VANCOUVER, BC, Nov. 4, 2021 /CNW/ - Premium Brands Holdings
Corporation (TSX: PBH), a leading producer, marketer and
distributor of branded specialty food products, announced today its
results for the third quarter of 2021.
HIGHLIGHTS
- Record third quarter revenue of $1.3
billion representing a 21.9%, or $240.7 million, increase as compared to the third
quarter of 2020
- Record third quarter adjusted EBITDA1 of
$122.6 million representing a 31.1%,
or $29.1 million, increase as
compared to the third quarter of 2020
- Record third quarter adjusted EPS1 of
$1.33 per share representing a 24.3%,
or $0.26 per share increase as
compared to the third quarter of 2020
- Clearwater Seafood, which is accounted for using the equity
method, continued to generate significantly improved results
posting quarterly sales and EBITDA of $158.4
million and $40.1 million,
respectively, as compared to $133.7
million and $25.4 million,
respectively in the third quarter of 2020
- The Company declared a quarterly dividend of $0.635 per share for the fourth quarter of
2021
- While conditions in many of the Company's selling channels have
returned to normal, its customers in the airline and cruise line
channels, as well as in certain segments of the foodservice
channel, continue to be impacted by pandemic related
challenges
- Subsequent to the quarter, the Company completed the
acquisitions of Maid-Rite Specialty Foods, a Pennsylvania based leading manufacturer of
customized cooked and raw protein solutions for retail and
foodservice customers across Canada and the U.S; and Westmorland Fisheries,
a New Brunswick based leading
processor, distributor and marketer of lobster products which it
sells to retail, foodservice and distribution customers around the
world
- Also, subsequent to the quarter, the Company increased its
revolving senior credit facility by US$250.0
million to approximately $1.5
billion, extended the facility's maturity date to
November 1, 2026, and linked the
interest rates associated with the facility to the Company's
performance relative to certain environmental and social objectives
set by the Company
1
|
The Company
reports its financial results in accordance with International
Financial Reporting Standards as issued by the International
Accounting Standards Board (IFRS). Adjusted EBITDA and
adjusted EPS are non-IFRS financial measures. Reconciliations
and explanations for all non-IFRS measures are included in the
Non-IFRS Financial Measures section of this press
release.
|
CONFERENCE CALL
The Company will hold a conference call to discuss its third
quarter 2021 results today at 10:30
a.m. PDT (1:30 p.m.
EDT). An investor presentation that will be referenced
on the conference call is available here or on the Company's
website at http://www.premiumbrandsholdings.com.
Access to the call may be obtained by calling the operator at
(833) 300-9218 / (647) 689-4551 (Conference ID: 2949817) up to ten
minutes prior to the scheduled start time. For those who are unable
to participate, a recording of the conference call will be
available through to 8:59 p.m. PST on
November 18, 2021 at (855) 859-2056 /
(404) 537-3406 (passcode: 2949817). Alternatively, a recording of
the conference call will be available at the Company's website at
http://www.premiumbrandsholdings.com.
SUMMARY FINANCIAL INFORMATION
(In millions of
dollars except per share amounts and ratios)
|
|
|
13
weeks ended Sep 25, 2021
|
13
weeks ended Sep 26, 2020
|
39
weeks ended Sep 25, 2021
|
39
weeks ended Sep 26, 2020
|
Revenue
|
|
|
1,341.8
|
1,101.1
|
3,586.3
|
3,012.7
|
Adjusted
EBITDA1
|
|
|
122.6
|
93.5
|
317.3
|
224.9
|
Earnings
|
|
|
46.9
|
34.7
|
94.7
|
60.4
|
EPS1
|
|
|
1.08
|
0.88
|
2.18
|
1.59
|
Adjusted
earnings1
|
|
|
57.8
|
42.0
|
142.6
|
83.1
|
Adjusted
EPS1
|
|
|
1.33
|
1.07
|
3.28
|
2.19
|
|
|
|
Trailing Four
Quarters Ended
|
|
|
|
Sep 25,
2021
|
Sep
26,
2020
|
Free cash
flow1
|
|
|
245.6
|
177.0
|
Declared
dividends
|
|
|
108.2
|
86.5
|
Declared dividend per
share
|
|
|
2.4825
|
2.2575
|
Payout
ratio1
|
|
|
44.1%
|
48.9%
|
1
|
Reconciliations
for all non-IFRS measures are included in the Non-IFRS Financial
Measures section of this press release.
|
"Our third quarter results continue to demonstrate the balance
and resiliency that we have built into our unique business model as
we once again generated record sales and cash flows despite facing
a barrage of widespread challenges including significant cost
inflation, supply chain disruptions, and labor shortages," said Mr.
George Paleologou, President and
CEO. "We are pleased but not surprised, by how our
entrepreneurial management teams adapted to these challenges with
unique and innovative solutions that not only resulted in our
strong results for the quarter but are positioning us to accelerate
our performance when things start to normalize. We are
particularly pleased with the results of our Seafood and
Distribution platforms, which generated record sales and cash flows
due in part to their preparedness for the surge in demand in the
foodservice channel following the loosening of pandemic related
restrictions in Canada and the
U.S.
"Our Seafood platform grew its sales for the quarter by 77%
while generating organic growth of 32%. Clearwater Seafood,
which is accounted for as an equity investment and not included in
our Seafood platform results, also delivered very strong results
with its sales and adjusted EBITDA for the quarter increasing by
almost 19% and 58%, respectively," added Mr. Paleologou. "We
are very pleased with how our seafood strategies are unfolding and
how we are positioned in this very exciting segment of the food
industry, which is benefiting from a number of long-term
sustainable consumer trends. Our investments in product
innovation, industry leading management teams and best-in-class
operating assets, combined with our targeted acquisitions strategy,
have positioned us well to be a global leader in seafood.
