Media Centre
2010/02/24

Maple Leaf Foods Reports Results for Fourth Quarter and Fiscal Year 2009

TORONTO, Feb. 24, 2010 (Canada NewsWire via COMTEX) -- Maple Leaf Foods Inc. (TSX: MFI) today reported its financial results for the fourth quarter and the year ended December 31, 2009. Fourth quarter highlights follow:
    <<
- Adjusted EPS increased to $0.19 compared to $0.12 last year due to
substantial recovery in the prepared meats business
- Adjusted Operating Earnings increased to $57.8 million from
$35.4 million
- Net earnings of $21.9 million compared to a net loss of $14.6 million
>>


Note: Adjusted Operating Earnings measures are defined as earnings from operations before one-time direct product recall, restructuring and other related costs and other income (expense). Adjusted Earnings per Share ("Adjusted EPS") measures are defined as basic earnings per share adjusted for the impact of one-time direct product recall, restructuring and other related costs, net of tax and minority interest.


"The increased earnings in the fourth quarter reflect significantly better performance in our protein business, offset slightly by a softer quarter in the bakery segment," said Michael H. McCain, President and CEO. "Our prepared meats results improved substantially, although an unexpected, counter seasonal run-up in raw material costs compressed margins in both primary processing and prepared meats late in the quarter. In our bakery operations, lower wheat costs were more than offset by higher promotional activity to launch new products and poor market conditions affecting our U.K. business.


"In 2009, we substantially completed the restructuring of our protein operations and focused our company on higher margin consumer packaged goods. Looking ahead, our priority is to increase earnings and margins to levels consistent with our peers. We have work to do on this goal and it will involve achieving the full potential of our prepared meats business, investing in our plant network to reduce costs, and delivering higher levels of organic growth."

    <<
Financial Overview
------------------
>>


Sales for the fourth quarter decreased 1% to $1,324.9 million compared to $1,339.7 million last year, while sales for the year were consistent at $5.2 billion.


Adjusted Operating Earnings increased to $57.8 million compared to $35.4 million last year, while earnings for the year increased to $196.1 million compared to $128.4 million last year, due to better performance in prepared meats and fresh poultry businesses. This improvement was partly offset by lower pork earnings, higher pension expense, and increased promotional, marketing and other expenses in the bakery operations.


Net earnings increased to $21.9 million or $0.16 per share in the fourth quarter of 2009 compared to a net loss of $14.6 million or $0.12 per share last year.

    <<
Following is a reconciliation of Basic EPS to Adjusted EPS:

Fourth Quarter Full Year
-------------------------------------------------------------------------
2009 2008 2009 2008
-------------------------------------------------------------------------
Basic EPS $ 0.16 $ (0.12) $ 0.40 $ (0.29)
Product recall,
restructuring and
other related costs 0.02 0.24 0.17 0.58
-------------------------------------------------------------------------
Adjusted EPS (i) $ 0.19 $ 0.12 $ 0.57 $ 0.29
-------------------------------------------------------------------------

(i) Table does not add due to rounding.

Business Segment Review
-----------------------

Following is a summary of Adjusted Operating Earnings by business segment:

Fourth Quarter Full Year
-------------------------------------------------------------------------
($ millions) 2009 2008 2009 2008
-------------------------------------------------------------------------
Meat Products Group $ 24.2 $ (2.1) $ 55.4 $ 29.5
Agribusiness Group 14.5 13.0 48.0 30.1
-------------------------------------------------------------------------
Protein Group 38.7 10.9 103.4 59.6
Bakery Products Group 21.9 26.6 102.2 83.0
Non-allocated Costs (i) (2.8) (2.1) (9.5) (14.2)
-------------------------------------------------------------------------
Adjusted Operating
Earnings $ 57.8 $ 35.4 $ 196.1 $ 128.4
-------------------------------------------------------------------------

(i) Non-allocated costs comprise costs related to systems conversion and
consulting fees. Management believes that not allocating these costs
provides a more comparable assessment of segmented operating results.

Meat Products Group
-------------------
(value-added prepared meats; chilled meal entrees and lunch kits;
value-added fresh pork, poultry and turkey products)
>>


Sales for the fourth quarter were largely consistent with last year. Adjusted Operating Earnings in the Meat Products Group increased to $24.2 million compared to a loss of $2.1 million last year. For the year, Adjusted Operating Earnings were $55.4 million compared to $29.5 million last year.


Earnings in the fourth quarter benefited from an increased contribution from the prepared meats business following a major product recall in August 2008. Although earnings are higher, they compare with a quarter that was materially impacted by the August 2008 product recall, and there still remains significant room to further increase sales and profitability.


