High Liner Foods

LUNENBURG, NS, Aug. 5, 2015 /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 twenty-six weeks ended July 4, 2015. All amounts are reported in U.S. dollars ("USD") unless otherwise noted.

High Liner Foods' common shares trade on the Toronto Stock Exchange and are quoted in Canadian dollars ("CAD"), and closed yesterday at CAD$24.20¹. The Company reports its financial results in USD and the average USD/CAD exchange rate was 1.2296 and 1.2362 for the thirteen and twenty-six weeks ended July 4, 2015, respectively (1.0911 and 1.0965 for the thirteen and twenty-six weeks ended June 28, 2014, respectively).

Due to the conversion of the Company's Canadian operations from CAD to USD for reporting purposes, to the extent the Canadian dollar continues to weaken against the U.S. dollar, the Company's USD-reported financial results will be unfavorably impacted. Also, investors are reminded for purposes of calculating financial ratios, including dividend payout and share price-to-earnings ratios, to take into consideration the Company's share price and dividend rate are reported in CAD and its earnings and financial position are reported in USD.

Today, the Board of Directors of the Company approved a quarterly dividend of CAD$0.12 per share on the Company's common shares payable on September 15, 2015 to holders of record on September 1, 2015.

Financial and operational highlights for the thirteen weeks ended July 4, 2015, or second quarter of 2015, include (all comparisons are relative to the second quarter of 2014, unless otherwise noted):

• Sales as reported decreased by $9.2 million, or 3.9%, to $226.3 million compared to $235.5 million;
• Sales in domestic currency decreased by $0.8 million, or 0.3%, to $241.8 million compared to $242.6 million;
• Adjusted EBITDA² decreased by $4.0 million, or 24.0%, to $12.7 million compared to $16.7 million;
• Adjusted EBITDA in domestic currency decreased by $3.1 million, or 18.2%, to $13.9 million compared to $17.0 million;
• Reported net income decreased by $1.2 million, or 23.1%, to $4.0 million (diluted earnings per share ("EPS") of $0.13) compared to $5.2 million (diluted EPS of $0.17);
• Adjusted Net Income² decreased by $2.8 million, or 37.3%, to $4.7 million (Adjusted Diluted EPS² of $0.15) compared to $7.5 million (Adjusted Diluted EPS of $0.24); and
• Net interest-bearing debt to Adjusted EBITDA, calculated on a rolling twelve-month basis, decreased to 4.2x at the end of the second quarter compared to 4.4x at the end of Fiscal 2014 and increased compared to 4.0x at the end of the first quarter of 2015.

Financial and operational highlights for the twenty-six weeks ended July 4, 2015, or first half of 2015, include (all comparisons are relative to the first half of 2014, unless otherwise noted):

• Sales as reported decreased by $1.6 million, or 0.3%, to $536.6 million compared to $538.2 million;
• Sales in domestic currency increased by $16.0 million, or 2.9%, to $568.7 million compared to $552.7 million;
• Adjusted EBITDA decreased by $0.5 million, or 1.1%, to $43.4 million compared to $43.9 million;
• Adjusted EBITDA in domestic currency increased by $0.7 million, or 1.6%, to $45.6 million compared to $44.9 million;
• Reported net income decreased by $0.6 million, or 3.5%, to $16.5 million (diluted earnings per share ("EPS") of $0.53) compared to $17.1 million (diluted EPS of $0.55); and
• Adjusted Net Income decreased by $1.0 million, or 4.7%, to $20.3 million (Adjusted Diluted EPS of $0.65) compared to $21.3 million (Adjusted Diluted EPS of $0.68).

"Sales and volume declines compared to the second quarter of fiscal 2014 resulted in earnings that were below our expectations", stated Keith Decker President and CEO. "Significant price increases due to raw material cost increases in 2014, along with the weaker Canadian dollar and some sales execution and promotion challenges, led to this sales and volume decline."

Financial Results

The financial results for the thirteen and twenty-six weeks ended July 4, 2015 and June 28, 2014 are summarized in the following table:

Sales volume decreased for the second quarter of 2015 by 6.4 million pounds, or 9.5%, to 61.3 million pounds, compared to 67.7 million pounds in the same period last year primarily reflecting lower sales volume from both our U.S. and Canadian operations, partially offset by the Atlantic Trading Acquisition.

