TORONTO, Aug. 21, 2019 /CNW/ - Corby Spirit and Wine
Limited ("Corby" or the "Company") (TSX: CSW.A, CSW.B) today
reported its financial results for the fourth quarter and year
ended June 30, 2019. The Corby Board
of Directors today also declared a dividend of $0.22 per share payable on September 27, 2019 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 11, 2019.
Revenue grew 3% for the year ended June
30, 2019, as performance of key strategic brands were
boosted by premium innovations and strategic price optimization
enabling Corby to reinvest behind its core strategies and fast
growing segments, notably gin. Net earnings of $25.7 million (or $0.90 per share) were reported for the year ended
June 30, 2019, in line with that of
the previous year. Net earnings of $7.8
million (or $0.27 per share)
were reported for the three-month period ended June 30, 2019, or $1.5
million below the same quarter last year, reflecting
increased advertising and promotional investment behind our key
brands.
"Our commitment to strategically align our investments and
focus on our key priorities and brands is delivering strong
top-line growth and is building a strong foundation in domestic and
new routes to market. I am pleased with the performance of our
brands; in particular, J.P. Wiser's and Ungava Gin which continue
to outpace the Canadian whisky and super premium gin categories,"
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, 2019, prepared in accordance with
International Financial Reporting Standards.
About Corby
Corby Spirit and Wine Limited is a leading
Canadian manufacturer, 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, Lamb's® rum, Polar Ice® vodka and
McGuinness® liqueurs, as well as the Ungava® gin, Cabot Trail®
maple-based liqueurs and Chic Choc® spiced rum and Foreign Affair®
wines. 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®, and Kenwood® wines. 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,
2019
The following Management's Discussion and Analysis ("MD&A")
dated August 21, 2019 should be read
in conjunction with the audited consolidated financial statements
and accompanying notes as at and for the year ended June 30, 2019, prepared in accordance with
International Financial Reporting Standards ("IFRS"). While the
annual financial statements were audited, information for the three
months ended June 30, 2019 and 2018
were not audited or reviewed by the Company's external auditors in
accordance with standards established by the Canadian Institute of
Chartered Accountants for a review of unaudited financial
statements by an entity's auditor.
This MD&A contains forward-looking statements, including
statements concerning possible or assumed future results of
operations of Corby Spirit and Wine Limited ("Corby" or the
"Company"), including the statements made under the headings
"Strategies and Outlook", "Liquidity and Capital Resources",
"Recent Accounting Pronouncements" and "Risks and Risk Management."
Forward-looking statements typically are preceded by, followed by
or include the words "believes", "expects", "anticipates",
"estimates", "intends", "plans" or similar expressions.
Forward-looking statements are not guarantees of future
performance. They involve risks and uncertainties, including, but
not limited to: the impact of competition; the impact, and
successful integration of, acquisitions; 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 21, 2019. 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 2019 (three months ended June 30, 2019) are against results for the fourth
quarter of fiscal 2018 (three months ended June 30, 2018). All dollar amounts are in
Canadian dollars unless otherwise stated.
Business Overview
Corby is a leading Canadian manufacturer, marketer and importer
of spirits and wines. Corby's national leadership is sustained by a
diverse brand portfolio that allows the Company to drive profitable
organic growth with strong, consistent cash flows. Corby is a
publicly traded company, with its shares listed on the 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,
McGuinness® liqueurs, and Ungava®
gin, Chic Choc® Spiced rum, and Cabot
Trail® maple cream liqueur (Coureur des
Bois®, in Quebec)
(collectively, the "Ungava Spirit Brands,") and the Foreign
Affair® wine brands (the "Foreign Affair Brands").
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®, 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 the majority of Corby's owned-brands under a
distillate agreement and a co-pack agreement, each expiring
September 30, 2026 at HWSL's
production facility in Windsor,
Ontario. Under an administrative services agreement which
also expires September 30, 2026,
Corby manages PR's business interests in Canada, including HWSL's production
facility.
Corby sources more than 90% of its spirits production
requirements from HWSL at its production facility in Windsor, Ontario. Corby's wholly-owned
subsidiary, Ungava Spirits Co. Ltd. ("Ungava Spirits") produces the
Ungava Spirits Brands and operates the Cowansville, Quebec production facility.
Corby's wholly-owned subsidiary, the Foreign Affair Winery Ltd.,
produces the Foreign Affair Brands and operates the winery and
vineyard, based in Ontario's
Niagara region (the "Foreign Affair Winery"). 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 products destined for sale in countries
located outside North America.
In most provinces, Corby's route to market in Canada entails shipping its products to
government-controlled LBs. The LBs then sell directly, or control
the sale of, beverage alcohol products to end consumers. Exceptions
to this model include 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. Other
provinces have aspects of both government-controlled and private
retailing, including British
Columbia, Saskatchewan and
Quebec.
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). Current retail
value information as discussed in this MD&A is based on
available pricing information as provided by the ACD and the
LBs.
In addition to a focus on efforts to open new international
markets, 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 its products in Canada and ships to third party US
distributors. 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 other international markets, Corby products are
distributed by PR affiliates or third parties (more information is
provided in the "Related Party Transactions" and "Significant
Events" sections of this MD&A).
Corby's operations are subject to seasonal fluctuations: sales
are typically strong in the first and second quarters, while
third-quarter sales usually decline after the end of the retail
holiday season. Fourth-quarter sales typically increase again with
the onset of warmer weather as consumers tend to increase their
purchasing levels during the summer season. In addition, retail
sales comparisons can be affected by timing of key holidays and LB
reporting calendars.
Strategies and Outlook
Corby's business strategies are designed to maximize sustainable
long-term value growth and deliver enhanced margin quality and
profit, while continuing to produce strong and consistent cash
flows from operating activities.
Management believes its focused brand prioritization strategy
will permit Corby to capture market share in the segments and
markets that are expected to deliver the most long-term value
growth. Brand prioritization requires a consumer insight and data
driven assessment of each brand's potential. This facilitates
resource allocation of Corby's marketing and sales efforts,
ensuring optimal value creation through revenue management and
investment return maximization.
Therefore, the Company's strategy is to concentrate its
endeavors to deliver relevant consumer offerings and invest to
leverage the growth potential of its key strategic brands, while
continuing to exploit new routes-to-market and channel
opportunities.
Pursuing new growth opportunities outside of Canada is also a key strategic priority. Our
goal is to leverage our Canadian whisky and gin expertise and
expand our business into markets where we believe there is growth
potential in both volume and margin.
Of importance to the implementation of our brand strategies is
an effective route-to-market and an optimized organizational
structure. Corby continues to invest in its trade marketing
expertise, ensuring that commercial resources are specialized to
meet the unique needs of its customers and their selling channels.
In all areas of the business, management believes setting clear
strategies and increasing efficiencies is key to Corby's overall
success and creating value for Corby shareholders.
The Company's portfolio of owned and represented brands provides
an excellent platform from which to achieve its objectives.
Innovation is also essential to capture incremental growth
opportunities. Successful innovation is delivered through a
structured evaluation process powered by consumer insight and
ongoing research and development. Corby benefits from having access
to PR North America's leading-edge
production technologies, through HWSL's Windsor, Ontario facility, where most of its
products are manufactured and developed. In addition, acquisitions
can provide access to further growth opportunities. Potential
acquisitions are assessed against specific criteria including the
Company's core competencies, portfolio of brands and strategic
priorities.
Finally, Corby is a strong advocate of social responsibility,
especially with respect to its sales and promotional activities.
Corby promotes responsible consumption of its products in
collaboration with local partners.
Significant Event
Corby declared special dividend and amended regular
dividend policy
On November 7, 2018, the Corby
Board of Directors declared a special dividend of $0.44 per share payable on January 11, 2019 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 14, 2018. The special dividend payment
resulted in a cash distribution of approximately $12.5 million to shareholders and was sourced
from Corby's surplus cash position.
The Corby Board of Directors also announced an amendment to its
dividend policy. Subject to business conditions and opportunities
and appropriate adjustment for extraordinary events, regular
dividends will be paid quarterly, on the basis of an annual amount
equal to the greater of 90% of net earnings per share in the
preceding fiscal year ended June 30,
and $0.60 per share. Previously, the
policy provided for such dividends to be based on 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. Under the
amended policy, the Corby Board of Directors declared a regular
dividend of $0.22 per share payable
on December 7, 2018 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
November 23, 2018.
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)
|
|
2019
|
2018
(1)
|
2017
(1)
|
|
|
|
|
|
Revenue
|
|
$
|
149.9
|
$
|
145.7
|
$
|
143.2
|
|
|
|
|
|
Earnings from
operations
|
|
34.2
|
34.9
|
35.0
|
- Earnings from
operations per common share
|
|
1.20
|
1.23
|
1.23
|
|
|
|
|
|
Net
earnings
|
|
25.7
|
25.7
|
25.6
|
- Basic earnings per
share
|
|
0.90
|
0.90
|
0.90
|
- Diluted earnings per
share
|
|
0.90
|
0.90
|
0.90
|
|
|
|
|
|
Total
assets
|
|
218.3
|
230.0
|
227.8
|
Total
liabilities
|
|
49.2
|
45.3
|
50.5
|
|
|
|
|
|
Regular dividends
paid per share
|
|
0.88
|
0.87
|
0.82
|
Special dividends
paid per share
|
|
0.44
|
-
|
-
|
|
|
|
|
|
(1)In
preparing its comparative information, in fiscal years 2018 and
2017, the Company has adjusted amounts reported
previously in the consolidated statement of earnings as a result of
the retrospective application of IFRS 15, Revenue from
Contracts with Customers.
|
In 2019, revenue increased $4.2
million over 2018, representing an increase of 3%, while net
earnings remained consistent with the prior year. This
year-over-year improvement in revenue was the result of strong
domestic performance of Corby-owned brand, J.P. Wiser's Deluxe,
commission growth from PR brand performance, increased focus and
innovations on premium brands such as the Ungava Spirits Brands and
an additional quarter of results from Foreign Affair Brands,
partially offset by a small decline in export revenue.
Inline with industry practice, the Company sold bulk whisky in
2019, although at lower levels than in previous years, enabling the
Company to rebalance its maturation inventories and to align them
with long-term strategies and forecasts.
The growth in revenues enabled the Company to reinvest in its
brand priorities in line with its long-term strategies, resulting
in stable earnings year over year.
Net assets (i.e., total assets less total liabilities) were
impacted by payment of the special dividend, as well as an increase
in pension liabilities (primarily the result of net actuarial
losses and unrealized gains and losses on pension plan assets).
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, Corby's
mixable liqueur brands and the Ungava Spirits 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, Polar Ice, Lot No.
40, Pike Creek, and the Ungava Spirits Brands are also sold to
international markets, particularly in the US and UK.
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
2019
|
2018
|
%
|
%
|
2019
|
2018
|
%
|
%
|
|
|
|
|
|
|
|
|
|
|
Brand
|
|
|
|
|
|
|
|
|
|
J.P. Wiser's Canadian
whisky
|
|
200
|
219
|
(9%)
|
1%
|
826
|
801
|
3%
|
9%
|
Polar Ice
vodka
|
|
98
|
98
|
0%
|
7%
|
362
|
365
|
(1%)
|
(2%)
|
Lamb's rum
|
|
103
|
107
|
(4%)
|
(4%)
|
394
|
419
|
(6%)
|
(4%)
|
Mixable
liqueurs
|
|
37
|
42
|
(12%)
|
(13%)
|
152
|
161
|
(5%)
|
(4%)
|
Ungava Spirits
Brands
|
|
28
|
31
|
(9%)
|
(8%)
|
127
|
106
|
20%
|
16%
|
Foreign Affair
Brands(1)
|
|
1
|
2
|
(34%)
|
(4%)
|
8
|
5
|
49%
|
48%
|
Other Corby-owned
brands
|
|
50
|
55
|
(8%)
|
(12%)
|
206
|
211
|
(2%)
|
(9%)
|
|
|
|
|
|
|
|
|
|
|
Total Corby
brands
|
|
517
|
554
|
(7%)
|
(2%)
|
2,075
|
2,068
|
0%
|
3%
|
|
|
|
|
|
|
|
|
|
|
(1)
Comparative information has not been provided for Foreign Affair
Brands, as these brands were not owned by
|
Corby prior to
October 2, 2017.
|
On a year-over-year comparison basis, Corby's owned-brands grew
value ahead of volume as shipment value increased 3% while shipment
volumes remained relatively flat. Revenue was driven by value
growth through premium innovations and strategic price management
as well as the performance of J.P. Wiser's (in both the domestic
and export markets), Ungava Spirits Brands and continued
integration of Foreign Affair Brands into the domestic market.
Fourth quarter performance experienced declines compared to a
strong prior comparable period where timing of LB orders and export
shipments drove results. LB orders were more evenly spaced
throughout the year. Shipment volumes declined 7% in the fourth
quarter, compared to shipment values which declined 2%.
Trends in Canada differ 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)
|
|
2019
|
2018
|
%
|
%
|
2019
|
2018
|
%
|
%
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
470
|
496
|
(5%)
|
(2%)
|
1,886
|
1,849
|
2%
|
4%
|
International
|
|
47
|
58
|
(20%)
|
(7%)
|
189
|
219
|
(13%)
|
(3%)
|
|
|
|
|
|
|
|
|
|
|
Total Corby
brands
|
|
517
|
554
|
(7%)
|
(2%)
|
2,075
|
2,068
|
0%
|
3%
|
Domestic shipment volumes for the fiscal year increased 2% while
shipment value grew 4%. Current fiscal year shipments benefited
from innovations such as J.P. Wiser's Old-Fashioned, the
collaboration with the NHL® Alumni Association on
the Alumni Whisky Series and Lamb's Sociable. Corby's domestic
shipment value benefited from favourable mix effects of the launch
of high marque innovations such as Alumni Whisky Series and the
Rare Range Series of the Northern Border Collection as well as
performance of the more premium Ungava Spirits Brands and Foreign
Affair Brands. Fourth quarter domestic shipment volumes declined 5%
in volume and 2% in value. Last year's results were impacted by LB
order phasing, specifically the Liquor Control Board of
Ontario ("LCBO") as inventory
levels normalized after a threatened strike in the previous
year.
During the year, as part of our international strategy, Corby
reorganized a significant portion of its international route to
market and this has caused some fluctuations in our shipment
patterns. Nevertheless, an improvement of value has been realized
through a more direct and optimized route to market. Shipment
volumes declined 13% on a year over year comparable basis while
value decreased 3%. The fourth quarter was similarly impacted.
