- Reports Continued Sales and Adjusted
EBITDA growth for the Fourth Quarter and Year Ended 2022
-
LUNENBURG, NS, Feb. 22,
2023 /CNW/ - High Liner Foods Incorporated (TSX: HLF)
("High Liner Foods" or "the Company"), a leading North American
value-added frozen seafood company, today announced financial
results for the fifty-two weeks ended December 31, 2022.
"We ended the year with another solid quarter of earnings,
including higher sales, gross profit and Adjusted EBITDA,
supporting our delivery of the fourth consecutive year of Adjusted
EBITDA growth," said Rod
Hepponstall, President and Chief Executive Officer of High
Liner Foods. "This is a tremendous result that stands out in our
corporate history and reflects the significant transformation of
our business and the talent and hard work of our team."
"Our success during 2022 and in the fourth quarter was driven by
strong operational performance, ongoing business improvements,
efficiencies, investment in inventory and in key customer, supplier
and distributor relationships. This strengthened our ability to
deliver solutions for our customers and consumers based on quality,
convenience and value and helped further our competitive
positioning in the market."
Mr. Hepponstall, added, "In the year ahead, we will continue to
execute against our branded and value-added strategy to innovate
across our portfolio and inspire innovation in the category."
Key financial results, reported in U.S. dollars ("USD"), for the
fifty-two weeks ended December 31, 2022, or Fiscal 2022, are
as follows (unless otherwise noted, all comparisons are relative to
the fifty-two weeks ended January 1, 2022, or "Fiscal
2021"):
- Sales increased by $194.3
million, or 22.2%, to $1,069.7
million compared to $875.4
million and sales volume increased by 17.2 million pounds,
or 7.4%, to 250.9 million pounds compared to 233.7 million
pounds;
- Gross profit increased by $31.4
million, or 15.8%, to $229.9
million compared to $198.5
million, while gross profit as a percentage of sales
decreased to 21.5% compared to 22.7%;
- Adjusted EBITDA(1) increased by $13.5 million, or 14.9%, to $103.9 million compared to $90.4 million, while Adjusted EBITDA as a
Percentage of Sales(1) decreased to 9.7% compared to
10.3%;
- Net income increased by $12.5
million, or 29.6%, to $54.7
million compared to $42.2
million and diluted earnings per share ("EPS") increased to
$1.56 per share compared to
$1.20 per share;
- Adjusted Net Income(1) increased by $6.9 million, or 15.4%, to $51.7 million compared to $44.8 million and Adjusted Diluted
EPS(1) increased to $1.48
per share compared to $1.28 per
share; and
- Net Debt(1) to Rolling Twelve-Month Adjusted
EBITDA(1) was 3.7x at December
31, 2022 compared to 3.0x at the end of Fiscal 2021 due to
increased investment in inventory.
Key financial results, reported in USD, for the thirteen weeks
ended December 31, 2022, or the fourth quarter of 2022, are as
follows (unless otherwise noted, all comparisons are relative to
the fourth quarter of 2021):
- Sales increased by $22.4 million,
or 9.8%, to $250.3 million compared
to $227.9 million and sales volume
decreased by 0.3 million pounds, or 0.5%, to 58.4 million pounds
compared to 58.7 million pounds;
- Gross profit increased by $6.2
million, or 12.8%, to $54.8
million compared to $48.6
million and gross profit as a percentage of sales increased
to 21.9% compared to 21.3%;
- Adjusted EBITDA(1) increased by $4.8 million, or 23.3%, to $25.4 million compared to $20.6 million and Adjusted EBITDA as a Percentage
of Sales increased to 10.1% compared to 9.0%;
- Net income increased by $3.9
million, or 54.2%, to $11.1
million compared to $7.2
million and diluted earnings per share ("EPS") increased to
$0.32 per share, compared to
$0.20 per share.
- Adjusted Net Income(1) increased by $3.2 million, or 35.2%, to $12.3 million compared to $9.1 million and Adjusted Diluted
EPS(1) increased to $0.35
per share compared to $0.26 per
share.
