MANAGEMENT S DISCUSSION AND ANALYSIS Product Recall Costs Impact Third Quarter Earnings

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1 MANAGEMENT S DISCUSSION AND ANALYSIS Product Recall Costs Impact Third Quarter Earnings Amendment to previously-issued MD&A The Company s interim financial statements for the period ended September 30, 2008 originally filed on SEDAR on November 3, 2008, were restated and refiled on February 12, 2009 to correct an understatement of future tax expense related to the sale of the Company s animal nutrition business on July 20, This MD&A originally filed on November 3, 2008 has also been amended and refiled on February 12, 2009 to correct information affected by the restatement and disclose subsequent events occurring from November 4, 2008 through to February 12, For the three months and nine months ended September 30, 2007, the restatement has the effect of increasing future tax expense resulting in a $12.2 million decrease in net earnings. The future tax liability at September 30, 2007 has also been increased by the same amount. Because the animal nutrition business sold was reported as a discontinued operation, the restatement does not have any impact on earnings from continuing operations or Adjusted Operating Earnings for fiscal 2007 or net earnings (loss) for fiscal In the financial statements for the three months and nine months ended September 30, 2008, the restatement has the effect of decreasing opening and ending retained earnings by $12.2 million and increasing future tax liability at December 31, 2007 and September 30, 2008 by the same amount. During 2007 there was an unusually high volume of activity within the taxation department, due to the sale of the Company s animal nutrition business and other restructuring activities. Because of this, the Company lacked a sufficient number of personnel with the required experience and capabilities to complete all necessary control procedures during this period of increased complexity. The Company has concluded that this constituted a material weakness in the design of its disclosure controls and procedures and internal control over financial reporting, and in the effectiveness of its disclosure controls and procedures at December 31, The impact of this material weakness, while limited to the taxation department, provides for the reasonable possibility that a material misstatement in the annual or interim financial statements of the Company would not be prevented or detected by the Company s internal control over financial reporting or its disclosure controls and procedures.

2 The Company is undertaking a review of the structure and capacity of its taxation department and plans to remediate any deficiencies identified during the first half of Subsequent event On December 16, 2008, the Company issued, on a private placement basis, 7,368,421 units at a price of $9.50 per unit for aggregate proceeds of $70 million. The net proceeds after issuance costs will be used for general corporate purposes. Each unit will consist of one subscription receipt for Maple Leaf Foods common shares and 0.4 common share purchase warrants. Each subscription receipt will entitle the holder to receive one common share of the Company on August 4, 2009 or, at the election of the Company, the return in cash of all the unit proceeds at a value of $9.50 per unit. Each whole common share purchase warrant is exercisable into one common share of the Company until December 16, 2010 at a price of $9.50. Overview The Company s earnings for the quarter were significantly affected by a voluntary recall, in August 2008, of sliced meats produced at the Company s Bartor Road, Toronto facility. Strong results in other businesses and initial benefits from the restructuring of the Company s protein operations offset these effects, resulting in a 6.4% improvement in Adjusted Operating Earnings for the quarter. These results, combined with insurance claim proceeds and profits on asset sales resulted in Adjusted Earnings per Share of $0.13 compared to $0.06 last year. For the year-to-date, Adjusted Earnings per Share of $0.17 compares to $0.31 last year, as earnings in the first half were impacted by sharp increases in commodity prices that compressed margins in the Bakery and Protein businesses. Margins began to improve towards the end of the third quarter as commodity prices started to trend downward. Note: Adjusted Operating Earnings are defined as earnings from continuing operations before one-time direct product recall, restructuring and other related costs and other income. Adjusted Earnings per Share measures are defined as earnings per share from continuing operations before one-time direct product recall, restructuring and other related costs and certain non-recurring tax adjustments. Adjusted Earnings per Share and Operating Earnings measures do not include an adjustment for the impact of lost sales resulting from the product recall. Product Recall On August 17, 2008 the Company voluntarily recalled two packaged meat products that were manufactured at its Bartor Road facility in Toronto because of a concern that these products may be contaminated with Listeria monocytogenes. Listeria monocytogenes is one of six species of Listeria, a bacterium that is prevalent in the environment. Listeria monocytogenes is the only species of Listeria that is pathogenic. In high risk populations, including the immune compromised, the elderly, infants and pregnant women, it can cause serious illness and death. After being advised that three packaged meat products manufactured at the Bartor Road facility tested positive for Listeria monocytogenes, the Company expanded its voluntary recall on August 20 th to include a total of 23 packaged 2

