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Press release from CNW Group

High Liner Foods Reports Strong Operating Results for the Fourth Quarter and Record Year for 2011

Wednesday, February 22, 2012

High Liner Foods Reports Strong Operating Results for the Fourth Quarter and Record Year for 201113:10 EST Wednesday, February 22, 2012- Strategic acquisition of Icelandic USA highlights another strong year -LUNENBURG, NS, Feb. 22, 2012 /CNW/ - High Liner Foods Incorporated (TSX: HLF; HLF.A), the leading North American value-added frozen seafood company, today reported financial results for the thirteen-week period and fiscal year 2011 ended December 31, 2011.  All amounts are reported in Canadian dollars.Financial and operational highlights for the fourth quarter include (all comparisons are relative to the fourth quarter of 2010, unless otherwise noted):Completed the acquisition of the Icelandic Group's U.S and Asian operations (together, "Icelandic Seafood acquisition") in December 2011 for a total purchase price of US$232.7 million excluding seasonal working capital, which positions High Liner as the leading value-added seafood supplier in North America;Sales increased by 25.4% to $176.5 million from $140.8 million;Adjusted EBITDA1 increased by 28.8% to $13.4 million from $10.4 million;Reported net loss of $3.0 million, or diluted loss per share of $0.20, compared with $1.7 million, or diluted earnings per share ("EPS") of $0.11, in the fourth quarter of 2010; the decrease is attributable to one-time costs related to the Icelandic Seafood acquisition ($10.3 million pre tax and $8.0 million after tax), partially offset by lower stock option expense;Excluding stock option expense, Adjusted EBITDA1 increased by 12.4% to $14.3 million from $12.8 million; andExcluding stock option expense, Adjusted Net Income2 increased by 18.2% to $6.7 million, or diluted EPS of $0.44, from $5.7 million, or diluted EPS of $0.37, in the fourth quarter of 2010.Financial and operational highlights for the fiscal year include (all comparisons are relative to fiscal year 2010, unless otherwise noted):Completed the integration of Viking Seafoods, Inc. in April 2011;Sales increased by 14.3% to $668.6 million from $584.7 million, despite approximately $12.7 million negative impact of the stronger Canadian dollar on the value of reported U.S. sales; the Viking acquisition added $37.5 million to sales versus $1.7 million in 2010, while the Icelandic Seafood acquisition contributed $9.0 million to sales;Adjusted EBITDA1 increased by 15.9% to $54.7 million from $47.2 millionReported net income of $18.2 million, or diluted EPS of $1.19, compared with $20.0 million, or diluted EPS of $1.23, in 2010, with the decrease attributable to costs related to the Icelandic Seafood acquisition, offset by lower stock operating expense;Excluding stock option expense, Adjusted EBITDA1 increased by 8.7% to $55.3 million from $50.9 million;Excluding stock option expense, Adjusted Net Income increased by 11.2% to $28.2 million, or diluted EPS of $1.84, from $25.4 million, or diluted EPS of $1.56, for fiscal year 2010; andSales volume, excluding the contribution of the Icelandic Seafood acquisition in late December, increased by 12.2% during the year, with 7.9% of increase due to the Viking acquisition."We are very pleased to report another strong year in the history of High Liner Foods," said Henry Demone, president and CEO.  The acquisition of Viking Seafoods at the end of 2010 as well as strength in our pre-Viking businesses helped us achieve a record year of sales, Adjusted EBITDA and Adjusted net income. Sales volume from our U.S. operations grew in both our food service and retail businesses at 32.1% and 12.5%, respectively. Our Canadian operations saw unchanged sales volumes due to a challenging retail market, but recorded a 4.1% increase in sales.  We culminated the year with the important strategic Icelandic Seafood acquisition, which now makes us the category leader in food service value-added frozen seafood in North America.  