__________________________
|
(1) This is a non-IFRS financial
measure. For more information on non-IFRS financial measures, see
"Non-IFRS Measures" below and see "Non-IFRS Financial Measures" in
our Fiscal 2022 Management's Discussion and Analysis ("2022
MD&A").
|
Q4 Operational
Update
The Company continued to deliver strong operational performance
in the fourth quarter. The success can be attributed to the
strength of the Company's supply chain, investment in inventory and
tailored offering to customer segments.
In our foodservice business the Company gained market share as
our branded and value-added offering continues to provide
operational efficiencies and menu innovation, two priorities for
customers in the current market. In retail, High Liner Foods did
experience slightly softer volume in retail during the fourth
quarter, compared to the same period in the prior year, driven by
the inflationary environment and the recessionary headwinds which
led to price sensitivity across the entire grocery sector. However,
the Company benefited from its value offering, in terms of price
and packaging size, appealing to a slightly greater price
sensitivity in the market.
While global supply chain pressures persist in the industry,
High Liner Foods' scale and proactive inventory investment enabled
the Company to improve customer service levels during the current
quarter. "We are fortunate that our diversified supply chain
was able to withstand the significant pressure of the past year and
that our balance sheet enabled us to make the necessary investments
in inventory to maximize our ability to satisfy demand for our
products. As pressures alleviate, we are well positioned to serve
our customers during the forthcoming seasonal peak in demand as we
enter the Lenten period," said Mr. Hepponstall.
Financial Results
For the purpose of presenting the Consolidated Financial
Statements in USD, CAD-denominated assets and liabilities in the
Company'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 in USD for the thirteen and fifty-two
weeks ended December 31, 2022 and January 1, 2022 are
summarized in the following table:
|
|
Thirteen weeks
ended
|
|
|
Fifty-two weeks
ended
|
(Amounts in 000s,
except per share amounts, unless
otherwise noted)
|
|
December 31,
2022
|
|
January 1,
2022
|
|
|
December 31,
2022
|
|
January 1,
2022
|
Sales volume
(millions of lbs)
|
|
58.4
|
|
58.7
|
|
|
250.9
|
|
233.7
|
Average foreign
exchange rate (USD/CAD)
|
|
1.3572
|
|
1.2606
|
|
|
1.3017
|
|
1.2535
|
Sales
|
|
$
250,346
|
|
$
227,879
|
|
|
$
1,069,714
|
|
$
875,405
|
Gross
profit
|
|
$
54,838
|
|
$
48,605
|
|
|
$
229,928
|
|
$
198,544
|
Gross profit as a
percentage of sales
|
|
21.9 %
|
|
21.3 %
|
|
|
21.5 %
|
|
22.7 %
|
Adjusted
EBITDA
|
|
$
25,385
|
|
$
20,600
|
|
|
$
103,867
|
|
$
90,422
|
Adjusted EBITDA as a
percentage of sales
|
|
10.1 %
|
|
9.0 %
|
|
|
9.7 %
|
|
10.3 %
|
Net
income
|
|
$
11,131
|
|
$
7,223
|
|
|
$
54,730
|
|
$
42,249
|
Diluted
EPS
|
|
$
0.32
|
|
$
0.20
|
|
|
$
1.56
|
|
$
1.20
|
Adjusted Net
Income
|
|
$
12,318
|
|
$
9,079
|
|
|
$
51,712
|
|
$
44,798
|
Adjusted Diluted
EPS
|
|
$
0.35
|
|
$
0.26
|
|
|
$
1.48
|
|
$
1.28
|
Diluted weighted
average number of shares outstanding
|
|
35,130
|
|
35,171
|
|
|
35,069
|
|
35,121
|
Sales volume for the thirteen weeks ended December 31, 2022, or the fourth quarter of 2022,
decreased by 0.3 million pounds, or 0.5%, to 58.4 million pounds
compared to 58.7 million pounds in the thirteen weeks ended
January 1, 2022, or the fourth
quarter of 2021. In our retail business, sales volume was lower
primarily due to consumers becoming more price-conscious,
resulting in softer demand for seafood products as consumers switch
to lower cost meal solutions, including our value portfolio. In our
foodservice business, sales volume was higher due to the reduced
COVID-19 restrictions on the Company's foodservice customers in the
fourth quarter of 2022 as compared to the fourth quarter of 2021,
leading to increased demand, as well as increased new business in
the current quarter compared to the same period in the prior year.
