2015 ANNUAL REPORT
Ceres’ Northgate Commodities Logistics
Centre is capable of handling unit trains
of up to 120 railcars.
COMMENCEMENT OF OPERATIONS AT NORTHGATE:
BUSHELS OF GRAIN
OF GRAIN LOADED
OF PROPANE
1.7 MILLION
544 RAILCARS
109 RAILCARS
REGIONAL GRAIN PRODUCTION
(WITHIN 100 MILES, IN M BUSHELS)
52.2M
WHEAT
15.1M
DURUM
23.7M
OATS
42.2M
CANOLA
1.6M
SOYBEANS
Saskatoon
Regina
Northgate
Minot
CERES GLOBAL AG CORP. ANNUAL REPORT
1
Our expertise lies in moving grain
across the U.S. Midwest and Canada.
Ceres’ Grain Division is anchored by Riverland Ag’s storage and handling facilities,
strategically located with connections to key trucking routes, and rail and shipping
channels. As part of the operations of the Northgate facility, Riverland Ag capitalizes
on additional grain origination opportunities direct from Western Canadian farmers.
We see significant synergies from Northgate, as a feeder source to the downstream
improvement of Riverland Ag’s existing storage assets by lowering grain purchase
costs, increasing throughput and inventory turns, and improving capacity utilization.
A high-speed grain elevator under construction, in addition to Northgate’s current
grain operations, will benefit from Northgate’s strategic location, and further maximize
the value of Ceres’ Grain Division assets.
2
CERES GLOBAL AG CORP. ANNUAL REPORT
Malt One
Calument
Electric Steel
MINNEAPOLIS
SOUTH METRO
Shakopee
Savage
Northgate
Duluth
MINNEAPOLIS
SOUTH METRO
Port Colborne
Buffalo
Origination Expansion
Current
ALL ALONG THE GRAINBELT: RIVERLAND AG GRAIN STORAGE FACILITIES
Malt One
Calument
Electric Steel
MINNEAPOLIS
SOUTH METRO
Shakopee
Savage
Northgate
Duluth
MINNEAPOLIS
SOUTH METRO
Port Colborne
Buffalo
Origination Expansion
Current
CERES GLOBAL AG CORP. ANNUAL REPORT
3
Financial Highlights
CONSOLIDATED
INCOME FROM
OPERATIONS:
$1.0M
EBITDA:
$(12.9)M
$(12.8)M
$3.6M
Northgate is now operational and starting
to diversify the products it handles.
Looking ahead, we anticipate that this
strategic asset will become a cornerstone
of our company and a significant catalyst
for greater value creation for shareholders.
4
CERES GLOBAL AG CORP. ANNUAL REPORT
2014201420152015 Financial Highlights
Letter to Shareholders
from the Chairman
Last year in my letter to shareholders, I outlined the many
activities that were underway at Ceres. This past year, with
the guidance of the new Board of Directors, and under CEO
Pat Bracken’s leadership, we continued to build a strong
foundation for the future success of Ceres.
To this end, we made important progress by completing
a fully backstopped rights offering on December 4, 2014.
This equity financing provided Ceres with the financial strength
and flexibility to build out one of our key new assets – the
Northgate transshipping hub.
The proceeds of the offering also allows the Company to
pursue other profit-enhancing opportunities.
By providing the market with `direct-from-farmer’
purchasing, Northgate’s logistic efficiencies, and strategically
located grain storage and handling facilities, Ceres is uniquely
positioned to supply important grain products and services
to our customers.
I am pleased to report that the temporary grain loading facility
that we built at Northgate is meeting all of our expectations,
and the construction of the high-speed loading facility is
progressing on time and on budget.
Additionally, we started to load propane at this facility
earlier this year and we continue to examine other build-out
opportunities.
We took a second important step by developing a detailed
grain strategy. Members of the Board of Directors and
management spent considerable time updating and refining
our plans for our Grain Division.
One crucial aspect of the revised plan is the increased
emphasis that we will place on meeting specific customer
needs for the segments that we serve. By providing the
market with `direct-from-farmer’ purchasing, Northgate’s
logistic efficiencies, and strategically located grain storage
and handling facilities, Ceres is uniquely positioned to supply
important grain products and services to our customers.
Effective Corporate Governance
Effective corporate governance is another important part of
the foundation for the future success of the Company. As you
will note in the Management Information Circular, the Board
has strengthened corporate governance by establishing three
sub committees of the Board:
• Audit and Finance
• Human Resources, Safety, and Environment
• Nomination, Governance, Risk, and Ethics
Additionally, the Board has worked closely with Pat and the
management team to instill a new culture throughout Ceres
– a culture of openness, transparency, and trust, with
employees assuming leadership roles and accountability
at all levels.
I am also pleased that Joseph Monroe joined our Board
of Directors on March 3, 2015. Joseph’s extensive experience
and leadership in the energy sector will be invaluable to Ceres
as we refine and expand our energy transloading business.
Finally, the profit levels at Ceres are much improved versus
fiscal year 2014. However, there is still room for significant
improvement.
The Board has worked closely with Pat and the management
team to instill a new culture throughout Ceres – a culture
of openness, transparency, and trust, with employees assuming
leadership roles and accountability at all levels
All of the work and effort this year has been clearly focused
on one goal: the achievement of acceptable long term returns
for our shareholders. To this end we are firmly committed.
In closing, I would like to thank all of our employees for their
commitment and hard work; our Board of Directors for their
very active leadership and oversight; and to each of you
– our investors - who believe in the Company, our strategy,
and our ability to execute.
We look forward to continuing our progress in fiscal 2016.
As part of this analysis, each one of Ceres’ assets was
evaluated for efficiency, for its ability to meet customer needs,
and for its long-term profit potential. As a result of this work,
subsequent to year end, the Company announced the sale
of the Electric Steel grain facility.
Sincerely,
Douglas E Speers
Chairman of the Board
Ceres Global Ag Corp.
CERES GLOBAL AG CORP. ANNUAL REPORT
5
Letter to Shareholders
from the Chief Executive Officer
We are pleased to report on the Company’s accomplishments
during fiscal year 2015, which was a period of transition,
execution, diversification and improved results.
Early in the fiscal year, we started the transition from an
investment company into an operating company with the
appointment of a new board, and a realignment of our
shareholders.
This was followed by the appointment of a new management
team in September, and a very successful rights issue and
debt restructuring later in the fall.
Northgate, our Commodity Logistics Centre is Saskatchewan,
started its first commercial operations in January 2015 with the
loading of durum wheat through our grain transloading facility.
From January through the end of March, Northgate
loaded 544 rail cars, averaging close to 30 rail cars a week.
Our partners at the BNSF Railway provided exceptional
service, allowing us to stage rail cars on site while we
matched truck and rail logistics.
We continue to be optimistic about the potential for this volume
to improve significantly at Northgate as we complete the
construction of our new shuttle loading elevator.
We also moved ahead with our expansion plans for the
grain elevator at Northgate. A few months ago, we announced
that the board has approved an expansion from the originally
planned 2.2 million bushel storage capacity to 2.7 million.
The additional 500,000 bushel storage enhances our ability
to originate, blend and store grain. Adding the extra storage
capacity now rather than later represents a significant savings
over any future expansion.
The elevator construction progressed on schedule and
on budget in the fourth quarter of fiscal 2015. We anticipate
receiving our first truckloads of grain into the new facility in
mid-October and loading our first train from the new elevator
by mid-November.
Our Grain Division made a significant improvement over the
previous fiscal year, posting an increase in gross profit of
$7.3 million over fiscal year 2014.
Diversification
In terms of diversification, subsequent to year end, in May
2015, we announced the start-up of natural gas liquids – or
NGL – transloading operations at Northgate in the form of
an agreement with Elbow River Marketing, a wholly owned
subsidiary of Parkland Fuel Corporation.
Ceres has started the process of loading propane rail cars
at Northgate for Elbow River, with a total of 44 rail cars loaded
in April and we expect to have loaded a total of 165 railcars
by the end of June, 2015.
The strategic agreement between Ceres and Elbow River
connects Northgate and Saskatchewan propane to the U.S.
market via the BNSF railway. The direct north-south link to the
U.S. provides new access points for natural gas liquid products.
We hope to leverage this experience into a more permanent
logistics flow with the potential addition of storage facilities
and rack loading.
From a strategic perspective, the region continues to be
underserved and overly dependent on east-west movement
of agriculture and energy commodities. Northgate effectively
removes the east-west step. Consequently, our location,
logistics expertise and ability to transport goods north-south is
a significant advantage for Ceres and its customers.
Also subsequent to year end, we entered into a non-binding
term sheet with a global fertilizer company to develop fertilizer
capacity at Northgate. This development will potentially allow
us to bring 100 car trains of phosphate-based fertilizer to
Northgate, warehouse them, and load trucks in a high-speed,
efficient manner through a terminal we are considering building.
This arrangement would provide our grain suppliers with the
ability to backhaul grain, meaning that after they unload their
grain, they could reload their trucks with fertilizer and return
to their destination – or near their destination – which would
greatly improve transportation economics, and highlight
Northgate as an advantageous pricing gateway.
We have also followed through on our mandate to focus on
what we believe are the right assets for the long-term benefit
of the Company, while divesting of assets that don’t fit into
our long-term plans.
6
CERES GLOBAL AG CORP. ANNUAL REPORT
Financial Highlights
Looking Forward
While the year was successful from an operations perspective,
we also gained ground financially.
Gross profit for the year ended March 31, 2015, was $11.7 million
compared to $4.4 million in 2014. For the year ended March 31,
2015, the gross profit percentage was 6.1 percent versus
1.9 percent in 2014.
The increase in gross profit for the year ended March 31, 2015,
compared to 2014 was primarily driven by increased trading
margins, an increase in storage and rental income, and slightly
offset by marginal increases in operating expenses.
Consolidated net loss was $1.4 million versus $19.3 million
in the prior year.
As of March 31, 2015, Ceres has capitalized costs totalling
$46.1 million for our Northgate project, including land acquisition
costs, environment costs, mass grading, site preparation, the
grain transloader, and related equipment and rail track costs.
As we move into fiscal year 2016, our focus is on creating
a profitable Ceres with positive cash flow in order to deliver
on our promise to our shareholders, and to be in a stronger
position to deliver value to our customers.
While our first priority is to get Northgate fully up to speed,
we have many opportunities to grow our core grain business,
and build our capacity to handle other products.
In addition to providing Canadian farmers with more
efficient and direct access to open markets south of the
border, our plans for Northgate include the prospect of
shipping energy commodities.
We view this as a significant differentiator from our
regional logistics competitors.
Our competitors are primarily energy focused, lacking
the expertise and origination know-how, and the resources
required for handling agricultural commodities. We believe
our ability to handle both grain and energy significantly
diversifies our business.
We have taken a highly strategic and long-term position
on the build out of our energy operations. If we see
opportunities that meet our criteria, we will pursue them,
much like we did with Elbow River.
We also see backhauling opportunities at Northgate for
our clients who want to unload grains and then load and
transport phosphate-based fertilizer back to their sites.
We remain very optimistic about Ceres’ future due to the
compelling market opportunity ahead of us, and because
we have the right team in place for the Company to reach
its potential.
I’d like to thank our shareholders who have continued
to support us through our transition over the past year.
This year has been highly productive for Ceres. We are
confident that we can carry that momentum throughout
the rest of calendar 2015 and 2016.
Sincerely,
Patrick Bracken
President and Chief Executive Officer
Ceres Global Ag Corp.
CERES GLOBAL AG CORP. ANNUAL REPORT
7
Table of Contents
1. Financial and Operating Summary
2. Quarterly Financial Data
3. Liquidity & Cash Flow
4. Capital Resources
5. Accounting Policies and Critical Accounting Estimates
6. Outlook
7. Other
8. Non-IFRS Financial Measures and Reconciliations
9. Key Assumptions & Advisories
10
18
19
20
21
21
23
24
25
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CERES GLOBAL AG CORP. ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
Table of Contents
1. Financial and Operating Summary…………………………………………………….
2
2. Quarterly Financial Data………………………………………………………………
10
3. Liquidity & Cash Flow………………………………………………………………...
11
4. Capital Resources……………………………………………………………………...
12
5. Accounting Policies and Critical Accounting Estimates………………………………
MANAGEMENT’S DISCUSSION AND ANALYSIS
6. Outlook……………………………………………………………………...................
Table of Contents
7. Other…………………………………………………………………….......................
1. Financial and Operating Summary…………………………………………………….
8. Non-IFRS Financial Measures and Reconciliations…………………………………..
2. Quarterly Financial Data………………………………………………………………
9. Key Assumptions & Advisories……………………………………………………….
3. Liquidity & Cash Flow………………………………………………………………...
13
13
15
2
16
10
17
11
4. Capital Resources……………………………………………………………………...
12
13
13
This Management’s Discussion and Analysis (“MD&A”) dated June 4, 2015 should be read in
5. Accounting Policies and Critical Accounting Estimates………………………………
conjunction with the March 31, 2015 audited Consolidated Financial Statements of Ceres Global
Ag Corp. (“Ceres”, the “Corporation”, “we”, “our”, and “us”) and the accompanying notes.
6. Outlook……………………………………………………………………...................
Additional information about Ceres filed with Canadian securities regulatory authorities, including
the quarterly and annual report and the annual information form is available online at
15
7. Other…………………………………………………………………….......................
www.sedar.com.
8. Non-IFRS Financial Measures and Reconciliations…………………………………..
Basis of Presentation
17
9. Key Assumptions & Advisories……………………………………………………….
Unless otherwise noted, all financial information has been prepared in accordance with
International Financial Reporting Standards (“IFRS”) as issued by the International Accounting
Standards Board (“IASB”). All information is reported in Canadian dollars (“CAD”) unless
otherwise specified.
This Management’s Discussion and Analysis (“MD&A”) dated June 4, 2015 should be read in
conjunction with the March 31, 2015 audited Consolidated Financial Statements of Ceres Global
Non-IFRS Financial Measures
Ag Corp. (“Ceres”, the “Corporation”, “we”, “our”, and “us”) and the accompanying notes.
This MD&A contains references to certain financial measures, including some that do not have any
Additional information about Ceres filed with Canadian securities regulatory authorities, including
standardized meaning prescribed by IFRS. For example, these measures include “EBITDA”
the quarterly and annual report and the annual information form is available online at
(Earnings before income tax, depreciation and amortization) and “Return on shareholders’ equity”,
www.sedar.com.
which both do not have a standardized meaning under IFRS. See Non-IFRS Financial Measures
and Reconciliations
Basis of Presentation
Unless otherwise noted, all financial information has been prepared in accordance with
International Financial Reporting Standards (“IFRS”) as issued by the International Accounting
Standards Board (“IASB”). All information is reported in Canadian dollars (“CAD”) unless
1
otherwise specified.
16
Non-IFRS Financial Measures
This MD&A contains references to certain financial measures, including some that do not have any
standardized meaning prescribed by IFRS. For example, these measures include “EBITDA”
(Earnings before income tax, depreciation and amortization) and “Return on shareholders’ equity”,
which both do not have a standardized meaning under IFRS. See Non-IFRS Financial Measures
and Reconciliations
CERES GLOBAL AG CORP. ANNUAL REPORT
9
1
Risks and Forward Looking Information
The Corporation’s financial and operational performance is potentially affected by a number of
factors, including, but not limited to, the factors described in the Key Assumptions & Advisories
section of this MD&A.
This MD&A contains forward-looking information based on the Corporation’s current
expectations, estimates, projections and assumptions. This information is subject to a number of
risks and uncertainties, including those discussed in this MD&A and the Corporation’s other
disclosure documents, many of which are beyond the Corporation’s control. Users of this
information are cautioned that actual results may differ materially. See “Key Assumptions and
Advisories” for information on material risk factors and assumptions underlying the Corporation’s
forward-looking information.
1. FINANCIAL AND OPERATING RESULTS
Financial Summary
(in thousands, except per share amounts)
Years ended March 31,
Three months ended March 31,
(in millions except per share)
2015
2014
2015
2014
Revenues
Gross profit (loss)
$
192.8
$
232.4
$
54.5
$
33.5
$
11.7
$
4.4
$
(0.2)
$
3.7
Income (loss) from operations
$
1.0
$
(12.9)
$
(2.4)
$
2.4
Net income (loss)
$
(1.4)
$
(19.3)
$
(3.5)
$
0.4
Common shares outstanding for period
18.4
14.3
27.1
14.2
Earnings (loss) per share
$
(0.08)
$
(1.35)
$
(0.13)
$
0.03
Total assets
$
308.9
$
232.2
Total bank indebtedness, current (1)
$
37.3
$
87.6
Long-term debt
Shareholders' equity,
$
30.4
$
-
$
218.8
$
134.1
Return on shareholders' equity (2)
-0.6%
-14.4%
(1) Includes Bank indebtedness and Repurchase obligations
(2) Non-IFRS measure. See Non-IFRS Financial Measures and Reconciliations section.
WHO WE ARE
Ceres operates in two areas: (1) Grain Storage, Handling and Merchandising – represented by its
Grain Division that utilizes a collection of North American commercial grain storage and handling
assets; and (2) Commodity Logistics – represented by the Northgate commodities logistics centre
in Northgate, Saskatchewan, and a 25% interest in Stewart Southern Railway Inc. (the “SSR”).
Grain Division
The Corporation’s Grain Division, which is primarily anchored by its wholly-owned subsidiary
Riverland Ag Corp. (“Riverland Ag”), is engaged in grain storage, procurement, merchandizing
and “process-ready” cleaning of specialty grains such as oats, barley, rye, and durum wheat through
nine grain storage and handling facilities in Minnesota, New York, and Ontario while also utilizing
the grain operating facility at the Northgate Commodity Logistics Centre (“NCLC” or
“Northgate”), with aggregate storage capacity of approximately 46.6 million bushels. The
2
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CERES GLOBAL AG CORP. ANNUAL REPORT
Corporation’s Grain business also manages two facilities in Wyoming on behalf of their owner,
Briess Industries. Four of the grain storage facilities are located at deep-water ports in the Great
Lakes and one on the Minnesota River which is tributary to the Mississippi River, allowing access
for vessels and barges, and enabling the efficient import and export of grains globally. 39.5 million
bushels of the Corporation’s facilities are “regular” for delivery for both spring wheat against the
Minneapolis Grain Exchange futures contract and oats against the Chicago Board of Trade futures
contract; in addition, spring wheat and oats sourced by the Corporation out of Canada are eligible
for delivery against the respective futures contract.
The majority of the Ceres Grain Division’s current storage space is utilized to benefit from grain
trading, arbitrage and merchandising opportunities. Management determines which of the
Corporation’s facilities is to be employed for the storage or throughput of a particular grain
shipment based on the source of the grain shipment, the elevator location relative to the end
customers, the cost of logistics to transport the grain, and the availability of space in the intended
elevator. In addition, the Corporation stores and handles grain for third-party customers.
