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Maple Leaf Foods Reports Results for the Second Quarter 2014

TSX: MFI
www.mapleleaffoods.com

TORONTO, July 31, 2014 /PRNewswire/ – Maple Leaf Foods Inc. (TSX: MFI) today
reported its financial results for the second quarter, June 30, 2014.

  • Adjusted Operating Earnings(1)(3) for the second quarter was a loss of $12.1 million compared to a loss
    of $32.3 million last year. For the first six months, Adjusted
    Operating Earnings was a loss of $42.0 million compared to a loss of
    $60.1 million last year.
  • Adjusted Earnings per Share(3)(4) for the quarter was a loss of $0.13 compared to a loss of $0.25 per
    share last year. Adjusted Earnings per Share for the first six months
    was a loss of $0.37 compared to a loss of $0.48 last year.
  • Net loss from continuing operations for the second quarter was $39.5
    million compared to $38.4 million last year. For the first six months,
    net loss from continuing operations was $164.2 million compared to
    $69.0 million last year.
  • The Company completed the sale of its 90% interest in Canada Bread
    Company, Limited to Grupo Bimbo in the second quarter of 2014.

“We continue to make good progress on our strategic agenda, although the
transitory cost of duplicative supply chains continues to be
significant,” said Michael H. McCain, President and CEO. “We
implemented material price increases during the second quarter which
going forward will fully offset significant raw material cost increases
to date. As anticipated, there is a short-term impact on demand, which
we expect will normalize in time. Our progress in converting to the new
supply chain continues as performance improves in our Western
facilities and commissioning of the new flagship plant in Hamilton,
Ontario is underway. Following the successful sale of our bakery
business, we completed a comprehensive organizational restructuring in
the quarter, right-sizing our structure to cost effectively support our
needs as a focused value-added protein company. We are managing
significant change along with our base business performance, and we are
very satisfied with our progress towards our financial targets.”

Financial Overview

Maple Leaf Foods Inc. (“the Company”) sales from continuing operations
of $831.8 million for the second quarter was an increase of 9.6% from
last year, or 8.2% after adjusting for the impacts of foreign exchange,
as higher pricing was partly offset by lower volume. Sales from
continuing operations of $1,543.1 million for the first six months was
an increase of 6.5%, or 5.3% after adjusting for foreign exchange, due
to the same factors.

Adjusted Operating Earnings for the second quarter was a loss of $12.1
million compared to a loss of $32.3 million last year, as improved
market conditions in the Agribusiness Group more than offset lower
earnings in the Meat Products Group. For the first six months, Adjusted
Operating Earnings increased was a loss of $42.0 million compared to a
loss of $60.1 million last year, due to similar factors.

Net loss from continuing operations for the second quarter was $39.5 million (loss of $0.28 per basic share
attributable to common shareholders) compared to a loss of $38.4
million (loss of $0.27 per basic share attributable to common
shareholders) last year. Net loss from continuing operations included
$20.0 million ($0.11per basic share attributable to common
shareholders) of pre-tax expenses related to restructuring and other
related costs (2013: $14.4 million, or $0.07 per basic share
attributable to common shareholders).

For the first six months, net loss from continuing operations was $164.2
million (loss of $1.17 per share attributable to common shareholders)
compared to a net loss of $69.0 million (loss of $0.49 per basic share
attributable to common shareholders) last year. Net loss from
continuing operations included $41.8 million ($0.22 per basic share
attributable to common shareholders) of pre-tax expenses related to
restructuring and other related costs (2013: $51.3 million or $0.27 per
basic share attributable to common shareholders). Net loss also
included financing costs of $98.6 million related to the repayment of
the Company’s long-term notes payable in April 2014.

Adjusted Earnings per Share was a loss of $0.13 in the second quarter of
2014 compared to a loss of $0.25 last year. For the first six months,
Adjusted Earnings per Share was a loss of $0.37 compared to a loss of
$0.48 last year.

Several items are excluded from the discussions of underlying earnings
performance as they are not representative of ongoing operational
activities. Please refer to the section entitled Reconciliation of
Non-IFRS Financial Measures at the end of the Management Discussion and
Analysis on page 11 for a description and reconciliation of all
non-IFRS financial measures.

Business Segment Review

Following is a summary of sales by business segment:

(Unaudited) Second Quarter Year-to-Date
($ thousands) 2014 2013 2014 2013
Meat Products Group $ 825,553 $ 752,471 $ 1,530,952 $ 1,430,537
Agribusiness Group(5) 6,237 6,794 12,185 18,081
Total Sales(3) $ 831,790 $ 759,265 $ 1,543,137 $ 1,448,618

The following table summarizes Adjusted Operating Earnings by business
segment:

(Unaudited) Second Quarter Year-to-Date
($ thousands) 2014 2013 2014 2013
Meat Products Group $ (15,644) $ (11,492) $ (43,091) $ (21,944)
Agribusiness Group 5,208 (16,888) 4,862 (29,814)
Protein Group $ (10,436) $ (28,380) $ (38,229) $ (51,758)
Non-Allocated Costs in Adjusted Operating Earnings(i) (1,614) (3,896) (3,749) (8,371)
Adjusted Operating Earnings(3) $ (12,050) $ (32,276) $ (41,978) $ (60,129)
(i) Non-allocated costs are comprised of expenses not separately
identifiable to business segment groups, and do not form part of the
measures used by the Company when assessing the segments’ operating
results. Non-allocated costs for 2013 have been restated on a
comparable basis.

