- Fully diluted earnings increase to $0.18 per share from $0.05 per
share for the same period last year -
- Integration of FPI businesses largely completed and most costs
expended -
- Dividend increased by 10% -LUNENBURG, NS, July 31 /CNW/ - High Liner Foods Incorporated (TSX:HLF)
today reported financial results for the thirteen week period ended June 28,
2008. (All amounts are reported in Canadian dollars).Financial and operational highlights, which reflect the FPI acquisition,
for the second quarter, include:
- Integration of Canadian retail operations into one information
technology platform and consolidation of High Liner and FPI sales
offices in Montreal and Calgary, which follows the consolidation of
the Toronto offices in the first quarter;
- Integration of U.S. retail operations into one information technology
platform and combination of distribution warehouses;
- Combination of US Retail and Food service divisions into one business
under the leadership of former FPI COO, Keith Decker;
- Sales of $140.0 million, including growth of 67.8% in the Canadian
operations and growth of 244.4% in the U.S. operations;
- Adjusted EBITDA(1) from continuing operations of $9.0 million compared
with $2.4 million for the second quarter of 2007;
- Net income from continuing operations of $3.3 million, an increase of
$2.8 million from the second quarter of 2007;
- Fully diluted earnings per share, excluding one-time integration
costs, were $0.23 per share for the second quarter and $0.46 per share
year to date.
"We are pleased with our strong financial results for the quarter and with
the progress of our integration program, which is now largely completed," said
Henry Demone, President and Chief Executive Officer, High Liner Foods Inc. Our
integration program has proceeded as planned, as we consolidated sales offices
in Montreal and in Calgary, and we integrated our IT platforms at both our
Canadian and U.S. retail operations."
Financial Results
-------------------------------------------------------------------------
(Amounts in thousands of Canadian $ except per share amounts)
-------------------------------------------------------------------------
Thirteen Thirteen Twenty-Six Twenty-Six
Weeks Weeks Weeks Weeks
ended ended ended ended
June 28, June 30, June 28, June 30,
2008 2007 2008 2007
-------------------------------------------------------------------------
Sales $ 139,960 $ 62,202 $ 289,198 $ 143,537
-------------------------------------------------------------------------
Adjusted EBITDA 8,982 2,403 17,803 7,749
-------------------------------------------------------------------------
Net income from continuing
operations $ 3,280 $ 485 $ 6,374 $ 3,502
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net income (loss) from
discontinued operations;
net of income tax $ 0 $ 307 $ 0 $ 290
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net income $ 3,280 $ 792 $ 6,374 $ 3,792
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic earnings per Common
Share:
Net income from
continuing operations $ 0.23 $ 0.02 $ 0.43 $ 0.28
Net income from
discontinued operations $ 0.00 $ 0.03 $ 0.00 $ 0.03
Net income $ 0.23 $ 0.05 $ 0.43 $ 0.31
Diluted earnings per
Common Share:
Net income from
continuing operations
excluding one-time
integration costs $ 0.23 $ 0.02 $ 0.46 $ 0.28
-------------------------------------------------------------------------
-------------------------------------------------------------------------Sales for the second quarter and the year-to-date increased 125.0% to
$140.0 million and 101.5% to $289.2 million respectively. The higher sales
were primarily 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 were essentially flat for the quarter
and down 9.5% for the year-to-date. When adjusted for the stronger Canadian
dollar, sales excluding the acquisition increased 2.4% for the quarter and
were down 4.4% on the year-to-date. The higher Canadian dollar reduced the
value of reported U.S. sales by approximately $1.7 million for the quarter and
$7.3 million over the first six months of the year. Sales volume for the first
half of 2008 has been dampened by price increases implemented in the latter
half of 2007.
Adjusted EBITDA was $9.0 million for the quarter and $17.8 million for
the year-to-date, representing increases of 273.8% and 129.8% respectively
over the corresponding periods in 2007. The increases were largely
attributable to the Acquisition.
