INVESTOR PRESENTATION Henry Demone, CEO; Paul Jewer, CFO Heather Keeler-Hurshman, Investor Relations November 2014
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
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: Presentation Currency 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 symbol 1 HLF Recent price 2 CAD$23.29 52-week range 2 CAD$19.10 - $25.49 Shares outstanding ~30.69M Total market cap ~CAD$715M Quarterly dividend 3 CAD$0.105 per share Current yield 3 ~1.9% Note: Effective May 30 th, 2014, HLF shares were split on a 2-for-1 basis. All share information in this presentation is reflected on a post-split basis. 1 Public company since the 1960 s; listed on TSX in 1971 2 Source: TSX November 11 th, 2014 closing price 3 Effective May 8 th, 2014 4 Source: TSX November 12 th, 2014 HLF Three Year Share Price History 4 5
High Liner Foods Corporate History 1899 WC Smith founded (salt fish) 1945 National Sea Products created 1986 Fisher Boy acquisition 1999 Name change to High Liner Foods 2007 FPI acquisition 1 2010 Viking acquisition 2011 Icelandic USA acquisition 2 2013 American Pride Seafoods acquisition 3 2014 Atlantic Trading Company acquisition 4 1926 High Liner brand created 1982 Commodore private label acquisition 1992 Northern Cod moratorium 2003/04 High Liner sells its fishing assets 2014 Today s High Liner Foods 1 Acquired FPI s North American marketing & manufacturing businesses 2 In 2005, Icelandic & Samband of Iceland merged 3 Acquired October 1 st, 2013 4 Acquired November 7 th, 2014 (see Slide 22) 6
Business Overview Geography Branding Channel Product Form 29% 20% 33% 33% 71% 80% 67% 67% USA (incl. Mexico) Canada HLF Brands Other Foodservice Retail * The charts above reflect the Company s business profile based on sales and on a proforma basis including Atlantic Trading Value-added Other 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 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 Market Leading Brands Diversified Global Procurement Frozen Food Logistics Expertise Innovative Product Development 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 Strong global procurement built on long-term relationships with network of quality suppliers 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 Logistics expertise allows timely delivery of raw materials and finished goods from over 20 countries to all key customers Seamless logistics process approach tailored to be costeffective and customer oriented Scheduled deliveries to major customers on regular basis 8
Leader in Sustainability Committed to sourcing all of our seafood from certified sustainable or responsible fisheries and aquaculture Recognized as a global leader in driving best practice improvements in wild fisheries and aquaculture In cooperation with NGOs, industry partners and other like-minded businesses, we have assumed a leadership role in substantial fishery and aquaculture improvements around the world Continued focus on improved sustainability across our supply chain, beyond the seafood we source 9
Manufacturing Footprint Lunenburg, NS (Can) New Bedford, MA (U.S.) Scallop Processing Capacity p.a.: 12m lbs Utilization: 67% New Bedford, MA (U.S.) Value-Added Capacity p.a.: 87m lbs Utilization: 61% Capacity p.a.: 40m lbs Utilization: 81% Malden, MA (U.S.) (1) Capacity p.a.: 41m lbs Utilization: 32% (1) Leased facility Newport News, VA (U.S.) Capacity p.a.: 90m lbs Utilization: 77% Portsmouth, NH (U.S.) Capacity p.a.: 80m lbs Utilization: 83% Burin, NL (Canada) Danvers, MA (U.S.) HLF facility Closed facility Low-cost and efficient $18M in annual synergies related to Icelandic USA acquisition included cost savings from two plant closures: Burin, NF (late 2012) Danvers, MA (early 2013) Scallop and value-added processing facility acquired as part of American Pride acquisition in Q4 2013 Aggregate production capacity of ~350M lbs per annum Ability to increase 25M lbs p.a. with minimal capital investment 10
Financial Review
Fiscal 2013 Highlights Strategic: Acquired American Pride Seafoods ( American Pride ) on October 1 st 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 Debt amendments in February 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 12
USD millions Sales History $1,200 $1,000 $947M $800 $600 $400 $200 $- 2006 2007 2008 2009 2010 2011 2012 2013 13
USD millions $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $- 2006 2007 2008 2009 2010 2011 2012 2013 EBITDA History $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: business acquisition, integration and other expenses; impairment of property, plant and equipment related to plant closures; increased cost of goods sold relating to purchase price allocation to inventory acquired over its book value; gains or losses on disposal of assets; and stock compensation expense Adjusted EBITDA: Partially Adjusted EBITDA as defined above, further adjusted to exclude the impact of non-cash stock compensation expense 14
