Maple Leaf Foods Reports Third Quarter Financial Results
Wed Oct 28, 8:54 AMTORONTO, Oct. 28 /CNW/ - Maple Leaf Foods Inc. (TSX: MFI.TO) today reported its financial results for the third quarter ended September 30, 2009.
- Adjusted EPS increased 62% to $0.21 compared to $0.13 last year
- Adjusted Operating Earnings increased 53% to $63.0 million from
$41.1 million last year
- Net earnings of $22.5 million compared to a net loss of $12.9 million
last year
- Sales declined 4% to $1.3 billion largely due to lower fresh meat
prices
- Launched innovative new products to support sales and margin growth
Note: Adjusted Operating Earnings measures are defined as earnings from
operations before one-time direct product recall, restructuring and other
related costs and other income (expense). Adjusted Earnings per Share
("Adjusted EPS") measures are defined as basic earnings per share
adjusted for the impact of one-time direct product recall, restructuring
and other related costs, net of tax and minority interest.
"Our third quarter results showed a very material increase in profitability compared to last year and prior historical levels and we are very pleased with this significant progress," said Michael H. McCain, President and CEO. "We benefited from the core strength of our bakery business, combined with substantial recovery in our packaged meats business. The sustainable earnings improvements from the protein restructuring implemented over the past three years are now more visible in our results. While we are making great progress, we still have to complete the work underway to fuel higher growth and margins consistent with our consumer packaged goods peer group."
Financial Overview
------------------
Sales for the third quarter decreased 3.6% to $1,296.6 million compared to $1,344.3 million last year. The sales decline was due primarily to lower fresh meat prices, the strategic exit or sale of non-profitable hog operations in 2008, and lower volumes in the Bakery Products Group.
Adjusted Operating Earnings increased to $63.0 million compared to $41.1 million last year, driven by improved performance in prepared meats, fresh poultry and bakery operations, combined with reduced losses in hog production operations as a result of benefits from restructuring initiatives.
Net earnings increased to $22.5 million ($0.17 per share) in the third quarter of 2009 compared to a net loss of $12.9 million ($0.10 per share) last year.
Following is a reconciliation of Basic EPS to Adjusted EPS:
Third Quarter Year-to-Date
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2009 2008 2009 2008
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Basic EPS $0.17 ($0.10) $0.24 ($0.18)
Product recall,
restructuring and other
related costs 0.04 0.24 0.15 0.34
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Adjusted EPS (i) $0.21 $0.13 $0.39 $0.17
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(i) Table does not add due to rounding.
Business Segment Review
-----------------------
Following is a summary of Adjusted Operating Earnings by business segment:
Third Quarter Year-to-Date
-------------------------------------------------------------------------
($ thousands) 2009 2008 2009 2008
-------------------------------------------------------------------------
Meat Products Group $18,111 $812 $31,144 $31,542
Agribusiness Group 15,062 12,336 33,518 17,152
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Protein Group 33,173 13,148 64,662 48,694
Bakery Products Group 32,749 30,550 80,259 56,378
Non-allocated Costs (i) (2,891) (2,621) (6,650) (12,007)
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Adjusted Operating Earnings 63,031 $41,077 138,271 $93,065
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(i) Non-allocated costs comprise costs related to systems conversion and
consulting fees. Management believes that not allocating these costs
provides a more comparable assessment of segmented operating results.
Meat Products Group
-------------------
(value-added prepared meats; chilled meal entrees and lunch kits; value-
added fresh pork, poultry and turkey products)
Adjusted Operating Earnings in the Meat Products Group were $18.1 million compared to $0.8 million last year reflecting solid progress in the recovery of the prepared meats business, which was impacted by a product recall in August 2008, and benefits from restructuring activities. Prepared meats performance also benefited from lower raw material costs, while volume continued to trend close to historical levels. Management remains focused on driving volume growth and improving earnings in this business, which is not yet performing to full potential. In addition, the Company plans to make investments in this business to improve efficiencies and reduce supply chain costs. Improved industry processor margins and yield efficiencies increased earnings in the Company's poultry operations, while results from primary pork processing were largely consistent with last year as lower pork markets were offset by restructuring and currency benefits.
