High Liner Foods

 - Delivers 12.8% Adjusted EBITDA Growth in Q4; and Year over Year Adjusted EBITDA Growth for Fiscal 2020 - 

LUNENBURG, NS, Feb. 24, 2021 /CNW/ - High Liner Foods Incorporated (TSX: HLF) ("High Liner Foods" or "the Company"), a leading North American value-added frozen seafood company, today reported financial results for the fifty-three weeks ended January 2, 2021.

"We could not be more proud of our performance in Q4 and throughout Fiscal 2020," said Rod Hepponstall, President and CEO of High Liner Foods. "While prioritizing the health and safety of our employees and supporting our customers through the pandemic, we delivered record annual EBITDA margin as a percentage of sales, despite the challenges presented by COVID-19."

"With a strong balance sheet, improved cash flow and a considerably improved leverage ratio, achieving our long term target of 3 times, we are well equipped to invest in our business and build upon our leadership in branded value-added seafood in North America."

"Looking ahead, we are well positioned for further profitability and revenue growth in 2021 and we remain steadfast in our commitment to the health and safety of our employees and support for customers as we collectively continue to navigate through the pandemic."

Key financial results, reported in U.S. dollars ("USD"), for the fourteen weeks ended January 2, 2021, or the fourth quarter of 2020, are as follows (unless otherwise noted, all comparisons are relative to the fourth quarter of 2019):

• Gross profit as a percentage of sales increased to 21.9% compared to 20.1% and gross profit decreased by $1.0 million, or 2.2%, to $43.5 million compared to $44.5 million;
  
  
• Adjusted EBITDA¹ as a percentage of sales increased to 10.7% compared to 8.5% and Adjusted EBITDA increased by $2.4 million, or 12.8%, to $21.2 million compared to $18.8 million;
  
  
• Net income increased by $10.4 million, or 346.7%, to $7.4 million compared to a net loss of $3.0 million and diluted earnings per share ("EPS") increased to $0.21 compared to a loss per share of $0.09; and
  
  
• Sales volume decreased by 0.1 million pounds, or 0.2%, to 59.6 million pounds compared to 59.7 million pounds and sales decreased by $23.2 million, or 10.5%, to $198.4 million compared to $221.6 million, reflecting the impact of COVID-19.

Key financial results, reported in USD, for the fifty-three weeks ended January 2, 2021, or Fiscal 2020, are as follows (unless otherwise noted, all comparisons are relative to Fiscal 2019):

• Gross profit as a percentage of sales increased to 21.5% compared to 19.7% and gross profit decreased by $8.0 million, or 4.3%, to $177.9 million compared to $185.9 million;
  
  
• Adjusted EBITDA¹ as a percentage of sales increased to 10.6% compared to 9.1% and Adjusted EBITDA increased by $2.7 million, or 3.2%, to $88.0 million compared to $85.3 million;
  
  
• Net income increased in by $18.5 million, or 179.6%, to $28.8 million compared to $10.3 million and diluted earnings per share ("EPS") increased to $0.83 per share compared to $0.30 per share;
  
  
• Adjusted Net Income¹ increased by $6.1 million, or 21.0%, to $35.2 million compared to $29.1 million and Adjusted Diluted EPS¹ increased to $1.02 per share compared to $0.85 per share;
  
  
• Net Debt¹ to rolling twelve-month Adjusted EBITDA improved to 3.0x at January 2, 2021 compared to 3.3x at September 26, 2020 and 4.1x at the end of Fiscal 2019; and
  
  
• Sales volume decreased by 17.9 million pounds, or 6.9%, to 240.9 million pounds compared to 258.8 million pounds and sales decreased by $114.7 million, or 12.2%, to $827.5 million compared to $942.2 million.

Q4 Operational Update

High Liner Foods' retail sales volume continued to be strong due to the increased demand related to COVID-19, partially offset by lost business in the fourth quarter of Fiscal 2019 that continued to impact volume year-over-year. The decline in sales volume was also partially offset by the additional week in the fourth quarter of Fiscal 2020, new business and new product sales. High Liner Foods continues to satisfy strong retail demand for its products with high case fill rates.

The Company's foodservice business was negatively impacted by restrictions imposed during the second wave of COVID-19 across North America. High Liner Foods was able to mitigate this negative impact as a result of tailoring its foodservice offering to better suit operators during the COVID-19 environment.  The Company also continues to benefit from the diversity of its foodservice business through this period with institutional foodservice customers, like health care facilities, providing stable demand.

High Liner Foods' manufacturing facilities continue to operate at planned capacity and high efficiency rates to meet demand from its retail and foodservice customers and consumers. The Company's overall supply chain continued to be robust with no significant issues related to production, transportation and warehousing activities nor the procurement of raw materials and ingredients.

Employee safety is High Liner Foods' top priority and as the pandemic continues to evolve, the Company will implement any further measures designed to protect the health and safety of its employees and prevent disruption to the Company's supply chain and operations.

