Same-store sales grew 20.3%, or 32.7% on a
two-year basis, and Adjusted EBITDA increased 39.4%
Raises full year 2021 guidance
MARKHAM, ON, Nov. 16, 2021 /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 October 2, 2021.
Third Quarter Highlights
- System-wide sales(1) grew 24.5% to
$258.6 million, primarily driven by
same-store sales growth(1) of 20.3% versus the
prior year. On a two-year basis, same-store sales
growth(1) was 32.7%, above the trend in the first
half of 2021.
- Revenue was $200.7 million, an
increase of 25.6% versus the prior year, in-line with system-wide
sales growth.
- Adjusted EBITDA grew 39.4% to $50.7
million, representing 25.2% of revenue, up 250 basis points
versus the prior year.
- Net income was $24.3 million, up
from $8.7 million in the prior
year.
- Adjusted Net Income(1) was $27.7 million or $0.39 per diluted share.
- The Company opened 6 new stores in the quarter and has
increased its network by 30 stores over the last 12 months.
- The Board of Directors has declared a dividend of $0.01 per common share.
2021 Outlook
- The Company has raised its 2021 guidance, now expecting revenue
of approximately $765 million
supported by same-store sales growth slightly above 15%, Adjusted
EBITDA of approximately $177 million
and Adjusted Net Income of approximately $69
million, or $0.97 per diluted
share.
"We are incredibly pleased with the strong performance our
business delivered in the third quarter, with every aspect of our
operating model contributing to this success," said Richard Maltsbarger, President and Chief
Executive Officer. "Pet Valu continued to outpace the robust growth
in the pet industry due to the strength of our brand as well as our
unique and engaging customer experiences, underscoring our position
as Canada's pet authority.
"Given the strong performance in Q3 and momentum in early Q4, we
have raised our 2021 guidance. As we move through the balance of
the year and into 2022, we are proactively managing current market
challenges in supply chain, labour and inflation with purposeful
investments that support our long-term growth strategies,"
continued Mr. Maltsbarger. "We remain in a strong position to
continue serving Canada's growing
population of pets and devoted pet lovers."
Financial Results for the Third Quarter Fiscal 2021
All comparative figures below are for the 13-week period
ended October 2, 2021, compared to the 13-week period ended
September 26, 2020.
Revenue increased by 25.6% to $200.7 million, compared to $159.8 million in the third quarter last year.
The increase in revenue was driven by growth in retail sales, as
well as franchise and other revenues.
Same-store sales growth(1) was 20.3% in
Q3 2021 primarily driven by a 12.9% increase in same-store
transactions and a 6.6% increase in same-store average spend per
transaction. This is compared to same-store sales growth of 12.4%
in Q3 2020 which primarily consisted of a (3.4)% decrease in
same-store transactions and a 16.3% increase in same-store average
spend per transaction.
Gross profit increased by $20.4
million, or 35.2%, to $78.3
million in Q3 2021, compared to $57.9
million in Q3 2020. Gross profit margin was 39.0% in Q3 2021
compared to 36.3% in Q3 2020. The gross profit margin increase of
2.7% was primarily driven by: (i) the favourable impact of the
stronger Canadian dollar on products sourced outside Canada and primarily denominated in U.S.
dollars; (ii) leverage gained on fixed costs due to higher revenue;
(iii) higher discounts in Q3 2020; and (iv) partially offset
by the absorption of incremental freight costs due to global supply
chain issues, distribution costs driven by e-commerce sales, and
incremental wages in our warehouses to support increased
demand.
Selling, general and administrative ("SG&A") expenses
increased by 27.3% to $39.4 million,
compared to $30.9 million in the
third quarter last year. SG&A expenses were 19.6% of revenue
compared to 19.3% of revenue in the third quarter last year. The
increase of $8.4 million in SG&A
expenses was primarily due to: (i) increased compensation costs of
$4.7 million as a result of the
Company operating separately from the Group, headcount investments
made to align with certain strategic initiatives and requirements
applicable to becoming a public company, and additional bonus
expense for key management as a result of the performance of the
business and the completion of the initial public offering (the
"Offering"); (ii) higher information technology expenses of
$1.2 million associated with the
implementation of SaaS arrangements.; (iii) higher advertising
expenses of $0.9 million; (iv) higher
depreciation and amortization of $0.7
million due to leasehold improvements and furniture and
fixtures for new and existing corporate-owned stores; and (v) fees
associated to the secondary offering of $0.4
million with the remainder of the variance being associated
to other general expenses and professional fees including public
company expenses.
