- Canadian retail remains strong; Icelandic USA integration ahead of plan -
LUNENBURG, NS, Aug. 8, 2012 /CNW/ - High Liner Foods Incorporated (TSX: HLF; HLF.A), the leading North American value-added frozen seafood company, today reported financial results for the thirteen- and twenty-six-week periods ended June 30, 2012. All amounts are reported in Canadian dollars.
Financial and operational highlights for the second quarter and first twenty-six weeks of 2012 include (all comparisons are relative to the second quarter and first twenty-six weeks of 2011, unless otherwise noted):
- Sales for the second quarter increased by 42.9% to $219.0 million from $153.3 million;
- Adjusted EBITDA1 for the second quarter increased by 52.0% to $16.5 million from $10.9 million;
- Reported net income for the second quarter, including one-time costs of the Icelandic USA acquisition, of $1.0 million, or diluted earnings per share ("EPS") of $0.06, compared with $4.8 million, or diluted EPS of $0.31, in the second quarter of 2011 ($2.8 million, or diluted EPS of $0.18, for the first twenty-six weeks of 2012, compared to $14.5 million, or diluted EPS of $0.94, the first twenty-six weeks of 2011);
- Adjusted Net Income2 of $5.5 million, or Adjusted diluted EPS of $0.36, compared with $5.5 million, or Adjusted diluted EPS of $0.36, in the second quarter of 2011 ($19.5 million, or diluted EPS of $1.27, for the first twenty-six weeks of 2012, compared to $15.4 million, or diluted EPS of $1.00, the first twenty-six weeks of 2011);
- The integration of Icelandic USA is ahead of plan.
"We are pleased to report another good quarter that saw sales and Adjusted EBITDA grow by 42.9% and 52.0%, respectively, largely due to the inclusion of Icelandic USA and continued improvement in Canadian retail performance," said Henry Demone, president and CEO. "Our results were slightly tempered on a year-over-year basis by the timing of the Lenten period, which fell mostly in the first quarter of this year. Nonetheless, on a pro forma basis that assumes Icelandic USA had been part of our operations for the same period in 2011, our U.S. operations experienced a strong 14.5% growth in Adjusted EBITDA. In Canada, our retail sales continued the strong growth seen in the first quarter, bolstered in part by the introduction of our 'Flame Savours' fire-roasted premium fillets at the beginning of the year. We recorded a 10.6% increase in total Canadian dollar sales and a 15.0% growth in retail sales volume. We are also pleased to announce that we continue to be ahead of schedule with the integration of Icelandic USA, and we expect to benefit from an early completion that solidifies our leadership position in the food service frozen seafood market."
Nearly 70% of the Company's operations, assets, and liabilities, are denominated in U.S. dollars or are impacted by the Canadian/U.S. dollar exchange rate. As such, foreign currency fluctuations affect the reported values of individual lines on the Company's balance sheet and income statement.
|(in thousands except per share amounts, unless otherwise noted)|| Thirteen
June 30, 2012
July 2, 2011
June 30, 2012
July 2, 2011
|Sales in million pounds||61.5||44.8||148.3||101.6|
|Sales in domestic currency||$217,665||$155,955||$505,283||$334,788|
|Foreign exchange impact||$1,384||$(2,670)||$1,465||$(4,395)|
|Sales in Canadian dollars||$219,049||$153,285||$506,748||$330,393|
|Adjusted net income||$5,512||$5,461||$19,531||$15,441|
|Adjusted EPS (Diluted)3||$0.36||$0.36||$1.27||$1.00|
|Average Shares Outstanding (Diluted)||15,450||15,339||15,419||15,381|
Sales for the second quarter increased to $219.0 million from $153.3 million for the same period a year ago. The 42.9% increase in sales was achieved as a result of the Icelandic USA acquisition and overall organic sales increases from our pre-Icelandic USA business. The weaker Canadian dollar resulted in an increase in the value of reported sales by $4.0 million, or 3.3%. Sales in domestic currency, which excludes the impact of currency translation, were $217.7 million compared with $156.0 million for the second quarter of 2011. Total sales volume increased by 37.0% to 61.5 million pounds, with Icelandic USA accounting for 36.0% and the pre-Icelandic USA volume growing by 1.0%. For comparison purposes, assuming that Icelandic USA had been part of High Liner's operations in the comparable period in 2011, total sales increased by 1.8% while total sales volume declined by 1.8%; however, year to date, total sales increased by 6.9% and total sales volume increased by 0.9%. The second quarter was affected by the timing of the Lenten period, which transpired mostly in the first quarter this year versus the later timing in 2011.
