Toronto, Apr 29, 2009 - Canada Bread Company, Limited today reported its financial results for the first quarter ended March 31, 2009.
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- Adjusted Operating Earnings increased 9% to $21.4M compared to last
year
- Adjusted Earnings per Share increased to $0.60 from $0.52
- Net earnings per share of $0.59 compared to $0.48 last year
Note: Adjusted Operating Earnings are defined as earnings from
operations before restructuring and other related costs and other
income. Adjusted Earnings per Share ("Adjusted EPS") are defined as
basic earnings per share adjusted for the impact of restructuring and
other related costs.
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"In line with the trend experienced late in 2008, the first quarter of 2009 continued to demonstrate a return to more stable and improved earnings, although margins were impacted by a decline in the Canadian dollar and its effect on wheat costs," said Richard Lan, President and CEO. "The improvement in the first quarter reflects actions we have taken to improve business efficiencies and pass through higher input costs as required. A higher value sales mix also contributed to results, and we continue to focus on innovation to provide consumers with appealing new product choices and accelerate growth."
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Financial Overview
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Sales for the first quarter increased 7.9% to $413.1 million compared to $382.9 million in the same period last year. Excluding acquisitions, sales increased by 5.3%, mostly as a result of price increases implemented across all North American bakery businesses in 2008 in response to escalating input costs and product mix improvements in the Fresh Bakery operations.
Earnings from operations before restructuring and other related costs ("Adjusted Operating Earnings") increased 9.2% to $21.4 million compared to $19.5 million last year. Net earnings for the quarter increased to $14.9 million compared to $12.2 million last year.
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The following is a summary of Adjusted EPS:
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First Quarter
Per share 2009 2008
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EPS $0.59 $0.48
Restructuring and other related costs $0.02 $0.04
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Adjusted EPS(i) $0.60 $0.52
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(i) This table does not add due to rounding
Business Segment Review
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Following is a summary of Adjusted Operating Earnings by business segment:
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First Quarter
($ millions) 2009 2008 Change
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Fresh Bakery $12.8 $12.7 1.0%
Frozen Bakery 8.5 6.9 24.5%
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$21.4(i) $19.5(i) 9.2%
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(i) This table does not add due to rounding
Fresh Bakery (Fresh bakery products, sweet goods, sandwiches, and
specialty fresh pasta and sauces)
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Fresh Bakery sales in the first quarter increased 10.9% to $263.0 million compared to $237.2 million last year mainly due to price increases taken in the first half of 2008, favourable sales mix and acquisitions. Excluding acquisitions, sales in Fresh Bakery increased 6.6% to $252.9 million.
Adjusted Operating Earnings in the quarter increased to $12.8 million compared to $12.7 million in the prior year. Price increases implemented in the first half of 2008, and better sales mix in the Fresh bakery operations and pasta business were the main contributors to improved margins in the quarter. Fresh Bakery margins recovered closer to long-term historical levels; however, margin recovery was partially mitigated by the weakening of the Canadian dollar which impacted the price of wheat in the first quarter of 2009. Additionally, prices for packaging and other ingredients remained higher than last year.
Fresh Bakery increased its investment in marketing and promotional activities in the first quarter of 2009 to support, among others, the national launch of Healthy Way(R) with ProCardio Recipe(TM) breads and fresh squares. Healthy Way(R) with ProCardio Recipe(TM) breads and fresh squares are the first line of Fresh Bakery products specifically targeting the heart health segment and broaden Dempster's(R) brand leadership in higher nutrition bakery products.
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Frozen Bakery (North American and U.K. frozen bakery products; including
frozen par-baked and specialty bakery products)
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Frozen Bakery sales for the quarter increased by 3.1% to $150.1 million from $145.6 million in the same period last year, driven mainly by price increases implemented in North America in 2008.
Adjusted Operating Earnings in the quarter increased to $8.5 million compared to $6.9 million in the first quarter of 2008. Earnings in the North American frozen bakery operations increased due to a combination of price increases implemented in 2008 and increased operational efficiencies. Lower distribution costs, the commissioning of the new bagel line in Roanoke, Virginia, in the first quarter of 2009 and the closure of the bagel facility in Toronto, Ontario, late in 2008 contributed to the operational improvements. Management is focused on achieving further efficiencies as the bagel line in Roanoke reaches planned production levels.
Earnings in the U.K. bakery operations declined in the quarter compared to last year due to a lower margin product mix as the effect of the economic recession has been more pronounced in the U.K. than in the Company's other operations. Also, increased promotional costs to restore bagel volumes reduced earnings. The bagel production line at the Rotherham plant continued to ramp up during the quarter, after a major oven fire that disrupted production through most of 2008. Production is now stabilized and Management is focused on increasing volumes to full capacity.
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Other Income
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In the first quarter of 2009, the Company received insurance proceeds of
$1.7 million (recorded in Other Income), mostly to cover business interruption
losses and operating impacts resulting from the oven fire in the U.K. in 2008.
Other Matters
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On April 28, 2009, Canada Bread Company, Limited declared a dividend of
$0.06 per share payable on July 2, 2009 to shareholders of record on June 5,
2009. Unless indicated otherwise, by the Company, in writing at or before the
time the dividend is paid, each dividend paid by the Corporation in 2009 or a
subsequent year is an eligible dividend for the purposes of the "Enhanced
Dividend Tax Credit System".
