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Premium Brands Holdings Corporation

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Premium Brands Holdings Corporation announces record second quarter sales and adjusted EBITDA and declares third quarter dividend
Premium Brands Holdings Corporation announces record second quarter sales and adjusted EBITDA and declares third quarter dividend

Canada NewsWire

VANCOUVER, Aug. 13, 2019 /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 2019.

HIGHLIGHTS FOR THE QUARTER

  • Record revenue of $945.4 million representing a 24.1% or $183.9 million increase as compared to the second quarter of 2018
  • Record adjusted EBITDA of $88.3 million representing a 19.0% or $14.1 million increase as compared to $74.2 million in the second quarter of 2018. After normalizing for the adoption of the new IFRS-16 accounting standard and unusual transitory challenges relating to weather and the outbreak of African Swine Fever (ASF) in China, the Company's adjusted EBITDA for the second quarter of 2019 is $90.1 million
  • Completed a private placement of 3.4 million common shares resulting in net proceeds of $250.9 million and the addition of the Canada Pension Plan Investment Board as a shareholder. Proceeds from the placement will help to support the Company's acquisition strategy, which is expected to continue to be a significant driver of its growth
  • The Company's major growth initiatives in seafood, protein and sandwiches are on or ahead of plan and are expected to result in accelerated growth in the second half of the year
  • Subsequent to the quarter, the Company declared a quarterly dividend of $0.525 per share

SUMMARY FINANCIAL INFORMATION
(In millions of dollars except per share amounts and ratios)


13 weeks

ended

June 29,

2019

13 weeks

ended

June 30,

2018

26 weeks

ended

June 29,

2019

26 weeks

ended

June 30,

2018






Revenue

945.4

761.5

1,722.0

1,346.4

Adjusted EBITDA

88.3

74.2

148.6

117.3

Earnings

31.2

30.6

41.2

43.8

EPS

0.89

0.96

1.20

1.40

Adjusted earnings

38.5

39.4

56.1

59.2

Adjusted EPS

1.10

1.24

1.63

1.89

 


Trailing Four Quarters Ended


June 29,

2019

June 30,

2018




Free cash flow

173.1

135.2

Declared dividends

69.5

56.1

Declared dividend per share

2.00

1.79

Payout ratio

40.2%

41.5%

 

"Overall we are very pleased with our second quarter results as we continued to generate record sales, adjusted EBITDA and free cash flow while navigating through significant transitory challenges and unusual industry headwinds," said Mr. George Paleologou, President and CEO.  "Furthermore, we remain on track to deliver another year of record results, driven by a wide variety of organic growth initiatives, several capacity expansions and an especially robust acquisitions pipeline.

"Our Seafood platform's recent expansion initiative in Ontario is going well and its new capacity projects in Quebec and Maine are either at or nearing completion positioning this platform for strong growth in the back half of 2019.  Our Protein platform is also expected to have an exceptionally strong second half of the year with its growth in the U.S. continuing to accelerate as its new and innovative meat snack, cooked protein and charcuterie products gain traction," stated Mr. Paleologou.

"Our Sandwich platform, which has undergone tremendous growth over the last number of years, is now set to enter the next phase of its evolution as it builds momentum in new channels such as grocery and convenience stores, and with new products such as assembled protein trays and snacks.  It has taken some time for the platform to position itself in these new channels and product categories but now much of the heavy lifting is done and we are starting to see solid results.  Correspondingly we are also expecting to see a strong performance from this platform in third and fourth quarters.

"Turning back to our second quarter results, we faced two major challenges in the quarter: very volatile commodity protein markets caused by a severe outbreak of African Swine Fever in China, and an unusually cold and wet spring in Ontario and Quebec that delayed the onset of barbecue season and other outdoor related lifestyle activities in these key markets. 

