High Liner Foods Reports Strong Operating Results for the Fourth Quarter and Record Year for 2011

- Strategic acquisition of Icelandic USA highlights another strong year -

LUNENBURG, NS, Feb. 22, 2012 /CNW/ - High Liner Foods Incorporated (TSX: HLF; HLF.A), the leading North American value-added frozen seafood company, today reported financial results for the thirteen-week period and fiscal year 2011 ended December 31, 2011.  All amounts are reported in Canadian dollars.

Financial and operational highlights for the fourth quarter include (all comparisons are relative to the fourth quarter of 2010, unless otherwise noted):

  • Completed the acquisition of the Icelandic Group's U.S and Asian operations (together, "Icelandic Seafood acquisition") in December 2011 for a total purchase price of US$232.7 million excluding seasonal working capital, which positions High Liner as the leading value-added seafood supplier in North America;
  • Sales increased by 25.4% to $176.5 million from $140.8 million;
  • Adjusted EBITDA1 increased by 28.8% to $13.4 million from $10.4 million;
  • Reported net loss of $3.0 million, or diluted loss per share of $0.20, compared with $1.7 million, or diluted earnings per share ("EPS") of $0.11, in the fourth quarter of 2010; the decrease is attributable to one-time costs related to the Icelandic Seafood acquisition ($10.3 million pre tax and $8.0 million after tax), partially offset by lower stock option expense;
  • Excluding stock option expense, Adjusted EBITDA1 increased by 12.4% to $14.3 million from $12.8 million; and
  • Excluding stock option expense, Adjusted Net Income2 increased by 18.2% to $6.7 million, or diluted EPS of $0.44, from $5.7 million, or diluted EPS of $0.37, in the fourth quarter of 2010.

Financial and operational highlights for the fiscal year include (all comparisons are relative to fiscal year 2010, unless otherwise noted):

  • Completed the integration of Viking Seafoods, Inc. in April 2011;
  • Sales increased by 14.3% to $668.6 million from $584.7 million, despite approximately $12.7 million negative impact of the stronger Canadian dollar on the value of reported U.S. sales; the Viking acquisition added $37.5 million to sales versus $1.7 million in 2010, while the Icelandic Seafood acquisition contributed $9.0 million to sales;
  • Adjusted EBITDA1 increased by 15.9% to $54.7 million from $47.2 million
  • Reported net income of $18.2 million, or diluted EPS of $1.19, compared with $20.0 million, or diluted EPS of $1.23, in 2010, with the decrease attributable to costs related to the Icelandic Seafood acquisition, offset by lower stock operating expense;
  • Excluding stock option expense, Adjusted EBITDA1 increased by 8.7% to $55.3 million from $50.9 million;
  • Excluding stock option expense, Adjusted Net Income increased by 11.2% to $28.2 million, or diluted EPS of $1.84, from $25.4 million, or diluted EPS of $1.56, for fiscal year 2010; and
  • Sales volume, excluding the contribution of the Icelandic Seafood acquisition in late December, increased by 12.2% during the year, with 7.9% of increase due to the Viking acquisition.

"We are very pleased to report another strong year in the history of High Liner Foods," said Henry Demone, president and CEO.  The acquisition of Viking Seafoods at the end of 2010 as well as strength in our pre-Viking businesses helped us achieve a record year of sales, Adjusted EBITDA and Adjusted net income. Sales volume from our U.S. operations grew in both our food service and retail businesses at 32.1% and 12.5%, respectively. Our Canadian operations saw unchanged sales volumes due to a challenging retail market, but recorded a 4.1% increase in sales.  We culminated the year with the important strategic Icelandic Seafood acquisition, which now makes us the category leader in food service value-added frozen seafood in North America.  Icelandic Seafood is an established leader in the U.S. food service market, and we believe that the combination with High Liner will enable us to leverage a more efficient supply chain and stronger purchasing power to address a larger customer base. By strengthening our industry leadership position, we believe our strategy creates incremental value to our shareholders."

Financial Results

More than half of the Company's operations, assets, and liabilities, are denominated in U.S. dollars or are impacted by the Canadian/U.S. dollar exchange rate.  As such, foreign currency fluctuations affect the reported values of individual lines on the Company's balance sheet and income statement.

