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Premium Brands Holdings Corporation (PBH)
Market: CDN Consolidated
$ 24.75
Nov 1, 2014, 7:31 AM EDT
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Premium Brands Holdings Corporation Announces Record 2011 Fourth Quarter Sales and Earnings from Operations

VANCOUVER, BRITISH COLUMBIA--(Marketwire - March 15, 2012) - 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 2011.

HIGHLIGHTS

  • Revenue for the quarter increased by 60.7% or $94.6 million to a record $250.6 million as compared to $156.0 million in the fourth quarter of 2010. Sales for 2011 were $794.3 million as compared to $535.2 million for 2010.
  • Record EBITDA for the quarter of $14.4 million representing a 37.2% increase as compared to $10.5 million in the fourth quarter of 2010. EBITDA for 2011 was $54.9 million as compared to $42.0 million in 2010.
  • Adjusted earnings attributable to shareholders and adjusted earnings per share for the quarter of $2.5 million and $0.13 per share, respectively, as compared to $2.1 million and $0.12 per share, respectively, in the fourth quarter of 2010. Adjusted earnings per share for 2011 was $0.79 per share as compared to $0.70 per share for 2010.
  • Declared quarterly dividend of $6.0 million or $0.294 per share.
  • Record rolling twelve months free cash flow of $38.2 million resulting in a dividend to free cash flow ratio of 59.3%.
  • 2012 projected organic sales growth of 6% to 8%.
  • 2012 projected EBITDA of $75.0 million to $80.0 million based on a variety of factors including a full year of EBITDA from businesses acquired in 2011.
  • An extra week of operations due to a 53 week fiscal year as compared to a 52 week fiscal year in 2010 resulting in approximately $15.6 million in incremental sales and $0.1 million in incremental EBITDA.
SUMMARY FINANCIAL INFORMATION
(In thousands of dollars except per share amounts) 14 Weeks 13 Weeks 53 Weeks 52 Weeks
Ended Ended Ended Ended
Dec 31, Dec 25, Dec 31, Dec 25,
2011 2010 2011 2010
Revenue 250,597 155,971 794,292 535,243
EBITDA 14,380 10,483 54,944 41,999
Adjusted earnings attributable to shareholders 2,525 2,145 14,882 12,430
Adjusted EPS 0.13 0.12 0.79 0.70
Free cash flow 38,225 32,205
Declared dividends 22,672 21,019
Declared dividend per share 1.176 1.176
Payout ratio 59.3 % 65.3 %

"We are pleased with the progress made by many of our businesses over the last year, both in terms of further solidifying their competitive positions in existing markets as well as establishing footholds in new markets across Canada and the U.S. Pacific Northwest," said Mr. Paleologou, President and CEO.

While the margins in many of Premium Brands' businesses were under pressure for most of 2011 due to record high costs for a variety of input commodities, its diversification strategies and focus on specialty markets and emerging consumer trends enabled it to continue to generate solid results.

"Looking forward, a combination of a full year's earnings from Piller's, which we acquired towards the end of 2011, the turnaround of our recently acquired Deli Chef and SJ Irvine businesses, and an improving economic environment for many of our legacy businesses, sets the stage for further improvement in our performance in 2012," added Mr. Paleologou.

About Premium Brands

Premium Brands owns a broad range of leading specialty food manufacturing and differentiated food distribution businesses with operations in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, 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, Hamish & Enzo and Piller's.

RESULTS OF OPERATIONS

Extra Week of Operations

The Company's fiscal year ends on the last Saturday of the calendar year. As a result its fiscal year is generally 52 weeks, however, every five to six years the Company has a fiscal year that is 53 weeks due to the calendar year being slightly longer than 52 weeks.

In 2011 the Company's fiscal year was 53 weeks resulting in an extra week of operations as compared to 2010. The Company estimates the impact of the extra week of operations on its sales and EBITDA to be $15.6 million ($11.9 million if recent acquisitions are excluded) and $0.1 million, respectively. The nominal impact on the Company's EBITDA relative to the higher sales impact is due to: (i) the year-end holiday season and generally poor weather in December resulting in the extra week being a relatively poor sales week; and (ii) despite the poor sales week the Company still incurred a full week of costs for items such as plant, sales, distribution and administrative overhead.

