Maple Leaf Foods Reports 2007 Second Quarter Financial Results
TORONTO, Jul 27, 2007 (Canada NewsWire via COMTEX News Network) -- Maple Leaf Foods Inc. (TSX: MFI) today reported its financial results for the second quarter ended June 30, 2007.
"We are very pleased with our performance in the second quarter from both an operating and a strategic perspective," said Michael McCain, President and CEO. "Our primary focus is the strategic transformation of the business to a focused, value-added meat, meals and bakery company, and we made excellent progress during the quarter. We finalized the sale of our animal nutrition business, we began the process of consolidating hog processing by closing a plant, and we are on track to complete what is a very complex change process. Operationally we delivered a solid profit performance in the second quarter, which in the context of our activity level and rising grain and meat raw material costs, was an excellent accomplishment."
Sales for the second quarter decreased 3% to $1.3 billion while earnings from continuing operations, before restructuring and other related costs, increased 12% to $52.7 million from $46.8 million last year. Management believes this is the most appropriate basis on which to evaluate operating results, as restructuring and other related costs are not representative of continuing operations. In the second quarter of 2007, the Company recorded restructuring and other related costs as a part of continuing operations of $30.7 million ($27.2 million after tax), of which $27.8 million related to the Company's strategic reorganization of its protein operations.
Earnings per share from continuing operations before restructuring and other related costs, net of taxes, were $0.13, compared to $0.12 last year, while year-to-date earnings per share on a comparable basis were $0.25 compared to $0.20 last year. The Company reported a net loss for the quarter of $1.7 million ($0.01 per share) compared to net earnings of $21.2 million ($0.17 per share) in the prior period.
The results of the animal nutrition business have been reflected separately as discontinued operations in the current and comparative results. Therefore all operating earnings comparisons exclude the results of the animal nutrition business. Following is a summary of earnings per share ("EPS") from continuing operations, before restructuring and other related costs:
Second Quarter Year-To-Date --------------------------------------- 2007 2006 2007 2006 ---- ---- ---- ---- Reported EPS from continuing operations $ (0.05) $ 0.12 $ (0.01) $ 0.20 Restructuring and other related costs, net of tax (ii) $ 0.18 $ - $ 0.26 $ - --------------------------------------- EPS from continuing operations before restructuring and other related costs (i) $ 0.13 $ 0.12 $ 0.25 $ 0.20 Discontinued operations $ 0.04 $ 0.05 $ 0.08 $ 0.10 --------------------------------------- --------------------------------------- Total EPS before restructuring and other related costs (i) $ 0.17 $ 0.17 $ 0.33 $ 0.30 --------------------------------------- --------------------------------------- (i) These are not recognized measures under Canadian GAAP. Management believes that this is the most appropriate basis on which to evaluate results, as restructuring and other related costs are not representative of continuing operations. (ii) Includes the per share impact of restructuring and other related costs net of tax and includes the recognition of a tax benefit of $5.1 million in Q2 related to the sale of the animal nutrition business. >>
Sale of Animal Nutrition Business
---------------------------------
On July 20, 2007, the Company completed the sale of its animal nutrition business to Nutreco Holding NV for $512 million subject to final closing adjustments. The Company estimates that it will record an after-tax gain in the third quarter of approximately $210 million on the transaction and approximately $190 million ($1.50 per share) after accounting for a $20.7 million goodwill impairment charge related to the transaction, which is recorded in earnings in the second quarter. Earnings attributable to the animal nutrition business are reported as discontinued operations. This sale represents another significant step in the Company's strategic reorganization to focus on its value-added meat, meals and bakery businesses. The transaction will result in a significant de-leveraging of the Company's balance sheet and provide it with flexibility to re-invest in growing its core businesses.
Included in the total assets of the Agribusiness Group prior to the sale was $99 million of goodwill recorded. Of this amount, $78 million has been allocated directly to the animal nutrition business being sold. A further $20.7 million of goodwill was, under the accounting rules, allocated to Maple Leaf's remaining feed and hog operations. The sale of the animal nutrition business places certain restrictions on the operations of two feed mills that have been retained by Maple Leaf to supply feed to its own hog production operations. This has reduced the assessment of future cash flows related to these remaining feed and hog operations. As a result, the Company has determined that this goodwill previously allocated to the remaining feed and hog operations is impaired and has recorded an impairment charge of $20.7 million in the second quarter.
Discontinued Operations
-----------------------
The operating results of the animal nutrition business that were sold have been classified as discontinued operations in the second quarter of 2007 and comparative amounts have been restated on a comparable basis. Earnings per share from discontinued operations were $0.04 for the quarter (2006: $0.05) and $0.08 for the first six months of 2007 (2006: $0.10).
Operating Review
----------------
Operating earnings from continuing operations for the second quarter before restructuring and other related costs increased 12% from last year, reflecting a 9% increase in Protein earnings and a 15% increase in Bakery earnings. For the year to date, Protein earnings from operations increased by 26%, and Bakery Products Group earnings increased by 13%.
Following is a summary of earnings from continuing operations by business segment before restructuring and other related costs:
($ millions) Second Quarter Year-to-Date ------------------------ ------------------------ 2007 2006 Change 2007 2006 Change ---- ---- ------ ---- ---- ------ Meat Products Group $ 14.8 $ 13.6 9% $ 36.2 $ 27.3 33% Agribusiness Group(1) 4.6 4.2 7% 5.5 5.7 (3%) ------------------------ ------------------------ Protein Value Chain 19.4 17.8 9% 41.7 33.0 26% Bakery Products Group 33.3 29.0 15% 60.8 53.7 13% ------------------------ ------------------------ $ 52.7 $ 46.8 12% $102.5 $ 86.7 18% ------------------------ ------------------------ ------------------------ ------------------------ (1) Agribusiness Group excludes the results of the animal nutrition business which are reported as discontinued operations. >>
Meat Products Group (value-added processed packaged meats; chilled meal
entrees, soups and lunch kits; value-added pork, poultry and turkey
products; and global meat sales.)
Meat Products Group sales for the second quarter declined 8% to $879 million, primarily due to lower international trading sales, as certain trading businesses have been exited and wound down as part of the Company's strategic re-alignment.
