Premium Brands Holdings Corporation Announces Record First Quarter Sales and Adjusted EBITDA and Declares Second Quarter Dividend
VANCOUVER, May 13, 2019 /CNW/ - Premium Brands Holdings Corporation (TSX: PBH), a leading producer, marketer and distributor of branded specialty food products, announced today its results for the first quarter of 2019.
HIGHLIGHTS FOR THE QUARTER
- Record revenue of $776.6 million representing a 32.8% or $191.7 million increase as compared to the first quarter of 2018
- Record adjusted EBITDA of $60.3 million representing a 39.9% or $17.2 million increase as compared to the first quarter of 2018. After normalizing for the adoption of the new IFRS-16 accounting standard, the Company's adjusted EBITDA for the first quarter of 2019 of $52.0 million was in line with its expectations
- Adjusted EPS for the quarter decreased to $0.52 per share from $0.64 per share in the first quarter of 2018 due to the highly seasonal nature of many of the businesses acquired in mid to late 2018 and to the adoption of the new IFRS-16 accounting standard
- Subsequent to the quarter, the Company declared a quarterly dividend of $0.525 per share
- Also subsequent to the quarter, the 2019 CEO's Letter to Shareholders titled "The Long Game" was posted to the Company's website
SUMMARY FINANCIAL INFORMATION
(In millions of dollars except per share amounts and ratios)
13 weeks |
13 weeks |
|||
Revenue |
776.6 |
584.9 |
||
Adjusted EBITDA |
60.3 |
43.1 |
||
Earnings |
10.0 |
13.2 |
||
EPS |
0.30 |
0.43 |
||
Adjusted earnings |
17.6 |
19.8 |
||
Adjusted EPS |
0.52 |
0.64 |
||
Trailing Four Quarters Ended |
||||
Mar 30, |
Mar 31, |
|||
Free cash flow |
167.8 |
129.0 |
||
Declared dividends |
65.7 |
52.8 |
||
Declared dividend per share |
1.95 |
1.74 |
||
Payout ratio |
39.2% |
40.9% |
||
"Our first quarter results were a solid start to the year as we once again posted record sales, adjusted EBITDA and free cash flow. Overall our performance was in line with our expectations and, combined with the solid progress we have made on a number of fronts to expand our various platforms in new geographies and channels, positions us well to deliver another year of record financial results. Our Seafood platform made great progress in launching its new meat and seafood distribution platform in Ontario; our Meat Snack and Deli Meats platforms secured a record number of new listings in Canada and the U.S. in key categories such as Italian charcuterie, meat snack sticks and plant protein based burgers; and our Sandwich platform continued to gain momentum in the retail and convenience store channels," said Mr. George Paleologou, President and CEO. "We are particularly pleased with the quarter since it was not without its challenges including a later than usual Easter and severe weather conditions in parts of eastern Canada.
"Looking forward, we are closely monitoring the African Swine Fever crisis that is currently unfolding in China and its impact on global protein markets. At this point, the situation is very fluid with many unknowns that make it difficult to determine with any certainty what its impacts will be. Furthermore, there are a number of potential factors that could significantly mitigate the impacts of ASF including pork demand destruction, particularly in China; increased global production of other proteins; international trade disputes; and timing of the containment of the disease. Regardless of how things play out, we are actively working on a range of initiatives with our supply chain partners and customers to manage the situation, including implementing selling price increases and, where possible, building inventory positions.
"I am, however, confident that any ASF challenges we experience will be transitory, particularly since we have had to deal with similar issues in the past and have always emerged a better and stronger company. Our business model of partnering with and empowering talented and successful entrepreneurs in the specialty food space ideally positions us to not only resolve any challenges on a timely basis but also to capitalize on them. We have time and time again created long-term shareholder value during these disruptive periods. Furthermore, the diversification we have built into our business model over the last ten years will also help to mitigate any ASF impacts. Today, pork costs as a percentage of our sales are only about 11%.
"On the acquisitions front, we continue to see an increasing number of opportunities. Not only is there a growing number of talented and successful food entrepreneurs from across Canada and the U.S. coming to us as their acquirer of choice, but we are also seeing increased interest from larger competitors to join our ecosystem. The combination of our unique culture, focus on long-term value creation and respect for the legacy of the businesses we partner with differentiates us from most, if not all, other major food companies in North America. It is for these reasons that the pace of our acquisitions activity has been accelerating and why our pipeline of potential opportunities remains very robust.
