2014

Maple Leaf Foods Reports Results for Third Quarter 2013

TSX: MFI
www.mapleleaffoods.com

TORONTO, Oct. 30, 2013 /PRNewswire/ - Maple Leaf Foods Inc. (TSX: MFI) today reported its financial results for the third quarter ended September 30, 2013.

  • Adjusted Operating Earnings(1)(2)(3) for the third quarter was $18.6 million compared to $47.9 million last year. Year-to-date Adjusted Operating Earnings were $12.0 million compared $102.3 million last year
  • Adjusted Earnings per Share(2)(3)(4) was a loss of $0.01 compared to Adjusted Earnings per Share of $0.13 last year. Year-to-date Adjusted Earnings per Share was a loss of $0.25 compared to Adjusted Earnings per Share of $0.21 last year.
  • The Bakery Products Group achieved Adjusted EBITDA(2)(5) margins of 13.5%, reflecting contributions from efficiency improvements and volume growth in the U.K. business

"This is a very challenging period of transition for the Maple Leaf organization, as the short-term impact of volatile protein market conditions, combined with the significant cost of change, has been material," said Michael H. McCain, President and CEO. "We have five significant operational start-ups occurring simultaneously, during a year when commodity markets have not been friendly. However, these transitory conditions do not detract from the underlying strength of the business or the strategic direction. Our commercial performance is solid and we are satisfied with the progress we are making in implementing our prepared meats strategy. Our bakery business is performing at record levels as we come into the back half of 2013. Through exploring strategic alternatives, we are committed to optimizing the value of this business, either as part of Maple Leaf or under new ownership."

Financial Overview

Maple Leaf Foods Inc. ("the Company") sales of $1,150.2 million for the third quarter declined 2.5% from last year, or 1.1% after adjusting for the impacts of divestitures and foreign exchange, due to lower volumes which were partly offset by higher pricing and improved sales mix. For the nine months ended September 30, 2013, sales decreased 3.6% from the prior year to $3,364.2 million, or 2.1% after adjusting for divestitures and foreign exchange, due to the same factors.

Adjusted Operating Earnings for the third quarter decreased 61.1% to $18.6 million compared to $47.9 million last year, as earnings in the Protein Group were impacted by higher costs related to the implementation of its prepared meats strategy and poor commodity market conditions, which were only partly offset by stronger Bakery Group results. For the nine months ended September 30, 2013, Adjusted Operating Earnings declined 88.2% to $12.0 million compared to $102.3 million last year, due to similar factors noted above.

Net earnings from continuing operations(2) for the third quarter were $nil (a loss of $0.02 per basic share attributable to common shareholders) compared to $11.4 million ($0.06 per basic share attributable to common shareholders) last year. Net earnings from continuing operations included $15.1 million ($0.08 per basic share attributable to common shareholders) of pre-tax expenses related to restructuring and other related costs (2012: $4.6 million, or $0.02 per basic share attributable to common shareholders). Year-to-date net loss from continuing operations was $42.2 million (loss of $0.34 per basic share attributable to common shareholders) compared to net earnings of $1.2 million (a loss of $0.02 per basic share attributable to common shareholders) last year. The year-to-date net loss included $77.9 million ($0.40 per basic share attributable to common shareholders) of pre-tax expenses related to restructuring and other related costs (2012: $34.7 million, or $0.19 per basic share attributable to common shareholders).

Adjusted Earnings per Share in the third quarter was a loss of $0.01 compared to Adjusted Earnings per Share of $0.13 last year. Year-to-date Adjusted Earnings per Share declined to a loss of $0.25 compared to Adjusted Earnings per Share of $0.21 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) Third Quarter Year-to-Date
(Unaudited)   2013   2012   2013   2012
Meat Products Group $ 750,947 $ 772,460   2,180,971 $ 2,295,124
Agribusiness Group(3)   6,339   6,359   24,420   17,657
Protein Group $ 757,286 $ 778,819 $ 2,205,391 $ 2,312,781
Bakery Products Group   392,924   401,294   1,158,836   1,176,019
Sales $ 1,150,210 $ 1,180,113 $ 3,364,227 $ 3,488,800

 

The following table summarizes Adjusted Operating Earnings by business segment:

