TORONTO, May 4, 2016 /CNW/ - Corby Spirit and Wine
Limited ("Corby" or the "Company") (TSX: CSW.A, CSW.B) today
reported its financial results for the third quarter ended
March 31, 2016. The Corby Board of
Directors today also declared a dividend of $0.19 per share payable on June 15, 2016 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 May
27, 2016.
Net earnings of $3.7 million (or
$0.13 per share) increased
$1.3 million or 55% for the three
month period ended March 31, 2016
compared to the same quarter last year. On a year to date basis,
net earnings of $16.1 million
increased $3.0 million or 23% for the
nine month period ended March 31,
2016, when compared to the same period last year.
For both the three month and nine month period results the
primary driver of net earnings growth was an increase in
commissions, due to a commission rate increase on Pernod Ricard
brands announced on August 26, 2015
and supplemented by strong shipments for the Pernod Ricard brand
portfolio, which is weighted in the higher growth spirit and wine
categories. On a year to date basis, the impact on net earnings of
overall lower case good shipments of Corby's owned-brands during
the holiday period was more than offset by lower advertising and
promotional investment in the US market.
"Corby net earnings have continued to grow with increased
commission revenues. The commission rate increase has proved
impactful while the good performance of the Pernod Ricard brand
portfolio reflects its positioning in higher growth spirit and wine
categories. After a difficult holiday period in a competitive
retail environment, case good shipments for the quarter ended
March 31 have stabilized with
shipment value flat compared to the same quarter last year," 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
nine-month period ended March 31,
2016, prepared in accordance with International Financial
Reporting Standards.
About Corby
Corby Spirit and Wine Limited is a leading
Canadian marketer and distributor of spirits and imported wines.
Corby's portfolio of owned-brands includes some of the most
renowned brands in Canada,
including J.P. Wiser's®, Lot 40®,
and Pike Creek® Canadian whiskies as well as Lamb's® rum, Polar
Ice® vodka and McGuinness® liqueurs. Through its affiliation with
Pernod Ricard S.A., a global leader in the spirits and wine
industry, 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®, Graffigna® and Kenwood® wines.
In 2016, Corby was named one of the 50 Best Workplaces in
Canada by The Great Place to Work®
Institute Canada for the fifth consecutive year, and was also
listed among Greater Toronto's Top
100 Employers. Corby is a publicly traded company based in
Toronto, Ontario, and listed on
the Toronto Stock Exchange under the trading symbols CSW.A and
CSW.B. For further information, please visit our website or follow
us on LinkedIn.
This press release contains forward-looking statements,
including statements concerning possible or assumed future results
of Corby's operations. Forward-looking statements typically are
preceded by, followed by or include the words "believes",
"expects", "anticipates", "estimates", "intends", "plans" or
similar expressions. Forward-looking statements are not guarantees
of future performance. They involve risks, uncertainties and
assumptions and, as such, actual results or expectations could
differ materially from those anticipated in these forward-looking
statements. Accordingly, readers should not place undue reliance on
forward-looking statements. All financial results are reported in
Canadian dollars.
CORBY SPIRIT AND WINE LIMITED
Management's
Discussion and Analysis
March 31,
2016
The following Management's Discussion and Analysis ("MD&A")
dated May 4, 2016, should be read in
conjunction with the unaudited interim condensed consolidated
financial statements and accompanying notes as at and for the three
and nine month periods ended March 31,
2016, prepared in accordance with International Financial
Reporting Standards ("IFRS"). These interim condensed financial
statements were not audited or reviewed by the Company's external
auditors in accordance with standards established by the Canadian
Institute of Chartered Accountants for a review of unaudited
interim condensed financial statements by an entity's auditor.
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,
2015.
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"), including the statements made under the headings
"Strategies and Outlook", "Liquidity and Capital Resources",
"Recent Accounting Pronouncements" and "Risks and Risk Management."
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 and uncertainties, 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 and other factors could also affect Corby's results. For
more information, please see the "Risk and Risk Management" section
of 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 May 4, 2016. 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
third quarter of fiscal 2016 (three months ended March 31, 2016) are against results for the third
quarter of fiscal 2015 (three months ended March 31, 2015). 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 J.P. 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®, Campo
Viejo®, Graffigna® and Kenwood® 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, with the exclusive
right to represent The Wine Group LLC ("The Wine Group") brands in
Canada until May 2018 through an agreement (which began
April 2013). The agreement
complements Corby's owned and represented brands and expands Corby
offerings in the premium wine sector. Corby represents all The Wine
Group brands, including Cupcake Vineyards, Big House Wine Co.,
Concannon Vineyard, Grayfox
Vineyards, Mogen David Wine Co and Benziger.
Pursuant to production agreements that expire in September 29, 2016, PR produces Corby's
owned-brands at HWSL's production facility in Windsor, Ontario. Under an administrative
services agreement, Corby manages PR's business interests in
Canada, including HWSL's
production facility, also until September
29, 2016. On November 11,
2015, the parties entered into new production agreements (a
distillate supply agreement and co-pack agreement) and an
administrative services agreement, each for a ten year term
commencing as of September 30, 2016,
thus extending these arrangements to September 30, 2026.
Corby sources more than 90% 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 third-party manufacturer in the United Kingdom ("UK"). The UK site blends and
bottles Lamb's rum products destined for sale in countries located
outside the Americas.
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). Any retail value
trends quoted exclude British
Columbia due to the province changing its value data from
retail dollars to wholesale dollars from the beginning of Fiscal
2016. This change in methodology distorts comparability against
prior periods.
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. See the "Related Party
Transactions" section of this MD&A for additional details. The
market in the US operates a three tier distribution system which
often requires a much longer and larger inventory pipeline than in
other markets, resulting in a disconnect between quarterly shipment
performance, as reported in the financial statements, and the true
underlying performance of the brands at retail level during the
same quarter.
For the UK market, Corby utilizes a third party contract bottler
and distribution company for the production and distribution of
Lamb's rum. The current production and distribution agreement will
terminate on June 30,
2016. Corby has signed an agreement with a new
distributor and is discussing agreements with a newly identified
production service provider. 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.
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 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 supports our goal of expanding our Canadian whisky
business into this market where we believe there is 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 specialized to meet the
differing needs of its customers and the selling channels they
inhabit. In all areas of the business, management believes setting
clear strategies, optimizing organization structure and increasing
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. During
the year, Corby continued a successful partnership with the Toronto
Transit Commission to provide free transit on New Year's Eve for a three year period which
began in 2013 and was recently extended to 2019. The Company
stresses its core values throughout its organization, including
those of conviviality, straightforwardness, commitment, integrity
and entrepreneurship.
Significant Events
Corby Increases Commission Rate under Pernod Ricard
Canadian Representation Agreements
On September 29, 2006, Corby completed a transaction
with PR which, amongst other things, provided the Company the
exclusive right to represent PR's brands in the Canadian market for
15 years and added the Absolut vodka brand in 2008. Commission
revenue earned from the representation of PR's brands in
Canada is presented in the
consolidated statement of earnings as part of "Revenue". On
August 26, 2015, Corby entered into
an agreement with PR and certain affiliates amending the
September 29, 2006 Canadian
representation agreements, to provide that Corby will provide more
specialized marketing, advertising and promotion services for the
brands of PR and its affiliates under the applicable existing
agreements in consideration of an increase to the rate of
commission payable by such entities.
Corby Extends Production and Administrative Services
Agreements with Pernod Ricard
On November 11, 2015, Corby and PR entered into a
distillate supply agreement and a co-pack agreement for the
continued production and bottling of Corby`s owned-brands by Pernod
Ricard at the HWSL production facility in Windsor, Ontario, for a 10 year term
commencing September 30, 2016.
On the same date, Corby and PR entered into an administrative
services agreement, under which Corby will continue to manage PR's
business interests in Canada,
including the HWSL production facility, with a similar term and
commencement date.
Corby declares special dividend
On November 11, 2015, the Corby Board of Directors
declared a special dividend of $0.62
per share payable on January 8, 2016
on the Voting Class A Common Shares and Non-Voting Class B Common
Shares of Corby to shareholders of record as at the close of
business on December 11, 2015. The
special dividend payment resulted in a cash distribution of
approximately $17.7 million to
shareholders and was sourced from Corby's surplus cash
position.
Brand Performance Review
Corby's portfolio of owned-brands accounts for approximately 80%
of the Company's total annual revenue. Included in this portfolio
are its key brands: J.P. 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 table summarizes the performance of Corby's
owned-brands (i.e., Case Goods) in terms of both shipment volume
(as measured by shipments to customers in equivalent nine-litre
cases) and shipment value (as measured by the change in net sales
revenue). The table includes results for sales in both Canada and international markets.
