Premium Brands Holdings Corporation Announces Record Fourth Quarter and 2017 Sales and EBITDA, 13% Dividend Increase, Four Acquisitions and Guidance for 2018
VANCOUVER, March 15, 2018 /CNW/ - Premium Brands Holdings Corporation (TSX: PBH), a leading producer, marketer and distributor of branded specialty food products, announced today:
- Its results for the fourth quarter of 2017 and for 2017, both of which included record sales and adjusted EBITDA
- A 13.1% increase in its quarterly dividend to $0.475 per share ($1.90 per share annually) from $0.420 per share ($1.68 per share annually)
- The signing of four separate definitive purchase agreements for the acquisitions of the following businesses:
| (i) |
Concord Premium Meats Ltd., an Ontario based manufacturer of branded and customized protein solutions for retailers and foodservice customers across Canada. Its proprietary brands include MarcAngelo, Skoulakis, Central Park Deli, Black River Angus and Connie's Kitchen; |
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| (ii) |
The Meat Factory Ltd., an Ontario based manufacturer of branded cooked protein products for retailers and foodservice customers across Canada. Its core brand is Lou's Barbeque, which is the number one brand in Canada in the fully cooked meals category and a leading brand in the fresh cooked ribs category; |
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| (iii) |
Country Prime Meats Ltd., a BC based manufacturer of shelf stable meat snacks for primarily businesses owned by the Company; and |
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| (iv) |
Frandon Seafood Inc., a Quebec based distributor of fresh and frozen seafood to foodservice and retail customers in the greater Montreal area. Frandon will play a key role in the Company's C&C business's expansion into the seafood product category. |
The combined purchase price for these businesses, which have annual sales of approximately $266.5 million, is $227.0 million. All four transactions are expected to be on an individual basis accretive to the Company's 2018 earnings.
- Its revenue and adjusted EBITDA guidance for 2018. Not including the impact of the four transactions outlined above, the Company is projecting 2018 revenue of between $2.65 billion and $2.73 billion and adjusted EBITDA of between $244.0 million and $256.0 million.
FOURTH QUARTER HIGHLIGHTS
- Record fourth quarter revenue of $585.4 million representing a 9.9% or $52.8 million increase as compared to the fourth quarter of 2016. Excluding the impact of an extra week of operations in the fourth quarter of 2016, the Company's revenue was up 16.3% or $82.0 million.
- Record fourth quarter adjusted EBITDA of $47.3 million representing a 3.7% or $1.7 million increase as compared to the fourth quarter of 2016. Excluding the impact of an extra week of operations in the fourth quarter of 2016, the Company's adjusted EBITDA was up 12.1% or $5.1 million.
- For the year, the Company generated new records for all of its key financial performance measurements: sales increased by 18.3% to $2.2 billion; adjusted EBITDA increased by 22.9% to $190.2 million; adjusted earnings per share increased by 16.3% to $2.86 per share and free cash flow per share increased by 4.5% to $4.41 per share.
SUMMARY FINANCIAL INFORMATION
(In millions of dollars except per share amounts and ratios)
| 13 weeks |
14 weeks |
52 weeks |
53 weeks ended Dec 31, |
|
| Revenue |
585.4 |
532.6 |
2,198.3 |
1,857.5 |
| Adjusted EBITDA |
47.3 |
45.6 |
190.2 |
154.8 |
| Earnings |
17.2 |
20.0 |
80.5 |
68.8 |
| EPS |
0.57 |
0.67 |
2.70 |
2.39 |
| Adjusted earnings |
18.5 |
21.0 |
85.3 |
71.2 |
| Adjusted EPS |
0.62 |
0.71 |
2.86 |
2.46 |
| Fiscal Year Ended |
||||
| Dec 30, 2017 |
Dec 31, 2016 |
|||
| Free cash flow |
131.3 |
121.5 |
||
| Declared dividends |
50.6 |
44.5 |
||
| Declared dividend per share |
1.68 |
1.52 |
||
| Payout ratio |
38.5% |
36.6% |
||
"2017 was another successful year for us as we moved closer towards our goal of becoming North America's leading specialty foods company. Our record sales and adjusted EBITDA of $2.2 billion and $190.2 million, respectively, is a testament to the progress we have made from back in 2001 when we first launched Premium Brands," said Mr. George Paleologou, President and CEO.
"In terms of the fourth quarter, while we continued to generate record sales and adjusted EBITDA our results were below our potential due to certain unexpected headwinds. In particular, very tight labor markets across North America created unusual operating challenges for many of our businesses as well as those of our supply chain partners. These challenges included higher employee turnover rates and in some cases labor shortages. We are, however, confident that we are taking all of the necessary steps needed to adjust to this new environment and, correspondingly, remain excited about the long term prospects for our company. Consistent with this, we are projecting 2018 to be another record year with sales of approximately $2.7 billion and adjusted EBITDA of $244.0 million to $256.0 million.