Earnings from continuing operations before restructuring and other related costs increased to $14.8 million from $13.6 million last year. Significant progress was made in the quarter to offset rising fresh meat input costs through price increases. The Company also recorded increased earnings in its fresh poultry operations due to higher industry poultry processor margins and improved operating performance resulting in part from closing its poultry processing facility in Atlantic Canada. While pricing to offset higher fresh meat prices in the consumer foods business was passed through in the second quarter, this did not fully offset the continuous rise in input costs and further price increases are expected through the balance of the year. Industry pork processor margins were slightly lower than last year. Earnings in the Meat Products Group were also affected by higher promotional and advertising costs related to the launch of Maple Leaf Simply Fresh chilled meals.
In the second quarter, Maple Leaf closed a pork processing facility in Saskatoon and announced the closure of two other meat processing facilities. Two of these facilities are primary pork processing operations in Saskatoon and Winnipeg that combined process 30,000 to 37,000 hogs per week. The closure of these two plants supports the expansion of the Brandon plant to a double shift operation. By the end of 2009, Maple Leaf will have consolidated all of its primary pork processing in Brandon. The Company also announced the closure of a value-added meat processing facility in Etobicoke, Ontario at the end of October 2007. These operations are being relocated to the Company's facility in Brampton, Ontario, where the business will benefit from expanded capacity and new processing technology. Closure costs, including severance, decommissioning and asset write-downs, are expected to result in a restructuring charge of approximately $5.0 million before tax. Most of these costs are expected to be charged against earnings in 2007, with $1.5 million charged in the second quarter.
Agribusiness Group (swine production; and animal by-products recycling,
livestock nutrition products)
Agribusiness Group sales from continuing operations for the second quarter decreased to $64 million from $66 million last quarter.
Earnings from continuing operations before restructuring and other related costs for the second quarter increased to $4.6 million from $4.2 million last year. Although hog prices were higher than the prior year, earnings from hog production operations were significantly lower due to the impact of substantially higher feed prices and higher mortality rates due to circo virus. However, mortality rates continue to improve and are expected to normalize by the end of the year. Comparisons for the second quarter were also affected by a one-time adjustment to inventory values last year. The Company had an effective ownership of 18% of the hogs it processed in the second quarter. The restructuring of these operations is well underway, which will reduce the total hogs under management and the cost and complexity of this business, and concentrate its hog production operations in Manitoba, in proximity to the Brandon processing plant. The Company expects to complete its restructuring in Manitoba during 2007 and to sell the remainder of its hog production assets in Ontario and Alberta by mid-2008.
Earnings from rendering operations increased due to higher prices for rendered products that track rising commodity grain prices. As previously described, financial results for the animal nutrition business have been reported as discontinued operations. Maple Leaf has retained ownership of two mills in Western Manitoba and the operating results of these mills are included in the Agribusiness Group.
Bakery Products Group (fresh, frozen and branded value-added bakery
products, including frozen par-baked bakery products; and specialty pasta
and sauces)
Bakery Products Group sales for the second quarter increased 12% to $375 million from $335 million last year. Excluding acquisitions, sales increased by 6% in the second quarter, with increases in both fresh and frozen bakery operations.
Earnings from continuing operations before restructuring and other related costs of $33.3 million increased by 15% from last year, due to increased contributions from acquisitions, primarily in the U.K. and improved operating earnings in the frozen bakery businesses. Significantly higher wheat costs, which are rising along with record high corn prices, impacted margins in the bakery businesses. Profitability in the fresh pasta business declined due to higher manufacturing costs and a sharp rise in dairy and flour costs. Growth in high margin value-added categories, improvements in operating efficiencies across a number of fresh bakery plants and pricing implemented earlier in the year helped to partially offset higher raw material costs as well as some continued industry-wide volume decline in the fresh bread segment. Price increases across the Bakery Products Group are anticipated through the balance of the year.
The U.K. bakery operations continued to benefit from organic growth in the specialty bakery market as well as the contribution of acquisitions earlier in the year. The Company is currently expanding freezer capacity at its Rotherham bakery to increase production capabilities, and also increasing manufacturing capacity in its croissant bakeries. Earnings from the North American frozen bakery operations increased, benefiting from ongoing price increases. The Roanoke plant, which is the Company's largest par-baked facility, is undertaking a major warehouse expansion that will significantly increase its storage capacity and reduce costs.
Restructuring and Other Related Costs
-------------------------------------
In the second quarter, the Company recorded a charge for restructuring and other related costs from continuing operations of $30.7 million (2006: $nil). Including full-year amounts charged to earnings during 2006, the following is a summary of restructuring and other related costs incurred in 2006 and 2007:
($ millions) ------------------------------------------ 2006 2007 ---------------------------------- Total- Full-year Q1 Q2 YTD to-date ------------------------------------------ Protein value chain restructuring 47.5 4.1 3.8 7.9 55.4 Retention payments 2.0 3.3 3.3 6.6 8.6 Bakery plant closure 5.5 2.2 - 2.2 7.7 Poultry plant closure 2.3 3.1 2.9 6.0 8.3 Impairment of a non-core equity investment 7.3 - - - 7.3 Goodwill impairment related to the sale of the animal nutrition business - - 20.7 20.7 20.7 ------------------------------------------ 64.6 12.7 30.7 43.4 108.0 Discontinued operations - 0.4 1.8 2.2 2.2 ------------------------------------------ Total restructuring 64.6 13.1 32.5 45.6 110.2 ------------------------------------------ ------------------------------------------ Cash incurred and to be incurred 25.4 8.2 6.6 14.8 40.2 Non-cash 39.2 4.9 25.9 30.8 70.0 ------------------------------------------ 64.6 13.1 32.5 45.6 110.2 ------------------------------------------ ------------------------------------------ >>
The Company has revised its estimates of total restructuring costs upwards by $25 million primarily to reflect the goodwill impairment recorded in the second quarter relating to the remaining feed and hog operations. The Company now estimates it will incur total restructuring costs of $165 million to $215 million between 2006 and 2009. The Company's estimate of total cash restructuring costs has not changed from its previous estimate of $55 million to $75 million.
