Planet Organic Health Corp Announces Third Quarter Results

EDMONTON, May 31 /CNW/ - Planet Organic Health Corp (TSX Venture Exchange - POH), Canada's leading natural products retailer announces their financial results for the third quarter ended March 31, 2010. Sales from continuing operations for the quarter ended March 31, 2010 were $28.3 million compared to $29.3 million for the same period in 2009, a decrease of $1.0 million, or 3.4%. Foreign currency translation differences accounted for $2.3 million of the decrease. By removing the impact of foreign currency translation differences, third quarter sales actually increased by 4% over last year.

Sales from continuing operations for the nine months ended March 31, 2010 were $83.0 million compared to $84.0 million for the nine months ended March 31, 2009, a decrease of $1.0 million, or 1.2%. Removing the significant impact of foreign currency translation differences, year to date sales increased by 4%.

For the third quarter, the Corporation recorded a net loss from continuing operations of $16.7 million compared to a loss of $1.3 million last year. However, the current quarter includes an impairment charge of $17.7 million, which, if removed, results in an adjusted net income for the current quarter of $1.1 million. For the nine months ended March 31, 2010, the Corporation recorded a net loss from continuing operations of $20.3 million, compared to a loss of $5.0 million for the first nine months last year. However, the current year includes an impairment charge of $17.7 million and a loss on debt extinguishment of $2.1 million which, if removed from the current year, results in a net loss of $2.6 million.

EBITDASX from continuing operations before restructuring costs for the quarter was $2.0 million, or 57% higher than the third quarter last year. The increase was driven primarily by strong gross margins and expenditure control. On a year to date basis, EBITDASX before restructuring charges of $4.7 million is 42% higher than last year. Restructuring charges include one-time restructuring expenses and losses on debt extinguishment.

The Planet Organic Market division, operating in nine locations in Canada throughout the quarter, reported sales for the quarter ended March 31, 2010 of $16.3 million, an increase of 5.8% over the same period last year. Same store sales increased by 9.9% over the third quarter last year, continuing the sales recovery that began last quarter.

The Mrs. Green's Natural Market division, operating in eleven US locations, reported sales of $12.0 million for the quarter ended March 31, 2010, a decrease of 13.7% over the third quarter last year. However, the decrease was entirely attributable to changes in foreign currency translation. Same store sales, which exclude the impact of foreign exchange translation differences, grew by 2.8% from the same quarter last year, also continuing the sales recovery that began last quarter.

"We are continuing to see sales growth in both our Canadian and US divisions that began in the second quarter." reports Darren Krissie, Executive Vice President, adding that "new and innovative marketing has been particularly successful in Planet Organic Market stores."

    
    Summary of key third quarter FY2010 financial results from continuing
    operations (in thousands of dollars)

                                Q3      Fiscal 2009       Q3      Fiscal 2010
                           Fiscal 2009 Year to Date  Fiscal 2010 Year to Date

    Sales                     $29,315      $83,981      $28,268      $82,992
    Cost of goods sold        $18,274      $52,181      $17,306      $51,096
    Gross profit              $11,041      $31,800      $10,962      $31,896
    Operating expenses(1)     $12,531      $37,211      $28,560      $35,468
    EBITDASX before
     restructuring costs       $1,277       $3,280       $2,013       $4,657
    EBITDASX after
     restructuring costs       $1,277       $3,280       $1,438         $(90)
    Loss before tax(1)        ($1,489)     ($5,411)    ($17,599)    ($21,305)
    Income taxes
     (recovery)(1)              ($162)       ($442)       ($917)       ($988)
    Net loss(1)               ($1,327)     ($4,969)    ($16,681)    ($20,317)
    Cash flow from operations  $1,558       $2,610       $1,082       $1,074

    (1) Includes impairment charge of $17,733.
    

Included in current quarter operating expenses are costs of $575 thousand pertaining to one-time restructuring costs and $17.7 million related to a goodwill and intangible asset impairment charge. Additionally, the Corporation recorded a foreign exchange gain of $593 thousand this quarter as the Canadian dollar continued to strengthen against the US dollar. This quarter last year, the Corporation recorded a foreign exchange loss of $664 thousand.

Cash flow from continuing operations for the quarter reflects the cash charges associated with restructuring expenses of $937 thousand. Pre-tax income in the quarter was primarily driven by operating efficiencies realized from recent restructuring initiatives and strengthening off gross margins. On a year to date basis, pre-tax losses this year also include $2.1 million in debt restructuring charges and $2.6 million in restructuring expenses while last year a foreign exchange loss of $3.7 million was recorded compared to a foreign exchange gain of $1.9 million this year.

As previously announced, the Corporation has divested of three operating divisions, being the natural health outlets which operate under the Sangster's Health Centre banner and the Healthy's banner, plus the vitamin and supplement manufacturing division which operated under the Trophic Canada banner. Of gross proceeds received of $11.1 million, $9.8 million was used to repay long term debt and bank indebtedness, significantly reducing the Corporation's debt exposure. The Corporation recorded a net gain on the sale of these divisions of $5.4 million.

As previously announced, the Corporation filed for creditor protection under the Companies Creditors' Arrangement Act on April 29, 2010, with the stay of proceedings now extended to June 18, 2010. The Corporation has also announced that it has entered into an Acquisition Agreement dated May 19, 2010, with The Catalyst Capital Group Inc., on behalf of funds managed by it ("Catalyst") in connection with the proposed acquisition by Catalyst of substantially all of the assets of the Corporation. Shareholders are reminded that, after giving effect to the transaction with Catalyst if approved by the Ontario Superior Court of Justice, that the Corporation will not have any operating assets or active business.

EBITDASX reported above is a non-GAAP measure and is earnings before interest, taxes, depreciation, amortization, stock-based compensation, foreign currency translation, impairment charges and loss on extinguishment of debt.

    
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    For further financial information and a copy of our interim or annual
    reports, please visit our corporate website at
    www.planetorganichealthcorp.com
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Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

    
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Forward-Looking Statements

Certain information included herein is forward-looking. Forward-looking statements include, without limitation, statements regarding the future financial position, business strategy, budgets, projected costs, capital expenditures, financial results, taxes and plans and objectives of or involving Planet and statements with respect to the timing an continuance of the CCAA protection, the uncertainty involved in court proceedings, the restructuring process, potential opportunities for the restructured business and ongoing operation of certain of the Company's retail grocery outlets. Many of these statements can be identified by looking for words such as "believe", "expects", "expected", "will", "intends", "projects", "anticipates", "estimates", "continues", "plan", "seek", "pursue", "opportunity", "grow", "progress" or similar words. Planet Organic believes the expectations reflected in such forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. Forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties some of which are described in Planet Organic's continuous disclosure documents. Such forward-looking statements necessarily involve known and unknown risks and uncertainties and other factors, which may cause Planet Organic's actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. Such factors include, but are not limited to: general economic, market and business conditions; industry capacity; competitive action by other companies; refining and marketing margins; the ability of suppliers to meet commitments; actions by governmental authorities including increases in taxes; changes in environmental and other regulations; and other factors, many of which are beyond the control of Planet Organic. Any forward-looking statements are made as of the date hereof and Planet Organic does not undertake any obligation, except as required under applicable law, to publicly update or revise such statements to reflect new information, subsequent or otherwise.

For further information: Planet Organic Health Corp., Darren Krissie, Executive Vice President, [phone]