Volumes in the prepared meats business continued to trend closer to historical levels, while margins increased compared to the fourth quarter of last year mainly due to lower raw material and packaging costs, the benefit of a stronger Canadian dollar and normalized supply chain operations. While earnings performance has improved compared to the prior year, margins were compressed in the latter part of the fourth quarter as the expected seasonal declines in meat prices did not materialize, with raw material prices rising sharply in December.


Earnings were lower in primary processing due to an increase in live hog market prices that compressed margins. Reduced pork earnings were partly offset by improved fresh poultry results due to better industry processor margins and operating efficiencies.

    <<
Agribusiness Group
------------------
(hog production and animal by-products recycling)
>>


Sales increased to $50.7 million from $49.2 million last year. Higher bio-diesel sales were partially offset by the impact of lower commodity prices which reduced the sales values of recycled by-products in the rendering operations.


Adjusted Operating Earnings for the Agribusiness Group in the fourth quarter rose to $14.5 million compared to $13.0 million in the prior year. Adjusted Operating Earnings for the year increased to $48.0 million from $30.1 million in 2008.


Improved earnings in the quarter were driven by higher sales volumes of bio-diesel in the Company's rendering operations. Earnings in the fourth quarter included increased bio-diesel production credits received from the Canadian government. This increase reflects a structural change in the support of renewable fuels that should improve industry-wide economics. Losses in hog production increased compared to last year due to lower hog prices on average and the strengthening of the Canadian dollar which reduces the sales value of hogs.

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Bakery Products Group
---------------------
(fresh and frozen branded value-added bakery products, including frozen
par-baked bakery products, sandwiches and specialty pasta and sauces).
>>


Sales declined to $432.0 million from $444.2 million in the prior year, mainly due to foreign exchange translation of the U.K. and U.S. businesses. Volume increases in the fresh and frozen North American bakeries and pasta business were offset by lower sales volume in the U.K. Bakery operations and the fresh sandwiches business in Canada.


Adjusted Operating Earnings for the fourth quarter decreased to $21.9 million compared to $26.6 million last year, while Adjusted Operating Earnings for the year increased to $102.2 million compared to $83.0 million in 2008. The decline in the fourth quarter was mainly due to the timing of promotional activities and higher marketing and other expenses. New product launches at the end of the third quarter of 2009, primarily the Dempster's(R) OvenFresh(TM) line of white and multigrain fresh par-baked breads and Cadbury(TM) Snack Cakes, were supported by promotional and marketing campaigns in the fourth quarter that contributed to increased expenses. Additionally, a short-term increase in trade investment in the Canadian market, the impact of currency changes and higher manufacturing costs in the U.K. bakery operations reduced earnings in the quarter. Partly offsetting these increased expenses was the positive impact of lower average commodity costs during the quarter compared to last year.

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Other Income (Expense)
----------------------
>>


Other expense for the quarter was $0.4 million compared to other income of $13.8 million last year. The income in 2008 was comprised mostly of insurance proceeds to cover business interruption losses related to an oven fire in the U.K. bakery business and the disposal of a redundant warehouse facility.

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Other Matters
-------------
>>


On February 23, 2010, Maple Leaf Foods Inc. declared a dividend of $0.04 per share on the outstanding common and non-voting common shares of the Company payable March 31, 2010 to shareholders of record at the close of business on March 10, 2010. Unless indicated otherwise by the Company in writing at or before the time the dividend is paid, this dividend will not be considered an eligible dividend for the purposes of the "Enhanced Dividend Tax Credit System".


It is currently anticipated, that all dividends the Company will pay in 2010 will not be considered an eligible dividend for the purposes of the "Enhanced Dividend Tax Credit System".


An investor presentation related to the Company's fourth and full year financial results is available at www.mapleleaf.com and can be found under Investor Relations on the Quarterly Results page. A conference call will be held at 2:30 p.m. EDT on February 24, 2010 to review Maple Leaf Foods' fourth and full year financial results. To participate in the call, please dial 416-340-8018 or 866-223-7781. For those unable to participate, playback will be made available an hour after the event at 416-695-5800 / 800-408-3053 (Passcode 7776003 followed by the number sign).


A webcast presentation of the third quarter financial results will also be available at http://investor.mapleleaf.ca via a link:


http://events.startcast.com/events6/91/C0015/Default.aspx  


The Company's full financial statements and related Management's Discussion and Analysis are available for download on the Company's website.

