Maple Leaf Foods Inc.(TSE:MFI.; ME:MFI) yesterday reported its financial results for the fourth quarter and year-ended December 31, 2000.
Mr. Michael McCain, President and Chief Executive Officer of Maple Leaf Foods, said: “We are pleased with the significant year-over-year earnings increases achieved by our Bakery and Agribusiness Groups. Although the Meat Products Group has had a difficult financial year, we are pleased with the Group’s continued operational improvements, and the significant reduction in operating losses at the Brandon fresh pork facility in the fourth quarter.”
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Financial Results
Sales for the fourth quarter of $1.1 billion increased by 19% from $898 million last year. This increase was largely due to pork sales from the Brandon, Manitoba fresh pork facility and the Landmark Group and Hub Meat Packers acquisitions. Full year sales of $3.9 billion were up 12 % from $3.5 billion last year. Earnings from operations, before unusual items, for the fourth quarter of $26.1 million decreased from $44.8 million last year. Full year earnings from operations, before unusual items, of $90.1 million was down from $146.9 million last year. Net earnings for the quarter, were $12.6 million ($0.12 per share) compared to $22.9 million ($0.23 per share) last year. Full year net earnings were $36.8 million ($0.34 per share) compared to $77.2 million ($0.77 per share) last year.
Meat Products Group
Meat Products Group sales for the fourth quarter of $685 million increased by 30% from $527 million last year. Full year sales of $2.4 billion were up 15% from $2.1 billion last year. Earnings from operations for the fourth quarter of $1.6 million, which is net of operating losses of $6.9 million at the Brandon pork facility, compared to earnings of $17.6 million last year. Full year losses from operations of $11.2 million compared to earnings from operations of $66.5 million last year. Quarterly start-up costs and operating losses this year at the Brandon pork facility totaling $58.0 million have been reduced from $20.0 million in the first quarter to $6.9 million in the fourth quarter ($24.0 million was capitalized in the first two quarters).
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By GlobalDataSolid operating improvements continued to be achieved at the Brandon facility due, in part, to further progress in building the size and skill base of its core employee group. Operating losses declined to a level in the fourth quarter in line with management’s expectation. First shift capacity utilization continued to grow through the fourth quarter and we expect first shift capacity will be reached early in 2001.
In addition to the Brandon operating losses, Maple Leaf Pork’s results continued to be adversely affected by high live hog prices and low margins in the pork industry generally.
Maple Leaf Consumer Foods’ recorded lower results over last year due, in part, to margin pressures from high meat costs. Maple Leaf Poultry recorded strong financial results in the fourth quarter with Maple Leaf Prime chicken and turkey product sales continuing to show strong market growth. Maple Leaf Foods International recorded improved results in the fourth quarter.
In January 2001, the Company announced it had reached an agreement to purchase the fresh pork operations of Schneider Corporation located in Winnipeg, Manitoba. Having obtained regulatory clearance, the transaction is expected to close in early March 2001. Bakery Products Group
Bakery Products Group sales for the fourth quarter of $165 million increased by 4% from $158 million last year. Full year sales of $651 million compared to $676 million last year. Earnings from operations for the fourth quarter of $5.8 million were up 66% from $3.5 million last year. Full year earnings from operations of $20.4 million were up 111% from $9.7 million last year.
Canada Bread reported its sixth consecutive quarterly increase in operating earnings, following improvements to its operations which were implemented in 1999. Cost reduction and margin improvement momentum, and renewed focus on investment in people, brands and new products are expected to result in continued improvement in financial performance. New product activity is gaining momentum at Canada Bread, highlighted by the launch of Dempster’s Originals – white bread made with unbleached flour, and the launch of a line of Dempster’s Whole Grain breads early in 2001.
In January 2001, Canada Bread announced that it had reached an agreement to increase its ownership in Multi-Marques Inc. from 25% to 100%. Multi-Marques is a leading Quebec-based bakery business with annual sales of about $300 million. The acquisition is subject to regulatory approval.
