The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from CNW Group

Canada Bread Reports Results for the First Quarter 2013

Thursday, May 02, 2013

Canada Bread Reports Results for the First Quarter 2013

08:00 EDT Thursday, May 02, 2013

TSX: CBY

TORONTO, May 2, 2013 /CNW/ - Canada Bread Company, Limited (TSX: CBY) today reported its financial results for the first quarter ended March 31, 2013. First quarter highlights include:

  • Adjusted Operating Earnings(1)(2) increased to $17.1 million compared to $7.9 million last year
  • Adjusted EPS(2)(3) increased to $0.45 from $0.19 last year
  • Net earnings(2) increased to $2.3 million compared to $0.2 million last year

"We made good progress in the quarter with improved results across our businesses," said Richard Lan, President and CEO. "Of note, the most substantial contribution came from improved operating efficiencies, including the contribution of our new Hamilton bakery to earnings. We are focused on delivering higher levels of profitable growth through cost reduction but even more importantly through innovation, category expansion and optimizing our sales mix. We are identifying new opportunities that we can act on commencing this year."

(1)     Adjusted Operating Earnings, a non-IFRS measure, is used by Management to evaluate financial operating results.  It is defined as earnings before income taxes adjusted for items that are not considered representative of on-going operational activities of the business, and items where the economic impact of the transactions will be reflected in earnings in future periods when the underlying asset is sold or transferred. Please refer to the section entitled Reconciliation of Non-IFRS Financial Measures at the end of this news release.
   
(2)      2012 figures have been restated for the impact of adopting the revised International Accounting Standard 19 Employee Benefits ("IAS 19"), as disclosed in Note 18 of the Company's 2013 first quarter unaudited condensed consolidated interim financial statements.
   
(3)      Adjusted Earnings per Share, a non-IFRS measure, is used by Management to evaluate on-going financial operating results.  It is defined as basic earnings per share attributable to common shareholders, and is adjusted for all items that are not considered representative of on-going operational activities of the business, and items where the economic impact of the transactions will be reflected in earnings in future periods when the underlying asset is sold or transferred. Please refer to the section entitled Reconciliation of Non-IFRS Financial Measures at the end of this news release.

Financial Overview

Sales for the first quarter decreased 0.4% to $368.7 million, but increased 0.6% after adjusting for the closure of a bakery in the U.K. and currency translation on sales in the U.S. and U.K. This increase in sales was mostly due to price increases in the fresh and North American frozen bakery businesses and higher croissant volumes in the U.K., partly offset by lower volumes in the fresh bread business.

Adjusted Operating Earnings for the first quarter increased to $17.1 million compared to $7.9 million last year, largely due to improved performance in the fresh bakery business. Results from the frozen and fresh pasta businesses also increased while earnings from the U.K. operations were consistent with last year.

Net earnings in the quarter were $2.3 million ($0.09 basic earnings per share) compared to $0.2 million ($0.01 basic earnings per share) last year and included $10.4 million of pre-tax restructuring and other related costs (2012: $5.9 million). Adjusted EPS for the first quarter were $0.45 compared to $0.19 last year.

Business Segment Review

The following table summarizes sales by business segment:  
   
(Unaudited) First Quarter
($ thousands)    2013     2012 
Fresh Bakery $   242,665 $ 248,183
Frozen Bakery     126,040   122,061
Sales $   368,705 $ 370,244
         
The following table summarizes Adjusted Operating Earnings by business segment:
         
(Unaudited) First Quarter
($ thousands)   2013   2012(1)
Fresh Bakery $ 13,260 $ 6,589
Frozen Bakery   3,841   1,267
Adjusted Operating Earnings $ 17,101 $ 7,856

(1)     

2012 Adjusted Operating Earnings have been restated for the impact of adopting the revised International Accounting Standard 19 Employee Benefits ("IAS 19"), as disclosed in Note 18 of the Company's 2013 first quarter unaudited condensed consolidated interim financial statements

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 first quarter declined 2.2% to $242.7 million from $248.2 million last year as lower volumes were partly offset by price increases implemented at the fresh bread business.

