Canada Bread Reports Results for Second Quarter 2009
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Source: Canada Bread Company, Limited
29/07/2009
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Toronto, Jul 29, 2009 - Canada Bread Company, Limited today reported its financial results for the second quarter ended June 30, 2009.
- Net earnings per share of $0.89 compared to $0.26 last year
- Adjusted Operating Earnings increased to $33.1 million from
$12.4 million
- North American bakery margins improved due to a decline in commodity
prices
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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"We are very pleased with the earnings growth we achieved in the second quarter" said Richard Lan, President and CEO. "With margins improved after the commodity price hyperinflation of last year, we are now focused on accelerating our growth through new product innovation, targeting expansion in new high growth categories and pursuing improvements that will bring increased efficiency through the supply chain."
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Financial Overview
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Sales for the second quarter decreased by 0.3% to $435.9 million compared to $437.4 million last year due to a moderate change in mix from specialty to staple products and lower volumes in the U.S. and U.K.
Earnings from operations before restructuring and other related costs and other income ("Adjusted Operating Earnings") increased to $33.1 million in the quarter compared to $12.4 million last year, while net earnings increased to $22.5 million compared to $6.5 million last year. The financial results for the second quarter 2008 were significantly below historical levels due to an unprecedented spike in input costs including flour, dairy and energy which impacted profitability.
The following is a summary of Adjusted Earnings per Share:
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Second quarter Year to Date
Per share 2009 2008 2009 2008
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EPS $0.89 $0.26 $1.47 $0.74
Restructuring and other related
costs $0.00 $0.04 $0.02 $0.08
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Adjusted EPS (i) $0.89 $0.30 $1.49 $0.81
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(i) Does not add due to rounding.
Business Segment Review
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Following is a summary of Adjusted Operating Earnings by business segment:
($ millions) Second Quarter Year To Date
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2009 2008 Change 2009 2008 Change
---- ---- ------ ---- ---- ------
Fresh Bakery $25.4 $12.5 103.7% $38.2 $25.1 51.9%
Frozen Bakery 7.8 (0.1) n/a 16.3 6.8 139.8%
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Adjusted
Operating
Earnings (i) $33.1 $12.4 167.3% $54.5 $31.9 70.6%
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(i) 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 second quarter increased 0.9% to $290.3 million compared to $287.6 million in the same period last year, mainly driven by favourable sales mix.
Adjusted Operating Earnings increased to $25.4 million in the second quarter compared to $12.5 million last year. The fresh bakery and pasta operations recorded improved margins as a result of lower commodity prices; however, this benefit was partly mitigated by a weaker Canadian dollar, which increased the cost of U.S. dollar priced flour and other ingredients.
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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 decreased by 2.8% to $145.7 million from $149.8 million in the same period last year, due to a moderate change in mix from specialty to staple products and lower volumes.
Adjusted Operating Earnings in the quarter increased to $7.8 million compared to a loss of $0.1 million last year. North American bakery operations continued to realize improved margins due to lower commodity prices, mostly wheat and fuel, and lower utility costs. Earnings from the U.K. bakery operations were largely consistent with last year. Sales of bagels were restored to levels achieved prior to the oven fire at the Rotherham plant in early 2008 and contributed to improved mix. However, margin improvement achieved in the quarter was offset by higher marketing and promotional expenses to support growth in the bagel market.
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Other Income
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In the quarter, other income was $0.8 million compared to $1.5 million
last year, mostly comprised of insurance proceeds received to cover business
interruption losses resulting from the oven fire in the U.K. in 2008.
Other Matters
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On July 28, 2009, Canada Bread Company, Limited declared a dividend of $0.06 per share payable on October 1, 2009 to shareholders of record on September 8, 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".
Consolidated Financial Statements
(Expressed in Canadian dollars)
CANADA BREAD COMPANY,
LIMITED
Three and six months ended June 30, 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
June 30, June 30, December 31,
2009 2008 2008
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(Unaudited) (Unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 21,124 $ 8,149 $ 11,721
Accounts receivable 68,020 89,722 57,079
Due from Maple Leaf Foods Inc. 76 - 54
Inventories 58,140 58,826 58,696
Future tax asset 5,436 19,367 5,388
Prepaid expenses 6,571 8,167 12,923
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$ 159,367 $ 184,231 $ 145,861
Property and equipment 410,456 412,036 417,150
Other long-term assets 10,453 10,533 9,964
Goodwill 405,877 401,531 404,484
Other intangible assets 20,245 13,356 17,451
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$ 1,006,398 $ 1,021,687 $ 994,910
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness $ 9,511 $ 10,092 $ 8,894
Accounts payable and accrued
charges 179,756 188,244 207,928
Due to Maple Leaf Foods Inc. - 6,213 -
Dividends payable 1,525 1,525 1,525
Income and other taxes payable 12,576 18,555 10,860
Current portion of long-term debt 42 90,272 41
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$ 203,410 $ 314,901 $ 229,248
Long-term debt 14,997 - 4,477
Future tax liability 35,726 33,492 36,043
Other long-term liabilities 8,623 13,317 16,802
Shareholders' equity 743,642 659,977 708,340
