TORONTO, Feb. 5, 2014 /CNW/ - Corby Spirit and Wine
Limited ("Corby" or the "Company") (TSX: CSW.A,
TSX: CSW.B) today reported its financial results for the
second quarter ended December 31,
2013. The Corby Board of Directors today also declared a
dividend of $0.18 per share payable
on March 14, 2014 on the Voting Class
A Common Shares and Non-voting Class B Common Shares of the Company
to shareholders of record as at the close of business on
February 28, 2014.
Net earnings for the quarter ended December 31, 2013 totaled $7.5 million or $0.26 per share, representing a decrease of
$1.4 million or $0.05 per share when compared with the same
quarter last year. Strong international sales in both the US and UK
were offset by a weaker domestic performance caused by a soft
Canadian spirit's category, and the severe Ontario weather over the holiday period.
Revenues grew by 2%, enabling higher investment behind our brand
portfolio platform for future growth - primarily a significant
step-up advertising and promotional investment in the US, and an
increase in structure costs. Increased US shipments were the result
of the Company's first quarter launch of its new JP Wiser's whisky
brand in the US market. The UK market benefited this quarter from a
shift in production timing at our third party bottling facility
(whereby shipments normally occurring in the first quarter shifted
into the second quarter). Lastly, shipments in Canada were down 5%, mostly reflecting soft
market conditions in the key categories in which Corby's portfolio
is heavily weighted (i.e., Canadian whisky, dark and white rum, and
vodka).
On a year-to-date basis, net earnings decreased
$0.7 million or $0.03 per share, when compared to the same
six-month period last year. Top-line revenue growth of 2% or
$1.7 million (driven from the launch
of JP Wiser's in the US), was more than offset by higher
advertising and promotional investment in the US, a decrease in
Canadian shipments as markets softened leading up to the holiday
period, non-repeat bulk whisky sales earned in the comparative
period, and an increase in structure costs.
"Although the US launch of JP Wiser's remains in
the early stages, we are certainly encouraged and genuinely
committed to continue our investment and build momentum behind this
brand. While the Canadian market softened this quarter, we noted
that our key brands held market share in each of their competitive
sets." noted Patrick O'Driscoll,
President and Chief Executive Officer of Corby.
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-month periods ended December
31, 2013, prepared in accordance with International
Financial Reporting Standards.
About Corby
Corby Spirit and Wine Limited is a leading Canadian marketer of
spirits and imported wines. Corby's portfolio of owned-brands
includes some of the most renowned brands in Canada, including Wiser's® Canadian whisky,
Lamb's® rum, Polar Ice® vodka and McGuinness® liqueurs. Through its
affiliation with Pernod Ricard S.A., Corby also represents leading
international brands such as ABSOLUT® vodka, Chivas Regal®, The
Glenlivet® and Ballantine's® Scotch whiskies, Jameson® Irish
whiskey, Beefeater® gin, Malibu® rum, Kahlúa® liqueur, Mumm®
champagne, and Jacob's Creek®, Wyndham Estate®, Stoneleigh®, Campo
Viejo® and Graffigna® wines.
The existing Voting Class A Common Shares and
Non-voting Class B Common Shares of the Company are traded on the
Toronto Stock Exchange under the symbols CSW.A and CSW.B,
respectively.
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, the Company's results 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.
CORBY SPIRIT AND WINE LIMITED
Management's Discussion and Analysis
December 31, 2013
The following Management's Discussion and
Analysis ("MD&A") dated February 5,
2014, should be read in conjunction with the unaudited
interim condensed consolidated financial statements and
accompanying notes as at and for the three and six month periods
ended December 31, 2013, prepared in
accordance with International Financial Reporting Standards
("IFRS"). These unaudited interim condensed financial statements do
not contain all disclosures required by IFRS for annual financial
statements and, accordingly, should also be read in conjunction
with the most recently prepared annual consolidated financial
statements for the year ended June 30,
2013. Effective November 7,
2013 the Company changed its name from Corby Distilleries
Limited to Corby Spirit and Wine Limited.
This MD&A contains forward-looking
statements, including statements concerning possible or assumed
future results of operations of Corby Spirit and Wine Limited
("Corby" or the "Company"). 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, including, but not limited to: the impact of
competition; business interruption; trademark infringement;
consumer confidence and spending preferences; regulatory changes;
general economic conditions; and the Company's ability to attract
and retain qualified employees. There can be no assurance that
forward-looking statements will prove to be accurate, as actual
results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not
place undue reliance on forward-looking statements. These factors
are not intended to represent a complete list of the factors that
could affect the Company. Additional factors are noted elsewhere in
this MD&A.
This document has been reviewed by the Audit
Committee of Corby's Board of Directors and contains certain
information that is current as of February
5, 2014. Events occurring after that date could render the
information contained herein inaccurate or misleading in a material
respect. Corby will provide updates to material forward-looking
statements, including in subsequent news releases and its interim
management's discussion and analyses filed with regulatory
authorities as required under applicable law. Additional
information regarding Corby, including the Company's Annual
Information Form, is available on SEDAR at www.sedar.com.
Unless otherwise indicated, all comparisons of
results for the second quarter of fiscal 2014 (three months ended
December 31, 2013) are against
results for the second quarter of fiscal 2013 (three months ended
December 31, 2012). All dollar
amounts are in Canadian dollars unless otherwise stated.
Business Overview
Corby is a leading Canadian marketer of spirits
and importer of 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 Toronto
Stock Exchange under the symbols "CSW.A" (Voting Class A Common
Shares) and "CSW.B" (Non-Voting Class B Common Shares). Corby's
Voting Class A Common Shares are majority-owned by Hiram Walker & Sons Limited ("HWSL") (a
private company) located in Windsor,
Ontario. HWSL is a wholly-owned subsidiary of international
spirits and wine company Pernod Ricard S.A. ("PR") (a French public
limited company), which is headquartered in Paris, France. Therefore, throughout the
remainder of this MD&A, Corby refers to HWSL as its parent, and
to PR as its ultimate parent. Affiliated companies are those that
are also subsidiaries of PR.
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
Canada ("Commissions"). The
Company also supplements these primary sources of revenue with
other ancillary activities incidental to its core business, such as
logistics fees. Revenue from Corby's owned-brands predominantly
consists of sales made to each of the provincial liquor boards
("LBs") in Canada, and also
includes sales to international markets.
Corby's portfolio of owned-brands includes some
of the most renowned brands in Canada, including Wiser's® Canadian whisky,
Lamb's® rum, Polar Ice® vodka and McGuinness® liqueurs. Through its
affiliation with PR, Corby also represents leading international
brands such as ABSOLUT® vodka, Chivas Regal®, The Glenlivet® and
Ballantine's® Scotch whiskies, Jameson® Irish whiskey, Beefeater®
gin, Malibu® rum, Kahlúa® liqueur, Mumm® champagne, and Jacob's
Creek®, Wyndham Estate®, Stoneleigh® and Graffigna® wines. In
addition to representing PR's brands in Canada, Corby also provides representation for
certain selected, unrelated third-party brands ("Agency brands")
when they fit within the Company's strategic direction and, thus,
complement Corby's existing brand portfolio.
The Company expanded its agency portfolio,
particularly with regard to our strategic priority of wines,
through an agreement (which began April
2013) with The Wine Group LLC ("The Wine Group"), providing
Corby with the exclusive rights to represent The Wine Group brands
in Canada for the next five years
(expiring May 2018). The agreement
complements Corby's owned and represented brands and expands Corby
offerings in the premium wine sector. Corby now represents all The
Wine Group brands, including Cupcake Vineyards, Big House Wine Co.,
Concannon Vineyard, Grayfox
Vineyards and Mogen David Wine Co.
Pursuant to a production agreement that expires
in September 2016, PR produces
Corby's owned-brands at HWSL's production facility in Windsor, Ontario. Under the production
agreement, Corby manages PR's business interests in Canada, including HWSL's production facility,
also until September 2016.
The Company sources more than 80% of its spirits
production requirements from HWSL at its production facility in
Windsor, Ontario. The Company's
remaining production requirements have been outsourced to various
third party vendors; including a formerly owned bottling plant in
Montreal, Quebec. The Company also
utilizes a third-party manufacturer in the United Kingdom ("UK") to produce its Lamb's
rum products destined for sale in countries located outside
North America.
In most provinces, Corby's route to market in
Canada entails shipping its
products to government-controlled LBs. The LBs then sell directly,
or control the sale of, beverage alcohol products to end consumers.
The exception to this model is Alberta, where the retail sector is
privatized. In this province, Corby ships products to a bonded
warehouse that is managed by a government-appointed service
provider who is responsible for warehousing and distribution into
the retail channel.
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 Canada
through its member affiliation with the Association of Canadian
Distillers ("ACD"), which tabulates and disseminates consumer
purchase information it receives from the LBs to its industry
members. Corby refers to this data throughout this MD&A as
"retail sales", which are measured both in volume (measured in
nine-litre-case equivalents) and in retail value (measured in
Canadian dollars).
Corby's international business is concentrated
in the United States ("US") and UK
and the Company has a different route to market for each. For the
US market, Corby manufactures the majority of its products in
Canada and ships to its US
distributor, Pernod Ricard USA,
LLC ("PR USA"), an affiliated company. For the UK market, Corby
utilizes a third party contract bottler and distribution company
for the production and distribution of Lamb's rum. Distributors
sell to various local wholesalers and retailers who in turn sell
directly to the consumer.
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.
Strategies and Outlook
Corby's business strategies are designed to
maximize sustainable long-term value growth, and thus deliver solid
profit while continuing to produce strong and consistent cash flows
from operating activities. The Company's portfolio of owned and
represented brands provides an excellent platform from which to
achieve its current and long-term objectives moving forward.
Management believes that having a focused brand
prioritization strategy will permit Corby to capture market share
in the segments and markets that are expected to deliver the most
growth in value over the long-term. Therefore, the Company's
strategy is to focus its investments on, and leverage the long-term
growth potential of, its key brands. As a result, Corby will
continue to invest behind its brands to promote its premium
offerings where it makes the most sense and drives the most value
for shareholders.
Brand prioritization requires an evaluation of
each brand's potential to deliver upon this strategy, and
facilitates Corby's marketing and sales teams' focus and resource
allocation. Over the long term, management believes that effective
execution of its strategy will result in value creation for
shareholders. Past disposal transactions (i.e., the sale of the
Seagram Coolers brand in March 2011,
and the October 2011 sale of certain
non-core brands and the subsidiary that owned the Montreal bottling facility) reflect this
strategy by streamlining Corby's portfolio and eliminating brands
with below average performance trends, thus focusing resources on
key brands.
Pursuing new growth opportunities outside of
Canada is also a key strategic
priority. Our agreement with PR USA to represent certain of Corby's
owned brands in the US is an important step towards expanding our
Canadian whisky business into this market where we see growth
potential in both volume and margin.
Of primary importance to the successful
implementation of our brand strategies is an effective route to
market strategy. Corby is committed to investing in its trade
marketing expertise and ensuring that its commercial resources are
focused around the differing needs of its customers and the selling
channels they inhabit. In all areas of the business, management
believes setting clear strategies which optimize organization
structure and increase efficiencies is key to Corby's overall
success.
In addition, management is convinced that
innovation is essential to seizing new profit and growth
opportunities. Successful innovation can be delivered through a
structured and efficient process as well as consistent investment
in consumer insight and research and development ("R&D"). As
far as R&D is concerned, the Company benefits from access to
leading-edge practices at PR's North American hub, which is located
in Windsor, Ontario.
Finally, the Company is a strong advocate of
social responsibility, especially with respect to its sales and
promotional activities. Corby will continue to promote the
responsible consumption of its products in its activities. Most
recently, Corby partnered with the Toronto Transit Commission to
provide free transit on New Year's
Eve for the next three years. The Company stresses its core
values throughout its organization, including those of
conviviality, straightforwardness, commitment, integrity and
entrepreneurship.
Significant Events
Corby Distilleries Limited changes its
name to Corby Spirit and Wine Limited
Effective November 7, 2013, Corby
Distilleries Limited began operating under the name Corby Spirit
and Wine Limited. The new name was approved at the Company's annual
and special meetings held November
7th, 2014, and reflecting the change, Corby now
trades on the TSX under the symbols CSW.A and CSW.B. The new name
coincided with a completely redesigned corporate branding and
logos. The new name and branding better reflect Corby's growing
activities with a strong focus on product, service and
marketing.
