Maple Leaf Foods Reports Results for the First Quarter 2014

TSX: MFI
www.mapleleaffoods.com

TORONTO, May 1, 2014 /CNW/ - Maple Leaf Foods Inc. (TSX: MFI) today reported its financial results for the first quarter, March 31, 2014.

  • Adjusted Operating Earnings(1)(3) for the first quarter was a loss of $29.9 million compared to a loss of $27.9 million last year.
  • Adjusted Earnings per Share(3)(4) for the quarter was a loss of $0.24 compared to a loss per share of $0.24 last year.
  • Net loss from continuing operations was $124.6 million compared to $30.6 million last year.
  • The Company expects the proposed sale of its 90% interest in Canada Bread Company, Limited to Grupo Bimbo to close in the second quarter of 2014.

"Although our financial performance is challenging in transition, particularly with volatile raw material costs, our first quarter was marked by significant accomplishments," said Michael H. McCain, President and CEO. "Our prepared meats network transition continues to proceed on course as we ramped up production at our new flagship facility in Hamilton and materially improved performance in our Western Canadian plant expansions. The first of five plant closures occurring this year was completed early in the second quarter."

"Pork markets have been impacted in an unprecedented way due to a virus in the U.S. hog industry, which has renewed pressure from a sharp rise in raw material costs. We have accelerated price increases in the second quarter to recover margins, and expect the effects of this to be transitory as the industry is forecasting a return to more normal conditions later in 2014."

Financial Overview

Maple Leaf Foods Inc. ("the Company") sales from continuing operations of $711.3 million for the first quarter was an increase of 3.2% from last year, or 2.1% after adjusting for the impacts of foreign exchange, primarily due to higher pricing and a higher value sales mix.

Adjusted Operating Earnings for the first quarter was a loss of $29.9 million compared to a loss of $27.9 million last year, as higher costs related to the network transformation and margin compression in the prepared meats business were largely offset by improved market conditions in primary pork processing and hog production.

Net loss from continuing operations for the first quarter was $124.6 million (a loss of $0.89 per basic share attributable to common shareholders) compared to a loss of $30.6 million (a loss of $0.22 per basic share attributable to common shareholders) last year. Net loss from continuing operations included $114.7 million ($0.54 per basic share attributable to common shareholders) of pre-tax interest and other financing costs compared to $16.1 million ($0.07 per basic share attributable to common shareholders) last year. The increase was due to additional financing costs of $98.4 million related to the repayment of the Company's long-term notes payable in April 2014, including a $78.7 million early repayment premium to lenders, $10.1 million in financing costs, and a $9.6 million loss transferred from accumulated other comprehensive income into earnings related to the settlement of interest rate swaps that are no longer designated as hedging instruments. Net loss from continuing operations also included $8.6 million ($0.05 per basic share attributable to common shareholders) of pre-tax expenses related to the modification of a long-term incentive compensation plan (2013: $nil), which was a decision made as a result of the planned sale of Canada Bread Company, Limited, recorded in selling, general and administrative costs. Net loss from continuing operations also included $21.8 million ($0.12 per basic share attributable to common shareholders) of pre-tax expenses related to restructuring and other related costs (2013: $37.0 million, or $0.20 per basic share attributable to common shareholders).

Adjusted Earnings per Share in the first quarter was a loss of $0.24 compared to a loss of $0.24 last year.

Several items are excluded from the discussions of underlying earnings performance as they are not representative of ongoing operational activities. Please refer to the section entitled Reconciliation of Non-IFRS Financial Measures at the end of this news release for a description and reconciliation of all non-IFRS financial measures.

Business Segment Review

Following is a summary of sales by business segment:

           
(Unaudited)     First Quarter
($ thousands)     2014   2013
Meat Products Group    $ 705,399  $ 678,066
Agribusiness Group(5)     5,948   11,287
Total Sales(3)   $ 711,347  $ 689,353

 

The following table summarizes Adjusted Operating Earnings by business segment:

           
(Unaudited)     First Quarter
($ thousands)     2014   2013(3)
Meat Products Group    $ (27,447)  $ (10,452)
Agribusiness Group     (346)   (12,926)
Protein Group    $ (27,793)  $ (23,378)
Non-allocated Costs in Adjusted Operating Earnings(i)     (2,135)   (4,474)
Adjusted Operating Earnings(3)    $ (29,928)  $ (27,852)

(i)  Non-allocated costs comprise expenses not separately identifiable to business segment groups, and do not form part of the measures used by the Company when assessing the segments' operating results. Non-allocated costs for 2013 have been re-stated on a comparable basis.   

Meat Products Group

Includes value-added prepared meats, lunch kits, protein snacks, and value-added fresh pork, poultry and turkey products sold to retail, foodservice, industrial and convenience channels. Includes leading Canadian brands such as Maple Leaf ®, Schneiders ® and many leading sub-brands.