Retail Sales Performance / Spirit Market
Trends
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.
To provide context for the following analysis, the Canadian
spirits industry fourth quarter retail sales volume grew 3% while
retail sales value improved 5%. Results for the fourth quarter were
impacted by the timing of Easter holiday (Q4 this year compared to
Q3 in the previous year) and liquor board reporting periods. Retail
sales volume grew 1% for the year ended June
30, 2019 compared to the prior year, while retail sales
value grew 3%. Industry trends were led by retail sales volume and
value growth in the Irish whiskey, gin and tequila
categories.
In the year ended June 30, 2019,
the vodka category grew 1% in retail volume and 2% in retail value.
Canadian whisky category volumes remained flat but grew 2% in
value. The rum category declined 2% in volume and 1% in value. Gin,
a growing priority within the Corby portfolio, increased volumes by
8% and value by 12% through growth of premium and super-premium
brands.
Corby's portfolio is heavily weighted in the Canadian whisky,
rum and vodka categories; together they make up over 87% of the
Company's total retail volumes.
The following brand discussion provides a more detailed analysis
of the performance of each of Corby's key brands relative to its
respective industry category. Retail sales volume and value data,
as provided by the ACD, is set out in the following table and is
discussed throughout this MD&A.
It should be noted that the retail information presented does
not include international retail sales of Corby-owned brands and
on-site winery sales.
Retail Sales Performance / Summary of Corby's Key
Brands
|
RETAIL SALES FOR
THE CANADIAN MARKET ONLY (AS PROVIDED BY THE
ACD1)
|
|
|
|
|
Three Months
Ended
|
|
Year
Ended
|
|
|
|
|
%
Retail
|
%
Retail
|
|
|
|
%
Retail
|
%
Retail
|
|
|
June
30,
|
June
30,
|
Volume
|
Value
|
|
June
30,
|
June
30,
|
Volume
|
Value
|
(Volumes in 000's
of 9L cases)
|
|
2019
|
2018
|
Growth
|
Growth
|
|
2019
|
2018
|
Growth
|
Growth
|
|
|
|
|
|
|
|
|
|
|
|
Brand
|
|
|
|
|
|
|
|
|
|
|
J.P. Wiser's Canadian
whisky
|
|
174
|
168
|
3%
|
6%
|
|
748
|
745
|
0%
|
3%
|
Polar Ice
vodka
|
|
86
|
84
|
3%
|
3%
|
|
356
|
348
|
2%
|
3%
|
Lamb's rum
|
|
73
|
76
|
(4%)
|
(5%)
|
|
313
|
327
|
(4%)
|
(6%)
|
Mixable
liqueurs
|
|
34
|
36
|
(5%)
|
(3%)
|
|
154
|
162
|
(5%)
|
(3%)
|
Ungava Spirits
Brands
|
|
22
|
20
|
9%
|
13%
|
|
110
|
91
|
21%
|
18%
|
Foreign Affair
Brands
|
|
1
|
1
|
7%
|
17%
|
|
3
|
3
|
23%
|
24%
|
Other Corby-owned
brands
|
|
46
|
45
|
1%
|
2%
|
|
190
|
187
|
2%
|
2%
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
436
|
430
|
1%
|
3%
|
|
1,874
|
1,863
|
1%
|
2%
|
|
|
|
|
|
|
|
|
|
|
|
(1)Refers to sales at the retail store
level in Canada, as provided by the Association of Canadian
Distillers.
|
J.P. Wiser's Canadian Whisky
J.P. Wiser's Canadian
whisky is Corby's flagship brand and one of Canada's best-selling Canadian whiskies. The
brand experienced flat retail volumes for the year ended
June 30, 2019 while retail value
outpaced the category with growth of 3% compared to the same period
last year. Retail sales volumes for the Canadian whisky category
were flat while retail value for the category improved 2% over the
same period.
Value growth was amplified through a series of new J.P. Wiser's
products launched in fiscal 2019 which include a range of
super-premium, limited edition Canadian whiskies created in
partnership with the NHL® Alumni Association, a
ready-to serve J.P. Wiser's Old-Fashioned Whisky Cocktail, and a
new limited release of J.P. Wiser's 35-Year-Old. Within the range,
organic growth in both retail volume and value was posted by J.P.
Wiser's Deluxe, J.P. Wiser's Apple Whisky, J.P. Wiser's Spiced
Vanilla Whisky, and J.P. Wiser's Triple Barrel Rye.
Performance of premium variants helped to offset a Wiser's Special
Blend volume decline of 5% amidst a strained economy Canadian
whisky segment.
Corby has strategically separated the premium variants of J.P.
Wiser's from its standard offering of Special Blend. J.P. Wiser's
premium range has benefitted from a revised and enhanced packaging,
an award-winning media campaign and premium innovations, enabling
it to significantly outperform the Canadian whisky market and
delivering volume growth of 4% and value growth 6%.
The brand is being supported nationally with the award-winning
"The Public Toast" campaign in a range of media channels and
continues to receive prestigious accolades that speak to the
quality of the brand. J.P. Wiser's 35-Year-Old was
awarded World's Best Canadian Blended
Whisky and J.P. Wiser's Vanilla Whisky was awarded
World's Best Canadian Flavoured Whisky at the 2019 World
Whiskies Awards. Wendel Clark Alumni Whisky Series, J.P. Wiser's
35-Year-Old, and J.P. Wiser's Canada Commemorative 2018 were
awarded Gold at the 2019 Canadian Whisky Awards. J.P. Wiser's
35-Year-Old also won Connoisseur Whisky of the Year after
winning the prior year's coveted Canadian Whisky of the Year
award.
Polar Ice Vodka
Polar Ice vodka is among the
top-selling vodka brands in Canada. Retail volume grew 2% and value grew
3% in the year ended June 30, 2019
following strategic price repositioning in key regions. The overall
vodka category in Canada grew 1%
in retail volume and 2% in value on a comparable basis driven by
the premium vodka segment. The standard vodka category, where Polar
Ice Vodka competes, improved 1% in retail volume and remained flat
in value compared to the prior comparable period.
Advertising and promotion investment continued to focus on brand
awareness and consumer trial, while range extensions, including
Polar Ice Arctic Extreme and Polar Ice Ontario Peach, deliver
premiumization.
Polar Ice won Silver at the 2018 International Wine and Spirits
Competition and Polar Ice Arctic Extreme won Double Gold at the
2018 San Francisco World Spirits Competition.
Lamb's Rum
Lamb's rum, one of the top-selling rum
families in Canada, continued to
be impacted by ongoing changes in consumer trends for standard rum
particularly in regional strongholds. Retail volumes for the
overall rum category declined 2% for the year ended June 30, 2019, while retail values declined 1%
compared to the same period last year, however, the economy rum
category declined 3% in retail volumes and 2% in value. Lamb's
experienced a 4% decline in retail volumes and a 6% decline in
retail value.
The Lamb's rum product line is heavily weighted in the dark and
white segments, which have faced evolving consumer preferences in
recent years and increased competitor pressure in key markets. Our
strategy remains to defend regional strongholds with targeted
campaigns, focus on the most differentiated variants and to launch
new flavour variants and format innovations to help recruit new
drinkers.
Mixable Liqueurs
Corby's portfolio of mixable liqueur
brands consists of McGuinness liqueurs (which is Canada's largest mixable liqueur brand family)
and Meaghers liqueurs. Retail volume for Corby's mixable liqueurs
portfolio lagged category trends with a decline in retail volume of
5% for the year ended June 30, 2019,
and a retail value decline of 3%. The liqueurs category grew 2% in
retail value and was flat in retail volume for the year ended
June 30, 2019. Category growth was
driven by traditional coffee and cream liqueurs.
Our strategy is to expand innovation and focus on strong
programming in the retail environment, ensuring that our flavour
offering is aligned to consumer trends. McGuinness Ruby Red
Grapefruit, a recently launched flavour innovation, as well as an
expanded range of flavour offerings in a convenient 375mL format
helps to encourage consumer trial. McGuinness also benefited from
co-branded programs activated in retail and on-premise and through
social media.
Ungava Spirits Brands
Retail volume and value for the
Ungava Spirits Brands increased 21% and 18%, respectively, for the
year ended June 30, 2019. The
flagship brand, Ungava gin, grew 19% in both retail volume and
value, outperforming the Canadian gin category, which grew 8% in
retail volume while retail value grew 12%. Ungava gin is the market
value leader in the super-premium gin category.
Cabot Trail maple-based liqueurs (in Quebec, Coureur des Bois) continued to perform
well, benefiting from increased distribution and successful
recruitment through retail tastings. Retail volume increased 15% in
the current fiscal year while retail value grew 16%.
New-to-world wine innovations were launched in the Quebec grocery channel by Ungava Spirits.
Distribution in this channel is restricted to wines bottled in
Quebec which Corby is now able to
access by utilizing the Cowansville production facility. Divine
Sunshine, a contemporary blend made with California grapes, and Coureurs des Vignes, a
premium French wine brand are our first entries into this unique
channel.
Foreign Affair Brands
The Foreign Affair Brands
represent Corby's first foray into the VQA Canadian wine category.
In addition to the LBs, Foreign Affair Brands are available through
several channels including direct delivery (on-premise and wine
club) and the on-site winery visitor centre, where the majority of
sales are conducted.
Only retail sales conducted through the LBs are reported by the
ACD. LB retail sales volume increased 23% for the year ended
June 30, 2019 when compared to the
same period last year while retail value grew 24%. The Canadian
table wine category was flat to the prior year for both retail
volume and value.
The Foreign Affair Brands won top awards, including Silver and
Gold medals at the Ontario Wine Awards and Wine Align National Wine
Awards, the Lieutenant Governor's Award of Excellence in Ontario
Wines and Silver at the Decanter International Wine Awards.
Other Corby-Owned Brands
Premium offerings in Canadian
whisky such as Lot No. 40, Pike Creek, and Gooderham & Worts
(collectively known as the Northern Border Collection) grew retail
volume 15% and value 13% for the year ended June 30, 2019 and continued to outperform the
Canadian whisky category in Canada.
Innovation remains an important pillar for delivering new profit
and growth opportunities to both the Corby domestic and export
business and highlights the quality of our products. A second Rare
Range series was launched in the second quarter (including Lot No.
40 11-Year-Old Cask Strength, Pike Creek 21-Year-Old European Oak
Finish, and Gooderham & Worts Eleven Souls) and has received
high praise, winning Gold medals at the 2019 Canadian Whisky
Awards.
Lot No. 40, Pike Creek, and Gooderham & Worts were all
awarded Gold medals at the 2019 Canadian Whisky Awards. Lot No. 40
has consistently won top awards in the most prestigious Canadian
and International competitions including Silver at the 2018 San
Francisco World Spirits Competition. In addition, Pike Creek Rum
barrel Finish was awarded Sipping Whisky of the
Year. Pike Creek 21-Year-Old European Oak Finish won
World's Best Corn Whisky at the 2019 World Whiskies Awards
while Lot No. 40 11-Year-Old Cask Strength won World's Best
Canadian Rye Whisky. Gooderham & Worts Little Trinity
(17-Year-Old) was awarded Best Canadian Blended Limited
Release at the World Whiskies Award for 2018.
Royal Reserve® retail volume grew 1% in the year
ended June 30, 2019 while retail
value was flat compared to the same period last year. Competitive
retail activity and industry-wide softness within the economy
segment of Canadian whisky impacted performance.
Financial and Operating Results
The following table presents a summary of certain selected
consolidated financial information of the Company for the year
ended June 30, 2019 and 2018.
|
|
(in millions of
Canadian dollars, except per share amounts)
|
|
2019
|
2018
(1)
|
$
Change
|
%
Change
|
|
|
|
|
|
|
Revenue
|
|
$
|
149.9
|
$
|
145.7
|
$
|
4.2
|
3%
|
|
|
|
|
|
|
Cost of
sales
|
|
(57.0)
|
(54.9)
|
(2.1)
|
4%
|
Marketing, sales and
administration
|
|
(58.8)
|
(56.6)
|
(2.2)
|
4%
|
Other
income
|
|
0.1
|
0.7
|
(0.6)
|
(86%)
|
|
|
|
|
|
|
Earnings from
operations
|
|
34.2
|
34.9
|
(0.7)
|
(2%)
|
|
|
|
|
|
|
Financial
income
|
|
1.5
|
1.1
|
0.4
|
26%
|
Financial
expenses
|
|
(0.5)
|
(0.7)
|
0.2
|
(37%)
|
|
|
1.0
|
0.4
|
0.6
|
140%
|
|
|
|
|
|
|
Earnings before
income taxes
|
|
35.2
|
35.3
|
(0.1)
|
0%
|
Income
taxes
|
|
(9.5)
|
(9.6)
|
0.1
|
(2%)
|
|
|
|
|
|
|
Net
earnings
|
|
$
|
25.7
|
$
|
25.7
|
$
|
-
|
0%
|
|
|
|
|
|
|
Per common
share
|
|
|
|
|
|
- Basic net
earnings
|
|
$
|
0.90
|
$
|
0.90
|
$
|
-
|
0%
|
- Diluted net
earnings
|
|
$
|
0.90
|
$
|
0.90
|
$
|
-
|
0%
|
|
|
|
|
|
|
(1)In
preparing its comparative information, in fiscal year 2018, the
Company has adjusted amounts reported previously in the
consolidated statement of earnings as a result of the retrospective
application of IFRS 15, Revenue from Contracts with
Customers.
|
Overall Financial Results
Net earnings were
stable when compared to the same period last year. Strong domestic
market performance, increased PR Brand commission revenue, and well
controlled overhead expenses funded increased marketing and sales
investment behind key priorities and brands, including boosting
support behind recently acquired brands, launch of new innovations
and new channel development.
Revenue
The following highlights the key
components of the Company's revenue streams:
|
|
|
|
|
|
June
30,
|
June 30,
|
|
|
(in millions of
Canadian dollars)
|
2019
|
2018
(1)
|
$
Change
|
%
Change
|
|
|
|
|
|
Revenue
streams:
|
|
|
|
|
Case
goods
|
$
|
119.4
|
$
|
115.9
|
$
|
3.5
|
3%
|
Commissions
|
26.8
|
25.7
|
1.1
|
4%
|
Other
services
|
3.7
|
4.1
|
(0.4)
|
(11%)
|
|
|
|
|
|
Revenue
|
$
|
149.9
|
$
|
145.7
|
$
|
4.2
|
3%
|
|
|
|
|
|
|
|
|
(1)In
preparing its comparative information, in fiscal year 2018, the
Company has adjusted amounts
reported previously in the consolidated statement of earnings as a
result of the retrospective
application of IFRS 15, Revenue from Contracts with
Customers.
|
Case Goods revenue increased $3.5
million, or 3% for the year ended June 30, 2019, when compared to the same period
last year. Growth during the year was attributable to strategic
price management, premiumization of innovations, strong domestic
shipments following prior year LCBO normalization of inventory
levels, performance of Ungava Spirits Brands, and the addition of
the Foreign Affair Brands.