"Our optimism about 2018 is based in part on realizing on the investments we have made over the last couple of years. These include our new state-of-the-art sandwich plant that came online last June, our new custom portioning and distribution center in the greater Toronto area that is scheduled to be completed next quarter, and synergies expected from acquisitions made over the last two years. We are also expecting continued solid growth in our legacy businesses driven by a robust innovation pipeline and leveraging their leadership in several niche areas of the food space that are benefiting from a variety of consumer trends. These trends include choosing higher quality foods made with simpler more wholesome ingredients, increasing reliance on convenience oriented foods both for on-the-go snacking as well as easy home meal preparation, and healthier eating including reduced sugar consumption and increased emphasis on protein.
"In terms of our four most recent acquisitions, we are very excited about all of these businesses both on a stand-alone basis as well as the potential synergies between them and our legacy businesses. All four companies have best-in-class management teams, modern well run facilities, entrepreneurial cultures and, in the cases of Concord and The Meat Factory, leading iconic brands.
"Looking forward, we continue to pursue a wide variety of acquisition opportunities and expect 2018 to be our busiest year yet for transactions," added Mr. Paleologou.
Dividends
The dividend increase will commence for the dividend period ending March 31, 2018 with the first dividend under the new rate being payable on April 16, 2018. Unless indicated otherwise in writing at or before the time the dividend is paid, each dividend paid by the Company in 2018 or a subsequent year is an eligible dividend for the purposes of the Enhanced Dividend Tax Credit System.
Acquisitions
The combined purchase price for the four acquisitions of $227.0 million consists of $155.9 million in cash, $45.4 million in the Company's common shares, $23.7 million in promissory notes and $2.0 million in contingent consideration.
The Meat Factory, Country Prime Meats and Frandon Seafood transactions are all expected to close within the next two weeks while the Concord Premium Meats transaction, which is subject to approval by the Competition Bureau, is expected to close in the second quarter of 2018.
KPMG Corporate Finance Inc. acted as financial advisor to the shareholders of Concord Premium Meats Ltd. while Fort Capital Partners acted as financial advisor to the shareholders of Country Prime Meats Ltd.
Guidance
For fiscal 2018 the Company is projecting revenues of between $2.65 billion and $2.73 billion and adjusted EBITDA of between $244 million and $256 million, representing an adjusted EBITDA margin range of 8.9% to 9.7%. These projections reflect: (i) the impact of acquisitions that were completed in 2017; and (ii) organic sales volume growth of approximately 13%, which is above the Company's long-term targeted range of 4% to 6% mainly due to its investment in additional sandwich production capacity in 2017 and the expected completion of a new custom portioning and distribution center in the greater Toronto area in the second quarter of 2018.
The Company's 2018 projections do not include: (i) the impact of the four acquisitions outlined above; and (ii) any provision for possible future acquisitions even though the Company continues to pursue a variety of opportunities and expects to complete several more transactions (in addition to those outlined above) in 2018. A business acquisition will only be reflected in the Company's guidance after the transaction has been closed.
ABOUT PREMIUM BRANDS
Premium Brands owns a broad range of leading specialty food manufacturing and differentiated food distribution businesses with operations in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Nova Scotia, Nevada, Ohio, Arizona, Minnesota, Mississippi, California and Washington State. The Company services a diverse base of customers located across North America and its family of brands and businesses include Grimm's, Harvest, McSweeney's, Piller's, Freybe, SJ Fine Foods, Expresco, Belmont Meats, Leadbetter, Skilcor, Hempler's, Isernio's, Fletcher's U.S., Direct Plus, Audrey's, SK Food Group, OvenPride, Bread Garden Go, Hygaard, Quality Fast Foods, Deli Chef, Buddy's Kitchen, Raybern's, Creekside Bakehouse, Stuyver's Bakestudio, Island City Baking, Shaw Bakers, Partners Crackers, Conte Foods, Larosa Foods, Gourmet Chef, Duso's, Centennial Foodservice, B&C Food Distributors, Shahir, Wescadia, Harlan Fairbanks, Maximum Seafood, Ocean Miracle, Hub City Fisheries, Diana's Seafood, C&C Packing, Premier Meats and Interprovincial Meat Sales.
EXTRA WEEK OF OPERATIONS
The Company's fiscal year is the 52 week or 53 week period ending on the nearest Saturday on or before December 31. For 2017 this was the 52 week period ended on December 30, 2017 and for 2016 this was the 53 week period ended on December 31, 2016. Correspondingly, the Company's results for 2016 and for the fourth quarter of 2016 include an extra week of operations as compared to 2017 (the "Extra Week").
