19:12:28 EDT Thu 28 Mar 2024
Enter Symbol
or Name
USA
CA



High Liner Foods Inc
Symbol HLF
Shares Issued 30,889,078
Close 2017-02-22 C$ 18.39
Market Cap C$ 568,050,144
Recent Sedar Documents

High Liner Foods earns $32.95-million (U.S.) in 2016

2017-02-22 09:56 ET - News Release

Mr. Keith Decker reports

HIGH LINER FOODS REPORTS OPERATING RESULTS FOR THE FOURTH QUARTER AND FULL YEAR OF 2016; FISCAL 2016 NET EARNINGS INCREASE 11.5% OVER PRIOR YEAR

High Liner Foods Inc. today released financial results for the 52 weeks ended Dec. 31, 2016. All amounts are reported in U.S. dollars, unless otherwise noted.

High Liner Foods' common shares trade on the Toronto Stock Exchange and are quoted in Canadian dollars, and closed yesterday at $19.90. The company reports its financial results in U.S. dollars, and the average U.S.-dollar/Canadian-dollar exchange rates for the 13 and 52 weeks ended Dec. 31, 2016, were 1.3341 and 1.3248, respectively (1.3358 and 1.2791 for the 13 and 52 weeks ended Jan. 2, 2016, respectively).

Due to the conversion of the company's Canadian operations from Canadian dollars to U.S. dollars for reporting purposes, to the extent the Canadian dollar weakens against the U.S. dollar, the company's U.S.-dollar-reported financial results will be unfavourably 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 Canadian dollars, and its earnings and financial position are reported in U.S. dollars.

Today, the board of directors of the company approved a quarterly dividend of 14 Canadian cents per share on the company's common shares, payable on March 15, 2017, to holders of record on March 3, 2017.

"We are pleased with 2016's financial results, particularly with the 11.5-per-cent increase achieved in net earnings despite a 2.5-per-cent decrease in annual sales volume that was due in part to the sale of our scallop business in the third quarter of 2016. The improvement in net earnings reflects the impact of lower raw material prices and incremental supply chain optimization savings in 2016, along with lower finance costs as a result of using strong free cash flow in 2016 to lower debt levels," stated Keith Decker, president and chief executive officer. "In 2016, we completed the last of the planned activities associated with the supply chain optimization project. Since launching this project in the third quarter of 2014, we've achieved pretax cost savings in excess of $20-million on an annual run-rate basis."

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

  • Sales as reported decreased by $45.5-million, or 4.5 per cent, to $956-million, compared with $1,001.5-million.
  • Sales in domestic currency decreased by $36.5-million, or 3.4 per cent, to $1,037.3-million, compared with $1,073.8-million.
  • Gross profit increased by $1.2-million, or 0.6 per cent, to $202.8-million, compared with $201.6-million.
  • Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased by $4.2-million, or 5.4 per cent, to $82.4-million, compared with $78.2-million.
  • Adjusted EBITDA in domestic currency increased by $5.5-million, or 6.6 per cent, to $89.4-million, compared with $83.9-million.
  • Reported net income increased by $3.4-million, or 11.5 per cent, to $33-million, compared with $29.6-million, and diluted earnings per share (EPS) increased by 11 cents to $1.06, compared with 95 cents.
  • Adjusted net income increased by $5.3-million, or 14.9 per cent, to $40.9-million, compared with $35.6-million, and adjusted diluted EPS increased by 17 cents to $1.31, compared with $1.14.
  • Canadian-dollar-equivalent adjusted diluted EPS increased by 28 Canadian cents to $1.74 (Canadian), compared with $1.46 (Canadian).
  • Net interest-bearing debt to adjusted EBITDA, calculated on a rolling 12-month basis, improved to 3.1 times at the end of fiscal 2016, compared with four times at the end of fiscal 2015.