Adjusted EBITDA(1) was $50.7 million, or 25.2% of revenue, compared to
$36.3 million, or 22.7% of
revenue, in the third quarter last year.
Net interest expense was $4.5
million in Q3 2021, a decrease of $10.5 million, or 70.1%, compared to $15.0 million in Q3 2020. The decrease was
primarily driven by lower interest expense on the 2021 Credit
Facilities resulting from lower interest rates and lower total debt
outstanding following the closing of the Offering.
Income taxes were $9.8 million in Q3 2021 compared to
$3.5 million in Q3 2020, an
increase of $6.3 million year over
year. The increase in income taxes was primarily the result of
higher taxable earnings in Q3 2021. The effective income tax rate
was unchanged at 28.6% in Q3 2021 and Q3 2020. The effective tax
rates are higher than the blended statutory rate of 26.5% primarily
because of non-deductible expenses.
Net income was $24.3 million, an increase of $15.7 million from net income of
$8.7 million in the third
quarter last year. The change in net income is explained from the
factors described above.
Adjusted Net Income(1) increased by
$17.8 million to $27.7 million in Q3 2021, compared to
$9.9 million in Q3 2020.
Adjusted Net Income as a percentage of revenue was 13.8% in Q3 2021
and 6.2% in Q3 2020.
Adjusted Net Income per Diluted
Share(1) was $0.39 compared to $0.18 in the third quarter last year.
Cash and cash equivalents at the end of the third quarter
totaled $23.3 million.
Free Cash Flow(1) amounted to
$46.8 million in Q3 2021.
Inventory at end of the third quarter of 2021 was
$88.1 million.
(1)
|
Refer to "Non-IFRS
Measures and Industry Metrics" and "Selected Consolidated Financial
Information" below, including for a reconciliation of the non-IFRS
measures used in this release to the most comparable IFRS measures.
Also refer to sections entitled "How We Assess the Performance of
our Business", "Non-IFRS Measures and Industry Metrics" and
"Selected Consolidated Financial Information" in the Company's
Management's Discussion and Analysis ("MD&A") for the third
quarter ended October 2, 2021, for further details concerning
same-store sales growth, Adjusted EBITDA, Adjusted Net Income and
Adjusted Net Income per Diluted Share and Free Cash Flow including
definitions and reconciliations to the relevant reported IFRS
measure.
|
Dividends
The Board of Directors has declared an initial quarterly
dividend of $0.01 per common share,
payable on December 15, 2021 to
holders of common shares of record as at the close of business on
November 30, 2021.
2021 Outlook
The Company has raised its 2021 guidance, driven by strong
performance in the third quarter and momentum early in the fourth
quarter. Pet Valu now expects to achieve the following for the full
year 2021:
- Revenue of approximately $765
million, supported by same-store sales growth slightly above
15% and 28-30 new store openings;
- Adjusted EBITDA of approximately $177
million, which incorporates previously disclosed public
company costs as well as incremental labour investments commencing
in Q4;
- Adjusted Net Income of approximately $69
million or $0.97 per diluted
share; and
- Net Capital Expenditures(2) of approximately
$20 million.
Since the onset of the COVID-19 pandemic in early 2020, Pet
Valu's performance has been significantly impacted by shifts in
consumption patterns, various iterations of pandemic-related
operating restrictions, and industry-wide supply chain disruptions.
While restrictions have eased in recent months, a heightened level
of uncertainty remains regarding potential for future disruption in
the second half of 2021. The above outlook is based on several
assumptions, including, but not limited to, the continued gradual
normalization in the industry and operating environment through the
remainder of 2021.
(2)
|
Net Capital
Expenditures represents purchase of property and equipment,
purchase of intangible assets, proceeds on disposal of property and
equipment and tenant allowances.
|
Conference Call Details
A conference call to discuss the Company's third quarter results
is scheduled for November 16, 2021,
at 8:30 a.m. ET. To access Pet Valu's
conference call, please dial 1-888-350-3870, (access code:
5518274). 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 1-800-770-2030
(ID: 5518274#) and will be accessible until November 23, 2021. 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 600
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.
