Maple Leaf Foods Reports Results for Fourth Quarter and Fiscal Year 2009

TORONTO, Feb. 24 /CNW/ - Maple Leaf Foods Inc. (TSX: MFI) today reported its financial results for the fourth quarter and the year ended December 31, 2009. Fourth quarter highlights follow:

    
    -  Adjusted EPS increased to $0.19 compared to $0.12 last year due to
       substantial recovery in the prepared meats business
    -  Adjusted Operating Earnings increased to $57.8 million from
       $35.4 million
    -  Net earnings of $21.9 million compared to a net loss of $14.6 million
    

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

"The increased earnings in the fourth quarter reflect significantly better performance in our protein business, offset slightly by a softer quarter in the bakery segment," said Michael H. McCain, President and CEO. "Our prepared meats results improved substantially, although an unexpected, counter seasonal run-up in raw material costs compressed margins in both primary processing and prepared meats late in the quarter. In our bakery operations, lower wheat costs were more than offset by higher promotional activity to launch new products and poor market conditions affecting our U.K. business.

"In 2009, we substantially completed the restructuring of our protein operations and focused our company on higher margin consumer packaged goods. Looking ahead, our priority is to increase earnings and margins to levels consistent with our peers. We have work to do on this goal and it will involve achieving the full potential of our prepared meats business, investing in our plant network to reduce costs, and delivering higher levels of organic growth."

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

Sales for the fourth quarter decreased 1% to $1,324.9 million compared to $1,339.7 million last year, while sales for the year were consistent at $5.2 billion.

Adjusted Operating Earnings increased to $57.8 million compared to $35.4 million last year, while earnings for the year increased to $196.1 million compared to $128.4 million last year, due to better performance in prepared meats and fresh poultry businesses. This improvement was partly offset by lower pork earnings, higher pension expense, and increased promotional, marketing and other expenses in the bakery operations.

Net earnings increased to $21.9 million or $0.16 per share in the fourth quarter of 2009 compared to a net loss of $14.6 million or $0.12 per share last year.

    
    Following is a reconciliation of Basic EPS to Adjusted EPS:

                                   Fourth Quarter              Full Year
    -------------------------------------------------------------------------
                                 2009         2008         2009         2008
    -------------------------------------------------------------------------
    Basic EPS             $      0.16  $     (0.12) $      0.40  $     (0.29)
    Product recall,
     restructuring and
     other related costs         0.02         0.24         0.17         0.58
    -------------------------------------------------------------------------
    Adjusted EPS (i)      $      0.19  $      0.12  $      0.57  $      0.29
    -------------------------------------------------------------------------

    (i) Table does not add due to rounding.

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

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

                                   Fourth Quarter               Full Year
    -------------------------------------------------------------------------
    ($ millions)                 2009         2008         2009         2008
    -------------------------------------------------------------------------
    Meat Products Group   $      24.2  $      (2.1) $      55.4  $      29.5
    Agribusiness Group           14.5         13.0         48.0         30.1
    -------------------------------------------------------------------------
    Protein Group                38.7         10.9        103.4         59.6
    Bakery Products Group        21.9         26.6        102.2         83.0
    Non-allocated Costs (i)      (2.8)        (2.1)        (9.5)       (14.2)
    -------------------------------------------------------------------------
    Adjusted Operating
     Earnings             $      57.8  $      35.4  $     196.1  $     128.4
    -------------------------------------------------------------------------

    (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
    -------------------
    (value-added prepared meats; chilled meal entrees and lunch kits;
    value-added fresh pork, poultry and turkey products)
    

Sales for the fourth quarter were largely consistent with last year. Adjusted Operating Earnings in the Meat Products Group increased to $24.2 million compared to a loss of $2.1 million last year. For the year, Adjusted Operating Earnings were $55.4 million compared to $29.5 million last year.

Earnings in the fourth quarter benefited from an increased contribution from the prepared meats business following a major product recall in August 2008. Although earnings are higher, they compare with a quarter that was materially impacted by the August 2008 product recall, and there still remains significant room to further increase sales and profitability.

Volumes in the prepared meats business continued to trend closer to historical levels, while margins increased compared to the fourth quarter of last year mainly due to lower raw material and packaging costs, the benefit of a stronger Canadian dollar and normalized supply chain operations. While earnings performance has improved compared to the prior year, margins were compressed in the latter part of the fourth quarter as the expected seasonal declines in meat prices did not materialize, with raw material prices rising sharply in December.

Earnings were lower in primary processing due to an increase in live hog market prices that compressed margins. Reduced pork earnings were partly offset by improved fresh poultry results due to better industry processor margins and operating efficiencies.

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

Sales increased to $50.7 million from $49.2 million last year. Higher bio-diesel sales were partially offset by the impact of lower commodity prices which reduced the sales values of recycled by-products in the rendering operations.

