Back to Media

Maple Leaf Foods Reports Third Quarter Financial Results

TORONTO, Oct 27, 2005 /PRNewswire-FirstCall via COMTEX News Network/ — Maple Leaf Foods Inc. (TSX:MFI)
today reported its financial results for the third quarter ended September 30,
2005.

“Our third quarter operating earnings were up a modest 5% in the face of
short term commodity market pressures, energy cost increases and significant
merger activity,” said Michael McCain, President and Chief Executive Officer.
“As a growth organization, it’s hard to describe this marginal increase in
earnings with great enthusiasm, but considering the many challenges we faced,
we are broadly satisfied with our results. The fundamentals are strong, we
continue to execute on our strategies and we are realizing continued earnings
growth in the value-added performance of our consumer products and fresh
bakery business portfolio.”

Sales for the third quarter decreased 5% to $1.6 billion compared with
$1.7 billion for the prior year, due to lower commodity prices that affected
the Company’s pork, poultry, feed and rendering businesses. Sales for the
first nine months of 2005 increased 6% to $4.9 billion, due primarily to the
acquisition of Schneider Foods in April 2004.

Earnings from operations before restructuring costs increased 5% to
$71.6 million for the third quarter and 17% to $211.4 million for the first
nine months of 2005. Comparisons of year-to-date earnings from operations
exclude $13.2 million ($8.8 million after tax) in restructuring costs incurred
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.

Net earnings for the third quarter were up 13% year over year from
$26.7 million to $30.1 million, but flat in earnings per share at $0.24 in
each year’s quarter. Year-to-date net earnings before restructuring costs were
$84.4 million ($0.67 per share), compared to $69.9 million ($0.62 per share)
last year. Including restructuring costs, year-to-date net earnings were
$76.0 million ($0.60 per share).

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
comprises 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

    ($ millions)                  Third Quarter           Year-to-Date (ii)
                             ----------------------    ----------------------
                              2005    2004   Change     2005    2004   Change
                             ------  ------  ------    ------  ------  ------
    Meat Products Group       13.3    15.2    (13%)     49.5    37.8     31%
    Agribusiness Group (i)    26.8    25.4      6%      83.0    77.2      8%
                             ----------------------   -----------------------
    Protein Value Chain       40.1    40.6     (1)%    132.5   115.0     15%
    Bakery Products Group     31.5    27.8     13%      78.9    66.1     19%
                             ----------------------   -----------------------
                              71.6    68.4      5%     211.4   181.1     17%
                             ----------------------   -----------------------
                             ----------------------   -----------------------

    (i)  Year-to-date figures include $0.2 million (2004: $4.6 million) of
         gains related to sales of poultry production quota. There are no
         gains related to sales of poultry production quota in the third
         quarters.
    (ii) Year-to-date excludes $13.2 million of restructuring costs in the
         first quarter of 2005.

    Protein Value Chain Operations
    ------------------------------

Protein Value Chain earnings declined 1% in the third quarter compared to
last year, reflecting a significant decline in primary fresh poultry processor
margins, a continuation of low primary pork processing margins resulting from
unusually high hog prices, and lower returns in the rendering commodity
businesses. These industry conditions overshadowed strong results from the
consumer products operations, and higher hog production margins. Year-to-date,
Protein Value Chain earnings are up 15% compared to last year, benefiting from
the portfolio mix and interrelationship across these operations.

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 third quarter of 2005 decreased 6% to
$1.1 billion as a result of lower underlying commodity values, while
year-to-date sales were up 11% to $3.3 billion compared to $2.9 billion last
year, due to the acquisition of Schneider Foods in April 2004.

Earnings from operations declined 13% to $13.3 million from $15.2 million
last year, while year-to-date earnings from operations increased 31% to
$49.5 million from $37.8 million in 2004. A significant decline in
industry-wide fresh poultry processor margins resulting from an increased
supply of live poultry was the primary reasons for the lower earnings. Fresh
pork operations benefited from a modest improvement in the underlying North
American pork processor spread, although the commodity processor margin
remained well below the five-year average. The consumer products operations
recorded excellent results in the quarter, supported by merger-related
benefits, lower raw material costs and an improved product mix, although the
organization has considerable merger related activity underway and yet to
complete. Results were also positively affected by increased sales of
processed meats, Schneiders Lunch Kits and a seasonal line of Maple Leaf Ready
Cooked Roasts. Increasing margins through innovation and value added
processing continues to be a major focus of the Company. In the third quarter,
Maple Leaf Fresh Grill! marinated pork, chicken and beef kebabs and cutlets
were launched with very positive market response. This line is being extended
with Maple Leaf Ready to Cook Roasts, a line of fresh, seasoned and marinated
oven-ready pork, poultry and beef roasts.

