Canada Bread Reports Results for First Quarter 2010

TORONTO, April 29 /CNW/ - Canada Bread Company, Limited (TSX: CBY) today reported its financial results for the first quarter ended March 31, 2010. First quarter highlights include:

    
       -  Adjusted Operating Earnings were $20.3 million; $21.4 million
          last year
       -  Adjusted EPS were $0.55 compared to $0.60 last year
       -  Basic EPS were $0.50 compared to $0.59 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, net of tax.
    

"Our first quarter results were impacted by transitory challenges in our Frozen Bakery business, including our North American and U.K. operations, which more than offset earnings growth in our Fresh Bakery business," said Richard Lan, President and CEO. "We are taking steps to reduce costs and build volumes, and as a result are seeing signs of improvement in these businesses. We are confident that these initiatives will drive better results."

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

Sales for the first quarter declined to $381.9 million from $413.1 million in the prior year, due to the unfavourable impact of currency shifts and lower volumes in the Frozen Bakery segment.

Adjusted Operating Earnings in the quarter decreased to $20.3 million from $21.4 million. The earnings decline in the first quarter mostly reflected the impact of lower volumes in the Frozen Bakery segment. This was partly offset by increased operating earnings in the Fresh Bakery segment.

Net earnings declined to $12.7 million ($0.50 per share) compared to $14.9 million ($0.59 per share) last year. Adjusted EPS declined to $0.55 from $0.60 in the prior year.

Following is a reconciliation of Basic EPS to Adjusted EPS:

    
                                                             First Quarter
    -------------------------------------------------------------------------
                                                           2010         2009
    -------------------------------------------------------------------------
    Basic EPS                                             $0.50        $0.59
    Restructuring and other related costs                 $0.05        $0.02
    -------------------------------------------------------------------------
    Adjusted EPS(i)                                       $0.55        $0.60
    -------------------------------------------------------------------------
    (i) Does not add due to rounding.


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

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

    -------------------------------------------------------------------------
    ($ thousands)                                            First Quarter
                                                           2010         2009
    -------------------------------------------------------------------------
    Fresh Bakery                                        $20,691      $12,818
    Frozen Bakery                                          (367)       8,532
    -------------------------------------------------------------------------
    Adjusted Operating Earnings                         $20,324      $21,350
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Fresh Bakery
    ------------
    

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

First quarter sales of $257.2 million were slightly lower than sales of $263.0 million in the same period last year, mostly due to lower sales in the fresh sandwich business and increased trade investment. Adjusted Operating Earnings in the quarter increased to $20.7 million from $12.8 million.

    
    Frozen Bakery
    -------------
    

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

Sales declined to $124.7 million from $150.1 million last year, in part due to the unfavourable impact of a stronger Canadian dollar on the Company's sales in the U.S. and U.K. and lower sales volume in both the North American and U.K. frozen bakery businesses.

Adjusted Operating Earnings in the quarter were a loss of $0.4 million compared to earnings of $8.5 million last year, mostly due to the decline in sales volume. Management expects the volume decline in North America to be transitory as new business is gradually being secured and is taking steps to reduce the cost base in the Company's U.K. operations until volumes improve.

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

On April 28, 2010, Canada Bread Company, Limited declared a dividend of $0.06 per share payable on July 2, 2010 to shareholders of record at the close of business on June 5, 2010. Unless indicated otherwise, by the Company, in writing at or before the time the dividend is paid, this dividend will be considered 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, 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 and the British pound; initiatives to restore sales volumes in the North American and U.K. frozen bakery businesses; initiatives to reduce its cost base in the U.K.; 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 under the "Risk Factors" in the Company's Annual Management's Discussion and Analysis for the year ended December 31, 2009 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, 2009 including the section entitled "Risk Factors" that will be available on SEDAR at www.sedar.com. The Company does not intend to, and the Company disclaims any obligation to, update any forward-looking statements, whether written or oral, or whether as a result of new information, future events or otherwise except as required by law.

