Canada Bread Reports Results for First Quarter 2009



    TORONTO, April 29 /CNW/ - Canada Bread Company, Limited (TSX: CBY) today
reported its financial results for the first quarter ended March 31, 2009.

    
    -   Adjusted Operating Earnings increased 9% to $21.4M compared to last
        year
    -   Adjusted Earnings per Share increased to $0.60 from $0.52
    -   Net earnings per share of $0.59 compared to $0.48 last year

        Note: Adjusted Operating Earnings are defined as earnings from
        operations before restructuring and other related costs and other
        income. Adjusted Earnings per Share ("Adjusted EPS") are defined as
        basic earnings per share adjusted for the impact of restructuring and
        other related costs.
    

    "In line with the trend experienced late in 2008, the first quarter of
2009 continued to demonstrate a return to more stable and improved earnings,
although margins were impacted by a decline in the Canadian dollar and its
effect on wheat costs," said Richard Lan, President and CEO. "The improvement
in the first quarter reflects actions we have taken to improve business
efficiencies and pass through higher input costs as required. A higher value
sales mix also contributed to results, and we continue to focus on innovation
to provide consumers with appealing new product choices and accelerate
growth."

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

    Sales for the first quarter increased 7.9% to $413.1 million compared to
$382.9 million in the same period last year. Excluding acquisitions, sales
increased by 5.3%, mostly as a result of price increases implemented across
all North American bakery businesses in 2008 in response to escalating input
costs and product mix improvements in the Fresh Bakery operations.
    Earnings from operations before restructuring and other related costs
("Adjusted Operating Earnings") increased 9.2% to $21.4 million compared to
$19.5 million last year. Net earnings for the quarter increased to $14.9
million compared to $12.2 million last year.

    
    The following is a summary of Adjusted EPS:

    -------------------------------------------------------------------------
                                                               First Quarter
    Per share                                                  2009     2008
    -------------------------------------------------------------------------
    EPS                                                       $0.59    $0.48
    Restructuring and other related costs                     $0.02    $0.04
    -------------------------------------------------------------------------
    Adjusted EPS(i)                                           $0.60    $0.52
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (i) This table does not add due to rounding


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

    Following is a summary of Adjusted Operating Earnings by business segment:

    -------------------------------------------------------------------------
                                                      First Quarter
    ($ millions)                                      2009     2008   Change
    -------------------------------------------------------------------------
    Fresh Bakery                                     $12.8    $12.7     1.0%
    Frozen Bakery                                      8.5      6.9    24.5%
    -------------------------------------------------------------------------
                                                   $21.4(i) $19.5(i)    9.2%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (i) This table does not add due to rounding


    Fresh Bakery (Fresh bakery products, sweet goods, sandwiches, and
    specialty fresh pasta and sauces)
    

    Fresh Bakery sales in the first quarter increased 10.9% to $263.0 million
compared to $237.2 million last year mainly due to price increases taken in
the first half of 2008, favourable sales mix and acquisitions. Excluding
acquisitions, sales in Fresh Bakery increased 6.6% to $252.9 million.
    Adjusted Operating Earnings in the quarter increased to $12.8 million
compared to $12.7 million in the prior year. Price increases implemented in
the first half of 2008, and better sales mix in the Fresh bakery operations
and pasta business were the main contributors to improved margins in the
quarter. Fresh Bakery margins recovered closer to long-term historical levels;
however, margin recovery was partially mitigated by the weakening of the
Canadian dollar which impacted the price of wheat in the first quarter of
2009. Additionally, prices for packaging and other ingredients remained higher
than last year.
    Fresh Bakery increased its investment in marketing and promotional
activities in the first quarter of 2009 to support, among others, the national
launch of Healthy Way(R) with ProCardio Recipe(TM) breads and fresh squares.
Healthy Way(R) with ProCardio Recipe(TM) breads and fresh squares are the
first line of Fresh Bakery products specifically targeting the heart health
segment and broaden Dempster's(R) brand leadership in higher nutrition bakery
products.