Meat Products Group

Includes value-added prepared meats, lunch kits, and fresh pork, poultry
and turkey products sold to retail, foodservice, industrial, and
convenience channels. Includes leading Canadian brands such as Maple
Leaf®, Schneiders® and many leading sub-brands.

Meat Products Group sales for the second quarter increased 9.7% to
$825.6 million, or 8.3% after adjusting for the weaker Canadian dollar
that benefited pork exports. This was primarily driven by higher market
prices for fresh pork, as well as price increases implemented in the
prepared meats business during the second quarter of 2014 in response
to higher raw material and inflationary costs. Partly offsetting these
were lower volume in the prepared meats business, largely due to the
pricing actions implemented in the second quarter, combined with a
decline in fresh pork volume. For the first six months, sales increased
7.0% to $1,531.0 million, or 5.8% after adjusting for the impact of
foreign exchange, largely due to the same factors noted above, with the
addition of higher volume and sales mix in the first quarter of 2014.

Adjusted Operating Earnings for the second quarter was a loss of $15.6
million compared to a loss of $11.5 million last year, as lower
earnings in the prepared meats and fresh poultry businesses were only
partly offset by improved results in the fresh pork business.

The prepared meats business incurred transitional costs of approximately
$25 million during the second quarter of 2014, which were largely
related to commissioning activities and overhead costs at the new meat
processing facility in Hamilton, Ontario. Last year, transitional costs
were approximately $12 million during the same period, mainly
attributable to start-up activities at plant expansions in Western
Canada.

Lower volume in the prepared meats business also contributed to lower
earnings. The decrease in volume was mainly due to price increases
taken during the second quarter of 2014, which were implemented to
offset rising raw material and inflationary costs in the quarter. Raw
material prices continued to remain higher than last year due to the
outbreaks of disease in hog production herds in the U.S. Adding to this
was a weakening Canadian dollar that also contributed to higher input
costs. Higher selling, general and administrative expense as a result
of the timing of advertising and promotional spend, also reduced
earnings.

Earnings in the fresh pork business increased due to improved domestic
and foreign sales. Higher primary pork processing margins and market
values for by-products also contributed to earnings, as did plant
labour and yield efficiencies which offset lower volume due to
decreased hog supplies. Earnings in fresh poultry declined due to an
unfavourable sales mix and plant operating inefficiencies. These were
partly offset by improved primary poultry processing spreads.

For the first six months, Adjusted Operating Earnings was a loss of
$43.1 million compared to a loss of $21.9 million last year, due to
similar factors noted above, as well as margin compression in the
prepared meats business, as the benefit of price increases in the
second quarter implemented to offset higher raw material prices going
forward, did not fully offset for the first six months.

Agribusiness Group

Includes Canadian hog production operations that primarily supplies the
Meat Products Group with livestock.

Agribusiness Group sales for the second quarter declined by 8.2% to $6.2
million compared to $6.8 million last year, due to lower pricing on
toll feed sales. Sales for the first six months declined 32.6% to $12.2
million, due to the same factors above.

Adjusted Operating Earnings in the second quarter was $5.2 million
compared to a loss of $16.9 million last year, primarily due to higher
market prices, net of hedging activities, for hogs, and lower feed
costs. For the first six months, Adjusted Operating Earnings was $4.9
million compared to a loss of $29.8 million last year, due to the same
factors above.

Divestiture of Canada Bread and Discontinued Operations

On May 23, 2014, Grupo Bimbo, S.A.B. de C.V. of Mexico (“Grupo Bimbo”)
acquired the 90.0% of issued and outstanding shares of Canada Bread
owned by the Company, by way of a statutory plan of arrangement under
the Business Corporations Act (Ontario) (the “Arrangement”). During the
quarter, the Company received gross proceeds of approximately $1,657.0
million (which includes its share of the dividend paid upon closing of
the Arrangement) for its 90.0% interest in Canada Bread, resulting in a
pre-tax gain of $1,030.5 million for the three months ended June 30,
2014, and $999.6 million for the six months ended June 30, 2014. Upon
the sale of the business, the net assets of Canada Bread have been
de-recognized from assets held for sale. For the six months ended June
30, 2014, the Canada Bread operations have been classified as
discontinued operations on the Consolidated Statements of Net Earnings
(Loss), and are presented as part of Bakery Products Group for
segmented reporting.

Discontinued operations for the three and six months ended June 30,
2014, pertain to the Bakery Products Group and transaction costs
associated with previous disposals. Discontinued operations in the
three and six months ended June 30, 2013, were restated to include the
Bakery Products Group, as well as the Rothsay and Olivieri businesses
that were sold during the fourth quarter of 2013.

Sales from discontinued operations for the second quarter were $225.0
million and included two months of results from the Bakery Products
Group. Sales from discontinued operations for the second quarter of
2013 were $458.7 million and included $374.5 million relating to the
Bakery Products Group, and $84.2 million related to the Rothsay and
Oliveri businesses.

