TORONTO, Ontario, Oct. 27, 2011 /PRNewswire/ - Canada Bread Company, Limited CBY today reported its financial results for the third quarter ended September 30, 2011.  Third quarter highlights include:

• Adjusted Operating Earnings⁽¹⁾ of $31.8 million were consistent with last year.
• Adjusted EPS⁽²⁾ increased to $1.24 (2010: $0.87), including $0.38 per share of a tax adjustment for a prior acquisition.
• Net earnings were $30.3 million, and included $1.6 million in pre-tax restructuring and other related costs related to network optimization initiatives, compared to $14.3 million last year.

"While our volumes increased in the quarter we continue to feel the impact of high raw material costs, which we largely offset through cost reductions and improved operating efficiencies," said Richard Lan, President and CEO. "We had excellent success with the commissioning of our new scale fresh bakery in Hamilton, Ontario in July, a major endeavour which was executed seamlessly - on time and on budget. Our U.K. business is also benefiting from manufacturing changes to focus on core categories and increase profitability. As commodity markets stabilize, we will continue to seek opportunities to drive volume and margin growth through reduced costs, innovation and product sales mix."

(1): Adjusted Operating Earnings are defined as earnings from operations before restructuring and other related costs and other income (expense).

(2): Adjusted Earnings per Share ("Adjusted EPS") are defined as basic earnings per share adjusted for the impact of restructuring and other related costs, net of tax.

Please refer to the section entitled Reconciliation of Non-IFRS Financial Measures in this news release.

Financial Overview

Sales for the third quarter increased to $417.2 million compared to $411.4 million last year.  After adjusting for the sale of the Company's fresh sandwich product line in February 2011 and currency translation on U.K. and U.S. sales from a stronger Canadian dollar, sales increased by 5% compared to last year, mostly due to price increases implemented in the first half of 2011.

Adjusted Operating Earnings for the third quarter were $31.8 million compared to $32.8 million in the prior year. The Company experienced some margin compression, as price increases implemented earlier in the year were not sufficient to fully offset the impact of a continued rise in raw material costs. Reduced costs resulting from operating efficiencies and lower selling, general and administrative expenses helped mitigate this impact. 

Adjusted Earnings per Share for the third quarter increased to $1.24 from $0.87 last year, and included $9.8 million ($0.38 per share) related to a tax adjustment associated with a prior acquisition.

Business Segment Review

The following table summarizes sales by business segment:

(Unaudited)						Third Quarter						Year-to-Date
($ thousands)						2011			2010			2011			2010
Fresh Bakery						$287,923			$285,232			$825,372			$824,951
Frozen Bakery						129,248			126,132			369,804			370,407
Total Sales						$417,171			$411,364			$1,195,176			$1,195,358

The following table summarized Adjusted Operating Earnings by business segment:

(Unaudited)						Third Quarter						Year-to-Date
($ thousands)						2011			2010			2011			2010
Fresh Bakery						$29,198			$30,633			$80,394			$79,316
Frozen Bakery						2,565			2,120			3,196			4,796
Adjusted Operating Earnings						$31,763			$32,753			$83,590			$84,112

Fresh Bakery

Includes fresh bakery products, including breads, rolls, bagels, sweet goods, and fresh pasta and sauces sold to retail, foodservice and convenience channels. It includes national brands such as Dempster's^® and Olivieri^® and many leading regional brands.

Fresh Bakery sales for the third quarter of $287.9 million were largely consistent with last year.  After adjusting for the sale of the Company's fresh sandwich product line, sales increased 5%, primarily benefiting from price increases implemented in the first half of 2011. Sales volumes in Fresh Bakery improved slightly due to increased retail sales volumes.

Adjusted Operating Earnings were $29.2 million compared to $30.6 million last year. During the quarter, margin compression resulting from price increases implemented in the first half of 2011 that were not sufficient to fully offset the continued rise in wheat cost was largely mitigated by cost reduction initiatives and lower promotional expenses.  During the quarter the Company also benefited from the sale of its fresh sandwich product line in February 2011.

