High Liner Foods reports third quarter financial results

- Results track well against strongest period of last year; dividend increased -

LUNENBURG, NS, Nov. 12 /CNW/ - High Liner Foods Incorporated (TSX: HLF; HLF.A), today reported financial results for the quarter ended October 3, 2009. All amounts are reported in Canadian dollars unless otherwise stated.

    
    Third quarter highlights:
    -   Higher sales in both Canadian retail and food service operations;
    -   Adjusted EBITDA(1) of $10.4 million;
    -   Net income of $5.1 million, or fully diluted earnings per share of
        $0.28;
    -   Overall sales decreased 3.8% to $143.7 million;
    -   Net interest bearing debt decreased to 32.8% of total capitalization
        compared to 39.5% at the end of last year and 39.1% at the end of the
        third quarter a year ago;
    -   Dividend declared for the fourth quarter of $0.075 cents per common
        and non-voting equity share; increased from $0.07 in the previous
        quarter.
    

"I am pleased with our performance, which was pretty well on par with our strongest quarter last year, pre-recession," said Henry Demone President and Chief Executive Officer. "Our sales volume was lower, though not surprising given our price increases earlier in the year and the weakened economy. The current recession did not affect High Liner in 2008 until after the third quarter. During the third quarter of this year, temporary supply constraints on tilapia and lower sales of higher priced crab and lobster also reduced sales. Overall, our performance has been strong during what has been a difficult period for the economy. For the year-to-date, our sales are up 9.1% and our net income improved 35.0% compared to the same period last year."

    
    -------------------------------------
    (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 general
        principles and guidance for reporting EBITDA issued by the Canadian
        Institute of Chartered Accountants.
    

Third Quarter Financial Results

Third quarter sales decreased 3.8% to $143.7 million. Excluding the impact of a weaker Canadian dollar, which increased the value of reported U.S. sales by approximately $2.9 million, sales in domestic currency were $137.7 million compared to $146.2 million for the third quarter of 2008. Higher selling prices, which dampen volume, were implemented late in 2008 and early in 2009 to cover the increased cost of certain seafood and other commodities and to offset the weakened Canadian dollar. Sales volume measured in pounds decreased 6.9% to 41.6 million compared to 44.7 million in the third quarter of last year.

Adjusted EBITDA for the quarter was $10.4 million, compared to $10.9 million in the third quarter of 2008. Excluding the effect of converting U.S. results to Canadian dollars, in domestic currency Adjusted EBITDA for the quarter was $10.0 million compared with $10.8 million for the same quarter a year ago.

Net income for the quarter was $5.1 million, or $0.28 per diluted share, compared to $5.4 million, or $0.29 per diluted share, for the same quarter last year.

    
    -------------------------------------------------------------------------
    (Amounts in thousands of Canadian $ except per share amounts)
    -------------------------------------------------------------------------
                                                      Thirty-      Thirty-
                            Thirteen     Thirteen       nine         nine
                          weeks ended  weeks ended  weeks ended  weeks ended
                            Oct. 3,      Sept. 27,    Oct. 3,      Sept. 27,
                              2009         2008         2009         2008
    -------------------------------------------------------------------------
    Sales                    $143,709     $149,354     $478,359     $438,552
    -------------------------------------------------------------------------
    Adjusted EBITDA           $10,359      $10,926      $32,534      $28,729
    -------------------------------------------------------------------------
    Net income                 $5,129       $5,442      $15,949      $11,816
    -------------------------------------------------------------------------
    Adjusted net income(1)     $5,129       $5,974      $16,515      $14,312
    -------------------------------------------------------------------------
    Diluted earnings per
     Common Share:
    -------------------------------------------------------------------------
    Net income                  $0.28        $0.29        $0.87        $0.64
    -------------------------------------------------------------------------
    Adjusted net income(1)      $0.28        $0.32        $0.90        $0.79
    -------------------------------------------------------------------------
    (1) Net income excluding one-time integration costs and non-operating
        items.
    

