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Canada Bread Reports Results for Second Quarter 2009

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  Published in House and Home on Wednesday, July 29th 2009 at 5:35 GMT, Last Modified on 2009-07-29 05:35:23 by Market Wire
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 TORONTO, July 29 /CNW/ - Canada Bread Company, Limited (TSX: CBY) today reported its financial results for the second quarter ended June 30, 2009. - Net earnings per share of $0.89 compared to $0.26 last year - Adjusted Operating Earnings increased to $33.1 million from $12.4 million - North American bakery margins improved due to a decline in commodity prices Note: Adjusted Operating Earnings are defined as earnings from operations before restructuring and other related costs and other income. Adjusted Earnings per Share ("Adjusted EPS") are defined as basic earnings per share adjusted for the impact of restructuring and other related costs. "We are very pleased with the earnings growth we achieved in the second quarter" said Richard Lan, President and CEO. "With margins improved after the commodity price hyperinflation of last year, we are now focused on accelerating our growth through new product innovation, targeting expansion in new high growth categories and pursuing improvements that will bring increased efficiency through the supply chain." Financial Overview ------------------ Sales for the second quarter decreased by 0.3% to $435.9 million compared to $437.4 million last year due to a moderate change in mix from specialty to staple products and lower volumes in the U.S. and U.K. Earnings from operations before restructuring and other related costs and other income ("Adjusted Operating Earnings") increased to $33.1 million in the quarter compared to $12.4 million last year, while net earnings increased to $22.5 million compared to $6.5 million last year. The financial results for the second quarter 2008 were significantly below historical levels due to an unprecedented spike in input costs including flour, dairy and energy which impacted profitability. The following is a summary of Adjusted Earnings per Share: ------------------------------------------------------ ------------------ Second quarter Year to Date Per share 2009 2008 2009 2008 ------------------------------------------------------ ------------------ EPS $0.89 $0.26 $1.47 $0.74 Restructuring and other related costs $0.00 $0.04 $0.02 $0.08 ------------------------------------------------------ ------------------ Adjusted EPS (i) $0.89 $0.30 $1.49 $0.81 ------------------------------------------------------ ------------------ ------------------------------------------------------ ------------------ (i) Does not add due to rounding. Business Segment Review ----------------------- Following is a summary of Adjusted Operating Earnings by business segment: ($ millions) Second Quarter Year To Date -------------------------------------------- ---------------------------- 2009 2008 Change 2009 2008 Change ---- ---- ------ ---- ---- ------ Fresh Bakery $25.4 $12.5 103.7% $38.2 $25.1 51.9% Frozen Bakery 7.8 (0.1) n/a 16.3 6.8 139.8% -------------------------------------------- ---------------------------- Adjusted Operating Earnings (i) $33.1 $12.4 167.3% $54.5 $31.9 70.6% -------------------------------------------- ---------------------------- -------------------------------------------- ---------------------------- (i) Does not add due to rounding. Fresh Bakery (Fresh bakery products, sweet goods, sandwiches, and specialty fresh pasta and sauces) Fresh Bakery sales in the second quarter increased 0.9% to $290.3 million compared to $287.6 million in the same period last year, mainly driven by favourable sales mix. Adjusted Operating Earnings increased to $25.4 million in the second quarter compared to $12.5 million last year. The fresh bakery and pasta operations recorded improved margins as a result of lower commodity prices; however, this benefit was partly mitigated by a weaker Canadian dollar, which increased the cost of U.S. dollar priced flour and other ingredients. Frozen Bakery (North American and U.K. frozen bakery products; including frozen par-baked and specialty bakery products) Frozen Bakery sales decreased by 2.8% to $145.7 million from $149.8 million in the same period last year, due to a moderate change in mix from specialty to staple products and lower volumes. Adjusted Operating Earnings in the quarter increased to $7.8 million compared to a loss of $0.1 million last year. North American bakery operations continued to realize improved margins due to lower commodity prices, mostly wheat and fuel, and lower utility costs. Earnings from the U.K. bakery operations were largely consistent with last year. Sales of bagels were restored to levels achieved prior to the oven fire at the Rotherham plant in early 2008 and contributed to improved mix. However, margin improvement achieved in the quarter was offset by higher marketing and promotional expenses to support growth in the bagel market. Other Income ------------ In the quarter, other income was $0.8 million compared to $1.5 million last year, mostly comprised of insurance proceeds received to cover business interruption losses resulting from the oven fire in the U.K. in 2008. Other Matters ------------- On July 28, 2009, Canada Bread Company, Limited declared a dividend of $0.06 per share payable on October 1, 2009 to shareholders of record on September 8, 2009. Unless indicated otherwise, by the Company, 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". 