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

    Frozen Bakery sales for the quarter increased by 3.1% to $150.1 million
from $145.6 million in the same period last year, driven mainly by price
increases implemented in North America in 2008.
    Adjusted Operating Earnings in the quarter increased to $8.5 million
compared to $6.9 million in the first quarter of 2008. Earnings in the North
American frozen bakery operations increased due to a combination of price
increases implemented in 2008 and increased operational efficiencies. Lower
distribution costs, the commissioning of the new bagel line in Roanoke,
Virginia, in the first quarter of 2009 and the closure of the bagel facility
in Toronto, Ontario, late in 2008 contributed to the operational improvements.
Management is focused on achieving further efficiencies as the bagel line in
Roanoke reaches planned production levels.
    Earnings in the U.K. bakery operations declined in the quarter compared
to last year due to a lower margin product mix as the effect of the economic
recession has been more pronounced in the U.K. than in the Company's other
operations. Also, increased promotional costs to restore bagel volumes reduced
earnings. The bagel production line at the Rotherham plant continued to ramp
up during the quarter, after a major oven fire that disrupted production
through most of 2008. Production is now stabilized and Management is focused
on increasing volumes to full capacity.

    
    Other Income
    ------------

    In the first quarter of 2009, the Company received insurance proceeds of
$1.7 million (recorded in Other Income), mostly to cover business interruption
losses and operating impacts resulting from the oven fire in the U.K. in 2008.

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

    On April 28, 2009, Canada Bread Company, Limited declared a dividend of
$0.06 per share payable on July 2, 2009 to shareholders of record on June 5,
2009. Unless indicated otherwise, by the Company, in writing at or before the
time the dividend is paid, each dividend paid by the Corporation in 2009 or a
subsequent year is an eligible dividend for the purposes of the "Enhanced
Dividend Tax Credit System".

    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. 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 expectations
concerning performance of the Company's business in general, and 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; 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 in the Company's Management's Discussion and Analysis 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 or implied by forward-looking statements are
discussed more fully under the heading "Risk Factors" in the Company's Annual
Management's Discussion and Analysis for the year ended December 31, 2008 and
updated in each quarterly Management's Discussion and Analysis that are
available on SEDAR at www.sedar.com. The Company does not intend, 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.

    Canada Bread Company Limited, which is 89.8% 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 2008
sales of $1.7 billion and employs approximately 8,500 people at its operations
across North America and in the United Kingdom.


    
    Consolidated Interim Financial Statements
    (Expressed in Canadian dollars)

    CANADA BREAD COMPANY,
    LIMITED

    Three months ended March 31, 2009 and 2008



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

    -------------------------------------------------------------------------
                                           As at         As at         As at
                                        March 31,     March 31,  December 31,
                                            2009          2008          2008
    -------------------------------------------------------------------------
                                      (Unaudited)   (Unaudited)
    ASSETS

    Current assets
      Cash and cash equivalents      $    10,826   $         -   $    11,721
      Accounts receivable                 57,619        80,649        57,079
      Due from Maple Leaf Foods Inc.       2,500             -            54
      Inventories                         59,761        55,753        58,696
      Future tax asset - current           5,612        19,059         5,388
      Prepaid expenses and other
       current assets                      5,663         5,364        12,923
      -----------------------------------------------------------------------
                                     $   141,981   $   160,825   $   145,861

    Property and equipment               417,381       411,323       417,150

    Goodwill                             406,573       402,806       404,484

    Other intangible assets               20,045        13,787        17,451

    Other long-term assets                10,298         9,503         9,964
    -------------------------------------------------------------------------
                                     $   996,278   $   998,244   $   994,910
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities
      Bank indebtedness              $     8,875   $    10,457   $     8,894
      Accounts payable and accrued
       charges                           184,014       177,346       207,928
      Due to Maple Leaf Foods Inc.             -         5,226             -
      Dividends payable                    1,525         1,525         1,525
      Income and other taxes payable       9,186        23,102        10,860
      Current portion of long-term debt       36        76,900            41
      -----------------------------------------------------------------------
                                     $   203,636   $   294,556   $   229,248

