Maple Leaf Foods Reports 2007 Third Quarter Financial Results



    TORONTO, Oct. 25 /CNW/ - Maple Leaf Foods Inc. (TSX: MFI) today reported
its financial results for the third quarter ended September 30, 2007.
    "In the past three months, the food industry continued to battle
unprecedented food inflation related to wheat, corn and other input costs, in
addition to the ongoing rise in the Canadian dollar," said Michael McCain,
President and CEO. "Our value-added meat and bakery businesses are meeting
these challenges by investing in our supply chains to reduce cost; realizing
operating improvements in manufacturing, distribution and management
processes; and offsetting these higher input costs through selective price
increases. Our bakery operations achieved strong results in difficult markets,
reflecting improved performances in Frozen Bakery and the UK bakery
operations. We recorded significant financial gains resulting from the sale of
our animal nutrition business, which provide us with a very strong balance
sheet and cash to reinvest in our core businesses. The reorganization of our
protein operations, which will significantly reduce our exposure to commodity
and currency pressures, is on track to deliver the anticipated growth in our
higher margin value-added categories."
    Sales for the third quarter from continuing operations decreased 1% to
$1.3 billion while earnings from continuing operations, before restructuring
and other related costs, increased 14% to $38.6 million from $33.9 million
last year. Management believes that this is the most appropriate measure on
which to evaluate operating results, as restructuring and other related costs
are not representative of continuing operations. In the third quarter of 2007,
the Company recorded restructuring and other related costs as a part of
continuing operations of $7.0 million ($5.5 million after tax).
    Earnings per share from continuing operations before restructuring and
other related costs were $0.06, compared to $0.05 last year, while
year-to-date earnings per share on a comparable basis were $0.31 compared to
$0.25 last year. The Company reported net earnings for the quarter of $220.4
million ($1.72 per share), including the gain on the sale of the animal
nutrition business of $217.7 million, compared to a net loss of $22.3 million
(loss of $0.17 per share) in the prior year.
    The results of the animal nutrition business are reflected separately as
discontinued operations in the current and comparative results; therefore all
operating earnings comparisons exclude the results of the animal nutrition
business. Following is a summary of earnings per share ("EPS") from continuing
operations, before restructuring and other related costs:

    
                                          Third Quarter        Year-To-Date
                                      ---------------------------------------
                                          2007      2006      2007      2006
                                          ----      ----      ----      ----

    Reported EPS from continuing
     operations                          $0.01    ($0.22)    $0.00    ($0.02)

    Restructuring and other related
     costs, net of tax, and U.S.
     tax adjustment (i)                  $0.05     $0.27     $0.31     $0.27

                                      ---------------------------------------
    EPS from continuing operations
     before restructuring and
     other related costs and U.S.
     tax adjustment (ii)                 $0.06     $0.05     $0.31     $0.25

    Discontinued operations              $1.71     $0.05     $1.80     $0.15

                                      ---------------------------------------
                                      ---------------------------------------
    Total EPS before restructuring
     and other related costs and
     U.S. tax adjustment (ii) (iii)      $1.77     $0.09     $2.10     $0.39
                                      ---------------------------------------
                                      ---------------------------------------

    (i) Includes the per share impact of restructuring and other related
    costs net of tax and minority interest and includes the recognition of a
    tax benefit of $5.1 million in Q2 related to the sale of the animal
    nutrition business and certain non-recurring tax adjustments in Q3, 2006.
    (ii) These are not recognized measures under Canadian GAAP. Management
    believes that this is the most appropriate basis on which to evaluate
    results, as restructuring and other related costs are not representative
    of continuing operations.
    (iii) Does not add due to rounding.
    


    Sale of Animal Nutrition Business
    ---------------------------------
    On July 20, 2007, Maple Leaf completed the sale of its animal nutrition
business to Nutreco Holding BV for gross proceeds of $525 million. The Company
recorded an after-tax gain during the third quarter of $218 million related to
the transaction ($1.70 per share). Including the impact of a $20.7 million
goodwill impairment charge and a $5.1 million tax benefit relating to the
retained operations of the animal nutrition business recorded in earnings in
the second quarter, the after-tax gain on the sale of the business is
$202 million ($1.58 per share).
    Earnings per share from discontinued operations in the third quarter of
2007 were $1.71 compared to $0.05 last year; and $1.80 for the first
nine months of 2007 compared to $0.15 for the same period last year.
    Proceeds from the sale of the animal nutrition business were used to pay
down long-term debt, strengthening the Company's balance sheet to support
future expansion of core business lines and potential acquisitions.

    Operating Review
    ----------------
    Earnings from continuing operations for the third quarter before
restructuring and other related costs increased 14% from last year, reflecting
a 27% decrease in Protein Group earnings, and a 31% increase in Bakery
Products Group earnings. Year to date, Protein Group earnings from operations
increased 14%, while Bakery Products Group earnings increased 19%.
    Following is a summary of earnings from continuing operations by business
segment before restructuring and other related costs:

    
    ($ millions)                  Third Quarter             Year-to-Date
                            ------------------------ ------------------------
                               2007    2006  Change     2007    2006  Change
                               ----    ----  ------     ----    ----  ------
    Meat Products Group      $ 11.6  $  9.2     25%   $ 47.8  $ 36.6     31%
    Agribusiness Group(1)      (4.2)    0.9       -      1.2     6.5    (81%)
                            ------------------------ ------------------------
    Protein Group               7.4    10.1    (27%)    49.0    43.1     14%
    Bakery Products Group      31.2    23.8     31%     92.1    77.5     19%
                            ------------------------ ------------------------
                             $ 38.6  $ 33.9     14%   $141.1  $120.6     17%
                            ------------------------ ------------------------
                            ------------------------ ------------------------

    (1) Agribusiness Group excludes the results of the animal nutrition
    business which are reported as discontinued operations.
    

    Meat Products Group (value-added processed packaged meats; chilled meal
    entrees, and lunch kits; value-added pork, poultry and turkey products;
    and global meat sales.)