Meat Products Group sales for the first quarter increased 4.0% to $705.4 million, or 3.0% after adjusting for the impact of foreign exchange. Prepared meats sales increased due to higher volumes, the benefit of price increases implemented during the third quarter of 2013, and a higher-value sales mix. In primary processing, higher pricing for fresh pork and increased volumes in fresh poultry more than offset lower fresh pork volumes.

Adjusted Operating Earnings for the first quarter declined to a loss of $27.4 million compared to a loss of $10.5 million last year, as lower earnings in the prepared meats business were only partly offset by improved results in primary processing.

The prepared meats business continued to execute its strategy to establish a low cost supply chain by consolidating its manufacturing network, including commissioning activities at its plant in Saskatoon, Saskatchewan and the new Heritage plant in Hamilton, Ontario. As a result, transitional costs of approximately $23 million were incurred during the first quarter. Last year, transitional costs were approximately $8 million during the same period, and largely related to incremental resources to support the transformation project. Transitional costs increased significantly year-over-year as start-up activities ramped up and duplicative overhead costs were added to the network. During April 2014, the Company closed its legacy Hamilton, Ontario wiener facility and transferred production to the new Heritage facility. The closures of the remaining four legacy facilities are expected to take place during the fourth quarter of 2014.

Margins in the prepared meats business were compressed by sharply higher raw material and inflationary costs that were not fully offset by pricing. Pork input prices increased significantly from last year due to outbreaks of disease in hog production herds in the U.S. that has significantly increased the price of live hogs in response to a decline in hog supply. The weakening Canadian dollar also contributed to higher input costs. To manage these higher costs, the Company is implementing price increases in the second quarter of 2014.

Growth in branded retail packaged meats volumes compared to last year partly offset the factors described above.

Earnings in the fresh pork business increased due to higher primary pork processing margins and increased labour and yield efficiencies. These benefits were partly offset by lower export margins, primarily in the Japanese market, and lower volumes. Earnings in fresh poultry were relatively consistent with the prior year, as higher volumes and lower selling, general and administrative costs were offset by unfavourable operational variances, in part caused by the unusually cold winter in Ontario, Canada.

Agribusiness Group
Includes Canadian hog production operations that primarily supplies the Meat Products Group with livestock.

Agribusiness Group sales for the first quarter declined by 47.3% to $5.9 million compared to $11.3 million last year, due to lower hog volumes sold to third parties and reduced pricing on toll feed sales.

Adjusted Operating Earnings in the first quarter improved to a loss of $0.3 million compared to a loss of $12.9 million last year, primarily due to higher market prices for hogs, net of hedging activities, and lower feed costs.

Discontinued operations
Discontinued operations in the first quarter of 2014 pertain to the Company's 90.0% interest in Canada Bread Company, Limited, which forms the Bakery Products Group. Discontinued operations in the first quarter of 2013 were restated to include the Bakery Products Group, as well as the Rothsay and Olivieri businesses that were sold during the fourth quarter of 2013.

Sales from discontinued operations for the first quarter declined $84.2 million to $342.8 million from $427.0 million, of which $80.2 million relates to the divestitures of the Rothsay and Olivieri businesses in the fourth quarter of 2013. Excluding these divestitures, Bakery Product Group sales decreased by 1.1%, or 2.4% after adjusting for discontinued categories in the U.K. and the impact of currency translation on sales in the U.S. and U.K.

Net earnings from discontinued operations decreased $23.3 million to a loss of $7.4 million from earnings of $15.9 million last year, of which $14.8 million relates to the Rothsay and Olivieri businesses, which were sold during the fourth quarter of 2013. Excluding these divestitures, net earnings from discontinued operations in the Bakery Products Group decreased $8.5 million to a loss of $6.8 million from earnings of $1.7 million last year. On a pre-tax basis, $31.0 million of the decline relates to transaction costs incurred in 2014 associated with the planned sale of Canada Bread. This decline was partly offset by a benefit of $8.5 million due to lower restructuring costs as the Ontario bakery consolidation was largely completed during 2013, and $6.5 million of lower depreciation, as no depreciation was taken after the assets were classified as held-for-sale following the announcement of the planned sale. Improvements in operations contributed a further $4.2 million, as lower overhead costs in the fresh bakery business, driven by the closure of a bakery in Toronto, Ontario during the second quarter of 2013, were only partly offset by higher selling, general and administrative costs. Lower input prices for wheat were offset by the impact of a weaker Canadian dollar on U.S. dollar denominated raw material costs, and higher inflationary costs. Higher other income contributed an additional $4.4 million, due to a legal settlement and gains on sale of investment properties in 2014, compared to an impairment loss on assets held for sale in the U.K. bakery business last year. Higher income taxes accounted for $1.2 million of the decrease. Although the Bakery Products Group generated a pre-tax loss, the transaction costs related to the planned sale do not give rise to a tax recovery as they will be offset against the gain on sale when recognized.

