MISSISSAUGA, ON, Feb. 22,
2017 /PRNewswire/ - Maple Leaf Foods Inc. (TSX: MFI) today
reported its financial results for the fourth quarter and full year
ended December 31, 2016.
- Fourth quarter sales were $828.2
million. Excluding the contribution of the 53rd week in
2015, sales increased by approximately 2.0% compared to last
year
- Net earnings in the quarter of $76.2
million and $181.7 million for
the year, compared to net earnings of $33.3
million and $41.6 million,
respectively in the same periods last year
- Adjusted EBITDA(1) margin was 10.4% in the fourth
quarter compared to 8.7% in 2015; and 11.6% in the current quarter
before additional variable compensation expenses, related to the
over-achievement of performance targets
- Adjusted Earnings per Share(2) were $0.31 in the quarter compared to $0.25 in the same quarter last year; and
$1.23 for the year compared to
$0.58 last year
- The Board approved a 22% increase to the regular quarterly
dividend to $0.11 per share,
effective in the first quarter of 2017
Consolidated Financial Highlights
Fourth quarter net earnings increased 128.8%, and Adjusted
Earnings per Share grew 24.0% compared to the same quarter last
year. Adjusted EBITDA margin of 10.4% contributed to free
cash flow of $35.9 million.
Measure(i)
(Unaudited)
|
Three months
ended
December 31,
|
|
Twelve months
ended
December 31,
|
2016
|
2015
|
% Change
|
2016
|
2015
|
Sales(ii)
|
828.2
|
873.1
|
(5.1)%
|
3,331.8
|
3,292.9
|
Adjusted
EBITDA
|
86.4
|
75.8
|
14.0%
|
343.4
|
219.8
|
Adjusted EBITDA
Margin
|
10.4%
|
8.7%
|
N/M(iii)
|
10.3%
|
6.7%
|
Adjusted Operating
Earnings(3)
|
63.7
|
47.8
|
33.3%
|
239.3
|
109.8
|
Net
Earnings
|
76.2
|
33.3
|
128.8%
|
181.7
|
41.6
|
Basic Earnings per
Share
|
0.57
|
0.24
|
137.5%
|
1.35
|
0.30
|
Adjusted Earnings per
Share
|
0.31
|
0.25
|
24.0%
|
1.23
|
0.58
|
Free Cash
Flow(4)
|
35.9
|
39.1
|
N/M
|
244.0
|
11.7
|
|
(i)
All financial measures in millions of dollars except Adjusted
EBITDA margin and Basic and Adjusted Earnings per
Share.
|
(ii) Fourth quarter and twelve
month performance comparisons in 2016 are affected by a 53rd week
in 2015. Excluding the impact of the 53rd week in 2015, fourth
quarter sales increased by approximately 2.0% and 3.0% for the full
year.
|
(iii) Not
meaningful.
|
|
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 Reconciliation of Non-IFRS Financial
Measures at the end of this news release for a description and
reconciliation of all non-IFRS financial measures.
|
"We finished 2016 with a strong quarter sustained by solid
commercial performance. We surpassed our Adjusted EBITDA
margin target for both the quarter and full year, demonstrating the
strength of the strategic foundation we have built," said
Michael H. McCain, President and
CEO. "With the combination of our increasingly competitive
cost structure, and commercial strategies that intersect with
important consumer needs and trends, we are well positioned for
future profitable growth."
Business Segment Review
Following is a summary of sales by business segment:
|
Three months
ended
December 31,
|
Twelve months
ended
December 31,
|
|
|
(Unaudited)
|
(Audited)
|
|
($
thousands)
|
2016
|
2015
|
2016
|
2015
|
|
Meat Products
Group
|
$
|
824,432
|
$
|
868,542
|
$
|
3,316,490
|
$
|
3,276,994
|
|
Agribusiness
Group
|
|
3,746
|
|
4,581
|
|
15,322
|
|
15,938
|
|
Total
Sales
|
$
|
828,178
|
$
|
873,123
|
$
|
3,331,812
|
$
|
3,292,932
|
|
The following table summarizes Adjusted Operating Earnings by
business segment:
($
thousands)
(Unaudited)
|
Three months
ended
December 31,
|
Twelve months
ended
December 31,
|
|
2016
|
2015
|
2016
|
2015
|
|
Meat Products
Group
|
$
|
73,510
|
$
|
54,619
|
$
|
263,605
|
$
|
108,440
|
|
Agribusiness
Group
|
|
(9,792)
|
|
(6,862)
|
|
(24,323)
|
|
1,360
|
|
Adjusted Operating
Earnings
|
$
|
63,718
|
$
|
47,757
|
$
|
239,282
|
$
|
109,800
|
|
Meat Products Group
Includes value-added prepared meats, lunch kits and snacks,
and value-added fresh pork and poultry products sold under flagship
Canadian brands such as Maple Leaf®, Maple Leaf Prime®, Maple Leaf
Natural Selections®, Schneiders®, Schneiders® Country Naturals®,
Mina®, and many leading regional brands.
Fourth Quarter 2016
Sales of $824.4 million for the
fourth quarter of 2016 decreased 5.1% from prior year, or 5.8%
after adjusting for the impacts of foreign exchange. Excluding only
the contribution of the 53rd week in 2015, sales increased by
approximately 2.0%, benefiting from stronger year-over-year
prepared meats sales.