(In thousands except per share amounts, unless otherwise noted)
  Thirteen weeks
ended Dec. 31,
2011
Thirteen weeks
ended Jan 1,
2011
Fifty-two weeks
ended Dec.31,
2011
Fifty-two weeks
ended Jan. 1,
2011
Sales in million pounds 51.2 43.0 200.7 176.6
Sales in domestic currency $174,233 $139,844 $672,318 $575,742
Foreign exchange impact $2,246 $891 ($3,729) $8,973
Sales in Canadian dollars $176,479 $140,775 $668,589 $584,715
Adjusted EBITDA $13,379 $10,391 $54,697 $47,185
Net income ($3,020) $1,686 $18,180 $19,985
Adjusted net income $5,743 $3,305 $27,555 $21,535
EPS (Diluted) ($0.20) $0.11 $1.19 $1.23
Adjusted EPS (Diluted)3 $0.38 $0.21 $1.80 $1.33
Average Shares Outstanding (Diluted) 15,290 15,374 15,341 16,244
         
Excluding Stock Option Expenses:        
Adjusted EBITDA $14,342 $12,758 $55,348 $50,918
Adjusted net income $6,706 $5,672 $28,206 $25,368
Adjusted EPS (Diluted)3 $0.44 $0.37 $1.84 $1.56

Sales for the fourth quarter increased to $176.5 million from $140.8 million for the same period a year ago.  The 25.4% increase in sales was achieved due in part to the change in the value of the Canadian dollar, which increased the value of reported sales by $1.4 million, or 1.0%. Sales in domestic currency, which excludes the impact of currency translation, were $174.2 million compared with $139.9 million for fourth quarter of 2010.  The robust growth in sales was the result of an increase in High Liner's pre-Viking business, as well as the contribution of the Viking acquisition, which accounted for $35.8 million of increased sales.  Excluding Icelandic Seafood, total sales volume increased by 13.4% to 48.7 million pounds, with the Viking acquisition accounting for 6.0% of the increase.  The Icelandic Seafood acquisition added 2.5 million pounds of sales during the quarter. Total sales also reflect the marginal contribution of the Icelandic Seafood acquisition from December 19 to December 31, 2011 of $9 million in sales.

Adjusted EBITDA for the fourth quarter increased by 28.8% to $13.4 million, or 7.6% of sales, from $10.4 million, or 7.4% of sales, for the same period in 2010.  Adjusted EBITDA excludes business acquisition and integration expenses and non-operating transactions. The increase resulted from higher sales volumes, higher selling prices and lower stock option expense, partially offset by higher seafood and other input costs.  During the fourth quarter of 2010, High Liner incurred an unusually high stock option expense due to the increase in High Liner's stock price during the period.  Excluding stock option expense, Adjusted EBITDA increased by 12.4% to $14.3 million from $12.8 million for the same period in 2010. Icelandic Seafood contributed $1.0 million to Adjusted EBITDA during the quarter.

Net loss for the quarter was $3.0 million, or diluted loss per share of $0.20, compared with net income of $1.7 million, or diluted EPS of $0.11, for the fourth quarter of 2010.  Net income was negatively impacted by one-time business acquisition and integration costs related to the Icelandic Seafood acquisition completed during the quarter.  In addition, during the quarter, we recorded an additional non-deductible one-time withholding tax of $0.8 million related to the inter-company dividends paid in connection with the financing of the Viking acquisition in the fourth quarter of 2010.  Excluding these costs, Adjusted net income was $5.7 million compared with $3.3 million for the same period last year. Furthermore, excluding stock option expense, Adjusted net income increased by 18.2% to $6.7 million, or diluted EPS of $0.44, from $5.7 million, or diluted EPS of $0.37, in the previous year.

The following tables reconcile our reported net income with our Adjusted net income for the year and for the fourth quarter.