Adjusted Operating Earnings for the Agribusiness Group in the fourth quarter rose to $14.5 million compared to $13.0 million in the prior year. Adjusted Operating Earnings for the year increased to $48.0 million from $30.1 million in 2008.

Improved earnings in the quarter were driven by higher sales volumes of bio-diesel in the Company's rendering operations. Earnings in the fourth quarter included increased bio-diesel production credits received from the Canadian government. This increase reflects a structural change in the support of renewable fuels that should improve industry-wide economics. Losses in hog production increased compared to last year due to lower hog prices on average and the strengthening of the Canadian dollar which reduces the sales value of hogs.

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

Sales declined to $432.0 million from $444.2 million in the prior year, mainly due to foreign exchange translation of the U.K. and U.S. businesses. Volume increases in the fresh and frozen North American bakeries and pasta business were offset by lower sales volume in the U.K. Bakery operations and the fresh sandwiches business in Canada.

Adjusted Operating Earnings for the fourth quarter decreased to $21.9 million compared to $26.6 million last year, while Adjusted Operating Earnings for the year increased to $102.2 million compared to $83.0 million in 2008. The decline in the fourth quarter was mainly due to the timing of promotional activities and higher marketing and other expenses. New product launches at the end of the third quarter of 2009, primarily the Dempster's(R) OvenFresh(TM) line of white and multigrain fresh par-baked breads and Cadbury(TM) Snack Cakes, were supported by promotional and marketing campaigns in the fourth quarter that contributed to increased expenses. Additionally, a short-term increase in trade investment in the Canadian market, the impact of currency changes and higher manufacturing costs in the U.K. bakery operations reduced earnings in the quarter. Partly offsetting these increased expenses was the positive impact of lower average commodity costs during the quarter compared to last year.

    
    Other Income (Expense)
    ----------------------
    

Other expense for the quarter was $0.4 million compared to other income of $13.8 million last year. The income in 2008 was comprised mostly of insurance proceeds to cover business interruption losses related to an oven fire in the U.K. bakery business and the disposal of a redundant warehouse facility.

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

On February 23, 2010, Maple Leaf Foods Inc. declared a dividend of $0.04 per share on the outstanding common and non-voting common shares of the Company payable March 31, 2010 to shareholders of record at the close of business on March 10, 2010. Unless indicated otherwise by the Company in writing at or before the time the dividend is paid, this dividend will not be considered an eligible dividend for the purposes of the "Enhanced Dividend Tax Credit System".

It is currently anticipated, that all dividends the Company will pay in 2010 will not be considered an eligible dividend for the purposes of the "Enhanced Dividend Tax Credit System".

An investor presentation related to the Company's fourth and full year 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 February 24, 2010 to review Maple Leaf Foods' fourth and full year financial results. To participate in the call, please dial 416-340-8018 or 866-223-7781. For those unable to participate, playback will be made available an hour after the event at 416-695-5800 / 800-408-3053 (Passcode 7776003 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://events.startcast.com/events6/91/C0015/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 of improved economics in the bio-diesel industry. 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; expected recovery of sales following the product recall; 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 will be available on SEDAR at www.sedar.com. The Company does not intend to, and the Company disclaims any obligation to, update any forward-looking statements, whether written or oral, or whether as a result of new information, future events or otherwise except as required by law.

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 December 31,
                                                           2009         2008
    -------------------------------------------------------------------------

    Assets

    Current assets
      Cash and cash equivalents                     $    29,316  $   365,518
      Accounts receivable                               200,317      139,144
      Inventories                                       349,909      377,414
      Income and other taxes recoverable                 18,067       20,971
      Future tax asset                                    4,301       19,787
      Prepaid expenses and other assets                  15,328       32,289
      -----------------------------------------------------------------------
                                                    $   617,238  $   955,123

    Property and equipment                            1,135,056    1,169,435
    Other long-term assets                              328,063      329,070
    Future tax asset                                     22,116       24,854
    Goodwill                                            857,278      876,261
    Other intangible assets                              97,713       97,358
    -------------------------------------------------------------------------
                                                    $ 3,057,464  $ 3,452,101
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities
      Bank indebtedness                             $     4,247  $     8,894
      Accounts payable and accrued charges              489,182      600,924
      Current portion of long-term debt                 206,147      179,244
      Other current liabilities                          37,837       28,456
      -----------------------------------------------------------------------
                                                    $   737,413  $   817,518

    Long-term debt                                      834,557    1,200,224
    Future tax liability                                 27,851       37,903
    Other long-term liabilities                         187,523      179,039
    Non-controlling interest                             81,070       74,447
    Shareholders' equity                              1,189,050    1,142,970
    -------------------------------------------------------------------------
                                                    $ 3,057,464  $ 3,452,101
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

