- Third Quarter produces $10.4 million in Adjusted Net Income, a 30% increase over 2012, and the quarterly dividend increases 6% -
LUNENBURG, NS, Nov. 7, 2013 /CNW/ - High Liner Foods Incorporated (TSX: HLF) ("High Liner Foods" or "the Company"), the leading North American value-added frozen seafood company, today reported financial results for the thirteen and thirty-nine weeks ended September 28, 2013. All amounts are reported in U.S. dollars ("USD") unless otherwise noted.
Financial and operational highlights for the third quarter of 2013 include (all comparisons are relative to the third quarter and first thirty-nine weeks of 2012, unless otherwise noted):
- Sales for the third quarter were $216.5 million, compared with $219.9 million;
- Reported net income increased in the third quarter to $7.4 million (diluted earnings per share ("EPS") of $0.48), compared with $2.2 million (diluted EPS of $0.14). Reported net income was $22.6 million (or diluted EPS of $1.45) for the first thirty-nine weeks of 2013, compared to $4.9 million ($0.32 diluted EPS);
- Adjusted Net Income1 increased in the third quarter to $10.4 million (Adjusted Diluted EPS1 of $0.66), compared with $8.0 million (Adjusted Diluted EPS of $0.52). Adjusted Net Income for the first thirty-nine weeks of 2013 was $29.3 million (Adjusted Diluted EPS of $1.88), compared to $27.4 million (Adjusted Diluted EPS of $1.78);
- Adjusted EBITDA1 for the third quarter was $22.1 million, compared with $21.8 million;
- Standardized Free Cash Flow1 was $64.7 million for the fifty-two week period ended September 28, 2013, compared with $41.1 million for the same period ended September 29, 2012; and
- Net interest-bearing debt to Adjusted EBITDA, calculated on a rolling fifty-two week basis, decreased to 3.16x at the end of the third quarter, compared to 3.40x at the end of fiscal 2012.
"We are pleased to report High Liner Foods' Adjusted Net Income was $10.4 million for the third quarter of 2013, which represents a $2.4 million, or 30%, increase over the third quarter of 2012," said Henry Demone, CEO. "Profitability improved in the third quarter, despite continued pressure on sales in certain segments of our business, and our operating cash flow was strong, as evidenced by Standardized Free Cash Flow of $64.7 million for the fifty-two week period ended September 28, 2013, compared to $41.1 million for the same period ended September 29, 2012. Strong cash flows from operating activities allowed us to reduce our net interest-bearing debt to Adjusted EBITDA ratio, also calculated on a rolling fifty-two week basis, from 3.40x at the end of fiscal 2012 to 3.16x at the end of the third quarter."
"Consistent with the first half of this year, in the third quarter we experienced sale declines compared to last year in our U.S. food service business and our U.S. and Canadian retail private label businesses. The decline in U.S. food service sales reflected continued soft restaurant sales related to a sluggish economic recovery in the U.S. and the decline in retail private label sales reflects the trend being experienced in the seafood marketplace overall of decreased demand for retail private label seafood products," explained Mr. Demone. "However, the impact of these sales declines in the third quarter was partially offset by sales growth in our branded retail business on both sides of the border and our Canadian food service business, when compared to the same period last year."
"The $2.4 million increase in Adjusted Net Income in the third quarter also reflects lower overall raw material costs, significant savings in financing costs resulting from amendments made to our term loan in the first quarter of this year, realization of synergies resulting from integrating the Icelandic USA acquisition and a lower effective income tax rate," said Mr. Demone. "In the first quarter of this year, we expedited the closure of our plant in Danvers, Massachusetts, and as a result, incurred incremental operating costs related to reduced plant throughput rates as our U.S. plants integrated new products into their respective production facilities. The extent of these incremental costs, incurred in part to ensure minimal disruption to our customers, was not fully anticipated, and while we have been successful in increasing plant throughput rates from those experienced in the first quarter, these rates have not been fully restored to optimal levels. As a result, the Company continued to incur additional operating costs in the third quarter related to the reduced throughput rates and the full impact of the synergies related to closing the Danvers plant have not yet been fully realized. Maximizing throughput rates and reducing operating costs associated with our U.S. manufacturing facilities is currently a top priority."