3 meat products produced on two manufacturing lines as a precautionary measure. As a further precaution, the Company also temporarily closed the Bartor Road facility. On August 23 rd, the Canadian Food Inspection Agency (CFIA) and the Public Health Agency of Canada announced their conclusion that a strain of Listeria bacteria linked to illness or death of several consumers in Canada matched the Listeria strain identified in some Maple Leaf Foods products. Immediately upon receiving this information the Company expanded its voluntary recall to include all production from the Bartor Road facility since January 1, This expanded recall was taken to assure the public that all precautionary steps were being followed to protect consumers, notwithstanding that there was no evidence of Listeria contamination in products beyond the two production lines originally under investigation. In taking this action, Management s position was to put the interests of consumers and public health first. This action resulted in 191 products being recalled, representing approximately 638,000 kilograms of product. Working closely with its customers, Maple Leaf quickly completed the recall of all products from retail shelves and foodservice distribution channels. As at October 21, 2008, the listeriosis strain identified in Maple Leaf products has been linked to 33 illnesses and 20 deaths. After a careful study of records, the factory and product test results, the CFIA, the Company and third party experts concluded that the most likely source of product contamination was a harbourage point for bacteria deep inside the mechanical operations of two slicing machines. This harbourage point had avoided the rigorous sanitation of this equipment that was completed on a daily basis in accordance with or exceeding the equipment manufacturer s recommendations. Several other environmental factors were identified that may have been source factors of the bacteria, but were not on product contact surfaces. On September 17 th, the Company resumed production at the Bartor Road facility after conducting six intensive sanitizations, comprehensive environmental testing and verification, and the completion of comprehensive pre-operation inspections by the CFIA. In conjunction with the re-opening of the factory, the Company reviewed its protocols and where warranted made further enhancements to its food safety protocols at all of its 24 packaged meat plants. This included regular disassembly and deep sanitation of slicing equipment, enhanced environmental testing and additional employee training relating to new operating procedures and control of food-borne pathogens. The Company s cleaning protocols exceed manufacturer s recommendations and its testing protocols are considered by Management to meet or exceed industry standards. On August 24 th, Management estimated that direct one-time costs related to the product recall would approximate $20 million before taxes, and that these amounts would be charged to earnings in the third quarter. These costs do not include the financial impact of reduced sales and volumes resulting from the recall. Based upon experience to date, Management has estimated that these one-time costs will amount to between $25.0 and $30.0 million. The final amounts of these one-time costs mostly comprise the total amount of returned and destroyed product, documentation for which has not yet been completely received from customers. Differences in costs from the initial estimate are caused by an increase in the length of time that the Bartor Road facility was closed, 3

4 additional consumer response costs, and increased sanitization and expert consulting expenses. Management has estimated the amount of the total liability incurred as of September 30, 2008 and has expensed $19.0 million in the quarter. The Bartor Road facility continues to operate under an elevated testing environment. The ramp up back to full production is taking longer than originally anticipated. The Company is, to the extent possible, putting alternative supply sources in place until the facility is operating closer to full capacity. Financial Overview Sales for the third quarter increased 3.3% to $1,344.3 million compared with $1,301.1 million last year. Higher commodity values resulting in higher sales in the rendering byproducts business along with higher sales in the bakery segment as a result of price increases taken earlier in the year and in the fourth quarter of last year offset the impact of lower volumes following the product recall in August. Sales for the year-to-date of $3,902.9 million compared with $3,936.0 million last year. Operating earnings from continuing operations before one-time direct product recall, restructuring and other related costs and other income ( Adjusted Operating Earnings ) for the quarter of $41.1 million represent an improvement of 6.4% from last year. Significant reductions in hog production losses, improved rendering by-product and biodiesel returns and improved pork processor margins more than offset the loss of volume and supply chain inefficiencies related to the product recall, and lower poultry primary processing earnings. Adjusted Operating Earnings for the year-to-date of $93.1 million compares with $141.1 million last year. In addition to the effect of the product recall, year-to-date earnings were also impacted by significant increases in commodity prices in the first half of the year that outpaced price increases, and higher hog production losses. Earnings per share from continuing operations and before one-time direct product recall, restructuring and other related costs ( Adjusted Earnings per Share ) of $0.13 compared with $0.06 last year. Adjusted Earnings per Share does not include an adjustment for the impact of lost sales resulting from the product recall. In addition to higher operating earnings, the Company also benefited from profits on the sale of a redundant property and insurance proceeds in respect of business interruption losses in the U.K. bakery business. Adjusted Earnings per Share for the year-to-date were $0.17 compared to $0.31 last year. 4

