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

- Continued Year-Over-Year Improvement in Gross Profit and Adjusted EBITDA -

- Company increases quarterly dividend by 7.7% - 

LUNENBURG, NS, Nov. 9, 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 and thirty-nine weeks ended October 1, 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$27.22¹.  The Company reports its financial results in USD and the average USD/CAD exchange rates for the thirteen and thirty-nine weeks ended October 1, 2016 were 1.3050 and 1.3218, respectively (1.3110 and 1.2612 for the thirteen and thirty-nine weeks ended October 3, 2015, respectively).

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$0.14 per share on the Company's common shares payable on December 15, 2016 to holders of record on December 1, 2016. The  quarterly dividend of CAD$0.14 per share represents a 7.7% increase from the CAD$0.13 per share quarterly dividend paid on September 15, 2016 to common shareholders of record on September 1, 2016.

"We are pleased that the results of the third quarter show continued improvement in gross profit and Adjusted EBITDA resulting from lower raw material prices and incremental supply chain optimization savings in 2016.  Adjusted EBITDA in the third quarter improved to 7.8% of sales, marking a 70 basis point improvement compared to 7.1% in the same period last year, despite a year-over-year decline in sales volume," stated Keith Decker, President and CEO.  "Lower sales volume in the third quarter primarily reflects the continued impact of lower overall demand for traditional breaded and battered frozen seafood products which we were unable to offset with sales from our new frozen seafood products that align with emerging consumer trends and preferences."

Mr. Decker continued, "We are also pleased with the strength of the cash flow generated by the business in 2016, which has allowed us to reduce our debt-to-Adjusted EBITDA leverage ratio to 3.0x at the end of the third quarter compared to 4.0x at the beginning of this year."

Financial and operational highlights for the thirteen weeks ended October 1, 2016, or third quarter of 2016, include (unless otherwise noted, all comparisons are relative to the third quarter of 2015):

• Sales as reported decreased by $9.3 million, or 3.9%, to $230.8 million compared to $240.1 million;
• Sales in domestic currency decreased by $9.3 million, or 3.6%, to $251.0 million compared to $260.3 million;
• Gross profit increased by $2.5 million, or 5.8%, to $46.4 million compared to $43.9 million;
• Adjusted EBITDA² increased by $0.8 million, or 4.9%, to $17.9 million compared to $17.1 million;
• Adjusted EBITDA in domestic currency increased by $1.0 million, or 5.6%, to $19.5 million compared to $18.5 million;
• Reported net income increased by $0.5 million, or 8.7%, to $6.6 million compared to $6.1 million and diluted earnings per share ("EPS") increased by $0.02 to $0.21 compared to $0.19;
• Adjusted Net Income² increased by $2.1 million, or 30.7%, to $9.2 million compared to $7.1 million; Adjusted Diluted EPS increased by $0.07 to $0.30 compared to $0.23; and CAD-Equivalent Adjusted Diluted EPS² increased by CAD$0.09 to CAD$0.39 compared to CAD$0.30; and
• Net interest-bearing debt² to Adjusted EBITDA, calculated on a rolling twelve-month basis, improved to 3.0x at the end of third quarter of 2016 compared to 3.4x at the end of the second quarter of 2016 and 4.0x at the end of Fiscal 2015.

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

• Sales as reported decreased by $30.6 million, or 3.9%, to $746.0 million compared to $776.6 million;
• Sales in domestic currency decreased by $22.5 million, or 2.7%, to $806.4 million compared to $828.9 million;
• Gross profit increased by $2.4 million, or 1.5%, to $158.0 million compared to $155.6 million;
• Adjusted EBITDA increased by $4.5 million, or 7.6%, to $65.0 million compared to $60.5 million;
• Adjusted EBITDA in domestic currency increased by $6.1 million, or 9.5%, to $70.1 million compared to $64.1 million;
• Reported net income increased by $3.1 million, or 13.9%, to $25.7 million compared to $22.6 million and diluted EPS increased by $0.11 to $0.82 compared to $0.72; and
• Adjusted Net Income increased by $6.0 million, or 21.7% to $33.4 million compared to $27.4 million; Adjusted Diluted EPS increased by $0.20 to $1.07 compared to $0.87; and CAD-Equivalent Adjusted Diluted EPS increased by CAD$0.31 to CAD$1.41 compared to CAD$1.10.

Financial Results

The financial results for the thirteen and thirty-nine weeks ended October 1, 2016 and October 3, 2015 are summarized in the following table:

	Thirteen weeks ended						Thirty-nine weeks ended
(Amounts in 000s, except per share amounts, unless otherwise noted)	October 1,  2016			October 3,  2015			October 1,  2016			October 3,  2015
Sales volume (millions of lbs)	64.4			67.4			214.9			218.2
Sales in domestic currency	$	251,034		$	260,278		$	806,426		$	828,945
Foreign exchange impact on sales	$	(20,279)		$	(20,197)		$	(60,456)		$	(52,303)
Sales in USD	$	230,755		$	240,081		$	745,970		$	776,642
Adjusted EBITDA in domestic currency	$	19,531		$	18,490		$	70,143		$	64,055
Foreign exchange impact on Adjusted EBITDA	$	(1,632)		$	(1,435)		$	(5,101)		$	(3,595)
Gross profit	$	46,424		$	43,862		$	157,952		$	155,593
Gross profit as a percentage of sales	20.1		%	18.3		%	21.2		%	20.0		%
Adjusted EBITDA	$	17,899		$	17,055		$	65,042		$	60,460
Adjusted EBITDA as a percentage of sales	7.8		%	7.1		%	8.7		%	7.8		%
Net income	$	6,603		$	6,073		$	25,694		$	22,562
Diluted EPS	$	0.21		$	0.19		$	0.82		$	0.72
Adjusted Net Income	$	9,246		$	7,074		$	33,383		$	27,423
Adjusted Diluted EPS	$	0.30		$	0.23		$	1.07		$	0.87
Diluted weighted average number of shares outstanding	31,289			31,242			31,138			31,346

