- Growth in the quarter driven by the addition of the FPI businesses -
LUNENBURG, NS, May 9 /CNW/ - High Liner Foods Incorporated (TSX:HLF)
today reported financial results for the thirteen week period ended March 29,
2008. (All amounts are reported in Canadian dollars).
Financial and operational highlights for the first quarter include:- Sales of $149.2 million, including growth of 60.4% in the Canadian
operations and growth of 108.7% in the U.S. operations;
- Operating EBITDA(1) from continuing operations of $8.8 million
compared with $5.3 million for the first quarter of 2007;
- Net income from continuing operations of $4.0 million, excluding
after-tax integration costs of $0.9 million, an increase of
$1.0 million from the first quarter of 2007;
- Fully diluted earnings per share, excluding one-time acquisition
costs, were $0.23 per share versus $0.26 per share last year;
- Full integration of Canadian sales force and consolidation of
High Liner and FPI sales offices in Toronto;
- Full integration of U.S. retail sales forces."Our acquisition of FPI's Manufacturing and Marketing Group in December
2007 resulted in growth in sales and Operating EBITDA for the first quarter,"
said Henry Demone, President and Chief Executive Officer, High Liner Foods
Inc. "However, an early Easter, which resulted in a shorter promotional period
leading up to Lent, dampened our top line for the quarter. Additionally, our
U.S. sales were negatively impacted by the year-over-year appreciation of the
Canadian dollar. As a result of both of these factors, our sales excluding the
acquisition were lower than last year at this time."
Mr. Demone continued: "In our first full quarter of ownership of the FPI
business, we clearly advanced our integration plan. We have consolidated the
High Liner and FPI sales offices in Toronto and fully integrated our Canadian
sales forces. We also completed the integration of our U.S. sales forces.
Importantly, while we incurred pre-tax integration costs of $1.5 million in
the quarter, we achieved the selling and administrative synergies planned thus
far."Financial Results
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(Amounts in thousands of Canadian $ except per share amounts)
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Thirteen Weeks ended Thirteen Weeks ended
March 29, 2008 March 31, 2007
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Sales $149,238 $81,335
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Operating EBITDA 8,821 5,346
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Net income from
continuing operations 3,094 3,017
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Net income (loss)
from discontinued
operations; net of
income tax 0 17
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Net income $3,094 $3,000
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Basic earnings per
Common Share:
Income from
continuing
operations $0.20 $0.26
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Income from
discontinued
operations $0.00 $0.00
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Net income $0.20 $0.26
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-------------------------------------------------------------------------Financial Results for the First Quarter
Sales for the first quarter of fiscal 2008 increased 83.5% to
$149.2 million from $81.3 million for the first quarter of fiscal 2007. The
increase was due to the acquisition of FPI's Manufacturing and Marketing Group
(the "Acquisition") during the fourth quarter of fiscal 2007. Excluding the
Acquisition, sales decreased by 16.8%. When adjusted for the stronger Canadian
dollar, sales for the first quarter of fiscal 2008 excluding the Acquisition
decreased 9.8%, with the higher Canadian dollar reducing the value of reported
U.S. sales by approximately $5.6 million. Sales for the quarter were dampened
by a shorter promotional period leading up to the end of Lent. Most retailers
and restaurants promote seafood beginning immediately after the Super-Bowl and
on through to Easter.
Operating EBITDA from continuing operations for the quarter increased to
$8.8 million from $5.3 million for the first quarter of last year. The
Acquisition added $4.5 million to Operating EBITDA during the quarter.
Excluding the Acquisition, lower Operating EBITDA was primarily the result of
rising input costs (including seafood) - which were partially offset by price
increases - lower sales volumes relative to last year, and higher distribution
costs.
Net income from continuing operations for the quarter was $3.1 million,
or $0.20 per share, compared to $3.0 million, or $0.26 per share, for the
first quarter of last year, after deducting dividends on preference shares.
During the quarter, the Company incurred integration costs of $1.5 million in
connection with the Acquisition consisting of consulting fees, travel costs,
employee retention costs, severance, package design costs, lease termination
costs and other similar items. Additionally, earnings per share were reduced
as a result of new common shares issued in relation to the acquisition, which
resulted in a higher share count compared to the first quarter of last year.
