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## Sales 

Sales for fiscal 2013 were $947.3 million, compared to $942.6 million in fiscal 2012. In 2013, more than two thirds of the Company’s operations, including sales, were denominated in USD. The weaker Canadian dollar in Fiscal 2013 compared to Fiscal 2012 decreased the value of reported USD sales by approximately $9.3 million relative to the conversion impact in 2012. 

Sales in domestic currency for 2013, including American Pride, were $956.3 million compared to $942.3 million for the previous year. American Pride added $39.7 million in sales in 2013. Sales volume measured in pounds, including American Pride, was 282.4 million pounds compared to 275.2 million pounds for the previous year, an increase of 2.6%. American Pride added 12.6 million pounds of sales in 2013. 

Excluding American Pride, sales in domestic currency decreased by $25.7 million and pounds sold decreased by 5.4 million in 2013 compared to 2012. The vast majority of the decrease in sales in 2013 is attributable to lower food service sales in the U.S. and lower retail private label value-added sales in Canada and the U.S., partially offset by strong club sales in both countries, increased branded retail sales in the U.S. and increased food service sales in Canada. The decline in U.S. food service sales reflects weak sales being experienced by the U.S. restaurant industry as a whole in 2013, and the decrease in retail private label value-added sales reflects a trend being experienced in the seafood marketplace overall of decreased demand for retail private label seafood products. In addition, sales in 2013 were negatively impacted by the following items compared to 2012: 

• Decreases in certain commodity seafood costs in 2013 led to a reduction in the selling prices for some products in 2013; 

• An earlier Lent resulted in a shorter selling period in 2013 between the Super Bowl and Good Friday, a period when seafood is typically heavily promoted; and 

• In the first quarter of 2013, we expedited the closure of our plant in Danvers and relocated food service distribution to Newport News which resulted in production and logistical challenges and hindered the delivery of product to our customers. 

Sales trends are discussed in more detail below in Section 5.4 “Performance by Segment”. 

## Gross Profit 

Gross profit in 2013 was $215.4 million compared to $206.7 million in 2012. Gross profit as a percentage of sales was 22.7% in 2013 compared to 21.9% the previous year. Gross profit increased by $8.8 million in 2013 relative to 2012 due to increased sales as a result of the American Pride Acquisition, along with an overall decrease in input costs and synergies realized from integrating Icelandic USA. Partially offsetting these items were a 2.0% decrease in the Company’s sales volumes (excluding the impact of the American Pride Acquisition); increased operating expenses related to our U.S. manufacturing facilities; and the impact of an unfavourable change in the CAD/USD exchange rate used to translate our CAD denominated operations to USD. 

In the first quarter of 2013, we expedited the closure of our plant in Danvers and increased production at our manufacturing facilities in Newport News and Portsmouth, and relocated U.S. food service distribution to Newport News. During this transition, we incurred incremental operating costs associated with decreased plant 

throughput rates as our manufacturing facilities integrated new products into their respective production facilities. While we have been successful in increasing plant throughput rates from those experienced in the first quarter, these rates have not been fully restored to optimal levels and as a result, we continued to incur additional operating costs in Newport News and Portsmouth related to these reduced throughputs. In addition, in the first quarter of 2013, additional costs were incurred related to the plant closure to relocate equipment and competitive pressures that reduced commodity selling prices more rapidly than the applicable decline in cost for these products, negatively impacted gross profit. 

## Distribution Expense 

Distribution expense, consisting of freight and storage, increased in 2013 by $8.9 million, or 19.9% from the previous year, due partially to higher sales volumes resulting from the American Pride Acquisition. Distribution expenses as a percentage of sales increased in 2013 to 5.6%, compared to 4.7% in the previous year, reflecting the production issues encountered after the closure of our Danvers plant in the first quarter of 2013 associated with reduced plant throughput rates and increased movement of product between our U.S. facilities to balance the productivity issues and plant capacities. In addition, in the first quarter of 2013 we relocated our U.S. food service distribution to Newport News and incurred additional distribution costs as a result of challenges encountered related to hiring and training additional staff for our cold storage facility. 

The additional distribution costs incurred in 2013 were approximately $9.0 million and had the effect of deferring the full impact of the expected synergies related to closing the Danvers plant. Excluding these additional costs, distribution expense would have been 4.7% of sales for 2013 equal to that of 2012. The Company has focused on these costs throughout the year and it is expected that costs will be lower as a percentage of sales in 2014 than in 2013, and just slightly higher than historical levels. 

## Selling, General and Administrative (“SG&A”) Expense 

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*  The % of stock compensation expense allocated between SG&A and Cost of sales in 2013 was relatively consistent with 2012. 

SG&A expense as reported was $2.0 million lower in 2013 than in the previous year. 

During 2013, we recorded a stock-based compensation expense of $6.1 million in SG&A compared to $9.3 million during 2012. In 2012, our stock-based compensation expense was higher than in 2013 due to a significant increase in our stock price in that year. Although our stock price continued to increase in 2013, we amended stock options granted prior to the third quarter of 2013 to 

