High Liner Foods Reports Operating Results for the First Quarter of 2018

LUNENBURG, NS, May 9, 2018 /CNW/ - High Liner Foods Incorporated (TSX: HLF) ("High Liner Foods", "High Liner" or "the Company"), the leading North American value-added frozen seafood company, today reported financial results for the thirteen weeks ended March 31, 2018. 

Today, the Board of Directors of the Company approved a quarterly dividend of CAD$0.145 per share on the Company's common shares payable on June 15, 2018 to holders of record on June 1, 2018¹.

The Company reports its financial results in U.S. dollars ("USD") and all amounts are reported in USD unless otherwise noted.  High Liner Foods' common shares trade on the Toronto Stock Exchange (TSX: HLF) and are quoted in Canadian dollars ("CAD").  HLF shares closed yesterday at CAD$11.39².

"We are pleased to have Rod Hepponstall as our new CEO, effective May 1, 2018.  I am confident that with Rod's proven leadership capabilities and extensive experience with the food industry in North America, he will successfully lead High Liner Foods," said Henry Demone, Chairman of the Company's Board of Directors.  "Excluding Rubicon, Adjusted EBITDA for the first quarter of 2018 was in line with the first quarter of 2017 and improving the efficiency of our manufacturing facilities remains a key focus in 2018 to deliver improved performance."

Financial and operational highlights for the thirteen weeks ended March 31, 2018, or the first quarter of 2018, include (unless otherwise noted, all comparisons are relative to the thirteen weeks ended April 1, 2017, or the first quarter of 2017):

• Sales increased by $43.5 million to $319.2 million compared to $275.7 million;
• Gross profit increased by $5.1 million to $60.6 million compared to $55.5 million;
• Adjusted EBITDA³ increased by $1.9 million to $24.2 million compared to $22.3 million;
• Net income decreased by $0.4 million to $10.3 million compared to $10.7 million and diluted earnings per share (EPS) decreased to $0.31 compared to $0.34;
• Adjusted Net Income³ decreased by $0.1 million to $10.7 million compared to $10.8 million and Adjusted Diluted EPS decreased to $0.32 compared to $0.35;
• CAD-Equivalent Adjusted Diluted EPS³ decreased to CAD$0.40 compared to CAD$0.46; and
• Including trailing twelve-month Adjusted EBITDA for the acquisition of Rubicon, net interest-bearing debt ³ to rolling twelve-month Adjusted EBITDA was 5.6x at March 31, 2018, consistent with at the end of Fiscal 2017.

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¹ The Company now offers the ability for its common shareholders to receive dividend payments through electronic funds transfers.  For more information, please refer to the "Other News" section of the Company's website.

² Source: TSX May 8, 2018.

³ Please refer to High Liner Foods' MD&A for the thirteen weeks ended March 31, 2018 for definitions of the non-IFRS financial measures used by the Company, including "Adjusted EBITDA", "Adjusted Net Income", "Adjusted Diluted EPS", "CAD-Equivalent Adjusted Diluted EPS" and "Net Interest-Bearing Debt".

The acquisition of Rubicon on May 30, 2017 had the impact of increasing sales volume by 7.9 million pounds, sales by $42.1 million, gross profit by $5.0 million and Adjusted EBITDA by $1.1 million in the first quarter of 2018 compared to the first quarter of 2017.

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 and financial statements are reported in USD.

The financial results for the thirteen weeks ended March 31, 2018 and April 1, 2017 are summarized in the following table:

	Thirteen weeks ended
(Amounts in 000s, except per share amounts, unless otherwise noted)	March 31,  2018		April 1,  2017
Sales volume (millions of lbs)	88.1		83.2
Average foreign exchange rate (USD/CAD)	1.2650		1.3238
Sales in domestic currency	$	336,882	$	296,107
Foreign exchange impact on sales	$	(17,698)	$	(20,372)
Sales in USD	$	319,184	$	275,735
Gross profit	$	60,561	$	55,508
Gross profit as a percentage of sales	19.0%		20.1%
Adjusted EBITDA in domestic currency	$	25,368	$	23,062
Foreign exchange impact on Adjusted EBITDA	$	(1,147)	$	(725)
Adjusted EBITDA	$	24,221	$	22,337
Adjusted EBITDA as a percentage of sales	7.6%		8.1%
Net income	$	10,251	$	10,742
Diluted EPS	$	0.31	$	0.34
Adjusted Net Income	$	10,703	$	10,815
Adjusted Diluted EPS	$	0.32	$	0.35
Diluted weighted average number of shares outstanding	33,498		31,138

Sales volume for the first quarter of 2018 increased by 4.9 million pounds to 88.1 million pounds compared to 83.2 million pounds in same period in 2017 reflecting the acquisition of Rubicon which contributed 7.9 million pounds.  Excluding the impact of the Rubicon, sales volume for the first quarter of 2018 decreased by 3.0 million pounds, reflecting lower sales volume in the U.S. retail and foodservice businesses.