Adjusted Operating Earnings for the fourth quarter of 2016 were
$73.5 million compared to
$54.6 million in the prior year.
Margins in prepared meats improved due to lower operating costs
across the network. Fresh pork earnings were higher than the prior
year due to stronger margins in the value-added retail and export
channels, higher industry margins, and operating efficiency gains.
Earnings in fresh poultry declined slightly as industry processor
margins receded from record levels in the fourth quarter of
2015.
Full Year 2016
Sales in the Meat Products Group for 2016 increased 1.2% to
$3,316.5 million, or decreased 0.3%
after adjusting for the weaker Canadian dollar. Excluding only the
contribution of the 53rd week in 2015, sales increased by
approximately 3.0%. Prepared meats sales declined slightly in
response to a price increase in the first quarter but strengthened
as the year progressed. Sales in fresh pork increased as the
Company's focus on increasing its value-added pork business
resulted in higher selling prices. Performance was also supported
by favourable exchange rates and pork markets. Fresh poultry sales
also increased due to stronger volume and an improved sales
mix.
Adjusted Operating Earnings for 2016 increased to $263.6 million compared to $108.4 million in the prior year. Higher earnings
in prepared meats resulted from lower operating costs across the
network and pricing implemented in the first quarter. Higher fresh
pork earnings resulted from increased contributions from
value-added retail and value-added export sales, higher industry
margins, and operating efficiency gains. Poultry results were
consistent with the prior year as gains from higher retail branded
sales and improved operating efficiencies were offset by lower
industry margins.
Agribusiness Group
Includes Canadian hog production operations that primarily
supply the Meat Products Group with livestock.
Fourth Quarter 2016
Agribusiness Group sales in the fourth quarter decreased to
$3.7 million from $4.6 million last year as a result of lower
prices for toll feed and an extra week in the fourth quarter of
2015.
Adjusted Operating Earnings declined to a loss of $9.8 million from a loss of $6.9 million last year due to lower hog prices,
which was not fully offset by the Company's risk management
program.
Full Year 2016
Agribusiness Group sales in 2016 declined slightly to
$15.3 million compared to
$15.9 million in the prior year, due
to 2015 sales benefiting from a 53rd week.
Adjusted Operating Earnings in 2016 decreased to a loss of
$24.3 million from earnings of
$1.4 million in the prior year,
reflecting the impact of lower hog prices and higher feed
costs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the fourth
quarter increased to $89.4 million
(10.8% of sales), from $63.6 million
(7.3% of sales) in the prior year. This increase largely reflects
differences in variable compensation programs linked to Company
performance. At Maple Leaf Foods, variable compensation programs
are linked to financial results. In 2015, targets were not achieved
and accordingly the variable compensation was reduced, while the
targets were exceeded in 2016, resulting in an increase in variable
compensation.
The Company recorded $9.9 million
in additional variable compensation expenses in the fourth quarter
of 2016 related to the over-achievement of performance targets for
incentive programs. Approximately 1,400 employees participate in
these multi-year programs.
During the year, selling, general and administrative expenses
increased to $324.8 million (9.7% of
sales), compared to $288.1 million
(8.7% of sales) in the prior year. The increase relates to
investment in advertising and promotional expenses and differences
in variable compensation programs linked to Company performance.
This was partially offset by a decrease in core selling, general
and administrative expenses as a result of the Company's ongoing
commitment to driving cost efficiencies.
Other Matters
On February 21, 2017, the Board of
Directors approved an increase in the quarterly cash dividend to
$0.11 per share, $0.44 per share on an annual basis, from
$0.09 per share, payable March 31, 2017, to shareholders of record at the
close of business on March 10, 2017.
Unless indicated otherwise by the Company in writing 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 Investor Material on the Investors page.
A conference call will be held at 2:30 p.m. EDT on
February 22, 2017, to review Maple Leaf Foods' fourth quarter
financial results. To participate in the call, please dial
416-340-2218 or 866-225-0198. For those unable to participate,
playback will be made available an hour after the event at
905-694-9451 or 800-408-3053 (Passcode: 8735790).
A webcast presentation of the fourth quarter financial results
will also be available at:
http://edge.media-server.com/m/p/sgtqtw9m
The Company's full audited financial statements and related
Management's Discussion and Analysis are available on the Company's
website.
Reconciliation of Non-IFRS Financial Measures
The Company uses the following non-IFRS measures: Adjusted
Operating Earnings, Adjusted Earnings per Share, Adjusted EBITDA,
and Free Cash Flow. Management believes that these non-IFRS
measures provide useful information to investors in measuring the
financial performance of the Company. 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 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. The table below provides a
reconciliation of net earnings as reported under IFRS to Adjusted
Operating Earnings for the three months ended, as indicated below,
and a reconciliation of net earnings as reported under IFRS in the
audited consolidated statements of net earnings to Adjusted
Operating Earnings for the years then ended, as indicated below.