"Our Distribution platform grew its sales for the quarter by 23%
while generating organic growth of 15%. This platform
continues to strengthen its position as Canada's leading specialty distributor of
protein and seafood solutions to the foodservice industry and to
increase its sales of differentiated protein and seafood products
and solutions to retailers across Canada", said Mr. Paleologou. "We expect
this platform to easily exceed $1
billion in sales next year, from less than $400 million just six years ago.
"We are also pleased to announce that subsequent to the quarter
we completed the acquisitions of Maid-Rite Specialty Foods and
Westmorland Fisheries. Both businesses are truly
best-in-class in what they do and will perfectly complement our
Protein and Seafood platforms, respectively. It is with great
pleasure that I welcome their talented and entrepreneurial
management teams into our ecosystem. We are very much looking
forward to working with them to help take their businesses to the
next level."
"Over the last year we have made significant progress towards
the targets we set three years ago of achieving $6 billion in sales and $600 million in EBITDA by 2023," stated Mr.
Paleologou. "With the continued strengthening of the trends
that have helped drive our success over the last decade, the
investments in capacity that we have either recently completed or
are underway, and our full pipeline of acquisition opportunities,
we now expect to exceed these targets," added Mr. Paleologou.
FOURTH QUARTER 2021 DIVIDEND
The Company also announced that its Board of Directors approved
a cash dividend of $0.635 per share
for the fourth quarter of 2021, which will be payable on
January 17, 2022 to shareholders of
record at the close of business on December
31, 2021.
Unless indicated otherwise in writing at or before the time the
dividend is paid, each dividend paid by the Company in 2021 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 investment income and
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. Investment income includes interest and
management fees generated from the Company's businesses that are
accounted for using the equity method.
Revenue
(in millions of
dollars except percentages)
|
|
13
weeks ended
Sep 25,
2021
|
%
(1)
|
13 weeks
ended
Sep 26,
2020
|
%
(1)
|
39 weeks
ended
Sep 25,
2021
|
%
(1)
|
39 weeks
ended
Sep 26,
2020
|
%
(1)
|
Revenue by
segment:
|
|
|
|
|
|
|
|
|
Specialty
Foods
|
776.3
|
57.9%
|
710.3
|
64.5%
|
2,207.7
|
61.6%
|
1,989.1
|
66.0%
|
Premium Food
Distribution
|
565.5
|
42.1%
|
390.8
|
35.5%
|
1,378.6
|
38.4%
|
1,023.6
|
34.0%
|
Consolidated
|
1,341.8
|
100.0%
|
1,101.1
|
100.0%
|
3,586.3
|
100.0%
|
3,012.7
|
100.0%
|
(1) Expressed as a percentage
of consolidated revenue.
|
Specialty Foods' (SF) revenue for the quarter increased by
$66.0 million or 9.3% primarily due
to: (i) selling price inflation of $39.6
million, which was driven by increases implemented in
reaction to inflationary pressures across a broad range of
production inputs; (ii) organic volume growth of $38.9 million representing a growth rate of
5.5%. After adjusting for the reversal of approximately
$10.8 million of transitory pandemic
related sales in the third quarter of 2020, SF's normalized organic
volume growth rate (OVGR) is 7.0%; and (iii) business acquisitions,
which accounted for $7.1 million of
SF's growth. These factors were partially offset by a
$19.6 million reduction in the
translated value of sales generated by SF's U.S. based businesses
due to a stronger Canadian dollar – approximately 48.4% of SF's
revenue for the quarter was generated by these businesses.
SF's normalized OVGR of 7.0% was driven primarily by its
artisan sandwich, meat snack, cooked meat and charcuterie growth
initiatives, including the ramping up of its U.S. expansion and the
launch of several new product lines. While this rate is above
SF's long-term targeted range of 4% to 6%, it was lower than
expected because of: (i) reduced featuring of products in the
retail channel as a result of production labor shortages and as a
transitory measure to manage the impact of record high cost
inflation; and (ii) supply chain and labor shortage challenges
experienced by some of its larger customers. SF's growth rate
was also impacted by asset related production capacity constraints
experienced by several of its businesses, which are being addressed
with a variety of initiatives including investing in additional
production capacity.
SF's revenue for the first three quarters of 2021 increased by
$218.6 million or 11.0% primarily due
to: (i) organic volume growth of 10.8% or approximately 9.2% after
normalizing for the estimated impacts of the pandemic; (ii) net
selling price inflation of $61.6
million; and (iii) business acquisitions, which accounted
for $32.7 million of the increase;
partially offset by a $89.8 million
reduction in the translated value of sales generated by the
Company's U.S. based businesses.
Premium Food Distribution's (PFD) revenue for the quarter
increased by $174.7 million or 44.7%
due to: (i) business acquisitions, which accounted for $88.8 million of PFD's growth; (ii) selling price
inflation of $81.0 million, which was
driven by increases implemented in reaction to inflationary
pressures across a broad range of procured products and production
inputs; and (iii) organic volume growth of $12.7 million representing a growth rate of
3.2%. After adjusting for approximately $11.4 million in sales recoveries associated with
the easing of pandemic related restrictions in the U.S. and
Canada, PFD's normalized OVGR is
0.3%. These factors were partially offset by a $7.8 million reduction in the translated value of
sales generated by PFD's U.S. based businesses due to a stronger
Canadian dollar.
PFD's normalized OVGR of 0.3% is below its long-term target of
4.0% to 6.0% primarily due to: (i) a significant decline in live
lobster featuring by retailers because of record high lobster
prices; (ii) lower exports to Asia
as a result of supply chain disruptions within that region; and
(iii) on an overall basis, PFD's foodservice focused businesses
still being in recovery mode and not yet generating organic growth
relative to 2019 sales levels. Normalizing for the factors
relating to less live lobster featuring and lower exports, PFD's
OVGR is 6.2%, which was driven by: (i) leveraging its new lobster
processing facility to develop sales opportunities in the retail
and foodservice channels; and (ii) the continued development of new
supply and product solutions for the retail channel, an initiative
that has benefited from customer relationships developed during the
pandemic.
