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HALIFAX, Nov. 1, 2013 /CNW/ - (TSX: CLR):
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Clearwater reports 12% growth in both sales and adjusted EBITDA in third
quarter of 2013.
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Year to date sales growth of 7.9% and adjusted EBITDA growth of 6.2%.
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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.
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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.
Seasonality
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.
Outlook
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:
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sales growth - 5% or greater,
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adjusted EBITDA margins - 18% or greater,
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return on assets - 12% or higher
Key Performance Indicators
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In 000's of Canadian dollars
(unless otherwise indicated)
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Rolling 12 months ended
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September 28,
2013
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September 29,
2012
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Target
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Profitability
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Adjusted EBITDA
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75,568
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69,546
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Adjusted EBITDA
(as a % of sales)
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20.4%
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20.2%
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18.0%
Or Greater
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Sales
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370,604
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344,630
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Sales growth
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7.5%
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4.6%
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5.0%
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Financial Performance
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Free cash flows
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25,199
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(5,317)
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Leverage (adjusted EBITDA multiple)
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3.1
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3.6
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3.0
Or lower
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Returns
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Return on assets
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12.5%
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11.9%
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12%
Or Greater
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Note: Refer to definitions within the Management Discussion and Analysis
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Management remains focused on six key initiatives to create shareholder
value.
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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.
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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.
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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.
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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.
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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.
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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:
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Expanding access to supply;
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Targeting profitable and growing markets, channels and customers;
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Innovating and positioning our products to deliver superior customer
satisfaction and value;
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Increasing margins by improving price realization and cost management;
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Preserving the long-term sustainability of our resources; and
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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 $100.0 million in
adjusted EBITDA by the end of 2016 or earlier.
1 - Refer to definitions within the Management discussion and Analysis
2- Clearwater's business experiences a predictable seasonal pattern in
which sales, margins and adjusted EBITDA are lower in the first half of
the year while investments in capital expenditures and working capital
are higher. This normally results in negative cash flows in the first
half of the year. We refer to the negative cash flows as "a net use of
cash" in this document.
Financial Statements and Management's Discussion and Analysis Documents
For a detailed analysis of Clearwater's 2013 third quarter results,
please see Clearwater's third Quarter 2013 Report, which includes
Management's Discussion and Analysis and the related financial
statements. These documents can be found in the disclosure documents
filed by the Corporation with the securities regulatory authorities
available at www.sedar.com or on Clearwater's website at www.clearwater.ca.
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13 weeks ended
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Year to date
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Rolling 12 months ended
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September 28, 2013
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September 29, 2012
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September 28, 2013
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September 29, 2012
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September 28, 2013
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September 29, 2012
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Sales
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$
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113,982
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$
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101,553
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$
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277,647
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$
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257,357
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$
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370,604
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$
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344,630
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Earnings
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27,224
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17,618
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15,596
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12,186
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26,114
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28,576
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Basic Earnings per share
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0.48
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0.30
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0.19
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0.13
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N/A
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N/A
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Diluted Earnings per share1
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0.47
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0.27
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0.19
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0.13
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N/A
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N/A
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Adjusted EBITDA 2
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$
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28,901
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$
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25,746
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$
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56,756
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$
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53,431
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$
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75,568
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$
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69,546
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Shares outstanding, at period-end
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50,948,698
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50,948,698
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50,948,698
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50,948,698
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N/A
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N/A
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Weighted average shares on a fully
diluted basis
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53,428,992
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60,069,575
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56,778,762
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67,882,334
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N/A
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N/A
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1.
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Diluted earnings per share for the 39 weeks ended September 28, 2013 and
September 29, 2012 was anti-dilutive.
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2.
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Please see the Management's Discussion and Analysis for a reconciliation
of adjusted EBITDA to the financial statements.
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COMMENTARY REGARDING FORWARD-LOOKING 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
Robert Wight, Chief Financial Officer, Clearwater, (902) 457-2369; Tyrone Cotie, Treasurer, Clearwater, (902) 457-8181.