Maple Leaf Foods Reports Results for First Quarter 2010

TORONTO, April 29 /CNW/ - Maple Leaf Foods Inc. (TSX: MFI) today reported its financial results for the first quarter ended March 31, 2010.

    
    -   Adjusted Operating Earnings increased to $33.9 million from $31.6
        million last year.
    -   Adjusted EPS increased to $0.09 compared to $0.05 last year.
    -   Net earnings increased to $8.8 million from $2.9 million last year.
    

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

"Our first quarter results reflect a modest growth in earnings," said Michael H. McCain, President and CEO. "Our protein business continues to show substantial year over year improvement in performance, although the unexpected early rise in meat raw material costs has temporarily slowed the improvement curve. The bakery business experienced a weaker quarter due to performance in the U.K. and the North American frozen bakery business. However, we are seeing signs of improvement in both these areas as volumes recover and our cost reduction initiatives take hold."

"This, along with price adjustments being implemented mostly in the second quarter, gives us confidence in expecting stronger margin growth and continued improvement through the remainder of 2010."

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

Sales for the first quarter declined 7% to $1,191.5 million from $1,279.3 million last year, mostly due to the impact of the strengthening of the Canadian dollar on fresh pork sales and the translation of bakery sales in the U.S. and the U.K. to Canadian dollars. Adjusted Operating Earnings increased 7% to $33.9 million compared to $31.6 million last year, due to better performance in the protein operations. Net earnings increased to $8.8 million or $0.06 per share in the first quarter of 2010 compared to net earnings of $2.9 million or $0.02 per share last year.

Following is a reconciliation of Basic EPS to Adjusted EPS:

    
                                                             First Quarter
    -------------------------------------------------------------------------
                                                            2010        2009
    -------------------------------------------------------------------------
    Basic EPS                                              $0.06       $0.02
    Restructuring and other related costs                   0.02        0.03
    -------------------------------------------------------------------------
    Adjusted EPS                                           $0.09(i)    $0.05
    -------------------------------------------------------------------------

    (i) Does not add due to rounding.

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

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

    
                                                             First Quarter
    -------------------------------------------------------------------------
    ($ millions)                                            2010        2009
    -------------------------------------------------------------------------
    Meat Products Group                                    $14.2       $11.4
    Agribusiness Group                                       6.5         2.1
    -------------------------------------------------------------------------
    Protein Group                                           20.7        13.5
    Bakery Products Group                                   16.7        19.5
    Non-allocated Costs (i)                                 (3.5)       (1.4)
    -------------------------------------------------------------------------
    Adjusted Operating Earnings                            $33.9       $31.6
    -------------------------------------------------------------------------

    (i) Non-allocated costs comprise costs related to systems conversion and
    consulting fees. Management believes that not allocating these costs
    provides a more comparable assessment of segmented operating results.

    Meat Products Group
    -------------------
    

Includes value-added prepared meats, chilled meal entrees and lunch kits; and fresh pork, poultry and turkey products sold to retail, foodservice, industrial and convenience channels. Includes leading Canadian brands such as Maple Leaf(R), Schneiders(R) and many leading sub-brands.

Sales for the first quarter declined to $768.2 million from $822.2 million last year, as the stronger Canadian dollar reduced the sales values of fresh pork. Additionally, sales volumes were lower in prepared meats due to the exit of a non-core business and normalized levels of promotional activity compared to the first quarter last year.

Adjusted Operating Earnings in the Meat Products Group increased to $14.2 million compared to $11.4 million last year, largely due to improved markets and efficiencies in the fresh poultry operations. Performance in the prepared meats business improved over last year as a result of better pricing and mix and cost reduction initiatives, partly offset by lower volumes. However, first quarter margins were impacted by a sharp increase in raw material prices that occurred late in the fourth quarter of 2009. Management is implementing staged price adjustments over the next two quarters across its prepared meats portfolio to offset higher input costs. Earnings from primary pork processing operations declined due to a stronger Canadian dollar and weaker export markets that more than offset the benefit of improved North American industry market conditions.

    
    Agribusiness Group
    ------------------
    

Consists of Canadian hog production and animal by-product recycling operations.

Agribusiness Group sales declined from $44.6 million last year to $41.8 million mostly due to lower sales of recycled by-products.

Adjusted Operating Earnings increased to $6.5 million compared to $2.1 million in the prior year. Losses in hog production operations were reduced due to lower feed costs and stronger hog market prices. However this improvement was impacted by the strengthening of the Canadian dollar and short-term hedging programs. Included in first quarter earnings is $3.0 million (2009: $0.1 million) in government support to compensate hog producers for losses in prior years. Earnings from by-product recycling declined slightly compared to last year due to increased raw material costs.

