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Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Colabor's Fourth Quarter and Fiscal Year 2017 Financial Results Conference Call. [Operator Instructions] Before turning the meeting over to management, please be advised that this conference call will contain statements that are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated.I would like to remind everyone that this conference call is being recorded on Thursday, February 22, 2018.I will now turn the conference over to Claude Gariepy, outgoing President and CEO. Please go ahead, sir.
Thank you very much. Good morning, everyone, and welcome to Colabor Group's 2017 fourth quarter and year-end conference call. With me today is Lionel Ettedgui, Colabor's new President and CEO; and Jean-François Neault, Senior Vice President and Chief Financial Officer, whom all you know.Earlier this morning, we issued our fourth quarter and year-end press release via the Marketwired news service. It can also be found, along with our financial statements and MD&A, on our website and shortly on SEDAR. Please note that the presentation is also available on our website at www.colabor.com under the Investor Events and Presentation section.Since Lionel just recently joined us, I will be reviewing our results and answering question along with Jean-François. But before I do so, I would like to formally introduce Colabor's new President and CEO, Lionel Ettedgui. Lionel joined our company on February 5, and was hired following a thorough process led by our Board of Directors on the basis of the strong entrepreneurial and operational experience in the food industry. As previously disclosed, I'm staying on until March 2, 2018, to help ensure a smooth leadership transition. Lionel?
[Operator Instructions] [Audio Gap]
Okay. I'm sorry. I think that we have an issue with technology. So maybe I will reintroduce myself. So good morning, everyone. Thank you, Claude, for the introduction. Like Claude just mentioned, it has only been 2 weeks since I joined the company. So I will leave the call entirely in the hands of Claude and Jean-François. I would simply like to say a few words. I'm truly excited to join Colabor at this important time in the company's development. As the largest Québec-owned food distribution company, we have a lot to be proud of. Over the last 2 weeks, I have met with dedicated employees in our divisions. We all agree that Colabor is well positioned to further grow in key segments of the food distribution industry.I'm excited to be building the foundation left by my predecessor.With this, thank you for your time. And I look forward to our next conference call, where I will be in a better position to discuss our results and action plan. Claude?
Thank you, Lionel. Our fourth quarter results were somewhat flat year-over-year with sales down 2.9% when adjusted for the lower number of days in the quarter. Net earnings improved slightly over last year's fourth quarter results.As our fourth quarter results demonstrate, we continued to face headwinds in Ontario from the effect of the historical contract loss. We have yet to achieve the anticipated level of efficiencies following initiatives implemented to optimize our distribution network.On the positive side, I'm happy to say that we are seeing margin and operational improvements at the Décarie division. The new leadership we engaged in the second quarter of '17 drove results in procurement, inventory management and cost control, resulting in a sustainable year-over-year improvement in the fourth quarter.Profitability further improved with the solid performance at our CFD division in Eastern Québec. Their focus on independent restaurants has been a key driver of this division's performance and recent success.Norref also continued to contribute stable EBITDA growth. As for our full year results for fiscal '17, headwinds in Ontario represented the largest drag on both top and bottom lines, followed by Décarie.We had a significant improvement in performance of our CFD division following a change in leadership along with investments made in their sales force to improve penetration of the independent restaurant market. These moves have supported higher EBITDA and revenue generation.Our Norref division has continued to be a strong contributor in '17 with stable top and bottom line growth. We are extremely happy with this division's ongoing success, especially in their ability to steadily grow their share of street or independent business.Following the loss of volume experienced in '17 and the expected volume loss from the Montana's contract, which is coming to an end on April 1, we remain very proactive. As you know, we have been focused on implementing measures to offset the loss of gross margin by rightsizing our operation. Our ultimate objective remains to achieve a better business balance in Ontario with an efficient network capable of serving our current mix of customers, while allowing us to generate organic growth in more profitable niches such as the street business.I will now let Jean-François review our financial results. Jean-François?
