- Delivers Strong Cash Flow, Reduced
Leverage and Ongoing Margin Improvements -
-
Increases Dividend by 2 Cents Per
Share -
LUNENBURG, NS, Nov. 6,
2020 /CNW/ - High Liner Foods Incorporated (TSX: HLF) ("High
Liner Foods" or "the Company"), a leading North American
value-added frozen seafood company, today reported financial
results for the thirteen and thirty-nine weeks ended
September 26, 2020.
"Our strong financial performance in the third quarter is a
result of continuous improvement, consistent delivery and
unrelenting focus on our customers' evolving needs," said
Rod Hepponstall, President and CEO
of High Liner Foods. "We have enhanced our business operations and
overall financial health, generating significant improvements to
cash flow, profitability and leverage, strengthening our ability to
navigate market challenges and deliver ongoing Adjusted EBITDA
improvements. Moving forward our increased cash flow will enable us
to invest further in our business, our brands and ongoing product
innovation, while continuing to reduce debt and support a higher
dividend."
Robert Pace, Chair of the Board
of Directors, said, "High Liner Foods has risen to the occasion
during a time of unprecedented challenge in the North American food
industry and proven how far the business has come in a relatively
short amount of time. We are raising the dividend as a result of
the Company's consistent performance and the Board's increased
confidence in the future outlook for the business. We would like to
thank shareholders for their support during our necessary business
transformation."
The Company's Board of Directors approved a quarterly dividend
of CAD$0.070 per share on the
Company's common shares, payable on December 15, 2020 to
holders of record on December 1, 2020. The quarterly dividend
of CAD$0.070 per share represents a
40.0% increase from the CAD$0.050 per
share quarterly dividend paid during the third quarter of 2020 and
reflects the Board's continued confidence in the Company's
operations.
Key financial results, reported in U.S. dollars ("USD"), for the
thirteen weeks ended September 26, 2020, or the third quarter
of 2020, are as follows (unless otherwise noted, all comparisons
are relative to the third quarter of 2019):
- Sales volume decreased by 5.5 million pounds, or 9.1%, to 54.7
million pounds compared to 60.2 million pounds and sales decreased
by $25.5 million, or 11.6%, to
$194.6 million compared to
$220.1 million;
- Gross profit as a percentage of sales increased to 20.0%
compared to 19.3% and gross profit decreased by $3.5 million, or 8.3%, to $38.9 million compared to $42.4 million;
- Adjusted EBITDA1 as a percentage of sales increased
to 9.8% compared to 7.5% and Adjusted EBITDA increased by
$2.6 million, or 15.8%, to
$19.1 million compared to
$16.5 million;
- Net income increased by $6.2
million, or 258.3%, to $3.8
million compared to a net loss of $2.4 million and diluted earnings per share
("EPS") increased to $0.11 compared
to a loss per share of $0.07;
and
- Net Debt1 to rolling twelve-month Adjusted EBITDA
improved to 3.3x at September 26,
2020 compared to 3.9x at June 27,
2020 and 4.1x at the end of Fiscal 2019.
___________________________
|
1 Please refer to High Liner Foods'
Management's Discussion and Analysis ("MD&A") for the thirteen
and thirty-nine weeks ended September 26, 2020 for definitions
of the non-IFRS financial measures used by the Company, including
"Adjusted EBITDA", "Adjusted Net Income", "Adjusted Diluted EPS"
and "Net Debt".
|
COVID-19 Related Update
High Liner Foods continues to satisfy strong retail demand for
its products with high case fill rates and product innovations.
The Company's foodservice business continues to steadily
rebound, with quarter over quarter improvements on volumes since
COVID-19 hit in March 2020.
Foodservice customers continue to respond favourably to the
Company's expanded value-added branded products which are well
suited to the new operating environment. The Company continues to
benefit from the diversity of its foodservice business through this
period with institutional foodservice customers, like health care
facilities, providing stable demand.
