SOURCE: Premium Brands Holdings Corporation

Premium Brands Holdings Corporation

March 12, 2015 07:00 ET

Premium Brands Holdings Corporation Announces Fourth Quarter 2014 Results and Increase in Dividend

VANCOUVER, BC--(Marketwired - March 12, 2015) - 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 2014.

HIGHLIGHTS FOR THE QUARTER

  • Revenue for the quarter increased by 16.0% to a record $322.1 million as compared to $277.7 million for the fourth quarter of 2013. For the year, revenue increased by $168.9 million or 15.7% to 1.24 billion.
  • Record fourth quarter adjusted EBITDA of $19.2 million despite $1.3 million in unusual asset write-downs. Adjusted EBITDA for the fourth quarter of 2013 was $15.4 million. For the year, adjusted EBITDA increased by $6.4 million or 9.1% to $76.1 million.
  • Adjusted earnings for the quarter of $4.5 million or $0.20 per share as compared to $2.8 million or $0.13 per share for the fourth quarter of 2013. For the year, adjusted earnings were $20.2 million or $0.92 per share as compared to $20.1 million or $0.95 per share for 2013.
  • Fourth quarter declared dividend of $0.3125 per share. Declared dividends for the year totaled $1.25 per share.
  • Rolling four quarters free cash flow of $57.4 million resulting in a dividend to free cash flow ratio of 48.4%.
  • Completed the acquisition of Ocean Miracle Seafood for $3.4 million plus contingent consideration of up to $3.0 million. Ocean Miracle Seafood is a distributor of live, fresh and frozen seafood to restaurants and specialty retailers in the Greater Toronto Area.

The Company also announced that it will be increasing its quarterly dividend by 10.4% to $0.345 per share ($1.38 per share annually) from $0.3125 per share ($1.25 per share annually). The increase will commence for the dividend period ended March 31, 2015 with the first dividend under the new rate being payable on April 15, 2015. Unless indicated otherwise in writing at or before the time the dividend is paid, each dividend paid by the Company in 2015 or a subsequent year is an eligible dividend for the purposes of the Enhanced Dividend Tax Credit System.

SUMMARY FINANCIAL INFORMATION

         
(In thousands of dollars except per share amounts and ratios)        
  13 weeks 13 weeks 52 Weeks 52 Weeks
  Ended Ended Ended Ended
  Dec 27, Dec 28, Dec 27, Dec 28,
  2014 2013 2014 2013
         
Revenue 322,092 277,672 1,241,656 1,072,737
Adjusted EBITDA 19,203 15,350 76,093 69,739
Earnings 1,131 870 11,392 12,539
EPS 0.05 0.04 0.52 0.60
Adjusted earnings 4,507 2,839 20,221 20,103
Adjusted EPS 0.20 0.13 0.92 0.95
         
 
  Rolling Four Quarters Ended
  Dec 27, Dec 28,
  2014 2013
     
Free cash flow 57,374 49,247
Declared dividends 27,768 26,498
Declared dividend per share 1.2500 1.2315
Payout ratio 48.4% 53.8%
     

"During 2014 we continued to make solid progress towards our goal of becoming one of North America's leading specialty foods companies," said Mr. George Paleologou, Present and CEO. "In fact, our sales growth for the year of $168.9 million exceeded what our total specialty food sales were when we began implementing our current business strategies in 2001," added Mr. Paleologou.

"2014 was, however, a very challenging year with the cost of many of the raw materials used in our operations reaching record highs. And while we are pleased with our overall results, we see our fourth quarter performance, with sales and adjusted EBITDA increases of 16.0% and 24.7%, respectively, as more indicative of our future potential. Our results are now starting to reflect the benefits associated with a number of significant investments we have made in recent years in both our existing businesses and in acquiring new specialty food businesses.

"In terms of the ramp up of our new 180,000 square foot sandwich facility in Columbus, OH, we have made significant progress over the last month and are pleased to report that we now expect this project to start being accretive to our earnings in the second quarter of 2015.