Management believes that this basis is the most appropriate on
which to evaluate operating results, as they are representative of
the ongoing operations of the Company.
|
Three months ended
December 31, 2016
|
($ thousands)
(Unaudited)
|
Meat
Products
Group
|
Agribusiness
Group
|
Non-allocated
costs
|
Consolidated
|
Net
earnings
|
|
|
|
$
|
76,224
|
Income
taxes
|
|
|
|
|
28,681
|
Earnings before
income taxes
|
|
|
|
$
|
104,905
|
Interest expense and
other financing costs
|
|
|
|
|
1,231
|
Other (income)
expense
|
|
5,095
|
|
(166)
|
|
96
|
|
5,025
|
Restructuring and
other related costs
|
|
5,025
|
|
—
|
|
(799)
|
|
4,226
|
Earnings (loss)
from operations
|
$
|
73,510
|
$
|
(9,792)
|
$
|
51,669
|
$
|
115,387
|
Decrease (increase)
in fair value of biological assets(5)
|
|
—
|
|
—
|
|
(48,172)
|
|
(48,172)
|
Unrealized (gain)
loss on futures contracts(5)
|
|
—
|
|
—
|
|
(3,497)
|
|
(3,497)
|
Adjusted Operating
Earnings
|
$
|
73,510
|
$
|
(9,792)
|
$
|
—
|
$
|
63,718
|
|
Three months ended
December 31, 2015
|
($ thousands)
(Unaudited)
|
Meat
Products
Group
|
Agribusiness
Group
|
Non-allocated
costs
|
Consolidated
|
Net
earnings
|
|
|
|
$
|
33,285
|
Income
taxes
|
|
|
|
|
12,403
|
Earnings before
income taxes
|
|
|
|
$
|
45,688
|
Interest expense and
other financing costs
|
|
|
|
1,216
|
Other (income)
expense
|
(144)
|
(162)
|
|
(5,668)
|
(5,974)
|
Restructuring and
other related costs
|
(98)
|
—
|
|
12,409
|
12,311
|
Earnings (loss)
from operations
|
$
|
54,619
|
$
|
(6,862)
|
$
|
5,484
|
$
|
53,241
|
Decrease (increase)
in fair value of biological assets(5)
|
—
|
—
|
|
(14,344)
|
(14,344)
|
Unrealized (gain)
loss on futures contracts (5)
|
—
|
—
|
|
8,860
|
8,860
|
Adjusted Operating
Earnings
|
$
|
54,619
|
$
|
(6,862)
|
$
|
—
|
$
|
47,757
|
|
Twelve months
ended December 31, 2016
|
($ thousands)
(Unaudited)
|
Meat
Products
Group
|
Agribusiness
Group
|
Non-allocated
costs
|
Consolidated
|
Net
earnings
|
|
|
|
$
|
181,702
|
Income
taxes
|
|
|
|
67,891
|
Earnings before
income taxes
|
|
|
|
$
|
249,593
|
Interest expense and
other financing costs
|
|
|
|
6,367
|
Other (income)
expense
|
7,008
|
(894)
|
(2,518)
|
3,596
|
Restructuring and
other related costs
|
4,761
|
—
|
1,809
|
6,570
|
Earnings (loss)
from operations
|
$
|
263,605
|
$
|
(24,323)
|
$
|
26,844
|
$
|
266,126
|
Decrease (increase)
in fair value of biological assets(5)
|
—
|
—
|
(6,263)
|
(6,263)
|
Unrealized (gain)
loss on futures contracts(5)
|
—
|
—
|
(20,581)
|
(20,581)
|
Adjusted Operating
Earnings
|
$
|
263,605
|
$
|
(24,323)
|
$
|
—
|
$
|
239,282
|
|
Twelve months ended
December 31, 2015
|
($ thousands)
(Unaudited)
|
Meat
Products
Group
|
Agribusiness
Group
|
Non-allocated
costs
|
Consolidated
|
Net
earnings
|
|
|
|
$
|
41,580
|
Income
taxes
|
|
|
|
11,071
|
Earnings before
income taxes
|
|
|
|
$
|
52,651
|
Interest expense and
other financing costs
|
|
|
|
4,711
|
Other (income)
expense
|
(884)
|
(275)
|
3,058
|
1,899
|
Restructuring and
other related costs
|
15,321
|
—
|
18,504
|
33,825
|
Earnings (loss)
from operations
|
$
|
108,440
|
$
|
1,360
|
$
|
(16,714)
|
$
|
93,086
|
Decrease (increase)
in fair value of biological assets(5)
|
—
|
—
|
12,778
|
12,778
|
Unrealized (gain)
loss on futures contracts(5)
|
—
|
—
|
3,936
|
3,936
|
Adjusted Operating
Earnings
|
$
|
108,440
|
$
|
1,360
|
$
|
—
|
$
|
109,800
|
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 as reported under IFRS
to Adjusted Earnings per Share for the three months ended, as
indicated below, and a reconciliation of basic earnings per share
as reported under IFRS in the audited consolidated statements of
net earnings to Adjusted Earnings per Share for the years then
ended, 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)
|
Three months
ended
December 31,
|
Twelve months
ended
December 31,
|
(Unaudited)
|
2016
|
2015
|
2016
|
2015
|
Basic earnings per
share
|
$
|
0.57
|
$
|
0.24
|
$
|
1.35
|
$
|
0.30
|
Restructuring and
other related costs(6)
|
0.02
|
0.07
|
0.04
|
0.18
|
Items included in
other income not considered representative of ongoing
operations(7)
|
—
|
(0.03)
|
(0.02)
|
0.02
|
Change in the fair
value of unrealized (gain) loss on futures
contract(8)
|
(0.02)
|
0.05
|
(0.11)
|
0.02
|
Change in the fair
value of biological assets(8)
|
(0.27)
|
(0.08)
|
(0.03)
|
0.07
|
Adjusted Earnings
per Share(10)
|
$
|
0.31
|
$
|
0.25
|
$
|
1.23
|
$
|
0.58
|
Adjusted Earnings Before Interest, Tax, Depreciation, and
Amortization
Adjusted EBITDA is calculated as earnings before interest and
income taxes plus depreciation and intangible asset amortization,
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.
