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Press release from CNW Group

Canada Bread Reports Results for the Fourth Quarter and Year End 2012

Tuesday, February 26, 2013

Canada Bread Reports Results for the Fourth Quarter and Year End 201208:05 EST Tuesday, February 26, 2013TORONTO, Feb. 26, 2013 /CNW/ - Canada Bread Company, Limited (TSX: CBY) today reported its financial results for the fourth quarter and year ended December 31, 2012.  Fourth quarter and full year highlights include:Adjusted Operating Earnings(1) for the fourth quarter increased 35.3% to $35.4 million compared to $26.2 million last yearAdjusted Operating Earnings for the full year increased 5.5% to $115.9 million compared to $109.8 million last yearAdjusted EPS(2) for the fourth quarter increased to $1.00 from $0.67 in 2011.  For the full year, Adjusted EPS decreased to $3.26 from $3.43.  Adjusted EPS in 2011 included a $0.49 tax adjustment related to a prior acquisition."We delivered solid earnings growth in the quarter, reflecting intense effort by our team and solid execution on a number of fronts, including cost reduction, innovation and campaigns to engage with consumers." said Richard Lan, President and CEO. "We continue to see significant potential to deliver incremental value. A number of initiatives are planned or underway to further drive profitability in 2013 and beyond."(1): Adjusted Operating Earnings, a non-IFRS measure, is defined as earnings from operations before restructuring and other related costs and other income. (2): Adjusted Earnings per Share ("Adjusted EPS"), a non-IFRS measure, is 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 OverviewSales for the fourth quarter decreased 2.4% to $390.7 million compared to $400.3 million last year. After adjusting for the closure of a bakery in the U.K. and currency translation on sales in the U.S. and U.K., sales decreased 0.4%. Higher prices and volumes in the North American and U.K. frozen bakery businesses were offset by lower volumes and unfavourable sales mix in the fresh pasta business. Volumes in the fresh bread business were consistent with last year.Sales for 2012 decreased 1.8% to $1,567.3 million compared to $1,595.5 million in 2011. After adjusting for the sale of the Company's fresh sandwich product line, the closure of a bakery in the U.K., and currency translation on sales in the U.S. and U.K., sales were consistent with last year.Adjusted Operating Earnings for the fourth quarter increased 35.3% to $35.4 million compared to $26.2 million last year. Earnings growth in the fresh bread and North American frozen bakery businesses was partly offset by lower earnings in the fresh pasta business, while earnings in the U.K. bakery operations were consistent with last year. Margin expansion in the fresh bread business was primarily due to increased operating efficiencies, lower duplicative overhead costs associated with the new Hamilton bakery, and higher costs in 2011 related to the implementation of SAP in Western Canada that were not repeated. The Company also benefited from positive hedging activities that reduced raw material costs.Adjusted Operating Earnings increased 5.5% to $115.9 million in 2012, compared to $109.8 million last year.Adjusted EPS for the fourth quarter were $1.00 compared to $0.67 last year. For the full year, Adjusted EPS decreased to $3.26 compared to $3.43 last year.  Adjusted EPS in 2011 included $0.49 per share related to a tax adjustment associated with a prior acquisition.Business Segment ReviewThe following table summarizes sales by business segment:     Fourth QuarterYear-to-Date  (Unaudited)(Audited)($ thousands) 2012 2011 2012 2011 Fresh Bakery   $  254,809    $261,963   $  1,059,865    $1,087,335 Frozen Bakery   135,892  138,317 507,435  508,121 Sales   $  390,701    $400,280   $  1,567,300    $  1,595,456 The following table summarized Adjusted Operating Earnings by business segment:           Fourth QuarterYear-to-Date  (Unaudited)(Audited)($ thousands) 2012 2011 2012 2011 Fresh Bakery   $24,631    $19,463   $91,171    $99,857 Frozen Bakery 10,813  6,738 24,697  9,934 Adjusted Operating Earnings   $35,444    $26,201   $115,868    $109,791 Fresh BakeryIncludes 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 fourth quarter declined 2.7% to $254.8 million from $262.0 million last year