AGM PRESENTATION 2016 ANNUAL AND SPECIAL GENERAL MEETING OF SHAREHOLDERS May 11, 2016
TIM RORABECK EVP, CORPORATE AFFAIRS & GENERAL COUNSEL
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 Report available on SEDAR (www.sedar.com) and the Investor Center section of High Liner Foods’ website (www.highlinerfoods.com). 3
PRESENTATION NOTES PRESENTATION CURRENCY: • High Liner Foods (“the Company”) began reporting its financial statements in USD in 2012, however its common shares trade on the TSX and are quoted in CAD and therefore references in this presentation to share price, dividends and market cap are in CAD. NON-IFRS MEASURES: • Certain non-IFRS financial measures and ratios are used when discussing the Company’s financial performance that do not have a standardized meaning prescribed by IFRS, but which management believes provide useful information to both management and investors in measuring the financial performance and condition of the Company. 4
HENRY DEMONE CHAIRMAN OF THE BOARD
KEITH DECKER PRESIDENT & CEO
FISCAL 2015 IN REVIEW STRATEGIC: • Organic growth challenges due to a number of external and internal factors • Significant progress on supply chain optimization focused on improved efficiency and cost savings at both the plant and entity level ($6M+ savings realized in 2015 related to these initiatives) • Completed succession planning at the senior-most level of the Company FINANCIAL (COMPARED TO FISCAL 2014): • Achieved $1B in sales for the second time reflecting recent acquisitions • Lower sales volume reflecting organic growth challenges and one week less of sales • Lower sales revenue, Adjusted EBITDA and Adjusted Net Income reflecting lower sales volume, increased raw material costs not fully recovered through price increases and a significant decline in the USD/CAD exchange rate, partially offset by supply chain optimization savings • Quarterly dividend increased in Q2 by 14.3% to CAD$0.12 per share (CAD$0.48 annualized) • Significantly improved free cash flow used to reduce debt and improved debt-to-Adjusted EBITDA ratio to 4.0x at the end of Fiscal 2015 compared to 4.4x at the end of Fiscal 2014 OPERATIONAL: • Ceased operations in Q2 at our previously leased manufacturing facility in Malden, MA • Restructuring and recruitment of new talent to key sales positions to address internal sales execution and promotional challenges 7
REVIEW OF 2016 STRATEGIC GOALS 1. PROFITABLE GROWTH • Increase EBITDA through a combination of: Organic growth - product innovation and expansion • Acquisitions – seafood category remains highly fragmented relative to other proteins • 2. SUPPLY CHAIN OPTIMIZATION • Annual operating cost savings of $20M to $25M through plant and supply chain efficiencies Cost savings beginning in 2015, with the full benefit being achieved on a run-rate basis by • the end of 2016 3. SUCCESSION PLANNING • Talent is key to support our growth strategy – capacity and expertise • Focus on developing and recruiting the next generation of leaders 8
PAUL JEWER EXECUTIVE VP & CFO
FISCAL 2015 FINANCIAL REVIEW SALES HISTORY $1,200 $ 1.0B $1,000 $800 USD millions $600 $400 $200 $- 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 10
FISCAL 2015 FINANCIAL REVIEW EBITDA HISTORY $100 $90 $78.2M $80 $70 USD millions $60 $50 $40 $30 $20 $10 $- 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Standardized EBITDA: Earnings before interest, taxes, depreciation and amortization as reported in the Company’s annual audited financial statements Adjusted EBITDA: Standardized EBITDA as defined above, adjusted to exclude: non-operating items associated with business acquisition and integration activities; other non-routine or one-time costs; and the impact of share-based compensation expense related to the Company’s stock price 11
