Continued strong free cash flow and significant balance sheet improvement
"In fiscal 2023 we generated the highest free cash flow in our history and took the opportunity to significantly reduce debt, invest in our business and return capital to our shareholders", said
Key financial results, reported in
- Sales volume increased by 6.1 million pounds, or 2.4%, to 257.0 million pounds compared to 250.9 million pounds and sales increased by
$10.6 million , or 1.0%, to$1,080.3 million compared to$1,069.7 million ; - Gross profit decreased by
$11.2 million , or 4.9%, to$218.7 million compared to$229.9 million , while gross profit as a percentage of sales decreased to 20.2% compared to 21.5%; - Adjusted EBITDA(1) decreased by
$8.8 million , or 8.5%, to$95.1 million compared to$103.9 million , and Adjusted EBITDA as a percentage of sales(1) decreased to 8.8% compared to 9.7%; - Net income decreased by
$23.0 million , or 42.0%, to$31.7 million compared to$54.7 million and diluted earnings per share ("EPS") decreased to$0.93 per share compared to$1.56 per share; and - Adjusted Net Income(1) decreased by
$13.0 million , or 25.1%, to$38.7 million compared to$51.7 million and Adjusted Diluted EPS(1) decreased to$1.14 per share compared to$1.48 per share. - Cash Flows from Operations increased by
$255.5 million , or 335.3%, to an inflow of$179.3 million compared to an outflow of$76.2 million .
Key financial results, reported in USD, for the thirteen weeks ended
- Sales volume increased by 1.2 million pounds, or 2.1%, to 59.6 million pounds compared to 58.4 million pounds and sales decreased by
$13.2 million , or 5.3%, to$237.1 million compared to$250.3 million ; - Gross profit decreased by
$6.1 million , or 11.1%, to$48.7 million compared to$54.8 million , and gross profit as a percentage of sales decreased to 20.5% compared to 21.9%; - Adjusted EBITDA(1) decreased by
$3.5 million , or 13.8%, to$21.9 million compared to$25.4 million , and Adjusted EBITDA as a percentage of sales decreased to 9.2% compared to 10.1%; - Net income decreased by
$4.7 million , or 42.3%, to$6.4 million compared to$11.1 million and diluted earnings per share ("EPS") decreased to$0.20 per share, compared to$0.32 per share; - Adjusted Net Income([1]) decreased by
$5.0 million , or 40.7% to$7.3 million compared to$12.3 million and Adjusted Diluted EPS(1) decreased to$0.23 per share compared to$0.35 per share; - Cash Flows from Operations increased by
$122.7 million , or 219.9%, to an inflow of$66.9 million compared to an outflow of$55.8 million ; and - Net Debt(1) to Rolling Twelve-Month Adjusted EBITDA(1) was 2.6x at
December 30, 2023 compared to 3.7x at the end of Fiscal 2022 and 3.0x at end of Fiscal 2021. This ratio increased during the second half of Fiscal 2022 due to a planned increased investment in inventory.
Financial Results and Operational Update
For the purpose of presenting the Consolidated Financial Statements in USD, CAD-denominated assets and liabilities in the Company's operations are converted using the exchange rate at the reporting date, and revenue and expenses are converted at the average exchange rate of the month in which the transaction occurs. As such, foreign currency fluctuations affect the reported values of individual lines on our balance sheet and income statement. When the USD strengthens (weakening CAD), the reported USD values of the Parent's CAD-denominated items decrease in the Consolidated Financial Statements, and the opposite occurs when the USD weakens (strengthening CAD).
Investors are reminded for purposes of calculating financial ratios, including dividend payout and share price-to-earnings ratios, to take into consideration that the Company's share price and dividend rate are reported in CAD and its earnings, EPS and financial statements are reported in USD.