  Fiscal Year
  2011 2010
(In thousands except per share amounts) Pre tax Income tax after tax  Diluted EPS  Pre tax Income tax after tax  Diluted EPS 
Adjusted net income from operations 38,787 (11,232) 27,555 $   1.80   33,499 (11,964)   21,535 $ 1.33
Business acquisition, integration and other financing costs   (11,275) 2,700 (8,575) $   (0.56) (875) 331 (544) $ (0.03)
Witholding tax adjustment   (800) (800) $   (0.05)   (1,006) (1,006) $ (0.06)
Net Income 27,512 (9,332) 18,180 $   1.19   32,624 (12,639)   19,985 $ 1.23
                     
  Fourth Quarter
  2011     2010  
 (In thousands except per share amounts) Pre tax Income tax after tax   Diluted EPS  Pre tax Income tax after tax  Diluted EPS 
Adjusted net income from operations 8,142 (2,399) 5,743 $   0.38 6,616 (3,311) 3,305 $ 0.21
Business acquisition, integration and other financing costs   (10,279) 2,316 (7,963) $ (0.52) (986) 373 (613) $ (0.04)
Witholding tax adjustment   (800) (800) $ (0.05)   (1,006) (1,006) $ (0.07)
Net Income (2,137) (883) (3,020) $ (0.20) 5,630 (3,944) 1,686 $ 0.11

 

Total debt increased as a result of the Icelandic Seafood acquisition.  The table below shows the Company's net debt at the end of fiscal 2011 and 2010.  The debt is interest-bearing debt, and as a result, excludes deferred financing charges.

    December 31   January 1, 
Amounts in ($000s)   2011   2011
Current bank loans $   121,975 $   43,027
Current portion of long-term debt and finance
leases obligations
  3,607   5,398
Long-term debt and finance leases obligations   254,306   47,260
Cross currency swap mark to market   -   207
Less: cash and cash equivalents   (3,260)   (598)
Total funded debt   376,628   95,294

Dividends

Today, the Board of Directors of the Company approved a quarterly dividend of $0.10 per Common and Non-Voting Equity Share payable on March 15, 2012 to shareholders of record on March 2, 2012.

Outlook

"Our operating results are strong and our success with strategic initiatives in 2011 help position us for 2012 and beyond," added Mr. Demone.  "Our focus will now be on integrating the Icelandic Seafood acquisition and benefitting from expected synergies resulting from the combined operations.  We expect a majority of the synergies to be achieved over the next two years, with total ongoing annual synergies thereafter in the range of US$16-18 million."

"Over the past year, we saw growth in both food service and retail businesses in the U.S. and we expect that strength to continue into 2012 with the addition of Viking and Icelandic Seafood brands of products as well as the strength in our High Liner and FPI businesses.  In Canada, while we recorded a turnaround positive 4.3% overall sales growth in 2011 due to improvement in our food service business, our retail operations remained under pressure due to increased selling prices and a more competitive retail environment.  Our Canadian retail business gained strength as 2011 progressed, following a disappointing first quarter.  To address this, we increased our marketing initiatives to drive volume in stores, launched value-pack commodity products that can compete with trader labels, and reformulated some items to achieve more competitive price points. We expect these initiatives, and the introduction of new products in 2012, to result in increased sales volume in Canada this year.  Additionally, while we expect raw material costs for most species that we procure to be higher during the first half of 2012 than we experienced for the same period in 2011, prices for several key raw materials have recently decreased.  Due to inventory and contracts, we will start to benefit from these lower costs during the second half of the year. We also expect our increased purchasing power, expanded distribution, and cost-reduction efforts to contribute to operating improvements this year," concluded Mr. Demone.

Supplemental Financial Information

For convenience, this news release includes the Company's Fiscal Fourth Quarter Statements of Income, Segment Information and Reconciliation of Adjusted EBITDA and Adjusted Net Income to IFRS-measures. This news release is not in any way a substitute for reading High Liner's financial statements, including notes to the financial statements, and Management's Discussion and Analysis.

The Company's audited consolidated financial statements for the year ended December 31, 2011 will be issued and filed on SEDAR on or before March 16, 2012. Management's Discussion and Analysis for the year ended December 31, 2011, including further discussion and analysis of fourth quarter events or items that affected results of operations, financial position, and cash flows, will also be issued and filed on or before March 16, 2012. Both documents will also be available in the Investor Information section of the Company's website at www.highlinerfoods.com.