"The weather issue has largely resolved itself with Central Canada returning to more normal conditions in the third quarter.  In terms of the ASF crisis, we continue to monitor the situation closely and to work with our supply chain partners and customers in managing this challenge.  Some specific steps we have taken include implementing selling price increases, many of which took effect late in the second quarter or in the third quarter, and investing in inventory positions when buying opportunities are presented.  No one knows how this issue is going to play out as there are many complex variables to consider including consumer demand destruction, changes in retail and foodservice featuring, ongoing trade disputes between China and North America, the substitution of other proteins for pork and the progress made in the containment of the disease.  I do, however, know that our unique business model of partnering with and empowering talented successful entrepreneurs and then supporting them in managing their businesses for the long term will enable us to continue to be leaders in the specialty foods industry no matter how this situation unfolds.

"On the acquisitions front, we are continuing to see a record number of opportunities, both at the Premium Brands level as well as within many of our businesses, as we are becoming the acquirer or partner of choice for an increasing number of successful food entrepreneurs in Canada and the U.S.  Many of these opportunities are getting close to fruition and we expect to show robust acquisition activity in the second half of the year.

"For additional information on our acquisitions and major capital projects as well as investment business strategies in general, please see my most recent Letter to Shareholders titled "The Long Game," which is posted on our website at www.premiumbrandsholdings.com," added Mr. Paleologou.

THIRD QUARTER 2019 DIVIDEND

The Company also announced that its Board of Directors approved a cash dividend of $0.525 per share for the third quarter of 2019, which will be payable on October 15, 2019 to shareholders of record at the close of business on September 30, 2019.

Unless indicated otherwise in writing at or before the time the dividend is paid, each dividend paid by the Company in 2019 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 and the United States. 

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 29,

2019

%

(1)

13 weeks

ended

Jun 30,

2018

%

(1)

26 weeks

ended

Jun 29,

2019

%

(1)

26 weeks

ended

Jun 30,

2018

%

(1)

Revenue by segment:









Specialty Foods

653.7

69.1%

522.0

68.5%

1,190.6

69.1%

900.0

66.8%

Premium Food Distribution

291.7

30.9%

239.5

31.5%

531.4

30.9%

446.4

33.2%

Consolidated

945.4

100.0%

761.5

100.0%

1,722.0

100.0%

1,346.4

100.0%



(1)

Expressed as a percentage of consolidated revenue

 

Specialty Foods' (SF) revenue for the second quarter of 2019 as compared to the second quarter of 2018 increased by $131.7 million or 25.2% primarily due to: (i) business acquisitions, which accounted for $108.4 million of the increase; (ii) organic volume growth of $19.3 million, which was driven primarily by meat snacks, deli meats and cooked protein products; and (iii) a $6.3 million increase in the translated value of its U.S. based businesses' sales resulting from a weaker Canadian dollar.  These factors were partially offset by selling price deflation of $2.3 million.

SF's organic volume growth rate (OVGR) for the quarter was approximately 6.2% after normalizing for: (i) the estimated impact of poor spring weather in eastern Canada, but before taking into account any related lost growth opportunities, on demand for barbecue and outdoor activity related products such as burgers, fresh protein skewers and marinated meats; (ii) lower than normal promotional and feature activity for pork related products due to uncertainties associated with a severe outbreak of African Swine Fever (ASF) in China; and (iii) the Easter holiday falling in the second quarter of this year versus the first quarter of last year.  The 6.2% normalized OVGR is slightly above the Company's long-term targeted range of 4% to 6%.  Excluding the normalizing factors, SF's OVGR for the quarter is 3.7%.

The $2.3 million in selling price deflation for the quarter was the result of lower input costs for certain cost plus sandwich sales arrangements partially offset by protein related price increases that took effect towards the end of the quarter and were largely in response to higher commodity pork costs. 

Specialty Foods' (SF) revenue for the first two quarters of 2019 as compared to the first two quarters of 2018 increased by $290.6 million or 32.3% primarily due to: (i) business acquisitions, which accounted for $250.2 million of the increase; (ii) organic volume growth of $30.4 million; and (iii) a $15.9 million increase in the translated value of its U.S. based businesses' sales.  These increases were partially offset by selling price deflation of $5.9 million.

