• 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