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Maple Leaf Foods Reports Results for Second Quarter 2010

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  Published in House and Home on Thursday, July 29th 2010 at 6:10 GMT by Market Wire
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 - Adjusted Operating Earnings increased 20% to $52.2 million from $43.6 million last year. - Adjusted EPS increased 42% to $0.17 compared to $0.12 last year. - Net earnings, which include a non-cash pre-tax charge of $20.7 million due to the change in fair value of long-term interest rate swaps, were $3.0 million compared to $4.9 million last year. 

 Financial Overview ------------------ 

 Business Segment Review ----------------------- Following is a summary of sales by business segment: ------------------------------------------------------------------------- Second Quarter Year-to-Date ------------------------------------------- ($ millions) 2010 2009 2010 2009 ------------------------------------------------------------------------- Meat Products Group $815.7 $830.4 $1,583.9 $1,652.6 Agribusiness Group 54.1 55.0 95.9 99.6 ------------------------------------------------------------------------- Protein Group $869.8 $885.4 $1,679.8 $1,752.2 Bakery Products Group 401.6 435.4 783.1 847.9 ------------------------------------------------------------------------- Sales $1,271.4 $1,320.8 $2,462.9 $2,600.1 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 

 Second Quarter Year-to-date ------------------------------------------------------------------------- ($ thousands) 2010 2009 2010 2009 ------------------------------------------------------------------------- Meat Products Group $14,443 $1,683 $28,656 $13,034 Agribusiness Group 13,838 16,311 20,298 18,456 ------------------------------------------------------------------------- Protein Group $28,281 $17,994 $48,954 $31,490 Bakery Products Group 26,239 27,984 42,983 47,509 Non-allocated Costs(i) (2,288) (2,337) (5,808) (3,759) ------------------------------------------------------------------------- Adjusted Operating Earnings $52,232 $43,641 $86,129 $75,240 ------------------------------------------------------------------------- (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 ------------------- 

 Agribusiness Group ------------------ 

 Bakery Products Group --------------------- 

 Other Matters ------------- 

 Forward-Looking Statements -------------------------- 

 ------------------------------------------------------------------------- ($ thousands) Three months ended Six months ended June 30, June 30, ------------------------------------------------------------------------- 2010 2009 2010 2009 ------------------------------------------------------------------------- Net earnings $ 2,967 $ 4,899 $ 11,721 $ 7,770 Non-controlling interest 2,104 2,293 3,406 3,866 Income Taxes 2,549 3,622 6,629 5,779 ------------------------------------------------------------------------- Earnings from operations before income taxes $ 7,620 $ 10,814 $ 21,756 $ 17,415 ------------------------------------------------------------------------- Interest expense 16,613 20,764 32,740 42,107 ------------------------------------------------------------------------- Restructuring and other related costs 7,453 13,852 11,416 19,186 ------------------------------------------------------------------------- Change in the fair value of non-designated interest rate swaps 20,748 - 20,748 - ------------------------------------------------------------------------- Other income (202) (1,789) (531) (3,468) ------------------------------------------------------------------------- Adjusted Operating Earnings $ 52,232 $ 43,641 $ 86,129 $ 75,240 ------------------------------------------------------------------------- 

