High Liner Foods Reports Operating Results for the Fourth Quarter and Full-Year of 2014

– Company reports sales exceeding $1.0 billion USD for the first time ever

LUNENBURG, NS, Feb. 18, 2015 /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 fourteen weeks and fifty-three weeks ended January 3, 2015.  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$23.071. The Company reports its financial results in USD and the average USD/CAD exchange rate during the fourth quarter of 2014 was 1.1356 and 1.1044 for the fifty-three weeks ended January 3, 2015. 

In regards to the USD/CAD exchange rate, due to the conversion of our Canadian parent company's CAD-denominated operations to USD for reporting purposes, to the extent the Canadian dollar continues to weaken against the U.S. dollar, our USD-reported financial results will be unfavourably impacted.  Also, investors are reminded for purposes of calculating financial ratios, including dividend payout and share price-to-earnings ratios, to take into consideration the Company's share price and dividend rate are reported in CAD and its earnings and financial position are reported in USD.

Financial and operational highlights for fiscal 2014 include (all comparisons are relative to fiscal year 2013):

  • Sales as reported increased by $104.3 million, or 11.0%, to $1,051.6 million compared to $947.3 million;
  • Sales in domestic currency increased by $127.2 million, or 13.3%, to $1,083.5 million compared to $956.3 million;
  • Adjusted EBITDA2 decreased by $2.0 million, or 2.3%, to $83.3 million compared to $85.3 million;
  • Adjusted EBITDA in domestic currency increased by $0.3 million, or 0.3%, to $86.6 million compared to $86.3 million;
  • Reported net income decreased by $1.1 million, or 3.4%, to $30.3 million (diluted EPS of $0.97) compared to $31.4 million (diluted EPS of $1.01);
  • Adjusted Net Income2 -decreased by $2.5 million, or 6.1%, to $38.8 million (Adjusted Diluted EPS2 of $1.24) compared to $41.3 million (Adjusted Diluted EPS of $1.32);
  • Atlantic Trading was acquired on October 7, 2014 and in combination with American Pride Seafoods (acquired October 1, 2013), added $150.8 million to sales compared to American Pride sales of $39.7 million in 2013; and
  • Net interest-bearing debt to Adjusted EBITDA, calculated on a rolling twelve month basis, increased to 4.4x at the end of fiscal 2014, compared to 3.9x at the end of fiscal 2013.

 

1 Source: TSX February 17, 2015.

2 Please refer to High Liner Foods' MD&A for the fourteen weeks and fifty-three weeks ended January 3, 2015 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 fourth quarter of 2014 include (all comparisons are relative to the fourth quarter of 2013):

  • Sales as reported increased by $16.2 million, or 6.5%, to $266.9 million compared to $250.7 million;
  • Sales in domestic currency increased by $23.1 million, or 9.1%, to $277.5 million compared to $254.4 million;
  • Adjusted EBITDA decreased by $2.3 million, or 10.1% to $20.4 million compared to $22.7 million;
  • Adjusted EBITDA in domestic currency decreased by $1.5 million, or 6.5%, to $21.6 million compared to $23.1 million;
  • Reported net income decreased by $3.2 million, or 36.4%, to $5.6 million (diluted EPS of $0.18), compared with $8.8 million (diluted EPS of $0.28);
  • Adjusted Net Income decreased by $2.8 million, or 23.5%, to $9.1 million (Adjusted Diluted EPS of $0.29) compared to $11.9 million (Adjusted Diluted EPS of $0.38); and
  • Atlantic Trading was acquired on October 1, 2014 (the "Atlantic Trading Acquisition") and added $13.6 million to sales in the fourth quarter of 2014.

 

"We are pleased to report that our annual sales exceeded $1.0 billion in 2014 for the first time in the Company's history.  In domestic currency, sales increased by $127.2 million in 2014, reflecting a 13.3% increase over the prior year and 17.1% compound annual growth since 2010," announced Mr. Demone, CEO.  "Our two most recent acquisitions, American Pride and Atlantic Trading, helped bolster sales in 2014 by adding $150.8 million to sales compared to American Pride sales of $39.7 million in 2013."