Adjusted Operating Earnings increased to $13.3 million compared to $6.6 million last year. The substantial earnings increase in the fresh bread business was mostly the result of improved operating efficiencies, contribution from the new Hamilton, Ontario bakery and non-recurrence of SAP start up costs incurred last year. Also benefiting earnings were price increases and lower advertising & promotional costs. During the quarter, approximately $3 million of duplicative overhead costs were incurred, pending the closure of a third Toronto bakery. These costs, expected to be approximately $5 million in total for the first half of the year, will be eliminated in early June when the bakery is closed and production transferred to the Company's recently constructed Hamilton, Ontario bakery. Earnings improvement in the fresh pasta business resulted from an inventory write-off in the first quarter of last year that did not re-occur.

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 CoTM.

Frozen Bakery sales for the first quarter increased 3.3% to $126.0 million from $122.1 million in 2012. 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 6.4%, primarily due to higher croissant volumes in the U.K. bakery, as well as higher pricing in the North American business.

Adjusted Operating Earnings for the first quarter increased to $3.8 million compared to $1.3 million last year. Higher margins in the North American frozen bakery business were largely due to price increases implemented during the quarter. Although the U.K. bakery business benefited from higher volumes and the closure of the Walsall facility last year, increased marketing spending during the quarter to support continued growth of the New York Bakery brand offset these improvements.

Subsequent Events

On April 4, 2013, the Company entered into an agreement to sell a bakery, producing specialty products, located in London, U.K.

On April 16, 2013, the Company announced plans to close a bakery in Shawinigan, Quebec on May 3, 2013. The Company will incur approximately $3.1 million before taxes in restructuring costs, including approximately $1.6 million of cash costs.

Other Matters

On May 1, 2013, Canada Bread declared a dividend of $0.50 per share payable on July 2, 2013 to shareholders of record at the close of business on June 7, 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 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

Adjusted Operating Earnings, a non-IFRS measure, is used by Management to evaluate financial operating results.  It is defined as earnings before income taxes adjusted for items that are not considered representative of on-going operational activities of the business, and items where the economic impact of the transactions will be reflected in earnings in future periods when the underlying asset is sold or transferred. The table below provides a reconciliation of net earnings as reported under IFRS in the unaudited condensed consolidated interim statements of earnings for the three month periods as indicated below to Adjusted Operating Earnings. Management believes that this basis is the most appropriate on which to evaluate operating results, as they are representative of the on-going operations of the Company.

   
(Unaudited) Three months ended March 31, 2013
($ thousands) Fresh
Bakery
Frozen
Bakery
Consolidated
Net earnings         $ 2,281
Income taxes           1,499
Earnings from operations before income taxes         $ 3,780
Interest expense           397
Earnings from operations before interest             
  and  income taxes $ 4,157 $ 20 $ 4,177
Other (income) expense   (1,298)   3,811   2,513
Restructuring and other related costs   10,401   10   10,411
Adjusted Operating Earnings $ 13,260 $ 3,841 $ 17,101
           
           
           
(Unaudited) Three months ended March 31, 2012(1)
($ thousands) Fresh
Bakery
Frozen
Bakery
Consolidated
Net earnings         $ 159
Income taxes           1,398
Earnings from operations before income taxes         $ 1,557
Interest expense           437
Earnings from operations before interest             
  and  income taxes $ 4,673 $ (2,679) $ 1,994
Other (income) expense   (231)   209   (22)
Restructuring and other related costs   2,147   3,737   5,884
Adjusted Operating Earnings $ 6,589 $ 1,267 $ 7,856

(1)     

2012 Net earnings and Adjusted Operating Earnings have been restated for the impact of adopting the revised International Accounting Standard 19 Employee Benefits ("IAS 19"), as disclosed in Note 18 of the Company's 2013 first quarter unaudited condensed consolidated interim financial statements

