Maple Leaf Foods Reports First Quarter 2017 Financial Results

 TSX: MFI
www.mapleleaffoods.com

MISSISSAUGA, ON, April 27, 2017 /CNW/ - Maple Leaf Foods Inc. (TSX: MFI) today reported its financial results for the first quarter, March 31, 2017.

  • Strong quarter with growth in sales and Adjusted Operating Earnings(1)
  • Balanced business portfolio offset impact of volatile pork market
  • Fifth consecutive quarter of double-digit Adjusted EBITDA Margins(2) reflects strong business fundamentals

Financial Highlights

First quarter sales increased 1.8% and Adjusted Earnings per Share(3) increased 17.9% compared to the same quarter of last year. Adjusted EBITDA margin was 10.8% in the quarter and contributed to Free Cash Flow(4) of approximately $34.8 million.

Measure(i)

(Unaudited)

Three months ended March 31,


2017

2016

% Change

Sales

811.2

796.9

1.8%

Adjusted EBITDA Margin

10.8%

10.2%

60 bps

Adjusted Operating Earnings

59.0

53.6

10.2%

Net Earnings

30.1

42.3

(28.8)%

Basic Earnings per Share

0.23

0.31

(25.8)%

Adjusted Earnings per Share

0.33

0.28

17.9%

Free Cash Flow

34.8

25.2

38.1%


(i) All financial measures in millions except Adjusted EBITDA Margin and Basic and Adjusted Earnings per Share.


Note:  Several items are excluded from the discussions of underlying earnings performance as they are not representative of ongoing operational activities. Refer to the section entitled Reconciliation of Non-IFRS Financial Measures at the end of this news release for a description and reconciliation of all non-IFRS financial measures.

 

"We are coming into 2017 with solid performance, delivering 10.8% Adjusted EBITDA Margin on 2% revenue growth, up from 10.2% last year," said Michael H. McCain, President and CEO. "We had modest volume growth in the quarter, and delivered excellent performance improvement despite some relatively turbulent market conditions. The highlight for the quarter was our acquisition of Lightlife Foods, which is a great step forward in advancing our long-term growth agenda. We aspire to be the most sustainable protein company in the world, and that is reflected in all of our strategies."

Sales and Earnings

The Company's products include value-added prepared meats, lunch kits and snacks, value-added fresh pork and poultry products and refrigerated plant protein products sold under flagship national brands such as Maple Leaf®, Maple Leaf Prime®, Maple Leaf Natural Selections®, Schneiders®, Schneiders® Country Naturals®, Mina® and Lightlife®.

Sales in the first quarter increased 1.8% to $811.2 million, or 2.1% after adjusting for the impact of foreign exchange and acquisitions. Stronger volume and higher value-added fresh pork export sales to Japan contributed to the increase.

Adjusted Operating Earnings increased to $59.0 million compared to $53.6 million last year, benefiting from stronger prepared meats volume and improved operational performance in our supply chain. Adjusted Operating earnings also increased as a result of the contribution from value-added fresh pork, including higher Canadian retail and export sales. These improvements were partially offset by lower poultry performance and margin compression in packaged bacon.

Net earnings for the first quarter decreased to $30.1 million ($0.23 per basic share) compared to $42.3 million ($0.31 per basic share) last year. The underlying progress in the business reflected in positive revenue and margin growth was more than offset by factors excluded in calculating Adjusted Operating Earnings, such as the change in fair value of biological assets and higher restructuring costs.

Other Matters

On April 26, 2017, the Board of Directors approved a dividend of $0.11 per share payable June 30, 2017, to shareholders of record at the close of business on June 9, 2017. Unless indicated otherwise by the Company in writing on or before the time the dividend is paid, the dividend will be considered an Eligible Dividend for the purposes of the "Enhanced Dividend Tax Credit System".

Conference Call

An investor presentation related to the Company's first quarter financial results is available at www.mapleleaffoods.com and can be found under Investor Information on the Investors page. A conference call will be held at 2:30 p.m. EDT on April 27, 2017, to review Maple Leaf Foods' first quarter financial results. To participate in the call, please dial 416-340-2218 or 1-800-273-9672. For those unable to participate, playback will be made available an hour after the event at 905-694-9451 or 1-800-408-3053 (Passcode: 6698923#).

A webcast presentation of the first quarter financial results will also be available at:

http://edge.media-server.com/m/p/xaou62ae

The Company's full unaudited condensed consolidated interim financial statements and related Management's Discussion and Analysis are available on the Company's website.