PFD's revenue for the first three quarters of 2021 increased by
$355.0 million or 34.7% primarily due
to: (i) business acquisitions, which accounted for $205.9 million of the increase; (ii) net selling
price inflation of $134.2 million;
and (iii) organic volume growth of 3.6% or approximately 2.9% after
normalizing for the estimated impacts of the pandemic; partially
offset by a $21.6 million reduction
in the translated value of sales generated by the Company's U.S.
based businesses.
Gross Profit
(in millions of
dollars except percentages)
|
|
13 weeks
ended
Sep 25,
2021
|
%
(1)
|
13 weeks
ended
Sep 26,
2020
|
%
(1)
|
39 weeks
ended
Sep 25,
2021
|
%
(1)
|
39 weeks
ended
Sep 26,
2020
|
%
(1)
|
Gross profit by
segment:
|
|
|
|
|
|
|
|
|
Specialty
Foods
|
156.9
|
20.2%
|
155.8
|
21.9%
|
456.2
|
20.7%
|
423.5
|
21.3%
|
Premium Food
Distribution
|
84.5
|
14.9%
|
57.9
|
14.8%
|
211.6
|
15.3%
|
154.6
|
15.1%
|
Consolidated
|
241.4
|
18.0%
|
213.7
|
19.4%
|
667.8
|
18.6%
|
578.1
|
19.2%
|
(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 quarter decreased by 170 basis points primarily due to: (i)
significantly higher costs for a broad range of production inputs,
which exceeded SF's selling price increases due to a portion of the
selling price increases taking effect part way through the quarter
and further increases taking effect after the quarter; (ii) wage
inflation; (iii) freight inflation; and (iv) additional outside
storage costs associated with inventory strategies used to help
mitigate the impact of rising production input costs and industry
wide supply chain disruptions. These factors were partially
offset by: (i) sales leveraging associated with SF's organic
growth; (ii) the reversal of transitory pandemic related costs
incurred in the third quarter of 2020; and (iii) improved plant
efficiencies resulting from investments in automation and a variety
of continuous improvement projects.
SF's gross margin for the first three quarters of 2021 decreased
by 60 basis points primarily due to the factors outlined above
partially offset by unusually low margins in the second quarter of
2020 as a result of lost sales leveraging caused by pandemic
related shutdowns of large portions of the U.S. and Canadian
economies.
PFD's gross margins for the quarter increased by 10 basis points
primarily due to: (i) higher margins generated by recently acquired
businesses; and (ii) sales leveraging associated with its organic
growth, including a favorable sales mix impact resulting from a
partial recovery of PFD's sales to the fine dining segment of the
foodservice channel. These factors were partially offset by
significantly higher costs for a broad range of procured products
and production inputs. PFD was able to more than offset these
increased costs with selling price increases (in general, PFD's
businesses are able to implement selling price increases quicker
than SF's businesses due to the more dynamic pricing structures
that are inherent to their segments of the food industry) but did
not maintain the same margin percentage due to a variety of factors
including providing its customers with time to adapt to the higher
price environment and a portion of its business being structured on
a cost-plus basis.
PFD's gross margins for the first three quarters of 2021
increased by 20 basis points primarily due to the factors outlined
above as well as unusually low margins on certain live seafood
products in the first quarter of 2020 because of pandemic related
demand destruction in Asia.
Selling, General and Administrative Expenses
(SG&A)
(in millions of
dollars except percentages)
|
|
13 weeks
ended
Sep 25,
2021
|
%
(1)
|
13 weeks
ended
Sep 26,
2020
|
%
(1)
|
39 weeks
ended
Sep 25,
2021
|
%
(1)
|
39 weeks
ended
Sep 26,
2020
|
%
(1)
|
SG&A by
segment:
|
|
|
|
|
|
|
|
|
Specialty
Foods
|
85.9
|
11.1%
|
83.6
|
11.8%
|
254.8
|
11.5%
|
242.9
|
12.2%
|
Premium Food
Distribution
|
42.5
|
7.5%
|
32.7
|
8.4%
|
118.5
|
8.6%
|
97.4
|
9.5%
|
Corporate
|
5.0
|
|
4.4
|
|
16.2
|
|
15.1
|
|
Investment
Income
|
(14.6)
|
|
(0.5)
|
|
(39.0)
|
|
(2.2)
|
|
Consolidated
|
118.8
|
8.9%
|
120.2
|
10.9%
|
350.5
|
9.8%
|
353.2
|
11.7%
|
(1) Expressed as a percentage
of the corresponding segment's revenue.
|
SF's SG&A for the quarter increased by $2.3 million primarily due to: (i) additional
variable selling costs associated with SF's organic growth; (ii)
freight and wage inflation; (iii) business acquisitions; and (iv)
higher travel costs, which were unusually low in the third quarter
of 2020 because of pandemic related restrictions; partially offset
by: (i) lower discretionary marketing costs as a result of
unusually high marketing costs in the third quarter of 2020 and
some of SF's businesses using reduced promotion as a transitory
measure to manage the impact of record high cost inflation across a
broad range of production inputs; (ii) reduced incentive-based
compensation accruals; and (iii) a lower translated value of the
SG&A associated with the Company's U.S. based businesses due to
a stronger Canadian dollar.
SF's SG&A for the first three quarters of 2021 as compared
to the first three quarters of 2020 increased by $11.9 million primarily due to: (i) additional
variable selling costs associated with SF's organic growth; (ii)
freight and wage inflation; and (iii) business acquisitions;
partially offset by: (i) reduced discretionary marketing costs; and
(ii) a lower translated value of the SG&A associated with the
Company's U.S. based businesses due to a stronger Canadian
dollar.
SF's SG&A as a percentage of sales (SG&A ratio) for the
quarter and for the first three quarters of 2021 both decreased by
70 basis points primarily due to: (i) sales leveraging; and (ii)
lower discretionary marketing costs; partially offset by freight
and wage inflation.
PFD's SG&A for the quarter increased by $9.8 million primarily due to: (i) business
acquisitions; and (ii) additional variable and infrastructure costs
associated with PFD's organic growth.
