High Liner Foods Incorporated (TSX: HLF; HLF.A), today announced that it will be consolidating its North American supply chain as a result of overcapacity at several plants and the acquisition of a more modern plant in Newport News, Virginia in December 2011.
The two affected facilities – located in Burin, Newfoundland and Labrador, and Danvers, Massachusetts – are the company’s highest-cost and most underutilized facilities.
“High Liner Foods recognizes that this is a very difficult day for the more than 300 employees, as well as their families, in both communities most of whom will be leaving the High Liner family later this year or early next year as a result of this decision,” said Henry Demone, Chief Executive Officer of High Liner Foods. “High Liner Foods has grown through three recent acquisitions, and many of High Liner’s plants are operating below capacity. High Liner Foods operates in a very competitive North American market with price-sensitive consumers, and we must be cost-efficient to remain competitive. Despite our growth, the reality is that we only need four North American plants to supply our customers.”
The Burin plant is scheduled to close by the end of December 2012. This plant employs 121 full-time employees (13 non-union and 108 union), with 28 casual employees as well as an additional 29 inactive employees on long-term disability. A small product development office in St. John’s, Newfoundland and Labrador, will also close at the end of 2012. Meanwhile, all commitments made by High Liner Foods to the Government of Newfoundland and Labrador in 2007 as part of the purchase agreement of the Fishery Products International assets will be respected. As part of that commitment, High Liner Foods has invested more than $4 million towards the Burin Employee Life and Health Trust, research and development, and other capital expenditures.
The plant in Danvers will remain open until the first quarter of 2013, and employs more than 160 people.
After-tax cash costs of approximately $2.7 million for the closures will be expensed over the period from today to the cessation of employment at each plant. In addition, an after-tax impairment charge of $9.9 million for plant and equipment to estimated net realizable value will be recorded. Under IFRS, $8.7 million of this will be reflected in the financial statements for the first quarter of 2012, with the remainder being expensed as additional depreciation between April 2012 and the closure of the facilities.
The annual ongoing pre-tax reduction in operating costs (which represents an increase in earnings before interest, taxes, depreciation and amortization, or EBITDA) resulting from this consolidation, once all the affected plants are closed, is estimated to be approximately $9.6 million, with savings scheduled to begin in January 2013. Approximately $7.5 million of these savings were included in the previously announced $16-$18 million in efficiencies estimated to result from the Icelandic USA acquisition concluded in December 2011. An additional $2 million of savings are also expected from the increased scope of the project, bringing the total to $9.6 million.
Notice of Conference Call
Management of High Liner Foods will host a conference call tomorrow, Friday, May 4, 2012 at 10:30 AM (ET) to discuss today’s announcement. To join the call, please dial 647-427-7450 or 1-888-231-8191. A taped replay of the conference call will be available until Friday, May 11, 2012 at midnight by calling 416-849-0833 or 1-855-859-2056, reference number 75973779.
A live audio webcast of the conference call will be also available at www.highlinerfoods.com. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download or registration that may be required to join the webcast. The webcast will be archived at the above website for one year.
About High Liner Foods Incorporated
High Liner Foods Incorporated is the leading North American processor and marketer of prepared, value-added frozen seafood. High Liner’s retail branded products are sold throughout the United States, Canada and Mexico under the High Liner, Fisher Boy, Mirabel, Sea Cuisine and Royal Sea labels, and are available in most grocery and club stores. The Company also sells its products under the High Liner, FPI, Mirabel, Viking, Icelandic Seafood, Samband of Iceland, Seastar, and Seaside brands to restaurants and institutions, and is the major supplier of private label seafood products to North American food retailers and food service distributors. High Liner Foods is a publicly traded Canadian company, trading under the symbols HLF and HLF.A on the Toronto Stock Exchange.
This document contains forward-looking statements. Forward-looking statements can generally be identified by the use of the conditional tense, the words “may”, “should”, “would”, “believe”, “plan”, “expect”, “intend”, “anticipate”, “estimate”, “foresee”, “objective” or “continue” or the negative of these terms or variations of them or words and expressions of similar nature. Specific forward-looking statements in this document include, but are not limited to expectations with respect to: timing of plant closures; timing and final number of related layoffs; amount and timing of the related one-time cash expense; amount and timing of the write-down of plant and equipment; amount and timing of the annual ongoing reduction in operating costs resulting from the plant consolidation; and amount and timing of the capital expenditures in excess of normal requirements to allow the movement of production between plants. These statements are based on a number of factors and assumptions including, but not limited to: availability, demand and prices of raw materials, energy and supplies; the condition of the Canadian and United States economies; foreign exchange rates, especially the rate of exchange of the Canadian dollar to the U.S. dollar; our ability to attract and retain customers and our operating costs. The statements are not a guarantee of future performance. By their nature, forward-looking statements involve uncertainties and risks that the forecasts and targets will not be achieved. Readers are cautioned not to place undue reliance on forward-looking statements, as actual results may differ materially from those expressed in such forward-looking statements. We include in publicly available documents filed from time to time with securities commissions and The Toronto Stock Exchange, a discussion of the risk factors that can cause anticipated outcomes to differ from actual outcomes. Except as required under applicable securities legislation, we do not undertake to update forward-looking statements, whether written or oral, that may be made from time to time by us or on our behalf, whether as a result of new information, future events or otherwise.
High Liner Foods Incorporated
K.L. Nelson, 902-634-6200
Executive Vice President,
Chief Financial Officer & Secretary
Salvador Diaz, 416-815-0700 ext. 242
For Media in Canada:
Colour for High Liner Foods
Nancy Doyle, 902-722-3156
For Media in the U.S.:
Matter Communications for High Liner Foods (USA)
Erik Arvidson, 978-499-9250
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