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. 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 particular, these forward-looking statements are based on expectations concerning performance of the Company's business in general, and are based on a number of factors and assumptions including, but not limited to: the condition of the Canadian, United States and United Kingdom economies; the rate of exchange of the Canadian dollar to the U.S. dollar; 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; continued access to capital; the cost of compliance with environmental and health standards; no adverse results from ongoing litigation; no unexpected actions of domestic and foreign governments and the general assumption that none of the risks identified in the Company's Management's Discussion and Analysis 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 or implied by forward-looking statements are discussed more fully under the heading "Risk Factors" in the Company's Annual Management's Discussion and Analysis for the year ended December 31, 2008 and updated in each quarterly Management's Discussion and Analysis that are 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. Canada Bread Company Limited, which is 89.8% owned by Maple Leaf Foods Inc., is a leading manufacturer and distributor of fresh bakery products, frozen par-baked products and fresh pasta and sauces. The Company had 2008 sales of $1.7 billion and employs approximately 8,500 people at its operations across North America and in the United Kingdom. Consolidated Financial Statements (Expressed in Canadian dollars) CANADA BREAD COMPANY, LIMITED Three and six months ended June 30, 2009 and 2008 CANADA BREAD COMPANY, LIMITED 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 $ 21,124 $ 8,149 $ 11,721 Accounts receivable 68,020 89,722 57,079 Due from Maple Leaf Foods Inc. 76 - 54 Inventories 58,140 58,826 58,696 Future tax asset 5,436 19,367 5,388 Prepaid expenses 6,571 8,167 12,923 ----------------------------------------------------------------------- $ 159,367 $ 184,231 $ 145,861 Property and equipment 410,456 412,036 417,150 Other long-term assets 10,453 10,533 9,964 Goodwill 405,877 401,531 404,484 Other intangible assets 20,245 13,356 17,451 ------------------------------------------------------------------------- $ 1,006,398 $ 1,021,687 $ 994,910 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Bank indebtedness $ 9,511 $ 10,092 $ 8,894 Accounts payable and accrued charges 179,756 188,244 207,928 Due to Maple Leaf Foods Inc. - 6,213 - Dividends payable 1,525 1,525 1,525 Income and other taxes payable 12,576 18,555 10,860 Current portion of long-term debt 42 90,272 41 ----------------------------------------------------------------------- $ 203,410 $ 314,901 $ 229,248 Long-term debt 14,997 - 4,477 Future tax liability 35,726 33,492 36,043 Other long-term liabilities 8,623 13,317 16,802 Shareholders' equity 743,642 659,977 708,340 ------------------------------------------------------------------------- $ 1,006,398 $ 1,021,687 $ 994,910 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CANADA BREAD COMPANY, LIMITED Consolidated Statements of Earnings (In thousands of Canadian dollars, except share amounts) ------------------------------------------------------------------------- Three months ended Six months ended June 30, June 30, (Unaudited) 2009 2008 2009 2008 ------------------------------------------------------------------------- Sales $ 435,918 $ 437,418 $ 849,043 $ 820,287 Cost of goods sold 350,578 373,381 687,844 691,052 ------------------------------------------------------------------------- Gross margin $ 85,340 $ 64,037 $ 161,199 $ 129,235 Selling, general and administrative expenses 52,199 51,639 106,708 97,293 ------------------------------------------------------------------------- Earnings from operations before the following: $ 33,141 $ 12,398 $ 54,491 $ 31,942 Restructuring and other related costs (101) (1,419) (674) (2,692) Other income 772 1,541 2,542 1,575 ------------------------------------------------------------------------- Earnings before interest and income taxes $ 33,812 $ 12,520 $ 56,359 $ 30,825 Interest expense 1,814 2,077 3,307 3,835 ------------------------------------------------------------------------- Earnings before income taxes $ 31,998 $ 10,443 $ 53,052 $ 26,990 Income taxes 9,461 3,905 15,633 8,241 ------------------------------------------------------------------------- Net earnings $ 22,537 $ 6,538 $ 37,419 $ 18,749 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic and diluted earnings per share $ 0.89 $ 0.26 $ 1.47 $ 0.74 ------------------------------------------------------------------------- Weighted average number of shares (millions) 25.4 25.4 25.4 25.4 ------------------------------------------------------------------------- CANADA BREAD COMPANY, LIMITED Consolidated Statements of Comprehensive Income (In thousands of Canadian dollars) ------------------------------------------------------------------------- Three months ended Six months ended June 30, June 30, (Unaudited) 2009 2008 2009 2008 ------------------------------------------------------------------------- Net earnings $ 22,537 $ 6,538 $ 37,419 $ 18,749 Other comprehensive income (loss) (2,874) (794) 920 9,235 ------------------------------------------------------------------------- Comprehensive income $ 19,663 $ 5,744 $ 38,339 $ 27,984 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 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 $ 587,163 $ 528,327 Net earnings 37,419 18,749 Dividends declared ($0.12 per share; 2008: $0.12 per share) (3,050) (3,050) ------------------------------------------------------------------------- Retained earnings, end of period $ 621,532 $ 544,026 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CANADA BREAD COMPANY, LIMITED Consolidated Statements of Cash Flows (In thousands of Canadian dollars) ------------------------------------------------------------------------- Three months ended Six months ended June 30, June 30, (Unaudited) 2009 2008 2009 2008 ------------------------------------------------------------------------- CASH PROVIDED BY (USED IN): Operating activities Net earnings $ 22,537 $ 6,538 $ 37,419 $ 18,749 Add (deduct) items not affecting cash: Depreciation and amortization 14,078 14,182 28,155 27,001 Future income taxes (872) (1,350) (796) (423) Loss on sale of property and equipment 138 188 330 173 Asset impairments and change in provision for restructuring and other related costs (433) 1,175 (974) 1,917 Amortization of terminated interest rate swap 645 - 645 - Other (1,388) (207) (2,031) 1,305 Change in non-cash operating working capital (7,096) (7,285) (28,088) (34,905) ------------------------------------------------------------------------- Cash provided by operating activities $ 27,609 $ 13,241 $ 34,660 $ 13,817 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Financing activities Dividends paid (1,525) (1,525) (3,050) (3,050) Net increase (decrease) in long-term debt 1,272 13,371 10,520 (17,377) Settlement of cross-currency interest rate swap with Maple Leaf Foods Inc. (8,502) - (8,502) 80,586 ------------------------------------------------------------------------- Cash provided by (used in) financing activities $ (8,755) $ 11,846 $ (1,032) $ 60,159 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Investing activities Additions to property and equipment (9,524) (17,242) (24,366) (25,870) Proceeds from sale of property and equipment 77 517 469 532 Acquisition of business, - net of cash acquired - (8) - (43,544) Other 255 160 (945) (39) ------------------------------------------------------------------------- Cash used in investing activities $ (9,192) $ (16,573) $ (24,842) $ (68,921) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Increase in cash and cash equivalents 9,662 8,514 8,786 5,055 Net cash and cash equivalents, beginning of period 1,951 (10,457) 2,827 (6,998) ------------------------------------------------------------------------- Net cash and cash equivalents, end of period $ 11,613 $ (1,943) $ 11,613 $ (1,943) ------------------------------------------------------------------------- ------------------------------------------------------------------------- CANADA BREAD COMPANY, LIMITED Segmented Financial Information (In thousands of Canadian dollars) ------------------------------------------------------------------------- Three months ended Six months ended June 30, June 30, (Unaudited) 2009 2008 2009 2008 ------------------------------------------------------------------------- Sales Fresh Bakery $ 290,258 $ 287,638 $ 553,261 $ 524,862 Frozen Bakery 145,660 149,780 295,782 295,425 ------------------------------------------------------------------------- $ 435,918 $ 437,418 $ 849,043 $ 820,287 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Earnings from operations before restructuring and other related costs Fresh Bakery $ 25,379 $ 12,457 $ 38,197 $ 25,146 Frozen Bakery 7,762 (59) 16,294 6,796 ------------------------------------------------------------------------- $ 33,141 $ 12,398 $ 54,491 $ 31,942 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Additions to property and equipment Fresh Bakery $ 5,703 $ 9,606 $ 11,431 $ 11,173 Frozen Bakery 3,821 7,636 12,935 14,697 ------------------------------------------------------------------------- $ 9,524 $ 17,242 $ 24,366 $ 25,870 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Depreciation and amortization Fresh Bakery $ 6,911 $ 7,472 $ 14,059 $ 13,852 Frozen Bakery 7,167 6,710 14,096 13,149 ------------------------------------------------------------------------- $ 14,078 $ 14,182 $ 28,155 $ 27,001 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- As at As at As at June 30, June 30, December 31, 2009 2008 2008 ------------------------------------------------------------------------- (Unaudited) (Unaudited) Total assets Fresh Bakery $ 443,964 $ 465,250 $ 440,733 Frozen Bakery 516,077 521,853 523,843 Non-allocated assets 46,357 34,584 30,334 ------------------------------------------------------------------------- $ 1,006,398 $ 1,021,687 $ 994,910 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Goodwill Fresh Bakery $ 155,962 $ 155,616 $ 156,268 Frozen Bakery 249,915 245,915 248,216 ------------------------------------------------------------------------- $ 405,877 $ 401,531 $ 404,484 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 

For further information: Lynda Kuhn, Senior Vice-President, Communications & Consumer Relations, (416) 926-2026, [ www.canadabread.ca ]