Basis of Presentation - Carve-out Financial
Information
Prior to the Offering, the Company was not operating as a
stand-alone entity and as a result, the financial information for
periods prior to June 30, 2021 are presented on a carve-out
basis that includes only legal entities representing the Canadian
operations of Pet Valu Holdings Ltd. (referred to as the "Group",
prior to the distribution of its U.S. operations to its
shareholder). For more information, see the Company's unaudited
condensed interim consolidated financial statements and related
MD&A for the 13-week and 39-week periods ended October 2,
2021 and September 26, 2020.
Non-IFRS Measures and Industry Metrics
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" and "Free cash
flow". This press release also makes reference to certain operating
metrics that are commonly used in the retail industry, including
"System-wide stores", "System-wide sales", "Same-store sales",
"Same-store sales growth". These non-IFRS measures and retail
industry operating metrics 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
retail industry metrics 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 October 2, 2021 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. 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 securities laws in Canada. 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 is forward-looking information, which is based on the
factors and assumptions, and subject to the risks, as set out
herein and in the Company's supplemented PREP Prospectus
("Prospectus") dated June 23, 2021.
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 or future events or developments 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 Prospectus.
A copy of the Prospectus and the Company's other publicly filed
documents can be accessed under the Company's profile on the System
for Electronic Document Analysis and Retrieval ("SEDAR") at
www.sedar.com.
The Company cautions that the list of risk factors and
uncertainties described in the Prospectus 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 the forward-looking information and are
cautioned not to place undue reliance on such information. The
forward-looking information contained in this press release
represents our expectations as of the date of this press release
(or as the date they are otherwise stated to be made), and are
subject to change after such date. However, we disclaim any
intention or obligation or undertaking to update or revise any
forward-looking information whether as a result of new information,
future events or otherwise, except as required under applicable
securities laws.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
Condensed Interim Consolidated Statements of Income and
Comprehensive Income (Loss)
(Unaudited, in thousands of Canadian dollars, except per share
amounts)
|
Quarters
Ended
|
|
Year to Date
Ended
|
|
October 2,
2021
|
|
September
26,
2020
|
|
October 2,
2021
|
|
September
26,
2020
|
|
13
weeks
|
|
13
weeks
|
|
39
weeks
|
|
39
weeks
|
|
|
|
|
|
Revenue:
|
|
|
|
|
Retail
sales
|
$
|
88,836
|
|
$
|
72,890
|
|
$
|
250,641
|
|
$
|
205,685
|
Franchise and other
revenues
|
111,870
|
|
86,922
|
|
302,319
|
|
239,368
|
Total
revenue
|
200,706
|
|
159,812
|
|
552,960
|
|
445,053
|
|
|
|
|
|
Cost of
sales
|
122,374
|
|
101,877
|
|
347,805
|
|
289,921
|
Gross
profit
|
78,332
|
|
57,935
|
|
205,155
|
|
155,132
|
|
|
|
|
|
Selling, general and
administrative expenses
|
39,354
|
|
30,910
|
|
116,998
|
|
87,020
|
Asset
impairments
|
17
|
|
—
|
|
17
|
|
—
|
Total operating
income
|
38,961
|
|
27,025
|
|
88,140
|
|
68,112
|
|
|
|
|
|
Interest expenses,
net
|
4,492
|
|
15,011
|
|
42,470
|
|
48,338
|
Loss (gain) on
foreign exchange
|
369
|
|
(164)
|