Revenue
(in thousands of dollars except percentages)
14 weeks % 13 weeks % 53 weeks % 52 weeks %
ended ended ended ended
Dec 31, Dec 25, Dec 31, Dec 25,
2011 2010 2011 2010
Revenue by segment:
Retail 157,902 63.0 % 76,469 49.0 % 442,289 55.7 % 248,061 46.3 %
Foodservice 92,695 37.0 % 79,502 51.0 % 352,003 44.3 % 287,182 53.7 %
Consolidated 250,597 100.0 % 155,971 100.0 % 794,292 100.0 % 535,243 100.0 %

Retail's revenue for the fourth quarter of 2011 as compared to the fourth quarter of 2010 increased by $81.4 million or 106.5% due to: (i) the acquisitions of SK Food Group in the fourth quarter of 2010, Deli Chef in the first quarter of 2011, SJ in the second quarter of 2011 and Piller's in the third quarter of 2011 which resulted in $68.8 million in incremental sales for the quarter; (ii) organic growth of $9.1 million representing an organic growth rate of approximately 11.9%; and (iii) $5.0 million in incremental sales in Retail's legacy businesses resulting from an extra week of operations in 2011. Partially offsetting these increases was the loss of approximately $1.5 million in sales of third party products sourced in the U.S. due to suppliers choosing to directly market these products to Canadian retailers.

Retail's strong organic growth for the quarter, which was well above the Company's targeted range of 6% to 8%, was partly due to a $6.4 million increase in frozen wrap and breakfast sandwich sales driven in part by a very successful fall promotion with a major café chain.

Retail's sales to convenience stores, which have been contracting on a year over year comparative basis for the last couple of years, were flat for the quarter as an improved economic environment, particularly in western Canada, helped to offset the negative impact that several factors, including record high gas prices, are having on consumer spending in this channel.

Retail's revenue for 2011 increased by $194.2 million or 78.3% as compared to 2010 primarily due to: (i) the acquisitions of Duso's and SK Food Group in 2010 and Deli Chef, SJ and Piller's in 2011, which resulted in incremental sales of $184.9 million; (ii) organic growth across a range of products and customers of $9.3 million representing an organic growth rate of approximately 3.7%; and (iii) $5.0 million in incremental sales in Retail's legacy businesses resulting from an extra week of operations in 2011. Partially offsetting these increases was: (i) a $1.9 million decrease in revenue in the first quarter of 2011 due to one-time sales in 2010 resulting from the Company's involvement with the 2010 Vancouver Winter Olympics; and (ii) the loss of approximately $3.1 million in sales of third party products sourced in the U.S. due to suppliers choosing to directly market these products to Canadian retailers.

Retail's low organic growth rate for 2011, which was below the Company's targeted range of 6% to 8%, was primarily due to: (i) lower sales of barbeque focused products during the first two quarters of 2011 due to extremely poor weather across western Canada; and (ii) a $3.0 million decrease in sales to convenience stores in the first three quarters of 2011 due to reduced consumer spending in this channel that was the result of a variety of factors including continued consumer concerns about the uncertainty of the economic environment and record high gas prices.

Looking forward (see Forward Looking Statements), the Company expects Retail's organic growth rate for 2012 to be within its targeted range of 6% to 8%. This is based on a number of assumptions including: (i) the successful implementation of a variety of new product and new customer based initiatives; (ii) the continuation of the positive trends the Company is seeing with respect to consumer spending in the convenience store channel; (iii) the successful integration of independent distributors from the Pridcorp Network into Retail's convenience store DSD network; and (iv) limited price inflation based on the cost of most of the food commodities used by Retail, many of which rose to record levels in 2011, stabilizing in 2012.

Foodservice's revenue for the fourth quarter of 2011 as compared to the fourth quarter of 2010 increased by $13.2 million or 16.6% due to: (i) $6.3 million in incremental sales in Foodservice's legacy businesses resulting from an extra week of operations in 2011; (ii) organic growth of $5.2 million representing an organic growth rate of 7.0%; and (iii) the acquisition of Hub City Fisheries in the fourth quarter of 2010 which resulted in $1.9 million in incremental sales. These increases were partially offset by a $0.2 million decrease in Worldsource's food brokerage sales due to reduced trading opportunities.

