Attention Business/Financial Editors CLEARWATER REPORTS SECOND QUARTER 2008 RESULTS /Not for release over US newswire services/ HALIFAX, August 14/CNW/ - (TSX:CLR.UN): Sales and gross profit for the second quarter of 2008 were $69 million and $13 million versus $75 million and $16 million in 2007 (prior to adjustment in 2008 for new inventory standard) Year to date sales and gross profit were $126 million and $25 million versus $134 million and $28 million (prior to adjustment in 2008 for new inventory standard) Distributable cash relatively stable for the first half of 2008 versus 2007 being a shortfall of $6.4 million versus a shortfall of $5.3 million in 2007. Sea and fishing trials completed for newly converted clam vessel, positioning clam business for growth. Incurred $1.6 million of commissioning costs during the quarter. Negotiated renewed and expanded joint venture agreement for the shrimp business, securing continued partnership for the future. Acquires new lobster vessel, improved efficiencies to result Fund enters into transaction agreement Today, Clearwater Seafoods Income Fund (the “Fund”) reported second quarter 2008 results. Sales and gross profit for the second quarter of 2008 were $69 million and $13 million versus $75 million and $16 million in 2007 (prior to the adjustment in 2008 for new inventory standard). There were a number of significant events, positive and negative, that impacted the second quarter of 2008 as discussed below. Exchange - For the second quarter of 2008, sales and margins were negatively impacted by $2 million when current effective rates are compared to those of 2007. Fluctuating exchange rates also resulted in an increase of $2.4 million in realized foreign exchange expense compared to 2007. It is important to understand that more than 80% of Clearwater's sales are denominated in currencies other than the Canadian dollar, whereas the majority of its expenses are in Canadian dollars. As a result, foreign exchange fluctuations can have a material impact on Clearwater's financial results. The overall impact of exchange on cash earnings was $4.4 million versus 2007 ($2 million negative impact on sales and gross profit and $2.4 million reduction in realized exchange gains). Vessel commissioning and restructuring expenses - During the quarter Clearwater incurred approximately $1.6 million in commissioning its new clam vessel. In addition, Clearwater incurred approximately $700,000 in restructuring costs for its lobster business. Lobster margins - margins were impacted in 2008 by increased shore prices from the December 2007 lobster buy. However, lower shore prices and good quality in the spring of 2008 buy have resulted in a stronger inventory position at the end of the second quarter, which we will see the benefit from in the second half of the year. Administration and selling expense reductions - Clearwater achieved continued reductions in administrative and selling expenses in 2008. This relates mainly to lower spending on professional and consulting fees. The current year strategic review costs of approximately $130,000 are offset by lower professional and consulting costs for the first quarter of 2008. The prior year included costs of approximately $650,000 related to potential acquisitions and approximately $200,000 more in information technology consultation spending. The impact of the new inventory accounting standard resulted in an additional reduction of $2.3 million in selling and administrative costs in the current quarter as those costs were reclassified to cost of goods sold. Impact from the adoption of new inventories accounting standard - The adoption of a new inventory standard had the impact of increasing second quarter earnings by $1 million but it did not materially impact year-to-date results (see details at the end of this release). The factors listed above led to lower distributable cash levels in the second quarter but on a year-to-date basis distributable cash levels are relatively consistent with 2007. Distributable cash for the first half of 2008 was a shortfall of $6.4 versus a shortfall of $5.3 million in 2007. Distributable cash for the second quarter of 2008 was a shortfall of $5 million versus $594,000 of distributable cash in 2007. On January 21, 2008, due to the 2007 financial results, the Trustees of the Fund announced the suspension of monthly distributions. Tom Traves, Chairman of the Trustees has stated “The Trustees will continue to monitor the distribution policy with distributions to be determined quarterly and paid in arrears after considering the traditional criteria in determining the distribution policy.” The Trustees have decided it would be appropriate to not pay a distribution for the second quarter of 2008. Strategic investments In late April 2008, Clearwater took delivery of the vessel it had been converting over the past several months for its clam fishery. The vessel undertook sea trials and commissioning in the second quarter and commenced fishing in June. Management continues to believe there is strong potential for growth in the clam business and expects to begin to realize this potential in the latter part of the year. This new vessel combined with the ocean bottom mapping technology will enable the clam business to realize significant improvements for 2008 and beyond. Clearwater has also renewed and expanded its joint venture agreement for its shrimp harvesting operations effective April 1, 2008. The key terms of this new agreement include an extension of the partnership for a further 10 years, the contribution by our partner of the factory vessel Ocean Prawns and the contribution by both parties of rights to fish shrimp and turbot fishing quotas. Each partner's equity interests in the partnership were adjusted to reflect the contribution of the vessel and use of quotas such that Clearwater's share of the partnership earnings have increased from 50% to 54% from April 1, 2008 onwards. This joint venture will enable Clearwater and its partner to combine shrimp harvesting assets and related shrimp and turbot quotas into a larger operating entity that is expected to create efficiencies and improved profits for the business in the future. Finally, subsequent to quarter-end Clearwater purchased a vessel for conversion for the lobster fleet. The total expected cost, including conversion costs is approximately $5.7 million. This vessel will lower the average age of the lobster fleet, improve operating efficiency and reliability of fishing efforts, significantly lower fuel consumption and result in greater stability in crewing. As a result, Clearwater expects to retire 3 of the 4 existing lobster vessels in the latter part of the year. We expect to realize increased returns from this vessel due to lower