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 third quarter decreased 12% to
$204.0 million from $230.6 million last year, while year-to-date sales
declined 13% to $600.2 million from $686.0 million. This decline in sales in
the quarter was mainly due to lower market prices for feed and rendered
products as a result of lower underlying commodity prices.

Earnings from operations for the third quarter of $26.8 were up 6% over
the prior year, while year-to-date earnings from operations increased 8% to
$83.0 million from $77.2 million in 2004. Although industry hog prices
declined from the third quarter last year, earnings from the Company’s hog
growing operations increased due to lower prices for feed grains that improved
hog production margins. The Company had effective ownership of 20% of the hogs
it processed in the quarter. Earnings from rendering operations declined due
to reduced export volumes and rising energy costs.

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 third quarter increased 4% to
$346.0 million compared to $332.4 million last year, supported by increased
sales of fresh and frozen bakery products in North America. Year-to-date sales
increased 4% to $1.0 billion compared to $966.9 million in 2004. Sales growth
in the third quarter was supported by higher nutrition fresh bakery sales and
market growth in the Wholesome Harvest line of high nutrition par- baked
products including wheat, multigrain and whole grain breads and rolls.

Earnings from operations increased 13% to $31.5 million compared to
$27.8 million last year, driven by increased earnings in the fresh bakery
operations. For the first nine months of 2005, earnings from operations
increased 19% to $78.9 million from $66.1 million in 2004. An improved sales
mix of higher value nutritious products, price increases, and reduced
administrative and operating costs that benefited from Six Sigma initiatives
all contributed to earnings growth in the third quarter. This increased
profitability was partially offset by costs associated with commissioning a
new bagel plant in England and higher advertising and promotional spending to
support the New York Bagel brand in the U.K. In North America, earnings from
increased frozen bakery sales were consistent with last year, as increased
sales were offset by higher distribution costs.

Other

—–

The significant rise in energy costs, which is challenging industries
globally, also impacted Maple Leaf’s third quarter earnings and can be
expected to increase costs for the remainder of the year. Energy in particular
has an impact in the short term, before these cost increases can be passed on
in the form of price increases. In the medium term, Maple Leaf broadly has the
ability to manage these inflationary pressures through initiatives to lower
energy consumption and other operating costs and through price increases.

Cash Flow and Financing

———————–

Total debt, net of cash balances, at the end of the third quarter
declined to $1.1 billion from $1.3 billion last year due to an equity issue in
late 2004 and positive cash flow from operating activities.

Interest expense for the third quarter was $23.6 million compared to
$23.7 million last year, and $74.7 million year-to-date compared to
$65.1 million last year-to-date. For the quarter, interest declined due to
significantly lower debt balances, but this reduction was offset by higher
interest rates. In the fourth quarter of 2004, the Company re-financed a
significant portion of its debt, replacing short-term, lower rate debt with
longer-term, fixed rate notes that have higher interest rates than short-term
floating debt. While the Company paid higher interest expense compared to last
year, 85% of the debt at September 2005 was not exposed to interest rate
fluctuations.

Cash flow from operating activities for the third quarter was
$104.4 million compared to $44.6 million last year. The strong increase in
cash flow was largely due to a decrease in working capital in the third
quarter of 2005, as a result of reduced accounts receivable and increased
accounts payable balances. Cash flow from operating activities for the
year-to-date increased to $134.1 million from $92.2 million in 2004.

Expenditures on plant and equipment for the third quarter declined to
$31.1 million from $45.6 million last year, while year-to-date expenditures
were $115.9 million compared to $108.1 last year. The most significant uses of
cash flow included a new feed mill in Atlantic Canada, a biodiesel plant in
Quebec, and environmental upgrades in the rendering business.

Other Matters

————-

Maple Leaf Foods declared a dividend of $0.04 per share payable on
December 30, 2005 to shareholders of record on December 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 third 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
2:30 p.m. EDT on October 27, 2005 to review Maple Leaf Foods’ third quarter
financial results. To participate in the call, please dial 1-416-340- 2216 or
866-898-9626. For those unable to participate, playback will be made available
an hour after the event at 416-695-5800/800-408-3053 (Passcode 3158418,
followed by the number sign).