Specifically, the J.P. Wiser's, Lamb's and Polar Ice brands are
also sold to international markets, particularly in the US and
UK.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
Nine Months
Ended
|
|
|
|
%
Shipment
|
%
Shipment
|
|
|
Shipment
Change
|
|
Mar.
31,
|
Mar.
31,
|
Volume
|
Value
|
Mar.
31,
|
Mar.
31,
|
Volume
|
Value
|
(Volumes in 000's
of 9L cases)
|
2016
|
2015
|
%
|
%
|
2016
|
2015
|
%
|
%
|
|
|
|
|
|
|
|
|
|
Brand
|
|
|
|
|
|
|
|
|
J.P. Wiser's Canadian
whisky
|
160
|
163
|
(2%)
|
8%
|
603
|
612
|
(2%)
|
0%
|
Lamb's rum
|
84
|
100
|
(17%)
|
(18%)
|
356
|
394
|
(10%)
|
(8%)
|
Polar Ice
vodka
|
80
|
83
|
(3%)
|
(6%)
|
274
|
286
|
(4%)
|
(1%)
|
Mixable
liqueurs
|
29
|
32
|
(8%)
|
(6%)
|
125
|
132
|
(5%)
|
(5%)
|
|
|
|
|
|
|
|
|
|
Total Key
Brands
|
353
|
378
|
(7%)
|
(2%)
|
1,358
|
1,424
|
(5%)
|
(3%)
|
Other Corby-owned
brands
|
49
|
43
|
12%
|
14%
|
162
|
167
|
(3%)
|
1%
|
|
|
|
|
|
|
|
|
|
Total Corby
brands
|
402
|
421
|
(5%)
|
0%
|
1,520
|
1,591
|
(4%)
|
(2%)
|
Overall, volume and shipment value for Corby owned-brands is
lower on a year over year comparative basis. Trends in Corby's
domestic market differ significantly from international markets as
highlighted in the following table:
|
|
|
|
|
|
|
Three Months
Ended
|
Nine Months
Ended
|
|
|
|
%
Shipment
|
%
Shipment
|
|
|
%
Shipment
|
%
Shipment
|
|
Mar.
31,
|
Mar.
31,
|
Volume
|
Value
|
Mar.
31,
|
Mar.
31,
|
Volume
|
Value
|
(Volumes in 000's
of 9L cases)
|
2016
|
2015
|
Growth
|
Growth
|
2016
|
2015
|
Growth
|
Growth
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
351
|
355
|
(1%)
|
1%
|
1,368
|
1,408
|
(3%)
|
(1%)
|
International
|
51
|
66
|
(23%)
|
(11%)
|
152
|
183
|
(17%)
|
(11%)
|
|
|
|
|
|
|
|
|
|
Total Corby
brands
|
402
|
421
|
(5%)
|
0%
|
1,520
|
1,591
|
(4%)
|
(2%)
|
For the three months ended March 31,
2016, Corby's domestic shipment value was 1% higher on a
year over year comparative basis. For the nine months ended
March 31, 2016, Corby's domestic
shipment value was 1% lower on a year over year comparative basis.
Lower shipments reflect a disappointing holiday period for the
Corby portfolio. Declines were due to a significant increase
of competitive retail activity in the economy segments of rum,
vodka and Canadian whisky, which were only partially offset by
newly introduced innovation, such as J.P.
Wiser's Double Still Rye and Gooderham & Worts Canadian
whiskies.
In international markets, lower shipments for the three and nine
month periods ended March 31, 2016
were largely attributable to performance of J.P. Wiser's in the US market. Our entry
into the US market achieved significant distribution points on
launch. We have since adjusted our strategy and concentrated
our investment on a smaller number of markets where the portfolio
has performed well and the greatest opportunities exist. Our
focus shifted from distribution gains to retail velocity driving
activities. As a result, we have not refilled the initial inventory
pipeline to non-priority markets. Increased sales focus on
our Canadian whisky craft range (Pike Creek and Lot No. 40), which
is starting to show encouraging results from a low base. In
the UK market, the patterns of Lamb's rum shipments have been
impacted by the announced transition to a new distributor as at
July 1, 2016.
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 table 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.
While Corby's focus on the US business is increasing, retail sales
data in the US is prepared using limited sampling techniques, which
does not provide meaningful trend analysis on a brand that has not
yet reached sufficient scale to make such disclosure meaningful.
Corby will provide such data as and when it is considered to offer
meaningful analysis of brand performance.
|
RETAIL SALES FOR
THE CANADIAN MARKET ONLY1
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
|
%
Retail
|
%
Retail
|
|
|
|
%
Retail
|
%
Retail
|
|
Mar.
31,
|
Mar.
31,
|
Volume
|
Value
|
|
Mar.
31,
|
Mar.
31,
|
Volume
|
Value
|
(Volumes in 000's
of 9L cases)
|
2016
|
2015
|
Growth
|
Growth
(2)
|
|
2016
|
2015
|
Growth
|
Growth
(2)
|
|
|
|
|
|
|
|
|
|
|
Brand
|
|
|
|
|
|
|
|
|
|
J.P. Wiser's Canadian
whisky
|
153
|
154
|
(1%)
|
1%
|
|
565
|
565
|
0%
|
1%
|
Lamb's rum
|
73
|
81
|
(9%)
|
(8%)
|
|
289
|
307
|
(6%)
|
(5%)
|
Polar Ice
vodka
|
76
|
75
|
2%
|
5%
|
|
268
|
275
|
(3%)
|
0%
|
Mixable
liqueurs
|
29
|
31
|
(5%)
|
(4%)
|
|
128
|
134
|
(5%)
|
(4%)
|
|
|
|
|
|
|
|
|
|
|
Total Key
Brands
|
331
|
341
|
(3%)
|
(1%)
|
|
1,250
|
1,281
|
(2%)
|
(1%)
|
Other Corby-owned
brands
|
45
|
40
|
12%
|
13%
|
|
150
|
153
|
(2%)
|
0%
|
|
|
|
|
|
|
|
|
|
|
Total
|
376
|
381
|
(1%)
|
1%
|
|
1,400
|
1,434
|
(2%)
|
(1%)
|
|
|
|
|
|
|
|
|
|
|
(1)Refers to sales at the retail store
level in Canada, as provided by the Association of Canadian
Distillers.
|
|
|
|
|
|
|
|
|
|
|
(2)Retail Value trends exclude British
Columbia due to the province changing Value data from Retail
dollars to Wholesale dollars
in July 2015. This change in methodology distorts comparability vs
prior periods.
|
The Canadian spirits industry posted positive retail sales
volume growth of 4% for the three months ended March 31, 2016 and retail sales volume growth of
3% for the nine months ended March 31,
2016. These trends are supported by double digit retail
sales volume growth in the Irish whiskey category and high single
digit sales volume growth in single malt Scotch whisky, bourbon,
tequila, and gin categories where Corby does not have
owned-brands.
As illustrated above, Corby's portfolio of owned brands
underperformed the spirits industry for the three and nine months
ended March 31, 2016. The following
brand discussion provides a more detailed analysis of the
performance of each of Corby's key brands relative to its
respective industry category.
Summary of Corby's Key Brands
J.P. Wiser's Canadian
Whisky
J.P. Wiser's Canadian
whisky, one of the top selling whisky families in Canada, is Corby's flagship brand. For
the three month period ended December 31,
2015, J.P. Wiser's Canadian
whisky retail volume declined 1% when compared to the same three
month period last year. Year to date, J.P. Wiser's Canadian whisky retail volume was
essentially flat on a year-over-year comparison basis. The Canadian
whisky category grew 4% in retail volume, when compared to the same
nine month period last year supported by successful innovation at
premium price points and aggressive competitive retail activity in
the economy segment.
Within the J.P. Wiser's range, positive growth posted by
J.P. Wiser's Deluxe and the
flavoured range was undercut by J.P.
Wiser's Special Blend which was impacted by a significant
increase of competitive retail activity in the economy segment of
Canadian whisky.
In July 2015, Corby began shipping
two innovative new variants of the J.P.
Wiser's family across Canada, J.P.
Wiser's Hopped and J.P.
Wiser's Double Still Rye. During the first quarter of
fiscal 2016, Corby launched new, premium point of sale material
featuring quality cues and the "J.P. Wiser's, Tastes Like Whisky,
Since 1857" campaign. In April
2016, the campaign platform was brought to life with
television advertising tied closely to sports broadcasts.
