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Maple Leaf Foods Reports Results for Third Quarter 2010

^{Published on 2010-10-28 05:46:56 - Market Wire}
 

 - Sales were consistent with last year at $1.3 billion - Adjusted Operating Earnings increased 2% to $64.5 million from $63.0 million last year - Adjusted EPS increased 10% to $0.23 compared to $0.21 last year - Net loss in the quarter, which included $48.1 million of non-cash pre-tax adjustments, was $16.1 million compared to net earnings of $22.5 million last year 

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

 Business Segment Review ----------------------- 

 ------------------------------------------------------------------------- Third Quarter Year-to-Date ------------------------------------------------ ($ millions) 2010 2009 2010 2009 ------------------------------------------------------------------------- Meat Products Group $834,655 $815,610 $2,418,570 $2,468,218 Agribusiness Group 47,468 55,813 143,333 155,378 ------------------------------------------------------------------------- Protein Group $882,123 $871,423 $2,561,903 $2,623,596 Bakery Products Group 411,088 425,174 1,194,181 1,273,103 ------------------------------------------------------------------------- Sales $1,293,211 $1,296,597 $3,756,084 $3,896,699 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 

 Third Quarter Year-to-date ------------------------------------------------------------------------- ($ thousands) 2010 2009 2010 2009 ------------------------------------------------------------------------- Meat Products Group $21,532 $18,111 $50,188 $31,144 Agribusiness Group 15,804 15,062 36,102 33,518 ------------------------------------------------------------------------- Protein Group $37,336 $33,173 $86,290 $64,662 Bakery Products Group 27,928 32,749 70,911 80,259 Non-allocated Costs(i) (801) (2,891) (6,609) (6,650) ------------------------------------------------------------------------- Adjusted Operating Earnings $64,463 $63,031 $150,592 $138,271 ------------------------------------------------------------------------- (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 -------------------------- 

 Non-GAAP Financial Measures --------------------------- 

 Three months ended September 30, ------------------------------------------------------------------------- ($ thousands) 2010 ------------------------------------------------------------------------- Meat Agri- Bakery Unallocated Consol- Products business Products costs idated Group Group Group Net earnings ($16,078) Non-controlling interest 1,423 Income taxes (2,258) ------------------------------------------------------------------------- Earnings from operations before income taxes (16,913) Interest expense 16,757 Change in the fair value of non-designated interest rate swaps 14,582 ------------------------------------------------------------------------- Earnings from operations before income taxes, interest expense and changes in the fair value of non- designated interest rate swaps (18,041) 15,785 17,483 (801) 14,426 Restructuring and other related costs 39,405 70 10,512 3 49,990 Other income 168 (51) (67) (3) 47 ------------------------------------------------------------------------- Adjusted Operating Earnings $21,532 $15,804 $27,928 ($801) $64,463 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Three months ended September 30, ------------------------------------------------------------------------- ($ thousands) 2009 ------------------------------------------------------------------------- Meat Agri- Bakery Unallocated Consol- Products business Products costs idated Group Group Group Net earnings $22,457 Non-controlling interest 2,537 Income taxes 10,466 ------------------------------------------------------------------------- Earnings from operations before income taxes 35,460 Interest expense 19,755 Change in the fair value of non-designated interest rate swaps - ------------------------------------------------------------------------- Earnings from operations before income taxes, interest expense and changes in the fair value of non- designated interest rate swaps 12,864 15,044 32,039 (4,732) 55,215 Restructuring and other related costs 5,046 114 597 1,810 7,567 Other income 201 (96) 113 31 249 ------------------------------------------------------------------------- Adjusted Operating Earnings $18,111 $15,062 $32,749 ($2,891) $63,031 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Nine months ended September 30, ------------------------------------------------------------------------- ($ thousands) 2010 ------------------------------------------------------------------------- Meat Agri- Bakery Unallocated Consol- Products business Products costs idated Group Group Group Net earnings ($4,357) Non-controlling interest 4,829 Income taxes 4,371 ------------------------------------------------------------------------- Earnings from operations before income taxes 4,843 Interest expense 49,497 Change in the fair value of non-designated interest rate swaps 35,330 ------------------------------------------------------------------------- Earnings from operations before income taxes, interest expense and changes in the fair value of non- designated interest rate swaps 4,838 35,278 58,084 (8,530) 89,670 Restructuring and other related costs 46,490 (62) 13,021 1,957 61,406 Other income (1,140) 886 (194) (36) (484) ------------------------------------------------------------------------- Adjusted Operating Earnings $50,188 $36,102 $70,911 ($6,609) $150,592 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Nine months ended September 30, ------------------------------------------------------------------------- ($ thousands) 2009 ------------------------------------------------------------------------- Meat Agri- Bakery Unallocated Consol- Products business Products costs idated Group Group Group Net earnings $30,227 Non-controlling interest 6,403 Income taxes 16,245 ------------------------------------------------------------------------- Earnings from operations before income taxes 52,875 Interest expense 61,862 Change in the fair value of non-designated interest rate swaps - ------------------------------------------------------------------------- Earnings from operations before income taxes, interest expense and changes in the fair value of non- designated interest rate swaps 9,312 32,177 81,130 (7,882) 114,737 Restructuring and other related costs 21,601 2,071 1,271 1,810 26,753 Other income 231 (730) (2,142) (578) (3,219) ------------------------------------------------------------------------- Adjusted Operating Earnings $31,144 $33,518 $80,259 ($6,650) $138,271 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 