A webcast presentation of the third quarter financial results will also
be available at http://investor.mapleleaf.ca at 2:30 p.m. EDT via a link. An
archived replay of the webcast will be available following the call at each of
the above links.

Consolidated Financial Statements
            (Expressed in Canadian dollars)


            MAPLE LEAF FOODS INC.


            Three and nine months ended September 30, 2005 and 2004



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

    -------------------------------------------------------------------------
                                           As at         As at         As at
                                       September     September      December
                                        30, 2005      30, 2004      31, 2004
    -------------------------------------------------------------------------
                                      (Unaudited)   (Unaudited)
    ASSETS                                        (As restated)
                                                    (Note 1(a))
    Current assets
      Cash and cash equivalents      $    60,062   $    46,726   $   111,770
      Accounts receivable (Note 3)       308,307       337,784       292,462
      Inventories                        403,206       390,181       385,128
      Future tax asset - current          20,016         5,292         6,708
      Prepaid expenses and other
       assets                             17,677        17,179        13,218
      -----------------------------------------------------------------------
                                         809,268       797,162       809,286

    Investments in associated
     companies                            79,292        78,671        82,302

    Property and equipment             1,101,067       992,936       973,718

    Other long-term assets               234,539       212,485       230,201

    Future tax asset - non-current        28,627        28,965        26,976

    Goodwill                             848,077       809,691       816,408

    Other intangibles                     81,383        45,329        82,840

    -------------------------------------------------------------------------
                                     $ 3,182,253   $ 2,965,239   $ 3,021,731
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities
      Accounts payable and accrued
       charges                       $   614,170   $   606,296   $   621,564
      Income and other taxes payable      13,832        12,244        27,651
      Current portion of long-term
       debt                              113,616       116,110       105,910
      -----------------------------------------------------------------------
                                         741,618       734,650       755,125

    Long-term debt                     1,064,580     1,234,029     1,052,195

    Future tax liability                  61,821        42,813        29,207

    Other long-term liabilities          258,239       162,587       205,542

    Minority interest                     74,885        79,995        74,109

    Shareholders' equity                 981,110       711,165       905,553

    -------------------------------------------------------------------------
                                     $ 3,182,253   $ 2,965,239   $ 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         Nine months ended
                                      September 30,             September 30,
    (Unaudited)                  2005         2004         2005         2004
    -------------------------------------------------------------------------
                                      (As restated)             (As restated)
                                        (Note 1(a))               (Note 1(a))

    Sales                 $ 1,615,812  $ 1,698,508  $ 4,864,333  $ 4,582,729

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings from
     operations before
     restructuring costs       71,561       68,405      211,381      181,093
    Restructuring costs
     (Note 2)                       -            -       13,157            -
    -------------------------------------------------------------------------

    Earnings from operations   71,561       68,405      198,224      181,093
    Other income (Note 4)       2,365          722        4,081        2,519
    -------------------------------------------------------------------------

    Earnings before interest
     and income taxes          73,926       69,127      202,305      183,612
    Interest expense           23,624       23,731       74,714       65,101
    -------------------------------------------------------------------------

    Earnings before income
     taxes                     50,302       45,396      127,591      118,511
    Income taxes               16,395       15,670       42,132       41,437
    -------------------------------------------------------------------------

    Earnings before minority
     interest                  33,907       29,726       85,459       77,074
    Minority interest           3,846        3,016        9,413        7,214

    -------------------------------------------------------------------------
    Net earnings for the
     period               $    30,061  $    26,710  $    76,046  $    69,860
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per share
     - basic (Note 10)    $      0.24  $      0.24  $      0.60  $      0.62

    Earnings per share
     - diluted (Note 10)  $      0.23  $      0.23  $      0.58  $      0.61

    Weighted average
     number of shares
     (millions)                 127.1        113.3        126.6        113.2

    Dividends declared
     per share            $      0.04  $      0.04  $      0.12  $      0.12

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The accompanying notes to the consolidated financial statements are an
    integral part of these statements.

