VANCOUVER, BC, March 10, 2022 /CNW/ - Premium Brands Holdings
Corporation (TSX: PBH), a leading producer, marketer and
distributor of branded specialty food products, announced today its
results for the fourth quarter of 2021.
FOURTH QUARTER HIGHLIGHTS
- Record fourth quarter revenue of $1.35
billion representing a 27.4%, or $289.2 million, increase as compared to the
fourth quarter of 2020
- Record fourth quarter adjusted EBITDA1 of
$113.4 million representing a 29.3%,
or $25.7 million, increase as
compared to the fourth quarter of 2020
- Record fourth quarter adjusted EPS1 of $1.19 per share representing a 38.4%, or
$0.33 per share increase as compared
to the fourth quarter of 2020
- Clearwater Seafoods, which is accounted for using the equity
method, continued to generate significantly improved results
posting quarterly sales and adjusted EBITDA of $141.7 million and $26.9
million, respectively, as compared to $128.6 million and $22.7
million, respectively in the fourth quarter of 2020
- 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 increased its quarterly
dividend by 10.2% to $0.70 per share
or $2.80 per share on an annualized
basis
- Also subsequent to the quarter, the Company completed the
acquisitions of: (i) Beechgrove Country Foods, an Ontario based manufacturer of dry cured and
cooked protein products; (ii) Leonetti's Frozen Foods, a
Pennsylvania based manufacturer of
premium handheld enrobed sandwiches; and (iii) Rocky Mountain
Flatbread, a British Columbia
based artisan pizza business. In addition, the Company increased
its ownership position in California-based artisan breads manufacturer
Shaw Bakers from 50% to 73.72%
- Also subsequent to the quarter, the Company issued its sales
and adjusted EBITDA guidance for 2022 with its sales expected to be
in the range of $5.60 billion to
$5.85 billion and its adjusted
EBITDA1 to be in the range of $510 million and $530
million
2021 HIGHLIGHTS
- Record revenue of $4.93 billion
representing a 21.2%, or $862.8
million, increase as compared to 2020
- Record adjusted EBITDA1 of $430.7 million representing a 37.8%, or
$118.1 million, increase as compared
to 2020
- Record adjusted EPS1 of $4.48 per share representing a 46.9%, or
$1.43 per share increase as compared
to the fourth quarter of 2020
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 fourth
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 www.premiumbrandsholdings.com.
Access to the call may be obtained by calling the operator at
(833) 300-9218 / (647) 689-4551 (Conference ID: 4991117) 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
March 24, 2022 at (855) 859-2056
/ (404) 537-3406 (passcode: 4991117). Alternatively, a recording of
the conference call will be available at the Company's website at
www.premiumbrandsholdings.com.
SUMMARY FINANCIAL INFORMATION
(In millions of
dollars except per share amounts and ratios)
|
|
|
13
weeks ended Dec 25, 2021
|
13
weeks ended Dec 26, 2020
|
52
weeks ended Dec 25, 2021
|
52
weeks ended Dec 26, 2020
|
Revenue
|
|
|
1,345.4
|
1,056.2
|
4,931.7
|
4,068.9
|
Adjusted
EBITDA1
|
|
|
113.4
|
87.7
|
430.7
|
312.6
|
Earnings
|
|
|
38.0
|
23.3
|
132.7
|
83.7
|
EPS1
|
|
|
0.87
|
0.57
|
3.05
|
2.16
|
Adjusted
earnings1
|
|
|
52.2
|
35.3
|
194.8
|
118.4
|
Adjusted
EPS1
|
|
|
1.19
|
0.86
|
4.48
|
3.05
|
Free cash
flow1
|
|
|
263.3
|
188.8
|
Declared
dividends
|
|
|
111.5
|
92.0
|
Declared dividend per
share
|
|
|
2.5400
|
2.3100
|
Payout
ratio1
|
|
|
42.3%
|
48.7%
|
1
|
Reconciliations
for all non-IFRS measures are included in the Non-IFRS Financial
Measures section of this press release.
|
"2021 was a very challenging year for our industry and for many
of our businesses. A once in a century pandemic,
unprecedented raw material cost inflation, persistent supply chain
disruptions and acute labor shortages created the perfect storm,"
said Mr. George Paleologou.
"Despite these challenges we were able to generate our
18th consecutive year of record financial results while
also making many strategic investments that well position us for
the future. I have no doubt that our continued success is due
to the combination of the incredibly talented people that run our
businesses and our decentralized, entrepreneurial focused culture
that enables them to respond to challenges with agility and
creativity.
"The operating environment in the fourth quarter was
particularly difficult with cost inflation and supply chain
disruptions hitting peak levels for the year and the emergence of
the Omicron variant towards the end of the quarter resulting in
significant employee absenteeism and further government mandated
restrictions on the foodservice industry. Our businesses once
again responded with a variety of strategies, including proactive
inventory management and selling price increases, however, due to
the severity of the challenges, our results were negatively
impacted. Nevertheless, we were still able to generate
another quarter of record performance.