|
(42,665)
|
|
(936)
|
Income before
income taxes
|
34,100
|
|
12,178
|
|
88,335
|
|
20,710
|
|
|
|
|
|
Income taxes
expense
|
9,751
|
|
3,479
|
|
16,283
|
|
5,917
|
Net
income
|
24,349
|
|
8,699
|
|
72,052
|
|
14,793
|
|
|
|
|
|
Less:
|
|
|
|
|
Net income
attributable to non-controlling interests
|
—
|
|
1,749
|
|
3,430
|
|
5,604
|
Net income
attributable to the Company
|
24,349
|
|
6,950
|
|
68,622
|
|
9,189
|
|
|
|
|
|
Other
comprehensive income (loss), net of tax:
|
|
|
|
|
Currency translation
adjustments reclassified to
net income
|
—
|
|
—
|
|
(29,665)
|
|
—
|
Currency translation
adjustments that may be
reclassified to net income, net of tax
|
10
|
|
16,139
|
|
21,080
|
|
(19,330)
|
Comprehensive income
(loss) for the period
attributable to the Company
|
$
|
24,359
|
|
$
|
23,089
|
|
$
|
60,037
|
|
$
|
(10,141)
|
|
|
|
|
|
Basic net income
per share attributable
to the Company
|
$
|
0.35
|
|
$
|
0.13
|
|
$
|
0.98
|
|
$
|
0.17
|
Diluted net income
per share
attributable to the Company
|
$
|
0.34
|
|
$
|
0.13
|
|
$
|
0.96
|
|
$
|
0.17
|
|
|
|
|
|
Reconciliation of Net Income to EBITDA and Adjusted
EBITDA
(Unaudited, in thousands of Canadian dollars
unless otherwise noted)
|
Quarters
Ended
|
|
Year to Date
Ended
|
|
October 2,
2021
|
September
26,
2020
|
|
October 2,
2021
|
September
26,
2020
|
|
13
weeks
|
13
weeks
|
|
39
weeks
|
39
weeks
|
|
|
|
|
|
|
|
Reconciliation of
net income to Adjusted EBITDA:
|
|
|
|
|
|
|
Net income
|
$
|
24,349
|
|
$
|
8,699
|
|
|
$
|
72,052
|
|
$
|
14,793
|
|
Depreciation and
amortization
|
8,434
|
|
7,874
|
|
|
25,077
|
|
23,406
|
|
Interest expenses,
net
|
4,492
|
|
15,011
|
|
|
42,470
|
|
48,338
|
|
Income taxes
expense
|
9,751
|
|
3,479
|
|
|
16,283
|
|
5,917
|
|
EBITDA
|
47,026
|
|
35,063
|
|
|
155,882
|
|
92,454
|
|
Adjustments to
EBITDA:
|
|
|
|
|
|
|
Management
fees(1)
|
—
|
|
284
|
|
|
679
|
|
1,085
|
|
Information technology
transformation costs(2)
|
1,239
|
|
1,746
|
|
|
3,796
|
|
5,651
|
|
IPO readiness and
separation costs(3)
|
709
|
|
1,910
|
|
|
4,229
|
|
3,428
|
|
Business transformation
costs(4)
|
205
|
|
286
|
|
|
1,924
|
|
1,058
|
|
COVID-19
pandemic(5)
|
—
|
|
107
|
|
|
—
|
|
1,831
|
|
Other professional
fees(6)
|
80
|
|
—
|
|
|
1,543
|
|
136
|
|
Share-based
compensation(7)
|
1,023
|
|
476
|
|
|
3,579
|
|
1,279
|
|
Asset
impairments(8)
|
17
|
|
—
|
|
|
17
|
|
—
|
|
Loss (gain) on foreign
exchange(9)
|
369
|
|
(164)
|
|
|
(42,665)
|
|
(936)
|
|
Pro forma
costs(10)
|
—
|
|
(3,372)
|
|
|
—
|
|
(9,390)
|
|
Adjusted
EBITDA
|
$
|
50,668
|
|
$
|
36,336
|
|
|
$
|
128,984
|
|
$
|
96,596
|
|
Adjusted EBITDA as
a percentage of revenue
|
25.2
|
%
|
22.7
|
%
|
|
23.3
|
%
|
21.7
|
%
|
Notes:
|
(1)
|
Represents management
fees paid to entities affiliated with Roark Capital Management, LLC
("Roark"). Concurrent with the closing of the Offering, the Company
terminated the management agreement with Roark.
|
(2)
|
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.
|
(3)
|
Represents expenses
incurred related to the following: (i) consulting, legal and
accounting fees for projects and process improvements incurred in
the preparation of the Offering and the legal restructuring to
separate the Company from the Group; (ii) retention bonuses for
certain key management personnel in connection with the Offering;
and (iii) professional fees incurred with respect to the secondary
offering. In YTD 2021, the Company recorded share-based
compensation expense in relation to the retention bonuses of $1.2
million which is included in SG&A. This amount was previously
recorded as bonus expense and included in SG&A in Fiscal 2020
and reclassified to share-based compensation in YTD 2021 as a
result of being paid through the issuance of common shares in lieu
of cash.