Conference Call

The Company will host a conference call on Thursday, February 23, at 9:30 a.m. ET (10:30 a.m. AT) to discuss its fourth quarter and full-year financial results.  To access the conference call by telephone, dial 647-427-7450 or 1-888-231-8191.  Please connect approximately ten minutes prior to the beginning of the call to ensure participation.  The conference call will be archived for replay by telephone until Thursday, March 1, 2012 at midnight.  To access the archived conference call, dial 1-855-859-2056 and enter the reservation number 48440440.

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 prepared, value-added frozen seafood.  High Liner's 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 its High Liner, FPI, Mirabel, Viking, Icelandic Seafood, Samband of Iceland, Seastar, and Seaside food service products to restaurants and institutions, and is the major supplier of private label seafood products to North American food retailers and food service distributors.  High Liner Foods is a publicly traded Canadian company, trading under the symbols HLF and HLF.A 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", "believe", "plan", "expect", "intend", "anticipate", "estimate", "foresee", "objective" 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,  planned volume growth, expectations that Icelandic Seafood will increase our market share for broad line value-added seafood products in the U.S. food service industry, higher average raw material costs in the first half of 2012 and our ability to mitigate with increased operating efficiencies and product pricing adjustments, anticipated financial performance, and our market position.  These statements are based on a number of factors and assumptions including, but not limited to: availability, demand and prices of raw materials, energy and supplies; the condition of the Canadian and United States economies; product pricing; foreign exchange rates, especially the rate of exchange of the Canadian dollar to the U.S. dollar; our ability to attract and retain customers and  our operating costs.  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 as supplemental indicators of operating performance. These non-IFRS measures are Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings per Share.

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.

HIGH  LINER FOODS INCORPORATED
 
For the thirteen and fifty-two weeks ended December  31, 2011
(with comparative figures for the thirteen and fifty-two weeks ended January 1, 2011)
(Unaudited)
CONSOLIDATED STATEMENTS OF INCOME
(in thousands of Canadian dollars, except per share amounts)
 
 
  For the thirteen
weeks ended,
December 31,
2011
For the thirteen
weeks ended,
January 1,
2011
  For the fifty-two
weeks ended,
December 31,
2011
  For the fifty-two
weeks ended,
January 1,
2011
                 
Sales $   176,479  $ 140,775    $ 668,589  $ 584,715
Cost of sales   138,709   106,913     516,659   447,542
Gross profit   37,770   33,862     151,930   137,173
Distribution expenses   9,430   7,338     35,021   30,027
Selling, general and administrative expenses, excluding stock option expense   17,889   18,327     72,086   68,500
Business acquisition, integration and other costs   10,279   986     11,275   875
Results from operating activities   172   7,211     33,548   37,771
Finance costs   2,220   1,552     5,983   5,165
Share of loss of equity accounted investee (net of income tax)   89   29     53   (18)
Income before income taxes   (2,137)   5,630     27,512   32,624
Income taxes                   
  Current   768   2,504     5,692   6,380
  Future   115   1,440     3,640   6,259
Total income taxes   883   3,944     9,332   12,639
Net income   (3,020)   1,686     18,180   19,985
PER SHARE INFORMATION                  
Earnings per Common Share                  
  Basic   (0.20)   0.11     1.20   1.24
  Diluted   (0.20)   0.11     1.19   1.23
                   
Average shares outstanding for the period                  
  Basic   15,086,846   15,148,633     15,108,823   16,096,010
  Diluted   15,289,777   15,373,635     15,340,963   16,243,780

 

HIGH  LINER FOODS INCORPORATED
For the thirteen and fifty-two weeks ended December 31, 2011
(with comparative figures for the thirteen and fifty-two weeks ended January 1, 2011)
(Unaudited)
Segmented Operations
(in thousands of Canadian dollars)
  Thirteen weeks Thirteen weeks Fifity-two weeks Fifity-two weeks
  December 31, 2011 January 1, 2011 December 31, 2011 January 1, 2011
Amounts in ($000s)  Canada   U.S.   Total   Canada   U.S.   Total   Canada   U.S.   Total   Canada   U.S.   Total 
Sales within geographic region 76,759 98,496 175,255 69,957 69,930 139,887 295,239 368,058 663,297 283,906 297,213 581,119
Sales outside of geographic region 2,172 9,157 11,329 1,798 2,370 4,168 7,930 17,600 25,530 5,697 9,438 15,135
  78,931 107,653 186,584 71,755 72,300 144,055 303,169 385,658 688,827 289,603 306,651 596,254
Intercompany sales outside of geographic region (2,453) (7,652) (10,105) (1,794) (1,486) (3,280) (7,160) (13,078) (20,238) (5,247) (6,292) (11,539)
Revenue (excluding intercompany sales)  76,478 100,001 176,479 69,961 70,814 140,775 296,009 372,580 668,589 284,356 300,359 584,715
Cost of sales (excluding intercompany sales)  (60,513) (78,196) (138,709) (52,587)  (54,326) (106,913) (228,443) (288,216) (516,659) (215,747) (231,795) (447,542)
Gross profit 15,965 21,805 37,770 17,374 16,488 33,862 67,566 84,364 151,930 68,609 68,564 137,173
Distribution expenses (3,845) (5,585) (9,430) (3,548) (3,790) (7,338) (14,750) (20,271) (35,021) (13,869) (16,158) (30,027)
Selling, general and administrative expenses (7,473) (10,416) (17,889) (9,557) (8,770) (18,327) (31,260) (40,826) (72,086) (33,603) (34,897) (68,500)
Business acquisition, integration and other expenses (1,220) (9,059) (10,279) (86) (900) (986) (1,265) (10,010) (11,275) (86) (789) (875)
Financing costs (1,201) (1,019) (2,220) (670) (882) (1,552) (1,837) (4,146) (5,983) (1,337) (3,828) (5,165)
(Loss) gain from equity accounted investee  (45) (44) (89) (14) (15) (29) (27) (26) (53) 9 9 18
Income before income tax  2,181 (4,318) (2,137) 3,499 2,131 5,630 18,427 9,085 27,512 19,723 12,901 32,624
Income taxes (1,426) 543 (883) (2,940) (1,004) (3,944) (5,379) (3,953) (9,332) (7,410) (5,229) (12,639)
Net income 755 (3,775) (3,020) 559 1,127 1,686 13,048 5,132 18,180 12,313 7,672 19,985
Add back:                        
Depreciation included in:                        
Cost of sales 589 1,055 1,644 555 857 1,412 2,315 3,811 6,126 2,315 3,371 5,686
Distribution 47 119 166 46 52 98 180 286 466 179 209 388
Selling, general and administrative expenses 287 47 334 308 37 345 1,147 162 1,309 1,082 145 1,227
Total depreciation 923 1,221 2,144 909 946 1,855 3,642 4,259 7,901 3,576 3,725 7,301
Amortization included in: Selling, general and administrative expenses 53 671 724 53 244 297 229 1,604 1,833 212 992 1,204
Total depreciation and amortization 976 1,892 2,868 962 1,190 2,152 3,871 5,863 9,734 3,788 4,717 8,505
Financing costs 1,201 1,019 2,220 670 882 1,552 1,837 4,146 5,983 1,337 3,828 5,165
Income taxes 1,426 (543) 883 2,940 1,004 3,944 5,379 3,953 9,332 7,410 5,229 12,639
Income before depreciation, amortization, financing and income taxes 4,358 (1,407) 2,951 5,131 4,203 9,334 24,135 19,094 43,229 24,848 21,446 46,294

__________________________________________________________

1Adjusted EBITDA is earnings before interest, taxes, depreciation and amortization, excluding business acquisition and integration costs and other income or expense, as disclosed in the consolidated statements of income.
2Adjusted net income is net income excluding business acquisition and integration costs, other income or expense, and withholding tax related to the financing of the Viking acquisition.
3Adjusted EPS is Adjusted net income, as defined, divided by the average diluted number of shares.


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