Adjusted Earnings per Share

Adjusted Earnings per Share, a non-IFRS measure, is used by Management to evaluate on-going financial operating results.  It is defined as basic earnings per share attributable to common shareholders, and is adjusted for items that are not considered representative of on-going operational activities of the business, and items where the economic impact of the transactions will be reflected in earnings in future periods when the underlying asset is sold or transferred.  The table below provides a reconciliation of basic earnings per share as reported under IFRS in the unaudited condensed consolidated interim statements of earnings for the three month periods as indicated below to Adjusted Earnings per Share. Management believes this basis is the most appropriate on which to evaluate financial results as they are representative of the on-going operations of the Company.

(Unaudited) Three months ended
March 31,
($ per share) 2013 2012(1)
         
Basic earnings per share $ 0.09 $ 0.01
Items not considered representative of on-going operations(2)   0.06   -
Restructuring and other related costs (3)   0.30   0.18
Adjusted Earnings per Share (4) $ 0.45 $ 0.19

(1)     

2012 Basic and Adjusted Earnings per Share have been restated for the impact of adopting the revised International Accounting Standard 19 Employee Benefits ("IAS 19"), as disclosed in Note 18 of the Company's 2013 first quarter unaudited condensed consolidated interim financial statements
(2)      Includes gains/losses associated with non-operational activities, including gains/losses related to restructuring activities, business combinations, discontinued operations, and assets held for sale, all net of tax.
(3)      Includes per share impact of restructuring and other related costs, net of tax.
(4)      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 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 by 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 annual Management's Discussion and Analysis for the year ended December 31, 2012 that is 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.


 


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

CANADA BREAD COMPANY, LIMITED

Three months ended March 31, 2013 and 2012

Consolidated Balance Sheets

                               
(In thousands of Canadian dollars)   As at March 31,     As at March 31,     As at December 31,     As at January 1,
(Unaudited)     2013     2012     2012     2012
                (Restated)     (Restated)     (Restated)
                               
ASSETS                        
Current assets                        
  Cash and cash equivalents $ 95,526    $ 42,070    $ 90,415    $ 59,223
  Accounts receivable    47,683     47,670     49,435     56,522
  Note receivable      42,611     51,910     44,063     45,847
  Inventories      61,661     56,181     62,766     60,048
  Income taxes recoverable   167     7,572     -     2,162
  Prepaid expenses and other assets   7,002     3,244     4,972     5,218
    $ 254,650    $ 208,647    $ 251,651    $ 229,020
  Property and equipment    399,861     416,505     410,479     425,944
  Investment property    9,148     9,546     9,103     8,415
  Other long-term assets   5,190     4,460     4,994     4,456
  Deferred tax asset   18,200     15,812     17,874     17,917
  Goodwill    265,934     264,342     264,243     266,013
  Intangible assets    9,753     12,814     11,647     12,710
  Total assets $ 962,736    $ 932,126    $ 969,991    $ 964,475
                               
LIABILITIES AND SHAREHOLDERS' EQUITY                         
Current liabilities                          
  Bank indebtedness $ 3,088    $ 4,786    $ -    $ 3,153
  Accounts payable and accruals   162,416     170,421     169,431     185,811
  Provisions      17,357     14,140     9,928     23,066
  Due to Maple Leaf Foods Inc.    5,116     3,650     4,830     2,451
  Dividends payable   12,708     5,083     12,708     5,083
  Income taxes payable   -     -     2,008     -
  Current portion of                      
      long-term debt     531     2,567     358     2,452
          $ 201,216    $ 200,647    $ 199,263    $ 222,016
  Long-term debt     4,138     1,567     2,921     1,634
  Deferred tax liability   21,119     18,607     19,998     21,784
  Employee benefits    47,855     51,199     56,011     50,434
  Provisions      5,039     5,046     6,277     5,005
  Total liabilities    $ 279,367    $ 277,066    $ 284,470    $ 300,873
                               