Commissions increased $1.1
million, or 4% largely attributable to strong PR spirits
portfolio performance, which lapped prior year LCBO distortion. The
PR brand portfolio benefitted from its positioning within premium
categories along with PR's investment to build these brands in
Canada.
Other services represent ancillary revenue incidental to Corby's
core business activities, such as logistical fees and from time to
time bulk whisky sales. Revenue from other services declined in the
year ended June 30, 2019 attributable
to decreased bulk whisky sales.
Cost of sales
Cost of sales was $57.0 million, an increase of $2.1 million, or 4% year over year. The increase
is relatively in line with Case Goods growth and is partially
attributable to the addition of the Foreign Affair Brands, higher
distribution costs to Western
Canada and increased warehousing fees related to recently
acquired brands. Combined with tactical price adjustments in
regional strongholds and the launch of new lower margin size and
innovation formats, overall gross margin on Case Goods was 54%;
comparable to the same period last year (note: Commissions are not
included in this calculation).
Marketing, sales and administration
Marketing,
sales and administration expenses increased $2.2 million, or 4% for the year ended
June 30, 2019. The incremental
increase in marketing and promotional investment was concentrated
on Ungava Spirits Brands, the Foreign Affair Brands, entry into the
Quebec grocery wine channel,
launch of new innovations and export market support. Overhead
expenses were well controlled and decreased as we also lapped prior
year acquisition-related professional fees, partially offset by
integration of the Foreign Affair Winery.
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. An increase in interest income for
the year ended June 30, 2019 is due
to increases in market interest rates compared to the same time
last year.
Income taxes
A reconciliation of the effective
tax rate to the statutory rates for each period is presented
below.
|
|
|
|
|
|
|
|
2019
|
2018
|
|
|
|
|
|
|
Combined basic
Federal and Provincial tax rates
|
|
|
26.8%
|
26.8%
|
Other
|
|
|
|
0.3%
|
0.6%
|
|
|
|
|
|
|
Effective tax
rate
|
|
|
27.1%
|
27.4%
|
Liquidity and Capital Resources
Corby's sources of liquidity are its deposits in cash management
pools of $61.1 million as at
June 30, 2019, and its cash generated
from operating activities. Corby's total contractual maturities are
represented by its accounts payable and accrued liabilities which
totalled $33 million as at
June 30, 2019 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)
|
2019
|
2018
|
$ Change
|
|
|
|
|
Operating
activities
|
|
|
|
Net earnings, adjusted
for non-cash items
|
$
|
41.1
|
$
|
40.9
|
$
|
0.2
|
Net change in non-cash
working capital
|
0.9
|
(1.8)
|
2.7
|
Net payments for
interest and income taxes
|
(8.0)
|
(7.8)
|
(0.2)
|
|
34.0
|
31.3
|
2.7
|
|
|
|
|
Investing
activities
|
|
|
|
Additions to capital
assets
|
(5.2)
|
(4.9)
|
(0.3)
|
Proceeds from
disposition of capital assets
|
-
|
0.5
|
(0.5)
|
Business
Acquisition
|
-
|
(6.4)
|
6.4
|
Deposits in cash
management pools
|
8.8
|
4.3
|
4.5
|
|
3.6
|
(6.5)
|
10.1
|
|
|
|
|
Financing
activity
|
|
|
|
Dividends
paid
|
(37.6)
|
(24.8)
|
(12.8)
|
|
$
|
(37.6)
|
$
|
(24.8)
|
(12.8)
|
|
|
|
|
Net change in
cash
|
$
|
-
|
$
|
-
|
$
|
-
|
Operating activities
Net cash generated from
operating activities was $34.0
million during the year ended June
30, 2019 reflecting an increase of $2.7 million compared to the same time last year.
Prior year cash flows from operating activities were negatively
impacted by the timing of advertising and promotional expenses
incurred as spend in the prior year was more heavily weighted
earlier in the year in preparation for summer promotion.
Investing activities
Net cash generated from
investing activities was $3.6 million
for the year ended June 30, 2019
compared to a use of cash of $6.5
million for the prior year. The prior year's use of cash
from investing activities was largely driven by Corby's acquisition
of the Foreign Affair Brands which was completed on October 2, 2017.
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. For more information related to these deposits please refer
to the "Related Party Transactions" section of this MD&A.
Financing activities
Cash used for financing
activities was $37.6 million for the
year ended June 30, 2019. Financing
activity reflects dividend payments paid to shareholders including
a special dividend of $12.5 million
paid January 11, 2019. As well,
regular quarterly dividends increased to $0.22 per share starting with the quarterly
dividend payment on December 8,
2017.
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
|
2019 - Q4
|
|
August 21,
2019
|
|
September 11,
2019
|
|
September 27,
2019
|
|
$
0.22
|
2019 - Q3
|
|
May 8,
2019
|
|
May 24,
2019
|
|
June 14,
2019
|
|
0.22
|
2019 - Q2
|
|
February 13,
2019
|
|
February 27,
2019
|
|
March 8,
2019
|
|
0.22
|
2019 -
special
|
|
November 7,
2018
|
|
December 14,
2018
|
|
January 11,
2019
|
|
0.44
|
2019 - Q1
|
|
November 7,
2018
|
|
November 23,
2018
|
|
December 7,
2018
|
|
0.22
|
2018 - Q4
|
|
August 22,
2018
|
|
September 12,
2018
|
|
September 28,
2018
|
|
0.22
|
2018 - Q3
|
|
May 9,
2018
|
|
May 25,
2018
|
|
June 13,
2018
|
|
0.22
|
2018 - Q2
|
|
February 7,
2018
|
|
February 23,
2018
|
|
March 9,
2018
|
|
0.22
|
2018 - Q1
|
|
November 8,
2017
|
|
November 24,
2017
|
|
December 8,
2017
|
|
0.22
|
2017 - Q4
|
|
August 23,
2017
|
|
September 15,
2017
|
|
September 29,
2017
|
|
0.21
|
2017 - Q3
|
|
May 10,
2017
|
|
May 26,
2017
|
|
June 14,
2017
|
|
0.21
|
2017 - Q2
|
|
February 8,
2017
|
|
February 24,
2017
|
|
March 10,
2017
|
|
0.21
|
2017 - Q1
|
|
November 9,
2016
|
|
November 25,
2016
|
|
December 9,
2017
|
|
0.21
|
Outstanding Share Data
As at August 21, 2019, 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, 2019:
|
|
|
|
|
|
|
|
Payments
During
2020
|
Payments
due in
2021
and 2022
|
Payments
due in
2023
and 2024
|
Payments
due after
2024
|
Obligations
with no
fixed
maturity
|
Total
|
|
|
|
|
|
|
|
|
|
Operating lease
obligations
|
$
|
1.7
|
$
|
2.6
|
$
|
1.5
|
$
|
0.9
|
$
|
-
|
$
|
6.7
|
Employee future
benefits
|
-
|
-
|
-
|
-
|
13.4
|
13.4
|
|
|
|
|
|
|
|
|
$
|
1.7
|
$
|
2.6
|
$
|
1.5
|
$
|
0.9
|
$
|
13.4
|
$
|
20.1
|
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 require 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
North American 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 agreed to
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 agreed to 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
continues 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 (the
"2011 Agreement"). On September 30,
2013, Corby paid $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 2011 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 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. On March 28, 2019 the agreement was amended to
include Ungava Gin. The agreement is effective for a five-year
period ending June 30, 2021.
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 21, 2019, 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 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 2019
The following table presents a summary of certain selected
consolidated financial information for the Company for the
three-month periods ended June 30,
2019 and 2018:
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
June
30,
|
June 30,
|
|
|
(in millions of
Canadian dollars, except per share amounts)
|
|
2019
|
2018
(1)
|
$
Change
|
%
Change
|
|
|
|
|
|
|
Revenue
|
|
$
|
39.2
|
$
|
40.2
|
$
|
(1.0)
|
(3%)
|
|
|
|
|
|
|
Cost of
sales
|
|
(14.0)
|
(14.6)
|
0.6
|
(5%)
|
Marketing, sales and
administration
|
|
(14.8)
|
(13.3)
|
(1.5)
|
12%
|
Other
income
|
|
0.1
|
0.3
|
(0.2)
|
(85%)
|
|
|
|
|
|
|
Earnings from
operations
|
|
10.5
|
12.6
|
(2.1)
|
(17%)
|
|
|
|
|
|
|
Financial
income
|
|
0.3
|
0.3
|
0.0
|
12%
|
Financial
expenses
|
|
(0.1)
|
(0.1)
|
0.0
|
(35%)
|
|
|
0.2
|
0.2
|
0.0
|
85%
|
|
|
|
|
|
|
Earnings before
income taxes
|
|
10.7
|
12.8
|
(2.1)
|
(16%)
|
Income
taxes
|
|
(2.9)
|
(3.5)
|
0.6
|
(18%)
|
|
|
|
|
|
|
Net
earnings
|
|
$
|
7.8
|
$
|
9.3
|
$
|
(1.5)
|
(16%)
|
|
|
|
|
|
|
Per common
share
|
|
|
|
|
|
- Basic net
earnings
|
|
$
|
0.27
|
$
|
0.33
|
$
|
(0.06)
|
(18%)
|
- Diluted net
earnings
|
|
$
|
0.27
|
$
|
0.33
|
$
|
(0.06)
|
(18%)
|
|
|
|
|
|
|
(1)In
preparing its comparative information, in fiscal years 2018, the
Company has adjusted amounts reported previously in the
consolidated statement of earnings as a result of the retrospective
application of IFRS 15, Revenue from Contracts with
Customers.
|
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)
|
2019
|
2018
(1)
|
$
Change
|
%
Change
|
|
|
|
|
|
Revenue
streams:
|
|
|
|
|
Case
goods
|
$
|
31.2
|
$
|
31.9
|
$
|
(0.7)
|
(2%)
|
Commissions
|
6.7
|
6.8
|
(0.1)
|
(2%)
|
Other
services
|
1.3
|
1.5
|
(0.2)
|
(10%)
|
|
|
|
|
|
Revenue
|
$
|
39.2
|
$
|
40.2
|
$
|
(1.0)
|
(3%)
|
|
|
|
|
|
(1)In
preparing its comparative information, in fiscal years 2018, the
Company has adjusted amounts reported previously in the
consolidated statement of earnings as a result of the retrospective
application of IFRS 15, Revenue from Contracts with
Customers.
|
Total revenue decreased 3% on a quarter-over-quarter comparison
basis, or $1.0 million. This is
primarily related to LBs return to regular order patterns and
impacted by changes in route to market in international markets.
The impact to Case Goods revenue was mitigated by improved pricing
and portfolio mix.
Commissions, compared to the same period last year, decreased
$0.1 million as we experienced
industry-wide softness in wine consumption that unfavourably
impacted PR and agency wine performance. This was partially offset
by strong PR spirit brands performance and strategic price
management on represented brands.
Other services represent ancillary revenue incidental to Corby's
core business activities, such as logistical fees and from time to
time bulk whisky sales. The reduced revenue for the quarter was
mostly attributable to decreased bulk whisky sales as the Company
continued to rebalance its maturation inventories.
Cost of sales
Cost of goods sold was
$14.0 million, representing a
$0.6 million, or 5% decrease this
period when compared with the same three-month period last year.
Gross margin was 57% for the current year quarter compared to 56%
the same quarter last year benefiting from changes in product mix
and cost savings from production synergies.
Marketing, sales and administration
Marketing,
sales and administration expenses increased $1.5 million, or 12%, over the same quarter last
year. This increase was driven by current year phasing of domestic
and international advertising and promotional activities, offset by
decreased overheads expenses.
Net earnings and earnings per share
Net
earnings for the fourth quarter were $7.8
million, or $0.27 per share,
which is a decrease of $1.5 million
over the same quarter last year due to the aforementioned
reasons.
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)
|
2019
|
2019
|
2019
|
2019
|
2018
(1)
|
2018
(1)
|
2018
(1)
|
2018
(1)
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
39.2
|
$
|
31.0
|
$
|
41.9
|
$
|
37.9
|
$
|
40.2
|
$
|
29.3
|
$
|
40.6
|
$
|
35.7
|
Earnings from
operations
|
10.5
|
5.9
|
9.1
|
8.7
|
12.6
|
6.5
|
7.9
|
7.9
|
Net
earnings
|
7.8
|
4.5
|
6.9
|
6.5
|
9.3
|
4.8
|
5.8
|
5.9
|
Basic EPS
|
0.27
|
0.16
|
0.24
|
0.23
|
0.33
|
0.17
|
0.20
|
0.21
|
Diluted
EPS
|
0.27
|
0.16
|
0.24
|
0.23
|
0.33
|
0.17
|
0.20
|
0.21
|
|
|
|
|
|
|
|
|
|
(1)In
preparing its comparative information, in fiscal years 2018, the
Company has adjusted amounts reported previously in the
consolidated statement of earnings as a result of the retrospective
application of IFRS 15, Revenue from Contracts with
Customers.
|
The above table demonstrates the seasonality of Corby's
business, as sales are typically strong in the first and second
quarters, while third-quarter sales (January, February and March)
usually decline after the end of the retail holiday season.
Fourth-quarter sales typically increase again with the onset of
warmer weather, as consumers tend to increase their purchasing
levels during the summer season.
Revenues for the second, third and fourth quarters of 2018
include Case Goods sales for the Foreign Affair Brands, which were
acquired on October 2, 2017.
Recent Accounting Pronouncements
New Accounting Standards
A number of new standards, amendments to standards and
interpretations were effective for Corby on July 1, 2018, and accordingly, have been applied
in preparing the audited consolidated financial statements for the
year ended June 30, 2019:
(i)
Revenue
In May 2014, the International
Accounting Standards Board ("IASB") issued IFRS 15, "Revenue from
Contracts with Customers" ("IFRS 15"), which provides a
comprehensive framework for the recognition, measurement and
disclosure of revenue from contracts with customers. IFRS 15 is
effective for annual periods beginning on or after January 1, 2018 and was therefore applied for the
first time by the Company for the interim period beginning
July 1, 2018.