Reconciliation of Non-IFRS Financial Measures

The Company uses the following non-IFRS measures: Adjusted Operating Earnings, Adjusted Earnings per Share, Adjusted EBITDA, and Free Cash Flow. Management believes that these non-IFRS measures provide useful information to investors in measuring the financial performance of the Company. These measures do not have a standardized meaning prescribed by IFRS and therefore they may not be comparable to similarly titled measures presented by other publicly traded companies and should not be construed as an alternative to other financial measures determined in accordance with IFRS.

Adjusted Operating Earnings





Three months ended March 31,

($ thousands)
(Unaudited)

2017

2016

Net earnings

$

30,105

$

42,269

Income taxes

11,980

15,794

Earnings before income taxes

$

42,085

$

58,063

Interest expense and other financing costs

1,227

1,106

Other expense (income)

2,704

591

Restructuring and other related costs

6,490

1,217

Earnings from operations

$

52,506

$

60,977

Increase in fair value of biological assets(5)

(2,797)

(16,841)

Unrealized loss on futures contracts(5)

9,321

9,446

Adjusted Operating Earnings

$

59,030

$

53,582





Adjusted Earnings per Share





Three months ended March 31,

($ per share)
(Unaudited)

2017

2016

Basic earnings per share

$

0.23

$

0.31

Restructuring and other related costs(6)

0.04

0.01

Items included in other expense (income) not considered representative of ongoing operations(7)

0.02

Change in the fair value of unrealized loss on futures contracts(8)

0.05

0.05

Change in the fair value of biological assets(8)

(0.02)

(0.09)

Adjusted Earnings per Share (9)

$

0.33

$

0.28





Adjusted Earnings Before Interest, Income Taxes, Depreciation, and Amortization





Three months ended March 31,

($ thousands)
(Unaudited)

2017

2016

Net earnings

$

30,105

$

42,269

Income taxes

11,980

15,794

Earnings before income taxes

$

42,085

$

58,063

Interest expense and other financing costs

1,227

1,106

Items included in other expense (income) not considered representative of ongoing operations

3,479

438

Restructuring and other related costs

6,490

1,217

Change in the fair value of biological assets and unrealized loss on futures contracts

6,524

(7,395)

Depreciation and amortization

28,062

28,031

Adjusted EBITDA

$

87,867

$

81,460





Free Cash Flow





Three months ended March 31,

($ thousands)
(Unaudited)

2017

2016

Cash provided by operating activities

$

55,008

$

45,437

Additions to long-term assets

(20,255)

(20,275)

Free Cash Flow (4)

$

34,753

$

25,162

 

Forward Looking Statements

This document contains, and the Company's oral and written public communications often contain, "forward-looking information" within the meaning of applicable securities law. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which the Company operates, as well as beliefs and assumptions made by Management of the Company. Such statements include, but are not limited to, statements with respect to objectives and goals, in addition to statements with respect to beliefs, plans, objectives, expectations, anticipations, estimates, and intentions. Specific forward-looking information in this document includes, but is not limited to, statements with respect to: the increases in operating efficiencies and cost reductions; expectations regarding the use of derivatives, futures and options; expectations regarding improving efficiencies; the expected use of cash balances; source of funds for ongoing business requirements; capital investments and expectations regarding capital expenditures; expectations regarding the implementation of environmental sustainability initiatives; expectations regarding the adoption of new accounting standards and the impact of such adoption on financial position; expectations regarding pension plan performance and future pension plan liabilities and contributions; expectations regarding levels of credit risk; and expectations regarding outcomes of legal actions. Words such as "expect", "anticipate", "intend", "may", "will", "plan", "believe", "seek", "estimate", and variations of such words and similar expressions are intended to identify such forward-looking information. These statements are not guarantees of future performance and involve assumptions, risks, and uncertainties that are difficult to predict.   

In addition, these statements and expectations concerning the performance of the Company's business in general are based on a number of factors and assumptions including, but not limited to: the condition of the Canadian, U.S., and Japanese economies; the rate of exchange of the Canadian dollar to the U.S. dollar, and the Japanese yen; 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 below or elsewhere in this document 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 information, 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, implied, or forecasted by forward-looking information include, among other things: 

