Edited Transcript of CLR.TO earnings conference call or presentation 11-Aug-20 5:00pm GMT

Finally, the forward-looking information included in this call is made as of the date of this call, and Clearwater does not undertake to update publicly or revise forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable securities laws.

I will now turn the call over to our CEO, Ian Smith, for an opening statement. Ian?

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Ian D. Smith, Clearwater Seafoods Incorporated – CEO [3]

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Hi, everyone. Good afternoon, and thank you for joining us. I’d like to begin by recognizing that we are all truly proud and grateful to our Clearwater employees. They are leading with courage, integrity, responsibility and with their hearts. They continue to protect themselves, their coworkers and families and work tirelessly to support a safe and reliable global food supply chain under what we all know are extraordinary conditions.

2020 began with great business momentum and promise like we came out of 2019. However, the impact of the pandemic on the first half of 2020 has been significant and complex for our customers, our supply chain partners, our company and our employees. The impact of COVID-19 expanded globally in the second quarter to impact all sales regions and most of our species, and the measures that we quickly implemented in the first quarter of 2020 have been successful in protecting the health and safety of our employees. We’ve managed harvesting, processing and procurement to align with consumer demands, strengthening our ability to remain in continuous operation at sea, on land and around the globe. Our customer relationships remain very strong and continue to provide critical insight into understanding regional markets and have facilitated specific COVID-19 responses tailored to these markets.

I’m pleased to tell you that demand improved in the latter prior of the second quarter and particularly in the month of June and is expected to improve further as governments relax measures and markets continue to reopen. We have responded by placing extra focus and attention on the expansion of global distribution, new products and formats and increasing promotional activity in channels that are experiencing heightened demand, including retail and e-commerce. We also continue to prepare for, and are already seeing, local recovery in foodservice channels.

Clearwater’s access to capital and our liquidity position remains strong. Adjustments to reduce spending and capital expenditures and operational changes at the inventory and procurement plans as well as temporary changes to our dividend policy and access — as well as access to government support programs have all helped to preserve cash and leave us in a confident position through the balance of 2020. We have taken these necessary steps to be well positioned as we move into the second half of the year and believe that we’re, again, well positioned to weather current economic conditions and take advantage of future growth opportunities as global seafood demand continues to recover.

I’ll now turn it over to our Chief Financial Officer, Teresa Fortney, to give you more detail.

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Teresa H. Fortney, Clearwater Seafoods Incorporated – VP of Finance & CFO [4]

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Thanks, Ian. Good afternoon, everyone, and thanks again also for joining us. So our second quarter with sales and our adjusted EBITDA were $106 million and $18.9 million, respectively, and that compared to $153.9 million and $30.3 million in the prior year due to the global impact of COVID-19. Year-to-date sales and adjusted EBITDA were $206.3 million and $32 million, respectively, compared to $274 million and $50.3 million in the prior year. Gross margin and adjusted EBITDA as a percentage of sales were 17.4% and 17.9%, respectively, in the second quarter, and that compared to 20.5% and 19.7% in 2019.

Leverage increased modestly to 5.3x compared to 5.2x in the second quarter of 2019. The company is continuing to advance the strategic review process with its financial advisers to identify, review and evaluate a broad range of potential strategic alternatives available to it with a view to continuing to enhance shareholder value. No time line for this process completion has been currently defined.

Sales volumes decreased across most the season regions in the first half due to lower demand in foodservice, partially offset by traditional retail and e-commerce demand, which continues to thrive in this difficult market. In the quarter, lower demand for clam, lobster and langoustines and higher costs related to COVID-19 were partially offset by lower harvesting costs for scallops and clam, lower fuel costs, continuous improvement program savings and refined procurement strategies and government support programs.

Cash used in operations was $6.9 million in the second quarter of 2020 as compared to $35.6 million in the same period of 2019. Free cash outflow was $18.8 million as compared to $48 million in the second quarter of 2019, and that was due to lower investments in working capital, which — and partially offset by lower cash earnings and higher capital expenditures.

