High Liner Foods Reports Second Quarter 2013 Operating Results

- Strong Second Quarter results in Adjusted Net Income of $9.2 million, a 68% increase over 2012 -

LUNENBURG, NS, Aug. 7, 2013 /CNW/ - High Liner Foods Incorporated (TSX: HLF) ("High Liner" or "the Company"), the leading North American value-added frozen seafood company, today reported financial results for the thirteen and twenty-six weeks ended June 29, 2013.  All amounts are reported in U.S. dollars ("USD") unless otherwise noted.

Financial and operational highlights for the second quarter of 2013 include (all comparisons are relative to the second quarter and first twenty-six weeks of 2012, unless otherwise noted):

  • Sales for the second quarter were $204.9 million, compared with $216.8 million;
  • Reported net income increased in the second quarter to $9.9 million (diluted earnings per share ("EPS") of $0.63), compared with $1.0 million (diluted EPS of $0.06) in the second quarter of 2012 ($15.1 million, or diluted EPS of $0.97, for the first twenty-six weeks of 2013, compared to $2.7 million, or $0.18 diluted EPS, for the first twenty-six weeks of 2012);
  • Adjusted Net Income1 increased in the second quarter to $9.2 million (Adjusted Diluted EPS1 of $0.59), compared with $5.5 million (Adjusted Diluted EPS of $0.35) in the second quarter of 2012 ($19.0 million, or Adjusted Diluted EPS of $1.22, for the first twenty-six weeks of 2013, compared to $19.5 million, or Adjusted Diluted EPS of $1.26, for the first twenty-six weeks of 2012);
  • Adjusted EBITDA1 for the second quarter was $19.3 million, compared with $16.4 million;
  • Standardized Free Cash Flow1 was $82.3 million for the rolling fifty-two weeks ended June 29, 2013, compared with $41.0 million for the same period ended June 30, 2012; and
  • Net interest-bearing debt to Adjusted EBITDA, calculated on a rolling fifty-two week basis, decreased to 3.15x at the end of the second quarter, compared to 3.40x at the end of fiscal 2012 and 3.74x at the end of the first quarter of 2013.

"We are pleased with our financial performance in the second quarter, particularly with the $3.7 million increase in the Company's Adjusted Net Income and the $2.9 million increase in its Adjusted EBITDA," said Henry Demone, President and CEO.  "Despite experiencing an overall reduction in sales volumes in the quarter, the Company's profitability has improved, primarily reflecting lower raw material costs compared to last year, along with realization of synergies resulting from integrating the Icelandic USA acquisition.  The increase in Adjusted Net Income also reflects significant savings in financing costs resulting from amendments made to our term loan in Q1 of this year," explained Mr. Demone.

"However, similar to Q1, we saw continued challenges in our U.S. food service business related to soft restaurant sales, and retail private labels sales continued to be weaker in both the U.S. and Canada, reflecting the trend of decreased private label seafood sales in the seafood marketplace overall.  Helping to offset lower private label sales in the U.S., sales increased in the second quarter for our Sea Cuisine and Fisher Boy products compared to last year, the impact of which was partially offset by higher Sea Cuisine promotional costs which are expensed as a reduction to sales as incurred."  Mr. Demone also noted, "Canadian branded retail sales volume was consistent with last year, while sales volume in our Canadian food service business experienced an increase in the second quarter compared to last year."

"Lastly, we remain focused on deleveraging and our strong Free Cash Flow is allowing us to do this.  When calculated on a fifty-two week rolling basis, net interest-bearing debt to Adjusted EBITDA has decreased from 3.74x at the end of the first quarter of this year to 3.15x at the end of the second quarter.

   
1Please refer to High Liner's Management Discussion & Analysis ("MD&A") for the Thirteen and Twenty-Six Weeks Ended June 29, 2013 for definitions of the non-IFRS financial measures used by the Company, including "Adjusted Net Income", "Adjusted Diluted EPS", "Adjusted EBITDA" and "Standardized Free Cash Flow".