    
    Bakery Products Group
    ---------------------
    

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

Sales declined to $381.5 million from $412.5 million last year, due to the unfavourable impact of the stronger Canadian dollar and lower sales volumes in the North American frozen and U.K. bakery operations.

Adjusted Operating Earnings for the first quarter decreased to $16.7 million compared to $19.5 million last year due primarily to lower sales volumes in both the U.K. and the North American frozen bakery businesses. Management expects the volume decline in North America to be transitory as new business is gradually being secured and is taking steps to reduce the cost base in the Company's U.K. operations until volumes improve. Declines in profitability in these two business units more than offset improved performance in the fresh bakery operations.

    
    Subsequent Events
    -----------------
    

On April 28, 2010, the Company issued notes payable totalling $75.0 million in a private placement with a group of institutional investors. The notes are unsecured, bear interest at 6.08% payable semi-annually and are due in April 2015.

Subsequent to the period end, the Company executed $590.0 million of interest rate swaps. Swaps totaling $330.0 million started on April 28, 2010 and have an expiry date of April 28, 2015 with an average interest rate of 3.34%. Swaps totaling $260.0 million start on December 8, 2011 and have an expiry date of December 8, 2015 with an average interest rate of 4.18%.

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

On April 28, 2010, Maple Leaf Foods Inc. declared a dividend of $0.04 per share payable on June 30, 2010 to shareholders of record at the close of business on June 4, 2010. Unless indicated otherwise by the Company in writing at or before the time the dividend is paid, these dividends will not be considered an eligible dividend for the purposes of the "Enhanced Dividend Tax Credit System".

It is currently anticipated that none of the dividends the Company will pay in 2010 will be considered an eligible dividend for the purposes of the "Enhanced Dividend Tax Credit System".

An investor presentation related to the Company's first 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 April 29, 2010 to review Maple Leaf Foods' first quarter financial results. To participate in the call, please dial 416-340-2216 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 6113830 followed by the number sign).

A webcast presentation of the first quarter financial results will also be available at http://investor.mapleleaf.ca via a link: http://events.startcast.com/events6/91/C0016/Default.aspx

The Company's full financial statements and related Management's Discussion and Analysis are available for download on the Company's website.

    
    Forward-Looking Statements
    --------------------------
    

This document contains, and the Company's oral and written public communications often contain, forward-looking statements that are based on current expectations, estimates, forecasts and projections about the industries in which the Company operates and beliefs and assumptions made by the Management of the Company. Such statements include, but are not limited to, statements with respect to objectives and goals, as well as statements with respect to beliefs, plans, expectations, anticipations, estimates and intentions. Specific statements include, but are not limited to, statements with respect to expectations concerning the ongoing nature of restructuring benefits in the Protein Group, expectations regarding earnings potential in the prepared meats business, and expectations regarding actions to reduce costs, restore volumes and/or increase prices. Words such as "expect," "anticipate," "intend," "attempt," "may," "will," "plan," "believe," "seek," "estimate," and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve assumptions and risks and uncertainties that are difficult to predict.

In addition, expectations concerning 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, United States, United Kingdom and Japanese economies; the rate of exchange of the Canadian dollar to the U.S. dollar, British pound and Japanese yen; expectations regarding actions to reduce costs, restore volumes and/or increase prices; 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 whether as a result of the protein business transformation or otherwise; continued access to capital; the cost of compliance with environmental and health standards; no adverse results from ongoing litigation that would not be covered by insurance; no unexpected actions of domestic and foreign governments and the general assumption that none of the risks identified under "Risk Factors" in the Company's Annual Management's Discussion and Analysis for the year ended December 31, 2009 will materialize. All of these assumptions have been derived from information currently available to the Company including information obtained by the Company from third-party sources. These assumptions may prove to be incorrect in whole or in part. In addition, actual results may differ materially from those expressed, implied or forecasted in such forward looking statements, which reflect the Company's expectations only as of the date hereof.

Factors that could cause actual results or outcomes to differ materially from the results expressed, implied or forecasted by forward-looking statements are discussed more fully in the Company's Annual Management's Discussion and Analysis for the year ended December 31, 2009 including the section entitled "Risk Factors" that is available on SEDAR at www.sedar.com. The Company does not intend to, and the Company disclaims any obligation to, update any forward-looking statements, whether written or oral, or whether as a result of new information, future events or otherwise except as required by law.

