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HALIFAX, Nov. 1, 2013 /CNW/ - (TSX: CLR):
-- Clearwater reports 12% growth in both sales and adjusted EBITDA
in third quarter of 2013.
-- Year to date sales growth of 7.9% and adjusted EBITDA growth of
-- Results included twelve month rolling adjusted EBITDA of $75.6
million and free cash flows of $25.2 million for 2013 versus
$69.5 million and a net use of cash of $5.3 million in the
prior period, respectively.
-- Management maintains strong and positive full year outlook
consistent with long term growth targets including sales growth
greater than 5%; adjusted EBITDA margins greater than 18%; and
return on assets greater than 12%
Third quarter results
Clearwater reported sales of $114.0 million and adjusted EBITDA(1) of $28.9
million for the third quarter of 2013 versus 2012 comparative figures of
$101.6 million and $25.7 million. Free cash flows(1) were $11.4 million
versus $13.0 million in the third quarter of 2012. Margins improved 3.7
percentage points from 24.0% in 2012 to 27.7% for 2013.
Adjusted EBITDA for the third quarter of 2013 increased $3.2 million, or
12.3%, as compared with the third quarter of 2012 due to a strong and growing
market demand that improved sales prices for the majority of species.
Margins were partially offset by higher clam and scallop harvest costs.
Free cash flow from operations improved in the third quarter of 2013 as a
result of strong sales prices and volumes which contributed to improved
margins. Demand remains strong for all species positively impacting
margins. This was offset by higher capital expenditures from scheduled
refits and vessel conversions, and the timing of payments to minority interest
partners. Refer to the Management discussion and analysis for further
information on free cash flow.
Clearwater reported sales of $277.6 million and adjusted EBITDA(1) of $56.8
million for the 39 weeks year to date versus 2012 comparative figures of
$257.4 million and $53.4 million. Year-to-date use of cash was $12.6 million
versus $20.5 million in 2012. Gross margins improved 1.3 percentage points,
to 22.2% as compared with the same period in 2012.
Adjusted EBITDA for 2013 increased 6.2% due to a strong and growing market
demand that improved sales prices for scallops, lobster and snow crab.
Margins were partially offset by higher clam, scallop and shrimp harvest costs.
In 2013 the use of cash improved by $7.9 million to $12.6 million as a result
of improved margins and lower interest expense and the timing of dividend
payments received from a joint venture.
Clearwater's business experiences a 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 third 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 7.5% to $370.6 million, adjusted EBITDA growth of 8.7% to $75.6
million and growth in free cash flows of $30.5 million to $25.2 million.
Global demand for seafood is outstripping supply, creating favorable market
dynamics for vertically integrated producers such as Clearwater which have
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
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 pleased with the
progress made in the third quarter and year-to-date periods and expects the
Company to hit its annual targets for 2013."
Mr. Smith continued "Market demand for our products is strong and has
contributed to improvements in revenue and free cash flow. As we continue to
invest in our business and increase our access to supply, we expect to
continue to deliver sustainable and profitable growth in 2014 and beyond."
Annual Targets for 2013
Management set 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)
September 28, September 29,
Rolling 12 months ended 2013 2012 Target
Adjusted EBITDA 75,568 69,546
Adjusted EBITDA 20.4% 20.2% 18.0%
(as a % of sales) Or Greater
Sales 370,604 344,630
Sales growth 7.5% 4.6% 5.0%
Free cash flows 25,199 (5,317)
Leverage (adjusted EBITDA 3.1 3.6 3.0
Return on assets 12.5% 11.9% 12%
Note: Refer to definitions
within the Management Discussion
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 to 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. During the summer months Clearwater realized
improved harvesting conditions and this combined with strong
demand, is leading to stronger sales, margins and adjusted EBITDA
in the second half of 2013 enabling Clearwater to continue the
trend of growth in 2013.
In June 2013 the Company announced the planned investment in a
third vessel for its' clam business.
This investment is estimated at $45 million. A vessel with
suitable size hull and power configuration has been sourced and a
yard is being commissioned to commence vessel conversion in the
first quarter of 2014. Management expects to 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% 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.