The Extra Week resulted in incremental revenue and adjusted EBITDA in the fourth quarter of 2016 of approximately $29.2 million and $3.4 million, respectively.
RESULTS OF OPERATIONS
Revenue
| (in millions of dollars except percentages) |
|||||||||
| 13 weeks |
% |
14 weeks |
% |
52 weeks |
% |
53 weeks |
% |
||
| Revenue by segment: |
|||||||||
| Specialty Foods |
372.6 |
63.6% |
326.9 |
61.4% |
1,334.2 |
60.7% |
1,136.6 |
61.2% |
|
| Premium Food Distribution |
212.8 |
36.4% |
205.7 |
38.6% |
864.1 |
39.3% |
720.9 |
38.9% |
|
| Consolidated |
585.4 |
100.0% |
532.6 |
100.0% |
2,198.3 |
100.0% |
1,857.5 |
100.0% |
|
Specialty Foods' (SF) revenue for the fourth quarter of 2017 as compared to the fourth quarter of 2016 increased by $45.7 million or 13.9% primarily due to: (i) business acquisitions, which accounted for $39.6 million of the increase; (ii) $35.2 million in organic volume growth, representing a growth rate of 12.3%, driven primarily by artisan sandwiches, meat snacks and cooked protein products; and (iii) $1.7 million in selling price increases that were implemented mainly in response to higher commodity raw material costs. These increases were partially offset by: (i) SF's exit from approximately $5.3 million of lower margin processed meat sales as part of a process to reallocate its production capacity to more sustainable and higher margin sales opportunities – including this factor SF's net organic growth for the quarter is 9.1%; (ii) $16.7 million in additional sales in the fourth quarter of 2016 due to the Extra Week; and (iii) an $8.8 million decrease in the translated value of its U.S. based businesses' sales resulting from a stronger Canadian dollar.
For 2017 as compared to 2016 SF's revenue increased by $197.6 million or 17.4% primarily due to: (i) business acquisitions, which accounted for $164.2 million of the increase; and (ii) $93.8 million of organic volume growth representing a growth rate of 8.4%. These increases were partially offset by: (i) SF's exit from approximately $20.7 million of lower margin sales – including this factor SF's net organic growth for 2017 is 6.5%; (ii) $16.7 million in additional sales in the fourth quarter of 2016 due to the Extra Week; (iii) a $16.3 million decrease in the translated value of its U.S. based businesses resulting from a stronger Canadian dollar; and (iv) $6.7 million in selling price reductions.
Premium Food Distribution's (PFD) revenue for the fourth quarter of 2017 as compared to the fourth quarter of 2016 increased by $7.1 million or 3.5% primarily due to: (i) business acquisitions, which accounted for $12.6 million of the increase; (ii) $3.6 million in organic volume growth representing a growth rate of 1.8%; and (iii) $3.4 million in selling price increases that were implemented mainly in response to high input costs for a variety of commodity beef raw materials. These factors were partially offset by $12.5 million in additional sales in the fourth quarter of 2016 due to the Extra Week.
PFD's low organic growth rate for the quarter was primarily due to: (i) capacity limitations at its Ontario distribution facility which are preventing it from pursuing a variety of growth opportunities – this issue is expected to be addressed when PFD's new facility in the Greater Toronto Area (GTA) is completed in mid-2018; (ii) less retailer feature sales in Quebec resulting from a variety of transitory issues including general timing of ad activity and higher raw material costs; and (iii) challenging weather in eastern Canada that impacted consumer spending in the foodservice channel. These factors were partially offset by continued strong growth in western Canada driven by: (i) the expansion of its western Canada foodservice distribution network into niche segments of the retail market; and (ii) the success of its non-distributive sales initiatives for national and large regional restaurant chains.
For 2017 as compared to 2016 PFD's revenue increased by $143.2 million or 19.9% primarily due to: (i) business acquisitions, which accounted for $117.7 million of the increase; (ii) $28.6 million of organic volume growth representing a growth rate of 4.0%; and (iii) $9.4 million in selling price increases. These factors were partially offset by $12.5 million in additional sales in the fourth quarter of 2016 due to the Extra Week.
