PEOPLE : FIRST
2 0 2 0 A N N U A L R E P O R T
To our dedicated team,
thank you.
Thank you for your
tireless efforts during
an unprecedented
global crisis.
Thank you for putting
the safety of others
above all else.
Thank you for keeping
shelves stocked and
business moving
forward.
Each one of you has a hand
in our ongoing success.
As we look to the future,
your individual efforts
will continue to make us
stronger, together.
Y E A R I N R E V I E W
2020 has reinforced
our purpose.
For millions of people around the world, health and wellness is no longer a growing trend –
it’s their #1 priority. And it’s driving global demand for products across the VMS industry.
As consumers continually flock to our trusted Jamieson brand, we have seen strong growth
across all our segments.
This year has not only put new confidence in our near 100-year history and our global position,
but in our ability to pull through any hardship as a team.
ACHIEVEMENTS THROUGH ADVERSITY
Created and implemented our Confidence and Compliance Plan
for safety assurance
Generated highest annual revenue in the company’s history
Increased our distribution and sales domestically and internationally
across new and existing channels
Generated highest brand equity and household penetration
of the Jamieson brand in history
Innovated and released products in line with new consumer trends
Transitioned to east and west coast third-party distribution centres
to increase capacity in our Windsor and Scarborough locations
Introduced a teamwork bonus for our frontline team
members in manufacturing and distribution
Disclosed our first Corporate Responsibility Commitment
document, outlining our ESG efforts to date
Established legal entities and distribution
warehouses in the Netherlands, UK and Australia
7
We are so
proud of how
the Jamieson
family has
come together
during these
challenging
times.
F R O M O U R C E O
Dear fellow shareholders:
2020 was the most successful year in Jamieson’s history despite a global
pandemic that created immense challenges. I am incredibly proud of everyone
at Jamieson for meeting these challenges head-on, ensuring we maintained our
momentum while prioritizing health and safety above all. The Company’s enduring
vision of improving the world’s health and wellness has remained steadfast for
nearly a century. The strength of our organization and exceptionally talented team,
coupled with our powerful, resilient brands, ensure an even brighter future over
the next hundred years.
The 17% increase in total revenue during 2020 reflected solid execution across
our strategic initiatives against the backdrop of consumers’ increasing emphasis
on health and wellness which resulted in a 19% increase in our Jamieson Brands
revenue. Importantly, we experienced a significant broadening of demand across
almost all categories as 2020 unfolded, supporting our view of the permanence
of consumers’ health habits reshaped by the pandemic. We also saw a sharp
acceleration on a global scale with international revenue increasing 50% in the
Jamieson Brands segment, accounting for 16% of total branded revenue for the year.
Our Adjusted EBITDA margins approached 22% in 2020, down fractionally from the
prior year, despite absorbing significant costs to ensure the health and safety of our
team members and mitigating supply disruptions caused by the pandemic.
Powerful brands remain at the core of our strategy, solidifying our competitive
position and enabling strong, sustainable growth. Consumers consistently identify
with Jamieson’s long-standing reputation for premium quality and innovative
products, helping us to continue gaining share domestically, strengthening our
position as the #1 consumer health brand in Canada. This also provides us with
a tremendous opportunity for expanding globally, where we’ve taken a thoughtful,
measured approach toward leveraging our capabilities as well as working with key
partners who help to amplify the power of our brand. China likely represents our
largest international opportunity for organic growth over the near term based on
the reputation of the Jamieson brand, underlying demographics and economic
scale versus the rest of the world. The rapid international growth we experienced
in 2020 was a result of significant progress in key markets including China, Europe
and the Middle East. While our success internationally over the past few years
has been impressive, we are truly in the early innings of leveraging the power of
our platform. Consumers’ heightened interest in health and wellness is global
in scope and shows no signs of slowing.
I’ve been honoured to have led this Company for the past seven years and am
very proud of our performance, delivering significant growth in sales, profits and
shareholder value. My recently announced decision to retire was two years in
the making and came after careful planning and consideration, working in close
partnership with the Board to ensure we had the right leader in place at the right
time. Mike Pilato is absolutely the right person for the job and on June 1, 2021,
he will succeed me as President and CEO of the Company. His vision and
leadership have been instrumental in our success, driving strategy and operations
in his role as President of Jamieson Canada. The fundamentals of Jamieson
Wellness have never been stronger, and Mike has the respect and support of
our entire team along with my complete confidence in his ability to execute our
winning strategy and drive shareholder value for the foreseeable future.
On behalf of the entire management team, I thank you for your continued support
and partnership as we look towards the upcoming year.
All the best,
MARK HORNICK
President & CEO, Jamieson Wellness Inc.
8
Even in the
midst of
uncertainty,
we have
continued
to grow and
thrive as
a team.
F R O M O U R C H A I R M A N
Dear fellow shareholders:
The impressive results at Jamieson Wellness in 2020 reflect the Company’s
strong position competitively, financially and organizationally. Despite
incredible disruption and uncertainty, we were able to maintain a safe
and healthy working environment for our employees and deliver significant
broad-based growth across products, channels and geographies.
In 2020, the Company also made significant progress in its ESG strategy
with the publication of our first Corporate Responsibility Commitment.
Environmental sustainability initiatives, commitments to furthering diversity,
equity and inclusion within the organization and externally, as well as
improvements to governance practices were all disclosed. This is just
the beginning, and I look forward to continuing to work with the Board
and the entire organization to embed these values into the Company
through the creation of a long-term ESG strategy.
The execution of our strategy by our senior leadership team has been
a critical factor in the Company’s success over the past several years.
Accordingly, with the recently announced retirement of Mark Hornick, I want
to assure you that the Board has been working closely with him for the past
two years to ensure a seamless transition. We are incredibly thankful to Mark
for his leadership, vision and strategic direction over the past seven years
as President and CEO, guiding the Company through an unprecedented
period of growth. But his ability to develop the next generation of leaders
will continue to positively shape the future of Jamieson, including the
hiring of Mike Pilato three years ago. On June 1, 2021, Mike will become
President and CEO of Jamieson Wellness and we are confident his extensive
background and impressive track record will enable us to maintain our strong
momentum, continuing to drive significant value for all stakeholders.
Our strong results in 2020 coupled with our solid financial position and
favourable outlook allowed us to increase our quarterly dividend rate for
the third consecutive year. Our business is well positioned for growth in
2021 and beyond, both domestically and internationally.
I would like to thank all our team members for their hard work and dedication
during such an uncertain time. My thanks also go out to our Board of
Directors and management team for their leadership, and for delivering
another outstanding year. We remain committed to driving shareholder
value while working to achieve our mission of becoming the world’s most
successful and trusted health and wellness company.
Sincerely,
DAVID WILLIAMS
Chairman of the Board, Jamieson Wellness Inc.
9
9
F R O M O U R I N C O M I N G P R E S I D E N T & C E O
Dear fellow shareholders:
It is with great pride that I reflect on 2020 and all that we have
accomplished. We worked together to prioritize the health and safety
of our frontline team members and met a growing global consumer
demand for our high-quality, trusted products. While 2020 came with
many unpredictable hurdles, the Jamieson Wellness team rose to the
challenge and has come out of this historic time stronger, together.
In 2020 we saw existing consumers increase their consumption of
our products, and many new consumers enter the category choosing
Jamieson, as they looked for a brand they could trust in a time of
uncertainty. As a result, we have a new, elevated consumer base that
we look forward to growing from in the years ahead. Our solid brands
are backed by our highly capable team and are ready to continue
meeting the demands of this health and wellness megatrend.
I am honoured to take on the leadership of this exceptional team in
2021. I thank Mark for the strong position he has led our company to
and wish him all the best in his upcoming retirement. I also thank Mark
and the Board of Directors for their support as we approach Jamieson’s
100th year. We have very clear priorities, both short and long-term, that
will take our company to the next level of success. We will continue to
prioritize health and safety while we innovate and increase distribution
to meet consumer needs along their life-long health and wellness
journey. We are focused on continuing our historic track record of robust
domestic growth, accelerating our international business in the 45+
markets we have penetrated, and continuing to expand our expertise
into new high potential geographies.
I want to thank the amazing Jamieson Wellness team, almost 1,000
strong, for their unwavering passion and dedication through 2020.
Without them we would not be in the position we are in today,
to continue this legacy of growth as Jamieson turns 100. I would
also like to thank our shareholders for your support and confidence
in our team as we continue to improve the world’s health and wellness
long into the future.
Sincerely,
MIKE PILATO
Incoming President & CEO, Jamieson Wellness Inc.
Our year
was dedicated
to delivering
health and
wellness
products when
consumers
needed
them most.
This annual report contains “forward-looking information” within the meaning of applicable securities laws, which forward-looking information represents
management’s expectations as at the date hereof and is subject to change after such date. For a detailed discussion of forward-looking information,
which applies in all respects to the forward-looking information contained herein, please refer to the section entitled “Forward-Looking Information”
in Jamieson Wellness’ annual information form dated March 30, 2021.
1 0
1 0
O U R S A F E T Y M E A S U R E S
Whatever it takes.
As we navigate these challenging times, health and safety have been at the forefront of every decision.
CONFIDENCE & COMPLIANCE PLAN
In honour of our commitment to health and safety, we implemented our Confidence and
Compliance Plan, which involves significant investments in physical distancing measures, PPE,
contact tracing and employee support. It has given considerable protection to our employees
in manufacturing, distribution and other critical on-site functions since early January, 2020.
We have remained firm on our safety measures throughout the expansion of our manufacturing
capacity and production lines across multiple facilities. We are extremely proud of how quickly
and efficiently our team has accomplished this in such a demanding environment.
JAN
26
Safety training started
on January 26, 2020
Reduced capacity through
shift gaps
Physical distancing
measures and guidelines
Increased sanitation equipment
and cleaning schedules
Protective equipment
Safeguarding our communities.
region frontline healthcare workers
58K surgical masks donated to Windsor
27K surgical masks donated to hospitals
in the Scarborough health network
Additionally, we donated thousands of bottles
of vitamins and nutritional supplements to
healthcare staff and their families in Windsor,
Scarborough, Toronto and Wuhan, China.
1 1
1 1
O P E R AT I O N A L C O L L A B O R AT I O N
United in our approach.
From the onset of the pandemic, our team took immediate action to maintain operations
with minimal risk to our communities, consumers and each other. Their devoted efforts
have ensured a steady flow of production.
FROM OUR OPERATIONS TEAM…
From the supply chain to HR and sales, the Jamieson family has collaborated at all levels
to keep our business running smoothly and meet the rising demand. By acting early, we
succeeded in securing adequate sources of supply to carry us through the pandemic.
…TO OUR THIRD-PARTY AND RETAIL PARTNERS
Our vendors have been critical in our effort to
maintain lead times and maximize the output of
products in the highest demand.