"Looking to the future, we made exceptional progress in 2021 in
moving towards our goal of becoming North
America's leading specialty food company having made
significant capital allocations in all our platforms including
major investments in acquisitions, capacity, automation and product
innovation. In the short term, a number of these initiatives
are not yet meeting our long-term targeted returns due to our
investments being based on ten-year plus business plans, but we are
very pleased with how they are progressing, and in particular with
how our Seafood Platform is quickly becoming a leading player in
the global seafood arena with its proprietary access to
best-in-class resources, full value-chain vertical integration,
best-in-class and dedicated management team and a unique and
historic partnership with several Mi'kmaq First Nations.
"Based on the momentum generated and investments made in 2021,
we are confident that we will exceed our objective of $6 billion in sales and $600 million in adjusted EBITDA by 2023 and look
forward to presenting our next five-year plan later this year,"
added Mr. Paleologou.
FIRST QUARTER 2022 DIVIDEND
The Company announced that it will be increasing its quarterly
dividend by 10.2% to $0.70 per share
or $2.80 per share on an annualized
basis. Correspondingly, the Company's Board of Directors
approved a cash dividend of $0.70 per
share for the first quarter of 2022, which will be payable on
April 15, 2022 to shareholders of
record at the close of business on March 31,
2022.
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 Holdings Corporation owns a broad range of
leading specialty food manufacturing and differentiated food
distribution businesses with operations across Canada and the United States. For
further information, please contact George
Paleologou, President and CEO or Will Kalutycz, CFO at (604) 656-3100.
www.premiumbrandsholdings.com
RESULTS OF OPERATIONS
The Company reports on two reportable segments, Specialty Foods
and Premium Food Distribution, as well as non-segmented 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 Dec
25, 2021
|
%
(1)
|
13
weeks ended Dec
26, 2020
|
%
(1)
|
52
weeks ended Dec
25, 2021
|
%
(1)
|
52
weeks ended Dec
26, 2020
|
%
(1)
|
Revenue by
segment:
|
|
|
|
|
|
|
|
|
Specialty
Foods
|
779.4
|
57.9%
|
678.1
|
64.2%
|
2,987.1
|
60.6%
|
2,667.3
|
65.6%
|
Premium Food
Distribution
|
566.0
|
42.1%
|
378.1
|
35.8%
|
1,944.6
|
39.4%
|
1,401.6
|
34.4%
|
Consolidated
|
1,345.4
|
100.0%
|
1,056.2
|
100.0%
|
4,931.7
|
100.0%
|
4,068.9
|
100.0%
|
(1) Expressed as a percentage
of consolidated revenue.
|
Specialty Foods' (SF) revenue for the quarter increased by
$101.3 million or 14.9% primarily due
to: (i) selling price inflation of $41.6
million, which was driven by increases implemented in
reaction to inflationary pressures across a broad range of raw
materials; (ii) organic volume growth of $41.2 million representing an organic volume
growth rate (OVGR) of 6.1% – after adjusting for transitory
pandemic related impacts of approximately $1.9 million, SF's normalized OVGR is 5.8%; (iii)
business acquisitions, which accounted for $29.8 million of SF's growth; and (iv) the
reclassification of $2.6 million of
promotion costs to selling, general and administrative
expense. These factors were partially offset by a
$13.9 million reduction in the
translated value of sales generated by SF's U.S. based businesses
due to a stronger Canadian dollar – approximately 52.3% of SF's
revenue for the quarter was generated by these businesses.
SF's normalized OVGR of 5.8% 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 at
the top end of the long-term targeted range of 4% to 6%, it was
lower than potential due to: (i) approximately $29.4 million in lost sales opportunities caused
by supply chain disruptions and labor shortages that resulted in
lower than normal customer order fill rates by the segment's U.S.
meat snack and sandwich businesses – adjusting for these, SF's
normalized OVGR is 10.1%; and (ii) less featuring of branded
products in the retail channel by the SF's Canadian protein
businesses, which was done on a temporary basis to mitigate the
margin impact of record increases in the cost of a variety of raw
materials while selling price increases were being implemented.
SF's revenue for 2021 increased by $319.8
million or 12.0% primarily due to: (i) organic volume growth
of 9.6% or approximately 8.3% after normalizing for the estimated
impacts of the pandemic; (ii) net selling price inflation of
$103.2 million; and (iii) business
acquisitions, which accounted for $62.4
million of the increase; partially offset by a $103.6 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 $187.9 million or 49.7%
due to: (i) business acquisitions, which accounted for $89.5 million of PFD's growth; (ii) selling price
inflation of $69.7 million, which was
driven by increases implemented in reaction to inflationary
pressures across a broad range of procured products and raw
materials; and (iii) organic volume growth of $33.9 million representing an OVGR of 9.0% –
after adjusting for transitory pandemic related impacts of
approximately $29.4 million, PFD's
normalized OVGR is 1.2%. These factors were partially offset
by a $5.2 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 1.2% is below its long-term target of
4.0% to 6.0% primarily due to: (i) approximately $10.1 million in lost sales opportunities caused
by supply chain disruptions that resulted in reduced lobster
exports to Asia and lower than
normal customer order fill rates – adjusting for these, PFD's
normalized OVGR is 3.9%, which was driven by a variety of factors
including the continued development of new supply and product
solutions for the retail channel; and (ii) continuing impacts of
pandemic related restrictions on the foodservice channel – as a
result PFD's foodservice businesses are still in recovery mode and
are not yet generating organic growth in this channel relative to
their 2019 sales levels.
