Raises Quarterly Dividend and Provides 2022
outlook
MARKHAM, ON, March 9, 2022 /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 fourth quarter
and fiscal year ended January 1, 2022.
Fourth Quarter Highlights
- System-wide sales(1) were $288.5 million, an increase of 11.7%, or 18.2%
excluding the 14th week in the prior year, primarily
driven by same-store sales growth(1) of
16.7%.
- Revenue was $223.1 million, up
9.7%, or 18.6% excluding the 14th week in the prior
year.
- Adjusted EBITDA(2) grew 11.5% to $53.3 million, representing 23.9% of revenue, up
40 basis points versus the prior year. Operating income was
$41.3 million, up 19.4% versus the
prior year.
- Net income was $26.7 million, up
from $13.8 million in the prior
year.
- Adjusted Net Income(2) was $29.3 million or $0.41 per diluted share.
- Opened 12 new stores in the quarter, increasing the network by
28 stores in the last 12 months.
- The Board of Directors declared a dividend of $0.06 per common share.
Fiscal Year Highlights
- System-wide sales were $998.1
million, an increase of 18.6%, or 20.6% excluding the
53rd week in 2020, primarily driven by same-store sales
growth (1) of 17.8%.
- Revenue was $776.0 million, up
19.7%, or 22.6% excluding the 53rd week in 2020.
- Adjusted EBITDA grew 26.2% to $182.3
million, representing 23.5% of revenue, up 120 basis points
versus the prior year. Operating income was $129.4 million, up 26.0%.
- Net income was $98.8 million, up
from $28.6 million in the prior
year.
- Adjusted Net Income was $73.0
million or $1.02 per diluted
share.
2022 Outlook
- The Company expects revenue between $845 and $870
million, supported by same-store sales growth between 6% and
9% and 30-45 new store openings, Adjusted EBITDA between
$187 and $194
million and Adjusted Net Income per Diluted
Share(2) between $1.37 and $1.44.
"Our strong fourth quarter performance capped off a record year
for our business, where we made significant advancements in our
strategic agenda, despite a challenging operating environment,"
said Richard Maltsbarger, President
and Chief Executive Officer. "Attractive holiday assortments and
depth of inventory complemented our unique and engaging customer
experiences and omnichannel capabilities to help Pet Valu again
take market share in Canada's
growing pet industry.
"As we look ahead to 2022, we target another year of growth
ahead of our long-term model," continued Mr. Maltsbarger. "We are
also excited to welcome Chico to the Pet Valu family, providing us
with an experienced entry into Quebec, and positioning us to better serve
Canada's devoted pet lovers with
700 stores across all 10 provinces. Given our strong financial
position, confidence in our outlook and established Quebec expansion plans, we have raised our
quarterly dividend to $0.06 per
share."
Financial Results for the Fourth Quarter Fiscal 2021
All comparative figures below are for the 13-week period
ended January 1, 2022, compared to the 14-week period ended
January 2, 2021.
Revenue increased by 9.7% to $223.1 million, compared to $203.4 million in the fourth quarter last year.
The comparative quarter includes $15.4
million of revenue from the 14th week. The
increase in revenue was driven by growth in retail sales, as well
as franchise and other revenues.
Same-store sales growth(1) was 16.7% in
Q4 2021 primarily driven by a 10.8% increase in same-store
transactions and a 5.4% increase in same-store average spend per
transaction. This is compared to same-store sales growth of 18.0%
in Q4 2020 which primarily consisted of a 0.8% increase in
same-store transactions and a 17.1% increase in same-store average
spend per transaction. Same-store transactions and same-store
average spend per transaction in Q4 2020 were impacted by a shift
in consumer behaviour associated with COVID-19 restrictions.