Market leadership in innovation to drive deeper customer relationships and growth in higher margin packaged meats and meals products is a primary strategic focus as the Company has repositioned itself as a branded consumer packaged goods business. In the third quarter, Maple Leaf introduced re-sealable packaging for deli meats and bacon, responding to consumer needs by vastly improving convenience and storability. Maple Leaf Gourmet(TM), a line of five ready-to-bake and serve gourmet fresh chicken and pork entrees, was also launched in the third quarter.
Agribusiness Group
------------------
(hog production and animal by-products recycling)
Adjusted Operating Earnings for the Agribusiness Group in the third quarter of 2009 increased to $15.1 million from $12.3 million last year. Benefits from restructuring have improved results in hog production. Hog production in North America, however, continues to be unprofitable as a result of lower market prices. Earnings from rendering operations, which include biodiesel production, were slightly lower than last year due to lower commodity prices that decreased the value of rendered by-products.
Bakery Products Group
---------------------
(fresh and frozen branded value-added bakery products, including frozen
par-baked bakery products, sandwiches and specialty pasta and sauces).
Adjusted Operating Earnings increased to $32.7 million in the third quarter compared to $30.6 million last year. Increased earnings were mostly driven by lower commodity costs that improved margins in the North American fresh and frozen bakeries and pasta operations, although partly offset by disappointing results in the fresh sandwich business and U.K. bakery operations. Although not material to the overall performance of the Bakery Products Group, the fresh sandwich business has not met expectations. Management considers this business, which includes Aliments Martel that was acquired last year, to be an important part of its growth strategy and is actively working on initiatives to improve its market share and profitability. Earnings from the U.K. bakery operations were lower due to the continued effects of the U.K. recession on sales of specialty bakery products and higher manufacturing overheads in the quarter.
The Bakery Group launched several exciting new innovative products in the quarter aimed at supporting margin and category expansion. Dempster's(R) OvenFresh(TM) is a line of fresh, long life white and multigrain baguettes and dinner rolls that finish baking at home in minutes. Under a licensing agreement, the Company has also launched Cadbury(TM) Snack Cakes in Eastern Canada, an exciting new addition to its sweet goods offerings in the region.
Other Income (Expense)
----------------------
Other expense for the quarter was $0.2 million compared to other income of $9.2 million last year. The amount recorded in 2008 was mostly comprised of insurance proceeds to cover business interruption losses in the U.K. bakery business and the disposal of a redundant warehouse facility.
Other Matters
-------------
In the third quarter of 2009 Maple Leaf Foods launched a completely redesigned website that provides significantly enhanced digital marketing functionality, new content on products and services, meal planning and recipes for consumers, investor information, and reinforces Maple Leaf's repositioning as a leading branded food company. To view the new website, please go to www.mapleleaf.com.
On October 28, 2009 Maple Leaf Foods Inc. declared a dividend of $0.04 per share payable on December 31, 2009 to shareholders of record at the close of business on December 8, 2009. This dividend is an eligible dividend for the purposes of the "Enhanced Dividend Tax Credit System".
It is currently anticipated, however, that all dividends the Company will pay in 2010 will not be considered an eligible dividend for the purposes of the "Enhanced Dividend Tax Credit System".
An investor presentation related to the Company's third quarter financial results is available at www.mapleleaf.com and can be found under Investor Relations on the Quarterly Results page. A conference call will be held at 2:30 p.m. EDT on October 28, 2009 to review Maple Leaf Foods' third quarter financial results. To participate in the call, please dial 416-340-8018 or 866-223-7781. For those unable to participate, playback will be made available an hour after the event at 416-695-5800/800-408-3053 (Passcode 8434408 followed by the number sign).
A webcast presentation of the third quarter financial results will also be available at http://investor.mapleleaf.ca via a link:
http://events.startcast.com/events6/91/C0013/Default.aspx
The Company's full financial statements and related Management's Discussion and Analysis are available for download on the Company's website.