Operational Highlights for the First Quarter
Canada
For the quarter, the Company's Canadian operations had sales of
$68.1 million, an increase of 60.4% from the first quarter of last year.
Higher sales in Canada were driven by the Acquisition, which contributed
$26.1 million in sales to the Canadian operations during the quarter.
High Liner retail sales volume for the quarter increased 1.5%(2) compared
with the first quarter of fiscal 2007 led by increases in Signature™,
skewer, and salmon product lines. Sales of four new shrimp products launched
in late 2007 also contributed to the increase.
High Liner food service sales volume for the quarter decreased 4.2%(2)
compared with the first quarter of fiscal 2007, as sales for most species to
most customers were down from last year. Additionally, the Acquisition had
resulted in some duplicate SKU's in this channel, impacting sales volumes of
the existing High Liner products.
United States
For the quarter, the Company's U.S. operations had sales of
$81.1 million, an increase of 108.7% from the first quarter of 2007. The
increase was due to the Acquisition, which added $55.4 million in sales to the
U.S. operations during the quarter.
For the High Liner® brand in the U.S., sales to traditional grocery
stores were lower than in the first quarter of fiscal 2007, when the Company's
largest customer made above average purchases in preparation for Lent 2007.
Sales to traditional grocery stores were also lower as a result of lost
distribution for certain products with other customers. Sales to club stores
were lower due to a reduction in cod sales, which in turn was due to price
increases early in 2007, supply constraints, and lost distribution resulting
from a club store customer splitting its business between two other suppliers
and High Liner as part of a test, which began in the fourth quarter of 2007.
The reduction in cod was partially offset by higher sales of value added
tilapia products. In addition, sales were down due to less activity by
High Liner in the "limited time offer" programs popular in club stores. Total
sales for the High Liner® brand in the United States decreased 40.7%(2) in
volume and by 35.5% in U.S. dollars compared with the first quarter of fiscal
2007.
Fisher Boy® sales volume for the quarter decreased 9.4%(2) as a
category market leader for breaded seafood decided to reduce promotional
activities during the last half of the quarter, resulting in lower consumer
traffic to breaded seafood section, reducing sales for the whole category.
Despite lower sales, our Fisher Boy breaded market share increased by
0.3 share points during the quarter.
High Liner's private label seafood sales volume for the quarter decreased
by 28.3%(2), primarily due to price increases passed on to customers that lead
to higher pricing on grocery store shelves. Additionally, Wal-Mart has been
gaining market share as it takes business away from other retailers to which
High Liner supplies private label products. High Liner does not supply
Wal-Mart's private label seafood.
Dividends
The Company paid a quarterly dividend of $0.05 per common share on
March 15, 2008 to shareholders of record on March 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 Board of Directors of the
Company resolved to pay a quarterly dividend in the amount of $0.05 per common
share payable on June 15, 2008 to shareholders of record on June 1, 2008.
The Company redeemed all of its outstanding Second Preference Shares on
February 20, 2008 and paid a final dividend on the Second Preference Shares of
$0.83 per share on February 21, 2008 for the period from December 31, 2007 to
February 20, 2008.
Outlook
"Throughout the balance of the year we will focus on the continued
successful integration of our operations and leveraging the potential of the
combined business to maximize future growth," said Mr. Demone. "In March, we
made the strategic decision to consolidate our two U.S. businesses. Our
integration plans also include the consolidation of our other Canadian sales
offices, our cold storage distribution centres and our computer systems. While
some synergies were realized almost immediately, others, coming from
procurement, purchasing and distribution will be achieved later in 2008 and
into 2009."
While some synergies related to the acquisition have been achieved, the
improvement in results has been muted by increases in non-fish commodity
prices. World commodity prices for flour and soy and canola oils, important
ingredients in the manufacture of many of the Company's products, have more
than doubled since last year. Although appearing to reach their peaks for now,
Management expects that these prices will continue to be high throughout 2008
and will negatively affect margins until price increases can be passed on
later this year. Additionally, the economic downturn in the U.S. is expected
to have some impact on financial results for the rest of the year.