"For additional information on our acquisitions and major capital projects as well as investment business strategies in general, please see my most recent Letter to Shareholders titled "The Long Game," which is posted on our website at www.premiumbrandsholdings.com," added Mr. Paleologou.
SECOND QUARTER 2019 DIVIDEND
The Company also announced that its Board of Directors approved a cash dividend of $0.525 per share for the second quarter of 2019, which will be payable on July 15, 2019 to shareholders of record at the close of business on June 28, 2019.
Unless indicated otherwise in writing at or before the time the dividend is paid, each dividend paid by the Company in 2019 or a subsequent year is an eligible dividend for the purposes of the Enhanced Dividend Tax Credit System.
ABOUT PREMIUM BRANDS
Premium Brands owns a broad range of leading specialty food manufacturing and differentiated food distribution businesses with operations across Canada and the United States.
RESULTS OF OPERATIONS
The Company reports on two reportable segments, Specialty Foods and Premium Food Distribution, as well as corporate costs (Corporate). The Specialty Foods segment consists of the Company's specialty food manufacturing businesses while the Premium Food Distribution segment consists of the Company's differentiated distribution and wholesale businesses.
Revenue
(in millions of dollars except percentages) |
||||||||
13 weeks |
% (1) |
13 weeks |
% (1) |
|||||
Revenue by segment: |
||||||||
Specialty Foods |
536.9 |
69.1% |
377.9 |
64.6% |
||||
Premium Food Distribution |
239.7 |
30.9% |
207.0 |
35.4% |
||||
Consolidated |
776.6 |
100.0% |
584.9 |
100.0% |
||||
(1) Expressed as a percentage of consolidated revenue |
||||||||
Specialty Foods' (SF) revenue for the first quarter of 2019 as compared to the first quarter of 2018 increased by $159.0 million or 42.1% primarily due to: (i) business acquisitions, which accounted for $141.8 million of the increase; (ii) organic volume growth of $11.2 million, which was driven primarily by meat snacks, deli meats and cooked protein products; and (iii) a $9.6 million increase in the translated value of its U.S. based businesses' sales resulting from a weaker Canadian dollar. These increases were partially offset by selling price deflation of $3.6 million.
SF's organic volume growth rate (OVGR) was approximately 4.0% after normalizing for the impact of Easter holiday related sales falling in the second quarter this year versus in the first quarter last year – before normalizing for the Easter holiday impact SF's OVGR was approximately 3.0%. SF's normalized OVGR was at the bottom end of the Company's long-term targeted range of 4% to 6% which is to be expected given that the first quarter is generally the Company's weakest due to the seasonality associated with many of its businesses. Furthermore, many of the new meat snack, cooked protein, deli meats and sandwich growth initiatives that are scheduled to launch this year in both the U.S. and Canada are not expected to start having a meaningful impact on SF's sales until part way through the second quarter.
Premium Food Distribution's (PFD) revenue for the first quarter of 2019 as compared to the first quarter of 2018 increased by $32.7 million or 15.8% primarily due to: (i) business acquisitions, which accounted for $39.5 million of the increase; and (ii) selling price inflation of $2.3 million.
PFD's legacy businesses' sales were down during the quarter primarily due to: (i) the later Easter holiday; (ii) reduced wholesale business with retailers in eastern Canada resulting from a variety of transitory factors including the timing of product promotions and a particularly harsh winter in Quebec; and (iii) lower foodservice sales in western Canada due mainly to lower consumer spending, particularly in the white-table-cloth segment of the market. These factors were partially offset by strong sales growth in the Greater Toronto Area foodservice market driven primarily by PFD's recent investment in a new 105,000 square foot custom cutting and distribution center for seafood and protein.
