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2008-11-14 20:53:06 CET 2008-11-14 20:54:06 CET REGULATED INFORMATION Clearwater Finance Inc. - Company AnnouncementCLEARWATER REPORTS THIRD QUARTER 2008 RESULTSAttention Business/Financial Editors CLEARWATER REPORTS THIRD QUARTER 2008 RESULTS /Not for release over US newswire services/ HALIFAX, November 14/CNW/ - (TSX:CLR.UN): Prices and margins stable and showing strength despite current market conditions Fleet fully operational and possibility of lower fuel costs in future quarters Sales and gross profit for the third quarter of 2008 were $82 million and $18 million versus $91 million and $22 million in 2007 (prior to adjustment in 2008 for new inventory standard) Management confident in refinancing its balance sheet and senior term debt which is due December 8, 2008 Today, Clearwater Seafoods Income Fund (the “Fund”) reported third quarter 2008 results. Sales prices and margins performed well during the quarter, despite challenging market conditions. We believe our strategy of operating with a variety of species and selling to a diverse group of customers worldwide will continue to show positive results in what we expect to be a challenging economic environment over the next twelve months. We are pleased to announce the completion of our multi-year vessel renewal program. With the last of our planned frozen-at-sea vessel conversions complete and our new lobster vessel expected to start operations in November, our fleet is now fully operational with no major vessel acquisitions or conversions planned for the next three to five years. This will result in a more efficient fleet with lower costs, improved quality and greater catch volumes, all of which will serve to further improve profitability. Looking at the quarter, sales and gross profit for the third quarter of 2008 were $82 million and $18 million versus $91 million and $22 million in 2007 (prior to the adjustment in 2008 for new inventory standard). There were a number of significant operational items that impacted the third quarter of 2008 as follows: Scallop ma- - Scallop margins down from 2007 due mainly to gi- s lower ov- sa- volumes driven lower catch volumes of larger size ra- es l scallops, part- offset higher average prices in the quarter. Costs ally were - hig- part to sale of product procured from third - er, - o parties a- hi- fu- costs. These factors combined, led an overall d herl decrease in total gross margins during the quarter. Subsequent to quarter- end fuel prices have declined which should lead to lower operating costs going forward. Clam margins - The clam fleet has operated with less harvesting capacity in the first half of 2008 resulting in lower harvest and sales volumes in the third quarter of 2008. We expect to see this improve in the future as our newly converted vessel, the Arctic Endurance, successfully completed its sea and fishing trials during the second quarter and has begun to harvest product, which is now being sold. Clam harvest costs were higher due to higher fuel costs but as stated above, these are expected to lower as fuel prices decline. Shrimp and turbot - Our new shrimp/turbot joint venture has shown some Shrimp prices in the quarter increased to the very promising initial results. highest levels we have seen in recent years, catch rates have been strong and margins from turbot were also very strong in the quarter. Lobsters - we realized improved lobster sales and margins in the quarter a as res- of shore prices prices paid, partia- lower selling lt ly prices. The factors listed above led to lower distributable cash levels in the third quarter and year-to-date as compared with 2007. Distributable cash for the quarter and nine months of 2008 was a shortfall of $3.2 million and $9.6 million versus distributable cash of $5.8 million and $486,000 in the comparative periods of 2007. The Trustees continue to monitor the distribution policy and have decided it would be appropr- to a a distribu- third of and ate ion - restrictions in agreements, not consid- distr- until - ring butio- - s - n the refinancing mentioned in this release is complete. Strategic investments In late April 2008, Clearwater took delivery of the vessel it had been converting over the past several months for its clam fishery. The vessel undertook sea trials and commissioning in the second quarter and commenced fishing in June. Management expects strong growth in the clam business and the full annual impact from this new vessel should be seen in 2009. Clearwater has also renewed and expanded its joint venture agreement for its shrimp harvesting operations effective April 1, 2008. The key terms of this new extension of the 10 10 years, the of the factory and and the of rights to fishing quotas. intere- in the part- to reflect the ts ersh- p - and use of quotas quotas share of - e increased from April April 1, 1, 2008 will enable tocombi- combine e and related shri- into a a larger p