- Substantial growth across all channels drives stronger earnings -
LUNENBURG, NS, Nov. 11 /CNW/ - High Liner Foods Incorporated (TSX:HLF), a
leading North American value-added frozen seafood company, today reported
financial results for the thirteen week period ended September 27, 2008. (All
amounts are reported in Canadian dollars).Third quarter highlights:
- Sales of $149.4 million, including growth of 72.0% in Canadian
operations and growth of 248.9% in U.S. operations;
- Adjusted EBITDA(1) from continuing operations of $10.9 million
compared with $3.9 million for the third quarter of 2007;
- Net income from continuing operations of $5.4 million, an increase of
$3.6 million from the third quarter of 2007;
- Fully diluted earnings per share, excluding one-time integration
costs, were $0.32 per share for the third quarter and $0.79 per share
year to date.
- Net interest bearing debt reduced to 39.1% of total capitalization
compared with 41.6% at the end of the second quarter of 2008 and
44.6% at the start of the year; and
- Integration of Canadian operations acquired from FPI in late 2007
completed during the quarter and integration of U.S. operations of
FPI completed subsequent to quarter end."Our strong third quarter earnings were driven by growth in all sales
channels resulting from our strong brands and focused execution of our
business plan," said Henry Demone, President and Chief Executive Officer, High
Liner Foods Inc. "Of particular note, our U.S. food service business was the
largest contributor to revenue for the quarter, our Canadian food service
revenue more than doubled and our Fisher Boy® brand in the U.S. delivered
solid growth and gained market share. Our profitability benefited from our
larger scale and integrated operations. We strengthened our organization by
completing the integration of our Canadian operations during the quarter and
the integration of our U.S. operations subsequent to quarter end."
Mr. Demone added: "During the third quarter we continued to strengthen
not only our organization, but also our capital structure. We issued 66,100
new Non-Voting Equity Shares and, after converting our Series A Preference
Shares, we have approximately five million Non-Voting Equity Shares now listed
on the Toronto Stock Exchange. Furthermore, we reduced net interest bearing
debt by $6.3 million during the quarter to 39.1% of total capitalization."Financial Results
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(Amounts in thousands of Canadian $ except per share amounts)
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Thirty- Thirty-
Thirteen Thirteen Nine Nine
Weeks ended Weeks ended Weeks ended Weeks ended
September September September September
27, 29, 27, 29,
2008 2007 2008 2007
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Sales 149,354 63,642 438,552 207,179
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Adjusted EBITDA 10,926 3,853 28,729 11,602
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Net income from
continuing
operations 5,442 1,835 11,816 5,337
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Net income (loss) from
discontinued
operations; net of
income tax - 82 - 372
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Net income 5,442 1,917 11,816 5,709
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Basic earnings per
Common Share:
Net income $0.35 $0.16 $0.79 $0.46
Net income excluding
one-time
integration costs $0.39 $0.18 $0.96 $0.49
Diluted earnings per
Common Share:
Net income $0.29 $0.15 $0.64 $0.46
Net income excluding
one-time
integration costs $0.32 $0.18 $0.79 $0.48
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-------------------------------------------------------------------------Sales for the third quarter and the year-to-date increased 134.7% to
$149.4 million and 111.7% to $438.6 million respectively. The higher sales
were due to the acquisition of FPI's Manufacturing and Marketing Group (the
"Acquisition") late in the fourth quarter of fiscal 2007.
Excluding the Acquisition, sales for the quarter were on par with last
year but down 6.7% on a year-to-date basis. When adjusted for the, until
recently, stronger Canadian dollar, year-to-date sales, excluding the
Acquisition, decreased 3.1%, with the higher average Canadian dollar reducing
the value of reported U.S. sales by approximately $7.0 million. Currency
valuations did not have a material impact on reported U.S. sales for the
quarter.
Adjusted EBITDA was up significantly due to the added sales volume and
resulting higher gross profit attributable to the Acquisition. Adjusted EBITDA
increased 183.6% to $10.9 million for the quarter and 147.6% to $28.7 million
for the year-to-date over the corresponding periods in 2007.