The lower sales volume was also partially due to the continued
impact of global supply chain challenges on raw material supply to
North America, that impacted the
Company's sales volumes by an estimated 1.8 million pounds in the
fourth quarter. This supply shortage however is a significant
improvement compared to the impact in the first three quarters of
Fiscal 2022, as the Company invested in working capital to address
the supply chain challenges.
Sales in the fourth quarter of 2022 increased by $22.4 million, or 9.8%, to $250.3 million compared to $227.9 million in the same period in 2021,
reflecting pricing actions related to inflationary increases in
input costs partially offset by the decrease in sales volume
discussed above, as well as a change in sales mix. The weaker
Canadian dollar in the fourth quarter of 2022 compared to the same
quarter of 2021 decreased value of reported USD sales from our
CAD-denominated operations by approximately $4.7 million relative to the conversion impact
last year.
Gross profit in the fourth quarter of 2022 increased by
$6.2 million to $54.8 million compared to $48.6 million in the same period in 2021 and
gross profit as a percentage of sales increased by 60 basis points
to 21.9% compared to 21.3%. The increase in gross profit reflects
the inflationary-pricing actions discussed previously and some
improvement in the operating efficiencies at our plants, which was
partially offset by the decrease in sales volume discussed above
and change in product mix. The weaker Canadian dollar decreased the
value of reported USD gross profit from our CAD-denominated
operations by approximately in $1.1
million relative to the conversion impact last year.
Adjusted EBITDA in the fourth quarter of 2022 increased by
$4.8 million to $25.4 million compared to $20.6 million in the same period in 2021 while
Adjusted EBITDA as a percentage of sales increased to 10.1%
compared to 9.0%. The increase in Adjusted EBITDA is a result
of the increase in gross profit and decrease in distribution
expenses, partially offset by the increase in net SG&A
expenses.
Reported net income in the fourth quarter of 2022 increased by
$3.9 million to net income of
$11.1 million (diluted EPS of
$0.32) compared to $7.2 million (diluted EPS of $0.20) in the same period in 2021. The increase
in net income was due to the increase in Adjusted EBITDA, decrease
in share-based compensation expense and a decrease in income tax
expense. The increase in net income was partially offset by an
increase in finance costs and an increase in business acquisition,
integration and other (income) expense.
Reported net income in the fourth quarter of 2022 included
certain non-routine expenses classified as "business acquisition,
integration and other (income) expense." Excluding the impact of
these non-routine items or other non-cash expenses, and share-based
compensation, Adjusted Net Income in the fourth quarter of 2022
increased by $3.2 million or 35.2% to
$12.3 million compared to
$9.1 million in 2021. Adjusted
Diluted EPS increased $0.09 in the
fourth quarter of 2022 to $0.35 as
compared to $0.26 in the same period
of the prior year.
Net cash flows (used in) provided by operating
activities in the fourth quarter of 2022 decreased by
$47.8 million to an outflow of
$55.8 million compared to an outflow
of $8.0 million in the same period in
2021 due to unfavorable changes in non-cash working capital
primarily due to the increased investment in inventory, higher
finance costs and income taxes paid, which was partially offset by
higher cash flows from operations.
Net Debt increased by $114.5
million to $385.5 million at
the end of Fiscal 2022 as compared to $271.0
million at the end of Fiscal 2021, primarily reflecting
higher bank loans on December 31, 2022 as compared to Fiscal
2021, partially offset by lower lease liabilities on
December 31, 2022 as compared to Fiscal 2021.
