Revision - Canada Bread Reports Results for Fourth Quarter Fiscal 2007



    Earnings Increase Despite Record High Input Costs

    TORONTO, Feb. 21 /CNW/ - Canada Bread Company, Limited (TSX: CBY) today
announced its financial results for the fourth quarter ended December 31,
2007.

    
    Financial and operational highlights include:
    -   Earnings from operations increased 19% in the quarter; 14% for the
        year
    -   Earnings per share increased 27% to $0.88 in the quarter; $3.31 for
        the year
    -   Fresh Bakery operating earnings down 22% in the quarter; down 6% for
        the year
    -   Frozen Bakery operating earnings up 146% in the quarter; 111% for the
        year

    Note: All earnings measures are defined as earnings before restructuring
    and other related costs. All earnings per share measures are defined as
    earnings per share before restructuring and other related costs.
    

    "We achieved solid results in the quarter despite the continuation of
unprecedented rises in commodity prices for flour and dairy products. Our
results reflect our ability to manage this impact through a balanced
combination of price increases and manufacturing and distribution efficiency
improvements," said Richard Lan, President and CEO. "The Frozen Bakery
business had a very strong quarter both in the U.K. and North America driven
by contributions from the new acquisitions in the U.K. and operational
efficiencies in North America. While the Fresh Bakery business balanced price
and wheat, results for the quarter were impacted by the increased investment
in marketing initiatives and inflationary costs."

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

    Sales for the fourth quarter increased 11% to $393.3 million compared to
the same period last year, and increased 13% to $1.5 billion for the year.
Excluding acquisitions, sales increased by 3% in the quarter and 5% for the
year, reflecting increased volumes in the U.K. and price increases across all
the bakery businesses.
    Earnings from operations before restructuring and other related costs
("Adjusted Operating Earnings") increased by 19% to $31.4 million for the
fourth quarter and by 14% to $129.5 million for the year. Price increases
across both the Frozen and Fresh Bakery groups offset rising input costs. This
combined with improved operational efficiencies and the contribution from
acquisitions in the U.K. resulted in favourable results for the quarter and
the year.
    Net earnings before restructuring and other related costs and certain
non-recurring tax adjustments for the fourth quarter were $22.4 million ($0.88
per share) compared to $17.7 million ($0.70 per share) in 2006. Net earnings
for the year, on a comparable basis, were $84.2 million ($3.31 per share)
compared to $78.5 million ($3.09 per share) last year.
    The following is a summary of net earnings and earnings per share ("EPS")
before restructuring and other related costs and the non-recurring U.S. tax
adjustment ("Adjusted EPS"):

    
    ($ millions)                   Fourth Quarter            Full Year
                               ----------------------  ----------------------
                                2007    2006  Change    2007    2006  Change
                                ----    ----  ------    ----    ----  ------
    Net Earnings                23.5    14.0     68%    83.8    53.6     56%

    Restructuring and other
     related costs, net of tax   1.7     3.7    (55%)    3.2     3.7    (15%)
    Tax benefit from lower
     future tax rates(ii)       (2.8)      -       -    (2.8)      -       -
    U.S. tax adjustment(i)         -       -       -       -    21.2       -
                               ----------------------------------------------
    Net earnings before
     restructuring and other
     related costs and
     non-recurring tax
     adjustments(iii)           22.4    17.7     27%    84.2    78.5      7%
                               ----------------------------------------------
                               ----------------------------------------------
    Adjusted EPS(iii)          $0.88   $0.70     27%   $3.31   $3.09      7%

    (i)    In Q3 2006, the Company recorded a non-recurring tax expense of
           $21.2 million to write down future tax assets related to its U.S.
           frozen bakery business.
    (ii)   During 2007, the Company recorded a net tax benefit of
           $2.8 million related to the enactment of lower future tax rates.
    (iii)  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 and the
           non-recurring U.S. tax adjustment are not representative of
           continuing operations.
    

