Media Centre
2005/04/28

Maple Leaf Foods Reports First Quarter Financial Results; Operating Earnings Before Restructuring Costs Up 27%

TORONTO--(BUSINESS WIRE)--April 28, 2005--Maple Leaf Foods Inc. (TSX:MFI) today reported its financial results for the first quarter ended March 31, 2005.

"We are very pleased with our first quarter results, reflecting continued earnings momentum into 2005," said Michael McCain, President and Chief Executive Officer. "This growth was achieved despite market headwinds in our fresh pork and poultry operations and resulted from a combination of factors, including the benefit of portfolio balance across our protein value chain operations, excellent bakery results, and continued gains in operating efficiencies throughout our businesses."

Sales for the first quarter increased to $1.6 billion from $1.2 billion last year, mostly due to the acquisition of Schneider Foods in April 2004, and increased sales in the Company's fresh pork and hog production operations. Excluding Schneider Foods, sales for the first quarter increased 3%.

Net earnings for the quarter before restructuring costs were $21.1 million ($0.17 per share) compared to $18.1 million ($0.16 per share) last year. Including restructuring costs, net earnings were $12.7 million ($0.10 per share).

The Company recorded restructuring expenses of $13.2 million before tax ($8.8 million after tax) to account for several ongoing business restructuring initiatives, principally the integration of Schneider Foods, the closure of a bakery in Peterborough, England, and other smaller restructuring activities.

Earnings from operations before restructuring costs increased 27% to $61.2 million compared to $48.0 million last year. Comparisons of earnings from operations exclude $13.2 million in restructuring costs in the first quarter of 2005. Management believes that this is the most appropriate basis on which to evaluate operating results, as restructuring costs are not representative of continuing operations.

Operating Review

The following is a summary of operating earnings by segment. The combination of the Company's Meat Products Group and the Agribusiness Group 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 deliver superior performance where their operations intersect. Accordingly, it is more meaningful to review the combined results of the Protein Value Chain rather than each segment independently.


Earnings from operations before restructuring costs

(CDN$ millions)                                First Quarter
                                           ----------------------
                                           2005    2004    Change
                                           ----    ----    ------
Meat Products Group                        18.7    10.0       87%
Agribusiness Group (i)                     21.9    20.3        8%
                                           ------------
Protein Value Chain                        40.6    30.3       34%
Bakery Products Group                      20.6    17.7       16%
                                           ------------
                                           61.2    48.0       27%
                                           ------------
                                           ------------

(i) Includes $0.2 million (2004: $4.1 million) of gains related to sales of poultry production quota.

The Protein Value Chain earnings improvement reflects positive contributions from Schneider Foods and hog production earnings, which more than offset decreases in industry wide poultry processing margins and lower rendering returns. Although industry margins in fresh pork declined, sales mix and operating improvements more than offset these impacts.

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 first quarter of 2005 increased to $1.1 billion from $678.6 million last year, primarily due to the contribution of Schneider Foods and higher pork prices.

Earnings from operations increased to $18.7 million from $10.0 million in 2004. The increase was due to the contribution from Schneider Foods and a modest improvement in fresh pork earnings, which more than offset a significant decline in poultry processing earnings. The improved pork earnings were achieved despite an 88% decline in industry pork processing margins from the first quarter last year, and reflected a higher mix of valued added sales and increased manufacturing efficiencies. Earnings from the fresh poultry operations declined due to a significant reduction in industry wide processor margins, which reached high levels last year due to a supply shortage related to Avian flu. Maple Leaf continues to benefit from its balanced portfolio of fresh and processed meat products and new product innovation, which is creating new markets with higher growth rates and margins. The expanded value-added processing capabilities of this group have resulted in new growth opportunities in sliced meats to meet increased demand in the foodservice sandwich market. In addition, a new generation of a lighter version of Fully Cooked Roasts was launched in the first quarter, in order to expand demand for this very popular line of products throughout the summer season.

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 first quarter decreased to $189.5 million from $212.1 million last year, mainly due to lower market prices for feed and rendered products.

Earnings from operations increased to $21.9 million from $20.3 million last year, primarily due to a 19% increase in hog prices that benefited the Company through its 21% effective ownership of hogs processed in the quarter. Earnings from the Company's rendering operations declined from last year due to the lower value of finished products, which compete with alternative feed ingredients. Earnings from the animal nutrition operations remained consistent with last year.