Proposed Sale of Canada Bread

On February 12, 2014, the Company announced that Grupo Bimbo, S.A.B. de C.V. of Mexico ("Grupo Bimbo") had agreed to acquire all of the issued and outstanding common shares of Canada Bread, a 90.0% owned subsidiary, by way of a statutory arrangement under the Business Corporations Act (Ontario) (the "Arrangement"). Under the terms of the Arrangement, Grupo Bimbo has agreed to acquire each common share of Canada Bread for $72.00 per share in cash. Maple Leaf expects to receive net proceeds of approximately $1.65 billion for its 90.0% interest in Canada Bread. The Company is not able to estimate the ultimate gain on disposition given the uncertainty surrounding the timing of the close of this proposed transaction.

On March 17, 2014, the proposed transaction received approval from the Canadian Competition Bureau to proceed. On March 24, 2014, the proposed transaction received clearance from the U.S. Department of Justice under the Hart-Scott-Rodino Act to proceed.

The arrangement was approved by the shareholders of Canada Bread at a special meeting held in April 2014. Subject to Investment Canada approval, the proposed transaction is expected to close in the second quarter of 2014.

Subsequent Events

On April 7, 2014, the Company terminated its cross-currency interest rate swaps maturing in December 2014 for a payment made of $29.6 million.

On April 14, 2014, the Company repaid notes payable for an amount of US$360.5 million (CAD$395.2 million) and CAD$400.0 million, including US$318.0 million (CAD$348.6 million) and CAD$354.5 million of principal, US$36.7 million (CAD$40.2 million) and CAD$37.6 million of early repayment premium, and US$5.8 million (CAD$6.4 million) and CAD$7.9 million of accrued interest.

Other Matters

On April 30, 2014, the Company declared a dividend of $0.04 per share payable June 30, 2014 to shareholders of record at the close of business on June 6, 2014. Unless indicated otherwise by the Company in writing on or before the time the dividend is paid, the dividend will be considered an Eligible Dividend for the purposes of the "Enhanced Dividend Tax Credit System".

An investor presentation related to the Company's first quarter financial results is available at www.mapleleaffoods.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 May 1, 2014 to review Maple Leaf Foods' first quarter financial results. To participate in the call, please dial 416-340-9432 or 800-952-4972. For those unable to participate, playback will be made available an hour after the event at 905-694-9451 / 800-408-3053 (Passcode 3568265).

A webcast presentation of the first quarter financial results will also be available at http://www.media-server.com/m/p/nb3tjyug

The Company's full financial statements and related Management's Discussion and Analysis are available for download on the Company's website.

Reconciliation of Non-IFRS Financial Measures

The Company uses the following non-IFRS measures: Adjusted Operating Earnings; Adjusted Earnings per Share; Adjusted EBITDA; and Net Debt. Management believes that these non-IFRS measures provide useful information to 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

Adjusted Operating Earnings, a non-IFRS measure, is used by Management to evaluate financial operating results. It is defined as earnings before income taxes from continuing operations adjusted for items that are not considered representative of on-going operational activities of the business and items where the economic impact of the transactions will be reflected in earnings in future periods when the underlying asset is sold or transferred. The table below provides a reconciliation of net earnings from continuing operations as reported under IFRS to Adjusted Operating Earnings for the three months ended, as indicated below. Management believes that this basis is the most appropriate on which to evaluate operating results, as they are representative of the on-going operations of the Company.

                     
      Three months ended March 31, 2014
        Meat            
($ thousands)     Products   Agribusiness   Unallocated    
(Unaudited)     Group   Group   costs   Consolidated
Net earnings (loss) from continuing operations                $ (124,606)
Income taxes                 (44,193)
Earnings (loss) before income taxes from continuing operations               $ (168,799)
Interest expense and other financing costs                 114,711
Change in the fair value of non-designated                  
  interest rate swaps                 (1,110)
Other (income) expense      (526)   (291)   (476)   (1,293)
Restructuring and other related costs     11,472   -   10,294   21,766
Earnings (loss) from Continuing Operations    $ (27,447) $ (346) $ (6,932) $ (34,725)
Decrease (increase) in fair value of biological assets (2)     -   -   (40,306)   (40,306)
Unrealized (gains) / loss on commodity futures contracts (2)     -   -   36,503   36,503
Modification of long-term incentive plan(2)     -   -   8,600   8,600
Adjusted Operating Earnings(3)   $   (27,447) $ (346) $ (2,135) $ (29,928)
                     