Gross profit increased by $6.5
million, or 8.6%, to $82.0
million in Q4 2021, compared to $75.5
million in Q4 2020. Gross profit margin was 36.8% in Q4 2021
compared to 37.1% in Q4 2020. The gross profit margin decrease was
primarily driven by: (i) the absorption of incremental freight
costs due to global supply chain constraints, and higher
distribution costs driven by incremental wages and storage to
support increased demand and e-commerce sales; (ii) partially
offset by the favourable impact of the stronger Canadian dollar on
products sourced outside Canada
and primarily denominated in U.S. dollars; and (iii) leverage
gained on fixed costs due to higher revenue.
Selling, general and administrative ("SG&A") expenses
decreased by 0.4% to $40.8 million,
compared to $40.9 million in the
fourth quarter last year. SG&A expenses were 18.3% of revenue
compared to 20.1% of revenue in the fourth quarter last year. The
decrease of $0.2 million in SG&A
expenses was primarily due to: (i) lower professional fees of
$3.3 million as the comparative
quarter included fees to support the preparation of the Company's
initial public offering (the "Offering") and separation activities;
(ii) lower compensation costs of $0.9
million as the comparative quarter included additional
severance as part of business transformation costs and bonus
expense related to the Offering as well an additional week due to
the Q4 2020 calendar; (iii) partially offset by $3.3 million of higher other selling, general and
administrative expenses primarily due to additional insurance
relating to public company requirements and lower gain on the sale
of assets due to fewer re-franchised stores in Q4 2021; (iv) higher
advertising expenses of $0.5 million;
and (v) higher depreciation and amortization of $0.3 million due to leasehold improvements and
furniture and fixtures for new and existing corporate-owned
stores.
Adjusted EBITDA(2) was $53.3 million, or 23.9% of revenue, compared to
$47.8 million, or 23.5% of
revenue, in the fourth quarter last year.
Net interest expense was $4.4
million in Q4 2021, a decrease of $11.3 million, or 71.9%, compared to $15.7 million in Q4 2020. The decrease was
primarily driven by lower interest expense on the 2021 Credit
Facilities (as defined in the Company's Management Discussion and
Analysis ("MD&A") for the fourth quarter ended January 1, 2022) resulting from lower interest
rates and lower total debt outstanding following the closing of the
Offering.
Income taxes were $10.0 million in Q4 2021 compared to
$5.5 million in Q4 2020, an
increase of $4.5 million year over
year. The increase in income taxes was primarily the result of
higher taxable earnings in Q4 2021. The effective income tax rate
was 27.2% in Q4 2021 compared to 28.6% in Q4 2020. The effective
tax rates are higher than the blended statutory rate of 26.5%
primarily because of non-deductible expenses.
Net income was $26.7 million, an increase of $12.9 million from net income of
$13.8 million in the fourth
quarter last year. The change in net income is explained from the
factors described above.
Adjusted Net Income(2) increased by
$12.0 million to $29.3 million in Q4 2021, compared to
$17.3 million in Q4 2020.
Adjusted Net Income as a percentage of revenue was 13.1% in Q4 2021
and 8.5% in Q4 2020.
Adjusted Net Income per Diluted
Share(2) was $0.41 compared to $0.31 in the fourth quarter last year.
Cash and cash equivalents at the end of the fourth
quarter totaled $50.1 million.
Free Cash Flow(2) amounted to
$35.3 million in Q4 2021.
Inventory at end of the fourth quarter of 2021 was
$91.7 million.
Financial Results for Fiscal 2021
All comparative figures below are for the 52-week period
ended January 1, 2022, compared to the 53-week period ended
January 2, 2021.
Revenue increased by 19.7% to $776.0 million, compared to $648.5 million in the prior year. The comparative
year includes $15.4 million of
revenue from the 53rd week. The increase in revenue was
driven by growth in retail sales, as well as franchise and other
revenues.
Same-store sales growth was 17.8% in Fiscal 2021
primarily driven by a 10.5% 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 10.6% in Fiscal 2020
which primarily consisted of a (5.2)% decrease in same-store
transactions and a 16.7% increase in same-store average spend per
transaction. Same-store sales growth in Fiscal 2020 was
significantly impacted by the onset of the COVID-19 pandemic and
the initial round of governmental lock-down measures.
