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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 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.
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.
Global demand for seafood is outstripping supply, creating favorable market
dynamics for vertically integrated producers such as Clearwater with strong
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
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
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%
Free cash flows 23,811 (13,461) N/A
3.5 4.0 by 2015
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%
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
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
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
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
(loss) (9,866) (2,505) (11,628) (5,432) 16,508 16,016
per share (0.24) (0.08) (0.30) (0.17) N/A N/A
per share(1) (0.24) (0.08) (0.30) (0.17) N/A N/A
EBITDA( 2) $ 17,043 16,739 $ 27,855 $ 27,685 $ 72,413 $ 66,714
period-end 50,948,698 50,948,698 50,948,698 50,948,698 N/A N/A
shares on a
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
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
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
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
SOURCE Clearwater Seafoods Incorporated
Robert Wight, Chief Financial Officer, Clearwater, (902) 457-2369; Tyrone
Cotie, Treasurer, Clearwater, (902) 457-8181.
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CO: Clearwater Seafoods Incorporated
ST: Nova Scotia
NI: FBR FOD FIN ERN
-0- Aug/07/2013 13:19 GMT
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