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

  • Sales as reported decreased by $14.9-million, or 6.6 per cent, to $210-million, compared with $224.9-million.
  • Sales in domestic currency decreased by $14.1-million, or 5.8 per cent, to $230.8-million, compared with $244.9-million.
  • Gross profit decreased by $1.2-million, or 2.6 per cent, to $44.9-million, compared with $46.1-million.
  • Adjusted EBITDA decreased by $400,000, or 2.2 per cent, to $17.4-million, compared with $17.8-million.
  • Adjusted EBITDA in domestic currency increased by $100,000, or 0.5 per cent, to $19.2-million, compared with $19.1-million.
  • Reported net income increased by $300,000, or 4.3 per cent, to $7.3-million, compared with $7-million, and diluted EPS increased by one cent to 24 cents, compared with 23 cents.
  • Adjusted net income decreased by $500,000, or 6.2 per cent, to $7.6-million, compared with $8.1-million, and adjusted diluted EPS decreased by two cents to 24 cents, compared with 26 cents.
  • Canadian-dollar-equivalent adjusted diluted EPS decreased by three Canadian cents 32 Canadian cents, compared with 35 Canadian cents.

The sale of the company's New Bedford scallop business on Sept. 7, 2016, had the impact of lowering sales volume by 600,000 pounds, sales as reported by $8-million and adjusted EBITDA by $300,000 in the fourth quarter of 2016, compared with the fourth quarter of 2015.

Financial results

The financial results for the 13 and 52 weeks ended Dec. 31, 2016, and Jan. 2, 2016, are summarized in the attached table.

   
                                        FINANCIAL HIGHLIGHTS                                                                        
          (in thousands of U.S. dollars, except per-share amounts, unless otherwise noted)

                                                           13 weeks ended              52 weeks ended  
                                                    Dec. 31,       Jan. 2,      Dec. 31,       Jan. 2,  
                                                       2016          2016          2016          2016 

Sales volume (millions of pounds)                      62.4          66.2         277.3         284.4
Sales in domestic currency                         $230,833      $244,889    $1,037,259    $1,073,834
Foreign exchange impact on sales                   $(20,787)     $(20,024)     $(81,243)     $(72,327)
Sales in U.S. dollars                              $210,046      $224,865      $956,016    $1,001,507
Gross profit                                        $44,885       $46,070      $202,837      $201,664
Gross profit as a percentage of sales                 21.4%         20.5%         21.2%         20.1%
Adjusted EBITDA in domestic currency                $19,246       $19,123       $89,382       $83,912
Foreign exchange impact on adjusted EBITDA          $(1,876)      $(1,366)      $(6,969)      $(5,694)
Adjusted EBITDA                                     $17,370       $17,757       $82,413       $78,218
Adjusted EBITDA as a percentage of sales               8.3%          7.9%          8.6%          7.8%
Net income                                           $7,256        $7,019       $32,950       $29,581
Diluted EPS                                           $0.24         $0.23         $1.06         $0.95
Adjusted net income                                  $7,565        $8,140       $40,948       $35,563
Adjusted diluted EPS                                  $0.24         $0.26         $1.31         $1.14

Sales volume decreased in the fourth quarter of 2016 by 3.8 million pounds, or 5.7 per cent, to 62.4 million pounds, compared with 66.2 million pounds in same period in 2015 due to lower sales volume in the company's U.S. retail and food service businesses, including the decline in scallop sales volume as a result of the sale of the New Bedford facility.

Sales decreased in the fourth quarter of 2016 by $14.9-million, or 6.6 per cent, to $210-million, compared with $224.9-million in the same period in 2015. Approximately 68 per cent of the company's operations, including sales, are denominated in U.S. dollars. The slightly stronger Canadian dollar in the fourth quarter of 2016 compared with the fourth quarter of 2015 increased the value of U.S.-dollar sales from the company's Canadian-dollar-denominated operations by approximately $100,000 relative to the conversion impact last year.

