Net earnings of
"I am delighted to see such strong results for the first half of our fiscal year; a testament that our focused efforts on key priorities and brands is driving top-line case-goods growth and translating into a healthy year over year increase in net sales. Our key brands continue to outpace the industry, not only in the Canadian whisky and super premium gin categories, but also within a super competitive vodka category. We will continue to build upon this momentum in the second half of the year through our consumer engagement programs and communication of our products, brand relevance and enduring commitment to quality," noted
Revenue for the second quarter increased 4%, reflecting a strong second quarter rebound of commission income from Pernod Ricard brands and bulk sales revenue related to rebalancing of maturing inventories. Revenue for the six-month period ended
The Corby Board of Directors also announced that
"I am confident that Paul's significant industry experience will enhance the Corby Board's skillset and I look forward to working with him," said
For further details, please refer to Corby's management's discussion and analysis and interim condensed consolidated financial statements and accompanying notes for the three-and-six-months ended
About Corby
This press release contains forward-looking statements, including statements concerning possible or assumed future results of Corby's operations. Forward-looking statements typically are preceded by, followed by or include the words "believes", "expects", "anticipates", "estimates", "intends", "plans" or similar expressions. Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions and, as such, actual results or expectations could differ materially from those anticipated in these forward-looking statements. Accordingly, readers should not place undue reliance on forward-looking statements. All financial results are reported in Canadian dollars.
Management's Discussion and Analysis
The following Management's Discussion and Analysis ("MD&A") dated
This MD&A contains forward-looking statements, including statements concerning possible or assumed future results of operations of
This document has been reviewed by the Audit Committee of Corby's Board of Directors and contains certain information that is current as of
Unless otherwise indicated, all comparisons of results for the second quarter of fiscal 2020 (three months ended
Business Overview
Corby is a leading Canadian manufacturer, marketer and importer of spirits and wines. Corby's national leadership is sustained by a diverse brand portfolio that allows the Company to drive profitable organic growth with strong, consistent cash flows. Corby is a publicly traded company, with its shares listed on the
The Company derives its revenues from the sale of its owned-brands ("Case Goods"), as well as earning commission income from the representation of selected non-owned brands in
Corby's portfolio of owned-brands includes some of the most renowned brands in
PR produces the majority of Corby's owned-brands under a distillate agreement and a co-pack agreement, each expiring
Corby sources more than 90% of its spirits production requirements from HWSL at its production facility in
In most provinces, Corby's route to market in
Corby's shipment patterns to the LBs will not always exactly match short-term consumer purchase patterns. However, given the importance of monitoring consumer consumption trends over the long term, the Company stays abreast of consumer purchase patterns in
In addition to a focus on efforts to open new international markets, Corby's international business is concentrated in
For the other international markets, Corby products are distributed by PR affiliates or third parties (more information is provided in the "Related Party Transactions" section of this MD&A).
Corby's operations are subject to seasonal fluctuations: sales are typically strong in the first and second quarters, while third-quarter sales usually decline after the end of the retail holiday season. Fourth-quarter sales typically increase again with the onset of warmer weather as consumers tend to increase their purchasing levels during the summer season. In addition, retail sales comparisons can be affected by timing of key holidays and LB reporting calendars.
Strategies and Outlook
Corby's business strategies are designed to maximize sustainable long-term value growth and deliver enhanced margin quality and profit, while continuing to produce strong and consistent cash flows from operating activities.
Management believes its focused brand prioritization strategy will permit Corby to capture market share in the segments and markets that are expected to deliver the most long-term value growth. Brand prioritization requires a consumer insight and data driven assessment of each brand's potential. This facilitates resource allocation of Corby's marketing and sales efforts, ensuring optimal value creation through revenue management and investment return maximization.
Therefore, the Company's strategy is to concentrate its endeavors to deliver relevant consumer offerings and invest to leverage the growth potential of its key strategic brands, while continuing to exploit new routes-to-market and channel opportunities.
Pursuing new growth opportunities outside of
Of importance to the implementation of our brand strategies is an effective route-to-market and an optimized organizational structure. Corby continues to invest in its trade marketing expertise, ensuring that commercial resources are specialized to meet the unique needs of its customers and their selling channels. In all areas of the business, management believes setting clear strategies and increasing efficiencies is key to Corby's overall success and creating value for Corby shareholders.
The Company's portfolio of owned and represented brands provides an excellent platform from which to achieve its objectives. Innovation is also essential to capture incremental growth opportunities. Successful innovation is delivered through a structured evaluation process powered by consumer insight and ongoing research and development. Corby benefits from having access to
Finally, Corby is a strong advocate of social responsibility, especially with respect to its sales and promotional activities. Corby promotes responsible consumption of its products in collaboration with local partners.
Brand Performance Review
Corby's portfolio of owned brands accounts for approximately 80% of the Company's total annual revenue. Included in this portfolio are its key brands:
Shipment Volume and Shipment Value Performance
The following table summarizes the performance of Corby's owned-brands (i.e., Case Goods) in terms of both shipment volume (as measured by shipments to customers in equivalent nine-litre cases) and shipment value (as measured by the change in net sales revenue). The table includes results for sales in both
BRAND PERFORMANCE CHART - INCLUDES BOTH CANADIAN AND INTERNATIONAL SHIPMENTS | |||||||||
Three Months Ended | Six Months Ended | ||||||||
Shipment Change | Shipment Change | ||||||||
Volume | Value | Volume | Value | ||||||
(Volumes in 000's of 9L cases) | 2019 | 2018 | % | % | 2019 | 2018 | % | % | |
Brand | |||||||||
235 | 249 | (6%) | (6%) | 456 | 451 | 1% | 0% | ||
Polar Ice vodka | 97 | 88 | 10% | 8% | 192 | 183 | 5% | 3% | |
Lamb's rum | 123 | 115 | 6% | 6% | 232 | 217 | 7% | 3% | |
Mixable liqueurs | 47 | 51 | (8%) | (9%) | 88 | 91 | (3%) | (2%) | |
Ungava Spirits Brands | 42 | 37 | 14% | 16% | 80 | 66 | 21% | 26% | |
Other Corby-owned brands(1) | 58 | 56 | 4% | 14% | 112 | 111 | 1% | (5%) | |
Total Corby brands | 602 | 596 | 1% | 1% | 1,160 | 1,119 | 4% | 2% |
(1) For presentation purposes, |
Corby's owned-brands experienced strong 4% shipment volume growth, resulting in value growth of 2% when compared to the six-month period ended
Trends in
Three Months Ended | Six Months Ended | |||||||
Shipment Change | Shipment Change | |||||||
Volume | Value | Volume | Value | |||||
(Volumes in 000's of 9L cases) | 2019 | 2018 | % | % | 2019 | 2018 | % | % |
Domestic | 543 | 539 | 1% | 0% | 1,044 | 1,018 | 3% | 2% |
International | 59 | 57 | 3% | 8% | 116 | 101 | 14% | 4% |
Total Corby brands | 602 | 596 | 1% | 1% | 1,160 | 1,119 | 4% | 2% |
Fiscal year to date domestic shipments grew 3% in volume and 2% in value compared to the same time last year. Second quarter domestic shipments grew 1% in volume and were flat in value. Performance on the more premium Ungava Spirits Brands delivered strong growth, while Polar Ice responded well to tactical regional strategies.