On October 20, 2004, the U.S. government implemented a tariff on all Canadian hogs entering the United States. In a subsequent decision on April 6, 2005, the U.S. International Trade Commission ruled unanimously that the domestic U.S. hog industry has not suffered any material injury as a result of the importation of Canadian hogs. As a result, duties applied to Canadian hogs entering the U.S. have ceased, and will be reimbursed to Canadian producers. The decision will have no material impact on Maple Leaf Foods.

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 first quarter increased to $316.2 million compared to $304.0 million last year, supported by increased sales of fresh and frozen bakery and fresh pasta products.

Earnings from operations increased to $20.6 million compared to $17.7 million last year, primarily driven by increased earnings in the fresh bakery operations. Strong sales of premium nutrition multigrain and specialty breads, operating cost reductions, and price increases that offset inflationary cost increases, all contributed to increased earnings for the quarter. Earnings from North American Frozen Bakery operations declined from last year due to increased distribution and input costs, although volumes increased for the quarter. Management anticipates some benefit from price increases through the remainder of the year to offset the significant cost increases, principally fuel costs. The Company commenced sales of its new FroBake(R) products in the U.S. late in the quarter, with good early market response. The U.K. bakery and fresh pasta operations both achieved strong sales in the quarter. A new bagel plant in the U.K. was substantially commissioned at the end of the quarter, resulting in the closure of an existing plant in Peterborough and consolidation of bagel manufacturing into a single location.

Cash Flow and Financing

Total debt, net of cash balances, of $1.2 billion at the end of the first quarter increased from $783.5 million last year due to the purchase of Schneider Foods in April 2004, partly offset by the proceeds of an equity issue in late 2004.

Cash flow from operating activities for the first quarter was a use of funds of $40.9 million compared to a source of funds of $23.1 million last year. This year over year change was due primarily to an increase in working capital in the first quarter of 2005, driven by a reduction in accounts payable and increased inventory balances.

Capital expenditures of $40.0 million compared to $21.1 million last year. Spending in the Bakery Products Group was primarily a result of the completion of a new bagel plant in the United Kingdom, as well as the installation of new equipment to support the FroBake(R) line of products. In the Agribusiness Group, significant capital was spent on a new biodiesel plant in Quebec and a new feed mill in Atlantic Canada.

Interest expense for the first quarter increased to $25.0 million from $18.4 million last year, primarily due to higher average debt incurred to finance the acquisition of Schneider Foods. The acquisition was initially funded with short-term debt that paid lower, short-term interest rates. In December 2004, the Company re-financed $500 million of debt at terms of seven, ten and twelve years at an effective average rate of 6.1%. As a result, interest expense will be higher than historical levels due to the higher interest rates on long-term debt.

Other Matters

Maple Leaf Foods declared a dividend of $0.04 per share payable on June 30, 2005 to shareholders of record on June 10, 2005.

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 23,000 people at its operations across Canada and in the United States, Europe and Asia. The Company had sales of $6.4 billion in 2004.

An investor presentation related to the Company's first 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 3:30 p.m. EST on April 28, 2005 to review Maple Leaf Foods' first quarter financial results. To participate in the call, please dial 1-416-405-9310 or 877-211-7911. For those unable to participate, playback will be made available an hour after the event at 416-695-5800 / 800-408-3053 (Passcode 3149292#).

A web cast presentation of the first quarter financial results will be available at http://www.firstcallevents.com/service/ajwz404882369gf12.html at 3:30 p.m. EST and via a link on the Company's website www.mapleleaf.com. An archived replay of the web cast will be available following the call at each of the above links.

The Company is hosting its Annual and Special Meeting today at 11:00 a.m. at the Glenn Gould Studio, CBC Building, Main Floor, 250 Front Street West, Toronto. A live web cast of the meeting may be accessed at http://www.startcast.com/shows/91/A0003. A replay of the web cast will also be available at this link or via the Company's website at http://www.mapleleaf.com/Investor/PresentationsWebCast shortly after the close of the Annual and Special Meeting.


                        Consolidated Financial Statements
                        (Expressed in Canadian dollars)

                             MAPLE LEAF FOODS INC.