During the quarter, the Fresh Bakery business recorded approximately $2.3 million of duplicative overhead costs, as the Company continues to operate three sub-scale bakeries as it gradually transitions production to its newly commissioned fresh bakery in Hamilton, Ontario, which officially opened on September 28, 2011. Production lines for rolls and breads are now in operation, and another two lines are planned to start commercial production by the end of 2011.  The final four lines, including flat breads, are planned for 2012. The Company plans to gradually transfer production from three bakeries in the Greater Toronto Area, and proceed with their closures between the end of 2011 through to early 2013.

Frozen Bakery

Includes frozen bakery products, including frozen par-baked bakery products, specialty and artisan breads, and bagels sold to retail, foodservice and convenience channels in North America and the U.K. It includes national brands such as Tenderflake^® and New York Bakery Co^TM.

Frozen Bakery sales for the third quarter increased 3% to $129.2 million from $126.1 million last year.  After adjusting for the impact of currency translation on sales in the U.S. and U.K., sales increased 5%, predominantly as a result of price increases implemented earlier in 2011. Sales volumes were slightly lower than last year, mainly due to a modest decline in North American frozen bakery sales volumes. In the U.K. operations, sales volumes increased benefiting from continued growth in bagel sales.

Adjusted Operating Earnings in Frozen Bakery for the third quarter increased to $2.6 million from $2.1 million last year largely driven by improved margins in the U.K. bakery operations. Earnings benefited from price increases implemented during the first half of the year and efficiency gains from the closure of the North American frozen bakery in Laval, Quebec, as well as the consolidation of production in the U.K.  These benefits were partly offset by the impact of higher raw material costs.

Other Matters

On October 26, 2011 Canada Bread Company, Limited declared a dividend of $0.20 per share payable on January 3, 2012 to shareholders of record at the close of business on December 8, 2011.  Unless indicated otherwise by the Company in writing on or before the time the dividend is paid, these dividends will be considered an eligible dividend for the purposes of the "Enhanced Dividend Tax Credit System".

Reconciliation of Non-IFRS Financial Measures

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

Adjusted Operating Earnings

The following table reconciles earnings from operations before restructuring and other related costs and other income (expense) to net earnings as reported under IFRS in the unaudited condensed consolidated interim statements of earnings for the three 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 and other income (expense) are not representative of operational results during the period.

(Unaudited)						Three months ended September 30, 2011
($ thousands)						Fresh Bakery			Frozen Bakery				Consolidated
Net earnings													$ 30,256
Income taxes													(74)
Earnings from operations before income taxes													$ 30,182
Interest expense													269
Earnings from operations before interest and income taxes						$ 28,658			$ 1,793				$ 30,451
Other Income						86			(372)				(286)
Restructuring and other related costs						454			1,144				1,598
Adjusted Operating Earnings(i)						$ 29,198			$  2,565				$ 31,763

(i) may not add due to rounding

(Unaudited)						Three months ended September 30, 2010
($ thousands) (i)						Fresh Bakery			Frozen Bakery			Consolidated
Net earnings												$ 14,313
Income taxes												7,172
Earnings from operations before income taxes												$ 21,485
Interest expense												823
Earnings from operations before interest and income taxes						$ 20,471			$  1,837			$ 22,308
Other Income						(67)			-			(67)
Restructuring and other related costs						10,229			283			10,512
Adjusted Operating Earnings						$ 30,633			$  2,120			$ 32,753

(i) May not add due to rounding

Adjusted Earnings per Share

The following table reconciles Adjusted Earnings per Share to basic earnings per share as reported under IFRS in the unaudited condensed consolidated interim 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 are not representative of operational results.