High Liner Foods' three plants continue to operate at planned
capacity and higher efficiency rates to meet demand from its retail
and foodservice customers and consumers. The Company's overall
supply chain continues to be robust with no significant issues
related to production, transportation and warehousing activities
nor the procurement of raw materials and ingredients.
Employee safety is High Liner Food's top priority and as the
pandemic evolves, it will implement any further measures designed
to protect the health and safety of its employees and prevent
disruption to the Company's supply chain and operations.
Financial Results
For the purpose of presenting the Consolidated Financial
Statements in USD, CAD-denominated assets and liabilities in the
Parent's operations are converted using the exchange rate at the
reporting date, and revenue and expenses are converted at the
average exchange rate of the month in which the transaction occurs.
As such, foreign currency fluctuations affect the reported values
of individual lines on our balance sheet and income statement. When
the USD strengthens (weakening CAD), the reported USD values of the
Parent's CAD-denominated items decrease in the Consolidated
Financial Statements, and the opposite occurs when the USD weakens
(strengthening CAD).
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, EPS and
financial statements are reported in USD.
The financial results for the thirteen and thirty-nine weeks
ended September 26, 2020 and September 28, 2019 are
summarized in the following table:
|
|
|
|
Thirteen weeks
ended
|
Thirty-nine weeks
ended
|
(Amounts in 000s,
except per share amounts, unless otherwise noted)
|
September
26,
2020
|
September
28,
2019
|
September
26,
2020
|
September 28,
2019
|
Sales volume
(millions of lbs)
|
54.7
|
60.2
|
181.3
|
199.1
|
Average foreign
exchange rate (USD/CAD)
|
1.3330
|
1.3205
|
1.3537
|
1.3295
|
Sales
|
$
|
194,621
|
$
|
220,141
|
$
|
629,038
|
$
|
720,599
|
Gross
profit
|
$
|
38,903
|
$
|
42,434
|
$
|
134,404
|
$
|
141,358
|
Gross profit as a
percentage of sales
|
20.0%
|
19.3%
|
21.4%
|
19.6%
|
Adjusted
EBITDA
|
$
|
19,068
|
$
|
16,455
|
$
|
66,860
|
$
|
66,553
|
Adjusted EBITDA as
a percentage of sales
|
9.8%
|
7.5%
|
10.6%
|
9.2%
|
Net income
(loss)
|
$
|
3,821
|
$
|
(2,400)
|
$
|
21,430
|
$
|
13,308
|
Diluted
EPS
|
$
|
0.11
|
$
|
(0.07)
|
$
|
0.63
|
$
|
0.39
|
Adjusted Net
Income
|
$
|
5,948
|
$
|
3,857
|
$
|
24,896
|
$
|
23,462
|
Adjusted Diluted
EPS
|
$
|
0.18
|
$
|
0.11
|
$
|
0.74
|
$
|
0.68
|
Diluted weighted
average number of shares outstanding
|
33,840
|
33,807
|
33,857
|
34,257
|
Sales volume for the third quarter of 2020 decreased by 5.5
million pounds to 54.7 million pounds compared to 60.2 million
pounds in same period in 2019. In our foodservice business, sales
volume continued to be lower due to the impact of COVID-19 on our
foodservice customers. In our retail business, sales volume
continued to be higher due to the increased demand related to
COVID-19, partially offset by lost business in the fourth quarter
of Fiscal 2019 that continued to impact volume year-over-year. The
decline in sales volume was partially offset by new business and
new product sales.
Sales in the third quarter of 2020 decreased by $25.5 million to $194.6
million compared to $220.1
million in the same period in 2019 due to the lower sales
volumes discussed above and changes in sales mix. In addition, the
weaker Canadian dollar in the third quarter of 2020 compared to the
same quarter of 2019 decreased the value of USD sales from our
CAD-denominated operations by approximately $0.5 million relative to the conversion impact
last year.
Gross profit in the third quarter of 2020 decreased by
$3.5 million to $38.9 million compared to $42.4 million in the same period in 2019 and
gross profit as a percentage of sales increased by 70 basis points
to 20.0% compared to 19.3%. Gross profit reflects the lower sales
volume discussed above, partially offset by favorable changes in
product mix reflected in the improved gross profit as a percentage
of sales. The weaker Canadian dollar had the effect of decreasing
the value of reported USD gross profit from our Canadian operations
in 2020 by approximately $0.1 million
relative to the conversion impact last year.