"Although we are well-positioned, supplying both at-home and
away-from-home food options and a full range of premium to value-priced
products, tougher economic times usually impact consumer spending on food
items, especially in the away-from-home channel," said Mr. Demone. "The
Acquisition makes us much stronger to deal with these challenging market
conditions. Moreover, as we continue to progress with our post-acquisition
strategy we are even more confident that the acquisition supports our other
key objectives for fiscal 2008 - more effectively managing costs in a
challenging environment while constantly improving the quality of our
products."
Conference Call
High Liner Foods will host a conference call on Friday, May 9, 2008 at
2 p.m. ET (3:00 p.m. AT) to discuss its first quarter fiscal 2008 results. To
access the conference call by telephone, dial 416-644-3429 or 1-800-814-4859.
Please connect approximately ten minutes prior to the beginning of the call to
ensure participation. The conference call will be archived for replay by
telephone until Friday, May 16, 2008 at midnight. To access the archived
conference call, dial 416-640-1917 or 1-877-289-8525 and enter the reservation
number 21269138 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 one year.
Financial Statements
For convenience, this press release includes the Company's Fiscal First
Quarter Balance Sheets and Statements of Income.HIGH LINER FOODS INCORPORATED
INTERIM REPORT
As at March 29, 2008
(with comparative figures as at March 31, 2007 and December 29, 2007)
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands of Canadian dollars)
March 29, March 31, December 29,
2008 2007 2007
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ASSETS
Current:
Cash 328 309 7,064
Accounts receivable 65,543 35,293 68,662
Income tax receivable 1,865 80 2,414
Inventories 116,348 43,158 107,589
Prepaid expenses 8,107 3,957 4,644
Future income taxes 567 272 1,302
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Total current assets 192,758 83,069 191,675
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Property, plant and equipment 57,962 25,398 57,515
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Other:
Future income taxes 1,586 2,849 1,677
Other assets 69 137 66
Employee future benefits 6,848 6,477 6,759
Intangible assets 20,951 - -
Goodwill 23,331 - -
Intangible assets and goodwill - - 42,762
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52,785 9,463 51,264
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303,505 117,930 300,454
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current:
Bank loans 46,552 14,222 61,280
Accounts payable and accrued
liabilities 61,330 25,125 51,068
Income taxes payable 153 111 437
Current portion of capital
lease obligations 525 576 603
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Total current liabilities 108,560 40,034 113,388
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Long-term debt 53,950 - 51,709
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Long-term capital lease
obligations 422 514 259
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Employee future benefits 4,336 3,760 4,227
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Shareholders' Equity:
Preference shares 50,236 20,000 50,270
Common shares 59,093 28,489 58,800
Contributed surplus 400 541 490
Retained earnings 41,972 38,294 40,112
Accumulated other
comprehensive income (15,464) (13,702) (18,801)
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136,237 73,622 130,871
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303,505 117,930 300,454
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HIGH LINER FOODS INCORPORATED
INTERIM REPORT
For the thirteen weeks ended March 29, 2008
(with comparative figures for the thirteen weeks ended March 31, 2007)
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands of Canadian dollars, except per share amounts)
Thirteen Weeks
2008 2007
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Sales $ 149,238 $ 81,335
Cost of sales 115,482 59,044
Distribution expenses 9,567 6,096
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Gross profit 24,189 16,195
Commission income 109 -
Selling, general and administrative expenses (16,555) (11,597)
Foreign exchange loss (402) (11)
Business acquisition costs (1,493) -
Amortization of intangibles assets (320) -
Other expense/non-operating transactions (103) (17)
Interest expense
Short-term (728) (109)
Long-term (875) (12)
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Income from continuing operations before income
taxes 3,822 4,449
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Income taxes
Current (634) (1,233)
Future (94) (199)
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Total income taxes from continuing operations (728) (1,432)
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Net income from continuing operations 3,094 3,017
Net loss from discontinued operations; net of
income tax - (17)
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Net income 3,094 3,000
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PER SHARE INFORMATION
Earnings per Common Share
Basic from continuing operations 0.20 0.26
Basic from discontinued operations - -
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Basic, net income 0.20 0.26
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Diluted from continuing operations 0.18 0.26
Diluted from discontinued operations - -
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Diluted, net income 0.18 0.26