On international performance, second quarter shipment volumes improved 3%, while shipment value grew 8% compared to the same period last year. Improvement in volume was impacted primarily by new Lamb's rum opportunities in the
Retail Sales Performance / Spirit Market Trends
It is of critical importance to understand the performance of Corby's brands at the retail level in
To provide context for the following analysis, the Canadian spirits industry exhibited second quarter retail sales volume growth of 2%, while retail sales value improved 4%. Retail sales volumes grew 3% for the six months ended
In the six-month period ended
Corby's portfolio is heavily weighted in the Canadian whisky, rum and vodka categories; together they make up about 86% of the Company's total retail volumes.
The following brand discussion provides a more detailed analysis of the performance of each of Corby's key brands relative to its respective industry category. Retail sales volume and value data, as provided by the ACD, is set out in the following table and is discussed throughout this MD&A.
It should be noted that the retail information presented does not include international retail sales of Corby-owned brands and on-site winery sales.
Retail Sales Performance / Summary of Corby's
RETAIL SALES FOR THE CANADIAN MARKET ONLY (AS PROVIDED BY THE ACD(1)) | ||||||||||||||
Three Months Ended | Six Months Ended | Twelve Months Ended | ||||||||||||
% Retail | % Retail | % Retail | % Retail | % Retail | % Retail | |||||||||
Dec 31, | Dec 31, | Volume | Value | Dec 31, | Dec 31, | Volume | Value | Dec 31, | Dec 31, | Volume | Value | |||
(Volumes in 000's of 9L cases) | 2019 | 2018 | Growth | Growth | 2019 | 2018 | Growth | Growth | 2019 | 2018 | Growth | Growth | ||
Brand | ||||||||||||||
235 | 241 | (3%) | (1%) | 420 | 418 | 0% | 2% | 750 | 750 | 0% | 2% | |||
Polar Ice vodka | 102 | 99 | 3% | 3% | 198 | 193 | 3% | 4% | 361 | 353 | 2% | 3% | ||
Lamb's rum | 86 | 95 | (9%) | (7%) | 166 | 177 | (6%) | (5%) | 302 | 322 | (6%) | (6%) | ||
Mixable liqueurs | 50 | 53 | (6%) | (3%) | 90 | 93 | (3%) | (1%) | 152 | 159 | (5%) | (3%) | ||
Ungava Spirits Brands | 52 | 44 | 17% | 18% | 80 | 66 | 22% | 22% | 124 | 105 | 18% | 18% | ||
Other Corby-owned brands (2) | 55 | 54 | 2% | 0% | 104 | 102 | 2% | 1% | 196 | 191 | 2% | 1% | ||
Total | 580 | 586 | (1%) | 0% | 1,058 | 1,049 | 1% | 2% | 1,885 | 1,880 | 0% | 1% |
(1) Refers to sales at the retail store level in |
(2) For presentation purposes, Foreign Affair Brands been grouped with other Corby-owned brands as full comparable periods have been attained. |
Coby has strategically separated the premium variants of
The brand is being supported nationally with a new "Drinks Soon?" campaign in a range of media channels and continues to receive prestigious accolades that speak to the quality of the brand.
Wiser's Special Blend retail volume dipped 2%, with flat retail value in the six-month comparable period ended
Polar Ice Vodka
Polar Ice vodka is among the top-selling vodka brands in
The brand is responding to a combination of strategic price repositioning, a new targeted marketing campaign, and has benefited from new packaging launched this fiscal year.
Lamb's Rum
Lamb's rum, one of the top-selling rum families in
The Lamb's rum product line is heavily weighted in the dark and white segments, which have faced evolving consumer preferences in recent years and increased competitor pressure in key markets. Our strategy remains to defend regional strongholds with targeted campaigns, focus on the most differentiated variants and to launch new flavour variants and format innovations to help recruit new drinkers.
Mixable Liqueurs
Corby's portfolio of mixable liqueur brands consists of McGuinness liqueurs (which is
Our strategy has been to expand innovation and focus on strong programming in the retail environment, ensuring that our flavour offering is aligned to consumer trends. For example, an expanded range of flavour offerings in a convenient 375mL format is designed to encourage consumer trial. McGuinness also benefited from co-branded programs activated in retail and on-premise and through social media.
Ungava Spirits Brands
Retail volume and value for the Ungava Spirits Brands increased 22% in volume and 22% in value, for the six months ended
Other Corby-Owned Brands
Premium offerings in Canadian whisky such as Lot No. 40,
Royal Reserve® grew 4% in both retail volume and value during the six months ended
Foreign Affair Brands are available through several channels including direct delivery (on-premise and wine club) and the on-site winery visitor centre, where the majority of sales are conducted. Retail performance is typically impacted by customer ordering patterns and does not capture direct delivery and on-site sales to consumers. The Foreign Affair Brands won top awards, including Silver and Gold medals at the Ontario Wine Awards and has recently launched the inaugural Whisky Barreled Cabernet Sauvignon, aged in
Financial and Operating Results
The following table presents a summary of certain selected consolidated financial information of the Company for the three and six-month periods ended
Three Months Ended | Six Months Ended | ||||||||||||||
(in millions of Canadian dollars, | |||||||||||||||
except per share amounts) | 2019 | 2018 | $ Change | % Change | 2019 | 2018 | $ Change | % Change | |||||||
Revenue | $ | 43.4 | $ | 41.9 | $ | 1.5 | 4% | $ | 82.1 | $ | 79.7 | $ | 2.4 | 3% | |
Cost of sales | (17.1) | (16.7) | (0.4) | 3% | (32.2) | (30.7) | (1.5) | 5% | |||||||
Marketing, sales and administration | (15.8) | (16.2) | 0.4 | (2%) | (30.7) | (31.3) | 0.6 | (2%) | |||||||
Other income (expense) | 0.1 | 0.1 | - | (30%) | - | 0.1 | (0.1) | (79%) | |||||||
Earnings from operations | 10.6 | 9.1 | 1.5 | 16% | 19.2 | 17.8 | 1.4 | 8% | |||||||
Financial income | 0.3 | 0.4 | (0.1) | (13%) | 0.7 | 0.7 | - | (8%) | |||||||
Financial expenses | (0.2) | (0.1) | (0.1) | 75% | (0.3) | (0.2) | (0.1) | 60% | |||||||
Net financial income | 0.1 | 0.3 | (0.2) | (43%) | 0.4 | 0.5 | (0.1) | (37%) | |||||||
Earnings before income taxes | 10.7 | 9.4 | 1.3 | 14% | 19.6 | 18.3 | 1.3 | 7% | |||||||
Income taxes | (2.9) | (2.5) | (0.4) | 14% | (5.3) | (4.9) | (0.4) | 6% | |||||||
Net earnings | $ | 7.8 | $ | 6.9 | $ | 0.9 | 14% | $ | 14.3 | $ | 13.4 | $ | 0.9 | 7% | |
Per common share | |||||||||||||||
- Basic net earnings | $ | 0.28 | $ | 0.24 | $ | 0.04 | 17% | $ | 0.50 | $ | 0.47 | $ | 0.03 | 6% | |
- Diluted net earnings | $ | 0.28 | $ | 0.24 | $ | 0.04 | 17% | $ | 0.50 | $ | 0.47 | $ | 0.03 | 6% |
Overall Financial Results
Net earnings grew
Revenue
The following highlights the key components of the Company's revenue streams:
Three Months Ended | Six Months Ended | ||||||||||||||
(in millions of Canadian dollars) | 2019 | 2018 | $ Change | % Change | 2019 | 2018 | $ Change | % Change | |||||||
Revenue streams: | |||||||||||||||
Case goods | $ | 33.8 | $ | 33.6 | $ | 0.2 | 1% | $ | 64.9 | $ | 63.5 | $ | 1.4 | 2% | |
Commissions | 8.4 | 7.5 | 0.9 | 11% | 14.8 | 14.5 | 0.3 | 2% | |||||||
Other services | 1.2 | 0.8 | 0.4 | 54% | 2.4 | 1.7 | 0.7 | 40% | |||||||
Revenue | $ | 43.4 | $ | 41.9 | $ | 1.5 | 4% | $ | 82.1 | $ | 79.7 | $ | 2.4 | 3% |
Case Goods revenue increased
Commissions increased
Other services represent ancillary revenue incidental to Corby's core business activities, such as logistical fees, on-premise spirit, wine and merchandise sales, and occasional bulk whisky sales. Revenue from other services grew in the three- and six-month periods ended
Cost of sales
Cost of sales was
Cost of sales increased by
Marketing, sales and administration
Marketing, sales and administration expenses decreased
Net financial income
Net financial income is comprised of interest earned on deposits in cash management pools, offset by interest costs associated with the Company's pension and post-retirement benefit plans. Interest income for both the three and six-month period ended
Income taxes
A reconciliation of the effective tax rate to the statutory rates for each period is presented below.
