VANCOUVER, BRITISH COLUMBIA–(Marketwire – Nov. 10, 2009) – 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 2009.
HIGHLIGHTS
- Revenue for the quarter was $123.4 million as compared to $123.4 million in the third quarter of 2008.
- EBITDA for the quarter was a record $13.2 million as compared to $11.7 million in the third quarter of 2008 and $11.5 million in the third quarter of 2007.
- Free cash flow for the rolling four quarters ended September 26, 2009 was $28.4 million as compared to declared distributions and dividends of $20.7 million.
- Earnings before costs associated with Premium Brands’ conversion to a corporation and unrealized gains and losses on foreign currency contracts for the quarter were $8.7 million versus $6.9 million in the third quarter of 2008.
- During the quarter Premium Brands completed a transaction by way of a plan of arrangement that resulted in its conversion from a publicly traded income trust to a publicly traded company.
- As part of its conversion to a corporation, Premium Brands renegotiated the terms of its senior credit facilities including extending the maturity date to July 2012, creating a new $10 million term facility to fund the costs of the conversion, and revising its financial covenants to provide it with increased financial flexibility.
- Subsequent to the quarter, the Company completed a $35.0 million offering of 7% convertible unsecured subordinated debentures, the proceeds of which are expected to be used to fund future acquisitions and capital projects.
“We are very pleased with our performance for the third quarter given the current challenging economic environment. Through continued growth in our businesses focusing on the grocery channel we were able to offset sales decreases in some of our more economically sensitive businesses, while our margins benefited from a combination of lower commodity input costs and other cost savings initiatives,” said Mr. George Paleologou, President and CEO.
“Looking forward, we are cautiously optimistic that we will continue to build on the positive momentum of the latter part of the third quarter. In addition, we expect to start seeing some of the positive impacts in the fourth quarter from Vancouver’s hosting of the 2010 Winter Olympics,” stated Mr. Paleologou. “Please see the Press Releases section under Investor Relations on our website for additional details on some of the initiatives we are putting into place in preparation for the Games,” added Mr. Paleologou.
On November 9, 2009 the Company completed a $35.0 million public offering of 7% convertible unsecured subordinated debentures resulting in net proceeds of $33.1 million after underwriting fees of $1.4 million and costs of approximately $0.5 million. As part of the offering, the Company granted the underwriters of the offering an option to purchase up to an additional $5.3 million of debentures, exercisable in whole or in part and at the sole discretion of the underwriters, at any time up until December 9, 2009.
“Our recent public offering of convertible unsecured subordinated debentures will significantly reduce our senior debt to EBITDA leverage and will provide us with additional capital to pursue our very successful acquisitions strategy,” stated Mr. Paleologou.
Premium Brands owns a broad range of leading branded specialty food businesses with manufacturing and distribution facilities located in British Columbia, Alberta, Saskatchewan, Manitoba and Washington State. In addition, it owns proprietary food distribution and wholesale networks through which it sells both its own products and those of third parties to approximately 25,000 customers. Premium Brands’ family of brands includes Grimm’s, Harvest, McSweeney’s, Bread Garden, Hygaard, Hempler’s, Quality Fast Foods, Gloria’s Best of Fresh, Harlan’s, Centennial Foodservice and B&C Foods.
Retail’s revenue for the third quarter of 2009 decreased by $1.8 million or 3.1% as compared to the third quarter of 2008 primarily due to a decrease of approximately $3.2 million in sales to convenience stores. The decrease in sales to convenience stores was the result of reduced consumer spending in this selling channel caused by a general slow down in the western Canadian economy. Partially offsetting this factor was continued organic growth in Retail’s sales to grocery format retailers.
Retail’s year-to-date revenue for 2009 as compared to 2008 decreased by $0.9 million or 0.6% due to a decrease in sales to convenience stores of approximately $5.7 million partially offset by $1.2 million in incremental sales resulting from business acquisitions and continued organic growth of its sales to grocery format retailers.
