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