Maple Leaf Foods Reports 2006 Second Quarter Financial Results
TORONTO, July 28, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- Maple Leaf Foods Inc. (TSX:MFI) today reported its financial results for the second quarter ended June 30, 2006.
"Currency challenges and global protein market conditions pressured our financial performance in the quarter," said Michael McCain, President and CEO. "While we fared better in these difficult markets than our peers in North America, the impact of currency, combined with these market conditions, pressured our margins in both hog production and primary processing. We are taking several long-term actions to offset these impacts."
"As previously discussed, we are moving forward with major mid-term initiatives to achieve our long-term EPS and RONA targets, including realigning our protein value chain operations, investing in value-added processing and new product innovation, and implementing significant manufacturing optimization and cost reduction initiatives. We anticipate that results for the second half of the year will be impacted by restructuring costs related to these actions. We will also execute strategic acquisitions to broaden our sales mix and expand our global operations."
Sales for the second quarter decreased to $1.5 billion compared with $1.6 billion for the prior year, primarily due to the lower commodity prices of export products. Year-to-date sales decreased 5% to $2.9 billion.
In the second quarter, earnings from operations decreased to $60.4 million from $78.7 million last year, while year-to-date earnings decreased to $112.2 million from $139.8 million in the first six months last year. Year-to-date earnings from operations in 2005 exclude $13.2 million ($8.8 million after tax) in restructuring costs incurred in the first quarter. Management believes that this is the most appropriate basis on which to evaluate operating results, as restructuring costs are not representative of continuing operations.
Net earnings for the quarter declined to $21.2 million ($0.17 per share) from $33.2 million ($0.26 per share) in the second quarter last year. Year-to-date net earnings were $38.5 million ($0.30 per share) compared to $54.3 million ($0.43 per share) before restructuring costs last year. Including restructuring costs, net earnings for the first six months of 2005 were $46.0 million ($0.36 per share).
Operating Review ---------------- The Company's Meat Products Group and the Agribusiness Group together comprise the Protein Value Chain operations, which are involved in producing animal protein products. These operations are highly interrelated and are strategically linked through the Company's Vertical Coordination business model. While each operation maintains a strong external customer focus, they are tightly coordinated to maximize profitability for the Company where their operations intersect. Accordingly, it is more meaningful to review the combined results of the Protein Value Chain rather than each segment independently. The following table, which forms the basis of discussion in this document of the Company's results of operations, reflects operating earnings by business segment before restructuring costs: Earnings from operations ------------------------ ($ millions) Second Quarter Year to Date --------------------- ---------------------- 2006 2005 Change 2006 2005 Change ---- ---- ------ ---- ---- ------ Meat Products Group 13.6 17.5 (22%) 27.3 36.1 (24%) Agribusiness Group 17.8 34.3 (48%) 31.2 56.2 (44%) --------------------- ---------------------- Protein Value Chain 31.4 51.8 (39%) 58.5 92.3 (37%) Bakery Products Group 29.0 26.9 8% 53.7 47.5 13% --------------------- ---------------------- 60.4 78.7 (23%) 112.2 139.8 (20%) --------------------- ---------------------- --------------------- ---------------------- Protein Value Chain ------------------- Protein Value Chain earnings for the second quarter declined to $31.4 million from $51.8 million last year, primarily due to the impact of currency changes and protein markets, resulting in significantly reduced earnings from hog production operations and pork sales to Japan, as well as higher energy costs. Year-to-date earnings decreased to $58.5 million from $92.3 million in 2005. A combination of portfolio balance, brand strength and value-added packaged meats & meals business helped the Company mitigate the very negative market conditions felt by more pure-play meat industry participants in the North American market.
Meat Products Group (branded value-added prepared meat products; fresh, frozen and branded value-added pork products; fresh, frozen and branded value-added chicken and turkey products; and global food marketing, distribution and trading)
Meat Products Group sales for the second quarter decreased 10% to $955 million primarily due to a decline in pork sales values and volume of frozen pork to Japan. Year-to-date sales were $1.9 billion compared to $2.1 billion last year.
