TORONTO, Nov. 6, 2019 /CNW/ - Corby Spirit and
Wine Limited ("Corby" or the "Company") (TSX: CSW.A, CSW.B)
today reported its financial results for the first quarter ended
September 30, 2019. The Corby Board
of Directors today also declared a dividend of $0.22 per share payable on December 6, 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 November 22, 2019.
Net earnings of $6.5 million
(or $0.23 per share) were reported
for the quarter ended September 30,
2019, in line with that of the same quarter in the prior
year. Revenue grew 2% for the three-month period ended September 30, 2019, as robust market performance
of key Corby-owned brands were enhanced by Liquor Board order
phasing, premium innovations and strategic price optimization.
Partially offsetting case good sales, commission income from Pernod
Ricard brands decreased as a result of Liquor Board inventory
management. Advertising and promotional investments during the
first quarter focused on core strategies and fast growing segments,
notably gin.
"Our key brands, J.P. Wiser's and Ungava gin continued to
drive the Canadian whisky and super premium gin categories. Focus
on our key priorities and brands through strategic alignment of our
investments and efforts delivered strong top-line case-good growth,
building on the foundation that we established in the previous
fiscal. Despite the dip in commission revenue, Pernod Ricard brands
continued to perform within their respective market categories. I
am pleased to see a strong start to the new fiscal year," noted
Patrick O'Driscoll, President and
Chief Executive Officer of Corby.
For further details, please refer to Corby's management's
discussion and analysis and interim condensed consolidated
financial statements and accompanying notes for the three-months
ended September 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 is 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
September
30, 2019
The following Management's Discussion and Analysis
("MD&A") dated November 6, 2019
should be read in conjunction with the interim condensed
consolidated financial statements and accompanying notes as at and
for the three-month period ended September
30, 2019, prepared in accordance with International
Financial Reporting Standards ("IFRS"). These interim condensed
consolidated financial statements were not audited or reviewed by
the Company's external auditors in accordance with standards
established by the Canadian Institute of Chartered Accountants for
a review of unaudited interim financial statements by an entity's
auditor. These unaudited interim condensed financial statements do
not contain all disclosures required by IFRS for annual financial
statements and, accordingly, should also be read in conjunction
with the most recently prepared annual consolidated financial
statements for the year ended June 30,
2019.
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 November 6, 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 first quarter of fiscal 2020 (three months ended September 30, 2019) are against results for the
first quarter of fiscal 2019 (three months ended September 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" section 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.
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, 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.
BRAND PERFORMANCE CHART - INCLUDES BOTH CANADIAN AND
INTERNATIONAL SHIPMENTS
|
|
|
Three Months
Ended
|
|
|
|
Shipment
Change
|
|
Sep.
30,
|
Sep.
30,
|
Volume
|
Value
|
(Volumes in 000's
of 9L cases)
|
2019
|
2018
|
%
|
%
|
|
|
|
|
|
Brand
|
|
|
|
|
J.P. Wiser's Canadian
whisky
|
220
|
202
|
9%
|
5%
|
Polar Ice
vodka
|
95
|
95
|
0%
|
(5%)
|
Lamb's rum
|
110
|
102
|
8%
|
1%
|
Mixable
liqueurs
|
41
|
40
|
3%
|
7%
|
Ungava Spirits
Brands
|
38
|
29
|
30%
|
38%
|
Other Corby-owned
brands (1)
|
54
|
55
|
(2%)
|
(12%)
|
|
|
|
|
|
Total Corby
brands
|
558
|
523
|
7%
|
4%
|
|
|
|
|
|
(1)For
presentation purposes, Foreign Affair Brands have been grouped with
other Corby-owned brands as full comparable periods have been
attained.
|
In the first quarter, Corby's owned-brands experienced
strong 7% shipment volume growth, resulting in value growth of 4%
when compared to the same period in the prior year. Revenue was
driven by the performance of J. P. Wiser's and Ungava Spirits
brands, premium innovations and strategic price
management.
Trends in Canada differ
from international markets as highlighted in the following
table:
|
|
|
Three Months
Ended
|
|
|
|
|
|
Shipment
Change
|
|
|
|
Sep.
30,
|
Sep.
30,
|
Volume
|
Value
|
(Volumes in 000's
of 9L cases)
|
2019
|
2018
|
%
|
%
|
|
|
|
|
|
|
|
Domestic
|
|
|
501
|
479
|
5%
|
4%
|
International
|
|
57
|
44
|
29%
|
0%
|
|
|
|
|
|
|
Total Corby
brands
|
558
|
523
|
7%
|
4%
|
Strong regional shipments of J.P. Wiser's Deluxe and
Wiser's Special Blend boosted domestic performance in the first
quarter as volumes grew 5% while shipment value grew 4%. Results
included innovations such as J.P. Wiser's Manhattan and J.P. Wiser's Old Fashioned, the
Alumni Whisky Series, a collaboration with the NHL®
Alumni Association and performance of the more premium Ungava
Spirits Brands.
On international performance, an improvement of 29% volume
has been realized through a more direct and optimized route to
market, although value remains flat to the prior comparable period
due to product and market mix.
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 experienced retail sales volume growth of
4% while retail sales value improved 6% for the quarter ended
September 30, 2019, when compared to
the same period in the prior year. Industry trends were led by
retail sales volume and value growth in the Irish whiskey, gin and
tequila categories.
In the three-month period ended September 30, 2019, the vodka
category grew 3% in retail volume and 4% in retail value. Canadian
whisky category volumes grew 2% and 4% in value. The rum category
remained flat in volume but grew 2% in value. Gin, a growing
priority within the Corby portfolio, increased volumes by 11% and
value by 16% 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
ACD(1))
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
|
|
|
%
Retail
|
%
Retail
|
|
|
|
%
Retail
|
%
Retail
|
|
|
Sep
30,
|
Sep
30,
|
Volume
|
Value
|
|
Sep
30,
|
Sep
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
|
|
181
|
177
|
2%
|
4%
|
|
752
|
746
|
1%
|
3%
|
Polar Ice
vodka
|
|
95
|
93
|
2%
|
4%
|
|
358
|
352
|
2%
|
2%
|
Lamb's rum
|
|
79
|
82
|
(4%)
|
(3%)
|
|
310
|
326
|
(5%)
|
(6%)
|
Mixable
liqueurs
|
|
40
|
40
|
1%
|
3%
|
|
154
|
161
|
(4%)
|
(3%)
|
Ungava Spirits
Brands
|
|
28
|
22
|
31%
|
28%
|
|
117
|
94
|
25%
|
21%
|
Other Corby-owned
brands (2)
|
|
50
|
48
|
3%
|
1%
|
|
194
|
193
|
1%
|
1%
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
473
|
462
|
2%
|
4%
|
|
1,885
|
1,872
|
1%
|
2%
|
(1)Refers to sales at the retail store
level in Canada, as provided by the Association of Canadian
Distillers.
|
|
|
|
(2)For
presentation purposes, Foreign Affair Brands have been grouped with
other Corby-owned brands as full comparable periods have been
attained.
|
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's retail volumes (excluding Special Blend) grew 2% in the
first quarter, while retail value (excluding Special Blend) grew 4%
compared to the same quarter last year. Retail sales volumes for
the Canadian whisky category grew 2% while retail value for the
category improved 4% over the same period.
