High Liner Foods Reports Results for Second Quarter Fiscal 2007



    - Strong Growth in Sales and Profitability Driven by Strength of Canadian
    Operations -

    LUNENBURG, NS, Aug. 3 /CNW/ - High Liner Foods Incorporated (TSX:HLF)
today reported its financial results for the thirteen week period ended
June 30, 2007. (All amounts are reported in Canadian dollars.)
    Financial and operational highlights for the second quarter of fiscal
2007 include:
    
    -  Sales for the second quarter of fiscal 2007 increased 7.9% to $62.2
       million from $57.6 million for the second quarter of fiscal 2006;
    -  15.6% growth in sales at the Canadian operations;
    -  Operating EBITDA(1) for the quarter increased to $2.4 million from
       $2.0 million for the same period last year;
    -  Net income from continuing operations of $0.5 million, or $0.02 per
       share, compared with $0.2 million, or $(0.01) per share (after
       deducting dividends on preference shares), for the second quarter of
       fiscal 2006;
    -  Net income of $0.8 million, or $0.05 per share, compared with a net
       loss of $0.4 million, or $0.07 per share, for the second quarter of
       fiscal 2006;
    -  Launch of seven new products; and
    -  A 17.7% reduction in inventories compared to the end of the second
       quarter of fiscal 2006.
    

    "Our results for the second quarter reflect the underlying strength of
our Canadian operations. Our Canadian business continued the long-term trend
of growth in sales volumes across most businesses, which had been interrupted
by the temporary impact of price increases implemented last October," said
Henry Demone, President and Chief Executive Officer. "While we continued our
focus to improve our U.S. operations, second quarter performance in the U.S.
was affected by the continued rise in input costs as well as higher
promotional costs. Even more significant, several large U.S. customers
purchased less of our products during the second quarter following higher than
expected purchases during the first quarter in preparation for Lent.
Importantly, however, our year-to-date sales to these key customers are ahead
of last year at this time. Consolidated sales growth for the quarter of almost
8% contributed to strong growth in overall profitability as last year's price
increases offset higher input costs. We also reduced freight and storage costs
due to a reduction in inventory, better rates and improved efficiencies."

    
    Financial Results

    -------------------------------------------------------------------------
    (Amounts in thousands of Canadian $ except per share amounts)
    -------------------------------------------------------------------------
                          Thirteen      Thirteen    Twenty-Six    Twenty-Six
                       Weeks ended   Weeks ended   Weeks ended   Weeks ended
                           June 30,       July 1,      June 30,       July 1,
                              2007          2006          2007          2006
    -------------------------------------------------------------------------
    Sales              $    62,202   $    57,633   $   143,537   $   135,325
    -------------------------------------------------------------------------
    Operating EBITDA         2,403         2,025         7,749         7,625
    -------------------------------------------------------------------------
    Net income from
     continuing
     operations        $       485   $       176   $     3,502   $     3,258
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income (loss)
     from discontinued
     operations; net
     of income tax     $       307   $      (581)  $       290   $    (1,085)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income         $       792   $      (405)  $     3,792   $     2,173
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic earnings per
     Common Share:
      Net income from
       continuing
       operations      $      0.02   $     (0.01)  $      0.28   $      0.26
      Net income (loss)
       from discontinued
       operations      $      0.03   $     (0.06)  $      0.03   $     (0.11)
      Net income       $      0.05   $     (0.07)  $      0.31   $      0.16
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Financial Results for the Quarter

    Sales for the second quarter of fiscal 2007 increased 7.9% to $62.2
million from $57.6 million for the second quarter of fiscal 2006. The increase
was primarily attributable to growth in sales in both the retail and food
service businesses at the Company's Canadian operations, which increased 15.6%
compared to the second quarter of fiscal 2006.
    Operating EBITDA for the quarter increased to $2.4 million from $2.0
million for the same period last year. The increase was due to a number of
factors, including higher sales, last year's price increases, which offset
higher input costs and lower freight and storage costs. Net income from
continuing operations for the quarter was $0.5 million, or $0.02 per share,
compared with $0.2 million, or $(0.01) per share, for the corresponding period
of 2006. Net income for the second quarter of fiscal 2007 included $0.4
million in vacation expense for the accrual of salaried vacation pay. Prior to
an accounting change implemented in the fiscal 2006 year-end financial
statements, the Company did not accrue salaried vacation pay on the balance
sheet. Consequently, estimates for the second quarter of fiscal 2006 are not
available and therefore no adjustment has been made to comparative numbers.
This increase in the accrual will be reversed by the end of 2007 as employees
take their vacation.