Gross Profit
(in millions of dollars except percentages) |
||||||||
13 weeks |
% (1) |
13 weeks |
% (1) |
|||||
Gross profit by segment: |
||||||||
Specialty Foods |
125.0 |
23.3% |
76.7 |
20.3% |
||||
Premium Food Distribution |
34.6 |
14.4% |
33.5 |
16.2% |
||||
Consolidated |
159.6 |
20.6% |
110.2 |
18.8% |
||||
(1) Expressed as a percentage of the corresponding segment's revenue |
||||||||
SF's gross profit as a percentage of its revenue (gross margin) for the first quarter of 2019 as compared to the first quarter of 2018 increased by 300 basis points primarily due to: (i) the adoption of the new IFRS-16 accounting standard which resulted in SF's gross margin increasing by approximately $5.1 million. Normalizing for this factor, SF's gross margin is 22.3%; (ii) improved operating efficiencies at a number of SF's plants due mainly to continuous improvement initiatives; (iii) incremental contribution margin associated with SF's organic volume growth; and (iv) the reclassification of $1.5 million of certain freight costs to selling, general and administrative expense. Unlike in prior quarters, recently acquired businesses did not have a meaningful positive impact on SF's gross margin due to the seasonality of many of these businesses.
PFD's gross margins for the first quarter of 2019 as compared to the first quarter of 2018 decreased by 180 basis points primarily due to: (i) its recently acquired Ready Seafood business having a lower gross margin relative to PFD's average gross margin. This was an even more significant factor as compared to previous quarters due to a combination of the seasonality of Ready's business and the growing impact on various markets of China's tariffs on U.S. caught lobsters. Looking forward (see Forward Looking Statements), Ready launched several initiatives at the end of the quarter that are expected to largely mitigate the impact of these tariffs on a go forward basis; (ii) transitory increases in a variety of commodity costs including beef, which is being impacted by growing global demand, and seafood, which is being impacted by a weaker Canadian dollar; and (iii) lost contribution margin associated with PFD's lower sales volume. These factors were partially offset by the adoption of the new IFRS-16 accounting standard which resulted in PFD's gross profit increasing by approximately $0.8 million.
Selling, General and Administrative Expenses (SG&A)
(in millions of dollars except percentages) |
||||||||
13 weeks |
% (1) |
13 weeks |
% (1) |
|||||
SG&A by segment: |
||||||||
Specialty Foods |
71.3 |
13.3% |
41.1 |
10.9% |
||||
Premium Food Distribution |
23.9 |
10.0% |
22.0 |
10.6% |
||||
Corporate |
4.1 |
4.0 |
||||||
Consolidated |
99.3 |
12.8% |
67.1 |
11.5% |
||||
(1) Expressed as a percentage of the corresponding segment's revenue |
||||||||
SF's SG&A for the first quarter of 2019 as compared to the first quarter of 2018 increased by $30.2 million primarily due to: (i) business acquisitions; (ii) the reclassification of $1.5 million of certain freight expenses from cost of sales; (iii) increased discretionary promotional spending associated with a number of new product launches; (iv) higher variable compensation accruals associated with growth in SF's free cash flow; (v) incremental freight costs resulting from a combination of higher sales volumes and increased freight rates; and (vi) a $0.9 million increase in the translated value of its U.S. based businesses' SG&A due to a weaker Canadian dollar. These factors were partially offset by the adoption of the new IFRS-16 accounting standard which resulted in a $0.7 million decrease in SF's SG&A.
SF's SG&A as a percentage of sales (SG&A ratio) for the first quarter of 2019 as compared to the first quarter of 2018 increased by 240 basis points primarily due to certain of the factors outlined above, namely business acquisitions, the reclassification of freight costs, increased discretionary marketing and higher variable compensation accruals with the impact of business acquisitions representing a majority of the increase. These factors were partially offset by the adoption of the new IFRS-16 accounting standard.
PFD's SG&A for the first quarter of 2019 as compared to the first quarter of 2018 increased by $1.9 million primarily due to business acquisitions partially offset by the adoption of the new IFRS-16 accounting standard which resulted in a $1.6 million decrease in PFD's SG&A. Investments in additional fleet and sales infrastructure made to support future growth were largely offset by: (i) lower variable selling costs associated with the decrease in PFD's legacy businesses' sales; and (ii) reduced variable compensation accruals.
PFD's SG&A ratio for the first quarter of 2019 as compared to the first quarter of 2018 decreased by 60 basis points primarily due to: (i) adoption of the new IFRS-16 accounting standard; and (ii) its recently acquired Ready Seafood business having a lower SG&A ratio relative to its average SG&A ratio. These factors were partially offset by lower sales relative to its higher fleet and sales infrastructure costs.
