Canada Bread Reports Third Quarter 2009 Financial Results

TORONTO, Oct. 28 /CNW/ - Canada Bread Company, Limited (TSX: CBY) today reported its financial results for the third quarter ended September 30, 2009.

    
    -   Net earnings per share increased to $0.99 compared to $0.77 last year
    -   Adjusted Operating Earnings increased to $36.9 million from
        $31.9 million
    -   Sales declined to $424.6 million from $443.1 million last year

    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.
    

"Our organization has achieved steady earnings growth despite challenging global economic conditions," said Richard Lan, President and CEO. "We are steadfastly focused on growing sales through deepening our relationships with customers, delivering more product innovation to appeal to consumers, and developing lots of excitement and momentum internally around our market wins and opportunities ahead."

Financial Overview

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

Sales for the third quarter decreased by 4.2% to $424.6 million compared to $443.1 million last year due to lower volumes and a moderate change in mix from specialty to staple products primarily in the U.K.

Adjusted Operating Earnings increased 15.9% to $36.9 million compared to $31.9 million last year, while net earnings increased 27.0% to $25.1 million compared to $19.7 million last year.

The following is a summary of Adjusted Earnings per Share:

    
    -------------------------------------------------------------------------
                                         Third Quarter        Year-to-Date

    Per share                           2009      2008       2009      2008
    -------------------------------------------------------------------------
    EPS                                $0.99     $0.77      $2.46     $1.51
    Restructuring and other
     related costs(i)                   0.02     $0.16      $0.04     $0.23
    -------------------------------------------------------------------------
    Adjusted EPS(ii)                   $1.00     $0.93      $2.50     $1.75
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (i)  Includes impact of restructuring and other related costs, net of
         tax.
    (ii) Does not add due to rounding.


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

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

    -------------------------------------------------------------------------
    ($ thousands)                        Third Quarter        Year-to-Date

                                        2009      2008       2009      2008
    -------------------------------------------------------------------------
    Fresh Bakery                     $33,260    25,985    $71,457    51,131
    Frozen Bakery                      3,655     5,874     19,949    12,670
    -------------------------------------------------------------------------
    Adjusted Operating Earnings      $36,915    31,859    $91,406    63,801
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Fresh Bakery (Fresh bakery products, sweet goods, sandwiches, and

specialty fresh pasta and sauces)

Fresh Bakery sales in the third quarter declined by 1.0% to $287.3 million, from $290.2 million last year, mainly due to lower sales of fresh sandwiches. Sales of fresh bakery products were largely consistent with the third quarter of 2008.

Adjusted Operating Earnings increased to $33.3 million in the third quarter compared to $26.0 million last year. The fresh bakery and pasta operations realized improved margins as a result of lower commodity prices, although the benefit was partly mitigated by a weaker Canadian dollar, which increased the cost of U.S. dollar priced flour and other ingredients. Earnings from the fresh sandwich business, which includes the 2008 Aliment Martel acquisition, have not met expectations. Management considers the business to be an important part of its growth strategy and is actively working on initiatives to improve its market share and profitability.

Fresh Bakery launched several exciting new innovative products in the quarter aimed at supporting margin and category expansion. Dempster's(R) OvenFresh(TM) is a line of fresh, long life white and multigrain baguettes and dinner rolls that finish baking at home in minutes. Under a licensing agreement, the Company has also launched Cadbury(TM) Snack Cakes in Eastern Canada, an exciting new addition to its sweet goods offerings in the region.

Frozen Bakery (North American and U.K. frozen bakery products; including

frozen par-baked and specialty bakery products)

Frozen Bakery sales decreased by 10.2% to $137.3 million from $152.9 million in the same period last year due to lower volumes and an unfavourable shift in mix from specialty to staple products primarily in the U.K. As the U.K. economy continues to be impacted by the global economic downturn, Management remains focused on initiatives to sustain sales volumes and expand product offerings that deliver value at reasonable prices.

Adjusted Operating Earnings in the quarter decreased to $3.7 million compared to $5.9 million last year. Earnings from the U.K. bakery operations declined in the quarter due to the continued effects of the recession on sales of premium specialty bakery products and also as a result of higher manufacturing overheads. North American frozen bakery operations benefited from lower commodity costs.

Other Income (Expense)

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

Other expense was $0.1 million in the quarter compared to other income of $4.8 million last year. Year-to-date other income was $2.4 million (2008: $6.4 million). Year-to-date and 2008 other income were primarily comprised of insurance proceeds received to cover business interruption losses resulting from the oven fire at the U.K. bakery in 2008.