Net earnings from discontinued operations for the second quarter was
$938.4 million and included a $1,030.5 million pre-tax gain on disposal
of the Bakery Products Group, and related income taxes of $103.7
million for an after tax net gain of $926.8 million. The balance of net
earnings from discontinued operations was comprised of $13.4 million of
the Bakery Products Group operations for two months, and $1.8 million
of transaction costs associated with the 2013 sale of the Rothsay
business. Net earnings from discontinued operations for the second
quarter of 2013 was $38.4 million and included $23.9 million in
earnings of the Bakery Products Group, $13.8 million related to
Rothsay, and $0.6 million related to Olivieri.

For additional information on discontinued operations please see Note 21
of the second quarter 2014 unaudited condensed consolidated financial
statements.

Other Matters

On July 30, 2014, the Company declared a dividend of $0.04 per share
payable September 30, 2014, to shareholders of record at the close of
business on September 5, 2014. Unless indicated otherwise by the
Company in writing on or before the time the dividend is paid, the
dividend will be considered an Eligible Dividend for the purposes of
the “Enhanced Dividend Tax Credit System”.

An investor presentation related to the Company’s second quarter
financial results is available at www.mapleleaffoods.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 July 31, 2014,
to review Maple Leaf Foods’ second quarter financial results. To
participate in the call, please dial 416-340-9432 or 800-952-4972. For
those unable to participate, playback will be made available an hour
after the event at 905-694-9451 / 800-408-3053 (Passcode 7829406).

A webcast presentation of the second quarter financial results will also
be available at http://www.media-server.com/m/p/nb3tjyug

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

Reconciliation of Non-IFRS Financial Measures

The Company uses the following non-IFRS measures: Adjusted Operating
Earnings, Adjusted Earnings per Share, Adjusted EBITDA, and Net Debt.
Management believes that these non-IFRS measures provide useful
information to investors in measuring the financial performance of the
Company for the reasons outlined below. These measures do not have a
standardized meaning prescribed by IFRS and therefore they may not be
comparable to similarly titled measures presented by other publicly
traded companies and should not be construed as an alternative to other
financial measures determined in accordance with IFRS.

Adjusted Operating Earnings

Adjusted Operating Earnings, a non-IFRS measure, is used by Management
to evaluate financial operating results. It is defined as earnings
before income taxes from continuing operations adjusted for items that
are not considered representative of ongoing operational activities of
the business and items where the economic impact of the transactions
will be reflected in earnings in future periods when the underlying
asset is sold or transferred. The table below provides a reconciliation
of net earnings as reported under IFRS in the unaudited consolidated
interim statements of earnings to Adjusted Operating Income for the
three and six months ended, as indicated below. Management believes
that this basis is the most appropriate on which to evaluate operating
results, as they are representative of the ongoing operations of the
Company.

Three months ended June 30, 2014
($ thousands)
(Unaudited)
Meat
Products
Group
Agribusiness
Group
Unallocated
costs
Consolidated
Net earnings (loss) from continuing operations $ (39,544)
Income taxes (13,863)
Earnings (loss) before income taxes from continuing operations $ (53,407)
Interest expense and other financing costs 10,298
Change in the fair value of non-designated interest rate swaps (1,995)
Other (income) expense 1,053 (164) 3,778 4,667
Restructuring and other related costs 11,074 8,922 19,996
Earnings (loss) from Continuing Operations $ (15,644) $ 5,208 $ (10,005) $ (20,441)
Decrease / (increase) in fair value of biological assets(2) 18,884 18,884
Realized (gain) / loss on commodity futures contracts(2) 16,100 16,100
Unrealized (gain) / loss on commodity futures contracts(2) (26,727) (26,727)
Modification impact to long-term incentive plan(2) 134 134
Adjusted Operating Earnings(3) $ (15,644) $ 5,208 $ (1,614) $ (12,050)
Three months ended June 30, 2013
($ thousands)
(Unaudited)
Meat
Products
Group
Agribusiness
Group
Unallocated
costs
Consolidated
Net earnings (loss) from continuing operations $ (38,366)
Income taxes (13,258)
Earnings (loss) before income taxes from continuing operations $ (51,624)
Interest expense 16,545
Change in the fair value of non-designated interest rate swaps (658)
Other (income) expense (1,541) (1,405) (3,129) (6,076)
Restructuring and other related costs 14,384 14,384
Earnings (loss) from Continuing Operations $ (11.492) $ (16,888) $ 951 $ (27,429)
Decrease / (increase) in fair value of biological assets(2) 185 185
Unrealized (gain) / loss on commodity futures contracts(2) (5,032) (5,032)
Adjusted Operating Earnings(3) $ (11,492) $ (16,888) $ (3,896) $ (32,276)
Six months ended June 30, 2014
($ thousands)
(Unaudited)
Meat
Products
Group
Agribusiness
Group
Unallocated
costs
Consolidated
Net earnings (loss) from continuing operations $ (164,150)
Income taxes (58,056)
Earnings (loss) before income taxes from continuing operations $ (222,206)
Interest expense and other financing costs 125,009
Change in the fair value of non-designated interest rate swaps (3,105)
Other (income) expense 527 (454) 3,301 3,374
Restructuring and other related costs 22,546 19,216 41,762
Earnings (loss) from Continuing Operations $ (43,091) $ 4,862 $ (16,937) $ (55,166)
Decrease / (increase) in fair value of biological assets(2) (21,422) (21,422)
Realized (gain) / loss on commodity futures contracts(2) 16,100 16,100
Unrealized (gain) / loss on commodity futures contracts(2) 9,776 9,776
Modification impact to long-term incentive plan(3) 8,734 8,734
Adjusted Operating Earnings $ (43,091) $ 4,862 $ (3,749) $ (41,978)