Net Debt to Rolling Twelve-Month Adjusted EBITDA was 3.7x at
December 31, 2022 compared to 3.0x at
the end of Fiscal 2021, due to the increase in Net Debt as a result
of increased investment in seasonal working capital and inflation
in raw materials. In the absence of any major acquisitions or
unplanned capital expenditures in 2023, we expect this ratio to be
back to the Company's long-term target of 3.0x at the end of Fiscal
2023.
Outlook
Mr. Hepponstall said, "I am confident in the resilience of our
business through market cycles and believe we are poised to once
again deliver year over year Sales and Adjusted EBITDA growth,
which combined with strong improvements in working capital, will
allow us to generate significant cash flow from operations and
create value for all stakeholders."
"While there will inevitably be periods of short-term economic
contraction that will impact consumer choices in restaurants or at
the grocery store, we have proven the resiliency of our business
and the competitive advantages offered by the diversification of
our business, portfolio and supply chain. We will leverage these
strengths to continue to drive topline growth in 2023 and position
us to inspire more seafood consumption and expand the category over
time."
To help mitigate the potential impact of inflationary and
economic pressures on financial performance, High Liner Foods will
draw on the diversification of its business, supply chain and
deploy an increasingly data-driven approach to understanding the
evolving needs and preferences of customers and consumers across
North America. The Company will
use customer insights to inform innovation and optimize choice and
value within its portfolio at a variety of price points.
The Company has a strong balance sheet and is well equipped
to invest in organic growth, explore opportunities for
transformative growth through potential M&A activities to build
shareholder value and continue to grow the dividend over time. It
anticipates making capital expenditures of approximately
$25.0 million for Fiscal 2023, to
fund further modernization of the asset base, explore automation
opportunities maintain and upgrade facilities and invest in
marketing initiatives.
Dividend
Today, the Company's Board of Directors approved a
quarterly dividend of CAD$0.13 per
share on the Company's common shares, payable on March 15,
2023 to holders of record on March 2, 2023. These dividends
are considered "eligible dividends" for Canadian income tax
purposes.
Conference Call
The Company will host a conference call on Thursday, February 23, 2023, at 10:00 a.m. ET (11:00
a.m. AT) during which Rod
Hepponstall, President & Chief Executive Officer,
Paul Jewer, Executive Vice President
& Chief Financial Officer and Anthony
Rasetta, Chief Commercial Officer, will discuss the
financial results for the fourth quarter of 2022. To access the
conference call by telephone, dial 416-764-8659 or 1-888-664-6392.
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 Thursday, March 23,
2023 at midnight (ET). To access the archived conference call, dial
1-888-390-0541 and enter the replay entry code 854018#.
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 Company's Audited Consolidated Financial Statements and
MD&A as at and for the fifty-two weeks ended December 31, 2022 were filed concurrently on
SEDAR with this news release and are also available at
www.highlinerfoods.com.
Non-IFRS Measures
The Company reports its financial results in accordance
with International Financial Reporting Standards
("IFRS"). Included in this media release are the
following non-IFRS financial measures: Adjusted
EBITDA, Adjusted EBITDA as a Percentage of Net Sales, Adjusted Net
Income, Adjusted Diluted EPS, Net Debt and Net Debt to Rolling
Twelve-Month Adjusted EBITDA.
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
for the reasons outlined below. These measures do not have any
standardized meaning as 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.
Adjusted EBITDA and Adjusted EBITDA as a Percentage of
Sales
Adjusted EBITDA is defined as earnings before interest, taxes,
depreciation and amortization adjusted for items that are not
considered representative of ongoing operational activities of the
business. The related margin, Adjusted EBITDA as a Percentage of
Sales, is defined as Adjusted EBITDA divided by net sales, where
net sales is defined as "Sales" on the consolidated statements of
income.