Cash Flow and Financing
-----------------------
Total debt, net of cash balances, totaled $1.3 billion at the end of the second quarter, compared to $1.1 billion last year. Cash used in operations for the second quarter was $0.4 million compared to a source of funds of $15.0 million last year. Cash flow from operating activities for the year-to-date was a use of cash of $18.0 million compared to $3.7 million in the first six months of 2006.
Total interest expense allocated to continuing activities for the quarter of $25.4 million compared to $22.5 million last year, largely due to increased debt balances resulting from strong investing activity. At the end of the second quarter, 71% of indebtedness was not exposed to interest rate fluctuations, compared to 82% in the previous year.
Capital expenditures on plant and equipment from continuing operations for the second quarter increased to $59.3 million compared to $43.5 million last year. The significant increase in capital expenditures reflects a number of initiatives that are in progress. The Company is undertaking a substantial capacity expansion in the U.K. bagel and croissant facilities, and the construction of a new warehouse at the Company's bakery in Roanoke, Virginia to increase internal capacity and reduce warehouse and distribution costs. In the second quarter, Canada Bread acquired assets previously owned by Interstate Bakery located in Lakewood, Washington for US$10 million, including a manufacturing facility and fresh bakery equipment. The Company is considering several options to utilize this purchase to continue to improve efficiencies in its western manufacturing operations. As well, the Company continued its capital investment to support the launch of the Maple Leaf Simply Fresh product line.
Forward-Looking Statements
--------------------------
This document may contain forward-looking information within the meaning of applicable securities legislation. Forward-looking information is based upon a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond Maple Leaf Foods' control that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. Maple Leaf does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise. Any forward-looking information in this press release speaks as of the date of this press release. Additional information about these assumptions and risks and uncertainties is contained in the filings with securities regulators including the annual information form and Management's Discussion and Analysis accompanying the financial statements in the reports to shareholders. These filings are available on the Company's website at www.mapleleaf.ca.
Other Matters
-------------
Maple Leaf Foods declared a dividend of $0.04 per share payable on September 28, 2007, to shareholders of record on September 7, 2007. Unless indicated otherwise in writing at or before the time the dividend is paid, each dividend paid by the corporation in 2007 or a subsequent year is an eligible dividend for the purposes of the "Enhanced Dividend Tax Credit System.
Maple Leaf Foods Inc. is a leading food processing company, headquartered in Toronto, Canada. The Company employs approximately 22,500 people at its operations across Canada and in the United States, the United Kingdom and Asia. The Company had sales of $5.9 billion in 2006.
An investor presentation related to the Company's second quarter financial results is available at www.mapleleaf.com and can be found on the Quarterly Results page under Investor Relations. A conference call will be held at 1:00 p.m. EDT on July 27, 2007 to review Maple Leaf Foods' second quarter financial results. To participate in the call, please dial 416-641-6113 or 866-226-1792. For those unable to participate, playback will be made available an hour after the event at 416-695-5800/800-408-3053 (Passcode 3228320 followed by the number sign).
A webcast presentation of the second quarter financial results will also be available at http://investor.mapleleaf.ca via a link http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=88490&eventID=1597727
Consolidated Financial Statements (Expressed in Canadian dollars) MAPLE LEAF FOODS INC. Three and six months ended June 30, 2007 and 2006 MAPLE LEAF FOODS INC. Consolidated Balance Sheets (In thousands of Canadian dollars) ------------------------------------------------------------------------- As at As at As at June 30, June 30, December 31, 2007 2006 2006 ------------------------------------------------------------------------- (Unaudited) (Unaudited) ASSETS Current assets Cash and cash equivalents $ 50,249 $ 33,562 $ 64,494 Accounts receivable (Note 5) 207,449 179,564 201,743 Inventories 427,259 383,435 388,242 Future tax asset - current 9,415 14,217 2,128 Prepaid expenses and other assets 23,856 16,523 11,158 Assets held for sale (Note 4(iii)) 271,874 98,217 280,439 ----------------------------------------------------------------------- 990,102 725,518 948,204 Investments in associated companies 1,068 39,421 15,499 Property and equipment 1,140,469 1,072,842 1,099,000 Other long-term assets 278,608 269,769 279,001 Future tax asset - non-current 18,270 33,320 23,464 Goodwill (Note 11) 802,403 768,958 824,741 Other intangibles 85,521 86,097 85,817 Assets held for sale (Note 4(iii)) - 173,764 - ------------------------------------------------------------------------- $ 3,316,441 $ 3,169,689 $ 3,275,726 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable and accrued charges $ 565,025 $ 543,631 $ 594,685 Income and other taxes payable 21,144 6,365 18,056 Current portion of long-term debt 85,454 105,119 91,084 Liabilities related to assets held for sale (Note 4(iii)) 61,433 59,105 74,474 ----------------------------------------------------------------------- 733,056 714,220 778,299 Long-term debt 1,257,611 1,054,883 1,185,970 Future tax liability 7,013 52,099 29,867 Other long-term liabilities 249,269 213,372 196,911 Long-term liabilities related to assets held for sale (Note 4(iii)) - 332 - Minority interest 83,269 95,843 90,237 Shareholders' equity 986,223 1,038,940 994,442 ------------------------------------------------------------------------- $ 3,316,441 $ 3,169,689 $ 3,275,726 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 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) ------------------------------------------------------------------------- Three months ended Six months ended June 30, June 30, (Unaudited) 2007 2006 2007 2006 ------------------------------------------------------------------------- Sales $ 1,318,773 $ 1,356,465 $ 2,634,908 $ 2,642,762 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Earnings from continuing operations before restructuring and other related costs $ 52,667 $ 46,831 $ 102,526 $ 86,655 Restructuring and other related costs (Note 2) (30,715) - (43,425) - ------------------------------------------------------------------------- Earnings from continuing operations $ 21,952 $ 46,831 $ 59,101 $ 86,655 Other income (Note 6) 1,501 72 1,969 1,954 ------------------------------------------------------------------------- Earnings from continuing operations before interest and income taxes $ 23,453 $ 46,903 $ 61,070 $ 88,609 Interest expense 25,352 22,518 49,943 44,663 ------------------------------------------------------------------------- Earnings (loss) from continuing operations before income taxes $ (1,899) $ 24,385 $ 11,127 $ 43,946 Income taxes (Note 8) 1,749 7,105 7,965 12,884 ------------------------------------------------------------------------- Earnings (loss) from continuing operations before minority interest $ (3,648) $ 17,280 $ 3,162 $ 31,062 Minority interest 2,810 2,545 4,354 5,000 ------------------------------------------------------------------------- Net earnings (loss) from continuing operations $ (6,458) $ 14,735 $ (1,192) $ 26,062 Net earnings from discontinued operations - net of income tax (Note 4(ii)) 4,787 6,451 9,984 12,396 ------------------------------------------------------------------------- Net earnings (loss) $ (1,671) $ 21,186 $ 8,792 $ 38,458 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic earnings (loss) per share (Note 10) from continuing operations $ (0.05) $ 0.12 $ (0.01) $ 0.20 from discontinued operations 0.04 0.05 0.08 0.10 ------------------------------------------------------------------------- $ (0.01) $ 0.17 $ 0.07 $ 0.30 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Diluted earnings (loss) per share (Note 10) from continuing operations $ (0.05) $ 0.11 $ (0.01) $ 0.20 from discontinued operations 0.04 0.05 0.08 0.10 ------------------------------------------------------------------------- $ (0.01) $ 0.16 $ 0.07 $ 0.30 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Weighted average number of shares (millions) 127.7 127.8 127.4 127.8 ------------------------------------------------------------------------- ------------------------------------------------------------------------- The accompanying notes to the consolidated financial statements are an integral part of these statements. MAPLE LEAF FOODS INC. Consolidated Statements of Retained Earnings (In thousands of Canadian dollars) ------------------------------------------------------------------------- Six months ended June 30, (Unaudited) 2007 2006 ------------------------------------------------------------------------- Retained earnings, beginning of period $ 204,415 $ 231,807 Net earnings for the period 8,792 38,458 Dividends declared ($0.08 per share; 2006: $0.08 per share) (10,224) (10,227) Premium on repurchase of share capital (Note 9) - (4,574) ------------------------------------------------------------------------- Retained earnings, end of period $ 202,983 $ 255,464 ------------------------------------------------------------------------- ------------------------------------------------------------------------- The accompanying notes to the consolidated financial statements are an integral part of these statements. Consolidated Statements of Comprehensive Income (Loss) (In thousands of Canadian dollars) ------------------------------------------------------------------------- Three months ended Six months ended June 30, June 30, (Unaudited) 2007 2006 2007 2006 ------------------------------------------------------------------------- Net earnings (loss) for the period $ (1,671) $ 21,186 $ 8,792 $ 38,458 Other comprehensive income (loss) (Note 14) Change in accumulated foreign currency translation adjustment (6,704) 1,330 (7,590) 2,094 Change in unrealized derivative gain on cash flow hedges 5,491 - 10,814 - ------------------------------------------------------------------------- $ (1,213) $ 1,330 $ 3,224 $ 2,094 ------------------------------------------------------------------------- Comprehensive income (loss) $ (2,884) $ 22,516 $ 12,016 $ 40,552 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 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) ------------------------------------------------------------------------- Three months ended Six months ended June 30, June 30, (Unaudited) 2007 2006 2007 2006 ------------------------------------------------------------------------- CASH PROVIDED BY (USED IN) Operating activities Net earnings (loss) from continuing operations $ (6,458) $ 14,735 $ (1,192) $ 26,062 Add (deduct) items not affecting cash: Depreciation and amortization 34,889 32,818 69,982 65,374 Stock-based compensation 3,414 2,228 7,085 4,819 Minority interest 2,810 2,545 4,354 5,000 Future income taxes (7,472) 4,670 (10,883) 1,816 Loss (gain) on sale of property and equipment 377 (27) (82) (568) Loss on sale of investments - 137 - 145 Goodwill impairment (Note 11) 20,713 - 20,713 - Change in other long-term receivables 128 469 (2,182) 2,056 Increase in pension asset (11,668) (11,821) (28,092) (24,262) Change in restructuring provision 3,712 (545) 7,433 (1,090) Other (6,632) 2,175 (3,423) 4,261 Change in operating working capital (38,447) (42,015) (78,619) (82,548) ------------------------------------------------------------------------- Cash provided by (used in) operating activities of continuing operations $ (4,634) $ 5,369 $ (14,906) $ 1,065 Cash provided by (used in) operating activities of discontinued operations 4,232 9,677 (3,117) (4,735) ------------------------------------------------------------------------- $ (402) $ 15,046 $ (18,023) $ (3,670) Financing activities Dividends paid (5,133) (5,127) (10,224) (10,227) Dividends paid to minority interest (183) (293) (434) (948) Net increase in long-term debt 45,102 48,533 119,164 35,488 Increase in share capital (Note 9) 12,887 10,440 15,102 13,383 Shares repurchased for cancellation (Note 9) - (2,028) - (8,257) Other (729) 297 7,377 2,354 ------------------------------------------------------------------------- Cash provided by financing activities of continuing operations $ 51,944 $ 51,822 $ 130,985 $ 31,793 Cash provided by (used in) financing activities of discontinued operations 9 402 (389) 402 ------------------------------------------------------------------------- $ 51,953 $ 52,224 $ 130,596 $ 32,195 Investing activities Additions to property and equipment (59,300) (43,466) (111,725) (61,369) Proceeds from sale of property and equipment 1,040 836 1,786 4,225 Purchase of net assets of businesses - net of cash acquired (Note 12) (2,628) - (13,431) (5,323) Proceeds on sale of investments (Note 12) 1,622 - 1,622 - Proceeds on disposal of business (Note 12) - - 5,470 - Purchase of Canada Bread shares - - (6,521) - Other (2,787) 1,217 121 (6,936) ------------------------------------------------------------------------- Cash used in investing activities of continuing operations $ (62,053) $ (41,413) $ (122,678) $ (69,403) Cash used in investing activities of discontinued operations (813) (969) (4,140) (6,062) ------------------------------------------------------------------------- $ (62,866) $ (42,382) $ (126,818) $ (75,465) Increase (decrease) in cash and cash equivalents (11,315) 24,888 (14,245) (46,940) Cash and cash equivalents, beginning of period 61,564 8,674 64,494 80,502 ------------------------------------------------------------------------- Cash and cash equivalents, end of period $ 50,249 $ 33,562 $ 50,249 $ 33,562 ------------------------------------------------------------------------- ------------------------------------------------------------------------- The accompanying notes to the consolidated financial statements are an integral part of these statements. MAPLE LEAF FOODS INC. Segmented Financial Information from Continuing Operations (In thousands of Canadian