Investor Presentation March 2014 Henry Demone, CEO Paul Jewer, CFO - - PowerPoint PPT Presentation

Investor Presentation

March 2014 Henry Demone, CEO Paul Jewer, CFO Keith Decker, COO

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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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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:

• 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 under Canadian GAAP

Company Overview

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TSX Listings Data

TSX symbol1 HLF Recent price2 $48.50 52-week range2 $29.70 - $49.80 Shares outstanding ~15.3M Total market cap ~$742M Quarterly dividend3 $0.19 Current yield3 ~1.6%

1 Public company since the 1960’s; listed on the TSX in 1971 2 Source: TSX March 14th, 2014 3 Effective February 19th, 2014

HLF Three Year Share Price History2

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High Liner Foods Corporate History

1 Acquired FPI’s North American marketing and manufacturing businesses 2 In 2005, Icelandic and Samband of Iceland merged 3 Acquired on October 1st, 2013 (see Slide 22)

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Today’s High Liner Foods 1926

High Liner brand created

1992

Northern Cod moratorium

2003/04

High Liner sells its fishing assets

2007

FPI acquisition1

2011

Icelandic USA acquisition2 2010 Viking acquisition

1899

WC Smith founded (salt fish)

1945

National Sea Products created

1999

Name change to High Liner Foods

2013

American Pride Seafoods acquisition3

1986

Fisher Boy acquisition

1982

Commodore private label acquisition

Business Profile

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61% 39%

Product Form

Value-added Other 74% 26%

Branded

HFL Brands Other

* The charts above reflect the Company’s business profile on a proforma basis after its acquisition of American Pride Seafoods on October 1st, 2013 (see Slide 22)

We are the North American leader in value-added frozen seafood

Business Profile (cont’d)

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70% 30%

Geography

USA (incl. Mexico) Canada 69% 31%

Retail / Food Service

Food Service Retail

* The charts above reflect the Company’s business profile on a proforma basis after its acquisition of American Pride Seafoods on October 1st, 2013 (see Slide 22)

Vision: To be the leading frozen seafood supplier in North America

Our Business Model

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Broadest market reach in industry Market leading brands Diversified global procurement Frozen food logistics expertise Innovative product development

Food Service Business Overview

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Leading foodservice brands

• High Liner, FPI, Icelandic Seafood,

Viking, America Pride Seafood

Strengths

• Cover all segments: chain

restaurants, food service 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,

Long John Silver’s, MacDonald’s

• Other: Nestle, Omaha Steaks,

Schwann’s

Retail Business Overview

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Leading retail brands

• High Liner, Sea Cuisine,

Fisher Boy

Strengths

• Sell to all retailers
• Sell to multiple areas of the

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

Rationalized Production Capacity

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• As part of the American Pride Seafoods

acquisition on October 1st, 2013, we acquired a plant in New Bedford, MA, bring our plant count to five

• In late 2012/early 2013 we reduced our

manufacturing footprint from six plants to four with the closure of our plants in Burin, NL (Nov 2012) and Danvers, MA (Jan 2013)

Lunenburg, NS (Canada) Capacity p.a.: 40m lbs Utilization: 81% Malden, MA (USA) (leased facility) Capacity p.a.: 41m lbs Utilization: 32% Newport News, VA (USA) Capacity p.a.: 90m lbs Utilization: 77% Portsmouth, NH (USA) Capacity p.a.: 80m lbs Utilization: 83% New Bedford, MA (USA) Value-added Scallop Processing Capacity p.a.: 87m lbs Capacity p.a.: 12m lbs Utilization: 61% Utilization: 67%

Financial Review

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Fiscal 2013 Highlights

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Strategic highlights:

• Acquired American Pride Seafoods (“American Pride”) on October 1st
• Achieved 99% of our strategic goal to sustainably source 100% of our seafood

Financial highlights:

• Created value for shareholders – increased share price and dividends
• Reported record sales and net earnings; however, these were lower than expected due to

challenges in 2013, including weak consumer spending in the U.S. casual dining segment and issues encountered with our plant consolidation in the U.S

• Amended our debt in Q1 2013 resulting in significant interest savings
• Significant deleveraging with strong free cash flow in the first three quarters of 2013, prior

to the American Pride acquisition

Operational highlights:

• Completed the Icelandic USA integration and related plant consolidation and relocation of
• ur U.S. food service distribution center in Q1 2013
• Related to the closure of our Danvers plant, production issues were encountered by our

remaining U.S. plants and resulted in additional operating costs in 2013

• The total annual synergies achieved related to the Icelandic USA acquisition are

approximately $18M; however, the additional operating costs incurred in 2013 had the effect of deferring the realization of the full impact of these synergies to 2014

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Sales Growth (US$ millions)

$- $200 $400 $600 $800 $1,000 $1,200 2006 2007 2008 2009 2010 2011 2012 2013*

$947M

* The American Pride acquisition added $39.7M to sales in 2013 for the period October 1st to December 28th, 2013

$0 $20 $40 $60 $80 $100 $120 2006 2007 2008 2009 2010 2011 2012 2013*

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EBITDA Growth (US$ millions)

$85.3M

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

• f 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 EBITDA as defined above, further adjusted to exclude the impact of non-cash stock compensation expense

* The American Pride acquisition added $1.5M to Adjusted EBITDA in 2013 for the period October 1st to December 28th, 2013

$0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70 $0.80 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Dividend History (Cdn$)

Common shares up to September 15, 2007; Common and Non-Voting shares from December 15th, 2007 to December 17th, 2012; Common shares from December 18, 2012 to present