We use Adjusted EBITDA (and Adjusted EBITDA as a percentage of
sales) as a performance measure as it approximates cash generated
from operations before capital expenditures and changes in working
capital, and it excludes the impact of expenses and recoveries
associated with certain non-routine items that are not considered
representative of the ongoing operational activities, as discussed
above, and share-based compensation expense related to the
Company's share price. For the fifty-two weeks
ended December 31, 2022, Adjusted EBITDA also excludes
the $10.0 million in insurance
proceeds as described in the Recent Developments section on
page 5 of the Company's MD&A. We believe investors and analysts
also use Adjusted EBITDA (and Adjusted EBITDA as a percentage of
sales) to evaluate the performance of our business. The most
directly comparable IFRS measure to Adjusted EBITDA is "Net income"
on the consolidated statements of income. Adjusted EBITDA is also
useful when comparing to other companies, as it eliminates the
differences in earnings that are due to how a company is financed.
Also, for the purpose of certain covenants on our credit
facilities, "EBITDA" is based on Adjusted EBITDA, with further
adjustments as defined in the Company's credit agreements.
The following table reconciles Adjusted EBITDA with measures
that are found in our Consolidated Financial Statements, and
calculates Adjusted EBITDA as a Percentage of Sales.
|
|
|
|
Thirteen weeks
ended
|
(Amounts in
$000s)
|
|
December 31,
2022
|
|
January 1,
2022
|
Net
income
|
|
$
11,131
|
|
$
7,223
|
Add back
(deduct):
|
|
|
|
|
Depreciation and
amortization expense
|
|
6,170
|
|
5,770
|
Finance
costs
|
|
5,951
|
|
3,704
|
Income tax
expense
|
|
307
|
|
1,333
|
Standardized
EBITDA
|
|
23,559
|
|
18,030
|
Add back
(deduct):
|
|
|
|
|
Business acquisition,
integration and other (income) expenses
|
|
945
|
|
521
|
Impairment of
property, plant and equipment
|
|
164
|
|
—
|
Loss on disposal of
assets
|
|
30
|
|
67
|
Share-based
compensation expense
|
|
687
|
|
1,982
|
Adjusted
EBITDA
|
|
$
25,385
|
|
$
20,600
|
Net
Sales
|
|
$
250,346
|
|
$
227,879
|
Adjusted EBITDA as
Percentage of Sales
|
|
10.1 %
|
|
9.0 %
|
|
|
|
|
Fifty-two weeks
ended
|
(Amounts in
$000s)
|
|
December 31,
2022
|
|
January 1,
2022
|
Net
income
|
|
$
54,730
|
|
$
42,249
|
Add back
(deduct):
|
|
|
|
|
Depreciation and
amortization expense
|
|
23,578
|
|
23,081
|
Finance
costs(1)
|
|
18,261
|
|
7,494
|
Income tax
expense
|
|
11,094
|
|
6,833
|
Standardized
EBITDA
|
|
107,663
|
|
79,657
|
Add back
(deduct):
|
|
|
|
|
Business acquisition,
integration and other (income) expenses(1)(2)
|
|
(7,173)
|
|
2,850
|
Impairment of
property, plant and equipment
|
|
332
|
|
42
|
Loss on disposal of
assets
|
|
163
|
|
122
|
Share-based
compensation expense
|
|
2,882
|
|
7,751
|
Adjusted
EBITDA
|
|
$
103,867
|
|
$
90,422
|
Net
Sales
|
|
$
1,069,714
|
|
$
875,405
|
Adjusted EBITDA as a
Percentage of Sales
|
|
9.7 %
|
|
10.3 %
|
|
(1) The
fifty-two weeks ended January 1, 2022 includes a $7.8 million
gain on modification of debt related to the debt refinancing
completed in March 2021.
|
(2) The
business acquisition, integration and other (income) expenses for
the fifty-two weeks ended December 31, 2022 includes insurance
proceeds of $10.0 million described in the Recent
Developments section on page 5 of the Company's MD&A which
is excluded in Adjusted EBITDA.
|
Adjusted Net Income and Adjusted Diluted EPS
Adjusted Net Income is net income adjusted for the after-tax
impact of items which are not representative of ongoing operational
activities of the business and certain non-cash expenses or income.