Shareholders' equity                      
Share capital   $ 142,965    $ 142,965    $ 142,965    $ 142,965
Retained earnings   551,398     525,308     555,322     530,852
Accumulated other                      
  comprehensive loss    (10,994)     (13,213)     (12,766)     (10,215)
Total shareholders' equity $ 683,369    $ 655,060    $ 685,521    $ 663,602
Total liabilities and shareholders' equity $ 962,736    $ 932,126    $ 969,991    $ 964,475
                           

 



Consolidated Statements of Earnings

(In thousands of Canadian dollars, except share amounts)     Three months ended March 31,
(Unaudited)       2013     2012
              (Restated)
                   
Sales   $ 368,705    $ 370,244
Cost of goods sold           300,797     308,489
                       
Gross margin   $ 67,908    $ 61,755
Selling, general and administrative expenses     50,807     53,899
                       
Earnings before the following:   $ 17,101    $ 7,856
Restructuring and other related costs     (10,411)     (5,884)
Other (expense) income         (2,513)     22
                       
Earnings before interest and income taxes    $ 4,177    $ 1,994
Interest expense           397     437
                       
Earnings before income taxes    $ 3,780    $ 1,557
Income taxes           1,499     1,398
                       
Net earnings   $ 2,281    $ 159
                       
Earnings per share              
  Basic and diluted earnings per share    $ 0.09    $ 0.01
Weighted average number of shares (millions)     25.4     25.4
               

 

Consolidated Statements of Comprehensive Income (Loss)

(In thousands of Canadian dollars)       Three months ended March 31,
(Unaudited)               2013     2012
                      (Restated)
             
Net earnings     $ 2,281   $ 159
                           
Other comprehensive income (loss)                
Item that will not be reclassified to profit or loss:            
  Change in actuarial gains and losses         6,503     (620)
Total item that will not be reclassified to profit or loss     6,503     (620)
Items that are or may be reclassified subsequently to profit or loss:            
  Change in accumulated foreign currency translation adjustment     928     (2,298)
  Change in unrealized gains and losses on cash flow hedges     844     (700)
Total items that are or may be reclassified subsequently to profit or loss   $ 1,772    $ (2,998)
    $ 8,275    $ (3,618)
Comprehensive income (loss)   $ 10,556    $ (3,459)

 


Consolidated Statements of Changes in Shareholders' Equity

                  Total      
                  accumulated      
                  other     Total
(In thousands of Canadian dollars)     Share     Retained     comprehensive     shareholders'
(Unaudited)     capital     earnings     loss     equity
                             
Balance at December 31, 2012                        
  (restated)   $ 142,965    $ 555,322    $ (12,766)    $ 685,521
  Net earnings     -     2,281     -     2,281
  Other comprehensive income     -     6,503     1,772     8,275
  Dividends declared ($0.50 per share)     -     (12,708)     -     (12,708)
Balance at March 31, 2013    $ 142,965    $ 551,398    $ (10,994)    $ 683,369
                             
                             
                  Total      
                  accumulated      
                  other     Total
(In thousands of Canadian dollars)     Share     Retained     comprehensive     shareholders'
(Unaudited)     capital     earnings     loss     equity
                            (Restated)
                             
Balance at January 1, 2012                        
  (restated)   $ 142,965    $ 530,852    $ (10,215)    $ 663,602
  Net earnings     -     159     -     159
  Other comprehensive loss     -     (620)     (2,998)     (3,618)
  Dividends declared ($0.20 per share)     -     (5,083)     -     (5,083)
Balance at March 31, 2012                        
  (restated)   $ 142,965    $ 525,308    $ (13,213)    $ 655,060
                         

 





Consolidated Statements of Cash Flows 

(In thousands of Canadian dollars)       Three months ended March 31,
(Unaudited)       2013     2012
            (Restated)
                   
CASH (USED IN) PROVIDED BY:                
                         