We are infinitely grateful that there have
been no significant closures across our food,
drug, mass and e-commerce channels.
Thanks to the collaboration of our retail partners
and sales team, our products have remained
widely available online and in stores.
1 2
F I N A N C I A L P E R F O R M A N C E
Rising needs.
Climbing numbers.
Jamieson Wellness has a long history of organic revenue growth. And this year,
we exceeded it beyond expectation. We experienced increases in both domestic
and international sales, with strong gains in multiple geographies, including China,
Europe and the Middle East.
Our success is the result of new investments in marketing and e-commerce initiatives,
sustained consumer confidence in the Jamieson brand, and an increasingly heightened
demand for health and wellness products.
AN INTENSIFIED MARKET DEMAND
In response to COVID-19, consumers are developing healthier habits – with a particular focus
on foundational health and immunity-related supplements.
This movement has led existing consumers to increase their product use and new consumers
to begin exploring the category. Newcomers are consistently showing preference for products
from a trusted company, like Jamieson Wellness. They want to know they are getting the
highest quality products available.
+17.0% Increased
Revenue
$403.7 million
+15.9% Increased Adjusted
EBITDA
$88.0 million
+25.8% Increased Adjusted
Net Income
$47.9 million
+21.1% Adjusted Earnings
Per Diluted Share
$1.16
1 3
1 3
Setting our
sights on
sustainability.
In pursuit of broader ESG efforts, we
have released our first ever Corporate
Responsibility Commitment. It highlights our
most recent environmental efforts, charitable
donations to frontline healthcare workers
during the pandemic, and our enhanced
diversity policy – which will help us ensure
fair representation of leadership and Board
roles by BIPOC and female leaders by 2025.
This document helps hold us accountable for
leading with safety and remaining transparent
in our communications throughout the pandemic.
E S G S T R AT E G Y
THE FUNDAMENTAL PILLARS OF
OUR CORPORATE RESPONSIBILITY
COMMITMENT
PRODUCT QUALITY & SAFETY
Set ourselves apart by providing consumers
with the purest, safest and most effective
natural health solutions available.
ENVIRONMENTAL IMPACT
Embrace business practices that help
preserve and enhance our natural
environment.
ETHICAL OPERATIONS
Operate under the guiding principle that
honesty and integrity are essential in all our
relationships, without compromise.
CULTURAL VALUES
Promote the physical, mental and social well-being
of employees through practices focused on
diversity, equality, inclusion, and mentorship.
LOCAL & GLOBAL COMMUNITIES
Make a difference worldwide by donating to
local charities, partnering with international
non-profits, and supporting important causes.
PARTNER POLICIES
Initiate requirements that encourage vendors,
suppliers and partners to join us in upholding
our company values.
CORPORATE GOVERNANCE
Continue to enact sound, ethical policies and
procedures that guide company operations
and facilitate long-term business success.
1
2
3
4
5
6
7
In keeping with our commitment to safety
and environmental sustainability, this is
the first year we will not proactively print
and distribute our annual report.
1 4
1 4
Healthy living:
the new normal.
GROWING FROM AN ELEVATED BASE
As we transition out of the pandemic, we fully expect to retain and
grow this exciting new base of consumers. From nearly a century
of experience in the marketplace, we know that year-long consumer
habits do not simply go away. And neither will the sharpened focus
on health and wellness. It was a growing megatrend before the
pandemic. Concerns around COVID-19 have simply accelerated it,
reinforcing good health as a necessity in our daily lives.
INCREASING OUR CAPACITY
We are confident in our ability to support the growing
demand. We have already accelerated our investment
plans to increase production capacity and expand
our international presence. Focusing on our supply
chain globally, we will continue to secure higher
inventory levels with our suppliers.
STRONGER TOGETHER
As our business forges ahead, safety
and well-being will remain our priority.
We are honoured to be supported by
people with such relentless dedication
to our vision of improving the world’s
health and wellness. Their
commitment will continue to
make us stronger, together.
F U T U R E O U T L O O K
1 5
1 5
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For the three and twelve months ended December 31, 2020
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
For the three and twelve months ended December 31, 2020
The following management’s discussion and analysis of financial condition and results of operations
(“MD&A”) of Jamieson Wellness Inc. (together with its subsidiaries), referred to herein as “Jamieson”, the
“Company”, “we”, “us” or “our”, is dated as of February 24, 2021. It should be read in conjunction with our audited
consolidated annual financial statements and our accompanying notes for the year ended December 31, 2020.
Our audited consolidated annual financial statements and accompanying notes for the year ended December
31, 2020 have been prepared in accordance with International Financial Reporting Standards (“IFRS”). These audited
consolidated annual financial statements include the accounts of our Company and other entities that we control and
are reported in Canadian dollars. All references in this MD&A to “Q4 2020” are to our fiscal quarter ended December
31, 2020 and to “Q4 2019” are to our fiscal quarter ended December 31, 2019. All references in this MD&A to “YTD
2020” are to our year ended December 31, 2020 and to “YTD 2019” are to our year ended December 31, 2019.
See “Forward-Looking Information” and “Risk Factors” for a discussion of the uncertainties, risks and
assumptions associated with these statements. Actual results may differ materially from those indicated or underlying
forward-looking information as a result of various factors, including those referred to under the heading “Risk Factors”
and elsewhere in this MD&A.
Non-IFRS Financial Measures
This MD&A makes reference to certain non-IFRS measures. Management uses these non-IFRS financial
measures for purposes of comparison to prior periods and development of future projections and earnings growth
prospects. This information is also used by management to measure the profitability of ongoing operations and in
analyzing our business performance and trends. These measures are not recognized measures under IFRS, do not have
a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented
by other companies. Rather, these measures are provided as additional information to complement those IFRS
measures by providing further understanding of our results of operations from management’s perspective.
Accordingly, they should not be considered in isolation nor as a substitute for analysis of our financial information
reported under IFRS. We use non-IFRS measures including “gross profit”, “gross profit margin”, “operating margin”
“EBITDA”, “Adjusted EBITDA”, “Adjusted EBITDA margin”, “Adjusted Net Income” and “Adjusted Diluted
Earnings per Share” to provide supplemental measures of our operating performance and thus highlight trends in our
core business that may not otherwise be apparent when relying solely on IFRS financial measures. Management also
uses non-IFRS measures in order to prepare annual operating budgets and to determine components of management
compensation.
Forward-Looking Information
Certain statements contained in this MD&A including, in particular, in the sections below entitled “Summary
of Factors Affecting our Performance”, “Liquidity and Capital Resources”, “Outlook” and “Risk Factors”, contain
forward-looking information within the meaning of applicable securities laws. Forward-looking information may
relate to our future outlook and anticipated events or results and may include information regarding our financial
position, business strategy, growth strategy, budgets, operations, financial results, taxes, dividend policy, plans and
objectives of our Company. Particularly, information regarding our expectations of future results, performance,
achievements, prospects or opportunities is forward-looking information. In some cases, forward-looking information
can be identified by the use of forward-looking terminology such as “plans”, “targets”, “expects”, “does not expect”,
“is expected”, “an opportunity exists”, “budget”, “scheduled”, “estimates”, “outlook”, “forecasts”, “projection”,
“prospects”, “strategy”, “intends”, “anticipates”, “does not anticipate”, “believes”, or variations of such words and
phrases or state that certain actions, events or results “may”, “could”, “would”, “might”, “will”, “will be taken”,
“occur” or “be achieved”. In addition, any statements that refer to expectations, intentions, projections or other
characterizations of future events or circumstances contain forward-looking information. Statements containing
forward-looking information are not historical facts but instead represent management’s expectations, estimates and
projections regarding future events or circumstances.
- 17 -
In addition, our assessments of, and targets for, annual revenue, Adjusted EBITDA, Adjusted Diluted
Earnings per Share and certain other measures are considered forward-looking information. See “Outlook” for
additional information concerning our strategies, assumptions and market outlook in relation to these assessments.
The forward-looking information contained in this MD&A is based on management’s opinions, estimates
and assumptions in light of its experience and perception of historical trends, current conditions and expected future
developments, as well as other factors that we believe to be appropriate and reasonable in the circumstances. Despite
a careful process to prepare and review the forward-looking information, there can be no assurance that the underlying
opinions, estimates and assumptions will prove to be correct. Certain assumptions in respect of the ability to pursue
further strategic acquisitions; our ability to source raw materials and other inputs from our suppliers; our ability to
continue to innovate product offerings that resonate with our target customer base; our ability to retain key
management and personnel; our ability to continue to expand our international presence and grow our brand
internationally; our ability to obtain and maintain existing financing on acceptable terms; currency exchange and
interest rates; the impact of competition; changes to trends in our industry or global economic factors; and changes to
laws, rules, regulations and global standards are material factors made in preparing the forward-looking information
and management’s expectations contained in this MD&A.
The forward-looking information contained in this MD&A represents management’s expectations as of the
date of this MD&A and is subject to change after such date. However, we disclaim any intention or obligation or
undertaking to update or revise any forward-looking information whether as a result of new information, future events
or otherwise, except (i) as required under applicable securities laws in Canada and (ii) to provide updates in our annual
MD&A for each financial year up to and including that in respect of 2021 on our growth targets disclosed in our final
prospectus dated June 29, 2017 in respect of our initial public offering and secondary offering, including to provide
information on our growth targets disclosed in such prospectus, actual results and a discussion of variances from our
growth targets. The forward-looking information contained in this MD&A is expressly qualified by this cautionary
statement.
Forward-looking information is necessarily based on a number of opinions, estimates and assumptions that
management considered appropriate and reasonable as of the date such statements are made, and is subject to known
and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity,
performance or achievements to be materially different from those expressed or implied by such forward-looking
information, including but not limited to those described below and referred to under the heading “Risk Factors” and
those discussed under the “Risk Factors” section of our most recent annual information form.
We caution that the list of risk factors and uncertainties is not exhaustive and other factors could also
adversely affect our results. Readers are urged to consider the risks, uncertainties and assumptions carefully in
evaluating the forward-looking information and are cautioned not to place undue reliance on such information.
Overview
Founded in 1922, Jamieson is Canada’s leading branded manufacturer, distributor and marketer of high-
quality natural health products. We offer consumers a comprehensive and innovative line of branded vitamins,
minerals and supplements (“VMS”) products and certain over-the-counter remedies through our Jamieson and Smart
Solutions by Lorna Vanderhaeghe brands as well as sports nutrition products through our Progressive, Precision and
Iron Vegan brands, all of which we refer to as our “Jamieson Brands” segment. In addition to our Jamieson Brands
segment, we also offer comprehensive manufacturing and product development services on a contract manufacturing
basis to select blue-chip consumer health companies and retailers worldwide, which we refer to as our “Strategic
Partners” segment.