  • risks associated with the Company focusing solely on the protein business;
  • risks related to the Company's decisions regarding any potential return of capital to shareholders;
  • risks associated with the concentration of production in fewer facilities;
  • risks associated with the availability of capital;
  • risks associated with changes in the Company's information systems and processes;
  • risks associated with cyber threats;
  • risks posed by food contamination, consumer liability, and product recalls;
  • risks associated with acquisitions, divestitures, and capital expansion projects;
  • impact on pension expense and funding requirements of fluctuations in the market prices of fixed income and equity securities and changes in interest rates;
  • cyclical nature of the cost and supply of hogs and the competitive nature of the pork market generally;
  • risks related to the health status of livestock;
  • impact of a pandemic on the Company's operations;
  • the Company's exposure to currency exchange risks;
  • ability of the Company to hedge against the effect of commodity price changes through the use of commodity futures and options;
  • impact of changes in the market value of the biological assets and hedging instruments;
  • risks associated with the supply management system for poultry in Canada;
  • risks associated with the use of contract manufacturers;
  • impact of international events on commodity prices and the free flow of goods;
  • risks posed by compliance with extensive government regulation;
  • risks posed by litigation;
  • impact of changes in consumer tastes and buying patterns;
  • impact of extensive environmental regulation and potential environmental liabilities;
  • risks associated with a consolidating retail environment;
  • risks posed by competition;
  • risks associated with complying with differing employment laws and practices, the potential for work stoppages due to non-renewal of collective agreements, and recruiting and retaining qualified personnel;
  • risks associated with pricing the Company's products;
  • risks associated with managing the Company's supply chain; and
  • risks associated with failing to identify and manage the strategic risks facing the Company.

The Company cautions the reader that the foregoing list of factors is not exhaustive. These factors are discussed in more detail under the heading "Risk Factors" in the Company's Management's Discussion and Analysis for the fiscal year ended December 31, 2016 that is available on SEDAR at www.sedar.com. The reader should review such section in detail. Some of the forward-looking information may be considered to be financial outlooks for purposes of applicable securities legislation including, but not limited to, statements concerning future capital expenditures. These financial outlooks are presented to evaluate anticipated future uses of cash flows, and may not be appropriate for other purposes and readers should not assume they will be achieved. The Company does not intend to, and the Company disclaims any obligation to, update any forward-looking information, whether written or oral, or whether as a result of new information, future events or otherwise, except as required by law. Additional information concerning the Company, including the Company's Annual Information Form is available on SEDAR at www.sedar.com.              

About Maple Leaf Foods Inc.

Maple Leaf Foods Inc. is a leading consumer protein company, making high quality, innovative products under national brands including Maple Leaf®, Maple Leaf Prime®, Maple Leaf Natural Selections®, Schneiders®, Schneiders® Country Naturals®, Mina® and Lightlife®. Maple Leaf employs approximately 11,500 people and does business in Canada, the U.S. and Asia. The Company is headquartered in Mississauga, Ontario and its shares trade on the Toronto Stock Exchange (MFI).

 Footnote Legend

  1. Adjusted Operating Earnings, a non-IFRS measure, is used by Management to evaluate financial operating results. It is defined as earnings before income taxes adjusted for items that are not considered representative of ongoing operational activities of the business and items where the economic impact of the transactions will be reflected in earnings in future periods when the underlying asset is sold or transferred. Please refer to the section entitled Non-IFRS Financial Measures in the Company's 2017 first quarter Management's Discussion and Analysis.
  2. Adjusted EBITDA, a non-IFRS measure, is calculated as earnings before interest and income taxes plus depreciation and intangible asset amortization, adjusted for items that are not considered representative of ongoing operational activities of the business, and items where the economic impact of the transactions will be reflected in earnings in future periods when the underlying asset is sold or transferred. Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by sales. Please refer to the section entitled Non-IFRS Financial Measures in the Company's 2017 first quarter Management's Discussion and Analysis. 
  3. Adjusted Earnings per Share, a non-IFRS measure, is used by Management to evaluate financial operating results. It is defined as basic earnings per share and is adjusted on the same basis as Adjusted Operating Earnings. Please refer to the section entitled Non-IFRS Financial Measures in the Company's 2017 first quarter Management's Discussion and Analysis.  
  4. Free Cash Flow, a non-IFRS measure, is used by Management to evaluate cash flow after investing in the maintenance or expansion of the Company's asset base. It is defined as cash provided by operations, less additions to long-term assets.
  5. Unrealized gains/losses on futures contracts is reported within cost of sales in the Company's 2017 first quarter unaudited condensed consolidated interim financial statements. For biological assets information, please refer to Note 6 of the Company's 2017 first quarter unaudited condensed consolidated interim financial statements.
  6. Includes per share impact of restructuring and other related costs, net of tax.
  7. Primarily includes acquisition related costs, interest income and gains/losses associated with investment properties and assets held for sale, net of tax.
  8. Includes per share impact of the change in unrealized losses on futures contracts and the change in fair value of biological assets, net of tax.
  9. May not add due to rounding.

