2009-03-27 14:30:48 CET
2009-03-27 14:31:56 CET
REGULATED INFORMATION
Clearwater Finance Inc. - Company Announcement
CLEARWATER REPORTS FOURTH QUARTER AND 2008 ANNUAL RESULTS AND PROVIDES UPDATE ON REFINANCING
Attention Business/Financial Editors
CLEARWATER REPORTS FOURTH QUARTER AND 2008 ANNUAL
RESULTS AND PROVIDES UPDATE ON REFINANCING
/Not for distribution to United States or for dissemination in the United
States /
HALIFAX, March 27/CNW/ - (TSX:CLR.UN, CLR.DB, CLR.DB.A):
Improved results in fourth quarter of 2008 after adjusting for non-routine
items
Fleet fully operational, no material capital expenditures currently planned
for the next 3-5 years
Management expects to be successful in refinancing its near-term debt
and foreign exchange lines
Today, Clearwater Seafoods Income Fund (the “Fund”) reported its fourth quarter
and 2008 annual results.
Clearwater reported normalized cash flow and EBITDA of $24.7 million and $44
million in 2008 versus $23.1 million and $40.6 million in 2007 (for calculation
of normalized cash flow and normalized EBITDA refer to the Definitions and
Reconciliations section of the 2008 annual MD&A). With the launch of the new
clam vessel and the finalization of a new shrimp joint venture, results have
showed improvement in 2008. During the last quarter of 2008 sales prices and
margins performed well and as a result margins, excluding the impact of a new
inventory accounting standard, improved by $3.1 million or 18% over the last
quarter of 2007.
Clearwater had a challenging year in 2008 and it incurred several significant
charges as follows:
• Contracts with Glitnir Banki, $51.4 million - In October 2008 the Icelandic
Services
Financial Authority took control ofGlitnir Banki (“Glitnir”)
subsequently placed into receivership. Prior to Glitnir's receivership
Clearwater had derivative contracts with Glitnir including foreign exchange
forwards and options and cross currency and interest rate swaps. Volatility
in markets in 2008 significantly increased the mark to market liability of
these contracts and as a result as at December 31, 2008 Clearwater
has incl- an estimated $51.4 million in
liabilities.
ded
Clearwater - c- co- cons- w- external legal
counseland and has received
- n- su- lted th
su- ted
t-
d
advice thatc- c- contrac- s- be declarednu-
andvo- void. As result
n- n- s o- l d.
r- r- ld
c- c-
s s
Clearwater - t- taking steps extinguish these
contracts but as of
sk-
ng
December 31, 2008 that has not been reflected in its financial statements.
Realized losses on foreign exchange contracts, $44.5 million - In 2008,
significant
the - v- volatility exchangerates, combined a
a large book
- l-
- t-
- l-
- ty
-
-
-
-
y
exchange op- c- co- contrac- resu- in
significantrealized losses. As
ionn- tr- s, ted
r- ct-
c- ,
s,
December 31, 2008 all the option contracts except one yen option contract with
an estimated
liability of $3.9 million had been settled.
Reorganization costs, $8.1 million - Clearwater incurred approximately million
$8.1 - in - c- co- costsassocia- with
restructuring,re- refinancing the
n ns- ts ed in-
s nc-
ng
business and the failed privatization. Clearwater will
incur additional costs
in 2009 as part of the debt refinancing but these costs are expected to be
lower than 2008.
Operationally the business was impacted by higher fuel costs in 2008. However,
in the second half of the year the business benefited from three key trends; the
clam fleet operated with more harvesting capacity , the lobster business
benefited from lower procurement costs and fuel costs began to decline.
Management is pleased to have completed our multi-year vessel renewal program
and as a result of the completion of this program, no material capital
expenditures are currently planned in the next 3-5 years. With the last of
Clearwater's planned frozen-at-sea vessel conversions complete, the fleet is now
fully operational. Clearwater is completing the conversion of a smaller non-
factory lobster vessel and expects to begin fishing with it in 2009. Management
believes this will result in a more efficient fleet with lower costs, improved
quality and greater catch volumes, all of which will serve to improve
profitability.
The recent global financial crisis has tightened liquidity in the financial
markets and has affected investor confidence in global equity and debt markets.
This has constrained lending activity and led to significant declines in global
market indices which in turn have negatively impacted the value of most publicly
traded securities including Clearwater's.