Gross profit increased by $56.6 million, or 24.5%, to $287.2 million in Fiscal 2021, compared to
$230.6 million in Fiscal 2020. Gross
profit margin was 37.0% of revenue in Fiscal 2021 compared to 35.6%
in Fiscal 2020. The gross profit margin increase 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 and (iii) partially offset by the absorption of incremental
freight costs due to global supply chain constraints, and higher
distribution costs driven by incremental wages and storage to
support increased demand, e-commerce sales and COVID-related
absences.
Selling, general and administrative ("SG&A")
expenses increased by 23.3% to $157.8 million, compared to $128.0 million in Fiscal 2020. SG&A
expenses were 20.3% of revenue compared to 19.7% of revenue in
Fiscal 2020. The increase of $29.8
million in SG&A expenses was primarily due to: (i)
increased compensation costs of $15.1
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 bonus expense for key management due to the
performance of the business and the completion of the Offering as
well as an additional week due to the 2020 fiscal calendar; (ii)
higher advertising expenses of $4.8
million; (iii) higher other selling, general and
administrative expense of $3.8
million primarily due to additional insurance from public
company requirements and higher selling expenses for e-commerce
sales; (iv) higher information technology expenses of $2.8 million associated with the implementation
of software as a service ("SaaS") arrangements; (v) higher
depreciation and amortization of $1.9
million due to leasehold improvements and furniture and
fixtures for new and existing corporate-owned stores; and (vi)
higher professional fees of $1.2
million to support the preparation of the Offering and the
secondary offering of the Company's common shares completed by its
principal shareholders on September 28,
2021 (the "Secondary Offering"), separation activities,
taxation matters and public entity requirements.
Adjusted EBITDA was $182.3 million, or 23.5% of revenue,
compared to $144.4 million, or
22.3% of revenue, in the prior year.
Net interest expense was $46.9 million in Fiscal 2021, a decrease of
$17.1 million, or 26.8%, compared to
$64.0 million in Fiscal 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 $26.3 million in Fiscal 2021 compared to
$11.4 million in Fiscal 2020, an
increase of $14.8 million year over
year. The increase in income taxes was primarily the result of
higher taxable earnings in Fiscal 2021. The effective income tax
rate was 21.0% in Fiscal 2021 compared to 28.6% in the prior year.
The Fiscal 2021 effective tax rate is lower than the blended
statutory rate of 26.5% primarily because of the favourable tax
treatment on foreign exchange gains related to the repayment of the
2016 Term Loans and on the settlement of a foreign exchange forward
contract (See "Liquidity and Capital Resources – Credit
Facilities"), partially offset by $1.4
million cumulative income tax expense related to the
enactment of Bill C-30 and interest income earned from advances
made to its former U.S. legal entity subsidiaries for 2019 and
2020. The Company previously had made protective elections to
impute taxable interest income from these advances under the
Pertinent Loan or Indebtedness regime. The Fiscal 2020 effective
tax rate is higher than the blended statutory rate of 26.5%
primarily because of non-deductible expenses.
Net income was $98.8 million, an increase of $70.2 million from net income of $28.6 million in Fiscal 2020. The change in
net income is explained from the factors described above.
Adjusted Net Income increased by $37.5 million to $73.0 million in Fiscal 2021, compared to
$35.5 million in Fiscal
2020. Adjusted Net Income as a percentage of revenue was 9.4%
in Fiscal 2021 and 5.5% in Fiscal 2020.
Adjusted Net Income per Diluted Share was
$1.02 compared to $0.64 in Fiscal 2020.
Cash and cash equivalents at the end of the year totaled
$50.1 million.
Free Cash Flow amounted to $86.3 million in Fiscal 2021.