Six months ended June 30, 2013
($ thousands)
(Unaudited)
Meat
Products
Group
Agribusiness
Group
Unallocated
costs
Consolidated
Net earnings (loss) from continuing operations $ (69,010)
Income taxes (29,932)
Earnings (loss) before income taxes from continuing operations $ (98,942)
Interest expense and other financing costs 32,648
Change in the fair value of non-designated interest rate swaps (1,275)
Other (income) expense (44,935) (516) (3,922) (49,373)
Restructuring and other related costs 49,597 1,745 51,342
Earnings (loss) from Continuing Operations $ (21,944) $ (29,814) $ (13,842) $ (65,600)
Decrease / (increase) in fair value of biological assets(2) 5,463 5,463
Unrealized (gain) / loss on commodity futures contracts(2) 8 8
Adjusted Operating Earnings(3) $ (21,944) $ (29,814) $ (8,371) $ (60,129)

Adjusted Earnings per Share

Adjusted Earnings per Share, a non-IFRS measure, is used by Management
to evaluate ongoing financial operating results. It is defined as basic
earnings per share from continuing operations attributable to common
shareholders, and is adjusted for items that are not considered
representative of ongoing operational activities of the business, and
items where the economic impact of the transactions will be reflected
in earnings in future periods when the underlying asset is sold or
transferred. The table below provides a reconciliation of basic
earnings per share from continuing operations as reported under IFRS in
the unaudited consolidated interim statements of earnings to Adjusted
Earnings per Share for the three and six months ended, as indicated
below. Management believes this basis is the most appropriate on which
to evaluate financial results as they are representative of the ongoing
operations of the Company.

($ per Share)
(Unaudited)
Three months ended June 30, Six months ended June 30,
2014 2013(i) 2014 2013(i)
Basic earnings (loss) per share from continuing operations $ (0.28) $ (0.27) $ (1.17) $ (0.49)
Restructuring and other related costs(ii) 0.11 0.07 0.22 0.27
Items included in other income not considered representative of on-going
operations(iii)
0.02 (0.02) 0.02 (0.29)
Change in the fair value of non-designated interest rate swaps(iv) (0.01) (0.01) (0.02) (0.01)
Change in the fair value of unrealized (gains) / losses on commodity
futures contracts(iv)
(0.14) (0.03) 0.05
Change in the fair value of realized (gains) / losses on commodity
futures contracts(iv)
0.08 0.09
Change in the fair value of biological assets(iv) 0.10 (0.11) 0.03
Other financing costs(v) (0.01) 0.51
Modification impact to long-term incentive plan(vi) 0.05
Adjusted Earnings per Share(vii) $ (0.13) $ (0.25) $ (0.37) $ (0.48)
(i) 2013 figures have been restated for the classification of the Rothsay
business and the Bakery Products Group as discontinued operations.
Refer

to Note 21 of the Company’s 2014 second quarter unaudited condensed
consolidated interim financial statements.
(ii) Includes per share impact of restructuring and other related costs, net
of tax and non-controlling interest.
(iii) Includes gains/losses associated with non-operational activities,
including gains/losses related to restructuring activities, business
combinations,

discontinued operations, assets held for sale, and hedge ineffectiveness
recognized in earnings, all net of tax.
(iv) Includes per share impact of the change in fair value of non-designated
interest rate swaps, unrealized and realized (gains) losses on
commodity

futures contracts and the change in fair value of biological assets, net
of tax.
(v) Includes a $76.3 million early repayment premium to lenders, $12.7
million in financing costs, and a $9.6 million loss transferred from
accumulated

other comprehensive income into earnings related to the settlement of
interest rate swaps that are no longer designated as hedging
instruments
(vi) Relates to a $8.7 million modification and mark to market changes of
long-term incentive compensation plan as a result of the costs been
fixed

and payments accelerated, which was a decision made conditional on the
sale of Canada Bread, and is therefore not considered representative

of ongoing operational activities of the business.
(vii) May not add due to rounding.

Forward-Looking Statements

This document contains, and the Company’s oral and written public
communications often contain, “forward-looking information” within the
meaning of applicable securities law. These statements are based on
current expectations, estimates, forecasts, and projections about the
industries in which the Company operates, as well as 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, in addition to statements with respect to beliefs, plans,
objectives, expectations, anticipations, estimates, and intentions.
Specific forward-looking information in this document includes, but is
not limited to, statements with respect to: the anticipated benefits,
timing, actions, costs, and investments associated with the Value
Creation Plan; expectations regarding Net Debt to EBITDA ratios during
the implementation of the Value Creation Plan; expectations regarding
the use of derivatives, futures and options; expectations regarding
improving efficiencies; the expected use of cash balances; source of
funds for ongoing business requirements; capital investments and debt
repayment; expectations regarding acquisitions and divestitures; the
timing of new plant openings and old plant closures, job losses and
LEED certification; expectations regarding the impact of new accounting
standards; expectations regarding sufficiency of the allowance for
uncollectible accounts; and expectations regarding pension plan
performance and future pension plan liabilities and contributions.
Words such as “expect”, “anticipate”, “intend”, “may”, “will”, “plan”,
“believe”, “seek”, “estimate”, and variations of such words and similar
expressions are intended to identify such forward-looking information.
These statements are not guarantees of future performance and involve
assumptions and risks and uncertainties that are difficult to predict.