Northgate Commodities Logistics Centre
Ceres owns approximately 1,300 acres of land at Northgate, Saskatchewan, where it is constructing
a new commodities logistics centre designed to utilize high-efficiency rail loops, capable of
handling unit trains of up to 120 railcars. The NCLC will be a $94.7 million grain, oil, natural gas
liquids (“NGL”) transload terminal and is connected to the Burlington Northern Santa Fe Railway
(the “BNSF”). The Corporation is currently operating a grain transloader where it unloads inbound
grain by truck from Canadian producers and loads the grain onto outbound railcars to customer
end-users, or to the Corporation’s existing facilities to take advantage of the value and strategic
location of its current asset base. In addition to the Corporation’s current grain operations at
Northgate, Ceres is also constructing a high-speed grain elevator that will benefit from the NCLC’s
strategic geographic location and position Ceres to further maximize the value of its existing Grain
Division assets.
Concurrent with its grain operations at NCLC, in April 2015, the Corporation is operating an NGL
transloader whereby the Corporation unloads NGLs from inbound trucks and loads the gas into
outbound rail cars on behalf of third-party customers. The Corporation is evaluating the
development of facilitating the logistics and handling of oil and fertilizer, and additional natural
gas transloading business at NCLC. There is ample land and track capacity for a potential supply
handling facility, which would offer unloading and logistics support for supplies used in the area’s
oil production. The Corporation is evaluating the feasibility and profit potential of such additional
projects around the supply handling facility initiative.
Ceres completed construction on its grain transloading facility in October 2014. While the
Corporation had grain contracted from Canadian producers at the time of completion, the BNSF
placed the first set of sixty-plus cars for loading on January 11, 2015. The approximate three-month
delay from completion of the transloading facility to its first outbound rail shipment was due to
obtaining final approval from U.S. Customs in transporting Canadian-produced product south into
the United States. Although this delay was costly and estimated at $2 million, the cause of the loss
was due to contracting grain for October/November delivery that did not ship until
January/February, as the Corporation sold into a selling weaker market during the fourth quarter
ended March 31, 2015. However, this loss was an initial one-time start-up opportunity cost.
Subsequent to obtaining U.S. Customs approval, the BNSF has continued to service the NCLC
facility, placing 50 to 100 cars multiple times per month. Furthermore, the construction of the
previously announced high speed elevator, with 2.7 million bushel storage capacity that will be
3
CERES GLOBAL AG CORP. ANNUAL REPORT
11
capable of loading a 120-car shuttle train within 15 hours, continues to be on schedule. The high-
speed grain elevator is expected to be operational October 2015, with final completion scheduled
for March 2016.
As at March 31, 2015, Ceres has capitalized costs totaling $49.9 million (March 31, 2014: $14.8
million) for the NCLC project, including land acquisition costs, environmental costs, mass grading,
site preparation, the grain transloader and related equipment, and rail track costs. In conjunction
with the commencement of the grain transloading operations in January 2015, during the quarter-
ended March 31, 2015, the Corporation placed into service $3.9 million in property, plant and
equipment at Northgate, which included the grain transloader, a portion of the rail track being
utilized for grain operations, and related machinery and equipment.
2015 HIGHLIGHTS
For the year ended March 31, 2015 compared to 2014:
Income from operations of $1.0 million (2014: loss from operations of $12.9 million);
Revenues of $192.8 million (2014: $232.4 million);
Gross profit of $11.7 million (2014: $4.4 million);
EBITDA1 was $3.6 million (2014: loss of $12.8 million);
Net loss of $1.4 million (2014: net loss of $19.3 million); and
Basic and fully diluted consolidated loss per share was $0.08 (2014: loss $1.35 per share).
For the fiscal quarter ended March 31, 2015 compared to 2014:
Revenues of $54.5 million (2014: $33.5 million);
Gross loss of $0.2 million (2014: gross profit of $3.7 million);
Loss from operations of $2.5 million (2014: income from operations of $2.4 million);
EBITDA loss of $1.6 million for the quarter (2014: EBITDA of $3.1 million);
Net loss of $3.5 million (2014: net income of $0.4 million); and
Basic and fully diluted consolidated loss per share was $0.13 (2014: loss $0.08 per share).
Revenues and Gross Profit
The Corporation’s Grain Division, primarily through Riverland Ag, is principally involved in an
agricultural commodity-based business, in which changes in selling prices generally move in
relation to changes in purchase prices. Therefore, increases or decreases in prices of the agricultural
commodities that the business deals in will have a relatively equal impact on sales and cost of sales
and a minimal impact on gross profit. Accordingly, management believes it is more important to
focus on changes in gross profit than it is to focus on changes in revenue dollars.
For the year ended March 31, 2015, revenues totalled $192.8 million (2014: $232.3 million) and
gross profit was $11.7 million (2014: $4.4 million). For the year ended March 31, 2015, gross profit
percentage was 6.1% (2014: 1.9%).
For the quarter ended March 31, 2015, revenues totalled $54.5 million (2014: $33.5 million) while
gross profit was a loss of $0.2 million (2014: $3.7 million). For the quarter ended March 31, 2015,
gross profit percentage was negative 0.4% (2014: 11%).
1 Non-IFRS measure. See Non-IFRS Financial Measures and Reconciliations section.
4
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CERES GLOBAL AG CORP. ANNUAL REPORT
The table below represents a summary of the components of gross profit for the year and quarters
ended March 31, 2015 and 2014:
(in millions)
12 months
3 months
2015
2014
2015
2014
Net trading margin
Storage and rental income
Operating expenses included in Cost of sales
Depreciation expense included in Cost of sales
$
21.8
6.5
(13.9)
(2.7)
$
15.3
5.4
(13.5)
(2.8)
$
2.6
1.5
(3.5)
(0.8)
$
5.8
1.7
(3.1)
(0.7)
Gross profit (loss)
$
11.7
$
4.4
$
(0.2)
$
3.7
Year-end March 31, 2015 vs. 2014
The increase in gross profit of $7.3 million for the year ended March 31, 2015 compared to 2014
was primarily driven by an increased trading margin, and a slight increase in storage and rental
income, both of which were slightly offset by increases in operating expenses. More specifically
relating to each:
Net trading margin
Net trading margins’ year-over-year increase of $6.5 million was driven by (1) the Corporation’s
growth and additions in its cereal grain trading portfolio; (2) an increase in its customer portfolio
that included North American and European millers; (3) the effective assessment of marketplace
needs and positioning the desired inventory quality at the right time for end-users, and; (4)
enhanced utilization through the Corporation’s strategic facilities located on the Great Lakes to
fulfill export and domestic demand in large volumes.
Storage and rental income
An increase in storage and rental income of $1.1 million for storing and handling third-party
customers’ grain was driven by an increase in third-party storage agreements, and an increase in
bushels handled on behalf of third-party customers.
Operating expenses and depreciation
Compared to 2014, operating expenses and depreciation increased by $0.3 million, or 2%. Nearly
all of the Corporation’s operating expenses and depreciation is incurred in USD then translated into
CAD at the average exchange rate during the period. The weakening in the CAD relative to the
USD of 8% was the primary cause for the increase in expense for the year.
Quarter ended March 31, 2015 vs. 2014
For the quarter ended March 31, 2015 compared to 2014, gross profit decreased $3.9 million. The
reduction in gross profit in the fourth quarter of 2015 compared to 2014, was due to:
Net trading margin
The reduction in net trading margin of $3.2 million due to (1) relatively static values on grains
throughout the quarter on grain the Corporation owns compared to the same quarter in prior year;
(2) the decline in nearby values in certain cereal grain markets from the third quarter of 2015 to the
fourth quarter of 2015; and (3) initial one-time delays of approximately $2 million in outbound
grain shipments by rail at Northgate that did not allow October/November contracted grain to move
until January/February, as the Corporation sold into a weaker selling market.
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CERES GLOBAL AG CORP. ANNUAL REPORT
13
Storage and rental income
Storage and rental increase decline of $0.2 million compared to the fourth quarter ended March 31,
2014, which was driven by a reduction in third-party bushels handled.
Operating expenses and depreciation
The increase in operating and depreciation expense of $0.5 million, or 13%, was entirely driven by
decline in the CAD of 12.4% relative to the USD from 2014 to 2015.
The table below presents the total number of bushels handled at the Corporation’s elevator facilities
for the company-owned grains and for grain handled for third-party storage tenants for the year and
quarters ended March 31, 2015 and 2014:
(Bushels in millions)
Company-owned bushels handled
Third-party bushels handled
Total bushels handled
12 months
3 months
2015
2014
19.64
18.27
37.91
26.49
9.70
36.19
2015
5.10
2.27
7.37
2014
2.53
2.87
5.40
The following table represents the net trading margins per bushel relative to company-owned
bushels handled; storage and rental income per bushel of third-party owned inventory handled;
along with the operating and depreciation expenses per bushel for all bushels handled for the year
and quarters ended March 31, 2015 and 2014.
(Dollars per bushel handled)
Net trading margin
Storage and rental income
Average gross profit before undernoted expenses
Operating and depreciation expense
12 months
3 months
2015
2014
2015
2014
$
1.11
0.36
$
0.58
0.56
$
0.52
0.66
$
2.30
0.60
0.75
(0.44)
0.57
(0.45)
0.56
(0.59)
1.39
(0.71)
Gross profit per bushel handled
$
0.31
$
0.12
$
(0.03)
$
0.68
The change in the dollars per bushel handled figures for the year and quarters ended March 31,
2015 and 2014 is due to the following:
Net trading margin per bushel handled
An increase in net trading margin for the year ended March 31, 2015 compared to 2014 was driven
by: effectively assessing the needs of the marketplace, positioning inventory quality in such a
manner to supply the desired quality grain to end-users, and; enhanced utilization through the
Corporation’s strategic facilities located on the Great Lakes to fulfill export and domestic demand
in large volumes.
The reduction in net trading margin for the quarter March 31, 2015 compared to 2014, is a function
of static basis values on premium grain and the decline in nearby values in certain cereal grain
markets for inventory the Corporation owned throughout the fourth quarter of 2015.
14
CERES GLOBAL AG CORP. ANNUAL REPORT
6
Storage and rental income per bushel handled
The reduction in $0.20 per bushel handled of third-party storage and rental income was a function
of handling more volume on behalf of third-party customers. Typically there is an inverse
relationship between the dollars per third-party bushel handled and the number of bushels handled
on behalf of the third-party customers.
For the Corporation’s third-party storage agreements, the Corporation earns a flat storage fee per
month (i.e. $0.07 per month for each bushel in-store), along with a fee for each bushel unloaded
and loaded out (i.e. $0.05 in and $0.05 out, for a total of $0.10 for each bushel handled). It is entirely
possible for the Corporation to handle zero bushels for a third-party tenant while earning $0.07 for
each bushel in store. As less bushels are handled, the dollars per bushel increases due to the storage
rate and total bushels in-store being in excess of the fee for handling bushels and total bushels as a
whole. Thus, the reduction compared to prior year is due to increased bushels being handled. On
the other hand, the increase in dollars per bushel for the quarter ended March 31, 2015 compared
to 2014, is due to less bushels being handled for third-party customers.
General and Administrative Expenses
General and administrative expense is composed of two components: Corporate level
administrative expenses and administrative expenses associated with running its Grain Division
(exclusive of those expenses incurred at grain facilities, which are captured in Cost of sales and are
a reduction to Gross profit as described above). In addition, the corporate administrative expenses
are inclusive of non-grain business growth initiatives. The following table below lays out the two
components of the Corporation’s consolidated general and administrative expenses for the years
and quarters ended March 31, 2015 and 2014:
(in millions)
Corporate administration
Grain Division administration
Total general and administrative expense
12 months
3 months
2015
2014
2015
2014
$
5.5
5.2
$
10.7
$
12.3
4.9
$
17.2
$
1.0
1.2
$
(0.4)
1.7
$
2.2
$
1.3
For the year ended March 31, 2015, general and administrative expenses totalled $10.7 million,
which represented a decrease compared to prior year of $6.5 million, or 62% (2014: $17.2 million).
The reduction in fiscal year 2015 compared to fiscal 2014 was due to the recognition in the prior
year of expenses relating to the termination of the Corporation’s management agreement with Front
Street Capital (Front Street). In fiscal 2014, the Corporation recorded provisions for $5.0 million
for the management transition payment that was made on October 1, 2013 to Front Street, and $1.4
million for contingent additional payments to Front Street, totalling $6.4 million.
For the quarter ended March 31, 2015, general and administrative expense totaled $2.3 million
versus $1.3 million in the fourth quarter of 2014. General and administrative expense for fiscal
quarter four of 2014 was less due to the reduction in fair value of the Corporation’s liability of
future payments to Front Street relating to the termination of the management agreement.
Excluding items relating to the termination of the management agreement, general and
administrative expenses incurred as part of normal business operations were comparable from fiscal
quarter four of 2014 to 2015.
7
CERES GLOBAL AG CORP. ANNUAL REPORT
15
For the year ended March 31, 2015 corporate general and administrative expense totalled $5.5
million compared to $12.3 million in the prior year, representing a reduction of $6.8 million, which
is due to the termination of the Front Street management agreement described above. The Grain
Division’s administrative expenses increased $0.3 million, or 6%. This increase is entirely driven
by the 8% decline of the CAD compared to prior year. In absolute USD terms, the Grain Division
administrative expense declined compared to prior year by approximately USD $0.1 million.
Furthermore, since termination of the management agreement with Front Street, general and
administrative expenses have significantly decreased, as the Corporation’s management has been
internalized. During the year ended March 31, 2015, the Corporation hired a new President & CEO
and Chief Financial Officer while also hiring a General Manager of Energy to lead the
Corporation’s business development efforts at Northgate. Concurrent with the internalization of
management, the Corporation terminated all of its consulting agreements with third-parties, as it
work that was previously performed by third-party consultants is now being performed internally,
which has led to realized general and administrative expense savings compared to prior years. In
addition, during the fourth quarter of fiscal 2015, the Corporation added a Vice President of Trading
& Risk Management to further strengthen its commercial trade team and develop commercial
opportunities while building out its grain trading team.
Finance (Loss) Income
Finance (loss) income for the year ended March 31, 2015 was $0.2 million compared to a loss of
$2.9 million in 2014. The slight loss in 2015 was driven by realized and unrealized losses on foreign
currency exchange that was partially offset by a gain on foreign currency hedging. The decline in
the loss compared to 2014 was driven by realized losses recognized in 2014 for the sale of
investments, which totalled $3 million. For the quarter ended March 31, 2015, the Corporation
recognized finance income of $0.1 million (2014: loss of less than $0.1 million), which was driven
by realized and unrealized gains on foreign currency exchange for the quarter.
Finance Expenses
(in thousands)
Interest on revolving credit facility
Interest on repurchase obligations
Long-term debt
Amortization of financing costs paid
Interest income and other interest expense
12 months
3 months
2015
2014
2015
2014
$
(1,761.2)
(137.5)
(402.4)
(742.4)
137.0
$
(4,028.7)
(158.0)
-
(530.9)
-
$
(288.3)
(35.2)
(402.4)
(295.0)
85.6
$
(865.0)
(71.1)
-
(195.0)
0.1
$
(2,906.5)
$
(4,717.6)
$
(935.3)
$
(1,131.0)
For the year ended March 31, 2015, finance expenses included interest on the Corporation’s short-
term credit facility, interest expense on repurchase obligations (a second form of short-term
borrowing), long term debt expense, and amortization on financing costs paid. These forms of
interest expense were slightly offset by interest income recognized during the year of over $0.1
million. Finance expenses declined over $1.8 million, or 38%, for the year ended March 31, 2015
compared to 2014. The decline is attributable to a reduction in overall grain prices compared to
prior year, and lower inventory quantities owned and in-store.
For the quarter ended March 31, 2015, finance expense was nearly $0.2 million less than the same
quarter in the prior year. The slight reduction was primarily driven by using the proceeds from the
Rights Offering (described further in the Capital Resources section below and in Note 15(e) of the
8
16
CERES GLOBAL AG CORP. ANNUAL REPORT
Consolidated Financial Statements) to temporarily pay down the Corporation’s revolving credit
facility in January 2015 to save on interest and finance expense. Total savings realized in the fourth
quarter of 2015 totaled over $0.5 million. The realized savings was partially offset by the
origination of term debt on December 30, 2014, which had an associated finance expense incurred
in fiscal quarter 4 of $0.4 million. (See the Capital Resources section below and Note 12 of the
Consolidated Financial Statements for further information on the long-term debt.)
Income Taxes
For the year ended March 31, 2015, the Corporation incurred income tax expense totaling $0.4
million (2014: recovery of $1.3 million). The income tax expense compared to the recovery in the
prior year’s periods is due to the realization of loss carrybacks for prior year tax losses, which
amounted to approximately $1.0 million.
Furthermore, the Corporation has not recognized its deferred tax assets, which are predominantly
composed of net operating loss carryforwards, as it is not probable that the benefit will be realized.
Income tax expense incurred for the year and quarter ended March 31, 2015 is composed of (1)
deferred tax expense, and (2) alternative minimum tax and state income tax incurred from
operations in the United States.
Share of Net Income (Loss) in Investments in Associates
The Corporation’s share of net income (loss) in investments in associates relates to two minority
investments that the Corporation holds that are accounted for the using the equity method. The
Corporation holds a 25% minority interest in the SSR, which is a short-line railway extending from
Richardson, Saskatchewan, to Stoughton, Saskatchewan. The Corporation’s second equity
investment is a 25% interest in Canterra Seeds, a Winnipeg-based pedigreed agriculture seed
company that produces and markets seed varieties in Western Canada and the Great Northern Plains
of the United States. The Corporation holds a 25% voting position on both investees’ board of
directors.
For the year ended March 31, 2015, the Corporation’s share of net income in its investment in
associates was a net gain of $1.2 million (2014: income of $0.5 million). For the quarter ended
March 31, 2015, the Corporation recognized a share of its loss in investments in associates totaling
less than $0.1 million compared to a loss of less than $0.2 million for the same quarter ended March
31, 2014.
Gain on translation of foreign currency accounts of foreign operations
For the year ended March 31, 2015, the Corporation recognized a gain on translation of foreign
accounts of foreign operations totaling $14.1 million (2014: $9.4 million). Gains and losses
pertaining to translation of foreign operations relate to net assets of USD functional currency
operations, which are translated into CAD using the rate at the reporting date while related net
income (or loss) is translated using the average rate for the period. The gain for the year was driven
by a 14% decline in the Canadian dollar compared 9% in 2014.
For the quarter ended March 31, 2015, the Corporation recognized a gain of $8.3 million compared
to a gain of $4.3 million for the fourth quarter ended March 31, 2014. The increase in the gain in
2015 was driven by a 9% decline in the Canadian dollar during the quarter compared 4% decline
in the fourth quarter of 2014.
