TSX: MFI
www.mapleleaffoods.com
MISSISSAUGA, ON, Feb. 28,
2019 /CNW/ - Maple Leaf Foods Inc. (the "Company") (TSX: MFI) today
reported its financial results for the fourth quarter and full year
ended December 31, 2018. The Company
also announced it will increase its quarterly dividend by
$0.015 per share or 11.5% to
$0.145 per share, effective the first
quarter of 2019.
Quarter highlights
- Sales growth driven by core business offset by declines in
fresh market prices
- Adjusted EBITDA(1) margin of 10.0% with strong
commercial performance offset by adverse fresh market
conditions
- Meaningful progress on strategic growth initiatives including
further momentum in sustainable meats, renovation of the entire
brand portfolio completed and continued double-digit growth in
plant protein
- Closed the strategic acquisitions of Cericola Farms and VIAU
Foods providing new and attractive growth avenues in underlying
businesses
- Announced $605.5 million
investment to construct state-of-the-art poultry facility to meet
the growing demand for value-added poultry while gaining
significant processing efficiencies, resulting in an approximately
$40.7 million restructuring charge in
the quarter
"In a year marked by the most challenging industry pork markets
in a decade, we delivered a 10% or greater Adjusted EBITDA margin
in three out of four quarters," said Michael H. McCain, President and
CEO. "Strong performance in our branded prepared meats
business, a rapidly growing plant protein business, recent
acquisitions and planned investments point to the strength of our
foundational strategies. By striving passionately to 'raise
the good in food,' we are uniquely positioning Maple Leaf for
sustainable growth as we satisfy the protein demand of a growing
population who have new ideas about what good food means."
Financial Highlights
Measure(a)
(Unaudited)
|
Three months
ended
December
31,
|
|
Twelve months
ended
December
31,
|
|
|
|
2018
|
|
2017
|
|
Change
|
|
|
2018
|
|
|
2017
|
|
Change
|
Sales(b)
|
|
$
|
893.9
|
|
$
|
876.8
|
|
2.0%
|
|
$
|
3,495.5
|
|
$
|
3,522.2
|
|
(0.8)%
|
Net
Earnings
|
|
$
|
11.9
|
|
$
|
59.1
|
|
(79.8)%
|
|
$
|
101.3
|
|
$
|
164.1
|
|
(38.2)%
|
Basic Earnings per
Share
|
|
$
|
0.10
|
|
$
|
0.47
|
|
(78.7)%
|
|
$
|
0.81
|
|
$
|
1.28
|
|
(36.7)%
|
Adjusted EBITDA
Margin
|
|
|
10.0%
|
|
|
10.7%
|
|
(70) bps
|
|
|
9.9%
|
|
|
10.8%
|
|
(90) bps
|
Adjusted
EBITDA
|
|
$
|
89.1
|
|
$
|
93.5
|
|
(4.7)%
|
|
$
|
344.3
|
|
$
|
381.1
|
|
(9.6)%
|
Adjusted Operating
Earnings(2)
|
|
$
|
54.0
|
|
$
|
64.7
|
|
(16.5)%
|
|
$
|
215.6
|
|
$
|
263.8
|
|
(18.3)%
|
Adjusted Earnings per
Share(3)
|
|
$
|
0.29
|
|
$
|
0.41
|
|
(29.3)%
|
|
$
|
1.22
|
|
$
|
1.54
|
|
(20.8)%
|
Free Cash
Flow(4)
|
|
$
|
55.1
|
|
$
|
40.3
|
|
36.8%
|
|
$
|
119.8
|
|
$
|
244.5
|
|
(51.0)%
|
(a)All financial measures in
millions of dollars except Adjusted EBITDA Margin and Basic and
Adjusted Earnings per Share.
|
|
(b)
2018 sales include the impact of the adoption of new accounting
standard IFRS 15. Refer to note 3(v) of the 2018 annual audited
consolidated financial statements for further details on the impact
of the adoption of new accounting standards.
|
|
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
Reconciliation of Non-IFRS Financial Measures at the end of this
news release for a description and reconciliation of all non-IFRS
financial measures.