Three Months Ended | Six Months Ended | |||||
2019 | 2018 | 2019 | 2018 | |||
Combined basic Federal and Provincial tax rates | 27% | 27% | 27% | 27% | ||
Other | 0% | 0% | 0% | 0% | ||
Effective tax rate | 27% | 27% | 27% | 27% |
Liquidity and Capital Resources
Corby's sources of liquidity are its deposits in cash management pools of
The Company believes that its deposits in cash management pools, combined with its historically strong operational cash flows, provide for sufficient liquidity to fund its operations, investing activities and commitments for the foreseeable future. The Company's cash flows from operations are subject to fluctuation due to commodity, foreign exchange and interest rate risks. Please refer to the "Risks and Risk Management" section of this MD&A for further information.
Cash Flows
Three Months Ended | Six Months Ended | ||||||||||||
(in millions of Canadian dollars) | 2019 | 2018 | $ Change | 2019 | 2018 | $ Change | |||||||
Operating activities | |||||||||||||
Net earnings, adjusted for non-cash items | $ | 13.0 | $ | 10.9 | $ | 2.1 | $ | 24.2 | $ | 20.6 | $ | 3.6 | |
Net change in non-cash working capital | 4.2 | 7.8 | (3.6) | 1.5 | 5.6 | (4.1) | |||||||
Net payments for interest and income taxes | (2.0) | (2.6) | 0.6 | (4.8) | (4.8) | - | |||||||
15.2 | 16.1 | (0.9) | 20.9 | 21.4 | (0.5) | ||||||||
Investing activities | |||||||||||||
Additions to property and equipment | (0.9) | (1.0) | 0.1 | (1.1) | (1.1) | - | |||||||
Proceeds from disposition of property and equipment | 0.1 | - | 0.1 | 0.1 | - | 0.1 | |||||||
Deposits in cash management pools | (7.8) | (8.8) | 1.0 | (6.6) | (7.8) | 1.2 | |||||||
(8.6) | (9.8) | 1.2 | (7.6) | (8.9) | 1.3 | ||||||||
Financing activities | |||||||||||||
Payment of lease liabilities | (0.3) | - | (0.3) | (0.8) | - | (0.8) | |||||||
Dividends paid | (6.3) | (6.3) | - | (12.5) | (12.5) | - | |||||||
(6.6) | (6.3) | (0.3) | (13.3) | (12.5) | (0.8) | ||||||||
Net change in cash | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - |
Operating activities
Net cash generated from operating activities was
For the six-month period ended
Investing activities
Net cash used in investing activities was
Cash management pools represent cash on deposit with
Financing activities
Cash used for financing activities was
On
The following table summarizes dividends paid and payable by the Company over the last two fiscal years:
for | Declaration date | Record Date | Payment date | $ / Share | ||||
2020 - Q2 | $ 0.22 | |||||||
2020 - Q1 | 0.22 | |||||||
2019 - Q4 | 0.22 | |||||||
2019 - Q3 | 0.22 | |||||||
2019 - Q2 | 0.22 | |||||||
2019 - special | 0.44 | |||||||
2019 - Q1 | 0.22 | |||||||
2018 - Q4 | 0.22 | |||||||
2018 - Q3 | 0.22 | |||||||
2018 - Q2 | 0.22 | |||||||
2018 - Q1 | 0.22 | |||||||
2017 - Q4 | 0.21 | |||||||
2017 - Q3 | 0.21 |
Outstanding Share Data
As at
Related Party Transactions
Transactions with parent, ultimate parent, and affiliates
Corby engages in a significant number of transactions with its parent company, its ultimate parent and various affiliates. Specifically, Corby renders services to its parent company, its ultimate parent, and affiliates for the marketing and sale of beverage alcohol products in
The companies operate under the terms of agreements that became effective on
In addition to the 2006 Agreements, Corby signed an agreement on
On
Deposits in cash management pools
Corby participates in a cash pooling arrangement under a Mirror Netting Service Agreement, together with PR's other Canadian affiliates, the terms of which are administered by
Selected Quarterly Information
Summary of Quarterly Financial Results
(in millions of Canadian dollars, | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | ||||||||
except per share amounts) | 2020 | 2020 | 2019 | 2019 | 2019 | 2019 | 2018 (1) | 2018 (1) | ||||||||
Revenue | $ | 43.4 | $ | 38.6 | $ | 39.2 | $ | 31.0 | $ | 41.9 | $ | 37.9 | $ | 40.2 | $ | 29.3 |
Earnings from operations | 10.6 | 8.7 | 10.5 | 5.9 | 9.1 | 8.7 | 12.6 | 6.5 | ||||||||
Net earnings | 7.8 | 6.5 | 7.8 | 4.5 | 6.9 | 6.5 | 9.3 | 4.8 | ||||||||
Basic EPS | 0.28 | 0.23 | 0.27 | 0.16 | 0.24 | 0.23 | 0.33 | 0.17 | ||||||||
Diluted EPS | 0.28 | 0.23 | 0.27 | 0.16 | 0.24 | 0.23 | 0.33 | 0.17 |
(1) In preparing its comparative information, in fiscal years 2018, the Company has adjusted amounts reported previously in the consolidated statement of earnings as a result of the retrospective application of IFRS 15, Revenue from Contracts with Customers. |
The above table demonstrates the seasonality of Corby's business, as sales are typically strong in the first and second quarters, while third-quarter sales (January, February and March) usually decline after the end of the retail holiday season. Fourth-quarter sales typically increase again with the onset of warmer weather, as consumers tend to increase their purchasing levels during the summer season.
Recent Accounting Pronouncements
A number of new standards, amendments to standards and interpretations are effective for the financial period ended
(i) Leases
In
The guidance permits two methods of adoption: retrospectively to each prior reporting period restated (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (modified retrospective method). The Company adopted this standard using the modified retrospective method. The Company has elected to set the right-of-use asset equal to the lease liability on the date of adoption. The Company has also elected not to restate prior year comparative information under the modified retrospective approach. Comparative information continues to be reported under IAS 17 and related interpretations.
