Net earnings at $94.5 million, up 37.0% for the quarterNet earnings at $179.3, up 17.9% since the beginning of the fiscal year
MONTREAL, QUEBEC, Nov. 3, 2009 (Marketwire) --
MONTREAL, QUEBEC -- (Marketwire) -- 11/03/09 -- We are presenting the results for the second quarter of fiscal 2010, which ended on September 30, 2009.
- Net earnings for the quarter ended September 30, 2009 totalled $94.5 million, an increase of $25.5 million or 37.0% compared to $69.0 million for the same quarter last fiscal year.
- Earnings before interest, income taxes, depreciation and amortization (EBITDA(1)) amounted to $174.7 million, an increase of $44.8 million or 34.5% in comparison to $129.9 million for the same quarter last fiscal year.
- Revenues for the quarter ended September 30, 2009 amounted to $1.483 billion, an increase of $29.2 million or 2.0% in comparison to $1.454 billion for the corresponding quarter last fiscal year.
- Basic Earnings per share (EPS) was $0.46 and diluted EPS $0.45 for the quarter ended September 30, 2009, as compared to $0.34 and $0.33 respectively for the corresponding quarter last fiscal year.
(in millions of
dollars except
per share amounts) For the three-month periods ended
(unaudited) September 30, 2009 September 30, 2008 June 30, 2009
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Revenues $ 1,482.7 $ 1,453.5 $ 1,446.4
EBITDA 174.7 129.9 158.5
Net earnings 94.5 69.0 84.8
EPS
Basic $ 0.46 $ 0.34 $ 0.41
Diluted $ 0.45 $ 0.33 $ 0.41
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- The acquired activities of Neilson Dairy (Neilson), completed on December 1, 2008, contributed to the quarter's revenues and EBITDA as compared to the second quarter of fiscal 2009.
- In the United States (US), the average block market(2) per pound of cheese declined by US$0.63 compared to the same period last fiscal year, placing downward pressure on revenues and EBITDA.
- While the average block market per pound of cheese in the US decreased, its relationship with the cost of milk as raw material benefitted the Company. In addition, the realization of inventories was favourable as compared to the same quarter last fiscal year.
- The Board of Directors approved a dividend of $0.145 per share payable on December 18, 2009 to common shareholders of record on December 7, 2009.
(in millions of dollars
except per share amounts) For the six-month periods ended
(unaudited) September 30, 2009 September 30, 2008
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Revenues $ 2,929.1 $ 2,815.5
EBITDA 333.1 280.3
Net earnings 179.3 152.0
EPS
Basic $ 0.87 $ 0.74
Diluted $ 0.86 $ 0.73
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(1) Measurement of results not in accordance with Generally Accepted
Accounting Principles
The Company assesses its financial performance based on its EBITDA, this
being earnings before interest, income taxes, depreciation and
amortization. EBITDA is not a measurement of performance as defined by
Generally Accepted Accounting Principles in Canada, and consequently may
not be comparable to similar measurements presented by other companies.
(2) "Average block market" is the average daily price of a 40 pound block of
cheddar traded on the Chicago Mercantile Exchange (CME), used as the base
price for cheese.
Normal Course Issuer Bid
Saputo announced today that it has the intention to purchase, by means of open market transactions through the facilities of the Toronto Stock Exchange (TSX) or such other means as may be permitted by the TSX or a securities regulatory authority, for cancellation purposes, some of its common shares (Common Shares) by way of a normal course issuer bid (the Bid), subject to regulatory approval. Under the Bid, Saputo may repurchase for cancellation up to 10,322,467 Common Shares over the twelve-month period starting on November 13, 2009, representing approximately 5% of its 206,449,340 issued and outstanding Common Shares as of October 31, 2009.
During the six (6) calendar months ended October 31, 2009, the average daily trading volume of Saputo's Common Shares was 313,101 shares. Accordingly, the Company is entitled to purchase, on any trading day, up to 78,275 Commons Shares representing 25% of the average daily trading volume of the issued and outstanding Common Shares. These purchases will be made in accordance with applicable regulations over a maximum period of 12 months beginning on November 13, 2009 and ending on November 12, 2010. The consideration that the Company will pay for any Common Shares acquired by it under the Bid will be in cash at the market price of such Common Shares at the time of acquisition. Within the previous twelve months, Saputo purchased 1,084,400 of its Common Shares under the normal course issuer bid established in November 2008, at an average price of $25.8555 per share.