______________________________ |
1 This is a non-IFRS financial measure. For more information on non-IFRS financial measures, see "Non-IFRS Measures" below and see "Non-IFRS Financial Measures" in our Fourth Quarter 2023 Management's Discussion and Analysis ("4Q2023 MD&A"). |
The financial results in USD for the thirteen and fifty-two weeks ended
Thirteen weeks ended | Fifty-two weeks ended | ||||||||
(Amounts in 000s, except per share amounts, unless otherwise noted) |
|
|
|
| |||||
Sales volume (millions of lbs) | 59.6 | 58.4 | 257.0 | 250.9 | |||||
Average foreign exchange rate (USD/CAD) | 1.3620 | 1.3572 | 1.3497 | 1.3017 | |||||
Sales | $ 237,126 | $ 250,346 | $ 1,080,338 | $ 1,069,714 | |||||
Gross profit | $ 48,657 | $ 54,838 | $ 218,689 | $ 229,928 | |||||
Gross profit as a percentage of sales | 20.5 % | 21.9 % | 20.2 % | 21.5 % | |||||
Adjusted EBITDA | $ 21,887 | $ 25,385 | $ 95,092 | $ 103,867 | |||||
Adjusted EBITDA as a percentage of sales | 9.2 % | 10.1 % | 8.8 % | 9.7 % | |||||
Net income | $ 6,416 | $ 11,131 | $ 31,677 | $ 54,730 | |||||
Diluted EPS | $ 0.20 | $ 0.32 | $ 0.93 | $ 1.56 | |||||
Adjusted Net Income | $ 7,293 | $ 12,318 | $ 38,680 | $ 51,712 | |||||
Adjusted Diluted EPS | $ 0.23 | $ 0.35 | $ 1.14 | $ 1.48 | |||||
Diluted weighted average number of shares outstanding | 33,776 | 35,130 | 33,934 | 35,069 |
Sales volume for the thirteen weeks ended
Sales in the fourth quarter of 2023 decreased by
Gross profit in the fourth quarter of 2023 decreased by
Adjusted EBITDA in the fourth quarter of 2023 decreased by
Reported net income in the fourth quarter of 2023 decreased by
Reported net income in the fourth quarter of 2023 and 2022 included certain non-routine expenses classified as "business acquisition, integration and other expense (income)." Excluding the impact of these non-routine items or other non-cash expenses, and share-based compensation, Adjusted Net Income in the Fiscal 2023 decreased by
Net cash flows provided by (used in) operating activities in the fourth quarter of 2023 increased by
Net Debt decreased by
Net Debt to Rolling Twelve-Month Adjusted EBITDA was 2.6x at
Outlook
"Overall, I am optimistic about the outlook for our business in 2024 and beyond", said
With a strong balance sheet,
While the Company anticipates that operating conditions will improve through the course of the fiscal year, additional challenges in the geopolitical and economic environment may impact the timeline for improvements to its financial performance and its growth agenda.
Dividend
Today, the Company's Board of Directors approved a quarterly dividend of
Conference Call
The Company will host a conference call on
A live audio webcast of the conference call will be available at www.highlinerfoods.com. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast.
The Company's Audited Consolidated Financial Statements and MD&A as at and for the fifty-two weeks ended
Non-IFRS Measures
The Company reports its financial results in accordance with International Financial Reporting Standards ("IFRS"). Included in this media release are the following non-IFRS financial measures: Adjusted EBITDA, Adjusted EBITDA as a Percentage of
The Company believes these non-IFRS financial measures provide useful information to both management and investors in measuring the financial performance and financial condition of the Company for the reasons outlined below. These measures do not have any standardized meaning as prescribed by IFRS and therefore may not be comparable to similarly titled measures presented by other publicly traded companies, nor should they be construed as an alternative to other financial measures determined in accordance with IFRS.
Adjusted EBITDA and Adjusted EBITDA as a Percentage of Sales
Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization adjusted for items that are not considered representative of ongoing operational activities of the business. The related margin, Adjusted EBITDA as a Percentage of Sales, is defined as Adjusted EBITDA divided by net sales, where net sales is defined as "Sales" on the consolidated statements of income.
We use Adjusted EBITDA (and Adjusted EBITDA as a percentage of sales) as a performance measure as it approximates cash generated from operations before capital expenditures and changes in working capital, and it excludes the impact of expenses and recoveries associated with certain non-routine items that are not considered representative of the ongoing operational activities, as discussed above, and share-based compensation expense related to the Company's share price. For the fifty-two weeks ended
The following table reconciles Adjusted EBITDA with measures that are found in our Consolidated Financial Statements, and calculates Adjusted EBITDA as a Percentage of Sales.