due to lower volumes in the fresh pasta business. Volumes in the fresh bread business were consistent with the prior year. For the full year, sales declined 2.5% to $1,059.9 million from $1,087.3 million last year. After adjusting for the sale of the Company's fresh sandwich product line, sales decreased 2.1% as volumes were lower in both the fresh bread and fresh pasta businesses. This was partly offset by the full year impact of price increases implemented during 2011 in the fresh bread business.Adjusted Operating Earnings were $24.6 million compared to $19.5 million last year. The increase was driven by efficiency gains in the fresh bread business resulting from the closure of the Delta, B.C. plant in late 2011 and the related transfer of production to more efficient bakeries. Earnings also benefited from positive hedging activities that reduced input costs, and from higher costs in 2011 related to the implementation of SAP in Western Canada that were not repeated in 2012. In addition, duplicative overhead costs were incurred last year as the Company continued to operate three bakeries while transferring production to the new, more efficient bakery in Hamilton, Ontario.  During 2012, two of these facilities were closed, with associated reduction in costs. Closure of the third Ontario bakery is planned for the second quarter of 2013. Partly offsetting these benefits were lower earnings in the fresh pasta business as supply chain issues resulted in lower volumes and an unfavourable sales mix.For the full year, Adjusted Operating Earnings decreased 8.7% to $91.2 million compared to $99.9 million last year, as lower earnings in the fresh pasta business were partly offset by earnings improvements in the fresh bread business.Frozen BakeryIncludes 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 CoTM.Frozen Bakery sales for the fourth quarter decreased 1.8% to $135.9 million from $138.3 million in 2011. After adjusting for the closure of a bakery in the U.K. and currency translation on sales in the U.S. and U.K., sales increased 4.1%, primarily due to stronger volumes in the North American and U.K. bakery businesses, as well as higher pricing in the North American business.Adjusted Operating Earnings for the fourth quarter increased 60.5% to $10.8 million compared to $6.7 million last year. The increase was mainly due to improved performance in the North American operations, which benefited from higher pricing and volumes, as well as positive hedging activities that reduced raw material costs, partially offset by higher administrative expenses.The U.K. bakery benefited from the closure of the Walsall facility earlier in the year and a new croissant business that began in the fourth quarter. However, these benefits were offset by higher trade spending related to the New York Bakery bagel brand, and increased manufacturing costs at the Maidstone facility.Adjusted Operating Earnings increased to $24.7 million in 2012 compared to $9.9 million last year, mainly due to improved performance at the North American bakery business.Subsequent EventsOn January 30, 2013, the Company announced plans to close a bakery in Grand Falls, New Brunswick and a bakery in Edmonton, Alberta in the first half of 2013.  The Company will incur approximately $6.3 million before taxes in restructuring costs, of which approximately $4.2 million are cash costs.Other MattersOn February 25, 2013, Canada Bread declared a dividend of $0.50 per share payable on April 1, 2013 to shareholders of record at the close of business on March 8, 2013. Unless indicated otherwise by the Company in writing on or before the time the dividend is paid, this dividend will be considered an Eligible Dividend for the purposes of the "Enhanced Dividend Tax Credit System".Reconciliation of Non-IFRS Financial MeasuresThe Company uses the following non-IFRS measures: Adjusted Operating Earnings and Adjusted EPS.  Management believes that these non-IFRS measures provide useful information to both Management and investors in measuring the financial performance of the Company for the reasons outlined below.  