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

    -------------------------------------------------------------------------
                                              Nine months ended September 30,
    (Unaudited)                                            2005         2004
    -------------------------------------------------------------------------
                                                                (As restated)
                                                                  (Note 1(a))

    Retained earnings, beginning of period          $   159,129  $    74,982
    Net earnings for the period                          76,046       69,860
    Dividends declared                                  (15,222)     (13,589)

    -------------------------------------------------------------------------
    Retained earnings, end of period                $   219,953  $   131,253
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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         Nine months ended
                                      September 30,             September 30,
    (Unaudited)                  2005         2004         2005         2004
    -------------------------------------------------------------------------
                                      (As restated)             (As restated)
    CASH PROVIDED BY                    (Note 1(a))               (Note 1(a))
     (USED IN)

    Operating activities
      Net earnings        $    30,061  $    26,710  $    76,046  $    69,860
      Add (deduct) items
       not affecting cash:
        Depreciation and
         amortization          33,058       32,996       98,939       91,264
        Stock-based compen-
         sation (Note 5)        2,089        1,040        5,599        2,505
        Minority interest       3,846        3,016        9,413        7,214
        Future income taxes     9,826        5,199        9,553       17,036
        Increase in pension
         asset                 (5,488)     (13,935)     (16,318)     (25,493)
        Undistributed
         earnings of associated
         companies             (2,527)       (1,799)     (5,791)      (3,304)
        (Gain) loss on sale
         of property and
         equipment               (598)         128       (1,420)      (1,112)
        (Gain) loss on sale
         of investments           363         (492)         363         (512)
      Other                     2,197      (11,711)       2,838      (10,642)
      Change in other long-
       term receivables           399          274        6,885       (5,525)
      Change in operating
       working capital         31,129        3,132      (51,984)     (49,130)
      -----------------------------------------------------------------------
                              104,355       44,558      134,123       92,161

    Financing activities
      Dividends paid           (5,099)      (4,532)     (15,222)     (13,589)
      Dividends paid to
       minority interest         (200)        (255)        (711)        (722)
      Net increase (decrease)
       in long-term debt      (53,737)     (14,378)     (63,588)     404,960
      Increase in share
       capital                  5,232          542       13,711        1,213
      -----------------------------------------------------------------------
                              (53,804)     (18,623)     (65,810)     391,862

    Investing activities
      Additions to property
       and equipment          (31,052)     (45,615)    (115,940)    (108,108)
      Proceeds from sale
       of property and
       equipment                1,684          210        8,287        9,066
      Purchase of net assets
       of businesses (Note 7)       -      (10,338)     (10,625)    (380,899)
      Other                    (4,440)       1,936       (1,743)       3,736
      -----------------------------------------------------------------------
                              (33,808)     (53,807)    (120,021)    (476,205)

    Increase (decrease) in
     cash and cash
     equivalents               16,743      (27,872)     (51,708)       7,818

    Cash and cash
     equivalents, beginning
     of period                 43,319       74,598      111,770       38,908

    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end of
     period               $    60,062  $    46,726  $    60,062  $    46,726
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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         Nine months ended
                                      September 30,             September 30,
    (Unaudited)                  2005         2004         2005         2004
    -------------------------------------------------------------------------

    Sales
      Meat Products Group $ 1,065,760  $ 1,135,501  $ 3,257,366  $ 2,929,806
      Agribusiness Group      204,034      230,559      600,216      686,001
      Bakery Products
       Group                  346,018      332,448    1,006,751      966,922
    -------------------------------------------------------------------------
                          $ 1,615,812  $ 1,698,508  $ 4,864,333  $ 4,582,729
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings from
     operations, before
     restructuring costs
      Meat Products Group $    13,309  $    15,246  $    49,456  $    37,833
      Agribusiness Group       26,826       25,331       82,979       77,151
      Bakery Products
       Group                   31,426       27,828       78,946       66,109
    -------------------------------------------------------------------------
                          $    71,561  $    68,405  $   211,381  $   181,093
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Additions to property
     and equipment
      Meat Products Group $    13,180  $    10,445  $    46,362  $    36,361
      Agribusiness Group        7,953       15,043       26,630       25,611
      Bakery Products
       Group                    9,919       20,127       42,948       46,136
    -------------------------------------------------------------------------
                          $    31,052  $    45,615  $   115,940  $   108,108
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Depreciation and
     amortization
      Meat Products Group $    15,098  $    16,776  $    47,362  $    43,396
      Agribusiness Group        6,662        5,585       18,352       15,839
      Bakery Products
       Group                   11,298       10,635       33,225       32,029
    -------------------------------------------------------------------------
                          $    33,058  $    32,996  $    98,939  $    91,264
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                             As at        As at        As at
                                         September    September     December
                                          30, 2005     30, 2004     31, 2004
    -------------------------------------------------------------------------
                                        (Unaudited)  (Unaudited)
    Total assets
      Meat Products Group              $ 1,576,352  $ 1,435,818  $ 1,452,100
      Agribusiness Group                   648,569      606,824      597,806
      Bakery Products Group                704,066      708,472      702,137
      Non-allocated assets                 253,266      214,125      269,688
    -------------------------------------------------------------------------
                                       $ 3,182,253  $ 2,965,239  $ 3,021,731
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The accompanying notes to the consolidated financial statements are an
    integral part of these statements.