PFD's revenue for 2021 increased by $543.0 million or 38.7% primarily due to: (i)
business acquisitions, which accounted for $295.4 million of the increase; (ii) net selling
price inflation of $203.9 million;
and (iii) organic volume growth of 5.1% or approximately 2.4% after
normalizing for the estimated impacts of the pandemic; partially
offset by a $27.1 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 Dec
25, 2021
|
%
(1)
|
13
weeks ended Dec
26, 2020
|
%
(1)
|
52
weeks ended Dec
25, 2021
|
%
(1)
|
52
weeks ended Dec
26, 2020
|
%
(1)
|
Gross profit by
segment:
|
|
|
|
|
|
|
|
|
Specialty
Foods
|
150.3
|
19.3%
|
144.3
|
21.3%
|
606.5
|
20.3%
|
567.9
|
21.3%
|
Premium Food
Distribution
|
83.8
|
14.8%
|
57.8
|
15.3%
|
295.4
|
15.2%
|
212.3
|
15.1%
|
Consolidated
|
234.1
|
17.4%
|
202.1
|
19.1%
|
901.9
|
18.3%
|
780.2
|
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 200 basis points primarily due to: (i)
significantly higher costs for a broad range of raw materials,
which exceeded SF's selling price increases due mainly to many of
these taking effect part way through the quarter – adjusting for a
full quarter's impact of price increases implemented during the
quarter, SF's normalized gross margin is approximately 21.1%; (ii)
wage, freight and general cost inflation; and (iii) 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; and (ii) the reclassification of $3.1 million in costs to selling, general and
administrative expenses.
SF's gross margin for 2021 decreased by 100 basis points
primarily due to the factors outlined above partially offset by:
(i) 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; and (ii) plant
production efficiency improvements in the first three quarters of
2021, driven by automation and improved throughputs.
PFD's gross margin for the quarter decreased by 50 basis points
primarily due to: (i) significantly higher costs for a broad range
of procured products and raw materials. PFD was able to more
than offset these increased costs with selling price increases (in
general, PFD's businesses have much more dynamic pricing structures
relative to SF's businesses) 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; (ii)
wage, freight and general cost inflation; and (iii) 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 its
organic growth; and (ii) higher margins generated by recently
acquired businesses.
PFD's gross margin for 2021 increased by 10 basis points
primarily due to unusually low margins on certain live seafood
products in the first quarter of 2020 because of pandemic related
demand destruction in Asia
partially offset by the net impact of the factors outlined
above.
Selling, General and Administrative Expenses
(SG&A)
(in millions of
dollars except percentages)
|
|
13
weeks ended Dec
25, 2021
|
%
(1)
|
13
weeks ended Dec
26, 2020
|
%
(1)
|
52
weeks ended Dec
25, 2021
|
%
(1)
|
52
weeks ended Dec
26, 2020
|
%
(1)
|
SG&A by
segment:
|
|
|
|
|
|
|
|
|
Specialty
Foods
|
87.1
|
11.2%
|
77.3
|
11.4%
|
342.0
|
11.4%
|
320.2
|
12.0%
|
Premium Food
Distribution
|
43.3
|
7.7%
|
31.2
|
8.3%
|
161.8
|
8.3%
|
128.6
|
9.2%
|
Corporate
|
5.0
|
|
6.1
|
|
21.1
|
|
21.1
|
|
Consolidated
|
135.4
|
10.1%
|
114.6
|
10.9%
|
524.9
|
10.6%
|
469.9
|
11.5%
|
Interest Income from
Investments
|
(14.7)
|
|
(0.2)
|
|
(53.7)
|
|
(2.3)
|
|
(1) Expressed as a percentage
of the corresponding segment's revenue.
|
SF's SG&A for the quarter increased by $9.8 million primarily due to: (i) freight and
wage inflation; (ii) business acquisitions; (iii) additional
variable selling costs associated with SF's organic growth; and
(iv) the reclassification of $3.1
million in costs from cost of sales. These factors
were partially offset by: (i) lower incentive-based compensation;
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 for 2021 increased by $21.8
million primarily due to the factors outlined above,
partially offset by 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 earlier in 2021 as
a transitory measure to manage the margin impact of record high
cost inflation across a broad range of raw materials.
SF's SG&A as a percentage of sales (SG&A ratio) for the
quarter and for 2021 decreased by 20 basis points and 60 basis
points, respectively, primarily due to: (i) sales leveraging; (ii)
lower incentive-based compensation; and (iii) reduced discretionary
marketing costs. These factors were partially offset by: (i)
freight and wage inflation; and (ii) the reclassification of
$3.1 million in costs from cost of
sales.
