N🟁N

Canada Bread Reports Results for the Second Quarter 2011

  //house-home.news-articles.net/content/2011/07/2 .. reports-results-for-the-second-quarter-2011.html
  Published in House and Home on Thursday, July 28th 2011 at 5:11 GMT by Market Wire
          ^{🞛 This publication is a summary or evaluation of another publication}

TORONTO, July 28, 2011 /CNW/ - Canada Bread Company, Limited (TSX: CBY) today reported its financial results for the second quarter ended June 30, 2011.  Second quarter highlights include:

• Adjusted Operating Earnings⁽¹⁾ increased 14% to $35.1 million.
• Adjusted EPS⁽¹⁾  were $0.97 compared to $0.85 last year.
• Net earnings were $14.9 million, and included $12.5 million in pre-tax restructuring costs related to network optimization initiatives.

"Our margins strengthened as price increases continue to take hold to offset higher commodity costs," said Richard Lan, President and CEO. "We also began commissioning of our new bakery in Hamilton, a very complex project that is progressing on time and on budget. We will continue implementing our value creation plan to reduce costs and build our capacity to increase top line growth".

(1): Adjusted Operating Earnings are defined as earnings from operations before restructuring and other related costs and other income (expense). Adjusted Earnings per Share ("Adjusted EPS") are defined as basic earnings per share adjusted for the impact of restructuring and other related costs, net of tax. Please refer to the section entitled Reconciliation of Non-IFRS Financial Measures in this news release.

Financial Overview

Sales for the second quarter of $406.2 million were consistent with $402.1 million last year.  After adjusting for the impacts of the sale of the fresh sandwich product line in February of 2011 and the impact of currency translation on sales in the U.K. and U.S., sales increased 4% compared to last year, primarily driven by higher selling prices as a result of price increases implemented in the first half of 2011.

Adjusted Operating Earnings in the quarter increased 14% to $35.1 million from $30.7 million in the prior year as the benefit of price increases and lower manufacturing costs offset higher raw material costs, particularly in the fresh bakery operations.  Earnings also benefited from reduced promotional costs and from cost reduction initiatives implemented in early 2011.

Adjusted EPS increased 14% to $0.97 compared to $0.85 in the prior year. Net earnings in the quarter decreased to $14.9 million ($0.59 basic earnings per share) from $20.9 million ($0.82 basic earnings per share) in the second quarter of 2010.  Net earnings in the quarter include $12.5 million of pre-tax costs related to restructuring activities (2010: $0.8 million).

Business Segment Review

The following table summarizes sales by business segment:

The following table summarized Adjusted Operating Earnings by business segment:

Fresh Bakery

Includes fresh bakery products, including breads, rolls, bagels, sweet goods, and fresh pasta and sauces sold to retail, foodservice and convenience channels. It includes national brands such as Dempster's^® and Olivieri^® and many leading regional brands.

Fresh Bakery sales for the second quarter of $282.4 million were consistent with $282.5 million last year.  After adjusting for the impact of the sale of the Company's fresh sandwich product line, sales increased 4% compared to those last year, primarily driven by the benefit of price increases taken in the first half of 2011 and partly offset by lower sales volumes. Price increases to offset the impact of higher commodity costs contributed to some volume decline, as consumers adjust to higher prices.

Adjusted Operating Earnings in the quarter increased 20% to $33.2 million compared to $27.8 million last year. Earnings benefited from improved margins, as price increases and improved operating efficiencies offset the impact of higher raw materials and inflationary costs.  Lower advertising and promotional expenses, cost reduction initiatives and the sandwich product line divestiture also contributed to stronger earnings. These benefits were partly offset by lower sales volumes.

The new fresh bakery in Hamilton, Ontario, which is a significant element of the Company's value creation plan, began initial production in July 2011 as planned. Construction and commissioning of this bakery, one of the largest fresh bakeries in North America, is on schedule and on budget. The Company will gradually transfer production from three bakeries in the Greater Toronto Area, which are scheduled for closure between the end of 2011 through to early 2013.

Frozen Bakery

Includes frozen bakery products, including frozen par-baked bakery products, specialty and artisan breads, and bagels sold to retail, foodservice and convenience channels in North America and the U.K. It includes national brands such as Tenderflake^® and New York Bakery Co^TM.