The following table summarizes the Company's financial results for the thirteen and thirty-nine week periods ended September 28, 2013.
| (All amounts in thousands, except
per share amounts and sales volume)
|Sales in million pounds||63.5||64.3||206.9||212.4|
|Sales in domestic currency||$219,414||$219,497||$701,879||$724,774|
|Foreign exchange impact||$(2,928)||$443||$(5,324)||$(429)|
|Sales in USD||$216,486||$219,940||$696,555||$724,345|
|Adjusted Net Income||$10,367||$7,976||$29,337||$27,435|
|Adjusted Diluted EPS||$0.66||$0.52||$1.88||$1.78|
| Weighted diluted average shares
Sales for the third quarter were $216.5 million, a decrease of $3.4 million or 1.5%, from $219.9 million for the same period last year. Approximately one-third of the Company's sales are denominated in Canadian dollars ("CAD") and the effect of translating CAD denominated sales to USD decreased the value of reported sales relative to the comparable period in 2012 by approximately $3.4 million.
Adjusted EBITDA was $22.1 million, or 10.2% of sales, in the third quarter of 2013, consistent with Adjusted EBITDA of $21.8 million, or 9.9% of sales, for the same period in 2012. While Adjusted EBITDA in the third quarter of 2013 reflects realization of synergies resulting from integrating the Icelandic USA acquisition and lower overall raw material costs, the favourable impact of these items was offset by the impact of lower sales and increased operating costs associated with the reduced plant throughput rates experienced at our U.S. manufacturing facilities since the closure of our Danvers plant in the first quarter of 2013.
Net income was $7.4 million (diluted EPS of $0.48) in the third quarter of 2013, compared with net income of $2.2 million (diluted EPS of $0.14) for the third quarter of 2012. In addition to the items cited in the preceding paragraph, the $5.2 million increase in net income in the third quarter also reflects: significantly reduced financing costs in 2013 resulting from amendments made to our term loan in the first quarter of this year; a non-cash recovery related to revaluing an embedded derivative associated with the long-term debt LIBOR floor on our term loan; a mark-to-market gain on an interest rate swap related to the embedded derivative; a lower stock-based compensation expense; and a lower effective income tax rate. In addition, net income for the third quarter of 2012 was negatively impacted by one-time integration costs related to the Icelandic USA acquisition expensed during that quarter.
Excluding the after-tax impact of certain items, including one-time costs related to acquiring American Pride Seafoods (discussed below), Icelandic USA integration costs, stock-based compensation expense, the revaluation of the embedded derivative associated with the long-term debt LIBOR floor, the mark-to-market gain on the interest rate swap related to the embedded derivative and certain other non-recurring expenses, Adjusted Net Income was $10.4 million (Adjusted Diluted EPS of $0.66) compared with $8.0 million (Adjusted Diluted EPS of $0.52) for the third quarter of 2012.
Standardized Free Cash Flow was $64.7 million for the fifty-two week period ended September 28, 2013 compared with $41.1 million for the same period ended September 29, 2012. Cash flow generated from operations and decreased non-cash working capital allowed the Company to reduce: net interest-bearing debt by $57.2 million, bringing net interest-bearing debt to $267.6 million at September 28, 2013 from $324.8 million at September 29, 2012; and the interest-bearing debt to Adjusted EBITDA ratio, calculated on a rolling fifty-two week basis, to 3.16x at the end of the third quarter of 2013, compared to 3.40x at the end of fiscal 2012.
Today, the Board of Directors of the Company approved a quarterly dividend of CAD$0.19 per Common Share payable on December 16, 2013 to shareholders of record on December 2, 2013. This represents a CAD$0.01 increase in the quarterly dividend per Common Share, or a CAD$0.04 increase in the dividend per Common Share on an annualized basis, reflecting the Board's continued confidence in the Company's operations.
"The first quarter of this year was challenging for several reasons, however, with the exception of the lingering plant throughput issues associated with the closure of our Danvers plant, and despite continued headwinds on food service sales in the U.S. and retail private label sales across the board, results have improved on a year-to-date basis. Adjusted Net Income for the first three quarters of 2013 increased by $1.9 million to $29.3 million, compared to $27.4 million for the same period last year," remarked Mr. Demone. "In addition, we are making progress on our strategic goals, including profitable growth, and were pleased to announce our acquisition of American Pride Seafoods ("American Pride") on October 1, 20132. American Pride's business compliments ours and will strengthen our leadership position in the seafood industry."
"We plan to delay the integration of this acquisition and to operate American Pride without any substantial changes to its existing operations until post-Lent 2014. This will delay realization of the full synergies expected from this acquisition until 2015, but will allow us to remain focused on our current efforts aimed at increasing plant throughputs in the U.S. to fully realize the synergies related to closing the Danvers plant," explained Mr. Demone.
