TORONTO, July 29 /CNW/ - Maple Leaf Foods Inc. (TSX: MFI) today reported
its financial results for the second quarter ended June 30, 2009.- Adjusted EPS of $0.12 compared to a loss of $0.01 last year
- Adjusted operating earnings increased 131% to $43.6 million in weak
protein market conditions
- Bakery Group margins improved as commodity input costs declined
- Prepared meats performance improving, but still below prior year
levels
- Protein restructuring contributed to improved hog production and
primary pork processing resultsNote: Adjusted Operating Earnings measures are defined as earnings from
operations before restructuring and other related costs and other income.
Adjusted Earnings per Share measures are defined as basic earnings per share
adjusted for the impact of restructuring and other related costs.
"Our stronger results reflect good performance in our bakery businesses
and steady improvement in our prepared meats business, recovering from the
product recall of last August," said Michael H. McCain, President and CEO. "We
are realizing material positive benefits from the transformation of our
protein operations over the past several years, which protected us from
challenging commodity markets in the quarter. While we have made good
progress, there remains significant value creation opportunity with very
positive effects on our future financial results."Financial Overview
------------------Sales for the second quarter decreased by 2.5% to $1,320.8 million
compared to $1,355.3 million last year due to lower volumes in primary
processing and prepared meats and lower market prices for fresh pork.
Earnings from operations before restructuring and other related costs and
other income ("Adjusted Operating Earnings") increased by 131.0% to $43.6
million compared to $18.9 million last year. Adjusted Operating Earnings were
higher in the second quarter principally due to higher margins in the Bakery
Products Group as input costs improved, operational improvements and good
sales mix in primary processing and the benefits of restructuring in both hog
and fresh pork operations. Offsetting these improvements was the performance
of the prepared meats business following the recall. Included in earnings in
the second quarter is a $6.3 million mark-to-market loss on foreign currency
contracts, expiring in the second quarter, that were entered into to fix the
value of U.S.-denominated debt balances.Following is a summary of Adjusted EPS:
Second Quarter Year-to-date
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2009 2008 2009 2008
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Basic EPS $0.04 $(0.07) $0.06 $(0.07)
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Restructuring and other related
costs 0.08 0.07 0.11 0.11
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Adjusted EPS(i) $0.12 $(0.01) $0.17 $0.03
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(i) Table does not add due to rounding.
Business Segment Review
-----------------------
Following is a summary of Adjusted Operating Earnings by business
segment:
Second Quarter Year-to-date
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($ thousands) 2009 2008 2009 2008
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Meat Products Group $1,683 $5,718 $13,034 $30,730
Agribusiness Group 16,311 7,596 18,456 4,816
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Protein Group 17,994 13,314 31,490 35,546
Bakery Products Group 27,984 8,671 47,509 25,828
Non-allocated Costs(i) (2,337) (3,095) (3,759) (9,386)
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Adjusted Operating Earnings $43,641 $18,890 $75,240 $51,988
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(i) Non-allocated costs comprise costs related to systems conversion and
consulting fees. Management believes that not allocating these costs
provides a more comparable assessment of segmented operating results.
Meat Products Group
-------------------
(value-added prepared meats; chilled meal entrees and lunch kits; value-
added fresh pork, poultry and turkey products)Adjusted Operating Earnings in the Meat Products Group were $1.7 million
in the second quarter of 2009 compared to $5.7 million last year. Although
gross margins on prepared meat products improved compared to the first quarter
of 2009 as the Company reduced its investment in trade spending and
promotions, higher raw material costs resulted in lower earnings compared to
the same period last year as the Company was not able to increase prices in a
business recovery environment. Lower earnings in prepared meats were partly
mitigated by strong results in primary pork processing as the Company
continued to benefit from the restructuring of its primary pork processing
operations, as the Brandon and Winnipeg operations are running efficiently and
at lower costs compared to last year. In addition, improved sales mix and a
weaker Canadian dollar benefited earnings in pork processing despite poor
industry market conditions. Earnings from the Company's poultry operations
were largely consistent compared to last year.Agribusiness Group
------------------
(hog production and animal by-products recycling)Adjusted Operating Earnings for the Agribusiness Group in the second
quarter of 2009 increased to $16.3 million from $7.6 million last year.