Gross Profit
| (in millions of dollars except percentages) |
|||||||||
| 13 weeks |
% |
14 weeks |
% |
52 weeks |
% |
53 weeks |
% |
||
| Gross profit by segment: |
|||||||||
| Specialty Foods |
73.6 |
19.8% |
71.5 |
21.9% |
279.7 |
21.0% |
234.4 |
20.6% |
|
| Premium Food Distribution |
34.5 |
16.2% |
33.1 |
16.1% |
138.9 |
16.1% |
116.4 |
16.1% |
|
| Consolidated |
108.1 |
18.5% |
104.6 |
19.6% |
418.6 |
19.0% |
350.8 |
18.9% |
|
SF's gross profit as a percentage of its revenue (gross margin) for the fourth quarter of 2017 as compared to the fourth quarter of 2016 decreased by 210 basis points primarily due to: (i) operating inefficiencies in a number of its plants resulting from tight labor market conditions that caused higher employee turnover rates and, in some circumstances, labor shortages and supply chain disruptions. SF's U.S. operations in particular were significantly impacted by this challenge. During the quarter SF implemented a variety of initiatives to address this issue, including more aggressive recruiting, new hire incentive programs and compensation changes. These initiatives started to have a favorable impact by the end of the quarter and are expected to significantly reduce the impact of this challenge going forward (see Forward Looking Statements); (ii) increased overhead costs associated with SF's new sandwich plant in Phoenix; (iii) higher costs for certain pork and beef raw material commodities; and (iv) interim operating inefficiencies at SF's artisan bread bakery in Langley, BC while it rationalizes production among three baking facilities (see Results of Operations – Plant Start-up Costs ). The impact of these temporary challenges was partially offset by contribution margin associated with SF's organic volume growth.
For 2017 as compared to 2016 SF's gross margin increased by 40 basis points primarily due: (i) contribution margin and production efficiencies associated with SF's organic volume growth; (ii) production efficiencies resulting from a variety of continuous improvement projects; and (iii) an improved sales mix resulting from a combination of SF's exit from certain lower margin product sales and its growth coming from higher margin branded products. These increases were, however, mostly offset by the impact in the third and fourth quarters of the challenges outline above.
PFD's gross margins for the fourth quarter of 2017 as compared to the fourth quarter of 2016 and for 2017 as compared to 2016 were relatively stable as the benefits of a variety of long-term initiatives focused on expanding PFD's margins, including increasing the utilization rates of its custom cutting facilities and optimizing its product mix, were offset by temporary challenges associated with the cost of certain raw material commodities.
Selling, General and Administrative Expenses (SG&A)
| (in millions of dollars except percentages) |
|||||||||
| 13 weeks |
% |
14 weeks |
% |
52 weeks |
% |
53 weeks |
% |
||
| SG&A by segment: |
|||||||||
| Specialty Foods |
34.2 |
9.2% |
30.8 |
9.4% |
129.8 |
9.7% |
109.5 |
9.6% |
|
| Premium Food Distribution |
21.5 |
10.1% |
20.3 |
9.9% |
83.5 |
9.7% |
71.3 |
9.9% |
|
| Corporate |
5.1 |
7.9 |
15.1 |
15.2 |
|||||
| Consolidated |
60.8 |
10.4% |
59.0 |
11.1% |
228.4 |
10.4% |
196.0 |
10.6% |
|
SF's SG&A for the fourth quarter of 2017 as compared to the fourth quarter of 2016 and for 2017 as compared to 2016 increased by $3.4 million and $20.3 million, respectively, primarily due to: (i) business acquisitions; (ii) variable selling and marketing costs associated with SF's organic volume growth; and (iii) investments in additional selling and administration infrastructure needed to support SF's continued organic volume growth. These increases were partially offset by additional SG&A in the fourth quarter of 2016 due to the Extra Week.
SF's SG&A as a percentage of sales (SG&A ratio) for the fourth quarter of 2017 as compared to the fourth quarter of 2016 and for 2017 as compared to 2016 remained relatively stable as the favorable impact of its organic revenue growth in relation to the relatively fixed nature of a variety of its SG&A costs was offset by: (i) higher SG&A ratios associated with its recent business acquisitions; and (ii) investments in additional selling and administration infrastructure needed to support SF's continued organic volume growth. Excluding the impact of acquisitions, SF's SG&A ratios for the fourth quarter of 2017 and for 2017 are 8.3% and 9.8%, respectively.
PFD's SG&A for the fourth quarter of 2017 as compared to the fourth quarter of 2016 and for 2017 as compared to 2016 increased by $1.2 million and $12.2 million, respectively, primarily due to: (i) business acquisitions; and (ii) investments in additional fleet and sales infrastructure needed to support PFD's continued organic volume growth. These increases were partially offset by additional SG&A in the fourth quarter of 2016 due to the Extra Week.
PFD's SG&A ratio for the fourth quarter of 2017 as compared to the fourth quarter of 2016 and for 2017 as compared to 2016 remained relatively stable as the favorable impact of its organic revenue growth in relation to the relatively fixed nature of a variety of its SG&A costs was offset by investments in additional selling and administration infrastructure needed to support its continued organic growth.
