Petco Health and Wellness Company Inc.

11/18/2021 | Press release | Distributed by Public on 11/18/2021 07:02

Press Release, dated November 18, 2021 - Form 8-K

Contacts:

Investor Relations

Kristy Moser

[email protected]

Media Relations

Ventura Olvera

[email protected]

FOR IMMEDIATE RELEASE: November 18, 2021

Petco Health + Wellness Company, Inc. announces record revenue and earnings with 15 percent comp growth and a 32 percent two-year comp

Rapidly expanding vet business, digital growth, recurring revenue programs and strong consumables sales drove six consecutive quarters of double-digit comparable sales growth with twelveconsecutive quarters of comparable sales growth

Net revenue of $1.4 billion grew 15 percent year over year with strong profit flow through

Earnings per share of $0.20; Adjusted Earnings Per Share1of $0.20

Raised full year 2021 guidance on top- and bottom-line

San Diego, November 18, 2021 - Petco Health and Wellness Company, Inc. (Nasdaq: WOOF), a complete partner in pet health and wellness, today released its financial results for its third quarter ended October 30, 2021.

In the third quarter of 2021, Petco delivered net revenue of $1.4 billion, up 15 percent versus prior year. Net income improved by $49.3 million from prior year to $52.8 million or $0.20 per share. Trailing twelve-month net income improved by $156.8 million from prior year to $129.3 million. Adjusted Net Income1 for the third quarter increased $40.4 million from prior year to $54.0 million or $0.20 per share, while Adjusted EBITDA1 increased by 17 percent from prior year to $138.5 million.

"Q3 marked our sixth consecutive quarter of double-digit growth with a 15 percent Q3 comp, lapping 17 percent a year ago, giving us confidence to raise guidance for Full Year 2021," said Ron Coughlin, Chairman and CEO of Petco. "Our focus on long-term, sustainable growth is powered by continued execution against our transformation, with one of the fastest veterinary expansions in history, further enhancement of our digital competitive advantages, expansion of our merchandise differentiation through powerful owned and exclusive brands, and our incredible Petco Partners who are improving more and more pet lives every single day in a challenging environment."

Additionally, through the first thirty-nine weeks of 2021, total debt remained roughly flat at $1.7 billion with Net Debt1 improving $94.8 million to $1.5 billion driven by net cash flow from operations of $288.4 million and Free Cash Flow1 of $124.1 million, up 43 percent and 18 percent, respectively, from the first thirty-nine weeks of 2020. Also, in the first thirty-nine weeks of 2021, Net Debt1 / Trailing Twelve Month Adjusted EBITDA1 decreased 19 percent or 0.6x to 2.6x driven by Free Cash Flow1 generation and growth in Adjusted EBITDA1.

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Fiscal Q3 2021 Highlights:

Comparisons are third quarter of 2021 ended October 30, 2021 versus third quarter of 2020 ended October 31, 2020 unless otherwise noted

Net revenue increased 15 percent to $1.4 billion driven by comp sales growth of 15 percent

Net income increased $49.3 million to $52.8 million or $0.20 per share

Adjusted Net Income1 increased $40.4 million to $54.0 million or $0.20 per share

Adjusted EBITDA1 increased 17 percent to $138.5 million 3

Trailing twelve-month net income increased $156.8 million to $129.3 million

Trailing Twelve Month Adjusted EBITDA1 increased $100.3 million to $567.9 million

Net cash provided by operating activities increased $87.0 million to $288.4 million in the first thirty-nine weeks of 2021

Free Cash Flow1 increased $18.9 million to $124.1 million in the first thirty-nine weeks of 2021

Total debt decreased $1.6 billion, or 48%, to $1.7 billion driven by the proceeds generated from the company's initial public offering, related recapitalization, and Free Cash Flow1 generation

Net Debt1 decreased $1.6 billion or 52% to $1.5 billion

Net Debt1 / Trailing Twelve Month Adjusted EBITDA1 improved 60 percent to 2.6x

Liquidity of $662.6 million as of October 30, 2021 inclusive of $221.5 million of cash and cash equivalents and $441.1 million of availability on revolving credit facility

Ended the quarter with 1,449 Pet Care Centers in the U.S. and Puerto Rico, 172 full-service Vet Hospitals within Pet Care Centers, and 108 Pet Care Centers in Mexico

Fiscal 2021 Guidance:

The following guidance as of November 18, 2021 reflects the company's expectations for fiscal year 2021.