"Looking forward, we are very excited about what lies ahead for 2015. Our recent investments in plant capacity and efficiency improvements combined with raw material costs returning to normal levels will help to expand our margins and drive our continued sales growth. Furthermore, we are pursuing a number of exciting acquisition opportunities and I am very confident that we will be adding to our portfolio of great specialty food businesses in the near future.

"Consistent with our outlook for 2015 and our objective of maintaining a payout ratio of approximately 50%, we are pleased to be announcing a 10.4% increase in our quarterly dividend to $0.345 per share per quarter or $1.38 per share per year," said 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, Ohio 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, Bread Garden Go, Hygaard, Hempler's, Quality Fast Foods, Direct Plus, Harlan Fairbanks, Creekside Bakehouse, Stuyver's Bakestudio, Centennial Foodservice, B&C Food Distributors, Shahir, Wescadia, Duso's, Maximum Seafood, SK Food Group, OvenPride, Hub City Fisheries, Audrey's, Deli Chef, Piller's and Freybe.

www.premiumbrandsholdings.com

RESULTS OF OPERATIONS

Revenue

  
(in thousands of dollars except percentages)  
   13 weeks ended
 Dec 27,
2014
 %   13 weeks ended
Dec 28,
2013
 %   52 weeks ended
 Dec 27,
2014
 %   52 weeks ended
 Dec 28,
2013
 %  
Revenue by segment:                     
 Retail  203,601  63.2 % 175,495  63.2 % 783,609  63.1 % 667,086  62.2 %
 Foodservice  118,491  36.8 % 102,177  36.8 % 458,047  36.9 % 405,651  37.8 %
 Consolidated  322,092  100.0 % 277,672  100.0 % 1,241,656  100.0 % 1,072,737  100.0 %
                      

Retail's revenue for the fourth quarter of 2014 as compared to the fourth quarter of 2013 increased by $28.1 million or 16.0% primarily due to organic growth across a range of products and customers. Retail's sandwich business, in particular, generated significant growth in both Canada and the U.S. primarily due to the introduction of a variety of new products by one of its major customers and expansion into new markets in the U.S. northeast.

Retail's revenue for 2014 increased by $116.5 million or 17.5% as compared to 2013 primarily due to: (i) net organic growth of $100.5 million, representing an average growth rate of 15.1%; and (ii) the acquisition of Freybe Gourmet Foods at the end of the first quarter of 2013 which accounted for $16.0 million of the increase.

Retail's organic growth rate for 2014 was well above the Company's targeted range of 6% to 8% primarily due to: (i) selling price increases that were implemented by several of its businesses in response to a record rise in the cost of a variety of raw materials (see Gross Profit); and (ii) an increase in the translated value of Retail's U.S. based businesses' sales resulting from a decline in the value of the Canadian dollar. Excluding these factors, Retail's organic growth for 2014 was slightly above the Company's net of inflation targeted range of 4% to 6%. 

Looking forward (see Forward Looking Statements), the Company is expecting Retail's organic growth for 2015 to continue to remain at above its targeted range based on (i) the factors outlined above; and (ii) continued implementation of a variety of growth initiatives including several production capacity expansion projects.

Foodservice's revenue for the fourth quarter of 2014 as compared to the fourth quarter of 2013 increased by $16.3 million or 16.0% primarily due to: (i) organic growth of $8.0 million, representing an average growth rate of 8.5%; (ii) the acquisitions of Reddi Foods and Ocean Miracle which accounted for $4.9 million of the increase; and (iii) increased sales in its Worldsource food brokerage business of $3.4 million resulting from improved trading opportunities and average higher selling prices for beef and pork products.

Foodservice's revenue for 2014 increased by $52.4 million or 12.9% as compared to 2013 primarily due to: (i) organic growth of $36.8 million, representing an average growth rate of 9.8%; (ii) the acquisitions of Reddi Foods and Ocean Miracle which accounted for $8.5 million of the increase; and (iii) increased sales in its Worldsource food brokerage business of $7.0 million resulting from improved trading opportunities and average higher selling prices for beef and pork products.