These measures do not have a standardized meaning prescribed by IFRS and therefore they may not be comparable to similarly titled measures presented by other publicly traded companies and should not be construed as an alternative to other financial measures determined in accordance with IFRS.Adjusted Operating EarningsThe following tables reconcile earnings from operations before restructuring and other related costs and other income (expense) to net earnings as reported under IFRS in the unaudited earnings for the three month and twelve month periods ended as indicated below.  Management believes that this is the most appropriate basis on which to evaluate operating results, as restructuring and other related costs and other income (expense) are not representative of operational results during the period. (Unaudited)Three months ended December 31, 2012($ thousands)FreshBakeryFrozen BakeryConsolidatedNet earnings   $22,371Income taxes  9,182Earnings from operations before income taxes   $31,553Interest expense  354Earnings from operations before interest     and income taxes $23,477 $8,430 $31,907Other (income) expense(109)(168)(277)Restructuring and other related costs1,2632,5513,814Adjusted Operating Earnings $24,631 $10,813 $35,444  (Unaudited)Three months ended December 31, 2011($ thousands)FreshBakeryFrozenBakeryConsolidatedNet earnings   $7,757Income taxes  6,152Earnings from operations before income taxes   $13,909Interest expense  180Earnings from operations before interest     and  income taxes $17,160 $(3,071) $14,089Other (income) expense(57)7(50)Restructuring and other related costs2,3609,80212,162Adjusted Operating Earnings $19,463 $6,738 $26,201    Twelve months ended December 31, 2012(Audited)($ thousands)Fresh BakeryFrozen BakeryUnallocatedcostsConsolidated     Net earnings    $74,200 Income taxes   30,683 Earnings from operations before income taxes    $104,883 Interest expense   1,547 Earnings from operations before interest      and income taxes $88,116  $18,314 $-  $106,430 Other (income) expense(1,676)41 - (1,635)Restructuring and other related costs4,731 6,342 - 11,073 Adjusted Operating Earnings $91,171  $24,697  $-  $115,868         Twelve months ended December 31, 2011(Audited)($ thousands)Fresh BakeryFrozen BakeryUnallocatedcostsConsolidated     Net earnings    $51,951Income taxes   10,845Earnings from operations before income taxes    $62,796Interest expense   1,052Earnings from operations before interest      and income taxes $85,046 $(21,198) $- $63,848Other (income) expense(49)(365)-(414)Restructuring and other related costs14,86031,497-46,357Adjusted Operating Earnings $99,857 $9,934 $- $109,791Adjusted Earnings per ShareThe following table reconciles Adjusted EPS to basic earnings per share as reported under IFRS as indicated below.  Management believes this is the most appropriate basis on which to evaluate financial results as restructuring and other related costs are not representative of operational results. Three months endedDecember 31,(Unaudited) Twelve months endedDecember 31,(Audited)($ per share)20122011 20122011      Basic earnings per share $0.88  $0.31  $2.92  $2.04Restructuring and other related costs(i)0.12 0.37 0.34 1.39Adjusted Earnings per Share (ii) $1.00  $0.67  $3.26  $3.43(i) Includes per share impact of restructuring and other related costs, net of tax.(ii) May not add due to rounding.Forward-Looking StatementsThis document contains, and the Company's oral and written public communications often contain, "forward-looking information" within the meaning of applicable securities laws.  These statements are based on current expectations, estimates, forecasts and projections about the industries in which the Company operates and beliefs and assumptions made management. 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 information in this document includes, but is not limited to, statements concerning expectations regarding the use of derivatives, futures and options, expectations regarding the timing and amount of capital investments, expectations regarding the timing and cost of old facility closures and new facility openings, the expected use of cash balances, source of funds for ongoing business requirements including renewal of existing securitization facilities, capital investments and debt repayment, expectations regarding LEED® certification, expectations regarding the impact of new accounting standards, expectations regarding sufficiency of the allowance for uncollectible accounts and expectations regarding pension plan performance and future pension liabilities and contributions. 