In the United States, sales of par-baked bread products once again grew significantly year-over-year. With strong sales momentum, improving product mix and the higher plant utilization rates, Maple Leaf Bakery recorded operating earnings in the fourth quarter and achieved a breakeven earnings result for the year, representing a significant improvement over 1999 Agribusiness Group
Agribusiness Group sales for the fourth quarter of $218 million increased 3% from $212 million last year. Earnings from operations of $18.8 million were down from $23.7 million last year. Full year sales of $846 million were up 18% from $720 million last year. Full year earnings from operations of $80.9 million were up 14% from $70.7 million last year.
Fourth quarter earnings results were adversely affected by a decline in earnings at Rothsay Rendering, which was a result of lower export prices on tallow products and increases in natural gas prices.
The overall increases in sales and operating earnings in 2000 are attributable to solid results from Shur-Gain’s animal nutrition operations, benefits from our vertical co-ordination pork value chain strategy and the inclusion of the results of Landmark Feeds and Elite Swine, acquired in the fourth quarter of 1999. Other Information
Other income for the fourth quarter of $11.8 million compares to $18.2 million last year. In the fourth quarter, the Company recognized real estate earnings of $10.7 million on sale of development properties. Full year other income of $34.6 million was down from $39.5 million last year.
Interest expense for the quarter of $16.4 million was up from $12.1 million last year. Full year interest expense of $63.7 million was up from $44.0 million last year. The increases are largely due to higher borrowing levels resulting from the acquisitions of The Landmark Group, in October 1999, and Hub Meat Packers, in May 2000, and higher short-term interest rates.
The Company declared a dividend of $0.04 per share payable March 30, 2001 to shareholders of record on February 26, 2001.
“Our difficult financial results in 2000 relates almost exclusively to a single factor, being the start-up issues surrounding our Brandon fresh pork facility,” said Mr. McCain. “We expect Brandon to become profitable during 2001. Our Bakery Group has successfully executed a turnaround in Canada and a major business start-up in the United States. Our Agribusiness Group, benefiting from our vertical coordination strategy, continues a trend of strong annual earnings growth. We remain confident about the future earnings potential of the Company.”
Consolidated Statements of Earnings
———————————————————————
In thousands of Canadian
dollars, except per Quarter ended Years ended
share amounts Dec 31 Dec 31
(Unaudited) 2000 1999 2000 1999
———————————————————————
Sales $ 1,068,481 $ 897,979 $ 3,943,289 $ 3,529,727
Earnings from
operations, before
unusual items 26,094 44,799 90,141 146,932
Unusual items – (10,967) – (10,967)
————————————————–
Earnings from
operations 26,094 33,832 90,141 135,965
Other income 11,845 18,164 34,604 39,514
Earnings before
interest and taxes 37,939 51,996 124,745 175,479
Interest expense 16,367 12,068 63,656 43,968
————————————————–
Earnings before
income taxes 21,572 39,928 61,089 131,511
Income taxes 6,341 12,863 19,310 46,364
————————————————–
Earnings before minority
interest 15,231 27,065 41,779 85,147
Minority interest 2,606 4,211 4,993 7,949
————————————————–
Net earnings for
the period $ 12,625 $ 22,854 $ 36,786 $ 77,198
————————————————–
————————————————–
Earnings per share $ 0.12 $ 0.23 $ 0.34 $ 0.77
Dividends per share
declared $ 0.04 $ 0.04 $ 0.16 $ 0.16
Weighted average
number of shares
(millions) 95.1 94.8 95.1 94.4
Segmented Financial Information
———————————————————————
In thousands of Quarter ended Years ended
Canadian dollars, Dec 31 Dec 31
(unaudited) 2000 1999 2000 1999
———————————————————————
Sales
Meat Products
Group $ 685,078 $ 527,284 $ 2,446,631 $ 2,134,141
Bakery Products
Group 165,316 158,221 650,904 675,941
Agribusiness Group 218,087 212,474 845,754 719,645
————————————————–
$ 1,068,481 $ 897,979 $ 3,943,289 $ 3,529,727
————————————————–
————————————————–
Earnings (loss) from
Operations
Meat Products