Forward-Looking Statements
--------------------------
This document contains, and the Company's oral and written public communications often contain, forward-looking statements that are based on current expectations, estimates, forecasts and projections about the industries in which the Company operates and beliefs and assumptions made by the Management of the Company. Such statements include, but are not limited to, statements with respect to objectives and goals, as well as statements with respect to beliefs, plans, objectives, expectations, anticipations, estimates and intentions. Specific statements include, but are not limited to, statements with respect to expectations concerning the ongoing nature of restructuring benefits in primary pork processing and hog production, expectations regarding earnings potential in the prepared meats business, expectations regarding earnings potential in the fresh sandwich business and expectations concerning the impact of the economic recession on the Company's operations. Words such as "expect," "anticipate," "intend," "attempt," "may," "will," "plan," "believe," "seek," "estimate," and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve assumptions and risks and uncertainties that are difficult to predict.
In addition, expectations concerning performance of the Company's business in general are based on a number of factors and assumptions including, but not limited to: the condition of the Canadian, United States, United Kingdom and Japanese economies; the rate of exchange of the Canadian dollar to the U.S. dollar and Japanese yen; expected recovery of sales following the product recall; the availability and prices of raw materials, energy and supplies; product pricing; the availability of insurance; the competitive environment and related market conditions; improvement of operating efficiencies whether as a result of the protein business transformation or otherwise; continued access to capital; the cost of compliance with environmental and health standards; no adverse results from ongoing litigation that would not be covered by insurance; no unexpected actions of domestic and foreign governments and the general assumption that none of the risks identified under "Risk Factors" in the Company's Annual Management's Discussion and Analysis for the year ended December 31, 2008 will materialize. All of these assumptions have been derived from information currently available to the Company including information obtained by the Company from third-party sources. These assumptions may prove to be incorrect in whole or in part. In addition, actual results may differ materially from those expressed, implied or forecasted in such forward looking statements, which reflect the Company's expectations only as of the date hereof.
Factors that could cause actual results or outcomes to differ materially from the results expressed, implied or forecasted by forward-looking statements are discussed more fully in the Company's Annual Management's Discussion and Analysis for the year ended December 31, 2008 including the section entitled "Risk Factors" that is available on SEDAR at www.sedar.com. The Company does not intend to, and the Company disclaims any obligation to, update any forward-looking statements, whether written or oral, or whether as a result of new information, future events or otherwise except as required by law.
Maple Leaf Foods Inc. is a leading food processing company, headquartered in Toronto, Canada. The Company employs approximately 24,000 people at its operations across Canada and in the United States, the United Kingdom, and Asia. The Company had sales of $5.2 billion in 2008.
Consolidated Financial Statements
(Expressed in Canadian dollars)
MAPLE LEAF FOODS INC.
Three and nine months ended September 30, 2009 and 2008
MAPLE LEAF FOODS INC.
Consolidated Balance Sheets
(In thousands of Canadian dollars)
-------------------------------------------------------------------------
As at As at As at
September September December
30, 2009 30, 2008 31, 2008
-------------------------------------------------------------------------
(Unaudited) (Unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 88,790 $ 125,509 $ 365,518
Accounts receivable 219,338 216,688 139,144
Inventories 371,257 397,642 377,414
Income and other taxes recoverable 17,081 3,683 20,971
Future tax asset 28,294 44,297 19,787
Prepaid expenses and other assets 26,116 33,768 32,289
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$ 750,876 $ 821,587 $ 955,123
Property and equipment 1,138,069 1,167,233 1,169,435
Other long-term assets 333,175 313,685 329,070
Future tax asset 25,557 57,890 24,854
Goodwill 867,941 871,312 876,261
Other intangible assets 99,810 98,238 97,358
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$3,215,428 $3,329,945 $3,452,101
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness $ 4,357 $ 9,521 $ 8,894
Accounts payable and accrued charges 532,752 563,831 600,924
Current portion of long-term debt 363,546 11,457 179,244
Other current liabilities 45,101 - 28,456
-------------------------------------------------------------------------
$ 945,756 $ 584,809 $ 817,518
Long-term debt 786,744 1,240,805 1,200,224
Future tax liability 45,592 94,726 37,903
Other long-term liabilities 182,127 236,785 179,039
Non-controlling interest 79,752 71,939 74,447
Shareholders' equity 1,175,457 1,100,881 1,142,970
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$3,215,428 $3,329,945 $3,452,101
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MAPLE LEAF FOODS INC.
