Premium Brands Holdings Corporation Announces Record 2011 Third Quarter Sales and Earnings from Operations
(firmenpresse) - VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 11/03/11 -- 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 2011.
HIGHLIGHTS
SUMMARY FINANCIAL INFORMATION
"Our results for the quarter show that we are making solid progress in the execution of our core business strategies. They do not, however, reflect the full potential of our business given that we are still being challenged by both record high costs for a variety of input commodities and by an improving but still weak economic environment," said Mr. George Paleologou, President and CEO.
"Certainly the highlight of the quarter was our acquisition of Piller's. This is a company that we have known and admired for many years for its leading position in Canada's deli market. Its Ontario based state-of-the-art manufacturing facilities, category leading brands and solid management team perfectly complement our western Canada based deli operations and will play a key part in the execution of our national deli strategy.
"As the Piller's acquisition occurred only two weeks before the end of our quarter it had a minimal impact on our results. However, looking forward, with this being our largest acquisition yet, and likely our most synergistic, we expect it to have a very positive impact on future results.
"In terms of the turnaround of our recently acquired Deli Chef business, we continue to make solid progress and are well ahead of plan having already achieved profitable operating results. We remain confident that this operation will contribute very positively towards our earnings in 2012 and beyond," added Mr. Paleologou.
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, Washington State and Nevada. The Company services over 26,000 customers and its family of brands and businesses include Grimm's, Harvest, McSweeney's, Bread Garden Express, Hygaard, Hempler's, Quality Fast Foods, Gloria's Best of Fresh, Harlan Fairbanks, Creekside Bakehouse, Centennial Foodservice, B&C Foods, Shahir, Duso's Fine Foods, Maximum Seafood, SK Food Group, OvenPride, Hub City Fisheries, Audrey's, Deli Chef, Hamish & Enzo and Piller's.
RESULTS OF OPERATIONS
Revenue
Retail's revenue for the third quarter of 2011 as compared to the third quarter of 2010 increased by $51.6 million or 83.5% due to: (i) the acquisitions of SK Food Group in the fourth quarter of 2010, Deli Chef in the first quarter of 2011, SJ in the second quarter of 2011 and Piller's in the third quarter of 2011 which resulted in $51.1 million in incremental sales; and (ii) organic growth across a broad range of products and customers of $0.5 million representing an organic growth rate of approximately 0.8%.
Retail's low organic growth for the quarter, which was below the Company's targeted range of 6% to 8%, was primarily due to: (i) the loss of approximately $1.1 million in sales of third party products sourced in the U.S. due to suppliers choosing to directly market these products to Canadian retailers; and (ii) a $0.6 million decrease in sales to convenience stores due to reduced consumer spending in this channel that was the result of a variety of factors, including record high gas prices. Excluding the impact of these two factors, Retail's organic growth rate was approximately 4.9% for the quarter.
Retail's revenue for the first three quarters of 2011 increased by $112.8 million or 65.7% as compared to the first three quarters of 2010 primarily due to the acquisitions of Duso's and SK Food Group in 2010 and Deli Chef, SJ and Piller's in 2011, which resulted in incremental sales of $116.1 million. These incremental sales were partially offset by: (i) lower sales of barbeque focused products during the first two quarters of 2011 due to extremely poor weather across western Canada; (ii) a $3.0 million decrease in sales to convenience stores due to reduced consumer spending in this channel; (iii) a $1.9 million decrease in revenue in the first quarter of 2011 due to one-time sales in 2010 resulting from the Company's involvement with the 2010 Vancouver Winter Olympics; and (iv) the loss of approximately $1.1 million in sales of third party products sourced in the U.S. due to suppliers choosing to directly market these products to Canadian retailers.
Looking forward (see Forward Looking Statements), Retail expects its organic growth rate, excluding the impacts of the convenience store channel and the loss of certain third party product sales, to continue to improve in the fourth quarter of 2011 and to approach its targeted organic growth rate of 6% to 8% in 2012. The lost third party product sales are expected to have a $1.4 million impact on the Company's sales in the fourth quarter of 2011 and a $1.3 million impact on the Company's sales in the first half of 2012.