Sales volume decreased in the third quarter of 2016 by 3.0 million pounds, or 4.4%, to 64.4 million pounds, compared to 67.4 million pounds in same period in 2015 primarily reflecting lower sales volume in our U.S. retail and foodservice businesses.

Sales decreased in the third quarter of 2016 by $9.3 million, or 3.9%, to $230.8 million compared to $240.1 million in the same period in 2015.  Approximately 69.0% of the Company's operations, including sales, are denominated in USD.  The stronger Canadian dollar in the third quarter of 2016 compared to the third quarter of 2015 increased the value of USD sales from the Company's CAD-denominated operations by approximately $0.3 million relative to the conversion impact last year.

In domestic currency, sales decreased in the third quarter of 2016 by $9.3 million, or 3.6%, to $251.0 million compared to $260.3 million in the same period in 2015 due to lower sales volume and the impact on product mix of lower demand for traditional breaded and battered frozen seafood products, which we were unable to offset with sales from our new frozen seafood products that align with emerging consumer trends and preferences.

Gross profit increased in the third quarter of 2016 by $2.5 million, or 5.8%, to $46.4 million compared to $43.9 million in the same period in 2015 reflecting an increase in gross profit as a percentage of sales, partially offset by lower sales volumes.  As a percentage of sales, gross profit increased by 170 basis points to 20.1% compared to 18.3% primarily due to lower raw material costs and higher supply chain optimization savings realized in the period despite some loss in efficiency associated with the transfer of production from the New Bedford facility to our other facilities.

Adjusted EBITDA increased in the third quarter of 2016 by $0.8 million, or 4.9%, to $17.9 million compared to $17.1 million in the same period in 2015.  The impact of converting our CAD-denominated operations and corporate activities to our USD presentation currency decreased the value of reported Adjusted EBITDA in USD by $1.6 million in the third quarter of 2016 compared to $1.4 million in the same period in 2015.

In domestic currency, Adjusted EBITDA increased in the third quarter of 2016 by $1.0 million, or 5.6%, to $19.5 million (7.8% of sales) compared to $18.5 million (7.1% of sales) in the same period in 2015.  The increase in Adjusted EBITDA reflects the improved gross profit previously mentioned and lower distribution expenses, partially offset by higher selling, general and administration (SG&A) expenses.

Net income increased in the third quarter of 2016 by $0.5 million, or 8.7%, to $6.6 million ($0.21 per diluted share) compared to $6.1 million ($0.19 per diluted share) in the same period in 2015.  The increase in net income reflects the increase in Adjusted EBITDA as explained above, lower business acquisition, integration and other expenses related to non-routine activities, lower finance costs and a lower effective income tax rate, partially offset by increased share-based compensation expense.

Adjusted Net Income excludes the after-tax impact of certain items, including business acquisition, integration and other expenses and other non-cash expenses related to: accelerated depreciation on equipment as part of the disposal of the New Bedford facility; share-based compensation expense; and marking-to-market an interest rate swap not designated for hedge accounting.  Adjusted Net Income increased in the third quarter of 2016 by $2.1 million, or 30.7%, to $9.2 million (Adjusted Diluted EPS of $0.30) compared to $7.1 million (Adjusted Diluted EPS of $0.23) in the same period in 2015.

Net cash flows provided by operating activities decreased in the third quarter of 2016 by $22.1 million to $17.4 million compared to $39.5 million in the same period in 2015, due to: increased net working capital requirements and higher income tax payments, partially offset by more favourable results from operations.

Net interest-bearing debt to Adjusted EBITDA, calculated on a rolling twelve-month basis, improved to 3.0x at the end of third quarter of 2016 compared 3.4x at the end of the second quarter of 2016 and 4.0x at the end of Fiscal 2015 reflecting the repayment of debt with cash flow provided by operating activities.

Outlook

"We expect the trend of year-over-year improvement in gross profit and Adjusted EBITDA to continue in the fourth quarter of 2016, and while we expect our sales volume trend to improve, we do not expect to return to volume growth until our new product sales can offset the decline that the traditional breaded and battered category is experiencing.  Completing outstanding supply chain optimization activities also remains a priority to achieve the full benefit associated with these activities, which we continue to believe will be a minimum of $20 million in annual costs savings on a run-rate basis, to be achieved by the end of 2016," concluded Mr. Decker.

Conference Call

The Company's Unaudited Condensed Interim Consolidated Financial Statements and MD&A as at and for the thirteen and thirty-nine weeks ended October 1, 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, November 9, 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 third 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, November 16, 2016 at midnight (ET).  To access the archived conference call, dial 1-855-859-2056 and enter the reservation number 99227641.

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 thirty-nine weeks ended October 1, 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 November 8, 2016.

² Please refer to High Liner Foods' MD&A for the thirteen and thirty-nine weeks ended October 1, 2016 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".

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]