(Unaudited)						Three months ended September 30,						Nine months ended September 30,
($ per share)						2011			2010			2011			2010
Basic earnings per share						$  1.19			$  0.56			$  1.74			$  1.90
Restructuring and other related costs(i)						0.05			0.30			1.02			0.38
Adjusted Earnings per Share (ii)						$  1.24			$  0.87			$  2.76			$  2.27

(i) Includes per share impact of restructuring and other related costs, net of tax.
(ii) 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 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, objectives, expectations, anticipations, estimates and intentions. Specific forward-looking statements in this document include, but are not limited to, statements concerning expectations regarding actions to reduce costs and improve efficiencies, restore volumes and/or increase prices, timing of promotional investment, improving business trends in 2011, 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 statements. These statements are not guarantees of future performance and involve assumptions and risks and uncertainties that are difficult to predict.

In particular, these forward-looking statements are based on a variety of factors and assumptions that are discussed throughout this document. In addition, 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, United States and United Kingdom economies; the rate of exchange of the Canadian dollar to the U.S. dollar and British pound; 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; 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 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 in such forward-looking statements are discussed in more detail under the heading "Risk Factors" in the Company's Management's Discussion and Analysis for the year ended December 31, 2010 and are updated each quarter in the Management's Discussion and Analysis, which are available on SEDAR at www.sedar.com. The reader should review such sections in detail. 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.

Additional information concerning the Company, including the Company's Annual Information Form, is available on SEDAR at www.sedar.com.

Canada Bread Company Limited, which is 90% owned by Maple Leaf Foods Inc. MFI, is a leading manufacturer and distributor of fresh bakery products, frozen par-baked products and fresh pasta and sauces. The Company had 2010 sales of $1.6 billion and employs approximately 7,500 people at its operations across North America and in the United Kingdom.

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

CANADA BREAD COMPANY, LIMITED

Three and nine months ended September 30, 2011 and 2010

CANADA BREAD COMPANY, LIMITED
Consolidated Balance Sheets
(In thousands of Canadian dollars)
(Unaudited)

					As at				As at				As at
					September 30,				September 30,				December 31,
					2011				2010				2010
ASSETS
Current assets
	Cash and cash equivalents			$	35,731			$	106,961			$	84,401
	Accounts receivable				49,542				133,840				29,773
	Due from Maple Leaf Foods Inc.				426				1,361				-
	Note receivable				70,507				-				59,159
	Inventories				62,721				56,046				55,477
	Prepaid expenses and other assets				8,154				7,539				4,516
	Income and other taxes recoverable				14,442				-				-
				$	241,523			$	305,747			$	233,326
	Property and equipment				421,431				387,484				387,603
	Investment property				8,537				3,829				3,743
	Employee benefits				2,186				1,035				-
	Other long-term assets				944				616				828
	Deferred tax asset				14,418				9,293				9,543
	Goodwill				268,264				266,174				264,276
	Other intangible assets				13,348				15,125				13,626
	Total assets			$	970,651			$	989,303			$	912,945
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
	Bank indebtedness			$	-			$	8,070			$	7,777
	Accounts payable and accruals				191,166				253,648				171,742
	Provisions				19,117				12,438				13,068
	Due to Maple Leaf Foods Inc.				-				-				5,336
	Dividends payable				5,083				1,525				1,525
	Income and other taxes payable				-				13,049				3,248
	Current portion of long-term debt				2,449				-				2,332
				$	217,815			$	288,730			$	205,028
	Long-term debt				1,697				3,117				1,629
	Deferred tax liability				24,469				25,661				24,188
	Employee benefits				54,412				28,592				37,491
	Other long-term liabilities				5,286				6,765				6,240
	Total liabilities			$	303,679			$	352,865			$	274,576
Shareholders' Equity
Share capital				$	142,965			$	142,965			$	142,965
Retained earnings					528,502				506,000				509,500
Accumulated other comprehensive loss					(4,495)				(12,527)				(14,096)
Total shareholders' equity				$	666,972			$	636,438			$	638,369
Total liabilities and shareholders' equity				$	970,651			$	989,303			$	912,945