Corby Launches J.P. Wiser's Rye and
J.P. Wiser's Spiced Canadian Whisky
in the US Market
In July 2012, the Company reached a
new agreement with PR USA to represent Corby brands in the United States for a five year period,
giving Corby access to one of the strongest spirits distribution
networks in the US market.
Since signing the agreement, Corby and PR USA
have been readying Corby's whisky portfolio for a national launch
which began in the first quarter of this fiscal year. Specifically,
Corby has developed two new Wiser's brand extensions under the
names J.P. Wiser's Rye and
J.P. Wiser's Spiced Whisky. The
launch is still in the early phases, but already has had an impact
on our financial results and will be discussed throughout this
MD&A.
Corby Continues its Exclusive Canadian
Representation of the Iconic ABSOLUT Vodka Brand
On September 30, 2013, Corby paid
$10.3 million to continue its
exclusive rights to represent the ABSOLUT vodka brand in
Canada for an eight-year period
ending September 29, 2021. The
previous representation period expired September 29, 2013. The terms of this agreement
are further described in the "Related Party Transactions" section
of this MD&A. The transaction was accounted for as an increase
in Intangible Assets and will be amortized, straight-line, over the
eight-year term of the agreement. Amortization expense will be
recorded net of commission revenues. The payment was funded from
the Company's deposits in cash management pools.
Brand Performance Review
Corby's portfolio of owned-brands accounts for
more than 80% of the Company's total annual revenue. Included in
this portfolio are its key brands: Wiser's Canadian whisky, Lamb's
rum, Polar Ice vodka and Corby's mixable liqueur brands. The sales
performance of these key brands significantly impacts Corby's net
earnings. Therefore, understanding each key brand is essential to
understanding the Company's overall performance.
Shipment Volume and Shipment Value
Performance
The following chart 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 gross sales revenue). The chart includes results for
sales in both Canada and
international markets. Specifically, the Wiser's, Lamb's and Polar
Ice brands are also sold to international markets, particularly in
the US and UK.
|
|
BRAND PERFORMANCE CHART - INCLUDES
BOTH CANADIAN AND INTERNATIONAL SHIPMENTS |
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Three Months Ended |
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Six Months Ended |
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Shipment |
|
Shipment |
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Shipment |
|
Shipment |
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Dec.
31, |
|
Dec.
31, |
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%
Volume |
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%
Value |
|
Dec.
31, |
|
Dec.
31, |
|
%
Volume |
|
%
Value |
Volumes (in 000's of 9L
cases) |
|
2013 |
|
2012 |
|
Change |
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Change |
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2013 |
|
2012 |
|
Change |
|
Change |
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Brand |
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|
Wiser's Canadian whisky |
|
237 |
|
244 |
|
(3%) |
|
3% |
|
479 |
|
448 |
|
7% |
|
14% |
Lamb's rum |
|
175 |
|
166 |
|
5% |
|
3% |
|
299 |
|
316 |
|
(5%) |
|
(5%) |
Polar Ice vodka |
|
102 |
|
98 |
|
4% |
|
6% |
|
198 |
|
207 |
|
(4%) |
|
(4%) |
Mixable liqueurs |
|
60 |
|
57 |
|
5% |
|
7% |
|
107 |
|
98 |
|
9% |
|
12% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Key Brands |
|
574 |
|
565 |
|
2% |
|
4% |
|
1,083 |
|
1,068 |
|
1% |
|
6% |
All other Corby-owned brands |
|
57 |
|
60 |
|
(5%) |
|
8% |
|
114 |
|
119 |
|
(4%) |
|
6% |
|
|
|
|
|
|
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|
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|
|
|
|
|
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|
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Total Corby brands |
|
631 |
|
625 |
|
1% |
|
4% |
|
1,197 |
|
1,187 |
|
1% |
|
6% |
Overall, Corby owned-brands experienced a modest
level of growth in both the three- and six- month periods ended
December 31, 2013. However, trends in
Corby's domestic market (i.e., Canada - in which 86% of the Company's brands
are sold) differ significantly from international markets as
highlighted in the following chart:
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Three Months Ended |
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Six Months Ended |
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Shipment |
|
Shipment |
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Shipment |
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Shipment |
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|
Dec. 31, |
|
Dec. 31, |
|
% Volume |
|
% Value |
|
Dec. 31, |
|
Dec. 31, |
|
% Volume |
|
% Value |
Volumes (in 000's of 9L cases) |
|
2013 |
|
2012 |
|
Change |
|
Change |
|
2013 |
|
2012 |
|
Change |
|
Change |
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|
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|
|
|
|
|
Domestic |
|
536 |
|
562 |
|
(5%) |
|
(2%) |
|
1,035 |
|
1,067 |
|
(3%) |
|
(1%) |
International |
|
95 |
|
63 |
|
51% |
|
106% |
|
162 |
|
120 |
|
35% |
|
105% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Corby brands |
|
631 |
|
625 |
|
1% |
|
4% |
|
1,197 |
|
1,187 |
|
1% |
|
6% |
Corby's performance was impacted by soft market
conditions in key spirit categories (i.e., Canadian whisky, rum and
vodka). Additionally, severe weather conditions impacted shipments
and inventory levels in Ontario,
and the effects of cycling against heavy Polar Ice vodka
promotional programming in Alberta
in the first quarter of last year. Partially offsetting these
factors were a strong shipment performance from Corby's liqueur
brands as they cycled against prior year production delays at our
third-party bottling supplier. Shipment value performed ahead of
volume as a result of our premiumization strategy, price increases
and effective management of our promotional programming. A more
in-depth discussion of Corby's key brands in the Canadian market is
provided in the "Summary of Corby's Key Brands" section of this
MD&A.
In international markets, Corby's portfolio of
owned brands increased significantly in both the three and six
month periods ended December 31,
2013. The growth in shipment volumes (+51% for the quarter,
+35% for the six month period) were mostly driven by the Company's
first quarter launch of its JP Wiser's Rye Canadian whisky brand in
the US. Corby is also benefiting from the more premium nature of
this brand, as is evidenced by value growth significantly outpacing
the growth in volume. Shipments of Lamb's rum in the UK market were
relatively consistent for the six month period, however, second
quarter volumes were significantly higher than normal as a result
of a shift in production timing at our third-party bottling
facility. This shift effectively moved volumes that normally would
have occurred in the first quarter (as previously described in the
first quarter MD&A) into the second quarter. , Shipments have
now evened out over the full six month period ended December 31, 2013.
Retail Volume and Retail Value
Performance
It is of critical importance to understand the
performance of Corby's brands at the retail level in Canada. Analysis of performance at the retail
level provides insight with regards to consumers' current purchase
patterns and trends. Retail sales data, as provided by the ACD, is
set out in the following chart and is discussed throughout this
MD&A. It should be noted that the retail sales information
presented does not include international retail sales of
Corby-owned brands:
|
|
RETAIL SALES FOR THE CANADIAN
MARKET ONLY(1) |
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Three Months Ended |
|
Six Months Ended |
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%
Retail |
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% Retail |
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%
Retail |
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%
Retail |
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|
Dec.
31, |
|
Dec.
31, |
|
Volume |
|
Value |
|
Dec.
31, |
|
Dec. 31, |
|
Volume |
|
Value |
Volumes (in 000's of 9L
cases) |
|
2013 |
|
2012 |
|
Change |
|
Change |
|
2013 |
|
2012 |
|
Change |
|
Change |
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|
Brand |
|
|
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|
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|
|
|
|
|
|
|
|
Wiser's Canadian whisky |
|
230 |
|
235 |
|
(2%) |
|
0% |
|
403 |
|
407 |
|
(1%) |
|
1% |
Lamb's rum |
|
132 |
|
138 |
|
(4%) |
|
(3%) |
|
236 |
|
246 |
|
(4%) |
|
(2%) |
Polar Ice vodka |
|
98 |
|
97 |
|
1% |
|
2% |
|
188 |
|
200 |
|
(6%) |
|
(2%) |
Mixable liqueurs |
|
62 |
|
62 |
|
0% |
|
2% |
|
104 |
|
104 |
|
0% |
|
1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Key Brands |
|
522 |
|
532 |
|
(2%) |
|
0% |
|
931 |
|
957 |
|
(3%) |
|
0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All other Corby-owned brands |
|
62 |
|
61 |
|
2% |
|
5% |
|
115 |
|
117 |
|
(2%) |
|
2% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
584 |
|
593 |
|
(2%) |
|
0% |
|
1,046 |
|
1,074 |
|
(3%) |
|
0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Refers to
sales at the retail store level in Canada, as provided by the
Association of Canadian Distillers. |
The Canadian spirits industry as a whole saw
retail sales volumes decline 1% during both the quarter and the six
month period ended December 31, 2013,
while industry retail sales value increased 1% over the same
periods. As illustrated in the above chart, Corby's brand portfolio
experienced retail volume below that of the spirits market on both
a three and six month comparison basis.
Corby's portfolio is heavily weighted in the
Canadian whisky, rum and vodka categories; as together they
combined to make up over 80% of the Company's total retail volumes.
For the six month period ended December 31,
2013 all three categories showed declines in retail volume
and retail value.
Summary of Corby's Key Brands
Wiser's Canadian Whisky
Corby's flagship brand, Wiser's Canadian whisky, continued to
outperform the Canadian whisky category and gained market share
despite a slight decline in retail volumes of 1% when compared to
the same six-month period last year. The Canadian whisky category
declined 2% during the same six month comparative period. As well,
Wiser's experienced 1% retail value growth while the category
declined slightly on a year-to-date comparative basis. Corby
continued its strong investment behind the brand, with a new
version of its highly successful Welcome to the Wiserhood
television commercial. In addition, Wiser's Spiced, launched last
year in Canada in the new
innovative spiced whisky category, continued to be supported by the
That's Spiced Up campaign.
Lamb's Rum
Lamb's rum, one of the top-selling rum families in Canada, experienced a 4% decline in retail
volumes and a 2% decline in retail value when compared to the same
six month period last year. The rum category in Canada decreased 2% in retail volume and was
off only slightly on retail value when compared to the same six
month period last year. The rum category in Canada has been driven entirely by the spiced
segment (+7% in retail volumes), while the dark and white rum
segments are in decline (-4% and -7%, in retail volumes
respectively over the same six month period last year). Corby's
Lamb's rum product line is heavily weighted in the dark and white
segments, with its spiced product (i.e., Lamb's Black Sheep)
continuing to build off of its small base.
Polar Ice Vodka
Polar Ice vodka is among the top three largest vodka brands in
Canada. On a year-to-date
comparative basis, the brand's retail volumes and retail value fell
6% and 2%, respectively. The decline is the result of timing of
promotional activity, specifically in the province of Alberta, conducted during the first quarter
last year. Excluding Alberta, the
brand's retail performance is consistent year over year in the rest
of Canada. The vodka category
reported an overall decline of 1% in retail volume and a slight
decrease in retail value this period when compared to the same six
month period last year.
Mixable Liqueurs
Corby's portfolio of mixable liqueur brands consists of McGuinness
liqueurs (which is Canada's
largest mixable liqueur brand family) and Meaghers liqueurs. Retail
volume and retail value for Corby's mixable liqueurs portfolio is
slightly ahead of market trends (retail volume was flat and retail
value was +1%), as the category as a whole declined 2% for retail
volume and 1% for retail value when compared to the same six month
period last year. The brands benefited from improved on-shelf
availability during the holiday sales period.
Other Corby-Owned Brands
Corby's other-owned brands grew in retail value by 2% as it
benefited from continued innovation, in particular, Pike Creek, Lot
40, Criollo Chocolate Sea Salted Caramel and Criollo® Chocolate
Raspberry Truffle. Lot 40 was most recently named "Canadian Whisky
of the Year" at the Canadian Whisky Awards. Additionally, the
launch of the Criollo range of luxury liqueurs was well received by
key customers and consumers. The performance of our new innovations
helped offset the category driven decline of Royal Reserve Canadian
whisky (the largest brand in this grouping).