The Company believes that the purchase by Saputo of its own shares may, in appropriate circumstances, be a responsible investment of funds on hand.
To the knowledge of Saputo, no director, senior officer or associate of a director or senior officer of Saputo, person acting jointly or in concert with the Company, or person holding 10% or more of any class of equity securities of Saputo currently intends to sell any Common Shares under this normal course issuer bid. However, sales by such persons through the facilities of TSX may occur if the personal circumstances of any such person change or any such person makes a decision unrelated to these normal course purchases. The benefits to any such person whose Common Shares are purchased would be the same as the benefits available to all other holders whose Common Shares are purchased.
Conference Call
A conference call to discuss the second quarter results of fiscal 2010 will be held on Tuesday, November 3, 2009, at 2:30 PM, Eastern time. To participate in the conference call, dial 1.800.920.3359. To ensure your participation, please dial in approximately five minutes before the call. To listen to this call on the web, please enter http://events.digitalmedia.telus.com/saputo/110309/index.php in your web browser.
For those unable to participate, a replay will be available until midnight, Eastern time, Tuesday, November 10, 2009. To access the replay, dial 1.800.558.5253, ID number 21440152. A replay of the conference call will also be available on the Company's web site at www.saputo.com.
About Saputo
Saputo produces, markets and distributes a wide array of products of the utmost quality, including cheese, fluid milk, yogurt, dairy ingredients and snack-cakes. Saputo is the 11th largest dairy processor in the world, the largest in Canada, the third largest in Argentina, among the top 3 cheese producers in the United States and the largest snack-cake manufacturer in Canada. Our products are sold in more than 40 countries under well-known brand names such as Saputo, Alexis de Portneuf, Armstrong, Baxter, Dairyland, Danscorella, De Lucia, Dragone, DuVillage 1860, Frigo Cheese Heads, Kingsey, La Paulina, Neilson, Nutrilait, Ricrem, Stella, Treasure Cave, HOP&GO!, Rondeau and Vachon. Saputo is a publicly traded company whose shares are listed on the Toronto Stock Exchange under the symbol SAP.
Management's Analysis
The goal of the management report is to analyse the results of and the financial position for the quarter ended September 30, 2009. It should be read while referring to our consolidated financial statements and accompanying notes for the three- and six-month periods ended September 30, 2009 and 2008. Saputo's accounting policies are in accordance with Canadian Generally Accepted Accounting Principles of the Canadian Institute of Chartered Accountants (CICA). All dollar amounts are in Canadian dollars unless otherwise indicated. This report takes into account material elements between September 30, 2009, and November 3, 2009, the date of this report, on which it was approved by the Board of Directors of Saputo Inc. (Company or Saputo). Additional information about the Company, including the Annual Report and the Annual Information Form for the year ended March 31, 2009 can be obtained on Sedar at www.sedar.com.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report, including the "Outlook" section, contains forward-looking statements within the meaning of securities laws. These statements are based, among others, on our current assumptions, expectations, estimates, objectives, plans and intentions regarding projected revenues and expenses, the economic and industry environments in which we operate or which could affect our activities, our ability to attract and retain clients and consumers as well as our operating costs, raw materials and energy supplies which are subject to a number of risks and uncertainties. Forward-looking statements can generally be identified by the use of the conditional tense, the words "may", "should", "would", "believe", "plan", "expect", "intend", "anticipate", "estimate", "foresee", "objective" or "continue" or the negative of these terms or variations of them or words and expressions of similar nature. Actual results could differ materially from the conclusion, forecast or projection stated in such forward-looking information. As a result, we cannot guarantee that any forward-looking statements will materialize. Assumptions, expectations and estimates made in the preparation of forward-looking statements and risks that could cause our actual results to differ materially from our current expectations are discussed throughout this MD&A and in our most recently filed Annual Report which is available on SEDAR at www.sedar.com. Forward-looking information contained in this report, including the "Outlook" section, is based on management's current estimates, expectations and assumptions, which management believes are reasonable as of the current date. You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. Except as required by law, we do not undertake to update these forward-looking statements, whether written or oral, that may be made from time to time by us or on our behalf.