dollars) ------------------------------------------------------------------------- Three months ended Six months ended June 30, June 30, (Unaudited) 2007 2006 2007 2006 ------------------------------------------------------------------------- Sales (i) Meat Products Group $ 878,966 $ 954,793 $ 1,774,692 $ 1,878,320 Agribusiness Group 64,445 66,370 127,349 127,797 Bakery Products Group 375,362 335,302 732,867 636,645 ------------------------------------------------------------------------- $ 1,318,773 $ 1,356,465 $ 2,634,908 $ 2,642,762 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Earnings from continuing operations before restructuring and other related costs (i) Meat Products Group $ 14,848 $ 13,591 $ 36,212 $ 27,318 Agribusiness Group 4,554 4,273 5,470 5,639 Bakery Products Group 33,265 28,967 60,844 53,698 ------------------------------------------------------------------------- $ 52,667 $ 46,831 $ 102,526 $ 86,655 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Additions to property and equipment (i) Meat Products Group $ 24,406 $ 27,116 $ 61,124 $ 38,144 Agribusiness Group 3,986 4,886 6,626 1,342 Bakery Products Group 30,908 11,464 43,975 21,883 ------------------------------------------------------------------------- $ 59,300 $ 43,466 $ 111,725 $ 61,369 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Depreciation and amortization (i) Meat Products Group $ 17,204 $ 17,013 $ 34,590 $ 34,006 Agribusiness Group 4,769 4,455 9,657 8,441 Bakery Products Group 12,916 11,350 25,735 22,927 ------------------------------------------------------------------------- $ 34,889 $ 32,818 $ 69,982 $ 65,374 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- As at As at As at June 30, June 30, December 31, 2007 2006 2006 ------------------------------------------------------------------------- (Unaudited) (Unaudited) Total assets (i) Meat Products Group $ 1,603,563 $ 1,524,483 $ 1,551,502 Agribusiness Group 380,635 413,071 422,095 Bakery Products Group 823,844 706,207 810,940 Non-allocated assets 236,525 253,947 210,750 ------------------------------------------------------------------------- $ 3,044,567 $ 2,897,708 $ 2,995,287 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (i) All amounts exclude the results and financial position of the animal nutrition business sold on July 20, 2007 (Note 4). 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, 2006. 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, 2006, except for the following: (a) Accounting changes Effective January 1, 2007 the Company prospectively adopted the guidance presented in CICA Handbook Sections 1530 "Comprehensive Income" ("Section 1530"), Section 3855 "Financial Instruments - Recognition and Measurement" ("Section 3855"), and Section 3865 "Hedges" ("Section 3865"). On January 1, 2007 the Company recorded the following transitional adjustment to the consolidated balance sheet as a result of the adoption of the new standards: ----------------------------------------------------------------- Increase in other current assets $ 1,167 Decrease in other assets (12,889) Increase in future tax assets - long-term 16,587 Increase in other current liabilities (3,085) Decrease in long-term debt 3,123 Increase in other long-term liabilities (37,101) Accumulated other comprehensive loss - cash flow hedges 32,198 ----------------------------------------------------------------- (i) Comprehensive Income In accordance with Section 1530, the Company has presented comprehensive income and its components as part of the financial statements to show unrealized gains and losses that are not included in income. In accordance with the new standard, $9.8 million relating to unrealized losses resulting from the translation of self-sustaining operations which had previously been classified as unrealized foreign currency adjustment within shareholders' equity is now presented within accumulated other comprehensive income. (ii) Financial Instruments In accordance with Section 3855, the Company has classified all financial assets as either held for trading, available for sale, held-to-maturity or loans and receivables. All financial liabilities are classified as either held for trading or as other liabilities. Financial assets and liabilities classified as held for trading are measured at fair value with changes in fair value recognized in net income in the period in which they arise. Financial assets classified as available-for-sale are measured at fair value with gains and losses recognized in other comprehensive income until the underlying financial asset is derecognized or becomes impaired. Held-to-maturity investments, loans and receivables and other liabilities are measured at amortized cost. Gains or losses on financial assets and liabilities carried at amortized cost are recognized in earnings when the financial asset or financial liability is derecognized or impaired. All derivative instruments, including any embedded derivatives that are required to be separated from their host instruments, are recorded at fair value with changes in fair value being recorded in income unless the derivative is designated as a cash flow hedge or a hedge of a net investment in a self-sustaining foreign operation. The Company completed a detailed review of its financial instruments and its contracts and determined that the fair value of embedded derivative instruments which required separation from their host instruments was not significant. (iii) Hedge Accounting The Company's existing hedging relationships continue to qualify for hedge accounting under the new standard. The Company continues to designate hedges as either fair value hedges, cash flow hedges or hedges of a net investment in a self-sustaining foreign operation. For a fair value hedge, changes in the fair value of the hedging derivative are recognized in income together with the offsetting change on the hedged item attributable to the hedged risk. For cash flow and net investment hedges, changes in the fair value of the hedging derivative, to the extent effective, are recorded in other comprehensive income (loss) and are subsequently recognized in income when the hedged item affects income. Any ineffectiveness in hedging relationships is recognized as income or loss immediately. On adoption the Company recognized an increase in other current assets of $1.2 million, a decrease in other assets of $12.9 million, an increase in other current liabilities of $3.1 million, an increase in other long-term liabilities of $37.1 million, a decrease in long-term debt of $3.1 million and an increase in accumulated other comprehensive loss of $32.2 million (net of future taxes of $16.6 million) to recognize the fair value of financial instruments designated to hedge the Company's commodity, interest rate, and foreign currency exposures. The above amounts include an additional adjustment identified in the second quarter of 2007 with respect to deferred amounts existing on the adoption date of $12.9 million relating to previously terminated cash flow hedges which were reclassified from other assets to accumulated other comprehensive loss in the amount of $8.7 million, net of future taxes of $4.2 million. On adoption of the new standard, there was no significant ineffectiveness in any of the Company's hedging relationships. The