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 2009 sales of $1.7 billion and employs approximately 8,000 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, 2010 and 2009


    CANADA BREAD COMPANY, LIMITED
    Consolidated Balance Sheets
    (In thousands of Canadian dollars)
    ------------------------------------------------------------------------
                                           As at       As at          As at
                                        March 31,   March 31,   December 31,
                                            2010        2009           2009
    ------------------------------------------------------------------------
                                      (Unaudited) (Unaudited)

    ASSSETS

    Current assets
      Cash and cash equivalents        $  68,471   $  10,826      $  57,698
      Accounts receivable                 56,399      57,619         63,620
      Due from Maple Leaf Foods Inc.       6,740       2,500              -
      Inventories                         53,383      59,761         56,659
      Future tax asset                     1,629       5,612          1,640
      Prepaid expenses and other assets    4,109       5,663          4,438
      ----------------------------------------------------------------------
                                       $ 190,731   $ 141,981      $ 184,055

    Property and equipment               373,477     417,381        387,252

    Goodwill                             375,107     406,573        386,807

    Other intangible assets               15,196      20,045         16,678

    Other long-term assets                11,066      10,298         11,620
    -------------------------------------------------------------------------
                                       $ 965,577   $ 996,278      $ 986,412
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities
      Bank indebtedness                $   6,167   $   8,875      $   4,247
      Accounts payable and accrued
       charges                           171,597     184,014        172,172
      Due to Maple Leaf Foods Inc.             -           -          3,817
      Dividends payable                    1,525       1,525          1,525
      Income and other taxes payable       7,313       9,186         13,155
      Current portion of long-term debt        -          36              -
      -----------------------------------------------------------------------
                                       $ 186,602   $ 203,636      $ 194,916

    Long-term debt                         2,311      13,730          2,547

    Future tax liability                  31,196      36,402         33,338

    Other long-term liabilities            8,187      17,006          8,524

    Shareholders' equity                 737,281     725,504        747,087
    -------------------------------------------------------------------------
                                       $ 965,577   $ 996,278      $ 986,412
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CANADA BREAD COMPANY, LIMITED
    Consolidated Statements of Earnings
    (In thousands of Canadian dollars, except share amounts)
    -------------------------------------------------------------------------
                                                Three months ended March 31,
    (Unaudited)                                         2010           2009
    -------------------------------------------------------------------------
    Sales                                          $ 381,932      $ 413,125

    Cost of goods sold                               306,807        337,266
    -------------------------------------------------------------------------
    Gross margin                                   $  75,125      $  75,859

    Selling, general and administrative expenses      54,801         54,509
    -------------------------------------------------------------------------
    Earnings from operations before the
     following:                                    $  20,324      $  21,350

    Restructuring and other related costs             (1,704)          (573)

    Other income                                          72          1,770
    -------------------------------------------------------------------------
    Earnings before interest and income taxes      $  18,692      $  22,547

    Interest expense                                     984          1,493
    -------------------------------------------------------------------------
    Earnings before income taxes                   $  17,708      $  21,054

    Income taxes                                       4,981          6,172
    -------------------------------------------------------------------------
    Net earnings                                   $  12,727      $  14,882
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per share - basic and diluted         $    0.50      $    0.59
    -------------------------------------------------------------------------
    Weighted average number of shares (millions)        25.4           25.4
    -------------------------------------------------------------------------



    CANADA BREAD COMPANY, LIMITED
    Consolidated Statements of Comprehensive Income (Loss)
    (In thousands of Canadian dollars)
    -------------------------------------------------------------------------
                                                Three months ended March 31,
    (Unaudited)                                         2010           2009
    -------------------------------------------------------------------------
    Net earnings                                   $  12,727      $  14,882

    Other comprehensive income (loss)                (21,008)         3,794
    -------------------------------------------------------------------------
    Comprehensive income (loss)                    $  (8,281)     $  18,676
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statements of Retained Earnings
    (In thousands of Canadian dollars, except share amounts)
    -------------------------------------------------------------------------
                                                Three months ended March 31,
    (Unaudited)                                         2010           2009
    -------------------------------------------------------------------------
    Retained earnings, beginning of period         $ 658,541      $ 587,163

