Transcript High Liner Foods

2014 INTRAFISH SEAFOOD INVESTOR FORUM
Paul Jewer, CFO
May 20, 2014 | New York
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 Foods’ Annual
available on SEDAR (www.sedar.com) and the Investor Information section of High
Liner Foods’ website (www.highlinerfoods.com).
2
Presentation Currency
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:
• Beginning with the 2012 annual report, the Company began to present its
financial statements 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 as originally
reported in Canadian GAAP
3
Company Overview
TSX Listings Data
TSX symbol1
HLF
Recent price2
CAD$44.35
52-week range2
Shares outstanding
Total market cap
Quarterly dividend3
Current yield3
CAD$29.51 - $49.80
~15.33M
~CAD$680M
CAD$0.21 per share
~1.9%
1 Public company since the 1960’s;
listed on TSX in 1971
2 Source: TSX
May 16th, 2014
3 Effective May 8th, 2014
HLF Three Year Share Price History2
5
High Liner Foods Corporate History
1945
1899
WC Smith
founded
(salt fish)
1999
National
Sea
Products
created
1986
Fisher Boy
acquisition
Name
change to
High Liner
Foods
1926
1982
1992
High Liner
brand
created
Commodore
private label
acquisition
Northern
Cod
moratorium
2007
FPI
acquisition1
2010
Viking
acquisition
2003/04
High Liner
sells its
fishing
assets
2011
Icelandic
USA
acquisition2
2013
American
Pride
Seafoods
acquisition3
2014
Today’s
High Liner
Foods
1 Acquired
FPI’s North American marketing & manufacturing businesses
In 2005, Icelandic & Samband of Iceland merged
3 Acquired on October 1st, 2013 (see Slide 22)
2
6
Business Overview
Geography
Branding
Channel
Product Form
26%
30%
31%
39%
70%
USA (incl. Mexico)
HFL Brands
Canada
Other
61%
69%
74%
Foodservice
Retail
Value-added
Other
* The charts above reflect the Company’s business profile based on sales and on a proforma basis including American Pride
• We are the North American leader in value-added frozen seafood
• In Canada, #1 market position in retail and largest foodservice player
• In the U.S., estimated #2 in retail value-added (including private label) on a volume
basis and the leading supplier of value-added products in foodservice
• Our vision is to be the leading supplier of frozen seafood in North America
7
Advantaged Business Model
with Market Breadth
Broadest Market
Reach in Industry
• 2X the size of largest
competitor in retail
& food service
channels (100%
ACV) in Canada
• Largest grocerychain supplier of
private label valueadded seafood in
U.S. and Canada
• The largest food
service suppliers of
value-added
seafood in U.S.
• Estimated #2
supplier of seafood
by volume in U.S.
retail channel
including private
label and niche
brands
Market Leading
Brands
Diversified Global
Procurement
Frozen Food Logistics
Expertise
• Strong global
procurement built
on long-term
relationships with
network of quality
suppliers
• Logistics expertise
allows timely
delivery of raw
materials and
finished goods
from over 20
countries to all key
customers
• Broad procurement
activities in North
America and strong
footprint in Asia
• Geographically
diverse procurement
territory mitigates
changes in the cost
of raw materials
• State-of-the-art
web-based IT system
to manage logistics
and quality for
overseas suppliers
Innovative Product
Development
• Seamless logistics
process approach
tailored to be costeffective and
customer oriented
• Scheduled
deliveries to major
customers on
regular basis
8
Optimized Manufacturing Footprint
Lunenburg, NS (Can)
Capacity p.a.: 40m lbs
Utilization: 81%
•
Low-cost and efficient
•
$18M in annual synergies
related to Icelandic USA
acquisition include cost
savings from two plant
closures:
Portsmouth, NH (U.S.)
Malden, MA (U.S.) (1)
Capacity p.a.: 41m lbs
Utilization: 32%
Capacity p.a.: 80m lbs
Utilization: 83%
(1) Leased facility

Danvers, MA (U.S.)
Capacity p.a.: 12m lbs
Utilization: 67%
Newport News, VA (U.S.)
New Bedford, MA (U.S.)
Value-Added
Capacity p.a.: 90m lbs
Utilization: 77%
Capacity p.a.: 87m lbs
Utilization: 61%