Foodservice's organic growth rate for 2014 was above the Company's targeted range of 6% to 8% mainly due to: (i) selling price increases that were implemented by several of its businesses in response to a record rise in the cost of a variety of raw materials (see Gross Profit) and (ii) increased wild sockeye salmon sales in the third quarter due to a very strong fishery on the west coast of B.C. These increases were partially offset by: (i) temporary supply chain disruptions for certain seafood products in the fourth quarter of 2014; and (ii) lower than expected growth in Foodservice's sales volume during the first half of 2014 due mainly to poor weather conditions across much of the Prairies and Ontario. Excluding the impact of selling price increases, Foodservice's organic growth for 2014 was slightly below the Company's net of inflation targeted range of 4% to 6%.

Looking forward (see Forward Looking Statements), the Company is expecting Foodservice's organic growth for 2015 to be at the bottom end of its targeted range of 6% to 8% based on: (i) a much weaker west coast sockeye salmon fishery as compared to 2014; and (ii) slower growth from its traditional restaurant customers due to a variety of factors including an expected slowdown in Alberta's economy resulting from lower oil prices, and a negative impact on consumer demand resulting from continued record high beef prices.

Gross Profit

  
(in thousands of dollars except percentages)  
   13 weeks ended
 Dec 27,
2014
 %   13 weeks ended
 Dec 28,
2013
 %   52 weeks ended
 Dec 27,
2014
 %   52 weeks ended
 Dec 28,
2013
 %  
Gross profit by segment:                     
 Retail  40,549  19.9 % 33,341  19.0 % 152,913  19.5 % 139,067  20.8 %
 Foodservice  17,323  14.6 % 17,744  17.4 % 75,865  16.6 % 73,987  18.2 %
 Consolidated  57,872  18.0 % 51,085  18.4 % 228,778  18.4 % 213,054  19.9 %
                      

Retail's gross profit as a percentage of its revenue (gross margin) for the fourth quarter of 2014 as compared to the fourth quarter of 2013 increased primarily due to: (i) selling price increases implemented by its protein focused businesses over the last several quarters (see Revenue) in order to address a record run up in raw material beef and pork costs that began in the fourth quarter of 2013; and (ii) some softening in raw material pork costs during the quarter. These positive factors were partially offset by: (i) temporarily lower operating efficiencies in Retail's sandwich operations while a new 180,000 square foot sandwich production facility is brought into production (see Plant Start-up and Restructuring Costs -- Sandwich Capacity Project); and (ii) a significant portion of its volume sales growth coming from products that are sold on a cost plus basis. These products generally have lower than average gross margins since the customer assumes the risk associated with changes in raw material costs.

Retail's gross margin for 2014 as compared to 2013 decreased primarily due to; (i) significant increases in the cost of a variety of raw materials, with the most significant being for beef and pork products which, for certain items, were 40% to 50% higher as compared to 2013; (ii) the sales mix changes that impacted the fourth quarter as discussed above; and (iii) the temporarily lower operating efficiencies in Retail's sandwich operations as discussed above.

Foodservice's gross margin for the fourth quarter of 2014 as compared to the fourth quarter of 2013 decreased primarily due to continued record high raw material beef costs. Foodservice has been able to recover most of these cost increases through higher selling prices, however, due to the extent of the increases it has not been able to achieve its historic gross margin levels. Looking forward (see Forward Looking Statements), Foodservice expects its gross margin to improve over the course of 2015 due to a combination of continued selling price increases and an easing off of raw material beef costs in the latter part of 2015. 

Foodservice's gross margin in the fourth quarter was also impacted by a $0.9 million write down of tuna inventory due to an unexpectedly strong tuna fishery in 2014 that resulted in lower selling prices for tuna purchased in 2013.

Foodservice's gross margin for 2014 as compared to 2013 decreased due to record increases in the cost of a variety of raw materials including beef, and the $0.9 million tuna inventory write down, as discussed above.

