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Clearwater reports 2013 second quarter results

/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