Corporate SG&A for the first quarter of 2019 as compared to the first quarter of 2018 increased by $0.1 million primarily due to increased investments in administrative infrastructure partially offset by the adoption of the new IFRS-16 accounting standard, which resulted in a $0.2 million decrease in Corporate SG&A.
Adjusted EBITDA
(in millions of dollars except percentages) |
||||||||
13 weeks |
% (1) |
13 weeks |
% (1) |
|||||
Adjusted EBITDA by segment: |
||||||||
Specialty Foods |
53.7 |
10.0% |
35.6 |
9.4% |
||||
Premium Food Distribution |
10.7 |
4.5% |
11.5 |
5.6% |
||||
Corporate |
(4.1) |
(4.0) |
||||||
Consolidated |
60.3 |
7.8% |
43.1 |
7.4% |
||||
Adjusted EBITDA by segment excluding IFRS-16 adoption: |
||||||||
Specialty Foods |
48.0 |
8.9% |
35.6 |
9.4% |
||||
Premium Food Distribution |
8.3 |
3.5% |
11.5 |
5.6% |
||||
Corporate |
(4.3) |
(4.0) |
||||||
Consolidated |
52.0 |
6.7% |
43.1 |
7.4% |
||||
(1) Expressed as a percentage of the corresponding segment's revenue |
||||||||
Adjusted EBITDA for the first quarter of 2019 as compared to the first quarter of 2018 increased by $17.2 million or 39.9%. Normalizing for the adoption of the new IFRS-16 accounting standard, the Company's adjusted EBITDA for the first quarter of 2019 is $52.0 million, representing an increase of $8.9 million or 20.6% from the first quarter of 2018. While the Company's sales were slightly below its expected range for the quarter, mainly due to a larger than expected impact from the later Easter holiday and some of the challenges facing PFD, its adjusted EBITDA was in line with expectations as improved operating efficiencies in a number of SF's plants more than offset the shortfall in sales.
Plant Start-up and Restructuring Costs
Plant start-up and restructuring costs consist of expenses associated with the start-up of new production capacity or the reconfiguration of existing capacity to gain efficiencies and/or additional capacity. The Company expects (see Forward Looking Statements) these projects to result in significant improvements in its future earnings and cash flows.
During the first quarter of 2019, the Company incurred $1.9 million in plant start-up and restructuring costs relating primarily to: (i) the start-up of PFD's new 105,000 square foot state-of-the-art distribution and custom cutting facility in the Greater Toronto Area (the GTA facility), which commenced operations near the end of the fourth quarter; and (ii) the start-up of a new 22,300 square foot culinary plant for fresh salads, soups and sauces in Surrey, BC (the Culinary facility), which also commenced operations near the end of the fourth quarter.
Interest and Other Financing Costs
The Company's interest and other financing costs for the first quarter of 2019 as compared to the first quarter of 2018 increased by $6.1 million primarily due to: (i) increases in its net funded debt; and (ii) a higher weighted average interest rate resulting from a combination of higher short term interest rates, on a year over year basis, and increased interest rate premiums associated with the Company's higher senior debt to adjusted EBITDA ratio.
Income Taxes
The Company's expected range (see Forward Looking Statements) for its provision for income taxes as a percentage of earnings before income taxes (income tax rate) for 2019 is 24% to 27%. This is based on: (i) an effective income tax rate range within the main tax jurisdictions that it operates in (the Tax Jurisdictions) of 21% to 28%; (ii) the expected allocation of its taxable income among the Tax Jurisdictions; and (iii) the deductibility of certain costs for income tax purposes.
For the first quarter of 2019, the Company's income tax rate was 14.5%, which is below its expected range primarily due to: (i) certain fixed amount deductions from taxable income that significantly impact the Company's effective tax rate in seasonally slower quarters; and (ii) a $0.6 million decrease in the translated value of its U.S. dollar denominated deferred income tax liabilities based on a quarter over quarter improvement in the strength of the Canadian dollar.
2019 Outlook
See Forward Looking Statements for a discussion of the risks and assumptions associated with forward looking statements.
Except as noted below, the Company's outlook for 2019 does not incorporate any provisions for possible future acquisitions even though the Company continues to pursue a variety of opportunities and expects to complete several more transactions in the coming quarters.