fleet management costs and lower mortality from improved handling. The overall impact of these investments is to increase our harvesting capacity while reducing our expected operating costs through employing more efficient vessels and reducing the size of our fleet. Strategic Review Earlier today Clearwater Seafoods Income Fund announced that it had entered into an acquisition agreement with CS Acquisition Limited Partnership (“CS Acquisition”), a partnership consortium led by Clearwater Fine Foods Incorporated (“CFFI”), the controlling unitholder of Clearwater Seafoods Limited Partnership. Under the terms of the Agreement, CS Acquisition will acquire all of the assets of the Fund, which will result in the Fund's unitholders receiving $4.50 per unit and the holders of convertible debentures receiving 101% of the par value of debentures plus accrued interest. Based on the recommendation of its Special Committee, the Board of Trustees has unanimously resolved to recommend that unitholders approve the transaction. The Fund will issue a management information circular which will contain its recommendation to unitholders together with the formal valuation and fairness opinion. This offer effectively results in CS Acquisition Limited Partnership acquiring all of the Fund's investment in Clearwater. Concurrent with this transaction, Clearwater will reorganize it current capital structure, which will effectively result in the replacement of existing debt facilities with new debt facilities and the consolidation of its partnership units. For further details of this proposed transaction please see the news release on this topic issued earlier today by Clearwater. Summary From an operational perspective, the clam business operated without any significant interruptions during the year-to-date period although we did incur significant expenses commissioning our new clam vessel. Lobster margins were impacted in 2008 by increased shore prices from the December 2007 lobster buy. However, lower shore prices and good quality in the spring of 2008 buy have resulted in a stronger inventory position at the end of the second quarter, which we will see the benefit from in the second half of the year. In addition, we incurred approximately $700,000 in restructuring expenses for our lobster business during the quarter to position it for greater profits in the future. Administrative and selling expenses continue to be lower than 2007. The only earnings in the frozen at sea shrimp business resulted from the one vessel in our joint venture. We successfully brought our new shrimp vessel on-stream in the second quarter and renewed and expanded the joint venture agreement for the shrimp harvesting operations effective April 1, 2008. In summary, margins were impacted by commissioning costs, foreign exchange and lower lobster margins. However, a fully commissioned clam fleet and a new shrimp joint venture will provide the opportunity to increase our harvest and sales volumes going forward. Outlook Colin MacDonald, Clearwater's CEO stated “We hold significant quotas in our key species, we have leading edge, innovative harvesting and processing technologies and we are vertically integrated. Our business strategies to deliver long-term value are sound. We have an outstanding and dedicated workforce, excellent quota positioning, and global customer relationships that span decades and we look forward to building on these strengths for the balance of 2008 and going forward.” Colin MacDonald Chief Executive Officer Clearwater Seafoods Limited Partnership August 14, 2008 Financial Statements and Management's Discussion and Analysis Documents For an analysis of Clearwater and Clearwater Seafoods Income Fund's quarterly results, please see management's discussion and analysis and the second quarter and year-to-date 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). Financial Highlights and Significant Items Summary of impact of new inventory accounting standard The second quarter and year-to-date 2008 results were prepared in accordance with the new inventory standard issued by the Canadian Institute of Chartered Accountants, effective January 1, 2008 for Clearwater. This standard provides more extensive guidance on the determination of cost and requires that variable overheads, a portion of administration expenses and depreciation be inventoried and as a result, included in the cost of goods sold. This standard was not applied retroactively and prior year numbers were not restated. An adjustment was made to decrease opening deficit to reflect the impact of this standard on the opening inventory figure for January 1, 2008. The first quarter 2007 does not reflect a similar adjustment and therefore the quarters are not readily comparable. The following table illustrates the impact of the new standard on amounts reported in the second quarter and year-to-date 2008 financial statements. Year-to-date Amount prior to Adjustment for new Amount per application of standard financial statements new standard Cost of good sold $ 101,180 $ 10,245 $ 111,425 Gross profit 25,168 (10,245) 14,923 Administration and selling 17,728 (4,943) 12,785 Depreciation and Amortization 5,596 (5,231) 365 Net loss $ (9,807) $ (71) $ (9,878) Second quarter Amount prior to Adjustment for new Amount per application of standard financial statements new standard Cost of good sold $ 56,295 $ 4,301 $ 60,596 Gross profit 12,938 (4,301) 8,637 Administration and selling 9,037 (2,339) 6,698 Depreciation and Amortization 2,840 (3,013) (173) Net income $ 10,440 $ 1,051 $ 11,491 ____________________________________________________________________ Key Financial Figures ($000's except unit amounts) Clearwater 13 weeks ended 26 weeks ended June 28, 2008 June 30, 2007 June 28, 2008 June 30, 2007 Sales $ 69,223 $ 75,311 $ 126,348 $ 134,406 Net earnings (loss) $ 11,491 $ 12,120 $ (9,878) $ 15,788 Basic net earnings (loss) per unit $ 0.22 $ 0.23 $ (0.19) $ 0.30 _________________________________ __ Cash flows from operating activities, before changes in working capital $ (2,529) $ 2,012 $ (3,697) $ (1,605) Distributable cash 1 $ (4,964) $ 594 $ (6,421) $ (5,307) Distributions declared 1 $ - $ 7,901 $ - $ 15,817 Weighted Average Units outstanding Limited Partnership Units 51,126,912 52,662,604 51,163,225 52,725,098 Fully diluted 62,324,111 64,484,281 62,360,424 60,620,119 ______ Please refer to the Distributable Cash definition in the MD&A for detailed reconciliations of these amounts. The Fund receives distributions from Clearwater and in turn distributes them to its unitholders. As such, distributable cash for the Fund is equal to the distributions received and paid. 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 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.