Operational Highlights for the Third Quarter

Canada

Sales for Canadian operations increased 4.3% to $73.7 million, with increases in both retail and food service operations. The higher sales resulted from price increases implemented in the first quarter of 2009 to recover rising input costs and to alleviate the impact of the weakening Canadian dollar. While helping to maintain profitability, these prices increases depressed sales volume, which was down 5.8% to 17.8 million pounds compared to the third quarter of last year.

After posting volume increases in the past several quarters (and while still up for the year-to-date), Canadian food service sales pounds for the quarter decreased 3.9% compared to the strong third quarter a year ago when the economic downturn had yet to impact the business. Sales of higher priced, but lower margin, crab and lobster contributed the most to this shortfall.

Retail sales pounds for the quarter decreased 7.7% as a result of price increases implemented in the first quarter of 2009 to offset higher Alaskan Pollock and salmon cost increases in Canadian dollars. Promotional spending increased at the end of the quarter to drive more demand in the fourth quarter.

United States

Sales for the Company's U.S. operations decreased 15.4% to US$63.9 million. Sales volume was down 8.0% to 23.8 million pounds compared to 25.9 million the third quarter of 2008.

U.S. retail sales pounds for the quarter decreased 12.9%, dampened by price increases implemented during the first quarter to offset Alaskan Pollock cost increases, and lower supplies of tilapia during the quarter.

Sales in pounds for U.S. food service operations declined 3.1% in the quarter due to fewer people eating away from home during a weakened economy. Sales of higher priced, but lower margin, crab and lobster contributed the most to this shortfall. The decrease in volume is also more pronounced at national family and casual dining restaurants, while most other channels within the U.S. food service business saw an increase in sales pounds.

Dividends

The Company paid a $0.07 per share quarterly dividend on September 15, 2009 to Common and Non-Voting Equity shareholders of record on September 1, 2009.

Today, the Board of Directors of the Company resolved to pay an increased quarterly dividend in the amount of $0.075 per Common and Non-Voting Equity Share payable on December 15, 2009 to shareholders of record on December 1, 2009.

Outlook

"We remain focused on leveraging our market leading brands and our strengths in procurement, logistics and product innovation to continue to grow our business," said Mr. Demone. "While it's all the more important that we carry on managing our business efficiently during these challenging economic times, we also believe it's important to re-invest in our business for the long-term. Our capital spending in the fourth quarter will be up significantly as a result of our decision last quarter to modernize one of our processing lines at our Portsmouth facility. This investment will help us manage our costs while increasing throughput."

Mr. Demone added: "Recently, we have seen lower raw material costs and a strengthening in the Canadian dollar, both of which benefit our business. Price decreases on commodity products along with greater promotional activity on value-added products should drive volume growth going forward."

Conference Call

The Company will host a conference call on Friday, November 13, 2009 at 10:30 a.m. ET (11:30 a.m. AT) to discuss its third quarter fiscal 2009 financial results. To access the conference call by telephone, dial 416-644-3418 or 1-877-974-0445. 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, November 20, 2009 at midnight. To access the archived conference call, dial 416-640-1917 or 1-877-289-8525 and enter the reservation number 4177363 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.

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(R), Fisher Boy(R), Mirabel(R), Royal Sea(R), and Sea Cuisine(TM) labels, and are available in most grocery and club stores. The Company also sells its High Liner(R), FPI(R) and Mirabel(R) 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 2009 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.

Financial Statements

For convenience, this press release includes the Company's Fiscal Third Quarter Balance Sheets and Statements of Income, Statements of Comprehensive Income, Statements of Retained Earnings and Statements of Cash Flows.