(in millions of dollars) |
Bottom of Range |
Top of Range |
Revenue |
||
Prior guidance |
3,660.0 |
3,720.0 |
Current guidance |
3,660.0 |
3,720.0 |
Adjusted EBITDA: |
||
Prior guidance |
320.0 |
340.0 |
Current guidance |
300.0 |
340.0 |
The Company's results for the first quarter of 2019 were, in general terms, in line with its expectations. Furthermore, its revenue outlook for 2019 remains within its previous guidance range of $3.66 billion to $3.72 billion as its major 2019 growth initiatives are proceeding in line with expectations.
The Company is, however, expanding the range of its adjusted EBITDA guidance for 2019 based on taking a conservative approach to estimating the transitory impacts of the higher global commodity protein costs that are expected to result from a severe outbreak of African Swine Fever (ASF) in China, or more particularly, the transitory impact of the time lag associated with the Company implementing selling price increases to counter such cost increases.
It is estimated that as much as 35% of China's hog herd, which is by far the largest in the world, could be infected with ASF. The result of a crisis of this scale will likely not only be higher global pork commodity prices as China looks to increase its imports, but also higher prices for other protein commodities such as beef and poultry as consumers both inside and outside of China turn to substitute products. The Company is closely monitoring the situation, which at this point is very fluid with many unknowns that make it difficult to determine with any certainty what its impacts will be.
Based on its past experience with similar events, the Company does not expect ASF to have any lasting negative impact on its business and, correspondingly, is not making any changes to its current five-year objective of achieving $6 billion in sales and a 10% adjusted EBITDA margin by 2023. Furthermore, there are a number of potential offsetting factors that could significantly mitigate the impact of ASF on global protein prices, including: pork demand destruction, particularly in China; increased global production of other proteins; international trade disputes; and timing of the containment of the disease. In addition, the product diversification that the Company has built into its business over the last ten years will also help to mitigate the impact of rising commodity pork costs. Today, commodity pork costs as a percentage of its sales are only approximately 11%.
Regardless of how the situation unfolds, the Company is actively working on a range of initiatives with its supply chain partners and customers to manage the situation, including implementing selling price increases and, where possible, building inventory positions.
Premium Brands Holdings Corporation |
|||
Consolidated Balance Sheets |
|||
(in millions of Canadian dollars) |
|||
Mar 30, |
Dec 29, |
Mar 31, |
|
Current assets: |
|||
Cash and cash equivalents |
14.7 |
19.4 |
18.5 |
Accounts receivable |
289.1 |
321.9 |
232.0 |
Inventories |
388.2 |
339.8 |
250.3 |
Prepaid expenses and other assets |
16.2 |
15.1 |
11.7 |
708.2 |
696.2 |
512.5 |
|
Capital assets |
472.8 |
476.4 |
341.2 |
Right of use assets |
271.8 |
- |
- |
Intangible assets |
443.9 |
452.9 |
213.2 |
Goodwill |
809.9 |
776.7 |
467.0 |
Investment in associates |
27.8 |
26.7 |
29.0 |
Other assets |
21.4 |
21.6 |
10.4 |
2,755.8 |
2,450.5 |
1,573.2 |
|
Current liabilities: |
|||
Cheques outstanding |
13.3 |
22.0 |
10.3 |
Bank indebtedness |
43.8 |
35.9 |
35.6 |
Dividends payable |
17.7 |
16.0 |
14.7 |
Accounts payable and accrued liabilities |
228.9 |
246.6 |
169.2 |
Current portion of long-term debt |
8.6 |
10.8 |
3.8 |
Current portion of lease obligations |
23.2 |
- |
- |
Current portion of provisions |
9.2 |
2.3 |
21.9 |
Current portion of puttable interest in subsidiaries |
72.2 |
73.2 |
33.4 |