In applying IFRS 16 for the first time, the Company used the following practical expedients as permitted by the standard:
- Elected to not apply the requirements of IFRS 16 to short-term leases and leases for which the underlying asset is of low value;
- Elected to set the right-of-use asset equal to the lease liability on the date of adoption;
- Excluded initial direct costs for the measurement of the right-of-use asset at the date of initial application;
Upon adoption of the standard, the Company recognized a right-of-use asset and a lease liability for the present value of the remaining future lease payments, discounted using the incremental borrowing rate at the date of initial application. The adoption of this standard resulted in the recognition of right-of-use assets and lease liabilities of
The weighted average lessee's incremental borrowing rate applied to the lease liabilities on the date of initial application was 3%. The Company will recognize the lease payments associated with these leases on a straight-line basis, over the lease term.
Under IFRS 16, depreciation expense on the right-of-use asset and interest expense on the lease liability replaced operating lease expenses.
The reconciliation between lease liabilities recognized on
As at | ||
Operating lease commitment as at | ||
in the Company's notes to the consolidated financial statements | $ | 6,671 |
Discounted using the incremental borrowing rate at | 6,349 | |
Short-term and low value leases excluded | (16) | |
Lease liabilities recognized as at | $ | 6,333 |
Lease liabilities due within one year | $ | 1,536 |
Lease liabilities | 4,797 | |
Total lease liabilities | $ | 6,333 |
Right-of-use assets are measured at the initial amount of the lease liabilities plus any indirect costs, lease payments made at or before the commencement date net of lease incentives received, and decommissioning costs. Subsequent to initial measurement, the right-of-use assets will be measured at cost and depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.
Right-of-use assets are included as follows in the condensed interim consolidated balance sheet as at
As at | ||||||
Building | Other | Total | ||||
Cost | ||||||
Balance, beginning of the period | $ | 4,473 | $ | 1,860 | $ | 6,333 |
Lease additions | - | - | - | |||
Balance, end of the period | $ | 4,473 | $ | 1,860 | $ | 6,333 |
Accumulated Depreciation | ||||||
Balance, beginning of the period | $ | - | $ | - | $ | - |
Depreciation | 449 | 351 | 800 | |||
Balance, end of the period | $ | 449 | $ | 351 | $ | 800 |
Carrying amount as at | $ | 4,024 | $ | 1,509 | $ | 5,533 |
Transactions involving lease liabilities as at and for the period ended
As at | ||
Balance, beginning of the period | $ | 6,333 |
Lease additions | - | |
Lease payments | (863) | |
Interest expense on lease liabilities | 82 | |
Less: Accrued Interest on lease liabilities | (9) | |
Balance, end of the period | $ | 5,543 |
Lease liabilities due within one year | $ | 1,461 |
Lease liabilities | 4,082 | |
Total lease liabilities | $ | 5,543 |
The expenses related to leases with variable consideration, short term leases and low value leases amounted to
(ii) Uncertainty over Income Tax Treatments
In
(iii) Financial Instruments
The IASB issued amendments to IFRS 9 "Financial Instruments" ("IFRS 9"). The amendment addresses concerns about how IFRS 9 classified prepayable financial assets and clarifies an aspect of accounting for financial liabilities following a modification. The amendments are to be applied retrospectively for fiscal years beginning on or after
(iv) Employee Benefits
The IASB published amendments to IAS 19 "Employee Benefits" ("IAS 19"). The amendment harmonizes accounting practices to provide more relevant information for decision-making. The amendments are to be applied retrospectively to plan amendments, curtailments or settlements occurring on or after
(v) Income Taxes
The IASB published amendments to IAS 12 "Income Taxes" ("IAS 12"). The amendment clarifies that the income tax consequences of dividends, where transactions or events that generate distributable profits are recognized, apply to all income tax consequences of dividends. The amendments are to be applied retrospectively for fiscal years beginning on or after
Internal Controls Over Financial Reporting
The Company maintains a system of disclosure controls and procedures to provide reasonable assurance that all material information relating to the Company is gathered and reported to senior management on a timely basis so that appropriate decisions can be made regarding public disclosure.
In addition, the CEO and CFO have designed, or caused to be designed under their supervision, internal controls over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be designed effectively can provide only reasonable assurance with respect to financial reporting and financial statement preparation.
Management, with the participation of the CEO and CFO, has evaluated the effectiveness of the Company's internal controls over financial reporting as at
There were no changes in internal controls over financial reporting during the Company's most recent interim period that have materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting.
Risks & Risk Management
The Company is exposed to a number of risks in the normal course of its business that have the potential to affect its operating and financial performance.
Industry and Regulatory
The beverage alcohol industry in
Additionally, as the Company becomes more reliant on international product sales in the US,
The Company continuously monitors the potential risk associated with any proposed changes to its government policy, regulatory and taxation environments and, as an industry leader, actively participates in trade association discussions relating to new developments.
Consumer Consumption Patterns
Beverage alcohol companies are susceptible to risks relating to changes in consumer consumption patterns. Consumer consumption patterns are affected by many external influences, not the least of which is economic outlook and overall consumer confidence in the stability of the economy as a whole. Additionally, the legalization of recreational cannabis in
Distribution/Supply Chain Interruption
The Company is susceptible to risks relating to distributor and supply chain interruptions. Distribution in
Supply chain interruptions, including a manufacturing or inventory disruption, could impact product quality and availability. The Company adheres to a comprehensive suite of quality programmes and proactively manages production and supply chains to mitigate any potential risk to consumer safety or Corby's reputation and profitability.
Inherent to producing maturing products, there is a potential for shortages or surpluses in future years if demand and supply are materially different from long-term forecasts. Additionally, the loss through contamination, fire or other natural disaster of the stock of maturing products may result in significant reduction in supply and, as a result, Corby may not be able to meet customer demands. The Company monitors category trends and regularly reviews maturing inventory levels.
Environmental Compliance
Environmental liabilities may potentially arise when companies are in the business of manufacturing products and, thus, required to handle potentially hazardous materials. As Corby largely outsources its production, including all of its storage and handling of maturing alcohol, the risk of environmental liabilities is considered minimal. Corby currently has no significant recorded or unrecorded environmental liabilities.
Industry Consolidation
In recent years, the global beverage alcohol industry has continued to experience consolidation. Industry consolidation can have varying degrees of impact and, in some cases, may even create exceptional opportunities. Either way, management believes that the Company is well positioned to deal with this or other changes to the competitive landscape in
Corby's ability to properly complete acquisitions and subsequently integrate them may affect its results
Corby monitors growth opportunities that may present themselves, including by way of acquisitions. While we believe that an acquisition may create the opportunity to realize certain benefits, achieving these benefits will depend in part on successfully consolidating functions and integrating operations, procedures and personnel in an efficient manner, as well as our ability to realize any anticipated growth opportunities or costs savings from combining the target's assets and operations with our existing brands and operations. Integration efforts following any acquisition may require the dedication of substantial management effort, time and resources, which may divert management's focus and resources from other strategic opportunities and from operational matters during this process. In addition, Corby may be required to assume greater-than-expected liabilities due to liabilities that are undisclosed at the time of completion of an acquisition. A failure to realize, in whole or in part, the anticipated benefits of an acquisition may have a negative impact on the results or financial position of Corby.