Foodservice's organic growth, which was within the Company's targeted range of 6% to 8%, was driven by a combination of: (i) higher sales to its core hotel, restaurant and institutional customers as a result of several factors including improved consumer spending in this channel; and (ii) increased wholesale seafood sales resulting partially from a competitor in the Greater Toronto Area shutting down its business.

Foodservice's revenue for 2011 as compared to 2010 increased by $64.8 million or 22.6% due to: (i) the acquisitions of Maximum Seafood and Hub City Fisheries in 2010 which resulted in $41.9 million in incremental sales; (ii) organic growth of $17.2 million representing an organic growth rate of 6.4%; (iii) $6.3 million in incremental sales in Foodservice's legacy businesses resulting from an extra week of operations in 2011; and (iv) increased Worldsource sales of $0.1 million. These increases were partially offset by a $0.7 million decrease in revenue due to one-time sales in the first quarter of 2010 resulting from the Company's involvement with the 2010 Vancouver Winter Olympics.

Looking forward (see Forward Looking Statements) the Company expects Foodservice's organic growth rate for 2012 to be within its targeted range of 6% to 8%. This is based on a number of assumptions including: (i) a continuation of the positive trends the Company is seeing with respect to consumer spending in the foodservice channel; (ii) western Canada's economy continuing to improve; and (iii) some price inflation based on continuing increases in certain beef commodity inputs.

Gross Profit
(in thousands of dollars except percentages)
14 weeks % 13 weeks % 53 weeks % 52 weeks %
ended ended ended ended
Dec 31, Dec 25, Dec 31, Dec 25,
2011 2010 2011 2010
Gross profit by segment:
Retail 37,366 23.7 % 20,878 27.3 % 113,354 25.6 % 75,000 30.2 %
Foodservice 16,408 17.7 % 14,338 18.0 % 66,307 18.8 % 56,637 19.7 %
Consolidated 53,774 21.5 % 35,216 22.6 % 179,661 22.6 % 131,637 24.6 %

Retail's gross profit as a percentage of its revenue (gross margin) for the fourth quarter of 2011 as compared to the fourth quarter of 2010 decreased primarily due to the acquisitions of SK Food Group in 2010 and SJ and Piller's in 2011 as these businesses generate lower average gross margins as compared to Retail's other businesses.

Excluding SK Food Group, SJ and Piller's, Retail's gross margin (legacy gross margin) for the fourth quarter of 2011 improved slightly to 29.5% as compared to 29.1% in the fourth quarter of 2010. While Retail's legacy gross margin did show some improvement during the quarter on a year over year basis, it is still below the Company's targeted range of 32% to 33% due to record high costs for a variety of input commodities including poultry, pork, beef, and flour.

Retail's gross margin for 2011 as compared to 2010 decreased primarily due to: (i) the acquisitions of SK Food Group, SJ and Piller's; and (ii) a number of Retail's businesses being impacted for much of 2011 by rising costs for a variety of input commodities. Throughout 2011 the Company implemented a number of initiatives, including selling price increases and product packaging changes, to address the impact of higher costs on its margins. Excluding SK Food Group, SJ and Piller's, Retail's gross margin for 2011 was 30.6% as compared to 30.9% for 2010.

Looking forward (see Forward Looking Statements), for 2012 Retail expects its gross margin, after accounting for the impact of recent acquisitions, to trend towards its targeted range of 25% to 26% based on: (i) Retail's continuing implementation of a variety of margin enhancement initiatives, including targeted selling price increases, new product development, packaging changes and improving plant efficiencies; and (ii) the costs of some of the input commodities that have impacted its margins over the last year stabilizing, albeit at historically high levels.

Foodservice's gross margin for the fourth quarter of 2011 as compared to the fourth quarter of 2010 was down slightly due to: (i) sales mix changes, namely increased sales of lower margin frozen seafood products; and (ii) continued record high costs for certain input commodities.

Foodservice's gross margin for 2011 as compared to 2010 decreased primarily due to: (i) the acquisitions of Maximum Seafood and Hub City Fisheries part way through 2010 as these businesses generate lower average gross margins as compared to Foodservice's other businesses; and (ii) rising input costs for a variety of input commodities, in general, and for beef based products, in particular. Excluding Maximum Seafood and Hub City Fisheries, Foodservice's gross margin for 2011 was 18.7% as compared to 18.4% in 2010.