Lamb's Rum
Lamb's rum, one of the top-selling rum
families in Canada, was
significantly impacted by consumer trends, particularly in respect
of the overall rum and white rum segments. Retail volumes for
overall rum declined 2% for the three months ended March 31, 2016 and was flat for the nine months
ended March 31, 2016 when compared to
the same three and nine month periods last year. White rum
retail volumes declined 2% and 3%, respectively when compared to
the same three month and nine month periods last year.
For the three month and nine month periods ended March 31, 2016, Lamb's declined 9% and 6%
respectively in retail volume when compared to the same periods
last year. Corby's Lamb's rum product line is heavily
weighted in the dark and white segments. It has experienced
poor results in the key province of Ontario and faced difficult economic
conditions in regional strongholds. Our strategy is to defend
these regional strongholds and to strongly promote the entire
range. In furtherance of this, a package redesign has been
implemented and began to appear at retail in March 2016.
Polar Ice Vodka
Polar Ice vodka is among the top
selling vodka brands in Canada.
Retail volume increased 2% for the three months ended March 31, 2016 when compared to the same three
month period last year. For the nine month period ended
March 31, 2016, retail volume
declined 3% year over year due to increased competitive retail
activity through the critical holiday period.
Performance of the overall vodka category in Canada which grew retail volumes 3% and 2%
respectively when compared to the same three and nine month periods
last year was driven by the premium segment of the category.
The focus of advertising and promotion investment was on driving
awareness and trial of Polar Ice 90 North via strong off-trade
programming (tastings, value-add promotions and loyalty rewards
programs). As well, continued digital media to support the
launch of Polar Ice 90 North, driving consumers to online
(polarice.ca) and social media channels.
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 for Corby's mixable liqueurs
portfolio lagged category trends with retail volume declining 5%
for both the three and nine month periods ended March 31, 2016 when compared to the same periods
last year.
When compared to the same periods last year, the liqueurs
category retail volume in Canada
grew 3% and 2% respectively for the three and nine months ended
March 31, 2016. It is being driven by
new innovations and cream based offerings with which McGuinness
does not directly compete.
Our current strategy is to explore innovation and focus on
strong programming in the retail environment, ensuring that our
flavour offering is aligned to consumer trends.
Other Corby-Owned Brands
Innovation remains an
important pillar for delivering new profit and growth opportunities
to the Corby domestic business. Recent premium offerings in
Canadian whisky such as Pike Creek®, Lot No. 40® and Gooderham
& Worts® collectively grew retail volume 152% and 90% for the
respective three and nine month periods ending March 31, 2016, outperforming the Canadian whisky
category in Canada, which grew 7%
and 4% respectively over the same periods.
At the recent sixth annual Canadian Whisky Awards, Lot No.
40 was awarded Canadian Whisky of the Year. It is
the second time Lot No. 40 has received the honour in the last
three years. Lot No. 40 was also named Best Canadian Rye
Whisky at the 2016 San Francisco World Spirits Competition.
After disappointing holiday results for Royal Reserve®, retail
volume increased 9% for the three months ended March 31, 2016 when compared to the same period
last year. With this positive result, Royal Reserve retail
volume declined only 3% for the nine month period ended
March 31, 2016 when compared to the
same period last year. This result is in line with the year to date
trend for the overall economy segment of Canadian whisky.
Financial and Operating Results
The following table presents a summary of certain selected
consolidated financial information of the Company for the three and
nine month periods ended March 31,
2016 and 2015.
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
(in millions of
Canadian dollars,
|
Mar.
31,
|
Mar.
31,
|
|
|
|
|
Mar.
31,
|
Mar.
31,
|
|
|
|
except per share
amounts)
|
2016
|
2015
|
$
Change
|
%
Change
|
|
2016
|
2015
|
$
Change
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
28.0
|
$
|
26.8
|
$
|
1.2
|
4%
|
|
$
|
102.8
|
$
|
99.6
|
$
|
3.2
|
3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
|
(10.0)
|
|
(10.4)
|
|
0.4
|
(4%)
|
|
|
(37.2)
|
|
(37.4)
|
|
0.2
|
(1%)
|
Marketing, sales and
administration
|
|
(12.8)
|
|
(13.3)
|
|
0.5
|
(4%)
|
|
|
(43.5)
|
|
(44.9)
|
|
1.4
|
(3%)
|
Other income
(expense)
|
|
(0.2)
|
|
-
|
|
(0.2)
|
N/A
|
|
|
(0.2)
|
|
0.1
|
|
(0.3)
|
(300%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from
operations
|
|
5.0
|
|
3.1
|
|
1.9
|
62%
|
|
|
21.9
|
|
17.4
|
|
4.5
|
26%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
income
|
|
0.3
|
|
0.4
|
|
(0.1)
|
(25%)
|
|
|
0.8
|
|
1.3
|
|
(0.5)
|
(38%)
|
Financial
expenses
|
|
(0.2)
|
|
(0.2)
|
|
-
|
0%
|
|
|
(0.7)
|
|
(0.8)
|
|
0.1
|
(13%)
|
Net financial
income
|
|
0.1
|
|
0.2
|
|
(0.1)
|
(50%)
|
|
|
0.1
|
|
0.5
|
|
(0.4)
|
(80%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before
income taxes
|
|
5.1
|
|
3.3
|
|
1.8
|
55%
|
|
|
22.0
|
|
17.9
|
|
4.1
|
23%
|
Income
taxes
|
|
(1.4)
|
|
(0.9)
|
|
(0.5)
|
54%
|
|
|
(5.9)
|
|
(4.8)
|
|
(1.1)
|
23%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
$
|
3.7
|
$
|
2.4
|
$
|
1.3
|
55%
|
|
$
|
16.1
|
$
|
13.1
|
$
|
3.0
|
23%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common
share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Basic net
earnings
|
$
|
0.13
|
$
|
0.08
|
$
|
0.05
|
63%
|
|
$
|
0.57
|
$
|
0.46
|
$
|
0.11
|
24%
|
|
- Diluted net
earnings
|
$
|
0.13
|
$
|
0.08
|
$
|
0.05
|
63%
|
|
$
|
0.57
|
$
|
0.46
|
$
|
0.11
|
24%
|
Overall Financial Results
Net earnings increased $1.3
million or 55% and $3.0
million or 23% respectively for the three and nine month
periods ended March 31, 2016, when
compared to the same periods last year. The primary driver of
growth was an increase in commissions, due to the commission rate
increase on PR brands, following the amendment of the September 29, 2006 Canadian representation
agreements with PR referred to under Significant Events. The
impact on net earnings of lower case good shipments is more than
offset by lower advertising and promotional investment in the US
market.
Revenue
The following highlights the key components of the Company's
revenue streams:
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
Mar.
31,
|
Mar.
31,
|
|
|
|
|
Mar.
31,
|
Mar.
31,
|
|
|
|
(in millions of
Canadian dollars)
|
2016
|
2015
|
$
Change
|
%
Change
|
|
2016
|
2015
|
$
Change
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
streams:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Case goods
|
$
|
22.6
|
$
|
22.7
|
$
|
(0.1)
|
0%
|
|
$
|
82.5
|
$
|
84.5
|
$
|
(2.0)
|
(2%)
|
|
Commissions
|
|
4.6
|
|
3.4
|
|
1.2
|
35%
|
|
|
17.1
|
|
12.1
|
|
5.0
|
41%
|
|
Other
services
|
|
0.8
|
|
0.8
|
|
-
|
0%
|
|
|
3.2
|
|
3.0
|
|
0.2
|
8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
28.0
|
$
|
26.8
|
$
|
1.2
|
4%
|
|
$
|
102.8
|
$
|
99.6
|
$
|
3.2
|
3%
|
Case goods revenue declined $0.1
million and $2.0 million
respectively for the three and nine month periods ended
March 31, 2016 when compared to the
same periods last year. The year to date decline reflected a
difficult holiday period in both the Canadian and US markets.
In Canada, in particular, a
significant increase of competitive retail activity in the economy
segments of rum and Canadian whisky was only partially offset by
newly introduced innovation, such as J.P.
Wiser's Double Still Rye and Gooderham & Worts Canadian
whiskies.
Commissions increased $1.2 million
or 35% and $5.0 million or 41%
respectively for the three and nine month periods ended
March 31, 2016 when compared to the
same periods last year. The primary driver of the growth was
the above mentioned commission rate increase on PR brands
supplemented by strong shipments for the PR portfolio.
Other services represents ancillary revenue incidental to
Corby's core business activities such as logistical fees.
Cost of sales
Cost of sales was $10.0 million
for the three month period ended March 31,
2016, which is 4% lower than the same period last year.
Gross margin on case goods for the quarter was 57% compared to 56%
for the prior year quarter.
