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Maple Leaf Foods Reports Results for Second Quarter 2013

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TSX: MFI
www.mapleleaffoods.com

TORONTO, July 31, 2013 /PRNewswire/ - Maple Leaf Foods Inc. (TSX: MFI) today reported its financial results for the second quarter ended June 30, 2013.

  • Adjusted Operating Earnings(1)(2) for the second quarter was $22.8 million compared to $63.1 million last year. Year-to-date Adjusted Operating Earnings were $30.4 million compared $94.8 million last year
  • Net earnings(2) for the second quarter was $nil, compared to $26.0 million last year. For the first six months, net loss was $14.7 million compared to net earnings of $20.2 million last year
  • Adjusted Earnings per Share(2)(3) was $0.02 compared to $0.23 last year. Year-to-date Adjusted Earnings per Share was a loss of $0.04 compared to $0.29 last year.

"Market conditions which affected first quarter results continued into the second quarter, although there was material improvement in important areas", said Michael H. McCain, President & CEO. "Hog production returns, global pork markets and volatile raw material markets all contributed to a material year-over-year earnings decline. This was compounded by the costs of transition and start-ups in our new prepared meat manufacturing and distribution network. These factors more than offset strong growth in prepared meats volumes from earlier in the year and solid improvement in the Bakery segment, which we expect will accelerate. Market conditions are expected to improve and our commercial fundamentals are good. Overall, we are satisfied with our strategic progress, although we are now at the peak of change and expect earnings volatility through this transition."

1. Adjusted Operating Earnings, a non-IFRS measure, is used by Management to evaluate financial operating results.  It is defined as earnings before income taxes adjusted for items that are not considered representative of on-going operational activities of the business, and items where the economic impact of the transactions will be reflected in earnings in future periods when the underlying asset is sold or transferred. Please refer to the section entitled Reconciliation of Non-IFRS Financial Measures at the end of this news release.
   
2. 2012 figures have been restated for the impact of adopting the revised International Accounting Standard 19 Employee Benefits ("IAS 19"), as disclosed in Note 25 of the Company's unaudited condensed consolidated interim financial statements.
   
3. Adjusted Earnings per Share, a non-IFRS measure, is used by Management to evaluate on-going financial operating results.  It is defined as basic earnings per share attributable to common shareholders, and is adjusted for all items that are not considered representative of on-going operational activities of the business, and items where the economic impact of the transactions will be reflected in earnings in future periods when the underlying asset is sold or transferred. Please refer to the section entitled Reconciliation of Non-IFRS Financial Measures at the end of this news release.

Financial Overview

Maple Leaf Foods Inc. ("the Company") sales of $1,214.2 million for the second quarter declined 3.7% from last year, or 2.2% after adjusting for the impacts of divestitures and foreign exchange, due to lower volumes which were partly offset by higher pricing. For the first six months sales decreased 3.9% from the prior year to $2,327.1 million, or 2.3% after adjusting for divestitures and foreign exchange, due to the same factors.

Adjusted Operating Earnings for the second quarter decreased 63.9% to $22.8 million compared to $63.1 million last year, as earnings in the Protein Group were impacted by unfavourable market conditions, which were only partly offset by stronger Bakery Group results. For the first six months, Adjusted Operating Earnings declined to $30.4 million compared to $94.8 million last year.

Net earnings for the second quarter decreased to $nil (loss of $0.02 per share attributable to common shareholders) compared to $26.0 million ($0.17 per share attributable to common shareholders) last year. Net earnings included $15.4 million ($0.08 per share) of pre-tax expenses related to restructuring and other related costs (2012: $9.8 million, or $0.06 per share). Year-to-date net loss was $14.7 million ($0.12 loss per basic share) compared to earnings of $20.2 million ($0.13 per share) last year. The year-to-date net loss included $62.8 million ($0.32 per share) of pre-tax expenses related to restructuring and other related costs (2012: $30.1 million, or $0.16 per share).

Adjusted Earnings per Share in the second quarter decreased to $0.02 compared to $0.23 last year. Year-to-date Adjusted Earnings per Share declined to a loss of $0.04 compared to $0.29 last year.

