Media Centre
2005/02/23

Maple Leaf Reports Strong 2004 Year-End And Fourth Quarter Financial Results

TORONTO--(BUSINESS WIRE)--Feb. 23, 2005--Maple Leaf Foods Inc. (TSX:MFI) today reported its financial results for the fourth quarter and year ended December 31, 2004.

"Our performance in 2004 reflects the underlying strength of our balanced portfolio of bakery and protein value chain operations," said Michael McCain, President and Chief Executive Officer. "Our earnings from operations for the year increased 68% and earnings per share increased from $0.36 to $0.90 on a comparable basis. We significantly strengthened our balance sheet through debt and equity refinancing. We are maintaining our disciplined focus on earnings growth, increasing our value-added product mix and successfully integrating the Schneider Foods organization into Maple Leaf."

Sales for the fourth quarter increased 40% to $1.8 billion compared to $1.3 billion last year. Sales for the year were $6.4 billion compared to $5.0 billion for 2003. The increase in 2004 sales was primarily due to the acquisition of Schneider Foods on April 5, 2004. Excluding Schneider Foods, sales increased 11% in the fourth quarter and 5% in 2004.

Net earnings for the fourth quarter were $33.2 million ($0.28 per share) compared to $27.0 million ($0.23 per share) for 2003, an increase of 23%. Net earnings for 2004 were $106.8 million ($0.90 per share) compared to $45.5 million ($0.36 per share) last year, before $11.7 million ($17.7 million pre-tax) of restructuring costs in 2003.

Operating Review

Comparisons of earnings from operations exclude $17.7 million ($11.7 million after tax) of restructuring costs in 2003. Management believes that this is the most appropriate basis on which to evaluate operating results, as restructuring costs are not representative of ongoing operating earnings. Earnings comparisons for the fourth quarter and year were also effected by income in 2003 related to sales of poultry production quota and a gain related to the wind up of a pension plan, all of which are more fully explained in previous quarterly reports and the 2003 Annual Financial Statements. The following table reflects earnings from operations by business group before these items, and forms the basis for discussion in this news release.


Earnings from Operations before Restructuring Costs

($ millions)                   Fourth Quarter              Full Year
                         --------------------------------------------
                         2004   2003   Change   2004   2003   Change
                         ----   ----   ------   ----   ----   ------
Meat Products Group      30.6   30.4       1%   68.5   14.8     363%
Agribusiness Group       21.0   13.1      59%   93.5   58.2      61%
                         -----------            -----------
Total Protein Value
 Chain                   51.6   43.5      18%  162.0   73.0     122%
Bakery Products Group    23.1   14.6      59%   89.2   58.1      53%
                         -----------            -----------
                         74.7   58.1      28%  251.2  131.1      92%
Sale of poultry
 production quota         0.6    5.5             5.2   11.8
Pension wind-up gain        -      -               -    9.5
                          ----------             ----------
Earnings from operations
 before restructuring
 costs                   75.3   63.6      18%  256.4  152.4      68%
                         ----   ----      ---  -----  -----
                         ----   ----           -----  -----

Earnings from operations for the fourth quarter increased by 28%, driven by strong improvements in both the Protein Value Chain and Bakery operations. This improvement was achieved despite the negative affect of a significant decline in pork processor and commodity poultry margins and a 4.7% increase in the value of the Canadian dollar in the fourth quarter, and reflects the benefit of a well balanced portfolio of protein and bakery operations, and the Company's improved value added sales mix.

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 fourth quarter of 2004 were $1.2 billion compared to $728.6 million in 2003, while sales for the year were $4.1 billion compared to $2.9 billion last year. The increase in sales was largely due to the contribution of Schneider Foods and increased sales from fresh pork and poultry operations. Excluding Schneider Foods sales increased 13.0% in the fourth quarter and 6.4% in 2004.

Earnings from operations for the fourth quarter were $30.6 million compared to $30.4 million last year, with the increased contribution from the Schneider Foods and the Consumer Foods processed meats operations, offset by a significant decline in industry pork and poultry processor margins. The Company's fresh pork and poultry operations performed well against these industry conditions due to improved manufacturing efficiencies and an increased valued added sales mix. Operating earnings for the year more than quadrupled to $68.5 million from $14.8 million in 2003. The processed meats operations benefited from a significant increase in sales and earnings in the fourth quarter driven by strong ham and bacon sales, and continued market growth through new product innovation. In the fourth quarter the Company launched four new varieties of Maple Leaf Fully Cooked Roasts, further solidifying its leadership in this premium convenience market. Schneider Foods benefited from continued strong growth of its recently launched Schneiders Hot n'Hearty sandwich makers and very strong Schneiders Lunchmate sales. Schneider Foods was accretive to earnings per share for the fourth quarter and the year.