Maple Leaf Foods Inc. is a leading food processing company, headquartered in Toronto, Canada. The Company employs approximately 23,500 people at its operations across Canada and in the United States, the United Kingdom, and Asia. The Company had sales of $5.2 billion in 2009.

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

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

    Current assets
      Cash and cash equivalents        $    72,334  $   263,260  $    29,316
      Accounts receivable                  167,607      178,448      200,317
      Inventories                          377,839      401,380      349,909
      Income and other taxes recoverable    15,807       26,700       18,067
      Future tax asset                       3,570       19,438        4,301
      Prepaid expenses and other assets     18,978       22,390       15,328
      -----------------------------------------------------------------------
                                       $   656,135  $   911,616  $   617,238
    Property and equipment               1,118,389    1,188,043    1,135,056
    Other long-term assets                 328,536      330,042      328,063
    Future tax asset                        40,345       29,183       22,116
    Goodwill                               848,577      877,044      857,278
    Other intangible assets                 96,232       99,951       97,713
    -------------------------------------------------------------------------
                                       $ 3,088,214  $ 3,435,879  $ 3,057,464
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities
      Bank indebtedness                $     6,167  $     8,875  $     4,247
      Accounts payable and accrued
       charges                             507,803      586,655      489,182
      Current portion of long-term debt    202,776      183,142      206,147
      Other current liabilities             39,479       12,358       37,837
      -----------------------------------------------------------------------
                                       $   756,225  $   791,030  $   737,413
    Long-term debt                         831,946    1,209,874      834,557
    Future tax liability                    36,053       42,941       27,851
    Other long-term liabilities            201,787      167,590      187,523
    Non-controlling interest                82,086       75,236       81,070
    Shareholders' equity                 1,180,117    1,149,208    1,189,050
    -------------------------------------------------------------------------
                                       $ 3,088,214  $ 3,435,879  $ 3,057,464
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

    -------------------------------------------------------------------------
                                                          Three months ended
                                                               March 31,
    (Unaudited)                                            2010         2009
    -------------------------------------------------------------------------

    Sales                                           $ 1,191,507  $ 1,279,299

    Cost of goods sold                                1,030,871    1,112,087
    -------------------------------------------------------------------------
    Gross margin                                    $   160,636  $   167,212

    Selling, general and administrative expenses        126,739      135,613
    -------------------------------------------------------------------------
    Earnings from operations before the following:  $    33,897  $    31,599

    Restructuring and other related costs                (3,963)      (5,334)

    Other income                                            329        1,679
    -------------------------------------------------------------------------
    Earnings from operations before interest and
     income taxes                                   $    30,263  $    27,944

    Interest expense                                     16,127       21,343
    -------------------------------------------------------------------------
    Earnings from operations before income taxes    $    14,136  $     6,601

    Income taxes                                          4,080        2,157
    -------------------------------------------------------------------------
    Earnings from operations before non-controlling
     interest                                       $    10,056  $     4,444

    Non-controlling interest                              1,302        1,573

    -------------------------------------------------------------------------
    Net earnings                                    $     8,754  $     2,871
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per share - basic and diluted          $      0.06  $      0.02

    -------------------------------------------------------------------------
    Weighted average number of shares (millions)          134.9        126.6

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



    MAPLE LEAF FOODS INC.
    Consolidated Statements of Comprehensive Income (Loss)
    (In thousands of Canadian dollars)

    -------------------------------------------------------------------------
                                                          Three months ended
                                                               March 31,
    (Unaudited)                                            2010         2009
    -------------------------------------------------------------------------

    Net earnings                                    $     8,754  $     2,871

    Other comprehensive income (loss)

      Change in accumulated foreign currency
       translation adjustment                           (18,116)      (1,347)
      Change in unrealized derivative loss on cash
       flow hedges                                        1,342        4,521
    -------------------------------------------------------------------------
                                                    $   (16,774) $     3,174
    -------------------------------------------------------------------------
    Comprehensive income (loss)                     $    (8,020) $     6,045
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statements of Retained Earnings
    (In thousands of Canadian dollars)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                          Three months ended
                                                               March 31,
    (Unaudited)                                            2010         2009
    -------------------------------------------------------------------------

    Retained earnings, beginning of period          $   344,839  $   314,649

    Net earnings                                          8,754        2,871

    Adoption of new accounting standard                       -         (207)