Metric

Current Guidance Prior Guidance

Net Revenue

$5.725 - $5.775 billion $5.6 - $5.7 billion

Adjusted EBITDA2

$577 - $582 million $565 - $575 million

Adjusted EPS2

$0.86 - $0.88 $0.81 - $0.85

Capital Expenditures

$220 - $235 million Near top of $185 - $235 million range

Assumptions in the guidance include that economic conditions, currency rates and the tax and regulatory landscape remain generally consistent. Adjusted EPS guidance assumes approximately $80 million of interest expense, a 26 percent tax rate and a 266 million weighted average diluted share count.

(1)

Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, Free Cash Flow, Net Debt, and Trailing Twelve Month Adjusted EBITDA are non-GAAP financial measures. See "Non-GAAP Financial Measures" for additional information on non-GAAP financial measures and a reconciliation to the most comparable GAAP measures.

(2)

We have not reconciled Adjusted EBITDA and Adjusted EPS outlook to the most comparable GAAP outlook because it is not possible to do so without unreasonable efforts due to the uncertainty and potential variability of reconciling items, which are dependent on future events and often outside of management's control and which could be significant. Because such items cannot be reasonably predicted with the level of precision required, we are unable to provide outlook for the comparable GAAP measures. Forward- looking estimates of Adjusted EBITDA and Adjusted EPS are made in a manner consistent with the relevant definitions and assumptions noted herein.

(3)

Adjusted EBITDA excludes a $19.8 million gain from (i) mark to market accounting on our investment in A Place for Rover, Inc. ("Rover") and (ii) the value of earn-out shares issued by Rover to the company pursuant to terms of Rover's business combination with Nebula Caravel Acquisition, Corp.

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Earnings Conference Call Webcast Information:

The company will host an earnings conference call on November 18, 2021 at 8:30 AM Eastern Time to discuss Petco's financial results. The conference call will be accessible through live webcast. Interested investors and other individuals can access the webcast, earnings release, earnings presentation, and infographic via the company's investor relations page at ir.petco.com. A replay of the webcast will be archived on the company's investor relations page through December 2, 2021 at approximately 5:00 PM Eastern Time.

About Petco, The Health + Wellness Co.:

Petco is a category-defining health and wellness company focused on improving the lives of pets, pet parents and our own Petco partners. Since our founding in 1965, we've been striving to set new standards in pet care, delivering comprehensive wellness solutions through our products and services, and creating communities that deepen the pet-pet parent bond. We operate more than 1,500 Petco locations across the U.S., Mexico and Puerto Rico, including a growing network of more than 150 in-store veterinary hospitals, and offer a complete online resource for pet health and wellness at petco.com and on the Petco app. In tandem with Petco Love (formerly the Petco Foundation), an independent nonprofit organization, we work with and support thousands of local animal welfare groups across the country and, through in-store adoption events, we've helped find homes for more than 6.5 million animals.