Corby has strategically separated the premium variants of
J.P. Wiser's from its standard offering of Special Blend,
differentiating the J.P. Wiser's premium range with revised and
enhanced packaging, an award-winning media campaign and premium
innovations. Value growth was driven 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
J.P. Wiser's Manhattan Whisky Cocktail innovation.
Within the range, organic growth in both retail volume and
value was posted by J.P. Wiser's Deluxe and J.P. Wiser's Apple
Whisky.
The brand is being supported nationally with a new "Drinks
Soon?" 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 Whiskyand 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.
Wiser's Special Blend performed well during the quarter
ended September 30, 2019,
particularly in regional strongholds, with retail volume growth of
2% and retail value growth of 5% compared to the same quarter last
year.
Polar Ice
Vodka
Polar Ice vodka is among the top-selling
vodka brands in Canada. Retail
volume grew 2% and value grew 4% in the quarter ended
September 30, 2019
following strategic price repositioning in key regions. The
overall vodka category in Canada
grew 3% in retail volume and 4% in value on a comparable basis
driven by the premium vodka segment. The standard vodka category,
where Polar Ice Vodka competes, improved 1% in both retail volume
and value compared to the same period in the prior year.
Advertising and promotion investment continued to focus
on brand awareness and consumer trial, while the brand
has also benefited from new packaging launched this
quarter.
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 were flat for the quarter ended
September 30,
2019, while retail values improved 2% compared
to the same period last year driven by the premium rum segment.The
economy rum category, however, declined 2% in retail volumes and 1%
in value. Lamb's experienced a 4% decline in retail volumes and a
3% 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 grew 1% for the quarter ended September 30, 2019, and a retail
value grew 3%. The liqueurs category grew 6% in retail value and 4%
in retail volume for the quarter ended September 30, 2019 with category
growth 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 31% in volume and 28% in value, for the
quarter ended September 30,
2019. The flagship brand, Ungava gin, grew 32%
in retail volume and 31% in retail value, outperforming the
Canadian gin category, which grew 11% in retail volume while retail
value grew 16%. 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 17% in
the current fiscal year while retail value grew 19%.
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.
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) lost momentum in the quarter ended
September 30, 2019, declining
4% in retail volume and 5% in retail value.
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® grew 3% in both
retail volume and value during the quarter ended September 30, 2019 compared to the same period
last year.
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.Retail performance is typically impacted by customer
ordering patterns and does not capture direct delivery and on-site
sales to consumers. 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.
Financial and Operating Results
The following table presents a summary of certain selected
consolidated financial information of the Company for the
three-month period ended September 30, 2019 and
2018.
|
|
|
Three Months
Ended
|
(in millions of
Canadian dollars,
except per share
amounts)
|
Sept.
30,
2019
|
Sept.
30,
2018
|
$
Change
|
%
Change
|
|
|
|
|
|
Revenue
|
$
|
38.6
|
$
|
37.9
|
$
|
0.7
|
|
2%
|
|
|
|
|
|
Cost of
sales
|
(15.0)
|
(14.1)
|
(0.9)
|
7%
|
Marketing, sales and
administration
|
(14.9)
|
(15.1)
|
0.2
|
(2%)
|
Other income
(expense)
|
0.0
|
0.0
|
0.0
|
95%
|
|
|
|
|
|
Earnings from
operations
|
8.7
|
8.7
|
0.0
|
0%
|
|
|
|
|
|
Financial
income
|
0.4
|
0.4
|
0.0
|
(3%)
|
Financial
expenses
|
(0.2)
|
(0.2)
|
0.0
|
48%
|
Net financial
income
|
0.2
|
0.2
|
0.0
|
(29%)
|
|
|
|
|
|
Earnings before
income taxes
|
8.9
|
8.9
|
0.0
|
(1%)
|
Income
taxes
|
(2.4)
|
(2.4)
|
0.0
|
(1%)
|
|
|
|
|
|
Net
earnings
|
$
|
6.5
|
$
|
6.5
|
$
|
0.0
|
(1%)
|
|
|
|
|
|
Per common
share
|
|
|
|
|
-
Basic net earnings
|
$
|
0.23
|
$
|
0.23
|
$
|
-
|
0%
|
-
Diluted net earnings
|
$
|
0.23
|
$
|
0.23
|
$
|
-
|
0%
|
Overall Financial
Results
Net earnings for the quarter ended
September 30, 2019 were stable when
compared to the same quarter in the prior year. Strong domestic
market performance and timing of key brand marketing and sales
promotional activities drove favourable results. This was
offset by decreased PR Brand commission revenue and timing of
overhead expenses.
Revenue
The
following highlights the key components of the Company's revenue
streams:
|
Three Months
Ended
|
|
Sept.
30,
|
Sept.
30,
|
|
|
(in millions of
Canadian dollars)
|
2019
|
2018
|
$
Change
|
%
Change
|
|
|
|
|
|
Revenue
streams:
|
|
|
|
|
Case
goods
|
$
31.1
|
$
30.0
|
$
1.1
|
4%
|
Commissions
|
6.4
|
7.0
|
(0.6)
|
(8%)
|
Other
services
|
1.1
|
0.9
|
0.2
|
27%
|
Revenue
|
$
38.6
|
$
37.9
|
$
0.7
|
2%
|
Case Goods revenue increased $1.1
million, or 4% for the quarter ended
September 30,
2019, when compared to the same period last
year. Growth during the year was attributable to strong regional
shipments resulting from year over year phasing of LB orders, LB
inventory management activities, strategic price management,
premium innovations, and robust performance of Ungava
Spirits Brands.
Commissions decreased $0.6
million, or 8% largely attributable to industry-wide
softness in wine consumption, heavily impacting the PR and agency
wine portfolios. PR Spirits continued to perform well in market,
however they experienced volume giveback resulting from LB
inventory management activities. 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 grew in
the quarter ended September 30,
2019 attributable to timing of bulk whisky
sales.