    Meat Products Group sales for the third quarter declined 7% to
$863 million, primarily due to exiting certain international markets as part
of the Company's strategic re-alignment.
    Earnings from continuing operations before restructuring and other
related costs increased to $11.6 million from $9.2 million last year. The
Company was able to offset most of the effects of rising fresh meat input
costs in its processed meat and meals business through pricing. However, the
consumer foods business experienced increased manufacturing and promotional
costs related to the launch of Maple Leaf Simply Fresh chilled meals. This
major expansion in the chilled meals category has received excellent consumer
support and experienced continued growth in market share, with four new lines
launched in the third quarter. The fresh poultry operations earnings increased
despite rising live bird costs, driven primarily by improved plant
efficiencies and higher commodity sales prices. Earnings in the fresh pork
operations were impacted by the continued strengthening of the Canadian
dollar.
    A cornerstone of Maple Leaf's new protein strategy is to significantly
reduce the volume of pork it processes to a level that supports the Company's
requirements for further processed products and to consolidate all fresh pork
processing at the Company's plant in Brandon, Manitoba. Supporting this
strategy, Maple Leaf launched a second shift in the front end of the Brandon
plant in early September, increasing hogs processed to approximately 13,000
daily. The plant is on schedule to reach 75,000 hogs per week in the fourth
quarter. The Company also recently closed two pork plants in Saskatchewan and
Manitoba respectively, which together processed approximately 1.7 million hogs
per year.

    Agribusiness Group (swine production and animal by-products recycling)

    Agribusiness Group sales from continuing operations for the third quarter
were consistent with last year at $53 million.
    Operating results from continuing operations before restructuring and
other related costs for the third quarter decreased to a loss of $4.2 million
compared to earnings of $0.9 million last year. Sharp increases in feed prices
and the continuing rise in the Canadian dollar, compounded by lower hog
prices, had a negative impact on hog processor margins. The Company had an
effective ownership of 19% of the hogs it processed in the third quarter. As
part of its protein reorganization, Maple Leaf is reducing its sows under
management from approximately 120,000 sows to approximately 35,000. Currently,
the Company owns approximately 66,000 sows, with the restructuring of this
component of the protein supply chain to be completed to mid 2008. Partially
offsetting the reduction in hog production earnings, rendering by-product
operations recorded increased earnings in the quarter due to strong prices for
rendered products that track rising commodity grain prices.

    Bakery Products Group (fresh, frozen and branded value-added bakery
    products, including frozen par-baked bakery products; and specialty pasta
    and sauces)

    Bakery Products Group sales for the third quarter increased 13% to
$385 million from $342 million last year primarily driven by the contribution
of acquisitions in the U.K. Excluding acquisitions, sales increased by 6%.
    Operating earnings before restructuring and other related costs increased
by 31% to $31.2 million due to increased contribution from acquisitions in the
U.K. and improved operating earnings in the Frozen Bakery business. In the
Fresh Bakery business, earnings were lower due to cost increases which the
Company continues to offset through reducing manufacturing and overhead costs
and price increases.
    Profitability in the fresh bakery operations decreased as the business
experienced an unprecedented rise in raw material costs that outpaced
previously implemented price increases. Growth in higher margin value-added
categories, improvements in operating efficiencies across a number of plants,
and forward flour purchases helped to offset these increasing input costs and
some continuing volume decline in the fresh bread market. The Company will
attempt to mitigate increasing input costs with additional price increases in
the fourth quarter.
    The U.K. bakery operations benefited from the contribution of
acquisitions and continued organic growth, offset in part by higher flour and
butter costs. The Company is currently expanding freezer capacity at its
Rotherham bagel plant and installing a new high-speed croissant line at its
Maidstone bakery to support continued growth in these core categories. During
the quarter, the Company acquired La Fornaia, a leading producer of an
extensive range of hand formed specialty bakery products, from traditional
Italian ciabatta and filled focaccia to a range of organic, multi-seed breads
and rolls. This acquisition extends the Company's product offering in the
premium specialty bakery market and enhances its new product innovation
capabilities.
    The North American frozen bakery business achieved a solid
quarter-over-quarter improvement in the earnings against a low base for the
comparative period as it increased volumes, improved operating efficiencies
and addressed issues that impacted its bakery in Roanoke, Virginia last year.
This plant, which is the Company's largest par-baked facility, is undertaking
a major warehouse expansion that will significantly increase its storage
capacity and further reduce costs.

    Restructuring and Other Related Costs
    -------------------------------------
    In the third quarter, the Company recorded a charge for restructuring and
other related costs from continuing operations of $7.0 million. Including
full-year amounts charged to earnings during 2006, the following is a summary
of restructuring and other related costs incurred since the announcement of
the Company's restructuring initiatives:

    
    ($ millions)
                            -------------------------------------------------
                                2006                2007
                            -----------------------------------------  Total-
                             Full-year   Q1      Q2      Q3     YTD   to-date
                            -------------------------------------------------
    Protein value chain
     restructuring              47.5     4.1     3.8     6.1    14.0    61.5
    Retention payments           2.0     3.3     3.3     0.6     7.2     9.2
    Bakery plant closure         5.5     2.2       -       -     2.2     7.7
    Poultry plant closure        2.3     3.1     2.9     0.3     6.3     8.6
    Impairment of a non-core
     equity investment           7.3       -       -       -       -     7.3
    Goodwill impairment
     related to retained
     operations of the animal
     nutrition business            -       -    20.7       -    20.7    20.7
                            -------------------------------------------------
                                64.6    12.7    30.7     7.0    50.4   115.0
    Discontinued operations        -     0.4     1.8     0.4     2.6     2.6
                            -------------------------------------------------
    Total restructuring         64.6    13.1    32.5     7.4    53.0   117.6
                            -------------------------------------------------
                            -------------------------------------------------
    Cash incurred and to
     be incurred                25.4     8.2     6.6     3.0    17.8    43.2
    Non-cash                    39.2     4.9    25.9     4.4    35.2    74.4
                            -------------------------------------------------
                                64.6    13.1    32.5     7.4    53.0   117.6
                            -------------------------------------------------
                            -------------------------------------------------
    

    The Company estimates it will incur total restructuring costs of
$165 million to $215 million between 2006 and 2009. The Company's estimate of
total cash restructuring costs in that period is $55 million to $75 million.

    Cash Flow and Financing
    -----------------------
    Total debt, net of cash balances of $93.7 million, was $0.8 billion at
the end of the third quarter, compared to $1.1 billion last year. Cash
received from the sale of the animal nutrition business was mostly cash tax
free and used to reduce long term debt in the third quarter. The remainder is
intended to be used to repay long term debt maturing in the fourth quarter.
Cash flow from operating activities for the third quarter was $24.6 million
compared to $77.4 million last year while year-to-date was $6.6 million
compared to $73.7 million in 2006. The decrease was largely attributable to an
increase in working capital.
    Interest expense including interest attributed to discontinued operations
for the quarter was $23.7 million compared to $25.1 million last year.
Year-to-date interest was $78.2 million, an increase of $4.0 million over last
year. The decrease in the third quarter was due to lower debt balances
attributable to the application of the animal nutrition proceeds. At the end
of the third quarter, 72% of indebtedness was not exposed to interest rate
fluctuations, compared to 83% in the previous year.
    Capital expenditures on plant and equipment from continuing operations
for the third quarter increased to $58.5 million compared to $34.5 million
last year. This significant increase in capital expenditures reflects a number
of initiatives to increase manufacturing and distribution efficiencies and
capacity expansion in core businesses. These projects include a substantial
expansion at the U.K. bagel and croissant facilities and the construction of a
new warehouse at the Company's bakery in Roanoke, Virginia. The Company
continued to support its expansion in the chilled meals market through capital
investment at its plant in Brampton, Ontario. Capital investments were also
made to support the consolidation of fresh pork processing at the Company's
plant in Brandon, Manitoba.