    
                        HIGH LINER FOODS INCORPORATED

                            As at October 3, 2009
    (with comparative figures as at September 27, 2008 and January 3, 2009)

                         CONSOLIDATED BALANCE SHEETS
                                 (Unaudited)
                     (in thousands of Canadian dollars)

                                        October 3,  September 27,  January 3,
                                             2009          2008         2009
    -------------------------------------------------------------------------
    ASSETS
      Current:
        Cash                                 1,924        2,712        7,032
        Accounts receivable                 55,736       63,196       63,873
        Income tax receivable                    -        1,732           45
        Inventories                        120,393      114,540      146,863
        Prepaid expenses                     1,974        1,926        1,782
        Future income taxes                  2,965          912        1,533
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Total current assets                 182,992      185,018      221,128
    -------------------------------------------------------------------------
      Property, plant and equipment         54,295       53,185       59,016
    -------------------------------------------------------------------------
      Other:
        Future income taxes                    522        1,262          833
        Other assets                           139           66          133
        Employee future benefits             4,315        7,316        3,477
        Intangible assets                   20,854       20,875       24,065
        Goodwill                            29,176       28,444       30,767
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                            55,006       57,963       59,275
    -------------------------------------------------------------------------
                                           292,293      296,166      339,419
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
      Current:
        Bank loans                          19,985       39,719       39,931
        Accounts payable and accrued
         liabilities                        52,990       51,328       73,611
        Income taxes payable                 1,615          771        2,443
        Current portion of long-term debt    3,522            -            -
        Current portion of capital lease
         obligations                           440          474          458
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Total current liabilities             78,552       92,292      116,443
    -------------------------------------------------------------------------
      Long-term debt                        53,830       54,441       63,939
    -------------------------------------------------------------------------
      Long-term capital lease obligations      527          510          513
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Other long-term liabilities            1,173            -        2,112
    -------------------------------------------------------------------------
      Future income taxes                      955            -            -
    -------------------------------------------------------------------------
      Employee future benefits               1,404        4,278          563
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Shareholders' Equity:
        Preference shares                        -            -            -
        Common shares                      108,804      110,155      109,787
        Contributed surplus                    364          364          364
        Retained earnings                   62,267       48,633       49,897
        Accumulated other comprehensive
         loss                              (15,583)     (14,507)      (4,199)
    -------------------------------------------------------------------------
                                           155,852      144,645      155,849
    -------------------------------------------------------------------------
                                           292,293      296,166      339,419
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                        HIGH LINER FOODS INCORPORATED

         For the thirteen and thirty-nine weeks ended October 3, 2009
        (with comparative figures for the thirteen and thirty-nine weeks
                          ended September 27, 2008)

                      CONSOLIDATED STATEMENTS OF INCOME
                                 (Unaudited)
         (in thousands of Canadian dollars, except per share amounts)

                               Thirteen Weeks           Thirty-Nine Weeks
                              2009         2008         2009         2008
    ----------------------------------------------- -------------------------
    Sales                 $   143,709  $   149,354  $   478,359  $   438,552
    Cost of sales             114,179      116,533      378,109      342,240
    Distribution expenses       7,560        9,135       24,791       27,115
    ----------------------------------------------- -------------------------
    Gross profit               21,970       23,686       75,459       69,197
    Selling, general and
     administrative
     expenses                 (13,604)     (14,250)     (48,136)     (44,685)
    Foreign exchange
     gain (loss)                  364          (98)         200         (387)
    Business acquisition
     costs                          -         (722)        (460)      (3,017)
    Amortization of
     intangible assets           (336)        (308)      (1,063)        (906)
    Loss on disposal of
     assets and other
     expense                     (112)         (12)        (452)        (126)
    Interest expense:
      Short-term                 (366)        (522)      (1,327)      (1,951)
      Long-term                  (905)        (860)      (2,833)      (2,601)
    ----------------------------------------------- -------------------------
    Income before income
     taxes                      7,011        6,914       21,388       15,524
    ----------------------------------------------- -------------------------
    Income taxes:
      Current                  (1,113)      (1,292)      (2,342)      (3,137)
      Future                     (769)        (180)      (3,097)        (571)
    ----------------------------------------------- -------------------------
    Total income taxes         (1,882)      (1,472)      (5,439)      (3,708)
    ----------------------------------------------- -------------------------
    Net income                  5,129        5,442       15,949       11,816
    ----------------------------------------------- -------------------------
    ----------------------------------------------- -------------------------