416.9 |
406.8 |
288.9 |
|
Long-term debt |
770.8 |
726.4 |
481.5 |
Lease obligations |
279.8 |
- |
- |
Provisions |
54.6 |
36.3 |
2.7 |
Puttable interest in subsidiaries |
5.3 |
4.6 |
4.6 |
Deferred revenue |
2.8 |
6.8 |
6.6 |
Pension obligation |
0.7 |
0.9 |
2.2 |
Deferred income taxes |
69.0 |
84.6 |
52.2 |
1,599.9 |
1,266.4 |
838.7 |
|
Convertible unsecured subordinated debentures |
361.1 |
360.2 |
214.3 |
Equity attributable to shareholders: |
|||
Retained earnings (deficit) |
5.5 |
32.4 |
(5.2) |
Share capital |
753.9 |
753.9 |
498.1 |
Reserves |
35.4 |
37.6 |
27.3 |
794.8 |
823.9 |
520.2 |
|
2,755.8 |
2,450.5 |
1,573.2 |
|
Premium Brands Holdings Corporation |
|||||||
Consolidated Statements of Operations |
|||||||
(in millions of Canadian dollars except per share amounts) |
|||||||
13 weeks ended Mar 30, 2019 |
13 weeks ended Mar 31, 2018 |
||||||
Revenue |
776.6 |
584.9 |
|||||
Cost of goods sold |
617.0 |
474.7 |
|||||
Gross profit before depreciation, amortization, and plant start-up and restructuring costs |
159.6 |
110.2 |
|||||
Selling, general and administrative expenses before depreciation, amortization, and |
|||||||
plant start-up and restructuring costs |
99.3 |
67.1 |
|||||
60.3 |
43.1 |
||||||
Plant start-up and restructuring costs |
1.9 |
0.6 |
|||||
58.4 |
42.5 |
||||||
Depreciation of capital assets |
14.3 |
8.8 |
|||||
Amortization of intangible assets |
5.0 |
3.2 |
|||||
Amortization of right of use assets |
6.7 |
- |
|||||
Accretion of lease obligations |
3.2 |
- |
|||||
Interest and other financing costs |
14.9 |
8.8 |
|||||
Acquisition transaction costs |
0.6 |
1.4 |
|||||
Change in value of puttable interest in subsidiaries |
0.5 |
1.6 |
|||||
Accretion of provisions |
0.9 |
0.3 |
|||||
Equity loss in investments in associates |
0.5 |
0.7 |
|||||
Other |
0.1 |
- |
|||||
Earnings before income taxes |
11.7 |
17.7 |
|||||
Provision (recovery) for income taxes |
|||||||
Current |
2.7 |
5.1 |
|||||
Deferred |
(1.0) |
(0.6) |
|||||
1.7 |
4.5 |
||||||
Earnings |
10.0 |
13.2 |
|||||
Earnings per share: |
|||||||
Basic |
0.30 |
0.43 |
|||||
Diluted |
0.30 |
0.43 |
|||||
Weighted average shares outstanding (in millions): |
|||||||
Basic |
33.7 |
30.8 |
|||||
Diluted |
33.8 |
31.0 |
|||||
Premium Brands Holdings Corporation |
|||||
Consolidated Statements of Cash Flows |
|||||
(in millions of Canadian dollars) |
|||||
13 weeks Mar 30, 2019 |
13 weeks ended Mar 31, 2018 |
||||
Cash flows from (used in) operating activities: |
|||||
Earnings |
10.0 |
13.2 |
|||
Items not involving cash: |
|||||
Depreciation of capital assets |
14.3 |
8.8 |
|||
Amortization of intangible assets |
5.0 |
3.2 |
|||
Amortization of right of use assets |
6.7 |
- |
|||
Accretion of lease obligations |
3.2 |
- |
|||
Change in value of puttable interest in subsidiaries |
0.5 |
1.6 |
|||
Equity loss in investments in associates |
0.5 |
0.7 |
|||
Deferred revenue |
0.1 |
0.1 |
|||
Non-cash financing costs |
1.1 |
0.7 |
|||
Accretion of provisions |
0.9 |
0.3 |
|||
Deferred income tax recovery |
(1.0) |
(0.6) |
|||
Other |
0.2 |
- |
|||
41.5 |
28.0 |
||||
Change in non-cash working capital |
(36.2) |
(38.9) |
|||
5.3 |
(10.9) |
||||
Cash flows from (used in) financing activities: |
|||||
Long-term debt, net |
53.6 |
52.1 |
|||
Payments for lease obligations |
(8.3) |
- |
|||
Bank indebtedness and cheques outstanding |
(0.7) |
25.5 |
|||
Dividends paid to shareholders |
(16.0) |
(13.0) |
|||
28.6 |
64.6 |
||||
Cash flows from (used in) investing activities: |
|||||
Capital asset additions |
(14.7) |
(12.4) |
|||
Business acquisitions |
(21.4) |
(33.5) |
|||
Payments to shareholders of non-wholly owned subsidiaries |
(1.2) |
(0.4) |
|||
Payment of provisions |
(0.8) |
- |
|||
Net change in share purchase loans and notes receivable |
0.1 |
0.1 |
|||
Investment in and advances to associates – net of distributions |