9
CERES GLOBAL AG CORP. ANNUAL REPORT
17
2. QUARTERLY FINANCIAL DATA
(in thousands, except per share amounts)
3 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
Reporting dates
3/31/2015
12/31/2014
9/30/2014
6/30/2014
3/31/2014
12/31/2013
9/30/2013
6/30/2013
(in millions except per share)
Q4 2015
Q3 2015
Q2 2015
Q1 2015
Q4 2014
Q3 2014
Q2 2014
Q1 2014
Revenues
Gross profit (loss)
$
54.5
$
69.7
$
17.1
$
51.5
$
33.5
$
54.8
$
74.4
$
69.7
$
(0.2)
$
5.4
$
5.3
$
1.2
$
3.7
$
0.1
$
2.6
$
(2.1)
Income (loss) from operations
$
(2.5)
$
3.3
$
2.4
$
(2.2)
$
2.4
$
(1.3)
$
(8.9)
$
(5.0)
Net income (loss)
$
(3.5)
$
2.3
$
1.9
$
(2.1)
$
0.4
$
(2.1)
$
(11.7)
$
(5.8)
Return on shareholders' equity
-1.6%
1.1%
1.4%
-1.6%
0.3%
-1.6%
-9.1%
-4.1%
Weighted-average number of
common shares for the quarter
27.1
17.9
14.2
14.2
14.2
14.2
14.3
14.3
Basic and fully diluted earnings
(loss) per share
EBITDA
EBITDA per share
Cash and portfolio investments,
$
(0.13)
$
0.13
$
0.13
$
(0.15)
$
0.03
$
(0.15)
$
(0.82)
$
(0.41)
$
(1.6)
$
3.8
$
3.2
$
(1.8)
$
3.1
$
(1.6)
$
(10.2)
$
(4.1)
$
(0.06)
$
0.21
$
0.23
$
(0.13)
$
0.22
$
(0.12)
$
(0.71)
$
(0.28)
at reporting date
$
6.0
$
86.3
$
13.7
$
26.4
$
12.9
$
7.3
$
15.9
$
24.1
Shareholders' equity, as at
reporting date
$
218.8
$
214.1
$
135.0
$
128.1
$
134.1
$
129.3
$
128.0
$
142.8
Shareholders' equity per common
share, as at reporting date
$
8.09
$
7.91
$
9.50
$
9.01
$
9.44
$
9.10
$
9.00
$
9.96
Revenues: The Corporation’s revenue is currently generated by its Grain Division, and revenues
are predominantly composed of the sale of grain, storage and rental income, and other operating
income that is earned. Since a predominant portion of revenue is composed of the sale of grain, as
a commercial commodities merchandizing business, revenues can vary from quarter-to-quarter due
to fluctuations of agricultural commodity prices. The Corporation has the flexibility to be
opportunistic in its decisions to buy, sell or hold inventory based on market conditions such as grain
supply, demand and grain values.
Gross profit (loss) & Income (loss) from operations: The Corporation’s Grain Division is
principally involved in an agricultural commodity-based business, in which changes in selling
prices generally move in relation to changes in purchase prices. Therefore, increases or decreases
in prices of the agricultural commodities are expected to have a relatively equal impact on sales
and cost of sales, and accordingly a minimal impact on gross profit. Therefore, management
believes it is more important to focus on changes in gross profit rather than changes in revenue
dollars. Gross profit may vary from quarter to quarter depending on gains from trading, carrying
income and basis income against changing inventory levels.
18
CERES GLOBAL AG CORP. ANNUAL REPORT
10
3. LIQUIDITY & CASH FLOW
(in thousands)
Net Cash Provided by (used in)
Operating activities
Investing activities
Net Cash Provided (Used) Before Financing Activities
Financing Activities
Foreign Exchange Gain (Loss) on Cash and Cash Equivalents
Held in Foreign Currency
Decrease in Cash and Cash Equivalents
Years ended March 31,
2015
2014
$
(22,653)
(22,550)
(45,203)
44,022
$
65,099
(7,389)
57,710
(66,679)
(5,693)
534
$
(6,874)
$
(8,435)
Cash and Cash Equivalents
$
5,136
$
12,009
Operating Activities
Cash from operating activities was $87.8 million lower in 2015 predominantly due to an increase
in cash used non-cash working capital accounts. Excluding assets held for sale as at March 31,
2014, working capital increased $77.5 million from March 31, 2014 to March 31, 2015.
Investing Activities
In 2015, cash used in investing activities was $22.6 million, a $15.2 million increase in cash used
from 2014, which was primarily due to the acquisition of property, plant and equipment at NCLC
and a slight offset by cash proceeds received from the disposition of assets held for sale in 2015.
Financing Activities
In 2015, our cash provided from financing activities increased $110.7 million. As we note herein
and in our Consolidated Financial Statements, we received proceeds from our rights offering, net
of share issuance costs, of $73.4 million and proceeds from term loans of $29.1 million.
As at March 31, 2015, we were in compliance with all of the terms of our debt agreements.
Available Sources of Liquidity
The Corporation’s sources of liquidity as at March 31, 2015 are cash and cash equivalents and
available funds under its revolving credit facility (“credit facility”). Management believes that cash
flow from operations will be adequate to fund operating expenditures, maintenance capital, interest,
and any income tax obligations. Growth capital expenditures in the next twelve months will be
funded by cash on hand and borrowing against the credit facility. Any additional debt incurred will
be serviced by the anticipated increases in cash flow and will only be borrowed within the
Corporation’s debt covenant limits. During the quarter ended March 31, 2015, the Corporation
temporarily paid down its revolving credit facility using proceeds from the rights offerings.
In addition, the revolving Corporation’s credit facilities at March 31, 2015 have certain covenants,
including minimum working capital of not less than $30 million. As at March 31, 2015 the
Corporation’s working capital totaled $123.1 million.
11
CERES GLOBAL AG CORP. ANNUAL REPORT
19
2015
Carrying
amount
Contractual
cash flows
1 year
2 years
3 to
5 years
More than
5 years
Bank indebtedness
Accounts payable and accrued liabilities
Repurchase obligations
Derivatives
Provision for future payments to Front Street Capital
Warrants
Long-term debt (1)
$
18,736,400
$
18,963,000
$
18,963,000
$
-
$
-
$
-
17,388,202
18,635,451
2,607,280
344,000
1,719,000
17,388,202
18,635,451
2,607,280
344,000
1,719,000
17,388,202
18,635,451
2,607,280
344,000
1,719,000
-
-
-
-
-
-
-
-
-
-
30,381,310
31,605,000
-
3,792,600
27,812,400
-
-
-
-
-
-
(1) Refer to Note 12 of our Consolidated Financial Statements
As disclosed within Note 10 of the Consolidated Financial Statements, during the year ended March
31, 2015, Ceres entered into a contract with a Canadian contractor to design and build an inland
grain terminal at the NCLC. The design and build process commenced in early September 2014
with substantial completion of the project expected to be in March 2016. The total contract price is
$40 million, and as at March 31, 2015, $14.6 million has been incurred. The remaining commitment
is expected to be met over the term of the contract through March 2016.
4. CAPITAL RESOURCES
The Corporation utilizes its revolving credit facility to finance its grain trading operations, which
primarily consist of purchases of grain inventories, financing of accounts receivable, and hedging
activities, less accounts payable. Levels of short-term debt fluctuate based on changes in underlying
commodity prices and the timing of grain purchases.
Credit Facility
As disclosed in Note 11 of the Consolidated Financial Statements, on December 30, 2014, the
Corporation amended and extended its syndicated uncommitted US$120 million 364-day revolving
credit agreement with Macquarie Bank Ltd. (“Macquarie Bank”). Borrowings bear interest at
2.875% plus overnight LIBOR. Interest is calculated and paid on a monthly basis. Amounts under
the credit agreement that remain undrawn are not subject to a commitment. The credit facility has
certain covenants pertaining to the accounts of the Corporation, and as at March 31, 2015, the
Corporation was in compliance with all debt covenants. Prior to this agreement, through Riverland
Ag, the Corporation had a revolving credit agreement that was substantially identical as it was
syndicated and for US$120 million with borrowing bearing interest at 2.875% plus overnight
LIBOR.
Long-term Debt
As disclosed in Note 12 of the Consolidated Financial Statements, and as previously reported, on
June 27, 2014, Ceres entered into a senior secured term loan facility agreement (the “Loan”) for
US$20 million with Macquarie Bank to finance further development and early stage construction
of Northgate.
Subsequent to that, and in conjunction with amending and extending the syndicated uncommitted
credit agreement described above, on December 30, 2014, the Corporation entered into a senior
secured term loan facility agreement (the “New Loan”) for US$25 million with Macquarie Bank.
This New Loan is for a term of 5 years with an interest rate of one month LIBOR plus 5.25%. This
New Loan extinguished and replaced the previous loan originated on June 27, 2014, which had an
initial term maturing on December 29, 2014.
20
CERES GLOBAL AG CORP. ANNUAL REPORT
12
Equity Financing & Rights Offering
As disclosed in Note 15(e) of the Consolidated Financial Statements, on December 4, 2014, the
Corporation successfully completed a fully backstopped rights offering. The rights offering was
fully subscribed at a price of $5.84. The Corporation issued 12,842,465 common shares for
aggregate gross proceeds of approximately $75 million. Costs incurred relating to the issuance of
shares totaled $1,571,062
5. ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES
Changes in Accounting Policies and Recently Announced Pronouncements
Refer to Note 3 to the Consolidated Financial Statements for information pertaining to accounting
changes effective in the year ended March 31, 2015 and future changes in accounting standards
that will be effective in future years.
Critical Accounting Estimates
The discussion and analysis of Ceres’ financial condition and results of operations are based
upon the Corporation’s Consolidated Financial Statements, which have been prepared in
accordance with IFRS. Ceres’ significant accounting policies and accounting estimates are
contained in the Consolidated Financial Statements (see Notes 3 and 4, respectively, for the
description of policies or references to notes where such policies are contained). The critical
accounting estimates are valuation of investments; valuation of inventories and commodity
derivatives; fair value of financial instruments; income taxes and the valuation of warrant
obligations; and deferred share units, because they require Ceres to make assumptions about
matters that are potentially uncertain at the time the accounting estimate is made and due to the
likelihood that materially different amounts could be reported under different conditions or using
different assumptions.
6. OUTLOOK
MARKET OUTLOOK
Grain Division
The Corporation is committed to improving the effectiveness of its grain merchandising, handling,
through-put, and overall utilization of its existing asset infrastructure with Northgate serving as the
anchor and catalyst of the enhancement. During the fiscal year ended March 31, 2015, the
Corporation received all material regulatory approvals and permits, including approvals from the
Canadian and U.S. Customs authorities on the border crossing to be used in connection with the
NCLC. The Corporation commenced grain operations at NCLC in the fourth quarter of 2015,
handling over 1.7 million bushels at Northgate shipping grain to existing facilities to fulfill
anticipatory local demand and directly to end-user customers.
The NCLC is located in an important spring wheat, durum and canola production region in Canada
with a significant amount of oats produced to the north and deliverable to the facility by truck. The
Northgate location will allow producers in the surrounding regions the ability to have freight
transport on the BNSF rail network, to which no other grain elevator in Western Canada has direct
access. Management expects that NCLC’s BNSF-served elevator will give Canadian grain
producers and handlers increased access to the United States and other international markets.
With a full fiscal year of Northgate, along with management’s commitment to enhancing its grain
merchandising and trade flow capabilities with the addition of key trading personnel and increased
13
CERES GLOBAL AG CORP. ANNUAL REPORT
21
utilization of its facilities, the Corporation expects to trade and handle more company-owned bushel
volume in fiscal year 2016 with the expectation that increased handling will lead to greater net
trading margins and gross profits. As we previously reported, during the 2014 shipping season the
Corporation loaded nine vessels out of its main Duluth, Minnesota, facility (compared to four in
2013). As management expects growth in company-owned bushels handled, we anticipate
incremental growth in outbound vessels out of our main Duluth facility driven by grain originated
out of Northgate.
In addition, during the year ended March 31, 2015, the Corporation added an international and
domestic durum wheat trading platform. Serving as diversification to its already-existing wheat
portfolio, durum wheat trading has enhanced gross profit and increased utilization of the
Corporation’s main elevator in Duluth, Minnesota, without any significant increases in operating
expenses. As part of its durum program, the Corporation has acquired durum from the Southwestern
and Great Northern Plans of the United States and Canada, including NCLC.
Subsequent to March 31, 2015, the Corporation expanded its operations by opening a grain
merchandising office in southeastern Ontario, which will play a key role in extending the
Corporation’s trading and merchandising reach into Ontario and the eastern Canadian markets, and
enhancing the utilization of its Port Colborne, Ontario, facility. Furthermore, the Corporation has
expanded its existing hard wheat trading portfolio with the addition of key personnel, which will
allow the Corporation to expand its geographic procurement and merchandising reach throughout
North America. Management expects that these two expansions, coupled with a full year of
Northgate grain origination, and other strategic initiatives will contribute positively to the
Corporation’s net earnings in fiscal 2016.
Logistics Division
The Corporation’s logistics-related initiatives anchor on the strategic geographic location of
Northgate, which is located in a prime area to facilitate the movement of oil and natural gas from
Canada to the United States. Concurrent with its grain operations at NCLC, in the first quarter of
fiscal year 2016, the Corporation entered into an agreement with Elbow River Marketing Ltd., a
wholly owned subsidiary of Parkland Fuel Corporation, to transload propane at Northgate. Under
this strategic agreement, the Corporation unloads propane from inbound trucks loading it into
railcars for shipment into the US market via the BNSF from Northgate, Saskatchewan. This
provides a direct link and an added access point for propane to enter the US market. Through May
31, 2015, the Corporation has loaded 109 railcars. Management expects this business to grow
throughout fiscal year 2016.
Geographically, the NCLC is located in a prime area to facilitate the movement of grain, oil and
natural gas from Canada to the United States. The direct connection to BNSF’s 32,000-mile
network presents a unique opportunity to secure Canadian-origin grain bushels for southbound
movement in large consist trains. BNSF’s railcar management system includes car auctions where
shippers are allowed to bid for Certificates of Transportation. These certificates represent the right
to empty rail cars and have priority placement over tariff car orders. Certificates of Transportation
are traded in the open market amongst shippers and grain elevators, allowing all shippers equal
access to rail equipment. This system is unique to BNSF and Union Pacific and is not available on
the CP or CN systems.
As the Northgate facility is designed to utilize high-efficiency rail loops, capable of handling unit
trains of up to 120 railcars, there is ample land and track capacity for additional potential supply
handling facilities at Northgate, which would offer unloading and logistic support for supplies used
22
CERES GLOBAL AG CORP. ANNUAL REPORT
14
in the area’s oil production. The Corporation is evaluating the feasibility and profit potential of
such additional projects around the supply handling facility initiatives of oil, fertilizer and
additional natural gas.
7. OTHER
CONTROLS ENVIRONMENT
Disclosure Controls and Procedures
Ceres maintains appropriate information systems, procedures and controls to ensure that new
information disclosed externally is complete, reliable and timely. National Instrument 52-109
Certification of Disclosure in Issuers’ Annual and Interim Filings (“NI 52-109”) requires the Chief
Executive Officer and the Chief Financial Officer to certify that they are responsible for
establishing and maintaining disclosure controls and procedures (“DC&P”) and that they have, as
at March 31, 2015, designed and evaluated the effectiveness of the DC&P (or have caused such
DC&P to be designed under their supervision) to provide reasonable assurance that material
information relating to Ceres is made known to them by others, particularly during the period in
which Ceres’ annual filings are being prepared, and that information required to be disclosed by
Ceres in its annual filings, interim filings or other reports filed or submitted by Ceres under
applicable securities legislation is recorded, processed, summarized and reported within the time
periods specified in applicable securities legislation.
Internal Controls over Financial Reporting
NI 52-109 also requires the Chief Executive Officer and the Chief Financial Officer to certify that
they are responsible for establishing and maintaining internal control over financial reporting
(“ICFR”) and that they have, as at March 31, 2015, designed and have effective ICFR to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with International Financial Reporting Standards
(IFRS). The control framework used by the Chief Executive Officer and the Chief Financial Officer
to design Ceres’ ICFR is the Risk Management and Governance: Guidance on Control (COCO
Framework) published by The Canadian Institute of Chartered Accountants. There have been no
changes in Ceres’ ICFR that has materially affected, or is reasonably likely to materially affect,
Ceres’ ICFR.
FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS
The Corporation’s financial instruments and other instruments, including a discussion of risks and
relevant risk sensitivities, can be found in Note 14 of the Consolidate Financial Statements.
OFF-BALANCE SHEET ARRANGEMENTS
The Corporation has not engaged in any off-balance sheet arrangements.
SHARES OUTSTANDING
As at June 4, 2015, the issued and outstanding equity securities of the Corporation consisted of
27,057,655 common shares.
15
CERES GLOBAL AG CORP. ANNUAL REPORT
23
CONTINGENT LIABILITIES
See Note 21 of the Consolidated Financial Statements for disclosure of the Corporation’s
contingent liabilities as at March 31, 2015.
SUBSEQUENT EVENT
See Note 22 of the Consolidated Financial Statements for disclosure of the Corporation’s
subsequent event occurring prior to the release of the Consolidated Financial Statements but
subsequent to March 31, 2015.
8. NON-IFRS FINANCIAL MEASURES AND RECONCILIATIONS
Certain financial measures in this MD&A and discussed below are not prescribed by and have a
standardized meaning under IFRS. As such, they are unlikely to be comparable to similar measures
presented by other issuers. These non-IFRS financial measures are included because management
uses the information to analyze leverage, liquidity, and operating performance.
Earnings Before Income Taxes, Depreciation and Amortization
The Corporation believes the presentation of EBITDA can provide useful information to investors
and shareholders as it provides increased transparency. EBITDA is one metric that is used by
management to determine the Corporation’s ability to service its debt and finance capital. EBITDA
excludes gains and losses on property, plant and equipment and assets held for sale, as these items
are considered to be non-reoccurring in nature.
The following table is a reconciliation of EBITDA for Ceres on a consolidated basis for the years
and quarters ended March 31, 2015 and 2014.