PFD's SG&A for the quarter increased by $12.1 million primarily due to: (i) business
acquisitions; (ii) additional variable and infrastructure costs
associated with PFD's organic growth; and (iii) higher
incentive-based compensation.
PFD's SG&A for 2021 increased by $33.2 million primarily due to the factors
outlined above partially offset by pandemic related travel cost
savings and government wage subsidies earlier in 2021.
PFD's SG&A ratios for the quarter and for 2021 decreased by
60 basis points and 90 basis points, respectively, primarily due
to: (i) sales leveraging; and (ii) PFD's recently acquired
businesses having lower SG&A ratios relative to its
average.
Interest income from investments in associates for the quarter
and for 2021 increased by $14.5
million and $51.4 million,
respectively, 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 Dec
25, 2021
|
%
(1)
|
13
weeks ended Dec
26, 2020
|
%
(1)
|
52
weeks ended Dec
25, 2021
|
%
(1)
|
52
weeks ended Dec
26, 2020
|
%
(1)
|
Adjusted EBITDA by
segment:
|
|
|
|
|
|
|
|
|
Specialty
Foods
|
63.2
|
8.1%
|
67.0
|
9.9%
|
264.5
|
8.9%
|
247.7
|
9.3%
|
Premium Food
Distribution
|
40.5
|
7.2%
|
26.6
|
7.0%
|
133.6
|
6.9%
|
83.7
|
6.0%
|
Corporate
|
(5.0)
|
|
(6.1)
|
|
(21.1)
|
|
(21.1)
|
|
Interest Income
from
Investments
|
14.7
|
|
0.2
|
|
53.7
|
|
2.3
|
|
Consolidated
|
113.4
|
8.4%
|
87.7
|
8.3%
|
430.7
|
8.7%
|
312.6
|
7.7%
|
(1) Expressed as a percentage
of the corresponding segment's revenue.
|
The Company's adjusted EBITDA for the quarter of $113.4 million, while being up $25.7 million or 29.3% as compared to the fourth
quarter of 2020, was significantly below what it would have been in
a normal operating environment. The three primary challenges
impacting the Company's fourth quarter adjusted EBITDA were: (i)
lost sales opportunities caused by supply chain disruptions and
labor shortages; (ii) delays in the timing of selling price
increases implemented to address significant cost inflation; and
(iii) the ongoing impacts of the pandemic. Correspondingly,
the Company's adjusted EBITDA margin for the quarter of 8.4% was
below its long-term target of 10%. Adjusting for the three
challenges outlined above, the Company's normalized EBITDA margin
is in line with its long-term target.
The Company's adjusted EBITDA for 2021 of $430.7 million is in line with its previously
provided guidance range of $423.0
million to $436.5
million. Its adjusted EBITDA margin for 2021 of 8.7%
was, however, lower than expected due to: (i) higher than planned
selling price inflation – correspondingly the Company's sales for
2021 of $4.93 billion were above its
guidance range of $4.70 billion to
$4.85 billion; and (ii) lower than
expected margins in its SF segment as a result of significant raw
materials cost inflation.
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 2021, the Company incurred $2.1
million in plant start-up and restructuring costs relating
to a variety of projects, including a 42,000 square foot expansion
of the Company's artisan bakery in British Columbia.
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 Dec
31, 2021
|
13
weeks ended Dec
31, 2020
|
52
weeks ended Dec
31, 2021
|
52
weeks ended Dec
31, 2020
|
Clearwater:
|
Sales
|
141.7
|
128.6
|
532.9
|
468.6
|
Gross
profit
|
42.1
|
40.4
|
165.9
|
123.4
|
SG&A
|
15.2
|
17.7
|
50.9
|
48.6
|
|
26.9
|
22.7
|
115.0
|
74.8
|
Depreciation
|
13.7
|
11.1
|
40.4
|
38.0
|
Amortization
|
(0.3)
|
0.4
|
4.0
|
1.6
|
Interest – senior
debt
|
2.8
|
7.3
|
12.9
|
29.7
|
Income from
investments
|
1.5
|
0.5
|
3.4
|
5.6
|
Unrealized foreign
exchange (gain) loss
|
9.8
|
(9.8)
|
7.0
|
(4.4)
|
Other
|
-
|
-
|
-
|
1.2
|
|
(0.6)
|
13.2
|
47.3
|
3.1
|
Interest – shareholder
debt
|
11.6
|
-
|
44.0
|
-
|
Payments to
shareholders
|
5.3
|
-
|
28.8
|
-
|
Acquisition related
costs
|
1.3
|
2.4
|
13.9
|
3.4
|
Closing risk fee paid
to Premium Brands
|
-
|
-
|
2.4
|
-
|
Income tax
recoveries
|
(3.8)
|
(2.1)
|
(8.7)
|
(1.7)
|
Earnings
(loss)
|
(15.0)
|
12.9
|
(33.1)
|
1.4
|
Pre-close earnings
(loss) (1)
|
(9.0)
|
12.9
|
(13.3)
|
1.4
|
|
(6.0)
|
-
|
(19.8)
|
-
|
Ownership
|
50.0%
|
-
|
50.0%
|
-
|
Clearwater net equity
earnings (loss) (2)
|
(3.0)
|
-
|
(9.9)
|
-
|
Other net equity
earnings (loss)
|
0.9
|
0.1
|
2.1
|
(2.0)
|
Equity earnings
(loss) in investment in associates
|
(2.1)
|
0.1
|
(7.8)
|
(2.0)
|
(1)
|
Amount relates to
Clearwater earnings prior to acquisition on January 25, 2021 and
acquisition-related adjustments not included in Company's
equity loss in investments in associates.
