/NOT FOR DISTRIBUTION TO UNITED STATES OR FOR DISSEMINATION IN THE UNITED STATES/
HALIFAX, March 23 /CNW/ - (TSX: CLR.UN, CLR.DB.B, CLR.DB.A):
- Increased annual operating EBITDA in 2009 by 18.5% to $40 million,
primarily a result of increased annual gross profit margins of 10% or
$4 million over 2008 to $44 million (see Note 1).
- Significantly improved leverage and reduced total debt by $27 million
- Strengthening Canadian dollar reduced fourth quarter margins by $4.3
Today, Clearwater Seafoods Limited Partnership ("Clearwater") reported its 2009 annual and fourth quarter results.
Clearwater reported increased annual EBITDA of $40 million, an increase of 18.5% or $6 million over 2008. This was primarily a result of a 10% increase in gross margins in 2009 to $44 million, an improvement of $4 million over 2008. The higher margins as a percentage of sales were due primarily to improved operating results in our clam business. In addition, stronger average foreign exchange rates on foreign currency denominated sales and lower fuel costs had a positive impact on margins for the year. The improved results in the clam business were driven by having the new clam vessel in operation all year as well an ongoing focus on cost reduction.
Some of the key trends experienced in the latter half of 2009 included a strengthening Canadian dollar relative to key foreign currencies and soft market conditions that reduced demand throughout the fourth quarter of 2009. Despite these challenges, Clearwater managed to improve operations and maintain key customer relationships and selling prices. In addition, for the majority of 2009 foreign exchange fluctuations were managed through the operations of the business as no foreign currency rate swaps were maintained in the second half of the year.
As expected, compared to the fourth quarter of 2008, Clearwater experienced lower sales volumes and margins in the fourth quarter of 2009, because of lower average foreign exchange rates and tighter lobster margins. Exchange rates, which were favourable for the first part of the year on US dollars, were 13% lower in the fourth quarter of 2009 as compared to 2008. In addition, soft local market conditions in the US and Japan led to a decline in sales and margins realized for live lobsters. Clearwater reported EBITDA of $8.7 million in the fourth quarter of 2009 versus $13.1 million in the same period of 2008. The fourth quarter of 2008 was a stronger quarter and the exchange rates and challenging market conditions for live lobster and other species made it difficult to achieve similar levels of EBITDA in the fourth quarter of 2009.
Subsequent to year-end, Clearwater disposed of non-core quotas from which it was not earning an adequate return on its capital employed. In the first quarter of 2010 Clearwater sold $2.6 million of non-core groundfish quotas and will record a gain on sale of $1.2 million. For all of 2009 and the first quarter of 2010 Clearwater generated proceeds of $17.9 million from the sale of non-core quotas and $1.3 million from the sale of other surplus assets.
Clearwater's leverage has improved to 5.14 times EBITDA from 6.71 in 2008 due to an improvement of $6.2 million in annual EBITDA a $27.2 million reduction in gross debt to $214.1 million at December 31, 2009 versus $241.3 million at December 31, 2008. Senior debt is now less than 2.03 times EBITDA, down from 2.87 times in 2008. Clearwater has a focused strategy for maintaining liquidity and reducing leverage which includes tightly managing its working capital, limiting capital spending and liquidating or selling assets which do not achieve an adequate return on capital.
Over the next several years Clearwater will continue to focus on reducing its leverage. This will come from a combination of improved earnings levels and from using the positive cash flow of the business to reduce debt. This should enable Clearwater to lower interest costs over time.
In December 2010 Clearwater Seafoods Income Fund has $45 million of convertible debentures that come due. These funds were invested by the Fund in Class C Units issued by Clearwater with similar terms and conditions, including maturity in December 2010. Clearwater also has approximately 1.3 billion in ISK denominated bonds, including CPI and accrued interest that come due in September 2010 (approximately Canadian $10.5 million). Clearwater is currently investigating refinancing alternatives and plans to refinance before respective maturity dates.
Prior to the receivership of Glitnir Banki hf ("Glitnir") in 2008 Clearwater had derivative contracts with Glitnir including foreign exchange derivative contracts and cross currency and interest rate swaps. For the foreign exchange derivative contracts, Clearwater and Glitnir reached an agreement in 2009 whereby the potential liability under these contracts was capped at $13.97 million, the minimum settlement was set at $2.9 million and Clearwater agreed to commence litigation on its position that these contracts are null and void and it has no liability. Clearwater has accrued $13.97 million plus interest as of December 31, 2009 for these contracts. For the cross currency and interest rate swap contracts, Clearwater has received external legal advice that these contracts may become declared null and void. In the fourth quarter of 2009 Clearwater commenced litigation with Glitnir with respect to these contracts and as well as for funds on deposit it has with Glitnir and damages related to financing that Glitnir was to provide for a privatization in 2008. It expects that this litigation could take some time to settle.
Looking forward to 2010, Clearwater's management believe that there is potential to build on the 2009 results with improvements in earnings and continuing the trend of positive cash flows. This is of course subject to any impact of weakened economic conditions in Asia, North America and Europe and a measure of stability in exchange rates. In addition, Clearwater expects continued soft market conditions in the first and perhaps second quarter of 2010 but expects that its efforts to improve results and reduce costs will show in the second half of 2010. Clearwater also believes that overall, as a food company, the business will continue to respond well in the current recessionary period as it has in 2009.
Colin MacDonald, Chairman and Chief Executive Officer, commented, "We are pleased to report a strong improvement in our results in 2009 despite the challenging worldwide economic conditions and are looking to build on that in 2010."
Chairman and Chief Executive Officer
Clearwater Seafoods Limited Partnership
March 23, 2010
Financial Statements and Management's Discussion and Analysis Documents
For an analysis of Clearwater and Clearwater Seafoods Income Fund's 2009 annual and fourth quarter results, please see the Management's Discussion and Analysis and the annual 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)
Clearwater 13 weeks ended 52 weeks ended
December 31, December 31, December 31, December 31,
2009 2008 2009 2008
Sales $68,394 $86,059 $284,066 $301,204
Net earnings (loss) ($2,191) ($81,734) $25,843 ($102,405)
Basic earnings (loss)
per unit ($0.04) ($1.60) $0.51 ($2.00)
EBITDA (1) $8,663 $13,122 $39,904 $33,671
Units 51,126,912 51,126,912 51,126,912 51,126,912
Fully diluted 62,323,941 62,323,941 62,323,941 62,323,941
1. Please see the Management's Discussion and Analysis for a
reconciliation of these amounts to the financial statements.
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.
(Note 1) Operating EBITDA is Earnings before interest, taxes, depreciation and amortization, foreign exchange gains and losses and one time and unusual adjustments. For a reconciliation of these amounts please refer to the Management's Discussion and Analysis.
Clearwater is recognized for its consistent quality, wide diversity and reliable delivery of premium seafood, including scallops, lobster, clams, coldwater shrimp, crab and ground fish.
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 Incorporated
For further information: 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