In addition, these statements and expectations concerning the
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, U.S., and Japanese economies; the rate of exchange of
the Canadian dollar to the U.S. dollar, and the Japanese yen; 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 Value Creation Plan or otherwise; continued
access to capital; the cost of compliance with environmental and health
standards; no adverse results from ongoing litigation; no unexpected
actions of domestic and foreign governments; and the general assumption
that none of the risks identified below or elsewhere in this document
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 information, 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
information include, among other things:

  • risks associated with the Company’s Transaction Services Agreement with
    Grupo Bimbo, S.A.B. de C.V. of Mexico
  • risks associated with implementing and executing the Value Creation
    Plan;
  • risks associated with the availability of capital;
  • risks associated with changes in the Company’s systems and processes;
  • risks posed by food contamination, consumer liability, and product
    recalls;
  • risks associated with acquisitions, divestitures, and capital expansion
    projects;
  • impact on pension expense and funding requirements of fluctuations in
    the market prices of fixed income and equity securities and changes in
    interest rates;
  • cyclical nature of the cost and supply of hogs and the competitive
    nature of the pork market generally;
  • risks related to the health status of livestock;
  • impact of a pandemic on the Company’s operations;
  • the Company’s exposure to currency exchange risks;
  • ability of the Company to hedge against the effect of commodity price
    changes through the use of commodity futures and options;
  • impact of changes in the market value of the biological assets and
    hedging instruments;
  • impact of international events on commodity prices and the free flow of
    goods;
  • risks posed by compliance with extensive government regulation;
  • risks posed by litigation;
  • impact of changes in consumer tastes and buying patterns;
  • impact of extensive environmental regulation and potential environmental
    liabilities;
  • risks associated with a consolidating retail environment;
  • risks posed by competition;
  • risks associated with complying with differing employment laws and
    practices, the potential for work stoppages due to non-renewal of
    collective agreements, and recruiting and retaining qualified
    personnel;
  • risks associated with pricing the Company’s products;
  • risks associated with managing the Company’s supply chain; and
  • risks associated with failing to identify and manage the strategic risks
    facing the Company.

The Company cautions the reader that the foregoing list of factors is
not exhaustive. These factors are discussed in more detail under the
heading “Risk Factors” presented previously in this document. The
reader should review such section in detail. Some of the
forward-looking information may be considered to be financial outlooks
for purposes of applicable securities legislation including, but not
limited to, statements concerning future EBITDA margins; capital
expenditures; cash costs; and non-cash restructuring charges. These
financial outlooks are presented to allow the Company to benchmark the
results of the Value Creation Plan. These financial outlooks may not be
appropriate for other purposes and readers should not assume they will
be achieved. The Company does not intend to, and the Company disclaims
any obligation to, update any forward-looking information, whether
written or oral, or whether as a result of new information, future
events or otherwise, except as required by law. Additional information
concerning the Company, including the Company’s Annual Information
Form, is available on SEDAR at www.sedar.com. Maple Leaf Foods Inc. is a leading Canadian value added meat, meals,
and bakery company, committed to delivering quality food products to
consumers around the world. Headquartered in Toronto, Canada, the
Company employs approximately 12,800 people at its operations in
Canada, the U.S., and Asia.

Footnote Legend

  1. Adjusted Operating Earnings, a non-IFRS measure, is used by Management
    to evaluate financial operating results. It is defined as earnings
    from continuing operations adjusted for items that are not considered
    representative of on-going operational activities of the business, and
    items where the economic impact of the transactions will be reflected
    in earnings in future periods when the underlying asset is sold or
    transferred. Please refer to the section entitled Reconciliation of
    Non-IFRS Financial Measures in this news release.
  2. Regarding biological assets, please refer to Note 6 of the Company’s
    2014 second quarter unaudited condensed consolidated interim financial
    statements. Realized and unrealized gains/losses on commodity futures
    contracts and settlement of long-term incentive plan are reported
    within cost of sales and selling, general and administrative
    respectively in the Company’s 2014 second quarter unaudited condensed
    consolidated interim financial statements.
  3. Figures exclude the results of the Rothsay business and the Bakery
    Products Group, which are reported as discontinued operations. Refer to
    Note 21 of the Company’s 2014 second quarter unaudited condensed
    consolidated interim financial statements.
  4. Adjusted Earnings per Share, a non-IFRS measure, is used by Management
    to evaluate on-going financial operating results. It is defined as
    basic earnings per share from continuing operations attributable to
    common shareholders, and is adjusted for all items that are not
    considered representative of on-going operational activities of the
    business, and items where the economic impact of the transactions will
    be reflected in earnings in future periods when the underlying asset is
    sold or transferred. Please refer to the section entitled
    Reconciliation of Non-IFRS Financial Measures in this news release.
  5. 2013 figures exclude the results of the Rothsay business, which are
    reported as discontinued operations. Refer to Note 21 of the Company’s
    2014 second quarter unaudited condensed consolidated interim financial
    statements.

Condensed Consolidated Interim Financial Statements
(Expressed in Canadian dollars)
(Unaudited)

MAPLE LEAF FOODS INC.