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

    Other Matters
    -------------
    Maple Leaf Foods declared a dividend of $0.04 per share payable on
December 31, 2007, to shareholders of record on December 14, 2007. Unless
indicated otherwise in writing at or before the time the dividend is paid,
each dividend paid by the corporation in 2007 or a subsequent year is an
eligible dividend for the purposes of the "Enhanced Dividend Tax Credit
System."

    Maple Leaf Foods Inc. is a leading food processing company, headquartered
in Toronto, Canada. The Company employs approximately 23,000 people at its
operations across Canada and in the United States, the United Kingdom and
Asia. The Company had sales of $5.9 billion in 2006.

    An investor presentation related to the Company's third quarter financial
results is available at www.mapleleaf.com and can be found under Investor
Relations on the Quarterly Results page. A conference call will be held at
2:30 p.m. EDT on October 25, 2007 to review Maple Leaf Foods' third quarter
financial results. To participate in the call, please dial 416-641-6113 or
866-226-1792. For those unable to participate, playback will be made available
an hour after the event at 416-695-5800/800-408-3053 (Passcode 3238339
followed by the number sign).
    A webcast presentation of the third quarter financial results will also
be available at http://investor.mapleleaf.ca via a link
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=88490&eventID=
1672872.


    
           Consolidated Financial Statements
           (Expressed in Canadian dollars)

           MAPLE LEAF FOODS INC.

           Three and Nine months ended September 30, 2007 and 2006



    MAPLE LEAF FOODS INC.
    Consolidated Balance Sheets
    (In thousands of Canadian dollars)

    -------------------------------------------------------------------------
                                           As at         As at         As at
                                    September 30, September 30,  December 31,
                                            2007          2006          2006
    -------------------------------------------------------------------------
                                      (Unaudited)   (Unaudited)
    ASSETS
    Current assets
      Cash and cash equivalents      $    93,727   $    42,607   $    64,494
      Accounts receivable (Note 4)       233,973       193,090       201,743
      Inventories                        407,423       391,824       388,242
      Future tax asset - current          11,939        15,930         2,128
      Prepaid expenses and other
       assets                             27,391        15,309        11,158
      Assets held for sale
       (Note 3(iii))                           -       274,194       280,439
      -----------------------------------------------------------------------
                                         774,453       932,954       948,204

    Investments in associated
     companies                               902        41,887        15,499

    Property and equipment             1,163,867     1,064,109     1,099,000

    Other long-term assets               282,067       274,972       279,001

    Future tax asset - non-current        18,159        14,939        23,464

    Goodwill                             833,131       767,425       824,741

    Other intangibles                     87,064        87,242        85,817
    -------------------------------------------------------------------------
                                     $ 3,159,643   $ 3,183,528   $ 3,275,726
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities
      Accounts payable and accrued
       charges                       $   584,575   $   607,098   $   594,685
      Income and other taxes payable      15,502        10,034        18,056
      Current portion of long-term debt   80,485        11,657        91,084
      Liabilities related to assets
       held for sale (Note 3(iii))             -        68,855        74,474
      -----------------------------------------------------------------------
                                         680,562       697,644       778,299

    Long-term debt                       845,397     1,136,876     1,185,970

    Future tax liability - non-current    73,405        46,168        29,867

    Other long-term liabilities          276,132       209,185       196,911

    Minority interest                     77,402        93,456        90,237

    Shareholders' equity               1,206,745     1,000,199       994,442
    -------------------------------------------------------------------------
                                     $ 3,159,643   $ 3,183,528   $ 3,275,726
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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



    MAPLE LEAF FOODS INC.
    Consolidated Statements of Earnings
    (In thousands of Canadian dollars, except share amounts)

    -------------------------------------------------------------------------
                                Three months ended         Nine months ended
                                      September 30,             September 30,
    (Unaudited)                  2007         2006         2007         2006
    -------------------------------------------------------------------------

    Sales                 $ 1,301,099  $ 1,320,633  $ 3,936,007  $ 3,963,395

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

    Earnings from
     continuing operations
     before restructuring
     and other related
     costs                     38,589       33,906      141,115      120,561
    Restructuring and
     other related costs
     (Note 2)                  (6,972)     (19,568)     (50,397)     (19,568)
    -------------------------------------------------------------------------

    Earnings from
     continuing operations     31,617       14,338       90,718      100,993
    Other income (expense)
     (Note 5)                     365          (39)       2,334        1,915
    -------------------------------------------------------------------------

    Earnings from
     continuing operations
     before interest and
     income taxes              31,982       14,299       93,052      102,908
    Interest expense           23,086       22,930       73,029       67,593
    -------------------------------------------------------------------------

    Earnings (loss) from
     continuing operations
     before income taxes        8,896       (8,631)      20,023       35,315
    Income taxes (Note 7)       4,608       20,152       12,573       33,036
    -------------------------------------------------------------------------

    Earnings (loss) from
     continuing operations
     before minority
     interest                   4,288      (28,783)       7,450        2,279
    Minority interest           2,590         (608)       6,944        4,392
    -------------------------------------------------------------------------
    Net earnings (loss)
     from continuing
     operations                 1,698      (28,175)         506       (2,113)
    Net earnings (loss)
     from discontinued
     operations - net of
     income tax
     (Note 3(ii))             218,726        5,866      228,710       18,262
    -------------------------------------------------------------------------
    Net earnings (loss)   $   220,424  $   (22,309) $   229,216  $    16,149
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic earnings (loss)
     per share (Note 9)
      From continuing
       operations         $      0.01  $     (0.22) $      0.00  $     (0.02)
      From discontinued
       operations                1.71         0.05         1.80         0.15
    -------------------------------------------------------------------------
                          $      1.72  $     (0.17) $      1.80  $      0.13
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Diluted earnings (loss)
     per share (Note 9)
      From continuing
       operations         $      0.01  $     (0.22) $      0.00  $     (0.02)
      From discontinued
       operations                1.66         0.05         1.75         0.14
    -------------------------------------------------------------------------
                          $      1.67  $     (0.17) $      1.75  $      0.12
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average number
     of shares (millions)       127.9        127.6        127.5        127.7