The following table provides a reconciliation of net earnings as
reported under IFRS in the audited consolidated statements of net
earnings to Adjusted EBITDA for the years ended, as indicated
below. Management believes Adjusted EBITDA is 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.
($
thousands)
|
Three months
ended
December 31,
|
Twelve months
ended
December 31,
|
(Unaudited)
|
2016
|
2015
|
2016
|
2015
|
Net
earnings
|
$
|
76,224
|
$
|
33,285
|
$
|
181,702
|
$
|
41,580
|
Income
taxes
|
28,681
|
12,403
|
67,891
|
11,071
|
Earnings before
income taxes
|
$
|
104,905
|
$
|
45,688
|
$
|
249,593
|
$
|
52,651
|
Interest expense and
other financing costs
|
1,231
|
1,216
|
6,367
|
4,711
|
Items included in
other income not considered representative of ongoing
operations(9)
|
96
|
(5,668)
|
(2,518)
|
3,058
|
Restructuring and
other related costs
|
4,226
|
12,311
|
6,570
|
33,825
|
Change in the fair
value of biological assets and unrealized (gain) loss on futures
contracts
|
(51,669)
|
(5,484)
|
(26,844)
|
16,714
|
Depreciation and
amortization
|
27,567
|
27,689
|
110,276
|
108,890
|
Adjusted
EBITDA
|
$
|
86,356
|
$
|
75,752
|
$
|
343,444
|
$
|
219,849
|
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)
|
Three months
ended
December 31,
|
Twelve months
ended
December 31,
|
(Unaudited)
|
2016
|
2015
|
2016
|
2015
|
Cash provided by
operating activities
|
$
|
72,114
|
$
|
77,353
|
$
|
357,157
|
$
|
159,407
|
Additions to
long-term assets
|
(36,219)
|
(38,204)
|
(113,194)
|
(147,699)
|
Free Cash
Flow
|
$
|
35,895
|
$
|
39,149
|
$
|
243,963
|
$
|
11,708
|
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, forecasts, and
projections about the industries in which the Company operates, as
well as beliefs and assumptions made by Management of the Company.
Such statements include, but are not limited to, statements with
respect to objectives and goals, in addition to 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 with
respect to: the increases in operating efficiencies and cost
reductions; expectations regarding the use of derivatives, futures
and options; expectations regarding improving efficiencies; the
expected use of cash balances; source of funds for ongoing business
requirements; capital investments and expectations regarding
capital expenditures; expectations regarding the implementation of
environmental sustainability initiatives; expectations regarding
the adoption of new accounting standards and the impact of such
adoption on financial position; expectations regarding pension plan
performance and future pension plan liabilities and contributions;
expectations regarding levels of credit risk; and expectations
regarding outcomes of legal actions. Words such as "expect",
"anticipate", "intend", "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, risks, and uncertainties that are difficult to
predict.
In addition, these statements and 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 Japanese economies; the
rate of exchange of the Canadian dollar to the U.S. dollar, and the
Japanese yen; 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 in this document 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 by
forward-looking information include, among other things:
- risks associated with the Company focusing solely on the
protein business;
- risks related to the Company's decisions regarding any
potential return of capital to shareholders;
- risks associated with the Plan and concentration of production
in fewer facilities;
- risks associated with the availability of capital;
- risks associated with changes in the Company's information
systems and processes;
- risks associated with cyber threats;
- risks posed by food contamination, consumer liability, and
product recalls;
- risks associated with acquisitions, divestitures, and capital
expansion projects;
- impact on pension expense and funding requirements of
fluctuations in the market prices of fixed income and equity
securities and changes in interest rates;
- cyclical nature of the cost and supply of hogs and the
competitive nature of the pork market generally;
- risks related to the health status of livestock;
- impact of a pandemic on the Company's operations;
- the Company's exposure to currency exchange risks;
- ability of the Company to hedge against the effect of commodity
price changes through the use of commodity futures and options;
- impact of changes in the market value of the biological assets
and hedging instruments;
- risks associated with the supply management system for poultry
in Canada;
- risks associated with the use of contract manufacturers;
- impact of international events on commodity prices and the free
flow of goods;
- risks posed by compliance with extensive government
regulation;
- risks posed by litigation;
- impact of changes in consumer tastes and buying patterns;
- impact of extensive environmental regulation and potential
environmental liabilities;
- risks associated with a consolidating retail environment;
- risks posed by competition;
- risks associated with complying with differing employment laws
and practices, the potential for work stoppages due to non-renewal
of collective agreements, and recruiting and retaining qualified
personnel;
- risks associated with pricing the Company's products;
- risks associated with managing the Company's supply chain;
and
- risks associated with failing to identify and manage the
strategic risks facing the Company.
