Transcript Document

Creating North America’s Leading Value-Added Seafood Supplier
Intrafish Investment Forum
New York
February 14, 2012
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).
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Listings Data*
TSX:
Recent Price:
52-Week Range
HLF
HLF.A
$18.70
$14.00
$13.20 - $19.00 $12.00 - $18.00
Shares Outstanding
~13.3 million
~1.8 million
Quarterly Dividend1
$0.10
$0.10
Current Yield1
2.1%
2.8%
Total Market Cap:
* As at Feb. 10, 2012
1
Based on the dividend rate effective September 15, 2011
$274 million
Our Vision
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Our Business Model
Broadest market reach in
industry
Market leading brands
Diversified global procurement
Frozen food logistics expertise
Innovative product development
Product Sales Volume
in ’000s of Pounds
275,000
250,000
225,000
200,000
175,000
150,000
125,000
100,000
75,000
50,000
25,000
0
2006
Procured
2007
2008
2009
2010 pf Q3 2010 Q3 2011
YTD
YTD
Produced in High Liner facilities
Pf = HLF + Icelandic USA only for 2010
2010
Sales as Reported in C$000s
with Impact of FX on Reported Sales
$900,000
$800,000
$700,000
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$0
2005
2006
2007
2008
2009
2010 2010pf
Pf = HLF + Icelandic USA only for 2010
*CDN $ Sales reported
Domestic $ Sales reported
Reduction to CDN $ from Domestic $ due to FX
Increase to CDN $ from Domestic $ due to FX
Q3
2010
YTD
Q3
2011
YTD*
EBITDA (in C$000s)
$90,000
$80,000
$70,000
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
$0
2006
2007
2008
2009
2010*
2010pf Q3 2010 Q3 2011
YTD
YTD
Pf = HLF + Icelandic USA and procurement ops for 2010 + proforma for freezer savings +
12mm of synergies
Standardized EBITDA
Adjusted EBITDA; earnings before interest, taxes, depreciation and amortization, excluding business acquisition,
integration and other expenses (income) and gains/losses on asset disposals
* Restated for IFRS
Diluted EPS Based on
Adjusted Net Income (1)
(1)
Adjusted net income is net income excluding business acquisition, integration and other expenses (income), net of income
tax
* Restated for IFRS
Return on Equity (ROE)
Based on Adjusted Net Income(1)
18%
15.5%
16%
14%
12%
10%
8%
12.8%
13.3%
2008*
2009*
14.0%
9.8%
8%
6%
4%
2%
0%
2006*
2007*
2010**
(1) Adjusted net income is net income excluding business acquisition, integration and other expenses (income), net of income tax
(*) In accordance with Canadian GAAP – Not restated
(**) Restated Fiscal 2010 in accordance with IFRS
(***) For the rolling 52 weeks ended October 1, 2011
2011***
Dividends per Share
$0.45
Annual Common/Non-voting* Dividends per
Share
Retraction of NVE
Shares, April 2010
$0.40
Purchase of Viking,
Dec. 2010
$0.35
$0.30
$0.25
Purchase of FPI,
Dec. 2007
Sale of NS Fishing,
May 2003
$0.20
$0.15
$0.10
$0.05
$2003
2004
2005
2006
2007
2008
2009
* Common shares up to September 15, 2007; Common and Non-Voting shares from December 15, 2007 to present
2010
2011P
Growth Strategy
Organic growth
• Develop new products
 Innovative value added products
 High-quality, innovatively packaged raw products
• Expand existing customer relationships
• Enter new, emerging markets, such as Mexico
Drive continued growth by leveraging our
core High Liner and FPI brands
Growth Strategy
Acquisitions
• Seek acquisitions that will expand our product
portfolio & strengthen our market leadership
Strict acquisition criteria
• Must be complementary to frozen seafood
• Should be synergistic
• Must leverage our existing:
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Leading brands
Strong customer relationships
Marketing & logistics expertise
Product development expertise
The Icelandic USA Acquisition
 Creates leading North American value-added seafood supplier
 Highly complementary businesses including products, customer base and
geography
 Adds strategic sourcing capabilities in Asia and Iceland
 Significant manufacturing and distribution synergies potential
 Modern and strategically situated production facility serves as platform for
future growth
 Expected to be immediately accretive to adjusted earnings
 Materially accretive once full synergies are achieved
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Overview of Icelandic USA
 Icelandic USA comprised of North American and certain Asian assets and business activities
of Icelandic Group h.f.
 Leading provider of value-added seafood products and high-quality Icelandic fillets to U.S.
