CANADA: Efficiency gains, American Pride deal boost High Liner profits
Canada's High Liner Foods has reported higher first-quarter profits on the back of improved efficiency and the impact of last year's acquisition of American Pride Seafoods.
High Liner, which supplies seafood products to retail and foodservice customers, booked adjusted EBITDA of US$27.2m for the three months to 29 March, up from US$21.3m a year ago.
In October, High Liner bought foodservice supplier American Pride to boost its presence in the US restaurant trade. The deal contributed to its EBITDA but, leaving that deal to one side, High Liner's EBITDA rose due to improved efficiency at manufacturing sites and lower distribution costs.
Sales rose 10% to US$302.6m, although the impact of the weaker Canadian dollar trimmed the top line.
Excluding American Pride, sales measured in Canadian dollars decreased by US$7.1m amid lower foodservice sales in the US. Poor weather in the US in the first quarter weighed on sales.
Net income more than doubled from US$5.3m to US$11.9m, helped by the improved EBITDA, lower stock compensation expenses and a fall in finance costs.
- First quarter of 2014 produces $13.8 million in Adjusted Net Income, a 41% increase over 2013, and the quarterly dividend increases 11% -
LUNENBURG, NS, May 8, 2014 /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 March 29, 2014. 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"). Yesterday, HLF common shares closed at CAD$44.141. The Company reports its financial results in USD and the average USD/CAD exchange rate during the first quarter of 2014 was $1.1020.
Today, the Board of Directors of the Company approved a quarterly dividend of CAD$0.21 per share on the Company's common shares payable on June 16, 2014 to holders of record on June 2, 2014 and will be adjusted pro rata in the event shareholders approve the 2-for-1 stock split being recommended by the Board at the Company's annual general meeting being held later today in Halifax, Nova Scotia. The quarterly dividend of CAD$0.21 per share represents an 11% increase from the CAD$0.19 per share quarterly dividend paid on March 17, 2014, reflecting the fourth dividend increase over the last six quarters and the Board's continued confidence in the Company's operations.
Financial and operational highlights for the first quarter of 2014 include (all comparisons are relative to the first quarter of 2013, unless otherwise noted):
- Sales increased by 10.0% to $302.6 million from $275.2 million (the American Pride Acquisition2 added $41.4 millionin sales);
- Reported net income increased by $6.6 million to $11.9 million (or diluted earnings per share ("diluted EPS") of$0.76), compared with $5.3 million (diluted EPS of $0.34);
- Adjusted Net Income3 increased by $4.0 million to $13.8 million (Adjusted Diluted EPS3 of $0.88) from $9.8 million(Adjusted Diluted EPS of $0.63);
- Adjusted EBITDA3 was $27.2 million, compared with $21.3 million (the American Pride Acquisition added $2.2 millionin Adjusted EBITDA); and
- Net interest-bearing debt to Adjusted EBITDA, calculated on a rolling fifty-two week basis, decreased to 3.8x at the end of the first quarter, compared to 3.9x at the end of fiscal 2013.
"We are pleased with our results for the first quarter of 2014, and in particular with the $6.0 million increase in Adjusted EBITDA compared to the first quarter last year," announced Mr. Demone, CEO. "The first quarter is historically our strongest quarter as retailers and restaurants typically promote seafood more during the Lenten period than any other time of the year. The improvements achieved in gross profit and Adjusted EBITDA in 2014 reflect strong operational performance during our busiest period and that challenges encountered by our U.S. operations in 2013, following the closure of our plant in Danvers, MA, early last year, have been largely resolved."
Mr. Demone added, "I am also pleased to be able to share that Mr. Peter Brown will be joining the Company this month as the new President and COO of High Liner Foods (USA). This position was most recently held by Keith Decker until he was promoted last September to the new position of President and COO of High Liner Foods Incorporated. Peter has more than 25 years of experience in the food industry, including 20 years with Cargill Inc., a global food conglomerate, where he held several positions of increasing responsibility, including VP positions with business, sales and operational responsibilities. Most recently, Peter was President of Quantum Foods LLC. Peter's leadership skills and experience will make him a great addition to our executive team."
The financial results for the first quarter are summarized in the following table:
|Thirteen weeks ended|
|(All currency amounts are shown in USD; amounts are shown in thousands,
except sales volumes and earnings per share amounts)
|Sales in domestic currency||$||310,066||$||275,838|
|Foreign exchange impact on sales||$||(7,421||$||(676)|
|Sales as reported||$||302,645||$||275,162|
|Sales volume in million pounds||94.5||85.1|
|Adjusted Net Income||$||13,784||$||9,787|
|Diluted earnings per share ("EPS")||$||0.76||$||0.34|
|Adjusted Diluted EPS||$||0.88||$||0.63|
|Weighted diluted average shares outstanding||15,682||15,611|
Sales for the first quarter of 2014 were $302.6 million, an increase of $27.4 million, or 10.0%, from $275.2 million for the same period in 2013. In 2014, more than 70% of the Company's operations, including sales, were denominated in USD. The weaker Canadian dollar in the first quarter of 2014 compared to the same quarter in 2013 decreased the value of reported USD sales by approximately $6.7 million relative to the conversion impact last year.