|
(2)
|
Amount relates to
Company's equity loss in Clearwater from January 25,
2021.
|
Clearwater Seafoods Incorporated (Clearwater)
Clearwater's sales for the
fourth quarter and 2021 increased by $13.1
million and $64.3 million,
respectively primarily due to the easing of pandemic related
restrictions and a corresponding reopening of economies in
North America and Asia, which resulted in stronger demand and
higher pricing for most of the species sold by
Clearwater. This was partially offset by a stronger Canadian
dollar relative to the U.S. dollar and the Euro as a significant
portion of Clearwater's sales are
denominated in these currencies.
Clearwater's gross margin for
the quarter decreased by 170 basis points to 29.7% primarily due
to: (i) the impact on sales from a stronger Canadian dollar; (ii)
higher shore prices for procured products; (iii) the elimination of
pandemic related subsidies received in 2020; and (iii) freight
inflation. These factors were partially offset by: (i) the
stronger pricing environment as discussed above; and (ii) a more
disciplined selling strategy based on leveraging Clearwater's stronger financial
position.
Clearwater's gross margin for
2021 increased by 480 basis points to 31.1% primarily due: (i) the
positive factors impacting the fourth quarter being much more
pronounced in earlier quarters; (ii) operational efficiencies in
the first and second quarters, driven by larger and higher quality
catches, continuous improvement initiatives; and the reversal of
pandemic related inefficiencies experienced in 2020; and (iii)
leveraging the market intelligence and insights of the Company's
other seafood businesses. These factors were partially offset
by the negative factors outlined above.
Clearwater's SG&A for the
quarter decreased by $2.5 million
primarily due to a change in timing of when incentive-based
compensation is expensed; partially offset by: (i) increased
R&D expenses associated with a variety of harvesting,
production and product development projects; (ii) wage inflation;
and (iii) elimination of pandemic related subsidies.
Clearwater SG&A for 2021 increased by $2.3 million primarily due to: (i) higher annual
incentive-based compensation associated with its improved
performance; (ii) the reversal of pandemic related government
subsidies; and (iii) a variety of cost increases mainly relating to
wage inflation, R&D spending and additional staff.
Sales and Adjusted EBITDA Outlook
See Forward Looking Statements for a discussion of the
risks and assumptions associated with forward looking
statements.
2022
For 2022, the Company expects its sales to be between
$5.60 billion and $5.85 billion and its adjusted EBITDA to be
between $510.0 million and
$530.0 million. These estimates
are based on a range of assumptions (see Forward Looking
Statements) including: (i) continued easing of pandemic related
restrictions in Canada and the
U.S. and corresponding demand increases in the foodservice,
airline, and cruise line channels; (ii) stabilization of raw
material costs with some mild deflation in certain commodities in
the latter half of 2022; and (iii) stabilization of the Canadian
dollar relative to the U.S. dollar at current levels.
The Company's sales and adjusted EBITDA outlooks for 2022 do not
incorporate any provisions for potential future acquisitions but do
include acquisitions outlined in Subsequent Events of the
Company's Management Discussion & Analysis for the 13 and 52
weeks ended December 25, 2021.
5 Year Plan
The Company continues to make solid progress on the execution of
its growth and value creation strategies and is confident (see
Forward Looking Statements) that it will exceed its
five-year targets set in 2018 of $6
billion in sales and $600
million in adjusted EBITDA by 2023.
