Clearwater reports second quarter 2010 results

/NOT FOR DISTRIBUTION TO UNITED STATES OR FOR DISSEMINATION IN THE UNITED STATES/

HALIFAX, Aug. 13 /CNW/ - (TSX: CLR.UN, CLR.DB.B, CLR.DB.A):

    
    -   Clearwater reported second quarter sales of $65.2 million and EBITDA
        of $7.1 million versus 2009 comparative figures of $70.2 and
        $8.5 million

    -   Year-to-date sales were $127.9 million and EBITDA was $13.6 million
        versus $141.2 million and $17.9 million in 2009.

    -   First half volumes remain healthy versus 2009 and planned pricing and
        productivity gains largely overcame the impact of foreign exchange on
        2010 top line revenue and EBITDA
    

Today, Clearwater Seafoods Limited Partnership ("Clearwater") reported its results for the second quarter of 2010.

Clearwater reported second quarter EBITDA of $7.1 million on sales of $65.2 million versus 2009 comparative figures of $8.5 and $70.2 million. During the second quarter of 2010 strong sales volumes, selling prices, lower costs and lower selling, general and administrative expenses offset 83% of the negative impact of a stronger Canadian dollar as compared to 2009.

Year-to-date, Clearwater reported EBITDA of $13.6 million on sales of $127.9 million versus $17.9 million and $141.2 million in 2009. In 2010 strong sales volumes, selling prices and lower costs offset 74% of the negative impact of a stronger Canadian dollar as compared to 2009.

In both the second quarter and first half of 2010 sales volumes have remained healthy with 2nd quarter volumes up 12% from 2009 and year-to-date volumes up 4%. Strong and accelerating demand for core products has allowed Clearwater management to execute planned price increases in the majority of species including scallops, clams and cooked and peeled shrimp and plans are in place to implement further increases in the remainder of the year.

Rolling four quarter EBITDA as of the second quarter of 2010 was $35.0 million as compared to $40.5 million in the comparative period in 2009. This decrease is a result of fiscal 2009 not exhibiting the typical seasonal pattern for the business, which is to realize higher EBITDA levels in the second half of the year as compared to the first half. In 2009, the first half EBITDA levels were higher than normal due largely to favourable exchange rates (for example the average exchange rate on the US dollar was 1.196 in the first half of 2009 versus 1.038 in the first half of 2010). In contrast, the second half of 2009 EBITDA levels were lower than seasonal norms due in part to soft market conditions for live lobster, which reduced demand and sales throughout the fourth quarter of 2009.

Looking forward to the balance of 2010, management believes that 2010 results will reflect a more typical pattern with the second half results showing greater strength than the first half, with improving annual EBITDA performance versus the prior year despite the continued negative impact of foreign exchange. This is based on expectations for continued strong sales volumes, planned price increases as well as the realization of additional cost savings and productivity gains in both operations and selling, general and administrative expenses. This expectation for higher second half EBITDA is dependent upon stable economic conditions in Asia, North America and Europe and a measure of stability in exchange rates.

In addition, Management and the Board will continue to focus on reducing debt levels and leverage. During the 12 months since the second quarter of 2009, Clearwater reduced its net debt by $10.5 million to $209.5 million versus $220.0 million at July 4, 2009. In the second quarter of 2010 net debt levels increased by $4.2 million due to the planned seasonal investment in inventories, primarily lobster. In the latter part of the year Clearwater will reduce this investment in working capital as these inventories are sold down. Clearwater's strategy for maintaining liquidity and reducing leverage includes carefully managing its working capital and capital expenditures and liquidating assets that do not achieve an adequate return on capital. Clearwater will continue to focus on reducing its leverage by improving earnings and using the positive cash flow of the business to reduce debt. This should enable Clearwater to lower interest costs over time.

Clearwater has two near-term loans for which it has been reviewing refinancing options. This includes approximately 1.3 billion in ISK denominated bonds (including CPI and accrued interest) that mature on September 27, 2010 (approximately Canadian $11.3 million) and $45 million of Class C Units that mature on December 31, 2010. Clearwater expects to be able to refinance these loans prior to their respective maturity dates.

Ian Smith, Chief Executive Officer, commented,

    
    "While foreign currency headwinds masked the underlying strength of
    operations in the first half of 2010 I am encouraged by our continued
    volume strength in the second quarter and the increasing global consumer
    and customer demand for our premium, wild, eco-labeled seafood. Taken in
    combination with our recent pricing, cost savings and other productivity
    initiatives, I believe Clearwater is poised to deliver markedly improved
    operating margins and earnings performance through the balance of 2010.
    Furthermore, I believe that our strategies of:

    - Expanding access to and supply of core species
    - Targeting profitable and growing markets;
    - Positioning our products as high quality, premium offerings;
    - Capitalizing on our investments in innovation;
    - Preserving the long-term sustainability of our resources; and
    - Improving the organizational capacity, talent, diversity and engagement

    will result in improved results in the near-term and provide us with a
    sustainable competitive advantage in the mid to longer term".

    Ian Smith
    Chief Executive Officer
    Clearwater Seafoods Limited Partnership
    August 13, 2010
    

Financial Statements and Management's Discussion and Analysis Documents

For an analysis of Clearwater and Clearwater Seafoods Income Fund's 2010 second quarter results, please see the Management's Discussion and Analysis and the 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          26 weeks ended
                                  July 3,     July 4,     July 3,     July 4,
                                    2010        2009        2010        2009
    -------------------------------------------------------------------------

    Sales                        $65,215     $70,176    $127,875    $141,188
    Net earnings (loss)           (4,474)     11,290     (10,721)     27,890
    Basic earnings (loss)
     per unit                     ($0.09)      $0.22      ($0.21)      $0.55
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    EBITDA(1)                     $7,113      $8,474     $13,600     $17,923

    Units outstanding at
     period-end
    Limited Partnership
     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.

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 groundfish.

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.

%SEDAR: 00018023E

For further information: Robert Wight, Chief Financial Officer, Clearwater, [phone]; Tyrone Cotie, Director of Corporate Finance and Investor Relations, Clearwater, [phone]