Cost of
sales
Cost of sales was $15.0 million, an increase of $0.9 million, or 7% year over year. On a case
rate basis our costs have decreased 0.5%. The overall increase in
cost of sales is the result of product mix. Cost increases have
been partially offset by strategic price initiatives, tactical
price adjustments in regional strongholds and the launch of premium
innovation. Overall gross margin on Case Goods was 53%; a decrease
from 55% realized in the same period last year (note: Commissions
are not included in this calculation).
Marketing, sales and
administration
Marketing, sales and
administration expenses decreased $0.2
million, or 2% for the quarter ended
September 30, 2019.
Marketing and promotional investment for the quarter was
concentrated on Ungava Spirits Brands, and export market support
with favourability from timing of promotional activity on other key
strategic priorities. Overhead expenses, though controlled,
increased as a result of phasing of employee compensation and
professional fees.
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. Interest income for the quarter
ended September 30,
2019 is consistent compared to the same period
in the prior year.
Income
taxes
A reconciliation of the effective tax
rate to the statutory rates for each period is presented
below.
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
|
Sept.
30,
|
Sept.
30,
|
|
|
|
|
2019
|
2018
|
|
|
|
|
|
|
|
Combined basic
Federal and Provincial tax rates
|
|
|
26.7%
|
26.9%
|
Other
|
|
|
|
|
0.4%
|
0.3%
|
|
|
|
|
|
|
|
Effective tax
rate
|
|
|
|
27.1%
|
27.2%
|
Liquidity and Capital Resources
Corby's sources of liquidity are its deposits in cash
management pools of $59.9 million as
at September 30,
2019, and its cash generated from operating
activities. Corby's total contractual maturities are represented by
its accounts payable and accrued liabilities and the short-term
lease liabilities which totalled $31.5
million as at September
30, 2019 and are all due to be paid within one
year. In addition, the Company has long-term lease liabilities of
$4.4 million which will be paid over
the next 5 years and thereafter. Other than obligations under lease
liabilities, the Company does not have any liabilities under
short-term or long-term debt facilities.
The Company believes that its deposits in cash management
pools, combined with its historically strong operational cash
flows, provide for sufficient liquidity to fund its operations,
investing activities and commitments for the foreseeable future.
The Company's cash flows from operations are subject to fluctuation
due to commodity, foreign exchange and interest rate risks. Please
refer to the "Risks and Risk Management" section of this MD&A
for further information.
Cash Flows
|
|
Three Months
Ended
|
|
|
Sept.
30,
|
Sept.
30,
|
$
|
(in millions of
Canadian dollars)
|
|
2019
|
2018
|
Change
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
Net earnings,
adjusted for non-cash items
|
|
$
11.2
|
$
9.7
|
$
1.5
|
Net change in
non-cash working capital
|
|
(2.8)
|
(2.2)
|
(0.6)
|
Net payments
for interest and income taxes
|
|
(2.7)
|
(2.2)
|
(0.5)
|
|
|
5.7
|
5.3
|
0.4
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
Additions to
capital assets
|
|
(0.2)
|
(0.1)
|
(0.1)
|
Deposits in
cash management pools
|
|
1.2
|
1.1
|
0.1
|
|
|
1.0
|
1.0
|
0.0
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
Payment of
lease liabilities
|
|
(0.4)
|
-
|
(0.4)
|
Dividends
paid
|
|
(6.3)
|
(6.3)
|
-
|
|
|
(6.7)
|
(6.3)
|
(0.4)
|
|
|
|
|
|
Net change in
cash
|
|
$
-
|
$
-
|
$
-
|
Operating activities
Net cash generated from operating activities was
$5.7 million during the quarter
ended September 30,
2019 compared to $5.3
million last year, reflecting an increase of $0.4 million. The Company adopted IFRS 16,
"Leases" ("IFRS 16") on July 1, 2019.
Consequently, $0.4 million in
cash payments related to lease obligations are now included in
financing activities. Under previous accounting standards these
payments were included in operating activities (please refer to the
"Recent Accounting Pronouncements" section of this
MD&A).
In addition, cash flows from operating activities were
positively impacted by a decrease in pension plan payments,
partially offset by unfavourable fluctuations resulting from the
timing of collections from customers and higher tax
payments.
Investing activities
Net
cash generated from investing activities during the quarter ended
September 30. 2019 was $1.0 million, flat compared to the same period in
the prior year. Investing activities include additions to capital
assets in both the current and the prior comparable
period.
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 $6.7
million for the quarter ended September 30, 2019, compared to $6.3 million last year. Financing activity
reflects dividend payments paid to shareholders and
payment of lease liabilities resulting from the adoption of new
IFRS 16 accounting standard (please refer to the "Recent Accounting
Pronouncements" section of this MD&A).
On November 6, 2019,
subsequent to the quarter ended September
30, 2019, Corby's Board of Directors declared its regular
quarterly dividend of $0.22 per
common share, to be paid December 6,
2019, to shareholders of record as at the close of business
on November 22, 2019. The Board of
Directors decided to exercise their discretion to declare and pay a
higher quarterly dividend than otherwise required under the
dividend policy. The policy provides that, 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.
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
|
2020 - Q1
|
|
November 6,
2019
|
|
November 22,
2019
|
|
December 6,
2019
|
|
$
0.22
|
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
|
Outstanding Share Data
As at November 6, 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.
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 November 6, 2019, as published by Standard &
Poor's and Moody's, was BBB+ and Baa1, 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.
Selected Quarterly Information
Summary of Quarterly Financial
Results
|
|
|
|
|
|
|
|
|
(in millions of
Canadian dollars,
|
Q1
|
Q4
|
Q3
|
Q2
|
Q1
|
Q4
|
Q3
|
Q2
|
except per share
amounts)
|
2020
|
2019
|
2019
|
2019
|
2019
|
2018
(1)
|
2018
(1)
|
2018
(1)
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
38.6
|
$
39.2
|
$
31.0
|
$
41.9
|
$
37.9
|
$
40.2
|
$
29.3
|
$
40.6
|
Earnings from
operations
|
8.7
|
10.5
|
5.9
|
9.1
|
8.7
|
12.6
|
6.5
|
7.9
|
Net
earnings
|
6.5
|
7.8
|
4.5
|
6.9
|
6.5
|
9.3
|
4.8
|
5.8
|
Basic EPS
|
0.23
|
0.27
|
0.16
|
0.24
|
0.23
|
0.33
|
0.17
|
0.20
|
Diluted
EPS
|
0.23
|
0.27
|
0.16
|
0.24
|
0.23
|
0.33
|
0.17
|
0.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
Recent Accounting Pronouncements
A number of new standards, amendments to standards and
interpretations are effective for the financial period ended
September 30, 2019, and accordingly,
have been applied in preparing the interim condensed consolidated
financial statements for the period ended September 30, 2019:
(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 became
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
adopted this standard using the modified retrospective method. The
Company has elected to set the right-of-use asset equal to the
lease liability. On the date of adoption, the Company did not
restate prior year comparative information under the modified
retrospective approach. Comparative information continues to be
reported under IAS 17 and related interpretations.