(1.0) |
(4.2) |
|||
Other |
0.4 |
0.1 |
|||
(38.6) |
(50.3) |
||||
Change in cash and cash equivalents |
(4.7) |
3.4 |
|||
Cash and cash equivalents – beginning of period |
19.4 |
15.1 |
|||
Cash and cash equivalents – end of period |
14.7 |
18.5 |
|||
Interest and other financing costs paid |
8.2 |
5.2 |
|||
Income taxes paid |
2.7 |
8.9 |
|||
NON-IFRS FINANCIAL MEASURES
The Company uses certain non-IFRS financial measures including adjusted EBITDA, free cash flow, adjusted earnings and adjusted earnings per share, which are not defined under IFRS and, as a result, may not be comparable to similarly titled measures presented by other publicly traded entities, nor should they be construed as an alternative to other earnings measures determined in accordance with IFRS. These non-IFRS measures are calculated as follows:
Adjusted EBITDA
(in millions of dollars) |
13 weeks |
13 weeks ended Mar 31, 2018 |
||
Earnings before income taxes |
11.7 |
17.7 |
||
Plant start-up and restructuring costs |
1.9 |
0.6 |
||
Depreciation of capital assets |
14.3 |
8.8 |
||
Amortization of intangible assets |
5.0 |
3.2 |
||
Amortization of right of use assets |
6.7 |
- |
||
Accretion of lease obligations |
3.2 |
- |
||
Interest and other financing costs |
14.9 |
8.8 |
||
Acquisition transaction costs |
0.6 |
1.4 |
||
Change in value of puttable interest in subsidiaries |
0.5 |
1.6 |
||
Accretion of provisions |
0.9 |
0.3 |
||
Equity loss in investments in associates |
0.5 |
0.7 |
||
Other |
0.1 |
- |
||
Consolidated adjusted EBITDA |
60.3 |
43.1 |
||
Impact from adoption of IFRS-16 |
(8.3) |
- |
||
Consolidated adjusted EBITDA excluding IFRS-16 impact |
52.0 |
43.1 |
Free Cash Flow
(in millions of dollars) |
52 weeks |
13 weeks |
13 weeks |
Rolling |
Cash flow from operating activities |
135.9 |
5.3 |
(10.9) |
152.1 |
Changes in non-cash working capital |
35.1 |
36.2 |
38.9 |
32.4 |
Lease obligation payments |
- |
(8.3) |
- |
(8.3) |
Acquisition transaction costs |
8.2 |
0.6 |
1.4 |
7.4 |
Plant start-up and restructuring costs |
5.2 |
1.9 |
0.6 |
6.5 |
Maintenance capital expenditures |
(19.8) |
(6.6) |
(4.1) |
(22.3) |
Free cash flow |
164.6 |
29.1 |
25.9 |
167.8 |
Adjusted Earnings and Adjusted Earnings per Share
(in millions of dollars except per share amounts) |
13 weeks |
13 weeks ended Mar 31, |
||
Earnings |
10.0 |
13.2 |
||
Plant start-up and restructuring costs |
1.9 |
0.6 |
||
Acquisition transaction costs |
0.6 |
1.4 |
||
Accretion of provisions |
0.9 |
0.3 |
||
Equity loss from associates in start-up |
0.5 |
0.6 |
||
Change in value of puttable interest in subsidiaries |
0.5 |
1.6 |
||
Amortization of intangibles associated with acquisitions |
5.0 |
3.2 |
||
Unrealized gain on foreign currency contracts |
- |
(0.1) |
||
19.4 |
20.8 |
|||
Current and deferred income tax effect of above items |
(1.8) |
(1.0) |
||
Adjusted earnings |
17.6 |
19.8 |
||
Weighted average shares outstanding |
33.7 |
30.8 |
||
Adjusted earnings per share |
0.52 |
0.64 |
FORWARD LOOKING STATEMENTS
This press release contains forward looking statements with respect to the Company, including, without limitation, statements regarding its business operations, strategy and financial performance and condition, cash distributions, proposed acquisitions, budgets, projected costs and plans and objectives of or involving the Company. While management believes that the expectations reflected in such forward looking statements are reasonable and represent the Company's internal expectations and belief as of May 13, 2019, there can be no assurance that such expectations will prove to be correct as such forward looking statements involve unknown risks and uncertainties beyond the Company's control which may cause its actual performance and results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward looking statements.