FISCAL 2015 FINANCIAL REVIEW DILUTED EPS AND ROE HISTORY $1.75 30% $1.50 25% Diluted Earnings per Share $1.14 $1.25 Return on Equity 20% $1.00 15% $0.75 10% $0.50 5% $0.25 $0.00 0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Diluted EPS Adjusted Diluted EPS Return on Equity Diluted EPS is net income as reported divided by the average diluted number of shares Adjusted Diluted EPS is Adjusted Net Income (1) divided by the average diluted number of shares (1) Adjusted Net Income is net income as reported excluding the after-tax impact of: business acquisition, integration and other non-routine costs; accelerated depreciation on equipment as part of the cessation of operations; accelerated amortization of deferred financing costs and other items resulting from debt refinancing and amendment activities; non- cash expense (income) related to marking-to-market an embedded derivative associated with the LIBOR floor included in long-term debt; non-cash expense (income) related to marking-to-market interest rate swaps not designated for hedge accounting; and share-based compensation expense. 12
FISCAL 2015 FINANCIAL REVIEW NET INTEREST-BEARING DEBT TO ADJUSTED EBITDA RATIO Net interest-bearing debt / rolling 12 month Adjusted EBITDA 5.0x 4.4x 4.4x 4.0x 4.0x 3.9x 4.0x 3.4x 3.2x 3.0x 3.0x 2.0x 1.0x 0.0x Dec 31/11 Dec 29/12 Sep 28/13 Dec 28/13 Sep 28/14 Jan 3/15 Jan 2/16 Target Pro forma Pre-American Pre-Atlantic Icelandic Pride Trading Acquisition Acquisition Acquisition 13
FISCAL 2015 FINANCIAL REVIEW DIVIDEND HISTORY $0.50 $0.465 $0.45 Annual Dividend paid per Share ($CAD) 12-year CAGR (2003 to 2015): 28% $0.40 $0.35 $0.30 $0.25 $0.20 $0.15 $0.10 $0.05 $0.00 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 14
FINANCIAL OVERVIEW – Q1 2016 • Sales volume decreased by 1.3.M lbs (1.5%) - impact of shorter promotional period associated with Lent in 2016 and lower demand for traditional breaded and battered frozen seafood products Sales decreased by $19.7M (6.4%) - lower volume, price decreases and the • impact of a weaker Canadian dollar on the conversion of our CAD-denominated operations to the USD presentation currency Adjusted EBITDA as a percentage of sales increased 20 basis points to 10.1% • reflecting lower raw material costs and supply chain optimization savings • Strong free cash flow from operations used to lower debt and improve debt-to- Adjusted EBITDA ratio to 3.7x from 4.0x at the end of Fiscal 2015 • Quarterly dividend increased in Q2 by 8.3% to $0.13 per common share or $0.52 on an annualized basis 15
FINANCIAL OVERVIEW – Q1 2016 SALES (USD MILLIONS) $350 $310.2 $290.5 $300 $250 $200 $150 $100 $50 $0 2015 2016 • Pounds sold decreased 1.5% to 88.2M lbs • Sales in domestic currency were $312.4M compared to $326.9M • Weaker CAD decreased reported USD sales by $5.9M relative to the conversion impact last year • Lower sales volume, price decreases and a change in product mix 16
FINANCIAL OVERVIEW – Q1 2016 EBITDA (USD MILLIONS) $35 $30.7 $29.4 $30 $25 $20 $15 $10 $5 $0 2015 2016 Standardized EBITDA Adjusted EBITDA • Adjusted EBITDA in domestic currency was consistent at $31.5M compared to $31.6M reflecting impact of lower sales volume fully offset by savings in distribution and SG&A expenses • As a percentage of sales increased to 10.1% compared to 9.9% 17
KEITH DECKER PRESIDENT & CEO
REVIEW OF 2016 STRATEGIC GOALS 1. ORGANIC SALES GROWTH – PRIMARY FOCUS IN 2016 • Strive for commercial excellence • Innovation 2. OPERATING EFFICIENCY AND COST MANAGEMENT • Annual operating cost savings of at least $20M on a run rate basis by the end of 2016 (full benefit to be realized in 2017) • “High Liner Foods Operating System” – creating a culture of operational excellence 3. TALENT MANAGEMENT • Acquiring, developing and retaining the best talent are critical to the success of the business • Active development of future leaders 19
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