Cost of sales was $37.2 million
for the nine months ended March 31,
2016 which is 1% lower when compared to the same period last
year. Gross margin on case goods was 57%, consistent with the
prior year period. The difference is attributable to an
amount recognized as payable to a third party distributor and
bottler of Lamb's rum in the UK as part of the planned transition
and termination of the current arrangements beginning July 1, 2016.
Marketing, sales and administration
Marketing, sales and administration expenses decreased 4% and 3%
respectively for the three and nine month periods ended
March 31, 2016 when compared to the
same periods last year. The decrease includes lower investment in
the US to reflect the transition to our adjusted strategy of
concentrating investment on a smaller number of markets where the
portfolio has performed well and the greatest opportunities
exist.
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.
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 with the prior year period.
Income taxes
A reconciliation of the effective tax rate to the statutory
rates for each period is presented below.
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
Mar.
31
|
Mar.
31
|
|
Mar.
31
|
Mar.
31
|
|
|
2016
|
2015
|
|
2016
|
2015
|
|
|
|
|
|
|
|
Combined basic
Federal and Provincial tax rates
|
|
27%
|
27%
|
|
27%
|
27%
|
Other
|
|
0%
|
0%
|
|
0%
|
0%
|
|
|
|
|
|
|
|
Effective tax
rate
|
|
27%
|
27%
|
|
27%
|
27%
|
Liquidity and Capital Resources
Corby's sources of liquidity are its deposits in cash management
pools of $75.6 million as at
March 31, 2016, and its cash
generated from operating activities. Corby's total contractual
maturities are represented by its accounts payable and accrued
liabilities, which totalled $23.1
million as at March 31, 2016,
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
|
|
Nine Months
Ended
|
|
Mar.
31,
|
Mar.
31,
|
|
|
|
Mar.
31,
|
Mar.
31,
|
|
|
(in millions of
Canadian dollars)
|
2016
|
2015
|
$
Change
|
|
2016
|
2015
|
$
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings,
adjusted for non-cash items
|
$
|
6.4
|
$
|
4.7
|
$
|
1.7
|
|
$
|
26.5
|
$
|
22.6
|
$
|
3.9
|
|
Net change in
non-cash working capital
|
|
(5.1)
|
|
(5.5)
|
|
0.4
|
|
|
(6.0)
|
|
(3.6)
|
|
(2.4)
|
|
Net payments for
interest and income taxes
|
|
-
|
|
(0.6)
|
|
0.6
|
|
|
(3.0)
|
|
(4.4)
|
|
1.4
|
|
|
1.3
|
|
(1.4)
|
|
2.7
|
|
|
17.5
|
|
14.6
|
|
2.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property
and equipment
|
|
(1.0)
|
|
(0.4)
|
|
(0.6)
|
|
|
(2.1)
|
|
(1.7)
|
|
(0.4)
|
|
Proceeds from
disposition of property
and equipment
|
|
-
|
|
-
|
|
-
|
|
|
-
|
|
0.2
|
|
(0.2)
|
|
Deposits in cash
management pools
|
|
22.8
|
|
24.3
|
|
(1.5)
|
|
|
18.5
|
|
19.9
|
|
(1.4)
|
|
|
21.8
|
|
23.9
|
|
(2.1)
|
|
|
16.4
|
|
18.4
|
|
(2.0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from note
receivable
|
|
-
|
|
0.6
|
|
(0.6)
|
|
|
-
|
|
0.6
|
|
(0.6)
|
|
Dividends
paid
|
|
(23.1)
|
|
(23.1)
|
|
0.0
|
|
|
(33.9)
|
|
(33.6)
|
|
(0.3)
|
|
|
(23.1)
|
|
(22.5)
|
|
(0.6)
|
|
|
(33.9)
|
|
(33.0)
|
|
(0.9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in
cash
|
$
|
-
|
$
|
-
|
$
|
-
|
|
$
|
-
|
$
|
-
|
$
|
-
|
Operating activities
Net cash from operating activities was $1.3 million during the quarter ended
March 31, 2016 compared to net cash
used of $1.4 million in the same
quarter of the prior year, representing an increase of $2.7 million. The quarter over quarter
change is attributable to higher earnings and lower tax
payments.
For the year to date period, net cash from operating activities
was $17.5 million, an increase of
$2.9 million compared to the same
nine month period last year. Increases in net earnings and
lower tax payments are partially offset by an increase in inventory
levels.
Investing activities
Net cash from investing activities was $21.8 million and $16.4
million for the three and nine month periods ending
March 31, 2016 compared to the
$23.9 million and $18.4 million for the same respective three and
nine month periods last year.
Investment in property and equipment is offset by deposits in
cash management pools. Cash management pools represent cash on
deposit with Citibank NA 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.
Financing activities
Cash used for financing activities was $23.1 million this quarter, an increase of
$0.6 million compared to the same
period last year due to the non-repeat of a note receivable, which
has been completely repaid. Financing activity reflects
dividend payments paid to shareholders including a special dividend
of $17.7 million. The special
dividend payment is consistent with the prior year.
Similarly, year to date cash used for financing activities was
$33.9 million, an increase of
$0.9 million reflecting the
non-repeat of the note receivable referred to above and an increase
in regular quarterly dividends paid to shareholders.
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
|
2016 - Q3
|
|
May 4,
2016
|
|
May 27,
2016
|
|
June 15,
2016
|
|
$ 0.19
|
2016 - Q2
|
|
February 3,
2016
|
|
February 26,
2016
|
|
March 11,
2016
|
|
0.19
|
2016 -
special
|
|
November 11, 2015
(special dividend)
|
|
December 11,
2015
|
|
January 8,
2016
|
|
0.62
|
2016 - Q1
|
|
November 11,
2015
|
|
November 27,
2015
|
|
December 11,
2015
|
|
0.19
|
2015 - Q4
|
|
August 26,
2015
|
|
September 16,
2015
|
|
September 30,
2015
|
|
0.19
|
2015 - Q3
|
|
May 6,
2015
|
|
May 29,
2015
|
|
June 12,
2015
|
|
0.19
|
2015 - Q2
|
|
February 4,
2015
|
|
February 27,
2015
|
|
March 13,
2015
|
|
0.19
|
2015 -
special
|
|
November 05, 2014
(special dividend)
|
|
December 12,
2014
|
|
January 9,
2015
|
|
0.62
|
2015 - Q1
|
|
November 05,
2014
|
|
November 28,
2014
|
|
December 14,
2014
|
|
0.19
|
2014 - Q4
|
|
August 27,
2014
|
|
September 15,
2014
|
|
September 30,
2014
|
|
0.18
|
Outstanding Share Data
As at May 4, 2016, 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 (the
"2006 Agreements"). 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. On
August 26, 2015, Corby entered into
an agreement with PR and certain affiliates amending the
September 29, 2006 Canadian
representation agreements, pursuant to which Corby will provide
more specialized marketing, advertising and promotion services for
the PR and affiliate brands under the applicable representation
agreements in consideration of an increase to the rate of
commission payable to Corby by such entities. On November 11, 2015, Corby and PR entered into
agreements for the continued production of Corby`s owned-brands by
Pernod Ricard at the HWSL production facility in Windsor, Ontario, for a 10 year term
commencing September 30, 2016.
On the same date, Corby and PR also entered into an administrative
services agreement, under which Corby will continue to manage PR's
business interests in Canada,
including the HWSL production facility, with a similar term and
commencement date.
In addition to the 2006 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 and was extended as noted below. These brands were
acquired by PR subsequent to the original representation rights
agreement dated September 29, 2006.
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 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 Aktiebolag, an affiliate of
PR and owner of the Absolut brand, to satisfy the parties'
obligations under the 2011 agreement.
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
J.P. 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.