    MAPLE LEAF FOODS INC.
    Notes to Consolidated Financial Statements
    (Tabular amounts in thousands of Canadian dollars, except share amounts)

    Three and nine months ended September 30, 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 an amendment to
            Canadian accounting principles, 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 $89.7 million from equity to debt as at
            September 30, 2004. The impact of the revised standard was a
            reduction in net earnings of $3.7 million (net of tax) for the
            nine months ended September 30, 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 periods, 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 approximately
            $92.2 million and an increase in long-term debt of approximately
            $91.0 million as of September 30, 2005. The remaining impact of
            the adoption of Accounting Guideline 15 was the consolidation of
            several of the Company's investments in various hog facilities.
            The result of the consolidation of the hog facilities is an
            increase in debt of approximately $18.1 million and an increase
            in total assets of approximately $34.9 million. 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 represents the write down
        of certain capital assets that were disposed of or that have become
        impaired as a result of the restructuring and $8.2 million relates to
        provisions for employee terminations, facility exit costs, and other
        restructuring costs. Of the $8.2 million in provisions, $0.9 million
        was paid in the quarter.

    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 September 30, 2005, trade accounts
        receivable being serviced under this program amounted to
        $194.5 million (September 30, 2004: $194.3 million; December 31,
        2004: $209.7 million).

    4.  OTHER INCOME (EXPENSE)

        ---------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                        September 30,           September 30,
                                    2005        2004        2005        2004
        ---------------------------------------------------------------------

        Earnings from
         associated companies  $   1,281   $     211   $   2,639   $     699
        Gain (loss) on sale of
         property and equipment      598        (128)      1,420       1,112
        Gain (loss) from real
         estate operations           424         (49)        566        (196)
        Gain on disposal of
         investments                 354         492         363         512
        Dividends received           131           -         439           -
        Other                       (423)        196        (238)        392
        Loss on redemption of
         convertible debenture         -           -      (1,108)          -

    -------------------------------------------------------------------------
                               $   2,365   $     722   $   4,081   $   2,519
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    5.  STOCK-BASED COMPENSATION

        The stock compensation expense during the third quarter was
        $2.1 million (2004: $1.0 million) and $6.0 million year to date
        (2004: $2.5 million). The Company granted 1,300,000 stock options
        (2004: 1,265,250) at a weighted average exercise price per share of
        $16.37 and 769,750 restricted share units (2004: 776,375) in the
        quarter. The fair value of the stock options and restricted
        share units granted during the quarter was $4.2 million
        (2004: $4.1 million) and $8.6 million, respectively
        (2004: $7.6 million).

    6.  PENSIONS

        During the quarter, the Company recorded income of $3.7 million
        related to net benefit plan income including post-retirement benefit
        costs (2004: $5.8 million income). For the first nine months of 2005,
        the Company recorded $7.6 million in net benefit plan income
        (2004: $6.8 million income).

    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
        June 30, 2005, the purchase price allocation has been completed.
        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
        for the year are as follows:

        ---------------------------------------------------------------------
                                             As at                     As at
                                       December 31,                  June 30,
                                              2004   Adjustments        2005
        ---------------------------------------------------------------------
        Net working capital (deficit)    $  79,590    $  (4,443)   $  75,147
        Investments                         21,191            -       21,191
        Property and equipment             152,604       (2,976)     149,628
        Other assets                         7,689       (1,977)       5,712
        Goodwill                           291,402       28,149      319,551
        Other intangibles                   72,480            -       72,480
        Long-term debt                    (146,691)           -     (146,691)
        Future income taxes                 27,014       19,886       46,900
        Pension benefit liability          (75,993)        (250)     (76,243)
        Post employment benefit liability  (49,631)         (53)     (49,684)
        Other long-term liabilities         (1,255)     (38,336)     (39,591)
        Minority interest                   (1,737)           -       (1,737)
        ---------------------------------------------------------------------
        Total purchase cost              $ 376,663    $       -    $ 376,663
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        In 2005, the Company purchased market shares in Canada Bread Company,
        Limited (66,900 shares in January for $2.7 million in cash and
        158,400 shares in May for $7.8 million comprised of cash of
        $4.3 million and shares of $3.5 million), thereby increasing its
        ownership to 87.5%. These acquisitions resulted in an increase in
        goodwill of $6.1 million, a decrease in minority interest of
        $4.2 million, and an increase in other net assets of $0.2 million.

