VANCOUVER, BC, Aug. 6, 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 second quarter of 2020.
"I would like to acknowledge our associates from across
Canada and the U.S. for their
commitment and hard work during these truly unprecedented
times. The challenges that our Company faced over the past
quarter were by far the most difficult in our history and I am very
humbled by how our people rose to the occasion. Their
dedication, perseverance and ingenuity ensured that we were able to
continue to provide our fellow citizens with essential food
products and to play an active role in contributing to the
well-being of the many communities that we are part of," said Mr.
George Paleologou, President and
CEO.
"April, in particular, was a very challenging month for us as
COVID-19 related issues impacted almost all elements of all our
businesses. The month proved to be a defining point as our
management teams took exceptional measures to address the unique
challenges that were faced by their respective businesses and
pursued initiatives that not only dealt with immediate issues but
also helped to position them to weather whatever was to come
next. Fortunately, April proved to be the eye of the storm
and since then we have seen steady and significant improvements
across all of our businesses giving us solid momentum as we head
into the back half of the year," added Mr. Paleologou.
HIGHLIGHTS
- Second quarter revenue of $976.6
million representing a 3.3% or $31.2
million increase as compared to the second quarter of
2019
- Excluding the estimated impact of the pandemic, the Company's
Specialty Foods and Premium Food Distribution segments' organic
growth rates for the quarter were 7.6% and 14.9%, respectively
- Second quarter adjusted EBITDA of $67.1
million, which decreased from $88.3
million in the second quarter of 2019 due to impacts
associated with the COVID-19 pandemic including lost sales and
$10.9 million in net transitory cost
impacts
- Second quarter adjusted EPS of $0.57 per share as compared to $1.10 per share in the second quarter of 2019
- At the end of the quarter the Company continued to maintain a
strong balance sheet and liquidity with $379.9 million of available credit capacity
- Subsequent to the quarter the Company raised net proceeds of
$308.7 million through the issuance
of common shares and convertible debentures increasing its
available credit capacity to almost $690
million
- The Company continues to suspend its revenue and adjusted
EBITDA guidance for 2020 due to uncertainties associated with
COVID-19 but reaffirmed that it expects to meet or exceed its 2023
targets of $6 billion in revenue and
$600 million in adjusted EBITDA
- The Company intends to resume its acquisition strategy which
had been put on hold due to uncertainties associated with
COVID-19
- The Company declared a quarterly dividend of $0.5775 per share
SUMMARY FINANCIAL INFORMATION
(In millions of dollars except per share amounts and
ratios)
|
|
13
weeks ended June 27, 2020
|
13
weeks ended June 29, 2019
|
26
weeks ended June 27, 2020
|
26
weeks ended June 29, 2019
|
Revenue
|
|
976.6
|
945.4
|
1,911.6
|
1,722.0
|
Adjusted
EBITDA
|
|
67.1
|
88.3
|
131.4
|
148.6
|
Earnings
|
|
13.5
|
31.2
|
25.7
|
41.2
|
EPS
|
|
0.36
|
0.89
|
0.69
|
1.20
|
Adjusted
earnings
|
|
21.2
|
38.5
|
41.1
|
56.1
|
Adjusted
EPS
|
|
0.57
|
1.10
|
1.10
|
1.63
|
|
|
Trailing Four
Quarters Ended
|
|
|
June
27, 2020
|
June
29, 2019
|
Free cash
flow
|
|
161.3
|
173.1
|
Declared
dividends
|
|
82.7
|
69.5
|
Declared dividend per
share
|
|
2.205
|
2.000
|
Payout
ratio
|
|
51.3%
|
40.2%
|
"As we look forward, we are pleased to see demand patterns in
certain channels returning to some level of normalcy as various
economies begin to open and consumers start to return to their
usual daily routines. We are especially pleased to see
consumer demand recovering in the quick service restaurant (QSR)
channel as the abrupt shutdown of a large portion of this market
hit our sandwich platform particularly hard. At one
point our sandwich platform had temporarily lost most of its legacy
sales base as COVID-19 related issues impacted its QSR, airline and
convenience store customers. The platform's management team
faced this challenge head on and immediately pivoted to developing
other sales opportunities. While many of these were at low or
marginal returns, they enabled the business to avoid mass employee
layoffs and ensure it was well positioned to service their legacy
customers as demand returned, which to a significant degree it has"
said Mr. Paleologou.