Sales in the first quarter of 2018 increased by $43.5 million to $319.2 million compared to $275.7 million in the same period in 2017.  Excluding the impact of a stronger Canadian dollar on the translation of USD sales from the Company's CAD-denominated operations relative to the conversion impact last year (approximately $2.9 million) and the impact of sales from Rubicon ($42.1 million), sales decreased by $1.5 million mainly due to product mix and the lower sales volume mentioned above, partially offset by price increases related to raw material cost increases.

Gross profit in the first quarter of 2018 increased by $5.1 million to $60.6 million compared to $55.5 million in the same period in 2017 primarily due to the acquisition of Rubicon, which contributed $5.0 million to gross profit in the first quarter of 2018.  Gross profit as a percentage of sales decreased to 19.0% compared to 20.1%, largely due to the impact of the Rubicon acquisition.  Excluding Rubicon, gross profit increased by $0.1 million to $55.6 million (20.1% as a percentage of sales) compared to $55.5 million (20.1% as a percentage of sales) in the same period of 2017 reflecting price increases, partially offset by lower sales volume and plant inefficiencies in our U.S. business.  In addition, the stronger Canadian dollar had the effect of increasing the value of reported USD gross profit from our Canadian operations in 2018 by approximately $0.6 million relative to the conversion impact last year.

Adjusted EBITDA in the first quarter of 2018 increased by $1.9 million to $24.2 million (7.6% of sales) compared to $22.3 million (8.1% of sales) in the same period in 2017.  Excluding the impact of converting our CAD-denominated operations and corporate activities to our USD presentation currency (a decrease of $1.1 million in 2017 and $0.7 million in the same period last year), Adjusted EBITDA increased by $2.3 million reflecting the higher gross profit mentioned previously, partially offset by increased distribution and SG&A expenses that were primarily related to Rubicon.  Adjusted EBITDA was positively affected by the acquisition of Rubicon which contributed $1.1 million in the first quarter of 2018.  Excluding Rubicon, Adjusted EBITDA was $23.1 million and 8.4% as a percentage of sales.

Reported net income in the first quarter of 2018 decreased by $0.4 million to $10.3 million (diluted EPS of $0.31) compared to $10.7 million (diluted EPS of $0.34) in the same period last year.  The decrease in net income reflects an increase in depreciation and amortization expenses and finance costs, partially offset by the increase in Adjusted EBITDA mentioned previously.

In the first quarter of 2018 and 2017, net income included other non-cash expenses and "business acquisition, integration and other expenses" related to termination benefits associated with restructuring activities in 2018 and business acquisition costs related to the acquisition of Rubicon in 2017.  Excluding the impact of these non-routine expenses and other non-cash expenses, Adjusted Net Income in the first quarter of 2018 decreased by $0.1 million to $10.7 million (Adjusted Diluted EPS of $0.32) compared to $10.8 million (Adjusted Diluted EPS of $0.35) in the same period last year.

Net cash flows provided by (used in) operating activities in the first quarter of 2018 increased by $21.3 million to an inflow of $9.0 million compared to an outflow of $12.3 million in the same period in 2017 primarily reflecting more favourable results from operations, a tax refund and a more favourable change in net non-cash working capital, partially offset by higher interest payments.

Including trailing twelve-month Adjusted EBITDA for the acquisition of Rubicon, net interest-bearing debt to rolling twelve-month Adjusted EBITDA was 5.6x at March 31, 2018, consistent with at the end of Fiscal 2017.

Outlook

"Areas of increased focus in 2018 to improve financial performance continue to include improving pricing methodologies, lowering fixed costs, further increasing the effectiveness of our supply chain and product innovation, and simplifying our business.  We will work to mitigate the impact of higher raw material costs on certain key species and higher supply chain expenses through these initiatives," concluded Mr. Demone.

Conference Call

The Company's Audited Consolidated Financial Statements and MD&A as at and for the thirteen weeks ended March 31, 2018 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 9, 2018, at 2:00 p.m. ET (3:00 p.m. AT) during which Henry Demone, Chairman of the High Liner Foods Board of Directors, Rod Hepponstall, President & CEO and Paul Jewer, Executive VP & CFO, will discuss the financial results for the first quarter of 2018.  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 16, 2018 at midnight (ET).  To access the archived conference call, dial 1-855-859-2056 and enter the reservation number 8393549.

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 & Co. 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 including earning trends and growth; 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 ; the expected timing and amount of recovery associated with product recall costs; our ability to  successfully integrate the acquisition of Rubicon Resources, LLC; our ability to develop new and innovative products that result in increased sales and market share; expected leverage levels and expected net interest-bearing debt to Adjusted EBITDA; and statements under the heading "Outlook" including expected demand, sales of new product and the efficiency of our plant production.  These statements are based on a number of factors and assumptions including, but not limited to: seafood and other ingredient 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 the interpretation of the U.S. Tax Reform by tax authorities; 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, CAD-Equivalent Adjusted Diluted EPS, and Net Interest-Bearing Debt.  Please refer to the Company's MD&A for the thirteen weeks ended March 31, 2018 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].

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, CPIR, Vice President, Investor Relations & Corporate Performance, High Liner Foods Incorporated, Tel: [phone], [email protected]