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

Business Segment Review

Following is a summary of sales by business segment:

                         
($ thousands)         Second Quarter     Year-to-Date
(Unaudited)         2013   2012     2013   2012
Meat Products Group        $ 751,302  $ 775,971     1,428,259  $ 1,501,508
Agribusiness Group         65,432   79,543     132,882   144,840
Protein Group        $ 816,734  $ 855,514    $ 1,561,141  $ 1,646,348
Bakery Products Group         397,486   404,736     765,912   774,725
Sales        $ 1,214,220  $ 1,260,250    $ 2,327,053  $ 2,421,073

The following table summarizes Adjusted Operating Earnings by business segment:

                         
($ thousands)         Second Quarter     Year-to-Date
(Unaudited)         2013   2012(1)     2013   2012(1)
Meat Products Group        $ (11,492)  $ 15,274    $ (21,944)  $ 30,403
Agribusiness Group         1,726   18,138     7,106   36,292
Protein Group        $ (9,766)  $ 33,412    $ (14,838)  $ 66,695
Bakery Products Group         32,684   31,244     46,808   33,603
Non-allocated Costs in Adjusted Operating Earnings(2)         (121)   (1,559)     (1,619)   (5,470)
Adjusted Operating Earnings         $ 22,797  $ 63,097    $ 30,351  $ 94,828

 

1. 2012 Adjusted Operating Earnings have been restated for the impact of adopting the revised International Accounting Standard 19 Employee Benefits ("IAS 19"), as disclosed in Note 25 of the Company's unaudited condensed consolidated interim financial statements
2. Non-allocated costs comprise expenses not separately identifiable to business segment groups, and do not form part of the measures used by the Company when assessing the segments' operating results.   

Protein Group

Results for the Protein Group, which includes the operations of the Company's Meat Products and Agribusiness Groups, should be viewed in totality due to intercompany transactions and correlated factors within these operations.

Sales for the second quarter in the Protein Group declined 4.5% to $816.7 million from $855.5 million last year. For the first six months, sales decreased 5.2% to $1,561.1 million. The quarter and year-to-date declines were primarily driven by lower volumes and the divestiture of the Company's potato processing business, partly offset by higher pricing.

Adjusted Operating Earnings in the second quarter declined to a loss of $9.8 million compared to Adjusted Operating Earnings of $33.4 million last year, reflecting a combination of poor market conditions and higher near-term costs related to the implementation of its prepared meats strategy.

For the first six months, Adjusted Operating Earnings decreased to a loss of $14.8 million compared to Adjusted Operating Earnings of $66.7 million last year, due to similar factors noted above with the addition of lower prepared meats volumes in the first quarter of 2013.

Meat Products Group
Includes value-added prepared meats, 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 ®, Schneiders ® and many leading sub-brands.

Meat Products Group sales for the second quarter declined 3.2% to $751.3 million, or 1.4% after adjusting for the impact of divesting the Company's potato processing business and foreign exchange. This was the result of lower volumes in primary pork processing, partly offset by higher pricing in fresh and prepared meats. For the first six months, sales declined 4.9% or 2.8% after adjusting for the impact of divesting the Company's potato processing business and foreign exchange, due to similar factors as well as lower prepared meats volumes in the first quarter.

Adjusted Operating Earnings for the second quarter declined to a loss of $11.5 million compared to earnings of $15.3 million last year, primarily due to lower earnings in the prepared meats and primary pork processing businesses.

Higher transitional costs compared to last year were incurred as the Company implements its strategy to increase scale, productivity and profitability in its prepared meats business. In the quarter, commissioning activities at three large plant expansions in Western Canada resulted in higher costs. Earnings were also impacted by higher raw material costs, driven primarily by an increase in pork belly prices. Retail volumes increased from last year but were offset by a decline in lower-margin foodservice volumes.

Earnings in primary pork processing continued to be negatively affected by the devaluation of the Japanese Yen, which was partly offset by improving primary processing spreads and higher margins in other export markets. Earnings in fresh poultry were affected by higher feed and related live bird costs, partly offset by higher volumes, pricing and increased sales into higher margin channels. The sale of the Company's potato processing business reduced Adjusted Operating Earnings by approximately $4 million in the second quarter compared to last year.

For the first six months, Adjusted Operating Earnings declined to a loss of $21.9 million compared to Adjusted Operating Earnings of $30.4 million last year due to similar factors noted above, with the addition of lower volumes in the prepared meats business during the first quarter of 2013. The sale of the Company's potato processing business reduced Adjusted Operating Earnings for the first six months by approximately $7 million compared to last year.

Agribusiness Group
Consists of Canadian hog production, animal by-product recycling operations including biodiesel manufacturing and distribution.

Sales in the Agribusiness Group for the second quarter were $65.4 million, 17.7% lower than last year due to a decline in biodiesel volumes, which was partly offset by higher pricing. Sales for the first six months declined 8.3% to $132.9 million due to similar factors.

Adjusted Operating Earnings in the second quarter declined to $1.7 million compared to $18.1 million last year, primarily due to increased hog production losses resulting from higher feed costs. In addition earnings declined in the by-products recycling business as a result of lower biodiesel volumes and higher raw material costs.