Premium Food Distribution's (PFD) revenue for the second quarter of 2019 as compared to the second quarter of 2018 increased by $52.2 million or 21.8% primarily due to: (i) business acquisitions, which accounted for $43.7 million of the increase; (ii) organic volume growth of $4.4 million, which was driven primarily by seafood products, in general, and PFD's new operation in the Greater Toronto Area (GTA), in particular; and (iii) selling price inflation of $4.1 million

PFD's OVGR for the quarter was approximately 4.0% after normalizing for (i) the estimated impact of poor spring weather in eastern Canada but before taking into account any related lost growth opportunities; and (ii) the Easter holiday falling in the second quarter of this year versus the first quarter of last year.  This is at the bottom end of the Company's long-term targeted OVGR range mainly due to lower foodservice sales in western Canada resulting from reduced consumer spending, particularly in the white tablecloth segment of the market.  Excluding the normalizing factors outlined above, PFD's OVGR for the quarter was 1.8%.

PFD's revenue for the first two quarters of 2019 as compared to the first two quarters of 2018 increased by $85.0 million or 19.0% primarily due to: (i) business acquisitions, which accounted for $83.2 million of the increase; (ii) selling price inflation of $6.4 million; and (iii) sales from PFD's new GTA operation.  These increases were partially offset by: (i) weather related challenges in eastern Canada during the first two quarters of the year; and (ii) lower foodservice sales in western Canada as discussed above.

Gross Profit

(in millions of dollars except percentages)


13 weeks

ended

Jun 29,

2019

%

(1)

13 weeks

ended

Jun 30,

2018

%

(1)

26 weeks

ended

Jun 29,

2019

%

(1)

26 weeks

ended

Jun 30,

2018

%

(1)

Gross profit by segment:









Specialty Foods

150.5

23.0%

121.4

23.3%

275.5

23.1%

198.1

22.0%

Premium Food Distribution

45.4

15.6%

38.0

15.9%

80.0

15.1%

71.5

16.0%

Consolidated

195.9

20.7%

159.4

20.9%

355.5

20.6%

269.6

20.0%



(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 2019 as compared to the second quarter of 2018 decreased by 30 basis points to 23.0% primarily due to: (i) higher commodity protein costs, in general, and commodity pork costs, in particular, that were the result of a severe outbreak of ASF in China.  SF raised its selling prices to compensate for these higher costs, however, many of the increases did not come into effect until towards the end of the quarter, or the beginning of the third quarter, resulting in a transitory impact on its gross margin.  Normalizing for the net of selling price increases impact of higher commodity pork costs, estimated at $4.8 million, SF's gross margin is 23.7%; (ii) the reclassification of $1.6 million in costs from SG&A; and (iii) additional outside storage costs mainly associated with long inventory positions taken to help hedge against further commodity pork cost increases and to prepare for new product launches planned for early in the third quarter.  These factors were partially offset by: (i) the adoption of the new IFRS-16 accounting standard which resulted in SF's gross margin increasing by approximately $3.6 million; (ii) improved operating efficiencies at a number of SF's plants associated with a variety of continuous improvement initiatives; and (iii) incremental contribution margin associated with SF's organic volume growth.

SF's gross margin for the first two quarters of 2019 as compared to the first two quarters of 2018 increased by 110 basis points to 23.1% primarily due to the same factors outlined above with the favorable factors outweighing the impact of higher protein commodity costs, which was only a challenge during the second quarter.  The impact of the adoption of IFRS-16 on SF's 2019 year-to-date gross profit was $9.2 million.

PFD's gross margins for the second quarter of 2019 as compared to the second quarter of 2018 decreased by 30 basis points primarily due to its Ready Seafood business, which was acquired in the third quarter of 2018, having a lower gross margin relative to PFD's average gross margin.  The impact of this was further amplified by Ready Seafood's lobster margins in the U.S. being negatively impacted by increased domestic supply caused by China implementing tariffs on U.S. caught lobsters in the latter part of 2018.  This factor was partially offset by: (i) general margin improvements on a variety of products; and (ii) the adoption of the new IFRS-16 accounting standard which resulted in PFD's gross profit increasing by approximately $0.5 million.

