Delivers 4% Same-Store Sales
Growth(1) and Narrows 2023 Outlook
MARKHAM,
ON, Nov. 7, 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 third
quarter ended September 30, 2023.
Third Quarter Highlights
- System-wide sales(1) were $357.2 million, an increase of 7.7% versus the
prior year. Same-store sales growth was 4.2%, primarily supported
by same-store average spend per transaction
growth(1) .
- Revenue was $262.3 million, an
increase of 7.2% versus the prior year, in-line with system-wide
sales growth.
- Adjusted EBITDA(2) was $57.2 million, up 0.4% versus the prior year,
representing 21.8% of revenue. Operating income was $37.4 million, down 13.7% versus the prior
year.
- Net income was $18.0 million,
down from $27.0 million in the prior
year.
- Adjusted Net Income(2) was $28.2 million or $0.39 per diluted share, compared to $30.7 million or $0.43 per diluted share, respectively, in the
prior year.
- Opened 8 new stores and ended the quarter with 766 stores
across the network.
- Officially opened the new Greater
Toronto Area ("GTA") distribution centre.
- The Board of Directors of the Company declared a dividend of
$0.10 per common share.
2023 Outlook
- The Company expects 2023 revenue between $1,055 and $1,065
million, driven by same-store sales growth between 5.5% and
6.5% and 35-40 new store openings, Adjusted EBITDA between
$230 and $233
million and Adjusted Net Income per Diluted
Share(2) between $1.60 and $1.63.
"We delivered 8% top-line growth and took a significant step
forward in our supply chain transformation with the opening of our
new GTA distribution centre in the quarter," said Richard Maltsbarger, President and Chief
Executive Officer of Pet Valu. "I am proud of the actions our teams
took to swiftly adapt to evolving consumer demand, while continuing
to drive same store sales growth through innovative product
launches, targeted promotions, and enriched digital
experiences.
"As we enter the final stretch of 2023, our full-year outlook
reflects the resiliency of our business and the Canadian pet
industry and our ability to grow across different business cycles,"
continued Mr. Maltsbarger. "We look forward to delivering an
engaging commercial program this holiday season and our innovative
new product launches. We are also excited about our recently
launched wholesale distribution expansion out of our new GTA
distribution centre, enabling us to begin tapping into a
significant new revenue opportunity selling to our Chico
franchisees in the Quebec
market."
Financial Results for the Third Quarter Fiscal 2023
All comparative figures below are for the 13-week period
ended September 30, 2023, compared to
the 13-week period ended October 1,
2022.
Revenue was $262.3 million
in Q3 2023, an increase of $17.6
million, or 7.2%, compared to $244.7
million in Q3 2022. The increase in revenue was driven by
growth in retail sales, as well as franchise and other
revenues.
Same-store sales growth was 4.2% in Q3 2023 primarily
driven by a 4.0% increase in same-store average spend per
transaction and a 0.2% increase in same-store transactions. This is
compared to same-store sales growth of 14.7% in Q3 2022, which
primarily consisted of a 7.6% increase in same-store transactions
and a 6.6% increase in same-store average spend per transaction.
Q3 2022 same-store sales growth was elevated given the
comparative period, Q3 2021, was impacted by a shift in consumer
behaviour associated with COVID-19 restrictions.
Gross profit decreased by $6.2
million, or 6.7%, to $87.3
million in Q3 2023, compared to $93.5
million in Q3 2022. Gross profit margin was 33.3% in Q3
2023, compared to 38.2% in Q3 2022. Excluding costs related to the
supply chain transformation of 1.8%, the gross profit margin was
35.1% and decreased by 3.1%. The decrease was primarily
driven by: (i) a duty recovery associated to COVID relief measures
received in Q3 2022; (ii) the unfavourable impact of the weaker
Canadian dollar on non-domestic sourced products primarily
denominated in U.S. dollars; (iii) unfavourable product margins,
net of lower inbound freight costs; and (iv) higher discounts
related to planned promotional activity.
Selling, general and administrative ("SG&A") expenses
were $49.9 million in Q3 2023, a
decrease of $0.3 million, or 0.6%,
compared to $50.2 million in Q3 2022.