Competition
The Canadian and international beverage alcohol industry is extremely competitive. Competitors may take actions to establish and sustain a competitive advantage through advertising and promotion and pricing strategies in an effort to maintain market share, which may negatively affect our sales, revenues and profitability. Corby constantly monitors the market and adjusts its own advertising, promotion and pricing strategies as appropriate.
Competitors may also affect Corby's ability to attract and retain high-quality employees. The Company's long heritage attests to Corby's strong foundation and successful execution of its strategies. Its role as a leading Canadian beverage alcohol company helps facilitate recruitment efforts.
Credit Risk
Credit risk arises from deposits in cash management pools held with PR via Corby's participation in the Mirror Netting Service Agreement (as previously described in the "Related Party Transactions" section of this MD&A), as well as credit exposure to customers, including outstanding accounts receivable. The maximum exposure to credit risk is equal to the carrying value of the Company's financial assets. The objective of managing counterparty credit risk is to prevent losses in financial assets. The Company assesses the credit quality of its counterparties, taking into account their financial position, past experience and other factors. As the large majority of Corby's accounts receivable balances are collectible from government-controlled LBs, management believes the Company's credit risk relating to accounts receivable is at an acceptably low level.
Exposure to Interest Rate Fluctuations
The Company does not have any short- or long-term debt facilities. Interest rate risk exists, as Corby earns market rates of interest on its deposits in cash management pools. An active risk management programme does not exist, as management believes that changes in interest rates would not have a material impact on Corby's financial position over the long term.
Exposure to Commodity Price Fluctuations
Commodity risk exists, as the manufacture of Corby's products requires the procurement of several known commodities, such as grains, sugar and natural gas. The Company strives to partially mitigate this risk through the use of longer-term procurement contracts where possible. In addition, subject to competitive conditions, the Company may pass on commodity price changes to consumers through pricing over the long term.
Foreign Currency Exchange Risk
The Company has exposure to foreign currency risk, as it conducts business in multiple foreign currencies; however, its exposure is primarily limited to the US dollar ("USD") and
USD Exposure
The Company's demand for USD has traditionally outpaced its supply, due to USD sourcing of production inputs and Advertising & Promotion expenses exceeding that of the Company's USD sales. Therefore, decreases in the value of the Canadian dollar ("CAD") relative to the USD will have an unfavourable impact on the Company's earnings.
GBP Exposure
The Company's exposure to fluctuations in the value of the GBP relative to the CAD was reduced as both sales and cost of production are denominated in GBP. While Corby's exposure has been minimized, increases in the value of the CAD relative to the GBP will have an unfavourable impact on the Company's earnings.
Third-Party Service Providers
HWSL, which Corby manages on behalf of PR, provides more than 90% of the Company's production requirements, among other services including administration and information technology. However, the Company is reliant upon certain third-party service providers in respect of certain of its operations. It is possible that negative events affecting these third-party service providers could, in turn, negatively impact the Company. While the Company has no direct control over how such third parties are managed, it has entered into contractual arrangements to formalize these relationships. In order to minimize operating risks, the Company actively monitors and manages its relationships with its third-party service providers.
Renewal of Distribution Agreements
The 2006 Agreements and the agreement regarding
Brand Reputation and Trademark Protection
The Company promotes nationally branded, non-proprietary products as well as proprietary products. Damage to the reputation of any of these brands, or to the reputation of any supplier or manufacturer of these brands, could negatively impact consumer opinion of the Company or the related products, which could have an adverse impact on the financial performance of the Company. The Company strives to mitigate such risks by selecting only those products from suppliers that strategically complement Corby's existing brand portfolio and by actively monitoring brand advertising and promotion activities.
Additionally, although the Company registers trademarks, as applicable, it cannot be certain that trademark registrations will be issued with respect to all the Company's applications. Also, while Corby constantly watches for and responds to competitive threats, as necessary, the Company cannot predict challenges to, or prevent a competitor from challenging, the validity of any existing or future trademark issued or licensed to Corby.
Information Technology and Cyber Security
The Company uses technology supplied by third parties, both related and non-related, to support operations and invests in information technology to improve route to market, reporting, analysis, and marketing initiatives. Issues with availability, reliability and security of systems and technology could adversely impact the Company's ability to compete resulting in corruption or loss of data, regulatory-related issues, litigation or brand reputation damage. With the fast-paced changing nature of the technology environment including digital marketing, the Company works with these third parties to maintain policies, processes and procedures to help secure and protect these information systems as well as consumer, corporate and employee data.
Valuation of
The following table summarizes Corby's goodwill and intangible assets and details the amounts associated with each brand (or basket of brands) and market as at
Carrying Values as at | ||||||
Associated Brand | Associated Market | Intangibles | Total | |||
Various PR brands | $ - | $ 10.1 | $ 10.1 | |||
Lamb's rum | 1.3 | 11.8 | 13.1 | |||
Ungava brands (2) | 5.1 | 3.2 | 8.3 | |||
0.4 | 2.5 | 2.9 | ||||
Other domestic brands | Canada | 1.9 | - | 1.9 | ||
$ 8.7 | $ 27.6 | $ 36.3 |
(1)The international business for Lamb's rum is primarily focused in the | ||||||
relate to all international markets outside of | ||||||
(2)The Ungava brands include trademarks related to Ungava Premium Canadian Gin, Chic Choc Spiced Rum and | ||||||
maple-based liqueurs. |
Therefore, economic factors (such as consumer consumption patterns) specific to these brands and markets are primary drivers of the risk associated with their respective goodwill and intangible assets valuations.