Annual Dividends per Share

10-year CAGR: 30.4% Current run rate: $0.76

$0.70

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Fiscal 2013 Highlights

Sales

• American Pride added $39.7M in sales
• Unfavourable change in the FX rate used to convert CAD-denominated sales to USD

for reporting purposes

• Decreases in certain seafood commodity prices led to a reduction in the selling

prices for some products in 2013

• Lower overall sales volume in 2013
• Weak sales being experienced by the U.S. restaurant industry as a whole
• An earlier Lent resulted in a shorter selling period in 2013
• Lower private label retail sales in the U.S. and Canada
• Higher branded retail sales and strong club store sales in the U.S. and Canada
• ffset some of the impact

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Sales in USD decreased $4.7M to $947.3M Sales in domestic currency increased $14.0M to $956.3M

Fiscal 2013 Highlights (cont’d)

Adjusted EBITDA (as defined on Slide 16)

• American Pride contributed $1.5M in Adjusted EBITDA
• Decrease in Q1 of $10M was partially mitigated with increased Adjusted EBITDA in

the subsequent three quarters

• Synergies realized from integrating the Icelandic USA acquisition and lower

commodity prices on certain species had a positive impact on Adjusted EBITDA

• Adjusted EBITDA negatively impacted by:
• Lower sales
• Competitive pressures in Q1 negatively impacting margins on certain products

where the Company had to reduce commodity selling prices more rapidly than the applicable decline in cost for these products

• Increased operating and distribution expenses related to activities associated

with the expedited closure of our Danvers plant in Q1 and relocating U.S. food service distribution to Newport News, VA

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Adjusted EBITDA in USD decreased $6.3M to $85.3M Adjusted EBITDA in domestic currency decreased $5.3M to $86.3M

Fiscal 2013 Highlights (cont’d)

Adjusted Net Income

• Significant savings in interest costs resulting from favourable amendments

made to the Company’s debt in February 2013

• Lower depreciation charges reflect the closure of plant in Danvers, MA

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Adjusted Net Income increased $3.2M to $41.3M

Adjusted Net Income: net income as reported in the Company’s financial statements, adjusted to exclude the after-tax 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; withholding tax related to inter-company dividends and non-cash stock compensation expense.

Estimated annual free cash flow of $40M to $50M

Deleveraging

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4.40x 3.40x 3.16x 3.90x < 3.0x

0.00x 1.00x 2.00x 3.00x 4.00x 5.00x Dec 31/11 Pro Forma Icelandic Dec 29/12 Sep 28/13 Dec 28/13 Target

Net interest-bearing debt / Adjusted EBITDA1

1 Adjusted EBITDA as defined on Slide 16

American Pride Seafoods Acquisition

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• Paid $34.5M on October 1, 2013, for American Pride Seafoods’ net assets,

excluding Accounts Receivables valued at $15M

• Financed with our ABL facility
• Plant and operations based out of New Bedford, MA
• Value-added, frozen seafood business, primarily selling to the food service market,

targeting national accounts and the non-commercial market segments

• Also has significant scallop processing business, making High Liner Foods a major

player in this business

• Integration is planned to start in May 2014 (post-Lent)
• Contributed $39.7M in sales and $1.5M in Adjusted EBITDA in 2013, and is

expected to be modestly accretive to earnings in 2014

Outlook

• Expect annual sales to exceed $1B for the first time in 2014.
• Focused on growing our Adjusted EBITDA in 2014 through a combination of organic

growth, acquisitions and supply chain optimization.

• Regarding current pricing on the major species we procure, prices for haddock,

scallops and shrimp remain high, while prices for cod and Alaskan pollock, our two largest species, remain attractive.

• The U.S. restaurant industry is continuing to show lackluster growth and it is as

important as ever that we continue our track record of offering new and innovative products, increase demand for frozen seafood products and grow our market share.

• American Pride has been operating as a stand-alone operation since they were
• acquired. We will start to integrate American Pride into the rest of our business

following the 2014 Lenten-season and expect by that time to have any lingering production issues in the U.S. resolved.

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Vision & Growth Strategy

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Our Vision

To be the leading frozen seafood supplier in North America

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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

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• Fisheries recovering around the world largely due to the

sustainability efforts over the last ten years by most seafood nations

• Growth from aquaculture species
• Long-term demand growth still greater than supply
• Short-term cost declines but long-term fundamentals signal

increasing costs.

Industry Drivers (cont’d)

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

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$150M Adjusted EBITDA by 2016 (pro forma basis)

Growth Strategy

Industry consolidation

• The seafood category is highly fragmented due to the global supply chain and

high number of species

• Meaningful growth over the next several years will come from acquisitions that

continue to consolidate the frozen seafood industry

• Four acquisitions since 2007 have served to significantly consolidate the

U.S. food service channel of the industry and to build High Liner Foods’ reputation as a successful consolidator with the ability to achieve meaningful synergies through integration of its acquisitions

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

• fferings that both increase the overall demand for frozen seafood products and

grow our market share

Product expansion

• We ship a truck to every major customer in North America on a weekly basis.

We are focused on increasing the weight per truck load through offering our customers new species and new formats of existing products and species.

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Investment Rationale

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Leading Processor in North America Strong Customer Relationships Unique Global Sourcing Network and Expertise Attractive Financial Profile and Strong Free Cash Flow Generation Competitively Advantaged North American Platform Management Team with Strong Track Record of Successful Acquisitions

Questions?

Heather Keeler-Hurshman, Director, Investor Relations