Corporate SG&A for the fourth quarter of 2017 as compared to the fourth quarter of 2016 decreased by $2.8 million primarily due to: (i) lower accruals for the Company's long-term incentive programs as a result of increased accruals in earlier quarters of 2017 as well as an overall reduction in 2017 based on a slower growth rate for the Company's fully diluted free cash flow per share relative to 2016; and (ii) additional SG&A in the fourth quarter of 2016 due to the Extra Week. These decreases were partially offset by investments in additional administrative infrastructure needed to support the Company's acquisitions and information technology strategies.
Corporate SG&A for 2017 as compared to 2016 was relatively flat as lower accruals for the Company's long-term incentive programs were offset by investments in additional administrative infrastructure needed to support the Company's acquisition and information technology strategies.
Adjusted EBITDA
| (in millions of dollars except percentages) |
|||||||||
| 13 weeks |
% |
14 weeks |
% |
52 weeks |
% |
53 weeks |
% |
||
| Adjusted EBITDA by segment: |
|||||||||
| Specialty Foods |
39.4 |
10.6% |
40.7 |
12.5% |
149.9 |
11.2% |
124.9 |
11.0% |
|
| Premium Food Distribution |
13.0 |
6.1% |
12.8 |
6.2% |
55.4 |
6.4% |
45.1 |
6.3% |
|
| Corporate |
(5.1) |
(7.9) |
(15.1) |
(15.2) |
|||||
| Consolidated |
47.3 |
8.1% |
45.6 |
8.6% |
190.2 |
8.7% |
154.8 |
8.3% |
|
Adjusted EBITDA for the fourth quarter of 2017 as compared to the fourth quarter of 2016 increased by $1.7 million or 3.7% to $47.3 million. Normalizing for the Extra Week, adjusted EBITDA increased by $5.1 million or 12.1%. While the fourth quarter adjusted EBITDA of $47.3 million represents a new fourth quarter record for the Company, it was below what was expected due to the challenges that impacted SF's and PDF's revenue and margins during the quarter, all of which are viewed by the Company as temporary.
The Company's adjusted EBITDA for 2017 as compared to 2016 increased by $35.4 million or 22.9% ($38.8 million or 25.6% after adjusting for the Extra Week) resulting in an adjusted EBITDA as a percentage of sales for 2017 of 8.7%, which is within the Company's targeted range for the year of 8.5% to 9.0%.
Plant Start-up 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 2017, the Company incurred $7.3 million in plant start-up costs for the following projects:
| Phoenix Plant |
The Company incurred $6.1 million in plant start-up costs associated with the commissioning of a new 212,000 square foot sandwich production facility in Phoenix, AZ (the Phoenix Plant). This project was completed in the fourth quarter of 2017 and correspondingly no further costs are expected. |
| Bakery |
The Company incurred $0.6 million in plant start-up costs associated with the reconfiguration of production between its two legacy artisan bakeries (one in Langley, BC and the other in Delta, BC) and its newest artisan bakery (in Richmond, BC), which it acquired at the end of 2016 as part of the purchase of Island City Baking.
Looking forward (see Forward Looking Statements), the Company expects to complete the Bakery Reconfiguration Project in the second quarter of 2018 and is projecting total plant start-up costs for this initiative of approximately $1.0 million. |
| GTA Facility |
The Company incurred $0.6 million in plant-start-up costs associated with the construction of a state-of-the-art distribution and custom cutting facility in the Greater Toronto Area (the GTA Facility).
Looking forward (see Forward Looking Statements), the Company expects to complete construction of the GTA Facility in Q2-2018 and to have the facility operating at normal production efficiencies by the end of the third quarter of 2018. The projected total plant start-up costs for this initiative is $2.4 million. |
Interest and Other Financing Costs
The Company's interest and other financing costs for the fourth quarter of 2017 as compared to the fourth quarter of 2016 and for 2017 as compared to 2016 increased by $2.6 million and $5.4 million, respectively, primarily due to: (i) increases in its net funded debt; and (ii) a higher weighted average interest rate resulting from a combination of rising short term interest rates and, in terms of 2017 as a whole, a larger percentage of the Company's total funded debt consisting of higher cost convertible debentures. These factors were partially offset by approximately $1.5 million in accretion of long-term debt in the third quarter of 2016 resulting from the early conversion of certain convertible debentures.
Income Taxes
The Company's expected range for its provision for income taxes as a percentage of earnings before income taxes (income tax rate) for 2017 is 28% to 30%. This is based on: (i) an effective income tax rate range within the main tax jurisdictions that it operated in during 2017 (the tax jurisdictions) of 26% to 35%; (ii) the expected allocation of its taxable income among the tax jurisdictions; and (iii) the deductibility of certain costs for income tax purposes.
For 2017, the Company's provision for income taxes as a percentage of earnings before income taxes (income tax rate) was 24.8%, which is below its expected range for 2017 primarily due to a $3.9 million unusual income tax recovery. This recovery was the result of the revaluation of the tax assets and liabilities of the Company's US entities to reflect major changes in U.S. income tax rates for years starting in 2018. Normalizing for this recovery, the Company's income tax rate for 2017 is 28.4%.
Looking forward (see Forward Looking Statements), based on currently implemented income tax rates the Company's expected range for its income tax rate in 2018 is 25% to 27%. The decrease in this range as compared to its expected range for 2018 is primarily due to reduced federal income tax rates in the
U.S. partially offset by slightly higher income tax rates in certain Canadian jurisdictions.
| Premium Brands Holdings Corporation |
|||
| Consolidated Balance Sheets |
|||
| (in millions of Canadian dollars) |
|||
| December 30, |
December 31, |
||
| Current assets: |
|||
| Cash and cash equivalents |
15.1 |
19.4 |
|
| Accounts receivable |
220.6 |
180.9 |
|
| Inventories |
218.1 |
170.4 |
|
| Prepaid expenses and other assets |
10.3 |
8.0 |
|
| 464.1 |
378.7 |
||
| Capital assets |
319.0 |
251.7 |
|
| Intangible assets |
201.2 |
149.8 |
|
| Goodwill |
439.1 |
320.3 |
|
| Investment in associates |
25.5 |
9.5 |
|
| Other assets |
10.6 |
11.1 |
|
| 1,459.5 |
1,121.1 |
||
| Current liabilities: |
|||
| Cheques outstanding |
13.9 |
12.4 |
|
| Bank indebtedness |
6.2 |
0.2 |
|
| Dividends payable |
13.0 |
11.4 |
|
| Accounts payable and accrued liabilities |
179.1 |
155.8 |
|
| Current portion of long-term debt |
1.8 |
2.2 |
|
| Current portion of provisions |
20.7 |
2.1 |
|
| Current portion of puttable interest in subsidiaries |
32.1 |
4.8 |
|
| 266.8 |
188.9 |
||
| Long-term debt |
417.9 |
152.2 |
|
| Puttable interest in subsidiaries |
4.6 |
27.4 |
|
| Deferred revenue |
6.5 |
4.3 |
|
| Provisions |
1.8 |
20.8 |
|
| Pension obligation |
2.1 |
1.5 |
|
| Deferred income taxes |
47.8 |
44.8 |
|
| 747.5 |
439.9 |
||
| Convertible unsecured subordinated debentures |
214.3 |
254.8 |
|
| Equity attributable to shareholders: |
|||
| Deficit |
(3.7) |
(33.3) |
|
| Share capital |
482.2 |
429.9 |
|
| Reserves |
19.2 |
29.3 |
|
| Non-controlling interest |
- |
0.5 |
|
| 497.7 |
426.4 |
||
| 1,459.5 |
1,121.1 |
||
| Premium Brands Holdings Corporation |
|||||
| Consolidated Statements of Operations |
|||||
| (in millions of Canadian dollars except per share amounts) |
|||||
| 13 weeks |
14 weeks |
52 weeks |
53 weeks |
||
| Revenue |
585.4 |
532.6 |
2,198.3 |
1,857.5 |
|
| Cost of goods sold |
477.3 |
428.0 |
1,779.7 |
1,506.7 |
|
| Gross profit before depreciation, amortization, plant start-up costs |
108.1 |
104.6 |
418.6 |
350.8 |
|
| Selling, general and administrative expenses before depreciation, amortization, plant |
60.8 |
59.0 |
228.4 |
196.0 |
|
| 47.3 |
45.6 |
190.2 |
154.8 |
||
| Plant start-up costs |
3.4 |
- |
7.3 |
- |
|
| 43.9 |
45.6 |
182.9 |
154.8 |
||
| Depreciation of capital assets |
8.6 |
7.3 |
30.9 |
27.4 |
|
| Amortization of intangible assets |
2.8 |
2.4 |
10.2 |
7.6 |
|
| Interest and other financing costs |
7.4 |
4.8 |
23.3 |
17.9 |
|
| Acquisition transaction costs |
3.7 |
1.1 |
4.2 |
1.6 |
|
| Change in value of puttable interest in subsidiaries |
1.3 |
1.6 |
5.7 |
4.1 |
|
| Accretion of provisions |
0.3 |
0.3 |
1.1 |
1.0 |
|
| Unrealized loss on foreign currency contracts |
- |
- |
- |
0.7 |
|
| Equity loss (income) in investments in associates |
0.2 |
- |
0.5 |
(0.4) |
|
| Earnings before income taxes |
19.6 |
28.1 |
107.0 |
94.9 |
|
| Provision for income taxes (recovery) |
|||||
| Current |
6.4 |
4.0 |
28.2 |
10.2 |
|
| Deferred |
(4.0) |
4.1 |
(1.7) |
15.9 |
|
| 2.4 |
8.1 |
26.5 |
26.1 |
||
| Earnings |
17.2 |
20.0 |
80.5 |
68.8 |
|
| Earnings (loss) for the year attributable to: |
|||||
| Shareholders |
17.2 |
20.0 |
80.5 |
68.9 |
|
| Non-controlling interest |
- |
- |
- |
(0.1) |
|
| 17.2 |
20.0 |
80.5 |
68.8 |
||
| Earnings per share from : |
|||||
| Basic |
0.57 |
0.67 |
2.70 |
2.39 |
|
| Diluted |
0.57 |
0.67 |
2.69 |
2.38 |
|
|
Weighted average shares outstanding (in millions): |
|||||
| Basic |
30.0 |
29.7 |
29.8 |
28.8 |
|
| Diluted |
30.1 |