Icelandic Seafood is an established leader in the U.S. food service market, and we believe that the combination with High Liner will enable us to leverage a more efficient supply chain and stronger purchasing power to address a larger customer base. By strengthening our industry leadership position, we believe our strategy creates incremental value to our shareholders."Financial ResultsMore than half of the Company's operations, assets, and liabilities, are denominated in U.S. dollars or are impacted by the Canadian/U.S. dollar exchange rate.  As such, foreign currency fluctuations affect the reported values of individual lines on the Company's balance sheet and income statement.(In thousands except per share amounts, unless otherwise noted) Thirteen weeks ended Dec. 31, 2011Thirteen weeksended Jan 1,2011Fifty-two weeksended Dec.31,2011Fifty-two weeksended Jan. 1,2011Sales in million pounds 51.243.0200.7176.6Sales in domestic currency$174,233$139,844$672,318$575,742Foreign exchange impact$2,246$891($3,729)$8,973Sales in Canadian dollars$176,479$140,775$668,589$584,715Adjusted EBITDA$13,379$10,391$54,697$47,185Net income($3,020)$1,686$18,180$19,985Adjusted net income $5,743$3,305$27,555$21,535EPS (Diluted)($0.20)$0.11$1.19$1.23Adjusted EPS (Diluted)3$0.38$0.21$1.80$1.33Average Shares Outstanding (Diluted)15,29015,37415,34116,244     Excluding Stock Option Expenses:    Adjusted EBITDA$14,342$12,758$55,348$50,918Adjusted net income $6,706$5,672$28,206$25,368Adjusted EPS (Diluted)3$0.44$0.37$1.84$1.56Sales for the fourth quarter increased to $176.5 million from $140.8 million for the same period a year ago.  The 25.4% increase in sales was achieved due in part to the change in the value of the Canadian dollar, which increased the value of reported sales by $1.4 million, or 1.0%. Sales in domestic currency, which excludes the impact of currency translation, were $174.2 million compared with $139.9 million for fourth quarter of 2010.  The robust growth in sales was the result of an increase in High Liner's pre-Viking business, as well as the contribution of the Viking acquisition, which accounted for $35.8 million of increased sales.  Excluding Icelandic Seafood, total sales volume increased by 13.4% to 48.7 million pounds, with the Viking acquisition accounting for 6.0% of the increase.  The Icelandic Seafood acquisition added 2.5 million pounds of sales during the quarter. Total sales also reflect the marginal contribution of the Icelandic Seafood acquisition from December 19 to December 31, 2011 of $9 million in sales.Adjusted EBITDA for the fourth quarter increased by 28.8% to $13.4 million, or 7.6% of sales, from $10.4 million, or 7.4% of sales, for the same period in 2010.  Adjusted EBITDA excludes business acquisition and integration expenses and non-operating transactions. The increase resulted from higher sales volumes, higher selling prices and lower stock option expense, partially offset by higher seafood and other input costs.  During the fourth quarter of 2010, High Liner incurred an unusually high stock option expense due to the increase in High Liner's stock price during the period.  Excluding stock option expense, Adjusted EBITDA increased by 12.4% to $14.3 million from $12.8 million for the same period in 2010. Icelandic Seafood contributed $1.0 million to Adjusted EBITDA during the quarter.Net loss for the quarter was $3.0 million, or diluted loss per share of $0.20, compared with net income of $1.7 million, or diluted EPS of $0.11, for the fourth quarter of 2010.  Net income was negatively impacted by one-time business acquisition and integration costs related to the Icelandic Seafood acquisition completed during the quarter.  In addition, during the quarter, we recorded an additional non-deductible one-time withholding tax of $0.8 million related to the inter-company dividends paid in connection with the financing of the Viking acquisition in the fourth quarter of 2010.  