Premium Brands Holdings Corporation Announces Record 2012 Fourth Quarter Performance
(firmenpresse) - VANCOUVER, BRITISH COLMBIA -- (Marketwire) -- 03/14/13 -- 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 2012.
HIGHLIGHTS
"We are pleased to report another quarter and year of record performance," said Mr. George Paleologou, President and CEO. "2012 was, however, a building year as considerable resources and time were invested in developing the infrastructure, including the construction of three new production facilities, that will support our growth objectives in the coming years.
"Overall, most of our businesses were in line with or exceeded our expectations for 2012 with the one major exception being our National Direct-to-Store Distribution or NDSD business, which is facing a number of challenges relating to structural changes occurring in the convenience store channel. We are, however, confident that NDSD is putting into place the solutions needed to address these challenges and expect a better performance by it in 2013.
"We are also very encouraged by the strong growth opportunities we are seeing across many of our businesses through a combination of product innovation, geographical expansion and entry into new market segments. With the investments we made in 2012 we are very well positioned to capitalize on these opportunities," 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, Nevada and Washington State. The Company services over 22,000 customers and its family of brands and businesses include Grimm's, Harvest, McSweeney's, Bread Garden Go, Hygaard, Hempler's, Quality Fast Foods, Gloria's Best of Fresh, Direct Plus, National Direct-to-Store Distribution (NDSD), Harlan Fairbanks, Creekside Bakehouse, Centennial Foodservice, B&C Foods, Shahir, Duso's, Maximum Seafood, SK Food Group, OvenPride, Hub City Fisheries, Audrey's, Deli Chef and Piller's.
RESULTS OF OPERATIONS
Extra Week of Operations
The Company's fiscal year ends on the last Saturday of the calendar year. As a result its fiscal year is generally 52 weeks, however, every five to six years the Company has a fiscal year that is 53 weeks due to the calendar year being slightly longer than 52 weeks.
In 2011 the Company's fiscal year was 53 weeks resulting in an extra week of operations as compared to 2012. The Company estimates the impact of the extra week of operations on its sales and EBITDA to be $15.6 million and $0.1 million, respectively. The nominal impact on the Company's EBITDA relative to the higher sales impact is due to: (i) the year-end holiday season and generally poor weather in December resulting in the extra week being a relatively poor sales week; and (ii) despite the poor sales week the Company still incurred a full week of costs for items such as plant, sales, distribution and administrative overhead.
Normalizing for the extra week in the fourth quarter of 2011 Retail's revenue for the fourth quarter of 2012 as compared to the fourth quarter of 2011 increased by $8.2 million or 5.7%.
Retail's organic growth for the quarter was slightly below the Company's targeted range of 6% to 8% due to a $3.2 million decrease in sales resulting from the following factors:
Excluding the sales decrease associated with the above four factors, Retail's organic growth rate for the quarter was approximately 8%.
Retail's revenue for 2012 increased by $160.1 million or 36.6% as compared to 2011 primarily due to: (i) the acquisitions of Piller's, SJ and Deli Chef in 2011, which resulted in incremental sales of $136.0 million; and (ii) net organic growth, i.e. after the impact of the four factors outlined above, across a range of products and customers of $33.4 million representing an organic growth rate of approximately 7.8%. These increases were partially offset by approximately $9.3 million in additional sales in 2011 due to the extra week of operations.
Looking forward (see Forward Looking Statements), for 2013 the Company expects Retail's organic sales growth to be at or slightly below its long-term targeted range of 6% to 8%.
Foodservice's revenue for the fourth quarter of 2012 as compared to the fourth quarter of 2011 was flat due to: (i) general organic growth of $5.6 million representing an organic growth rate of 6.6%; (ii) increased sales in its Worldsource food brokerage business of $0.7 million resulting from improved trading opportunities; and (iii) these increases being offset by $6.3 million in additional sales in 2011 that were the result of the extra week of operations.
Foodservice's organic growth rate for the quarter was in line with the Company's long-term target of 6% to 8% and above its expectations as the impacts of a delay in the start of the 2012/13 National Hockey League season and of product supply issues resulting from the shutdown at the end of the third quarter of one of Canada's largest beef processors were more temporary than initially estimated.
Foodservice's revenue for 2012 as compared to 2011 increased by $19.8 million or 5.6% due to: (i) general organic growth of $20.8 million representing a growth rate of 6.4%; (ii) increased sales in its Worldsource food brokerage business of $4.2 million; and (iii) $1.1 million in unusual trading volume in its Hub City Fisheries business resulting from the sale of excess inventory relating to a very successful salmon fishery in 2011. These increases were partially offset by approximately $6.3 million in additional sales in 2011 due the extra week of operations.
Looking forward (see Forward Looking Statements), for 2013 the Company expects Foodservice's organic sales growth to be within its long-term targeted range of 6% to 8%.
Retail's gross profit as a percentage of its revenue (gross margin) for the fourth quarter of 2012 as compared to the fourth quarter of 2011 was relatively flat due to higher margins in its deli meats businesses, which were the result of lower average costs for a variety of beef and pork raw materials, being offset by: (i) lower margins in its NDSD business resulting from the transition of certain product sales to third party distributors and wholesale distributors; (ii) increased plant overheads associated with Stuyver's new artisan bakery, which was completed in the third quarter of 2012; (iii) a temporary shortage of reasonably priced turkey raw materials in Ontario that resulted in record high turkey input costs for Piller's. This shortage, which had a negative impact on Piller's gross profit of approximately $1.5 million, was the result of short term structural issues with Canada's poultry supply management system's policies and procedures; and (iv) production inefficiencies attributable to SK Food Group's launch of new sandwich wraps for two large international customers.