Earnings from operations for the second quarter declined to $13.6 million from $17.5 million last year, while year-to-date earnings decreased to $27.3 million from $36.1 million last year. Earnings in the second quarter declined primarily due to global protein markets and the impact of currency shifts in the U.S. dollar and the Japanese yen. While higher value chilled pork volumes to Japan remained strong, margins continue to be impacted by the depreciation of the yen, which declined more against the Canadian than the U.S. dollar and thus had a relatively greater impact on Maple Leaf compared to U.S. competitors. Price increases to offset these currency changes have been impeded by the current oversupply of protein in the global market. Profitability in the North American pork market was also pressured by an abundance of proteins, although poultry earnings improved from last year. These lower earnings offset strong performance by the Company's consumer foods operations, which benefited from lower raw material costs and price increases that were instituted to offset higher energy and related costs, reflecting the positive impact of the portfolio balance in the Meat Products Group.
The Company will be making significant investments in its value-added meats business to support increased capacity and further cost reductions. These capital investments include the relocation of the existing Schneiders Lunchmates manufacturing operation to a new facility in Guelph, Ontario that will double the production capacity and reduce manufacturing costs. The Company has also purchased a 185,000 square foot facility in Brampton, Ontario to manufacture a new line of refrigerated, branded meal solution products. These products are expected to be launched in the first quarter of 2007. Capital spending related to these investments will amount to approximately $70 million, to be spent principally in 2006.
Agribusiness Group (research, development and supply of quality livestock nutrition products and services; pet food; swine production; and animal by-products recycling)
Agribusiness Group sales for the second quarter increased to $207 million compared to $203 million last year, year-to-date sales increased 5% to $408 million compared to $389 million last year.
Earnings from operations for the second quarter declined to $17.8 million from $34.3 million last year, and year-to-date declined 44% to $31.2 million due to significantly lower results in the hog production operations. A 7% decline in hog prices and a weaker U.S. dollar resulted in a lower realized price for hogs, and combined with higher feed prices contributed to the earnings decline. Earnings were also negatively impacted by a one-time adjustment in the inventory values of work in progress hogs following the implementation of a new costing and tracking system in 2006, and by higher energy costs. Maple Leaf had effective ownership of 19% of the 1.7 million hogs it processed in the second quarter. A review of these hog operations is well underway and the Company may incur special charges this year as it restructures this business to restore competitiveness and improve profitability. This may include the sale or liquidation of investments that cannot achieve the Company's targets for return on capital employed in this business.
Bakery Products Group (fresh, frozen and branded value-added bakery products, including frozen par-baked bakery products; and specialty pasta and sauces)
Bakery Product Group sales for the second quarter increased to $335 million compared to $314 million last year, supported by increased volume in the U.K. bakery operations, an improved sales mix and price increases, which more than offset some market softness. Year-to-date sales increased to $637 million compared to $603 million in 2005. Earnings from operations in the second quarter increased to $29.0 million from $26.9 million last year, while year-to date earnings rose to $53.7 million from $47.5 million.
Fresh Bakery operating earnings increased from last year due to an improved mix of higher margin bakery products, supported by an ongoing focus on new product innovation, higher nutrition products and investment in brand building. The Company benefited from the first quarter launch of Dempster's Smart, a white bread product made with a new enriched whole wheat flour that provides the health attributes of whole grain bread. These gains more than offset an industry wide volume decline and higher input costs. A price increase implemented in February helped to offset higher fuel prices, and the Company will continue to pass through price adjustments as necessary to offset rising input costs, including wheat and energy, which have increased significantly from last year.
Frozen bakery earnings increased as well in the second quarter due to the increased contribution from the U.K. bakery operations, which benefited from the contribution of recent investments including increased production from the new bagel plant in Rotherham and the par-baked plant in Walsall, which was acquired in the first quarter of 2006. Significantly higher advertising and promotional costs were also incurred in the second quarter last year to support increased bagel production. The North American frozen bakery operations achieved a strong volume increase in the quarter, although profits were impacted by higher energy, distribution and raw material costs. The business continues to gradually pass through price increases to offset these higher input costs.
