Canada Bread Reports 2007 First Quarter Financial Results



    TORONTO, April 26 /CNW/ - Canada Bread Company, Limited (TSX: CBY) today
announced its financial results for the first quarter ended March 31, 2007.
    "In the first quarter we achieved continued growth through increasing our
sales mix of higher nutrition and specialty fresh bakery products, and
expanding our U.K. bakery business," said Richard Lan, President and CEO of
Canada Bread. "While North American frozen bakery operations realized a modest
improvement, there is much we can do to increase earnings in this segment. To
accelerate strategic repositioning of this business, we have established new
executive leadership under a 30 year veteran of the bakery industry.
    Sales for the first quarter increased 19% to $358.3 million from
$301.6 million last year, partially due to the contribution from recent
acquisitions. Excluding acquisitions, sales increased 8%.
    Earnings from operations before restructuring and other related costs for
the first quarter were $30.0 million compared to $28.0 million last year, as a
result of higher earnings in both the fresh and frozen businesses. Earnings
from operations exclude $2.2 million ($1.5 million after tax) of restructuring
and other related costs in the first quarter of 2007. Management believes this
is the most appropriate basis on which to evaluate operating results, as
restructuring and other related costs are not representative of ongoing
operating earnings.
    Following is a summary of net earnings and earnings per share (EPS)
before and after restructuring and other related costs:

    
    ($ millions except per share amounts)              First Quarter
                                           ----------------------------------
                                                2007        2006      Change
                                                ----        ----      ------
    Net earnings as reported                    17.9        19.4       (7.7%)

    Restructuring and other related costs,
     net of tax                                  1.5           -
                                           ----------------------------------
    Net earnings before restructuring and
     other related costs(i)                     19.4        19.4        0.0%
                                           ----------------------------------
                                           ----------------------------------
    EPS before restructuring and other
     related costs(i)                          $0.76       $0.76       $0.00
                                           ----------------------------------
                                           ----------------------------------

    i) This is not a recognized measure under Canadian GAAP. Management
       believes that this is the most appropriate basis on which to evaluate
       operating results, as restructuring and other related costs are not
       representative of continuing operations.


    Net earnings before restructuring and other related costs was
$19.4 million ($0.76 per share), consistent with last year.

    Operating Review
    ----------------

    The following table summarizes operating earnings by business segment
before restructuring and other related costs:

    Earnings from Operations before Restructuring and Other Related Costs
    ---------------------------------------------------------------------

    ($ millions)                                       First Quarter
                                           ----------------------------------
                                                2007        2006      Change
                                                ----        ----      ------
    Fresh Bakery                                22.0        21.6          2%
    Frozen Bakery                                8.0         6.4         24%
                                           ----------------------------------
                                                30.0        28.0          7%
                                           ----------------------------------
                                           ----------------------------------
    

    Fresh Bakery (Fresh bakery products, specialty baked goods and hand-held
    ------------  snacks, and fresh pasta and sauces)

    Fresh Bakery sales increased 6% to $219.2 million in the first quarter
from $207.5 last year due to sales mix improvements and price increases
implemented last year to offset inflationary costs. Earnings from operations
in the first quarter increased to $22.0 million from $21.6 million last year,
benefiting from product mix and price improvements which mostly offset higher
wheat prices and some volume declines. Reinforcing its leadership in the
growing higher nutrition market, the Company launched Dempster's WholeGrains
Prebiotic, a delicious bread that contains inulin, a unique source of
prebiotic fibre that promotes digestive health. Dempster's WholeGrains
Prebiotic is the first major brand in Canada to offer the benefits of
prebiotics. Fresh pasta earnings decreased in the quarter due to higher dairy
and packaging costs.

    Frozen Bakery (North American and U.K. frozen bakery products; including
    -------------  frozen par-baked and specialty bakery products)

    Frozen Bakery sales in the first quarter increased to $139.2 million from
$94.1 million last year. A significant portion of the sales increase reflected
the contributions from the acquisitions of the French Croissant Company Ltd.
on November 27, 2006 in the United Kingdom. Excluding acquisition, sales
increased 14% in the first quarter, principally related to growth in the bagel
business in the UK. Earnings from operations increased to $8.0 million in the
first quarter from $6.4 million last year. The U.K. bakery operations recorded
another strong quarter, benefiting from the contribution of acquisitions, as
well as continued bagel earnings growth. During the quarter, the Company began
a project to further expand capacity at its Rotherham bagel facility through
an $8.3 million investment in freezing capacity that will allow the business
to pursue further opportunities in the frozen bagel market in the U.K. and
Europe. This expansion, together with investments in croissant capacity at the
French Croissant Company, is expected to well position the business to
continue its growth in the specialty bakery market.
    The profitability of the Company's North American frozen bakery
operations increased from last year, although still below earnings potential.
A strategic realignment of this business is being developed to position it for
higher returns. In April, the Company announced a senior leadership change in
its Frozen Bakery business.