    Long-term debt                        13,730             -         4,477

    Future tax liability - non-current    36,402        34,105        36,043

    Other long-term liabilities           17,006        13,825        16,802

    Shareholders' equity                 725,504       655,758       708,340
    -------------------------------------------------------------------------
                                     $   996,278   $   998,244   $   994,910
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

    -------------------------------------------------------------------------
                                                 Three months ended March 31,
    (Unaudited)                                           2009          2008
    -------------------------------------------------------------------------

    Sales                                          $   413,125   $   382,869

    Cost of goods sold                                 337,266       317,671
    -------------------------------------------------------------------------

    Gross margin                                   $    75,859   $    65,198

    Selling, general and administrative expenses        54,509        45,654
    -------------------------------------------------------------------------

    Earnings from operations before the following: $    21,350   $    19,544

    Restructuring and other related costs                 (573)       (1,273)

    Other income                                         1,770            34
    -------------------------------------------------------------------------

    Earnings before interest and income taxes      $    22,547   $    18,305

    Interest expense                                     1,493         1,758
    -------------------------------------------------------------------------

    Earnings before income taxes                   $    21,054   $    16,547

    Income taxes                                         6,172         4,336

    -------------------------------------------------------------------------
    Net earnings                                   $    14,882   $    12,211
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted earnings per share           $      0.59   $      0.48

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



    CANADA BREAD COMPANY, LIMITED
    Consolidated Statements of Comprehensive Income
    (In thousands of Canadian dollars)

    -------------------------------------------------------------------------
                                                 Three months ended March 31,
    (Unaudited)                                           2009          2008
    -------------------------------------------------------------------------

    Net earnings                                   $    14,882   $    12,211

    Other comprehensive income                           3,794        10,029

    -------------------------------------------------------------------------
    Comprehensive income                           $    18,676   $    22,240
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statements of Retained Earnings
    (In thousands of Canadian dollars, except share amounts)

    -------------------------------------------------------------------------
                                                 Three months ended March 31,
    (Unaudited)                                           2009          2008
    -------------------------------------------------------------------------

    Retained earnings, beginning of period         $   587,163   $   528,327

    Net earnings                                        14,882        12,211

    Dividends declared ($0.06 per share; 2008:
     $0.06 per share)                                   (1,525)       (1,525)

    -------------------------------------------------------------------------
    Retained earnings, end of period               $   600,520   $   539,013
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

    -------------------------------------------------------------------------
                                                 Three months ended March 31,
    (Unaudited)                                           2009          2008
    -------------------------------------------------------------------------

    CASH PROVIDED BY (USED IN):

    Operating activities
      Net earnings                                 $    14,882   $    12,211
      Add (deduct) items not affecting cash:
        Depreciation and amortization                   14,077        12,819
        Future income taxes                                 76           927
        Loss (gain) on sale of property and
         equipment                                         192           (15)
        Asset impairments and change in provision
         for restructuring and other related costs        (540)          742
      Other                                               (643)        1,512
      Change in non-cash operating working capital     (20,993)      (27,620)
    -------------------------------------------------------------------------
    Cash provided by operating activities          $     7,051   $       576
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Financing activities
      Dividends paid                               $    (1,525)  $    (1,525)
      Net increase (decrease) in long-term debt          9,248       (30,748)
      Settlement of cross currency interest rate
       swap with Maple Leaf                                  -        80,586
    -------------------------------------------------------------------------
    Cash provided by financing activities          $     7,723   $    48,313
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Investing activities
      Additions to property and equipment          $   (14,842)  $    (8,628)
      Proceeds from sale of property and equipment         392            15
      Acquisition of businesses - net of cash
       acquired                                              -       (43,536)
      Change in intangible assets                           37          (199)
      Other                                             (1,237)            -
    -------------------------------------------------------------------------
    Cash used in investing activities              $   (15,650)  $   (52,348)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Decrease in cash and cash equivalents          $      (876)  $    (3,459)

    Net cash and cash equivalents, beginning
     of period                                           2,827        (6,998)

    -------------------------------------------------------------------------
    Net cash and cash equivalents, end of period   $     1,951   $   (10,457)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

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


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