 ------------------------------------------------------------------------- ($ per share) Three months ended Nine months ended September 30, September 30, ------------------------------------------------------------------------- 2010 2009 2010 2009 ------------------------------------------------------------------------- Basic Earnings per Share $(0.12) $0.17 $(0.03) $0.24 ------------------------------------------------------------------------- Restructuring and other related costs(i) 0.27 0.04 0.33 0.15 ------------------------------------------------------------------------- Change in the fair value of non-designated interest rate swaps(ii) 0.08 - 0.18 - ------------------------------------------------------------------------- Adjusted Earnings per Share(iii) $0.23 $0.21 $0.49 $0.39 ------------------------------------------------------------------------- (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. Management believes that it is appropriate to remove the impacts of these fair value adjustments when discussing the underlying operations of the business, as it provides shareholders with a more accurate representation of the underlying results of the business. (iii)Does not add due to rounding. Consolidated Interim Financial Statements (Expressed in Canadian dollars) MAPLE LEAF FOODS INC. Nine months ended September 30, 2010 and 2009 MAPLE LEAF FOODS INC. Consolidated Balance Sheets (In thousands of Canadian dollars) ------------------------------------------------------------------------- As at As at As at September 30, September 30, December 31, 2010 2009 2009 ------------------------------------------------------------------------- (Unaudited) (Unaudited) ASSETS Current assets Cash and cash equivalents $ 10,303 $ 88,790 $ 29,316 Accounts receivable 164,740 207,207 189,221 Inventories 343,678 354,460 331,781 Income and other taxes recoverable 20,641 17,081 18,067 Future tax asset 8,737 28,294 4,301 Prepaid expenses and other assets 17,403 26,116 15,328 Assets held for sale 24,086 28,928 29,224 ----------------------------------------------------------------------- $ 589,588 $ 750,876 $ 617,238 Property and equipment 1,106,080 1,101,327 1,099,220 Other long-term assets 336,642 333,175 328,063 Future tax asset 57,761 25,557 22,116 Goodwill 853,652 867,941 857,278 Other intangible assets 96,160 99,810 97,713 Assets held for sale 1,835 36,742 35,836 ------------------------------------------------------------------------- $ 3,041,718 $ 3,215,428 $ 3,057,464 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Bank indebtedness $ 8,070 $ 4,357 $ 4,247 Accounts payable and accrued charges 513,413 520,542 477,071 Current portion of long-term debt 385,377 363,546 206,147 Other current liabilities 10,692 45,101 37,837 Liabilities held for sale 10,230 12,210 12,111 ----------------------------------------------------------------------- $ 927,782 $ 945,756 $ 737,413 Long-term debt 569,338 786,744 834,557 Future tax liability 49,064 45,592 27,851 Other long-term liabilities 234,116 182,127 187,523 Non-controlling interest 83,621 79,752 81,070 Shareholders' equity 1,177,797 1,175,457 1,189,050 ------------------------------------------------------------------------- $ 3,041,718 $ 3,215,428 $ 3,057,464 ------------------------------------------------------------------------- ------------------------------------------------------------------------- MAPLE LEAF FOODS INC. Consolidated Statements of Earnings (In thousands of Canadian dollars, except share amounts) ------------------------------------------------------------------------- Three months ended Nine months ended September 30, September 30, (Unaudited) 2010 2009 2010 2009 ------------------------------------------------------------------------- Sales $1,293,211 $1,296,597 $3,756,084 $3,896,699 Cost of goods sold 1,103,115 1,103,724 3,224,348 3,368,411 ------------------------------------------------------------------------- Gross margin $ 190,096 $ 192,873 $ 531,736 $ 528,288 Selling, general and administrative expenses 125,633 129,842 381,144 390,017 ------------------------------------------------------------------------- Earnings from operations before the following: $ 64,463 $ 63,031 $ 150,592 $ 138,271 Restructuring and other related costs (49,990) (7,567) (61,406) (26,753) Change in fair value of non-designated interest rate swaps (14,582) - (35,330) - Other income (expense) (47) (249) 484 3,219 ------------------------------------------------------------------------- Earnings (loss) from operations