Forward-Looking Statements:

This earnings release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 as contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, concerning expectations, beliefs plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are not statements of historical fact, including statements regarding our fiscal year 2021 guidance, our growth plans, and execution on our transformation initiatives. Such forward-looking statements can generally be identified by the use of forward-looking terms such as "believes," "expects," "may," "intends," "will," "shall," "should," "anticipates," "opportunity," "illustrative", or the negative thereof or other variations thereon or comparable terminology. Although Petco believes that the expectations and assumptions reflected in these statements are reasonable, there can be no assurance that these expectations will prove to be correct or that any forward-looking results will occur or be realized. Nothing contained in this earnings release is, or should be relied upon as, a promise or representation or warranty as to any future matter, including any matter in respect of the operations or business or financial condition of Petco. All forward-looking statements are based on expectations and assumptions about future events that may or may not be correct or necessarily take place and that are by their nature subject to significant uncertainties and contingencies, many of which are outside the control of Petco. Forward-

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looking statements are subject to a number of risks, uncertainties and other factors that could cause actual results or events to differ materially from the potential results or events discussed in the forward-looking statements, including, without limitation, those identified in this earnings release as well as the following: (i) increased competition (including from multi-channel retailers and e-Commerce providers); (ii) reduced consumer demand for our products and/or services; (iii) our reliance on key vendors; (iv) our ability to attract and retain qualified employees; (v) risks arising from statutory, regulatory and/or legal developments; (vi) macroeconomic pressures in the markets in which we operate; (vii) failure to effectively manage our costs; (viii) our reliance on our information technology systems; (ix) our ability to prevent or effectively respond to a privacy or security breach; (x) our ability to effectively manage strategic ventures, alliances or acquisitions; (xi) economic or regulatory developments that might affect our ability to provide attractive promotional financing; (xii) interruptions and other supply chain issues; (xiii) catastrophic events, health crises, and pandemics, including the potential effects that the ongoing COVID-19 pandemic and/or corresponding macroeconomic uncertainty could have on our financial position, results of operations and cash flows; (xiv) our ability to maintain positive brand perception and recognition; (xv) product safety and quality concerns; (xvi) changes to labor or employment laws or regulations; (xvii) our ability to effectively manage our real estate portfolio; (xviii) constraints in the capital markets or our vendor credit terms; (xix) changes in our credit ratings; and (xx) the other risks, uncertainties and other factors identified under "Risk Factors" and elsewhere in Petco's Securities and Exchange Commission filings. The occurrence of any such factors could significantly alter the results set forth in these statements.

Petco cautions that the foregoing list of risks, uncertainties and other factors is not complete, and forward-looking statements speak only as of the date they are made. Petco undertakes no duty to update publicly any such forward-looking statement, whether as a result of new information, future events or otherwise, except as may be required by applicable law, regulation or other competent legal authority.

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PETCO HEALTH AND WELLNESS COMPANY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited and subject to reclassification)

13 Weeks Ended
October 30,
2021
October 31,
2020
Percent
Change

Net sales

$ 1,443,264 $ 1,259,997 15 %

Cost of sales

848,555 718,559 18 %

Gross profit

594,709 541,438 10 %

Selling, general and administrative expenses

532,760 495,401 8 %

Operating income

61,949 46,037 35 %

Interest income

(18 ) (49 ) (63 %)

Interest expense

18,769 53,795 (65 %)

Other non-operating income

(19,773 ) - N/M

Income (loss) before income taxes and income from equity method investees

62,971 (7,709 ) N/M

Income tax expense (benefit)

14,095 (7,940 ) N/M

Income from equity method investees

(2,637 ) (1,875 ) 41 %

Net income

51,513 2,106 2,346 %

Net loss attributable to noncontrolling interest

(1,239 ) (1,297 ) (4 %)

Net income attributable to Class A and B-1 common stockholders

$ 52,752 $ 3,403 1,450 %

Net income per Class A and B-1 common share:

Basic

$ 0.20 $ 0.02 1,126 %

Diluted

$ 0.20 $ 0.02 1,121 %

Weighted average shares used in computing net income per Class A and B-1 common share:

Basic

264,228 209,015 26 %

Diluted

265,322 209,015 27 %

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CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(Unaudited and subject to reclassification)

October 30,
2021
January 30,
2021

ASSETS

Current assets:

Cash and cash equivalents

$ 221,484 $ 111,402

Receivables, less allowance for credit losses1

45,478 41,827

Merchandise inventories, net

644,389 538,675

Prepaid expenses

37,762 40,032

Other current assets

40,761 45,613

Total current assets

989,874 777,549

Fixed assets

1,657,876 1,487,987

Less accumulated depreciation

(975,456 ) (860,440 )

Fixed assets, net

682,420 627,547

Operating lease right-of-use assets

1,369,231 1,328,108

Goodwill

2,183,202 2,179,310

Trade name

1,025,000 1,025,000

Other intangible assets

4,793 4,793

Less accumulated amortization

(4,336 ) (4,079 )

Other intangible assets, net

457 714

Other long-term assets

219,362 137,474

Total assets

$ 6,469,546 $ 6,075,702

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable and book overdrafts

$ 380,174 $ 339,485

Accrued salaries and employee benefits

159,705 129,484

Accrued expenses and other liabilities

214,525 145,846

Current portion of operating lease liabilities

256,831 258,289

Current portion of long-term debt and other lease liabilities

20,303 2,203

Total current liabilities

1,031,538 875,307

Senior secured credit facilities, net, excluding current portion

1,643,423 1,646,281

Operating lease liabilities, excluding current portion

1,128,201 1,083,575

Deferred taxes, net

309,072 280,920

Other long-term liabilities

136,399 134,354

Total liabilities

4,248,633 4,020,437

Commitments and contingencies

Stockholders' equity:

Class A common stock2

226 226

Class B-1 common stock3

38 38

Class B-2 common stock4

- -

Preferred stock5

- -

Additional paid-in-capital

2,126,294 2,092,110

Retained earnings (accumulated deficit)

113,172 (22,251 )

Accumulated other comprehensive loss

(2,328 ) (1,275 )

Total stockholders' equity

2,237,402 2,068,848

Noncontrolling interest

(16,489 ) (13,583 )

Total equity

2,220,913 2,055,265

Total liabilities and equity

$ 6,469,546 $ 6,075,702
(1)

Allowances for credit losses are $1,617 as of October 30, 2021 and $3,267 as of January 30, 2021

(2)

Class A common stock, par value $0.001 per share (1.0 billion shares authorized and 226.5 million shares issued and outstanding as of October 30, 2021 and 226.4 million shares issued and outstanding as of January 30, 2021)

(3)

Class B-1 common stock, par value $0.001 per share (75.0 million shares authorized and 37.8 million shares issued and outstanding)

(4)

Class B-2 common stock, par value $0.000001 per share (75.0 million shares authorized and 37.8 million shares issued and outstanding)

(5)

Preferred stock, par value $0.001 per share (25.0 million shares authorized and no shares issued or outstanding)

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PETCO HEALTH AND WELLNESS COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited and subject to reclassification)

39 Weeks Ended
October 30, October 31,
2021 2020

Cash flows from operating activities:

Net income (loss)

$ 132,517 $ (24,826 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

125,637 128,961

Amortization of debt discounts and issuance costs

4,579 18,291

Provision for deferred taxes

28,523 6,889

Equity-based compensation

36,491 7,464

Impairments, write-offs and losses on sale of fixed and other assets

5,918 7,651

Loss on extinguishment and modification of debt

20,838 -

Income from equity method investees

(7,490 ) (2,952 )

Amounts reclassified out of accumulated other comprehensive income

- 7,898

Change in contingent consideration obligation

- (425 )

Non-cash operating lease costs

315,930 324,477

Other non-operating income

(64,934 ) -

Changes in assets and liabilities:

Receivables

(3,652 ) (8,938 )

Merchandise inventories

(105,682 ) (63,313 )

Prepaid expenses and other assets

(8,053 ) (18,651 )

Accounts payable and book overdrafts

47,973 54,523

Accrued salaries and employee benefits

27,673 34,100

Accrued expenses and other liabilities

45,437 7,654

Operating lease liabilities

(314,620 ) (304,426 )