Diluted Earnings per Share Return on Equity Diluted EPS and ROE History $1.75 30% $1.50 $1.32 25% $1.25 20% $1.00 $0.75 15% $0.50 10% $0.25 5% $0.00 2006 2007 2008 2009 2010 2011 2012 2013 0% Diluted EPS Partially Adjusted Diluted EPS Adjusted Diluted EPS Return on Equity Diluted EPS is net income as reported divided by the average diluted number of shares Partially Adjusted Diluted EPS is based on Adjusted Net Income (1) except including non-cash stock compensation expense Adjusted Diluted is based on Adjusted Net Income (1) (1) Adjusted Net Income is net income as reported excluding the after-tax impact of: business acquisition, integration and other expenses; impairment of property, plant and equipment related to plant closures; additional depreciation on property to be disposed of as part of an acquisition; increased cost of goods sold relating to purchase price allocation to inventory acquired over its book value; non-cash expense from revaluing an embedded derivative associated with the long-term debt LIBOR floor and marking-to-market an interest rate swap related to the embedded derivative; the write-off or write down of deferred financing charges on the re-pricing of our term loan; withholding tax related to intercompany dividends; and stock compensation expense. 15
Annual Dividend paid per Share ($CAD) Dividend History $0.45 $0.40 $0.35 $0.30 $0.25 $0.20 $0.15 $0.10 $0.05 11-year CAGR (2003 to 2014): 29% $0.35 $0.41 * $0.00 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 * CAD$0.095 per share in Q1; CAD$0.105 in Q2, Q3 & Q4 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 16
Financial Review YTD 2014 Sales (USD millions) $900 $800 $700 $600 $500 $400 $300 $200 $100 $0 $696.6 YTD 2013 YTD 2014 Excluding American Pride American Pride $784.7 American Pride added $105.4M in sales (33.9M pounds) Sales in domestic currency were $806.0M in 2014 and $701.9M in 2013 Weaker Canadian dollar decreased reported USD sales by almost $16M compared to last year Pounds sold were 231.0M in 2014 and 206.9M in 2013 17
Financial Review YTD 2014 EBITDA (USD millions) $64 $63 $62 $61 $60 $59 $58 $57 $56 $55 $54 $53 $62.7M YTD 2013 YTD 2014 Standardized EBITDA Partially Adjusted EBITDA Adjusted EBITDA $62.9M American Pride added $3.1M in Adjusted EBITDA Strong operational performance in Q1 2014 through the busy Lenten period vs. operating challenges in the U.S. in Q1 2013 Lower sales volume (excluding American Pride) and higher SG&A (both countries), partially offset by higher product margins and lower distribution costs in the U.S. 18
Financial Review YTD 2014 Diluted EPS (USD) $1.20 $1.00 $0.94 $0.95 $0.80 $0.60 $0.40 $0.20 $0.00 YTD 2013 YTD 2014 Diluted EPS Partially Adjusted Diluted EPS Adjusted Diluted EPS 19
Debt Leverage Ratio Net interest-bearing debt / rolling 52 week Adjusted EBITDA 5.00x 4.00x 3.00x 4.4x 3.4x 3.2x 3.9x 4.0x <3.0x 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 Sep 27/14 Target 20
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 December 2017 to April 2021 and ABL from December 2016 to April 2019) Reduced interest costs Debt Amendments Q1 2014 Additionally, Term Loan facility increased from $250M to $300M and a number of covenants on this facility were improved or removed 21
One of the largest importers of frozen Atlantic salmon into the U.S. Premium quality salmon sustainably sourced from Chili and Norway Sold primarily to the U.S. retail market in frozen raw (unprocessed) and value-added formats Immediately accretive to earnings Annual revenues of between $75M and $80M and expected to more than double the Company s sales in salmon products Product margins expected to be comparable to those achieved on similar products sold by the Company Estimated purchase price of $19.0M - includes working capital and contingent consideration to be paid in each of the next two years upon achieving certain EBITDA thresholds Financed with our ABL Atlantic Trading Company Acquisition 22
Vision & Growth Strategy 23
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 24
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 25
Profitable growth Organic growth, supply chain optimization and acquisitions Supply chain optimization Optimize our systems in procurement and purchasing, inventory management, product rationalization, and shipping and warehousing Succession planning 2014 Strategic Goals 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) 26
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 Growth Strategy 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 27
Competitively Advantaged North American Platform Investment Rationale Strong Customer & Vendor Relationships Market Leader in North American Value-Added Seafood Market Unique Global Sourcing Network and Expertise Proven & Experienced Management Team Attractive Financial Profile and Strong Free Cash Flow Generation 28
QUESTIONS?