SG&A expenses represented 19.0% and 20.5% of total revenue for
Q3 2023 and Q3 2022, respectively. The decrease of $0.3 million in SG&A expenses was primarily
due to: (i) higher gains on the sale of assets related to
re-franchised stores, (ii) decreased compensation costs due to
lower variable and share-based compensation expenses; partially
offset by (iii) higher depreciation and amortization on property,
equipment, and software from store growth and information
technology investments.
Adjusted EBITDA increased by $0.2
million, or 0.4%, to $57.2
million in Q3 2023, compared to $57.0
million in Q3 2022. Adjusted EBITDA excludes $4.2 million of higher costs from investment in
associate, business transformation, information technology
transformation, other professional fees, share-based compensation,
and loss on foreign exchange. Adjusted EBITDA was also impacted by
lower EBITDA of $4.0 million in Q3
2023 compared to Q3 2022. Adjusted EBITDA as a percentage of
revenue was 21.8% and 23.3% in Q3 2023 and Q3 2022,
respectively.
Net interest expense was $8.1
million in Q3 2023, an increase of $2.6 million, or 47.6%, compared to $5.5 million in Q3 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 third quarter ended
September 30, 2023) resulting from higher interest rates
compared to Q3 2022.
Income taxes were $7.9 million in Q3 2023 compared to
$10.1 million in Q3 2022, a
decrease of $2.2 million year over
year. The decrease in income taxes was primarily the result of
lower taxable earnings in Q3 2023. The effective income tax rate
was 30.4% in Q3 2023 compared to 27.2% in Q3 2022. The Q3 2023 and
Q3 2022 effective tax rate was higher than the blended statutory
rate of 26.5% primarily due to the impairment of an investment in
associate and non-deductible expenses.
Net income decreased by $9.0
million to $18.0 million in Q3
2023, compared to $27.0 million in Q3
2022. In addition to the factors described above, the change in net
income is also explained by the impairment related to an investment
in associate.
Adjusted Net Income decreased by $2.5 million to $28.2 million in Q3 2023, compared to
$30.7 million in Q3 2022.
Adjusted Net Income as a percentage of revenue was 10.8% in Q3 2023
and 12.6% in Q3 2022, respectively. The 1.8% year over year
decrease results from the factors described above.
Adjusted Net Income per Diluted Share decreased by
$0.04 to $0.39 in Q3 2023, compared to $0.43 in Q3 2022 primarily from the factors
described above.
Cash at the end of the third quarter totaled $11.3 million.
Free Cash Flow(2) amounted to
$18.1 million in Q3 2023
compared to $19.9 million in Q3
2022, a decrease of $1.8 million
primarily driven by an increase in cash used for investing
activities primarily due to higher Net Capital
Expenditures(2), an increase in payments of interest on
lease liabilities due to the new GTA distribution centre and store
network expansion, partially offset by a decrease in repayment of
principal on lease liabilities due to timing of quarter end in Q3
2023.
Inventory at end of Q3 2023 was $135.0 million compared to $118.4 million at the end of Q4 2022, an
increase of $16.6 million primarily
due to growth in revenue, improved vendor fill rates and timing of
receipts resulting from global supply chain improvements.
Dividends
On November 6,
2023, the Board of Directors of the Company declared a
dividend of $0.10 per common share
payable on December 15, 2023 to
holders of common shares of record as at the close of business on
November 30, 2023.
Outlook
For the full year 2023, the Company expects:
- Revenue between $1,055 and
$1,065 million, supported by
same-store sales growth of between 5.5% and 6.5%, and 35 to 40 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
$233 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 $1.63;
- 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 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 third quarter ended September 30, 2023 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 third quarter ended September 30, 2023
for the definitions of Non-IFRS financial measures and to "Selected
Consolidated Financial Information" below for a reconciliation of
the non-IFRS measures to the most comparable IFRS
measure.
|
Conference Call Details
A conference call to discuss the Company's third quarter results
is scheduled for November 7, 2023, at
8:30 a.m. ET. To access Pet Valu's
conference call, please dial 1-833-950-0062 (ID: 025031). 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 1-866-813-9403
(ID: 597341) and will be accessible until November 14, 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 third quarter ended September 30, 2023 for further information on
non-IFRS measures and supplementary financial measures, including
for their definition and, for non-IFRS measures, a reconciliation
to the most comparable IFRS measure, also included under "Selected
Consolidated Financial Information" below.