    Financial Results for the Six-Month Period

    Sales for the first six months of fiscal 2007 increased 6.1% to $143.5
million from $135.3 million for the first six months of fiscal 2006. Operating
EBITDA for the first six months of fiscal 2007 increased to $7.7 million from
$7.6 million for the corresponding period of fiscal 2006 as the contribution
from sales of new products in the first half of fiscal 2007, as well as price
increases in 2006, were partially offset by higher input costs, additional
fixed marketing costs, additional incentives, and other items. Net income from
continuing operations for the first six months of fiscal 2007 was $3.5
million, or $0.28 per share, compared to $3.3 million, or $0.26 per share, for
the corresponding period of 2006.

    Operational Highlights for the Quarter

    Canada

    Canadian retail sales for the second quarter of fiscal 2007 increased
6.7%(2) compared with the second quarter of fiscal 2006 as sales volumes
returned to the their long-term growth trends following the effect of the
price increases implemented on most retail products in October of 2006. Within
the Canadian retail business, sales volumes of Signature(TM) products
increased 6.9%(2) and sales of raw fillets decreased 3.3%,(2) as lower sales
of traditional fillet blocks continued to offset the sales growth of
vacuum-packed individually quick frozen fillets.
    Canadian food service sales volumes also returned to their long-term
growth trend in the quarter, increasing 11.7%(2) compared to the same period
last year. The increase was due to a return to higher sales of most species to
most customers, strong contributions from new products, and price increases
implemented in 2006 and on selected items in 2007.

    United States

    U.S. sales of High Liner(R) brand products for the quarter decreased
13.0%(2) (2.3% on a dollar basis in U.S. dollars) compared to the second
quarter of fiscal 2006. For the most part, the decrease was attributable to a
75% volume decrease in the traditional grocery store channel due to the
Company's largest customer buying higher volumes of product than it required
during the first quarter. As a result, this customer limited its purchases
during the second quarter. On a year to date basis, sales with this customer
are up from last year in dollars.
    Sales volume of High Liner(R) brand seafood products in the U.S. club
store channel decreased 2.9%(2), primarily due to the effect of price
increases in early 2007 on cod and supply constraints on cod, which more than
offset higher sales of tilapia products.
    Fisher Boy(R) sales grew for the third consecutive quarter, increasing
4.9%(2) compared to the same quarter last year. The increase was the result of
successful initiatives to improve sales, including new product introductions
early in 2007.
    Sales volume of private label seafood products in the U.S. decreased
14.8%(2). The decrease is the result of lower sales to the Company's two
largest customers, which overbought product in the first quarter of the year.
On a year to date basis, sales with these customers are up over last year.

    Dividends

    High Liner Foods paid a quarterly dividend on its Common Shares of $0.05
per share on June 15, 2007 to shareholders of record on June 1, 2007.
    On August 3, 2007, the Board of Directors approved a quarterly dividend
in the amount of $0.05 per Common Share payable on September 15, 2007 to
shareholders of record on September 1, 2007.
    The Company paid regular quarterly dividends on its Second Preference
Shares in the amount of $1.51 per share on June 30, 2007 for the period of
March 31, 2006 to June 29, 2007 compared to $1.48 for the corresponding period
last year.

    Other Developments

    As previously disclosed, on April 30, 2007, the Company confirmed that a
Letter of Intent for the potential acquisition of certain FPI Limited Canadian
and U.S. assets had been reached. Negotiations are still ongoing at the time
of this press release.