"Organic growth however, was a challenge in our U.S. foodservice business in 2014 and combined with significant increases in the cost of certain key species in 2014 that were not fully recovered in the year and a weaker Canadian dollar, Adjusted EBITDA decreased in 2014 by $2.0 million compared to last year," explained Mr. Demone.

Mr. Demone continued, "Overall, good progress was made on our strategic goals in 2014, all of which are multi-year goals that will continue into 2015.  In regards to our goal focused on achieving profitable growth, the integration of American Pride was successfully executed in 2014 and we were very pleased to announce the acquisition of Atlantic Trading in October.  In 2014 we were successful in gaining momentum on our supply chain optimization goal in the second half of the year, and while, as expected, net savings were not realized in 2014, and we believe that $20 to $25 million in annual cost savings can be achieved related to this goal.  Lastly, we made progress on succession planning, our third strategic goal, as exemplified by transitions during the year in the CFO and the U.S. President & COO roles, and most recently, the announcement of the transition that will occur in 2015 in the Canadian President & COO role."

Financial Results

The following table summarizes the Company's financial results for the fourteen weeks and fiscal year ended January 3, 2015 with comparisons to the thirteen weeks and fifty-two weeks ended December 28, 2013, respectively.


Fourteen weeks ended

Thirteen weeks ended

Fifty-three weeks ended

Fifty-two weeks ended

(Amounts in 000s, except per share amounts, unless otherwise noted)

January 3,
 2015

December 28,
 2013

January 3,
 2015

December 28,
 2013

Sales in domestic currency

$

277,533


$

254,430


$

1,083,487


$

956,308


Foreign exchange impact on sales

$

(10,638)


$

(3,685)


$

(31,874)


$

(9,007)


Sales as reported

$

266,895


$

250,745


$

1,051,613


$

947,301


Sales in million pounds

76.6


74.4


307.6


281.3


Adjusted EBITDA

$

20,437


$

22,683


$

83,341


$

85,343


Net income

$

5,639


$

8,767


$

30,300


$

31,356


Adjusted Net Income

$

9,073


$

11,944


$

38,781


$

41,281


Diluted EPS

$

0.18


$

0.28


$

0.97


$

1.01


Adjusted Diluted EPS

$

0.29


$

0.38


$

1.24


$

1.32


Weighted diluted average shares outstanding

30,805


31,289


31,317


31,186


 

Sales increased in the fourth quarter of 2014 by $16.2 million, or 6.5%, to $266.9 million, compared to $250.7 million in 2013.  Approximately 70% of the Company's operations, including sales, are denominated in USD and the remainder is denominated in CAD.  The weaker Canadian dollar in the fourth quarter of 2014 compared to the same period last year decreased the value of reported USD sales of our CAD-denominated operations by approximately $6.4 million compared to the fourth quarter of 2013.

Sales in domestic currency increased in the fourth quarter of 2014 by $23.1 million, or 9.1%, to $277.5 million compared to $254.4 million in 2013.  Sales volume increased in the fourth quarter of 2014 by 2.2 million pounds, or 3.0%, to 76.6 million pounds compared to 74.4 million pounds in 2013.  Atlantic Trading added $13.6 million and 1.9 million pounds to sales in the fourth quarter of 2014 and excluding the impact of Atlantic Trading, sales in domestic currency increased by $9.5 million in the fourth quarter of 2014 and pounds sold increased by 0.3 million compared to the same period in 2013 due in part to the impact of one additional week of sales in the fourth quarter of 2014 (the fourth quarter of 2014 reflects operations for fourteen weeks compared to thirteen weeks in the fourth quarter of 2013).  Sales volume from our Canadian operations were higher in the fourth quarter of 2014 compared to the same period last year, but were partially offset by lower sales volume from our U.S. operations (excluding Atlantic Trading).

