Maple Leaf Foods Reports Results for Third Quarter 2010

Oct 28, 2010, 08:38 ET from Maple Leaf Foods Inc.

TORONTO, Oct. 28 /PRNewswire-FirstCall/ - Maple Leaf Foods Inc. (TSX: MFI) today reported its financial results for the third quarter ended September 30, 2010.

    -   Sales were consistent with last year at $1.3 billion
    -   Adjusted Operating Earnings increased 2% to $64.5 million from
        $63.0 million last year
    -   Adjusted EPS increased 10% to $0.23 compared to $0.21 last year
    -   Net loss in the quarter, which included $48.1 million of non-cash
        pre-tax adjustments, was $16.1 million compared to net earnings of
        $22.5 million last year

Note: Adjusted Operating Earnings measures are defined as earnings from operations before restructuring and other related costs, other income and the impact of the change in fair value of interest rate swaps. Adjusted Earnings per Share ("Adjusted EPS") measures are defined as basic earnings per share adjusted for the impact of restructuring and other related costs and the impact of the change in fair value of interest rate swaps, net of tax and non-controlling interest. Refer to the section entitled Non-GAAP Financial Measures at the end of this news release.

"The rapid rise in raw material costs in both grains and meat proteins, is the story for 2010," said Michael H. McCain, President and CEO. "Notwithstanding this significant inflation, we realized our sixth consecutive quarter of earnings growth, continued margin expansion in the protein segment, and double digit earnings per share improvement over last year. This steady progress reflects our focus on near-term value creation and implementing initiatives across our businesses to increase margins and growth that are expected to deliver significant return to shareholders now and through 2015."

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

Third quarter sales of $1,293.2 million were consistent with last year. Excluding currency impacts related to the U.K. and U.S. bakery operations and fresh pork sales, sales increased by 2%. Adjusted Operating Earnings increased 2% to $64.5 million compared to $63.0 million last year. Improved results in the Meat Group, supported by better performance in fresh pork and poultry, were partly offset by lower earnings in the Bakery Products Group, mostly due to lower volume and increased investment to support product launches, advertising and promotions.

Net loss, including a non-cash pre-tax charge of $14.6 million due to the change in fair value of long-term interest rate swaps not designated in a formal hedging relationship and $50.0 million in restructuring costs (including $33.5 million of non-cash charges), was $16.1 million in the third quarter of 2010 compared to net earnings of $22.5 million last year. Year-to-date net loss was $4.4 million compared to net earnings of $30.2 million last year.

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

Following is a summary of sales by business segment:

    -------------------------------------------------------------------------
                                      Third Quarter           Year-to-Date
                             ------------------------------------------------
    ($ millions)                    2010        2009        2010        2009
    -------------------------------------------------------------------------
    Meat Products Group         $834,655    $815,610  $2,418,570  $2,468,218
    Agribusiness Group            47,468      55,813     143,333     155,378
    -------------------------------------------------------------------------
    Protein Group               $882,123    $871,423  $2,561,903  $2,623,596
    Bakery Products Group        411,088     425,174   1,194,181   1,273,103
    -------------------------------------------------------------------------
    Sales                     $1,293,211  $1,296,597  $3,756,084  $3,896,699
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

                                      Third Quarter           Year-to-date
    -------------------------------------------------------------------------
    ($ thousands)                   2010        2009        2010        2009
    -------------------------------------------------------------------------
    Meat Products Group          $21,532     $18,111     $50,188     $31,144
    Agribusiness Group            15,804      15,062      36,102      33,518
    -------------------------------------------------------------------------
    Protein Group                $37,336     $33,173     $86,290     $64,662
    Bakery Products Group         27,928      32,749      70,911      80,259
    Non-allocated Costs(i)          (801)     (2,891)     (6,609)     (6,650)
    -------------------------------------------------------------------------
    Adjusted Operating
     Earnings                    $64,463     $63,031    $150,592    $138,271
    -------------------------------------------------------------------------

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

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

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

Sales for the third quarter increased 2% to $834.7 million from $815.6 million in the third quarter last year. Excluding the impact of a stronger Canadian dollar that reduced the value of fresh pork sales, sales increased by 4%. Improved pork markets, higher net pricing in prepared meats and improved sales mix contributed to increased sales. These benefits were partly offset by reduced volumes in fresh pork and prepared meats as consumers continue to adjust to new price points.