 

CANADA BREAD COMPANY, LIMITED
Consolidated Statements of Earnings
(In thousands of Canadian dollars, except share amounts)
(Unaudited)

			Three months ended								Nine months ended
			September 30,								September 30,
				2011				2010				2011				2010
Sales			$	417,171			$	411,364			$	1,195,176			$	1,195,358
Cost of goods sold				335,174				324,497				956,389				948,390
Gross margin			$	81,997			$	86,867			$	238,787			$	246,968
Selling, general and administrative expenses				50,234				54,114				155,197				162,856
Earnings from operations before the following:			$	31,763			$	32,753			$	83,590			$	84,112
Restructuring and other related costs				(1,598)				(10,512)				(34,195)				(13,021)
Other income				286				67				364				194
Earnings from operations before interest and income taxes			$	30,451			$	22,308			$	49,759			$	71,285
Interest expense				269				823				872				2,679
Earnings from operations before income taxes			$	30,182			$	21,485			$	48,887			$	68,606
Income taxes				(74)				7,172				4,693				20,375
Net earnings			$	30,256			$	14,313			$	44,194			$	48,231
Earnings per share attributable to common shareholders
Basic and diluted earnings per share			$	1.19			$	0.56			$	1.74			$	1.90
Weighted average number of shares (millions)				25.4				25.4				25.4				25.4

CANADA BREAD COMPANY, LIMITED
Consolidated Statements of Comprehensive Income (Loss)
(In thousands of Canadian dollars)
(Unaudited)

				Three months ended								Nine months ended
				September 30,								September 30,
(Unaudited)					2011				2010				2011				2010
Net earnings				$	30,256			$	14,313			$	44,194			$	48,231
Other comprehensive income (loss)
	Change in accumulated foreign currency translation adjustment				14,070				(7,062)				8,554				(8,549)
	Change in unrealized gains and losses on cash flow hedges				1,902				274				1,047				1,656
	Change in actuarial gains and losses				(13,500)				-				(13,500)				-
				$	2,472			$	(6,788)			$	(3,899)			$	(6,893)
Comprehensive income				$	32,728			$	7,525			$	40,295			$	41,338

CANADA BREAD COMPANY, LIMITED
Consolidated Statements of Changes in Shareholder's Equity
(In thousands of Canadian dollars)
(Unaudited)

(Unaudited)					Share capital				Retained earnings				Total accumulated other comprehensive loss				Total shareholders' equity
Balance at January 1, 2011				$	142,965			$	509,500			$	(14,096)			$	638,369
	Net earnings				-				44,194				-				44,194
	Other comprehensive income (loss)				-				(13,500)				9,601				(3,899)
	Dividends declared ($0.46 per share)				-				(11,692)				-				(11,692)
Balance at September 30, 2011				$	142,965			$	528,502			$	(4,495)			$	666,972

(Unaudited)					Share capital				Retained earnings				Total accumulated other comprehensive loss				Total shareholders' equity
Balance at January 1, 2010				$	142,965			$	462,343			$	(5,634)			$	599,674
	Net earnings				-				48,231				-				48,231
	Other comprehensive loss				-				-				(6,893)				(6,893)
	Dividends declared ($0.18 per share)				-				(4,574)				-				(4,574)
Balance at September 30, 2010				$	142,965			$	506,000			$	(12,527)			$	636,438

 

CANADA BREAD COMPANY, LIMITED
Consolidated Statements of Cash Flows
(In thousands of Canadian dollars)
(Unaudited)