    PER SHARE INFORMATION
    Earnings per Common Share
      Basic, net income          0.28         0.35         0.87         0.79
      Diluted, net income        0.28         0.29         0.87         0.64
    ----------------------------------------------- -------------------------
    ----------------------------------------------- -------------------------

    Average shares
     outstanding for
     the period
      Basic                18,338,476   14,595,394   18,404,424   13,816,631
      Diluted              18,355,358   18,510,665   18,412,967   18,094,365
    ----------------------------------------------- -------------------------
    ----------------------------------------------- -------------------------

    Depreciation               (1,629)      (1,588)      (5,011)      (4,604)



                        HIGH LINER FOODS INCORPORATED

         For the thirteen and thirty-nine weeks ended October 3, 2009
       (with comparative figures for the thirteen and thirty-nine weeks
                          ended September 27, 2008)

               CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                 (Unaudited)
                     (in thousands of Canadian dollars)

                               Thirteen Weeks           Thirty-Nine Weeks
                              2009         2008         2009         2008
    ----------------------------------------------- -------------------------
    Net income for the
     period                     5,129        5,442       15,949       11,816
    ----------------------------------------------- -------------------------

    Other comprehensive
     income, net of future
     income taxes
      Unrealized foreign
       exchange (losses)
       gains of self-
       sustaining foreign
       operations (net of
       $0.4 million tax
       expense and $0.5
       million tax recovery
       for the thirteen and
       thirty-nine weeks in
       2009; net of nil
       taxes in 2008)          (3,612)         813       (4,740)       2,080
    ----------------------------------------------- -------------------------
      Net (loss) gain on
       derivative financial
       instruments designated
       as cash flow hedges
       (net of $1.0 million
       income tax recovery
       and a $1.8 million
       income tax recovery
       for the thirteen and
       thirty-nine weeks in
       2009; $0.2 million
       tax expense and $1.0
       million tax expense
       for the thirteen and
       thirty-nine weeks
       in 2008)                (2,264)         387       (4,473)       2,260
      Net loss (gain) on
       derivatives designated
       as cash flow hedges in
       prior periods
       transferred to net
       income in the current
       period (net of $0.8
       million and $1.3
       million income tax
       expense for the thirteen
       and thirty-nine weeks
       in 2009; $0.1 million
       and $0.1 million of
       income tax recovery
       for the thirteen and
       thirty-nine weeks
       in 2008)                   405         (304)      (2,676)         (46)
    ----------------------------------------------- -------------------------
      Net (loss) gain on
       derivatives designated
       as cash flow hedges     (1,859)          83       (7,149)       2,214
    ----------------------------------------------- -------------------------
    Other comprehensive
     (loss) income             (5,471)         896      (11,889)       4,294
    ----------------------------------------------- -------------------------
    Comprehensive (loss)
     income                      (342)       6,338        4,060       16,110
    ----------------------------------------------- -------------------------
    ----------------------------------------------- -------------------------



                        HIGH LINER FOODS INCORPORATED

         For the thirteen and thirty-nine weeks ended October 3, 2009
       (with comparative figures for the thirteen and thirty-nine weeks
                          ended September 27, 2008)

                 CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
                                 (Unaudited)
                     (in thousands of Canadian dollars)