                     
    Three months ended March 31, 2013
      Meat            
($ thousands)     Products   Agribusiness   Unallocated    
(Unaudited)     Group   Group  (5)   costs   Consolidated
Net earnings (loss) from continuing operations                $ (30,644)
Income taxes                 (16,674)
Earnings (loss) before income taxes from continuing operations               $ (47,318)
Interest expense                 16,103
Change in the fair value of non-designated                  
  interest rate swaps                 (617)
Other (income) expense      (43,393)   889   (793)   (43,297)
Restructuring and other related costs     35,213   -   1,745   36,958
Earnings (loss) from Continuing Operations    $   (10,452) $ (12,926) $ (14,793) $ (38,171)
Decrease (increase) in fair value of biological assets (2)      -   -   5,278   5,278
Unrealized (gains) / losses  on commodity futures contracts (2)       -   -   5,041   5,041
Adjusted Operating Earnings(3)    $ (10,452) $ (12,926) $ (4,474) $ (27,852)

 

Adjusted Earnings per Share

Adjusted Earnings per Share, a non-IFRS measure, is used by Management to evaluate on-going financial operating results. It is defined as basic earnings per share from continuing operations attributable to common shareholders, and is adjusted for items that are not considered representative of on-going operational activities of the business, and items where the economic impact of the transactions will be reflected in earnings in future periods when the underlying asset is sold or transferred. The table below provides a reconciliation of basic earnings per share from continuing operations as reported under IFRS to Adjusted Earnings per Share for the three months ended, as indicated below. Management believes this basis is the most appropriate on which to evaluate financial results as they are representative of the on-going operations of the Company.

             
($ per Share)   Three months ended March 31,
(Unaudited)     2014   2013(i)
Basic earnings (loss) per share from continuing operations   $   (0.89) $   (0.22)
Restructuring and other related costs(ii)     0.12   0.20
Items included in other income not considered representative          
       of on-going operations(iii)     -   (0.27)
Change in the fair value of non-designated interest rate swaps(iv)      (0.01)   -
Change in the fair value of unrealized losses on commodity           
       futures contracts(iv)     0.19   0.03
Change in the fair value of biological assets(iv)     (0.21)   0.03
Other financing costs (v)     0.51   -
Modification of long-term incentive plan (vi)     0.05   -
Adjusted Earnings per Share(vii)   $ (0.24) $   (0.24)

 

(i)      2013 figures have been restated for the classification of the Rothsay business and the Bakery Products Group as discontinued operations. Refer to Note 20 of the Company's 2014 first quarter unaudited condensed consolidated interim financial statements.
(ii)     Includes per share impact of restructuring and other related costs, net of tax and non-controlling interest.
(iii)     Includes gains/losses associated with non-operational activities, including gains/losses related to restructuring activities, business combinations, discontinued operations, assets held for sale, and hedge ineffectiveness recognized in earnings, all net of tax.
(iv)    Includes per share impact of the change in fair value of non-designated interest rate swaps, unrealized (gains) losses on commodity futures contracts and the change in fair value of biological assets, net of tax.
(v)     Includes a $78.7 million early repayment premium to lenders, $10.1 million in financing costs, and a $9.6 million loss transferred from accumulated other comprehensive income into earnings related to the settlement of interest rate swaps that are no longer designated as hedging instruments
(vi)      Relates to a $8.6 million modification of a long-term incentive compensation plan, which was a decision made as a result of the planned sale of Canada Bread Company, Limited, and is therefore not considered representative of ongoing operational activities of the business.
(vii)   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 information" within the meaning of applicable securities law. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which the Company operates, as well as 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, in addition to statements with respect to beliefs, plans, objectives, expectations, anticipations, estimates, and intentions. Specific forward-looking information in this document includes, but is not limited to, statements with respect to: the expected timing of the completion of the sale of shares of Canada Bread to Grupo Bimbo (there can be no assurances that any transaction will be completed); the anticipated benefits, timing, actions, costs, and investments associated with the Plan; expectations regarding Net Debt to EBITDA ratios during the implementation of the Plan; expectations  regarding the use of derivatives, futures and options; expectations regarding improving efficiencies; the expected use of cash balances; source of funds for ongoing business requirements; capital investments and debt repayment; expectations regarding acquisitions and divestitures; the timing of new plant openings and old plant closures, job losses and LEED® certification; expectations regarding the impact of new accounting standards; expectations regarding sufficiency of the allowance for uncollectible accounts; and expectations regarding pension plan performance and future pension plan liabilities and contributions. Words such as "expect", "anticipate", "intend", "may", "will", "plan", "believe", "seek", "estimate", and variations of such words and similar expressions are intended to identify such forward-looking information. These statements are not guarantees of future performance and involve assumptions and risks and uncertainties that are difficult to predict.