|
(4)
|
Predominately
represents severance, recruitment, and consulting expenses
associated to the strategic reorganization in the senior leadership
team and key functional departments as part of the Company's
separation from the Group.
|
(5)
|
Represents
non-recurring costs incurred in Fiscal 2020 in response to the
COVID-19 pandemic including personal protective equipment for
Company employees, signage for the stores, short-term increased
hourly pay and one-time bonuses for store associates and warehouse
staff awarded in the second quarter of 2020, and professional fees
associated with planning key initiatives for cash flow management
and the negotiation of rent deferrals and abatements with landlords
and franchisees.
|
(6)
|
Professional fees
incurred with respect to the CRA's examination of the Company's
Canadian tax filings for the 2016 fiscal year.
|
(7)
|
Represents
share-based compensation in respect of our legacy option plan,
long-term incentive plan, and deferred share unit plan.
Share-based compensation for YTD 2021 also includes expense in
relation to retention bonuses of $1.2 million which were paid
through the issuance of common shares in lieu of cash. This amount
was previously recorded as bonus expense and included in SG&A
in Fiscal 2020.
|
(8)
|
Non-cash impairment
charge taken against certain right-of-use assets for
corporate-owned stores.
|
(9)
|
Represents foreign
exchange gains and losses.
|
(10)
|
Represents pro forma
costs to normalize for on-going expenses previously allocated to
entities forming part of the Group, specifically operations in the
United States, which are no longer affiliated with the Company, for
Fiscal 2020. These costs represent compensation costs associated
with supply chain, merchandising, distribution and other corporate
functions, as well as information technology costs. Approximately
18% of the pro forma costs relate to cost of sales and 82% to
SG&A. Beginning in Q1 2021, our on-going expenses are reported
directly in cost of sales and SG&A, as those costs are now
directly incurred by the Company.
|
Reconciliation of Net Income to Adjusted Net
Income
(Unaudited, in thousands of Canadian dollars unless otherwise
noted)
|
Quarters
Ended
|
|
|
Year to Date
Ended
|
|
|
October 2,
2021
|
|
September
26,
2020
|
|
|
October 2,
2021
|
|
September
26,
2020
|
|
|
13
weeks
|
|
13
weeks
|
|
|
39
weeks
|
|
39
weeks
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
net income to Adjusted Net Income:
|
|
|
|
|
|
|
|
|
Net income
|
$
|
24,349
|
|
$
|
8,699
|
|
|
$
|
72,052
|
|
$
|
14,793
|
|
Adjustments to net
income:
|
|
|
|
|
|
|
Management
fees(1)
|
—
|
|
284
|
|
|
679
|
|
1,085
|
|
Information technology
transformation costs(2)
|
1,239
|
|
1,746
|
|
|
3,796
|
|
5,651
|
|
IPO readiness and
separation costs(3)
|
709
|
|
1,910
|
|
|
4,229
|
|
3,428
|
|
Business transformation
costs(4)
|
205
|
|
286
|
|
|
1,924
|
|
1,058
|
|
COVID-19
pandemic(5)
|
—
|
|
107
|
|
|
—
|
|
1,831
|
|
Other professional
fees(6)
|
80
|
|
—
|
|
|
1,543
|
|
136
|
|
Share-based
compensation(7)
|
1,023
|
|
476
|
|
|
3,579
|
|
1,279
|
|
Asset
impairments(8)
|
17
|
|
—
|
|
|
17
|
|
—
|
|
Loss (gain) on foreign
exchange(9)
|
369
|
|
(164)
|
|
|
(42,665)
|
|
(936)
|
|
Pro forma
costs(10)
|
—
|
|
(3,372)
|
|
|
—
|
|
(9,390)
|
|
Tax effect of
adjustments to net income
|
(304)
|
|
(98)
|
|
|
(1,480)
|
|
(692)
|
|
Adjusted Net
Income
|
$
|
27,687
|
|
$
|
9,874
|
|
|
$
|
43,674
|
|
$
|
18,243
|
|
Adjusted Net
Income as a percentage of revenue
|
13.8
|
%
|
6.2
|
%
|
|
7.9
|
%
|
4.1
|
%
|
Adjusted Net
Income per Diluted Share(11)
|
$
|
0.39
|
|
$
|
0.18
|
|
|
$
|
0.61
|
|
$
|
0.33
|
|
Notes:
|
(1)
|
Represents management
fees paid to entities affiliated with Roark. Concurrent with the
closing of the Offering, the Company terminated the management
agreement with Roark.
