Mr. Ian Smith reports

CLEARWATER REPORTS RECORD THIRD QUARTER RESULTS

Clearwater Seafoods Inc. has released its third quarter results for the period ended Sept. 27, 2014.

Highlights

• Record third quarter sales of $134.1-million and adjusted earnings before interest, taxes, depreciation and amortization of $30.9-million driven by strong demand and higher exchange rates;
• Year-to-date growth of 17.1 per cent and 8.4 per cent in sales and adjusted EBITDA, respectively;
• Rolling 12-month adjusted EBITDA increased by $8.3-million to $83.9-million and free cash flow by $7.2-million to $32.4-million;
• Announces 20-per-cent increase in dividend -- declares quarterly dividend of three cents per share payable on Dec. 15, 2014, to shareholders of record as of Nov. 28, 2014;
• Announces the appointment of Ron van der Giesen as president, global supply chain.

Third quarter results

Clearwater reported record sales of $134.1-million and adjusted EBITDA of $30.9-million for the third quarter of 2014 versus 2013 comparative figures of $114.0-million and $28.9-million, reflecting growth of 17.6 per cent and 7.1 per cent in both sales and adjusted EBITDA, respectively.

The growth in both sales and adjusted EBITDA was driven by strong market demand that increased sales volumes, in particular for turbot and clams, and higher prices in scallops, shrimp and lobster, as well as a $5.3-million positive impact due to a foreign exchange rate environment that had average spots rates for currencies such as the U.S. dollar and euro at higher levels in 2014 than the third quarter of 2013.

Margins declined 2.3 basis points in the third quarter of 2014 due to higher harvesting costs for scallops and shrimp, partially offsetting the growth in adjusted EBITDA.

Free cash flows were $6.2-million versus $11.4-million in the third quarter of 2013, a decline of $5.2-million, due to higher capital expenditures.

Year-to-date results

Clearwater reported year-to-date sales of $325.2-million and adjusted EBITDA of $61.5-million versus 2013 comparative figures of $277.6-million and $56.8-million, reflecting growth of 17.1 per cent and 8.4 per cent, respectively.

The growth in both sales and adjusted EBITDA was driven by strong market demand that increased sales volumes for clams, higher prices for scallops, shrimp and lobster, as well as a $17.9-million positive impact due to a foreign exchange rate environment that had average spots rates for currencies such as the U.S. dollar and euro at higher levels in 2014 than 2013.

Free cash flows improved $6.3-million from a use in cash of $12.6-million in 2013 to $6.4-million in 2014 due to higher adjusted EBITDA and an $11.2-million improvement in working capital, partially offset by higher capital expenditures (net of designated borrowings) from scheduled refits and vessel conversions, and the timing of payments to minority interest partners.

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 typically 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 third quarter of 2014 are consistent with management's expectations for the quarter and in line with its expectations for fiscal 2014.

Outlook

Global demand for seafood is outpacing supply, creating favourable 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 toward 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 marketplace 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 licences, premium product quality, diversity of species, global sales footprint, and year-round harvest and delivery capability.

Ian Smith, chief executive officer, commented: "We are delighted with the results in the third quarter in both harvesting and sales.

"We posted strong sales results across our portfolio of sustainably harvested, wild caught seafood and are maintaining our annual financial targets. Also, we have continued to invest and advance several major capital projects that are key to sustaining our long-term growth, profitability and competitive advantage.

"Looking to the longer term, we are encouraged by a recent agricultural outlook published by the OECD-FAO that predicts growth in seafood pricing is expected to outpace other proteins by almost three times from now until 2020."

For 2014, Clearwater has the following annual targets:

• Sales growth -- 5 per cent or greater;
• Free cash flow -- 5 per cent or greater;
• Leverage -- three times or lower;
• Return on assets -- 12 per cent or higher.

Dividends

The board of directors approved a 20-per-cent increase in the dividend and declared a quarterly dividend of three cents per share payable on Dec. 15, 2014, to shareholders of record as of Nov. 28, 2014.

In making the determination of dividend levels, Clearwater's board gives consideration to a number of key principles including:

• The expected future earnings;
• The amount of free cash flows that should be retained to reinvest in the business;
• The assurance that all obligations can be met with respect to existing loan agreements;
• The desire for the dividend to increase in the future as the business continues to grow and expand.

The board reviews dividends quarterly with a view to revisiting the appropriate dividend amount annually.

These dividends are eligible dividends as defined for the purposes of the Income Tax Act (Canada) and applicable provincial legislation, and, therefore, qualify for the favourable tax treatment applicable to such dividends.

Appointment of vice-president, global supply chain

Ian Smith, chief executive officer, commented: "I am pleased to announce the appointment of Ron van der Giesen to the position of president, global supply chain. A former Unilever executive, Ron brings more than 25 years of fast-moving consumer goods (FMCG) global supply chain management and leadership experience to Clearwater. His proven track record, diverse global experience and demonstrated leadership abilities made him the ideal candidate for the position."

Management believes that it has the correct strategies and focus to provide sustainable competitive advantage and long-term growth. These strategies include:

1. Expanding access to supply;
2. Targeting profitable and growing markets, channels and customers;
3. Innovating and positioning the company's products to deliver superior customer satisfaction and value;
4. Increasing margins by improving price realization and cost management;
5. Preserving the long-term sustainability of the company's resources;
6. Improving the company's 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, is entitled five-one-five and includes goals to achieve $500-million in sales and $100-million in adjusted EBITDA by the end of 2016 (in five years) or earlier.

Financial statements and management's discussion and analysis documents

For a detailed analysis of Clearwater's 2014 third quarter results please see Clearwater's third quarter report for 2014, 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 SEDAR or on Clearwater's website.

                                        FINANCIAL HIGHLIGHTS
                                  (In thousands, except per share)

                                13 weeks ended   13 weeks ended   26 weeks ended   26 weeks ended             
                                Sept. 27, 2014   Sept. 28, 2013   Sept. 27, 2014   Sept. 28, 2013

Sales                          $       134,069  $       113,982   $      325,244   $      277,647
Earnings (loss)                          2,959           27,224            9,668           15,596
Basic earnings (loss) per share          (0.02)            0.48             0.02             0.19
Diluted earnings (loss) per share        (0.02)            0.47             0.02             0.19
Adjusted EBITDA                         30,945           28,901           61,506           56,756

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