    Restructuring and Other Related Costs
    -------------------------------------

    During the first quarter, the company recorded restructuring and other
related costs of $2.2 million ($1.5 million after tax) related to the
previously announced closure of a fresh bakery in Langley, British Columbia.

    Cash Flow and Financing
    -----------------------

    Cash flow from operating activities was $19.9 million for the first
quarter compared to a use of funds of $5.5 million in the prior year period,
primarily as a result of decreases in net working capital.
    Interest expense for the first quarter was $1.3 million compared to
$0.7 million last year as a result of increased debt that was used to finance
acquisitions in 2006.
    Capital expenditures on plant and equipment for the first quarter were
$11.7 million compared to $9.9 million last year.

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

    This document may contain forward-looking information within the meaning
of applicable securities legislation. Forward looking information is based
upon a number of assumptions and is subject to a number of risks and
uncertainties, many of which are beyond the Company's control, that could
cause actual results to differ materially from those that are disclosed in or
implied by such forward looking information. Any forward-looking information
in this press release speaks as of the date of this press release. Canada
Bread does not undertake to update any such forward-looking information
whether as a result of new information, future events or otherwise. Additional
information about these assumptions and risks and uncertainties is contained
in the filings with securities regulators including the annual information
form and Management's Discussion and Analysis accompanying the financial
statements in the reports to shareholders. These filings are available on the
Company's website at www.canadabread.ca.

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

    The Company declared a dividend of $0.06 per share payable on July 2,
2007 to shareholders of record on June 15, 2007. Unless indicated otherwise in
writing at or before the time the dividend is paid, each dividend paid by the
corporation in 2007 or a subsequent year is an eligible dividend for the
purposes of the "Enhanced Dividend Tax Credit System".

    Canada Bread, which is 88.0% owned by Maple Leaf Foods Inc., is a leading
manufacturer and distributor of fresh bakery products, frozen par-baked
products and fresh pasta and sauces. The Company had 2006 sales of
$1.3 billion and employs approximately 8,700 people at its operations across
North America and in the United Kingdom.


    Interim Consolidated Financial Statements
    (Expressed in Canadian dollars)

    CANADA BREAD COMPANY, LIMITED

    Three months ended March 31, 2007 and 2006



    
    CANADA BREAD COMPANY, LIMITED
    Consolidated Balance Sheets
    (In thousands of Canadian dollars)

    -------------------------------------------------------------------------
                                               As at       As at       As at
                                            March 31,   March 31,   December
                                                2007        2006    31, 2006
    -------------------------------------------------------------------------
                                          (Unaudited) (Unaudited)

    ASSETS

    Current assets
      Cash and cash equivalents            $   9,945   $       -   $       -
      Accounts receivable (Note 3)            56,041      27,097      57,272
      Inventories                             48,536      38,809      46,081
      Future tax asset - current               5,349       5,245       5,873
      Prepaid expenses                         5,549       5,052       3,576
      Other current assets (Note 2(a)(iii))   60,944           -           -
      -----------------------------------------------------------------------
                                             186,364      76,203     112,802

    Property and equipment                   376,998     354,565     374,647

    Goodwill                                 374,112     315,362     372,980

    Other intangibles                          5,132       5,654       5,321

    Future tax asset - non-current               402      10,242         403

    Other long-term assets                     1,941         940      58,115
    -------------------------------------------------------------------------
                                           $ 944,949   $ 762,966   $ 924,268
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities
      Bank indebtedness                    $       -   $   3,674   $   1,130
      Accounts payable and accrued charges   164,194     120,598     169,134
      Due to Maple Leaf Foods Inc.             9,453       3,648       9,336
      Dividends payable                        1,525       1,525       1,525
      Income and other taxes payable          18,361      14,580      23,336
      Current portion of long-term debt       11,529         182       9,494
      -----------------------------------------------------------------------
                                             205,062     144,207     213,955

    Long-term debt                            96,113      35,589      86,471

    Future tax liability                      29,878      23,717      29,611

    Other long-term liabilities               10,123       5,908       5,787

    Shareholders' equity (Note 4)            603,773     553,545     588,444
    -------------------------------------------------------------------------
                                           $ 944,949   $ 762,966   $ 924,268
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The accompanying notes to the consolidated financial statements are an
    integral part of these statements.



