• Sales for the quarter from continuing operations up 15% to $58.2 million despite a labor dispute at the Company’s Vancouver plant and the first quarter historically being the Company’s most difficult due to seasonal factors.
  • Earnings before interest, taxes, depreciation, amortization and unusual items increased 45.5% to $2.7 million due to the expansion of the Company’s gross margins, which improved from 22.1% in 2000 to 30.9% in 2001.
  • Sale of the Fresh Pork Division completed on April 17, 2001 resulting in an after tax gain of $24.3 million or $2.94 per share, all of which will be recorded in the Company’s second quarter 2001 results.
  • After taking a charge of $5.7 million relating to the final settlement of the Vancouver plant labor dispute, the Company incurred a net loss for the quarter of $3.0 million versus net income of $1.2 million in 2000.

Premium Brands Inc. (Toronto: FFF) announced yesterday its results for the first quarter ended March 24, 2001. Sales for the quarter were $58.2 million versus $55.2 million in 2000. Included in 2000’s revenues are $4.6 million in sales from the Stone Mill fresh salad operation, which was sold in August 2000. After adjusting for Stone Mill’s revenue, the Company’s remaining businesses showed a total sales increase of $7.6 million or 15%.

The Company recorded a net loss for the quarter of $3.0 million or $0.36 per share versus net earnings of $1.2 million or $0.15 per share in 2000. Included in the net loss for 2001 was a final charge of $5.7 million for the settlement of a labor dispute at the Company’s Vancouver processing plant, approximately $3.5 million of which was for payments that will be made to employees as part of a wage restructuring. This restructuring, combined with a realignment of production at several of the Company’s plants, is expected to generate benefits of approximately $3.5 million per year once the Vancouver facility is operating at full capacity.

Sales through the Company’s direct to store delivery (“DSD”) and direct to home delivery (“DHD”) channels increased to $22.4 million in the first quarter of 2001 from $13.0 million in 2000 due to the continued expansion of its unique proprietary distribution initiatives. These initiatives, which are focused on developing and controlling distribution networks into alternative marketing channels such as convenience stores, neighborhood delicatessens, small grocery chains and directly to consumers’ homes are creating significant top and bottom line growth opportunities. Since 1997, sales through the Company’s DSD and DHD channels have increased from $28.8 million to $85.5 million due primarily to its proprietary distribution initiatives.

Sales through the Company’s more traditional retail and foodservice channels decreased to $35.8 million in the first quarter from $42.2 million in 2000 due to the Vancouver plant dispute and the sale of the Company’s Stone Mill fresh salad operation in August 2000.

The Company’s gross profit for the quarter, as a percentage of sales, expanded to 30.9% from 22.1% in 2000 due to an increased percentage of sales coming from its higher margin DSD and DHD channels.

“Our success in developing proprietary alternative distribution channels is what will differentiate our company from other good North American food companies. These channels diversify our customer base and improve our pricing power,” said Fred Knoedler, President and CEO. “No other company in our industry can match the degree of diversification and control we have in our distribution channels,” added Mr. Knoedler.

“This quarter marks the beginning of a new era for our company. With the sale of our Fresh Pork Division complete, we are very excited by the prospects of our remaining businesses. We are now a true consumer products company whose cash flows and performance will be driven by product development, marketing expertise, manufacturing efficiency and control and diversification of distribution channels,” stated Mr. Knoedler. “The success of our Prepared Foods Division over the last several years can be directly attributed to its ability to excel in each of these four areas,” added Mr. Knoedler.

The Company’s Prepared Foods Division has, over the last five years, grown its sales from $115.4 million to $276.4 million while from 1996 to 1999 its earnings before interest, taxes, depreciation, amortization and unusual items or EBITDA grew from $1.8 million to $18.7 million. In 2000, the Division’s EBITDA fell to $9.9 million due to the Vancouver plant labor dispute and $3.1 million in start up losses associated with its direct to home distribution initiatives.

“Historically the first quarter of the year is our company’s most difficult due to seasonal factors,” said Will Kalutycz, CFO. “Despite this and the effects of the recently resolved Vancouver plant labor dispute, the strength of our proprietary distribution initiatives enabled us to continue expanding our sales and margins,” added Mr. Kalutycz.

“Our focus on building leading brands and on developing and controlling alternative distribution channels will ideally position Premium Brands to benefit from current trends in the North American food industry,” stated Mr. Knoedler.

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.

For further information, please contact Will Kalutycz, CFO at 604-656-3100.