Selling, General and Administrative Expenses (SG&A)

   
(in thousands of dollars except percentages)  
   13 weeks ended
 Dec 27,
2014
 %   13 weeks ended
 Dec 28,
2013
 %   52 weeks ended
 Dec 27,
2014
 %   52 weeks ended
 Dec 28,
2013
 %  
SG&A by segment:                     
 Retail  22,577  11.1 % 21,333  12.2 % 90,460  11.5 % 86,476  13.0 %
 Foodservice  14,151  11.9 % 12,811  12.5 % 54,529  11.9 % 50,572  12.5 %
 Corporate  1,941      1,591      7,696      6,267     
 Consolidated  38,669  12.0 % 35,735  12.9 % 152,685  12.3 % 143,315  13.4 %
                      

Retail's SG&A for the fourth quarter of 2014 as compared to the fourth quarter of 2013 increased by $1.2 million due to incremental costs associated with Retail's organic sales growth (see Revenue) including higher variable selling costs, such as freight, and additional sales and administration infrastructure. These increases were partially offset by reduced costs resulting from the sale of a portion of Retail's direct-to-store delivery network (see Plant Start-up and Restructuring Costs -- NDSD Reconfiguration Project).

Retail's SG&A for 2014 as compared to 2013 increased by $4.0 million primarily due to: (i) additional SG&A resulting from the acquisition of Freybe Gourmet Foods at the end of the first quarter of 2013; and (ii) incremental costs associated with Retail's organic sales growth as discussed above. These increases were partially offset by: (i) a temporary reduction in discretionary marketing and advertising programs in the second and third quarters of 2014 as part of a strategy to partially mitigate the impact of record high raw material costs (see Gross Profit); and (ii) the rationalization and subsequent sale of a portion of Retail's direct-to-store delivery network channel as discussed above.

Retail's SG&A as a percentage of its revenue for 2014 as compared to 2013 decreased mainly due to: (i) the fixed nature of certain costs relative to the growth in its revenue (see Revenue); and (ii) decreased discretionary marketing and advertising spending as discussed above.

Foodservice's SG&A for the fourth quarter of 2014 as compared to the fourth quarter of 2013 increased by $1.3 million primarily due to: (i) incremental costs associated with Foodservice's organic sales growth (see Revenue) including higher variable selling costs and additional sales and administration infrastructure; and (ii) an unusual bad debt expense of $0.4 million resulting from a major restaurant chain customer permanently shutting down its operations.

Foodservice's SG&A as a percentage of its revenue for 2014 as compared to 2013 decreased mainly due to the fixed nature of certain costs relative to the growth in its revenue (see Revenue).

Adjusted EBITDA

   
(in thousands of dollars except percentages)  
   13 weeks ended
 Dec 27,
2014
  %   13 weeks ended
 Dec 28,
2013
  %   52 weeks ended
 Dec 27,
2014
  %   52 weeks ended
 Dec 28,
2013
  %  
Adjusted EBITDA by segment:                         
 Retail  17,972   8.8 % 12,008   6.8 % 62,453   8.0 % 52,591   7.9 %
 Foodservice  3,172   2.7 % 4,933   4.8 % 21,336   4.7 % 23,415   5.8 %
 Corporate  (1,941 )     (1,591 )     (7,696 )     (6,267 )    
 Consolidated  19,203   6.0 % 15,350   5.5 % 76,093   6.1 % 69,739   6.5 %
                          

The Company's adjusted EBITDA for the fourth quarter of 2014 as compared to the fourth quarter of 2013 increased by $3.9 million or 25.1% to $19.2 million primarily due to:

  • Growth in the Company's sales (see Revenue);
  • Improved operating efficiencies resulting from the reconfiguration of the Company's deli meats production capacity (see Plant Start-up and Restructuring Charges -- Deli Capacity Project);
  • Improved gross margins resulting from higher selling prices and decreases in certain raw material costs (see Gross Profit); and
  • The rationalization and subsequent sale of the Company's direct-to-store delivery network for the convenience store channel (see Plant Start-up and Restructuring Charges -- NDSD Reconfiguration Project).

These increases were partially offset by:

  • Temporarily lower operating efficiencies in the Company's sandwich operations while a new 180,000 square foot sandwich production facility is brought into production (see Plant Start-up and Restructuring Costs -- Sandwich Capacity Project); and
  • $1.3 million in unusual costs incurred by the Company's foodservice operation consisting of a $0.9 million write down of tuna inventory (see Gross Profit) and a $0.4 million bad debt write-off (see Selling, General and Administrative Expenses).