PFD's gross margins for the first two quarters of 2019 as compared to the first two quarters of 2018 decreased by 90 basis points primarily due to the factors outlined above as well as some transitory impacts on its margins in the first quarter of 2019 caused by increased commodity protein and seafood costs. The impact of the adoption of IFRS-16 on PFD's 2019 year-to-date gross profit was $1.3 million.

Selling, General and Administrative Expenses (SG&A)

(in millions of dollars except percentages)


13 weeks

ended

Jun 29,

2019

%

(1)

13 weeks

ended

Jun 30,

2018

%

(1)

26 weeks

ended

Jun 29,

2019

%

(1)

26 weeks

ended

Jun 30,

2018

%

(1)

SG&A by segment:









Specialty Foods

77.4

11.8%

58.3

11.2%

148.7

12.5%

99.5

11.1%

Premium Food Distribution

26.5

9.1%

23.5

9.8%

50.4

9.5%

45.5

10.2%

Corporate

3.7


3.4


7.8


7.3


Consolidated

107.6

11.4%

85.2

11.2%

206.9

12.0%

152.3

11.3%



(1)

Expressed as a percentage of the corresponding segment's revenue

 

SF's SG&A for the second quarter of 2019 as compared to the second quarter of 2018 increased by $19.1 million primarily due to: (i) business acquisitions, which accounted for most of the increase; (ii) variable and infrastructure costs, including discretionary marketing, associated with supporting SF's current and future growth initiatives; (iii) $0.8 million in wage and freight inflation; (iv) a $0.7 million increase in the translated value of its U.S. based businesses' SG&A due to a weaker Canadian dollar; and (v) variable compensation accruals associated with growth in SF's free cash flow.  These factors were partially offset by: (i) the reclassification of $1.6 million in costs as an offset to revenue; and (ii) the adoption of the new IFRS-16 accounting standard which resulted in a $0.6 million decrease in SF's SG&A.

SF's SG&A as a percentage of sales (SG&A ratio) for the second quarter of 2019 as compared to the second quarter of 2018 increased by 60 basis points to 11.8% primarily due to business acquisitions and, to a much lesser extent, increased discretionary marketing and higher variable compensation accruals.  These factors were partially offset by the reclassification of certain costs as outlined above and the adoption of the new IFRS-16 accounting standard.

SF's SG&A for the first two quarters of 2019 as compared to the first two quarters of 2018 increased by $49.2 million primarily due to the same factors outlined above except for the reclassification of costs which did not have a material impact on SF's year-to-date SG&A due to offsetting reclassifications in the first and second quarters.  The impact of U.S. dollar translation and the adoption of IFRS-16 on SF's 2019 year-to-date SG&A was $1.6 million and $1.3 million, respectively.

PFD's SG&A for the second quarter of 2019 as compared to the second quarter of 2018 increased by $3.0 million primarily due to: (i) business acquisitions, which accounted for most of the increase; (ii) infrastructure costs associated with supporting SF's future growth; and (iii) freight and wage inflation of approximately $0.5 million.  These factors were partially offset by the adoption of the new IFRS-16 accounting standard which resulted in a $1.4 million decrease in PFD's SG&A.

PFD's SG&A ratio for the second quarter of 2019 as compared to the second quarter of 2018 decreased by 70 basis points primarily due to: (i) adoption of the new IFRS-16 accounting standard; and (ii) business acquisitions.  These factors were partially offset by PFD's investment in additional fleet and sales infrastructure to support future growth initiatives.

PFD's SG&A for the first two quarters of 2019 as compared to the first two quarters of 2018 increased by $4.9 million primarily due to the same factors outlined above.  The impact of the adoption of IFRS-16 on PFD's 2019 year-to-date SG&A was $3.0 million.

