## 5.4 PERFORMANCE By SEgMENT 

## Canadian Operations 

Our Canadian operations had external sales of $296.0 million in 2011, compared to $284.4 million in the previous year, representing an increase of 4.1%. The improvement in sales is a reversal of the decline experienced in fiscal 2010. Sales volume was relatively unchanged from 2011 at 69.9 million pounds compared to the previous year. Canadian food service sales volume increased by 5.5% in pounds, as the economic activity in Canada increased relative to 2010. Retail sales pounds decreased by 6.2% relative to the same period last year, due to consumers’ responses to increased prices and competition. 

Our retail operations were challenged in 2011, principally in the uncoated fillet category. We increased selling prices in 2009 and 2010, especially on uncoated fillets, which resulted in price increases at the consumer level that allowed cheaper private label and trader labels to gain market share in the category. To counteract this increase in competition, we invested sales and marketing funds to drive more volume through our customers’ stores, launched new value-pack commodity items to better compete with trader labels, and reformulated some products to have more competitive price points. We expect 1  our investment in these initiatives to result in higher retail volume in 2012. 

Adjusted EBITDA 4  in our Canadian operations for 2011 was $25.4 million compared to $25.0 million for the previous year. Although Adjusted EBITDA 4  is relatively flat compared to 2011, it increased as result of higher overall sales volumes, cost-reduction strategies, new product introductions, lower exchange rates that effectively reduced our product cost, and lower stock option expense of $3.1 million. However, EBITDA decreased as a result of investments we made in expanding distribution for the High Liner brand in our retail operations. 

## U.S. Operations 

(All currency amounts in this section are in U.S. dollars, unless otherwise noted) 

Our U.S. operations had external sales of $376.3 million in 2011, including the Viking and Icelandic USA Acquisitions, compared to $291.4 million in 2010. Viking added $37.5 million to our sales in 2011 compared to $1.7 million in 2010. The Icelandic USA Acquisition added $8.7 million to our sales in 2011. Sales volume for the year, including Viking but excluding the Icelandic USA Acquisition, increased by 20.5% to 128.3 million pounds compared to 106.5 million pounds in the 2010. Viking accounted for a 13.1% increase in volume and 6.6% increase in sales value. Our base business volume grew 7.4% in pounds and 9.0% in dollars. 

Our U.S. food service operations, including Viking but excluding the Icelandic USA Acquisition, recorded an increase in sales pounds of 28.1% in 2011. Viking accounted for 24.2% of the increase in volume, with the base business growing 3.9%. This continues to be a positive development 

as it represents the first year of growth since the start of the economic downturn, and we continue to remain cautiously optimistic that the worst of the recession in the United States is behind us and that consumers will be eating away from home more often. The increase in our base business was led by our distributor businesses. Our national accounts business was down by volume as these channels were particularly hit by the economic conditions. 

U.S. retail operations experienced a 12.1% increase in sales volume in 2011. We experienced growth for our branded products in traditional grocery stores of 17.8% during the quarter as we expanded distribution for our Fisher Boy  and Sea Cuisine  products, and also launched additional new products. We ran a television and radio advertising campaign in 2011 to increase Fisher Boy  brand awareness and increase sales. The ad campaign was very positive, in our opinion, justifying the incremental investment spent in marketing during the year relative to the previous year. Sales to club stores increased more than 20% in volume during 2011 as a result of new product launches, increased distribution for existing products, and strong sales for seasonal products. Sales volume for our private label products was in line with that of 2010, increasing by 2.5%. 

Adjusted EBITDA 4  for the U.S. operations for the year was $29.5 million compared to $21.5 million in 2010, an increase of 37.0%. Adjusted EBITDA 4  improved due to an increase in sales volume, largely coming from Viking. A stronger Canadian dollar decreased Adjusted EBITDA 4  in Canadian dollars by CAD$0.9 million. In addition, stock option expense in 2011 was $0.3 million lower than in 2010. 

## Outlook 1 

Our operating results are strong and our success with strategic initiatives in 2011 help position us for 2012 and beyond. Our focus will now be on integrating the Icelandic USA Acquisition and benefitting from expected synergies resulting from the combined operations. We expect a majority of the synergies to be achieved over the next two years, with total ongoing annual synergies thereafter in the range of US$16-$18 million. 

Over the past year, we saw growth in both food service and retail businesses in the U.S. and we expect 1  that strength to continue into 2012 with the addition of Viking  and Icelandic Seafood  brands of products as well as the strength in our High Liner and FPI  businesses. In Canada, while we recorded a turnaround positive 4.1% overall sales growth in 2011 due to improvement in our food service business, our retail operations remained under pressure due to increased selling prices and a more competitive retail environment. Our Canadian retail business gained strength as 2011 progressed, following a disappointing first quarter. To address this, we increased our marketing initiatives to drive volume in stores, launched value-pack commodity products that can compete with trader labels, and reformulated some items to achieve more competitive price points. We expect these initiatives, and the introduction of new products in 2012, to result in 