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 fourth quarter of 2004 were $238.9 million compared to $234.8 million last year, while sales for the year increased to $924.9 million compared to $918.8 million in 2003. Operating earnings for the fourth quarter of 2004 increased to $21.0 million from $13.1 million last year, while operating earnings for the year increased 61% to $93.5 million from $58.2 million last year.

The improvement in profitability in the fourth quarter and for the year was primarily due to continued strong hog prices and cost reductions in the Company's hog production operations. In December 2004, the Company had an effective hog ownership interest of approximately 21%. Earnings from feed operations were largely consistent with last year, while profits from rendering operations declined from the fourth quarter last year due to reductions in the price of competing feed ingredients.

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

Bakery Products Group sales for the fourth quarter of 2004 were $345.9 million compared to $310.1 million last year, while sales for the year of $1.31 billion compared to $1.25 billion in 2003. Earnings from operations for the fourth quarter were $23.1 million compared to $14.6 million last year, while operating earnings for the year increased to $89.2 million from $58.1 million in 2003.

The Bakery Group benefited significantly from a sales mix that is weighted towards health and well-being categories. Strong sales of branded whole grain, whole wheat and specialty breads, and price increases implemented to offset rising input costs contributed to increased earnings for the quarter. Product line extensions for the quarter supporting this focus included national expansion of Dempsters Whole Grains bagels. Fresh Bakery operations realized improved operating performance and efficiencies quarter-over quarter, benefiting from the application of Six Sigma to reduce manufacturing and distribution costs. The Bakery Group also benefited from increased demand for bread products, as the low carbohydrate trend continued to abate. Frozen Bakery sales and earnings increased for the year, due to ongoing growth in the U.K. bakery operations. Earnings from North American Frozen Bakery operations declined for the fourth quarter and year due to increased distribution costs and a stronger Canadian dollar, although volumes increased for the year. The Company is launching a revolutionary new line of FroBake(R) products that complement its par-baked product line and provide a superior alternative to frozen dough by offering a product that is more moist and crusty while eliminating the need to proof the bread. FroBake(R) products will be produced on a commercial basis at the Company's bakery in Roanoke, Virginia commencing in the second quarter of 2005.

Cash Flow and Financing: Total debt, net of cash balances, of $1,046.3 million at the end of the year increased from $696.7 million last year. The primary drivers of the increase was debt incurred to purchase Schneider Foods, offset partly by the proceeds of an equity issue in the fourth quarter. Cash flow from operating activities for the fourth quarter increased to $144.2 million from $111.2 million last year. Cash flow from operating activities for the year was $239.1 million compared to $76.6 million in 2003. The increase for the year was primarily the result of higher earnings and a significant improvement in working capital performance.

Interest expense for the fourth quarter increased to $23.4 million from $18.1 million last year, while interest expense for 2004 was $83.5 million compared to $68.4 million last year. The increase for the quarter and year was primarily due to higher average debt incurred to finance the acquisition of Schneider Foods.

During the fourth quarter the Company completed three separate financing transactions that enabled the Company to refinance short-term debt incurred to acquire Schneider Foods and redeem a significant portion of its convertible debenture for cash. These transactions have provided the Company with long-term liquidity at investment grade financing rates. As a result of these transactions, the Company had invested cash balances in excess of $100 million as at December 31, 2004, of which $79.8 million was employed on January 7, 2005 to redeem convertible debentures.

As noted above, on December 9th, the Company completed $500 million in long-term debenture financings for terms of seven, ten and twelve years. The notes were issued to institutional investors in Canada and the United States at fixed interest rates between 5.21% and 6.22%.

Also on December 9th, Maple Leaf Foods completed an agreement with its principal bank syndicate to renew the Company's primary revolving credit facility. This renewal increased the maximum available amount from $635 million to $700 million, and extended the maturity from October 3, 2005 to December 6, 2007. The new bank facility is an unsecured revolving credit arrangement and bears interest based on short term interest rates.