Adjusted EBITDA

(in millions of dollars except percentages)


13 weeks

ended

Jun 29,

2019

%

(1)

13 weeks

ended

Jun 30,

2018

%

(1)

26 weeks

ended

Jun 29,

2019

%

(1)

26 weeks

ended

Jun 30,

2018

%

(1)

Adjusted EBITDA by segment:









Specialty Foods

73.1

11.2%

63.1

12.1%

126.8

10.7%

98.6

11.0%

Premium Food Distribution

18.9

6.5%

14.5

6.1%

29.6

5.6%

26.0

5.8%

Corporate

(3.7)


(3.4)


(7.8)


(7.3)


Consolidated

88.3

9.3%

74.2

9.7%

148.6

8.6%

117.3

8.7%



(1)

Expressed as a percentage of the corresponding segment's revenue

 

Adjusted EBITDA for the second quarter of 2019 as compared to the second quarter of 2018 increased by $14.1 million or 19.0% to $88.3 million.  This was below the Company's expectations for the quarter primarily due to the weather and ASF related issues outlined above but within the range used to determine its 2019 market guidance.  Normalizing for these factors, the Company estimates its adjusted EBITDA for the quarter to be $98.9 million.

Excluding the impact of adopting the new IFRS-16 accounting standard, the Company's adjusted EBITDA for the second quarter of 2019 is $79.6 million, representing an increase of $5.4 million or 7.3% from the second quarter of 2018.

Plant Start-up and Restructuring Costs

Plant start-up and restructuring costs consist of expenses associated with the start-up of new production capacity or the reconfiguration of existing capacity to gain efficiencies and/or additional capacity.  The Company expects (see Forward Looking Statements) these projects to result in significant improvements in its future earnings and cash flows.

During the quarter and for the first two quarters of 2019, the Company incurred $1.4 million and $3.3 million, respectively, in plant start-up and restructuring costs relating primarily to: (i) the start-up of PFD's new 105,000 square foot state-of-the-art distribution and custom cutting facility in the Greater Toronto Area, which commenced operations near the end of the fourth quarter of 2018; and (ii) the start-up of a new 22,300 square foot culinary plant for fresh salads, soups and sauces in Surrey, BC, which also commenced operations near the end of the fourth quarter of 2018.

Interest and Other Financing Costs

The Company's interest and other financing costs for the second quarter of 2019 as compared to the second quarter of 2018 increased by $3.0 million primarily due to: (i) increases in its net funded debt  prior to the completion of the Private Placement, which occurred towards the end of the quarter; and (ii) a higher weighted average interest rate resulting from a combination of higher short term interest rates, on a year over year basis, and increased interest rate premiums associated with the Company's higher senior debt to adjusted EBITDA ratio prior to the Private Placement.

Income Taxes

The Company's expected range (see Forward Looking Statements) for its provision for income taxes as a percentage of earnings before income taxes (income tax rate) for 2019 is 24% to 27%.  This is based on: (i) an effective income tax rate range within the main tax jurisdictions that it operates in (the Tax Jurisdictions) of 21% to 28%; (ii) the expected allocation of its taxable income among the Tax Jurisdictions; and (iii) the deductibility of certain costs for income tax purposes.

For the first two quarters of 2019, the Company's income tax rate was 20.6%, which is below its expected range primarily due to a $1.3 million decrease in the translated value of its U.S. dollar denominated deferred income tax liabilities resulting from an increase in the quarter end date Canadian versus U.S. dollar spot rate on a year over year basis.  

2019 Outlook

See Forward Looking Statements for a discussion of the risks and assumptions associated with forward looking statements.