Looking forward (see Forward Looking Statements), Foodservice expects its gross margin to remain stable to slightly up for 2012 as compared to 2011 based on the benefits of its various margin improvement initiatives, which include selling price increases, improved operating efficiencies resulting from higher sales volumes and the introduction of a new hamburger patty program, being largely offset by increases in the cost of certain beef input commodities.

Selling, General and Administrative Expenses (SG&A)
(in thousands of dollars except percentages)
14 weeks % 13 weeks % 53 weeks % 52 weeks %
ended ended ended ended
Dec 31, Dec 25, Dec 31, Dec 25,
2011 2010 2011 2010
SG&A by segment:
Retail 25,981 16.5 % 12,430 16.3 % 72,777 16.5 % 44,806 18.1 %
Foodservice 11,794 12.7 % 10,911 13.7 % 45,740 13.0 % 39,042 13.6 %
Corporate 1,619 1,392 6,200 5,790
Consolidated 39,394 15.7 % 24,733 15.9 % 124,717 15.7 % 89,638 16.7 %

Retail's SG&A in the fourth quarter of 2011 as compared to the fourth quarter of 2010 increased by $13.6 million primarily due to: (i) the acquisitions of SK Food Group in 2010 and Deli Chef, SJ and Piller's in 2011 which resulted in an increase of $12.4 million; (ii) incremental SG&A in Retail's legacy businesses resulting from an extra week of operations in 2011; and (iii) higher freight and fuel costs resulting from fuel price increases. These increases were partially offset by lower distribution costs resulting from the rationalization of certain areas of Retail's direct-to-store delivery network.

Retail's SG&A for 2011 as compared to 2010 increased by $28.0 million primarily due to: (i) the acquisitions of Duso's and SK Food Group in 2010 and the acquisitions of Deli Chef, SJ and Piller's in 2011 which resulted in an increase in Retail's SG&A of $27.4 million; (ii) incremental SG&A in Retail's legacy businesses resulting from an extra week of operations in 2011; and (iii) 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 distribution costs resulting from the rationalization of certain areas of Retail's direct-to-store delivery network.

Excluding acquisitions, Retail's SG&A as a percentage of revenue for 2011 was approximately 19.0% as compared to 18.8% for 2010.

Foodservice's SG&A in the fourth quarter of 2011 as compared to the fourth quarter of 2010 increased by $0.9 million primarily due to: (i) incremental SG&A in Foodservice's legacy businesses resulting from an extra week of operations in 2011; (ii) the acquisition of Hub City Fisheries in the fourth quarter of 2010 which accounted for $0.1 million of the increase; and (iii) higher freight and fuel costs resulting from fuel price increases.

Foodservice's SG&A for 2011 as compared to 2010 increased by $6.7 million primarily due to: (i) the acquisitions of Maximum Seafood and Hub City Fisheries in 2010 which accounted for $4.6 million of the increase; (i) incremental SG&A in Foodservice's legacy businesses resulting from an extra week of operations in 2011; (ii) the recognition in the second quarter of 2010 of a $0.5 million gain on the sale of a redundant property; and (iii) higher freight and fuel costs resulting from fuel price increases.

Excluding acquisitions and the $0.5 million gain on the sale of a redundant property in the second quarter of 2010, Foodservice's SG&A as a percentage of revenue for 2011 was approximately 13.9% as compared to 14.1% for 2010.

EBITDA
(in thousands of dollars except percentages)
14 weeks % 13 weeks % 53 weeks % 52 weeks %
ended ended ended ended
Dec 31, Dec 25, Dec 31, Dec 25,
2011 2010 2011 2010
EBITDA by segment:
Retail 11,385 7.2 % 8,448 11.0 % 40,577 9.2 % 30,194 12.2 %
Foodservice 4,614 4.9 % 3,427 4.3 % 20,567 5.8 % 17,595 6.1 %
Corporate (1,619 ) (1,392 ) (6,200 ) (5,790 )
Consolidated 14,380 5.7 % 10,483 6.7 % 54,944 6.9 % 41,999 7.8 %

The Company's EBITDA for the fourth quarter of 2011 as compared to the fourth quarter of 2010 increased by $3.9 million or 37.2% primarily due to: (i) acquisitions; (ii) organic growth in a number of the Company's legacy businesses; and (iii) estimated additional EBITDA of approximately $0.1 million due to an extra week of operations in the fourth quarter of 2011.