    CANADA BREAD COMPANY, LIMITED
    Consolidated Statements of Earnings
    (In thousands of Canadian dollars, except share amounts)

    -------------------------------------------------------------------------
                                                 Three months ended March 31,
    (Unaudited)                                             2007        2006
    -------------------------------------------------------------------------

    Sales                                              $ 358,337   $ 301,564
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings from operations before restructuring
     and other related costs                              29,961      28,001

    Restructuring and other related costs (Note 5)        (2,192)          -
    -------------------------------------------------------------------------

    Earnings from operations                              27,769      28,001

    Other income                                             502         186
    -------------------------------------------------------------------------

    Earnings before interest and income taxes             28,271      28,187

    Interest expense                                       1,255         729
    -------------------------------------------------------------------------

    Earnings before income taxes                          27,016      27,458

    Income taxes                                           9,106       8,061
    -------------------------------------------------------------------------
    Net earnings                                       $  17,910   $  19,397
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per share - basic                         $    0.70   $    0.76

    Earnings per share - diluted                       $    0.70   $    0.76
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average number of shares (millions)            25.4        25.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CANADA BREAD COMPANY, LIMITED
    Consolidated Statements of Retained Earnings
    (In thousands of Canadian dollars, except share amounts)

    -------------------------------------------------------------------------
                                                 Three months ended March 31,
    (Unaudited)                                             2007        2006
    -------------------------------------------------------------------------

    Retained earnings, beginning of period             $ 450,733   $ 406,649

    Net earnings                                          17,910      19,397

    Dividends declared ($0.06 per share; 2006:
     $0.06 per share)                                     (1,525)     (1,525)
    -------------------------------------------------------------------------
    Retained earnings, end of period                   $ 467,118   $ 424,521
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated Statements of Comprehensive Income
    (In thousands of Canadian dollars)

    -------------------------------------------------------------------------
                                                 Three months ended March 31,
    (Unaudited)                                             2007        2006
    -------------------------------------------------------------------------

    Net earnings                                       $  17,910   $  19,397

    Other comprehensive income (loss) (Note 4)              (894)        941
    -------------------------------------------------------------------------
    Comprehensive income                               $  17,016   $  20,338
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The accompanying notes to the consolidated financial statements are an
    integral part of these statements.



    CANADA BREAD COMPANY, LIMITED
    Consolidated Statements of Cash Flows
    (In thousands of Canadian dollars)

    -------------------------------------------------------------------------
                                                 Three months ended March 31,
    (Unaudited)                                             2007        2006
    -------------------------------------------------------------------------

    CASH PROVIDED BY (USED IN)

    Operating activities
      Net earnings                                     $  17,910   $  19,397
      Add (deduct) items not affecting cash:
        Depreciation and amortization                     12,284      11,294
        Future income taxes                                  970      (1,077)
        Gain on sale of property and equipment              (490)       (162)
      Other                                                  244          54
      Change in operating working capital                (10,970)    (35,022)
      -----------------------------------------------------------------------
                                                          19,948      (5,516)

    Financing activities
      Dividends paid                                      (1,525)     (1,525)
      Increase in long-term debt                          11,677       3,294
      -----------------------------------------------------------------------
                                                          10,152       1,769

    Investing activities
      Additions to property and equipment                (11,667)     (9,870)
      Proceeds from sale of property and equipment           600         276
      Purchase of net assets of business, net of
       cash acquired (Note 7)                             (7,989)     (1,865)
      Change in intangible assets                             31         150
      -----------------------------------------------------------------------
                                                         (19,025)    (11,309)

    Increase (decrease) in cash and cash equivalents      11,075     (15,056)

    Cash and cash equivalents (bank indebtedness),
     beginning of period                                  (1,130)     11,382
    -------------------------------------------------------------------------
    Cash and cash equivalents (bank indebtedness),
     end of period                                     $   9,945   $  (3,674)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The accompanying notes to the consolidated financial statements are an
    integral part of these statements.



