TSX: MFI
www.mapleleaffoods.com
Fourth quarter delivers strong sales and margin
momentum in the Meat Protein Group while consistent disciplined
brand building activities drive over 30.0% sales growth in the
Plant Protein Group
MISSISSAUGA, ON, Feb. 27, 2020 /PRNewswire/ - Maple Leaf Foods
Inc. ("Maple Leaf Foods" or "the Company") (TSX: MFI) today
reported its financial results for the fourth quarter and full year
ended December 31, 2019. The Company also announced it will
increase its quarterly dividend by $0.015 per share or 10.3% to $0.16 per
share, effective the first quarter of 2020.
"Our teams delivered on our strategic, operational and financial
priorities in the fourth quarter," said Michael H. McCain, President and CEO. "In meat
protein, we continue to see the results of our brand renovation
strategy and focus on sustainable meats. Despite an extremely
challenging and volatile year in meat protein due to global trade
issues and the impact of African swine fever, we delivered Adjusted
EBITDA margin expansion in the quarter and year in this
segment.
"We are seeing our disciplined investments in advertising and
marketing take hold in plant protein, which combined with continued
product innovation and broader distribution points, resulted in
strong growth in the fourth quarter. We expect this momentum to
continue as these strategies unfold," continued Mr. McCain.
Fourth Quarter 2019 Highlights
- Total Company sales growth of 13.7% and Adjusted Earnings
Before Interest, Taxes, Depreciation and Amortization
("EBITDA")(i) margin of 7.4% of sales was fueled
by strong performance in the Meat Protein Group.
- Meat Protein Group sales grew 13.3% (9.9% excluding the impact
of acquisitions) driven predominantly by favourable pork market
prices and consistent execution of the Company's brand renovation
strategy. Adjusted EBITDA margin was 11.4%, expanding 130 basis
points ("bps"), in line with expectations.
- Continued solid Plant Protein Group sales growth of 31.5% was
the second consecutive quarter of growth exceeding 30.0%. Focused
and disciplined investment in marketing and brand, as well as
building sales support and supply chain infrastructure, resulted in
selling, general and administrative expenses ("SG&A") of
$45.3 million. Adjusted EBITDA in the
Plant Protein Group was a loss of $34.9
million.
- Net earnings for the quarter of $17.5
million increased 46.1% over prior year.
2019 Highlights and 2020 Outlook
- First major food company globally to become carbon neutral.
- Sales growth of 12.8% was supported by strong performance in
the Meat Protein Group and double-digit growth in the Plant Protein
Group.
- Total Company's Adjusted EBITDA margin was 8.1%. The Meat
Protein Group's Adjusted EBITDA margin of 10.4% grew 50 bps
year-over-year, despite volatility in the meat protein market and
the four-month pork embargo by China. Strategic investments in the Plant
Protein Group impacted both the Plant Protein, and the total
Company Adjusted EBITDA margin.
- Capital expenditures of $270.7
million included Construction Capital(i)
of $82.8 million, the majority of
which was related to long-term investments in the London poultry facility.
- Balance sheet remains strong, with Net
Debt(i) of $442.0
million and undrawn committed credit of $1,465.0 million.
- Outlook for 2020: Focus on profitable growth in the Meat
Protein Group, expecting higher sales and expanding gross margin,
with a continued focus on cost control. In the Plant Protein Group,
the Company expects 30.0% top-line growth, improvement in IFRS
gross margin, and SG&A spend of approximately $150.0 million.
"We are very excited about where we are headed as a Company. Our
investments in our meat protein business are paying off. In plant
protein, we are continuing on a purposeful yet disciplined path as
we build our brands and solidify our strong market position," Mr.
McCain concluded.
(i) Refer to the section
titled Non-IFRS Financial Measures in this news
release.
|
Financial Highlights
Measure(i)
|
Three months ended
December 31,
|
Twelve months
ended December 31,
|
(Unaudited)
|
|
2019
|
|
2018
|
Change
|
|
2019
|
|
2018
|
Change
|
Sales
|
$
|
1,016.0
|
$
|
893.9
|
13.7 %
|
$
|
3,941.5
|
$
|
3,495.5
|
12.8 %
|
Net
Earnings
|
$
|
17.5
|
$
|
11.9
|
46.1 %
|
$
|
74.6
|
$
|
101.3
|
(26.4)%
|
Basic Earnings per
Share
|
$
|
0.14
|
$
|
0.10
|
40.0 %
|
$
|
0.60
|
$
|
0.81
|
(25.9)%
|
Adjusted Operating
Earnings(ii)
|
$
|
28.4
|
$
|
54.0
|
(47.4)%
|
$
|
145.4
|
$
|
215.6
|
(32.6)%
|
Adjusted Earnings per
Share(ii)
|
$
|
0.12
|
$
|
0.29
|
(58.6)%
|
$
|
0.68
|
$
|
1.22
|
(44.3)%
|
Free Cash
Flow(ii)
|
$
|
(3.6)
|
$
|
55.1
|
(106.5)%
|
$
|
(0.6)
|
$
|
119.8
|
(100.5)%
|
|
(i) All financial measures
in millions of dollars except Basic and Adjusted Earnings per
Share.
|
|
(ii) Refer to the section
titled Non-IFRS Financial Measures in this news
release.
|
Fourth Quarter 2019
Sales for the fourth quarter increased 13.7% to $1,016.0 million compared to $893.9 million last year, or increased 10.4%
after adjusting for acquisitions. Sales growth was driven by
meat protein, tied to higher meat values, favourable mix and volume
supported by food renovation and growth in sustainable meats,
coupled with accelerated growth in plant protein.
Net Earnings for the fourth quarter of 2019 were $17.5 million ($0.14 per basic share) compared to $11.9 million ($0.10 per basic share) last year. The increase is
attributable to the same factors as noted below and lower
restructuring and acquisition costs, which are excluded in
calculating Adjusted Operating Earnings.
Adjusted Operating Earnings for the fourth quarter of 2019 were
$28.4 million compared to
$54.0 million last year. The decrease
in Adjusted Operating Earnings reflects strategic investments in
plant protein and the short term dilutive impact of acquisitions
which more than offset strong commercial performance in meat
protein, driven by favourable sales mix, pricing actions taken to
mitigate impact of higher input costs, and continued growth in
sustainable meats. Results also benefited from stronger pork
markets compared to a year ago.
Full Year 2019
Sales for 2019 were $3,941.5
million compared to $3,495.5
million last year, an increase of 12.8%. Excluding
acquisitions, sales increased 5.2%, driven by favourable pricing,
mix and volume in meat protein and accelerated growth in plant
protein of 23.6%.
Net earnings for 2019 were $74.6
million ($0.60 per basic
share) compared to $101.3 million
($0.81 per basic share) last year.
Strong commercial performance and favourable resolution of income
tax audits were more than offset by strategic investments in plant
protein to drive top line growth and heightened volatility in hog
prices. Net earnings were negatively impacted by $12.1 million due to non-cash fair value changes
in biological assets and derivative contracts, which are excluded
in the calculation of Adjusted Operating Earnings below.
Adjusted Operating Earnings for 2019 were $145.4 million compared to $215.6 million last year, and Adjusted Earnings
per Share for 2019 were $0.68
compared to $1.22 last year due to
similar factors as noted above.
For further discussion on key metrics and a discussion of
results by operating segment, refer to the section titled Operating
Review.
Note: Several
items are excluded from the discussions of underlying earnings
performance as they are not representative of ongoing operational
activities. Refer to the section entitled Non-IFRS Financial
Measures at the end of this news release for a description and
reconciliation of all non-IFRS financial measures.
|
Operating Review
During the year ended December 31, 2019, the Company
completed a comprehensive analysis of the role of its rapidly
expanding plant protein business in the Company's meat and plant
protein portfolio, their respective financial profiles and
long-term value creation opportunities. Based on the importance of
these two distinct businesses and differing strategic and financial
requirements to maximize their market leadership and long-term
shareholder value, the Company has disaggregated its business into
two operating segments. These segments offer different products,
with separate organizational structures, brands, financial and
marketing strategies. The Company's chief operating decision makers
regularly review internal reports for these businesses; performance
of the Meat Protein Group is based on revenue growth, Adjusted
Operating Earnings and Adjusted EBITDA, while the performance
of the Plant Protein Group is based predominantly on revenue growth
rates, managing gross margins and controlling investment levels
which generate high revenue growth rates.
