/Not for distribution to United States or for dissemination in the United States/ HALIFAX, Aug. 7, 2013 /CNW/ - (TSX: CLR): -- Second quarter 2013 sales revenues were significantly higher than 2012 due to strong and growing demand. -- Free cash flows were strong in both the quarter and year-to-date periods due to higher earnings and a disciplined and focused approach to working capital management. -- Strong catch rates in the latter part of the second quarter and the first part of the third quarter combined with strong demand are expected to build sales, margins and adjusted EBITDA momentum in the second half of the year. -- Management maintains strong and positive full year outlook consistent with long term growth targets including sales growth >5%; adjusted EBITDA margins >18%; and return on assets > 12% Today, Clearwater Seafoods Incorporated ("Clearwater") reported its results for the second quarter of 2013. Second quarter results Clearwater reported second quarter 2013 sales of $95.4 million and adjusted EBITDA(1) of $17.0 million versus 2012 comparative figures of $85.0 million and $16.7 million. Free cash flows(1) in the second quarter of 2013 were ($10.9) million versus ($27.3) million in the second quarter of 2012. Adjusted EBITDA for the second quarter of 2013 increased 2% as compared with the second quarter of 2012 due to a strong and growing market demand for Clearwater's products which is evidenced in top line growth, partially offset by higher clam and shrimp harvest costs incurred due to weather related harvest disruptions during the first quarter and early in the second quarter. The net use of cash(2) improved by $16.5 million to $10.9 million in the second quarter of 2013 as compared to the second quarter of 2012 as a result of a $4.9 million reduction in the investment in working capital, less cash, other income and expense items, lower payments on long-term debt and lower payments to minority partners. The larger investment in working capital in 2012 was due to higher inventory that were incurred due to strong catch rates. For the second quarter of 2013, excluding non-operational items of $7.7 million, earnings improved by $0.6 million, primarily due to lower interest expense. Non-operational items for the second quarter included refinancing and debt settlement costs, non-cash unrealized foreign exchange losses on foreign exchange contracts from the strengthening of the US dollar and Euro against the Canadian dollar. In addition, realized foreign exchange losses from the translation of the US dollar denominated debt, that settled June 2013, contributed to a non-operational loss in earnings for the second quarter. Refer to second quarter earnings within the Management Discussion and Analysis for further information. Year-to-date results Year-to-date 2013 Clearwater reported sales of $163.7 million and adjusted EBITDA(1) of $27.9 million versus 2012 comparative figures of $155.8 million and $27.7 million. Year-to-date use of cash was $25.2 million versus $33.4 million in 2012. Year-to-date adjusted EBITDA for 2013 was stable as compared with 2012 performance due to a strong and growing market demand for Clearwater's products which is evidenced in top line growth, partially offset by higher clam and shrimp harvest costs incurred due to weather related harvest disruptions during the first quarter and early in the second quarter causing higher cost inventories and lower available opening inventory of shrimp and clams due to record sales in the fourth quarter 2012. Year-to-date 2013 the use of cash improved by $8.2 million to $25.2 million as a result of lower interest expense, less cash, other income/expense items, lower payments on long-term debt and lower payments to minority shareholders, a $3.2 million reduction in the net investment in property plant and equipment (expenditures net of disposals and designated borrowings) offset partially by a $7.6 million incremental net investment in working capital. For the first half of 2013, excluding non-operational items of $6.3 million, earnings improved by $0.4 million, primarily due to lower interest expense. Including these non-operational items the net loss increased by $6.2 million to $11.6 million. Non-operational items for the first half of 2013 included refinancing and debt settlement costs, non-cash unrealized foreign exchange losses on foreign exchange contracts from the strengthening of the US dollar and Euro against the Canadian dollar. In addition realized foreign exchange losses from the translation of the US dollar denominated debt that settled June 2013 contributed to a non-operational loss in earnings for the first half of the year. Refer to year to date 2013 earnings within the Management Discussion and Analysis for further information. Seasonality Clearwater's business experiences a predictable seasonal pattern in which sales, margins and adjusted EBITDA are lower in the first half of the year while investments in capital expenditures and working capital are higher resulting in lower free cash flows in the first half of the year and higher free cash flows in the second half of the year. Results for the 2013 second quarter and year-to-date period are consistent with Management's expectations and position the business to deliver on its annual targets for 2013. When considering and seeking to understand seasonality, it is useful to look at rolling twelve month results. Rolling twelve month results include sales growth of 5.2% to $358.3 million, adjusted EBITDA growth of 8.5% to $72.4 million and $37.3 million of growth in free cash flows to $23.8 million. Outlook Global demand for seafood is outstripping supply, creating favorable market dynamics for vertically integrated producers such as Clearwater with strong resource access. Demand has been driven by growing worldwide population, shifting consumer tastes towards healthier diets, and rising purchasing power of middle class consumers in emerging economies. The supply of wild seafood is limited and is expected to continue to lag behind the growing global demand. This supply-demand