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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from   to   

Commission File Number: 001-38496

 

Canopy Growth Corporation

(Exact name of registrant as specified in its charter)

 

 

Canada

N/A

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

1 Hershey Drive

Smiths Falls, Ontario

K7A 0A8

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (855) 558-9333

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common shares, no par value

 

CGC

 

NASDAQ Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☒    No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  ☒    No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes     No  

As of August 5, 2021, there were 393,179,437 common shares of the registrant issued and outstanding.

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements

1

 

Condensed Interim Consolidated Balance Sheets

1

 

Condensed Interim Consolidated Statements of Operations and Comprehensive (Loss) Income

2

 

Condensed Interim Consolidated Statements of Shareholders’ Equity

3

 

Condensed Interim Consolidated Statements of Cash Flows

5

 

Notes to Condensed Interim Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

27

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

45

Item 4.

Controls and Procedures

46

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

46

Item 1A.

Risk Factors

46

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

46

Item 3.

Defaults Upon Senior Securities

47

Item 4.

Mine Safety Disclosures

47

Item 5.

Other Information

47

Item 6.

Exhibits

47

Signatures

49

 

Unless otherwise noted or the context indicates otherwise, references in this Quarterly Report on Form 10-Q (“Quarterly Report”) to the “Corporation”, “Canopy Growth”, “we”, “us” and “our” refer to Canopy Growth Corporation, its direct and indirect wholly-owned subsidiaries and, if applicable, its joint ventures and investments accounted for by the equity method; the term “cannabis” means the plant of any species or subspecies of genus Cannabis and any part of that plant, including all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers; and the term “U.S. hemp” has the meaning given to the term “hemp” in the U.S. Agricultural Improvement Act of 2018, including hemp-derived cannabidiol (“CBD”).

 

This Quarterly Report contains references to our trademarks and trade names and to trademarks and trade names belonging to other entities. Solely for convenience, trademarks and trade names referred to in this Quarterly Report may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend our use or display of other companies’ trademarks or trade names to imply a relationship with, or endorsement or sponsorship of us or our business by, any other companies.

 

All currency amounts in this Quarterly Report are stated in Canadian dollars, which is our reporting currency, unless otherwise noted. All references to “dollars” or “CDN$” are to Canadian dollars and all references to “US$” are to U.S. dollars.

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

CANOPY GROWTH CORPORATION

CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS

(in thousands of Canadian dollars, except number of shares and per share data, unaudited)

 

 

June 30,

2021

 

 

March 31,

2021

 

ASSETS

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

559,840

 

 

$

1,154,653

 

Short-term investments

 

 

1,491,286

 

 

 

1,144,563

 

Restricted short-term investments

 

 

14,336

 

 

 

11,332

 

Amounts receivable, net

 

 

106,455

 

 

 

92,435

 

Inventory

 

 

411,675

 

 

 

367,979

 

Prepaid expenses and other assets

 

 

91,584

 

 

 

67,232

 

Total current assets

 

 

2,675,176

 

 

 

2,838,194

 

Other financial assets

 

 

791,658

 

 

 

708,167

 

Property, plant and equipment

 

 

1,142,614

 

 

 

1,074,537

 

Intangible assets

 

 

347,063

 

 

 

308,167

 

Goodwill

 

 

2,000,458

 

 

 

1,889,354

 

Other assets

 

 

9,514

 

 

 

5,061

 

Total assets

 

$

6,966,483

 

 

$

6,823,480

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

91,339

 

 

$

67,262

 

Other accrued expenses and liabilities

 

 

79,938

 

 

 

100,813

 

Current portion of long-term debt

 

 

15,705

 

 

 

9,827

 

Other liabilities

 

 

69,148

 

 

 

106,428

 

Total current liabilities

 

 

256,130

 

 

 

284,330

 

Long-term debt

 

 

1,545,073

 

 

 

1,573,136

 

Deferred income tax liabilities

 

 

26,570

 

 

 

21,379

 

Liability arising from Acreage Arrangement

 

 

450,000

 

 

 

600,000

 

Warrant derivative liability

 

 

299,318

 

 

 

615,575

 

Other liabilities

 

 

109,038

 

 

 

107,240

 

Total liabilities

 

 

2,686,129

 

 

 

3,201,660

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Redeemable noncontrolling interest

 

 

135,300

 

 

 

135,300

 

Canopy Growth Corporation shareholders' equity:

 

 

 

 

 

 

 

 

Common shares - $nil par value; Authorized - unlimited number of shares;

   Issued - 393,119,100 shares and 382,875,179 shares, respectively

 

 

7,463,557

 

 

 

7,168,557

 