    Outlook

    "The rebound in sales volumes in Canada in the second quarter is a
testament to the strength of the High Liner(R) brand and the loyalty of our
consumers," said Mr. Demone. "Both our retail and food service businesses are
well positioned to continue to deliver steady long-term growth as we focus on
providing innovative new products that meet consumers preferences. We are
pleased with our progress to date in our efforts to turn around our U.S.
operations. We will continue to execute our strategy to strengthen the High
Liner brand in that market by introducing additional value-added premium
seafood products to our established customer base, as well as by expanding
distribution in both the traditional grocery store and club store channels. We
look forward to leveraging the consistent improvement we have seen in our
Fisher Boy(R) business over the last three quarters through the continued
transition of these products to our High Liner brand. While we believe that
cost pressures for most of our species have abated, the cost of haddock, and
especially cod, will continue to rise. With the expectation of higher input
costs going forward, we will continue to monitor costs across our operations,
adjusting our product mix and evaluating our potential to implement price
increases as required."

    Conference Call

    High Liner Foods will host a conference call on Tuesday, August 7, 2007
at 10:30 a.m. ET (11:30 a.m. AT) to discuss its second quarter fiscal 2007
financial results. To access the conference call by telephone, dial
416-644-3422 or 1-800-732-1073. Please connect approximately ten minutes prior
to the beginning of the call to ensure participation. The conference call will
be archived for replay until Tuesday, August 14, 2007 at midnight. To access
the archived conference call, dial 416-640-1917 or 1-877-289-8525 and enter
the reservation number 21240773 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

                        HIGH LINER FOODS INCORPORATED

                             As at June 30, 2007
     (with comparative figures as at July 1, 2006 and December 30, 2006)

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


                                         June 30,       July 1,  December 30,
                                            2007          2006          2006
    -------------------------------------------------------------------------
    ASSETS
      Current:
        Cash                                 112           298           240
        Accounts receivable               26,342        27,404        31,221
        Income tax receivable                 50            19           161
        Inventories                       39,635        48,136        41,278
        Prepaid expenses                   5,484         3,553         3,495
        Future income taxes                1,023           330           295
    -------------------------------------------------------------------------
      Total current assets                72,646        79,740        76,690
    -------------------------------------------------------------------------
      Property, plant and equipment       24,188        26,106        26,038
    -------------------------------------------------------------------------
      Other:
        Future income taxes                2,723         3,800         3,005
        Other assets                         565           614         1,084
        Employee future benefits           6,588         6,208         6,360
    -------------------------------------------------------------------------
                                           9,876        10,622        10,449
    -------------------------------------------------------------------------
                                         106,710       116,468       113,177
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    LIABILITIES AND SHAREHOLDERS' EQUITY
      Current:
        Bank loans                         5,748        22,960        10,115
        Accounts payable and accrued
         liabilities                      24,687        20,056        27,087
        Income taxes payable                 186           297             -
        Current portion of capital
         lease obligations                   553           593           560
    -------------------------------------------------------------------------
      Total current liabilities           31,174        43,906        37,762
    -------------------------------------------------------------------------
      Long-term capital lease
       obligations                           458           484           477
    -------------------------------------------------------------------------
      Employee future benefits             3,846         3,607         3,702
    -------------------------------------------------------------------------
      Shareholders' Equity:
        Preference shares                 20,000        20,000        20,000
        Common shares                     28,489        28,085        28,106
        Contributed surplus                  550           499           503
        Retained earnings                 38,265        35,680        36,204
        Accumulated other
         comprehensive income            (16,072)            -             -
        Foreign currency translation
         account                               -       (15,793)      (13,577)
    -------------------------------------------------------------------------
                                          71,232        68,471        71,236
    -------------------------------------------------------------------------
                                         106,710       116,468       113,177
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                        HIGH LINER FOODS INCORPORATED

          For the thirteen and twenty-six weeks ended June 30, 2007
               (with comparative figures for the thirteen and
                    twenty-six weeks ended July 1, 2006)