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 December 31, 2013 and 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
(in
millions of Canadian dollars, |
|
|
Dec.
31, |
|
|
Dec.
31, |
|
|
$ |
|
|
% |
|
|
Dec.
31, |
|
|
Dec.
31, |
|
|
$ |
|
|
% |
except per share amounts) |
|
|
2013 |
|
|
2012
(1) |
|
|
Change |
|
|
Change |
|
|
2013 |
|
|
2012
(1) |
|
|
Change |
|
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
38.5 |
|
$ |
37.7 |
|
$ |
0.8 |
|
|
2% |
|
$ |
75.3 |
|
$ |
73.6 |
|
$ |
1.7 |
|
|
2% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
(14.4) |
|
|
(13.8) |
|
|
(0.6) |
|
|
4% |
|
|
(27.2) |
|
|
(27.8) |
|
|
0.6 |
|
|
(2%) |
Marketing, sales and
administration |
|
|
(14.2) |
|
|
(11.9) |
|
|
(2.3) |
|
|
19% |
|
|
(28.3) |
|
|
(24.4) |
|
|
(3.9) |
|
|
16% |
Other income
(expense) |
|
|
0.3 |
|
|
- |
|
|
0.3 |
|
|
N/A |
|
|
0.3 |
|
|
0.1 |
|
|
0.2 |
|
|
200% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from
operations |
|
|
10.2 |
|
|
12.0 |
|
|
(1.8) |
|
|
(15%) |
|
|
20.1 |
|
|
21.5 |
|
|
(1.4) |
|
|
(7%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial income |
|
|
0.4 |
|
|
0.5 |
|
|
(0.1) |
|
|
(20%) |
|
|
0.9 |
|
|
0.9 |
|
|
- |
|
|
0% |
Financial
expenses |
|
|
(0.3) |
|
|
(0.3) |
|
|
- |
|
|
0% |
|
|
(0.6) |
|
|
(0.6) |
|
|
- |
|
|
0% |
Net financial
income |
|
|
0.1 |
|
|
0.2 |
|
|
(0.1) |
|
|
(50%) |
|
|
0.3 |
|
|
0.3 |
|
|
- |
|
|
0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income
taxes |
|
|
10.3 |
|
|
12.2 |
|
|
(1.9) |
|
|
(16%) |
|
|
20.4 |
|
|
21.8 |
|
|
(1.4) |
|
|
(6%) |
Income taxes |
|
|
(2.8) |
|
|
(3.3) |
|
|
0.5 |
|
|
(15%) |
|
|
(5.3) |
|
|
(6.0) |
|
|
0.7 |
|
|
(12%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings |
|
$ |
7.5 |
|
$ |
8.9 |
|
$ |
(1.4) |
|
|
(16%) |
|
$ |
15.1 |
|
$ |
15.8 |
|
$ |
(0.7) |
|
|
(5%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Basic net
earnings |
|
$ |
0.26 |
|
$ |
0.31 |
|
$ |
(0.05) |
|
|
(16%) |
|
$ |
0.53 |
|
$ |
0.56 |
|
$ |
(0.03) |
|
|
(5%) |
|
- Diluted net
earnings |
|
$ |
0.26 |
|
$ |
0.31 |
|
$ |
(0.05) |
|
|
(16%) |
|
$ |
0.53 |
|
$ |
0.56 |
|
$ |
(0.03) |
|
|
(5%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 In preparing its comparative
information, the Company has adjusted amounts reported previously
in the condensed consolidated
financial statements as a result of the retrospective
application of the amendments to IAS 19, Employee Benefits. Refer
to Note 3
for details regarding adjusted amounts. |
Overall Financial Results
For the three-month period ended December 31, 2013, net earnings decreased
$1.4 million or $0.05 per share, when compared to the same three
month period last year. Increased shipments to international
customers both in the US and UK markets were more than offset by
higher advertising and promotional investment in the US, a decrease
in Canadian shipments, and an increase in certain employee related
costs and inflationary-type expenses.
On a year-to-date basis, net earnings decreased
$0.7 million or 5%, when compared to
the same six-month period last year. Increased shipments to the US,
which had been driven from the first quarter launch of JP Wiser's,
was more than offset by higher advertising and promotional
investment in the US, a decrease in Canadian shipments, non-repeat
bulk whisky sales earned in the comparative period, and an increase
in employee related costs and inflationary-type expenses.
Revenue
The following highlights the key components of
the Company's revenue streams:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended |
|
|
Six
Months Ended |
|
|
|
Dec. 31, |
|
|
Dec. 31, |
|
|
$ |
|
% |
|
|
Dec. 31, |
|
|
Dec. 31, |
|
|
$ |
|
% |
(in millions of
Canadian dollars) |
|
|
2013 |
|
|
2012 |
|
|
Change |
|
Change |
|
|
2013 |
|
|
2012 |
|
|
Change |
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue streams: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Case goods |
|
$ |
32.8 |
|
$ |
31.3 |
|
$ |
1.5 |
|
5% |
|
$ |
63.4 |
|
$ |
59.8 |
|
$ |
3.5 |
|
6% |
|
Commissions |
|
|
4.5 |
|
|
4.9 |
|
|
(0.4) |
|
(8%) |
|
|
9.6 |
|
|
9.2 |
|
|
0.4 |
|
4% |
|
Other services |
|
|
1.2 |
|
|
1.5 |
|
|
(0.3) |
|
(20%) |
|
|
2.4 |
|
|
4.6 |
|
|
(2.3) |
|
(49%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
38.5 |
|
|
37.7 |
|
|
0.8 |
|
2% |
|
|
75.3 |
|
|
73.6 |
|
|
1.7 |
|
2% |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
Case goods revenue for the quarter increased
$1.5 million on account of increased
shipments to both the US and UK markets. The increase in the US
market has been driven by the first quarter launch of JP Wiser's
whisky brands, while the UK market benefited from a shift in
production timing at our third party bottling facility (simply a
shift from first quarter to second quarter as year-to-date revenues
are relatively consistent). Offsetting the growth in revenues from
international markets was a decrease in shipments domestically, as
the Canadian spirit market softened in the months leading up to the
holiday period, especially in the categories for which Corby is
heavily weighted (i.e., Canadian whisky, dark and white rum, and
vodka).
Year-to-date Case Goods revenue grew
$3.5 million when compared to the
same six month period last year on account of increased shipments
to the US, resulting from the launch and distribution build-up of
JP Wiser's. The growth in US revenue was partially offset by the
aforementioned reduction in shipments to Canadian customers and is
mostly reflective of market conditions discussed previously. In
addition to general market conditions in Canada, the Company's Polar Ice vodka brand is
cycling against heavy promotional programming conducted in the
first quarter of last year, thus unfavourably impacting
year-to-date revenues.
Commissions decreased $0.4 million or 8% on a quarter-over-quarter
comparative basis. Commission revenues are generated through the
representation of many international brands in Canada through Corby's affiliation with PR as
well as a select number of unrelated third-party agency brands. The
decrease in commission this quarter was mostly the result of having
higher amortization expense on account of the representation rights
acquired on September 30, 2013,
whereby Corby secured the exclusive rights to represent the ABSOLUT
vodka brand in Canada for a
further eight-year term.
On a year-to-date basis, Commissions increased
$0.4 million or 4% when compared with
the same six month period last year. The growth experienced in the
year-to-date period was driven by the addition of a new third-party
agency partner, The Wine Group. Affiliated PR brands performance
was consistent with the same six-month period last year. Offsetting
the increased commissions earned from the new third-party agency
partner was the aforementioned increase in representation rights
amortization expense.
On another matter, a third-party contract to
represent the Stolichnaya vodka brand expired December 31, 2013 and was not renewed. In the
prior fiscal year, commissions earned from our representation of
this brand in Canada were
$0.8 million on a net earnings
basis.
Other services represents ancillary revenue
incidental to Corby's core business activities such as logistical
fees and bulk whisky sales. The year-to-date decrease of
$2.3 million in other services
revenue is primarily due to the fact the Company ceased selling
bulk whisky in September 2012.
Cost of sales
Cost of sales was $14.4
million for the quarter, representing an increase of 4%, or
$0.6 million when compared to the
same quarter last year. The increase in cost of sales is mostly the
result of increased shipment volumes, particularly into the US
market supporting the launch of JP Wiser's brands. Gross margin was
comparable on a quarter-over-quarter basis at 58% for the same
quarter last year (note: commissions are not included in this
calculation).
On a year-to-date basis, cost of sales was
$27.2 million compared to
$27.8 million last year, a decrease
of $0.6 million, or 2%. Gross margin
for the year-to-date period was 59% versus 57% last year (note:
commissions are not included in this calculation). The improved
gross margin reflects the fact that the comparative period included
bulk whisky sales, which are typically lower margin than case
goods.
Marketing, sales and
administration
Marketing, sales and administration expenses
were $14.2 million for the second
quarter ended December 31, 2013,
which is an increase of 19% or $2.3
million compared to the same quarter last year. The increase
is most significantly driven by increased advertising and
promotional investment behind the Company's owned-brands in the US
market as well as certain employee related costs and
inflationary-type expenses.
On a year-to-date basis marketing, sales and
administration expenses increased $3.9
million, or 16% over the same six month period last year. As
previously mentioned, Corby has made significant investments behind
the launch of the JP Wiser's brand in the US market through
increased advertising and promotional spend. In addition, certain
employee related costs and inflationary-type expenses also
contributed to the increase.
Other income and expenses
Other income and expenses include such items as
realized foreign exchange gains and losses, and gains on sale of
property and equipment. Favourable movements in the US dollar
compared to the Canadian dollar have resulted in foreign exchange
gains in the quarter and year-to-date periods. Other balances
comprising this account were consistent over these periods.
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. This balance is relatively consistent for both the
three- and six-month comparative periods.
Income taxes
Income tax expense for the three and six month
periods were $2.8 million and
$5.3 million as compared to
$3.3 million and $6.0 million last year. The reduced income tax is
the result of having lower earnings in both the three- and
six-month periods when compared to the same periods last year. A
reconciliation of the effective tax rate to the statutory rates for
each period is presented below. Note that the effective tax rate is
impacted by permanent differences between financial income and
income reported for taxation purposes as well as the impact of
other adjustments that arise upon the completion of annual tax
filings.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
Dec.
31 |
|
|
Dec.
31 |
|
|
Dec. 31 |
|
|
Dec.
31 |
|
|
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined basic Federal and Provincial tax
rates |
|
|
27% |
|
|
27% |
|
|
27% |
|
|
27% |
Other |
|
|
0% |
|
|
0% |
|
|
(1%) |
|
|
1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
|
|
27% |
|
|
27% |
|
|
26% |
|
|
28% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity and Capital Resources
Corby's sources of liquidity are its deposits in
cash management pools of $102.2
million as at December 31,
2013, and its cash generated from operating activities.
Corby's total contractual maturities are represented by its
accounts payable and accrued liabilities, which totalled
$26.3 million as at December 31, 2013, and are all due to be paid
within one year. The Company does not have any liabilities under
short- or long-term debt facilities.
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 |
|
|
|
Dec.
31, |
|
|
Dec. 31, |
|
|
|
|
|
Dec. 31, |
|
|
Dec.