Finally, on December 20th, the Company completed a common share offering of 11,340,000 shares at a price of $14.55 for net proceeds of approximately $160 million after costs of $5 million.

Other Matters

The Company declared a dividend of $0.04 per share payable on March 31, 2005 to shareholders of record on March 11, 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.

A web cast and conference call will be held at 2:30 p.m. (EST) on February 23, 2005. To view the webcast, please log on to http://www.mapleleaf.com/investor/default.aspx

A replay of the webcast will be available through the same webcast site later in the day, or at www.mapleleaf.com under the Investor Relations section.

To participate in the conference call, please dial in to 1-416-470-1140 or 877-793-3791.


Maple Leaf Foods Inc.
Notes to Consolidated Financial Statements
(For the quarters ended December 31, 2004 and December 31, 2003)
(Tabular amounts in thousands of Canadian dollars except
 per share amounts)

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, 2003. 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, 2003.

a) Hedging relationships

As discussed in note 2(m)(i) of the annual consolidated financial statements for the year ended December 31, 2003, the Company is in compliance with Canadian Accounting Guideline 13 relating to hedging and the implementation of Accounting Guideline 13, effective January 1, 2004, had no impact on the Company.

b) Accounting for asset retirement obligations

The application of new accounting standard, Section 3110, "Accounting for Asset Retirement Obligations" as disclosed in note 2(m)(ii) of the annual consolidated financial statements for the year ended December 31, 2003, did not have a material impact on the financial statements of the Company.

c) Revenue recognition

The Company recognizes revenues from product sales upon transfer of title to customers. Revenue is recorded at the invoice price for each product net of estimated returns. An estimate of sales incentives provided to customers is also recognized at the time of sale and is classified as cost of sales. Sales incentives include various rebate and promotional programs with the Company's customers, primarily rebates based on achievement of specified volume levels.

d) Comparative figures

Certain 2003 comparative figures have been reclassified to conform with the financial statement presentation adopted in 2004.

2. 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 December 31, 2004, trade accounts receivable amounting to $209.7 million (December 31, 2003: $186.8 million) had been sold under these programs.

3. Restructuring costs

During the first quarter of 2003, the Company recorded $7.4 million in restructuring costs ($4.8 million, net of tax), relating to plant closures and operational restructuring in the Bakery Products Group.

During the third quarter of 2003, the Company recorded $10.3 million in restructuring costs ($6.9 million, net of tax), relating to plant closures and operational restructuring of several businesses, primarily consolidation of feed mill operations in the Maritimes and reorganization of Atlantic Canada meat processing operations.


4. Other income (expense)

---------------------------------------------------------------------
---------------------------------------------------------------------
                                 Quarter ended    Twelve months ended
                                  December 31,        December 31,
                               --------------------------------------
                                2004        2003      2004      2003

Earnings (losses) from
 associated companies          $ 286       $ (57)    $ 985      $ 51
Rental income                    178          54       458       337
Dividends received                32           -       144        39
Fees related to bakery
 reorganization                    -        (283)        -    (1,832)
Loss from real estate
 operations                      (50)       (734)     (246)     (192)
Gain (loss) on sale of
 investments, net                (95)        362       417       362
Gain (loss) on sale of
 property and equipment         (220)       (229)      892      (142)

                               --------------------------------------
                               $ 131      $ (887)  $ 2,650  $ (1,377)
                               --------------------------------------
                               --------------------------------------

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

    5. Stock-based compensation

    Stock options

The fair value of the total stock options issued in a quarter is determined using the Black-Scholes option pricing model with the following weighted average assumptions:


---------------------------------------------------------------------
---------------------------------------------------------------------
                                          Quarters ended December 31,
                                           2004                  2003
---------------------------------------------------------------------

Expected option life (years)                4.2                  4.2
Risk-free interest rate                     4.2%                 4.2%
Expected annual volatility                 32.8%                35.1%
Dividend yield                              1.1%                 1.5%
---------------------------------------------------------------------
---------------------------------------------------------------------

During the quarter, the Company granted 23,750 stock options (2003: 85,000) at a weighted average price per share of $14.56 (2003: $10.85). Year-to-date, the Company granted 1,416,600 stock options (2003: 2,742,000) at a weighted average price per share of $13.09 (2003: $10.34).