In addition, these statements and 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, U.S., U.K., and Japanese economies; the rate of exchange of the Canadian dollar to the U.S. dollar, the British pound, and the Japanese yen; 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 Plan or otherwise; 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 in this document 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 information, 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 information include,

among other things:

• risks associated with the pending acquisition of Canada Bread by Grupo Bimbo;

• risks associated with implementing and executing the Plan;

• risks associated with the availability of capital and the Company's outstanding indebtedness;

• risks associated with changes in the Company's systems and processes;

• risks posed by food contamination, consumer liability, and product recalls;

• risks associated with acquisitions, divestitures, and capital expansion projects;

• impact on pension expense and funding requirements of fluctuations in the market prices of fixed income and equity securities and changes ininterest rates;

• cyclical nature of the cost and supply of hogs and the competitive nature of the pork market generally;

• risks related to the health status of livestock;

• impact of a pandemic on the Company's operations;

• the Company's exposure to currency exchange risks;

• ability of the Company to hedge against the effect of commodity price changes through the use of commodity futures and options;

• impact of changes in the market value of the biological assets and hedging instruments;

• impact of international events on commodity prices and the free flow of goods;

• risks posed by compliance with extensive government regulation;

• risks posed by litigation;

• impact of changes in consumer tastes and buying patterns;

• impact of extensive environmental regulation and potential environmental liabilities;

• risks associated with a consolidating retail environment;

• risks posed by competition;

• risks associated with complying with differing employment laws and practices globally, the potential for work stoppages due to non-renewal of collective agreements, and recruiting and retaining qualified personnel;

• risks associated with the Company's independent distributors;

• risks associated with pricing the Company's products;

• risks associated with managing the Company's supply chain; and

• risks associated with failing to identify and manage the strategic risks facing the Company.

The Company cautions the reader that the foregoing list of factors is not exhaustive. These factors are discussed in more detail under the heading "Risk Factors" in the Company's Annual Management's Discussion and Analysis for the period ended December 31, 2013, that is available on SEDAR at www.sedar.com. The reader should review such section in detail. The Company does not intend to, and the Company disclaims any obligation to, update any forward-looking information, 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, will be available on SEDAR at www.sedar.com.

Maple Leaf Foods Inc. is a leading Canadian value added meat, meals, and bakery company committed to delivering quality food products to consumers around the world. Headquartered in Toronto, Canada, the Company employs approximately 18,000 people at its operations across Canada and in the United States, Europe and Asia.

Footnote Legend

  1. Adjusted Operating Earnings, a non-IFRS measure, is used by Management to evaluate financial operating results.  It is defined as earnings from continuing operations adjusted for items that are not considered representative of on-going operational activities of the business, and items where the economic impact of the transactions will be reflected in earnings in future periods when the underlying asset is sold or transferred. Please refer to the section entitled Reconciliation of Non-IFRS Financial Measures in this news release.
  2. Regarding biological assets, please refer to Note 6 of the Company's 2014 first quarter unaudited condensed consolidated interim financial statements. Unrealized gains/losses on commodity futures contracts and settlement of long-term incentive plan are reported within cost of sales and selling, general and administrative respectively in the Company's 2014 first quarter unaudited condensed consolidated interim financial statements.
  3. Figures exclude the results of the Rothsay business and the Bakery Products Group, which are reported as discontinued operations. Refer to Note 20 of the Company's 2014 first quarter unaudited condensed consolidated interim financial statements.
  4. Adjusted Earnings per Share, a non-IFRS measure, is used by Management to evaluate on-going financial operating results.  It is defined as basic earnings per share from continuing operations attributable to common shareholders, and is adjusted for all items that are not considered representative of on-going operational activities of the business, and items where the economic impact of the transactions will be reflected in earnings in future periods when the underlying asset is sold or transferred. Please refer to the section entitled Reconciliation of Non-IFRS Financial Measures in this news release.
  5. 2013 figures exclude the results of the Rothsay business, which are reported as discontinued operations. Refer to Note 20 of the Company's 2014 first quarter unaudited condensed consolidated interim financial statements.

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

MAPLE LEAF FOODS INC.