The Company's adjusted EBITDA for 2014 as compared to 2013 increased by $6.4 million or 9.1% to $76.1 million primarily due to the factors that favourably impacted the fourth quarter. These were partially offset by: (i) the factors that unfavourably impacted the fourth quarter; and (ii) below normal margins on most protein products for the first three quarters of 2014 due to record high raw material costs (see Gross Profit). The impact of this factor was much more severe in the first half of 2014 due to: (i) most of the raw material cost increases occurred during this period; and (ii) delays associated with increasing selling prices, such as customer notice periods, which resulted in most selling price increases taking effect in the latter part of the year.

Looking forward (see Forward Looking Statements), the Company expects its adjusted EBITDA to continue to show substantial improvement in 2015 based on:

  • Gross margins in the Company's deli and premium processed meats operations returning to normal levels;
  • A steady improvement in the profitability of the Company's sandwich operations driven by: (i) improved operating efficiencies at its new production facility as start-up related issues are resolved and its workforce becomes more experienced; and (ii) sales growth which will help to offset the incremental overhead associated with its new production facility and the sales and administration infrastructure that was put into place in 2014 to support the sandwich operation's long-term growth objectives;
  • Strong growth from the Company's businesses that have completed significant capital projects over the last three years including: its bakery operations, which completed a new state-of-the-art artisan bakery in 2012; its seafood operations, which built a new seafood processing facility in 2013; and its premium processed meats operations, which expanded its Ferndale, WA facility in 2013;
  • Continued improvement in the performance of the Company's deli meat operations with the completion of the Deli Capacity Project (see Plant Start-up and Restructuring Costs -- Deli Capacity Project);
  • The integration of the Ocean Miracle business acquisition;
  • Continued improvement in the Company's foodservice operation's gross margins (see Gross Profit);
  • The turnaround of the Company's protein snack foods business with the completion of its NDSD Reconfiguration Project (see Plant Start-up and Restructuring Costs -- NDSD Reconfiguration Project); and
  • Continued general organic growth.

Plant Start-up and Restructuring Costs

Plant start-up and restructuring costs consist of costs associated with the start-up of new production capacity and/or the significant restructuring of one or more of the Company's businesses. The Company expects these projects to result in significant improvements in its future earnings and cash flows.

                
Project  13 weeks ended
 Dec 27,
2014
 13 weeks ended
Dec 28,
2013
 52 weeks ended
Dec 27,
2014
 52 weeks ended
Dec 28,
2013
 Expected Completion Date
           
Sandwich Capacity  6,723  -  15,305  -  Q2-2015
Deli Capacity  -  3,120  3,449  9,480  Complete
NDSD Reconfiguration  -  212  1,375  2,170  Complete
New Seafood Facility Start-up  -  -  -  210  Complete
Other  -  706  170  889   
   6,723  4,038  20,299  12,749   
           

Sandwich Capacity Project

This project involves the reconfiguration of the Company's U.S. based sandwich production capacity including the construction of a new 180,000 square foot production facility in Columbus, OH. Once complete, it will provide the Company with much needed incremental sandwich production capacity and will result in improved efficiencies at its other U.S. sandwich plant in Reno, NV.

The first phase of the project was completed in the third quarter of 2014 with the startup of the new Columbus plant in August. The second and final phase of the project consists of: (i) getting the Columbus plant operating at normal efficiency levels (see Adjusted EBITDA); and (ii) reallocation of production between the Columbus and Reno plants to maximize various operational efficiencies. The second phase of the project was originally projected to be completed by the end of 2014, however, due to unexpectedly high sales volumes in the fourth quarter of 2014 and in early 2015 certain aspects of the project had to be delayed. In response, the Company has brought in additional resources and now expects (see Forward Looking Statements) this phase of the project to be completed in the second quarter of 2015.