(in thousands)
Net income (loss) for the period
Add/(Deduct):
12 months
3 months
2015
2014
2015
2014
$
(1,385)
$
(19,270)
$
(3,485)
$
391
Finance expenses
Gain on sale or property, plant and equipment
Loss on impairment of assets held for sale
Income taxes (recovered)
Share of net (income) loss in investments in
asscoiates
Depreciation on property, plant and equipment
2,906
-
-
419
(1,181)
2,821
4,718
(200)
763
(1,323)
(464)
3,000
935
-
-
114
39
774
1,131
(3)
763
(104)
156
789
$
3,580
$
(12,776)
$
(1,623)
$
3,123
24
CERES GLOBAL AG CORP. ANNUAL REPORT
16
Return on Shareholders’ Equity
Ceres believes that the return on shareholders’ equity can be an effective measure used to evaluate
the performance of the business over time. Management uses this metric to analyze performance
and set targets. Return on shareholders’ equity is the quotient of the net income (loss) for the period
and the total shareholders’ as at the reporting date.
The following table is a calculation of return on shareholders’ equity for Ceres for the years and
quarters ended March 31, 2015 and 2014.
(in thousands)
12 months
3 months
2015
2014
2015
2014
Net income (loss) for the period
Total shareholders' equity as at reporting date
$
(1,385)
218,838
$
(19,270)
134,075
$
(3,485)
218,838
$
391
134,075
-0.6%
-14.4%
-1.6%
0.3%
9. KEY ASSUMPTIONS & ADVISORIES
FORWARD LOOKING INFORMATION
This annual MD&A contains information that is “forward-looking information”, “forward-looking
statements” and “future oriented financial information” (collectively herein referred to as “forward-
looking statements”) within the meaning of applicable securities laws. Forward-looking statements
in this document may include, among others, statements regarding future operations and results,
anticipated business prospects and financial performance of Ceres and its subsidiaries, expectations
or projections about the future, strategies and goals for growth, the action against Ceres initiated
by the Scoular Company, expected and future cash flows, costs, planned capital expenditures,
additional anticipated capital projects, construction and completion dates, including the plans,
costs, timing and capital requirements for the development of the Northgate Commodities Logistics
Centre (“NCLC”), operating and financial results, critical accounting estimates and the expected
financial and operational consequences of future commitments.
Generally, forward-looking statements can be identified by the use of forward-looking terminology
such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “outlook”, “likely”,
“probably”, “going forward”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or
“does not anticipate”, “believes”, “may have implications” or similar words and phrases or
statements that certain actions, events or results “may”, “could”, “should”, “would”, “might”, or
“will be taken”, “occur”, or “be achieved”. Forward-looking statements in this document are
intended to provide Ceres’ shareholders and potential investors with information regarding Ceres
and its subsidiaries, including Management’s assessment of future financial and operational plans
and outlook for Ceres and its subsidiaries.
Forward-looking statements are based on the opinions and estimates of management at the date the
information is made, and are based on a number of assumptions and subject to a variety of risks
and uncertainties and other factors that could cause actual events or results to differ materially from
those projected in the forward-looking statements. Actual results or events may differ from those
predicted in these forward-looking statements. All of the Corporation’s forward-looking statements
are qualified by the assumptions that are stated or inherent therein, including the assumptions listed
below. Although Ceres believes these assumptions are reasonable, this list is not exhaustive of
factors that may affect any of the forward-looking statements.
17
CERES GLOBAL AG CORP. ANNUAL REPORT
25
KEY ASSUMPTIONS
Key assumptions have been made in connection with the forward-looking statements in this interim
MD&A. These assumptions include, but are not limited to, the following (in no particular order of
importance):
- No material change in the regulatory environment in Canada and the United States;
- Supply and demand factors as well as the pricing environment for grains and other
agricultural commodities;
- Fluctuation of currency and interest rates;
- General financial conditions for Western Canadian and American agricultural producers;
- Market share that will be achieved by the Corporation;
- Adequate and timely service from the railroad companies, and in particular from the
Burlington Northern Santa Fe railroad at the NCLC;
- The ability of Ceres to successfully build and operate the Northgate grain elevator;
- The Corporation’s ability to successfully defend itself against, or settle, the dispute with
The Scoular Company;
- Realization of economic benefits resulting from the synergies with NCLC;
- The Corporation’s ability to maintain existing customer contracts and relationships coupled
with its ability to increase its customer portfolio; and
- Continued compliance by the Corporation with its loan covenants.
The preceding list is not exhaustive of all possible factors. All factors should be considered
carefully when making decisions with respect to Ceres. Many such factors and events are not within
the control of Ceres. Factors that could cause actual results or events to differ materially from
current expectations include, among others, risks related to weather, politics and governments,
changes in environmental and other laws and regulations, competitive factors in the agricultural,
food processing and feed sectors, construction and completion of capital projects, labour,
equipment and material costs, access to capital markets, interest and currency exchange rates,
technological developments, global and local economic conditions, the ability of Ceres to
successfully implement strategic initiatives and whether such strategic initiatives will yield the
expected benefits, the operating performance of the Corporation’s assets, the availability and price
of commodities, and the regulatory environment, processes and decisions. Ceres has attempted to
identify important factors that could cause actual actions, events or results to differ materially from
those described in forward-looking statements. However, there may be other factors that might
cause actions, events or results that are not anticipated, estimated or intended. There can be no
assurance that forward-looking information will prove to be accurate, as actual results and future
events could differ materially from those anticipated in such statements or information.
By its nature, forward-looking information is subject to various risks and uncertainties, including
those risks discussed in other sections of this interim MD&A and in other filings and
communications, any of which could cause Ceres’ actual results and experience to differ materially
from the anticipated results or published expectations. Additional information on these and other
factors is available in the reports filed by Ceres with Canadian securities regulators. Readers are
cautioned not to place undue reliance on this forward-looking information, which is given as of the
18
26
CERES GLOBAL AG CORP. ANNUAL REPORT
date of this interim MD&A or otherwise, and not to use future-oriented information or financial
outlooks for anything other than their intended purpose. Ceres undertakes no obligation to update
publicly or revise any forward-looking statements or information, whether as a result of new
information, change in management’s estimates or opinions, future events or otherwise, except as
required by law.
19
CERES GLOBAL AG CORP. ANNUAL REPORT
27
Table of Contents
Management’s Responsibility for Financial Reporting
Independent Auditors’ Report
Consolidated Balance Sheets
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Cash Flows
Consolidated Statements of Changes in Shareholders’ Equity
30
31-32
33
34
35
36
Notes to the Consolidated Financial Statements
37 – 73
28
CERES GLOBAL AG CORP. ANNUAL REPORT
CERES GLOBAL AG CORP.
Table of Contents
March 31, 2015 and 2014
Management’s Responsibility for Financial Reporting
Independent Auditors’ Report
Consolidated Financial Statements of
Consolidated Balance Sheets
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Cash Flows
Consolidated Statements of Changes in Shareholders’ Equity
Page
2
3-4
5
6
7
8
Notes to the Consolidated Financial Statements
9 – 45
For the years ended March 31, 2015 and 2014
CERES GLOBAL AG CORP. ANNUAL REPORT
29
Management’s Responsibility for Financial Reporting
These consolidated financial statements of the Corporation are the responsibility of management. The
consolidated financial statements were prepared by management in accordance with International Financial
Reporting Standards (“IFRS”) using information available to June 4, 2015 and management’s best estimates and
judgments, where appropriate.
Management has established a system of internal accounting and administrative controls to provide reasonable
assurance that assets are safeguarded from loss or unauthorized use, transactions are properly authorized and
recorded, and financial records are properly maintained for the preparation of reliable financial statements.
The Board of Directors discharges its responsibility for the consolidated financial statements primarily through
its Audit Committee, which comprises members of the Board of Directors. The Audit Committee meets with
management and with the external auditors to discuss the results of the audit examination and review the
consolidated financial statements of the Corporation. The Audit Committee also considers, for review by the
Board and approval by the shareholders, the engagement or re-appointment of the external auditors. The financial
statements have been approved by the Board of Directors and have been audited by KPMG LLP, Chartered
Accountants, in accordance with Canadian generally accepted auditing standards. Their Independent Auditors’
Report outlines their responsibilities, the scope of their audit, and their opinion on the accompanying consolidated
financial statements. KPMG LLP has full and unrestricted access to the Audit Committee.
Patrick Bracken
Chief Executive Officer
Mark Kucala
Chief Financial Officer
30
CERES GLOBAL AG CORP. ANNUAL REPORT
2
INDEPENDENT AUDITORS’ REPORT
To the Shareholders of Ceres Global Ag Corp.
We have audited the accompanying consolidated financial statements of Ceres Global Ag Corp., which
comprise the consolidated balance sheets as at March 31, 2015 and March 31, 2014, the consolidated
statements of comprehensive income (loss), changes in shareholders’ equity and cash flows for the years
then ended, and notes, comprising a summary of significant accounting policies and other explanatory
information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with International Financial Reporting Standards, and for such internal control as
management determines is necessary to enable the preparation of consolidated financial statements that
are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on our judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to
fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s
preparation and fair presentation of the consolidated financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide
a basis for our audit opinion.
CERES GLOBAL AG CORP. ANNUAL REPORT
31
KPMG LLP Suite 2000 - One Lombard Place Winnipeg MB R3B 0X3 Canada Telephone (204) 957-1770 Fax (204) 957-0808 Internet www.kpmg.ca KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG Network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity KPMG Canada provides services to KPMG LLP. Sender Name Title/EnclosuresLetter Template.Docx Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated
financial position of Ceres Global Ag Corp. as at March 31, 2015 and March 31, 2014, and its consolidated
financial performance and its consolidated cash flows for the years then ended in accordance with
International Financial Reporting Standards.
Chartered Accountants
June 4, 2015
Winnipeg, Canada
32
CERES GLOBAL AG CORP. ANNUAL REPORT
CERES GLOBAL AG CORP.
Consolidated Balance Sheets
ASSETS
Current
Cash
Portfolio investments
Due from Brokers
Derivatives
Accounts receivable, trade
Inventories, grains
Sales taxes recoverable
Income taxes recoverable
Assets held for sale
Prepaid expenses and sundry assets
Current assets
Investments in associates
Intangible assets
Investment property
Property, plant and equipment
Non-current assets
TOTAL ASSETS
LIABILITIES
Current
Bank indebtedness
Accounts payable and accrued liabilities
Repurchase obligations
Derivatives
Provision for future payments to Front Street Capital
Warrants
Current liabilities
Long-term debt
Deferred income taxes
Non-current liabilities
TOTAL LIABILITIES
SHAREHOLDERS' EQUITY
Common shares
Deferred share units
Contributed surplus
Currency translation account
Deficit
Note
14(d)
6
14(a)
5
7
8
9
10
11
13
14(a)
17
15(c)
12
18
15(e)
16
March 31,
2015
March 31,
2014
$
5,136,032
848,163
8,641,335
9,472,984
7,910,824
147,940,077
1,137,391
-
-
$
12,009,400
848,163
4,620,007
2,965,891
6,757,757
113,320,466
1,469,543
58,465
18,233,455
1,410,699
1,477,376
182,497,505
161,760,523
5,619,412
379,260
-
120,450,079
126,448,751
4,625,667
331,650
14,803,988
50,687,083
70,448,388
$
308,946,256
$
232,208,911
$
18,736,400
17,388,202
18,635,451
2,607,280
344,000
1,719,000
59,430,333
30,381,310
296,971
30,678,281
$
71,746,950
7,567,634
15,941,080
1,752,256
970,000
-
97,977,920
-
156,534
156,534
90,108,614
98,134,454
208,884,960
319,820
9,228,422
22,179,246
(21,774,806)
137,100,022
62,500
9,228,422
8,072,943
(20,389,430)
TOTAL SHAREHOLDERS' EQUITY
218,837,642 134,074,457
COMMITMENTS
CONTINGENT LIABILITIES
SUBSEQUENT EVENT
10
21
22
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
308,946,256
$
232,208,911
The accompanying notes are an integral part of these financial statements.
ON BEHALF OF THE BOARD
Signed
"Harold Wolkin"
Director
Signed
"Doug Speers"
Director
CERES GLOBAL AG CORP. ANNUAL REPORT
33
5
CERES GLOBAL AG CORP.
Consolidated Statements of Comprehensive Income (Loss)
For years ended March 31, 2015 and 2014
REVENUES
Cost of sales
GROSS PROFIT
General and administrative expenses
INCOME (LOSS) FROM OPERATIONS
Finance loss
Finance expenses
Loss on impairment of assets held for sale
Gain on sale of property, plant and equipment
LOSS BEFORE INCOME TAXES AND UNDERNOTED ITEM
Income taxes (recovered)
LOSS BEFORE UNDERNOTED ITEM
Share of net income in investments in associates
LOSS FOR THE PERIOD
Other comprehensive gain for the period
Gain on translation of foreign currency accounts of foreign operations
TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD
Note
2015
2014
$ 192,765,006 $ 232,353,830
(181,073,981) (227,982,570)
11,691,025 4,371,260
(10,742,873) (17,227,514)
948,152 (12,856,254)
(188,963) (2,918,839)
(2,906,495) (4,717,551)
- (763,201)
- 199,540
(2,147,306) (21,056,305)
419,315 (1,322,628)
(2,566,621) (19,733,677)
1,181,245 463,700
(1,385,376) (19,269,977)
14(b)
14(c)
7
18
8
14,106,303 9,365,847
(9,904,130)
$
12,720,927
$
WEIGHTED-AVERAGE NUMBER OF SHARES FOR THE PERIOD
18,360,019
14,260,601
LOSS PER SHARE
Basic
Diluted
Supplemental disclosure of selected information:
Depreciation included in Cost of sales
Depreciation included in General and administrative expenses
Amortization of financing costs included in Finance expenses
Personnel costs included in Cost of sales
Personnel costs included in General and administrative expenses
The accompanying notes are an integral part of these financial statements.
$ (0.08) $ (1.35)
$ (0.08) $ (1.35)
10
10
$ 2,742,253 $ 2,843,568
$ 79,470 $ 156,167
$ 742,445 $ 530,988
$ 1,663,530 $ 1,527,417
$ 520,687 $ 442,982
34
CERES GLOBAL AG CORP. ANNUAL REPORT
6
CERES GLOBAL AG CORP.
Consolidate d State me nts of Cash Flows
For the ye ars e nde d March 31 2015 and 2014
C ASH FLO W S FRO M O PERATING AC TIVITIES
Net loss for the period
Adjustments for:
Depreciation of property, plant and equipment
Revaluation of warrants conditionally issued
Realized loss on sale of investments
Unrealized increase in fair value of investments
Loss on assets held for sale
Realized gain on sale of property, plant and equipment
Finance expenses
Income tax expense (recovery)
Deferred share units issued to Directors and fair value adjustment
Share of net income in investments in associates
Changes in non-cash working capital accounts
Interest paid
Income taxes recovered (paid)
C ash flow provide d by (use d in) ope rating activitie s
C ASH FLO W S FRO M INVESTING AC TIVITIES
Proceeds from disposition of assets held for sale
Proceeds from sale of investments
Dividend received from associate
Repayment of loan receivable from associate
Acquisition of, and costs capitalized on, investment property
Proceeds from sale of property, plant and equipment
Acquisition of property, plant and equipment
C ash flow use d in inve sting activitie s
C ASH FLO W S FRO M FINANC ING AC TIVITIES
Net proceeds from (repayment of) bank indebtedness
Proceeds from term loans
Net repayment of repurchase obligations
Financing costs paid
Proceeds from common shares issued
Share issuance costs
Deferred share units redeemed
Repurchase of common shares under normal course issuer bid
C ash flow provide d by (use d in) financing activitie s
Fore ign e xchange cash flow adjustme nt on accounts
de nominate d in a fore ign curre ncy
Incre ase (de cre ase ) in cash for the pe riod
Cash, beginning of period
C ash, e nd of pe riod
Note
2015
2014
$
(1,385,376)
$
(19,269,977)
10
15(c)
2,821,723
2,999,735
75,000
-
-
-
-
-
2,974,760
(513,896)
763,201
(199,540)
2,906,495
4,717,551
419,315
276,032
(1,322,628)
62,500
(1,181,245)
(463,700)
(24,014,566)
79,030,214
(2,471,290)
(4,634,761)
(170,017)
955,867
(22,723,929)
65,099,326
6,759,240
-
187,500
-
-
3,189,928
125,000
62,500
(5,052,271)
(9,806,713)
-
1,549,940
18
16
8
20
7
9
10
(24,444,302)
(2,509,343)
(22,549,833)
(7,388,688)
11
12
13
11, 12
15(e)
15(e)
16
(56,885,000)
(52,670,000)
29,065,000
-
365,329
(12,939,394)
(1,933,734)
75,000,000
(1,571,062)
(18,712)
(105,340)
-
-
-
-
(964,424)
44,021,821
(66,679,158)
(5,621,427)
534,084
(6,873,368)
(8,434,436)
12,009,400
20,443,836
$
5,136,032
$
12,009,400
The accompanying notes are an integral part of these financial statements
CERES GLOBAL AG CORP. ANNUAL REPORT
35
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36
CERES GLOBAL AG CORP. ANNUAL REPORT
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
1. CORPORATE STATUS, REPORTING ENTITY AND NATURE OF OPERATIONS
Ceres Global Ag Corp. (hereinafter referred to as “Ceres” or the “Corporation”) was incorporated on
November 1, 2007, as amended on December 6, 2007, under the provisions of the Business Corporations
Act (Ontario). On April 1, 2013, Ceres Global Ag Corp. amalgamated with Corus Land Holding Corp.
Thereafter, the amalgamated corporation continued operating as Ceres Global Ag Corp. Ceres is a
corporation domiciled in Canada, with its head office located at 36 Toronto Street, Suite 850, Toronto,
Ontario, Canada, M5C 2C5.
These consolidated financial statements of Ceres as at and for the year ended March 31, 2015 include the
accounts of Ceres and its wholly owned subsidiaries Ceres Canada Holding Corp., Riverland Agriculture
limited (“Riverland Canada”), Ceres U.S. Holding Corp., and Riverland Ag Corp. (“Riverland Ag”). All
intercompany transactions and balances have been eliminated.
Unless otherwise stated, Riverland Ag and Riverland Canada will be collectively referred to as Riverland
Ag. Riverland Ag is an agricultural cereal grain storage, customer-specific procurement and supply
ingredient company that owns and operates nine (9) grain storage, handling and merchandising facilities
in the states of Minnesota and New York, and the province of Ontario, with a combined licensed capacity
of 47 million bushels. Riverland Ag also manages two (2) facilities in Wyoming on behalf of its customer-
owner.
All of the Corporation’s revenues for the years ended March 31, 2015 and 2014 are generated by Riverland
Ag in the United States and Canada, which represents the Corporation’s only reportable segment.
Furthermore, as at March 31, 2015, of the Corporation’s $309.0 million in total assets, $248.9 million are
domiciled in the United States, while $60.1 million are domiciled in Canada. As at March 31, 2014, the
Corporation had $199.6 million in total assets domiciled in the United States while $32.6 million were
domiciled in Canada.
2.