                   Three months ended March 31, 2005 and 2004


MAPLE LEAF FOODS INC.
Consolidated Balance Sheets
(In thousands of Canadian dollars)

---------------------------------------------------------------------
---------------------------------------------------------------------
                                       As at       As at        As at
                                   March 31,   March 31, December 31,
                                        2005        2004         2004
---------------------------------------------------------------------
                                 (Unaudited) (Unaudited)
ASSETS                                     (As restated)
                                             (Note 1(a))
Current assets
 Cash and cash equivalents          $ 89,011    $ 46,085    $ 111,770
 Accounts receivable (Note 3)        277,953     226,256      292,462
 Inventories                         417,212     292,118      385,128
 Future tax asset - current           20,020       4,352        6,708
 Prepaid expenses and other assets    14,035      12,407       13,218
---------------------------------------------------------------------
                                     818,231     581,218      809,286

Investments in associated companies   83,824      56,209       82,302

Property and equipment             1,090,020     795,972      973,718

Other long-term assets               232,875     179,453      230,201

Future tax asset - non-current        32,353      31,591       26,976

Goodwill                             850,732     519,910      816,408

Other intangibles                     81,552      12,008       82,840
---------------------------------------------------------------------
                                 $ 3,189,587 $ 2,176,361  $ 3,021,731
---------------------------------------------------------------------
---------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
 Accounts payable and accrued
  charges                          $ 559,425   $ 509,296    $ 621,564
 Income and other taxes payable       17,783       5,079       27,651
 Current portion of long-term debt    64,049       4,400      105,910
---------------------------------------------------------------------
                                     641,257     518,775      755,125

Long-term debt                     1,250,112     825,144    1,052,195

Future tax liability                  43,359      56,246       29,207

Other long-term liabilities          247,835      35,907      205,542

Minority interest                     76,831      70,734       74,109

Shareholders' equity                 930,193     669,555      905,553
---------------------------------------------------------------------
                                 $ 3,189,587 $ 2,176,361  $ 3,021,731
---------------------------------------------------------------------
---------------------------------------------------------------------

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 March 31,
(Unaudited)                                   2005               2004
---------------------------------------------------------------------
                                                        (As restated)
                                                          (Note 1(a))

Sales                                  $ 1,582,278        $ 1,194,731
---------------------------------------------------------------------
---------------------------------------------------------------------

Earnings from operations before
 restructuring costs                        61,150             48,002

Restructuring costs (Note 2)                13,157                  -
---------------------------------------------------------------------

Earnings from operations                    47,993             48,002

Other income (expense) (Note 4)              (542)              1,096
---------------------------------------------------------------------

Earnings before interest and income taxes   47,451             49,098

Interest expense                            25,046             18,403
---------------------------------------------------------------------

Earnings before income taxes                22,405             30,695

Income taxes                                 7,554             10,837
---------------------------------------------------------------------

Earnings before minority interest           14,851             19,858

Minority interest                            2,103              1,743
---------------------------------------------------------------------
Net earnings for the period               $ 12,748           $ 18,115
---------------------------------------------------------------------
---------------------------------------------------------------------

Basic earnings per share (Note 10)        $   0.10           $   0.16

Diluted earnings per share (Note 10)      $   0.10           $   0.16
---------------------------------------------------------------------
---------------------------------------------------------------------

Weighted average number of shares
 (millions)                                  126.0              113.2
---------------------------------------------------------------------
---------------------------------------------------------------------


Consolidated Statements of Retained Earnings
(In thousands of Canadian dollars)

---------------------------------------------------------------------
---------------------------------------------------------------------
                                         Three months ended March 31,
(Unaudited)                                   2005               2004
---------------------------------------------------------------------
                                                        (As restated)
                                                          (Note 1(a))

Retained earnings, beginning of period   $ 159,129           $ 74,982

Net earnings for the period                 12,748             18,115

Dividends declared ($0.04 per share;
 2004: $0.04 per share)                    (5,050)            (4,528)
---------------------------------------------------------------------

Retained earnings, end of period         $ 166,827           $ 88,569
---------------------------------------------------------------------
---------------------------------------------------------------------

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 March 31,
(Unaudited)                                   2005               2004
---------------------------------------------------------------------
                                                        (As restated)
CASH PROVIDED BY (USED IN)                                (Note 1(a))