Adjusted Operating Earnings in the Meat Products Group increased to $21.5 million compared to $18.1 million last year, reflecting higher market prices for fresh chicken and pork and improved operational efficiencies in the Company's poultry operations. While margins in the prepared meats business benefited from improved net pricing and early operational benefits of product simplification, profitability in the business was impacted by lower volumes as consumers adjust to new price points. Margins continue to be pressured by further increases in raw material meat costs that resulted in continued focus on price adjustments during the quarter.

Management is focused on implementing near-term initiatives to increase margins in the prepared meats business as part of its recently announced value creation plan. In order to streamline product mix, significant changes are being implemented to standardize ingredient formulations, product sizes and specifications across all categories. These initiatives will be completed during 2011, reducing complexity for customers and improving operating efficiencies.

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

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

Agribusiness Group sales declined 15% to $47.5 million from $55.8 million in the third quarter last year due to lower sales values and volumes in the rendering operations.

Adjusted Operating Earnings for the Agribusiness Group increased to $15.8 million from $15.1 million in the third quarter last year. Earnings from hog production operations improved due to higher hog market prices and lower feed costs. Stronger performance in hog production was partially offset by lower earnings in the by-product recycling business compared to last year due to lower by-product sales values and volumes.

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

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

Third quarter sales in the Bakery Products Group declined 3% from $425.2 million last year to $411.1 million this year, primarily due to currency translation impacts and lower volumes. Excluding currency impacts on the translation of bakery sales in the U.S. and U.K., sales declined by 1%.

Third quarter Adjusted Operating Earnings in the Bakery Products Group declined from a strong comparative quarter of $32.7 million to $27.9 million this year. Lower volumes and increased investment in marketing and promotional activities in the fresh bakery business impacted earnings. Brand investment included advertising and promotional expenses to support Dempster's Smart(R) 16, a line extension of Dempster's Smart(R), which includes 16 whole grains and reduced sodium; support for the launch of Dempster's(R) rye bread line in Ontario; and extensions in Dempster's Oven Fresh(R). In the fourth quarter, the fresh bakery business launched a significant promotional bread campaign with hockey superstar Sidney Crosby as the brand ambassador of Dempster's(R) to promote the benefits of breads, healthy eating and good nutrition.

Management continues to focus on increasing volumes in the North American frozen business while driving cost improvements in baked goods production in the U.K. Cost improvements underway in the U.K. include the transfer of a production line to an existing low-cost scale facility in Maidstone, England in the second quarter that consolidates the majority of croissant production into one site.

The construction of a new large scale fresh bakery facility in Hamilton, Ontario is proceeding on plan. Commissioning of this 375,000 square foot facility is scheduled to commence in mid 2011, allowing for the consolidation of production from three Ontario bakeries. The Company expects to incur restructuring charges totalling approximately $25 million, which includes $5 million in non-cash items.

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

On October 27, 2010, Maple Leaf Foods Inc. declared a dividend of $0.04 per share payable on December 31, 2010 to shareholders of record at the close of business on December 6, 2010. Unless indicated otherwise by the Company in writing at or before the time the dividend is paid, these dividends will not be considered an eligible dividend for the purposes of the "Enhanced Dividend Tax Credit System".

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

An investor presentation related to the Company's third quarter financial results is available at www.mapleleaf.com and can be found under Investor Relations on the Quarterly Results page. A conference call will be held at 2:30 p.m. EDT on October 28, 2010 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 416-695-5800/800-408-3053 (Passcode 8236200 followed by the number sign).

A webcast presentation of the third quarter financial results will also be available at http://investor.mapleleaf.ca via a link: http://www.bellwebcasting.ca/audience/index.asp?eventid=20810663

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

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

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

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

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

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

    Non-GAAP Financial Measures
    ---------------------------

The Company uses the following non-GAAP measures: Adjusted Operating Earnings, Adjusted EPS, EBITDA and Net Debt. Management believes that these non-GAAP 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 Canadian GAAP 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 Canadian GAAP.

Adjusted Operating Earnings

The following table reconciles earnings from operations before restructuring and other related costs, other income (expense) and the impact of the change in fair value of non-designated interest rate swaps to net earnings as reported under Canadian GAAP in the unaudited interim period consolidated statements of earnings for the three-month and nine-month periods ended as indicated below. Management believes that this is the most appropriate basis on which to evaluate operating results, as restructuring and other related costs, other income (expense) and the change in fair value of non-designated interest rate swaps are not representative of operational results.