The Company adopted IFRS 15 using the full retrospective
approach with restatement of prior year comparative figures. After
completing the analysis of significant customer contracts, the
Company determined that the implementation of IFRS 15 did not
result in a significant impact to the Company's financial position
and performance. The application of IFRS 15 has required that
certain advertising and promotional expenditures (previously
reported in Marketing, sales and administration), when paid
directly to customers, be classified as a reduction to revenue.
For the year ended June 30, 2018,
the implementation of IFRS 15 resulted in a reduction to revenue
from Case Goods sales of $871 with a
corresponding reduction to Marketing, sales and administration.
There was no impact to net earnings, the Company's balance sheet or
statement of cash flows.
The Company's accounting policies for revenues have been updated
to reflect the more extensive requirements under IFRS 15 and are
outlined in Note 4 – Significant Accounting Policies, "Revenue
Recognition" to the audited consolidated financial statements for
the year-ended June 30, 2019.
(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 own 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 became effective
July 1, 2018 and has been applied
retrospectively to all periods presented.
The adoption of IFRS 9 did not have a significant impact on the
Company's consolidated financial statements. Financial assets and
liabilities have been classified and measured in accordance with
IFRS 9. As a result of the application of IFRS 9 and
classifications, there has been no change to the carrying value of
financial assets and liabilities.
Changes to the classification of Corby's financial assets and
liabilities under IFRS 9 are as follows:
Financial
Asset/Liability
|
|
|
Category
Under IAS 39
|
|
|
Category
Under IFRS 9
|
|
|
|
|
|
|
|
|
|
Deposits in cash
management pools
|
|
|
Loans and
receivables
|
|
|
Amortized
cost
|
Accounts
receivable
|
|
|
|
Loans and
receivables
|
|
|
Amortized
cost
|
Accounts payable and
accrued liabilities
|
|
|
Loans and
receivables
|
|
|
Amortized
cost
|
(iii)
Foreign Currency Transactions and Advance Consideration
The IASB issued a new interpretation IFRIC 22, "Foreign Currency
Transactions and Advance Consideration" ("IFRIC 22"). IFRIC 22
clarifies the accounting for transactions that include the receipt
or payment of advance consideration in a foreign currency.
Specifically, IFRIC 22 addresses how an entity recognizes a
non-monetary asset or liability arising from a prepayment or
receipt before the entity recognizes the related asset, expense or
income. The IASB determined that the date of the transaction, for
the purpose of determining the exchange rate, is the date of
initial recognition of the non-monetary prepayment asset or
deferred income liability. If there are multiple payments or
receipts in advance, a date of transaction is established for each
payment or receipt. The Company adopted IFRIC 22, effective
July 1, 2018, with no significant
impact on the Company's consolidated financial statements.
(iv)
Share Based Payments
The IASB issued an amendment to IFRS 2 "Share-based Payment"
("IFRS 2"). This amendment clarifies the accounting for
cash-settled share-based payment transactions that include a
performance condition. For Corby, this amendment to IFRS 2 became
effective July 1, 2018 and did not
have a significant impact on the Company's consolidated financial
statements.
Recent accounting pronouncements not in effect
The below standards have been issued but are not yet effective
for the financial period ended June 30,
2019, and accordingly, have not been applied in preparing
the audited consolidated financial statements:
(i)
Leases
In January 2016, the IASB issued a
new standard IFRS 16, "Leases" ("IFRS 16"), which will ultimately
replace IAS 17, "Leases" ("IAS 17"). IFRS 16 specifies how an
entity will recognize, measure, present and disclose leases. The
standard provides a single lessee accounting model, requiring
lessees to recognize assets and liabilities for all leases unless
the lease term is 12 months or less or the underlying asset has a
low value. The standard is effective for annual periods beginning
on or after January 1, 2019 and must
be applied retrospectively. For Corby, this standard will become
effective July 1, 2019.
The guidance permits two methods of adoption: retrospectively to
each prior reporting period restated (full retrospective method),
or retrospectively with the cumulative effect of initially applying
the guidance recognized at the date of initial application
(modified retrospective method). The Company will adopt the
standard using the modified retrospective method. The Company has
elected to set the right-of-use asset equal to the lease
liability.
In preparation for adoption of the standard, the Company has
completed the review of relevant contracts and has concluded there
will be a right-of-use asset and a corresponding lease liability of
approximately $5,900, recognized on
the Company's statements of financial position upon the adoption of
the standard. The Company has elected to not apply the requirements
of IFRS 16 to short-term leases and leases for which the underlying
asset is of low value. The Company will recognize the lease
payments associated with these leases on a straight-line basis,
over the lease term.
(ii)
Uncertainty over Income Tax Treatments
In June 2017, the IASB issued a
new interpretation IFRIC 23, "Uncertainty over Income Tax
Treatments" ("IFRIC 23). IFRIC 23 specifies the accounting
treatment for current and deferred tax liabilities and assets in
circumstances in which there is uncertainty over the tax
treatments. The standard is effective for annual periods beginning
on or after January 1, 2019, with
earlier application permitted. For Corby, this standard will become
effective July 1, 2019. The new
interpretation is not expected to have a significant impact on the
Company's consolidated financial statements.
(iii)
Financial Instruments
The IASB issued amendments to IFRS 9 "Financial Instruments"
("IFRS 9"). The amendment addresses concerns about how IFRS 9
classified prepayable financial assets and clarifies an aspect of
accounting for financial liabilities following a modification. The
amendments are to be applied retrospectively for fiscal years
beginning on or after January 1,
2019. The amendment and additions to IFRS 9 will not have an
impact on the Company's audited consolidated financial
statements.
(iv)
Employee Benefits
The IASB published amendments to IAS 19 "Employee Benefits"
("IAS 19"). The amendment harmonizes accounting practices to
provide more relevant information for decision-making. The
amendments are to be applied retrospectively to plan amendments,
curtailments or settlements occurring on or after January 1, 2019. The amendment and additions to
IAS 19 will not have an impact on the Company's consolidated
financial statements.
(v)
Income Taxes
The IASB published amendments to IAS 12 "Income Taxes" ("IAS
12"). The amendment clarifies that the income tax consequences of
dividends, where transactions or events that generate distributable
profits are recognized, apply to all income tax consequences of
dividends. The amendments are to be applied retrospectively for
fiscal years beginning on or after January
1, 2019. The amendments and additions to IAS 12 will not
have an impact on the Company's consolidated financial statements.
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, 2019, 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,
2019, 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.
Additionally, 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 (including on
matters such as regulatory requirements, import duties and
taxation) 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. Additionally, the legalization of recreational
cannabis in Canada could have the
potential to impact consumer consumption patterns with respect to
beverage alcohol products. 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, or a change in
business model 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 maturing products, there is a potential
for shortages or surpluses in future years if demand and supply are
materially different from long-term forecasts. Additionally,
the loss through contamination, fire or other natural disaster of
the stock of maturing products may result in significant reduction
in supply and, as a result, Corby may not be able to meet customer
demands. The Company monitors category trends and regularly reviews
maturing inventory levels.
Environmental Compliance
Environmental
liabilities may potentially arise when companies are in the
business of manufacturing products and, thus, required to handle
potentially hazardous materials. As Corby largely outsources its
production, including all of its storage and handling of maturing
alcohol, the risk of environmental liabilities is considered
minimal. Corby currently has no significant recorded or unrecorded
environmental liabilities.
Industry Consolidation
In recent years, the
global beverage alcohol industry has continued to experience
consolidation. Industry consolidation can have varying degrees of
impact and, in some cases, may even create exceptional
opportunities. Either way, management believes that the Company is
well positioned to deal with this or other changes to the
competitive landscape in Canada
and other markets in which it carries on business.
Corby's ability to properly complete acquisitions and
subsequently integrate them may affect its results
Corby
monitors growth opportunities that may present themselves to Corby,
including by way of acquisitions. While we believe that an
acquisition may create the opportunity to realize certain benefits,
achieving these benefits will depend in part on successfully
consolidating functions and integrating operations, procedures and
personnel in an efficient manner, as well as our ability to realize
any anticipated growth opportunities or costs savings from
combining the target's assets and operations with our existing
brands and operations. Integration efforts following any
acquisition (including the recent acquisitions of the Ungava
Spirits Brands and Foreign Affair Winery) may require the
dedication of substantial management effort, time and resources,
which may divert management's focus and resources from other
strategic opportunities and from operational matters during this
process. In addition, Corby may be required to assume
greater-than-expected liabilities due to liabilities that are
undisclosed at the time of completion of an acquisition. A failure
to realize, in whole or in part, the anticipated benefits of an
acquisition may have a negative impact on the results or financial
position of Corby.
Competition
The Canadian and international
beverage alcohol industry is extremely competitive. Competitors may
take actions to establish and sustain a competitive advantage
through advertising and promotion and pricing strategies in an
effort to maintain market share, which may negatively affect our
sales, revenues and profitability. Corby constantly monitors the
market and adjusts its own advertising, promotion and pricing
strategies as appropriate.
Competitors may also affect Corby's ability to attract and
retain high-quality employees. The Company's long heritage attests
to Corby's strong foundation and successful execution of its
strategies. Its role as a leading Canadian beverage alcohol company
helps facilitate recruitment efforts.
Credit Risk
Credit risk arises from deposits in
cash management pools held with PR via Corby's participation in the
Mirror Netting Service Agreement (as previously described in the
"Related Party Transactions" section of this MD&A), as well as
credit exposure to customers, including outstanding accounts
receivable. The maximum exposure to credit risk is equal to the
carrying value of the Company's financial assets. The objective of
managing counterparty credit risk is to prevent losses in financial
assets. The Company assesses the credit quality of its
counterparties, taking into account their financial position, past
experience and other factors. As the large majority of Corby's
accounts receivable balances are collectible from
government-controlled LBs, management believes the Company's credit
risk relating to accounts receivable is at an acceptably low
level.
Exposure to Interest Rate Fluctuations
The
Company does not have any short- or long-term debt facilities.
Interest rate risk exists, as Corby earns market rates of interest
on its deposits in cash management pools. An active risk management
programme does not exist, as management believes that changes in
interest rates would not have a material impact on Corby's
financial position over the long term.
Exposure to Commodity Price
Fluctuations
Commodity risk exists, as the manufacture
of Corby's products requires the procurement of several known
commodities, such as grains, sugar and natural gas. The Company
strives to partially mitigate this risk through the use of
longer-term procurement contracts where possible. In addition,
subject to competitive conditions, the Company may pass on
commodity price changes to consumers through pricing over the long
term.
Foreign Currency Exchange Risk
The Company has
exposure to foreign currency risk, as it conducts business in
multiple foreign currencies; however, its exposure is primarily
limited to the US dollar ("USD") and 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.
Additionally, although the Company registers trademarks, as
applicable, it cannot be certain that trademark registrations will
be issued with respect to all the Company's applications. Also,
while Corby constantly watches for and responds to competitive
threats, as necessary, the Company cannot predict challenges to, or
prevent a competitor from challenging, the validity of any existing
or future trademark issued or licensed to Corby.
Information Technology and Cyber Security
The
Company uses technology supplied by third parties, both related and
non-related, to support operations and invests in information
technology to improve route to market, reporting, analysis, and
marketing initiatives. Issues with availability, reliability
and security of systems and technology could adversely impact the
Company's ability to compete resulting in corruption or loss of
data, regulatory-related issues, litigation or brand reputation
damage. With the fast-paced changing nature of the technology
environment including digital marketing, the Company works with
these third parties to maintain policies, processes and procedures
to help secure and protect these information systems as well as
consumer, corporate and employee data.
Valuation of 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. 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 as at June 30,
2019:
|
|
|
|
|
|
|
|
|
Carrying Values as at
June 30, 2019
|
|
|
|
|
|
|
|
Associated
Brand
|
|
Associated
Market
|
|
Goodwill
|
Intangibles
|
Total
|
|
|
|
|
|
|
|
Various PR
brands
|
|
Canada
|
|
$
|
-
|
$
|
13.0
|
$
|
13.0
|
Lamb's rum
|
|
United
Kingdom(1)
|
|
1.3
|
11.8
|
13.1
|
Ungava brands
(2)
|
|
Canada
|
|
5.1
|
3.2
|
8.3
|
Foreign Affair Winery
brands
|
|
Canada
|
|
0.4
|
2.5
|
2.9
|
Other domestic
brands
|
|
Canada
|
|
1.9
|
-
|
1.9
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8.7
|
$
|
30.5
|
$
|
39.2
|
|
|
|
|
|
|
|
(1)The
international business for Lamb's rum is primarily focused in the
UK, however, the trademarks and licences
purchased relate to all
international markets outside of Canada, as Corby previously owned
the Canadian rights.
|
(2)The
Ungava brands include trademarks related to Ungava Premium Canadian
Gin, Chic Choc Spiced Rum and Cabot Trail
maple-based liqueurs.
|
Therefore, economic factors (such as consumer consumption
patterns) specific to these brands and markets are primary drivers
of the risk associated with their respective goodwill and
intangible assets valuations.
Employee Future Benefits
The Company has
certain obligations under its registered and non-registered defined
benefit pension plans and other post-retirement benefit plan. There
is no assurance that the Company's benefit plans will be able to
earn the assumed rate of return. New regulations and market-driven
changes may result in changes in the discount rates and other
variables, which would result in the Company being required to make
contributions in the future that differ significantly from
estimates. An extended period of depressed capital markets and low
interest rates could require the Company to make contributions to
these plans in excess of those currently contemplated, which, in
turn, could have an adverse impact on the financial performance of
the Company. Somewhat mitigating the impact of a potential market
decline is the fact that the Company monitors its pension plan
assets closely and follows strict guidelines to ensure that pension
fund investment portfolios are diversified in-line with industry
best practices. For further details related to Corby's defined
benefit pension plans, please refer to Note 10 of the annual
audited consolidated financial statements for the year ended
June 30, 2019.