The estimated fair value of the options issued during the fourth quarter of 2004 and the prior year comparable quarter was minimal and $4.5 million year-to-date (2003: $5.8 million year-to-date). The value is amortized to income over the vesting period of the related options. The charge to earnings in the quarter was $1.0 million (2003: $0.5 million) and for the year was $3.4 million (2003: $0.8 million).

Restricted stock units ("RSUs")

In the fourth quarter of 2004, the Company granted 12,625 RSUs (789,000 year-to-date) to its employees under the Company's Share Incentive Plan. Each RSU entitles the holder to receive one common share in the capital of the Company at specified future dates. The issuance of these shares is dependent upon the achievement of specified performance targets relative to an index and continued employment with the Company at the end of the third and fifth years.

The fair value of the total RSUs granted in a quarter is determined using a present value calculation with an assumed forfeiture rate. The fair value of the RSUs granted in the quarter was $0.1 million ($7.7 million year-to-date). This amount is amortized to income on a pro rata basis over the vesting periods of the related RSUs. The amortization of the fair value of the RSUs had an earnings impact in the quarter of $0.6 million ($0.7 million year-to-date).

Pro forma impact on earnings

In 2003, the Company elected to early adopt the new "Stock-based Compensation and Other Stock-based Payments" accounting rules on a prospective basis for awards granted or modified after January 1, 2003. During 2002, the Company granted 2,503,500 stock options at a weighted average price per share of $14.36. The effect of these stock option awards, had they been charged to earnings during the year on a fair value basis, would have been an expense of $3.4 million (2003: $3.5 million) with a related reduction to basic and diluted earnings per common share of $0.03 (2003: $0.03).

6. Pensions

During the quarter, the Company recorded income of $4.3 million related to net benefit plan income including post-retirement benefit costs (2003: $9.5 million). For the full year, the Company recorded $11.1 million in net benefit plan income (2003: $16.2 million). These amounts exclude gains from plan wind-up.

7. Investment in Canada Bread Company Limited ("Canada Bread")

During 2004, the Company acquired 490,400 shares (2003: 6,887,800) in Canada Bread for $18.9 million (2003: $180.8 million). This increased Maple Leaf's ownership to 86.6%. Subsequently, in January 2005, the Company purchased an additional 66,900 shares for $2.7 million, increasing its ownership to 86.9%.

8. Acquisitions

On April 5, 2004, the Company acquired Schneider Corporation ("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 December 31, 2004, a preliminary purchase price allocation (including fair value assigned to intangible assets, certain fixed assets, legal claims, investments, long-term debt, pensions, post-retirement benefits and taxes) has been completed, but the Company has not yet finalized all of its restructuring and integration plans for the operations acquired. Accordingly, the allocation of the purchase cost to the assets and liabilities acquired is still subject to change. Goodwill resulting from the above transaction is included in the total assets of the Meat Products Group.

Details of net assets acquired and purchase adjustments made in 2004 and 2003 are as follows:


---------------------------------------------------------------------
---------------------------------------------------------------------
                             Schneider                 2004     2003
                                 Foods     Other      Total    Total
---------------------------------------------------------------------
Net working capital (deficit) $ 79,590    $ (304)  $ 79,286 $ (9,915)
Investments                     21,191         -     21,191       56
Property and equipment         152,604         -    152,604   (2,524)
Other assets                     7,689         -      7,689        -
Goodwill                       291,402     1,976    293,378   17,162
Other intangibles               72,480         -     72,480        -
Long-term debt                (146,691)        -   (146,691)       -
Future income taxes             27,014         -     27,014    2,985
Pension benefit liability      (75,993)        -    (75,993)       -
Post employment benefit
 liability                     (49,631)        -    (49,631)       -
Other long-term liabilities     (1,255)        -     (1,255)       -
Minority interest               (1,737)        -     (1,737)    (762)
---------------------------------------------------------------------
Total purchase cost            376,663     1,672    378,335    7,002

Consideration:
  Cash                         376,663     6,003    382,666    7,002
  Accounts payable, accrued
   charges, and long-term debt       -     4,331      4,331        -
---------------------------------------------------------------------
                             $ 376,663  $  1,672  $ 378,335  $ 7,002
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9. Long-term debt

In December 2004, the Company completed the following re-financing transactions:

(a) In December 2004, the Company renegotiated its primary bank debt facility. The principal changes were an increase in the size of the facility from $635.0 million to $700.0 million and the maturity date was extended from October 3, 2005 to December 6, 2007.

