• Net profit slumps 67.1%
  • Adjusted EBTIDA up 78.3%
  • Net sales climb to C$218.8m
Profits were negatively impacted by after-tax one-time integration costs related to the acquisition

Profits were negatively impacted by after-tax one-time integration costs related to the acquisition

Costs related to last year's acquisition of Icelandic Group hit High Liner Foods' bottom line but the new addition helped drive operating profit and sales in the third quarter.

Net income in the three months ended 29 September slumped 67.1% to C$2.2m (US$2.2m). The company said profits were negatively impacted by after-tax one-time integration costs related to the acquisition and additional depreciation on property to be disposed of as part of the deal.

Adjusted EBITDA soared 78.3% to C$21.6m as a result of higher sales volumes resulting from the acquisition and lower seafood and other input costs.

Sales in the quarter increased to C$218.8m from C$161.7m a year ago. The 35.3% increase was also a result of the Icelandic acquisition.

Show the press release

High Liner Foods Reports Continued Strong Operating Results for the Third Quarter of 2012

- High Liner and Icelandic USA Acquisition now operating under single ERP platform; debt reduced by $47.8 million in first three quarters of 2012 -

LUNENBURG, NS, Nov. 8, 2012 /CNW/ - High Liner Foods Incorporated (TSX: HLF; HLF.A), the leading North American value-added frozen seafood company, today reported financial results for the thirteen and thirty-nine weeks ended September 29, 2012. All amounts are reported in Canadian dollars.

Financial and operational highlights for the third quarter and first thirty-nine weeks of 2012 include (all comparisons are relative to the third quarter and first thirty-nine weeks of 2011, unless otherwise noted):

Sales for the third quarter increased by 35.3% to $218.8 million from $161.7 million;
Reported net income for the third quarter, including one-time costs of the Icelandic USA Acquisition, of $2.2 million (diluted earnings per share ("EPS") of $0.14) compared with $6.7 million (diluted EPS of $0.44); $5.0 million (diluted EPS of $0.32) for the first thirty-nine weeks of 2012 compared with $21.2 million (diluted EPS of $1.38);
Adjusted EBITDA1 for the third quarter increased by 78.3% to $21.6 million from $12.1 million; $69.7 million for the first thirty-nine weeks of 2012 compared with $41.3 million;
Adjusted Net Income2 of $7.9 million (Adjusted diluted EPS3 of $0.51) for the third quarter compared with $6.3 million (Adjusted diluted EPS of $0.41); $27.4 million (Adjusted diluted EPS of $1.78) for the first thirty-nine weeks of 2012 compared with $21.7 million (Adjusted diluted EPS of $1.41);
Interest-bearing debt reduced by $47.8 million in the first thirty-nine weeks of 2012;
The integration of Icelandic USA Acquisition continues to progress ahead of schedule.
"As we continue the process of integrating the Icelandic USA Acquisition operations with ours, we are pleased to report another strong quarter that saw sales and Adjusted EBITDA grow by 35.3% and 78.3%, respectively," said Henry Demone, president and CEO. "The increases were largely due to the addition of the Icelandic USA Acquisition, which had a robust 5.9% year-over-year sales growth on a pro forma basis that assumes the Icelandic USA Acquisition had been part of our operations for the same quarter in 2011. Our non-Icelandic USA sales declined by 4.8% due to a variety of reasons. Overall, Adjusted EBITDA growth remained strong at 18.4% on a pro forma basis. EBITDA growth was also positively affected by lower seafood input costs, which we previously forecasted would begin to show a favourable contribution to profitability in the third quarter. With regard to the Icelandic USA Acquisition integration, we are pleased that we have maintained our pace ahead of plan, and that High Liner is now operating under one enterprise resource planning (ERP) system. We now project synergies from the Icelandic USA acquisition of at least $18 million, the high end of our original estimate of $16 - $18 million."

Financial Results

Nearly 70% of the Company's operations, assets, and liabilities, are denominated in U.S. dollars or are impacted by the Canadian/U.S. dollar exchange rate. As such, foreign currency fluctuations affect the reported values of individual lines on the Company's balance sheet and income statement.

(in thousands except per share amounts,
unless otherwise noted) Thirteen
weeks ended
Sept. 29, 2012 Thirteen
weeks ended
Oct. 1, 2011 Thirty-nine
weeks ended
Sept. 29, 2012 Thirty-nine
weeks ended
Oct. 1, 2011
Sales in million pounds 64.3 47.8 212.4 149.4
Sales in domestic currency $219,496 $163,298 $724,780 $498,085
Foreign exchange impact $(741) $(1,581) $723 $(5,975)
Sales in Canadian dollars $218,755 $161,717 $725,503 $492,110
Adjusted EBITDA $21,609 $12,120 $69,683 $41,332
Net income $2,186 $6,695 $4,959 $21,200
Adjusted net income $7,918 $6,261 $27449 $21,702
EPS (Diluted) $0.14 $0.44 $0.32 $1.38
Adjusted EPS (Diluted) $0.51 $0.41 $1.78 $1.41
Average Shares Outstanding (Diluted) 15,441 15,312 15,426 15,358