Year-to-date Adjusted Operating Earnings decreased to $7.1 million compared to $36.3 million last year, almost entirely driven by the increase in hog production losses.

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

Bakery Products Group sales for the second quarter decreased 1.8% to $397.5 million, or 0.7% after adjusting for discontinued bread categories in the U.K. and currency translation on sales in the U.S. and U.K.  Lower sales volumes in the fresh bakery business were partially offset by volume growth in the U.K. as well as higher pricing implemented during the first quarter in the fresh and North American frozen bakery businesses.

Sales for the first six months decreased 1.1% to $765.9 million compared to $774.7 million last year, but were consistent with last year after adjusting for discontinued bread categories in the U.K. and currency translation due to similar factors.

Second quarter Adjusted Operating Earnings increased 4.6% to $32.7 million compared to $31.2 million last year, driven by higher earnings in the fresh bakery, U.K. bakery, and fresh pasta businesses.

Earnings in the fresh bakery business increased as a result of reduced costs and improved operating efficiencies. Also contributing to earnings were lower sales waste and SG&A expenses. These benefits were partly offset by a decline in volume. During the quarter, the Company closed a third bakery in the Toronto area, eliminating any future duplicative overhead costs associated with consolidating production at its bakery in Hamilton, Ontario.

Performance in the North American frozen bakery business was consistent as earlier price increases offset inflationary costs and lower volumes. Results in the fresh pasta business increased mainly due to lower SG&A costs. Earnings in the U.K. bakery business improved primarily due to higher volumes in both bagels and croissants. This business continues to benefit from network consolidation, investment in scale facilities and focus on its core categories.

For the first six months, Adjusted Operating Earnings increased 39.3% to $46.8 million compared to $33.6 million last year. Operational improvements and lower SG&A expenses more than offset lower volumes, mainly in the fresh bakery business. Price increases earlier in the year also contributed to earnings growth, but this was largely offset by higher raw material and other inflationary costs.

Other Matters

In July the company sold its turkey agricultural operations for gross proceeds of $48.2 million. The assets and liabilities associated with the turkey agricultural operations are classified as assets held for sale as at June 30, 2013.

On July 30, 2013, the Company declared a dividend of $0.04 per share payable September 30, 2013 to shareholders of record at the close of business on September 6, 2013. Unless indicated otherwise by the Company in writing on or before the time the dividend is paid, the dividend will be considered an Eligible Dividend for the purposes of the "Enhanced Dividend Tax Credit System".

An investor presentation related to the Company's second quarter financial results is available at www.mapleleaffoods.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 July 31, 2013 to review Maple Leaf Foods' second quarter financial results. To participate in the call, please dial 416-340-8061 or 866-225-0198. For those unable to participate, playback will be made available an hour after the event at 905-694-9451 / 800-408-3053 (Passcode 3231342).

A webcast presentation of the second quarter financial results will also be available at http://edge.media-server.com/m/p/2pus9m49/lan/en

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

Reconciliation of Non-IFRS Financial Measures

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

Adjusted Operating Earnings

Adjusted Operating Earnings, a non-IFRS measure, is used by Management to evaluate financial operating results.  It is defined as earnings before income taxes adjusted for items that are not considered representative of on-going operational activities of the business, and items where the economic impact of the transactions will be reflected in earnings in future periods when the underlying asset is sold or transferred. The table below provides a reconciliation of net earnings as reported under IFRS in the unaudited consolidated interim statements of earnings to Adjusted Operating Earnings for the three and six months ended, as indicated below. Management believes that this basis is the most appropriate on which to evaluate operating results, as they are representative of the on-going operations of the Company.

                     
      Three months ended June 30, 2013
        Meat       Bakery        
($ thousands)   Products   Agribusiness   Products   Unallocated    
(Unaudited)   Group   Group   Group   costs   Consolidated
Net earnings                  $ 9
Income taxes                   252
Earnings before income taxes                  $ 261
Interest expense                   16,836
Change in the fair value of non-designated                    
   interest rate swaps                   (658)
Other (income) expense   (1,541)   (1,430)   1,878   (3,129)   (4,222)
Restructuring and other related costs   14,384   -   1,043   -   15,427
Earnings (loss) from Operations  $   (11,492)  $ 1,726  $   32,684  $ 4,726  $ 27,644
Decrease in fair value of biological assets    -   -   -   185   185
Unrealized gains on commodity futures contracts    -   -   -   (5,032)   (5,032)
Adjusted Operating Earnings (loss)  $   (11,492)  $ 1,726  $   32,684  $ (121)  $ 22,797

 