Six months ended June 30, 2014 and 2013

Consolidated Balance Sheets
(In thousands of Canadian dollars) As at June 30,
2014
As at June 30,
2013
As at December 31,
2013
(Unaudited) (Unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 539,610 $ 145,608 $ 506,670
Accounts receivable 51,981 111,732 111,034
Notes receivable 119,963 111,074 115,514
Inventories 275,101 328,905 287,786
Biological assets 126,096 75,882 95,740
Income and other taxes recoverable 36,273 36,657 43,300
Prepaid expenses and other assets 27,769 20,350 17,921
Assets held for sale 634 55,467 5,206
$ 1,177,427 $ 885,675 $ 1,183,171
Property and equipment 1,031,767 1,284,416 1,323,318
Investment property 3,204 11,515 12,865
Employee benefits 110,872 128,378 117,615
Other long-term assets 9,061 13,873 16,628
Deferred tax asset 700 119,149 26,119
Goodwill 428,236 741,605 720,798
Intangible assets 182,335 200,246 198,578
Total assets $ 2,943,602 $ 3,384,857 $ 3,599,092
LIABILITIES AND EQUITY
Current liabilities
Bank indebtedness $ $ 7,685 $ 4,408
Accounts payable and accruals 278,907 509,266 649,554
Provisions 52,576 34,591 54,853
Current portion of long-term debt 407 6,749 209,780
Other current liabilities 35,992 16,196 47,927
$ 367,882 $ 574,487 $ 966,522
Long-term debt 9,911 1,337,945 744,212
Employee benefits 142,622 298,209 174,503
Provisions 27,499 39,626 19,603
Other long-term liabilities 23,193 53,684 28,744
Deferred tax liability 19,393 12,376 23,516
Total liabilities $ 590,500 $ 2,316,327 $ 1,957,100
Shareholders’ equity
Share capital $ 922,888 $ 902,986 $ 905,216
Retained earnings 1,344,343 14,694 602,717
Contributed surplus 82,994 91,687 79,139
Accumulated other comprehensive income (loss)
associated with continuing operations
4,227 (8,687) (4,593)
Treasury stock (1,350) (1,350) (1,350)
Total shareholders’ equity $ 2,353,102 $ 999,330 $ 1,581,129
Non-controlling interest 69,200 60,863
Total equity $ 2,353,102 $ 1,068,530 $ 1,641,992
Total liabilities and equity $ 2,943,602 $ 3,384,857 $ 3,599,092
Consolidated Statements of Net Earnings (Loss)
(In thousands of Canadian dollars, except share amounts)
(Unaudited)
Three months ended June 30, Six months ended June 30,
2014 2013 2014 2013
(Restated) (Restated)
(Note 21) (Note 21)
Sales $ 831,790 $ 759,265 $ 1,543,137 $ 1,448,618
Cost of goods sold 772,466 710,677 1,435,878 1,360,563
Gross margin $ 59,324 $ 48,588 $ 107,259 $ 88,055
Selling, general and administrative expenses 79,765 76,017 162,425 153,655
Loss from continuing operations before the following: $ (20,441) $ (27,429) $ (55,166) $ (65,600)
Restructuring and other related costs (19,996) (14,384) (41,762) (51,342)
Change in fair value of non-designated interest rate swaps 1,995 658 3,105 1,275
Other income (4,667) 6,076 (3,374) 49,373
(Loss) earnings before interest and income taxes from continuing
operations
$ (43,109) $ (35,079) $ (97,197) $ (66,294)
Interest expense and other financing costs 10,298 16,545 125,009 32,648
Loss before income taxes from continuing operations $ (53,407) $ (51,624) $ (222,206) $ (98,942)
Income taxes (13,863) (13,258) (58,056) (29,932)
Loss from continuing operations $ (39,544) $ (38,366) $ (164,150) $ (69,010)
Net earnings from discontinued operations 938,399 38,375 931,011 54,277
Net earnings (loss) $ 898,855 $ 9 $ 766,861 $ (14,733)
Attributed to:
Common shareholders $ 897,797 $ (2,454) $ 764,886 $ (17,392)
Non-controlling interest 1,058 2,463 1,975 2,659
$ 898,855 $ 9 $ 766,861 $ (14,733)
(Loss) earnings per share attributable to common shareholders:
Basic and diluted (loss) earnings per share $ 6.38 $ (0.02) $ 5.45 $ (0.12)
Basic and diluted loss per share from continuing operations $ (0.28) $ (0.27) $ (1.17) $ (0.49)
Weighted average number of shares (millions) 140.7 139.9 140.4 139.9
Consolidated Statements of Comprehensive Income
(In thousands of Canadian dollars)
(Unaudited)
Three months ended June 30, Six months ended June 30,
2014 2013 2014 2013
Net earnings (loss) $ 898,855 $ 9 $ 766,861 $ (14,733)
Other comprehensive (loss) income
Items that will not be reclassified to profit or loss:
Change in actuarial gains and losses (Net of tax of $1.2 million and
$1.0 million;
2013: $16.7 million and $36.1 million)
$ (3,545) $ 48,110 $ (2,831) $ 104,341
Total items that will not be reclassified to profit or loss $ (3,545) $ 48,110 $ (2,831) $ 104,341
Items that are or may be reclassified subsequently to profit or loss:
Change in accumulated foreign currency translation adjustment (Net of
tax of nil)
$ (560) $ 20 $ (215) $ (219)
Change in unrealized gains and losses on cash flow hedges (Net of tax of
$2.2
million and $3.0 million; 2013: $0.6 million and $0.1 million)
6,017 1,968 8,236 (147)
Total items that are or may be reclassified subsequently to profit or
loss
$ 5,457 $ 1,988 $ 8,021 $ (366)
Other comprehensive income from continuing operations $ 1,912 $ 50,098 $ 5,190 $ 103,975
Other comprehensive income from discontinued operations(i) (Net of tax
of $1.2 million and $1.3 million; 2013: $2.1 million and $4.7
million)
$ (5,429) $ 10,241 $ (569) $ 18,580
Total other comprehensive (loss) income $ (3,517) $ 60,339 $ 4,621 $ 122,555
Comprehensive income $ 895,338 $ 60,348 $ 771,482 $ 107,822
Attributed to:
Common shareholders $ 895,187 $ 56,650 $ 769,751 $ 103,165
Non-controlling interest $ 151 $ 3,698 $ 1,731 $ 4,657
(i) The above amount includes $3.6 million for the three months ended June
30, 2014 (2013: $6.4 million) and $4.4 million for the six months

