Premium Brands Holdings Corporation Announces Record 2011 Second Quarter Sales and EBITDA
(firmenpresse) - VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 08/04/11 -- 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 2011.
HIGHLIGHTS
SUMMARY FINANCIAL INFORMATION
"Even while very high commodity input costs, unusually poor weather and, to a lessening extent, economic headwinds, continued to impact our industry, our business still generated record sales and EBITDA," said Mr. George Paleologou, President and CEO. "Our consistent results, despite the challenging environment, reflect the diversity of our portfolio of businesses and the strength of our differentiation based business strategies.
"Looking forward, we are bullish on our expected performance for the balance of 2011. This is supported by the positive momentum that many of our businesses experienced during the latter part of the quarter. Furthermore, on a more global basis, we are also seeing continued improvement in the overall economy and some stabilization in the cost of many of the input commodities that have been impacting our margins.
"We are also pleased to report that during the quarter we commissioned a new burger manufacturing facility in Calgary, Alberta and completed the acquisition of a further 25.7% interest in SJ Irvine Fine Foods bringing our total interest in SJ to 50.7%. In addition, we made significant progress in the turnaround of our recently acquired Deli Chef business and remain confident that it will achieve profitability in 2011 and will contribute positively to our earnings in 2012.
"In terms of future business acquisitions, we are continuing to pursue a number of promising opportunities and fully expect to add to the seven transactions we have completed since the beginning of 2010," stated Mr. Paleologou.
About Premium Brands
Premium Brands owns a broad range of leading specialty food manufacturing and differentiated food distribution businesses with operations in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Washington State and Nevada. The Company services over 26,000 customers and its family of brands and businesses include Grimm's, Harvest, McSweeney's, Bread Garden Express, Hygaard, Hempler's, Quality Fast Foods, Gloria's Best of Fresh, Harlan Fairbanks, Creekside Bakehouse, Centennial Foodservice, B&C Foods, Shahir, Duso's Fine Foods, Maximum Seafood, SK Food Group, OvenPride, Hub City Fisheries, Audrey's, Deli Chef and Hamish & Enzo.
RESULTS OF OPERATIONS
Revenue
Retail's revenue for the second quarter of 2011 as compared to the second quarter of 2010 increased by $34.4 million or 59.5% due to: (i) the acquisitions of SK Food Group in the fourth quarter of 2010, Deli Chef in the first quarter of 2011 and SJ in the second quarter of 2011 which resulted in $32.6 million in incremental sales; and (ii) organic growth across a broad range of products and customers of $1.8 million representing an organic growth rate of approximately 3.1%.
Retail's organic growth for the quarter, which was below the Company's targeted range of 6% to 8%, was impacted by: (i) extremely poor weather across western Canada that resulted in lower sales of barbeque focused products; and (ii) a $1.4 million decrease in sales to convenience stores due to reduced consumer spending in this channel that was the result of a variety of factors, including the poor weather in western Canada and record high gas prices. The effect of these factors was partially offset by $2.7 million in incremental sales resulting from Easter occurring in the second quarter of 2011 as compared to the first quarter in 2010.
Retail's revenue for the first two quarters of 2011 increased by $61.2 million or 55.7% as compared to the first two quarters of 2010 primarily due to the acquisitions of Duso's and SK Food Group in 2010 and Deli Chef and SJ in 2011, which resulted in incremental sales of $65.0 million. These incremental sales were partially offset by: (i) lower sales of barbeque focused products due to extremely poor weather across western Canada for most of the two quarters; (ii) a $1.9 million decrease in revenue due to one-time sales in 2010 resulting from the Company's involvement with the 2010 Vancouver Winter Olympics; and (iii) a $2.4 million decrease in sales to convenience stores due to reduced consumer spending in this channel.