Inventory at the end of the year was $91.7 million.
|
(1)
|
This is a
supplementary financial measure. Refer to "Non-IFRS Measures and
Supplementary Financial Measures" below.
|
|
(2)
|
This is a Non-IFRS
financial measure. Non-IFRS financial measures are not standardized
financial measures under IFRS and might not be comparable to
similar financial measures disclosed by other issuers. Refer to
"Non-IFRS Measures and Supplementary Financial Measures" 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 Supplementary Finanical Measures" and "Selected Consolidated
Financial Information" in the Company's Management's Discussion and
Analysis ("MD&A") for the fourth quarter ended January 1, 2022,
incorporated by reference herein, for further details concerning
same-store sales growth, Adjusted EBITDA, Adjusted Net Income,
Adjusted Net Income per Diluted Share and Free Cash Flow including
definitions and reconciliations to the relevant reported IFRS
measure.
|
Dividends
On March 9, 2022, the Company
announced that its Board declared a dividend of $0.06 per common share payable on April 15, 2022 to holders of common shares of
record as at the close of business on March
31, 2022.
2022 Outlook
The following information, except for same-store sales growth,
includes the impact of Les Franchises Chico Inc. ("Chico"), which
was acquired by the Company on February 25,
2022.
For the full year 2022, the Company expects:
- Revenue between $845 and
$870 million, supported by same-store
sales growth of between 6% and 9%, and 30 to 45 new store openings
inclusive of 5 to 10 stores under the Chico banner in Quebec;
- Adjusted EBITDA between $187 and
$194 million, which incorporates a
full year of public company costs, as well as incremental
investments in labour as well as storage and throughput capacity,
disclosed in late 2021;
- Adjusted Net Income per Diluted Share between $1.37 and $1.44;
- Information technology expenses of approximately $9 million and share-based compensation of
approximately $7 million, both of
which are excluded from Adjusted EBITDA and Adjusted Net Income per
Diluted Share; and
- Net Capital Expenditures(3) between $20 and $25
million.
Due to the impact of various forms of government mandated
operating restrictions imposed in early 2021, the Company expects
year-over-year growth to be stronger in the first half of 2022,
particularly the first quarter, compared to year-over-year growth
in the second half of the year. The Company also continues to
expect the pet industry growth to gradually normalize to historical
levels through 2022, as pandemic spend tailwinds ease. The relative
distribution of revenue is expected to be more representative of
pre-pandemic years, such as 2019.
|
(3)
|
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 fourth quarter
results is scheduled for March 9,
2022, 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 March 16, 2022. 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 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.