ended June 30, 2014 (2013: $12.9 million) relating to actuarial gains
and losses that will not subsequently be re-classified to profit or
loss.
Consolidated Statements of Changes in Total Equity
Attributable to Common Shareholders
(In thousands of Canadian dollars)
(Unaudited)
Share
capital
Retained
earnings
Contributed
surplus
Total
accumulated
other
comprehensive
income (loss)
associated with
continuing
operations
Total
accumulated
other
comprehensive
income
associated with
assets
held for sale
Treasury
stock
Non-
controlling
interest
Total
equity
(Note 15) (Note 7)
Balance at December 31, 2013 $ 905,216 $ 602,717 $ 79,139 $ (4,593) $ $ (1,350) $ 60,863 $ 1,641,992
Net earnings 764,886 1,975 766,861
Re-classification to assets held for sale 799 (799)
Other comprehensive income (loss) (6,045) 8,021 2,889 (244) 4,621
Dividends declared ($0.08 per share) (11,271) (3,017) (14,288)
Stock-based compensation expense 19,867 19,867
Disposal of business (2,090) (59,577) (61,667)
Exercise of stock options 17,672 17,672
Modification of stock compensation plan (5,944) (16,012) (21,956)
Balance at June 30, 2014 $ 922,888 $ 1,344,343 $ 82,994 $ 4,227 $ $ (1,350) $ $ 2,353,102
Attributable to Common Shareholders
(In thousands of Canadian dollars)
(Unaudited)
Share
capital
Retained
deficit
Contributed
surplus
Total
accumulated
other
comprehensive
loss
associated with
continuing
operations
Total
accumulated
other
comprehensive
income
associated with
assets
held for sale
Treasury
stock
Non-
controlling
interest
Total
equity
Balance at December 31, 2012 $ 902,810 $ (72,701) $ 75,913 $ (13,263) $ $ (1,845) $ 67,085 $ 957,999
Net earnings (loss) (17,392) 2,659 (14,733)
Other comprehensive income (loss) 115,981 4,576 1,998 122,555
Dividends declared ($0.08 per share) (11,194) (2,542) (13,736)
Stock-based compensation expense 10,761 10,761
Exercise of stock options 176 176
Issuance of treasury stock (495) 495
Modification of stock compensation plan 3,508 3,508
Other 2,000 2,000
Balance at June 30, 2013 $ 902,986 $ 14,694 $ 91,687 $ (8,687) $ $ (1,350) $ 69,200 $ 1,068,530
Consolidated Statements of Cash Flow
(In thousands of Canadian dollars)
(Unaudited)
Three months ended June 30, Six months ended June 30,
2014 2013 2014 2013
CASH (USED IN) PROVIDED BY:
Operating activities
Net income (loss) $ 898,855 $ 9 $ 766,861 $ (14,733)
Add (deduct) items not affecting cash:
Change in fair value of biological assets 18,884 185 (21,422) 5,463
Depreciation and amortization 23,650 35,417 50,293 69,269
Stock-based compensation 11,175 5,201 19,867 10,761
Deferred income taxes 84,453 (7,444) 40,439 (22,182)
Income tax current 7,512 7,696 9,943 11,971
Interest expense and other financing costs 10,910 16,836 125,795 33,336
(Loss) gain on sale of long-term assets 398 (848) 162 (1,804)
Gain on sale of business (1,008,044) (1,007,576)
Gain on sale of assets held for sale (168) (1,736) (45,556)
Change in fair value of non-designated interest
rate swaps
(1,994) (658) (3,104) (1,275)
Change in fair value of derivative financial
instruments
(26,025) (3,457) 10,609 1,510
Impairment of assets (net of reversals) 785 675 785 5,809
Increase in pension liability 2,988 4,881 6,381 12,629
Net income taxes paid (1,762) (4,963) (8,615) (12,037)
Net settlement of financial instruments (23,631) (23,631)
Early repayment premium (76,311) (76,311)
Interest paid (19,904) (16,383) (38,229) (31,814)
Change in provision for restructuring and other
related costs
16,597 3,846 30,257 41,951
Other (33,520) (6,195) (27,970) (10,200)
Change in non-cash operating working capital (225,927) 62,431 (262,010) 41,574
Cash (used in) provided by operating activities $ (340,911) $ 97,061 $ (409,212) $ 94,672
Financing activities
Dividends paid $ (5,658) $ (5,598) $ (11,271) $ (11,194)
Dividends paid to non-controlling interest (3,017) (1,271) (24,621) (2,542)
Net increase (decrease) in long-term debt (698,664) (33) (699,014) (508)
Net drawings (payments) on the credit facility (555,000) 70,000 (255,000) 114,000
Exercise of stock options 16,722 17,672 176
Payment of financing fees (3,769) (3,769)
Other 293 293
Cash (used in) provided by financing activities $ (1,249,386) $ 63,391 $ (976,003) $ 100,225
Investing activities
Additions to long-term assets $ (78,259) $ (89,377) $ (175,931) $ (165,432)
Acquisition of business (922)
Capitalization of interest expense (2,721) (3,945) (5,504) (7,195)
Adjustment to sale of business (468)
Proceeds from sale of business 1,647,015 1,647,015
Transaction Costs
Cash associated with divested business
Proceeds from sale of long-term assets
(28,901)
(23,011)
905