Deli Capacity Project

This project involved the reconfiguration of the Company's deli meats production capacity in western Canada including: (i) the shutdown of an older facility in Richmond, BC; (ii) a major realignment of a new facility in Langley, BC acquired in 2013 as part of the acquisition of Freybe Gourmet Foods; (iii) the transfer of the Langley plant's distribution to the Company's distribution centre in Surrey, BC; and (iv) the start-up of a new distribution operation in Calgary, AB.

This project, which increased the Company's deli meats production capacity and significantly improved its operating efficiencies, was completed in the second quarter of 2014.

NDSD Reconfiguration Project

This project involved the restructuring and rationalization of NDSD, the Company's direct-to-store delivery business for the convenience store channel. The project was initiated to address the impact that a variety of factors, including the proliferation of quick serve restaurants, was having on consumer demand for food products sold through this channel.

The major elements of the initiative, which consisted mainly of streamlining NDSD's distribution infrastructure so that it could be profitable on a lower sales volume, were completed in 2013. The restructuring costs incurred in 2014 consist mainly of final employee severance payments and the write-down of inventory made obsolete by the reconfiguration. 

In the third quarter of 2014, NDSD's Quebec operations were sold to a well-established regional distributor as part of a strategy to: (i) form strategic alliances with strong regional distributors (Strategic Distributors) for the direct-to-store delivery of the Company's products to the convenience store channel; and (ii) shutdown and/or sell NDSD's direct-to-store delivery operations to the Strategic Distributors. In the fourth quarter of 2014 the Company continued to execute this strategy with the sale/exit of NDSD's operations in Alberta, Saskatchewan and Manitoba. Correspondingly, the Company has entered into strategic alliances with strong regional distributors in each of these markets.

As a result of the sale of NDSD's operations the Company recorded a loss of $0.7 million in the fourth quarter of 2014.

Looking forward (see Forward Looking Statements), the Company expects to sell the small remaining portion of NDSD's operations, consisting of several routes in the Vancouver region, in the first half of 2015.

New Seafood Facility Start-up Project

This project, which consisted of the start-up of a new seafood processing facility in Richmond, BC and the subsequent integration of a business acquired from Harbour Marine in 2013, was completed in the first quarter of 2013.

Other Income

Other income for 2014 consists of a $4.7 million gain resulting from the Retail segment's sale and leaseback of a distribution centre in Surrey, BC in the first quarter.

Other income for 2013 consists of a $1.2 million gain resulting from the Retail segment's sale of vacant land in Edmonton, AB in the third quarter.

Interest and other financing costs

The Company's interest and other financing costs for the fourth quarter of 2014 as compared to the fourth quarter of 2013 and for 2014 as compared to 2013 increased by $0.2 million and $2.1 million, respectively, primarily due to an increase in the Company's funded debt resulting from the Company's project capital expenditure initiatives and business acquisitions.

FREE CASH FLOW

          
(in thousands of dollars)  52 weeks
ended
Dec 27, 2014
  52 weeks
ended
Dec 28, 2013
 
       
Cash flow from operating activities  21,344   15,156  
Changes in non-cash working capital  20,283   22,663  
Sale of redundant property  -   2,413  
Acquisition transaction costs  266   560  
Plant start-up and restructuring costs  20,299   12,749  
Capital maintenance expenditures  (4,818 ) (4,294 )
Free cash flow  57,374   49,247  
       

ADJUSTED EARNINGS PER SHARE

                  
(in thousands of dollars except per share amounts)  13 weeks ended
 Dec 27,
2014
  13 weeks ended
 Dec 28,
2013
  52 weeks ended
 Dec 27,
2014
  52 weeks ended
 Dec 28,
2013
 
             
Earnings attributable to shareholders  1,125   897   11,426   12,688  
                  
Plant start-up and restructuring costs  6,723   4,038   20,299   12,749  
Other income  -   -   (4,703 ) (1,158 )
Acquisition transaction costs  78   26   266   560  
Accretion of provisions  80   2   342   307  
Unrealized loss (gain) on foreign currency contracts  (400 ) (300 ) (400 ) (100 )
Unrealized loss (gain) on interest rate swap contracts  -   100   -   200  
Other gains and losses  655   (900 ) 655   (1,662 )
Income tax recovery  (1,378 ) -   (1,378 ) -  
   6,883   3,863   26,507   23,584  
                  
