Premium Brands Holdings Corporation Reports Record Third Quarter 2020 Results and Declares Fourth Quarter Dividend
VANCOUVER, BC, Nov. 5, 2020 /CNW/ - Premium Brands Holdings Corporation (TSX: PBH), a leading producer, marketer and distributor of branded specialty food products, announced today its results for the third quarter of 2020.
HIGHLIGHTS
- Third quarter record revenue of $1.1 billion representing a 13.7% or $132.8 million increase as compared to the third quarter of 2019
- Organic volume growth of 9.1% or 12.5% after excluding the estimated impact of COVID-19 related factors
- Record third quarter adjusted EBITDA of $93.5 million representing an 11.2% or $9.4 million increase as compared to the third quarter of 2019
- $3.6 million in estimated net direct costs associated with COVID-19 related factors. Excluding these the Company's adjusted EBITDA increased by 15.5% as compared to the third quarter of 2019
- Record third quarter adjusted EPS of $1.07 per share as compared to $0.88 per share in the third quarter of 2019
- While sales in many of the Company's selling channels have returned to, or surpassed, pre COVID-19 levels, sales in the fine dining, airline and cruise line channels continue to be challenged
- The Company ended the quarter with a 1.4 : 1 senior debt to adjusted EBITDA ratio and approximately $700 million in available credit capacity
- During the quarter the Company completed the acquisition of Global Gourmet Foods Inc. and announced the acquisition of Allseas Fisheries Corp. resulting in $127.3 million of capital being allocated
- The Company declared a quarterly dividend of $0.5775 per share for the fourth quarter of 2020
SUMMARY FINANCIAL INFORMATION
(In millions of dollars except per share amounts and ratios)
13 weeks |
13 weeks |
39 weeks |
39 weeks |
|||
Revenue |
1,101.1 |
968.3 |
3,012.7 |
2,690.3 |
||
Adjusted EBITDA |
93.5 |
84.1 |
224.9 |
232.6 |
||
Earnings |
34.7 |
26.9 |
60.4 |
68.0 |
||
EPS |
0.88 |
0.72 |
1.59 |
1.92 |
||
Adjusted earnings |
42.0 |
33.0 |
83.1 |
88.9 |
||
Adjusted EPS |
1.07 |
0.88 |
2.19 |
2.51 |
||
Trailing Four Quarters Ended |
||||||
Sep 26, |
Sep 28, |
|||||
Free cash flow |
177.0 |
174.7 |
||||
Declared dividends |
86.5 |
73.1 |
||||
Declared dividend per share |
2.2575 |
2.0500 |
||||
Payout ratio |
48.9% |
41.8% |
||||
"I would like to once again acknowledge the hard work and dedication of all our associates during these uncertain and volatile times. They have truly been the key factor that has enabled us to manage through this incredibly challenging period and continue to make a meaningful contribution to the many communities that we are part of. As I have said many times before, I am deeply humbled by how our people constantly rise to the occasion," said Mr. George Paleologou, President and CEO.
"We are very pleased with the progress we made during this past quarter. As the economy began re-opening and demand returned in a robust manner in several key selling channels, the resiliency built into our businesses enabled them to quickly respond to the shifting needs of consumers and customers," added Mr. Paleologou.
"While our sales in most channels, including QSR, convenience store and retail, were back to pre COVID-19 or better levels by the end of the quarter, some of our businesses continued to see demand destruction in the fine dining, airline and cruise line channels. We were, however, still able to generate record results due to the dynamic and entrepreneurial nature of our businesses that enabled those impacted to pivot in new directions, finding new customers, channels and markets. Furthermore, many of these initiatives have resulted in new long term sustainable relationships, which is one of the reasons why we expect to emerge from this crisis a bigger, stronger and even more resilient company.
"Another major challenge during the quarter for many of our businesses was managing a variety of pandemic related labor issues including scarcity of people, unsettled morale, high absenteeism and increased turnover rates. This resulted in production inefficiencies and, at times, lower than ideal customer fill rates. Our businesses implemented a variety of initiatives to mitigate the impact of this challenge which, by the end of the quarter, had lessened significantly.