Adjusted EBITDA decreased in the fourth quarter of 2014 by $2.3 million, or 10.1%, to $20.4 million compared to $22.7 million in the same period last year.  The weaker Canadian dollar in fiscal 2014 compared to fiscal 2013 decreased the value of the Adjusted EBITDA in USD from our CAD-denominated operations by approximately $0.8 million relative to the conversion impact in 2013.

As a percentage of sales, Adjusted EBITDA in domestic currency was 7.8% in the fourth quarter of 2014, down from 9.1% in the same period last year.  Adjusted EBITDA in domestic currency decreased in the fourth quarter of 2014 due to lower product margins due to cost increases not fully recovered through price increases in both Canada and the U.S., along with higher SG&A expense in the U.S. and Canada, partially offset by higher sales volume and lower distribution costs in the U.S.

Net income for the fourth quarter of 2014 decreased by $3.2 million to $5.6 million ($0.18 per diluted share) compared to $8.8 million ($0.28 per diluted share) in 2013.  In addition to the $2.3 million decrease in Adjusted EBITDA explained above, the $3.2 million decrease in net income in the fourth quarter also reflects: higher one-time costs related to business acquisition, integration and other activities, including external consulting costs related to the Company's Supply Chain Optimization Project and an impairment loss on equipment related the Company's announcement on January 9, 2015 that it will cease production at its leased manufacturing facility in Malden, MA, in the second quarter of 2015; and higher financing costs as a result of higher debt levels.  The unfavourable impact of these items was partially offset by lower stock-based compensation expense in the fourth quarter of 2014 compared to the same period last year and lower income taxes.

Excluding the after-tax impact of certain items, including one-time costs related to acquisitions and integration activities, the Company's Supply Chain Optimization Project, impairment losses on equipment, stock-based compensation expense, and certain other non-recurring expenses, Adjusted Net Income in the fourth quarter of 2014 decreased by $2.8 million to $9.1 million (Adjusted Diluted EPS of $0.29) compared with $11.9 million (Adjusted Diluted EPS of $0.38) for the fourth quarter of 2013. 

Dividends

Today, the Board of Directors of the Company approved a quarterly dividend of CAD$0.105 per share payable on March 16, 2015 to shareholders of record on February 27, 2015.

Outlook

"As I already shared, our strategic goals will not change in 2015 and remain: profitable growth; supply chain optimization; and succession planning.  The Company will continue to focus on increasing profitability, and in 2015 the full benefit of synergies resulting from the American Pride integration will be realized, and we expect to start realizing cost savings related to supply chain optimization initiatives, with the full benefit of these initiatives being achieved in 2016." stated Mr. Demone.

Mr. Demone concluded, "Organic growth in our U.S. foodservice business was challenging in 2014, however, to the extent our foodservice customers benefit from recent improvements in U.S. consumer spending, partially fueled by lower gas prices, we could begin to see some improvement in organic growth in this part of our business."

Conference Call

The Company's Consolidated Financial Statements and MD&A for the fiscal period ended January 3, 2015 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 Wednesday, February 18, 2015 at 2:00 p.m. ET (3:00 p.m. AT) during which Henry Demone, CEO, Paul Jewer, Executive Vice President & CFO and Keith Decker, President & COO will discuss the financial results for the fourth quarter of 2014 and fiscal 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 Wednesday, February 25, 2015 at midnight.  To access the archived conference call, dial 1-855-859-2056 and enter the reservation number 67472763.

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 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 C. Wirthy 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, Samband of Iceland and American Pride Seafood labels to restaurants and institutions and is a 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; 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 EBITDA, Adjusted Net Income, Adjusted Earnings per Share and Adjusted Standardized Free Cash Flow.  Please refer to the Company's MD&A for the fiscal year ended January 3, 2015 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

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