Thirteen weeks ended | ||||
(Amounts in $000s) | ||||
Net income | $ 6,416 | $ 11,131 | ||
Add back (deduct): | ||||
Depreciation and amortization expense | 7,977 | 6,170 | ||
Finance costs | 5,817 | 5,951 | ||
Income tax expense | 666 | 307 | ||
Standardized EBITDA | 20,876 | 23,559 | ||
Add back (deduct): | ||||
Business acquisition, integration and other expenses (income) | 410 | 945 | ||
Impairment of property, plant and equipment | — | 164 | ||
(Gain) loss on disposal of assets | (67) | 30 | ||
Share-based compensation expense | 668 | 687 | ||
Adjusted EBITDA | $ 21,887 | $ 25,385 | ||
$ 237,126 | $ 250,346 | |||
Adjusted EBITDA as Percentage of Sales | 9.2 % | 10.1 % |
Fifty-two weeks ended | ||||
(Amounts in $000s) | ||||
Net income | $ 31,677 | $ 54,730 | ||
Add back (deduct): | ||||
Depreciation and amortization expense | 26,373 | 23,578 | ||
Finance costs | 26,178 | 18,261 | ||
Income tax expense | 2,434 | 11,094 | ||
Standardized EBITDA | 86,662 | 107,663 | ||
Add back (deduct): | ||||
Business acquisition, integration and other expenses (income)(1) | 7,070 | (7,173) | ||
Impairment of property, plant and equipment | — | 332 | ||
(Gain) loss on disposal of assets | (109) | 163 | ||
Share-based compensation expense | 1,469 | 2,882 | ||
Adjusted EBITDA | $ 95,092 | $ 103,867 | ||
$ 1,080,338 | $ 1,069,714 | |||
Adjusted EBITDA as a Percentage of Sales | 8.8 % | 9.7 % |
(1) | The business acquisition, integration and other expenses (income) for the fifty-two weeks ended |
Adjusted Net Income and Adjusted Diluted EPS
Adjusted Net Income is net income adjusted for the after-tax impact of items which are not representative of ongoing operational activities of the business and certain non-cash expenses or income. Adjusted Diluted EPS is Adjusted Net Income divided by the average diluted number of shares outstanding.
We use Adjusted Net Income and Adjusted Diluted EPS to assess the performance of our business without the effects of the above-mentioned items, and we believe our investors and analysts also use these measures. We exclude these items because they affect the comparability of our financial results and could potentially distort the analysis of trends in business performance. For the fifty-two weeks ended
The table below reconciles our Adjusted Net Income with measures that are found in our Consolidated Financial Statements and calculates Adjusted Diluted EPS.
Thirteen weeks ended | Thirteen weeks ended | ||||||||
$000s | Adjusted | $000s | Adjusted | ||||||
Net income | $ 6,416 | $ 0.20 | $ 11,131 | $ 0.32 | |||||
Add back (deduct): | |||||||||
Business acquisition, integration and other (income) expenses | 410 | 0.01 | 945 | 0.03 | |||||
Impairment of property, plant and equipment | — | — | 164 | — | |||||
Share-based compensation expense | 668 | 0.03 | 687 | 0.02 | |||||
Tax impact of reconciling items (1) | (201) | (0.01) | (609) | (0.02) | |||||
Adjusted Net Income | $ 7,293 | $ 0.23 | $ 12,318 | $ 0.35 | |||||
Average shares for the period (000s) | 33,776 | 35,130 |
Fifty-two weeks ended | Fifty-two weeks ended | |||||||
$000s | Adjusted | $000s | Adjusted | |||||
Net income | $ 31,677 | $ 0.93 | $ 54,730 | $ 1.56 | ||||
Add back (deduct): | ||||||||
Business acquisition, integration and other (income) expenses (2) | 7,070 | 0.21 | (7,173) | (0.20) | ||||
Impairment of property, plant and equipment | — | — | 332 | 0.01 | ||||
Share-based compensation expense | 1,469 | 0.04 | 2,882 | 0.08 | ||||
Tax impact of reconciling items (1) | (1,536) | (0.04) | 941 | 0.03 | ||||
Adjusted Net Income | $ 38,680 | $ 1.14 | $ 51,712 | $ 1.48 | ||||
Average shares for the period (000s) | 33,934 | 35,069 |
(1) The tax impact of reconciling items includes the tax impact of the insurance proceeds of |
(2) The business acquisition, integration and other expenses (income) for the fifty-two weeks ended |
Net Debt and Net Debt to Rolling Twelve-Month Adjusted EBITDA
Net Debt is calculated as the sum of bank loans, long-term debt (excluding deferred finance costs and modification gains/losses) and lease liabilities, less cash.