31, |
|
|
|
(in millions of
Canadian dollars) |
|
|
2013 |
|
|
2012 |
|
|
$ Change |
|
|
2013 |
|
|
2012 |
|
|
$ Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings, adjusted for non-cash items |
|
$ |
11.9 |
|
$ |
13.5 |
|
$ |
(1.6) |
|
$ |
23.3 |
|
$ |
24.3 |
|
$ |
(1.1) |
|
Net change in non-cash working capital |
|
|
2.5 |
|
|
(2.1) |
|
|
4.5 |
|
|
(4.4) |
|
|
(0.0) |
|
|
(4.3) |
|
Net payments for interest and income taxes |
|
|
(2.1) |
|
|
(2.9) |
|
|
0.8 |
|
|
(4.5) |
|
|
(8.8) |
|
|
4.3 |
|
|
|
12.3 |
|
|
8.5 |
|
|
3.7 |
|
|
14.4 |
|
|
15.5 |
|
|
(1.1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to capital assets |
|
|
(0.1) |
|
|
(0.2) |
|
|
0.0 |
|
|
(0.3) |
|
|
(0.2) |
|
|
(0.1) |
|
Net proceeds from sale of plant and brands |
|
|
- |
|
|
- |
|
|
- |
|
|
(10.3) |
|
|
- |
|
|
(10.3) |
|
Proceeds from disposition of capital assets |
|
|
0.2 |
|
|
- |
|
|
0.2 |
|
|
0.2 |
|
|
0.2 |
|
|
0.1 |
|
Deposits in cash management pools |
|
|
(7.2) |
|
|
(3.5) |
|
|
(3.7) |
|
|
5.9 |
|
|
(6.3) |
|
|
12.2 |
|
|
|
(7.1) |
|
|
(3.7) |
|
|
(3.5) |
|
|
(4.4) |
|
|
(6.4) |
|
|
1.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid |
|
|
(5.1) |
|
|
(4.8) |
|
|
(0.3) |
|
|
(10.0) |
|
|
(9.1) |
|
|
(0.9) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
Net cash from operating activities was
$12.3 million during the quarter
ended December 31, 2013 compared to
$8.5 million in the same quarter last
year, representing an increase of $3.7
million. The quarter-over-quarter change is mostly
attributable to the net change in non-cash working capital and was
impacted by the timing of payments to vendors at the end of the
period.
For the year-to-date period, net cash from
operating activities was $14.4
million, a decrease of $1.1
million when compared to the same period last year and is
representative of lower net earnings after adjustment for non-cash
items. The impacts of working capital fluctuations were offset by
lower tax instalments in the current year compared to the same six
month period last year.
Investing activities
Cash used in investing activities was
$7.1 million for the quarter and
$4.4 million for the six month period
ending December 31, 2013, compared to
$3.7 million and $6.4 million for the same three and six month
periods last year. Activities during the current and prior year
quarter substantially reflect the amount deposited in cash
management pools. Cash management pools represent cash on deposit
with The Bank of Nova Scotia via
Corby's Mirror Netting Service Agreement with PR. Corby has daily
access to these funds and earns a market rate of interest from PR
on its deposits. Changes in cash management pools reflect amounts
either deposited in or withdrawn from these bank accounts and are
simply a function of Corby's cash requirements during the period of
time being reported on. For more information related to these
deposits, please refer to the "Related Party Transactions" section
of this MD&A.
The year-to-date period includes a payment of
$10.3 million to PR for the exclusive
right to represent the ABSOLUT vodka brand in Canada for an eight year term, as discussed in
the "Related Party Transaction" section of this MD&A. The
payment was made on September 30,
2013 and was funded through withdrawals from cash management
pools.
Financing activities
Cash used for financing activities was
$5.1 million this quarter and
$10.0 million on a year-to-date basis
and represents the payment of dividends to shareholders.
Year-over-year higher dividends per share were paid when compared
with the same three and six month periods of the prior year. The
payment of these dividends is in accordance with the Company's
previously disclosed dividend policy.
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 |
2014 - Q2 |
|
|
February 5, 2014 |
|
|
February 28, 2014 |
|
|
March 14, 2014 |
|
|
$ |
0.18 |
2014 - Q1 |
|
|
November 6, 2014 |
|
|
November 29, 2013 |
|
|
December 13, 2013 |
|
|
|
0.18 |
2013 - Q4 |
|
|
August 28, 2013 |
|
|
September 13, 2013 |
|
|
September 30, 2013 |
|
|
|
0.17 |
2013 - Q3 |
|
|
May 9, 2013 |
|
|
May 31, 2013 |
|
|
June 14, 2013 |
|
|
|
0.17 |
2013 - Q2 |
|
|
February 6, 2013 |
|
|
February 28, 2013 |
|
|
March 15, 2013 |
|
|
|
0.17 |
2013 - special |
|
|
November 7, 2012 (special dividend) |
|
|
December 14, 2012 |
|
|
January 10, 2013 |
|
|
|
0.54 |
2013 - Q1 |
|
|
November 7, 2012 |
|
|
November 30, 2012 |
|
|
December 14, 2012 |
|
|
|
0.17 |
2012 - Q4 |
|
|
August 29, 2012 |
|
|
September 15, 2012 |
|
|
September 30, 2012 |
|
|
|
0.15 |
2012 - Q3 |
|
|
May 10, 2012 |
|
|
May 31, 2012 |
|
|
June 15, 2012 |
|
|
|
0.15 |
Outstanding Share Data
As at February
5th, 2014, Corby had 24,274,320 Voting Class A
Common Shares and 4,194,536 Non-Voting Class B Common Shares
outstanding. The Company does not have a stock option plan, and
therefore, there are no options outstanding.
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 Canada. Furthermore, Corby outsources the
large majority of its distilling, maturing, storing, blending,
bottling and related production activities to its parent company. A
significant portion of Corby's bookkeeping, recordkeeping services,
data processing and other administrative services are also
outsourced to its parent company. Transactions with the parent
company, ultimate parent and affiliates are subject to Corby's
related party transaction policy, which requires such transactions
to undergo an extensive review and receive approval from an
Independent Committee of the Board of Directors.
The companies operate under the terms of
agreements that became effective on September 29, 2006. These agreements provide the
Company with the exclusive right to represent PR's brands in the
Canadian market for fifteen years, as well as providing for the
continuing production of certain Corby brands by PR at its
production facility in Windsor,
Ontario, for ten years. Corby also manages PR's business
interests in Canada, including the
Windsor production facility.
Certain officers of Corby have been appointed as directors and
officers of PR's Canadian entities, as approved by Corby's Board of
Directors.
In addition to the aforementioned agreements,
Corby signed an agreement on September 26,
2008, with its ultimate parent to be the exclusive Canadian
representative for the ABSOLUT vodka and Plymouth gin brands, for a five-year term
expiring October 1, 2013. These
brands were acquired by PR subsequent to the original
representation rights agreement dated September 29, 2006.
Further, on November 9,
2011, Corby entered into an agreement with a PR affiliate
for a new term for Corby's exclusive right to represent ABSOLUT
vodka in Canada from September 30, 2013 to September 29, 2021, which is consistent with the
term of Corby's Canadian representation of the other PR brands in
Corby's portfolio. On September 30,
2013, Corby paid the present value of $10 million, or $10.3
million, for the additional eight years of the new term
pursuant to an agreement entered into between Corby and The Absolut
Company, an affiliate of PR and owner of the Absolut brand, to
satisfy the parties' obligations under the 2011 agreement. Since
the agreement is a related party transaction, the agreement was
approved by the Independent Committee of the Corby Board of
Directors, in accordance with Corby's related party transaction
policy, following an extensive review and with external financial
and legal advice.
Pursuant to the November
9, 2011 agreement, Corby also agreed to continue with the
mirror netting arrangement with PR and its affiliates, under which
Corby's excess cash will continue to be deposited to cash
management pools. The mirror netting arrangement with PR and its
affiliates is further described below.
On July 1, 2012,
the Company entered into a five year agreement with PR USA, an
affiliated company, which provides PR USA the exclusive right to
represent Wiser's Canadian whisky and Polar Ice vodka in the US.
The agreement provides these key brands with access to PR USA's
extensive national distribution network throughout the US and
complements PR USA's premium brand portfolio. The agreement is
effective for a five year period ending June
30, 2017. The agreement with PR USA is a related party
transaction between Corby and PR USA, as such; the agreement was
approved by the Independent Committee of the Board of Directors of
Corby following an extensive review, in accordance with Corby's
related party transaction policy.
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 The
Bank of Nova Scotia. The Mirror
Netting Service Agreement acts to aggregate each participant's net
cash balance for purposes of having a centralized cash management
function for all of PR's Canadian affiliates, including Corby. 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
February 5, 2014, as published by
Standard & Poor's and Moody's, was BBB- and Baa3, respectively.
PR compensates Corby for the benefit it receives from having the
Company participate in the Mirror Netting Service Agreement by
paying interest to Corby based upon the 30-day Canadian Dealer
Offered Rate ("CDOR") plus 0.40% (previous to June 2013, LIBOR plus 0.40% was used, as the
Canadian LIBOR rate was discontinued). Corby accesses these funds
on a daily basis and has the contractual right to withdraw these
funds or terminate these cash management arrangements upon
providing five days' written notice.
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) |
|
|
2014 |
|
2014 |
|
2013 |
|
2013 |
|
2013 |
|
2013 |
|
2012 (1) |
|
2012 (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
$
38.5 |
|
$ 36.7 |
|
$ 33.5 |
|
$ 25.7 |
|
$ 37.7 |
|
$ 35.9 |
|
$ 32.4 |
|
$ 29.2 |
Earnings from operations |
|
|
10.2 |
|
9.9 |
|
10.0 |
|
5.3 |
|
12.0 |
|
9.5 |
|
6.6 |
|
6.1 |
Net earnings |
|
|
7.5 |
|
7.5 |
|
7.3 |
|
3.9 |
|
8.9 |
|
6.9 |
|
4.9 |
|
4.6 |
Basic EPS |
|
|
0.26 |
|
0.26 |
|
0.26 |
|
0.14 |
|
0.31 |
|
0.24 |
|
0.17 |
|
0.16 |
Diluted EPS |
|
|
0.26 |
|
0.26 |
|
0.26 |
|
0.14 |
|
0.31 |
|
0.24 |
|
0.17 |
|
0.16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The
selected information that is presented for quarterly periods in
fiscal 2012 does not reflect the impact of
the adoption of the amendments to IAS 19, Employee Benefits. |
The above chart 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.
New Accounting Pronouncements
New accounting standards
The following new and revised standards and interpretations were
effective for Corby on July 1,
2013:
(i) Fair
Value Measurement
The IASB issued a new standard, IFRS 13, "Fair
Value Measurement" ("IFRS 13") which defines fair value, provides
guidance in a single IFRS framework for measuring fair value and
identifies the required disclosures pertaining to fair value
measurement. IFRS 13 applies to all International Financial
Reporting Standards that require or permit fair value measurements
or disclosures. IFRS 13 defines fair value as the price that would
be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement
date. This standard is effective for annual periods beginning on or
after January 1, 2013, and must be
applied prospectively. For Corby, this standard became effective
July 1, 2013. The Company determined
that the adoption of IFRS 13 had no impact on its results of
operations and financial position. Certain additional information
for assets and liabilities not measured at fair value, but for
which fair value is disclosed is included in Note 3 of the
unaudited condensed consolidated interim financial statements for
the second quarter ended December 31,
2013.
(ii) Financial
Instruments - Asset and Liability Offsetting
The IASB has issued amendments to IFRS 7,
"Financial Instruments: Disclosures" ("IFRS 7 amendment") which
clarify the requirements for offsetting financial instruments and
require new disclosures on the effect of offsetting arrangements on
an entity's financial position. The IFRS 7 amendment is effective
for annual periods beginning on or after January 1, 2013 and must be applied
retrospectively. For Corby, this amendment became effective
July 1, 2013. The adoption of
the IFRS 7 amendment did not have an impact on the Company's
consolidated results of operations and financial position.
(iii) Consolidated Financial
Statements
The IASB issued new standards, IFRS 10,
"Consolidated Financial Statements" ("IFRS 10"), IFRS 11, "Joint
Arrangements" ("IFRS 11"), and IFRS 12, "Disclosure of Interest in
Other Entities" ("IFRS 12"). In addition, the IASB amended IAS 27,
"Separate Financial Statements" ("IAS 27") and IAS 28, "Investments
in Associates and Joint Ventures" ("IAS 28"). The objective of IFRS
10 is to define the principles of control and establish the basis
of determining when and how an entity should be included within a
set of consolidated financial statements. IFRS 11 establishes
principles to determine the type of joint arrangement and guidance
for financial reporting activities required by entities that have
an interest in an arrangement that is jointly controlled. IFRS 12
enables users of the financial statements to evaluate the nature
and risks associated with its interest in other entities and the
effects of those interests on its financial performance.
IFRS 10, 11 and 12, and the amendments to IAS 27
and 28 are effective for annual periods beginning on or after
January 1, 2013 and must be applied
retrospectively. For Corby, this set of standards and amendments
became effective July 1, 2013. The
adoption of IFRS 10, 11, and 12 and the amendments to IAS 27 and 28
did not have an impact on the Company's results of operations,
financial position and disclosures.