VMS and sports nutrition are two large and growing segments of the consumer health industry. Jamieson is
Canada’s #1 overall consumer health brand by sales and Canada’s #1 brand in VMS by sales. Our trusted reputation
and success in Canada have allowed us to significantly grow the business internationally, with products being sold in
over 45 countries and regions worldwide.
Our trusted reputation, strong industry relationships and certifications and commitment to meeting the highest
standards of manufacturing, together with high quality production capabilities, attract opportunities for us to
- 18 -
manufacture products for select blue-chip consumer health companies and retailers worldwide. Combining deep
consumer insights with extensive research and development capabilities, we deliver category-leading innovation
and growth.
Our leading market position and brands, focus on quality and innovation and extensive selection of products,
make us the preferred partner for retailers in Canada.
Summary of Factors Affecting Our Performance
We believe our performance and future success depend on a number of factors that present significant
opportunities for us. These factors are also subject to a number of inherent risks and challenges, some of which are
discussed below and referred to under “Risk Factors”.
Impact of COVID-19
Considering the outbreak of COVID-19 around the world, conditions may come into existence that influence
our operations. Since becoming aware of the outbreak in early January 2020, the Company has secured additional,
alternate sources of raw materials to ensure continuity of supply and implemented safety measures across the
organization to ensure that our employees and business partners are protected. Consumer response to COVID-19 has
resulted in the acceleration of demand for both immunity and general health supplements. Higher demand includes
the impact of temporary non-essential store closures within the supplement-only portion of the health food channel
during the year while our products remained widely available within essential e-commerce and food, drug, and mass
(“FDM”) channels.
Revenue and the distribution of our products may be impacted by an escalation of COVID-19 infections
should it lead to the closure of essential FDM and e-commerce channels. High demand and service interruptions to
transportation may affect the delivery of raw materials and ingredients as well as international and domestic shipments
of finished goods. Manufacturing closures have the potential to impact our ability to produce finished goods and affect
the availability of purchased finished goods. The duration and impact of the COVID-19 outbreak is unknown and our
ability to continue to adapt to the changing environment may materially affect our business, results of operations or
financial condition.
We have not benefited from or applied for any government financial aid or relief fund relating to the COVID-
19 pandemic.
Our Brands
Our iconic brands have been built around consumer trust through focus on product quality, purity and
potency. Our well-established brands include Jamieson, Smart Solutions by Lorna Vanderhaeghe, Progressive,
Precision and Iron Vegan. Maintaining, enhancing and growing our brand appeal in Canada and internationally is
critical to our continued success. Failure to maintain and enhance our brands in any of the targeted markets may
materially and adversely affect the business, results of operations or financial condition.
Product Innovation and Planning
We believe that product innovation is integral to our success and we continue to focus on innovation as a key
pillar of our growth. Our business is subject to changing consumer trends and preferences which is dependent, in part,
on continued consumer interest in our new products, line extensions and reformulations. The success of new product
offerings, enhancements, or reformulations depends upon a number of factors, including our ability to: (i) accurately
anticipate customer needs; (ii) develop new products, line extensions or reformulations that meet these needs;
(iii) successfully commercialize new products, line extensions and reformulations in a timely manner; (iv) price
products competitively; (v) manufacture and deliver products in sufficient volumes and in a timely manner;
(vi) differentiate product offerings from those of competitors; and (vii) maintain relationships with scientist employees
and consultants and members of our panel of consumer health industry experts, which we call the Jamieson Scientific
- 19 -
Advisory Board, in order to benefit from their expertise and innovations. We believe our pace of innovation and speed
to market with the introduction of new products provide us with a competitive advantage within the space we compete.
Customer Relationships
We have longstanding and deeply entrenched customer relationships with Canada’s top retailers across the
FDM, club, health food store, specialty and online retail channels. We sell products through our knowledgeable retail
partners and we are dependent on retail partners across all channels to display and present our products to customers,
in their brick-and-mortar stores and on their online e-commerce sites. Our partners service customers by stocking and
displaying our products, and, in certain health food and other specialty stores, explaining product attributes and health
benefits. Our relationships with these retail customers are important for consumer trust in the brand and the advertising
and educational programs we continue to deploy. Failure to maintain these relationships with retail partners or
financial difficulties experienced by these retail partners could adversely affect our business.
Sourcing and Production
We have developed a strong, global supply chain based on long-standing relationships and have had
relationships with the majority of our suppliers for over ten years. We purchase our ingredients from approximately
250 high quality raw material ingredient and packaging suppliers worldwide and potential suppliers are subject to a
rigorous evaluation process by our quality assurance department. We are dependent on a stable and consistent supply
of materials and inputs, including ingredients and packaging products. Although materials and inputs are generally
available from multiple sources, certain materials and inputs are sourced from a restricted number of suppliers. In
2020, our top ten suppliers accounted for approximately 50% of our purchases. As is customary in the consumer health
industry, we do not have long-term written contracts with most suppliers and often enter into short to medium-term
contracts for raw materials at fixed prices to provide time to address price increases and mitigate margin erosion.
Consumer Trends
The Canadian consumer health industry is subject to shifts in consumer trends, preferences and spending.
Our revenue and operating results depend, in part, on our ability to respond to such changes in a timely manner. As a
result of our broad product scope and our strong innovation capabilities, we believe that we are well-positioned to
respond to these shifts in consumer trends, preferences and spending.
Our revenue is also impacted by consumer spending habits, including spending on our products, which are
affected by many factors that are beyond our control, including, but not limited to, prevailing economic conditions,
levels of employment, fuel prices, salaries and wages, the availability of consumer credit, and consumer perception of
economic conditions.
Competition
The market for VMS and sports nutrition products is highly competitive. Our direct competition consists of
publicly and privately-owned companies, which tend to be highly fragmented in terms of both geographic market
coverage and product categories. In many of our product categories, we compete not only with widely advertised
branded products, but also with private label products. Given our significant scale and broad product scope relative to
our competition, iconic brand status, strong innovation capabilities and high-quality manufacturing, we believe that
we are well-positioned to capitalize on favorable long-term trends in the VMS and sports nutrition segments. The
specialized knowledge, expertise, and certifications required for production of VMS and sports nutrition products, is
generally a significant barrier to entry for new competitors. Internationally, our competition varies by market and we
have a strategic approach to entering international markets, which includes evaluating certain factors in each market,
such as competitiveness, pricing dynamics, growth potential, regulatory environment and the propensity to be attracted
to foreign brands.
- 20 -
Foreign Exchange
We currently benefit from a natural currency hedge by purchasing certain materials and inputs in U.S. dollars
and selling our products internationally in U.S. dollars. With respect to sales in Canada, we are exposed to fluctuating
U.S.-Canadian currency exchange rate where the products sold contain materials and inputs purchased with
U.S. dollars. We manage our net exposure to fluctuating U.S.-Canadian currency exchange rate with foreign exchange
hedging contracts. We do not have foreign exchange hedging contracts in place with respect to all currencies in which
we currently do business but may, from time to time, enter into additional foreign exchange hedging contracts in
respect of other foreign currencies.
Currency hedging entails a risk of illiquidity and, to the extent the applicable foreign currency depreciates or
appreciates against the Canadian dollar, the use of hedges could result in losses greater than if the hedging had not
been used. There can be no assurance that our hedging strategies, if any, will be effective in the future or that we will
be able to enter into foreign exchange hedging contracts on satisfactory terms.
Business Acquisitions
We leverage our relationships and network of industry participants and advisors to actively source and
identify acquisition opportunities. We continue to pursue strategic acquisitions that enable us to further broaden and
diversify product offerings and leverage current manufacturing and distribution facilities for new products. Any
acquisitions may involve large transactions or realignment of existing investments, and present financial, managerial
and operational challenges, which, if not successfully overcome, may reduce our profitability.
Implementation of Growth Strategies
We have a successful track record of growing revenues faster than the broader VMS segment and we believe
we have a strong domestic and international growth strategy in place aimed at continuing to exceed broader industry
growth rates. Our future success depends, in part, on management’s ability to implement our growth strategy,
including (i) product innovations within existing categories and growth into adjacent categories and continued growth
of existing products in existing categories; (ii) further penetration into international markets and new geographies; and
(iii) in support of our profitability targets, improvements in operating income, gross profit and operating expense
margins. The ability to implement this growth strategy depends, among other things, on our ability to develop new
products and product line extensions that appeal to consumers, maintain and expand brand loyalty and brand
recognition, maintain and improve competitive position in the channels in which we compete and identify and
successfully enter and market products in new geographic markets, market segments and categories.
Regulation
In Canada and in the other jurisdictions in which we operate, we are subject to the laws and regulations
applicable to any business engaged in formulation, production and distribution of consumer health products. This
includes natural health product regulations, laws governing advertising, consumer protection regulations,
environmental laws, laws governing the operation of warehouse facilities and labour and employment laws. We hold
all required Health Canada site licenses, Canadian Food Inspection Agency certifications and import licenses for all
of our manufacturing and distribution centres. Our products sold outside of Canada are subject to tariffs, treaties and
various trade agreements as well as laws affecting the importation of consumer goods and we continuously monitor
changes in these laws, regulations, treaties and agreements.
There is currently no uniform regulation applicable to natural health products worldwide and there has been
an increasing movement in certain foreign markets to increase the regulation of natural health products. The adoption
of new laws, regulations or other constraints or changes in the interpretations of such requirements may result in
compliance costs or lead us to discontinue product sales and may have an adverse effect on the marketing of our
products, resulting in loss of sales. We believe that Canadian regulations are amongst the most stringent worldwide
and, as we currently operate in compliance with these high standards, increased regulation in foreign jurisdictions
makes us uniquely positioned to grow sales in such jurisdictions.
- 21 -
How We Assess the Performance of our Business
The key performance indicators below are used by management in evaluating the performance of our
Company and assessing our business. We refer to certain key performance indicators used by management and
typically used by our competitors in the Canadian consumer health industry, certain of which are not recognized under
IFRS. See “Non-IFRS Financial Measures”.
Revenue
The majority of our revenue is derived from the sale of Jamieson branded products to distributors, retail and
wholesale customers, as well as providing contract manufacturing services and the sale of product through our
Strategic Partners segment.
Revenue is recognized for the sale of Jamieson branded products and the manufacturing of products to our
strategic partners at the point in time when control of the asset is transferred to the customer, based on applicable
shipping terms. We generally have a right to payment at the time of delivery (which is the same time that we have
satisfied our performance obligations under the arrangement), as such, a receivable is recognized as the consideration
is unconditional and only the passage of time is required before payment is due.