								Three months ended					Nine months ended
								September 30,					September 30,
								2011			2010			2011			2010
CASH PROVIDED BY (USED IN):
Operating activities
	Net earnings						$	30,256		$	14,313		$	44,194		$	48,231
	Add (deduct) items not affecting cash:
		Depreciation and amortization						11,432			13,110			35,046			38,222
		Deferred income taxes						3,766			(4,373)			(292)			(6,130)
		Income tax current						(3,107)			10,441			5,322			25,401
		Interest expense						269			823			872			2,679
		Loss (gain) on sale of property and
			equipment					267			(62)			268			(109)
		Asset impairments and change in
			provision for restructuring and other
			related costs					(1,920)			9,746			24,280			10,093
	Income taxes paid (net of refunds)							(4,487)			(7,750)			(21,887)			(25,598)
	Interest paid							(437)			(295)			(795)			(1,017)
	Other							2,845			1,770			257			861
	Change in non-cash operating
			working capital					9,761			6,950			(32,892)			4,113
Cash provided by operating activities							$	48,645		$	44,673		$	54,373		$	96,746
Financing activities
	Dividends paid						$	(8,642)		$	(1,525)		$	(11,692)		$	(4,574)
	Net increase in long-term debt							-			697			-			570
Cash used in financing activities							$	(8,642)		$	(828)		$	(11,692)		$	(4,004)
Investing activities
	Additions to long term assets						$	(25,087)		$	(25,778)		$	(88,715)		$	(47,888)
	Capitalization of interest expense to
		long term assets						-			(126)			(119)			(158)
	Proceeds from sale of long term assets							(148)			55			5,294			740
	Change in intangible assets							292			-			(34)			-
	Other							-			91			-			4
Cash used in investing activities							$	(24,943)		$	(25,758)		$	(83,574)		$	(47,302)
Increase (decrease) in cash and
	cash equivalents						$	15,060		$	18,087		$	(40,893)		$	45,440
Net cash and cash equivalents,
	beginning of period							20,671			80,804			76,624			53,451
Net cash and cash equivalents, end of period							$	35,731		$	98,891		$	35,731		$	98,891
Net cash and cash equivalents is comprised of:
Cash and cash equivalents							$	35,731		$	106,961		$	35,731		$	106,961
Bank indebtedness								-			(8,070)			-			(8,070)
Net cash and cash equivalents, end of period							$	35,731		$	98,891		$	35,731		$	98,891

 

 

CANADA BREAD COMPANY, LIMITED
Segmented Financial Information
(In thousands of Canadian dollars)
(Unaudited) 

						Three months ended						Nine months ended
						September 30,						September 30,
						2011			2010			2011			2010
Sales
	Fresh Bakery				$	287,923		$	285,232		$	825,372		$	824,951
	Frozen Bakery					129,248			126,132			369,804			370,407
					$	417,171		$	411,364		$	1,195,176		$	1,195,358
Earnings from operations before
	restructuring and other related
	costs and other income
		Fresh Bakery			$	29,198		$	30,633		$	80,394		$	79,316
		Frozen Bakery				2,565			2,120			3,196			4,796
					$	31,763		$	32,753		$	83,590		$	84,112
Capital expenditures
	Fresh Bakery				$	19,362		$	19,818		$	74,995		$	33,309
	Frozen Bakery					5,725			5,960			13,720			14,579
					$	25,087		$	25,778		$	88,715		$	47,888
Depreciation and amortization
	Fresh Bakery				$	6,376		$	7,330		$	19,445		$	20,636
	Frozen Bakery					5,056			5,780			15,601			17,586
					$	11,432		$	13,110		$	35,046		$	38,222

						September 30,			September 30,			December 31,
						2011			2010			2010
Total assets
	Fresh Bakery					$	516,818		$	476,959		$	437,976
	Frozen Bakery						383,728			388,305			372,211
	Non-allocated assets						70,105			124,039			102,758
						$	970,651		$	989,303		$	912,945
Goodwill
	Fresh Bakery					$	125,892		$	125,892		$	125,892
	Frozen Bakery						142,372			140,282			138,384
						$	268,264		$	266,174		$	264,276

 

 

 

 

SOURCE Canada Bread Company, Limited