CORBY SPIRIT AND WINE LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
FOR the Years ENDED June 30, 2019 and
2018
CORBY SPIRIT AND
WINE LIMITED
|
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
as at June 30,
2019 and 2018
|
|
|
|
|
(in thousands of
Canadian dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30,
|
June 30,
|
|
|
Notes
|
2019
|
2018
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Deposits in cash
management pools
|
|
|
$
|
61,136
|
$
|
69,955
|
Accounts
receivable
|
|
8
|
32,260
|
33,469
|
Inventories
|
|
9
|
61,912
|
59,789
|
Prepaid
expenses
|
|
|
554
|
593
|
|
|
|
|
|
Total current
assets
|
|
|
155,862
|
163,806
|
Other
assets
|
|
10
|
1,498
|
1,830
|
Property, plant and
equipment
|
|
11
|
21,683
|
19,331
|
Goodwill
|
|
12
|
8,757
|
8,757
|
Intangible
assets
|
|
13
|
30,531
|
36,311
|
|
|
|
|
|
|
|
Total
assets
|
|
|
$
|
218,331
|
$
|
230,035
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
Accounts payable and
accrued liabilities
|
|
15
|
$
|
32,998
|
$
|
31,242
|
Income and other
taxes payable
|
|
|
989
|
1,240
|
|
|
|
|
|
Total current
liabilities
|
|
|
33,987
|
32,482
|
Provision for
employee benefits
|
|
10
|
13,427
|
9,991
|
Deferred income
taxes
|
|
16
|
1,820
|
2,868
|
|
|
|
|
|
Total
liabilities
|
|
|
49,234
|
45,341
|
|
|
|
|
|
Shareholders'
equity
|
|
|
|
|
Share
capital
|
|
17
|
14,304
|
14,304
|
Accumulated other
comprehensive (loss) income
|
|
18
|
(3,226)
|
486
|
Retained
earnings
|
|
|
158,019
|
169,904
|
Total
shareholders' equity
|
|
|
169,097
|
184,694
|
Total liabilities
and shareholders' equity
|
|
|
$
|
218,331
|
$
|
230,035
|
|
|
|
|
|
The accompanying
notes are an integral part of these consolidated financial
statements.
|
|
|
|
|
CORBY SPIRIT AND
WINE LIMITED
|
CONSOLIDATED
STATEMENTS OF EARNINGS
|
|
|
|
|
|
|
|
(The three months
ended June 30, 2019 and 2018 have not been audited or reviewed by
the Company's external auditor)
|
(in thousands of
Canadian dollars, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
|
For the Year
Ended
|
|
|
|
|
|
|
|
|
|
|
June
30,
|
June 30,
|
June
30,
|
June 30,
|
|
|
Notes
|
2019
|
2018
(1)
|
2019
|
2018
(1)
|
|
|
|
|
|
|
|
Revenue
|
|
19
|
$
|
39,235
|
$
|
40,241
|
$
|
149,938
|
$
|
145,724
|
|
|
|
|
|
|
|
Cost of
sales
|
|
|
(13,982)
|
(14,642)
|
(57,028)
|
(54,855)
|
Marketing, sales and
administration
|
|
|
(14,835)
|
(13,281)
|
(58,798)
|
(56,631)
|
Other
income
|
|
20
|
48
|
326
|
96
|
705
|
|
|
|
|
|
|
|
Earnings from
operations
|
|
|
10,466
|
12,644
|
34,208
|
34,943
|
|
|
|
|
|
|
|
Financial
income
|
|
21
|
350
|
312
|
1,492
|
1,187
|
Financial
expenses
|
|
21
|
(124)
|
(190)
|
(478)
|
(764)
|
|
|
|
226
|
122
|
1,014
|
423
|
|
|
|
|
|
|
|
Earnings before
income taxes
|
|
|
10,692
|
12,766
|
35,222
|
35,366
|
|
|
|
|
|
|
|
Current income
taxes
|
|
16
|
(3,132)
|
(3,439)
|
(9,215)
|
(9,263)
|
Deferred income
taxes
|
|
16
|
255
|
(73)
|
(313)
|
(422)
|
Income
taxes
|
|
|
(2,877)
|
(3,512)
|
(9,528)
|
(9,685)
|
|
|
|
|
|
|
|
Net
earnings
|
|
|
$
|
7,815
|
$
|
9,254
|
$
|
25,694
|
$
|
25,681
|
|
|
|
|
|
|
|
Basic earnings per
share
|
|
22
|
$
|
0.27
|
$
|
0.33
|
$
|
0.90
|
$
|
0.90
|
Diluted earnings
per share
|
|
22
|
$
|
0.27
|
$
|
0.33
|
$
|
0.90
|
$
|
0.90
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding
|
|
|
|
|
|
|
Basic
|
|
|
28,468,856
|
28,468,856
|
28,468,856
|
28,468,856
|
Diluted
|
|
|
28,468,856
|
28,468,856
|
28,468,856
|
28,468,856
|
|
|
|
|
|
|
|
(1)In
preparing its comparative information, the Company has adjusted
amounts reported previously in the interim condensed consolidated
statement of earnings as a result of the retrospective application
of IFRS 15, Revenue from Contracts with Customers. Refer to Note 3
for details regarding adjusted amounts.
|
|
|
|
|
|
|
|
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, 2019 and 2018
|
|
|
|
|
|
(in thousands of
Canadian dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30,
|
June 30,
|
|
|
|
|
Notes
|
2019
|
2018
|
|
|
|
|
|
|
|
Net
earnings
|
|
|
|
$
|
25,694
|
$
|
25,681
|
|
|
|
|
|
|
|
Other
Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts that will not
be subsequently reclassified to
earnings:
|
|
|
|
|
|
Net actuarial (losses)
gains
|
|
|
10
|
(5,073)
|
8,883
|
Income
taxes
|
|
|
16
|
1,361
|
(2,380)
|
|
|
|
|
|
(3,712)
|
6,503
|
|
|
|
|
|
|
|
Total
comprehensive income
|
|
|
|
$
|
21,982
|
$
|
32,184
|
CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
for the years
ended June 30, 2019 and 2018
|
|
|
|
|
|
(in thousands of
Canadian dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
Capital
|
Accumulated
Other
Comprehensive
(Loss) Income
|
Retained
Earnings
|
Total
|
|
|
|
|
|
|
|
Balance as at June
30, 2018
|
|
$
|
14,304
|
$
|
486
|
$
169,904
|
$
|
184,694
|
Total comprehensive
income
|
|
-
|
(3,712)
|
25,694
|
21,982
|
Dividends
|
|
|
-
|
-
|
(37,579)
|
(37,579)
|
|
|
|
|
|
|
|
|
Balance as at June
30, 2019
|
|
$
|
14,304
|
$
|
(3,226)
|
$
158,019
|
$
|
169,097
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at June
30, 2017
|
|
$
|
14,304
|
$
|
(6,017)
|
$
168,991
|
$
|
177,278
|
Total comprehensive
income
|
|
-
|
6,503
|
25,681
|
32,184
|
Dividends
|
|
|
-
|
-
|
(24,768)
|
(24,768)
|
|
|
|
|
|
|
|
Balance as at June
30, 2018
|
|
$
|
14,304
|
$
|
486
|
$
169,904
|
$
|
184,694
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of these consolidated financial
statements.
|
CORBY SPIRIT AND
WINE LIMITED
|
CONSOLIDATED
STATEMENTS OF CASH FLOW
|
|
|
|
|
|
|
(The three months
ended June 30, 2019 and 2018 have not been audited or reviewed by
the Company's external auditor)
|
(in thousands of
Canadian dollars)
|
|
|
For the Three
Months Ended
|
For the Year
Ended
|
|
|
|
|
|
|
|
|
June
30,
|
June 30,
|
June
30,
|
June 30,
|
|
Notes
|
2019
|
2018
|
2019
|
2018
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
Net
earnings
|
|
$
|
7,815
|
$
|
9,254
|
$
|
25,694
|
$
|
25,681
|
Adjustments
for:
|
|
|
|
|
|
Amortization and
depreciation
|
23
|
2,208
|
2,124
|
8,668
|
8,214
|
Net financial
income
|
21
|
(226)
|
(122)
|
(1,014)
|
(423)
|
Gain on disposal of
property and equipment
|
|
-
|
(144)
|
-
|
(324)
|
Income tax
expense
|
|
2,877
|
3,512
|
9,528
|
9,685
|
Provision for
employee benefits
|
|
87
|
(85)
|
(1,783)
|
(1,969)
|
|
|
12,761
|
14,539
|
41,093
|
40,864
|
Net change in
non-cash working capital balances
|
25
|
(1,922)
|
65
|
881
|
(1,809)
|
Interest
received
|
|
350
|
311
|
1,492
|
1,187
|
Income taxes
paid
|
|
(2,319)
|
(1,589)
|
(9,466)
|
(8,935)
|
|
|
|
|
|
|
Net cash from
operating activities
|
|
8,870
|
13,326
|
34,000
|
31,307
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
Additions to property
and equipment
|
11
|
(2,503)
|
(2,100)
|
(5,254)
|
(4,958)
|
Proceeds from
disposition of property and equipment
|
|
14
|
71
|
14
|
518
|
Business
acquisition
|
6
|
-
|
-
|
-
|
(6,397)
|
Deposits in cash
management pools
|
|
(118)
|
(5,034)
|
8,819
|
4,298
|
|
|
|
|
|
|
Net cash used in
(from) investing activities
|
|
(2,607)
|
(7,063)
|
3,579
|
(6,539)
|
|
|
|
|
|
|
Financing
activity
|
|
|
|
|
|
Dividends
paid
|
|
(6,263)
|
(6,263)
|
(37,579)
|
(24,768)
|
|
|
|
|
|
|
Net cash used in
financing activity
|
|
(6,263)
|
(6,263)
|
(37,579)
|
(24,768)
|
|
|
|
|
|
|
Net increase in
cash
|
|
-
|
-
|
-
|
-
|
Cash, beginning of
year
|
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
Cash, end of
year
|
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|
|
|
|
|
|
The accompanying
notes are an integral part of these consolidated financial
statements.
|
CORBY SPIRIT AND WINE LIMITED
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
For the years ended
June 30, 2019 and 2018
(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 manufacturer, marketer and importer of spirits and
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, 2019.
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.
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 21,
2019.
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 applying at the
transaction date. Non-monetary assets and liabilities denominated
in foreign currencies are recognized at the historical exchange
rate applicable at the transaction date. Monetary assets and
liabilities denominated in foreign currencies are translated at the
exchange rate applying at the balance sheet date. Foreign
currency differences related to operating activities are recognized
in earnings from operations for the period; foreign currency
differences related to financing activities are recognized within
net financial income.
Basis of Measurement
These 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 judgments,
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.
Judgment 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, judgment and estimates are often
interrelated.
Estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant.
Estimates are made on the assumption the Company will continue as a
going concern and are based on information available at the time of
preparation. Estimates may be revised where the circumstance on
which they were based change or where new information becomes
available. Future outcomes can differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognized in the
period in which the estimates are revised and in any future periods
affected.
Critical judgments, estimates and assumptions are used in
applying accounting policies and 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,
plant and equipment. A CGU is defined as the smallest identifiable
group of assets that generates cash inflows that are largely
independent of the cash inflows from other assets or groups of
assets. 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.
Intangible assets and property, plant 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 the higher of fair value less
costs to sell and value in use ("VIU"), which involves estimating
future cash flows before taxes. The process of determining the
recoverable amount requires the Company to make estimates and
assumptions of a long-term nature regarding discount rates,
projected revenues, royalty rates and margins, as applicable,
derived from past experience, actual operating results and budgets.
These estimates and assumptions may change in the future due to
uncertain competitive and economic market conditions or changes in
business strategies.
(ii)
Purchase Price Allocation
The purchase price related to a business combination is
allocated to the underlying acquired assets and liabilities based
on their estimated fair values at the time of acquisition. The
determination of fair value requires the Company to make
assumptions, estimates and judgments regarding future events. The
allocation process is inherently subjective and impacts the amounts
assigned to individually identifiable assets and liabilities. As a
result, the purchase price allocation impacts the Company's
reported assets and liabilities and future net earnings due to the
impact on future depreciation and amortization expense and
impairment tests. In addition, due to the timing and complexities
related to business combinations, adjustments to provisional
amounts recorded are expected subsequent to the reporting period
until the allocation is finalized.
(iii)
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.
(iv)
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.
(v)
Fair value of grapes at point of harvest
Where possible, the fair value of grapes at the point of harvest
is determined by reference to local market prices for grapes of a
similar quality and varietal. For grapes for which local market
prices are not readily available, the average price of similar
grapes is used.
(vi)
Other
Other estimates include determining the useful lives of
property, plant 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 were effective for Corby on July 1, 2018, and accordingly, have been applied
in preparing these consolidated financial statements:
(i)
Revenue
In May 2014, the International
Accounting Standards Board ("IASB") issued IFRS 15, "Revenue from
Contracts with Customers" ("IFRS 15"), which provides a
comprehensive framework for the recognition, measurement and
disclosure of revenue from contracts with customers. IFRS 15 is
effective for annual periods beginning on or after January 1, 2018 and was therefore applied for the
first time by the Company for the interim period beginning
July 1, 2018.
The Company adopted IFRS 15 using the full retrospective
approach with restatement of prior year comparative figures. After
completing the analysis of significant customer contracts, the
Company determined that the implementation of IFRS 15 did not
result in a significant impact to the Company's financial position
and performance. The application of IFRS 15 has required that
certain advertising and promotional expenditures (previously
reported in Marketing, sales and administration), when paid
directly to customers, be classified as a reduction to revenue.
For the year ended June 30, 2018,
the implementation of IFRS 15 resulted in a reduction to revenue
from Case Goods sales of $871 with a
corresponding reduction to Marketing, sales and administration.
There was no impact to net earnings, the Company's balance sheet or
statement of cash flows.
The Company's accounting policies for revenues have been updated
to reflect the more extensive requirements under IFRS 15 and are
outlined in Note 4 – Significant Accounting Policies, "Revenue
Recognition".
(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 own 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 became effective
July 1, 2018 and has been applied
retrospectively to all periods presented.
The adoption of IFRS 9 did not have a significant impact on the
Company's consolidated financial statements. Financial assets and
liabilities have been classified and measured in accordance with
IFRS 9. As a result of the application of IFRS 9 and
classifications, there has been no change to the carrying value of
financial assets and liabilities.
Changes to the classification of Corby's financial assets and
liabilities under IFRS 9 are as follows:
Financial
Asset/Liability
|
|
|
Category
Under IAS 39
|
|
Category Under
IFRS 9
|
|
|
|
|
|
|
|
|
Deposits in cash
management pools
|
|
Loans and
receivables
|
|
|
Amortized
cost
|
Accounts
receivable
|
|
|
Loans and
receivables
|
|
|
Amortized
cost
|
Accounts payable and
accrued liabilities
|
|
Loans and
receivables
|
|
|
Amortized
cost
|
(iii)
Foreign Currency Transactions and Advance Consideration
The IASB issued a new interpretation IFRIC 22, "Foreign Currency
Transactions and Advance Consideration" ("IFRIC 22"). IFRIC 22
clarifies the accounting for transactions that include the receipt
or payment of advance consideration in a foreign currency.