5 Following is a summary of Earnings per Share ( EPS ): Third Quarter Year-To-Date As restated (iv) As restated (iv) EPS from continuing operations $(0.10) $0.01 $(0.18) $0.00 Product recall, restructuring and $0.24 $0.05 $0.34 $0.31 other related costs (i) Adjusted EPS (ii) (iii) $0.13 $0.06 $0.17 $0.31 Discontinued operations $1.61 $1.70 EPS before one-time direct product recall, restructuring and other related costs and (ii) (iii) certain non-recurring tax adjustments $0.13 $1.67 $0.17 $2.00 (i) Includes the per share impact of one-time direct product recall, restructuring and other related costs net of tax and minority interest and the recognition of a tax benefit of $5.1 million in Q related to the sale of the animal nutrition business. (ii) These are not recognized measures under Canadian GAAP. Management believes that this is the most appropriate basis on which to evaluate results, as product recall, restructuring, and other related costs are not representative of continuing operations. (iii) Does not add due to rounding (iv) Refer to Amendment to previously issued MD&A on Page 1. Business Segment Review Following is a summary of Adjusted Operating Earnings by business segment: ($ millions) Third Quarter Year-to-Date Change Change Meat Products Group $0.8 $ 13.6 (94.0%) $ 31.5 $50.1 (37.0%) Agribusiness Group (i) 12.3 (3.5) 453.2% % Protein Group % (6.6%) Bakery Products Group (6.3%) (39.8%) Non-allocated Costs (ii) (2.6) (4.1) 36.1% (12.0) (4.6) (158.5%) $ 41.1 $ % $93.1 $141.1 (34.1%) (i) (ii) Agribusiness Group excludes the results of the animal nutrition business that are reported as discontinued operations. Non-allocated costs include costs related to the Company s IT system conversion, certain shared services and consulting expenses related to restructuring initiatives. Management believes that not allocating these costs provides a more comparable assessment of segment operating results. Meat Products Group (value-added processed packaged meats; chilled meal entrees and lunch kits; value-added pork, poultry and turkey products; and global meat sales.) Meat Products Group sales for the quarter declined by 2.9% to $838.2 million compared with $863.0 million last year, and by 6.8% for the year-to-date. The impact of the product recall on the sales decline was partly offset by higher sales in the fresh pork business due to increased fresh pork prices. Lower sales related to the product recall resulted from the 5

6 non-availability of recalled products, overall declines in the deli and sliced meats category, and lower sales of other Maple Leaf branded products as consumers in the early stages of the recall did not distinguish between different product lines. The rates of sales decline were most significant in the three weeks following the product recall. While sales began to improve towards the end of the quarter, Management expects the product recall will continue to have a material impact on sales and earnings in the fourth quarter. Meat Products Group Adjusted Operating Earnings of $0.8 million compared to $13.6 million last year. This decline in earnings was principally a result of lower sales and higher supply chain costs related to the product recall, which Management estimates impacted Adjusted Operating Earnings by approximately $14 million in the quarter. In addition earnings declined due to lower poultry processor margins and higher input costs in the packaged meats business. In the quarter, the Company realized higher earnings in the primary pork processing business due to improved pork processing margins and benefits related to double shifting the Brandon pork processing facility. Adjusted Operating Earnings of $31.5 million for the year-to-date compared with $50.1 million last year. Production at the Company s poultry processing plant in Edmonton was halted at the end of September as a result of a strike, which has continued into October. Negotiations are continuing with the assistance of a mediator. Agribusiness Group (swine production and animal by-products recycling) Agribusiness Group sales for the third quarter increased 19.8% to $63.7 million from $53.2 million last year due to strong commodity prices that increased rendering byproduct sales values, partly offset by a decline in hog volumes resulting from the divestiture of the Ontario and Alberta hog operations. Year-to-date sales of $183.8 million compare to $180.5 million in the prior year. Adjusted Operating Earnings from the Agribusiness Group were $12.3 million compared to a loss of $3.5 million in Earnings from rendering operations benefited from higher commodity prices during most of the quarter, and higher earnings from bio diesel sales. Hog production losses were significantly reduced from last year and from the run rate for the first half of the year due to the divestiture of the Alberta and Ontario hog production businesses, a lower cost of production and improved efficiencies in the restructured Manitoba operations. For the year-to-date, Adjusted Operating Earnings of $17.2 million compared to $2.0 million in Bakery Products Group (fresh, frozen and branded value-added bakery products, including frozen par-baked bakery products; and specialty pasta and sauces) Bakery Products Group sales for the third quarter increased 14.9% to $442.5 million from $385.0 million last year due to higher selling prices and contributions from acquisitions. Excluding acquisitions, sales increased by 9.8% compared to last year. Year-to-date sales of $1,261.7 million compare to $1,117.8 million in the prior year. 6