The Company cautions the reader that the foregoing list of
factors is not exhaustive. These factors 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, 2016, that is available on SEDAR at
www.sedar.com. The reader should review such section in
detail. Some of the forward-looking information may be considered
to be financial outlooks for purposes of applicable securities
legislation including, but not limited to, statements concerning
future capital expenditures. These financial outlooks are presented
to evaluate anticipated future uses of cash flows, and may not be
appropriate for other purposes and readers should not assume they
will be achieved. 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.
Maple Leaf Foods Inc. is a leading consumer protein company,
making high quality, innovative products under national brands
including Maple Leaf®, Maple Leaf Prime®, Maple Leaf Natural
Selections®, Schneiders®, Schneiders® Country Naturals® and Mina®.
The Company employs approximately 11,000 people across Canada and exports to global markets,
including the U.S. and Asia. The
Company is headquartered in Mississauga,
Ontario and its shares trade on the Toronto Stock Exchange
(MFI).
Footnote Legend
1.
|
Adjusted EBITDA is
calculated as earnings before interest and income taxes plus
depreciation and intangible asset amortization, 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. Please refer to
the section entitled Reconciliation of Non-IFRS Financial Measures
in this news release.
|
2.
|
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. Please refer to the section entitled Reconciliation of
Non-IFRS Financial Measures in this news release.
|
3.
|
Adjusted Operating
Earnings, a non-IFRS measure, is used by Management to evaluate
financial operating results. It is defined as earnings 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. Please refer
to the section entitled Reconciliation of Non-IFRS Financial
Measures in this news release.
|
4.
|
Free Cash Flow, a
non-IFRS measure, is defined as cash flow from operations less
additions to long-term assets.
|
5.
|
Regarding
biological assets, please refer to Note 7 of the Company's 2016
annual audited consolidated financial statements. Unrealized
gains/losses on futures contracts are reported within cost of goods
sold in the Company's 2016 annual audited consolidated financial
statements.
|
6.
|
Includes per share
impact of restructuring and other related costs, net of
tax.
|
7.
|
Primarily includes
a depreciation charge on assets servicing divested businesses,
interest income and gains/losses associated with investment
properties and assets held for sale, net of
tax.
|
8.
|
Includes per share
impact of the change in unrealized (gain) loss on futures contracts
and the change in fair value of biological assets, net of
tax.
|
9.
|
Primarily includes
a depreciation charge on assets servicing divested businesses,
interest income and gains/losses associated with investment
properties and assets held for sale.
|
10.
|
May not add due to
rounding.
|
Consolidated Balance Sheets
(In thousands of
Canadian dollars)
(Audited)
|
As at December
31,
2016
|
As at December
31,
2015
|
|
|
|
(Restated)(i)
|
ASSETS
|
|
|
|
Current
assets
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
403,621
|
|
$
|
292,269
|
|
Accounts
receivable
|
|
127,749
|
|
|
57,958
|
|
Notes
receivable
|
|
32,485
|
|
|
103,706
|
|
Inventories
|
|
261,719
|
|
|
257,671
|
|
Biological
assets
|
|
111,445
|
|
|
103,877
|
|
Prepaid expenses and
other assets
|
|
30,372
|
|
|
14,946
|
|
Assets held for
sale
|
|
4,837
|
|
|
130
|
|
$
|
972,228
|
|
$
|
830,557
|
|
Property and
equipment
|
|
1,085,275
|
|
|
1,082,360
|
|
Investment
property
|
|
1,929
|
|
|
7,336
|
|
Employee
benefits
|
|
10,311
|
|
|
66,519
|
|
Other long-term
assets
|
|
6,557
|
|
|
10,791
|
|
Deferred tax
asset
|
|
—
|
|
|
55,094
|
|
Goodwill
|
|
428,236
|
|
|
428,236
|
|
Intangible