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 information. These statements are not guarantees of future performance and involve assumptions and risks and uncertainties that are difficult to predict.In particular, these 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, U.S. and U.K. 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 information, 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 information 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, 2012 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 information, 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. (TSX:MFI), is a leading manufacturer and distributor of fresh bakery products, frozen par-baked products and fresh pasta and sauces. The Company had 2012 sales of $1.6 billion and employs approximately 6,400 people at its operations across North America and in the United Kingdom.Consolidated Financial Statements(Expressed in Canadian dollars)CANADA BREAD COMPANY, LIMITEDThree and twelve months ended December 31, 2012 and 2011 CANADA BREAD COMPANY, LIMITEDConsolidated Balance Sheets(In thousands of Canadian dollars)   As at As at  December 31, December 31,  2012 2011  ASSETS Current assets Cash and cash equivalents$ 90,415  $59,223 Accounts receivable49,435  56,522 Notes receivable  44,063  45,847 Inventories  62,766  60,048 Income taxes recoverable-  2,162 Prepaid expenses and other assets4,972  5,218 $ 251,651  $229,020   Property and equipment410,479  425,944 Investment property9,103  8,415 Other long-term assets4,994  4,456 Deferred tax asset  17,874  17,917 Goodwill  264,243  266,013 Intangible assets  11,647  12,710 Total assets  $ 969,991  $964,475 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Bank indebtedness$-  $3,153 Accounts payable and accruals169,431  185,811 Provisions  9,928  23,066 Due to Maple Leaf Foods Inc.4,830  2,451 Dividends payable  12,708  5,083 Income taxes payable2,008  - Current portion of long-term debt358  2,452 $199,263  $222,016  Long-term debt  2,921  1,634 Deferred tax liability19,998  21,784 Employee benefits  56,011  50,434 Provisions  6,277  5,005 Total liabilities $ 284,470  $300,873 Shareholders' equity   Share capital$142,965  $142,965Retained earnings  555,322  530,852Accumulated other comprehensive loss(12,766) (10,215)Total shareholders' equity$685,521  $663,602Total liabilities and shareholders' equity$969,991  $964,475 CANADA BREAD COMPANY, LIMITEDConsolidated Statements of Earnings(In thousands of Canadian dollars, except share amounts)  Three months ended     Twelve months ended December 31,     December 31, 2012 2011 2012 2011 (Unaudited) (Unaudited)      Sales $390,701   $400,280  $  1,567,300   $ 1,595,456 Cost of goods sold 308,973  328,043 1,255,760  1,284,432 Gross margin  $81,728   $72,237  $311,540   $311,024 Selling, general and   administrative expenses    46,284  46,036 195,672  201,233 Earnings before the following: $35,444   $26,201  $115,868   $109,791Restructuring and other related costs (3,814) (12,162) (11,073) (46,357)Other income (expense) 277  50 1,635  414 Earnings before interest and     income taxes $31,907   $14,089  $ 106,430    $63,848Interest expense 354  180 1,547  1,052 Earnings before income taxes  $ 31,553   $13,909  $ 104,883   $62,796Income taxes 9,182  6,152 30,683  10,845 Net earnings $22,371   $7,757  $74,200   $51,951 Earnings per share attributable to  common shareholdersBasic and diluted earnings per share  $0.88   $0.31  $2.92   $2.04 Weighted average number  of shares (millions)      25.4  25.4 25.4  25.4         CANADA BREAD COMPANY, LIMITEDConsolidated Statements of Comprehensive Income(In thousands of Canadian dollars)    Three months ended     Twelve months ended December 31,     December 31,  2012 2011 2012 2011  (Unaudited)(Unaudited)                    Net earnings    $22,371   $7,757  $ 74,200   $51,951 Other comprehensive income (loss)  Change in accumulated foreign currency    translation adjustment 2,293  (5,247) (1,980) 3,307 Change in unrealized gains and losses    on cash flow hedges79  (473) (571) 574 Change in actuarial gains and losses 2,332  (948) (6,532) (14,448)         $4,704   $(6,668)  $ (9,083)  $(10,567)   Comprehensive income  $27,075   $1,089  $65,117   $41,384 CANADA BREAD COMPANY, LIMITED Consolidated Statements of Changes in