Employee Future Benefits
The Company has certain obligations under its registered and non-registered defined benefit pension plans and other post-retirement benefit plan. There is no assurance that the Company's benefit plans will be able to earn the assumed rate of return. New regulations and market-driven changes may result in changes in the discount rates and other variables, which would result in the Company being required to make contributions in the future that differ significantly from estimates. An extended period of depressed capital markets and low interest rates could require the Company to make contributions to these plans in excess of those currently contemplated, which, in turn, could have an adverse impact on the financial performance of the Company. Somewhat mitigating the impact of a potential market decline is the fact that the Company monitors its pension plan assets closely and follows strict guidelines to ensure that pension fund investment portfolios are diversified in-line with industry best practices. For further details related to Corby's defined benefit pension plans, please refer to Note 10 of the annual audited consolidated financial statements for the year ended
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
(Unaudited) | |||||||
(in thousands of Canadian dollars) | |||||||
As at | Notes | 2019 | 2018 | 2019 | |||
ASSETS | |||||||
Deposits in cash management pools | $ | 67,658 | $ | 77,692 | $ | 61,136 | |
Accounts receivable | 4 | 31,467 | 30,738 | 32,260 | |||
Inventories | 5 | 60,612 | 60,181 | 61,912 | |||
Prepaid expenses | 614 | 849 | 554 | ||||
Total current assets | 160,351 | 169,460 | 155,862 | ||||
Other assets | 1,654 | 2,875 | 1,498 | ||||
Right-of-use assets | 2 | 5,533 | - | - | |||
Property, plant and equipment | 21,149 | 19,066 | 21,683 | ||||
6 | 8,757 | 8,757 | 8,757 | ||||
Intangible assets | 27,640 | 33,421 | 30,531 | ||||
Total assets | $ | 225,084 | $ | 233,579 | $ | 218,331 | |
LIABILITIES | |||||||
Accounts payable and accrued liabilities | 7 | $ | 32,443 | $ | 34,748 | $ | 32,998 |
Income and other taxes payable | 229 | 206 | 989 | ||||
Dividends payable | - | 12,526 | - | ||||
Current lease liabilities | 2 | 1,461 | - | - | |||
Total current liabilities | 34,133 | 47,480 | 33,987 | ||||
Provision for employee benefits | 12,864 | 9,209 | 13,427 | ||||
Deferred income taxes | 2,604 | 3,423 | 1,820 | ||||
Long-term lease liabilities | 2 | 4,082 | - | - | |||
Total liabilities | 53,683 | 60,112 | 49,234 | ||||
Shareholders' equity | |||||||
Share capital | 14,304 | 14,304 | 14,304 | ||||
Accumulated other comprehensive (loss) income | (2,704) | 914 | (3,226) | ||||
Retained earnings | 159,801 | 158,249 | 158,019 | ||||
Total shareholders' equity | 171,401 | 173,467 | 169,097 | ||||
Total liabilities and shareholders' equity | $ | 225,084 | $ | 233,579 | $ | 218,331 |
The accompanying notes are an integral part of these interim condensed consolidated financial statements. |
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS | |||||||||
(Unaudited) | |||||||||
(in thousands of Canadian dollars, except per share amounts) | |||||||||
For the Three Months Ended | For the Six Months Ended | ||||||||
Notes | 2019 | 2018 | 2019 | 2018 | |||||
Revenue | 8 | $ | 43,418 | $ | 41,865 | $ | 82,055 | $ | 79,748 |
Cost of sales | (17,136) | (16,660) | (32,154) | (30,710) | |||||
Marketing, sales and administration | (15,792) | (16,172) | (30,681) | (31,290) | |||||
Other income | 9 | 57 | 81 | 12 | 58 | ||||
Earnings from operations | 10,547 | 9,114 | 19,232 | 17,806 | |||||
Financial income | 10 | 355 | 406 | 711 | 771 | ||||
Financial expense | 10 | (184) | (105) | (370) | (231) | ||||
171 | 301 | 341 | 540 | ||||||
Earnings before income taxes | 10,718 | 9,415 | 19,573 | 18,346 | |||||
Current income taxes | (2,663) | (2,431) | (4,668) | (4,550) | |||||
Deferred income taxes | (207) | (88) | (597) | (398) | |||||
Income taxes | (2,870) | (2,519) | (5,265) | (4,948) | |||||
Net earnings | $ | 7,848 | $ | 6,896 | $ | 14,308 | $ | 13,398 | |
Basic earnings per share | $ | 0.28 | $ | 0.24 | $ | 0.50 | $ | 0.47 | |
Diluted earnings per share | $ | 0.28 | $ | 0.24 | $ | 0.50 | $ | 0.47 | |
Weighted average common shares outstanding | |||||||||
Basic | 28,468,856 | 28,468,856 | 28,468,856 | 28,468,856 | |||||
Diluted | 28,468,856 | 28,468,856 | 28,468,856 | 28,468,856 |
The accompanying notes are an integral part of these interim condensed consolidated financial statements. |
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||||||||
(Unaudited) | |||||||||
(in thousands of Canadian dollars) | |||||||||
For the Three Months Ended | For the Six Months Ended | ||||||||
2019 | 2018 | 2019 | 2018 | ||||||
Net earnings | $ | 7,848 | $ | 6,896 | $ | 14,308 | $ | 13,398 | |
Other Comprehensive Income: | |||||||||
Amounts that will not be subsequently reclassified to earnings: | |||||||||
Net actuarial gains | 355 | 293 | 710 | 586 | |||||
Income taxes | (93) | (79) | (188) | (158) | |||||
262 | 214 | 522 | 428 | ||||||
Total comprehensive income | $ | 8,110 | $ | 7,110 | $ | 14,830 | $ | 13,826 |
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN | ||||||||
SHAREHOLDERS' EQUITY | ||||||||
(Unaudited) | ||||||||
(in thousands of Canadian dollars) | ||||||||
Share Capital | Accumulated | Retained | Total | |||||
Balance as at | $ | 14,304 | $ | (3,226) | $ | 158,019 | $ | 169,097 |
Total comprehensive income | - | 522 | 14,308 | 14,830 | ||||
Dividends | - | - | (12,526) | (12,526) | ||||
Balance as at | $ | 14,304 | $ | (2,704) | $ | 159,801 | $ | 171,401 |
Balance as at | $ | 14,304 | $ | 486 | $ | 169,904 | $ | 184,694 |
Total comprehensive income | - | 428 | 13,398 | 13,826 | ||||
Dividends | - | - | (25,053) | (25,053) | ||||
Balance as at | $ | 14,304 | $ | 914 | $ | 158,249 | $ | 173,467 |
The accompanying notes are an integral part of these interim condensed consolidated financial statements. |
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW | |||||||||
(Unaudited) | |||||||||
(in thousands of Canadian dollars) | |||||||||
For the Three Months Ended | For the Six Months Ended | ||||||||
Notes | 2019 | 2018 | 2019 | 2018 | |||||
Operating activities | |||||||||
Net earnings | $ | 7,848 | $ | 6,896 | $ | 14,308 | $ | 13,398 | |
Adjustments for: | |||||||||
Amortization and depreciation | 11 | 2,650 | 2,154 | 5,285 | 4,293 | ||||
Net financial income | 10 | (171) | (301) | (341) | (540) | ||||
Loss on disposal of property and equipment | - | 14 | - | - | |||||
Income tax expense | 2,870 | 2,519 | 5,265 | 4,948 | |||||
Provision for employee benefits | (166) | (356) | (298) | (1,471) | |||||
13,031 | 10,926 | 24,219 | 20,628 | ||||||
Net change in non-cash working capital balances | 12 | 4,238 | 7,784 | 1,478 | 5,589 | ||||
Interest received | 277 | 407 | 622 | 770 | |||||
Income taxes paid | (2,340) | (3,035) | (5,429) | (5,585) | |||||
Net cash from operating activities | 15,206 | 16,082 | 20,890 | 21,402 | |||||
Investing activities | |||||||||
Additions to property and equipment | (890) | (1,028) | (1,116) | (1,138) | |||||
Proceeds from disposition of property and equipment | 55 | - | 55 | - | |||||
Deposits in cash management pools | (7,758) | (8,790) | (6,522) | (7,737) | |||||
Net cash used in investing activities | (8,593) | (9,818) | (7,583) | (8,875) | |||||
Financing activity | |||||||||
Payment of lease liabilities | (350) | - | (781) | - | |||||
Dividends paid | (6,263) | (6,264) | (12,526) | (12,527) | |||||
Net cash used in financing activity | (6,613) | (6,264) | (13,307) | (12,527) | |||||
Net increase in cash | - | - | - | - | |||||
Cash, beginning of year | - | - | - | - | |||||
Cash, end of year | $ | - | $ | - | $ | - | $ | - |
The accompanying notes are an integral part of these interim condensed consolidated financial statements. |
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands of Canadian dollars, except per share amounts)
1. GENERAL INFORMATION
Corby is controlled by
Corby is a public company incorporated and domiciled in
2. SIGNIFICANT ACCOUNTING POLICIES
(i) Basis of Preparation
Statement of compliance
These interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting" ("IAS 34"), as issued by the
These interim condensed consolidated financial statements were approved by the Company's Board of Directors on
Functional and presentation currency
The Company's interim condensed consolidated financial statements are presented in Canadian dollars, which is the Company's, and its subsidiaries, functional and presentation currency.
