READY
SET
GROW
CERES GLOBAL AG | FY20 16 AN N UAL R EPORT
FY2016
YEAR OF RAMP UP
Over the past year, Ceres has been primarily focused on the build-out of our Northgate Logistics Centre
and optimizing the performance of our network of facilities strategically located around the Great Lakes.
During a year of ramping up operations, we made significant progress, including naming Robert Day as
President and Interim CEO. Additionally, we signed an agreement with Koch Fertilizer Canada to store and
handle phosphate fertilizer at Northgate and have commenced construction.
INCREASED REVENUE BY
162% TO
NEW GRAIN ELEVATOR AT
NORTHGATE WITH BUSHEL
STORAGE CAPACITY OF
GREW THE NUMBER OF
BUSHELS HANDLED BY
154% TO
TOTAL NUMBER OF
RAIL CARS LOADED AT
NORTHGATE
$505.5M
2.7M
57.3M
3,200
FY2017
LOOKING AHEAD
With Northgate fully operational and an established network of facilities in place located around the Great
Lakes, we are well positioned to capitalize on growth opportunities and sustain our momentum into FY2017.
Our focus this year will be to:
1. Accelerate Northgate’s utilization
2. Diversify our commodities mix
3.
Improve operational efficiencies across our network
4. Reach more domestic and international markets through
the expansion and diversification of Northgate
ABOUT CERES GLOBAL AG
Headquartered in Minneapolis, Ceres Global Ag is focused on two primary businesses: a Grain Storage, Handling
and Merchandising unit; and a Commodity Logistics unit.
The Company’s grain storage, handling, and merchandising unit is anchored by a collection of nine grain storage
and handling assets located in Minnesota, New York, Saskatchewan and Ontario. Combined the assets have an
aggregate storage capacity of approximately 43 million bushels.
The Ceres Northgate Terminal houses the Commodity Logistics Centre, a state-of-the-art grain, agriculture services
and oilfield supplies trans-loading site. It is also connected to the Grain Storage, Handling and Merchandising
network through a high-speed elevator with a 2.7M-bushel storage capacity.
ASSETS & CAPABILITIES
Ceres has a network of facilities strategically located around the Great Lakes and in close proximity
to sources of grain origination. Our network includes:
NUMBER OF
ELEVATORS
9
BUSHEL
CAPACITY
43M
STRATEGICALLY LOCATED NEAR POINTS OF ORIGINATION
Northgate
Duluth Storage
Duluth Lakeport
Duluth
DULUTH
MINNEAPOLIS
SOUTH METRO
Port Colborne
Buffalo
Malt One
Calumet
Shakopee
Savage
MINNEAPOLIS
SOUTH METRO
Origination Expansion
Current
STRATEGIC PARTNERS
To better service our customers and improve the economics of our Northgate facilities, we have established
long-term partnerships with leaders in their respective industries:
BNSF
Railway
Koch Fertilizer
Canada
Provides railway access from Northgate to 28 American
Will provide phosphate fertilizer that famers can backhaul
states, numerous Pacific Gulf ports and Mexico though its
from Northgate
32,000 mile network
MULTI-MODAL,
MULTI-COMMODITY
FACILITY
NEW GRAIN ELEVATOR AT
NORTHGATE WITH BUSHEL
STORAGE CAPACITY OF
FERTILIZER WAREHOUSE
HOLDING (EXPECTED
COMPLETION IS Q1 FY2017)
ENERGY TRANSLOADING
PER MONTH
1,300 ACRES
2.7M
26,000 TONS
150 RAIL CARS
SPOTLIGHT ON NORTHGATE The Ceres Northgate Terminal is a state-of-the-art grain, agriculture services and oilfield supplies trans-loading site. Northgate’s proximity to points of origination allows for cost-effective shipping of high-quality Canadian grains to U.S., Mexican and select Asian markets. In FY2016, Ceres completed the build-out of Northgate including construction of a high-speed elevator and the commissioning of three steel storage bins with 2.7M bushels of storage capacity. The grain elevator is complemented by: CHAIRMAN’S MESSAGE
Against a backdrop of low and volatile commodity prices
and an unexpected drop in the price of durum wheat, Ceres
Global Ag made considerable progress on our long term
strategic plan in FY 2016.
Our efforts over the past 15 months were focused in
5 key areas:
1) Developing stronger customer relationships
Over the past year, Ceres has made significant effort to
segment the markets we serve, identify key customers
within each segment and formalize our relationships for
the long term. As a result, Ceres increased sales to US
customers and reached new customers in Mexico, Europe
and Asia. We also signed new storage and handling
agreement in several facilities.
2) Completing our Northgate high-speed grain elevator and
building fertilizer and energy opportunities
Northgate is a $100-million state-of-the-art facility that
brings together a high-speed grain elevator, two highly-
efficient loop tracks capable of handling 120 car units, and
trans-loading capabilities for energy products and oilfield
supplies. The grain facility was completed on time and on
budget in May 2016, and the fertilizer facility is now under
construction.
3) Expanding our farmer contacts to ensure efficient and
reliable sourcing
In tandem with the build-out of Northgate, we have formed
strong relationship with farmers to ensure that supply
matches demand. Our origination team at Northgate did an
outstanding job in developing these relationships so we
could “hit the ground running” once the grain elevator was
commissioned in May 2016.
4) Diversifying our commodity mix to maximize profit
opportunities
In FY2016, we were able to grow our expertise in handling
a variety of crops, namely canola and pulses like lentils and
dried peas. This is consistent with our strategy to diversify
the commodities we handle and store beyond our core
grain commodities.
5) Optimizing our facilities
Through increased origination and stronger customer
relationships, Ceres increased volumes and commitments
to better utilize capacity of our infra-structure. This lowers
costs and in the long term will improve margins. We have
idled facilities that are less efficient or that do not fit our
longer term strategy.
FY 2016 was not without its challenges. Our financial results
were impacted by a number of factors throughout the year,
putting pressure on our gross profit, trading margins and
net income. Chief among them was the loss of $11.7 million
due to the negative impact of durum wheat price declines
on our grain inventory at the end of the third quarter.
Another pressure on our financial performance was the
impact of the volatile changes to the value of the Canadian
dollar as a number of our expenses are denominated in
U.S. currency.
The company took a number of steps to improve our
operational efficiency and reduce our exposure to
risk, including optimizing our network of facilities and
developing a better balance of commodities in our
inventory. As a result, we are more efficient, better hedged
against exposure to risk and have more tradable inventory.
Another key development was the orderly management
transition that saw Robert Day appointed as President
and Interim CEO, succeeding Pat Bracken, who was
at the helm during our pivotal transformation into an
operating company. On behalf of the Board, I would like
to congratulate Bob and thank Pat for his role in shaping
our strategy, overseeing the construction of Northgate and
introducing new commodities to our operations.
Our goal of achieving acceptable long-term returns for our
shareholders remains constant. We realize that much still
needs to be done. Looking ahead, we will continue to build
on last year’s accomplishments. With record crop levels in
our supply area, we expect to extend our ability to trade
and handle increased volumes of grain in FY 2017, and, with
more efficient facilities, we will be in an excellent position to
compete in international and domestic marketplaces.
In closing, I would like to thank our employees for the
progress we have made, our Board of Directors for their
guidance and each of our shareholders for their support as
we build a world-class company.
Douglas E. Speers
Chairman of the Board
Table of Contents
1. Financial and Operating Results
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
6
17
18
20
21
21
23
24
25
MANAGEMENT’S DISCUSSION AND ANALYSIS
Table of Contents
Financial and Operating Summary…………………………………………………………………
Quarterly Financial Data……………………………………………...……………………………
Liquidity & Cash Flow…………………………………………………………...………………...
Capital Resources…………………………………………………………...……………………...
Accounting Policies and Critical Accounting Estimates………………………………...…………
Outlook…………………………………………………………………….....................................
Other…………………………………………………………………….........................................
Non-IFRS Financial Measures and Reconciliations………………………………………………..
MANAGEMENT’S DISCUSSION AND ANALYSIS
Key Assumptions & Advisories……………………………..……………………………………..
Table of Contents
2
13
14
16
17
17
19
20
21
Financial and Operating Summary…………………………………………………………………
Quarterly Financial Data……………………………………………...……………………………
This Management’s Discussion and Analysis (“Annual MD&A”) dated September 22, 2016 should be read in
conjunction with the audited Consolidated Financial Statements for the fifteen-month period ended June 30,
2016 of Ceres Global Ag Corp. (“Ceres”, the “Corporation”, “we”, “our”, and “us”), and the Corporation’s
audited consolidated financial statements for the year ended March 31, 2015 (the “Annual Consolidated
Financial Statements”). 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
www.sedar.com.
Liquidity & Cash Flow…………………………………………………………...………………...
Capital Resources…………………………………………………………...……………………...
16
14
13
2
Accounting Policies and Critical Accounting Estimates………………………………...…………
17
Outlook…………………………………………………………………….....................................
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. All information is
reported in Canadian dollars (“CAD”) unless otherwise specified.
Other…………………………………………………………………….........................................
19
17
Non-IFRS Financial Measures and Reconciliations………………………………………………..
Key Assumptions & Advisories……………………………..……………………………………..
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. These measures include “EBITDA” (Earnings before interest, income tax,
depreciation and amortization) and “Return on shareholders’ equity”, neither of which have a standardized
meaning under IFRS. See “Non-IFRS Financial Measures and Reconciliations.”
This Management’s Discussion and Analysis (“Annual MD&A”) dated September 22, 2016 should be read in
conjunction with the audited Consolidated Financial Statements for the fifteen-month period ended June 30,
Change in Fiscal Year-End
2016 of Ceres Global Ag Corp. (“Ceres”, the “Corporation”, “we”, “our”, and “us”), and the Corporation’s
On February 10, 2016, the Board of Directors approved a change in the fiscal year end from March 31 to June
audited consolidated financial statements for the year ended March 31, 2015 (the “Annual Consolidated
30. As a result of the change, the Corporation has a fifteen month fiscal period that is reported in this Annual
Financial Statements”). Additional information about Ceres filed with Canadian securities regulatory
Report for the fiscal-period ending June 30, 2016. In conjunction with the change in fiscal year, Ceres will
authorities, including the quarterly and annual report and the annual information form, is available online at
www.sedar.com.
21
20
1
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. All information is
reported in Canadian dollars (“CAD”) unless otherwise specified.
FY2016 ANNUAL REPORT
5
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. These measures include “EBITDA” (Earnings before interest, income tax,
depreciation and amortization) and “Return on shareholders’ equity”, neither of which have a standardized
meaning under IFRS. See “Non-IFRS Financial Measures and Reconciliations.”
Change in Fiscal Year-End
On February 10, 2016, the Board of Directors approved a change in the fiscal year end from March 31 to June
30. As a result of the change, the Corporation has a fifteen month fiscal period that is reported in this Annual
Report for the fiscal-period ending June 30, 2016. In conjunction with the change in fiscal year, Ceres will
1
change its reporting and presentation currency to USD. The Corporation will begin reporting in USD as at and
for the three-month period ending September 30, 2016. Ceres believes that these changes will give investors a
view of the Corporation’s financial performance that better aligns the fiscal year with that of the agricultural
crop year.
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 “Key Assumptions & Advisories”.
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
(in millions except per share)
Revenues (1)
Gross profit (loss) (1)
Income (loss) from operations (1)
Net income (loss) (1)
Common shares outstanding for period
Loss per share - Basic (1)
Loss per share - Diluted (1)
As at:
Total assets
Total bank indebtedness, current (2)
Term debt (3)
Shareholders' equity (1)
Return on shareholders' equity (4)
Fifteen-month
period ended
June 30, 2016
Twelve-month
period ended
March 31, 2015
Twelve-month
period ended
March 31, 2014
Three months ended June 30,
2016
2015
$
$
$
$
$
$
505.5
(0.7)
(14.0)
(15.8)
27.0
(0.58)
(0.58)
$
$
$
$
192.8
11.7
1.0
(1.4)
18.4
(0.08)
(0.08)
$
$
$
$
232.4
4.4
(12.9)
(19.3)
14.3
(1.35)
(1.35)
$
$
$
$
149.3
2.4
(0.4)
(1.9)
27.0
(0.07)
(0.07)
$
$
$
$
59.3
1.9
(0.6)
(1.7)
27.1
(0.06)
(0.06)
$
$
$
$
$
$
$
$
$
$
$
$
330.2
72.0
29.6
204.2
-7.7%
$
$
$
$
308.9
37.3
30.4
218.8
-0.6%
$
232.2
$
87.6
$
-
134.1
$
-14.4%
(1) Inclusive of the durum wheat loss of $10.3 million for the fifteen-month period ended June 30, 2016
(2) Includes Bank indebtedness, repurchase obligations and outstanding cheques in excess of cash on hand
(3) Non-IFRS measure. See Non-IFRS Financial Measures and Reconciliations section
(4) Includes current portion of long-term debt
HIGHLIGHTS FOR THE THREE MONTHS ENDED JUNE 30, 2016
In an environment of low commodity prices with suppressed margin opportunities, the Corporation
increased gross profit and the volume of company-owned bushels handled compared to the three months
ended June 30, 2015.
Gross profit of $2.4 million for the quarter-ended June 30, 2016 compared to $1.9 million for the same
quarter in 2015.
Handled approximately 18 million bushels of grain and oilseed during the quarter, compared to 6.7 bushels
for the same quarter in 2015.
2
6
CERES GLOBAL AG CORP.
Loaded 1,146 railcars of grain, oilseed, and propane, including 13 unit trains, destined for the US, Latin
American, and Asian markets out of Northgate as defined below compared to 317 railcars for the quarter-
ended June 30, 2015.
Acquired 116,700 shares in conjunction with its normal course issuer bids compared to 51,900 for the
quarter-ended March 31, 2016 (and nil for the quarter-ended June 30, 2015).
Continued the construction of the fertilizer storage warehouse at Northgate in conjunction with the
agreement to handle and store fertilizer on behalf of Koch Fertilizer Canada, ULC (“Koch”).
WHO WE ARE
While having one reportable segment, the Corporation operates in two business units: (1) grain storage,
handling and merchandising unit, and; (2) commodity logistics. Ceres’ grain storage, handling, and
merchandising unit is anchored by a collection of nine (9) grain storage and handling assets in Minnesota, New
York, Saskatchewan and Ontario having aggregate storage capacity of approximately 43 million bushels as at
June 30, 2016, including 5.4 million bushels of idled capacity. The Corporation’s Commodity Logistics unit is
focused on the development of a commodity logistics centre in Northgate, Saskatchewan. The Northgate
Commodities Logistics Centre (“Northgate” or the “NCLC”) is a state-of-the-art grain, agriculture services, and
oilfield supplies transloading site, which is being developed in conjunction with several potential energy and
agricultural input company partners and connected to Burlington Northern Santa Fe Railway (the “BNSF”).
Ceres also has a 25% interest in Stewart Southern Railway Inc., a short-line railway with a range of 130
kilometres that operates in Southeastern Saskatchewan.
Grain Division
The Corporation’s grain division is engaged in grain storage, procurement, merchandising of specialty grains
and oilseeds such as oats, barley, rye, hard red spring wheat, durum wheat, canola and pulses through nine grain
storage and handling facilities in Minnesota, New York, Saskatchewan and Ontario, while also utilizing the
grain operating facility at the Northgate Commodity Logistics Centre, with aggregate storage capacity of
approximately 43 million bushels. Through March 15, 2016, the Corporation’s grain division also managed two
facilities in Wyoming on behalf of their owner, Briess Industries Inc. (“Briess”). Four of the grain storage
facilities are located at deep-water ports in the Great Lakes, and one is located 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. Approximately 34 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 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
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 $100 million grain, oil, natural gas liquids terminal and is connected to the
BNSF with plans to further build out infrastructure to support storing and handling of phosphate-based fertilizer,
which is described in further detail within the “Outlook” below.
3
FY2016 ANNUAL REPORT
7
The Corporation commenced its initial grain operations at Northgate in October 2014, operating the facility
with a grain transloader for six months during the year-ended March 31, 2015. Therefore, fiscal year 2016 is
the first full year of operations at the site. As part of its grain operations, the Corporation contracts grain and
oilseed purchases from western Canadian producers that are delivered by truck and unloaded at the NCLC grain
terminal. Ceres has the option of storing the grain on-site or loading it into outbound railcars to customer end-
users, or to the Corporation’s existing facilities, taking advantage of the value and strategic location of its current
asset base.
For the twelve-month period ended June 30, 2016, the number of grain and oilseed railcars loaded out of the
Northgate facility increased nearly three-and-a-half times compared to the twelve-month period ended June 30,
2015. For the same twelve-month period in 2016 compared to 2015, the number of propane railcars loaded out
has increased nearly five-and-a-half times.
Concurrent with its grain operations at NCLC, in April 2015, the Corporation entered into an agreement with
Elbow River Marketing (“ERM”), 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.
In conjunction with Northgate operations, the Corporation has incurred $5.2 million in operating expenses at
the facility for the fifteen-month period ended June 30, 2016 (2015: $0.9 million).
the Corporation.
During the three-months ended June 30, 2016, the Corporation, through a third-party contractor, completed
construction of the high-speed elevator in April 2016. While Phase 1 was completed in October 2015, the
completion of the final phase of construction included a concrete slipform, the concrete grain bins, and cleaner
dust system. The construction was completed within fiscal budget and finished slightly ahead of the May 2016
target date.
As part of the capital investment at Northgate, as at June 30, 2016, the Corporation has property, plant and
equipment of approximately $84 million (as at March 31, 2015: $49.9 million). This is inclusive of land
acquisition costs, environmental costs, mass grading, site preparation, the grain transloader and related
equipment, rail track costs, and permanent high-speed inland terminal elevator constructions costs.
Overall Performance
The Corporation recognized a net loss for the quarter ended June 30, 2016 of $1.9 million, compared to a net
loss of $3.5 million in the fourth quarter of the prior year. Items affecting the quarter ended June 30, 2016,
compared to the quarter ended June 30, 2015 included:
Corporation recognized a net loss of $1.9 million compared to a loss of $1.7 million in 2015.
Gross profit for the quarter-ended June 30, 2016, totaled $2.4 million compared to $1.9 million for the same
quarter ended June 30, 2015. Increased gross profit was driven by greater net trading margins for the quarter
that resulted from enhanced carrying income in the futures market along with an increase in company-
owned stocks in-store and increased storage and rental income.