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
|
|
September
30,
2023
|
October 1,
2022
|
September
30,
2023
|
October 1,
2022
|
|
13
weeks
|
13
weeks
|
39
weeks
|
39
weeks
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
Retail
sales
|
$
|
106,708
|
$
|
103,167
|
$
|
311,739
|
$
|
293,297
|
|
Franchise and other
revenues
|
155,586
|
141,557
|
457,220
|
392,356
|
|
Total
revenue
|
262,294
|
244,724
|
768,959
|
685,653
|
|
|
|
|
|
|
Cost of
sales
|
174,977
|
151,182
|
502,323
|
429,660
|
|
Gross
profit
|
87,317
|
93,542
|
266,636
|
255,993
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
49,947
|
50,231
|
154,175
|
138,212
|
|
Total operating
income
|
37,370
|
43,311
|
112,461
|
117,781
|
|
|
|
|
|
|
Interest expenses,
net
|
8,128
|
5,508
|
22,190
|
14,049
|
|
Loss on foreign
exchange
|
246
|
832
|
444
|
931
|
|
Other loss
(gain)
|
3,160
|
(83)
|
4,718
|
(207)
|
|
Income before income
taxes
|
25,836
|
37,054
|
85,109
|
103,008
|
|
|
|
|
|
|
Income tax
expense
|
7,860
|
10,068
|
24,326
|
28,123
|
|
Net
income
|
17,976
|
26,986
|
60,783
|
74,885
|
|
|
|
|
|
|
Other comprehensive
income, net of tax:
|
|
|
|
|
|
Currency translation
adjustments that
may be reclassified to
net income, net of tax
|
(25)
|
22
|
18
|
25
|
|
Comprehensive income
for the period
attributable to the
shareholders of the Company
|
$
|
17,951
|
$
|
27,008
|
$
|
60,801
|
$
|
74,910
|
|
|
|
|
|
|
Basic net income per
share attributable to the
common
shareholders
|
$
|
0.25
|
$
|
0.38
|
$
|
0.85
|
$
|
1.06
|
|
Diluted net income
per share attributable to the
common
shareholders
|
$
|
0.25
|
$
|
0.38
|
$
|
0.84
|
$
|
1.04
|
Reconciliation of Net Income to EBITDA and Adjusted
EBITDA
(Unaudited, in thousands of Canadian dollars unless otherwise
noted)
|
Quarters
Ended
|
Year to Date
Ended
|
|
September
30,
2023
|
October 1,
2022
|
September
30,
2023
|
October 1,
2022
|
|
13
weeks
|
13
weeks
|
39
weeks
|
39
weeks
|
|
Reconciliation of
net income to Adjusted EBITDA:
|
|
|
|
|
|
Net income
|
$
|
17,976
|
$
|
26,986
|
$
|
60,783
|
$
|
74,885
|
|
Depreciation and
amortization
|
14,187
|
9,595
|
35,719
|
27,741
|
|
Interest expenses,
net
|
8,128
|
5,508
|
22,190
|
14,049
|
|
Income tax
expense
|
7,860
|
10,068
|
24,326
|
28,123
|
|
EBITDA
|
48,151
|
52,157
|
143,018
|
144,798
|
|
Adjustments to
EBITDA:
|
|
|
|
|
|
Information technology
transformation costs(1)
|
1,294
|
1,252
|
2,445
|
3,329
|
|
Business transformation
costs(2)
|
3,124
|
834
|
5,652
|
1,215
|
|
Other professional
fees(3)
|
167
|
163
|
516
|
1,159
|
|
Share-based
compensation(4)
|
1,025
|
1,799
|
2,989
|
4,318
|
|
Loss on foreign
exchange(5)
|
246
|
832
|
444
|
931
|
|
Investment in
associate(6)
|
3,160
|
(83)
|
4,718
|
(207)
|
|
Adjusted
EBITDA
|
$
|
57,167
|
$
|
56,954
|
$
|
159,782
|
$
|
155,543
|
|
Adjusted EBITDA as a
percentage of revenue
|
21.8 %
|
23.3 %
|
20.8 %
|
22.7 %
|
|
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 such as
duplicative warehousing and distribution costs, implementation
costs associated with new information technology systems and other
transition costs incurred during the transition to a new
distribution centre. The expenses included in cost of sales in Q3
2023 and YTD 2023 were $2.1 million and $2.6 million, respectively
(Q3 2022 and YTD 2022 – $nil). The expenses included in selling,
general, and administrative expenses were $1.0 million and $3.1
million in Q3 2023 and YTD 2023, respectively (Q3 2022 and YTD 2022
– $0.8 million and $1.2 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 and in Q3 2023 for the 2018 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 $3.2 million and $3.4
million for Q3 2023 and YTD 2023, respectively (Q3 2022 and YTD
2022 – $0.2 million and $0.3 million, respectively) and
(gain) or loss on the fair value of the related call option for Q3
2023 and YTD 2023 of $nil and $1.3 million, respectively (Q3 2022
and YTD 2022 – $(0.3) million and $(0.5) million,
respectively).