Excluding one-time integration costs, net income for the quarter was $6.0
million, or diluted earnings per share ("EPS") of $0.32, compared to $2.2
million, or diluted EPS of $0.18, for the same quarter last year. For the
year-to-date, net income excluding one-time integration costs was $14.3
million, or diluted EPS of $0.79, compared to $6.0 million, or diluted EPS of
$0.48, for the same period last year.
As would be expected, changes in depreciation and amortization, interest
expense and average shares outstanding result from financing the Acquisition.
Operational Highlights for the Third Quarter
Canada
The Company's Canadian operations achieved sales of $70.7 million for the
quarter, an increase of 72.0% from the third quarter of last year due to the
Acquisition, which contributed sales of $31.1 million for the quarter. Sales
volume (in pounds) increased 66.5%(2) with an increase of 34.5%(2) in the
retail channel and food service volume more than doubling over last year.
Excluding the Acquisition, sales in Canadian operations were down 3.6% in
dollars and 0.6%(2) by volume for the period, due to lower volumes in the
Canadian food service channel resulting from price increases.
United States
The Company's U.S. operations had sales of $78.7 million for the quarter,
an increase of 248.9% from the third quarter of 2007. The Acquisition more
than doubled sales volume and contributed $55.2 million in sales to the U.S.
operations during the quarter.
Excluding the Acquisition, the U.S. operations' sales in Canadian dollars
increased 3.7%, or 3.8% in U.S. dollars, resulting from a 2.3%(2) increase in
sales volume and higher price points. The Company's Fisher Boy® products
performed particularly well, achieving an 11.6% increase in sales volume and
gaining additional market share of 0.8 share points (a 4.2% increase) in the
breaded category. The Company's Fisher Boy sales, as well as its private label
sales, are benefiting from rising prices on competing national brands.
Additionally, these "value" products generally benefit from economic downturns
when many budget conscious consumers opt for less expensive products.
Dividends
The Company paid its twentieth consecutive quarterly dividend on
September 15, 2008 to shareholders of record on September 1, 2008. Effective
with this payment the dividend was increased by 10% to $0.055 per common
share. In conjunction with this, the Company also paid its last dividend on
its Series A Preference Shares in the amount of $0.1375 per share prior to
their conversion to non-voting common shares.
Subsequent to the end of the quarter, the Board of Directors of the
Company resolved to pay a quarterly dividend in the amount of $0.0625 per
Common Share and per Non-Voting Equity Share payable on December 15, 2008 to
shareholders of record on December 1, 2008, representing an annualized rate of
$0.25 per share. This represents an increase of 13.6% over the previous
dividend.
Liquidity
The Company has in place a $120 million committed revolving credit
facility, maturing in December, 2010. Availability under this facility at the
end of the quarter was $52.0 million ($61.7 million as of October 25, 2008),
which is sufficient to cover our expected working capital requirements for the
next 12 months.
Outlook
"Food companies have become increasingly aware of the market challenges
posed by input cost inflation, foreign exchange volatility, and the economic
downturn," said Mr. Demone. "Recent changes in the value of the Canadian
dollar also affect our operations. As a leading North American value-added
frozen seafood company and the largest in Canada, High Liner is not immune to
these challenges. A weaker Canadian dollar increases the sales and profits of
our U.S. operations on conversion to our domestic currency. This positive
impact is off set by higher costs on imported raw materials and finished goods
of our Canadian operations. If the Canadian dollar weakness persists it will
take time to pass on these cost increases to customers. However, we have
managed to keep operations efficient and profitable while smoothly integrating
the FPI businesses into our operations. We have strong brands, a track record
of successful product innovation and sound logistics. Moreover, our
competitive advantage in the worldwide procurement of raw materials and
finished goods ensures quality, certainty of supply and competitive costs."