Fourth Quarter 2019
The following table summarizes the Company's sales, gross
profit, SG&A expenses, Adjusted Operating Earnings, Adjusted
EBITDA, and Adjusted EBITDA margin by operating segment for the
three months ended December 31, 2019
and December 31, 2018:
|
Three
months ended December 31, 2019
|
Three months
ended December 31,
2018(i)
|
($
millions) (Unaudited)
|
Meat
Protein
Group
|
Plant
Protein
Group
|
Non-
Allocated(ii)
|
Total
|
Meat Protein
Group
|
Plant Protein
Group
|
Non-
Allocated(ii)
|
Total
|
Sales
|
$
|
970.3
|
49.7
|
(4.1)
|
$
|
1,016.0
|
$
|
856.1
|
37.8
|
—
|
$
|
893.9
|
Gross
profit
|
$
|
150.5
|
7.2
|
3.0
|
$
|
160.8
|
$
|
133.2
|
9.5
|
19.1
|
$
|
161.8
|
Selling, general
and administrative
|
$
|
84.0
|
45.3
|
—
|
$
|
129.3
|
$
|
77.4
|
11.3
|
—
|
$
|
88.7
|
expenses
|
Adjusted Operating
Earnings
|
$
|
66.5
|
(38.1)
|
—
|
$
|
28.4
|
$
|
55.8
|
(1.8)
|
—
|
$
|
54.0
|
Adjusted
EBITDA
|
$
|
110.2
|
(34.9)
|
—
|
$
|
75.3
|
$
|
86.1
|
3.0
|
—
|
$
|
89.1
|
Adjusted EBITDA
margin
|
|
11.4%
|
(70.3)%
|
N/A
|
|
7.4%
|
|
10.1%
|
8.0%
|
N/A
|
|
10.0%
|
|
|
(i)
|
Comparative
figures have been presented to align with current reportable
segments.
|
|
|
(ii)
|
Non-allocated
includes eliminations of inter-segment sales and associated cost of
goods sold, and non-allocated costs which are comprised of expenses
not separately identifiable to reportable segments and are not part
of the measures used by the Company when assessing a segment's
operating results.
|
Meat Protein Group
The Meat Protein Group is comprised of prepared meats,
ready-to-cook and ready-to-serve meals, value-added fresh pork and
poultry products that are sold to retail, foodservice and
industrial channels and agricultural operations in pork and
poultry. The Meat Protein Group includes leading brands such as
Maple Leaf®, Maple Leaf Prime®, Schneiders®, Mina®, Greenfield
Natural Meat Co.®, Swift® and many leading regional brands.
Sales for the fourth quarter increased 13.3% to $970.3 million compared to $856.1 million last year, or increased 9.9% after
adjusting for acquisitions. Sales growth was driven by stronger
pork market prices, pricing actions implemented in the third
quarter and in late 2018 to mitigate higher input costs and mix
tied to food renovation supporting major brand strategies.
Continued expansion of sustainable meats, including double-digit
growth in the U.S., also contributed to strong sales.
Gross profit for the fourth quarter of 2019 was $150.5 million (gross margin of 15.5%) compared
to $133.2 million (gross margin of
15.6%) last year. Strong commercial and operational performance,
including favourable mix attributed to food renovation, continued
expansion of sustainable meats and pricing action taken to mitigate
higher input costs, contributed to higher gross profit in the
quarter. This improved performance was partially offset by
bio-security costs in our hog growing operations and a temporary
import suspension of Canadian pork into China.
SG&A expenses for the fourth quarter of 2019 were
$84.0 million (8.7% of sales),
compared to $77.4 million (9.0% of
sales) last year. The increase in SG&A expenses is primarily
related to variable compensation dependent on business performance.
On a percentage of sales basis, SG&A expenses for meat protein
were 0.3% lower than last year.
Adjusted Operating Earnings for the fourth quarter of 2019 were
$66.5 million compared to
$55.8 million last year. Improved
commercial and operational performance was driven by favourable mix
attributed to food renovation, higher sustainable meats sales and
pricing action taken to mitigate higher input costs. This was
partially offset by increased bio-security costs in our hog barns
and a temporary import suspension of Canadian pork into
China. Increases in SG&A
expenses, as noted above, also impacted earnings in the
quarter.
Adjusted EBITDA Margin for the fourth quarter was 11.4% compared
to 10.1% last year. The increase is consistent with the factors
noted above. Adjusted EBITDA margin was impacted by the adoption of
International Financial Reporting Standards ("IFRS") 16
Leases. Upon the adoption of IFRS 16, leases previously
classified as operating leases were capitalized on the Company's
consolidated balance sheet. For the fourth quarter an incremental
$8.8 million in depreciation and
$2.1 million in interest was recorded
on the Company's consolidated statement of earnings, not included
in Adjusted EBITDA.
Plant Protein Group
The Plant Protein Group is comprised of refrigerated plant
protein products, premium grain-based protein and vegan cheese
products sold to retail, foodservice and industrial channels. The
Plant Protein Group includes the leading brands Lightlife® and
Field Roast Grain Meat Co.™
Sales for the fourth quarter increased 31.5% to $49.7 million compared to $37.8 million last year. Sales growth was driven
by expanded distribution of new products and continued volume
increases in its existing portfolio.
Gross profit for the fourth quarter of 2019 was $7.2 million (gross margin of 14.4%) compared to
$9.5 million (gross margin of 25.0%)
last year. The decrease in gross profit was attributed to
inefficiencies associated with start-up production and other costs
related to supporting high growth.
SG&A expenses for the fourth quarter of 2019 were
$45.3 million (91.1% of sales),
compared to $11.3 million (29.8% of
sales) last year. The increase in SG&A expenses reflects the
evolution of the Company's plant protein strategy to drive sales
growth and secure market share in a rapidly growing market.
Supporting this strategy, significant investment in advertising,
promotion and marketing was incurred during the quarter to enhance
brand awareness and support new product launches and expanded
distribution. In addition, the Company invested to broaden
organizational capacity and its innovation pipeline.
Adjusted Operating Earnings for the fourth quarter of 2019 were
a loss of $38.1 million compared to a
loss of $1.8 million last year. The
decline in Adjusted Operating Earnings reflects a deliberate focus
on accelerating sales growth through increased investments in
advertising, promotion and marketing, organizational capacity,
product development and operational efficiency.
Full Year 2019
The following table summarizes the Company's sales, gross
profit, SG&A expenses, Adjusted Operating Earnings, Adjusted
EBITDA, and Adjusted EBITDA margin by operating segment for the
year ended December 31, 2019 and December 31, 2018.