Consolidated Statements of Earnings
(In thousands of Canadian dollars, except share amounts)
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
(Unaudited) 2009 2008 2009 2008
-------------------------------------------------------------------------
Sales $1,296,597 $1,344,334 $3,896,699 $3,902,898
Cost of goods sold 1,103,724 1,186,245 3,368,411 3,438,406
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Gross margin $ 192,873 $ 158,089 $ 528,288 $ 464,492
Selling, general and
administrative expenses 129,842 117,012 390,017 371,427
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Earnings from operations
before the following: $ 63,031 $ 41,077 $ 138,271 $ 93,065
Product recall,
restructuring and other
related costs (7,567) (42,902) (26,753) (62,242)
Other income (expense) (249) 9,157 3,219 11,075
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Earnings from operations
before interest and
income taxes $ 55,215 $ 7,332 $ 114,737 $ 41,898
Interest expense 19,755 22,325 61,862 65,856
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Earnings (loss) from
operations before income
taxes $ 35,460 $ (14,993) $ 52,875 $ (23,958)
Income taxes 10,466 (4,243) 16,245 (6,202)
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Earnings (loss) from
operations before
non-controlling
interest $ 24,994 $ (10,750) $ 36,630 $ (17,756)
Non-controlling interest 2,537 2,169 6,403 4,526
-------------------------------------------------------------------------
Net earnings (loss) $ 22,457 $ (12,919) $ 30,227 $ (22,282)
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Basic earnings (loss)
per share $ 0.17 $ (0.10) $ 0.24 $ (0.18)
Diluted earnings (loss)
per share 0.17 (0.10) 0.23 (0.18)
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Weighted average number
of shares (millions) 131.0 126.3 128.2 126.8
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MAPLE LEAF FOODS INC.
Consolidated Statements of Comprehensive Income (Loss)
(In thousands of Canadian dollars)
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
(Unaudited) 2009 2008 2009 2008
-------------------------------------------------------------------------
Net earnings (loss) $ 22,457 $ (12,919) $ 30,227 $ (22,282)
Other comprehensive income
(loss)
Change in accumulated
foreign currency
translation adjustment (15,009) (9,187) (7,829) (953)
Change in unrealized
derivative loss on cash
flow hedges 1,353 2,326 14,174 (2,313)
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$ (13,656) $ (6,861) $ 6,345 $ (3,266)
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Comprehensive income
(loss) $ 8,801 $ (19,780) $ 36,572 $ (25,548)
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Consolidated Statements of Retained Earnings
(In thousands of Canadian dollars)
-------------------------------------------------------------------------
Nine months ended September 30,
(Unaudited) 2009 2008
-------------------------------------------------------------------------
Retained earnings, beginning of period $ 314,649 $ 378,604
Net earnings (loss) 30,227 (22,282)
Adoption of new accounting standard (207) -
Dividends declared ($0.12 per share; 2008:
$0.12 per share) (15,504) (15,700)
Premium on shares repurchased for cancellation - (5,515)
Premium on shares issued from Restricted Share
Unit Trust - (819)
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Retained earnings, end of period $ 329,165 $ 334,288
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MAPLE LEAF FOODS INC.