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

    The following table summarizes Adjusted Operating Earnings by business
segment:

    
    ($ millions)                   Fourth Quarter           Year-to-Date
                               ----------------------  ----------------------
                                2007    2006  Change    2007    2006  Change
                                ----    ----  ------    ----    ----  ------
    Fresh Bakery                15.7    20.0    (22%)   88.4    93.9     (6%)
    Frozen Bakery               15.7     6.4    146%    41.1    19.5    111%
                               ----------------------  ----------------------
                                31.4    26.4     19%   129.5   113.4     14%
                               ----------------------  ----------------------
                               ----------------------  ----------------------
    

    Fresh Bakery (Fresh bakery products, specialty baked goods and hand-held
    snacks, and fresh pasta and sauces)

    Fresh Bakery sales for the fourth quarter increased 5% to $239.0 million
compared to $227.6 million last year, largely due to the benefit of price
increases implemented during the year. Sales for the year increased 5% to
$945.9 million compared to $898.8 million last year.
    Adjusted Operating Earnings in the fourth quarter decreased by 22% to
$15.7 million and decreased by 6% to $88.4 million compared to $93.9 million
for the year. Price increases largely offset rising direct input costs,
primarily flour, but increased spend on marketing initiatives, inflationary
increases in manufacturing costs and an industry-wide volume decline in the
fresh bread category resulted in lower earnings for the quarter and full year.
    In the first quarter of 2008, the Company completed the purchase of
Aliments Martel Inc., a leading manufacturer and distributor of sandwiches,
meals and sweet goods based in Quebec. The Company plans to grow in the
sandwich business, and this acquisition is a significant step in supporting
this strategy. With this acquisition, the Company becomes the national leader
in the Canadian pre-packaged sandwich market.

    Frozen Bakery (North American and U.K. frozen bakery products; including
    frozen par-baked and specialty bakery products)

    Frozen Bakery sales in the fourth quarter increased 21% to $154.3 million
from $127.9 million last year and increased by 30% to $567.3 million for the
year. A significant portion of the increase reflected the contribution from
acquisitions in the U.K. Organic growth was 1% in the quarter and 5% for the
year driven by volume growth in the U.K. bagel business and price increases.
    Adjusted Operating Earnings for the quarter increased to $15.7 million
from $6.4 million last year despite rising wheat and dairy costs. The North
American frozen bakery business achieved a solid quarter-over-quarter
improvement in earnings driven by the resolution of operational issues
experienced in 2006 at the Roanoke, Virginia facility. The Company also
completed a large warehouse expansion at this facility, that has optimized
storage capacity and reduced third party storage costs and freight. The U.K.
bakery business benefited from the contribution of acquisitions and continued
organic growth in its bagel business, offset in part by higher flour and
butter costs.
    Adjusted Operating Earnings for the year increased by 111% to $41.1
million from $19.5 million last year, primarily driven by the contribution
from acquisitions and operational efficiencies as outlined above. In the U.K.,
the benefits of price increases were not sufficient to offset the impact of
higher input costs and investments in promotion and advertising. However,
these headwinds were offset by the positive contribution of acquisitions and
organic growth in bagel and other specialty bakery categories. During the
year, the Company acquired La Fornaia Ltd., a specialty Italian baker and,
responding to customer needs, expanded capacity at its Rotherham bagel
facility, positioning the business to continue its growth in the specialty
bakery market. Through these investments, the Company now operates one of the
largest specialty bakeries in the U.K.

    Commodity Price Increases
    -------------------------

    Since the beginning of 2008, wheat prices have continued to increase at a
significant rate. In order to offset these impacts, further price increases
during 2008 will be necessary. The timing of such price increases may not
match the increase in wheat prices and other inflationary increases, but over
the medium-term the Company expects to recover these increased costs through
increased prices and operating efficiencies.

    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 our objectives and goals, as well as statements
with respect to our beliefs, plans, objectives, expectations, anticipations,
estimates and intentions. Words such as "expect," "anticipate," "intend,"
"attempt," "may," "will," "plan," "believe," "seek," "estimate," and
variations of such words and similar expressions are intended to identify such
forward-looking statements. These statements are not guarantees of future
performance and involve assumptions and risks and uncertainties that are
difficult to predict. Therefore, actual outcomes and results may differ
materially from what is expressed, implied or forecasted in such
forward-looking statements. The Company does not intend, 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.
    These forward-looking statements are based on a variety of factors and
assumptions including, but not limited to: the condition of the Canadian and
United States economies; the rate of appreciation of the Canadian dollar
versus the U.S. dollar and Japanese yen; the availability and saleability of
prices of livestock, raw materials, energy and supplies; product pricing; the
competitive environment and related market conditions; improvement of
operating efficiencies; continued access to capital; the cost of compliance
with environmental and health standards; adverse results from ongoing
litigation; no expected actions of domestic and foreign governments and the
general assumption that none of the risks identified under "Risk Factors" will
materialize. These assumptions have been derived from information currently
available to the Company including information obtained by the Company from
third-party industry analysts.
    Actual results may differ materially from those predicted by such
forward-looking statements. While the Company does not know what impact any of
these differences may have on its business, results of operations, financial
condition and the market price of its securities may be materially adversely
affected. Factors that could cause actual results or outcomes to differ
materially from the results expressed or implied by forward-looking statements
are discussed more fully in the Company's Management Discussion and Analysis
which will be available on SEDAR at www.sedar.com.