($
millions)
|
2019
|
2018(i)
|
Meat Protein
Group
|
Plant
Protein Group
|
Non-
Allocated(ii)
|
Total
|
Meat Protein
Group
|
Plant Protein
Group
|
Non-
Allocated(ii)
|
Total
|
Sales
|
$
|
3,778.0
|
176.4
|
(12.9)
|
$
|
3,941.5
|
$
|
3,357.0
|
138.6
|
—
|
$
|
3,495.5
|
Gross
profit
|
$
|
568.0
|
35.0
|
(12.1)
|
$
|
591.0
|
$
|
518.3
|
38.8
|
(5.3)
|
$
|
551.8
|
Selling, general
and administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
expenses
|
$
|
338.7
|
119.0
|
—
|
$
|
457.7
|
$
|
305.5
|
36.0
|
—
|
$
|
341.5
|
Adjusted Operating
Earnings
|
$
|
229.3
|
(84.0)
|
—
|
$
|
145.4
|
$
|
212.8
|
2.8
|
—
|
$
|
215.6
|
Adjusted
EBITDA
|
$
|
393.2
|
(71.6)
|
(0.4)
|
$
|
321.2
|
$
|
331.6
|
12.7
|
—
|
$
|
344.3
|
Adjusted EBITDA
margin
|
|
10.4
|
(40.6)%
|
N/A
|
|
8.1%
|
|
9.9%
|
9.2%
|
N/A
|
|
9.9%
|
|
|
(i)
|
Comparative
figures have been presented to align with current reportable
segments.
|
|
|
(ii)
|
Non-allocated
includes eliminations of inter-segment sales and associated cost of
goods sold, and non-allocated costs which are comprised of expenses
not separately identifiable to reportable segments and are not part
of the measures used by the Company when assessing a segment's
operating results.
|
Meat Protein Group
Sales for 2019 increased 12.5% to $3,778.0 million compared to $3,357.0 million last year. Excluding
acquisitions, sales grew 4.9%, driven by favourable mix tied to
food renovation supporting major brand strategies and pricing
actions implemented during the third quarter and in late 2018 to
mitigate higher raw material input costs. Continued expansion of
sustainable meats, including double-digit growth in the U.S., also
contributed to strong sales.
Gross profit for 2019 was $568.0
million (gross margin of 15.0%) compared to $518.3 million (gross margin of 15.4%) last year.
Stronger commercial performance, including favourable mix
attributed to food renovation, expansion of sustainable meats and
pricing actions taken to mitigate higher raw material costs,
contributed to higher gross profit. Improvement in commercial
performance was partially offset by the temporary import suspension
of Canadian pork into China for
the third quarter and part of the fourth quarter and capacity
expansion costs in the lunch kits and pastry categories.
SG&A expenses for 2019 were $338.7
million (9.0% of sales), compared to $305.5 million (9.1% of sales) last year. The
increase in SG&A expenses is primarily related to increases in
headcount due to acquisitions, variable compensation dependent on
business performance and investments tied to growth in the U.S. and
Asia.
Adjusted Operating Earnings for 2019 were $229.3 million compared to $212.8 million last year. Improved commercial and
operational performance was driven by favourable mix attributed to
food renovation, higher sustainable meats sales and pricing action
taken to mitigate higher raw material costs. This was partially
offset by increased bio-security costs in the Company's hog barns,
capacity expansion costs in protein kits and meat pies and
increases in SG&A as noted above.
Adjusted EBITDA margin was 10.4% compared to 9.9% last year, the
increase is consistent with the factors noted above. Upon the
adoption of IFRS 16, leases previously classified as operating
leases were capitalized on the Company's consolidated balance
sheet. For 2019, an incremental increase of $34.1 million in depreciation and $8.3 million in interest were recorded on the
Company's consolidated statement of earnings, not included in
Adjusted EBITDA.
Plant Protein Group
Sales for 2019 increased 27.3% to $176.4
million compared to $138.6
million last year. Excluding acquisitions, sales increased
23.6% driven by expanded distribution of new products and continued
volume increases in its existing portfolio.
Gross profit for 2019 was $35.0
million (gross margin of 19.8%) compared to $38.8 million (gross margin of 28.0%) last year.
The decrease in gross profit was attributed to inefficiencies
associated with start-up production and other costs related to
supporting high growth.
SG&A expenses for 2019 were $119.0
million (67.4% of sales), compared to $36.0 million (26.0% of sales) last year. The
increase in SG&A expenses reflects the evolution of the
Company's plant protein strategy to drive sales growth and secure
market share in a rapidly growing market. Supporting this strategy,
significant investment in advertising, promotion and marketing was
incurred during the year to enhance brand awareness and support new
product launches and expand distribution. In addition, the Company
invested to broaden organizational capacity and its pipeline of new
product innovation.
Adjusted Operating Earnings for 2019 were a loss of $84.0 million compared to earnings of
$2.8 million last year. The decline
in Adjusted Operating Earnings is consistent with the factors noted
above.
Other Matters
On February 26, 2020, the Board of
Directors approved a quarterly dividend of $0.16 per share (up
from $0.145 per share in each quarter
of 2019), $0.64 per share on an
annual basis, payable March 31, 2020
to shareholders of record at the close of business March 13, 2020. Unless indicated otherwise by the
Company at or before the time the dividend is paid, the dividend
will be considered an Eligible Dividend for the purposes of the
"Enhanced Dividend Tax Credit System".
Conference Call
An investor presentation related to the Company's fourth quarter
financial results is available at www.mapleleaffoods.com and
can be found under Presentations and Webcasts on the
Investors page. A conference call will be held at 8:00
a.m. EST on February 27, 2020, to review Maple Leaf Foods'
fourth quarter financial results. To participate in the call,
please dial 416-764-8609 or 1-888-390-0605. For those unable to
participate, playback will be made available an hour after the
event at 416-764-8677 or 1-888-390-0541 (Passcode: 076661#).
A webcast presentation of the fourth quarter financial results
will also be available at:
https://event.on24.com/wcc/r/2166266/4360E85DBC3ECDCA56BCD824C81237DB
The Company's full Audited Financial Statements and related
Management's Discussion and Analysis are available on the Company's
website.
2020 Outlook and Long-term Targets
Maple Leaf is a leading consumer protein company, with the
competitive advantages of a portfolio of leading brands, a robust
pipeline of opportunities in attractive expanding markets and a
proven-track record of execution. Combined with its solid balance
sheet and capital structure that provide the financial flexibility
to invest in future growth, Maple Leaf Foods is well-positioned to
drive sustainable growth and create shareholder value.
A key part of Maple Leaf's long-term growth includes its Plant
Protein Group. In 2019, the Company articulated its ambitious goal,
to achieve $3.0 billion in sales in
the Plant Protein Group by 2029. This would assume a market size of
approximately $25 billion. In that
environment the Company would aspire to generate approximately
30.0% gross margin and SG&A expense (as a % of sales) in the
low double-digit range. Long-term, achieving these targets is
expected to result in Adjusted EBITDA margins that exceed those in
the Meat Protein Group.
This will be driven by:
- Capitalizing on the high growth plant protein market,
predominantly in the refrigerated space.
- Leveraging Maple Leaf Foods' established expertise in brand
development and effective marketing.
- Delivering on a pipeline of new product innovation to broaden
and deepen its product portfolio.
- Executing on a multi-tier supply capacity strategy including
leverage of existing meat protein footprint, opportunistic
utilization of co-packing services and development of new capacity
starting with the highly modularized Shelbyville plant processing facility.
In 2017, the Company established an Adjusted EBITDA margin
target of 14.0-16.0% to be achieved in 2022. This target
remains unchanged for the Meat Protein Group, and includes:
- Low single-digit organic revenue growth and achieve an Adjusted
EBITDA margin in the Meat Protein Group between 14.0-16.0% in
2022.
This will be driven by:
- Growth in sustainable meats, including further establishing the
business as a leading provider of Raised Without Antibiotics
("RWA") pork and poultry in North America.
- Continued benefits from brand renovation strategies to
accelerate volume growth and product mix shift in branded prepared
meats products.
- Focus on cost control through operational efficiencies.
In 2018, the Company announced the construction of a
London, Ontario poultry processing
facility. Construction is underway, however, due to poor weather
conditions last spring, along with a robust economy and highly
competitive environment, some construction components have taken
longer to source. As a result, construction completion is expected
to be delayed and start-up of this new poultry facility is now
planned for the second quarter of 2022.
In 2019, the Company announced the construction of a
Shelbyville, Indiana facility.
Maple Leaf Foods is continuing to advance engineering and design
work, adapting its plans to provide the flexibility necessary to
meet the demands of the rapidly evolving plant protein market. The
Company is focused on ensuring that the new facility is designed to
provide the right scalability to meet current and future consumer
demand. While this additional engineering and design work means
that completion of the Shelbyville,
Indiana facility will be delayed until the end of 2022, the
Company is able to expand capacity within its existing network to
allow it to meet immediate demand.