Premium Brands
Holdings Corporation
|
Consolidated Balance Sheets
|
(in millions of
Canadian dollars)
|
|
|
|
|
|
|
Dec
25, 2021
|
Dec
26, 2020
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
|
16.5
|
363.0
|
Accounts
receivable
|
|
521.7
|
387.0
|
Inventories
|
|
645.2
|
448.8
|
Prepaid expenses and
other assets
|
|
28.6
|
25.8
|
|
|
1,212.0
|
1,224.6
|
|
|
|
|
Capital
assets
|
|
617.3
|
524.9
|
Right of use
assets
|
|
464.5
|
328.5
|
Intangible
assets
|
|
526.3
|
517.9
|
Goodwill
|
|
1,001.2
|
853.4
|
Investment in and
advances to associates
|
|
568.8
|
74.2
|
Other assets
|
|
18.8
|
16.8
|
|
|
|
|
|
|
4,408.9
|
3,540.3
|
|
|
|
|
Current
liabilities:
|
|
|
|
Cheques
outstanding
|
|
18.7
|
19.1
|
Bank
indebtedness
|
|
16.3
|
-
|
Dividends
payable
|
|
28.4
|
25.2
|
Accounts payable and
accrued liabilities
|
|
445.5
|
369.3
|
Puttable interest in
subsidiaries
|
|
27.1
|
28.1
|
Current portion of
long-term debt
|
|
4.6
|
9.5
|
Current portion of
lease obligations
|
|
32.9
|
26.2
|
Current portion of
provisions
|
|
7.7
|
16.4
|
|
|
581.2
|
493.8
|
|
|
|
|
Long-term
debt
|
|
1,074.0
|
525.6
|
Lease
obligations
|
|
477.4
|
342.7
|
Deferred
revenue
|
|
2.8
|
2.8
|
Provisions
|
|
63.4
|
57.2
|
Deferred income
taxes
|
|
105.2
|
94.5
|
|
|
2,304.0
|
1,516.6
|
|
|
|
|
Convertible unsecured
subordinated debentures
|
|
331.0
|
425.7
|
|
|
|
|
Equity attributable to
shareholders:
|
|
|
|
Retained
earnings
|
|
35.6
|
11.2
|
Share
capital
|
|
1,713.3
|
1,569.7
|
Reserves
|
|
25.0
|
17.1
|
|
|
1,773.9
|
1,598.0
|
|
|
|
|
|
|
4,408.9
|
3,540.3
|
Premium Brands
Holdings Corporation
|
Consolidated Statements of Operations
|
(in millions of
Canadian dollars except per share amounts)
|
|
|
|
|
|
|
|
13 weeks
ended
Dec 25,
2021
|
13 weeks
ended
Dec 26,
2020
|
52 weeks
ended
Dec 25,
2021
|
52 weeks
ended
Dec 26,
2020
|
|
|
|
|
|
Revenue
|
1,345.4
|
1,056.2
|
4,931.7
|
4,068.9
|
Cost of goods
sold
|
1,111.3
|
854.1
|
4,029.8
|
3,288.7
|
Gross profit before
depreciation, amortization and plant start-up
and restructuring costs
|
234.1
|
202.1
|
901.9
|
780.2
|
|
|
|
|
|
Interest income from
investment in associates
|
14.7
|
0.2
|
53.7
|
2.3
|
Selling, general and
administrative expenses
|
135.4
|
114.6
|
524.9
|
469.9
|
Operating profit
before depreciation, amortization and plant start-
up and restructuring costs
|
113.4
|
87.7
|
430.7
|
312.6
|
|
|
|
|
|
Plant start-up and
restructuring costs
|
1.1
|
2.0
|
2.1
|
8.2
|
Depreciation of
capital assets
|
16.8
|
17.9
|
70.0
|
67.2
|
Amortization of
intangible assets
|
7.1
|
6.9
|
27.3
|
26.2
|
Amortization of right
of use assets
|
10.7
|
8.1
|
37.5
|
31.6
|
Accretion of lease
obligations
|
5.3
|
3.9
|
19.2
|
15.0
|
Interest and other
financing costs
|
8.3
|
10.6
|
41.3
|
43.0
|
Change in fair value
of option liabilities
|
3.1
|
-
|
30.0
|
-
|
Acquisition
transaction costs
|
1.9
|
1.3
|
7.7
|
5.6
|
Accretion of
provisions
|
1.9
|
2.5
|
7.3
|
8.5
|
Equity loss
(earnings) in investments in associates
|
2.1
|
(0.1)
|
7.8
|
2.0
|
Change in value of
puttable interest in subsidiaries
|
-
|
0.5
|
0.5
|
(3.3)
|
Clearwater closing
risk fee
|
-
|
-
|
(2.4)
|
-
|
Acquisition bargain
purchase gain
|
-
|
-
|
(1.8)
|
-
|
Provisions not
earned
|
-
|
-
|
-
|
(2.0)
|
Earnings before
income taxes
|
55.1
|
34.1
|
184.2
|
110.6
|
|
|
|
|
|
Provision for income
taxes
|
|
|
|
|
Current
|
11.2
|
4.2
|
66.3
|
18.3
|
Deferred
|
5.9
|
6.6
|
(14.8)
|
8.6
|
|
17.1
|
10.8
|
51.5
|
26.9
|
|
|
|
|
|
Earnings
|
38.0
|
23.3
|
132.7
|
83.7
|
|
|
|
|
|
Earnings per
share:
|
|
|
|
|
Basic
|
0.87
|
0.57
|
3.05
|
2.16
|
Diluted
|
0.87
|
0.57
|
3.04
|
2.15
|
|
|
|
|
|
Weighted average
shares outstanding (in millions):
|
|
|
|
|
Basic
|
43.7
|
41.3
|
43.5
|
38.8
|