Excluding the Acquisition, EBITDA was affected by the following items:
(1) input cost increases (including seafood), which were offset by price
increases implemented by the Company; (2) lower sales volumes relative to last
year due to higher selling prices; and (3) higher distribution costs driven by
higher fuel costs. Sales, marketing and administration costs increased as the
Company grew its sales force and corporate costs increased as a result of the
Acquisition.
Net income from continuing operations for the second quarter was $3.3
million, or $0.23 per basic share, compared to $0.5 million, or $0.02 per
basic share, for the same quarter last year after deducting dividends on
preference shares. For the year-to-date, net income from continuing operations
was $6.4 million, or $0.43 per basic share, compared to $3.5 million, or $0.28
per basic share, for the same period last year. The Company incurred
integration costs of $0.8 million for the quarter and $2.3 million for the
year-to-date in relation to the Acquisition.
Other factors affecting profitability included higher depreciation and
amortization resulting from the Acquisition's preliminary purchase price
allocation, and higher interest expense as a result of financing the
Acquisition.
As part of the acquisition, new common shares were issued in December
2007, resulting in more shares outstanding and impacting basic earnings per
share for the second quarter of 2008 and the year-to-date. Additionally,
Series A Preference shares issued on the Acquisition and to the majority of
the holders of the Second Preference Shares, which are convertible into common
shares, further increasing the average number of dilutive shares, reducing the
dilutive income per common share. Diluted earnings per share from continuing
operations for the second quarter of 2008 was $0.18 per share, compared to
$0.02 per share, for the same quarter last year. For the year-to-date, diluted
earnings per share from continuing operations $0.36 per basic share, compared
to $0.28 per share, for the same period last year.
Operational Highlights for the Second Quarter
The acquired FPI business contributed significant growth in sales and
profitability to both Canadian and U.S. operations.
Canada
The Company's Canadian operations achieved sales of $70.6 million for the
quarter, an increase of 67.8% from the second quarter of last year. The
Acquisition contributed $29.5 million in sales to the Canadian operations
during the quarter. Excluding the acquisition, sales at the Canadian
operations were down 1.9%. Sales volume in pounds including the Acquisition
was up 62.0%(2) from the second quarter of last year. Excluding the
Acquisition, sales volume was down 2.6%(2) for the period.
Canadian retail sales volume for the second quarter of fiscal 2008
increased 35.6%(2) compared with the second quarter of fiscal 2007, as a
result of the Acquisition. Excluding the Acquisition, sales volume increased
0.5%(2).
Canadian food service sales volume, including the Acquisition, doubled
over last year. Excluding the Acquisition, sales volume for the quarter
decreased 5.3%(2). Higher selling prices have had some negative impact on
sales volume for both the retail and food service businesses.
(2) As measured in volume (pounds).
United States
The Company's U.S. operations had sales of $69.4 million for the quarter,
an increase of 244.4% from the second quarter of 2007. The Acquisition
contributed $48.4 million in sales to the U.S. operations during the quarter.
Excluding the acquisition, the U.S. operations' sales in Canadian dollars
increased 4.0%, despite the strengthened Canadian dollar. In U.S. dollars,
sales increased by 4.9%. Sales volume including the Acquisition more than
doubled compared with the second quarter of 2007. Excluding the Acquisition,
sales volume was up 8.3%(2).
Sales volume for the High Liner® brand in the U.S. decreased by
12.5%(2) compared with the second quarter of fiscal 2007, due to volume
decreases in the club store channel. As previously reported, the Company lost
some club store business when a customer split its business between High Liner
and two other suppliers as part of a test. Despite the fact that High Liner
outperformed the other suppliers, the customer has decided to have two
suppliers (including High Liner) on a go forward basis. In addition, sales
were down due to less activity by High Liner in the "limited time offer"
programs popular in club stores.
Fisher Boy® sales volume for the quarter increased 16.4%(2), as the
brand gained additional market share of 3.3 share points in the breaded
category. The Company's U.S. private label seafood sales volume increased
6.3%(2). The Company's Fisher Boy and private label sales are benefiting from
rising prices on competitors national brands.