Three months ended March 31, 2014 and 2013

(In thousands of Canadian dollars)       As at March 31,   As at March 31,   As at December 31,
          2014   2013   2013
          (Unaudited)   (Unaudited)    
ASSETS                
Current assets                
  Cash and cash equivalents     $   470,783 $ 92,438 $ 506,670
  Accounts receivable       69,594   109,186   111,034
  Notes receivable       109,154   119,145   115,514
  Inventories        283,273   325,363   287,786
  Biological assets        140,428   79,934   95,740
  Income and other taxes recoverable       36,376   39,731   43,300
  Prepaid expenses and other assets       41,818   21,362   17,921
  Assets held for sale       1,000,946   22,847   5,206
         $ 2,152,372 $ 810,006  $  $ 1,183,171
  Property and equipment       994,268   1,243,101   1,323,318
  Investment property       3,221   12,019   12,865
  Employee benefits        114,793   133,152   117,615
  Other long-term assets        8,273   12,731   16,628
  Deferred tax asset       66,399   127,288   26,119
  Goodwill        428,236   754,746   720,798
  Intangible assets        185,263   208,033   198,578
  Total assets      $  3,952,825  $ 3,301,076  $ 3,599,092
                   
LIABILITIES AND EQUITY                
Current liabilities                
  Bank indebtedness      $ -  $ 33,491  $ 4,408
  Accounts payable and accruals       435,628   447,589   649,554
  Provisions       40,100   41,720   54,853
  Current portion of long-term debt       1,334,965   6,823   209,780
  Other current liabilities        128,399   17,842   47,927
  Liabilities associated with assets held for sale        311,400   -   -
         $ 2,250,492  $ 547,465  $ 966,522
  Long-term debt        6,232   1,256,708   744,212
  Employee benefits        140,051   371,344   174,503
  Provisions        30,994   34,921   19,603
  Other long-term liabilities        26,753   75,647   28,744
  Deferred tax liability       -   9,449   23,516
  Total liabilities       $ 2,454,522  $ 2,295,534  $ 1,957,100
Shareholders' equity                
Share capital      $ 906,166 $ 902,986 $ 905,216
Retained earnings (deficit)       458,202   (31,151)   602,717
Contributed surplus       71,819   82,673   79,139
Accumulated other comprehensive loss                
   associated with continuing operations        (1,230)   (13,958)   (4,593)
Accumulated other comprehensive income                
  associated with discontinued operations       4,159   -   -
Treasury stock       (1,350)   (1,845)   (1,350)
Total shareholders' equity      $ 1,437,766 $ 938,705 $ 1,581,129
Non-controlling interest       60,537   66,837   60,863
Total equity     $ 1,498,303 $ 1,005,542  $ 1,641,992
Total liabilities and equity      $ 3,952,825 $ 3,301,076 $ 3,599,092

 




(In thousands of Canadian dollars, except share amounts)       Three months ended March 31,
(Unaudited)     2014   2013
                (Restated)
               
                 
Sales   $ 711,347  $ 689,353
Cost of goods sold     663,412   649,886
Gross margin   $ 47,935  $ 39,467
Selling, general and administrative expenses     82,660   77,638
Loss from continuing operations before the following:   $ (34,725)  $ (38,171)
Restructuring and other related costs     (21,766)   (36,958)
Change in fair value of non-designated interest rate swaps     1,110   617
Other income     1,293   43,297
Loss before interest and income taxes from continuing operations   $ (54,088)  $  (31,215)
Interest expense and other financing costs      114,711   16,103
Loss before income taxes from continuing operations   $ (168,799)  $ (47,318)
Income taxes     (44,193)   (16,674)
Net loss from continuing operations   $ (124,606)  $ (30,644)
Net earnings (loss) from discontinued operations      (7,388)   15,902
Net loss   $  (131,994) $ (14,742)
               
Attributed to:          
Common shareholders   $ (132,911)  $ (14,938)
Non-controlling interest     917   196
         $ (131,994) $ (14,742)
               
Loss per share attributable to common shareholders           
  Basic and diluted loss per share   $ (0.95) $ (0.11)
  Basic and diluted loss per share from continuing operations   $   (0.89)  $   (0.22)
Weighted average number of shares (millions)     140.2   139.9

 

See accompanying Notes to the Unaudited Condensed Consolidated Interim Financial Statements.

(In thousands of Canadian dollars)         Three months ended March 31,
(Unaudited)       2014   2013
           
                   
                   
Net loss  $ (131,994) $ (14,742)
                         
Other comprehensive income (loss)            
                       
Items that will not be reclassified to profit or loss:        
           
  Change in actuarial gains and losses              
      (Net of tax of $0.2 million; 2013: $19.4 million) $ 714  $ 56,231
Total items that will not be reclassified to profit or loss  $ 714  $ 56,231
                       
Items that are or may be reclassified subsequently to profit or loss:        
                       
  Change in accumulated foreign currency translation adjustment        
      (Net of tax of $nil million; 2013: $nil million)  $ 345  $ (239)
  Change in unrealized gains and losses on cash flow hedges        
      (Net of tax of $0.8 million; 2013: ($0.7 million))    2,219   (2,115)
Total items that are or may be reclassified             
  subsequently to profit or loss  $       2,564  $ (2,354)
Other comprehensive income from continuing operations   $ 3,278  $ 53,877
                         