BASIS OF PREPARATION
Statement of compliance
These consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS). The accounting, estimation and valuation policies, as described below, have
been consistently applied to all periods presented herein.
These consolidated financial statements were authorized for issue by the Audit Committee of the Board
of Directors on June 4, 2015.
Functional and presentation currency
These consolidated financial statements are presented in Canadian dollars (“CAD”), which is the
Corporation’s functional currency.
Basis of measurement
These consolidated financial statements have been prepared on the historical cost basis, except for the
following material items in the statement of financial position:
CERES GLOBAL AG CORP. ANNUAL REPORT
37
9
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
2.
BASIS OF PREPARATION (continued)
Basis of measurement (continued)
Derivative financial instruments are measured at fair value;
Financial instruments at fair value through profit or loss are measured at fair value; and
Inventories are measured at fair value less costs to sell.
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies described below have been applied consistently to all periods presented in these
consolidated financial statements.
Investments in associates
Associates are entities in which Ceres has significant influence, but has no control, over the financial and
operating policies. Significant influence is presumed to exist when the Corporation holds between 20%
and 50% of the voting power of another entity. Ceres has a 25% equity ownership interest in two Canadian
companies.
Investments in associates are accounted for using the equity method and are recognized initially at cost.
The Corporation’s investment includes goodwill identified on acquisition, net of any accumulated
impairment losses. The consolidated financial statements include the Corporation’s share of the after-tax
net income (or net loss) and of the changes in equity during a reporting period, after adjustments (if any)
to align the accounting policies with those of the Corporation, from the date that significant influence
commences until the date that significant influence ceases. If the Corporation’s accumulated share of net
losses in an associate were to exceed the carrying amount of its interest in that associate, the carrying
amount of that interest, including any long-term investments, would be reduced to nil and the recognition
of further losses would be discontinued except to the extent the Corporation were to have an obligation or
were to have made payments on behalf of the associate.
The Corporation reviews its investments in associates for impairment whenever events or changes in
business circumstances indicate that the carrying amount of the investments may not be recoverable.
Evidence of impairment in value might include the absence of an ability to recover the carrying amount
of the investments, the inability of the associates to sustain earnings capacity that would justify the
carrying amount of the investments, or, where applicable, estimated sales proceeds that are insufficient to
recover the carrying amount of the investments. If the recoverable amount of the investments is
determined to be less than the carrying amount, an impairment write-down is recorded based on the excess
of the carrying amount over management’s estimate of the recoverable amount.
38
CERES GLOBAL AG CORP. ANNUAL REPORT
10
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Transaction costs
Portfolio transaction costs include brokerage commissions incurred in the purchase and sale of portfolio
securities in which Ceres invests. Corporate transaction costs include costs directly attributable to the
acquisition of subsidiaries and the investments in associates. All such costs are expensed in the period
incurred and classified with General and administrative expenses in the Statement of Comprehensive
Income (Loss).
Transaction costs related to the issuance of equity instruments of the Corporation or its subsidiaries are
accounted for as a reduction of the stated capital of the equity securities issued. Transaction costs related
to the issuance of debt instruments of the Corporation or its subsidiaries are considered in the
determination of amortized cost using the effective interest method for the measurement of non-derivative
financial liabilities, and relate to bank indebtedness. Transaction costs related to Bank indebtedness are
amortized using the straight-line method over the term of the financing arrangement while transaction
costs for Long-term debt is amortized using the effective interest method.
Classification of financial instruments
Financial assets
A financial asset is classified at fair value through profit or loss, if it is classified as held for trading or is
designated as such upon initial recognition. Financial assets are designated at fair value through profit or
loss if the Corporation manages such investments and makes purchase and sale decisions in accordance
with the Corporation’s documented risk management and investment strategies. Financial assets at fair
value through profit or loss are measured at fair value, and changes therein are recognized in net income
or loss. Portfolio investments represent non-derivative financial assets classified as held for trading. The
Corporation’s unrealized gains on open cash contracts are derivative financial assets classified as held for
trading.
Financial assets having fixed or determinable payments, and which are not quoted in an active market are
defined as loans and receivables. Such assets are initially recognized at fair value plus directly attributable
transaction costs, if any. Thereafter, loans and receivables are measured at amortized cost using the
effective interest method, less impairment losses, if any. Loans and receivables include due from Brokers,
and accounts receivable, trade.
Financial liabilities
Unrealized losses on open cash contracts are classified as held for trading and valued at fair value through
profit or loss. The provision for future payment to Front Street Capital is also valued at fair value through
profit and loss. Non-derivative financial liabilities of the Corporation include bank indebtedness, accounts
payable and accrued liabilities, repurchase obligations, management fees payable, and due to Manager.
These financial liabilities are initially recognized at fair value plus any directly attributable transaction
costs. Thereafter, these financial liabilities are measured at amortized cost using the effective interest
method.
CERES GLOBAL AG CORP. ANNUAL REPORT
39
11
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Classification of financial instruments (continued)
Equity
Common shares and unconditional warrants
Common shares and certain warrants are classified as equity. Incremental costs directly attributable to the
issue of common shares and warrants are recognized as a deduction from equity, net of the effects of
income taxes, if any.
Contributed surplus
The value of warrants issued that have expired is recognized as contributed surplus, net of the effects of
income taxes, if any.
Repurchase of common shares
When common shares recognized as equity are repurchased, the amount of the consideration paid (which
may include directly attributable transaction costs) is recognized as a deduction from equity, net of the
effects of income taxes, if any. The portion of the consideration paid that represents the value of the stated
capital of the shares repurchased is deducted from the carrying amount of common shares. Any difference
between the total consideration paid and the stated capital amount of the shares repurchased is added to
(or deducted from) retained earnings, as applicable.
Valuation of investments
Portfolio investments are held for trading, and are measured and reported at fair value. Securities and
ownership interests over which the Corporation exercises significant influence or control are accounted
for using the equity-accounting model or through consolidation, as appropriate.
As at a reporting date, the fair value of financial instruments traded in active markets (primarily equity
securities of public companies and related derivative instruments, if any) is based on the bid price for
investments held by the Corporation, and on the asking price for investments sold short, if any. The fair
value of financial instruments not traded in an active market (including but not limited to: securities in
private companies, warrants and restricted securities) is determined using valuation techniques.
Depending on various circumstances, the Corporation may use several methods and makes assumptions
based on market conditions existing at each reporting date. Valuation techniques may include, without
limitation, the use of comparable recent arm’s length transactions, discounted cash flow analysis, option
pricing models and other valuation techniques commonly used by market participants.
Recognition of investments
Purchases and sales of investments are recognized on the trade date, being the date on which the
Corporation commits to purchase or sell an investment. Investments cease to be recognized when the
rights to receive cash flows from the investments have expired or the Corporation has transferred
substantially all risks and rewards of ownership.
40
CERES GLOBAL AG CORP. ANNUAL REPORT
12
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Derivative contracts
Ceres may purchase forward foreign exchange contracts to act as an economic hedge against assets and
liabilities denominated in foreign currencies. As at a reporting date, forward foreign exchange contracts
are valued based on the difference between the forward contract rate and the forward bid rate (for currency
held). Unrealized gains and losses, if any, on these forward contracts used to hedge foreign currency assets
and liabilities are presented separately on the Balance Sheet and included in Derivative assets or
Derivative liabilities, as applicable, and are recognized in the Statement of Comprehensive Income (Loss)
as a component of Finance income (loss) and included with the change in fair value of investments. Upon
the closing out of these contracts, any gains or losses on foreign exchange are reported in Finance income
(loss) in the Statement of Comprehensive Income (Loss) as realized gain (loss) on currency hedging
transactions.
To reduce price risk caused by market fluctuations, Riverland Ag generally follows a policy of using
exchange-traded futures and options contracts to minimize its net position of merchandisable agricultural
commodity inventories and forward cash purchase and sales contracts. Riverland Ag will also use
exchange-traded futures and options contracts as components of merchandising strategies designed to
enhance margins. The results of these strategies may be significantly influenced by factors such as the
volatility of the relationship between the value of exchange-traded commodities futures contracts and the
cash prices of the underlying commodities, and volatility of freight markets. Derivative contracts have not
been designated, and are not accounted for, as fair value hedges. Management determines fair value based
on exchange-quoted prices, and in the case of its forward purchase and sale contracts, estimated fair value
is adjusted for differences in local markets. Realized and unrealized gains and losses in the value of
inventories of merchandisable agricultural commodities, forward cash purchase and sales contracts, and
exchange-traded futures contracts are recognized in the Statement of Comprehensive Income (Loss) as a
component of Cost of sales. Unrealized gains and losses on these derivative contracts are recognized in
earnings and classified on the Balance Sheet as Due from Broker, Derivative assets or Derivative
liabilities, as applicable.
Fair value measurements
The Corporation uses a valuation hierarchy as a framework for disclosing fair values, based on the inputs
to measure the fair value. This hierarchy prioritizes the inputs into three broad levels as follows:
Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities including
exchange-traded derivative contracts that can be assessed at measurement date;
Level 2 – inputs are quoted prices for similar assets and liabilities in active markets or inputs that are
observable inputs for the asset or liability, either directly (i.e. prices) or indirectly (i.e. derived from
prices); and
Level 3 – inputs are unobservable inputs based on the Corporation’s own assumptions used to measure
assets and liabilities at fair value (i.e. inputs are unobservable).
CERES GLOBAL AG CORP. ANNUAL REPORT
41
13
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Foreign currency translation, transactions of Canadian dollar functional currency entities
Foreign currency transactions are translated into CAD using the exchange rates prevailing at the dates of
the transactions. As at a reporting date, assets and liabilities denominated in a foreign currency are
translated into CAD, as follows:
Foreign currency monetary items are translated using the spot exchange rate in effect at the
reporting date, and;
Non-monetary items measured at fair value in a foreign currency are translated using the exchange
rate(s) in effect as at the date(s) on which fair value was determined.
Foreign exchange gains or losses resulting from the settlement of such transactions and from the
translation as at a reporting date of assets and liabilities denominated in foreign currencies are reflected in
the Statement of Comprehensive Income (Loss). Translation gains or losses on securities included in the
investment portfolio of the Corporation are recognized in Finance income (loss) in the Statement of
Comprehensive Income (Loss) and classified with the change in fair value of investments.
Foreign currency translation, non-CAD functional currency entities
Foreign operating entities and its functional currency is the U.S. dollar (“USD”). For the preparation of
these consolidated financial statements, all assets and liabilities are translated into the presentation
currency of Canadian dollars using the foreign exchange rate in effect as at the reporting date with income
statement accounts translated using the average exchange rate for the reporting or applicable period.
Translation adjustments arising from changes in exchange rates are reported as a component of other
comprehensive income and form part of the cumulative translation account in shareholders’ equity. When
a foreign operation is disposed of such that control, significant influence or joint control is lost, the
cumulative amount in the translation account related to that foreign operation is reclassified to profit or
loss as part of the profit or loss on disposal.
Revenue recognition, net sales and cost of sales
The Corporation follows a policy of recognizing sales revenue at the time of delivery of the product and
when all of the following have occurred: a sales agreement is in place, title and risk of loss have passed,
pricing is fixed or determinable, and collection is reasonably assured. Grain storage, rental and other
operating income are recorded as earned on an accrual basis. Freight costs and handling charges related
to sales are presented gross in Revenues and Cost of sales.
Other direct and indirect costs associated with inventory and storage, including payroll and benefits of
elevator employees, depreciation of buildings, silos and elevators, utilities and other similar costs are
classified with Cost of sales. Income and expenses are recorded on an accrual basis. Investment
transactions are recognized on the trade date. Dividend revenues are recognized on the ex-dividend date.
Interest and other revenues are recognized as earned. Realized gains and losses from the sale of
investments are calculated using the average cost method. The change over a reporting period of the
difference between the fair value and the cost of portfolio investments is recognized in Finance income
(loss) in the Statement of Comprehensive Income (Loss) as an unrealized increase (decrease) in fair value
of investments.
14
42
CERES GLOBAL AG CORP. ANNUAL REPORT
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Finance income (loss)
Finance income (loss) pertains to revenues, gains and losses related to the investing activity of the
Corporation, and includes:
Interest revenues on interest-bearing securities and cash balances;
Dividend revenues, if any, from portfolio investments;
Realized gains (losses) on sale of portfolio investments;
Realized gains (losses) on currency-hedging transactions;
Realized and unrealized gains (losses) on foreign exchange; and
Unrealized increase (decrease) in fair value of investments.
Depending on the movements of equity and other markets, finance income and losses will vary for each
reporting period.
Finance expenses
Finance expenses represent the aggregate of interest expense on borrowings and the amortization of
financing transaction costs.
Inventories
Inventories represent agricultural grain commodities and are stated at fair value less costs to sell. Fair value
is primarily determined from market prices quoted on public commodity exchanges, adjusted for expected
freight costs to normal delivery points and a price premium or discount to cover local supply and demand
factors as estimated by management. Changes in the fair value less costs to sell inventories of agricultural
grain commodities are recognized in profit or loss as and when they occur, and such changes are included
as a component of cost of sales.
Assets held for sales
Assets are classified as held for sale when all the following criteria are met:
management commits to a plan to sell the asset;
the asset is available for immediate sale in its present condition;
an active program to locate a buyer to complete the plan to sell the asset have been initiated;
the sale of the asset is probable, and is expected to be completed within one year;
the asset is being actively marketed for sale at a price that is reasonable in relation to its current
fair value; and
actions required to complete the plan indicate that it is unlikely that significant changes to the plan
will be made or discontinued.
CERES GLOBAL AG CORP. ANNUAL REPORT
43
15
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation. Cost includes expenditures
that are directly attributable to the acquisition of the asset. Subsequent costs are included in the asset’s
carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the Corporation and the cost can be measured
reliably. The carrying amount of a replaced asset is de-recognized when replaced. Repairs and maintenance
costs are expensed as incurred.
Property, plant and equipment are reviewed for impairment at the end of each reporting period to assess
whether there is any indication of impairment. If any indication of impairment exists, an estimate of the
asset’s recoverable amount is calculated as the higher of fair value less costs of disposal and value in use.
Land is not depreciated. Depreciation on the other assets is provided for on a straight-line basis over the
estimated useful lives of assets as follows:
Buildings, silos/elevators, and improvements
Machinery and equipment
Furniture, fixtures, office equipment, and computer
15 – 31 years
7 – 15 years
7 years
For the purpose of measuring recoverable amounts, assets are grouped at the lowest levels for which there
are separately identifiable cash flows.
Gains and losses on disposals of property, plant and equipment are determined by comparing the disposal
proceeds with the carrying amount of the asset and are included as part of other gains and losses in the
consolidated statements of income.
Repurchase obligations
The Corporation periodically enters into sale/repurchase agreements whereby the Corporation receives
cash in exchange for selling inventory to a commodity trading financial institution and the Corporation
agrees to repurchase the inventory from financial institution at a fixed rate on a future date. The
Corporation accounts for these as product financing arrangements, and accordingly, these transactions are
treated as borrowings and commodity inventory in the Company’s consolidated financial statements and
no sales and purchases are reported in the consolidated financial statements.
44
CERES GLOBAL AG CORP. ANNUAL REPORT
16
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income taxes
Income tax expense comprises current and deferred taxes. Current tax and deferred tax are recognized in
profit or loss, except to the extent that it relates to a business combination, or to items recognized directly
in equity or in other comprehensive income. Current tax is the expected tax payable or receivable on the
taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date,
and any adjustment to tax payable in respect of previous years.
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not
recognized for the following temporary differences: the initial recognition of assets or liabilities in a
transaction that is not a business combination and that affects neither accounting nor taxable profit or loss,
and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is
probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized for
taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at
the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws
that have been enacted or substantively enacted as at the reporting date. Deferred tax assets and liabilities
are offset to the extent that they relate to income taxes levied on the same taxable entity by the same
taxation authority.
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences,
to the extent that it is probable that future taxable income will be available against which they can be
utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realized; such reductions are reversed when the
probability of future taxable profits improves.
Loss per Share
Loss per Share (“EPS”) is reported for basic and diluted net income (loss). Basic EPS is calculated by
dividing net income (loss) for the reporting period by the weighted-average number of common shares
outstanding during the reporting period. Diluted EPS is calculated by adjusting net income (loss) and the
weighted-average number of common shares outstanding for the effects, if any, of all potentially dilutive
common shares, resulting from the exercise of Warrants or the redemption of Deferred Share Units
outstanding as at the end of a reporting period. The effect of the potential issuance of common shares
related to the redemption of Deferred Share Units on diluted EPS has not been determined, as it is anti-
dilutive in a period of loss.
Share-based payments
Deferred Share Unit
The Corporation has established a Directors’ Deferred Share Unit Plan (the “DSU Plan”), which became
effective on March 10, 2014 and is an equity-settled share-based payment plan. Under the DSU Plan, a
director who is not an employee of the Corporation or any affiliate and who is a non-executive Chair of
the Board is an Eligible Director. Any Eligible Director may elect to receive some or all the Annual Cash
Remuneration amount (as defined in the DSU Plan) for that Director in the form of Deferred Share Units
(“DSUs”). DSUs are settled by the issuance of common shares on the Entitlement Date (as defined under
the DSU Plan), which is a date after the end of a director’s term of service with the Board.
CERES GLOBAL AG CORP. ANNUAL REPORT
45
17
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Share-based payments (continued)
Deferred Share Unit (continued)
As at the dates on which DSUs are issued under the Plan, the Corporation recognizes as an expense the
portion of the Directors’ fees issued in the form of DSUs issued to the Director, which are issued at fair
value, and the Corporation increases shareholders’ equity by an equal amount. The Corporation revalues
DSUs as at each reporting period-end, based on the volume-weighted average trading price per common
share of the Corporation on the Toronto Stock Exchange during the immediately preceding five (5) trading
days. Revaluation adjustments are recognized as an increase or decrease in the expense for Directors’ fees
during the reporting period, with a corresponding increase or decrease in shareholders’ equity.
Stock Options
Stock options are equity-settled share-based payment transactions. The Corporation follows the fair value
method to measure stock option awards it grants to certain officers, key employees and consultants of the
Corporation and its subsidiaries. The fair value of stock options on the date the options are granted is
determined by the Black Scholes option pricing model with assumptions for risk-free interest rate, dividend
yield, volatility of the expected market price of the Corporation’s common shares and an expected life of
the options. The number of stock option awards expected to vest are estimated using a forfeiture rate based
on historical experience and future expectations, as applicable. Compensation is amortized to earnings
over the vesting period of the related option. The Corporation uses graded or accelerated amortization,
which specifies that each vesting tranche must be accounted for as a separate arrangement with a unique
fair value measurement. Each vesting tranche is subsequently amortized separately and in parallel from
the grant date.