In applying IFRS 16 for the first time, the Company used
the following practical expedients as permitted by the
standard:
- Elected to not apply the requirements of IFRS 16 to
short-term leases and leases for which the underlying asset is of
low value;
- Elected to set the right-of-use asset equal to the lease
liability;
- The exclusion of initial direct costs for the measurement
of the right-of-use asset at the date of initial
application;
Upon adoption of the standard, the Company recognized a
right-of-use asset and a lease liability for the present value of
the remaining future lease payments, discounted using the
incremental borrowing rate at the date of initial application. The
adoption of this standard resulted in the recognition of
right-of-use assets and lease liabilities of $6,333 as at July 1,
2019.
The weighted average lessee's incremental borrowing rate
applied to the lease liabilities on the date of initial application
was 3%. The Company will recognize the lease payments associated
with these leases on a straight-line basis, over the lease
term.
Under IFRS 16, depreciation expense on the right-of-use
asset and interest expense on the lease liability replaced
operating lease expenses.
The reconciliation between lease liabilities recognized on
July 1, 2019 and operating lease
commitments disclosed using the weighted average incremental
borrowing rate as at the date of initial application is as
follows:
|
|
|
|
As
at
|
|
|
|
|
July 1,
2019
|
Operating lease
commitment as at June 30, 2019 as disclosed
|
|
|
|
in the
Company's notes to the consolidated financial statements
|
|
|
$
6,671
|
|
|
|
|
|
Discounted using the
incremental borrowing rate at July 1, 2019
|
|
|
6,349
|
Short-term and low
value leases excluded
|
|
|
|
(16)
|
|
|
|
|
|
Lease liabilities
recognized as at July 1, 2019
|
|
|
|
$
6,333
|
|
|
|
|
|
Lease liabilities due
within one year
|
|
|
|
$
1,536
|
Lease
liabilities
|
|
|
|
4,797
|
Total lease
liabilities
|
|
|
|
$
6,333
|
Right-of-use assets are measured at the initial amount of
the lease liabilities plus any indirect costs, lease payments made
at or before the commencement date net of lease incentives
received, and decommissioning costs. Subsequent to initial
measurement, the right-of-use assets will be measured at cost and
depreciated over the shorter of the asset's useful life and the
lease term on a straight-line basis.
Right-of-use assets are included as follows in the
condensed interim consolidated balance sheet as at September 30, 2019:
|
|
|
|
As
at
|
|
|
|
|
Sept. 30,
2019
|
|
|
Building
|
Other
|
Total
|
Cost
|
|
|
|
|
|
|
|
|
|
Balance, beginning of
the period
|
|
$
4,473
|
$
1,860
|
$
6,333
|
Lease
additions
|
|
-
|
-
|
-
|
Balance, end of the
period
|
|
$
4,473
|
$
1,860
|
$
6,333
|
|
|
|
|
|
Accumulated
Depreciation
|
|
|
|
|
|
|
|
|
|
Balance, beginning of
the period
|
|
$
-
|
$
-
|
$
-
|
Depreciation
|
|
224
|
176
|
400
|
Balance, end of the
period
|
|
$
224
|
$
176
|
$
400
|
|
|
|
|
|
Carrying amount as at
Sept 30, 2019
|
|
$
4,249
|
$
1,684
|
$
5,933
|
Transactions involving lease liabilities as at and for the
period ended September 30, 2019 were
as follows:
|
|
|
|
As
at
|
|
|
|
|
Sept. 30,
2019
|
Balance, beginning
of the period
|
|
|
|
$
6,333
|
|
|
|
|
|
Lease
additions
|
|
|
|
-
|
Lease
payments
|
|
|
|
(431)
|
Interest expense on
lease liabilities
|
|
|
|
42
|
Less: Accrued
Interest on lease liabilities
|
|
|
|
(9)
|
|
|
|
|
|
Balance, end of
the period
|
|
|
|
$
5,935
|
|
|
|
|
|
Lease liabilities due
within one year
|
|
|
|
$
1,518
|
Lease
liabilities
|
|
|
|
4,417
|
Total lease
liabilities
|
|
|
|
$
5,935
|
The expenses related to leases with variable
consideration, short term leases and low value leases amounted to
$81 for the three months ended
September 30, 2019.
(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 became
effective July 1, 2019. The new
interpretation did not have a significant impact on the Company's
interim condensed 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. For Corby, this standard became
effective July 1, 2019. The new
amendment did not have a significant impact on the Company's
interim condensed 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. For Corby, this
standard became effective July 1,
2019. The new amendment did not have a significant impact on
the Company's interim condensed 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. For Corby, this
standard became effective July 1,
2019. The new amendment did not have a significant impact on
the Company's interim condensed consolidated financial
statements.
Internal Controls Over Financial
Reporting
The Company maintains a system of disclosure controls and
procedures to provide reasonable assurance that all material
information relating to the Company is gathered and reported to
senior management on a timely basis so that appropriate decisions
can be made regarding public disclosure.
In addition, the CEO and CFO have designed, or caused to
be designed under their supervision, internal controls over
financial reporting to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with IFRS. Internal
control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be
designed effectively can provide only reasonable assurance with
respect to financial reporting and financial statement
preparation.
Management, with the participation of the CEO and CFO, has
evaluated the effectiveness of the Company's internal controls over
financial reporting as at September 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 controls 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, 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 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
September 30,
2019:
|
|
|
|
Carrying Values as at
September 30, 2019
|
|
|
|
|
|
|
|
Associated
Brand
|
|
Associated
Market
|
|
Goodwill
|
Intangibles
|
Total
|
|
|
|
|
|
|
|
Various PR
brands
|
|
Canada
|
|
$
-
|
$
11.6
|
$
11.6
|
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
|
$
29.1
|
$
37.8
|
|
|
|
|
|
|
|
(1)The
international business for Lamb's rum is primarily focused in the
UK, however, the trademarks and licences purchased relate to all
international markets outside of Canada, as Corby previously owned
the Canadian rights.
|
Therefore, economic factors (such as consumer consumption
patterns) specific to these brands and markets are primary drivers
of the risk associated with their respective goodwill and
intangible assets valuations.
