CIBC Retail & Small Consumer Small Cap Forum 2013 Q1-13 Present… · CIBC Retail & Small Consumer Small Cap Forum June 13, 2013 | Toronto. Heather Keeler -Hurshman Director, Investor

CIBC Retail & Small Consumer Small Cap Forum

June 13, 2013 | Toronto

Heather Keeler-HurshmanDirector, Investor Relations

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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 CurrenciesCAD 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:• Effective with the company’s 2012 annual report, all financial

statements are presented 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 DataTSX symbol HLF

Recent price1 $31.70

52-week range1 $18.82 - $39.00

Shares outstanding ~15.16M

Total market cap ~$481M

Quarterly dividend2 $0.18

Current yield2 2.3%

1 Source: TSX June 6, 20132 Effective June 1, 20133 Public company since the 1960’s; listed on the TSX in 1971

HLF Share Price Over the Last 12 Months1

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High Liner Foods Corporate History

1926High Liner

brand created

1992 Northern

Cod moratorium

2003/04 High Liner

sells its fishing assets

2007 FPI

acquisition1

2011 Icelandic

USAacquisition

2010 Viking

acquisition

1899WC Smith founded

(salt fish)

1945National

Sea Products created

2005 Icelandic

and Samband

merge

1999Name

changed to High Liner

Foods

1 Acquired FPI’s North Americanmarketing and manufacturing business

2013Today’s

High Liner Foods

Business Profile

7

64%

36%

Product Form

Value Added Other

77%

23%

Branded

HFL Brands Other

Business Profile (cont’d)…

8

65%

35%

Geography

USA (incl. Mexico)Canada

65%

35%

Retail / Food Service

Food Service Retail

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 and Viking

Strengths• Cover all segments: chain

restaurants, food services 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,

Nestle, Omaha Steaks, Schwann’s, MacDonald’s

Retail Business Overview

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Leading retail brands • High Liner, Sea Cuisine, Fisher

Boy

Strengths• Sell to all retailers• Sell to every area of 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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• Reduced from 6 plants to 4• Low manufacturing footprint

Financial Review

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Fiscal 2012 Highlights

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Financial highlights:• Strong growth in sales, adjusted EBITDA and adjusted EPS• Created value for shareholders – increased share price / dividends

Operational highlights:• The Icelandic USA acquisition which was completed in Dec 2011,

was fully integrated by Nov 2012 • The expected annual synergies are at least $18M, the high end of

the original estimate of $16M to $18M. • Plant consolidation was completed with the closing of two plants

Dec 2012 / Jan 2013

Recognition for new products:• Voted Best New Product by Canadian Living in the “Frozen Fish /

Prepared Meal Category” for 4 years in a row for High Liner’s Pan Sear, Market Cuts and Flame Savours products

The North American leader in value-added frozen seafood

Vision achieved during a milestone year

1515

Sales Growth (US$ millions)

$-

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

2006 2007 2008 2009 2010 2011 2012

$943M

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EBITDA Growth (US$millions)

$0

$20

$40

$60

$80

$100

$120

2006 2007 2008 2009 2010 2011 2012

$91.7M

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

$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 P

Dividend History (Cdn$)

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

Annual Dividends per Share

10-year CAGR: 30%Current run rate: $0.72

$0.69

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Q1 2013 - A Challenging Quarter

Challenges:• Decline in selling prices for commodity products

• Weak private label sales

• Soft U.S. restaurant sales

• Early Lent

• Production and distribution challenges with the move to Newport News

Successes:• On track for projected synergies from Icelandic USA’s integration

• Reduced interest expense and leverage ratio

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Q1 2013 - Financial Review

Sales as Reported (in US$ millions)

210.0 199.5

77.6 75.6

$0

$50

$100

$150

$200

$250

$300

$350

Q1 2012 Q1 2013US Canada

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$275.2$287.6

$0$5

$10$15$20$25$30$35

Q1 2012 Q1 2013

$31.5

EBITDA (in US$ millions)

Q1 2013 - Financial Review

$21.3

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

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

Q1 2012 Q1 2013

$0.63

$0.91

Diluted EPSQ1 2013 – Financial Review

Diluted EPS: Net Income as reported the Company’s annual audited financial statements divided by the average diluted number of shares

Partially Adjusted Diluted EPS: Based on the Company’s reported Net Income, adjusted to exclude the 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; and withholding tax related to inter-company dividends.

Adjusted Diluted EPS: Partially Adjusted EPS as defined above, further adjusted to exclude the impact of non-cash stock compensation expense

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

Deleveraging

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6.6x

4.4x

3.4x 3.7x< 3.0x 3.0x

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

Dec 31/11 Dec 31/11 Pro forma Icelandic

Dec 31/12 Mar 31/13 PF Full Synergies

Target

Debt / EBITDA

2013 cost savings: $4.7M cash; $6.2M total or $0.30 per share

Q1 2013 – Debt Amendments

Term loan ($233M)• Reduced rates 5.5% + 1.50 LIBOR floor to 3.5% + 1.25 LIBOR floor

• Less restrictive financial covenants

• More room for dividends

• More flexible for acquisitions

ABL ($180M working capital working capital facility)• Currently borrowing $45M to $50M against this line

• Improved pricing grid

• More flexible for acquisitions

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Outlook & Growth Strategy

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Our Vision

The North American leader in frozen seafood

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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 10 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

• Seafood cost increasing less than other proteins

Industry Drivers (cont’d)…

2013 Strategic Goals

1. Profitable growth

• Icelandic USA synergies

• Organic growth

• Smaller-scale acquisitions

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$150M Adjusted EBITA by 2015 (proforma basis)

2013 Strategic Goals

2. Supply chain excellence

• Optimize our systems in:

• Procurement and purchasing

• Inventory management

• Product rationalization

• Shipping and warehousing

• Contribute $20M to $25M to 2015 EBITDA target

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2013 Strategic Goals

3. Sustainable sourcing

• Source all seafood from certified or responsible fisheries and aquaculture farms by the end of 2013

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?