TORONTO, Aug. 24, 2016 /CNW/ - Corby Spirit and Wine
Limited ("Corby" or the "Company") (TSX: CSW.A, CSW.B) today
reported its financial results for the fourth quarter ended
June 30, 2016. The Corby Board of
Directors today also declared a dividend of $0.19 per share payable on September 30, 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 September 15, 2016.
Net earnings of $9.3 million (or
$0.33 per share) were reported for
the three month period ended June 30,
2016, representing an improvement of $2.0 million or 27% when compared with the same
quarter last year. On a full year basis, Net earnings of
$25.4 million (or $0.89 per share) represents an increase of
$5.0 million or 25% when compared
with last year.
Corby's strong quarterly and yearly earnings performance was
largely the result of a negotiated increase in commission rates on
Pernod Ricard brands, following the amendment of the September 29, 2006 Canadian representation
agreements. The commission rate change was supplemented by strong
shipments for the Pernod Ricard brand portfolio, which is weighted
in the higher growth spirit and wine categories. While overall
shipments of Corby-owned brands were lower year over year, the
earnings impact was more than offset by decreased advertising and
promotional investment in the US market as a result of a more
focused strategy.
"I am pleased with Corby's strong fourth quarter and full year
earnings results which highlighted the importance of the Pernod
Ricard portfolio while we revitalize and reposition our portfolio
of owned brands towards more fertile growth segments. In particular
it was pleasing to see the continued growth and acclaim around our
premium craft Canadian whisky range both in Canada and international markets", 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 consolidated financial statements and
accompanying notes for the three-months and year ended June 30, 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
June 30,
2016
The following Management's Discussion and Analysis ("MD&A")
dated August 24, 2016, should be read
in conjunction with the audited consolidated financial statements
and accompanying notes as at and for the year ended June 30, 2016, prepared in accordance with
International Financial Reporting Standards ("IFRS").
This MD&A contains forward-loking 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 August 24, 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
fourth quarter of fiscal 2016 (three months ended June 30, 2016) are against results for the fourth
quarter of fiscal 2015 (three months ended June 30, 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 and from time to time bulk whisky sales to rebalance
its maturation inventories. 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.
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. The agreements reflecting these
arrangements were scheduled to expire September 29, 2016. On November 11, 2015, the parties entered into new
agreements (a distillate supply agreement, a co-pack agreement and
an administrative services agreement) each for a ten year term
commencing 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
in volume (measured in nine-litre case equivalents). In the past,
the Company was able to also provide retail value information
(measured in Canadian dollars). However, retail value information
has no longer been provided due to the province of British Columbia changing its value data from
retail dollars to wholesale dollars. This change in methodology
distorts comparability against prior periods and with other
provincial LB customers. It is not known at this time when the
Company will be able to re-introduce this retail value level of
analysis.
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 in fiscal 2016, Corby utilized a third party
contract bottler and distribution company for the production and
distribution of Lamb's rum. These arrangements were terminated on
June 30, 2016. Corby has signed an
agreement with a new distributor and is finalizing an agreement
with a new manufacturer. More information has been provided in the
"Related Party Transactions" section of this MD&A. 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. Corby benefits from having
access to leading-edge practices at PR's North American hub, which
is located in Windsor, Ontario,
where most of its products are manufactured.
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 ten-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.
Three-Year Review of Selected Financial Information
The following table provides a summary of certain selected
consolidated financial information for the Company. This
information has been prepared in accordance with IFRS.
|
|
|
|
|
|
|
|
(in millions of
Canadian dollars, except per share amounts)
|
|
|
2016
|
|
2015
|
|
2014(1)
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
140.0
|
$
|
132.1
|
$
|
137.3
|
|
|
|
|
|
|
|
|
Earnings from
operations
|
|
|
34.6
|
|
27.2
|
|
33.5
|
|
- Earnings from
operations per common share
|
|
|
1.22
|
|
0.96
|
|
1.18
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
|
25.4
|
|
20.4
|
|
25.0
|
|
- Basic earnings per
share
|
|
|
0.89
|
|
0.72
|
|
0.88
|
|
- Diluted earnings
per share
|
|
|
0.89
|
|
0.72
|
|
0.88
|
|
|
|
|
|
|
|
|
Total
assets
|
|
|
228.5
|
|
233.7
|
|
254.9
|
Total
liabilities
|
|
|
57.7
|
|
45.6
|
|
45.8
|
|
|
|
|
|
|
|
|
Regular dividends
paid per share
|
|
|
0.76
|
|
0.75
|
|
0.71
|
Special dividends
paid per share
|
|
|
0.62
|
|
0.62
|
|
-
|
|
|
|
|
|
|
|
|
1In
preparing its comparative information, the Company has adjusted
amounts reported previously in the
consolidated balance sheet as a result of
the retrospective application of the amendments to IAS 32,
Financial Instruments - Presentation.
|
As depicted in the above chart, revenue and net earnings dipped
sharply in 2015, then recovered in 2016. The decrease noted in 2015
was largely attributable to the lapping of the J.P. Wiser's
Canadian whisky launch in the US market (launched in 2014). As with
any launch this size, the initial inventory pipeline buildup was
significant. In addition, 2015 included substantial advertising and
promotional investment to further support the brand in the US, thus
adding more downward pressure on earnings that year.
Net earnings recovered in 2016, increasing $5.0 million from 2015. This year over year
improvement was primarily the result of an increase in commissions,
due to the negotiated commission rate increase on PR brands,
following the amendment of the September 29,
2006 Canadian representation agreements with PR referred to
under the "Significant Events" section of this MD&A. In
addition, the Company sold bulk whisky as it rebalanced its
maturation inventories, which is a normal industry practice as
strategy is refined and future forecasts updated.
Net assets (i.e., total assets less total liabilities) had a
decreasing trend since 2014. This is primarily the result of Corby
returning value to shareholders via a special dividend in each of
2015 and 2016 with a dividend of $0.62 per share or $17.7
million being paid each year.
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.
|
BRAND PERFORMANCE
CHART - INCLUDES BOTH CANADIAN AND INTERNATIONAL
SHIPMENTS
|
|
|
|
|
|
|
Three Months
Ended
|
Year
Ended
|
|
|
|
|
Shipment
Change
|
|
|
Shipment
Change
|
|
|
June
30
|
June
30
|
Volume
|
Value
|
June
30
|
June
30
|
Volume
|
Value
|
(Volumes in 000's
of 9L cases)
|
|
2016
|
2015
|
%
|
%
|
2016
|
2015
|
%
|
%
|
|
|
|
|
|
|
|
|
|
|
Brand
|
|
|
|
|
|
|
|
|
|
J.P. Wiser's Canadian
whisky
|
|
207
|
194
|
7%
|
10%
|
810
|
806
|
0%
|
2%
|
Lamb's rum
|
|
94
|
109
|
(14%)
|
(13%)
|
450
|
503
|
(10%)
|
(9%)
|
Polar Ice
vodka
|
|
101
|
97
|
5%
|
9%
|
375
|
383
|
(2%)
|
2%
|
Mixable
liqueurs
|
|
42
|
42
|
(1%)
|
(5%)
|
167
|
174
|
(4%)
|
(5%)
|
|
|
|
|
|
|
|
|
|
|
Total Key
Brands
|
|
445
|
442
|
1%
|
3%
|
1,802
|
1,866
|
(3%)
|
(1%)
|
Other Corby-owned
brands
|
|
54
|
48
|
11%
|
21%
|
216
|
216
|
0%
|
5%
|
|
|
|
|
|
|
|
|
|
|
Total Corby
brands
|
|
498
|
491
|
2%
|
5%
|
2,018
|
2,082
|
(3%)
|
(1%)
|
Corby's owned-brands had strong fourth quarter shipments on
account of Corby's Canadian whisky portfolio (i.e., JP Wiser's and
the craft range included in "other") and a positive contribution
from Polar Ice vodka. The performance of these brands more than
offset the continued weak trends seen with Lamb's rum. Year-to-date
shipment volumes ended down versus last year, while shipment value
held relatively even, once again mostly impacted by Lamb's rum and
Corby's mixable liqueur brands.
Trends in Canada differ
significantly from international markets as highlighted in the
following table:
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
Year
Ended
|
|
|
|
|
Shipment
Change
|
|
|
Shipment
Change
|
|
|
June
30
|
June
30
|
Volume
|
Value
|
June
30
|
June
30
|
Volume
|
Value
|
(Volumes in 000's
of 9L cases)
|
|
2016
|
2015
|
%
|
%
|
2016
|
2015
|
%
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
451
|
450
|
0%
|
4%
|
1,819
|
1,858
|
(2%)
|
0%
|
International
|
|
47
|
41
|
17%
|
22%
|
199
|
223
|
(11%)
|
(5%)
|
|
|
|
|
|
|
|
|
|
|
Total Corby
brands
|
|
498
|
491
|
2%
|
5%
|
2,018
|
2,082
|
(3%)
|
(1%)
|
In the domestic market, a strong fourth quarter value increase
helped offset the difficult holiday period experienced in Q2,
leaving Corby even on shipment value when compared to last year
(albeit down 2% on shipment volume for the year). The challenges
experienced in the holiday period 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 shipment volumes year over year
were largely attributable to Lamb's in the U.K. where shipment
patterns were disrupted during the fourth quarter of 2016 by the
announced transition to a new distributor as of July 1, 2016. In the US market, shipments
were flat versus the prior year. Results from the launch two years
ago of J.P. Wiser's Rye and Spiced
Canadian whiskies have not been achieved. The consumer demand
that was expected did not materialize and these concepts have
struggled against long established brands in an increasingly price
competitive segment. Corby has therefore reprioritized its focus on
a smaller number of markets in the US and on the more premium and
differentiated craft range (Lot No. 40 and Pike Creek), both of
which have achieved a small but growing base of business.
Retail Sales Volume 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 volume data, as provided by the ACD, is set out in the
following table and is discussed throughout this MD&A. Note
that retail sales value information has not been provided as the
province of British Columbia began
to only provide wholesale pricing data starting in July 2015, thus significantly impacting any
meaningful comparison against prior periods and with other LB
customers. It is not known at this time when the Company will be
able to re-introduce this retail value level of analysis.
It should be noted that the retail information presented does
not include international retail sales of Corby-owned brands. While
Corby's focus on the US business is increasing, retail 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
|
|
Year
Ended
|
|
|
|
|
%
Retail
|
|
|
|
%
Retail
|
|
|
Jun
30
|
Jun
30
|
Volume
|
|
Jun
30
|
Jun
30
|
Volume
|
(Volumes in 000's
of 9L cases)
|
|
2016
|
2015
|
Growth
|
|
2016
|
2015
|
Growth
|
|
|
|
|
|
|
|
|
|
Brand
|
|
|
|
|
|
|
|
|
J.P. Wiser's Canadian
whisky
|
|
160
|
159
|
1%
|
|
722
|
720
|
0%
|
Lamb's rum
|
|
82
|
83
|
(1%)
|
|
364
|
382
|
(5%)
|
Polar Ice
vodka
|
|
82
|
80
|
3%
|
|
345
|
350
|
(1%)
|
Mixable
liqueurs
|
|
35
|
37
|
(5%)
|
|
163
|
171
|
(5%)
|
|
|
|
|
|
|
|
|
|
Total Key
Brands
|
|
359
|
358
|
0%
|
|
1,594
|
1,623
|
(2%)
|
Other Corby-owned
brands
|
|
41
|
42
|
(1%)
|
|
181
|
184
|
(2%)
|
|
|
|
|
|
|
|
|
|
Total
|
|
400
|
400
|
0%
|
|
1,775
|
1,807
|
(2%)
|
|
|
|
|
|
|
|
|
|
(1)Refers to sales at the retail store
level in Canada, as provided by the Association of Canadian
Distillers.
|
The Canadian spirits industry's retail volume performance
increased 1% for the quarter ended June 30,
2016 and 2% for the full year ended June 30, 2016, when compared with the same
periods last year. The full year trend was 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 which are categories in which
Corby does not have owned-brands.
As illustrated above, the performance of Corby's portfolio of
owned brands trailed behind the spirits industry during the fourth
quarter and on a full year comparison basis. 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. The brand's
retail volumes for the fourth quarter were up 1%, while its full
year performance was essentially flat when compared with last
year.
Year over year, the Canadian whisky category grew 3% in retail
volume, 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 (retail volume
grew 3% year over year) and the flavoured range was undercut by
J.P. Wiser's Special Blend (retail
volumes declined 3% compared to last year) 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. In June
2016, Corby also added J.P.
Wiser's Last Barrels, a super-premium limited edition.