These increases were partially offset by: (i) the continuing impact of high commodity costs on the selling margins of several of the Company's businesses; and (ii) higher freight and fuel costs resulting from fuel price increases.

The Company's EBITDA for 2011 increased by $12.9 million or 30.8% as compared to 2010 primarily due to the same factors that impacted its fourth quarter EBITDA, however, this increase was also partially offset by (i) one-time benefits in the first quarter of 2010 associated with the Company's involvement with the 2010 Vancouver Winter Olympics; and (ii) the recognition in the second quarter of 2010 of a $0.5 million gain on the sale of a redundant property.

Looking forward (see Forward Looking Statements), the Company expects its EBITDA for 2012 to increase significantly based on: (i) a full year of EBITDA from businesses acquired part way through 2011; (ii) improved EBITDA resulting from the turnaround of its recently acquired Deli Chef and SJ businesses; (iii) improved stability, albeit at historically high levels, in the cost of many of the input commodities that have been negatively impacting its margins for the last two years; and (iv) continued improvement in consumer spending in the convenience store and restaurant channels. Based on these factors the Company is projecting its 2012 EBITDA to be in the range of $75.0 million to $80.0 million.

Interest

The increases in the Company's interest and other financing costs for both the fourth quarter of 2011 as compared to the fourth quarter of 2010, and 2011 as compared to 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.

These increases were partially offset by lower interest rates on the Company's senior credit facilities due to: (i) a lower interest rate environment in general; and (ii) the Company negotiating a lower credit spread on its senior credit facilities.

Restructuring Costs

Restructuring costs consist of costs associated with a significant restructuring of one or more of the Company's businesses. In 2011, the Company incurred $2.8 million in restructuring costs consisting of:

  • $2.1 million in charges relating to the Company's recently acquired Deli Chef business. Included in this amount is approximately $1.8 million for severance and other costs associated with the shutdown on April 29, 2011 of Deli Chef's sandwich plant in Gatineau, Quebec. As previously announced the Company expects to incur $6 million to $7 million in capital and restructuring costs relating to the changes being made to Deli Chef's business. As at the end of 2011 these costs totaled $2.5 million consisting of the $2.1 million in restructuring costs outlined above and $0.4 million in capital expenditures.

    Looking forward (see Forward Looking Statements), as part of the restructuring of Deli Chef the Company is projecting to invest $3.4 million in 2012 on the construction of a new 20,000 square foot sandwich plant.
  • $0.5 million in redundant lease costs associated with the expansion of the Company's artisan bread capacity.
  • $0.5 million in charges associated with the rationalization of the Company's direct-to-store delivery networks.
  • $0.2 million in severance and other costs relating to changes being made to SJ Irvine's business subsequent to the Company acquiring control of it in the second quarter of 2011.

The above costs were partially offset by a gain of $0.5 million resulting from sales to independent distributors forming part of the Company's Direct Plus convenience store direct-to-store distribution network (the Direct Plus DSD network) of the exclusive right to sell certain of the Company's products to convenience stores in defined territories. These sales of distribution territories were completed in conjunction with the restructuring of the Direct Plus DSD network.

Acquisition Bargain Purchase Gain

During the second quarter of 2011, the Company completed an initial fair value assessment 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.

In the fourth quarter of 2011 the Company finalized its fair value assessment for the acquisition of Deli Chef resulting in an additional bargain purchase gain of $0.1 million.

Income Taxes

The Company's low deferred income tax provision in 2010 and deferred income tax recovery in the fourth quarter of 2010 was due to the Company recognizing a deferred tax asset of $2.6 million in the fourth quarter of 2010. This asset was the result of the Company determining that the final tax attributes associated with the Conversion were higher than estimated at the time of the Conversion.

Note that in the Company's 2010 consolidated financial statements prepared in accordance with GAAP the $2.6 million income tax provision recovery resulting from the recognition of the additional tax attributes was largely offset by an income tax provision expense resulting from the recognition of a corresponding deferred credit of $2.2 million. Under IFRS the full deferred credit associated with the Conversion, including the $2.2 million recognized in 2010 under GAAP, was recognized in 2009.