On March 21, 2016 the Company
entered into an agreement with Pernod Ricard UK Ltd. ("PRUK"), an
affiliated company, which provides PRUK the exclusive right to
represent Lamb's rum in Great
Britain effective July 1,
2016. Previously, Lamb's rum was represented by an unrelated
third party in this market. The agreement provides Lamb's with
access to PRUK's extensive national distribution network throughout
Great Britain. The agreement is
effective for a five year period ending June
30, 2021. Since the agreement with PRUK is a related party
transaction between Corby and PRUK, the agreement was approved by
the Independent Committee of the Board of Directors of Corby
following a thorough 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 Citibank N.A.
effective July 17, 2014. 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
May 4, 2016, 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%. 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
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of
Canadian dollars,
|
|
Q3
|
|
Q2
|
|
Q1
|
|
Q4
|
|
Q3
|
|
Q2
|
|
Q1
|
|
Q4
|
except per share
amounts)
|
|
2016
|
|
2016
|
|
2016
|
|
2015
|
|
2015
|
|
2015
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
28.0
|
$
|
38.3
|
$
|
36.4
|
$
|
32.5
|
$
|
26.8
|
$
|
38.0
|
$
|
34.8
|
$
|
33.4
|
Earnings from
operations
|
|
5.0
|
|
8.2
|
|
8.6
|
|
9.8
|
|
3.1
|
|
7.7
|
|
6.6
|
|
9.2
|
Net
earnings
|
|
3.7
|
|
6.1
|
|
6.3
|
|
7.3
|
|
2.4
|
|
5.8
|
|
4.9
|
|
6.9
|
Basic EPS
|
|
0.13
|
|
0.22
|
|
0.22
|
|
0.26
|
|
0.08
|
|
0.20
|
|
0.17
|
|
0.24
|
Diluted
EPS
|
|
0.13
|
|
0.22
|
|
0.22
|
|
0.26
|
|
0.08
|
|
0.20
|
|
0.17
|
|
0.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The above table demonstrates the seasonality of Corby's
business, as sales are typically strong in the first and second
quarters, while third-quarter sales (January, February and March)
usually decline after the end of the retail holiday season. Fourth
quarter sales typically increase again with the onset of warmer
weather, as consumers tend to increase their purchasing levels
during the summer season. The overall decline experienced in 2015
compared to 2014 is largely attributable to lapping the J.P.
Wiser's Rye and J.P. Wiser's Spiced
whisky launch in the US in 2014. In addition to the
non-repeat of inventory pipe-line build-up for the US launch,
advertising and promotional investment for these brands ramped up
in 2015 to drive awareness and trial. Increases in 2016 are
attributable to an increase in commissions, due to the commission
rate increase on PR brands, following the amendment of the
September 29, 2006 Canadian
representation agreements with PR referred to under Significant
Events.
Recent Accounting Pronouncements
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, 2016,
and accordingly, have not been applied in preparing these interim
condensed consolidated financial statements:
(i) Revenue
In May 2014, the IASB released
IFRS 15, "Revenue from contracts with customers" ("IFRS 15"), which
supersedes IAS 11, "Construction Contracts", IAS 18, "Revenues",
IFRIC 13, "Customer Loyalty Programmes", IFRIC 15, "Agreement for
the Construction of Real Estate", IFRIC 18, "Transfers of Assets
from Customers" and SIC-31, "Revenue – Barter Transactions
Involving Advertising Services". The core principle of IFRS 15 is
that an entity should recognize revenue to depict the transfer of
promised goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in
exchange for those goods or services. IFRS 15 will also result in
enhanced disclosures about revenue, provide guidance for
transactions that were not previously addressed comprehensively
(for example, service revenue and contract modifications) and
improve guidance for multiple-element arrangements. IFRS 15 will be
effective for Corby's fiscal year beginning on July 1, 2018, with earlier application permitted.
The Company has not yet assessed the impact of the adoption of this
standard on its financial statements and disclosures.
(ii) 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.
This standard is effective for annual periods beginning on or after
January 1, 2018 and must be applied
retrospectively. For Corby, this standard will become effective
July 1, 2018. The Company is
currently assessing the impact of the new standard on its financial
statements and disclosures.
(iii) Disclosure
initiative
In December 2014, the IASB issued
Disclosure Initiative Amendments to IAS 1 as part of the IASB's
Disclosure Initiative. These amendments encourage entities to apply
professional judgement regarding disclosure and presentation in
their financial statements. These amendments are effective for
annual periods beginning on or after January
1, 2016. Earlier application is permitted. For Corby, these
amendments will become effective July 1,
2016. The Company is assessing the potential impact of these
amendments.
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. As the Company becomes more
reliant on international product sales in the US, UK and other
countries-exposure to changes in the laws and regulations in those
countries could also adversely affect the operations, financial
performance or reputation of the Company.
The Company continuously monitors the potential risk associated
with any proposed changes to its government policy, regulatory and
taxation environments and, as an industry leader, actively
participates in trade association discussions relating to new
developments.
Consumer Consumption Patterns
Beverage alcohol
companies are susceptible to risks relating to changes in consumer
consumption patterns. Consumer consumption patterns are affected by
many external influences, not the least of which is economic
outlook and overall consumer confidence in the stability of the
economy as a whole. Corby offers a diverse portfolio of products
across all major spirits categories and at various price
points. Corby continues to identify and offer new innovations
in order to address consumer desires.
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. International sales are
subject to the variations in distribution systems within each
country where the products are sold.
Supply chain interruptions, including a manufacturing or
inventory disruption, could impact product quality and
availability. The Company adheres to a comprehensive suite of
quality programmes and proactively manages production and supply
chains to mitigate any potential risk to consumer safety or Corby's
reputation and profitability.
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 continued to experience
consolidation. Industry consolidation can have varying degrees of
impact and, in some cases, may even create exceptional
opportunities. Either way, management believes that the Company is
well positioned to deal with this or other changes to the
competitive landscape in Canada
and other markets in which it carries on business.
Competition
The Canadian and international
beverage alcohol industry is extremely competitive. Competitors may
take actions to establish and sustain a competitive advantage
through advertising and promotion and pricing strategies in an
effort to maintain market share. 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. Its role as
a leading Canadian beverage alcohol company helps facilitate
recruitment efforts.
Credit Risk
Credit risk arises from deposits in
cash management pools held with PR via Corby's participation in the
Mirror Netting Service Agreement (as previously described in the
"Related Party Transactions" section of this MD&A), as well as
credit exposure to customers, including outstanding accounts
receivable. The maximum exposure to credit risk is equal to the
carrying value of the Company's financial assets. The objective of
managing 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.
Exposure to Interest Rate Fluctuations
The
Company does not have any short- or long-term debt facilities.
Interest rate risk exists, as Corby earns market rates of interest
on its deposits in cash management pools. An active risk management
programme does not exist, as management believes that changes in
interest rates would not have a material impact on Corby's
financial position over the long term.
Exposure to Commodity Price
Fluctuations
Commodity risk exists, as the manufacture
of Corby's products requires the procurement of several known
commodities, such as grains, sugar and natural gas. The Company
strives to partially mitigate this risk through the use of
longer-term procurement contracts where possible. In addition,
subject to competitive conditions, the Company may pass on
commodity price changes to consumers through pricing over the long
term.
Foreign Currency Exchange Risk
The Company has
exposure to foreign currency risk, as it conducts business in
multiple foreign currencies; however, its exposure is primarily
limited to the US dollar ("USD") and 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 and Advertising &
Promotion expenses exceeding that of the Company's USD sales.
Therefore, decreases in the value of the Canadian dollar ("CAD")
relative to the USD will have an unfavourable impact on the
Company's earnings.
GBP Exposure
The Company's exposure to fluctuations in the value of the GBP
relative to the CAD was reduced as both sales and cost of
production are denominated in GBP. While Corby's exposure has been
minimized, increases in the value of the CAD relative to the GBP
will have an unfavourable impact on the Company's earnings.
Third-Party Service Providers
HWSL, which Corby
manages on behalf of PR, provides more than 90% of the Company's
production requirements, among other services including
administration and information technology. However, the Company is
reliant upon certain third-party service providers in respect of
certain of its operations. It is possible that negative events
affecting these third-party service providers could, in turn,
negatively impact the Company. While the Company has no direct
control over how such third parties are managed, it has entered
into contractual arrangements to formalize these relationships. In
order to minimize operating risks, the Company actively monitors
and manages its relationships with its third-party service
providers.
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.
Information Technology
The Company uses
technology supplied by third parties, both related and non-related,
to support operations and invests in information technology to
improve route to market, reporting, analysis, and marketing
initiatives. Issues with availability, reliability and
security of systems and technology could adversely impact the
Company's ability to compete resulting in corruption or loss of
data, regulatory related issues, litigation or brand reputation
damage. With the fast paced changing nature of the technology
environment including digital marketing the Company works with our
third parties to maintain policies, processes and procedures to
help secure and protect these information systems as well as
consumer, corporate and employee data.
Valuation of 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 table 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
March 31, 2016
|
Associated
Brand
|
|
Associated
Market
|
|
|
Goodwill
|
Intangibles
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Various PR
brands
|
|
Canada
|
|
|
$
|
-
|
$
|
32.1
|
$
|
32.1
|
Lamb's rum
|
|
United
Kingdom(1)
|
|
|
|
1.4
|
|
11.8
|
|
13.2
|
Corby domestic
brands
|
|
Canada
|
|
|
|
1.9
|
|
-
|
|
1.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3.3
|
$
|
43.9
|
$
|
47.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 9 of the consolidated
financial statements for the year ended June
30, 2015.