|
(2)
|
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.
|
(3)
|
Represents expenses
incurred related to the following: (i) consulting, legal and
accounting fees for projects and process improvements incurred in
the preparation of the Offering and the legal restructuring to
separate the Company from the Group; (ii) retention bonuses for
certain key management personnel in connection with the Offering;
and (iii) professional fees incurred with respect to the secondary
offering. In YTD 2021, the Company recorded share-based
compensation expense in relation to the retention bonuses of $1.2
million which is included in SG&A. This amount was previously
recorded as bonus expense and included in SG&A in Fiscal 2020
and reclassified to share-based compensation in YTD 2021 as a
result of being paid through the issuance of common shares in lieu
of cash.
|
(4)
|
Predominately
represents severance, recruitment, and consulting expenses
associated to the strategic reorganization in the senior leadership
team and key functional departments as part of the Company's
separation from the Group.
|
(5)
|
Represents
non-recurring costs incurred in Fiscal 2020 in response to the
COVID-19 pandemic including personal protective equipment for
Company employees, signage for the stores, short-term increased
hourly pay and one-time bonuses for store associates and warehouse
staff awarded in the second quarter of 2020, and professional fees
associated with planning key initiatives for cash flow management
and the negotiation of rent deferrals and abatements with landlords
and franchisees.
|
(6)
|
Professional fees
incurred with respect to the CRA's examination of the Company's
Canadian tax filings for the 2016 fiscal year.
|
(7)
|
Represents
share-based compensation in respect of our legacy option plan,
long-term incentive plan, and deferred share unit plan.
Share-based compensation for YTD 2021 also includes expense in
relation to retention bonuses of $1.2 million which were paid
through the issuance of common shares in lieu of cash. This amount
was previously recorded as bonus expense and included in SG&A
in Fiscal 2020.
|
(8)
|
Non-cash impairment
charge taken against certain right-of-use assets for
corporate-owned stores.
|
(9)
|
Represents foreign
exchange gains and losses.
|
(10)
|
Represents pro forma
costs to normalize for on-going expenses previously allocated to
entities forming part of the Group, specifically operations in the
United States, which are no longer affiliated with the Company, for
Fiscal 2020. These costs represent compensation costs associated
with supply chain, merchandising, distribution and other corporate
functions, as well as information technology costs. Approximately
18% of the pro forma costs relate to cost of sales and 82% to
SG&A. Beginning in Q1 2021, our on-going expenses are reported
directly in cost of sales and SG&A, as those costs are now
directly incurred by the Company.
|
(11)
|
Adjusted Net Income
per Diluted Share for Q3 2020 and YTD 2020 are calculated on a
pro-forma basis using the weighted average common shares
outstanding based on the capital reorganization and the legacy
option plan immediately prior to the Offering.
|
Condensed Interim Consolidated Statements of Cash
