High Liner Foods Reports Operating Results for the First Quarter of 2016

- Growth in free cash flow used to reduce debt and Company increases quarterly dividend by 8.3% -

LUNENBURG, NS, May 11, 2016 /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 weeks ended April 2, 2016.  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$16.49^[1].  The Company reports its financial results in USD and the average USD/CAD exchange rate was 1.3721 for the thirteen weeks ended April 2, 2016 (1.2429 for the thirteen weeks ended April 4, 2015).

Due to the conversion of the Company's Canadian operations from CAD to USD for reporting purposes, to the extent the Canadian dollar weakens 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 that 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$0.13 per share on the Company's common shares payable on June 15, 2016 to holders of record on June 1, 2016.  The quarterly dividend of CAD$0.13 per share represents an 8.3% increase from the CAD$0.12 per share quarterly dividend paid on March 15, 2016 to common shareholders of record on March 1, 2016, and reflects the Board's continued confidence in the Company's operations.

Financial and operational highlights for the first quarter of 2016 include (unless otherwise noted, all comparisons are relative to the first quarter of 2015):

• Sales as reported decreased by $19.7 million, or 6.4%, to $290.5 million compared to $310.2 million;
• Sales in domestic currency decreased by $14.5 million, or 4.4%, to $312.4 million compared to $326.9 million;
• Adjusted EBITDA^[2]decreased by $1.3 million, or 4.2%, to $29.4 million compared to $30.7 million;
• Adjusted EBITDA in domestic currency was consistent at $31.5 million compared to $31.6 million;
• Reported net income increased by $1.2 million, or 9.6%, to $13.7 million compared to $12.5 million and diluted earnings per share ("EPS") increased by $0.04 to $0.44 compared to $0.40;
• Adjusted Net Income² was consistent at $15.4 million compared to $15.6 million; Adjusted Diluted EPS decreased by $0.01 to $0.49 compared to $0.50; and CAD-Equivalent Adjusted Diluted EPS² increased by CAD$0.05 to CAD$0.67 compared to CAD$0.62; and
• Net interest-bearing debt to Adjusted EBITDA, calculated on a rolling twelve-month basis, improved to 3.7x at the end of the first quarter of 2016 compared to 4.0x at the end of Fiscal 2015.

"In the first quarter of 2016, sales volume trends improved from those experienced throughout 2015 and strong free cash flow from operations, including from improved inventory management, allowed us to pay down debt and improve our debt leverage," stated Keith Decker, President and CEO.  "As expected, we benefited in the first quarter from lower raw material prices and incremental supply chain optimization savings which increased Adjusted EBITDA as a percentage of sales to 10.1% in the first quarter of 2016 compared to 9.9% of sales in 2015".

Financial Results

The financial results for the thirteen weeks ended April 2, 2016 and April 4, 2015 are summarized in the following table:

						Thirteen weeks ended
(Amounts in 000s, except per share amounts, unless otherwise noted)						April 2, 2016			April 4, 2015
Sales volume (millions of lbs)							88.2			89.5
Sales in domestic currency						$	312,412		$	326,864
Foreign exchange impact on sales						$	(21,864)		$	(16,642)
Sales as reported						$	290,548		$	310,222
Adjusted EBITDA in domestic currency						$	31,461		$	31,632
Foreign exchange impact on Adjusted EBITDA						$	(2,044)		$	(960)
Adjusted EBITDA in USD						$	29,417		$	30,672
Net income						$	13,717		$	12,533
Adjusted Net Income						$	15,368		$	15,628
Diluted EPS						$	0.44		$	0.40
Adjusted Diluted EPS						$	0.49		$	0.50
Diluted weighted average number of shares outstanding	31,208									31,373

Sales volume decreased in the first quarter of 2016 by 1.3 million pounds, or 1.5%, to 88.2 million pounds, compared to 89.5 million pounds in same period in 2015 due to lower volumes in our U.S. foodservice business reflecting a shorter promotional period associated with Lent in the first quarter of 2016 compared to the first quarter of 2015 and the impact of lower demand for traditional breaded and battered frozen seafood products.

Sales decreased in the first quarter of 2016 by $19.7 million, or 6.4%, to $290.5 million compared to $310.2 million in the same period in 2015.  Approximately 74% of the Company's operations, including sales, are denominated in USD.  The weaker Canadian dollar in the first quarter of 2016 compared to the first quarter of 2015 decreased the value of reported USD sales of the Company's CAD-denominated operations by approximately $5.9 million relative to the conversion impact last year.