We consider Net Debt to be an important indicator of our Company's financial leverage because it represents the amount of debt that is not covered by available cash. We believe investors and analysts use Net Debt to determine the Company's financial leverage. Net Debt has no comparable IFRS financial measure, but rather is calculated using several asset and liability items in the consolidated statements of financial position.
Net Debt to Rolling Twelve-Month Adjusted EBITDA is calculated as Net Debt divided by Rolling Twelve-Month Adjusted EBITDA (see above). We consider Net Debt to Rolling Twelve-Month Adjusted EBITDA to be an important indicator of our ability to generate earnings sufficient to service our debt, that enhances understanding of our financial performance and highlights operational trends. This measure is widely used by investors and rating agencies in the valuation, comparison, rating and investment recommendations of companies; however, the calculations of Adjusted EBITDA may not be comparable to those of other companies, which limits their usefulness as comparative measures.
The following table reconciles Net Debt to IFRS measures reported as at the end of the indicated periods in the consolidated statements of financial position and calculates Net Debt to Rolling Twelve-Month Adjusted EBITDA.
(Amounts in $000s) |
|
| ||
Bank loans | $ 2,559 | $ 127,554 | ||
Add-back: Deferred finance costs included in bank loans (1) | 441 | 574 | ||
Total bank loans | 3,000 | 128,128 | ||
Long-term debt | 233,791 | 238,200 | ||
Current portion of long-term debt | 5,625 | 7,500 | ||
Add-back: Deferred finance costs included in long-term debt (2) | 3,607 | 4,972 | ||
Less: Net loss on modification of debt (3) | (393) | (542) | ||
Total term loan debt | 242,630 | 250,130 | ||
Long-term portion of lease liabilities | 6,997 | 2,813 | ||
Current portion of lease liabilities | 4,589 | 4,622 | ||
Total lease liabilities | 11,586 | 7,435 | ||
Less: Cash | (7,300) | (155) | ||
Net Debt | $ 249,916 | $ 385,538 | ||
Rolling Twelve-Month Adjusted EBITDA | $ 95,092 | $ 103,867 | ||
Net Debt to Rolling Twelve-Month Adjusted EBITDA | 2.6x | 3.7x |
(1) Represents deferred finance costs that are included in "Bank loans" in the consolidated statements of financial position. See Note 11 to the Consolidated Financial Statements. |
(2) Represents deferred finance costs that are included in "Long-term debt" in the consolidated statements of financial position. See Note 14 to the Consolidated Financial Statements. |
(3) The net gain/loss on modification of debt has been excluded from the calculation of Net Debt as it does not represent the expected cash outflows from the term loan facility. |
Forward Looking Statements
Forward-looking statements can generally be identified by the use of the conditional tense, the words "may", "should", "would", "could", "believe", "plan", "expect", "intend", "anticipate", "estimate", "foresee", "objective", "goal", "remain" or "continue" or the negative of these terms or variations of them or words and expressions of similar nature. Actual results could differ materially from the conclusion, forecast or projection stated in such forward-looking information. As a result, we cannot guarantee that any forward-looking statements will materialize. Assumptions, expectations and estimates made in the preparation of forward-looking statements and risks that could cause our actual results to differ materially from our current expectations are discussed in detail in the Company's materials filed with the Canadian securities regulatory authorities from time to time, including the Risk Factors section of our MD&A for the thirteen and fifty-two weeks ended
About
For further information about the Company, please visit our website at www.highlinerfoods.com or send an e-mail to investor@highlinerfoods.com.
SOURCE
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