"Looking beyond COVID-19, I remain very optimistic about our
future. We are very pleased with how our portfolio businesses
reacted to the challenges created by the COVID-19 pandemic as they
once again demonstrated the agility and responsiveness of our
entrepreneurial based business model. I have no doubt that we
will emerge from this crisis a stronger and even more resilient
company. The momentum shown in our May, June and July results
reflect this with a number of our businesses now facing
unprecedented demand for their products from both new and legacy
customers.
"In terms of our five-year objectives of reaching $6 billion in sales and $600 million in adjusted EBITDA by 2023, we
remain on track. While the COVID-19 crisis has impacted the
trajectory of how we will get there, the incredible amount of new
product innovation being developed across our many businesses
combined with an especially robust acquisition pipeline make us
more confident than ever that we will meet or exceed them," added
Mr. Paleologou.
THIRD QUARTER 2020 DIVIDEND
The Company also announced that its Board of Directors approved
a cash dividend of $0.5775 per share
for the third quarter of 2020, which will be payable on
October 15, 2020 to shareholders of
record at the close of business on September
30, 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.
For further information, please contact George Paleologou, President and CEO or
Will Kalutycz, CFO at (604)
656-3100.
www.premiumbrandsholdings.com
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 ended Jun
27, 2020
|
%
(1)
|
13
weeks ended Jun
29, 2019
|
%
(1)
|
26
weeks ended Jun
27, 2020
|
%
(1)
|
26
weeks ended Jun
29, 2019
|
%
(1)
|
Revenue by
segment:
|
|
|
|
|
|
|
|
|
Specialty
Foods
|
647.8
|
66.3%
|
653.7
|
69.1%
|
1,278.8
|
66.9%
|
1,190.6
|
69.1%
|
Premium Food
Distribution
|
328.8
|
33.7%
|
291.7
|
30.9%
|
632.8
|
33.1%
|
531.4
|
30.9%
|
Consolidated
|
976.6
|
100.0%
|
945.4
|
100.0%
|
1,911.6
|
100.0%
|
1,722.0
|
100.0%
|
(1) Expressed as a percentage
of consolidated revenue
|
Specialty Foods' (SF) revenue for the second quarter of 2020 as
compared to the second quarter of 2019 decreased by $5.9 million or 0.9% primarily due to issues
associated with the COVID-19 pandemic including a general slowdown
in Canadian and U.S. consumer activity and the shutdown, in whole
or in part, of a number of SF's customers' businesses for a
significant portion of the quarter. SF's sales to the
foodservice industry, in general, and to quick service restaurants,
in particular, accounted for most of the impact. The effect
on SF's sales of COVID-19 related challenges, net of sales
increases to retail food chains resulting from COVID-19 related
shifts in consumer buying patterns, is estimated to be
approximately $85 million.
Normalizing for this amount, SF's organic volume growth rate (OVGR)
for the quarter is approximately 7.6%, which is above the Company's
long-term targeted range of 4% to 6% due to: (i) several very
successful new product launches in the sandwich and meat snack
product categories; and (ii) year over year favorable weather
conditions in central Canada that
resulted in increased sales of BBQ related products.
SF's revenue for the second quarter also benefited from: (i) net
selling price inflation of $16.3
million, which was largely driven by price increases
implemented by SF's protein businesses in reaction to higher pork
and beef commodity input costs; (ii) a $12.7
million increase in the translated value of its U.S. based
businesses' sales resulting from a weaker Canadian dollar; and
(iii) business acquisitions, which accounted for $1.4 million of the increase.