"In terms of our five-year objectives of reaching $6 billion in sales and $600 million in adjusted EBITDA by 2023, we are more confident than ever that we are on the right track. With strong momentum across our many businesses, a solid balance sheet, and a record number of opportunities in our acquisition pipeline, we are looking beyond the pandemic and are very excited about what the future holds," added Mr. Paleologou.
FOURTH QUARTER 2020 DIVIDEND
The Company also announced that its Board of Directors approved a cash dividend of $0.5775 per share for the fourth quarter of 2020, which will be payable on January 15, 2021 to shareholders of record at the close of business on December 31, 2020.
Unless indicated otherwise in writing at or before the time the dividend is paid, each dividend paid by the Company in 2020 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, the United States and Italy.
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) |
39 weeks |
% (1) |
39 weeks |
% (1) |
|
Revenue by segment: |
||||||||
Specialty Foods |
710.3 |
64.5% |
632.0 |
65.3% |
1,989.1 |
66.0% |
1,822.6 |
67.7% |
Premium Food Distribution |
390.8 |
35.5% |
336.3 |
34.7% |
1,023.6 |
34.0% |
867.7 |
32.3% |
Consolidated |
1,101.1 |
100.0% |
968.3 |
100.0% |
3,012.7 |
100.0% |
2,690.3 |
100.0% |
(1) Expressed as a percentage of consolidated revenue |
||||||||
Specialty Foods' (SF) revenue for the third quarter of 2020 as compared to the third quarter of 2019 increased by $78.3 million or 12.4% primarily due to:
(i) |
Organic volume growth of $60.5 million representing a growth rate of 9.6%. After adjusting for the impact of COVID-19 related factors (estimated to be $9.9 million), SF's normalized organic volume growth rate is 11.1%. In general terms, COVID-19 related factors had a positive impact on its retail channel sales and a negative impact on its sales to the airline and foodservice channels; |
(ii) |
Net selling price inflation of $8.5 million, which was driven primarily by increases implemented by SF's protein businesses in reaction to higher pork and beef input commodity costs; |
(iii) |
Business acquisitions, which accounted for $6.5 million of SF's growth; and |
(iv) |
A currency translation related increase of $2.8 million resulting from a weaker Canadian dollar relative to the U.S. dollar – approximately 46.0% of SF's revenue for the quarter was in the U.S. |
SF's normalized organic volume growth rate, which was well above its long-term targeted range of 4% to 6%, was primarily in the sandwich, meat snacks, premium dry cured meats and cooked meats product categories and was driven by a variety of factors including new product launches, new customer initiatives and more favorable weather conditions in central Canada relative to the third quarter of 2019.
SF's revenue for the first three quarters of 2020 as compared to the first three quarters of 2019 increased by $166.5 million or 9.1% primarily due to: (i) organic volume growth of 6.0% or approximately 10.4% after normalizing for the impacts of COVID-19 related factors; (ii) net selling price inflation of $29.0 million; (iii) a currency translation effect of $19.7 million; and (iv) business acquisitions, which accounted for $8.2 million of the increase.
Premium Food Distribution's (PFD) revenue for the third quarter of 2020 as compared to the third quarter of 2019 increased by $54.5 million or 16.2% primarily due to:
(i) |
Organic volume growth of $27.5 million representing a growth rate of 8.2%. After adjusting for the impact of COVID-19 related factors (estimated to be $23.7 million), PFD's normalized organic volume growth rate is 15.2%. PFD's sales to fine dining, cruise line and export customers were severely impacted by COVID-19 related factors, however, it was able to partially mitigate this by: (i) leveraging existing and developing new retail customer relationships; and (ii) broadening the product portfolios of some of its businesses; |
(ii) |
Business acquisitions, which accounted for $26.5 million of PFD's growth; and |
(iii) |
A currency translation effect of $1.4 million – approximately 28.1% of PFD's revenue for the quarter was in the U.S. |
The above factors were partially offset by net selling price deflation of $0.9m, which was relatively low as price deflation on lobster products was mostly offset by price inflation on beef and pork based products.