Sales in domestic currency increased by $34.3 million to $310.1 million in 2014, compared to $275.8 million in 2013. American Pride added $41.4 million in sales in 2014. Excluding American Pride, sales in domestic currency decreased by $7.1 million. This decrease is due mainly to lower foodservice sales in the U.S., partially offset by increased branded retail sales in both countries and increased foodservice sales in Canada. The lower foodservice sales in the U.S. reflect continued soft U.S. restaurant sales in the first quarter that were exacerbated by the particularly harsh winter weather experienced in 2014.
Adjusted EBITDA in the first quarter of 2014 was $27.2 million, or 9.0% of sales, compared to $21.3 million, or 7.7% of sales, for the same period in 2013. American Pride added $2.2 million in Adjusted EBITDA in 2014 and excluding American Pride, Adjusted EBITDA increased by $3.7 million due to improved efficiency at our Newport News and Portsmouth manufacturing facilities, and lower distribution costs as a percentage of sales. In the first quarter of 2013, Adjusted EBITDA was negatively impacted by competitive pressures that reduced commodity selling prices on certain products more rapidly than the applicable decline in cost for these products. The favourable impact of the above items on Adjusted EBITDA was partially offset by lower overall sales from the Company's non-APS operations and an unfavourable change in the USD/CAD exchange rate used to translate our CAD-denominated operations to USD.
Net income in the first quarter of 2014 was $11.9 million (diluted EPS of $0.76) compared to $5.3 million (diluted EPS of $0.34) in the first quarter of 2013. In addition to the items cited in the preceding paragraph, the $6.6 millionincrease in net income in the first quarter also reflects a $2.6 million decrease in stock-based compensation expense in 2014 and lower financing costs resulting from lower interest rates as a result of debt amendments made in earlyFebruary 2013, lower long-term debt levels and lower amortization of deferred financing costs, partially offset by higher average short-term debt levels.
Excluding the after-tax impact of certain items, including one-time costs related to acquisition and integration activities, stock-based compensation expense, accelerated amortization of financing costs and other items resulting from debt refinancing and amendment activities, the non-cash expense (income) related to the revaluation of the embedded derivative associated with our long-term debt LIBOR floor, the mark-to-market loss on the interest rate swap related to the embedded derivative and certain other non-recurring expenses, Adjusted Net Income was $13.8 million (Adjusted Diluted EPS of $0.88) in the first quarter of 2014 compared to $9.8 million (Adjusted Diluted EPS of$0.63) in the first quarter of 2013.
Net cash flows provided by operating activities decreased by $11.7 million in the first quarter of 2014 to $(0.9) million, compared to $10.8 million in the same period last year, due to increased net non-cash working capital requirements in 2014, partially offset by improved operating results. Capital expenditures increased by $8.5 million in the first quarter of 2014 reflecting the purchase of a previously-leased cold storage distribution facility in Peabody, MA, in March 2014.
On April 24, 2014, the Company announced completion of favourable amendments to its debt facilities. Additional information regarding these amendments is provided in the news release issued by the Company on April 24, 2014and in its MD&A and Unaudited Condensed Interim Consolidated Financial Statements for the thirteen weeks endedMarch 29, 2014. All of these documents are available on SEDAR and at www.highlinerfoods.com.
"As disclosed in the Company's annual report, our strategic goals for 2014 are profitable growth, supply chain optimization and succession planning. The Lenten period ended later in 2014 than it did in 2013 with Good Fridayfalling on April 18 this year compared to March 29 last year. With the busy Lenten season behind us, we will start integrating American Pride and increase the organizational focus on identifying and executing on initiatives that will serve to optimize our supply chain. We are also taking advantage of the larger scale business we have built over the last several years through acquisitions," stated Mr. Demone.
Mr. Demone concluded, "To the extent the USD/CAD exchange rate remains above par, our reported results will continue to be unfavourably impacted by the conversion of our parent company's CAD-denominated operations to USD. The U.S. restaurant industry is continuing to show lackluster growth and we are particularly focused on the development of new and innovative product offerings to grow our share of this market segment."
The Company's Unaudited Condensed Interim Consolidated Financial Statements and MD&A for the thirteen weeks ended March 29, 2014 were filed concurrently on SEDAR with this news release and are also available atwww.highlinerfoods.com.
The Company will host a conference call on Friday, May 9, 2014, at 10:30 a.m. EDT (11:30 a.m. ADT) during whichHenry Demone, CEO, Paul Jewer, Executive VP & CFO and Keith Decker, President & COO will discuss the financial results for the first quarter of 2014. 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 Friday, May 16, 2014 at midnight. To access the archived conference call, dial 1-855-859-2056 and enter the reservation number 27857599.
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 and Sea Cuisine 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; increased operating efficiencies, including maximizing plant throughput rates and reducing operating and distribution costs; changes to sales volume, margins and input costs, including raw material prices; changes to American Pride's operations; achievement of strategic goals, including our ability to increase our market share, acquire and integrate other businesses and reduce our 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 EPS, Adjusted EBITDA and Adjusted Standardized Free Cash Flow. Please refer to the Company's MD&A for the thirteen weeks ended ended March 29, 2014 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.
Original source: High Liner Foods
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