Other comprehensive income from discontinued operations(i)        
      (Net of tax of $0.1 million; 2013: $2.6 million)  $ 4,860  $ 8,339
Total other comprehensive income  $   8,138  $ 62,216
             
Comprehensive income (loss) $ (123,856)   47,474
           
Attributed to:        
           
Common shareholders  $ (125,436)  $ 46,451
Non-controlling interest  $ 1,580  $ 1,023
           

 

(i) The above amount includes ($0.8 million) (2013: $6.5 million) relating to actuarial gains and losses that will not subsequently be
re-classified to profit or loss.
                      
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

 

              Attributable to Common Shareholders            
                                Total       Total                  
                                accumulated       accumulated                  
                                other       other                  
                                comprehensive       comprehensive                  
                                loss       income                  
                                associated with       associated with           Non-      
(In thousands of Canadian dollars)   Share     Retained     Contributed     continuing       assets     Treasury     controlling     Total
(Unaudited)     capital     earnings     surplus     operations       held for sale     stock     interest     equity
                                                           
Balance at                                                   
  December 31, 2013  $ 905,216    $ 602,717    $ 79,139    $ (4,593)      $ -    $   (1,350)    $ 60,863    $   1,641,992
    Net earnings (loss)   -     (132,911)     -     -       -     -     917     (131,994)
    Transfer to held for sale   -     -     -     799       (799)     -     -     -
    Other comprehensive                                                
      income (loss)     -     (47)     -     2,564       4,958     -     663     8,138
    Dividends declared                                                
      ($0.04 per share)   -     (5,613)     -     -       -     -     (1,906)     (7,519)
    Stock-based compensation                                                
      expense     -     -     8,692     -       -     -     -     8,692
    Exercise of stock options   950     -     -     -       -     -     -     950
    Modification of stock                                                 
      compensation plan   -     (5,944)     (16,012)     -       -     -     -     (21,956)
Balance at March 31, 2014  $ 906,166    $ 458,202    $ 71,819    $ (1,230)      $ 4,159    $   (1,350)    $ 60,537    $ 1,498,303
                                                           
                                                           
              Attributable to Common Shareholders            
                                Total       Total                  
                                accumulated       accumulated                  
                                other       other                  
                                comprehensive       comprehensive                  
                                loss       income                  
                                associated with       associated with           Non-      
(In thousands of Canadian dollars)   Share     Retained     Contributed     continuing       assets     Treasury     controlling     Total
(Unaudited)     capital     deficit     surplus     operations       held for sale     stock     interest     equity
                                                           
Balance at December 31, 2012  $ 902,810    $ (72,701)    $ 75,913    $ (13,263)      $ -    $ (1,845)    $ 67,085    $ 957,999
    Net earnings     -     (14,938)     -     -       -     -     196     (14,742)
    Other comprehensive                                                
      income (loss)      -     62,084     -     (695)       -     -     827     62,216
    Dividends declared                                                
      ($0.04 per share)   -     (5,596)     -     -       -     -     (1,271)     (6,867)
    Stock-based compensation                                                
      expense     -     -     5,560     -       -     -     -     5,560
    Exercise of stock options   176     -     -     -       -     -     -     176
    Other     -     -     1,200     -       -     -     -     1,200
Balance at March 31, 2013  $ 902,986    $ (31,151)    $ 82,673    $ (13,958)      $ -    $ (1,845)    $ 66,837    $ 1,005,542

 

See accompanying Notes to the Unaudited Condensed Consolidated Interim Financial Statements.

(In thousands of Canadian dollars)       Three months ended March 31,
(Unaudited)         2014   2013
                     