Sales decreased for the second quarter of 2015 by $9.2 million, or 3.9%, to $226.3 million, compared to $235.5 million for the same period in 2014. Approximately 70% of the Company's operations, including sales, are denominated in USD. The weaker Canadian dollar in the second quarter of 2015 compared to the same quarter in 2014 decreased the value of reported USD sales of the Company's CAD-denominated operations approximately $8.6 million relative to the conversion impact last year.

Sales in domestic currency decreased in the second quarter of 2015 by $0.8 million, or 0.3%, to $241.8 million, compared to $242.6 million in 2014 reflecting lower overall sales volume, partially offset by the impact of price increases in both countries.

Adjusted EBITDA decreased for the second quarter of 2015 by $4.0 million, or 24.0%, to $12.7 million compared to $16.7 million for the same period in 2014.  The impact of converting our CAD-denominated operations and Corporate to USD, decreased the value of reported Adjusted EBITDA in USD by $1.2 million in second quarter of 2015 compared to $0.3 million in 2014, primarily due to the weaker Canadian dollar in 2015.

In domestic currency, Adjusted EBITDA decreased in the second quarter of 2015 by $3.1 million, or 18.2%, to $13.9 million compared to $17.0 million in 2014. This decrease was due to lower overall sales volume and lower gross profit margin as a percentage of sales, partially offset by lower SG&A and distribution expenses. As a percentage of sales, Adjusted EBITDA in domestic currency was 5.8% in 2015 compared to 7.0% in 2014.

Net income decreased in the second quarter of 2015 by $1.2 million, or 23.1%, to $4.0 million ($0.13 per diluted share) compared to $5.2 million ($0.17 per diluted share) in the second quarter last year. The decrease in net income reflects lower Adjusted EBITDA as explained above, partially offset by lower one-time expenses and lower tax expense.

Excluding the after-tax impact of certain items, including one-time acquisition, integration and other expenses, share-based compensation expense, items relating to debt refinancing and amendment activities, and certain other non-recurring expenses, Adjusted Net Income was $4.7 million (Adjusted Diluted EPS of $0.15) in the second quarter of 2015 compared to $7.5 million (Adjusted Diluted EPS of $0.24) in the second quarter of 2014. 

Net cash flows provided by operating activities decreased in the second quarter of 2015 by $13.6 million to $9.1 million compared to $22.7 million in the same period last year, due to lower cash flows from changes in net non-cash working capital.

Outlook

Mr. Decker concluded, "With an improvement in sales trends towards the end of the second quarter, we will continue to focus on increasing volume in the remainder of 2015.  Volume improvements will help to achieve the benefits related to our supply chain optimization initiatives and improve earnings.  These efforts will be further assisted to the extent we realize expected lower seafood raw material prices."

Conference Call

The Company's Unaudited Condensed Interim Consolidated Financial Statements and MD&A as at and for the thirteen and twenty-six weeks ended July 4, 2015 were filed concurrently on SEDAR with this news release and are also available at www.highlinerfoods.com.

The Company will host a conference call on Wednesday, August 5, 2015, at 2:00 p.m. ET (3:00 p.m. AT) during which Keith Decker, President and CEO and Paul Jewer, Executive VP & CFO will discuss the financial results for the second quarter of 2015. 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 Wednesday, August 12, 2015 at midnight (ET). To access the archived conference call, dial 1-855-859-2056 and enter the reservation number 86440859.

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, Sea Cuisine, and effective October 7, 2014, C. Wirthy 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 Seafood labels and is the major supplier of private label value-added seafood products to North American food retailers and foodservice 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", "will", 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; changes to sales volume, margins and input costs, including raw material prices; changes to American Pride's operations; achievement, and timing of achievement, of strategic goals and publicly stated financial targets, including to increase our market share, acquire and integrate other businesses and reduce our operating and supply chain costs; and our ability to develop new and innovative products that result in increased sales and market share.  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; income tax rates; and our ability to attract and retain experienced and skilled employees.  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 as supplemental indicators of operating performance.  These non-IFRS measures are Adjusted Net Income, Adjusted Diluted EPS, Adjusted EBITDA and Adjusted Standardized Free Cash Flow.  Please refer to the Company's MD&A for the thirteen and twenty-six weeks ended July 4, 2015 for definitions of non-IFRS financial measures used by the Company and reconciliation of these non-IFRS measures to measures that are found in our consolidated financial statements.

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.

For further information about the Company, please visit our website at www.highlinerfoods.com or send an e-mail to investor@highlinerfoodinc.com.

SOURCE High Liner Foods Incorporated

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