PFD's SG&A for first three quarters of 2021 as compared to
the first three quarters of 2020 increased by $21.1 million primarily due to: (i) the factors
outlined above; and (ii) higher incentive-based compensation;
partially offset by pandemic related travel cost savings and
government wage subsidies.
PFD's SG&A ratios for the quarter and for the first three
quarters of 2021 both decreased by 90 basis points primarily due to
sales leveraging.
Investment income for the quarter increased by $14.1 million primarily due to interest and
management fees relating to the acquisition of a 50% interest in
Clearwater.
Adjusted EBITDA
(in millions of
dollars except percentages)
|
|
13 weeks
ended
Sep 25,
2021
|
%
(1)
|
13 weeks
ended
Sep 26,
2020
|
%
(1)
|
39 weeks
ended
Sep 25,
2021
|
%
(1)
|
39 weeks
ended
Sep 26,
2020
|
%
(1)
|
Adjusted EBITDA by
segment:
|
|
|
|
|
|
|
|
|
Specialty Foods
|
71.0
|
9.1%
|
72.2
|
10.2%
|
201.4
|
9.1%
|
180.6
|
9.1%
|
Premium Food
Distribution
|
42.0
|
7.4%
|
25.2
|
6.4%
|
93.1
|
6.8%
|
57.2
|
5.6%
|
Corporate
|
(5.0)
|
|
(4.4)
|
|
(16.2)
|
|
(15.1)
|
|
Investment Income
|
14.6
|
|
0.5
|
|
39.0
|
|
2.2
|
|
Consolidated
|
122.6
|
9.1%
|
93.5
|
8.5%
|
317.3
|
8.8%
|
224.9
|
7.5%
|
(1) Expressed as a percentage
of the corresponding segment's revenue.
|
The Company's adjusted EBITDA for the quarter increased by
$29.1 million or 31.1%.
Normalizing for the impact of the pandemic, which is estimated to
be $7.6 million, consisting of
$6.8 million in lost margin on
approximately $32.8 million of
continuing sales impacts and transitory pandemic related costs of
$0.8 million, the Company's adjusted
EBITDA and adjusted EBITDA margin for the quarter are approximately
$130.2 million and 9.5%,
respectively.
The Company's adjusted EBITDA for the quarter was in line with
its expectations with the adjusted EBITDA of its PFD segment
exceeding expectations, mainly due to a stronger than expected
recovery of its foodservice channel sales, and its SF segment
lagging expectations, mainly due to production input cost inflation
and lower organic volume growth. Correspondingly, due to SF's
lower margins and the changes in sales mix, i.e. higher than
expected PFD sales and lower than expected SF sales, the Company's
adjusted EBITDA margin for the quarter was lower than expected.
The Company's adjusted EBITDA for the first three quarters of
2021 increased by $92.4 million or
41.1% to $317.3 million.
Normalizing for the impact of the pandemic, which is estimated to
be $26.1 million, consisting of
$28.9 million in lost margin on
approximately $126.5 million of
continuing sales impacts and $2.8
million of offsetting cost savings, mainly associated with
reduced travel and discretionary spending, the Company's adjusted
EBITDA and adjusted EBITDA margin for the first three quarters of
2021 are approximately $343.4 million
and 9.2%, respectively.
Plant Start-up and Restructuring Costs
Plant start-up and restructuring costs consist of expenses
associated with: (i) the start-up of new production capacity; (ii)
the reconfiguration of existing capacity to gain efficiencies
and/or additional capacity; and/or (iii) the restructuring of a
business to improve its profitability. The Company expects (see
Forward Looking Statements) these investments to result in
improvements in its future earnings and cash flows.
During the first three quarters of 2021, the Company incurred
$1.0 million in plant start-up and
restructuring costs primarily related to: (i) a 42,000 square foot
expansion of the Company's artisan bakery in British Columbia; and (ii) the installation of
a new cooking line at the Company's cooked protein plant in
Quebec.
Equity Earnings (Loss) in Investment in Associates
Equity earnings (loss) in investment in associates includes the
Company's proportionate share of the earnings and losses of its
investments in associates.
(in millions
of dollars)
|
13 weeks
ended
Oct 2,
2021
|
13 weeks
ended
Oct 3,
2020
|
39 weeks
ended
Oct 2,
2021
|
39 weeks
ended
Oct 3,
2020
|
Clearwater:
|
Sales
|
158.4
|
133.7
|
391.2
|
340.0
|
Gross profit
|
53.1
|
35.8
|
123.8
|
83.0
|
SG&A
|
13.0
|
10.4
|
35.6
|
31.0
|
|
40.1
|
25.4
|
88.2
|
52.0
|
Depreciation
|
9.7
|
10.0
|
26.7
|
25.0
|
Amortization
|
1.4
|
1.0
|
4.3
|
3.0
|
Interest – senior
debt
|
3.1
|
7.5
|
10.1
|
22.3
|
Non-controlling
interest
|
0.5
|
1.5
|
1.9
|
5.1
|
Unrealized foreign
exchange (gain) loss
|
6.5
|
(6.9)
|
(2.8)
|
5.5
|
Other
|
(0.1)
|
0.3
|
(0.2)
|
1.1
|
|
19.0
|
12.0
|
48.2
|
(10.0)
|
Interest – shareholder
debt
|
12.4
|
-
|
32.4
|
-
|
Payments to
shareholders
|
11.8
|
-
|
23.5
|
-
|
Acquisition
costs
|
-
|
1.0
|
12.8
|
1.0
|
Closing risk fee paid
to Premium Brands
|
-
|
-
|
2.4
|
-
|
Income taxes
|
(1.6)
|
(1.5)
|
(4.8)
|
0.4
|
Earnings
(loss)
|
(3.6)
|
12.5
|
(18.1)
|
(11.4)
|
Pre-close earnings
(loss)
|
-
|
12.5
|
(4.3)
|
(11.4)
|
|
(3.6)
|
-
|
(13.8)
|
-
|
Ownership
|
50.0%
|
-
|
50.0%
|
-
|
Clearwater net equity
earnings (loss)
|
(1.8)
|
-
|
(6.9)
|
-
|
Other net equity
earnings (loss)
|
1.0
|
(0.3)
|
1.2
|
(2.1)
|
Equity earnings
(loss) in investment in associates
|
(0.8)
|
(0.3)
|
(5.7)
|
(2.1)
|
Clearwater Seafoods Incorporated (Clearwater)
Clearwater's sales for the
quarter increased by $24.7 million
primarily due to the easing of pandemic related restrictions and a
corresponding reopening of economies in North America and Asia, which drove higher volumes and prices
for many of the species sold by Clearwater including clams, lobsters, and
scallops. This was partially offset by: (i) a stronger
Canadian dollar relative to the U.S. dollar and Euro as a
significant portion of Clearwater's sales are denominated in these
currencies; (ii) a decline in crab sales because of reduced
procurement opportunities as well as pandemic related restrictions
on the export of certain products to Asia by Clearwater's operations in Scotland; and (iii) the timing of
landings.