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

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



    MAPLE LEAF FOODS INC.
    Consolidated Statements of Retained Earnings
    (In thousands of Canadian dollars)

    -------------------------------------------------------------------------
                                              Nine months ended September 30,
    (Unaudited)                                            2007         2006
    -------------------------------------------------------------------------

    Retained earnings, beginning of period          $   204,415  $   231,807

    Net earnings for the period                         229,216       16,149
    Dividends declared ($0.12 per share;
     2006: $0.12 per share)                             (15,391)     (15,306)
    Premium on repurchase of share capital (Note 8)           -      (11,530)
    -------------------------------------------------------------------------
    Retained earnings, end of period                $   418,240  $   221,120
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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



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

    -------------------------------------------------------------------------
                                Three months ended         Nine months ended
                                      September 30,             September 30,
    (Unaudited)                  2007         2006         2007         2006
    -------------------------------------------------------------------------

    Net earnings (loss)
     for the period       $   220,424  $   (22,309) $   229,216  $    16,149

    Other comprehensive
     income (loss) (Note 13)

      Change in accumulated
       foreign currency
       translation
       adjustment              (6,132)         524      (13,722)       2,618
      Change in net
       unrealized
       derivative loss on
       cash flow hedges         7,459            -       18,273            -
    -------------------------------------------------------------------------
                          $     1,327  $       524  $     4,551  $     2,618
    -------------------------------------------------------------------------
    Comprehensive income
     (loss)               $   221,751  $   (21,785) $   233,767  $    18,767
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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



    MAPLE LEAF FOODS INC.
    Consolidated Statements of Cash Flows
    (In thousands of Canadian dollars)

    -------------------------------------------------------------------------
                                Three months ended         Nine months ended
                                      September 30,             September 30,
    (Unaudited)                  2007         2006         2007         2006
    -------------------------------------------------------------------------

    CASH PROVIDED BY (USED IN)
    Operating activities
    Net earnings (loss)
     from continuing
     operations           $     1,698  $   (28,174) $       506  $    (2,112)
    Add (deduct) items
     not affecting cash:
      Depreciation and
       amortization            35,722       32,168      105,704       97,542
      Stock-based
       compensation             3,389        2,198       10,474        7,017
      Minority interest         2,590         (608)       6,944        4,392
      Future income taxes        (133)      14,033      (11,016)      15,849
      Loss (gain) on sale
       of property and
       equipment                 (173)         298         (255)        (270)
      Loss (gain) on sale
       of investments            (162)           -         (162)         145
      Goodwill impairment
       (Note 10)                    -            -       20,713            -
    Change in other
     long-term receivables      2,296           30          114        2,086
    Increase in pension
     asset                     (8,634)     (10,135)     (36,726)     (34,397)
    Change in restructuring
     provision                  3,285       14,901       10,718       13,811
    Other                      (5,081)      (1,680)      (8,504)       2,581
    Change in operating
     working capital            3,800       39,010      (74,819)     (43,538)
    -------------------------------------------------------------------------
    Cash provided by
     operating activities
     of continuing
     operations           $    38,597  $    62,041  $    23,691  $    63,106
    Cash provided by
     (used in) operating
     activities of
     discontinued
     operations               (13,969)      15,310      (17,086)      10,575
    -------------------------------------------------------------------------
                          $    24,628  $    77,351  $     6,605  $    73,681
    Financing activities
      Dividends paid           (5,167)      (5,080)     (15,391)     (15,306)
      Dividends paid to
       minority interest         (184)        (463)        (618)      (1,411)
      Net increase
       (decrease) in
       long-term debt        (378,703)     (11,644)    (259,539)      23,844
      Increase in share
       capital (Note 8)         5,242          720       20,344       14,102
      Shares repurchased
       for cancellation
       (Note 8)                     -      (14,799)           -      (23,056)
      Purchase of
       treasury stock          (4,692)           -       (4,692)           -
      Other                       (86)           3        7,291        2,357
    -------------------------------------------------------------------------
    Cash provided by
     (used in) financing
     activities of
     continuing
     operations           $  (383,590) $   (31,263) $  (252,605) $       530
    Cash provided by
     (used in) financing
     activities of
     discontinued
     operations                     -            -         (389)         402
    -------------------------------------------------------------------------
                          $  (383,590) $   (31,263) $  (252,994) $       932
    Investing activities
      Additions to property
       and equipment          (58,511)     (34,506)    (170,236)     (95,875)
      Proceeds from sale
       of property and
       equipment                1,334          783        3,120        5,008
      Acquisition of
       businesses
        - net of cash
         acquired (Note 11)   (51,192)      (5,000)     (64,623)     (10,323)
      Proceeds on sale of
       investments (Note 11)    2,091            -        3,713            -
      Proceeds on disposal
       of business (Note 11)        -            -        5,470            -
      Purchase of Canada
       Bread shares (Note 11)       -            -       (6,521)           -
      Other                     1,262        3,767        1,383       (3,169)
    -------------------------------------------------------------------------
    Cash used in investing
     activities of
     continuing
     operations           $  (105,016) $   (34,956) $  (227,694) $  (104,359)
    Cash provided by
     (used in) investing
     activities of
     discontinued
     operations               507,456       (2,087)     503,316       (8,149)
    -------------------------------------------------------------------------
                          $   402,440  $   (37,043) $   275,622  $  (112,508)
    Increase (decrease)
     in cash and cash
     equivalents               43,478        9,045       29,233      (37,895)
    Cash and cash
     equivalents, beginning
     of period                 50,249       33,562       64,494       80,502
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end
     of period            $    93,727  $    42,607  $    93,727  $    42,607
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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



    MAPLE LEAF FOODS INC.
    Segmented Financial Information from Continuing Operations
    (In thousands of Canadian dollars)

    -------------------------------------------------------------------------
                                Three months ended         Nine months ended
                                      September 30,             September 30,
    (Unaudited)                  2007         2006         2007         2006
    -------------------------------------------------------------------------