    -------------------------------------------------------------------------
                                Three months ended       Twelve months ended
                                    December 31,              December 31,
                                 2009         2008         2009         2008
                                    (Unaudited)
    -------------------------------------------------------------------------
    Sales                 $ 1,324,903  $ 1,339,704  $ 5,221,602  $ 5,242,602
    Cost of goods sold      1,118,967    1,184,003    4,487,378    4,622,409
    -------------------------------------------------------------------------
    Gross margin          $   205,936  $   155,701  $   734,224  $   620,193
    Selling, general and
     administrative
     expenses                 148,096      120,351      538,113      491,778
    -------------------------------------------------------------------------
    Earnings from
     operations before
     the following:       $    57,840  $    35,350  $   196,111  $   128,415
    Product recall,
     restructuring and
     other related costs       (4,392)     (40,570)     (31,145)    (102,812)
    Other income                  394       13,789        3,613       24,864
    -------------------------------------------------------------------------
    Earnings from
     operations before
     interest and income
     taxes                $    53,842  $     8,569  $   168,579  $    50,467
    Interest expense           19,372       22,795       81,234       88,651
    -------------------------------------------------------------------------
    Earnings (loss) from
     operations before
     income taxes         $    34,470  $   (14,226) $    87,345  $   (38,184)
    Income taxes               11,051       (2,336)      27,296       (8,538)
    -------------------------------------------------------------------------
    Earnings (loss) from
     operations before
     non-controlling
     interest             $    23,419  $   (11,890) $    60,049  $   (29,646)
    Non-controlling
     interest                   1,499        2,685        7,902        7,211
    -------------------------------------------------------------------------
    Net earnings (loss)   $    21,920  $   (14,575) $    52,147  $   (36,857)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic earnings (loss)
     per share            $      0.16  $     (0.12) $      0.40  $     (0.29)
    Diluted earnings
     (loss) per share     $      0.16  $     (0.12) $      0.39  $     (0.29)
    -------------------------------------------------------------------------
    Weighted average number
     of shares (millions)       134.4        126.4         129.8       126.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

    -------------------------------------------------------------------------
                                Three months ended       Twelve months ended
                                    December 31,              December 31,
                                  2009       2008          2009         2008
                                    (Unaudited)
    -------------------------------------------------------------------------
    Net earnings (loss)   $     21,920  $ (14,575)  $    52,147  $   (36,857)

    Other comprehensive
     loss
      Change in
       accumulated foreign
       currency translation
       adjustment               (7,815)    (5,626)      (15,644)      (6,579)
      Change in unrealized
       loss on cash flow
       hedges                   (1,303)    (8,016)       12,871      (10,329)
    -------------------------------------------------------------------------
                          $     (9,118) $ (13,642)  $    (2,773) $   (16,908)
    -------------------------------------------------------------------------
    Comprehensive income
     (loss)               $     12,802  $ (28,217)  $    49,374  $   (53,765)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Consolidated Statements of Retained Earnings
    (In thousands of Canadian dollars)
    -------------------------------------------------------------------------
                                                     Years ended December 31,
                                                           2009         2008
    -------------------------------------------------------------------------
    Retained earnings, beginning of year            $   314,649  $   378,604
    Net earnings (loss)                                  52,147      (36,857)
    Adoption of new accounting standard                    (207)           -
    Dividends declared ($0.16 per share; 2008:
     $0.16 per share)                                   (20,913)     (20,769)
    Premium on shares repurchased for cancellation            -       (5,515)
    Premium on shares issued from Restricted Share
     Unit Trust                                            (837)        (814)
    -------------------------------------------------------------------------
    Retained earnings, end of year                  $   344,839  $   314,649
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    MAPLE LEAF FOODS INC.
    Consolidated Statements of Cash Flows
    (In thousands of Canadian dollars)
    -------------------------------------------------------------------------
                                Three months ended       Twelve months ended
                                    December 31,              December 31,
                                 2009         2008         2009         2008
                                    (Unaudited)
    -------------------------------------------------------------------------
    Cash provided by (used in):