In domestic currency, sales decreased in the fourth quarter of 2016 by $14.1-million, or 5.8 per cent, to $230.8-million, compared with $244.9-million in the same period in 2015, due to the lower U.S. sales volume, and the impact on product mix of lower demand for traditional breaded and battered frozen seafood products which the company was unable to offset with sales from its new frozen seafood products that align with emerging consumer trends and preferences.

Gross profit decreased in the fourth quarter of 2016 by $1.2-million, or 2.6 per cent, to $44.9-million, compared with $46.1-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 90 basis points to 21.4 per cent, compared with 20.5 per cent, primarily due to lower raw material costs and higher supply chain optimization savings realized in the period.

Adjusted EBITDA decreased in the fourth quarter of 2016 by $400,000, or 2.2 per cent, to $17.4-million, compared with $17.8-million in the same period in 2015. The impact of converting the company's Canadian-dollar-denominated operations and corporate activities to its U.S.-dollar presentation currency decreased the value of reported adjusted EBITDA in U.S. dollars by $1.9-million in the fourth quarter of 2016, compared with $1.4-million in the same period in 2015.

In domestic currency, adjusted EBITDA increased in the fourth quarter of 2016 by $100,000, or 0.5 per cent, to $19.2-million (8.3 per cent of sales), compared with $19.1-million (7.8 per cent of sales) in the same period in 2015. The increase in adjusted EBITDA reflects a reduction in distribution expenses and selling, general and administration expenses, largely offset by the lower gross profit.

Net income increased in the fourth quarter of 2016 by $300,000, or 4.3 per cent, to $7.3-million (diluted EPS of 24 cents), compared with $7-million (diluted EPS of 23 cents) in the same period in 2015. The increase in net income reflects a decrease in finance costs and share-based compensation expense, partially offset by the decrease in adjusted EBITDA as explained above, and higher income tax 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 decreased in the fourth quarter of 2016 by $500,000, or 6.2 per cent, to $7.6-million (adjusted diluted EPS of 24 cents), compared with $8.1-million (adjusted diluted EPS of 26 cents) in the same period in 2015.

Net cash flows provided by operating activities decreased in the fourth quarter of 2016 by $1.1-million to $14.7-million, compared with $15.8-million in the same period in 2015, due to decreased cash flow from non-cash working capital and higher income tax payments, partially offset by more favourable results from operations and lower interest payments.

Net interest-bearing debt to adjusted EBITDA, calculated on a rolling 12-month basis, improved to 3.1 times at the end of fiscal 2016, compared three times at the end of the third quarter of 2016 and four times at the end of fiscal 2015, reflecting the repayment of debt with cash flow provided by operating activities.

Outlook

"We expect the trend of lower demand for frozen breaded and battered seafood products will continue into 2017 and that we will not return to volume growth until our new product sales can offset the decline that the traditional breaded and battered category is experiencing. Innovation activities and new product offerings in 2017 will focus on bringing new customers to the frozen seafood category through the introduction of new frozen seafood products that align with emerging consumer trends and preferences. After completing our supply chain optimization project and improving our debt-to-adjusted-EBITDA ratio in 2016, we are well positioned for product innovation and further acquisition opportunities to support sales and earnings growth, and further species diversification," concluded Mr. Decker.

Conference call

The company's consolidated financial statements, and management's discussion and analysis as at and for the 52 weeks ended Dec. 31, 2016, were filed concurrently on SEDAR with this news release and are also available on the company's website.

The company will host a conference call on Wednesday, Feb. 22, 2017, at 2 p.m. ET (3 p.m. AT), during which Mr. Decker, president and chief executive officer, and Paul Jewer, executive vice-president and chief financial officer, will discuss the fourth quarter and fiscal 2016 financial results. 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, March 1, 2017, at 12 a.m. ET. To access the archived conference call, dial 1-855-859-2056 and enter the reservation No. 56156120.

A live audio webcast of the conference call will be available on the company's website. 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 Inc.

High Liner Foods is the leading North American processor and marketer of value-added frozen seafood.

We seek Safe Harbor.

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