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 the
overall rum category declined 1% for the quarter and were
essentially flat for the year, when compared to the same periods
last year. White rum retail volumes declined 2% and 3%,
respectively, when compared to the same quarter and full year
results last year.
Lamb's experienced a decline of 5% in retail volume on a full
year over year comparison basis. The 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, and our strategy is to defend
these regional strongholds and to aggressively promote the entire
range. In addition, 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 3% for the three months ended June 30, 2016 when compared to the same
three-month period last year. For the year ended June 30, 2016, retail volume declined 1% year
over year due to increased competitive retail activity through the
critical holiday period.
The overall vodka category in Canada grew retail volumes 2% when compared to
both the three and twelve month periods last year with performance
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 quarter and year ended June 30,
2016, on a same period over period comparison
basis.
Over those same periods, the liqueurs category retail volume in
Canada experienced a slight
decline during the quarter when compared to the same quarter last
year and grew 1% compared to the twelve months ended June 30, 2016. It is being driven by new
innovations and cream based offerings with which McGuinness does
not directly compete.
Our current strategy is to expand innovation and focus on strong
programming in the retail environment, ensuring that our flavour
offering is aligned to consumer trends. Two new flavours were
launched during the fourth quarter 2016, McGuinness Simple Syrup
and McGuinness Apple Whisky.
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 143% and 103% for the
respective fourth quarter and year ended June 30, 2016, outperforming the Canadian whisky
category in Canada, which grew 1%
and 3% respectively over the same periods.
Lot No. 40 was awarded Canadian Whisky of the Year
at the sixth annual Canadian Whisky Awards, the second time it 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 rebounded somewhat to end the year at a 3% decline on a full
year over year comparison basis. 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 years
ended June 30, 2016 and 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of
Canadian dollars, except
per share amounts)
|
|
|
2016
|
|
2015
|
$ Change
|
%
Change
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
140.0
|
$
|
132.1
|
$
|
7.9
|
6%
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
|
|
(49.4)
|
|
(49.1)
|
|
(0.3)
|
1%
|
Marketing, sales and
administration
|
|
|
(55.6)
|
|
(55.9)
|
|
0.3
|
(1%)
|
Other
income
|
|
|
(0.4)
|
|
0.1
|
|
(0.5)
|
(500%)
|
|
|
|
|
|
|
|
|
|
Earnings from
operations
|
|
|
34.6
|
|
27.2
|
|
7.4
|
27%
|
|
|
|
|
|
|
|
|
|
Financial
income
|
|
|
1.1
|
|
1.6
|
|
(0.5)
|
(31%)
|
Financial
expenses
|
|
|
(1.0)
|
|
(1.1)
|
|
0.1
|
(9%)
|
|
|
|
0.1
|
|
0.5
|
|
(0.4)
|
(80%)
|
|
|
|
|
|
|
|
|
|
Earnings before
income taxes
|
|
|
34.7
|
|
27.7
|
|
7.0
|
25%
|
Income
taxes
|
|
|
(9.3)
|
|
(7.3)
|
|
(2.0)
|
27%
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
$
|
25.4
|
$
|
20.4
|
$
|
5.0
|
25%
|
|
|
|
|
|
|
|
|
|
Per common
share
|
|
|
|
|
|
|
|
|
|
- Basic net
earnings
|
|
$
|
0.89
|
$
|
0.72
|
$
|
0.17
|
24%
|
|
- Diluted net
earnings
|
|
$
|
0.89
|
$
|
0.72
|
$
|
0.17
|
24%
|
Overall Financial Results
Net earnings
increased $5.0 million or 25% when
compared with last year. The primary driver of growth was a
negotiated increase in commission rate on PR brands, following the
amendment of the September 29, 2006
Canadian representation agreements with PR referred to under the
"Significant Events" section of this MD&A. The impact on net
earnings of lower case good shipments is more than offset by lower
advertising and promotional investment in the US market. In
addition, net earnings also benefited from the sale of bulk whisky
as the Company sought to rebalance its maturation inventories.
Revenue
The following highlights the key
components of the Company's revenue streams:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of
Canadian dollars)
|
|
|
|
2016
|
|
2015
|
$
Change
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
Revenue
streams:
|
|
|
|
|
|
|
|
|
|
|
Case goods
|
|
|
$
|
111.1
|
$
|
111.8
|
$
|
(0.7)
|
(1%)
|
|
Commissions
|
|
|
|
23.0
|
|
16.4
|
|
6.6
|
40%
|
|
Other
services
|
|
|
|
5.9
|
|
3.9
|
|
2.0
|
51%
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
140.0
|
|
132.1
|
|
7.9
|
6%
|
The decline in Case goods revenue 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.
The substantial increase in commissions was driven by the above
aforementioned commission rate increase negotiated on PR brands
supplemented by strong shipments for the brands in the PR
portfolio, reflecting its position within the higher growth spirit
and wine categories.
Other services represent ancillary revenue incidental to Corby's
core business activities, such as logistical fees and from time to
time bulk whisky sales. This year, the increase in the other
services category was attributable to bulk whisky sales as the
Company rebalanced its maturation inventories.
Cost of sales
Cost of sales was $49.4 million for the year ended June 30, 2016, an increase of $0.3 million when compared with last year, albeit
on 3% lower shipment volumes. While overall gross margin on case
goods remained a creditable 58% year on year, the results reflect
an amount paid to a former third party distributor and bottler of
Lamb's rum in the UK as part of the planned transition and
termination which became effective July 1,
2016.
Marketing, sales and administration
Marketing,
sales and administration expenses decreased $0.3 million or 1% when compared with last year.
The change year over year is comprised of a significant decrease in
marketing expenses, which was mostly offset by employee related
costs and activities. In addition, the decreased marketing activity
reflects lower investment in the US as Corby transitioned its
strategy of concentrating investment on a smaller number of US
markets.
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. The
$0.5 million change year over year is
primarily related to foreign currency fluctuations.
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. The decrease is due to lower
deposits in cash management pools and decreased market interest
rates.
Income taxes
A reconciliation of the effective
tax rate to the statutory rates for each period is presented
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
Combined basic
Federal and Provincial tax rates
|
|
|
|
|
26.8%
|
|
26.6%
|
Other
|
|
|
|
|
0.0%
|
|
(0.1%)
|
|
|
|
|
|
|
|
|
Effective tax
rate
|
|
|
|
|
26.8%
|
|
26.5%
|
Liquidity and Capital Resources
Corby's sources of liquidity are its deposits in cash management
pools of $85.0 million as at
June 30, 2016, and its cash generated
from operating activities. Corby's total contractual maturities are
represented by its accounts payable and accrued liabilities, which
totalled $30.7 million as at
June 30, 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of
Canadian dollars)
|
|
|
|
|
2016
|
|
2015
|
$ Change
|
|
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
|
|
|
|
|
Net earnings,
adjusted for non-cash items
|
|
|
|
$
|
41.2
|
$
|
33.7
|
$
|
7.5
|
|
Net change in
non-cash working capital
|
|
|
|
|
(3.7)
|
|
(0.4)
|
|
(3.3)
|
|
Net payments for
interest and income taxes
|
|
|
|
|
(4.2)
|
|
(6.2)
|
|
2.0
|
|
|
|
|
|
33.3
|
|
27.1
|
|
6.2
|
|
|
|
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
|
|
|
|
|
Additions to capital
assets
|
|
|
|
|
(3.1)
|
|
(2.8)
|
|
(0.3)
|
|
Proceeds from
disposition of capital assets
|
|
|
|
|
-
|
|
0.2
|
|
(0.2)
|
|
Deposits in cash
management pools
|
|
|
|
|
9.1
|
|
13.9
|
|
(4.8)
|
|
|
|
|
|
6.0
|
|
11.3
|
|
(5.3)
|
|
|
|
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
|
|
|
|
|
Proceeds from note
receivable
|
|
|
|
|
-
|
|
0.6
|
|
(0.6)
|
|
Dividends
paid
|
|
|
|
|
(39.3)
|
|
(39.0)
|
|
(0.3)
|
|
|
|
|
|
(39.3)
|
|
(38.4)
|
|
(0.9)
|
|
|
|
|
|
|
|
|
|
|
Net change in
cash
|
|
|
|
$
|
-
|
$
|
-
|
$
|
-
|
Operating activities
Net cash from operating
activities increased $6.2 million
this year versus last. This is reflective of the increase in net
earnings and lower tax payments being partially offset by an
increase in inventory levels.
Investing activities
Net cash generated from
investing activities was $6 million
for the year ended June 30, 2016,
representing a decrease of $5.3
million when compared to last year.
The Company's additions to capital assets were more than offset
by its withdrawals from 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 this year was purely for paying dividends to
shareholders. Dividends this year included a special dividend of
$17.7 million, in addition to the
regular dividends paid quarterly. The special dividend payment is
consistent with the prior year.
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 - Q4
|
|
August 24,
2016
|
|
September 15,
2016
|
|
September 30,
2016
|
|
$
0.19
|
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,
2015
|
|
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 August 24, 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.
Contractual Obligations
The following table presents a summary of the maturity periods
of the Company's contractual obligations as at June 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments
|
|
Payments
|
|
Payments
|
|
Payments
|
|
Obligations
|
|
|
|
|
|
|
During
|
|
due in
2018
|
|
due in
2020
|
|
due after
|
|
with no
fixed
|
|
|
|
|
|
|
2017
|
|
and 2019
|
|
and 2021
|
|
2021
|
|
maturity
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease
obligations
|
|
$
|
1.6
|
$
|
2.3
|
$
|
1.4
|
$
|
2.8
|
$
|
-
|
$
|
|
8.1
|
Employee future
benefits
|
|
|
-
|
|
-
|
|
-
|
|
-
|
|
24.6
|
|
|
24.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.6
|
$
|
2.3
|
$
|
1.4
|
$
|
2.8
|
$
|
24.6
|
$
|
|
32.7
|
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 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 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. Since the agreement is a
related party transaction, the agreement was approved by the
Independent Committee of the Corby Board of Directors, in
accordance with Corby's related party transaction policy, following
an extensive review and with external financial and legal
advice.
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
August 24, 2016, as published by
Standard & Poor's and Moody's, was BBB- and Baa2, 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.
Results of Operations – Fourth Quarter of Fiscal 2016
The following table presents a summary of certain selected
consolidated financial information for the Company for the
three-month periods ended June 30,
2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
(in millions of
Canadian dollars, except
|
|
|
June
30,
|
|
June 30,
|
|
|
|
per share
amounts)
|
|
|
2016
|
|
2015
|
$
Change
|
%
Change
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
37.2
|
$
|
32.5
|
$
|
4.7
|
15%
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
|
|
(12.3)
|
|
(11.7)
|
|
(0.6)
|
5%
|
Marketing, sales and
administration
|
|
|
(12.0)
|
|
(11.0)
|
|
(1.0)
|
9%
|
Other income
(expense)
|
|
|
(0.1)
|
|
0.0
|
|
(0.1)
|
(437%)
|
|
|
|
|
|
|
|
|
|
Earnings from
operations
|
|
|
12.8
|
|
9.8
|
|
3.0
|
31%
|
|
|
|
|
|
|
|
|
|
Financial
income
|
|
|
0.2
|
|
0.3
|
|
(0.1)
|
(20%)
|
Financial
expenses
|
|
|
(0.2)
|
|
(0.3)
|
|
0.0
|
(10%)
|
|
|
|
0.0
|
|
0.0
|
|
(0.0)
|
(80%)
|
|
|
|
|
|
|
|
|
|
Earnings before
income taxes
|
|
|
12.8
|
|
9.8
|
|
3.0
|
31%
|
Income
taxes
|
|
|
(3.5)
|
|
(2.5)
|
|
(1.0)
|
37%
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
$
|
9.3
|
$
|
7.3
|
$
|
2.0
|
27%
|
|
|
|
|
|
|
|
|
|
Per common
share
|
|
|
|
|
|
|
|
|
|
- Basic net
earnings
|
|
$
|
0.33
|
$
|
0.26
|
$
|
0.07
|
27%
|
|
- Diluted net
earnings
|
|
$
|
0.33
|
$
|
0.26
|
|
0.07
|
27%
|
Revenue
The following table highlights the
various components of the Company's revenue streams for the
quarter:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
|
|
|
June
30,
|
|
June 30,
|
|
|
|
(in millions of
Canadian dollars)
|
|
|
|
2016
|
|
2015
|
$
Change
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
Revenue
streams:
|
|
|
|
|
|
|
|
|
|
Case
goods
|
|
|
$
|
28.6
|
$
|
27.3
|
$
|
1.3
|
5%
|
Commissions
|
|
|
|
5.9
|
|
4.3
|
|
1.6
|
38%
|
Other
services
|
|
|
|
2.7
|
|
0.9
|
|
1.8
|
196%
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
$
|
37.2
|
$
|
32.5
|
$
|
4.7
|
15%
|
Revenue increased $4.7 million
this quarter when compared with the same quarter last year with all
three revenue streams contributing to the strong performance. Case
goods revenue increased $1.3 million
quarter over quarter and was primarily the result of general price
increases combined with modest volume increases in both
Canada and international markets.