(in millions of dollars)

Bottom of Range

Top of Range




Revenue



Prior guidance

3,660.0

3,720.0

Current guidance

3,660.0

3,720.0

Adjusted EBITDA:



Prior guidance – pre IFRS-16

300.0

340.0

Prior guidance – post IFRS-16

331.0

371.0

Current guidance – post IFRS-16

331.0

371.0

 

Despite the Company's second quarter sales and adjusted EBITDA being below its expectations for the quarter, it is maintaining its 2019 outlook for these metrics based on: (i) the second quarter variances from plan were within the tolerances built into its current guidance ranges; (ii) the significant progress being made on its various meat snack, seafood, sandwich, deli meats and cooked protein growth initiatives, which is expected to accelerate the Company's growth in the back half of the year; and (iii) the Company is in the late stages of negotiations for the acquisition of several businesses and correspondingly expects these to contribute to its 2019 results.

There were no developments in the quarter that changed the Company's long-term outlook for its business and correspondingly it is maintaining its long-term objectives of achieving $6 billion in sales and a 10% adjusted EBITDA margin by 2023.

Premium Brands Holdings Corporation

 

Consolidated Balance Sheets

(in millions of Canadian dollars)






Jun 29,

2019

Dec 29,

2018

Jun 30,

2018

Current assets:




Cash and cash equivalents

12.0

19.4

15.7

Accounts receivable

354.6

321.9

320.8

Inventories

372.5

339.8

329.6

Prepaid expenses and other assets

16.7

15.1

13.3


755.8

696.2

679.4





Capital assets

478.6

476.4

430.9

Right of use assets

266.7

-

-

Intangible assets

435.8

452.9

349.5

Goodwill

803.1

776.7

611.1

Investment in associates

29.4

26.7

27.9

Other assets

21.4

21.6

20.5






2,790.8

2,450.5

2,119.3





Current liabilities:




Cheques outstanding

14.6

22.0

11.1

Bank indebtedness

2.8

35.9

3.4

Dividends payable

19.7

16.0

15.8

Accounts payable and accrued liabilities

261.4

246.6

259.2

Current portion of long-term debt

8.5

10.8

7.9

Current portion of lease obligations

24.1

-

-

Current portion of provisions

9.1

2.3

21.6

Current portion of puttable interest in subsidiaries

53.8

73.2

35.2


394.0

406.8

354.2





Long-term debt

567.8

726.4

573.6

Lease obligations

274.9

-

-

Provisions

55.0

36.3

2.0

Puttable interest in subsidiaries

5.0

4.6

4.6

Deferred revenue

2.8

6.8

6.6

Pension obligation

0.8

0.9

1.7

Deferred income taxes

69.4

84.6

70.9


1,369.7

1,266.4

1,013.6





Convertible unsecured subordinated debentures

362.0

360.2

358.3





Equity attributable to shareholders:




Retained earnings

17.0

32.4

9.5

Share capital

1,021.0

753.9

714.9

Reserves

21.1

37.6

23.0


1,059.1

823.9

747.4






2,790.8

2,450.5

2,119.3

 

Premium Brands Holdings Corporation

Consolidated Statements of Operations

(in millions of Canadian dollars except per share amounts)



13 weeks
ended
Jun 29, 
2019

13 weeks
ended 
Jun 30,
2018

26 weeks
ended 
Jun 29,
2019

26 weeks
ended 
Jun 30, 
2018






Revenue

945.4

761.5

1,722.0

1,346.4

Cost of goods sold

749.5

602.1

1,366.5

1,076.8

Gross profit before the below

195.9

159.4

355.5

269.6






Selling, general and administrative expenses before the below

107.6

85.2

206.9

152.3


88.3

74.2

148.6

117.3






Plant start-up and restructuring costs

1.4

0.5

3.3

1.1


86.9

73.7

145.3

116.2






Depreciation of capital assets

14.5

10.8

28.8

19.6

Amortization of intangible assets

5.1

3.6

10.1

6.8

Amortization of right of use assets

6.8

-

13.5

-

Accretion of lease obligations

3.2

-

6.4

-

Interest and other financing costs

14.7

11.7

29.6

20.5

Business acquisition transaction costs

0.5

3.6

1.2

5.0

Change in value of puttable interest in subsidiaries

-

1.7

0.5

3.3

Accretion of provisions

1.5

-

2.4

0.3

Equity loss in investments in associates

0.4

0.4

0.9

1.1

Earnings before income taxes

40.2

41.9

51.9

59.6






Provision (recovery) for income taxes





Current

7.8

12.6

10.5

17.7

Deferred

1.2

(1.3)