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

    On February 21, 2008, Canada Bread Company, Limited declared a dividend
of $0.06 per share payable on April 1, 2008 to shareholders of record on
March 10, 2008. 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".
    Canada Bread Company Limited, which is 88.0% owned by Maple Leaf Foods
Inc., is a leading manufacturer and distributor of fresh bakery products,
frozen par-baked products and fresh pasta and sauces. The Company had 2007
sales of $1.5 billion and employs approximately 8,400 people at its operations
across North America and in the United Kingdom.

    
    Consolidated Financial Statements
    (Expressed in Canadian dollars)

    CANADA BREAD COMPANY,
    LIMITED

    Three and twelve months ended December 31, 2007 and 2006



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

    -------------------------------------------------------------------------
                                                           As at December 31,
                                                           2007         2006
    -------------------------------------------------------------------------

    Assets

    Current Assets:
      Cash and cash equivalents                      $    2,847   $        -
      Accounts receivable                                68,464       57,272
      Inventories                                        47,036       46,081
      Future tax asset - current                          5,937        5,873
      Prepaid expenses                                    4,798        3,576
      Other current assets                               80,586            -
      -----------------------------------------------------------------------
                                                     $  209,668   $  112,802

    Property and equipment                              396,623      374,647
    Goodwill                                            371,066      372,980
    Other long-term assets                                7,955       58,115
    Future tax asset - non-current                            -          403
    Other intangibles                                    12,870        5,321
    -------------------------------------------------------------------------
                                                     $  998,182   $  924,268
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity

    Current Liabilities:
      Bank indebtedness                              $    9,845   $   10,260
      Accounts payable and accrued charges              177,695      169,134
      Due to Maple Leaf Foods Inc.                        5,408        9,336
      Dividends payable                                   1,525        1,525
      Income and other taxes payable                     15,078       23,336
      Current portion of long-term debt                 107,644          364
      -----------------------------------------------------------------------
                                                     $  317,195   $  213,955

    Long-term debt                                            5       86,471
    Future tax liability - non-current                   33,522       29,611
    Other long-term liabilities                          12,417        5,787
    Shareholders' equity                                635,043      588,444
    -------------------------------------------------------------------------
                                                     $  998,182   $  924,268
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

    -------------------------------------------------------------------------
                                  Three months ended     Twelve months ended,
                                         December 31,            December 31,
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------
                              (Unaudited) (Unaudited)

    Sales                     $  393,270  $  355,479  $1,513,179  $1,334,932
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings from operations
     before restructuring and
     other related costs      $   31,382  $   26,391  $  129,454  $  113,410
    Restructuring and other
     related costs                (2,427)     (5,484)     (4,619)     (5,484)
    -------------------------------------------------------------------------
    Earnings from operations  $   28,955  $   20,907  $  124,835  $  107,926
    Other income                      95         292         581         432
    -------------------------------------------------------------------------
    Earnings before interest
     and income taxes         $   29,050  $   21,199  $  125,416  $  108,358
    Interest expense               1,542       1,026       5,618       3,656
    -------------------------------------------------------------------------
    Earnings before income
     taxes                    $   27,508  $   20,173  $  119,798  $  104,702
    Income taxes                   3,979       6,185      36,047      51,152
    -------------------------------------------------------------------------
    Net earnings for the
     period                   $   23,529  $   13,988  $   83,751  $   53,550
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per share
     - basic and diluted      $     0.93  $     0.55  $     3.30  $     2.11
    -------------------------------------------------------------------------
    Weighted average number
     of shares (millions)           25.4        25.4        25.4        25.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CANADA BREAD COMPANY, LIMITED
    Consolidated Statements of Retained Earnings
    (In thousands of Canadian dollars)

    -------------------------------------------------------------------------
                                             Twelve months ended December 31,
                                                           2007         2006
    -------------------------------------------------------------------------

    Retained earnings, beginning of period           $  450,733   $  406,649
    Net earnings for the period                          83,751       53,550
    Inter-company acquisition                               (57)      (3,366)
    Dividends declared ($0.24 per share; 2006:
     $0.24 per share)                                    (6,100)      (6,100)
    -------------------------------------------------------------------------
    Retained earnings, end of period                 $  528,327   $  450,733
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

    -------------------------------------------------------------------------
                                  Three months ended     Twelve months ended,
                                         December 31,            December 31,
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------
                              (Unaudited) (Unaudited)
    Net earnings for the
     period                   $   23,529  $   13,988  $   83,751  $   53,550