created efficien- efficiencies profits for the ies business with significantly less capital employed. We expect returnsfrom this The overall impact of these investments is to increase our harvesting capacity while reducing our expected operating costs through employing more efficient vessels and reducing the size of our fleet. Strategic Review On October 28, 2008 Clearwater Seafoods Income Fund and CS Acquisition Limited Partnership (the "Purchaser") announced that they would not be in a position to close the previously announced transaction pursuant to which a partnership owned by a consortium led by Clearwater Fine Foods Inc. ("CFFI"), would acquire the business of the Fund. This announcement came as a result of the unprecedented uncertainty and volatility in global financial markets and, in particular, Glitnir Banki hf being placed into receivership shortly before the anticipated closing in October. Glitnir was to provide approximately 10 per cent of the financing required to complete the transaction. Despite diligent efforts to address the financing issues, the parties were unsuccessful in arranging the alternative sources of financing needed for the completion of the transaction. As a result, the parties terminated the transaction agreement. Tom Traves, Chairman of the Trustees, speaking on behalf of the Fund, stated, "The Trustees are disappointed that this disruption of the financial markets did not allow the Fund and the consortium partners to complete the transaction. However, we remain confident in the business and its prospects for the long term. The Trustees will continue to work with CFFI to review alternatives to maximize value for the unit holders." CFFI continues to be supportive of the Trustees' efforts. John Risley, President of CFFI, stated "Clearwater has and will continue to be a long term strategic investment for CFFI and we continue to believe in the long term prospects of the business. We will continue to work with the Fund and its advisors in reviewing its options as markets return to more normal conditions." Refinancing Management is currently working on refinancing its balance sheet and with a successful conclusion, believes that the following renewed facilities combined with the significant cash balances currently being carried will be sufficient to meet Clearwater's ongoing cash requirements: Notes due in December 2008 - There are approximately Canadian $43 and mil- US$15 mill- of term - due December 2008. ion on - - - s Man- is iscurr- discussions - exte- the date and gem- ntly od nt rep- these notes in - 2009 and b- it will be successful in ace - l- - e- - es y achieving this. Foreign exchange contracts - Clearwater has a significant book of exchange for- contr- outstanding. - quarter-end mark to ign cts t mar- liability thesecontracts wasapproximately $7.9million (see et noteto Clear- Seafoods L- Partnership'sfinancial ater m- t- d sta- Subse- to quarter- the Canadian dollar eme- uent end ts). dep- significantly against thecurren- contracted for, in in eci- ies ted particular the US dollar and the Japanese Yen. As a result the majority of Clearwater's opt- contracts effect- became forward contracts, on vely the of whi- a- due - Novemb- 2008 to - 2009. h e nr - - - - - y Man- iscurr- - discussions w- view to extending the gem- ntly n th nt maturity of these contracts to better match its foreign currency receipts. For further information on Clearwater's capital resources please refer to the liquidity and capital resources section of its 2008 third quarter Management's Discussion and Analysis. Summary With the last of our planned frozen-at-sea vessel conversions complete and our new lobster vessel expected to start operations in November, our fleet is now fully operational with no major vessel acquisitions or conversions planned for the next three to five years. This will result in a more efficient fleet with lower costs, improved quality and greater catch volumes, all of which will serve to further improve profitability. Harvestcostsha- been impacted by higher fuelcosts, but subsequent to e quarter-end ha- declined to moreacceptable levels. A one-cent perli- e re change in - pr- of fuel impacts harvesting cos- by approximately $280,000 - ce s e based on - 2007 fuel purchases. Subsequent to quarter-end 2008 fu- - l - - - l prices per litre declined below year-to-date average costs. The current exchange environment has seen a weakening of the Canadian dollar versus a basket of international currencies. In fiscal 2007 46% of our sales were denominated in US dollars at an average exchange rate of 1.07, 19% were in Euros at an average rate of 1.45, 9% were in Japanese Yen at an average rate of 0.009 and 7% were in Pound Sterling at an average rate of 2.12. Clearwater does not expect to realize a material net benefit to short-term cash flows from this positive exchange environment as it has substantial foreign exchange contracts including option and forwards which effectively lock