PFD's normalized organic volume growth rate, which was also well above its long-term target of 4% to 6%, was driven by recent capacity investments, namely a new lobster processing facility in Saco, Maine, a recently expanded protein and seafood distribution facility in Montreal, and a new distribution and custom cutting operation in the Greater Toronto Area. These have enabled PFD to pursue a range of new sales initiatives including developing new customer relationships and expanding its product offerings.
PFD's revenue for the first three quarters of 2020 as compared to the first three quarters of 2019 increased by $155.9 million or 18.0% primarily due to: (i) business acquisitions, which accounted for $88.5 million of the increase; (ii) organic volume growth of 6.1% or approximately 15.2% after normalizing for the impacts of COVID-19 related factors; (iii) net selling price inflation of $10.3 million; and (iv) a currency translation effect of $4.4 million.
Gross Profit
(in millions of dollars except percentages) |
||||||||
13 weeks |
% (1) |
13 weeks |
% (1) |
39 weeks |
% (1) |
39 weeks |
% (1) |
|
Gross profit by segment: |
||||||||
Specialty Foods |
155.8 |
21.9% |
142.8 |
22.6% |
423.5 |
21.3% |
418.3 |
23.0% |
Premium Food Distribution |
57.9 |
14.8% |
47.8 |
14.2% |
154.6 |
15.1% |
127.8 |
14.7% |
Consolidated |
213.7 |
19.4% |
190.6 |
19.7% |
578.1 |
19.2% |
546.1 |
20.3% |
(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 third quarter of 2020 as compared to the third quarter of 2019 decreased by 70 basis points primarily due to $4.6 million in COVID-19 related costs consisting mainly of labor related production inefficiencies, employee thank-you bonuses and investments in additional employee safety measures; partially offset by government wage subsidies. Normalizing for these items, SF's gross margin is 22.6%. The sales deleveraging benefits of higher production volumes were largely offset by: (i) sales mix changes as COVID-19 related lost sales of higher margin specialized sandwich and meal solutions for the airline industry were offset by lower margin sandwich sales in alternative channels; and (ii) labor wage inflation.
SF's gross margin for the first three quarters of 2020 as compared to the first three quarters of 2019 decreased by 170 basis points primarily due to: (i) the reasons outlined above; (ii) the loss of critical mass in several production facilities during the second quarter of 2020 as a result of COVID-19 related sales impacts; and (iii) additional outside storage costs in the first two quarters of 2020 that were mainly due to long inventory positions taken to help hedge against unusually volatile global pork and beef commodity costs and to mitigate the risk of supply chain disruptions.
PFD's gross margins for the third quarter of 2020 as compared to the third quarter of 2019 increased by 60 basis points primarily due to: (i) sales deleveraging benefits associated with PFD's higher sales volumes; (ii) commodity cost benefits resulting from new supply relationships and favorable inventory positions relative to inflationary beef and pork commodity costs; and (iii) some normalization in lobster margins as they were below normal levels in the third quarter of 2019 due to a variety of transitory challenges. These factors were partially offset by additional overhead associated with recent capacity investments.
PFD's gross margins for the first three quarters of 2020 as compared to the first three quarters of 2019 increased by 40 basis points to 15.1% primarily due to the reasons outlined above plus an additional offsetting factor of sales mix changes in the second quarter of 2020 associated with COVID-19 related issues.