Shareholders' Equity(In thousands of Canadian dollars)      Total        accumulated       other Total   Share Retainedcomprehensive shareholders'   capital earningsloss equity  Balance at December 31, 2011  $ 142,965   $530,852  $ (10,215)  $663,602      Net earnings-  74,200 -  74,200   Other comprehensive loss -  (6,532)(2,551) (9,083)  Dividends declared ($1.70 per share)-  (43,198)-  (43,198) Balance at December 31, 2012  $  142,965   $555,322  $(12,766)  $685,521         Total        accumulated        other Total   Share Retainedcomprehensive shareholders'   capital earningsloss equity    Balance at December 31, 2010  $  142,965  $510,126 $(14,096)  $638,995   Net earnings - 51,951- 51,951  Other comprehensive income (loss) - (14,448)3,881 (10,567)  Dividends declared ($0.66 per share)- (16,777)- (16,777) Balance at December 31, 2011 $ 142,965  $530,852 $(10,215)  $663,602  CANADA BREAD COMPANY, LIMITEDConsolidated Statements of Cash Flows(In thousands of Canadian dollars)   Three months ended   Twelve months ended  December 31,   December 31,  2012 2011 2012 2011  (Unaudited) (Unaudited)     CASH PROVIDED BY (USED IN): Operating activities Net earnings  $22,371   $7,757  $74,200   $ 51,951 Add (deduct) items not affecting cash:  Depreciation and amortization13,003  12,793 49,525  47,839  Deferred income taxes1,526  (6,003) 2,080  (6,295)  Income tax current 7,656  11,818 28,603  17,140  Interest expense 354  180 1,547  1,052  (Gain) loss on sale of long-lived assets (341) (36) (478) 232  Change in provision for restructuring and    other related costs 983  7,952 (6,772) 32,232 Decrease in pension liability (1,376) - (3,251) - Net income taxes paid (6,043) 1,684 (24,265) (20,203) Interest paid (329) 45 (1,533) (750) Other 599  (2,074) 903  (1,817) Change in non-cash operating     working capital (9,899) 14,605 (11,452) (18,287)Cash provided by (used in) operating activities $28,504   $48,721  $109,107   $103,094 Financing activities Dividends paid  $(12,733)  $(5,085)  $ (35,573)  $(16,777) Net increase in long-term debt (99) - (921) -Cash used in financing activities  $ (12,832)  $(5,085) $(36,494)  $(16,777) Investing activities Additions to long-term assets $(12,357)  $(23,802)  $(44,537)  $(112,517) Capitalization of interest expense to    long-term assets -  - -  (119) Proceeds from sale of long-term assets1,387  536 6,269  5,830 Change in intangible assets -  (31) -  (65)Cash used in investing activities $ (10,970)  $(23,297)  $(38,268)  $(106,871)   Increase (decrease) in cash and  cash equivalents$4,702   $20,339  $34,345   $(20,554)Net cash and cash equivalents,   beginning of period 85,713  35,731 56,070  76,624Net cash and cash equivalents, end of period $ 90,415   $56,070 $90,415   $56,070   Net cash and cash equivalents is comprised of:Cash and cash equivalents $90,415   $59,223 $90,415   $59,223Bank indebtedness -  (3,153) -  (3,153)Net cash and cash equivalents, end of period $90,415   $56,070  $ 90,415   $56,070            CANADA BREAD COMPANY, LIMITEDSegmented Financial Information(In thousands of Canadian dollars)  Three months ended   Twelve months ended December 31,   December 31, 2011 2010 2011 2010 (Unaudited) (Unaudited)   Sales  Fresh Bakery $254,809   $261,963  $1,059,865   $1,087,335 Frozen Bakery135,892  138,317 507,435  508,121   $390,701   $400,280  $1,567,300   $1,595,456   Earnings before restructuring and        other related costs and other income        Fresh Bakery  $24,631   $19,463  $91,171   $99,857  Frozen Bakery 10,813  6,738 24,697  9,934   $ 35,444   $26,201 $ 115,868   $109,791   Capital expenditures  Fresh Bakery   $8,142   $20,793  $32,695   $95,788 Frozen Bakery  4,215  3,009 11,842  16,729  $12,357   $23,802  $44,537   $112,517  Depreciation and amortization  Fresh Bakery  $8,226   $7,584  $30,848   $27,029 Frozen Bakery 4,777  5,209 18,677  20,810  $ 13,003   $12,793  $49,525   $47,839      As at As at December 31, December 31,  2012 2011  Total assets Fresh Bakery     $504,062   $516,485  Frozen Bakery    356,311  368,534 Non-allocated assets    109,618  79,456  $969,991   $964,475Goodwill Fresh Bakery     $125,892   $125,892  Frozen Bakery    138,351  140,121  $264,243   $266,013    SOURCE: Canada Bread Company, LimitedFor further information: Investor Contact: Nick Boland, VP Investor Relations: 416-926-2005 Media Contact: 416-926-2020