/NOT FOR DISTRIBUTION TO UNITED STATES OR FOR DISSEMINATION IN THE
UNITED STATES /
HALIFAX, May 31, 2011 /CNW/ - (TSX: CLR.UN CLR.DB.B CLR.DB.A):
EBITDA grew by 25.1% to $9.9 million in the first quarter of 2011 due to
continued expansion of gross margins.
Management expects positive gross margins and earnings momentum to
continue in 2011
Plans to invest up to $15 million to upgrade its fleet harvesting and
plant processing capabilities in 2011
Board approves plans to convert from trust to public corporate structure
New Executive Vice President and Chief Commercial Officer joins
Clearwater effective April 26th
Today, Clearwater Seafoods Limited Partnership ("Clearwater") reported
its results for the first quarter of 2011.
Clearwater reported 2011 first quarter EBITDA of $9.9 million on sales
of $69.2 million versus 2010 comparative figures of $7.91 million and $69.31 million representing a growth in EBITDA of 25.1%.
The growth in first quarter 2011 EBITDA of $2.0 million came as a result
of improved sales prices and a shift to higher margin species,
partially offset by lower sales volumes, higher harvesting costs per
pound and a strengthening Canadian dollar.
1 - Refer to consolidation of entity previously proportionately
consolidated within the critical accounting policy section in the MD&A
for changes to the 2010 comparatives.
Outlook for 2011
Management is encouraged by the first quarter 2011 results and the
increasing global consumer and customer demand for its premium, wild,
sustainably harvested seafood. Taken in combination with the successful
execution of its' pricing strategy, cost savings and other productivity
initiatives, management believes Clearwater is poised to deliver sales,
operating margin and earnings growth through the balance of 2011.
Included in these productivity initiatives are Clearwater's 2011 plant
and vessel upgrade program and a restructuring of its Canadian Lobster
operations. The plant and vessel upgrade program is on track with the
majority of the investments to be completed in the first half of 2011.
In total, Clearwater expects to invest up to $15 million to upgrade its
fleet harvesting and plant processing capabilities in 2011.
In addition, Clearwater has restructured its lobster operations. We have
closed a surplus dry land storage facility for live lobster in Clark's
Harbor, Nova Scotia and reinvested and expanded capacity in two of our
newer and larger lobster holding facilities located in Arichat and
Lockeport, Nova Scotia. With a net neutral impact to EBITDA in 2011,
this restructuring positions Clearwater to improve profitability and
productivity within a highly competitive segment of the seafood
industry that has good long term growth prospects.
Foreign Exchange Hedging Program
Clearwater has a targeted foreign exchange hedging program that is
designed to reduce volatility in net cash flows. This program focuses
on using forward contracts to lock in exchange rates for up to 75% of
expected sales receipts in its key currencies for periods up to 18
months forward. As of May 31, 2011 Clearwater has covered 69% of its
estimated net Euro and Yen exposure for the remainder of 2011. As a
result, Clearwater expects that the impact of exchange rate volatility
on 2011 cash flows will be largely mitigated. In addition, Clearwater
has significant natural hedges against US dollar exposures through
loans denominated in US dollars.
In 2009 the Canadian Federal government announced tax changes for income
trusts that allow trusts to convert to a corporation on a tax-free
basis prior to 2013.
Clearwater has reviewed its corporate structure in light of this
legislation and determined that a public corporate structure is more
appropriate than a trust structure for the business. The business has
the ability to defer income taxes and it plans to continue to retain
earnings to reduce debt and provide for asset replacement and growth.
As a result, Clearwater's Board of Trustees has determined that the Fund
should convert from an income trust to a public corporate structure
effective January 1, 2012. The Fund is developing its conversion plan
and further details will be announced in the second quarter of 2011.
The Fund's annual general meeting will be deferred from its initially
announced date of June 22, 2011 to August 25, 2011 so that this may be
addressed at the same meeting as the annual general business.
Investment by Cooke Aquaculture
On May 4th Cooke Aquaculture announced they had purchased an interest in
Clearwater's trust units representing approximately 10% of Clearwater's
Cooke Aquaculture, based in Blacks Harbour, New Brunswick is a well
established leader in the high quality aquaculture of salmon and trout.
Clearwater is pleased that an experienced and successful Canadian
seafood company like Cooke sees the same value and growth opportunity
in our company that we do.
New Vice President Customer Relations
Effective April 26th, 2011, Greg Morency has joined Clearwater as
Executive Vice President, Chief Commercial Officer responsible for
Clearwater's global sales and marketing organization.
