The Company's interest and other financing costs for the fourth quarter of 2012 as compared to the fourth quarter of 2011 increased by $0.3 million to $4.5 million primarily due to the issuance of $57.5 million of convertible debentures in June 2012, the proceeds of which were used to repay lower cost senior debt.
The Company's interest and other financing costs for 2012 as compared to 2011 increased by $3.1 million to $17.6 million primarily due to: (i) an increase in the Company's average outstanding net funded debt; and (ii) the issuance of $57.5 million of convertible debentures in June 2012, the proceeds of which were used to repay lower cost senior debt.
Restructuring costs consist of costs associated with the significant restructuring of one or more of the Company's businesses. For 2012, the Company incurred $5.7 million in restructuring costs consisting of:
-- $2.5 million in costs relating to the reconfiguration of the Company's sandwich production facilities. This initiative consists of the following three parts: (i) the construction of a new 20,000 square foot sandwich plant in Laval, Quebec, which was completed at the end of the second quarter of 2012 and commenced operations in July 2012; (ii) the transfer of the operations of the Company's leased sandwich production facility in Edmonton, Alberta to its owned sandwich production facility in Edmonton and the subsequent shutdown of the leased facility. This was completed in August 2012; and (iii) the transfer of the production of certain products from the Company's sandwich plant in Etobicoke, Ontario to its new plant in Laval and the subsequent sale of the Etobicoke plant's remaining operations, which consisted primarily of fresh sandwich production. This was completed at the end of September 2012. The project, which was effectively completed at the end of 2012, is expected (see Forward Looking Statements) to generate the following benefits: (i) a new state-of-the-art facility in Laval which will be used to grow the Company's sandwich business in central and eastern Canada; (ii) reduced plant operating overhead costs through the shutdown of the Company's leased facility in Edmonton; (iii) improved production efficiencies by transferring production from the less efficient Etobicoke plant to the new Laval plant; and (iv) freight savings associated with reconfiguring production so that sandwiches for the central and eastern Canadian markets are made in the Laval facility while sandwiches for the western Canadian market are produced in the Edmonton facility.-- $1.7 million in charges relating to the restructuring of the Company's NDSD business' DSD networks for the convenience store channel (the DSD Restructuring Initiative). The DSD Restructuring Initiative involves the merging and rationalization of the following three DSD networks: a. The Company's Direct Plus DSD network, which operates primarily in western Canada; b. The DSD network acquired as part of the Deli Chef acquisition in 2011. This network operates in Ontario and Quebec; and c. A network of independent distributors controlled by Pridcorp. The Company acquired Pridcorp at the end of 2011. This network operates in various markets across Canada, including the Maritimes.-- At the end of the third quarter of 2012 the Company anticipated that the DSD Restructuring Initiative would be completed in the first quarter of 2013 at a total cost of approximately $1.3 million. Since then the following events have taken place: a. Several of NDSD's large corporate customers have, for cost savings purposes, chosen to switch to wholesale distributors to deliver products, including those of the Company's various businesses, to their stores. Wholesale distribution is a discounted distribution service that does not provide the value added services offered by DSD networks, namely: (i) in-store merchandising; (ii) inventory management; and (iii) part case sales. In general terms, the additional services provided by DSD distribution usually results in improved same store sales due to better management of a store's shelf space. b. NDSD has been unable to find suitable local independent distributors for several regions in which its trucks are not able to operate profitably due to insufficient sales volumes. As a result of these factors NDSD is expanding the rationalization of its DSD network. This is expected to push out the restructuring to the second quarter of 2013 and to result in approximately $3.1 million in additional severance and other restructuring related costs. The Company firmly believes that there is an important and profitable role for DSD distribution in Canada, particularly in remote areas and among independent and small chain convenience store retailers. Furthermore, given the history of larger convenience store chains switching back to DSD distribution due to lower sales under a wholesale distribution model, there is significant potential for NDSD to win back the distribution business lost in 2012. Looking forward (see Forward Looking Statements), the restructuring of NDSD is expected to: (i) result in a significant improvement in NDSD's earnings starting in the third quarter of 2013, regardless of whether or not NDSD is successful in winning back some of the large convenience store chain distribution business lost in 2012; and (ii) position NDSD as Canada's leading distributor for large convenience store retailers who choose DSD distribution.-- $1.2 million in startup, redundant lease and severance costs associated with Stuyver's new artisan bread facility, which commenced commercial operations in the second quarter of 2012. This initiative, which was also effectively completed at the end of 2012, is expected to (see Forward Looking Statements): (i) substantially increase Stuyver's production capacity as its previous bakery, which was shut down in July 2012, was operating at near to capacity; and (ii) generate significant production efficiencies once the plant is operating at a reasonable level of capacity utilization.-- $0.3 million in restructuring costs associated with a variety of initiatives including the start-up of Centennial Foodservice's new seafood processing facility and the transitioning of production from the Company's Richmond, BC deli meats processing facility, which is scheduled to be shutdown in July 2013, to some of its other deli meats processing plants.