following table illustrates the fair values of financial instruments by type of hedging relationship: ----------------------------------------------------------------- As at January 1, 2007 Other Current Current Long-term Assets Liabilities Liabilities ----------------------------------------------------------------- Futures contracts to hedge commodity price exposure $ 1,112 $ 203 $ - Cross currency interest rate swaps to hedge U.S. dollar-denominated notes payable(i) 55 25,324 100,037 Interest rate swaps to hedge interest rate exposure - - 12,471 Foreign currency contracts to hedge transactions denominated in foreign currencies - 880 - ----------------------------------------------------------------- Total $ 1,167 $ 26,407 $ 112,508 ----------------------------------------------------------------- ----------------------------------------------------------------- (i) The fair value amount includes a currency revaluation loss of $98.7 million that has been recorded in the accumulated foreign currency translation adjustment, a component of accumulated other comprehensive income. The fair value of the Company's financial instruments used to hedge commodity, interest rate, and foreign currency exposures as at June 30, 2007 are as follows: ----------------------------------------------------------------- As at June 30, 2007 Other Current Current Long-term Assets Liabilities Liabilities ----------------------------------------------------------------- Futures contracts to hedge commodity price exposure $ 379 $ 532 $ - Cross currency interest rate swaps to hedge U.S. dollar-denominated notes payable(i) - 35,203 126,152 Interest rate swaps to hedge interest rate exposure - 4,299 3,950 Foreign currency contracts to hedge transactions denominated in foreign currencies 3,960 - - ----------------------------------------------------------------- Total $ 4,339 $ 40,034 $ 130,102 ----------------------------------------------------------------- ----------------------------------------------------------------- (i) The fair value amount includes a currency revaluation loss of $105.5 million that has been recorded in the accumulated foreign currency translation adjustment, a component of accumulated other comprehensive income. (b) Recent accounting pronouncements In May 2007 the Accounting Standards Board issued CICA Handbook Section 3031 "Inventories". The standard introduces changes to the measurement and disclosure of inventory and converges with international accounting standards. The standard is effective for interim and annual periods relating to fiscal years beginning on or after January 1, 2008. The Company has not yet determined the impact the adoption of this standard will have on its financial statements. In October 2006, the Accounting Standards Board issued CICA Handbook Section 1535, "Capital Disclosures", which establishes standards for disclosing information about an entity's capital and how it is managed. The standard is effective for interim and annual financial statements relating to fiscal years beginning on or after October 1, 2007. The Company does not expect that the adoption of this standard will have a material impact on its financial statements. In October 2006, the Accounting Standards Board issued CICA Handbook Section 3863, "Financial Instruments - Presentation". The existing requirements related to presentation of financial instruments have been carried forward unchanged. The standard is effective for interim and annual financial statements relating to fiscal years beginning on or after October 1, 2007. The Company does not expect the adoption of this standard will have a material impact on its financial disclosure and results of operations. (c) Comparative figures Certain 2006 comparative figures have been reclassified to conform to the financial statement presentation adopted in 2007 and the year ended 2006. 2. RESTRUCTURING AND OTHER RELATED COSTS During the second quarter of 2007, the Company recorded $32.5 million in restructuring and other related costs ($28.4 million after tax). The portion of these restructuring and other related costs that related to continuing operations was $30.7 million and the balance is disclosed as part of discontinued operations (Note 4(ii)). The most significant item included in restructuring and other related costs for the quarter is a goodwill impairment charge of $20.7 million that relates to the Company's remaining hog and feed operations (Note 11). The balance of these costs related to the closure of a primary pork processing plant in Saskatoon, closure of a value-added meat processing facility in Etobicoke, Ontario, further costs related to the closure of a poultry plant in Nova Scotia, and retention bonuses recorded. During the first quarter of 2007, the Company recorded restructuring and other related costs of $13.1 million ($9.8 million after tax). The majority of these costs related to the sale of the Company's European seafood and convenience businesses, further costs related to the closure of a poultry plant in Nova Scotia and the closure of a fresh bakery in British Columbia. The following table provides a summary of costs recognized and cash payments made in respect of the above-mentioned restructuring initiatives in 2007 and the corresponding liability as at June 30, 2007, all on a pre-tax basis: Asset Impairment and Site accelerated Severance closing depreciation --------------------------------------------------------------------- Balance at December 31, 2006 $ 14,172 $ 5,031 $ - Charges 2,560 1,931 4,893 Cash payments (1,395) (2,242) - Non-cash items - - (4,893) --------------------------------------------------------------------- Balance at March 31, 2007 $ 15,337 $ 4,720 $ - Charges 2,093 736 1,320 Goodwill impairment (Note 11) - - 20,713 Cash payments (4,080) (2,034) - Non-cash items - - (22,033) --------------------------------------------------------------------- Balance at June 30, 2007 $ 13,350 $ 3,422 $ - --------------------------------------------------------------------- --------------------------------------------------------------------- Retention Pension Total --------------------------------------------------------------------- Balance at December 31, 2006 $ 3,015 $ - $ 22,218 Charges 3,735 - 13,119 Cash payments (484) - (4,121) Non-cash items - - (4,893) --------------------------------------------------------------------- Balance at March 31, 2007 $ 6,266 $ - $ 26,323 Charges 3,783 3,900 11,832 Goodwill impairment (Note 11) - - 20,713 Cash payments (653) - (6,767) Non-cash items - (3,900) (25,933) --------------------------------------------------------------------- Balance at June 30, 2007 $ 9,396 $ - $ 26,168 --------------------------------------------------------------------- --------------------------------------------------------------------- 3. SUBSEQUENT EVENT On July 20, 2007 the Company completed the sale of its animal nutrition business. The Company received proceeds of $512 million and estimates that it will record an after-tax gain of approximately $210 million subject to normal closing adjustments in the third quarter. This gain is based on estimated proceeds of $512 million and June 30, 2007 carrying values of the net assets sold, and is subject to change. This gain excludes a related goodwill impairment loss of $20.7 million recorded in the second quarter as part of restructuring and other related charges (Note 11). 