In terms of sales to the convenience store channel, Retail is working on a number of initiatives to address the impact that general channel contraction is having on both its sales and profitability. These include working with its convenience store customers to develop new foodservice product programs that will better position them to compete with quick service restaurants, and exploring new strategic relationships with other distributors servicing this channel.
Foodservice's revenue for the third quarter of 2011 as compared to the third quarter of 2010 increased by $10.5 million or 12.8% due to: (i) increased sales to Foodservice's core hotel, restaurant and institutional customers of approximately $4.3 million representing an organic growth rate of 6.6%; (ii) the acquisition of Hub City Fisheries in the fourth quarter of 2010 which resulted in $3.4 million in incremental sales; and (iii) increased wholesale seafood sales resulting partially from a competitor in the Greater Toronto Area shutting down its business. These increases were partially offset by a $1.1 million decrease in Worldsource's food brokerage sales due to reduced trading opportunities.
Foodservice's revenue for the first three quarters of 2011 as compared to the first three quarters of 2010 increased by $51.6 million or 24.9% due to: (i) the acquisitions of Maximum Seafood and Hub City Fisheries in 2010 which resulted in $40.0 million in incremental sales; (ii) increased sales to Foodservice's core hotel, restaurant and institutional customers of $8.1 million representing an organic growth rate of approximately 4.4%; (iii) increased wholesale seafood sales resulting partially from a competitor in the Greater Toronto Area shutting down its business; and (iv) increased Worldsource sales of $0.3 million. These increases were partially offset by a $0.7 million decrease in revenue due to one-time sales in the first quarter of 2010 resulting from the Company's involvement with the 2010 Vancouver Winter Olympics.
Looking forward (see Forward Looking Statements) assuming western Canada's economy continues to strengthen, the Company expects Foodservice to achieve its targeted organic growth of 6% to 8% for the next several quarters.
Gross Profit
Retail's gross profit as a percentage of its revenue (gross margin) for the third quarter of 2011 as compared to the third quarter of 2010 decreased primarily due to the acquisitions of SK Food Group in 2010 and SJ and Piller's in 2011 as these businesses generate lower average gross margins as compared to Retail's other businesses. Excluding SK Food Group, SJ and Piller's, Retail's gross margin for the third quarter was 32.1%.
Retail's gross margin for the first three quarters of 2011 as compared to the first three quarters of 2010 decreased primarily due to: (i) the acquisitions of SK Food Group, SJ and Piller's; and (ii) a number of Retail's businesses being impacted for much of 2011 by rising costs for a variety of food and non-food input commodities. Throughout 2011 the Company has been implementing a number of initiatives, including selling price increases and product packaging changes, to address the impact of higher costs on its margins. Excluding SK Food Group, SJ and Piller's, Retail's gross margin for the first three quarters of 2011 was 31.0%.
Looking forward (see Forward Looking Statements), Retail expects its gross margin, after adjusting for the impact of acquisitions, to be under continued pressure for the next several quarters due to expected increases in the cost of certain protein input commodities. In anticipation of this, Retail is continuing to work on a variety of margin enhancement initiatives, including targeted selling price increases, new product development, packaging changes, and improving plant efficiencies.
Foodservice's gross margin for the third quarter of 2011 was relatively stable as compared to the third quarter of 2010.
Foodservice's gross margin for the first three quarters of 2011 as compared to the first three quarters of 2010 decreased primarily due to: (i) the acquisitions of Maximum Seafood and Hub City Fisheries part way through 2010 as both of these businesses generate lower average gross margins as compared to Foodservice's other businesses; and (ii) rising input costs for a variety of food and non-food commodities, in general, and for beef based products, in particular. Excluding Maximum Seafood and Hub City Fisheries, Foodservice's gross margin for the first three quarters of 2011 was 19.9%.