Additional paid-in capital

 

 

2,413,779

 

 

 

2,415,650

 

Accumulated other comprehensive loss

 

 

(61,518

)

 

 

(34,240

)

Deficit

 

 

(5,675,738

)

 

 

(6,068,156

)

Total Canopy Growth Corporation shareholders' equity

 

 

4,140,080

 

 

 

3,481,811

 

Noncontrolling interests

 

 

4,974

 

 

 

4,709

 

Total shareholders' equity

 

 

4,145,054

 

 

 

3,486,520

 

Total liabilities and shareholders' equity

 

$

6,966,483

 

 

$

6,823,480

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

1

 


CANOPY GROWTH CORPORATION

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF

OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

(in thousands of Canadian dollars, except number of shares and per share data, unaudited)

 

 

 

Three months ended June 30,

 

 

 

2021

 

 

2020

 

Revenue

 

$

155,423

 

 

$

119,088

 

Excise taxes

 

 

19,214

 

 

 

8,672

 

Net revenue

 

 

136,209

 

 

 

110,416

 

Cost of goods sold

 

 

108,971

 

 

 

103,921

 

Gross margin

 

 

27,238

 

 

 

6,495

 

Operating expenses

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

112,574

 

 

 

135,392

 

Share-based compensation

 

 

13,126

 

 

 

30,685

 

Asset impairment and restructuring costs

 

 

89,249

 

 

 

12,794

 

Total operating expenses

 

 

214,949

 

 

 

178,871

 

Operating loss

 

 

(187,711

)

 

 

(172,376

)

Loss from equity method investments

 

 

(100

)

 

 

(7,189

)

Other income (expense), net

 

 

580,666

 

 

 

48,205

 

Income (loss) before income taxes

 

 

392,855

 

 

 

(131,360

)

Income tax (expense) recovery

 

 

(2,900

)

 

 

3,038

 

Net income (loss)

 

 

389,955

 

 

 

(128,322

)

Net loss attributable to noncontrolling interests and

   redeemable noncontrolling interest

 

 

(2,463

)

 

 

(19,821

)

Net income (loss) attributable to Canopy Growth Corporation

 

$

392,418

 

 

$

(108,501

)

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per share

 

$

1.02

 

 

$

(0.30

)

Basic weighted average common shares outstanding

 

 

384,055,133

 

 

 

363,763,347

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per share

 

$

0.84

 

 

$

(0.30

)

Diluted weighted average common shares outstanding

 

 

404,546,243

 

 

 

363,763,347

 

 

 

 

 

 

 

 

 

 

Comprehensive loss:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

389,955

 

 

$

(128,322

)

Other comprehensive income (loss), net of income tax effect

 

 

 

 

 

 

 

 

Fair value changes of own credit risk of financial liabilities

 

 

660

 

 

 

(15,360

)

Foreign currency translation

 

 

(27,938

)

 

 

(53,124

)

Total other comprehensive income (loss), net of income tax effect

 

 

(27,278

)

 

 

(68,484

)

Comprehensive income (loss)

 

 

362,677

 

 

 

(196,806

)

Comprehensive income (loss) attributable to noncontrolling interests

   and redeemable noncontrolling interest

 

 

(2,463

)

 

 

(19,821

)

Comprehensive income (loss) attributable to Canopy Growth Corporation

 

$

365,140

 

 

$

(176,985

)

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

 

 

2

 


 

CANOPY GROWTH CORPORATION

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands of Canadian dollars, unaudited)

 

 

 

 

 

 

 

Additional paid-in capital

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares

 

 

Share-based reserve

 

 

Warrants

 

 

Ownership changes

 

 

Redeemable noncontrolling interest

 

 

other comprehensive income (loss)

 

 

Deficit

 

 

Noncontrolling interests

 

 

Total

 

Balance at March 31, 2021

 

$

7,168,557

 

 

$

480,786

 

 

$

2,568,438

 

 

$

(512,340

)

 

$

(121,234

)

 

$

(34,240

)

 

$

(6,068,156

)

 

$

4,709

 

 

$

3,486,520

 

Other issuances of common shares

   and warrants

 

 

285,915

 

 

 

(25,692

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

260,223

 

Replacement equity instruments

   from the acquisition of Supreme

   Cannabis

 

 

-

 

 

 

5,566

 

 

 

13,350

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

18,916

 

Exercise of Omnibus Plan stock

   options

 

 

5,522

 

 

 

(1,930

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,592

 

Share-based compensation

 

 

-

 

 

 

12,861

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

12,861

 

Issuance and vesting of restricted

   share units

 

 

3,563

 

 

 