"A veteran of the food and consumer products industry, Mr. Morency, has
held senior leadership positions at Heinz, Unilever, International
Paper and Tate & Lyle. Mr. Morency also has extensive industry
experience in North America, Europe and Asia including his most recent
position as Vice President and General Manager, Asia Pacific for Tate &
Lyle. Greg's proven track record, international experience in sales and
marketing as well as his knowledge of global consumer markets make him
an ideal fit for this key position," said Ian Smith, Chief Executive
Officer of Clearwater.
Leading the global sales and marketing organization, Mr. Morency will
take responsibility and be the driving force behind the execution of
two of Clearwater's core strategies: targeting profitable and growing
markets, channels and customers; and, innovating and positioning
products to deliver superior customer satisfaction and value.
Ian Smith, Chief Executive Officer, commented,
"We will continue to execute with excellence against our overall
business strategy as well as key cost saving and productivity
initiatives. Market demand for our products is strong across all major
segments and we have every expectation that our business momentum will
continue in 2011. Furthermore, we believe that our six core strategies
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
will enable winning results and provide Clearwater with sustainable
competitive advantage and long term growth."
Chief Executive Officer
Clearwater Seafoods Limited Partnership
May 31, 2011
Financial Statements and Management's Discussion and Analysis Documents
For a detailed analysis of Clearwater and Clearwater Seafoods Income
Fund's 2011 first quarter results, please see the Management's
Discussion and Analysis and the financial statements. These documents
can be found in the disclosure documents filed by Clearwater Seafoods
Income Fund with the securities regulatory authorities available at www.sedar.com or at its website www.clearwater.ca.
Key Financial Figures ($000's except unit amounts)
13 weeks ended
April 2, 2011
April 3, 2010
Net earnings (loss) 1
Units outstanding at period-end
Limited Partnership Units
1. Please see the Management's Discussion and Analysis for a
reconciliation of these amounts to the financial statements.
Note: In the table above comparative sales for 2010 and EBITDA have been
adjusted to reflect the full consolidation of an entity that was
previously proportionately consolidated.
The Fund does not consolidate the results of Clearwater's operations but
rather accounts for the investment using the equity method. Due to the
limited amount of information that this would provide on the underlying
operations of Clearwater, the financial highlights of Clearwater are
Consolidation of Entity Previously Proportionately Consolidated
As a result of changes made effective January 1, 2011 to the management
agreement that governs Clearwater's frozen-at-sea shrimp and turbot
harvesting operations, Clearwater began to fully consolidate these
operations in 2011. Previously it included its proportionate 54% share
of these operations in its results. To provide for greater ease of
comparison, Clearwater has updated the 2010 comparative figures in the
MD&A to full consolidation, which included increasing sales, cost of
goods sold, selling, general and administration, interest expense and
minority interest expense. The MD&A contains a full reconciliation of
the adjustments made to the 2010 comparative figures.
With the acquisition of control Clearwater remeasured its' interest in
these operations to fair value which resulted in a gain of $11.6
million in the first quarter of 2011.
International Financial Reporting Standards ("IFRS")
Effective January 1, 2011 International Financial Reporting Standards
("IFRS") replaced Canadian GAAP for publicly accountable enterprises.
Accordingly, Clearwater began reporting under IFRS in the first quarter
of 2011 and has provided comparative figures for 2010 using IFRS.
It is critical for readers of Clearwater's financial statements to
There was no impact on Clearwater's EBITDA from the adoption of IFRS.
There was no impact on Clearwater's cash flows from operations and total
cash flows from the adoption of IFRS.
The adoption of IFRS did not impact any of Clearwater's key lending
All adjustments required to adopt IFRS were non-cash.
There are additional disclosures required under IFRS which have
dramatically increased the length of the first quarter of 2011
The main changes to Clearwater's financial statements were as follows:
There were no material changes to the statement of cash flows. The net
earnings figure changed due to non-cash changes in depreciation, the
amortization of the cumulative foreign currency translation account and
non-cash adjustments required to record the Class D & E units at fair
value and minority interest but cash flow from operations did not
Statement of Financial Position
The carrying value of certain property, plant and equipment as of
January 1, 2010 increased by $4.5 million upon transition to IFRS due
to asset componentization. In addition a reclassification of $1.5
million was recorded as of January 1, 2011 from other assets to
property, plant and equipment.