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

                                Thirteen Weeks             Twenty-Six Weeks
                              2007          2006          2007          2006
    -------------------------------------------------------------------------
    Sales              $    62,202        57,633   $   143,537       135,325
    Cost of sales           50,039        46,881       114,608       109,087
    -------------------------------------------------------------------------
    Gross profit            12,163        10,752        28,929        26,238
    Selling, general
     and administrative
     expenses               (9,453)       (8,714)      (20,862)      (18,744)
    Foreign exchange
     (loss)/gain              (307)          (13)         (318)          131
    Depreciation and
     amortization             (747)         (753)       (1,523)       (1,503)
    Other income/
     (expense)/
     non-operating
     transactions              (14)          181           (31)          171
    Interest expense:
      Short-term                23          (309)          (69)         (593)
      Long-term                (14)          (21)          (26)          (41)
    -------------------------------------------------------------------------
    Income from
     continuing
     operations before
     income taxes            1,651         1,123         6,100         5,659
    -------------------------------------------------------------------------
    Income taxes:
      Current               (1,190)         (764)       (2,423)       (1,340)
      Future                    24          (183)         (175)       (1,061)
    -------------------------------------------------------------------------
    Total income taxes
     from continuing
     operations             (1,166)         (947)       (2,598)       (2,401)
    -------------------------------------------------------------------------
    Net income from
     continuing
     operations                485           176         3,502         3,258
    Net income/(loss)
     from discontinued
     operations; net of
     income tax                307          (581)          290        (1,085)
    -------------------------------------------------------------------------
    Net income                 792          (405)        3,792         2,173
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    PER SHARE INFORMATION
    Earnings per Common
     Share
      Basic from
       continuing
       operations             0.02         (0.01)         0.28          0.26
      Basic from
       discontinued
       operations             0.03         (0.06)         0.03         (0.11)
      Basic                   0.05         (0.07)         0.31          0.16
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

      Diluted from
       continuing
       operations             0.02         (0.01)         0.28          0.26
      Diluted from
       discontinued
       operations             0.03         (0.06)         0.03         (0.11)
      Diluted                 0.05         (0.07)         0.31          0.15
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Average shares
     outstanding for
     the period
      Basic             10,373,638    10,303,411    10,346,748    10,295,851
      Diluted           10,442,357    10,367,361    10,423,026    10,362,613
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                        HIGH LINER FOODS INCORPORATED

          For the thirteen and twenty-six weeks ended June 30, 2007

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

                                                      Thirteen    Twenty-Six
                                                         Weeks         Weeks
                                                          2007          2007
    -------------------------------------------------------------------------
    Net income for the period                              792         3,792
                                                  ------------- -------------

    Other comprehensive income, net of future
     income taxes
      Unrealized losses of  self-sustaining foreign
       operations (net of nil income taxes)             (1,286)       (1,471)
                                                  ------------- -------------
      Net loss on derivative financial instruments
       designated as cash flow hedges (net of
       $0.1 million and $0.4 million income tax
       recovery for the thirteen and twenty-six
       weeks ended June 30, 2007, respectively)           (978)       (1,233)
      Net loss on derivatives designated as cash
       flow hedges in prior periods transferred to
       net income in the current period (net of
       $0.1 million and $0.1 million income tax
       recovery for the thirteen and twenty-six
       weeks ended June 30, 2007, respectively)           (107)         (239)
                                                  ------------- -------------
      Change in gains and losses on derivatives
       designated as cash flow hedges                   (1,085)       (1,472)
                                                  ------------- -------------

    Other comprehensive income                          (2,371)       (2,943)
                                                  ------------- -------------
    Comprehensive income                                (1,579)          849
                                                  ------------- -------------
                                                  ------------- -------------



                        HIGH LINER FOODS INCORPORATED

          For the thirteen and twenty-six weeks ended June 30, 2007
               (with comparative figures for the thirteen and
                    twenty-six weeks ended July 1, 2006)

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

                                Thirteen Weeks             Twenty-Six Weeks
                              2007          2006          2007          2006
    -------------------------------------------------------------------------
    Balance, beginning
     of period as
     previously
     reported               38,294        36,895        36,204        35,075