SF's revenue for the first two quarters of 2020 as compared to
the first two quarters of 2019 increased by $88.2 million or 7.4% primarily due to: (i)
organic volume growth, net of the impacts of the COVID-19 pandemic,
of $49.1 million; (ii) net selling
price inflation of $20.5 million;
(iii) a $16.9 million increase in the
translated value of its U.S. based businesses' sales resulting from
a weaker Canadian dollar; and (iv) business acquisitions,
which accounted for $1.7 million of
the increase.
Premium Food Distribution's (PFD) revenue for the second quarter
of 2020 as compared to the second quarter of 2019 increased by
$37.1 million or 12.7% primarily due
to: (i) business acquisitions, which accounted for $28.8 million of the increase; (ii) net selling
price inflation of $9.0 million,
which was driven by price increases put through to address higher
beef and pork commodity input costs partially offset by lower live
seafood selling prices resulting from decreases in lobster and
salmon commodity input costs; and (iii) a $2.5 million increase in the translated value of
its U.S. based businesses' sales resulting from a weaker
Canadian dollar. Adjusting for these factors PFD's sales
decreased by $5.9 million due to an
estimated $46 million in net lost
sales resulting from the COVID-19 pandemic related issues outlined
above partially offset by: (i) new sales generated by leveraging
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 (GTA); and (ii) a new
live lobster listing with a large U.S. based retail grocery
group.
Normalizing for the impact of COVID-19, PFD's OVGR is estimated
to be approximately 14.9%, which is above the Company's long-term
targeted range of 4% to 6% primarily due to the factors outlined
above.
PFD's revenue for the first two quarters of 2020 as compared to
the first two quarters of 2019 increased by $101.4 million or 19.1% primarily due to: (i)
business acquisitions, which accounted for $62.0 million of the increase; (ii) organic
volume growth, net of the impacts of the COVID-19 pandemic, of
$25.0 million; (iii) net selling
price inflation of $11.4 million; and
(iv) a $3.0 million increase in the
translated value of its U.S. based businesses' sales resulting from
a weaker Canadian dollar.
Gross Profit
(in millions of
dollars except percentages)
|
|
13
weeks ended Jun
27, 2020
|
%
(1)
|
13
weeks ended Jun
29, 2019
|
%
(1)
|
26
weeks ended Jun
27, 2020
|
%
(1)
|
26
weeks ended Jun
29, 2019
|
%
(1)
|
Gross profit by
segment:
|
|
|
|
|
|
|
|
|
Specialty
Foods
|
128.5
|
19.8%
|
150.5
|
23.0%
|
267.7
|
20.9%
|
275.5
|
23.1%
|
Premium Food
Distribution
|
54.8
|
16.7%
|
45.4
|
15.6%
|
96.6
|
15.3%
|
80.0
|
15.1%
|
Consolidated
|
183.3
|
18.8%
|
195.9
|
20.7%
|
364.3
|
19.1%
|
355.5
|
20.6%
|
(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 second quarter of 2020 as compared to the second quarter of
2019 decreased by 320 basis points primarily due to: (i)
$14.6 million in COVID-19 related net
transitory costs consisting mainly of employee absenteeism pay,
employee thank-you bonuses, production inefficiencies and
investments in additional employee safety measures partially offset
by government wage subsidies; and (ii) sales mix changes and lost
sales volume associated with COVID-19 related issues, the impact of
which was amplified by SF's recent investments in the
infrastructure of a number of plants. To a lesser extent,
SF's gross margin was also impacted by: (i) labor wage inflation;
and (ii) additional outside storage costs, mainly associated with
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.
The above factors were partially offset by: (i) general margin
expansion resulting from a combination of selling price increases
and inventory strategies used to hedge against commodity cost
volatility; and (ii) the reclassification of $1.3 million in costs to selling, general and
administration expense.
SF's gross margin for the first two quarters of 2020 as compared
to the first two quarters of 2019 decreased by 220 basis points to
20.9% primarily due to the factors outlined above.
PFD's gross margins for the second quarter of 2020 as compared
to the second quarter of 2019 increased by 110 basis points
primarily due to: (i) improved market conditions resulting from
lower salmon and lobster commodity costs; (ii) favorable inventory
positions relative to inflationary beef and pork commodity costs;
and (iii) increased procurement by PFD businesses for the company's
other businesses resulting in additional margin capture.