CASH (USED IN) PROVIDED BY:            
Operating activities            
  Net loss            $ (131,994)  $ (14,742)
  Add (deduct) items not affecting cash:            
      Change in fair value of biological assets       (40,306)   5,278
      Depreciation and amortization       26,643   33,852
      Stock-based compensation       8,692   5,560
      Deferred income taxes       (44,014)   (14,738)
      Income tax current       2,431   4,275
      Interest expense and other financing costs       114,885   16,500
      (Gain) loss on sale of property and equipment       441   (956)
      (Gain) loss on sale of business        468   -
      (Gain) loss on sale of assets held for sale       (1,736)   (45,388)
      (Gain) loss on sale of investment property       (313)   -
      (Gain) loss on acquisition        -   985
      (Gain) loss on disposal of intangible assets       (364)   -
      Change in fair value of non-designated interest rate swaps     (1,110)   (617)
      Change in fair value of derivative financial instruments       36,634   4,967
      Impairment of assets (net of reversals)       -   5,134
  Increase in pension liability       3,393   7,748
  Net income taxes paid       (6,853)   (7,074)
  Interest paid         (18,325)   (15,431)
  Change in provision for restructuring and other related costs     13,660   38,105
  Other           5,550   (4,990)
  Change in non-cash operating working capital       (36,083)   (20,857)
Cash used by operating activities        $ (68,301)    $ (2,389)
Financing activities            
  Dividends paid        $ (5,613)  $ (5,596)
  Dividends paid to non-controlling interest       (21,604)   (1,271)
  Net increase in long-term debt       299,650   43,525
  Exercise of stock options       950   176
Cash provided by financing activities        $ 273,383    $ 36,834
Investing activities            
  Additions to long-term assets        $ (97,672)  $ (76,055)
  Acquisition of business       -   (922)
  Capitalization of interest expense       (2,783)   (3,250)
  Adjustment to sale of business        (468)   -
  Proceeds from sale of long-term assets       2,350   4,491
  Proceeds from sale of assets held for sale       6,108   58,067
Cash used in investing activities        $ (92,465)    $ (17,669)
Increase in cash and cash equivalents        $ 112,617  $ 16,776
Net cash and cash equivalents, beginning of period         502,262   42,171
Net cash and cash equivalents, end of period        $ 614,879    $ 58,947
                   
Net cash and cash equivalents is comprised of:          
Attributed to continuing operations          
Cash and cash equivalents        $ 470,783  $ 92,438
Bank indebtedness       -   (33,491)
Net cash and cash equivalents from continued operations, end of period    $ 470,783    $ 58,947
Attributed to held for sale           
Cash and cash equivalents        $ 144,096  $ -
Bank indebtedness       -   -
Net cash and cash equivalents held for sale, end of period         $ 144,096    $ -
                       
Net cash and cash equivalents, end of period        $ 614,879    $ 58,947
                       

 

See accompanying Notes to the Unaudited Condensed Consolidated Interim Financial Statements.

 

            Three months ended March 31,
                  2014     2013
                            (Restated)
                           
Sales                      
    Meat Products Group              $ 705,399    $ 678,066
    Agribusiness Group(i)               5,948     69,422
    Bakery Products Group(i)               342,837     368,913
Total sales                $ 1,054,184    $ 1,116,401
Sales from discontinued operations              (342,837)     (427,048)
Sales from continuing operations            $ 711,347    $ 689,353
                           
Earnings before restructuring and other related                    
  costs and other income                      
    Meat Products Group              $ (27,447)    $ (10,452)
    Agribusiness Group(i)               (346)     5,380
    Bakery Products Group(i)             26,872     17,101
    Non-allocated costs               (6,932)     (14,793)
Total earnings before restructuring                     
  and other related costs and other income            $ (7,853)    $ (2,764)
Earnings before restructuring                       
  and other related costs and other income                    
  from discontinued operations              (26,872)     (35,407)
Earnings before restructuring                     
and other related costs and other income                    
  from continuing operations            $ (34,725)    $ (38,171)
                           
Capital expenditures                      
    Meat Products Group              $ 67,814    $ 66,144
    Agribusiness Group(i)               823     2,444
    Bakery Products Group(i)             10,200     7,467
             $ 78,837    $ 76,055
                           
Depreciation and amortization                    
    Meat Products Group              $ 19,981    $ 15,568
    Agribusiness Group(i)               1,520     4,156
    Bakery Products Group(i)               5,142     14,128
            $ 26,643    $ 33,852

(i) The prior year results of the animal by-product recycling operations, Fresh pasta and Sauces businesses and Canada Bread were included in the comparative results of the Agribusiness Group and Bakery Products respectively.

            As at March 31,   As at March 31,   As at December 31,
            2014   2013(i)   2013
                     
Total assets                  
  Meat Products Group      $ 1,953,203    $ 1,695,950    $ 1,823,866
  Agribusiness Group(i)       237,537   274,205   195,537
  Bakery Products Group       1,000,112   992,721   1,169,669
  Non-allocated assets(i)       761,973   338,200   410,020
      $ 3,952,825    $ 3,301,076    $ 3,599,092
                       
Goodwill                    
  Meat Products Group      $ 428,236    $ 442,925    $ 428,236
  Agribusiness Group(i)       -   13,845   -
  Bakery Products Group       -   297,976   292,562
      $ 428,236    $ 754,746    $ 720,798

 

(i) The prior year results as at March 31, 2013 of the Agribusiness Group and Bakery Products Group include assets and goodwill from the animal by-product recycling operations, Fresh Pasta and sauces, and Canada Bread businesses, respectively.  

 

 

 

 

 

SOURCE Maple Leaf Foods Inc.

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