Flows
(Unaudited, in thousands of Canadian dollars)
|
Quarters
Ended
|
|
Year to Date
Ended
|
|
October 2,
2021
|
|
September
26,
2020
|
|
October 2,
2021
|
September
26,
2020
|
|
13
weeks
|
|
13
weeks
|
|
39
weeks
|
39
weeks
|
Cash provided by
(used in):
|
|
|
|
|
Operating
activities:
|
|
|
|
|
Net income for the
period
|
$
|
24,349
|
|
$
|
8,699
|
|
$
|
72,052
|
|
$
|
14,793
|
Adjustments
for:
|
|
|
|
|
Depreciation and
amortization
|
8,434
|
|
7,874
|
|
25,077
|
|
23,406
|
Impairment of
right-of-use assets
|
17
|
|
—
|
|
17
|
|
—
|
Deferred franchise
fees
|
336
|
|
(19)
|
|
665
|
|
70
|
Gain on disposal of
property and equipment
|
(430)
|
|
7
|
|
(858)
|
|
(68)
|
Gain on sale of
right-of-use assets
|
(109)
|
|
(51)
|
|
(285)
|
|
(76)
|
Gain on foreign
exchange
|
369
|
|
(164)
|
|
(42,665)
|
|
(936)
|
Share-based
compensation expense
|
1,023
|
|
—
|
|
1,045
|
|
—
|
Interest expenses,
net
|
4,492
|
|
15,011
|
|
42,470
|
|
48,338
|
Income taxes
expense
|
9,751
|
|
3,479
|
|
16,283
|
|
5,917
|
Income taxes
paid
|
(2,719)
|
|
23
|
|
(10,398)
|
|
(2,467)
|
Change in non-cash
operating working capital:
|
|
|
|
|
Accounts
receivable
|
1,999
|
|
(1,529)
|
|
(2,604)
|
|
1,620
|
Inventories
|
(1,333)
|
|
(6,553)
|
|
(10,110)
|
|
(909)
|
Prepaid
expenses
|
(1,922)
|
|
(98)
|
|
(1,742)
|
|
(858)
|
Accounts payable and
accrued liabilities
|
12,184
|
|
2,592
|
|
(3,879)
|
|
33,617
|
Net cash provided
by operating activities
|
56,441
|
|
29,271
|
|
85,068
|
|
122,447
|
Financing
activities:
|
|
|
|
|
Issuance of common
shares, net of transaction costs
|
—
|
|
—
|
|
295,210
|
|
—
|
Proceeds from exercise
of share options
|
62
|
|
—
|
|
62
|
|
—
|
Proceeds of 2021 Term
Facility
|
—
|
|
—
|
|
355,000
|
|
—
|
Repayment of 2021 Term
Facility
|
(2,219)
|
|
—
|
|
(2,219)
|
|
—
|
Proceeds of 2021
Revolving Credit Facility
|
—
|
|
—
|
|
40,000
|
|
—
|
Repayment of 2021
Revolving Credit Facility
|
(40,000)
|
|
—
|
|
(40,000)
|
|
—
|
Repayment of 2016 Term
Loans
|
—
|
|
(1,962)
|
|
(680,424)
|
|
(5,945)
|
Proceeds of 2016
Revolving Credit Facility
|
—
|
|
—
|
|
—
|
|
28,112
|
Repayment of 2016
Revolving Credit Facility
|
—
|
|
(28,112)
|
|
—
|
|
(28,112)
|
Interest paid on
long-term debt
|
(2,560)
|
|
(13,592)
|
|
(38,975)
|
|
(43,066)
|
Repayment of principal
on lease liabilities
|
(11,361)
|
|
(10,204)
|
|
(35,167)
|
|
(30,543)
|
Interest paid on lease
liabilities
|
(2,888)
|
|
(2,855)
|
|
(8,649)
|
|
(8,186)
|
Financing
costs
|
—
|
|
—
|
|
(6,589)
|
|
—
|
Standby letter of
credit commitment fees
|
(52)
|
|
—
|
|
(4,355)
|
|
—
|
Net
distributions
|
—
|
|
(1,958)
|
|
(16,983)
|
|
(15,921)
|
Net cash used in
financing activities
|
(59,018)
|
|
(58,683)
|
|
(143,089)
|
|
(103,661)
|
Investing
activities:
|
|
|
|
|
Purchases of property
and equipment
|
(4,490)
|
|
(2,296)
|
|
(14,770)
|
|
(5,482)
|
Purchase of intangible
assets
|
(461)
|
|
(491)
|
|
(1,594)
|
|
(1,566)
|
Proceeds on disposal
of property and equipment
|
2,240
|
|
316
|
|
4,443
|
|
424
|
Right-of-use asset
initial direct costs
|
(598)
|
|
(678)
|
|
(1,435)
|
|
(830)
|
Tenant
allowances
|
(25)
|
|
(72)
|
|
246
|
|
448
|
Notes
receivable
|
16
|
|
369
|
|
237
|
|
531
|
Lease
receivables
|
6,118
|
|
5,489
|
|
17,750
|
|
16,391
|