Financial Results

For the purpose of presenting the Consolidated Financial Statements in USD, CAD-denominated assets and liabilities in the Parent's operations are converted using the exchange rate at the reporting date, and revenue and expenses are converted at the average exchange rate of the month in which the transaction occurs. As such, foreign currency fluctuations affect the reported values of individual lines on our balance sheet and income statement. When the USD strengthens (weakening CAD), the reported USD values of the Parent's CAD-denominated items decrease in the Consolidated Financial Statements, and the opposite occurs when the USD weakens (strengthening CAD).

Investors are reminded for purposes of calculating financial ratios, including dividend payout and share price-to-earnings ratios, to take into consideration that the Company's share price and dividend rate are reported in CAD and its earnings, EPS and financial statements are reported in USD.

The financial results for the fifty-three weeks ended January 2, 2021 and fifty-two weeks ended December 28, 2019 are summarized in the following table:

Sales volume for the fourth quarter of 2020 decreased by 0.1 million pounds to 59.6 million pounds compared to 59.7 million pounds in same period in 2019. In our foodservice business, sales volume continued to be lower due to the impact of COVID-19 on our foodservice customers. In our retail business, sales volume continued to be higher due to the increased demand related to COVID-19, partially offset by lost business in the fourth quarter of Fiscal 2019 that continued to impact volume year-over-year. The decline in sales volume was partially offset by the additional week in the fourth quarter of Fiscal 2020, new business and new product sales.

Sales in the fourth quarter of 2020 decreased by $23.2 million to $198.4 million compared to $221.6 million in the same period in 2019 due to the lower sales volumes discussed above and changes in sales mix.

Gross profit in the fourth quarter of 2020 decreased by $1.0 million to $43.5 million compared to $44.5 million in the same period in 2019 and gross profit as a percentage of sales increased by 180 basis points to 21.9% compared to 20.1%. Gross profit reflects the lower sales volume discussed above, partially offset by favorable changes in product mix reflected in the improved gross profit as a percentage of sales and reduced labour costs due to the estimated wage subsidies for which the Company was eligible during the fourth quarter.

Adjusted EBITDA in the fourth quarter of 2020 increased by $2.4 million to $21.2 million compared to $18.8 million in the same period in 2019 and Adjusted EBITDA as a percentage of sales increased by 220 basis points to 10.7% compared to 8.5%. The increase in Adjusted EBITDA reflects a decrease in net SG&A expenses, partially offset by the decrease in gross profit discussed previously.

Reported net income (loss) in the fourth quarter of 2020 increased by $10.4 million to net income of $7.4 million (diluted EPS of $0.21) compared to a loss of $3.0 million (diluted loss per share of $0.09) in the same period in 2019. The increase in net income reflects the increase in Adjusted EBITDA discussed previously, a decrease in business acquisition, integration and other expense and a decrease in finance costs primarily due to the recognition in the fourth quarter of 2019 of a loss on the modification of debt related to the debt refinancing completed in October 2019. This was partially offset by an increase in share-based compensation expense and an increase in income tax expense.

Reported net income in the fourth quarter of 2020 included an expense of $1.0 million related to certain non-routine expenses classified as "business acquisition, integration and other expense compared to an expense of $2.6 million in the same period in 2019. Excluding the impact of these non-routine items or other non-cash expenses, share-based compensation and the loss on modification of debt, Adjusted Net Income in the fourth quarter of 2020 increased by $4.6 million or 80.7% to $10.3 million compared to $5.7 million in 2019. Correspondingly, Adjusted Diluted EPS increased by $0.12 to $0.29 compared to 0.17 in 2019.

Net cash flows provided by operating activities in the fourth quarter of 2020 increased by $46.4 million to an inflow of $22.3 million compared to an outflow of $24.1 million in the same period in 2019 primarily reflecting favorable changes in net non-cash working capital and higher cash flows from operations, partially offset by higher income taxes paid. The favorable changes in net non-cash working capital are the result of favorable changes in accounts receivable, inventories and accounts payable and accrued liabilities.

Net Debt decreased by $78.6 million to $268.0 million at January 2, 2021 compared to $346.6 million at December 28, 2019, reflecting repayments of long-term debt during Fiscal 2020, a decrease in current bank loans and a higher cash balance as at January 2, 2021 as compared to December 28, 2019. This was partially offset by higher lease liabilities in 2020 as compared to 2019.

Net Debt to Adjusted EBITDA improved to 3.0x at January 2, 2021 compared to 4.1x at the end of Fiscal 2019. In the absence of any major acquisitions or unplanned capital expenditures in 2021, we expect this ratio will further improve by the end of Fiscal 2021.

Outlook

As the Company executes on its strategy and drives continuous improvement and increased investment in its operations, High Liner Foods is confident that it will be able to deliver the third consecutive year of Adjusted EBITDA growth in 2021.

The Company anticipates that its Fiscal 2021 capital expenditures will be approximately $20.0 million, an increase over the average capital investment in the business over the past three years as the Company sought to conserve cash and strengthen its financial position.