Management has evaluated the various aspects of Clearwater's business and
financial circumstances that could be affected by these conditions as they
currently exist as follows:
Cash flow from operations when normalized continues to be positive
calculation
(see in liquidity capital section the
MD&A).
has seen weake-
numberof
markets for
ing
c- lines, sales volumes
line withmanagement's
r-
a-
n
margins have
part due to
favorable
In addition, we bel-
as a
a company the the
eve
business will respond well in the current recessionary period.
There has not been any material impact to date on Clearwater's costs the
with of lowerlobster
raw prices and
lower fuel
c-
s-
s.
In the fall of 2008 lobster costs were significantly lower than recent
years, lowering Clearwater's costs and partially offsetting lower sales
prices.
Clearwater procures approximately 80% of the live lobster it
uses in its live lobster business.
Fuel prices declined in the latter part of 2008 and this trend continued
into 2009 resulting in current spot rates that are approximately 34
cents/litre below our 2008 average cost/litre.
Based on 2008 fuel
purchases for Clearwater's factory a one-cent litre
change in the price fuel i- harvesting costs by approxim-
p- tely
c-
s
$280,000.
The US dollar, Japanese Yen and European Euro currencies have
strengthened relative to the Canadian dollar in the latter part of 2008.
Sales in these currencies in 2008 were US$116 million, Euro 43 million
and Yen 2.9 billion and the average exchange rates realized in 2008 were
1.07 for the US dollar, 1.55 for the Euro and 0.01 for the Yen.
The strengthening exchange rates have a significant positive impact
on sales receipts.
In 2009, the positive impact of strengthening exchange rates will be
partially offset by forward contracts in place that effectively lock in
place US$78 million at an average rate of 1.11, Euros 8 million at an
average rate of 1.62 and Yen 3 billion at an average rate of 0.0123.
Clearwater has had some non-routine costs in 2008 - over the past
Clearwater
year has incurred approximately $8.1 million in costs
associated withrestructuri- and refinancing the
business.
g
Clearwater will incur additional costs in - as part of the debt
-
-
9
refinancing but these costs are expected to be lower than 2008.
In 2008, the significant volatility in exchange rates, combined with a
large book of exchange contracts resulted in significant exchange
losses. Realized losses (on derivative contracts, net of gains on debt
and work- capital)
to million million
million in
ng
2008, significant
-
- from contracts.
contracts. contracts. contracts.
-
-
-
-
-
-
-
-
-
g
n
Management will only use forward contracts in managing its exchange program
going forward.
Clearwater expects to
be successful in refinancing its near-term debt and
maturi- foreign foreign
foreign foreign - Dece-
2008
2008
2008 2008
ies
- ber
-
-
s
Clearw- obtained
-
- - notes amended the
the the
the
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n
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nn
condit- of others
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million million
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ons
o
- xima-
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y
and$26.6 million
- by 2009, and
and
and
and
-
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d
upon payment
- - - notes approximately
approximately
approximately approximately
- - -
- - -
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CDNmillion
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for
for for
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ee
totalapproximately approximately
approximately approximately to refinanced.
refinanced.
refinanced.
refinanced.
additi- in December December
December December arra- foreign
foreign foreign
foreign
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fore- exchange
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contra- to match -
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million million million
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short-- loan. Therefor-
Therefore, Therefore, -
faci- Clearwater Clearwater
Clearwater Clearwater
erm ,
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planni- to refinance refinance
refinance refinance - - - CDN$-
million. million.
million. million.
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yyy
Clearw- also intends
intends intends faci-
for for
for
- its
ter
ities
-
s
hedging program.
In 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 believes that it will be successful in
refinancing these units and the related convertible debentures as they come
due.
Clearwater intends to
flow to reduce debt levels which management
believes will put it in a strong position to refinance these debentures.
Borrowing costs are
higher on maturing debt facilities - the current environment
econom-
- in borrowing borrowing
borrowing borrowing
c
-
-
l
costs Clearwater.
- - - rece- extended US
US US
US
- - - tly
- - -
- - -
- - -
- - -
- - -
- - -
- - -
rrr
dollarCanadian
-
mont- amended
amended amended amended
-
s
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-
r
theof some
-
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term term
term
-
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l
notes.The total The total The
total The total
The total amount of these notes as at December 31, 2008 was CDN
amount of amount of amount
of these amount of these
these notes as these notes as notes
as at notes as at
at December at December
December 31, December 31,
31, 2008 was 31, 2008 was 2008
was CDN 2008 was CDN
CDN CDN
approximate-
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these these
these
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notes approximately approximately
approximately approximately - exte- therate
rate
rate rate
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afterextension
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and and
and
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-
incr- on the
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the
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approximate- CDN
- - Clea- currently currently
currently currently
y
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t
attemp- to refinanc- refinanc-
refinance, refinance,
- - inte- would
would
would would
ing , ,
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ee
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Clearwater continues to pursue a
- -
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rr
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aa
strate- keeping
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however, however,
y
-
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s
w
given
current market conditions, this may require it to vary the term of
any debt and employ diff- borrowing structures
going forward
rent
which may impact its borrowing costs.