|
OPERATING REVIEW
The following is a summary of sales and Adjusted Operating
Earnings for the fourth quarter:
($
millions)
|
|
Fourth
Quarter
|
|
2018
|
|
|
2017
|
|
Change
|
Sales
|
|
$
|
893.9
|
|
$
|
876.8
|
|
2.0%
|
Adjusted Operating
Earnings
|
|
$
|
54.0
|
|
$
|
64.7
|
|
(16.5)%
|
Adjusted EBITDA
Margin
|
|
|
10.0%
|
|
|
10.7%
|
|
(70) bps
|
The following table summarizes sales and Adjusted Operating
Earnings for the two years ended December
31:
($
millions)
|
|
2018
|
|
|
2017
|
|
Change
|
Sales
|
|
$
|
3,495.5
|
|
$
|
3,522.2
|
|
(0.8)%
|
Adjusted Operating
Earnings
|
|
$
|
215.6
|
|
$
|
263.8
|
|
(18.3)%
|
Adjusted EBITDA
Margin
|
|
|
9.9%
|
|
|
10.8%
|
|
(90) bps
|
Sales and Earnings Review
Fourth Quarter
Sales for the fourth quarter increased 2.0% to $893.9 million or decreased 1.9% after
adjusting for the impact of IFRS 15 and acquisitions. Sales growth
in prepared meats, driven by favourable sales mix supported by food
renovation and pricing actions taken early in the quarter to
mitigate inflationary pressures, plant protein and sustainable
meats was more than offset by declines in fresh market prices.
Net Earnings for the quarter were $11.9
million ($0.10 per basic
share) compared to $59.1 million
($0.47 per basic share) in the same
period last year. Strong commercial performance in prepared meats,
driven by favourable sales mix, pricing actions and lower input
costs, and continued growth in sustainable meats was more than
offset by the impact of adverse fresh market conditions. Results
also benefited from a lower level of variable compensation costs
compared to the prior year. In addition, Net Earnings were impacted
by restructuring costs of $42.2
million, primarily related to the Company's previously
announced strategic investment in poultry, and acquisition costs,
which are excluded in calculating Adjusted Operating Earnings.
Basic Earnings per Share was $0.10
for the fourth quarter of 2018 compared to $0.47 in the fourth quarter of 2017 due to the
factors described above.
Adjusted Operating Earnings for the fourth quarter of 2018 were
$54.0 million compared to
$64.7 million in the fourth quarter
of 2017. The decrease is attributable to the same factors impacting
Net Earnings, excluding restructuring and acquisition costs, as
noted above.
Adjusted Earnings per Share in the fourth quarter of 2018 was
$0.29 compared to $0.41 in the fourth quarter of 2017.
Adjusted EBITDA margin for the fourth quarter decreased to 10.0%
from 10.7% in the fourth quarter of 2017 consistent with the
factors noted above.
Full Year 2018
Sales for 2018 were $3,495.5
million compared to $3,522.2
million in the prior year a decrease of 0.8%, or a decrease
of 0.5% after adjusting for the impact of IFRS 15 and acquisitions.
For the year, the core business experienced sales growth in
prepared meats, sustainable meats and plant protein, which was more
than offset by declines in fresh market prices. Improvements in
sales were primarily driven by pricing actions taken to mitigate
inflationary pressures, favourable sales mix supported by food
renovation and growth in the U.S. for both sustainable meat and
plant protein.
Net Earnings for the year were $101.3
million ($0.81 per basic
share) compared to $164.1 million
($1.28 per basic share) in the prior
year. Improved commercial performance in prepared meats, driven by
favourable sales mix, pricing actions and lower input
costs, and in the fresh value-added portfolio were more than offset
by adverse fresh market conditions and strategic investments to
complete the launch of food renovation for the Company's flagship
brands. Results also benefited from a lower level of variable
compensation costs compared to the prior year. In addition, Net
Earnings were impacted by restructuring costs of $46.2 million, primarily related to the Company's
previously announced strategic investment in poultry, the change in
the fair value of biological assets, unrealized gains on derivative
contracts and acquisition costs, which are excluded in calculating
Adjusted Operating Earnings.