    CANADA BREAD COMPANY, LIMITED
    Segmented Financial Information
    (In thousands of Canadian dollars)

    -------------------------------------------------------------------------
                                                 Three months ended March 31,
    (Unaudited)                                             2007        2006
    -------------------------------------------------------------------------

    Sales
      Fresh Bakery                                     $ 219,186   $ 207,494
      Frozen Bakery                                      139,151      94,070
    -------------------------------------------------------------------------
                                                       $ 358,337   $ 301,564
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings from operations before restructuring
     and other related costs
      Fresh Bakery                                     $  22,001   $  21,576
      Frozen Bakery                                        7,960       6,425
    -------------------------------------------------------------------------
                                                       $  29,961   $  28,001
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Additions to property and equipment
      Fresh Bakery                                     $   7,002   $   5,551
      Frozen Bakery                                        4,665       4,319
    -------------------------------------------------------------------------
                                                       $  11,667   $   9,870
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Depreciation and amortization
      Fresh Bakery                                     $   6,202   $   5,812
      Frozen Bakery                                        6,082       5,482
    -------------------------------------------------------------------------
                                                       $  12,284   $  11,294
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------
                                               As at       As at       As at
                                            March 31,   March 31,   December
                                                2007        2006    31, 2006
    -------------------------------------------------------------------------
                                          (Unaudited) (Unaudited)
    Total assets (Note 2(b))
      Fresh Bakery                         $ 385,157   $ 361,462   $ 378,311
      Frozen Bakery                          525,974     363,960     529,360
      Non-allocated assets                    33,818      37,544      16,597
    -------------------------------------------------------------------------
                                           $ 944,949   $ 762,966   $ 924,268
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The accompanying notes to the consolidated financial statements are an
    integral part of these statements.



    CANADA BREAD COMPANY, LIMITED
    Notes to Consolidated Financial Statements
    (Tabular amounts in thousands of Canadian dollars)

    Three months ended March 31, 2007 and 2006

    -------------------------------------------------------------------------

    1.  THE COMPANY

        Canada Bread Company, Limited ("Canada Bread" or "the Company") and
        its subsidiaries operate in the bakery industry across North America
        and internationally. Its principal business is the manufacture and
        sale of bakery and pasta products, including fresh bread, rolls,
        bagels and par-baked bread. Canada Bread is 88% owned by Maple Leaf
        Foods Inc. ("Maple Leaf") as at March 31, 2007.

    2.  SIGNIFICANT ACCOUNTING POLICIES

        The unaudited interim consolidated financial statements should be
        read in conjunction with the annual consolidated financial statements
        for the year ended December 31, 2006. These unaudited interim
        consolidated financial statements have been prepared in accordance
        with Canadian generally accepted accounting principles using the same
        accounting policies as were applied in the consolidated financial
        statements for the year ended December 31, 2006, except for the
        following:

        (a) Accounting changes

            Effective January 1, 2007 the Company prospectively adopted the
            guidance presented in CICA Handbook Sections 1530 "Comprehensive
            Income" ("Section 1530"), Section 3855 "Financial Instruments -
            Recognition and Measurement" ("Section 3855"), and Section 3865
            "Hedges" ("Section 3865").

            On January 1, 2007 the Company recorded the following
            transitional adjustment to the consolidated balance sheet as a
            result of the adoption of the new standards:

            -----------------------------------------------------------------
            Increase in other current assets                       $   3,369
            Increase in future tax assets - long-term                     85
            Increase in other long-term liabilities                   (3,616)
            Accumulated other comprehensive loss - cash flow hedges      162
            -----------------------------------------------------------------

            (i) Comprehensive Income

            In accordance with Section 1530, the Company has presented
            comprehensive income and its components as part of the financial
            statements to show unrealized gains and losses that are not
            included in GAAP income. Comprehensive income is the change in
            equity during a period resulting from transactions and other
            events from non-owner sources. It includes all changes in equity
            during a period except those resulting from investments by owners
            and distributions to owners. In accordance with the new standard,
            $5.3 million relating to unrealized losses resulting from the
            translation of self-sustaining operations which had previously
            been classified as unrealized foreign currency adjustment within
            shareholders' equity is now presented within accumulated other
            comprehensive income.