(iv) Employee
Benefits
The IASB issued amendments to IAS 19, "Employee
Benefits" ("IAS 19 (Amended 2011)"), which eliminate the option to
defer the recognition of actuarial gains and losses through the
"corridor" approach, replaces the expected return on plan assets
calculation with a discount rate methodology in calculating pension
expense for defined benefit plans, revises the presentation of
changes in assets and liabilities arising from defined benefit
plans and enhances the disclosures for defined benefit plans. IAS
19 (Amended 2011) is effective for annual periods beginning on or
after January 1, 2013, and must be
applied retrospectively.
The adoption IAS 19 (Amended 2011), primarily
the elimination of the "corridor" approach and the impact of the
replacement of the expected return on plan assets with a discount
rate methodology in calculating pension expense, has impacted the
Company's net earnings and comprehensive income and it financial
position in the comparative periods. The Company has provided a
detailed explanation of the impacts in Note 3 of the Company's
unaudited condensed consolidated interim financial statements for
the second quarter ended December 31,
2013.
Recent accounting pronouncements
A number of new standards, amendments to
standards and interpretations have been issued but are not yet
effective for the financial year ending June
30, 2014, and accordingly, have not been applied in
preparing these interim condensed consolidated financial
statements:
(v) Financial Instruments
- Asset and Liability Offsetting
The IASB has issued amendments to IAS 32,
"Financial Instruments: Presentation" ("IAS 32"), which clarify the
requirements which permit offsetting a financial asset and
liability in the financial statements. The amendments to IAS 32 are
effective for annual periods beginning on or after January 1, 2014 and must be applied
retrospectively. For Corby, this amendment will become effective
July 1, 2014. The Company is
assessing the impact of the amendments IAS 32 on its consolidated
financial statements.
(vi) Financial
Instruments
The IASB has issued a new standard, IFRS 9,
"Financial Instruments" ("IFRS 9"), which will ultimately replace
IAS 39, "Financial Instruments: Recognition and Measurement" ("IAS
39"). The replacement of IAS 39 is a multi-phase project with the
objective of improving and simplifying the reporting for financial
instruments and the issuance of IFRS 9 is part of the first phase
of this project. IFRS 9 uses a single approach to determine whether
a financial asset or liability is measured at amortized cost or
fair value, replacing the multiple rules in IAS 39. For financial
assets, the approach in IFRS 9 is based on how an entity manages
its financial instruments in the context of its business model and
the contractual cash flow characteristics of the financial assets.
IFRS 9 requires a single impairment method to be used, replacing
multiple impairment methods in IAS 39. For financial liabilities
measured at fair value, fair value changes due to changes in an
entity's credit risk are presented in other comprehensive income.
IFRS 9 is effective for annual periods beginning on or after
January 1, 2015 and must be applied
retrospectively. For Corby, this standard will become effective
July 1, 2015. The Company is
currently assessing the impact of the new standard on its
consolidated financial statements.
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.
There were no changes in internal control 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 Canada is subject to government policy,
extensive regulatory requirements and significant rates of taxation
at both the federal and provincial levels. As a result, changes in
the government policy, regulatory and/or taxation environments
within the beverage alcohol industry may affect Corby's business
operations, causing changes in market dynamics or changes in
consumer consumption patterns. In addition, the Company's
provincial LB customers have the ability to mandate changes that
can lead to increased costs, as well as other factors that may
impact financial results.
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 the economic outlook and overall consumer confidence in
the stability of the economy as a whole. Corby offers a diverse
portfolio of products across all major spirits categories and at
various price points, which complements consumer desires and offers
exciting innovation.
Distribution/Supply Chain Interruption
The Company is susceptible to risks relating to distributor and
supply chain interruptions. Distribution in Canada is largely accomplished through the
government-owned provincial LBs and, therefore, an interruption
(e.g., a labour strike) for any length of time may have a
significant impact on the Company's ability to sell its products in
a particular province and/or market.
Supply chain interruptions, including a
manufacturing or inventory disruption, could impact product quality
and availability. The Company adheres to a comprehensive suite of
quality programs and proactively manages production and supply
chains to mitigate any potential risk to consumer safety or Corby's
reputation and profitability.
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 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
experienced a significant amount of 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
Canada.
Competition
The Canadian 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. Corby constantly monitors
the market and adjusts its own 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. Being 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 and note receivable.
The maximum exposure to credit risk is equal to the carrying value
of the Company's financial assets. The objective of managing
counter-party credit risk is to prevent losses in financial assets.
The Company assesses the credit quality of its counter-parties,
taking into account their financial position, past experience and
other factors. As the large majority of Corby's accounts receivable
balances are collectable from government-controlled LBs, management
believes the Company's credit risk relating to accounts receivable
is at an acceptably low level. The Company's note receivable is
secured.
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 and also has a note
receivable that earns a fixed rate of interest. An active risk
management program 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 UK pound sterling
("GBP"). Corby does not utilize derivative instruments to manage
this risk. Subject to competitive conditions, changes in foreign
currency rates may be passed on to consumers through pricing over
the long term.
USD Exposure
The Company's demand for USD has traditionally outpaced its supply,
due to USD sourcing of production inputs 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 80%
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.
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.
The Company registers trademarks, as applicable, while constantly
watching for and responding to competitive threats, as
necessary.
Valuation of Goodwill and Intangible
Assets
Goodwill and intangible assets account for a significant amount of
the Company's total assets. Goodwill and intangible assets are
subject to impairment tests that involve the determination of fair
value. Inherent in such fair value determinations are certain
judgments and estimates including, but not limited to, projected
future sales, earnings and capital investment; discount rates; and
terminal growth rates. These judgments and estimates may change in
the future due to uncertain competitive market and general economic
conditions, or as the Company makes changes in its business
strategies. Given the current state of the economy, certain of the
aforementioned factors affecting the determination of fair value
may be impacted and, as a result, the Company's financial results
may be adversely affected.
The following chart summarizes Corby's goodwill and intangible
assets and details the amounts associated with each brand (or
basket of brands) and market:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying Values as at December 31,
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Associated Brand |
|
|
|
Associated Market |
|
|
|
Goodwill |
|
|
|
Intangibles |
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Various PR brands |
|
|
|
Canada |
|
|
$ |
- |
|
|
$ |
45.6 |
|
|
$ |
45.6 |
Lamb's rum |
|
|
|
United Kingdom(1) |
|
|
|
1.4 |
|
|
|
11.8 |
|
|
|
13.2 |
Corby domestic brands |
|
|
|
Canada |
|
|
|
1.9 |
|
|
|
- |
|
|
|
1.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3.3 |
|
|
$ |
57.4 |
|
|
$ |
60.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The international
business for Lamb's rum is primarily focused in the UK, however,
the trademarks and licences
purchased, relate to all international markets outside of
Canada, as Corby previously owned the Canadian rights. |
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 16 of the consolidated financial
statements for the year ended June 30,
2013.
CORBY SPIRIT AND WINE LIMITED |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTERIM CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of Canadian dollars) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec.
31, |
|
|
Dec. 31, |
|
|
June 30, |
|
|
June 30, |
|
|
Notes |
|
|
2013 |
|
|
2012 (1) |
|
|
2013
(1) |
|
|
2012 (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits in cash management pools |
|
|
|
$ |
102,185 |
|
$ |
116,436 |
|
$ |
108,043 |
|
$ |
110,113 |
Accounts receivable |
|
4 |
|
|
28,828 |
|
|
30,731 |
|
|
23,642 |
|
|
28,611 |
Income and other taxes recoverable |
|
|
|
|
1,589 |
|
|
701 |
|
|
1,055 |
|
|
- |
Inventories |
|
5 |
|
|
50,009 |
|
|
46,706 |
|
|
49,083 |
|
|
47,760 |
Prepaid expenses |
|
|
|
|
301 |
|
|
590 |
|
|
533 |
|
|
555 |
Current portion of note receivable |
|
6 |
|
|
600 |
|
|
600 |
|
|
600 |
|
|
600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
|
|
183,512 |
|
|
195,764 |
|
|
182,956 |
|
|
187,639 |
Note receivable |
|
6 |
|
|
600 |
|
|
1,200 |
|
|
600 |
|
|
1,200 |
Deferred income taxes |
|
|
|
|
1,567 |
|
|
1,791 |
|
|
1,699 |
|
|
1,753 |
Property and equipment |
|
|
|
|
7,620 |
|
|
7,159 |
|
|
8,092 |
|
|
7,524 |
Goodwill |
|
|
|
|
3,278 |
|
|
3,278 |
|
|
3,278 |
|
|
3,278 |
Intangible assets |
|
7 |
|
|
57,456 |
|
|
51,506 |
|
|
49,665 |
|
|
53,771 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
$ |
254,033 |
|
$ |
260,698 |
|
$ |
246,290 |
|
$ |
255,165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
|
8 |
|
$ |
26,333 |
|
$ |
24,330 |
|
$ |
24,185 |
|
$ |
22,400 |
Income and other taxes payable |
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
3,656 |
Dividend payable |
|
|
|
|
- |
|
|
15,373 |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
26,333 |
|
|
39,703 |
|
|
24,185 |
|
|
26,056 |
Provision for employee benefits |
|
|
|
|
20,950 |
|
|
21,310 |
|
|
20,794 |
|
|
20,837 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
47,283 |
|
|
61,013 |
|
|
44,979 |
|
|
46,893 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
|
|
|
14,304 |
|
|
14,304 |
|
|
14,304 |
|
|
14,304 |
Accumulated other comprehensive loss |
|
|
|
|
(7,023) |
|
|
(7,457) |
|
|
(7,363) |
|
|
(7,551) |
Retained earnings |
|
|
|
|
199,469 |
|
|
192,838 |
|
|
194,370 |
|
|
201,519 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders' equity |
|
|
|
|
206,750 |
|
|
199,685 |
|
|
201,311 |
|
|
208,272 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders'
equity |
|
|
|
$ |
254,033 |
|
$ |
260,698 |
|
$ |
246,290 |
|
$ |
255,165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
In preparing its comparative information, the Company has
adjusted amounts reported previously in the condensed consolidated
financial statements as a result of the retrospective application
of the amendments to IAS 19, Employee Benefits. Refer to Note 3 for
details regarding adjusted amounts.
|
|
The accompanying notes are an integral part of
these condensed consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CORBY SPIRIT AND
WINE LIMITED |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec.