2020 Outlook
For 2020, the Company expects to achieve the
following:
Meat Protein Group - Profitable Growth
- Mid-to-high single digit revenue growth driven by sustainable
meats and higher sales to Asian markets.
- Gross margin expansion due to the continued mix-shift benefits
in prepared meats resulting from growth in sustainable meats and
brand renovation, coupled with pork complex conditions more in-line
with the 5-year average, as well as contributions from higher sales
to Asian markets.
- Expand Adjusted EBITDA margin, making significant progress
towards the 2022 Adjusted EBITDA margin target of 14.0-16.0%, based
on the factors noted above as well cost efficiencies.
Plant Protein Group - Investing for Growth
- Revenue growth of approximately 30% from 2019 levels, which is
in line with long-term strategic targets. This growth is driven by
continued product innovation, brand awareness resulting in further
demand generation, increased distribution points, and strong growth
in the underlying market.
- Gross margin expansion relative to 2019 levels, as product
margins are expected to increase materially, while being impacted
by the inherent inefficiencies of a rapidly growing business.
- SG&A expense is expected to be approximately $150.0 million. The Company will continue to
invest in advertising, promotion and marketing to establish brand,
while scaling up talent and operations to develop the
organizational structure required for this growing business.
Capital
- The Company currently estimates its capital expenditures for
the full year of 2020 will be in a range of approximately
$650.0 million to $700.0 million.
- Approximately 70% of this will be Construction Capital, which
is mainly related to ongoing construction of the London, Ontario poultry facility; further
capacity and efficiency improvements in our prepared meats
business; and investments in plant protein capacity at an existing
facility, as well as further design, engineering, and site work at
the Shelbyville, Indiana
location.
- The balance of capital is slated for continued profit
enhancement, maintenance and sustainability projects.
In addition to financial and operational priorities, Maple Leaf
Foods believes that shared value and operating its business for the
benefit of all stakeholders is crucial. The Company's guiding
pillars to be the "Most Sustainable Protein Company on Earth"
include Better Food, Better Care, Better Communities, Better
Planet, are core to how Maple Leaf Foods conducts itself. To that
end, the Company's priorities include:
- Commitment to carbon neutrality.
- Better Food: leading the real food movement and transitioning
key brands to 100.0% "raised without antibiotics".
- Better Care: further advancement of animal care, including
progress towards transitioning all sows under management to open
housing systems by 2021.
- Better Communities: Investing approximately 1.0% of pre-tax
profit to advance sustainable food security.
- Better Planet: Focus on eliminating waste in any resources the
Company consumes, including food, energy, water, packaging and
time.
Non-IFRS Financial Measures
The Company uses the following non-IFRS measures: Adjusted
Operating Earnings, Adjusted Earnings per Share, Adjusted EBITDA,
Adjusted EBITDA Margin, Construction Capital, Net Debt, Free Cash
Flow and Return on Net Assets. Management believes that these
non-IFRS measures provide useful information to 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 EBITDA and Adjusted
EBITDA Margin
Adjusted Operating Earnings, Adjusted EBITDA and Adjusted EBITDA
Margin are non-IFRS measures used by Management to evaluate
financial operating results. Adjusted Operating Earnings is defined
as earnings before income taxes adjusted for items that are not
considered representative of ongoing 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. Adjusted EBITDA is defined as
Adjusted Operating Earnings plus depreciation and intangible asset
amortization, adjusted for items included in other expense that are
not considered representative of ongoing operational activities of
the business. Adjusted EBITDA Margin is calculated as Adjusted
EBITDA divided by sales.
The table below provides a reconciliation of earnings (loss)
before income taxes under IFRS to Adjusted Operating Earnings and
Adjusted EBITDA for the three and twelve months ended December 31. Management believes that these
non-IFRS measures are useful in assessing the performance of the
Company's ongoing operations and its ability to generate cash flows
to fund its cash requirements, including the Company's capital
investment program.
|
Three months ended
December 31, 2019
|
Three months ended
December 31, 2018(i)
|
($
millions) (Unaudited)
|
Meat
Protein
Group
|
Plant
Protein
Group
|
Non-
Allocated(ii)
|
Total
|
Meat Protein
Group
|
Plant
Protein
Group
|
Non-
Allocated(ii)
|
Total
|
Earnings (loss)
before income taxes
|
$
|
62.1
|
(38.2)
|
(0.2)
|
$
|
23.6
|
$
|
13.3
|
(1.7)
|
6.5
|
$
|
18.1
|
Interest expense and
other financing costs
|
|
—
|
—
|
7.4
|
|
7.4
|
|
—
|
—
|
4.2
|
|
4.2
|
Other expense
(income)
|
|
(0.6)
|
0.1
|
(4.1)
|
|
(4.6)
|
|
0.3
|
(0.1)
|
8.3
|
|
8.5
|
Restructuring and
other related costs
|
|
5.0
|
—
|
—
|
|
5.0
|
|
42.2
|
—
|
—
|
|
42.2
|
Earnings (loss)
from operations
|
$
|
66.5
|
(38.1)
|
3.0
|
$
|
31.4
|
$
|
55.8
|
(1.8)
|
19.1 $
|
$
|
73.1
|
Decrease in fair
value of biological assets(iii)
|
|
—
|
—
|
(7.8)
|
|
(7.8)
|
|
—
|
—
|
(22.2)
|
|
(22.2)
|
Unrealized loss
(gain) on derivative contracts(iii)
|
|
—
|
—
|
4.7
|
|
4.7
|
|
—
|
—
|
3.1
|
|
3.1
|
Adjusted Operating
Earnings
|
$
|
66.5
|
(38.1)
|
—
|
$
|
28.4
|
$
|
55.8
|
(1.8)
|
—
|
$
|
54.0
|
Depreciation and
amortization
|
|
43.1
|
3.3
|
—
|
|
46.4
|
|
30.6
|
4.7
|
—
|
|
35.3
|
Items included in
other expense representative of
|
|
|
|
|
|
|
|
|
|
|
|
|
ongoing
operations(iv)
|
|
0.6
|
(0.1)
|
—
|
|
0.5
|
|
(0.3)
|
0.1
|
—
|
|
(0.2)
|
Adjusted
EBITDA
|
$
|
110.2
|
(34.9)
|
—
|
$
|
75.3
|
$
|
86.1
|
3.0
|
—
|
$
|
89.1
|
Adjusted EBITDA
margin
|
|
11.4%
|
(70.3)%
|
N/A
|
|
7.4%
|
|
10.1%
|
8.0%
|
N/A
|
|
10.0%
|
|
|
(i)
|
Comparative
figures have been presented to align with current reportable
segments.
|
|
|
(ii)
|
Non-allocated
includes eliminations of inter-segment sales and associated cost of
goods sold, and non-allocated costs which are comprised of expenses
not separately identifiable to reportable segments and are not part
of the measures used by the Company when assessing a segment's
operating results.
|
|
|
(iii)
|
Unrealized
gains/losses on derivative contracts is reported within cost of
sales in the Company's 2019 annual audited consolidated financial
statements. For biological assets information, please refer to Note
6 of the Company's 2019 annual audited consolidated financial
statements
|
|
|
(iv)
|
Primarily includes
(gains) and losses on disposal of investment properties,
acquisition related costs and interest income, net of
tax.
