PREMIUM BRANDS HOLDINGS CORPORATION

Consolidated Financial Statements

Fiscal Years Ended

December 30, 2023 and December 31, 2022

Independent auditor's report

To the Shareholders of Premium Brands Holdings Corporation

Our opinion

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of Premium Brands Holdings Corporation and its subsidiaries (together, the Company) as at December 30, 2023 and December 31, 2022, and its financial performance and its cash flows for the 52 weeks ended December 30, 2023 and for the 53 weeks ended December 31, 2022 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS).

What we have audited

The Company's consolidated financial statements comprise:

  • the consolidated balance sheets as at December 30, 2023 and December 31, 2022;
  • the consolidated statements of operations for the 52 weeks ended December 30, 2023 and for the 53 weeks ended December 31, 2022;
  • the consolidated statements of comprehensive earnings for the 52 weeks ended December 30, 2023 and for the 53 weeks ended December 31, 2022;
  • the consolidated statements of cash flows for the 52 weeks ended December 30, 2023 and for the 53 weeks ended December 31, 2022;
  • the consolidated statements of changes in shareholders' equity for the 52 weeks ended December 30, 2023 and for the 53 weeks ended December 31, 2022; and
  • the notes to the consolidated financial statements, comprising material accounting policy information and other explanatory information.

Basis for opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities in accordance with these requirements.

PricewaterhouseCoopers LLP

PricewaterhouseCoopers Place, 250 Howe Street, Suite 1400, Vancouver, British Columbia, Canada V6C 3S7 T: +1 604 806 7000, F: +1 604 806 7806, ca_vancouver_main_fax@pwc.com

"PwC" refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the 52 weeks ended December 30, 2023. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter

Impairment assessment of goodwill and indefinite lived intangible assets

Refer to note 2 - Summary of material accounting policies, note 6 - Intangible assets and note 7 - Goodwill to the consolidated financial statements.

The Company had goodwill of $1,084.1 million and indefinite lived intangible assets of $232.6 million as at December 30, 2023. Management performs an impairment assessment annually, or more frequently if events or changes in circumstances indicate that the carrying value of goodwill and indefinite lived intangible assets may not be recoverable. The impairment assessment is based on a comparison of the recoverable amount of a cash generating unit (CGU) to the underlying carrying amount of the CGU's net assets, including goodwill and indefinite lived intangible assets. When the carrying amount of the CGU's net assets exceeds its recoverable amount, the difference is charged to earnings. The recoverable amount of the CGU is based on the higher of its fair value less costs of disposal and its value in use. Management used a discounted cash flow model to determine the CGU's value in use.

Assessing impairment of goodwill and indefinite lived intangible assets requires management to make significant judgments including making estimates with regards to the amounts and timing of future cash flows and the discount rate to be used to value such cash flows. No impairment was

How our audit addressed the key audit matter

Our approach to addressing the matter included the following procedures, among others:

  • Testing how management determined the recoverable amounts of the CGUs:
    • Testing the appropriateness of the method used and the mathematical accuracy of the discounted cash flow models.
    • Testing the amounts and timing of the future cash flows by comparing to the Board of Directors approved budget and past performance of the Company.
    • Evaluating the reasonableness of the discount rate assumptions with the assistance of professionals with specialized skill and knowledge in the field of valuations by considering available data from comparable companies.
    • Testing the underlying data used in the discounted cash flow models.

Key audit matter

How our audit addressed the key audit matter

recognized as a result of the 2023 impairment assessment.

We considered this a key audit matter due to (i) the significance of the goodwill and indefinite lived intangible asset balances and (ii) the significant judgment made by management in determining the recoverable amounts of the CGUs. This has resulted in a high degree of subjectivity and audit effort in performing audit procedures to test the amounts and timing of future cash flows and the discount rate assumptions to be used to value such cash flows. Professionals with specialized skill and knowledge in the field of valuation assisted us in performing our procedures.