                                    Three months ended September 30,
    -------------------------------------------------------------------------
    ($ thousands)                                2010
    -------------------------------------------------------------------------
                              Meat      Agri-    Bakery  Unallocated  Consol-
                            Products  business  Products    costs     idated
                             Group     Group     Group

    Net earnings                                                    ($16,078)
    Non-controlling interest                                           1,423
    Income taxes                                                      (2,258)
    -------------------------------------------------------------------------
    Earnings from operations
     before income taxes                                             (16,913)
    Interest expense                                                  16,757
    Change in the fair value
     of non-designated
     interest rate swaps                                              14,582
    -------------------------------------------------------------------------
    Earnings from operations
     before income taxes,
     interest expense and
     changes in the fair
     value of non-
     designated interest
     rate swaps              (18,041)   15,785    17,483      (801)   14,426
    Restructuring and other
     related costs            39,405        70    10,512         3    49,990
    Other income                 168       (51)      (67)       (3)       47
    -------------------------------------------------------------------------
    Adjusted Operating
     Earnings                $21,532   $15,804   $27,928     ($801)  $64,463
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                    Three months ended September 30,
    -------------------------------------------------------------------------
    ($ thousands)                                2009
    -------------------------------------------------------------------------
                              Meat      Agri-    Bakery  Unallocated  Consol-
                            Products  business  Products    costs     idated
                             Group     Group     Group

    Net earnings                                                     $22,457
    Non-controlling interest                                           2,537
    Income taxes                                                      10,466
    -------------------------------------------------------------------------
    Earnings from operations
     before income taxes                                              35,460
    Interest expense                                                  19,755
    Change in the fair value
     of non-designated
     interest rate swaps                                                   -
    -------------------------------------------------------------------------
    Earnings from operations
     before income taxes,
     interest expense and
     changes in the fair
     value of non-
     designated interest
     rate swaps               12,864    15,044    32,039    (4,732)   55,215
    Restructuring and other
     related costs             5,046       114       597     1,810     7,567
    Other income                 201       (96)      113        31       249
    -------------------------------------------------------------------------
    Adjusted Operating
     Earnings                $18,111   $15,062   $32,749   ($2,891)  $63,031
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                                     Nine months ended September 30,
    -------------------------------------------------------------------------
    ($ thousands)                                 2010
    -------------------------------------------------------------------------
                              Meat      Agri-    Bakery  Unallocated  Consol-
                            Products  business  Products    costs     idated
                             Group     Group     Group

    Net earnings                                                     ($4,357)
    Non-controlling interest                                           4,829
    Income taxes                                                       4,371
    -------------------------------------------------------------------------
    Earnings from operations
     before income taxes                                               4,843
    Interest expense                                                  49,497
    Change in the fair value
     of non-designated
     interest rate swaps                                              35,330
    -------------------------------------------------------------------------
    Earnings from operations
     before income taxes,
     interest expense and
     changes in the fair
     value of non-
     designated interest
     rate swaps                4,838    35,278    58,084    (8,530)   89,670
    Restructuring and other
     related costs            46,490       (62)   13,021     1,957    61,406
    Other income              (1,140)      886      (194)      (36)     (484)
    -------------------------------------------------------------------------
    Adjusted Operating
     Earnings                $50,188   $36,102   $70,911   ($6,609) $150,592
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                     Nine months ended September 30,
    -------------------------------------------------------------------------
    ($ thousands)                                 2009
    -------------------------------------------------------------------------
                              Meat      Agri-    Bakery  Unallocated  Consol-
                            Products  business  Products    costs     idated
                             Group     Group     Group

    Net earnings                                                     $30,227
    Non-controlling interest                                           6,403
    Income taxes                                                      16,245
    -------------------------------------------------------------------------
    Earnings from operations
     before income taxes                                              52,875
    Interest expense                                                  61,862
    Change in the fair value
     of non-designated
     interest rate swaps                                                   -
    -------------------------------------------------------------------------
    Earnings from operations
     before income taxes,
     interest expense and
     changes in the fair
     value of non-
     designated interest
     rate swaps                9,312    32,177    81,130    (7,882)  114,737
    Restructuring and other
     related costs            21,601     2,071     1,271     1,810    26,753
    Other income                 231      (730)   (2,142)     (578)   (3,219)
    -------------------------------------------------------------------------
    Adjusted Operating
     Earnings                $31,144   $33,518   $80,259   ($6,650) $138,271
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

Adjusted Earnings per Share

The following table reconciles Adjusted Earnings per Share to basic earnings per share as reported under Canadian GAAP in the unaudited interim period consolidated statements of earnings for the three- and nine-month periods ended as indicated below. Management believes this is the most appropriate basis on which to evaluate financial results as restructuring and other related costs and the change in the fair value of non-designated interest rate swaps are not representative of operational results.

    -------------------------------------------------------------------------
    ($ per share)                    Three months ended    Nine months ended
                                        September 30,         September 30,
    -------------------------------------------------------------------------
                                       2010       2009       2010       2009
    -------------------------------------------------------------------------
    Basic Earnings per Share         $(0.12)     $0.17     $(0.03)     $0.24
    -------------------------------------------------------------------------
    Restructuring and other
     related costs(i)                  0.27       0.04       0.33       0.15
    -------------------------------------------------------------------------
    Change in the fair value of
     non-designated interest
     rate swaps(ii)                    0.08          -       0.18          -
    -------------------------------------------------------------------------
    Adjusted Earnings per Share(iii)  $0.23      $0.21      $0.49      $0.39
    -------------------------------------------------------------------------

    (i)  Includes per share impact of restructuring and other related costs,
         net of tax and non-controlling interest.
    (ii) Includes per share impact of the change in fair value of
         non-designated interest rate swaps, net of tax. Management believes
         that it is appropriate to remove the impacts of these fair value
         adjustments when discussing the underlying operations of the
         business, as it provides shareholders with a more accurate
         representation of the underlying results of the business.
    (iii)Does not add due to rounding.


                  Consolidated Interim Financial Statements
                  (Expressed in Canadian dollars)

                  MAPLE LEAF FOODS INC.

                  Nine months ended September 30, 2010 and 2009



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

    -------------------------------------------------------------------------
                                           As at         As at         As at
                                    September 30, September 30,  December 31,
                                            2010          2009          2009
    -------------------------------------------------------------------------
                                      (Unaudited)   (Unaudited)
    ASSETS

    Current assets
      Cash and cash equivalents      $    10,303   $    88,790   $    29,316
      Accounts receivable                164,740       207,207       189,221
      Inventories                        343,678       354,460       331,781
      Income and other taxes
       recoverable                        20,641        17,081        18,067
      Future tax asset                     8,737        28,294         4,301
      Prepaid expenses and other
       assets                             17,403        26,116        15,328
      Assets held for sale                24,086        28,928        29,224
      -----------------------------------------------------------------------
                                     $   589,588   $   750,876   $   617,238

    Property and equipment             1,106,080     1,101,327     1,099,220

    Other long-term assets               336,642       333,175       328,063

    Future tax asset                      57,761        25,557        22,116

    Goodwill                             853,652       867,941       857,278

    Other intangible assets               96,160        99,810        97,713

    Assets held for sale                   1,835        36,742        35,836
    -------------------------------------------------------------------------
                                     $ 3,041,718   $ 3,215,428   $ 3,057,464
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities
      Bank indebtedness              $     8,070   $     4,357   $     4,247
      Accounts payable and accrued
       charges                           513,413       520,542       477,071
      Current portion of long-term
       debt                              385,377       363,546       206,147
      Other current liabilities           10,692        45,101        37,837
      Liabilities held for sale           10,230        12,210        12,111
      -----------------------------------------------------------------------
                                     $   927,782   $   945,756   $   737,413

    Long-term debt                       569,338       786,744       834,557

    Future tax liability                  49,064        45,592        27,851

    Other long-term liabilities          234,116       182,127       187,523

    Non-controlling interest              83,621        79,752        81,070

    Shareholders' equity               1,177,797     1,175,457     1,189,050
    -------------------------------------------------------------------------
                                     $ 3,041,718   $ 3,215,428   $ 3,057,464
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                        September 30,           September 30,
    (Unaudited)                     2010        2009        2010        2009
    -------------------------------------------------------------------------