|
|
Twelve months
ended December 31, 2019
|
Twelve months ended
December 31, 2018(i)
|
($
millions)
|
Meat
Protein
Group
|
Plant
Protein
Group
|
Non-
Allocated(ii)
|
Total
|
Meat
Protein
Group
|
Plant
Protein
Group
|
Non-
Allocated(ii)
|
Total
|
Earnings (loss)
before income taxes
|
$
|
218.0
|
(84.2)
|
(46.8)
|
$
|
87.0
|
$
|
169.3
|
2.7
|
(31.0)
|
$
|
141.1
|
Interest expense and
other financing costs
|
—
|
—
|
32.0
|
32.0
|
—
|
—
|
10.0
|
10.0
|
Other expense
(income)
|
0.3
|
0.2
|
2.7
|
3.3
|
(2.8)
|
0.1
|
15.6
|
13.0
|
Restructuring and
other related costs
|
11.0
|
—
|
—
|
11.0
|
46.2
|
—
|
—
|
46.2
|
Earnings (loss)
from operations
|
$
|
229.3
|
(84.0)
|
(12.1)
|
$
|
133.3
|
$
|
212.8
|
2.8
|
(5.3)
|
$
|
210.3
|
Decrease in fair
value of biological assets(iii)
|
—
|
—
|
5.5
|
5.5
|
—
|
—
|
10.9
|
10.9
|
Unrealized loss
(gain) on derivative contracts(iii)
|
—
|
—
|
6.5
|
6.5
|
—
|
—
|
(5.6)
|
(5.6)
|
Adjusted Operating
Earnings
|
$
|
229.3
|
(84.0)
|
—
|
$
|
145.4
|
$
|
212.8
|
2.8
|
—
|
$
|
215.6
|
Depreciation and
amortization
|
164.2
|
12.6
|
—
|
176.8
|
116.1
|
9.9
|
—
|
126.0
|
Items included in
other expense representative of
|
|
|
|
|
|
|
|
|
ongoing operations(iv)
|
(0.3)
|
(0.2)
|
(0.4)
|
(1.0)
|
2.8
|
(0.1)
|
—
|
2.7
|
Adjusted
EBITDA
|
$
|
393.2
|
(71.6)
|
(0.4)
|
$
|
321.2
|
$
|
331.6
|
12.7
|
—
|
$
|
344.3
|
Adjusted EBITDA
margin
|
10.4%
|
(40.6)%
|
N/A
|
8.1%
|
9.9%
|
9.2%
|
N/A
|
9.9%
|
|
|
(i)
|
Comparative
figures have been presented to align with current reportable
segments.
|
|
|
(ii)
|
Non-allocated
includes eliminations of inter-segment sales and associated cost of
goods sold, and non-allocated costs which are comprised of expenses
not separately identifiable to reportable segments and are not part
of the measures used by the Company when assessing a segment's
operating results.
|
|
|
(iii)
|
Unrealized
gains/losses on derivative contracts is reported within cost of
sales in the Company's 2019 annual audited consolidated financial
statements. For biological assets information, please refer to Note
6 of the Company's 2019 annual audited consolidated financial
statements
|
|
|
(iv)
|
Primarily includes
(gains) and losses on disposal of investment properties,
acquisition related costs and interest income, net of
tax.
|
Adjusted Earnings per Share
Adjusted Earnings per Share, a non-IFRS measure, is used by
Management to evaluate financial operating results. It is defined
as basic earnings per share and is adjusted on the same basis as
Adjusted Operating Earnings. The table below provides a
reconciliation of basic earnings per share under IFRS to Adjusted
Earnings per Share for the three and twelve months ended
December 31, as indicated below.
Management believes this basis is the most appropriate on which to
evaluate financial results as they are representative of the
ongoing operations of the Company.
($ per
share)
(Unaudited)
|
Three months ended
December 31,
|
Twelve months
ended December 31,
|
|
2019
|
|
2018
|
2019
|
2018
|
Basic earnings per
share
|
$
|
0.14
|
$
|
0.10
|
$
|
0.60
|
$
|
0.81
|
Restructuring and
other related costs(ii)
|
0.03
|
0.25
|
0.07
|
0.27
|
Income tax recovery
not considered
|
|
|
|
|
representative of
ongoing operations
|
—
|
—
|
(0.08)
|
—
|
Items included in
other (income) expense
|
|
|
|
|
not considered
representative of ongoing
operations(ii)
|
(0.03)
|
0.06
|
0.02
|
0.11
|
Change in the fair
value of biological
|
(0.05)
|
(0.13)
|
0.03
|
0.06
|
assets(iii)
|
Unrealized loss
(gain) on derivative
|
|
|
|
|
contracts(iii)
|
0.03
|
0.02
|
0.04
|
(0.03)
|
Adjusted Earnings
per Share(i)
|
$
|
0.12
|
$
|
0.29
|
$
|
0.68
|
$
|
1.22
|
|
|
(i)
|
May not add due to
rounding.
|
|
|
(ii)
|
Includes per share
impact of restructuring and other related costs, net of
tax.
|
|
|
(iii)
|
Includes per share
impact of the change in unrealized loss (gain) on derivative
contracts and the change in fair value of biological assets, net of
tax.
|
Construction Capital
Construction Capital, a non-IFRS measure, is used by Management
to evaluate the amount of capital resources invested in specific
strategic development projects that have not yet entered commercial
production. It is defined as investments in projects over
$50.0 million that are related to
longer-term strategic initiatives, with no returns expected for at
least 12 months in the future and the asset will be re-categorized
from Construction Capital once operational. Current strategic
initiatives primarily include the investments in the London, Ontario poultry production facility,
and the plant protein production facility in Shelbyville, Indiana. The following table is a
summary of Construction Capital activity and debt financing for the
periods indicated below.
($
thousands)
|
2019
|
2018
|
Opening balance at
January 1
|
$
|
22,422
|
$
|
12,950
|
Additions
|
18,100
|
1,925
|
Balance at March
31
|
$
|
40,522
|
$
|
14,875
|
Additions
|
23,127
|
3,693
|
Balance at June
30
|
$
|
63,649
|
$
|
18,568
|
Additions
|
15,832
|
2,014
|
Balance at
September 30
|
$
|
79,481
|
$
|
20,582
|
Additions
|
25,730
|
1,840
|
Balance at
December 31(i)
|
$
|
105,211
|
$
|
22,422
|
Construction
Capital debt financing(ii)
|
$
|
105,211
|
$
|
22,422
|
|
|
(i)
|
Total Construction
Capital additions in 2019 were $82.8 million (2018: $9.5
million).
|
|
|
(ii)
|
Assumed to be
fully funded by debt to the extent that the Company has Net Debt
outstanding.
|
Net Debt
The following table reconciles Net Debt to amounts reported
under IFRS in the Company's consolidated financial statements as at
December 31, as indicated below. The
Company calculates Net Debt as cash and cash equivalents, less
long-term debt and bank indebtedness. Management believes this
measure is useful in assessing the amount of financial leverage
employed.
($
thousands)
|
As at December
31,
|
2019
|
2018
|
Cash and cash
equivalents
|
$
|
97,285
|
$
|
72,578
|
Current portion of
long-term debt
|
$
|
(899)
|
$
|
(80,897)
|
Long-term
debt
|
(538,429)
|
(302,524)
|
Total
debt
|
$
|
(539,328)
|
$
|
(383,421)
|
Net
Debt
|
$
|
(442,043)
|
$
|
(310,843)
|
Free Cash Flow
Free Cash Flow, a non-IFRS measure, is used by Management to
evaluate cash flow after investing in the maintenance or expansion
of the Company's asset base. It is defined as cash provided by
operations, less additions to long-term assets. The following table
calculates Free Cash Flow for the periods indicated below:
($
thousands) (Unaudited)
|
Three months ended
December 31,
|
Twelve months
ended December 31,
|
2019
|
2018
|
2019
|
2018
|
Cash provided by
operating activities
|
$
|
81,145
|
$
|
106,961
|
$
|
270,180
|
$
|
299,685
|
Additions to
long-term assets
|
(84,785)
|
(51,894)
|
(270,745)
|
(179,865)
|
Free Cash
Flow
|
$
|
(3,640)
|
$
|
55,067
|
$
|
(565)
|
$
|
119,820
|
Return on Net Assets
RONA is calculated by dividing tax effected earnings from
operations (adjusted for items which are not considered
representative of the underlying operations of the business) by
average monthly net assets. Net assets are defined as total assets
(excluding cash and deferred tax assets) less non-interest bearing
liabilities (excluding deferred tax liabilities). Management
believes that RONA is an appropriate basis upon which to evaluate
long-term financial performance.