Excluding these costs, Adjusted net income was $5.7 million compared with $3.3 million for the same period last year. Furthermore, excluding stock option expense, Adjusted net income increased by 18.2% to $6.7 million, or diluted EPS of $0.44, from $5.7 million, or diluted EPS of $0.37, in the previous year.The following tables reconcile our reported net income with our Adjusted net income for the year and for the fourth quarter. Fiscal Year 20112010(In thousands except per share amounts)Pre taxIncome taxafter tax Diluted EPS Pre taxIncome taxafter tax Diluted EPS Adjusted net income from operations38,787 (11,232)27,555 $  1.80   33,499(11,964)  21,535$1.33Business acquisition, integration and other financing costs  (11,275)2,700 (8,575)$  (0.56)(875)331(544)$(0.03)Witholding tax adjustment (800)(800)$  (0.05) (1,006)(1,006)$(0.06)Net Income27,512 (9,332)18,180 $  1.19   32,624(12,639)  19,985$1.23            Fourth Quarter 2011  2010   (In thousands except per share amounts)Pre taxIncome taxafter tax Diluted EPS Pre taxIncome taxafter tax Diluted EPS Adjusted net income from operations8,142 (2,399)5,743 $  0.38 6,616(3,311)3,305$0.21Business acquisition, integration and other financing costs  (10,279)2,316 (7,963)$(0.52)(986)373(613)$(0.04)Witholding tax adjustment (800)(800)$(0.05) (1,006)(1,006)$(0.07)Net Income(2,137)(883)(3,020)$(0.20)5,630(3,944)1,686$0.11 Total debt increased as a result of the Icelandic Seafood acquisition.  The table below shows the Company's net debt at the end of fiscal 2011 and 2010.  The debt is interest-bearing debt, and as a result, excludes deferred financing charges.  December 31 January 1, Amounts in ($000s) 2011 2011Current bank loans$  121,975 $  43,027Current portion of long-term debt and financeleases obligations 3,607  5,398Long-term debt and finance leases obligations 254,306  47,260Cross currency swap mark to market -  207Less: cash and cash equivalents (3,260) (598)Total funded debt 376,628  95,294DividendsToday, the Board of Directors of the Company approved a quarterly dividend of $0.10 per Common and Non-Voting Equity Share payable on March 15, 2012 to shareholders of record on March 2, 2012.Outlook"Our operating results are strong and our success with strategic initiatives in 2011 help position us for 2012 and beyond," added Mr. Demone.  "Our focus will now be on integrating the Icelandic Seafood acquisition and benefitting from expected synergies resulting from the combined operations.  We expect a majority of the synergies to be achieved over the next two years, with total ongoing annual synergies thereafter in the range of US$16-18 million.""Over the past year, we saw growth in both food service and retail businesses in the U.S. and we expect that strength to continue into 2012 with the addition of Viking and Icelandic Seafood brands of products as well as the strength in our High Liner and FPI businesses.  In Canada, while we recorded a turnaround positive 4.3% overall sales growth in 2011 due to improvement in our food service business, our retail operations remained under pressure due to increased selling prices and a more competitive retail environment.  Our Canadian retail business gained strength as 2011 progressed, following a disappointing first quarter.  To address this, we increased our marketing initiatives to drive volume in stores, launched value-pack commodity products that can compete with trader labels, and reformulated some items to achieve more competitive price points. We expect these initiatives, and the introduction of new products in 2012, to result in increased sales volume in Canada this year.  Additionally, while we expect raw material costs for most species that we procure to be higher during the first half of 2012 than we experienced for the same period in 2011, prices for several key raw materials have recently decreased.  Due to inventory and contracts, we will start to benefit from these lower costs during the second half of the year. We also expect our increased purchasing power, expanded distribution, and cost-reduction efforts to contribute to operating improvements this year," concluded Mr. Demone.Supplemental Financial Information For convenience, this news release includes the Company's Fiscal Fourth Quarter Statements of Income, Segment Information and Reconciliation of Adjusted EBITDA and Adjusted Net Income to IFRS-measures. This news release is not in any way a substitute for reading High Liner's financial statements, including notes to the financial statements, and Management's Discussion and Analysis.The Company's audited consolidated financial statements for the year ended December 31, 2011 will be issued and filed on SEDAR on or before March 16, 2012. Management's Discussion and Analysis for the year ended December 31, 2011, including further discussion and analysis of fourth quarter events or items that affected results of operations, financial position, and cash flows, will also be issued and filed on or before March 16, 2012. Both documents will also be available in the Investor Information section of the Company's website at www.highlinerfoods.com.Conference Call The Company will host a conference call on Thursday, February 23, at 9:30 a.m. ET (10:30 a.m. AT) to discuss its fourth quarter and full-year financial results.  