General and administrative expenses totaled $2.8 million compared to $2.5 million for the quarter-ended
June 30, 2016. The $0.3 million increase was driven by $0.2 million increase in labor and personnel costs,
as the Corporation expanded its grain trading and merchandising group.
(See “General and Administrative Expenses” below for a further discussion.)
Interest expense totaled $1.2 million for the quarter-ended June 30, 2016 compared to $0.7 million for the
same quarter in 2015. The increase of $0.5 million is a result of greater daily average borrowings on the
revolving line of credit during the quarter-ended June 30, 2016 compared to the three-month period ended
June 30, 2015, as funds from the December 2014 Rights Offering were used to pay down the borrowings
on the revolving credit facility during the quarter-ended June 30, 2015.
Impact of Foreign Currency
While the financial accounts of the Corporation are reported in CAD, the Corporation incurs and transacts
revenues and expenses in CAD and USD. With the exception of revenues earned from transloading propane at
Northgate, all of the Corporation’s revenues are earned and transacted in USD. Of the Corporation’s nine grain
elevators, seven incur operating expenses that are denominated in USD. All of the Corporation’s grain division
general and administrative expenses are incurred in USD, while a significant portion of the Ceres’ corporate
general and administrative are incurred in USD but recorded in CAD. Thus, all revenues and expenses that are
denominated in USD are translated into CAD using the average exchange rates prevailing at the dates of the
transactions. As a result, the weakened CAD has increased revenues and expenses.
Furthermore, the weakened CAD has a similar effect on the Corporation’s balance sheet. Of the Corporation’s
$330 million total assets, $230 million are denominated in USD, which as at June 30, 2016, totaled US$178
million. (As at March 31, 2015, the Corporation’s total assets were $309 million, with $249 million
denominated in USD, or US$196 million.) The Corporation’s USD denominated assets and liabilities are
translated to CAD at the spot rate as at the reporting date. Similar to the translation effect on revenues and
expenses, the weakened CAD increases the CAD equivalent of the USD denominated assets and liabilities of
As previously announced, along with changing its fiscal year-end from March 31 to June 30, the Corporation
will change its reporting and presentation currency to USD. The Corporation will commence reporting in USD
as at and for the three-month period ending September 30, 2016.
Revenues and Gross Profit
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 that the business deals in will have a relatively equal impact
on sales and cost of sales. Accordingly, management believes it is more important to focus on changes in gross
profit and bushels handled than on changes in revenue dollars.
For the fifteen-months ended June 30, 2016, revenues totaled $505.5 million (for the twelve-months ended
March 31, 2015: $192.8). For the fifteen-months ended June 30, 2016, the Corporation sold 57.3 million bushels
of grain and oilseed compared to 22.6 million bushels for the twelve-months ended March 31, 2015.
For the quarter ended June 30, 2016, revenues totaled $149.3 million compared to $59.3 million for the quarter
ended June 30, 2015, as the Corporation sold 18.7 million bushels of grain and oilseed compared to 5.4 million
for the quarter ended June 30, 2015.
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CERES GLOBAL AG CORP.
June 30, 2015, as funds from the December 2014 Rights Offering were used to pay down the borrowings
on the revolving credit facility during the quarter-ended June 30, 2015.
Impact of Foreign Currency
While the financial accounts of the Corporation are reported in CAD, the Corporation incurs and transacts
revenues and expenses in CAD and USD. With the exception of revenues earned from transloading propane at
Northgate, all of the Corporation’s revenues are earned and transacted in USD. Of the Corporation’s nine grain
elevators, seven incur operating expenses that are denominated in USD. All of the Corporation’s grain division
general and administrative expenses are incurred in USD, while a significant portion of the Ceres’ corporate
general and administrative are incurred in USD but recorded in CAD. Thus, all revenues and expenses that are
denominated in USD are translated into CAD using the average exchange rates prevailing at the dates of the
transactions. As a result, the weakened CAD has increased revenues and expenses.
Furthermore, the weakened CAD has a similar effect on the Corporation’s balance sheet. Of the Corporation’s
$330 million total assets, $230 million are denominated in USD, which as at June 30, 2016, totaled US$178
million. (As at March 31, 2015, the Corporation’s total assets were $309 million, with $249 million
denominated in USD, or US$196 million.) The Corporation’s USD denominated assets and liabilities are
translated to CAD at the spot rate as at the reporting date. Similar to the translation effect on revenues and
expenses, the weakened CAD increases the CAD equivalent of the USD denominated assets and liabilities of
the Corporation.
As previously announced, along with changing its fiscal year-end from March 31 to June 30, the Corporation
will change its reporting and presentation currency to USD. The Corporation will commence reporting in USD
as at and for the three-month period ending September 30, 2016.
Revenues and Gross Profit
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 that the business deals in will have a relatively equal impact
on sales and cost of sales. Accordingly, management believes it is more important to focus on changes in gross
profit and bushels handled than on changes in revenue dollars.
For the fifteen-months ended June 30, 2016, revenues totaled $505.5 million (for the twelve-months ended
March 31, 2015: $192.8). For the fifteen-months ended June 30, 2016, the Corporation sold 57.3 million bushels
of grain and oilseed compared to 22.6 million bushels for the twelve-months ended March 31, 2015.
For the quarter ended June 30, 2016, revenues totaled $149.3 million compared to $59.3 million for the quarter
ended June 30, 2015, as the Corporation sold 18.7 million bushels of grain and oilseed compared to 5.4 million
for the quarter ended June 30, 2015.
5
FY2016 ANNUAL REPORT
9
The table below represents a summary of the components of gross profit for the fiscal periods ended June 30,
2016 and March 31, 2015 and the three-months ended June 30, 2016 and 2015:
(in millions)
Fifteen-month
period ended
June 30, 2016
Twelve-month
period ended
March 31, 2015
Three-month
period ended
June 30, 2016
Three-month
period ended
June 30, 2015
Net trading margin
Storage and rental income
Logistics and energy transloading
Management service revenue
Operating expenses included in Cost of sales
Depreciation expense included in Cost of sales
$
11.4
11.1
1.1
2.0
(21.3)
(5.0)
$
21.8
6.5
-
-
(13.9)
(2.7)
$
5.2
2.5
0.4
-
(4.4)
(1.3)
$
4.6
1.8
0.2
-
(3.9)
(0.8)
Gross profit (loss)
$
(0.7)
$
11.7
$
2.4
$
1.9
For the fifteen-months ended June 30, 2016, the Corporation recognized a gross loss of $0.7 million compared
to a gross profit of $11.7 million for the twelve-months ended March 31, 2015. The decline in gross profit was
primarily driven by a reduction in net trading margin.
Net trading margin
For the fifteen-month period ended June 30, 2016, the Corporation recognized $11.4 million in net trading
margin. Excluding the net trading loss of durum in the fifteen-month period ended June 30, 2016 of $10.3
million, and the durum net trading margin of $6.8 million for the twelve-month period ended March 31, 2015,
total net trading margins total $21.7 million and $15 million for the fifteen-month and twelve-month period
ended June 30, 2016 and 2015, respectively. Consequently, the decline in net trading margin for the fifteen-
month period ended June 30, 2016 compared to the twelve-month period ended June 30, 2015, was driven
primarily by the reduction in the durum wheat trading margin of $17.1 million from prior year. The durum loss
was due to the durum price declines on the Corporation’s durum inventories during the quarter ended December
31, 2015. While price volatility is normal in commodity markets, the drop in durum prices through early
calendar 2015, through 2015’s harvest year, extending through calendar year 2015, was far greater than normal,
as the market moved from near $20 per bushel to below $10 per bushel.
The price decline in the durum market was two-fold: (1.) Canada & U.S. supplies were not as tight as forecasted
earlier in the year, and; (2.) other durum crops around the world produced high yields and increased global
supplies. Since that time the Corporation has implemented a number of measures to better mitigate the risk of
a similar event from reoccurring, which include: (a.) lowering the flat-priced volume limit for trading durum;
(b.) increased the number of steps and involvement of senior management in the decision-making process
around trading durum; (c.) an alternation of the durum business model to focus more on supply chain versus
flat priced trading.
Durum aside and excluding the impact of the weakened CAD, the Corporation’s net trading margin increased
$6.7 million, which was attributable to strong carry income in the futures market along with an increased in
trading activity compared to prior year as evidenced by sales bushels totaling 57.3 million compared to 22.6
million for the twelve-months ended March 31, 2015.
During the quarter ended June 30, 2016, the Corporation’s total net trading margin totaled $5.2 million
compared to $4.6 million for the quarter ended June 30, 2015. The increase in trading margin was most
attributable to the expansion of the Corporation’s commodity trading portfolio and geographical regions into
which the Corporation sold, which included oilseed destined to the Asian market and trading corn into the Latin
American market. While the overall trading margin increased during the quarter ending June 30, 2016 compared
June 30, 2015, the margin per bushel was significantly less at $0.27 compared to $0.85. This was due to a
significant increase in inventory value of products the Corporation was holding during the quarter ending June
30, 2015 and not due to a difference in trading margins.
Storage and rental income
The Corporation’s storage and rental income totaled $11.1 million for the fifteen-months ended June 30, 2016
compared to $6.5 million for the twelve-months ended March 31, 2015. During the fifteen-month period ended
June 30, 2016, the Corporation had, on average, more bushels in-store than during the twelve-month period
March 31, 2015.
During the quarter-ended June 30, 2016, the Corporation’s storage and rental income amounted to $2.5 million
while totaling $1.8 million for the quarter-ended June 30, 2015. The increase in storage for the quarter-ended
June 30, 2016, was attributable to an increase in the number of bushels stored, and the storage and handling
rates for each storage agreement.
Logistics and energy transloading
in the quarter ended June 30, 2016.
Management service revenue
The Corporation earns a service fee for handling liquefied petroleum gas (“LPG” or “propane”) at Northgate.
The Corporation earns all of its propane transloading revenue in CAD. Total propane transloading has amounted
to approximately $1.1 million for the fifteen-months ended June 30, 2016, while $0.4 million was recognized
As we disclosed in our MD&A for the twelve- and three-month period ended March 31, 2016, in March 2013,
the Corporation sold a grain elevator in Ralston, Wyoming, and a related barley seed plant in Powell, Wyoming,
to Briess. As part of the sale, the Corporation agreed to manage the facility for Briess for three years, and to,
among other things, contract malting barley with producers on behalf of Briess. If the Corporation met certain
annual performance targets based on the number of bushels contracted, Ceres would receive a contingency
payment at the end of the three year term of USD $1.5 million. In March 2016, the Corporation earned and
recognized the contingency following the completion of the final year’s barley contracting for crop year 2016,
receiving USD $1.5 million.
Operating expenses and depreciation
A significant majority of the Corporation’s operating expenses are incurred in USD, and the Corporation has
seven operating facilities in the United States. The impact of the USD-to-CAD fluctuation is significant to
operating and depreciation expense. A majority of the operating expenses incurred at the Corporation’s Port
Colborne, Ontario, and Northgate, Saskatchewan, facilities are incurred in CAD.
For the fifteen-month period ended June 30, 2016, operating and depreciation expenses totaled $26.3 million
compared to $16.6 for the twelve-month period ended March 31, 2015. Operating and depreciation expenses
from operating Northgate total $5.2 million primarily driven by labor and depreciation expense with the
commencement of the grain operations, and the high-speed grain terminal being placed into service and
depreciating during the 15 months ended June 30, 2016. Excluding Northgate expenses, total operating and
depreciation expenses amounted to $21.1 million. The largest operating expense categories that make up the
$21.1 million are labor expenses of $7.7 million, depreciation expense of $3.9 million, property tax of $2.3
million, and utilities expense of $2.2 million.
For the three-month period ending June 30, 2016, total operating and depreciation expense totaled $5.7 million
compared to $4.7 million for the same period in 2015. On a CAD basis, much of the increase was driven by
operations at Northgate increasing $0.9 million in operating expenses and depreciation compared to the same
6
7
10
CERES GLOBAL AG CORP.
American market. While the overall trading margin increased during the quarter ending June 30, 2016 compared
June 30, 2015, the margin per bushel was significantly less at $0.27 compared to $0.85. This was due to a
significant increase in inventory value of products the Corporation was holding during the quarter ending June
30, 2015 and not due to a difference in trading margins.
Storage and rental income
The Corporation’s storage and rental income totaled $11.1 million for the fifteen-months ended June 30, 2016
compared to $6.5 million for the twelve-months ended March 31, 2015. During the fifteen-month period ended
June 30, 2016, the Corporation had, on average, more bushels in-store than during the twelve-month period
March 31, 2015.
During the quarter-ended June 30, 2016, the Corporation’s storage and rental income amounted to $2.5 million
while totaling $1.8 million for the quarter-ended June 30, 2015. The increase in storage for the quarter-ended
June 30, 2016, was attributable to an increase in the number of bushels stored, and the storage and handling
rates for each storage agreement.
Logistics and energy transloading
The Corporation earns a service fee for handling liquefied petroleum gas (“LPG” or “propane”) at Northgate.
The Corporation earns all of its propane transloading revenue in CAD. Total propane transloading has amounted
to approximately $1.1 million for the fifteen-months ended June 30, 2016, while $0.4 million was recognized
in the quarter ended June 30, 2016.
Management service revenue
As we disclosed in our MD&A for the twelve- and three-month period ended March 31, 2016, in March 2013,
the Corporation sold a grain elevator in Ralston, Wyoming, and a related barley seed plant in Powell, Wyoming,
to Briess. As part of the sale, the Corporation agreed to manage the facility for Briess for three years, and to,
among other things, contract malting barley with producers on behalf of Briess. If the Corporation met certain
annual performance targets based on the number of bushels contracted, Ceres would receive a contingency
payment at the end of the three year term of USD $1.5 million. In March 2016, the Corporation earned and
recognized the contingency following the completion of the final year’s barley contracting for crop year 2016,
receiving USD $1.5 million.
Operating expenses and depreciation
A significant majority of the Corporation’s operating expenses are incurred in USD, and the Corporation has
seven operating facilities in the United States. The impact of the USD-to-CAD fluctuation is significant to
operating and depreciation expense. A majority of the operating expenses incurred at the Corporation’s Port
Colborne, Ontario, and Northgate, Saskatchewan, facilities are incurred in CAD.
For the fifteen-month period ended June 30, 2016, operating and depreciation expenses totaled $26.3 million
compared to $16.6 for the twelve-month period ended March 31, 2015. Operating and depreciation expenses
from operating Northgate total $5.2 million primarily driven by labor and depreciation expense with the
commencement of the grain operations, and the high-speed grain terminal being placed into service and
depreciating during the 15 months ended June 30, 2016. Excluding Northgate expenses, total operating and
depreciation expenses amounted to $21.1 million. The largest operating expense categories that make up the
$21.1 million are labor expenses of $7.7 million, depreciation expense of $3.9 million, property tax of $2.3
million, and utilities expense of $2.2 million.
For the three-month period ending June 30, 2016, total operating and depreciation expense totaled $5.7 million
compared to $4.7 million for the same period in 2015. On a CAD basis, much of the increase was driven by
operations at Northgate increasing $0.9 million in operating expenses and depreciation compared to the same
7
FY2016 ANNUAL REPORT
11
period in the prior year. The increase in Northgate depreciation expense of $0.4 million is a result of placing
the assets from the final phase of construction into service which include a concrete slipform, the concrete grain
bins, and cleaner dust system. Excluding Northgate, the operating and depreciation expense is comparable for
the quarter ended June 30, 2016 to the quarter ended June 30, 2015.
The table below represents 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 fiscal periods ended June
30, 2016 and March 31, 2015 and the three-months ended June 30, 2016 and 2015.
(Bushels in millions)
Total bushels handled
Fifteen-month
period ended
June 30, 2016
Twelve-month
period ended
March 31, 2015
Three-month
period ended
June 30, 2016
Three-month
period ended
June 30, 2015
55.8
37.9
18.7
6.7
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 fifteen-month and twelve-months ended June
30, 2016 and March 31, 2015, respectively, along with the three-month periods ended June 30, 2016 and 2015.
(Dollars per bushel handled)
Average gross profit before undernoted
expenses
Fifteen-month
period ended
June 30, 2016
Twelve-month
period ended
March 31, 2015
Three-month
period ended
June 30, 2016
Three-month
period ended
June 30, 2015
$
0.40
$
0.75
$
0.41
$
0.96
Operating and depreciation expense
(0.47)
(0.44)
(0.30)
(0.70)
Gross profit (loss) per bushel handled
$
(0.07)
$
0.31
$
0.11
$
0.26
* Exclusive of management service and logistics and energy transloading revenues
Gross profit analysis for the fifteen-month period ended June 30, 2016
Gross profit per bushel handled was a loss of 7-cents per bushel compared to a profit of 3-cents per bushel for
the twelve-months ended March 31, 2015. The decline was driven by a reduction in net trading margin per
bushel handled of company-owned grain, which was predominantly driven by the trading losses the Corporation
experienced in durum during the fifteen-month period ended June 30, 2016. Excluding the durum wheat net
trading margin (loss) per bushel handled for the fifteen-month ended June 30, 2016 and the twelve-month period
ended March 31, 2015, net trading margins totaled $0.84 compared to $1.07, respectively for the two periods.
Furthermore, the Corporation’s storage and rental income per bushel handled increased in the fifteen-months
ended June 30, 2016 compared the twelve-months ended March 31, 2015. The favorable change is attributable
to: (1) a decline in third-party bushels handled compared to the twelve-months ended March 31, 2015; (2)
having more third-party storage bushels held in-store on average throughout the fifteen-months ended June 30,
2016 compared to the twelve-months ended March 31, 2015; (3) at more favorable storage and handling rates
as per the third-party storage contracts. The slight increase in operating and depreciation expense is
predominantly driven by operating expenses incurred at Northgate.
Gross profit analysis for the three-month period ended June 30, 2016
Gross profit per bushel handled for the three-month period ended June 30, 2016 was 11-cents compared to 26-
cents for the same period in 2015. The reduction in gross profit per bushel handled was driven by a decline in
the net trading margin per bushel handled and storage and rental income per bushels handled. The decline was
predominantly driven by a three-fold increase in the amount of third-party bushels handled while storage and
rental income increase less than double. Operating and depreciation expense per bushel handled declined to 30-
cents for the three-months ended June 30, 2016 compared to 70-cents for the same three months in 2015. While
total bushels handled increased nearly 3-fold from the three-months ended June 30, 2015 to 2016, expense only
increased just over 1.5-times due to a portion of these costs being fixed.