    <<
Forward-Looking Statements
--------------------------
>>


This document contains, and the Company's oral and written public communications often contain, forward-looking statements that are based on current expectations, estimates, forecasts and projections about the industries in which the Company operates and beliefs and assumptions made by the Management of the Company. Such statements include, but are not limited to, statements with respect to objectives and goals, as well as statements with respect to beliefs, plans, expectations, anticipations, estimates and intentions. Specific statements include, but are not limited to, statements with respect to expectations concerning the ongoing nature of restructuring benefits in the Protein Group, expectations regarding earnings potential in the prepared meats business, and expectations of improved economics in the bio-diesel industry. Words such as "expect," "anticipate," "intend," "attempt," "may," "will," "plan," "believe," "seek," "estimate," and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve assumptions and risks and uncertainties that are difficult to predict.


In addition, expectations concerning performance of the Company's business in general are based on a number of factors and assumptions including, but not limited to: the condition of the Canadian, United States, United Kingdom and Japanese economies; the rate of exchange of the Canadian dollar to the U.S. dollar, British pound and Japanese yen; expected recovery of sales following the product recall; the availability and prices of raw materials, energy and supplies; product pricing; the availability of insurance; the competitive environment and related market conditions; improvement of operating efficiencies whether as a result of the protein business transformation or otherwise; continued access to capital; the cost of compliance with environmental and health standards; no adverse results from ongoing litigation that would not be covered by insurance; no unexpected actions of domestic and foreign governments and the general assumption that none of the risks identified under "Risk Factors" in the Company's Annual Management's Discussion and Analysis for the year ended December 31, 2009 will materialize. All of these assumptions have been derived from information currently available to the Company including information obtained by the Company from third-party sources. These assumptions may prove to be incorrect in whole or in part. In addition, actual results may differ materially from those expressed, implied or forecasted in such forward looking statements, which reflect the Company's expectations only as of the date hereof.


Factors that could cause actual results or outcomes to differ materially from the results expressed, implied or forecasted by forward-looking statements are discussed more fully in the Company's Annual Management's Discussion and Analysis for the year ended December 31, 2009 including the section entitled "Risk Factors" that will be available on SEDAR at www.sedar.com. The Company does not intend to, and the Company disclaims any obligation to, update any forward-looking statements, whether written or oral, or whether as a result of new information, future events or otherwise except as required by law.


Maple Leaf Foods Inc. is a leading food processing company, headquartered in Toronto, Canada. The Company employs approximately 23,500 people at its operations across Canada and in the United States, the United Kingdom, and Asia. The Company had sales of $5.2 billion in 2009.

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

-------------------------------------------------------------------------
As at December 31,
2009 2008
-------------------------------------------------------------------------

Assets

Current assets
Cash and cash equivalents $ 29,316 $ 365,518
Accounts receivable 200,317 139,144
Inventories 349,909 377,414
Income and other taxes recoverable 18,067 20,971
Future tax asset 4,301 19,787
Prepaid expenses and other assets 15,328 32,289
-----------------------------------------------------------------------
$ 617,238 $ 955,123

Property and equipment 1,135,056 1,169,435
Other long-term assets 328,063 329,070
Future tax asset 22,116 24,854
Goodwill 857,278 876,261
Other intangible assets 97,713 97,358
-------------------------------------------------------------------------
$ 3,057,464 $ 3,452,101
-------------------------------------------------------------------------
-------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
Bank indebtedness $ 4,247 $ 8,894
Accounts payable and accrued charges 489,182 600,924
Current portion of long-term debt 206,147 179,244
Other current liabilities 37,837 28,456
-----------------------------------------------------------------------
$ 737,413 $ 817,518

Long-term debt 834,557 1,200,224
Future tax liability 27,851 37,903
Other long-term liabilities 187,523 179,039
Non-controlling interest 81,070 74,447
Shareholders' equity 1,189,050 1,142,970
-------------------------------------------------------------------------
$ 3,057,464 $ 3,452,101
-------------------------------------------------------------------------
-------------------------------------------------------------------------



MAPLE LEAF FOODS INC.
Consolidated Statements of Earnings
(In thousands of Canadian dollars, except share amounts)