A portion of our revenue is derived from contract manufacturing services provided to customers in our
Strategic Partners segment under a tolling arrangement where the customer supplies us with a raw material or
ingredient. Revenue is recognized net of the cost of the raw material or ingredient supplied by the customer.
Rights of return give rise to variable consideration. The variable consideration is estimated at contract
inception using the expected value method as this best predicts the amount of variable consideration to which we are
entitled. The variable consideration is constrained to the extent that it is highly probable that a significant reversal in
the amount of cumulative revenue recognized will not occur when any uncertainty is subsequently resolved. For
products that are expected to be returned, a refund liability is recognized as a reduction of revenue at the time the
control of the products purchased is transferred to the customers.
We may provide discounts and sales promotional incentives to our customers, which give rise to variable
consideration. The variable consideration is constrained to the extent that it is highly probable that a significant
reversal in the amount of cumulative revenue recognized will not occur when any uncertainty is subsequently resolved.
The application of the constraint on variable consideration increases the amount of revenue that will be deferred. We
apply the most likely amount method estimating discounts provided to customers using contracted rates and estimating
sales promotional incentives provided to customers based on historical spending patterns. Jamieson may also provide
other consideration to customers for customer-specific programs to promote the Company’s products. Consequently,
revenues are recognized net of these estimated program costs. All other estimated non-customer-specific promotional
costs and consideration are expensed as selling, general and administrative (“SG&A”) expenses.
In subsequent periods, we monitor the performance of customers against agreed-upon obligations related to
sales incentive programs and make any adjustments to both revenue and sales incentive accruals as required.
As required for the audited consolidated annual financial statements, we have disaggregated revenue
recognized from contracts with customers. Please refer to Note 23 in our audited consolidated annual financial
statements for the disclosure on disaggregated revenue.
Gross Profit
“Gross profit” is defined as revenue less cost of sales. Cost of sales includes product-related costs, labour,
other operating costs such as rent, repair and maintenance, and amortization. Our cost of sales may include different
costs compared to other manufacturers and distributors in the Canadian consumer health industry. Management
believes that gross profit is a useful measure in assessing the Company’s underlying operating performance before
SG&A expenses and share-based compensation.
- 22 -
Gross Profit Margin
“Gross profit margin” is defined as gross profit divided by revenue.
SG&A
Our SG&A expenses are predominantly comprised of wages, benefits, travel, marketing, accounting fees,
legal fees, non-customer-specific promotional costs and other expenses related to the corporate infrastructure required
to support our business. Our SG&A expenses also include regulatory, legal, accounting, insurance, termination
benefits and other expenses associated with being a public company.
Earnings from Operations
“Earnings from operations” is defined as gross profit less SG&A expenses and share-based compensation.
Operating Margin
“Operating margin” is defined as earnings from operations divided by revenue.
EBITDA
“EBITDA” is defined as net income before: (i) provision for (recovery of) income taxes; (ii) interest (income)
expense and other financing costs; (iii) depreciation of property, plant, and equipment; and (iv) amortization of
intangible assets.
Adjusted EBITDA
“Adjusted EBITDA” is defined as EBITDA before: (i) share-based compensation; (ii) foreign exchange
(gain) loss; (iii) termination benefits and related costs; (iv) international market expansion; (v) business integration;
(vi) COVID-19 related costs; and (vii) other non-operating and non-recurring costs. We believe Adjusted EBITDA is
a useful measure to assess the performance and cash flow of our Company as it provides more meaningful operating
results by excluding the effects of interest, taxes, depreciation and amortization costs, expenses we believe are not
reflective of our underlying business performance and other one-time, non-recurring or non-cash expenses.
Adjusted EBITDA Margin
“Adjusted EBITDA margin” is defined as Adjusted EBITDA divided by revenue.
Adjusted Net Income
“Adjusted Net Income” is defined as consolidated net income adjusted for the impact of: (i) share-based
compensation; (ii) foreign exchange (gain) loss; (iii) termination benefits and related costs; (iv) international market
expansion; (v) business integration; (vi) COVID-19 related costs; (vii) revaluation of deferred tax liability; and
(viii) other non-operating and non-recurring costs net of related tax effects. We believe Adjusted Net Income is a
useful measure to assess the performance of our Company as it provides more meaningful operating results by
excluding the effects of expenses that are not reflective of our underlying business performance and other one-time or
non-recurring expenses.
Adjusted Diluted Earnings per Share
“Adjusted Diluted Earnings per Share” is defined as Adjusted Net Income divided by the total number of
outstanding diluted shares at the end of the most recently completed quarter for the relevant period. We believe
Adjusted Diluted Earnings per Share is a useful measure to assess the performance of our Company.
- 23 -
Selected Consolidated Financial Information
The following table provides selected historical financial information and other data of the Company which
should be read in conjunction with our audited consolidated annual financial statements and related notes. A
reconciliation of net income to EBITDA, Adjusted EBITDA, and Adjusted Net Income can be found below for the
respective fiscal periods.
($ in 000's, except as otherwise noted)
Revenue
Cost of sales
Gross profit
Selling, general and administrative expenses
Share-based compensation
Earnings from operations
Operating margin
Foreign exchange loss
Other expenses
Interest expense and other financing costs
Income before income taxes
Provision for income taxes
Net income
Adjusted net income
EBITDA
Adjusted EBITDA
Adjusted EBITDA margin
Weighted average number of shares
Basic
Diluted
Three months ended
December 31
2020
2019
Twelve months ended
December 31
2020
2019
120,369
77,855
42,514
18,624
1,156
22,734
18.9%
632
19
1,409
20,674
5,269
15,405
17,614
25,417
29,383
24.4%
103,253
63,711
39,542
17,637
1,573
20,332
19.7%
227
(35)
1,966
18,174
5,011
13,163
14,253
22,902
25,641
24.8%
403,661
258,905
144,756
76,259
4,925
63,572
15.7%
460
22
6,042
57,048
15,450
41,598
47,948
75,299
87,985
21.8%
344,980
215,246
129,734
69,942
4,343
55,449
16.1%
404
3,369
9,372
42,304
10,647
31,657
38,111
62,592
75,909
22.0%
39,866,189
41,487,349
38,967,875
40,130,698
39,539,955
41,160,341
38,535,274
39,614,909
Earnings per share attributable to common shareholders:
Basic, earnings per share
Diluted, earnings per share
Adjusted Diluted, earnings per share
0.39
0.37
0.42
0.34
0.33
0.36
1.05
1.01
1.16
0.82
0.80
0.96
The following table provides selected consolidated financial position data for the periods indicated.
($ in 000's)
Selected Consolidated Financial Position Data:
Total assets
Total non-current liabilities
As at December 31,
2020
As at December 31,
2019
609,341
225,929
561,775
229,265
- 24 -
Results of Operations — three months ended December 31, 2020 and 2019
The following table provides a summary of our results for the three months ended December 31, 2020 and
December 31, 2019.
($ in 000's, except as otherwise noted)
Revenue
Cost of sales
Gross profit
Gross profit margin
Selling, general and administrative expenses
Share-based compensation
Earnings from operations
Operating margin
Foreign exchange loss
Other expenses
Interest expense and other financing costs
Income before income taxes
Provision for income taxes
Net income
Adjusted net income
EBITDA
Adjusted EBITDA
Adjusted EBITDA margin
Three months ended
December 31
2020
2019
$ Change
% Change
120,369
77,855
42,514
35.3%
18,624
1,156
22,734
18.9%
632
19
1,409
20,674
5,269
15,405
17,614
25,417
29,383
24.4%
103,253
63,711
39,542
38.3%
17,637
1,573
20,332
19.7%
227
(35)
1,966
18,174
5,011
13,163
14,253
22,902
25,641
24.8%
17,116
14,144
2,972
-
987
(417)
2,402
-
405
54
(557)
2,500
258
2,242
3,361
2,515
3,742
-
16.6%
22.2%
7.5%
(3.0%)
5.6%
(26.5%)
11.8%
(0.8%)
178.4%
154.3%
(28.3%)
13.8%
5.1%
17.0%
23.6%
11.0%
14.6%
(0.4%)
- 25 -
The following table provides a reconciliation of net income to EBITDA, Adjusted EBITDA, and Adjusted
Net Income for the three months ended December 31, 2020 and December 31, 2019.
($ in 000's, except as otherwise noted)
Net income
Add:
Provision for income taxes
Interest expense and other financing costs
Depreciation of property, plant, and equipment
Amortization of intangible assets
Earnings before interest, taxes, depreciation, and
amortization (EBITDA)
Share-based compensation (1)
Foreign exchange loss
International market expansion (2)
Business integration (3)
COVID-19 related costs (4)
Other (5)
Adjusted EBITDA
Provision for income taxes
Interest expense and other financing costs
Depreciation of property, plant, and equipment
Amortization of intangible assets
Share-based compensation (6)
Other
Tax effect of normalization adjustments
Adjusted net income
Three months ended
December 31
2020
2019
$ Change
% Change
15,405
13,163
2,242
17.0%
5,269
1,409
2,336
998
25,417
1,156
632
-
1,759
402
17
29,383
(5,269)
(1,409)
(2,336)
(998)
(1,012)
-
(745)
17,614
5,011
1,966
1,845
917
22,902
1,573
227
278
465
-
196
25,641
(5,011)
(1,966)
(1,845)
(917)
(1,383)
58
(324)
14,253
258
(557)
491
81
2,515
(417)
405
(278)
1,294
402
(179)
3,742
(258)
557
(491)
(81)
371
(58)
(421)
3,361
5.1%
(28.3%)
26.6%
8.8%
11.0%
(26.5%)
178.4%
(100.0%)
278.3%
100.0%
(91.3%)
14.6%
(5.1%)
28.3%
(26.6%)
(8.8%)
26.8%
(100.0%)
(129.9%)
23.6%
(1)
(2)
(3)
(4)
(5)
(6)
The Company’s share-based compensation expense pertains to our long-term incentive plan (the “LTIP”)
(refer to “Share-based compensation”), with performance-based share units (“PSUs”) and time-based
restricted share units (“RSUs”) expenses, and associated payroll taxes included within the current period.
Costs in 2019 pertained to the initial setup expenses incurred in establishing our presence in China including
regulatory, distribution and supply agreements, and a study of the Chinese market focusing on broad industry
understanding and factors affecting consumer purchase preferences.
We incurred start-up costs of $1.4 million in our transition to a third-party logistics provider to make room
for capacity expansion at our Twin Oaks and Scarborough distribution facilities. Remaining expenses pertain
to the integration of our operations and supply chain activities, along with a pre-existing contractual
obligation, associated with the acquisition and subsequent integration of our acquired business, which
terminates at the end of 2020. We incurred expenses related to supply chain optimization and other consulting
fees in connection with our acquired business in Q4 2019.
