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2009-03-27 14:30:48 CET 2009-03-27 14:31:56 CET REGULATED INFORMATION Clearwater Finance Inc. - FyrirtækjafréttirCLEARWATER REPORTS FOURTH QUARTER AND 2008 ANNUAL RESULTS AND PROVIDES UPDATE ON REFINANCINGAttention 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 ter n - - - - - - - - - - nn condit- of others - - appr- million million million million ons o - xima- - ely - - - - - - - - - y and$26.6 million - by 2009, and and and and - - - - d upon payment - - - notes approximately approximately approximately approximately - - - - - - - - - - - - - - - - - - - - - - - - lll CDNmillion - - andpayable for for for for - - - - - - - - ee totalapproximately approximately approximately approximately to refinanced. refinanced. refinanced. refinanced. additi- in December December December December arra- foreign foreign foreign foreign n, ged exchan- lenders - fore- exchange exchange exchange exchange e o gn contra- to match - - with million million million million ts - - s - - - - - s short-- loan. Therefor- Therefore, Therefore, - faci- Clearwater Clearwater Clearwater Clearwater erm , - ities - - - - - - - s planni- to refinance refinance refinance refinance - - - CDN$- million. million. million. million. g - - - 02 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 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 - - - r theof some - - Cana- dollar term term term term - - ian - d - - - - - - 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- - - inte- onthese these these these y - - est 6 - - - - e notes approximately approximately approximately approximately - exte- therate rate rate rate - sion, - - - - - - - , afterextension - - 2008,volatility and and and and - - s - - - - - r relatedinterest - incr- on the the the the - ased. - - - - s approximate- CDN - - Clea- currently currently currently currently y - - water - - 2 t attemp- to refinanc- refinanc- refinance, refinance, - - inte- would would would would ing , , - - est - - - - - - ee - - Clearwater continues to pursue a - - - - - - - - - - - - - - - - rr - - - - - - - - - - - - - - - - ss - - oo - - - - - - - - - - ee aa strate- keeping - - poss- however, however, however, however, y - - ble, 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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