Clearwater reports third quarter 2011 results


HALIFAX, Nov. 15, 2011 /CNW/ - (TSX: CLR CLR.DB.B CLR.DB.A):

  • Fifth consecutive quarter of growth in EBITDA, positive earnings momentum expected to continue in the fourth quarter of 2011 and into 2012
  • Continued growth in both sales, EBITDA and gross margin in the third quarter of 2011
    • Sales grew by 6.5% to $97.6 million
    • EBITDA grew by 17.5% to $22.8 million
    • Gross margin expanded from 17.6% to 20.2%
  • The ratio of total debt to EBITDA (leverage) improved to 4.04 in the third quarter of 2011 from 4.43 at December 31, 2010, continuing a trend of significant improvement since December 31, 2008.
  • Focused investments  in fleet and plants to maintain value and improve efficiency
  • Management communicate specifics of value creation initiatives

Today, Clearwater Seafoods Limited Partnership ("Clearwater") reported its results for the third quarter of 2011.

Clearwater reported 2011 third quarter EBITDA of $22.8 million on sales of $97.6 million versus 2010 comparative figures of $19.41 million and $91.61 million representing EBITDA growth of 17.5% and sales growth of 6.5%.

For year to date 2011, Clearwater reported EBITDA of $44.8 million on sales of $245.6 million versus 2010 comparative figures of $35.61 million and $231.71 million representing EBITDA growth of 25.8% and sales growth of 6.0%

The 17.5% growth in third quarter and 25.8% growth in year to date 2011 EBITDA 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 stronger Canadian dollar.  Clearwater experienced lower volumes in the first three quarters of 2011 due primarily to planned refit work done on its fleet, which reduced time available to harvest.  Clearwater experienced lower volumes in the third quarter of 2011 due mostly to the timing of turbot and snow crab sales in 2011.

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.

Focused investments to maintain value and improve efficiency

In August 2011 Clearwater signed an agreement to purchase the remaining 40% share in a scallop vessel bringing its ownership up to 100%.  The purchase price was $4.0 million and Clearwater intends to invest up to an additional $2.0 million to install new processing equipment on the vessel to improve its efficiency.
Clearwater's 2011 plant and vessel upgrade program is on target with the majority of the investments completed in the first three quarters of 2011.  Clearwater invested $19.1 million in the first three quarters of 2011 and plans to spend an additional $4.2 million in the remainder of the year for a total investment in 2011 of approximately $23.3 million.  Clearwater is reviewing capital expenditure plans for 2012 and believes they will approximate $20.0 million.  Clearwater will provide an update on this estimate when it reports its results for the fourth quarter of 2011.


Ian Smith, Chief Executive Officer, commented, "Management is encouraged by the third quarter and year to date 2011 results and the increasing global consumer and customer demand for our premium, wild, sustainably harvested seafood. 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 earnings momentum will continue through the fourth quarter of 2011 and into 2012."

Management's commitment to creating shareholder value

Over the past several months, the Trustees of Clearwater Seafoods Income Fund have been engaged in discussions with Cooke Aquaculture Inc. ("Cooke") with respect to a non-binding proposal made by Cooke to acquire securities of Clearwater.

On September 27 2011 the Fund's Trustees announced that they did not intend to pursue further discussions with Cooke after concluding that their proposal did not adequately reflect the value of the business and its future prospects.

Management believes that the increase in Clearwater's share value is a reflection of its' growing sales and EBITDA levels.  In light of this interest in the company and the additional focus on the trading value of the shares, management believes it has a responsibility to communicate more clearly its vision to create shareholder value.

There are six key initiatives that management is pursuing to continue to create value for the shareholders. They are:

  • Growing EBITDA sustainably - Clearwater has demonstrated its ability to consistently grow EBITDA in a sustainable manner over the past three years increasing EBITDA from $34.0 million in fiscal year 2008 to $58.6 million for the twelve months ended October 1, 2011.
  • Focusing on generating strong free cash flows - Clearwater's management will continue to focus on generating and retaining cash flows over the past three years.  They have accomplished this through increasing cash earnings, improving working capital management, selling non-core assets and carefully planning and managing the capital expenditure program.
  • Improving leverage and committing to leverage targets - Clearwater has reduced its leverage as a multiple of EBITDA over the past three years from 6.71 as of December 31, 2008 to 4.04 as of October, 2011 and has committed to further reductions to achieve a target of 3.0.  Management believes that lower leverage will position the business positively with debt rating agencies and lenders and ultimately allow it to lower its cost of debt.
  • Improving the capital structure - As of the start of the fourth quarter 2011 management completed the conversion of the public entity from a trust to a corporate structure, making the structure more efficient and transparent for both investors and lenders
  • Focused management of foreign exchange - Over the past year Clearwater has implemented a focused and targeted foreign exchange hedging program to reduce the impact of volatility in exchange rates on earnings.  This combined with stronger processes for price management has reduced the impact of exchange rate volatility on the business.
  • Building world class leadership, management, sales and marketing capabilities   - Over the past two years the company hired Ian Smith from Campbell's Soup as CEO and Greg Morency from Tate & Lyle as Vice President and Chief Commercial Officer.  As a result, we have made improvements to our processes around price and margin management, sales forecasting and customer planning.
  • Communicating the underlying asset values - Clearwater has an industry leading portfolio of quotas that provide strong security of underlying value to lenders and investors.  Furthermore, the company has and continues to make focused investments to maintain the value and improve the efficiency of its vessels and plant assets, both of which serve to support strong asset values that more than support the current trading value of the shares.

Management has developed financial targets for these initiatives including sales growth, EBITDA growth, leverage, return on assets and free cash flows. Management has already been communicating its results on a number of these measures and will expand these disclosures in future quarters.

Management believes that it has the correct strategies and focus to enable improved results and provide 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.

Financial Statements and Management's Discussion and Analysis Documents

For a detailed analysis of the Fund's 2011 third 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 the Fund with the securities regulatory authorities available at or at its website

Key Financial Figures (In 000 of Canadian dollars except share amounts)
Clearwater 13 weeks ended   39 weeks ended
  October 1, 2011   October 2, 2010   October 1, 2011   October 2, 2010
  Sales 1 $97,590   $91,633   $245,645   $231,738
  Net earnings (loss) 1 5,065   4,260   6,560   (10,312)
  EBITDA 1 $22,771   $19,357   $44,814   $35,563
  Shares outstanding, at period-end 2 50,947,160   51,126,912   50,947,160   51,126,912
  Fully diluted 71,831,642   62,323,941   71,831,642   62,323,941

1 - Please see the Management's Discussion and Analysis for a reconciliation of these amounts to the financial statements.
2 - Effective October 2, 2011 the units of the Fund were converted into shares of Clearwater Seafoods Incorporated on a 1 for 1 basis.

Note:  In the table above comparative sales and EBITDA for 2010 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 included above.


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.

About Clearwater

Clearwater is recognized for its consistent quality, wide diversity and reliable delivery of premium wild, eco-labelled 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 sustain and grow its seafood resource. This commitment has allowed it to remain a leader in the global seafood market.



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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