Operating activities
 Net earnings                             $ 12,748           $ 18,115
 Add (deduct) items not affecting cash:
  Depreciation and amortization             32,620             26,304
  Stock-based compensation (Note 5)          1,768                625
  Minority interest                          2,103              1,743
  Future income taxes                      (4,538)              5,956
  Increase in pension asset                (5,231)            (5,087)
  Undistributed (earnings) losses of
   associated companies                    (1,276)                443
  Loss on redemption of convertible
   debenture                                 1,108                  -
  Gain on sale of property and equipment     (171)            (1,049)
 Other                                     (1,757)            (3,082)
 Change in other long-term receivables       6,036              (655)
 Change in operating working
  capital                                 (84,306)           (20,178)
---------------------------------------------------------------------
                                          (40,896)             23,135

Financing activities
 Dividends paid                            (5,050)            (4,528)
 Dividends paid to minority interest         (311)              (234)
 Increase in long-term debt                 55,830              5,965
 Proceeds from share issuance (Note 8)       4,723                277
 Other                                         758                  -
---------------------------------------------------------------------
                                            55,950              1,480

Investing activities
 Additions to property and equipment      (39,958)           (21,115)
 Proceeds from sale of property
  and equipment                              3,703              3,674
 Purchase of net assets of
  businesses (Note 7)                      (2,746)                  -
 Other                                       1,188                  3
---------------------------------------------------------------------
                                          (37,813)           (17,438)

Increase (decrease) in cash and
 cash equivalents                         (22,759)              7,177

Cash and cash equivalents, beginning
 of period                                 111,770             38,908
---------------------------------------------------------------------

Cash and cash equivalents, end
 of period                                $ 89,011           $ 46,085
---------------------------------------------------------------------
---------------------------------------------------------------------

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)

---------------------------------------------------------------------
---------------------------------------------------------------------
                                         Three months ended March 31,
(Unaudited)                                   2005               2004
---------------------------------------------------------------------

Sales
 Meat Products Group                   $ 1,076,628        $   678,633
 Agribusiness Group                        189,474            212,125
 Bakery Products Group                     316,176            303,973
---------------------------------------------------------------------
                                       $ 1,582,278        $ 1,194,731
---------------------------------------------------------------------
---------------------------------------------------------------------

Earnings from operations, before
 restructuring costs
 Meat Products Group                   $    18,656        $     9,985
 Agribusiness Group                         21,851             20,275
 Bakery Products Group                      20,643             17,742
---------------------------------------------------------------------
                                       $    61,150        $    48,002
---------------------------------------------------------------------
---------------------------------------------------------------------

Additions to property and equipment
 Meat Products Group                   $    17,759        $     6,701
 Agribusiness Group                          9,743              2,738
 Bakery Products Group                      12,456             11,676
---------------------------------------------------------------------
                                       $    39,958        $    21,115
---------------------------------------------------------------------
---------------------------------------------------------------------

Depreciation and amortization
 Meat Products Group                   $    16,353        $    10,490
 Agribusiness Group                          5,370              5,067
 Bakery Products Group                      10,897             10,747
---------------------------------------------------------------------
                                       $    32,620        $    26,304
---------------------------------------------------------------------
---------------------------------------------------------------------


---------------------------------------------------------------------
---------------------------------------------------------------------
                                      As at        As at        As at
                                  March 31,    March 31, December 31,
                                       2005         2004         2004
---------------------------------------------------------------------
                                (Unaudited)  (Unaudited)
Total assets
 Meat Products Group            $ 1,566,451  $   683,577  $ 1,452,100
 Agribusiness Group                 631,358      582,899      597,806
 Bakery Products Group              697,529      696,934      702,137
 Non-allocated assets               294,249      212,951      269,688
---------------------------------------------------------------------
                                $ 3,189,587  $ 2,176,361  $ 3,021,731
---------------------------------------------------------------------
---------------------------------------------------------------------

    MAPLE LEAF FOODS INC.