This facility can be drawn in either Canadian or U.S. dollars and bears interest based on bankers' acceptance rates for Canadian dollar loans and LIBOR for U.S. dollar loans.

As at December 31, 2004, $66.0 million (2003: $207.8 million) of the revolving facility was utilized, of which the full amount was in respect of letters of credit and trade finance (2003: $55.8 million).

(b) In December 2004, the Company issued $500.0 million of notes payable. The notes were issued in tranches of U.S. and Canadian dollar denominations, with maturity dates from seven to twelve years and bearing interest at fixed annual coupon rates. Details of the five tranches are:


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---------------------------------------------------------------------
Principal                        Maturity Date          Annual Coupon
---------------------------------------------------------------------

US $207 million                           2011                   5.2%
US $98 million                            2014                   5.6%
US $7 million                             2016                   5.8%
CAD $105 million                          2014                   6.1%
CAD $20 million                           2016                   6.2%
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---------------------------------------------------------------------

Interest is payable semi-annually. Through the use of cross-currency swaps and forwards (note 10), the Company effectively converted: U.S. $177.0 million of debt maturing in 2011 into Canadian dollar-denominated debt of $227.4 million bearing interest at an annual fixed rate of 5.6%, U.S. $98 million of debt maturing in 2014 into Canadian dollar-denominated debt of $135.3 million bearing interest at an annual fixed rate of 6.0%, and U.S. $2 million of debt maturing in 2016 into Canadian dollar-denominated debt of $2.7 million bearing interest at an annual fixed rate of 6.1%. The financial impact of currency rate changes on the swaps are reported as other liabilities. At December 31, 2004, the swap liabilities were $31.9 million based on year-end exchange rates.

(c) At December 31, 2004, the Company had convertible debentures with a principal amount of $91.3 million outstanding. These convertible debentures previously had a maturity date of December 2005 and were recorded as equity. On December 8, 2004, the Company issued a cash redemption notice with payment due on January 7, 2005. Accordingly, as of that date, the Company reclassified $90.0 million of the convertible debentures to current debt. On January 7, 2005, certain of the debenture holders tendered $79.8 million for cash redemption and the remaining debenture holders tendered $11.5 million of the debentures for conversion to common equity (see notes 11 and 12).

The required repayments of long-term debt are as follows:


---------------------------------------------------------------------
---------------------------------------------------------------------
2005                                                     $    105,910
2006                                                           11,977
2007                                                           84,110
2008                                                           10,957
2009                                                          178,415
Thereafter                                                    766,736
---------------------------------------------------------------------
Total long-term debt                                     $  1,158,105
---------------------------------------------------------------------
---------------------------------------------------------------------

10. Derivatives

In the ordinary course of business, the Company enters into derivative financial instruments to reduce underlying fair value and cash flow risks associated with foreign currency, interest rates and commodity prices. If the Company had not entered into these contracts, operating earnings for the fourth quarter 2004 would have been higher by $5.5 million ($16.3 million year-to-date) and interest expense for the fourth quarter of 2004 would have been lower by $5.1 million ($17.7 million lower year-to-date).

In the second quarter, the Company entered into a series of interest rate and cross currency swaps to hedge the interest rate on the anticipated debt issue (see note 9). The swaps that were originally issued for notional amounts of $50.0 million and US$185.0 million, have terms of seven and ten years and fixed interest rates that range between 6.0% and 6.7%. Concurrent with the debt issue in December 2004, the Company terminated a portion of the swaps relating to the debt issue for $16.1 million. This amount will be deferred and amortized as interest expense over the life of the hedged debt (7 to 12 years). In addition, the Company modified the remaining swaps to match the coupon payments on the hedged debt. These remaining swaps have notional amounts of US$185.0 million and have terms of seven to ten years and fixed interest rates that range between 5.6% and 6.1%. As at December 31, 2004, these swaps had a market value loss of $37.5 million (2003: nil).

11. Shareholders' equity

On December 20, 2004, the Company issued 11.3 million common shares pursuant to a public offering at $14.55 per share for net proceeds to the Company of $160.0 million (after costs of $5.0 million). McCain Capital Corporation ("MCC") acquired 5,154,639 shares pursuant to this equity offering, increasing MCC share ownership as at December 31, 2004 to 33.2%.