These factors were partially offset by sales mix changes associated
with COVID-19 related issues.
PFD's gross margins for the first two quarters of 2020 as
compared to the first two quarters of 2019 increased by 20
basis points to 15.3% primarily due to the reasons outlined above
plus an additional offsetting factor of lower live seafood margins
in the first quarter of 2020 that were the result of certain
businesses having to work through higher cost inventory relative to
selling price decreases caused by COVID-19 related market
disruptions.
Selling, General and Administrative Expenses
(SG&A)
(in millions of
dollars except percentages)
|
|
13
weeks ended Jun
27, 2020
|
%
(1)
|
13
weeks ended Jun
29, 2019
|
%
(1)
|
26
weeks ended Jun
27, 2020
|
%
(1)
|
26
weeks ended Jun
29, 2019
|
%
(1)
|
SG&A by
segment:
|
|
|
|
|
|
|
|
|
Specialty
Foods
|
79.7
|
12.3%
|
77.4
|
11.8%
|
159.3
|
12.5%
|
148.7
|
12.5%
|
Premium Food
Distribution
|
32.1
|
9.8%
|
26.5
|
9.1%
|
64.6
|
10.2%
|
50.4
|
9.5%
|
Corporate
|
4.4
|
|
3.7
|
|
9.0
|
|
7.8
|
|
Consolidated
|
116.2
|
11.9%
|
107.6
|
11.4%
|
232.9
|
12.2%
|
206.9
|
12.0%
|
(1) Expressed as a percentage
of the corresponding segment's revenue
|
SF's SG&A for the second quarter of 2020 as compared to the
second quarter of 2019 increased by $2.3
million primarily due to: (i) an increase in the translated
value of SF's U.S. based businesses' SG&A resulting from a
weaker Canadian dollar; (ii) the reclassification of $1.3 million in costs from cost of sales; (iii)
additional variable compensation in certain businesses; and (iv)
business acquisitions. These factors were partially offset
by: (i) a decrease of approximately $2.2
million in discretionary marketing costs resulting from a
number of retail promotions being cancelled or delayed due to
COVID-19 related factors; and (ii) $0.6
million in COVID-19 related net transitory cost decreases
consisting primarily of travel costs savings, wage reductions and
government wage subsidies partially offset by employee thank-you
bonuses.
SF's SG&A for the first two quarters of 2020 as compared to
the first two quarters of 2019 increased by $10.6 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 SF's growth initiatives.
PFD's SG&A for the second quarter of 2020 as compared to the
second quarter of 2019 increased by $5.6
million primarily due to: (i) business acquisitions; and
(ii) additional variable compensation in certain
businesses. These factors were partially offset by
$0.9 million in COVID-19 related net
transitory cost decreases consisting primarily of wage
reductions.
PFD's SG&A for the first two quarters of 2020 as compared to
the first two quarters of 2019 increased by $14.2 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 ended Jun
27, 2020
|
%
(1)
|
13
weeks ended Jun
29, 2019
|
%
(1)
|
26
weeks ended Jun
27, 2020
|
%
(1)
|
26
weeks ended Jun
29, 2019
|
%
(1)
|
Adjusted EBITDA by
segment:
|
|
|
|
|
|
|
|
|
Specialty
Foods
|
48.8
|
7.5%
|
73.1
|
11.2%
|
108.4
|
8.5%
|
126.8
|
10.7%
|
Premium Food
Distribution
|
22.7
|
6.9%
|
18.9
|
6.5%
|
32.0
|
5.1%
|
29.6
|
5.6%
|
Corporate
|
(4.4)
|
|
(3.7)
|
|
(9.0)
|
|
(7.8)
|
|
Consolidated
|
67.1
|
6.9%
|
88.3
|
9.3%
|
131.4
|
6.9%
|
148.6
|
8.6%
|
(1) Expressed as a percentage
of the corresponding segment's revenue
|
Adjusted EBITDA for the second quarter of 2020 as compared to
the second quarter of 2019 decreased by $21.2 million or 24.0% to $67.1 million primarily due to the impact of
COVID-19 related factors. The impact of these factors was
most severe in April with the Company's May and June results each
showing substantial sequential improvement.