 ------------------------------------------------------------------------- ($ per share) Three months ended Six months ended June 30, June 30, ------------------------------------------------------------------------- 2010 2009 2010 2009 ------------------------------------------------------------------------- Basic Earnings per Share $ 0.02 $ 0.04 $ 0.09 $ 0.06 ------------------------------------------------------------------------- Restructuring and other related costs(i) 0.04 0.08 0.06 0.11 ------------------------------------------------------------------------- Change in the fair value of non-designated interest rate swaps 0.11 - 0.11 - ------------------------------------------------------------------------- Adjusted Earnings per Share(ii) $ 0.17 $ 0.12 $ 0.26 $ 0.17 ------------------------------------------------------------------------- (i) Includes per share impact of restructuring and other related costs, net of tax and non-controlling interest. (ii) Includes per share impact of the change in fair value of non- designated interest rate swaps, net of tax. Consolidated Interim Financial Statements (Expressed in Canadian dollars) MAPLE LEAF FOODS INC. Six months ended June 30, 2010 and 2009 MAPLE LEAF FOODS INC. Consolidated Balance Sheets (In thousands of Canadian dollars) ------------------------------------------------------------------------- As at As at As at June 30, June 30, December 31, 2010 2009 2009 ------------------------------------------------------------------------- (Unaudited) (Unaudited) ASSETS Current assets Cash and cash equivalents $ 24,772 $ 207,795 $ 29,316 Accounts receivable 170,857 183,238 200,317 Inventory 374,695 388,006 349,909 Income and other taxes recoverable 21,478 25,922 18,067 Future tax asset 8,706 24,763 4,301 Prepaid expenses and other assets 24,092 42,356 15,328 ----------------------------------------------------------------------- $ 624,600 $ 872,080 $ 617,238 Property and equipment 1,129,883 1,159,897 1,135,056 Other long-term assets 336,791 331,966 328,063 Future tax asset 46,614 23,953 22,116 Goodwill 855,634 877,678 857,278 Other intangible assets 96,517 101,281 97,713 ------------------------------------------------------------------------- $ 3,090,039 $ 3,366,855 $ 3,057,464 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Bank indebtedness $ 8,071 $ 9,511 $ 4,247 Accounts payable and accrued charges 486,242 528,190 489,182 Current portion of long-term debt 466,950 375,508 206,147 Other current liabilities 16,006 51,355 37,837 ----------------------------------------------------------------------- $ 977,269 $ 964,564 $ 737,413 Long-term debt 582,670 939,808 834,557 Future tax liability 48,155 45,787 27,851 Other long-term liabilities 204,280 168,905 187,523 Non-controlling interest 82,353 77,372 81,070 Shareholders' equity 1,195,312 1,170,419 1,189,050 ------------------------------------------------------------------------- $ 3,090,039 $ 3,366,855 $ 3,057,464 ------------------------------------------------------------------------- ------------------------------------------------------------------------- MAPLE LEAF FOODS INC. Consolidated Statements of Earnings (In thousands of Canadian dollars, except share amounts) ------------------------------------------------------------------------- Three months ended Six months ended June 30, June 30, (Unaudited) 2010 2009 2010 2009 ------------------------------------------------------------------------- Sales $ 1,271,366 $ 1,320,803 $ 2,462,873 $ 2,600,102 Cost of goods sold 1,090,362 1,152,600 2,121,233 2,264,687 ------------------------------------------------------------------------- Gross margin $ 181,004 $ 168,203 $ 341,640 $ 335,415 Selling, general and administrative expenses 128,772 124,562 255,511 260,175 ------------------------------------------------------------------------- Earnings from operations before the following: $ 52,232 $ 43,641 $ 86,129 $ 75,240 Restructuring and other related costs (7,453) (13,852) (11,416) (19,186) Change in fair value of non-designated interest rate swaps (20,748) - (20,748) - Other income 202 1,789 531 3,468 ------------------------------------------------------------------------- Earnings from operations before interest and income taxes $ 24,233 $ 31,578 $ 54,496 $ 59,522 Interest expense 16,613 20,764 32,740 42,107 ------------------------------------------------------------------------- Earnings from operations before income taxes $ 7,620 $ 10,814 $ 21,756 $ 17,415 Income taxes 2,549 3,622 6,629 5,779 ------------------------------------------------------------------------- Earnings from operations before non-controlling interest $ 5,071 $ 7,192 $ 15,127 $ 11,636 Non-controlling interest 2,104 2,293 3,406 3,866 ------------------------------------------------------------------------- Net earnings $ 2,967 $ 4,899 $ 11,721 $ 7,770 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic earnings per share $ 0.02 $ 0.04 $ 0.09 $ 0.06 Diluted earnings per share $ 0.02 $ 0.04 $ 0.08 $ 0.06 ------------------------------------------------------------------------- Weighted average number of shares (millions) 135.2 126.7 135.0 126.7 ------------------------------------------------------------------------- MAPLE LEAF FOODS INC. Consolidated Statements of Comprehensive Income (In thousands of Canadian dollars) ------------------------------------------------------------------------- Three months ended Six months ended June 30, June 30, (Unaudited) 2010 2009 2010 2009 ------------------------------------------------------------------------- Net earnings $ 2,967 $ 4,899 $ 11,721 $ 7,770 Other comprehensive income (loss) Change in accumulated foreign currency translation adjustment 12,877 8,527 (5,239) 7,180 Change in unrealized derivative loss on cash flow hedges 823 8,300 2,165 12,821 ------------------------------------------------------------------------- $ 13,700 $ 16,827 $ (3,074) $ 20,001 ------------------------------------------------------------------------- Comprehensive income $ 16,667 $ 21,726 $ 8,647 $ 27,771 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Consolidated Statements of Retained Earnings (In thousands of Canadian dollars) ------------------------------------------------------------------------- Six months ended June 30, (Unaudited) 2010 2009 ------------------------------------------------------------------------- Retained