31, |
|
|
Dec. 31, |
|
|
Dec. 31, |
|
|
Dec. 31, |
|
|
Notes |
|
|
2013 |
|
|
2012 (1) |
|
|
2013 |
|
|
2012
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
9 |
|
$ |
38,536 |
|
$ |
37,668 |
|
$ |
75,271 |
|
$ |
73,608 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
|
|
(14,393) |
|
|
(13,776) |
|
|
(27,192) |
|
|
(27,814) |
Marketing, sales and
administration |
|
|
|
|
(14,244) |
|
|
(11,876) |
|
|
(28,271) |
|
|
(24,351) |
Other income |
|
10 |
|
|
316 |
|
|
12 |
|
|
339 |
|
|
98 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from
operations |
|
|
|
|
10,215 |
|
|
12,028 |
|
|
20,147 |
|
|
21,541 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial income |
|
|
|
|
422 |
|
|
450 |
|
|
881 |
|
|
902 |
Financial
expenses |
|
|
|
|
(319) |
|
|
(277) |
|
|
(638) |
|
|
(575) |
Net
financial income |
|
11 |
|
|
103 |
|
|
173 |
|
|
243 |
|
|
327 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before
income taxes |
|
|
|
|
10,318 |
|
|
12,201 |
|
|
20,390 |
|
|
21,868 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current income
taxes |
|
|
|
|
(2,864) |
|
|
(3,283) |
|
|
(5,319) |
|
|
(6,138) |
Deferred income
taxes |
|
|
|
|
90 |
|
|
(20) |
|
|
(8) |
|
|
72 |
Income taxes |
|
|
|
|
(2,774) |
|
|
(3,303) |
|
|
(5,327) |
|
|
(6,066) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings |
|
|
|
$ |
7,544 |
|
$ |
8,898 |
|
$ |
15,063 |
|
$ |
15,802 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share |
|
|
|
$ |
0.26 |
|
$ |
0.31 |
|
$ |
0.53 |
|
$ |
0.56 |
Diluted earnings
per share |
|
|
|
$ |
0.26 |
|
$ |
0.31 |
|
$ |
0.53 |
|
$ |
0.56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
In preparing its comparative information, the
Company has adjusted amounts reported previously in the condensed
consolidated financial statements as a result of the retrospective
application of the amendments to IAS 19, Employee Benefits. Refer
to Note 3 for details regarding adjusted amounts.
|
|
The accompanying notes are an integral
part of these condensed consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CORBY SPIRIT AND WINE
LIMITED |
|
|
|
|
|
|
|
|
|
|
|
|
INTERIM CONDENSED CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of Canadian
dollars) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec. 31, |
|
|
Dec. 31, |
|
|
Dec. 31, |
|
|
Dec. 31, |
|
|
|
2013 |
|
|
2012 (1) |
|
|
2013 |
|
|
2012 (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
7,544 |
|
$ |
8,898 |
|
$ |
15,063 |
|
$ |
15,802 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts that will not be subsequently
reclassified to earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial gains |
|
|
233 |
|
|
64 |
|
|
465 |
|
|
128 |
|
Income taxes |
|
|
(63) |
|
|
(17) |
|
|
(125) |
|
|
(34) |
|
|
|
170 |
|
|
47 |
|
|
340 |
|
|
94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
$ |
7,714 |
|
$ |
8,945 |
|
$ |
15,403 |
|
$ |
15,896 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTERIM CONDENSED CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of Canadian
dollars) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Capital |
|
|
Accumulated
Other
Comprehensive
Loss |
|
|
Retained
Earnings |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at June 30, 2013
(1) |
|
$ |
14,304 |
|
$ |
(7,363) |
|
$ |
194,370 |
|
$ |
201,311 |
Total comprehensive income |
|
|
- |
|
|
340 |
|
|
15,063 |
|
|
15,403 |
Dividends |
|
|
- |
|
|
- |
|
|
(9,964) |
|
|
(9,964) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at December 31,
2013(1) |
|
$ |
14,304 |
|
$ |
(7,023) |
|
$ |
199,469 |
|
$ |
206,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at June 30,
2012(1) |
|
$ |
14,304 |
|
$ |
(7,551) |
|
$ |
201,519 |
|
$ |
208,272 |
Total comprehensive income |
|
|
- |
|
|
94 |
|
|
15,802 |
|
|
15,896 |
Dividends |
|
|
- |
|
|
- |
|
|
(24,483) |
|
|
(24,483) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at December
31, 2012(1) |
|
$ |
14,304 |
|
$ |
(7,457) |
|
$ |
192,838 |
|
$ |
199,685 |
1 |
In preparing its comparative information, the Company has
adjusted amounts reported previously in the condensed consolidated
financial statements as a result of the retrospective application
of the amendments to IAS 19, Employee Benefits. Refer to Note 3 for
details regarding adjusted amounts.
|
|
The accompanying notes are an integral part of
these condensed consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CORBY SPIRIT AND WINE
LIMITED |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTERIM CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOW
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands
of Canadian dollars) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec.
31, |
|
|
Dec. 31, |
|
|
Dec.
31, |
|
|
Dec. 31, |
|
|
Notes |
|
|
2013 |
|
|
2012
(1) |
|
|
2013 |
|
|
2012
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
|
$ |
7,544 |
|
$ |
8,898 |
|
$ |
15,063 |
|
$ |
15,802 |
Adjustments for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization and depreciation |
|
|
|
|
1,792 |
|
|
1,375 |
|
|
3,236 |
|
|
2,747 |
Net financial income |
|
11 |
|
|
(103) |
|
|
(173) |
|
|
(243) |
|
|
(327) |
Gain on disposal of property and
equipment |
|
|
|
|
(92) |
|
|
- |
|
|
(107) |
|
|
(69) |
Income tax expense |
|
|
|
|
2,774 |
|
|
3,303 |
|
|
5,327 |
|
|
6,066 |
Provision for pensions |
|
|
|
|
(15) |
|
|
60 |
|
|
(17) |
|
|
95 |
|
|
|
|
|
11,900 |
|
|
13,463 |
|
|
23,259 |
|
|
24,314 |
Net change in non-cash working
capital balances |
|
13 |
|
|
2,471 |
|
|
(2,050) |
|
|
(4,375) |
|
|
(30) |
Interest received |
|
|
|
|
406 |
|
|
405 |
|
|
850 |
|
|
790 |
Income taxes paid |
|
|
|
|
(2,523) |
|
|
(3,305) |
|
|
(5,322) |
|
|
(9,593) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash from operating
activities |
|
|
|
|
12,254 |
|
|
8,513 |
|
|
14,412 |
|
|
15,481 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property and
equipment |
|
|
|
|
(149) |
|
|
(157) |
|
|
(259) |
|
|
(203) |
Additions to intangible
assets |
|
7 |
|
|
- |
|
|
- |
|
|
(10,293) |
|
|
- |
Proceeds from disposition of
property and equipment |
|
|
|
|
210 |
|
|
- |
|
|
246 |
|
|
155 |
Deposits in cash management
pools |
|
|
|
|
(7,191) |
|
|
(3,516) |
|
|
5,858 |
|
|
(6,323) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing
activities |
|
|
|
|
(7,130) |
|
|
(3,673) |
|
|
(4,448) |
|
|
(6,371) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid |
|
|
|
|
(5,124) |
|
|
(4,840) |
|
|
(9,964) |
|
|
(9,110) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing
activity |
|
|
|
|
(5,124) |
|
|
(4,840) |
|
|
(9,964) |
|
|
(9,110) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash |
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
Cash, beginning of period |
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, end of period |
|
|
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
1 |
In preparing its comparative information, the Company has
adjusted amounts reported previously in the condensed consolidated
financial statements as a result of the retrospective application
of the amendments to IAS 19, Employee Benefits. Refer to Note 3 for
details regarding adjusted amounts.
|
|
The accompanying notes are an integral part of
these condensed consolidated financial statements.
|
|
CORBY SPIRIT AND WINE LIMITED
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
(in thousands of Canadian dollars, except per share
amounts)
1. GENERAL
INFORMATION
Corby Spirit and Wine Limited ("Corby" or the
"Company") is a leading Canadian marketer of spirits and importer
of wines. The Company derives its revenues from the sale of its
owned-brands in Canada and other
international markets, as well as earning commissions from the
representation of selected non-owned brands in the Canadian
marketplace. Revenues predominantly consist of sales made to each
of the provincial liquor boards in Canada.
Corby is controlled by Hiram Walker & Sons Limited ("HWSL"), which
is a wholly owned subsidiary of Pernod Ricard, S.A. ("PR"), a
French public limited company that controls 51.6% of the
outstanding Voting Class A Common Shares of Corby as at
December 31, 2013.
Corby is a public company incorporated and
domiciled in Canada, whose shares
are traded on the Toronto Stock Exchange. The Company's registered
address is 225 King Street West, Suite 1100, Toronto, ON M5V 3M2.
Effective November 7, 2013, Corby
changed its name and began operating as Corby Spirit and Wine
Limited. Prior to this date, Corby operated as Corby Distilleries
Limited. Reflecting the change Corby began trading on the TSX under
the symbols CSW.A and CSW.B.
2. 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
International Accounting Standards Board ("IASB"). These interim
condensed consolidated financial statements follow the same
accounting policies as the most recent annual consolidated
financial statements, except for changes in accounting policies and
methods described in Note 3 to these condensed consolidated
financial statements. These interim condensed consolidated
financial statements should be read in conjunction with the
Company's 2013 annual financial statements.
These interim condensed consolidated financial
statements were approved by the Company's Board of Directors on
February 05, 2014.
Functional and presentation
currency
The Company's interim condensed consolidated financial statements
are presented in Canadian dollars, which is the Company's
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 International
Financial Reporting Standards ("IFRS") as described in Note 4 to
the Company's annual consolidated financial statements as at and
for the year ended June 30, 2013.
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 the 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 consolidated financial statements, and the reported
amounts of revenues and expenses during the reporting period. These
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 change or where new information becomes
available. Future outcomes can differ from these estimates.
Judgement is commonly used in determining
whether a balance or transaction should be recognized in the
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.
The Company has applied judgement in determining
the tax rates used for measuring deferred taxes and identifying the
indicators of impairment for property and equipment, goodwill and
intangible assets. In the absence of standards or interpretations
applicable to a specific transaction, management uses its judgement
to define and apply accounting policies that provide relevant and
reliable information in the context of the preparation of the
financial statements.
Estimates are used when estimating the useful
lives of property and equipment and intangible assets for the
purpose of depreciation and amortization, when accounting for or
measuring items such as allowances for uncollectible accounts
receivable and inventory obsolescence, assumptions underlying the
actuarial determination of provision for pensions, income and other
taxes, provisions, certain fair value measures including those
related to the valuation of share-based payments and financial
instruments, and when testing goodwill, intangible assets and other
assets for impairment. Actual results may 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.
3. ADOPTION OF NEW AND REVISED
STANDARDS AND INTERPRETATIONS
New accounting standards
The following new and revised standards and interpretations were
effective for Corby on July 1,
2013:
(i) Fair
Value Measurement
The IASB issued a new standard, IFRS 13, "Fair
Value Measurement" ("IFRS 13") which defines fair value, provides
guidance in a single IFRS framework for measuring fair value and
identifies the required disclosures pertaining to fair value
measurement. IFRS 13 applies to all International Financial
Reporting Standards that require or permit fair value measurements
or disclosures. IFRS 13 defines fair value as the price that would
be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement
date. This standard is effective for annual periods beginning on or
after January 1, 2013, and must be
applied prospectively. For Corby, this standard became effective
July 1, 2013. The Company determined
that the adoption of IFRS 13 had no impact on its results of
operations and financial position.
The Company has no financial instruments carried
at fair value on its balance sheet. Certain additional information
for assets and liabilities not measured at fair value, but for
which fair value is disclosed is as follows:
The carrying amount of the Company's deposits in
cash management pools, accounts receivable, accounts payable and
accrued liabilities approximate their fair value at each balance
sheet date due to their short-term maturities. Fair value is
determined using Level 2 inputs.
The carrying value of the note receivable
approximates fair value based on the present value of future cash
flows, based on estimated market rates for instruments of similar
terms and conditions. Fair value is determined using Level 2
inputs.
(ii) Financial
Instruments - Asset and Liability Offsetting
The IASB has issued amendments to IFRS 7,
"Financial Instruments: Disclosures" ("IFRS 7 amendment") which
clarify the requirements for offsetting financial instruments and
require new disclosures on the effect of offsetting arrangements on
an entity's financial position. The IFRS 7 amendment is effective
for annual periods beginning on or after January 1, 2013 and must be applied
retrospectively. For Corby, this amendment became effective
July 1, 2013. The adoption of
the IFRS 7 amendment did not have an impact on the Company's
consolidated results of operations and financial position.
(iii) Consolidated Financial
Statements
The IASB issued new standards, IFRS 10,
"Consolidated Financial Statements" ("IFRS 10"), IFRS 11, "Joint
Arrangements" ("IFRS 11"), and IFRS 12, "Disclosure of Interest in
Other Entities" ("IFRS 12"). In addition, the IASB amended IAS 27,
"Separate Financial Statements" ("IAS 27") and IAS 28, "Investments
in Associates and Joint Ventures" ("IAS 28"). The objective of IFRS
10 is to define the principles of control and establish the basis
of determining when and how an entity should be included within a
set of consolidated financial statements. IFRS 11 establishes
principles to determine the type of joint arrangement and guidance
for financial reporting activities required by entities that have
an interest in an arrangement that is jointly controlled. IFRS 12
enables users of the financial statements to evaluate the nature
and risks associated with its interest in other entities and the
effects of those interests on its financial performance.