|
Reconciliation of Net Income to Adjusted Net
Income
(Unaudited, in thousands of Canadian dollars unless otherwise
noted)
|
Quarters
Ended
|
Year to Date
Ended
|
|
September
30,
2023
|
October 1,
2022
|
September
30,
2023
|
October 1,
2022
|
|
13
weeks
|
13
weeks
|
39
weeks
|
39
weeks
|
|
Reconciliation of
net income to Adjusted Net Income:
|
|
|
|
|
|
Net income
|
$
|
17,976
|
$
|
26,986
|
$
|
60,783
|
$
|
74,885
|
|
Adjustments to net
income:
|
|
|
|
|
|
Information technology
transformation costs(1)
|
1,294
|
1,252
|
2,445
|
3,329
|
|
Business transformation
costs(2)
|
6,704
|
834
|
9,232
|
1,215
|
|
Other professional
fees(3)
|
167
|
163
|
516
|
1,159
|
|
Share-based
compensation(4)
|
1,025
|
1,799
|
2,989
|
4,318
|
|
Loss on foreign
exchange(5)
|
246
|
832
|
444
|
931
|
|
Investment in
associate(6)
|
3,160
|
(83)
|
4,718
|
(207)
|
|
Tax effect of
adjustments to net income
|
(2,350)
|
(1,034)
|
(3,685)
|
(2,186)
|
|
Adjusted Net
Income
|
$
|
28,222
|
$
|
30,749
|
$
77,442
|
77,442
|
$
|
83,444
|
|
Adjusted Net Income
as a percentage of revenue
|
10.8 %
|
12.6 %
|
10.1 %
|
12.2 %
|
|
Adjusted Net Income
per Diluted Share
|
$
|
0.39
|
$
|
0.43
|
$
1.07
|
1.07
|
$
|
1.16
|
|
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 such as
duplicative warehousing and distribution costs, implementation
costs associated with new information technology systems, and other
transition costs incurred during the transition to a new
distribution centre. This also includes duplicative depreciation
expense on property and equipment and right-of-use assets, and
interest expense on lease liabilities. The expenses included in
cost of sales in Q3 2023 and YTD 2023 were $4.6 million and $5.1
million, respectively (Q3 2022 and YTD 2022 – $nil). The expenses
included in selling, general, and administrative expenses were $1.0
million and $3.1 million in Q3 2023 and YTD 2023, respectively (Q3
2022 and YTD 2022 – $0.8 million and $1.2 million, respectively).
The interest expense on the lease liability in Q3 2023 and YTD 2023
was $1.0 million (Q3 2022 and YTD 2022 – $nil).
|
|
(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 and in
Q3 2023 for the 2018 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 $3.2 million and $3.4
million for Q3 2023 and YTD 2023, respectively (Q3 2022 and YTD
2022 – $0.2 million and $0.3 million, respectively) and
(gain) or loss on the fair value of the related call option for Q3
2023 and YTD 2023 of $nil and $1.3 million, respectively (Q3 2022
and YTD 2022 – $(0.3) million and $(0.5) million,
respectively).