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 two quarters of 2020, the
Company incurred $3.5 million and
$5.5 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 it
being unable to forecast its results with reasonable accuracy due
to the impacts of the COVID-19 pandemic being highly
uncertain. While the Company has seen steady and consistent
improvement in its business since that time, including through July
and early August, there is still considerable uncertainty about
what the impacts of COVID-19 will be in the latter half of 2020
and, as a result, the Company is continuing to suspend providing
annual sales and adjusted EBITDA guidance. The Company does,
however, based on current circumstances, expect continued
improvement in its financial performance on a month to month basis
after considering the normal seasonality of its businesses.
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 has 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.
The Company also expects to resume its business acquisition
strategy, which had been temporarily suspended due to the
uncertainties surrounding the COVID-19 pandemic, based on: (i) the
current trend of improving results in primarily all of its
businesses; and (ii) the recent strengthening of its balance sheet
and liquidity through the issuance of common shares and convertible
debentures for net proceeds of $308.7
million.
Premium Brands
Holdings Corporation
|
Consolidated
Balance Sheets
|
(in millions of
Canadian dollars)
|
|
|
|
|
|
Jun
27, 2020
|
Dec
28, 2019
|
Jun
29, 2019
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
14.6
|
18.4
|
12.0
|
Accounts
receivable
|
373.6
|
346.5
|
354.6
|
Inventories
|
430.5
|
396.2
|
372.5
|
Prepaid expenses and
other assets
|
17.5
|
19.4
|
16.7
|
|
836.2
|
780.5
|
755.8
|
|
|
|
|
Capital
assets
|
524.3
|
502.1
|
478.6
|
Right of use
assets
|
316.2
|
300.4
|
266.7
|
Intangible
assets
|
503.8
|
490.2
|
435.8
|
Goodwill
|
804.5
|
780.2
|
803.1
|
Investment in and
advances to associates
|
75.2
|
64.6
|
29.4
|
Other assets
|
18.3
|
19.1
|
21.4
|
|
|
|
|
|
3,078.5
|
2,937.1
|
2,790.8
|
|
|
|
|
Current
liabilities:
|
|
|
|
Cheques
outstanding
|
13.2
|
16.4
|
14.6
|
Bank
indebtedness
|
14.4
|
24.9
|
2.8
|
Dividends
payable
|
21.7
|
19.7
|
19.7
|
Accounts payable and
accrued liabilities
|
331.1
|
285.0
|
261.4
|
Current portion of
long-term debt
|
7.9
|
7.7
|
8.5
|
Current portion of
lease obligations
|
26.4
|
32.1
|
24.1
|
Current portion of
provisions
|
15.9
|
8.5
|
9.1
|
Current portion of
puttable interest in subsidiaries
|
53.3
|
58.2
|
53.8
|
|
483.9
|
452.5
|
394.0
|
|
|
|
|
Long-term
debt
|
689.9
|
603.0
|
567.8
|
Lease
obligations
|
328.1
|
303.2
|
274.9
|
Provisions
|
56.8
|
62.4
|
55.0
|
Puttable interest in
subsidiaries
|
-
|
-
|
5.0
|
Deferred income
taxes
|
75.5
|
76.8
|
69.4
|
Other