Despite extremely challenging market conditions, Agribusiness Group results
improved following the sale or exit of non-core hog production operations in
Ontario as part of the Company's protein restructuring, and operational
improvements in core operations in Manitoba. The Company owned approximately
215,000 hogs in the quarter, representing approximately 20% of the supply into
the Brandon processing plant. Results for the second quarter also included
$3.0 million (2008: $0.2 million) in government support to compensate hog
producers for losses in prior years. Results from rendering operations were
strong but down from the prior year period as volumes and commodity prices
declined.Bakery Products Group
---------------------
(fresh and frozen branded value-added bakery products, including frozen
par-baked bakery products, sandwiches and specialty pasta and sauces).Adjusted Operating Earnings increased to $28.0 million in the second
quarter compared to $8.7 million last year due to declines in commodity costs
that improved margins. This result for 2009 compares to a significantly
reduced prior year quarter when extremely sharp spikes in wheat, dairy and
fuel costs severely impacted profitability. In the Canadian bakery operations,
lower input costs were partly offset by a weaker Canadian dollar that
increased the cost of U.S. dollar priced flour. In the frozen bakery business,
the benefit of lower commodity costs was partly offset by an unfavourable
sales mix shift from specialty to lower margin staple products. Earnings from
the U.K. bakery operations were largely consistent with last year, although
the economic recession in the U.K. has adversely affected sales mix.Other Income
------------Other income for the quarter was $1.8 million (2008: $1.9 million),
mostly comprising insurance proceeds for business interruption losses in the
U.K. bakery business and the disposal of investments.Other Matters
-------------On December 16, 2008 the Company issued 7,368,421 subscription receipts
for proceeds of $70 million. The Company's two largest shareholders purchased
a majority of the units: the Ontario Teachers Pension Plan Board ("Ontario
Teachers") 5,484,784 units for $52.1 million and McCain Capital Corporation
("MCC") 1,694,737 units for $16.1 million. Pursuant to the terms of the
offering, the Company had the option to return the subscription proceeds or
issue common shares in satisfaction of the subscription receipts. As required
under the Subscription Receipt Agreement, a Special Committee of independent
directors was formed to evaluate the Company's alternatives and take
independent advice. On July 28, 2009, it approved Management's recommendation
that the Company issue 7,368,421 common shares on August 4, 2009 in
satisfaction of the subscription receipts. This decision reflects the
Company's approach to ensuring that it maintains an appropriate mix of equity
and debt in its capital structure and that these levels are maintained over
time.
The Company has been advised by Ontario Teachers and MCC that Ontario
Teachers has delivered notice to MCC to terminate, effective June 30, 2010,
the shareholder agreement that has existed between them since 2001. The
Company had been advised and previously reported that the agreement provides
that the board of directors of the Company will consist of three nominees of
MCC, two nominees of Ontario Teachers, the Chief Executive Officer of the
Company and seven independent directors to be mutually agreed to by MCC and
Ontario Teachers. Accordingly, absent earlier termination or amendment by the
parties, the shareholders agreement will no longer be effective after June 30,
2010.
On July 28, 2009 Maple Leaf Foods Inc. declared a dividend of $0.04 per
share payable on September 30, 2009 to shareholders of record on September 8,
2009. Unless indicated otherwise in writing at or before the time the dividend
is paid, each dividend paid by the Corporation in 2009 or a subsequent year is
an eligible dividend for the purposes of the "Enhanced Dividend Tax Credit
System".
An investor presentation related to the Company's second quarter
financial results is available at www.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 July 29, 2009 to review Maple Leaf Foods' second
quarter financial results. To participate in the call, please dial
416-641-6111 or 866-696-5911. For those unable to participate, playback will
be made available an hour after the event at 416-695-5800/800-408-3053
(Passcode 3783726 followed by the number sign).
A webcast presentation of the second quarter financial results will also
be available at http://investor.mapleleaf.ca via a link:
http://events.startcast.com/events6/91/C0011/Default.aspx
The Company's full financial statements and related Management's
Discussion and Analysis are available for download on the Company's website.Forward-Looking Statements
--------------------------This document contains, and the Company's oral and written public
communications often contain, forward-looking statements that are based on
current expectations, estimates, forecasts and projections about the
industries in which the Company operates and beliefs and assumptions made by
the Management of the Company. Such statements include, but are not limited
to, statements with respect to objectives and goals, as well as statements
with respect to beliefs, plans, objectives, expectations, anticipations,
estimates and intentions. Specific statements include, but are not limited to,
statements with respect to expectations concerning the ongoing nature of
restructuring benefits in primary pork processing and hog production,
expectations regarding earnings potential in the prepared meats business, and
expectations concerning the impact of the economic recession on the Company's
operations. Words such as "expect," "anticipate," "intend," "attempt," "may,"
"will," "plan," "believe," "seek," "estimate," and variations of such words
and similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future performance and
involve assumptions and risks and uncertainties that are difficult to predict.
