High Liner Foods Reports First Quarter 2015 Operating Results and Announces Executive and Board Appointments

- Company reports 13.4% increase to Adjusted Net Income and increases the quarterly dividend by 14.3% -

- New Chief Executive Officer and Chairman of the Board Announced -

LUNENBURG, NS, May 12, 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 thirteen weeks ended April 4, 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$22.971.  The Company reports its financial results in USD and the average USD/CAD exchange rate was 1.2617 for the thirteen weeks ended April 4, 2015 (1.102 for the thirteen weeks ended March 29, 2014).

Due to the conversion of the Company's Canadian operations from CAD to USD for reporting purposes, to the extent the Canadian dollar continues to weaken against the U.S. dollar, the Company's USD-reported financial results will be unfavorably 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.

Today, the Board of Directors of the Company approved a quarterly dividend of CAD$0.120 per share on the Company's common shares payable on June 15, 2015 to holders of record on June 1, 2015.  The quarterly dividend of CAD$0.12 per share represents a 14.3% increase from the CAD$0.105 per share quarterly dividend paid on March 16, 2015 to common shareholders of record on February 27, 2015, and reflects the Board's continued confidence in the Company's operations.

Financial and operational highlights for the thirteen weeks ended April 4, 2015, or first quarter of 2015, include (all comparisons are relative to the first quarter of 2014, unless otherwise noted):

  • Sales as reported increased by $7.6 million, or 2.5%, to $310.2 million compared to $302.6 million;
  • Sales in domestic currency increased by $16.8 million, or 5.4%, to $326.9 million compared to $310.1 million;
  • Adjusted EBITDA2 increased by $3.4 million, or 12.6%, to $30.7 million compared to $27.2 million;
  • Reported net income increased by $0.6 million, or 5.0%, to $12.5 million (diluted earnings per share ("EPS") of $0.40) compared to $11.9 million (diluted EPS of $0.38);
  • Adjusted Net Income2 increased by $1.8 million, or 13.4%, to $15.6 million (Adjusted Diluted EPS2 of $0.50) compared to $13.8 million (Adjusted Diluted EPS of $0.44); and
  • Net interest-bearing debt to Adjusted EBITDA, calculated on a rolling twelve-month basis, improved to 4.0x at the end of the first quarter compared to 4.4x at the end of Fiscal 2014.

1 Source: TSX May 11, 2015.

2 Please refer to High Liner Foods' MD&A for the thirteen weeks ended April 4, 2015 for definitions of the

non-IFRS financial measures used by the Company, including "Adjusted Net Income", "Adjusted Diluted

EPS" and "Adjusted EBITDA".

"We are satisfied with the Company's performance in the first quarter of 2015, and in particular with the increases in Adjusted EBITDA and Adjusted Net Income compared to the first quarter of last year," stated Henry Demone, Chief Executive Officer.  "Our latest acquisition, Atlantic Trading, bolstered sales and partially offset the impact of volume declines in other areas of our business.  A weaker Canadian dollar year-over-year continues to negatively impact the results reported by our Canadian business, both in terms of its impact on the translation of these operations from CAD to USD and its impact on the cost of raw materials, which are largely purchased in USD."

Mr. Demone continued, "Our supply chain optimization initiatives continued to progress as expected throughout the first quarter, with the exception of a few areas where activities have been slightly delayed.  While the first quarter's results only reflect nominal cost savings associated with these initiatives, we announced plans in early January to cease operations at our leased Malden facility, which is expected to reduce annual operating costs, and increase annual EBITDA, by $3.0 million.  Operations at this facility ceased as planned in early April and I would like to thank the many employees involved with the successful transfer of production from the Malden plant to our other facilities."

The Company also announced today that Keith Decker, currently the Company's President and Chief Operating Officer, will become President and Chief Executive Officer and that Henry Demone, currently Chief Executive Officer, will assume the role of Chairman of the Company's Board of Directors.  In connection with these changes, David Hennigar will continue to serve on the Board in the new position of Lead Director and Vice Chairman, and Mr. Decker will be joining the Board of Directors.  These executive and Board appointments will be effective  following the conclusion of the Company's upcoming annual general meeting today.

"Succession planning has been a top priority for High Liner Foods over the last several years.  Keith's appointment to President and CEO follows a number of recent changes at the executive level of the Company as part of our succession plans to ensure continued strong leadership into the future," said Mr. Hennigar, Chair of the Board.

The necessary changes will be made to the Charter of the Board of Directors and related governance documents in connection with these appointments.

Financial Results

The financial results for the thirteen weeks ended April 4, 2015 and March 29, 2014 are summarized in the following table:


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

Thirteen weeks ended

April 4,
 2015


March 29,
 2014

Sales in domestic currency

$

326,864


$

310,066

Foreign exchange impact on sales

$

(16,642)


$

(7,421)

Sales as reported

$

310,222


$

302,645

Sales in millions of pounds

89.5


94.2

Adjusted EBITDA

$

30,672


$

27,234

Net income

$

12,533


$

11,901

Adjusted Net Income

$

15,628


$

13,784

Diluted EPS

$

0.40


$

0.38

Adjusted Diluted EPS

$

0.50


$

0.44

Weighted diluted average shares outstanding

31,373


31,365

† 2014 EPS reflect retrospective application of a 2-for-1 stock split on May 30, 2014 as explained in High Liner

Foods' MD&A for the thirteen weeks ended April 4, 2015.