OPERATING RESULTS
Consolidated revenues for the quarter ended September 30, 2009 amounted to $1.483 billion, an increase of $29.0 million or 2.0% in comparison to the $1.454 billion for the corresponding quarter last fiscal year. The increase was mainly due to the contribution of Neilson in our Canadian Dairy Products Division. This increase was partially offset by a lower average block market per pound of cheese in the US. The addition of F&A Dairy of California (F&A Dairy Acquisition) on July 20, 2009 also increased revenues for the quarter. The weakening of the Canadian dollar compared to the US dollar contributed favourably to revenues.
For the six-month period ended September 30, 2009, revenues totalled $2.929 billion, an increase of $114.0 million or 4.0% in comparison to the $2.815 billion for the corresponding period last fiscal year. Revenues from our CEA Dairy Products Sector increased mainly due to the inclusion of Neilson. This increase was offset by a lower average block market per pound of cheese in addition to decreased volumes in our USA Dairy Products Sector during the period as compared to the corresponding period last fiscal year. The weakening of the Canadian dollar compared to the US dollar contributed favourably to revenues.
Consolidated earnings before interest, income taxes, depreciation and amortization (EBITDA) for the second quarter of fiscal 2010 amounted to $174.7 million, an increase of $44.8 million or 34.5% in comparison to $129.9 million for the same quarter last fiscal year. The EBITDA increase is explained by improved operational efficiencies, changes to the product-price formula and lower ingredients and other costs in our USA Dairy Products Sector. The EBITDA increase is also explained by the inclusion of Neilson, improved operational efficiencies and lower ingredients and other costs in our Canadian Dairy Products Division.
For the six-month period ended September 30, 2009, EBITDA totalled $333.1 million, an increase of $52.8 million or 18.8% in comparison to the $280.3 million for the corresponding period last fiscal year. The inclusion of Neilson in our CEA Dairy Products Sector, as well as improved operational efficiencies stemming from initiatives undertaken in the current and prior fiscal years in our USA and CEA Dairy Products Sectors increased EBITDA in comparison to the same period last fiscal year. This increase was partially offset by negative market factors in the US and lower profitability in our Argentinean Division.
OTHER CONSOLIDATED RESULTS ITEMS
Depreciation and amortization for the second quarter of fiscal 2010 totalled $28.0 million, an increase of $5.0 million compared to the same quarter last fiscal year. For the six-month period ended September 30, 2009, depreciation and amortization expense amounted to $56.4 million, an increase of $11.0 million as compared to the $45.4 million for the same period last fiscal year. These increases are due mainly to the additional charge in our CEA Dairy Products Sector as a result of the inclusion of Neilson. Capital investments undertaken by all divisions in the prior fiscal year also contributed to increase the expense for the respective periods.
Net interest expense increased by $4.0 million to $10.7 million for the quarter ended September 30, 2009 and $5.3 million to $18.7 million for the six-month period ended September 30, 2009 in comparison to the respective quarter and six-month period of last fiscal year. The increase is mainly due to higher debt levels to fund the acquisition of Neilson as compared to the corresponding periods last fiscal year.
Income taxes for the second quarter of fiscal 2010 totalled $41.5 million, reflecting an effective tax rate of 30.5% compared to 31.2% for the same quarter last fiscal year. Income taxes for the six-month period ended September 30, 2009 totalled $78.8 million, reflecting an effective tax rate of 30.5% in comparison to 31.4% for the same period last fiscal year. Our income tax rates vary and could increase or decrease based on the amount of taxable income derived and from which source, any amendments to tax laws and income tax rates and changes in assumptions and estimates used for tax assets and liabilities by the Company and its affiliates.