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$ 1,006,398 $ 1,021,687 $ 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 Six months ended
June 30, June 30,
(Unaudited) 2009 2008 2009 2008
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Sales $ 435,918 $ 437,418 $ 849,043 $ 820,287
Cost of goods sold 350,578 373,381 687,844 691,052
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Gross margin $ 85,340 $ 64,037 $ 161,199 $ 129,235
Selling, general and
administrative
expenses 52,199 51,639 106,708 97,293
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Earnings from
operations before the
following: $ 33,141 $ 12,398 $ 54,491 $ 31,942
Restructuring and
other related costs (101) (1,419) (674) (2,692)
Other income 772 1,541 2,542 1,575
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Earnings before
interest and income
taxes $ 33,812 $ 12,520 $ 56,359 $ 30,825
Interest expense 1,814 2,077 3,307 3,835
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Earnings before income
taxes $ 31,998 $ 10,443 $ 53,052 $ 26,990
Income taxes 9,461 3,905 15,633 8,241
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Net earnings $ 22,537 $ 6,538 $ 37,419 $ 18,749
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Basic and diluted
earnings per share $ 0.89 $ 0.26 $ 1.47 $ 0.74
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Weighted average
number of shares
(millions) 25.4 25.4 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 Six months ended
June 30, June 30,
(Unaudited) 2009 2008 2009 2008
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Net earnings $ 22,537 $ 6,538 $ 37,419 $ 18,749
Other comprehensive
income (loss) (2,874) (794) 920 9,235
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Comprehensive income $ 19,663 $ 5,744 $ 38,339 $ 27,984
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Consolidated Statements of Retained Earnings
(In thousands of Canadian dollars, except per share amounts)
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Six months ended
June 30,
(Unaudited) 2009 2008
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Retained earnings, beginning of period $ 587,163 $ 528,327
Net earnings 37,419 18,749
Dividends declared ($0.12 per share; 2008:
$0.12 per share) (3,050) (3,050)
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Retained earnings, end of period $ 621,532 $ 544,026
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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 Six months ended
June 30, June 30,
(Unaudited) 2009 2008 2009 2008
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CASH PROVIDED BY (USED IN):
Operating activities
Net earnings $ 22,537 $ 6,538 $ 37,419 $ 18,749
Add (deduct) items
not affecting cash:
Depreciation and
amortization 14,078 14,182 28,155 27,001
Future income
taxes (872) (1,350) (796) (423)
Loss on sale of
property and
equipment 138 188 330 173
Asset impairments
and change in
provision for
restructuring and
other related
costs (433) 1,175 (974) 1,917
Amortization of
terminated
interest rate
swap 645 - 645 -
Other (1,388) (207) (2,031) 1,305
Change in non-cash
operating working
capital (7,096) (7,285) (28,088) (34,905)
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Cash provided by
operating activities $ 27,609 $ 13,241 $ 34,660 $ 13,817
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Financing activities
Dividends paid (1,525) (1,525) (3,050) (3,050)
Net increase
(decrease) in
long-term debt 1,272 13,371 10,520 (17,377)
Settlement of
cross-currency
interest rate swap
with Maple Leaf
Foods Inc. (8,502) - (8,502) 80,586
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Cash provided by (used
in) financing
activities $ (8,755) $ 11,846 $ (1,032) $ 60,159
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Investing activities
Additions to
property and
equipment (9,524) (17,242) (24,366) (25,870)
Proceeds from sale
of property and
equipment 77 517 469 532
Acquisition of
business, - net of
cash acquired - (8) - (43,544)
Other 255 160 (945) (39)
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Cash used in investing
activities $ (9,192) $ (16,573) $ (24,842) $ (68,921)
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Increase in cash and
cash equivalents 9,662 8,514 8,786 5,055
Net cash and cash
equivalents,
beginning of period 1,951 (10,457) 2,827 (6,998)
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Net cash and cash
equivalents, end of
period $ 11,613 $ (1,943) $ 11,613 $ (1,943)
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CANADA BREAD COMPANY, LIMITED
Segmented Financial Information
(In thousands of Canadian dollars)
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Three months ended Six months ended
June 30, June 30,
(Unaudited) 2009 2008 2009 2008
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Sales
Fresh Bakery $ 290,258 $ 287,638 $ 553,261 $ 524,862
Frozen Bakery 145,660 149,780 295,782 295,425
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$ 435,918 $ 437,418 $ 849,043 $ 820,287
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Earnings from
operations before
restructuring and
other related costs
Fresh Bakery $ 25,379 $ 12,457 $ 38,197 $ 25,146
Frozen Bakery 7,762 (59) 16,294 6,796
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$ 33,141 $ 12,398 $ 54,491 $ 31,942
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Additions to property
and equipment
Fresh Bakery $ 5,703 $ 9,606 $ 11,431 $ 11,173
Frozen Bakery 3,821 7,636 12,935 14,697
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$ 9,524 $ 17,242 $ 24,366 $ 25,870
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Depreciation and
amortization
Fresh Bakery $ 6,911 $ 7,472 $ 14,059 $ 13,852
Frozen Bakery 7,167 6,710 14,096 13,149
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$ 14,078 $ 14,182 $ 28,155 $ 27,001
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As at As at As at
June 30, June 30, December 31,
2009 2008 2008
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(Unaudited) (Unaudited)
Total assets
Fresh Bakery $ 443,964 $ 465,250 $ 440,733
Frozen Bakery 516,077 521,853 523,843
Non-allocated assets 46,357 34,584 30,334
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$ 1,006,398 $ 1,021,687 $ 994,910
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Goodwill
Fresh Bakery $ 155,962 $ 155,616 $ 156,268
Frozen Bakery 249,915 245,915 248,216
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$ 405,877 $ 401,531 $ 404,484
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