Employee Future
Benefits
The Company has certain
obligations under its registered and non-registered defined benefit
pension plans and other post-retirement benefit plan. There is no
assurance that the Company's benefit plans will be able to earn the
assumed rate of return. New regulations and market-driven changes
may result in changes in the discount rates and other variables,
which would result in the Company being required to make
contributions in the future that differ significantly from
estimates. An extended period of depressed capital markets and low
interest rates could require the Company to make contributions to
these plans in excess of those currently contemplated, which, in
turn, could have an adverse impact on the financial performance of
the Company. Somewhat mitigating the impact of a potential market
decline is the fact that the Company monitors its pension plan
assets closely and follows strict guidelines to ensure that pension
fund investment portfolios are diversified in-line with industry
best practices. For further details related to Corby's defined
benefit pension plans, please refer to Note 10 of the annual
audited consolidated financial statements for the year ended
June 30, 2019.
CORBY SPIRIT AND WINE LIMITED
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
2019 AND 2018
CORBY SPIRIT AND
WINE LIMITED
|
|
|
|
|
INTERIM CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
(Not audited or
reviewed by the Company's external auditor)
|
|
|
|
|
(in thousands of
Canadian dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sept.
30,
|
Sept. 30,
|
June 30,
|
|
|
Notes
|
2019
|
2018
|
2019
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
Deposits in cash
management pools
|
|
$
59,900
|
$
68,902
|
$
61,136
|
Accounts
receivable
|
|
4
|
29,914
|
30,533
|
32,260
|
Income taxes
recoverable
|
|
95
|
-
|
-
|
Inventories
|
|
5
|
63,751
|
61,752
|
61,912
|
Prepaid
expenses
|
|
|
811
|
645
|
554
|
|
|
|
|
|
|
Total current
assets
|
|
154,471
|
161,832
|
155,862
|
Other
assets
|
|
|
1,438
|
2,284
|
1,498
|
Right-of-use
assets
|
|
2
|
5,933
|
-
|
-
|
Property, plant and
equipment
|
|
21,120
|
18,748
|
21,683
|
Goodwill
|
|
|
8,757
|
8,757
|
8,757
|
Intangible
assets
|
|
|
29,086
|
34,866
|
30,531
|
|
|
|
|
|
|
Total
assets
|
|
|
$
220,805
|
$
226,487
|
$ 218,331
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
Accounts payable and
accrued liabilities
|
6
|
$
29,988
|
$
28,112
|
$
32,998
|
Income and other
taxes payable
|
|
-
|
810
|
989
|
Current lease
liabilities
|
2
|
1,518
|
-
|
-
|
Total current
liabilities
|
|
31,506
|
28,922
|
33,987
|
Provision for
employee benefits
|
|
13,024
|
9,161
|
13,427
|
Deferred income
taxes
|
|
2,304
|
3,257
|
1,820
|
Long-term lease
liabilities
|
2
|
4,417
|
-
|
-
|
|
|
|
|
|
|
Total
liabilities
|
|
|
51,251
|
41,340
|
49,234
|
|
|
|
|
|
|
Shareholders'
equity
|
|
|
|
|
Share
capital
|
|
|
14,304
|
14,304
|
14,304
|
Accumulated other
comprehensive (loss) income
|
|
(2,966)
|
700
|
(3,226)
|
Retained
earnings
|
|
|
158,216
|
170,143
|
158,019
|
|
|
|
|
|
|
Total
shareholders' equity
|
|
169,554
|
185,147
|
169,097
|
|
|
|
|
|
|
Total liabilities
and shareholders' equity
|
|
$
220,805
|
$
226,487
|
$ 218,331
|
|
|
|
|
|
|
The accompanying
notes are an integral part of these consolidated financial
statements.
|
|
|
CORBY SPIRIT AND
WINE LIMITED
|
|
|
|
INTERIM CONDENSED
CONSOLIDATED STATEMENTS OF EARNINGS
|
|
|
|
|
|
|
|
|
(Not audited or
reviewed by the Company's external auditor)
|
|
|
|
(in thousands of
Canadian dollars, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
|
|
|
|
|
|
|
|
|
Sept.
30,
|
Sept. 30,
|
|
|
Notes
|
2019
|
2018
|
|
|
|
|
|
Revenue
|
7
|
$
38,637
|
$
37,883
|
|
|
|
|
|
Cost of
sales
|
|
(15,018)
|
(14,050)
|
Marketing, sales and
administration
|
|
(14,889)
|
(15,118)
|
Other (expenses)
income
|
8
|
(45)
|
(23)
|
|
|
|
|
|
Earnings from
operations
|
|
8,685
|
8,692
|
|
|
|
|
|
Financial
income
|
9
|
356
|
365
|
Financial
expenses
|
9
|
(186)
|
(126)
|
|
|
|
170
|
239
|
|
|
|
|
|
Earnings before
income taxes
|
|
8,855
|
8,931
|
|
|
|
|
|
Current income
taxes
|
|
(2,005)
|
(2,119)
|
Deferred income
taxes
|
|
(390)
|
(310)
|
Income
taxes
|
|
(2,395)
|
(2,429)
|
|
|
|
|
|
Net
earnings
|
|
$
6,460
|
$
6,502
|
|
|
|
|
|
Basic earnings per
share
|
|
$
0.23
|
$
0.23
|
Diluted earnings
per share
|
|
$
0.23
|
$
0.23
|
|
|
|
|
|
Weighted average
common shares outstanding
|
|
|
|
Basic
|
|
28,468,856
|
28,468,856
|
Diluted
|
|
28,468,856
|
28,468,856
|
|
|
|
|
|
The accompanying
notes are an integral part of these consolidated financial
statements.
|
|
|
|
CORBY SPIRIT AND
WINE LIMITED
|
|
|
|
|
INTERIM CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
(Not audited or
reviewed by the Company's external auditor)
|
|
|
|
|
(in thousands of
Canadian dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sept.
30,
|
Sept. 30,
|
|
|
|
|
|
2019
|
2018
|
|
|
|
|
|
|
|
Net
earnings
|
|
|
|
$
6,460
|
$
6,502
|
|
|
|
|
|
|
|
Other
Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts that will not
be subsequently reclassified to earnings:
|
|
|
|
Net actuarial
gains
|
|
|
|
355
|
293
|
Income
taxes
|
|
|
|
(95)
|
(79)
|
|
|
|
|
|
260
|
214
|
|
|
|
|
|
|
|
Total
comprehensive income
|
|
|
|
$
6,720
|
$
6,716
|
CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
|
|
(Not audited or
reviewed by the Company's external auditor)
|
|
|
|
|
(in thousands of
Canadian dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
Capital
|
Accumulated
Other
Comprehensive
(Loss) Income
|
Retained
Earnings
|
Total
|
|
|
|
|
|
|
|
Balance as at June
30, 2019
|
|
$
14,304
|
$
(3,226)
|
$
158,019
|
$
169,097
|
Total comprehensive
income
|
|
-
|
260
|
6,460
|
6,720
|
Dividends
|
|
|
-
|
-
|
(6,263)
|
(6,263)
|
|
|
|
|
|
|
|
Balance as at
September 30, 2019
|
|
$
14,304
|
$
(2,966)
|
$
158,216
|
$
169,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at June
30, 2018
|
|
$
14,304
|
$
486
|
$
169,904
|
$
184,694
|
Total comprehensive
income
|
|
-
|
214
|
6,502
|
6,716
|
Dividends
|
|
|
-
|
-
|
(6,263)
|
(6,263)
|
|
|
|
|
|
|
|
Balance as at
September 30, 2018
|
|
$
14,304
|
$
700
|
$
170,143
|
$
185,147
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of these consolidated financial
statements.