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 audited
consolidated financial statements and related MD&A for the
52-week and 53-week periods ended January 1, 2022 and
January 2, 2021, respectively.
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" and "Free Cash
Flow". 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 fourth quarter ended January 1,
2022 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 annual information form ("AIF") dated
March 8, 2022. 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 AIF. A copy
of the AIF 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 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 (Loss)
(Unaudited, expressed in thousands of Canadian dollars, except per
share amounts)
|
Quarters
Ended
|
Fiscal Year
Ended
|
|
January 1,
2022
|
January 2,
2021
|
January 1,
2022
|
January 2,
2021
|
|
13
weeks
|
14
weeks
|
52
weeks
|
53
weeks
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
Retail
sales
|
$
|
96,664
|
$
|
90,065
|
$
|
347,305
|
$
|
295,750
|
|
Franchise and other
revenues
|
126,389
|
113,341
|
428,708
|
352,709
|
|
Total
revenue
|
223,053
|
203,406
|
776,013
|
648,459
|
|
|
|
|
|
|
Cost of
sales
|
141,029
|
127,909
|
488,834
|
417,830
|
|
Gross
profit
|
82,024
|
75,497
|
287,179
|
230,629
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
40,758
|
40,933
|
157,773
|
127,953
|
|
Total operating
income
|
41,266
|
34,564
|
129,406
|
102,676
|
|
|
|
|
|
|
Interest expenses,
net
|
4,403
|
15,671
|
46,873
|
64,009
|
|
Loss (gain) on
foreign exchange
|
105
|
(466)
|
(42,560)
|
(1,402)
|
|
Share of loss from
associate
|
8
|
—
|
8
|
—
|
|
Income before
income taxes
|
36,750
|
19,359
|
125,085
|
40,069
|
|
|
|
|
|
|
Income taxes
expense
|
10,009
|
5,530
|
26,292
|
11,447
|
|
Net
income
|
26,741
|
13,829
|
98,793
|
28,622
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
Net income
attributable to non-controlling interests
|
—
|
1,815
|
3,430
|
7,419
|
|
Net income
attributable to the shareholders of the
Company
|
26,741
|
12,014
|
95,363
|
21,203
|
|
|
|
|
|
|
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
|
2
|
38,347
|
21,082
|
19,017
|
|
Comprehensive income
for the
period attributable to
the shareholders of the
Company
|
$
|
26,743
|
$
|
50,361
|
$
|
86,780
|
$
|
40,220
|
|
|
|
|
|
|
Basic net income
per share
attributable to the common
shareholders
|
$
|
0.38
|
$
|
0.22
|
$
|
1.36
|
$
|
0.39
|
|
Diluted net income
per share
attributable to the common
shareholders
|
$
|
0.37
|
$
|
0.22
|
$
|
1.33
|
$
|
0.38
|
Reconciliation of Net Income to EBITDA and Adjusted
EBITDA
(Unaudited, in thousands of Canadian
dollars unless otherwise noted)
|
Quarters
Ended
|
|
Fiscal Year
Ended
|
|
January 1,
2022
|
January 2,
2021
|
|
January 1,
2022
|
January 2,
2021
|
|
13
weeks
|
14
weeks
|
|
52
weeks
|
53
weeks
|
|
Reconciliation of
net income to Adjusted EBITDA:
|
|
|
|
|
|
|
Net income
|
$
|
26,741
|
$
|
13,829
|
|
$
|
98,793
|
$
|
28,622
|
|
Depreciation and
amortization
|
8,637
|
8,646
|
|
33,714
|
32,052
|
|
Interest expenses,
net
|
4,403
|
15,671
|
|
