Milling & Baking News - November 7, 2006 - 18

F I N A N C I A L

R E S U L T S

Canada Bread sustains loss in
quarter behind higher flour costs
TORONTO - Significantly higher flour
costs coupled with new product launch
expenses contributed to a loss in earnings at Canada Bread Company, Ltd. The
company sustained a loss of C$2,715,000

An improved product mix helped mitigate
the effects of a soft bread market in Canada.

($2,406,000) in the third quarter ended Sept.
30, versus net earnings of C$23,038,000 in
the third quarter last year.
"Our profitability in the quarter was
impacted by a 35% increase in flour
costs, which we are taking steps to recover through price increases," said
Richard Lan, president and chief executive officer.
Sales for the third quarter increased
to C$342,344,000 ($303,461,000) from
C$314,518,000 for the prior year period,
primarily because of improved volume
in the U.S. and U.K. bakery operations,
improved sales mix and price increases.
The Fresh Bakery segment's sales
grew by 5% to C$233,856,000, while earnings from operations were C$25,507,000
compared with C$24,902,000 in the third
quarter last year.
"Earnings in the quarter did not keep
pace with the sales increase due to a 35%

Tasty Baking income tops $500,000
in quarter, up 63% from a year ago
PHILADELPHIA - Net income at Tasty
Baking Co. in the third quarter ended Sept.
30 was $506,000, equal to 6c per share on the
common stock, up 63% from $311,000, or 4c
per share, in the same period a year ago.
Sales totaled $41,328,000, down 3% from
last year's $42,424,000. Promotional spending was lower in the quarter than was the
case last year, and stale returns were lower
too, Tasty Baking said.
"We are pleased with our third-quarter
results," said Charles P. Pizzi, president and
chief executive officer. "We continued to
exercise disciplined cost control measures
during the quarter. This discipline, along
with improved net sales realization, result-

ed in gross margin expansion of 3.6 percentage points and earnings per share growth of
50% versus the same quarter last year."
Results would have been better still but
for higher fuel costs, which pinched consumer spending, Mr. Pizzi said.
He said the company has been encouraged by the progress it is making in the
evaluation of its long-term strategic manufacturing options.
The development of new products remains a key component of profitable growth
for Tasty Baking, Mr. Pizzi said during an
Oct. 31 conference call.
"We believe it is important to launch appropriate new products to increase excite-

Lance income dips 7% on slowdown
in private label product sales
CHARLOTTE, N.C. - Earnings at snack
foods maker Lance, Inc. fell 7% in the third
quarter as private label product sales growth
slowed. Net income in the third quarter ended
Sept. 30 was $7,479,000, equal to 24c per share
on the common stock, down from $8,024,000,
or 27c per share, in the same period a year ago.
During the quarter, the company incurred
pre-tax integration related charges of $510,000
associated with the acquisition of Tom's.
Net sales and other operating revenue of
$191,936,000 compared with $171,927,000 in
last year's third quarter.
18 / Milling & Baking News, November 7, 2006

Looking forward, Lance said rising flour
costs and soft demand for non-branded
products has resulted in a reduction in sales
and profit expectations. Lance revised its
full-year 2006 projection for net sales to approximately $745 million to $750 million,
down from $750 million to $775 million.
Earnings per share were adjusted downward to 64c to 67c, compared with earlier
estimates of 70c to 75c.
During the third quarter, branded product revenue rose $18.7 million, or 18%.
"We are pleased with our third-quarter

rise in flour prices, the most significant
increase in 10 years, as adverse weather
conditions impacted global wheat supply and prices," the company said.
"Growth in profitability in the company's fresh bakery business was also
affected by some continued softness in
the Canadian bread market, although
this was mitigated by an improved
sales mix of higher value products and
price increases."
Frozen Bakery sales rose 19% to
C$108,488,000, while operating earnings
plunged 83% to C$1,329,000. The segment's results were adversely affected
by high flour prices as well as start-up
costs and product waste related to the
launch of a new product line for a major
food service customer.
For the nine months ended Sept. 30,
net income totaled C$39,562,000, equal to
C$1.56 per share on the common stock,
down 30% from C$56,185,000, or C$2.21 per
share, in the same period a year ago. Sales
in the nine months were C$979,453,000, up
7% from C$918,174,000. MBN

ment in the brand and provide niche snacking opportunities for our consumers," he
said. "We expect to continue growing topline sales with product line extensions as we
evaluate the sales of our consumer research
and observe industry trends. We are well
aware of the importance of health and wellness in our category. Wellness is different
things to different people. We are continuing to focus on defining what wellness is to
our Tastykake consumer. The success of our
sugar-free Sensables line demonstrates our
ability to successfully develop and position
a healthier snack option."
For the first nine months ended Sept. 30,
net income was $2,595,000, or 32c per share,
up 55% from $1,676,000, or 21c per share, in
the first nine months of fiscal 2005. Net sales
totaled $126,799,000, down from $127,309,000
in the same period a year ago. MBN

performance, which was in line with our
earnings expectations," said David V. Singer, president and chief executive officer of
Charlotte-based Lance. "During the quarter,
we continued to achieve growth in our core
product categories. We also continued to
make progress on our key initiatives during
the quarter, including plant consolidations,
opening of distribution centers in Texas and
Florida, shifting of salty snack production
to acquired facilities and beginning the implementation of a much needed enterprise
computer system solution."
Looking toward 2007, Mr. Singer said
Lance is confident it will be able to execute
on its strategic initiatives, and has taken
steps to mitigate rising costs. MBN
bakingbusiness.com / world-grain.com
http://www.bakingbusiness.com http://www.world-grain.com
Milling & Baking News - November 7, 2006

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