                 
($ thousands) Third Quarter Year-to-Date
(Unaudited)   2013   2012(2)   2013   2012(2)
Meat Products Group $ (21,624) $ 22,875 $ (43,568) $ 55,783
Agribusiness Group(3)   1,559   (3,978)   (28,255)   (10,627)
Protein Group $ (20,065) $ 18,897 $ (71,823) $ 45,156
Bakery Products Group   38,547   29,903   85,355   63,506
Non-allocated Costs in Adjusted Operating Earnings(i)   120   (934)   (1,499)   (6,404)
Adjusted Operating Earnings $ 18,602 $ 47,866 $ 12,033 $ 102,258
(i)      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 include 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 third quarter in the Protein Group declined 2.8% to $757.3 million from $778.8 million last year. For the first nine months, sales decreased 4.6% to $2,205.4 million. The quarter and year-to-date declines were primarily driven by lower volumes and the divestiture of the Company's potato processing operations, partly offset by higher pricing and sales mix.

Adjusted Operating Earnings in the third quarter was a loss of $20.1 million compared to Adjusted Operating Earnings of $18.9 million last year, reflecting transitory costs related to commissioning newly expanded prepared meats facilities and continued weakness in commodity market conditions.

For the first nine months, Adjusted Operating Earnings decreased to a loss of $71.8 million compared to Adjusted Operating Earnings of $45.2 million last year, due to similar factors noted above as well as 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 third quarter declined 2.8% to $750.9 million, or 1.0% after adjusting for the impact of divesting the Company's potato processing operations and foreign exchange. Lower volumes in primary pork processing and the prepared meats business were partly offset by higher pricing in primary processing and favourable sales mix in the prepared meats business. For the first nine months, sales declined 5.0%, or 3.0% after adjusting for the impact of divesting the Company's potato processing operations and foreign exchange. Volumes in the prepared meats business decreased by approximately 8% in the first quarter as consumers responded in the short-term to higher prices, but subsequently improved in the second and third quarters.

Adjusted Operating Earnings for the third quarter declined to a loss of $21.6 million compared to Adjusted Operating Earnings of $22.9 million last year, due to the factors discussed below.

The Company is in an intense phase of implementing a strategy to increase scale, productivity and profitability in its prepared meats network. This includes commissioning activities at three recently expanded facilities, a new distribution centre servicing Central and Eastern Canada, and a newly constructed state-of-the-art scale plant in Hamilton, Ontario. Supporting these activities resulted in transitional costs of approximately $15 million during the quarter (2012: approximately $3 million) and approximately $34 million for the nine months ended September 30, 2013 (2012: approximately $8 million), particularly related to installing new technologies, transferring volume, and providing incremental resources required to support these start-ups. Beyond the transformation initiatives, earnings were negatively impacted by higher raw material and other inflationary costs, primarily due to an increase in fresh pork prices. Partly offsetting these declines were improvements in sales mix, resulting from several new product launches in the second half of 2012 and the first half of 2013.

Earnings in primary pork processing continued to be negatively affected by the devaluation of the Japanese Yen, which lowered profitability on export sales. North American primary pork processing spreads also contracted as live hog costs outpaced an increase in pork prices. Earnings in fresh poultry were consistent as lower primary processing spreads were offset by lower selling, general, and administrative costs.

The sale of the Company's potato processing operations reduced Adjusted Operating Earnings by approximately $3 million in the third quarter compared to last year.

For the first nine months, Adjusted Operating Earnings were a loss of $43.6 million compared to Adjusted Operating Earnings of $55.8 million last year due to similar factors noted above, as well as lower volumes in the prepared meats business in the first quarter of 2013. The sale of the Company's potato processing operations reduced Adjusted Operating Earnings for the nine months ended September 30, 2013 by approximately $10 million compared to last year.

Agribusiness Group
Includes Canadian hog production operations.

Agribusiness Group sales for the third quarter of $6.3 million were consistent with the prior year. Sales for the first nine months increased 38.3% to $24.4 million from $17.7 million last year due to higher hog volumes and higher pricing on toll feed sales.

Adjusted Operating Earnings in the third quarter increased to $1.6 million compared to a loss of $4.0 million last year. Hog production earnings increased due to the reversal of a provision, reflecting the termination of a preliminary arrangement with a supplier to receive hogs on a cost of production basis rather than at market price. Earnings also benefited from an increase in live hog prices that more than offset higher feed costs. Partly offsetting these increases was a lower contribution from hedging programs compared to last year.