Adjusted Operating Earnings for 2018 were $215.6 million compared to $263.8 million in 2017. The decrease is
attributable to the same factors impacting Net Earnings, excluding
restructuring costs, the change in the fair value of biological
assets, unrealized gains on derivative contracts and acquisition
costs, as noted above.
Adjusted Earnings per Share were $1.22 compared to $1.54 in the prior year, consistent with the
factors noted above.
Adjusted EBITDA margin for the year was 9.9%
compared to 10.8% in the prior year, consistent with factors noted
above.
Other Matters
On February 27,
2019, the Board of Directors approved a quarterly dividend
of $0.145 per share (up from
$0.13 per share in each quarter of
2018), $0.58 per share on an annual
basis, payable March 29, 2019 to
shareholders of record at the close of business March 15, 2019. 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 Investor Material on
the Investors page. A conference call will be held at 10:30a.m. EDT on February
28, 2019, to review Maple Leaf Foods' fourth quarter
financial results. To participate in the call, please dial
416-764-8609 or 888-390-0605. For those unable to participate,
playback will be made available an hour after the event at 416 764
8677 or 888 390 0541 (Passcode: 449108 #).
A webcast presentation of the fourth quarter financial results
will also be available at:
https://edge.media-server.com/m6/p/ve6rh7wu
The Company's full audited financial statements and related
Management's Discussion and Analysis are available on the Company's
website.
Outlook
Maple Leaf Foods is committed to creating shared value with a
focus on driving commercial and financial results and creating
competitive advantage through addressing some of society's most
pressing issues. The Company 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.
Ongoing uncertainty in fresh pork markets are expected with
continued global trade negotiations, potential for increased supply
and the confirmation of African Swine Fever in China. Within this environment, management
remains focused on existing opportunities to grow its core business
and profitability through improved commercial performance,
operational efficiencies and progress against strategic initiatives
for longer-term value creation.
In 2017, Maple Leaf Foods set a profitability target to achieve
Adjusted EBITDA margin between 14% - 16% within five years. The
Company maintains a steadfast focus on meeting this target as
planned with ongoing progress and advancement of five key growth
initiatives: (i) sustainable meat; (ii) poultry network; (iii) food
renovation; (iv) plant protein; and (v) cost culture delivering
operational savings and efficiencies to fuel growth.
For 2019 the Company expects to:
- Invest approximately $400 million
in capital expenditures, including approximately $250 million related to the construction of the
new value-added poultry facility in London, Ontario;
- Continue to build its leadership in sustainable meat with
further advancement in animal care including progress towards
transitioning all sows under management to open housing systems by
2021, and ongoing retail and food service growth of the RWA
category in Canada and the
U.S.;
- Initiate construction of its London Poultry facility;
- Gain further momentum in prepared meats sales volume as the
Company benefits from the food renovation and brand repositioning
of its Maple Leaf®, Schneiders® and Swift® brands;
- Continue to accelerate its leadership in the North American
refrigerated plant-based protein market under its flagship
Lightlife and Field Roast brands, targeting consistent double
digit-growth in sales supported by new product innovations and
investment in capacity to meet demand; and
- Continue to pay shareholder dividends commensurate with the
growth of the business.