imbalance has created a market place in which purchasers of seafood are increasingly willing to pay a premium to suppliers that can provide consistent quality and food safety, wide diversity and reliable delivery of premium, wild, sustainably harvested seafood. Clearwater, like other vertically integrated seafood companies, is well positioned to take advantage of this opportunity because of its licenses, premium product quality, diversity of species, global sales footprint, and year-round harvest and delivery capability. Ian Smith, Chief Executive Officer, commented, "Management is satisfied with the progress made in the second quarter and year-to-date periods and expects the Company to hit its annual targets for 2013." Mr. Smith continued "Strong catch rates in the latter part of the second quarter and the first part of the third quarter have resulted in both higher available volumes to sell in the third and fourth quarters at a lower cost of capture. When combined with strong demand, this should yield strong sales, margins and EBITDA consistent with our annual targets for 2013." Annual Targets for 2013 Building on the success achieved in 2012, management has the following annual targets for 2013: -- sales growth - 5% or greater, -- adjusted EBITDA margins - 18% or greater, -- return on assets - 12% or higher Key Performance Indicators In 000's of Canadian dollars (unless otherwise indicated) June 29, June 30, Rolling 12 months ended 2013 2012 Target Profitability Adjusted EBITDA* 72,413 66,714 N/A Adjusted EBITDA 18.0% (as a % of sales) 20.2% 19.6% or greater Sales* 358,262 340,580 N/A Sales growth 5.2% 5.3% 5.0% Financial Performance Free cash flows 23,811 (13,461) N/A Leverage 3.0 Or lower 3.5 4.0 by 2015 Returns Return on assets 12% 12.0% 11.4% Or Greater * Supplemental information provided for target Note: Refer to definitions within the Management Discussion and Analysis Management remains focused on six key initiatives to create shareholder value. 1. Sustainably growing adjusted EBITDA and sales - Clearwater has experienced continued growth in rolling twelve month adjusted EBITDA and sales by controlling costs and improving productivity, product mix and prices. Clearwater will continue to lever its vertical integration to maximize value per pound in existing segments and to capture a growing share of the seafood value chain through the introduction of value-added new products in certain core species. Management expects that the trend of earnings growth will continue in 2013 despite lower available supply of inventories to start the year and difficult weather conditions for harvesting in the first half of the year. Clearwater has begun to realize on improved harvest conditions and this combined with strong demand, should lead to strong sales, margins and adjusted EBITDA in the second half of 2013 and enable Clearwater to continue the trend of growth in annual results in 2013. In June 2013 the Company announced the planned investment in a third vessel for its' clam business. This investment, estimated at $45 million will begin once a suitable hull is sourced and a yard is commissioned to complete the work. Management is seeking to source a hull in the third quarter of 2013, complete conversion work over a period of 18 months and enter the new vessel into service in 2015. This investment will drive growth in Clearwater's clam business by expanding access to clam supply by approximately 60% when the customer distribution chain is fully in place by 2017, at which time Clearwater expects to earn incremental contribution margins of approximately $8 million per year. 2. Generating strong free cash flows- Clearwater is focused on increasing free cash flows through generating strong cash earnings, managing its working capital and carefully planning and managing its capital expenditure program. Seasonality results in lower free cash flows higher debt balances and higher leverage in the first half of the year and higher free cash flows, lower debt balances and lower leverage levels in the second half of the year. The net use of cash improved by $16.5 million to $10.9 million in the second quarter of 2013 as compared to the second quarter of 2012 as a result of a $4.9 million reduction in the investment in working capital, less cash other income/expense items, lower payments on long-term debt and lower payments to minority shareholders. The larger investment in working capital in 2012 was due to higher inventory that was due to strong catch rates. 3. Improving the capital structure - During the second quarter of 2013 Clearwater successfully completed a refinancing of substantially all of its senior debt facilities. The new capital structure provides financing for $45 million investment in a new vessel for the Company's clam harvesting operations, reduces the overall cost of debt and annual interest costs by 1.75 percentage points to 4.75% or approximately $2.6 million per year, further enhances liquidity through the use of a revolving debt facility that is not limited by a borrowing base and provides full availability through the fiscal period of the full amount of the $75 million facility and allows for early redemption of 7.25% convertible debentures. As of June 29, 2013 leverage decreased to 3.5x adjusted EBITDA from 4.0x as of June 30, 2012. Although this financing and the previously mentioned investment in a third clam vessel will result in an increase in total leverage for the next 2 years, management remains committed to a long-term leverage goal of 3x or lower and expects to return to those levels by 2015. 4. Focused management of foreign exchange - Clearwater has a focused and targeted foreign exchange hedging program to reduce the impact of short-term volatility in exchange rates on earnings. This, combined with stronger processes for price management reduces the impact of exchange rate volatility on the business. As of August 2013, Clearwater has approximately 66% of its estimated US Dollar, Euro and Yen exposures for 2013 hedged at rates of 0.986, 1.25 and 0.013 respectively and approximately 1% of its estimated US Dollar, Euro and Yen exposures for 2014 hedged at rates of 0.984, 1.33 and 0.011 respectively. 