In addition, expectations concerning performance of the Company's
business in general are based on a number of factors and assumptions
including, but not limited to: the condition of the Canadian, United States,
United Kingdom and Japanese economies; the rate of exchange of the Canadian
dollar to the U.S. dollar and Japanese yen; expected recovery of sales
following the product recall; the availability and prices of raw materials,
energy and supplies; product pricing; the availability of insurance; the
competitive environment and related market conditions; improvement of
operating efficiencies whether as a result of the protein business
transformation or otherwise; continued access to capital; the cost of
compliance with environmental and health standards; no adverse results from
ongoing litigation that would not be covered by insurance; no unexpected
actions of domestic and foreign governments and the general assumption that
none of the risks identified under "Risk Factors" in the Company's Annual
Management's Discussion and Analysis for the year ended December 31, 2008 will
materialize. All of these assumptions have been derived from information
currently available to the Company including information obtained by the
Company from third-party sources. These assumptions may prove to be incorrect
in whole or in part. In addition, actual results may differ materially from
those expressed, implied or forecasted in such forward looking-statements,
which reflect the Company's expectations only as of the date hereof.
Factors that could cause actual results or outcomes to differ materially
from the results expressed, implied or forecasted by forward-looking
statements are discussed more fully in the Company's Annual Management's
Discussion and Analysis for the year ended December 31, 2008 including the
section entitled "Risk Factors" that is available on SEDAR at www.sedar.com.
The Company does not intend to, and the Company disclaims any obligation to,
update any forward-looking statements, whether written or oral, or whether as
a result of new information, future events or otherwise except as required by
law.
Maple Leaf Foods Inc. is a leading food processing company, headquartered
in Toronto, Canada. The Company employs approximately 24,000 people at its
operations across Canada and in the United States, the United Kingdom, and
Asia. The Company had sales of $5.2 billion in 2008.Consolidated Financial Statements
(Expressed in Canadian dollars)
MAPLE LEAF FOODS INC.
Three and six months ended June 30, 2009 and 2008
MAPLE LEAF FOODS INC.
Consolidated Balance Sheets
(In thousands of Canadian dollars)
-------------------------------------------------------------------------
As at As at As at
June 30, June 30, December 31,
2009 2008 2008
-------------------------------------------------------------------------
(Unaudited) (Unaudited)
Assets
Current assets
Cash and cash
equivalents $ 207,795 $ 16,419 $ 365,518
Accounts receivable 183,238 239,596 139,144
Inventories 388,006 388,746 377,414
Income and other taxes
recoverable 25,922 - 20,971
Future tax asset 24,763 39,886 19,787
Prepaid expenses and other
assets 42,356 23,922 32,289
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$ 872,080 $ 708,569 $ 955,123
Property and equipment 1,159,897 1,172,268 1,169,435
Other long-term assets 331,966 315,079 329,070
Future tax asset 23,953 39,011 24,854
Goodwill 877,678 856,758 876,261
Other intangible assets 101,281 93,263 97,358
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$ 3,366,855 $ 3,184,948 $ 3,452,101
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Liabilities and Shareholders' Equity
Current liabilities
Bank indebtedness $ 9,511 $ 10,092 $ 8,894
Accounts payable and
accrued charges 528,190 534,754 600,924
Income and other taxes
payable - 7,243 -
Current portion of
long-term debt 375,508 12,251 179,244
Other current liabilities 51,355 - 28,456
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$ 964,564 $ 564,340 $ 817,518
Long-term debt 939,808 1,089,793 1,200,224
Future tax liability 45,787 80,529 37,903
Other long-term liabilities 168,905 247,530 179,039
Non-controlling interest 77,372 81,586 74,447
Shareholders' equity 1,170,419 1,121,170 1,142,970
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$ 3,366,855 $ 3,184,948 $ 3,452,101
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MAPLE LEAF FOODS INC.