Net earnings totalled $94.5 million for the quarter ended September 30, 2009 compared to $69.0 million for the same quarter last fiscal year. For the six-month period ended September 30, 2009, net earnings totalled $179.3 million compared to $152.0 million for the corresponding period last fiscal year. These reflect the various factors analyzed in this report.
SELECTED QUARTERLY FINANCIAL INFORMATION
(in millions of dollars except per share amounts)
Fiscal year 2010
---------------------------------
Q2 Q1
---------------------------------
Revenues $1,482.7 $1,446.4
EBITDA 174.7 158.5
Net earnings 94.5 84.8
EPS
Basic $ 0.46 $ 0.41
Diluted $ 0.45 $ 0.41
---------------------------------
---------------------------------
Fiscal year 2009
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Q4 Q3 Q2 Q1
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Revenues $1,460.4 $1,517.5 $1,453.5 $1,361.9
EBITDA 141.9 125.7 129.9 150.3
Net earnings 69.2 57.8 69.0 83.0
EPS
Basic $ 0.33 $ 0.28 $ 0.34 $ 0.40
Diluted $ 0.33 $ 0.28 $ 0.33 $ 0.40
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Fiscal year 2008
---------------------------------
Q4 Q3
---------------------------------
Revenues $1,266.1 $1,277.0
EBITDA 137.5 137.0
Net earnings 75.2 82.0
EPS
Basic $ 0.37 $ 0.40
Diluted $ 0.36 $ 0.39
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---------------------------------
Selected factors positively (negatively) affecting EBITDA(1)
(in millions of dollars)
Fiscal years 2010 2009
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Q2 Q1 Q4 Q3
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Market factors(2) 4.8 (30.0) (27.0) (12.9)
US currency exchange 5.6 6.0 7.0 7.0
Inventory write-down - - (2.4) (18.5)
Plant closure costs - - - (2.0)
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(1) as compared to same quarter of previous fiscal year.
(2) Market factors include the market pricing impact related to sales of
dairy ingredients, the average block market per pound of cheese and its
effect on the absorption of fixed costs and on the realization of
inventories as well as the effect of the relationship between the average
block market per pound of cheese and the cost of milk as raw material.
CASH AND FINANCIAL RESOURCES
For the three-month period ended September 30, 2009, cash generated by operating activities before changes in non-cash working capital items amounted to $133.6 million, an increase of $39.2 million in comparison to the $94.4 million for the corresponding quarter last fiscal year. Since the beginning of the fiscal year, this figure amounted to $252.2 million, an increase of $47.4 million in comparison to $204.8 million for the same period last fiscal year. Increases in the three- and six-month periods are primarily attributable to increased net earnings as well as higher depreciation expense and future income taxes as compared to the same periods last fiscal year. Non-cash working capital items generated $22.9 million for the second quarter of fiscal 2010, compared to $16.9 million for the corresponding quarter of fiscal 2009. For the six-month period ended September 30, 2009, non-cash working capital items generated $6.6 million, as compared to a usage of $21.5 million for the same period last fiscal year. The change in non-cash working capital items during the three- and six-month period ended September 30, 2009 as compared to the same periods last fiscal year can be attributed to a decrease in inventory, mainly in our CEA Dairy Products Sector, as well as an increase in income tax payable as a result of increased earnings.
Investing activities comprised mainly of additions to fixed assets of $30.6 million and $56.9 million for the three- and six-month periods ended September 30, 2009 respectively and $49.7 million for the F&A Dairy Acquisition in the three-month period ended September 30, 2009.
Financing activities for the second quarter of fiscal 2010 consisted of repayment of bank loans for $13.6 million, issuance of shares for a cash consideration of $4.1 million as part of the stock option plan, the purchase of share capital totalling $28.1 million in accordance with a normal course issuer bid, as well as the payment of $58.9 million of dividends. Additionally, for the six-month period ended September 30, 2009, the Company reimbursed $340 million of long-term bank credit facilities with the proceeds from the issuance of $330 million long-term unsecured Senior Notes.
As at September 30, 2009, the Company had working capital of $213.8 million, an increase from the $166.7 million as at March 31, 2009. This is mainly related to the decrease in short-term liabilities, mainly bank loans and the current portion of long-term debt. The increase was partially offset by a reduction of inventory since the end of the last fiscal year.