46,873
|
64,009
|
|
Income taxes
expense
|
10,009
|
5,530
|
|
26,292
|
11,447
|
|
EBITDA
|
49,790
|
43,676
|
|
205,672
|
136,130
|
|
Adjustments to
EBITDA:
|
|
|
|
|
|
|
Management
fees(1)
|
—
|
48
|
|
679
|
1,133
|
|
Information technology
transformation costs(2)
|
1,518
|
2,801
|
|
5,314
|
8,452
|
|
IPO readiness and
separation costs(3)
|
—
|
4,253
|
|
4,229
|
7,681
|
|
Business transformation
costs(4)
|
514
|
548
|
|
2,438
|
1,606
|
|
COVID-19
pandemic(5)
|
—
|
2
|
|
—
|
1,833
|
|
Other professional
fees(6)
|
246
|
538
|
|
1,789
|
674
|
|
Share-based
compensation(7)
|
1,154
|
711
|
|
4,733
|
1,990
|
|
Asset
impairments(8)
|
—
|
—
|
|
17
|
—
|
|
Loss (gain) on foreign
exchange(9)
|
105
|
(466)
|
|
(42,560)
|
(1,402)
|
|
Share of loss from
associate
|
8
|
—
|
|
8
|
—
|
|
Pro forma
costs(10)
|
—
|
(4,292)
|
|
—
|
(13,682)
|
|
Adjusted
EBITDA
|
$
|
53,335
|
$
|
47,819
|
|
$
|
182,319
|
$
|
144,415
|
|
Adjusted EBITDA as
a percentage of revenue
|
23.9%
|
23.5%
|
|
23.5%
|
22.3%
|
|
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 a
rrangements 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
primarily 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
|
|
Fiscal Year
Ended
|
|
January 1,
2022
|
January 2,
2021
|
|
January 1,
2022
|
January 2,
2021
|
|
13
weeks
|
14
weeks
|
|
52
weeks
|
53
weeks
|
|
Reconciliation of
net income to Adjusted Net Income:
|
|
|
|
|
|
|
Net income
|
$
|
26,741
|
$
|
13,829
|
|
$
|
98,793
|
$
|
28,622
|
|
Adjustments to net
income:
|
|
|
|
|
|
|
Management
fees(1)
|
—
|
48
|
|
679
|
1,133
|
|
Information technology
transformation costs(2)
|
1,518
|
2,801
|
|
5,314
|
8,452
|
|
IPO readiness and
separation costs(3)
|
—
|
4,253
|
|
4,229
|
7,681
|
|
Business transformation
costs(4)
|
514
|
548
|
|
2,438
|
1,606
|
|
COVID-19
pandemic(5)
|
—
|
2
|
|
—
|
1,833
|
|
Other professional
fees(6)
|
246
|
538
|
|
1,789
|
674
|
|
Share-based
compensation(7)
|
1,154
|
711
|
|
4,733
|
1,990
|
|
Asset
impairments(8)
|
—
|
—
|
|
17
|
—
|
|
Loss (gain) on foreign
exchange(9)
|
105
|
(466)
|
|
(42,560)
|
(1,402)
|
|
Share of loss from
associate
|
8
|
—
|
|
8
|
—
|
|
Pro forma
costs(10)
|
—
|
(4,292)
|
|
—
|
(13,682)
|
|
Tax effect of
adjustments to net income
|
(990)
|
(720)
|
|
(2,470)
|
(1,412)
|
|
Adjusted Net
Income
|
$
|
29,296
|
$
|
17,252
|
|
$
|
72,970
|
$
|
35,495
|
|
Adjusted Net
Income as a percentage of revenue
|
13.1%
|
8.5%
|
|
9.4%
|
5.5%
|
|
Adjusted Net
Income per Diluted Share(11)
|
$
|
0.41
|
$
|
0.31
|
|
$
|
1.02
|
$
|
0.64
|
|
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
primarily 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 Q4 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
|
Fiscal Year
Ended
|
|
January 1,
2022
|
January 2,
2021
|
January 1,
2022
|
January 2,
2021
|
|
13
weeks
|
14
weeks
|
52
weeks
|
53
weeks
|
|
Cash provided by
(used in):
|
|
|
|
|
|
Operating
activities:
|
|
|
|
|
|
Net income for the
period
|
$
|
26,741
|
$
|
13,829
|
$
|
98,793
|
$
|
28,622
|
|
Adjustments
for:
|
|
|
|
|
|
Depreciation and
amortization
|
8,637