On January 7, 2005, certain convertible debenture holders exercised their conversion right and the Company issued 763,933 common shares from Treasury at a price of $15 per share (see note 12).

12. Convertible debentures

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

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

13. Earnings Per Share

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


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---------------------------------------------------------------------
                                 Quarter ended   Twelve months ended
                                  December 31,          December 31,
                                 2004      2003       2004      2003
                             ------------------- --------------------
Numerator:
 Net earnings                $ 33,240  $ 26,988  $ 106,759  $ 35,068
 Convertible debenture charge    (817)   (1,214)    (4,476)  ( 4,851)
                             ------------------- --------------------
 Earnings available to
  common shareholders
  -  basic                     32,423    25,774    102,283    30,217

 Effect on earnings of
  dilutive securities:
  Convertible debt (ii)         1,222         -      4,882         -
                             ------------------- --------------------
 Earnings available to
  common shareholders -
  fully diluted              $ 33,645  $ 25,774  $ 107,165  $ 30,217
                             ------------------- --------------------
                             ------------------- --------------------

Denominator:
 Weighted average common
  shares outstanding (in
  millions)                   114.435   113.100    113.623   113.064
 Effect of dilutive
  securities (in millions):
  Employee stock options(i)     1.775     0.000      1.095     0.226
  Convertible debt(ii)
                                6.087     0.000      6.087     0.000
                             ------------------- --------------------
Weighted average shares -
 diluted (in millions)        122.297   113.100    120.805   113.290
                             ------------------- --------------------
                             ------------------- --------------------

(i) Excludes the effect of 11.4 million options and restricted stock
 units (2003: 5.4 million) to purchase common shares that are
 anti-dilutive.

(ii) For 2003, the convertible debt is anti-dilutive.

Earnings per share (basic)       0.28      0.23       0.90      0.27
Earnings per share (diluted)     0.28      0.23       0.89      0.27

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14. Supplemental information

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                                 Quarter ended   Twelve months ended
                                  December 31,          December 31,
                                ---------------  --------------------
                                         2004                   2004

Cash interest paid                     20,971                 77,585
Cash taxes paid                        14,464                 44,910

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Maple Leaf Foods Inc.
Consolidated Balance Sheets

---------------------------------------------------------------------
---------------------------------------------------------------------
In thousands of Canadian dollars                  As at December 31,
                                                 2004           2003
---------------------------------------------------------------------

ASSETS
Current assets:
 Cash and cash equivalents                 $  111,770      $  38,908
 Accounts receivable (Note 2)                 292,462        242,306
 Inventories                                  385,128        259,758
 Future tax asset - current                     6,708          4,854
 Prepaid expenses and other assets             13,218          9,355
                                         ----------------------------
                                              809,286        555,181
Investments in associated companies            82,302         58,189
Property and equipment                        973,718        802,332
Other long-term assets                        230,201        171,262
Future tax asset - non-current                 26,976         29,906
Goodwill                                      816,408        523,561
Other intangible assets                        82,840          8,290
                                         ----------------------------
                                          $ 3,021,731    $ 2,148,721
                                         ----------------------------
                                         ----------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
 Accounts payable and accrued charges      $  621,564      $ 501,997
 Income and other taxes payable                27,651         12,212
 Current portion of long-term debt
  (Note 9)                                    105,910          4,959
                                         ----------------------------
                                              755,125        519,168
Long-term debt (Note 9)                     1,052,195        730,627
Future tax liability                           29,207         50,397
Other long-term liabilities                   205,542         35,274
Minority interest                              74,109         70,068

Shareholders' equity (Note 11):               905,553        743,187
                                         ----------------------------
                                          $ 3,021,731    $ 2,148,721
                                         ----------------------------
                                         ----------------------------

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



Maple Leaf Foods Inc.
Consolidated Statements of Earnings

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In thousands of
 Canadian dollars,             Quarter ended     Twelve months ended
 except per share               December 31,            December 31,
 amounts                    2004        2003        2004        2003
--------------------------------------------------------------------
                      (Unaudited) (Unaudited)