Looking forward (see Forward Looking Statements), assuming a return to normal weather conditions, Retail expects its organic growth rate, excluding the impact of the convenience store channel, to continue to improve in the latter half of 2011. In terms of its sales to the convenience store channel, Retail is working on a number of initiatives to address the impact that general industry contraction is having on both its sales and profitability. These include working with its convenience store customers to develop new foodservice product programs that will better position them to compete with quick serve restaurants, and exploring new strategic relationships with other distributors servicing this channel.
Foodservice's revenue for the second quarter of 2011 as compared to the second quarter of 2010 increased by $23.5 million or 34.5% due to: (i) the acquisitions of Maximum Seafood in the third quarter of 2010 and Hub City Fisheries in the fourth quarter of 2010 which resulted in $20.7 million in incremental sales; (ii) increased sales to Foodservice's core hotel, restaurant and institutional customers of $1.7 million representing an organic growth rate of approximately 2.7%; and (iii) increased sales in Foodservice's Worldsource food brokerage business of $1.1 million.
Foodservice's revenue for the first two quarters of 2011 as compared to the first two quarters of 2010 increased by $41.1 million or 32.7% due to: (i) the acquisitions of Maximum Seafood and Hub City Fisheries in 2010 which resulted in $36.6 million in incremental sales; (ii) increased sales to Foodservice's core hotel, restaurant and institutional customers of $3.8 million representing an organic growth rate of approximately 3.3%; and (iii) increased sales in Foodservice's Worldsource food brokerage business of $1.4 million. These increases were partially offset by a $0.7 million decrease in revenue due to one-time sales in 2010 resulting from the Company's involvement with the 2010 Vancouver Winter Olympics.
Foodservice's organic growth rate for sales to its core hotel, restaurant and institutional customers in the first half of 2011 was lower than expected primarily due to extremely poor weather conditions across most of western Canada. Looking forward (see Forward Looking Statements), assuming a return to more normal weather conditions, Foodservice expects to achieve the Company's targeted organic growth rate of 6% to 8% for the latter half of 2011.
Gross Profit
Retail's gross profit as a percentage of its revenue (gross margin) for the second quarter of 2011 as compared to the second quarter of 2010 decreased primarily due to: (i) the acquisitions of SK Food Group in 2010 and SJ in 2011 as these businesses generate lower average gross margins as compared to Retail's other businesses; and (ii) a number of Retail's businesses being impacted by rising costs for a variety of food and non-food input commodities, in general, and turkey products, in particular. Excluding SK Food Group and SJ, Retail's gross margin for the first quarter was 30.6%.
Retail's gross margin for the first two quarters of 2011 as compared to the first two quarters of 2010 decreased primarily due to the same factors impacting its gross margin in the second quarter. Excluding SK Food Group and SJ, Retail's gross margin for the first two quarters of 2011 was 30.4%.
Looking forward (see Forward Looking Statements), Retail expects to see continued improvement in its gross margin (after normalizing for the impact of acquisitions) in the latter half of 2011 based on: (i) during the second quarter of 2011 Retail initiated a number of product selling price increases that were not in effect for the full quarter; (ii) the implementation of a variety of margin enhancement initiatives, including new product development, packaging changes, and improving plant efficiencies; and (iii) the cost of many of the input commodities impacting its gross margins in the first half of 2011 are expected to remain relatively stable, albeit at historically high levels, over the last half of 2011.
Foodservice's gross margin for the second quarter of 2011 as compared to the second quarter of 2010 decreased primarily due to: (i) the acquisitions of Maximum Seafood and Hub City Fisheries as both of these businesses generate lower average gross margins as compared to Foodservice's other businesses; and (ii) rising input costs for a variety of food and non-food commodities, in general, and for beef-based products, in particular. Excluding Maximum Seafood and Hub City Fisheries, Foodservice's gross margin for the second quarter was 20.2%.
Foodservice's gross margin for the first two quarters of 2011 as compared to the first two quarters of 2010 decreased primarily due to the same factors that impacted its gross margin in the second quarter of 2011. Excluding Maximum Seafood and Hub City Fisheries, Foodservice's gross margin for the first two quarters of 2011 was 19.7%.