    Adjustment relating
     to financial
     instruments                 -             -           (98)            -
                       ------------------------------------------------------
    Balance, beginning
     of period as
     restated               38,294        36,895        36,106        35,075
    Net income for
     the period                792          (405)        3,792         2,173
    Dividends:
      Common Shares           (519)         (514)       (1,035)         (996)
      Second Preference
       Shares                 (302)         (296)         (598)         (572)
                       ------------------------------------------------------
    Balance, end of
     period                 38,265        35,680        38,265        35,680
                       ------------------------------------------------------
                       ------------------------------------------------------



                        HIGH LINER FOODS INCORPORATED

          For the thirteen and twenty-six weeks ended June 30, 2007
               (with comparative figures for the thirteen and
                    twenty-six weeks ended July 1, 2006)

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

                                Thirteen Weeks             Twenty-Six Weeks
                              2007          2006          2007          2006
    -------------------------------------------------------------------------
    Cash provided by
     (used in)
     operations:
      Net income from
       continuing
       operations
       for the period          485           176         3,502         3,258
      Charges (credits)
       to income not
       involving cash
       from operations:
        Depreciation and
         amortization          747           753         1,523         1,503
        (Gain) loss on
         disposal of
         assets                  8          (155)            3          (147)
        Stock
         compensation
         expense                27            23           175            23
        Payments of
         employee future
         benefits in
         excess of
         expense                 4          (170)          (51)         (390)
        Future income
         taxes                 (24)          183           175         1,061
    -------------------------------------------------------------------------
      Cash flow from
       operations before
       changes in non-
       cash working
       capital               1,247           810         5,327         5,308
      Net change in
       non-cash working
       capital balances      7,048        11,215        (1,308)         (681)
      Operating
       activities of
       discontinued
       operations              307          (581)          290        (1,085)
    -------------------------------------------------------------------------
                             8,602        11,444         4,309         3,542
    -------------------------------------------------------------------------
    Cash provided by
     (used in) financing
     activities:
      Change in current
       bank loans           (8,474)      (10,535)       (4,367)       (1,848)
      Repayment of
       long-term capital
       lease obligations      (114)          (91)         (224)         (209)
      Dividends paid:
        Preference            (302)         (296)         (598)         (572)
        Common                (519)         (514)       (1,035)         (996)
      Repurchase of
       capital stock             -             -             -           (46)
      Issue of equity
       shares                    -            52           378           151
    -------------------------------------------------------------------------
                            (9,409)      (11,384)       (5,846)       (3,520)
    -------------------------------------------------------------------------
    Cash provided by
     (used in) investing
     activities:
      Purchase of
       property, plant
       and equipment
       (net of investment
       tax credits)           (238)         (486)         (287)         (960)
      Net expenditures on
       disposal of assets      (18)            8           (40)          (20)
      Decrease in other
       receivables             188           205           891           530
      Investing
       activities of
       discontinued
       operations               93             -           187           (22)
    -------------------------------------------------------------------------
                                25          (273)          751          (472)
    -------------------------------------------------------------------------
    Impact of foreign
     exchange
     translation on cash       585           165           658           168
    -------------------------------------------------------------------------
    Increase (decrease)
     in cash during the
     period                   (197)          (48)         (128)         (282)
    Cash, beginning of
     period                    309           346           240           580
    -------------------------------------------------------------------------
    Cash, end of period        112           298           112           298
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    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(R) and Fisher Boy(R) labels and available in most grocery
and club stores. The Company also sells its High Liner(R) food service
products to restaurants and institutions. The Company is also 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 2007 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. Foreign exchange
        gains/losses are now included in Operating EBITDA and prior years
        have been restated to reflect this change.

    (2) As measured in volume (pounds)
    

    %SEDAR: 00001789E




For further information:

For further information: Kelly Nelson, Vice President Corporate Services
& Chief Financial Officer, High Liner Foods Incorporated, Tel: (902) 634-8811,
investor@highlinerfoods.com; Lawrence Chamberlain, Investor Relations, The
Equicom Group Inc., Tel: (416) 815-0700 ext.257, lchamber@equicomgroup.com


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