Dividends
The Company paid its nineteenth consecutive quarterly dividend of $0.05
per common share on June 15, 2008 to shareholders of record on June 1, 2008.
In conjunction with this, the Company also paid dividends on its Series A
Preference Shares in the amount of $0.125 per share.
Subsequent to the end of the quarter, the Company's Board of Directors
resolved to pay a quarterly dividend in the amount of $0.055 per Common Share
payable on September 15, 2008 to shareholders of record on September 1, 2008.
This represents a 10% increase in the previous dividend.
The Company expects that approximately 5,000,000 Series A Preference
Shares will be converted to Non-Voting Equity Shares and listed on the Toronto
Stock Exchange pursuant to a short form prospectus issued on July 15, 2008.
Outlook
"Overall, our results continue to prove the value of our combined
business, which is well positioned with leading market positions in multiple
channels and markets in North America," said Mr. Demone. "While largely
completed, we will finalize the successful integration of our operations
throughout the balance of the year and focus on leveraging the potential of
the combined business to maximize future growth. We are pleased with the
synergies realized thus far, while much of the synergies expected, including
from procurement, purchasing and distribution, will be achieved later in 2008
and into 2009. Importantly, the amalgamation of our businesses has made us a
much stronger company, improving our ability to handle market challenges such
as input cost inflation, and strengthening our relationships with customers
and suppliers. And, while the economic downturn in the U.S. and food inflation
are expected to have some impact on financial results for the rest of the
year, we should benefit from our strong value-priced offerings, including
Fisher boy and private label products in the U.S."
Conference Call
High Liner Foods will host a conference call on Friday, August 1, 2008 at
10:30 a.m. ET (11:30 a.m. AT) to discuss its second quarter fiscal 2008
results. To access the conference call by telephone, dial 416-644-3417 or
1-800-732-0232. Please connect approximately ten minutes prior to the
beginning of the call to ensure participation. The conference call will be
archived for replay until Friday, August 8, 2008 at midnight. To access the
archived conference call, dial 416-640-1917 or 1-877-289-8525 and enter the
reservation number 21278502 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 Second
Quarter Balance Sheets and Statements of Income.HIGH LINER FOODS INCORPORATED
As at June 28, 2008
(with comparative figures as at June 30, 2007 and December 29, 2007)
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands of Canadian dollars)
June 28, June 30, December
2008 2007 29, 2007
-------------------------------------------------------------------------
ASSETS
Current:
Cash 3,969 112 7,064
Accounts receivable 60,334 26,342 68,662
Income tax receivable 1,703 50 2,414
Inventories 109,012 39,635 107,589
Prepaid expenses 7,834 5,484 4,644
Future income taxes 435 1,023 1,302
-------------------------------------------------------------------------
Total current assets 183,287 72,646 191,675
-------------------------------------------------------------------------
Property, plant and equipment 53,160 24,188 57,515
-------------------------------------------------------------------------
Other:
Future income taxes 1,288 2,723 1,677
Other assets 66 565 66
Employee future benefits 7,206 6,588 6,759
Intangible assets 20,783 - -
Goodwill 29,018 - -
Intangible assets and goodwill - - 42,762
-------------------------------------------------------------------------
58,361 9,876 51,264
-------------------------------------------------------------------------
294,808 106,710 300,454
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current:
Bank loans 48,501 5,748 61,280
Accounts payable and accrued
liabilities 48,997 24,687 51,068
Income taxes payable 91 186 437
Current portion of capital lease
obligations 493 553 603
-------------------------------------------------------------------------
Total current liabilities 98,082 31,174 113,388
-------------------------------------------------------------------------
Long-term debt 53,172 - 51,709
-------------------------------------------------------------------------
Long-term capital lease obligations 501 458 259
-------------------------------------------------------------------------
Employee future benefits 4,149 3,846 4,227
-------------------------------------------------------------------------
Shareholders' Equity:
Preference shares 50,236 20,000 50,270
Common shares 59,372 28,489 58,800
Contributed surplus 369 550 490