Foreign currency translation
Transactions denominated in foreign currencies are translated into the functional currency using the exchange rate applying at the transaction date. Non-monetary assets and liabilities denominated in foreign currencies are recognized at the historical exchange rate applicable at the transaction date. Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate applying at the balance sheet date. Foreign currency differences related to operating activities are recognized in earnings from operations for the period; foreign currency differences related to financing activities are recognized within net financial income.
Basis of Measurement
These interim condensed consolidated financial statements are prepared in accordance with the historical cost model, except for certain categories of assets and liabilities, which are measured in accordance with other methods provided for by IFRS as described in the most recent annual consolidated financial statements, except for recently adopted policies and methods described below. Historical cost is generally based on the fair value of the consideration given in exchange for assets.
Use of Estimates and Judgements
The preparation of these interim condensed consolidated financial statements in conformity with IFRS requires management to make certain judgements, estimates and assumptions that affect the application of accounting policies, the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the interim condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period.
Judgement is commonly used in determining whether a balance or transaction should be recognized in the interim condensed consolidated financial statements, and estimates and assumptions are more commonly used in determining the measurement of recognized transactions and balances. However, judgement and estimates are often interrelated.
Estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Estimates are made on the assumption the Company will continue as a going concern and are based on information available at the time of preparation. Estimates may be revised where the circumstance on which they were based changes or where new information becomes available. Future outcomes can differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
Management's most critical estimates in determining the value of assets and liabilities and the most critical judgements in applying accounting policies that have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities within the next year have been described in Note 2 of the Company's most recent annual consolidated financial statements, except for the impact of the adoption of the new and revised standards and interpretations described below.
Seasonality
The interim condensed consolidated financial statements should not be taken as indicative of the performance to be expected for the full fiscal year due to the seasonal nature of the spirits business. Corby's operations are typically subject to seasonal fluctuations in that the retail holiday season generally results in an increase in consumer purchases over the course of October, November and December. Further, the summer months traditionally result in higher consumer purchases of spirits as compared to the winter and spring months. As a result, the Company's first and second quarter of each fiscal year tend to reflect the impact of seasonal fluctuations in that more shipments are typically made during those quarters.
(ii) Adoption of New and Revised Standards and Interpretations
Recent accounting pronouncements
A number of new standards, amendments to standards and interpretations are effective for the financial period ended
(a) Leases
In
The guidance permits two methods of adoption: retrospectively to each prior reporting period restated (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (modified retrospective method). The Company adopted this standard using the modified retrospective method. The Company has elected to set the right-of-use asset equal to the lease liability on the date of adoption. The Company has also elected to not restate prior year comparative information under the modified retrospective approach. Comparative information continues to be reported under IAS 17 and related interpretations.
In applying IFRS 16 for the first time, the Company used the following practical expedients as permitted by the standard:
- Elected to not apply the requirements of IFRS 16 to short-term leases and leases for which the underlying asset is of low value;
- Elected to set the right-of-use asset equal to the lease liability on the date of adoption;
- Excluded initial direct costs for the measurement of the right-of-use asset at the date of initial application;
Upon adoption of the standard, the Company recognized a right-of-use asset and a lease liability for the present value of the remaining future lease payments, discounted using the incremental borrowing rate at the date of initial application. The adoption of this standard resulted in the recognition of right-of-use assets and lease liabilities of
The weighted average lessee's incremental borrowing rate applied to the lease liabilities on the date of initial application was 3%. The Company will recognize the lease payments associated with these leases on a straight-line basis, over the lease term.
Under IFRS 16, depreciation expense on the right-of-use asset and interest expense on the lease liability replaced operating lease expenses.
The reconciliation between lease liabilities recognized on
As at | ||
Operating lease commitment as at | ||
in the Company's notes to the consolidated financial statements | $ | 6,671 |
Discounted using the incremental borrowing rate at | 6,349 | |
Short-term and low value leases excluded | (16) | |
Lease liabilities recognized as at | $ | 6,333 |
Lease liabilities due within one year | $ | 1,536 |
Lease liabilities | 4,797 | |
Total lease liabilities | $ | 6,333 |
Right-of-use assets are measured at the initial amount of the lease liabilities plus any indirect costs, lease payments made at or before the commencement date net of lease incentives received, and decommissioning costs. Subsequent to initial measurement, the right-of-use assets will be measured at cost and depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.
Right-of-use assets are included as follows in the interim condensed consolidated balance sheet as at
As at | ||||||
Building | Other | Total | ||||
Cost | ||||||
Balance, beginning of the period | $ | 4,473 | $ | 1,860 | $ | 6,333 |
Lease additions | - | - | - | |||
Balance, end of the period | $ | 4,473 | $ | 1,860 | $ | 6,333 |
Accumulated Depreciation | ||||||
Balance, beginning of the period | $ | - | $ | - | $ | - |
Depreciation | 449 | 351 | 800 | |||
Balance, end of the period | $ | 449 | $ | 351 | $ | 800 |
Carrying amount as at | $ | 4,024 | $ | 1,509 | $ | 5,533 |
Transactions involving lease liabilities as at and for the period ended
As at | ||
Balance, beginning of the period | $ | 6,333 |
Lease additions | - | |
Lease payments | (863) | |
Interest expense on lease liabilities | 82 | |
Less: Accrued Interest on lease liabilities | (9) | |
Balance, end of the period | $ | 5,543 |
Lease liabilities due within one year | $ | 1,461 |
Lease liabilities | 4,082 | |
Total lease liabilities | $ | 5,543 |
The expenses related to leases with variable consideration, short term leases and low value leases amounted to
(b) Uncertainty over Income Tax Treatments
In
(c) Financial Instruments
The IASB issued amendments to IFRS 9 "Financial Instruments" ("IFRS 9"). The amendment addresses concerns about how IFRS 9 classified prepayable financial assets and clarifies an aspect of accounting for financial liabilities following a modification. The amendments are to be applied retrospectively for fiscal years beginning on or after
(d) Employee Benefits
The IASB published amendments to IAS 19 "Employee Benefits" ("IAS 19"). The amendment harmonizes accounting practices to provide more relevant information for decision-making. The amendments are to be applied retrospectively to plan amendments, curtailments or settlements occurring on or after
(e) Income Taxes
The IASB published amendments to IAS 12 "Income Taxes" ("IAS 12"). The amendment clarifies that the income tax consequences of dividends, where transactions or events that generate distributable profits are recognized, apply to all income tax consequences of dividends. The amendments are to be applied retrospectively for fiscal years beginning on or after
3. FAIR VALUE
The Company uses a fair value hierarchy in order to classify the fair value measurements and disclosures related to the Company's financial assets and financial liabilities. The fair value hierarchy has the following levels:
- Level 1 – Quoted market prices in active markets for identical assets or liabilities;
- Level 2 – Inputs other than quoted market prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); and
- Level 3 – Unobservable inputs such as inputs for the asset or liability that are not based on observable market data.
The level in the fair value hierarchy within which the fair value measurement is categorized in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety.