liabilities
|
10.1
|
4.0
|
3.6
|
|
1,644.3
|
1,501.9
|
1,369.7
|
|
|
|
|
Convertible unsecured
subordinated debentures
|
366.0
|
364.0
|
362.0
|
|
|
|
|
Equity attributable to
shareholders:
|
|
|
|
Retained
earnings
|
2.2
|
19.9
|
17.0
|
Share
capital
|
1,034.2
|
1,023.6
|
1,021.0
|
Reserves
|
31.8
|
27.7
|
21.1
|
|
1,068.2
|
1,071.2
|
1,059.1
|
|
|
|
|
|
3,078.5
|
2,937.1
|
2,790.8
|
Premium Brands
Holdings Corporation
|
|
Consolidated
Statements of Operations
|
(in millions of
Canadian dollars except per share amounts)
|
|
|
|
|
|
|
13 weeks
ended
Jun 27,
2020
|
13 weeks
ended
Jun 29,
2019
|
26 weeks
ended
Jun 27, 2020
|
26 weeks
ended
Jun 29,
2019
|
|
|
|
|
|
Revenue
|
976.6
|
945.4
|
1,911.6
|
1,722.0
|
Cost of goods
sold
|
793.3
|
749.5
|
1,547.3
|
1,366.5
|
Gross profit before
the below
|
183.3
|
195.9
|
364.3
|
355.5
|
|
|
|
|
|
Selling, general and
administrative expenses before the below
|
116.2
|
107.6
|
232.9
|
206.9
|
|
67.1
|
88.3
|
131.4
|
148.6
|
|
|
|
|
|
Plant start-up and
restructuring costs
|
3.5
|
1.4
|
5.5
|
3.3
|
Depreciation of
capital assets
|
16.6
|
14.5
|
32.5
|
28.8
|
Amortization of
intangible assets
|
6.5
|
5.1
|
12.8
|
10.1
|
Amortization of right
of use assets
|
7.9
|
6.8
|
15.6
|
13.5
|
Accretion of lease
obligations
|
3.7
|
3.2
|
7.4
|
6.4
|
Interest and other
financing costs
|
11.0
|
14.7
|
22.5
|
29.6
|
Acquisition
transaction costs
|
1.5
|
0.5
|
2.9
|
1.2
|
Change in value of
puttable interest in subsidiaries
|
(4.3)
|
-
|
(4.3)
|
0.5
|
Accretion of
provisions
|
1.9
|
1.5
|
3.6
|
2.4
|
Provisions not
earned
|
-
|
-
|
(2.0)
|
-
|
Equity loss in
investments in associates
|
1.3
|
0.4
|
1.8
|
0.9
|
Earnings before
income taxes
|
17.5
|
40.2
|
33.1
|
51.9
|
|
|
|
|
|
Provision for income
taxes (recovery)
|
|
|
|
|
Current
|
8.2
|
7.8
|
12.3
|
10.5
|
Deferred
|
(4.2)
|
1.2
|
(4.9)
|
0.2
|
|
4.0
|
9.0
|
7.4
|
10.7
|
|
|
|
|
|
Earnings
|
13.5
|
31.2
|
25.7
|
41.2
|
|
|
|
|
|
Earnings per
share:
|
|
|
|
|
Basic
|
0.36
|
0.89
|
0.69
|
1.20
|
Diluted
|
0.36
|
0.89
|
0.68
|
1.20
|
|
|
|
|
|
Weighted average
shares outstanding (in millions):
|
|
|
|
|
Basic
|
37.4
|
35.1
|
37.4
|
34.4
|
Diluted
|
37.5
|
35.2
|
37.5
|
34.5
|
Premium Brands
Holdings Corporation
|
|
Consolidated
Statements of Cash Flows
|
(in millions of
Canadian dollars)
|
|
|
|
|
|
|
13 weeks
ended
Jun 27,
2020
|
13 weeks
ended
Jun 29,
2019
|
26 weeks
ended
Jun 27,
2020
|
26 weeks
ended
Jun 29,
2019
|
|
|
|
|
|
Cash flows from (used
in) operating activities:
|
|
|
|
|
Earnings
|
13.5
|
31.2
|
25.7
|
41.2
|
Items not involving
cash:
|
|
|
|
|
Depreciation of
capital assets
|
16.6
|
14.5
|
32.5
|
28.8
|
Amortization of
intangible assets
|
6.5
|
5.1
|
12.8
|
10.1
|
Amortization of right
of use assets
|
7.9
|
6.8
|
15.6
|
13.5
|
Accretion of lease
obligations
|
3.7
|
3.2
|
7.4
|
6.4
|
Change in value of
puttable interest in subsidiaries
|
(4.3)
|
-
|
(4.3)
|
0.5
|
Equity loss in
investments in associates
|
1.3
|
0.4
|
1.8
|
0.9
|
Non-cash financing
costs
|
1.3
|
1.2
|
2.5
|
2.3
|
Accretion of
provisions
|
1.9
|
1.5
|
3.6
|
2.4
|
Provisions not
earned
|
-
|
-
|
(2.0)
|
-
|
Deferred income taxes
(recovery)
|
(4.2)
|
1.2
|
(4.9)
|
0.2
|
Other
|
-
|
-
|
-
|
0.3
|
|
44.2
|
65.1
|
90.7
|
106.6
|
Change in non-cash
working capital
|
63.8
|
(30.1)
|
(3.4)
|
(66.3)
|
|
108.0
|
35.0
|
87.3
|
40.3
|
|
|
|
|
|
Cash flows from (used
in) financing activities:
|
|
|
|
|
Long-term debt,
net
|
(68.8)
|
(192.6)
|
56.8
|
(139.0)
|
Payments for lease
obligations
|
(10.3)
|
(8.7)
|
(20.0)
|
(17.0)
|
Bank indebtedness and
cheques outstanding
|
10.7
|
(39.9)
|
(13.7)
|
(40.5)
|
Common share issuance
from private placement – net of
|
-
|
250.9
|
-
|
250.9
|
issuance
costs
|
Dividends paid to
shareholders
|
(21.7)
|
(17.7)
|
(41.4)
|
(33.8)
|
|
(90.1)
|
(8.0)
|
(18.3)
|
20.6
|
|
|
|
|
|
Cash flows from (used
in) investing activities:
|
|
|
|
|
Capital asset
additions
|
(19.5)
|
(24.0)
|
(48.8)
|
(38.7)
|
Business
acquisitions
|
(1.2)
|
(1.9)
|
(13.0)
|
(23.3)
|
Payments to
shareholders of non-wholly owned subsidiaries
|
(0.6)
|
(1.1)
|
(0.6)
|
(2.3)
|
Payment for settlement
of puttable interest of non-wholly
|
-
|
(0.5)
|
-
|
(0.5)
|
owned
subsidiary
|
Payment of
provisions
|
-
|
-
|
(7.0)
|
(0.8)
|
Proceeds from
sale-leaseback
|
6.4
|
-
|
6.4
|
-
|
Net change in share
purchase loans and notes receivable
|
0.3
|
0.2
|
0.8
|
0.3
|
Investment in and
advances to associates – net of
|
0.1
|
(2.3)
|
(10.6)
|
(3.3)
|
distributions
|
Other
|
-
|
(0.1)
|
-
|
0.3
|
|
(14.5)
|
(29.7)
|
(72.8)
|
(68.3)
|
|
|
|
|
|
Change in cash and
cash equivalents
|
3.4
|
(2.7)
|
(3.8)
|
(7.4)
|
Cash and cash
equivalents – beginning of period
|
11.2
|
14.7
|
18.4
|
19.4
|
|
|
|
|
|
Cash and cash
equivalents – end of period
|
14.6
|
12.0
|
14.6
|
12.0
|
|
|
|
|
|
|
|
|
|
|
Interest and other
financing costs paid
|
11.9
|
17.7
|
20.7
|
25.9
|
Income taxes
paid
|
5.0
|
2.7
|
9.6
|
5.4
|
NON-IFRS FINANCIAL MEASURES
The Company uses certain non-IFRS financial measures including
adjusted EBITDA, free cash flow, adjusted earnings and adjusted
earnings per share, which are not defined under IFRS and, as a
result, may not be comparable to similarly titled measures
presented by other publicly traded entities, nor should they be
construed as an alternative to other earnings measures determined
in accordance with IFRS. These non-IFRS measures are
calculated as follows:
Adjusted EBITDA
(in millions of
dollars)
|
13
weeks ended Jun
27, 2020
|
13
weeks ended Jun
29, 2019
|
26
weeks ended Jun
27, 2020
|
26
weeks ended Jun
29, 2019
|
Earnings before
income taxes
|
17.5
|
40.2
|
33.1
|
51.9
|
Plant start-up and
restructuring costs
|
3.5
|
1.4
|
5.5