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 law. These statements
are based on current expectations, estimates, projections, beliefs,
judgments and assumptions based on information available at the
time the applicable forward-looking statement was made and in light
of the Company's experience combined with its perception of
historical trends. Such statements include, but are not limited to,
statements with respect to objectives and goals, in addition to
statements with respect to beliefs, plans, targets, goals,
objectives, expectations, anticipations, estimates, and intentions.
Forward-looking statements are typically identified by words such
as "anticipate", "continue", "estimate", "expect", "may", "will",
"project", "should", "could", "would", "believe", "plan", "intend",
"design", "target", "undertake", "view", "indicate", "maintain",
"explore", "entail", "schedule", "objective", "strategy", "likely",
"potential", "outlook", "aim", "propose", "goal", and similar
expressions suggesting future events or future performance. These
statements are not guarantees of future performance and involve
assumptions, risks, and uncertainties that are difficult to
predict.
By their nature, forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause
actual results or events to differ materially from those
anticipated in such forward-looking statements. The Company
believes the expectations reflected in the forward-looking
statements are reasonable, but no assurance can be given that these
expectations will prove to be correct and such forward-looking
statements should not be unduly relied upon.
Specific forward-looking information in this document may
include, but is not limited to, statements with respect to:
- future performance, including future financial objectives,
goals and targets, expected capital spend and expected SG&A
expenditures for the Company and each of its operating
segments;
- the execution of the Company's business strategy, including the
development and expected timing of business initiatives, brand
expansion and repositioning, and other growth opportunities, as
well as the impact thereof;
- the impact of international trade conditions on the Company's
business, including access to markets, implications associated with
the spread of foreign animal disease (such as ASF), and other
social, economic and political factors that affect trade;
- competitive conditions and the Company's ability to position
itself competitively in the markets in which it competes;
- capital projects, including planning, construction, estimated
expenditures, schedules, approvals, expected capacity, in-service
dates and anticipated benefits of construction of new facilities
and expansions of existing facilities;
- the Company's dividend policy, including future levels and
sustainability of cash dividends, the tax treatment thereof and
future dividend payment dates;
- the impact of commodity prices on the Company's operations and
financial performance, including the use and effectiveness of
hedging instruments;
- expected future cash flows and the sufficiency thereof, sources
of capital at attractive rates, future contractual obligations,
future financing options, renewal of credit facilities, and
availability of capital to fund growth plans, operating obligations
and dividends;
- operating risks, including the execution, monitoring and
continuous improvement of the Company's food safety programs,
animal health initiatives and cost reduction initiatives;
- the implementation, cost and impact of environmental
sustainability initiatives, as well as the anticipated future cost
of remediating environmental liabilities;
- the adoption of new accounting standards and the impact of such
adoption on the financial position of the Company;
- expectations regarding pension plan performance, including
future pension plan assets, liabilities and contributions; and
- developments and implications of actual or potential legal
actions.
Various factors or assumptions are typically applied by the
Company in drawing conclusions or making the forecasts,
projections, predictions or estimations set out in the
forward-looking statements. These factors and assumptions are based
on information currently available to the Company, including
information obtained by the Company from third-party sources, and
include but are not limited to the following:
- the competitive environment, associated market conditions and
market share metrics, the expected behaviour of competitors and
customers and trends in consumer preferences;
- the success of the Company's business strategy, including
execution of the strategy in each of the Meat Protein and Plant
Protein Groups;
- prevailing commodity prices, interest rates, tax rates and
exchange rates;
- the economic condition of and the socio-political dynamics
between Canada, the U.S.,
Japan and China, and the ability of the Company to
access markets in these countries;
- the spread of foreign animal disease (including ASF),
preparedness strategies to manage such spread, and implications for
all protein markets;
- the availability of capital to fund future capital requirements
associated with existing operations, assets and projects;
- expectations regarding participation in and funding of the
Company's pension plans;
- the availability of insurance coverage to manage certain
liability exposures;
- the extent of future liabilities and recoveries related to
legal claims;
- prevailing regulatory, tax and environmental laws; and
- future operating costs and performance, including the Company's
ability to achieve operating efficiencies and maintain high sales
volumes, high turnover of inventories and high turnover of accounts
receivable.
Readers are cautioned that these assumptions may prove to be
incorrect in whole or in part. The Company's actual results may
differ materially from those anticipated in any forward-looking
statements.
Factors that could cause actual results or outcomes to differ
materially from the results expressed, implied, or projected in the
forward-looking statements contained in this document include,
among other things, risks associated with the following:
- competition, market conditions and the activities of
competitors and customers;
- food safety, consumer liability and product recalls;
- the health status of livestock, including the impact of
potential pandemics;
- international trade and access to markets, as well as social,
political and economic dynamics affecting same;
- availability of and access to capital;
- decision respecting the return of capital to shareholders;
- the execution of capital projects, including cost, schedule and
regulatory variables;
- cyber security and the maintenance and operation of the
Company's information systems and processes;
- acquisitions and divestitures;
- climate change;
- fluctuations in the debt and equity markets;
- fluctuations in interest rates and currency exchange rates;
- pension assets and liabilities;
- cyclical nature of the cost and supply of hogs and the
competitive nature of the pork market generally;
- the effectiveness of commodity and interest rate hedging
strategies;
- impact of changes in the market value of the biological assets
and hedging instruments;
- the supply management system for poultry in Canada;
- availability of plant protein ingredients;
- intellectual property, including product innovation, product
development, brand strategy and trademark protection;
- consolidation of operations and focus on protein;
- the use of contract manufacturers;
- reputation;
- weather;
- compliance with government regulation and adapting to changes
in laws;
- actual and threatened legal claims;
- consumer trends and changes in consumer tastes and buying
patterns;
- environmental regulation and potential environmental
liabilities;
- consolidation in the retail environment;
- employment matters, including complying with employment laws
across multiple jurisdictions, the potential for work stoppages due
to non-renewal of collective agreements, recruiting and retaining
qualified personnel, reliance on key personnel and succession
planning;
- pricing of products;
- managing the Company's supply chain;
- changes in International Financial Reporting Standards and
other accounting standards that the Company is required to adhere
to for regulatory purposes;
- other factors as set out in this document under the heading
"Risk Factors".
The Company cautions readers that the foregoing list of factors
is not exhaustive.
Readers are further cautioned that some of the forward-looking
information, such as statements concerning future capital
expenditures, Adjusted EBITDA margin growth in the Meat Protein
Group, expected sales and growth margin targets in the Plant
Protein Group and SG&A spend, may be considered to be financial
outlooks for purposes of applicable securities legislation. These
financial outlooks are presented to evaluate potential future
earnings and anticipated future uses of cash flows, and may not be
appropriate for other purposes. Readers should not assume
these financial outlooks will be achieved.
More information about risk factors can be found under the
heading "Risk Factors" in the Company's Annual Management's
Discussion and Analysis for the year ended December 31, 2019, that is available on SEDAR at
www.sedar.com. The reader should review such section in
detail. Additional information concerning the Company,
including the Company's Annual Information Form, is available on
SEDAR at www.sedar.com.
All forward-looking statements included herein speak only as of
the date hereof. Unless required by law, the Company does not
undertake any obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. All forward-looking statements
contained herein are expressly qualified by this cautionary
statement.
About Maple Leaf Foods Inc.
Maple Leaf Foods Inc. is a producer of food products under
leading brands including Maple Leaf®, Maple Leaf Prime®,
Schneiders®, Mina®, Greenfield Natural Meat Co.®, Swift®,
Lightlife®, and Field Roast Grain Meat Co.™ The Company's
portfolio includes prepared meats, ready-to-cook and ready-to-serve
meals, valued-added fresh pork and poultry and plant protein
products. The address of the Company's registered office is 6985
Financial Dr. Mississauga,
Ontario, L5N 0A1, Canada.