"I am excited about the opportunity in front of us and am confident that High Liner Foods has the capabilities and capacity to grow revenue as we continue to drive profitability. As we invest in our business to drive growth of our higher margin, branded value-added products, we will remain disciplined in our approach to overall capital allocation," said Rod Hepponstall, President and CEO of High Liner Foods. "We are focused on investing in our plants and related technology that will enhance efficiency and strengthen how we go to market."

The Company believes that it is well positioned to continue to navigate the challenges presented by COVID-19 to its foodservice business and that the Company's resilient supply chain and compelling product offering positions High Liner Foods to capitalize on the resurgence in foodservice as COVID-19 related restrictions are lifted.

Furthermore, the Company remains confident in its liquidity position as a result of its prudent cash management and early refinancing of debt in late 2019. The Company does not have any impending debt maturities and will continue to utilize its $150.0 million working capital credit facility if required. The Company currently has no borrowings on this facility.

Dividend

Today, the Company's Board of Directors approved a quarterly dividend of CAD$0.070 per share on the Company's common shares, payable on March 15, 2021 to holders of record on March 3, 2021.

Conference Call

The Company will host a conference call on Wednesday, February 24, 2021, at 2:00 p.m. ET (3:00 p.m. AT) during which Rod Hepponstall, President & Chief Executive Officer and Paul Jewer, Executive Vice President & Chief Financial Officer, will discuss the financial results for the fourth quarter of 2020. 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, March 3, 2021 at midnight (ET). To access the archived conference call, dial 1-855-859-2056 and enter the reservation number 3131226.

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.

The Company's Audited Consolidated Financial Statements and MD&A as at and for the fifty-three weeks ended January 2, 2021 were filed concurrently on SEDAR with this news release and are also available at www.highlinerfoods.com.

About High Liner Foods Incorporated

High Liner Foods Incorporated is a leading North American processor and marketer of value-added frozen seafood. High Liner Foods' retail branded products are sold throughout the United States and Canada under the High Liner, Fisher Boy, Mirabel, Sea Cuisine, and Catch of the Day labels, and are available in most grocery and club stores. The Company also sells branded products to restaurants and institutions under the High Liner, Mirabel, Icelandic Seafood and FPI labels and is a 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.

Forward-looking statements can generally be identified by the use of the conditional tense, the words "may", "should", "would", "could", "believe", "plan", "expect", "intend", "anticipate", "estimate", "foresee", "objective", "goal", "remain" or "continue" or the negative of these terms or variations of them or words and expressions of similar nature. Actual results could differ materially from the conclusion, forecast or projection stated in such forward-looking information. As a result, we cannot guarantee that any forward-looking statements will materialize. Assumptions, expectations and estimates made in the preparation of forward-looking statements and risks that could cause our actual results to differ materially from our current expectations are discussed in detail in the Company's materials filed with the Canadian securities regulatory authorities from time to time, including the Risk Factors section of our MD&A for the fifty-three weeks ended January 2, 2021, the Risk Factors section of our 2020 Annual Report and the Risk Factors section of our 2020 Annual Information Form. The risks and uncertainties that may affect the operations, performance, development and results of High Liner Foods' business include, but are not limited to, the following factors: compliance with food safety laws and regulations; timely identification of and response to events that could lead to a product recall; volatility in the CAD/USD exchange rate; competitive developments including increases in overseas seafood production and industry consolidation; availability and price of seafood raw materials and finished goods and the impact of geopolitical events (and related economic sanctions) on the same; the impact of the U.S. Trade Representative's tariffs on certain seafood products; costs of commodity products and other production inputs, and the ability to pass cost increases on to customers; successful integration of acquired operations; potential increases in maintenance and operating costs; shifts in market demands for seafood; performance of new products launched and existing products in the market place; changes in laws and regulations, including environmental, taxation and regulatory requirements; technology changes with respect to production and other equipment and software programs; enterprise resource planning system risk; adverse impacts of cybersecurity attacks or breach of sensitive information; supplier fulfillment of contractual agreements and obligations; competitor reactions; High Liner Foods' ability to generate adequate cash flow or to finance its future business requirements through outside sources; credit risk associated with receivables from customers; volatility associated with the funding status of the Company's post-retirement pension benefits; adverse weather conditions and natural disasters; the availability of adequate levels of insurance; management retention and development; and the potential impact of a pandemic outbreak of a contagious illness, such as the 2019 coronavirus/COVID-19 pandemic, on general economic and business conditions and therefore the Company's operations and financial performance. Forward-looking information is based on management's current estimates, expectations and assumptions, which we believe are reasonable as of the current date. You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. Except as required under applicable securities laws, we do not undertake to update these 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. 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 International Financial Reporting Standards ("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 Diluted EPS and Net Debt. Please refer to the Company's MD&A for the fifty-three weeks ended January 2, 2021 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 Audited 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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