General and Administrative Expenses
General and administrative expense is composed of three components: corporate level administrative expenses,
administrative expenses associated with operating the 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), and
the revaluation of the provision for future payments to Front Street Capital. In addition, the corporate
administrative expenses are inclusive of non-grain business growth initiatives.
The following table sets out the components of the Corporation’s consolidated general and administrative
expenses for the fiscal periods ended June 30, 2016 and March 31, 2015 and the three-months ended June 30,
2016 and 2015:
(in millions)
Corporate administration
Grain Division administration
Revaluation of provision of Front Street Capital
Fifteen-month
Twelve-month
period ended
period ended
June 30, 2016
March 31, 2015
Three-month
period ended
June 30, 2016
Three-month
period ended
June 30, 2015
$
5.8
$
6.1
$
1.3
$
1.1
7.6
(0.2)
5.2
(0.6)
1.5
-
1.2
0.2
Total general and administrative expense
$
13.2
$
10.7
$
2.8
$
2.5
For the fifteen-month period ended June 30, 2016, general and administrative expenses totaled $13.2 million
compared to $10.7 million in the twelve-month period ended March 31, 2015.
Corporate administrative expenses declined due to a reduction in spending. In the previous year, the corporation
incurred expenses in connection with the finalization and build-out of Northgate prior to commencing
operations there, in addition to expenses indirectly associated with the corporations rights offering (the “Rights
Offering”), which were not direct costs relating to share issuance. In the twelve-month period ended March 31,
2015, the Corporation incurred non-capitalized consulting and third-party service costs associated with
Northgate, including legal fees and licensing, and site services, while those expenses were nominal in the
fifteen-month period ended June 30, 2016.
The grain division’s administrative expenses for the fifteen-month period ended June 30, 2016 totaled $7.6
million. The largest administrative expense categories that make up the $7.6 million are labor expenses of $5.2
million, accounting and legal services of $0.5 and travel expenses of $0.4 million. The increase in grain division
administrative expenses is primarily driven by labor and personnel costs, as the Corporation expanded its grain
trading and merchandising group and grain settlements team, and added an internal human resources manager.
The magnitude of the revaluation in the provision for future payments due to Front Street Capital is
predominantly due to the inverse correlation between the liability and the Corporation’s stock price. During the
twelve-month period ending March 31, 2015, the stock price declined at a greater rate compared to the fifteen-
month period ended June 30, 2016. This led to a reduction in the unrealized gain due to revaluation of the
8
9
12
CERES GLOBAL AG CORP.
Gross profit analysis for the three-month period ended June 30, 2016
Gross profit per bushel handled for the three-month period ended June 30, 2016 was 11-cents compared to 26-
cents for the same period in 2015. The reduction in gross profit per bushel handled was driven by a decline in
the net trading margin per bushel handled and storage and rental income per bushels handled. The decline was
predominantly driven by a three-fold increase in the amount of third-party bushels handled while storage and
rental income increase less than double. Operating and depreciation expense per bushel handled declined to 30-
cents for the three-months ended June 30, 2016 compared to 70-cents for the same three months in 2015. While
total bushels handled increased nearly 3-fold from the three-months ended June 30, 2015 to 2016, expense only
increased just over 1.5-times due to a portion of these costs being fixed.
General and Administrative Expenses
General and administrative expense is composed of three components: corporate level administrative expenses,
administrative expenses associated with operating the 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), and
the revaluation of the provision for future payments to Front Street Capital. In addition, the corporate
administrative expenses are inclusive of non-grain business growth initiatives.
The following table sets out the components of the Corporation’s consolidated general and administrative
expenses for the fiscal periods ended June 30, 2016 and March 31, 2015 and the three-months ended June 30,
2016 and 2015:
(in millions)
Fifteen-month
period ended
June 30, 2016
Twelve-month
period ended
March 31, 2015
Three-month
period ended
June 30, 2016
Three-month
period ended
June 30, 2015
Corporate administration
Grain Division administration
Revaluation of provision of Front Street Capital
$
5.8
7.6
(0.2)
$
6.1
5.2
(0.6)
$
1.3
1.5
-
$
1.1
1.2
0.2
Total general and administrative expense
$
13.2
$
10.7
$
2.8
$
2.5
For the fifteen-month period ended June 30, 2016, general and administrative expenses totaled $13.2 million
compared to $10.7 million in the twelve-month period ended March 31, 2015.
Corporate administrative expenses declined due to a reduction in spending. In the previous year, the corporation
incurred expenses in connection with the finalization and build-out of Northgate prior to commencing
operations there, in addition to expenses indirectly associated with the corporations rights offering (the “Rights
Offering”), which were not direct costs relating to share issuance. In the twelve-month period ended March 31,
2015, the Corporation incurred non-capitalized consulting and third-party service costs associated with
Northgate, including legal fees and licensing, and site services, while those expenses were nominal in the
fifteen-month period ended June 30, 2016.
The grain division’s administrative expenses for the fifteen-month period ended June 30, 2016 totaled $7.6
million. The largest administrative expense categories that make up the $7.6 million are labor expenses of $5.2
million, accounting and legal services of $0.5 and travel expenses of $0.4 million. The increase in grain division
administrative expenses is primarily driven by labor and personnel costs, as the Corporation expanded its grain
trading and merchandising group and grain settlements team, and added an internal human resources manager.
The magnitude of the revaluation in the provision for future payments due to Front Street Capital is
predominantly due to the inverse correlation between the liability and the Corporation’s stock price. During the
twelve-month period ending March 31, 2015, the stock price declined at a greater rate compared to the fifteen-
month period ended June 30, 2016. This led to a reduction in the unrealized gain due to revaluation of the
9
FY2016 ANNUAL REPORT
13
provision for the fifteen-month period ended June 30, 2016 compared to the twelve-month period ended March
31, 2015.
exercised and converted to common shares, or are extinguished upon the expiration of the outstanding warrants,
it will not result in the outlay of any cash by the Corporation.
General and administrative expense increased $0.3 million for the three-month period ending March 31, 2016
compared to 2015. The increase was driven by $0.2 million increase in labor and personnel costs, as the
Corporation expanded its grain trading and merchandising group. Additionally, the Corporation incurred
increased legal expenses related to the legal dispute brought against the Corporation as we reported and
disclosed within footnote 21 in the Annual Financial Statements.
Finance Income
For the fifteen-month period ended June 30, 2016, finance income totalled $1.6 million compared to finance
loss of $189 thousand during the twelve-month period end March 31, 2015. For the quarter ended June 30,
2016, the Corporation incurred a finance loss of $130 thousand, which represented a $43 thousand increase
compared to the finance loss of $87 for the quarter ended June 30, 2015. Finance income is composed of realized
and unrealized losses on foreign exchange transactions and currency hedging transactions along with
revaluation gains of portfolio investments.
For the fifteen-month period ended June 30, 2016, the increase compared to the twelve-month period ended
March 31, 2015 is attributable to the revaluation of the Corporations investment in Canterra Seeds Holdings,
Ltd. (“Canterra” or “the Investee”) as we previously reported for the quarter ended September 30, 2015. Until
September 30, 2015, the Corporation held a 25% equity interest in Canterra that had a carrying value of
$2,168,767. This investment, accounted for using the equity method, was classified on the Consolidated
Balance Sheet as “Investments in associates”. During the quarter ended September 30, 2015, the Investee issued
additional common equity shares, resulting in the dilution of the Corporation’s equity interest to 17%. As such,
the Corporation no longer had significant influence over the financial and operating policies of the Investee.
Therefore, during the fifteen-month period ended June 30, 2016, Ceres reclassified its investment to portfolio
investments and recorded it at fair value, recognizing a gain of $1,368,247 classified within the Consolidated
Statement of Comprehensive Income as “Finance income”.
Revaluation of Derivative Warrant Liability
As described in Note 15 of the Consolidated Financial Statements for the fifteen-month period ended June 30,
2016 and twelve-month period ended March 31, 2015, in connection with the completion of the Rights Offering,
on December 4, 2014, Ceres issued an aggregate of 2,083,334 warrants to the stand-by purchasers. The warrants
issued were conditional upon approval at the Corporation’s annual general meeting (“AGM”), which was
obtained at the AGM on August 6, 2015. Furthermore, the stand-by warrants were issued at a fixed exercise
price of $5.84 and are each exercisable into one common share of the Corporation. The warrants have an expiry
date 24 months after issuance, or December 4, 2016.
In the event that the warrants are being exercised prior to the occurrence of a change of control of the
Corporation, but after a transaction that will cause a change of control has been publicly announced, in lieu of
exercising the warrants, the holders of warrants can elect a cashless exercise to receive common shares equal
to: the difference between the ten-day VWAP of the Corporation’s stock price and $5.84; multiplied by the
number of common shares in respect of which the election is made; divided by the ten-day VWAP of the
Corporation’s stock price. If a warrant holder exercises this option, there will be variability in the number of
shares issued per warrant.
In accordance with IFRS, a contract to issue a variable number of shares fails to meet the definition of equity
and must instead be classified as a derivative liability and measured at fair value with changes in the fair value
recognized in the statement of operations and comprehensive loss at each period end. If the warrants are
10
14
CERES GLOBAL AG CORP.
As at June 30, 2016, the fair value of the Warrants is estimated using the Black-Scholes pricing model with the
following assumptions: an average risk free interest rate of 0.52%; an average expected volatility factor of
15.68%; an expected dividend yield of nil; and expected remaining life of 0.43 years. The fair value of the
stand-by warrants as at June 30, 2016, was estimated at $136,000 (as at March 31, 2015: $1,719,000).
Revaluation of derivative warrant liability was an unrealized gain of $1.6 million for the fifteen-month period
ended June 30, 2016 compared to an unrealized loss of $75 thousand for the twelve-month period ended March
31, 2015. For the quarter ended June 30, 2016, the revaluation of derivative warrant liability was an unrealized
loss of $40 thousand compared to an unrealized loss of $836 thousand for the quarter ended June 30, 2015.
An unrealized gain or loss for a particular period is directly related to the change in the fair value, which is
primarily driven by the remaining life of the warrants at the revaluation date. For the fifteen-month period from
April 1, 2015 to June 30, 2016, the unrealized gain of $1.6 million is attributable to the decrease in the life of
the warrants from 1.68 years remaining at March 31, 2015, to 0.43 years at June 30, 2016. Additionally, for the
fifteen-month period from April 1, 2015 to June 30, 2016, our stock price decreased from $6.00 at March 31,
2015 to $5.35 at June 30, 2016, which also decreased the fair value.
As the unrealized gain or loss for a particular period is inversely related to the change in the stock price for the
respective period, the $0.40 increase in the stock price for the three-month period from March 31, 2016 to June
30, 2016 resulted in an unrealized loss for the quarter.
Interest Expense
(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
Fifteen-month
Twelve-month
period ended
period ended
June 30, 2016
March 31, 2015
Three-month
period ended
June 30, 2016
Three-month
period ended
June 30, 2015
$
(2,682.7)
$
(1,761.2)
$
(581.4)
$
(201.8)
(234.5)
(2,215.8)
(860.4)
115.8
(137.5)
(402.4)
(742.4)
137.0
(438.5)
(221.2)
-
-
(15.1)
(423.3)
(127.8)
1.5
Total general and administrative expense
$
(5,877.6)
$
(2,906.5)
$
(1,241.1)
$
(766.5)
For the fifteen-months ended June 30, 2016, interest expense totaled $5.9 million and $2.9 million for the
twelve-month period ended March 31, 2015. Interest expense for the fifteen months ended June 30, 2016
included fifteen months of interest on the term loan that was obtained during the prior fiscal year on December
30, 20141. The Corporation’s daily average borrowings on the revolving line of credit was $51.4 million during
the fifteen months ended June 30, 2016.
For the quarter ended June 30, 2016, interest expense totaled $1.2 million compared to $767 thousand for the
quarter ended June 30, 2015. The increase was driven by the interest on the revolving credit facility, which
increased $379.6 for three months ended June 30, 2016 compared to the same three months in 2015. The average
daily borrowings for the quarter ended June 30, 2016 increased from $21.7 million USD to $55.8 million USD
for the quarters ended June 30, 2015 and June 30, 2016, respectively, as funds from the December 2014 Rights
1 While the Corporation’s corporate term debt was obtained on December 30, 2014, prior to this date, and commencing on
June 27, 2014, the Corporation had obtained a bridge loan from Macquarie Bank in the amount of US$20 million. Since
the bridge loan was directly used to fund the initial build-out at Northgate, the related interest expense was capitalized as
financing costs to property, plant and equipment.
11
exercised and converted to common shares, or are extinguished upon the expiration of the outstanding warrants,
it will not result in the outlay of any cash by the Corporation.
As at June 30, 2016, the fair value of the Warrants is estimated using the Black-Scholes pricing model with the
following assumptions: an average risk free interest rate of 0.52%; an average expected volatility factor of
15.68%; an expected dividend yield of nil; and expected remaining life of 0.43 years. The fair value of the
stand-by warrants as at June 30, 2016, was estimated at $136,000 (as at March 31, 2015: $1,719,000).
Revaluation of derivative warrant liability was an unrealized gain of $1.6 million for the fifteen-month period
ended June 30, 2016 compared to an unrealized loss of $75 thousand for the twelve-month period ended March
31, 2015. For the quarter ended June 30, 2016, the revaluation of derivative warrant liability was an unrealized
loss of $40 thousand compared to an unrealized loss of $836 thousand for the quarter ended June 30, 2015.
An unrealized gain or loss for a particular period is directly related to the change in the fair value, which is
primarily driven by the remaining life of the warrants at the revaluation date. For the fifteen-month period from
April 1, 2015 to June 30, 2016, the unrealized gain of $1.6 million is attributable to the decrease in the life of
the warrants from 1.68 years remaining at March 31, 2015, to 0.43 years at June 30, 2016. Additionally, for the
fifteen-month period from April 1, 2015 to June 30, 2016, our stock price decreased from $6.00 at March 31,
2015 to $5.35 at June 30, 2016, which also decreased the fair value.
As the unrealized gain or loss for a particular period is inversely related to the change in the stock price for the
respective period, the $0.40 increase in the stock price for the three-month period from March 31, 2016 to June
30, 2016 resulted in an unrealized loss for the quarter.
Interest Expense
(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
Fifteen-month
period ended
June 30, 2016
Twelve-month
period ended
March 31, 2015
Three-month
period ended
June 30, 2016
Three-month
period ended
June 30, 2015
$
(2,682.7)
(234.5)
(2,215.8)
(860.4)
115.8
$
(1,761.2)
(137.5)
(402.4)
(742.4)
137.0
$
(581.4)
-
(438.5)
(221.2)
-
$
(201.8)
(15.1)
(423.3)
(127.8)
1.5
Total general and administrative expense
$
(5,877.6)
$
(2,906.5)
$
(1,241.1)
$
(766.5)
For the fifteen-months ended June 30, 2016, interest expense totaled $5.9 million and $2.9 million for the
twelve-month period ended March 31, 2015. Interest expense for the fifteen months ended June 30, 2016
included fifteen months of interest on the term loan that was obtained during the prior fiscal year on December
30, 20141. The Corporation’s daily average borrowings on the revolving line of credit was $51.4 million during
the fifteen months ended June 30, 2016.
For the quarter ended June 30, 2016, interest expense totaled $1.2 million compared to $767 thousand for the
quarter ended June 30, 2015. The increase was driven by the interest on the revolving credit facility, which
increased $379.6 for three months ended June 30, 2016 compared to the same three months in 2015. The average
daily borrowings for the quarter ended June 30, 2016 increased from $21.7 million USD to $55.8 million USD
for the quarters ended June 30, 2015 and June 30, 2016, respectively, as funds from the December 2014 Rights
1 While the Corporation’s corporate term debt was obtained on December 30, 2014, prior to this date, and commencing on
June 27, 2014, the Corporation had obtained a bridge loan from Macquarie Bank in the amount of US$20 million. Since
the bridge loan was directly used to fund the initial build-out at Northgate, the related interest expense was capitalized as
financing costs to property, plant and equipment.
11
FY2016 ANNUAL REPORT
15
Offering were used to pay down the borrowings on the revolving credit facility during the quarter-ended June
30, 2015.
For the fifteen-month period ended June 30, 2016 and twelve month period ended March 31, 2015, the spot rate
at which USD denominated assets and liabilities are translated to CAD along with the daily average USD to
CAD rates for comparative purposes were as follows:
Income Taxes
Income taxes for the fifteen-month period ended June 30, 2016 amounted to a recovery of $0.3 million
compared to an expense of $0.4 million for the twelve months ended March 31, 2015. The expense in the prior
year related to current income taxes incurred while the recovery in 2016 relates to deferred income taxes.
Income taxes expense for the quarter ended June 30, 2016 totalled $25 thousand compared to a recovery of
$320 thousand for the quarter ended June 30, 2015.
Share of Net Income (Loss) in Investments in Associates
For the fifteen months ended June 30, 2016, the Corporation’s share of net income in its investment in associates
was $0.3 million compared to $1.2 million for the twelve-month period ended March 31, 2015. For the quarter
ended June 30, 2016, the Corporation’s share of a net loss in its investment in associates was $41 thousand
compared to net income of $304 thousand for the quarter ended June 30, 2015.
For the fifteen-months ended June 30, 2016, the decline is primarily driven by prior year’s recognition of equity
share of income in Canterra of $0.9 million. As disclosed above, upon dilution due to the Investee issuing
additional common equity shares and Ceres no longer having significant influence over the financial and
operating policies of the Investee, Ceres records its investments in Canterra at fair value as classified on the
Consolidated Balance Sheet within “Portfolio investments”. Any change in the fair value is recorded in Finance
income within the Consolidated Statement of Comprehensive Loss.
In the three-month period ended June 30, 2015, the Corporation recognized a gain in its net share in investments
in associates of $304 thousand: $315 thousand related to a gain associated with Canterra, and a loss of $11
thousand recognized in Ceres’ portion of net income earned by SSR. For the three months ended March 31,
2016, the Corporation’s share of a net loss of $41 thousand related to the Stewart Southern Railway Inc. The
decline in the share of net income (loss) in investment in associates was driven by a decline SSR’s profitability.