The Company employs approximately 13,000 people and does business
primarily in Canada, the U.S. and
Asia. The Company's shares trade
on the Toronto Stock Exchange (MFI).
Consolidated Balance Sheets
(In thousands of
Canadian dollars)
(Audited)
|
As at
December 31, 2019
|
As at December 31,
2018(i)
|
ASSETS
|
|
|
Current
assets
|
|
|
Cash and cash
equivalents
|
$
|
97,285
|
$
|
72,578
|
Accounts
receivable
|
154,969
|
146,283
|
Notes
receivable
|
31,699
|
30,504
|
Inventories
|
385,534
|
348,901
|
Biological
assets
|
119,016
|
111,493
|
Prepaid expenses and
other assets
|
51,494
|
38,222
|
Assets held for
sale
|
34,293
|
—
|
|
$
|
874,290
|
$
|
747,981
|
Property and
equipment
|
1,386,482
|
1,283,950
|
Right-of-use
assets
|
227,426
|
—
|
Investment
property
|
1,864
|
5,109
|
Employee
benefits
|
—
|
5,389
|
Other long-term
assets
|
14,081
|
8,074
|
Goodwill
|
657,179
|
664,879
|
Intangible
assets
|
352,713
|
424,616
|
Total
assets
|
$
|
3,514,035
|
$
|
3,139,998
|
LIABILITIES AND
EQUITY
|
|
|
Current
liabilities
|
|
|
Accounts payable and
accruals
|
$
|
445,774
|
$
|
344,460
|
Current portion of
provisions
|
3,973
|
3,457
|
Current portion of
long-term debt
|
899
|
80,897
|
Current portion of
lease obligations
|
39,505
|
—
|
Income taxes
payable
|
205
|
42,884
|
Other current
liabilities
|
44,698
|
24,031
|
|
$
|
535,054
|
$
|
495,729
|
Long-term
debt
|
538,429
|
302,524
|
Lease
obligations
|
204,013
|
—
|
Employee
benefits
|
116,742
|
103,982
|
Provisions
|
44,929
|
49,895
|
Other long-term
liabilities
|
3,026
|
53,564
|
Deferred tax
liability
|
121,972
|
127,465
|
Total
liabilities
|
$
|
1,564,165
|
$
|
1,133,159
|
Shareholders'
equity
|
|
|
Share
capital
|
$
|
840,005
|
$
|
849,655
|
Retained
earnings
|
1,137,450
|
1,178,389
|
Contributed
surplus
|
—
|
4,649
|
Accumulated other
comprehensive income (loss)
|
2,793
|
3,532
|
Treasury
stock
|
(30,378)
|
(29,386)
|
Total shareholders'
equity
|
$
|
1,949,870
|
$
|
2,006,839
|
Total liabilities and
equity
|
$
|
3,514,035
|
$
|
3,139,998
|
|
(i) Restated, see Note
29(a) of the Company's 2019 audited consolidated financial
statements.
|
Consolidated Statements of Net Earnings
(In thousands of
Canadian dollars, except share amounts)
|
Three months
ended
December 31,
|
Twelve months
ended
December 31,
|
2019
|
2018
|
2019
|
2018
|
|
(Unaudited)
|
(Unaudited)
|
(Audited)
|
(Audited)
|
Sales
|
$
|
1,015,969
|
$
|
893,939
|
$
|
3,941,545
|
$
|
3,495,519
|
Cost of goods
sold
|
855,204
|
732,151
|
3,350,566
|
2,943,722
|
Gross
profit
|
$
|
160,765
|
$
|
161,788
|
$
|
590,979
|
$
|
551,797
|
Selling, general and
administrative expenses
|
129,356
|
88,698
|
457,681
|
341,492
|
Earnings before the
following:
|
$
|
31,409
|
$
|
73,090
|
$
|
133,298
|
$
|
210,305
|
Restructuring and
other related costs
|
5,025
|
42,217
|
11,004
|
46,188
|
Other expense
(income)
|
(4,624)
|
8,543
|
3,268
|
12,974
|
Earnings before
interest and income taxes
|
$
|
31,008
|
$
|
22,330
|
$
|
119,026
|
$
|
151,143
|
Interest expense and
other financing costs
|
7,383
|
4,247
|
32,031
|
10,040
|
Earnings before
income taxes
|
$
|
23,625
|
$
|
18,083
|
$
|
86,995
|
$
|
141,103
|
Income tax
expense
|
6,168
|
6,134
|
12,367
|
39,755
|
Net
earnings
|
$
|
17,457
|
$
|
11,949
|
$
|
74,628
|
$
|
101,348
|
Earnings per share
attributable to common shareholders:
|
|
|
|
|
Basic earnings per
share
|
$
|
0.14
|
$
|
0.10
|
$
|
0.60
|
$
|
0.81
|
Diluted earnings per
share
|
$
|
0.14
|
$
|
0.10
|
$
|
0.60
|
$
|
0.79
|
Weighted average
number of shares (millions)
|
|
|
|
|
Basic
|
123.5
|
123.2
|
123.6
|
125.0
|
Diluted
|
124.4
|
123.7
|
125.2
|
127.5
|
Consolidated Statements of Other Comprehensive Income
(Loss)
(In thousands of
Canadian dollars)
|
Three months ended
December 31,
|
Twelve months
ended December 31,
|
2019
|
2018
|
2019
|
2018
|
|
(Unaudited)
|
(Unaudited)
|
(Audited)
|
(Audited)
|
Net
earnings
|
$
|
17,457
|
$
|
11,949
|
$
|
74,628
|
$
|
101,348
|
Other comprehensive
income (loss)
|
|
|
|
|
Actuarial gains and
losses that will not be reclassified to profit or
|
|
|
|
|
|
|
|
|
loss (Net of tax of
$10.6 million and $3.6 million; 2018: $9.7
million and $3.7 million)
|
$
|
29,938
|
$
|
(26,312)
|
$
|
(9,870)
|
$
|
11,879
|
Items that are or may
be reclassified subsequently to profit or loss:
|
|
|
|
|
Change in accumulated
foreign currency translation adjustment
|
|
|
|
|
|
|
|
|
(Net of tax of $0.0
million and $0.0 million, 2018: $0.0 million
and $0.0 million)
|
$
|
(4,429)
|
$
|
20,405
|
$
|
(15,992)
|
$
|
33,273
|
Change in foreign
exchange on long-term debt designated as a
|
|
|
|
|
net investment hedge
(Net of tax of $0.7
million and $2.2 million; 2018 $2.2 million and $2.5
million)
|
3,792
|
(11,084)
|
11,748
|
(13,335)
|
Change in unrealized
gains and losses on cash flow hedges
|
|
|
|
|
(Net of tax of $0.6
million and $1.2 million; 2018: $0.3 million
and $1.7 million)
|
1,866
|
(898)
|
3,505
|
(6,786)
|
Total items that are
or may be reclassified subsequently to profit or
loss
|
$
|
1,229
|
$
|
8,423
|
$
|
(739)
|
$
|
13,152
|
Total other
comprehensive (loss) income
|
$
|
31,167
|
$
|
(17,889)
|
$
|
(10,609)
|
$
|
25,031
|
Comprehensive
income
|
$
|
48,624
|
$
|
(5,940)
|
$
|
64,019
|
$
|
126,379
|
Consolidated Statements of Changes in Total Equity
|
|
|
|
Accumulated
other
comprehensive income
(loss)(i)
|
|
|
(In thousands of Canadian dollars)
(Audited)
|
Share
capital
|
Retained
earnings
|
Contributed
surplus
|
Foreign
currency
translation
adjustment
|
Unrealized
gains and
losses on
cash flow
hedges
|
Treasury
stock
|
Total
equity
|
Balance at