Conference Call
High Liner Foods will host a conference call on Wednesday, November 12,
2008 at 10:30 a.m. ET (11:30 a.m. AT) to discuss its third quarter fiscal 2008
results. To access the conference call by telephone, dial 416-644-3426 or
1-800-589-8577. Please connect approximately ten minutes prior to the
beginning of the call to ensure participation. The conference call will be
archived for replay until Wednesday, November 19, 2008 at midnight. To access
the archived conference call, dial 416-640-1917 or 1-877-289-8525 and enter
the reservation number 21286317 followed by the number sign.
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 90 days.
Financial Statements
For convenience, this press release includes the Company's Fiscal Third
Quarter Balance Sheets,Statements of Income, Statements of Comprehensive
Income, Statements of Retained Earnings and Statements of Cash Flows.HIGH LINER FOODS INCORPORATED
As at September 27, 2008
(with comparative figures as at September 29, 2007 and December 29, 2007)
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands of Canadian dollars)
September September December
27, 2008 29, 2007 29, 2007
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ASSETS
Current:
Cash 2,712 107 7,064
Accounts receivable 63,196 26,695 68,662
Income tax receivable 1,732 100 2,414
Inventories 114,540 46,401 110,521
Prepaid expenses 1,926 816 1,712
Future income taxes 912 1,579 1,302
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Total current assets 185,018 75,698 191,675
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Property, plant and equipment 53,185 24,009 57,515
-------------------------------------------------------------------------
Other:
Future income taxes 1,262 2,177 1,677
Other assets 66 1,349 66
Employee future benefits 7,316 6,668 6,759
Intangible assets 20,875 - -
Goodwill 28,444 - -
Intangible assets and goodwill - - 42,762
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57,963 10,194 51,264
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296,166 109,901 300,454
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current:
Bank loans 39,719 4,982 61,280
Accounts payable and
accrued liabilities 51,328 28,850 51,068
Income taxes payable 771 352 437
Current portion of capital
lease obligations 474 493 603
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Total current liabilities 92,292 34,677 113,388
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Long-term debt 54,441 - 51,709
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Long-term capital lease obligations 510 360 259
-------------------------------------------------------------------------
Employee future benefits 4,278 3,944 4,227
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Shareholders' Equity:
Preference shares - 20,000 50,270
Common shares 110,155 28,489 58,800
Contributed surplus 364 574 490
Retained earnings 48,633 39,356 40,112
Accumulated other
comprehensive income (14,507) (17,499) (18,801)
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144,645 70,920 130,871
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296,166 109,901 300,454
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HIGH LINER FOODS INCORPORATED
For the thirteen and thirty-nine weeks ended September 27, 2008
(with comparative figures for the thirteen and thirty-nine
weeks ended September 29, 2007)
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands of Canadian dollars, except per share amounts)
Thirteen Weeks Thirty-Nine Weeks
2008 2007 2008 2007
----------------------------------------------- -------------------------
Sales $ 149,354 $ 63,642 $ 438,552 $ 207,179
Cost of sales 116,533 47,413 342,240 152,571
Distribution expenses 9,135 4,540 27,115 15,115
----------------------------------------------- -------------------------
Gross profit 23,686 11,689 69,197 39,493
Commission income 298 - 762 -
Selling, general and
administrative expenses (14,548) (8,482) (45,447) (29,736)
Foreign exchange loss (98) (90) (387) (408)
Business acquisition costs (722) (391) (3,017) (391)
Amortization of
intangibles assets (308) - (906) -
Loss on disposal of assets
and other expense (12) (8) (126) (39)
Interest (expense) income
Short-term (522) 29 (1,951) (46)
Long-term (860) (14) (2,601) (40)
----------------------------------------------- -------------------------
Income from continuing
operations before income
taxes 6,914 2,733 15,524 8,833
----------------------------------------------- -------------------------
Income taxes
Current (1,292) (679) (3,137) (3,102)
Future (180) (219) (571) (394)
----------------------------------------------- -------------------------
Total income taxes from
continuing operations (1,472) (898) (3,708) (3,496)