Sales                $ 1,782,254 $ 1,273,450 $ 6,364,983 $ 5,041,896

Earnings from
 operations before
 restructuring costs      75,271      63,586     256,364     152,428
Restructuring costs
 (Note 3)                      -           -           -     (17,732)
                     ------------------------------------------------
Earnings from
 operations               75,271      63,586     256,364     134,696
Other income
 (expense) (Note 4)          131        (887)      2,650      (1,377)
                     ------------------------------------------------
Earnings before interest
 and income taxes         75,402      62,699     259,014     133,319
Interest expense          23,419      18,066      83,478      68,369
                     ------------------------------------------------
Earnings before income
 taxes                    51,983      44,633     175,536      64,950
Income taxes              16,042      15,591      58,862      22,879
                     ------------------------------------------------
Earnings before
 minority interest        35,941      29,042     116,674      42,071
Minority interest          2,701       2,054       9,915       7,003
                     ------------------------------------------------
Net earnings for the
 period                $  33,240   $  26,988  $  106,759   $  35,068
                     ------------------------------------------------
                     ------------------------------------------------

Earnings per share
 (basic) (Note 13)      $   0.28     $  0.23   $    0.90     $  0.27
Earnings per share
 (diluted) (Note 13)    $   0.28     $  0.23   $    0.89     $  0.27
Dividends per share
 declared                   0.04        0.04        0.16        0.16
Weighted average number
 of shares (millions)      114.4       113.1       113.6       113.1

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



Maple Leaf Foods Inc.
Consolidated Statements of Retained Earnings

--------------------------------------------------------------------
--------------------------------------------------------------------
In thousands of Canadian dollars, except per           Twelve Months
 share amounts.                                   ended December 31,
                                                      2004      2003
--------------------------------------------------------------------

Retained earnings, beginning of period            $ 74,982  $ 63,758
Net earnings for the period                        106,759    35,068
Dividends declared ($0.16 per share; 2003:
 $0.16 per share)                                  (18,136)  (18,094)
Convertible debenture charge (Note 12)              (4,476)   (4,851)
Premium on repurchase of share capital                   -      (899)
--------------------------------------------------------------------
Retained earnings, end of period                 $ 159,129  $ 74,982
--------------------------------------------------------------------
--------------------------------------------------------------------

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



Maple Leaf Foods Inc.
Consolidated Statements of Cash Flows

---------------------------------------------------------------------
---------------------------------------------------------------------
In thousands of                   Quarter ended  Twelve months ended
 Canadian dollars                  December 31,         December 31,
                               2004        2003      2004       2003
---------------------------------------------------------------------
CASH PROVIDED BY
 (USED IN):              (Unaudited) (Unaudited)

Operating activities
 Net earnings for the
  period                   $ 33,240    $ 26,988 $ 106,759   $ 35,068
 Add (deduct) items not
  affecting cash:
  Depreciation and
   amortization              34,230      26,462   125,494    101,230
  Stock based compensation
   (Note 5)                   1,590         499     4,095        849
  Minority interest           2,701       2,054     9,915      7,003
  Future income taxes        (9,051)     12,180     7,985        580
  Increase in pension asset
   (Note 6)                     516     (12,267)  (24,977)   (29,501)
  Undistributed (earnings)
   losses of associated
   companies                 (2,985)      1,776    (6,289)     1,483
  (Gain) loss on sale of
   property and equipment       220         229      (892)       142
  (Gain) loss on sale of
   investments                   95        (362)     (417)      (362)
  Other                      (6,873)     (2,686)  (17,515)    (7,648)
 Change in other long-term
  receivables                  (493)     (3,914)   (6,018)    (3,856)
 Proceeds from pension
  plan wind-up                    -      27,251         -     27,251
 Change in non-cash
  operating working capital  91,027      33,032    40,963    (55,637)
                            -----------------------------------------
                            144,217     111,242    239,103    76,602
                            -----------------------------------------

Financing activities
 Dividends paid              (4,547)     (4,527)   (18,136)  (18,094)
 Dividends paid to
  minority interest            (234)       (234)      (956)   (1,663)
 Increase in long-term debt 575,523    (117,297) 1,023,007    69,338
 Decrease in long-term
  debt                     (729,577)     (7,510)  (772,101)  (20,332)
 Convertible debenture
  interest paid              (1,369)     (1,369)    (5,478)   (5,478)
 Increase in share
  capital                   165,030         346    166,243     3,118
 Changes in deferred
  financing costs
  (Note 10)                 (17,934)     (1,657)   (17,934)   (1,657)
 Shares repurchased for
  cancellation                    -           -          -    (1,829)
 Other                          866         465      2,250     1,858
                            -----------------------------------------
                            (12,242)   (131,783)   376,895    25,261
                            -----------------------------------------