Other Comprehensive income (loss) for the period
Net investment hedge – net income
During the fifteen-month period ended June 30, 2016, the Corporation hedged a portion of its investment in a
US subsidiary through US dollars futures contracts, which mitigated the foreign currency risk arising from the
subsidiary’s net assets. The Corporation settled the USD futures hedge and realized a gain of $1.4 million (2015:
nil), which has been recognized in other comprehensive income.
Gain (loss) on translation of foreign currency accounts of foreign operations
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.
For the fifteen-month period ended June 30, 2016, the Corporation recognized a net loss on translation of foreign
accounts totaling $37 thousand, compared to a gain of $14.1 million for the twelve-month period ended March
31, 2015.
The Corporation will generally recognize a gain on translation of foreign currency accounts when the spot rate
from USD to CAD as at the balance sheet date is weaker than the average exchange rate for the period. When
the spot rate at the balance sheet rate is stronger than the average rate, a loss is recognized.
Fifteen-month
Twelve-month
period ended
period ended
June 30, 2016
March 31, 2015
Three-month
period ended
June 30, 2016
Three-month
period ended
June 30, 2015
Spot rate at balance sheet
Average exchange rate
1.30
1.31
1.27
1.14
1.30
1.29
1.24
1.23
Return on shareholders' equity
Weighted-average number of
Basic and fully diluted earnings
(loss) per share
EBITDA
EBITDA per share
Cash and cash equivalents and
Shareholders' equity, as at
reporting date
Shareholders' equity per common
2. QUARTERLY FINANCIAL DATA
Reporting dates
6/30/2016
3/31/2016
12/31/2015
9/30/2015
6/30/2015
3/31/2015
12/31/2014
9/30/2014
(in millions except per share)
Q5 2016
Q4 2016
Q3 2016
Q2 2016
Q1 2016
Q4 2015
Q3 2015
Q2 2015
3 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
Revenues
Gross profit (loss)
$
149.3
$
119.4
$
82.3
$
95.2
$
59.3
$
54.5
$
69.7
$
17.1
$
2.4
$
3.9
$
(10.4)
$
1.5
$
1.9
$
(0.2)
$
5.4
$
5.3
Income (loss) from operations
$
(0.4)
$
1.3
$
(13.1)
$
(1.1)
$
(0.6)
$
(2.5)
$
3.3
$
2.4
Net income (loss)
$
(1.9)
$
1.2
$
(13.4)
$
0.1
$
(1.7)
$
(3.5)
$
2.3
$
1.9
-0.9%
0.6%
-6.2%
0.0%
-0.8%
-1.6%
1.1%
1.4%
common shares for the quarter
$
26.9
$
27.0
$
27.1
27.1
27.1
27.1
17.9
14.2
$
(0.07)
$
0.04
$
(0.50)
$
0.00
$
(0.06)
$
(0.13)
$
0.13
$
0.13
$
0.7
$
2.6
$
(11.9)
$
1.3
$
-
$
(1.6)
$
3.8
$
3.2
$
0.03
$
0.10
$
(0.44)
$
0.05
$
-
$
(0.06)
$
0.21
$
0.23
portfolio investments, at reporting date (1)
$
4.2
$
10.4
$
8.4
$
67.1
$
4.4
$
6.0
$
86.3
$
13.7
$
204.2
$
207.6
$
215.1
$
224.5
$
213.8
$
218.8
$
214.1
$
135.0
share, as at reporting date
$
7.59
$
7.68
$
7.95
$
8.30
$
7.90
$
8.09
$
7.91
$
9.50
1) Inclusive of cheques issued in excess of cash on hand
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 significant portion of revenue is generated through 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
12
13
16
CERES GLOBAL AG CORP.
For the fifteen-month period ended June 30, 2016 and twelve month period ended March 31, 2015, the spot rate
at which USD denominated assets and liabilities are translated to CAD along with the daily average USD to
CAD rates for comparative purposes were as follows:
Fifteen-month
period ended
June 30, 2016
Twelve-month
period ended
March 31, 2015
Three-month
period ended
June 30, 2016
Three-month
period ended
June 30, 2015
Spot rate at balance sheet
Average exchange rate
1.30
1.31
1.27
1.14
1.30
1.29
1.24
1.23
2. QUARTERLY FINANCIAL DATA
Reporting dates
6/30/2016
3/31/2016
12/31/2015
9/30/2015
6/30/2015
3/31/2015
12/31/2014
9/30/2014
(in millions except per share)
Q5 2016
Q4 2016
Q3 2016
Q2 2016
Q1 2016
Q4 2015
Q3 2015
Q2 2015
3 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
Revenues
Gross profit (loss)
$
149.3
$
119.4
$
82.3
$
95.2
$
59.3
$
54.5
$
69.7
$
17.1
$
2.4
$
3.9
$
(10.4)
$
1.5
$
1.9
$
(0.2)
$
5.4
$
5.3
Income (loss) from operations
$
(0.4)
$
1.3
$
(13.1)
$
(1.1)
$
(0.6)
$
(2.5)
$
3.3
$
2.4
Net income (loss)
$
(1.9)
$
1.2
$
(13.4)
$
0.1
$
(1.7)
$
(3.5)
$
2.3
$
1.9
Return on shareholders' equity
Weighted-average number of
-0.9%
0.6%
-6.2%
0.0%
-0.8%
-1.6%
1.1%
1.4%
common shares for the quarter
$
26.9
$
27.0
$
27.1
27.1
27.1
27.1
17.9
14.2
Basic and fully diluted earnings
(loss) per share
EBITDA
EBITDA per share
Cash and cash equivalents and
$
(0.07)
$
0.04
$
(0.50)
$
0.00
$
(0.06)
$
(0.13)
$
0.13
$
0.13
$
0.7
$
2.6
$
(11.9)
$
1.3
$
-
$
(1.6)
$
3.8
$
3.2
$
0.03
$
0.10
$
(0.44)
$
0.05
$
-
$
(0.06)
$
0.21
$
0.23
portfolio investments, at reporting date (1)
$
4.2
$
10.4
$
8.4
$
67.1
$
4.4
$
6.0
$
86.3
$
13.7
Shareholders' equity, as at
reporting date
Shareholders' equity per common
$
204.2
$
207.6
$
215.1
$
224.5
$
213.8
$
218.8
$
214.1
$
135.0
share, as at reporting date
$
7.59
$
7.68
$
7.95
$
8.30
$
7.90
$
8.09
$
7.91
$
9.50
1) Inclusive of cheques issued in excess of cash on hand
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 significant portion of revenue is generated through 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
13
FY2016 ANNUAL REPORT
17
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. Therefore, management of the company
believes it is more important to focus on changes in gross profit and bushels handled 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.
3. LIQUIDITY & CASH FLOW
(in thousands)
Net Cash Provided by (Used in)
Operating activities
Investing activities
Net Cash Used Before Financing Activities
Financing Activities
Foreign Exchange Cash Flow Adjustment on Accounts
Denominated in a Foreign Currency
Decrease in Cash and Cash Equivalents
Fifteen-month
period ended
June 30, 2016
Twelve-month
period ended
March 31, 2016
$
7,434
(39,258)
(31,824)
29,024
$
(22,724)
(22,550)
(45,274)
44,022
(2,478)
(5,621)
$
(5,278)
$
(6,873)
Cash and Cash Equivalents (Outstanding cheques)
$
(143)
$
5,136
Operating Activities
Cash provided operating activities was $7.4 million for the fifteen month period ended June 30, 2016, $30.1
greater than the twelve months ending March 31, 2015 predominantly due to the change in non-cash working
capital accounts of $44.4 million from a net decrease of $24.0 million for the twelve months ended March 31,
2015, to an increase of $20.4 million for the fifteen months ended June 30, 2016. The change in working capital
was partially offset by the increase in net loss of $14.4 million, from a net loss of $1.4 million for the twelve-
month period ended March 31, 2015, compared to a net loss of $18.8 million for the fifteen months in ended
June 30, 2016.
Investing Activities
The Corporation’s primary investing activities are acquisitions of property, plant and equipment. During the
fifteen months ended June 30, 2016, cash used in investing activities were $39.3 million, which comprised of
additions of property, plant and equipment of $41.2 million, offset by the proceeds of $1.9 million from the sale
of the Electric Steel facility. The cash used for investing activities at NCLC totaled $33.5 million of the $41.2
million for the fifteen-month period ended June 30, 2016.
Financing Activities
During the fifteen months ended June 30, 2016, the Corporation had $29.0 million in cash provided by financing
activities compared to $44.0 million for twelve months March 31, 2015. The $29.0 million in cash provided by
financing activities for the fifteen-month period ended June 30, 2016 consisted primarily of borrowings on the
revolving credit facility. The $44.0 million received from financing activities for the twelve months end March
31, 2015, was inclusive of net proceeds of $73.6 million received from the Rights Offering in December 2014,
which was used to pay down debt of $56.9M. Additionally, the Corporation received $29.0 million from the
term loan credit facility.
Available Sources of Liquidity
The Corporation’s sources of liquidity as at June 30, 2016 include available funds under its revolving credit
facility (the “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 are expected to be funded by cash on hand and borrowing against the
Credit Facility. Any additional debt incurred is expected to be serviced by the anticipated increases in cash flow
and will only be borrowed within the Corporation’s debt covenant limits.
In addition, the Corporation’s Credit Facility at June 30, 2016 contains certain covenants, including a covenant
that the company maintain minimum working capital of not less than $30 million. As at June 30, 2016 the
Corporation’s working capital – defined as current assets less current liabilities – totaled $73.6 million. In
addition to working capital, the covenants include the maintenance of “consolidated debt” to “consolidated
tangible net worth” (as defined in the agreement) of not more than 4.0 to 1.0; consolidated tangible net worth
of not less than $160 million; certain limitations on capital expenditures and interest coverage ratio of not less
than 1.15. As at June 30, 2016 and March 31, 2015, the Corporation was in compliance with all of the above
As at June 30, 2016 and March 31, 2015, the following are the contractual maturities of financial liabilities,
Bank indebtedness
$
72,014,760
$
72,337,860
$
72,337,860
$
-
$
-
$
-
Accounts payable and accrued liabilities
20,738,687
20,738,687
20,738,687
Carrying
amount
Contractual
cash flows
1 year
2 years
3 to
5 years
More than
5 years
-
-
-
3,327,501
3,327,501
3,327,501
95,000
136,000
95,000
136,000
95,000
136,000
29,671,371
30,631,066
2,127,866
6,478,000
22,025,200
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Carrying
amount
Contractual
cash flows
1 year
2 years
3 to
5 years
More than
5 years
$
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
mentioned financial covenants.
Liquidity risk
excluding interest payments:
June 30, 2016
Provision for future payments to Front Street Capital
Repurchase obligations
Derivatives
Warrants
Long-term debt (Note 10)
March 31, 2015
Bank indebtedness
Accounts payable and accrued liabilities
Repurchase obligations
Derivatives
Provision for future payments to Front Street Capital
Warrants
Long-term debt
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.
14
15
18
CERES GLOBAL AG CORP.
Available Sources of Liquidity
The Corporation’s sources of liquidity as at June 30, 2016 include available funds under its revolving credit
facility (the “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 are expected to be funded by cash on hand and borrowing against the
Credit Facility. Any additional debt incurred is expected to be serviced by the anticipated increases in cash flow
and will only be borrowed within the Corporation’s debt covenant limits.
In addition, the Corporation’s Credit Facility at June 30, 2016 contains certain covenants, including a covenant
that the company maintain minimum working capital of not less than $30 million. As at June 30, 2016 the
Corporation’s working capital – defined as current assets less current liabilities – totaled $73.6 million. In
addition to working capital, the covenants include the maintenance of “consolidated debt” to “consolidated
tangible net worth” (as defined in the agreement) of not more than 4.0 to 1.0; consolidated tangible net worth
of not less than $160 million; certain limitations on capital expenditures and interest coverage ratio of not less
than 1.15. As at June 30, 2016 and March 31, 2015, the Corporation was in compliance with all of the above
mentioned financial covenants.
Liquidity risk
As at June 30, 2016 and March 31, 2015, the following are the contractual maturities of financial liabilities,
excluding interest payments:
June 30, 2016
Carrying
amount
Contractual
cash flows
1 year
2 years
3 to
5 years
More than
5 years
Bank indebtedness
$
72,014,760
$
72,337,860
$
72,337,860
$
-
$
-
$
-
Accounts payable and accrued liabilities
20,738,687
20,738,687
20,738,687
Repurchase obligations
Derivatives
Provision for future payments to Front Street Capital
Warrants
Long-term debt (Note 10)
-
-
-
3,327,501
3,327,501
3,327,501
95,000
136,000
95,000
136,000
95,000
136,000
29,671,371
30,631,066
2,127,866
6,478,000
22,025,200
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
March 31, 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
$
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
-
-
-
-
-
-
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.
15
FY2016 ANNUAL REPORT
19
4. CAPITAL RESOURCES
The Corporation utilizes the 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 the Consolidated Financial Statements for the fifteen-month period ended June 30, 2016 and
twelve-month period end March 31, 2015, on December 18, 2015, the Corporation renewed and amended its
uncommitted US$120 million credit facility, which now expires on December 18, 2016. Borrowings bear an
interest rate dependent on the facility utilization level: at any time the utilization level is less than 50%,
overnight LIBOR plus 2.875% per annum, and at any time that the utilization level is greater than or equal to
50%, overnight LIBOR plus 2.750% per annum. Interest is calculated and paid on a monthly basis. The Credit
Facility subject to borrowing base limitations. Amounts under the Credit Agreement that remain undrawn are
not subject to a commitment fee. The Credit Facility has certain covenants pertaining to the accounts of the
Corporation, and as at June 30, 2016, the Corporation was in compliance with all covenants.
Prior to the December 18, 2015 amendment, borrowings under the Credit Facility were subject to interest of
overnight LIBOR plus 2.875% per annum, with interest calculated and paid monthly.
Term Debt
In addition, as noted in the Annual Consolidated Financial Statements, 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 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. The New Loan is for a term of 5 years with an
interest rate of one month LIBOR plus 5.25%. The New Loan extinguished and replaced the previous loan
originated on June 27, 2014, which had an initial term maturing on December 29, 2014.
The New Loan is for US$25,000,000 with a term of 5 years, an interest rate of one month LIBOR plus 5.25%.
On November 17, 2015, immediately following the closure of the sale of Electric Steel, the Corporation used
the net sales proceeds to repay a portion of its outstanding term debt in accordance with the terms of the New
Loan. The total amount repaid on the term debt was US$1,357,621 (CAD $1,808,895). The next principal
payment on the term loan is payable on December 29, 2016 for the amount of US$1,642,379 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. The New Loan has an effective interest rate of 6.21% plus one
month LIBOR.
Equity Financing & Rights Offering
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
$1,640,421.
Normal Course Issuer Bid
During the fifteen-month period ended June 30, 2016, the Corporation purchased Shares under normal course
issuer bids with 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. On June 10, 2015, Ceres
announced a normal course issuer bid (“the 2015-2016 NCIB”) which commenced on June 12, 2015 and
concluded on June 11, 2016. The Corporation renewed the normal course issuer bid (“the 2016-2017 NCIB”)
commencing on June 12, 2016. Using the facilities of the TSX and in accordance with its rules and policies,
Ceres intends to purchase up to a maximum of 1,595,765 of its Common Shares, representing approximately
10 percent of its unrestricted public float as of June 2, 2016, subject to a maximum aggregate purchase price of
$5 million pursuant to restrictions under the Corporation’s Credit Facility. The 2016-2017 NCIB will conclude
on the earlier of the date on which purchases under the 2016-2017 NCIB have been completed and June 11,
2017. Ceres may purchase up to a daily maximum of 2,119 Common Shares under the 2016-2017 NCIB, except
for purchases made in accordance with the “block purchase” exception under applicable Toronto Stock
Exchange (“TSX”) rules and policies.
During the fifteen-month period ended June 30, with purchases commencing period from February 11, 2016,
the Corporation purchased a total of 168,600 common shares under its normal course issuer bids for aggregate
cash consideration of $852,847. The stated capital value of these repurchased Shares was $1,301,592. The
excess of the stated capital value of the repurchased common shares over the cost thereof, being $448,745, was
allocated to Retained Earnings in the fifteen-month period ended June 30, 2016.
During the twelve-month period ended March 31, 2015, the Corporation did not purchase any Shares under any
Normal Course Issuer Bid.
5. ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES
Changes in Accounting Policies and Standards Issued But Not Yet Effective
Refer to Note 3 to the Annual Consolidated Financial Statements for information pertaining to accounting
changes effective for the current fiscal year ending June 30, 2016, and information on standards issued but not
yet effective.
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 Annual 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
16
17
The 2015 cereal grain harvest resulted in high quality spring wheat, oats and durum wheat, which has led North
America and the world in an over-supply situation that continued through the first-half of calendar 2016. As a
20
CERES GLOBAL AG CORP.
Normal Course Issuer Bid
During the fifteen-month period ended June 30, 2016, the Corporation purchased Shares under normal course
issuer bids with 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. On June 10, 2015, Ceres
announced a normal course issuer bid (“the 2015-2016 NCIB”) which commenced on June 12, 2015 and
concluded on June 11, 2016. The Corporation renewed the normal course issuer bid (“the 2016-2017 NCIB”)
commencing on June 12, 2016. Using the facilities of the TSX and in accordance with its rules and policies,
Ceres intends to purchase up to a maximum of 1,595,765 of its Common Shares, representing approximately
10 percent of its unrestricted public float as of June 2, 2016, subject to a maximum aggregate purchase price of
$5 million pursuant to restrictions under the Corporation’s Credit Facility. The 2016-2017 NCIB will conclude
on the earlier of the date on which purchases under the 2016-2017 NCIB have been completed and June 11,
2017. Ceres may purchase up to a daily maximum of 2,119 Common Shares under the 2016-2017 NCIB, except
for purchases made in accordance with the “block purchase” exception under applicable Toronto Stock
Exchange (“TSX”) rules and policies.
During the fifteen-month period ended June 30, with purchases commencing period from February 11, 2016,
the Corporation purchased a total of 168,600 common shares under its normal course issuer bids for aggregate
cash consideration of $852,847. The stated capital value of these repurchased Shares was $1,301,592. The
excess of the stated capital value of the repurchased common shares over the cost thereof, being $448,745, was
allocated to Retained Earnings in the fifteen-month period ended June 30, 2016.
During the twelve-month period ended March 31, 2015, the Corporation did not purchase any Shares under any
Normal Course Issuer Bid.
5. ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES
Changes in Accounting Policies and Standards Issued But Not Yet Effective
Refer to Note 3 to the Annual Consolidated Financial Statements for information pertaining to accounting
changes effective for the current fiscal year ending June 30, 2016, and information on standards issued but not
yet effective.
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 Annual 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 2015 cereal grain harvest resulted in high quality spring wheat, oats and durum wheat, which has led North
America and the world in an over-supply situation that continued through the first-half of calendar 2016. As a
17
FY2016 ANNUAL REPORT
21
result of the supply in the market, for the quarter ended June 30, 2016, the Corporation was able to profit by
carrying inventory during the quarter, capturing strong carrying charges on inventory hedged in the futures
market, as deferred price in the futures market was greater than the nearby futures price. Thus, carrying income
earned in the quarter was slightly offset by unrealized mark-to-market losses on premium declines on
inventories held in-store.
Early indications of 2016 crop suggests strong yields with quantities that are slightly better than a ten-year
average. We anticipate strong supplies to continue in spring wheat, oats and soft red winter wheat, which would
perpetuate relatively flat premium levels through the first and potential second quarter of fiscal year 2017 due
to static demand along with futures near ten-year lows. While premiums declined during the quarter ended June
30, 2016 and we expect to remain flat, management views favorable upside in the potential and likelihood of
premium appreciation.
During the quarter-ended June 30, 2016, the Corporation completed construction of the high-speed elevator in
April 2016. The final phase of the construction included the completion of a concrete slipform, the concrete
grain bins, and cleaner dust system. The construction was completed within fiscal budget, and finished slightly
ahead of the May 2016 target date. The Corporation continued to increase operations at Northgate, loading
railcars of grain and/or oilseed at Northgate destined to the United States milling market, Asian and Latin
American.
Furthermore, the Corporation continues to execute on its strategy as being a preferred supplier to end-users
throughout North America. While Ceres has expanded commodity trading into the oilseed space, originating
canola from Canadian producers, and selling to the North American end-users and export gateways, the
Corporation has also expanded into the Latin American markets. In addition, subsequent to June 30, 2016, the
Corporation expanded its commodity trading portfolio with the addition of peas, lentils and flax, which will be
originated at Northgate and exported into the Latin American and Asian markets.
Management expects that a full year of utilization of the high-speed elevator at Northgate, coupled with the
expanded commodity trading portfolio and volume trade and customers reached, will contribute positively to
the Corporation’s net earnings in fiscal 2017.
Logistics Division
In November 2015, Ceres entered into an agreement with Koch for the storage and handling of dry fertilizer
products at Northgate. Koch will bring 65 - 80 car trains of phosphate-based fertilizer to Northgate, where Ceres
will unload and warehouse it in a new state of the art 26,000 ton fertilizer storage terminal. The fertilizer will
be loaded out by Ceres into trucks and distributed to Canadian grain fertilizer producers distributors. While the
partnership with Koch provides the international fertilizer producer access to the western Canadian market,
Ceres views this partnership as a strategic compliment to its existing grain operations at Northgate.
This arrangement will provide the Corporation’s grain suppliers at Northgate the ability to backhaul grain, as
local grain suppliers would reload their trucks with fertilizer after having unloaded grain and return to their
origination. Management anticipates that this will greatly improve transportation economics, and further
highlight Northgate as an advantageous pricing gateway. In addition, in December 2015, the Corporation signed
a contract with a construction vendor to build the fertilizer storage warehouse. The contract commitment totals
USD $9 million, which is based on the minimum guaranteed volume under the agreement with Koch. The
Corporation broke-ground, beginning construction in April 2016 with completion targeted for spring 2017.
In addition, the Corporation continues to unload LPG from inbound trucks and loading LPG into railcars for
shipment into the US market via the BNSF from Northgate, Saskatchewan. The transloading of LPG has
continued grow through the quarter-ended June 30, 2016, as we transloaded a record number of railcars for a
fiscal quarter. Management anticipates that the transloading of propane will continue to grow, as the movement
of LPG by rail out of Canada into the United States is a new trade flow for the product. As a result, market
participants are becoming familiar with the new movement.
In addition, management is exploring opportunities to build out and further develop the NCLC energy
transloading business with additional tenant customers, and the potential of handling other types of energy
products. The Corporation is pursuing opportunities that further leverage the international port advantages of
NCLC with other oilfield and agricultural inputs products. As we continue to assess the value proposition of
crude oil handling and transloading, while assessing markets with Canadian and US sources of production that
would be tributary to Northgate. In addition, we are working with potential partners to assess their crude oil
distribution alternatives.
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 June 30, 2016, 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 June 30, 2016, designed and evaluated the effectiveness of 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 material changes in the Corporation’s internal control over financial reporting
during the three month period ended June 30, 2016 that materially affected, or are reasonably likely to materially
affect, the Corporation’s internal control over financial reporting.
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 Annual Consolidated Financial Statements.
OFF-BALANCE SHEET ARRANGEMENTS
The Corporation has not engaged in any off-balance sheet arrangements.
18
19
22
CERES GLOBAL AG CORP.
fiscal quarter. Management anticipates that the transloading of propane will continue to grow, as the movement
of LPG by rail out of Canada into the United States is a new trade flow for the product. As a result, market
participants are becoming familiar with the new movement.
In addition, management is exploring opportunities to build out and further develop the NCLC energy
transloading business with additional tenant customers, and the potential of handling other types of energy
products. The Corporation is pursuing opportunities that further leverage the international port advantages of
NCLC with other oilfield and agricultural inputs products. As we continue to assess the value proposition of
crude oil handling and transloading, while assessing markets with Canadian and US sources of production that
would be tributary to Northgate. In addition, we are working with potential partners to assess their crude oil
distribution alternatives.
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 June 30, 2016, 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 June 30, 2016, designed and evaluated the effectiveness of 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 material changes in the Corporation’s internal control over financial reporting
during the three month period ended June 30, 2016 that materially affected, or are reasonably likely to materially
affect, the Corporation’s internal control over financial reporting.
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 Annual Consolidated Financial Statements.
OFF-BALANCE SHEET ARRANGEMENTS
The Corporation has not engaged in any off-balance sheet arrangements.
19
FY2016 ANNUAL REPORT
23
RELATED-PARTY TRANSACTIONS
The Corporation’s related party transactions can be found in Note 19 of the Annual Consolidated Financial
Statements.
SHARES OUTSTANDING
As at September 22, 2016, the issued and outstanding equity securities of the Corporation consisted of
26,886,655 common shares.
CONTINGENCIES AND COMMITMENTS
See Note 21 of the Annual Consolidated Financial Statements for disclosure of the Corporation’s contingencies
and commitments as at June 30, 2016.
CHANGE IN REPORTING CURRENCY AND YEAR-END
The Corporation has changed its fiscal year-end from March 31 to June 30. In conjunction with the change in
fiscal year, Ceres will change its reporting and presentation currency to USD. The Corporation will begin
reporting in USD as at and for the three-month period ending September 30, 2016.
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 Interest, 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 fifteen-month period
ended June 30, 2016, twelve-month period ended March 31, 2015, and quarters ended June 30, 2016 and 2015.
(in thousands)
Net income (loss) for the period
Add/(Deduct):
Interest Expense
Revaluation of derivative warrant liability
Gain on sale or property, plant and equipment
Income taxes (recovered)
Share of net (income) loss in investments in
associates
Depreciation on property, plant and equipment
Fifteen-month
period ended
June 30, 2016
Twelve-month
period ended
March 31, 2015
Three-month
period ended
June 30, 2016
Three-month
period ended
June 30, 2015
$
(15,772)
$
(1,385)
$
(1,918)
$
(1,700)
5,878
(1,583)
(272)
(285)
(367)
5,057
2,906
75
-
419
(1,181)
2,821
1,241
40
25
40
1,257
767
836
-
(320)
(304)
778
(7,344)
$
3,655
685
$
57
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’
equity as at the reporting date.
The following table is a calculation of return on shareholders’ equity for the fifteen-month period ended June
30, 2016, twelve-month period ended March 31, 2015, and quarters ended June 30, 2016 and 2015.
(in thousands)
Net income (loss) for the period
Total shareholders' equity as at reporting date
Fifteen-month
Twelve-month
period ended
period ended
June 30, 2016
March 31, 2015
Three-month
period ended
June 30, 2016
Three-month
period ended
June 30, 2015
$
(15,772)
$
(1,385)
$
(1,918)
$
(1,700)
204,184
-7.7%
218,838
-0.6%
204,184
-0.9%
213,775
-0.8%
Total Gross Profit (Loss) and General & Administrative Expenses in USD
As disclosed above, the Corporation earns substantially all of its revenues, and incurs much of its operating
expenses, in USD. Similarly, the Corporation incurs much of its general and administrative expenses in USD.
As a result, and due to the significant decline in the CAD for the three and fifteen-month periods ended June
30, 2016, compared to the twelve-month period ended March 31, 2015 and three month period ended June 30,
2016, management places an importance in evaluating and analyzing gross profits (losses) and general and
administrative expenses in USD.
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 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.
20
21
24
CERES GLOBAL AG CORP.
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’
equity as at the reporting date.
The following table is a calculation of return on shareholders’ equity for the fifteen-month period ended June
30, 2016, twelve-month period ended March 31, 2015, and quarters ended June 30, 2016 and 2015.
(in thousands)
Fifteen-month
period ended
June 30, 2016
Twelve-month
period ended
March 31, 2015
Three-month
period ended
June 30, 2016
Three-month
period ended
June 30, 2015
Net income (loss) for the period
Total shareholders' equity as at reporting date
$
(15,772)
204,184
$
(1,385)
218,838
$
(1,918)
204,184
$
(1,700)
213,775
-7.7%
-0.6%
-0.9%
-0.8%
Total Gross Profit (Loss) and General & Administrative Expenses in USD
As disclosed above, the Corporation earns substantially all of its revenues, and incurs much of its operating
expenses, in USD. Similarly, the Corporation incurs much of its general and administrative expenses in USD.
As a result, and due to the significant decline in the CAD for the three and fifteen-month periods ended June
30, 2016, compared to the twelve-month period ended March 31, 2015 and three month period ended June 30,
2016, management places an importance in evaluating and analyzing gross profits (losses) and general and
administrative expenses in USD.
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 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.
21
FY2016 ANNUAL REPORT
25
information, which is given as of the 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.
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.
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:
- 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; and
- The Corporation’s ability to maintain existing customer contracts and relationships coupled with its ability to
increase its customer portfolio.
The preceding list is not an exhaustive list 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
26
CERES GLOBAL AG CORP.
22
23
information, which is given as of the 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.
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.
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:
- 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; and
- The Corporation’s ability to maintain existing customer contracts and relationships coupled with its ability to
increase its customer portfolio.
The preceding list is not an exhaustive list 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
22
23
FY2016 ANNUAL REPORT
27
Consolidated Financial Statements of
For the fifteen-month period ended June 30, 2016 and the twelve-month period ended March 31,
2015
28
CERES GLOBAL AG CORP.
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
37–68
FY2016 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 September 22, 2016 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
Professional 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.
Robert Day
President and Interim CEO
Mark Kucala
Chief Financial Officer
30
CERES GLOBAL AG CORP.
2
INDEPENDENT AUDITORS’ REPORT
To the Shareholders of Ceres Global Ag Corp.
INDEPENDENT AUDITORS’ REPORT
We have audited the accompanying consolidated financial statements of Ceres Global Ag Corp., which
To the Shareholders of Ceres Global Ag Corp.
comprise the consolidated balance sheets as at June 30, 2016 and March 31, 2015, the consolidated
statements of comprehensive income (loss), changes in shareholders’ equity and cash flows for the
We have audited the accompanying consolidated financial statements of Ceres Global Ag Corp., which
fifteen-month period ended June 30, 2016 and the twelve-month period ended March 31, 2015, and notes,
comprise the consolidated balance sheets as at June 30, 2016 and March 31, 2015, the consolidated
comprising a summary of significant accounting policies and other explanatory information.
statements of comprehensive income (loss), changes in shareholders’ equity and cash flows for the
Management’s Responsibility for the Consolidated Financial Statements
fifteen-month period ended June 30, 2016 and the twelve-month period ended March 31, 2015, and notes,
comprising a summary of significant accounting policies and other explanatory information.
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’s Responsibility for the Consolidated Financial Statements
management determines is necessary to enable the preparation of consolidated financial statements that
Management is responsible for the preparation and fair presentation of these consolidated financial
are free from material misstatement, whether due to fraud or error.
statements in accordance with International Financial Reporting Standards, and for such internal control as
Auditors’ Responsibility
management determines is necessary to enable the preparation of consolidated financial statements that
are free from material misstatement, whether due to fraud or error.
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
Auditors’ Responsibility
standards require that we comply with ethical requirements and plan and perform the audit to obtain
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
reasonable assurance about whether the consolidated financial statements are free from material
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those
misstatement.
standards require that we comply with ethical requirements and plan and perform the audit to obtain
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
reasonable assurance about whether the consolidated financial statements are free from material
consolidated financial statements. The procedures selected depend on our judgment, including the
misstatement.
assessment of the risks of material misstatement of the consolidated financial statements, whether due to
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s
consolidated financial statements. The procedures selected depend on our judgment, including the
preparation and fair presentation of the consolidated financial statements in order to design audit
assessment of the risks of material misstatement of the consolidated financial statements, whether due to
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s
the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
preparation and fair presentation of the consolidated financial statements in order to design audit
accounting policies used and the reasonableness of accounting estimates made by management, as well
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
as evaluating the overall presentation of the consolidated financial statements.
the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide
accounting policies used and the reasonableness of accounting estimates made by management, as well
a basis for our audit opinion.
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.
FY2016 ANNUAL REPORT
31
KPMG LLP Suite 2000 - One Lombard Place Winnipeg MB R3B 0X3 Canada Telephone Fax Internet (204) 957-1770 (204) 957-0808 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. KPMG LLP Suite 2000 - One Lombard Place Winnipeg MB R3B 0X3 Canada Telephone Fax Internet (204) 957-1770 (204) 957-0808 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. 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 June 30, 2016 and March 31, 2015, and its consolidated
financial performance and its consolidated cash flows for the fifteen-month period ended June 30, 2016
and the twelve-month period ended March 31, 2015 in accordance with International Financial Reporting
Standards.
Chartered Professional Accountants
September 22, 2016
Winnipeg, Canada
32
CERES GLOBAL AG CORP.
CERES GLOBAL AG CORP.
Consolidate d Balance She e ts
ASSETS
Current
Cash
Due from Brokers
Unrealized gains on open cash contracts
Accounts receivable, trade
Inventories, grains
Sales taxes recoverable
Prepaid expenses and sundry assets
Portfolio investments
Current assets
Investments in associates
Intangible assets
Property, plant and equipment
Non-current assets
TOTAL ASSETS
LIABILITIES
Current
Bank indebtednes s
Current portion of long-term debt
Accounts payable and accrued liabilities
Repurchase obligations
Unrealized losses on open cash contracts
Provision for future payments to Front Street Capital
Derivative warrant liabilty
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
6
14(a)
5
14(b)
7
8
9
10
13
14(a)
17
15(c)
10
18
June 30,
2016
March 31,
2015
$
937,135
$
5,136,032
7,072,446
6,615,551
17,435,550
132,950,061
169,743
2,455,662
4,385,177
8,641,335
9,472,984
7,910,824
147,940,077
1,137,391
1,410,699
848,163
172,021,325
182,497,505
3,817,616
388,680
5,619,412
379,260
153,939,357
120,450,079
158,145,653
126,448,751
$
330,166,978
$
308,946,256
$
72,014,760
2,127,866
$
18,736,400
-
20,738,687
-
3,327,501
95,000
136,000
17,388,202
18,635,451
2,607,280
344,000
1,719,000
98,439,814
59,430,333
27,543,505
-
30,381,310
296,971
27,543,505
30,678,281
$
125,983,319
$
90,108,614
15(e)
$
207,555,798
$
208,884,960
16
762,739
9,426,757
23,536,873
319,820
9,228,422
22,179,246
(37,098,508)
(21,774,806)
TOTAL SHAREHOLDERS' EQUITY
$ 204,183,659 $ 218,837,642
COMMITMENTS
CONTINGENT LIABILITIES
21(b)
21(a)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$ 330,166,978 $ 308,946,256
The accompanying notes are an integral part of these financial statements.
ON BEHALF OF THE BOARD
Signed
"Gary Mize"
Director
Signed
"Doug Speers"
Director
5
FY2016 ANNUAL REPORT
33
CERES GLOBAL AG CORP.
Consolidated Statements of Comprehensive Income (Loss)
For the fifteen-month period ended June 30, 2016 and twelve-month period ended March 31, 2015
Note Fifteen-month
period ended
June 30, 2016
Twelve-month
period ended
March 31, 2015
REVENUES
Cost of sales
GROSS PROFIT (LOSS)
General and administrative expenses
INCOME (LOSS) FROM OPERATIONS
Finance income (loss)
Revaluation of derivative warrant liability
Gain on sale of property, plant and equipment
Interest expense
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 income (loss) for the period
Net investment hedge - net income
(Loss) gain on translation of foreign currency accounts of foreign operations
TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD
11
15
12
18
7
14 (c)
$ 505,519,647 $ 192,765,006
(506,250,798) (181,073,981)
(731,151) 11,691,025
(13,238,174) (10,667,873)
(13,969,325) 1,023,152
1,567,046 (188,963)
1,583,000 (75,000)
272,109 -
(5,877,578) (2,906,495)
(16,424,748) (2,147,306)
(285,330) 419,315
(16,139,418) (2,566,621)
366,971 1,181,245
(15,772,447) (1,385,376)
1,394,732
-
(37,105) 14,106,303
12,720,927
$
(14,414,820)
$
WEIGHTED-AVERAGE NUMBER OF SHARES FOR THE PERIOD
27,031,968
18,360,019
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 Interest expense
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.
$ (0.58) $ (0.08)
$ (0.58) $ (0.08)
8
8
$ 4,946,950 $ 2,742,253
$ 109,950 $ 79,470
$ 860,396 $ 742,445
$ 2,421,886 $ 1,663,530
$ 1,336,944 $ 520,687
34
CERES GLOBAL AG CORP.
6
CERES GLOBAL AG CORP.