Current and deferred income tax effect of above items  (2,376 ) (1,024 ) (6,286 ) (3,481 )
                  
Adjusted earnings attributable to shareholders  4,507   2,839   20,221   20,103  
                  
Weighted average shares outstanding  22,170   21,234   22,063   21,253  
                  
Adjusted earnings per share  $ 0.20   $ 0.13   $ 0.92   $ 0.95  
             

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 11, 2015, 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) 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 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) execution risk associated with the Company's business restructuring initiatives; (xii) risks associated with the Company's business acquisition strategies; (xiii) changes in the value of the Canadian dollar relative to the U.S. dollar; and (xiv) new government regulations affecting the Company's business and operations; (xv) the Company's ability to raise the capital needed to fund its various growth initiatives; (xvi) labour related issues including potential labour disputes with employees represented by labour unions and labour shortages; (xvii) the loss of and/or the inability to attract key personnel; (xviii) fluctuations in interest rates charged on the Company's variable rate debt obligations which have not been hedged with interest rate swaps; (xix) a major disruption, failure, or breach of the Company's information technology systems; (xx) credit risk associated with the Company's major customers; (xxi) plant shutdowns, periods of reduced production, or unexpected interruptions in production capabilities as a result of equipment failures; (xxii) risks related to the health status of livestock which impact both the supply of raw materials to the Company's production facilities as well as consumer confidence in the Company's products; (xxiii) risks associated with international events that affect the price of food commodities or the free flow of food products between countries; and (xxiv) changes in environmental, health and safety regulations under which the Company operates. Details on these risk factors as well as other factors can be found in the Company's 2014 MD&A, which is filed electronically through SEDAR and is available online at www.sedar.com.

Unless otherwise indicated, the forward looking information in this document is made as of March 11, 2015 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  
(in thousands of Canadian dollars)  
          
   December 27, 2014   December 28, 2013  
Current assets:         
 Cash and cash equivalents  9,453   1,437  
 Accounts receivable  116,544   92,880  
 Inventories  121,693   108,729  
 Prepaid expenses  5,798   7,746  
 Other assets  763   358  
   254,251   211,150  
Capital assets  203,340   177,275  
Intangible assets  71,545   75,099  
Goodwill  174,846   168,925  
Investment in associates  9,517   7,949  
Deferred income taxes  22,257   26,697  
Other assets  3,391   3,222  
   739,147   670,317  
Current liabilities:         
 Cheques outstanding  6,353   5,689  
 Bank indebtedness  -   29,466  
 Dividend payable  6,978   6,863  
 Accounts payable and accrued liabilities  102,598   94,288  
 Current portion of long-term debt  2,645   113,222  
 Current portion of provisions  1,746   2,219  
   120,320   251,747  
Long-term debt  211,292   11,938  
Puttable interest in subsidiaries  17,900   14,498  
Deferred revenue  4,520   1,103  
Provisions  4,556   3,820  
Pension obligation  1,437   653  
   360,025   283,759  
          
Convertible unsecured subordinated debentures  174,549   177,057  
          
Equity attributable to shareholders:         
 Deficit  (36,838 ) (19,816 )
 Share capital  227,247   221,994  
 Equity component of convertible debentures  1,744   1,744  
 Reserves  11,804   4,929  
 Non-controlling interest  616   650  
   204,573   209,501  
   739,147   670,317  
       
  
Premium Brands Holdings Corporation  
Consolidated Statements of Operations  
(in thousands of Canadian dollars except per share amounts)  
          
   52 weeks ended December 27, 2014   52 weeks ended December 28, 2013  
          
Revenue  1,241,656   1,072,737  
Cost of goods sold  1,012,878   859,683  
Gross profit before depreciation, amortization, plant start-up and restructuring costs, and other income  228,778   213,054  
          
Selling, general and administrative expenses before depreciation, amortization, plant start-up and restructuring costs, and other income  152,685   143,315  
   76,093   69,739  
          