Selling, General and Administrative Expenses (SG&A)
(in millions of dollars except percentages) |
||||||||
13 weeks |
% (1) |
13 weeks |
% (1) |
39 weeks |
% (1) |
39 weeks |
% (1) |
|
SG&A by segment: |
||||||||
Specialty Foods |
83.6 |
11.8% |
73.5 |
11.6% |
242.9 |
12.2% |
222.2 |
12.2% |
Premium Food Distribution |
32.7 |
8.4% |
28.7 |
8.5% |
97.4 |
9.5% |
79.1 |
9.1% |
Corporate |
3.9 |
4.3 |
12.9 |
12.2 |
||||
Consolidated |
120.2 |
10.9% |
106.5 |
11.0% |
353.2 |
11.7% |
313.5 |
11.7% |
(1) Expressed as a percentage of the corresponding segment's revenue |
||||||||
SF's SG&A for the third quarter of 2020 as compared to the third quarter of 2019 increased by $10.1 million primarily due to: (i) higher discretionary marketing costs, a portion of which were deferred from the second quarter as a result of COVID-19 related factors; (ii) additional variable selling and infrastructure costs associated with supporting SF's growth initiatives; (iii) increased variable compensation; and (iv) business acquisitions.
SF's SG&A for the first three quarters of 2020 as compared to the first three quarters of 2019 increased by $20.7 million primarily due to the reasons outlined above partially offset by lower discretionary marketing costs in the second quarter of 2020 as a result of a number of retail promotions being cancelled or delayed due to COVID-19 related factors.
PFD's SG&A for the third quarter of 2020 as compared to the third quarter of 2019 increased by $4.0 million primarily due to: (i) business acquisitions; and (ii) additional variable compensation.
PFD's SG&A for the first three quarters of 2020 as compared to the first three quarters of 2019 increased by $18.3 million primarily due to the factors outlined above as well as additional variable selling and infrastructure costs in the first quarter of 2020 associated with supporting its growth.
Adjusted EBITDA
(in millions of dollars except percentages) |
||||||||
13 weeks |
% (1) |
13 weeks |
% (1) |
39 weeks |
% (1) |
39 weeks |
% (1) |
|
Adjusted EBITDA by segment: |
||||||||
Specialty Foods |
72.2 |
10.2% |
69.3 |
11.0% |
180.6 |
9.1% |
196.1 |
10.8% |
Premium Food Distribution |
25.2 |
6.4% |
19.1 |
5.7% |
57.2 |
5.6% |
48.7 |
5.6% |
Corporate |
(3.9) |
(4.3) |
(12.9) |
(12.2) |
||||
Consolidated |
93.5 |
8.5% |
84.1 |
8.7% |
224.9 |
7.5% |
232.6 |
8.6% |
(1) Expressed as a percentage of the corresponding segment's revenue |
||||||||
Adjusted EBITDA for the third quarter of 2020 as compared to the third quarter of 2019 increased by $9.4 million or 11.2% to $93.5 million primarily due to the Company's growth initiatives partially offset by the impacts of COVID-19 related factors. Normalizing for the COVID-19 related factors, which are estimated to be approximately $33.6 million in lost sales and $3.6 million in net additional costs, the Company's adjusted EBITDA and adjusted EBITDA margin are approximately $105.1 million and 9.3%, respectively.
Plant Start-up and Restructuring Costs
Plant start-up and restructuring costs consist of expenses associated with: (i) the start-up of new production capacity; (ii) the reconfiguration of existing capacity to gain efficiencies and/or additional capacity; and/or (iii) the restructuring of a business to improve its profitability. The Company expects (see Forward Looking Statements) these projects to result in improvements in its future earnings and cash flows.
During the quarter and for the first three quarters of 2020, the Company incurred $0.7 million and $6.2 million, respectively, in plant start-up and restructuring costs for a variety of projects including: (i) the startup of a new 50,000 square foot lobster processing facility in Saco, ME; (ii) the startup of a new 45,000 square foot distribution and seafood processing facility in Montreal; (iii) the startup of a 25,000 square foot expansion of the Company's cooked protein plant in Montreal; (iv) staffing changes in certain businesses which resulted in unusually high severance costs; and (v) the shutdown of an unprofitable retail outlet in the Company's PFD segment.
Sales and Adjusted EBITDA Outlook
See Forward Looking Statements for a discussion of the risks and assumptions associated with forward looking statements.
