Pet Valu reports strong sales and margins for fiscal 2007 resulting in a 65% increase in net income and earnings per share of US$1.42 (C$1.53)



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

    MARKHAM, ON, March 14 /CNW/ - Pet Valu, Inc. announced today fourth
quarter results for fiscal 2007. On a consolidated basis, net income for the
quarter ended December 29, 2007 was $4.7 million or $0.55 per share as
compared to net income of $3.3 million or $0.37 per share for the fourth
quarter of fiscal 2006. Net income excluding non-comparable items was
$4.7 million or $0.55 per share for the quarter ended December 29, 2007 as
compared to net income excluding non-comparable items of $3.8 million or $0.44
per share for the fourth quarter of fiscal 2006.
    Net income for the fiscal year ended December 29, 2007 was $12.4 million
or $1.42 per share as compared to net income of $7.5 million or $0.93 per
share for fiscal 2006. Net income excluding non-comparable items for the
fiscal year ended December 29, 2007 was $12.4 million or $1.42 per share, or
C$1.53 based on the average exchange rate for fiscal 2007 of 1.0752. 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.

    
                          13 Weeks      13 Weeks      52 Weeks      52 Weeks
                             ended         ended         ended         ended
                       December 29,  December 30,  December 29,  December 30,
                              2007          2006          2007          2006

    No. of Stores              343           352           343           352
    Sales and Revenue  $46,937,000   $40,001,000  $162,993,000  $147,037,000
    Gross Profit       $16,016,000   $13,346,000   $51,053,000   $43,657,000
    EBITDA(1)           $7,818,000    $5,721,000   $21,918,000   $16,232,000
    EBITDA excluding
     non-comparable
     items              $7,992,000    $6,679,000   $22,092,000   $17,397,000

    Net Income          $4,719,000    $3,253,000   $12,382,000    $7,519,000
    Net Income excluding
     non-comparable
     items(2)           $4,705,000    $3,809,000   $12,368,000    $8,207,000

    Basic EPS                $0.55         $0.37         $1.42         $0.93
    Diluted EPS              $0.46         $0.32         $1.20         $0.79

    Basic EPS excluding
     non-comparable
     items(3)                $0.55         $0.44         $1.42         $1.02
    Diluted EPS excluding
     non-comparable items    $0.46         $0.37         $1.20         $0.86

    Non-comparable Items
     (before tax)
      Executive
       employment
       related payment    $640,000             -      $640,000             -
      Promotion Fund
       Allowance         ($466,000)    ($180,000)    ($466,000)    ($180,000)
      Loss on
       Extinguishment
       of Debt                   -    $1,138,000             -    $1,138,000
      Financing
       Initiatives
       costs                     -             -             -      $207,000
      Future tax
       recovery on
       NOLs              ($125,000)    ($154,000)    ($125,000)    ($154,000)
      Applicable tax
       on non-comparable
       items              ($63,000)    ($248,000)     ($63,000)    ($323,000)
    


    SALES

    Comparable store sales for the thirteen week period ending December 29,
2007 increased by 6.8% in Canada and by 6.7% in the United States as compared
to the thirteen week period ending December 30, 2006. During the quarter, the
Company continued with the implementation of programs designed to shift its
product offering to higher-margin, high-quality pet products. For the year
ending December 29, 2007, comparable store sales increase by 6.5% in Canada
and 3.6% in the United States.