|
3.3
|
Depreciation of
capital assets
|
16.6
|
14.5
|
32.5
|
28.8
|
Amortization of
intangible assets
|
6.5
|
5.1
|
12.8
|
10.1
|
Amortization of right
of use assets
|
7.9
|
6.8
|
15.6
|
13.5
|
Accretion of lease
obligations
|
3.7
|
3.2
|
7.4
|
6.4
|
Interest and other
financing costs
|
11.0
|
14.7
|
22.5
|
29.6
|
Acquisition
transaction costs
|
1.5
|
0.5
|
2.9
|
1.2
|
Change in value of
puttable interest in subsidiaries
|
(4.3)
|
-
|
(4.3)
|
0.5
|
Accretion of
provisions
|
1.9
|
1.5
|
3.6
|
2.4
|
Provisions not
earned
|
-
|
-
|
(2.0)
|
-
|
Equity loss in
investments in associates
|
1.3
|
0.4
|
1.8
|
0.9
|
Adjusted
EBITDA
|
67.1
|
88.3
|
131.4
|
148.6
|
Free Cash Flow
(in millions of
dollars)
|
52
weeks ended Dec
28, 2019
|
26
weeks ended Jun
27, 2020
|
26
weeks ended Jun
29, 2019
|
Rolling Four Quarters
|
Cash flow from
operating activities
|
164.2
|
87.3
|
40.3
|
211.2
|
Changes in non-cash
working capital
|
63.0
|
3.4
|
66.3
|
0.1
|
Lease obligation
payments
|
(35.8)
|
(20.0)
|
(17.0)
|
(38.8)
|
Business acquisition
transaction costs
|
3.3
|
2.9
|
1.2
|
5.0
|
Plant start-up and
restructuring costs
|
9.6
|
5.5
|
3.3
|
11.8
|
Maintenance capital
expenditures
|
(26.5)
|
(13.0)
|
(11.5)
|
(28.0)
|
Free cash
flow
|
177.8
|
66.1
|
82.6
|
161.3
|
Adjusted Earnings and Adjusted Earnings per Share
(in millions of
dollars except per share amounts)
|
13
weeks ended Jun
27, 2020
|
13
weeks ended Jun
29, 2019
|
26
weeks ended Jun
27, 2020
|
26
weeks ended Jun
29, 2019
|
Earnings
|
13.5
|
31.2
|
25.7
|
41.2
|
Plant start-up and
restructuring costs
|
3.5
|
1.4
|
5.5
|
3.3
|
Business acquisition
transaction costs
|
1.5
|
0.5
|
2.9
|
1.2
|
Accretion of
provisions
|
1.9
|
1.5
|
3.6
|
2.4
|
Provisions not
earned
|
-
|
-
|
(2.0)
|
-
|
Equity loss from
associates in start-up
|
1.3
|
0.4
|
1.8
|
0.9
|
Change in value of
puttable interest in subsidiaries
|
(4.3)
|
-
|
(4.3)
|
0.5
|
Amortization of
intangibles associated with acquisitions
|
6.5
|
5.1
|
12.8
|
10.1
|
|
23.9
|
40.1
|
46.0
|
59.6
|
Current and deferred
income tax effect of above items
|
(2.7)
|
(1.6)
|
(4.9)
|
(3.5)
|
Adjusted
earnings
|
21.2
|
38.5
|
41.1
|
56.1
|
Weighted average
shares outstanding
|
37.4
|
35.1
|
37.4
|
34.4
|
Adjusted earnings per
share
|
0.57
|
1.10
|
1.10
|
1.63
|
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 August 6, 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
and analysis 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; and
(viii) convertible debentures.
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 26 weeks ended June 27, 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 post the COVID-19 pandemic.
- 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 in their
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 August 6,
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