                                  Thirteen Weeks           Thirty-Nine Weeks
                                 2009         2008         2009         2008
    ----------------------------------------------- -------------------------
    Balance, beginning of
     period                    58,421       44,330       49,897       40,112
    Net income for the
     period                     5,129        5,442       15,949       11,816
    Dividends:
      Common shares            (1,283)        (745)      (3,584)      (2,087)
      Series A preference
       shares                       -         (274)           -         (774)
      Second preference
       shares                       -            -            -         (166)
      Share issuance expenses       -         (120)           5         (268)
    ----------------------------------------------- -------------------------
    Balance, end of period     62,267       48,633       62,267       48,633
    ----------------------------------------------- -------------------------
    ----------------------------------------------- -------------------------



                        HIGH LINER FOODS INCORPORATED

         For the thirteen and thirty-nine weeks ended October 3, 2009
       (with comparative figures for the thirteen and thirty-nine weeks
                          ended September 27, 2008)

                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (Unaudited)
                     (in thousands of Canadian dollars)

                                  Thirteen Weeks           Thirty-Nine Weeks
                                 2009         2008         2009         2008
    ----------------------------------------------- -------------------------
    Cash provided by (used
     in) operations:
      Net income for the
       period                   5,129        5,442       15,949       11,816
      Charges (credits) to
       income not involving
       cash from operations:
        Depreciation and
         amortization           2,199        2,002        6,780        5,829
        Loss (gain) on
         disposal of assets       114           15          461           92
        Stock compensation
         (reversal) expense       (17)         (60)          38          (81)
        Payments of employee
         future benefits
         less than expense
         (in excess
         of expense)                7          (17)           9         (558)
        Unrealized foreign
         exchange (gain)
         loss                    (187)        (170)         710          212
        Future income taxes       769          180        3,097          571
    ----------------------------------------------- -------------------------
      Cash flow from
       operations before
       changes in non-cash
       working capital          8,014        7,392       27,044       17,881
      Net change in non-
       cash working
       capital balances         5,722        2,587       (5,972)       4,061
    ----------------------------------------------- -------------------------
                               13,736        9,979       21,072       21,942
    ----------------------------------------------- -------------------------
    Cash (used in) provided
     by financing
     activities:
      Change in current
       bank loans             (12,136)      (9,596)     (16,777)     (23,640)
      Repayment of long-
       term capital lease
       obligations               (116)         (97)        (326)        (420)
      Dividends paid:
        Second Preference           -            -            -         (166)
        Series A Preference         -         (274)           -         (774)
        Common                 (1,283)        (745)      (3,584)      (2,087)
      Share issuance cost           -         (120)           5         (268)
      Share repurchase            (62)           -         (983)           -
      Preference share
       redemption                   -            -            -          (18)
      Issue of equity
       shares                       -          540            -          991
    ----------------------------------------------- -------------------------
                              (13,597)     (10,292)     (21,665)     (26,382)
    ----------------------------------------------- -------------------------
    Cash (used in) provided
     by investing activities:
      Purchase of property,
       plant and equipment
       (net of investment
       tax credits)            (2,065)        (870)      (4,158)      (1,889)
      Net proceeds
       (expenditures) on
       disposal of assets           1            4           12          (29)
      Business acquisition
       adjustment                   -         (144)           -        1,758
    ----------------------------------------------- -------------------------
                               (2,064)      (1,010)      (4,146)        (160)
    ----------------------------------------------- -------------------------
    Foreign exchange
     impact on cash              (300)          66         (369)         248
    ----------------------------------------------- -------------------------
    Decrease in cash during
     the period                (2,225)      (1,257)      (5,108)      (4,352)
    Cash, beginning of
     period                     4,149        3,969        7,032        7,064
    ----------------------------------------------- -------------------------
    Cash, end of period         1,924        2,712        1,924        2,712
    ----------------------------------------------- -------------------------
    

SOURCE High Liner Foods Incorporated

For further information: For further information: Kelly Nelson, Vice President Corporate Services & Chief Financial Officer, High Liner Foods Incorporated, Tel: (902) 634-6200, investor@highlinerfoods.com; Trevor Heisler, Investor Relations, The Equicom Group Inc., (416) 815-0700 ext. 270, theisler@equicomgroup.com


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