"Looking forward, continued cost increases for shrimp and haddock may adversely affect volumes as well as margins for certain products during the balance of 2013 and into next year. The decline in our U.S. food service sales compared to 2012 continues to be disappointing, but to the extent there are improvements in this sector of the U.S. economy, we believe the Company is well positioned for its sales volumes to improve," concluded Mr. Demone.
This news release is not in any way a substitute for reading High Liner Foods' financial statements, including notes to the financial statements, and the MD&A. The Company's Unaudited Condensed Interim Consolidated Financial Statements for the third quarter of fiscal 2013, which includes the Statements of Financial Position, Income, Comprehensive Income, Changes in Shareholders' Equity, Cash Flows and notes to the financial statements, can be viewed in the Investor Information section of the High Liner Foods website at http://www.highlinerfoods.com/en/home/investorinformation/quarterlyreports.aspx.
The Company will host a conference call on Friday, November 8, 2013 at 10:30 a.m. ET (11:30 a.m. AT) during which Henry Demone, Chief Executive Officer, Kelly Nelson, Executive Vice President & Chief Financial Officer and Keith Decker, High Liner Foods' newly appointed President & Chief Operating Officer3 will discuss the financial results for the third quarter of 2013. To access the conference call by telephone, dial 647-427-7450 or 1-888-231-8191. Please connect approximately 10 minutes prior to the beginning of the call to ensure participation. The conference call will be archived for replay by telephone until Friday, November 15, 2013 at midnight. To access the archived conference call, dial 1-855-859-2056 and enter the reservation number 83195028.
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 value-added frozen seafood. High Liner Foods' retail branded products are sold throughout the United States, Canada and Mexico under the High Liner, Fisher Boy, Mirabel and Sea Cuisine labels, and are available in most grocery and club stores. The Company also sells branded products to restaurants and institutions under the High Liner, Icelandic Seafood, FPI, Viking, Mirabel, Samband of Iceland and American Pride Seafoods labels and is the major supplier of private label value-added 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. Forward-looking statements can generally be identified by the use of the conditional tense, the words "may", "should", "would", believe", "plan", "expect", "goal", "remain" 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: anticipated financial performance; increased operating efficiencies, including maximizing plant throughput rates and reducing operating and distribution costs; increased sales volume; input cost changes, including raw material prices and distribution costs; realization of synergies related to the Icelandic USA and American Pride acquisitions; changes to American Pride's operations; profit margins; achievement of strategic goals; and our market position. These statements are based on a number of factors and assumptions including, but not limited to: seafood availability, demand and pricing; product pricing, including the cost of raw materials, energy and supplies; operating costs; plant performance; the condition of the Canadian and U.S. economies; our ability to attract and retain customers; required level of bank loans and interest rates; and income tax rates. The statements are not a guarantee of future performance. By their nature, forward-looking statements involve uncertainties and risks that could result in the forecasts and targets not being 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 provided as supplemental indicators of operating performance. These non-IFRS measures are "Adjusted Net Income", "Adjusted Diluted EPS", "Adjusted EBITDA" and "Standardized Free Cash Flow". Please refer to High Liner Foods' MD&A for the Thirteen and Thirty-Nine Weeks Ended September 28, 2013 for definitions of the non-IFRS financial measures used by the Company.
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 Please refer to High Liner Foods' Management Discussion & Analysis ("MD&A") for the Thirteen and Thirty-Nine Weeks Ended September 28, 2013 for definitions of the non-IFRS financial measures used by the Company, including "Adjusted Net Income", "Adjusted Diluted EPS", "Adjusted EBITDA" and "Standardized Free Cash Flow".
|2 High Liner Foods announced its acquisition of American Pride Seafoods from American Seafoods Group LLC on October 1, 2013. The full press release describing this acquisition is available on our website at www.highlinerfoods.com. This acquisition event occurred after September 28, 2013 and as such, the financial results reported above for the thirteen and thirty-nine weeks ended September 28, 2013 do not reflect results from the operations of American Pride.|
|3 High Liner Foods announced Mr. Decker's appointment to the newly created position of President and Chief Operating Officer of High Liner Foods on September 19, 2013. The full press release describing this appointment is available on our website at www.highlinerfoods.com.|
SOURCE: High Liner Foods Incorporated
For further information:
Executive Vice President & Chief Financial Officer
High Liner Foods Incorporated
Tel: (902) 634-6200
Heather Keeler-Hurshman, CA
Director, Investor Relations
High Liner Foods Incorporated
Tel: (902) 421-7100