7 Adjusted Operating Earnings in the Bakery Group were $30.6 million compared to $32.6 million last year. Earnings were significantly impacted in the first half of 2008 by an unprecedented rise in commodity prices. Price increases implemented late in 2007 and early 2008 contributed to results in the third quarter, but have not offset prior losses. In the early part of the quarter, earnings across the business were affected by high wheat and oil prices, which began to decline towards the end of the quarter. Management anticipates that the combination of the price increases implemented earlier in the year and lower commodity prices will continue to improve margins through the end of the year. Earnings for the quarter were also affected by increased investments in marketing and innovation initiatives. For the year-to-date, Adjusted Operating Earnings of $56.4 million compared to $93.6 million in The Company s U.K. bakery business experienced lower bagel sales growth as result of a fire at the principal bagel line at the Rotherham plant, which impacted sales and earnings and increased manufacturing costs as the new oven was commissioned. These costs and business disruption are covered by insurance and proceeds of $4.8 million received in the third quarter are included in other income. The Company has received $6.5 million yearto-date and expects to receive further insurance reimbursements in the fourth quarter of 2008 and in the first quarter of As part of its acquisition integration activities, the U.K. bakery business is taking steps to further reduce costs and improve operating efficiencies. This includes the closure of two small bakery operations announced in the quarter, with production from these facilities, primarily croissants and bagels, being transferred to the Company s larger bakeries in Maidstone and Rotherham. Gross Margin Gross margin decreased by 4.4% to $158.1 million for the quarter from $151.5 million last year. Reduced volumes and increased supply chain costs related to the product recall were mostly offset by improved margins in the Protein and Agribusiness Groups. In the Protein Group, improved pork processor margins were partly offset by a decrease in poultry processor margins as a result of higher live bird costs. In the Agribusiness Group margins improved in the rendering business driven by higher commodity prices and improved results in the biodiesel operations. The Bakery Group margins were relatively flat for the quarter. Selling, General and Administrative Expenses Selling, general and administrative expenses increased 3.7% to $117.0 million in the quarter from $112.9 million for the same period last year. This increase is primarily related to investments in innovation and marketing new products in the bakery businesses. During the quarter the Company also expensed $2.6 million related to consulting and other expenditures related to preliminary work to replace and standardize information systems. 7

8 One-time Product Recall, Restructuring and Other Related Costs The Company has incurred several costs during the year that Management does not consider representative of ongoing operations, which have been disclosed separately from Earnings from Operations. These costs comprise $23.9 million related to restructuring of the Company s operations, and $19.0 million of one-time costs related to the Company s product recall in August As a result of the product recall, the Company will incur certain non-recurring expenses. The majority of these expenses relate to the recall and destruction of product, sanitation of the Bartor Road facility and the cost of communicating with consumers. Management expects that the final amounts of these costs will be finalized during the fourth quarter, and estimates that the total of these non-recurring costs will amount to between $25.0 and $30.0 million, of which $19.0 million has been incurred and charged to earnings in the third quarter. During the quarter, the Company recorded $23.9 million of restructuring and other related costs. These costs related principally to the final costs of settling contract commitments related to the exit of the Ontario hog production business, estimated costs of closure of elements of the Company s hog genetic operations, closure of two bakery facilities in the U.K. and the closure of a primary pork processing plant in Manitoba. Since the Company announced the restructuring of its operations in 2006, it has charged $232.8 million of restructuring and other related costs to earnings. Following is a summary of restructuring costs charged to earnings since