    Notes to Consolidated Financial Statements

(Tabular amounts in thousands of Canadian dollars, except share amounts)

    Three months ended March 31, 2005 and 2004

 
    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, 2004. 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, 2004, except for the following:

a) Convertible debentures

Effective January 1, 2005, the Company adopted the amendment to section 3860, "Financial Instruments - Disclosure and Presentation", on a retroactive basis with restatement of prior periods. The revised standard, which is effective for January 1, 2005, requires obligations of a fixed amount that may be settled, at the issuer's option, by a variable number of the issuer's own equity instruments to be presented as liabilities. As a result of adopting the revised standard, the Company reclassified the principal component of its convertible debenture (see Note 9) as a debt instrument and reclassified the interest, accretion charges and related tax effects in the statement of earnings in the comparative periods. Retroactive application of this standard resulted in a reclassification of $89.1 million from equity to debt as at March 31, 2004. The impact of the revised standard was a reduction in net earnings of $1.2 million (net of tax) for the three months ended March 31, 2004 and $4.5 million for the twelve months ended December 31, 2004. There was no impact to basic or diluted earnings per share for prior periods as a result of adopting this change retroactively.

b) Variable interest entities

The Company adopted the guidance in Accounting Guideline 15, "Consolidation of Variable Interest Entities", retroactively without restatement of prior period, effective January 1, 2005. As a result of the adoption, there are several entities that have now been consolidated with the results of the Company. The most significant impact was the consolidation of the hog processing facility in Brandon, Manitoba, as described in Note 22 of the Company's financial statements for the year ended December 31, 2004. This resulted in an increase in assets of $97.5 million and an increase in long-term debt of $97.5 million. The remaining impact of the adoption of Accounting Guideline 15 was the consolidation of several of the Company's investments in various hog facilities, which were not significant to the consolidated financial statements. There was no impact on the net earnings of the Company from the consolidation of these entities.

c) Comparative figures

Certain 2004 comparative figures have been reclassified to conform to the financial statement presentation adopted in 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 relates to the write down of certain assets that were disposed of or that have become impaired as a result of the restructuring.

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 March 31, 2005, trade accounts receivable being serviced under this program amounted to $204.2 million (March 31, 2004: $201.7 million; December 31, 2004: $209.7 million).


4. OTHER INCOME (EXPENSE)

---------------------------------------------------------------------
---------------------------------------------------------------------
                                         Three months ended March 31,
                                              2005               2004
---------------------------------------------------------------------

Earnings (loss) from associated companies    $ 186             $ (12)
Gain on sale of property and equipment         171              1,049
Dividends received                             230                  -
Loss on redemption of convertible
 debenture                                 (1,108)                  -
Other                                         (21)                 59
---------------------------------------------------------------------
                                           $ (542)            $ 1,096
---------------------------------------------------------------------
---------------------------------------------------------------------

5. STOCK-BASED COMPENSATION

The stock compensation charge to earnings during the first quarter was $1.8 million (2004: $0.6 million). During the quarter, the Company granted 25,000 stock options (2004: nil) at a weighted average exercise price per share of $15.60 and 21,250 restricted share units (2004: nil). The combined fair value of the stock options and restricted share units granted during the quarter was $0.2 million (2004: nil).

During 2002, the Company granted 2,503,500 stock options at a weighted average price per share of $14.36. The effect of these stock options, had they been charged to earnings on a fair value basis during the quarter, would have been nominal.

6. PENSIONS

During the quarter, the Company recorded income of $1.0 million related to net benefit plan income including post-retirement benefit costs (2004: $1.3 million).

7. ACQUISITIONS

On April 5, 2004, the Company acquired Schneider Foods for cash consideration of $376.7 million including transaction costs of $8.1 million and the assumption of Schneider Foods debt. As at March 31, 2005, a preliminary purchase price allocation (including fair values assigned to intangible assets, certain fixed assets, legal claims, long-term debt, pensions, post-retirement benefits and taxes) has been completed. Accordingly, the allocation of the purchase cost to the assets and liabilities acquired is still subject to change. Goodwill resulting from this transaction is included in the total assets of the Meat Products Group.