Adjusted Diluted EPS is Adjusted Net Income divided by the average
diluted number of shares outstanding.
We use Adjusted Net Income and Adjusted Diluted EPS to assess
the performance of our business without the effects of the
above-mentioned items, and we believe our investors and analysts
also use these measures. We exclude these items because they affect
the comparability of our financial results and could potentially
distort the analysis of trends in business performance. For the
fifty-two weeks ended December 31, 2022, Adjusted Net Income
also excludes the $10.0 million in
insurance proceeds as described in the Recent Developments
section on page 5 of the Company's MD&A. The most comparable
IFRS financial measures are net income and EPS.
The table below reconciles our Adjusted Net Income with measures
that are found in our Consolidated Financial Statements and
calculates Adjusted Diluted EPS.
|
|
|
|
Thirteen weeks
ended
|
|
|
|
December 31,
2022
|
|
January 1,
2022
|
|
|
|
$000s
|
|
Adjusted Diluted EPS
|
|
$000s
|
|
Adjusted
Diluted EPS
|
|
Net
income
|
|
$
11,131
|
|
$
0.32
|
|
$
7,223
|
|
$
0.20
|
|
Add back
(deduct):
|
|
|
|
|
|
|
|
|
|
Business acquisition,
integration and other (income)
expenses
|
|
945
|
|
0.03
|
|
521
|
|
0.01
|
|
Impairment of
property, plant and equipment
|
|
164
|
|
—
|
|
—
|
|
—
|
|
Share-based
compensation expense
|
|
687
|
|
0.02
|
|
1,982
|
|
0.06
|
|
Tax impact of
reconciling items
|
|
(609)
|
|
(0.02)
|
|
(647)
|
|
(0.02)
|
|
Adjusted Net
Income
|
|
$
12,318
|
|
$
0.35
|
|
$
9,079
|
|
$
0.26
|
|
Average shares for
the period (000s)
|
|
|
|
35,130
|
|
|
|
35,171
|
|
|
|
|
|
Fifty-two weeks
ended
|
|
|
December 31,
2022
|
|
January 1,
2022
|
|
|
$000s
|
|
Adjusted
Diluted EPS
|
|
$000s
|
|
Adjusted
Diluted EPS
|
Net
income
|
|
$
54,730
|
|
$
1.56
|
|
$
42,249
|
|
$
1.20
|
Add back
(deduct):
|
|
|
|
|
|
|
|
|
Business acquisition,
integration and other
(income) expenses (1)
|
|
(7,173)
|
|
(0.20)
|
|
2,850
|
|
0.08
|
Gain on modification
of debt (2)
|
|
—
|
|
—
|
|
(7,901)
|
|
(0.22)
|
Impairment of
property, plant and equipment
|
|
332
|
|
0.01
|
|
42
|
|
—
|
Share-based
compensation expense
|
|
2,882
|
|
0.08
|
|
7,751
|
|
0.23
|
Tax impact of
reconciling items
|
|
941
|
|
0.03
|
|
(193)
|
|
(0.01)
|
Adjusted Net
Income
|
|
$
51,712
|
|
$
1.48
|
|
$
44,798
|
|
$
1.28
|
Average shares for
the period (000s)
|
|
|
|
35,069
|
|
|
|
35,121
|
|
(1) The
business acquisition, integration and other (income) expenses for
the fifty-two weeks ended December 31, 2022, includes
insurance proceeds of $10.0 million described in the Recent
Developments section on page 5 of the Company's MD&A which
is excluded in Adjusted Net Income.
|
(2) Included
in the "Finance costs" line in the consolidated statements of
income for the fifty-two weeks ended January 1, 2022 and
represents a gain on the modification of debt related to the debt
refinancing completed in March 2021.
|
Net Debt and Net Debt to Rolling Twelve-Month Adjusted
EBITDA
Net Debt is calculated as the sum of bank loans, long-term debt
(excluding deferred finance costs and modification gains/losses)
and lease liabilities, less cash.