Stock Appreciation Rights
Stock Appreciation Rights (“SARs”) may be granted to officers, certain employees and consultants of the
Corporation on such terms and conditions determined by the Board of Directors (the “Board”). Stand
Alone SARs are cash-settled share-based payment transactions and are measured at the fair value of the
liability as at the date the Stand-Alone SARs are granted. At the end of each reporting period, the
Corporation re-measures the fair value of the liability for such Stand-Alone SARs, and any changes in fair
value of that liability is recognized in profit or loss for the period. Tandem SARs are granted with stock
options. Tandem SARs shall be settled by the payment or the delivery of cash or common shares, as may
be determined by the Board. Any portion of Tandem SARs to be settled for cash shall be measured using
the measurement standards described for Stand-Alone SARs. The portion, if any, of the Tandem SARs to
be settled by the issuance of common shares shall be measured using the measurement standards that apply
to stock options awards, as described in the preceding paragraph.
Option-pricing models require the use of highly subjective estimates and assumptions including the
expected share price volatility. Changes in the underlying assumptions can materially affect fair value
estimates. Therefore, existing models do not necessarily provide reliable measurement of the fair value of
the Corporation’s stock options.
46
CERES GLOBAL AG CORP. ANNUAL REPORT
18
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Future changes in accounting standards
On May 28, 2014, the International Accounting Standards Board issued IFRS 15 Revenue from Contracts
with Customers. The new standard is effective for annual periods beginning on or after January 1, 2017.
The Corporation intends to adopt IFRS 15 in its financial statements for the annual period beginning on
April 1, 2017. The Corporation is evaluating the effects related to the future adoption of IFRS 15. The
Corporation does not currently expect to early adopt this new standard.
On December 18, 2014, the IASB issued amendments to IAS 1 Presentation of Financial Statements as
part of its major initiative to improve presentation and disclosure in financial reports. The amendments
are effective for annual periods beginning on or after January 1, 2016. The Corporation intends to adopt
these amendments in its financial statements for the annual period beginning on April 1, 2016. The extent
of the impact of adoption of the amendments has not yet been determined.
Effective for annual reporting periods beginning on or after January 1, 2018, the current standard for
financial instruments (IAS 39 Financial Instruments – Recognition and Measurement) will be replaced
by IFRS 9 Financial Instruments. The new standard will replace the current multiple classification and
measurement models for financial assets and liabilities with a single model having only two classification
categories: amortized cost and fair value. The Corporation is evaluating the effects related to the future
adoption of IFRS 9. The Corporation does not currently expect to early adopt this new standard.
4.
SUMMARY OF SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES, AND
ASSUMPTIONS
The timely preparation of financial statements requires management to make judgments, estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the
disclosure of contingent assets and liabilities. Actual results may differ from estimates. Estimate and
underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized
prospectively. The following summarizes the accounting judgments, estimates and assumptions
management considers significant:
Valuation of investments
Portfolio investments are held for trading, are measured and reported at fair value, and may include
securities not traded in an active market. The fair value of such securities is determined using valuation
techniques. Depending on various circumstances, the Corporation may use several methods and makes
assumptions based on market conditions existing at each reporting date. Valuation techniques may
include, without limitation, the use of comparable recent arm’s length transactions, discounted cash flow
analysis, option-pricing models and other valuation techniques commonly used by market participants.
Inventories and Commodity Derivatives
To reduce price risk caused by market fluctuations, the Corporation generally follows a policy of using
exchange traded futures and options contracts to minimize its net position of merchandisable agricultural
commodity inventories and forward cash purchase and sales contracts. The Corporation will also use
exchange traded futures and options contracts as components of merchandising strategies designed to
enhance margins. The results of these strategies can be significantly impacted by factors such as the
CERES GLOBAL AG CORP. ANNUAL REPORT
47
19
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
4.
SUMMARY OF SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES, AND
ASSUMPTIONS (CONTINUED)
Inventories and Commodity Derivatives (continued)
volatility of the relationship between the value of exchange traded commodities futures contracts and the
cash prices of the underlying commodities, and volatility of freight markets.
Derivative instruments, including futures contracts, forward commitments, options and other similar types
of contracts and commitments based on commodity derivatives, are carried at their fair value. The
estimated fair value of the commodity derivative contracts that require the receipt or posting of cash
collateral is recorded on a net basis (offset against cash collateral posted or received, also known as margin
deposits) within commodity derivative assets or liabilities. Management determines fair value based on
exchange quoted prices and in the case of its forward purchase and sale contracts, estimated fair value is
adjusted for differences in local markets. While the Corporation considers its commodity contracts to be
effective economic hedges, the Corporation does not designate or account for its commodity contracts as
hedges. Realized and unrealized gains and losses in the value of commodity contracts and grain
inventories are recognized in earnings immediately in cost of sales in the accompanying Statement of
Comprehensive Loss. Unrealized gains and losses on these derivative contracts are included in due from
broker, derivative asset and liabilities on the accompanying consolidated balance sheets.
Estimates and assumptions are required in determination of fair values of commodity inventories,
particularly for those commodities where exchange-traded prices are not available. For these inventories,
management assesses the available quote market prices and applied judgment in determining the effect
local market conditions on those.
5.
INVENTORIES
As at March 31, 2015 and 2014, the Corporation held $147,940,077 and $109,684,490 of inventories at
fair value less costs to sell, respectively. $3,635,976 of inventories were held at lower of cost or market at
March 31, 2014 compared nil at March 31, 2015.
For the years ended March 31, 2015 and 2014, inventories recognized as an expense through cost of sales
totaled $191,026,575 and $217,679,277, respectively. Furthermore, as at March 31, 2015 and 2014, the
carrying amount of inventories pledged as security against the Corporation’s repurchase obligations
totaled $18,692,777 and $14,804,027, respectively.
6.
DUE FROM (TO) BROKERS
Due from Brokers is composed of commodity futures and options contracts and margin deposits in the
form of cash and open trade equity maintained by a broker in connection with such contracts. Amounts
due from Brokers are offset by amounts due to the same Brokers, under the terms and conditions of
enforceable master netting arrangements in effect with all brokers, through which the Company executes
its transactions and for which it intends either to settle on a net basis, or to realize the asset and settle the
liability simultaneously.
48
CERES GLOBAL AG CORP. ANNUAL REPORT
20
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
6.
DUE FROM (TO) BROKERS (continued)
As at March 31, 2015 and 2014, the amounts due from Brokers represent the following:
Due from Brokers
Margin deposits
Unrealized gains on future contracts and options,
at fair value
Due to Brokers
Unrealized losses on future contracts and options,
at fair value
7.
ASSETS HELD FOR SALE
2015
2014
$
6,525,747
$
4,725,570
2,673,417
9,199,164
55,242
4,780,812
$
(557,829)
8,641,335
(160,805)
4,620,007
$
During the quarter ended September 30, 2014, the Company discontinued its plan to sell its Savage,
Minnesota, facility after a decision was made in the quarter then ended to retain and use the facility to
complement future strategic initiatives. Accordingly, in the quarter then ended, the Company reclassified
the assets from assets held for sale to property, plant and equipment. During the quarter in which it was
reclassified, the Corporation recognized $235,928 of depreciation expense, representing what would have
been recognized for the year ended March 31, 2015 had the asset been classified as property, plant and
equipment.
On May 23, 2014, the Corporation closed the sale of the Manitowoc grain storage facility, for gross
proceeds of $6,759,240. At March 31, 2014, the net book value relating to Manitowoc had been written
down to an amount equal to the gross proceeds from the sale. As a result, there was no effect on the
Statement of Comprehensive Loss for the three-month period ended June 30, 2014. Pursuant to the
purchase and sales agreement, Riverland Ag is leasing back from the purchaser one million bushels of
storage capacity at the Manitowoc grain facility for a three-year term.
As at March 31, 2015, the Company has no assets held for sale; however, as at March 31, 2014 the major
classes of assets held for sale were as follows:
March 31, 2014
Manitowoc
Savage
Totals
Land
Buildings and silos / elevators
Machinery and equipment
Furniture and fixtures, computers, office equipment and
other assets
$
118,782
6,830,873
504,838
$
1,093,308
9,973,350
261,206
$
1,212,090
16,804,223
766,044
200,556
51,490
252,046
Impairment loss on reclassification as assets held for sale
Foreign currency translation adjustment
7,655,049
(763,201)
(37,747)
6,854,101
$
11,379,354
-
-
$
11,379,354
$
19,034,403
(763,201)
(37,747)
18,233,455
21
CERES GLOBAL AG CORP. ANNUAL REPORT
49
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
8.
INVESTMENT IN ASSOCIATES
Canterra Seeds Holdings, Ltd., common shares
Stewart Southern Railway Inc., common shares
2015
2014
$
$
1,854,207
3,765,205
$
1,165,473
3,460,194
5,619,412
$
4,625,667
(a)
Investment in Canterra Seeds Holdings, Ltd. (“Canterra”)
Ceres holds a 25% equity interest in Canterra, a Canadian company. Canterra purchases, produces, and
distributes seed varieties and related technologies to its customers throughout Western Canada and the
Great Northern Plains and Pacific North West of the United States. Major operating decisions of Canterra
are made by its Board of Directors and Ceres has a 25% voting right on Canterra’s Board of Directors.
Due to these factors, Ceres does not control Canterra, and accounts for its investment in Canterra using
the equity method.
It is the Corporation’s policy to record its portion of changes in Canterra’s equity on a quarterly lag.
Therefore, for year ended March 31, 2015, the Corporation has recorded its portion of Canterra’s change
in equity for the twelve months ended December 31, 2014.
The following table presents summarized financial information for Canterra (in thousands of CAD):
Revenues
Income from continuing operations
Net income
Current assets
Non-current assets
Current liabilities
2015
2014
$
$
$
36,446
2,792
2,840
$
$
$
19,119
764
15,577
$
$
$
26,273
2,117
2,120
$
$
$
22,730
847
22,285
For the year-ended March 31, 2015, the Corporation’s consolidated Statement of Comprehensive Income
(Loss) includes the Corporation’s share of net income of Canterra for $688,734 (2014: net loss of
$356,706).
Included below is a reconciliation of the Corporation’s 25% portion in Canterra’s equity to the carrying
value reported on the Consolidated Balance Sheets as at March 31, 2015 and 2014:
Investee's equity as at March 31
$
4,306,429
$
1,292,291
Corporation's 25% portion of Canterra's equity
Identifiable intangible asset, net of accumulated amortization
$
$
1,076,607
777,600
$
$
323,073
842,400
Carrying value
$
1,854,207
$
1,165,473
2015
2014
50
CERES GLOBAL AG CORP. ANNUAL REPORT
22
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
8.
INVESTMENT IN ASSOCIATES (continued)
(b)
Investment in Stewart Southern Railway Inc. (“SSR”)
Ceres holds a 25% equity interest in SSR, a Canadian company. Ceres also holds rights to a 25% voting
position on SSR’s Board of Directors. SSR operates a 132-kilometre (82-mile) short-line railway in
southeastern Saskatchewan. Major operating decisions of SSR are made by its Board of Directors and
Ceres does not have a majority of the board seats. Due to these factors, Ceres does not control SSR, and
accounts for its investment in SSR using the equity method.
The following table presents summarized financial information for SSR (in thousands of CAD):
Revenues
Income from continuing operations
Net income
Current assets
Non-current assets
Current liabilities
Non-current liabilities
2015
2014
$
$
$
7,919
2,716
1,970
$
$
$
$
4,789
11,792
2,079
33
$
$
$
10,532
3,311
3,311
$
$
$
$
4,922
10,603
2,255
20
For the year-ended March 31, 2015, the Corporation’s consolidated Statement of Comprehensive Income
included the Corporation’s share in the change of SSR’s net income of $492,511 (2014: $820,406). During
the year-ended March 31, 2015, the Corporation received a dividend from SSR for $187,500 (2014:
$125,000).
Included below is a reconciliation of the Corporation’s 25% portion in SSR’s equity to the carrying value
reported on the Consolidated Balance Sheets as at March 31, 2015 and 2014:
Investee's equity as at March 31
Corporation's 25% portion of SSR equity
Goodwill
Carrying value
2015
2014
$
14,469,482
$
13,249,439
$
$
3,617,370
147,835
$
$
3,312,359
147,835
$
3,765,205
$
3,460,194
CERES GLOBAL AG CORP. ANNUAL REPORT
51
23
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
9.
INVESTMENT PROPERTY
During the quarter ended September 30, 2014, management determined that the assets at the Northgate
Commodities Logistics Centre (“NCLC” or “Northgate”) no longer met the criteria to be classified as
Investment Property under IAS 40 – Investment Property based on management’s decision to solely
develop and operate NCLC as owner and operator of the facility. Based on this decision, management had
determined that the appropriate classification for the assets at the NCLC would be Property, plant and
equipment, as guided by IAS 16 – Property, Plant and Equipment. The reclassification to Property, plant
and equipment had no retroactive implications, as the accounting policy elected to account for previously
classified Investment Property was the cost model, which is consistent with IAS 16.
For the years ended March 31, 2015 and 2014, changes to the investment property are as follows:
Cost, as at beginning of period
Investment property additions
Development and other construction costs capitalized
Foreign currency translation adjustments
Amount reclassified to Property, plant and equipment
Cost, as at end of period
$
2015
14,803,988
-
5,061,659
(9,388)
19,856,259
(19,856,259)
$ -
$
2014
4,975,921
12,397
9,794,316
21,354
14,803,988
-
$ 14,803,988
52
CERES GLOBAL AG CORP. ANNUAL REPORT
24
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
10. PROPERTY, PLANT AND EQUIPMENT
March 31, 2015
Cost
Balances, April 1, 2014
Asset additions
Reclassification of investment property
Reclassification of assets held for sale
Foreign currency translation adjustments
Balances, March 31, 2015
Accumulated depreciation
Balances, April 1, 2014
Depreciation charged to operations
Reclassification of assets held for sale
Foreign currency translation adjustments
Balances, March 31, 2015
Land
Buildings and
silos/elevators
Machinery &
equipment
Office equipment &
other assets
Totals
5,045,257
2,593,946
19,856,259
1,103,297
871,233
29,469,992
46,732,781
5,091,401
-
11,732,753
7,605,711
71,162,646
3,621,399
1,951,816
-
342,626
545,123
6,460,964
-
-
-
-
-
(5,962,716)
(2,234,761)
(1,674,416)
209,039
(9,662,854)
(689,203)
(351,219)
(79,033)
(100,072)
(1,219,527)
2,859,009
23,133,860
-
90,480
(184,527)
25,898,822
(919,444)
(235,743)
(32,389)
(472,388)
(1,659,964)
58,258,446
32,771,023
19,856,259
13,269,156
8,837,540
132,992,424
(7,571,363)
(2,821,723)
(1,785,838)
(363,421)
(12,542,345)
Carrying amount, March 31, 2015
$
29,469,992
$
61,499,792
$
5,241,437
$
24,238,858
$
120,450,079
March 31, 2014
Cost
Balances, April 1, 2013
Asset additions
Disposals
Reclassification of assets held for sale
Foreign currency translation adjustments
Balances, March 31, 2014
Accumulated depreciation
Balances, April 1, 2013
Depreciation charged to operations
Disposals
Reclassification of assets held for sale
Foreign currency translation adjustments
Balances, March 31, 2014
$
5,810,194
-
(61,622)
(1,212,090)
508,775
5,045,257
$
61,607,549
562,031
(1,478,177)
(19,251,988)
5,293,366
46,732,781
$
3,835,820
524,419
(119,005)
(951,023)
331,188
3,621,399
$
1,728,162
1,422,893
(56,909)
(395,623)
160,486
2,859,009
$
72,981,725
2,509,343
(1,715,713)
(21,810,724)
6,293,815
58,258,446
-
-
-
-
-
-
(5,727,015)
(2,364,350)
276,183
2,447,765
(595,299)
(5,962,716)
(532,506)
(336,452)
50,940
184,979
(56,164)
(689,203)
(714,222)
(298,937)
19,091
143,576
(68,952)
(919,444)
(6,973,743)
(2,999,739)
346,214
2,776,320
(720,415)
(7,571,363)
Carrying amount, March 31, 2014
$
5,045,257
$
40,770,065
$
2,932,196
$
1,939,565
$
50,687,083
Asset additions during the year ended March 31, 2015 accrued and not yet paid as at the reporting date
totaled $8,326,721 (2014: nil).
In addition, the Corporation has assets under construction of $24,016,033 (2014: $1,156,804) consisting
primarily of the development of Northgate. As at March 31, 2015, property, plant and equipment relating
to NCLC totaled $49,958,486 with $24,026,521 being land and land improvements; $2,029,377 of
buildings and elevators in-service; $1,548,887 of rail track, machinery and equipment in-service; and
CERES GLOBAL AG CORP. ANNUAL REPORT
53
25
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
10. PROPERTY, PLANT AND EQUIPMENT (continued)
$302,224 of other assets. Accumulated depreciation expenses on the in-service property, plant and
equipment totals $30,573, all of which was incurred and recognized in the quarter-ending March 31, 2015.
For the year ended March 31, 2015, capitalized development and other construction costs include
borrowing costs of $1,576,316 (year ended March 31, 2014: $nil). Under IAS 23 – Borrowing Costs,
Ceres is required to capitalize all costs that are directly attributable to the construction of a qualifying
asset. Borrowing costs are directly related to the term loan, which is used to finance the development and
construction related to the assets in NCLC.
During the year ended March 31, 2015, the Corporation entered into contract with a Canadian railroad
contractor to furnish and install the rail system at the NCLC, which was completed in the quarter ended
March 31, 2015. The total contract price was $5,325,527 and as at March 31, 2015 $4,937,431 had been
incurred.
During the year ended March 31, 2015, Ceres entered into a contract with a Canadian contractor to design
and build an inland grain terminal at the NCLC. The design and build process commenced in early
September 2014 with substantial completion of the project expected to be in March 2016. The total
contract price is $39,955,000, and as at March 31, 2015, $14,571,230 has been incurred. The remaining
commitment is expected to be met over the term of the contract through March 2016.
11. BANK INDEBTEDNESS
On December 30, 2014, the Corporation amended and extended its syndicated uncommitted
US$120,000,000, 364-day revolving credit agreement. The short-term obligation is guaranteed by Ceres
Canada Holding Corp., Ceres U.S. Holding Corp., Riverland Ag Corp., and Riverland Canada. The credit
agreement is subject to borrowing base limitations, and the revolver is secured by predominantly all assets
of the Corporation, including cash but excluding other property, plant and equipment.
Borrowings bear interest at 2.875% plus overnight LIBOR. Interest is calculated and paid on a monthly
basis. Amounts under the credit agreement that remain undrawn are not subject to a commitment. The
credit facility has certain covenants pertaining to the accounts of the Corporation, and as at March 31,
2015 and 2014, the Corporation was in compliance with all debt covenants.