----------------------------------------------- -------------------------
Net income from
continuing operations 5,442 1,835 11,816 5,337
Net income from
discontinued operations;
net of income tax - 82 - 372
----------------------------------------------- -------------------------
Net income 5,442 1,917 11,816 5,709
----------------------------------------------- -------------------------
----------------------------------------------- -------------------------
PER SHARE INFORMATION
Earnings per Common Share
Basic from continuing
operations 0.35 0.15 0.79 0.43
Basic from discontinued
operations - 0.01 - 0.03
----------------------------------------------- -------------------------
Basic, net income 0.35 0.16 0.79 0.46
----------------------------------------------- -------------------------
----------------------------------------------- -------------------------
Diluted from continuing
operations 0.29 0.15 0.64 0.43
Diluted from discontinued
operations - - - 0.03
----------------------------------------------- -------------------------
Diluted, net income 0.29 0.15 0.64 0.46
----------------------------------------------- -------------------------
----------------------------------------------- -------------------------
Average shares outstanding
for the period
Basic 14,595,394 10,373,638 13,816,631 10,355,711
Diluted 18,510,665 10,452,592 18,094,365 10,441,586
----------------------------------------------- -------------------------
----------------------------------------------- -------------------------
HIGH LINER FOODS INCORPORATED
For the thirteen and thirty-nine weeks
ended September 27, 2008
(with comparative figures for the thirteen and
thirty-nine weeks ended September 29, 2007)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(in thousands of Canadian dollars)
Thirteen Weeks Thirty-Nine Weeks
2008 2007 2008 2007
----------------------------------------------- -------------------------
Net income for the
period 5,442 1,917 11,816 5,709
----------------------------------------------- -------------------------
Other comprehensive
income, net of future
income taxes
Unrealized foreign
exchange gains
(losses) of
self-sustained
foreign operations
(net of nil taxes
in 2008 and 2007) 813 (947) 2,080 (2,418)
----------------------------------------------- -------------------------
Net gain (loss) on
derivative financial
instruments designated
as cash flow hedges
(net of $0.2 million
income tax expense and
a $1.0 million income
tax expense for the
thirteen and twenty-six
weeks in 2008; $0.1
million and $0.4 million
tax recovery for the
thirteen and twenty-six
weeks in 2007,
respectively) 387 (941) 2,260 (2,174)
Net loss (gain) on
derivatives designated
as cash flow hedges in
prior periods
transferred to net
income in the current
period (net of $0.1
million and $0.1 million
income tax recovery for
the thirteen and
twenty-six weeks in
2008; $0.1 million and
$0.1 million of income
tax recovery for the
thirteen and twenty-six
weeks in 2007) (304) 461 (46) 222
----------------------------------------------- -------------------------
Change in gains and
losses on derivatives
designated as cash flow
hedges 83 (480) 2,214 (1,952)
----------------------------------------------- -------------------------
Other comprehensive
income (loss) 896 (1,427) 4,294 (4,370)
----------------------------------------------- -------------------------
Comprehensive income 6,338 490 16,110 1,339
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HIGHLINER FOODS INCORPORATED
For the thirteen and thirty-nine weeks
ended September 27, 2008
(with comparative figures for the thirteen and
thirty-nine weeks ended September 29, 2007)
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(Unaudited)
(in thousands of Canadian dollars)
Thirteen Weeks Thirty-Nine Weeks
2008 2007 2008 2007
----------------------------------------------- -------------------------
Balance, beginning of
period 44,330 38,265 40,112 36,106
Net income for the
period 5,442 1,917 11,816 5,709
Dividends:
Common shares (745) (518) (2,087) (1,553)
Series A preference
shares (274) - (774) -
Second preference
shares - (308) (166) (906)
Share issuance expenses (120) - (268) -
----------------------------------------------- -------------------------
Balance, end of period 48,633 39,356 48,633 39,356
----------------------------------------------- -------------------------
----------------------------------------------- -------------------------
HIGHLINER FOODS INCORPORATED
For the thirteen and thirty-nine weeks
ended September 27, 2008
(with comparative figures for the thirteen and
thirty-nine weeks ended September 29, 2007)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands of Canadian dollars)
Thirteen Weeks Thirty-Nine Weeks
2008 2007 2008 2007
----------------------------------------------- -------------------------