Sales for the third quarter increased to $218.8 million from $161.7 million for the same period a year ago. The 35.3% increase in sales was achieved as a result of the Icelandic USA Acquisition. The weaker Canadian dollar relative to the same periods last year resulted in an increase in the value of reported sales. Sales in domestic currency, which excludes the impact of currency translation, were $219.5 million compared with $163.3 million for the third quarter of 2011. Total sales volume increased by 34.6% to 64.3 million pounds. The Icelandic USA Acquisition accounted for 39.4% of volume growth, offset by a 4.8% decline in pre-Icelandic USA volume. For comparison purposes, assuming that the acquired Icelandic USA operations had been part of High Liner's operations in the comparable period in 2011, total sales declined by 1.9% while total sales pounds declined by 3.5%; however, year to date, total sales increased by 4.1% while total sales volume was flat. The decline during the third quarter for the pre-Icelandic USA operations was due to a variety of reasons, not related to the Icelandic USA acquisition.

Adjusted EBITDA for the third quarter increased by 78.3% to $21.6 million, or 9.9% of sales, from $12.1 million, or 7.5% of sales, for the same period in 2011. The increase in Adjusted EBITDA was due to higher sales volumes resulting from the Icelandic USA Acquisition and lower seafood and other input costs. For comparison purposes, assuming that the acquired business had been part of High Liner's U.S. operations in the third quarter of 2011, Adjusted EBITDA increased by 18.4% year over year. Synergies achieved in the quarter were $2.6 million and year to date total $5.6 million.

Net income for the quarter was $2.2 million (diluted EPS of $0.14) compared with net income of $6.7 million (diluted EPS of $0.44) for the third quarter of 2011. As in the previous two quarters, net income was negatively impacted by after-tax one-time integration costs related to the Icelandic USA acquisition expensed during the quarter as well as additional depreciation on property to be disposed of as part of the acquisition. As well, the significant increase in the value of High Liner's stock increased stock compensation expense in the quarter by $3.3 million ($5.3 million higher for the first thirty-nine weeks of 2012). Excluding the one-time integration costs, the additional depreciation, the non-cash expense from revaluing an embedded derivative and interest rate swap associated with the long-term debt, and stock-based compensation expense, Adjusted net income was $7.9 million (Adjusted diluted EPS of $0.51) compared with $6.3 million (Adjusted diluted EPS of $0.41) for the same quarter in 2011.

Free cash flow4 was $40.9 million for the rolling four quarters ended September 29, 2012. Cash flow generated from operations, as well as the seasonal reduction in working capital, allowed the Company to reduce interest-bearing debt by $47.8 million. This, combined with a stronger Canadian dollar, decreased total interest-bearing debt from $379.9 million at December 31, 2011 to $320.9 million at September 29, 2012.

Dividends

Today, the Board of Directors of the Company approved a quarterly dividend of $0.11 per Common and Non-Voting Equity Share payable on December 15, 2012 to shareholders of record on December 1, 2012.

Outlook

"The Icelandic USA Acquisition was accretive on an adjusted basis for both the third quarter and year to date, and we continue to expect it to be accretive for the full year," said Mr. Demone. "As we have maintained an accelerated pace of integrating our U.S. operations with Icelandic USA's, we expect to benefit from the synergies earlier than anticipated and further solidify our leadership position in the North American frozen seafood food service market. Our Canadian retail operations continue to remain strong and we expect this performance to be sustained into next year. We began to see the benefits of lower seafood input costs during the third quarter, which we project to continue into the fourth, quarter and into 2013, as seafood costs are expected to remain favorable. Lower seafood costs will reduce our commodity sales as we pass on some of these lower product costs to customers. Lower commodity product costs should increase margins and profitability. All these factors considered, we are optimistic about our operating performance for the full year and beyond."

Supplemental Financial Information

This news release is not in any way a substitute for reading High Liner's financial statements, including notes to the financial statements, and Management's Discussion and Analysis. The Company's Fiscal Third Quarter Interim Financial Statements, which includes the Statements of Financial Position, Income, Comprehensive Income, Changes in Shareholders' Equity, Cash Flows and notes, can be viewed in the Investor Information section of the High Liner Foods website at http://www.highlinerfoods.com/en/home/investorinformation/quarterlyreports.aspx

Conference Call

High Liner will host a conference call on Friday, November 9, at 10:30 a.m. ET (11:30 a.m. AT) to discuss its third quarter financial results. To access the conference call by telephone, dial 647-427-7450 or 1-888-231-8191. Please connect approximately ten minutes prior to the beginning of the call to ensure participation. The conference call will be archived for replay by telephone until Friday, November 16, 2012 at midnight. To access the archived conference call, dial 1-855-859-2056 and enter the reservation number 48345826.

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 prepared, value-added frozen seafood. High Liner's branded products are sold throughout the United States, Canada and Mexico under the High Liner, Fisher Boy, Mirabel, Sea Cuisine and Royal Sea labels, and are available in most grocery and club stores. The Company also sells its products under the High Liner, FPI, Mirabel, Viking, Icelandic Seafood, Samband of Iceland, Seastar, and Seaside brands to restaurants and institutions, and is the major supplier of private label seafood products to North American food retailers and food service distributors. High Liner Foods is a publicly traded Canadian company, trading under the symbols HLF and HLF.A on the Toronto Stock Exchange.

 

Original source: High Liner Foods