-------------------------------------------------------------------------
Three months ended Twelve months ended
December 31, December 31,
2009 2008 2009 2008
(Unaudited)
-------------------------------------------------------------------------
Sales $ 1,324,903 $ 1,339,704 $ 5,221,602 $ 5,242,602
Cost of goods sold 1,118,967 1,184,003 4,487,378 4,622,409
-------------------------------------------------------------------------
Gross margin $ 205,936 $ 155,701 $ 734,224 $ 620,193
Selling, general and
administrative
expenses 148,096 120,351 538,113 491,778
-------------------------------------------------------------------------
Earnings from
operations before
the following: $ 57,840 $ 35,350 $ 196,111 $ 128,415
Product recall,
restructuring and
other related costs (4,392) (40,570) (31,145) (102,812)
Other income 394 13,789 3,613 24,864
-------------------------------------------------------------------------
Earnings from
operations before
interest and income
taxes $ 53,842 $ 8,569 $ 168,579 $ 50,467
Interest expense 19,372 22,795 81,234 88,651
-------------------------------------------------------------------------
Earnings (loss) from
operations before
income taxes $ 34,470 $ (14,226) $ 87,345 $ (38,184)
Income taxes 11,051 (2,336) 27,296 (8,538)
-------------------------------------------------------------------------
Earnings (loss) from
operations before
non-controlling
interest $ 23,419 $ (11,890) $ 60,049 $ (29,646)
Non-controlling
interest 1,499 2,685 7,902 7,211
-------------------------------------------------------------------------
Net earnings (loss) $ 21,920 $ (14,575) $ 52,147 $ (36,857)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic earnings (loss)
per share $ 0.16 $ (0.12) $ 0.40 $ (0.29)
Diluted earnings
(loss) per share $ 0.16 $ (0.12) $ 0.39 $ (0.29)
-------------------------------------------------------------------------
Weighted average number
of shares (millions) 134.4 126.4 129.8 126.7
-------------------------------------------------------------------------
-------------------------------------------------------------------------



MAPLE LEAF FOODS INC.
Consolidated Statements of Comprehensive Income (Loss)
(In thousands of Canadian dollars)

-------------------------------------------------------------------------
Three months ended Twelve months ended
December 31, December 31,
2009 2008 2009 2008
(Unaudited)
-------------------------------------------------------------------------
Net earnings (loss) $ 21,920 $ (14,575) $ 52,147 $ (36,857)

Other comprehensive
loss
Change in
accumulated foreign
currency translation
adjustment (7,815) (5,626) (15,644) (6,579)
Change in unrealized
loss on cash flow
hedges (1,303) (8,016) 12,871 (10,329)
-------------------------------------------------------------------------
$ (9,118) $ (13,642) $ (2,773) $ (16,908)
-------------------------------------------------------------------------
Comprehensive income
(loss) $ 12,802 $ (28,217) $ 49,374 $ (53,765)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Consolidated Statements of Retained Earnings
(In thousands of Canadian dollars)
-------------------------------------------------------------------------
Years ended December 31,
2009 2008
-------------------------------------------------------------------------
Retained earnings, beginning of year $ 314,649 $ 378,604
Net earnings (loss) 52,147 (36,857)
Adoption of new accounting standard (207) -
Dividends declared ($0.16 per share; 2008:
$0.16 per share) (20,913) (20,769)
Premium on shares repurchased for cancellation - (5,515)
Premium on shares issued from Restricted Share
Unit Trust (837) (814)
-------------------------------------------------------------------------
Retained earnings, end of year $ 344,839 $ 314,649
-------------------------------------------------------------------------
-------------------------------------------------------------------------



MAPLE LEAF FOODS INC.
Consolidated Statements of Cash Flows
(In thousands of Canadian dollars)
-------------------------------------------------------------------------
Three months ended Twelve months ended
December 31, December 31,
2009 2008 2009 2008
(Unaudited)
-------------------------------------------------------------------------
Cash provided by (used in):