earnings, beginning of period $ 344,839 $ 314,649 Net earnings 11,721 7,770 Adoption of new accounting standard - (207) Dividends declared ($0.08 per share; 2009: $0.08 per share) (10,811) (10,130) Premium on shares issued from Restricted Share Unit Trust (2,665) - ------------------------------------------------------------------------- Retained earnings, end of period $ 343,084 $ 312,082 ------------------------------------------------------------------------- ------------------------------------------------------------------------- MAPLE LEAF FOODS INC. Consolidated Statements of Cash Flows (In thousands of Canadian dollars) ------------------------------------------------------------------------- Three months ended Six months ended June 30, June 30, (Unaudited) 2010 2009 2010 2009 ------------------------------------------------------------------------- CASH PROVIDED BY (USED IN): Operating activities Net earnings $ 2,967 $ 4,899 $ 11,721 $ 7,770 Add (deduct) items not affecting cash: Depreciation and amortization 36,253 38,910 73,798 77,278 Stock-based compensation 4,441 4,547 8,881 9,113 Non-controlling interest 2,104 2,293 3,406 3,866 Future income taxes 547 (906) (9,698) (2,844) Loss (gain) on sale of property and equipment 145 55 (1,098) 164 Gain on sale of investments - (501) - (501) Amortization of terminated interest rate swap 502 503 1,005 1,101 Change in fair value of non-designated interest rate swaps 20,748 - 20,748 - Change in fair value of derivative financial instruments 34 2,565 (2,202) (10,242) Decrease (increase) in net pension asset (635) 704 206 1,099 Change in provision for restructuring and other related costs 4,043 10,250 4,225 12,904 Other 3,321 (9,728) 1,275 (5,327) Change in non-cash operating working capital (34,848) (63,077) (8,223) (142,698) ------------------------------------------------------------------------- Cash provided by (used in) operating activities $ 39,622 $ (9,486) $ 104,044 $ (48,317) ------------------------------------------------------------------------- Financing activities Dividends paid $ (5,417) $ (5,064) $ (10,811) $ (10,130) Dividends paid to non-controlling interest (156) (156) (442) (361) Net decrease in long-term debt (36,084) (32,450) (26,609) (33,195) Increase in share capital - - 40 - Purchase of treasury stock (496) - (496) - Increase in deferred financing costs (1,694) - (1,694) - Other (575) 2,511 (1,252) 2,728 ------------------------------------------------------------------------- Cash used in financing activities $ (44,422) $ (35,159) $ (41,264) $ (40,958) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Investing activities Additions to property and equipment $ (42,161) $ (36,015) $ (70,864) $ (93,687) Proceeds from sale of property and equipment 317 22,780 2,489 23,393 Proceeds from sale of investments - 1,540 - 1,540 Purchase of Canada Bread Shares (2,690) - (2,690) - Other (132) 239 (83) (311) ------------------------------------------------------------------------- Cash used in investing activities $ (44,666) $ (11,456) $ (71,148) $ (69,065) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Decrease in cash and cash equivalents $ (49,466) $ (56,101) $ (8,368) $ (158,340) Net cash and cash equivalents, beginning of period 66,167 254,385 25,069 356,624 ------------------------------------------------------------------------- Net cash and cash equivalents, end of period $ 16,701 $ 198,284 $ 16,701 $ 198,284 ------------------------------------------------------------------------- ------------------------------------------------------------------------- MAPLE LEAF FOODS INC. Segmented Financial Information (In thousands of Canadian dollars) ------------------------------------------------------------------------- Three months ended Six months ended June 30, June 30, (Unaudited) 2010 2009 2010 2009 ------------------------------------------------------------------------- Sales Meat Products Group $ 815,735 $ 830,413 $ 1,583,915 $ 1,652,607 Agribusiness Group 54,057 54,977 95,865 99,565 Bakery Products Group 401,574 435,413 783,093 847,930 ------------------------------------------------------------------------- $ 1,271,366 $ 1,320,803 $ 2,462,873 $ 2,600,102 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Earnings from operations before restructuring and other related costs, change in fair value of non-designated interest rate swaps and other income Meat Products Group $ 14,443 $ 1,683 $ 28,656 $ 13,034 Agribusiness Group 13,838 16,311 20,298 18,456 Bakery Products Group 26,239 27,984 42,983 47,509 Non-allocated costs (2,288) (2,337) (5,808) (3,759) ------------------------------------------------------------------------- $ 52,232 $ 43,641 $ 86,129 $ 75,240 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Capital expenditures Meat Products Group $ 19,064 $ 20,711 $ 32,690 $ 51,960 Agribusiness Group 5,522 2,141 9,713 5,189 Bakery Products Group 17,575 13,163 28,461 36,538 ------------------------------------------------------------------------- $ 42,161 $ 36,015 $ 70,864 $ 93,687 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Depreciation and amortization Meat Products Group $ 18,856 $ 20,033 $ 38,787 $ 39,611 Agribusiness Group 4,179 4,037 8,324 8,071 Bakery Products Group 13,218 14,840 26,687 29,596 ------------------------------------------------------------------------- $ 36,253 $ 38,910 $ 73,798 $ 77,278 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- As at As at As at June 30, June 30, December 31, 2010 2009 2009 ------------------------------------------------------------------------- (Unaudited) (Unaudited) Total assets Meat Products Group $ 1,654,609 $ 1,705,527 $ 1,653,389 Agribusiness Group 275,964 291,564 287,057 Bakery Products Group 956,765 1,002,024 955,469 Non-allocated assets 202,701 367,740 161,549 ------------------------------------------------------------------------- $ 3,090,039 $ 3,366,855 $ 3,057,464 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Goodwill Meat Products Group $ 442,231 $ 450,432 $ 442,943 Agribusiness Group 14,136 14,136 14,136 Bakery Products Group 399,267 413,110 400,199 ------------------------------------------------------------------------- $ 855,634 $ 877,678 $ 857,278 ------------------------------------------------------------------------- -------------------------------------------------------------------------