Cash provided by (used
in) operations:
Net income from
continuing operations
for the period 5,442 1,835 11,816 5,337
Charges (credits) to
income not involving
cash from operations:
Depreciation and
amortization 2,002 735 5,829 2,253
(Gain) loss on
disposal of assets 15 1 92 3
Stock compensation
expense (60) 74 (81) 249
Payments of employee
future benefits in
excess of expense (17) 40 (558) (12)
Unrealized foreign
exchange (gain)
loss (170) (383) 212 (586)
Future income taxes 180 219 571 394
----------------------------------------------- -------------------------
Cash flow from
operations before
changes in non-cash
working capital 7,392 2,521 17,881 7,638
Net change in non-cash
working capital
balances 2,433 155 3,155 (1,068)
Operating activities
of discontinued
operations - 82 - 374
----------------------------------------------- -------------------------
9,825 2,758 21,036 6,944
----------------------------------------------- -------------------------
Cash provided by (used
in) financing
activities:
Change in current bank
loans (9,596) (396) (23,640) (3,946)
Repayment of long-term
capital lease
obligations (97) (98) (420) (322)
Dividends paid
Second Preference - (308) (166) (906)
Series A Preference (274) - (774) -
Common (745) (518) (2,087) (1,553)
Share issuance cost (120) - (268) -
Share redemption - - (18) -
Issue of equity shares 540 - 991 379
----------------------------------------------- -------------------------
(10,292) (1,320) (26,382) (6,348)
----------------------------------------------- -------------------------
Cash provided by (used
in) investing
activities:
Purchase of property,
plant and equipment
(net of investment
tax credits) (870) (1,164) (1,889) (1,475)
Net expenditures on
disposal of assets 4 13 (29) (15)
Use of investment tax
credits 154 (320) 906 1,156
Business acquisition
adjustment (144) - 1,758 -
Change in other
receivables - (27) - (614)
Investing activities
of discontinued
operations - 63 - 250
----------------------------------------------- -------------------------
(856) (1,435) 746 (698)
----------------------------------------------- -------------------------
Foreign exchange impact
on cash 66 (8) 248 (31)
----------------------------------------------- -------------------------
Increase (decrease) in
cash during the period (1,257) (5) (4,352) (133)
Cash, beginning of
period 3,969 112 7,064 240
----------------------------------------------- -------------------------
Cash, end of period 2,712 107 2,712 107
----------------------------------------------- -------------------------About High Liner Foods Incorporated
High Liner Foods Incorporated is a 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® and Sea Cuisine™ labels, and are
available in most grocery and club stores. The Company also sells its High
Liner®, FPI® and Mirabel® food service products to restaurants and
institutions, and is a 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, including sales,
earnings, marketing, and profitability comments for 2008 and beyond. These
statements contain words such as "anticipate", "expect", "could", "should",
"may", "plans", "will", or similar expressions that are based on and arise out
of our experience, our perception of trends, current conditions and expected
future developments as well as other factors. 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 a number of important factors, as discussed herein and in our
other continuous disclosure documents, could cause actual results to 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 thorough discussion of the risk
factors that can cause anticipated outcomes to differ from actual outcomes. We
disclaim any intention or obligation to update or revise forward-looking
statements.
For further information about the Company, please visit our Internet site
at www.highlinerfoods.com or send an e-mail to investor@highlinerfoods.com.-------------------------------------
(1) Adjusted earnings before interest, taxes, depreciation and
amortization, business acquisition costs, other income and non-
operating transactions as disclosed on the consolidated statements of
income. Management believes that EBITDA is a useful performance
measure as it approximates cash generated from operations, before
capital expenditures and changes in working capital and excludes
unusual items. EBITDA also assists comparison among companies as it
eliminates the differences in earnings due to how a company is
financed. The calculation of Adjusted EBITDA follows the February
2008 draft general principles and guidance for reporting EBITDA
issued by the Canadian Institute of Chartered Accountants.
(2) As measured in volume (pounds)%SEDAR: 00001789E
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