9 2008 ($ millions) Q1 Q2 Q3 YTD Total-todate Protein group restructuring Impairment/disposal of Ontario and Alberta hog production assets, and impairment of long-lived hog production assets Impairment/disposal of hog genetic operations Goodwill impairment related to retained operations of the animal nutrition business Retention payments Poultry plant closure (0.5) 0.1 (0.2) 8.3 Impairment of a non-core equity investment Bakery closures Discontinued operations Total restructuring Cash incurred and to be incurred Non-cash The Company estimates that restructuring costs to be charged against future earnings, reflecting known or announced restructuring, is between $42.0 and $92.0 million, including cash charges of $25.0 to $40.0 million. These amounts relate to the sale of the Burlington and Lethbridge primary processing pork facilities and the consolidation of other operations. Excluding these two initiatives, the Company will have materially restructured its protein operations to focus growth in its higher margin value-added meat and meals business. The Company may incur future restructuring costs related to rationalization of manufacturing and supply chain operations in the Protein and Bakery businesses, but these costs are not quantifiable at this time. Other Income Other income for the quarter of $9.2 million compares with $0.4 million last year. The increase from last year is mainly due to a gain of $4.3 million related to the disposal of a redundant warehouse facility and insurance proceeds of $4.8 million in respect of lost profits in the U.K. bakery. For the year-to-date, other income of $11.1 million compares with $2.3 million last year. Insurance proceeds included in year-to-date amounts are $6.5 million. The Company expects additional insurance proceeds related to the U.K. in both the fourth quarter of 2008 and the first quarter of As these proceeds represent a recovery of costs and lost profits, they should be considered in combination with the Bakery Group results. 9

10 Cash Flow and Financing Total debt, net of cash balances, was $1,136.3 million at the end of the third quarter, compared to $854.8 million as at December 31, 2007 and $832.2 million at the end of the third quarter of The increase from the beginning of the year was largely due to the Company s capital investment program, increases in working capital related to higher commodity costs, acquisitions completed in the first quarter of 2008 and the purchase of shares in Canada Bread. Cash flow from continuing operations for the quarter was $50.5 million compared to $38.6 million last year. The favourable variance is largely attributable to a reduction in accounts receivable related to reduced sales volumes in the U.K. bakery and an increase in securitization of receivables. This was partially offset by an increased investment in inventory within the protein segment as a result of price increases for raw materials and reduced sales following the product recall. For the year-to-date, cash flow from continuing operations was $8.6 million compared to $23.7 million last year. The decrease is largely due to a reduction in current taxes payable and an increase in inventories, which was partially offset by the third quarter reduction in U.K. bakery accounts receivable. The Company s strategy related to liquidity is to reduce reliance on any single source of credit, maintain sufficient undrawn credit facilities to provide liquidity and to spread debt maturities over time to reduce refinancing risk. At September 30 th, 2008, the Company had available undrawn committed credit of $352.7 million under the terms of its principal banking arrangements. These banking arrangements, which mature in 2011, are subject to certain covenants and other restrictions. At the end of the third quarter, the Company was in compliance with all of its lending covenants. Management does not anticipate that the Company will breach any of its covenants based on estimates of future earnings and cash funding needs. The total amount of debt due in the next twelve months is $21.0 million. The Company is exposed to fluctuations in the prices of raw materials, seasonal and other marketrelated price changes. Due to the high sales volumes and rapid turnover of inventories, the impact of these price fluctuations is generally short term. When commodity price increases are significant, it can increase the funding required for investments in working capital. These cash flow requirements will be funded from current operating cash flow and existing credit facilities. Management is of the opinion that its operating cash flow and existing credit facilities provide the Company with sufficient resources to finance ongoing business requirements and its planned capital investment program. Interest expense for the quarter was $22.3 million compared to $23.1 million last year, largely due to lower short-term interest rates offset by slightly higher average debt balances. At September 30, 2008, 57% of indebtedness was not exposed to interest rate fluctuations, compared to 72% in the previous year. Subsequent to the end of the quarter, the Company designated additional hedges on its floating rate debt such that 70% of indebtedness was not subject to interest rate fluctuations. Capital expenditures on plant and equipment for the third quarter were $49.3 million compared to $58.5 million last year. Year-to-date, capital investment was $157.7 million 10