4. DISCONTINUED OPERATIONS (i) On July 20, 2007 the Company sold its animal nutrition business, retaining only two mills in Western Canada to meet future requirements of its hog production operations. As a result, the Company has reclassified the portion of its animal nutrition business that has been sold as discontinued operations. (ii) The results for discontinued operations were as follows: --------------------------------------------------------------------- Three months ended Six months ended June 30, June 30, (Unaudited) 2007 2006 2007 2006 --------------------------------------------------------------------- Sales $ 158,547 $ 140,231 $ 303,849 $ 279,885 --------------------------------------------------------------------- --------------------------------------------------------------------- Earnings from operations before restructuring and other related costs $ 11,803 $ 13,565 $ 22,950 $ 25,543 Restructuring and other related costs (1,830) - (2,239) - --------------------------------------------------------------------- Earnings from operations $ 9,973 $ 13,565 $ 20,711 $ 25,543 Other income 108 138 169 225 --------------------------------------------------------------------- Earnings from operations before interest and income taxes $ 10,081 $ 13,703 $ 20,880 $ 25,768 Interest expense 2,190 2,362 4,539 4,432 --------------------------------------------------------------------- Earnings before income taxes $ 7,891 $ 11,341 $ 16,341 $ 21,336 Income taxes 3,104 4,890 6,357 8,940 --------------------------------------------------------------------- Net earnings from discontinued operations $ 4,787 $ 6,451 $ 9,984 $ 12,396 --------------------------------------------------------------------- --------------------------------------------------------------------- In calculating net earnings from discontinued operations, interest expense has been allocated to these operations assuming a uniform debt-to-equity ratio for all operating companies. (iii) Assets held for sale and liabilities related to assets held for sale comprised: --------------------------------------------------------------------- As at As at As at June 30, June 30, December 31, Assets held for sale 2007 2006 2006 --------------------------------------------------------------------- Accounts receivable $ 56,559 $ 61,356 $ 62,063 Inventories 40,650 34,826 39,604 Future tax asset - current 193 193 193 Prepaid expenses and other assets 269 1,842 828 Investments in associated companies 6,877 6,861 6,611 Property and equipment 85,650 86,091 88,398 Other long-term assets 2,200 2,915 3,090 Goodwill 77,871 77,897 77,922 Other intangibles 1,605 - 1,730 --------------------------------------------------------------------- $ 271,874 $ 271,981 $ 280,439 --------------------------------------------------------------------- Classified as: Current $ 271,874 $ 98,217 $ 280,439 Long-term - 173,764 - --------------------------------------------------------------------- $ 271,874 $ 271,981 $ 280,439 --------------------------------------------------------------------- --------------------------------------------------------------------- --------------------------------------------------------------------- As at As at As at Liabilities related to assets June 30, June 30, December 31, held for sale 2007 2006 2006 --------------------------------------------------------------------- Accounts payable and accrued changes $ 57,408 $ 55,934 $ 71,201 Income and other taxes payable 3,150 2,531 2,009 Long term debt 585 972 974 Other long term liabilities 290 - 290 --------------------------------------------------------------------- $ 61,433 $ 59,437 $ 74,474 --------------------------------------------------------------------- Classified as: Current $ 61,433 $ 59,105 $ 74,474 Long-term - 332 - --------------------------------------------------------------------- $ 61,433 $ 59,437 $ 74,474 --------------------------------------------------------------------- --------------------------------------------------------------------- 5. ACCOUNTS RECEIVABLE Under revolving securitization programs, the Company has sold certain of its trade accounts receivable to financial institutions. The Company retains servicing responsibilities and retains a limited recourse obligation for delinquent receivables. At June 30, 2007, trade accounts receivable being serviced under this program amounted to $238.6 million (June 30, 2006: $241.1 million; December 31, 2006: $241.5 million). 6. OTHER INCOME (EXPENSE) --------------------------------------------------------------------- Three months ended Six months ended June 30, June 30, 2007 2006 2007 2006 --------------------------------------------------------------------- Proceeds from insurance claims $ 1,854 $ - $ 1,854 $ - Rental 85 79 156 116 Gain (loss) on sale of property and equipment (377) 27 82 568 Gain (loss) from real estate operations (61) (43) (126) 1,135 Other - 9 3 135 --------------------------------------------------------------------- $ 1,501 $ 72 $ 1,969 $ 1,954 --------------------------------------------------------------------- --------------------------------------------------------------------- 7. PENSIONS During the quarter, the Company recorded $4.2 million related to net benefit plan income including postretirement benefit costs (2006: $3.7 million). For the six months ended June 30, 2007, the Company recorded $8.1 million in net benefit plan income including postretirement benefit costs (2006: $6.6 million). 8. INCOME TAXES The Company recorded tax expense of $1.7 million in the second quarter of 2007 on a loss from continuing operations of $1.9 million. The reason for the variance from the Company's normal effective tax rate on earnings of 36.3% is due to: (i) the recognition of a tax benefit of $5.1 million related to outside basis differences on shares of subsidiaries that will be sold as part of the sale of the animal nutrition business, and (ii) the tax effect on restructuring and other related costs which was recorded using an effective tax rate of 11.6%. The low effective tax rate on restructuring and other related costs was caused by the goodwill impairment charge which is not deductible for tax purposes. 9. SHARE CAPITAL The following table sets forth the continuity for shares issued and outstanding during the year and the corresponding carrying value: --------------------------------------------------------------------- Number of shares Share capital $ ------------------------ ------------------------ 2007 2006 2007 2006 --------------------------------------------------------------------- Balance at January 1, 127,135,866 127,704,812 $ 769,696 $ 765,666 Exercise of options 210,687 252,767 2,215 2,943 Repurchased for cancellation(i) - (461,900) - (2,773) --------------------------------------------------------------------- Balance at March 31, 127,346,553 127,495,679 $ 771,911 $ 765,836 Exercise of options 1,250,118 876,473 14,411 10,439 Repurchased for cancellation(i) - (150,900) - (910) --------------------------------------------------------------------- Balance at June 30, 128,596,671 128,221,252 $ 786,322 $ 775,365 --------------------------------------------------------------------- --------------------------------------------------------------------- (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 carrying value of the shares was charged to retained earnings. 