|
|
|
CORBY SPIRIT AND
WINE LIMITED
|
|
|
|
INTERIM CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOW
|
|
|
|
|
|
|
|
|
(Not audited or
reviewed by the Company's external auditor)
|
|
|
|
(in thousands of
Canadian dollars)
|
|
|
|
|
|
|
For the Three
Months Ended
|
|
|
|
|
|
|
|
|
Sept.
30,
|
Sept. 30,
|
|
|
Notes
|
2019
|
2018
|
|
|
|
|
|
Operating
activities
|
|
|
|
Net
earnings
|
|
$
6,460
|
$
6,502
|
Adjustments
for:
|
|
|
|
Amortization and
depreciation
|
10
|
2,635
|
2,140
|
Net financial
income
|
9
|
(170)
|
(239)
|
Gain on disposal of
property and equipment
|
|
-
|
(14)
|
Income tax
expense
|
|
2,395
|
2,429
|
Provision for
employee benefits
|
|
(132)
|
(1,115)
|
|
|
|
11,188
|
9,703
|
Net change in
non-cash working capital balances
|
11
|
(2,760)
|
(2,209)
|
Interest
received
|
|
345
|
363
|
Income taxes
paid
|
|
(3,089)
|
(2,551)
|
|
|
|
|
|
Net cash from
operating activities
|
|
5,684
|
5,306
|
|
|
|
|
|
Investing
activities
|
|
|
|
Additions to property
and equipment
|
|
(226)
|
(110)
|
Proceeds from
disposition of property and equipment
|
|
-
|
14
|
Deposits in cash
management pools
|
|
1,236
|
1,053
|
|
|
|
|
|
Net cash from
investing activities
|
|
1,010
|
957
|
|
|
|
|
|
Financing
activity
|
|
|
|
Payment of lease
liabilities
|
2
|
(431)
|
-
|
Dividends
paid
|
|
(6,263)
|
(6,263)
|
|
|
|
|
|
Net cash used in
financing activity
|
|
(6,694)
|
(6,263)
|
|
|
|
|
|
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 INTERIM
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Not audited
or reviewed by the Company's external auditor)
(in
thousands of Canadian dollars, except per share amounts)
1. GENERAL INFORMATION
Corby Spirit and Wine Limited ("Corby" or the "Company") is a
leading Canadian 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 September 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. SIGNIFICANT ACCOUNTING POLICIES
(i) Basis of Preparation
Statement of compliance
These interim condensed
consolidated financial statements have been prepared in accordance
with International Accounting Standard 34, "Interim Financial
Reporting" ("IAS 34"), as issued by the International Accounting
Standards Board ("IASB"). These interim condensed consolidated
financial statements follow the same accounting policies as the
most recent annual consolidated financial statements, except for
changes in accounting policies and methods described below. These
interim condensed consolidated financial statements should be read
in conjunction with the Company's 2019 annual financial
statements.
These consolidated financial statements were approved by the
Company's Board of Directors on November 6,
2019.
Functional and presentation currency
The
Company's interim condensed consolidated financial statements are
presented in Canadian dollars, which is the Company's, and its
subsidiaries, functional and presentation currency.
Foreign currency translation
Transactions
denominated in foreign currencies are translated into the
functional currency using the exchange rate applying at the
transaction date. Non-monetary assets and liabilities denominated
in foreign currencies are recognized at the historical exchange
rate applicable at the transaction date. Monetary assets and
liabilities denominated in foreign currencies are translated at the
exchange rate applying at the balance sheet date. Foreign
currency differences related to operating activities are recognized
in earnings from operations for the period; foreign currency
differences related to financing activities are recognized within
net financial income.
Basis of Measurement
These interim condensed
consolidated financial statements are prepared in accordance with
the historical cost model, except for certain categories of assets
and liabilities, which are measured in accordance with other
methods provided for by IFRS as described in the most recent annual
consolidated financial statements, except for recently adopted
policies and methods described 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 these interim condensed consolidated financial statements in
conformity with IFRS requires management to make certain
judgements, estimates and assumptions that affect the application
of accounting policies, the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the
date of the interim condensed consolidated financial statements,
and the reported amounts of revenues and expenses during the
reporting period.
Judgement is commonly used in determining whether a balance or
transaction should be recognized in the interim condensed
consolidated financial statements, and estimates and assumptions
are more commonly used in determining the measurement of recognized
transactions and balances. However, judgement and estimates are
often interrelated.
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 changes 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.
Management's most critical estimates in determining the value of
assets and liabilities and the most critical judgements in applying
accounting policies that have a significant risk of causing
material adjustments to the carrying amounts of assets and
liabilities within the next year have been described in Note 2 of
the Company's most recent annual consolidated financial statements,
except for the impact of the adoption of the standards and
interpretations described below.
Seasonality
The interim condensed consolidated
financial statements should not be taken as indicative of the
performance to be expected for the full fiscal year due to the
seasonal nature of the spirits business. Corby's operations are
typically subject to seasonal fluctuations in that the retail
holiday season generally results in an increase in consumer
purchases over the course of October, November and December.
Further, the summer months traditionally result in higher consumer
purchases of spirits as compared to the winter and spring months.
As a result, the Company's first and second quarter of each fiscal
year tend to reflect the impact of seasonal fluctuations in that
more shipments are typically made during those quarters.
(ii)
Adoption of New and Revised Standards and
Interpretations
Recent accounting pronouncements
A number of
new standards, amendments to standards and interpretations are
effective for the financial period ended September 30, 2019, and accordingly, have been
applied in preparing these interim condensed consolidated financial
statements:
(a)
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 became
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 adopted this standard
using the modified retrospective method. The Company has elected to
set the right-of-use asset equal to the lease liability. On the
date of adoption, the Company did not restate prior year
comparative information under the modified retrospective approach.
Comparative information continues to be reported under IAS 17 and
related interpretations.