Cash Flow and Financing
-----------------------
Interest expense for the second quarter was $24.9 million compared to $26.0
million last year as lower debt balances offset higher short-term interest
rates. At the end of the second quarter, interest rates on 82% of the Company's
indebtedness was fixed and therefore not significantly exposed to interest rate
fluctuations. Year-to-date interest expense was $49.1 million compared to $51.1
million last year.
Cash flow from operating activities for the second quarter was $15.0 million compared to $70.7 million last year. This decrease was primarily the result of an increased investment in working capital and lower earnings. Cash flow from operating activities for the year-to-date was a use of cash of $3.7 million compared to a source of funds of $29.8 million in the first six months of 2005.
Capital expenditures on plant and equipment for the second quarter were largely consistent with last year at $45.9 million, and include an investment of approximately $10 million to acquire a facility that provides increased capacity to support growth in the value-added packaged meats and meals business.
During the quarter, the Company completed an agreement with its principal bank syndicate to renew its primary revolving credit facility. The result was an increase in the facility from $700 million to $870 million, coupled with a slight reduction in interest rates. This renewal has strengthened the Company's medium-term liquidity and the facility will continue to be used to meet the Company's shorter term funding requirements for general corporate purposes. Total debt at the end of the quarter, net of cash balances, was $1.1 billion, a decline from $1.2 billion last year.
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 our objectives and goals, as well as statements with respect to our beliefs, plans, objectives, expectations, anticipations, estimates and intentions. Words such as "expect," "anticipate," "intend," "attempt," "may," "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. Therefore, actual outcomes and results may differ materially from what is expressed, implied or forecasted in such forward-looking statements. The Company does not intend, 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. Refer to the Company's annual report, management proxy circular, annual information form and other filings with the Ontario Securities Commission and Toronto Stock Exchange for further information on risks and uncertainties that could cause actual results to differ materially from forward-looking statements.
These forward looking statements are based on a variety of factors and assumptions including, but not limited to: the condition of the Canadian and U.S. economies, the rate of appreciation of the Canadian dollar versus the U.S. dollar and Japanese yen, the availability and prices of livestock, raw materials, energy and supplies, product pricing, the competitive environment and related market conditions, operating efficiencies, access to capital, the cost of compliance with environmental and health standards, adverse results from ongoing litigation and actions of domestic and foreign governments. These assumptions have been derived from information currently available to the Company including information obtained by the Company from third-party industry analysts. Actual results may differ materially from those predicted by such forward-looking statements. While the Company does not know what impact any of these differences may have, its business, results of operations, financial condition and the market price of its securities may be materially adversely affected. Factors that could cause actual results or outcomes to differ materially from the results expressed or implied by forward-looking statements include, among other things: the risks posed by food contamination, consumer liability and product recalls; the risks related to the health status of livestock; the risks related to the creditworthiness of customers to whom the Company extends credit; the Company's exposure to currency exchange risks; the impact of international events on commodity prices and the free flow of goods; the cyclical nature of the cost and supply of hogs and the pork market generally; the risks posed by compliance with extensive government regulation; the impact of the rate of duty imposed by the United States government on the shipment of live swine to the United States; the risk due to the consolidating customer environment; leverage risk and the risk posed by pandemic.
Other Matters
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Maple Leaf Foods declared a dividend of $0.04 per share payable on September 29, 2006, to shareholders of record on September 8, 2006.
Maple Leaf Foods Inc. is a leading Canadian food processing company committed to delivering quality food products to consumers around the world. Headquartered in Toronto, Canada, the Company employs approximately 24,000 people at its operations across Canada and in the United States, Europe and Asia. The Company had sales of $6.1 billion in 2005.
An investor presentation related to the Company's second 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 10:00 a.m. EDT on July 28, 2006 to review Maple Leaf Foods' second quarter financial results. To participate in the call, please dial 416-641-6113 or 866-542-4239. For those unable to participate, playback will be made available an hour after the event at 416-695-5800/800-408-3053 (Passcode 3192256 followed by the number sign).
