Delivers 6% Same-Store Sales
Growth(1) and Reaffirms Guidance
MARKHAM,
ON, Aug. 8, 2023 /CNW/ - Pet Valu Holdings
Ltd. ("Pet Valu" or the "Company") (TSX: PET), the leading
Canadian specialty retailer of pet food and pet-related supplies,
today announced its financial results for the second
quarter ended July 1, 2023.
Second Quarter
Highlights
- System-wide sales(1) were $343.9 million, an increase of 10.1% versus the
prior year. Same-store sales growth was 6.0%, with both basket and
traffic growth contributing.
- Revenue was $256.4 million, up
12.6% versus last year.
- Adjusted EBITDA(2) was $53.8 million, up 3.9% versus the prior year,
representing 21.0% of revenue. Operating income was $40.2 million, up 2.3% versus the prior
year.
- Net income was $24.1 million,
down from $25.3 million in the prior
year.
- Adjusted Net Income(2) was $26.3 million or $0.36 per diluted share, compared to $27.9 million or $0.39 per diluted share, respectively, in the
prior year.
- Opened 7 new stores and ended the quarter with 758 stores
across the network.
- The Board of Directors of the Company declared a dividend of
$0.10 per common share.
2023 Outlook
- The Company expects 2023 revenue between $1,050 and $1,075
million, driven by same-store sales growth between 7% and
10% and 40-50 new store openings, Adjusted EBITDA between
$230 and $237
million and Adjusted Net Income per Diluted
Share(2) between $1.60 and $1.66.
"We are pleased with our second quarter results, rounding out
strong performance for the first half of 2023, in which our
business delivered on all key metrics," said
Richard Maltsbarger, President and Chief Executive Officer of
Pet Valu. "Our double-digit growth in consumables, such as pet food
and cat litter, makes it clear our expert level customer service,
curated offering of premium products and strengthening omni-channel
shopping capabilities continue to resonate with devoted pet lovers
across Canada.
"With a recent shift in consumer demand, our teams are
prioritizing key projects, investments and talent to those actions
that will continue to deliver the greatest value across the second
half of 2023 and support our long-term profitable growth,"
continued Mr. Maltsbarger. "Our Supply Chain transformation
proceeds on-plan with shipments to stores from our new GTA facility
commencing this month. We are also investing in our customer-facing
ACEs, growing our franchise ownership base, and accelerating
investments in our e-commerce experience, all while closely
managing key cost levers."
Financial Results for the Second
Quarter Fiscal 2023
All comparative figures below are for the 13-week period
ended July 1, 2023, compared to the
13-week period ended July 2,
2022.
Revenue was $256.4 million
in Q2 2023, an increase of $28.7
million, or 12.6%, compared to $227.7
million in Q2 2022. The increase in revenue was driven by
growth in retail sales, as well as franchise and other
revenues.
Same-store sales growth was 6.0% in Q2 2023 primarily
driven by a 4.8% increase in same-store average spend per
transaction and a 1.2% increase in same-store transactions. This is
compared to same-store sales growth of 21.2% in Q2 2022, which
primarily consisted of a 19.3% increase in same-store transactions
and a 1.5% increase in same-store average spend per
transaction. Q2 2022 same-store sales growth was elevated
given the comparative period, Q2 2021, was impacted by a shift in
consumer behaviour associated with COVID-19 restrictions.
Gross profit increased by $6.7
million, or 7.9%, to $92.1
million in Q2 2023, compared to $85.4
million in Q2 2022. Gross profit margin was 35.9% in Q2
2023, compared to 37.5% in Q2 2022. Excluding costs related to the
supply chain transformation of 0.20%, the gross profit margin was
36.1% and decreased by 1.4%. The decrease was primarily
driven by: (i) the unfavourable impact of the weaker Canadian
dollar on non-domestic sourced products primarily denominated in
U.S. dollars; (ii) higher wholesale merchandise sales due to
increased franchise penetration and improved fill rates to
franchisees; partially offset by (iii) favourable product margins
as lower inbound freight costs more than offset higher distribution
costs.