Consolidated Statements of Cash Flows
(In thousands of Canadian dollars)
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
(Unaudited) 2009 2008 2009 2008
-------------------------------------------------------------------------
CASH PROVIDED BY (USED IN):
Operating activities
Net earnings (loss) $ 22,457 $ (12,919) $ 30,227 $ (22,282)
Add (deduct) items not
affecting cash:
Depreciation and
amortization 36,637 37,353 113,915 111,062
Stock-based compensation 4,551 3,840 13,664 12,026
Non-controlling interest 2,537 2,169 6,403 4,526
Future income taxes (9,541) (12,517) (12,385) (21,765)
Loss (gain) on sale of
property and equipment 313 (4,302) 477 (4,073)
Gain on sale of
investments - - (501) -
Amortization of
terminated interest
rate swap 502 917 1,603 5,499
Change in fair value of
derivative financial
instruments (2,028) (1,483) (12,270) (1,749)
Change in other long-term
receivables - 163 - 559
Decrease (increase) in
net pension asset 20 (5,137) 1,119 (16,199)
Change in provision for
restructuring and other
related costs 2,946 17,448 15,850 28,792
Other (3,843) 2,848 (9,170) 2,052
Change in non-cash
operating working
capital 2,464 22,070 (140,234) (89,835)
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Cash provided by
operating activities $ 57,015 $ 50,450 $ 8,698 $ 8,613
-------------------------------------------------------------------------
Financing activities
Dividends paid (5,374) (5,252) (15,504) (15,700)
Dividends paid to non-
controlling interest (155) (183) (516) (599)
Net increase (decrease)
in long-term debt (132,682) 138,037 (165,877) 359,371
Increase in share capital - 900 - 4,010
Purchase of treasury stock (3,190) - (3,190) (11,341)
Shares repurchased for
cancellation - - - (11,814)
Other 78 2,085 2,806 784
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Cash provided by (used in)
financing activities $ (141,323) $ 135,587 $ (182,281) $ 324,711
-------------------------------------------------------------------------
Investing activities
Additions to property
and equipment (29,705) (49,344) (123,392) (157,708)
Proceeds from sale of
property and equipment 179 6,682 23,572 17,227
Proceeds from sale of
investments - - 1,540 -
Acquisition of businesses
- net of cash acquired - (1,295) - (62,954)
Purchase of Canada
Bread shares - (32,643) - (32,643)
Other (17) 224 (328) 365
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Cash used in investing
activities $ (29,543) $ (76,376) $ (98,608) $(235,713)
-------------------------------------------------------------------------
Increase (decrease) in
cash and cash equivalents (113,851) 109,661 (272,191) 97,611
Net cash and cash
equivalents, beginning
of period 198,284 6,327 356,624 18,377
-------------------------------------------------------------------------
Net cash and cash
equivalents, end of
period $ 84,433 $ 115,988 $ 84,433 $ 115,988
-------------------------------------------------------------------------
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MAPLE LEAF FOODS INC.
Segmented Financial Information
(In thousands of Canadian dollars)
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
(Unaudited) 2009 2008 2009 2008
-------------------------------------------------------------------------
Sales
Meat Products Group $ 815,610 $ 838,195 $2,468,218 $2,457,378
Agribusiness Group 55,813 63,658 155,378 183,819
Bakery Products Group 425,174 442,481 1,273,103 1,261,701
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$1,296,597 $1,344,334 $3,896,699 $3,902,898
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings from operations
before product recall,
restructuring and other
related costs and other
income (expense)
Meat Products Group $ 18,111 $ 812 $ 31,144 $ 31,542
Agribusiness Group 15,062 12,336 33,518 17,152
Bakery Products Group 32,749 30,550 80,259 56,378
Non-allocated costs (2,891) (2,621) (6,650) (12,007)
-------------------------------------------------------------------------
$ 63,031 $ 41,077 $ 138,271 $ 93,065
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Capital expenditures
Meat Products Group $ 17,278 $ 29,742 $ 69,238 $ 101,593
Agribusiness Group 3,110 2,638 8,299 9,614
Bakery Products Group 9,317 16,964 45,855 46,501
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$ 29,705 $ 49,344 $ 123,392 $ 157,708
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Depreciation and
amortization
Meat Products Group $ 18,542 $ 18,970 $ 58,151 $ 56,548
Agribusiness Group 4,004 4,085 12,077 12,252
Bakery Products Group 14,091 14,298 43,687 42,262
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$ 36,637 $ 37,353 $ 113,915 $ 111,062
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As at As at As at
September September December
30, 2009 30, 2008 31, 2008
-------------------------------------------------------------------------
(Unaudited) (Unaudited)
Total assets
Meat Products Group $1,703,980 $1,716,044 $1,677,671
Agribusiness Group 302,660 240,432 318,387
Bakery Products Group 893,481 908,152 922,158
Non-allocated assets 315,307 465,317 533,885
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$3,215,428 $3,329,945 $3,452,101
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Goodwill
Meat Products Group $ 450,004 $ 450,734 $ 450,431
Agribusiness Group 14,136 12,942 14,445
Bakery Products Group 403,801 407,636 411,385
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$ 867,941 $ 871,312 $ 876,261
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ContactsLynda Kuhn
Senior Vice-President
Communications & Consumer Relations
(416) 926-2026
www.mapleleaf.com
158.94 (1.43%)