0.2

(1.9)


9.0

11.3

10.7

15.8






Earnings

31.2

30.6

41.2

43.8






Earnings per share:





Basic

0.89

0.96

1.20

1.40

Diluted

0.89

0.96

1.20

1.39






Weighted average shares outstanding (in millions):





Basic

35.1

31.8

34.4

31.3

Diluted

35.2

31.9

34.5

31.4

 

Premium Brands Holdings Corporation

 

Consolidated Statements of Cash Flows

(in millions of Canadian dollars)



13 weeks
ended
Jun 29, 
2019

13 weeks
ended 
Jun 30, 
2018

26 weeks
ended
Jun 29, 
2019

26 weeks
ended
Jun 30, 
2018






Cash flows from (used in) operating activities:





Earnings

31.2

30.6

41.2

43.8

Items not involving cash:





Depreciation of capital assets

14.5

10.8

28.8

19.6

Amortization of intangible assets

5.1

3.6

10.1

6.8

Amortization of right of use asset

6.8

-

13.5

-

Accretion of lease obligations

3.2

-

6.4

-

Change in value of puttable interest in subsidiaries

-

1.7

0.5

3.3

Equity loss in investments in associates

0.4

0.4

0.9

1.1

Deferred revenue

-

-

0.1

0.1

Non-cash financing costs

1.2

2.3

2.3

3.0

Accretion of provisions

1.5

-

2.4

0.3

Deferred income taxes (recovery)

1.2

(1.3)

0.2

(1.9)

Other

-

-

0.2

-


65.1

48.1

106.6

76.1

Change in non-cash working capital

(30.1)

7.5

(66.3)

(31.4)


35.0

55.6

40.3

44.7






Cash flows from (used in) financing activities:





Long-term debt, net

(192.6)

72.7

(139.0)

124.8

Payments for lease obligations

(8.7)

-

(17.0)

-

Bank indebtedness and cheques outstanding

(39.9)

(31.7)

(40.5)

(6.2)

Convertible debentures – net of issuance costs

-

164.7

-

164.7

Common share issuance from private placement – net of





issuance costs

250.9

164.9

250.9

164.9

Dividends paid to shareholders

(17.7)

(14.8)

(33.8)

(27.8)

Other

-

(1.8)

-

(1.8)


(8.0)

354.0

20.6

418.6






Cash flows from (used in) investing activities:





Capital asset additions

(24.0)

(15.8)

(38.7)

(28.2)

Business acquisitions

(1.9)

(384.5)

(23.3)

(418.0)

Payments to shareholders of non-wholly owned subsidiaries

(1.1)

(1.4)

(2.3)

(1.8)

Payment for settlement of puttable interest of non-wholly





owned subsidiary

(0.5)

-

(0.5)

-

Payment of provisions

-

(0.5)

(0.8)

(0.5)

Purchase of shares for employee share loans

-

(10.0)

-

(10.0)

Investment in and advances to associates – net of





distributions

(2.3)

(1.0)

(3.3)

(5.3)

Other

0.1

0.8

0.6

1.1


(29.7)

(412.4)

(68.3)

(462.7)






Change in cash and cash equivalents

(2.7)

(2.8)

(7.4)

0.6

Cash and cash equivalents – beginning of period

14.7

18.5

19.4

15.1






Cash and cash equivalents – end of period

12.0

15.7

12.0

15.7











Interest and other financing costs paid

17.7

12.0

25.9

17.2

Income taxes paid

2.7

9.0

5.4

17.9

 