Clearwater has a focused strategy for maintaining liquidity - given its
borrowing
that capaci- capaci- capacity has been impactedby
lower earnings
y has y has
over year as as current difficultborrowing
environme-
the t,
Clearwater is taking a multi-faceted approach to maintaining liquidity:
o Tightly managing its working capital - this includes lowering its
investment in trade receivables through a combination of tighter
collection terms and discounting and limiting its investment in
inventories through tight review of any slow moving items and
improved integration of its fleet and sales force;
o Limited capital spending - Clearwater has completed its current multi-year
fleet renewal program and currently it has no material planned capital
expenditures over the next three to five years. Management believes this fleet
renewal program will result in a more efficient fleet with lower costs,
improved quality and greater catch volumes, all of which will serve to improve
profitability. Clearwater's capital program focus over the next few years will
be to maintain its existing fleet and complete any necessary repairs and
maintenance.
Clearwater's planned capital expenditures for
2009 total $5
million;
.
o Liquidating under performing assets, selling non-core assets - Clearwater
has a- will continue to review and
liquidate
d
underperforming a- non-core assets. In the fourth quarter
of
d
2008 Clearwaters- a surpluslong-liner vessel for net proceeds
ld
of approximate- - million and subsequent to year-end
2008 it
y 1
has - deposits on some non-core quota sales and a
second
-
-
-
n
long--
iner.
o Limiting distributions - no distributions were paid in 2008 and
none are expected to be paid in 2009 or 2010 until such time as
the convertible debentures are refinanced; and o Reviewing alternative lending arrangements - Clearwater is reviewing
alternative lending arrangements, including asset
backed lending arrangements a- other financing
structures
d
available to more highly levered borrowers. Generally, the amount
of leverage to - has declined. At the
same
-
-
-
-
-
-
-
s
time, lower than expected earnings have impacted trailing EBITDA coverage ratios
which limits access to some of the more traditional debt markets that Clearwater
has had access to in the past. This may result in higher borrowing costs in the
short-term.
Clearwat- believesthat itwill - able to refina- - maturing
debt and this,
r e ce -
s
combined with improving operat- which continue to
providepositive cash
ons
flow, should - Clearwater to main- liquidi- sufficie-
to operate
- ain y t
-
-
-
e
busines- However, while management expe- to - successf-
in refinancing
. ts e l
this debt there is no guarantee that it will be able to do so in the current
markets. Clearwater believes the refinancing of its debt will include
restrictions on future distributions, restrictions on capital expenditures as
well as some agreed reductions in principal. Over the next several years
Clearwater will be focused on reducing its leverage. This will come from a
combination of improved earnings levels, which will improve trailing EBITDA
levels, and from using the positive cash flow of the business to reduce debt.
Clearwater believes that over time this approach will provide for a lower cost
of capital by restoring access to a greater variety of debt sources.
Colin MacDonald
Chairman and Chief Executive Officer
Clearwater Seafoods Limited Partnership
March 27, 2008
Financial Statements and Management's Discussion and Analysis
Documents
For an analysis of Clearwater and Clearwater Seafoods Income Fund's fourth
quarter and annual results, please see the Management's Discussion and
Analysis and the 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).
___________________________________________________________
Key Financial Figures ($000's except unit amounts)
Clearwater 13 weeks
Years ended
ended
December December
31,December 31, December 31,
31, 2008 2007
2008 2007
(as
(as
restated)
restated)
Sales $84,270 $77,720
$292,175 $302,681
Net earnings (loss) ($81,734) ($4,371)
($102,405) $20,951
Basic net earnings (loss) per
unit ($1.60) ($0.08)
($2.00) $0.40
Normalized
operarating activities b-
f-
re
changes in working capital 1
$24,663 $23,077
Normalized EBITDA
$44,035 $40,612
We ighted average units outstanding at year-end
Limited Partnership Units 51,126,912 51,626,912
51,126,912 51,626,912
Fully diluted 62,323,941 62,824,111
62,323,941 62,824,111
1. Please see the Management's Discussion and Analysis for a reconciltion of
these amounts to the
financial statements.
The Fund does not consolidate the results of Clea- operations but
rather
wate-
's
accounts for the investment using the equity Due to the limited amount
method. of information that this would provide on
the underlying 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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