    Sales (i)
      Meat Products Group $   862,961  $   925,777  $ 2,637,653  $ 2,804,097
      Agribusiness Group       53,158       52,828      180,507      180,625
      Bakery Products
       Group                  384,980      342,028    1,117,847      978,673
    -------------------------------------------------------------------------
                          $ 1,301,099  $ 1,320,633  $ 3,936,007  $ 3,963,395
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings (loss) from
     continuing operations,
     before restructuring
     and other related
     costs (i)
      Meat Products Group $    11,582  $     9,227  $    47,794  $    36,545
      Agribusiness Group       (4,247)         836        1,223        6,475
      Bakery Products
       Group                   31,254       23,843       92,098       77,541
    -------------------------------------------------------------------------
                          $    38,589  $    33,906  $   141,115  $   120,561
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Additions to property
     and equipment (i)
      Meat Products Group $    32,022  $    17,258  $    93,146  $    55,402
      Agribusiness Group        3,790        6,284       10,416        7,626
      Bakery Products
       Group                   22,699       10,964       66,674       32,847
    -------------------------------------------------------------------------
                          $    58,511  $    34,506  $   170,236  $    95,875
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Depreciation and
     amortization (i)
      Meat Products Group $    17,621  $    16,324  $    52,211  $    50,330
      Agribusiness Group        5,327        4,444       14,984       12,885
      Bakery Products
       Group                   12,774       11,400       38,509       34,327
    -------------------------------------------------------------------------
                          $    35,722  $    32,168  $   105,704  $    97,542
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                           As at         As at         As at
                                    September 30, September 30,  December 31,
                                            2007          2006          2006
    -------------------------------------------------------------------------
                                      (Unaudited)   (Unaudited)
    Total assets (i)
      Meat Products Group            $ 1,592,649   $ 1,538,755   $ 1,551,502
      Agribusiness Group                 460,053       405,771       422,095
      Bakery Products Group              869,776       707,390       810,940
      Non-allocated assets               237,165       257,418       210,750
    -------------------------------------------------------------------------
                                     $ 3,159,643   $ 2,909,334   $ 2,995,287
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (i) All amounts exclude the results and financial position of the animal
        nutrition business sold on July 20, 2007.

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



    1.  SIGNIFICANT ACCOUNTING POLICIES

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

        (a) Accounting changes

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

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

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

            Increase in other current assets                      $    1,167
            Decrease in other assets                                 (12,889)
            Increase in future tax asset - long-term                  16,587
            Increase in other current liabilities                     (3,085)
            Decrease in long-term debt                                 3,123
            Increase in other long-term liabilities                  (37,101)
            Accumulated other comprehensive loss - cash flow hedges   32,198

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

            (i)   Comprehensive Income

            In accordance with Section 1530, the Company has presented
            comprehensive income and its components as part of the financial
            statements to show unrealized gains and losses that are not
            included in income. In accordance with the new standard,
            $9.8 million relating to unrealized losses resulting from the
            translation of self-sustaining operations which had previously
            been classified as unrealized foreign currency adjustment within
            shareholders' equity is now presented within accumulated other
            comprehensive income.

            (ii)  Financial Instruments

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

            (iii) Hedge Accounting

            The Company's existing hedging relationships as at December 31,
            2006 continue to qualify for hedge accounting under the new
            standard. The Company continues to designate hedges as either
            fair value hedges, cash flow hedges or hedges of a net investment
            in a self-sustaining foreign operation. For a fair value hedge,
            changes in the fair value of the hedging derivative are
            recognized in income together with the offsetting change on the
            hedged item attributable to the hedged risk. For cash flow and
            net investment hedges, changes in the fair value of the hedging
            derivative, to the extent effective, are recorded in other
            comprehensive income (loss) and are subsequently recognized in
            income when the hedged item affects income. Any ineffectiveness
            in hedging relationships is recognized as income or loss
            immediately.

            On adoption the Company recognized an increase in other current
            assets of $1.2 million, a decrease in other assets of
            $12.9 million, an increase in other current liabilities of
            $3.1 million, an increase in other long-term liabilities of
            $37.1 million, a decrease in long-term debt of $3.1 million and
            an increase in accumulated other comprehensive loss of
            $32.2 million (net of future taxes of $16.6 million) to recognize
            the fair value of financial instruments designated to hedge the
            Company's commodity, interest rate, and foreign currency
            exposures. The above amounts include an additional adjustment
            identified in the second quarter of 2007 with respect to deferred
            amounts existing on the adoption date of $12.9 million relating
            to previously terminated cash flow hedges which were reclassified
            from other assets to accumulated other comprehensive loss in the
            amount of $8.7 million, net of future taxes of $4.2 million. On
            adoption of the new standard, there was no significant
            ineffectiveness in any of the Company's hedging relationships.
            The following table illustrates the fair values of financial
            instruments by type of hedging relationship:

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

            Futures contracts to hedge
             commodity price exposure   $    1,112   $      203   $        -
            Cross currency interest
             rate swaps to hedge U.S.
             dollar-denominated notes
             payable(i)                         55       25,324      100,037
            Interest rate swaps to hedge
             interest rate exposure              -            -       12,471
            Foreign currency contracts
             to hedge transactions
             denominated in foreign
             currencies                          -          880            -

            -----------------------------------------------------------------
            Total                       $    1,167  $    26,407  $   112,508
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            (i)  The fair value amount includes a currency revaluation loss
                 of $98.7 million that has been recorded in the accumulated
                 foreign currency translation adjustment, a component of
                 accumulated other comprehensive income.


            The fair value of the Company's financial instruments used to
            hedge commodity, interest rate, and foreign currency exposures as
            at September 30, 2007 are as follows:

            -----------------------------------------------------------------
                                                    As at September 30, 2007
                                                                       Other
                                           Current      Current    Long-term
                                            Assets  Liabilities  Liabilities
            -----------------------------------------------------------------

            Futures contracts to hedge
             commodity price exposure   $    7,203   $       80   $        -
            Cross currency interest
             rate swaps to hedge U.S.
             dollar-denominated notes
             payable(i)                          -       34,858      152,513
            Foreign currency contracts
             to hedge transactions
             denominated in foreign
             currencies                      3,381            -            -

            -----------------------------------------------------------------
            Total                       $   10,584   $   34,938   $  152,513
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            (i)  The fair value amount includes a currency revaluation loss
                 of $129.1 million that has been recorded in the accumulated
                 foreign currency translation adjustment, a component of
                 accumulated other comprehensive income.


        (b) Recent accounting pronouncements

            In May 2007 the Accounting Standards Board issued CICA Handbook
            Section 3031 "Inventories". The standard introduces changes to
            the measurement and disclosure of inventory and converges with
            international accounting standards. The standard is effective for
            interim and annual periods relating to fiscal years beginning on
            or after January 1, 2008. The Company has not yet determined the
            impact the adoption of this standard will have on its financial
            statements.