Clearwater's gross margin for
the quarter increased by 670 basis points to 33.5% primarily due
to: (i) a strong pricing environment, which was driven by several
factors including increased demand associated with the reopening of
economies in North America and
Asia; (ii) improved operating
efficiencies resulting from larger catch sizes per sea-day as well
as the reversal of pandemic related inefficiencies incurred in the
third quarter of 2020; and (iii) foreign currency impacts including
realized gains on hedges. These factors were partially offset
by the reversal of pandemic related government subsidies received
in the third quarter of 2020.
Clearwater's SG&A increased
by $2.6 million primarily due to: (i)
higher discretionary compensation accruals associated with its
improved performance as well as a change in the method used to
account for its long-term incentive plan; (ii) the reversal of
pandemic related government subsidies received in the third quarter
of 2020; and (iii) increased professional fees driven by a variety
of items including BREXIT related issues and the timing of
billings.
Sales and Adjusted EBITDA Outlook
See Forward Looking Statements for a discussion of the
risks and assumptions associated with forward looking
statements.
2021
The Company's sales and adjusted EBITDA outlooks for 2021 do not
incorporate any provisions for potential future acquisitions.
For 2021, the Company expects (see Forward Looking
Statements) its sales to be between $4.70 billion and $4.85
billion and its adjusted EBITDA to be between $423.0 million and $436.5
million, which is consistent with the Company's previously
released outlook on August 5,
2021. While the Company's overall guidance targets remain
unchanged, it does expect its adjusted EBITDA margin for 2021 to be
lower than the previously forecasted 9% as a result of: (i) sales
mix changes, namely its PFD segment's revenue is exceeding the
Company's earlier expectations while, for the reasons outlined
above, its SF segment's revenue is lagging its earlier
expectations; and (ii) continued cost inflation across a variety of
production inputs. The acquisitions of Maid-Rite and
Westmorland subsequent to the quarter are not expected to have a
material impact on the Company's results for 2021 based on: (i) the
seasonality of these businesses; and (ii) the timing of the
transactions.
5 Year Plan
The Company continues to make solid progress on the execution of
its growth and value creation strategies and remains confident (see
Forward Looking Statements) it will achieve or exceed
the five-year targets set in 2018 of $6
billion in sales and $600
million in adjusted EBITDA. While pandemic related
factors continue to impact some of its businesses, substantially
all of these impacts are expected to be temporary.
Furthermore, the pandemic has enabled many of its businesses to
develop new sustainable sales opportunities as well as strengthen
customer and supply chain relationships, all of which will enhance
its ability to achieve its five-year targets (see Forward
Looking Statements).
Premium Brands
Holdings Corporation
|
Consolidated
Balance Sheets
|
(in millions of
Canadian dollars)
|
|
|
|
|
|
Sep 25,
2021
|
Dec 26,
2020
|
Sep 26,
2020
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
24.9
|
363.0
|
192.7
|
Accounts
receivable
|
478.1
|
387.0
|
358.6
|
Inventories
|
513.6
|
448.8
|
417.0
|
Prepaid expenses and
other assets
|
21.8
|
25.8
|
17.7
|
|
1,038.4
|
1,224.6
|
986.0
|
|
|
|
|
Capital
assets
|
579.9
|
524.9
|
530.0
|
Right of use
assets
|
442.6
|
328.5
|
315.8
|
Intangible
assets
|
512.3
|
517.9
|
514.8
|
Goodwill
|
872.6
|
853.4
|
819.7
|
Investments in and
advances to associates
|
560.2
|
74.2
|
75.1
|
Other
assets
|
17.5
|
18.4
|
18.0
|
|
|
|
|
|
4,023.5
|
3,541.9
|
3,259.4
|
|
|
|
|
Current
liabilities:
|
|
|
|
Cheques
outstanding
|
19.4
|
19.1
|
13.8
|
Bank
indebtedness
|
2.2
|
-
|
2.9
|
Dividends
payable
|
27.7
|
25.2
|
23.4
|
Accounts payable and
accrued liabilities
|
420.8
|
369.3
|
370.1
|
Puttable interest in
subsidiaries
|
27.1
|
28.1
|
27.6
|
Current portion of
long-term debt
|
6.7
|
9.5
|
7.5
|
Current portion of
lease obligations
|
30.1
|
26.2
|
26.2
|
Current portion of
provisions
|
11.5
|
16.4
|
10.0
|
|
545.5
|
493.8
|
481.5
|
|
|
|
|
Long-term
debt
|
806.4
|
525.6
|
549.9
|
Lease
obligations
|
456.4
|
342.7
|
329.0
|
Deferred
revenue
|
2.8
|
2.8
|
2.8
|
Provisions
|
57.3
|
57.2
|
59.3
|
Pension
obligation
|
1.7
|
1.6
|
1.2
|
Deferred income
taxes
|
93.2
|
94.5
|
75.6
|
|
1,963.3
|
1,518.2
|
1,499.3
|
|
|
|
|
Convertible unsecured
subordinated debentures
|
456.0
|
425.7
|
424.5
|
|
|
|
|
Equity attributable
to shareholders:
|
|
|
|
Retained
earnings
|
22.8
|
11.2
|
13.5
|
Share
capital
|
1,563.6
|
1,569.7
|
1,290.5
|
Reserves
|
17.8
|