Reduction of the Cumulative Foreign Currency Translation Account - IFRS
1 allows entities to reduce this account to nil upon the date of
transition, i.e. January 1, 2010. This resulted in a reduction of $4.4
million of this account as of January 1, 2010.
Non-controlling Interest - Non-controlling interest is presented as a
component of equity under IFRS rather than as a liability. This
resulted in a reclassification of $3.6 million of minority interest to
non-controlling interest as of January 1, 2010.
Deferred income taxes - As of January 1, 2010 deferred tax liabilities
were decreased by $443,000.
Long-term debt - As of January 1, 2010 long-term debt was decreased by
$19.9 million due to the revaluation of Class D and E units to fair
market value. Previously, the Class D and E Units in the Partnership
were accounted for at cost and the Fund analyzed the carrying value of
these investments by considering whether there was a loss in value that
was other than temporary. Under IFRS, the Class D and E Units were
accounted for as a financial asset, measured at fair value through
profit or loss. In addition the revolving loan is presented as a
component of current liabilities under IFRS rather than as a long term
liability. This resulted in a reclassification of $29.3 million as of
January 1, 2010.
Under Canadian GAAP, the Class A Units and Class B Exchangeable Units
were classified as equity. Under IFRS, the Class A and B Units are
accounted for as a financial liability, measured at cost, and are
classified as "Partnership unit liability". The carrying value included
$2.2 million related to the conversion option on the Class D and E
units, which has been reclassified to the Class D and E unit liability.
Amounts previously disclosed as deficit, contributed surplus, and
accumulated other comprehensive loss within equity, are included within
the classification "Net deficit attributable to unitholders" under
IFRS. The impact to deficit of $20.7 million as at January 1, 2010 was
a result of the $19.9 million revaluation of the Class D and E units to
fair market value (refer above), the reclassification of the reduction
in accumulated other comprehensive loss of $4.4 million and a reduction
in accumulated amortization of $4.5 million as a result of the
componentization of property, plant and equipment.
Under Canadian GAAP, a deferred gain on fishing rights was classified as
other long term liabilities. Under IFRS, the deferred gain is not
recognized, reducing total fishing rights by $10.1 million as of
January 1, 2010.
Statement of income (loss)
Depreciation and amortization charges - As a result of refining the
degree to which we componentized our vessels and plants we have
recorded higher depreciation and amortization charges in the first
quarter of 2010 of $134,000.
Mark-to-Market on the long-term debt. As a result of the revaluation of
the Class D and E Units to fair market value a mark-to-market
adjustment of $4.2 million was recorded in the first quarter of 2010.
As a result of the revaluation of the Class D and E Units to fair market
value, deferred financing charges of $279,000 were reversed.
Amortization of The Cumulative Foreign Currency Translation Account -
This account accumulates the exchange difference that results from
converting foreign subsidiaries at average current rates of exchange
and converting all assets and liabilities at period end rates. IFRS 1
allows entities to reduce this account to nil upon the date of
transition, i.e. January 1, 2010 and Clearwater took this election.
Under Canadian GAAP, a gain or loss equivalent to the proportionate
amount of exchange gains and losses accumulated in the account was
recognized in net income when there was a reduction in Clearwater's net
investment in its subsidiary. Under IFRS this account is only
recognized in net income if there is considered to be a permanent
reduction in the investment. As a result of this difference, a
previously recognized loss of $214,000 was reversed.
Deferred income taxes - deferred taxes decreased by $18,000 due to the
tax impact of the other IFRS adjustments.
Presentation of non-controlling interest - non-controlling interest of
($59,000) is presented as an allocation of net earnings rather than as
a recovery under IFRS.
The net impact of the above changes was a $3.8 million increase in the
net loss to $10.1 million for the first quarter of 2010.
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. The
Fund and Clearwater do 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.
Clearwater is recognized for its consistent quality, wide diversity and
reliable delivery of premium wild, eco-labeled seafood, including
scallops, lobster, clams, coldwater shrimp, crab and groundfish.
Since its founding in 1976, Clearwater has invested in science, people,
technology, resource ownership and resource management to preserve and
grow its seafood resource. This commitment has allowed it to remain a
leader in the global seafood market.
SOURCE CLEARWATER SEAFOODS INCOME FUND
For further information:
Robert Wight, Chief Financial Officer, Clearwater, (902) 457-2369; Tyrone Cotie, Director of Corporate Finance and Investor Relations, Clearwater, (902) 457-8181.