Year-to-date Adjusted Operating Earnings decreased to a loss of $28.3 million compared to a loss of $10.6 million last year due to higher feed costs that outpaced an increase in hog prices, and a lower contribution from hedging programs. The third quarter provision reversal noted above did not impact year-to-date results as the costs associated with the provision were recorded in the first and second quarters of 2013.

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 third quarter decreased 2.1% to $ 392.9 million, or 1.3% after adjusting for discontinued categories in the U.K. and the impact of currency translation on sales in the U.S. and U.K. The impact of lower sales volumes in the fresh bakery business were partially offset by volume growth in the U.K. and higher pricing in the fresh, frozen, and U.K. bakery businesses.

Sales for the first nine months decreased 1.5% to $1,158.8 million compared to $1,176.0 million last year or 0.8% after adjusting for discontinued categories in the U.K. and currency translation due to similar factors noted above.

Third quarter Adjusted Operating Earnings increased 28.9% to $38.5 million from $29.9 million last year, driven by higher earnings in the North American frozen and U.K. bakery businesses.

The North American frozen bakery business benefited from operational cost reductions and higher pricing, while the U.K. business earnings benefited from increased volumes in the bagel and croissant categories. Lower volumes and higher raw material and inflationary costs in the fresh bakery business were partly offset by operating efficiencies, driven by the closure of a third Toronto, Ontario bakery, higher pricing, and lower selling, general, and administrative expenses. Earnings in the fresh pasta business were consistent with the prior year.

For the first nine months, Adjusted Operating Earnings increased 34.4% to $85.4 million from $63.5 million last year. Earnings in the frozen bakery and U.K. bakery business improved due to similar factors noted above. In the fresh bakery business, earnings improved as a result of higher pricing, operational improvements, and lower selling, general, and administrative spend, partly offset by lower volumes and higher raw material and other inflationary costs. Earnings in the fresh pasta business increased mainly due to an inventory write-off in the first quarter of last year that did not re-occur.

Sale of Rothsay Business

The Company disposed of its Rothsay by-product recycling business during the fourth quarter, pursuant to an agreement to sell the business to Darling International Inc. The operating results of the Rothsay business have been classified as discontinued operations and 2012 amounts have been presented as discontinued operations on a comparable basis. The Rothsay business was previously reported in the Agribusiness Group. Earnings per share from discontinued operations were $0.11 for the third quarter (2012: $0.11) and $0.31 for the nine months ended September 30, 2013 (2012: $0.32).

Long-term EBITDA Margin Targets

As a result of the disposition of the Rothsay business, the Company has adjusted its 2015 EBITDA margin target to 10.8%, which reflects a revised EBITDA margin target of 10.0% for the Protein Group and an unchanged target of 12.3% for the Bakery Products Group.

Subsequent Events

On October 10, 2013, the Company repaid debentures originally due October 2016.  The book value of the debentures as at December 31, 2012 was $26.3 million, with remaining principle payments as at September 30, 2013 of $24.9 million. The total amount paid was $28.2 million, including accrued interest of $0.9 million.

On October 21, 2013 the Company announced that it is exploring strategic alternatives for its Bakery business, including a potential sale of the Company's 90% ownership interest in Canada Bread Company, Limited. This process is expected to conclude in early 2014. Maple Leaf has established a committee of independent directors to oversee the process and recommend the use of proceeds in the event of a sale, which may include a combination of debt repayment, reinvestment in the business and returning capital to shareholders. There can be no assurance that the process being undertaken by Maple Leaf will result in the consummation of any transaction.

On October 24, 2013, the Company announced that it has signed a definitive agreement to sell substantially all of the net assets of its fresh pasta and sauce business, a component of the Bakery Products Group, for gross proceeds of approximately $120 million. Subject to Competition Bureau review, the transaction is expected to close by the end of 2013.

On October 28, 2013, the Company sold its Rothsay operations for gross proceeds of $644.5 million.  The assets and liabilities associated with Rothsay are classified as held for sale as at September 30, 2013.

Other Matters

On October 29 2013, the Company declared a dividend of $0.04 per share payable December 31, 2013 to shareholders of record at the close of business on December 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 third 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 October 30, 2013 to review Maple Leaf Foods' third quarter financial results. To participate in the call, please dial 416-340-2216 or 866-226-1792. For those unable to participate, playback will be made available an hour after the event at 905-694-9451 / 800-408-3053 (Passcode 3231342).