As at September 30, 2009, our net interest bearing debt-to-equity ratio stood at 0.31, in comparison to 0.36 as at March 31, 2009, mainly resulting from the decrease in indebtedness due to the payments with available cash from operations.
As at September 30, 2009, the Company had available bank credit facilities of approximately $606 million, $53.8 million of which were drawn. Should the need arise, the Company could make additional financing arrangements to pursue growth through acquisitions.
BALANCE SHEET
With regards to balance sheet items as at September 30, 2009, compared to those as at March 31, 2009, the strengthening of the Canadian dollar versus the US dollar since March 31, 2009 resulted in the conversion of the balance sheets of foreign subsidiaries at lower rates, thus decreasing the Canadian dollar value of balance sheet items. In addition, the lower average block market per pound of cheese has caused a decrease in our Dairy Products Division (USA) working capital items as at September 30, 2009 in comparison to March 31, 2009. The Company's total assets stood at $3.310 billion as at September 30, 2009 compared to $3.499 billion as at March 31, 2009.
SHARE CAPITAL INFORMATION
Share capital authorized by the Company is comprised of an unlimited number of common and preferred shares. The common shares are voting and participating. The preferred shares can be issued in one or more series, and the terms and privileges of each series must be determined at the time of their creation.
Issued as at
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October 29, September 30, March 31,
Authorized 2009 2009 2009
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Common Shares Unlimited 206,449,340 206,445,896 207,087,283
Preferred shares Unlimited - - -
Stock options 10,788,385 10,817,920 9,128,841
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During the six-month period ended September 30, 2009, the Company purchased 1,084,400 common shares at prices ranging from $24.10 to $27.25 per share as part of the normal course issuer bid effective November 13, 2008 and expiring on November 12, 2009. Under this normal course issuer bid, the Company is authorized to purchase, for cancellation purposes, up to 10,340,377 of its common shares. Prior to these purchases, the Company had not purchased any common shares under this current normal course issuer bid.
CONTRACTUAL OBLIGATIONS
The Company completed during the first quarter of fiscal 2010 a $330 million debt financing, composed of $110 million Canadian denominated unsecured Senior Notes, issued at an interest rate of 5.34% for a term of five years maturing on June 22, 2014, and $220 million Canadian denominated unsecured Senior Notes issued at an interest rate of 5.82% for a term of seven years maturing on June 22, 2016. The proceeds of this financing were used to pay down part of the Company's existing credit facilities and for general corporate purposes.
The Company's contractual obligations consist of commitments and/or estimates to repay certain of its long-term debts as well as certain leases of premises, equipment and rolling stock.
(in thousands of dollars)
September 30, 2009 March 31, 2009
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Long-term Minimum Long-term Minimum
Debt lease Total debt lease Total
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Less than
1 year $182,019 $12,680 $194,699 $214,421 $13,769 $228,190
1-2 years - 9,394 9,394 200,000 10,042 210,042
2-3 years - 8,083 8,083 140,000 8,831 148,831
3-4 years - 6,817 6,817 - 7,251 7,251
4-5 years 110,000 8,054 118,054 - 6,213 6,213
Subsequent
Years 273,535 4,920 278,455 63,065 11,360 74,425
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$565,554 $49,948 $615,502 $617,486 $57,466 $674,952
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ACCOUNTING STANDARDS
Goodwill and Intangible assets
In February 2008, the CICA issued Handbook Section 3064, Goodwill and Intangible Assets, which supersedes Section 3062, Goodwill and Other Intangible Assets, and Section 3450, Research and Development Costs, effective April 1, 2009 for the Company. This new section sets out standards for recognition, measurement, presentation and disclosure of goodwill and intangible assets. The adoption of this section had no impact on the consolidated financial statements of the Company.