Commissions increased primarily on account of the aforementioned
commission rate increase on the PR brand portfolio which came into
effect July 1, 2015. Other services
reflect bulk whisky sales made to third party customers as the
Company rebalanced its maturation inventories.
Cost of Sales
Cost of goods sold was
$12.3 million, $0.6 million representing a 5% increase this
period when compared with the same three-month period last year.
Gross margin was 61% for the current year quarter compared to 59%
the same quarter last year (note: commissions are not included in
this calculation).
Marketing, sales and administration
Marketing,
sales and administration expenses increased $1.0 million, or 9% over the same quarter last
year. The increase is the combination of increased investment in
brand marketing activities and higher employee related expenses and
activities. More specifically, the Company launched its new
J.P. Wiser's television campaign in
Canada while reducing spend in the
US market as we concentrate our investment in a smaller number of
markets where the portfolio has performed well and the greatest
opportunities exist.
Net earnings and earnings per share
Net
earnings for the fourth quarter were $9.3
million, or $0.33 per share,
which is an increase of $2.0 million
over the same quarter last year. As discussed previously, higher
commissions from PR brands, general price increases in Canada for case goods, and bulk whisky sales
drove the improved performance.
Selected Quarterly Information
Summary of Quarterly Financial Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of
Canadian dollars,
|
|
Q4
|
|
Q3
|
|
Q2
|
|
Q1
|
|
Q4
|
|
Q3
|
|
Q2
|
|
Q1
|
except per share
amounts)
|
|
2016
|
|
2016
|
|
2016
|
|
2016
|
|
2015
|
|
2015
|
|
2015
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
37.2
|
$
|
28.0
|
$
|
38.3
|
$
|
36.4
|
$
|
32.5
|
$
|
26.8
|
$
|
38.0
|
$
|
34.8
|
Earnings from
operations
|
|
12.8
|
|
5.0
|
|
8.2
|
|
8.6
|
|
9.8
|
|
3.1
|
|
7.7
|
|
6.6
|
Net
earnings
|
|
9.3
|
|
3.7
|
|
6.1
|
|
6.3
|
|
7.3
|
|
2.4
|
|
5.8
|
|
4.9
|
Basic EPS
|
|
0.33
|
|
0.13
|
|
0.22
|
|
0.22
|
|
0.26
|
|
0.08
|
|
0.20
|
|
0.17
|
Diluted
EPS
|
|
0.33
|
|
0.13
|
|
0.22
|
|
0.22
|
|
0.26
|
|
0.08
|
|
0.20
|
|
0.17
|
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.
In addition to the seasonality effect, net earnings has
increased each quarter in 2016 versus the same quarter in 2015.
This is primarily attributable to an increase in commissions, due
to the negotiated 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 consolidated financial
statements:
(i) Revenue
In May 2014, the International
Accounting Standards Board ("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 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 application of these amendments will not have a
significant impact on the Company.
Disclosure Controls and Procedures
The Company maintains a system of disclosure controls and
procedures that has been designed to provide reasonable assurance
that information required to be disclosed by the Company in its
public filings is recorded, processed, summarized and reported
within required time periods and includes controls and procedures
designed to ensure that all relevant information is accumulated and
communicated to senior management, including the Company's Chief
Executive Officer ("CEO") and Chief Financial Officer ("CFO"), to
allow timely decisions regarding required disclosure.
Management, with the participation of the CEO and CFO, has
evaluated the effectiveness of the Company's disclosure controls
and procedures (as defined in National Instrument 52-109) as at
June 30, 2016, and has concluded that
such disclosure controls and procedures are effective based upon
such evaluation.
Internal Controls Over Financial Reporting
The Company maintains a system of disclosure controls and
procedures to provide reasonable assurance that all material
information relating to the Company is gathered and reported to
senior management on a timely basis so that appropriate decisions
can be made regarding public disclosure.
In addition, the CEO and CFO have designed, or caused to be
designed under their supervision, internal controls over financial
reporting to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements
for external purposes in accordance with IFRS. Internal control
systems, no matter how well designed, have inherent limitations.
Therefore, even those systems determined to be designed effectively
can provide only reasonable assurance with respect to financial
reporting and financial statement preparation.
Management, with the participation of the CEO and CFO, has
evaluated the effectiveness of the Company's internal controls over
financial reporting as at June 30,
2016, and has concluded that internal control over financial
reporting is designed and operating effectively to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with IFRS. Management's assessment was based
on the framework established in Internal Control – Integrated
Framework (2013), published by the Committee of Sponsoring
Organizations of the Treadway Commission.
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.
Inherent to producing mature products there is a potential for
shortages or surpluses in future years if demand and supply are
materially different from long-term forecasts.
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
June 30, 2016
|
Associated
Brand
|
|
Associated
Market
|
|
|
Goodwill
|
|
Intangibles
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Various PR
brands
|
|
Canada
|
|
$
|
-
|
$
|
30.6
|
$
|
|
30.6
|
Lamb's rum
|
|
United
Kingdom(1)
|
|
|
1.4
|
|
11.8
|
|
|
13.2
|
Corby domestic
brands
|
|
Canada
|
|
|
1.9
|
|
-
|
|
|
1.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3.3
|
$
|
42.4
|
$
|
|
45.7
|
|
|
|
|
|
|
|
|
|
|
|
(1)The
international business for Lamb's rum is primarily focused in the
UK, however, the trademarks and licences
purchased relate to all international markets outside of Canada, as
Corby previously owned the Canadian rights.
|
Therefore, economic factors (such as consumer consumption
patterns) specific to these brands and markets are primary drivers
of the risk associated with their respective goodwill and
intangible assets valuations.
Employee Future Benefits
The Company has
certain obligations under its registered and non-registered defined
benefit pension plans and other post-retirement benefit plan. There
is no assurance that the Company's benefit plans will be able to
earn the assumed rate of return. New regulations and market-driven
changes may result in changes in the discount rates and other
variables, which would result in the Company being required to make
contributions in the future that differ significantly from
estimates. An extended period of depressed capital markets and low
interest rates could require the Company to make contributions to
these plans in excess of those currently contemplated, which, in
turn, could have an adverse impact on the financial performance of
the Company. Somewhat mitigating the impact of a potential market
decline is the fact that the Company monitors its pension plan
assets closely and follows strict guidelines to ensure that pension
fund investment portfolios are diversified in-line with industry
best practices. For further details, related to Corby's defined
benefit pension plans, please refer to Note 15 of the consolidated
financial statements for the year ended June
30, 2016.
CORBY SPIRIT AND
WINE LIMITED
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
as at June 30,
2016 and 2015
|
|
|
|
|
|
|
|
|
|
(in thousands of
Canadian dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30
|
|
June 30
|
|
|
|
|
Notes
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Deposits in cash
management pools
|
|
|
|
|
|
$
|
85,031
|
$
|
94,100
|
Accounts
receivable
|
|
|
|
7
|
|
|
30,045
|
|
24,763
|
Income taxes
recoverable
|
|
|
|
|
|
|
-
|
|
1,257
|
Inventories
|
|
|
|
8
|
|
|
54,173
|
|
50,858
|
Prepaid
expenses
|
|
|
|
|
|
|
476
|
|
226
|
|
|
|
|
|
|
|
|
|
|
Total current
assets
|
|
|
|
|
|
|
169,725
|
|
171,204
|
Deferred income
taxes
|
|
|
|
9
|
|
|
2,099
|
|
1,165
|
Property and
equipment
|
|
|
|
10
|
|
|
11,003
|
|
9,784
|
Goodwill
|
|
|
|
11
|
|
|
3,278
|
|
3,278
|
Intangible
assets
|
|
|
|
12
|
|
|
42,398
|
|
48,281
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
|
|
|
|
$
|
228,503
|
$
|
233,712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
Accounts payable and
accrued liabilities
|
|
|
|
14
|
|
$
|
30,719
|
$
|
25,540
|
Income and other
taxes payable
|
|
|
|
|
|
|
2,359
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total current
liabilities
|
|
|
|
|
|
|
33,078
|
|
25,540
|
Provision for
employee benefits
|
|
|
|
15
|
|
|
24,640
|
|
20,048
|
Total
liabilities
|
|
|
|
|
|
|
57,718
|
|
45,588
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
|
|
|
|
|
|
|
|
Share
capital
|
|
|
|
16
|
|
|
14,304
|
|
14,304
|
Accumulated other
comprehensive loss
|
|
|
|
17
|
|
|
(10,220)
|
|
(6,733)
|
Retained
earnings
|
|
|
|
|
|
|
166,701
|
|
180,553
|
|
|
|
|
|
|
|
|
|
|
Total
shareholders' equity
|
|
|
|
|
|
|
170,785
|
|
188,124
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
and shareholders' equity
|
|
|
|
|
|
$
|
228,503
|
$
|
233,712
|
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of these consolidated financial
statements.
|
CORBY SPIRIT AND
WINE LIMITED
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED
STATEMENTS OF EARNINGS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of
Canadian dollars, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
|
For the Year
Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30
|
|
June 30
|
|
June
30
|
|
June 30
|
|
|
Notes
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
18
|
|
$
|
37,202
|
$
|
32,473
|
$
|
140,002
|
$
|
132,066
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
|
|
|
|
(12,147)
|
|
(11,680)
|
|
(49,344)
|
|
(49,037)
|
Marketing, sales and
administration
|
|
|
|
|
(12,107)
|
|
(11,006)
|
|
(55,635)
|
|
(55,865)
|
Other (expense)
income
|
|
19
|
|
|
(185)
|
|
27
|
|
(400)
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from
operations
|
|
|
|
|
12,763
|
|
9,814
|
|
34,623
|
|
27,239
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
income
|
|
20
|
|
|
242
|
|
303
|
|
1,102
|
|
1,606
|
Financial
expenses
|
|
20
|
|
|
(232)
|
|
(259)
|
|
(961)
|
|
(1,107)
|
|
|
|
|
|
10
|
|
44
|
|
141
|
|
499
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before
income taxes
|
|
|
|
|
12,773
|
|
9,858
|
|
34,764
|
|
27,738
|
|
|
|
|
|
|
|
|
|
|
|
|
Current income
taxes
|
|
9
|
|
|
(3,380)
|
|
(2,225)
|
|
(8,983)
|
|
(6,952)
|
Deferred income
taxes
|
|
9
|
|
|
(65)
|
|
(291)
|
|
(346)
|
|
(371)
|
Income
taxes
|
|
|
|
|
(3,445)
|
|
(2,516)
|
|
(9,329)
|
|
(7,323)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
|
|
$
|
9,328
|
$
|
7,342
|
$
|
25,435
|
$
|
20,415
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
|
|
|
$
|
0.33
|
$
|
0.26
|
$
|
0.89
|
$
|
0.72
|
Diluted earnings
per share
|
|
|
|
$
|
0.33
|
$
|
0.26
|
$
|
0.89
|
$
|
0.72
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
21
|
|
|
28,468,856
|
|
28,468,856
|
|
28,468,856
|
|
28,468,856
|
|
Diluted
|
|
21
|
|
|
28,468,856
|
|
28,468,856
|
|
28,468,856
|
|
28,468,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of these consolidated financial
statements.
|
CORBY SPIRIT AND
WINE LIMITED
|
|
|
|
|
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
for the years
ended June 30, 2016 and 2015
|
|
|
|
|
|
(in thousands of
Canadian dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30
|
June 30
|
|
|
|
Notes
|
2016
|
2015
|
|
|
|
|
|
|
Net
earnings
|
|
|
|
$
|
25,435
|
$
|
20,415
|
|
|
|
|
|
|
Other
Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
Amounts that will not
be subsequently reclassified to earnings:
|
|
|
|
|
Net actuarial
losses
|
|
|
|
(4,767)
|
(3,308)
|
|
Income
taxes
|
|
|
|
1,280
|
878
|
|
|
|
|
|
(3,487)
|
(2,430)
|
|
|
|
|
|
|
|
Total
comprehensive income
|
|
|
|
$
|
21,948
|
$
|
17,985
|
CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
(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
|
|
-
|
(3,487)
|
25,435
|
21,948
|
Dividends
|
|
-
|
-
|
(39,287)
|
(39,287)
|
|
|
|
|
|
|
Balance as at June
30, 2016
|
|
$
|
14,304
|
$
|
(10,220)
|
$
|
166,701
|
$
|
170,785
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at June
30, 2014
|
|
$
|
14,304
|
$
|
(4,303)
|
$
|
199,140
|
$
|
209,141
|
Total comprehensive
income
|
|
-
|
(2,430)
|
20,415
|
17,985
|
Dividends
|
|
-
|
-
|
(39,002)
|
(39,002)
|
|
|
|
|
|
|
Balance as at June
30, 2015
|
|
$
|
14,304
|
$
|
(6,733)
|
$
|
180,553
|
$
|
188,124
|
|
The accompanying
notes are an integral part of these consolidated financial
statements.