Adjusted EBITDA in the third quarter of 2020 increased by
$2.6 million to $19.1 million compared to $16.5 million in the same period in 2019 and
Adjusted EBITDA as a percentage of sales increased by 230 basis
points to 9.8% compared to 7.5%. Adjusted EBITDA reflects a
decrease in distribution expense and net SG&A expenses,
partially offset by the decrease in gross profit discussed
previously. In addition, the weaker Canadian dollar decreased the
value of reported Adjusted EBITDA in USD from our Canadian
operations in 2020 by approximately $0.1
million relative to the conversion impact last year.
Reported net income (loss) in the third quarter of 2020
increased by $6.2 million to income
of $3.8 million (diluted EPS of
$0.11) compared to a loss of
$2.4 million (diluted loss per share
of $0.07) in the same period in 2019.
The increase in net income reflects the increase in Adjusted EBITDA
discussed previously and decreases in share-based compensation
expense, business acquisition, integration and other expense
(income) and finance costs, partially offset by an increase in
income tax expense.
Reported net income in the third quarter of 2020 included an
expense of $0.6 million related to
certain non-routine expenses classified as "business acquisition,
integration and other expense (income) compared to an expense of
$3.4 million in the same period in
2019. Excluding the impact of these non-routine, other non-cash
expenses and share-based compensation, Adjusted Net Income in the
third quarter of 2020 increased by $2.0
million or 51.3% to $5.9
million compared to $3.9
million the same period last year. Correspondingly, Adjusted
Diluted EPS increased by $0.07 to
$0.18 compared to 0.11 in the same
period last year.
Net cash flows provided by operating activities in the third
quarter of 2020 increased by $30.8
million to $46.3 million
compared to $15.5 million in the same
period in 2019 primarily reflecting favorable changes in net
non-cash working capital and higher cash flows from operations,
partially offset by higher income taxes paid. The favorable changes
in net non-cash working capital are the result of favorable changes
in accounts receivable, inventories and provisions, partially
offset by an unfavorable change in accounts payable.
Net Debt at September 26, 2020 decreased by $41.7 million to $286.0
million compared to $327.7
million at June 27, 2020 reflecting a decrease in
short-term borrowings, a decrease in lease liabilities and a higher
cash on hand balance.
Net Debt to Adjusted EBITDA improved to 3.3x at
September 26, 2020 compared to 3.9x at June 27, 2020 and 4.1x at the end of Fiscal 2019.
We expect that at the end of Fiscal 2020 this ratio will be higher
than the ratio as at September 26,
2020, due to increased seasonal working capital requirements
in advance of the Lenten period.
Outlook
Based on the consistent performance of the Company over the past
quarters and steady recovery of its foodservice business, High
Liner Foods remains confident that it can deliver Adjusted EBITDA
growth in 2020.
High Liner Foods believes it is fully prepared to navigate the
second wave of COVID-19 in North
America. The Company is confident that its diverse and
integrated North American business will continue to satisfy the
needs of retail and foodservice customers and consumers through
excellent fill rates, product innovation and creative solutions to
help solve challenges facing foodservice operators looking for
convenience-focused products.
The Company is confident in its liquidity position as a result
of its prudent cash management and early refinancing of debt in
late 2019. The Company does not have any impending debt maturities
and will continue to utilize its $150.0
million working capital credit facility if required.
Borrowings on this facility, net of cash on hand, are currently
approximately $nil.
"Over half a million new customers have entered the frozen
seafood category in 2020 and frozen seafood is the fastest growing
section of the frozen food aisle," said Rod
Hepponstall, President and CEO of High Liner Foods. "We are
ready to seize the opportunity to grow our value-added business,
capitalizing on our market leadership in Canada and the significant runway for growth
in the U.S market. As we activate plans for growth, we will
continue to strengthen the bottom line and drive the improvements
and efficiencies that will deliver ongoing Adjusted EBITDA
improvement."
