Canada Bread Reports Results for Fourth Quarter and Fiscal Year 2009

TORONTO, Feb. 24 /CNW/ - Canada Bread Company, Limited (TSX: CBY) today reported its financial results for the fourth quarter and year ended December 31, 2009. Fourth quarter highlights include:

    
        -  Adjusted Operating Earnings decreased to $29.1 million from
           $33.8 million
        -  Basic EPS decreased to $0.59 compared to $1.04 last year
        -  Full year Adjusted Operating Earnings increased to $120.5 million
           from $97.6 million

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

"As a company, our goal is to deliver higher levels of growth by expanding into new categories and markets," said Richard Lan, President and CEO. "The earnings decline in the fourth quarter reflects important investments in new products to drive growth. These included expanding our sweet goods with Cadbury(TM) Snack Cakes, and launching Dempster's(R) OvenFresh(TM) ready-to-bake premium dinner breads. For the year 2009, we achieved solid earnings and margin recovery following the sharp commodity cost increases of the previous year. In 2010, we are continuing to place a strong emphasis on innovation to support our leading brands and market shares and investing in our plant network, such as construction of the new Ontario bakery, to increase scale and efficiency."

Financial Overview

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

Sales for the fourth quarter declined to $432.2 million from $445.0 million in the prior year, mainly due to unfavourable currency translation of the Company's sales in the U.K. and U.S. as the Canadian dollar appreciated against the British pound and U.S. dollar compared to last year. Volume increases in the fresh and frozen North American bakeries and pasta business were offset by continued lower sales volume in the U.K. bakery operations and the fresh sandwiches business in Canada. Sales for the full year were consistent at $1.7 billion.

Adjusted Operating Earnings in the quarter decreased to $29.1 million from $33.8 million but increased from $97.6 million to $120.5 million for the full year. The fourth quarter decline was mostly due to the timing of promotional activities, higher marketing and other expenses mostly in the Fresh Bakery segment. Additionally, a short-term increase in trade investment in the Canadian marketplace, the impact of currency changes and higher manufacturing costs in the U.K. bakery operations reduced earnings in the quarter. Lower commodity costs partly offset these increases. Reduced Adjusted Operating Earnings and lower other income contributed to lower net earnings, which declined from $26.5 million ($1.04 per share) last year to $15.0 million ($0.59 per share) in the fourth quarter of 2009. Net earnings for the full year increased from $64.9 million ($2.55 per share) to $77.5 million ($3.05 per share).

Business Segment Review

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

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

    
    -------------------------------------------------------------------------
    ($ thousands)                      Fourth Quarter          Full Year

                                       2009       2008       2009       2008
    -------------------------------------------------------------------------
    Fresh Bakery                    $20,078    $25,398    $91,535    $76,529
    Frozen Bakery                     9,053      8,433     29,002     21,103
    -------------------------------------------------------------------------
    Adjusted Operating Earnings     $29,131    $33,831   $120,537    $97,632
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Fresh Bakery

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

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

Fourth quarter sales of $279.2 million were consistent with last year as increased sales volumes in the fresh bakery and pasta businesses were offset by lower sales volume in the fresh sandwiches business.

Adjusted Operating Earnings in the quarter decreased to $20.1 million from $25.4 million mostly due to increased promotional activities and higher marketing and other expenses. New product launches at the end of the third quarter of 2009, primarily the Dempster's(R) OvenFresh(TM) line of white and multigrain fresh par-baked breads and Cadbury(TM) Snack Cakes, were supported by promotional and marketing campaigns in the fourth quarter which contributed to increase expenses compared to the prior year. Additionally, operating earnings were reduced by a short-term increase in trade investment in the Canadian marketplace. Partly offsetting these increases was the benefit of lower commodity costs. Adjusted Operating Earnings for the full year increased to $91.5 million from $76.5 million last year.

Frozen Bakery

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

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

Sales declined to 152.9 million from $165.8 million last year, mainly driven by the impact of unfavourable currency translation of the Company's sales in the U.K. and U.S. as the Canadian dollar appreciated against the British pound and U.S. dollar compared to the prior year. Sales volumes increased in the North American frozen bakeries due to the addition of new customers. However, improved volumes in North America were offset by lower volumes in the U.K. bakery operations due to a trade down in consumers' purchases from premium to staple products and less promotional activity compared to the prior year.

Adjusted Operating Earnings in the quarter were $9.1 million, slightly higher than last year. The benefits of lower raw material costs and timing of promotional activities were partly offset by increased supply chain investment in the U.K. bakery operations, and the impact of unfavorable currency translation of U.S. dollar denominated sales. For the full year, Adjusted Operating Earnings increased to $29.0 million from $21.1 million last year.

Other Income (Expense)

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

Other income was not significant in the quarter compared to $8.3 million last year. Full year other income was $2.4 million in 2009 compared to $14.7 million in 2008 and mostly related to, in both years, insurance proceeds received to cover business interruption losses resulting from the 2008 oven fire at a bakery facility in the U.K.