In addition certain large investments in longer term assets, for
example vessel conversion/acquisitions, are funded with long term
capital such as amoritizing term loans. As a result Clearwater
does not deduct such capital expenditures in the determination of
free cash flows but rather deducts the related debt payments.
Free cash flow for the rolling 12 month period ending September
28, 2013 increased by $30.5 million to $25.2 million as compared
to the same period in 2012 as a result of improvements in cash
flows from operations. Improvements were a result of strong
demand for the majority of species contributing to higher prices
and sales volumes. In addition lower interest costs and a
reduction in the use of working capital contributed to the
improvement in free cash flow.
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 allowed for the early redemption of 7.25%
As of September 28, 2013 leverage decreased to 3.1x adjusted
EBITDA from 3.6x as of September 29, 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.
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. Clearwater
has approximately 73% 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 33% of its estimated US Dollar,
Euro and Yen exposures for 2014 hedged at rates of 0.984, 1.37 and
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 and is implementing a more robust ERP
system to provide enhanced business information to support
management decision making.
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 placed a value on these quotas of $453
million. Clearwater obtained further independent support for the
value in these licenses in the third quarter of 2012 when the
Arctic surf clam fishery received the Marine Stewardship Council
(MSC) certification. These species join the Clearwater family of
MSC-certified sustainable seafood offerings including Canadian sea
scallops, Argentine scallops, Canadian coldwater shrimp and
Eastern Canadian offshore lobster. Clearwater now boasts a total
of seven species certified sustainable 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
Management believes that it has the correct strategies and focus to provide
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 and create value for its shareholders.
This includes the capacity to execute Clearwater's five year strategic plan.
This plan, developed and initiated in 2012, has the stated aim to achieve
$500.0 million in sales and $100.0 million in adjusted EBITDA by the end of
2016 or earlier.
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 third quarter results, please see
Clearwater's third 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
Rolling 12 months
13 weeks ended Year to date ended
September September September September September September
28, 2013 29, 2012 28, 2013 29, 2012 28, 2013 29, 2012
Sales $ 113,982 $ 101,553 $ 277,647 $ 257,357 $ 370,604 $ 344,630
Earnings 27,224 17,618 15,596 12,186 26,114 28,576
share 0.48 0.30 0.19 0.13 N/A N/A
share(1) 0.47 0.27 0.19 0.13 N/A N/A
EBITDA( 2) $ 28,901 $ 25,746 $ 56,756 $ 53,431 $ 75,568 $ 69,546
( ) 50,948,698 50,948,698 50,948,698 50,948,698 N/A N/A
shares on a
basis 53,428,992 60,069,575 56,778,762 67,882,334 N/A N/A
1. Diluted earnings per share for the 39 weeks ended September 28, 2013
and September 29, 2012 was anti-dilutive.
2. Please see the Management's Discussion and Analysis for a
reconciliation of adjusted EBITDA to the financial statements.
COMMENTARY REGARDING FORWARD-LOOKING STATEMENTS
This news release may contain "forward-looking information" as defined in
applicable Canadian securities legislation. All statements other than
statements of historical fact, included in this release, including, without
limitation, statements regarding future plans and objectives of Clearwater,
constitute forward-looking information that involve various known and unknown
risks, uncertainties, and other factors outside management's control.
Forward-looking information is based on a number of factors and assumptions
which have been used to develop such information but which may prove to be
incorrect including, but not limited to, total allowable catch levels, selling
prices, weather, exchange rates, fuel and other input costs. There can be no
assurance that such information will prove to be accurate and actual results
and future events could differ materially from those anticipated in such
For additional information with respect to risk factors applicable to
Clearwater, reference should be made to Clearwater's continuous disclosure
materials filed from time to time with securities regulators, including, but
not limited to, Clearwater's Annual Information Form. The forward-looking
information contained in this release is made as of the date of this release
and Clearwater does not undertake to update publicly or revise the
forward-looking information contained in this release, whether as a result of
new information, future events or otherwise, except as required by applicable
No regulatory authority has approved or disapproved the adequacy or accuracy
of this news release.
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 MAR ERN
-0- Nov/01/2013 12:22 GMT
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