Operating activities

Net earnings (loss) $ 21,920 $ (14,575) $ 52,147 $ (36,857)
Add (deduct) items
not affecting cash:
Depreciation and
amortization 35,574 38,157 149,489 149,219
Stock-based
compensation 4,736 5,134 18,400 17,160
Non-controlling
interest 1,499 2,686 7,902 7,212
Future income taxes 4,995 (1,489) (7,390) (23,254)
Loss (gain) on sale
of property and
equipment 660 (651) 1,137 (4,724)
Gain on sale of
investments - - (501) -
Amortization of
terminated interest
rate swaps 503 732 2,106 4,391
Change in fair value
of derivative
financial
instruments (1,103) 14,600 (13,373) 12,851
Change in other
long-term receivables 90 334 90 893
Decrease (increase)
in net pension asset (157) (11,290) 962 (27,489)
Change in provision
for restructuring and
other related costs (804) 9,067 15,046 37,859
Other 1,342 2,174 (7,828) 6,066
Change in non-cash
operating working
capital 11,253 141,991 (128,981) 52,156
-------------------------------------------------------------------------
Cash provided by
operating activities $ 80,508 $ 186,870 $ 89,206 $ 195,483
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Financing activities
Dividends paid (5,409) (5,069) (20,913) (20,769)
Dividends paid to
non-controlling
interest (156) (156) (672) (755)
Increase (decrease) in
long-term debt (96,918) 32,914 (262,795) 392,285
Proceeds on issuance
of share capital 1,480 1,133 1,480 5,143
Shares repurchased
for cancellation - - - (11,814)
Issuance of equity
units - 69,106 - 69,106
Purchase of treasury
stock - - (3,190) (11,341)
Other 304 1,210 3,110 1,994
-------------------------------------------------------------------------
Cash provided by
(used in) financing
activities $ (100,699) $ 99,138 $ (282,980) $ 423,849
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Investing activities
Additions to property
and equipment (39,501) (48,512) (162,893) (206,220)
Proceeds from
disposal of property
and equipment 145 2,500 23,717 19,727
Acquisition of
businesses
- net of cash
acquired - (8) - (62,962)
Proceeds on sale of
investments - 1,053 1,540 1,053
Purchase of
Canada Bread shares - - - (32,643)
Other 183 (405) (145) (40)
-------------------------------------------------------------------------
Cash used in
investing activities $ (39,173) $ (45,372) $ (137,781) $ (281,085)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Increase (decrease) in
cash and cash
equivalents (59,364) 240,636 (331,555) 338,247
Cash and cash
equivalents,
beginning of period 84,433 115,988 356,624 18,377
-------------------------------------------------------------------------
Cash and cash
equivalents, end of
period $ 25,069 $ 356,624 $ 25,069 $ 356,624
-------------------------------------------------------------------------
-------------------------------------------------------------------------



MAPLE LEAF FOODS INC.
Segmented Financial Information
(In thousands of Canadian dollars)
-------------------------------------------------------------------------
Three months ended Twelve months ended
December 31, December 31,
2009 2008 2009 2008
(Unaudited)
-------------------------------------------------------------------------
Sales
Meat Products Group $ 842,175 $ 846,316 $ 3,310,393 $ 3,303,694
Agribusiness Group 50,686 49,180 206,064 232,999
Bakery Products Group 432,042 444,208 1,705,145 1,705,909
-------------------------------------------------------------------------
$ 1,324,903 $ 1,339,704 $ 5,221,602 $ 5,242,602
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings from operations
before product recall,
restructuring and other
related costs and other
income
Meat Products Group $ 24,244 $ (2,087) $ 55,388 $ 29,455
Agribusiness Group 14,505 12,980 48,023 30,132
Bakery Products Group 21,896 26,601 102,155 82,979
Non-allocated costs (2,805) (2,144) (9,455) (14,151)
-------------------------------------------------------------------------
$ 57,840 $ 35,350 $ 196,111 $ 128,415
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Capital expenditures
Meat Products Group $ 17,532 $ 31,645 $ 86,770 $ 133,238
Agribusiness Group 4,749 1,963 13,048 11,577
Bakery Products Group 17,220 14,904 63,075 61,405
-------------------------------------------------------------------------
$ 39,501 $ 48,512 $ 162,893 $ 206,220
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Depreciation and
amortization
Meat Products Group $ 17,926 $ 19,164 $ 76,077 $ 75,712
Agribusiness Group 4,431 3,969 16,508 16,221
Bakery Products Group 13,217 15,024 56,904 57,286
-------------------------------------------------------------------------
$ 35,574 $ 38,157 $ 149,489 $ 149,219
-------------------------------------------------------------------------
-------------------------------------------------------------------------

-------------------------------------------------------------------------
As at As at
December 31, December 31,
2009 2008
-------------------------------------------------------------------------
Total assets
Meat Products Group $ 1,653,389 $ 1,675,048
Agribusiness Group 287,057 301,627
Bakery Products Group 955,469 1,003,739
Non-allocated assets 161,549 471,687
-------------------------------------------------------------------------
$ 3,057,464 $ 3,452,101
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Goodwill
Meat Products Group $ 442,943 $ 450,431
Agribusiness Group 14,136 14,445
Bakery Products Group 400,199 411,385
-------------------------------------------------------------------------
$ 857,278 $ 876,261
-------------------------------------------------------------------------
-------------------------------------------------------------------------
>>


SOURCE: Maple Leaf Foods Inc.


Lynda Kuhn, Senior Vice President, Communications, (416) 926-2026, www.mapleleaf.com


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