Adjusted EBITDA for the second quarter increased by 52.0% to $16.5 million, or 7.5% of sales, from $10.9 million, or 7.1% of sales, for the same period in 2011. The increase in Adjusted EBITDA was due to higher sales volumes resulting from the addition of Icelandic USA and higher selling prices, partially offset by higher seafood and other input costs. For comparison purposes, assuming that Icelandic USA had been part of High Liner's U.S. operations in the second quarter of 2011, Adjusted EBITDA increased by 7.3% year over year. Synergies achieved in the quarter were $2.0 million and year to date were $3.0 million.
Net income for the quarter was $1.0 million, or diluted EPS of $0.06, compared with net income of $4.8 million, or diluted EPS of $0.31, for the second quarter of 2011. Net income was negatively impacted by after-tax one-time integration costs related to the Icelandic USA acquisition expensed during the quarter as well as asset impairment costs, higher amortization of intangible assets, and higher financing costs. Excluding the one-time integration costs, asset impairment, non-cash expense from revaluing an embedded derivative associated with the long-term debt, as the interest rate is not less than LIBOR of 1.5%, which is currently greater than prevailing interest rates, and stock-based compensation expense, Adjusted net income was $5.5 million, or Adjusted diluted EPS of $0.36, equal to the previous year.
Free cash flow4 was $40.8 million for the rolling four quarters ended June 30, 2012. This allowed the Company to reduce interest-bearing debt by $34.1 million from $382.4 million at December 31, 2011 to $348.3 million at June 30, 2012.
Today, the Board of Directors of the Company approved a quarterly dividend of $0.11 per Common and Non-Voting Equity Share payable on September 15, 2012 to shareholders of record on September 1, 2012. This represents a 10.0% increase from the $0.10-per-share quarterly dividend paid on June 15, 2012, reflecting the Board's continued confidence in the Company's operations, and the third dividend increase over the last seven quarters.
"We remain ahead of schedule in combining the operations of Icelandic USA with our existing operations, and expect to be rewarded with synergies a few months earlier than anticipated for 2013," said Henry Demone. "We are confident that the successful integration will strengthen our leadership position in the U.S. frozen seafood food service market. Equally important, we are pleased to be able to sustain the improved performance at our Canadian operations, driven by our sales and marketing programs and introduction of the 'Flame Savours' product in the retail market earlier this year, and expect this momentum to continue for the rest of the year. While the quarter reflects flat Adjusted earnings per share versus last year due to timing issues and higher fixed interest and amortization expenses, the acquisition of Icelandic USA remains accretive on a year-to-date basis and we expect it to be so for the full year. Lastly, consistent with our comments last quarter, we expect to see input cost improvements during the second half of the year as a result of earlier price decreases for several key raw materials. All these should help deliver operating strength as we enter the second half of 2012."
Supplemental Financial Information
This news release is not in any way a substitute for reading High Liner's financial statements, including notes to the financial statements, and Management's Discussion and Analysis. The Company's Fiscal Second Quarter Interim Financial Statements, which includes the Statements of Financial Position, Income, Comprehensive Income, Changes in Shareholders' Equity, Cash Flows and notes, can be viewed in the Investor Information section of the High Liner Foods website at
High Liner will host a conference call on Thursday, August 9, at 10:30 a.m. ET (11:30 a.m. AT) to discuss its second quarter financial results. To access the conference call by telephone, dial 647-427-7450 or 1-888-231-8191. 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 Thursday, August 16, 2012 at midnight. To access the archived conference call, dial 1-855-859-2056 and enter the reservation number 99500324.