2020
The Company withdrew its annual sales and adjusted EBITDA guidance in May 2020 based on not being able to forecast its results with reasonable accuracy due to uncertainties surrounding the impact COVID-19 related factors would have on it. While the Company has seen steady and consistent improvement in its business since that time, there is still considerable uncertainty about what impacts these factors will have on it in the coming quarters, particularly in light of recent increases in infection rates across North America. Assuming a relatively stable situation for the balance of 2020, the Company is expecting to continue generating year over year improvement in its sales and adjusted EBITDA through the fourth quarter, however, due to the seasonality of many of its businesses, the degree of this improvement will likely not be to the same extent as achieved in the third quarter.
5 Year Plan
Despite the near-term uncertainty on what the impacts of COVID-19 will be, the Company remains confident in its ability to achieve the five-year targets set in 2018 of $6 billion in sales and $600 million in adjusted EBITDA. While COVID-19 related factors have impacted many areas of the Company's business, substantially all of these are expected to be temporary. Furthermore, the COVID-19 crisis has enabled many of its businesses to develop new sustainable sales opportunities as well as strengthen customer and supply chain relationships, all of which will enhance its ability to achieve its five-year targets.
Premium Brands Holdings Corporation |
|||
Consolidated Balance Sheets |
|||
(in millions of Canadian dollars) |
|||
Sep 26, |
Dec 28, |
Sep 28, |
|
Current assets: |
|||
Cash and cash equivalents |
192.7 |
18.4 |
15.2 |
Accounts receivable |
358.6 |
346.5 |
334.2 |
Inventories |
417.0 |
396.2 |
358.6 |
Prepaid expenses and other assets |
17.7 |
19.4 |
17.6 |
986.0 |
780.5 |
725.6 |
|
Capital assets |
530.0 |
502.1 |
493.6 |
Right of use assets |
315.8 |
300.4 |
299.3 |
Intangible assets |
514.8 |
490.2 |
445.7 |
Goodwill |
819.7 |
780.2 |
817.1 |
Investment in and advances to associates |
75.1 |
64.6 |
59.2 |
Other assets |
18.0 |
19.1 |
21.7 |
3,259.4 |
2,937.1 |
2,862.2 |
|
Current liabilities: |
|||
Cheques outstanding |
13.8 |
16.4 |
15.8 |
Bank indebtedness |
2.9 |
24.9 |
27.4 |
Dividends payable |
23.4 |
19.7 |
19.6 |
Accounts payable and accrued liabilities |
370.1 |
285.0 |
285.4 |
Current portion of long-term debt |
7.5 |
7.7 |
5.6 |
Current portion of lease obligations |
26.2 |
32.1 |
30.4 |
Current portion of provisions |
10.0 |
8.5 |
12.6 |
Current portion of puttable interest in subsidiaries |
27.6 |
58.2 |
53.2 |
481.5 |
452.5 |
450.0 |
|
Long-term debt |
549.9 |
603.0 |
539.4 |
Lease obligations |
329.0 |
303.2 |
302.7 |
Provisions |
59.3 |
62.4 |
58.0 |
Puttable interest in subsidiaries |
- |
- |
5.0 |
Deferred income taxes |
75.6 |
76.8 |
67.0 |
Other liabilities |
4.0 |
4.0 |
5.1 |
1,499.3 |
1,501.9 |
1,427.2 |
|
Convertible unsecured subordinated debentures |
424.5 |
364.0 |
363.0 |
Equity attributable to shareholders: |
|||
Retained earnings |
13.5 |
19.9 |
24.2 |
Share capital |
1,290.5 |
1,023.6 |
1,021.0 |
Reserves |
31.6 |
27.7 |
26.8 |