A webcast presentation of the second quarter financial results will also be available at http://investor.mapleleaf.ca at 10:00 a.m. EDT via a link http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=88490&eventID=1352492. An archived replay of the webcast will be available following the call at each of the above links.
Consolidated Financial Statements (Expressed in Canadian dollars) MAPLE LEAF FOODS INC. Three and Six months ended June 30, 2006 and 2005 MAPLE LEAF FOODS INC. Consolidated Balance Sheets (In thousands of Canadian dollars)
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As at As at As at June 30, June 30, December 31, 2006 2005 2005
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(Unaudited) (Unaudited) ASSETS Current assets
Cash and cash equivalents $ 33,562 $ 43,319 $ 80,502
Accounts receivable (Note 3) 240,920 318,630 247,014
Inventories 418,261 401,816
400,848
Future tax asset - current 14,410 20,599 15,329
Prepaid expenses and other
assets 18,366 16,900
12,104
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725,519 801,264 755,797 Investments in associated companies 46,281 79,313 61,939 Property and equipment 1,158,933 1,111,369 1,137,317 Other long-term assets 272,684 235,023 261,907 Future tax asset - non-current 33,320 29,608 38,499 Goodwill (Note 9) 846,855 851,005 847,853 Other intangibles 86,097 81,204 86,468
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$ 3,169,689 $ 3,188,786 $
3,189,780
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LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable and accrued charges $ 599,565 $ 584,364 $ 669,941 Income and other taxes payable 9,116 22,610 31,727
Current portion of long-term
debt 105,539 62,471
110,428
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714,220 669,445 812,096 Long-term debt (Note 11) 1,055,435 1,202,488 1,032,829 Future tax liability 51,879 41,469 56,183 Other long-term liabilities 213,372 235,600 202,576 Minority interest 95,843 75,044 87,425 Shareholders' equity 1,038,940 964,740 998,671
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$ 3,169,689 $ 3,188,786 $
3,189,780
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The accompanying notes to the consolidated financial statements are an integral part of these statements. MAPLE LEAF FOODS INC. Consolidated Statements of Earnings (In thousands of Canadian dollars, except share amounts)
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Three months ended June 30, Six months ended June 30, (Unaudited) 2006 2005 2006 2005
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(As restated) (As restated) (Note (1a)) (Note 1(a)) Sales $ 1,496,696 $ 1,580,482 $ 2,922,647 $ 3,081,125
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Earnings from operations before restructuring costs 60,396 78,670 112,198 139,820 Restructuring costs (Note 2) - - - 13,157
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Earnings from operations 60,396 78,670 112,198 126,663 Other income (Note 4) 210 2,258 2,179 1,716
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Earnings before interest and income taxes 60,606 80,928 114,377 128,379 Interest expense 24,880 26,044 49,095 51,090
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Earnings before income taxes 35,726 54,884 65,282 77,289 Income taxes (Note 6) 11,995 18,183 21,824 25,737
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Earnings before minority interest 23,731 36,701 43,458 51,552 Minority interest 2,545 3,464 5,000 5,567
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Net earnings $ 21,186 $ 33,237 $ 38,458 $ 45,985
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Earnings per share - basic (Note 8) $ 0.17 $ 0.26 $ 0.30 $ 0.36 Earnings per share - diluted (Note 8)$ 0.16 $ 0.25 $ 0.30 $ 0.35
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Weighted average number of shares (millions) 127.8 126.6 127.8 126.3
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The accompanying notes to the consolidated financial statements are an integral part of these statements. Consolidated Statements of Retained Earnings (In thousands of Canadian dollars)
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Six months ended June 30, (Unaudited) 2006 2005
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Retained earnings, beginning of period $ 231,807 $ 159,129
Net earnings for the period 38,458
45,985
Dividends declared
($0.08 per share; 2005: $0.08 per share) (10,227) (10,123)
Premium on repurchase of share capital (Note 7) (4,574) -
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Retained earnings, end of period $ 255,464 $
194,991