Rigorous cash preservation measures were implemented during the first half of the year, including operational adjustments to several species that significantly improved cash flows while having minimal impact on species profitability. Clearwater will continue to use cash preservation measures into the second half of the year to manage leverage and liquidity. We expect to generate positive free cash flow in fiscal 2020.

Leverage at the end of the second quarter at 5.3x compared to 5.2 for the same period in 2019. And the lower impact — sorry, the impact of lower demand from COVID-19 was largely offset by disciplined working capital management and strong 2019 results included in the trailing 12-month calculation, which overall resulted in lower net debt balances.

Leverage is expected to increase in the third quarter as our normal seasonal cycle and as a direct impact from COVID-19. With a global economic recovery in the second half of 2020, we could see leverage decrease by the end of the year from current levels.

The company’s ability to operate safely and continuously throughout the pandemic has helped us to support the financial well-being of our employees, supported hundreds of workers in the fishery sector and their communities and has ensured the availability and delivery of safe and nutritious seafood to our customers locally, nationally and internationally. While the short-term impact of COVID-19 has introduced additional forward-looking uncertainty, Clearwater is a vertically integrated seafood company with proprietary licenses, advanced and year-round harvesting and processing capabilities, our premium product quality, the diversity of our species, our global sales and distribution footprint and an experienced and dedicated workforce has positioned Clearwater to take advantage of future growth opportunities as global seafood demand continues to recover.

We are now ready to take questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from George Doumet from Scotiabank.

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George Doumet, Scotiabank Global Banking and Markets, Research Division – Analyst [2]

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On the China sales, I think they’re down close to 50% in the quarter. I know this is a hard question to answer, but what is the impact of the salmon COVID outbreak and maybe restrictions around seafood generally play in that role? And can you maybe tell us where that China sales number is trending today, or I guess, closer to early August?

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Ian D. Smith, Clearwater Seafoods Incorporated – CEO [3]

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Yes. I think it’s clearly hard to say what the future is going to look like in China. But I can tell you that like in the rest of the world, our demand in China continues to improve.

There are no known cases of contamination of COVID-19 via contaminated food or water. And based on the current scientific knowledge of COVID-19, it’s considered unlikely that infection from food or water can occur.

Seafood, like any other surface may potentially become contaminated if adequate food handling and sanitation measures are not in place or when handled by an infected person. Additionally, media attributions of a local outbreak to seafood sources, as I think you’re alluding to, could adversely affect demand for products in the seafood industry and government control measures everywhere, including China, continue to evolve.

We continue to take effective action in this area around securing the health of our employees and making sure that our products are safe. It’s what we do every day. And again, like other markets, China’s been traditionally skewed towards foodservice, so it’s had a deeper impact. I would say, interestingly, the rest of Asia has held up pretty well. And we see demand continuing to improve and we see that in our current order patterns as well, not just in China, but in many other countries around the world.

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George Doumet, Scotiabank Global Banking and Markets, Research Division – Analyst [4]

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Okay. And maybe a question for Teresa. I think you guys reported $5 million of wage subsidies in the first half. Do you expect to report a similar level in the second half?

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Teresa H. Fortney, Clearwater Seafoods Incorporated – VP of Finance & CFO [5]

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So great question, George, and we are expecting that we’re going to qualify for some wage subsidies. With the change in the program that was announced by the government just several weeks back, they changed the process now to be a sliding scale relative to your sales. So it’s a little bit hard to say what we’ll be eligible for until we actually see how our monthly revenues flow.

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George Doumet, Scotiabank Global Banking and Markets, Research Division – Analyst [6]

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Okay. Okay. Ian, what impact, I guess, do the pandemic have on the strategic review?

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Ian D. Smith, Clearwater Seafoods Incorporated – CEO [7]

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None.

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George Doumet, Scotiabank Global Banking and Markets, Research Division – Analyst [8]

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Fair enough. And can you talk…

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Ian D. Smith, Clearwater Seafoods Incorporated – CEO [9]

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I’ll qualify that. Sorry, I’ll qualify that by saying it’s taking longer to do things that we would normally be doing in person, just because of restrictions on in-person meetings and travel and so on. So I’d say that.

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George Doumet, Scotiabank Global Banking and Markets, Research Division – Analyst [10]

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Have those constraints subsided a lot?