Selling, general and administrative ("SG&A") expenses
were $51.9 million in Q2 2023, an
increase of $5.8 million, or 12.6%,
compared to $46.1 million in Q2 2022.
SG&A expenses represented 20.2% and 20.2% of total revenue for
Q2 2023 and Q2 2022, respectively. The increase of $5.8 million in SG&A expenses was primarily
due to: (i) increased compensation costs as a result of headcount
and salary investments; (ii) higher depreciation and amortization
from store growth and investments, and other assets; partially
offset by (iii) lower professional fees.
Adjusted EBITDA increased by $2.0
million, or 3.9%, to $53.8
million in Q2 2023, compared to $51.8
million in Q2 2022. Adjusted EBITDA excludes $0.5 million of lower costs from business
transformation, investment in associate, other professional fees,
information technology transformation, share-based compensation,
and loss (gain) on foreign exchange. Adjusted EBITDA was also
impacted by higher EBITDA of $2.5
million in Q2 2023 compared to Q2 2022. Adjusted EBITDA as a
percentage of revenue was 21.0% and 22.8% in Q2 2023 and Q2 2022,
respectively.
Net interest expense was $7.2
million in Q2 2023, an increase of $2.6 million, or 56.9%, compared to $4.6 million in Q2 2022. The increase was
primarily driven by higher interest expense on the 2021 Term
Facility (as defined in the Company's management's discussion and
analysis ("MD&A") for the second quarter ended July 1,
2023) resulting from higher interest rates compared to Q2 2022.
Income taxes were $9.0 million in Q2 2023 compared to
$9.5 million in Q2 2022, a
decrease of $0.5 million year over
year. The decrease in income taxes was primarily the result of
lower taxable earnings in Q2 2023. The effective income tax rate
was 27.1% in Q2 2023 compared to 27.3% in Q2 2022. The Q2 2023 and
Q2 2022 effective tax rate is higher than the blended statutory
rate of 26.5% primarily because of non-deductible expenses.
Net income decreased by $1.2
million to $24.1 million in Q2
2023, compared to $25.3 million in Q2
2022. The change in net income is explained by the factors
described above.
Adjusted Net Income decreased by $1.6 million to $26.3 million in Q2 2023, compared to
$27.9 million in Q2 2022.
Adjusted Net Income as a percentage of revenue was 10.2% in Q2 2023
and 12.2% in Q2 2022. The 2.0% year over year decrease results from
the factors described above.
Adjusted Net Income per Diluted Share decreased by
$0.03 to $0.36 in Q2 2023, compared to $0.39 in Q2 2022 primarily from the factors
described above.
Cash at the end of the second quarter totaled
$8.8 million.
Free Cash Flow(2) amounted to $13.0 million in Q2 2023 compared to
$20.4 million in Q2 2022, a
decrease of $7.4 million
primarily driven by an increase in cash used for investing
activities primarily due to higher Net Capital Expenditures, an
increase in repayment of principal and interest on lease
liabilities due to store network expansion, partially offset by an
increase in cash from operating activities.
Inventory at end of Q2 2023 was $130.8 million compared to $118.4 million at the end of Q4 2022, an increase
of $12.4 million primarily due to
growth in revenue, improved vendor fill rates and timing of
receipts resulting from global supply chain improvements.
Dividends
On August 7, 2023, the Board of
Directors of the Company declared a dividend of $0.10 per common share payable on September 15, 2023 to holders of common shares of
record as at the close of business on August
31, 2023.
Outlook
For the full year 2023, the Company expects:
- Revenue between $1,050 and
$1,075 million, supported by
same-store sales growth of between 7% and 10%, and 40 to 50 new
store openings;
- Gross profit margin slightly below the Company's historical
range of 35% to 36%, as the Company faces unfavourable foreign
exchange rates and incurs approximately 100 basis points of cost
associated with its supply chain transformation;
- Adjusted EBITDA between $230 and
$237 million, which incorporates
expense leverage on investments made in 2022, partially offset by
the unfavourable foreign exchange rates;
- Adjusted Net Income per Diluted Share between $1.60 and $1.66;
- Business transformation costs of approximately $17 million, Information Technology costs of
approximately $4 million, and
share-based compensation of approximately $7
million, all of which are excluded from Adjusted EBITDA and
Adjusted Net Income per Diluted Share; and
- Net Capital Expenditures(2) of approximately
$60 million, roughly half of which is
attributable to investments in the Company's supply chain
transformation.