December 31, 2018
|
$
|
849,655
|
1,178,389
|
4,649
|
8,518
|
(4,986)
|
(29,386)
|
$
|
2,006,839
|
Impact of new IFRS
standards
|
—
|
(1,100)
|
—
|
—
|
—
|
—
|
(1,100)
|
Net
earnings
|
—
|
74,628
|
—
|
—
|
—
|
—
|
74,628
|
Other comprehensive
income (loss)(ii)
|
—
|
(9,870)
|
—
|
(4,244)
|
3,505
|
—
|
(10,609)
|
Dividends declared
($0.58 per share)
|
—
|
(71,824)
|
—
|
—
|
—
|
—
|
(71,824)
|
Share-based
compensation expense
|
—
|
—
|
17,935
|
—
|
—
|
—
|
17,935
|
Deferred taxes on
share-based compensation
|
—
|
—
|
460
|
—
|
—
|
—
|
460
|
Repurchase of
shares
|
(17,410)
|
(12,310)
|
(16,016)
|
—
|
—
|
—
|
(45,736)
|
Exercise of stock
options
|
7,760
|
—
|
—
|
—
|
—
|
—
|
7,760
|
Shares purchased by
RSU trust
|
—
|
—
|
—
|
—
|
—
|
(14,978)
|
(14,978)
|
Settlement of
share-based compensation
|
—
|
(20,463)
|
(7,028)
|
—
|
—
|
13,986
|
(13,505)
|
Balance at
December 31, 2019
|
$
|
840,005
|
1,137,450
|
—
|
4,274
|
(1,481)
|
(30,378)
|
$
|
1,949,870
|
|
|
|
|
|
|
|
|
|
Accumulated other
comprehensive income
(loss)(i)
|
|
|
(In thousands of Canadian dollars)
(Audited)
|
Share
capital
|
Retained
earnings
|
Contributed
surplus
|
Foreign
currency
translation
adjustment
|
Unrealized
gains and
losses on
cash flow
hedges
|
Treasury
stock
|
Total
equity
|
Balance at December
31, 2017
|
$
|
835,154
|
1,253,035
|
—
|
(11,420)
|
1,800
|
(26,961)
|
$
|
2,051,608
|
Impact of new IFRS
standards
|
—
|
(3,695)
|
—
|
—
|
—
|
—
|
(3,695)
|
Net
earnings
|
—
|
101,348
|
—
|
—
|
—
|
—
|
101,348
|
Issuance of shares
for acquisition
|
28,801
|
—
|
—
|
—
|
—
|
—
|
28,801
|
Other comprehensive
income (loss)(ii)
|
—
|
11,879
|
—
|
19,938
|
(6,786)
|
—
|
25,031
|
Dividends declared
($0.52 per share)
|
—
|
(65,119)
|
—
|
—
|
—
|
—
|
(65,119)
|
Share-based
compensation expense
|
—
|
—
|
18,366
|
—
|
—
|
—
|
18,366
|
Deferred taxes on
share-based compensation
|
—
|
—
|
(2,400)
|
—
|
—
|
—
|
(2,400)
|
Repurchase of
shares
|
(30,140)
|
(101,495)
|
(10,360)
|
—
|
—
|
—
|
(141,995)
|
Exercise of stock
options
|
15,840
|
—
|
—
|
—
|
—
|
—
|
15,840
|
Shares purchased by
RSU trust
|
—
|
—
|
—
|
—
|
—
|
(13,000)
|
(13,000)
|
Settlement of
share-based compensation
|
—
|
(17,564)
|
(957)
|
—
|
—
|
10,575
|
(7,946)
|
Balance at December
31, 2018
|
$
|
849,655
|
1,178,389
|
4,649
|
8,518
|
(4,986)
|
(29,386)
|
$
|
2,006,839
|
(i)
|
Items that are or may
be subsequently reclassified to profit or loss.
|
(ii)
|
Included in other
comprehensive income (loss) is the change in actuarial gains and
losses that will not be reclassified to profit or loss and has been
reclassified to retained earnings.
|
Consolidated Statements of Cash Flows
(In thousands of
Canadian dollars)
|
Three months
ended
December 31,
|
Twelve months
ended
December 31,
|
2019
|
2018
|
2019
|
2018
|
CASH PROVIDED BY
(USED IN):
|
(Unaudited)
|
(Unaudited)
|
(Audited)
|
(Audited)
|
Operating
activities
|
|
|
|
|
Net
earnings
|
$
|
17,457
|
$
|
11,949
|
$
|
74,628
|
$
|
101,348
|
Add (deduct) items
not affecting cash:
|
|
|
|
|
Change in fair value
of biological assets
|
(7,771)
|
(22,229)
|
5,545
|
10,905
|
Depreciation and
amortization
|
46,437
|
35,302
|
176,796
|
126,066
|
Share-based
compensation
|
4,583
|
4,581
|
17,935
|
18,366
|
Deferred income
taxes
|
(4,126)
|
(13,195)
|
(1,323)
|
10,055
|
Income tax
current
|
10,294
|
19,329
|
13,690
|
29,700
|
Interest expense and
other financing costs
|
7,383
|
4,247
|
32,031
|
10,040
|
(Gain) loss on sale
of long-term assets
|
(5,256)
|
985
|
(4,164)
|
5,623
|
Change in fair value
of non-designated derivatives
|
5,161
|
3,825
|
5,785
|
(4,657)
|
Change in net pension
liability
|
2,926
|
1,858
|
4,730
|
7,378
|
Net income taxes
paid
|
(2,726)
|
(396)
|
(40,682)
|
(6,820)
|
Interest
paid
|
(7,131)
|
(3,662)
|
(28,137)
|
(7,996)
|
Change in provision
for restructuring and other related costs
|
4,179
|
40,403
|
8,144
|
33,760
|
Change in derivatives
margin
|
(4,014)
|
(3,585)
|
(2,210)
|
10,998
|
Other
|
(412)
|
1,349
|
1,779
|
(5,529)
|
Change in non-cash
operating working capital
|
14,161
|
26,200
|
5,633
|
(39,552)
|
Cash provided by
operating activities
|
$
|
81,145
|
$
|
106,961
|
$
|
270,180
|
$
|
299,685
|
Financing
activities
|
|
|
|
|
Dividends
paid
|
$
|
(17,921)
|
$
|
(16,096)
|
$
|
(71,824)
|
$
|
(65,119)
|
Net increase in
long-term debt
|
69,861
|
194,977
|
169,491
|
357,941
|
Payment of lease
obligation
|
(8,971)
|
—
|
(34,690)
|
—
|
Exercise of stock
options
|
—
|
—
|
7,760
|
15,840
|
Repurchase of
shares
|
(20,347)
|
(27,110)
|
(20,347)
|
(166,526)
|
Payment of financing
fees
|
(38)
|
(96)
|
(5,635)
|
(650)
|
Purchase of treasury
stock
|
—
|
(3,000)
|
(14,978)
|
(13,000)
|
Cash provided by
financing activities
|
$
|
22,584
|
$
|
148,675
|
$
|
29,777
|
$
|
128,486
|
Investing
activities
|
|
|
|
|
Additions to
long-term assets
|
$
|
(84,785)
|
$
|
(51,894)
|
$
|
(270,745)
|
$
|
(179,865)
|
Acquisition of
business, net of cash acquired
|
—
|
(241,176)
|
(847)
|
(379,556)
|
Proceeds from sale of
long-term assets
|
7,581
|
369
|
7,727
|
403
|
Payment of income tax
liabilities assumed on acquisition
|
—
|
—
|
(11,385)
|
—
|
Cash used in
investing activities
|
$
|
(77,204)
|
$
|
(292,701)
|
$
|
(275,250)
|
$
|
(559,018)
|
Increase
(decrease) in cash and cash equivalents
|
$
|
26,525
|
$
|
(37,065)
|
$
|
24,707
|
$
|
(130,847)
|
Cash and cash
equivalents, beginning of period
|
70,760
|
109,643
|
72,578
|
203,425
|
Cash and cash
equivalents, end of period
|
$
|
97,285
|
$
|
72,578
|
$
|
97,285
|
$
|
72,578
|
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SOURCE Maple Leaf Foods Inc.