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Ian D. Smith, Clearwater Seafoods Incorporated – CEO [11]

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Well, we’re still in an Atlantic bubble. And nobody can travel here without self-isolating for 14 days before they see anyone.

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George Doumet, Scotiabank Global Banking and Markets, Research Division – Analyst [12]

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And just a quick clarification for Teresa. I think you mentioned that free cash flow is expected to be positive. I think in the last quarter, you might have alluded that free cash flow this year is going to be higher than last year. Is it just positive? Or do you still expect to have free cash flows generation above 2019 levels this year?

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Teresa H. Fortney, Clearwater Seafoods Incorporated – VP of Finance & CFO [13]

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We haven’t got the 2019 number for the year sitting in front of me, George. We’re expecting it to be stronger than what we were forecasting end of the last quarter. So I’d have to look up and reference the prior year, but it’s going to be solid for this year.

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Operator [14]

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Your next question comes from Bryan Hunt with Wells Fargo.

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Bryan Cecil Hunt, Wells Fargo Securities, LLC, Research Division – MD & Senior Analyst [15]

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I was wondering — I know you’re a golf fan, Ian, but hopefully, you’re a baseball fan as well. And so I’m going to preface this by saying, if I was part of the Toronto Blue Jays’ organization, what inning would we be in if your strategic review were playing the Blue Jays?

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Ian D. Smith, Clearwater Seafoods Incorporated – CEO [16]

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I’ll be — yes, that’s a great way to try to get at a better answer than I can give you, Bryan. What I can tell you is that the process is continuing in earnest despite the delays and the impacts of COVID-19. But I can’t comment on the time line for its completion.

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Bryan Cecil Hunt, Wells Fargo Securities, LLC, Research Division – MD & Senior Analyst [17]

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Okay. I was wondering if you could talk about — there’s obviously the side of it pivot around the world to food at home from dining out. And I was wondering if you can talk about how your organization pivoted to more retail product, whether it’s an innovation and in total volume of sales. And what cost impact, whether it’s operating cost and/or capital cost impact has that had in the most recent quarter?

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Ian D. Smith, Clearwater Seafoods Incorporated – CEO [18]

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Right. So I’ll begin at the end of your question. So I would say that the cost impact has been nominal, right? So if you look at the first half of the year, I would say, on a price per pound impact of our shifting that’s been going on, it’s in the single digits. And as demand has improved since, really, the end of April, demand has improved, sales have improved and prices have improved. So prices have not — so prices were modestly affected. But they’re not being affected now despite the heightened demand in nonfood service channels, which continues to grow.

We tend to have more premium-priced shellfish items. But the types — the best way to try to explain it to you, there’s all kinds of different ways to get into — and I’ll focus on retail for a moment. So first of all, we have a number of customers that we deal with directly and we’ve simply been increasing sales to them. We’ve essentially not sold all that we could potentially sell to those retailers because we have constrained volume relative to sustainability. So we like to spread it around. But there’s fewer places to spread it, and so we’ve been doing more business with some of our key Canadian and North American retail customers directly. That’s number one.

Number 2 is we have a number of foodservice distributors, both in North America and Asia and in Europe that are multichannel distributors, and they are shifting as well. So our ability to get our products into retail is enhanced by having really good distributors who have strong exposure to retail channels, and they’re making the pivot for us.

We also have distributors and customers who are on the processing side, who have made their own pivots to retail and are making more value-added products. And then there’s the things that we’re doing on our own. So for example, we’re packing products for retail customers that are going straight to frozen or chilled, or i.e., fresh section. So if the seafood counter is closed in a public store, you can still find our products. And by the way, there are seafood counters that are back open. But back in April, if they were closed, you could find Clearwater scallops in the chilled section, so nonfrozen. You can always find them in the frozen section. But if the counter wasn’t open, you could find them in one of the coolers in the seafood section of the perimeter to the store, chilled in a grab-and-go package.

We’ve also through — mostly through customers who are doing value-added processing, done more retail friendly packs. And those packs have been for their e-commerce business as well as for retail, more kind of single-serve, double-serve, grab and go. We’ve had new listings with the online stores for all the major retail players. And we’ve also expanded distribution with players like Ocado in the U.K.