assets
|
|
128,085
|
|
|
138,155
|
|
Total
assets
|
$
|
2,632,621
|
|
$
|
2,619,048
|
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
Accounts payable and
accruals
|
$
|
256,163
|
|
$
|
256,473
|
|
Provisions
|
|
11,889
|
|
|
32,531
|
|
Current portion of
long-term debt
|
|
794
|
|
|
813
|
|
Income taxes
payable
|
|
9,544
|
|
|
9,670
|
|
Other current
liabilities
|
|
96,857
|
|
|
29,637
|
|
$
|
375,247
|
|
$
|
329,124
|
|
Long-term
debt
|
|
9,119
|
|
|
9,843
|
|
Employee
benefits
|
|
108,730
|
|
|
203,241
|
|
Provisions
|
|
16,555
|
|
|
14,622
|
|
Other long-term
liabilities
|
|
12,654
|
|
|
20,901
|
|
Deferred tax
liability
|
|
22,293
|
|
|
—
|
|
Total
liabilities
|
$
|
544,598
|
|
$
|
577,731
|
|
|
|
|
|
Shareholders'
equity
|
|
|
|
|
Share
capital
|
$
|
853,633
|
|
$
|
882,770
|
Retained
earnings
|
|
1,247,737
|
|
|
1,161,047
|
Accumulated other
comprehensive income (loss)
|
|
1,619
|
|
|
(414)
|
Treasury
stock
|
|
(14,966)
|
|
|
(2,086)
|
Total shareholders'
equity
|
$
|
2,088,023
|
|
$
|
2,041,317
|
Total liabilities and
equity
|
$
|
2,632,621
|
|
$
|
2,619,048
|
Consolidated Statements of Net Earnings
|
Three months
ended
December 31,
|
Twelve months
ended
December 31,
|
(In thousands of
Canadian dollars, except share amounts)
|
2016
|
2015
|
2016
|
2015
|
|
(Unaudited)
|
(Unaudited)
|
(Audited)
|
(Audited)
|
Sales
|
$
|
828,178
|
$
|
873,123
|
$
|
3,331,812
|
$
|
3,292,932
|
Cost of goods
sold
|
|
623,362
|
|
756,277
|
|
2,740,866
|
|
2,911,791
|
Gross
margin
|
$
|
204,816
|
$
|
116,846
|
$
|
590,946
|
$
|
381,141
|
Selling, general and
administrative expenses
|
|
89,429
|
|
63,605
|
|
324,820
|
|
288,055
|
Earnings before the
following:
|
$
|
115,387
|
$
|
53,241
|
$
|
266,126
|
$
|
93,086
|
Restructuring and
other related costs
|
|
(4,226)
|
|
(12,311)
|
|
(6,570)
|
|
(33,825)
|
Other income
(expense)
|
|
(5,025)
|
|
5,974
|
|
(3,596)
|
|
(1,899)
|
Earnings before
interest and income taxes
|
$
|
106,136
|
$
|
46,904
|
$
|
255,960
|
$
|
57,362
|
Interest expense and
other financing costs
|
|
1,231
|
|
1,216
|
|
6,367
|
|
4,711
|
Earnings before
income taxes
|
$
|
104,905
|
$
|
45,688
|
$
|
249,593
|
$
|
52,651
|
Income taxes
expense
|
|
28,681
|
|
12,403
|
|
67,891
|
|
11,071
|
Net
earnings
|
$
|
76,224
|
$
|
33,285
|
$
|
181,702
|
$
|
41,580
|
Earnings per share
attributable to common shareholders:
|
|
|
|
|
|
Basic earnings per
share
|
$
|
0.57
|
$
|
0.24
|
$
|
1.35
|
$
|
0.30
|
|
Diluted earnings per
share
|
$
|
0.56
|
$
|
0.24
|
$
|
1.32
|
$
|
0.29
|
Weighted average
number of shares (millions)
|
|
|
|
|
|
|
|
|
|
Basic
|
|
133.5
|
|
136.7
|
|
134.2
|
|
140.2
|
|
Diluted
|
|
136.8
|
|
138.2
|
|
137.6
|
|
141.7
|
Consolidated Statements of Other Comprehensive Income
(Loss)
|
Three months
ended
December 31,
|
Twelve months
ended
December 31,
|
(In thousands of
Canadian dollars)
|
|
2016
|
|
2015
|
2016
|
|
2015
|
|
|
(Unaudited)
|
|
(Unaudited)
|
(Audited)
|
|
(Audited)
|
Net
earnings
|
$
|
76,224
|
$
|
33,285
|
$
|
181,702
|
$
|
41,580
|
Other comprehensive
income (loss)
|
|
|
|
|
|
|
|
|
Actuarial gains and
losses that will not be reclassified to profit or loss
|
|
|
|
|
|
|
|
|
|
|
(Net of tax of $18.1
million and $17.0 million; 2015: $4.7 million and $0.2
million)
|
$
|
49,390
|
$
|
(13,603)
|
$
|
46,243
|
$
|
389
|
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; 2015: $0.0 million)
|
$
|
(1,427)
|
$
|
550
|
$
|
(390)
|
$
|
1,769
|
|
Change in unrealized
gains and losses on cash flow hedges
|
|
|
|
|
|
|
|
(Net of tax of $0.6
million and $0.8 million; 2015: $0.6 million and $0.7
million)
|
|
(1,601)
|
|
1,792
|
2,423
|
|
(1,957)
|
Total items that are
or may be reclassified subsequently to profit or loss
|
$
|
(3,028)
|
$
|
2,342
|
$
|
2,033
|
$
|
(188)
|
Total other
comprehensive income (loss)
|
$
|
46,362
|
$
|
(11,261)
|
$
|
48,276
|
$
|
201
|
Comprehensive
income
|
$
|
122,586
|
$
|
22,024
|
$
|
229,978
|
$
|
41,781
|