Investing activities
 Additions to property
  and equipment             (48,669)    (39,708)  (156,777) (132,607)
 Proceeds from sale of
  property and equipment      3,583         717     12,649     1,933
 Investment in Canada Bread
  (Note 7)                  (18,909)          -    (18,909)  (74,831)
 Purchase of net assets of
  businesses (Note 8)        (1,767)     (1,416)  (382,666)   (7,002)
 Change in other
  investments, net           (1,443)      1,488      1,111    (6,196)
 Other                          274      (1,535)     1,456    (1,118)
                            -----------------------------------------
                            (66,931)    (40,454)  (543,136) (219,821)
                            -----------------------------------------

Increase (decrease) in cash
 and cash equivalents        65,044     (60,995)    72,862  (117,958)
Cash and cash equivalents,
 beginning of period         46,726      99,903     38,908   156,866
                            -----------------------------------------
Cash and cash equivalents,
 end of period              111,770      38,908    111,770    38,908
                            -----------------------------------------

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



Maple Leaf Foods Inc.
Segmented Financial Information


---------------------------------------------------------------------
---------------------------------------------------------------------
In thousands of                 Quarter ended    Twelve months ended
 Canadian dollars                December 31,           December 31,
                              2004       2003       2004        2003
---------------------------------------------------------------------
Sales
 Meat Products Group   $ 1,197,449  $ 728,578 $4,127,255 $ 2,869,866
 Agribusiness Group        238,911    234,762    924,912     918,820
 Bakery Products Group     345,894    310,110  1,312,816   1,253,210
                       ---------------------- -----------------------
                       $ 1,782,254 $1,273,450 $6,364,983 $ 5,041,896
                       ---------------------- -----------------------
                       ---------------------- -----------------------

Earnings from
 operations, before
 restructuring costs(1)

 Meat Products Group    $   30,607     30,402 $   68,440   $  24,341
 Agribusiness Group         21,585     18,624     98,736      69,927
 Bakery Products Group      23,079     14,560     89,188      58,160
                       ---------------------- -----------------------
                        $   75,271  $  63,586 $  256,364   $ 152,428
                       ---------------------- -----------------------
                       ---------------------- -----------------------

Capital expenditures
 Meat Products Group    $   15,471   $  7,600 $   51,832   $  36,782
 Agribusiness Group          9,268      8,067     34,879      31,033
 Bakery Products Group      23,930     24,041     70,066      64,792
                       ---------------------- -----------------------
                        $   48,669  $  39,708 $  156,777   $ 132,607
                       ---------------------- -----------------------
                       ---------------------- -----------------------

Depreciation and
 amortization
 Meat Products Group    $   17,420  $  10,922  $  60,816   $  41,703
 Agribusiness Group          5,484      4,944     21,323      18,835
 Bakery Products Group      11,326     10,596     43,355      40,692
                       ---------------------- -----------------------
                        $   34,230  $  26,462 $  125,494   $ 101,230
                       ---------------------- -----------------------
                       ---------------------- -----------------------



---------------------------------------------------------------------
---------------------------------------------------------------------
                                                              As at
In thousands of Canadian dollars,                       December 31,
                                                 2004           2003
---------------------------------------------------------------------
Total assets
 Meat Products Group                      $ 1,452,100      $ 666,489
 Agribusiness Group                           597,806        555,693
 Bakery Products Group                        702,137        716,463
 Non-allocated assets                         269,688        210,076
                                        -----------------------------
                                          $ 3,021,731    $ 2,148,721
                                        -----------------------------
                                        -----------------------------

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

(1) Prior to 2004, the Company included the cost of production contracts with hog producers in the Meat Products Group. Management considers it more appropriate to include these impacts in the Agribusiness Group operating results. Therefore, 2003 segmented operating earnings before restructuring costs have been restated to reflect this change in presentation and make them comparable with 2004.

Maple Leaf Foods Inc. (TSX:MFI)


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

    SOURCE: Maple Leaf Foods Inc.

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