So that’s essentially how we moved and the impact of packaging and additional cost relative to the cost of the product itself has been nominal.

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Bryan Cecil Hunt, Wells Fargo Securities, LLC, Research Division – MD & Senior Analyst [19]

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So just two quick questions and I’ll be done. You talked about retail and e-comm has been your focus. Can you tell us what your retail sales and your e-comm sales were up year-over-year in Q2?

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Ian D. Smith, Clearwater Seafoods Incorporated – CEO [20]

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So it’s hard to say because we’re direct and indirect. And we don’t — we can’t give you with precision — we’re not — we don’t release with precision, we don’t release what we’re selling directly at individual major retail customers. And our multichannel distributors, it’s really hard for us to pin down what’s going into retail, which is it versus e-comm versus foodservice, right?

But we do know that our retail — so anecdotally, I could tell you that our retail sales are up pretty consistent with where — how far retail is up if you take the North American market. So our retail sales, anecdotally, would be up in the 30% to 40% range versus prior year.

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Bryan Cecil Hunt, Wells Fargo Securities, LLC, Research Division – MD & Senior Analyst [21]

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Great. And then my last question, Teresa, last time we spoke, you all had reduced guidance for CapEx down to the $30 million to $34 million range. Has that changed at all?

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Teresa H. Fortney, Clearwater Seafoods Incorporated – VP of Finance & CFO [22]

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No, that’s consistent with where we are continuing to forecast, we’ve removed our discretionary spending. But that $30 million to $35 million is going to continue to give us what we need to stay fully operational and efficient in the fleet and in our facilities and has some accretive strategic projects still included in there as well.

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Operator [23]

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Your next question comes from Doug Cooper from Beacon Securities.

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Doug Cooper, Beacon Securities Limited, Research Division – MD and Head of Research [24]

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First of all, Teresa, can you just walk through the — how you accounted for the $5 million of wage subsidies? How does that flow through the income statement?

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Teresa H. Fortney, Clearwater Seafoods Incorporated – VP of Finance & CFO [25]

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So interesting question, and it’s — we broke it down and had to have a look at what was the support for the government wage subsidy. So to the extent that — and we would have qualified for wage subsidies related to all of our Canadian employees, and so many of those employees are in our operations, in the fleet operations, in the land-based operations. And so many of the wage subsidies received for that would have been capitalized and included into inventory and is released as that product is sold.

And then as any wage subsidies that were associated with salaried folks who would be in flowing through to, say, SG&A, the cost would have been realized in the period in which they worked. So there’s not an easy formula to go there.

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Doug Cooper, Beacon Securities Limited, Research Division – MD and Head of Research [26]

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Yes. I guess what I’m just trying to get at was the, call it, $16 million in shareholder EBITDA already, does that include — the $5.1 million, is that included in that? Or — and if it was, is there any offset? There was a onetime cost associated with COVID that you had to undertake in the quarter, whether it’s for screens or PPE or anything else, increased wages to get people to come, that kind of stuff?

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Teresa H. Fortney, Clearwater Seafoods Incorporated – VP of Finance & CFO [27]

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So for the total first half of the year, we have incremental costs associated with COVID of $5.7 million. And we would have had that $5.8 million, and we would have had wage subsidies in our P&L that would have offset $5.1 million of that. So first half of the year, we would be tracking $0.7 million less on subsidies than costs.

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Doug Cooper, Beacon Securities Limited, Research Division – MD and Head of Research [28]

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Okay. And do you expect some of those — I don’t know if we can call them onetime costs anymore, this might be the new way of life, but — to continue or in the plant or the ships putting Plexiglass up or whatever, maybe keeps the worker safe. Is all that sort of done? Do you expect any ongoing costs in terms of PPE or anything like that?

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Teresa H. Fortney, Clearwater Seafoods Incorporated – VP of Finance & CFO [29]

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So I’ll answer that in 2 parts. So all of the right things that we’ve been doing in the vessels and in the (inaudible) we’re continuously looking at making sure we can even do further enhancements for the safety of our employees.

Having said that, we’re also forecasting that the costs associated with it are certainly — the large part are over, but there are still some costs that are continuing for the year. You’ve got to remember that those costs in the plants and the fleet will cycle through inventory and then come out as we sell products, but a good chunk of cost — we had incremental costs, as an example, where inventory values would have been impacted in the first quarter, based on the onset of COVID with market prices resetting. So some of those costs would have been more the onetime in nature and not recurring.

So overall, some more cost to flow. We start (inaudible) continuing with (inaudible) paying to our employees. And so — but certainly, much lower than what we’ve been incurring so far.

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Doug Cooper, Beacon Securities Limited, Research Division – MD and Head of Research [30]

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Okay. Just moving on to the outlook. How do you feel about your inventory levels? It looks like about just under $90 million. Q2 a year ago was $120 million. How do you feel about the rebound in the second half? And maybe how should we think about the second half this year versus second half last year in terms of percentage change? Do you anticipate, sort of, being at 80% of last year or higher? Or any sort of qualitative factor outlook you can give us would be great.

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Ian D. Smith, Clearwater Seafoods Incorporated – CEO [31]

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Sure. I’ll take that. So as I alluded to earlier, demand and sales continued to improve since the end of April. We’ve had a successful shift to sales to channels, experienced heightened demand, especially retail, but also e-commerce. And we’re seeing improvements in traditional foodservice already as economies reopen around the world, and we do expect this trend to continue.

Uncertainty persists, largely associated with countries making continued progress on reopening and economic recovery. But based on our customer demand and order patterns, we’re consciously optimistic, with some species having already fully allocated demand for the second half of the year. And we expect species with more traditional exposure to foodservice like lobster, as an example, to be more impacted through the balance of the year.

From an inventory standpoint, we have very good visibility to our order patterns and long customer histories and a very robust forecasting system, and we are procuring to demand. And where we see some potential anomalies from an inventory perspective, whether it’s the end of the quarter or the end of the year, it’s the phenomenon of timing of landings.

The animals don’t know when the quarter end happens, as you’ve heard me say before. So any blips at the species level in inventories will be associated with timing of landings, not demand or procurement, but with our own harvest.

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Doug Cooper, Beacon Securities Limited, Research Division – MD and Head of Research [32]

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Right. And maybe a final question. Just the end — your clients at the end of the day, whether they be distributors or foodservice or whoever, how are they coming through this process? Are any of them in trouble or financial trouble? Maybe just any clarity on that.

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Ian D. Smith, Clearwater Seafoods Incorporated – CEO [33]

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Sorry, I would say I think we’ve been very fortunate. It’s there — these — most of our customers are well financed and in great shape. Teresa can probably comment in further detail. We have had customers taking advantage of extended terms, in terms of sales terms and days to pay that we have extended them. And we’ve obviously been taking advantage of our great relationship and use of EDC insurance. Everything we do sell is 100% EDC-insured. But we don’t see any issues on the horizon relative to our core customer base, other than we know that we’ve had requests for dating because they’re doing the same thing we’re doing, which is preserving liquidity and cash.

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Teresa H. Fortney, Clearwater Seafoods Incorporated – VP of Finance & CFO [34]

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I can’t add anything more to that.

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Operator [35]

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Your next question comes from John Sartz with Viking Capital Corp.

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John Sartz, [36]

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So I have a question about the strategic process, and I have to apologize ahead for the pun, the bad pun. But in view of — I mean, the quotas are restricted to Canadian owners. And I’m just wondering how far are you able to cast the net in terms of finding potential acquirers?

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Ian D. Smith, Clearwater Seafoods Incorporated – CEO [37]

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Yes. So the — John, the ownership of the Canadian quotas are not restricted to Canadian buyers. But you have to have a 51% Canadian ownership component. You have to have foreign ownership, can only be a minority. And I think foreign interest would be aware of that. But I think there are a number of examples within Canada and globally where structures exist that would accommodate such an occurrence.

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John Sartz, [38]

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So are you currently exploring those types of — I guess, do you have any — are you dealing with clients in — or potential acquirers within that category?

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Ian D. Smith, Clearwater Seafoods Incorporated – CEO [39]

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Love to comment, but I can’t.

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John Sartz, [40]

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Okay. So my second question — sorry, just one more question, a very short one. In terms of the somewhat tense political climate between Canada and China, has that have any impact on your business in China?

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Ian D. Smith, Clearwater Seafoods Incorporated – CEO [41]

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No. I think there’s been impact on the seafood trade in China associated with these outbreaks that have been connected to seafood processing. So there’s been an impact more broadly on seafood. But there’s been no specific impact that is directed at Clearwater.

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Operator [42]

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Your next question comes from Jonathan Lamers from BMO.

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Jonathan Lamers, BMO Capital Markets Equity Research – Analyst [43]

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On COVID, Ian, apart from the seasonal shrimp processing operation, are there any cases in the operations you are monitoring?

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Ian D. Smith, Clearwater Seafoods Incorporated – CEO [44]

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There are no active cases in our operations, thankfully.

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Jonathan Lamers, BMO Capital Markets Equity Research – Analyst [45]

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Great. On demand trends, would you happen to have any color on the decline in sales at the end of the quarter or quarter-to-date in Q3? I think the food service distributors are talking about things improving to the minus 20% to minus 25% range at the end of calendar Q2 and since, just in terms of their overall volumes. I was just wondering if that’s consistent with the experience you’ve had?

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Ian D. Smith, Clearwater Seafoods Incorporated – CEO [46]

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Yes. So I can’t comment on a specific percentage, Jonathan. But what I can tell you is that the strength that we saw in our order patterns in the month of June continued into July and seems to be holding true in the month of August.

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Jonathan Lamers, BMO Capital Markets Equity Research – Analyst [47]

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And can you just remind us again, what visibility you would have to orders over the balance of Q3 and Q4 at this time of year? Which species would already be fully ordered?

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Ian D. Smith, Clearwater Seafoods Incorporated – CEO [48]

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Yes. So I can’t tell you that. But I can tell you that some of our major core species would be on — already on allocation through the balance of the year. We have a 12-month rolling forecast system. It goes quite deep. It goes by region, it goes by customer, regardless of what channel that they’re in, and it gets repopulated every 2 weeks directly by our salespeople who are in the market, who are updating those forecasts. And it goes into relative — goes detail all the way down to the SKU level.

So it’s quite a robust system, and it really gives us the strength — gives me the confidence to make the forward-looking statements I’m making today about strengthening order patterns and allocations for certain species through the balance of the year.

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Jonathan Lamers, BMO Capital Markets Equity Research – Analyst [49]

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And you’ve seen quite a decline in demand volumes on certain major species like clams and shrimp. Would it make sense to cut prices to stimulate demand? How do you think about balancing those two?

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Ian D. Smith, Clearwater Seafoods Incorporated – CEO [50]

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Yes. So interestingly, a great question. Prices, as I said earlier, were down single digits for the quarter and the first half of the year, although they improved in second quarter versus first quarter. And they were — the prices were down single-digit as a percent on lower demand and lower volume sales. So what we’re seeing now, we saw in June, we continue to see in July and August, is that both sales revenue, sales volume and prices are now steadily improving as we head into and get ready for our business’ busiest sales period of the year, which starts really post-Labor Day.

So no, the short answer is no. We don’t see opportunity in reducing prices.

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Jonathan Lamers, BMO Capital Markets Equity Research – Analyst [51]

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Okay. And just a quick question on the Q2 costs for Teresa. Are you able to help frame whether lower marine diesel fuel was a material benefit to the Q2, or should be for Q3?

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Teresa H. Fortney, Clearwater Seafoods Incorporated – VP of Finance & CFO [52]

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So we are continuing to benefit from lower fuel cost. Q2 balance of the year, that’s what we’re expecting, yes.

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Operator [53]

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Your next question comes from Justine Ho with Mesirow Capital.

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Justine Ho, Mesirow Financial Inc., Research Division – Senior Analyst [54]

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Sorry I missed it earlier, but can you — you mentioned the cash flow will be positive, but I wasn’t sure that you meant cash flow would be positive for the second half of 2020 or for the full year of 2020? Free cash flow, sorry, free cash flow.

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Teresa H. Fortney, Clearwater Seafoods Incorporated – VP of Finance & CFO [55]

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Free cash flow, so we have here weight. Our free cash flow is heavier-weighted to the second half of the year. So my comments, Justine, was in reference to the total year. But that naturally means that it also was — is heavier in our second half.

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Justine Ho, Mesirow Financial Inc., Research Division – Senior Analyst [56]

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Okay. So your comment was based on the full year free cash flow positive?

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Teresa H. Fortney, Clearwater Seafoods Incorporated – VP of Finance & CFO [57]

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Yes.

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Justine Ho, Mesirow Financial Inc., Research Division – Senior Analyst [58]

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Got you. And do you define free cash flow as cash flow from operations minus CapEx?

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Teresa H. Fortney, Clearwater Seafoods Incorporated – VP of Finance & CFO [59]

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That will be the largest bulk of it. And if you actually look in our financial statements, we do provide a definition of it there, so you can actually see a bridge in our MD&A as well.

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Operator [60]

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(Operator Instructions) Your next question comes from Jonathan Norwood from Viking Capital.

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Jonathan Norwood, [61]

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I just had a follow-up to my colleague, John Sartz’ question with respect to the strategic review process. So maybe I’ll try a little bit of a different attack. But — so you mentioned there was kind of 3 steps to the process: first is to identify; second to review; and then third, to evaluate. And so I think I asked you this on the call last quarter in, and you had indicated — I’d ask you what stage you’re in, and I think you had indicated still the identifying stage.

So can you tell us which stage you’re in now?

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Ian D. Smith, Clearwater Seafoods Incorporated – CEO [62]

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Jonathan, I’d love to give you more information. As you can imagine, we anticipated this question. It was a matter of significant discussion with our special committee of our Board and our capital advisers and legal advisers and I cannot provide you with more information than I already have.

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Jonathan Norwood, [63]

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Okay. Okay. And just one additional question then. So Teresa, it’s been maybe 16 or 17 months since you had indicated that you would be stepping down as CFO. And obviously, there hasn’t been an appointment made in that regard.

And so I’m just wondering what is the time line, I guess, for appointing a new CFO? And is it something that could potentially be part of the strategic review process? I’m just wondering if you could give us a little more color there.

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Teresa H. Fortney, Clearwater Seafoods Incorporated – VP of Finance & CFO [64]

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So Ian, do you want to talk there? Or would you like me to talk to that?

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Ian D. Smith, Clearwater Seafoods Incorporated – CEO [65]

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I’m happy to talk to it, but I’m equally happy to let you answer the question.

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Teresa H. Fortney, Clearwater Seafoods Incorporated – VP of Finance & CFO [66]

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Okay. Here we go. So at this point, there’s no specific time lines. I’m fully committed and engaged in seeing through and working with the company. So there are no specific plans in place at this time.

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Ian D. Smith, Clearwater Seafoods Incorporated – CEO [67]

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So the only thing I would add to that is that the earlier announcement was based on lifestyle and life issues facing Teresa and her family, and we’re very grateful to Teresa, who originally stayed — agreed to stay on through a transition process. And now with everything that’s going on in the world, has made an open-ended commitment to us. And she is delightful to work with. She’s doing an outstanding job, and we’re going to continue to operate as a team going forward. And her commitment is now open-ended, which I’m grateful to — grateful for.

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Jonathan Norwood, [68]

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Okay. So there’s no active search then being undertaken for a new CFO?

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Ian D. Smith, Clearwater Seafoods Incorporated – CEO [69]

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Correct.

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Operator [70]

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Thank you very much. Ian Smith, there are no further questions at this time. Please proceed.

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Ian D. Smith, Clearwater Seafoods Incorporated – CEO [71]

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Okay. Listen, thank you very much for all calling in today. I know it’s the dead of summer. And hopefully, some of you are calling in from the beach or the dock, and we’ll let you get back to that. We really appreciate your time and attention today. And when we have more information to share with you, you can be sure that we will be reaching out. Thank you, and have a great afternoon.

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Operator [72]

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Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Thank you.