Canada Bread Reports Results for Fourth Quarter and Fiscal Year 2009
TORONTO, Feb. 24 /CNW/ - Canada Bread Company, Limited (TSX: CBY) today reported its financial results for the fourth quarter and year ended December 31, 2009. Fourth quarter highlights include:
- Adjusted Operating Earnings decreased to $29.1 million from
$33.8 million
- Basic EPS decreased to $0.59 compared to $1.04 last year
- Full year Adjusted Operating Earnings increased to $120.5 million
from $97.6 million
Note: Adjusted Operating Earnings are defined as earnings from
operations before restructuring and other related costs and other
income (expense). 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.
"As a company, our goal is to deliver higher levels of growth by expanding into new categories and markets," said Richard Lan, President and CEO. "The earnings decline in the fourth quarter reflects important investments in new products to drive growth. These included expanding our sweet goods with Cadbury(TM) Snack Cakes, and launching Dempster's(R) OvenFresh(TM) ready-to-bake premium dinner breads. For the year 2009, we achieved solid earnings and margin recovery following the sharp commodity cost increases of the previous year. In 2010, we are continuing to place a strong emphasis on innovation to support our leading brands and market shares and investing in our plant network, such as construction of the new Ontario bakery, to increase scale and efficiency."
Financial Overview
------------------
Sales for the fourth quarter declined to $432.2 million from $445.0 million in the prior year, mainly due to unfavourable currency translation of the Company's sales in the U.K. and U.S. as the Canadian dollar appreciated against the British pound and U.S. dollar compared to last year. Volume increases in the fresh and frozen North American bakeries and pasta business were offset by continued lower sales volume in the U.K. bakery operations and the fresh sandwiches business in Canada. Sales for the full year were consistent at $1.7 billion.
Adjusted Operating Earnings in the quarter decreased to $29.1 million from $33.8 million but increased from $97.6 million to $120.5 million for the full year. The fourth quarter decline was mostly due to the timing of promotional activities, higher marketing and other expenses mostly in the Fresh Bakery segment. Additionally, a short-term increase in trade investment in the Canadian marketplace, the impact of currency changes and higher manufacturing costs in the U.K. bakery operations reduced earnings in the quarter. Lower commodity costs partly offset these increases. Reduced Adjusted Operating Earnings and lower other income contributed to lower net earnings, which declined from $26.5 million ($1.04 per share) last year to $15.0 million ($0.59 per share) in the fourth quarter of 2009. Net earnings for the full year increased from $64.9 million ($2.55 per share) to $77.5 million ($3.05 per share).
Business Segment Review
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Following is a summary of Adjusted Operating Earnings by business segment:
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($ thousands) Fourth Quarter Full Year
2009 2008 2009 2008
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Fresh Bakery $20,078 $25,398 $91,535 $76,529
Frozen Bakery 9,053 8,433 29,002 21,103
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Adjusted Operating Earnings $29,131 $33,831 $120,537 $97,632
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Fresh Bakery
------------
(fresh bakery products, sweet goods, sandwiches, and specialty fresh pasta and sauces)
Fourth quarter sales of $279.2 million were consistent with last year as increased sales volumes in the fresh bakery and pasta businesses were offset by lower sales volume in the fresh sandwiches business.
Adjusted Operating Earnings in the quarter decreased to $20.1 million from $25.4 million mostly due to increased promotional activities and higher marketing and other expenses. New product launches at the end of the third quarter of 2009, primarily the Dempster's(R) OvenFresh(TM) line of white and multigrain fresh par-baked breads and Cadbury(TM) Snack Cakes, were supported by promotional and marketing campaigns in the fourth quarter which contributed to increase expenses compared to the prior year. Additionally, operating earnings were reduced by a short-term increase in trade investment in the Canadian marketplace. Partly offsetting these increases was the benefit of lower commodity costs. Adjusted Operating Earnings for the full year increased to $91.5 million from $76.5 million last year.
Frozen Bakery
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(North American and U.K. frozen bakery products; including frozen par-baked and specialty bakery products)
Sales declined to 152.9 million from $165.8 million last year, mainly driven by the impact of unfavourable currency translation of the Company's sales in the U.K. and U.S. as the Canadian dollar appreciated against the British pound and U.S. dollar compared to the prior year. Sales volumes increased in the North American frozen bakeries due to the addition of new customers. However, improved volumes in North America were offset by lower volumes in the U.K. bakery operations due to a trade down in consumers' purchases from premium to staple products and less promotional activity compared to the prior year.