Consolidated Interim Balance Sheets

(In thousands of Canadian dollars)


As at March 31,
2017

As at March 31,
2016

As at December 31,
2016



(Unaudited)

(Unaudited)
(Restated)(iii)


ASSETS





Current assets






Cash and cash equivalents


$

143,596

$

290,916

$

403,621


Accounts receivable


128,066

72,603

127,749


Notes receivable


31,886

91,299

32,485


Inventories


312,569

293,542

261,719


Biological assets


116,884

123,472

111,445


Prepaid expenses and other assets


27,393

35,729

30,372


Assets held for sale


4,837

130

4,837



$

765,231

$

907,691

$

972,228


Property and equipment


1,090,942

1,077,991

1,085,275


Investment property


1,920

6,754

1,929


Employee benefits


8,104

59,637

10,311


Other long-term assets


6,311

6,141

6,557


Deferred tax asset


36,575


Goodwill


560,285

428,236

428,236


Intangible assets


163,041

133,609

128,085


Total assets


$

2,595,834

$

2,656,634

$

2,632,621






LIABILITIES AND EQUITY





Current liabilities






Accounts payable and accruals


$

280,438

$

271,728

$

256,163


Provisions


12,607

26,129

11,889


Current portion of long-term debt


837

681

794


Income taxes payable


8,410

8,075

9,544


Other current liabilities


50,721

18,543

96,857



$

353,013

$

325,156

$

375,247


Long-term debt


8,998

9,826

9,119


Employee benefits


111,430

196,812

108,730


Provisions


15,755

14,009

16,555


Other long-term liabilities


12,146

19,196

12,654


Deferred tax liability


31,648

22,293


Total liabilities


$

532,990

$

564,999

$

544,598






Shareholders' equity





Share capital


$

846,066

$

882,812

$

853,633

Retained earnings


1,239,713

1,197,365

1,247,737

Contributed surplus


5,067

Accumulated other comprehensive income


706

11,178

1,619

Treasury stock


(23,641)

(4,787)

(14,966)

Total shareholders' equity


$

2,062,844

$

2,091,635

$

2,088,023

Total liabilities and equity


$

2,595,834

$

2,656,634

$

2,632,621


 

Consolidated Interim Statements of Net Earnings

(In thousands of Canadian dollars, except share amounts)





Three months ended March 31,

(Unaudited)





2017

2016










Sales





$

811,185

$

796,889

Cost of goods sold





677,489

658,632

Gross margin





$

133,696

$

138,257

Selling, general and administrative expenses





81,190

77,280

Earnings before the following:





$

52,506

$

60,977

Restructuring and other related costs





(6,490)

(1,217)

Other income (expense)





(2,704)

(591)

Earnings before interest and income taxes





$

43,312

$

59,169

Interest expense and other financing costs





1,227

1,106

Earnings before income taxes





$

42,085

$

58,063

Income taxes





11,980

15,794

Net earnings





$

30,105

$

42,269








Earnings per share:








Basic earnings per share                                 





$

0.23

$

0.31


Diluted earnings per share





$

0.22

$

0.31

Weighted average number of shares (millions)








Basic





130.5

134.7


Diluted





134.3

137.5

 

Consolidated Interim Statements of Other Comprehensive Income (Loss)

(In thousands of Canadian dollars)


Three months ended March 31,

(Unaudited)


2017

2016





Net earnings


$

30,105

$

42,269

Other comprehensive (loss) income






Actuarial (losses) gains that will not be reclassified to profit or loss





(Net of tax of $1.0 million; 2016: $1.4 million)


$

(2,840)

$

3,860

Items that are or may be reclassified subsequently to profit or loss:






Change in accumulated foreign currency translation adjustment





(Net of tax of $0.0 million; 2016: $0.0 million)


$

(2,076)

$

(156)



Change in unrealized gains on cash flow hedges





(Net of tax of $0.4 million; 2016: $4.1 million)                          


1,163

11,748

Total items that are or may be reclassified subsequently to profit or loss


$

(913)

$

11,592

Total other comprehensive (loss) income


$

(3,753)

$

15,452

Comprehensive income


$

26,352

$

57,721

 

Consolidated Interim Statements of Changes in Total Equity





Accumulated other
comprehensive income
(loss)
(i)



(In thousands of Canadian dollars)
(Unaudited)

Share
capital

Retained
earnings

Contributed
surplus

Foreign
currency
translation
adjustment

Unrealized
gains and
losses on cash
flow hedges

Treasury
stock

Total
equity

Balance as at December 31, 2016

$

853,633

$

1,247,737

$

$

2,116

$

(497)

