- Improved sales volume and net earnings over the prior year -

- Company announces agreement to sell its facility and scallop business in New Bedford, MA -

LUNENBURG, NS, Aug. 16, 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 twenty-six weeks ended July 2, 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$20.02¹.  The Company reports its financial results in USD and the average USD/CAD exchange rates for the thirteen and twenty-six weeks ended July 2, 2016 were 1.2883 and 1.3302, respectively (1.2296 and 1.2362 for the thirteen and twenty-six weeks ended July 4, 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$0.13 per share on the Company's common shares payable on September 15, 2016 to holders of record on September 1, 2016.

Financial and operational highlights for the thirteen weeks ended July 2, 2016, or second quarter of 2016, include (unless otherwise noted, all comparisons are relative to the second quarter of 2015):

• Sales as reported decreased by $1.6 million, or 0.7%, to $224.7 million compared to $226.3 million;
• Sales in domestic currency increased by $1.2 million, or 0.5%, to $243.0 million compared to $241.8 million;
• Adjusted EBITDA² increased by $5.0 million, or 39.4%, to $17.7 million compared to $12.7 million;
• Adjusted EBITDA in domestic currency increased by $5.3 million, or 38.1%, to $19.2 million compared to $13.9 million;
• Reported net income increased by $1.4 million, or 35.0%, to $5.4 million compared to $4.0 million and diluted earnings per share ("EPS") increased by $0.04 to $0.17 compared to $0.13;
• Adjusted Net Income² increased by $4.1 million, or 87.2%, to $8.8 million compared to $4.7 million; Adjusted Diluted EPS increased by $0.13 to $0.28 compared to $0.15; and CAD-Equivalent Adjusted Diluted EPS² increased by CAD$0.18 to CAD$0.36 compared to CAD$0.18; and
• Net interest-bearing debt² to Adjusted EBITDA, calculated on a rolling twelve-month basis, improved to 3.4x at the end of second quarter of 2016 compared to 3.7x at the end of the first quarter of 2016 and 4.0x at the end of Fiscal 2015.

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

• Sales as reported decreased by $21.4 million, or 4.0%, to $515.2 million compared to $536.6 million;
• Sales in domestic currency decreased by $13.3 million, or 2.3%, to $555.4 million compared to $568.7 million;
• Adjusted EBITDA increased by $3.7 million, or 8.5%, to $47.1 million compared to $43.4 million;
• Adjusted EBITDA in domestic currency increased by $5.0 million, or 11.0%, to $50.6 million compared to $45.6 million;
• Reported net income increased by $2.6 million, or 15.8%, to $19.1 million compared to $16.5 million and diluted EPS increased by $0.08 to $0.61 compared to $0.53; and
• Adjusted Net Income increased by $3.8 million, or 18.7% to $24.1 million compared to $20.3 million; Adjusted Diluted EPS increased by $0.13 to $0.77 compared to $0.65; and CAD-Equivalent Adjusted Diluted EPS increased by CAD$0.24 to CAD$1.04 compared to CAD$0.80.

"We are pleased with the results of the second quarter of 2016, returning to sales volume growth and achieving higher Adjusted EBITDA as a result of improved execution and higher supply chain optimization savings compared to the second quarter last year.  Also, free cash flow from operations continued to be strong, allowing us to reduce debt and further improve our debt leverage ratios," stated Keith Decker, President and CEO.

Mr. Decker continued, "We have reached agreement with Blue Harvest Fisheries to sell our processing facility and scallop business located in New Bedford, Massachusetts.  As part of this agreement, Blue Harvest will supply High Liner Foods with scallops so that we can continue to supply high-quality scallop products to our valued customers."

On August 16, 2016, High Liner Foods entered into a purchase and sale agreement ( the "Agreement") with Blue Harvest Fisheries, whereby Blue Harvest will acquire the assets of High Liner's scallop business, along with its facility in New Bedford, Massachusetts.  Under the Agreement, High Liner will receive cash proceeds of $8 million for the business and facility, plus additional amounts for High Liner scallop inventories.  Following completion of the transaction, High Liner will continue to offer scallops to its customers through an ongoing supply agreement with Blue Harvest.  The transaction is expected to close within the next several weeks.  The scallop processing facility was fully operational at the time the Agreement was entered into, but value-added fish operations had ceased at this facility in mid-July 2016, following the transfer of this production to the Company's other manufacturing facilities.