International Financial Reporting Standards (IFRS)
In February 2008, the AcSB announced January 1, 2011 as the changeover date for publicly-listed companies with December 31st year ends to adopt IFRS, replacing Canada's own generally accepted accounting principles. The changeover date applies to interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. Accordingly, the Company's IFRS adoption date of April 1, 2011 will require the restatement, for comparative purposes, of amounts reported by the Company for the year ended March 31, 2011 and an opening IFRS balance sheet as of April 1, 2010.
In order to ensure seamless transition to IFRS, the Company has divided its convergence plan into the following phases:
Phase 1: Identification and Analysis
Phase 2: Impact Analysis and Development Phase
Phase 3: Implementation Phase
The Company is currently in the Impact Analysis and Development Phase of its convergence plan and is progressing according to schedule. The effects of any Canadian GAAP to IFRS divergences noted during the Company's Phase 1 are currently being investigated for significance and have not, as of yet, been quantified.
Furthermore, accounting policies are currently under analysis by Management with active implication of Senior Management in the identification and approval of significant IFRS policy divergences.
The Company has identified the following eight accounting areas that it has deemed of either high or moderate significance:
IFRS 1 "First Time Adoption of Reporting Standards"
IFRS 2 "Share-Based Payment"
IFRS 3 "Business Combinations"
IAS 16 "Property, Plant and Equipment"
IAS 19 "Employee Benefits"
IAS 32 & IAS 39 "Financial Instruments Presentation, Recognition and Measurement"
IAS 36 "Impairment of Assets"
Significance has been established as the potential impact divergences may have on the Company's financial statements. The determination of the significance of the areas listed above has been assessed based on a review of CICA publications detailing divergences between Canadian GAAP and IFRS and through an analysis undertaken by the IFRS Convergence Team of all enacted IFRS Standards.
Readers of the Financial Statements are cautioned that the International Accounting Standards Board (IASB) intends on further revising several accounting standards (including but not limited to "Financial Instruments" and "Post Employment Benefits") that may result in modification to the accounting areas identified as above. The IASB has also indicated several other convergence projects between IFRS and FASB that may further alter this assessment.
Financial Statement readers should also note that any transition divergences between Canadian GAAP and IFRS will be accounted for through retained earnings (or another category of equity where applicable) and not through the consolidated statement of earnings. As such, reconciliations shall be presented in the year of conversion specifying significant IFRS adjustments.
In phase II, which began on October 1, 2009, the Company is analyzing the impact of the divergences that it has identified and developping processes to eliminate any incongruencies.
Identification and Resolution of Key IT and Data Systems Requirements
The Company has performed an initial analysis of its data system infrastructure and has concluded that transition to IFRS will not result in a material modification to any of its IT processes as a result of the divergences it has identified.
Future amendments to IFRS may, however, contradict these initial findings.
Internal Control over Financial Reporting
The Company is currently identifying the impact of divergences on its internal controls, the impact of which will be disclosed in accordance with CSA requirements when the assessment has been finalized.
Financial Reporting Expertise, Including Training Requirements
The Company has undertaken the development of an internal communication plan to disseminate relevant modifications to the accounting for and reporting of financial results ensuing from significant IFRS divergences.
Status of Remaining Key Elements
The status of the remaining key elements, as identified by CSA Staff Notice 52-320 and as discussed in the Company's 2009 Annual Report remains unchanged.
FOLLOW-UP ON CERTAIN SPECIFIC ITEMS OF THE ANALYSIS
For an analysis of off-balance sheet arrangements, guarantees, related party transactions, accounting standards, critical accounting policies and use of accounting estimates as well as risks and uncertainties, we encourage you to consult the comments provided in the 2009 Annual Report on pages 31 to 36 of the management's analysis, since there were no notable changes during the six-month period ended September 30, 2009.
DISCLOSURE CONTROLS AND PROCEDURES
The Chief Executive Officer and the Chief Financial Officer are responsible for establishing and maintaining disclosure controls and procedures. The Company's disclosure controls and procedures are designed to provide reasonable assurance that material information relating to the Company is made known to Management in a timely manner so that information required to be disclosed under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation.
INTERNAL CONTROLS OVER FINANCIAL REPORTING
The Chief Executive Officer and the Chief Financial Officer are responsible for establishing and maintaining internal control over financial reporting.