Plant start-up and restructuring costs  20,299   12,749  
Other income  (4,703 ) (1,158 )
   60,497   58,148  
          
Depreciation of capital assets  20,084   17,597  
Amortization of intangible assets  4,356   4,371  
Amortization of other assets  5   5  
Interest and other financing costs  20,556   18,460  
Amortization of financing costs  253   312  
Acquisition transaction costs  266   560  
Change in value of puttable interest in subsidiaries  1,996   1,639  
Accretion of provisions  342   307  
Unrealized gain on foreign currency contracts  (400 ) (100 )
Unrealized loss on interest rate swap contracts  -   200  
Equity income in associates  (52 ) (91 )
Other gains and losses  655   (1,662 )
Earnings before income taxes  12,436   16,550  
          
Provision for income taxes         
 Current  (3,538 ) 2,855  
 Deferred  4,582   1,156  
   1,044   4,011  
          
Earnings  11,392   12,539  
          
Earnings (loss) for the year attributable to:         
 Shareholders  11,426   12,688  
 Non-controlling interest  (34 ) (149 )
          
   11,392   12,539  
          
Earnings per share         
 Basic  0.52   0.60  
 Diluted  0.52   0.59  
        
        
Premium Brands Holdings Corporation  
Consolidated Statements of Cash Flows  
(in thousands of Canadian dollars)  
          
   52 weeks ended December 27, 2014   52 weeks ended December 28, 2013  
          
Cash flows from (used in) operating activities:         
 Earnings  11,392   12,539  
 Items not involving cash:         
  Depreciation of capital assets  20,084   17,597  
  Amortization of intangible and other assets  4,361   4,376  
  Amortization of financing costs  253   312  
  Change in value of puttable interest in subsidiaries  1,996   1,639  
  Gain on sales of capital assets  (4,682 ) (1,212 )
  Accrued interest income  (21 ) (25 )
  Net unrealized loss (gain) on foreign currency contracts and interest rate swaps  (400 ) 100  
  Equity income in associates  (52 ) (91 )
  Deferred revenue  716   (528 )
  Accretion of convertible debentures, long-term debt and provisions  3,261   2,888  
  Reversal of provision  -   (762 )
  Non-cash loss on sale of routes  137   -  
  Change in value of cash conversion option  -   (170 )
  Deferred income taxes  4,582   1,156  
   41,627   37,819  
 Change in non-cash working capital  (20,283 ) (22,663 )
   21,344   15,156  
          
Cash flows from (used in) financing activities:         
 Long-term debt - net  88,686   (19,658 )
 Bank indebtedness and cheques outstanding  (28,803 ) 22,048  
 Convertible debentures - net of issuance costs  -   54,600  
 Dividends paid to shareholders, net of dividends received from cancelled shares  (27,653 ) (25,822 )
 Purchase of 7.00% debentures under normal course issuer bid  -   (228 )
 Share issuance and financing costs  (1,026 ) (69 )
   31,204   30,871  
          
Cash flows from (used in) investing activities:         
 Capital asset additions  (47,065 ) (15,608 )
 Business acquisitions  (2,885 ) (54,339 )
 Investment in associates  (1,860 ) (2,677 )
 Net change in share purchase loans and notes receivable  (326 ) 221  
 Promissory note from associate  -   500  
 Distribution from associates  344   -  
 Proceeds from sale and leaseback of asset  10,200   25,000  
 Net proceeds from sales of assets  168   2,543  
 Purchase of interest in non-wholly owned subsidiary pursuant to exercise of puttable interest  -   (1,847 )
 Payments to shareholders of non-wholly owned subsidiaries  (801 ) (1,276 )
 Payment of provisions  (2,347 ) (920 )
   (44,572 ) (48,403 )
          
Increase (decrease) in cash and cash equivalents  7,976   (2,376 )
Effects of exchange on cash and cash equivalents  40   55  
Cash and cash equivalents - beginning of year  1,437   3,758  
          
Cash and cash equivalents - end of year  9,453   1,437  

Contact Information

  • For further information, please contact
    George Paleologou
    President and CEO
    or
    Will Kalutycz
    CFO
    (604) 656-3100