The Company has no financial instruments carried at fair value on its balance sheet. For financial assets and liabilities that are valued at other than fair value on its balance sheets (i.e., deposits in cash management pools, accounts receivable, accounts payable and accrued liabilities, and dividends payable), fair value approximates their carrying value at each balance sheet date due to their short-term maturities. Fair value is determined using Level 2 inputs. Level 3 inputs are used to determine the fair value of pension plan assets contained within the infrastructure and real estate funds.
4. ACCOUNTS RECEIVABLE
2019 | 2018 | 2019 | ||||
Trade receivables | $ | 16,617 | $ | 16,041 | $ | 18,359 |
Due from related parties | 13,134 | 13,101 | 10,993 | |||
Other | 1,716 | 1,596 | 2,908 | |||
$ | 31,467 | $ | 30,738 | $ | 32,260 |
5. INVENTORIES
2019 | 2018 | 2019 | ||||||
Raw materials | $ 3,554 | $ 3,434 | $ 3,223 | |||||
Work-in-progress | 48,332 | 46,921 | 49,180 | |||||
Finished goods | 8,726 | 9,826 | 9,509 | |||||
$ 60,612 | $ 60,181 | $ 61,912 |
The cost of inventory recognized as an expense and included in cost of goods sold during the three and six month periods ended
6.
2019 | 2018 | 2019 | ||||||
$ 8,757 | $ 8,757 | $ 8,757 | ||||||
Impact of acquisitions during the period | - | - | - | |||||
$ 8,757 | $ 8,757 | $ 8,757 |
There have been no impairment losses recognized with respect to goodwill during the three and six month periods ended
7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
2019 | 2018 | 2019 | ||||||
Trade payables and accruals | $ 22,545 | $ 23,881 | $ 23,199 | |||||
Due from related parties | 8,909 | 9,919 | 7,214 | |||||
Other | 989 | 948 | 2,585 | |||||
$ 32,443 | $ 34,748 | $ 32,998 |
8. REVENUE
The Company's revenue consists of the following streams:
Three months ended | Six months ended | |||||||
2019 | 2018 | 2019 | 2018 | |||||
Case goods sales | $ 33,839 | $ 33,546 | $ 64,933 | $ 63,542 | ||||
Commissions (net of amortization of representation rights) | 8,352 | 7,522 | 14,767 | 14,522 | ||||
Other services | 1,227 | 797 | 2,355 | 1,684 | ||||
$ 43,418 | $ 41,865 | $ 82,055 | $ 79,748 |
Commissions for the three and six month periods are shown net of amortization of long-term representation rights of
9. OTHER INCOME
The Company's other income (expense) consists of the following amounts:
Three months ended | Six months ended | |||||||
2019 | 2018 | 2019 | 2018 | |||||
Foreign exchange gain (loss) | $ 6 | $ 59 | $ (31) | $ 34 | ||||
Loss on disposal of property and equipment | - | (14) | - | - | ||||
Other income | 51 | 36 | 43 | 24 | ||||
$ 57 | $ 81 | $ 12 | $ 58 |
10. NET FINANCIAL INCOME AND EXPENSE
The Company's financial income (expense) consists of the following amounts:
Three months ended | Six months ended | |||||||
2019 | 2018 | 2019 | 2018 | |||||
Interest income | $ 355 | $ 406 | $ 711 | $ 771 | ||||
Interest expense on lease liabilities | (40) | - | (82) | - | ||||
Net financial impact of pensions | (144) | (105) | (288) | (231) | ||||
$ 171 | $ 301 | $ 341 | $ 540 |
11. EXPENSES BY NATURE
Earnings from operations include depreciation and amortization, as well as personnel expenses, as follows:
Three months ended | Six months ended | |||||||
2019 | 2018 | 2019 | 2018 | |||||
Depreciation of property and equipment | $ 805 | $ 709 | $ 1,595 | $ 1,403 | ||||
Depreciation of right-of-use assets | 400 | - | 800 | - | ||||
Amortization of intangible assets | 1,445 | 1,445 | 2,890 | 2,890 | ||||
Salary and payroll costs | 6,235 | 6,364 | 12,837 | 12,637 | ||||
Expenses related to pensions and benefits | 330 | 378 | 660 | 707 | ||||
$ 9,215 | $ 8,896 | $ 18,782 | $ 17,637 |
12. NET CHANGE IN NON-CASH WORKING CAPITAL BALANCES
Three months ended | Six months ended | |||||||
2019 | 2018 | 2019 | 2018 | |||||
Accounts receivable | $ (1,553) | $ (205) | $ 793 | $ 2,731 | ||||
Inventories | 3,139 | 1,571 | 1,300 | (392) | ||||
Prepaid expenses | 197 | (204) | (60) | (256) | ||||
Accounts payable and accrued liabilities | 2,455 | 6,622 | (555) | 3,506 | ||||
$ 4,238 | $ 7,784 | $ 1,478 | $ 5,589 |
13. DIVIDENDS
On
14. RELATED PARTY TRANSACTIONS
Transactions with parent, ultimate parent, and affiliates
The majority of Corby's issued and outstanding voting Class A shares are owned by HWSL. HWSL is a wholly-owned subsidiary of PR. Therefore, HWSL is Corby's parent and PR is Corby's ultimate parent. Affiliated companies are subsidiaries, which are controlled by Corby's parent and/or ultimate parent.
The companies operate under the terms of agreements that became effective on
In addition to the aforementioned agreements, Corby signed an agreement on
On
On
Transactions between Corby and its parent, ultimate parent and affiliates during the period are as follows:
Three months ended | Six months ended | |||||||
2019 | 2018 | 2019 | 2018 | |||||
Sales to related parties | ||||||||
Commissions - parent, ultimate parent and affiliated companies | $ 9,341 | $ 8,410 | $ 16,729 | $ 16,285 | ||||
Products for resale at an export level - affiliated companies | 1,498 | 1,381 | 3,120 | 2,445 | ||||
$ 10,839 | $ 9,791 | $ 19,849 | $ 18,730 | |||||
Cost of goods sold, purchased from related parties | ||||||||
Distilling, blending, and production services - parent | $ 4,634 | $ 5,899 | $ 10,375 | $ 11,935 | ||||
Administrative services purchased from related parties | ||||||||
Marketing, selling and administration services - parent | $ 707 | $ 523 | $ 1,415 | $ 1,046 |
Balances outstanding with related parties are due within 60 days, are to be settled in cash and are unsecured.
Deposits in cash management pools
Corby participates in a cash pooling arrangement under the Mirror Netting Service Agreement together with PR's other Canadian affiliates, the terms of which are administered by
As a result of Corby's participation in this agreement, Corby's credit risk associated with its deposits in cash management pools is contingent upon PR's credit rating. PR's credit rating as at
15. SEGMENT INFORMATION
Corby has two reportable segments: Case Goods and Commissions. Corby's Case Goods segment derives its revenue from the production and distribution of its owned beverage alcohol brands. Corby's portfolio of owned-brands includes some of the most renowned and respected brands in
Corby's Commissions segment earns commission income from the representation of non-owned beverage alcohol brands in
The Commissions segment's financial results are fully reported as "Commissions" in Note 8 of the interim condensed consolidated financial statements. Therefore, a table detailing operational results by segment has not been provided as no additional meaningful information would result.
SOURCE
© Canada Newswire, source