In applying IFRS 16 for the first time, the Company used the
following practical expedients as permitted by the standard:
- Elected to not apply the requirements of IFRS 16 to short-term
leases and leases for which the underlying asset is of low
value;
- Elected to set the right-of-use asset equal to the lease
liability;
- The exclusion of initial direct costs for the measurement of
the right-of-use asset at the date of initial application;
Upon adoption of the standard, the Company recognized a
right-of-use asset and a lease liability for the present value of
the remaining future lease payments, discounted using the
incremental borrowing rate at the date of initial application. The
adoption of this standard resulted in the recognition of
right-of-use assets and lease liabilities of $6,333 as at July 1,
2019.
The weighted average lessee's incremental borrowing rate applied
to the lease liabilities on the date of initial application was 3%.
The Company will recognize the lease payments associated with these
leases on a straight-line basis, over the lease term.
Under IFRS 16, depreciation expense on the right-of-use asset
and interest expense on the lease liability replaced operating
lease expenses.
The reconciliation between lease liabilities recognized on
July 1, 2019 and operating lease
commitments disclosed using the weighted average incremental
borrowing rate as at the date of initial application is as
follows:
|
|
|
|
As
at
|
|
|
|
|
July 1,
2019
|
Operating lease
commitment as at June 30, 2019 as disclosed
|
|
|
|
in the
Company's notes to the consolidated financial statements
|
|
|
$
6,671
|
|
|
|
|
|
Discounted using the
incremental borrowing rate at July 1, 2019
|
|
|
6,349
|
Short-term and low
value leases excluded
|
|
|
|
(16)
|
|
|
|
|
|
Lease liabilities
recognized as at July 1, 2019
|
|
|
|
$
6,333
|
|
|
|
|
|
Lease liabilities due
within one year
|
|
|
|
$
1,536
|
Lease
liabilities
|
|
|
|
4,797
|
Total lease
liabilities
|
|
|
|
$
6,333
|
Right-of-use assets are measured at the initial amount of the
lease liabilities plus any indirect costs, lease payments made at
or before the commencement date net of lease incentives received,
and decommissioning costs. Subsequent to initial measurement, the
right-of-use assets will be measured at cost and depreciated over
the shorter of the asset's useful life and the lease term on a
straight-line basis.
Right-of-use assets are included as follows in the condensed
interim consolidated balance sheet as at September 30, 2019:
|
|
|
|
As
at
|
|
|
|
|
Sept. 30,
2019
|
|
|
Building
|
Other
|
Total
|
Cost
|
|
|
|
|
|
|
|
|
|
Balance, beginning of
the period
|
|
$
4,473
|
$
1,860
|
$
6,333
|
Lease
additions
|
|
-
|
-
|
-
|
Balance, end of the
period
|
|
$
4,473
|
$
1,860
|
$
6,333
|
|
|
|
|
|
Accumulated
Depreciation
|
|
|
|
|
|
|
|
|
|
Balance, beginning of
the period
|
|
$
-
|
$
-
|
$
-
|
Depreciation
|
|
224
|
176
|
400
|
Balance, end of the
period
|
|
$
224
|
$
176
|
$
400
|
|
|
|
|
|
Carrying amount as at
Sept 30, 2019
|
|
$
4,249
|
$
1,684
|
$
5,933
|
Transactions involving lease liabilities as at and for the
period ended September 30, 2019 were
as follows:
|
|
|
|
As
at
|
|
|
|
|
Sept. 30,
2019
|
Balance, beginning
of the period
|
|
|
|
$
6,333
|
|
|
|
|
|
Lease
additions
|
|
|
|
-
|
Lease
payments
|
|
|
|
(431)
|
Interest expense on
lease liabilities
|
|
|
|
42
|
Less: Accrued
Interest on lease liabilities
|
|
|
|
(9)
|
|
|
|
|
|
Balance, end of
the period
|
|
|
|
$
5,935
|
|
|
|
|
|
Lease liabilities due
within one year
|
|
|
|
$
1,518
|
Lease
liabilities
|
|
|
|
4,417
|
Total lease
liabilities
|
|
|
|
$
5,935
|
The expenses related to leases with variable consideration,
short term leases and low value leases amounted to $81 for the three months ended September 30, 2019.
(b)
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 became
effective July 1, 2019. The new
interpretation did not have a significant impact on the Company's
interim condensed consolidated financial statements.
(c)
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. For Corby, this standard became effective July 1, 2019. The new amendment did not have a
significant impact on the Company's interim condensed consolidated
financial statements.
(d)
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. For Corby, this standard became
effective July 1, 2019. The new
amendment did not have a significant impact on the Company's
interim condensed consolidated financial statements.
(e)
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. For Corby, this standard became effective
July 1, 2019. The new amendment did
not have a significant impact on the Company's interim condensed
consolidated financial statements.
3. FAIR VALUE
The Company uses a fair value hierarchy in order to classify the
fair value measurements and disclosures related to the Company's
financial assets and financial liabilities. The fair value
hierarchy has the following levels:
- Level 1 – Quoted market prices in active markets for identical
assets or liabilities;
- Level 2 – Inputs other than quoted market prices included in
Level 1 that are observable for the asset or liability, either
directly (as prices) or indirectly (derived from prices); and
- Level 3 – Unobservable inputs such as inputs for the asset or
liability that are not based on observable market data.
The level in the fair value hierarchy within which the fair
value measurement is categorized in its entirety is determined on
the basis of the lowest level input that is significant to the fair
value measurement in its entirety.
The Company has no financial instruments carried at fair value
on its balance sheet. For financial assets and liabilities that are
valued at other than fair value on its balance sheets (i.e.,
deposits in cash management pools, deposit on business acquisition,
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.
4. ACCOUNTS RECEIVABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sept.
30,
|
Sept. 30,
|
June 30,
|
|
|
|
|
|
2019
|
2018
|
2019
|
|
|
|
|
|
|
|
|
Trade
receivables
|
|
|
|
$
14,565
|
$
17,288
|
$
18,359
|
Due from related
parties
|
|
|
13,701
|
10,613
|
10,993
|
Other
|
|
|
|
1,648
|
2,632
|
2,908
|
|
|
|
|
|
$
29,914
|
$
30,533
|
$
32,260
|
5. INVENTORIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Sept.
30,
|
Sept. 30,
|
June 30,
|
|
|
|
|
|
2019
|
2018
|
2019
|
|
|
|
|
|
|
|
|
Raw
materials
|
|
|
|
$
3,910
|
$
3,581
|
$
3,223
|
Work-in-progress
|
|
|
|
48,686
|
46,425
|
49,180
|
Finished
goods
|
|
|
|
11,155
|
11,746
|
9,509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
63,751
|
$
61,752
|
$
61,912
|
The cost of inventory recognized as an expense and included in
cost of goods sold during the three month period ended September 30, 2019 was $13,994 (2018 – $12,634). During the three-month periods ended
September 30, 2018 and 2019 there
were no write-downs of inventory as a result of net realizable
value being lower than cost. No inventory write-downs recognized in
previous years were reversed.
