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Press release from CNW Group

Clearwater reports strong 2012 annual and fourth quarter results

Monday, March 11, 2013

Clearwater reports strong 2012 annual and fourth quarter results08:36 EDT Monday, March 11, 2013/Not for distribution to United States or for dissemination in the United States /HALIFAX, March 11, 2013 /CNW/ - (TSX: CLR, CLR.DB.A):Clearwater continued to strengthen its financial position and create shareholder value in the fourth quarter of 2012 growing sales, adjusted EBITDA1 and generating strong free cash flows:In 2012 Clearwater had the highest revenues and adjusted EBITDA in its historyAnnual results for 2012 include sales growth of 5.3% to $350.4 million and adjusted EBITDA growth of 18.1% to $72.2 million.Results for fourth quarter of 2012 include sales growth of 6.7% to $93.0 million and adjusted EBITDA1 growth of 16.7% to $18.8 million.Free cash flow $17.1 million in 2012.Today, Clearwater Seafoods Incorporated ("Clearwater") reported its results for the annual and fourth quarter of 2012.Clearwater reported sales of $350.4 million and adjusted EBITDA1 of $72.2 million versus 2011 comparative figures of $332.8 million and $61.2 million representing growth rates of 5.3% in sales and 18.1% in adjusted EBITDA. This represents the fourth consecutive year of improved results.For the year growth in sales and adjusted EBITDA came as a result of higher sales volumes, particularly of coldwater shrimp, as well as higher sales prices for most species. The impact of the growth in sales on adjusted EBITDA was partially offset by a shift to lower margin species and higher procurement costs in certain species. Fourth quarter 2012 sales were $93.0 million and adjusted EBITDA was $18.8 million versus 2011 comparative figures of $87.1 million and $16.1 million, representing growth rates of 6.7% in sales and 16.7% in adjusted EBITDA.Free cash flows grew in the fourth quarter of 2012 to $37.8 million versus $15.9 million in 2011.  For the year, free cash flows grew to $17.1 million versus $2.2 million in 2011.  The improvements to free cash flow in 2012 were driven by growth in adjusted EBITDA of 18.1%, lower capital expenditures and a reduction in investment in working capital.Free cash flows were used to reduce debt during the quarter.  This, combined with higher adjusted EBITDA has resulted in an improvement in leverage from 3.8x at the December 31, 2011 to 2.9x as at December 31, 2012.1 - Refer to definitions within the Management discussion and AnalysisOutlook 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, "In 2012 the company had the highest revenues and adjusted EBITDA in its history. Management is pleased with the progress made towards our financial targets for creating shareholder value and expects that earnings and free cash flow momentum will continue through 2013."Management's commitment to creating shareholder value Building on the success achieved in 2012, management has set the following targets for 2013:sales growth - 5% or greater,adjusted EBITDA margins - 18% or greater,leverage - 3.0x; andreturn on assets - 12% or higher on a sustained basis.The sales and adjusted EBITDA ratios are annual goals whereas the return on assets and leverage ratios will be accomplished over time.Key Performance IndicatorsIn 000's of Canadian dollars(unless otherwise indicated)Years Ended December 3120122011TargetProfitability  Adjusted EBITDA*72,24361,188N/AAdjusted EBITDA (as a % of sales)20.6%18.4%18%Or Greater   Sales*350,447332,785N/ASales growth5.3%5.5%5.0%   Financial Performance  Free cash flows17,0532,197 N/A    Leverage2.93.8  3.0Or lower    Returns  Return on assets12.1%10.7%12%Or Greater    * Supplemental information provided for targetNote: Refer to definitions within the Management Discussion and Analysis Management has undertaken six initiatives to create shareholder value.Growing adjusted EBITDA and sales sustainably - Clearwater has experienced continued growth in adjusted EBITDA and sales by controlling costs and improving productivity, product mix and prices. Sales growth in 2012 of 5.3% exceeded Clearwater's 5% annual sales growth target. Annual adjusted EBITDA as expressed as a percentage of sales continues to be strong at 20.6% and exceeded 2011 rates of 18.4% by 12%.Clearwater will continue to lever its vertical integration existing segments 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 however, lower available supply of inventories as of December 31, 2012 and poor weather conditions for harvesting early in the year may limit growth in the first quarter of 2013.  However, continued strong results in the second half of the year will enable Clearwater to continue the trend of growth in annual results in 2013.Generating strong free cash flows and improving leverage - Clearwater is focused on generating increasing free cash flows and improving leverage on an annualized basis through generating strong cash earnings, managing its working capital and carefully planning and managing its capital expenditure program.  