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Press release from CNW Group

Clearwater Reports 2013 First Quarter Results

Wednesday, May 08, 2013

Clearwater Reports 2013 First Quarter Results

08:15 EDT Wednesday, May 08, 2013

/NOT FOR DISTRIBUTION TO UNITED STATES OR FOR DISSEMINATION IN THE UNITED STATES/

HALIFAX, May 8, 2013 /CNW/ - (TSX: CLR, CLR.DB.A)

  • Results for the first quarter of 2013 were consistent with management expectations and include sales of $68.3 million, adjusted EBITDA1 of $10.8 million versus 2012 comparative figures of $70.9 million and $10.9 million, respectively
  • Rolling twelve month results include adjusted EBITDA growth of 16.2% to $72.1 million and $8.8 million of growth in free cash flows to $9.0 million.
  • Adjusted EBITDA of $10.8 million was stable as compared with the first quarter of 2012 as continued productivity improvements drove strong margins
  • Lower sales volumes were a result of lower available opening inventory of cold water shrimp and clams due to record sales in the fourth quarter 2012.  Continuing strong demand momentum for our core species in Asia, in particular China, and North America will result in higher sales as supply increases later in the year
  • Management maintains strong and positive full year outlook consistent with long term growth targets including sales growth >5%; adjusted EBITDA margins >18%; leverage of approximately 3.0x; and return on assets > 12%


Today, Clearwater Seafoods Incorporated ("Clearwater") reported its results for the first quarter of 2013.

Clearwater reported sales of $68.3 million and adjusted EBITDA1 of $10.8 million versus 2012 comparative figures of $70.9 million and $10.9 million.  Free cash flows in the first quarter of 2013 were ($14.5) million versus ($6.1) million in the first quarter of 2012.

Results for the first quarter of 2013 are consistent with Management's expectations and position the business to deliver on its annual targets for 2013.

Adjusted EBITDA for the first quarter of 2013 was stable as compared with strong first quarter of 2012 performance as strong sales volumes for scallops and continued productivity improvements primarily offset the impact from lower sales volumes driven by lower available opening inventory of cold water shrimp and clams due to record sales in the fourth quarter 2012.

Free cash flow decreased by $8.4 million to ($14.5) million in the first quarter of 2013 as a result of a $14.6 million investment in working capital.  The investment in working capital was higher than in the first quarter of 2012 primarily as a result of having to replenish the lower opening inventory to normal levels during the first quarter of 2013.

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.

1 - Refer to definitions within the Management discussion and Analysis

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 and expects the Company to hit its annual targets for 2013."

Annual Targets for 2013

Building on the success achieved in 2012, management has set the following annual targets for 2013:

  • sales growth - 5% or greater,
  • adjusted EBITDA margins - 18% or greater,
  • leverage - 3.0x adjusted EBITDA; and
  • return on assets - 12% or higher

  Key Performance Indicators
In 000's of Canadian dollars
(unless otherwise indicated)
 

  Rolling 12 months ended March 30,
2013
March 31,
2012
Target
  Profitability      
  Adjusted EBITDA* 72,109 62,057 N/A
  Adjusted EBITDA 20.7% 18.6% 18%

 
(as a % of sales)     Or Greater
         
  Sales* 347,860 334,434 N/A
  Sales growth 4.0% 6.0% 5.0%
         
 
 
Financial Performance
Free cash flows
 
9,006
 
156
 
N/A
         
  Leverage 3.2 3.9 3.0
        Or lower
         
         
  Returns      
  Return on assets 13.0% 11.2% 12%
        Or Greater
  * Supplemental information provided for target        
  Note: Refer to definitions within the Management Discussion and Analysis      

 

Management has undertaken six initiatives to create shareholder value.

  1. Growing adjusted EBITDA and sales sustainably - 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 in the first quarter and difficult weather conditions for harvesting early in the year.  Stronger harvest conditions in the second half of the year are expected to enable Clearwater to continue the trend of growth in annual results in 2013.

  2. Generating strong free cash flows - Clearwater is focused on generating 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.

    Free cash flows were ($14.5) million for the first quarter of 2013 versus ($6.1) million in 2012 as a result of greater harvesting activities and investments in working capital in the first quarter of 2013.

    As of the first quarter in 2013 leverage increased to 3.2x adjusted EBITDA versus 2.9x as at December 31, 2012, which was consistent with Management expectations.  Management expects leverage to rise through the first half of 2013 and to decline thereafter for the balance of the year.

  3. 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 interest costs by approximately $4.6 million annually, strengthens its liquidity and provides the capital structure necessary to execute growth plans.  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.

  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 March 2013, Clearwater has approximately 76% of its US Dollar, Euro and Yen exposures for 2013 hedged at rates of 0.985, 1.26 and 0.013 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 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 2013 first quarter results, please see Clearwater's First 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)
 
      13 weeks ended Rolling 12 months ended
      March 30, 2013     March 31, 2012     March 30, 2013     March 31, 2012  
                           
  Sales $ 68,297   $ 70,878   $ 347,860   $ 334,434
  Earnings (loss)   (1,762)     (2,927)     23,869     18,194
  Basic Loss per share   (0.06)     (0.09)     N/A     N/A
  Diluted Loss per share1   (0.06)     (0.09)     N/A     N/A
                         
  Adjusted EBITDA 2 $ 10,812   $ 10,946   $ 72,109   $ 62,057
                         
  Shares outstanding, at period-end   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     N/A     N/A

1. Diluted loss per share for the periods ended March 30, 2013 and March 31, 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 March 30, 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

For further information:

Robert Wight, Chief Financial Officer, Clearwater, (902) 457-2369; Tyrone Cotie, Treasurer, Clearwater, (902) 457-8181.

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