Looking forward (see Forward Looking Statements), Foodservice expects the cost of the input commodities impacting its gross margins to remain at historically high levels for the foreseeable future. It does, however, expect to see continued improvement in its margins in the latter half of 2011 due to: (i) the steady implementation of product selling price increases; (ii) improved operating efficiencies resulting from sales growth expected in 2011; and (iii) the introduction of a new hamburger patty program that utilizes the recently completed capacity expansion at its Calgary facility.
Selling, General and Administrative Expenses (SG&A)
Retail's SG&A in the second quarter of 2011 as compared to the second quarter of 2010 increased by $4.9 million primarily due to: (i) the acquisitions of SK Food Group in 2010 and Deli Chef and SJ in 2011 which resulted in an increase in of $4.8 million; and (ii) higher freight and fuel costs resulting from fuel price increases. These increases were partially offset by lower variable selling costs, such as sales commissions, resulting from reduced convenience store channel sales.
Retail's SG&A for the first two quarters of 2011 as compared to the first two quarters of 2010 increased by $7.9 million primarily due to: (i) the acquisitions of Duso's and SK Food Group in 2010 and the acquisition of Deli Chef in 2011 which resulted in an increase in Retail's SG&A of $8.4 million; and (ii) higher freight and fuel costs resulting from fuel price increases. These increases were partially offset by: (i) a decrease in one-time costs associated with the Company's involvement in the 2010 Vancouver Winter Olympics in 2010; and (ii) lower variable selling costs, such as sales commissions, resulting from reduced convenience store channel sales.
Excluding acquisitions, Retail's SG&A as a percentage of revenue increased to 19.5% for the first two quarters of 2011 from 19.3% for the first two quarters of 2010 due to a variety of factors including higher freight and fuel costs.
Foodservice's SG&A in the second quarter of 2011 as compared to the second quarter of 2010 increased by $2.6 million primarily due to: (i) the acquisitions of Maximum Seafood and Hub City Fisheries in 2010 which accounted for $2.0 million of the increase; (ii) the recognition in the second quarter of 2010 of a $0.5 million gain on the sale of redundant property; and (iii) increases in a variety of costs including freight and fuel.
Foodservice's SG&A for the first two quarters of 2011 as compared to the first two quarters of 2010 increased by $4.4 million primarily due to: (i) the acquisitions of Maximum Seafood and Hub City Fisheries in 2010 which accounted for $3.6 million of the increase; (ii) the recognition in the second quarter of 2010 of a $0.5 million gain on the sale of redundant property; and (iii) increases in a variety of costs including freight and fuel.
Excluding acquisitions, Foodservice's SG&A as a percentage of revenue increased to 14.4% for the first two quarters of 2011 from 14.3% for the first two quarters of 2010 primarily due to the recognition in the second quarter of 2010 of a $0.5 million gain on the sale of redundant property.
EBITDA
The Company's EBITDA for the second quarter of 2011 as compared to the second quarter of 2010 increased primarily due to acquisitions partially offset by the impact of rising commodity costs on the selling margins of several of the Company's businesses.
The Company's EBITDA for the first two quarters of 2011 as compared to the first two quarters of 2010 increased primarily due to acquisitions partially offset by (i) one-time benefits in the first quarter of 2010 associated with the Company's involvement with the 2010 Vancouver Olympics; (ii) the impact of rising commodity costs on the selling margins of several of the Company's businesses; (iii) the recognition in the second quarter of 2010 of a $0.5 million gain on the sale of redundant property; and (iv) approximately $0.2 million in lost EBITDA associated with the Deli Chef business.
Interest
The increases in the Company's interest and other financing costs for both the second quarter of 2011 as compared to the second quarter of 2010, and the first two quarters of 2011 as compared to the first two quarters of 2010, were primarily due to: (i) an increase in the Company's net funded debt; and (ii) the repayment of lower cost senior debt through the issuance of convertible unsecured subordinated debentures at the beginning of 2011.