Other Matters

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

On February 23, 2010, Canada Bread Company, Limited declared a dividend of $0.06 per share payable on April 1, 2010 to shareholders of record at the close of business on March 10, 2010. Unless indicated otherwise, by the Company, in writing at or before the time the dividend is paid, these dividends will be considered an eligible dividend for the purposes of the "Enhanced Dividend Tax Credit System".

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; 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 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.

    
    Canada Bread Company, Limited
    Consolidated Balance Sheets
    (In thousands of Canadian dollars)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                     As at December 31,
                                                     2009         2008
    -------------------------------------------------------------------------
    ASSETS

    Current Assets:
      Cash and cash equivalents                 $  57,698    $  11,721
      Accounts receivable                          63,620       57,079
      Inventories                                  56,659       58,696
      Future tax asset                              1,640        5,388
      Prepaid expenses and other assets             4,438       12,977
      -----------------------------------------------------------------------
                                                $ 184,055    $ 145,861

    Property and equipment                        387,252      417,150
    Goodwill                                      386,807      404,484
    Other long-term assets                         11,620        9,964
    Other intangible assets                        16,678       17,451
    -------------------------------------------------------------------------
                                                $ 986,412    $ 994,910
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current Liabilities:
      Bank indebtedness                         $   4,247    $   8,894
      Accounts payable and accrued charges        172,172      207,928
      Due to Maple Leaf Foods Inc.                  3,817            -
      Dividends payable                             1,525        1,525
      Income and other taxes payable               13,155       10,860
      Current portion of long-term debt                 -           41
      -----------------------------------------------------------------------
                                                $ 194,916    $ 229,248

    Long-term debt                                  2,547        4,477
    Future tax liability                           33,338       36,043
    Other long-term liabilities                     8,524       16,802
    Shareholders' equity                          747,087      708,340
    -------------------------------------------------------------------------
                                                $ 986,412    $ 994,910
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Canada Bread Company, Limited
    Consolidated Statements of Earnings
    (In thousands of Canadian dollars, except share amounts)

    -------------------------------------------------------------------------
                              Three months ended         Twelve months ended
                                December 31,                December 31,
                             2009          2008         2009           2008
                         (Unaudited)   (Unaudited)
    -------------------------------------------------------------------------

    Sales                $ 432,190     $ 444,957  $ 1,705,788    $ 1,708,330
    Cost of goods sold     342,213       357,176    1,365,470      1,411,729
    -------------------------------------------------------------------------

    Gross margin         $  89,977     $  87,781  $   340,318    $   296,601
    Selling, general and
     administrative
     expenses               60,846        53,950      219,781        198,969
    -------------------------------------------------------------------------

    Earnings from
     operations
     before the
     following:          $  29,131     $  33,831  $   120,537    $    97,632
    Restructuring and
     other related costs    (3,637)       (2,082)      (4,908)       (10,492)
    Other income                10         8,330        2,439         14,702
    -------------------------------------------------------------------------

    Earnings
     before interest
     and income taxes    $  25,504     $  40,079  $   118,068    $   101,842
    Interest expense         1,104         1,861        5,084          7,843
    -------------------------------------------------------------------------

    Earnings
     before income
     taxes               $  24,400     $  38,218  $   112,984    $    93,999
    Income taxes             9,391        11,758       35,506         29,063
    -------------------------------------------------------------------------
    Net earnings         $  15,009     $  26,460  $    77,478    $    64,936
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per share -
     basic and diluted  $     0.59     $    1.04  $      3.05    $      2.55

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

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



    Canada Bread Company, Limited
    Consolidated Statements of Comprehensive Income
    (In thousands of Canadian dollars)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                           Three months ended         Twelve months ended

                               December 31,                December 31,

                            2009          2008          2009          2008
                        (Unaudited)   (Unaudited)
    -------------------------------------------------------------------------

    Net earnings         $  15,009     $  26,460     $  77,478     $  64,936

    Other comprehensive
     income (loss)
      Change in
       accumulated
       foreign currency
       translation
       adjustment          (10,684)       16,862       (34,398)       20,161
      Change in
       unrealized
       derivative loss
       on cash flow
       hedges                  650        (4,065)        1,754        (5,700)
    -------------------------------------------------------------------------
                         $ (10,034)    $  12,797     $ (32,644)    $  14,461

    -------------------------------------------------------------------------
    Comprehensive
     income              $   4,975     $  39,257     $  44,834     $  79,397
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statements of Retained Earnings
    (In thousands of Canadian dollars)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                     Years ended December 31,
                                                            2009        2008
    -------------------------------------------------------------------------
    Retained earnings, beginning of year               $ 587,163   $ 528,327

    Net earnings                                          77,478      64,936

    Dividends declared
     ($0.24 per share; 2008: $0.24 per share)             (6,100)     (6,100)