Looking forward (see Forward Looking Statements), Foodservice expects its gross margin to remain stable over the next several quarters as the benefits of its various margin improvement initiatives, which include selling price increases, improved operating efficiencies resulting from its higher sales volumes and the introduction of a new hamburger patty program, are expected to be offset by increases in the cost of certain protein input commodities.
Selling, General and Administrative Expenses (SG&A)
Retail's SG&A in the third quarter of 2011 as compared to the third quarter of 2010 increased by $6.5 million primarily due to: (i) the acquisitions of SK Food Group in 2010 and Deli Chef, SJ and Piller's in 2011 which resulted in an increase of $6.7 million; and (ii) higher freight and fuel costs resulting from fuel price increases. These increases were partially offset by: (i) lower distribution costs resulting from the rationalization of certain areas of Retail's direct-to-store delivery network; and (ii) lower variable selling costs, such as sales commissions, resulting from reduced convenience store channel sales.
Retail's SG&A for the first three quarters of 2011 as compared to the first three quarters of 2010 increased by $14.4 million primarily due to: (i) the acquisitions of Duso's and SK Food Group in 2010 and the acquisitions of Deli Chef, SJ and Piller's in 2011 which resulted in an increase in Retail's SG&A of $15.1 million; and (ii) higher freight and fuel costs resulting from fuel price increases. These increases were partially offset by: (i) a decrease in one-time costs associated with the Company's involvement in the 2010 Vancouver Winter Olympics in 2010; (ii) lower variable selling costs, such as sales commissions, resulting from reduced convenience store channel sales; and (iii) lower distribution costs resulting from the rationalization of certain areas of Retail's direct-to-store delivery network.
Excluding acquisitions, Retail's SG&A as a percentage of revenue for the first three quarters of 2011 was approximately 18.8% as compared to 18.9% for the first three quarters of 2010.
Foodservice's SG&A in the third quarter of 2011 as compared to the third quarter of 2010 increased by $1.4 million primarily due to: (i) increased distribution and variable selling costs associated with Foodservice's organic sales growth; (ii) the acquisition of Hub City Fisheries in the fourth quarter of 2010 which accounted for $0.4 million of the increase; and (iii) higher freight and fuel costs resulting from fuel price increases.
Foodservice's SG&A for the first three quarters of 2011 as compared to the first three quarters of 2010 increased by $5.8 million primarily due to: (i) the acquisitions of Maximum Seafood and Hub City Fisheries in 2010 which accounted for $4.0 million of the increase; (ii) the recognition in the second quarter of 2010 of a $0.5 million gain on the sale of a redundant property; (iii) increased distribution and variable selling costs associated with Foodservice's organic sales growth; and (iv) higher freight and fuel costs resulting from fuel price increases.
Excluding acquisitions, Foodservice's SG&A as a percentage of revenue for the first three quarters of 2011 was approximately 13.6% as compared to 13.8% for the first three quarters of 2010 after adjusting for a $0.5 million gain on the sale of a redundant property.
EBITDA
The Company's EBITDA for the third quarter of 2011 as compared to the third quarter of 2010 increased primarily due to: (i) acquisitions; and (ii) organic growth and improved margins in a number of the Company's legacy businesses. These increases were partially offset by a variety of factors including the continuing impact of high commodity costs on the selling margins of several of the Company's businesses.
The Company's EBITDA for the first three quarters of 2011 as compared to the first three quarters of 2010 increased primarily due to acquisitions partially offset by (i) one-time benefits in the first quarter of 2010 associated with the Company's involvement with the 2010 Vancouver Winter Olympics; (ii) the impact of rising commodity costs on the selling margins of several of the Company's businesses; and (iii) the recognition in the second quarter of 2010 of a $0.5 million gain on the sale of a redundant property.
Depreciation and Amortization (D&A)
The increases in the Company's D&A expense for both the third quarter of 2011 as compared to the third quarter of 2010, and the first three quarters of 2011 as compared to the first three quarters of 2010, were primarily due to business acquisitions made in 2010 and 2011 by both its Retail and Foodservice segments.