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 in the
audited consolidated statement of earnings to Adjusted Operating
Earnings for three months and years ended December 31, 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,
|
Twelve months
ended
December
31,
|
($
thousands)
|
|
2018
|
|
2017
|
|
|
2018
|
|
2017
|
Net
earnings
|
|
$
|
11,949
|
|
$
|
59,064
|
|
$
|
101,348
|
|
$
|
164,089
|
Income
taxes
|
|
6,134
|
|
12,153
|
|
39,755
|
|
50,192
|
Earnings before
income taxes
|
|
$
|
18,083
|
|
$
|
71,217
|
|
$
|
141,103
|
|
$
|
214,281
|
Interest expense and
other financing costs
|
|
4,247
|
|
1,276
|
|
10,040
|
|
5,168
|
Other expense
(income)
|
|
8,543
|
|
5,319
|
|
12,974
|
|
(3,609)
|
Restructuring and
other related costs
|
|
42,217
|
|
5,921
|
|
46,188
|
|
23,024
|
Earnings from
operations
|
|
$
|
73.090
|
|
$
|
83,733
|
|
$
|
210,305
|
|
$
|
238,864
|
(Decrease) Increase
in fair value of biological assets(5)
|
|
(22,229)
|
|
(27,629)
|
|
10,905
|
|
(1,267)
|
Unrealized loss
(gain) on derivative contracts(5)
|
|
3,139
|
|
8,548
|
|
(5,584)
|
|
26,243
|
Adjusted Operating
Earnings
|
|
$
|
54,000
|
|
$
|
64,652
|
|
$
|
215,626
|
|
$
|
263,840
|
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
in the audited consolidated statements of earnings to Adjusted
Earnings per Share for three months and years 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)
|
Three months
ended
December
31,
|
Twelve months
ended
December
31,
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
Basic earnings per
share
|
|
$
|
0.10
|
|
$
|
0.47
|
|
$
|
0.81
|
|
$
|
1.28
|
Restructuring and
other related costs(6)
|
|
0.25
|
|
0.03
|
|
0.27
|
|
0.13
|
Items included in
other expense (income) not considered
|
|
|
|
|
|
|
|
|
representative of
ongoing operations(7)
|
|
0.06
|
|
0.02
|
|
0.11
|
|
(0.01)
|
Change in fair value
of biological assets(8)
|
|
(0.13)
|
|
(0.16)
|
|
0.06
|
|
(0.01)
|
Unrealized loss
(gain) on derivative contracts(8)
|
|
0.02
|
|
0.05
|
|
(0.03)
|
|
0.15
|
Adjusted Earnings
per Share(9)
|
|
$
|
0.29
|
|
$
|
0.41
|
|
$
|
1.22
|
|
$
|
1.54
|
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
earnings to Adjusted EBITDA for three months and years ended
December 31, 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,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net
earnings
|
|
$
|
11,949
|
|
$
|
59,064
|
|
$
|
101,348
|
|
$
|
164,089
|
Income
taxes
|
|
6,134
|
|
12,153
|
|
39,755
|
|
50,192
|
Earnings before
income taxes
|
|
$
|
18,083
|
|
$
|
71,217
|
|
$
|
141,103
|
|
$
|
214,281
|
Interest expense and
other financing costs
|
|
4,247
|
|
1,276
|
|
10,040
|
|
5,168
|
Items included in
other expense (income) not considered
|
|
|
|
|
|
|
|
|
representative of
ongoing operations(7)
|
|
8,339
|
|
2,991
|
|
15,630
|
|
(3,582)
|
Restructuring and
other related costs
|
|
42,217
|
|
5,921
|
|
46,188
|
|
23,024
|
Change in fair value
of biological assets and unrealized loss
|
|
|
|
|
|
|
|
|
(gain) on derivative
contracts
|
|
(19,090)
|
|
(19,081)
|
|
5,321
|
|
24,976
|
Depreciation and
amortization(10)
|
|
35,302
|
|
31,152
|
|
126,035
|
|
117,190
|
Adjusted
EBITDA
|
|
$
|
89,098
|
|
$
|
93,476
|
|
$
|
344,317
|
|
$
|
381,057
|
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,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Cash provided by
operating activities
|
|
$
|
106,961
|
|
$
|
103,448
|
|
$
|
299,685
|
|
$
|
386,695
|
Additions to
long-term assets
|
|
(51,894)
|
|
(63,192)
|
|
(179,865)
|
|
(142,245)
|
Free Cash
Flow
|
|
$
|
55,067
|
|
$
|
40,256
|
|
$
|
119,820
|
|
$
|
244,450
|
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: expectations regarding the use of derivatives, futures
and options; the expected use of cash balances; the payment of
dividends; source of funds for ongoing business requirements;
capital investments and expectations regarding capital
expenditures; expectations regarding acquisitions; 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 associated with the availability of
capital;
- risks related to the health status of livestock;
- risks associated with concentration of production in fewer
facilities;
- risks posed by food contamination, consumer liability, and
product recalls;
- risks associated with cyber threats;
- risks related to the Company's decisions regarding any
potential return of capital to shareholders;
- risks associated with acquisitions, divestitures, capital
expansion projects and integration of new
businesses;
- risk associated with climate change;
- 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;
- 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 commodities and
hedging instruments;
- risks associated with the supply management system for poultry
in Canada;
- risks posed by litigation;
- risks associated with changes in the Company's information
systems and processes;
- 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;
- the Company's exposure to currency exchange risks;
- 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;
- risks associated with failing to identify and manage the
strategic risks facing the Company; and
- impact of changes in IFRS in respect of or as they may affect
the availability of capital.