Forward looking statements generally can be identified by the use of the words "may", "could", "should", "would", "will", "expect", "intend", "plan", "estimate", "project", "anticipate", "believe" or "continue", or the negative thereof or similar variations. Forward looking statements in this press release include statements with respect to the Company's expectations and/or projections on its: (i) revenue; (ii) adjusted EBITDA; (iii) plant start-up and restructuring costs; (iv) income tax rates; (v) dividend policy; (vi) capital expenditures and business acquisitions; (vii) senior debt capacity utilization; and (viii) convertible debentures.
Some of the factors that could cause actual results to differ materially from the Company's expectations are outlined under Risks and Uncertainties in the Company's MD&A.
Assumptions used by the Company to develop forward looking statements contained or incorporated by reference in this press release are based on information currently available to it and include those outlined below as well as those outlined elsewhere in the Company's MD&A. Readers are cautioned that this information is not exhaustive.
- The overall economic conditions in Canada and the United States will be relatively stable with modest improvement in the near to medium term. In particular, the Company is expecting a general improvement in Alberta's economy in the latter half of 2019, driven by improving oil prices.
- The 2019 adjusted EBITDA guidance provided by the Company in its fiscal 2018 MD&A was based on the average cost of the basket of food commodities purchased by it being relatively stable. The Company has, however, adjusted its adjusted EBITDA guidance range for 2019 to reflect the uncertainties associated with an outbreak of African Swine Fever in China (see Results of Operations – 2019 Outlook).
- The Company's major capital projects, plant start-up and business acquisition initiatives will progress in line with its expectations.
- The Company will be able to continue to access sufficient skilled and unskilled labor at reasonable wage levels.
- The Company will be able to continue to access sufficient goods and services for its manufacturing and distribution operations.
- The value of the Canadian dollar relative to the U.S. dollar will continue to fluctuate in line with recent levels.
- The Company will be able to achieve its projected operating efficiency improvements.
- There will not be any material changes in the competitive environment of the markets in which the Company's various businesses compete.
- There will not be any material changes in the key food trends that are driving growth in many of the Company's businesses. These trends include: (i) growing demand for higher quality foods made with simpler more wholesome ingredients and/or with differentiating attributes such as antibiotic free, no added hormones or use of organic ingredients; (ii) increased reliance on convenience oriented foods both for on-the-go snacking as well as easy home meal preparation; (iii) healthier eating including reduced sugar consumption and increased emphasis on protein; (iv) increased snacking in between and in place of meals; (v) increased interest in understanding the background and stories behind food products being consumed; and (vi) increased social awareness on issues such as sustainability, sourcing products locally, animal welfare and food waste.
- Overall North American weather patterns will be in line with historic patterns.
- There will not be any material changes in the Company's relationships with its larger customers including the loss of a major product listing and/or being forced to give significant product pricing concessions.
- There will not be any material changes in the trade relationship between Canada and the U.S., particularly with respect to certain protein commodities such as beef, pork and chicken products.
- The Company will be able to negotiate new collective agreements with no labor disruptions.
- The Company will be able to continue to access reasonably priced debt and equity capital.
- The Company's average interest cost on floating rate debt will remain relatively stable in the near to medium future.
- Contractual counterparties will continue to fulfill their obligations to the Company.
- There will be no material changes to the tax and other regulatory requirements governing the Company.
Management has set out the above summary of assumptions related to forward looking statements included in this press release in order to provide a more complete perspective on the Company's future operations. Readers are cautioned that this information may not be appropriate for other purposes.
Unless otherwise indicated, the forward looking statements in this press release are made as of May 13, 2019 and, except as required by applicable law, will not be publicly updated or revised. This cautionary statement expressly qualifies the forward looking statements in this document.
SOURCE Premium Brands Holdings Corporation
please contact George Paleologou, President and CEO or Will Kalutycz, CFO at (604) 656-3100. www.premiumbrandsholdings.com
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