Interest received on
lease receivables and other
|
1,775
|
|
1,590
|
|
5,132
|
|
4,649
|
Repurchase of
franchises
|
—
|
|
—
|
|
—
|
|
(283)
|
Net cash provided
by investing activities
|
4,575
|
|
4,227
|
|
10,009
|
|
14,282
|
Effect of exchange
rate on cash
|
(168)
|
|
675
|
|
(157)
|
|
(546)
|
Net increase
(decrease) in cash
|
1,830
|
|
(24,510)
|
|
(48,169)
|
|
32,522
|
Cash, beginning of
period
|
21,482
|
|
100,869
|
|
71,481
|
|
43,837
|
Cash, end of
period
|
$
|
23,312
|
|
$
|
76,359
|
|
$
|
23,312
|
|
$
|
76,359
|
Free Cash Flows
(Unaudited, in thousands of Canadian dollars)
|
Quarters
Ended
|
|
Year to Date
Ended
|
|
October 2,
2021
|
|
September
26,
2020
|
|
October 2,
2021
|
|
September
26,
2020
|
|
13
weeks
|
|
13
weeks
|
|
39
weeks
|
|
39
weeks
|
|
|
|
|
|
Cash provided by
operating activities
|
$
|
56,441
|
|
$
|
29,271
|
|
$
|
85,068
|
|
$
|
122,447
|
Cash provided by
investing activities
|
4,575
|
|
4,227
|
|
10,009
|
|
14,282
|
Repayment of principal
on lease liabilities
|
(11,361)
|
|
(10,204)
|
|
(35,167)
|
|
(30,543)
|
Interest paid on lease
liabilities
|
(2,888)
|
|
(2,855)
|
|
(8,649)
|
|
(8,186)
|
Notes
receivables
|
(16)
|
|
(369)
|
|
(237)
|
|
(531)
|
Free Cash
Flow
|
$
|
46,751
|
|
$
|
20,070
|
|
$
|
51,024
|
|
$
|
97,469
|
Condensed Interim Consolidated Statements of Financial
Position
(Unaudited, in thousands of Canadian dollars)
|
As at October
2,
2021
|
|
As at January
2,
2021
|
Assets
|
|
|
Current
assets:
|
|
|
Cash
|
$
|
23,312
|
|
$
|
71,481
|
Accounts and other
receivables
|
15,261
|
|
12,629
|
Inventories,
net
|
88,122
|
|
78,012
|
Prepaid expenses and
other assets
|
12,662
|
|
8,585
|
Current portion of
lease receivable
|
25,244
|
|
23,145
|
Total current
assets
|
164,601
|
|
193,852
|
Non-current
assets:
|
|
|
Lease
receivables
|
110,322
|
|
96,743
|
Right-of-use
assets
|
78,850
|
|
84,950
|
Property and
equipment
|
57,097
|
|
55,738
|
Intangible
assets
|
36,924
|
|
36,072
|
Goodwill
|
93,101
|
|
93,276
|
Other
assets
|
1,251
|
|
1,488
|
Total non-current
assets
|
377,545
|
|
368,267
|
Total
assets
|
$
|
542,146
|
|
$
|
562,119
|
Liabilities and
Shareholders' Deficit
|
|
|
Current
liabilities:
|
|
|
Accounts payable and
accrued liabilities
|
$
|
82,747
|
|
$
|
99,954
|
Income taxes
payable
|
7,498
|
|
1,042
|
Current portion of
deferred franchise fees
|
995
|
|
891
|
Current portion of
lease liabilities
|
44,997
|
|
42,753
|
Current portion of
long-term debt
|
8,875
|
|
7,448
|
Total current
liabilities
|
145,112
|
|
152,088
|
Non-current
liabilities:
|
|
|
Long-term deferred
franchise fees
|
3,036
|
|
2,475
|
Long-term lease
liabilities
|
179,203
|
|
173,906
|
Long-term
debt
|
338,538
|
|
698,912
|
Deferred tax
liabilities
|
3,145
|
|
4,282
|
Total non-current
liabilities
|
523,922
|
|
879,575
|
|
|
|
Total
liabilities
|
669,034
|
|
1,031,663
|
Shareholders'
deficit:
|
|
|
Common
shares
|
302,053
|
|
—
|
Contributed
surplus
|
900
|
|
—
|
Deficit
|
(429,660)
|
|
—
|
Currency translation
reserve
|
(181)
|
|
—
|
Group's net
investment
|
—
|
|
(588,530)
|
Non-controlling
interests
|
—
|
|
118,986
|
Total
shareholders' deficit
|
(126,888)
|
|
(469,544)
|
|
|
|
Total liabilities
and shareholders' deficit
|
$
|
542,146
|
|
$
|
562,119
|
SOURCE Pet Valu Canada Inc.