Operating activities              
  Net earnings   $ 2,281    $ 159
  Add (deduct) items not affecting cash:            
      Depreciation and amortization         12,777     11,349
      Deferred income taxes         (2,502)     (207)
      Income tax current         4,001     1,605
      Interest expense         397     437
      Gain on sale of long-term assets       (1,316)     (231)
      Change in provision for restructuring and other related costs     6,421     (4,350)
      Impairment of assets         3,570     -
  Increase (decrease) in pension liability     1,282     (36)
  Net income taxes paid          (8,591)     (6,555)
  Interest received (paid)         64     (359)
  Other           142     150
  Change in non-cash operating working capital     (1,513)     (7,427)
Cash (used in) provided by operating activities   $ 17,013   $ (5,465)
                       
Financing activities              
  Dividends paid    $ (12,708)    $ (5,083)
  Net increase in long-term debt         1,650     -
Cash used in financing activities     $ (11,058)    $ (5,083)
                       
Investing activities              
  Additions to long-term assets   $ (6,488)    $ (10,657)
  Proceeds from sale of long-term assets     2,556     2,419
Cash used in investing activities   $ (3,932)    $ (8,238)
                       
Increase (decrease) in cash and cash equivalents   $ 2,023    $ (18,786)
Net cash and cash equivalents, beginning of period     90,415     56,070
Net cash and cash equivalents, end of period   $ 92,438    $ 37,284
                       
Net cash and cash equivalents is comprised of:            
Cash and cash equivalents   $ 95,526    $ 42,070
Bank indebtedness           (3,088)     (4,786)
Net cash and cash equivalents, end of period   $ 92,438    $ 37,284








Segmented Financial Information  
                          Three months ended March 31
                      2013     2012
                           
Sales                        
  Fresh Bakery                  $ 242,665    $ 248,183
  Frozen Bakery                 126,040     122,061
                   $ 368,705    $ 370,244
                           
Earnings before restructuring and other related                        
  costs and other income                        
  Fresh Bakery                 $ 13,260    $ 6,589
  Frozen Bakery                 3,841     1,267
                     $ 17,101    $ 7,856
                           
Capital expenditures                        
  Fresh Bakery                $ 1,841    $ 9,194
  Frozen Bakery                 4,647     1,463
                     $ 6,488    $ 10,657
                           
Depreciation and amortization                        
  Fresh Bakery                $ 8,049    $ 7,057
  Frozen Bakery                 4,728     4,292
                 $ 12,777    $ 11,349

 

                     





                         
      As at March 31,     As at March 31,     As at December 31,     As at January 1,
      2013     2012     2012     2012
Total assets                        
  Fresh Bakery   $ 495,095    $ 513,106    $ 504,062    $ 516,485
  Frozen Bakery     340,886     353,533     356,311     368,534
  Non-allocated assets     126,755     65,487     109,618     79,456
    $ 962,736    $ 932,126    $ 969,991    $ 964,475
Goodwill                          
  Fresh Bakery   $ 125,892    $ 125,892    $ 125,892    $ 125,892
  Frozen Bakery     140,042     138,450     138,351     140,121
    $ 265,934    $ 264,342    $ 264,243    $ 266,013
                         

 

 

 

 

SOURCE: Canada Bread Company, Limited

For further information:

Investor Contact: Nick Boland,
VP Investor Relations: 416-926-2005
Media Contact: 416-926-2020

Products
  • Globe Unlimited

    Digital all access pass across devices. subscribe

  • The Globe and Mail Newspaper

    Newspaper delivered to your doorstep. subscribe

  • Globe2Go

    The digital replica of our newspaper. subscribe

  • Globe eBooks

    A collection of articles by the Globe. subscribe

See all Globe Products

Advertise with us

GlobeLink.ca

Your number one partner for reaching Canada's Influential Achievers. learn more

The Globe at your Workplace
Our Company
Customer Service
Globe Recognition
Mobile Apps
NEWS APP
INVESTING APP
Other Sections