Diluted
|
43.9
|
41.4
|
43.7
|
39.0
|
Premium Brands
Holdings Corporation
|
Consolidated Statements of Cash Flows
|
(in millions of
Canadian dollars)
|
|
|
|
|
|
|
|
13 weeks
ended
Dec 25,
2021
|
13 weeks
ended
Dec 26,
2020
|
52 weeks
ended
Dec 25,
2021
|
52 weeks
ended
Dec 26,
2020
|
|
|
|
|
|
|
Cash flows from (used
in) operating activities:
|
|
|
|
|
Earnings
|
38.0
|
23.3
|
132.7
|
83.7
|
Items not involving
cash:
|
|
|
|
|
Depreciation of
capital assets
|
16.8
|
17.9
|
70.0
|
67.2
|
Amortization of
intangible assets
|
7.1
|
6.9
|
27.3
|
26.2
|
Amortization of right
of use assets
|
10.7
|
8.1
|
37.5
|
31.6
|
Accretion of lease
obligations
|
5.3
|
3.9
|
19.2
|
15.0
|
Change in value of
puttable interest in subsidiaries
|
-
|
0.5
|
0.5
|
(3.3)
|
Equity loss (earnings)
in investment in associates
|
2.1
|
(0.1)
|
7.8
|
2.0
|
Change in fair value
of option liabilities
|
3.1
|
-
|
30.0
|
-
|
Non-cash financing
costs
|
0.1
|
1.5
|
4.4
|
5.4
|
Accretion of
provisions
|
1.9
|
2.5
|
7.3
|
8.5
|
Deferred income taxes
(recovery)
|
5.9
|
6.6
|
(14.8)
|
8.6
|
Acquisition bargain
purchase gain
|
-
|
-
|
(1.8)
|
-
|
Provisions not
earned
|
-
|
-
|
-
|
(2.0)
|
|
91.0
|
71.1
|
320.1
|
242.9
|
Change in non-cash
working capital
|
(112.1)
|
(69.6)
|
(253.8)
|
(15.6)
|
|
(21.1)
|
1.5
|
66.3
|
227.3
|
|
|
|
|
|
|
Cash flows from (used
in) financing activities:
|
|
|
|
|
Long-term debt,
net
|
263.0
|
(0.6)
|
546.8
|
(68.9)
|
Payments for lease
obligations
|
(13.4)
|
(10.5)
|
(50.4)
|
(40.8)
|
Bank indebtedness and
cheques outstanding
|
13.4
|
2.4
|
15.9
|
(22.2)
|
Dividends paid to
shareholders
|
(27.6)
|
(23.4)
|
(108.2)
|
(86.5)
|
Repayment of
convertible debentures
|
(8.0)
|
-
|
(8.0)
|
(5.4)
|
Proceeds from issuance
of convertible debentures – net of
issuance costs
|
-
|
-
|
-
|
143.5
|
Common shares issued
as a result of public offering and
concurrent private placement – net of
issuance costs
|
-
|
275.3
|
-
|
440.5
|
|
227.4
|
243.2
|
396.1
|
360.2
|
|
|
|
|
|
|
Cash flows from (used
in) investing activities:
|
|
|
|
|
Capital asset
additions
|
(43.2)
|
(21.7)
|
(143.2)
|
(92.6)
|
Business and asset
acquisitions
|
(174.6)
|
(52.6)
|
(359.7)
|
(109.0)
|
Payment of
provisions
|
-
|
-
|
(14.7)
|
(15.9)
|
Payments to
shareholders of non-wholly owned subsidiaries
|
-
|
-
|
(0.6)
|
(1.0)
|
Payment for settlement
of puttable interest of non-wholly
owned subsidiary
|
-
|
-
|
(0.9)
|
(21.5)
|
Net change in share
purchase loans and notes receivable
|
0.5
|
0.2
|
1.2
|
2.3
|
Investment in and
advances to associates – net of
distributions
|
2.6
|
(0.3)
|
(441.0)
|
(11.6)
|
Proceeds from
sale-leaseback
|
-
|
-
|
150.0
|
6.4
|
|
(214.7)
|
(74.4)
|
(808.9)
|
(242.9)
|
|
|
|
|
|
Change in cash and
cash equivalents
|
(8.4)
|
170.3
|
(346.5)
|
344.6
|
Cash and cash
equivalents – beginning of period
|
24.9
|
192.7
|
363.0
|
18.4
|
|
|
|
|
|
Cash and cash
equivalents – end of period
|
16.5
|
363.0
|
16.5
|
363.0
|
|
|
|
|
|
|
|
|
|
|
Interest and other
financing costs paid
|
13.0
|
7.9
|
40.4
|
35.5
|
Income taxes
paid
|
22.6
|
16.2
|
51.8
|
26.9
|
|
|
|
|
|
|
|
|
|
|
|
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 Dec
25, 2021
|
13
weeks ended Dec
26, 2020
|
52
weeks ended Dec
25, 2021
|
52
weeks ended Dec
26, 2020
|
Earnings before
income taxes
|
55.1
|
34.1
|
184.2
|
110.6
|
Plant start-up and
restructuring costs
|
1.1
|
2.0
|
2.1
|
8.2
|
Depreciation of
capital assets
|
16.8
|
17.9
|
70.0
|
67.2
|
Amortization of
intangible assets
|
7.1
|
6.9
|
27.3
|
26.2
|
Amortization of right
of use assets
|
10.7
|
8.1
|
37.5
|
31.6
|
Accretion of lease
obligations
|
5.3
|
3.9
|
19.2
|
15.0
|
Interest and other
financing costs
|
8.3
|
10.6
|
41.3
|
43.0
|
Change in fair value
of option liabilities