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, 2018, 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.
About Maple Leaf Foods Inc.
Maple Leaf Foods Inc. ("Maple Leaf Foods") is a producer of food
products under leading brands including Maple Leaf®, Maple Leaf
Prime®, Maple Leaf Natural Selections®, Schneiders®, Schneiders®
Country Naturals®, Mina®, Greenfield Natural Meat Co.™, Lightlife™,
Field Roast Grain Meat Co.™ and Swift®. Maple Leaf Foods employs
approximately 12,000 people and does business in Canada, 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. Adjusted EBITDA margin is calculated
as Adjusted EBITDA divided by sales. Please refer to the section
entitled Non-IFRS Financial Measures in this news
release.
|
2. 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. Please refer to the section entitled
Non-IFRS Financial Measures in this news release.
|
3. 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 Non-IFRS
Financial Measures in this news release.
|
4. 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. Please refer to the section entitled
Non-IFRS Financial Measures in this news release.
|
5. Unrealized
gains/losses on derivative contracts is reported within cost of
sales in the Company's 2018 annual audited consolidated financial
statements. For biological assets information, please refer to Note
7 of the Company's 2018 annual audited consolidated financial
statements.
|
6. Includes per
share impact of restructuring and other related costs, net of
tax.
|
7. Primarily
includes (gains) and losses on disposal of investment properties,
acquisition related costs and interest income, net of
tax.
|
8. 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.
|
9. May not add due
to rounding.
|
10. Depreciation and
amortization excludes depreciation related to investment
properties
|
Consolidated Balance Sheets
(In thousands of
Canadian dollars)
|
|
As at December
31,
|
|
As at December
31,
|
(Audited)
|
|
2018
|
|
2017
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
72,578
|
|
$
|
203,425
|
Accounts
receivable
|
|
146,735
|
|
123,968
|
Notes
receivable
|
|
30,504
|
|
28,918
|
Inventories
|
|
348,901
|
|
273,365
|
Biological
assets
|
|
111,493
|
|
111,735
|
Prepaid expenses and
other assets
|
|
38,222
|
|
24,393
|
|
|
$
|
748,433
|
|
$
|
765,804
|
Property and
equipment
|
|
1,283,669
|
|
1,116,309
|
Investment
property
|
|
5,109
|
|
1,892
|
Employee
benefits
|
|
5,389
|
|
9,856
|
Other long-term
assets
|
|
8,074
|
|
6,125
|
Goodwill
|
|
647,721
|
|
517,387
|
Intangible
assets
|
|
429,416
|
|
215,197
|
Total
assets
|
|
$
|
3,127,811
|
|
$
|
2,632,570
|
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Accounts payable and
accruals
|
|
$
|
343,872
|
|
$
|
300,659
|
Current portion of
provisions
|
|
3,457
|
|
9,335
|
Current portion of
long-term debt
|
|
80,897