before interest and income taxes $ (156) $ 55,215 $ 54,340 $ 114,737 Interest expense 16,757 19,755 49,497 61,862 ------------------------------------------------------------------------- Earnings (loss) from operations before income taxes $ (16,913) $ 35,460 $ 4,843 $ 52,875 Income taxes (2,258) 10,466 4,371 16,245 ------------------------------------------------------------------------- Earnings (loss) from operations before non-controlling interest $ (14,655) $ 24,994 $ 472 $ 36,630 Non-controlling interest 1,423 2,537 4,829 6,403 ------------------------------------------------------------------------- Net earnings (loss) $ (16,078) $ 22,457 $ (4,357) $ 30,227 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic earnings (loss) per share $ (0.12) $ 0.17 $ (0.03) $ 0.24 Diluted earnings (loss) per share $ (0.12) $ 0.17 $ (0.03) $ 0.23 ------------------------------------------------------------------------- Weighted average number of shares (millions) 135.5 131.0 135.2 128.2 ------------------------------------------------------------------------- MAPLE LEAF FOODS INC. Consolidated Statements of Comprehensive Income (Loss) (In thousands of Canadian dollars) ------------------------------------------------------------------------- Three months ended Nine months ended September 30, September 30, (Unaudited) 2010 2009 2010 2009 ------------------------------------------------------------------------- Net earnings (loss) $ (16,078) $ 22,457 $ (4,357) $ 30,227 Other comprehensive income (loss) Change in accumulated foreign currency translation adjustment (4,779) (15,009) (10,018) (7,829) Change in unrealized derivative loss on cash flow hedges 1,100 1,353 3,265 14,174 ------------------------------------------------------------------------- $ (3,679) $ (13,656) $ (6,753) $ 6,345 ------------------------------------------------------------------------- Comprehensive income (loss) $ (19,757) $ 8,801 $ (11,110) $ 36,572 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Consolidated Statements of Retained Earnings (In thousands of Canadian dollars) ------------------------------------------------------------------------- Nine months ended September 30, (Unaudited) 2010 2009 ------------------------------------------------------------------------- Retained earnings, beginning of period $ 344,839 $ 314,649 Net earnings (loss) (4,357) 30,227 Adoption of new accounting standard - (207) Dividends declared ($0.12 per share; 2009: $0.12 per share) (16,243) (15,504) Premium on shares issued from Restricted Share Unit Trust (2,665) - ------------------------------------------------------------------------- Retained earnings, end of period $ 321,574 $ 329,165 ------------------------------------------------------------------------- ------------------------------------------------------------------------- MAPLE LEAF FOODS INC. Consolidated Statements of Cash Flows (In thousands of Canadian dollars) ------------------------------------------------------------------------- Three months ended Nine months ended September 30, September 30, (Unaudited) 2010 2009 2010 2009 ------------------------------------------------------------------------- CASH PROVIDED BY (USED IN): Operating activities Net earnings $ (16,078) $ 22,457 $ (4,357) $ 30,227 Add (deduct) items not affecting cash: Depreciation and amortization 34,356 36,637 108,154 113,915 Stock-based compensation 4,440 4,551 13,321 13,664 Non-controlling interest 1,423 2,537 4,829 6,403 Future income taxes (10,635) (9,541) (20,333) (12,385) Loss (gain) on sale of property and equipment 83 313 (1,015) 477 Gain on sale of investments - - - (501) Amortization of terminated interest rate swap 503 502 1,508 1,603 Change in fair value of non-designated interest rate swaps 14,582 - 35,330 - Change in fair value of derivative financial instruments 3,382 (2,028) 1,180 (12,270) Decrease in net pension asset 1,087 20 1,293 1,119 Change in provision for restructuring and other related costs 43,678 2,946 47,903 15,850 Other (2,096) (3,843) (821) (9,170) Change in non-cash operating working capital 42,955 2,464 34,732 (140,234) ------------------------------------------------------------------------- Cash provided by operating activities $ 117,680 $ 57,015 $ 221,724 $ 8,698 ------------------------------------------------------------------------- Financing activities Dividends paid $ (5,432) $ (5,374) $ (16,243) $ (15,504) Dividends paid to non- controlling interest (156) (155) (598) (516) Net decrease in long-term debt (81,770) (132,682) (108,379) (165,877) Increase in share capital 3,234 - 3,274 - Purchase of treasury stock - (3,190) (496) (3,190) Increase in deferred financing costs (63) - (1,757) - Other 971 78 (281) 2,806 ------------------------------------------------------------------------- Cash used in financing activities $ (83,216) $ (141,323) $ (124,480) $ (182,281) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Investing activities Additions to property and equipment $ (49,073) $ (29,705) $ (119,937) $ (123,392) Proceeds from sale of property and equipment 56 179 2,545 23,572 Proceeds from sale of investments - - - 1,540 Purchase of Canada Bread Shares - - (2,690) - Other 85 (17) 2 (328) ------------------------------------------------------------------------- Cash used in investing activities $ (48,932) $ (29,543) $ (120,080) $ (98,608) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Decrease in cash and cash equivalents $ (14,468) $ (113,851) $ (22,836) $ (272,191) Net cash and cash equivalents, beginning of period 16,701 198,284 25,069 356,624 ------------------------------------------------------------------------- Net cash and cash equivalents, end of period $ 2,233 $ 84,433 $ 2,233 $ 84,433 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net cash and cash equivalents is comprised of: Cash and cash equivalents $ 10,303 $ 88,790 $ 10,303 $ 88,790 Bank indebtedness (8,070) (4,357) (8,070) (4,357) ------------------------------------------------------------------------- Net cash and cash equivalents, end of period $ 2,233 $ 84,433 $ 2,233 $ 84,433 ------------------------------------------------------------------------- ------------------------------------------------------------------------- MAPLE LEAF FOODS INC. Segmented Financial Information (In thousands of Canadian dollars) ------------------------------------------------------------------------- Three months ended Nine months ended September 30, September 30, (Unaudited) 2010 2009 2010 2009 ------------------------------------------------------------------------- Sales Meat Products Group $ 834,655 $ 815,610 $2,418,570 $2,468,218 Agribusiness Group 47,468 55,813 143,333 155,378 Bakery Products Group 411,088 425,174 1,194,181 1,273,103 ------------------------------------------------------------------------- $1,293,211 $1,296,597 $3,756,084 $3,896,699 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Earnings from operations before restructuring and other related costs, change in fair value of non-designated interest rate swaps and other income (expense) Meat Products Group $ 21,532 $ 18,111 $ 50,188 $ 31,144 Agribusiness Group 15,804 15,062 36,102 33,518 Bakery Products Group 27,928 32,749 70,911 80,259 Non-allocated costs (801) (2,891) (6,609) (6,650) ------------------------------------------------------------------------- $ 64,463 $ 63,031 $ 150,592 $ 138,271 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Capital expenditures Meat Products Group $ 16,676 $ 17,278 $ 49,366 $ 69,238 Agribusiness Group 3,554 3,110 13,267 8,299 Bakery Products Group 28,843 9,317 57,304 45,855 ------------------------------------------------------------------------- $ 49,073 $ 29,705 $ 119,937 $ 123,392 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Depreciation and amortization Meat Products Group $ 16,693 $ 18,542 $ 55,480 $ 58,151 Agribusiness Group 4,025 4,004 12,349 12,077 Bakery Products Group 13,638 14,091 40,325 43,687 ------------------------------------------------------------------------- $ 34,356 $ 36,637 $ 108,154 $ 113,915 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- As at As at As at September September December 30, 2010 30, 2009 31, 2009 ------------------------------------------------------------------------- (Unaudited) (Unaudited) Total assets Meat Products Group $1,643,340 $1,701,854 $1,653,389 Agribusiness Group 275,160 285,499 287,057 Bakery Products Group 957,911 977,113 955,469 Non-allocated assets 165,307 250,962 161,549 ------------------------------------------------------------------------- $3,041,718 $3,215,428 $3,057,464 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Goodwill Meat Products Group $ 442,124 $ 450,004 $ 442,943 Agribusiness Group 14,142 14,136 14,136 Bakery Products Group 397,386 403,801 400,199 ------------------------------------------------------------------------- $ 853,652 $ 867,941 $ 857,278 ------------------------------------------------------------------------- -------------------------------------------------------------------------