|
8,646
|
33,714
|
32,052
|
|
Impairment of
right-of-use assets
|
—
|
—
|
17
|
—
|
|
Deferred franchise
fees
|
184
|
326
|
849
|
396
|
|
Gain on disposal of
property and equipment
|
(158)
|
(869)
|
(1,016)
|
(937)
|
|
Loss (gain) on sale of
right-of-use assets
|
402
|
20
|
117
|
(56)
|
|
Loss (gain) on foreign
exchange
|
105
|
(466)
|
(42,560)
|
(1,402)
|
|
Share-based
compensation expense
|
1,154
|
—
|
2,199
|
—
|
|
Share of loss from
associate
|
8
|
—
|
8
|
—
|
|
Interest expenses,
net
|
4,403
|
15,671
|
46,873
|
64,009
|
|
Income taxes
expense
|
10,009
|
5,530
|
26,292
|
11,447
|
|
Income taxes
paid
|
(2,719)
|
(7,491)
|
(13,117)
|
(9,958)
|
|
Change in non-cash
operating working capital:
|
|
|
|
|
|
Accounts
receivable
|
1,423
|
(2,067)
|
(1,181)
|
(447)
|
|
Inventories
|
(3,577)
|
(5,510)
|
(13,687)
|
(6,419)
|
|
Prepaid
expenses
|
2,019
|
(3,253)
|
277
|
(4,111)
|
|
Accounts payable and
accrued liabilities
|
4,460
|
5,328
|
581
|
38,945
|
|
Net cash provided
by operating activities
|
53,091
|
29,694
|
138,159
|
152,141
|
|
Financing
activities:
|
|
|
|
|
|
Issuance of common
shares, net of transaction costs
|
—
|
—
|
295,210
|
—
|
|
Proceeds from exercise
of share options
|
1
|
—
|
63
|
—
|
|
Dividends paid on
common shares
|
(700)
|
—
|
(700)
|
—
|
|
Proceeds of 2021 Term
Facility
|
—
|
—
|
355,000
|
—
|
|
Repayment of 2021 Term
Facility
|
(2,219)
|
—
|
(4,438)
|
—
|
|
Proceeds of 2021
Revolving Credit Facility
|
—
|
—
|
40,000
|
—
|
|
Repayment of 2021
Revolving Credit Facility
|
—
|
—
|
(40,000)
|
—
|
|
Repayment of 2016 Term
Loans
|
—
|
(1,921)
|
(680,424)
|
(7,866)
|
|
Proceeds of 2016
Revolving Credit Facility
|
—
|
—
|
—
|
28,112
|
|
Repayment of 2016
Revolving Credit Facility
|
—
|
—
|
—
|
(28,112)
|
|
Interest paid on
long-term debt
|
(2,315)
|
(12,376)
|
(41,290)
|
(55,442)
|
|
Repayment of principal
on lease liabilities
|
(11,473)
|
(11,903)
|
(46,640)
|
(42,446)
|
|
Interest paid on lease
liabilities
|
(2,908)
|
(3,130)
|
(11,557)
|
(11,316)
|
|
Financing
costs
|
—
|
—
|
(6,589)
|
—
|
|
Standby letter of
credit commitment fees
|
(639)
|
—
|
(4,994)
|
—
|
|
Net
distributions
|
—
|
(2,907)
|
(16,983)
|
(18,828)
|
|
Net cash used in
financing activities
|
(20,253)
|
(32,237)
|
(163,342)
|
(135,898)
|
|
Investing
activities:
|
|
|
|
|
|
Purchases of property
and equipment
|
(9,017)
|
(9,846)
|
(23,787)
|
(15,328)
|
|
Purchase of intangible
assets
|
(805)
|
(2,248)
|
(2,399)
|
(3,814)
|
|
Proceeds on disposal
of property and equipment
|
724
|
1,835
|
5,167
|
2,259
|
|
Right-of-use asset
initial direct costs
|
(840)
|
(299)
|
(2,275)
|
(1,129)
|
|
Tenant
allowances
|
498
|
568
|
744
|
1,016
|
|
Notes
receivable
|
(2,585)
|
(17)
|
(2,348)
|
514
|
|
Lease
receivables
|
6,339
|
6,028
|
24,089
|
22,419
|
|
Interest received on
lease receivables and other
|
1,842
|
1,811
|
6,974
|
6,460
|
|
Investment in
associate
|
(2,174)
|
—
|
(2,174)
|
—
|
|
Repurchase of
franchises
|
—
|
(567)
|
—
|
(850)
|
|
Net cash provided
by investing activities
|
(6,018)
|
(2,735)
|
3,991
|
11,547
|
|
Effect of exchange
rate on cash
|
(64)
|
400
|
(221)
|
(146)
|
|
Net increase
(decrease) in cash
|
26,756
|
(4,878)
|
(21,413)
|
27,644
|
|
Cash, beginning of
period
|
23,312
|
76,359
|
71,481
|
43,837
|
|
Cash, end of
period
|
$
|
50,068
|
$
|
71,481
|
$
|
50,068
|
$
|
71,481
|
Free Cash Flows
(Unaudited, expressed in thousands of Canadian dollars)
|
Quarters
Ended
|
Fiscal Year
Ended
|
|
January 1,
2022
|
January 2,
2021
|
January 1,
2022
|
January 2,
2021
|
|
13
weeks
|
14
weeks
|
52
weeks
|
53
weeks
|
|
|
|
|
|
|
Cash provided by
operating activities
|
$
|
53,091
|
$
|
29,694
|
$
|
138,159
|
$
|
152,141
|
|
Cash (used in)
provided by investing activities
|
(6,018)
|
(2,735)
|
3,991
|
11,547
|
|
Repayment of principal
on lease liabilities
|
(11,473)
|
(11,903)
|
(46,640)
|
(42,446)
|
|
Interest paid on lease
liabilities
|
(2,908)
|
(3,130)
|
(11,557)
|
(11,316)
|
|
Notes
receivables
|
2,585
|
17
|
2,348
|
(514)
|
|
Free Cash
Flow
|
$
|
35,277
|
$
|
11,943
|
$
|
86,301
|
$
|
109,412
|
Consolidated Statements of Financial Position
(Audited, expressed in thousands of Canadian dollars)
|
As at January
1,
2022
|
As at January
2,
2021
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
Cash
|
$
|
50,068
|
$
|
71,481
|
|
Accounts and other
receivables
|
14,398
|
12,629
|
|
Inventories,
net
|
91,699
|
78,012
|
|
Prepaid expenses and
other assets
|
10,432
|
8,585
|
|
Current portion of
lease receivable
|
26,621
|
23,145
|
|
Total current
assets
|
193,218
|
193,852
|
|
Non-current
assets:
|
|
|
|
Lease
receivables
|
121,936
|
96,743
|
|
Right-of-use
assets
|
80,757
|
84,950
|
|
Property and
equipment
|
62,067
|
55,738
|
|
Intangible
assets
|
37,359
|
36,072
|
|
Goodwill
|
92,938
|
93,276
|
|
Deferred tax
assets
|
5,601
|
—
|
|
Investment in
associate
|
2,179
|
—
|
|
Other
assets
|
3,118
|
1,488
|
|
Total non-current
assets
|
405,955
|
368,267
|
|
|
|
|
Total
assets
|
$
|
599,173
|
$
|
562,119
|
|
|
|
|
Liabilities and
Shareholders' Deficit
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
86,977
|
$
|
99,954
|
|
Income taxes
payable
|
13,553
|
1,042
|
|
Current portion of
deferred franchise fees
|
1,032
|
891
|
|
Current portion of
lease liabilities
|
41,960
|
42,753
|
|
Current portion of
long-term debt
|
8,875
|
7,448
|
|
Total current
liabilities
|
152,397
|
152,088
|
|
Non-current
liabilities:
|
|
|
|
Long-term deferred
franchise fees
|
3,183
|
2,475
|
|
Long-term lease
liabilities
|
196,954
|
173,906
|
|
Long-term
debt
|
336,621
|
698,912
|
|
Deferred tax
liabilities
|
4,540
|
4,282
|
|
Total non-current
liabilities
|
541,298
|
879,575
|
|
|
|
|
Total
liabilities
|
693,695
|
1,031,663
|
|
|
|
|
Shareholders'
deficit:
|
|
|
|
Common
shares
|
307,497
|
—
|
|
Contributed
surplus
|
1,779
|
—
|
|
Deficit
|
(403,619)
|
—
|
|
Currency translation
reserve
|
(179)
|
—
|
|
Group's net
investment
|
—
|
(588,530)
|
|
Non-controlling
interests
|
—
|
118,986
|
|
Total
shareholders' deficit
|
(94,522)
|
(469,544)
|
|
|
|
|
Total liabilities
and shareholders' deficit
|
$
|
599,173
|
$
|
562,119
|
SOURCE Pet Valu Canada Inc.