IFRS 10, 11 and 12, and the amendments to IAS 27
and 28 are effective for annual periods beginning on or after
January 1, 2013 and must be applied
retrospectively. For Corby, this set of standards and amendments
became effective July 1, 2013. The
adoption of IFRS 10, 11, and 12 and the amendments to IAS 27 and 28
did not have an impact on the Company's results of operations,
financial position and disclosures.
(iv) Employee
Benefits
The IASB issued amendments to IAS 19, "Employee
Benefits" ("IAS 19 (Amended 2011)"), which eliminate the option to
defer the recognition of actuarial gains and losses through the
"corridor" approach, replaces the expected return on plan assets
calculation with a discount rate methodology in calculating pension
expense for defined benefit plans, revises the presentation of
changes in assets and liabilities arising from defined benefit
plans and enhances the disclosures for defined benefit plans. IAS
19 (Amended 2011) is effective for annual periods beginning on or
after January 1, 2013, and must be
applied retrospectively.
As a result of adoption IAS 19 (Amended 2011),
primarily the elimination of the "corridor" approach and the impact
of the replacement of the expected return on plan assets with a
discount rate methodology in calculating pension expense, the
following are the impacts on the Company's net earnings and
comprehensive income for the three and six month periods ended
December 31, 2012 and its financial
position as at July 1, 2012,
December 31, 2012 and June 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 months
ended |
|
|
6 months ended |
|
|
|
|
|
|
Dec. 31 |
|
|
Dec. 31 |
Net earnings and total
comprehensive income impacts |
|
|
|
|
|
2012 |
|
|
2012 |
Marketing, sales and
administration |
|
|
|
|
|
(72) |
|
|
(134) |
Other income |
|
|
|
|
|
104 |
|
|
208 |
Earnings from operations |
|
|
|
|
|
32 |
|
|
74 |
|
|
|
|
|
|
|
|
|
|
Financial expense |
|
|
|
|
|
(161) |
|
|
(322) |
Earnings before income taxes |
|
|
|
|
|
(129) |
|
|
(248) |
|
|
|
|
|
|
|
|
|
|
Income taxes |
|
|
|
|
|
34 |
|
|
66 |
Net earnings |
|
|
|
|
|
(95) |
|
|
(182) |
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
|
|
|
|
64 |
|
|
128 |
Tax impact of other comprehensive
income |
|
|
|
|
|
(17) |
|
|
(34) |
Net comprehensive income |
|
|
|
|
|
47 |
|
|
94 |
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
(48) |
|
|
(88) |
|
|
|
|
|
|
|
|
|
|
Decrease in basic and diluted earnings
per common share |
|
|
|
|
$ |
(0.01) |
|
$ |
- |
Basic and diluted earnings per common
share, as restated |
|
|
|
|
$ |
0.31 |
|
$ |
0.56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec.31 |
|
|
June 30, |
|
|
July 1, |
Balance sheet impacts |
|
|
2012 |
|
|
2013 |
|
|
2012 |
Provision for pensions |
|
$ |
(10,406) |
|
$ |
(10,345) |
|
$ |
(10,287) |
Deferred income taxes |
|
|
2,767 |
|
|
2,752 |
|
|
2,736 |
Retained earnings |
|
|
182 |
|
|
230 |
|
|
- |
Accumulated other comprehensive
loss |
|
|
7,457 |
|
|
7,363 |
|
|
7,551 |
Certain additional information with respect to
the net defined benefit expense and liability associated with the
Company's pension and post-employment benefit plans, as restated
for the impact of IAS 19 (Amended 2011), for the financial year
ended June 30, 2013 is as
follows:
|
|
|
|
2013 |
|
|
|
|
|
Net defined benefit
pension expense recognized in total comprehensive income |
|
|
|
|
Current service cost |
|
|
$ |
2,128 |
Interest cost |
|
|
|
1,016 |
Past service cost |
|
|
|
(638) |
|
|
|
|
|
Net expense recognized in net
earnings |
|
|
|
2,506 |
|
|
|
|
|
Actuarial gains recognized in other
comprehensive income |
|
|
|
(256) |
|
|
|
|
|
Total net expense recognized in total
comprehensive income |
|
|
$ |
2,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension |
|
|
|
Other
Benefit |
|
|
|
|
|
|
|
Plans |
|
|
|
Plans |
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets |
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets, beginning
of year |
|
$ |
43,470 |
|
|
$ |
- |
|
|
$ |
43,470 |
|
Interest income |
|
|
1,584 |
|
|
|
- |
|
|
|
1,584 |
|
Actuarial gains (losses) |
|
|
903 |
|
|
|
- |
|
|
|
903 |
|
Company contributions |
|
|
1,629 |
|
|
|
- |
|
|
|
1,629 |
|
Plan participants' contributions |
|
|
154 |
|
|
|
- |
|
|
|
154 |
|
Benefits paid |
|
|
(3,622) |
|
|
|
- |
|
|
|
(3,622) |
|
Administrative costs |
|
|
(265) |
|
|
|
- |
|
|
|
(265) |
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets, end of
year |
|
$ |
43,853 |
|
|
$ |
- |
|
|
$ |
43,853 |
|
|
|
|
|
|
|
|
|
|
|
|
Present value of defined benefit
obligation |
|
|
|
|
|
|
|
|
|
|
|
Defined benefit obligation, beginning
of year |
|
$ |
53,830 |
|
|
$ |
10,477 |
|
|
$ |
64,307 |
|
Current service cost |
|
|
1,601 |
|
|
|
262 |
|
|
|
1,863 |
|
Interest cost |
|
|
2,179 |
|
|
|
421 |
|
|
|
2,600 |
|
Curtailment |
|
|
- |
|
|
|
(638) |
|
|
|
(638) |
|
Plan participants' contributions |
|
|
154 |
|
|
|
- |
|
|
|
154 |
|
Actuarial (gains) losses |
|
|
554 |
|
|
|
94 |
|
|
|
648 |
|
Benefits paid |
|
|
(3,671) |
|
|
|
(616) |
|
|
|
(4,287) |
Present value of the defined benefit
obligations, end of year |
|
$ |
54,647 |
|
|
$ |
10,000 |
|
|
$ |
64,647 |
|
|
|
|
|
|
|
|
|
|
|
|
Net defined benefit liability |
|
$ |
10,794 |
|
|
$ |
10,000 |
|
|
$ |
20,794 |
The significant actuarial assumptions are as
follows:
|
|
|
|
|
Pension |
|
|
Other
Benefit |
|
|
|
|
|
Plans |
|
|
Plans |
|
|
|
|
|
|
|
|
|
Accrued benefit obligation, end
of year |
|
|
|
|
|
|
|
|
Discount rate |
|
|
|
|
4.1% |
|
|
4.1% |
Compensation increase |
|
|
|
|
3.0 - 3.5% |
|
|
N/A |
Inflation rate |
|
|
|
|
2.0% |
|
|
N/A |
Medical cost trend rate |
|
|
|
|
N/A |
|
|
6.1% |
|
|
|
|
|
|
|
|
|
Benefit expense, for the year |
|
|
|
|
|
|
|
|
Discount rate |
|
|
|
|
4.2% |
|
|
4.2% |
Compensation increase |
|
|
|
|
3.0 - 3.5% |
|
|
N/A |
Inflation rate |
|
|
|
|
2.0% |
|
|
N/A |
Medical cost trend rate |
|
|
|
|
N/A |
|
|
6.0% |
|
|
|
|
|
|
|
|
|
The discount rate has been set based on current
market rates at the end of the Company's financial year, assuming a
rate of return comparable to high quality fixed income securities
of equivalent currency and term that approximate the terms of the
pension plan liabilities. A 25 basis points ("bp") increase in the
assumed discount rate would decrease the amount of the Company's
provision for pensions and pension expense in respect of its
registered and non-registered defined benefit plans by $2,274 and $115,
respectively.
Conversely, a 25bp decrease in the assumed
discount rate would increase the amount of the Company's provision
for pensions and pension expense in respect of its registered and
non-registered defined benefit plans by $2,374 and $124,
respectively.
A 25bp increase in the assumed rate of
inflation, which also impacts compensation rates and medical cost
trend rates, would increase the amount of the Company's provision
for pensions and pension expense in respect of its registered and
non-registered defined benefit plans by $678 and $51,
respectively. Conversely, a 25bp decrease in the assumed rate of
inflation would increase the amount of the Company's provision for
pensions and pension expense in respect of its registered and
non-registered defined benefit plans by $626 and $51,
respectively.
The medical cost trend rate is based on
historical trends and external data. The medical cost trend rate
used was 6.1% for 2013, 6.0% being the trend rate for 2014, with
4.6% being the ultimate for 2026 and later years. A 1% increase the
assumed medical cost trend rate would result in an increase of
$1,220 to the provision for pensions
and an increase of $128 on the net
benefit expense in respect of its other benefit plans.
Recent accounting pronouncements
A number of new standards, amendments to
standards and interpretations have been issued but are not yet
effective for the financial year ending June
30, 2014, and accordingly, have not been applied in
preparing these interim condensed consolidated financial
statements:
(v) Financial Instruments
- Asset and Liability Offsetting
The IASB has issued amendments to IAS 32,
"Financial Instruments: Presentation" ("IAS 32"), which clarify the
requirements which permit offsetting a financial asset and
liability in the financial statements. The amendments to IAS
32 are effective for annual periods beginning on or after
January 1, 2014 and must be applied
retrospectively. For Corby, this amendment will become effective
July 1, 2014. The Company is
assessing the impact of the amendments to IAS 32 on its
consolidated financial statements.
(vi) Financial
Instruments
The IASB has issued a new standard, IFRS 9,
"Financial Instruments" ("IFRS 9"), which will ultimately replace
IAS 39, "Financial Instruments: Recognition and Measurement" ("IAS
39"). The replacement of IAS 39 is a multi-phase project with the
objective of improving and simplifying the reporting for financial
instruments and the issuance of IFRS 9 is part of the first phase
of this project. IFRS 9 uses a single approach to determine whether
a financial asset or liability is measured at amortized cost or
fair value, replacing the multiple rules in IAS 39. For financial
assets, the approach in IFRS 9 is based on how an entity manages
its financial instruments in the context of its business model and
the contractual cash flow characteristics of the financial assets.
IFRS 9 requires a single impairment method to be used, replacing
multiple impairment methods in IAS 39. For financial liabilities
measured at fair value, fair value changes due to changes in an
entity's credit risk are presented in other comprehensive income.
IFRS 9 is effective for annual periods beginning on or after
January 1, 2015 and must be applied
retrospectively. For Corby, this standard will become effective
July 1, 2015. The Company is
currently assessing the impact of the new standard on its
consolidated financial statements.
4. ACCOUNTS RECEIVABLE
|
|
|
|
Dec. 31, |
|
|
Dec. 31, |
|
|
June 30, |
|
|
June 30, |
|
|
|
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade receivables |
|
|
$ |
19,538 |
|
$ |
19,215 |
|
$ |
16,491 |
|
$ |
19,759 |
Due from related parties |
|
|
|
9,290 |
|
|
11,516 |
|
|
7,151 |
|
|
8,852 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
28,828 |
|
$ |
30,731 |
|
$ |
23,642 |
|
$ |
28,611 |
5. INVENTORIES
|
|
|
|
Dec. 31, |
|
|
Dec. 31, |
|
|
June 30, |
|
|
June 30, |
|
|
|
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raw materials |
|
|
$ |
2,476 |
|
$ |
1,860 |
|
$ |
2,132 |
|
$ |
1,597 |
Work-in-progress |
|
|
|
40,098 |
|
|
38,098 |
|
|
39,669 |
|
|
40,703 |
Finished goods |
|
|
|
7,435 |
|
|
6,748 |
|
|
7,282 |
|
|
5,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
50,009 |
|
$ |
46,706 |
|
$ |
49,083 |
|
$ |
47,760 |
The cost of inventory recognized as an expense
and included in cost of goods sold for the three and six
months ended December 31, 2013 was
$11,318 and $22,141 (2012 - $10,844 and $22,198), respectively. During the three and six
month periods ended December 31, 2013
and 2012, there were no significant write-downs of inventory as a
result of net realizable value being lower than cost, and no
inventory write-downs recognized in previous years were
reversed.