            In October 2006, the Accounting Standards Board issued CICA
            Handbook Section 1535, "Capital Disclosures", which establishes
            standards for disclosing information about an entity's capital
            and how it is managed. The standard is effective for interim and
            annual financial statements relating to fiscal years beginning on
            or after October 1, 2007. The Company does not expect that the
            adoption of this standard will have a material impact on its
            financial statements.

            In October 2006, the Accounting Standards Board issued CICA
            Handbook Section 3863, "Financial Instruments - Presentation".
            The existing requirements related to presentation of financial
            instruments have been carried forward unchanged. The standard is
            effective for interim and annual financial statements relating to
            fiscal years beginning on or after October 1, 2007. The Company
            does not expect the adoption of this standard will have a
            material impact on its financial statements.

        (c) Comparative figures

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

    2.  RESTRUCTURING AND OTHER RELATED COSTS

        During the third quarter of 2007, the Company recorded $7.4 million
        in restructuring and other related costs ($5.9 million after tax).
        The portion of these restructuring and other related costs that
        related to continuing operations was $7.0 million and the balance is
        disclosed as part of discontinued operations (Note 3 (ii)).

        During the second quarter of 2007, the Company recorded $32.5 million
        in restructuring and other related costs ($28.4 million after tax).
        The portion of these restructuring and other related costs that
        related to continuing operations was $30.7 million and the balance is
        disclosed as part of discontinued operations (Note 3(ii)). The most
        significant item included in restructuring and other related costs
        for the quarter is a goodwill impairment charge of $20.7 million that
        relates to the Company's remaining hog and feed operations (Note 10).
        The balance of these costs related to the closure of a primary pork
        processing plant in Saskatoon, closure of a value-added meat
        processing facility in Etobicoke, Ontario, further costs related to
        the closure of a poultry plant in Nova Scotia, and retention bonuses
        recorded.

        During the first quarter of 2007, the Company recorded restructuring
        and other related costs of $13.1 million ($9.8 million after tax).
        The portion of these restructuring and other related costs that
        related to continuing operations was $12.7 million and the balance is
        disclosed as part of discontinued operations. The majority of these
        costs related to the sale of the Company's European seafood and
        convenience businesses, further costs related to the closure of a
        poultry plant in Nova Scotia and the closure of a fresh bakery in
        British Columbia.

        The following table provides a summary of costs recognized and cash
        payments made in respect of the above-mentioned restructuring
        initiatives in 2007 and the corresponding liability as at
        September 30, 2007, all on a pre-tax basis:

                                                                       Asset
                                                                  impairment
                                                                         and
                                                           Site  accelerated
                                         Severance      closing depreciation
        ---------------------------------------------------------------------

        Balance at December 31, 2006    $   14,172   $    5,031   $        -
          Charges                            2,560        1,931        4,893
          Cash payments                     (1,395)      (2,242)           -
          Non-cash items                         -            -       (4,893)
        ---------------------------------------------------------------------
        Balance at March 31, 2007       $   15,337   $    4,720   $        -
          Charges                            2,093          736        1,320
          Goodwill impairment (Note 10)          -            -       20,713
          Cash payments                     (4,080)      (2,034)           -
          Non-cash items                         -            -      (22,033)
        ---------------------------------------------------------------------
        Balance at June 30, 2007        $   13,350   $    3,422   $        -
          Charges                            2,338          631        3,795
          Cash payments                     (3,503)      (1,177)           -
          Non-cash items                         -         (589)      (3,795)
        ---------------------------------------------------------------------
        Balance at September 30, 2007   $   12,185   $    2,287   $        -
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


                                         Retention      Pension        Total
        ---------------------------------------------------------------------

        Balance at December 31, 2006    $    3,015   $        -   $   22,218
          Charges                            3,735            -       13,119
          Cash payments                       (484)           -       (4,121)
          Non-cash items                         -            -       (4,893)
        ---------------------------------------------------------------------
        Balance at March 31, 2007       $    6,266   $        -   $   26,323
          Charges                            3,783        3,900       11,832
          Goodwill impairment (Note 10)          -            -       20,713
          Cash payments                       (653)           -       (6,767)
          Non-cash items                         -       (3,900)     (25,933)
        ---------------------------------------------------------------------
        Balance at June 30, 2007        $    9,396   $        -   $   26,168
          Charges                              641            -        7,405
          Cash payments                     (1,861)           -       (6,541)
          Non-cash items                         -            -       (4,384)
        ---------------------------------------------------------------------
        Balance at September 30, 2007   $    8,176   $        -       22,648
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    3.  DISCONTINUED OPERATIONS

        (i)   On July 20, 2007 the Company sold its animal nutrition
              business, retaining only two mills in Western Canada to meet
              future requirements of its hog production operations, for gross
              proceeds of $524.8 million. As a result, the Company has
              reclassified the portion of its animal nutrition business that
              has been sold as discontinued operations.

        (ii)  The results for discontinued operations were as follows:

        ---------------------------------------------------------------------
                                Three months ended         Nine months ended
                                      September 30,             September 30,
                                 2007         2006         2007         2006
        ---------------------------------------------------------------------

        Sales              $   38,793   $  137,132   $  342,642   $  417,017

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

        Earnings from
         operations before
         restructuring and
         other related
         costs             $    2,701   $   12,385   $   25,651   $   37,928
        Restructuring and
         other related
         costs                   (433)        (124)      (2,672)        (124)
        ---------------------------------------------------------------------

        Earnings from
         operations        $    2,268   $   12,261   $   22,979   $   37,804
        Other income               (7)          23          162          248
        ---------------------------------------------------------------------

        Earnings from
         operations before
         interest and
         income taxes      $    2,261   $   12,284   $   23,141   $   38,052
        Interest expense          608        2,145        5,147        6,577
        ---------------------------------------------------------------------

        Earnings before
         income taxes      $    1,653   $   10,139   $   17,994   $   31,475
        Income taxes              643        4,273        7,000       13,213
        ---------------------------------------------------------------------

        Net earnings from
         discontinued
         operations before
         gain on sale      $    1,010   $    5,866   $   10,994   $   18,262
        Gain on sale of
         business (net of
         income taxes of
         $65.9 million)       217,716            -      217,716            -
        ---------------------------------------------------------------------
        Net earnings from
         discontinued
         operations        $  218,726   $    5,866   $  228,710   $   18,262
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        In calculating net earnings from discontinued operations, interest
        expense has been allocated to these operations assuming a uniform
        debt-to-equity ratio for all operating companies.