Sales volume decreased in the first quarter of 2015 by 4.7 million pounds, or 5.0%, to 89.5 million pounds, compared to 94.2 million pounds in the same period last year primarily reflecting lower sales volume from our U.S. and Canadian operations, partially offset by the Atlantic Trading Acquisition.

Sales increased in the first quarter of 2015 by $7.6 million, or 2.5%, to $310.2 million, compared to $302.6 million in the same period in 2014.  Approximately 70% of the Company's operations, including sales, are denominated in USD.  The weaker Canadian dollar in the first quarter of 2015 compared to the same quarter in 2014 decreased the value of reported USD sales of the Company's CAD-denominated operations approximately $8.7 million relative to the conversion impact last year.

Sales in domestic currency increased in the first quarter of 2015by $16.8 million, or 5.4%, to $326.9 million, compared to $310.1 million in 2014 reflecting price increases, partially offset by lower sales volume.

Adjusted EBITDA increased in the first quarter of 2015 by $3.4 million, or 12.6%, to $30.7 million compared to $27.2 million in the same period in 2014.  The weaker CAD in the first quarter of 2015 compared to the same period in 2014 decreased the value of Adjusted EBITDA in USD from our CAD-denominated operations by $1.0 million relative to the conversion impact in 2014.

In domestic currency, Adjusted EBITDA increased in the first quarter of 2015 by $3.7 million, or 13.2%, to $31.6 million compared to $28.0 million in 2014.  As a percentage of sales, Adjusted EBITDA in domestic currency was 9.7% in 2015 compared to 9.0% in 2014.  This increase was due to lower SG&A and distribution expenses, partially offset by lower overall sales volume and lower overall gross profit margin as a percentage of sales.

Net income increased in the first quarter of 2015 by $0.6 million, or 5.3%, to $12.5 million ($0.40 per diluted share) compared to $11.9 million ($0.38 per diluted share) in the first quarter last year.  The $0.6 million increase in net income reflects higher Adjusted EBITDA as explained above and lower financing costs primarily due to costs recognized in the first quarter of 2014 resulting from amendments to our credit facilities.  The favourable impact of these items was partially offset by higher one-time acquisition, integration and other expenses in the first quarter of 2015, which included external consulting costs related to the Company's Supply Chain Optimization Project and costs associated with plant closures, including those related to cessation of operations at the Company's leased Malden facility in April 2015.

Excluding the after-tax impact of certain items, including one-time acquisition, integration and other expenses, share-based compensation expense, items relating to debt refinancing and amendment activities, and certain other non-recurring expenses, Adjusted Net Income was $15.6 million (Adjusted Diluted EPS of 0.50) in the first quarter of 2015 compared to $13.8 million (Adjusted Diluted EPS of $0.44) in the first quarter of 2014. 

Net cash flows provided by (used in) operating activities increased in the first quarter of 2015 by $18.9 million to $18.0 million compared to $(0.9) million in the same period last year, due to increased cash flows from: operating activities, including interest and income taxes; and changes in net non-cash working capital.

Outlook

"Our strategic goal to optimize our supply chain continues to be a top priority for the organization and while delays were experienced in the first quarter in certain areas, our overall expectation to achieve $20 to $25 million in annual cost savings related to this goal by the end of 2016 has not changed," stated Mr. Demone.

"Organic growth in our business remained challenging in the first quarter of 2015 and we continue to believe that focusing efforts on the development of innovative product offerings is key to driving organic growth across our business."  Mr. Demone concluded, "Over the last year, we have experienced significant increases in raw material costs on certain species, and while we have passed a significant portion of these increases on to our customers, these higher prices may impact sales volume in the near term."

Conference Call

The Company's Unaudited Condensed Interim Consolidated Financial Statements and MD&A as at and for the thirteen weeks ended April 4, 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 Tuesday, May 12, 2015, 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 first quarter of 2015.  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 Tuesday, May 19, 2015 at midnight.  To access the archived conference call, dial 1-855-859-2056 and enter the reservation number 28819358.

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 the Appointees

Henry Demone - Mr. Demone is CEO of High Liner Foods. In September 2013, as part of succession planning, Mr. Demone transitioned the day-to-day responsibilities of the Company over to Mr. Decker. Prior to that transition, Mr. Demone had been the Company's President and CEO since 1992, and before that, had been the Company's President since 1989.  Mr. Demone is also a Director of Saputo Inc. and Emera Inc.

Keith Decker - Mr. Decker is President and COO of High Liner Foods and prior to being promoted to this position in September 2013, Mr. Decker was President and COO U.S. Operations.  Before joining High Liner Foods in 2007 as part of the FPI Acquisition, Mr. Decker served as FPI's Director of Commodity Sales and Vice President of Sales, its Executive Vice President of Sales and Marketing, and immediately prior to the acquisition, was FPI's President and Chief Operating Officer.

David Hennigar - Mr. Hennigar is: Chair of the Board of High Liner Foods and Annapolis Group Inc.; Executive Chairman of Thornridge Holdings Limited, the holder of 37.5% of High Liner Foods' common shares; and a Director of several other public and private companies. He is also an investment advisor at Altus Securities Inc.  Prior to November 4, 2010 he was a Director of Scotia Investments Ltd.

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 weeks ended April 4, 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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