|
CORBY SPIRIT AND
WINE LIMITED
|
CONSOLIDATED
STATEMENTS OF CASH FLOW
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of
Canadian dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
|
For the Year
Ended
|
|
|
|
|
|
|
|
|
June
30
|
June 30
|
June
30
|
June 30
|
|
Notes
|
2016
|
2015
|
2016
|
2015
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
Net
earnings
|
|
$
|
9,328
|
$
|
7,342
|
$
|
25,435
|
$
|
20,415
|
Adjustments
for:
|
|
|
|
|
|
Amortization and
depreciation
|
22
|
1,916
|
1,861
|
7,611
|
7,445
|
Net financial
income
|
20
|
(10)
|
(44)
|
(141)
|
(499)
|
Loss (gain) on
disposal of property and equipment
|
|
106
|
(16)
|
99
|
(116)
|
Income tax
expense
|
9
|
3,445
|
2,516
|
9,329
|
7,323
|
Provision for
employee benefits
|
|
(148)
|
(577)
|
(1,136)
|
(858)
|
|
|
14,637
|
11,082
|
41,197
|
33,710
|
Net change in
non-cash working capital balances
|
24
|
2,371
|
3,169
|
(3,668)
|
(381)
|
Interest
received
|
|
251
|
310
|
1,102
|
1,606
|
Income taxes
paid
|
|
(1,510)
|
(2,128)
|
(5,367)
|
(7,863)
|
|
|
|
|
|
|
Net cash from
operating activities
|
|
15,749
|
12,433
|
33,264
|
27,072
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
Additions to property
and equipment
|
10
|
(922)
|
(1,098)
|
(3,074)
|
(2,799)
|
Proceeds from
disposition of property and equipment
|
|
16
|
29
|
28
|
200
|
Deposits in cash
management pools
|
|
(9,433)
|
(5,955)
|
9,069
|
13,929
|
|
|
|
|
|
|
Net cash (used in)
from investing activities
|
|
(10,339)
|
(7,024)
|
6,023
|
11,330
|
|
|
|
|
|
|
Financing
activity
|
|
|
|
|
|
Proceeds from note
receivable
|
|
-
|
-
|
-
|
600
|
Dividends
paid
|
|
(5,410)
|
(5,409)
|
(39,287)
|
(39,002)
|
|
|
|
|
|
|
Net cash used in
financing activity
|
|
(5,410)
|
(5,409)
|
(39,287)
|
(38,402)
|
|
|
|
|
|
|
Net increase in
cash
|
|
-
|
-
|
-
|
-
|
Cash, beginning of
period
|
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
Cash, end of
period
|
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of these consolidated financial
statements.
|
CORBY SPIRIT AND WINE LIMITED
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(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
June 30, 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 consolidated
financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") and using the
accounting policies described herein.
These consolidated financial statements were approved by the
Company's Board of Directors on August 24,
2016.
Functional and presentation currency
The
Company's 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 prevailing at the
transaction date. Non-monetary assets and liabilities denominated
in foreign currencies are recognized at the historical exchange
rate prevailing at the transaction date. Monetary assets and
liabilities denominated in foreign currencies are translated at the
exchange rate prevailing 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 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 consolidated financial statements in conformity with IFRS
requires management to make certain judgements, estimates and
assumptions that affect the application of accounting policies, the
reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the consolidated
financial statements, and the reported amounts of revenues and
expenses during the reporting period. These estimates are made on
the assumption the Company will continue as a going concern and are
based on information available at the time of preparation.
Estimates may be revised where the circumstance on which they were
based change or where new information becomes available. Future
outcomes can differ from these estimates.
Judgement is commonly used in determining whether a balance or
transaction should be recognized in the consolidated financial
statements and estimates and assumptions are more commonly used in
determining the measurement of recognized transactions and
balances. However, judgement and estimates are often
interrelated.
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.
Critical judgments and estimates used in applying accounting
policies have the most significant effect on the
following:
(i) Impairment
The Company uses judgment in determining the grouping of assets
to identify its Cash Generating Units ("CGUs") for purposes of
testing for impairment of goodwill, intangible assets and property
and equipment.
Intangible assets and property and equipment are subject to
impairment tests whenever there is an indication that the value of
the asset has been impaired and at least once a year for
non-current assets with indefinite useful lives (goodwill and
trademarks and licences). Judgment has been used in determining
whether there has been an indication of impairment.
The Company uses estimates to determine a CGU's or group of
CGUs' recoverable amount based on value in use ("VIU") which
involves estimating future cash flows before taxes.
(ii) Income and other
taxes
In calculating current and deferred income and other taxes, the
Company uses judgment when interpreting the tax rules in
jurisdictions where the Company operates. The Company also uses
judgment in classifying transactions and assessing probable
outcomes of claimed deductions, which considers expectations of
future operating results, the timing and reversal of temporary
differences, and possible audits of income tax and other tax
filings by tax authorities.
Deferred income tax assets require management judgment in order
to determine the amounts to be recognized. This includes assessing
the timing of the reversal of temporary differences to which
deferred income tax rates are applied.
(iii) Post-employment
benefits
The accounting for the Company's post-employment benefit plan
requires the use of estimates and assumptions. The accrued benefit
liability is calculated using actuarial determined data and the
Company's best estimates of future salary escalations, retirement
ages of employees, employee turnover, mortality rates, market
discount rates, and expected health and dental care costs.
(iv) Other
Other estimates include determining the useful lives of property
and equipment and intangible assets for the purpose of depreciation
and amortization, as well as measuring items such as allowances for
uncollectible accounts receivable and inventory obsolescence and
certain fair value measures including those related to the
valuation of share-based payments and financial instruments.
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
consolidated financial statements:
(i) Revenue
In May 2014, the International
Accounting Standards Board ("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 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 application of these amendments will not have a
significant impact on the Company.
4. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied
consistently to all years presented in these consolidated financial
statements.
Basis of Consolidation
Subsidiaries are
entities controlled by the Company. Control exists where the
Company has the power to govern the financial and operating
policies of an entity so as to obtain benefits from its activities.
The financial statements of subsidiaries are included in the
Company's consolidated financial statement from the date that the
control commences until the date that control ceases.
Intra-company balances and transactions and any unrealized
income and expenses arising from intra-company transactions are
eliminated in preparing the consolidated financial statements.
Deposits in Cash Management Pools
Corby
participates in a cash pooling arrangement under a Mirror Netting
Services 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.
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.
Inventories
Inventories are measured at the
lower of cost (acquisition cost and cost of production, including
indirect production overheads) and net realizable value. Net
realizable value is the selling price less the estimated cost of
completion and sale of the inventories. Most inventories are valued
using the average cost method. The cost of long-cycle inventories
is calculated using a single method which includes distilling and
ageing maturing costs but excludes finance costs. These inventories
are classified in current assets, although a substantial part
remains in inventory for more than one year before being sold in
order to undergo the ageing maturing process used for certain
spirits.
Property and equipment
Property and equipment
are recognized at acquisition cost and broken down by component.
Cost includes expenditures that are directly attributable to the
acquisition of the asset.
Depreciation is calculated on a straight-line basis over the
estimated useful life of the assets. Useful life and depreciation
methods are reviewed at each reporting date. Items of property and
equipment are written down when impaired.
The range of depreciable lives for the major categories of
property and equipment are as follows:
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Leasehold
improvements
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5 to 10
years
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Machinery and
equipment
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3 to 12
years
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Casks
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12
years
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Other capital
assets
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3 to 20
years
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Depreciation of property and equipment is recognized within
earnings from operations. The Company commences recognition of
depreciation in earnings when the item of property and equipment is
ready for its intended use.
Gains and losses on disposal of an item of property and
equipment are determined by comparing the proceeds from disposal
with the carrying amount of property and equipment and are
recognized net, within earnings from operations.
Fully-depreciated items of property and equipment that are still
in use continue to be recognized in the cost and accumulated
depreciation.
The cost of replacing part of an item of property and equipment
is recognized in the carrying amount of the item if it is probable
that the future economic benefits embodied within the part will
flow to the Company and its cost can be measured reliably. The
carrying amount of the replaced part is derecognized. The costs of
repairs and maintenance of property and equipment are recognized in
earnings from operations as incurred.
Leases
The Company leases certain premises and
equipment. Terms vary in length and typically permit renewal for
additional periods. These leases are classified as operating leases
under which minimum rent, including scheduled escalations, is
expensed on a straight-line basis over the term of the lease.
Leases are classified as finance leases whenever the terms of
the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as
operating leases. The Company currently has no finance leases.
Goodwill
Goodwill arising in a business
combination is recognized as an asset at the date that control is
acquired. For acquisitions on or after July 1, 2010, goodwill is measured as the excess
of the sum of the fair value of the consideration transferred over
the fair value of the identifiable assets acquired less the fair
value of the liabilities assumed. Goodwill is tested for impairment
at least annually and whenever there is an indication that the
asset may be impaired.
As part of its transition to IFRS, the Company elected to apply
IFRS 3 – Business Combinations ("IFRS 3"), only to those
business combinations that occurred on or after July 1, 2010. In respect of acquisitions
prior to July 1, 2010, goodwill
represents the amount recognized under previous Canadian GAAP.
Goodwill is measured at cost less any accumulated impairment
losses.
Intangible Assets
Intangible assets include the
following:
(i) Long-term Representation
Rights
Long-term representation rights represent the cost of
the Company's exclusive right to represent PR's brands in
Canada. These representation
rights are carried at cost, less accumulated amortization.
Amortization is provided for on a straight-line basis, over the
term of their respective agreements. Representation rights are
scheduled to expire on September 30,
2021. Amortization is recognized as a reduction to
commission revenue earned from the representation of PR brands.
(ii) Trademarks and
licences
Trademarks and licences represent the value of
trademarks and licences of businesses acquired and are measured at
cost on initial recognition. These intangible assets are deemed to
have an indefinite life and are, therefore, not amortized.
Trademarks and licences are tested for impairment on an annual
basis or more frequently if events or changes in circumstances
indicate that the assets might be impaired.
(iii) Non-refundable upfront
fees
Non-refundable upfront fees are carried at cost, less
accumulated amortization. Amortization is provided for on a
straight-line basis over the term of the associated agreement and
recognized within revenue.
Impairment
(i) Financial Assets
A financial asset is assessed at each reporting date to
determine whether there is any objective evidence that it is
impaired. A financial asset is considered to be impaired if
objective evidence indicates that one or more events have occurred
that have had a negative effect on the estimated future cash flows
of that asset.
Objective evidence that a financial asset is impaired includes,
but is not limited to, default or delinquency by a debtor,
restructuring of an amount due to the Company on terms the Company
would not consider otherwise, indicators the debtor will enter
bankruptcy, or adverse changes in the status of the debtor's
economic conditions.
An impairment loss in respect of a financial asset measured at
amortized cost is calculated as the difference between its carrying
amount and the present value of the estimated future cash flows,
discounted at the original effective interest rate.
Individually significant financial assets are tested for
impairment on an individual basis. The remaining financial assets
are assessed collectively in groups that share similar credit risk
characteristics.
All impairment losses are recognized in net earnings.
An impairment loss is reversed if the reversal can be
objectively related to an event occurring after the impairment loss
was recognized. For financial assets measured at amortized cost,
the reversal is recognized in earnings.
(ii) Non-financial assets
The carrying amount of the Company's non-financial assets are
reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indications exist, the
asset's recoverable amount is estimated.
Intangible assets and property and equipment are subject to
impairment tests whenever there is an indication that the value of
the asset has been impaired and at least once a year for
non-current assets with indefinite useful lives (goodwill and
trademarks and licences).