Adjusted Operating Earnings in the quarter were $9.1 million, slightly higher than last year. The benefits of lower raw material costs and timing of promotional activities were partly offset by increased supply chain investment in the U.K. bakery operations, and the impact of unfavorable currency translation of U.S. dollar denominated sales. For the full year, Adjusted Operating Earnings increased to $29.0 million from $21.1 million last year.
Other Income (Expense)
----------------------
Other income was not significant in the quarter compared to $8.3 million last year. Full year other income was $2.4 million in 2009 compared to $14.7 million in 2008 and mostly related to, in both years, insurance proceeds received to cover business interruption losses resulting from the 2008 oven fire at a bakery facility in the U.K.
Other Matters
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On February 23, 2010, Canada Bread Company, Limited declared a dividend of $0.06 per share payable on April 1, 2010 to shareholders of record at the close of business on March 10, 2010. Unless indicated otherwise, by the Company, in writing at 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".
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. 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 expectations concerning performance of the Company's business in general, and 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 the 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 under the "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 or implied by forward-looking statements are discussed more fully under the heading "Risk Factors" in the Company's Annual Management's Discussion and Analysis for the year ended December 31, 2009 that will be 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.
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 2009 sales of $1.7 billion and employs approximately 8,000 people at its operations across North America and in the United Kingdom.
Canada Bread Company, Limited
Consolidated Balance Sheets
(In thousands of Canadian dollars)
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As at December 31,
2009 2008
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ASSETS
Current Assets:
Cash and cash equivalents $ 57,698 $ 11,721
Accounts receivable 63,620 57,079
Inventories 56,659 58,696
Future tax asset 1,640 5,388
Prepaid expenses and other assets 4,438 12,977
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$ 184,055 $ 145,861
Property and equipment 387,252 417,150
Goodwill 386,807 404,484
Other long-term assets 11,620 9,964
Other intangible assets 16,678 17,451
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$ 986,412 $ 994,910
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Bank indebtedness $ 4,247 $ 8,894
Accounts payable and accrued charges 172,172 207,928
Due to Maple Leaf Foods Inc. 3,817 -
Dividends payable 1,525 1,525
Income and other taxes payable 13,155 10,860
Current portion of long-term debt - 41
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$ 194,916 $ 229,248
Long-term debt 2,547 4,477
Future tax liability 33,338 36,043
Other long-term liabilities 8,524 16,802
Shareholders' equity 747,087 708,340
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$ 986,412 $ 994,910
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Canada Bread Company, Limited
Consolidated Statements of Earnings
(In thousands of Canadian dollars, except share amounts)
-------------------------------------------------------------------------
Three months ended Twelve months ended
December 31, December 31,
2009 2008 2009 2008
(Unaudited) (Unaudited)
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Sales $ 432,190 $ 444,957 $ 1,705,788 $ 1,708,330
Cost of goods sold 342,213 357,176 1,365,470 1,411,729
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Gross margin $ 89,977 $ 87,781 $ 340,318 $ 296,601
Selling, general and
administrative
expenses 60,846 53,950 219,781 198,969
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Earnings from
operations
before the
following: $ 29,131 $ 33,831 $ 120,537 $ 97,632
Restructuring and
other related costs (3,637) (2,082) (4,908) (10,492)
Other income 10 8,330 2,439 14,702
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Earnings
before interest
and income taxes $ 25,504 $ 40,079 $ 118,068 $ 101,842
Interest expense 1,104 1,861 5,084 7,843
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Earnings
before income
taxes $ 24,400 $ 38,218 $ 112,984 $ 93,999
Income taxes 9,391 11,758 35,506 29,063
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Net earnings $ 15,009 $ 26,460 $ 77,478 $ 64,936
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Earnings per share -
basic and diluted $ 0.59 $ 1.04 $ 3.05 $ 2.55
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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 Twelve months ended
December 31, December 31,
2009 2008 2009 2008
(Unaudited) (Unaudited)
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Net earnings $ 15,009 $ 26,460 $ 77,478 $ 64,936
Other comprehensive
income (loss)
Change in
accumulated
foreign currency
translation