FREE CASH FLOW
The following table provides a reconciliation of free cash flow to cash flow from operating activities:
(in thousands of dollars) 53 weeks 52 weeks
ended ended
Dec 31, 2011 Dec 25, 2010
Cash flow from operating activities 29,524 32,793
Changes in non-cash working capital 6,050 (2,847 )
Sale of redundant property - 1,747
Deferred revenue 1,118 1,207
Acquisition transaction costs 1,594 1,018
Restructuring costs 2,819 -
Capital maintenance expenditures (2,880 ) (1,713 )
Free cash flow 38,225 32,205
ADJUSTED EARNINGS PER SHARE
The following table provides a reconciliation of adjusted earnings per share:
(in thousands of dollars except per share amounts)
14 weeks 13 weeks 53 weeks 52 weeks
ended ended ended ended
Dec 31, 2011 Dec 25, 2010 Dec 31, 2011 Dec 25, 2010
Earnings attributable to shareholders 1,464 4,033 12,803 13,903
Acquisition transaction costs 702 554 1,594 1,018
Accretion of provisions for contingent consideration 209 - 244 -
Unrealized loss (gain) on foreign currency contracts 495 193 (220 ) 125
Unrealized loss on interest rate swap contracts 100 - 100 -
Restructuring costs 74 - 2,819 -
Acquisition bargain purchase gain (100 ) - (1,455 ) -
Deferred income tax impact of above items (419 ) (55 ) (1,003 ) (36 )
Unusual deferred income tax asset recognition - (2,580 ) - (2,580 )
2,525 2,145 14,882 12,430
Weighted average number of shares outstanding 20,169 17,973 18,782 17,670
Adjusted earnings per share 0.13 0.12 0.79 0.70