1,335.6 |
1,071.2 |
1,072.0 |
|
3,259.4 |
2,937.1 |
2,862.2 |
|
Premium Brands Holdings Corporation |
||||||||||||||||
Consolidated Statements of Operations |
||||||||||||||||
(in millions of Canadian dollars except per share amounts) |
||||||||||||||||
13 weeks |
13 weeks |
39 weeks |
39 weeks |
|||||||||||||
Revenue |
1,101.1 |
968.3 |
3,012.7 |
2,690.3 |
||||||||||||
Cost of goods sold |
887.4 |
777.7 |
2,434.6 |
2,144.2 |
||||||||||||
Gross profit before the below |
213.7 |
190.6 |
578.1 |
546.1 |
||||||||||||
Selling, general and administrative expenses before the below |
120.2 |
106.5 |
353.2 |
313.5 |
||||||||||||
93.5 |
84.1 |
224.9 |
232.6 |
|||||||||||||
Plant start-up and restructuring costs |
0.7 |
3.7 |
6.2 |
7.0 |
||||||||||||
Depreciation of capital assets |
16.8 |
15.0 |
49.3 |
43.8 |
||||||||||||
Amortization of intangible assets |
6.5 |
5.1 |
19.3 |
15.2 |
||||||||||||
Amortization of right of use assets |
7.9 |
7.0 |
23.5 |
20.5 |
||||||||||||
Accretion of lease obligations |
3.7 |
3.4 |
11.1 |
9.8 |
||||||||||||
Interest and other financing costs |
9.9 |
12.5 |
32.4 |
42.1 |
||||||||||||
Acquisition transaction costs |
1.4 |
1.3 |
4.3 |
2.5 |
||||||||||||
Change in value of puttable interest in subsidiaries |
0.5 |
- |
(3.8) |
0.5 |
||||||||||||
Accretion of provisions |
2.4 |
1.6 |
6.0 |
4.0 |
||||||||||||
Provisions not earned |
- |
- |
(2.0) |
- |
||||||||||||
Equity loss in investments in associates |
0.3 |
0.4 |
2.1 |
1.3 |
||||||||||||
Earnings before income taxes |
43.4 |
34.1 |
76.5 |
85.9 |
||||||||||||
Provision for income taxes |
||||||||||||||||
Current |
1.8 |
6.6 |
14.1 |
17.1 |
||||||||||||
Deferred |
6.9 |
0.6 |
2.0 |
0.8 |
||||||||||||
8.7 |
7.2 |
16.1 |
17.9 |
|||||||||||||
Earnings |
34.7 |
26.9 |
60.4 |
68.0 |
||||||||||||
Earnings per share: |
||||||||||||||||
Basic |
0.88 |
0.72 |
1.59 |
1.92 |
||||||||||||
Diluted |
0.88 |
0.71 |
1.58 |
1.92 |
||||||||||||
Weighted average shares outstanding (in millions): |
||||||||||||||||
Basic |
39.2 |
37.3 |
38.0 |
35.4 |
||||||||||||
Diluted |
39.4 |
37.4 |
38.2 |
35.5 |
||||||||||||
Premium Brands Holdings Corporation |
||||||||||
Consolidated Statements of Cash Flows |
||||||||||
(in millions of Canadian dollars) |
||||||||||
13 weeks |
13 weeks |
39 weeks |
39 weeks |
|||||||
Cash flows from (used in) operating activities: |
||||||||||
Earnings |
34.7 |
26.9 |
60.4 |
68.0 |
||||||
Items not involving cash: |
||||||||||
Depreciation of capital assets |
16.8 |
15.0 |
49.3 |
43.8 |
||||||
Amortization of intangible assets |
6.5 |
5.1 |
19.3 |
15.2 |
||||||
Amortization of right of use assets |
7.9 |
7.0 |
23.5 |
20.5 |
||||||
Accretion of lease obligations |
3.7 |
3.4 |
11.1 |
9.8 |
||||||
Change in value of puttable interest in subsidiaries |
0.5 |
- |
(3.8) |
0.5 |
||||||
Equity loss in investments in associates |
0.3 |
0.4 |
2.1 |
1.3 |
||||||
Non-cash financing costs |
1.4 |
1.2 |
3.9 |
3.5 |
||||||
Accretion of provisions |
2.4 |
1.6 |
6.0 |
4.0 |
||||||
Provisions not earned |
- |
- |
(2.0) |
- |
||||||
Deferred income taxes |
6.9 |
0.6 |
2.0 |
0.8 |
||||||
Other |
- |
(0.2) |
0.1 |
0.2 |
||||||
81.1 |
61.0 |
171.9 |
167.6 |
|||||||
Change in non-cash working capital |