Other information

Management is responsible for the other information. The other information comprises the Management's Discussion and Analysis.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of management and those charged with governance for the consolidated financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company's financial reporting process.

Auditor's responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

  • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
  • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
  • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
  • Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
  • Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
  • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor's report is Robert Coard.

/s/PricewaterhouseCoopers LLP

Chartered Professional Accountants

Vancouver, British Columbia

March 15, 2024

Premium Brands Holdings Corporation

Consolidated Balance Sheets

(in millions of Canadian dollars)

December 30,

December 31,

2023

2022

Current assets:

Cash and cash equivalents

27.6

11.4

Accounts receivable (note 24)

509.9

590.8

Inventories (note 3)

746.7

786.1

Prepaid expenses and other assets

43.8

38.0

1,328.0

1,426.3

Capital assets (note 4)

1,163.9

862.2

Right of use assets (note 5)

565.3

576.0

Intangible assets (note 6)

540.6

558.5

Goodwill (note 7)

1,084.1

1,093.0

Investment in and advances to associates (note 8)

453.5

538.9

Other assets

22.7

23.7

5,158.1

5,078.6

Current liabilities:

Cheques outstanding

16.4

19.3

Bank indebtedness (note 9)

-

18.0

Dividends payable (note 16)

34.4

31.3

Accounts payable and accrued liabilities

470.9

419.4

Current portion of puttable interest in subsidiaries (note 12)

30.4

23.1

Current portion of long-term debt (note 10)

2.0

6.5

Current portion of lease obligations (note 5)

53.9

45.4

Current portion of provisions (note 11)

29.9

1.8

637.9

564.8

Long-term debt (note 10)

1,510.4

1,421.4

Lease obligations (note 5)

583.4

589.3

Puttable interest in subsidiaries (note 12)

42.4

43.9

Deferred revenue

2.8

2.8

Provisions (note 11)

14.5

44.2

Deferred income taxes (note 21)

115.7

120.6

2,907.1

2,787.0

Convertible unsecured subordinated debentures (note 13)

484.5

478.6

Equity attributable to shareholders:

Retained earnings

18.8

63.8

Share capital (note 14)

1,703.9

1,702.6

Reserves (note 15)

43.8

46.6

1,766.5

1,813.0

5,158.1

5,078.6

Subsequent events (note 28)

Approved by the Board of Directors

(signed) George Paleologou

Director

(signed) Johnny Ciampi

Director

The accompanying notes are an integral part of these consolidated financial statements.

Premium Brands Holdings Corporation

Consolidated Statements of Operations

(in millions of Canadian dollars except per share amounts)

52 weeks

53 weeks

ended

ended

December 30,

December 31,

2023

2022

Revenue

6,261.0

6,029.8

Cost of goods sold (note 19)

5,052.6

4,926.1

Gross profit before depreciation, amortization, and plant start-up and restructuring costs

1,208.4

1,103.7

Interest income from investment in associates (note 8)

60.9

61.8

Selling, general and administrative expenses (note 19)

710.2

661.3

Operating profit before depreciation, amortization, and plant start-up and restructuring costs

559.1

504.2

Depreciation of capital assets (note 4)

86.5

79.5

Amortization of intangible assets (note 6)

13.3

28.8

Amortization of right of use assets (note 5)

60.2

52.0

Accretion of lease obligations (note 5)

26.4

24.5

Plant start-up and restructuring costs

45.3

27.2

Interest and other financing costs (note 20)

150.9

81.4

Acquisition transaction costs

4.4

6.2

Change in value of puttable interest in subsidiaries (note 12)

10.2

5.5

Accretion of provisions (note 11)

2.2

6.8

Remeasurement of provisions (note 11)

-

(21.8)

Equity loss in investments in associates (note 8)

22.5

15.8

Change in value of investments in associates (note 8)

2.5

16.0

Fair value gains on investments in associates (note 8)

-

(19.9)

Other

1.5

0.7

Earnings before income taxes

133.2

201.5

Provision for income taxes (recovery) (note 21)

Current

43.1

36.4

Deferred

(4.1)

5.0

39.0

41.4

Earnings

94.2

160.1

Earnings per share (note 17):

Basic

2.12

3.59

Diluted

2.11

3.57

Weighted average shares outstanding (in millions):

Basic

44.4

44.6

Diluted

44.6

44.8

The accompanying notes are an integral part of these consolidated financial statements.