in the rate to be realized by Clearwater for the next 12-18 months depending on currency. Clearwater's inventory of foreign exchange contracts is disclosed in note 5(a) to its third quarter 2008 financial statements. Outlook Colin MacDonald, Clearwater's CEO stated “Our strengths are our strong positions in our internationally recognized sustainable fisheries, our leading edge, innovative harvesting and processing technologies, our vertical integration and our business strategies to deliver long-term value. We have an outstanding and dedicated workforce,- quota - and global customer - - - - - - - - - - - - - - t - - - , relationships that - and we forwa- building on these - d - - - - s strengths for the balance of 2008 and going forward. “Our sales prices and margins performed well during the quarter, despite challenging market conditions. We believe our strategy of operating with a variety of species and selling to a diverse group of customers world-wide as well as strong demand for sustainable seafood will continue to show positive results in what we expect to be a challenging economic environment over the next twelve months. “Finally I am pleased to announce the completion of our multi-year vessel renewal program and we look forward to operating the most up-to-date fleet of factory freezer vessels in Canada.” Colin MacDonald Chief Executive Officer Clearwater Seafoods Limited Partnership November 14, 2008 Financial Statements and Management's Discussion and Analysis Documents For an analysis of Clearwater and Clearwater Seafoods Income Fund's quarterly results, please see management's discussion and analysis and the third quarter and year-to-date 2008 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). Financial Highlights and Significant Items Effective January 1, 2008, Clearwater adopted section 3031 “Inventories” that establishes more extensive guidance on the determination of cost, requires impairment testing and expands the disclosure requirements to increase transparency. The adoption of this standard impacted the costs that are included in inventory, as a portion of plant overhead, administration and depreciation costs are included in inventory. As a result, the gross profit has been impacted as the administration and depreciation costs that are now included in inventory are expensed as part of the cost of goods sold as opposed to other costs that are listed below the gross profit. In the third quarter of 2008 Clearwater changed its accounting policy from expensing refit costs as incurred to capitalizing and amortizing them over the period between refits as this results in the financial statements providing more reliable and relevant information about the effects of these refits on the entity's financial position and financial performance. Clearwater has changed this policy retroactively and a result has updated the comparative figures presented to reflect the new policy. The adoption of this policy reduced amounts in of sold for costs, increased amortization expense and increased capital expenditures. Clearwater 2008 third quarter report provides full details on the impact of these changes in accounting policies and standards on the 2008 and 2007 figures. _______________________________________- ___________________ Clearwat- 13 39 weeks ended r weeks ended - S- Se- Sept- Se- September 27, Sept- September 29, 2007 - p- te- mber te- 2008 mber - e- ber 29, ber 29, - b- 27, 27, 2007 - r 20- 20- - 2- 8 8 - , - 2- r 08 - - , - - - 8 (as (as (as (as re- rest- rest- restated) ta- ted) ted) ed) S- $- $9- $207,905 $224,9- l- 1- ,5- 1 s 5- 5 7 Net earnings (- $8- ($20,671) $25,322 (loss) 1- 705 ,- 3- ) Basic net earnings (loss) per u- (- $0- ($0.40) $0.48 it 0- 17 2- ) Cash flows from operating activities before changes in working capital $- $7- $2,426 $8,679 ,- 867 93 Distributable cash (- $5- ($9,631) $486 (1) 3- 793 2- 0) Distributions declared (1) $0 $7- $0 $23,692 875 Weighted average out- - units tan- - ing - - - - - - - - g Limited Partnership Units 5- 52,6- 51,151,076 52,6- 52,648,140 ,- 8,140 8,140 2- ,- 12 Fully - 62- 61,8- 62,348,105 61,8- 61,872,612 diluted - 32- 2,612 2,612 - ,9- - 1 - - - - - 1 1.Please refer to the Distributable Cash definition in the MD&A for detailed The reconciliations of these amounts. receives Fund dis- - f- Cl- in distributes them unitholders. As su- rib- - omar- h, tio- - at- s - r - - - - - - - - s distributable cash for the Fund is equal to the distributions received and paid. 2.The Fund does not consolidate the results of Clearwater's operations but rather accounts for the investment the using equitymet- - D- li- of inform- that this w- on on theunderl- od. - e it- tion u- ing - d d - - - . operations of Clearwater, the financial highlights of Clearwater are included above. About Clearwater 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. 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. |
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