(3,563

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Changes in redeemable

   noncontrolling interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,463

)

 

 

-

 

 

 

-

 

 

 

2,463

 

 

 

-

 

Ownership changes relating to

   noncontrolling interests

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

265

 

 

 

265

 

Comprehensive (loss) income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(27,278

)

 

 

392,418

 

 

 

(2,463

)

 

 

362,677

 

Balance at June 30, 2021

 

$

7,463,557

 

 

$

468,028

 

 

$

2,581,788

 

 

$

(512,340

)

 

$

(123,697

)

 

$

(61,518

)

 

$

(5,675,738

)

 

$

4,974

 

 

$

4,145,054

 

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

 

3

 


 

CANOPY GROWTH CORPORATION

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands of Canadian dollars, unaudited)

 

 

 

 

 

 

 

Additional paid-in capital

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares

 

 

Share-based reserve

 

 

Warrants

 

 

Ownership changes

 

 

Redeemable noncontrolling interest

 

 

other comprehensive income (loss)

 

 

Deficit

 

 

Noncontrolling interests

 

 

Total

 

Balance at March 31, 2020

 

$

6,373,544

 

 

$

517,741

 

 

$

2,638,951

 

 

$

(501,403

)

 

$

(40,134

)

 

$

220,899

 

 

$

(4,323,236

)

 

$

221,758

 

 

$

5,108,120

 

Other issuances of common shares

   and warrants

 

 

26,214

 

 

 

(26,798

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(584

)

Exercise of warrants

 

 

315,256

 

 

 

-

 

 

 

(70,266

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

244,990

 

Exercise of Omnibus Plan stock

   options

 

 

9,231

 

 

 

(4,509

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,722

 

Share-based compensation

 

 

-

 

 

 

29,140

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

29,140

 

Changes in redeemable

   noncontrolling interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(22,513

)

 

 

-

 

 

 

-

 

 

 

10,663

 

 

 

(11,850

)

Ownership changes relating to

   noncontrolling interests

 

 

-

 

 

 

-

 

 

 

-

 

 

 

162

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,647

 

 

 

2,809

 

Comprehensive income (loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(68,484

)

 

 

(108,501

)

 

 

(19,821

)

 

 

(196,806

)

Balance at June 30, 2020

 

$

6,724,245

 

 

$

515,574

 

 

$

2,568,685

 

 

$

(501,241

)

 

$

(62,647

)

 

$

152,415

 

 

$

(4,431,737

)

 

$

215,247

 

 

$

5,180,541

 

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

 

 

4

 


 

CANOPY GROWTH CORPORATION

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands of Canadian dollars, unaudited)

 

 

 

Three months ended June 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

389,955

 

 

$

(128,322

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation of property, plant and equipment

 

 

17,116

 

 

 

17,415

 

Amortization of intangible assets

 

 

8,016

 

 

 

16,632

 

Share of loss on equity method investments

 

 

100

 

 

 

7,189

 

Share-based compensation

 

 

13,126

 

 

 

30,685

 

Asset impairment and restructuring costs

 

 

89,249

 

 

 

12,794

 

Income tax expense (recovery)

 

 

2,900

 

 

 

(3,038

)

Non-cash foreign currency

 

 

(17,846

)

 

 

8,688

 

Interest paid

 

 

(23,666

)

 

 

(57

)

Change in operating assets and liabilities, net of effects from

   purchases of businesses:

 

 

 

 

 

 

 

 

Amounts receivable

 

 

(4,946

)

 

 

17,577

 

Prepaid expenses and other assets

 

 

(8,804

)

 

 

(16,059

)

Inventory

 

 

44,228

 

 

 

(10,772

)

Accounts payable and accrued liabilities

 

 

(16,960

)

 

 

3,755

 

Other, including non-cash fair value adjustments

 

 

(658,248

)

 

 

(75,033

)

Net cash used in operating activities

 

 

(165,780

)

 

 

(118,546

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of and deposits on property, plant and equipment

 

 

(20,279

)

 

 

(61,547

)

Purchases of intangible assets

 

 

(833

)

 

 

(3,088

)

Proceeds on sale of intangible assets

 

 

-

 

 

 

18,337

 

Purchases of short-term investments

 

 

(346,603

)

 

 

(382,486

)

Net cash proceeds on sale of subsidiaries

 

 

10,324

 

 

 

-

 

Sale of (investments in) other financial assets

 

 

56

 

 

 

(2,564

)

Recovery of amounts related to construction financing

 

 

-

 

 

 

10,000

 

Payment of acquisition related liabilities

 

 

(8,367

)

 

 

(4,511

)