Premium Brands Holdings Corporation

Consolidated Statements of Comprehensive Earnings

(in millions of Canadian dollars)

52 weeks

53 weeks

ended

ended

December 30,

December 31,

2023

2022

Earnings

94.2

160.1

Items that may be realized to earnings (loss) in future periods:

Unrealized gain (loss) on foreign exchange currency contracts (note 24)

1.5

(0.6)

Unrealized foreign exchange gain (loss) on investment in foreign operations

(5.8)

22.2

Items that will not be realized to earnings in future periods:

Actuarial gain (loss) on pension plan assets

(1.0)

0.6

Other comprehensive earnings

(5.3)

22.2

Comprehensive earnings

88.9

182.3

The accompanying notes are an integral part of these consolidated financial statements.

Premium Brands Holdings Corporation

Consolidated Statements of Cash Flows

(in millions of Canadian dollars)

52 weeks

53 weeks

ended

ended

December 30,

December 31,

2023

2022

Cash flows from (used in) operating activities:

Earnings

94.2

160.1

Items not involving cash:

Depreciation of capital assets (note 4)

86.5

79.5

Amortization of intangible assets (note 6)

13.3

28.8

Amortization of right of use assets (note 5)

60.2

52.0

Accretion of lease obligations (note 5)

26.4

24.5

Change in value of puttable interest in subsidiaries (note 12)

10.2

5.5

Accretion of provisions (note 11)

2.2

6.8

Remeasurement of provisions (note 11)

-

(21.8)

Equity loss in investment in associates (note 8)

22.5

15.8

Change in value of investments in associates (note 8)

2.5

16.0

Fair value gains on investments in associates (note 8)

-

(19.9)

Non-cash financing costs

7.9

6.8

Deferred income taxes (recovery) (note 21)

(4.1)

5.0

Other

1.5

0.7

323.3

359.8

Change in non-cash working capital (note 25)

110.6

(263.3)

433.9

96.5

Cash flows from (used in) financing activities:

Long-term debt, net

112.2

297.1

Payments for lease obligations (note 5)

(74.0)

(64.2)

Bank indebtedness and cheques outstanding

(20.9)

2.3

Dividends paid to shareholders (note 16)

(134.4)

(122.5)

Proceeds from issuance of convertible debentures - net of issuance costs (note 13)

-

143.0

Common shares purchased for cancellation (note 14)

(1.4)

(13.7)

(118.5)

242.0

Cash flows from (used in) investing activities:

Capital asset additions (note 4)

(399.7)

(228.4)

Business and asset acquisitions (note 18)

(5.5)

(122.9)

Payment of provisions (note 11)

(4.3)

(14.5)

Payments to shareholders of non-wholly owned subsidiaries (note 12)

(1.2)

(0.6)

Payments for settlement of puttable interest of non-wholly owned subsidiaries

(2.3)

(1.7)

Net change in share purchase loans and notes receivable

0.5

(5.4)

Investment in and advances to associates - net of distributions

113.3

29.9

(299.2)

(343.6)

Change in cash and cash equivalents

16.2

(5.1)

Cash and cash equivalents - beginning of year

11.4

16.5

Cash and cash equivalents - end of year

27.6

11.4

Supplemental cash flow information (note 25)

Interest and other financing costs paid

145.3

70.0

Income taxes paid

33.2

81.2

The accompanying notes are an integral part of these consolidated financial statements.

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Premium Brands Holdings Corporation published this content on 15 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 15 March 2024 11:07:46 UTC.