Other long-term liabilities

1,359 27,103

Net cash provided by operating activities

288,444 201,480

Cash flows from investing activities:

Cash paid for fixed assets

(164,330 ) (96,289 )

Cash paid for acquisitions, net of cash acquired

(3,545 ) -

Cash paid for investments

- (1,000 )

Distributions from equity investees

- 73

Proceeds from sale of assets

105 1,296

Net cash used in investing activities

(167,770 ) (95,920 )

Cash flows from financing activities:

Borrowings under long-term debt agreements

1,700,000 440,000

Repayments of long-term debt

(1,686,611 ) (487,938 )

Debt refinancing costs and original issue discount

(24,665 ) -

Payments for finance lease liabilities

(2,650 ) (2,831 )

Proceeds from employee stock purchase plan

2,920 -

Tax withholdings on stock-based awards

(13 ) -

Repurchase of equity

- (105 )

Payment of contingent consideration

- (250 )

Payment of offering costs

(3,844 ) -

Net cash used in financing activities

(14,863 ) (51,124 )

Net increase in cash, cash equivalents and restricted cash

105,811 54,436

Cash, cash equivalents and restricted cash at beginning of period

119,540 154,718

Cash, cash equivalents and restricted cash at end of period

$ 225,351 $ 209,154

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NON-GAAP FINANCIAL MEASURES

The following information provides definitions and reconciliations of the non-GAAP financial measures presented in this earnings release to the most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles (GAAP). The company has provided this non-GAAP financial information, which is not calculated or presented in accordance with GAAP, as information supplemental and in addition to the financial measures presented in this earnings release that are calculated and presented in accordance with GAAP. Such non-GAAP financial measures should not be considered superior to, as a substitute for or alternative to, and should be considered in conjunction with, the GAAP financial measures presented in this earnings release. The non-GAAP financial measures in this earnings release may differ from similarly titled measures used by other companies.

Adjusted EBITDA and Trailing Twelve Month Adjusted EBITDA

Adjusted EBITDA, including Trailing Twelve Month Adjusted EBITDA, is considered a non-GAAP financial measure under the Securities and Exchange Commission's ("SEC") rules because it excludes certain amounts included in net income (loss) calculated in accordance with GAAP. Management believes that Adjusted EBITDA is a meaningful measure to share with investors because it facilitates comparison of the current period performance with that of the comparable prior period. In addition, Adjusted EBITDA affords investors a view of what management considers to be Petco's core operating performance as well as the ability to make a more informed assessment of such operating performance as compared with that of the prior period.

Please see the company's Annual Report on Form 10-K for the fiscal year ended January 30, 2021 filed with the SEC on April 5, 2021 for additional information on Adjusted EBITDA. The tables below reflect the calculation of Adjusted EBITDA for the thirteen weeks and trailing twelve months ended October 30, 2021 compared to the prior year quarter and twelve-month period ended October 31, 2020, respectively, as well as the twelve-month period ended January 30, 2021.

(dollars in thousands) 13 Weeks Ended

Reconciliation of Net Income Attributable to Class A and B-1

Common Stockholders to Adjusted EBITDA

October 30,
2021
October 31,
2020

Net income attributable to Class A and B-1 common stockholders

$ 52,752 $ 3,403

Add (deduct):

Interest expense, net

18,751 53,746

Income tax expense (benefit)

14,095 (7,940 )

Depreciation and amortization

42,792 42,923

Income from equity method investees

(2,637 ) (1,875 )

Asset impairments and write offs

3,228 1,390

Equity-based compensation

13,381 2,847

Other non-operating income

(19,773 ) -

Mexico joint venture EBITDA (1)

6,661 4,917

Store pre-opening expenses

4,222 3,625

Store closing expenses

1,264 2,311

Non-cash occupancy-related costs (2)

1,540 3,920

Non-recurring costs (3)

2,233 8,834

Adjusted EBITDA

$ 138,509 $ 118,101

Net sales

$ 1,443,264 $ 1,259,997

Net margin (4)

3.7 % 0.3 %

Adjusted EBITDA Margin

9.6 % 9.4 %

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(dollars in thousands) Trailing Twelve Months

Reconciliation of Net Income (Loss) Attributable to Class A and B-1

Common Stockholders to Adjusted EBITDA

October 30,
2021
January 30,
2021
October 31,
2020

Net income (loss) attributable to Class A and B-1 common stockholders

$ 129,264 $ (26,483 ) $ (27,495 )

Add (deduct):

Interest expense, net

108,117 218,430 229,426

Income tax expense (benefit)

53,984 (3,337 ) (20,932 )

Depreciation and amortization

171,512 174,836 172,905

Income from equity method investees

(11,020 ) (6,482 ) (5,067 )

Loss on debt extinguishment and modification

38,387 17,549 -

Goodwill & indefinite-lived intangible impairment

- - 19,000

Asset impairments and write offs

13,873 15,606 10,266

Equity-based compensation

41,942 12,915 9,951

Other non-operating income

(64,934 ) - -

Mexico joint venture EBITDA (1)

25,178 19,074 17,206

Store pre-opening expenses

13,957 9,228 9,290

Store closing expenses

5,164 7,782 8,487

Non-cash occupancy-related costs (2)

7,715 19,240 23,846

Non-recurring costs (3)

34,788 25,990 20,785

Adjusted EBITDA

$ 567,927 $ 484,348 $ 467,668

Net sales

$ 5,630,505 $ 4,920,202 $ 4,731,145

Net margin (4)

2.3 % (0.5 %) (0.6 %)

Adjusted EBITDA Margin

10.1 % 9.8 % 9.9 %

Adjusted Net Income and Adjusted EPS

Adjusted Net Income and Adjusted diluted earnings per share attributable to Petco common stockholders (Adjusted EPS) are considered non-GAAP financial measures under the SEC's rules because they exclude certain amounts included in the net income (loss) attributable to Petco common stockholders and diluted earnings per share attributable to Petco common stockholders calculated in accordance with GAAP. Management believes that Adjusted Net Income and Adjusted EPS are meaningful measures to share with investors because they facilitate comparison of the current period performance with that of the comparable prior period. In addition, Adjusted Net Income and Adjusted EPS afford investors a view of what management considers to be Petco's core earnings performance as well as the ability to make a more informed assessment of such earnings performance with that of the prior period.

The tables below reflect the calculation of Adjusted Net Income (Loss) and Adjusted EPS for the thirteen weeks ended October 30, 2021 compared to the prior year quarter ended October 31, 2020.

(in thousands, except per share amounts) 13 Weeks Ended
Reconciliation of Diluted EPS to Adjusted EPS October 30, 2021 October 31, 2020
Amount Per share Amount Per share

Net income attributable to common stockholders / diluted EPS

$ 52,752 $ 0.20 $ 3,403 $ 0.02

Add (deduct):

Income tax expense (benefit)

14,095 0.05 (7,940 ) (0.04 )

Asset impairments and write offs

3,228 0.01 1,390 0.01

Equity-based compensation

13,381 0.05 2,847 0.01

Other non-operating income

(19,773 ) (0.08 ) - -

Store pre-opening expenses

4,222 0.02 3,625 0.02

Store closing expenses

1,264 0.00 2,311 0.01

Non-cash occupancy-related costs (2)

1,540 0.01 3,920 0.02

Non-recurring costs (3)

2,233 0.01 8,834 0.04

Adjusted pre-tax income / diluted earnings per share

$ 72,942 $ 0.27 $ 18,390 $ 0.09

Income tax expense at 26% normalized tax rate

18,965 0.07 4,781 0.02

Adjusted Net Income / Adjusted EPS

$ 53,977 $ 0.20 $ 13,609 $ 0.07

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Free Cash Flow

Free Cash Flow is a non-GAAP financial measure that is calculated as net cash provided by operating activities less cash paid for fixed assets. Management believes that Free Cash Flow, which measures the ability to generate additional cash from business operations, is an important financial measure for use in evaluating the company's financial performance.