Consolidated Statements of Earnings
(In thousands of Canadian dollars, except share amounts)
-------------------------------------------------------------------------
Three months ended June 30, Six months ended June 30,
(Unaudited) 2009 2008 2009 2008
-------------------------------------------------------------------------
Sales $ 1,320,803 $ 1,355,301 $ 2,600,102 $ 2,558,564
Cost of goods
sold 1,152,600 1,204,824 2,264,687 2,252,161
-------------------------------------------------------------------------
Gross margin $ 168,203 $ 150,477 $ 335,415 $ 306,403
Selling,
general and
administrative
expenses 124,562 131,587 260,175 254,415
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Earnings from
operations
before the
following: $ 43,641 $ 18,890 $ 75,240 $ 51,988
Restructuring
and other
related costs (13,852) (11,618) (19,186) (19,340)
Other income 1,789 1,933 3,468 1,918
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Earnings from
operations before
interest and
income taxes $ 31,578 $ 9,205 $ 59,522 $ 34,566
Interest expense 20,764 21,868 42,107 43,531
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Earnings (loss)
from operations
before income
taxes $ 10,814 $ (12,663) $ 17,415 $ (8,965)
Income taxes 3,622 (4,079) 5,779 (1,959)
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Earnings (loss)
from operations
before
non-controlling
interest $ 7,192 $ (8,584) $ 11,636 $ (7,006)
Non-controlling
interest 2,293 769 3,866 2,357
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Net earnings
(loss) $ 4,899 $ (9,353) $ 7,770 $ (9,363)
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Basic and
diluted
earnings
(loss) per
share $ 0.04 $ (0.07) $ 0.06 $ (0.07)
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Weighted
average number
of shares
(millions) 126.7 126.9 126.7 127.1
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MAPLE LEAF FOODS INC.
Consolidated Statements of Comprehensive Income (Loss)
(In thousands of Canadian dollars)
-------------------------------------------------------------------------
Three months ended June 30, Six months ended June 30,
(Unaudited) 2009 2008 2009 2008
-------------------------------------------------------------------------
Net earnings
(loss) $ 4,899 $ (9,353) $ 7,770 $ (9,363)
Other comprehensive
income (loss)
Change in
accumulated
foreign
currency
translation
adjustment 8,527 1,507 7,180 8,234
Change in
unrealized
derivative
loss on cash
flow hedges 8,300 (1,593) 12,821 (4,639)
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$ 16,827 $ (86) $ 20,001 $ 3,595
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Comprehensive
income (loss) $ 21,726 $ (9,439) $ 27,771 $ (5,768)
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Consolidated Statements of Retained Earnings
(In thousands of Canadian dollars, except per share amounts)
-------------------------------------------------------------------------
Six months ended June 30,
(Unaudited) 2009 2008
-------------------------------------------------------------------------
Retained earnings, beginning of period $ 314,649 $ 378,604
Net earnings (loss) 7,770 (9,363)
Adoption of new accounting standard (207) -
Dividends declared ($0.08 per share;
2008: $0.08 per share) (10,130) (10,448)
Premium on shares repurchased for cancellation - (5,515)
Premium on shares issued from Restricted
Share Unit Trust - (822)
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Retained earnings, end of period $ 312,082 $ 352,456
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MAPLE LEAF FOODS INC.