|
Condensed Interim Consolidated Statements of Cash
Flows
(Unaudited, in thousands of Canadian dollars)
|
Quarters
Ended
|
Year to Date
Ended
|
|
September
30,
2023
|
October 1,
2022
|
September
30,
2023
|
October 1,
2022
|
|
13
weeks
|
13
weeks
|
39
weeks
|
39
weeks
|
|
Cash provided by
(used in):
|
|
|
|
|
|
Operating
activities:
|
|
|
|
|
|
Net income for the
period
|
$
|
17,976
|
$
|
26,986
|
$
|
60,783
|
$
|
74,885
|
|
Adjustments for items
not affecting cash:
|
|
|
|
|
|
Depreciation and
amortization
|
14,187
|
9,595
|
35,719
|
27,741
|
|
Deferred franchise
fees
|
74
|
160
|
137
|
66
|
|
Gain on disposal of
property and equipment
|
(1,017)
|
(277)
|
(1,321)
|
(319)
|
|
Loss on sale of
right-of-use assets
|
155
|
300
|
689
|
460
|
|
Loss on foreign
exchange
|
246
|
832
|
444
|
931
|
|
(Gain) loss on
financial instruments
|
—
|
(255)
|
1,302
|
(499)
|
|
Share-based
compensation expense
|
1,025
|
1,799
|
2,989
|
4,318
|
|
Share of loss from
associate
|
3,160
|
172
|
3,416
|
292
|
|
Interest expenses,
net
|
8,128
|
5,508
|
22,190
|
14,049
|
|
Income tax
expense
|
7,860
|
10,068
|
24,326
|
28,123
|
|
Income taxes
paid
|
(9,360)
|
(5,550)
|
(43,130)
|
(31,123)
|
|
Security deposits
paid
|
—
|
—
|
—
|
(5,073)
|
|
Changes in non-cash
operating working capital:
|
|
|
|
|
|
Accounts
receivable
|
(601)
|
(1,927)
|
(1,740)
|
(5,606)
|
|
Inventories
|
(4,261)
|
(19,191)
|
(16,541)
|
(43,747)
|
|
Prepaid
expenses
|
(8,151)
|
(1,378)
|
(4,589)
|
(3,215)
|
|
Accounts payable and
accrued liabilities
|
5,023
|
6,982
|
(4,544)
|
15,301
|
|
Net cash provided by
operating activities
|
34,444
|
33,824
|
80,130
|
76,584
|
|
Financing
activities:
|
|
|
|
|
|
Proceeds from exercise
of share options
|
5
|
511
|
4,349
|
4,694
|
|
Dividends paid on
common shares
|
(7,146)
|
(4,236)
|
(21,390)
|
(12,676)
|
|
Repayment of 2021 Term
Facility
|
(4,438)
|
(2,218)
|
(41,312)
|
(6,656)
|
|
Interest paid on
long-term debt
|
(3,797)
|
(5,468)
|
(7,664)
|
(12,639)
|
|
Repayment of principal
on lease liabilities
|
(8,210)
|
(12,026)
|
(39,068)
|
(35,841)
|
|
Interest paid on lease
liabilities
|
(4,554)
|
(2,970)
|
(11,151)
|
(8,788)
|
|
Standby letter of
credit commitment fees
|
(209)
|
(314)
|
(872)
|
(628)
|
|
Net cash used in
financing activities
|
(28,349)
|
(26,721)
|
(117,108)
|
(72,534)
|
|
Investing
activities:
|
|
|
|
|
|
Business acquisition,
net of cash acquired
|
—
|
291
|
(3,000)
|
(12,538)
|
|
Purchases of property
and equipment
|
(14,881)
|
(7,041)
|
(42,262)
|
(16,693)
|
|
Purchase of intangible
assets
|
(714)
|
(713)
|
(2,689)
|
(2,686)
|
|
Proceeds on disposal
of property and equipment
|
1,669
|
607
|
2,870
|
1,382
|
|
Right-of-use asset
initial direct costs
|
(464)
|
(600)
|
(1,454)
|
(1,218)
|
|
Tenant
allowances
|
537
|
117
|
1,185
|
672
|
|
Notes
receivable
|
157
|
597
|
1,050
|
895
|
|
Lease
receivables
|
7,692
|
6,788
|
22,269
|
20,017
|
|
Interest received on
lease receivables and other
|
2,556
|
2,237
|
8,065
|
6,052
|
|
Investment in
associate
|
—
|
(645)
|
—
|
(1,779)
|
|
Repurchase of
franchises
|
—
|
—
|
(512)
|
—
|
|
Net cash (used in)
provided by investing activities
|
(3,448)
|