Assets subject to impairment tests are included in
Cash-Generating Units ("CGUs"), corresponding to linked groups of
assets, which generate identifiable cash flows. For the purpose of
impairment testing, assets are grouped together into the smallest
group of assets that generates cash inflows from continuing use
that are largely independent of the cash inflows of other assets or
CGUs. CGUs to which goodwill has been allocated are aggregated so
that the level at which impairment testing is performed reflects
the lowest level at which goodwill is monitored for internal
reporting purposes. When the recoverable amount of a CGU is less
than its carrying amount, an impairment loss is recognized within
earnings from operations. The recoverable amount of the CGU is the
higher of its fair value less costs to sell and its value in
use.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a discount rate that
reflects current market assessments of the time value of money and
the risks specific to the asset or CGU. Projected cash flows are
discounted to present based on annual budgets and multi-year
strategies, extrapolated into subsequent years based on the medium
and long-term trends for each market and brand. The calculation
includes a terminal value derived by capitalizing the cash flows
generated in the last forecasted year. Assumptions applied to sales
and advertising spending are determined by management based on
previous results and long-term development trends in the markets
concerned. The present values of discounted cash flows are
sensitive to these assumptions as well as to consumer trends and
economic factors.
Fair value is based either on the sale price, net of selling
costs, obtained under normal market conditions or earnings
multiples observed in recent transactions concerning similar
assets.
Impairment losses are recognized in the statement of earnings.
Impairment losses recognized in respect of CGUs are allocated first
to reduce the carrying amount of any goodwill allocated to the CGU
and then to reduce the carrying amounts of the other assets in the
CGU on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. With
respect to other assets, impairment losses recognized in prior
periods are assessed at each reporting date for any indicators that
the impairment loss has decreased or no longer exists. An
impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount. An impairment
loss is reversed only to the extent that the carrying amount of the
assets does not exceed the carrying amount that would have been
determined, net of depreciation and amortization, if no impairment
loss had been recognized.
Provisions
Provisions are recognized when there
is a present legal or constructive obligation as a result of a past
event, it is probable that an outflow of economic benefits will be
required to settle the obligation and that obligation can be
measured reliably. If the effect of the time value of money is
material, provisions are discounted using a current pre-tax rate
that reflects the risk specific to the liability. Provisions are
reviewed on a regular basis and adjusted to reflect management's
best current estimates. Due to the judgmental nature of these
items, future settlements may differ from amounts recognized.
Provisions notably include: provisions for employee benefits (Note
15) and provisions for uncertain tax positions (Note 9).
Employee Benefits
Short-term employee benefit
obligations are measured on an undiscounted basis and are expensed
as the related service is provided. The Company recognizes a
liability and an expense for short-term benefits such as bonuses if
the Company has a present legal obligation or constructive
obligation to pay this amount as a result of past service provided
by the employee and the obligation can be reasonably estimated.
The Company maintains registered defined benefit pension plans
under which benefits are available to certain employee groups. The
Company makes supplementary retirement benefits available to
certain employees under a non-registered defined benefit pension
plan. The Company also provides a defined contribution plan.
(i) Defined Benefit
Plans
For defined benefit plans, the cost of providing benefits is
determined using the projected unit credit method. The measurement
is made at each balance sheet date and the personnel data
concerning employees is revised at least every three years.
Remeasurement, comprising actuarial gains and losses, the effect of
the changes to the asset ceiling (if applicable) and the return on
plan assets (excluding interest), is reflected immediately in the
statement of financial position with a charge or credit recognized
in other comprehensive income in the period in which they occur.
Remeasurement recognized in other comprehensive income is reflected
immediately in retained earnings and will not be reclassified to
profit or loss. Past service cost is recognized in profit or loss
in the period of a plan amendment. Net interest is calculated by
applying the discount rate at the beginning of the period to the
net defined benefit liability or asset.
Defined benefit costs are categorized as follows:
- Service costs (including current service costs, past service
cost and gains and losses on curtailments and settlements)
- Net interest expense or income
- Remeasurement
Service costs are presented in marketing, sales and
administration in the consolidated statement of earnings.
Curtailment gains and losses are accounted for as past service
costs. Net interest cost is included in net financial income and
expenses.
The provision for employee benefits recognized in the balance
sheet represents the actual deficit or surplus in the Company's
defined benefit plans. Any surplus resulting from this calculation
is limited to the present value of any economic benefits available
in the form of refunds from the plans or reductions in future
contributions to the plans.
(ii) Defined contribution
plans
Contributions are recognized as expenses when the employees have
rendered services. As the Company is not committed beyond the
amount of such contributions, no provision is recognized in respect
of defined contribution plans.
(iii) Termination benefits
A liability for a termination benefit is recognized at the
earlier of when the entity can no longer withdraw the offer of the
termination benefit and when the entity recognizes any related
restructuring costs.
Income Taxes
Income tax expense comprises
current and deferred income tax. Income tax expense is recognized
in net earnings except to the extent that it relates to items
recognized either in other comprehensive income or directly in
equity, in which case it is recognized in other comprehensive
income or in equity, respectively.
Current income tax expense comprises the tax payable on the
taxable income for the current financial year using tax rates
enacted or substantively enacted at the reporting date, and any
adjustment to income taxes payable in respect of previous
years.
Deferred tax is recognized on temporary differences between the
tax and book value of assets and liabilities in the consolidated
balance sheet and is measured using the balance sheet approach.
Deferred tax is measured at the tax rates that are expected to
apply to temporary differences when they reverse, using tax rates
enacted or substantively enacted at the reporting date. Deferred
tax assets and liabilities are offset if there is a legally
enforceable right to offset the recognized amounts and the Company
intends to settle on a net basis or to realize the asset and settle
the liability simultaneously.
A deferred tax asset is recognized for unused tax losses, tax
credits and deductible temporary differences to the extent that it
is probable that future taxable earnings will be available against
which they can be utilized. Deferred tax assets are reviewed
at each reporting date and are reduced to the extent that it is no
longer probable that all or part of the related tax benefit will be
realized.
In determining the amount of current and deferred tax the
Company takes into account the impact of uncertain tax positions
and whether additional taxes and interest may be due. The Company
believes that its accruals for tax liabilities are adequate for all
open tax years based on its assessment of many factors, including
interpretations of tax law and prior experience. This assessment
relies on estimates and assumptions and may involve a series of
judgements about future events. New information may become
available that causes the Company to change its judgement regarding
the adequacy of existing tax liabilities; such changes to tax
liabilities will impact tax expense in the period that such a
determination is made.
Revenue
Recognition
Revenue
is comprised of case good sales, commissions and revenues from
ancillary activities and is measured at the fair value of the
consideration received or to be received, after deducting trade
discounts, volume rebates and sales-related taxes and duties. Sales
are recognized when the significant risks and rewards of ownership
have been transferred, generally at the date of transfer of
ownership
title.
(i) Costs of services
rendered in connection with sales
In accordance with IAS 18 – Revenue ("IAS 18"), certain
costs of services rendered in connection with sales, such as
advertising programmes in conjunction with distributors, listing
costs for new products, and promotional activities at point of
sale, are deducted directly from sales if there is no separately
identifiable service whose fair value can be reliably measured.
(ii) Commissions
When the Company acts in the capacity of an agent rather than as
the principal in a transaction, the revenue recognized is the net
amount of commissions earned by the Company. Commissions are
reported net of amortization of long-term representation rights and
non-refundable upfront fees. The long-term representation rights
represent the Company's exclusive right to represent PR's brands in
Canada and are being amortized on
a straight-line basis over the term of their respective
agreements.
(iii) Interest
Interest income is recognized on an accrual basis using the
effective interest method. Primarily interest income is earned on
deposits in cash management pools.
Stock-Based Compensation Plans
The Company
utilizes a Restricted Share Units Plan as its long-term incentive
plan. Through this plan, restricted share units ("RSUs") will be
granted to certain officers and employees at a grant price equal to
the market closing price of the Company's Voting Class A Common
Shares on the last day prior to grant. RSUs vest at the end of a
three-year term, subject to the achievement of pre-determined
corporate performance targets. The related compensation expense is
recognized over this period. Accrued RSUs are valued at the closing
market price of the Company's Voting Class A Common shares at each
balance sheet date.
Unvested RSUs will attract dividend-equivalent units whenever
dividends are paid on the Voting Class A Common Shares of the
Company and will be immediately reinvested into additional RSUs,
which will vest and become payable at the end of the three-year
vesting period, subject to the same performance conditions as the
original RSU award. On the date of vesting, the holder will be
entitled to the cash value of the number of RSUs granted, plus any
RSUs received from reinvested dividend-equivalents, at the market
closing price of the Company's Voting Class A Common Shares as at
the vesting date. RSUs do not entitle participants to acquire any
rights or entitlements as a shareholder of the Company.
Earnings per Common Share
The Company presents
basic and diluted earnings per share ("EPS") amounts for its common
shares. Basic EPS is calculated by dividing the net earnings
attributable to common shareholders of the Company by the weighted
average number of common shares outstanding during the period.
Diluted EPS is calculated by adjusting the net income attributable
to shareholders and the weighted average number of shares
outstanding for the effect of potentially dilutive shares. There
are no potentially dilutive shares as at June 30, 2016.
Classification of Financial
Instruments
Financial assets and financial liabilities
are recognized when the Company becomes a party to the contractual
provisions of the instruments. Financial instruments are classified
into one of the following categories: fair value through profit or
loss, held-to-maturity investments, loans and receivables,
available-for-sale financial assets, or other financial
liabilities. The classification determines the accounting treatment
of the instrument. The classification is determined by the Company
when the financial instrument is initially recorded, based on the
underlying purpose of the instrument.
Corby's financial assets and liabilities are classified and
measured as follows:
Financial
Asset/Liability
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Category
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Measurement
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Deposits in cash
management pools
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Loans and
receivables
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Amortized
cost
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Accounts
receivable
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Loans and
receivables
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Amortized
cost
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Accounts payable and
accrued liabilities
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Loans and
receivables
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Amortized
cost
|
Financial instruments measured at amortized cost are initially
recognized at fair value plus any directly attributable transaction
costs and then, subsequently, at amortized cost using the effective
interest method, less any impairment losses, with gains and losses
recognized in earnings in the period in which the gain or loss
occurs.
All financial assets are recognized and derecognized on the
trade date. A financial asset is derecognized when the contractual
rights to the cash flows from the asset expired or when the Company
transferred the financial asset to another party without retaining
control or substantially all the risks and rewards of ownership of
the asset. Any interest in transferred financial assets that is
created or retained by the Company is recognized as a separate
asset or liability.
A financial liability is derecognized when its contractual
obligations are discharged, cancelled or expire.
Transaction costs are added to the initial fair value of
financial assets and liabilities when those financial assets and
liabilities are not measured at fair value subsequent to initial
measurement. Transaction costs are amortized to net earnings, in
finance expense, using the effective interest method.
Segmented Reporting
An operating segment is a
component of the Company that engages in business activities from
which it may earn revenues and incur expenses, including revenues
and expenses that relate to transactions with any of the Company's
other operations. Segment operating results are reviewed regularly
by the Company's CEO to make decisions about resources to be
allocated to the segment and assess its performance, and for which
discrete financial information is available.
5. FINANCIAL INSTRUMENTS
Corby's financial instruments consist of its deposits in cash
management pools, accounts receivable and accounts payable and
accrued liabilities balances.
Financial Risk Management Objectives and
Policies
In the normal course of business, the Company
is exposed to financial risks that have the potential to negatively
impact its financial performance. The Company does not use
derivative financial instruments to manage these risks, as
management believes that the risks arising from the Company's
financial instruments are already at an acceptably low level. These
risks are discussed in more detail below.
Credit Risk
Credit risk arises from cash held with PR via Corby's participation
in the Mirror Netting Services Agreement (further described in Note
26), 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 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.
Management believes that the Company's credit risk relating to
accounts receivable is at an acceptably low level. Over 85% of
Corby's trade receivable balances are collectable from
government-controlled liquor boards. The remaining trade receivable
balances relate to agency sales and sales generated from export
sales. Receivables that are neither past due nor impaired are
considered credit of high quality. At June
30, 2016 no trade receivable balances were considered
impaired.
With respect to Corby's deposits in PR's cash management pools,
the Company monitors PR's credit rating in the normal course of
business and has the right to terminate its participation in the
Mirror Netting Services Agreement at any time, subject to five
days' written notice.
Liquidity Risk
Corby's sources of liquidity are its
deposits in cash management pools of $85,031 and its cash generated by operating
activities. Corby's total contractual maturities are represented by
its accounts payable and accrued liabilities balances which totaled
$30,719 as at June 30, 2016, and are all due to be paid within
one year. The Company believes that its deposits in cash management
pools, combined with its historically strong and consistent
operational cash flows, are more than sufficient to fund its
operations, investing activities and commitments for the
foreseeable future.
Interest Rate Risk
Interest rate risk is the risk that
the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market interest rates. 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 program does not exist, as management
believes that changes in interest rates would not have a material
impact on Corby's financial position over the long-term.
