Vancouver, BC-based Premium Brands, a producer and marketer of specialty branded consumer food products and conventional processed meats, has announced its Q2 and year to date financial results for the 13- and 26-week periods ending 29 June 2002.

"During the Q2 we continued to make solid progress towards realising our sales and earnings potential," said Fred Knoedler, chairman and CEO: "After almost two years of restructuring, both of our divisions are well positioned for profitable growth."

Specialty Foods

Q2 sales through the firm's Specialty Foods Division (SFD), excluding its Goodlife Foods Division, increased by C$1.4m or 5% to C$27.5m due mostly to the extra week in the Q2. A C$5m drop in Goodlife Foods' sales due to the conversion of its business model from corporate-owned trucks to franchisee-owned routes caused an 11% drop in the SFD's sales to C$30m. On a year to date basis, the Division's sales were down C$6m to C$57.4m due to a C$9.1m drop in Goodlife Foods sales to C$5.1m.

"Overall, we are satisfied with the SFD's Q2 sales performance given that our current focus is on improving profitability through our various cost cutting initiatives," said George Paleologou, president: "Furthermore, SFD's businesses, excluding Goodlife Foods, were able to maintain their sales levels despite an unseasonably cold spring that delayed the BBQ season and resulted in lower convenience store sales volumes."

"In terms of Goodlife Foods, it continues to make solid progress growing its franchisee base. Its sales, excluding franchise fees, were up 9% to C$2.5m as compared to the Q1 2002 while its franchised routes were up 5% to 45," said Paleologou.

The SFD's operating profit, as a percentage of sales, increased to 7.5% from 2.9% in 2001. The Division's improved results reflect both stronger margins on its core specialty food products as well as savings generated through various operational and logistical initiatives, including the conversion of its Goodlife Foods business to franchisee owned routes and the amalgamation and integration of its McSweeney's and Grimm's direct-to-store distribution networks.

"Looking forward, we expect to see continued strong improvement in SFD's margins," stated Paleologou.

Mainstream Processed Meats

The Mainstream Processed Meats Division's (MPM) sales increased by C$8.5m or 30% to C$37.1m for the Q2 due to a combination of successfully entering new markets in the US, recapturing business lost during a lengthy labour dispute that ended in April 2001 and an extra week of sales in the quarter. The extra week resulted in about C$2.4m of the MPM's sales increase. On a year to date basis, MPM sales were up C$12.7m or 22% to C$69.8m. In volume terms, the Division's sales increased by 36% to 7.4 million kilograms for the quarter and by 30% to 13.5 million kilograms for the year.

MPM's Q2 operating profit fell to C$1.6m from C$2m in 2001 due primarily to production inefficiencies associated with returning its Vancouver plant to 100% of pre-labour dispute operating levels and competitive conditions in the lower margin commodity processed meats segment of its business. Lower fresh pork commodity prices and strong margins on the Division's premium processed meat products helped to offset the effects of these items. In particular, MPM's Harvest product line, which is in the process of being launched into the US, achieved record sales and margins during the quarter.

"We are pleased to see that the sales initiatives being worked on by the MPM Division for the last nine months are now translating into increased sales," said Paleologou: "our Vancouver plant is operating at pre-labour dispute levels and with the resolution of several ramp up issues during the Q2, MPM is well positioned to start delivering superior performance."

Subsequent to the Q2, the company completed a re-financing of its bank debt that will provide it with C$12m of additional debt capacity and will shift about C$12m of its current debt to long-term debt. As a result of the financing, the company will be writing off in the Q3 about C$0.9m (C$0.6m after tax) in deferred costs relating to its previous debt financing.

Consolidated statements of operations

(Unaudited and in C$000s except per share amounts)

                                13 weeks 12 weeks  26 weeks 24 weeks
                                  ended    ended     ended    ended
                                 June 29, June 16,  June 29, June 16,
                                   2002     2001      2002      2001
Sales                          $ 67,073 $ 62,231 $ 127,170 $ 120,467
Cost of products sold            49,106   42,498    92,249    82,744
Gross profit                     17,967   19,733    34,921    37,723
Selling, general and
 administrative                  12,742   15,736    25,233    30,993
Equity in earnings of
 significantly influenced
  companies and other              (196)    (539)     (291)     (689)
                                  5,421    4,536     9,979     7,419
Depreciation                      2,031    1,992     4,063     3,919
                                  3,390    2,544     5,916     3,500
Interest                          1,384    1,288     2,588     2,717
Amortization of goodwill and
 intangible assets                  334      405       668       800
Non-controlling interest             92     (442)      153      (882)
Loss on sale of assets (note 5)      84        -       136         -
Labour dispute charge                 -        -         -     5,724
Earnings (loss) before income
 taxes and discontinued
  operations                      1,496    1,293     2,371    (4,859)
Income tax expense (recovery)       308      378       510    (2,555)
Earnings (loss) before
 discontinued operations          1,188      915     1,861    (2,304)
Discontinued operations
 (net of tax)                         -   23,506         -    23,766
Net earnings                   $  1,188 $ 24,421  $  1,861  $ 21,462

Earnings (loss) per share:
 Basic and fully diluted before
  discontinued operations      $   0.12 $   0.11  $   0.18  $  (0.28)
 Basic and fully diluted for
  discontinued operations      $   0.00 $   2.85  $   0.00  $   2.88
 Basic and fully diluted       $   0.12 $   2.96  $   0.18  $   2.60

Weighted average
 shares outstanding              10,311    8,258    10,320     8,262