57.4 |
55.0 |
53.9 |
(11.3) |
||||||
138.5 |
116.0 |
225.8 |
156.3 |
|||||||
Cash flows from (used in) financing activities: |
||||||||||
Long-term debt, net |
(125.1) |
(37.6) |
(68.3) |
(176.6) |
||||||
Payments for lease obligations |
(10.3) |
(9.1) |
(30.3) |
(26.1) |
||||||
Bank indebtedness and cheques outstanding |
(10.9) |
25.9 |
(24.6) |
(14.6) |
||||||
Dividends paid to shareholders |
(21.7) |
(19.7) |
(63.1) |
(53.5) |
||||||
Repayment of convertible debentures |
(5.4) |
- |
(5.4) |
- |
||||||
Proceeds from issuance of convertible debentures – net of issuance costs |
143.5 |
- |
143.5 |
- |
||||||
Common shares issued as a result of public offering and concurrent private placement – net of issuance costs |
165.2 |
- |
165.2 |
250.9 |
||||||
135.3 |
(40.5) |
117.0 |
(19.9) |
|||||||
Cash flows from (used in) investing activities: |
||||||||||
Capital asset additions |
(22.1) |
(24.5) |
(70.9) |
(63.2) |
||||||
Business acquisitions |
(43.4) |
(31.7) |
(56.4) |
(55.0) |
||||||
Payments to shareholders of non-wholly owned subsidiaries |
(0.4) |
- |
(1.0) |
(2.3) |
||||||
Payment for settlement of puttable interest of non-wholly owned subsidiaries |
(21.5) |
- |
(21.5) |
(0.5) |
||||||
Payment of provisions |
(8.9) |
- |
(15.9) |
(0.8) |
||||||
Proceeds from sale-leaseback |
- |
- |
6.4 |
- |
||||||
Net change in share purchase loans and notes receivable |
1.3 |
- |
2.1 |
- |
||||||
Investment in and advances to associates – net of distributions |
(0.7) |
(16.3) |
(11.3) |
(19.6) |
||||||
Other |
- |
0.2 |
- |
0.8 |
||||||
(95.7) |
(72.3) |
(168.5) |
(140.6) |
|||||||
Change in cash and cash equivalents |
178.1 |
3.2 |
174.3 |
(4.2) |
||||||
Cash and cash equivalents – beginning of period |
14.6 |
12.0 |
18.4 |
19.4 |
||||||
Cash and cash equivalents – end of period |
192.7 |
15.2 |
192.7 |
15.2 |
||||||
Interest and other financing costs paid |
6.9 |
7.5 |
27.6 |
33.4 |
||||||
Income taxes paid (recovered) |
1.1 |
(4.5) |
10.7 |
0.9 |
||||||
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 |
39 weeks |
39 weeks ended Sep 28, 2019 |
Earnings before income taxes |
43.4 |
34.1 |
76.5 |
85.9 |
Plant start-up and restructuring costs |
0.7 |
3.7 |
6.2 |
7.0 |
Depreciation of capital assets |
16.8 |
15.0 |
49.3 |
43.8 |
Amortization of intangible assets |
6.5 |
5.1 |
19.3 |
15.2 |
Amortization of right of use assets |
7.9 |
7.0 |
23.5 |
20.5 |
Accretion of lease obligations |
3.7 |
3.4 |
11.1 |
9.8 |
Interest and other financing costs |
9.9 |
12.5 |
32.4 |
42.1 |
Acquisition transaction costs |
1.4 |
1.3 |
4.3 |
2.5 |
Change in value of puttable interest in subsidiaries |
0.5 |
- |
(3.8) |
0.5 |
Accretion of provisions |
2.4 |
1.6 |
6.0 |
4.0 |
Provisions not earned |
- |
- |
(2.0) |
- |
Equity loss in investments in associates |
0.3 |
0.4 |
2.1 |
1.3 |
Adjusted EBITDA |
93.5 |
84.1 |
224.9 |
232.6 |
Free Cash Flow
(in millions of dollars) |
52 weeks |
39 weeks |
39 weeks |
Rolling |
Cash flow from operating activities |
164.2 |
225.8 |
156.3 |
233.7 |
Changes in non-cash working capital |
63.0 |
(53.9) |
11.3 |
(2.2) |
Lease obligation payments |
(35.8) |
(30.3) |
(26.1) |
(40.0) |
Business acquisition transaction costs |
3.3 |
4.3 |
2.5 |
5.1 |