    Dividends declared ($0.04 per share; 2009: $0.04
     per share)                                          (5,394)      (5,066)
    -------------------------------------------------------------------------
    Retained earnings, end of period                $   348,199  $   312,247
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

    -------------------------------------------------------------------------
                                                          Three months ended
                                                               March 31,
    (Unaudited)                                            2010         2009
    -------------------------------------------------------------------------

    CASH PROVIDED BY (USED IN):

    Operating activities
      Net earnings                                  $     8,754  $     2,871
      Add (deduct) items not affecting cash:
        Depreciation and amortization                    37,545       38,368
        Stock-based compensation                          4,440        4,566
        Non-controlling interest                          1,302        1,573
        Future income taxes                             (10,245)      (1,938)
        Loss (gain) on sale of property and equipment    (1,243)         109
        Amortization of terminated interest rate swap       503          598
        Change in fair value of derivative financial
         instruments                                     (2,236)     (12,807)
      Decrease in net pension asset                         841          395
      Change in provision for restructuring and other
       related costs                                        182        2,653
      Other                                              (2,046)       4,402
      Change in non-cash operating working capital       26,625      (79,621)
    -------------------------------------------------------------------------
    Cash provided by (used in) operating
     activities                                     $    64,422  $   (38,831)
    -------------------------------------------------------------------------

    Financing activities
      Dividends paid                                $    (5,394) $    (5,066)
      Dividends paid to non-controlling interest           (286)        (205)
      Net increase (decrease) in long-term debt           9,475         (745)
      Increase in share capital                              40            -
      Other                                                (677)         217
    -------------------------------------------------------------------------
    Cash provided by (used in) financing
     activities                                     $     3,158  $    (5,799)
    -------------------------------------------------------------------------

    Investing activities
      Additions to property and equipment           $   (28,703) $   (57,672)
      Proceeds from sale of property and equipment        2,172          613
      Other                                                  49         (550)
    -------------------------------------------------------------------------
    Cash used in investing activities               $   (26,482) $   (57,609)
    -------------------------------------------------------------------------

    Increase (decrease) in cash and cash
     equivalents                                    $    41,098  $  (102,239)
    Net cash and cash equivalents, beginning of
     period                                              25,069      356,624
    -------------------------------------------------------------------------
    Net cash and cash equivalents, end of period    $    66,167  $   254,385
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

    -------------------------------------------------------------------------
                                                          Three months ended
                                                               March 31,
                                                           2010         2009
    -------------------------------------------------------------------------

    Sales
      Meat Products Group                           $   768,180  $   822,194
      Agribusiness Group                                 41,808       44,588
      Bakery Products Group                             381,519      412,517
    -------------------------------------------------------------------------
                                                    $ 1,191,507  $ 1,279,299
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings from operations before restructuring
     and other related costs and other income
      Meat Products Group                           $    14,213  $    11,351
      Agribusiness Group                                  6,460        2,145
      Bakery Products Group                              16,744       19,525
      Non-allocated costs                                (3,520)      (1,422)
    -------------------------------------------------------------------------
                                                    $    33,897  $    31,599
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Capital expenditures
      Meat Products Group                           $    13,626  $    31,249
      Agribusiness Group                                  4,191        3,048
      Bakery Products Group                              10,886       23,375
    -------------------------------------------------------------------------
                                                    $    28,703  $    57,672
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Depreciation and amortization
      Meat Products Group                           $    19,931  $    19,578
      Agribusiness Group                                  4,145        4,034
      Bakery Products Group                              13,469       14,756
    -------------------------------------------------------------------------
                                                    $    37,545  $    38,368
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                             As at        As at        As at
                                          March 31,    March 31, December 31,
                                              2010         2009         2009
    -------------------------------------------------------------------------
                                        (Unaudited)  (Unaudited)
    Total assets
      Meat Products Group              $ 1,656,111  $ 1,731,057  $ 1,653,389
      Agribusiness Group                   287,425      294,098      287,057
      Bakery Products Group                920,465      997,154      955,469
      Non-allocated assets                 224,213      413,570      161,549
    -------------------------------------------------------------------------
                                       $ 3,088,214  $ 3,435,879  $ 3,057,464
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Goodwill
      Meat Products Group              $   442,599  $   450,432  $   442,943
      Agribusiness Group                    14,136       14,136       14,136
      Bakery Products Group                391,842      412,476      400,199
    -------------------------------------------------------------------------
                                       $   848,577  $   877,044  $   857,278
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

SOURCE Maple Leaf Foods Inc.

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


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