- 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
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(Amounts in thousands of Canadian $ except per share amounts)
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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
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Sales $ 62,202 $ 57,633 $ 143,537 $ 135,325
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Operating EBITDA 2,403 2,025 7,749 7,625
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Net income from
continuing
operations $ 485 $ 176 $ 3,502 $ 3,258
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Net income (loss)
from discontinued
operations; net
of income tax $ 307 $ (581) $ 290 $ (1,085)
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Net income $ 792 $ (405) $ 3,792 $ 2,173
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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
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-------------------------------------------------------------------------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™ 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® 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® 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® 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® 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® 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
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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
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Total current assets 72,646 79,740 76,690
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Property, plant and equipment 24,188 26,106 26,038
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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
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9,876 10,622 10,449
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106,710 116,468 113,177
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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
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Total current liabilities 31,174 43,906 37,762
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Long-term capital lease
obligations 458 484 477
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Employee future benefits 3,846 3,607 3,702
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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)
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71,232 68,471 71,236
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106,710 116,468 113,177
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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
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Sales $ 62,202 57,633 $ 143,537 135,325
Cost of sales 50,039 46,881 114,608 109,087
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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)
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Income from
continuing
operations before
income taxes 1,651 1,123 6,100 5,659
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Income taxes:
Current (1,190) (764) (2,423) (1,340)
Future 24 (183) (175) (1,061)
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Total income taxes
from continuing
operations (1,166) (947) (2,598) (2,401)
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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)
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Net income 792 (405) 3,792 2,173
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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
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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
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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
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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
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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)
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Other comprehensive income (2,371) (2,943)
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Comprehensive income (1,579) 849
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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
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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)
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Balance, end of
period 38,265 35,680 38,265 35,680
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------------------------------------------------------
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
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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
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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)
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8,602 11,444 4,309 3,542
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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
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(9,409) (11,384) (5,846) (3,520)
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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)
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25 (273) 751 (472)
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Impact of foreign
exchange
translation on cash 585 165 658 168
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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
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-------------------------------------------------------------------------About High Liner Foods Incorporated
High Liner Foods Incorporated is one of North America's largest
processors and marketers of prepared, value-added frozen seafood. High Liner's
branded products are sold throughout the United States, Canada and Mexico
under the High Liner® and Fisher Boy® labels and available in most grocery
and club stores. The Company also sells its High Liner® 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@highlinerfoodinc.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
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