Consolidate d State me nts of Cash Flows
For the fifte e n-month pe riod e nde d June 30, 2016 and twe lve -month pe riod e nde d
March 31, 2015
C ASH FLO W S FRO M O PERATING AC TIVITIES
Net loss for t he period
Adjust ment s for:
Depreciat ion of propert y, plant and equipment
Revaluat ion of derivat ive warrant liabilit y
Share incent ive compensat ion
Revaluat ion of port folio invest ment s
Gain on sale of propert y, plant and equipment
Int erest expense
Income t ax expense (recovery)
Deferred share unit s issued t o Direct ors and fair value adjust ment
Share of net income in invest ment s in associat es
Changes in non-cash working capit al accounts
Int erest paid
Income t axes recovered (paid)
C ash fl ow provi de d by (use d i n) ope rati ng acti vi ti e s
C ASH FLO W S FRO M INVESTING AC TIVITIES
Proceeds from disposit ion of asset s held for sale
Dividend received from associat e
Acquisit ion of, and costs capit alized on, invest ment propert y
Note
8
15(c)
11
12
18
16
7
20
Fi fte e n-month
pe ri od e n d
June 30, 2016
Twe l ve -month
pe ri od e nd
March 31, 2015
$
(15,772,447)
$
(1,385,376)
5,056,900
2,821,723
(1,583,000)
198,335
(1,368,247)
(272,109)
75,000
-
-
-
5,877,578
2,906,495
(285,330)
484,708
419,315
276,032
(366,972)
(1,181,245)
20,367,980
(24,014,566)
(4,899,622)
(2,471,290)
(4,177)
(170,017)
7,433,597
(22,723,929)
1,931,980
-
-
6,759,240
187,500
(5,052,271)
Acquisit ion of propert y, plant and equipment
8
(41,189,711)
(24,444,302)
C ash fl ow use d i n i nve stin g acti viti e s
C ASH FLO W S FRO M FINANC ING AC TIVITIES
Net proceeds from (repayment of) bank indebt edness
Net proceeds from (repayment of) t erm loan
Net proceeds from (repayment of) repurchase obligat ions
Financing cost s paid
Proceeds from common shares issued
Share issuance costs
Deferred share unit s redeemed for cash
Repurchase of common shares under normal course issuer bid
C ash fl ow provi de d by fi nanci ng acti vi ti e s
Fore i gn e xchange cash fl ow adjustme nt on accounts
de nomi nate d i n a fore i gn curre ncy
De cre ase in cash for the pe ri od
Cash, beginning of period
11
10
13
15(e)
15(e)
16
15(b)
(39,257,731)
(22,549,833)
51,741,360
(56,885,000)
(1,808,895)
29,065,000
(19,310,584)
365,329
(676,090)
(1,933,734)
-
75,000,000
(69,359)
(1,571,062)
-
(852,847)
(18,712)
-
29,023,585
44,021,821
(2,478,208)
(5,621,427)
(5,278,757)
(6,873,368)
5,136,032
12,009,400
C ash and cash e qui val e nts, e nd of pe ri od
$
(142,725)
$
5,136,032
Cash
Cheques issued in excess of cash on hand
C ash and cash e qui val e nts, e nd of pe ri od
$
937,135
$
5,136,032
9
(1,079,860)
-
$
(142,725)
$
5,136,032
The accompanying notes are an integral part of these financial statements
7
FY2016 ANNUAL REPORT
35
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36
CERES GLOBAL AG CORP.
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
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. In
addition, on April 1, 2014, Ceres Global Ag Corp. amalgamated with Riverland Agriculture Ltd. and
Ceres Canada Holding Corp. Thereafter, the amalgamated corporations continued operating as Ceres
Global Ag Corp. Ceres is a corporation domiciled in Canada, with its head office located at 1660 South
Highway 100, Suite 350, St. Louis Park, Minnesota, United States, 55416.
These consolidated financial statements of Ceres as at and for the fifteen-month period ended June 30,
2016 include the accounts of Ceres and its wholly owned subsidiaries Ceres U.S. Holding Corp. and
Riverland Ag Corp. (“Riverland Ag”). All intercompany transactions and balances have been eliminated.
In combination with Riverland Ag, the Corporation 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 provinces of
Ontario and Saskatchewan, with a combined licensed capacity of 43 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 fifteen-month period ended June 30, 2016 and twelve-month
period ended March 31, 2015, are generated by Riverland Ag in the United States and Canada, which
represents the Corporation’s only reportable segment. The one reportable segment consists of two
operating segments: (1) grain trading, handling and storage, and; (2) logistics, which includes transloading
non-grain commodities on behalf of third-party customers. With the exception of $1,479,832 of revenue
recognized for the fifteen-month period ended June 30, 2016 (2015: nil), all of the Corporation’s revenues
are comprised of grain trading, handling and storage, which total $504,039,815 for the fifteen-month
period ended June 30, 2016 (2015: $192,765,006).
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 September 22, 2016.
Change in fiscal year-end
On February 10, 2016, the Board of Directors approved a change in the fiscal year from April 1 to March
31 to July 1 to June 30. Accordingly, for the 2016 fiscal reporting year, the Corporation is reporting
consolidated financial statements for the fifteen-month period ended June 30, 2016, with comparative
figures for the twelve month period ended March 31, 2015, and consequently the results shown are not
fully comparable. The reason for this change is to better align the Corporation’s year-end with the
agricultural crop year.
9
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
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. In
addition, on April 1, 2014, Ceres Global Ag Corp. amalgamated with Riverland Agriculture Ltd. and
Ceres Canada Holding Corp. Thereafter, the amalgamated corporations continued operating as Ceres
Global Ag Corp. Ceres is a corporation domiciled in Canada, with its head office located at 1660 South
Highway 100, Suite 350, St. Louis Park, Minnesota, United States, 55416.
These consolidated financial statements of Ceres as at and for the fifteen-month period ended June 30,
2016 include the accounts of Ceres and its wholly owned subsidiaries Ceres U.S. Holding Corp. and
Riverland Ag Corp. (“Riverland Ag”). All intercompany transactions and balances have been eliminated.
In combination with Riverland Ag, the Corporation 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 provinces of
Ontario and Saskatchewan, with a combined licensed capacity of 43 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 fifteen-month period ended June 30, 2016 and twelve-month
period ended March 31, 2015, are generated by Riverland Ag in the United States and Canada, which
represents the Corporation’s only reportable segment. The one reportable segment consists of two
operating segments: (1) grain trading, handling and storage, and; (2) logistics, which includes transloading
non-grain commodities on behalf of third-party customers. With the exception of $1,479,832 of revenue
recognized for the fifteen-month period ended June 30, 2016 (2015: nil), all of the Corporation’s revenues
are comprised of grain trading, handling and storage, which total $504,039,815 for the fifteen-month
period ended June 30, 2016 (2015: $192,765,006).
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 September 22, 2016.
Change in fiscal year-end
On February 10, 2016, the Board of Directors approved a change in the fiscal year from April 1 to March
31 to July 1 to June 30. Accordingly, for the 2016 fiscal reporting year, the Corporation is reporting
consolidated financial statements for the fifteen-month period ended June 30, 2016, with comparative
figures for the twelve month period ended March 31, 2015, and consequently the results shown are not
fully comparable. The reason for this change is to better align the Corporation’s year-end with the
agricultural crop year.
9
FY2016 ANNUAL REPORT
37
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 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:
Derivative financial instruments are measured at fair value;
Financial instruments at fair value through profit or loss are measured at fair value; and
Inventories of agricultural commodities are measured at fair value less costs to sell.
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Transaction costs
The accounting policies described below have been applied consistently to all periods presented in these
consolidated financial statements.
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.
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.
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
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
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.
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.
38
CERES GLOBAL AG CORP.
10
11
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
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.
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.
11
FY2016 ANNUAL REPORT
39
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
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 and repurchase obligations. 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.
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.
liabilities, as applicable.
Fair value measurements
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.
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, 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 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
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).
40
CERES GLOBAL AG CORP.
12
13
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
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, 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 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).
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FY2016 ANNUAL REPORT
41
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
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.
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.
Interest expenses
Finance expenses represent the aggregate of interest expense on borrowings and the amortization of
financing transaction costs.
Inventories
Inventories represent agricultural grain and oilseed 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.
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. When parts of an item of property and equipment have different useful lives, they are accounted
for as separate components of property and equipment and depreciated accordingly. The carrying amount
of a replaced component is derecognized.
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.
42
CERES GLOBAL AG CORP.
14
15
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
Inventories
Inventories represent agricultural grain and oilseed 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.
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. When parts of an item of property and equipment have different useful lives, they are accounted
for as separate components of property and equipment and depreciated accordingly. The carrying amount
of a replaced component is derecognized.
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.
15
FY2016 ANNUAL REPORT
43
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
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.
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.
Future changes in accounting standards
The standards and interpretations that are issued but not yet effective up to the date of issuance of the
Corporation’s interim consolidated financial statements are listed below. This listing of standards and
interpretations issued includes those that the Corporation reasonably expects to have an impact on
disclosures, financial position or performance when applied at a future date.
44
CERES GLOBAL AG CORP.
16
17
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
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.
Future changes in accounting standards
The standards and interpretations that are issued but not yet effective up to the date of issuance of the
Corporation’s interim consolidated financial statements are listed below. This listing of standards and
interpretations issued includes those that the Corporation reasonably expects to have an impact on
disclosures, financial position or performance when applied at a future date.
17
FY2016 ANNUAL REPORT
45
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
IAS 1 – Presentation of Financial Statements
On December 18, 2014, the International Accounting Standards Board (“IASB”) issued amendments to
IAS 1 as part of its major initiative to improve presentation and disclosure in financial reports. The
amendments to IAS 1 will be effective for annual periods beginning on or after January 1, 2016. The
Corporation does not expect the amendments to have a material impact on the financial statements.
IFRS 9 – Financial Instruments
On July 24, 2014, the IASB issued the final version of IFRS 9, which replaces IAS 39 – Financial
Instruments: Recognition and Measurement and all previous versions of IFRS 9. The new standard
introduces requirements for the classification and measurement of financial assets and financial liabilities,
impairment, hedge accounting and the fair value of an entity’s own debt. IFRS 9 will be effective for
annual periods beginning on or after January 1, 2018, with earlier adoption permitted. Ceres has not yet
determined the impact of this standard on the Corporation’s consolidated financial statements and has not
decided whether to early adopt this standard.
IFRS 15 – Revenue from Contracts with Customers
On May 28, 2014, the IASB issued IFRS 15, which provides a single, principles-based five-step model to
be applied to all contracts with customers. IFRS 15 specifies how and when to recognize revenue as well
as requiring entities to provide users of financial statements with more relevant disclosures. IFRS 15
supersedes IAS 18 – Revenue, IAS 11 – Construction Contracts and a number of revenue-related
interpretations and applies to annual reporting periods beginning on or after January 1, 2018. Application
of the standard is mandatory for all IFRS reporters and early adoption is permitted. Ceres has not yet
determined the impact of this standard on the Corporation’s consolidated financial statements and has not
decided whether to early adopt this standard.
IFRS 16 – Leases
On January 13, 2016, the IASB issued IFRS 16 Leases. This standard introduces a single lessee accounting
model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12
months, unless the underlying asset is of low value. A lessee is required to recognize a right-of-use asset
representing its right to use the underlying asset and a lease liability representing its obligation to make
lease payments. The new standard is effective for annual periods beginning on or after January 1, 2019.
The Corporation intends to adopt IFRS 16 in its financial statements for its annual period beginning on
July 1, 2019. The extent of the impact of adoption of the standard has not yet been determined.
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
18
46
CERES GLOBAL AG CORP.
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
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 June 30, 2016 and March 31, 2015, the Corporation held $132,950,061 and $147,940,077 of
inventories at fair value less costs to sell, respectively. For the fifteen-month period ended June 30, 2016,
inventories recognized as an expense through cost of sales totaled $386,572,723 and $191,026,575 for the
year ended March 31, 2015. Furthermore, as at March 31, 2015, the carrying amount of inventories
pledged as security against the Corporation’s repurchase obligations totaled $18,692,777.
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.
19
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
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
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 June 30, 2016 and March 31, 2015, the Corporation held $132,950,061 and $147,940,077 of
inventories at fair value less costs to sell, respectively. For the fifteen-month period ended June 30, 2016,
inventories recognized as an expense through cost of sales totaled $386,572,723 and $191,026,575 for the
year ended March 31, 2015. Furthermore, as at March 31, 2015, the carrying amount of inventories
pledged as security against the Corporation’s repurchase obligations totaled $18,692,777.
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.
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FY2016 ANNUAL REPORT
47
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
As at June 30, 2016 and March 31, 2015, the amounts due from Brokers represent the following:
The following table presents summarized financial information for SSR (in thousands of CAD):
Revenues
Net income
Income from continuing operations
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Fifteen-month
period ended
June 30, 2016
$
5,084
$
386
$
193
$
4,148
$
10,879
$
269
$
78
Twelve-month
period ended
March 31, 2015
$
7,919
$
2,716
$
1,970
$
4,789
$
11,792
$
2,079
$
33
For the period-ended June 30, 2016, the Corporation’s consolidated Statement of Comprehensive Income
included the Corporation’s share in the change of SSR’s equity of $52,411 (2015: $492,511). During the
period-ended June 30, 2016, the Corporation did not receive a dividend from SSR (2015: $187,500).
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 June 30, 2016 and March 31, 2015:
Investee's equity as at reporting date
Corporation's 25% portion of SSR equity
Goodwill
Carrying value
June 30, 2016
March 31, 2015
$
14,679,127
$
14,469,482
$
3,669,781
$
147,835
$
3,617,370
$
147,835
$
3,817,616
$
3,765,205
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.
INVESTMENT IN ASSOCIATES
Canterra Seeds Holdings, Ltd., common shares
Stewart Southern Railway Inc., common shares
June 30, 2016 March 31, 2015
$
7,066,022
$
6,525,747
166,508
7,232,530
2,673,417
9,199,164
$
(160,084)
7,072,446
(557,829)
8,641,335
$
June 30, 2016 March 31, 2015
$
-
3,817,616
$
1,854,207
3,765,205
$
3,817,616
$
5,619,412
(a)
Investment in Canterra Seeds Holdings, Ltd. (“Canterra”)
As at March 31, 2015, Ceres held 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, as at March 31, 2015, had
a 25% voting right on Canterra’s Board of Directors. Due to these factors, Ceres did not control Canterra,
and accounted for its investment in Canterra using the equity method, which had a carrying value of
$1,854,207 and was classified on the Consolidated Balance Sheet as “Investments in associates”. During
the quarter ended June 30, 2015, the Corporation recorded its portion of Canterra’s net income of
$314,560. See note 11.
During the fifteen-month period ended June 30, 2016, the Investee issued additional common equity
shares, resulting in the dilution of the Corporation’s equity interest to 17%. As a result, the Corporation
no longer has a significant influence over the financial and operating policies of the Investee. Therefore,
Ceres reclassified its investment to portfolio investments and recorded it at fair value, recognizing a gain
of $1,368,247 classified within the Statement of Comprehensive Loss as “Finance income”.
(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.
48
CERES GLOBAL AG CORP.
20
21
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
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
Fifteen-month
period ended
June 30, 2016
$
$
$
5,084
386
193
$
$
$
$
4,148
10,879
269
78
Twelve-month
period ended
March 31, 2015
$
$
$
7,919
2,716
1,970
$
$
$
$
4,789
11,792
2,079
33
For the period-ended June 30, 2016, the Corporation’s consolidated Statement of Comprehensive Income
included the Corporation’s share in the change of SSR’s equity of $52,411 (2015: $492,511). During the
period-ended June 30, 2016, the Corporation did not receive a dividend from SSR (2015: $187,500).
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 June 30, 2016 and March 31, 2015:
Investee's equity as at reporting date
Corporation's 25% portion of SSR equity
Goodwill
Carrying value
June 30, 2016
March 31, 2015
$
14,679,127
$
14,469,482
$
$
3,669,781
147,835
$
$
3,617,370
147,835
$
3,817,616
$
3,765,205
21
FY2016 ANNUAL REPORT
49
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
8.
PROPERTY, PLANT AND EQUIPMENT
June 30, 2016
Cost
Balances, April 1, 2015
Asset additions
Disposals
Foreign currency translation adjustments
Balances, June 30, 2016
Accumulated depreciation
Balances, April 1, 2015
Depreciation charged to operations
Disposals
Foreign currency translation adjustments
Balances, June 30, 2016
Land
Buildings and
silos/elevators
Machinery &
equipment
Office equipment &
other assets
Totals
29,469,992
229,673
(465,065)
186,524
29,421,124
71,162,646
31,454,047
(1,189,183)
1,377,631
102,805,141
-
-
-
-
-
(9,662,854)
(3,531,894)
146,320
(686,513)
(13,734,941)
6,460,964
24,059,125
(254,000)
115,100
30,381,189
(1,219,527)
(969,739)
66,141
(12,020)
(2,135,145)
25,895,822
(17,194,945)
-
337,023
9,037,900
(1,659,964)
(555,267)
-
379,320
(1,835,911)
132,989,424
38,547,900
(1,908,248)
2,016,278
171,645,354
(12,542,345)
(5,056,900)
212,461
(319,213)
(17,705,997)
Carrying amount, June 30, 2016
$
29,421,124
$
89,070,200
$
28,246,044
$
7,201,989
$
153,939,357
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
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
Asset additions during the fifteen months ended June 30, 2016 accrued and not yet paid as at the reporting date
totaled $5,684,911 (2015: $8,326,721). In addition, as at June 30, 2016, the Corporation had assets under
construction of $4,231,914 (2015: $24,016,033) consisting primarily of the fertilizer storage infrastructure at
Northgate.
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
9. BANK INDEBTEDNESS
On December 18, 2015, the Corporation amended its uncommitted USD$120,000,000 credit facility (the
“Credit Facility”), which now expires on December 18, 2016. Borrowings bear an interest rate dependent
on the facility utilization level: at any time the utilization level is less than 50%, overnight LIBOR plus
2.875% per annum, and at any time that the utilization level is greater than or equal to 50%, overnight
LIBOR plus 2.750% per annum. Interest is calculated and paid on a monthly basis. The Credit Facility is
subject to borrowing base limitations. Amounts under the Credit Facility that remain undrawn are not
subject to a commitment fee.
The Credit Facility has certain covenants pertaining to the accounts of the Corporation. As at September
30, 2015, the Corporation was unable to fulfill its interest coverage ratio financial covenant as required
under its term loan facility agreement. Subsequent to September 30, Ceres received an irrevocable waiver
of the covenant violation from its lender, and as a result, the lender could not demand payment of the debt
as a result of the breach. As at June 30, 2016, the Corporation was in compliance with all covenants.