Specifically, IFRIC 22 addresses how an entity recognizes a
non-monetary asset or liability arising from a prepayment or
receipt before the entity recognizes the related asset, expense or
income. The IASB determined that the date of the transaction, for
the purpose of determining the exchange rate, is the date of
initial recognition of the non-monetary prepayment asset or
deferred income liability. If there are multiple payments or
receipts in advance, a date of transaction is established for each
payment or receipt. The Company adopted IFRIC 22, effective
July 1, 2018, with no significant
impact on the Company's consolidated financial statements.
(iv)
Share Based Payments
The IASB issued an amendment to IFRS 2 "Share-based Payment"
("IFRS 2"). This amendment clarifies the accounting for
cash-settled share based payment transactions that include a
performance condition. For Corby, this amendment to IFRS 2 became
effective July 1, 2018, and did not
have a significant impact on the Company's consolidated financial
statements.
Recent accounting pronouncements not in
effect
The below standards have been issued but are not
yet effective for the financial period ended June 30, 2019, and accordingly, have not been
applied in preparing these consolidated financial statements:
(v)
Leases
In January 2016, the IASB issued a
new standard IFRS 16, "Leases" ("IFRS 16"), which will ultimately
replace IAS 17, "Leases" ("IAS 17"). IFRS 16 specifies how an
entity will recognize, measure, present and disclose leases. The
standard provides a single lessee accounting model, requiring
lessees to recognize assets and liabilities for all leases unless
the lease term is 12 months or less or the underlying asset has a
low value. The standard is effective for annual periods beginning
on or after January 1, 2019 and must
be applied retrospectively. For Corby, this standard will become
effective July 1, 2019.
The guidance permits two methods of adoption: retrospectively to
each prior reporting period restated (full retrospective method),
or retrospectively with the cumulative effect of initially applying
the guidance recognized at the date of initial application
(modified retrospective method). The Company will adopt the
standard using the modified retrospective method. The Company has
elected to set the right-of-use asset equal to the lease
liability.
In preparation for adoption of the standard, the Company has
completed the review of relevant contracts and has concluded there
will be a right-of-use asset and a corresponding lease liability of
approximately $5,900, recognized on
the Company's statements of financial position upon the adoption of
the standard. The Company has elected to not apply the requirements
of IFRS 16 to short-term leases and leases for which the underlying
asset is of low value. The Company will recognize the lease
payments associated with these leases on a straight-line basis,
over the lease term.
(vi)
Uncertainty over Income Tax Treatments
In June 2017, the IASB issued a
new interpretation IFRIC 23, "Uncertainty over Income Tax
Treatments" ("IFRIC 23). IFRIC 23 specifies the accounting
treatment for current and deferred tax liabilities and assets in
circumstances in which there is uncertainty over the tax
treatments. The standard is effective for annual periods beginning
on or after January 1, 2019, with
earlier application permitted. For Corby, this standard will become
effective July 1, 2019. The new
interpretation is not expected to have a significant impact on the
Company's consolidated financial statements.
(vii)
Financial Instruments
The IASB issued amendments to IFRS 9 "Financial Instruments"
("IFRS 9"). The amendment addresses concerns about how IFRS 9
classified prepayable financial assets and clarifies an aspect of
accounting for financial liabilities following a modification. The
amendments are to be applied retrospectively for fiscal years
beginning on or after January 1,
2019. The amendment and additions to IFRS 9 will not have an
impact on the Company's consolidated financial statements.
(viii)
Employee Benefits
The IASB published amendments to IAS 19 "Employee Benefits"
("IAS 19"). The amendment harmonizes accounting practices to
provide more relevant information for decision-making. The
amendments are to be applied retrospectively to plan amendments,
curtailments or settlements occurring on or after January 1, 2019. The amendment and additions to
IAS 19 will not have an impact on the Company's consolidated
financial statements.
(ix)
Income Taxes
The IASB published amendments to IAS 12 "Income Taxes" ("IAS
12"). The amendment clarifies that the income tax consequences of
dividends, where transactions or events that generate distributable
profits are recognized, apply to all income tax consequences of
dividends. The amendments are to be applied retrospectively for
fiscal years beginning on or after January
1, 2019. The amendments and additions to IAS 12 will not
have an impact on the Company's consolidated financial
statements.
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
The consolidated financial statements include the accounts of Corby
Spirit and Wine Limited and its subsidiaries, collectively referred
to as "Corby" or the "Company."
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 statements 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.
Grapes produced from vineyards controlled by the Company that
are part of inventory are measured at their fair value less costs
to sell at the point of harvest.
Inventory of wine that is produced by the Company is valued at
the lower of cost and net realizable value, with cost being
determined on an average cost basis. Inventory of bulk wine and
grapes is included in work-in-progress inventory in Note 9.
Property, Plant and
Equipment
Property, plant 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,
plant and equipment are written down when impaired.
The ranges of depreciable lives for the major categories of
property, plant and equipment are as follows:
|
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
25
years
|
Leasehold
improvements
|
|
|
|
|
|
5 to 10
years
|
Machinery and
equipment
|
|
|
|
|
|
3 to 12
years
|
Casks
|
|
|
|
|
|
12
years
|
Vines
|
|
|
|
|
|
30
years
|
Other capital
assets
|
|
|
|
|
|
3 to 20
years
|
Depreciation of property, plant and equipment is recognized
within earnings from operations. The Company commences recognition
of depreciation in earnings when the item of property, plant and
equipment is ready for its intended use.
Gains and losses on disposal of an item of property, plant and
equipment are determined by comparing the proceeds from disposal
with the carrying amount of property, plant and equipment and are
recognized net, within earnings from operations.
Fully depreciated items of property, plant and equipment that
are still in use continue to be recognized in cost and accumulated
depreciation.
The cost of replacing part of an item of property, plant 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, plant 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.
Business Combinations
The Company applies the
acquisition method in accounting for business combinations. The
cost of an acquisition is the aggregate of the consideration
transferred, measured at the acquisition date fair value.
Acquisition related costs are expensed as incurred.
Goodwill represents the excess of the consideration transferred
over the fair value of identifiable assets acquired and liabilities
assumed in business combinations, all measured at fair value.
If the initial accounting for a business combination is
incomplete by the end of the reporting period in which the
combination occurs, the Company reports provisional amounts for the
items for which the accounting is incomplete. Those provisional
amounts are adjusted during the measurement period (not greater
than one year from acquisition date) to reflect new information
about facts and circumstances that existed at the acquisition date
that, if known, would have affected the amounts recognized at that
time.
Goodwill
Goodwill
arising in a business combination is recognized as an asset at the
date that control is acquired. 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.
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 amounts 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, plant 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 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 the 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
10) and provisions for uncertain tax positions (Note 16).
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
costs 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
judgments about future events. New information may become available
that causes the Company to change its judgment 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
The Company
derives its revenue from Case Goods sales, Commissions and other
services. The Company recognizes revenue when control of the goods
or services sold has been transferred to the customer. Revenue is
measured at the amount of consideration to which the Company
expects to be entitled after deducting trade discounts, volume
rebates, sales-related taxes and duties and costs of services
directly provided by customers.
(i)
Case Goods Sales
Corby's Case Goods are primarily sold to provincial liquor
boards and international customers. Transfer of control over Case
Goods is achieved when products are shipped from the Company's
various distribution sites and accepted by the customer. For sales
to consumers through the Company's winery retail store, the
transfer of control is deemed to occur when the product is
purchased by the consumer.
Case Goods sales are recorded net of trade discounts, volume
rebates, sales-related taxes and duties and costs of services
provided directly by customers which include: distribution, listing
costs for new products, promotional activities at point of sale and
other advertising and promotional services.
(ii)
Commissions
When the Company acts in the capacity of an agent rather than as
the principal in a transaction, revenue is recognized in the amount
of the commission to which the Company is contractually entitled in
exchange for representation services performed. Commissions are
reported net of amortization of long-term representation rights.
The long-term representation rights represent the cost of the
Company's exclusive right to represent PR's brands in Canada and are amortized on a straight-line
basis over the term of their respective agreements.
(iii)
Other services
Other services include revenue from ancillary activities,
including logistics fees and bulk whisky sales. Logistics fees are
recognized as services are rendered. Bulk whisky sales are
recognized when control of the goods has been transferred to the
customer.
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, and are settled in cash. The related
compensation expense is recognized over the three-year vesting
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, 2019.
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, fair value through other comprehensive income, or amortized
cost. 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:
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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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Amortized
cost
|
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Amortized cost
|
Accounts
receivable
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Amortized
cost
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Amortized cost
|
Accounts payable and
accrued liabilities
|
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Amortized
cost
|
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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 Service Agreement (further described in Note
27), 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 collectible 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.
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 Service 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 $61,136 and its cash generated by operating
activities. Corby's total contractual maturities are represented by
its accounts payable and accrued liabilities balances, which
totaled $32,998 as at June 30, 2019, 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. Level 3
inputs are used to determine the fair value of pension plan assets
contained within the infrastructure and real estate funds.
6. BUSINESS ACQUISITION
In the prior fiscal year, on October 2,
2017, the Company acquired all of the shares of Vinnova
Corporation and substantially all of the assets of the Crispino
Estate Vineyard partnership, which together operated as the Foreign
Affair Winery, a Niagara, Ontario-based wine producer for a purchase
price of $6,397. The transaction,
through a wholly-owned subsidiary, included Foreign Affair's
portfolio of wines as well as related production assets and
inventory. The acquisition was accounted for using the acquisition
method. The purchase price was funded from the Company's Deposits
in cash management pools.
The total purchase consideration of $6,397 was allocated to the net tangible assets
acquired based on their fair value of $3,543, identifiable intangible assets
(trademarks) of $2,500 and
$354 to goodwill. The fair
values of the identifiable intangible assets related to trademarks
were based on the relief from royalty method, using Level 3 inputs
within the fair value hierarchy, which included forecasted future
cash flows, long-term revenue growth rates, royalty rates and
discount rates.
On the acquisition date, details of the fair value of
identifiable assets and liabilities acquired, purchase
consideration and goodwill were as follows:
Purchase
consideration transferred:
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$
6,397
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|
Identifiable net
assets acquired:
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Trade
receivables
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210
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Inventory
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1,425
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Prepaid
expenses
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37
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Property, plant and
equipment
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2,146
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Trademark
|
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2,500
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Trade
payables
|
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(275)
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$
6,043
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Excess initially
allocated to goodwill
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$
354
|
Goodwill arising from this transaction is not expected to be
deductible for tax purposes.
7. 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:
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June
30,
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June 30,
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2019
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2018
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|
Share
capital
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$
14,304
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$
14,304
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Accumulated other
comprehensive (loss) income
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(3,226)
|
486
|
Retained
earnings
|
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|
158,019
|
169,904
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Net capital under
management
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$
169,097
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$
184,694
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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
90% 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.
8. ACCOUNTS RECEIVABLE
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June
30,
|
June 30,
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2019
|
2018
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|
Trade
receivables
|
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|
|
$
18,386
|
$
19,523
|
Due from related
parties
|
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|
10,993
|
12,137
|
Other
|
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|
|
2,908
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1,829
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|
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|
|
|
32,287
|
33,489
|
Allowance for
uncollectible amounts
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|
(27)
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(20)
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$
32,260
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$
33,469
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9. INVENTORIES
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|
June
30,
|
June 30,
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2019
|
2018
|
|
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|
Raw
materials
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|
$
3,223
|
$
3,424
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Work-in-progress
|
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|
49,180
|
46,875
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Finished
goods
|
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|
9,509
|
9,490
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|
$
61,912
|
$
59,789
|
The cost of inventory recognized as an expense and included in
cost of goods sold during the year ended June 30, 2019 was $49,514 (2018 – $48,439). During the year, there were write-downs
of $313 (2018-$263) 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.
10. PROVISION FOR EMPLOYEE BENEFITS
The Company provides pension benefits to its employees through a
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, 2019, the Company recognized
contributions of $406 as expense
(2018 - $379) 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, 2016 for the executive plan and December 31, 2017 for the salaried plan. The next
required valuations must be completed with an effective date no
later than December 31, 2019 and
December 31, 2020, respectively. 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, 2019, the average
duration of the defined benefit obligation for the registered and
non-registered pension plans and the post-retirement benefit plan
is 14.2 years (2018 – 14.1 years).
Company contributions to the registered and non-registered
pension plans are expected to be $2,428 for the fiscal year ended June 30, 2020.
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 Canadian Pensioners Mortality tables as
prepared by the Canadian Institute of Actuaries.
The significant actuarial assumptions are as follows:
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2019
|
|
|
|
2018
|
|
|
|
|
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
|
|
|
|
3.1%
|
3.1%
|
3.1%
|
|
3.6%
|
3.6%
|
3.6%
|
Compensation
increase
|
|
|
3.0%
|
3.0%
|
N/A
|
|
3.0%
|
3.0%
|
N/A
|
Inflation
|
|
|
|
2.0%
|
2.0%
|
2.0%
|
|
2.0%
|
2.0%
|
2.0%
|
|
|
|
|
|
|
|
|
|
|
|
Benefit expense,
for the year
|
|
|
|
|
|
|
|
|
|
Discount
rate
|
|
|
|
3.6%
|
3.6%
|
3.6%
|
|
3.4%
|
3.4%
|
3.4%
|
Compensation
increase
|
|
|
3.0%
|
3.0%
|
N/A
|
|
3.0%
|
3.0%
|
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 point ("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 $4,530 and $158,
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 $4,922 and $182,
respectively. The method used to determine the impact of the
discount rate changes is consistent with the method used in prior
years and the method used to determine the amounts recognized in
the financial statements.
The medical cost trend rate used was 5.4% for 2019 (2018 –
5.5%), with 4.5% being the ultimate trend rate for 2026 and years
thereafter. The dental cost trend rate used was 4.5% for 2019 (2018
– 4.5%). Assumed health care cost trend rates have a significant
effect on the amounts reported for the other benefit plan. 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 $1,310 and $86, 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
$1,030 and $65, respectively. The method used to determine
the impact of medical cost rate changes is consistent with the
method used in prior years and 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,
|
|
|
|
|
|
|
2019
|
2018
|
Present value of
defined benefit obligation of unfunded plans
|
|
|
$
(9,902)
|
$
(9,169)
|
Present value of
defined benefit obligation of partially funded plans
|
|
(11,481)
|
(10,644)
|
Present value of
defined benefit obligation of fully funded plans
|
|
|
(46,211)
|
(44,251)
|
Total present value
of defined benefit obligation
|
|
|
(67,594)
|
(64,064)
|
Fair value of plan
assets
|
|
|
|
55,665
|
55,903
|
|
|
|
|
|
|
|
|
Net defined benefit
liability
|
|
|
|
$
(11,929)
|
$
(8,161)
|
Information about the Company's pension and other benefit plans
for the year ended June 30, 2019 is
as follows:
|
|
|
|
|
|
|
2019
|
|
|
|
|
Registered
|
Non-registered
|
Other
|
|
|
|
|
|
Pension
|
Pension
|
Benefit
|
|
|
|
|
|
Plans
|
Plans
|
Plan
|
Total
|
|
|
|
|
|
|
|
|
Fair value of plan
assets
|
|
|
|
|
|
Fair value of plan
assets, beginning of year
|
$
43,706
|
$
12,197
|
$
-
|
$
55,903
|
Interest income
|
|
|
1,543
|
465
|
-
|
2,008
|
Actuarial losses
|
|
|
(191)
|
(1,298)
|
-
|
(1,489)
|
Company contributions
|
|
688
|
1,939
|
-
|
2,627
|
Plan participants' contributions
|
130
|
-
|
-
|
130
|
Benefits paid
|
|
|
(2,770)
|
(500)
|
-
|
(3,270)
|
Administrative costs
|
|
(179)
|
(65)
|
-
|
(244)
|
|
|
|
|
|
|
|
|
Fair value of plan
assets, end of year
|
$
42,927
|
$
12,738
|
$
-
|
$
55,665
|
|
|
|
|
|
|
|
|
Present value of
defined benefit obligation
|
|
|
|
|
Defined benefit
obligation, beginning of year
|
$
44,251
|
$
10,644
|
$
9,169
|
$
64,064
|
Current service cost
|
|
913
|
247
|
167
|
1,327
|
Interest cost
|
|
|
1,548
|
373
|
321
|
2,242
|
Plan participants' contributions
|
130
|
-
|
-
|
130
|
Actuarial (gains) losses:
|
|
|
|
|
|
|
Experience (gains)
and losses
|
(1,305)
|
7
|
(80)
|
(1,378)
|
|
Losses due to
financial assumption changes
|
3,444
|
766
|
752
|
4,962
|
Benefits paid
|
|
|
(2,770)
|
(556)
|
(427)
|
(3,753)
|
|
|
|
|
|
|
|
|
Present value of the
defined benefit obligations, end of year
|
$
46,211
|
$
11,481
|
$
9,902
|
$
67,594
|
|
|
|
|
|
|
|
|
Net defined benefit
liability (asset)
|
|
$
3,284
|
$
(1,257)
|
$
9,902
|
$
11,929
|
|
|
|
|
|
|
|
|
The defined benefit
liability (asset) is recorded in the consolidated balance sheet as
follows:
|
|
Other
assets
|
|
|
$
-
|
$
1,498
|
$
-
|
$
1,498
|
Pension
obligation
|
|
|
$
(3,284)
|
$
(241)
|
$
(9,902)
|
$
(13,427)
|
The actual return on plan assets for the financial year ended
June 30, 2019 was $519, 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, 2018 is
as follows:
|
|
|
|
|
|
|
2018
|
|
|
|
|
Registered
|
Non-registered
|
Other
|
|
|
|
|
|
Pension
|
Pension
|
Benefit
|
|
|
|
|
|
Plans
|
Plans
|
Plan
|
Total
|
Fair value of plan
assets
|
|
|
|
|
|
Fair value of plan
assets, beginning of year
|
$
39,444
|
$
10,158
|
$
-
|
$
49,602
|
Interest income
|
|
|
1,355
|
351
|
-
|
1,706
|
Actuarial gains
|
|
|
3,801
|
1,126
|
-
|
4,927
|
Company contributions
|
|
1,740
|
1,113
|
-
|
2,853
|
Plan participants' contributions
|
133
|
-
|
-
|
133
|
Benefits paid
|
|
|
(2,592)
|
(501)
|
-
|
(3,093)
|
Administrative costs
|
|
(175)
|
(50)
|
-
|
(225)
|
Fair value of plan
assets, end of year
|
$
43,706
|
$
12,197
|
$
-
|
$
55,903
|
|
|
|
|
|
|
|
|
Present value of
defined benefit obligation
|
|
|
|
|
Defined benefit
obligation, beginning of year
|
$
45,955
|
$
10,840
|
$
11,056
|
$
67,851
|
Current service cost
|
|
917
|
248
|
255
|
1,420
|
Interest cost
|
|
|
1,520
|
359
|
366
|
2,245
|
Plan participants' contributions
|
133
|
-
|
-
|
133
|
Actuarial (gains) losses:
|
|
|
|
|
|
|
Experience (gains)
and losses
|
(391)
|
15
|
(624)
|
(1,000)
|
|
Gains due to
financial assumption changes
|
(1,291)
|
(275)
|
(1,528)
|
(3,094)
|
|
Losses due to
demographic assumption changes
|
-
|
-
|
138
|
138
|
Benefits paid
|
|
|
(2,592)
|
(543)
|
(494)
|
(3,629)
|
|
|
|
|
|
|
|
|
Present value of the
defined benefit obligations, end of year
|
$
44,251
|
$
10,644
|
$
9,169
|
$
64,064
|
|
|
|
|
|
|
|
|
Net defined benefit
(asset) liability
|
$
545
|
$
(1,553)
|
$
9,169
|
$
8,161
|
|
|
|
|
|
|
|
|
The defined benefit
(asset) liability is recorded in the consolidated balance sheet as
follows:
|
|
|
|
|
|
|
|
|
Other
assets
|
|
|
$
-
|
$
1,830
|
$
-
|
$
1,830
|
Pension
obligation
|
|
|
$
(545)
|
$
(277)
|
$
(9,169)
|
$
(9,991)
|
The actual return on plan assets for the financial year ended
June 30, 2018 was $6,633, 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:
|
|
|
|
|
|
2019
|
2018
|
|
|
|
|
|
|
|
|
Current service
costs
|
|
|
|
|
$
1,327
|
$
1,420
|
Net interest &
admin costs
|
|
|
|
478
|
764
|
|
|
|
|
|
|
|
|
Net expense
recognized in Net Earnings
|
|
|
1,805
|
2,184
|
|
|
|
|
|
|
|
|
Net actuarial losses
(gains) recognized in Other Comprehensive Income
|
|
5,073
|
(8,883)
|
|
|
|
|
|
|
|
|
Total net loss
(income) recognized in Total Comprehensive Income
|
|
$
6,878
|
$
(6,699)
|
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, 2019, the fair value of the Trust's
assets totaled $356,605, of which the
Company's registered pension plans hold approximately 12% of the
total Trust assets.
The fair values of assets held on behalf of the Company's
registered pension plans are categorized in the fair value
hierarchy as at June 30 as
follows:
|
|
|
|
|
|
|
|
|
June
30,
|
June 30,
|
|
|
|
|
|
|
2019
|
2018
|
|
|
|
|
|
|
|
|
Cash and Canadian
Equities - level 1
|
|
|
$
11,209
|
$
9,884
|
Bond funds - level
2
|
|
|
|
|
13,331
|
12,432
|
Foreign equities and
Foreign Equity funds - level 2
|
|
9,055
|
12,526
|
Infrastructure and
real estate funds - level 3
|
|
|
9,332
|
8,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
42,927
|
$
43,706
|
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,
|
|
|
|
|
|
|
2019
|
2018
|
|
|
|
|
|
|
|
|
Canadian equity
pooled funds
|
|
|
|
$
3,333
|
$
4,498
|
Foreign equity pooled
funds
|
|
|
|
3,953
|
2,644
|
Refundable tax on
account with Canada Revenue Agency
|
|
5,452
|
5,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
12,738
|
$
12,197
|
The fair values of the investments held by the non-registered
plan as at June 30, 2019 are
categorized as Level 2 in the fair value hierarchy.
The fair value of the Refundable Tax held on account with Canada
Revenue Agency is determined by estimating the future benefit
payments, which will deplete the Refundable Tax account over the
remaining life of the plan, and applying a discount rate based on
long-term Government of Canada
bond yields.
11. PROPERTY, PLANT AND EQUIPMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30,
|
|
|
|
|
June
30,
|
|
|
2018
|
Acquisition
|
Additions
|
Depreciation
|
Disposals
|
2019
|
|
|
|
|
|
|
|
|
Land
|
|
$
1,367
|
$
-
|
$
-
|
$
-
|
$
-
|
$
1,367
|
Vines
|
700
|
-
|
99
|
-
|
-
|
799
|
Building
|
1,819
|
-
|
47
|
-
|
-
|
1,866
|
Leasehold
improvements
|
1,312
|
-
|
22
|
-
|
-
|
1,334
|
Machinery and
equipment
|
10,064
|
-
|
1,738
|
-
|
-
|
11,802
|
Casks
|
14,017
|
-
|
2,445
|
-
|
(14)
|
16,448
|
Other
|
4,013
|
-
|
903
|
-
|
-
|
4,916
|
Gross
value
|
33,292
|
-
|
5,254
|
-
|
(14)
|
38,532
|
|
|
|
|
|
|
|
|
Vines
|
(17)
|
-
|
-
|
(42)
|
-
|
(59)
|
Building
|
(130)
|
-
|
-
|
(74)
|
-
|
(204)
|
Leasehold
improvements
|
(978)
|
-
|
-
|
(79)
|
-
|
(1,057)
|
Machinery and
equipment
|
(5,147)
|
-
|
-
|
(975)
|
-
|
(6,122)
|
Casks
|
(6,016)
|
-
|
-
|
(1,126)
|
-
|
(7,142)
|
Other
|
(1,673)
|
-
|
-
|
(592)
|
-
|
(2,265)
|
Accum.
depreciation
|
(13,961)
|
-
|
-
|
(2,888)
|
-
|
(16,849)
|
|
|
|
|
|
|
|
|
Property, plant and
equipment
|
$
19,331
|
$
-
|
$
5,254
|
$
(2,888)
|
$
(14)
|
$
21,683
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
Acquisition
|
|
|
|
June 30,
|
|
|
2017
|
(Note
6)
|
Additions
|
Depreciation
|
Disposals
|
2018
|
|
|
|
|
|
|
|
|
Land
|
|
$
27
|
$
1,340
|
$
-
|
$
-
|
$
-
|
$
1,367
|
Vines
|
-
|
700
|
-
|
-
|
-
|
700
|
Building
|
1,800
|
-
|
19
|
-
|
-
|
1,819
|
Leasehold
improvements
|
1,222
|
8
|
82
|
-
|
-
|
1,312
|
Machinery and
equipment
|
8,277
|
98
|
1,701
|
-
|
(12)
|
10,064
|
Casks
|
12,013
|
-
|
2,267
|
-
|
(263)
|
14,017
|
Other
|
3,124
|
-
|
889
|
-
|
-
|
4,013
|
Gross
value
|
26,463
|
2,146
|
4,958
|
-
|
(275)
|
33,292
|
|
|
|
|
|
|
|
|
Vines
|
-
|
-
|
-
|
(17)
|
-
|
(17)
|
Building
|
(58)
|
-
|
-
|
(72)
|
-
|
(130)
|
Leasehold
improvements
|
(874)
|
-
|
-
|
(104)
|
-
|
(978)
|
Machinery and
equipment
|
(4,423)
|
-
|
-
|
(727)
|
3
|
(5,147)
|
Casks
|
(5,103)
|
-
|
-
|
(985)
|
72
|
(6,016)
|
Other
|
(1,228)
|
-
|
-
|
(445)
|
-
|
(1,673)
|
Accum.
depreciation
|
(11,686)
|
-
|
-
|
(2,350)
|
75
|
(13,961)
|
|
|
|
|
|
|
|
|
Property, plant and
equipment
|
$
14,777
|
$
2,146
|
$
4,958
|
$
(2,350)
|
$
(200)
|
$
19,331
|
12. GOODWILL
Changes in the carrying amount of goodwill are as follows:
|
|
|
|
|
|
June
30,
|
June 30,
|
|
|
|
|
|
|
2019
|
2018
|
|
|
|
|
|
|
|
|
Balance, beginning of
year
|
|
|
|
|
$
8,757
|
$
8,403
|
Acquisitons during
the year (Note 6)
|
|
|
|
-
|
354
|
|
|
|
|
|
|
|
|
Balance, end of
year
|
|
|
|
|
$
8,757
|
$
8,757
|
There has been no impairment recognized with respect to goodwill
during 2019 (2018 - $nil).
13. INTANGIBLE ASSETS
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
Movements in the
Year
|
|
|
|
Opening
|
|
|
|
|
Ending
|
|
|
Book
Value
|
Additions
|
Amortization
|
Impairments
|
Disposals
|
Book
Value
|
|
|
|
|
|
|
|
|
Long-term
representation rights
|
$
18,850
|
$
-
|
$
(5,780)
|
$
-
|
$
-
|
$
13,070
|
Trademarks and
licenses
|
17,461
|
-
|
-
|
-
|
-
|
17,461
|
|
|
|
|
|
|
|
|
|
|
$
36,311
|
$
-
|
$
(5,780)
|
$
-
|
$
-
|
$
30,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
Movements in the
Year
|
|
|
|
Opening
|
|
|
|
|
Ending
|
|
|
Book
Value
|
Additions
|
Amortization
|
Impairments
|
Disposals
|
Book
Value
|
|
|
|
|
|
|
|
|
Long-term
representation rights
|
$
24,632
|
$
-
|
$
(5,782)
|
$
-
|
$
-
|
$
18,850
|
Trademarks and
licenses
|
14,961
|
2,500
|
-
|
-
|
-
|
17,461
|
Non-refundable
upfront fees
|
82
|
-
|
(82)
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
$
39,675
|
$
2,500
|
$
(5,864)
|
$
-
|
$
-
|
$
36,311
|
14. 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, 2019, along with the data
and assumptions applied to the CGUs of the Case Goods Segment are
as follows:
|
|
|
|
|
Carrying
|
|
|
|
|
|
|
Carrying
|
Value
|
|
Terminal
|
|
|
|
|
Value
|
Trademarks
|
Discount
|
Growth
|
|
|
|
|
Goodwill
|
&
Licences
|
Rate
|
Rate
|
|
|
|
|
|
|
|
|
Case Goods
Segment
|
|
|
$
8,757
|
$
17,461
|
8.1% to
12.4%
|
1.5% to
2.0%
|
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 that represent the lowest level within the group
at which the goodwill is monitored for internal management
purposes.