17.1
|
31.6
|
|
1,604.2
|
1,598.0
|
1,335.6
|
|
|
|
|
|
4,023.5
|
3,541.9
|
3,259.4
|
Premium Brands
Holdings Corporation
|
Consolidated
Statements of Operations
|
(in millions of
Canadian dollars except per share amounts)
|
|
|
13 weeks
ended
Sep 25,
2021
|
13 weeks
ended
Sep 26,
2020
|
39 weeks
ended
Sep 25,
2021
|
39 weeks
ended
Sep 26,
2020
|
|
|
|
|
|
Revenue
|
1,341.8
|
1,101.1
|
3,586.3
|
3,012.7
|
Cost of goods
sold
|
1,100.4
|
887.4
|
2,918.5
|
2,434.6
|
Gross profit before
depreciation, amortization and plant start-up
and restructuring costs
|
241.4
|
213.7
|
667.8
|
578.1
|
|
|
|
|
|
Selling, general and
administrative expenses before depreciation,
amortization and plant start-up and
restructuring costs
|
118.8
|
120.2
|
350.5
|
353.2
|
|
122.6
|
93.5
|
317.3
|
224.9
|
|
|
|
|
|
Plant start-up and
restructuring costs
|
-
|
0.7
|
1.0
|
6.2
|
Depreciation of
capital assets
|
18.4
|
16.8
|
53.2
|
49.3
|
Amortization of
intangible assets
|
6.8
|
6.5
|
20.2
|
19.3
|
Amortization of right
of use assets
|
9.5
|
7.9
|
26.8
|
23.5
|
Accretion of lease
obligations
|
5.1
|
3.7
|
13.9
|
11.1
|
Interest and other
financing costs
|
11.7
|
9.9
|
33.0
|
32.4
|
Change in fair value
of option liabilities
|
2.6
|
-
|
26.9
|
-
|
Acquisition
transaction costs
|
1.4
|
1.4
|
5.8
|
4.3
|
Accretion of
provisions
|
1.8
|
2.4
|
5.4
|
6.0
|
Equity loss in
investments in associates
|
0.8
|
0.3
|
5.7
|
2.1
|
Change in value of
puttable interest in subsidiaries
|
-
|
0.5
|
0.5
|
(3.8)
|
Clearwater closing
risk fee
|
-
|
-
|
(2.4)
|
-
|
Acquisition bargain
purchase gain
|
-
|
-
|
(1.8)
|
-
|
Provisions not
earned
|
-
|
-
|
-
|
(2.0)
|
Earnings before
income taxes
|
64.5
|
43.4
|
129.1
|
76.5
|
|
|
|
|
|
Provision for income
taxes (recovery)
|
|
|
|
|
Current
|
18.1
|
1.8
|
55.1
|
14.1
|
Deferred
|
(0.5)
|
6.9
|
(20.7)
|
2.0
|
|
17.6
|
8.7
|
34.4
|
16.1
|
|
|
|
|
|
Earnings
|
46.9
|
34.7
|
94.7
|
60.4
|
|
|
|
|
|
Earnings per
share:
|
|
|
|
|
Basic
|
1.08
|
0.88
|
2.18
|
1.59
|
Diluted
|
1.07
|
0.88
|
2.17
|
1.58
|
|
|
|
|
|
Weighted average
shares outstanding (in millions):
|
|
|
|
|
Basic
|
43.5
|
39.2
|
43.5
|
38.0
|
Diluted
|
43.6
|
39.4
|
43.6
|
38.2
|
Premium Brands
Holdings Corporation
|
Consolidated
Statements of Cash Flows
|
(in millions of
Canadian dollars)
|
|
|
|
|
|
|
|
13 weeks
ended
Sep 25,
2021
|
13 weeks
ended
Sep 26,
2020
|
39 weeks
ended
Sep 25,
2021
|
39 weeks
ended
Sep 26,
2020
|
|
|
|
|
|
Cash flows from (used
in) operating activities:
|
|
|
|
|
Earnings
|
46.9
|
34.7
|
94.7
|
60.4
|
Items not involving
cash:
|
|
|
|
|
|
Depreciation of capital
assets
|
18.4
|
16.8
|
53.2
|
49.3
|
Amortization of
intangible assets
|
6.8
|
6.5
|
20.2
|
19.3
|
Amortization of right
of use assets
|
9.5
|
7.9
|
26.8
|
23.5
|
Accretion of lease
obligations
|
5.1
|
3.7
|
13.9
|
11.1
|
Change in value of
puttable interest in subsidiaries
|
-
|
0.5
|
0.5
|
(3.8)
|
Equity loss in
investments in associates
|
0.8
|
0.3
|
5.7
|
2.1
|
Change in fair value of
option liabilities
|
2.6
|
-
|
26.9
|
-
|
Non-cash financing
costs
|
1.6
|
1.4
|
4.3
|
3.9
|
Accretion of
provisions
|
1.8
|
2.4
|
5.4
|
6.0
|
Deferred income taxes
(recovery)
|
(0.5)
|
6.9
|
(20.7)
|
2.0
|
Acquisition bargain
purchase gain
|
-
|
-
|
(1.8)
|
-
|
Provisions not
earned
|
-
|
-
|
-
|
(2.0)
|
Other
|
-
|
-
|
-
|
0.1
|
|
93.0
|
81.1
|
229.1
|
171.9
|
Change in non-cash
working capital
|
(39.2)
|
57.4
|
(141.7)
|
53.9
|
|
53.8
|
138.5
|
87.4
|
225.8
|
|
Cash flows from (used
in) financing activities:
|
|
Long-term debt,
net
|
10.1
|
(125.1)
|
283.8
|
(68.3)
|
Payments for lease
obligations
|
(14.5)
|
(10.3)
|
(37.0)
|
(30.3)
|
Bank indebtedness and
cheques outstanding
|
(1.3)
|
(10.9)
|
2.5
|
(24.6)
|
Dividends paid to
shareholders
|
(27.7)
|
(21.7)
|
(80.6)
|
(63.1)
|
Repayment of
convertible debentures
|
-
|
(5.4)
|
-
|
(5.4)
|
Proceeds from issuance
of convertible debentures -net of
issuance
costs
|
-
|
143.5
|
-
|
143.5
|
Common shares issued as
a result of public offering and
concurrent
private placement – net of issuance costs
|
-
|
165.2
|
-
|
165.2
|
|
(33.4)
|
135.3
|
168.7
|
117.0
|
|
Cash flows from (used
in) investing activities:
|
|
|
|
|
|
Capital asset
additions
|
(31.4)
|
(22.1)
|
(100.0)
|
(70.9)
|
Business
acquisitions
|
(6.1)
|
(43.4)
|
(185.1)
|
(56.4)
|
Payment of
provisions
|
(8.4)
|
(8.9)
|
(14.7)
|
(15.9)
|
Proceeds from
sale-leaseback
|
-
|
-
|
150.0
|
6.4
|
Net change in share
purchase loans and notes receivable
|
0.2
|
1.3
|
0.7
|
2.1
|
Payments to
shareholders of non-wholly owned subsidiaries
|
-
|
(0.4)
|
(0.6)
|
(1.0)
|
Payment for settlement
of puttable interest of non-wholly
owned
subsidiary
|
(0.7)
|
(21.5)
|
(0.9)
|
(21.5)
|
Investment in and
advances to associates – net of
distributions
|
26.7
|
(0.7)
|
(443.6)
|
(11.3)
|
|
(19.7)
|
