Milling & Baking News - February 27, 2007 - 55

F I N A N C I A L

George K. Baum
Advisors' Nationally
Recognized Food &
Agriculture Practice

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Serving the
industry through:
M&A Advisory
Divestitures
Recapitalizations
Private Capital Raising

PLAZA COLONNADE
4801 MAIN STREET, SUITE 510
KANSAS CITY, MO 64112
(816)474-1100
www.gkbaum.com

Producing
Soft White
Wheat
Products
since 1929.
1929 .

For
specifications
an d samples ,
call u s at

1-800KNAPPEN
Knappen

Milling Company
A ugusta, MI

56 / Milling & Baking News, February 27, 2007

R E S U L T S

3.8% offset by the negative impact of
foreign currency translation, which
impacted Weston Foods sales growth
by approximately 4.4%.
For the fourth quarter, Weston
Foods posted operating income of
C$67 million, up from C$48 million
in the fourth quarter of 2005. Net
sales were C$1 billion, up 0.6% from
C$980 million.
Weston Foods said its operating income and margin growth in 2006 were
adversely affected by higher energy
costs as well as higher distribution
costs compared to 2005, in particular
in the United States. The company
said it continues to focus its manufacturing capacity for more efficient production runs and where appropriate,
outsourcing shorter-run products to
contract manufacturers. In addition,
Weston Foods is in the process of evaluating strategic and cost-reduction
initiatives related to its manufacturing
assets, distribution
networks and administrative infrastructure with the
objective of ensuring a low-cost operating structure.
During the fourth quarter of 2006,
Weston Foods approved a restructuring plan to downsize its fresh-baked
sweet goods facility in Bay Shore, N.Y.
(See Milling & Baking News of Feb. 13,
Page 14.) The plan involves the transfer of full-size dessert cake and cookie
production to existing Weston Foods
facilities. Once the downsizing is
complete, Weston Foods said the Bay
Shore location will be "a more focused
facility producing primarily danish
and pie products." This restructuring is expected to be completed by
the third quarter of 2008. In connection with the restructuring, Weston
Foods expects to recognize a total
fixed asset impairment charge of C$4
million and a total charge of C$6 million for employee termination benefits
and other exit related costs over the
next 18 months.
Also during the fourth quarter of
2006, Weston Foods approved a plan
to close an ice cream cone baking facility in Los Angeles and transfer the
production to existing Weston Foods
facilities. This restructuring is expected to be completed in the first quarter
of 2007. As a result of this restructuring, Weston Foods expects to recognize total accelerated depreciation of
C$3 million and a total charge of C$2
million for employee termination benefits and other exit related costs.
In addition to its actions in Bay

Shore and Los Angeles, Weston Foods
also approved several other restructuring plans in 2006, including:
* Restructuring a portion of the distribution network in Quebec, which is
expected to be completed by the end
of 2007;
* Closing a fresh bakery manufacturing facility in Quebec, which also is
expected to be completed by the end
of 2007; and
* Closing a frozen bagel facility in
Nebraska, which was completed early
in the third quarter of 2006.
During the fourth quarter of 2006,
Weston Foods recognized C$16 million of restructuring and other charges
in connection with all of these restructuring plans as well as other plans
approved in previous years. These
restructuring and other charges consisted of C$8 million of employee
termination benefits and other exit
related costs, C$7 million of fixed asset
impairment
and
accelerated
depreciation and
a loss of C$1 million on the sale of
fixed assets.
Commenting in
a Feb. 14 conference call, Gary Prince,
president of Weston Foods U.S., provided an update on several major initiatives at Weston Foods.
"At Interbake Foods, the restructuring program we started 18 to 24 months
ago is now complete," Mr. Prince said.
"During the fourth quarter, we closed
the Elizabeth, N.J., bakery and all
manufacturing has been transferred to
the new facility. We are now focused
on throughputs and waste levels, with
the goal of achieving normalized rates
in four to six months. This was an important and complex piece of work."
Mr. Prince said the company also is
on track with its investment in its Indiana muffin and bread operation.
"We have two muffin lines producing to market and the bread line will
start up shortly," he said. "This facility provides much-needed capacity to
support our growth potential within
the Midwest market. In addition to
lowering our costs, we look forward
to a significant quality improvement
as an outcome of this investment."
Asked to put into perspective the
shift in consumer buying patterns to
higher quality bread, Mr. Prince responded, "Simply put, they're moving to whole grains. From regular
mainstream breads, they're moving
to whole grains. And whether that's
in-store or packaged products, we see
that trend continuing." MBN
bakingbusiness.com / world-grain.com

http://www.gkbaum.com http://www.bakingbusiness.com http://www.world-grain.com

Milling & Baking News - February 27, 2007

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