Prior to the December 18, 2015 amendment, borrowings under the Credit Facility were subject to interest
of overnight LIBOR plus 2.875% per annum, with interest calculated and paid monthly.
As at June 30, 2016 and March 31 2015, the Corporation had $84,214,000 and $132,741,000 in
availability, respectively, on its revolving line of credit.
As at June 30, 2016 and March 31, 2015, the carrying amount of bank indebtedness is summarized as
follows:
Revolving line of credit
Unamortized financing costs
Cheques issued in excess of cash on hand
10. TERM LOAN
June 30, 2016
March 31, 2015
$
71,258,000
$
18,963,000
(323,100)
1,079,860
(226,600)
-
$
72,014,760
$
18,736,400
On December 30, 2014, the Corporation entered into a senior secured term loan facility agreement for
US$25,000,000. This term loan is for a term of 5 years with an interest rate of one month LIBOR plus
5.25%. The first principal payment on the New Loan is payable on December 29, 2016 for the amount of
US$1,642,379. On November 17, 2015, immediately following the closure of the sale of the Electric Steel
facility, the Corporation used the net sales proceeds to repay a portion of its outstanding term debt. The
total amount repaid on the term debt was USD$1,357,621 (CAD $1,808,895). Following the payment on
December 29, 2016, the next principal payments of USD$5,000,000 are payable on each of December 29,
2017, and December 28, 2018, and USD$12,000,000 payable on December 27, 2019. The loan has an
effective interest rate of 6.21% plus one month LIBOR.
50
CERES GLOBAL AG CORP.
22
23
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
9. BANK INDEBTEDNESS
On December 18, 2015, the Corporation amended its uncommitted USD$120,000,000 credit facility (the
“Credit Facility”), which now expires on December 18, 2016. Borrowings bear an interest rate dependent
on the facility utilization level: at any time the utilization level is less than 50%, overnight LIBOR plus
2.875% per annum, and at any time that the utilization level is greater than or equal to 50%, overnight
LIBOR plus 2.750% per annum. Interest is calculated and paid on a monthly basis. The Credit Facility is
subject to borrowing base limitations. Amounts under the Credit Facility that remain undrawn are not
subject to a commitment fee.
The Credit Facility has certain covenants pertaining to the accounts of the Corporation. As at September
30, 2015, the Corporation was unable to fulfill its interest coverage ratio financial covenant as required
under its term loan facility agreement. Subsequent to September 30, Ceres received an irrevocable waiver
of the covenant violation from its lender, and as a result, the lender could not demand payment of the debt
as a result of the breach. As at June 30, 2016, the Corporation was in compliance with all covenants.
Prior to the December 18, 2015 amendment, borrowings under the Credit Facility were subject to interest
of overnight LIBOR plus 2.875% per annum, with interest calculated and paid monthly.
As at June 30, 2016 and March 31 2015, the Corporation had $84,214,000 and $132,741,000 in
availability, respectively, on its revolving line of credit.
As at June 30, 2016 and March 31, 2015, the carrying amount of bank indebtedness is summarized as
follows:
Revolving line of credit
Unamortized financing costs
Cheques issued in excess of cash on hand
10. TERM LOAN
June 30, 2016
March 31, 2015
$
71,258,000
(323,100)
1,079,860
$
18,963,000
(226,600)
-
$
72,014,760
$
18,736,400
On December 30, 2014, the Corporation entered into a senior secured term loan facility agreement for
US$25,000,000. This term loan is for a term of 5 years with an interest rate of one month LIBOR plus
5.25%. The first principal payment on the New Loan is payable on December 29, 2016 for the amount of
US$1,642,379. On November 17, 2015, immediately following the closure of the sale of the Electric Steel
facility, the Corporation used the net sales proceeds to repay a portion of its outstanding term debt. The
total amount repaid on the term debt was USD$1,357,621 (CAD $1,808,895). Following the payment on
December 29, 2016, the next principal payments of USD$5,000,000 are payable on each of December 29,
2017, and December 28, 2018, and USD$12,000,000 payable on December 27, 2019. The loan has an
effective interest rate of 6.21% plus one month LIBOR.
23
FY2016 ANNUAL REPORT
51
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
In connection with the origination of the term loan, 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 term loan are recognized as a reduction in the
balance of the loan, and are amortized over the term of the loan using the effective interest rate method.
June 30, 2016 March 31, 2015
Total term debt
Less current portion of long-term debt
Unamortized financing costs
$
30,631,066
(2,127,866)
28,503,200
(959,695)
$
31,605,000
-
$
31,605,000
(1,223,690)
Total long-term debt
$
27,543,505
$
30,381,310
Both the term 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 its
guarantors; and (iii) a pledge of substantially all of the equity interests and investment property held by
Ceres and each guarantor.
11. FINANCE INCOME (LOSS)
The following table presents realized and unrealized gain (loss) on foreign exchange and the revaluation
of portfolio investments for the fifteen-month period ended June 30, 2016 and twelve-month period ended
March 31, 2015:
Realized and unrealized loss on foreign exchange
Realized and unrealized gain on currency-hedging
transactions
Revaluation of portfolio investments (note 7 (a))
Fifte e n-month
pe riod e nde d
June 30, 2016
$
(27,759)
Twelve-month
period ended
March 31, 2015
$
(773,610)
226,558
1,368,247
1,567,046
$
584,647
-
(188,963)
$
As at March 31, 2015, the Corporation held a 25% equity interest in Canterra Seeds Holdings, Ltd.
(“Canterra” or “the Investee”), that had a carrying value of $1,854,207. This investment, accounted for
using the equity method, was classified on the Consolidated Balance Sheet as “Investments in associates”.
During the quarter ended September 30, 2015, the Investee issued additional common equity shares,
resulting in the dilution of the Corporation’s equity interest to 17%, and it no longer having a significant
influence over the financial and operating policies of the Investee. Therefore, during the fifteen-month
period ended June 30, 2016, Ceres reclassified its investment to portfolio investments and recorded it at
fair value, recognizing a gain of $1,368,247 classified within the Statement of Comprehensive Loss as
“Finance income”. The investment in Canterra totals $3,537,014 as at June 30, 2016, and is classified on
the Consolidated Balance Sheet within “Portfolio investments, at fair value” (note 14(b)).
24
52
CERES GLOBAL AG CORP.
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
12. INTEREST EXPENSE
Interest on revolving line of credit
Interest on repurchase obligation
Long-term debt
Amortization of financing costs paid
Interest income and other interest expense
13. REPURCHASE OBLIGATIONS
The following table presents interest income (expense) for the fifteen-month period June 30, 2016 and
twelve-month period ended March 31, 2015:
Fifteen-month
Twelve-month
period ended
June 30, 2016
period ended
March 31, 2015
$
(2,682,665)
$
(1,761,120)
(234,530)
(2,215,816)
(860,396)
115,829
(137,549)
(402,421)
(742,445)
137,040
$
(5,877,578)
$
(2,906,495)
As at March 31, 2015, the Corporation had two open repurchase commitments 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 fifteen-month period ending June 30, 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 recognized the inventory owned by Corporation in this regard on its
consolidated balance sheet and has recorded a liability of $18,635,451 plus accrued interest payable. As
at March 31, 2015, the fixed interest rate on the open repurchase commitment is at 3.06%.
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 June 30, 2016.
Unrealized gains and losses on open cash contracts, which are held for trading and valued at fair value
through profit and loss, are as follows as at June 30, 2016 and March 31, 2015:
Derivative assets
Unrealized gains on open cash contracts
Derivative liabilities
Unrealized losses on open cash contracts
2016
2015
$
6,615,551
$
9,472,984
$
(3,327,501)
$
(2,607,280)
25
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
12. INTEREST EXPENSE
The following table presents interest income (expense) for the fifteen-month period June 30, 2016 and
twelve-month period ended March 31, 2015:
Fifteen-month
period ended
June 30, 2016
Twelve-month
period ended
March 31, 2015
Interest on revolving line of credit
Interest on repurchase obligation
Long-term debt
Amortization of financing costs paid
Interest income and other interest expense
13. REPURCHASE OBLIGATIONS
$
$
(2,682,665)
(234,530)
(2,215,816)
(860,396)
115,829
(5,877,578)
(1,761,120)
(137,549)
(402,421)
(742,445)
137,040
(2,906,495)
$
$
As at March 31, 2015, the Corporation had two open repurchase commitments 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 fifteen-month period ending June 30, 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 recognized the inventory owned by Corporation in this regard on its
consolidated balance sheet and has recorded a liability of $18,635,451 plus accrued interest payable. As
at March 31, 2015, the fixed interest rate on the open repurchase commitment is at 3.06%.
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 June 30, 2016.
Unrealized gains and losses on open cash contracts, which are held for trading and valued at fair value
through profit and loss, are as follows as at June 30, 2016 and March 31, 2015:
2016
2015
Derivative assets
Unrealized gains on open cash contracts
Derivative liabilities
Unrealized losses on open cash contracts
$
6,615,551
$
9,472,984
$
(3,327,501)
$
(2,607,280)
25
FY2016 ANNUAL REPORT
53
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
(b) Portfolio investments
Commodity risk
Portfolio investments are classified as held for trading, and consist of equity securities of private
companies are as follows as at June 30, 2016 and March 31, 2015
2016
2015
Total fair value
$
4,385,177
$
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.
(c) 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 June 30, 2016 and March 31, 2015, the Corporation’s market risk pertaining to portfolio investments
was potentially affected by changes in actual market prices. As at June 30, 2016 and March 31, 2015, 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.
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 June 30, 2016 and March 31, 2015 had increased or decreased
by 10%, with all other variables remaining constant:
Change in fair value of investments
2016
2015
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
$
$
438,518
(438,518)
$
$
0.02
(0.02)
$
$
84,816
(84,816)
$
$
0.00
(0.00)
25 bps increase in annual interest rate
$
(22,580)
$
(0.00)
$
(54,611)
$
(0.00)
54
CERES GLOBAL AG CORP.
26
27
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 June 30, 2016 and March 31, 2015 had increased or decreased by
5%, with all other variables remaining constant:
2016
2015
Increase
Increase
Increase
(decrease)
Increase
(decrease)
(decrease)
in earnings
(decrease)
in earnings
Change in bid/ask prices of commodities
in net income
per share
in net income
per share
5% increase in bid-ask prices
5% decrease in bid-ask prices
$
215,960
$
0.01
$
193,030
$
0.01
$
(215,960)
$
(0.01)
$
(193,030)
$
(0.01)
Interest rate risk
As at June 30, 2016 and March 31, 2015, 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 June 30, 2016 and March 31, 2015, 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.
Interest rate risk
As disclosed in Note 9 (Bank Indebtedness) and Note 10 (Term Loan), as at June 30, 2016 and March 31,
2015, 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 June 30, 2016
and March 31, 2015, 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:
2016
2015
Increase
Increase
Increase
Increase
in net
in loss
loss per share
in net
in loss
loss
per share
Change in interest rate on revolving facility
Change in interest rate on term loan
25 bps increase in annual interest rate
$
(6,381)
$
(0.00)
$
(149,384)
$
(0.01)
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
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 June 30, 2016 and March 31, 2015 had increased or decreased by
5%, with all other variables remaining constant:
Change in bid/ask prices of commodities
2016
2015
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
$
$
215,960
(215,960)
$
$
0.01
(0.01)
$
$
193,030
(193,030)
$
$
0.01
(0.01)
Interest rate risk
As at June 30, 2016 and March 31, 2015, 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 June 30, 2016 and March 31, 2015, 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.
Interest rate risk
As disclosed in Note 9 (Bank Indebtedness) and Note 10 (Term Loan), as at June 30, 2016 and March 31,
2015, 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 June 30, 2016
and March 31, 2015, 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
2016
Increase
in net
Increase
in loss
loss per share
2015
Increase
in net
loss
Increase
in loss
per share
25 bps increase in annual interest rate
$
(22,580)
$
(0.00)
$
(54,611)
$
(0.00)
Change in interest rate on term loan
25 bps increase in annual interest rate
$
(6,381)
$
(0.00)
$
(149,384)
$
(0.01)
27
FY2016 ANNUAL REPORT
55
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
Ceres is not subject to cash flow interest rate risk concerning the repurchase obligations, as these liabilities
bear interest at fixed rates.
Liquidity risk
As at June 30, 2016 and March 31, 2015, the following are the contractual maturities of financial liabilities,
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 June 30, 2016 and March 31,
2015, 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 June 30, 2016 and
March 31, 2015, no allowance for doubtful accounts is warranted.
The Corporation had one customer that individually represented more than 10% of total revenue for the
fifteen-month period ended June 30, 2016, comprising 16% of total revenue. For the twelve-month period
ended March 31, 2015, no sales were made to any one customer which represented more than 10% of total
sales.
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.
excluding interest payments:
June 30, 2016
Provision for future payments to Front Street Capital
Repurchase obligations
Derivatives
Warrants
Long-term debt (Note 10)
March 31, 2015
Repurchase obligations
Derivatives
Warrants
Long-term debt
Currency risk
Bank indebtedness
$
72,014,760
$
72,337,860
$
72,337,860
$
-
$
-
$
-
Accounts payable and accrued liabilities
20,738,687
20,738,687
20,738,687
Carrying
amount
Contractual
cash flows
1 year
2 years
3 to
5 years
More than
5 years
-
-
-
3,327,501
3,327,501
3,327,501
95,000
136,000
95,000
136,000
95,000
136,000
-
-
-
-
-
29,671,371
30,631,066
2,127,866
6,478,000
22,025,200
-
-
-
-
-
-
Carrying
amount
Contractual
cash flows
1 year
2 years
5 years
5 years
3 to
More than
Bank indebtedness
$
18,736,400
$
18,963,000
$
18,963,000
$
-
$
-
$
-
Accounts payable and accrued liabilities
17,388,202
17,388,202
17,388,202
Provision for future payments to Front Street Capital
344,000
344,000
344,000
18,635,451
18,635,451
18,635,451
2,607,280
2,607,280
2,607,280
-
-
-
-
-
-
-
-
-
-
1,719,000
1,719,000
1,719,000
30,381,310
31,605,000
-
3,792,600
27,812,400
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.
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.
-
-
-
-
-
-
-
-
-
-
-
56
CERES GLOBAL AG CORP.
28
29
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
Liquidity risk
As at June 30, 2016 and March 31, 2015, the following are the contractual maturities of financial liabilities,
excluding interest payments:
June 30, 2016
Carrying
amount
Contractual
cash flows
1 year
2 years
3 to
5 years
More than
5 years
Bank indebtedness
$
72,014,760
$
72,337,860
$
72,337,860
$
-
$
-
$
-
Accounts payable and accrued liabilities
20,738,687
20,738,687
20,738,687
Repurchase obligations
Derivatives
Provision for future payments to Front Street Capital
Warrants
Long-term debt (Note 10)
-
-
-
3,327,501
3,327,501
3,327,501
95,000
136,000
95,000
136,000
95,000
136,000
29,671,371
30,631,066
2,127,866
6,478,000
22,025,200
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
March 31, 2015
Carrying
amount
Contractual
cash flows
1 year
2 years
5 years
5 years
3 to
More than
Bank indebtedness
$
18,736,400
$
18,963,000
$
18,963,000
$
-
$
-
$
-
Accounts payable and accrued liabilities
17,388,202
17,388,202
17,388,202
Repurchase obligations
Derivatives
18,635,451
18,635,451
18,635,451
2,607,280
2,607,280
2,607,280
Provision for future payments to Front Street Capital
344,000
344,000
344,000
Warrants
Long-term debt
1,719,000
1,719,000
1,719,000
30,381,310
31,605,000
-
3,792,600
27,812,400
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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.
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.
29
FY2016 ANNUAL REPORT
57
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
As at June 30, 2016 and March 31, 2015, the following is a summary, at fair value, of Ceres’ exposure to
significant currency risks:
(d) Fair value measurements
2016
2015
Net futures
contracts (to
buy foreign
currency)
Net asset
exposure*
Net futures
contracts (to
buy foreign
currency)
Net asset
exposure
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:
June 30, 2016
Le ve l 1
Le ve l 2
Le ve l 3
Total
3,537,014
848,163
4,385,177
$
(950,446)
$
-
$
840,344
$
-
166,508
-
Currency
U.S. dollars
*Exposure excludes the effect of future foreign exchange contracts
As at June 30, 2016 and March 31, 2015, 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 June 30, 2016 and March 31, 2015, with all other variables
remaining constant, related to assets and liabilities denominated in foreign currencies:
Change in foreign exchange rate
2016
2015
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
$
$
(53,853)
59,522
$
$
(0.00)
0.00
$
$
(50,589)
55,914
$
$
(0.00)
0.00
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.
During the fifteen-month period ended June 30, 2016, the Corporation hedged a portion of its investment
in a US subsidiary through US dollars futures contracts, which mitigated the foreign currency risk arising
from the subsidiary’s net assets. During the quarter ended December 31, 2015, the Corporation settled the
US dollar futures hedge and realized a gain of $1.4 million, which has been recognized in other
comprehensive income.
58
CERES GLOBAL AG CORP.
30
Portfolio investments
Due from broker, unrealized
gains on futures and
options (Note 6)
Unrealized gains on open
cash contracts (Derivatives)
Due to Broker, unrealized
losses on futures and
options (Note 6)
Unrealized losses on open
cash contracts (Derivatives)
Derivative warrant liability
Provision for future payments
to Front Street Capital
Portfolio investments
Due from broker, unrealized
gains on futures and
options (Note 6)
Unrealized gains on open
cash contracts (Derivatives)
Due to Broker, unrealized
losses on futures and
options (Note 6)
Unrealized losses on open
cash contracts (Derivatives)
Derivative warrant liability
Provision for future payments
to Front Street Capital
-
-
-
-
-
-
-
-
-
-
(160,084)
2,673,417
(557,829)
6,615,551
(3,327,501)
(136,000)
(95,000)
6,594,064
-
-
9,472,984
(2,607,280)
(1,719,000)
(344,000)
4,802,704
-
-
-
-
-
-
-
-
-
-
-
-
2,115,588
848,163
6,424
848,163
Le ve l 1
Le ve l 2
Le ve l 3
Total
March 31, 2015
848,163
848,163
166,508
6,615,551
(160,084)
(3,327,501)
(136,000)
(95,000)
7,448,651
2,673,417
9,472,984
(557,829)
(2,607,280)
(1,719,000)
(344,000)
7,766,455
31
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
(d) 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:
Portfolio investments
Due from broker, unrealized
gains on futures and
options (Note 6)
Unrealized gains on open
cash contracts (Derivatives)
Due to Broker, unrealized
losses on futures and
options (Note 6)
Unrealized losses on open
cash contracts (Derivatives)
Derivative warrant liability
Provision for future payments
to Front Street Capital
Portfolio investments
Due from broker, unrealized
gains on futures and
options (Note 6)
Unrealized gains on open
cash contracts (Derivatives)
Due to Broker, unrealized
losses on futures and
options (Note 6)
Unrealized losses on open
cash contracts (Derivatives)
Derivative warrant liability
Provision for future payments
to Front Street Capital
June 30, 2016
Le ve l 1
Le ve l 2
Le ve l 3
Total
-
3,537,014
848,163
4,385,177
166,508
-
-
6,615,551
(160,084)
-
-
-
6,424
(3,327,501)
(136,000)
(95,000)
6,594,064
-
-
-
-
-
-
848,163
166,508
6,615,551
(160,084)
(3,327,501)
(136,000)
(95,000)
7,448,651
Le ve l 1
Le ve l 2
Le ve l 3
Total
March 31, 2015
-
2,673,417
-
-
-
9,472,984
(557,829)
-
-
-
2,115,588
(2,607,280)
(1,719,000)
(344,000)
4,802,704
848,163
848,163
-
-
-
-
-
-
848,163
2,673,417
9,472,984
(557,829)
(2,607,280)
(1,719,000)
(344,000)
7,766,455
31
FY2016 ANNUAL REPORT
59
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
15. SHARE CAPITAL AND WARRANTS
(a)
Authorized
Unlimited number of voting, participating Common shares, without par value.
(b) Normal Course Issuer Bids
During the fifteen-month period ended June 30, 2016, the Corporation purchased Shares under normal
course issuer bids with 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. On
June 10, 2015, Ceres announced a normal course issuer bid (“the 2015-2016 NCIB”) which commenced
on June 12, 2015 and concluded on June 11, 2016. The Corporation renewed the normal course issuer bid
(“the 2016-2017 NCIB”) commencing on June 12, 2016. Using the facilities of the TSX and in accordance
with its rules and policies, Ceres intends to purchase up to a maximum of 1,595,765 of its Common
Shares, representing approximately 10 percent of its unrestricted public float as of June 2, 2016, subject
to a maximum aggregate purchase price of $5 million pursuant to restrictions under the Corporation’s
Credit Facility. The 2016-2017 NCIB will conclude on the earlier of the date on which purchases under
the 2016-2017 NCIB have been completed and June 11, 2017. Ceres may purchase up to a daily maximum
of 2,119 Common Shares under the 2016-2017 NCIB, except for purchases made in accordance with the
“block purchase” exception under applicable Toronto Stock Exchange (“TSX”) rules and policies.
During the period from February 11, 2016 to June 30, 2016, the Corporation purchased a total of 168,600
common shares under the normal course issuer bids, 2015-2016 NCIB and 2016-2017 NCIB, for
aggregate cash consideration of $852,847. The stated capital value of these repurchased Shares was
$1,301,592. The excess of the stated capital value of the repurchased common shares over the cost thereof,
being $448,745, was allocated to Retained Earnings in the fifteen month period ended June 30, 2016.
During the twelve-month period ended March 31, 2015, the Corporation did not purchase any Shares
under any Normal Course Issuer Bid.
(c) Common Share Purchase Warrants
In connection with the completion of the Corporation’s rights offering (the “Rights Offering”), on
December 4, 2014, Ceres issued an aggregate of 2,083,334 warrants (the “Warrants”) to the stand-by
purchasers. The Warrants issued were conditional upon approval at the Corporation’s annual general
meeting (“AGM”), which was obtained at the AGM on August 7, 2015.
Furthermore, the Warrants were issued at a fixed exercise price of $5.84 and are each exercisable into one
common share of the Corporation (a “Common Share”). The Warrants have an expiry date of December
4, 2016, being 24 months after issuance. In the event that the Warrants are being exercised prior to the
completion of a change of control of the Corporation, but after a transaction that will result in such a
change of control has been publicly announced, in lieu of exercising the Warrants, the holders of Warrants
can elect a cashless exercise to receive Common Shares equal to: the difference between the ten-day
Volume-Weighted Average Price (“VWAP”) of the Corporation’s stock price and $5.84; multiplied by
the number of Common Shares in respect of which the election is made; divided by the ten-day VWAP
of the Corporation’s stock price. If a Warrant holder exercises this option, there will be variability in the
number of shares issued per Warrant.
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
In accordance with IFRS, a contract to issue a variable number of shares fails to meet the definition of
equity and must instead be classified as a derivative liability and measured at fair value with changes in
the fair value recognized in the statement of operations and comprehensive loss at each period end. If the
Warrants are exercised and converted to Common Shares, or are extinguished upon the expiration of the
outstanding Warrants, it will not result in the outlay of any cash by the Corporation.
As at June 30, 2016, the fair value of the Warrants is estimated using the Black-Scholes pricing model
with the following assumptions: an average risk free interest rate of 0.52%; an average expected volatility
factor of 15.68%; an expected dividend yield of nil; and expected remaining life of 0.43 years. The fair
value of the stand-by warrants as at June 30, 2016, was estimated at $136,000 (as at March 31, 2015:
$1,719,000).
(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 June 30, 2016 and March 31, 2015, no SARs had been awarded.
60
CERES GLOBAL AG CORP.
32
33
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
In accordance with IFRS, a contract to issue a variable number of shares fails to meet the definition of
equity and must instead be classified as a derivative liability and measured at fair value with changes in
the fair value recognized in the statement of operations and comprehensive loss at each period end. If the
Warrants are exercised and converted to Common Shares, or are extinguished upon the expiration of the
outstanding Warrants, it will not result in the outlay of any cash by the Corporation.
As at June 30, 2016, the fair value of the Warrants is estimated using the Black-Scholes pricing model
with the following assumptions: an average risk free interest rate of 0.52%; an average expected volatility
factor of 15.68%; an expected dividend yield of nil; and expected remaining life of 0.43 years. The fair
value of the stand-by warrants as at June 30, 2016, was estimated at $136,000 (as at March 31, 2015:
$1,719,000).
(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 June 30, 2016 and March 31, 2015, no SARs had been awarded.
33
FY2016 ANNUAL REPORT
61
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
During the fifteen months ended June 30, 2016, Ceres granted stock options (“options”) under the
corporation’s stock option plan to certain officers and employees of the Corporation. The exercise price
is fixed by the Board of Directors at the time of grant; provided that the exercise price shall not be less
than fair market value of the common shares.
(e)
Issued and outstanding as at June 30, 2016 and March 31, 2015
The following is a summary of the changes in the Common shares and Warrants for the fifteen-month
period ended June 30, 2015 and twelve-month period ended March 31, 2015:
As at June 30, 2016, the outstanding Options are as follows:
Weighted-
average
exercise price
($)
Weighted-
average
Remaining
Contractual
Term (Years)
Number
of Options
Outstanding as at March 31, 2015
-
$
-
-
Granted
Exercised
Expired/forfeited
322,500
-
(44,169)
6.72
-
6.25
Outstanding as at June 30, 2016
Exercisable as at June 30, 2016
278,331
$
6.71
113,695
$
6.73
3.80
3.77
At the grant date, the fair value of the Options is estimated using the Black-Scholes pricing model with
the following weighted-average assumptions: an average risk free interest rate of 0.80%; expected
volatility of 28.1%; dividend yield of nil; an average expected option life of 3.5 years; and average exercise
price of $6.72. The weighted average grant date fair value of the Options granted during the fifteen-month
period ended June 30, 2016, is $1.45 (twelve months ended March 31, 2015: nil).
The total Option compensation cost that has been included in general and administrative expenses for the
fifteen months ended June 30, 2016, amounted to $198,335 (twelve months ended March 31, 2015: nil)
with the non-cash expense being accrued and classified within contributed surplus in the Consolidated
Balance Sheet.
Warrants, conditionally issued, December 4, 2014, classified as liabilities
Balances, March 31, 2015
27,050,673
$
208,884,960
Balances, March 31, 2014
Adjustment to outstanding common shares
Issuance of common shares, December 4, 2014
Share issuance costs
Redemption of deferred share units
Share issuance costs
Repurchase under normal course issuer bid
Balances, June 30, 2016
16. DEFERRED SHARE UNIT PLAN
Common shares
Shares
Dollars
14,208,679
$
137,100,022
(471)
12,842,465
-
-
-
6,982
-
75,000,000
(1,571,062)
(1,644,000)
41,789
(69,359)
(168,600)
(1,301,592)
26,889,055
$
207,555,798
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
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.
62
CERES GLOBAL AG CORP.
34
35
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
(e)
Issued and outstanding as at June 30, 2016 and March 31, 2015
The following is a summary of the changes in the Common shares and Warrants for the fifteen-month
period ended June 30, 2015 and twelve-month period ended March 31, 2015:
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
Balances, March 31, 2015
Redemption of deferred share units
Share issuance costs
Repurchase under normal course issuer bid
Balances, June 30, 2016
16. DEFERRED SHARE UNIT PLAN
Common shares
Shares
Dollars
14,208,679
(471)
12,842,465
-
-
$
137,100,022
-
75,000,000
(1,571,062)
(1,644,000)
27,050,673
$
208,884,960
6,982
-
41,789
(69,359)
(168,600)
(1,301,592)
26,889,055
$
207,555,798
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
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.
35
FY2016 ANNUAL REPORT
63
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
The following is a summary of the changes in the number of DSUs issued and outstanding for the fifteen-
month period ended June 30, 2016 and twelve-month period ended March 31, 2015:
of $249,000 related to the revaluation of the provision for future payments to Front Street Capital (twelve-
month period ended March 31, 2015: revaluation gain of $626,000).
15-month period ended
June 30, 2016
12-month period ended
March 31, 2015
number of
units
Fair Market
Value
number of
units
Fair Market
Value
Balance, beginning of period
Units redeemed
Units issued
52,813
(6,983)
96,887
$
$
$
6.06
5.98
5.34
8,913
(2,674)
46,574
$
$
$
7.01
7.00
6.06
Balance, end of period
142,717
$
5.34
52,813
$
6.06
17. MANAGEMENT FEES
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 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 the five-
year period ending August 23, 2018, 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 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 June 30, 2016, management has determined the fair value of the potential additional payments
provided for under the Transition Agreement is $95,000 (March 31, 2015: $344,000). As at June 30, 2016,
the fair value of each additional payment was determined using the binomial options pricing model, with
a remaining term to August 23, 2018, using volatility of 25% and a risk-free interest rate of 0.52% (twelve-
month period ended March 31, 2015: remaining term to August 23, 2018, volatility of 25% and risk-free
interest rate of 0.62%). 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. For the fifteen-month period ended June 30, 2016, the Corporation recognized a gain
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:
Income (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 unrealized losses on investments
(non-taxable portion of unrealized gains on investments)
Changes in unrecognized temporary difference on deferred
Non-deductible changes in the revaluation of the derivative
income tax assets
warrant liability
Foreign exchange and other differences
2016
2015
$
$
$
8,512,285
(24,937,033)
(16,424,748)
26.5%
(4,352,558)
(2,807,910)
39,246
-
(6,539,794)
4,392,488
(2,147,306)
26.5%
(569,036)
551,696
(143,492)
(1,885,738)
104,332
64,594
7,576,934
2,850,338
(485,480)
(359,894)
4,067,228
-
(449,047)
988,351
Income tax expense (recovered)
$
(285,330)
419,315
64
CERES GLOBAL AG CORP.
36
37
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
of $249,000 related to the revaluation of the provision for future payments to Front Street Capital (twelve-
month period ended March 31, 2015: revaluation gain of $626,000).
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:
Income (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 unrealized losses on investments
(non-taxable portion of unrealized gains on investments)
Changes in unrecognized temporary difference on deferred
income tax assets
Non-deductible changes in the revaluation of the derivative
warrant liability
Foreign exchange and other differences
2016
2015
$
$
$
8,512,285
(24,937,033)
(16,424,748)
26.5%
(4,352,558)
(2,807,910)
39,246
-
(6,539,794)
4,392,488
(2,147,306)
26.5%
(569,036)
551,696
(143,492)
(1,885,738)
104,332
64,594
7,576,934
2,850,338
(485,480)
(359,894)
4,067,228
-
(449,047)
988,351
Income tax expense (recovered)
$
(285,330)
419,315
37
FY2016 ANNUAL REPORT
65
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
The components of the provision for income taxes are as follows:
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
(c) Tax losses carried forward
(i)
Canadian operations
Canada
Current
Deferred
United States of America - Federal
Current
Deferred
United States of America - State
Current
Deferred
2016
$
-
(296,971)
(296,971)
$
2015
134,142
140,437
274,579
(5,310)
(20,075)
(25,385)
39,246
(2,220)
37,026
93,164
-
93,164
51,572
-
51,572
Income tax expense (recovered)
(285,330)
$
419,315
(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:
2016
2015
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
47,710,311
1,026,920
845,834
217,995
-
-
29,682,633
1,026,920
845,834
389,640
6,044,365
861,641
Deferred tax liabilities:
Deferred income tax liability, property, plant and equipment
Taxable portion of unrealized depreciation of investment in
associates
Other temporary deductible differences, net of temporary
taxable differences
Unrecognized deferred tax assts
49,801,060
38,851,033
(20,359,490)
(17,845,828)
(590,261)
(360,345)
(415,686)
(18,234)
(21,365,437)
(18,224,407)
(28,435,623)
(20,923,597)
Noncurrent deferred tax liabilities, net
$
-
(296,971)
As at June 30, 2016, the Corporation has accumulated non-capital losses in the amount of $46,336,292
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
2031
2032
2033
2034
2035
2036
$
Amount
1,056,126
7,335,493
7,380,692
13,586,280
8,197,795
8,779,906
$
46,336,292
As at June 30, 2016, 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 June 30, 2016, 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
Federal
2026
2027
2028
2029
2031
2032
2033
2034
2036
$
-
-
-
-
9,596,976
3,686,320
8,570,443
12,772,909
32,141,472
$
66,768,120
State
5,248,595
1,724,905
7,773,863
9,210,006
16,022,178
3,369,906
9,999,689
15,648,306
2,034,311
71,031,759
66
CERES GLOBAL AG CORP.
38
39
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
(c) Tax losses carried forward
(i)
Canadian operations
As at June 30, 2016, the Corporation has accumulated non-capital losses in the amount of $46,336,292
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
2031
2032
2033
2034
2035
2036
$
Amount
1,056,126
7,335,493
7,380,692
13,586,280
8,197,795
8,779,906
$
46,336,292
As at June 30, 2016, 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 June 30, 2016, 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
2026
2027
2028
2029
2031
2032
2033
2034
2036
$
Federal
-
-
-
-
9,596,976
3,686,320
8,570,443
12,772,909
32,141,472
$
66,768,120
State
5,248,595
1,724,905
7,773,863
9,210,006
16,022,178
3,369,906
9,999,689
15,648,306
2,034,311
71,031,759
39
FY2016 ANNUAL REPORT
67
CERES GLOBAL AG CORP.
Notes to Consolidated Financial Statements
June 30, 2016 and March 31, 2015
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 fifteen-month period
ended June 30, 2016 and twelve-month period ended March 31, 2015:
Salaries and short-term employee/director benefits
Share-based compensation
Fifteen-month
period ended
June 30, 2016
Twelve-month
period end
March 31, 2015
$
1,942,441
644,257
$
2,111,836
494,577
$
2,586,698
$
2,606,413
As at June 30, 2016 and March 31, 2015, directors and officers of the Corporation, through a controlled
entity, beneficially own, directly or indirectly, or exercise control or direction over 40.7% and 40.3%,
respectively, of the outstanding Common shares of the Corporation.
20. CHANGES IN NON-CASH WORKING CAPITAL ACCOUNTS
Fifteen-month
period ended
June 30, 2016
Twelve-month
period ended
March 31, 2015
Decrease (increase) in due from Broker
Decrease (increase) in net derivative assets
Increase in accounts receivable
Decrease (increase) in inventories
Decrease (increase) in Sales taxes recoverable
(Increase) decrease in prepaid expenses and sundry assets
Increase in accounts payable and accrued liabilities
Decrease in provision for future payment to Front Street Capital
$
$
1,803,344
3,789,843
(3,022,080)
(4,929,716)
(7,988,907) (1,455,462)
18,871,966
(16,515,546)
967,648
332,152
219,660
(1,025,848)
4,198,934
1,982,426
(626,000)
(249,000)
$ (24,014,566)
$ 20,367,980
68
CERES GLOBAL AG CORP.
40
CORPORATE INFORMATION
Senior Management
Directors
Robert Day
Douglas Speers
Gary Mize
President and Interim Chief
Independent Director, Chairman, and
Independent Director, Chair of Audit
Executive Officer
Member of the Human Resources,
and Finance Committee, Chair of the
Mark Kucala
Vice President and
Chief Financial Officer
Safety and Environmental Committee
Nominating, Governance, Risk and
Patrick Bracken
Ethics Committee
Member of the Nominating,
James Vanasek
Governance, Risk and Ethics
Member of Audit and Finance
Committee
Committee
Harvey Joel
Independent Director, Chair of
the Human Resources Safety and
Environmental Committee, Member of
the Audit and Finance Committee
Corporate Office
1660 S. Highway 100
St. Louis Park, MN
55416 USA
Registered Office
155 Wellington West, 40th floor
Toronto, ON M5V 3J7
Transfer Agent
CST Trust Company
Auditors
KPMG LLP
333 Bay Street, Suite 4600
Toronto, ON M5H 2S5
Investor Contact
Joe Racanelli
NATIONAL Equicom
T: 416 586 1943
E: jracanelli@national.ca
AGM
Ceres Global Ag Corp.
Annual General Meeting
November 10 at 9:00 am
Davies Ward Phillips & Vineberg LLP
155 Wellington West, 40th floor
Toronto, ON M5V 3J7
ceresglobalagcorp.com
Ceres Global Ag Corp
1660 S. Highway 100
St. Louis Park, MN 55416 USA
ceresglobalagcorp.com