                       
    Three months ended June 30, 2012(1)
      Meat       Bakery        
($ thousands)   Products   Agribusiness   Products   Unallocated    
(Unaudited)   Group   Group   Group   costs   Consolidated
Net earnings                  $ 25,988
Income taxes                   10,672
Earnings before income taxes                  $ 36,660
Interest expense                   18,413
Change in the fair value of non-designated                    
   interest rate swaps                   220
Other (income) expense    (2,259)   (433)   (1,349)   624   (3,417)
Restructuring and other related costs   8,571   -   1,205   -   9,776
Earnings (loss) from Operations  $ 15,274  $ 18,138  $   31,244  $ (3,004)  $ 61,652
Decrease in fair value of biological assets    -   -   -   3,233   3,233
Unrealized gains on commodity futures contracts   -   -   -   (1,788)   (1,788)
Adjusted Operating Earnings (loss)  $ 15,274  $ 18,138  $   31,244  $ (1,559)  $ 63,097
(1) 2012 Net loss and Adjusted Operating Earnings have been restated for the impact of adopting the revised International Accounting Standard 19 Employee Benefits ("IAS 19"), as disclosed in Note 25 of the Company's unaudited condensed
consolidated interim financial statements

                       
      Six months ended June 30, 2013
      Meat       Bakery        
($ thousands)   Products   Agribusiness   Products   Unallocated    
(Unaudited)   Group   Group   Group   costs   Consolidated
Net loss                  $ (14,733)
Income taxes                   (10,211)
Loss before income taxes                  $ (24,944)
Interest expense                   33,336
Change in the fair value of non-designated                    
   interest rate swaps                   (1,275)
Other (income) expense   (44,935)   (568)   4,392   (3,922)   (45,033)
Restructuring and other related costs   49,597   -   11,454   1,745   62,796
Earnings (loss) from Operations  $   (21,944)  $ 7,106  $   46,808  $ (7,090)  $ 24,880
Decrease in fair value of biological assets    -   -   -   5,463   5,463
Unrealized losses on commodity futures contracts    -   -   -   8   8
Adjusted Operating Earnings (loss)  $   (21,944)  $ 7,106  $   46,808  $ (1,619)  $ 30,351

 

                     
    Six months ended June 30, 2012(1)
      Meat       Bakery        
($ thousands)   Products   Agribusiness   Products   Unallocated    
(Unaudited)   Group   Group   Group   costs   Consolidated
Net earnings                  $ 20,213
Income taxes                   10,502
Earnings before income taxes                  $ 30,715
Interest expense                   36,056
Change in the fair value of non-designated                    
   interest rate swaps                   (4,933)
Other (income) expense   (2,167)   (523)   (1,371)   760   (3,301)
Restructuring and other related costs   23,043   -   7,089   -   30,132
Earnings (loss) from Operations  $ 30,403  $ 36,292  $   33,603  $ (11,629)  $ 88,669
Decrease in fair value of biological assets   -   -   -   1,101   1,101
Unrealized losses on commodity futures contracts     -   -   -   5,058   5,058
Adjusted Operating Earnings (loss)  $ 30,403  $ 36,292  $   33,603  $ (5,470)  $ 94,828
(1) 2012 Net loss and Adjusted Operating Earnings have been restated for the impact of adopting the revised International Accounting Standard 19 Employee Benefits ("IAS 19"), as disclosed in Note 25 of the Company's unaudited condensed consolidated interim financial statements

Adjusted Earnings per Share

Adjusted Earnings per Share, a non-IFRS measure, is used by Management to evaluate on-going financial operating results.  It is defined as basic earnings per share attributable to common shareholders, and is adjusted for items that are not considered representative of on-going operational activities of the business, and items where the economic impact of the transactions will be reflected in earnings in future periods when the underlying asset is sold or transferred.  The table below provides a reconciliation of basic earnings per share as reported under IFRS in the unaudited consolidated interim statements of earnings to Adjusted Earnings per Share for the three and six months ended, as indicated below. Management believes this basis is the most appropriate on which to evaluate financial results as they are representative of the on-going operations of the Company.