|
|
805
|
Income taxes
payable
|
|
42,685
|
|
7,855
|
Other current
liabilities
|
|
24,031
|
|
31,597
|
|
|
$
|
494,942
|
|
$
|
350,251
|
Long-term
debt
|
|
302,524
|
|
8,443
|
Employee
benefits
|
|
103,982
|
|
117,808
|
Provisions
|
|
49,895
|
|
11,273
|
Other long-term
liabilities
|
|
53,564
|
|
12,689
|
Deferred tax
liability
|
|
116,065
|
|
80,498
|
Total
liabilities
|
|
$
|
1,120,972
|
|
$
|
580,962
|
|
|
|
|
|
Shareholders'
equity
|
|
|
|
|
Share
capital
|
|
$
|
849,655
|
|
$
|
835,154
|
Retained
earnings
|
|
1,178,389
|
|
1,253,035
|
Contributed
surplus
|
|
4,649
|
|
—
|
Accumulated other
comprehensive income (loss)
|
|
3,532
|
|
(9,620)
|
Treasury
stock
|
|
(29,386)
|
|
(26,961)
|
Total shareholders'
equity
|
|
$
|
2,006,839
|
|
$
|
2,051,608
|
Total liabilities and
equity
|
|
$
|
3,127,811
|
|
$
|
2,632,570
|
Consolidated Statements of Net Earnings
(In thousands of
Canadian dollars, except share amounts)
|
Three months
ended
December
31,
|
|
Twelve months
ended
December
31,
|
2018
|
2017
|
|
2018
|
2017
|
|
|
(Unaudited)
|
(Unaudited)
|
|
(Audited)
|
(Audited)
|
Sales
|
$
|
893,939
|
$
|
876,809
|
$
|
3,495,519
|
$
|
3,522,226
|
Cost of goods
sold
|
732,151
|
700,948
|
2,943,722
|
|
2,934,747
|
Gross
margin
|
$
|
161,788
|
$
|
175,861
|
$
|
551,797
|
$
|
587,479
|
Selling, general and
administrative expenses
|
88,698
|
92,128
|
|
341,492
|
|
348,615
|
Earnings before the
following:
|
$
|
73,090
|
$
|
83,733
|
$
|
210,305
|
$
|
238,864
|
Restructuring and
other related costs
|
(42,217)
|
(5,921)
|
|
(46,188)
|
|
(23,024)
|
Other income
(expense)
|
(8,543)
|
(5,319)
|
|
(12,974)
|
|
3,609
|
Earnings before
interest and income taxes
|
$
|
22,330
|
$
|
72,493
|
$
|
151,143
|
$
|
219,449
|
Interest expense and
other financing costs
|
4,247
|
1,276
|
|
10,040
|
|
5,168
|
Earnings before
income taxes
|
$
|
18,083
|
$
|
71,217
|
$
|
141,103
|
$
|
214,281
|
Income tax
expense
|
6,134
|
12,153
|
39,755
|
|
50,192
|
Net
earnings
|
$
|
11,949
|
$
|
59,064
|
$
|
101,348
|
$
|
164,089
|
Earnings per share
attributable to common shareholders:
|
|
|
|
|
|
|
Basic earnings per
share
|
$
|
0.10
|
$
|
0.47
|
$
|
0.81
|
$
|
1.28
|
Diluted earnings per
share
|
$
|
0.10
|
$
|
0.45
|
$
|
0.79
|
$
|
1.24
|
Weighted average
number of shares (millions)
|
|
|
|
|
|
|
Basic
|
123.2
|
126.9
|
|
125.0
|
|
128.6
|
Diluted
|
123.7
|
130.6
|
|
127.5
|
|
132.4
|
Consolidated Statements of Other Comprehensive Income
(Loss)
(In thousands of
Canadian dollars)
|
Three months
ended
December
31,
|
Twelve months
ended
December
31,
|
2018
|
2017
|
|
2018
|
2017
|
|
(Unaudited)
|
(Unaudited)
|
|
(Audited)
|
(Audited)
|
Net
earnings
|
$
|
11,949
|
$
|
59,064
|
|
$
|
101,348
|
$
|
164,089
|
Other comprehensive
income (loss)
|
|
|
|
|
|
Actuarial gains and
losses that will not be reclassified to profit or loss (Net of tax