Group $ 1,571 $ 17,586 $ (11,218) $ 66,483
Bakery Products Group 5,769 3,479 20,481 9,711
Agribusiness Group 18,754 23,734 80,878 70,738
————————————————–
$ 26,094 $ 44,799 $ 90,141 $ 146,932
————————————————–
————————————————–
Consolidated Balance Sheets
———————————————————————
In thousands of Canadian dollars As at December 31,
(Unaudited) 2000 1999
———————————————————————
ASSETS
Current assets:
Cash and cash equivalents $ 42,053 $ 41,007
Accounts receivable 246,966 200,593
Inventories 192,335 169,587
Prepaid and other assets 13,546 12,339
———– ———–
494,900 423,526
Investments in associated companies 95,141 91,275
Property and equipment 686,659 639,155
Other assets 174,524 153,857
Future tax asset 13,945 –
Goodwill 318,746 302,922
———– ———–
$ 1,783,915 $ 1,610,735
———– ———–
———– ———–
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Bank indebtedness $ 41,852 $ 25,214
Accounts payable and accrued charges 429,286 397,531
Income and other taxes payable 14,960 24,281
Current portion of long-term debt 13,334 10,607
———– ———–
499,432 457,633
Long-term debt 708,427 571,095
Other long-term liabilities 6,001 6,545
Future tax liability 40,689 –
Deferred income taxes – 33,900
Minority interest 78,773 76,872
Shareholders’ equity 450,593 464,690
———– ———–
$ 1,783,915 $ 1,610,735
———– ———–
———– ———–
Notes to Interim Financial Reporting
New accounting guidelines issued in Canada require the liability approach to be adopted to account for income taxes. The Company has adopted the new income tax accounting standard retroactively, effective January 1, 2000, without restating the financial statements of any prior periods as permitted under the standard. The retroactive application of the recommendation would not materially affect net earnings or net earnings per share as previously reported for 1999. In total, adoption of the standard results in a cumulative reduction to retained earnings at January 1, 2000 of $29,334,000.
The Company has adopted the new accounting guidelines for pension benefits prospectively from January 1, 2000. This application of the recommendation does not materially affect net earnings or net earnings per share as at and for the year ended December 31, 2000.
In 1999, the Company elected to retroactively change the method used to account for post-retirement benefits other than pensions, and accordingly restated opening shareholders’ equity. The impact of these changes is described in Note 16 to the Company’s 1999 Annual Financial Statements.
Consolidated Statements of Cash Flows
———————————————————————
In thousands of Canadian dollars Years ended December 31,
(Unaudited) 2000 1999
———————————————————————
CASH PROVIDED BY (USED IN):
Operating activities
Net earnings for the period $ 36,786 $ 77,198
Add (deduct) items not affecting cash:
Depreciation 76,922 62,723
Amortization 9,617 8,532
Minority interest 4,993 7,949
Future income taxes (21,931) –
Deferred income taxes – 1,147
Undistributed earnings of associated
companies (6,342) (2,115)
Gain on sale of property and equipment (1,228) (292)
Gain on sale of business and short-term
investments (16,828) (21,430)
Other 4,646 2,881
Non-cash amounts included in unusual items – 9,307
Changes in non-cash operating working capital(54,535) (9,271)
———– ———–
32,100 136,629
———– ———–
Financing activities
Dividends paid (15,218) (15,730)
Dividends paid to minority interest (2,538) (6,793)
Increase in long-term debt, net 118,131 53,520
Convertible debenture interest paid (5,478) (5,804)
Increase in share capital 1,525 2,103
Shares repurchased for cancellation (1,251)
Other 1,180 (1,475)
———– ———–
96,351 25,821
———– ———–
Investing activities
Additions to property and equipment (108,590) (121,760)
Proceeds from sale of property and equipment 6,465 6,592
Acquisition of net assets of businesses (61,483) (107,114)
Net reduction in other investments 2,737 –
Net proceeds on sale of short-term
investments 16,828 –
Net proceeds from divestiture of businesses 61,417
———– ———–
(144,043) (160,865)
———– ———–
Net increase (decrease) in cash for the period (15,592) 1,585
Cash and cash equivalents, beginning of period 15,793 14,208
———– ———–
Cash and cash equivalents, end of period $ 201 $ 15,793
———– ———–
———– ———–