Prior to this agreement, Riverland had a revolving credit agreement that was substantially identical as it
was syndicated and for US$120,000,000 with borrowing bearing interest at 2.875% plus overnight
LIBOR. As at March 31, 2015 and 2014, the Corporation had $132,741,000 and $60,802,500 in
availability, respectively, on its revolving line of credit.
54
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26
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
11. BANK INDEBTEDNESS (continued)
As at March 31, 2015 and 2014, the carrying amount of bank indebtedness is summarized as follows:
Revolving line of credit
Unamortized financing costs
12. TERM LOAN
2015
2014
$
18,963,000
(226,600)
$
71,857,500
(110,550)
$
18,736,400
$
71,746,950
On June 27, 2014, Ceres entered into a senior secured term loan facility agreement (the “Loan”) for
US$20,000,000 to finance further development and early stage construction of Northgate. This Loan was
for an initial term of six months maturing on December 29, 2014, with an ability to extend the term of the
facility for a further six months at the request of Ceres and subject to the approval of the lender. For the
first six months this loan bore an interest at a rate of 7.25%.
The Corporation paid an arrangement fee of 2.0% for the Loan, plus legal fees and other related borrowing
costs. As reported in Note 10 (Property, Plant and Equipment) under IAS 23 – Borrowing Costs, Ceres
has capitalized all borrowing costs directly attributable to the construction and development of the assets
at Northgate.
In conjunction with amending and extending the syndicated uncommitted credit agreement described
above, on December 30, 2014, the Corporation entered into a senior secured term loan facility agreement
(the “New Loan”) for US$25,000,000. This New Loan is for a term of 5 years with an interest rate of one
month LIBOR plus 5.25%. This New Loan extinguished and replaced the previous loan originated on
June 27, 2014. The first principal payment on the New Loan is payable on December 29, 2016 for the
amount of US$3,000,000 with the following principal payments of US$5,000,000 payable on each of
December 29, 2017, and December 28, 2018, and US$12,000,000 payable on December 27, 2019.
Both the New Loan and the revolving credit agreement disclosed above, are secured by the following: (i)
a security interest in substantially all of the personal property of Ceres and its guarantors; (ii) a charge and
mortgage over substantially all of the real property and elevator assets held by Riverland Ag and Riverland
Canada, and its guarantors; and (iii) a pledge of substantially all of the equity interests and investment
property held by Ceres Canada Holding Corp. and each guarantor.
In connection with the New Loan, which has an effective interest rate of 6.21% + one month LIBOR, the
Corporation paid transaction costs relating to the loan closure in the amount of $1,278,902, which includes
legal fees and other related borrowing costs. Transaction costs directly attributable to the issuance of the
New Loan are recognized as a reduction in the balance of the New Loan, and are amortized over the term
of the loan using the effective interest rate method.
CERES GLOBAL AG CORP. ANNUAL REPORT
55
27
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
12. TERM LOAN (continued)
2015
USD
CAD
2014
USD
CAD
Long-term debt
Unamortized financing costs
$
$
25,000,000
(967,956)
24,032,044
$
$
$
31,605,000
(1,223,690)
30,381,310
-
$
-
$
-
-
$
-
$
-
13. REPURCHASE OBLIGATIONS
As at March 31, 2015, the Corporation had two open repurchase commitment under its product financing
arrangement to repurchase 2,500,000 bushels of certain grains. Under the product financing arrangement,
the Corporation sold grain under contract and simultaneously entered into contracts to repurchase the grain
during the first quarter of the fiscal year ending March 31, 2016. Since the Corporation is obligated to
repurchase these commodities, it has not recognized these transactions as sales. As at March 31, 2015,
the Corporation continues to recognize the inventory owned by Corporation in this regard on its
consolidated balance sheet and has recorded a liability of $18,635,451 (2014: $15,941,080), plus accrued
interest payable. As at March 31, 2015, the fixed interest rate on the open repurchase commitment is at
3.06% (2014: 3.08%).
14. FINANCIAL INSTRUMENTS
(a)
Fair value of financial instruments
The carrying value of financial instruments measured at amortized cost, classified as current assets and
current liabilities, such as cash equivalents, trade receivables, and accounts payable and accrued liabilities,
approximate fair value due to the short-term maturity of the instruments. The carrying amount of the
Corporation’s long-term debt is an approximate fair value as it has an interest rate reflective of current
market conditions at March 31, 2015.
Derivative assets and Derivative liabilities, which are held for trading and valued at fair value through
profit and loss, are as follows as of March 31:
Derivative assets
Unrealized gains on open cash contracts
Derivative liabilities
Unrealized losses on open cash contracts
2015
2014
$
9,472,984
$
2,965,891
$
(2,607,280)
$
1,752,256
56
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28
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
14. FINANCIAL INSTRUMENTS (continued)
(b)
Finance loss
For the years ended March 31, 2015 and 2014, finance (loss) income includes the following:
2015
2014
Interest and other revenues
Realized loss on sale of investments
Realized gain (loss) on currency-hedging transactions
Realized and unrealized gain (loss) on foreign exchange
Unrealized increase (decrease) in fair value of investments
$
-
-
584,647
(773,610)
-
(188,963)
$
(c) Finance expenses
For the years ended March 31, 2015 and 2014, finance expenses include the following:
$
4,059
(2,974,760)
(468,891)
6,857
513,896
(2,918,839)
$
Interest on revolving line of credit
Interest on repurchase obligation
Long-term debt
Amortization of financing costs paid
Interest income and other interest expense
(d) Portfolio investments
2015
2014
$
(1,761,120)
(137,549)
(402,421)
(742,445)
137,040
$
(4,028,687)
(158,057)
-
(530,988)
181
$
(2,906,495)
$
(4,717,551)
Portfolio investments are classified as held for trading, and consist of equity securities of private
companies.
Total fair value
$
848,163
$
848,163
Fair value for securities in private companies has been determined using primarily the market approach
for recent and comparable transactions, adjusted by management to consider factors such as liquidity risk.
2015
2014
CERES GLOBAL AG CORP. ANNUAL REPORT
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29
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
14. FINANCIAL INSTRUMENTS (continued)
(e) Management of financial instruments risks
In the normal course of business, the Corporation is exposed to various financial instruments risks,
including market risk (consisting of price risk, commodity risk, interest rate risk and currency risk), credit
risk, custodian and prime brokerage risks, and liquidity risk. The Corporation’s overall risk management
program seeks to minimize potentially adverse effects of those risks on the Corporation’s financial
performance. The Corporation may use derivative financial instruments to mitigate certain risk exposures.
The Corporation may invest in non-public and public issuers and assets.
Price risk
As at March 31, 2015 and 2014, the Corporation’s market risk pertaining to portfolio investments was
potentially affected by changes in actual market prices. As at March 31, 2015 and 2014, the Corporation’s
portfolio investments are solely in private companies. Therefore, market factors affecting the value of the
portfolio investments are primarily changes in fair value of the investments and the Corporation’s ability
to liquidate the investments. As at March 31, 2015 and 2014, currency risk concerning the portfolio
investments is no longer a significant risk issue, as the value of portfolio investments denominated in a
currency other than Canadian dollars is not material.
Notwithstanding the foregoing, the following is a summary of the effect on the results of operations of the
Corporation, if the fair value of each of the portfolio investments as at March 31, 2015 and 2014 had
increased or decreased by 10%, with all other variables remaining constant:
Change in fair value of investments
2015
2014
Increase
(decrease)
in net income
Increase
(decrease)
in earnings
per share
Increase
(decrease)
in net income
Increase
(decrease)
in earnings
per share
10% increase in fair value
10% decrease in fair value
$
$
84,816
(84,816)
$
$
0.00
(0.00)
$
$
84,816
(84,816)
$
$
0.00
(0.00)
58
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CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
14. FINANCIAL INSTRUMENTS (continued)
(e) Management of financial instruments risks (continued)
Commodity risk
The following is a summary of the effect on the results of operations of the Corporation, if the fair value
of each of the open cash contracts as at March 31, 2015 and 2014 had increased or decreased by 5%, with
all other variables remaining constant:
Change in bid/ask prices of commodities
2015
2014
Increase
(decrease)
in net income
Increase
(decrease)
in earnings
per share
Increase
(decrease)
in net income
Increase
(decrease)
in earnings
per share
5% increase in bid-ask prices
5% decrease in bid-ask prices
$
$
193,030
(193,030)
$
$
0.01
(0.01)
$
$
21,599
(21,599)
$
$
0.00
(0.00)
Interest rate risk
As at March 31, 2015 and 2014, the Corporation has no long or short portfolio positions in any interest-
bearing investment securities.
As at March 31, 2015 and 2014, except for cash on deposit, the amounts of which vary from time-to-time
and on which the Corporation earns interest at nominal variable interest rates, the Corporation had no
other variable rate interest-bearing securities. As at those dates, a notional increase or decrease in interest
rates applicable to cash on deposit would not have materially affected interest revenue and the results of
operations. Therefore, as at March 31, 2015 and 2014, the Corporation’s assets are not directly exposed
to any significant degree to cash flow interest rate risk due to changes in prevailing market interest rates.
CERES GLOBAL AG CORP. ANNUAL REPORT
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31
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
14. FINANCIAL INSTRUMENTS (continued)
(e) Management of financial instruments risks (continued)
Interest rate risk
As disclosed in Note 11 (Bank Indebtedness) and Note 12 (Term Loan), as at March 31, 2015 and 2014,
the Corporation’s revolving credit facility bears interest at an annual rate of 2.875% plus overnight LIBOR
along with its term loan bearing an interest 5.25% plus one-month LIBOR. As at March 31, 2015 and
2014, management has determined the effect on the future results of operations of the Corporation if the
variable interest rate component applicable on those dates on the: (1) revolving credit facility; and (2)
term loan were to both increase by 25 basis points (“25 bps”) as at those dates, respectively. The potential
effects on the future result of operations would be as follows:
Change in interest rate on revolving facility
2015
Increase
in net
Increase
in loss
loss per share
2014
Increase
in net
loss
Increase
in loss
per share
25 bps increase in annual interest rate
$
(54,611)
$
(0.00)
$
(179,644)
$
(0.01)
Change in interest rate on term loan
25 bps increase in annual interest rate
$
(149,384)
$
(0.01)
$
-
$
-
Ceres is not subject to cash flow interest rate risk concerning the repurchase obligations, as these liabilities
bear interest at fixed rates.
Credit risk
Credit risk is the risk a counterparty would be unable to pay for amounts due to the Corporation in
accordance with the terms and conditions of the debt instruments. As at March 31, 2015 and 2014, the
Corporation is subject to credit risk concerning cash, amounts due from brokers, trade accounts receivable,
and to the extent, open cash contracts for grain commodities that have given rise to unrealized gains. The
maximum exposure to credit risk on those assets is limited to the carrying value of those assets. The
Corporation uses various grain contracts as part of its overall grain merchandising strategies. Performance
on these contracts is dependent on delivery of the grain or a customer buy-out. There is counter-party risk
associated with non-performance, which may have the potential of creating losses. Management has
assessed the counter-party risk and believes that insignificant losses, if any, would result from non-
performance.
The Corporation regularly evaluates its credit risk concerning its trade accounts receivable to the extent
that such receivables may be concentrated in certain industries or with significant customers. The
Corporation minimizes this risk by having a diverse customer base and established credit policies. The
aging of the Corporation’s trade accounts receivable is substantially current. Based on its review and
assessment of its trade accounts receivable, management has determined that as at March 31, 2015 and
2014, no allowance for doubtful accounts is warranted.
60
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32
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
14. FINANCIAL INSTRUMENTS (continued)
(e) Management of financial instruments risks (continued)
Custody and prime brokerage risk
There are risks involved with dealing with a custodian or broker who settle trades. In certain
circumstances, the securities or other assets deposited with the custodian or broker may be exposed to
credit risk with respect to those parties. In addition, there may be practical or timing problems associated
with enforcing the Corporation’s rights to its assets in the case of the insolvency of any such party.
Notwithstanding the foregoing, management has evaluated the risk of loss related to the custodian or
brokers and has determined this risk to be insignificant.
Liquidity risk
As at March 31, 2015 and 2014, the following are the contractual maturities of financial liabilities,
excluding interest payments:
2015
Carrying
amount
Contractual
cash flows
1 year
2 years
3 to
5 years
More than
5 years
Bank indebtedness
Accounts payable and accrued liabilities
Repurchase obligations
Derivatives
Provision for future payments to Front Street Capital
Warrants
Long-term debt (Note 12)
$
18,736,400
$
18,963,000
$
18,963,000
$
-
$
-
$
-
17,388,202
18,635,451
2,607,280
344,000
1,719,000
17,388,202
18,635,451
2,607,280
344,000
1,719,000
17,388,202
18,635,451
2,607,280
344,000
1,719,000
-
-
-
-
-
-
-
-
-
-
30,381,310
31,605,000
-
3,792,600
27,812,400
-
-
-
-
-
-
2014
Carrying
amount
Contractual
cash flows
1 year
2 years
5 years
5 years
3 to
More than
Bank indebtedness
$
71,746,950
$
71,857,500
$
71,857,500
$
-
$
-
$
-
Accounts payable and accrued liabilities
7,567,634
7,567,634
7,567,634
Repurchase obligations
Derivatives
15,941,080
15,941,080
15,941,080
1,752,256
1,752,256
1,752,256
Provision for future payments to Front Street Capital
970,000
970,000
970,000
-
-
-
-
-
-
-
-
-
-
-
-
Future expected operational cash flows and sufficient assets are available to fund the settlement of these
obligations in the normal course of business. In addition, the following factors allow for the substantial
mitigation of liquidity risk: the prompt settlement of amounts due from brokers, the active management
of trade accounts receivable and the lack of concentration risk related thereto. The Corporation’s cash
flow management activities and the continued likelihood of its operations further minimize liquidity risk.
CERES GLOBAL AG CORP. ANNUAL REPORT
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33
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
14. FINANCIAL INSTRUMENTS (continued)
(e) Management of financial instruments risks (continued)
Currency risk
In the normal course of business, Ceres may hold assets or have liabilities denominated in currencies other
than Canadian dollars. Therefore, Ceres is exposed to currency risk, as the value of any assets or liabilities
denominated in currencies other than CAD will vary due to changes in foreign exchange rates.
As at March 31, 2015 and 2014, the following is a summary, at fair value, of Ceres’ exposure to significant
currency risks:
2015
2014
Net futures
contracts (to
buy foreign
currency)
Net futures
contracts (to
buy foreign
currency)
Net asset
exposure
Net asset
exposure*
$
840,344
$
-
$
5,175,147
$
-
Currency
U.S. dollars
*Exposure excludes the effect of future foreign exchange contracts
As at March 31, 2015 and 2014, the Corporation had no commitment to any futures foreign exchange
contracts.
The following is a summary of the effect on Ceres’ results of operations if the CAD had become 5%
stronger or weaker against the USD as at March 31, 2015 and 2014, with all other variables remaining
constant, related to assets and liabilities denominated in foreign currencies:
Change in foreign exchange rate
2015
2014
Increase
(decrease)
in net income
Increase
(decrease)
in earnings
per share
Increase
(decrease)
in net income
Increase
(decrease)
in earnings
per share
C$ 5% stronger
C$ 5% weaker
$
$
(50,589)
55,914
$
$
(0.00)
0.00
$
$
(272,537)
301,225
$
$
(0.02)
0.02
Currency risk related to the accounts of Ceres’ foreign subsidiary relates primarily to the translation of its
accounts into CAD for the purposes of the consolidated financial reporting of Ceres. Adjustments related
to the translation of foreign currency accounts of a foreign operation are included as other comprehensive
income and have no effect on the determination of net income for the reporting period.
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CERES GLOBAL AG CORP. ANNUAL REPORT
34
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
14. FINANCIAL INSTRUMENTS (continued)
(f) Fair value measurements
The following is a summary of the classification of assets and liabilities carried at fair value, using the
hierarchy of inputs prescribed by IFRS 13 Fair Value Measurement:
March 31, 2015
Level 1
Level 2
Level 3
Total
$ - $ - $ 848,163 $ 848,163
2,673,417
Portfolio investments
Due from Broker, unrealized
gains on futures and
options (Note 6)
Derivative assets (Note 14(a)) -
Due to Broker, unrealized
losses on futures and
options (Note 6)
Derivative liabilities (Note 14(a)) -
Warrants (Note 15(c))
-
Provision for future payments
to Front Street Capital
-
9,472,984
- 2,673,417
- 9,472,984
(557,829) -
(2,607,280)
(1,719,000)
- (557,829)
- (2,607,280)
- (1,719,000)
-
- (344,000)
$ 2,115,588 $ 4,803,704 $ 848,163 $ 7,766,455
(344,000)
March 31, 2014
Level 1
Level 2
Level 3
Total
$ - $ - $ 848,163 $ 848,163
Portfolio investments
Due from Broker, unrealized
gains on futures and
options (Note 6)
Derivative assets (Note 14(a)) -
Due to Broker, unrealized
losses on futures and
options (Note 6)
Derivative liabilities (Note 14(a)) -
Provision for future payments
to Front Street Capital
-
55,242
-
2,965,891
- 55,242
- 2,965,891
(160,805) -
(1,752,256)
- (160,805)
- (1,752,256)
(970,000)
- (970,000)
$ (105,563) $ 243,635 $ 848,163 $ 986,235
During the year ended March 31, 2014, portfolio investments having a fair value of $718,685 were
transferred from Level 2 to Level 1. This transfer occurred when restricted shares acquired by the
Corporation were converted into unrestricted common shares (in the normal course of business and
following a hold period).
CERES GLOBAL AG CORP. ANNUAL REPORT
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35
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
15. SHARE CAPITAL AND WARRANTS
(a)
Authorized
Unlimited number of voting, participating Common shares, without par value.
(b) Normal Course Issuer Bids
During the year ended March 31, 2015, the Corporation did not purchase any Shares under any Normal
Course Issuer Bid.
During the year ended March 31, 2014, on July 9, 2013, Ceres announced a normal course issuer bid (the
“2013-2014 NCIB”) commencing on July 11, 2013, the purpose of which was to provide Ceres with a
mechanism to decrease the potential spread between the net asset value per Share and the market price of
the common shares. The 2013-2014 NCIB was scheduled to conclude on the earlier of the date on which
purchases under the bid were completed and July 10, 2014. For the period from July 11, 2013 to October
15, 2013, Ceres purchased 126,020 common shares under the 2013-2014 NCIB for aggregate cash
consideration of $964,424. The stated capital value of these repurchased Shares was $1,198,882. The
excess of the stated capital value of the repurchased common shares over the cost thereof, being $234,458,
was allocated to Retained Earnings in the year ended March 31, 2014. The Corporation made no purchases
under the 2013-2014 NCIB after October 15, 2013.