We incurred additional costs related to COVID-19. These costs do not reflect the ongoing costs of operation
and they have been adjusted for comparison purposes. In the current quarter, we donated vitamin supplements
to various charitable organizations within Canada and provided funding for a COVID-19 related research
study. In December 2020, we re-established shift premiums to essential Jamieson hourly staff who
maintained production through the government mandated shutdowns of non-essential services as the province
of Ontario entered another period of lockdown.
In 2019, we incurred expenses pertaining to special projects and cyber-security enhancements.
Costs pertaining to our LTIP, excluding PSUs and RSUs granted to certain employees (refer to “Share-based
compensation”).
- 26 -
The following table provides selected financial information for the Jamieson Brands operating segment for
the three months ended December 31, 2020 and December 31, 2019.
Jamieson Brands
($ in 000's, except as otherwise noted)
For the three months ended December 31,
Revenue
Gross profit
Gross profit margin
Selling, general and administrative expenses
Share-based compensation
Earnings from operations
Operating margin
Adjusted EBITDA
Adjusted EBITDA margin
2020
2019
$ Change
% Change
89,733
38,566
43.0%
16,906
1,156
20,504
22.9%
26,642
29.7%
78,803
35,962
45.6%
16,035
1,573
18,354
23.3%
23,154
29.4%
10,930
2,604
-
871
(417)
2,150
-
3,488
-
13.9%
7.2%
(2.6%)
5.4%
(26.5%)
11.7%
(0.4%)
15.1%
0.3%
The following table provides a reconciliation for the Jamieson Brands operating segment from earnings from
operations to Adjusted EBITDA for the three months ended December 31, 2020 and December 31, 2019.
($ in 000's, except as otherwise noted)
For the three months ended December 31,
Earnings from operations
Depreciation of property, plant, and equipment
Amortization of intangible assets
Share-based compensation
International market expansion
Business integration
COVID-19 related costs
Other
Adjusted EBITDA
2020
20,504
1,857
998
1,156
-
1,759
370
(2)
26,642
2019
18,354
1,358
917
1,573
278
465
-
209
23,154
$ Change
2,150
499
81
(417)
(278)
1,294
370
(211)
3,488
% Change
11.7%
36.7%
8.8%
(26.5%)
(100.0%)
278.3%
100.0%
(101.0%)
15.1%
- 27 -
The following table provides selected financial information for the Strategic Partners operating segment for
the three months ended December 31, 2020 and December 31, 2019.
Strategic Partners
($ in 000's, except as otherwise noted)
For the three months ended December 31,
Revenue
Gross profit
Gross profit margin
Selling, general and administrative expenses
Earnings from operations
Operating margin
Adjusted EBITDA
Adjusted EBITDA margin
2020
30,636
3,948
12.9%
1,718
2,230
7.3%
2,741
8.9%
2019
$ Change
% Change
24,450
3,580
14.6%
1,602
1,978
8.1%
2,487
10.2%
6,186
368
-
116
252
-
254
-
25.3%
10.3%
(1.7%)
7.2%
12.7%
(0.8%)
10.2%
(1.3%)
The following table provides a reconciliation for the Strategic Partners operating segment from earnings
from operations to Adjusted EBITDA for the three months ended December 31, 2020 and December 31, 2019.
($ in 000's, except as otherwise noted)
For the three months ended December 31,
Earnings from operations
Depreciation of property, plant, and equipment
COVID-19 related costs
Other
Adjusted EBITDA
Revenue
2020
2,230
479
32
-
2,741
2019
1,978
487
-
22
2,487
$ Change
252
(8)
32
(22)
254
% Change
12.7%
(1.6%)
100.0%
(100.0%)
10.2%
Revenue increased 16.6%, or $17.1 million, to $120.4 million in Q4 2020. This was driven by 13.9% growth
in Jamieson Brands revenue and 25.3% growth in Strategic Partners revenue compared with Q4 2019.
Revenue in the Jamieson Brands segment increased by $10.9 million, or 13.9%, to $89.7 million in Q4 2020
due to strong growth in domestic and international Jamieson Brands sales of $9.1 million and $1.8 million respectively.
The VMS market experienced strong growth as COVID-19 continues to drive consumer demand on immunity and
general health. Our domestic Jamieson Brands sales increased by 13.7% over Q4 2019 reflecting consistent point-of-
sale growth over an expanded base, with Jamieson gaining market share over our leading competitors. Our results
reflect strong growth in e-commerce and FDM channel retailers, while regional government mandated restrictions
impacted replenishments of certain health food retailers who have not transitioned to web-based platforms for
servicing their customers. Our international business increased by 14.8% compared to Q4 2019, which includes the
expected timing of shipments to China realized in the preceding quarter. Consumer demand for immunity products
continues to be high, as we realized strong growth in Eastern Europe and the Middle East in the quarter.
Revenue in the Strategic Partners segment increased 25.3%, or $6.2 million, to $30.6 million in Q4 2020
mainly due to timing, with order fulfillment weighted towards the latter half of this year as we managed customer
requirements along with additional programs with our largest customers. The resultant increase in soft-gel volumes
associated with these programs was partially offset by lower powder volumes, where a strategic partner retail customer
consolidated stores while emerging from their Chapter 11 reorganization.
Gross profit
Gross profit increased by $3.0 million to $42.5 million in Q4 2020, including $1.6 million primarily relating
to start-up costs in our transition to a third-party logistics provider. Normalized gross profit increased by $4.6 million
to $44.1 million in Q4 2020 mainly driven by revenue growth. Gross profit margin decreased by 300 basis points to
35.3% in Q4 2020, including 130 basis points as a result of the aforementioned third-party transition and other costs.
- 28 -
Normalized gross profit margin was 36.6% or 170 basis points lower than prior year including a 60 basis points
reduction from segment mix and a 110 basis points reduction mainly due to higher costs to ensure continuity of supply.
All in response to COVID-19, these supply costs include the implementation of physical distancing and safety
measures in our production facilities, higher costs to expediate raw materials and third-party packaging costs to
maximize throughput.
Gross profit in the Jamieson Brands segment increased by $2.6 million to $38.6 million in Q4 2020, including
$1.6 million in start-up costs primarily relating to our transition to a third-party logistics provider. Normalized gross
profit increased by $4.2 million to $40.2 million in Q4 2020 mainly driven by revenue growth. Gross profit margin
decreased by 260 basis points to 43.0% in Q4 2020, including 180 basis points as a result of third-party transition and
other costs. Normalized gross profit margin was 44.8% or 80 basis points lower compared to Q4 2019 as favourable
promotional and volume driven efficiencies were offset by higher supply continuity costs required to maximize
throughput as noted above.
Gross profit in the Strategic Partners segment increased by $0.4 million to $3.9 million in Q4 2020 mainly
driven by higher volumes, partially offset by an expected reduction resulting from customer mix and supply continuity
costs. Gross profit margin decreased by 170 basis points to 12.9% due to the factors noted above including a reduction
in volume and efficiency at our powder processing facility offset by higher soft-gel and tablet volumes.
Selling, general and administrative expenses
SG&A expenses increased by $1.0 million to $18.6 million in Q4 2020. Normalized for the impact of
specified costs, SG&A expenses increased by $1.4 million from $16.7 million in Q4 2019 to $18.1 million in Q4 2020.
The normalized SG&A increase of $1.3 million in Jamieson Brands was driven by increased headcount to support our
worldwide and e-commerce expansion plans, higher variable compensation, and increased marketing investments.
Normalized SG&A in the Strategic Partners segment increased by $0.1 million compared to the same period in the
prior year due to higher compensation expense.
Specified costs of $0.6 million in the current quarter are mainly comprised of COVID-19 donations and wage
premiums. Specified costs of $1.0 million in Q4 2019 were related to initial set-up expenses for establishing our
presence in China, supply chain optimization, cyber-security enhancements and other consulting fees.
Share-based compensation
Share-based compensation decreased by $0.4 million to $1.2 million in Q4 2020 reflecting lower payroll
taxes based on the number of employee exercised options in the prior year and the number of awards issued in the
current year.
Earnings from operations and operating margin
Earnings from operations increased by $2.4 million as a result of higher revenue and gross profit. Operating
margin decreased by 80 basis points to 18.9% in Q4 2020 due to factors impacting gross profit margin discussed
above, partially offset by lower fixed costs as a percentage of revenues.
Earnings from operations in the Jamieson Brands segment increased by $2.2 million due to higher revenue
and gross profit. Operating margin decreased 40 basis points to 22.9% in Q4 2020 due to factors impacting gross profit
margin discussed above partially offset by lower fixed costs as a percentage of revenues.
Earnings from operations in the Strategic Partners segment increased by $0.3 million due to higher revenue
and gross profit. Operating margin decreased 80 basis points primarily due to factors impacting gross profit margin
discussed above.
- 29 -
Foreign exchange loss
Foreign exchange loss of $0.6 million in Q4 2020 was a result of changes in the USD/CAD exchange rate on
our USD denominated accounts receivable and accounts payable at the end of the quarter. We experience fluctuations
in the USD/CAD exchange rates between the date of transaction and when cash is realized.
Interest expense and other financing costs
Interest expense and other financing costs decreased by $0.6 million to $1.4 million in Q4 2020 due to lower
average borrowings and lower prevailing interest rates in the quarter. We have entered into interest rate swaps to
manage our long-term interest rate exposure by fixing a portion of our floating rates from October 2020 to September
2024.
Provision for income taxes
Provision for income taxes was $5.3 million in Q4 2020 compared to $5.0 million in Q4 2019. Our Q4 2020
effective tax rate of 25.5% includes the impact of non-deductible share-based compensation over an increased revenue
base and adjustments reflected in our latest tax returns. Our Q4 2019 effective tax rate was 27.6% which included the
impact of non-deductible share-based compensation.
Depreciation
Depreciation expense increased by $0.5 million to $2.3 million in Q4 2020 due to increases in our capital
investments to increase capacity which includes depreciation on our right-of-use lease assets pertaining to our
transition to a third-party logistics provider.
Amortization
Amortization expense increased by $0.1 million to $1.0 million in Q4 2020 driven by investments in website
development, system implementations, product patent and registrations.
EBITDA and Adjusted EBITDA
EBITDA increased by $2.5 million to $25.4 million in Q4 2020 primarily due to the factors discussed above.
Adjusted EBITDA increased by $3.7 million to $29.4 million and Adjusted EBITDA margin decreased by
40 basis points to 24.4% for the quarter mainly due to higher volumes offset by lower gross profit margins.
Adjusted EBITDA in the Jamieson Brands segment increased by $3.5 million to $26.6 million while
Adjusted EBITDA margin increased by 30 basis points to 29.7%. The increase was primarily driven by higher volumes
and lower fixed costs as a percentage of revenues.