Financial Results

The following table summarizes the Company's financial results for the thirteen and twenty-six week periods ended June 29, 2013.

(All amounts in thousands, except per share
amounts and sales volume)
  Thirteen
weeks ended
June 29, 2013
  Thirteen
weeks ended
June 30, 2012
  Twenty-six
weeks ended
June 29, 2013
  Twenty-six
weeks ended
June 30, 2012
Sales in million pounds   58.8   61.3   143.5   148.2
Sales in domestic currency   $206,628   $217,665   $482,465   $505,283
Foreign exchange impact   $(1,720)   $(834)   $(2,395)   $(872)
Sales in USD   $204,908   $216,831   $480,070   $504,411
Adjusted EBITDA   $19,293   $16,372   $40,591   $47,901
Net income   $9,881   $989   $15,145   $2,717
Adjusted Net Income   $9,184   $5,450   $18,970   $19,459
Diluted EPS   $0.63   $0.06   $0.97   $0.18
Adjusted Diluted EPS   $0.59   $0.35   $1.22   $1.26
Weighted diluted average shares outstanding   15,575   15,450   15,593   15,419

Sales for the second quarter were $204.9 million, a decrease of $11.9 million or 5.5%, from $216.8 million for the same period last year.  Approximately 64% of the decline was attributable to U.S. sales and reflects lower food service sales in the U.S. and lower retail private label sales in both the U.S and Canada as explained above.  Approximately one-third of the Company's sales are denominated in Canadian dollars ("CAD") and the effect of translating CAD denominated sales to USD decreased the value of reported sales relative to the comparable period in 2012 by approximately $0.9 million.

Adjusted EBITDA was $19.3 million, or 9.4% of sales, in the second quarter of 2013, an increase of $2.9 million from $16.4 million, or 7.6% of sales, for the same period in 2012.  The increase in Adjusted EBITDA reflects realization of synergies resulting from integrating the Icelandic USA acquisition and lower raw material costs in the second quarter compared to last year, partially offset by lower sales volumes and increased marketing and distribution costs.

Net income was $9.9 million (diluted EPS of $0.63) in the second quarter of 2013, compared with net income of $1.0 million (diluted EPS of $0.06) for the second quarter of 2012.  The increase reflects the same items cited above contributing to the $2.9 million increase in Adjusted EBITDA in the second quarter of 2013 compared to last year, along with significantly reduced financing costs in 2013 resulting from amendments made to our term loan in Q1 2013, a non-cash recovery related to revaluing an embedded derivative associated with the long-term debt LIBOR floor on our term loan, lower amortization of intangible assets and a lower stock-based compensation expense.  In addition, net income for the second quarter of 2012 was negatively impacted by one-time integration costs related to the Icelandic USA acquisition and asset impairment costs expensed during the quarter.

Excluding the after-tax impact of certain items, including one-time integration costs, stock-based compensation expense, the revaluation of the embedded derivative associated with the long-term debt LIBOR floor, and certain other non-recurring expenses, Adjusted Net Income was $9.2 million (Adjusted Diluted EPS of $0.59) compared with $5.5 million (Adjusted Diluted EPS of $0.35) for the same quarter in 2012.

Standardized Free Cash Flow was $82.3 million for the rolling fifty-two weeks ended June 29, 2013 compared with $41.0 million for the same period ended June 30, 2012.  Cash flow generated from operations allowed the Company to reduce net interest-bearing debt by $74.5 million, bringing net interest-bearing debt to $266.3 million at June 29, 2013 from $340.8 million at June 30, 2012.

Dividends

Today, the Board of Directors of the Company approved a quarterly dividend of CAD$0.18 per Common Share payable on September 16, 2013 to shareholders of record on September 3, 2013.