                     
    Three months ended   Six months ended
($ per share)   June 30,   June 30,
(Unaudited)     2013   2012(5)     2013   2012(5)
Basic earnings (loss) per share      $ (0.02)  $ 0.17    $ (0.12)  $ 0.13
Restructuring and other related costs(1)     0.08   0.06     0.32   0.16
Items not considered representative of on-going operations(2)     (0.01)   -     (0.27)   -
Change in the fair value of non-designated interest rate swaps(3)      -   -     (0.01)   (0.03)
Change in the fair value of unrealized (gains) losses on commodity                     
futures contracts(3)     (0.03)   (0.01)     -   0.02
Change in the fair value of biological assets(3)     -   0.02     0.03   0.01
Adjusted Earnings per Share(4)      $ 0.02  $ 0.23    $ (0.04)  $ 0.29

(1)  Includes per share impact of restructuring and other related costs, net of tax and non-controlling interest.
(2)  Includes gains/losses associated with non-operational activities, including gains/losses related to restructuring activities, business combinations, discontinued operations, assets held for sale, and hedge ineffectiveness recognized in earnings, all net of tax.
(3)     Includes per share impact of the change in fair value of non-designated interest rate swaps, unrealized (gains) losses on commodity futures contracts and the change in fair value of biological assets, net of tax.
(4)  May not add due to rounding.
(5)  2012 basic loss and Adjusted Earnings per Share have been restated for the impact of adopting the revised International Accounting Standard 19 Employee Benefits ("IAS 19"), as disclosed in Note 25 of the Company's unaudited condensed consolidated interim financial statements.

Forward-Looking Statements

This document contains, and the Company's oral and written public communications often contain, "forward-looking information" within the meaning of applicable securities law.  These statements are based on current expectations, estimates, forecasts and projections about the industries in which the Company operates 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, objectives, expectations, anticipations, estimates and intentions. Specific forward-looking information in this document includes, but is not limited to, statements with respect to the anticipated benefits, timing, actions, costs and investments associated with the Company's Value Creation Plan, expectations regarding improving business trends, expectations regarding actions to reduce costs, restore and/or promote volumes and/or increase prices, improve efficiencies, expected duplicative overhead costs incurred due to the concurrent operation of the new Hamilton fresh bakery and existing bakeries, the expected use of cash balances, source of funds for ongoing business requirements, capital investments and debt repayment, and expectations regarding sufficiency of the allowance for uncollectible accounts. 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 information. These statements are not guarantees of future performance and involve assumptions and risks and uncertainties that are difficult to predict.

In addition, these statements and expectations concerning the performance of the Company's business in general are based on a number of factors and assumptions including, but not limited to: the condition of the Canadian, U.S., U.K. and Japanese economies; the rate of exchange of the Canadian dollar to the U.S. dollar, U.K. British pound and the Japanese yen;  the availability and prices of raw materials, energy and supplies; product pricing; the availability of insurance; the competitive environment and related market conditions; improvement of operating efficiencies whether as a result of the Value Creation Plan or otherwise; continued access to capital; the cost of compliance with environmental and health standards; no adverse results from ongoing litigation; no unexpected actions of domestic and foreign governments; and the general assumption that none of the risks identified below or elsewhere in this document will materialize.  All of these assumptions have been derived from information currently available to the Company including information obtained by the Company from third-party sources. These assumptions may prove to be incorrect in whole or in part.  In addition, actual results may differ materially from those expressed, implied or forecasted in such forward-looking information, which reflect the Company's expectations only as of the date hereof.

Factors that could cause actual results or outcomes to differ materially from the results expressed, implied or forecasted by forward-looking information is discussed more fully in the Company's Annual Management's Discussion and Analysis for the period ended December 31, 2012 including the section entitled "Risk Factors", that are updated each quarter in the Management's Discussion and Analysis, and are available on SEDAR at www.sedar.com. The Company does not intend to, and the Company disclaims any obligation to, update any forward-looking information, whether written or oral, or whether as a result of new information, future events or otherwise except as required by law.

Maple Leaf Foods Inc. ("Maple Leaf" or the "Company") is a leading Canadian value-added meat, meals and bakery company committed to delivering quality food products to consumers around the world. Headquartered in Toronto, Canada, the Company employs approximately 20,000 people at its operations across Canada and in the United States, Europe and Asia.

 

 

 

Condensed Consolidated Interim Financial Statements
(Expressed in Canadian dollars)
(Unaudited)

MAPLE LEAF FOODS INC.

Three and six months ended June 30, 2013 and 2012

Consolidated Balance Sheets

(In thousands of Canadian dollars)   As at June 30,     As at June 30,     As at December 31,     As at January 1,
(Unaudited)     2013     2012     2012     2012
              (Restated)     (Restated)     (Restated)
                           