Retained earnings 44,330 38,265 40,112
Accumulated other comprehensive income (15,403) (16,072) (18,801)
-------------------------------------------------------------------------
138,904 71,232 130,871
-------------------------------------------------------------------------
294,808 106,710 300,454
-------------------------------------------------------------------------
-------------------------------------------------------------------------
HIGH LINER FOODS INCORPORATED
For the thirteen and twenty-six weeks ended June 28, 2008
(with comparative figures for the thirteen and
twenty-six weeks ended June 30, 2007)
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands of Canadian dollars, except per share amounts)
Thirteen Weeks Twenty-Six Weeks
2008 2007 2008 2007
------------------------------------------------- -----------------------
Sales $ 139,960 $ 62,202 $ 289,198 $ 143,537
Cost of sales 110,225 46,114 225,707 105,158
Distribution expenses 8,413 4,479 17,980 10,575
------------------------------------------------- -----------------------
Gross profit 21,322 11,609 45,511 27,804
Commission income 355 - 464 -
Selling, general and
administrative expenses (14,344) (9,657) (30,899) (21,254)
Foreign exchange gain (loss) 113 (307) (289) (318)
Business acquisition costs (802) - (2,295) -
Amortization of
intangibles assets (278) - (598) -
Loss on disposal of assets
and other expense (11) (14) (114) (31)
Interest expense
Short-term (701) 34 (1,429) (75)
Long-term (866) (14) (1,741) (26)
------------------------------------------------- -----------------------
Income from continuing
operations before
income taxes 4,788 1,651 8,610 6,100
------------------------------------------------- -----------------------
Income taxes
Current (1,211) (1,190) (1,845) (2,423)
Future (297) 24 (391) (175)
------------------------------------------------- -----------------------
Total income taxes from
continuing operations (1,508) (1,166) (2,236) (2,598)
------------------------------------------------- -----------------------
Net income from continuing
operations 3,280 485 6,374 3,502
Net income from discontinued
operations; net of
income tax - 307 - 290
------------------------------------------------- -----------------------
Net income 3,280 792 6,374 3,792
------------------------------------------------- -----------------------
------------------------------------------------- -----------------------
PER SHARE INFORMATION
Earnings per Common Share
Basic from continuing
operations 0.23 0.02 0.43 0.28
Basic from discontinued
operations - 0.03 - 0.03
------------------------------------------------- -----------------------
Basic, net income 0.23 0.05 0.43 0.31
------------------------------------------------- -----------------------
------------------------------------------------- -----------------------
Diluted from continuing
operations 0.18 0.02 0.36 0.28
Diluted from discontinued
operations - 0.03 - 0.03
------------------------------------------------- -----------------------
Diluted, net income 0.18 0.05 0.36 0.31
------------------------------------------------- -----------------------
------------------------------------------------- -----------------------
Average shares outstanding
for the period
Basic 13,458,103 10,373,638 13,427,250 10,346,748
Diluted 18,469,488 10,442,357 17,886,145 10,423,026
------------------------------------------------- -----------------------
------------------------------------------------- -----------------------
HIGH LINER FOODS INCORPORATED
For the thirteen and twenty-six weeks ended June 28, 2008
(with comparative figures for the thirteen and
twenty-six weeks ended June 30, 2007)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(in thousands of Canadian dollars)
Thirteen Weeks Twenty-Six Weeks
2008 2007 2008 2007
------------------------------------------------- -----------------------
Net income for the period 3,280 792 6,374 3,792
------------------------------------------------- -----------------------
Other comprehensive income,
net of future income taxes
Unrealized foreign exchange
gains (losses) of self-
sustained foreign
operations (net of
$0.1 million income
tax recovery and nil for
the thirteen and tweny-six
weeks in 2008,
respectively and nil
taxes in 2007) (464) (1,286) 1,267 (1,471)
------------------------------------------------- -----------------------
Net gain (loss) gain on
derivative financial
instruments designated
as cash flow hedges
(net of $0.1 million
income tax recovery and
a $0.8 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) 325 (978) 1,873 (1,233)
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 expense 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) 200 (107) 258 (239)