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 the 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, Sea Cuisine and Royal Sea labels, and are available in most grocery and club stores. The Company also sells its products under the High Liner, FPI, Mirabel, Viking, Icelandic Seafood, Samband of Iceland, Seastar, and Seaside brands to restaurants and institutions, and is the 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. Forward-looking statements can generally be identified by the use of the conditional tense, the words "may", "should", "would", "believe", "plan", "expect", "intend", "anticipate", "estimate", "foresee", "objective" or "continue" or the negative of these terms or variations of them or words and expressions of similar nature. Specific forward-looking statements in this document include, but are not limited to expectations with respect to: our market position; continued success in integrating Icelandic USA; realization of near term and on-going annual synergies from combining operations; continued operating strength in the US; growth in our food service and retail operations; continuation of second quarter momentum throughout 2012; continued implementation of strategic initiatives; cost improvements in the second half of 2012; raw material costs decreasing in the last half of 2012; and our enhanced purchasing power, expanded distribution and cost reduction efforts delivering further operating improvements this year. These statements are based on a number of factors and assumptions including, but not limited to: availability, demand and prices of raw materials, energy and supplies; the condition of the Canadian and United States economies; product pricing; foreign exchange rates, especially the rate of exchange of the Canadian dollar to the U.S. dollar; our ability to attract and retain customers and our operating costs; timing of plant closures and the amount and timing of the related one-time cash expense; amount and timing of the write-down of plant and equipment; amount and timing of the annual ongoing reduction in operating costs resulting from the plant consolidation; and amount and timing of the capital expenditures in excess of normal requirements to allow the movement of production between plants; and timing and final number of layoffs from plant closures. 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 actual results may differ materially from those expressed in such forward-looking statements. We include in publicly available documents filed from time to time with securities commissions and The Toronto Stock Exchange, a discussion of the risk factors that can cause anticipated outcomes to differ from actual outcomes. Except as required under applicable securities legislation, we do not undertake to update forward-looking statements, whether written or oral, that may be made from time to time by us or on our behalf, whether as a result of new information, future events or otherwise.
The Company reports its financial results in accordance with IFRS. Included in this media release are certain non-IFRS financial measures as supplemental indicators of operating performance. These non-IFRS measures are Adjusted EBITDA, Adjusted Net Income, Adjusted Earnings per Share and Free Cash Flow.
The Company believes these non-IFRS financial measures provide useful information to both management and investors in measuring the financial performance and financial condition of the Company. These measures do not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable to similarly titled measures presented by other publicly traded companies, nor should they be construed as an alternative to other financial measures determined in accordance with IFRS.
|1||Adjusted EBITDA is earnings before interest, taxes, depreciation and amortization, excluding impairment of property, plant and equipment, business acquisition and integration expenses, stock compensation expense, gains or losses on disposal of assets, and the increase in cost of goods sold relating to inventory acquired from the Icelandic USA and Viking Acquisitions, above its historical cost, as part of the fair value requirements of purchase price accounting.|
|2||Adjusted net income is net income excluding the after-tax impairment of property, plant and equipment, business acquisition and integration expenses, stock compensation expense, the increase in cost of goods sold relating to inventory acquired from the Icelandic USA and Viking Acquisitions, non-cash expense from revaluing an embedded derivative associated with the long-term debt, as the interest rate is not less than LIBOR of 1.5%, which is currently greater than prevailing interest rates, and withholding tax related inter-company dividends.|
|3||Adjusted EPS is Adjusted net income, as defined, divided by the average diluted number of shares.|
|4||The definition of Free cash flow follows the general principles and guidance for Standardized Cash Flow issued by the Canadian Institute of Chartered Accountants, which is cash flow from operating activities less purchase of property, plant and equipment (net of investment tax credits), as reported on the Consolidated Statement of Cash Flows.|
SOURCE: High Liner Foods Incorporated
For further information:
Executive Vice President and
Chief Financial Officer
High Liner Foods Incorporated
Tel: (902) 634-6200
Tel: (416) 815-0700 ext.242