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 14, 2012, 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 2011 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 14, 2012 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 31, 2011 December 25, 2010 December 27, 2009
Current assets:
Cash and cash equivalents 4,860 868 469
Accounts receivable 78,830 52,807 34,380
Other assets 103 194 180
Inventories 79,977 57,366 45,991
Prepaid expenses 13,455 3,421 2,116
177,225 114,656 83,136
Capital assets 167,982 76,184 66,029
Intangible assets 77,087 53,986 38,298
Goodwill 150,417 141,091 110,535
Other assets 2,250 2,705 2,265
Investment in associate - 414 891
Deferred income taxes 39,952 42,817 48,468
614,913 431,853 349,622
Current liabilities:
Cheques outstanding 2,504 1,670 2,470
Bank indebtedness 18,061 6,827 2,411
Dividend payable 5,958 5,368 5,180
Accounts payable and accrued liabilities 80,162 53,699 36,202
Puttable interest in subsidiaries - 2,086 1,992
Current portion of long-term debt 20,536 19,822 8,212
Provisions for contingent consideration 2,924 - -
Other - 220 1,185
130,145 89,692 57,652
Puttable interest in subsidiaries 15,210 10,566 2,001
Deferred revenue 1,943 1,369 -
Pension obligation 1,345 827 852
Provisions for contingent consideration 8,360 - -
Long-term debt 162,661 112,004 74,705
Convertible unsecured subordinated debentures 89,396 37,306 36,769
Other 100 - -
409,160 251,764 171,979
Equity attributable to shareholders:
Accumulated earnings 133,370 121,252 107,271
Accumulated dividends declared (130,497 ) (108,758 ) (87,739 )
Retained earnings 2,873 12,494 19,532
Share capital 198,057 163,754 155,859
Equity component of convertible debentures 1,916 919 919
Reserves 1,442 1,653 234
Non-controlling interest 1,465 1,269 1,099
205,753 180,089 177,643
614,913 431,853 349,622
Premium Brands Holdings Corporation
Consolidated Statements of Operations
(in thousands of Canadian dollars except per share amounts)
14 weeks ended December 31, 2011 13 weeks ended December 25, 2010 53 weeks ended December 31, 2011 52 weeks ended December 25, 2010
Revenue 250,597 155,971 794,292 535,243
Cost of goods sold 196,823 120,755 614,631 403,606
Gross profit before depreciation and amortization 53,774 35,216 179,661 131,637
Selling, general and administrative expenses before depreciation and amortization 39,394 24,733 124,717 89,638
14,380 10,483 54,944 41,999
Depreciation of capital assets 3,916 2,330 12,091 8,210
Amortization of intangible assets 1,201 813 3,573 2,757
Amortization of other assets 1 1 5 5
Interest and other financing costs 4,194 2,702 14,496 9,994
Amortization of financing costs 212 49 405 295
Acquisition transaction costs 702 554 1,594 1,018
Change in value of puttable interest in subsidiaries 150 700 1,828 1,450
Accretion of provisions for contingent consideration 209 - 244 -
Unrealized loss (gain) on foreign currency contracts 495 193 (220 ) 125
Unrealized loss on interest rate swap contracts 100 - 100 -
Restructuring costs 74 - 2,819 -
Acquisition bargain purchase gain (100 ) - (1,455 ) -
Equity loss in associate - 146 277 477
Earnings before income taxes 3,226 2,995 19,187 17,668
Provision for (recovery of) income taxes
Current 121 850 1,526 1,140
Deferred 1,580 (1,922 ) 4,562 2,395
1,701 (1,072 ) 6,088 3,535
Earnings 1,525 4,067 13,099 14,133
Earnings for the period attributable to:
Shareholders 1,464 4,033 12,803 13,903
Non-controlling interest 61 34 296 230
1,525 4,067 13,099 14,133
Earnings per share:
Basic 0.07 0.22 0.68 0.79
Diluted 0.07 0.22 0.68 0.78
Weighted average shares outstanding (in 000s)
Basic 20,169 17,973 18,782 17,670
Diluted 20,266 18,130 18,879 17,828
Premium Brands Holdings Corporation
Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
14 weeks ended December 31, 2011 13 weeks ended December 25, 2010 53 weeks ended December 31, 2011 52 weeks ended December 25, 2010
Cash flows from operating activities:
Earnings 1,525 4,067 13,099 14,133
Items not involving cash:
Depreciation of capital assets 3,916 2,330 12,091 8,210
Amortization of intangible assets 1,201 813 3,573 2,757
Amortization of other assets 1 1 5 5
Amortization of financing costs 212 49 405 295
Change in value of puttable interest in subsidiaries 150 700 1,828 1,450
Loss (gain) on sales of capital assets 24 (8 ) 23 (407 )
Gain on disposal of goodwill (521 ) - (521 ) -
Accrued interest income (8 ) 24 (51 ) (33 )
Unrealized loss (gain) on foreign currency contracts and interest rate swaps 595 193 (120 ) 125
Equity loss in associate - 146 277 477
Deferred revenue (328 ) (20 ) (544 ) (299 )
Accretion of convertible debentures 366 142 1,422 537
Accretion of long-term debt 146 173 736 301
Accretion of provisions for contingent consideration 209 - 244 -
Acquisition bargain purchase gain (100 ) - (1,455 ) -
Deferred income taxes 1,580 (1,922 ) 4,562 2,395
8,968 6,688 35,574 29,946
Change in non-cash working capital 3,542 5 (6,050 ) 2,847
12,510 6,693 29,524 32,793
Cash flows from financing activities:
Long-term debt - net 3,813 16,719 33,553 28,022
Bank indebtedness and cheques outstanding 7,637 3,211 12,068 991
Convertible debentures - net of issuance costs - - 54,600 -
Deferred revenue - 8 1,118 1,207
Dividends paid to shareholders, net of dividends received from cancelled shares (5,025 ) (5,224 ) (21,149 ) (20,831 )
Share issuance and financing costs (322 ) (163 ) (703 ) (171 )
6,103 14,551 79,487 9,218
Cash flows from investing activities:
Capital asset additions (14,295 ) (1,650 ) (23,493 ) (5,107 )
Business acquisitions (2,167 ) (19,190 ) (76,848 ) (37,877 )
Repayment of share purchase loans and notes receivable 55 38 118 101
Promissory note from associate - - (300 ) (100 )
Payment for customer supplier agreement (2,187 ) - (2,187 ) -
Purchase of trade name (355 ) - (355 ) -
Net proceeds from sales of assets 999 16 1,018 1,993
Payments to shareholders of non-wholly owned subsidiaries (227 ) (98 ) (672 ) (835 )
Purchase of shares of non-wholly owned subsidiary pursuant to puttable interest - - (2,286 ) -
Other 168 83 - 175
(18,009 ) (20,801 ) (105,005 ) (41,650 )
Increase in cash and cash equivalents 604 443 4,006 361
Effects of exchange on cash and cash equivalents (34 ) 21 (14 ) 38
Cash and cash equivalents - beginning of period 4,290 404 868 469
Cash and cash equivalents - end of period 4,860 868 4,860 868

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