$

(14,966)

$

2,088,023


Net earnings

30,105

30,105


Other comprehensive income (loss)(ii)

(2,840)

(2,076)

1,163

(3,753)


Dividends declared ($0.11 per share)

(14,325)

(14,325)


Share-based compensation expense

7,213

7,213


Deferred taxes on share-based compensation

2,750

2,750


Repurchase of shares

(9,174)

(18,681)

(9,963)

(37,818)


Exercise of stock options

1,607

1,607


Settlement of share-based compensation

(2,283)

1,325

(958)


Shares purchased by RSU trust

(10,000)

(10,000)

Balance as at March 31, 2017

$

846,066

$

1,239,713

$

$

40

$

666

$

(23,641)

$

2,062,844












Accumulated other
comprehensive income
(loss)(i)



(In thousands of Canadian dollars)
(Unaudited)

Share
capital

Retained
earnings

Contributed
surplus

Foreign
currency
translation
adjustment

Unrealized
gains and
losses on cash
flow hedges

Treasury
stock

Total
equity

Balance as at December 31, 2015(iii)

$

882,770

$

1,161,047

$

$

2,506

$

(2,920)

$

(2,086)

$

2,041,317


Net earnings

42,269

42,269


Other comprehensive income (loss)(ii)

3,860

(156)

11,748

15,452


Dividends declared ($0.09 per share)

(12,111)

(12,111)


Share-based compensation expense

5,498

5,498


Deferred taxes on share-based compensation

1,500

1,500


Repurchase of shares

2,300

(1,648)

652


Exercise of stock options

42

42


Settlement of share-based compensation

(283)

(283)


Shares purchased by RSU trust

(2,701)

(2,701)

Balance at March 31, 2016(iii)

$

882,812

$

1,197,365

$

5,067

$

2,350

$

8,828

$

(4,787)

$

2,091,635



(i) 

Items that are or may be subsequently reclassified to profit or loss.

(ii) 

Included in other comprehensive income (loss) is the change in actuarial gains and losses that will not be reclassified to profit or loss and has been reclassified to retained earnings.

(iii) 

Restated, see Note 2 (d) of the Company's 2017 first quarter unaudited condensed consolidated interim financial statements.

 

Consolidated Interim Statements of Cash Flows

(In thousands of Canadian dollars)

Three months ended March 31,

(Unaudited)

2017

2016

CASH PROVIDED BY (USED IN) :



Operating activities




Net earnings

$

30,105

$

42,269


Add (deduct) items not affecting cash:





Change in fair value of biological assets

(2,797)

(16,841)



Depreciation and amortization

28,071

28,871



Share-based compensation

7,213

5,498



Deferred income taxes

10,478

14,579



Income tax current

1,502

1,215



Interest expense and other financing costs

1,227

1,106



Loss on sale of long-term assets

321

497



Change in fair value of non-designated derivative financial instruments

8,183

7,228


Change in net pension liability

1,064

5,676


Net income taxes paid

(2,658)

(2,913)


Interest paid

(818)

(1,086)


Change in provision for restructuring and other related costs

2,614

(6,913)


Change in derivatives margin

(2,430)

(7,266)


Other

(913)

3,604


Change in non-cash working capital

(26,154)

(30,087)

Cash provided by operating activities

$

55,008

$

45,437

Financing activities




Dividends paid

$

(14,325)

$

(12,111)


Net decrease in long-term debt

(185)

(167)


Exercise of stock options

1,607

42


Repurchase of shares

(81,980)

(11,922)


Payment of deferred financing fees

(64)


Purchase of treasury stock

(10,000)

(2,701)

Cash used in financing activities

$

(104,947)

$

(26,859)

Investing activities




Additions to long-term assets

$

(20,255)

$

(20,275)


Acquisition of business, net of cash acquired

(189,917)


Proceeds from sale of long-term assets

86

344

Cash used in investing activities

$

(210,086)

$

(19,931)

Decrease in cash and cash equivalents

$

(260,025)

$

(1,353)

Cash and cash equivalents, beginning of period

403,621

292,269

Cash and cash equivalents, end of period

$

143,596

$

290,916

 

SOURCE Maple Leaf Foods Inc.

For further information: Investor Contact: Jennifer Postelnik, 905-285-5898; Media Contact: Scott Bonikowsky, 905-285-1515

RELATED LINKS
http://www.mapleleaffoods.com

Custom Packages

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

Start today.

CNW Membership

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

Learn about CNW services

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