About Premium Brands
Premium Brands owns a broad range of leading specialty food manufacturing and differentiated food distribution businesses with operations in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Nevada and Washington State. The Company services over 22,000 customers and its family of brands and businesses include Grimm's, Harvest, McSweeney's, Bread Garden Go, Hygaard, Hempler's, Quality Fast Foods, Gloria's Best of Fresh, Direct Plus, National Direct-to-Store Distribution (NDSD), Harlan Fairbanks, Creekside Bakehouse, Centennial Foodservice, B&C Foods, Shahir, Duso's, Maximum Seafood, SK Food Group, OvenPride, Hub City Fisheries, Audrey's, Deli Chef and Piller's.
RESULTS OF OPERATIONS
Extra Week of Operations
The Company's fiscal year ends on the last Saturday of the calendar year. As a result its fiscal year is generally 52 weeks, however, every five to six years the Company has a fiscal year that is 53 weeks due to the calendar year being slightly longer than 52 weeks.
In 2011 the Company's fiscal year was 53 weeks resulting in an extra week of operations as compared to 2012. The Company estimates the impact of the extra week of operations on its sales and EBITDA to be $15.6 million and $0.1 million, respectively. The nominal impact on the Company's EBITDA relative to the higher sales impact is due to: (i) the year-end holiday season and generally poor weather in December resulting in the extra week being a relatively poor sales week; and (ii) despite the poor sales week the Company still incurred a full week of costs for items such as plant, sales, distribution and administrative overhead.
Revenue(in thousands of dollars except percentages) 13 weeks 14 weeks 52 weeks 53 weeks ended ended ended ended Dec 29, Dec 31, Dec 29, Dec 31, 2012 % 2011 % 2012 % 2011 %Revenue by segment: Retail 151,404 62.0% 152,542 62.2% 597,013 61.6% 436,929 55.4% Foodservice 92,645 38.0% 92,695 37.8% 371,762 38.4% 352,003 44.6% -------------------------------------------------------------------------- Consolidated 244,049 100.0% 245,237 100.0% 968,775 100.0% 788,932 100.0% -------------------------------------------------------------------------- --------------------------------------------------------------------------
Normalizing for the extra week in the fourth quarter of 2011 Retail's revenue for the fourth quarter of 2012 as compared to the fourth quarter of 2011 increased by $8.2 million or 5.7%.
Retail's organic growth for the quarter was slightly below the Company's targeted range of 6% to 8% due to a $3.2 million decrease in sales resulting from the following factors:
i. The restructuring of Retail's NDSD business' distribution network. This initiative involves the conversion of NDSD's customers in certain defined territories from being serviced by NDSD's direct-to-store delivery (DSD) trucks to being serviced by exclusive third party distributors that form part of NDSD's distribution network (see Restructuring Costs). As a result, in territories that have been converted the Company now sells its products at a discounted price to an exclusive third party distributor who in turn sells and distributes the Company's products to convenience store retailers.ii. The decision by two large convenience store chains to use basic service wholesale distributors instead of NDSD's full service DSD network to deliver the Company's products to their stores. Similar to the impact of transitioning certain business to third party distributors, this resulted in the Company selling its products at a discounted price to wholesale distributors who in turn sell and distribute the products to the applicable convenience store chain's retail locations.iii.The sale of Retail's fresh sandwich operation in Etobicoke, Ontario as part of the consolidation of its sandwich operations.iv. The continued decline in consumer demand for food products purchased through the convenience store channel. This trend is being driven by a variety of factors (including changing consumer eating habits, the proliferation of quick serve restaurants, high gas prices and pay-at- the-pump legislation) that are impacting consumer discretionary spending in this retail channel.