Foodservice’s revenue for the third quarter of 2009 increased by $1.8 million or 2.9% as compared to the third quarter of 2009. Acquisitions accounted for approximately $6.2 million of the increase and organic growth of its WorldSource food brokerage business for another $1.1 million. Partially offsetting these increases was a decrease in its sales to hotels and restaurants due to weaker economic conditions in western Canada that resulted in lower consumer sales in these venues and, to a lesser extent, lower average selling prices resulting from food cost deflation.
Foodservice’s year-to-date revenue for 2009 as compared to 2008 increased by $19.9 million due to business acquisitions, which accounted for $27.7 million of the increase, and organic growth of approximately $5.2 million in its WorldSource food brokerage business. These increases were partially offset by a decrease in sales to hotels and restaurants resulting from lower consumer sales in these venues.
Retail’s gross profit as a percentage of its revenue (“gross margin”) for the third quarter of 2009 as compared to the third quarter of 2008 increased by 3.1 percentage points primarily due to lower costs for a range of commodities used in the manufacturing of its products and, to a lesser extent, improved production efficiencies resulting from a combination of factors including the recent merger of its two Edmonton based sandwich production facilities.
Retail’s year-to-date gross margin for 2009 as compared to 2008 increased by 1.3 percentage points due to a variety of factors including lower costs for a range of commodities used in the manufacturing of its products, improved production efficiencies and lower freight costs.
Foodservice’s gross margin for the third quarter of 2009 as compared to the third quarter of 2008 decreased by 0.3 percentage points primarily due to changes in its sales mix resulting from the growth of its WorldSource food brokerage business and its acquisition of B&C Food Distributors in the latter half of 2008 (both of which generate lower margins relative to its legacy businesses) combined with the contraction of its higher margin hotel and restaurant sales as discussed above. Excluding the impact of the WorldSource and B&C businesses, Foodservice’s gross margin for the third quarter of 2009 as compared to the third quarter of 2008 was approximately 1.0 percentage points higher with the increase being due to a variety of factors including lower commodity input costs, improved product pricing and operational efficiencies.
Foodservice’s year-to-date gross margin for 2009 as compared to 2008 decreased by 2.0 percentage points primarily due to changes in its sales mix as discussed above. Excluding the impact of the WorldSource and B&C businesses, Foodservice’s year-to-date gross margin for 2009 as compared to 2008 was approximately 0.3 percentage points lower.
Retail’s selling, general and administrative expenses (“SG&A”) for the third quarter of 2009 as compared to the third quarter of 2008 decreased by $0.8 million due to a variety of factors including reduced sales commissions resulting from its lower convenience store sales (as the primary compensatio
n for sales people in this channel are sales based commissions) and reduced freight and fuel costs resulting from a general decrease in gas and diesel prices.
Retail’s year-to-date SG&A for 2009 as compared to 2008 was relatively flat at $31.4 million as reduced sales commissions resulting from its lower convenience store sales and reduced freight and fuel costs resulting from a general decrease in gas and diesel prices were offset by a variety of cost increases including higher promotional spending in the grocery sales channel.
Foodservice’s SG&A for the third quarter of 2009 as compared to the third quarter of 2008 increased by $0.6 million due primarily to business acquisitions partially offset by lower variable selling expenses resulting from its lower sales to hotels and restaurants.
The change in Foodservice’s year-to-date SG&A for 2009 as compared to 2008 reflects the same trends that impacted its SG&A expenses for the third quarter of 2009 as compared to the third quarter of 2008.
The Company’s adjusted EBITDA for the third quarter of 2009 as compared to the third quarter of 2008 increased by $1.5 million primarily due to:
- Disciplined product pricing strategies that enabled the Company to benefit from decreases in a range of commodity input costs;
- Continued organic growth in the grocery segment of the retail market and through its WorldSource food brokerage business;
- The successful implementation of the Company’s business acquisition and integration strategies; and
- The ongoing improvement in the efficiency of its manufacturing operations.
Partially offsetting these favourable factors was the continued impact of the challenging economic environment on the Company’s sales to convenience stores, restaurants and hotels.
Source: Premium Brands Holdings Corporation