Consolidated Statements of Cash Flows
(In thousands of Canadian dollars)
-------------------------------------------------------------------------
Three months ended June 30, Six months ended June 30,
(Unaudited) 2009 2008 2009 2008
-------------------------------------------------------------------------
Cash provided by (used in):
Operating activities
Net earnings
(loss) $ 4,899 $ (9,353) $ 7,770 $ (9,363)
Add (deduct)
items not
affecting
cash:
Depreciation
and
amortization 38,910 38,637 77,278 73,709
Stock-based
compensation 4,547 3,923 9,113 8,186
Non-controlling
interest 2,293 769 3,866 2,357
Future income
taxes (906) (8,944) (2,844) (9,248)
Loss on sale
of property
and equipment 55 37 164 118
Gain on sale
of investments (501) - (501) -
Amortization of
terminated
interest rate
swap 503 1,371 1,101 4,582
Change in fair
value of
derivative
financial
instruments 2,565 1,923 (10,242) (266)
Decrease (increase)
in net pension
asset 704 (5,031) 1,099 (11,062)
Asset impairments
and change in
provision for
restructuring and
other related
costs 10,250 7,381 12,904 11,344
Other (9,728) (3,308) (5,327) (289)
Change in
non-cash
operating
working
capital (63,077) (87,636) (142,698) (111,905)
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Cash used in
operating
activities $ (9,486) $ (60,231) $ (48,317) $ (41,837)
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Financing
activities
Dividends paid (5,064) (5,262) (10,130) (10,448)
Dividends paid
to non-
controlling
interest (156) (184) (361) (416)
Net increase
(decrease) in
long-term debt (32,450) 103,810 (33,195) 221,334
Increase in
share capital - 1,513 - 3,110
Purchase of
treasury stock - (4,992) - (11,341)
Shares repurchased
for cancellation - (11,814) - (11,814)
Other 2,511 (1,816) 2,728 (1,301)
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Cash provided by
(used in)
financing
activities $ (35,159) $ 81,255 $ (40,958) $ 189,124
-------------------------------------------------------------------------
Investing
activities
Additions to
property and
equipment (36,015) (62,654) (93,687) (108,364)
Proceeds from
sale of property
and equipment 22,780 2,524 23,393 10,545
Proceeds from
sale of
investments 1,540 - 1,540 -
Acquisition of
businesses
- net of cash
acquired - (87) - (61,659)
Other 239 210 (311) 141
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Cash used in
investing
activities $ (11,456) $ (60,007) $ (69,065) $ (159,337)
-------------------------------------------------------------------------
Decrease in
cash and cash
equivalents (56,101) (38,983) (158,340) (12,050)
Net cash and cash
equivalents,
beginning of
period 254,385 45,310 356,624 18,377
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Net cash and
cash
equivalents,
end of period $ 198,284 $ 6,327 $ 198,284 $ 6,327
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MAPLE LEAF FOODS INC.
Segmented Financial Information
(In thousands of Canadian dollars)
-------------------------------------------------------------------------
Three months ended June 30, Six months ended June 30,
(Unaudited) 2009 2008 2009 2008
-------------------------------------------------------------------------
Sales
Meat
Products
Group $ 830,413 $ 856,638 $ 1,652,607 $ 1,619,183
Agribusiness
Group 54,977 61,567 99,565 120,161
Bakery
Products
Group 435,413 437,096 847,930 819,220
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$ 1,320,803 $ 1,355,301 $ 2,600,102 $ 2,558,564
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Earnings from
operations before
restructuring
and other related
costs and other
income
Meat
Products
Group $ 1,683 $ 5,718 $ 13,034 $ 30,730
Agribusiness
Group 16,311 7,596 18,456 4,816
Bakery
Products
Group 27,984 8,671 47,509 25,828
Non-allocated
costs (2,337) (3,095) (3,759) (9,386)
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$ 43,641 $ 18,890 $ 75,240 $ 51,988
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-------------------------------------------------------------------------
Capital expenditures
Meat
Products
Group $ 20,711 $ 38,756 $ 51,960 $ 71,851
Agribusiness
Group 2,141 4,077 5,189 6,976
Bakery
Products
Group 13,163 19,821 36,538 29,537
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$ 36,015 $ 62,654 $ 93,687 $ 108,364
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Depreciation
and amortization
Meat
Products
Group $ 20,033 $ 19,552 $ 39,611 $ 37,578
Agribusiness
Group 4,037 4,333 8,071 8,167
Bakery
Products
Group 14,840 14,752 29,596 27,964
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$ 38,910 $ 38,637 $ 77,278 $ 73,709
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As at As at As at
June 30, June 30, December 31,
2009 2008 2008
-------------------------------------------------------------------------
(Unaudited) (Unaudited)
Total assets
Meat Products Group $ 1,707,809 $ 1,716,978 $ 1,677,671
Agribusiness Group 308,508 251,004 318,387
Bakery Products Group 917,383 901,740 922,158
Non-allocated assets 433,155 315,226 533,885
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$ 3,366,855 $ 3,184,948 $ 3,452,101
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Goodwill
Meat Products Group $ 450,432 $ 450,930 $ 450,431
Agribusiness Group 14,136 12,922 14,445
Bakery Products Group 413,110 392,906 411,385
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$ 877,678 $ 856,758 $ 876,261
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