|
3.1
|
-
|
30.0
|
-
|
Acquisition
transaction costs
|
1.9
|
1.3
|
7.7
|
5.6
|
Accretion of
provisions
|
1.9
|
2.5
|
7.3
|
8.5
|
Equity loss
(earnings) in investments in associates
|
2.1
|
(0.1)
|
7.8
|
2.0
|
Change in value of
puttable interest in subsidiaries
|
-
|
0.5
|
0.5
|
(3.3)
|
Clearwater closing
risk fee
|
-
|
-
|
(2.4)
|
-
|
Acquisition bargain
purchase gain
|
-
|
-
|
(1.8)
|
-
|
Provisions not
earned
|
-
|
-
|
-
|
(2.0)
|
Adjusted
EBITDA
|
113.4
|
87.7
|
430.7
|
312.6
|
Free Cash Flow
(in millions of
dollars)
|
|
|
52
weeks ended Dec
25, 2021
|
52
weeks ended Dec
26, 2020
|
Cash flow from
operating activities
|
|
|
66.3
|
227.3
|
Changes in non-cash
working capital
|
|
|
253.8
|
15.6
|
Lease obligation
payments
|
|
|
(50.4)
|
(40.8)
|
Business acquisition
transaction costs
|
|
|
7.7
|
5.6
|
Clearwater closing
risk fee
|
|
|
(2.4)
|
-
|
Plant start-up and
restructuring costs
|
|
|
2.1
|
8.2
|
Income taxes on sale
and leaseback transaction
|
|
|
15.5
|
-
|
Maintenance capital
expenditures
|
|
|
(29.3)
|
(27.1)
|
Free cash
flow
|
|
|
263.3
|
188.8
|
Adjusted Earnings and Adjusted Earnings per Share
(in millions of
dollars except per share amounts)
|
13
weeks ended Dec
25, 2021
|
13
weeks ended Dec
26, 2020
|
52
weeks ended Dec
25, 2021
|
52
weeks ended Dec
26, 2020
|
Earnings
|
38.0
|
23.3
|
132.7
|
83.7
|
Plant start-up and
restructuring costs
|
1.1
|
2.0
|
2.1
|
8.2
|
Acquisition
transaction costs
|
1.9
|
1.3
|
7.7
|
5.6
|
Accretion of
provisions
|
1.9
|
2.5
|
7.3
|
8.5
|
Provisions not
earned
|
-
|
-
|
-
|
(2.0)
|
Equity loss
(earnings) from investments in associates
|
2.1
|
(0.1)
|
7.8
|
2.0
|
Change in value of
puttable interest in subsidiaries
|
-
|
0.5
|
0.5
|
(3.3)
|
Amortization of
intangibles associated with acquisitions
|
7.1
|
6.9
|
27.3
|
26.2
|
Change in fair value
of option liabilities
|
3.1
|
-
|
30.0
|
-
|
Clearwater closing
risk fee
|
-
|
-
|
(2.4)
|
-
|
Acquisition bargain
purchase gain
|
-
|
-
|
(1.8)
|
-
|
|
55.2
|
36.4
|
211.2
|
128.9
|
Current and deferred
income tax effect of above items, and
unusual tax recovery
|
(3.0)
|
(1.1)
|
(16.4)
|
(10.5)
|
Adjusted
earnings
|
52.2
|
35.3
|
194.8
|
118.4
|
Weighted average
shares outstanding
|
43.7
|
41.3
|
43.5
|
38.8
|
Adjusted earnings per
share
|
1.19
|
0.86
|
4.48
|
3.05
|
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, budpgets, 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 March 10, 2022, 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)
dividends and dividend policy; (vi) capital expenditures and
business acquisitions; (vii) senior debt capacity utilization;
(viii) convertible debentures; (ix) impacts of the 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 Management Discussion & Analysis for the 13 and 52
weeks ended December 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 document. 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 procured products and raw
materials 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 Company will be able to access sufficient skilled and
unskilled labor at reasonable wage levels.
- The Company will be able to access sufficient goods and
services for its manufacturing and distribution operations.
- The Russian Conflict will not: (i) materially impact the cost
of raw materials purchased by the Company or its ability to procure
them; or (ii) result in other retaliatory actions that adversely
impact the Company's operations or the operations of its customers
and suppliers.
- 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'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 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 March 10,
2022 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