CANADA: Premium Brands Inc. announces fourth quarter results and completion of fresh pork division divestiture
High North American hog prices resulted in significant losses in the Company's Fresh Pork Division. These losses, combined with a $10.6 million charge relating to the Vancouver plant labour dispute and the realignment of several plants' production lines, resulted in a net loss for the quarter of $7.3 million or $0.92 per share. For the year, the combination of the Fresh Pork Division's poor results and the $10.6 million charge resulted in a net loss of $5.8 million or $0.74 per share.
On April 17, 2001 the Company completed the sale of its Fresh Pork Division to Olymel S.E.C, a limited partnership, for proceeds of about $90 million. Premium will be recording an after tax gain on the transaction of approximately $23 million or $2.71 per share in the first quarter of 2001. In conjunction with the sale, Premium Brands and Olymel entered into a seven-year supply agreement which guarantees the Company's processed meat operations access to a supply of high quality fresh pork.
On April 11, 2001 the Company announced the signing of a five-year labour agreement with United Food and Commercial Workers Local 1518, which represents the Vancouver plant's unionized employees. The new agreement, in conjunction with a realignment of production at several of the Company's plants, is expected to generate benefits of approximately $3.5 million per year and will play a significant part in making the Vancouver facility a low cost producer of processed meat products.
"With the sale of the Fresh Pork Division and the settlement of the Vancouver plant labour dispute, our company is re-positioned for growth," said Fred Knoedler, President and CEO.
"Looking forward, our focus will be on building our branded consumer products and distribution businesses, both of which have a history of strong growth and expanding margins," stated Mr. Knoedler.
During the quarter, the Company's Distribution Division's sales increased by over 150% to $15.7 million while its gross profit increased to $5.3 million from $2.0 million in 1999. For the year, the Distribution Division's sales were up almost 100% to $47.0 million while its gross profit, as a percentage of sales, expanded to 37.1% from 32.5% in 1999.
The Prepared Foods Division's sales and gross profit for the quarter decreased by 10.3% and 15.3%, respectively, due to the Vancouver plant labour dispute and the sale of the Division's salad business earlier in the year. For the year, these factors resulted in a 1.2% and 6.9% decrease in the Division's sales and gross profit, respectively. Excluding the salad business's results for 1999 and 2000, the Prepared Foods Division would have shown a sales increase of $8.3 million or 4% and a gross profit decrease of 2.5%.
The Company's performance was also impacted by rising selling, general and administration costs that were almost entirely the result of increased overheads associated with the expansion of its proprietary distribution networks.
"The combination of our leading brands and unique proprietary distribution channels will enable us to continue growing at double digit rates and, as our distribution channels achieve critical mass, generate strong sustainable operating margins," said Will Kalutycz, CFO. "Furthermore, we see significant opportunities to create value for shareholders through strategic transactions," added Mr. Kalutycz.
After adjusting for losses associated with the Fresh Pork Division and the Company's new Goodlife Foods home delivery initiative, and normalizing for the effects of the Vancouver labour dispute, Premium Brands' earnings before interest, taxes, depreciation and amortization ("EBITDA") for fiscal 2000 would have been approximately $15 million.
"The benefits associated with the recently resolved Vancouver plant labour dispute combined with the strong growth opportunities of our various business units should enable us to significantly expand our EBITDA in 2001," stated Mr. Kalutycz.
"The sale of the Fresh Pork Division was a significant step in the Corporation's continuing process of reviewing strategic alternatives to create and maximize shareholder value," said Richard Klassen, Chairman of Premium Brands. "Our remaining businesses are now ideally positioned to benefit from current trends in the North American food industry," added Mr. Klassen.
Premium Brands has been engaged in the food processing business since 1917 and has manufacturing facilities in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Washington and Oregon.
CONSOLIDATED INCOME STATEMENT (in thousands of CDN dollars except earnings per share amounts) 13 week 12 week 53 week 52 week period period period period ended ended ended ended Dec 30, Dec 25, Dec 30, Dec 25, 2000 1999 2000 1999 (Unaudited) (Unaudited) (Audited) (Audited) Sales by division: Prepared Foods Division $51,471 $57,379 $229,407 $232,217 Distribution Division 15,667 6,181 46,984 23,683 Fresh Pork Division 58,617 43,232 225,299 182,100 125,755 106,792 501,690 438,000 Gross profit (loss) by division: Prepared Foods Division $13,545 $16,001 $52,864 $56,775 Distribution Division 5,302 2,016 17,425 7,686 Fresh Pork Division (22) 2,306 (4,350) 8,586 18,825 20,323 65,939 73,047 Expenses: Selling, general and administrative 20,032 14,908 66,928 56,326 Depreciation 2,372 1,748 10,177 8,321 Amortization 714 283 1,736 874 Interest 3,049 939 7,719 3,451 Equity earnings (591) 17 (2,076) (975) Gain on sale of assets 225 -- (2,214) -- Dilution gain on subsidiary's share issuance (888) 198 (8,795) -- Labour dispute and plant re-alignment costs 10,617 -- 10,617 -- Plant restructuring -- 6,767 -- 6,767 Non-controlling interest (883) (127) (749) (35) Earnings before income taxes (15,822) (4,409) (17,404) (1,682) Income taxes (8,488) (1,540) (11,609) (873) Net earnings (loss) (7,334) (2,869) (5,795) (809) Net earnings (loss) per share: Basic (0.92) (0.37) (0.74) (0.11) Fully diluted (0.92) (0.37) (0.74) (0.11) CONSOLIDATED BALANCE SHEET AMOUNTS (in thousands of CDN dollars) Dec 30, Dec 25, 2000 1999 (Audited) (Audited) Current assets: Cash $237 $1,530 Accounts receivable 39,463 41,929 Inventories 27,598 25,002 Prepaid expenses 4,026 2,245 Deferred income taxes 8,700 -- 80,024 70,706 Notes receivable 9,481 2,066 Deferred income taxes 4,007 -- Investment in significantly influenced companies 35,944 16,601 Capital assets 123,338 92,040 Goodwill 19,301 16,557 Other 2,012 1,820 $274,107 $199,790 Current liabilities: Bank indebtedness $40,417 $29,798 Accounts payable 33,372 24,739 Current term-debt 9,780 3,143 83,569 57,680 Long-term debt 88,032 55,353 Deferred income taxes -- 717 171,601 113,750 Non-controlling interest 9,186 330 Shareholders' equity 93,320 85,710 $274,107 $199,790
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