    Other comprehensive income
     (loss)
      Change in accumulated
       foreign currency
       translation adjustment    (10,560)      8,614     (29,290)      9,628
      Change in unrealized
       derivative gain on cash
       flow hedges                (1,775)          -      (1,543)          -
    -------------------------------------------------------------------------
                                 (12,335)      8,614     (30,833)      9,628
    -------------------------------------------------------------------------
    Comprehensive income      $   11,194  $   22,602  $   52,918  $   63,178
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

    -------------------------------------------------------------------------
                                  Three months ended     Twelve months ended,
                                         December 31,            December 31,
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------
                              (Unaudited) (Unaudited)
    CASH PROVIDED BY (USED IN)

    Operating activities
      Net earnings            $   23,529  $   13,988  $   83,751  $   53,550
      Add (deduct) items not
       affecting cash:
        Depreciation and
         amortization             12,676      11,606      49,612      45,010
        Future income taxes        3,386      (1,502)      4,374      14,028
        Loss (gain) on sale
         of property and
         equipment                   (68)       (262)       (515)       (330)
      Asset impairments and
       change in
       restructuring and
       other related costs         1,455       3,881       2,002       3,527
      Other                        1,170        (642)     (1,369)     (1,652)
      Change in operating
       working capital            (7,056)      9,462     (15,740)     (7,791)
      -----------------------------------------------------------------------
                              $   35,092  $   36,531  $  122,115  $  106,342
    Financing activities
      Dividends paid              (1,525)     (1,525)     (6,100)     (6,100)
      Change in long-term debt   (21,435)     40,313      20,764      (1,824)
      -----------------------------------------------------------------------
                              $  (22,960) $   38,788  $   14,664  $   (7,924)
    Investing activities
      Additions to property
       and equipment             (21,146)    (15,521)    (85,729)    (47,998)
      Proceeds from sale of
       property and equipment        134         301         922       1,744
      Acquisition of businesses     (396)    (71,976)    (48,865)    (73,841)
      Change in intangible
       assets                         (4)          8         155          35
      -----------------------------------------------------------------------
                              $  (21,412) $  (87,188) $ (133,517) $ (120,060)
    Increase (decrease) in
     cash and cash equivalents    (9,280)    (11,869)      3,262     (21,642)
    Cash and cash equivalents
     (bank indebtedness),
     beginning of period           2,282       1,609     (10,260)     11,382
    -------------------------------------------------------------------------
    Cash and cash equivalents
     (bank Indebtedness), end
     of period                $   (6,998) $  (10,260) $   (6,998) $  (10,260)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

    -------------------------------------------------------------------------
                                  Three months ended     Twelve months ended,
                                         December 31,            December 31,
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------
                              (Unaudited) (Unaudited)
    Sales
      Fresh Bakery            $  239,003  $  227,606  $  945,853  $  898,797
      Frozen Bakery              154,267     127,873     567,326     436,135
    -------------------------------------------------------------------------
                              $  393,270  $  355,479  $1,513,179  $1,334,932
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings from operations
     before restructuring and
     other related costs
      Fresh Bakery            $   15,677  $   20,001  $   88,402  $   93,928
      Frozen Bakery               15,705       6,390      41,052      19,482
    -------------------------------------------------------------------------
                              $   31,382  $   26,391  $  129,454  $  113,410
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Additions to property and
     equipment
      Fresh Bakery            $    9,425  $   13,093  $   40,393  $   36,109
      Frozen Bakery               11,721       2,428      45,336      11,889
    -------------------------------------------------------------------------
                              $   21,146  $   15,521  $   85,729  $   47,998
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Depreciation and
     amortization
      Fresh Bakery            $    6,507  $    6,064  $   25,683  $   23,286
      Frozen Bakery                6,169       5,542      23,929      21,724
    -------------------------------------------------------------------------
                              $   12,676  $   11,606  $   49,612  $   45,010
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                                           As at December 31,
                                                            2007        2006
    -------------------------------------------------------------------------
    Total assets
      Fresh Bakery                                    $  400,518  $  378,311
      Frozen Bakery                                      573,772     529,360
      Non-allocated assets                                23,892      16,597
    -------------------------------------------------------------------------
                                                      $  998,182  $  924,268
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill
      Fresh Bakery                                    $  131,256  $  128,251
      Frozen Bakery                                      239,810     244,729
    -------------------------------------------------------------------------
                                                      $  371,066  $  372,980
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    




For further information:

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


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