content_image/150931.jpg
## 5. Performance 

## 5.1 The American Pride Acquisition 

On October 1, 2013, High Liner Foods acquired the net assets and operations of American Pride Seafoods from Seattle-based American Seafoods Group LLC. 

American Pride is primarily a value-added frozen seafood food service and scallop processing business based in New Bedford, MA. The acquisition bolstered High Liner Foods’ market leadership position in the food service segment of the U.S. value-added frozen seafood market, and also added a significant U.S. based scallop processing operation to the Company’s business portfolio. 

American Pride’s branded and private label products are primarily distributed in the U.S. to food service customers in the commercial and independent restaurant, health care and education markets, as well as to some export and U.S. retail markets. 

High Liner Foods paid $34.5 million in cash proceeds, subject to closing working capital adjustments, to acquire American Pride’s net assets, which principally included inventory, plant and equipment located in New Bedford, and excluded accounts receivable of approximately $15.5 million, for a total estimated enterprise value at that time of approximately $50.0 million. As part of the transaction, we also assumed certain operating leases related to the acquired businesses. The acquisition was financed within existing credit facilities. 

Subsequent to the acquisition date and after estimated working capital adjustments, the purchase price was estimated to be $30.3 million, excluding accounts receivable. The Company and the vendor have yet to finalize the working capital adjustments for this transaction; however, the final amount will be ascertainable later in 2014. Additional information on the fair value of the identifiable assets and liabilities acquired is provided in note 4  to the Consolidated Financial Statements. The net assets recognized 

in the December 28, 2013 financial statements are based on a provisional assessment of fair value as the Company has sought an independent valuation for the purchase price allocation. The results of the valuation have not been finalized as at the date these financial statements were approved for issue by management, and as a result, the financial information disclosed is based on management’s best estimate and are disclosed on a provisional basis. 

American Pride’s revenues were approximately $190 million in 2012. The acquisition was modestly accretive to earnings in 2013 and we expect it will modestly accretive in 2014, after considering the impact of incremental interest costs related to financing the acquisition, and excluding the impact of any integration costs. One-time costs associated with the acquisition were expensed in 2013 and the acquisition was financed within existing credit facilities. 

High Liner Foods plans to operate American Pride without any substantial changes to its existing operations until post-Lent 2014. This will allow High Liner Foods to continue its current efforts focused on fully realizing the synergies related to the closure of our plant in Danvers, which occurred in the first quarter of 2013. As a result, realization of the full synergies expected from integrating this acquisition will be not be realized until after 2014. While the operating margins of American Pride have traditionally been lower than those of High Liner Foods, the Company expects these margins will improve to levels closer to High Liner Foods’ existing operating margins once American Pride is fully integrated and expected synergies from the transaction are realized. 

Since this acquisition didn’t occur until early in the fourth quarter of 2013, only one quarter of 2013’s financial performance includes the impact of the American Pride Acquisition. The information in the following table is intended to assist the reader in understanding the impact of the American Pride Acquisition on the Company’s consolidated financial performance in fiscal 2013. 

<img src='content_image/150931.jpg'>

