Free cash flows were $38.7 million versus $37.8 million in the fourth quarter of 2012, an increase of 2.4 per cent. Margins improved 3.1 percentage points from 19.9 per cent in 2012 to 23.1 per cent for 2013.
Adjusted EBITDA increased due to strong market demand that resulted in an increase in sales volumes for scallops and shrimp, and improved sales prices for several species. Margins were partially offset by higher harvesting costs per pound for scallops and shrimp.
Free cash flow from operations for the fourth quarter of 2013 grew 9.1 per cent from the same period in 2012 as a result of strong sales prices and volumes which contributed to improved margins. Improvements in free cash flow from operations were partially offset by higher capital expenditures from scheduled refits and vessel conversions, and the timing of payments to minority interest partners. Refer to the Management discussion and analysis for further information on free cash flow.
Annual 2013 results
Clearwater reported sales of $388.7 million and adjusted EBITDA1 of $79.1 million for 2013 versus 2012 comparative figures of $350.3 million and $72.2 million, reflecting growth of 10.9 per cent and 9.5 per cent, respectively. Results for free cash flow were $26.1 million in 2013 versus $17.3 million in 2012 an increase of 50.6 per cent. Gross margins improved 1.8 percentage points, to 22.5 per cent as compared with the same period in 2012.
Growth in adjusted EBITDA and free cash flow from operations were due to a strong and growing market demand that improved sales prices for scallops, clams and snow crab and strong sales volumes for scallops. Margins were partially offset by higher clam, scallops and shrimp harvest costs. Improvements in free cash flow from operations were partially offset by higher capital expenditures from scheduled refits and vessel conversions, and the timing of payments to minority interest partners.
Clearwater successfully met its annual 2013 profitability and financial performance targets of sales growth of five per cent or greater; adjusted EBITDA margins of 18 per cent or greater; and return on assets of 12 per cent or greater.
the desire to provide room for the dividend to increase in the future as the business continues to grow and expand.
Outlook
Global demand for seafood is outpacing supply, creating favorable 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 towards 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 market place 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 licenses, premium product quality, diversity of species, global sales footprint, and year-round harvest and delivery capability.
Ian Smith, Chief Executive Officer, commented: "In 2013 Clearwater surpassed all previous records for sales revenue and adjusted EBITDA."
Mr Smith continued "We posted strong results across our portfolio of sustainably harvested, wild caught seafood with six out of seven core species showing increased revenues, margins or both. We also made significant improvements to our capital structure and advanced several major capital projects - activities critical to sustaining our long term growth, profitability and competitive advantage."