Clearwater's operations have a predictable seasonal pattern in which adjusted EBITDA is higher in the second half of the year and capital expenditures and inventories are higher in the first half of the year.  This 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.Free cash flows grew in the fourth quarter of 2012 to $37.8 million versus $15.9 million in 2011.  For the year, free cash flows grew to $17.1 million versus $2.2 million in 2011. The improvements to free cash flow in 2012 were driven by growth in adjusted EBITDA of 18.1%, lower capital expenditures and a reduction in investment in working capital. Reductions in working capital were primarily a result of a decline in inventory during the year.As of the fourth quarter of 2012 leverage improved to 2.9x versus 3.8x as at December 31, 2011.  Strong free cash flows were used to reduce debt during the fourth quarter of 2012. Clearwater's operations have a predictable seasonal pattern in which adjusted EBITDA is higher in the second half of the year and capital expenditures and investments in working capital is higher in the first half of the year.  As a result it expects leverage to rise in the first half of 2013 after which it will decline.Improving the capital structure - During the second quarter of 2012 Clearwater successfully completed a series of capital market transactions that substantially improved its debt structure.  The financing enables Clearwater to reduce projected interest costs by approximately $4.6 million annually, strengthens its liquidity and provides the capital structure necessary to execute growth plans while further reducing overall leverage.  Clearwater is now focused on initiating an active communications plan with its investors to ensure continued access, when required, to all sources of growth capital.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 February 2013, Clearwater has approximately 76% of its US Dollar, Euro and Yen exposures for 2013 hedged at rates of 0.987, 1.27 and 0.013 respectively.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.Communicating underlying asset values - Clearwater has an industry-leading portfolio of quotas that provide strong security of underlying value to lenders and investors.  In the second quarter of 2012 an independent appraisal of these quotas was completed by TriNav Fisheries Consultants, which 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:Expanding access to supply;Targeting profitable and growing markets, channels and customers;Innovating and positioning our products to deliver superior customer satisfaction and value;Increasing margins by improving price realization and cost management;Preserving the long-term sustainability of our resources; andImproving our organizational capability and capacity, talent, diversity and engagementManagement also believes that it has the people, processes and financial resources to execute this strategy to create value for its shareholders including the five year plan it developed in early 2012 to support and give direction to these goals.Financial Statements and Management's Discussion and Analysis Documents For a detailed analysis of Clearwater's 2012 fourth quarter and annual results, please see the Management's Discussion and Analysis and 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 at its website www.clearwater.ca.Key Financial Figures (In 000 of Canadian dollars except share amounts)             13 weeks ended  Year Ended     December 31, 2012 December 31, 2011 December 31, 2012 December 31, 2011           Sales  $92,957 $87,140 $350,447 $332,785 Earnings  10,518 16,394 22,704 22,955 Basic Earnings per share  0.17 0.28 0.29 0.32 Diluted Earnings per share1 0.15 0.23 0.29 0.32           Adjusted EBITDA 2 $18,812 $16,115 $72,243 $61,188           Shares outstanding, at period-end 3 50,948,698 50,947,695 50,948,698 51,064,503 Weighted average shares on a fully diluted basis 4 60,069,575 71,831,640 65,536,260 72,265,245Diluted earnings per share for the years ended December 31, 2012 and 2011 were anti-dilutive.Please see the Management's Discussion and Analysis for a reconciliation of adjusted EBITDA to the financial statements.Effective October 2, 2011 the units of the Fund were converted into shares of Clearwater Seafoods Incorporated on a 1 for 1 basis.If the outstanding convertible debentures were exercised the shares outstanding on a fully diluted basis at December 31, 2012 would be 58,472,257 shares.COMMENTARY REGARDING FORWARD-LOOKING STATEMENTSThis 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 ClearwaterClearwater 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 IncorporatedFor further information: Robert Wight, Chief Financial Officer, Clearwater, (902) 457-2369; Tyrone Cotie, Treasurer, Clearwater, (902) 457-8181.