of $-9.8 million and $3.7 million; 2017: $1.2 million and $1.0
million)
|
$
|
(26,312)
|
$
|
(3,508)
|
|
$
|
11,879
|
$
|
(3,117)
|
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, 2017: $0.0 million and $0.0 million)
|
$
|
20,405
|
$
|
1,376
|
|
$
|
33,273
|
$
|
(13,536)
|
Change in foreign
exchange on long-term debt designated as a net investment hedge
(Net of tax of $2.2 million and $2.5 million; 2017 $0.0 million and
$0.0 million)
|
(11,084)
|
—
|
|
(13,335)
|
—
|
Change in unrealized
gains and losses on cash flow hedges (Net of tax of $0.3 million
and $1.7 million; 2017: $1.6 million and $0.8 million)
|
(898)
|
(4,553)
|
|
(6,786)
|
2,297
|
Total items that are
or may be reclassified subsequently to profit or loss
|
$
|
8,423
|
$
|
(3,177)
|
|
$
|
13,152
|
$
|
(11,239)
|
Total other
comprehensive income (loss)
|
$
|
(17,889)
|
$
|
(6,685)
|
|
$
|
25,031
|
$
|
(14,356)
|
Comprehensive
income
|
$
|
(5,940)
|
$
|
52,379
|
|
$
|
126,379
|
$
|
149,733
|
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, 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
|
Settlement of
share-based compensation
|
—
|
(17,564)
|
(957)
|
—
|
—
|
10,575
|
(7,946)
|
Shares purchased by
RSU trust
|
—
|
—
|
—
|
—
|
—
|
(13,000)
|
(13,000)
|
Balance at
December 31, 2018
|
$
|
849,655
|
$
|
1,178,389
|
$
|
4,649
|
$
|
8,518
|
$
|
(4,986)
|
$
|
(29,386)
|
$
|
2,006,839
|
|
|
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, 2016
|
$
|
853,633
|
$
|
1,247,737
|
|
$
|
—
|
$
|
2,116
|
$
|
(497)
|
$
|
(14,966)
|
$
|
2,088,023
|
Net
earnings
|
—
|
164,089
|
|
—
|
—
|
—
|
—
|
164,089
|
Other comprehensive
income (loss)(ii)
|
—
|
(3,117)
|
|
—
|
(13,536)
|
2,297
|
—
|
(14,356)
|
Dividends declared
($0.44 per share)
|
—
|
(56,640)
|
|
—
|
—
|
—
|
—
|
(56,640)
|
Share-based
compensation expense
|
—
|
—
|
|
21,087
|
—
|
—
|
—
|
21,087
|
Deferred taxes on
share-based compensation
|
—
|
—
|
|
4,750
|
—
|
—
|
—
|
4,750
|
Repurchase of
shares
|
(24,409)
|
(66,074)
|
|
(25,837)
|
—
|
—
|
—
|
(116,320)
|
Exercise of stock
options
|
5,930
|
—
|
|
—
|
—
|
—
|
—
|
5,930
|
Settlement of
share-based compensation
|
—
|
(32,960)
|
|
—
|
—
|
—
|
16,005
|
(16,955)
|
Shares purchased by
RSU trust
|
—
|
—
|
|
—
|
—
|
—
|
(28,000)
|
(28,000)
|
Balance at December
31, 2017
|
$
|
835,154
|
$
|
1,253,035
|
|
$
|
—
|
$
|
(11,420)
|
$
|
1,800
|
$
|
(26,961)
|
$
|
2,051,608
|
(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,
|
2018
|
2017
|
2018
|
2017
|
CASH PROVIDED BY
(USED IN):
|
(Unaudited)
|
|
(Unaudited)
|
|
(Audited)
|
(Audited)
|
Operating
activities
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
$
|
11,949
|
|
$
|
59,064
|
|
$
|
101,348
|
|
$
|
164,089
|
Add (deduct) items
not affecting cash:
|
|
|
|
|
|
|
|
|
Change in fair value
of biological assets
|
|
(22,229)
|
|
(27,629)
|
|
10,905
|
|
(1,267)
|
Depreciation and