Foreign Currency Risk
The Company has exposure to
foreign currency risk as it conducts business in multiple foreign
currencies; however, its exposure is primarily limited to the US
dollar ("USD") and UK pound sterling ("GBP"). Corby does not
utilize derivative instruments to manage this risk. Subject to
competitive conditions, changes in foreign currency rates may be
passed on to consumers through pricing over the long-term.
USD Exposure
The Company's demand for USD has traditionally outpaced its supply,
due to USD sourcing of production inputs exceeding that of the
Company's USD sales. Therefore, decreases in the value of the
Canadian dollar ("CAD") relative to the USD will have an
unfavourable impact on the Company's earnings.
GBP Exposure
The Company's supply of GBP outpaces demand, as Corby's sales into
the UK market are denominated in GBP, while having only certain
production inputs denominated in GBP. Therefore, increases in the
value of the CAD relative to the GBP will have an unfavourable
impact on the Company's earnings.
Commodity Risk
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 via pricing.
Fair Value of Financial Instruments
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.
6. CAPITAL MANAGEMENT
The Company's objectives when managing capital are:
- To ensure sufficient capital exists to allow management the
flexibility to execute its strategic plans; and
- To ensure shareholders receive a reasonable return on their
investment in the form of quarterly dividends.
Management includes the following items in its definition of
capital:
|
|
June
30,
|
June 30,
|
|
|
2016
|
2015
|
|
|
|
|
Share
capital
|
|
$
|
14,304
|
$
|
14,304
|
Accumulated other
comprehensive loss
|
|
(10,220)
|
(6,733)
|
Retained
earnings
|
|
166,701
|
180,553
|
|
|
|
|
Net capital under
management
|
|
$
|
170,785
|
$
|
188,124
|
The Company is not subject to any externally imposed capital
requirements.
The Company's dividend policy stipulates that, barring any
unanticipated developments, regular dividends will be paid
quarterly, on the basis of an annual amount equal to the greater of
85% of net earnings per share in the preceding fiscal year ended
June 30, and $0.60 per share.
The Company is meeting all of its objectives and stated policies
with respect to its management of capital.
7. ACCOUNTS RECEIVABLE
|
|
June
30,
|
June 30,
|
|
|
2016
|
2015
|
|
|
|
|
Trade
receivables
|
|
$
|
15,342
|
$
|
14,600
|
Due from related
parties
|
|
13,055
|
8,721
|
Other
|
|
1,838
|
1,641
|
|
|
30,235
|
24,962
|
|
|
|
|
Allowance for
uncollectible amounts
|
|
(190)
|
(199)
|
|
|
|
|
|
|
$
|
30,045
|
$
|
24,763
|
8. INVENTORIES
|
|
June
30,
|
June 30,
|
|
|
2016
|
2015
|
|
|
|
|
Raw
materials
|
|
$
|
2,088
|
$
|
2,113
|
Work-in-progress
|
|
44,005
|
42,426
|
Finished
goods
|
|
8,080
|
6,319
|
|
|
|
|
|
|
$
|
54,173
|
$
|
50,858
|
The cost of inventory recognized as an expense and included in
cost of goods sold during the year ended June 30, 2016 was $39,605 (2015 – $39,510). During the year, there were write-downs
of $178 (2015 - $112) on inventory as a result of net realizable
value being lower than cost. No inventory write-downs recognized in
previous years were reversed. Inventory write-downs are included in
cost of goods sold.
9. INCOME TAXES
|
|
2016
|
2015
|
Current income tax
expense
|
|
|
|
Current
period
|
|
$
|
8,970
|
$
|
7,176
|
Adjustments with
respect to prior period tax estimates
|
|
13
|
(224)
|
|
|
|
|
|
|
$
|
8,983
|
$
|
6,952
|
|
|
|
|
Deferred income
tax expense
|
|
|
|
Origination and
reversal of temporary differences
|
|
$
|
475
|
$
|
278
|
Change in tax
rate
|
|
(1)
|
(6)
|
Adjustments with
respect to prior period tax estimates
|
|
(128)
|
99
|
|
|
|
|
|
|
$
|
346
|
$
|
371
|
|
|
|
|
Total income tax
expense
|
|
$
|
9,329
|
$
|
7,323
|
There are no capital loss carry-forwards available for tax
purposes.
The Company's effective tax rates are comprised of the following
items:
|
2016
|
2015
|
|
|
|
|
|
Net earnings for the
financial year
|
$
|
25,435
|
|
$
|
20,415
|
|
Total income tax
expense
|
9,329
|
|
7,323
|
|
Earnings before
income tax expense
|
$
|
34,764
|
|
$
|
27,738
|
|
|
|
|
|
|
Income tax using the
combined Federal and Provincial
|
|
|
|
|
|
statutory tax
rates
|
$
|
9,320
|
26.8%
|
$
|
7,382
|
26.6%
|
|
|
|
|
|
Non-deductible
expenses
|
125
|
0.4%
|
106
|
0.4%
|
Adjustments with
respect to prior period tax estimates
|
(115)
|
(0.3%)
|
(125)
|
(0.4%)
|
Other
|
(1)
|
(0.0%)
|
(40)
|
(0.1%)
|
|
|
|
|
|
Effective income tax
rate
|
$
|
9,329
|
26.8%
|
$
|
7,323
|
26.5%
|
Deferred tax assets (liabilities) are broken down by nature as
follows:
|
June
30,
|
Recognized
in
|
June
30,
|
|
2015
|
Earnings
|
OCI
|
Equity
|
2016
|
Provision for
pensions
|
$
|
5,525
|
$
|
(75)
|
$
|
1,280
|
$
|
-
|
$
|
6,730
|
Property, plant and
equipment
|
(1,676)
|
(375)
|
-
|
-
|
(2,051)
|
Inventory
|
(273)
|
91
|
-
|
-
|
(182)
|
Intangibles
|
(2,642)
|
-
|
-
|
-
|
(2,642)
|
Other
|
231
|
13
|
-
|
-
|
244
|
|
|
|
|
|
|
|
$
|
1,165
|
$
|
(346)
|
$
|
1,280
|
$
|
-
|
$
|
2,099
|
|
|
|
|
|
|
|
|
|
June
30,
|
Recognized
in
|
June
30,
|
|
2014
|
Earnings
|
OCI
|
Equity
|
2015
|
Provision for
pensions
|
$
|
4,553
|
$
|
94
|
$
|
878
|
$
|
-
|
$
|
5,525
|
Property, plant and
equipment
|
(1,396)
|
(280)
|
-
|
-
|
(1,676)
|
Inventory
|
(361)
|
88
|
-
|
-
|
(273)
|
Intangibles
|
(2,618)
|
(24)
|
-
|
-
|
(2,642)
|
Other
|
480
|
(249)
|
-
|
-
|
231
|
|
|
|
|
|
|
|
$
|
658
|
$
|
(371)
|
$
|
878
|
$
|
-
|
$
|
1,165
|
Income tax recoverable includes a provision for uncertain tax
risks in the amount of $786 at
June 30, 2016 and 2015.
10. PROPERTY AND EQUIPMENT
|
June
30,
|
|
|
|
June
30,
|
|
2015
|
Additions
|
Depreciation
|
Disposals
|
2016
|
|
|
|
|
|
|
Leasehold
improvements
|
$
|
1,002
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
1,002
|
Machinery and
equipment
|
6,323
|
838
|
-
|
(366)
|
6,795
|
Casks
|
9,068
|
1,605
|
-
|
(24)
|
10,649
|
Other
|
1,531
|
631
|
-
|
-
|
2,162
|
Gross
value
|
17,924
|
3,074
|
-
|
(390)
|
20,607
|
|
|
|
|
|
|
Leasehold
improvements
|
(646)
|
-
|
(114)
|
-
|
(760)
|
Machinery and
equipment
|
(3,488)
|
-
|
(523)
|
260
|
(3,751)
|
Casks
|
(3,525)
|
-
|
(765)
|
3
|
(4,286)
|
Other
|
(481)
|
-
|
(326)
|
-
|
(807)
|
Accum.
depreciation
|
(8,140)
|
-
|
(1,728)
|
264
|
(9,604)
|
|
|
|
|
|
|
Property, plant and
equipment
|
$
|
9,784
|
$
|
3,074
|
$
|
(1,728)
|
$
|
(127)
|
$
|
11,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
June 30,
|
|
2014
|
Additions
|
Depreciation
|
Disposals
|
2015
|
|
|
|
|
|
|
Leasehold
improvements
|
$
|
1,002
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
1,002
|
Machinery and
equipment
|
5,872
|
466
|
-
|
(15)
|
6,323
|
Casks
|
7,455
|
1,744
|
-
|
(131)
|
9,068
|
Other
|
942
|
589
|
-
|
-
|
1,531
|
Gross
value
|
15,271
|
2,799
|
-
|
(146)
|
17,924
|
|
|
|
|
|
|
Leasehold
improvements
|
(532)
|
-
|
(114)
|
-
|
(646)
|
Machinery and
equipment
|
(2,889)
|
-
|
(611)
|
12
|
(3,488)
|
Casks
|
(2,921)
|
-
|
(654)
|
50
|
(3,525)
|
Other
|
(297)
|
-
|
(184)
|
-
|
(481)
|
Accum.
depreciation
|
(6,639)
|
-
|
(1,563)
|
62
|
(8,140)
|
|
|
|
|
|
|
Property, plant and
equipment
|
$
|
8,632
|
$
|
2,799
|
$
|
(1,563)
|
$
|
(84)
|
$
|
9,784
|
11. GOODWILL
Changes in the carrying amount of goodwill are as follows:
|
|
June
30,
|
June 30,
|
|
|
2016
|
2015
|
|
|
|
|
Balance, beginning of
year
|
|
$
|
3,278
|
$
|
3,278
|
Decreases in
goodwill
|
|
-
|
-
|
|
|
|
|
Balance, end of
year
|
|
$
|
3,278
|
$
|
3,278
|
There have been no impairment losses recognized with respect to
goodwill during 2016 (2015 -$nil).
12. INTANGIBLE ASSETS
|
|
|
2016
|
|
|
Movements in the
Year
|
|
|
Opening
|
|
|
|
|
Ending
|
|
Book
Value
|
Additions
|
Amortization
|
Impairments
|
Disposals
|
Book
Value
|
|
|
|
|
|
|
|
Long-term
representation rights
|
$
|
36,192
|
$
|
-
|
$
|
(5,780)
|
$
|
-
|
$
|
-
|
$
|
30,412
|
Trademarks and
licenses
|
11,801
|
-
|
-
|
-
|
-
|
11,801
|
Non-refundable
upfront fees
|
288
|
-
|
(103)
|
-
|
-
|
185
|
|
|
|
|
|
|
|
|
$
|
48,281
|
$
|
-
|
$
|
(5,883)
|
$
|
-
|
$
|
-
|
$
|
42,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
Movements in the
Year
|
|
|
Opening
|
|
|
|
|
Ending
|
|
Book
Value
|
Additions
|
Amortization
|
Impairments
|
Disposals
|
Book
Value
|
|
|
|
|
|
|
|
Long-term
representation rights
|
$
|
41,972
|
$
|
-
|
$
|
(5,780)
|
$
|
-
|
$
|
-
|
$
|
36,192
|
Trademarks and
licenses
|
11,801
|
-
|
-
|
-
|
-
|
11,801
|
Non-refundable
upfront fees
|
390
|
-
|
(102)
|
-
|
-
|
288
|
|
|
|
|
|
|
|
|
$
|
54,163
|
$
|
-
|
$
|
(5,882)
|
$
|
-
|
$
|
-
|
$
|
48,281
|
13. IMPAIRMENT
The Company tests goodwill and indefinite-lived intangibles
(trademarks and licences) for impairment on an annual basis.The
carrying value of goodwill and indefinite-lived intangibles at
June 30, 2016, along with the data
and assumptions applied to the Cash Generating Units ("CGUs") of
the Case Goods Segment are as follows:
|
|
|
|
|
Carrying
|
|
|
|
|
|
|
Carrying
|
Value
|
|
Terminal
|
|
|
|
|
Value
|
Trademarks
|
Discount
|
Growth
|
|
|
|
|
Goodwill
|
&
Licences
|
Rate
|
Rate
|
|
|
|
|
|
|
|
|
Case Goods
Segment
|
|
|
$
|
3,278
|
$
|
11,801
|
8.9% to
9.6%
|
1.2% to
2.5%
|
The Company's commissions segment has no goodwill or indefinite
lived intangibles.
For purposes of impairment testing, goodwill and intangibles
with an indefinite life (trademarks and licences) were allocated to
the group of CGUs which represent the lowest level within the group
at which the goodwill is monitored for internal management
purposes.
During the financial year ended June 30,
2016, the Company performed impairment testing on goodwill
and indefinite-lived intangible assets in accordance with its
accounting policy and identified no impairment.