6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sept.
30,
|
Sept. 30,
|
June 30,
|
|
|
|
|
|
2019
|
2018
|
2019
|
|
|
|
|
|
|
|
|
Trade payables and
accruals
|
|
|
$
20,836
|
$
16,513
|
$
23,199
|
Due to related
parties
|
|
|
|
7,631
|
8,468
|
7,214
|
Other
|
|
|
|
1,521
|
3,131
|
2,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
29,988
|
$
28,112
|
$
32,998
|
7. REVENUE
The Company's revenue consists of the following streams:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
|
|
|
Sept.
30,
|
Sept. 30,
|
|
|
|
|
|
|
2019
|
2018
|
|
|
|
|
|
|
|
|
Case Goods
sales
|
|
|
|
|
$
31,094
|
$
29,996
|
Commissions (net of
amortization of representation rights)
|
|
|
6,415
|
7,000
|
Other
services
|
|
|
|
|
1,128
|
887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
38,637
|
$
37,883
|
Commissions for the quarter are shown net of amortization of
long-term representation rights of $1,445 (2018 - $1,445). Other services include revenues
incidental to the manufacture of Case Goods, such as logistics fees
and miscellaneous bulk spirit sales.
8. OTHER (EXPENSES) INCOME
The Company's other (expenses) and income consist of the
following amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
|
|
|
Sept.
30,
|
Sept. 30,
|
|
|
|
|
|
|
2019
|
2018
|
|
|
|
|
|
|
|
|
Foreign exchange
loss
|
|
|
|
$
(38)
|
$
(25)
|
Gain on disposal of
property and equipment
|
|
|
-
|
14
|
Other
expenses
|
|
|
|
|
(7)
|
(12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
(45)
|
$
(23)
|
9. NET FINANCIAL INCOME AND EXPENSE
The Company's financial income (expense) consists of the
following amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
|
|
|
Sept.
30,
|
Sept. 30,
|
|
|
|
|
|
|
2019
|
2018
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
|
|
$
356
|
$
365
|
Interest expense on
lease liabilities
|
|
|
(42)
|
-
|
Net financial impact
of pensions
|
|
|
(144)
|
(126)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
170
|
$
239
|
10. EXPENSES BY NATURE
Earnings from operations include depreciation and amortization,
as well as personnel expenses, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
|
|
|
Sept.
30,
|
Sept. 30,
|
|
|
|
|
|
|
2019
|
2018
|
|
|
|
|
|
|
|
|
Depreciation of
property and equipment
|
|
|
$
790
|
$
695
|
Depreciation of lease
liabilities
|
|
|
400
|
-
|
Amortization of
intangible assets
|
|
|
1,445
|
1,445
|
Salary and payroll
costs
|
|
|
|
6,603
|
6,273
|
Expenses related to
pensions and benefits
|
|
|
330
|
329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
9,568
|
$
8,742
|
11. NET CHANGE IN NON-CASH WORKING CAPITAL BALANCES
|
|
|
|
|
Three
Months Ended
|
|
|
|
|
|
|
Sept.
30,
|
Sept. 30,
|
|
|
|
|
|
|
2019
|
2018
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
|
|
$
2,346
|
$
2,936
|
Inventories
|
|
|
|
|
(1,839)
|
(1,963)
|
Prepaid
expenses
|
|
|
|
|
(257)
|
(52)
|
Accounts payable and
accrued liabilities
|
|
|
(3,010)
|
(3,130)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
(2,760)
|
$
(2,209)
|
12. DIVIDENDS
On November 6, 2019 subsequent to
the quarter ended September 30, 2019,
the Board of Directors declared its regular quarterly dividend of
$0.22 per common share,
to be paid on December 6, 2019, to
shareholders of record as at the close of business on November 22, 2019. This dividend is in accordance
with the Company's dividend policy.
13. 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
|
|
|
Sept.
30,
|
Sept. 30,
|
|
|
|
|
|
|
2019
|
2018
|
|
|
|
|
|
|
|
|
Sales to related
parties
|
|
|
|
|
|
|
Commissions - parent,
ultimate parent and affiliated companies
|
|
|
$
7,388
|
$
7,874
|
Products for resale
at an export level - affiliated companies
|
|
|
1,622
|
982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
9,010
|
$
8,856
|
|
|
|
|
|
|
|
|
Cost of goods
sold, purchased from related parties
|
|
|
|
|
Distilling, blending,
and production services - parent
|
|
|
$
5,741
|
$
6,036
|
|
|
|
|
|
|
|
|
Administrative
services purchased from related parties
|
|
|
|
|
Marketing, selling
and administration services - parent
|
|
|
$
556
|
$
523
|
Balances outstanding with related parties are due within 60
days, are to be settled in cash and are unsecured.
During the three months ended September
30, 2019, Corby sold casks to its parent company for net
proceeds of $nil (2018 - $14).
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
November 6, 2019, as published by
Standard & Poor's and Moody's, was BBB+ and Baa1, 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 three months ended September 30, 2019, Corby earned interest income
of $376 from PR (2018 – $384). Corby has the right to terminate its
participation in the Mirror Netting Service Agreement at any time,
subject to five days' written notice.
14. SEGMENT INFORMATION
Corby has two reportable segments: Case Goods and Commissions.
Corby's Case Goods segment derives its revenue from the production
and distribution of its owned beverage alcohol brands. Corby's
portfolio of owned-brands includes some of the most renowned and
respected brands in Canada, such
as J. P. Wiser's Canadian whisky, Lamb's rum, Polar Ice vodka, and
McGuinness liqueurs.
Corby's Commissions segment earns commission income from the
representation of non-owned beverage alcohol brands in Canada. Corby represents leading international
brands such as ABSOLUT vodka, Chivas
Regal, The Glenlivet and Ballantine's scotches, Jameson Irish whiskey, Beefeater gin, Malibu
rum, Kahlúa liqueur, Mumm champagne, and Jacob's Creek and Wyndham
Estate wines.
The Commissions segment's financial results are fully reported
as "Commissions" in Note 7 of the interim condensed consolidated
financial statements. Therefore, a table detailing operational
results by segment has not been provided as no additional
meaningful information would result.
SOURCE Corby Spirit and Wine Limited
Copyright 2019 Canada NewsWire
(2)The Ungava brands include trademarks related
to Ungava Premium Canadian Gin, Chic Choc Spiced Rum and Cabot
Trail maple-based liqueurs.
|