Consolidated Statements of Changes in Total Equity
|
Accumulated other
comprehensive income (loss)(ii)
|
|
|
|
|
(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, 2015
|
|
|
|
|
|
|
|
|
(Restated)(i)
|
$
|
882,770
|
$
|
1,161,047
|
$
|
—
|
$
|
2,506
|
$
|
(2,920)
|
$
|
(2,086)
|
$
|
2,041,317
|
|
Net
earnings
|
|
—
|
|
181,702
|
|
—
|
|
—
|
|
—
|
|
—
|
|
181,702
|
|
Other comprehensive
income (loss)(iii)
|
|
—
|
|
46,243
|
|
—
|
|
(390)
|
|
2,423
|
|
—
|
|
48,276
|
|
Dividends declared
($0.36 per share)
|
|
—
|
|
(48,348)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(48,348)
|
|
Share-based
compensation expense
|
|
—
|
|
—
|
|
29,224
|
|
—
|
|
—
|
|
—
|
|
29,224
|
|
Deferred taxes on
share-based compensation
|
|
—
|
|
—
|
|
3,550
|
|
—
|
|
—
|
|
—
|
|
3,550
|
|
Repurchase of
shares
|
|
(31,963)
|
|
(83,778)
|
|
(32,418)
|
|
—
|
|
—
|
|
—
|
|
(148,159)
|
|
Exercise of stock
options
|
|
2,826
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2,826
|
|
Settlement of
share-based compensation
|
|
—
|
|
(9,129)
|
|
(356)
|
|
—
|
|
—
|
|
5,032
|
|
(4,453)
|
|
Shares purchased by
RSU trust
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(17,912)
|
|
(17,912)
|
Balance at
December 31, 2016
|
$
|
853,633
|
$
|
1,247,737
|
$
|
—
|
$
|
2,116
|
$
|
(497)
|
$
|
(14,966)
|
$
|
2,088,023
|
|
|
|
|
|
Accumulated other
comprehensive income (loss)(ii)
|
|
|
|
|
(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, 2014
|
|
|
|
|
|
|
|
|
(Restated)(i)
|
$
|
936,479
|
$
|
1,216,998
|
$
|
79,652
|
$
|
737
|
$
|
(963)
|
$
|
(224)
|
$
|
2,232,679
|
|
Net
earnings
|
|
—
|
|
41,580
|
|
—
|
|
—
|
|
—
|
|
—
|
|
41,580
|
|
Other comprehensive
income (loss)(iii)
|
|
—
|
|
389
|
|
—
|
|
1,769
|
|
(1,957)
|
|
—
|
|
201
|
|
Dividends declared
($0.32 per share)
|
|
—
|
|
(44,668)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(44,668)
|
|
Share-based
compensation expense
|
|
—
|
|
—
|
|
12,870
|
|
—
|
|
—
|
|
—
|
|
12,870
|
|
Repurchase of
shares
|
|
(56,744)
|
|
(48,163)
|
|
(90,216)
|
|
—
|
|
—
|
|
—
|
|
(195,123)
|
|
Issuance of treasury
stock
|
|
—
|
|
(3,860)
|
|
(2,306)
|
|
—
|
|
—
|
|
3,326
|
|
(2,840)
|
|
Exercise of stock
options
|
|
3,035
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3,035
|
|
Settlement of
share-based compensation
|
|
—
|
|
(1,229)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(1,229)
|
|
Shares purchased by
RSU trust
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(5,188)
|
|
(5,188)
|
Balance at December
31, 2015 (Restated)(i)
|
$
|
882,770
|
$
|
1,161,047
|
$
|
—
|
$
|
2,506
|
$
|
(2,920)
|
$
|
(2,086)
|
$
|
2,041,317
|
|
|
(ii) Items that are or may be subsequently reclassified
to profit or loss.
|
(iii) 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
|
Three months
ended
December 31,
|
Twelve months
ended
December 31,
|
(In thousands of
Canadian dollars)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
CASH PROVIDED BY
(USED IN):
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Audited)
|
|
(Audited)
|
Operating
activities
|
|
|
|
|
Net
earnings
|
$
|
76,224
|
$
|
33,285
|
$
|
181,702
|
$
|
41,580
|
|
Add (deduct) items
not affecting cash:
|
|
|
|
|
|
|
|
|
|
Change in fair value
of biological assets
|
(48,172)
|
(14,344)
|
(6,263)
|
12,778
|
|
|
Depreciation and
amortization
|
27,576
|
28,529
|
111,651
|
123,480
|
|
|
Share-based
compensation
|
10,165
|
6,198
|
29,224
|
12,870
|
|
|
Deferred income
taxes
|
27,013
|
11,462
|
63,124
|
9,178
|
|
|
Income tax
current
|
1,668
|
941
|
4,767
|
1,893
|
|
|
Interest expense and
other financing costs
|
1,231
|
1,216
|
6,367
|
4,711
|
|
|
Loss (gain) on sale
of long-term assets
|
3,518
|
(4,163)
|
(1,235)
|
(10,344)
|
|
|
Change in fair value
of non-designated derivative financial instruments
|
(4,637)
|
7,727
|
(25,086)
|
(1,429)
|
|
|
Impairment of assets
(net of reversals)
|
638
|
—
|
2,831
|
1,907
|
|
Change in net pension
liability
|
5,623
|
6,770
|
24,903
|
26,761
|
|