A webcast presentation of the third quarter financial results will also be available at http://edge.media-server.com/m/p/p4cgamtu/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, Adjusted Earnings per Share, Adjusted EBITDA, Net Debt and Return on Net Assets ("RONA"). Management believes that these non-IFRS measures provide useful information to 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 nine 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 September 30, 2013
      Meat       Bakery        
($ thousands)   Products   Agribusiness   Products   Unallocated    
(Unaudited)   Group   Group (3)   Group   costs   Consolidated
Net earnings (loss) from continuing operations                 $ 14
Income taxes                   1,091
Earnings (loss) before income taxes from continuing operations                 $ 1,105
Interest expense                   18,673
Change in the fair value of non-designated                    
  interest rate swaps                   (655)
Other (income) expense   (2,029)   (141)   755   (17,040)   (18,455)
Restructuring and other related costs   11,379   -   3,714   -   15,093
Earnings (loss) from Continuing Operations  $   (21,624) $ 1,559 $   38,547 $ (2,721) $ 15,761
Decrease (increase) in fair value of biological assets    -   -   -   (894)   (894)
Unrealized (gains) losses on commodity futures contracts    -   -   -   3,735   3,735
Adjusted Operating Earnings $   (21,624) $ 1,559 $   38,547 $ 120 $ 18,602
                       
                       
    Three months ended September 30, 2012(2)
      Meat       Bakery        
($ thousands)   Products   Agribusiness   Products   Unallocated    
(Unaudited)   Group   Group (3)   Group   costs   Consolidated
Net earnings (loss) from continuing operations                 $ 11,372
Income taxes                   5,487
Earnings (loss) before income taxes from continuing operations                 $ 16,859
Interest expense                   18,442
Change in the fair value of non-designated                    
  interest rate swaps                   (2,247)
Other (income) expense    (829)   (3)   13   (667)   (1,486)
Restructuring and other related costs   4,414   -   170   -   4,584
Earnings (loss) from Continuing Operations  $ 22,875 $ (3,978) $   29,903 $ (12,648) $ 36,152
Decrease (increase) in fair value of biological assets    -   -   -   13,038   13,038
Unrealized (gains) losses on commodity futures contracts    -   -   -   (1,324)   (1,324)
Adjusted Operating Earnings  $ 22,875 $ (3,978) $   29,903 $ (934) $ 47,866
                       
                       
    Nine months ended September 30, 2013
      Meat       Bakery        
($ thousands)   Products   Agribusiness   Products   Unallocated    
(Unaudited)   Group   Group (3)   Group   costs   Consolidated
Net earnings (loss) from continuing operations                 $ (42,185)
Income taxes                   (18,625)
Earnings (loss) before income taxes from continuing operations                 $ (60,810)
Interest expense                   52,009
Change in the fair value of non-designated                    
  interest rate swaps                   (1,930)
Other (income) expense   (46,913)   (709)   5,147   (20,962)   (63,437)
Restructuring and other related costs   60,976   -   15,168   1,745   77,889
Earnings (loss) from Continuing Operations  $   (43,568) $ (28,255) $   85,355 $ (9,811) $ 3,721
Decrease (increase) in fair value of biological assets    -   -   -   4,569   4,569
Unrealized (gains) / losses on commodity futures contracts      -   -   -   3,743   3,743
Adjusted Operating Earnings $   (43,568) $ (28,255) $   85,355 $ (1,499) $ 12,033
                       
                       
    Nine months ended September 30, 2012(2)
      Meat       Bakery        
($ thousands)   Products   Agribusiness   Products   Unallocated    
(Unaudited)   Group   Group (3)   Group   costs   Consolidated
Net earnings (loss) from continuing operations                 $ 1,199
Income taxes                   5,474
Earnings (loss) before income taxes from continuing operations                 $ 6,673
Interest expense                   54,503
Change in the fair value of non-designated                    
  interest rate swaps                   (7,180)
Other (income) expense   (2,996)   (65)   (1,358)   93   (4,326)
Restructuring and other related costs   27,456   -   7,259   -   34,715
Earnings (loss) from Continuing Operations  $ 55,783 $ (10,627) $   63,506 $ (24,277) $ 84,385
Decrease (increase) in fair value of biological assets    -   -   -   14,139   14,139
Unrealized (gains) losses on commodity futures contracts      -   -   -   3,734   3,734
Adjusted Operating Earnings  $ 55,783 $ (10,627) $   63,506 $ (6,404) $ 102,258

 

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 from continuing operations 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 from continuing operations as reported under IFRS in the unaudited consolidated interim statements of earnings to Adjusted Earnings per Share for the three and nine 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   Nine months ended
($ per share)     September 30,   September 30,
($ thousands)     2013   2012(2)   2013   2012(2)
Basic earnings (loss) per share from continuing operations   $ (0.02) $ 0.06 $ (0.34) $ (0.02)
Restructuring and other related costs(i)     0.08   0.02   0.40   0.19
Items included in other income not considered representative of                  
  on-going operations(ii)     (0.08)   -   (0.34)   -
Change in the fair value of non-designated interest rate swaps(iii)      -   (0.01)   (0.01)   (0.04)
Change in the fair value of unrealized (gains) losses on commodity                   
  futures contracts(iii)     0.02   (0.01)   0.02   0.02
Change in the fair value of biological assets(iii)     -   0.07   0.02   0.07
Adjusted Earnings per Share(iv)   $ (0.01) $ 0.13 $ (0.25) $ 0.21
(i)      Includes per share impact of restructuring and other related costs, net of tax and non-controlling interest.
(ii)      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.
(iii)      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.
(iv)      May not add due to rounding.

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.

Footnote Legend

  1. Adjusted Operating Earnings, a non-IFRS measure, is used by Management to evaluate financial operating results.  It is defined as earnings from operations 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 in 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 28 of the Company's unaudited condensed consolidated interim financial statements.
  3. Figures exclude the results of the Rothsay business, which is reported as discontinued operations. Refer to Note 19 of the Company's third quarter unaudited condensed consolidated interim financial statements.
  4. 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 from continuing operations 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 in this news release.
  5. Adjusted EBITDA, a non-IFRS measure, is used by Management to evaluate financial operating results.  It is defined as earnings before interest and income taxes plus depreciation and intangible asset amortization, 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.

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

MAPLE LEAF FOODS INC.

Three and nine months ended September 30, 2013 and 2012

Consolidated Balance Sheets

(In thousands of Canadian dollars)   As at September 30,    As at September 30,    As at December 31,   As at January 1,
(Unaudited)   2013   2012   2012   2012
              (Restated)     (Restated)     (Restated)
                           
ASSETS                        
Current assets                        
  Cash and cash equivalents    $ 400,306    $ 87,300    $ 90,414    $ -
  Accounts receivable      107,436     85,589     117,533     133,504
  Notes receivable      124,005     138,661     124,457     123,545
  Inventories      323,766     313,485     301,804     293,231
  Biological assets      80,590     40,123     78,127     49,265
  Income and other taxes recoverable     38,317     43,039     41,527     43,789
  Prepaid expenses and other assets     21,808     19,419     12,590     24,688
  Assets held for sale     110,838     23,259     37,087     -
       $ 1,207,066    $ 750,875    $ 803,539    $ 668,022
  Property and equipment     1,273,264     1,122,881     1,212,177     1,067,246
  Investment property     13,011     13,740     11,979     11,232
  Employee benefits     126,813     101,840     107,831     133,942
  Other long-term assets      16,634     11,930     13,663     11,926
  Deferred tax asset     113,958     146,484     132,558     127,456
  Goodwill      725,545     752,590     753,156     753,739
  Intangible assets      199,576     207,264     208,793     191,896
  Total assets    $ 3,675,867    $ 3,107,604    $ 3,243,696    $ 2,965,459
                           
LIABILITIES AND EQUITY                        
Current liabilities                        
  Bank indebtedness    $ -    $ 31,279    $ 48,243    $ 36,404
  Accounts payable and accruals     597,101     459,491     446,911     507,059
  Provisions      36,993     27,382     26,335     44,255
  Current portion of long-term debt      641,306     6,068     6,573     5,618
  Other current liabilities     15,999     17,624     14,961     20,409
  Liabilities associated with                         
  assets held for sale      18,511     -     -     -
       $ 1,309,910    $ 541,844    $ 543,023    $ 613,745
  Long-term debt      892,433     1,119,045     1,206,945     941,956
  Employee benefits      264,924     429,568     420,933     350,853
  Provisions      37,226     28,714     25,800     28,936
  Other long-term liabilities      57,632     81,784     80,084     88,153
  Deferred tax liability     13,750     8,617     8,912     11,703
  Total liabilities     $ 2,575,875    $ 2,209,572    $ 2,285,697    $ 2,035,346
Shareholders' equity                        
Share capital    $ 902,986    $ 902,810    $ 902,810    $ 902,810
Retained earnings (deficit)     47,148     (122,156)     (72,701)     (78,674)
Contributed surplus     91,172     80,956     75,913     64,327
Accumulated other                         
  comprehensive loss      (10,472)     (13,942)     (13,263)     (17,042)
Treasury stock     (1,350)     (15,370)     (1,845)     (6,347)
Total shareholders' equity     $ 1,029,484    $ 832,298    $ 890,914    $ 865,074
Non-controlling interest     70,508     65,734     67,085     65,039
Total equity    $ 1,099,992    $ 898,032    $ 957,999    $ 930,113
Total liabilities and equity    $ 3,675,867    $ 3,107,604    $ 3,243,696    $ 2,965,459

 

Consolidated Statements of Earnings (Loss)

(In thousands of Canadian dollars, except share amounts)                      
          Three months ended September 30,       Nine months ended September 30,
(Unaudited) 2013   2012   2013   2012
                (Restated)           (Restated)
                             
                             
Sales   $ 1,150,210    $ 1,180,113    $ 3,364,227    $ 3,488,800
Cost of goods sold   1,013,074     1,015,360     2,990,174     2,997,684
Gross margin $ 137,136    $ 164,753    $ 374,053    $ 491,116
Selling, general and administrative expenses   121,375     128,601     370,332     406,731
Earnings from continuing operations                       
  before the following: $ 15,761    $ 36,152    $ 3,721    $ 84,385
Restructuring and other related costs    (15,093)     (4,584)     (77,889)     (34,715)
Change in fair value of non-designated                       
  interest rate swaps    655     2,247     1,930     7,180
Other income (expense)    18,455     1,486     63,437     4,326
Earnings (loss) before interest and                       
  income taxes from continuing operations $ 19,778    $ 35,301    $ (8,801)    $ 61,176
Interest expense    18,673     18,442     52,009     54,503
Earnings (loss) before income taxes                       
  from continuing operations $ 1,105    $ 16,859    $ (60,810)    $ 6,673
Income taxes   1,091     5,487     (18,625)     5,474
Net earnings (loss) from continuing operations $ 14    $ 11,372    $ (42,185)    $ 1,199
Net earnings from discontinued operations    15,507     14,671     42,974     45,057
Net earnings (loss) $ 15,521    $ 26,043    $ 789    $ 46,256
                             
Attributed to:                      
Common shareholders  $ 12,955    $ 23,689    $ (4,436)    $ 41,277
Non-controlling interest   2,566     2,354     5,225     4,979
         $ 15,521    $ 26,043    $ 789    $ 46,256
                             
Earnings per share attributable to common shareholders                  
  Basic earnings (loss) per share  $ 0.09    $ 0.17    $ (0.03)    $ 0.30
  Diluted earnings (loss) per share  $ 0.09    $ 0.16    $ (0.03)    $ 0.30
  Basic earnings (loss) per share                      
    from continuing operations  $ (0.02)    $ 0.06    $ (0.34)    $ (0.02)
  Diluted earnings (loss) per share                      
    from continuing operations  $ (0.02)    $ 0.06    $ (0.34)    $ (0.02)
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 September 30,   Nine months ended September 30,
(Unaudited)           2013   2012   2013   2012
                          (Restated)           (Restated)
                                       
                                       
Net earnings (loss)          $ 15,521    $ 26,043   $ 789   $ 46,256
Other comprehensive income (loss)                          
Items that will not be reclassified                           
  to profit or loss:                              
    Change in actuarial gains and losses   25,201     (43,763)     142,473     (68,852)
Total items that will not be reclassified                       
  to profit or loss           25,201     (43,763)     142,473     (68,852)
Items that are or may be reclassified                         
  subsequently to profit or loss:                            
    Change in accumulated foreign currency                   
      translation adjustment         (445)     (3,985)     4,539     (3,702)
    Change in unrealized gains and losses                  
      on cash flow hedges         (1,410)     2,069     (1,111)     6,312
Total items that are or may be reclassified                   
  subsequently to profit or loss         (1,855)     (1,916)     3,428     2,610
                   $ 23,346    $ (45,679)    $ 145,901   $ (66,242)
Comprehensive income (loss)        $ 38,867    $ (19,636)    $ 146,690   $ (19,986)
Attributed to:                                
Common shareholders          $ 36,288    $ (21,079)    $ 139,454   $ (23,792)
Non-controlling interest           2,579     1,443     7,236     3,806

 

Consolidated Statements 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)   -     (4,436)     -     -     -     5,225     789
    Other comprehensive                                        
      income (loss)     -     141,099     -     2,791     -     2,011     145,901
    Dividends declared                                        
      ($0.12 per share)   -     (16,814)     -     -     -     (3,813)     (20,627)
    Stock-based compensation                                        
      expense     -     -     10,246     -     -     -     10,246
    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 September 30, 2013  $ 902,986    $ 47,148    $ 91,172    $ (10,472)    $ (1,350)    $ 70,508    $ 1,099,992
                                                   
                                                   
                                                   
            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      -     41,277     -     -     -     4,979     46,256
    Other comprehensive                                        
      income (loss)      -     (68,169)     -     3,100     -     (1,173)     (66,242)
    Dividends declared                                        
      ($0.12 per share)   -     (16,590)     -     -     -     (3,202)     (19,792)
    Stock-based compensation                                        
      expense     -     -     16,229     -     -     -     16,229
    Other     -     -     400     -     -     91     491
    Re-purchase of treasury stock   -     -     -     -     (9,023)     -     (9,023)
Balance at September 30, 2012  $ 902,810    $ (122,156)    $ 80,956    $ (13,942)    $ (15,370)    $ 65,734    $ 898,032

 

Consolidated Statements of Cash Flows

(In thousands of Canadian dollars)   Three months ended September 30,   Nine months ended September 30,
(Unaudited)       2013     2012     2013     2012
                      (Restated)           (Restated)
                                   
CASH (USED IN) PROVIDED BY:                        
Operating activities                        
  Net earnings (loss)    $ 15,521    $ 26,043    $ 789    $ 46,256
  Add (deduct) items not affecting cash:                        
    Change in fair value of biological assets     (894)     13,038     4,569     14,139
    Depreciation and amortization     35,867     33,077     105,136     97,646
    Stock-based compensation     (515)     5,490     10,246     16,229
    Deferred income taxes     (1,275)     (92)     (23,457)     (728)
    Income tax current     7,725     10,648     19,696     21,787
    Interest expense     18,715     18,442     52,051     54,498
    Gain on sale of property and equipment     (1,452)     (8)     (2,933)     (421)
    Gain on sale of assets held for sale     (11,520)     (139)     (57,076)     (459)
    Gain on sale of investment property     -     -     (323)     -
    Gain on acquisition     -     -     985     -
    Change in fair value of non-designated                        
      interest rate swaps     (655)     (2,247)     (1,930)     (7,180)
    Change in fair value of                        
      derivative financial instruments     2,353     (2,320)     3,863     3,303
    Impairment of assets (net of reversals)     115     -     5,924     -
  Increase in pension liability     2,081     4,982     14,710     18,083
  Net income taxes paid     (8,941)     (6,993)     (20,978)     (16,512)
  Interest paid     (17,656)     (18,045)     (49,470)     (53,423)
  Change in provision for restructuring                        
    and other related costs     5,955     (525)     47,906     6,059
  Other         (9,191)     (5,567)     (20,376)     (7,389)
  Change in non-cash operating working capital     82,145     (4,661)     123,719     (40,233)
Cash provided by operating activities    $ 118,378    $ 71,123    $ 213,051    $ 151,655
Financing activities                        
  Dividends paid    $ (5,620)    $ (5,617)    $ (16,814)    $ (16,590)
  Dividends paid to non-controlling interest     (1,271)     (1,271)     (3,813)     (2,440)
  Net increase in long-term debt     199,418     9,136     312,910     189,136
  Purchase of treasury stock     -     (9,023)     -     (9,023)
  Exercise of stock options     -     -     176     -
  Other         (293)     (484)     -     (1,267)
Cash provided by (used in) financing activities    $ 192,234    $ (7,259)    $ 292,459    $ 159,816
Investing activities                        
  Additions to long-term assets    $ (108,076)    $ (78,172)    $ (273,508)    $ (197,611)
  Acquisition of business     -     -     (922)     (31,130)
  Capitalization of interest expense     (3,931)     (1,609)     (11,126)     (4,130)
  Proceeds from sale of long-term assets     2,030     1,102     8,496     5,851
  Proceeds from sale of assets held for sale     61,748     2,417     129,685     7,974
  Other         -     (3)     -     -
Cash used in investing activities    $ (48,229)    $ (76,265)    $ (147,375)    $ (219,046)
Increase (decrease) in cash and cash equivalents    $ 262,383    $ (12,401)    $ 358,135    $ 92,425
Net cash and cash equivalents, beginning of period     137,923     68,422     42,171     (36,404)
Net cash and cash equivalents, end of period    $ 400,306    $ 56,021    $ 400,306    $ 56,021
Net cash and cash equivalents is comprised of:                        
Cash and cash equivalents    $ 400,306    $ 87,300    $ 400,306    $ 87,300
Bank indebtedness     -     (31,279)     -     (31,279)
Net cash and cash equivalents, end of period    $ 400,306    $ 56,021    $ 400,306    $ 56,021

 

Segmented Financial Information

                Three months ended September 30,       Nine months ended September 30,
              2013     2012     2013     2012
                    (Restated)           (Restated)
Sales                            
    Meat Products Group      $ 750,947    $ 772,460    $ 2,180,971    $ 2,295,124
    Agribusiness Group       75,687     67,330     212,896     194,243
    Bakery Products Group     392,924     401,294     1,158,836     1,176,019
Total sales        $ 1,219,558    $ 1,241,084    $ 3,552,703    $ 3,665,386
Sales from discontinued operations      (69,348)     (60,971)     (188,476)     (176,586)
Sales from continuing operations    $ 1,150,210    $ 1,180,113    $ 3,364,227    $ 3,488,800
                                 
Earnings before restructuring and other related                  
  costs and other income                        
    Meat Products Group      $ (21,624)    $ 22,875    $ (43,568)    $ 55,783
    Agribusiness Group       22,562     15,699     29,668     49,486
    Bakery Products Group     38,547     29,903     85,355     63,506
    Non-allocated costs       (2,721)     (12,648)     (9,811)     (24,277)
Total earnings before restructuring                         
  and other related costs and other income  $ 36,764    $ 55,829    $ 61,644    $ 144,498
Earnings before restructuring                         
  and other related costs and other income                      
  from discontinued operations      (21,003)     (19,677)     (57,923)     (60,113)
Earnings before restructuring                         
  and other related costs and other income                      
  from continuing operations    $ 15,761    $ 36,152    $ 3,721    $ 84,385
                                 
Capital expenditures                          
    Meat Products Group      $ 92,257    $ 63,582    $ 231,463    $ 148,712
    Agribusiness Group       3,591     3,242     11,436     8,937
    Bakery Products Group     12,228     11,348     30,609     39,962
             $ 108,076    $ 78,172    $ 273,508    $ 197,611
                                 
Depreciation and amortization                        
    Meat Products Group      $ 17,428    $ 14,912    $ 49,847    $ 44,829
    Agribusiness Group       4,043     4,023     12,295     11,949
    Bakery Products Group     14,396     14,142     42,994     40,868
             $ 35,867    $ 33,077    $ 105,136    $ 97,646

        As at September 30,   As at September 30,   As at December 31,   As at January 1,
          2013     2012     2012     2012
                (Restated)     (Restated)     (Restated)
Total assets                        
  Meat Products Group  $ 1,798,777    $ 1,554,470    $ 1,617,413    $ 1,482,741
  Agribusiness Group   282,061     213,808     275,167     224,108
  Bakery Products Group   1,014,807     999,391     1,005,432     944,032
  Non-allocated assets   580,222     339,935     345,684     314,578
         $ 3,675,867    $ 3,107,604    $ 3,243,696    $ 2,965,459
                             
Goodwill                        
  Meat Products Group  $ 428,235    $ 442,692    $ 442,925    $ 442,336
  Agribusiness Group   -     13,845       13,845     13,845
  Bakery Products Group   297,310     296,053     296,386     297,558
         $ 725,545    $ 752,590    $ 753,156    $ 753,739

 

 

 

SOURCE Maple Leaf Foods Inc.



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