Outlook

"On a year-to-date basis, the strong second quarter results helped to partially offset the impact of what was a challenging first quarter.  As expected, the lower margins on commodity products we faced in Q1 were primarily contained to the first quarter, however, shortages and related price increases for shrimp and haddock may have an adverse affect on our margins for certain products during the balance of 2013. Reduced sales volumes, primarily in our U.S. food service business, continued into the second quarter, but to the extent there are improvements in this sector of the U.S. economy, sales volumes should improve. Increased operating expenses experienced in Q1 related to an expedited Icelandic USA integration were reduced in Q2, and we are still working on fully realizing synergies related to the integration, including further reducing distribution costs and increasing plant throughput," explained Mr. Demone.

Mr. Demone concluded, "The second quarter results reflect the impact of synergies related to the Icelandic USA acquisition and in 2013 we continue to focus on identifying further operating efficiencies that leverage our scale of business and leadership position in value-added frozen seafood in North America. We remain committed to achieving our 2013 strategic goals, which as disclosed previously are: profitable growth, through organic sales growth, acquisitions and operating efficiencies; supply chain excellence through unlocking benefits from our fully integrated infrastructure, services and processes; and sustainable sourcing, though sourcing all our seafood from certified sustainable or responsible fisheries or aquaculture farms by the end of this year."

This news release is not in any way a substitute for reading High Liner's financial statements, including notes to the financial statements, and the MD&A.  The Company's Unaudited Condensed Interim Consolidated Financial Statements for the second quarter of fiscal 2013, which includes the Statements of Financial Position, Income, Comprehensive Income, Changes in Shareholders' Equity, Cash Flows and notes to the financial statements, can be viewed in the Investor Information section of the High Liner Foods website at http://www.highlinerfoods.com/en/home/investorinformation/quarterlyreports.aspx.  At the end of fiscal 2012, the Company changed its presentation currency from CAD to USD, effective retrospectively to January 3, 2010.  The restated Statements of Financial Position, Income and Cash Flows for the second and third quarters of 2012 to reflect the change to a USD presentation currency are also located at http://www.highlinerfoods.com/en/home/investorinformation/miscellaneousfinancialinformation.aspx.

Conference Call

The Company will host a conference call on Thursday, August 8, 2013 at 10:30 a.m. ET (11:30 a.m. AT) to discuss its second quarter 2013 financial results. 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 Thursday, August 15, 2013 at midnight.  To access the archived conference call, dial 1-855-859-2056 and enter the reservation number 17378678.

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's retail branded products are sold throughout the United States, Canada and Mexico under the High Liner, Fisher Boy, Mirabel, Sea Cuisine and Royal Sea labels, and are available in most grocery and club stores.  The Company also sells branded products under the High Liner, Icelandic Seafood, FPI, Viking, Mirabel, and Samband of Iceland labels to restaurants and institutions, 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", "would", "could", "believe", "plan", "expect", "intend", "anticipate", "estimate", "foresee", "objective", "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; increased sales volume; decreased costs, including distribution costs; realization of synergies related to the Icelandic USA acquisition; raw material prices; profit margins; achievement of strategic goals; and our market position.  These statements are based on a number of factors and assumptions including, but not limited to: seafood availability, demand and pricing, including the cost of raw materials, energy and supplies; the condition of the Canadian and U.S. economies; product pricing; our ability to attract and retain customers; our operating costs, level of bank loans and interest rates, and income tax rates .  The statements are not a guarantee of future performance.  By their nature, forward-looking statements involve uncertainties and risks that the forecasts and targets will not be 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 provided as supplemental indicators of operating performance. These non-IFRS measures are "Adjusted Net Income", "Adjusted Diluted EPS", "Adjusted EBITDA" and "Standardized Free Cash Flow".  Please refer to High Liner's MD&A for the Thirteen and Twenty-Six Weeks Ended June 29, 2013 for definitions of the non-IFRS financial measures used by the Company.

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.

SOURCE High Liner Foods Incorporated

Back