Retail's gross margin for 2012 as compared to 2011 decreased from 24.7% to 22.2% due primarily to: (i) the factors impacting Retail's fourth quarter margins as outlined above; (ii) the acquisitions of Piller's and SJ part way through 2011 as both of these businesses generally have lower gross margins as compared to Retail's other businesses; and (iii) a change in selling terms whereby in the third quarter of 2011 certain customers began receiving their products FOB the Company's plant instead of FOB the customers' warehouses. This resulted in the elimination of freight being billed to these customers and corresponding decreases in gross profit and selling expenses.
Foodservice's gross margin for the fourth quarter of 2012 as compared to the fourth quarter of 2011 and for 2012 as compared to 2011 remained relatively stable.
Selling, General and Administrative Expenses (SG&A)
Retail's SG&A in the fourth quarter of 2012 as compared to the fourth quarter of 2011 decreased slightly due to: (i) an extra week of operations in 2011; and (ii) the rationalization of NDSD's distribution network. These decreases were mostly offset by: (i) increased marketing costs associated with the promotion of Piller's new "Simply Free" line of deli meats; and (ii) increases in a variety of variable selling costs associated with Retail's organic sales growth.
Retail's SG&A for 2012 as compared to 2011 increased by $12.5 million primarily due to: (i) the acquisitions of Piller's, SJ and Deli Chef in 2011 which resulted in an increase in Retail's SG&A of $13.5 million; and (ii) the factors impacting Retail's fourth quarter SG&A as outlined above. These items were partially offset by a decrease in freight costs due to the change in selling terms whereby in the third quarter of 2011 certain customers started receiving their products FOB the Company's plant instead of FOB the customers' warehouses (see Gross Profit).
Foodservice's SG&A in the fourth quarter of 2012 as compared to the fourth quarter of 2011 increased by $0.3 million while its SG&A for 2012 as compared to 2011 increased by $2.8 million. Both increases were due to: (i) increased costs associated with the development of the infrastructure needed to accelerate the growth of its seafood based initiatives; and (ii) a variety of items including higher variable selling costs associated with Foodservice's organic sales growth.
The reduction in Corporate's SG&A for the fourth quarter of 2012 as compared to the fourth quarter of 2011 and for 2012 as compared to 2011 was due to decreases in a variety of items including discretionary bonuses, corporate marketing costs, consulting fees and external accounting fees.
The Company's Adjusted EBITDA for the fourth quarter of 2012 as compared to the fourth quarter of 2011 increased by $0.6 million or 4.4% to $15.0 million primarily due to:
These increases were partially offset by:
The Company's Adjusted EBITDA for 2012 as compared to 2011 increased by $13.3 million or 24.2% to $68.3 million primarily due to: (i) acquisitions made part way through 2011; and (ii) the factors impacting the Company's fourth quarter Adjusted EBITDA as outlined above.
The Company is not at this time providing guidance on its projected Adjusted EBITDA for 2013 due to uncertainty around the timing of several of its strategic priorities, including: (i) sales initiatives associated with bringing Stuyver's, Deli Chef's and Centennial's new plants into full production; and (ii) the restructuring of NDSD's DSD network. Looking forward (see Forward Looking Statements) the Company expects to provide guidance on its projected Adjusted EBITDA for 2013 with the release of its 2013 first quarter results.
Interest
The Company's interest and other financing costs for the fourth quarter of 2012 as compared to the fourth quarter of 2011 increased by $0.3 million to $4.5 million primarily due to the issuance of $57.5 million of convertible debentures in June 2012, the proceeds of which were used to repay lower cost senior debt.
The Company's interest and other financing costs for 2012 as compared to 2011 increased by $3.1 million to $17.6 million primarily due to: (i) an increase in the Company's average outstanding net funded debt; and (ii) the issuance of $57.5 million of convertible debentures in June 2012, the proceeds of which were used to repay lower cost senior debt.
Restructuring Costs
Restructuring costs consist of costs associated with the significant restructuring of one or more of the Company's businesses. For 2012, the Company incurred $5.7 million in restructuring costs consisting of:
Other
Other income of $0.1 million in 2012 consists of the following unusual items: (i) a $7.2 million gain resulting from the partial reversal of contingent consideration associated with the acquisition of Piller's; (ii) a $6.9 million loss resulting from the write-down of redundant real estate assets to their fair market value; and (iii) a $0.2 million loss resulting from the settlement of a legal claim dating back to 2001.
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 March 13, 2013, 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; (x) execution risk associated with the Company's growth initiatives; (xi) risks associated with the Company's business acquisition strategies; and (xii) 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 2012 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 March 13, 2013 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.
Contacts:
Premuim Brands Holdings Corporation
George Paleologou
President and CEO
(604) 656-3100
Premuim Brands Holdings Corporation
Will Kalutycz
CFO
(604) 656-3100
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Datum: 14.03.2013 - 06:00 Uhr
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