Net cash outflow on acquisition of noncontrolling interests

 

 

-

 

 

 

(125

)

Net cash outflow on acquisition of subsidiaries

 

 

(8,857

)

 

 

-

 

Net cash used in investing activities

 

 

(374,559

)

 

 

(425,984

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Payment of share issue costs

 

 

(444

)

 

 

(595

)

Proceeds from issuance of shares by RIV Capital

 

 

-

 

 

 

92

 

Proceeds from exercise of stock options

 

 

3,592

 

 

 

4,722

 

Proceeds from exercise of warrants

 

 

-

 

 

 

244,990

 

Issuance of long-term debt

 

 

-

 

 

 

4,439

 

Repayment of long-term debt

 

 

(48,116

)

 

 

(6,345

)

Net cash (used in) provided by financing activities

 

 

(44,968

)

 

 

247,303

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(9,506

)

 

 

(30,079

)

Net decrease in cash and cash equivalents

 

 

(594,813

)

 

 

(327,306

)

Cash and cash equivalents, beginning of period

 

 

1,154,653

 

 

 

1,303,176

 

Cash and cash equivalents, end of period

 

$

559,840

 

 

$

975,870

 

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.


5

 


 

CANOPY GROWTH CORPORATION

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands of Canadian dollars, unaudited)

 

 

Three months ended June 30,

 

 

2021

 

 

 

 

2020

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

 

 

Cash received during the period:

 

 

 

 

 

 

 

 

 

Income taxes

$

33

 

 

 

 

$

2,000

 

Cash paid during the period:

 

 

 

 

 

 

 

 

 

Income taxes

$

330

 

 

 

 

$

408

 

Noncash investing and financing activities

 

 

 

 

 

 

 

 

 

Additions to property, plant and equipment

$

4,776

 

 

 

 

$

17,337

 

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

 

6

 


 

 

CANOPY GROWTH CORPORATION

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of Canadian dollars, unaudited)

1.  DESCRIPTION OF BUSINESS

Canopy Growth Corporation is a publicly traded corporation, incorporated in Canada, with its head office located at 1 Hershey Drive, Smiths Falls, Ontario. References herein to “Canopy Growth” or “the Company” refer to Canopy Growth Corporation and its subsidiaries.

The principal activities of the Company are the production, distribution and sale of a diverse range of cannabis and cannabinoid-based products for both adult recreational and medical purposes under a portfolio of distinct brands in Canada pursuant to the Cannabis Act, which came into effect on October 17, 2018 and regulates both the medical and recreational cannabis markets in Canada. The Company has also expanded to jurisdictions outside of Canada where federally lawful, permissible and regulated for cannabis and/or hemp, and the Company, through its subsidiaries, operates in the United States, Germany, and certain other global markets. Additionally, the Company produces, distributes and sells a range of other consumer products globally, including vaporizers; beauty, skincare, wellness and sleep products; and sports nutrition beverages.

2.  BASIS OF PRESENTATION

These condensed interim consolidated financial statements have been presented in Canadian dollars and are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Canopy Growth has determined that the Canadian dollar is the most relevant and appropriate reporting currency as, despite continuing shifts in the relative size of our operations across multiple geographies, the majority of our operations are conducted in Canadian dollars and our financial results are prepared and reviewed internally by management in Canadian dollars. Our condensed interim consolidated financial statements, and the financial information contained herein, are reported in thousands of Canadian dollars, except share and per share amounts or as otherwise stated.

Certain information and footnote disclosures normally included in the audited annual consolidated financial statements prepared in accordance with U.S. GAAP have been omitted or condensed. These condensed interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2021 (the “Annual Report”) and have been prepared on a basis consistent with the accounting policies as described in the Annual Report.

These condensed interim consolidated financial statements are unaudited and reflect adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary to provide a fair statement of results for the interim periods in accordance with U.S. GAAP.

The results reported in these condensed interim consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for an entire fiscal year. The policies set out below are consistently applied to all periods presented, unless otherwise noted.

Principles of consolidation

The accompanying condensed interim consolidated financial statements include the accounts of the Company and all entities in which the Company either has a controlling voting interest or is the primary beneficiary of a variable interest entity. All intercompany accounts and transactions have been eliminated on consolidation. Information on the Company’s subsidiaries with noncontrolling interests is included in Note 20.

Use of estimates

The preparation of these condensed interim consolidated financial statements and accompanying notes in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ from those estimates.

New accounting policies

Recently Adopted Accounting Pronouncements

Income Taxes

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which among other things, eliminates certain exceptions in the current rules regarding the approach for intraperiod tax allocations and the methodology for calculating income taxes in an interim

7

 


 

period, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The Company adopted ASU 2019-12 as of April 1, 2021. There was no impact of adopting ASU 2019-12 on the condensed interim consolidated financial statements.

