High Liner Foods Reports Operating Results for the Fourth Quarter and Full-Year of 2013

- Company reports record sales and earnings for fiscal 2013 (reported in USD); Board of Directors recommending a two-for-one stock split for shareholder approval at upcoming AGM -

LUNENBURG, NS, Feb. 19, 2014 /CNW/ - High Liner Foods Incorporated (TSX: HLF) ("High Liner Foods" or "the Company"), the leading North American value-added frozen seafood company, today reported financial results for the thirteen-week period and fiscal year ended December 28, 2013.  All amounts are reported in U.S. dollars ("USD") unless otherwise noted.

Financial and operational highlights for the fourth quarter of 2013 include (all comparisons are relative to the fourth quarter of 2012, unless otherwise noted):

  • American Pride Seafoods was acquired on October 1, 2013 (the "American Pride Acquisition");
  • Sales increased by 14.9% to $250.7 million from $218.3 million (the American Pride Acquisition added $39.7 million in sales);
  • Reported net income increased by $11.5 million to $8.8 million (or diluted earnings per share ("EPS") of $0.56), compared with a net loss of $2.7 million (diluted EPS of $(0.17));
  • Adjusted Net Income1 increased by $1.3 million to $11.9 million (Adjusted Diluted EPS1 of $0.76) from $10.6 million (Adjusted Diluted EPS of $0.68); and
  • Adjusted EBITDA1 was $22.7 million, compared with $22.1 million (the American Pride Acquisition added $1.5 million in Adjusted EBITDA).

Financial and operational highlights for fiscal 2013 include (all comparisons are relative to fiscal year 2012, unless otherwise noted):

  • Sales increased by 0.5% to $947.3 million from $942.6 million (the American Pride Acquisition added $39.7 million in sales);
  • Reported net income increased by $29.2 million to $31.4 million (or diluted EPS of $2.01), compared with $2.2 million (diluted EPS of $0.14);
  • Adjusted Net Income increased by $3.2 million to $41.3 million (Adjusted Diluted EPS of $2.65) from $38.1 million (Adjusted Diluted EPS of $2.46);
  • Adjusted EBITDA was $85.3 million, compared with $91.7 million;
  • Adjusted Standardized Free Cash Flow was $28.1 million, compared with $66.3 million;
  • Net interest-bearing debt to Adjusted EBITDA increased to 3.9x at the end of fiscal 2013, compared to 3.4x at the end of fiscal 2012; and
  • Integration of Icelandic USA was completed in the first quarter of 2013 and American Pride was acquired on October 1, 2013.

"Following years of exceptionally strong growth, we are pleased to report that in fiscal 2013, High Liner Foods achieved the highest sales and earnings in its history," announced Mr. Demone, CEO.  "The acquisition of American Pride bolstered sales in the fourth quarter and contributed to a strong finish to the year, which overall, has been a successful year, but hasn't been without its challenges.  Excluding American Pride, sales in the fourth quarter from our U.S. food service business and our U.S. and Canadian retail value-added private label businesses declined on a year-over-year basis.  This was consistent with what we experienced in the first three quarters of the year, reflecting continued soft sales in the U.S. restaurant industry in 2013 and the trend in the seafood marketplace overall of decreased demand for retail value-added private label seafood products.  We were successful in partially offsetting the sales declines in these market segments, with strong sales to club stores in the fourth quarter and continued growth in our retail Sea Cuisine product line in the U.S."

Mr. Demone added, "Adjusted Net Income increased by $3.2 million, or 8.4%, to $41.3 million in fiscal 2013, compared to fiscal 2012.  On an overall basis, our seafood costs were lower in 2013 compared to last year, and as a result of amendments made to our term loan in the first quarter of 2013, interest costs were significantly lower in fiscal 2013 than in fiscal 2012.  The increase in earnings year-over-year also reflects synergies realized from completing the integration of Icelandic USA, however the full impact of these synergies was partially offset by incremental operating and distribution costs incurred in the U.S. after our plant in Danvers, Massachusetts was closed in the first quarter of 2013.  Our facilities experienced production challenges as they worked to integrate products into their production lines that had been previously manufactured by the Danvers plant.  Resolving these issues has been a top priority since the first quarter of 2013 and plant throughputs have been consistently improving."

"In late 2010, we made an ambitious, but important, organizational commitment to source all of our seafood from certified sustainable or responsible fisheries and aquaculture, and we set a goal to accomplish this by the end of 2013.  Earlier this month, we were extremely pleased to report that by the end of 2013, we'd accomplished 99% of this goal2 and we remain committed to achieving 100% going forward," explained Mr. Demone.

Financial Results

The following table summarizes the Company's financial results for the thirteen-week period and fiscal year ended December 28, 2013.

  Thirteen weeks ended Fifty-two weeks ended
(Amounts in 000s, except per share amounts,
unless otherwise noted)
December 28,
2013
  December 29,
2012
  December 28,
2013
  December 29,
2012
Sales in domestic currency $ 254,427   $ 217,569   $ 956,307   $ 942,348
Foreign exchange impact on sales $ (3,682)   $ 711   $ (9,006)   $ 283
Sales as reported $ 250,745   $ 218,280   $ 947,301   $ 942,631
Sales in million pounds   74.5     62.6     282.4     275.2
Adjusted EBITDA $ 22,683   $ 22,070   $ 85,343   $ 91,687
Net income (loss) $ 8,767   $ (2,686 ) $ 31,356   $ 2,203
Adjusted Net Income $ 11,944   $ 10,633   $ 41,281   $ 38,071
Diluted EPS $ 0.56   $ (0.17 ) $ 2.01   $ 0.14
Adjusted Diluted EPS $ 0.76   $ 0.68   $ 2.65   $ 2.46
Weighted diluted average shares outstanding   15,645     15,562     15,593     15,460

Sales for the fourth quarter were $250.7 million, an increase of $32.5 million, or 14.9%, from $218.3 million for the same period in 2012.  In 2013, more than two thirds of the Company's operations, including sales, were denominated in USD.  The weaker Canadian dollar in the fourth quarter of 2013 compared to the same period last year decreased the value of reported USD sales by approximately $4.5 million relative to the conversion impact in 2012.

Sales in domestic currency for the fourth quarter, including the American Pride Acquisition, were $254.4 million compared to $217.6 million for the same period in 2012.  American Pride added $39.7 million in sales.  Sales volume measured in pounds, including the American Pride Acquisition, was 74.5 million pounds compared to 62.6 million pounds for the previous year, an increase of 19.0%.  American Pride added 12.6 million pounds in 2013.  Excluding the American Pride Acquisition, sales in domestic currency decreased by $2.8 million and pounds sold decreased by 0.6 million in the fourth quarter of 2013 compared to the same period in 2012.

Adjusted EBITDA for the fourth quarter of 2013, including the American Pride Acquisition, was $22.7 million, or 9.0% of sales, compared to $22.1 million, or 10.1% of sales, for the same period in 2012.  American Pride added $1.5 million in Adjusted EBITDA in 2013.  Excluding the American Pride Acquisition, Adjusted EBITDA in the fourth quarter of 2013 decreased by $0.9 million.  While Adjusted EBITDA in the fourth quarter of 2013 reflects the realization of synergies from completing the integration of Icelandic USA in 2013 and lower overall raw material costs, the favourable impact of these items was offset by the impact of lower sales from the Company's operations (excluding American Pride) and increased operating costs associated with the reduced plant throughput rates experienced at our U.S. manufacturing facilities since the closure of our Danvers plant.

Net income in the fourth quarter was $8.8 million (diluted EPS of $0.56), compared with a net loss of $2.7 million (diluted EPS of $(0.17)) in the fourth quarter of 2012.  In addition to the items cited in the preceding paragraph, the $11.5 million increase in net income in the fourth quarter also reflects:

  • significantly lower financing costs in 2013 resulting from favourable amendments made to our term loan in the first quarter of 2013, and related to the same debt amendments, $6.4 million in amortization of deferred financing costs was accelerated (expensed) in the fourth quarter of 2012;
  • a $3.1 million decrease in stock-based compensation expense in 2013, as in 2012 this expense reflected a significant increase in the Company's stock price that occurred in the fourth quarter of 2012; and
  • lower overall one-time costs related to acquisition and integration activities in the fourth quarter of 2013 compared to the same period in 2012.

Excluding the after-tax impact of certain items, including one-time costs related to acquiring American Pride, integration costs related to Icelandic USA, stock-based compensation expense, the revaluation of the embedded derivative associated with the long-term debt LIBOR floor, the mark-to-market gain on the interest rate swap related to the embedded derivative and certain other non-recurring expenses, Adjusted Net Income was $11.9 million (Adjusted Diluted EPS of $0.76) compared with $10.6 million (Adjusted Diluted EPS of $0.68) for the fourth quarter of 2012.

Dividends and Proposed Share Split

Today, the Board of Directors of the Company approved a quarterly dividend of CAD$0.19 per share payable on March 17, 2014 to shareholders of record on March 3, 2014.  The quarterly dividend was increased three times in fiscal 2013 and the $0.19 per share approved today represents a 27% increase from the CAD$0.15-per-share quarterly dividend paid a year ago.  High Liner Foods was recently added to the S&P/TSX Canadian Dividend Aristocrats® Index, an index designed to measure the performance of S&P Broad Market Index ("BMI") Canada constituents which have followed a managed-dividend policy of consistently increasing dividends.

The Board of Directors is also recommending an amendment to the Company's memorandum to divide the issued and outstanding common shares of the Company on a two-for-one basis ("stock split"), to be voted on by the Company's common shareholders at its upcoming annual general meeting in Halifax, Nova Scotia, on May 8, 2014.

Outlook

"We will continue to focus on our vision to be the leading supplier of frozen seafood in North America.  We expect our annual sales will exceed the $1.0 billion mark for the first time and we remain committed to growing Adjusted EBITDA to $150 million, although we have extended the period to reach this goal by one year to 2016.  Our strategy to achieve this goal hasn't changed and organic growth, acquisitions and optimizing our supply chain will all play an important role," stated Mr. Demone.  "We are focused on growing our Adjusted EBITDA in 2014.  Regarding current pricing on the major seafood species we procure, prices for haddock, scallops and shrimp remain high, while prices for cod and Alaskan pollock, our two largest species, remain attractive.  The U.S. restaurant industry is continuing to show lackluster growth and it is as important as ever that we continue our track record of offering new and innovative products to our customers to increase the overall demand for frozen seafood products and grow our market share."

Mr. Demone  concluded, "We have been operating American Pride as a stand-alone operation since they were acquired last October and will start to integrate it into the rest of our business following the 2014 Lenten season.  We expect by that time to have any lingering issues associated with reduced plant throughput rates in the U.S. resolved."

Conference Call

The Company's Consolidated Financial Statements and MD&A for the fiscal period ended December 28, 2013 were filed concurrently on SEDAR with this news release and are also available at www.highlinerfoods.com.

The Company will host a conference call on Thursday, February 20, 2014 at 10:30 a.m. ET (11:30 a.m. AT) during which Henry Demone, CEO, Kelly Nelson, Executive Vice President & CFO and Keith Decker, President & COO will discuss the financial results for the fourth quarter and fiscal 2013.  To access the conference call by telephone, dial 647-427-7450 or 1-888-231-8191.  Please connect approximately 10 minutes prior to the beginning of the call to ensure participation.  The conference call will be archived for replay by telephone until Friday, Thursday, February 27, 2014 at midnight.  To access the archived conference call, dial 1-855-859-2056 and enter the reservation number 46528964.

A live audio webcast of the conference call will be available at www.highlinerfoods.com.  Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast.  The webcast will be archived at the above website for one year.

About High Liner Foods Incorporated

High Liner Foods Incorporated is the leading North American processor and marketer of value-added frozen seafood.  High Liner Foods' retail branded products are sold throughout the United States, Canada and Mexico under the High Liner, Fisher Boy, Mirabel and Sea Cuisine labels, and are available in most grocery and club stores.  The Company also sells branded products to restaurants and institutions under the High Liner, Icelandic Seafood, FPI, Viking, Mirabel, Samband of Iceland and American Pride Seafoods labels and is the major supplier of private label value-added seafood products to North American food retailers and food service distributors.  High Liner Foods is a publicly traded Canadian company, trading under the symbol HLF on the Toronto Stock Exchange.

This document contains forward-looking statements. Forward-looking statements can generally be identified by the use of the conditional tense, the words "may", "should", "will", believe", "plan", "expect", "goal", "remain" or "continue", or the negative of these terms or variations of them or words and expressions of similar nature.  Specific forward-looking statements in this document include, but are not limited to expectations with respect to: anticipated financial performance; increased operating efficiencies, including maximizing plant throughput rates and reducing operating and distribution costs; changes to sales volume, margins and input costs, including raw material prices; changes to American Pride's operations; achievement of strategic goals, including our ability to increase our market share, acquire and integrate other businesses and reduce our supply chain costs;and our ability develop new and innovative products that result in increased sales.  These statements are based on a number of factors and assumptions including, but not limited to: seafood availability, demand and pricing; product pricing, including the cost of raw materials, energy and supplies; operating costs; plant performance; the condition of the Canadian and U.S. economies; our ability to attract and retain customers; required level of bank loans and interest rates; income tax rates; and our ability to attract and retain experienced and skilled employees.  The statements are not a guarantee of future performance.  By their nature, forward-looking statements involve uncertainties and risks that could result in the forecasts and targets not being achieved.  Readers are cautioned not to place undue reliance on forward-looking statements, as actual results may differ materially from those expressed in such forward-looking statements.  We include in publicly available documents filed from time to time with securities commissions and The Toronto Stock Exchange, a discussion of the risk factors that can cause anticipated outcomes to differ from actual outcomes.  Except as required under applicable securities legislation, we do not undertake to update forward-looking statements, whether written or oral, that may be made from time to time by us or on our behalf, whether as a result of new information, future events or otherwise.

The Company reports its financial results in accordance with IFRS.  Included in this media release are certain non-IFRS financial measures as supplemental indicators of operating performance. These non-IFRS measures are Adjusted EBITDA, Adjusted Net Income, Adjusted Earnings per Share and Adjusted Standardized Free Cash Flow.  Please refer to the Company's MD&A for the year ended December 28, 2013 for definitions of non-IFRS financial measures used by the Company and reconciliation of these non-IFRS measures to measures that are found in our consolidated financial statements.

The Company believes these non-IFRS financial measures provide useful information to both management and investors in measuring the financial performance and financial condition of the Company.  These measures do not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable to similarly titled measures presented by other publicly traded companies, nor should they be construed as an alternative to other financial measures determined in accordance with IFRS.

For further information about the Company, please visit our website at www.highlinerfoods.com or send an e-mail to investor@highlinerfoods.com.

____________________________
1 Please refer to High Liner Foods' Management Discussion & Analysis ("MD&A") for the year ended December 28, 2013 for definitions of the non-IFRS financial measures used by the Company, including "Adjusted Net Income", "Adjusted Diluted EPS", "Adjusted EBITDA" and "Adjusted Standardized Free Cash Flow" 
2 The Company issued a press release on achieving 99% of its 2013 sustainability goal on February 6, 2014 which can be viewed on the High Liner Foods' website or by following this link.

 

SOURCE High Liner Foods Incorporated

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