                      CONSOLIDATED BALANCE SHEET AMOUNTS
(in thousands of CDN dollars)

Proforma
(Note A)
Mar 24, Mar 24, Mar 18,
2001 2001 2000
(Unaudited)(Unaudited)(Unaudited)

Current assets:
Cash $110 $110 $638
Accounts receivable 21,268 35,267 38,401
Inventories 22,801 29,003 31,072
Prepaid expenses 3,691 3,726 3,703
Future income taxes 370 6,399 —
$48,240 $74,505 $73,814

Notes receivable 8,632 8,632 1,963
Future income taxes 8,178 5,915 —
Investment in significantly influenced
companies 36,108 36,108 19,751
Capital assets 88,658 123,920 115,028
Goodwill and other 24,219 24,219 18,570

$214,035 $273,299 $229,126

Current liabilities:
Bank Indebtedness $11,196 $43,472 $41,239
Accounts payable 32,615 33,874 21,276
Current term-debt 1,500 9,390 3,141
$45,311 $86,736 $65,656

Long-term debt 50,931 93,041 73,393
Deferred income taxes — — 717
$96,242 $179,777 $139,766

Non-controlling interest 7,242 7,242 2,195
Shareholders’ equity 110,551 86,280 87,165

$214,035 $273,299 $229,126

Note A: Proforma amounts reflect the sale of the Company’s Fresh Pork
Division.

CONSOLIDATED INCOME STATEMENT
(in thousands of CDN dollars except earnings per share amounts)

Proforma
(Note A)
12 week 12 week 12 week
period period period
ended ended ended
Mar 24, Mar 24, Mar 18,
2001 2001 2000
(Unaudited) (Unaudited) (Unaudited)

Sales by distribution channel:
Retail $30,065 $30,065 $36,606
Foodservice 5,791 5,791 5,620
Direct to store 15,634 15,634 13,006
Direct to home 6,746 6,746 —
58,236 58,236 55,232
Gross profit: $17,990 $17,990 $12,211

Selling, general and administrative 15,461 15,461 11,152
Equity earnings (150) (150) (782)
2,679 2,679 1,841

Depreciation 1,927 1,927 1,294
Amortization 395 395 299
Interest 1,225 1,225 835
Labor dispute 5,724 5,724 —
Dilution gain on issuance of
subsidiary’s shares — — (3,833)
Non-controlling interest (440) (440) (22)

Earnings (loss) before income taxes
and discontinued operations (6,152) (6,152) 3,268

Discontinued operations (net of tax) 24,528 260 (1,732)
Income tax expense (recovery) (2,933) (2,933) 364

Net earnings (loss) $21,309 $(2,959) $1,172

Net earnings (loss) per share:
Basic and fully diluted $2.58 $(0.36) $0.15

Earnings (loss) per share before
discontinued operations:
Basic and fully diluted $(0.39) $(0.39) $0.37

Earnings (loss) per share for
discontinued operations:
Basic and fully diluted $2.97 $0.03 $(0.22)

Note A: Proforma amounts reflect the sale of the Company’s Fresh Pork
Division

CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands of CDN dollars)

Proforma
(Note A)
12 week 12 week 12 week
period period period
ended ended ended
Mar 24, Mar 24, Mar 18,
2001 2001 2000
(Unaudited)(Unaudited)(Unaudited)

Cash provided by (used for):

Operations:
Net earnings (loss) before
discontinued operations $(3,219) $(3,219) $2,904
Items not involving cash:
Depreciation 1,927 1,927 2,102
Amortization of goodwill and
intangibles 395 395 299
Deferred / future income taxes 393 393 —
Adjustment to retained earnings for
Fit (5,014) (5,014) —
Non-controlling interest (440) (440) (22)
Adjustment to non-controlling interest
for FIT (1,504) (1,504) —
Translation adjustment 494 494 6
Dilution gain on subsidiary’s share
issuance — — (3,833)
Equity in earnings of affiliate (150) (150) (782)
(7,118) (7,118) 674

Change in non-cash operating working
capital 26,640 3,894 (7,161)
Discontinued operations 24,528 260 (1,732)
44,050 (2,964) (8,219)
Financing:
Increase in long-term debt (47,601) 2,399 6,688
Conversion of Class B convertible
shares — — 83
Conversion of options 199 199 308
Purchase of Common Shares for
cancellation (216) (216) (810)
Increase (decrease) in bank
indebtedness (29,221) 3,055 10,981
Decrease (increase) in notes
receivable 849 849 103
(75,990) 6,286 17,353

Investing:
Investment in significantly
influenced companies (14) (14) (1,674)
Disposal of (additions to) capital
assets 32,753 (2,509) (8,090)
Decrease in other assets (926) (926) (262)
31,813 (3,449) (10,026)

Decrease in cash (127) (127) (892)
Cash, beginning of period 237 237 1,530

Cash, end of period $110 $110 $638

Note A: Proforma amounts reflect the sale of the Company’s Fresh Pork
Division