(95.7)
|
(594.2)
|
(168.5)
|
|
|
Change in cash and
cash equivalents
|
0.7
|
178.1
|
(338.1)
|
174.3
|
Cash and cash
equivalents – beginning of period
|
24.2
|
14.6
|
363.0
|
18.4
|
|
|
|
|
|
Cash and cash
equivalents – end of period
|
24.9
|
192.7
|
24.9
|
192.7
|
|
|
|
|
|
|
|
|
|
|
Interest and other
financing costs paid
|
7.6
|
6.9
|
27.4
|
27.6
|
Income taxes
paid
|
6.2
|
1.1
|
29.2
|
10.7
|
NON-IFRS FINANCIAL MEASURES
The Company uses certain non-IFRS financial measures including
adjusted EBITDA, free cash flow, adjusted earnings and adjusted
earnings per share, which are not defined under IFRS and, as a
result, may not be comparable to similarly titled measures
presented by other publicly traded entities, nor should they be
construed as an alternative to other earnings measures determined
in accordance with IFRS. These non-IFRS measures are
calculated as follows:
Adjusted EBITDA
(in millions of
dollars)
|
13 weeks
ended
Sep 25,
2021
|
13 weeks
ended
Sep 26,
2020
|
39 weeks
ended
Sep 25,
2021
|
39 weeks
ended
Sep 26,
2020
|
Earnings before
income taxes
|
64.5
|
43.4
|
129.1
|
76.5
|
Plant start-up and
restructuring costs
|
-
|
0.7
|
1.0
|
6.2
|
Depreciation of
capital assets
|
18.4
|
16.8
|
53.2
|
49.3
|
Amortization of
intangible assets
|
6.8
|
6.5
|
20.2
|
19.3
|
Amortization of right
of use assets
|
9.5
|
7.9
|
26.8
|
23.5
|
Accretion of lease
obligations
|
5.1
|
3.7
|
13.9
|
11.1
|
Interest and other
financing costs
|
11.7
|
9.9
|
33.0
|
32.4
|
Change in fair value
of option liabilities
|
2.6
|
-
|
26.9
|
-
|
Acquisition
transaction costs
|
1.4
|
1.4
|
5.8
|
4.3
|
Change in value of
puttable interest in subsidiaries
|
-
|
0.5
|
0.5
|
(3.8)
|
Accretion of
provisions
|
1.8
|
2.4
|
5.4
|
6.0
|
Equity loss in
investments in associates
|
0.8
|
0.3
|
5.7
|
2.1
|
Clearwater closing
risk fee
|
-
|
-
|
(2.4)
|
-
|
Acquisition bargain
purchase gain
|
-
|
-
|
(1.8)
|
-
|
Provisions not
earned
|
-
|
-
|
-
|
(2.0)
|
Adjusted
EBITDA
|
122.6
|
93.5
|
317.3
|
224.9
|
Free Cash Flow
(in millions of
dollars)
|
52 weeks
ended
Dec 26,
2020
|
39 weeks
ended
Sep 25,
2021
|
39 weeks
ended
Sep 26,
2020
|
Rolling
Four
Quarters
|
Cash flow from
operating activities
|
227.3
|
87.4
|
225.8
|
88.9
|
Changes in non-cash
working capital
|
15.6
|
141.7
|
(53.9)
|
211.2
|
Lease obligation
payments
|
(40.8)
|
(37.0)
|
(30.3)
|
(47.5)
|
Business acquisition
transaction costs
|
5.6
|
5.8
|
4.3
|
7.1
|
Clearwater closing
risk fee
|
-
|
(2.4)
|
-
|
(2.4)
|
Plant start-up and
restructuring costs
|
8.2
|
1.0
|
6.2
|
3.0
|
Income taxes on sale
and leaseback transaction
|
-
|
15.5
|
-
|
15.5
|
Maintenance capital
expenditures
|
(27.1)
|
(22.0)
|
(18.9)
|
(30.2)
|
Free cash
flow
|
188.8
|
190.0
|
133.2
|
245.6
|
Declared
dividends
|
|
|
|
108.2
|
Payout
ratio
|
|
|
|
44.1%
|
Adjusted Earnings and Adjusted Earnings per Share
(in millions of
dollars except per share amounts)
|
13 weeks
ended
Sep 25,
2021
|
13 weeks
ended
Sep 26,
2020
|
39 weeks
ended
Sep 25,
2021
|
39 weeks
ended
Sep 26,
2020
|
Earnings
|
46.9
|
34.7
|
94.7
|
60.4
|
Plant start-up and
restructuring costs
|
-
|
0.7
|
1.0
|
6.2
|
Business acquisition
transaction costs
|
1.4
|
1.4
|
5.8
|
4.3
|
Accretion of
provisions
|
1.8
|
2.4
|
5.4
|
6.0
|
Provisions not
earned
|
-
|
-
|
-
|
(2.0)
|
Equity loss from
associates in start-up
|
0.8
|
0.3
|
5.7
|
2.1
|
Change in value of
puttable interest in subsidiaries
|
-
|
0.5
|
0.5
|
(3.8)
|
Amortization of
intangibles associated with acquisitions
|
6.8
|
6.5
|
20.2
|
19.3
|
Change in fair value
of option liabilities
|
2.6
|
-
|
26.9
|
-
|
Clearwater closing
risk fee
|
-
|
-
|
(2.4)
|
-
|
Acquisition bargain
purchase gain
|
-
|
-
|
(1.8)
|
-
|
|
60.3
|
46.5
|
156.0
|
92.5
|
Current and deferred
income tax effect of above items, and
unusual tax recovery
|
(2.5)
|
(4.5)
|
(13.4)
|
(9.4)
|
Adjusted
earnings
|
57.8
|
42.0
|
142.6
|
83.1
|
Weighted average
shares outstanding
|
43.5
|
39.2
|
43.5
|
38.0
|
Adjusted earnings per
share
|
1.33
|
1.07
|
3.28
|
2.19
|
FORWARD LOOKING STATEMENTS
This press release contains forward looking statements with
respect to the Company, including, without limitation, statements
regarding its business operations, strategy and financial
performance and condition, cash distributions, proposed
acquisitions, budgets, projected costs and plans and objectives of
or involving the Company. While management believes that the
expectations reflected in such forward looking statements are
reasonable and represent the Company's internal expectations and
belief as of November 4, 2021, there
can be no assurance that such expectations will prove to be correct
as such forward looking statements involve unknown risks and
uncertainties beyond the Company's control which may cause its
actual performance and results in future periods to differ
