Clearwater Reports Continued Growth

Fri, 01 Nov 2013


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 6.2%.
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 EBITDA1 of $28.9 million for the third quarter of 2013 versus 2012 comparative figures of $101.6 million and $25.7 million. Free cash flows1 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.

Year-to-date results

Clearwater reported sales of $277.6 million and adjusted EBITDA1 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 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 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)
Rolling 12 months ended September 28,
2013 September 29,
2012 Target
Adjusted EBITDA 75,568 69,546

Adjusted EBITDA
(as a % of sales) 20.4% 20.2% 18.0%
Or Greater

Sales 370,604 344,630
Sales growth 7.5% 4.6% 5.0%

Financial Performance
Free cash flows 25,199 (5,317)

Leverage (adjusted EBITDA multiple) 3.1 3.6 3.0
Or lower

Return on assets 12.5% 11.9% 12%
Or Greater
Note: Refer to definitions within the Management Discussion and Analysis

Management remains focused on six key initiatives to create shareholder value.

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.

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.

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% convertible debentures.

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.

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 0.011 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 and is implementing a more robust ERP system to provide enhanced business information to support management decision making.

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 worldwide.

Management believes that it has the correct strategies and focus to provide 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; and
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 or on Clearwater’s website at

13 weeks ended Year to date Rolling 12 months ended
September 28, 2013 September 29, 2012 September 28, 2013 September 29, 2012 September 28, 2013 September 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
Basic Earnings per share 0.48 0.30 0.19 0.13 N/A N/A
Diluted Earnings per share1 0.47 0.27 0.19 0.13 N/A N/A

Adjusted EBITDA 2 $ 28,901 $ 25,746 $ 56,756 $ 53,431 $ 75,568 $ 69,546

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 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.


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 forward-looking information.

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 securities laws.

No regulatory authority has approved or disapproved the adequacy or accuracy of this news release.

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

View the Clearwater website as

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