Adjusted EBITDA in the Strategic Partners segment increased by $0.3 million, to $2.7 million driven by
higher volumes. Adjusted EBITDA margin decreased by 130 basis points to 8.9% mainly due to the impact of gross
profit margins discussed above.
- 30 -
Results of Operations — year ended December 31, 2020 and 2019
The following table provides a summary of our results for the year ended December 31, 2020 and December
31, 2019.
($ in 000's, except as otherwise noted)
Revenue
Cost of sales
Gross profit
Gross profit margin
Selling, general and administrative expenses
Share-based compensation
Earnings from operations
Operating margin
Foreign exchange loss
Other expenses
Interest expense and other financing costs
Income before income taxes
Provision for income taxes
Net income
Adjusted net income
EBITDA
Adjusted EBITDA
Adjusted EBITDA margin
For the year ended
December 31
2020
2019
$ Change
% Change
403,661
258,905
144,756
35.9%
344,980
215,246
129,734
37.6%
76,259
4,925
63,572
15.7%
460
22
6,042
57,048
15,450
41,598
47,948
75,299
87,985
21.8%
69,942
4,343
55,449
16.1%
404
3,369
9,372
42,304
10,647
31,657
38,111
62,592
75,909
22.0%
58,681
43,659
15,022
-
6,317
582
8,123
-
56
(3,347)
(3,330)
14,744
4,803
9,941
9,837
12,707
12,076
-
17.0%
20.3%
11.6%
(1.7%)
9.0%
13.4%
14.6%
(0.4%)
13.9%
(99.3%)
(35.5%)
34.9%
45.1%
31.4%
25.8%
20.3%
15.9%
(0.2%)
- 31 -
The following table provides a reconciliation of net income to EBITDA, Adjusted EBITDA, and Adjusted
Net Income for the year ended December 31, 2020 and December 31, 2019.
($ in 000's, except as otherwise noted)
Net income
Add:
Provision for income taxes
Interest expense and other financing costs
Depreciation of property, plant, and equipment
Amortization of intangible assets
Earnings before interest, taxes, depreciation, and amortization
(EBITDA)
Share-based compensation (1)
Foreign exchange loss
Termination benefits and related costs (2)
International market expansion (3)
Business integration (4)
COVID-19 related costs (5)
Other (6)
Adjusted EBITDA
Provision for income taxes
Interest expense and other financing costs
Depreciation of property, plant, and equipment
Amortization of intangible assets
Share-based compensation (7)
Revaluation of deferred tax liability (8)
Other
Tax effect of normalization adjustments
Adjusted net income
For the year ended
December 31
2020
2019
$ Change
% Change
41,598
31,657
9,941
31.4%
15,450
6,042
8,260
3,949
75,299
4,925
460
-
13
2,202
5,064
22
87,985
(15,450)
(6,042)
(8,260)
(3,949)
(4,349)
-
97
(2,084)
47,948
10,647
9,372
7,263
3,653
62,592
4,343
404
480
1,712
1,240
-
5,138
75,909
(10,647)
(9,372)
(7,263)
(3,653)
(3,582)
(1,032)
175
(2,424)
38,111
4,803
(3,330)
997
296
12,707
582
56
(480)
(1,699)
962
5,064
(5,116)
12,076
(4,803)
3,330
(997)
(296)
(767)
1,032
(78)
340
9,837
45.1%
(35.5%)
13.7%
8.1%
20.3%
13.4%
13.9%
(100.0%)
(99.2%)
77.6%
100.0%
(99.6%)
15.9%
(45.1%)
35.5%
(13.7%)
(8.1%)
(21.4%)
100.0%
(44.6%)
14.0%
25.8%
(1)
(2)
(3)
(4)
(5)
The Company’s share-based compensation expense pertains to our LTIP, with PSUs and time-based RSU
expenses, and associated payroll taxes of $0.4 million included within the current period.
In 2019, we incurred severance costs and salary continuance related to reorganization activities undertaken
in order to gain the capabilities and structure to meet our long-term goals.
Costs in 2019 pertained to professional fees in establishing our presence in China including entering into
regulatory, distribution and supply agreements, and the performance of a study of the Chinese market
focusing on broad industry understanding and factors affecting consumer purchase preferences.
We incurred start-up costs of $1.5 million in our transition to a third-party logistics provider to make room
for capacity expansion at our Twin Oaks and Scarborough distribution facilities. Remaining expenses pertain
to the integration of our operations and supply chain activities, along with a pre-existing contractual
obligation, associated with the acquisition and subsequent integration of our acquired business, which
terminates at the end of 2020. In 2019, we incurred expenses pertaining to optimizing our manufacturing and
supply chain processes, and other consulting fees.
We incurred additional costs related to COVID-19. These costs do not reflect the ongoing costs of operation
and they have been adjusted for comparison purposes. Costs include donations of PPE and vitamin
supplements, funding for a COVID-19 related research study, as well as shift premiums paid to essential
- 32 -
Jamieson hourly staff who maintained production through government mandated lockdown periods during
the year. We have also provided for accounts receivable and specific inventory related to an international
retail strategic partner customer who voluntarily entered into bankruptcy protection based on the impact of
COVID-19 stay-at-home orders. Based on an executed trade agreement, we have resumed shipment to this
partner.
In 2019, costs were mainly comprised of a $3.4 million charge in connection with our amended and restated
credit agreement including the write-off of unamortized deferred financing fee pertaining to our Amended
Credit Agreement (refer to “Credit Facilities”). Additionally, we recorded a partial reserve in connection
with a receivable from a key strategic partner customer, who fell victim to a social engineering scheme. Other
costs in 2019 pertained to union contract negotiations, cyber-security enhancements and other special
projects.
Costs pertaining to our LTIP, excluding PSUs and RSUs granted to certain employees (refer to “Share-based
compensation”).
In 2019, we recorded a tax benefit on the revaluation of our deferred tax liability as a result of lower expected
future tax rates due to the closure of our west coast office and distribution center.
(6)
(7)
(8)
The following table provides selected financial information for the Jamieson Brands operating segment for
the year ended December 31, 2020 and December 31, 2019.
Jamieson Brands
($ in 000's, except as otherwise noted)
For the year ended December 31,
Revenue
Gross profit
Gross profit margin
Selling, general and administrative expenses
Share-based compensation
Earnings from operations
Operating margin
Adjusted EBITDA
Adjusted EBITDA margin
2020
2019
$ Change
% Change
316,423
133,861
42.3%
67,169
4,925
61,767
19.5%
81,519
25.8%
265,843
116,827
43.9%
62,403
4,343
50,081
18.8%
67,436
25.4%
50,580
17,034
-
4,766
582
11,686
-
14,083
-
19.0%
14.6%
(1.6%)
7.6%
13.4%
23.3%
0.7%
20.9%
0.4%
The following table provides a reconciliation for the Jamieson Brands operating segment from earnings from
operations to Adjusted EBITDA for the year ended December 31, 2020 and December 31, 2019.
($ in 000's, except as otherwise noted)
For the year ended December 31,
Earnings from operations
Depreciation of property, plant, and equipment
Amortization of intangible assets
Share-based compensation
Termination benefits and related costs
International market expansion
Business integration
COVID-19 related costs
Other
Adjusted EBITDA
2020
61,767
6,345
3,949
4,925
-
13
2,202
2,318
-
81,519
2019
50,081
5,373
3,649
4,343
464
1,712
1,226
-
588
67,436
$ Change
11,686
972
300
582
(464)
(1,699)
976
2,318
(588)
14,083
% Change
23.3%
18.1%
8.2%
13.4%
(100.0%)
(99.2%)
79.6%
100.0%
(100.0%)
20.9%
- 33 -
The following table provides selected financial information for the Strategic Partners operating segment for
the year ended December 31, 2020 and December 31, 2019.
Strategic Partners
($ in 000's, except as otherwise noted)
For the year ended December 31,
Revenue
Gross profit
Gross profit margin
Selling, general and administrative expenses
Earnings from operations
Operating margin
Adjusted EBITDA
Adjusted EBITDA margin
2020
2019
$ Change
% Change
87,238
10,895
12.5%
9,090
1,805
2.1%
6,466
7.4%
79,137
12,907
16.3%
7,539
5,368
6.8%
8,473
10.7%
8,101
(2,012)
-
1,551
(3,563)
-
(2,007)
-
10.2%
(15.6%)
(3.8%)
20.6%
(66.4%)
(4.7%)
(23.7%)
(3.3%)
The following table provides a reconciliation for the Strategic Partners operating segment from earnings
from operations to Adjusted EBITDA for the year ended December 31, 2020 and December 31, 2019.
($ in 000's, except as otherwise noted)
For the year ended December 31,
Earnings from operations
Depreciation of property, plant, and equipment
Amortization of intangible assets
Termination benefits and related costs
Business integration
COVID-19 related costs
Other
Adjusted EBITDA
Revenue
2020
1,805
1,915
-
-
-
2,746
-
6,466
2019
5,368
1,890
4
16
14
-
1,181
8,473
$ Change
(3,563)
25
(4)
(16)
(14)
2,746
(1,181)
(2,007)
% Change
(66.4%)
1.3%
(100.0%)
(100.0%)
(100.0%)
100.0%
(100.0%)
(23.7%)
Revenue increased 17.0%, or $58.7 million, to $403.7 million in YTD 2020. This was driven by 19.0%
growth in Jamieson Brands revenue and 10.2% growth in Strategic Partners revenue year-over-year.
Revenue in the Jamieson Brands segment increased by $50.6 million, or 19.0%, to $316.4 million in YTD
2020 due to strong growth in domestic and international Jamieson Brands sales of $33.4 million and $17.2 million
respectively. The VMS market experienced strong growth as COVID-19 continues to drive consumer demand on
immunity and general health. Our domestic Jamieson Brands sales increased by 14.4% over prior year reflecting
consistent point-of-sale growth throughout the year, with Jamieson’s growth outpacing the market as consumers
turned to trusted brands in their purchasing decision. Our results reflect strong growth in e-commerce and FDM
channel retailers, while regional government mandated restrictions impacted replenishments of certain health food
retailers who have not transitioned to web-based platforms for servicing their customers. We continue to expand our
global reach and product portfolio, with international sales increasing 49.9% versus prior year. We realized strong
growth in China, Eastern Europe, and the Middle East based on continued demand for immunity products. China
continues to lead our international growth through increased sales on cross border e-commerce and shipments into
domestic retail stores as we expand our distribution network.
Revenue in the Strategic Partners segment increased 10.2%, or $8.1 million, to $87.2 million in YTD 2020
due to incremental revenue related to the change in billing practices for a key partner along with additional programs
with our largest customers leading to an increase in soft-gel production. This was partially offset by the availability
of production capacity to meet accelerated demand, and lower powder volumes for a strategic partner retail customer
who has consolidated stores while emerging from their Chapter 11 reorganization.