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The accompanying notes to the consolidated financial statements are an integral part of these statements. MAPLE LEAF FOODS INC. Consolidated Statements of Cash Flows (In thousands of Canadian dollars)
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Three months ended June 30, Six months ended June 30, (Unaudited) 2006 2005 2006 2005
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CASH PROVIDED BY (USED IN) Operating activities Net earnings $ 21,186 $ 33,237 $ 38,458 $ 45,985 Add (deduct) items not affecting cash: Depreciation and amortization 35,868 33,261 71,390 65,881 Stock-based compensation 2,228 1,742 4,819 3,510 Minority interest 2,545 3,464 5,000 5,567 Future income taxes 4,670 4,265 1,816 (273) Undistributed earnings of associated companies (142) (1,988) (279) (3,264) Loss on redemption of convertible debenture - - - 1,108 Gain on sale of property and equipment (139) (651) (705) (822) Loss (gain) on sale of investments 137 (11) 145 - Other 2,228 4,948 5,317 3,576 Change in other long-term receivables 469 450 2,056 6,486 Increase in pension asset (11,821) (9,246) (24,262) (14,873) Change in operating working capital (42,183) 1,193 (107,425) (83,113)
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15,046 70,664 (3,670) 29,768 Financing activities Dividends paid (5,127) (5,073) (10,227) (10,123) Dividends paid to minority interest (293) (200) (948) (511) Net increase (decrease) in long-term debt 48,935 (65,681) 35,890 (9,851) Increase in share capital (Note 7) 10,440 3,756 13,383 8,479 Shares repurchased for cancellation (Note 7) (2,028) - (8,257) - Other 297 (758) 2,354 -
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52,224 (67,956) 32,195 (12,006) Investing activities Additions to property and equipment (45,911) (44,930) (71,725) (84,888) Proceeds from sale of property and equipment 958 2,900 4,397 6,603 Purchase of net assets of businesses (Note 10) - (7,879) (5,323) (10,625) Other 2,571 1,509 (2,814) 2,697
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(42,382) (48,400) (75,465) (86,213) Increase (decrease) in cash and cash equivalents 24,888 (45,692) (46,940) (68,451) Cash and cash equivalents, beginning of period 8,674 89,011 80,502 111,770
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Cash and cash equivalents, end of period $ 33,562 $ 43,319 $ 33,562 $ 43,319
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The accompanying notes to the consolidated financial statements are an integral part of these statements. MAPLE LEAF FOODS INC. Segmented Financial Information (In thousands of Canadian dollars)
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Three months ended June 30, Six months ended June 30, (Unaudited) 2006 2005 2006 2005
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(As restated) (As restated) (Note (1a)) (Note 1(a)) Sales Meat Products Group $ 954,793 $ 1,063,325 $ 1,878,320 $ 2,089,212 Agribusiness Group 206,601 202,930 407,682 388,995 Bakery Products Group 335,302 314,227 636,645 602,918
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$ 1,496,696 $ 1,580,482 $ 2,922,647 $
3,081,125
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Earnings from operations, before restructuring costs Meat Products Group $ 13,591 $ 17,491 $ 27,318 $ 36,147 Agribusiness Group 17,838 34,302 31,182 56,153 Bakery Products Group 28,967 26,877 53,698 47,520
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$ 60,396 $ 78,670 $ 112,198 $
139,820
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Additions to property and equipment Meat Products Group $ 27,116 $ 15,423 $ 38,144 $ 33,182 Agribusiness Group 7,331 8,934 11,698 18,677 Bakery Products Group 11,464 20,573 21,883 33,029
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$ 45,911 $ 44,930 $ 71,725 $
84,888
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Depreciation and amortization Meat Products Group $ 17,013 $ 15,911 $ 34,006 $ 32,264 Agribusiness Group 7,505 6,320 14,457 11,690 Bakery Products Group 11,350 11,030 22,927 21,927
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$ 35,868 $ 33,261 $ 71,390 $
65,881
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As at As at As at June 30, June 30, December 31, 2006 2005 2005
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(Unaudited) (Unaudited) (As restated) (Note 1(b)) Total assets Meat Products Group $ 1,524,483 $ 1,579,737 $ 1,501,295 Agribusiness Group 685,052 646,408 688,766 Bakery Products Group 706,207 723,915 694,519 Non-allocated assets 253,947 238,726 305,200
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$ 3,169,689 $ 3,188,786 $
3,189,780