        (iii) Assets held for sale and liabilities related to assets held for
              sale of the animal nutrition business in the comparative
              periods comprised:

        ---------------------------------------------------------------------
                                                          As at        As at
                                                   September 30, December 31,
        Assets held for sale                               2006         2006
        ---------------------------------------------------------------------

        Accounts receivable                          $   63,785   $   62,063
        Inventories                                      35,896       39,604
        Future tax asset - current                          193          193
        Prepaid expenses and other assets                 1,490          828
        Investments in associated companies               6,860        6,611
        Property and equipment                           83,710       88,398
        Other long-term assets                            2,863        3,090
        Goodwill                                         79,397       77,922
        Other intangibles                                     -        1,730
        ---------------------------------------------------------------------
                                                     $  274,194   $  280,439
        ---------------------------------------------------------------------

        Classified as:
          Current                                    $  274,194   $  280,439
          Long-term                                           -            -
        ---------------------------------------------------------------------
                                                     $  274,194   $  280,439
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        ---------------------------------------------------------------------
                                                          As at        As at
        Liabilities related to assets              September 30, December 31,
         held for sale                                     2006         2006
        ---------------------------------------------------------------------

        Accounts payable and accrued charges         $   64,937   $   71,201
        Income and other taxes payable                    2,945        2,009
        Long-term debt                                      973          974
        Other long-term liabilities                           -          290
        ---------------------------------------------------------------------
                                                     $   68,855   $   74,474
        ---------------------------------------------------------------------

        Classified as:
          Current                                    $   68,855   $   74,474
          Long-term                                           -            -
        ---------------------------------------------------------------------
                                                     $   68,855   $   74,474
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    4.  ACCOUNTS RECEIVABLE

        Under revolving securitization programs, the Company has sold certain
        of its trade accounts receivable to financial institutions. The
        Company retains servicing responsibilities and retains a limited
        recourse obligation for delinquent receivables. At September 30,
        2007, trade accounts receivable being serviced under this program
        amounted to $228.9 million (September 30, 2006: $229.6 million;
        December 31, 2006: $241.5 million).

    5.  OTHER INCOME

        ---------------------------------------------------------------------
                                Three months ended         Nine months ended
                                      September 30,             September 30,
                                 2007         2006         2007         2006
        ---------------------------------------------------------------------

        Proceeds from
         insurance claims  $        -   $        -   $    1,854   $        -
        Rental                     76           27          232          143
        Gain (loss) on
         sale of property
         and equipment            173         (298)         255          270
        Gain (loss) from
         real estate
         operations               112          (38)         (14)       1,097
        Other                       4          270            7          404

        ---------------------------------------------------------------------
                           $      365   $      (39)  $    2,334   $    1,914
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    6.  PENSIONS

        During the quarter, the Company recorded $3.9 million related to net
        benefit plan income including postretirement benefit costs (2006:
        $3.3 million). For the nine months ended September 30, 2007, the
        Company recorded $12.0 million in net benefit plan income including
        postretirement benefit costs (2006: $9.9 million).

    7.  INCOME TAXES

        The Company recorded tax expense of $4.6 million and $12.6 million
        for the three months and nine months ended September 30, 2007,
        respectively. The reason for the variance from the Company's normal
        effective tax rate on earnings is primarily due to: (i) the
        recognition of a tax benefit of $5.1 million in the second quarter
        related to outside basis differences on shares of subsidiaries that
        were sold as part of the sale of the animal nutrition business in the
        third quarter, and (ii) the tax effect on restructuring and other
        related costs which was recorded using an effective tax rate of
        16.0%. The low effective tax rate on restructuring and other related
        costs was caused by the goodwill impairment charge of $20.3 million
        recorded in the second quarter, which is not deductible for tax
        purposes.

    8.  SHARE CAPITAL

        The following table sets forth the continuity for shares issued and
        outstanding during the year and the corresponding carrying value:

        ---------------------------------------------------------------------
                                  Number of shares           Share capital $
                         -------------------------- -------------------------
                                 2007         2006         2007         2006
        ---------------------------------------------------------------------
        Balance at
         January 1,       127,135,866  127,704,812   $  769,696   $  765,666
        Exercise of
         options              210,687      252,767        2,215        2,943
        Repurchased for
         cancellation(i)            -     (461,900)           -       (2,773)

        ---------------------------------------------------------------------
        Balance at
         March 31,        127,346,553  127,495,679   $  771,911   $  765,836
        Exercise of
         options            1,250,118      876,473       14,411       10,439
        Repurchased for
         cancellation(i)            -     (150,900)           -         (910)

        ---------------------------------------------------------------------
        Balance at
         June 30,         128,596,671  128,221,252   $  786,322   $  775,365
        Exercise of
         options              545,600       72,700        5,639          720
        Repurchased for
         cancellation(i)            -   (1,296,800)           -       (7,843)

        ---------------------------------------------------------------------
        Balance at
         September 30,    129,142,271  126,997,152   $  791,961   $  768,242
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        (i)   The Company repurchased for cancellation 461,900 common shares
              during the first quarter of 2006, 150,900 common shares during
              the second quarter of 2006, and 1,296,800 common shares during
              the third quarter of 2006 pursuant to a normal course issuer
              bid at an average exercise price of $13.48 per share, $13.44
              per share, and $11.41 per share, respectively. The excess of
              the purchase cost over the carrying value of the shares was
              charged to retained earnings.

        (ii)  The Company repurchased 307,600 common shares by a trust during
              the third quarter for cash consideration of $4.7 million for
              the purpose of funding grants under the Restricted Share Unit
              plan. The shares have been recorded as treasury stock, a
              separate component of shareholders' equity.


    9.  EARNINGS PER SHARE

        The following table sets forth the calculation of basic and fully
        diluted earnings per share:

        ---------------------------------------------------------------------
                                  Three months ended September 30,
                                  2007                        2006
        ---------------------------------------------------------------------
                                Weighted                    Weighted
                                 Average                     Average
                          Net   Number of             Net   Number of
                       Earnings Shares(ii)  EPS    Earnings Shares(ii)  EPS
                       --------------------------  --------------------------
        Basic
          Continuing
           operations  $  1,698    127.9  $ 0.01   $(28,175)  127.6  $ (0.22)
          Discontinued
           operations   218,726    127.9    1.71      5,866   127.6     0.05
        ---------------------------------------------------------------------
                       $220,424    127.9  $ 1.72   $(22,309)  127.6  $ (0.17)
        Stock
         options(i)           -      3.6   (0.05)         -     1.4        -
        Diluted
          Continuing
           operations  $  1,698    131.5  $ 0.01   $(28,175)  129.0  $ (0.22)
          Discontinued
           operations   218,726    131.5    1.66      5,866   129.0     0.05
        ---------------------------------------------------------------------
                       $220,424    131.5  $ 1.67   $(22,309)  129.0  $ (0.17)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        (i)   Excludes the effect of 6.1 million options and restricted stock
              units (2006: 10.0 million) to purchase common shares that are
              anti-dilutive
        (ii)  In millions