Interest
The increases in the Company's interest and other financing costs for both the third quarter of 2011 as compared to the third quarter of 2010, and the first three quarters of 2011 as compared to the first three quarters of 2010, were primarily due to: (i) an increase in the Company's net funded debt; and (ii) the repayment of lower cost senior debt through the issuance of convertible unsecured subordinated debentures at the beginning of 2011.
Change in Value of Puttable Interest in Subsidiaries
Change in value of puttable interest represents an estimate of the change in the value of options held by non-controlling shareholders of certain subsidiaries of the Company that entitle such shareholders to require the Company to purchase their interest in the applicable subsidiary.
Change in value of puttable interest in subsidiaries for the third quarter of 2011 as compared to the third quarter of 2010 decreased by $0.3 million primarily due to the purchase by the Company in the second quarter of 2011 of the minority interest in its Stuyver's artisan bakery business.
Change in value of puttable interest in subsidiaries for the first three quarters of 2011 as compared to the first three quarters of 2010 increased by $0.9 million primarily due to: (i) increased accretion resulting from changes made in the latter half of 2010 to the assumptions used to value the put options; and (ii) incremental accretion relating to new put options resulting from business acquisitions made in the fourth quarter of 2010 and in 2011.
Restructuring Costs
Restructuring costs consist of costs associated with a significant restructuring of one or more of the Company's businesses. In the first three quarters of 2011, the Company incurred $2.7 million in restructuring costs consisting primarily of: (i) $2.1 million in charges relating to the Company's recently acquired Deli Chef business. Included in this is approximately $1.8 million for severance and other costs associated with the shutdown on April 29, 2011 of Deli Chef's sandwich plant in Gatineau, Quebec. As previously announced the Company expects to incur $6 million to $7 million in capital and restructuring costs relating to the changes being made to Deli Chef's business. As at the end of the third quarter these costs totaled $2.2 million; (ii) $0.4 million in redundant lease costs associated with the expansion of the Company's artisan bread capacity; and (iii) $0.2 million in charges associated with the rationalization of the Company's direct-to-store delivery networks.
Acquisition Bargain Purchase Gains
During the second quarter of 2011, the Company finalized its fair value assessment for the acquisition of Deli Chef. In doing so it determined that the fair value of the net identifiable assets acquired was $1.4 million greater than the consideration paid. Under IFRS this difference is recognized immediately as a bargain purchase gain.
Free Cash Flow
The following table provides a reconciliation of free cash flow to cash flow from operating activities:
FORWARD LOOKING STATEMENTS
This discussion and analysis 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 November 2, 2011, 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.
Factors that could cause actual results to differ materially from the Company's expectations include, among other things: (i) seasonal and/or weather related fluctuations in the Company's sales; (ii) changes in consumer discretionary spending resulting from changes in economic conditions and/or general consumer confidence levels; (iii) changes in the cost of raw materials used in the production of the Company's products; (iv) changes in the cost of products sourced from third party manufacturers and sold through the Company's proprietary distribution networks; (v) risks associated with the Company's conversion from a publicly traded income trust to a publicly traded corporation, including related changes in Canada's income tax laws; (vi) changes in the Company's relationships with its larger customers; (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; and (x) new government regulations affecting the Company's business and operations. Details on these risk factors as well as other factors can be found in the Company's 2010 MD&A, which is filed electronically through SEDAR and is available online at .
Unless otherwise indicated, the forward looking information in this document is made as of November 2, 2011 and, except as required by applicable law, will not be publicly updated or revised. This cautionary statement expressly qualifies the forward looking information in this document.
Premium Brands Holdings Corporation
CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands)
Premium Brands Holdings Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands except per share amounts)
Premium Brands Holdings Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
Contacts:
Premium Brands Holdings Corporation
George Paleologou
President and CEO
(604) 656-3100
Premium Brands Holdings Corporation
Will Kalutycz
CFO
(604) 656-3100
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Datum: 03.11.2011 - 06:00 Uhr
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