CIBC Retail & Small Consumer Small Cap Forum June 13, 2013 | Toronto Heather Keeler-Hurshman Director, Investor Relations
Disclaimer Certain statements made in this presentation are forward-looking and are subject to important risks, uncertainties and assumptions concerning future conditions that may ultimately prove to be inaccurate and may differ materially from actual future events or results. Actual results or events may differ materially from those predicted. Certain material factors or assumptions were applied in drawing the conclusions as reflected in the forward-looking information. Additional information about these material factors or assumptions is contained in High Liner's annual MD&A and is available on SEDAR (www.sedar.com). 2
Presentation Currencies CAD presentation: • High Liner Foods is traded on the Toronto Stock Exchange and references to stock price, dividends and market cap are presented in CAD. USD presentation: • Effective with the company’s 2012 annual report, all financial statements are presented in USD. • 2010, 2011 and 2012 are fully converted and restated under IFRS rules to USD. • Previous years Canadian GAAP statements are converted from CAD at the annual period end and average USD/CAD exchange rates and remain under Canadian GAAP. 3
Company Overview 4
TSX Listings Data TSX symbol HLF Recent price 1 $31.70 52-week range 1 $18.82 - $39.00 Shares outstanding ~15.16M Total market cap ~$481M Quarterly dividend 2 $0.18 Current yield 2 2.3% HLF Share Price Over the Last 12 Months 1 1 Sou ource: T TSX June 6, 2013 6, 2013 2 2 Effective ve June 1, 1, 2013 2013 3 Public com 3 ompany y since the 1960’ 1960’s; listed on on t the T TSX in 1971 1971 5
High Liner Foods Corporate History 2003/04 1926 1992 2011 2007 2010 High Liner High Liner Northern Icelandic sells its FPI Viking brand Cod USA fishing acquisition 1 acquisition created moratorium acquisition assets 1945 1999 2005 1899 2013 National Name Icelandic WC Smith Today’s Sea changed to and founded High Liner Products High Liner Samband (salt fish) Foods created Foods merge 1 Acquired FPI’s North American marketing and manufacturing business 6
Business Profile Product Form Branded 23% 36% 64% 77% Value Added Other HFL Brands Other 7
Business Profile (cont’d)… Geography Retail / Food Service 35% 35% 65% 65% USA (incl. Mexico) Food Service Retail Canada 8
Our Business Model Broadest market reach in industry Market leading brands Diversified global procurement Frozen food logistics expertise Innovative product development 9
Food Service Business Overview Leading foodservice brands • High Liner, FPI, Icelandic and Viking Strengths • Cover all segments: chain restaurants, food services distributors, healthcare and education • Diverse product line • Private label • Dominant supplier position • Leading innovation Examples of key customers • Food distributors: Sysco, US Foods, GFS, Reinhart, PFG • Restaurant chains: Arby’s, Carl’s JR, Nestle, Omaha Steaks, Schwann’s, MacDonald’s 10
Retail Business Overview Leading retail brands • High Liner, Sea Cuisine, Fisher Boy Strengths • Sell to all retailers • Sell to every area of store • Recognized brands • Private label • Leading innovation Examples of key customers • Grocery: Walmart, Target, Whole Foods, Safeway, Kroger, Sobey’s, Loblaw • Club: Costco, Sam’s, BJ’s 11
Rationalized Production Capacity • Reduced from 6 plants to 4 • Low manufacturing footprint 12
Financial Review 13
Fiscal 2012 Highlights Vision achieved during a milestone year Financial highlights: • Strong growth in sales, adjusted EBITDA and adjusted EPS • Created value for shareholders – increased share price / dividends Operational highlights: • The Icelandic USA acquisition which was completed in Dec 2011, was fully integrated by Nov 2012 • The expected annual synergies are at least $18M, the high end of the original estimate of $16M to $18M. • Plant consolidation was completed with the closing of two plants Dec 2012 / Jan 2013 Recognition for new products: • Voted Best New Product by Canadian Living in the “Frozen Fish / Prepared Meal Category” for 4 years in a row for High Liner’s Pan Sear , Market Cuts and Flame Savours products The North American leader in value-added frozen seafood 14
Sales Growth (US$ millions) $943M $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $- 2006 2007 2008 2009 2010 2011 2012 15 15
EBITDA Growth (US$millions) $91.7M $120 $100 $80 $60 $40 $20 $0 2006 2007 2008 2009 2010 2011 2012 Standardized EBITDA: Earnings before interest, taxes, depreciation and amortization as reported in the Company’s annual audited financial statements Partially Adjusted EBITDA: Standardized EBITDA as defined above, adjusted to exclude the impact of impairment of property, plant and equipment; business acquisition and integration expenses; gains or losses on disposal of assets; and the increase in cost of goods sold relating to inventory acquired as part of a business acquisition and recorded above its book value as part of the fair value reporting requirements of purchase price accounting Adjusted EBITDA: Partially Adjusted EBITA as defined above, further adjusted to exclude the impact of non- 16 cash stock compensation expense
Dividend History (Cdn$) Annual Dividends per Share $0.80 $0.69 10-year CAGR: 30% $0.70 Current run rate: $0.72 $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0.00 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 P Common shares up to September 15, 2007; Common and Non-Voting shares from December 15, 2007 to December 17, 2012; Common shares from December 18, 2012 to present 17
Q1 2013 - A Challenging Quarter Challenges: • Decline in selling prices for commodity products • Weak private label sales • Soft U.S. restaurant sales • Early Lent Production and distribution challenges with the move to Newport News • Successes: • On track for projected synergies from Icelandic USA’s integration • Reduced interest expense and leverage ratio 18
Q1 2013 - Financial Review Sales as Reported (in US$ millions) $350 $287.6 $275.2 $300 $250 77.6 75.6 $200 $150 210.0 $100 199.5 $50 $0 Q1 2012 Q1 2013 US Canada 19
Q1 2013 - Financial Review EBITDA (in US$ millions) $35 $31.5 $30 $25 $21.3 $20 $15 $10 $5 $0 Q1 2012 Q1 2013 Standardized EBITDA: Earnings before interest, taxes, depreciation and amortization as reported in the Company’s annual audited financial statements Partially Adjusted EBITDA: Standardized EBITDA as defined above, adjusted to exclude the impact of impairment of property, plant and equipment; business acquisition and integration expenses; gains or losses on disposal of assets; and the increase in cost of goods sold relating to inventory acquired as part of a business acquisition and recorded above its book value as part of the fair value reporting requirements of purchase price accounting Adjusted EBITDA: Partially Adjusted EBITA as defined above, further adjusted to exclude the impact of non- cash stock compensation expense
Q1 2013 – Financial Review Diluted EPS $0.91 $1.00 $0.80 $0.63 $0.60 $0.40 $0.20 $0.00 Q1 2012 Q1 2013 Diluted EPS: Net Income as reported the Company’s annual audited financial statements divided by the average diluted number of shares Partially Adjusted Diluted EPS: Based on the Company’s reported Net Income, adjusted to exclude the impact of impairment of property, plant and equipment; business acquisition and integration expenses; gains or losses on disposal of assets; the increase in cost of goods sold relating to inventory acquired as part of a business acquisition and recorded above its book value as part of the fair value reporting requirements of purchase price accounting; non-cash expense from revaluing an embedded derivative associated with the long-term debt LIBOR floor; marking to market an interest rate swap related to the embedded derivative; the write-off of deferred financing charges on the re-pricing of the Term Loan; and withholding tax related to inter-company dividends. Adjusted Diluted EPS: Partially Adjusted EPS as defined above, further adjusted to exclude the impact of non-cash stock compensation expense
Deleveraging Estimated annual free cash flow of $40M to $50M 7.0x 6.6x Debt / EBITDA 6.0x 5.0x 4.4x 3.7x 4.0x 3.4x < 3.0x 3.0x 3.0x 2.0x 1.0x 0.0x Dec 31/11 Dec 31/11 Dec 31/12 Mar 31/13 PF Full Target Pro forma Synergies Icelandic 22
Q1 2013 – Debt Amendments Term loan ($233M) • Reduced rates 5.5% + 1.50 LIBOR floor to 3.5% + 1.25 LIBOR floor • Less restrictive financial covenants • More room for dividends • More flexible for acquisitions ABL ($180M working capital working capital facility) • Currently borrowing $45M to $50M against this line • Improved pricing grid • More flexible for acquisitions 2013 cost savings: $4.7M cash; $6.2M total or $0.30 per share 23
Outlook & Growth Strategy 24
Our Vision The North American leader in frozen seafood 25
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