The discount rate used for these calculations is a pre-tax rate
which corresponds to the weighted average cost of capital.
Different discount rates were used to allow for risks specific to
certain markets or geographical areas in calculating cash flows.
Assumptions made in terms of future changes in sales and of
terminal values are reasonable and in accordance with market data
available for each of the CGUs. Additional impairment tests are
applied where events or specific circumstances suggest that a
potential impairment exists.
A 50 basis points ("bp") increase in the discount rates would
result in no impairment to goodwill or the indefinite-lived
intangibles. A 50bp decrease in the terminal growth rate would
result in no impairment to goodwill or indefinite-lived
intangibles.
14. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
|
|
|
June
30,
|
June 30,
|
|
|
|
2016
|
2015
|
|
|
|
|
|
Trade payables and
accruals
|
|
$
|
22,570
|
$
|
17,950
|
Due to related
parties
|
|
6,657
|
6,386
|
Other
|
|
1,492
|
1,204
|
|
|
|
|
|
|
|
|
$
|
30,719
|
$
|
25,540
|
15. PROVISION FOR EMPLOYEE BENEFITS
The Company provides pension benefits to its employees through
defined contribution pension plan and defined benefit pension
plans. Employees hired after July 1,
2010 are no longer offered enrolment into the Company's
defined benefit pension plans. Instead, the Company provides these
employees a defined contribution pension plan. To become eligible
to join the defined contribution pension plan, most employees must
first accrue one year of service. For the year ended June 30, 2016, the Company recognized
contributions of $323 as expense
(2015 - $305) with respect to the
defined contribution pension plan.
The Company has two defined benefit pension plans for executives
and salaried employees (the "registered pension plans"), two
supplementary executive retirement plans for retired and current
senior executives of the Company (the "non-registered pension
plans"), and a post-retirement benefit plan ("other benefit plan")
covering retiree life insurance, health care and dental care.
Benefits under these plans are based on years of service and
compensation levels.
The registered pension plans are registered under the Pension
Benefits Act (Ontario) (the "Act")
with regulatory oversight by the Financial Services Commission of
Ontario. The latest valuations
completed for these plans are dated December
31, 2013. The next required valuations must be completed
with an effective date no later than December 31, 2016. The Act requires funding
valuations for the registered pension plans to be performed at
least once every three years and plan deficits must be funded over
a period of up to five years. The registered pension plans are
funded through a combination of employee and employer
contributions.
The Company is under no obligation to make any funding in
respect to the benefits accruing under the non-registered pension
plans. However, the Company has adopted a funding policy to make
periodic contributions to the non-registered pension plans to
provide security for the benefits accrued by the members. Such
funding policy may be reviewed and amended at any time by the
Company.
The post-retirement benefit plan is unfunded.
As at June 30, 2016, the average
duration of the defined benefit obligation for the registered and
non-registered pension plans and the post retirement benefit plan
is 13.7 years.
Company contributions to the registered and non-registered
pension plans are expected to be $1,628 for the fiscal year ended June 30, 2017.
The Company maintains a Canadian Pension Committee, which
provides oversight of the Company's pension benefit policies,
investment policies and plan administration. The Company uses the
service of third parties to provide investment management services
such as managing the pension plan assets in accordance with the
established investment policies.
The Company is subject to certain risks as a result of the
existence of its registered and non-registered pension plans and
its post-retirement benefit plan. These risks include actuarial
risks such as investment risk, interest rate risk as this impacts
the discount rate, longevity risk and compensation risk.
The present value of the defined benefit obligation is
calculated using a discount rate. If the return on plan assets is
below this rate, a plan's surplus is reduced or a plan deficit
occurs. The Company mitigates this investment risk by establishing
an investment policy to be followed by the registered pension
plans' investment managers and providing oversight to the Canadian
Pension Committee. The Company's investment policy requires the
registered pension plans' assets be invested in a diversified
portfolio that does not concentrate investment in any one security
or bond.
An increase in interest rates will increase the discount rate,
which will subsequently decrease the present value of the defined
benefit obligation. An increase in longevity and compensation will
increase the present value of the defined benefit obligation.
Longevity risk is impacted by mortality assumptions, which are
based on the 2014 Private / Public Sector Canadian Pensioners
Mortality tables as prepared by the Canadian Institute of
Actuaries.
The significant actuarial assumptions are as follows:
|
|
|
2016
|
|
|
|
2015
|
|
Registered
|
Non-registered
|
Other
|
|
Registered
|
Non-registered
|
Other
|
|
Pension
|
Pension
|
Benefit
|
|
Pension
|
Pension
|
Benefit
|
|
Plans
|
Plans
|
Plan
|
|
Plans
|
Plans
|
Plan
|
|
|
|
|
|
|
|
|
Accrued benefit
obligation, end of year
|
|
|
|
|
|
|
|
Discount
rate
|
3.4%
|
3.4%
|
3.4%
|
|
3.9%
|
3.9%
|
3.9%
|
Compensation
increase
|
3.0-3.5%
|
3.5%
|
N/A
|
|
3.0-3.5%
|
3.5%
|
N/A
|
Inflation
|
2.0%
|
2.0%
|
2.0%
|
|
2.0%
|
2.0%
|
2.0%
|
|
|
|
|
|
|
|
|
Benefit expense,
for the year
|
|
|
|
|
|
|
|
Discount
rate
|
|
3.9%
|
3.9%
|
3.9%
|
|
4.4%
|
4.4%
|
4.4%
|
Compensation
increase
|
|
3.0-3.5%
|
3.5%
|
N/A
|
|
3.0-3.5%
|
3.5%
|
N/A
|
Inflation
|
|
2.0%
|
2.0%
|
2.0%
|
|
2.0%
|
2.0%
|
2.0%
|
The discount rate has been set based on current market rates at
the end of the Company's financial year, assuming a rate of return
comparable to high quality fixed income securities of equivalent
currency and term that approximate the terms of the pension plan
liabilities. A 50 basis points ("bp") increase in the assumed
discount rate would decrease the amount of the Company's provision
for pensions and pension expense in respect of its registered and
non-registered defined benefit plans by $4,726 and $187,
respectively. Conversely, a 50bp decrease in the assumed discount
rate would increase the amount of the Company's provision for
pensions and pension expense in respect of its registered and
non-registered defined benefit plans by $5,168 and $219,
respectively. The method used to determined the impact of the
discount rate changes is consistent with the method used to
determine the amounts recognized in the financial statements.
The medical cost trend rate used was 5.8% for 2016 (2015 –
5.9%), with 4.7% being the ultimate trend rate for 2026 and years
thereafter. The dental cost trend rate used was 5.0% for 2016 (2015
– 5.0%). Assumed health care cost trend rates have a significant
effect on the amounts reported for the other benefit plans. A 1%
increase in the assumed medical cost trend rate would increase the
amount of the Company's provision for pensions and pension expense
by $1,379 and $107, respectively. Conversely, a 1% decrease in
the medical cost trend rate would decrease the amount of the
Company's provision for pensions and pension expense by
$1,110 and $82, respectively. The method used to determine
the impact of compensation rate changes is consistent with the
method used to determine the amounts recognized in the financial
statements.
A summary of the Company's defined benefit obligation and plan
assets is as follows:
|
|
June
30,
|
June
30,
|
|
|
2016
|
2015
|
Present value of
defined benefit obligation of unfunded plans
|
|
$
|
(11,068)
|
$
|
(10,438)
|
Present value of
defined benefit obligation of partially funded plans
|
|
(10,682)
|
(10,019)
|
Present value of
defined benefit obligation of fully funded plans
|
|
(48,733)
|
(45,650)
|
Total present value
of defined benefit obligation
|
|
(70,483)
|
(66,107)
|
Fair value of plan
assets
|
|
45,843
|
46,059
|
|
|
|
|
Net defined benefit
liability
|
|
(24,640)
|
(20,048)
|
Information about the Company's pension and other benefit plans
for the year ended June 30, 2016 is
as follows:
|
|
|
|
|
2016
|
|
|
Registered
|
Non-registered
|
Other
|
|
|
|
Pension
|
Pension
|
Benefit
|
|
|
|
Plans
|
Plans
|
Plan
|
Total
|
|
|
|
|
|
|
Fair value of plan
assets
|
|
|
|
|
|
Fair value of plan
assets, beginning of year
|
|
$
|
36,268
|
$
|
9,791
|
$
|
-
|
$
|
46,059
|
|
Interest
income
|
|
|
1,381
|
|
373
|
|
-
|
|
1,754
|
|
Actuarial
losses
|
|
|
(226)
|
|
(384)
|
|
-
|
|
(610)
|
|
Company
contributions
|
|
|
1,550
|
|
303
|
|
-
|
|
1,853
|
|
Plan participants'
contributions
|
|
|
170
|
|
-
|
|
-
|
|
170
|
|
Benefits
paid
|
|
|
(2,562)
|
|
(491)
|
|
-
|
|
(3,053)
|
|
Membership
transfers
|
|
|
(90)
|
|
-
|
|
-
|
|
(90)
|
|
Administrative
costs
|
|
|
(200)
|
|
(40)
|
|
-
|
|
(240)
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan
assets, end of year
|
|
$
|
36,291
|
$
|
9,552
|
$
|
-
|
$
|
45,843
|
|
|
|
|
|
|
|
|
|
|
Present value of
defined benefit obligation
|
|
|
|
|
|
|
|
|
|
Defined benefit
obligation, beginning of year
|
|
$
|
45,650
|
$
|
10,019
|
$
|
10,438
|
$
|
66,107
|
|
Current service
cost
|
|
|
898
|
|
184
|
|
210
|
|
1,292
|
|
Interest
cost
|
|
|
1,709
|
|
376
|
|
390
|
|
2,475
|
|
Plan participants'
contributions
|
|
|
170
|
|
-
|
|
-
|
|
170
|
|
Actuarial (gains)
losses:
|
|
|
|
|
|
|
|
|
|
|
|
Experience (gains)
and losses
|
|
|
8
|
|
16
|
|
(83)
|
|
(59)
|
|
|
Losses due to
financial assumption changes
|
|
|
2,949
|
|
624
|
|
643
|
|
4,216
|
|
|
Losses due to
demographic assumption changes
|
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Membership
transfers
|
|
|
(90)
|
|
-
|
|
-
|
|
(90)
|
|
Benefits
paid
|
|
|
(2,561)
|
|
(537)
|
|
(530)
|
|
(3,628)
|
|
|
|
|
|
|
|
|
|
|
Present value of the
defined benefit obligations, end of year
|
|
$
|
48,733
|
$
|
10,682
|
$
|
11,068
|
$
|
70,483
|
|
|
|
|
|
|
|
|
|
Net defined benefit
liability
|
|
$
|
12,442
|
$
|
1,130
|
$
|
11,068
|
$
|
24,640
|
The actual return on plan assets for the financial year ended
June 30, 2016 was $1,144, which was composed of interest income and
actuarial gains and losses included in the reconciliation of the
fair value of plan assets above.
Information about the Company's pension and other benefit plans
for the year ended June 30, 2015 is
as follows:
|
|
|
|
|
2015
|
|
|
Registered
|
Non-registered
|
Other
|
|
|
|
Pension
|
Pension
|
Benefit
|
|
|
|
Plans
|
Plans
|
Plan
|
Total
|
|
|
|
|
|
|
Fair value of plan
assets
|
|
|
|
|
|
Fair value of plan
assets, beginning of year
|
|
$
|
36,550
|
$
|
11,953
|
$
|
-
|
$
|
48,503
|
|
Interest
income
|
|
1,586
|
259
|
-
|
1,845
|
|
Actuarial
gains
|
|
1,534
|
62
|
-
|
1,596
|
|
Company
contributions
|
|
1,271
|
306
|
-
|
1,577
|
|
Plan participants'
contributions
|
|
181
|
-
|
-
|
181
|
|
Benefits
paid
|
|
(4,654)
|
(2,749)
|
-
|
(7,403)
|
|
Administrative
costs
|
|
(200)
|
(40)
|
-
|
(240)
|
|
|
|
|
|
|
Fair value of plan
assets, end of year
|
|
$
|
36,268
|
$
|
9,791
|
$
|
-
|
$
|
46,059
|
|
|
|
|
|
|
Present value of
defined benefit obligation
|
|
|
|
|
|
Defined benefit
obligation, beginning of year
|
|
$
|
44,138
|
$
|
10,699
|
$
|
10,157
|
$
|
64,994
|
|
Current service
cost
|
|
697
|
330
|
173
|
1,200
|
|
Interest
cost
|
|
1,884
|
412
|
416
|
2,712
|
|
Past service
cost
|
|
-
|
-
|
-
|
-
|
|
Plan participants'
contributions
|
|
181
|
-
|
-
|
181
|
|
Actuarial (gains)
losses:
|
|
|
|
|
|
|
|
Experience (gains)
and losses
|
|
(1)
|
637
|
(708)
|
(72)
|
|
|
Gains due to
financial assumption changes
|
|
3,405
|
686
|
697
|
4,788
|
|
|
Losses due to
demographic assumption changes
|
|
-
|
-
|
188
|
188
|
|
Benefits
paid
|
|
(4,654)
|
(2,745)
|
(485)
|
(7,884)
|
|
|
|
|
|
|
Present value of the
defined benefit obligations, end of year
|
|
$
|
45,650
|
$
|
10,019
|
$
|
10,438
|
$
|
66,107
|
|
|
|
|
|
|
Net defined benefit
liability
|
|
$
|
9,382
|
$
|
228
|
$
|
10,438
|
$
|
20,048
|
The actual return on plan assets for the financial year ended
June 30, 2015 was $3,441 which was composed of interest income and
actuarial gains and losses included in the reconciliation of the
fair value of plan assets above.