10. EARNINGS PER SHARE The following table sets forth the calculation of basic and fully diluted earnings per share: --------------------------------------------------------------------- Three months ended June 30, 2007 2006 --------------------------------------------------------------------- Weighted Weighted Average Average Net Number of Net Number of Earnings Shares(ii) EPS Earnings Shares(ii) EPS ------------------------- --------------------------- Basic Continuing operations $(6,458) 127.7 $(0.05) $14,735 127.8 $ 0.12 Discontinued operations 4,787 127.7 0.04 6,451 127.8 0.05 --------------------------------------------------------------------- $(1,671) 127.7 $(0.01) $21,186 127.8 $ 0.17 Stock options(i) - 4.1 - - 2.1 (0.01) Diluted Continuing operations $(6,458) 131.8 $(0.05) $14,735 129.9 $ 0.11 Discontinued operations 4,787 131.8 0.04 6,451 129.9 0.05 --------------------------------------------------------------------- $(1,671) 131.8 $(0.01) $21,186 129.9 $ 0.16 --------------------------------------------------------------------- --------------------------------------------------------------------- (i) Excludes the effect of 7.7 million options and restricted stock units (2006: 9.5 million) to purchase common shares that are anti-dilutive (ii) In millions --------------------------------------------------------------------- Six months ended June 30, 2007 2006 --------------------------------------------------------------------- Weighted Weighted Average Average Net Number of Net Number of Earnings Shares(ii) EPS Earnings Shares(ii) EPS -------------------------- --------------------------- Basic Continuing operations $(1,192) 127.4 $(0.01) $26,062 127.8 $ 0.20 Discontinued operations 9,984 127.4 0.08 12,396 127.8 0.10 --------------------------------------------------------------------- $ 8,792 127.4 $ 0.07 $38,458 127.8 $ 0.30 Stock options(i) - 3.6 - - 2.2 - Diluted Continuing operations $(1,192) 131.0 $(0.01) $26,062 130.0 $ 0.20 Discontinued operations 9,984 131.0 0.08 12,396 130.0 0.10 --------------------------------------------------------------------- $ 8,792 131.0 $ 0.07 $38,458 130.0 $ 0.30 --------------------------------------------------------------------- --------------------------------------------------------------------- (i) Excludes the effect of 8.3 million options and restricted stock units (2006: 9.5 million) to purchase common shares that are anti-dilutive (ii) In millions 11. GOODWILL The Company entered into an agreement to sell the animal nutrition business in the second quarter of 2007 and the terms and conditions of sale placed certain restrictions on the operations of two feed mills and resulted in a change in the Company's assessment of future cash flows of its remaining feed and hog operations. As a result, the Company has determined that the goodwill related to the remaining feed and hog operations is fully impaired and has recorded an impairment charge of $20.7 million in the second quarter. The sale transaction closed on July 2007 and it is estimated that the Company will record an after-tax gain of approximately $210 million excluding this goodwill impairment loss (see Note 3) in the third quarter. In accordance with CICA Handbook 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 2007, the Company completed its annual goodwill impairment test for all reporting units and determined that there was no additional impairment in any other reporting units. 12. ACQUISITIONS AND DIVESTITURES (a) On February 26, 2007 the Company acquired 100% ownership of the shares in Pâtisserie Chevalier Inc. ("Chevalier") for $7.9 million. Chevalier is a leading producer of single-portion snack cake products in Quebec. As at June 30, 2007 the Company has not yet finalized the purchase price allocation. (b) During the first quarter, the Company completed the sale of its European seafood and convenience businesses in Germany. The sales of these businesses will not have a significant impact on ongoing earnings or cash flows. (c) During the first and second quarter of 2007, the Company completed a number of buy and sell transactions of certain hog investment companies related to the realignment of its hog production business. These transactions did not have a significant impact on the financial position of the Company. (d) On January 16, 2007, the Company purchased 122,900 additional shares in Canada Bread for $6.5 million, increasing the Company's ownership interest in Canada Bread from 87.5% to 88.0%. 13. SUPPLEMENTAL CASH FLOW INFORMATION --------------------------------------------------------------------- Three months ended Six months ended June 30, June 30, 2007 2006 2007 2006 --------------------------------------------------------------------- Net interest paid $ 40,741 $ 37,507 $ 55,948 $ 49,648 Net income taxes paid 13,352 15,621 25,242 43,059 --------------------------------------------------------------------- --------------------------------------------------------------------- 14. ACCUMULATED OTHER COMPREHENSIVE LOSS Accumulated other comprehensive loss consists of the following: --------------------------------------------------------------------- Six months ended June 30, 2007 2006 --------------------------------------------------------------------- Balance at the beginning of the period (Note 1(a)) - net(i) $ (9,809) $ (18,558) Transition adjustment as of January 1, 2007 (Note 1(a)) (32,198) - --------------------------------------------------------------------- Adjusted balance at the beginning of the period $ (42,007) $ (18,558) Change in accumulated foreign currency translation adjustment - net(i) (7,590) 2,094 Change in unrealized derivative gain on cash flow hedges - net(ii) 10,814 - ------------------------------------------------------------------- Other comprehensive income for the period $ 3,224 $ 2,094 --------------------------------------------------------------------- Accumulated other comprehensive loss as at June 30 $ (38,783) $ (16,464) --------------------------------------------------------------------- --------------------------------------------------------------------- (i) Balance at the beginning of the period is net of tax of $9.1 million. The change in accumulated foreign currency translation adjustment is net of taxes of $nil for the six months ended June 30, 2007 (change for the quarter of $6.7 million net of taxes of $nil). (ii) Unrealized derivative gain on cash flow hedges is net of tax of $5.2 million for the six months ended June 30, 2007 (change for the quarter of $5.5 million net of taxes of $2.3 million). The Company estimates that $4.2 million of net unrealized derivative gain included in other comprehensive income will be reclassified into net earnings within the next twelve months. During the quarter, a loss of approximately $2.7 million (net of tax of $1.3 million) was released to income from accumulated other comprehensive loss, which is included in the net change for the period.SOURCE: Maple Leaf Foods Inc.
Lynda Kuhn, Senior Vice-President, Communications & Consumer Affairs, (416)926-2026
www.mapleleaf.com