    CANADIAN OPERATIONS

    Sales and revenue from Canadian operations increased by $6.9 million or
22.7% for the fourth quarter ended December 29, 2007 and increased by
$15.3 million or 13.7% for the year as compared to the prior year. Comparable
store sales increases of 6.8% and 6.5% for the quarter and the year,
respectively, contributed to the increase in sales and revenue. Canadian
dollar sales are translated into U.S. dollars for financial reporting purposes
which, due to the increase in the foreign currency exchange rate of 13.7% and
5.5% for the quarter and the year, respectively, also contributed to the
increase in sales and revenue as denominated in U.S. dollars.
    Cash flow represented by EBITDA excluding non-comparable items increased
by $4.6 million to $20.1 million for the year as compared to $15.5 million in
the prior year and by $1.3 million to $7.0 million in the fourth quarter of
fiscal 2007 as compared to the fourth quarter of the prior year.
    Canadian net income excluding non-comparable items for the fourth quarter
of fiscal 2007 increased by $0.8 million to $3.8 million as compared to
$3.0 million in the fourth quarter of the prior year. Canadian net income
excluding non-comparable items for the year increased by $3.9 million to
$10.6 million as compared to $6.7 million in the prior year.

    
                          13 Weeks      13 Weeks      52 Weeks      52 Weeks
                             ended         ended         ended         ended
                       December 29,  December 30,  December 29,  December 30,
                              2007          2006          2007          2006

    No. of Stores              281           283           281           283
    Sales and Revenue  $37,523,000   $30,590,000  $127,077,000  $111,801,000
    Gross Profit       $13,064,000   $10,310,000   $40,965,000   $33,554,000
    EBITDA(1)           $6,874,000    $4,831,000   $19,902,000   $14,349,000
    EBITDA excluding
     non-comparable
     items              $7,048,000    $5,789,000   $20,076,000   $15,515,000

    Net Income          $3,705,000    $2,302,000   $10,481,000    $5,880,000
    Net Income excluding
     non-comparable
     items(2)           $3,816,000    $3,012,000   $10,592,000    $6,722,000

    Non-comparable
     Items (before tax)
      Executive
       employment
       related
       payment            $640,000             -      $640,000             -
      Promotion Fund
       Allowance         ($466,000)    ($180,000)    ($466,000)    ($180,000)
      Loss on
       Extinguishment
       of Debt                   -    $1,138,000             -    $1,138,000
      Financing
       Initiatives costs         -             -             -      $207,000
       Applicable tax
       on non-comparable
       items              ($63,000)    ($248,000)     ($63,000)    ($323,000)
    


    U.S. OPERATIONS

    Sales and revenue from U.S. operations for the fourth quarter ended
December 29, 2007 was $9.4 million which was consistent with the fourth
quarter of fiscal 2006.
    Cash flow represented by EBITDA was $1.0 million for the fourth quarter
of fiscal 2007, which was consistent with the fourth quarter of the prior
year.
    Net income excluding non-comparable items for the fourth quarter of
fiscal 2007 was $1.0 million, which was $0.1 million higher than the fourth
quarter of the prior year.
    Net income excluding non-comparable items for the year ended December 29,
2007 increased by $0.3 million as compared to fiscal 2006.

    
                          13 Weeks      13 Weeks      52 Weeks      52 Weeks
                             ended         ended         ended         ended
                       December 29,  December 30,  December 29,  December 30,
                              2007          2006          2007          2006

    No. of Stores               62            69            62            69
    Sales and revenue   $9,412,000    $9,411,000   $35,915,000   $35,236,000
    Gross Profit        $2,996,000    $3,121,000   $10,505,000   $10,561,000
    EBITDA(1)             $987,000      $977,000    $2,433,000    $2,342,000

    Net Income          $1,085,000    $1,049,000    $2,346,000    $2,111,000
    Net Income excluding
     non-comparable
     items(2)             $960,000      $895,000    $2,221,000    $1,957,000

    Non-comparable Items
      Future tax
       recovery on NOLs  ($125,000)    ($154,000)    ($125,000)    ($154,000)
    