Amounts recognized in comprehensive income in respect to the
defined benefit plans are as follows:
|
2016
|
2015
|
|
|
|
Net defined
benefit pension expense recognized in Total Comprehensive
Income
|
|
|
|
Current service
costs
|
$
|
1,292
|
$
|
1,200
|
Interest
costs
|
961
|
1,107
|
|
|
|
Net expense
recognized in Net Earnings
|
2,253
|
2,307
|
|
|
|
Net actuarial losses
recognized in Other Comprehensive Income
|
4,767
|
3,308
|
|
|
|
Total net expense
recognized in Total Comprehensive Income
|
$
|
7,020
|
$
|
5,615
|
The assets of the registered pension plans consist of cash,
contributions receivable and investments held in the Hiram Walker
& Corby Canadian Pooled Fund Trust. As at June 30, 2016, the fair value of the Trust's
assets totaled $320,491. The
Company's registered pension plans comprise approximately 11% of
the total Trust assets.
The fair value of assets held on behalf of the Company's
registered pension plans are categorized in the fair value
hierarchy as at June 30 are as
follows:
|
June
30,
|
June 30,
|
|
2016
|
2015
|
|
|
|
Cash and Canadian
Equities - level 1
|
$
|
8,184
|
$
|
7,922
|
Bond funds - level
2
|
12,329
|
12,747
|
Foreign equities and
Foreign Equity funds - level 2
|
9,105
|
10,021
|
Infrastructure and
real estate funds - level 3
|
6,673
|
5,578
|
|
|
|
|
$
|
36,291
|
$
|
36,268
|
The assets of the non-registered pension plan consist of cash,
investments and refundable taxes on account with Canada Revenue
Agency. The investments held by the non-registered pension plan are
invested in a limited number of pooled funds. The assets, based on
market values at June 30, are as
follows:
|
June
30,
|
June 30,
|
|
2016
|
2015
|
|
|
|
Canadian equity
pooled funds
|
$
|
1,957
|
$
|
1,617
|
Foreign equity pooled
funds
|
3,035
|
2,863
|
Refundable tax on
account with Canada Revenue Agency
|
4,560
|
5,311
|
|
|
|
|
$
|
9,552
|
$
|
9,791
|
The fair values of the investments held by the non-registered
plan as at June 30, 2016 are
categorized as Level 2 in the fair value hierarchy.
16. SHARE CAPITAL
|
|
June
30,
|
June 30,
|
|
|
2016
|
2015
|
|
|
|
|
Number of shares
authorized:
|
|
|
|
|
Voting Class A Common
Shares - no par value
|
|
Unlimited
|
Unlimited
|
|
Non-voting Class B
Common Shares - no par value
|
|
Unlimited
|
Unlimited
|
|
|
|
|
Number of shares
issued and fully paid:
|
|
|
|
|
Voting Class A Common
Shares
|
|
24,274,320
|
24,274,320
|
|
Non-voting Class B
Common Shares
|
|
4,194,536
|
4,194,536
|
|
|
|
|
|
|
28,468,856
|
28,468,856
|
|
|
|
|
Stated
value
|
|
$
|
14,304
|
$
|
14,304
|
17. ACCUMULATED OTHER COMPREHENSIVE LOSS
|
|
June
30,
|
June 30,
|
|
|
2016
|
2015
|
|
|
|
|
Actuarial losses on
pension obligations
|
|
$
|
14,021
|
$
|
9,254
|
|
less: income
taxes
|
|
(3,801)
|
(2,521)
|
|
|
|
|
Accumulated other
comprehensive loss
|
|
$
|
10,220
|
$
|
6,733
|
18. REVENUE
The Company's revenue consists of the following streams:
|
2016
|
2015
|
|
|
|
Case good
sales
|
$
|
111,104
|
$
|
111,733
|
Commissions (net of
amortization)
|
23,030
|
16,442
|
Other
services
|
5,868
|
3,891
|
|
|
|
|
$
|
140,002
|
$
|
132,066
|
Commissions for the year are shown net of amortization of
long-term representation rights and non-refundable upfront fees of
$5,882 (2015 - $5,882). Other services include revenues
incidental to the manufacture of case goods, such as logistics fees
and miscellaneous bulk spirit sales.
19. OTHER (EXPENSE) INCOME
The Company's other (expense) income consists of the following
amounts:
|
2016
|
2015
|
|
|
|
Foreign exchange
loss
|
$
|
(301)
|
$
|
(91)
|
(Loss) gain on
disposal of property and equipment
|
(99)
|
116
|
Other
|
-
|
50
|
|
|
|
|
$
|
(400)
|
$
|
75
|
20. NET FINANCIAL INCOME AND EXPENSE
The Company's financial income (expense) consists of the
following amounts:
|
|
|
2016
|
2015
|
|
|
|
|
|
Interest
income
|
|
$
|
1,102
|
$
|
1,606
|
Net financial impact
of pensions
|
(961)
|
(1,107)
|
|
|
|
|
|
|
|
|
$
|
141
|
$
|
499
|
21. EARNINGS PER SHARE
The following table sets forth the numerator and denominator
utilized in the computation of basic and diluted earnings per
share:
|
2016
|
2015
|
|
|
|
Numerator:
|
|
|
|
Net
earnings
|
$
|
25,435
|
$
|
20,415
|
Denominator:
|
|
|
|
Weighted average
shares outstanding
|
28,468,856
|
28,468,856
|
22. EXPENSES BY NATURE
Earnings from operations include depreciation and amortization,
as well as personnel expenses as follows:
|
2016
|
2015
|
|
|
|
Depreciation of
property and equipment
|
$
|
1,728
|
$
|
1,563
|
Amortization of
intangible assets
|
5,883
|
5,882
|
Salary and payroll
costs
|
22,518
|
22,546
|
Expenses related to
pensions and benefits
|
1,292
|
1,200
|
|
|
|
|
$
|
31,421
|
$
|
31,191
|
23. RESTRICTED SHARE UNITS PLAN
|
|
2016
|
|
|
2015
|
|
|
Weighted
|
|
|
Weighted
|
|
Restricted
|
Average
|
|
Restricted
|
Average
|
|
Share
|
Grant
Date
|
|
Share
|
Grant
Date
|
|
Units
|
Fair
Value
|
|
Units
|
Fair
Value
|
|
|
|
|
|
|
Non-vested, beginning
of year
|
62,154
|
$
|
19.49
|
|
73,780
|
$
|
17.58
|
|
Granted
|
21,359
|
18.96
|
|
16,008
|
20.78
|
|
Reinvested dividend
equivalent units
|
2,775
|
18.54
|
|
3,633
|
22.58
|
|
Performance
adjustments
|
(19,025)
|
20.84
|
|
-
|
n/a
|
|
Vested
|
(25,148)
|
17.47
|
|
(31,267)
|
15.98
|
|
|
|
|
|
|
Non-vested, end of
year
|
42,115
|
$
|
19.75
|
|
62,154
|
$
|
19.49
|
Compensation expense related to this plan for the year ended
June 30,2016 was $40 (2015 - $450).
24. NET CHANGE IN NON-CASH WORKING CAPITAL BALANCES
|
2016
|
2015
|
|
|
|
Accounts
receivable
|
$
|
(5,282)
|
$
|
55
|
Inventories
|
(3,315)
|
1,703
|
Prepaid
expenses
|
(250)
|
30
|
Accounts payable and
accrued liabilities
|
5,179
|
(2,169)
|
|
|
|
|
$
|
(3,668)
|
$
|
(381)
|
25. DIVIDENDS
On August 24, 2016 subsequent to
the year ended June 30, 2016, the
Board of Directors declared its regular quarterly dividend of
$0.19 per common share, to be paid on
September 30, 2016, to shareholders
of record as at the close of business on September 15, 2016. This dividend is in
accordance with the Company's dividend policy.
26. 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 and bottling 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:
|
2016
|
2015
|
|
|
|
Sales to related
parties
|
|
|
Commissions - parent,
ultimate parent and affiliated companies
|
$
|
26,614
|
$
|
19,602
|
Products for resale
at an export level - affiliated companies
|
6,061
|
6,126
|
|
|
|
|
$
|
32,675
|
$
|
25,728
|
|
|
|
Cost of goods
sold, purchased from related parties
|
|
|
Distilling, blending,
and production services - parent
|
$
|
22,853
|
$
|
20,351
|
|
|
|
Administrative
services purchased from related parties
|
|
|
Marketing, sales and
administraton services - parent
|
$
|
2,550
|
$
|
2,500
|
Marketing, sales and
administraton services - affiliate
|
4,708
|
7,724
|
Balances outstanding with related parties are due within 60
days, are to be settled in cash and are unsecured.
During the year ended June 30,
2016, Corby sold casks to its parent company for net
proceeds of $27 (2015 - $171).
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
August 24, 2016, as published by
Standard & Poor's and Moody's, was BBB- and Baa2, 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 year ended June 30,
2016, Corby earned interest income of $1,127 from PR (2015 – $1,610). Corby has the right to terminate its
participation in the Mirror Netting Services Agreement at any time,
subject to five days' written notice.
Key management personnel
Key management
personnel are those individuals having authority and responsibility
for planning, directing and controlling the activities of the
Company, including members of the Company's Board of Directors. The
Company considers key management to be the members of the Board of
Directors and the Senior Management Team (which includes the CEO,
CFO, and Vice Presidents).
Certain key management personnel also participate in the
company's RSU plan.
Key management personnel compensation is comprised of:
|
2016
|
2015
|
|
|
|
Wages, salaries and
short term employee benefits
|
$
|
4,075
|
$
|
3,482
|
Other long term
benefits
|
702
|
632
|
Share-based payment
transactions
|
398
|
191
|
|
|
|
|
$
|
5,175
|
$
|
4,305
|
Certain members of the board and key management personnel are
provided benefits and or salary and wages through the parent
company or the ultimate parent company in addition to the amounts
reported above.
27. 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 18 of the consolidated financial
statements. Therefore, a table detailing operational results by
segment has not been provided as no additional meaningful
information would result.
Geographic information regarding the Company is as follows:
|
|
|
|
|
2016
|
|
|
United
States
|
United
|
Rest
of
|
|
|
Canada
|
of America
|
Kingdom
|
World
|
Total
|
|
|
|
|
|
|
Revenue
|
$
|
128,251
|
$
|
6,861
|
$
|
3,567
|
$
|
1,323
|
$
|
140,002
|
Capital assets and
goodwill
|
12,577
|
-
|
1,704
|
-
|
14,281
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
United
States
|
United
|
Rest
of
|
|
|
Canada
|
of America
|
Kingdom
|
World
|
Total
|
|
|
|
|
|
|
Revenue
|
$
|
121,511
|
$
|
5,297
|
$
|
4,349
|
$
|
909
|
$
|
132,066
|
Capital assets and
goodwill
|
11,652
|
-
|
1,410
|
-
|
13,062
|
In 2016, revenue to three major customers accounted for 39%, 17%
and 14%, respectively (2015 – 35%, 17% and 14%). These major
customers are located in Canada
and revenues are derived from the Case Goods segment.
28. COMMITMENTS
Future minimum payments under operating leases for premises and
equipment for the next five years and thereafter are as
follows:
|
|
|
2017
|
$
|
1,593
|
2018
|
|
1,226
|
2019
|
|
1,044
|
2020
|
|
872
|
2021
|
|
547
|
Thereafter
|
|
2,791
|
|
|
|
|
$
|
8,073
|
Total lease payments recognized as an expense during the year
total $2,147 (2015 - $2,079). The Company has commitments of
$268 (2015 - $381) as at June 30,
2016 for the acquisition of capital assets.
SOURCE Corby Spirit and Wine Limited