The Company previously announced on February 17, 2016, that it would cease value-added fish operations at its New Bedford facility to reduce excess capacity across its North American production network, thereby improving manufacturing efficiencies and helping the Company achieve its supply chain optimization objectives.  The annual ongoing pre-tax reduction in operating costs (which represents an increase in earnings before interest, taxes, depreciation and amortization, or EBITDA) resulting from the consolidation is estimated to be approximately $7.0 million, with a nominal amount of this amount to be realized in the last half of 2016.  The impact on annual EBITDA related to discontinuing scallop processing operations at the New Bedford facility is expected to be nominal.  As of July 2, 2016, the Company has incurred approximately $7.3 million in pre-tax one-time costs relating to the transfer of assets, cessation of employment at the New Bedford plant, write-down of inventories, accelerated depreciation, impairment of assets, and other costs.

Financial Results

The financial results for the thirteen and twenty-six weeks ended July 2, 2016 and July 4, 2015 are summarized in the following table:

Sales volume increased in the second quarter of 2016 by 1.0 million pounds, or 1.6%, to 62.3 million pounds, compared to 61.3 million pounds in same period in 2015 primarily reflecting higher sales volume in our U.S. foodservice business.

Sales decreased in the second quarter of 2016 by $1.6 million, or 0.7%, to $224.7 million compared to $226.3 million in the same period in 2015.  Approximately 71% of the Company's operations, including sales, are denominated in USD.  The weaker Canadian dollar in the second quarter of 2016 compared to the second quarter of 2015 decreased the value of reported USD sales of the Company's CAD-denominated operations by approximately $3.0 million relative to the conversion impact last year.

In domestic currency, sales increased in the second quarter of 2016 by $1.2 million, or 0.5%, to $243.0 million compared to $241.8 million in the same period in 2015 reflecting higher sales volume, partially offset by the impact of sales price decreases and a change in product mix.

Adjusted EBITDA increased in the second quarter of 2016 by $5.0 million, or 39.4%, to $17.7 million compared to $12.7 million in the same period in 2015.  The impact of converting our CAD-denominated operations and and corporate activities to the USD presentation currency decreased the value of reported Adjusted EBITDA in USD by $1.4 million in the second quarter of 2016 compared to $1.2 million in the same period in 2015, due in part to the weaker Canadian dollar in 2016.

In domestic currency, Adjusted EBITDA increased in the second quarter of 2016 by $5.3 million, or 38.1%, to $19.2 million compared to $13.9 million in the same period in 2015.  The increase in Adjusted EBITDA reflects higher sales volumes and higher Adjusted EBITDA as a percentage of sales.  Adjusted EBITDA as a percentage of sales increased to 7.9% of sales in the second quarter of 2016 compared to 5.8% of sales in the second quarter of 2015 reflecting lower raw material costs, higher supply chain optimization savings realized in the period and lower SG&A expenses.

Net income increased in the second quarter of 2016 by $1.4 million, or 35.0%, to $5.4 million ($0.17 per diluted share) compared to $4.0 million ($0.13 per diluted share) in the same period in 2015.  The increase in net income reflects the increase in Adjusted EBITDA as explained above and lower finance costs, partially offset by the after-tax impact of increased share-based compensation expense and a higher effective income tax rate.

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 and the impairment of property, plant and equipment as part of the cessation of plant operations; share-based compensation expense; and marking-to-market an interest rate swap not designated for hedge accounting.  Adjusted Net Income increased in the second quarter of 2016 by $4.1 million, or 87.2%, to $8.8 million (Adjusted Diluted EPS of $0.28) compared to $4.7 million (Adjusted Diluted EPS of $0.15) in the same period in 2015.

Net cash flows provided by operating activities increased in the second quarter of 2016 by $9.0 million to $18.1 million compared to $9.1 million in the same period in 2015, due to: increased cash flows from operating activities reflecting more favourable results from operations and lower income tax payments; and favourable changes in net non-cash working capital.

Net interest-bearing debt to Adjusted EBITDA, calculated on a rolling twelve-month basis, improved to 3.4x at the end of second quarter of 2016 compared 3.7x at the end of the first 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 remain focused on growing sales volume and earnings in the back half of 2016 in what we expect will remain a relatively stable raw material cost environment.  Completing outstanding supply chain optimization activities also remains a priority and we continue to believe a minimum of $20 million in annual costs savings on a run-rate basis, will 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 twenty-six weeks ended July 2, 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 Tuesday, August 16, 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 second 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 Tuesday, August 23, 2016 at midnight (ET).  To access the archived conference call, dial 1-855-859-2056 and enter the reservation number 46108262.

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 twenty-six weeks ended July 2, 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].

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¹ Source: TSX August 15, 2016.
² Please refer to High Liner Foods' MD&A for the thirteen and twenty-six weeks ended July 2, 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