adjustment (10,684) 16,862 (34,398) 20,161
Change in
unrealized
derivative loss
on cash flow
hedges 650 (4,065) 1,754 (5,700)
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$ (10,034) $ 12,797 $ (32,644) $ 14,461
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Comprehensive
income $ 4,975 $ 39,257 $ 44,834 $ 79,397
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Consolidated Statements of Retained Earnings
(In thousands of Canadian dollars)
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Years ended December 31,
2009 2008
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Retained earnings, beginning of year $ 587,163 $ 528,327
Net earnings 77,478 64,936
Dividends declared
($0.24 per share; 2008: $0.24 per share) (6,100) (6,100)
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Retained earnings, end of year $ 658,541 $ 587,163
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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 Twelve months ended
December 31, December 31,
2009 2008 2009 2008
(Unaudited) (Unaudited)
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CASH PROVIDED BY (USED IN):
Operating activities
Net earnings $ 15,009 $ 26,460 $ 77,478 $ 64,936
Add (deduct) items
not affecting cash:
Depreciation and
amortization 12,319 14,411 54,025 55,425
Future income taxes 2,166 2,211 67 3,605
Loss (gain) on sale
of property and
equipment 10 (36) 471 103
Change in provision
for restructuring
and other related
costs 2,811 (2,867) 2,204 4,037
Amortization of
terminated interest
rate swaps 658 - 1,975 -
Other (266) 332 (2,859) 1,419
Change in non-cash
operating working
capital 10,495 41,662 (24,315) 7,910
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Cash provided by
operating activities $ 43,202 $ 82,173 $ 109,046 $ 137,435
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Financing activities
Dividends paid $ (1,525) $ (1,525) $ (6,100) $ (6,100)
Changes in
long-term debt 2,547 (73,987) (1,971) (103,132)
Settlement of
interest rate swaps
With Maple Leaf
Foods Inc. - - (8,502) 80,586
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Cash provided by
(used in) financing
activities $ 1,022 $ (75,512) $ (16,573) $ (28,646)
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Investing activities
Additions to
property and
equipment $ (11,212) $ (14,145) $ (41,659) $ (54,170)
Proceeds from
sale of
property and
equipment 32 - 547 512
Acquisition of
businesses, net
of cash acquired - (114) - (44,827)
Change in intangible
assets 501 (382) 501 (479)
Other (286) - (1,238) -
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Cash used in
investing activities $ (10,965) $ (14,641) $ (41,849) $ (98,964)
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Increase (decrease)
in cash and cash
equivalents $ 33,259 $ (7,980) $ 50,624 $ 9,825
Net cash and cash
equivalents,
beginning of period 20,192 10,807 2,827 (6,998)
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Net cash and cash
equivalents,
end of period $ 53,451 $ 2,827 $ 53,451 $ 2,827
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Canada Bread Company, Limited
Segmented Financial Information
(In thousands of Canadian dollars)
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Three months ended Twelve months ended
December 31, December 31,
2009 2008 2009 2008
(Unaudited) (Unaudited)
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Sales
Fresh Bakery $ 279,244 $ 279,132 $1,119,790 $1,094,190
Frozen Bakery 152,946 165,825 585,998 614,140
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$ 432,190 $ 444,957 $1,705,788 $1,708,330
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Earnings from
operations before
restructuring and
other related costs
and other income
Fresh Bakery $ 20,078 $ 25,398 $ 91,535 $ 76,529
Frozen Bakery 9,053 8,433 29,002 21,103
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$ 29,131 $ 33,831 $ 120,537 $ 97,632
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Capital expenditures
Fresh Bakery $ 6,045 $ 7,377 $ 21,722 $ 24,462
Frozen Bakery 5,167 6,768 19,937 29,708
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$ 11,212 $ 14,145 $ 41,659 $ 54,170
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Depreciation and
amortization
Fresh Bakery $ 6,816 $ 7,588 $ 27,632 $ 28,563
Frozen Bakery 5,503 6,823 26,393 26,862
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$ 12,319 $ 14,411 $ 54,025 $ 55,425
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As at As at
December 31, December 31,
2009 2008
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Total assets
Fresh Bakery $ 441,020 $ 440,733
Frozen Bakery 476,681 523,843
Non-allocated assets 68,711 30,334
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$ 986,412 $ 994,910
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Goodwill
Fresh Bakery $ 155,946 $ 156,268
Frozen Bakery 230,861 248,216
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$ 386,807 $ 404,484
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For further information: Lynda Kuhn, Senior Vice-President, Communications, (416) 926-2026, www.canadabread.ca
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