1,638
|
(14,478)
|
(5,896)
|
|
Effect of exchange
rate on cash
|
(113)
|
(426)
|
(237)
|
(440)
|
|
Net increase
(decrease) in cash
|
2,534
|
8,315
|
(51,693)
|
(2,286)
|
|
Cash, beginning of
period
|
8,807
|
39,467
|
63,034
|
50,068
|
|
Cash, end of
period
|
$
|
11,341
|
$
|
47,782
|
$
|
11,341
|
$
|
47,782
|
Free Cash Flows
(Unaudited, expressed in thousands of Canadian dollars)
|
Quarters
Ended
|
Year to Date
Ended
|
|
September
30,
2023
|
October 1,
2022
|
September
30,
2023
|
October 1,
2022
|
|
13
weeks
|
13
weeks
|
39
weeks
|
39
weeks
|
|
|
|
|
|
|
Cash provided by
operating activities
|
$
|
34,444
|
$
|
33,824
|
$
|
80,130
|
$
|
76,584
|
|
Cash (used in) provided
by investing activities
|
(3,448)
|
1,638
|
(14,478)
|
(5,896)
|
|
Repayment of principal
on lease liabilities
|
(8,210)
|
(12,026)
|
(39,068)
|
(35,841)
|
|
Interest paid on lease
liabilities
|
(4,554)
|
(2,970)
|
(11,151)
|
(8,788)
|
|
Notes
receivable
|
(157)
|
(597)
|
(1,050)
|
(895)
|
|
Free Cash
Flow
|
$
|
18,075
|
$
|
19,869
|
$
|
14,383
|
$
|
25,164
|
Condensed Interim Consolidated Statements of Financial
Position
(Unaudited, expressed in thousands of Canadian dollars)
|
As at September
30,
2023
|
As at December
31,
2022
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
Cash
|
$
|
11,341
|
$
|
63,034
|
|
Accounts and other
receivables
|
24,519
|
22,965
|
|
Inventories,
net
|
135,047
|
118,410
|
|
Income taxes
recoverable
|
3,944
|
—
|
|
Prepaid expenses and
other assets
|
21,040
|
22,262
|
|
Current portion of
lease receivables
|
32,653
|
29,827
|
|
Total current
assets
|
228,544
|
256,498
|
|
|
|
|
Non-current
assets:
|
|
|
|
Long-term lease
receivables
|
152,176
|
141,187
|
|
Right-of-use assets,
net
|
172,294
|
82,242
|
|
Property and
equipment, net
|
113,861
|
91,774
|
|
Intangible assets,
net
|
52,582
|
52,280
|
|
Goodwill
|
97,600
|
97,574
|
|
Deferred tax
assets
|
6,652
|
6,652
|
|
Investment in
associate
|
—
|
4,708
|
|
Other
assets
|
4,223
|
7,261
|
|
Total non-current
assets
|
599,388
|
483,678
|
|
|
|
|
Total
assets
|
$
|
827,932
|
$
|
740,176
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
96,699
|
$
|
103,782
|
|
Income taxes
payable
|
—
|
15,141
|
|
Current portion of
deferred franchise fees
|
1,238
|
1,197
|
|
Current portion of
lease liabilities
|
59,609
|
51,335
|
|
Current portion of
long-term debt
|
17,750
|
17,750
|
|
Total current
liabilities
|
175,296
|
189,205
|
|
|
|
|
Non-current
liabilities:
|
|
|
|
Long-term deferred
franchise fees
|
4,091
|
4,017
|
|
Long-term lease
liabilities
|
308,527
|
215,966
|
|
Long-term
debt
|
279,626
|
320,063
|
|
Deferred tax
liabilities
|
8,246
|
8,250
|
|
Other
liabilities
|
5,767
|
2,299
|
|
Total non-current
liabilities
|
606,257
|
550,595
|
|
|
|
|
Total
liabilities
|
781,553
|
739,800
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
Common
shares
|
321,698
|
316,208
|
|
Contributed
surplus
|
5,209
|
4,107
|
|
Deficit
|
(280,387)
|
(319,780)
|
|
Currency translation
reserve
|
(141)
|
(159)
|
|
Total shareholders'
equity
|
46,379
|
376
|
|
Total liabilities
and shareholders' equity
|
$
|
827,932
|
$
|
740,176
|
SOURCE Pet Valu Canada Inc.