29.8 |
29.9 |
28.9 |
|
| Premium Brands Holdings Corporation |
||||||
| Consolidated Statements of Cash Flows |
||||||
| (in millions of Canadian dollars) |
||||||
| 13 weeks |
14 weeks |
52 weeks |
53 weeks |
|||
| Cash flows from (used in) operating activities: |
||||||
| Earnings |
17.2 |
20.0 |
80.5 |
68.8 |
||
| Items not involving cash: |
||||||
| Depreciation of capital assets |
8.6 |
7.3 |
30.9 |
27.4 |
||
| Amortization of intangible assets |
2.8 |
2.4 |
10.2 |
7.6 |
||
| Change in value of puttable interest in |
1.3 |
1.6 |
5.7 |
4.1 |
||
| Gain on sales of capital assets |
(0.1) |
- |
(0.2) |
- |
||
| Net unrealized loss on foreign currency contracts |
- |
- |
- |
0.7 |
||
| Equity loss (income) in associates |
0.2 |
- |
0.5 |
(0.4) |
||
| Deferred revenue |
(0.1) |
(0.1) |
1.9 |
(0.2) |
||
| Non-cash financing costs |
0.8 |
0.7 |
2.9 |
3.6 |
||
| Accretion of provisions |
0.3 |
0.3 |
1.1 |
1.0 |
||
| Deferred income taxes |
(4.0) |
4.1 |
(1.7) |
15.9 |
||
| 27.0 |
36.3 |
131.8 |
128.5 |
|||
| Change in non-cash working capital |
(14.0) |
(2.2) |
(45.9) |
21.4 |
||
| 13.0 |
34.1 |
85.9 |
149.9 |
|||
| Cash flows from (used in) financing activities: |
||||||
| Long-term debt – net |
209.1 |
(32.5) |
264.6 |
(53.5) |
||
| Bank indebtedness and cheques outstanding |
6.6 |
4.8 |
4.6 |
1.9 |
||
| Proceeds from convertible debentures – net of issuance costs |
- |
107.7 |
- |
190.1 |
||
| Repayment of convertible debentures |
- |
- |
- |
(0.7) |
||
| Dividends paid to shareholders, net of dividends received from cancelled shares |
(12.4) |
(11.3) |
(48.9) |
(42.5) |
||
| Share issuance and financing costs |
- |
- |
- |
(0.6) |
||
| 203.3 |
68.7 |
220.3 |
94.7 |
|||
| Cash flows from (used in) investing activities: |
||||||
| Capital asset additions |
(15.8) |
(16.7) |
(64.9) |
(42.8) |
||
| Business acquisitions |
(185.5) |
(70.8) |
(225.7) |
(189.2) |
||
| Payments to shareholders of non-wholly owned subsidiaries |
- |
- |
(2.3) |
(1.7) |
||
| Payment of provisions |
(0.1) |
- |
(1.8) |
(1.7) |
||
| Purchase of shares for employee share loans |
- |
(1.6) |
- |
(1.6) |
||
| Net change in share purchase loans and notes receivable |
0.3 |
- |
0.6 |
0.4 |
||
| Investment in associates net of distributions |
(14.0) |
- |
(16.5) |
0.2 |
||
| Net proceeds from sales of assets |
- |
0.1 |
0.2 |
0.3 |
||
| Other |
(0.1) |
0.2 |
(0.1) |
(0.4) |
||
| (215.2) |
(88.8) |
(310.5) |
(236.5) |
|||
| (Decrease) increase in cash and cash equivalents |
1.1 |
14.0 |
(4.3) |
8.1 |
||
| Cash and cash equivalents – beginning of year |
14.0 |
5.4 |
19.4 |
11.3 |
||
| Cash and cash equivalents – end of year |
15.1 |
19.4 |
15.1 |
19.4 |
||
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 |
14 weeks |
52 weeks |
53 weeks |
| Earnings before income taxes |
19.6 |
28.1 |
107.0 |
94.9 |
| Plant start-up costs |
3.4 |
- |
7.3 |
- |
| Depreciation of capital assets |
8.6 |
7.3 |
30.9 |
27.4 |
| Amortization of intangible assets |
2.8 |
2.4 |
10.2 |
7.6 |
| Interest and other financing costs |
7.4 |
4.8 |
23.3 |
17.9 |
| Acquisition transaction costs |
3.7 |
1.1 |
4.2 |
1.6 |
| Change in value of puttable interest in subsidiaries |
1.3 |
1.6 |
5.7 |
4.1 |
| Accretion of provisions |
0.3 |
0.3 |
1.1 |
1.0 |
| Unrealized loss on foreign currency contracts |
- |
- |
- |
0.7 |
| Equity loss (income) in associates |
0.2 |
- |
0.5 |
(0.4) |
| Consolidated adjusted EBITDA |
47.3 |
45.6 |
190.2 |
154.8 |
Free Cash Flow
| (in millions of dollars) |
52 weeks |
53 weeks |
|
| Cash flow from operating activities |
85.9 |
149.9 |
|
| Changes in non-cash working capital |
45.9 |
(21.4) |
|
| Acquisition transaction costs |
4.2 |
1.6 |
|
| Plant start-up costs |
7.3 |
- |
|
| Maintenance capital expenditures |
(12.0) |
(8.6) |
|
| Free cash flow |
131.3 |
121.5 |
Adjusted Earnings and Adjusted Earnings per Share
