less accumulated depreciation |
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( |
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Fixed assets, net |
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Operating lease right-of-use assets |
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Goodwill |
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Trade name |
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Other intangible assets |
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Less accumulated amortization |
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( |
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Other intangible assets, net |
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Other long-term assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND EQUITY |
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Current liabilities: |
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Accounts payable and book overdrafts |
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$ |
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$ |
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Accrued salaries and employee benefits |
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Accrued expenses and other liabilities |
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Current portion of operating lease liabilities |
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Current portion of long-term debt and other lease liabilities |
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Total current liabilities |
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Senior secured credit facilities, net, excluding current portion |
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Operating lease liabilities, excluding current portion |
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Deferred taxes, net |
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Other long-term liabilities |
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Total liabilities |
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Commitments and contingencies (Notes 3, 4 and 8) |
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Stockholders' equity: |
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Class A common stock, $ Issued and outstanding - and |
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Class B-1 common stock, $ Issued and outstanding - |
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Class B-2 common stock, $ Issued and outstanding - |
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Preferred stock, $ Issued and outstanding - |
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Additional paid-in-capital |
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Accumulated deficit |
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( |
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( |
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Accumulated other comprehensive loss |
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( |
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( |
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Total stockholders’ equity |
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Noncontrolling interest |
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( |
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( |
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Total equity |
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Total liabilities and equity |
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$ |
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$ |
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See accompanying notes to consolidated financial statements.
2
PETCO HEALTH AND WELLNESS COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts) (Unaudited)
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Thirteen weeks ended |
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May 1, 2021 |
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May 2, 2020 |
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Net sales |
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$ |
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$ |
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Cost of sales |
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Gross profit |
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Selling, general and administrative expenses |
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Operating income |
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Interest income |
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( |
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( |
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Interest expense |
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Loss on extinguishment and modification of debt |
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Income (loss) before income taxes and income from equity method investees |
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( |
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Income tax expense (benefit) |
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( |
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Income from equity method investees |
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( |
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( |
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Net income (loss) |
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( |
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Net loss attributable to noncontrolling interest |
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( |
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( |
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Net income (loss) attributable to Class A and B-1 common stockholders |
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$ |
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$ |
( |
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Net income (loss) per Class A and B-1 common share (1): |
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Basic |
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$ |
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$ |
( |
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Diluted |
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$ |
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$ |
( |
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Weighted average shares used in computing net income (loss) per Class A and B-1 common share (1): |
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Basic |
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Diluted |
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(1) |
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See accompanying notes to consolidated financial statements.
3
PETCO HEALTH AND WELLNESS COMPANY, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands) (Unaudited)
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Thirteen weeks ended |
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May 1, 2021 |
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May 2, 2020 |
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Net income (loss) |
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$ |
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$ |
( |
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Net loss attributable to noncontrolling interest |
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( |
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( |
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Net income (loss) attributable to Class A and B-1 common stockholders |
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( |
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Other comprehensive loss, net of tax: |
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Foreign currency translation adjustment |
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( |
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( |
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Unrealized loss on derivatives |
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( |
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Losses on derivatives reclassified to income |
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Total other comprehensive loss, net of tax |
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( |
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( |
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Comprehensive income (loss) |
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( |
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Comprehensive loss attributable to noncontrolling interest |
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( |
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( |
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Comprehensive income (loss) attributable to Class A and B-1 common stockholders |
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$ |
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$ |
( |
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See accompanying notes to consolidated financial statements.
4
PETCO HEALTH AND WELLNESS COMPANY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ / MEMBERS’ EQUITY
(In thousands) (Unaudited)
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Common stock |
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Members’ interest (1) |
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Class A (shares) |
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Class B-1 (shares) |
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Class B-2 (shares) |
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Amount |
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Additional paid-in capital |
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Accumulated deficit (1) |
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Accumulated other comprehensive loss |
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Total stockholders’ equity |
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Noncontrolling interest |
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Total equity |
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Balance at January 30, 2021 |
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$ |
— |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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$ |
( |
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$ |
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Equity-based compensation expense (Note 7) |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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Foreign currency translation adjustment, net of tax |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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— |
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( |
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Issuance of restricted stock awards |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Balance at May 1, 2021 |
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$ |
— |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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$ |
( |
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$ |
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Common stock |
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Members’ interest (1) |
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Class A (shares) |
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Class B-1 (shares) |
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Class B-2 (shares) |
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Amount |
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Additional paid-in capital |
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Accumulated deficit (1) |
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Accumulated other comprehensive loss |
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Total members’ equity |
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Noncontrolling interest |
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Total equity |
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Balance at February 1, 2020 |
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$ |
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— |
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— |
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— |
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$ |
— |
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$ |
— |
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$ |
( |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
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Equity-based compensation expense (Note 7) |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
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( |
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( |
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Foreign currency translation adjustment, net of tax |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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— |
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( |
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Unrealized loss on derivatives, net of tax |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
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— |
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( |
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Losses on derivatives reclassified to income, net of tax |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Balance at May 2, 2020 |
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$ |
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— |
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— |
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— |
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$ |
— |
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$ |
— |
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$ |
( |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
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(1) |
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See accompanying notes to consolidated financial statements.
5
PETCO HEALTH AND WELLNESS COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited)
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Thirteen weeks ended |
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May 1, 2021 |
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May 2, 2020 |
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Cash flows from operating activities: |
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Net income (loss) |
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$ |
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$ |
( |
) |
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Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
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Depreciation and amortization |
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Amortization of debt discounts and issuance costs |
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Provision for deferred taxes |
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( |
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Equity-based compensation |
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Impairments, write-offs and losses on sale of fixed and other assets |
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Loss on extinguishment and modification of debt |
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Income from equity method investees |
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( |
) |
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( |
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Amounts reclassified out of accumulated other comprehensive income (Note 5) |
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Change in contingent consideration obligation |
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( |
) |
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Non-cash operating lease costs |
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Changes in assets and liabilities: |
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Receivables |
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( |
) |
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Merchandise inventories |
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( |
) |
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( |
) |
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Prepaid expenses and other assets |
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( |
) |
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( |
) |
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Accounts payable and book overdrafts |
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( |
) |
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Accrued salaries and employee benefits |
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( |
) |
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( |
) |
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Accrued expenses and other liabilities |
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|
|
|
Operating lease liabilities |
|
|
( |
) |
|
|
( |
) |
|
Other long-term liabilities |
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
|
|
|
|
|
( |
) |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
Cash paid for fixed assets |
|
|
( |
) |
|
|
( |
) |
|
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
Borrowings under long-term debt agreements |
|
|
|
|
|
|
|
|
|
Repayments of long-term debt |
|
|
( |
) |
|
|
( |
) |
|
Debt refinancing costs |
|
|
( |
) |
|
|
|
|
|
Payments for finance lease liabilities |
|
|
( |
) |
|
|
( |
) |
|
Payment of offering costs |
|
|
( |
) |
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
|
( |
) |
|
|
|
|
|
Net increase in cash, cash equivalents and restricted cash |
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash at beginning of year |
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash at end of year |
|
$ |
|
|
|
$ |
|
|
|
Supplemental cash flow disclosures: |
|
|
|
|
|
|
|
|
|
Interest paid, net |
|
$ |
|
|
|
$ |
|
|
|
Capitalized interest |
|
$ |
|
|
|
$ |
|
|
|
Income taxes paid |
|
$ |
|
|
|
$ |
|
|
|
Supplemental non-cash investing and financing activities disclosure: |
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses for capital expenditures |
|
$ |
|
|
|
$ |
|
|
See accompanying notes to consolidated financial statements.
6
PETCO HEALTH AND WELLNESS COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Summary of Significant Accounting Policies
Basis of Presentation
Petco Health and Wellness Company, Inc. (together with its consolidated subsidiaries, the “Company”) is a national specialty retailer of premium pet consumables, supplies and companion animals and services. The Company manages its business as
In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments necessary for a fair presentation as prescribed by accounting principles generally accepted in the United States (“GAAP”). All adjustments were comprised of normal recurring adjustments, except as noted in these Notes to Consolidated Financial Statements.
There have been no significant changes from the significant accounting policies disclosed in Note 1 of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 30, 2021.
The results of operations for the thirteen weeks ended May 1, 2021 are not necessarily indicative of the results of operations that may be achieved for the entire fiscal year ending January 29, 2022.
Corporate Conversion and Initial Public Offering
The Company previously operated as a Delaware limited liability company under the name PET Acquisition LLC. In January 2021, the Company converted to a Delaware corporation pursuant to a statutory conversion and changed its name to Petco Health and Wellness Company, Inc. The existing balances of members’ interest and accumulated deficit prior to this conversion were reclassified to additional paid-in capital in the condensed consolidated balance sheets. This reclassification had no effect on the Company’s results of operations.
On January 19, 2021, the Company completed its initial public offering of
Subsequent Event
On June 1, 2021, Scooby Aggregator, LP, the Company’s principal stockholder, completed the sale of
Use of Estimates
The preparation of these condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. These estimates are based on information that is currently available and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could vary from those estimates under different assumptions or conditions.
7
Cash and Cash Equivalents
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the condensed consolidated balance sheets to the total amounts reported in the condensed consolidated statements of cash flows.
|
|
|
May 1, 2021 |
|
|
January 30, 2021 |
|
||
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
Restricted cash included in other current assets |
|
|
|
|
|
|
|
|
|
Total cash, cash equivalents and restricted cash in the statement of cash flows |
|
$ |
|
|
||||