Frozen Bakery sales for the second quarter increased 4% to $123.9 million from $119.5 million last year.  After adjusting for the impact of currency translation on sales in the U.S. and U.K., sales increased 5% predominantly as a result of price increases implemented in the first half of 2011.  Sales volumes improved slightly compared to last year, benefiting from  increased bagel sales volumes in the U.K. following the re- launch of the New York Bakery brand earlier this year.

Adjusted Operating Earnings in the quarter declined 36% to $1.9 million from $3.0 million last year largely due to higher commodity prices.  The frozen bakery business continues to implement price increases to fully offset the impact of higher raw material and other inflationary costs. Resulting margin compression was partially offset by lower operating costs.

In the United Kingdom, the Company sold a small scale bakery in Cumbria in April 2011 and closed a bakery in London in May 2011, with production consolidated into its bakeries in Maidstone and Walsall.

Other Matters

On July 27, 2011 Canada Bread Company, Limited declared a dividend of $0.20 per share payable on October 3, 2011 to shareholders of record at the close of business on September 9, 2011.  Unless indicated otherwise by the Company in writing at or before the time the dividend is paid, these dividends will be considered an eligible dividend for the purposes of the "Enhanced Dividend Tax Credit System".

In the Interim Report to Shareholders dated as at April 27, 2011 for the first quarter ended March 31, 2011, the dividend of $0.20 per share payable on July 4, 2011 to shareholders of record at the close of business on June 10, 2011 was erroneously described as non-eligible for the purposes of the "Enhanced Dividend Tax Credit System".  The dividend payable on July 4, 2011 to shareholders of record at the close of business on June 10, 2011 is eligible for the purposes of the "Enhanced Dividend Tax Credit System", as indicated in the Company's press release dated April 28, 2011.

Reconciliation of Non-IFRS Financial Measures

The Company uses the following non-IFRS measures: Adjusted Operating Earnings and Adjusted EPS.  Management believes that these non-IFRS measures provide useful information to both management and investors in measuring the financial performance of the Company for the reasons outlined below.  These measures do not have a standardized meaning prescribed by IFRS and therefore they may not be comparable to similarly titled measures presented by other publicly traded companies and should not be construed as an alternative to other financial measures determined in accordance with IFRS.

Adjusted Operating Earnings

The following table reconciles earnings from operations before restructuring and other related costs and other income (expense) to net earnings as reported under IFRS in the unaudited condensed consolidated interim statements of earnings for the three-month periods ended as indicated below.  Management believes that this is the most appropriate basis on which to evaluate operating results, as restructuring and other related costs and other income (expense) are not representative of operational results.

' (i) May not add due to rounding

(i) May not add due to rounding

Adjusted Earnings per Share

The following table reconciles Adjusted Earnings per Share to basic earnings per share as reported under IFRS in the unaudited condensed consolidated interim statements of earnings for the three and six month periods ended as indicated below.  Management believes this is the most appropriate basis on which to evaluate financial results as restructuring and other related costs are not representative of operational results.

(i) Includes per share impact of restructuring and other related costs, net of tax.

(ii) May not add due to rounding.

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 forward-looking statements in this document include, but are not limited to, statements concerning expectations regarding actions to reduce costs and improve efficiencies, restore volumes and/or increase prices, timing of promotional investment, improving business trends in 2011, the expected use of cash balances, source of funds for ongoing business requirements, capital investments and debt repayment, and expectations regarding sufficiency of the allowance for uncollectible accounts. 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 a variety of factors and assumptions that are discussed throughout this document. In addition, expectations concerning the 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 and United Kingdom economies; the rate of exchange of the Canadian dollar to the U.S. dollar and British pound; 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 below or elsewhere 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 in such forward-looking statements are discussed in more detail under the heading "Risk Factors" in the Company's Management's Discussion and Analysis for the year ended December 31, 2010 and are updated each quarter in the Management's Discussion and Analysis, which are available on SEDAR at [ www.sedar.com ]. The reader should review such sections in detail. 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.

Additional information concerning the Company, including the Company's Annual Information Form, is available on SEDAR at [ www.sedar.com ].

Canada Bread Company Limited, which is 90% owned by Maple Leaf Foods Inc. (TSX:MFI), is a leading manufacturer and distributor of fresh bakery products, frozen par-baked products and fresh pasta and sauces. The Company had 2010 sales of $1.6 billion and employs approximately 7,500 people at its operations across North America and in the United Kingdom.

Condensed Consolidated Interim Financial Statements
(Expressed in Canadian dollars)
(Unaudited)

CANADA BREAD COMPANY,
LIMITED

Three and six months ended June 30, 2011 and 2010