(c) Common Share Purchase Warrants
In connection with the completion of the rights offering, Ceres issued an aggregate of 2,083,334 warrants
to the stand-by purchasers, with the issuance being conditional upon approval at the Corporation’s annual
general meeting to be held in August 2015. In the event that such warrant approvals are not obtained, the
Corporation will make a cash payment to the standby purchasers equal to the number of common shares
subject to the applicable number of standby warrants multiplied by the amount (if any) by which the then-
current mark price (basis the five-day VWAP) of the common shares exceeds the subscription price,
provided that the amount shall not be less than 2% nor greater than 4% of such standby purchasers’
subscription commitment.
Furthermore, the stand-by warrants issued, subject to shareholder approval, were issued at a fixed price
of $5.84 and are each convertible into one common share of the Corporation. The warrants have an expiry
date 24 months after issuance. The fair value of the stand-by warrants has been estimated at the date of
issuance using the Black Scholes pricing model, using the following assumptions: an average risk free
interest rate of 1.01%; an average expected volatility factor of 22.75%; an expected dividend yield of nil;
and expected life of 2 years from issuance. The fair value of the stand-by warrants at the time of issuance
was estimated at $1,644,000. Due to the conditional nature and certain other net settlement terms of the
warrants, they are not considered equity under IFRS as at March 31, 2015, and are classified as a current
liability.
On June 11, 2013, the Common Share Purchase Warrants (collectively the “Warrants”) that were issued
on June 11, 2010 to the vendors of Riverland Ag, expired and were cancelled. The Corporation allocated
the aggregate stated capital value of the Warrants of $202,384 to Contributed Surplus.
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CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
15. SHARE CAPITAL AND WARRANTS (continued)
(d) Stock Option and Appreciation Rights
On March 10, 2014, the Board approved the Ceres Global Ag Corp. Stock Option Plan (the “Options
Plan”). The Options Plan is available to certain officers, key employees and consultants of the
Corporation and its subsidiaries. The purpose of the Options Plan is to attract, retain and motivate these
parties by providing them with the opportunity, through options, to acquire a proprietary interest in the
Corporation and to benefit from its growth.
The Options Plan is administered by the Board, which shall determine (among other things) those officers,
key employees and consultants who may be granted awards as Participants and the terms and conditions
of any award to any such Participant. The Exercise Price of the options shall be fixed by the Board and
shall be no less than 100% of the Market Price on the effective date of the award of the options, which
may be granted for a term not exceeding ten (10) years. The maximum number of common shares
reserved for issuance upon the exercise of options cannot exceed 10% of the total number of common
shares issued and outstanding less the number of common shares reserved for issuance under the
Corporation’s Directors Deferred Share Unit Plan (Note 16). Restrictions exist as to the number of options
that may be granted to Insiders within any one-year period, and as to the number of, and the aggregate
fair market value of, the common shares underlying the options that may be granted to any one Participant.
The Options Plan also provides for the Board to grant Stock Appreciation Rights (“SARs”) to certain
officers, key employees and consultants of the Corporation. Stand-Alone SARs granted under the Plan
shall become vested at such times, in such installments and subject to the terms and conditions of the
Options Plan (including satisfaction of Performance Criteria and/or continued employment) as may be
determined by the Board. The Base Price for each common share subject to a Stand-Alone SAR shall not
be less that 100% of the Market Price of a common share on the Effective Date of the award of such
Stand-Alone SAR. Tandem SARs may be granted at or after the Effective Date of the related award of
options, and each Tandem SAR shall be subject to the same terms and conditions and denominated in the
same currency as the option to which it relates and the additional terms and conditions under the Options
Plan. Tandem SARs may be exercised only if and to the extent the options related thereto are then vested
and exercisable. On exercise of a Tandem SAR, the related option shall be cancelled and the Participant
shall be entitled to an amount in settlement of such Tandem SAR calculated and in such form as provided
by the Options Plan.
As at March 31, 2015 and 2014, no stock options or SARs had been awarded.
CERES GLOBAL AG CORP. ANNUAL REPORT
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37
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
15. SHARE CAPITAL AND WARRANTS (continued)
(e)
Issued and outstanding as at March 31, 2015 and 2014
The following is a summary of the changes in the Common shares and Warrants for the year ended March
31, 2015 and 2014:
Common shares
Warrants
Shares
Dollars
Shares
Dollars
Balances, April 1, 2013
Expiry of Warrants, June 11, 2013
Repurchases under normal course issuer bid
Balances, March 31, 2014
Adjustment to outstanding common shares
Issuance of common shares, December 4, 2014
Share issuance costs
Warrants, conditionally issued, December 4, 2014, classified as liabilities
-
(126,020)
14,208,679
(471)
12,842,465
-
-
14,334,699
$
138,298,904
-
(1,198,882)
137,100,022
$
150,000
(150,000)
-
-
$
202,384
(202,384)
-
$
-
-
75,000,000
(1,571,062)
(1,644,000)
-
-
-
2,083,334
-
-
-
1,644,000
Balances, March 31, 2015
27,050,673
$
208,884,960
2,083,334
$
1,644,000
On December 4, 2014, the Corporation completed a fully backstopped rights offering (the “Offering”).
The Offering was fully subscribed at a price of $5.84. The Corporation issued 12,842,465 common shares
for aggregate gross proceeds of $75,000,000. Costs incurred relating to the issuance of shares totaled
$1,571,062.
16. DEFERRED SHARE UNIT PLAN
Effective January 1, 2014, Ceres has a Directors’ Deferred Share Unit Plan, whereby deferred share units
(“DSU”) are issued to Eligible Directors, in lieu of cash, for a portion of Directors’ fees otherwise payable
to Directors. The Fair Market Value of the DSUs on the date such units are calculated and issued represents
the volume-weighted average trading price of Ceres’ common shares for the five trading days immediately
preceding the date of issuance of the DSUs. Each DSU entitles the director to receive payment after the
end of the director’s term in the form of common shares of the Corporation. Under the plan, the aggregate
number of common shares issuable by Ceres under this Plan is limited to 450,000 common shares. Certain
insider restrictions and annual dollar limits per Eligible Director exist. Dividends, if any, otherwise
payable on the common shares represented by the DSUs are converted into additional DSUs based on the
Fair Market Value as of the date on which any such dividends would be paid. The Plan also provides for
the Board to award additional DSUs (referred to in the Plan agreement as “Matching DSUs”) to an Eligible
Director who has elected to receive DSUs pertaining to his/her Annual Cash Remuneration amount (as
defined by the Plan).
The Corporation intends to settle all DSUs with shares through the issuance of treasury shares.
Compensation expense is included as part of Directors’ fees classified with general and administrative
expenses, and is recognized in the accounts as and when services are rendered to the Corporation. DSUs
38
66
CERES GLOBAL AG CORP. ANNUAL REPORT
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
16. DEFERRED SHARE UNIT PLAN (continued)
outstanding as at a reporting period-end are revalued at the fair market value as at that period and changes
in the fair market value are recognized to Directors’ fees in the period in which the changes occur.
The following is a summary of the changes in the number of DSUs issued and outstanding for the years
ended March 31, 2015 and 2014:
2015
2014
number of
units
Fair Market
Value
number of
units
Fair Market
Value
Balance, beginning of period
Units redeemed
Units issued
8,912.73
(2,673.83)
46,573.84
$
$
$
7.01
7.00
6.06
-
-
8,912.73
-
$
$
-
$
7.01
Balance, end of period
52,812.74
$
6.06
8,912.73
$
7.01
17. MANAGEMENT FEES
The following table presents management fee expense charged to the accounts of the Corporation for the
years ended March 31:
2015
2014
Management fees and related HST
Management transition payment
Revaluation of provision for future payments to Front Street Capital
-
$
-
(626,000)
$
1,327,357
5,000,000
970,000
$
(626,000)
$
7,297,357
On August 23, 2013, Ceres announced it entered into a Management Transition Agreement (the
“Transition Agreement”) with Front Street Capital 2004 (“Front Street Capital”), which provided, among
other things, for the early termination of the Management Agreement. The Transition Agreement was
approved by the shareholders at the annual and special meeting held on September 27, 2013. The
Transition Agreement provided for the following:
The Management Agreement was terminated effective November 30, 2013;
Monthly management fee payments to the Front Street Capital ended December 31, 2013;
On October 1, 2013, Ceres paid the Front Street Capital $5 million plus HST of $650,000;
Front Street Capital will be paid an additional $1 million if the five-day volume-weighted
average price of Ceres’ common shares (the “5-day VWAP”) reaches $10 within five years,
and a further $1 million if the 5-day VWAP reaches $11 at any time during that 5-year
period;
The additional payments will become payable immediately if, prior to the fifth anniversary
of the date of the Transition Agreement, there occurs either a change in control or a going
private transaction for a price in excess of $7.85 per share;
CERES GLOBAL AG CORP. ANNUAL REPORT
67
39
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
17. MANAGEMENT FEES (continued)
Ceres shall deposit into an escrow fund 5% of any gross sale proceeds in excess of net book value and
direct transaction costs from the sale of any of Ceres’ assets, to a maximum amount of $1 million, and
such escrow fund amount shall be paid to the Manager if the 5-day VWAP does not reach $10 within five
years
As at March 31, 2015, management has determined the fair value of the potential additional payments
provided for under the Transition Agreement is $344,000 (March 31, 2014: $970,000). As at March 31,
2015, the fair value of each additional payment was determined using the binomial options pricing model,
with a remaining term to December 31, 2018, using volatility of 25% and a risk-free interest rate of 0.60%
(March 31, 2014: remaining term to December 31, 2018, volatility of 35% and risk-free interest rate of
1.71%). Management recalculates the fair value of such potential additional payments as at each quarter-
end and adjusts the provision recognized in the accounts in the quarter such adjustment would be
necessary.
68
CERES GLOBAL AG CORP. ANNUAL REPORT
40
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
18.
INCOME TAXES
(a) Reconciliation of statutory tax provision to the effective tax provision
As the Corporation operates in several tax jurisdictions, its income is subject to taxation at various
rates.
The provision for income taxes differs from the amount that would have resulted from applying
the Canadian statutory income tax rates to income before income taxes for the following reasons:
Loss before income taxes and share of net income in
investments in associates:
Canada
United States of America
Combined statutory Canadian federal and Ontario corporate
income tax rate
Provision for income taxes recoverable using statutory rate
Adjusted for the income tax effect of:
Difference in tax rates applicable to subsidiaries
U.S. state taxes, net of U.S. federal benefit
Intercompany dividend eliminated upon consolidations
Non-deductible portion of capital losses
Non-deductible portion of unrealized losses on investments
(non-taxable portion of unrealized gains on investments)
Changes in unrecognized temporary difference on deferred
income tax assets
Foreign exchange and other differences
$
$
$
2015
2014
(6,539,794)
4,392,488
(2,147,306)
(15,512,509)
(5,543,796)
(21,056,305)
26.5%
(569,036)
26.5%
(5,579,917)
551,696
(143,492)
(1,885,738)
-
(694,637)
(527,158)
(1,360,853)
455,375
64,594
(68,091)
2,850,338
(449,047)
988,351
6,540,780
(88,127)
4,257,289
Income tax expense (recovered)
$
419,315
(1,322,628)
CERES GLOBAL AG CORP. ANNUAL REPORT
69
41
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
18.
INCOME TAXES (continued)
The components of the provision for income taxes are as follows:
Canada
Current
Deferred
United States of America - Federal
Current
Deferred
United States of America - State
Current
Deferred
$
2015
134,142
140,437
274,579
93,164
-
93,164
51,572
-
51,572
$
2014
(135,488)
50,736
(84,752)
(1,247,356)
-
(1,247,356)
9,480
-
9,480
Income tax expense (recovered)
$
419,315
$
(1,322,628)
(b) Deferred income tax liability
The tax effects of temporary differences that give rise to significant elements of the net deferred income
tax liability are as follows:
2015
2014
Deferred tax assets:
Non-capital and net operating losses carried-forward
Allowable capital losses carried forward
Deductible portion of unrealized depreciation of investments
Share issuance costs
Other temporary deductible differences, net of temporary
$
taxable differences
Accrued interest not deductible until paid
29,682,633
1,026,920
845,834
389,640
6,044,365
861,641
27,172,420
1,247,392
981,910
-
2,458,877
705,739
38,851,033
32,566,338
Deferred income tax liability, property, plant and equipment
(18,224,407)
(15,417,555)
Unrecognized deferred tax assts
(18,224,407)
(15,417,555)
(20,923,597)
(17,305,317)
Noncurrent deferred tax liabilities, net
$
(296,971)
(156,534)
70
CERES GLOBAL AG CORP. ANNUAL REPORT
42
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
18.
INCOME TAXES (continued)
(c) Tax losses carried forward
(i)
Canadian operations
As at March 31, 2015, the Corporation has accumulated non-capital losses in the amount of $46,447,367
relating to operations in Canada. The non-capital losses are being carried forward and, unless utilized,
will expire in the following taxation years:
Year of expiry
2028
2029
2030
2031
2032
2033
2034
2035
$
Amount
591,209
2,064
6,387,927
5,943,058
7,313,866
7,179,113
11,788,060
7,242,070
$
46,447,367
As at March 31, 2015, Ceres has accumulated capital losses totaling $7,750,339, which are available
indefinitely to be applied against capital gains in future taxation years. The potential income tax benefit
of the capital losses has not been recognized in the financial statements.
(ii) Unites States of America operations
As at March 31, 2015, the Corporation has accumulated net operating losses in the amounts noted below
in USD, for federal and state income tax purposes. These net operating losses are being carried forward
and, unless utilized, will expire in the following taxation years:
Year of expiry
2027
2028
2029
2030
2031
2032
2033
2034
$
Federal
-
-
-
-
9,717,275
3,686,320
8,570,443
12,772,909
$
34,746,947
State
6,177,900
2,742,186
10,857,882
12,769,195
1,457,305
501,671
869,453
3,514,695
38,890,287
CERES GLOBAL AG CORP. ANNUAL REPORT
71
43
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
19. RELATED PARTY TRANSACTIONS
Key management personnel
The Corporation has defined key management personnel as senior executive officers, as well as the
members of the Board of Directors, as they collectively have the authority and responsibility for planning,
directing and controlling the activities of the Corporation and its subsidiaries. The following table
summarizes total compensation expense for key management personnel for the years ended March 31,
2015 and 2014.
Salaries and bonuses accrued, senior executive officers
Benefits, senior executive officers
Directors' fees
2015
2014
$
2,068,766
43,070
494,577
$
1,188,149
34,859
445,551
$
2,606,413
$
1,668,559
As at March 31, 2015 and 2014, directors and officers of the Corporation, through a controlled entity,
beneficially own, directly or indirectly, or exercise control or direction over 40.3% and 17.7%,
respectively, of the outstanding Common shares of the Corporation.
20. CHANGES IN NON-CASH WORKING CAPITAL ACCOUNTS
2015
2014
Decrease (increase) in due from Broker, commodity futures contracts
Increase in net derivative assets
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Decrease (increase) in Sales taxes recoverable
Decrease in prepaid expenses and sundry assets
Increase in accounts payable and accrued liabilities
Decrease in management fees payable
Increase (decrease) in provision for future payment to Front Street
Capital
(Decrease) increase in due to Manager
$
$
(3,022,080)
(4,929,716)
7,980,680
(458,109)
(1,455,462) 7,262,978
(16,515,546) 62,834,829
332,152
(1,528,175)
97,116
219,660
1,982,426
2,390,223
(250,763)
-
970,000
(268,565)
$ (24,014,566) $ 79,030,214
(626,000)
-
72
CERES GLOBAL AG CORP. ANNUAL REPORT
44
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
March 31, 2015 and 2014
21. CONTINGENT LIABILITIES
The Corporation is involved in various legal claims and legal notices arising in the ordinary course of
business. The Corporation believes it has adequately assessed each claim, and the necessity of a provision
for such claims. As at March 31, 2015, the Corporation has no provision for any contingent liabilities.
Furthermore, during the quarter ended March 31, 2014, Ceres terminated its arrangements and ongoing
discussions with a potential development partner with respect to the development and construction of a
grain facility at NCLC. The termination of discussions with the potential partner may have implications
for any amounts to be collected from the potential partner and amounts previously paid to Ceres by the
potential partner in respect to a certain portion of NCLC site preparation costs under a Cost-Sharing
Agreement. The recovery and/or reimbursement of such amounts, if any, will be subject to resolution of
the claim described below.
During the year ended March 31, 2015, the potential partner initiated an action against the Corporation
for injunctive relief and unspecified damages relating to the development and construction of a grain
facility at the Corporation’s NCLC.
As of the date hereof, the Corporation, based on the advice of its litigation counsel, does not believe that
the claims alleged by the former partner have any legal merit, and therefore, the Corporation intends to
vigorously defend the lawsuit. Prior to the termination of its relationship with the former partner, the
counterparty paid $3,899,146 in costs related to the project. The Corporation does not believe that the
counterparty is entitled to any of these costs based on the legal relationship that existed at the time, and
based on the claims alleged in the counterparty’s complaint. The outcome of this complaint is difficult to
assess or quantify. The plaintiff may seek recovery of large or indeterminate amounts, and the magnitude
of the potential loss may remain unknown for substantial periods of time. The cost to defend this
complaint may be significant. In addition, this complaint, if decided adversely to the Corporation or settled
by the Corporation, may result in liability material to the Corporation’s financial statements as a whole or
may materially and adversely affect the Corporation’s business, financial position, cash flow, and/or
results of operations.
22. SUBSEQUENT EVENT
Subsequent to March 31, 2015, the Corporation entered into an agreement to sell its Electric Steel grain
facility in Minneapolis, Minnesota, to the University of Minnesota for gross proceeds of US$1,450,000
subject to final approval by the University’s Board of Regents. The Corporation is expecting to close on
the sale in the first quarter of fiscal 2016. As at March 31, 2015, the carrying value of the related facility’s
property, plant and equipment totaled approximately US$1,300,000 (CAD$1,643,460).
CERES GLOBAL AG CORP. ANNUAL REPORT
73
45
AGM
Ceres Global Ag Corp.
Annual General Meeting
9am EDT, Aug.6, 2015
The Omni King Edward Hotel
Belgravia Room
37 King St. East
Toronto, Ontario
Management
Patrick Bracken
President and
Chief Executive Officer
Mark Kucala
Vice President and
Chief Financial Officer
Craig Reiners
Senior Vice President – Grain
Robert Day
Vice President – Trading
and Risk Management
Directors
Douglas E. Speers
Chairman
Patrick Bracken
Harvey T. Joel
Gary W. Mize
Joseph M. Monroe
James T. Vanasek
Harold M. Wolkin
Ceres Global Ag Corp
36 Toronto Street, Suite 850
Toronto, ON Canada M5C 2C5
ceresglobalagcorp.com