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

Jun 29,

2019

13 weeks

ended

Jun 30,

2018

26 weeks

ended

Jun 29,

2019

26 weeks

ended

Jun 30,

2018

Earnings before income taxes

40.2

41.9

51.9

 

59.6

Plant start-up and restructuring costs

1.4

0.5

3.3

1.1

Depreciation of capital assets

14.5

10.8

28.8

19.6

Amortization of intangible assets

5.1

3.6

10.1

6.8

Amortization of right of use assets

6.8

-

13.5

-

Accretion of lease obligations

3.2

-

6.4

-

Interest and other financing costs

14.7

11.7

29.6

20.5

Business acquisition transaction costs

0.5

3.6

1.2

5.0

Change in value of puttable interest in subsidiaries

-

1.7

0.5

3.3

Accretion of provisions

1.5

-

2.4

0.3

Equity loss in investments in associates

0.4

0.4

0.9

1.1

Adjusted EBITDA

88.3

74.2

148.6

117.3

 

Free Cash Flow

(in millions of dollars)

52 weeks

ended

Dec 29,

2018

26 weeks

ended

Jun 29,

2019

26 weeks

ended

Jun 30,

2018

 

Rolling

Four

Quarters

Cash flow from operating activities

 

135.9

40.3

44.7

131.5

Changes in non-cash working capital

35.1

66.3

31.4

70.0

Lease obligation payments

-

(17.0)

-

(17.0)

Business acquisition transaction costs

8.2

1.2

5.0

4.4

Plant start-up and restructuring costs

5.2

3.3

1.1

7.4

Maintenance capital expenditures

(19.8)

(11.5)

(8.1)

(23.2)

Free cash flow

164.6

82.6

74.1

173.1

 

Adjusted Earnings and Adjusted Earnings per Share

(in millions of dollars except per share amounts)

13 weeks

ended

Jun 29,

2019

13 weeks

ended

Jun 30,

2018

26 weeks

ended

Jun 29,

2019

26 weeks

ended

Jun 30,

2018

Earnings

 

31.2

30.6

41.2

43.8

Plant start-up and restructuring costs

1.4

0.5

3.3

1.1

Business acquisition transaction costs

0.5

3.6

1.2

5.0

Accretion of provisions

1.5

-

2.4

0.3

Equity loss from associates in start-up

0.4

0.4

0.9

1.0

Change in value of puttable interest in subsidiaries

-

1.7

0.5

3.3

Amortization of intangibles associated with acquisitions

5.1

3.6

10.1

6.8

Unrealized loss on foreign currency contracts

-

0.1

-

-


40.1

40.5

59.6

61.3

Current and deferred income tax effect of above items

(1.6)

(1.1)

(3.5)

(2.1)

Adjusted earnings

38.5

39.4

56.1

59.2

Weighted average shares outstanding

35.1

31.8

34.4

31.3

Adjusted earnings per share

1.10

1.24

1.63

1.89

 

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 13, 2019, 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; and (viii) convertible debentures.

Some of the factors that could cause actual results to differ materially from the Company's expectations are outlined under Risks and Uncertainties in the Company's MD&A.

Assumptions used by the Company to develop forward looking information 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 the Company's MD&A.  Readers are cautioned that this information is not exhaustive.

  • The overall economic conditions in Canada and the United States will be relatively stable with modest improvement in the near to medium term.
  • The average cost of the basket of food commodities purchased by it being relatively stable for the balance of the year including no further major disruptions in the commodity pork market. 
  • 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 key food trends that are driving growth in many of the Company's businesses.  These trends 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 information included in this press release in order to provide a more complete perspective on the Company's future operations. Readers are cautioned that this information may not be appropriate for other purposes.

Unless otherwise indicated, the forward looking information in this press release is made as of August 13, 2019 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 press release.

SOURCE Premium Brands Holdings Corporation

View original content: http://www.newswire.ca/en/releases/archive/August2019/13/c6285.html

please contact George Paleologou, President and CEO or Will Kalutycz, CFO at (604) 656-3100.Copyright CNW Group 2019

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