5. Building world class leadership, management, sales and marketing capabilities - Clearwater has begun implementing best in class programs for key account management, new product development, sales and operations planning, recruitment and compensation practices. In addition, over the past two years Clearwater has added a number of new people to its senior management team and its' Board of Directors. 6. Communicating underlying asset values - Clearwater has an industry-leading portfolio of quotas that provide strong security of underlying value to lenders and investors. In 2012 an independent appraisal of these quotas placed a value on the quotas of $453 million. Clearwater obtained further independent support for the value in these licenses in the third quarter of 2012 when both the Arctic surf clam fishery and Nova Scotia snow crab fishery received the Marine Stewardship Council (MSC) certification. These species join the Clearwater family of MSC-certified offerings including Canadian sea scallops, Argentine scallops, Canadian coldwater shrimp and Eastern Canadian offshore lobster. Clearwater now boasts a total of seven species certified by the MSC, completing the certification of all its core products, and giving the Company the widest selection of MSC-certified species of any seafood harvester worldwide. Management believes that it has the correct strategies and focus to provide a sustainable competitive advantage and long-term growth. These strategies include: 1. Expanding access to supply; 2. Targeting profitable and growing markets, channels and customers; 3. Innovating and positioning our products to deliver superior customer satisfaction and value; 4. Increasing margins by improving price realization and cost management; 5. Preserving the long-term sustainability of our resources; and 6. Improving our organizational capability and capacity, talent, diversity and engagement Management also believes that it has the people, processes and financial resources to execute these strategies to create value for its shareholders including the execution of the five year plan it developed in 2012 to support and give direction to these goals. 1 - Refer to definitions within the Management discussion and Analysis 2- Clearwater's business experiences a predictable seasonal pattern in which sales, margins and adjusted EBITDA are lower in the first half of the year while investments in capital expenditures and working capital are higher. This normally results in negative cash flows in the first half of the year. We refer to the negative cash flows as "a net use of cash" in this document. Financial Statements and Management's Discussion and Analysis Documents For a detailed analysis of Clearwater's 2013 second quarter results, please see Clearwater's Second Quarter 2013 Report, which includes Management's Discussion and Analysis and the related financial statements. These documents can be found in the disclosure documents filed by the Corporation with the securities regulatory authorities available at www.sedar.com or on Clearwater's website at www.clearwater.ca. Key Financial Figures (In 000 of Canadian dollars except share amounts) Rolling 12 months 13 weeks ended Year to date ended June 30, June 29, 2013 June 29, June 30, June 29, 2013 2012 June 30, 2012 2013 2012 Sales $ 95,368 $ 84,926 $ 163,665 $ 155,804 $ 358,262 $ 340,580 Earnings (loss) (9,866) (2,505) (11,628) (5,432) 16,508 16,016 Basic Loss per share (0.24) (0.08) (0.30) (0.17) N/A N/A Diluted Loss per share(1) (0.24) (0.08) (0.30) (0.17) N/A N/A Adjusted $ EBITDA( 2) $ 17,043 16,739 $ 27,855 $ 27,685 $ 72,413 $ 66,714 Shares outstanding, at period-end 50,948,698 50,948,698 50,948,698 50,948,698 N/A N/A Weighted average shares on a fully diluted basis( 3) 58,472,257 71,831,640 58,472,257 71,831,640 N/A N/A 1. Diluted loss per share for the periods ended June 29, 2013 and June 30, 2012 was anti-dilutive. 2. Please see the Management's Discussion and Analysis for a reconciliation of adjusted EBITDA to the financial statements. 3. If the outstanding convertible debentures were exercised the shares outstanding on a fully diluted basis at June 29, 2013 would be 58,472,257 shares. COMMENTARY REGARDING FORWARD-LOOKING STATEMENTS This news release may contain forward-looking statements. Such statements involve known and unknown risks, uncertainties, and other factors outside management's control including, but not limited to, total allowable catch levels, selling prices, weather, exchange rates, fuel and other input costs that could cause actual results to differ materially from those expressed in the forward-looking statements. Clearwater does not undertake any obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances other than as required under applicable securities laws. About Clearwater Clearwater is one of North America's largest vertically integrated seafood companies and the largest holder of shellfish licenses and quotas in Canada. It is recognized globally for its superior quality, food safety, diversity of species and reliable worldwide delivery of premium wild, eco-certified seafood, including scallops, lobster, clams, coldwater shrimp, crab and groundfish. Since its founding in 1976, Clearwater has invested in science, people and technological innovation as well as resource ownership and management to sustain and grow its seafood resource. This commitment has allowed it to remain a leader in the global seafood market and in sustainable seafood excellence. SOURCE Clearwater Seafoods Incorporated Robert Wight, Chief Financial Officer, Clearwater, (902) 457-2369; Tyrone Cotie, Treasurer, Clearwater, (902) 457-8181. To view this news release in HTML formatting, please use the following URL: http://www.newswire.ca/en/releases/archive/August2013/07/c4162.html CO: Clearwater Seafoods Incorporated ST: Nova Scotia NI: FBR FOD FIN ERN -0- Aug/07/2013 13:19 GMT
Clearwater reports 2013 second quarter results
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