Other Matters

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

On October 27, 2009, Canada Bread Company, Limited declared a dividend of $0.06 per share payable on January 4, 2010 to shareholders of record at the close of business on December 8, 2009. Unless indicated otherwise, by the Company, in writing at or before the time the dividend is paid, these dividends will not 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, expectations regarding earnings potential in the fresh sandwich business, 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 under the "Risk Factors" in the Company's Annual 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 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 2008 sales of $1.7 billion and employs approximately 8,500 people at its operations across North America and in the United Kingdom.

    

    Consolidated Financial Statements
    (Expressed in Canadian dollars)

    CANADA BREAD COMPANY, LIMITED

    Three and nine months ended September 30, 2009 and 2008



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

    -------------------------------------------------------------------------
                                          As at          As at         As at
                                   September 30,  September 30,  December 31,
                                           2009           2008          2008
    -------------------------------------------------------------------------
                                     (Unaudited)    (Unaudited)

    ASSETS

    Current assets

      Cash and cash equivalents     $    24,549    $    20,328   $    11,721
      Accounts receivable                70,879         76,108        57,079
      Inventories                        58,266         58,451        58,696
      Future tax asset                    4,878         18,719         5,388
      Prepaid expenses and
       other receivables                  7,065         13,039        12,977
      -----------------------------------------------------------------------
                                    $   165,637   $    186,645   $   145,861

    Property and equipment              392,695        408,160       417,150

    Other long-term assets               10,616          9,815         9,964

    Goodwill                            392,456        395,181       404,484

    Other intangible assets              18,775         18,331        17,451
    -------------------------------------------------------------------------
                                    $   980,179   $  1,018,132   $   994,910
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities

      Bank indebtedness             $     4,357   $      9,521   $     8,894
      Accounts payable and
       accrued charges                  169,361        185,670       207,928
      Due to Maple Leaf Foods Inc.        4,971          3,960             -
      Dividends payable                   1,525          1,525         1,525
      Income and other taxes
       payable                           13,610         18,560        10,860
      Current portion of long-term
       debt                                   -             50            41
      -----------------------------------------------------------------------
                                    $   193,824   $    219,286   $   229,248

    Long-term debt                            -         78,453         4,477

    Future tax liability                 34,079         35,867        36,043

    Other long-term liabilities           8,639         13,918        16,802

    Shareholders' equity                743,637        670,608       708,340
    -------------------------------------------------------------------------
                                    $   980,179   $  1,018,132   $   994,910
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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


    -------------------------------------------------------------------------
                                 Three months ended        Nine months ended
                                    September 30,            September 30,
    (Unaudited)                  2009         2008         2009         2008
    -------------------------------------------------------------------------

    Sales                 $   424,555  $   443,086  $ 1,273,598  $ 1,263,373

    Cost of goods sold        335,413      363,501    1,023,257    1,054,553
    -------------------------------------------------------------------------

    Gross margin          $    89,142  $    79,585  $   250,341  $   208,820
    Selling, general and
     administrative
     expenses                  52,227       47,726      158,935      145,019
    -------------------------------------------------------------------------

    Earnings from
     operations before
     the following:       $    36,915  $    31,859  $    91,406  $    63,801
    Restructuring and
     other related costs         (597)      (5,718)      (1,271)      (8,410)
    Other income (expense)       (113)       4,797        2,429        6,372
    -------------------------------------------------------------------------

    Earnings before
     interest and income
     taxes                $    36,205  $    30,938 $     92,564  $    61,763
    Interest expense              673        2,147        3,980        5,982
    -------------------------------------------------------------------------

    Earnings before
     income taxes         $    35,532  $    28,791 $     88,584  $    55,781
    Income taxes               10,482        9,064       26,115       17,305
    -------------------------------------------------------------------------
    Net earnings          $    25,050  $    19,727 $     62,469  $    38,476
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per share -
     basic and diluted    $      0.99  $      0.77 $       2.46  $      1.51
    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         Nine months ended
                                  September 30,              September 30,
    (Unaudited)                  2009         2008         2009         2008
    -------------------------------------------------------------------------

    Net earnings          $    25,050  $    19,727  $    62,469  $    38,476
    Other comprehensive
     income (loss)            (23,530)      (7,571)     (22,610)       1,664

    -------------------------------------------------------------------------
    Comprehensive income  $     1,520  $    12,156  $    39,859  $    40,140
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

    -------------------------------------------------------------------------
                                              Nine months ended September 30,
    (Unaudited)                                            2009         2008
    -------------------------------------------------------------------------
    Retained earnings, beginning of period          $   587,163  $   528,327
    Net earnings                                         62,469       38,476
    Dividends declared ($0.18 per share;
     2008: $0.18 per share)                              (4,575)      (4,575)
    -------------------------------------------------------------------------
    Retained earnings, end of period                $   645,057  $   562,228
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