        In May 2005, the Company purchased the remaining 32% interest in
        Cappola Food Inc. for net proceeds of approximately $3.6 million
        resulting in additional goodwill of approximately $1.6 million.

    8.  SHARE CAPITAL

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

        ---------------------------------------------------------------------
                                   Number of shares        Share capital $
                              ------------------------- ---------------------
                                     2005         2004       2005       2004
        ---------------------------------------------------------------------
        Balance at January 1, 125,174,627  113,174,213  $ 731,291  $ 565,048
        Exercise of options       416,069       27,800      4,723        277
        Conversion of con-
         vertible debentures
         (Note 9)                 763,933            -     12,217          -
        ---------------------------------------------------------------------
        Balance at March 31,  126,354,629  113,202,013    748,231    565,325
        Exercise of options       334,755       37,600      3,756        394
        Issuance of shares(i)     214,450            -      3,495          -
        ---------------------------------------------------------------------
        Balance at June 30,   126,903,834  113,239,613    755,482    565,719
        Exercise of options       440,997       50,000      5,232        542
        ---------------------------------------------------------------------
        Balance at
         September 30,        127,344,831  113,289,613    760,714    566,261
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        (i) Consists of shares issued to purchase additional shares in
            Canada Bread Company, Limited (see Note 7)

    9.  CONVERTIBLE DEBENTURES

        On December 8, 2004, the Company issued a cash redemption notice for
        the aggregate principal amount of the convertible debentures
        outstanding of $91.3 million for cash at par plus accrued interest
        with a redemption date 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 shareholders' equity of
        $0.9 million. Accordingly, the Company paid cash of $79.8 million to
        redeem the remaining debentures outstanding, resulting in a net loss
        on redemption of $1.1 million in the first quarter of 2005.

        The remaining credit balance on the conversion feature of
        $6.4 million was recognized upon repayment of the debentures 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 September 30,
                                  2005                        2004
    -------------------------------------------------------------------------
                                Weighted                    Weighted
                                 Average                     Average
                          Net    Shares               Net    Shares
                       Earnings   (iii)     EPS    Earnings   (iii)     EPS
                      --------------------------- ---------------------------
    Basic              $ 30,061   127.1   $ 0.24   $ 26,710   113.3   $ 0.24
      Stock options(i)        -     3.2    (0.01)         -     0.5        -
      Convertible
       debt(ii)               -       -        -      1,223     6.1    (0.01)
    -------------------------------------------------------------------------
    Diluted            $ 30,061   130.3   $ 0.23   $ 27,933   119.9   $ 0.23
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                   Nine months ended September 30,
                                  2005                        2004
    -------------------------------------------------------------------------
                                Weighted                    Weighted
                                 Average                     Average
                          Net    Shares               Net    Shares
                       Earnings   (iii)     EPS    Earnings   (iii)     EPS
                      --------------------------- ---------------------------
    Basic              $ 76,046   126.6   $ 0.60   $ 69,860   113.2   $ 0.62
      Stock options(i)        -     3.7    (0.02)         -     0.5        -
      Convertible
       debt(ii)               -       -        -      3,659     6.1    (0.01)
    -------------------------------------------------------------------------
      Diluted          $ 76,046   130.3   $ 0.58   $ 73,519   119.8   $ 0.61
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

        (i)   Excludes the effect of approximately 10.3 million options and
              restricted stock units to purchase common shares for the three
              months ended September 30 (2004: 13.3 million) and 9.8 million
              options and restricted stock options to purchase common shares
              for the nine months ended September 30 (2004: 13.3 million)
              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       Nine months ended
                                        September 30,           September 30,
                                    2005        2004        2005        2004
        ---------------------------------------------------------------------
        Net interest paid      $  15,636   $  16,203   $  66,402   $  56,614
        Net income taxes paid     10,233       9,028      39,221      30,446
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

SOURCE Maple Leaf Foods Inc.

Lynda Kuhn, Vice-President, Public & Investor Relations, (416) 926-2026,
www.mapleleaf.com

http://www.prnewswire.com