ASSETS                        
Current assets                        
  Cash and cash equivalents    $   145,608    $   83,631   $   90,414   $   -
  Accounts receivable      111,732     108,014     116,503     133,504
  Notes receivable      111,074     124,323     125,487     98,545
  Inventories      328,905     319,722     301,804     293,231
  Biological assets      75,882     53,259     78,127     49,265
  Income and other taxes recoverable     36,657     45,831     41,527     43,789
  Prepaid expenses and other assets     20,350     18,946     12,590     24,688
  Assets held for sale      55,467     25,502     37,087     -
       $   885,675    $   779,228   $   803,539   $   643,022
  Property and equipment     1,284,416     1,090,473     1,212,177     1,067,246
  Investment property     11,515     12,305     11,979     11,232
  Employee benefits      128,378     119,002     107,831     133,942
  Other long-term assets      13,873     11,244     13,663     11,926
  Deferred tax asset     119,149     130,892     132,558     127,456
  Goodwill      741,605     754,150     753,156     753,739
  Intangible assets      200,246     203,821     208,793     191,896
  Total assets    $   3,384,857    $   3,101,115    $   3,243,696   $   2,940,459
                           
LIABILITIES AND EQUITY                        
Current liabilities                        
  Bank indebtedness    $   7,685   $   15,209   $   48,243   $   36,404
  Accounts payable and accruals     509,266     482,917     446,911     482,059
  Provisions      34,591     31,942     26,335     44,255
  Current portion of long-term debt     6,749     5,739     6,573     5,618
  Other current liabilities     16,196     17,543     14,961     20,409
       $   574,487    $   553,350   $   543,023    $ 588,745
  Long-term debt     1,337,945     1,122,186     1,206,945     941,956
  Employee benefits      298,209     382,811     420,933     350,853
  Provisions      39,626     28,963     25,800     28,936
  Other long-term liabilities      53,684     77,459     80,084     88,153
  Deferred tax liability     12,376     8,749     8,912     11,703
  Total liabilities     $   2,316,327    $   2,173,518   $   2,285,697   $   2,010,346
Shareholders' equity                        
Share capital   $   902,986   $   902,810   $   902,810   $   902,810
Retained earnings (deficit)     14,694     (96,872)     (72,701)     (78,674)
Contributed surplus     91,687     75,066     75,913     64,327
Accumulated other                         
  comprehensive loss      (8,687)     (12,530)     (13,263)     (17,042)
Treasury stock     (1,350)     (6,347)     (1,845)     (6,347)
Total shareholders' equity     $   999,330   $   862,127    $   890,914    $   865,074
Non-controlling interest     69,200     65,470     67,085     65,039
Total equity    $   1,068,530   $   927,597   $   957,999   $   930,113
Total liabilities and equity    $   3,384,857   $   3,101,115   $   3,243,696   $   2,940,459

 


Consolidated Statements of Earnings (Loss)

(In thousands of Canadian dollars, except share amounts)     Three months ended June 30,         Six months ended June 30,
(Unaudited)   2013     2012     2013   2012
                (Restated)           (Restated)
                           
                           
Sales    $ 1,214,220     1,260,250   $  2,327,053  $   2,421,073
Cost of goods sold   1,064,348     1,060,504     2,049,866   2,050,386
Gross margin  $ 149,872     199,746   $   277,187 $   370,687
Selling, general and administrative expenses   122,228     138,094     252,307   282,018
Earnings before the following:  $ 27,644     61,652   $   24,880 $   88,669
Restructuring and other related costs    (15,427)     (9,776)     (62,796)   (30,132)
Change in fair value of non-designated                     
  interest rate swaps    658     (220)     1,275   4,933
Other income (expense)    4,222     3,417     45,033   3,301
Earnings before interest and income taxes  $ 17,097     55,073   $  8,392 $   66,771
Interest expense    16,836     18,413     33,336   36,056
Earnings (loss) before income taxes  $ 261     36,660   $   (24,944) $   30,715
Income taxes   252     10,672     (10,211)   10,502
Net earnings (loss)  $ 9     25,988   $   (14,733) $   20,213
Attributed to:                    
Common shareholders  $ (2,454)     23,379   $   (17,392)  $   17,588
Non-controlling interest   2,463     2,609     2,659   2,625
         $ 9     25,988   $   (14,733) $   20,213
Earnings (loss) per share attributable to                    
  common shareholders                     
Basic earnings (loss) per share  $ (0.02)     0.17   $   (0.12) $   0.13
Diluted earnings (loss) per share  $ (0.02)     0.16   $   (0.12) $   0.12
Weighted average number of shares (millions)   139.9     139.5     139.9   139.5

 



Consolidated Statements of Comprehensive Income (Loss)

(In thousands of Canadian dollars)         Three months ended June 30,   Six months ended June 30,
(Unaudited)             2013     2012     2013     2012
                          (Restated)           (Restated)
                                       
                                       
Net earnings (loss)          $ 9    $ 25,988    $ (14,733)    $ 20,213
Other comprehensive income (loss)                            
Items that will not be reclassified                             
  to profit or loss:                              
    Change in actuarial gains and losses     54,538     (23,973)     117,272     (25,089)
Total items that will not be reclassified                         
  to profit or loss           54,538     (23,973)     117,272     (25,089)
Items that are or may be reclassified                           
  subsequently to profit or loss:                            
    Change in accumulated foreign currency                     
      translation adjustment         4,231     2,500     4,984     283
    Change in unrealized gains and losses                      
      on cash flow hedges         1,570     537     299     4,243
Total items that are or may be reclassified                       
  subsequently to profit or loss         5,801     3,037     5,283     4,526
                   $ 60,339    $ (20,936)    $ 122,555    $ (20,563)
Comprehensive income (loss)        $ 60,348    $ 5,052    $ 107,822    $ (350)
Attributed to:                                
Common shareholders          $ 56,650    $ 2,345    $ 103,165    $ (2,713)
Non-controlling interest           3,698     2,707     4,657     2,363

 






Consolidated Statement of Changes in Total Equity

            Attributable to Common Shareholders            
                                Total                  
                                accumulated                  
                    Retained           other           Non-      
(In thousands of Canadian dollars)   Share     earnings     Contributed     comprehensive     Treasury     controlling     Total
(Unaudited)     capital     (deficit)     surplus     loss     stock     interest     equity
Balance at                                           
  December 31, 2012  $ 902,810    $ (72,701)    $ 75,913    $ (13,263)    $ (1,845)    $ 67,085    $ 957,999
    (restated)                                           
    Net earnings (loss)   -     (17,392)     -     -     -     2,659     (14,733)
    Other comprehensive                                        
      income (loss)     -     115,981     -     4,576     -     1,998     122,555
    Dividends declared                                        
      ($0.08 per share)   -     (11,194)     -     -     -     (2,542)     (13,736)
    Stock-based compensation                                        
      expense     -     -     10,761     -     -     -     10,761
    Exercise of stock options   176     -     -     -     -     -     176
    Issuance of treasury stock   -     -     (495)     -     495     -     -
    Modification of DSU plan   -     -     3,508     -     -     -     3,508
    Other     -     -     2,000     -     -     -     2,000
Balance at June 30, 2013  $ 902,986    $ 14,694    $ 91,687    $ (8,687)    $ (1,350)    $ 69,200    $ 1,068,530
                                                   
                                                   
                                                   
            Attributable to Common Shareholders            
                                Total                  
                                accumulated                  
                                other           Non-      
(In thousands of Canadian dollars)   Share     Retained     Contributed     comprehensive     Treasury     controlling     Total
(Unaudited)     capital     deficit     surplus     loss     stock     interest     equity
                                                  (Restated)
                                                   
Balance at                                          
  January 1, 2012     $ 902,810    $ (78,674)    $ 64,327    $ (17,042)    $ (6,347)    $ 65,039    $ 930,113
    (restated)                                           
    Net earnings      -     17,588     -     -     -     2,625     20,213
    Other comprehensive                                        
      income (loss)      -     (24,813)     -     4,512     -     (262)     (20,563)
    Dividends declared                                        
      ($0.08 per share)   -     (10,973)     -     -     -     (1,932)     (12,905)
    Stock-based compensation                                        
      expense     -     -     10,739     -     -     -     10,739
Balance at June 30, 2012  $ 902,810    $ (96,872)    $ 75,066    $ (12,530)    $ (6,347)    $ 65,470    $ 927,597

 




Consolidated Statements of Cash Flows

(In thousands of Canadian dollars)   Three months ended June 30,   Six months ended June 30,
(Unaudited)         2013     2012     2013     2012
                      (Restated)           (Restated)
                                   