foodservice and retail customers
 State-of-the-art 150,000 ft2 facility in Newport News, VA; built in 1997 with annual capacity of
80-90 million lbs, including a new freezer storage opened in July 2011
 Subsidiaries that include processing operations in China and procurement operations
 Strong brand portfolio – unparalleled industry reputation for quality
Icelandic Seafood
 Premium quality fillets
and block cuts
 “Best-in class” offerings
 Premium unprocessed
fillets and shellfish
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Samband of Iceland
 High quality value-added
processed seafood
products
 High quality unprocessed
fillets and shellfish
Creates Leading North American Value-Added
Seafood Supplier
 Distinct Canadian leader in both retail and foodservice channels
 Leading player in U.S. value-added foodservice market with national
distribution capabilities
 Shift in revenue mix creates a strong U.S. growth platform
 Increasing U.S. sales to approximately 66% of total 2010 pro forma sales
 Long-standing relationships with diversified, blue-chip North American
customers
 Stronger purchasing power and improved economies of scale in production
and distribution will allow pro forma company to unlock valuable synergies
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Highly Complementary Businesses
Products
Customer Base
(1)
High Liner
Icelandic USA
Value-added processed
Value-added processed and unprocessed
Retail &
Other
10%
Retail &
Other
40%
Food
Service
60%
Other
1%
Sales by
(1)
Geography
Canada
44%
Food
Service
90%
Other
Canada
5%
2%
USA
55%
USA
93%
Selected Brands
Procurement
Capabilities
(1) Based on calendar 2010 sales
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Worldwide
Predominantly Asia and Iceland
Highly Complementary Businesses
 Opportunity to create an efficient low cost North American manufacturing footprint
 Between High Liner and Icelandic USA, there are 6 production facilities across North
America with total annual capacity of approximately 318 million lbs
NORTH AMERICA
Lunenburg, NS (Can)
CHINA
Burin, NL (Can)
Dalian, China
Malden, MA (US)
Danvers, MA (US)
Portsmouth, NH (US)
High Liner facility
Icelandic USA facility
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Newport News, VA (US)
Unique Sourcing and Distribution Capabilities
 Icelandic USA sources fish from almost 20 countries worldwide
 Predominantly from U.S., Asia and Iceland
 Integrated supply with Asia operations and 60-year relationship with
prominent Iceland producers
 Stringent supplier selection process and monitoring of product quality
 Distribution center / freezer storage opened in July 2011 is fully integrated
with Newport News production facility, annual EBITDA improvement of $5.2
million starting in October 2011
Icelandic USA distribution center in Newport News, VA
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Significant Manufacturing and Distribution
Synergies Potential
 Annual synergies expected to be in the range of $16 – $18 million
 Total near-term potential cost savings and synergies of approximately $12.1
million
 Plant optimization through improved economies of scale in production and
distribution
 Variable cost rationalization including efficiencies in procurement,
manufacturing and packaging
 Selling, general and corporate efficiencies including savings on
administrative functions
 Majority of synergies are expected to be achieved over 2012 and 2013
 New freezer savings of $5.2 million starting in October 2011 with expiry of
lease on previous cold storage facility
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Strong Track Record of Achieving Synergies
 History of realizing synergies and successfully integrating acquisitions
 FPI acquisition: synergies of $14 million as planned, integration within 10 months
 Viking acquisition: expected synergies of ~$2 million, integration within 3.5 months
$268
$368
6.0%
$75
$ millions
4.5%
$40
4.5%
(1)
4.0%
3.8%
$25
$16 - $18(2)
$12
$14
3.0%
$2
2.0%
$0
Ann. Date:
FPI
Viking
Icelandic
24-Aug-07
10-Dec-10
17-Nov-11
Revenue
(1) Based on near-term synergies of $12.1 million
(2) Expected total ongoing annual synergies
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Synergies
Synergies as % of Revenue
Synergies as %
of Revenue
5.0%
$50
Platform for Future Growth
 Well located Newport News, VA plant serves all 50 states
 Highly leverageable platform positioned for growth and expansion
 Flexible, modular manufacturing platforms and customized production lines
 Recently completed capital investment projects will drive incremental top line growth and
strengthen cost leadership position
 Freezer storage project, modernized equipment
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Transaction Overview
Transaction Description
 Purchase price of US$232.7 million cash consideration plus seasonal working
capital adjustments
 5.0x adjusted EBITDA(1) including expected total ongoing annual synergies
 High Liner has entered into a 7-year royalty free licensing agreement for use
of Icelandic Seafood brand in the U.S., Canada and Mexico
 High Liner has also structured a long-term distribution agreement
 Ensures Icelandic producers will continue to have access to U.S. market
 High Liner will continue to be able to supply customers with high-quality
fillets from Iceland under Icelandic Seafood brand
 Acquisition was financed through the issuance of long-term debt and an
increase in High Liner’s existing asset-based loan facility
(1) Last twelve months ended September 30, 2011 excluding non-recurring items
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Financing Summary
 Acquisition was financed through the issuance of long-term debt and an
increase in High Liner’s existing asset-based loan facility
 US$250 million 6-year Senior Secured Term Loan B, at 5.5% plus LIBOR
floor of 1.5%
 Existing bank facility increases from US$120 million to US$180 million, at
LIBOR plus 2.5%
 Increased borrowing supported by cash flow of existing and acquired
businesses
 Near-term synergies of approximately $12.1 million would reduce pro forma
leverage on closing to approximately 3.8x (1)
(1)
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Based on average working capital debt
Icelandic USA Financial Summary
 Last twelve months ended September 30, 2011
Revenue of US$268 million
Adjusted EBITDA(1) of US$29 million
(1) Excluding non-recurring items and adjusted for a full year of savings from investment in a new freezer facility
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Summary
 Creates leading North American value-added seafood supplier
 Highly complementary businesses including products, customer base and
geography
 Adds strategic sourcing capabilities in Asia and Iceland
 Significant manufacturing and distribution synergies potential
 Modern and strategically situated production facility serves as platform for
future growth
 Expected to be immediately accretive to adjusted earnings
 Materially accretive once full synergies are achieved
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