11 compared with $170.2 million last year. During 2008, the Company has completed the construction of new warehousing in Western Canada, double shifting of the Brandon pork processing facility and a significant expansion at its Winnipeg ham cutting operation. Taxes The Company recorded a tax recovery of $4.2 million on a loss of $15.0 million in the third quarter of 2008, at an average rate of 28.3%. The rate is lower than the marginal statutory tax rates primarily the result of restructuring and other related costs in the third quarter that are deductible at an effective tax rate of 29.4%, offset by lower Canadian Federal tax rates enacted in December Risks and Uncertainties The Company is subject to risks that affect the food industry in general, including risks posed by food spoilage, accidental contamination, product tampering, consumer product liability, and the potential costs and disruptions of a product recall. The Company actively manages these risks by maintaining strict and rigorous controls and processes in its manufacturing and distribution systems and by maintaining prudent levels of insurance. The Company s facilities are subject to audit by federal health agencies in Canada and similar institutions outside of Canada, and performs its own audits to ensure compliance with its internal standards, which are generally at, or higher than, regulatory agency standards. However, the Company cannot guarantee that compliance with procedures and regulations will necessarily mitigate the risks related to food safety. The direct and indirect costs of the Company s product recall in August have impacted Company earnings in the third quarter and are expected to impact earnings during the fourth quarter, as a result of direct costs and lower sales as market shares recover from the effects of the inability to manufacture and sell products, and lower sales as consumer and customers reduced their purchases of the Company s products. Management anticipates that the Company will fund these costs through a combination of internal cash flows and credit facilities. Credit facilities are made available to Company on terms that include certain restrictive covenants. Management does not anticipate that the Company will breach any such covenants based on current estimates of future earnings and cash funding needs, however increases in the costs of the product recall, or deterioration of earnings related to other impacts may impact the Company s access to credit. In the normal course of business, the Company provides post retirement pension benefits to its employees under both defined contribution and defined benefit pension plan arrangements. The assets of the defined benefit plans are invested primarily in foreign and domestic fixed income and equity securities, which are subject to fluctuations in market prices. In addition, the discount rates used to perform the actuarial calculation of the plan liabilities are also based on long-term market interest rates. Fluctuations in these market prices and rates can impact pension expense and funding requirements. To the extent that recent market price declines of pension assets do not recover in the near term, 11

12 the Company may experience a significant increase in pension expense and in its funding requirements to its defined benefit plan in future years. Litigation Several class action lawsuits have been filed against the Company in different jurisdictions in Canada seeking to recover damages for alleged adverse health impacts experienced by individuals resulting from consumption of the Company s recalled meat products. The Company maintains policies of insurance covering product liability claims. The Company has no reason to believe that liability resulting from recalled product claims will exceed its insurance limits. Summary of Quarterly Results Following is a summary of unaudited quarterly financial information (in thousands of dollars except per share information): First Quarter Second Quarter Third Quarter As restated (iii) Fourth Quarter Total As restated (iii) Sales 2008 $1,203,263 $1,355,301 $1,344,334 $3,902,898 Net earnings (loss) from continuing operations ,316,135 1,318,773 1,301,099 $1,273,633 5,209, $(10) $(9,353) ($12,919) ($22,282) ,266 (6,458) 1,698 $(23,738) (23,232) Net earnings (loss) 2008 $(10) $(9,353) ($12,919) ($22,282) ,463 (1,671) 208,244 $(22,072) 194,964 Earnings per share: Basic from continuing operations 2008 $ 0.00 $ (0.07) ($0.10) ($ 0.18) (0.05) 0.01 $ (0.19) (0.18) Adjusted EPS from continuing operations (i) 2008 $ 0.04 $ (0.01) $0.13 $ $ Total Basic (ii) 2008 $ 0.00 $ (0.07) ($0.10) ($ 0.18) (0.01) 1.62 $ (0.17) 1.53 Diluted from continuing operations (ii) 2008 $ 0.00 $ (0.07) ($0.10) ($ 0.18) (0.05) 0.01 $ (0.19) (0.18) Total Diluted (ii) 2008 $ 0.00 $ (0.07) ($0.10) ($ 0.18) (0.01) 1.58 $ (0.17) 1.50 (i) These are not recognized measures under Canadian GAAP. Management believes that this is the most appropriate basis on which to evaluate results, as one-time direct product recall, restructuring and other related costs and certain non-recurring tax adjustments are not representative of continuing operations. (ii) Does not add due to rounding. (iii) Refer to Amendment to previously issued MD&A on Page 1. 12