Plant start-up and restructuring costs |
9.6 |
6.2 |
7.0 |
8.8 |
Maintenance capital expenditures |
(26.5) |
(18.9) |
(17.0) |
(28.4) |
Free cash flow |
177.8 |
133.2 |
134.0 |
177.0 |
Adjusted Earnings and Adjusted Earnings per Share
(in millions of dollars except per share amounts) |
13 weeks |
13 weeks |
39 weeks |
39 weeks ended Sep 28, |
Earnings |
34.7 |
26.9 |
60.4 |
68.0 |
Plant start-up and restructuring costs |
0.7 |
3.7 |
6.2 |
7.0 |
Business acquisition transaction costs |
1.4 |
1.3 |
4.3 |
2.5 |
Accretion of provisions |
2.4 |
1.6 |
6.0 |
4.0 |
Provisions not earned |
- |
- |
(2.0) |
- |
Equity loss from associates in start-up |
0.3 |
0.4 |
2.1 |
1.3 |
Change in value of puttable interest in subsidiaries |
0.5 |
- |
(3.8) |
0.5 |
Amortization of intangibles associated with acquisitions |
6.5 |
5.1 |
19.3 |
15.2 |
46.5 |
39.0 |
92.5 |
98.5 |
|
Current and deferred income tax effect of above items |
(4.5) |
(6.0) |
(9.4) |
(9.6) |
Adjusted earnings |
42.0 |
33.0 |
83.1 |
88.9 |
Weighted average shares outstanding |
39.2 |
37.3 |
38.0 |
35.4 |
Adjusted earnings per share |
1.07 |
0.88 |
2.19 |
2.51 |
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 November 5, 2020, 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; (viii) convertible debentures; (ix) impacts of the COVID-19 pandemic; and * liquidity outlook.
Some of the factors that could cause actual results to differ materially from the Company's expectations are outlined in the Company's MD&A for the 13 and 39 weeks ended September 26, 2020 and for the 13 and 52 weeks ended December 28, 2019.
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 this press release. Readers are cautioned that this information is not exhaustive.
- The general economic conditions in Canada and the United States will return to pre COVID-19 levels in the medium term and there will not be any major shutdowns of the Canadian or U.S. economies in the near term.
- The Company's businesses impacted by the COVID-19 pandemic will recover from the resulting disruptions in the medium term and, to the extent there are ongoing changes in their operating costs resulting from the crisis, will be able to recover these through increased selling prices.
- The Company's organic growth initiatives will progress in line with previous expectations post the COVID-19 pandemic.
- The average cost of the basket of food commodities purchased by the Company will be relatively stable over the medium term.
- 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 long-term food trends that have been driving growth in many of the Company's businesses. These 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.
- Weather conditions in the Company's core markets will not have a significant impact on any of its businesses.
- 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 these statements may not be appropriate for other purposes.
Unless otherwise indicated, the forward looking statements in this press release are made as of November 5, 2020 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
please contact George Paleologou, President and CEO or Will Kalutycz, CFO at (604) 656-3100.
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