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The accompanying notes to the consolidated financial statements are an integral part of these statements. 1. SIGNIFICANT ACCOUNTING POLICIES The unaudited interim consolidated financial statements should be
read in conjunction with the annual consolidated financial statements
for the year ended December 31, 2005. These unaudited interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles using the same accounting policies as were applied in the consolidated financial statements for the year ended December 31, 2005, except for the following: a) Accounting Changes Effective January 1, 2006, the Company retroactively adopted, with restatement of prior periods, the guidance presented in EIC Abstract 156 "Accounting by a Vendor for Consideration Given to a Customer including a Reseller of the Vendor's Products". The EIC requires vendors to classify certain consideration provided to customers as a reduction of revenue rather than as cost of sales unless the vendor receives, or will receive an identifiable benefit in exchange for the consideration. The impact of the adoption of this standard was a reduction in sales during the quarter of approximately $95.7 million (2005: $85.8 million) and during the six months ended June 30, 2006 of approximately $186.4 million (2005: $167.4 million). This accounting change had no impact on operating earnings, net earnings or earnings per share. b) Comparative Figures The December 31, 2005 segmented total assets for the purposes of the segmented financial information have been revised to reflect the allocation of certain assets relating to Schneider's acquisition that are now being managed by the Agribusiness group. Certain other 2005 comparative figures have been reclassified to conform to the financial statement presentation adopted in 2006 and year-end 2005. 2. RESTRUCTURING COSTS
During the first quarter of 2005, the Company recorded $13.2 million
in restructuring costs ($8.8 million after tax) in respect of certain
plant closures and operational restructuring for several of its businesses associated with the integration of Schneider Corporation ("Schneider Foods"), the closure of the Company's bakery in Peterborough, England, and certain other operational restructuring items. Of the $13.2 million, $5.0 million represents the write down of certain capital assets that were disposed of or that have become impaired as a result of the restructuring and $8.2 million relates to provisions for employee terminations, facility exit costs, and other
restructuring costs. Of the $8.2 million in provisions, $0.5 million
was paid in the second quarter (2005: $0.8 million) leaving an outstanding balance of $4.5 million. 3. ACCOUNTS RECEIVABLE Under revolving securitization programs, the Company has sold, with limited recourse, certain of its trade accounts receivable to financial institutions. The Company retains servicing responsibilities and assumes limited recourse obligations for delinquent receivables. At June 30, 2006, trade accounts receivable being serviced under this program amounted to $241.1 million (June 30, 2005: $195.0 million; December 31, 2005: $230.1 million). 4. OTHER INCOME (EXPENSE)
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Three months ended Six months ended June 30, June 30, 2006 2005 2006 2005
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Earnings from associated companies $ 143 $ 1,172 $ 280 $ 1,358 Gain on sale of property and equipment 139 651 705 822 Gain (loss) from real estate operations (43) 284 1,135 142 Dividends received 3 78 35 308 Other (32) 73 24 194 Loss on redemption of convertible debenture - - - (1,108)
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$ 210 $ 2,258 $ 2,179 $
1,716
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5. PENSIONS
During the quarter, the Company recorded income of $3.7 million
related to net benefit plan income including post-retirement benefit
costs (2005: $2.9 million expense). For the six months of 2006, the Company recorded $6.6 million in net benefit plan income (2005: $3.9 million income). 6. INCOME TAX Included in the income tax expense for the second quarter is a one- time charge arising from changes to income tax legislation of $3.7 million consisting of a reassessment of the pre-acquisition tax liabilities of a subsidiary offset by the removal of the Large Corporation Tax in Canada. This charge was substantially offset by a net decrease to future tax liabilities and assets of $3.6 million due to income tax rate changes enacted during the quarter. 7. SHARE CAPITAL The following table sets forth the continuity for shares issued and outstanding during the year and the corresponding value:
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Number of shares Share capital $ ------------------------ ---------------------- 2006 2005 2006 2005
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Balance at January 1, 127,704,812 125,174,627 $ 765,666 $ 731,291 Exercise of options 252,767 416,069 2,943 4,723 Repurchased for cancellation (i) (461,900) - (2,773) - Conversion of convertible debentures - 763,933 - 12,217
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Balance at March 31, 127,495,679 126,354,629 765,836 748,231 Exercise of options 876,473 334,755 10,439 3,756 Repurchased for cancellation (i) (150,900) - (910) - Issuance of shares (ii) - 214,450 - 3,495
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Balance at June 30, 128,221,252 126,903,834 $ 775,365 $ 755,482
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(i) The Company repurchased for cancellation 461,900 common shares during the first quarter of 2006 and 150,900 common shares during the second quarter of 2006 pursuant to a normal course issuer bid at an average exercise price of $13.48 per share and $13.44 per share respectively. The excess of the purchase cost over the book value of the shares was charged to retained earnings. (ii) Consists of shares issued to purchase additional shares in Canada Bread Company, Limited 8. EARNINGS PER SHARE The following table sets forth the calculation of basic and fully diluted earnings per share:
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Three months ended June 30, 2006 2005
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Weighted Weighted Net Average Net Average Earnings Shares(ii) EPS Earnings Shares(ii) EPS --------------------------- ---------------------------- Basic $ 21,186 127.8 $ 0.17 $ 33,237 126.6 $ 0.26 Stock options (i) - 2.1 (0.01) - 3.7 (0.01)
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Diluted $ 21,186 129.9 $ 0.16 $ 33,237 130.3 $ 0.25
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Six months ended June 30, 2006 2005
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Weighted Weighted Net Average Net Average Earnings Shares(ii) EPS Earnings Shares(ii) EPS --------------------------- ---------------------------- Basic $ 38,458 127.8 $ 0.30 $ 45,985 126.3 $ 0.36 Stock options (i) - 2.2 - - 3.4 (0.01)
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Diluted $ 38,458 130.0 $ 0.30 $ 45,985 129.7 $ 0.35
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(i) Excludes the effect of approximately 9.5 million options and restricted stock units to purchase common shares for the three months ended June 30 (2005: 9.5 million) and 9.5 million options and restricted stock options to purchase common shares for the six months ended June 30 (2005: 9.8 million) that are anti-dilutive. (ii) In millions 9. GOODWILL In accordance with Canadian accounting standards section 3062, "Goodwill and Other Intangible Assets", the Company tests goodwill for possible impairment on an annual basis and at any other time if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. During the second quarter of 2006, the Company completed the goodwill impairment test for all reporting units and determined that there was no impairment to the carrying value of goodwill. 10. ACQUISITIONS In the first quarter of 2006, the Company made two acquisitions totalling $5.3 million. On March 24, 2006 Canada Bread acquired Harvestime Limited ("Harvestime"), a bakery in Walsall, England. Harvestime is a producer of par-baked breads, rolls and specialty bakery products. In January 2006, the Company purchased the assets of a hatchery in Quebec that supplies chick embryos for the production
of influenza vaccines. The Company has not yet finalized the purchase
price allocations for either of these acquisitions. 11. LONG-TERM DEBT In May 2006, the Company renegotiated its unsecured revolving debt facility. The principal changes were (i) an increase in the size of the facility from $700 million to $870 million; (ii) an extension of the maturity date from December 6, 2007 to May 31, 2011; and (iii) a modest reduction in drawn debt pricing and commitment fees on the unutilized amount. 12. SUPPLEMENTAL CASH FLOW INFORMATION
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Three months ended Six months ended June 30, June 30, 2006 2005 2006 2005
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Net interest paid $ 37,507 $ 35,875 $ 49,648 $ 50,766 Net income taxes paid 15,621 8,407 43,059 28,988
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SOURCE Maple Leaf Foods Inc.
Lynda Kuhn, Vice-President, Public & Investor Relations, (416) 926-2026,
www.mapleleaf.com
http://www.prnewswire.com