The table below reflects the calculation of Free Cash Flow for the thirteen and thirty- nine weeks ended October 31, 2021 compared to the thirteen and thirty-nine weeks ended October 31, 2020.

(in thousands) 13 Weeks Ended 39 Weeks Ended
October 30,
2021
October 31,
2020
October 30,
2021
October 31,
2020

Net cash provided by operating activities

$ 86,040 $ 109,091 $ 288,444 $ 201,480

Cash paid for fixed assets

(64,447 ) (46,246 ) (164,330 ) (96,289 )

Free Cash Flow

$ 21,593 $ 62,845 $ 124,114 $ 105,191

Net Debt

Net Debt is a non-GAAP financial measure that is calculated as the sum of current and non-current debt, less cash and cash equivalents. Management considers this adjustment useful because it reduces the volatility of total debt caused by fluctuations between cash paid against the company's revolving credit facility and cash held on hand in cash and cash equivalents.

The table below reflects the calculation of Net Debt as of October 30, 2021 compared to the prior quarters ended January 30, 2021 and October 31, 2020.

(dollars in thousands) October 30,
2021
January 30,
2021
October 31,
2020

Total debt:

Senior secured credit facilities, net, including current portion

$ 1,660,423 $ 1,646,281 $ 2,355,426

Senior notes, net

- - 868,624

Finance leases, including current portion

14,828 13,639 13,615

Total debt

1,675,251 1,659,920 3,237,665

Less: cash and cash equivalents

(221,484 ) (111,402 ) (195,832 )

Net Debt

$ 1,453,767 $ 1,548,518 $ 3,041,833

Adjusted EBITDA (TTM)

$ 567,927 $ 484,348 $ 467,668

Net Debt / Adjusted EBITDA ratio

2.6x 3.2x 6.5x

Adjusted EBITDA, Adjusted Net Income and Adjusted EPS Footnotes

(1)

Mexico Joint Venture EBITDA represents 50% of the entity's operating results for all periods, as adjusted to reflect the results on a basis comparable to Adjusted EBITDA. In the financial statements, this joint venture is accounted for as an equity method investment and reported net of depreciation and income taxes. Because such a presentation would not reflect the adjustments made in the calculation of Adjusted EBITDA, we include the 50% interest in the company's Mexico joint venture on an Adjusted EBITDA basis to ensure consistency. The table below presents a reconciliation of Mexico joint venture net income to Mexico joint venture EBITDA.

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13 Weeks Ended
(in thousands) October 30,
2021
October 31,
2020

Net income

$ 5,274 $ 4,053

Depreciation

3,660 2,915

Income tax expense

3,277 2,103

Foreign currency gain

(60 ) (395 )

Interest expense, net

1,171 1,158

EBITDA

$ 13,322 $ 9,834

50% of EBITDA

$ 6,661 $ 4,917
(2)

Non-cash occupancy-related costs include the difference between cash and straight-line rent for all periods.

(3)

Non-recurring costs include: severance; legal reserves and related fees; one-time consulting and other costs associated with our strategic transformation initiatives; discontinuation and liquidation costs; and costs related to our initial public offering and refinancing. While we have incurred significant costs associated with the COVID-19 pandemic during fiscal 2020 and 2021, we have not classified any of these costs as non-recurring due to the uncertainty surrounding the pandemic's length and long-term impact on the macroeconomic operating environment.

(4)

We define net margin as net income (loss) attributable to Class A and B-1 common stockholders divided by net sales and Adjusted EBITDA margin as Adjusted EBITDA divided by net sales.

WOOF-F

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