    -------------------------------------------------------------------------
    Retained earnings, end of year                     $ 658,541   $ 587,163
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Canada Bread Company, Limited
    Consolidated Statements of Cash Flows
    (In thousands of Canadian dollars)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                               Three months ended        Twelve months ended
                                      December 31,               December 31,
                               2009          2008        2009           2008
                            (Unaudited)   (Unaudited)
    -------------------------------------------------------------------------

    CASH PROVIDED BY (USED IN):

    Operating activities

    Net earnings          $  15,009     $  26,460   $  77,478      $  64,936
    Add (deduct) items
     not affecting cash:
      Depreciation and
       amortization          12,319        14,411      54,025         55,425
      Future income taxes     2,166         2,211          67          3,605
      Loss (gain) on sale
       of property and
       equipment                 10           (36)        471            103
      Change in provision
       for restructuring
       and other related
       costs                  2,811        (2,867)      2,204          4,037
      Amortization of
       terminated interest
       rate swaps               658             -       1,975              -
    Other                      (266)          332      (2,859)         1,419
    Change in non-cash
     operating working
     capital                 10,495        41,662     (24,315)         7,910
    -------------------------------------------------------------------------
    Cash provided by
     operating activities $  43,202     $  82,173  $  109,046     $  137,435
    -------------------------------------------------------------------------

    Financing activities
      Dividends paid      $  (1,525)    $  (1,525) $   (6,100)    $   (6,100)

      Changes in
       long-term debt         2,547       (73,987)     (1,971)      (103,132)
      Settlement of
       interest rate swaps
       With Maple Leaf
       Foods Inc.                 -            -      (8,502)        80,586

    -------------------------------------------------------------------------
    Cash provided by
     (used in) financing
     activities           $   1,022     $ (75,512) $  (16,573)    $  (28,646)
    -------------------------------------------------------------------------

    Investing activities
      Additions to
       property and
       equipment          $ (11,212)    $ (14,145) $  (41,659)    $  (54,170)
      Proceeds from
       sale of
       property and
       equipment                 32             -         547            512
      Acquisition of
       businesses, net
       of cash acquired           -          (114)          -        (44,827)
      Change in intangible
       assets                   501          (382)        501           (479)
      Other                    (286)            -      (1,238)             -
    -------------------------------------------------------------------------
    Cash used in
     investing activities $ (10,965)    $ (14,641) $  (41,849)    $  (98,964)
    -------------------------------------------------------------------------

    Increase (decrease)
     in cash and cash
     equivalents           $ 33,259     $  (7,980) $   50,624     $    9,825

    Net cash and cash
     equivalents,
     beginning of period     20,192        10,807       2,827         (6,998)
    -------------------------------------------------------------------------
    Net cash and cash
     equivalents,
     end of period         $ 53,451     $   2,827  $   53,451     $    2,827
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Canada Bread Company, Limited
    Segmented Financial Information
    (In thousands of Canadian dollars)

    -------------------------------------------------------------------------
                              Three months ended         Twelve months ended
                                     December 31,                December 31,
                              2009          2008         2009           2008
                           (Unaudited)   (Unaudited)
    -------------------------------------------------------------------------

    Sales
      Fresh Bakery       $ 279,244      $ 279,132  $1,119,790     $1,094,190
      Frozen Bakery        152,946        165,825     585,998        614,140
    -------------------------------------------------------------------------
                         $ 432,190      $ 444,957  $1,705,788     $1,708,330
    -------------------------------------------------------------------------

    Earnings from
     operations before
     restructuring and
     other related costs
     and other income
      Fresh Bakery       $  20,078      $  25,398  $   91,535     $   76,529
      Frozen Bakery          9,053          8,433      29,002         21,103
    -------------------------------------------------------------------------
                         $  29,131      $  33,831  $  120,537     $   97,632
    -------------------------------------------------------------------------

    Capital expenditures
      Fresh Bakery       $   6,045      $   7,377  $   21,722     $  24,462
      Frozen Bakery          5,167          6,768      19,937        29,708
    -------------------------------------------------------------------------
                         $  11,212      $  14,145  $   41,659     $  54,170
    -------------------------------------------------------------------------

    Depreciation and
     amortization
      Fresh Bakery       $   6,816      $   7,588  $   27,632     $   28,563
      Frozen Bakery          5,503          6,823      26,393         26,862
    -------------------------------------------------------------------------
                         $  12,319      $  14,411  $   54,025     $   55,425
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                           As at                       As at
                                     December 31,                December 31,
                                            2009                        2008
    -------------------------------------------------------------------------
    Total assets
      Fresh Bakery                     $ 441,020                  $  440,733
      Frozen Bakery                      476,681                     523,843
      Non-allocated assets                68,711                      30,334
    -------------------------------------------------------------------------
                                       $ 986,412                  $  994,910
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Goodwill
      Fresh Bakery                     $ 155,946                  $  156,268
      Frozen Bakery                      230,861                     248,216
    -------------------------------------------------------------------------
                                       $ 386,807                  $  404,484
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

SOURCE Canada Bread Company, Limited

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


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890