            (ii) Financial Instruments

            In accordance with Section 3855, the Company has classified all
            financial assets as either held for trading, available for sale,
            held-to-maturity or loans and receivables. All financial
            liabilities are classified as either held for trading or as other
            liabilities. Financial assets and liabilities classified as held
            for trading are measured at fair value with changes in fair value
            recognized in net income in the period in which they arise.
            Financial assets classified as available-for-sale are measured at
            fair value with gains and losses recognized in other
            comprehensive income until the underlying financial asset is
            derecognized or becomes impaired. Held-to-maturity investments,
            loans and receivables and other liabilities are measured at
            amortized cost. Gains or losses on financial assets and
            liabilities carried at amortized cost are recognized in earnings
            when the financial asset or financial liability is derecognized
            or impaired. All derivative instruments, including any embedded
            derivatives that are required to be separated from their host
            instruments, are recorded at fair value with changes in fair
            value being recorded in income unless the derivative is
            designated as a cash flow hedge or a hedge of a net investment in
            a self-sustaining foreign operation. The Company completed a
            detailed review of its financial instruments and its contracts
            and determined that the fair value of embedded derivative
            instruments which required separation from their host instruments
            was not significant.

            (iii) Hedge Accounting

            The Company's existing hedging relationships continue to qualify
            for hedge accounting under the new standard. The Company
            continues to designate hedges as either fair value hedges, cash
            flow hedges or hedges of a net investment in a self-sustaining
            foreign operation. For a fair value hedge, changes in the fair
            value of the hedging derivative are recognized in income together
            with the offsetting change on the hedged item attributable to the
            hedged risk. For cash flow and net investment hedges, changes in
            the fair value of the hedging derivative, to the extent
            effective, are recorded in other comprehensive income (loss) and
            are subsequently recognized in income when the hedged item
            affects income. Any ineffectiveness in hedging relationships is
            recognized in income immediately.

            On adoption the Company recognized an increase in other current
            assets of $3.4 million, an increase in other long term
            liabilities of $3.6 million and an increase in accumulated other
            comprehensive loss of $0.2 million (net of future taxes of
            $0.1 million) to recognize the fair value of interest rate and
            cross currency interest rate swaps used to hedge the Company's
            interest rate and foreign currency exposure. On adoption of the
            new standard, there was no significant ineffectiveness in these
            hedging relationships. The following table illustrates the fair
            values of financial instruments by type of hedging relationship:

            -----------------------------------------------------------------
                                                       As at January 1, 2007
                                                          Other        Other
                                                        Current    Long-term
                                                         Assets  Liabilities
            -----------------------------------------------------------------

            Cross currency interest rate swaps to
             hedge the net investment in self-
             sustaining foreign operations(i)         $  59,803    $       -
            Interest rate swaps to hedge interest
             rate exposure                                    -        3,616
            -----------------------------------------------------------------
            Total                                     $  59,803    $   3,616
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            (i) The fair value of the cross currency interest rate swaps
                recorded in the accounts includes a gain of $ 56.4 million
                which had been recorded prior to adoption of the new standard
                related to the loss on currency translation that was
                previously recorded in the unrealized foreign currency
                adjustment account.

            The fair value of the Company's financial instruments used to
            hedge interest rate and foreign currency exposures as at
            March 31, 2007 are as follows:

            -----------------------------------------------------------------
                                                        As at March 31, 2007
                                                          Other        Other
                                                        Current    Long-term
                                                         Assets  Liabilities
            -----------------------------------------------------------------

            Cross currency interest rate swaps to
             hedge the net investment in self-
             sustaining foreign operations(i)         $  60,425    $       -
            Interest rate swaps to hedge interest
             rate exposure                                    -        3,293
            Foreign currency contracts to hedge
             transactions denominated in foreign
             currencies                                     519            -
            -----------------------------------------------------------------
            Total                                     $  60,944    $   3,293
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            (i) The fair value amount includes a currency revaluation gain of
                $58.2 million, which has been recorded in the unrealized
                foreign currency translation adjustment, a component of
                accumulated other comprehensive income.

        (b) Comparative figures

            Certain 2006 comparative figures have been reclassified to
            conform to the financial statement presentation adopted in 2007
            and the year ended 2006.

    3.  ACCOUNTS RECEIVABLE

        Under revolving securitization programs, the Company has sold, with
        limited recourse, certain of its trade accounts receivable to
        financial institutions. The Company retains servicing
        responsibilities and assumes limited recourse obligations for
        delinquent receivables. At March 31, 2007, trade accounts receivable
        being serviced under this program amounted to $70.0 million
        (March 31, 2006: $70.0 million; December 31, 2006: $70.0 million)

    4.  ACCUMULATED OTHER COMPREHENSIVE LOSS

        Shareholders' equity consists of the following:

        ---------------------------------------------------------------------
                                                              As at March 31,
                                                            2007        2006
        ---------------------------------------------------------------------