To access the conference call by telephone, dial 647-427-7450 or 1-888-231-8191.  Please connect approximately ten minutes prior to the beginning of the call to ensure participation.  The conference call will be archived for replay by telephone until Thursday, March 1, 2012 at midnight.  To access the archived conference call, dial 1-855-859-2056 and enter the reservation number 48440440.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 IncorporatedHigh Liner Foods Incorporated is the leading North American processor and marketer of prepared, value-added frozen seafood.  High Liner's branded products are sold throughout the United States, Canada and Mexico under the High Liner, Fisher Boy, Mirabel, Sea Cuisine and Royal Sea labels, and are available in most grocery and club stores.  The Company also sells its High Liner, FPI, Mirabel, Viking, Icelandic Seafood, Samband of Iceland, Seastar, and Seaside food service products to restaurants and institutions, and is the major supplier of private label seafood products to North American food retailers and food service distributors.  High Liner Foods is a publicly traded Canadian company, trading under the symbols HLF and HLF.A 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", "would", "believe", "plan", "expect", "intend", "anticipate", "estimate", "foresee", "objective" 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,  planned volume growth, expectations that Icelandic Seafood will increase our market share for broad line value-added seafood products in the U.S. food service industry, higher average raw material costs in the first half of 2012 and our ability to mitigate with increased operating efficiencies and product pricing adjustments, anticipated financial performance, and our market position.  These statements are based on a number of factors and assumptions including, but not limited to: availability, demand and prices of raw materials, energy and supplies; the condition of the Canadian and United States economies; product pricing; foreign exchange rates, especially the rate of exchange of the Canadian dollar to the U.S. dollar; our ability to attract and retain customers and  our operating costs.  The statements are not a guarantee of future performance.  By their nature, forward-looking statements involve uncertainties and risks that the forecasts and targets will not be 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 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 and Adjusted Earnings per Share.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.HIGH  LINER FOODS INCORPORATED For the thirteen and fifty-two weeks ended December  31, 2011(with comparative figures for the thirteen and fifty-two weeks ended January 1,2011)(Unaudited)CONSOLIDATED STATEMENTS OF INCOME(in thousands of Canadian dollars, except per share amounts)   For the thirteen weeks ended, December 31, 2011For the thirteenweeks ended,January 1,2011 For the fifty-twoweeks ended, December 31, 2011 For the fifty-twoweeks ended,January 1,2011         Sales$  176,479  $140,775  $668,589  $584,715Cost of sales 138,709  106,913  516,659  447,542Gross profit 37,770 33,862  151,930  137,173Distribution expenses 9,430  7,338  35,021  30,027Selling, general and administrative expenses, excluding stock option expense 17,889 18,327  72,086  68,500Business acquisition, integration and other costs 10,279  986  11,275  875Results from operating activities 172 7,211  33,548  37,771Finance costs 2,220  1,552  5,983  5,165Share of loss of equity accounted investee (net of income tax) 89  29  53  (18)Income before income taxes (2,137) 5,630  27,512  32,624Income