CORBY SPIRIT AND
WINE LIMITED
|
INTERIM CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
(Not audited or
reviewed by the Company's external auditor)
|
(in thousands of
Canadian dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mar.
31,
|
|
Mar. 31,
|
|
June 30,
|
|
|
Notes
|
|
|
2016
|
|
2015
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Deposits in cash
management pools
|
|
|
|
$
|
75,598
|
$
|
88,145
|
$
|
94,100
|
Accounts
receivable
|
|
5
|
|
|
26,214
|
|
25,658
|
|
24,763
|
Income taxes
recoverable
|
|
|
|
|
-
|
|
1,354
|
|
1,257
|
Inventories
|
|
6
|
|
|
52,907
|
|
52,987
|
|
50,858
|
Prepaid
expenses
|
|
|
|
|
336
|
|
314
|
|
226
|
|
|
|
|
|
|
|
|
|
|
Total current
assets
|
|
|
|
|
155,055
|
|
168,458
|
|
171,204
|
Deferred income
taxes
|
|
|
|
|
683
|
|
592
|
|
1,165
|
Property and
equipment
|
|
|
|
|
10,647
|
|
9,090
|
|
9,784
|
Goodwill
|
|
|
|
|
3,278
|
|
3,278
|
|
3,278
|
Intangible
assets
|
|
|
|
|
43,868
|
|
49,751
|
|
48,281
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
|
|
$
|
213,531
|
$
|
231,169
|
$
|
233,712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
Accounts payable and
accrued liabilities
|
|
7
|
|
$
|
23,111
|
$
|
25,483
|
$
|
25,540
|
Income and other
taxes payable
|
|
|
|
|
489
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total current
liabilities
|
|
|
|
|
23,600
|
|
25,483
|
|
25,540
|
Provision for
employee benefits
|
|
|
|
|
19,029
|
|
17,093
|
|
20,048
|
Total
liabilities
|
|
|
|
|
42,629
|
|
42,576
|
|
45,588
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
|
|
|
|
|
|
|
|
Share
capital
|
|
|
|
|
14,304
|
|
14,304
|
|
14,304
|
Accumulated other
comprehensive loss
|
|
|
|
|
(6,184)
|
|
(4,331)
|
|
(6,733)
|
Retained
earnings
|
|
|
|
|
162,782
|
|
178,620
|
|
180,553
|
|
|
|
|
|
|
|
|
|
|
Total
shareholders' equity
|
|
|
|
|
170,902
|
|
188,593
|
|
188,124
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
and shareholders' equity
|
|
|
|
$
|
213,531
|
$
|
231,169
|
$
|
233,712
|
The accompanying
notes are an integral part of these condensed consolidated
financial statements.
|
CORBY SPIRIT AND
WINE LIMITED
|
INTERIM CONDENSED
CONSOLIDATED STATEMENTS OF EARNINGS
|
|
|
|
|
|
|
|
|
|
|
(Not audited or
reviewed by the Company's external auditor)
|
(in thousands of
Canadian dollars, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
|
For the Nine
Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mar.
31,
|
|
Mar. 31,
|
|
Mar.
31,
|
|
Mar. 31,
|
|
Notes
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
8
|
$
|
28,042
|
$
|
26,838
|
$
|
102,800
|
$
|
99,593
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
|
|
(10,004)
|
|
(10,372)
|
|
(37,197)
|
|
(37,357)
|
Marketing, sales and
administration
|
|
|
(12,808)
|
|
(13,363)
|
|
(43,528)
|
|
(44,859)
|
Other (expense)
income
|
9
|
|
(198)
|
|
15
|
|
(215)
|
|
48
|
|
|
|
|
|
|
|
|
|
|
Earnings from
operations
|
|
|
5,032
|
|
3,118
|
|
21,860
|
|
17,425
|
|
|
|
|
|
|
|
|
|
|
Financial
income
|
10
|
|
269
|
|
395
|
|
860
|
|
1,303
|
Financial
expenses
|
10
|
|
(250)
|
|
(266)
|
|
(729)
|
|
(848)
|
|
|
|
19
|
|
129
|
|
131
|
|
455
|
|
|
|
|
|
|
|
|
|
|
Earnings before
income taxes
|
|
|
5,051
|
|
3,247
|
|
21,991
|
|
17,880
|
|
|
|
|
|
|
|
|
|
|
Current income
taxes
|
|
|
(1,159)
|
|
(874)
|
|
(5,603)
|
|
(4,727)
|
Deferred income
taxes
|
|
|
(229)
|
|
(6)
|
|
(281)
|
|
(80)
|
Income
taxes
|
|
|
(1,388)
|
|
(880)
|
|
(5,884)
|
|
(4,807)
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
$
|
3,663
|
$
|
2,367
|
$
|
16,107
|
$
|
13,073
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
|
$
|
0.13
|
$
|
0.08
|
$
|
0.57
|
$
|
0.46
|
Diluted earnings
per share
|
|
$
|
0.13
|
$
|
0.08
|
$
|
0.57
|
$
|
0.46
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
28,468,856
|
|
28,468,856
|
|
28,468,856
|
|
28,468,856
|
Diluted
|
|
|
28,468,856
|
|
28,468,856
|
|
28,468,856
|
|
28,468,856
|
The accompanying
notes are an integral part of these condensed consolidated
financial statements.
|
CORBY SPIRIT AND
WINE LIMITED
|
INTERIM CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
(Not audited or
reviewed by the Company's external auditor)
|
(in thousands of
Canadian dollars)
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
|
For the Nine
Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
Mar.
31,
|
|
Mar. 31,
|
|
Mar.
31,
|
|
Mar. 31,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
$
|
3,663
|
$
|
2,367
|
$
|
16,107
|
$
|
13,073
|
|
|
|
|
|
|
|
|
|
Amounts that will not
be subsequently reclassified to earnings:
|
|
|
|
|
|
|
|
|
Net actuarial gains
|
|
250
|
|
234
|
|
750
|
|
(42)
|
Income taxes
|
|
(67)
|
|
(62)
|
|
(201)
|
|
14
|
|
|
183
|
|
172
|
|
549
|
|
(28)
|
|
|
|
|
|
|
|
|
|
Total
comprehensive income
|
$
|
3,846
|
$
|
2,539
|
$
|
16,656
|
$
|
13,045
|
INTERIM CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
|
|
(Not audited or
reviewed by the Company's external auditor)
|
|
|
|
|
|
|
|
(in thousands of
Canadian dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
Capital
|
Accumulated
Other
Comprehensive
Loss
|
|
Retained
Earnings
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
Balance as at June
30, 2015
|
|
$
|
14,304
|
$
|
(6,733)
|
$
|
180,553
|
$
|
188,124
|
Total comprehensive
income
|
|
|
-
|
|
549
|
|
16,107
|
|
16,656
|
Dividends
|
|
|
-
|
|
-
|
|
(33,878)
|
|
(33,878)
|
|
|
|
|
|
|
|
|
|
|
Balance as at
March 31, 2016
|
|
$
|
14,304
|
$
|
(6,184)
|
$
|
162,782
|
$
|
170,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at June
30, 2014
|
|
$
|
14,304
|
$
|
(4,303)
|
$
|
199,140
|
$
|
209,141
|
Total comprehensive
income
|
|
|
-
|
|
(28)
|
|
13,073
|
|
13,045
|
Dividends
|
|
|
-
|
|
-
|
|
(33,593)
|
|
(33,593)
|
|
|
|
|
|
|
|
|
|
|
Balance as at March
31, 2015
|
|
$
|
14,304
|
$
|
(4,331)
|
$
|
178,620
|
$
|
188,593
|
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
|
|
|
|
|
|
|
|
|
|
|
(Not audited or
reviewed by the Company's external auditor)
|
(in thousands of
Canadian dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
|
For the Nine
Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mar.
31,
|
|
Mar. 31,
|
|
Mar.