6. NOTE RECEIVABLE
|
|
|
|
Dec. 31, |
|
|
Dec. 31, |
|
|
June 30, |
|
|
June 30, |
|
|
|
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note receivable |
|
|
$ |
1,200 |
|
$ |
1,800 |
|
$ |
1,200 |
|
$ |
1,800 |
Less: current portion |
|
|
|
600 |
|
|
600 |
|
|
600 |
|
|
600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
600 |
|
$ |
1,200 |
|
$ |
600 |
|
$ |
1,200 |
As part of the Company's sale of the Seagram Coolers brand on
March 15, 2011, the purchase price
was satisfied in part by a promissory note secured by specific
property and issued by the purchaser in favour of Corby for
$2,400, which is to be paid in equal
annual instalments of $600 plus
interest of 5% per annum, with the final payment due January 31, 2015.
7. INTANGIBLE ASSETS
On September 30,
2013, Corby purchased the exclusive rights to represent
ABSOLUT vodka brand in Canada for
an eight year period ending September 29,
2021 for a purchase price of $10,293. The terms of this agreement are further
described in Note 15 - "Related Party Transactions". The
transaction was accounted for as an increase to Intangible Assets
and the purchase price will be amortized, straight-line, over the
eight-year term of the agreement beginning on October 1, 2013:
|
|
|
|
|
|
Movements in the six month period ending December 31,
2013 |
|
|
|
Opening |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending |
|
|
|
Book
Value |
|
|
Additions |
|
|
Amortization |
|
|
Impairments |
|
|
Disposals |
|
|
Book
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term representation rights |
|
$ |
37,439 |
|
$ |
10,293 |
|
$ |
(2,587) |
|
$ |
- |
|
$ |
- |
|
$ |
45,145 |
Trademarks and licenses |
|
|
11,801 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
11,801 |
Non-refundable upfront fees |
|
|
425 |
|
|
142 |
|
|
(57) |
|
|
- |
|
|
- |
|
|
510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
49,665 |
|
$ |
10,435 |
|
$ |
(2,644) |
|
$ |
- |
|
$ |
- |
|
$ |
57,456 |
|
|
|
|
|
|
Movements in the six month period ending December 31,
2012 |
|
|
|
Opening |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending |
|
|
|
Book
Value |
|
|
Additions |
|
|
Amortization |
|
|
Impairments |
|
|
Disposals |
|
|
Book
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term representation rights |
|
$ |
41,970 |
|
$ |
- |
|
$ |
(2,265) |
|
$ |
- |
|
$ |
- |
|
$ |
39,705 |
Trademarks and licenses |
|
|
11,801 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
11,801 |
Non-refundable upfront fees |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
53,771 |
|
$ |
- |
|
$ |
(2,265) |
|
$ |
- |
|
$ |
- |
|
$ |
51,506 |
8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
|
|
|
|
Dec. 31, |
|
|
Dec. 31, |
|
|
June 30, |
|
|
June 30, |
|
|
|
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade payables and accruals |
|
|
$ |
19,580 |
|
$ |
17,619 |
|
$ |
17,715 |
|
$ |
16,584 |
Due to related parties |
|
|
|
6,753 |
|
|
6,711 |
|
|
6,470 |
|
|
5,816 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
26,333 |
|
$ |
24,330 |
|
$ |
24,185 |
|
$ |
22,400 |
9. REVENUE
The Company's revenue consists of the following streams:
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
|
Dec. 31, |
|
|
Dec. 31, |
|
|
Dec.
31, |
|
|
Dec. 31, |
|
|
|
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Case goods sales |
|
|
$ |
32,815 |
|
$ |
31,304 |
|
$ |
63,355 |
|
$ |
59,824 |
Commissions (net of amortization of representation
rights) |
|
|
|
4,540 |
|
|
4,886 |
|
|
9,563 |
|
|
9,175 |
Other services |
|
|
|
1,181 |
|
|
1,478 |
|
|
2,353 |
|
|
4,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
38,536 |
|
$ |
37,668 |
|
$ |
75,271 |
|
$ |
73,608 |
Commissions for the three and six month periods
are shown net of long-term representation rights and non-refundable
upfront fees of $1,483 and
$2,643, (2012 - $1,133 and $2,265),
respectively. Other services include revenues incidental to the
manufacture of case goods, such as logistics fees and miscellaneous
bulk spirit sales.
10. OTHER INCOME
The Company's other income consists of the following
amounts:
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
|
Dec. 31, |
|
|
Dec. 31, |
|
|
Dec. 31, |
|
|
Dec. 31, |
|
|
|
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange gain |
|
|
$ |
224 |
|
$ |
12 |
|
$ |
232 |
|
$ |
29 |
Gain on disposal of property and
equipment |
|
|
|
92 |
|
|
- |
|
|
107 |
|
|
69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
316 |
|
$ |
12 |
|
$ |
339 |
|
$ |
98 |
11. NET FINANCIAL INCOME AND EXPENSE
The Company's financial income (expense) consists of the
following amounts:
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
|
Dec. 31, |
|
|
Dec. 31, |
|
|
Dec. 31, |
|
|
Dec. 31, |
|
|
|
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
$ |
422 |
|
$ |
450 |
|
$ |
881 |
|
$ |
902 |
Interest expense |
|
|
|
- |
|
|
(24) |
|
|
- |
|
|
(68) |
Net financial impact of
pensions |
|
|
|
(319) |
|
|
(253) |
|
|
(638) |
|
|
(507) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
103 |
|
$ |
173 |
|
$ |
243 |
|
$ |
327 |
12. EXPENSES BY NATURE
Earnings from operations include depreciation and amortization,
as well as personnel expenses as follows:
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
|
Dec. 31, |
|
|
Dec. 31, |
|
|
Dec. 31, |
|
|
Dec. 31, |
|
|
|
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation of property and equipment |
|
|
$ |
308 |
|
$ |
242 |
|
$ |
592 |
|
$ |
482 |
Amortization of intangible assets |
|
|
|
1,484 |
|
|
1,133 |
|
|
2,644 |
|
|
2,265 |
Salary and payroll costs |
|
|
|
5,103 |
|
|
4,740 |
|
|
10,310 |
|
|
9,693 |
Expenses related to pensions and
benefits |
|
|
|
445 |
|
|
491 |
|
|
890 |
|
|
1,023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
7,340 |
|
$ |
6,606 |
|
$ |
14,436 |
|
$ |
13,463 |
14. NET CHANGE IN NON-CASH WORKING CAPITAL BALANCES
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
|
Dec. 31, |
|
|
Dec. 31, |
|
|
Dec. 31, |
|
|
Dec. 31, |
|
|
|
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
$ |
423 |
|
$ |
(605) |
|
$ |
(5,156) |
|
$ |
(2,120) |
Inventories |
|
|
|
1,496 |
|
|
334 |
|
|
(926) |
|
|
1,054 |
Prepaid expenses |
|
|
|
119 |
|
|
(310) |
|
|
232 |
|
|
(35) |
Income and other taxes recoverable / payable |
|
|
|
(1,246) |
|
|
(89) |
|
|
(532) |
|
|
(891) |
Accounts payable and accrued liabilities |
|
|
|
1,679 |
|
|
(1,380) |
|
|
2,007 |
|
|
1,962 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,471 |
|
$ |
(2,050) |
|
$ |
(4,375) |
|
$ |
(30) |
14. DIVIDENDS
On February 5,
2014 subsequent to the quarter ended December 31, 2013, the Board of Directors
declared its regular quarterly dividend of $0.18 per common share, to be paid on
March 14, 2014, to shareholders of
record as at the close of business on February 28, 2014. This dividend is in accordance
with the Company's dividend policy.
15. 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 September 29, 2006. These agreements provide the
Company with the exclusive right to represent PR's brands in the
Canadian market for 15 years, as well as providing for the
continuing production of certain Corby brands by PR at its
production facility in Windsor,
Ontario, for 10 years. Corby also manages PR's business
interests in Canada, including the
Windsor production facility.
Certain officers of Corby have been appointed as directors and
officers of PR's Canadian entities, as approved by Corby's Board of
Directors.
In addition to the aforementioned agreements,
Corby signed an agreement on September 26,
2008, with its ultimate parent to be the exclusive Canadian
representative for the ABSOLUT vodka and Plymouth gin brands, for a five-year term
which expired October 1, 2013. These
brands were acquired by PR subsequent to the original
representation rights agreement dated September 29, 2006.
On November 9,
2011, the Company entered into an agreement with PR for a
new term for Corby's exclusive right to represent ABSOLUT vodka in
Canada from September 30, 2013 to September 29, 2021, which is consistent with the
term of Canadian representation for the other PR brands in Corby's
portfolio. Under this agreement, on September 30, 2013, Corby paid $10.3 million for the additional eight years of
the new term to PR.
Effective as of July 1,
2012, the Company entered into a five year agreement with
Pernod Ricard USA, LLC ("PR USA"),
an affiliated company, which provides PR USA the exclusive rights
to represent Wiser's Canadian whisky and Polar Ice vodka in the US.
Previously, Wiser's Canadian whisky and Polar Ice vodka were
represented by an unrelated third party in this market. The
agreement is effective for a five year period ending June 30, 2017.
Transactions between Corby and its parent,
ultimate parent and affiliates during the period are as
follows:
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
|
Dec.
31, |
|
|
Dec. 31, |
|
|
Dec.
31, |
|
|
Dec. 31, |
|
|
|
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales to related parties |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions - parent, ultimate parent and
affiliated companies |
|
|
$ |
5,011 |
|
$ |
5,180 |
|
$ |
10,113 |
|
$ |
9,935 |
Products for resale at an export level -
affiliated companies |
|
|
|
2,846 |
|
|
913 |
|
|
6,616 |
|
|
1,679 |
Bulk spirits - parent |
|
|
|
- |
|
|
- |
|
|
- |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
7,857 |
|
$ |
6,093 |
|
$ |
16,729 |
|
$ |
11,617 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold, purchased from related
parties |
|
|
|
|
|
|
|
|
|
|
|
|
|
Distilling, blending, and production services -
parent |
|
|
$ |
4,960 |
|
$ |
5,264 |
|
$ |
11,483 |
|
$ |
10,320 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Administrative services purchased from related
parties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing, selling and administration services -
parent and affiliated companies |
|
|
$ |
2,290 |
|
$ |
511 |
|
$ |
3,608 |
|
$ |
1,022 |
Balances outstanding with related parties are
due within 60 days, are to be settled in cash and are
unsecured.
Corby has a number of defined benefit pension
plans; for the three and six month periods ending December 31, 2013, contributions to these plans
totaled $295 and $613, (2012- $306
and $636), respectively.
During the three and six month periods ending
December 31, 2013, Corby sold casks
to its parent company for net proceeds of $210 and $246 (2012
- nil and $150), respectively.
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 The Bank of
Nova Scotia. The Mirror Netting
Services Agreement acts to aggregate each participant's net cash
balance for the purposes of having a centralized cash management
function for all of PR's Canadian affiliates, including Corby.
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 February 05, 2014, as
published by Standard & Poor's and Moody's, was BBB- and Baa3,
respectively. PR compensates Corby for the benefit it receives from
having the Company participate in the Mirror Netting Services
Agreement by paying interest to Corby based upon the 30-day CDOR
rate plus 0.40%. During the three and six month periods ending
December 31, 2013, Corby earned
interest income of $409 and
$855 from PR (2012 - $429 and $861),
respectively. Corby has the right to terminate its participation in
the Mirror Netting Services Agreement at any time, subject to five
days' written notice.
16. 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 Canada, such as Wiser's Canadian whisky,
Lamb's rum, Polar Ice vodka, and McGuinness liqueurs.
Corby's Commissions segment earns commission
income from the representation of non-owned beverage alcohol brands
in Canada. Corby represents
leading international brands such as ABSOLUT vodka, Chivas Regal, The Glenlivet and Ballantine's
scotches, Jameson Irish whiskey,
Beefeater gin, Malibu rum, Kahlúa liqueur, Mumm champagne, and
Jacob's Creek and Wyndham Estate wines.
The Commissions segment's financial results are
fully reported as "Commissions" in Note 9 of these interim
condensed consolidated statements. Therefore, a table detailing
operational results by segment has not been provided as no
additional meaningful information would result.
SOURCE Corby Spirit and Wine Limited