Burin, NL (Canada)
New Bedford, MA (U.S.)
Scallop Processing
HLF facility
•
Burin, NF (late 2012)
Danvers, MA (early 2013)
Scallop and value-added
processing facility acquired
as part of American Pride
acquisition in Q4 2013
Closed facility
Aggregate production capacity of ~350M lbs per annum
Ability to increase 25M lbs p.a. with minimal capital investment
9
Financial Review
Fiscal 2013 Highlights
Strategic:
• Acquired American Pride Seafoods (“American Pride”) on October 1st
• Achieved 99% of our strategic goal to sustainably source all of our seafood
Financial:
• Created value for shareholders – increased share price and dividends
• Reported record sales and net earnings (although lower than expected)
• Debt amendments in Feb 2013 resulted in significant interest savings
• Significant deleveraging in Q1 – Q3 (prior to the American Pride acquisition)
Operational:
• Completed Icelandic USA integration and related plant consolidation and
relocation of U.S. food service distribution center in Q1 2013
• $18M in total annual synergies achieved related to the Icelandic USA
acquisition
11
Sales History
$1,200
$947M
USD millions
$1,000
$800
$600
$400
$200
$-
2006
2007
2008
2009
2010
2011
2012
2013
12
$3.00
$2.65 30%
$2.50
25%
$2.00
20%
$1.50
15%
$1.00
10%
$0.50
5%
$0.00
0%
2006
Diluted EPS
2007
2008
2009
Partially Adjusted Diluted EPS
2010
2011
2012
Adusted Diluted EPS
Return on Equity
Diluted Earnings per Share
Diluted EPS and ROE History
2013
Return on Equity
Diluted EPS is net income as reported divided by the average diluted number of shares
Partially Adjusted Diluted EPS is based on Adjusted Net Income(1) except including non-cash stock compensation expense
Adjusted Diluted is based on Adjusted Net Income(1)
(1)Adjusted
Net Income is net income as reported excluding the after-tax impact of: business acquisition, integration and other expenses; impairment of
property, plant and equipment related to plant closures; additional depreciation on property to be disposed of as part of an acquisition; increased cost of
goods sold relating to purchase price allocation to inventory acquired over its book value; non-cash expense from revaluing an embedded derivative
associated with the long-term debt LIBOR floor and marking-to-market an interest rate swap related to the embedded derivative; the write-off or write
down of deferred financing charges on the re-pricing of our term loan; withholding tax related to intercompany dividends; and stock compensation expense.
13
Dividend History
$0.82*
Annual Dividend per Share ($CAD)
$0.90
$0.80
$0.70
$0.70
10-year CAGR (2003 to 2013): 31%
$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 2014
*Assumes Q3 and Q4 dividend at same rate approved for Q2 of CAD$0.21
Common shares up to September 15, 2007; Common and non-voting shares from
Dec 15, 2007 to Dec 17, 2012; Common shares from December 18, 2012 to present
14
Financial Review – Q1 2014
Sales (USD millions)
$350
$300
$302.6
$275.2
•
Q1 sales in domestic
currency were $310.1M
in 2014 and $275.8 M in
2013
•
American Pride sales
were $41.4M in Q1 2014
$250
$200
$150
$100
$50
$0
Q1 2013
Q1 2014
Excluding American Pride
American Pride
15
Financial Review – Q1 2014
EBITDA (USD millions)
$30
$25
$27.2M
•
Strong operational
performance in Q1 through
the busy Lenten period
•
$6.0M improvement in
Adjusted EBITDA reflects
challenges encountered by
our U.S. operations in 2013
are largely resolved
•
American Pride contributed
$41.4M in sales and $2.2M in
Adjusted EBITDA
$21.3M
$20
$15
$10
$5
$-
Q1 2013
Q1 2014
Standardized EBITDA
Partially Adjusted EBITDA
Adjusted EBITDA
16
Financial Review – Q1 2014
Diluted EPS (USD)
$1.00
$0.88
$0.80
$0.63
$0.60
$0.40
$0.20
$0.00
Q1 2013
Diluted EPS
Q1 2014
Partially Adjusted EPS
Adjusted EPS
17
Deleveraging
Net interest-bearing debt / Adjusted EBITDA ratio
5.00x
4.4x
3.9x
4.00x
3.4x
3.8x
3.2x
<3.0x
3.00x
2.00x
1.00x
0.00x
Dec 31/11
Pro Forma
Icelandic
Dec 29/12
Sep 28/13
Pre-American
Pride
Acquisition
Dec 28/13
Mar 29/14
Target
18
Debt Amendments – Q1 2014
• Favourable amendments to the Company’s debt facilities – Term Loan and asset
based loan (ABL) – announced late April
• Term Loan and ABL:



Increased capacity and flexibility for acquisitions, investments,
distributions, capital expenditures and operational matters
Extended terms (Term Loan from Dec 2017 to Apr 2021 and ABL from Dec
2016 to Apr 2019)
Reduced interest costs
• Additionally, Term Loan facility increased from $250M to $300M and a number
of covenants on this facility were improved or removed
19
Vision & Growth Strategy
20
Steady Course
Following years of strong growth,
High Liner Foods remains on a steady course
to achieve its vision to be the leading supplier of
frozen seafood in North America
21
Industry Drivers
Long-term growth influenced by strong North American
demographics
An aging,
health-conscious
population
45+ years of age
account for half of seafood
consumption
Health benefits tied to
eating fish
• Fisheries recovering around the world largely due to the sustainability
efforts over the last ten years
• Growth from aquaculture species
• Long-term demand growth still greater than supply
22
2014 Strategic Goals
Profitable growth
• Organic growth, acquisitions and supply chain optimization
Supply chain optimization
• Optimize our systems in procurement and purchasing, inventory
management, product rationalization, and shipping and warehousing
Succession planning
• With a significant number of retirements expected in the next ten years, focus
is required to both develop and hire talent to elevate the organization when
retirement vacancies occur and to build the human capacity and expertise
necessary to support our growth strategy and ensure the successful integration
of acquired companies
$150M Adjusted EBITDA by 2016 (pro forma basis)
23
Growth Strategy
Innovation
• We are a recognized leader in our industry for introducing new and innovative
products and we will continue to focus on developing innovative product
offerings that both increase the overall demand for frozen seafood products
and grow our market share
Industry consolidation
• Seafood category is highly fragmented due to global supply chain and high
number of species
• Substantial growth over the next several years must come from acquisitions
that continue to consolidate the frozen seafood industry

Four acquisitions since 2007 have significantly consolidated the U.S. food
service channel and High Liner Foods has built a reputation as a successful
consolidator with the ability to achieve meaningful synergies through
integration of its acquisitions
24
Investment
Rationale
Competitively
Advantaged
North
American
Platform
Strong
Customer &
Vendor
Relationships
Proven &
Experienced
Management
Team
Market Leader in
North American
Value-Added
Seafood Market
Unique
Global
Sourcing
Network and
Expertise
Attractive
Financial
Profile and
Strong Free
Cash Flow
Generation
25
QUESTIONS?