31,
|
|
Mar. 31,
|
|
Notes
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
$
|
3,663
|
$
|
2,367
|
$
|
16,107
|
$
|
13,073
|
Adjustments
for:
|
|
|
|
|
|
|
|
|
|
Amortization and
depreciation
|
11
|
|
1,911
|
|
1,855
|
|
5,695
|
|
5,584
|
Net financial
income
|
10
|
|
(19)
|
|
(129)
|
|
(131)
|
|
(455)
|
Gain on disposal of
property and equipment
|
|
|
-
|
|
(17)
|
|
(7)
|
|
(100)
|
Income tax
expense
|
|
|
1,388
|
|
880
|
|
5,884
|
|
4,807
|
Provision for
employee benefits
|
|
|
(487)
|
|
(256)
|
|
(988)
|
|
(281)
|
|
|
|
6,456
|
|
4,700
|
|
26,560
|
|
22,628
|
Net change in
non-cash working capital balances
|
12
|
|
(5,149)
|
|
(5,456)
|
|
(6,039)
|
|
(3,550)
|
Interest
received
|
|
|
259
|
|
411
|
|
851
|
|
1,296
|
Income taxes
paid
|
|
|
(280)
|
|
(1,064)
|
|
(3,857)
|
|
(5,735)
|
|
|
|
|
|
|
|
|
|
|
Net cash from
operating activities
|
|
|
1,286
|
|
(1,409)
|
|
17,515
|
|
14,639
|
|
|
|
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
|
|
|
|
Additions to property
and equipment
|
|
|
(1,006)
|
|
(456)
|
|
(2,152)
|
|
(1,701)
|
Proceeds from
disposition of property and equipment
|
|
|
1
|
|
32
|
|
12
|
|
171
|
Deposits in cash
management pools
|
|
|
22,778
|
|
24,294
|
|
18,502
|
|
19,884
|
|
|
|
|
|
|
|
|
|
|
Net cash used in
investing activities
|
|
|
21,773
|
|
23,870
|
|
16,362
|
|
18,354
|
|
|
|
|
|
|
|
|
|
|
Financing
activity
|
|
|
|
|
|
|
|
|
|
Proceeds from note
receivable
|
|
|
-
|
|
600
|
|
-
|
|
600
|
Dividends
paid
|
|
|
(23,059)
|
|
(23,061)
|
|
(33,877)
|
|
(33,593)
|
|
|
|
|
|
|
|
|
|
|
Net cash used in
financing activity
|
|
|
(23,059)
|
|
(22,461)
|
|
(33,877)
|
|
(32,993)
|
|
|
|
|
|
|
|
|
|
|
Net increase in
cash
|
|
|
-
|
|
-
|
|
-
|
|
-
|
Cash, beginning of
period
|
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash, end of
period
|
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
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
(Not audited or reviewed by the Company's external
auditor)
(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. The
Company also supplements these primary sources of revenue with
other ancillary activities incidental to its core business, such as
logistics fees.
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 March 31,
2016.
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 interim condensed consolidated financial statements. These
interim condensed consolidated financial statements should be read
in conjunction with the Company's 2015 annual financial
statements.
These interim condensed consolidated financial statements were
approved by the Company's Board of Directors on May 4, 2016.
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 IFRS as explained in the accounting
policies below. Historical cost is generally based on the fair
value of the consideration given in exchange for assets.
Use of Estimates and Judgements
The preparation
of 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 interim condensed 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 interim condensed
consolidated financial statements and estimates and assumptions are
more commonly used in determining the measurement of recognized
transactions and balances. However, judgement and estimates are
often interrelated.
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.
Seasonality
The interim condensed consolidated
financial statements should not be taken as indicative of the
performance to be expected for the full fiscal year due to the
seasonal nature of the spirits business. Corby's operations are
typically subject to seasonal fluctuations in that the retail
holiday season generally results in an increase in consumer
purchases over the course of October, November and December.
Further, the summer months traditionally result in higher consumer
purchases of spirits as compared to the winter and spring months.
As a result, the Company's first and second quarter of each fiscal
year tend to reflect the impact of seasonal fluctuations in that
more shipments are typically made during those quarters.
3. ADOPTION OF NEW AND REVISED STANDARDS AND
INTERPRETATIONS
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, 2016,
and accordingly, have not been applied in preparing these interim
condensed consolidated financial statements:
(i) Revenue
In May 2014, the IASB released
IFRS 15, "Revenue from contracts with customers" ("IFRS 15"), which
supersedes IAS 11, "Construction Contracts", IAS 18, "Revenues",
IFRIC 13, "Customer Loyalty Programmes", IFRIC 15, "Agreement for
the Construction of Real Estate", IFRIC 18, "Transfers of Assets
from Customers" and SIC-31, "Revenue – Barter Transactions
Involving Advertising Services". The core principle of IFRS 15 is
that an entity should recognize revenue to depict the transfer of
promised goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in
exchange for those goods or services. IFRS 15 will also result in
enhanced disclosures about revenue, provide guidance for
transactions that were not previously addressed comprehensively
(for example, service revenue and contract modifications) and
improve guidance for multiple-element arrangements. IFRS 15 will be
effective for Corby's fiscal year beginning on July 1, 2018, with earlier application permitted.
The Company is currently assessing the impact of the new standard
on its financial statements and disclosures.
(ii) 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.
This standard is effective for annual periods beginning on or
after January 1, 2018 and must be
applied retrospectively. For Corby, this standard will become
effective July 1, 2018. The Company
is currently assessing the impact of the new standard on its
financial statements and disclosures.
(iii) Disclosure
initiative
In December 2014, the IASB issued
Disclosure Initiative Amendments to IAS 1 as part of the IASB's
Disclosure Initiative. These amendments encourage entities to apply
professional judgement regarding disclosure and presentation in
their financial statements. These amendments are effective for
annual periods beginning on or after January
1, 2016. Earlier application is permitted. For Corby, these
amendments will become effective July 1,
2016. The Company is assessing the potential impact of these
amendments.
(iv) Leases
In January 2016, the IASB issued a
new standard IFRS 16, "Leases" ("IFRS 16"), which will ultimately
replace IAS 17, "Leases" ("IAS 17"). IFRS 16 specifies how an
entity will recognize, measure, present and disclose leases. The
standard provides a single lessees accounting model, requiring
lessees to recognize assets and liability for all leases unless the
lease term is 12 months or less or the underlying asset has a low
value. The standard is effective for annual periods beginning on or
after January 1, 2019 and must be
applied retrospectively. For Corby, this standard will become
effective July 1, 2019. The Company
is currently assessing the impact of the new standard on its
financial statements and disclosures.
4. FAIR VALUE
The Company uses a fair value hierarchy in order to classify the
fair value measurements and disclosures related to the Company's
financial assets and financial liabilities. The fair value
hierarchy has the following levels:
- Level 1 – Quoted market prices in active markets for identical
assets or liabilities;
- Level 2 – Inputs other than quoted market prices included in
Level 1 that are observable for the asset or liability, either
directly (as prices) or indirectly (derived from prices); and
- Level 3 – Unobservable inputs such as inputs for the asset or
liability that are not based on observable market data.
The level in the fair value hierarchy within which the fair
value measurement is categorized in its entirety is determined on
the basis of the lowest level input that is significant to the fair
value measurement in its entirety.
The Company has no financial instruments carried at fair value
on its balance sheet. For financial assets and liabilities that are
valued at other than fair value on its balance sheets (i.e.,
deposits in cash management pools, accounts receivable, accounts
payable and accrued liabilities), fair value approximates their
carrying value at each balance sheet date due to their short-term
maturities. Fair value is determined using Level 2 inputs.
5. ACCOUNTS RECEIVABLE
|
|
|
|
|
Mar.
31,
|
|
Mar. 31,
|
|
June 30,
|
|
|
|
|
|
2016
|
|
2015
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Trade
receivables
|
|
|
|
$
|
14,779
|
$
|
15,410
|
$
|
14,401
|
Due from related
parties
|
|
|
|
|
9,677
|
|
8,835
|
|
8,721
|
Other
|
|
|
|
|
1,758
|
|
1,413
|
|
1,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
26,214
|
$
|
25,658
|
$
|
24,763
|
6. INVENTORIES
|
|
|
|
|
|
|
Mar.
31,
|
|
Mar. 31,
|
|
June 30,
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Raw
materials
|
|
|
|
|
|
$
|
1,987
|
$
|
1,893
|
$
|
2,113
|
Work-in-progress
|
|
|
|
|
|
|
43,842
|
|
41,775
|
|
42,426
|
Finished
goods
|
|
|
|
|
|
|
7,078
|
|
9,319
|
|
6,319
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
52,907
|
$
|
52,987
|
$
|
50,858
|
The cost of inventory recognized as an expense and included in
cost of goods sold for the three and nine months ended March 31, 2016 was $7,391 and $28,750
(2015 – $7,951 and $29,860), respectively. During the three and nine
month periods ended March 31, 2016
and 2015, 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.
7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
|
|
|
|
Mar.