We consider Net Debt to be an important indicator of our
Company's financial leverage because it represents the amount of
debt that is not covered by available cash. We believe investors
and analysts use Net Debt to determine the Company's financial
leverage. Net Debt has no comparable IFRS financial measure, but
rather is calculated using several asset and liability items in the
consolidated statements of financial position.
Net Debt to Rolling Twelve-Month Adjusted EBITDA is calculated
as Net Debt divided by Rolling Twelve-Month Adjusted
EBITDA (see above). We consider Net Debt to Rolling
Twelve-Month Adjusted EBITDA to be an important indicator of our
ability to generate earnings sufficient to service our debt, that
enhances understanding of our financial performance and highlights
operational trends. This measure is widely used by investors and
rating agencies in the valuation, comparison, rating and investment
recommendations of companies; however, the calculations of Adjusted
EBITDA may not be comparable to those of other companies, which
limits their usefulness as comparative measures.
The following table reconciles Net Debt to IFRS measures
reported as at the end of the indicated periods in the consolidated
statements of financial position and calculates Net Debt to Rolling
Twelve-Month Adjusted EBITDA.
(Amounts in
$000s)
|
|
December 31,
2022
|
|
January 1,
2022
|
|
Bank loans
|
|
$
127,554
|
|
$
4,388
|
|
Add-back: Deferred
finance costs included in bank loans (1)
|
|
574
|
|
163
|
|
Total bank
loans
|
|
128,128
|
|
4,551
|
|
Long-term
debt
|
|
238,200
|
|
244,994
|
|
Current portion of
long-term debt
|
|
7,500
|
|
5,625
|
|
Add-back: Deferred
finance costs included in long-term debt (2)
|
|
4,972
|
|
5,810
|
|
Less: Net loss on
modification of debt (3)
|
|
(542)
|
|
(674)
|
|
Total term loan
debt
|
|
250,130
|
|
255,755
|
|
Long-term portion of
lease liabilities
|
|
2,813
|
|
6,851
|
|
Current portion of
lease liabilities
|
|
4,622
|
|
4,327
|
|
Total lease
liabilities
|
|
7,435
|
|
11,178
|
|
Less: Cash
|
|
(155)
|
|
(443)
|
|
Net
Debt
|
|
$
385,538
|
|
$
271,041
|
|
Rolling Twelve-Month
Adjusted EBITDA
|
|
$
103,867
|
|
$
90,422
|
|
Net Debt to Rolling
Twelve-Month Adjusted EBITDA
|
|
3.7x
|
|
3.0x
|
|
|
(1)
Represents deferred finance costs that are included in "Bank loans"
in the consolidated statements of financial position. See Note 12
to the Consolidated Financial Statements.
|
(2) Represents deferred finance costs
that are included in "Long-term debt" in the consolidated
statements of financial position. See Note 15 to the Consolidated
Financial Statements.
|
(3) A
gain on modification of debt related to the refinancing completed
in March 2021, has been excluded from the calculation of Net Debt
as it does not represent the expected cash outflows from the term
loan facility. See Note 15 to the Consolidated Financial
Statements.
|
Forward Looking
Statements
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
fifty-two weeks ended December 31,
2022 and the Risk Factors section of our 2022 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, freight, storage 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; completion and/or
advancement of sustainability initiatives, including, without
limitation, initiatives relating to the carbon workplan, waste
reduction and/or seafood sustainability and traceability
initiatives; 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; economic and
geopolitical conditions such as Russia's invasion of Ukraine and the implementation and/or
expansion of related sanctions policies; and the potential impact
of a pandemic outbreak of a contagious illness, such as 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.
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 and Canada 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.
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