CASH (USED IN) PROVIDED BY:                        
Operating activities                        
  Net earnings (loss)    $ 9    $ 25,988    $ (14,733)    $ 20,213
  Add (deduct) items not affecting cash:                        
    Change in fair value of biological assets     185     3,233     5,463     1,101
    Depreciation and amortization     35,417     33,180     69,269     64,569
    Stock-based compensation     5,201     5,303     10,761     10,739
    Deferred income taxes     (7,444)     1,387     (22,182)     (637)
    Income tax current     7,696     9,285     11,971     11,139
    Interest expense     16,836     18,413     33,336     36,056
    Gain on sale of property and equipment     (525)     (433)     (1,481)     (413)
    Gain on sale of assets held for sale     (168)     (320)     (45,556)     (320)
    Gain on sale of investment property     (323)           (323)      
    Gain on acquisition     -     -     985     -
    Change in fair value of non-designated                        
      interest rate swaps     (658)     220     (1,275)     (4,933)
    Change in fair value of                        
      derivative financial instruments     (3,457)     (326)     1,510     5,623
    Impairment of assets (net of reversals)     675     -     5,809     -
  Increase in pension liability     4,881     4,490     12,629     13,101
  Net income taxes paid     (4,963)     (3,920)     (12,037)     (9,519)
  Interest paid     (16,383)     (18,585)     (31,814)     (35,378)
  Change in provision for restructuring                        
    and other related costs     3,846     1,141     41,951     6,584
  Other         (6,195)     (874)     (11,185)     (1,822)
  Change in non-cash operating working capital     62,431     27,299     41,574     (35,571)
Cash provided by operating activities    $ 97,061    $ 105,481    $ 94,672    $ 80,532
Financing activities                        
  Dividends paid    $ (5,598)    $ (5,393)    $ (11,194)    $ (10,973)
  Dividends paid to non-controlling interest     (1,271)     (661)     (2,542)     (1,169)
  Net increase in long-term debt     69,967     30,000     113,492     180,000
  Exercise of stock options     -     -     176     -
  Other         293     (321)     293     (783)
Cash provided by financing activities    $ 63,391    $ 23,625    $ 100,225    $ 167,075
Investing activities                        
  Additions to long-term assets    $ (89,377)    $ (63,633)    $ (165,432)    $ (119,439)
  Acquisition of business     -     -     (922)     (31,130)
  Capitalization of interest expense     (3,945)     (1,307)     (7,195)     (2,521)
  Proceeds from sale of long-term assets     11,846     7,760     74,404     10,306
  Other         -     3     -     3
Cash used in investing activities    $ (81,476)    $ (57,177)    $ (99,145)    $ (142,781)
Increase in cash and cash equivalents    $ 78,976    $ 71,929    $ 95,752    $ 104,826
Net cash and cash equivalents, beginning of period     58,947     (3,507)     42,171     (36,404)
Net cash and cash equivalents, end of period    $ 137,923    $ 68,422    $ 137,923    $ 68,422
Net cash and cash equivalents is comprised of:                        
Cash and cash equivalents    $ 145,608    $ 83,631    $ 145,608    $ 83,631
Bank indebtedness     (7,685)     (15,209)     (7,685)     (15,209)
Net cash and cash equivalents, end of period    $ 137,923    $ 68,422    $ 137,923    $ 68,422

 



Segmented Financial Information

                Three months ended June 30,       Six months ended June 30,
              2013     2012     2013     2012
                                 
Sales                            
  Meat Products Group      $ 751,302    $ 775,971    $ 1,428,259   $ 1,501,508
  Agribusiness Group       65,432     79,543     132,882     144,840
  Bakery Products Group       397,486     404,736     765,912     774,725
             $ 1,214,220   $ 1,260,250    $ 2,327,053   $ 2,421,073
                                 
Earnings before restructuring and other related                  
  costs and other income                        
    Meat Products Group      $ (11,492)    $ 15,274    $ (21,944)    $ 30,403
    Agribusiness Group       1,726     18,138     7,106     36,292
    Bakery Products Group     32,684     31,244     46,808     33,603
    Non-allocated costs       4,726     (3,004)     (7,090)     (11,629)
             $ 27,644    $ 61,652    $ 24,880    $ 88,669
                                 
Capital expenditures                          
  Meat Products Group      $ 73,062    $ 46,159    $ 139,206    $ 85,131
  Agribusiness Group       5,401     2,614     7,845     5,694
  Bakery Products Group       10,914     14,860     18,381     28,614
             $ 89,377    $ 63,633    $ 165,432    $   119,439
                                 
Depreciation and amortization                        
  Meat Products Group      $ 16,851    $ 15,151    $ 32,419    $ 29,917
  Agribusiness Group       4,096     3,983     8,252     7,926
  Bakery Products Group       14,470     14,046     28,598     26,726
             $ 35,417    $ 33,180    $ 69,269    $ 64,569

 

          As at June 30,     As at June 30,     As at December 31,     As at January 1,
            2013       2012       2012       2012
                                     
Total assets                                
  Meat Products Group    $ 1,756,916      $ 1,548,254      $ 1,617,413      $ 1,465,576
  Agribusiness Group     274,898       222,849       275,167       223,013
  Bakery Products Group     1,021,971       991,870       1,005,432       937,292
  Non-allocated assets     331,072       338,142       345,684       314,578
           $ 3,384,857      $ 3,101,115      $ 3,243,696      $ 2,940,459
                                     
Goodwill                                
  Meat Products Group    $ 428,828      $ 442,726      $ 442,925      $ 442,336
  Agribusiness Group     13,845       13,845       13,845       13,845
  Bakery Products Group     298,932       297,579       296,386       297,558
           $ 741,605      $ 754,150      $ 753,156      $ 753,739

 


 

SOURCE Maple Leaf Foods Inc.



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