        Share capital (25,416,812 common shares)       $ 142,965   $ 142,965
        Retained earnings                                467,118     424,521
        Accumulated other comprehensive loss
         (see below)                                      (6,310)    (13,941)
        ---------------------------------------------------------------------
                                                       $ 603,773   $ 553,545
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Accumulated other comprehensive loss consists of the following:

        ---------------------------------------------------------------------
                                                 Three months ended March 31,
                                                            2007        2006
        ---------------------------------------------------------------------

        Balance at the beginning of the period         $  (5,254)  $ (14,882)
        Transition adjustment as of January 1, 2007
         (Note 2(a))                                        (162)          -
        ---------------------------------------------------------------------
        Adjusted balance at the beginning of
         the period                                    $  (5,416)  $ (14,882)

          Change in accumulated foreign currency
           translation adjustment                           (715)        941
          Change in unrealized derivative loss on
           cash flow hedges - net(i)                        (179)          -
          -------------------------------------------------------------------
          Other comprehensive income (loss) for
           the period                                  $    (894)  $     941
        ---------------------------------------------------------------------
        Accumulated other comprehensive loss as at
         March 31, 2007                                $  (6,310)  $ (13,941)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        (i) Unrealized derivative loss on cash flow hedges is net of tax of
            $0.1 million in the quarter. The Company estimates that
            $1.8 million of net derivative gains included in other
            comprehensive income will be reclassified into net earnings
            within the next 12 months. During the quarter, a gain of
            approximately $0.9 million was released to income from
            accumulated other comprehensive loss, which is included in the
            net change for the period.

    5.  RESTRUCTURING AND OTHER RELATED COSTS

        During the fourth quarter of 2006, the Company recorded restructuring
        and other related costs of $5.5 million ($3.7 million after tax).
        These costs related to the closure of a fresh bakery plant in British
        Columbia, and lease termination costs related to the winding down of
        the fresh waffle business in Ontario. During the first quarter of
        2007, additional costs of $2.2 million ($1.5 million after tax) were
        incurred relating to these closures. The following table provides a
        summary of the costs recognized and cash payments made in respect of
        these restructuring and other related initiatives in the first
        quarter of 2007 as well as the related liability as at March 31,
        2007.

        ---------------------------------------------------------------------
                                             Acceler-
                                                ated
                                    Site      Deprec-
                   Severance     closing      iation   Retention       Total
        ---------------------------------------------------------------------
        2006 Restructuring
        and other related Costs

        Charges
         during
         fourth
         quarter   $   2,525   $   1,428   $   1,531   $       -   $   5,484
        Cash
         draw-downs        -         (67)          -           -         (67)
        Non-cash
         items             -           -      (1,531)          -      (1,531)
        ---------------------------------------------------------------------
        Balance at
         December
         31, 2006  $   2,525   $   1,361   $       -   $       -   $   3,886
        Charges
         during
         first
         quarter   $       -   $     269   $   1,861   $      62   $   2,192
        Cash
         draw-downs        -        (193)          -           -        (193)
        Non-cash
         items             -           -      (1,861)          -      (1,861)
        ---------------------------------------------------------------------
        Balance at
         March 31,
         2007      $   2,525   $   1,437   $       -   $      62   $   4,024
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    6.  PENSIONS

        During the quarter, the Company recorded $2.5 million related to net
        benefit plan expense (2006: $2.5 million).

    7.  ACQUISITIONS

        On February 26, 2007 the Company acquired 100% ownership in
        Pâtisserie Chevalier Inc. ("Chevalier") for $7.9 million. Chevalier
        is a leading producer of single-portion snack cake products in
        Quebec. As at March 31, 2007 the Company has not yet finalized the
        purchase price allocation.

        On October 2, 2006, the Company acquired the shares of Royal Touch
        Foods Inc. ("Royal Touch") for $8.0 million, net of estimated cash
        acquired of $0.8 million. The Company purchased 50% of the Royal
        Touch shares from Maple Leaf and acquired the remaining shares from
        an unrelated third party for the same price. As at March 31, 2007 the
        Company has not yet finalized the purchase price allocation.

    8.  SUPPLEMENTAL CASH FLOW INFORMATION

        ---------------------------------------------------------------------
                                                 Three months ended March 31,
                                                            2007        2006
        ---------------------------------------------------------------------
        Net interest paid                              $   1,434   $     729
        Net income taxes paid                             13,088      17,277
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    





For further information:

For further information: Lynda Kuhn, Vice-President Public & Investor
Relations, (416) 926-2026, www.canadabread.ca


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