------------------------------------------------- -----------------------
Change in gains and losses
on derivatives designated
as cash flow hedges 525 (1,085) 2,131 (1,472)
------------------------------------------------- -----------------------
Other comprehensive income
(loss) 61 (2,371) 3,398 (2,943)
------------------------------------------------- -----------------------
Comprehensive income (loss) 3,341 (1,579) 9,772 849
------------------------------------------------- -----------------------
------------------------------------------------- -----------------------
HIGH LINER FOODS INCORPORATED
For the thirteen and twenty-six weeks ended June 28, 2008
(with comparative figures for the thirteen and
twenty-six weeks ended June 30, 2007)
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(Unaudited)
(in thousands of Canadian dollars)
Thirteen Weeks Twenty-Six Weeks
2008 2007 2008 2007
------------------------------------------------- -----------------------
Balance, beginning of
period 41,972 38,294 40,112 36,106
Net income for the period 3,280 792 6,374 3,792
Dividends:
Common shares (672) (519) (1,342) (1,035)
Series A preference shares (250) - (500) -
Second preference shares - (302) (166) (598)
Share issuance expenses - - (148) -
------------------------------------------------- -----------------------
Balance, end of period 44,330 38,265 44,330 38,265
------------------------------------------------- -----------------------
------------------------------------------------- -----------------------
HIGH LINER FOODS INCORPORATED
For the thirteen and twenty-six weeks ended June 28, 2008
(with comparative figures for the thirteen and
twenty-six weeks ended June 30, 2007)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands of Canadian dollars)
Thirteen Weeks Twenty-Six Weeks
2008 2007 2008 2007
------------------------------------------------- -----------------------
Cash provided by (used in)
operations:
Net income from continuing
operations for the period 3,280 485 6,374 3,502
Charges (credits) to income
not involving cash from
operations:
Depreciation and
amortization 1,919 744 3,827 1,518
(Gain) loss on disposal
of assets (1) 7 77 3
Stock compensation expense (136) 22 (21) 173
Payments of employee
future benefits
in excess of expense (542) 3 (541) (52)
Unrealized foreign
exchange (gain) loss (318) (336) 382 (203)
Future income taxes 297 (24) 391 175
------------------------------------------------- -----------------------
Cash flow from operations
before changes in
non-cash working capital 4,499 901 10,489 5,116
Net change in non-cash
working capital balances (2,075) 7,324 721 (1,221)
Operating activities of
discontinued operations - 307 - 292
------------------------------------------------- -----------------------
2,424 8,532 11,210 4,187
------------------------------------------------- -----------------------
Cash provided by (used in)
financing activities:
Change in current bank
loans 2,151 (7,788) (14,043) (3,550)
Repayment of long-term
capital lease obligations (197) (114) (323) (224)
Dividends paid
Second Preference - (302) (166) (598)
Common (672) (519) (1,342) (1,035)
Series A Preference (250) - (500) -
Share issuance cost - - (148) -
Share redemption - - (18) -
Issue of equity shares 248 - 451 378
------------------------------------------------- -----------------------
1,280 (8,723) (16,089) (5,029)
------------------------------------------------- -----------------------
Cash provided by (used in)
investing activities:
Purchase of property,
plant and equipment (net
of investment tax credits) (519) (258) (1,019) (311)
Net expenditures on
disposal of assets (12) (8) (33) (28)
Use of investment tax
credits 493 732 752 1,475
Business acquisition
adjustment (5) - 1,902 -
Decrease in other
receivables - (546) - (586)
Investing activities of
discontinued operations - 94 - 187
------------------------------------------------- -----------------------
(43) 14 1,602 737
------------------------------------------------- -----------------------
Foreign exchange impact
on cash (20) (20) 182 (23)
------------------------------------------------- -----------------------
Increase (decrease) in cash
during the period 3,641 (197) (3,095) (128)
Cash, beginning of period 328 309 7,064 240
------------------------------------------------- -----------------------
Cash, end of period 3,969 112 3,969 112
------------------------------------------------- -----------------------
------------------------------------------------- -----------------------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 symbol HLF 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 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.%SEDAR: 00001789E
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