1,976
(28,901)
(23,011)
3,255


6,467
Proceeds from sale of assets held for sale 9,870 6,108 67,937
Cash provided by (used in) investing activities $ 1,515,028 $ (81,476) $ 1,422,563 $ (99,145)
Increase (decrease) in cash and cash equivalents $ (75,269) $ 78,976 $ 37,348 $ 95,752
Net cash and cash equivalents, beginning of period 470,783 58,947 502,262 42,171
Net cash and cash equivalent in held for sale, beginning
of period
$ 144,096 $ $ $
Net cash and cash equivalents, end of period $ 539,610 $ 138,908 $ 539,610 $ 138,908
Net cash and cash equivalents is comprised of:
Cash and cash equivalents $ 539,610 $ 145,608 $ 539,610 $ 145,608
Bank indebtedness (7,685) (7,685)
Net cash and cash equivalents, end of period $ 539,610 $ 137,923 $ 539,610 $ 137,923
Segmented Financial Information
Three months ended June 30, Six months ended June 30,
2014 2013 2014 2013
(Restated) (Restated)
Sales
Meat Products Group $ 825,553 $ 752,471 $ 1,530,952 $ 1,430,537
Agribusiness Group(i) 6,237 67,787 12,185 137,209
Bakery Products Group(i) 225,024 397,682 567,861 766,595
Total sales $ 1,056,814 $ 1,217,940 $ 2,110,998 $ 2,334,341
Sales from discontinued operations (225,024) (458,675) (567,861) (885,723)
Sales from continuing operations $ 831,790 $ 759,265 $ 1,543,137 $ 1,448,618
Earnings before restructuring and other related costs
and other income
Meat Products Group $ (15,644) $ (11,492) $ (43,091) $ (21,944)
Agribusiness Group(i) 5,208 1,726 4,862 7,106
Bakery Products Group(i) 20,957 36,459 47,829 53,560
Non-allocated costs (10,005) 951 (16,937) (13,842)
Total earnings before restructuring and other related costs and
other income
$ 516 $ 27,644 $ (7,337) $ 24,880
Earnings before restructuring and other related costs and other
income from discontinued operations
(20,957) (55,073) (47,829) (90,480)
Earnings before restructuring and other related costs
and other income from continuing operations
$ (20,441) $ (27,429) $ (55,166) $ (65,600)
Capital expenditures
Meat Products Group $ 72,809 $ 73,062 $ 140,623 $ 139,206
Agribusiness Group(i) 1,146 5,401 1,969 7,845
Bakery Products Group(i) 7,589 10,914 17,789 18,381
$ 81,544 $ 89,377 $ 160,381 $ 165,432
Depreciation and amortization
Meat Products Group $ 18,206 $ 16,851 $ 38,187 $ 32,419
Agribusiness Group(i)
Unallocated(ii)
904
4,540
4,096
2,424
4,540
8,252
Bakery Products Group(i) 14,470 5,142 28,598
$ 23,650 $ 35,417 $ 50,293 $ 69,269
(i) The prior year results of the animal by-product recycling operations,
Fresh Pasta and Sauces businesses and Canada Bread are

included in the comparative results of the Agribusiness Group and Bakery
Products Group respectively.
As at June 30,
2014
As at March 31,
2013(i)
As at December 31,
2013
Total assets
Meat Products Group $ 1,989,717 $ 1,756,916 $ 1,823,866
Agribusiness Group(i) 219,558 274,898 195,537
Bakery Products Group(i) 1,021,971 1,169,669
Non-allocated assets 734,327 331,072 410,020
$ 2,943,602 $ 3,384,857 $ 3,599,092
Goodwill
Meat Products Group $ 428,236 $ 428,828 $ 428,236
Agribusiness Group(i) 13,845
Bakery Products Group(i) 298,932 292,562
$ 428,236 $ 741,605 $ 720,798
(i) The prior year results as at June 30, 2013 of the Agribusiness Group and
Bakery Products Group include assets and goodwill

from the animal by-product recycling operations, Fresh Pasta and Sauces,
and Canada Bread businesses, respectively
.

SOURCE Maple Leaf Foods Inc.

Investor Contact: Nick Boland,
VP Investor Relations: 416-926-2005
Media Contact: 416-926-2020