taxes           Current 768  2,504  5,692  6,380 Future 115  1,440  3,640  6,259Total income taxes 883  3,944  9,332  12,639Net income (3,020) 1,686  18,180  19,985PER SHARE INFORMATION         Earnings per Common Share           Basic (0.20) 0.11  1.20  1.24 Diluted (0.20) 0.11  1.19  1.23          Average shares outstanding for the period          Basic 15,086,846  15,148,633  15,108,823  16,096,010 Diluted 15,289,777  15,373,635  15,340,963  16,243,780 HIGH  LINER FOODS INCORPORATEDFor the thirteen and fifty-two weeks ended December 31, 2011(with comparative figures for the thirteen and fifty-two weeks ended January 1, 2011)(Unaudited)Segmented Operations(in thousands of Canadian dollars) Thirteen weeksThirteen weeksFifity-two weeksFifity-two weeks December 31, 2011January 1, 2011December 31, 2011January 1, 2011Amounts in ($000s) Canada  U.S.  Total  Canada  U.S.  Total  Canada  U.S.  Total  Canada  U.S.  Total Sales within geographic region76,759 98,496 175,255 69,95769,930139,887295,239 368,058 663,297 283,906297,213581,119Sales outside of geographic region2,172 9,157 11,329 1,7982,3704,1687,930 17,600 25,530 5,6979,43815,135 78,931 107,653186,584 71,75572,300144,055303,169 385,658 688,827 289,603306,651596,254Intercompany sales outside of geographic region(2,453)(7,652)(10,105)(1,794)(1,486)(3,280)(7,160)(13,078)(20,238)(5,247)(6,292)(11,539)Revenue (excluding intercompany sales) 76,478 100,001 176,479 69,96170,814140,775296,009 372,580 668,589 284,356300,359584,715Cost of sales (excluding intercompany sales) (60,513)(78,196)(138,709)(52,587) (54,326)(106,913)(228,443)(288,216)(516,659)(215,747)(231,795)(447,542)Gross profit15,965 21,805 37,770 17,37416,48833,86267,566 84,364 151,930 68,60968,564137,173Distribution expenses(3,845)(5,585)(9,430)(3,548)(3,790)(7,338)(14,750)(20,271)(35,021)(13,869)(16,158)(30,027)Selling, general and administrative expenses(7,473)(10,416)(17,889)(9,557)(8,770)(18,327)(31,260)(40,826)(72,086)(33,603)(34,897)(68,500)Business acquisition, integration and other expenses(1,220)(9,059)(10,279)(86)(900)(986)(1,265)(10,010)(11,275)(86)(789)(875)Financing costs(1,201)(1,019)(2,220)(670)(882)(1,552)(1,837)(4,146)(5,983)(1,337)(3,828)(5,165)(Loss) gain from equity accounted investee (45)(44)(89)(14)(15)(29)(27)(26)(53)9918Income before income tax 2,181 (4,318)(2,137)3,4992,1315,63018,427 9,085 27,51219,72312,90132,624Income taxes(1,426)543 (883)(2,940)(1,004)(3,944)(5,379)(3,953)(9,332)(7,410)(5,229)(12,639)Net income755 (3,775)(3,020)5591,1271,68613,048 5,132 18,180 12,3137,67219,985Add back:            Depreciation included in:            Cost of sales589 1,055 1,644 5558571,4122,315 3,811 6,126 2,3153,3715,686Distribution47 119 166 465298180 286 466 179209388Selling, general and administrative expenses287 47 334 308373451,147 162 1,309 1,0821451,227Total depreciation923 1,221 2,144 9099461,8553,642 4,259 7,901 3,5763,7257,301Amortization included in: Selling, general and administrative expenses53 671 724 53244297229 1,604 1,833 2129921,204Total depreciation and amortization976 1,892 2,868 9621,1902,1523,871 5,863 9,734 3,7884,7178,505Financing costs1,201 1,019 2,220 6708821,5521,837 4,146 5,983 1,3373,8285,165Income taxes1,426 (543)883 2,9401,0043,9445,379 3,953 9,332 7,4105,22912,639Income before depreciation, amortization, financing and income taxes4,358 (1,407)2,951 5,1314,2039,33424,135 19,094 43,229 24,84821,44646,294__________________________________________________________ 1Adjusted EBITDA is earnings before interest, taxes, depreciation and amortization, excluding business acquisition and integration costs and other income or expense, as disclosed in the consolidated statements of income.2Adjusted net income is net income excluding business acquisition and integration costs, other income or expense, and withholding tax related to the financing of the Viking acquisition.3Adjusted EPS is Adjusted net income, as defined, divided by the average diluted number of shares.For further information: K.L. Nelson Executive Vice President, Chief Financial Officer & SecretaryHigh Liner Foods Incorporated Tel:  (902) 634-6200 investor@highlinerfoods.com Salvador Diaz Investor RelationsTMX Equicom Tel:  (416) 815-0700 ext.242 sdiaz@equicomgroup.com