Pet Valu reports fiscal 2006 earnings per share of US$0.93 (C$1.05)



    All financial results expressed in U.S. dollars unless otherwise
    indicated

    MARKHAM, ON, March 16 /CNW/ - Pet Valu, Inc. announced today fourth
quarter results for fiscal 2006. On a consolidated basis, net income for the
quarter ended December 30, 2006 was $3.3 million or $0.37 per share as
compared to net income of $4.0 million or $0.54 per share for the fourth
quarter of fiscal 2005. Net income excluding non-comparable items was
$3.8 million or $0.44 per share for the quarter ended December 30, 2006 as
compared to net income excluding non-comparable items of $3.2 million or
$0.42 per share for the fourth quarter of fiscal 2005.
    Net income for the year ended December 30, 2006 was $7.5 million or
$0.93 per share as compared to net income of $7.3 million or $0.97 per share
for fiscal 2005. Net income excluding non-comparable items for the year ended
December 30, 2006 was $8.2 million or $1.02 per share, or C$1.16 based on the
average exchange rate for fiscal 2006 of 1.1341. Net income excluding
non-comparable items for the year ended December 31, 2005 was $6.4 million or
$0.86 per share, or C$1.04 based on the average exchange rate for fiscal 2005
of 1.2115.

    
                          13 Weeks      13 Weeks      52 Weeks      52 Weeks
                             ended         ended         ended         ended
                          December      December      December      December
                          30, 2006      31, 2005      30, 2006      31, 2005

    No. of Stores              352           351           352           351
    Sales and Revenue  $40,001,000   $37,563,000  $147,037,000  $134,406,000
    Gross Profit       $13,346,000   $11,754,000   $43,657,000   $37,336,000
    EBITDA(1)           $5,721,000    $5,217,000   $16,232,000   $14,101,000
    EBITDA excluding
     non-comparable
     items              $6,679,000    $5,799,000   $17,397,000   $14,682,000

    Net Income          $3,253,000    $4,013,000    $7,519,000    $7,254,000
    Net Income
     excluding
     non-comparable
     items(2)           $3,809,000    $3,175,000    $8,207,000    $6,416,000

    Basic EPS                $0.37         $0.54         $0.93         $0.97
    Diluted EPS              $0.32         $0.46         $0.79         $0.84

    Basic EPS
     excluding
     non-comparable
     items(3)                $0.44         $0.42         $1.02         $0.86
    Diluted EPS
     excluding
     non-comparable
     items                   $0.37         $0.37         $0.86         $0.74

    Non-comparable
     Items
     (before tax)
      Promotion Fund
       Allowance         ($180,000)     $582,000     ($180,000)     $582,000
      Financing
       Initiatives costs         -             -      $207,000             -
      Loss on
       Extinguishment
       of Debt          $1,138,000             -    $1,138,000             -
      Future tax
       recovery on
       NOLs              ($154,000)  ($1,210,000)    ($154,000)  ($1,210,000)
      Applicable tax on
       non-comparable
       items             ($248,000)    ($210,000)    ($323,000)    ($210,000)
    


    NON-COMPARABLE ITEMS

    Non-comparable items include loss on debt extinguishment, an allowance
(recovery) for the deficit balance in the promotion fund account, costs
related to financing initiatives that were cancelled, and future tax recovery
of unrealized net operating loss carryforwards of the U.S. operations. Loss on
extinguishment of debt resulted from the prepayment of C$15 million of
debentures. The Company and its franchisees make contributions to the Canadian
promotion fund, which is used for marketing and advertising activities. As of
the end of fiscal 2005, the Company determined that the deficit balance of the
promotion fund was unlikely to be recovered in the next fiscal year due to the
magnitude of the promotion fund deficit and the Company's assessment of its
future promotional plans. Therefore, an allowance was provided. In fiscal
2006, a partial recovery was recognized as a result of a reduction in the
deficit balance. To address the repayment of C$15.1 million of debentures
maturing on July 24, 2006, the Company incurred legal and other costs to
assist in the preparation of documents and materials for a potential financing
initiative that was eventually cancelled.

    SALES

    Comparable store sales for the thirteen week period ending December 30,
2006 increased by 4.0% in Canada and decreased by 1.2% in the U.S. as compared
to the thirteen week period ending December 31, 2005. During the quarter, the
Company continued with the implementation of programs designed to shift its
product offering to higher-margin, high-quality pet products.

    CANADIAN OPERATIONS

    Sales and revenue from Canadian operations for the fourth quarter ended
December 30, 2006 was $30.6 million compared to $28.3 million for the fourth
quarter of fiscal 2005. A 4.0% increase in comparable store sales and a 3.0%
increase in the average foreign currency exchange rate used to convert
Canadian dollars to U.S. dollars contributed to the increase in U.S. dollar
sales and revenue. Cash flow represented by EBITDA excluding non-comparable
items increased by $2.6 million to $15.5 million for the year as compared to
$12.9 million in the prior year and by $0.7 million to $5.8 million in the
fourth quarter of fiscal 2006 as compared to $5.1 million in the fourth
quarter of the prior year. Canadian net income excluding non-comparable items
for the fourth quarter of fiscal 2006 increased by $0.5 million as compared to
the fourth quarter of the prior year. Canadian net income excluding
non-comparable items for the year increased by $1.7 million as compared to the
prior year.

    
                          13 Weeks      13 Weeks      52 Weeks      52 Weeks
                             ended         ended         ended         ended
                          December      December      December      December
                          30, 2006      31, 2005      30, 2006      31, 2005

    No. of Stores              283           285           283           285
    Sales and Revenue  $30,590,000   $28,301,000  $111,801,000  $100,555,000
    Gross Profit       $10,310,000    $8,901,000   $33,554,000   $27,463,000
    EBITDA(1)           $4,831,000    $4,491,000   $14,349,000   $12,303,000
    EBITDA excluding
     non-comparable
     items              $5,789,000    $5,073,000   $15,515,000   $12,885,000

    Net Income          $2,302,000    $2,111,000    $5,880,000    $4,622,000
    Net Income
     excluding
     non-comparable
     items(2)           $3,012,000    $2,483,000    $6,722,000    $4,994,000

    Non-comparable
     Items (before tax)
      Promotion Fund
       Allowance         ($180,000)     $582,000     ($180,000)     $582,000
      Financing
       Initiatives costs         -             -      $207,000             -
      Loss on
       Extinguishment
       of Debt          $1,138,000             -    $1,138,000             -
      Applicable tax on
       non-comparable
       items             ($248,000)    ($210,000)    ($323,000)    ($210,000)
    


    U.S. OPERATIONS

    Sales and revenue from U.S. operations for the fourth quarter ended
December 30, 2006 was $9.4 million as compared to $9.3 million for the fourth
quarter of fiscal 2005. Cash flow represented by EBITDA was $1.0 million for
the fourth quarter of fiscal 2006, which was $0.2 million greater than the
fourth quarter of the prior year. Net income excluding non-comparable items
for the fourth quarter of fiscal 2006 was $0.9 million, which was $0.1 million
greater than the fourth quarter of the prior year.
    Net income excluding non-comparable items for the year ended December 30,
2006 increased by $0.1 million as compared to fiscal 2005. Non-comparable
items consisted of a deferred tax recovery relating to net operating loss
carry forwards of $0.2 million in the fourth quarter of fiscal 2006 as
compared to $1.2 million in the fourth quarter of fiscal 2005. At December 30,
2006, there are $16.1 million in unrecognized net operating loss carryforwards
and $6.8 million of unrecognized future tax recoveries.


    
                          13 Weeks      13 Weeks      52 Weeks      52 Weeks
                             ended         ended         ended         ended
                          December      December      December      December
                          30, 2006      31, 2005      30, 2006      31, 2005

    No. of Stores               69            66            69            66
    Sales and revenue   $9,411,000    $9,263,000   $35,236,000   $33,851,000
    Gross Profit        $3,121,000    $2,931,000   $10,561,000   $10,324,000
    EBITDA(1)             $977,000      $808,000    $2,342,000    $2,253,000

    Net Income          $1,049,000    $1,998,000    $2,111,000    $3,101,000
    Net Income
     excluding
     non-comparable
     items(2)             $895,000      $788,000    $1,957,000    $1,891,000

    Non-comparable
     Items
      Future tax
       recovery on NOLs  ($154,000)  ($1,210,000)    ($154,000)  ($1,210,000)
    


    OUTLOOK

    The Company has several key operating objectives for 2007 and 2008. A
primary objective will be to continue re-engineering existing operating
practices to highest industry standards. In this regard, the Company will be
seeking to improve its technological systems, including those related to
materials handling, as well as those where there are opportunities to increase
automation of routine practices throughout the business. The Company will also
be reviewing its fuel and energy strategies so as to improve distribution
efficiencies; its merchandising models so as to be able to fully utilize
varying store sizes within the scope of small box retailing; its franchising
systems in Canada; and its risk management strategies.
    As well, the Company plans to upgrade the shopping experience at its
stores under "Better Pet Nutrition" reniching, including enhancements to store
image and services, expansion of differentiated product selection, the
identification of more targeted store location criteria, improvements to space
management programs, and the integration of an e-commerce component to the
business.
    The Company intends to validate a U.S. market expansion platform that
addresses changes in both the niche positioning of competitors as well as
changes in consumer purchasing trends. On another front, the Company plans on
strengthening the capacity of management to complete its operating and growth
objectives, as well as improving the productivity of management by
establishing higher levels of accountability in relation to strategic business
planning, project management and inter-departmental coordination.
    The Company's financial goal will be to efficiently utilize available
capital by applying cash flow to projects that meet targeted returns. In
general, the current focus of the Company will be toward generating profit
improvements from existing operations and re-engineering the platform for
future growth.

    CONFERENCE CALL

    Pet Valu, Inc. will host a live conference call on March 23, 2007 at
10:00 a.m. (EST) to discuss its financial results for its fiscal 2006 year and
to answer questions from participants concerning those results. The discussion
will be led by the Company's Chief Executive Officer, Geoffrey Holt and its
Chief Financial Officer, Dale Winkworth. To access via tele-conference please
dial 416-915-9608, if calling within the Greater Toronto Area, and toll free
at 1-866-214-7077, if calling outside the GTA. A playback of the event will be
made available for seven days after the event. To access the playback of the
event, please dial 416-915-1028 along with the passcode number of 955278, if
calling within the GTA, and toll free at 1-866-244-4494 (along with passcode)
if outside the GTA.

    NON-GAAP FINANCIAL MEASURES

    
    (1)  EBITDA is not a recognized measure under GAAP. As this measure does
         not have a standardized meaning prescribed by GAAP, the Company's
         method of calculating EBITDA may differ from other companies. The
         Company believes that EBITDA is a useful supplemental measure as it
         provides investors with an indication of cash available prior to
         debt service, capital expenditures and income taxes.
    (2)  Net Income excluding non-comparable items is not a recognized
         measure under GAAP. As this measure does not have a standardized
         meaning prescribed by GAAP, it is unlikely to be comparable to
         similar measures presented by other companies. The Company believes
         that earnings excluding non-comparable items is a useful
         supplemental measure. It is used by the Company to assess its
         underlying performance from continuing operations and to provide a
         more useful comparison by eliminating non-recurring items.
    (3)  EPS excluding non-comparable items is not a recognized measure under
         GAAP. As this measure does not have a standardized meaning
         prescribed by GAAP, it is unlikely to be comparable to similar
         measures presented by other companies. The Company believes that
         earnings excluding non-comparable items is a useful supplemental
         measure. It is used by the Company to assess its underlying
         performance from continuing operations and to provide a more useful
         comparison by eliminating non-recurring items
    

    FORWARD LOOKING STATEMENTS

    Certain information in this news release is forward-looking and is
subject to important risks and uncertainties. Forward-looking information
includes information concerning the Company's future financial performance,
business strategy, plans, goals, objectives, business prospects and
opportunities. The forward-looking information reflects predictions and does
not in any way reflect a guarantee. Factors which could cause actual results
or events to differ materially from current expectations include, among other
things: the ability of the Company to successfully implement its strategic
initiatives and whether such strategic initiatives will yield the expected
benefits; competitive conditions in the businesses in which the Company
participates; changes in consumer spending; the outcome of legal proceedings
as they arise; general economic conditions and normal business uncertainty;
the availability of suitable store locations; customer preferences towards
product offerings; adverse climate changes; the occurrence of a pandemic or
other catastrophic event which could create shortages of labour, products or
services required to operate the business profitably; fluctuations in foreign
currency exchange rates; changes in the Company's relationship with its
merchandise and service suppliers; interest rate fluctuations and other
changes in borrowing costs; and changes in laws, rules and regulations
applicable to the Company or the markets in which the Company operates. The
Company cautions that this is not an exhaustive list of factors that may
affect the forward-looking information in this news release. Potential
investors and readers are urged to give careful consideration to all of these
factors in evaluating any forward-looking information and are cautioned not to
place undue reliance on such information. While the Company believes that its
forecasts and assumptions are reasonable, results or events predicted in this
forward-looking information may differ materially from actual results or
events.

    Pet Valu is a specialty retailer of pet food and pet supplies operating
Company-owned and franchised locations in Canada and the U.S. The TSX stock
symbol for Pet Valu Canada Inc., Pet Valu, Inc.'s publicly traded Canadian
operating subsidiary, is PVC.





For further information:

For further information: Michael Fitzgerald, Secretary, (905) 946-1200,
extension 3503

Organization Profile

PET VALU CANADA INC.

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