| (in millions of dollars except per share amounts) |
13 weeks |
14 weeks |
52 weeks |
53 weeks |
| Earnings |
17.2 |
20.0 |
80.5 |
68.8 |
| Plant start-up costs |
3.4 |
- |
7.3 |
- |
| Acquisition transaction costs |
3.7 |
1.1 |
4.2 |
1.6 |
| Accretion of provisions |
0.3 |
0.3 |
1.1 |
1.0 |
| Unrealized loss on foreign currency contracts |
- |
- |
- |
0.7 |
| 24.6 |
21.4 |
93.1 |
72.1 |
|
| Current and deferred income tax effect of above items |
(6.1) |
(0.4) |
(7.8) |
(0.9) |
| Adjusted earnings |
18.5 |
21.0 |
85.3 |
71.2 |
| Weighted average shares outstanding |
30.0 |
29.7 |
29.8 |
28.8 |
| Adjusted earnings per share |
0.62 |
0.71 |
2.86 |
2.47 |
FORWARD LOOKING STATEMENTS
This press release contains forward looking statements with respect to the Company, including its business operations, strategy and financial performance and condition. These statements generally can be identified by the use of forward looking words such as "may", "could", "should", "would", "will", "expect", "intend", "plan", "estimate", "project", "anticipate", "believe" or "continue", or the negative thereof or similar variations.
Although management believes that the expectations reflected in such forward looking statements are reasonable and represent the Company's internal expectations and belief as of March 15, 2018, such 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.
Some of the factors that could affect future results and could cause results to differ materially from those expressed in the forward-looking statements contained herein include: (i) changes in the cost of raw materials used in the production of the Company's products; (ii) seasonal and/or weather related fluctuations in the Company's sales; (iii) changes in consumer discretionary spending resulting from changes in economic conditions and/or general consumer confidence levels; (iv) changes in the cost of finished products sourced from third party manufacturers; (v) changes in the Company's relationships with its larger customers; (vi) access to commodity raw materials; (vii) potential liabilities and expenses resulting from defects in the Company's products; (viii) changes in consumer food product preferences; (ix) competition from other food manufacturers and distributors; * execution risk associated with the Company's growth and business restructuring initiatives; (xi) risks associated with the Company's business acquisition strategies; (xii) changes in the value of the Canadian dollar relative to the U.S. dollar; (xiii) new government regulations affecting the Company's business and operations; (xiv) the Company's ability to raise the capital needed to fund its growth initiatives; (xv) labor related issues including potential disputes with employees represented by labor unions and labor shortages; (xvi) the loss and/or inability to attract key senior personnel; (xvii) fluctuations in the interest rates associated with the Company's funded debt; (xviii) failure or breach of the Company's information systems; (xix) financial exposure resulting from credit extended to the Company's customers; (xx) the malfunction of critical equipment used in the Company's operations; (xxi) livestock health issues; (xxii) international trade issues; and (xxiii) changes in environmental, health and safety standards. Details on these risk factors as well as other factors can be found in the Company's 2017 MD&A, which is filed electronically through SEDAR and is available online at www.sedar.com.
Unless otherwise indicated, the forward looking statements in this document are made as of March 15, 2018 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 press release.
SOURCE Premium Brands Holdings Corporation
George Paleologou, President and CEO or Will Kalutycz, CFO at (604) 656-3100.
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