- 34 -
Gross profit
Gross profit increased by $15.0 million in YTD 2020, including $1.6 million primarily relating to start-up
costs in our transition to a third-party logistics provider. Normalized gross profit increased by $16.6 million to $146.3
million in YTD 2020 mainly driven by revenue growth. Gross profit margin decreased by 170 basis points to 35.9%
in YTD 2020, including 40 basis points as a result of the aforementioned third-party transition and other costs.
Normalized gross profit margin was 36.3% or 130 basis points lower than prior year including a 170 basis points
reduction mainly due to higher costs to ensure continuity of supply, partially offset by a 40 basis points addition from
favourable segment mix. All in response to COVID-19, these supply costs include the implementation of physical
distancing and safety measures in our production facilities, higher costs to expediate raw materials and third-party
packaging costs to maximize throughput.
Gross profit in the Jamieson Brands segment increased by $17.0 million to $133.9 million in YTD 2020,
including $1.6 million in start-up costs primarily relating to our transition to a third-party logistics provider.
Normalized gross profit increased by $18.6 million to $135.5 million in YTD 2020 mainly driven by revenue growth.
Gross profit margin decreased by 160 basis points to 42.3% in YTD 2020, including 50 basis points as a result of
third-party transition and other costs. Normalized gross profit margin was 42.8% or 110 basis points lower compared
to YTD 2019 due to higher supply continuity costs as noted above, partially offset by modest operational efficiencies
that normally accompany higher volumes.
Gross profit in the Strategic Partners segment decreased by $2.0 million to $10.9 million in YTD 2020. The
decrease was primarily driven by customer mix, supply continuity costs, and the factors impacting revenue noted
above. Gross profit margin decreased by 380 basis points to 12.5% in YTD 2020 due to the billing change of a key
customer along with the same factors noted above.
Selling, general and administrative expenses
SG&A expenses increased by $6.3 million, to $76.3 million in YTD 2020. Normalized for the impact of
specified costs, SG&A expenses increased by $5.8 million from $64.7 million in YTD 2019 to $70.5 million in YTD
2020. The normalized SG&A increase of $5.8 million in Jamieson Brands was mainly driven by higher variable
compensation expense, increase in domestic marketing program costs, plus the investment in resources for e-
commerce and international growth, partially offset by a reduction in travel, meals and entertainment costs as a result
of COVID-19. Normalized SG&A in the Strategic Partners segment is consistent to the same period in the prior year.
Specified costs of $5.7 million in the current year is mainly comprised of COVID-19 donations and wage
premiums, reserves pertaining to a retail strategic partner customer’s bankruptcy based on the impact of COVID-19,
along with a pre-existing contractual obligation on our acquired business. Specified costs of $5.2 million in 2019 were
mainly related to initial set-up expenses for establishing our presence in China, the optimization of our manufacturing
and supply chain processes, cyber-security enhancements and a partial reserve we recorded in connection with a
receivable from a key strategic partner customer, who fell victim to a social engineering scheme.
Share-based compensation
Share-based compensation increased by $0.6 million to $4.9 million in YTD 2020 due to the alignment of
our grant timing to reflect annual performance targets, the cumulative effect of our stock-based equity grants since
our initial public offering on July 7, 2017, and lower payroll taxes based on the number of employee exercised options
in the prior year and the number of awards issued in the current year.
Earnings from operations and operating margin
Earnings from operations increased by $8.1 million in YTD 2020 as a result of higher revenue. Operating
margin decreased by 40 basis points to 15.7% in YTD 2020 mainly due to gross profit margin impact discussed above
partially offset by lower fixed costs as a percentage of revenues.
Earnings from operations in the Jamieson Brands segment increased by $11.7 million and operating margin
increased 70 basis points to 19.5% in YTD 2020 mainly due to higher volumes discussed above and lower fixed costs
- 35 -
as a percentage of revenues.
Earnings from operations in the Strategic Partners segment decreased by $3.6 million to $1.8 million and
operating margin decreased by 470 basis points primarily due to factors impacting revenue and gross profit margin
discussed above along with higher SG&A expenses and reserves driven by COVID-19.
Foreign exchange loss
Foreign exchange loss of $0.5 million in YTD 2020 is due to fluctuations in USD/CAD exchange rates
between the date of the transaction and when cash is realized.
Other expenses
In YTD 2019, other expenses were comprised of a $3.4 million charge in connection with our amended and
restated credit agreement including the write-off of unamortized deferred financing fee pertaining to our Amended
Credit Agreement (refer to “Credit Facilities”).
Interest expense and other financing costs
Interest expense and other financing costs decreased by $3.3 million to $6.0 million in YTD 2020 due to
lower interest rates as a result of our amended and restated credit agreement (refer to “Credit Facilities”).
Provision for income taxes
Provision for income taxes was $15.5 million in YTD 2020 compared to $10.6 million in YTD 2019. Our
YTD 2020 effective tax rate of 27.1% includes the impact of non-deductible share-based compensation over an
increased revenue base and adjustments reflected in our latest tax returns. Our YTD 2019 effective tax rate was 25.2%
which included the impact of non-deductible share-based compensation and a one-time tax benefit of $1.0 million due
to a revaluation of our deferred tax liability as a result of lower expected future tax rates due to the closure of our west
coast office and distribution center.
Depreciation
Depreciation expense increased by $1.0 million to $8.3 million in YTD 2020 due to increases in our capital
investments to increase capacity which includes depreciation on our right-of-use lease assets pertaining to our
transition to a third-party logistics provider.
Amortization
Amortization expense increased by $0.3 million to $3.9 million in YTD 2020 driven by investments in
website development, system implementations, product patent and registrations.
EBITDA and Adjusted EBITDA
EBITDA increased by $12.7 million to $75.3 million in YTD 2020 primarily due to the factors discussed
above.
Adjusted EBITDA increased by $12.1 million to $88.0 million and Adjusted EBITDA margin decreased by
20 basis points to 21.8% mainly due to higher volumes offset by lower gross profit margins.
Adjusted EBITDA in the Jamieson Brands segment increased by $14.1 million to $81.5 million and Adjusted
EBITDA margin increased by 40 basis points to 25.8% in YTD 2020. The increase was primarily driven by higher
volumes and lower fixed costs as a percentage of revenues.
Adjusted EBITDA in the Strategic Partners segment decreased by $2.0 million, to $6.5 million and Adjusted
- 36 -
EBITDA margin decreased by 330 basis points to 7.4% in YTD 2020. The decrease was mainly due to the impact of
gross profit margins discussed above.
Summary of Consolidated Quarterly Results
The following is a summary of selected consolidated financial information for each of the eight most recently
completed quarters prepared in accordance with IFRS.
($ in 000's, except per share amounts)
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
2020
2019
Revenue by segment
Jamieson Brands
Strategic Partners
Total revenue
89,733
30,636
120,369
82,604
22,961
105,565
74,292
18,912
93,204
69,794
14,729
84,523
78,803
24,450
103,253
70,184
18,374
88,558
60,816
19,776
80,592
56,041
16,537
72,578
9,911
5,384
6,469
Earnings from operations
22,734
17,804
10,675
12,359
20,332
13,265
11,940
Net income
Adjusted net income
EBITDA
15,405
12,144
17,614
12,655
6,038
9,882
8,011
7,800
13,163
14,253
4,928
9,492
8,186
7,897
25,417
21,202
12,715
15,964
22,902
12,221
15,007
12,463
Adjusted EBITDA
29,383
22,933
18,983
16,687
25,641
19,394
16,392
14,481
Basic, earnings per share
Diluted, earnings per share
Adjusted Diluted, earnings per share
0.39
0.37
0.42
0.31
0.29
0.30
0.15
0.15
0.24
0.20
0.20
0.19
0.34
0.33
0.36
0.13
0.12
0.24
0.21
0.21
0.20
0.14
0.14
0.16
Revenue
Jamieson Brands segment revenue for the last eight quarters were impacted by factors including the following:
accelerated demand for immunity and general health products as a result of the COVID-19 pandemic;
the impact of innovation within our core VMS portfolio;
shipment fluctuations in our international markets;
the volume and timing of promotion and media;
the volume of inventory and timing of shipments to distributors and retailers;
seasonality;
severity of cold and flu season; and
foreign currency fluctuations.
•
•
•
•
•
•
•
•
Strategic Partners segment revenue for the last eight quarters were impacted by factors including the following:
•
•
•
•
•
•
•
available capacity when considering demand for Jamieson Brands products;
launch of new programs with existing or new customers, which include initial pipeline shipments;
availability of customer supplied materials;
innovation and geographic demand for high quality certified manufacturers;
the impact of a change from a tolling arrangement to turnkey for certain products;
periodic price increases to recapture cost escalation; and
foreign currency fluctuations.
Earnings from operations
Earnings from operations for the last eight quarters were also impacted by factors including the following:
•
•
•
revenue factors impacting price and volume noted above;
return on incremental promotion and marketing programs;
improvements in production efficiencies and higher economies of scale;
- 37 -
•
•
•
•
•
•
temporary increases to production costs driven by physical distancing initiatives and safety measures
established within our facilities to protect our employees as a result of the COVID-19 pandemic;
supply continuity costs including air freight and third-party packaging costs to meet higher demand during
the COVID-19 pandemic;
additional costs incurred in our transition to a third-party logistics provider to make room for capacity
expansion at our Twin Oaks and Scarborough distribution facilities;
raw material costs in native currency;
timing of marketing spend and variable compensation; and
foreign currency fluctuations.
Selected Annual Information
The following selected annual information is shown for the three most recently completed financial years:
($ in 000's, except share and per share amounts)
2020
2019
2018
For the year ended
December 31
Revenue
Earnings from operations
Net income
Adjusted net income
EBITDA
Adjusted EBITDA
Basic, earnings per share
Diluted, earnings per share
Adjusted Diluted, earnings per share
Selected Consolidated Financial Position Data:
Total assets
Total non-current liabilities
Dividends declared for the year:
Cash dividends per common share
403,661
344,980
319,776
63,572
41,598
47,948
75,299
87,985
1.05
1.01
1.16
55,449
31,657
38,111
62,592
75,909
0.82
0.80
0.96
47,157
26,673
33,733
55,297
67,628
0.70
0.67
0.85
609,341
225,929
561,775
229,265
549,021
205,739
0.47
0.38
0.34
Over the three-year period, revenue increased year-over-year driven by growth in the Jamieson Brands
segment through innovations and international expansion and growth in the Strategic Partners segment through
increased business with existing and new customers. In 2020, significant growth was achieved across both segments
as consumer response to COVID-19 resulted in the acceleration of demand for immunity and general health
supplements domestically and internationally.