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Average shares outstanding for the period
Basic 13,396,396 10,319,858
Diluted 17,303,300 10,404,097
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HIGH LINER FOODS INCORPORATED
INTERIM REPORT
For the thirteen weeks ended March 29, 2008
(with comparative figures for the thirteen weeks ended March 31, 2007)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(in thousands of Canadian dollars)
Thirteen Weeks
2008 2007
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Net income for the period 3,094 3,000
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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 in 2008, nil
taxes in 2007) 1,731 (186)
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Net gain (loss) on derivative financial
instruments designated as cash flow hedges
(net of $0.9 million income tax expense
in 2008, $0.1 million tax recovery in 2007) 1,548 (255)
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 income tax expense in 2008
$0.1 million of income tax recovery in 2007) 58 (132)
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Change in gains and losses on derivatives
designated as cash flow hedges 1,606 (387)
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Other comprehensive income 3,337 (573)
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Comprehensive income 6,431 2,427
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HIGH LINER FOODS INCORPORATED
INTERIM REPORT
For the thirteen weeks ended March 29, 2008
(with comparative figures for the thirteen weeks ended March 31, 2007)
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(Unaudited)
(in thousands of Canadian dollars)
Thirteen Weeks
2008 2007
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Balance, beginning of period 40,112 36,106
Net income for the period 3,094 3,000
Dividends:
Common shares (670) (516)
Series A preference shares (250) -
Second preference shares (166) (296)
Share issuance expenses (148) -
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Balance, end of period 41,972 38,294
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HIGH LINER FOODS INCORPORATED
INTERIM REPORT
For the thirteen weeks ended March 29, 2008
(with comparative figures for the thirteen weeks ended March 31, 2007)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands of Canadian dollars)
Thirteen Weeks
2008 2007
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Cash provided by (used in) operations:
Net income from continuing operations for the
period 3,094 3,017
Charges (credits) to income not involving cash
from operations:
Depreciation and amortization 1,912 776
(Gain) loss on disposal of assets 78 (5)
Stock compensation expense 114 148
Payments of employee future benefits in excess
of expense 1 (55)
Future income taxes 94 199
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Cash flow from operations before changes in
non-cash working capital 5,293 4,080
Net change in non-cash working capital balances 2,906 (8,356)
Operating activities of discontinued operations - (15)
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8,199 (4,291)
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Cash provided by (used in) financing activities:
Change in current bank loans (16,301) 4,107
Repayment of long-term capital lease obligations (126) (110)
Dividends paid
Second Preference (166) (296)
Common (670) (516)
Series A Preference (250) -
Share issuance cost (148) -
Share redemption (19) -
Issue of equity shares 203 378
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(17,477) 3,563
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Cash provided by (used in) investing activities:
Purchase of property, plant and equipment (net
of investment tax credits) (521) (49)
Net expenditures on disposal of assets (21) (22)
Use of investment tax credits 259 743
Business acquisition adjustment 1,907 -
Decrease in other receivables - (40)
Investing activities of discontinued operations - 94
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1,624 726
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Translation adjustment 918 71
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Increase (decrease) in cash during the period (6,736) 69
Cash, beginning of period 7,064 240
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Cash, end of period 328 309
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-------------------------------------------------------------------------About High Liner Foods Incorporated
High Liner Foods Incorporated is one of North America's largest
processors and marketers 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® and Sea Cuisine™ labels, and
available in most grocery and club stores. The Company also sells its High
Liner® and FPI® 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) Earnings before interest, taxes, depreciation and amortization,
litigation costs, other income and non-operating transactions as
disclosed on the consolidated statements of income. EBITDA is not a
recognized measure under Canadian generally accepted accounting
principles (GAAP), however, management believes that it is a useful
performance measure as it approximates cash generated from
operations, before capital expenditures and changes in working
capital and excludes unusual items. Operating EBITDA also assists
comparison among companies as it eliminates the differences in
earnings due to how a company is financed.
(2) As measured in volume (pounds)
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