        ---------------------------------------------------------------------
                                   Nine months ended September 30,
                                  2007                        2006
        ---------------------------------------------------------------------
                                Weighted                    Weighted
                                 Average                     Average
                          Net   Number of             Net   Number of
                       Earnings Shares(ii)  EPS    Earnings Shares(ii)  EPS
                       --------------------------  --------------------------
        Basic
          Continuing
           operations  $    506    127.5  $    -   $ (2,113)  127.7  $ (0.02)
          Discontinued
           operations   228,710    127.5    1.80     18,262   127.7     0.15
        ---------------------------------------------------------------------
                       $229,216    127.5  $ 1.80   $ 16,149   127.7  $  0.13
        Stock
         options(i)           -      3.2   (0.05)         -     1.9    (0.01)
        Diluted
          Continuing
           operations  $    506    130.7  $    -   $ (2,113)  129.6  $ (0.02)
          Discontinued
           operations   228,710    130.7    1.75     18,262   129.6     0.14
        ---------------------------------------------------------------------
                       $229,216    130.7  $ 1.75   $ 16,149   129.6  $  0.12
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        (i)   Excludes the effect of 6.4 million options and restricted stock
              units (2006: 9.5 million) to purchase common shares that are
              anti-dilutive
        (ii)  In millions


    10. GOODWILL IMPAIRMENT

        The Company entered into an agreement to sell the animal nutrition
        business in the second quarter of 2007 and the terms and conditions
        of sale placed certain restrictions on the operations of two feed
        mills and resulted in a change in the Company's assessment of future
        cash flows of its remaining feed and hog operations. As a result, the
        Company has determined that the goodwill related to the remaining
        feed and hog operations is fully impaired and has recorded an
        impairment charge of $20.7 million in the second quarter.

    11. ACQUISITIONS AND DIVESTITURES

        (a) On August 17, 2007 the Company acquired La Fornaia Ltd. a leading
            producer of an extensive range of quality, specialty breads from
            traditional Italian ciabatta to organic breads and crisp breads
            for a total consideration of pnds stlg 18.8 million
            ($40.0 million). The Company has not yet finalized the purchase
            equation for this acquisition.

        (b) On August 31, 2007 the Company purchased an additional interest
            in its subsidiary Cold Springs Farms Limited ("Cold Springs") for
            $5.0 million in cash with a remaining obligation to pay an
            additional $5.0 million in the third quarter of 2008. The Company
            has not yet finalized the purchase equation for this acquisition.

        (c) On February 26, 2007 the Company acquired 100% ownership of the
            shares in Pâtisserie Chevalier Inc. ("Chevalier") for
            $7.9 million. Chevalier is a leading producer of single-portion
            snack cake products in Quebec. As at September 30, 2007 the
            Company has not yet finalized the purchase price allocation.

        (d) During the first quarter, the Company completed the sale of its
            European seafood and convenience businesses in Germany. The sales
            of these businesses will not have a significant impact on ongoing
            earnings or cash flows.

        (e) During the first, second and third quarters of 2007, the Company
            completed several transactions comprising both the purchase and
            sale of interests in certain hog investment companies related to
            the realignment of its hog production business. These
            transactions did not have a significant impact on the financial
            position of the Company.

        (f) On January 16, 2007, the Company purchased 122,900 additional
            shares in Canada Bread for $6.5 million, increasing the Company's
            ownership interest in Canada Bread from 87.5% to 88.0%.

    12. SUPPLEMENTAL CASH FLOW INFORMATION

        ---------------------------------------------------------------------
                                Three months ended         Nine months ended
                                      September 30,             September 30,
                                 2007         2006         2007         2006
        ---------------------------------------------------------------------
        Net interest paid  $    9,116   $   10,127   $   65,064   $   59,775
        Net income taxes
         paid                  19,550        9,580       44,792       52,639
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    14. ACCUMULATED OTHER COMPREHENSIVE LOSS

        Accumulated other comprehensive loss consists of the following:

        ---------------------------------------------------------------------
                                              Nine months ended September 30,
                                                           2007         2006
        ---------------------------------------------------------------------

        Balance at the beginning of the period
         (Note 1(a)) - net(i)                        $   (9,809)  $  (18,558)
        Transition adjustment as of January 1, 2007
         (Note 1(a))                                    (32,198)           -
        ---------------------------------------------------------------------
        Adjusted balance at the beginning
         of the period                               $  (42,007)  $  (18,558)

          Change in accumulated foreign currency
           translation adjustment - net(i)              (13,722)       2,618
          Change in unrealized derivative loss
           on cash flow hedges - net(ii)                 18,273            -
          -------------------------------------------------------------------
          Other comprehensive income for the period  $    4,551   $    2,618
        ---------------------------------------------------------------------

        Balance at end of period                     $  (37,456)  $  (15,940)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        (i)   Balance at the beginning of the current period is net of tax of
              $9.1 million. The change in accumulated foreign currency
              translation adjustment is net of taxes of $nil for the nine
              months ended September 30, 2007 (change for the quarter of
              $6.1 million net of taxes of $nil).

        (ii)  Change in unrealized derivative loss on cash flow hedges is net
              of tax of $9.1 million for the nine months ended September 30,
              2007 (change for the quarter of $7.5 million net of taxes of
              $3.9 million).

              The Company estimates that $1.7 million of net unrealized
              derivative loss included in other comprehensive income will be
              reclassified into net earnings within the next twelve months.
              The actual amount of this reclassification will be impacted by
              future changes in the fair value of financial instruments
              designated as cash flows hedges and the actual amount
              reclassified could differ from this estimated amount. During
              the quarter, a loss of approximately $1.6 million net of taxes
              $0.8 million was released to income from accumulated other
              comprehensive loss, which is included in the net change for the
              period.


    14. SUBSEQUENT EVENT

        On October 1, 2007 the Company granted 1.5 million Restricted Share
        Units under the Restricted Share Unit Plan. Awards granted under the
        Restricted Share Unit Plan are satisfied by shares to be purchased on
        the open market via a trust established for that purpose.
    





For further information:

For further information: Lynda Kuhn, Senior Vice-President,
Communications & Consumer Affairs, (416) 926-2026, www.mapleleaf.com


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