Change in Value of Puttable Interest in Subsidiaries
The increases in the Company's change in value of puttable interest in subsidiaries for both the second quarter of 2011 as compared to the second quarter of 2010, and the first two quarters of 2011 as compared to the first two quarters of 2010, were primarily due to: (i) increased accretion resulting from changes made in the latter half of 2010 to the assumptions used to value the put options; and (ii) incremental accretion relating to new put options resulting from business acquisitions made in the last two quarters of 2010 and in 2011.
Restructuring Costs
Restructuring costs consist of costs associated with a significant restructuring of one or more of the Company's businesses. In the first two quarters of 2011 the Company incurred $1.8 million in restructuring costs consisting primarily of: (i) $1.5 million relating to the Company's recently acquired Deli Chef business. Included in these costs are $1.1 million associated with the shutdown on April 29, 2011 of Deli Chef's sandwich plant in Gatineau, Quebec and $0.2 million for restructuring relating to Deli Chef's direct-to-store distribution network. As previously announced the Company expects to incur $6 million to $7 million in capital and restructuring costs relating to changes being made to the Deli Chef business; and (ii) $0.3 million in redundant production overhead associated with the expansion of the Company's artisan bread capacity.
Acquisition Bargain Purchase Gains
During the second quarter of 2011, the Company finalized its purchase price allocation for the acquisition of Deli Chef. In doing so, it determined that the fair value of the net identifiable assets acquired was $1.4 million greater than the consideration paid. Under IFRS this difference is recognized immediately as a bargain purchase gain.
Free Cash Flow
The following table provides a reconciliation of free cash flow to cash flow from operating activities:
FORWARD LOOKING STATEMENTS
This discussion and analysis contains forward looking statements with respect to the Company, including its business operations, strategy and financial performance and condition. These statements generally can be identified by the use of forward looking words such as "may", "could", "should", "would", "will", "expect", "intend", "plan", "estimate", "project", "anticipate", "believe" or "continue", or the negative thereof or similar variations.
Although management believes that the expectations reflected in such forward looking statements are reasonable and represent the Company's internal expectations and belief as of August 3, 2011, such statements involve unknown risks and uncertainties beyond the Company's control which may cause its actual performance and results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward looking statements.
Factors that could cause actual results to differ materially from the Company's expectations include, among other things: (i) seasonal and/or weather related fluctuations in the Company's sales; (ii) changes in consumer discretionary spending resulting from changes in economic conditions and/or general consumer confidence levels; (iii) changes in the cost of raw materials used in the production of the Company's products; (iv) changes in the cost of products sourced from third party manufacturers and sold through the Company's proprietary distribution networks; (v) risks associated with the Company's conversion from a publicly traded income trust to a publicly traded corporation, including related changes in Canada's income tax laws; (vi) changes in the Company's relationships with its larger customers; (vii) potential liabilities and expenses resulting from defects in the Company's products; (viii) changes in consumer food product preferences; (ix) competition from other food manufacturers and distributors; and (x) new government regulations affecting the Company's business and operations. Details on these risk factors as well as other factors can be found in the Company's 2010 MD&A, which is filed electronically through SEDAR and is available online at .
Unless otherwise indicated, the forward looking information in this document is made as of August 3, 2011 and, except as required by applicable law, will not be publicly updated or revised. This cautionary statement expressly qualifies the forward looking information in this document.
Premium Brands Holdings Corporation
CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands)
Premium Brands Holdings Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands except per share amounts)
Premium Brands Holdings Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
Contacts:
Premium Brands Holdings Corporation
George Paleologou
President and CEO
(604) 656-3100
Premium Brands Holdings Corporation
Will Kalutycz
CFO
(604) 656-3100
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Datum: 04.08.2011 - 11:00 Uhr
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Food
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