31,
|
|
Mar. 31,
|
|
June 30,
|
|
|
|
|
2016
|
|
2015
|
|
2015
|
|
|
|
|
|
|
|
|
|
Trade payables and
accruals
|
|
|
$
|
15,260
|
$
|
16,577
|
$
|
17,951
|
Due to related
parties
|
|
|
|
6,735
|
|
8,038
|
|
6,385
|
Other
|
|
|
|
1,116
|
|
868
|
|
1,204
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
23,111
|
$
|
25,483
|
$
|
25,540
|
8. REVENUE
The Company's revenue consists of the following streams:
|
|
Three months
ended
|
Nine months
ended
|
|
|
|
Mar.
31,
|
|
Mar. 31,
|
|
Mar.
31,
|
|
Mar. 31,
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Case goods
sales
|
|
$
|
22,584
|
$
|
22,669
|
$
|
82,480
|
$
|
84,489
|
Commissions (net of
amortization of
|
|
|
|
|
|
|
|
|
|
representation
rights)
|
|
|
4,603
|
|
3,362
|
|
17,083
|
|
12,133
|
Other
services
|
|
|
855
|
|
807
|
|
3,237
|
|
2,971
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
28,042
|
$
|
26,838
|
$
|
102,800
|
$
|
99,593
|
Commissions for the three and nine month periods are shown net
of amortization of long-term representation rights and
non-refundable upfront fees of $1,471
and $4,412 (2015 - $1,471 and $4,412).
Other services include revenues incidental to the manufacture of
case goods, such as logistics fees.
9. OTHER (EXPENSE) INCOME
The Company's other (expense) income consists of the following
amounts:
|
Three months
ended
|
Nine months
ended
|
|
|
Mar.
31,
|
|
Mar. 31,
|
|
Mar.
31,
|
|
Mar. 31,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
Foreign exchange
loss
|
$
|
(198)
|
$
|
(16)
|
$
|
(222)
|
$
|
(81)
|
Gain on disposal of
property and equipment
|
|
-
|
|
31
|
|
7
|
|
114
|
Other
income
|
|
-
|
|
-
|
|
-
|
|
15
|
|
|
|
|
|
|
|
|
|
|
$
|
(198)
|
$
|
15
|
$
|
(215)
|
$
|
48
|
10. NET FINANCIAL INCOME AND EXPENSE
The Company's financial income consists of the following
amounts:
|
|
|
Three months
ended
|
Nine months
ended
|
|
|
|
|
Mar.
31,
|
|
Mar. 31,
|
|
Mar.
31,
|
|
Mar. 31,
|
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
$
|
269
|
$
|
395
|
$
|
860
|
$
|
1,303
|
Interest
expense
|
|
|
|
(10)
|
|
-
|
|
(10)
|
|
(7)
|
Net financial impact
of pensions
|
|
|
|
(240)
|
|
(266)
|
|
(719)
|
|
(841)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19
|
$
|
129
|
$
|
131
|
$
|
455
|
11. EXPENSES BY NATURE
Earnings from operations include depreciation and amortization,
as well as personnel expenses as follows:
|
|
Three months
ended
|
Nine months
ended
|
|
|
|
Mar.
31,
|
|
Mar. 31,
|
|
Mar.
31,
|
|
Mar. 31,
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Depreciation of
property and equipment
|
|
$
|
440
|
$
|
384
|
$
|
1,283
|
$
|
1,172
|
Amortization of
intangible assets
|
|
|
1,471
|
|
1,471
|
|
4,412
|
|
4,412
|
Salary and payroll
costs
|
|
|
5,551
|
|
5,556
|
|
16,382
|
|
16,771
|
Expenses related to
pensions and benefits
|
|
|
323
|
|
244
|
|
968
|
|
957
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,785
|
$
|
7,655
|
$
|
23,045
|
$
|
23,312
|
12. NET CHANGE IN NON-CASH WORKING CAPITAL BALANCES
|
|
Three months
ended
|
Nine months
ended
|
|
|
|
Mar.
31,
|
|
Mar. 31,
|
|
Mar.
31,
|
|
Mar. 31,
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
$
|
4,384
|
$
|
5,228
|
$
|
(1,451)
|
$
|
(840)
|
Inventories
|
|
|
(1,524)
|
|
(1,572)
|
|
(2,049)
|
|
(426)
|
Prepaid
expenses
|
|
|
35
|
|
132
|
|
(110)
|
|
(58)
|
Accounts payable and
accrued liabilities
|
|
|
(8,044)
|
|
(9,244)
|
|
(2,429)
|
|
(2,226)
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(5,149)
|
$
|
(5,456)
|
$
|
(6,039)
|
$
|
(3,550)
|
13. DIVIDENDS
On May 4, 2016 subsequent to the
quarter ended March 31, 2016, the
Board of Directors declared its regular quarterly dividend of
$0.19 per common share, to be paid on
June 15, 2016, to shareholders of
record as at the close of business on May
27, 2016. This dividend is in accordance with the Company's
dividend policy.
14. RELATED PARTY TRANSACTIONS
Transactions with parent, ultimate parent, and
affiliates
The majority of Corby's issued and
outstanding voting Class A shares are owned by HWSL. HWSL is a
wholly-owned subsidiary of PR. Therefore, HWSL is Corby's parent
and PR is Corby's ultimate parent. Affiliated companies are
subsidiaries which are controlled by Corby's parent and/or ultimate
parent.
The companies operate under the terms of agreements that became
effective on 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.
Recently, the production and administrative agreements were each
renewed for a further ten year term, commencing October 2016.
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 and was extended as noted below.
These brands were acquired by PR subsequent to the original
representation rights agreement dated September 29, 2006.
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 Aktiebolag, an affiliate of
PR and owner of the Absolut brand, to satisfy the parties'
obligations under the 2011 agreement.
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
J. P. Wiser's Canadian whisky and
Polar Ice vodka in the US. Previously, J.
P. 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.
On March 21, 2016 the Company
entered into an agreement with Pernod Ricard UK Ltd. ("PRUK"), an
affiliated company, which provides PRUK the exclusive rights to
represent Lamb's rum in Great
Britain effective July 1,
2016. Previously, Lamb's rum was represented by an unrelated
third party in this market. The agreement is effective for a five
year period ending June 30, 2021.
Transactions between Corby and its parent, ultimate parent and
affiliates during the period are as follows:
|
|
Three months
ended
|
Nine months
ended
|
|
|
|
Mar.
31,
|
|
Mar. 31,
|
|
Mar.
31,
|
|
Mar. 31,
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Sales to related
parties
|
|
|
|
|
|
|
|
|
|
Commissions - parent,
ultimate parent and affiliated companies
|
|
$
|
5,459
|
$
|
4,163
|
$
|
19,737
|
$
|
14,402
|
Products for resale
at an export level - affiliated companies
|
|
|
1,186
|
|
1,033
|
|
3,854
|
|
4,173
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,645
|
$
|
5,196
|
$
|
23,591
|
$
|
18,575
|
|
|
|
|
|
|
|
|
|
|
Cost of goods
sold, purchased from related parties
|
|
|
|
|
|
|
|
|
|
Distilling, blending,
and production services - parent
|
|
$
|
5,061
|
$
|
5,767
|
$
|
17,305
|
$
|
16,244
|
|
|
|
|
|
|
|
|
|
|
Administrative
services purchased from related parties
|
|
|
|
|
|
|
|
|
|
Marketing, selling
and administration services - parent
|
|
$
|
638
|
$
|
625
|
$
|
1,912
|
$
|
1,875
|
Marketing, selling
and administration services - affiliate
|
|
|
360
|
|
1,560
|
|
5,130
|
|
6,594
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
998
|
$
|
2,185
|
$
|
7,042
|
$
|
8,469
|
Balances outstanding with related parties are due within 60
days, are to be settled in cash and are unsecured.
During the three and nine month periods ending March 31, 2016, Corby sold casks to its parent
company for net proceeds of $1 and
$12 (2015 - $32 and $171),
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 Citibank N.A.. 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
May 4, 2016, 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 nine month periods ending March 31, 2016, Corby earned interest income of
$275 and $871 from PR (2015 – $390 and $1,294),
respectively. Corby has the right to terminate its participation in
the Mirror Netting Services Agreement at any time, subject to five
days' written notice.
15. SEGMENT INFORMATION
Corby has two reportable segments: Case Goods and Commissions.
Corby's Case Goods segment derives its revenue from the production
and distribution of its owned beverage alcohol brands. Corby's
portfolio of owned-brands includes some of the most renowned and
respected brands in Canada, such
as J. P. 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 8 of the interim condensed consolidated
financial statements. Therefore, a table detailing operational
results by segment has not been provided as no additional
meaningful information would result.
SOURCE Corby Spirit and Wine Limited