Canada Bread Company Limited, which is 89.8% owned by Maple Leaf Foods Inc., is a leading manufacturer and distributor of fresh bakery products, frozen par-baked products and fresh pasta and sauces. The Company had 2008 sales of $1.7 billion and employs approximately 8,500 people at its operations across North America and in the United Kingdom.
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Consolidated Interim Financial Statements
(Expressed in Canadian dollars)
CANADA BREAD COMPANY,
LIMITED
Three months ended March 31, 2009 and 2008
CANADA BREAD COMPANY, LIMITED
Consolidated Balance Sheets
(In thousands of Canadian dollars)
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As at As at As at
March 31, March 31, December 31,
2009 2008 2008
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(Unaudited) (Unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 10,826 $ - $ 11,721
Accounts receivable 57,619 80,649 57,079
Due from Maple Leaf Foods Inc. 2,500 - 54
Inventories 59,761 55,753 58,696
Future tax asset - current 5,612 19,059 5,388
Prepaid expenses and other
current assets 5,663 5,364 12,923
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$ 141,981 $ 160,825 $ 145,861
Property and equipment 417,381 411,323 417,150
Goodwill 406,573 402,806 404,484
Other intangible assets 20,045 13,787 17,451
Other long-term assets 10,298 9,503 9,964
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$ 996,278 $ 998,244 $ 994,910
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness $ 8,875 $ 10,457 $ 8,894
Accounts payable and accrued
charges 184,014 177,346 207,928
Due to Maple Leaf Foods Inc. - 5,226 -
Dividends payable 1,525 1,525 1,525
Income and other taxes payable 9,186 23,102 10,860
Current portion of long-term debt 36 76,900 41
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$ 203,636 $ 294,556 $ 229,248
Long-term debt 13,730 - 4,477
Future tax liability - non-current 36,402 34,105 36,043
Other long-term liabilities 17,006 13,825 16,802
Shareholders' equity 725,504 655,758 708,340
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$ 996,278 $ 998,244 $ 994,910
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CANADA BREAD COMPANY, LIMITED
Consolidated Statements of Earnings
(In thousands of Canadian dollars, except share amounts)
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Three months ended March 31,
(Unaudited) 2009 2008
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Sales $ 413,125 $ 382,869
Cost of goods sold 337,266 317,671
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Gross margin $ 75,859 $ 65,198
Selling, general and administrative expenses 54,509 45,654
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Earnings from operations before the following: $ 21,350 $ 19,544
Restructuring and other related costs (573) (1,273)
Other income 1,770 34
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Earnings before interest and income taxes $ 22,547 $ 18,305
Interest expense 1,493 1,758
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Earnings before income taxes $ 21,054 $ 16,547
Income taxes 6,172 4,336
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Net earnings $ 14,882 $ 12,211
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Basic and diluted earnings per share $ 0.59 $ 0.48
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Weighted average number of shares (millions) 25.4 25.4
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CANADA BREAD COMPANY, LIMITED
Consolidated Statements of Comprehensive Income
(In thousands of Canadian dollars)
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Three months ended March 31,
(Unaudited) 2009 2008
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Net earnings $ 14,882 $ 12,211
Other comprehensive income 3,794 10,029
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Comprehensive income $ 18,676 $ 22,240
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Consolidated Statements of Retained Earnings
(In thousands of Canadian dollars, except share amounts)
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Three months ended March 31,
(Unaudited) 2009 2008
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Retained earnings, beginning of period $ 587,163 $ 528,327
Net earnings 14,882 12,211
Dividends declared ($0.06 per share; 2008:
$0.06 per share) (1,525) (1,525)
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Retained earnings, end of period $ 600,520 $ 539,013
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CANADA BREAD COMPANY, LIMITED
Consolidated Statements of Cash Flows
(In thousands of Canadian dollars)
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Three months ended March 31,
(Unaudited) 2009 2008
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CASH PROVIDED BY (USED IN):
Operating activities
Net earnings $ 14,882 $ 12,211
Add (deduct) items not affecting cash:
Depreciation and amortization 14,077 12,819
Future income taxes 76 927
Loss (gain) on sale of property and
equipment 192 (15)
Asset impairments and change in provision
for restructuring and other related costs (540) 742
Other (643) 1,512
Change in non-cash operating working capital (20,993) (27,620)
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Cash provided by operating activities $ 7,051 $ 576
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Financing activities
Dividends paid $ (1,525) $ (1,525)
Net increase (decrease) in long-term debt 9,248 (30,748)
Settlement of cross currency interest rate
swap with Maple Leaf - 80,586
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Cash provided by financing activities $ 7,723 $ 48,313
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Investing activities
Additions to property and equipment $ (14,842) $ (8,628)
Proceeds from sale of property and equipment 392 15
Acquisition of businesses - net of cash
acquired - (43,536)
Change in intangible assets 37 (199)
Other (1,237) -
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Cash used in investing activities $ (15,650) $ (52,348)
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Decrease in cash and cash equivalents $ (876) $ (3,459)
Net cash and cash equivalents, beginning
of period 2,827 (6,998)
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Net cash and cash equivalents, end of period $ 1,951 $ (10,457)
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