    Sales                     $1,293,211  $1,296,597  $3,756,084  $3,896,699
    Cost of goods sold         1,103,115   1,103,724   3,224,348   3,368,411
    -------------------------------------------------------------------------
    Gross margin              $  190,096  $  192,873  $  531,736  $  528,288
    Selling, general and
     administrative expenses     125,633     129,842     381,144     390,017
    -------------------------------------------------------------------------
    Earnings from operations
     before the following:    $   64,463  $   63,031  $  150,592  $  138,271
    Restructuring and
     other related costs         (49,990)     (7,567)    (61,406)    (26,753)
    Change in fair value
     of non-designated
     interest rate swaps         (14,582)          -     (35,330)          -
    Other income (expense)           (47)       (249)        484       3,219
    -------------------------------------------------------------------------
    Earnings (loss) from
     operations before
     interest and income
     taxes                    $     (156) $   55,215  $   54,340  $  114,737
    Interest expense              16,757      19,755      49,497      61,862
    -------------------------------------------------------------------------
    Earnings (loss) from
     operations before
     income taxes             $  (16,913) $   35,460  $    4,843  $   52,875
    Income taxes                  (2,258)     10,466       4,371      16,245
    -------------------------------------------------------------------------
    Earnings (loss) from
     operations before
     non-controlling interest $  (14,655) $   24,994  $      472  $   36,630
    Non-controlling interest       1,423       2,537       4,829       6,403
    -------------------------------------------------------------------------
    Net earnings (loss)       $  (16,078) $   22,457  $   (4,357) $   30,227
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic earnings (loss)
     per share                $    (0.12) $     0.17  $    (0.03) $     0.24
    Diluted earnings (loss)
     per share                $    (0.12) $     0.17  $    (0.03) $     0.23

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

    Weighted average number
     of shares (millions)          135.5       131.0       135.2       128.2

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



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

    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                        September 30,           September 30,
    (Unaudited)                     2010        2009        2010        2009
    -------------------------------------------------------------------------

    Net earnings (loss)       $  (16,078) $   22,457  $   (4,357) $   30,227

    Other comprehensive
     income (loss)

      Change in accumulated
       foreign currency
       translation adjustment     (4,779)    (15,009)    (10,018)     (7,829)
      Change in unrealized
       derivative loss on
       cash flow hedges            1,100       1,353       3,265      14,174
    -------------------------------------------------------------------------
                              $   (3,679) $  (13,656) $   (6,753) $    6,345
    -------------------------------------------------------------------------
    Comprehensive income
     (loss)                   $  (19,757) $    8,801  $  (11,110) $   36,572
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statements of Retained Earnings
    (In thousands of Canadian dollars)

    -------------------------------------------------------------------------
                                                           Nine months ended
                                                                September 30,
    (Unaudited)                                             2010        2009
    -------------------------------------------------------------------------

    Retained earnings, beginning of period            $  344,839  $  314,649
    Net earnings (loss)                                   (4,357)     30,227
    Adoption of new accounting standard                        -        (207)
    Dividends declared ($0.12 per share;
     2009: $0.12 per share)                              (16,243)    (15,504)
    Premium on shares issued from Restricted
     Share Unit Trust                                     (2,665)          -

    -------------------------------------------------------------------------
    Retained earnings, end of period                  $  321,574  $  329,165
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                        September 30,           September 30,
    (Unaudited)                     2010        2009        2010        2009
    -------------------------------------------------------------------------

    CASH PROVIDED BY (USED IN):

    Operating activities
      Net earnings            $  (16,078) $   22,457  $   (4,357) $   30,227
      Add (deduct) items not
       affecting cash:
        Depreciation and
         amortization             34,356      36,637     108,154     113,915
        Stock-based compensation   4,440       4,551      13,321      13,664
        Non-controlling interest   1,423       2,537       4,829       6,403
        Future income taxes      (10,635)     (9,541)    (20,333)    (12,385)
        Loss (gain) on sale of
         property and equipment       83         313      (1,015)        477
        Gain on sale of
         investments                   -           -           -        (501)
        Amortization of
         terminated interest
         rate swap                   503         502       1,508       1,603
        Change in fair value
         of non-designated
         interest rate swaps      14,582           -      35,330           -
        Change in fair value
         of derivative
         financial instruments     3,382      (2,028)      1,180     (12,270)
      Decrease in net pension
       asset                       1,087          20       1,293       1,119
      Change in provision for
       restructuring and other
       related costs              43,678       2,946      47,903      15,850
      Other                       (2,096)     (3,843)       (821)     (9,170)
      Change in non-cash
       operating working
       capital                    42,955       2,464      34,732    (140,234)
    -------------------------------------------------------------------------
    Cash provided by
     operating activities     $  117,680  $   57,015  $  221,724  $    8,698
    -------------------------------------------------------------------------

    Financing activities
      Dividends paid          $   (5,432) $   (5,374) $  (16,243) $  (15,504)
      Dividends paid to non-
       controlling interest         (156)       (155)       (598)       (516)
      Net decrease in
       long-term debt            (81,770)   (132,682)   (108,379)   (165,877)
      Increase in share capital    3,234           -       3,274           -
      Purchase of treasury stock       -      (3,190)       (496)     (3,190)
      Increase in deferred
       financing costs               (63)          -      (1,757)          -
      Other                          971          78        (281)      2,806
    -------------------------------------------------------------------------
    Cash used in financing
     activities               $  (83,216) $ (141,323) $ (124,480) $ (182,281)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Investing activities
      Additions to property
       and equipment          $  (49,073) $  (29,705) $ (119,937) $ (123,392)
      Proceeds from sale of
       property and equipment         56         179       2,545      23,572
      Proceeds from sale of
       investments                     -           -           -       1,540
      Purchase of Canada Bread
       Shares                          -           -      (2,690)          -
      Other                           85         (17)          2        (328)
    -------------------------------------------------------------------------
    Cash used in investing
     activities               $  (48,932) $  (29,543) $ (120,080) $  (98,608)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Decrease in cash and
     cash equivalents         $  (14,468) $ (113,851) $  (22,836) $ (272,191)

    Net cash and cash
     equivalents, beginning
     of period                    16,701     198,284      25,069     356,624

    -------------------------------------------------------------------------
    Net cash and cash
     equivalents, end of
     period                   $    2,233  $   84,433  $    2,233  $   84,433
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net cash and cash
     equivalents is
     comprised of:
      Cash and cash
       equivalents            $   10,303  $   88,790  $   10,303  $   88,790
      Bank indebtedness           (8,070)     (4,357)     (8,070)     (4,357)

    -------------------------------------------------------------------------
    Net cash and cash
     equivalents, end of
     period                   $    2,233  $   84,433  $    2,233  $   84,433
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

    -------------------------------------------------------------------------
                                  Three months ended       Nine months ended
                                        September 30,           September 30,
    (Unaudited)                     2010        2009        2010        2009
    -------------------------------------------------------------------------

    Sales
      Meat Products Group     $  834,655  $  815,610  $2,418,570  $2,468,218
      Agribusiness Group          47,468      55,813     143,333     155,378
      Bakery Products Group      411,088     425,174   1,194,181   1,273,103
    -------------------------------------------------------------------------
                              $1,293,211  $1,296,597  $3,756,084  $3,896,699
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings from operations
     before restructuring and
     other related costs,
     change in fair value of
     non-designated interest
     rate swaps and other
     income (expense)
      Meat Products Group     $   21,532  $   18,111  $   50,188  $   31,144
      Agribusiness Group          15,804      15,062      36,102      33,518
      Bakery Products Group       27,928      32,749      70,911      80,259
      Non-allocated costs           (801)     (2,891)     (6,609)     (6,650)
    -------------------------------------------------------------------------
                              $   64,463  $   63,031  $  150,592  $  138,271
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Capital expenditures
      Meat Products Group     $   16,676  $   17,278  $   49,366  $   69,238
      Agribusiness Group           3,554       3,110      13,267       8,299
      Bakery Products Group       28,843       9,317      57,304      45,855
    -------------------------------------------------------------------------
                              $   49,073  $   29,705  $  119,937  $  123,392
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Depreciation and
     amortization
      Meat Products Group     $   16,693  $   18,542  $   55,480  $   58,151
      Agribusiness Group           4,025       4,004      12,349      12,077
      Bakery Products Group       13,638      14,091      40,325      43,687
    -------------------------------------------------------------------------
                              $   34,356  $   36,637  $  108,154  $  113,915
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                               As at       As at       As at
                                           September   September    December
                                            30, 2010    30, 2009    31, 2009
    -------------------------------------------------------------------------
                                          (Unaudited) (Unaudited)
    Total assets
      Meat Products Group                 $1,643,340  $1,701,854  $1,653,389
      Agribusiness Group                     275,160     285,499     287,057
      Bakery Products Group                  957,911     977,113     955,469
      Non-allocated assets                   165,307     250,962     161,549
    -------------------------------------------------------------------------
                                          $3,041,718  $3,215,428  $3,057,464
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Goodwill
      Meat Products Group                 $  442,124  $  450,004  $  442,943
      Agribusiness Group                      14,142      14,136      14,136
      Bakery Products Group                  397,386     403,801     400,199
    -------------------------------------------------------------------------
                                          $  853,652  $  867,941  $  857,278
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

SOURCE Maple Leaf Foods Inc.