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The Company's Adjusted EBITDA for the fourth quarter of 2012 as compared to the fourth quarter of 2011 increased by $0.6 million or 4.4% to $15.0 million primarily due to:
i. The improved performance of Centennial Foodservice which was driven by a combination of the success of the new fresh burger production facility it completed in 2011 and a general improvement in consumer demand in the segment of the foodservice channel serviced by Centennial;ii. The improved performance of the Company's deli and processed meats businesses due to a combination of lower average costs for a variety of beef and pork raw materials and market share increases;iii.Lower corporate costs resulting from decreases in a variety of items including discretionary bonuses, corporate marketing costs, consulting fees and external accounting fees; andiv. General organic growth across a variety of businesses.
These increases were partially offset by:
i. A significant decrease in the earnings of NDSD due to: (a) the decision by two large convenience store chains to use wholesale distributors; (b) delays in fully implementing the SG&A savings associated with its restructuring (see Restructuring Costs). As a result, the Company lost the margin associated with sales that were transitioned to exclusive third party distributors but did not fully realize the cost savings projected to result from these changes; and (c) the continued decline in consumer demand for food products purchased through the convenience store channel. The Company expects (see Forward Looking Statements) to see a significant improvement in NDSD's earnings once it completes its restructuring late in the second quarter of 2013;ii. A decrease in the contribution margin generated by Stuyver's due to increased overhead costs associated with its new state-of-the-art bakery. This issue is expected (see Forward Looking Statements) to be resolved in the coming months as Stuyver's leverages the new plant's capacity to grow its business;iii.A temporary shortage of reasonably priced turkey raw materials in Ontario that resulted in record high turkey input costs for Piller's. This shortage, which had a negative impact on Piller's Adjusted EBITDA of approximately $1.5 million, was the result of short term structural issues with Canada's poultry supply management system's policies and procedures;iv. Increased marketing costs associated with the launch of Piller's new "Simply Free" line of deli meats;v. Temporary production inefficiencies resulting from SK Food Group's launch of new sandwich wraps for two large international customers; andvi. Increased selling, marketing and administration costs associated with the development of the infrastructure needed to accelerate the growth of Foodservice's seafood based initiatives.
The Company's Adjusted EBITDA for 2012 as compared to 2011 increased by $13.3 million or 24.2% to $68.3 million primarily due to: (i) acquisitions made part way through 2011; and (ii) the factors impacting the Company's fourth quarter Adjusted EBITDA as outlined above.
The Company is not at this time providing guidance on its projected Adjusted EBITDA for 2013 due to uncertainty around the timing of several of its strategic priorities, including: (i) sales initiatives associated with bringing Stuyver's, Deli Chef's and Centennial's new plants into full production; and (ii) the restructuring of NDSD's DSD network. Looking forward (see Forward Looking Statements) the Company expects to provide guidance on its projected Adjusted EBITDA for 2013 with the release of its 2013 first quarter results.