Investments-Equity Securities

In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). ASU 2020-01 clarifies the interaction of accounting for the transition into and out of the equity method. The new standard also clarifies the accounting for measuring certain purchased options and forward contracts to acquire investments. The Company adopted ASU 2020-01 as of April 1, 2021. There was no impact of adopting ASU 2020-01 on the condensed interim consolidated financial statements.

Accounting Guidance not yet adopted

Convertible Instruments and Contracts in an Entity’s Own Equity

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. In addition, ASU 2020-06 enhances information transparency by making targeted improvements to the disclosures for convertible instruments and earnings-per-share (EPS) guidance and amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. ASU 2020-06 is effective for interim and annual periods beginning after December 15, 2021, with early adoption permitted after December 15, 2020. The Company is evaluating the impact on the consolidated financial statements and expects to implement the provisions of ASU 2020-06 effective April 1, 2022.

3.  ASSET IMPAIRMENT AND RESTRUCTURING COSTS

In the three months ended June 30, 2021, the Company recorded charges related to operational changes resulting from the continuing strategic review of its business as a result of recent acquisition activities, and the partial outcome of certain integration initiatives. Additionally, the Company recognized incremental costs associated with the closure of certain of its Canadian production facilities in December 2020. Charges totaling $89,249 were recognized in the three months ended June 30, 2021, primarily representing the difference between the net book value of the associated long-lived assets and their estimated fair value.

4.  CASH AND CASH EQUIVALENTS

The components of cash and cash equivalents are as follows:

 

 

 

June 30,

 

 

March 31,

 

 

 

2021

 

 

2021

 

Cash

 

$

367,284

 

 

$

436,588

 

Cash equivalents

 

 

192,556

 

 

 

718,065

 

 

 

$

559,840

 

 

$

1,154,653

 

 

5.  SHORT-TERM INVESTMENTS

The components of short-term investments are as follows:

 

 

 

June 30,

 

 

March 31,

 

 

 

2021

 

 

2021

 

Term deposits

 

$

442,916

 

 

$

463,824

 

Government securities

 

 

92,360

 

 

 

136,620

 

Asset-backed securities

 

 

252,848

 

 

 

16,342

 

Commercial paper and other

 

 

703,162

 

 

 

527,777

 

 

 

$

1,491,286

 

 

$

1,144,563

 

 

The amortized cost of short-term investments at June 30, 2021 is $1,492,227 (March 31, 2021 – $1,145,364).

8

 


 

6.  AMOUNTS RECEIVABLE, NET

The components of amounts receivable, net are as follows:

 

 

 

June 30,

 

 

March 31,

 

 

 

2021

 

 

2021

 

Accounts receivable, net

 

$

87,582

 

 

$

67,106

 

Indirect taxes receivable

 

 

8,674

 

 

 

8,281

 

Interest receivable

 

 

6,052

 

 

 

5,140

 

Other receivables

 

 

4,147

 

 

 

11,908

 

 

 

$

106,455

 

 

$

92,435

 

 

Included in the accounts receivable, net balance at June 30, 2021 is an allowance for doubtful accounts of $1,582 (March 31, 2021 – $1,411).

7.  INVENTORY

The components of inventory are as follows:

 

 

 

June 30,

 

 

March 31,

 

 

 

2021

 

 

2021

 

Raw materials, packaging supplies and consumables

 

$

66,006

 

 

$

55,554

 

Work in progress

 

 

219,816

 

 

 

223,652

 

Finished goods

 

 

125,853

 

 

 

88,773

 

 

 

$

411,675

 

 

$

367,979

 

 

In the three months ended June 30, 2021, the Company recorded write-downs related to inventory in cost of goods sold of $6,014 (three months ended June 30, 2020 $19,386).

8.  PREPAID EXPENSES AND OTHER ASSETS

The components of prepaid expenses and other assets are as follows:

 

 

 

June 30,

 

 

March 31,

 

 

 

2021

 

 

2021

 

Prepaid expenses

 

$

44,412

 

 

$

28,349

 

Deposits

 

 

21,008

 

 

 

18,316

 

Prepaid inventory

 

 

1,157

 

 

 

1,496

 

Other assets

 

 

25,007

 

 

 

19,071

 

 

 

$

91,584

 

 

$

67,232

 

 

 

9

 


 

 

9.  OTHER FINANCIAL ASSETS

The following table outlines changes in other financial assets. Additional details on how the fair value of significant investments is calculated are included in Note 21.

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign