High Liner Foods Reports Third Quarter 2014 Operating Results

LUNENBURG, NS, Nov. 7, 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 and thirty-nine weeks ended September 27, 2014.  All amounts are reported in U.S. dollars ("USD") unless otherwise noted.

High Liner Foods' common shares trade on the Toronto Stock Exchange and are quoted in Canadian dollars ("CAD"), and closed yesterday at CAD$21.931.  The Company reports its financial results in USD and the average USD/CAD exchange rate during the third quarter of 2014 was 1.0877 and 1.0936 for the thirty-nine weeks ended September 27, 2014.

Financial and operational highlights for the third quarter of 2014 include (all comparisons are relative to the third quarter of 2013, unless otherwise noted):

  • Sales as reported increased in the third quarter of 2014 by $30.1 million, or 13.9%, to $246.6 million compared to $216.5 million (the American Pride Acquisition2 added $31.9 million in sales);
  • Sales in domestic currency increased in the third quarter of 2014 by $33.9 million, or 15.4%, to $253.3 million compared to $219.4 million (excluding $31.9 million in sales from the American Pride Acquisition, sales in domestic currency increased in the third quarter of 2014 by $2.0 million, or 0.9%);
  • Adjusted EBITDA3 decreased in the third quarter of 2014 by $3.1 million, or 14.0%, to $19.0 million compared to $22.1 million (the American Pride Acquisition added $0.5 million in Adjusted EBITDA);
  • Reported net income3 increased in the third quarter of 2014 by $0.2 million, or 2.7%, to $7.6 million (diluted earnings per share ("EPS") of $0.24) compared to $7.4 million (diluted EPS of $0.24);
  • Adjusted Net Income decreased in the third quarter of 2014 by $2.0 million, or 19.2%, to $8.4 million (Adjusted Diluted EPS3 of $0.27) compared to $10.4 million (Adjusted Diluted EPS of $0.33); and
  • Net interest-bearing debt to Adjusted EBITDA, calculated on a rolling fifty-two week basis, increased to 4.0x at the end of the third quarter of 2014 compared to 3.9x at the end of fiscal 2013.

1 Source: TSX November 6, 2014.

2 In October 2013, High Liner Foods purchased the American Pride Seafoods business from American Seafoods Group LLC, a value-added frozen seafood and scallop processing business serving the U.S. foodservice market from New Bedford, MA.  For additional information on this acquisition (the "American Pride Acquisition") please refer to the Company's Management Discussion & Analysis ("MD&A") for the thirteen and thirty-nine weeks ended September 27, 2014.

3 Please refer to High Liner Foods' MD&A for the thirteen and thirty-nine weeks ended September 27, 2014 for definitions of the non-IFRS financial measures used by the Company, including "Adjusted Net Income", "Adjusted Diluted EPS" and "Adjusted EBITDA".

Financial and operational highlights for the thirty-nine weeks ended September 27, 2014 or first three quarters of 2014 include (all comparisons are relative to the first three quarters of 2013, unless otherwise noted):

  • Sales increased in the first three quarters of 2014 by $88.1 million, or 12.6%, to $784.7 million compared to $696.6 million (the American Pride Acquisition added $105.4 million in sales);
  • Sales in domestic currency increased in the first three quarters of 2014 by $104.1 million, or 14.8%, to $806.0 million compared to $701.9 million (excluding $105.4 million in sales from the American Pride Acquisition, sales in domestic currency decreased in the first three quarters of 2014 by $1.3 million, or 0.2%);
  • Adjusted EBITDA increased in the first three quarters of 2014 by 0.2 million, or 0.3%, to $62.9 million compared to $62.7 million (the American Pride Acquisition added $3.1 million in Adjusted EBITDA);
  • Reported net income increased in the first three quarters of 2014 by $2.1 million, or 9.3%, to $24.7 million (diluted earnings per share ("EPS") of $0.79) compared to $22.6 million (diluted EPS of $0.72); and
  • Adjusted Net Income increased in the first three quarters of 2014 by $0.4 million, or 1.3%, to $29.7 million (Adjusted Diluted EPS of $0.95) compared to $29.3 million (Adjusted Diluted EPS of $0.94).

"Sales increased in the third quarter of 2014 primarily reflecting the American Pride Seafood business we acquired in October of last year," announced Mr. Demone.  "However, excluding sales from American Pride, we continued to experience sale volume declines in our U.S. food service business."

Mr. Demone continued, "The continued sales decline in our U.S. foodservice business reinforces how important it is for the Company to bring innovative products to its customers, and we continue to make progress on this.  We also made good progress on our supply chain optimization initiatives in the third quarter and expect these initiatives will bring margin improvement and cost reductions beginning in early 2015."

The Company also shared today that Mario Marino, President and COO of its Canadian Operations, has announced his intention to retire and will step down from his position in April 2015.  He will remain with the Company in an advisory role until the end of 2015.  Mr. Marino has added tremendous value to High Liner Foods during his 34 year tenure with the Company.  A succession plan is in place for Mr. Marino and following a transition period, his position will be filled internally by Jeff O'Neill, who currently holds the position Vice President Sales and Marketing, Retail, Canadian Operations.

The Company's also announced today that Frank van Schaayk joined the Company's Board of Directors.  Mr. van Schaayk has extensive food industry experience, including the past twenty-two years in various management roles at McCain Foods where he most recently held the title Regional President of the Americas until recently retiring.  "We are extremely pleased to have Frank join the High Liner Foods' Board," said David Hennigar, Chairman of the Board. "His experience and expertise will further strengthen the strategic business profile of our Board."

Financial Results

The financial results for the thirteen and thirty-nine weeks ended September 27, 2014 and September 28, 2013 are summarized in the following table:

(All currency amounts are shown in USD; amounts are shown in thousands, except sales volumes and earnings per share amounts)

Thirteen weeks ended

Thirty-nine weeks ended

September 27,
 2014

September 28,
 2013

September 27,
 2014

September 28,
 2013

Sales in domestic currency

$

253,263


$

219,414


$

805,954


$

701,879


Foreign exchange impact on sales

$

(6,710)


$

(2,928)


$

(21,236)


$

(5,324)


Sales as reported

$

246,553


$

216,486


$

784,718


$

696,555


Sales volume in millions of pounds

70.1


62.7


231.0


206.9


Adjusted EBITDA

$

18,978


$

22,055


$

62,903


$

62,660


Net income

$

7,572


$

7,444


$

24,661


$

22,589


Adjusted Net Income

$

8,386


$

10,367


$

29,709


$

29,337


Diluted EPS

$

0.24


$

0.24


$

0.79


$

0.72


Adjusted Diluted EPS

$

0.27


$

0.33


$

0.95


$

0.94


Weighted diluted average shares outstanding

31,382


31,188


31,301


31,186


† Amounts reflect retrospective application of May 30, 2014 2-for-1 stock split as explained in High Liner Foods' MD&A for the thirteen and thirty-nine weeks ended September 27, 2014.

 

Sales for the third quarter of 2014 were $246.6 million, an increase of $30.1 million, or 13.9%, from $216.5 million for the same period in 2013.  In 2014, approximately 70% of the Company's operations, including sales, were denominated in USD.  The weaker Canadian dollar in the third quarter of 2014 compared to the same quarter in 2013 decreased the value of reported USD sales of the Company's CAD-denominated operations approximately $3.6 million relative to the conversion impact last year.

Sales in domestic currency increased by $33.9 million, or 15.5%, to $253.3 million in the third quarter of 2014, compared to $219.4 million in 2013.  American Pride added $31.9 million in sales in 2014, and excluding this amount, sales in domestic currency increased by $2.0 million in 2014.

Adjusted EBITDA in the third quarter of 2014 was $19.0 million, or 7.7% of sales, compared to $22.1 million, or 10.2% of sales, for the same period in 2013.  American Pride added $0.5 million in Adjusted EBITDA in 2014 and excluding this amount, Adjusted EBITDA decreased by $3.6 million due to lower overall sales volume (excluding American Pride), lower product margins in the U.S. and higher SG&A spending in the U.S.  The impact of these unfavourable items was partially offset by higher product margins in Canada and lower distribution costs in the U.S.

Net income in the third quarter of 2014 was $7.6 million (diluted EPS of $0.24) compared to $7.4 million (diluted EPS of $0.24) in the third quarter of 2013.  In addition to the items cited in the preceding paragraph, the $0.2 million increase in net income also reflects: lower financing costs resulting from a mark-to-market loss on an embedded derivative in 2013, lower interest rates in 2014 and a favourable change in the valuation of interest rate swaps, partially offset by higher average debt levels in 2014; a $1.3 million decrease in stock-based compensation expense; and a lower effective income tax rate.

Excluding the after-tax impact of certain items, including one-time costs related to acquisition and integration activities, stock-based compensation expense, accelerated amortization of financing costs and other items resulting from debt refinancing and amendment activities, the non-cash expense (income) related to the revaluation of the embedded derivative associated with our long-term debt LIBOR floor, the mark-to-market loss (gain) on the interest rate swaps related to the embedded derivative and certain other non-recurring expenses, Adjusted Net Income was $8.4 million (Adjusted Diluted EPS of $0.27) in the third quarter of 2014 compared to $10.4 million (Adjusted Diluted EPS of $0.33) in the third quarter of 2013. 

Net cash flows (used in) provided by operating activities decreased by $9.2 million in the third quarter of 2014 to $(4.0) million compared to $5.2 million in the same period last year, due to increased net non-cash working capital requirements and less favourable results from operations, partially offset by lower finance costs and income tax payments.

The Board of Directors of the Company approved today a quarterly dividend of CAD$0.105 per share on the Company's common shares payable on December 15, 2014 to holders of record on December 1, 2014.

Outlook

"We were pleased to announce in early October our acquisition of Atlantic Trading Company.  Atlantic Trading is a complementary business that enhances the portfolio of products we offer our customers and is expected to more than double our sales in salmon products," stated Mr. Demone.  "This is a great example of the types of opportunities we believe continue to exist for us to acquire further frozen seafood companies in North America."

"Looking ahead, the U.S. foodservice sector may remain challenging for many of our major foodservice customers and we remain committed to working with them to develop innovative seafood products to help drive increased sales." Mr. Demone concluded, "The integration of American Pride, which commenced after Lent, continues to be on track for completion in the fourth quarter, with the full benefit of associated synergies expected to be realized next year.  We also expect to start realizing cost savings in 2015 related to supply chain initiatives, with the full benefit being achieved in 2016."

Conference Call

The Company's Unaudited Condensed Interim Consolidated Financial Statements and MD&A as at and for the thirteen and thirty-nine weeks ended September 27, 2014 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 Friday, November 7, 2014, at 2:00 p.m. EST (3:00 p.m. AST) during which Henry Demone, CEO, Paul Jewer, Executive VP & CFO and Keith Decker, President & COO will discuss the financial results for the third quarter of 2014.  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, November 14, 2014 at midnight.  To access the archived conference call, dial 1-855-859-2056 and enter the reservation number 15249457.

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, Sea Cuisine, and effective October 7, 2014, C. Wirthy 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 Seafood labels and is the major supplier of private label value-added seafood products to North American food retailers and foodservice 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; changes to sales volume, margins and input costs, including raw material prices; changes to American Pride's operations; achievement, and timing of achievement, of strategic goals and publicly stated financial targets, including to increase our market share, acquire and integrate other businesses and reduce our operating and supply chain costs; and our ability to develop new and innovative products that result in increased sales and market share.  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 Net Income, Adjusted Diluted EPS, Adjusted EBITDA and Adjusted Standardized Free Cash Flow.  Please refer to the Company's MD&A for the thirteen and thirty-nine weeks ended September 27, 2014 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.

SOURCE High Liner Foods Incorporated

Back