Net income taxes
paid
|
(793)
|
(605)
|
(4,944)
|
(12,735)
|
|
Interest
paid
|
(991)
|
(1,022)
|
(3,904)
|
(3,674)
|
|
Change in provision
for restructuring and other related costs
|
271
|
6,011
|
(17,256)
|
(14,963)
|
|
Cash settlement of
restricted share units
|
—
|
(5,904)
|
(216)
|
(11,236)
|
|
Derivatives
margin
|
(22,745)
|
(534)
|
1,772
|
1,587
|
|
Other
|
(2,518)
|
(2,262)
|
736
|
932
|
|
Change in non-cash
operating working capital
|
(1,957)
|
4,048
|
(11,016)
|
(23,889)
|
Cash provided by
operating activities
|
$
|
72,114
|
$
|
77,353
|
$
|
357,157
|
$
|
159,407
|
Financing
activities
|
|
|
|
|
|
|
|
Dividends
paid
|
$
|
(11,967)
|
$
|
(10,842)
|
$
|
(48,348)
|
$
|
(44,668)
|
|
Net increase
(decrease) in long-term debt
|
(199)
|
(83)
|
(1,051)
|
(125)
|
|
Exercise of stock
options
|
1,165
|
847
|
2,826
|
3,035
|
|
Repurchase of
shares
|
(60,490)
|
(44,194)
|
(72,412)
|
(182,549)
|
|
Payment of deferred
financing fees
|
(631)
|
—
|
(2,412)
|
(277)
|
|
Purchase of treasury
stock
|
(4,811)
|
(4,000)
|
(17,912)
|
(5,188)
|
Cash used in
financing activities
|
$
|
(76,933)
|
$
|
(58,272)
|
$
|
(139,309)
|
$
|
(229,772)
|
Investing
activities
|
|
|
|
|
|
Additions to
long-term assets
|
$
|
(36,219)
|
$
|
(38,204)
|
$
|
(113,194)
|
$
|
(147,699)
|
|
Transaction
costs
|
—
|
(1)
|
—
|
(64)
|
|
Proceeds from sale of
long-term assets
|
311
|
4,854
|
6,698
|
14,069
|
Cash used in
investing activities
|
$
|
(35,908)
|
$
|
(33,351)
|
$
|
(106,496)
|
$
|
(133,694)
|
Increase
(decrease) in cash and cash equivalents
|
$
|
(40,727)
|
$
|
(14,270)
|
$
|
111,352
|
$
|
(204,059)
|
Net cash and cash
equivalents, beginning of period
|
|
444,348
|
|
306,539
|
|
292,269
|
|
496,328
|
Net cash and cash
equivalents, end of period
|
$
|
403,621
|
$
|
292,269
|
$
|
403,621
|
$
|
292,269
|
Segmented Financial Information
|
Three months ended
December 31,
|
Twelve months ended
December 31,
|
(In thousands of
Canadian dollars)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Audited)
|
|
(Audited)
|
Sales
|
|
|
|
|
|
|
Meat Products
Group
|
$
|
824,432
|
$
|
868,542
|
$
|
3,316,490
|
$
|
3,276,994
|
|
Agribusiness
Group
|
3,746
|
4,581
|
15,322
|
15,938
|
Total
sales
|
$
|
828,178
|
$
|
873,123
|
$
|
3,331,812
|
$
|
3,292,932
|
Earnings (loss)
before restructuring and other related costs and other
income
|
|
|
|
|
|
Meat Products
Group
|
$
|
73,510
|
$
|
54,619
|
$
|
263,605
|
$
|
108,440
|
|
Agribusiness
Group
|
(9,792)
|
(6,862)
|
(24,323)
|
1,360
|
|
Non-allocated
|
51,669
|
5,484
|
26,844
|
(16,714)
|
Total earnings
(loss) before restructuring and other related costs and other
income
|
$
|
115,387
|
$
|
53,241
|
$
|
266,126
|
$
|
93,086
|
Capital
expenditures
|
|
|
|
|
|
Meat Products
Group
|
$
|
26,075
|
$
|
29,838
|
$
|
95,293
|
$
|
123,455
|
|
Agribusiness
Group
|
10,144
|
7,367
|
17,901
|
22,295
|
|
$
|
36,219
|
$
|
37,205
|
$
|
113,194
|
$
|
145,750
|
Depreciation and
amortization
|
|
|
|
|
|
Meat Products
Group
|
$
|
25,659
|
$
|
25,870
|
$
|
102,820
|
$
|
102,302
|
|
Agribusiness
Group
|
1,908
|
1,819
|
7,456
|
6,588
|
|
Non-allocated(i)
|
9
|
840
|
1,375
|
14,590
|
|
$
|
27,576
|
$
|
28,529
|
$
|
111,651
|
$
|
123,480
|
|
|
|
|
|
|
|
|
|
(i)
Includes depreciation on assets used to service divested
business.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands of
Canadian dollars)
|
|
|
|
|
As at December
31,
|
(Audited)
|
|
|
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
(Restated)(i)
|
Total
assets
|
|
|
|
|
|
|
|
|
|
Meat Products
Group
|
|
|
|
|
$
|
1,867,146
|
$
|
1,853,146
|
|
Agribusiness
Group
|
|
|
|
|
|
207,730
|
|
188,890
|
|
Non-allocated
assets
|
|
|
|
|
|
557,745
|
|
577,012
|
|
|
|
|
|
$
|
2,632,621
|
$
|
2,619,048
|
Goodwill
|
|
|
|
|
|
|
|
|
|
Meat Products
Group
|
|
|
|
|
$
|
428,236
|
$
|
428,236
|
(i)
Refer to Note 3(v) of the Company's 2016 audited consolidated
financial statements for further information.
|
SOURCE Maple Leaf Foods Inc.