    NON-COMPARABLE ITEMS

    A one-time payment was made in relation to an employment contract between
the CEO of the Company and the Company. The contract expired as of
December 31, 2007. A new contract was executed with the CEO effective January
1, 2008. The new contract does not contain provisions for any one-time
payments of similar magnitudes.
    The Company and its franchisees make contributions to the Canadian
promotion fund, which is used for marketing and advertising activities. The
Company determined that the deficit balance of the promotion fund at the end
of fiscal 2007 is no longer 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, the allowance that was
initially provided at the end of fiscal 2005, and adjusted in fiscal 2006, has
been reversed in full.
    The loss on extinguishment of debt resulted from the prepayment of a
C$15 million debenture in fiscal 2006.
    To address the repayment of C$15.1 million of debentures which matured on
July 24, 2006, the Company incurred legal and other costs in relation to a
potential financing initiative that was ultimately not pursued.
    The Company has net operating losses ("NOLs") carried forward with
respect to its U.S. operations. Each year the Company performs a valuation to
determine the amount of NOLs that it will recognize for accounting purposes
based on the projected taxable income of the U.S. operations. The deferred tax
assets are then adjusted resulting in either a future tax recovery or a future
tax expense being recorded on the statement of operations. The Company
recognized a deferred tax recovery of $0.1 million in the fourth quarter of
fiscal 2007 as compared to $0.2 million in the fourth quarter of fiscal 2006.
At December 29, 2007, there are $14.0 million in unrecognized net operating
loss carryforwards and $5.6 million of unrecognized future tax recoveries.

    OUTLOOK

    The Company has several key operating objectives for fiscal 2008 and
thereafter.
    A primary objective will be to continue the re-engineering of existing
operating practices to highest industry standards. In this regard, the Company
will be seeking to improve its technological systems, improve upon the
performance management systems as they apply to the execution of operating
practices and initiatives to realize business improvements, and continue to
develop both waste reduction and energy conservation programs.
    The Company plans to build upon its existing competitive strengths in
relation to store service and differentiated product selection. This includes
expanding the number of high quality differentiated brand name products and
the continued development of specialized private label pet food formulations
and pet supply products. As well, the Company plans improvements to the
customer shopping experience through continued efforts to advance the level of
knowledgeable service provided by store staff, improvements in the utilization
of store space, and enhancements to the overall store image.
    The Company intends to focus on growth strategies within existing
markets. These strategies will include the expansion of the number of stores
where opportunities for either acquisition or greenfield development are
available and meet targeted returns. The Company also plans to expand sales in
existing stores through the optimization of product offerings that are
tailored to each store location.
    The current franchising system in Canada, which has been in place for
more than 20 years, will be reviewed during the year. The goal is to develop a
system that more closely aligns the mutual interests of the franchisees with
that of the Company.
    The Company's financial goals include the efficient utilization of
available capital by applying cash to projects that meet targeted returns.
Significant capital expenditures are expected during fiscal 2008 and fiscal
2009 in relation to the development of infrastructure including the building
and equipping of a new automated warehouse facility, the acquisition of small
box competitor locations where feasible, the renewal of a normal course issuer
bid, and the development of new systems reflecting forward looking
technological improvements.
    In general, the current focus of the Company will be toward generating
incremental profit improvements from existing operations and creating
infrastructure strengths necessary to support platforms for future growth.
    While the average compound growth in earnings over the past four years
exceeds 50% per annum, 2008 may not follow that trend. Projects initiated over
the past four years have had fairly immediate impacts; however, many of the
remaining projects, while generating high returns, require higher
infrastructure investments, particularly in our staffing and equipment
capabilities in the areas of information technology and systems development.
In addition, projects which relate to technological improvements, have longer
lead-times for completion resulting in longer periods of expense absorption
prior to the realization of benefits. Most beneficial effects of these
projects would occur in 2009, 2010, and thereafter. Management will attempt to
prioritize some initiatives with a more immediate profit impact into the
project mix, but it is difficult to predict project mix outcomes.

    
    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 net
        income 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 EPS 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 and wholesaler of pet food and
pet-related supplies and a franchisor of pet food and pet-related supply
outlets. 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

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PET VALU CANADA INC.

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