amortization
|
|
35,302
|
|
31,161
|
|
126,066
|
|
117,227
|
Share-based
compensation
|
|
4,581
|
|
4,579
|
|
18,366
|
|
21,087
|
Deferred income
taxes
|
|
(13,195)
|
|
6,889
|
|
10,055
|
|
40,920
|
Income tax
current
|
|
19,329
|
|
5,264
|
|
29,700
|
|
9,272
|
Interest expense and
other financing costs
|
|
4,247
|
|
1,276
|
|
10,040
|
|
5,168
|
Loss (gain) on sale
of long-term assets
|
|
985
|
|
2,903
|
|
5,623
|
|
(5,781)
|
Change in fair value
of non-designated derivatives
|
|
3,825
|
|
6,972
|
|
(4,657)
|
|
21,877
|
Impairment of assets
(net of reversals)
|
|
—
|
|
—
|
|
—
|
|
3,776
|
Change in net pension
liability
|
|
1,858
|
|
4,482
|
|
7,378
|
|
5,379
|
Net income taxes
paid
|
|
(396)
|
|
(1,716)
|
|
(6,820)
|
|
(10,604)
|
Interest
paid
|
|
(3,662)
|
|
306
|
|
(7,996)
|
|
(2,299)
|
Change in provision
for restructuring and other related costs
|
|
40,403
|
|
(84)
|
|
33,760
|
|
9,037
|
Change in derivatives
margin
|
|
(3,585)
|
|
(12,059)
|
|
10,998
|
|
(13,210)
|
Other
|
|
1,349
|
|
(1,378)
|
|
(5,529)
|
|
(6,316)
|
Change in non-cash
operating working capital
|
|
26,200
|
|
23,418
|
|
(39,552)
|
|
28,340
|
Cash provided by
operating activities
|
|
$
|
106,961
|
|
$
|
103,448
|
|
$
|
299,685
|
|
$
|
386,695
|
Financing
activities
|
|
|
|
|
|
|
|
|
Dividends
paid
|
|
$
|
(16,096)
|
|
$
|
(13,963)
|
|
$
|
(65,119)
|
|
$
|
(56,640)
|
Net increase
(decrease) in long-term debt
|
|
194,977
|
|
(139)
|
|
357,941
|
|
(1,083)
|
Exercise of stock
options
|
|
—
|
|
—
|
|
15,840
|
|
5,930
|
Repurchase of
shares
|
|
(27,110)
|
|
(26,300)
|
|
(166,526)
|
|
(180,110)
|
Payment of deferred
financing fees
|
|
(96)
|
|
(677)
|
|
(650)
|
|
(1,302)
|
Purchase of treasury
stock
|
|
(3,000)
|
|
(6,000)
|
|
(13,000)
|
|
(28,000)
|
Cash provided by
(used in) financing activities
|
|
$
|
148,675
|
|
$
|
(47,079)
|
|
$
|
128,486
|
|
$
|
(261,205)
|
Investing
activities
|
|
|
|
|
|
|
|
|
Additions to
long-term assets
|
|
$
|
(51,894)
|
|
$
|
(63,192)
|
|
$
|
(179,865)
|
|
$
|
(142,245)
|
Acquisition of
business, net of cash acquired
|
|
(241,176)
|
|
—
|
|
(379,556)
|
|
(199,440)
|
Proceeds from sale of
long-term assets
|
|
369
|
|
398
|
|
403
|
|
15,999
|
Cash used in
investing activities
|
|
$
|
(292,701)
|
|
$
|
(62,794)
|
|
$
|
(559,018)
|
|
$
|
(325,686)
|
Decrease in cash
and cash equivalents
|
|
$
|
(37,065)
|
|
$
|
(6,425)
|
|
$
|
(130,847)
|
|
$
|
(200,196)
|
Net cash and cash
equivalents, beginning of period
|
|
109,643
|
|
209,850
|
|
203,425
|
|
403,621
|
Net cash and cash
equivalents, end of period
|
|
$
|
72,578
|
|
$
|
203,425
|
|
$
|
72,578
|
|
$
|
203,425
|
View original content to download
multimedia:http://www.prnewswire.com/news-releases/maple-leaf-foods-reports-results-for-the-fourth-quarter-and-year-end-2018-and-announces-11-5-increase-to-quarterly-dividend-300803681.html
SOURCE Maple Leaf Foods Inc.