13 For an explanation and analysis of quarterly results, refer to Management s Discussion and Analysis for each of the respective quarterly periods filed on SEDAR and also available on the Company s website at Changes in Accounting Policies During the year, the Company has discontinued the practice of allocating certain corporate level costs to its segments and has added a Non-allocated costs category to the segment information tables. Non-allocated costs include costs related to the Company s IT system conversion, certain shared services and consulting expenses related to restructuring initiatives. In January 2006, the Accounting Standards Board (the AcSB ) announced its decision to require all publicly accountable enterprises to report under International Financial Reporting Standards ( IFRS ) for years beginning on or after January 1, As a result, financial reporting by Canadian publicly accountable enterprises will change significantly from current Canadian GAAP to IFRS. On February 13, 2008, the AcSB confirmed that publicly accountable enterprises will be required to use IFRS, as issued by the International Accounting Standards Board, unless modifications or additions to the requirements of IFRS are issued by the AcSB. IFRS must be adopted for interim and annual financial statements related to fiscal years beginning on or after January 1, 2011, with restatement of comparative periods. The Company is currently assessing the future impact of these new standards on its consolidated financial statements. In May 2007, the Accounting Standards Board issued CICA Handbook Section 3031 Inventories. The standard introduces changes to the measurement and disclosure of inventory and is consistent with International Financial Reporting Standards. The Company adopted the measurement provisions of the standard effective January 1, The adoption of the standard did not have a material impact on the results of operations or measurement of inventory. In October 2006, the Accounting Standards Board issued CICA Handbook Section 3862 Financial Instruments Disclosure and Section 3863, Financial Instruments Presentation which replaces Section 3861 Financial Instruments Disclosure and Presentation. The new disclosure standards require increased disclosure of risks associated with recognized and unrecognized financial instruments and how those risks are managed. The standards carry forward the former presentation requirements of Section The Company has complied with the new disclosure requirements beginning in In October 2006, the Accounting Standards Board issued CICA Handbook Section 1535, Capital Disclosures, which establishes standards for disclosing information about an entity s capital and how it is managed. The Company has complied with the new disclosure requirements beginning in

14 Other Matters On October 23, 2008, Maple Leaf Foods Inc. declared a dividend of $0.04 per share payable on December 31, 2008 to shareholders of record on December 8, Unless indicated otherwise, by the corporation, in writing at or before the time the dividend is paid, each dividend paid by the corporation in 2008 or a subsequent year is an eligible dividend for the purposes of the Enhanced Dividend Tax Credit System. Forward-Looking Statements This document contains, and the Company s oral and written public communications often contain, forward-looking statements that are based on current expectations, estimates, forecasts and projections about the industries in which the Company operates and beliefs and assumptions made by the Management of the Company. Such statements include, but are not limited to, statements with respect to our objectives and goals, as well as statements with respect to our beliefs, plans, objectives, expectations, anticipations, estimates and intentions. Words such as expect, anticipate, intend, attempt, may, will, plan, believe, seek, estimate, and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve assumptions and risks and uncertainties that are difficult to predict. In particular, these forward-looking statements are based on a variety of factors and assumptions including, but not limited to: the condition of the Canadian and United States economies; the magnitude of the rate of change of the Canadian dollar versus the U.S. dollar; the availability and prices of raw materials, energy and supplies; product pricing; the competitive environment and related market conditions; improvement of operating efficiencies; continued access to capital; the cost of compliance with environmental and health standards; adverse results from ongoing litigation; no expected actions of domestic and foreign governments and the general assumption that none of the risks identified under Risk Factors in the Company s 2007 Annual Information Form will materialize. These assumptions have been derived from information currently available to the Company including information obtained by the Company from third-party industry analysts. 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 statements. Factors that could cause actual results or outcomes to differ materially from the results expressed, implied or forecasted in such forward-looking statements are discussed more fully in the Company s Management s Discussion and Analysis for the year ended December 31, 2007, which is available on SEDAR at The Company does not intend, and the Company disclaims any obligation to update any forward-looking statements, whether written or oral, or whether as a result of new information, future events or otherwise except as required by law. Maple Leaf Foods Inc. is a leading food processing company, headquartered in Toronto, Canada. The Company employs approximately 23,500 people at its operations across Canada and in the United States, the United Kingdom and Asia. The Company had sales of $5.2 billion in