During the financial year ended June 30,
2019, 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
that 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 point ("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.
15. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30,
|
June 30,
|
|
|
|
|
|
|
2019
|
2018
|
|
|
|
|
|
|
|
|
Trade payables and
accruals
|
|
|
|
|
$
23,199
|
$
23,706
|
Due to related
parties
|
|
|
|
|
7,214
|
6,071
|
Other
|
|
|
|
|
2,585
|
1,465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
32,998
|
$
31,242
|
16. INCOME TAXES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
2018
|
Current income tax
expense
|
|
|
|
|
|
|
Current
period
|
|
|
|
|
|
$
9,110
|
$
9,103
|
Adjustments with
respect to prior period tax estimates
|
|
|
105
|
160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
9,215
|
$
9,263
|
|
|
|
|
|
|
|
|
|
Deferred income
tax expense
|
|
|
|
|
|
|
Origination and
reversal of temporary differences
|
|
|
$
465
|
$
516
|
Adjustments with
respect to prior period tax estimates
|
|
|
(152)
|
(94)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
313
|
422
|
|
|
|
|
|
|
|
|
|
Total income tax
expense
|
|
|
|
|
$
9,528
|
$
9,685
|
There are no capital loss carry-forwards for tax purposes.
The Company's effective tax rates comprise the following
items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
2018
|
|
|
|
|
|
|
|
|
|
Net earnings for the
financial year
|
|
|
$
25,694
|
|
$
25,681
|
Total income tax
expense
|
|
|
|
9,528
|
|
9,685
|
Earnings before
income tax expense
|
|
|
$
35,222
|
|
$
35,366
|
|
|
|
|
|
|
|
|
|
Income tax using the
combined Federal and Provincial
|
|
|
|
|
statutory tax
rates
|
|
|
$
9,454
|
26.8%
|
$
9,475
|
26.8%
|
|
|
|
|
|
|
|
|
|
Non-deductible
expenses
|
|
|
147
|
0.4%
|
118
|
0.3%
|
Adjustments with
respect to prior period tax estimates
|
(47)
|
(0.1%)
|
92
|
0.3%
|
Other
|
|
|
|
(26)
|
0.0%
|
-
|
0.0%
|
|
|
|
|
|
|
|
|
|
Effective income tax
rate
|
|
|
$
9,528
|
27.1%
|
$
9,685
|
27.4%
|
Deferred tax (liabilities) assets are broken down by nature as
follows:
|
|
|
June
30,
|
Recognized
in
|
June
30,
|
|
|
|
2018
|
Earnings
|
OCI
|
Equity
|
Acquisitions
|
2019
|
Provision for
pensions
|
$
2,293
|
$
(409)
|
$
1,361
|
$
-
|
$
-
|
$
3,245
|
Property, plant and
equipment
|
(2,736)
|
(135)
|
-
|
-
|
-
|
(2,871)
|
Losses
|
|
-
|
243
|
-
|
-
|
-
|
243
|
Intangibles
|
|
(2,854)
|
43
|
-
|
-
|
|
(2,811)
|
Other
|
|
429
|
(55)
|
-
|
-
|
-
|
374
|
|
|
|
|
|
|
|
|
|
|
|
|
$
(2,868)
|
$
(313)
|
$
1,361
|
$
-
|
$
-
|
$
(1,820)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30,
|
Recognized
in
|
June
30,
|
|
|
|
2017
|
Earnings
|
OCI
|
Equity
|
Acquisitions
|
2018
|
Provision for
pensions
|
$
5,189
|
$
(516)
|
$
(2,380)
|
$
-
|
$
-
|
$
2,293
|
Property, plant and
equipment
|
(2,360)
|
(376)
|
-
|
-
|
-
|
(2,736)
|
Inventory
|
|
(91)
|
91
|
-
|
-
|
-
|
-
|
Intangibles
|
|
(3,073)
|
219
|
-
|
-
|
-
|
(2,854)
|
Other
|
|
269
|
160
|
-
|
-
|
-
|
429
|
|
|
|
|
|
|
|
|
|
|
|
|
$
(66)
|
$
(422)
|
$
(2,380)
|
$
-
|
$
-
|
$
(2,868)
|
Income taxes payable includes a provision for uncertain tax
risks in the amount of $636 at
June 30, 2019 ($636 – June 30,
2018).
Deferred tax assets include the expected benefit of operating
losses from certain wholly owned subsidiaries and are expected to
be utilized against future taxable income.
17. SHARE CAPITAL
|
|
|
|
|
|
June
30,
|
June 30,
|
|
|
|
|
|
|
2019
|
2018
|
|
|
|
|
|
|
|
|
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
|
18. ACCUMULATED OTHER COMPREHENSIVE LOSS (INCOME)
|
|
|
|
|
|
June
30,
|
June 30,
|
|
|
|
|
|
|
2019
|
2018
|
|
|
|
|
|
|
|
|
Actuarial losses
(gains) on pension obligations
|
|
|
$
4,459
|
$
(614)
|
less: income
taxes
|
|
|
|
|
(1,233)
|
128
|
|
|
|
|
|
|
|
|
Accumulated other
comprehensive loss (income)
|
|
|
$
3,226
|
$
(486)
|
19. REVENUE
The Company's revenue consists of the following streams:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
2018
(1)
|
|
|
|
|
|
|
|
|
Case good
sales
|
|
|
|
|
$
119,407
|
$
115,863
|
Commissions (net of
amortization)
|
|
|
|
26,852
|
25,747
|
Other
services
|
|
|
|
|
3,679
|
4,114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
149,938
|
$
145,724
|
|
|
|
|
|
|
|
|
(1) In preparing its comparative
information, the Company has adjusted amounts reported previously
in the consolidated statement of earnings as a result of the
retrospective application of IFRS 15, Revenue from Contracts with
Customers. Refer to Note 3 for details regarding adjusted
amounts.
|
Commissions for the year are shown net of amortization of
long-term representation rights and non-refundable upfront fees of
$5,780 (2018 - $5,864). Other services include revenues
incidental to the manufacture of case goods, such as logistics fees
and miscellaneous bulk spirit sales.
20. OTHER INCOME
The Company's other income consists of the following
amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
2018
|
|
|
|
|
|
|
|
|
Foreign exchange
(loss) gain
|
|
|
|
|
$
(32)
|
$
128
|
Gain on disposal of
property and equipment
|
|
|
|
-
|
324
|
Other
|
|
|
|
|
128
|
253
|
|
|
|
|
|
|
$
96
|
$
705
|
21. NET FINANCIAL INCOME AND EXPENSE
The Company's financial income consists of the following
amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
2018
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
|
|
$
1,492
|
$
1,187
|
Net financial impact
of pensions
|
|
|
|
(478)
|
(764)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
1,014
|
$
423
|
22. EARNINGS PER SHARE
The following table sets forth the numerator and denominator
utilized in the computation of basic and diluted earnings per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
2018
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
$
25,694
|
$
25,681
|
Denominator:
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
|
28,468,856
|
28,468,856
|
23. EXPENSES BY NATURE
Earnings from operations include depreciation and amortization,
as well as personnel expenses, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
2018
|
|
|
|
|
|
|
|
|
Depreciation of
property and equipment
|
|
|
|
$
2,888
|
$
2,350
|
Amortization of
intangible assets
|
|
|
|
5,780
|
5,864
|
Salary and payroll
costs
|
|
|
|
|
25,703
|
26,257
|
Expenses related to
pensions and benefits
|
|
|
|
1,327
|
1,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
35,698
|
$
35,891
|
24. RESTRICTED SHARE UNITS PLAN
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
|
Restricted
|
Average
|
|
Restricted
|
Average
|
|
|
|
|
Share
|
Grant
Date
|
|
Share
|
Grant
Date
|
|
|
|
|
Units
|
Fair
Value
|
|
Units
|
Fair
Value
|
|
|
|
|
|
|
|
|
|
Non-vested, beginning
of year
|
|
|
66,814
|
$
20.83
|
|
55,357
|
$
20.62
|
Granted
|
|
|
15,738
|
20.16
|
|
14,541
|
21.59
|
Reinvested dividend equivalent units
|
|
4,513
|
19.30
|
|
3,099
|
20.87
|
Performance adjustments
|
|
|
2,029
|
23.58
|
|
5,346
|
22.44
|
Vested
|
|
|
(28,958)
|
20.16
|
|
(11,529)
|
21.55
|
|
|
|
|
|
|
|
|
|
Non-vested, end of
year
|
|
|
60,136
|
$
20.95
|
|
66,814
|
$
20.83
|
Compensation expense related to this plan for the year ended
June 30, 2019 was $376 (2018 - $498).
25. NET CHANGE IN NON-CASH WORKING CAPITAL BALANCES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
2018
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
|
|
$
1,209
|
$
1,568
|
Inventories
|
|
|
|
|
(2,123)
|
(3,005)
|
Prepaid
expenses
|
|
|
|
|
39
|
(29)
|
Accounts payable and
accrued liabilities
|
|
|
|
1,756
|
(343)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
881
|
$
(1,809)
|
26. DIVIDENDS
On August 21, 2019 subsequent to
the year ended June 30, 2019, the
Board of Directors declared its regular quarterly dividend of
$0.22 per common share, to be paid on
September 27, 2019, to shareholders
of record as at the close of business on September 11, 2019. This dividend is in
accordance with the Company's dividend policy.
27. RELATED PARTY TRANSACTIONS
Transactions with parent, ultimate parent, and
affiliates
The majority of Corby's issued and outstanding voting Class A
shares are owned by HWSL. HWSL is a wholly-owned subsidiary of PR.
Therefore, HWSL is Corby's parent and PR is Corby's ultimate
parent. Affiliated companies are subsidiaries, which are controlled
by Corby's parent and/or ultimate parent.
The companies operate under the terms of agreements that became
effective on September 29, 2006.
These agreements provide the Company with the exclusive right to
represent PR's brands in the Canadian market for 15 years, as well
as providing for the continuing production of certain Corby brands
by PR at its production facility in Windsor, Ontario, for 10 years. Corby also
manages PR's business interests in Canada, including the Windsor production facility. Certain officers
of Corby have been appointed as directors and officers of PR's
North American entities, as approved by Corby's Board of Directors.
In 2015, 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
$10.3 million for the additional
eight years of the new term pursuant to an agreement entered into
between Corby and The Absolut Company Aktiebolag, an affiliate of
PR and owner of the ABSOLUT brand, to satisfy the parties'
obligations under the 2011 agreement.
On 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 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
2018
|
|
|
|
|
|
|
|
|
Sales to related
parties
|
|
|
|
|
|
|
Commissions - parent,
ultimate parent and affiliated companies
|
|
$
30,726
|
$
29,672
|
Products for resale
at an export level - affiliated companies
|
|
4,483
|
8,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
35,209
|
$
37,847
|
|
|
|
|
|
|
|
|
Cost of goods
sold, purchased from related parties
|
|
|
|
|
Distilling, blending,
and production services - parent
|
|
|
$
22,179
|
$
22,559
|
|
|
|
|
|
|
|
|
Administrative
services purchased from related parties
|
|
|
|
Marketing, sales and
administraton services - parent
|
|
|
$
2,092
|
$
2,105
|
Marketing, sales and
administraton services - affiliate
|
|
|
$
-
|
$
582
|
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,
2019, Corby sold casks to its parent company for net
proceeds of $14 (2018 - $584).
During the year ended June 30,
2019, Corby entered into a transaction with its parent
whereby Corby exchanged certain vintages and varieties of bulk
whisky inventory with a fair value of $645 for differing vintages and varieties of bulk
whisky with an equivalent fair value in an effort to balance each
company's future inventory requirements. The exchange was not a
culmination of the earnings process and as such did not impact
Corby's net earnings nor its financial position.
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 Service 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 21, 2019, 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 CDOR rate plus
0.40%. During the year ended June 30,
2019, Corby earned interest income of $1,627 from PR (2018 – $1,252). 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 comprises:
|
|
|
|
|
|
2019
|
2018
|
|
|
|
|
|
|
|
|
Wages, salaries and
short term employee benefits
|
|
|
$
3,437
|
$
3,632
|
Other long term
benefits
|
|
|
|
|
690
|
696
|
Share-based payment
transactions
|
|
|
|
450
|
191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
4,577
|
$
4,519
|
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.
28. 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,
McGuinness liqueurs, Ungava Spirits Brands and Foreign Affair
Brands.
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 19 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:
|
|
|
|
|
|
|
2019
|
|
|
|
|
United
States
|
United
|
Rest
of
|
|
|
|
|
Canada
|
of America
|
Kingdom
|
World
|
Total
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
138,848
|
$
6,149
|
$
3,334
|
$
1,607
|
$
149,938
|
Capital assets and
goodwill
|
|
28,890
|
-
|
1,550
|
-
|
30,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
(1)
|
|
|
|
|
United
States
|
United
|
Rest
of
|
|
|
|
|
Canada
|
of America
|
Kingdom
|
World
|
Total
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
134,187
|
$
4,315
|
$
3,904
|
$
3,318
|
$
145,724
|
Capital assets and
goodwill
|
|
26,513
|
-
|
1,575
|
-
|
28,088
|
In 2019, revenue to three major customers accounted for 31%, 16%
and 13%, respectively (2018 – 34%, 15% and 13%). These major
customers are located in Canada
and revenues are derived from the Case Goods segment.
(1) In preparing its comparative
information, the Company has adjusted amounts reported previously
in the consolidated statement of earnings as a result of the
retrospective application of IFRS 15, Revenue from Contracts with
Customers. Refer to Note 3 for details regarding adjusted
amounts.
|
29. COMMITMENTS
Future minimum payments under operating leases for premises and
equipment for the next five years and thereafter are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
|
|
|
|
$
1,678
|
2021
|
|
|
|
|
|
|
1,425
|
2022
|
|
|
|
|
|
|
1,184
|
2023
|
|
|
|
|
|
|
810
|
2024
|
|
|
|
|
|
|
644
|
Thereafter
|
|
|
|
|
|
930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
6,671
|
Total lease payments recognized as an expense during the year
total $1,993 (2018 - $1,983). The Company has commitments of
$620 (2018 - $1,023) as at June 30,
2019 for the acquisition of capital assets.
SOURCE Corby Spirit and Wine Limited