(1) This is
a supplementary financial measure. Refer to "Non-IFRS Measures and
Supplementary Financial Measures" below and to the section entitled
"How We Assess the Performance of our Business in the MD&A for
the definitions of supplementary financial measures.
|
|
(2)
This is a Non-IFRS financial measure. Non-IFRS financial
measures are not recognized measures under IFRS and do not have
standardized meanings prescribed by IFRS. They are therefore
unlikely to be comparable to similar measures presented by other
companies. Refer to "How We Assess the Performance of our Business"
in the MD&A for the second quarter ended July 1, 2023 for
the definitions of Non-IFRS financial measures.
|
|
Conference Call Details
A conference call to discuss the Company's second quarter
results is scheduled for August 8,
2023, at 8:30 a.m. ET. To
access Pet Valu's conference call, please dial 1-833-950-0062 (ID:
675228). A live webcast of the call will also be available through
the Events & Presentations section of the Company's website at
https://investors.petvalu.com/.
For those unable to participate, a playback will be available
shortly after the conclusion of the call by dialing 1-226-828-7578
(ID: 869032) and will be accessible until August 15, 2023. The webcast will also be
archived and available through the Events & Presentations
section of the Company's website at
https://investors.petvalu.com/.
About Pet Valu
Pet Valu is Canada's leading
retailer of pet food and pet-related supplies with over 700
corporate-owned or franchised locations across the country. For
more than 40 years, Pet Valu has earned the trust and loyalty of
pet parents by offering knowledgeable customer service, a premium
product offering and engaging in-store services. Pet Valu's
neighbourhood stores offer more than 7,000 competitively-priced
products, including a broad assortment of premium, super premium,
holistic and award-winning proprietary brands. To learn more,
please visit: www.petvalu.com.
Non-IFRS Measures and Supplementary Financial
Measures
This press release makes reference to certain non-IFRS measures.
These measures are not recognized measures under IFRS and do not
have a standardized meaning prescribed by IFRS. They are therefore
unlikely to be comparable to similar measures presented by other
companies. Rather, these measures are provided as additional
information to complement IFRS measures by providing further
understanding of the Company's results of operations from
management's perspective. Accordingly, they should not be
considered in isolation nor as a substitute for analysis of the
Company's financial information reported under IFRS. Pet Valu uses
non-IFRS measures, including "EBITDA", "Adjusted EBITDA", "Adjusted
Net Income", Adjusted Net Income per Diluted Share", "Free Cash
Flow" and "Net Capital Expenditures". This press release also makes
reference to certain supplementary financial measures that are
commonly used in the retail industry, including "System-wide
stores", "System-wide sales", "Same-store sales", and "Same-store
sales growth". These non-IFRS measures and supplementary financial
measures are used to provide investors with supplemental measures
of Pet Valu's operating performance and thus highlight trends in
its core business that may not otherwise be apparent when relying
solely on IFRS financial measures. The Company also believes that
securities analysts, investors and other interested parties
frequently use non-IFRS measures and these supplementary financial
measures in the evaluation of issuers. Management uses non-IFRS
measures in order to facilitate operating performance comparisons
from period to period, to prepare annual operating budgets and to
determine components of management compensation. Refer to the
MD&A for the second quarter ended July 1, 2023 for further
information on non-IFRS measures and industry metrics, including
for their definition and, for non-IFRS measures, a reconciliation
to the most comparable IFRS measure.
Forward-Looking
Information
Some of the information contained in this press release is
forward-looking information. Forward-looking information is
provided as of the date of this press release and is based on
management's opinions, estimates and assumptions in light of its
experience and perception of historical trends, current trends,
current conditions and expected future developments, as well as
other factors that management believes appropriate and reasonable
in the circumstances. Such forward-looking information is intended
to provide information about management's current expectations and
plans, and may not be appropriate for other purposes. Pet Valu does
not undertake to update any such forward-looking information
whether as a result of new information, future events or otherwise,
except as required under applicable Canadian securities laws.
Actual results and the timing of events may differ materially from
those anticipated in the forward-looking information as a result of
various factors. Particularly, information regarding our
expectations of future results, targets, performance achievements,
prospects or opportunities, including the information under the
headings "2023 Outlook" and "Outlook" in this press release, is
"future-oriented financial information" or a "financial outlook"
within the meaning of applicable securities legislation, which is
based on the factors and assumptions, and subject to the risks, as
set out herein and in the Company's annual information form dated
March 6, 2023 ("AIF"). Often but not
always, forward-looking information can be identified by the use of
forward-looking terminology such as "may", "will", "expect",
"believe", "estimate", "plan", "could", "should", "would",
"outlook", "forecast", "anticipate", "foresee", "continue" or the
negative of these terms or variations of them or similar
terminology.
Many factors could cause our actual results, level of activity,
performance or achievements, future events or developments, or
outlook to differ materially from those expressed or implied by the
forward-looking information, including, without limitation, the
factors discussed in the "Risk Factors" section of the AIF. A copy
of the AIF and the Company's other publicly filed documents can be
accessed under the Company's profile on SEDAR+ at
www.sedarplus.ca.
The Company cautions that the list of risk factors and
uncertainties described in the AIF is not exhaustive and other
factors could also adversely affect its results. Readers are urged
to consider the risks, uncertainties and assumptions carefully in
evaluating forward-looking information and are cautioned not to
place undue reliance on such information.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
Condensed Interim Consolidated Statements of Income and
Comprehensive Income
(Unaudited, expressed in thousands of Canadian dollars, except per
share amounts)
|
Quarters
Ended
|
Year to Date
Ended
|
|
July 1,
2023
|
July 2,
2022
|
July 1,
2023
|
July 2,
2022
|
|
13
weeks
|
13
weeks
|
26
weeks
|
26
weeks
|
|
|
|
|
|
Revenue:
|
|
|
|
|
Retail
sales
|
$
103,012
|
$
97,055
|
$
205,031
|
$
190,130
|
Franchise and other
revenues
|
153,361
|
130,621
|
301,634
|
250,799
|
Total
revenue
|
256,373
|
227,676
|
506,665
|
440,929
|
|
|
|
|
|
Cost of
sales
|
164,268
|
142,305
|
327,346
|
278,478
|
Gross
profit
|
92,105
|
85,371
|
179,319
|
162,451
|
|
|
|
|
|
Selling, general and
administrative expenses
|
51,881
|
46,062
|
104,228
|
87,981
|
Total operating
income
|
40,224
|
39,309
|
75,091
|
74,470
|
|
|
|
|
|
Interest expenses,
net
|
7,155
|
4,560
|
14,062
|
8,541
|
(Gain) loss on foreign
exchange
|
(113)
|
120
|
198
|
99
|
Other loss
(gain)
|
133
|
(152)
|
1,558
|
(124)
|
Income before income
taxes
|
33,049
|
34,781
|
59,273
|
65,954
|
|
|
|
|
|
Income tax
expense
|
8,971
|
9,503
|
16,466
|
18,055
|
Net
income
|
24,078
|
25,278
|
42,807
|
47,899
|
|
|
|
|
|
Other comprehensive
income, net of tax:
|
|
|
|
|
Currency translation
adjustments that
may be reclassified to
net income, net of tax
|
29
|
5
|
43
|
3
|
Comprehensive income
for the period
attributable to the
shareholders of the Company
|
$
24,107
|
$
25,283
|
$
42,850
|
$
47,902
|
|
|
|
|
|
Basic net income per
share attributable to the
common
shareholders
|
$
0.34
|
$
0.36
|
$
0.60
|
$
0.68
|
Diluted net income
per share attributable to the
common
shareholders
|
$
0.33
|
$
0.35
|
$
0.59
|
$
0.67
|
|
|
|
|
|
Reconciliation of Net Income to EBITDA and Adjusted
EBITDA
(Unaudited, in thousands of Canadian dollars unless otherwise
noted)
|
Quarters
Ended
|
Year to Date
Ended
|
|
July 1,
2023
|
July 2,
2022
|
July 1,
2023
|
July 2,
2022
|
|
13
weeks
|
13
weeks
|
26
weeks
|
26
weeks
|
Reconciliation of
net income to Adjusted EBITDA:
|
|
|
|
|
Net income
|
$
24,078
|
$
25,278
|
$
42,807
|
$
47,899
|
Depreciation and
amortization
|
10,904
|
9,270
|
21,532
|
18,146
|
Interest expenses,
net
|
7,155
|
4,560
|
14,062
|
8,541
|
Income tax
expense
|
8,971
|
9,503
|
16,466
|
18,055
|
EBITDA
|
51,108
|
48,611
|
94,867
|
92,641
|
Adjustments to
EBITDA:
|
|
|
|
|
Information technology
transformation costs(1)
|
429
|
1,007
|
1,151
|
2,077
|
Business transformation
costs(2)
|
948
|
381
|
2,528
|
381
|
Other professional
fees(3)
|
349
|
348
|
349
|
996
|
Share-based
compensation(4)
|
963
|
1,492
|
1,964
|
2,519
|
(Gain) loss on foreign
exchange(5)
|
(113)
|
120
|
198
|
99
|
Investment in
associate(6)(7)
|
133
|
(152)
|
1,558
|
(124)
|
Adjusted
EBITDA(7)
|
$
53,817
|
$
51,807
|
$
102,615
|
$
98,589
|
Adjusted EBITDA as a
percentage of revenue(7)
|
21.0 %
|
22.8 %
|
20.3 %
|
22.4 %
|
Notes:
|
(1)
|
Represents discrete,
project-based implementation costs associated with new information
technology systems and discrete SaaS arrangements for
transformational initiatives supporting merchandise planning,
inventory and order management, e-commerce and omni-channel
capabilities, customer relationship management and other key
processes.
|
(2)
|
Represents expenses
associated to supply chain transformation initiatives, including
the new distribution centre. The expenses included in cost of sales
in Q2 2023 and YTD 2023 were $0.5 million and $0.5 million,
respectively (Q2 2022 and YTD 2022 – $nil). The expenses included
in selling, general, and administrative expenses were $0.4 million
and $2.0 million in Q2 2023 and YTD 2023, respectively (Q2 2022 and
YTD 2022 – $0.4 million and $0.4 million, respectively).
|
(3)
|
Professional fees
primarily incurred with respect to: (i) the Canada Revenue Agency's
("CRA") examination of the Company's Canadian tax filings for the
2016 fiscal year; (ii) acquisition and integration costs incurred
in relation to Chico in Fiscal 2022; and (iii) professional fees
incurred with respect to the secondary offering of the
Company's common shares completed June 1, 2023 (the "2023 Secondary
Offering").
|
(4)
|
Represents share-based
compensation in respect of our amended and restated share option
plan, long-term incentive plan, and deferred share unit
plan.
|
(5)
|
Represents foreign
exchange gains and losses.
|
(6)
|
Represents the
Company's share of loss from associate of $0.1 million and $0.3
million for Q2 2023 and YTD 2023, respectively (Q2 2022 and YTD
2022 – $0.1 million and $0.1 million, respectively) and (gain)
or loss on the fair value of the related call option for Q2 2023
and YTD 2023 of $nil and $1.3 million, respectively (Q2 2022 and
YTD 2022 – $(0.2) million and $(0.2) million, respectively).
|
(7)
|
In Q3 2022, the Company
revised its definition of Adjusted EBITDA to exclude the gain or
loss on the fair value of the call option related to an investment
in an associate. The previously reported Q2 2022 and YTD 2022
Adjusted EBITDA of $52.1 million and $98.8 million was revised to
exclude a $0.2 million gain on the fair value of the call option,
respectively.
|
|
|
Reconciliation of Net Income to Adjusted Net Income
(Unaudited, in thousands of Canadian dollars unless otherwise
noted)
|
Quarters
Ended
|
Year to Date
Ended
|
|
July 1,
2023
|
July 2,
2022
|
July 1,
2023
|
July 2,
2022
|
|
13
weeks
|
13
weeks
|
26
weeks
|
26
weeks
|
Reconciliation of
net income to Adjusted Net Income:
|
|
|
|
|
Net income
|
$
24,078
|
$
25,278
|
$
42,807
|
$
47,899
|
Adjustments to net
income:
|
|
|
|
|
Information technology
transformation costs(1)
|
429
|
1,007
|
1,151
|
2,077
|
Business transformation
costs(2)
|
948
|
381
|
2,528
|
381
|
Other professional
fees(3)
|
349
|
348
|
349
|
996
|
Share-based
compensation(4)
|
963
|
1,492
|
1,964
|
2,519
|
(Gain) loss on foreign
exchange(5)
|
(113)
|
120
|
198
|
99
|
Investment in
associate(6)(7)
|
133
|
(152)
|
1,558
|
(124)
|
Tax effect of
adjustments to net income
|
(519)
|
(598)
|
(1,335)
|
(1,152)
|
Adjusted Net
Income(7)
|
$
26,268
|
$
27,876
|
$
49,220
|
$
52,695
|
Adjusted Net Income
as a percentage of revenue(7)
|
10.2 %
|
12.2 %
|
9.7 %
|
12.0 %
|
Adjusted Net Income
per Diluted Share(7)
|
$
0.36
|
$
0.39
|
$
0.68
|
$
0.73
|
Notes:
|
(1)
|
Represents discrete,
project-based implementation costs associated with new information
technology systems and discrete SaaS arrangements for
transformational initiatives supporting merchandise planning,
inventory and order management, e-commerce and omni-channel
capabilities, customer relationship management and other key
processes.
|
(2)
|
Represents expenses
associated to supply chain transformation initiatives, including
the new distribution centre. The expenses included in cost of sales
in Q2 2023 and YTD 2023 were $0.5 million and $0.5 million,
respectively (Q2 2022 and YTD 2022 - $nil). The expenses included
in selling, general, and administrative expenses were $0.4 million
and $2.0 million in Q2 2023 and YTD 2023 respectively (Q2 2022 and
YTD 2022 - $0.4 million and $0.4 million, respectively).
|
(3)
|
Professional fees
primarily incurred with respect to: (i) the CRA's examination of
the Company's Canadian tax filings for the 2016 fiscal year; (ii)
acquisition and integration costs incurred in relation to Chico in
Fiscal 2022; and (iii) professional fees incurred with respect to
the 2023 Secondary Offering.
|
(4)
|
Represents share-based
compensation in respect of our amended and restated share option
plan, long-term incentive plan, and deferred share unit
plan.
|
(5)
|
Represents foreign
exchange gains and losses.
|
(6)
|
Represents the
Company's share of loss from associate of $0.1 million and $0.3
million for Q2 2023 and YTD 2023, respectively (Q2 2022 and YTD
2022 – $0.1 million and $0.1 million, respectively) and
(gain) or loss on the fair value of the related call option for Q2
2023 and YTD 2023 of $nil and $1.3 million, respectively (Q2 2022
and YTD 2022 – $(0.2) million and $(0.2) million, respectively).
|
(7)
|
In Q3 2022, the Company
revised its definition of Adjusted Net Income to exclude the gain
or loss on the fair value of the call option related to an
investment in associate. The previously reported Q2 2022 and YTD
2022 Adjusted Net Income of $28.1 million and $52.9 million were
revised to exclude a $0.2 million gain on the fair value of the
call option, net of tax, respectively.
|
|
|
Condensed Interim Consolidated Statements of Cash
Flows
(Unaudited, in thousands of Canadian dollars)
|
Quarters
Ended
|
Year to Date
Ended
|
|
July 1,
2023
|
July 2,
2022
|
July 1,
2023
|
July 2,
2022
|
|
13
weeks
|
13
weeks
|
26
weeks
|
26
weeks
|
Cash provided by
(used in):
|
|
|
|
|
Operating
activities:
|
|
|
|
|
Net income for the
period
|
$
24,078
|
$
25,278
|
$
42,807
|
$
47,899
|
Adjustments for items
not affecting cash:
|
|
|
|
|
Depreciation and
amortization
|
10,904
|
9,270
|
21,532
|
18,146
|
Deferred franchise
fees
|
(20)
|
(46)
|
63
|
(94)
|
Gain on disposal of
property and equipment
|
(167)
|
(34)
|
(304)
|
(42)
|
Loss on sale of
right-of-use assets
|
179
|
122
|
534
|
160
|
(Gain) loss on foreign
exchange
|
(113)
|
120
|
198
|
99
|
(Gain) loss on
financial instruments
|
—
|
(244)
|
1,302
|
(244)
|
Share-based
compensation expense
|
963
|
1,492
|
1,964
|
2,519
|
Share of loss from
associate
|
133
|
92
|
256
|
120
|
Interest expenses,
net
|
7,155
|
4,560
|
14,062
|
8,541
|
Income tax
expense
|
8,971
|
9,503
|
16,466
|
18,055
|
Income taxes
paid
|
(9,360)
|
(6,248)
|
(33,770)
|
(25,573)
|
Security deposits
paid
|
—
|
(5,073)
|
—
|
(5,073)
|
Change in non-cash
operating working capital:
|
|
|
|
|
Accounts
receivable
|
(1,787)
|
(3,964)
|
(1,139)
|
(3,679)
|
Inventories
|
9,424
|
(16,319)
|
(12,280)
|
(24,556)
|
Prepaid
expenses
|
641
|
(1,167)
|
3,562
|
(1,837)
|
Accounts payable and
accrued liabilities
|
(10,522)
|
15,947
|
(9,567)
|
8,319
|
Net cash provided by
operating activities
|
40,479
|
33,289
|
45,686
|
42,760
|
Financing
activities:
|
|
|
|
|
Proceeds from exercise
of share options
|
3,736
|
3,596
|
4,344
|
4,183
|
Dividends paid on
common shares
|
(14,244)
|
(8,440)
|
(14,244)
|
(8,440)
|
Repayment of 2021 Term
Facility
|
(4,436)
|
(2,220)
|
(36,874)
|
(4,438)
|
Interest paid on
long-term debt
|
(2,094)
|
(4,216)
|
(3,867)
|
(7,171)
|
Repayment of principal
on lease liabilities
|
(12,979)
|
(12,046)
|
(30,858)
|
(23,815)
|
Interest paid on lease
liabilities
|
(3,393)
|
(2,911)
|
(6,597)
|
(5,818)
|
Standby letter of
credit commitment fees
|
(347)
|
—
|
(663)
|
(314)
|
Net cash used in
financing activities
|
(33,757)
|
(26,237)
|
(88,759)
|
(45,813)
|
Investing
activities:
|
|
|
|
|
Business acquisition,
net of cash acquired
|
(3,000)
|
—
|
(3,000)
|
(12,829)
|
Purchases of property
and equipment
|
(16,663)
|
(4,532)
|
(27,381)
|
(9,652)
|
Purchase of intangible
assets
|
(1,432)
|
(1,360)
|
(1,975)
|
(1,973)
|
Proceeds on disposal
of property and equipment
|
918
|
713
|
1,201
|
775
|
Right-of-use asset
initial direct costs
|
(522)
|
(278)
|
(990)
|
(618)
|
Tenant
allowances
|
221
|
57
|
648
|
555
|
Notes
receivable
|
827
|
108
|
893
|
298
|
Lease
receivables
|
7,364
|
6,707
|
14,577
|
13,229
|
Interest received on
lease receivables and other
|
2,534
|
1,903
|
5,509
|
3,815
|
Investment in
associate
|
—
|
(1,134)
|
—
|
(1,134)
|
Repurchase of
franchises
|
(512)
|
—
|
(512)
|
—
|
Net cash (used in)
provided by investing activities
|
(10,265)