materially from any estimates or projections of future performance
or results expressed or implied by such forward looking
statements.
Forward looking statements generally can be identified by the
use of the words "may", "could", "should", "would", "will",
"expect", "intend", "plan", "estimate", "project", "anticipate",
"believe" or "continue", or the negative thereof or similar
variations. Forward looking statements in this press release
include statements with respect to the Company's expectations
and/or projections on its: (i) revenue; (ii) adjusted EBITDA; (iii)
plant start-up and restructuring costs; (iv) income tax rates; (v)
dividend policy; (vi) capital expenditures and business
acquisitions; (vii) senior debt capacity utilization; (viii)
convertible debentures; (ix) impacts of the COVID-19 pandemic; *
liquidity outlook; (xi) equity earnings or loss in investment in
associates; and (xii) 5 year plan.
Some of the factors that could cause actual results to differ
materially from the Company's expectations are outlined in the
Company's MD&A for the 13 and 39 Weeks Ended September 25, 2021.
Assumptions used by the Company to develop forward looking
statements contained or incorporated by reference in this press
release are based on information currently available to it and
include those outlined below as well as those outlined elsewhere in
this press release. Readers are cautioned that this
information is not exhaustive.
- The general economic conditions in Canada and the
United States will return to pre-pandemic levels in the
medium term and will continue to show steady improvement in the
short term as pandemic related restrictions are eased.
- The Company's businesses impacted by the pandemic will recover
from the resulting disruptions in the medium term and, to the
extent there are ongoing changes in their operating costs resulting
from the crisis, will be able to recover these through increased
selling prices.
- The Company's organic growth initiatives will progress in line
with previous expectations post the pandemic.
- The average cost of the basket of food commodities purchased by
the Company will stabilize and start to moderate in the short to
medium term relative to recent increased volatility and
inflationary trends.
- The value of the Canadian dollar relative to the U.S. dollar
will continue to fluctuate in line with the levels seen over the
last several months.
- The Company will be able to access sufficient skilled and
unskilled labor at reasonable wage levels.
- The Company's major capital projects, plant start-up and
restructuring, and business acquisition initiatives will progress
in line with its expectations.
- The Company will be able to access sufficient goods and
services for its manufacturing and distribution operations.
- The Company will be able to achieve its projected operating
efficiency improvements.
- There will not be any material changes in the competitive
environment of the markets in which the Company's various
businesses compete.
- There will not be any material changes in the long-term food
trends that have been driving growth in many of the Company's
businesses. These include: (i) growing demand for higher
quality foods made with simpler more wholesome ingredients and/or
with differentiating attributes such as antibiotic free, no added
hormones or use of organic ingredients; (ii) increased reliance on
convenience oriented foods both for on-the-go snacking as well as
easy home meal preparation; (iii) healthier eating including
reduced sugar consumption and increased emphasis on protein and
seafood; (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.
- The Company will be able to negotiate new collective agreements
with no labor disruptions.
- The Company will be able to access reasonably priced debt and
equity capital.
- The Company's average interest cost on floating rate debt will
remain relatively stable in the near to medium future.
- Contractual counterparties will continue to fulfill their
obligations to the Company.
- There will be no material changes to the tax and other
regulatory requirements governing the Company.
Management has set out the above summary of assumptions related
to forward looking statements included in this press release in
order to provide a more complete perspective on the Company's
future operations. Readers are cautioned that these
statements may not be appropriate for other purposes.
Unless otherwise indicated, the forward looking statements in
this press release are made as of November
4, 2021 and, except as required by applicable law, will not
be publicly updated or revised. This cautionary statement
expressly qualifies the forward looking statements in this press
release.
SOURCE Premium Brands Holdings Corporation