    Net earnings                                      12,727         14,882

    Dividends declared ($0.06 per share;
     2009: $0.06 per share)                           (1,525)        (1,525)
    -------------------------------------------------------------------------
    Retained earnings, end of period               $ 669,743      $ 600,520
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CANADA BREAD COMPANY, LIMITED
    Consolidated Statements of Cash Flows
    (In thousands of Canadian dollars)
    -------------------------------------------------------------------------
                                                Three months ended March 31,
    (Unaudited)                                         2010           2009
    -------------------------------------------------------------------------

    Cash provided by (used in):

    Operating activities
      Net earnings                                 $  12,727      $  14,882
      Add (deduct) items not affecting cash:
        Depreciation and amortization                 12,691         14,077
        Future income taxes                           (2,041)            76
        Loss (gain) on sale of property and
         equipment                                       (52)           192
        Amortization of terminated interest rate
         swap                                            658              -
        Asset impairments and change in provision
         for restructuring and other related costs     1,072           (540)
      Other                                               95           (643)
      Change in non-cash operating working capital    (7,715)       (20,993)
    -------------------------------------------------------------------------
    Cash provided by operating activities          $  17,435      $   7,051
    -------------------------------------------------------------------------

    Financing activities
      Dividends paid                               $  (1,525)     $  (1,525)
      Net increase (decrease) in long-term debt         (236)         9,248
    -------------------------------------------------------------------------
    Cash provided by (used in) financing
     activities                                    $  (1,761)     $   7,723
    -------------------------------------------------------------------------

    Investing activities
      Additions to property and equipment          $  (7,556)     $ (14,842)
      Proceeds from sale of property and equipment       685            392
      Other                                               50         (1,200)
    -------------------------------------------------------------------------
    Cash used in investing activities              $  (6,821)     $ (15,650)
    -------------------------------------------------------------------------

    Increase (decrease) in cash and cash
     equivalents                                   $   8,853      $    (876)

    Net cash and cash equivalents, beginning
     of period                                        53,451          2,827
    -------------------------------------------------------------------------
    Net cash and cash equivalents, end of period   $  62,304      $   1,951
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CANADA BREAD COMPANY, LIMITED
    Segmented Financial Information
    (In thousands of Canadian dollars)
    -------------------------------------------------------------------------
                                                Three months ended March 31,
    (Unaudited)                                         2010           2009
    -------------------------------------------------------------------------
    Sales
       Fresh Bakery                                $ 257,189      $ 263,003
       Frozen Bakery                                 124,743        150,122
    -------------------------------------------------------------------------
                                                   $ 381,932      $ 413,125
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings from operations before restructuring
     and other related costs and other income
       Fresh Bakery                                $  20,691      $  12,818
       Frozen Bakery                                    (367)         8,532
    -------------------------------------------------------------------------
                                                   $  20,324      $  21,350
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Additions to property and equipment
       Fresh Bakery                                $   4,084      $   5,728
       Frozen Bakery                                   3,472          9,114
    -------------------------------------------------------------------------
                                                   $   7,556      $  14,842
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Depreciation and amortization
       Fresh Bakery                                $   6,789      $   7,148
       Frozen Bakery                                   5,902          6,929
    -------------------------------------------------------------------------
                                                   $  12,691      $  14,077
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    ------------------------------------------------------------------------
                                           As at       As at          As at
                                        March 31,   March 31,   December 31,
                                            2010        2009           2009
    ------------------------------------------------------------------------
                                      (Unaudited) (Unaudited)

    Total assets
      Fresh Bakery                     $ 442,995   $ 442,703      $ 441,020
      Frozen Bakery                      439,881     524,853        476,681
      Non-allocated assets                82,701      28,722         68,711
    ------------------------------------------------------------------------
                                       $ 965,577   $ 996,278      $ 986,412
    ------------------------------------------------------------------------
    ------------------------------------------------------------------------
    Goodwill
      Fresh Bakery                     $ 156,048   $ 156,264      $ 155,946
      Frozen Bakery                      219,059     250,309        230,861
    ------------------------------------------------------------------------
                                       $ 375,107   $ 406,573      $ 386,807
    ------------------------------------------------------------------------
    ------------------------------------------------------------------------
    

SOURCE Canada Bread Company, Limited

For further information: For further information: Lynda Kuhn, SVP Communications, (416) 926-2026, www.canadabread.ca


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