8.4 FOREIgN CURRENCy  Overview 8.3 LOSS OF CUSTOMER AND CREDIT RISk  Income Statement Effects of Foreign Currency this increases inventory on our balance sheet, it results in  higher income and profitability due to the negotiated lower  cost product.  In 2010, we established a joint venture between High Liner  and an European raw material supplier. The joint venture,  along with an Asian company, established a processing  facility in China and began operations in 2010. This facility  processes products from raw material primarily sourced from  our European joint venture partner and sold to us. In addition  to helping us contain costs, the joint venture allows us to  better control quality and availability of products. Senior management accountability:  Kelly Nelson, Executive Vice President, CFO & Secretary Board oversight accountability:  Audit Committee We acquired a primary processing plant in China as part of the Icelandic USA Acquisition. This subsidiary  produces raw material and finished goods for our Newport News operations. High Liner Foods’ income statement and balance sheet are  both affected by foreign currency fluctuations in a number  of ways. Generally, a stronger Canadian dollar is beneficial  to earnings and working capital requirements but can  reduce shareholders' equity as discussed below. Conversely,  a weakening Canadian dollar increases costs and working  capital and decreases sales and related profit. Senior management accountability:  Kelly Nelson, Executive  Vice President, CFO & Secretary; Mario Marino, President and  Chief Operating Officer Canadian Operations; Keith Decker,  President and Chief Operating Officer High Liner Foods (USA) Board oversight accountability:  Audit Committee The average Canadian dollar in 2011 (at an exchange rate of  $0.9891 for each U.S. dollar) has strengthened approximately  4% over the average of 2010. More than 55% of the Company’s  sales and expenses are denominated in U.S. dollars. As such,  fluctuations in exchange rates impact the translated value of  sales, costs and expenses. Secondly, most of the items we sell  in Canada have U.S.-dollar-denominated raw material costs  as we procure these on world markets in U.S. dollars. Thirdly,  items we produce in one country and sell in another are  affected by exchange fluctuations.  High Liner Foods has a self-sustaining operating subsidiary  in the U.S. Its domestic currency is U.S. dollars. In addition,  a small amount of sales of the Canadian company are  transacted in U.S. dollars. Because we report our financial  results in Canadian dollars, a strengthening Canadian dollar  has the immediate effect of decreasing the Canadian dollar  value of U.S.-dollar-denominated sales, costs and expenses. In 2011, U.S.-dollar-denominated sales comprised  approximately 55% of our total ongoing sales in domestic  currency. In 2012, our U.S.-dollar-denominated sales revenue  is expected 1  to grow to approximately 67% of our total sales  due to the Icelandic USA Acquisition.  We sell the vast majority of our products to large food  retailers, supercentres and club stores, and food service  distributors in North America. The food distribution  industry is consolidating. Our customers are getting larger,  more sophisticated and want to conduct business with  experienced, reliable suppliers. We are an important supplier  to our customers because we can transact business on their  terms. We must continue to grow and stay ahead of customer  expectations in order to continue to be important to them.  We have one customer that represents approximately 15%  of our sales. When we include the expected annual Icelandic  USA sales, this customer will represent 1  approximately 17%  of our sales. We focus on ensuring that our supply chain  management and technology infrastructure keep pace with  the service delivery expectations of our customers. We do not currently insure our accounts receivable risk as  our bad debt expense has been nominal. Although economic  conditions are not as positive as they were prior to the  downturn, we believe 1  the worst is behind us and expect 1 most of our customers will see improvements in business  results. As of the filing of this report, we are not aware of any  customer who is in financial trouble that would result in a  loss to the Company, and our receivables are substantially  current at year-end. In looking at the effect on net income, the majority of sales  in U.S. dollars, being those of our U.S. subsidiary, have U.S.- dollar-denominated input costs and, therefore, changes in  exchange rate only affect the conversion to Canadian dollars  of profit earned in the U.S. operations. For products produced  in Canada destined for the U.S. market, raw material is also  purchased in U.S. dollars. However, labour, packaging and  overhead for these products are purchased in Canadian  dollars and, therefore, a strengthening Canadian dollar  increases these costs in U.S.-dollar terms and decreases  the related profit. Conversely, a weakening Canadian dollar  decreases these costs in U.S. dollar terms and increases  the related profit. For products produced in the U.S. for the  Canadian market, the full product cost is subject to changes  in exchange rates.  44 HIGH LINER FOODS INCORPORATED