|
2,184
|
(11,030)
|
(7,534)
|
Effect of exchange
rate on cash
|
100
|
3
|
(124)
|
(14)
|
Net (decrease)
increase in cash
|
(3,443)
|
9,239
|
(54,227)
|
(10,601)
|
Cash, beginning of
period
|
12,250
|
30,228
|
63,034
|
50,068
|
Cash, end of
period
|
$
8,807
|
$
39,467
|
$
8,807
|
$
39,467
|
Free Cash Flows
(Unaudited, expressed in thousands of Canadian dollars)
|
Quarters
Ended
|
Year to Date
Ended
|
|
July 1,
2023
|
July 2,
2022
|
July 1,
2023
|
July 2,
2022
|
|
13
weeks
|
13
weeks
|
26
weeks
|
26
weeks
|
|
|
|
|
|
Cash provided by
operating activities
|
$
40,479
|
$
33,289
|
$
45,686
|
$
42,760
|
Cash (used in) provided
by investing activities
|
(10,265)
|
2,184
|
(11,030)
|
(7,534)
|
Repayment of principal
on lease liabilities
|
(12,979)
|
(12,046)
|
(30,858)
|
(23,815)
|
Interest paid on lease
liabilities
|
(3,393)
|
(2,911)
|
(6,597)
|
(5,818)
|
Notes
receivable
|
(827)
|
(108)
|
(893)
|
(298)
|
Free Cash
Flow
|
$
13,015
|
$
20,408
|
$
(3,692)
|
$
5,295
|
Condensed Interim Consolidated Statements of Financial
Position
(Unaudited, expressed in thousands of Canadian dollars)
|
As at July
1,
2023
|
As at December
31,
2022
|
Assets
|
|
|
Current
assets:
|
|
|
Cash
|
$
8,807
|
$
63,034
|
Accounts and other
receivables
|
23,864
|
22,965
|
Inventories,
net
|
130,786
|
118,410
|
Income taxes
recoverable
|
2,183
|
—
|
Prepaid expenses and
other assets
|
12,889
|
22,262
|
Current portion of
lease receivables
|
31,431
|
29,827
|
Total current
assets
|
209,960
|
256,498
|
|
|
|
Non-current
assets:
|
|
|
Long-term lease
receivables
|
148,415
|
141,187
|
Right-of-use assets,
net
|
173,521
|
82,242
|
Property and
equipment, net
|
105,877
|
91,774
|
Intangible assets,
net
|
52,798
|
52,280
|
Goodwill
|
97,623
|
97,574
|
Deferred tax
assets
|
6,652
|
6,652
|
Investment in
associate
|
3,089
|
4,708
|
Other
assets
|
4,324
|
7,261
|
Total non-current
assets
|
592,299
|
483,678
|
Total
assets
|
$
802,259
|
$
740,176
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
|
Current
liabilities:
|
|
|
Accounts payable and
accrued liabilities
|
$
90,088
|
$
103,782
|
Income taxes
payable
|
—
|
15,141
|
Current portion of
deferred franchise fees
|
1,266
|
1,197
|
Current portion of
lease liabilities
|
52,110
|
51,335
|
Current portion of
long-term debt
|
17,750
|
17,750
|
Total current
liabilities
|
161,214
|
189,205
|
|
|
|
Non-current
liabilities:
|
|
|
Long-term deferred
franchise fees
|
4,011
|
4,017
|
Long-term lease
liabilities
|
304,843
|
215,966
|
Long-term
debt
|
283,775
|
320,063
|
Deferred tax
liabilities
|
8,246
|
8,250
|
Other
liabilities
|
5,642
|
2,299
|
Total non-current
liabilities
|
606,517
|
550,595
|
Total
liabilities
|
767,731
|
739,800
|
|
|
|
Shareholders'
equity:
|
|
|
Common
shares
|
321,693
|
316,208
|
Contributed
surplus
|
4,168
|
4,107
|
Deficit
|
(291,217)
|
(319,780)
|
Currency translation
reserve
|
(116)
|
(159)
|
Total shareholders'
equity
|
34,528
|
376
|
Total liabilities
and shareholders' equity
|
$
802,259
|
$
740,176
|
|
|
|
SOURCE Pet Valu Canada Inc.