High Liner Foods reports 4Q and year-end results for 2010

February 24, 2011 09:21

High Liner Foods Incorporated, a leading North American value-added frozen seafood company, today reported financial results for the thirteen-week period and fiscal year 2010 ended January 1, 2011, reports www.megafishnet.com with reference to High Liner Foods.

Financial and operational highlights for the fourth quarter include (all comparisons are relative to the fourth quarter of 2009, unless otherwise noted):

  • Completed the acquisition of Viking Seafoods, Inc. in December 2010, which strengthens our position in the U.S. food service industry for broad line value-added seafood products;
  • Common Stock price increased by 35% during the quarter to CAD16.25 from CAD12.00 at the end of the third quarter, resulting in an increase in stock option expense of CAD2.5 million for the quarter;
  • Reported net income of CAD2.0 million, or diluted earnings per share of CAD0.13, compared with CAD3.8 million, or diluted EPS of CAD0.21, in the fourth quarter of 2009, with the decrease due to increased stock option expense and acquisition-related costs;
  • Excluding stock option expense, Adjusted EBITDA(1) increased by 17.6% to CAD13.4 million from CAD11.4 million; and
  • Excluding stock option expense, Adjusted Net Income(2) increased by 22.5% to $6.8 million, or diluted EPS of $0.44, from $5.5 million, or diluted EPS of $0.30, in the fourth quarter of 2009.

Financial and operational highlights for the fiscal year include (all comparisons are relative to fiscal year 2009, unless otherwise noted):

  • Common Stock price increased by 76% during the year to CAD16.25 from CAD9.25 at the end of fiscal year 2009, resulting in an increase in stock option expense of CAD4.0 million for the year;
  • Reported net income of CAD19.8 million, or diluted EPS of CAD1.22, up from CAD19.7 million, or diluted EPS of CAD1.07;
  • Excluding stock option expense, Adjusted EBITDA increased by 15.6% to CAD50.8 million from CAD43.9 million;
  • Excluding stock option expense, Adjusted Net Income increased by 22.9% to CAD25.6 million, or diluted EPS of CAD1.58, from CAD20.8 million, or diluted EPS of $1.13, for fiscal year 2009
  • Sales volume increased by 1.6% during the year; and
  • Sales of CAD584.7 million, compared with CAD627.2 million, due primarily to a stronger Canadian dollar that reduced the sales of our U.S. subsidiary when reported in Canadian dollars.

"We are very pleased by our continued strong profitability in 2010, with meaningful growth in Adjusted EBITDA and operating cash flow, despite lower reported sales largely driven by the stronger Canadian dollar, lower prices on commodity products, increased promotions on value-added products, and lower volume in Canadian operations as consumers reacted to higher selling prices," said Henry Demone, president and CEO, High Liner Foods Incorporated. "We benefited from the growth in sales volumes in the U.S. in both our food service and retail businesses, as well as from our cost-reduction initiatives to expand our margins. Moreover, we improved on our key performance measures while executing our strategic goals."

Financial Results

Approximately half of the Company's operations and assets, and more than 50% of its liabilities, are denominated in U.S. dollars. As such, foreign currency fluctuations affect the reported values of individual lines on the Company's balance sheet and income statement.

Sales for the fourth quarter decreased to CAD140.7 million from CAD148.8 million for the same period a year ago. The stronger Canadian dollar accounted for approximately CAD3.0 million of the decline, as sales generated by our U.S. operations were translated at a lower U.S. dollar value. Sales in domestic currency, which excludes the impact of currency translation, were CAD139.8 million compared with CAD145.0 million for fourth quarter of 2009. Total sales volume was 42.9 million pounds, an increase of 0.1 million pounds from the same period last year, which consists of an increase of 0.6 million pounds related to the acquisition of Viking Seafoods, Inc. and a 0.5-million pound decrease largely attributable to the effect of price increases, offset by increased sales volume in our U.S. food service operations and the launch of several new products.

Adjusted EBITDA for the quarter declined by 4.2% to CAD10.6 million, or 7.5% of sales, from CAD11.0 million, or 7.4% of sales, for the fourth quarter last year. While approximately CAD0.4 million of the decline was due to the stronger Canadian dollar, a significant increase in stock option expense during the quarter offset improvements in operating profitability. Stock option expense increased to CAD2.8 million from CAD0.3 million during the same period last year due to the increase in High Liner's Common Stock price from CAD12.00 to CAD16.25 per share during the quarter.

Our acquisition of the assets of Viking Seafoods, Inc. late in the fourth quarter contributed CAD1.7 million in sales and CAD0.1 million in EBITDA from December 13, 2010 to January 1, 2011.

Net income for the quarter was CAD2.0 million, or diluted EPS of CAD0.13, compared with CAD3.8 million, or diluted EPS of CAD0.21, for the fourth quarter of 2009. In addition to stock option expenses, net income was impacted by non-recurring business acquisition costs and a higher effective tax rate. The higher taxes were due to a CAD1.0 million withholding tax on inter-company dividends related to the tax-efficient financing of the Viking acquisition, as well as changes in income tax rules regarding the tax deductibility of stock option expenses. Adjusted net income(2) was CAD3.6 million, compared with CAD5.3 million for the same period last year.

Excluding stock option expense that resulted from the substantial stock price increase during the quarter, Adjusted EBITDA increased by 17.6% to $13.4 million from CAD11.4 million and adjusted net income increased by 22.5% to CAD6.8 million, or diluted EPS of CAD0.44, from CAD5.5 million, or diluted EPS of CAD0.30, from the same quarter last year. The retraction of 3.2 million non-voting shares during the second quarter of 2010 partly accounts for the increase in diluted EPS.

Dividends

Today, the Board of Directors of the Company resolved to pay a quarterly dividend of CAD0.09 per Common and Non-Voting Equity Share payable on March 15, 2011 to shareholders of record on March 1, 2011. This represents a 5.9% increase from the CAD0.085-per-share quarterly dividend paid on December 15, 2010, reflecting the Board's continued confidence in the Company's operations.

Outlook

"We are encouraged by our strong operating results and strategic initiatives in 2010, and believe that we are well positioned for further growth in 2011," added Mr. Demone. "We are making significant progress in integrating the Viking acquisition, and we expect Viking to substantially increase our market share for broad line value-added seafood products in the U.S. food service industry. We continue to develop innovative, new products, such as "Fire Roasters(TM)," which are flame-seared seafood products for the U.S. food service market launched in December and receiving excellent market response, and "High Liner(R) Pan-Sear Selects," whose Lime Chili Tilapia & Savoury Herb Cod offering was recently awarded Best New Product in the frozen fish category by Canadian Living. We expect to mitigate higher average raw material costs in 2011 with increased operating efficiencies and product pricing adjustments. Supported by a strong balance sheet and a continuing commitment to the sustainability of our industry, we are well positioned in the value-added frozen seafood market in North America."

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