Sales in domestic currency decreased in the first quarter of 2016 by $14.5 million, or 4.4%, to $312.4 million compared to $326.9 million in the same period in 2015 reflecting lower sales volume, price decreases and a change in product mix.

Adjusted EBITDA decreased for the first quarter of 2016 by $1.3 million, or 4.2%, to $29.4 million compared to $30.7 million in the same period in 2015.  The impact of converting our CAD-denominated operations and Corporate to the USD presentation currency decreased the value of reported Adjusted EBITDA in USD by $2.0 million in the first quarter of 2016 compared to $1.0 million in the same period in 2015, primarily due to the weaker Canadian dollar in 2016.

In domestic currency, Adjusted EBITDA decreased in the first quarter of 2016 by $0.1 million, or 0.1%, to $31.5 million compared to $31.6 million in the same period in 2015.  The decrease in Adjusted EBITDA reflects that the impact of lower sales volume was fully offset by savings in distribution and SG&A expenses.  As a result of these savings, Adjusted EBITDA in domestic currency increased to 10.1% of sales in the first quarter of 2016 compared to 9.7% of sales in the first quarter of 2015.

Net income increased in the first quarter of 2016 by $1.2 million, or 9.6%, to $13.7 million ($0.44 per diluted share) compared to $12.5 million ($0.40 per diluted share) in the same period in 2015.  The increase in net income reflects the after-tax impact of lower business acquisition, integration and other expenses related to non-routine activities (including those related to the cessation of plant operations) and lower finance costs, partially offset by the decrease in Adjusted EBITDA as explained above.

Adjusted Net Income excludes the after-tax impact of certain items, including: business acquisition, integration and other expenses; and non-cash expenses related to accelerated depreciation on equipment as part of the cessation of plant operations, marking-to-market an interest rate swap not designated for hedge accounting, and share-based compensation expense.  Adjusted Net Income decreased in the first quarter of 2016 by $0.2 million, or 1.3%, to $15.4 million (Adjusted Diluted EPS of $0.49) compared to $15.6 million (Adjusted Diluted EPS of $0.50) in the same period in 2015. 

Net cash flows provided by operating activities increased in the first quarter of 2016 by $11.8 million to $29.8 million compared to $18.0 million in the same period in 2015, primarily reflecting increased cash flows from changes in net non-cash working capital.

Net interest-bearing debt to Adjusted EBITDA, calculated on a rolling twelve-month basis, improved to 3.7x at the end of the first quarter of 2016 compared to 4.0x at the end of Fiscal 2015 reflecting the repayment of debt with cash flow provided by operating activities.

Outlook

"While we are encouraged with the progress made in the first quarter, there is still work we need to do in 2016 to improve performance going forward.  We will continue to focus on improving earnings through stabilizing sales volume and managing costs.  Our raw material prices are expected to be relatively stable for the remainder of this year and completing outstanding supply chain optimization activities remains a priority, including the transfer of New Bedford's value-added fish production to our other facilities which is on track to be completed by the end of the third quarter of this year," concluded Mr. Decker.

Conference Call

The Company's Unaudited Condensed Interim Consolidated Financial Statements and MD&A as at and for the thirteen weeks ended April 2, 2016 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, May 11, 2016, at 2:00 p.m. ET (3:00 p.m. AT) during which Keith Decker, President and CEO and Paul Jewer, Executive Vice President and CFO will discuss the financial results for the first quarter of 2016.  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, May 18, 2016 at midnight (ET).  To access the archived conference call, dial 1-855-859-2056 and enter the reservation number 91155745.

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 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 and FPI 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", "estimate", "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; 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 including, without limitation, related to the cessation of value added fish processing operations at our New Bedford facility and the related one-time costs and balance sheet implications of same; 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 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 CAD-Equivalent Adjusted Diluted EPS.  Please refer to the Company's MD&A for the thirteen weeks ended April 2, 2016 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 [email protected].

^{______________________________
1} Source: TSX May 10, 2016.
² Please refer to High Liner Foods' MD&A for the thirteen weeks ended April 2, 2016 for definitions of the non-IFRS financial measures used by the Company, including "Adjusted EBITDA", "Adjusted Net Income", "Adjusted Diluted EPS" and "CAD-Equivalent Adjusted Diluted EPS".

 

SOURCE High Liner Foods Incorporated

Paul Jewer, FCPA, FCA, Executive Vice President & Chief Financial Officer, High Liner Foods Incorporated, Tel: [phone], [email protected]; Heather Keeler-Hurshman, CPA, CA, Vice President, Investor Relations, & Corporate Performance, High Liner Foods Incorporated, Tel: [phone], [email protected]