    Operating activities

      Net earnings (loss) $    21,920   $  (14,575) $    52,147  $   (36,857)
      Add (deduct) items
       not affecting cash:
        Depreciation and
         amortization          35,574       38,157      149,489      149,219
        Stock-based
         compensation           4,736        5,134       18,400       17,160
        Non-controlling
         interest               1,499        2,686        7,902        7,212
        Future income taxes     4,995       (1,489)      (7,390)     (23,254)
        Loss (gain) on sale
         of property and
         equipment                660         (651)       1,137       (4,724)
        Gain on sale of
         investments                -            -         (501)           -
        Amortization of
         terminated interest
         rate swaps               503          732        2,106        4,391
        Change in fair value
         of derivative
         financial
         instruments           (1,103)      14,600      (13,373)      12,851
      Change in other
       long-term receivables       90          334           90          893
      Decrease (increase)
       in net pension asset      (157)     (11,290)         962      (27,489)
      Change in provision
       for restructuring and
       other related costs       (804)       9,067       15,046       37,859
      Other                     1,342        2,174       (7,828)       6,066
      Change in non-cash
       operating working
       capital                 11,253      141,991     (128,981)      52,156
    -------------------------------------------------------------------------
    Cash provided by
     operating activities $    80,508   $  186,870  $    89,206  $   195,483
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Financing activities
      Dividends paid           (5,409)      (5,069)     (20,913)     (20,769)
      Dividends paid to
       non-controlling
       interest                  (156)        (156)        (672)        (755)
      Increase (decrease) in
       long-term debt         (96,918)      32,914      (262,795)     392,285
      Proceeds on issuance
       of share capital         1,480        1,133        1,480        5,143
      Shares repurchased
       for cancellation             -            -            -      (11,814)
      Issuance of equity
       units                        -       69,106            -       69,106
      Purchase of treasury
       stock                        -            -       (3,190)     (11,341)
      Other                       304        1,210        3,110        1,994
    -------------------------------------------------------------------------
    Cash provided by
     (used in) financing
     activities           $  (100,699) $    99,138  $  (282,980) $   423,849
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Investing activities
      Additions to property
       and equipment          (39,501)     (48,512)    (162,893)    (206,220)
      Proceeds from
       disposal of property
       and equipment              145        2,500       23,717       19,727
      Acquisition of
       businesses
         - net of cash
           acquired                 -           (8)           -      (62,962)
      Proceeds on sale of
       investments                  -        1,053        1,540        1,053
      Purchase of
       Canada Bread shares          -            -            -      (32,643)
      Other                       183         (405)        (145)         (40)
    -------------------------------------------------------------------------
    Cash used in
     investing activities $   (39,173) $   (45,372) $  (137,781) $  (281,085)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Increase (decrease) in
     cash and cash
     equivalents              (59,364)     240,636     (331,555)     338,247
    Cash and cash
     equivalents,
     beginning of period       84,433      115,988      356,624       18,377
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end of
     period               $    25,069  $   356,624  $    25,069  $   356,624
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    MAPLE LEAF FOODS INC.
    Segmented Financial Information
    (In thousands of Canadian dollars)
    -------------------------------------------------------------------------
                                Three months ended       Twelve months ended
                                    December 31,              December 31,
                                 2009         2008         2009         2008
                                    (Unaudited)
    -------------------------------------------------------------------------
    Sales
      Meat Products Group $   842,175  $   846,316  $ 3,310,393  $ 3,303,694
      Agribusiness Group       50,686       49,180      206,064      232,999
      Bakery Products Group   432,042      444,208    1,705,145    1,705,909
    -------------------------------------------------------------------------
                          $ 1,324,903  $ 1,339,704  $ 5,221,602  $ 5,242,602
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings from operations
     before product recall,
     restructuring and other
     related costs and other
     income
      Meat Products Group $    24,244  $    (2,087) $    55,388  $    29,455
      Agribusiness Group       14,505       12,980       48,023       30,132
      Bakery Products Group    21,896       26,601      102,155       82,979
      Non-allocated costs      (2,805)      (2,144)      (9,455)     (14,151)
    -------------------------------------------------------------------------
                          $    57,840  $    35,350  $   196,111  $   128,415
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Capital expenditures
      Meat Products Group $    17,532  $    31,645  $    86,770  $   133,238
      Agribusiness Group        4,749        1,963       13,048       11,577
      Bakery Products Group    17,220       14,904       63,075       61,405
    -------------------------------------------------------------------------
                          $    39,501  $    48,512  $   162,893  $   206,220
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Depreciation and
     amortization
      Meat Products Group $    17,926  $    19,164  $    76,077  $    75,712
      Agribusiness Group        4,431        3,969       16,508       16,221
      Bakery Products Group    13,217       15,024       56,904       57,286
    -------------------------------------------------------------------------
                          $    35,574  $    38,157  $   149,489  $   149,219
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                                                          As at        As at
                                                    December 31, December 31,
                                                           2009         2008
    -------------------------------------------------------------------------
    Total assets
      Meat Products Group                           $ 1,653,389  $ 1,675,048
      Agribusiness Group                                287,057      301,627
      Bakery Products Group                             955,469    1,003,739
      Non-allocated assets                              161,549      471,687
    -------------------------------------------------------------------------
                                                    $ 3,057,464  $ 3,452,101
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill
      Meat Products Group                           $   442,943  $   450,431
      Agribusiness Group                                 14,136       14,445
      Bakery Products Group                             400,199      411,385
    -------------------------------------------------------------------------
                                                    $   857,278  $   876,261
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

SOURCE Maple Leaf Foods Inc.

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