Details of purchase adjustments made in respect of this transaction
in the quarter are as follows:

---------------------------------------------------------------------
---------------------------------------------------------------------
                                    As at                       As at
                             Dec 31, 2004  Adjustments   Mar 31, 2005
---------------------------------------------------------------------
Net working capital (deficit)    $ 79,590    $ (1,602)       $ 77,988
Investments                        21,191            -         21,191
Property and equipment            152,604      (8,424)        144,180
Other assets                        7,689        (668)          7,021
Goodwill                          291,402       32,841        324,243
Other intangibles                  72,480            -         72,480
Long-term debt                  (146,691)            -      (146,691)
Future income taxes                27,014       16,317         43,331
Pension benefit liability        (75,993)        (250)       (76,243)
Post employment benefit
 liability                       (49,631)         (53)       (49,684)
Other long-term liabilities       (1,255)     (38,161)       (39,416)
Minority interest                 (1,737)            -        (1,737)
---------------------------------------------------------------------
Total purchase cost             $ 376,663          $ -      $ 376,663
---------------------------------------------------------------------
---------------------------------------------------------------------

In January 2005, the Company purchased 66,900 shares in Canada Bread
Company, Limited for $2.7 million, increasing its ownership to 86.9%.

8. SHARE CAPITAL

The following table sets forth the continuity for shares issued and
outstanding during the quarter and the corresponding value:

---------------------------------------------------------------------
---------------------------------------------------------------------
                                Number of shares      Share capital $
                        ---------------------------------------------
                               2005         2004       2005      2004
---------------------------------------------------------------------

Opening balance         125,174,627  113,174,213  $ 731,291 $ 565,048
Exercise of options         416,069       27,800      4,723       277
Conversion of convertible
 debentures (Note 9)        763,933            -     12,217         -
---------------------------------------------------------------------
                        126,354,629  113,202,013  $ 748,231 $ 565,325
---------------------------------------------------------------------
---------------------------------------------------------------------

9. CONVERTIBLE DEBENTURES

On December 8, 2004, the Company issued a redemption notice for the aggregate principal amount on the debentures of $91.3 million for cash at par plus accrued interest with a date fixed for redemption of January 7, 2005. As a result, the Company no longer had the option to satisfy repayment on redemption with common shares. Accordingly, as of that date the Company reclassified $90.0 million of the convertible debentures to current debt, leaving $7.3 million related to the debenture holders' conversion option within shareholders' equity. For the period from the date of the reclassification to December 31, 2004, the carrying charges, including coupon interest, were classified as interest expense.

On January 7, 2005, certain of the debenture holders exercised their conversion rights and the Company issued 763,933 common shares for a reduction in the total cash to be paid by the Company upon redemption of approximately $11.5 million and a proportionate reduction in the debenture holder's conversion option within shareholder's equity of $0.9 million. Accordingly, the Company paid $79.8 million to redeem the remaining debentures outstanding resulting in a net loss on redemption of $1.1 million for the quarter.

The remaining credit balance on the conversion feature of $6.4 million was recognized upon repayment of the bonds through contributed surplus as an equity transaction.

10. EARNINGS PER SHARE

The following table sets forth the calculation of basic and fully diluted earnings per share:


---------------------------------------------------------------------
---------------------------------------------------------------------
                                   Three months ended March 31,
                                 2005                     2004
---------------------------------------------------------------------
                             Weighted                 Weighted
                         Net  Average             Net  Average
                    Earnings   Shares    EPS Earnings   Shares    EPS
                                (iii)                    (iii)
---------------------------------------------------------------------
Basic               $ 12,748    126.0 $ 0.10 $ 18,115    113.2 $ 0.16
 Stock options(i)          -      3.2      -        -      0.3      -
 Convertible debt(ii)      -        -      -    1,216      6.1      -
---------------------------------------------------------------------
Diluted             $ 12,748    129.2 $ 0.10 $ 19,331    119.6 $ 0.16
---------------------------------------------------------------------

(i) Excludes the effect of 10.0 million options and restricted stock units (2004: 11.8 million) to purchase common shares that are anti-dilutive

(ii) As detailed in Note 9, the convertible debentures were all converted or repaid on January 7, 2005

(iii) In millions

11. SUPPLEMENTAL CASH FLOW INFORMATION


---------------------------------------------------------------------
---------------------------------------------------------------------
                                         Three months ended March 31,
                                                 2005            2004
---------------------------------------------------------------------
Net interest paid                            $ 14,891        $ 13,697
Net income taxes paid                          20,581          15,254
---------------------------------------------------------------------
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    Maple Leaf Foods Inc. (TSX:MFI)

CONTACT: Maple Leaf Foods Inc.
Lynda Kuhn
Vice-President, Public & Investor Relations
(416) 926-2026
www.mapleleaf.com

SOURCE: Maple Leaf Foods Inc.


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