    -------------------------------------------------------------------------
                                 Three months ended        Nine months ended
                                    September 30,            September 30,
    (Unaudited)                  2009         2008         2009         2008
    -------------------------------------------------------------------------

    CASH PROVIDED BY (USED IN):

    Operating activities
      Net earnings        $    25,050  $    19,727  $    62,469  $    38,476
      Add (deduct) items
       not affecting cash:
        Depreciation and
         amortization          13,551       14,012       41,706       41,014
        Future income
         taxes                 (1,303)       1,817       (2,099)       1,394
        Loss (gain) on
         sale of property
         and equipment            131          (34)         461          139
        Asset impairments
         and change in
         provision for
         restructuring and
         other related costs      367        4,987         (607)       6,904
        Amortization of
         terminated
         interest rate swap       672            -        1,317            -
      Other                      (562)        (218)      (2,593)       1,087
      Change in non-cash
       operating working
       capital                 (6,722)       1,154      (34,810)     (33,752)
    -------------------------------------------------------------------------
    Cash provided by
     operating activities $    31,184  $    41,445  $    65,844  $    55,262
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Financing activities
      Dividends paid           (1,525)      (1,525)      (4,575)      (4,575)
      Net decrease in
       long-term debt         (15,038)     (11,768)      (4,518)     (29,145)
      Settlement of cross-
       currency interest
       rate swap with
       Maple Leaf Foods Inc.        -            -       (8,502)      80,586
    -------------------------------------------------------------------------
    Cash provided by
     (used in) financing
     activities           $   (16,563)  $  (13,293) $   (17,595) $    46,866
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Investing activities
      Additions to
       property and
       equipment               (6,081)     (14,155)     (30,447)     (40,025)
      Proceeds from
       sale of property
       and equipment               46           86          515          618
      Acquisition of
       business, - net
       of cash acquired             -       (1,275)           -      (44,819)
      Other                        (7)         (58)        (952)         (97)
    -------------------------------------------------------------------------
    Cash used in investing
     activities            $   (6,042) $   (15,402) $   (30,884) $   (84,323)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Increase in cash and cash
      equivalents               8,579       12,750       17,365       17,805
    Net cash and cash
      equivalents,
      beginning of period      11,613       (1,943)       2,827       (6,998)
    -------------------------------------------------------------------------
    Net cash and cash
     equivalents, end
     of period             $   20,192  $    10,807  $    20,192  $    10,807
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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


    -------------------------------------------------------------------------
                                 Three months ended        Nine months ended
                                    September 30,             September 30,
    (Unaudited)                  2009         2008         2009         2008
    -------------------------------------------------------------------------

    Sales
      Fresh Bakery        $   287,285  $   290,196  $   840,546  $   815,058
      Frozen Bakery           137,270      152,890      433,052      448,315
    -------------------------------------------------------------------------
                          $   424,555  $   443,086  $ 1,273,598  $ 1,263,373
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings from
     operations before
     restructuring and
     other related costs
     and other income
     (expense)
      Fresh Bakery        $    33,260  $    25,985  $    71,457  $    51,131
      Frozen Bakery             3,655        5,874       19,949       12,670
    -------------------------------------------------------------------------
                          $    36,915  $    31,859  $    91,406  $    63,801
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Additions to property
     and equipment
      Fresh Bakery        $     4,246  $     5,912  $    15,677  $    17,085
      Frozen Bakery             1,835        8,243       14,770       22,940
    -------------------------------------------------------------------------
                          $     6,081  $    14,155  $    30,447  $    40,025
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Depreciation and
     amortization
      Fresh Bakery        $     6,757  $     7,122  $    20,816  $    20,975
      Frozen Bakery             6,794        6,890       20,890       20,039
    -------------------------------------------------------------------------
                          $    13,551  $    14,012  $    41,706  $    41,014
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                                          As at          As at         As at
                                   September 30,  September 30,  December 31,
                                           2009           2008          2008
    -------------------------------------------------------------------------
                                     (Unaudited)    (Unaudited)

    Total assets
      Fresh Bakery                  $   447,100    $   459,396   $   440,733
      Frozen Bakery                     493,270        507,191       523,843
      Non-allocated assets               39,809         51,545        30,334
    -------------------------------------------------------------------------
                                    $   980,179    $ 1,018,132   $   994,910
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Goodwill
      Fresh Bakery                  $   155,949    $   156,691   $   156,268
      Frozen Bakery                     236,507        238,490       248,216
    -------------------------------------------------------------------------
                                    $   392,456    $   395,181   $   404,484
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

SOURCE Canada Bread Company, Limited

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


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