Conference Call
The Company will host a conference call on Friday,
November 6, 2020, at 2:00 p.m.
ET (3:00 p.m. AT) during which
Rod Hepponstall, President &
Chief Executive Officer and Paul
Jewer, Executive Vice President & Chief Financial
Officer, will discuss the financial results for the third quarter
of 2020. 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, November 13, 2020 at midnight (ET). To access the
archived conference call, dial 1-855-859-2056 and enter the
reservation number 1568934.
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.
The Company's Unaudited Condensed Interim Consolidated Financial
Statements and MD&A as at and for the thirteen and thirty-nine
weeks ended September 26, 2020 were
filed concurrently on SEDAR with this news release and are also
available at www.highlinerfoods.com.
About High Liner Foods Incorporated
High Liner Foods Incorporated is a 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 Catch of the Day labels, and are available in
most grocery and club stores. The Company also sells branded
products to restaurants and institutions under the High
Liner, Mirabel, Icelandic
Seafood and FPI labels and is a 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.
Forward-looking statements can generally be identified by the
use of the conditional tense, the words "may", "should", "would",
"could", "believe", "plan", "expect", "intend", "anticipate",
"estimate", "foresee", "objective", "goal", "remain" or "continue"
or the negative of these terms or variations of them or words and
expressions of similar nature. Actual results could differ
materially from the conclusion, forecast or projection stated in
such forward-looking information. As a result, we cannot guarantee
that any forward-looking statements will materialize. Assumptions,
expectations and estimates made in the preparation of
forward-looking statements and risks that could cause our actual
results to differ materially from our current expectations are
discussed in detail in the Company's materials filed with the
Canadian securities regulatory authorities from time to time,
including the Risk Factors section of our MD&A for the thirteen
and thirty-nine weeks ended September 26, 2020, the Risk
Factors section of our 2019 Annual Report and the Risk Factors
section of our 2019 Annual Information Form. The risks and
uncertainties that may affect the operations, performance,
development and results of High Liner Foods' business include, but
are not limited to, the following factors: compliance with food
safety laws and regulations; timely identification of and response
to events that could lead to a product recall; volatility in the
CAD/USD exchange rate; competitive developments including increases
in overseas seafood production and industry consolidation;
availability and price of seafood raw materials and finished goods
and the impact of geopolitical events (and related economic
sanctions) on the same; the impact of the U.S. Trade
Representative's tariffs on certain seafood products; costs of
commodity products and other production inputs, and the ability to
pass cost increases on to customers; successful integration of
acquired operations; potential increases in maintenance and
operating costs; shifts in market demands for seafood; performance
of new products launched and existing products in the market place;
changes in laws and regulations, including environmental, taxation
and regulatory requirements; technology changes with respect to
production and other equipment and software programs; enterprise
resource planning system risk; adverse impacts of cybersecurity
attacks or breach of sensitive information; supplier fulfillment of
contractual agreements and obligations; competitor reactions; High
Liner Foods' ability to generate adequate cash flow or to finance
its future business requirements through outside sources; credit
risk associated with receivables from customers; volatility
associated with the funding status of the Company's post-retirement
pension benefits; adverse weather conditions and natural disasters;
the availability of adequate levels of insurance; management
retention and development; and the potential impact of a pandemic
outbreak of a contagious illness, such as the 2019
coronavirus/COVID-19 pandemic, on general economic and business
conditions and therefore the Company's operations and financial
performance. Forward-looking information is based on management's
current estimates, expectations and assumptions, which we believe
are reasonable as of the current date. You should not place undue
importance on forward-looking information and should not rely upon
this information as of any other date. Except as required under
applicable securities laws, we do not undertake to update these
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. 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 Net Debt. Please refer to the Company's MD&A for the
thirteen and thirty-nine weeks ended September 26, 2020 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 Unaudited Condensed Interim 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
investor@highlinerfoods.com.
SOURCE High Liner Foods Incorporated