Thank you, Claude, and good morning, everyone. Before I begin, please note that our fourth quarter and year-end have had fewer days than the comparable period of last year. There were 16 weeks in our latest fourth quarter compared with 17 weeks in the fourth quarter of 2016. Consequently, our 2017 full year results are comprised of 52 weeks compared with 53 weeks in 2016.In order to provide comparable figures, I have normalized the sales figure in this call and refer you to the accompanying presentation and MD&A available on our website for the non-normalized sales variation.Our fourth quarter consolidated sales reached $401.6 million, down 2.9% over last year's fourth quarter. Sales in the Distribution segment decreased by 1.9%, reflecting the historical loss of the procurement contract for Popeyes Louisiana Kitchen at the Ontario division. This was partially mitigated by stable growth at the Norref division.Sales in the Wholesale segment were down 5.4% mainly due to the Décarie division from continuing competitive pressure in the Montreal market.For the year-end, cumulative consolidated sales were $1.3 billion, representing a decrease of 4.4% over 2016. Cumulative sales in the Distribution segment were down 3%, primarily from the Ontario division, resulting from the historical contract losses, partially mitigated by stable growth at the Norref division.Cumulative sales in the Wholesale segment were down 8.4%, mainly from the Décarie division.Fourth quarter adjusted EBITDA stood at $7.1 million or 1.8% of sales compared with $9.1 million or 2.1% of sales in the equivalent quarter of last year. The decrease in adjusted EBITDA is mainly due to the loss of volume and operational inefficiency at our Ontario division. This unfavorable variance was compensated in part by a better EBITDA generation from most of our Québec division.On a full year basis, cumulative adjusted EBITDA was $24.7 million or 1.9% of sales compared with $30.3 million or 2.2% of sales in 2016. The large majority of the reduction in cumulative adjusted EBITDA comes from the loss of volume and operational ineffectiveness at the Ontario division and the loss of volume at the Décarie division from continued competitive pressure.These negative variance were partially offset by an impressive improvement margin as a percentage of sales at the CFD division. Net earning for the fourth quarter stood at $0.5 million or a negligible amount per share, up slightly over last year's fourth quarter net loss of $0.2 million. This improvement stems mainly from the reduction in cost not related to current operations and reduction in financial expenses.For fiscal 2017, net loss stood at $18.6 million or $0.18 per share, down from net earning of $0.3 million or negligible amount per share in 2016. This variance comes from the $16.4 million noncash impairment charge accounted for in the third quarter, higher costs associated with current operation, which are comprised of $6.4 million assessment notice and costs related to the closure of Vaughan DC, the effect of which were mitigated by saving of $4.4 million in financial charges from the recap concluded in the fourth quarter of 2016.Cash flow from operating activities reached $11.5 million in the fourth quarter of 2017 compared to $15.5 million for the same period in 2016. This change is mainly due to the payment of the $6.4 million assessment advice to the Ontario Ministry of Finance, lower adjusted EBITDA and positive net change in working capital that was less significant in the fourth quarter of 2017.For fiscal 2017, cash flow was $18.1 million, down from $33.1 million in 2016. This change is mainly due to the payment of the assessment in the fourth quarter, lower adjusted EBITDA and increase in charge not related to operation.The positive cash flow generation combined with the positive effects of the recap transaction allowed Colabor to maintain a healthy balance sheet.As at December 30, 2017, our total debt including convertible debentures and bank overdraft stood at $110.6 million, down from $118.1 million at the end of the previous year.Our total debt-to-trailing adjusted EBITDA ratio, therefore, remain relatively stable at 4.5x when compared to the ratio at the end of the third quarter.Excluding the convertible debenture, our total debt-to-adjusted EBITDA ratio slightly improved to 2.5x when compared to 2.6x at the end of the third quarter of 2017.At year-end, $28.1 million was drawn from our authorized credit facilities of $140 million compared with $39.5 million at the end of last year, leaving us with sufficient flexibility to carry out our initiatives and reinvest in our operations.Before I turn the call over to Claude, it is my understanding that our analyst from TD, Derek Lessard, is unable to join our call today.I will now turn the call back to Claude for his conclusion. Claude?
Thank you very much, Jean-François. Overall, 2017 was a challenging year for Colabor. In '18, we can expect some volatility to continue in Ontario with the anticipated loss of volume from current and historical contract losses. The benefits from our efforts to optimize and rightsize this operation is also taking a bit longer than we had expected. However, improvements should start materializing later in '18.We also remain cautiously optimistic with the recent positive results demonstrated by the Décarie division. Moreover, I am proud to say that many of our divisions are also faring well. Norref continues to remain a strong contributor with consistent top and bottom line growth. Boucherville has proven to be very profitable and resilient throughout the last few years. CFD is now a sustainable and profitable business. And very importantly, our balance sheet remains solid in [ LT ].With this, I will open the call for questions, if there are some.So I'm told that there are no analysts on the line. So thank you, operator.Ladies and gentlemen, thank you for participating. Sorry for the issue that we had with technology. I hope that you are still there. Since this is my last conference call with Colabor, I would like to thank all our shareholders, bankers and analysts for our -- for your ongoing support. After 6 years of leading a wonderful group of people, it is with a light heart that I'm passing on the leadership into the capable hands of Lionel.
Thank you, Claude. I look forward to updating you on our progress during our first quarter call in May. Good day, everyone. Have a good day.
Ladies and gentlemen, this concludes the conference call for today. Thank you for participating. Please disconnect your lines.