Total assets have increased over the three-year period reflecting investments in working capital and property,
plant, and equipment designed to improve efficiency or expand capacity. In 2020, significant investments were made
to expand production capacity in response to growing demands driven by the COVID-19 pandemic.
Liquidity and Capital Resources
Overview
Our principal uses of funds are for operating expenses, capital expenditures, finance costs, and debt service.
Management believes that cash generated from operations, together with amounts available under our Credit Facilities
(refer to “Credit Facilities”), will be sufficient to meet the Company’s future operating expenses, capital expenditures,
and future debt service costs.
- 38 -
Our primary liquidity and capital requirements are for capital expenditures, working capital and general
corporate needs. We have cash and availability under our Credit Facilities that we expect to utilize, along with cash
flow from operations, to provide capital to support the growth of our business (primarily through working capital and
capital expenditures), repay short-term obligations and for general corporate purposes. We believe that cash from
operations, together with our cash balance and our Credit Facilities will be sufficient to meet ongoing capital
expenditures, working capital requirements and other cash needs.
Our ability to fund future debt service costs, operating expenses, and capital expenditures will depend on our
future operating performance which will be affected by general economic, financial and other factors including factors
beyond our control (refer to “Risk Factors”). From time to time, our management reviews acquisition opportunities
and if suitable opportunities arise, may make selected acquisitions to implement our business strategy. Historically,
the funding for any such acquisitions has come from cash flow from operating activities and additional debt.
Credit Facilities
As at December 31, 2020, the Company had $127.1 million in cash and available revolving and swingline
facilities.
On September 27, 2019, Jamieson Laboratories Ltd. (“JLL”), a wholly owned subsidiary of Jamieson,
amended and restated its credit agreement (the “Amended Credit Agreement”) to add Jamieson Health Products USA
Ltd. (collectively with JLL the “Borrowers”) as a co-borrower and to provide a secured revolving facility of $275.0
million (including a $10.0 million swingline facility) with the option to increase the revolving facility by $200.0
million (collectively, the “Credit Facilities”). The Credit Facilities mature on September 27, 2024 with the outstanding
principal repayable in full on this date.
We concluded that the amendments to the Initial Credit Agreement (as defined below) represent a substantial
modification of the terms with our lenders. Accordingly, extinguishment accounting was applied, resulting in the
derecognition of the previous unamortized deferred financing fee of $2.0 million. Financing costs of $1.4 million were
incurred as part of the issuance of the Credit Facilities which have been expensed and recorded as other expenses.
Prior to the Amended Credit Agreement, JLL was party to the credit agreement dated January 31, 2017 with
a syndicate of lenders (the “Initial Credit Agreement”). The Initial Credit Agreement provided a secured term credit
facility of $195.0 million (with the option to increase the facility up to $255.0 million) and a secured revolving credit
facility of $75.0 million (including a $10.0 million swingline facility). Financing costs of $4.3 million and $1.5 million
were incurred as part of the issuance of the term credit facility and revolving credit facility, respectively.
For the three and twelve months ended December 31, 2020, JLL made drawings of $13.2 million and $60.2
million, and debt repayments of $24.3 million and $76.0 million, respectively, applied against the Credit Facilities.
For the three and twelve months ended December 31, 2020, the weighted average interest rate on the Credit Facilities
was 3.1% (2019 - Initial Credit Agreement rate 4.4%).
The Credit Facilities are secured by security agreements and first charges over the assets including property,
plant and equipment and intellectual property of the Borrowers and certain other subsidiaries of JLL, subject to
permitted liens. Under the terms of the Credit Facilities, the Borrowers are subject to restrictive covenants and must
maintain an interest coverage ratio of not less than 3.00:1.00 and a leverage ratio not greater than 4.00:1.00. We are
in compliance with all covenants as at the date of this MD&A.
- 39 -
Analysis of Cash Flows — three months ended December 31, 2020 and 2019
($ in 000's, except as otherwise noted)
Cash, beginning of period
Cash flows from (used in):
Operating activities
Investing activities
Financing activities
Cash, end of period
Cash Flows Generated from Operating Activities
Three months ended
December 31
2020
2019
$ Change
% Change
3,144
4,153
(1,009)
(24.3%)
18,744
(4,220)
(16,502)
1,166
12,996
(3,488)
(13,463)
198
5,748
(732)
(3,039)
968
44.2%
(21.0%)
(22.6%)
488.9%
In Q4 2020, cash flows generated from operating activities totalled $18.7 million compared to $13.0 million
for the same period in the prior year. Cash from operating activities before working capital considerations of $22.2
million was $4.0 million higher, primarily due to increased earnings in the current quarter. Cash invested in working
capital decreased by $1.7 million mainly driven by timing of payments and significant shipments in the quarter
lowering inventory.
Cash Flows Used in Investing Activities
Cash flows used in investing activities in Q4 2020 totalled $4.2 million compared to $3.5 million for the
same period in the prior year. Purchases of property, plant and equipment increased by $0.8 million reflecting our
investments in additional manufacturing and packaging equipment required to expand production capacity, along with
an increase in right-of-use lease assets pertaining to our transition to a third-party logistics provider. This was partially
offset by a $0.1 million decrease in expenditures on intangible assets mainly due to timing. Our intangible assets
consist primarily of website development, system implementation, product patent and registrations.
Cash Flows Used in Financing Activities
Cash flows used in financing activities in Q4 2020 totalled $16.5 million compared to $13.5 million for the
same period in the prior year. In Q4 2020, we made net repayments of $11.0 million to our Credit Facilities, distributed
$5.0 million of dividends to common shareholders, and made payments of lease liabilities of $0.8 million, offset by
$0.3 million we received for the exercise of stock options and our employee share purchase plan (“ESPP”). In Q4
2019, we made net repayments of $9.3 million to our Credit Facilities, distributed $3.9 million of dividends to common
shareholders, and made payments of lease liabilities of $0.5 million, offset by $0.2 million we received for the exercise
of stock options and our ESPP.
Analysis of Cash Flows — for the year ended December 31, 2020 and 2019
($ in 000's, except as otherwise noted)
Cash, beginning of period
Cash flows from (used in):
Operating activities
Investing activities
Financing activities
Cash, end of period
Cash Flows Generated from Operating Activities
For the year ended
December 31
2020
2019
$ Change
% Change
198
12,445
(12,247)
(98.4%)
40,596
(13,169)
(26,459)
1,166
16,396
(9,498)
(19,145)
198
24,200
(3,671)
(7,314)
968
147.6%
(38.7%)
(38.2%)
488.9%
In YTD 2020, cash flows generated from operating activities totalled $40.6 million compared to $16.4 million
for the same period in the prior year. Cash from operating activities before working capital considerations of $60.8
- 40 -
million was $9.9 million higher, primarily due to increased earnings and the impact of financing fees paid on our debt
renewal on prior year’s earnings. Cash invested in working capital decreased by $14.3 million mainly driven by timing
of payments and accelerated deductions of trade obligations by our domestic retail partners in the prior year. This was
partially offset by increases in inventories to secure raw material supply.
Cash Flows Used in Investing Activities
Cash flows used in investing activities in YTD 2020 totalled $13.2 million compared to $9.5 million for the
same period in the prior year. Purchases of property, plant and equipment increased by $2.2 million reflecting our
investments in additional manufacturing and packaging equipment required to expand production capacity, along with
an increase in right-of-use lease assets pertaining to our transition to a third-party logistics provider. Expenditures on
intangible assets increased by $1.4 million reflecting our investments in website development, system implementation,
product patent and registrations
Cash Flows Used in Financing Activities
Cash flows used in financing activities in YTD 2020 totalled $26.5 million compared to $19.1 million for the
same period in the prior year. In YTD 2020, we made net repayments of $15.7 million to our Credit Facilities,
distributed $18.6 million of dividends to common shareholders, and made payments of lease liabilities of $2.4 million,
offset by $10.3 million we received for the exercise of stock options and our ESPP. In YTD 2019, we made net
repayments of $4.1 million to our Credit Facilities, distributed $14.7 million of dividends to common shareholders,
and made payments of lease liabilities of $1.9 million, offset by $1.6 million we received for the exercise of stock
options and our ESPP.
Contractual Obligations
The following table summarizes our significant undiscounted maturities of our contractual obligations and
commitments as at December 31, 2020.
($ in 000's)
Operating leases (1)
Trade and other payable
Revolving credit facility (2)
Total contractual obligations
2021
2022-2025
Thereafter
Total
$
$
$
$
4,005
73,084
-
77,089
14,883
-
149,058
163,941
15,839
-
-
15,839
34,727
73,084
149,058
256,869
$
$
$
$
(1)
(2)
We have entered into several operating leases for vehicles, production equipment, computer and
communications equipment, office equipment, and office and warehouse space. In 2020, the Company has
entered into leases with a third-party logistics provider to make room for capacity expansion. As of December
31, 2020, our total minimum lease payments payable in future years are $34.7 million.
On September 27, 2019, JLL amended and restated the Initial Credit Agreement to provide a secured
revolving facility of $275.0 million (including a $10.0 million swingline facility) with the option to increase
the revolving facility up to $475.0 million. The Credit Facilities mature on September 27, 2024 with the
outstanding principal repayable in full on this date.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future
material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures,
or capital resources.
- 41 -
Related Party Transactions
Balances and transactions between us and our subsidiaries, have been eliminated on consolidation.
Share-based compensation
The LTIP is an equity-based compensation plan providing for the issuance of securities under which grants
will be made. Under the LTIP, the board of directors of the Company, at its discretion, may grant share options,
restricted shares, RSUs, PSUs, stock appreciation rights and deferred share units. The awards are settled in common
shares of the Company (“Common Shares”) with a cash settlement alternative available to the Company. We also
maintain the ESPP for all eligible employees for the purchase of Common Shares.
Our share-based compensation expense, for the three and twelve months ended December 31, 2020 is $1.2
million and $4.9 million, respectively, (2019 - $1.6 million and $4.3 million ).
Financial Instruments
We primarily use foreign currency forward contracts to manage our exposure to fluctuations with respect to
transactions in U.S. dollars pertaining to inventory purchases and our international sales. These agreements mature at
various dates and qualify for hedge accounting as cash flow hedges of future foreign currency transactions. The terms
of the foreign currency forward contracts match the terms of the expected highly probable forecast transactions. As a
result, there is no hedge ineffectiveness to be recognized in the consolidated statements of operations and
comprehensive income. As of December 31, 2020, $156.1 million of anticipated foreign currency denominated
purchases have been hedged with underlying foreign exchange forward contracts settling at various dates in the 2
years following the end of the current quarter.
We also use interest rate swaps to manage our long-term interest rate exposure with respect to interest on our
Credit Facilities which is based on fluctuating CDOR. We have entered into an interest rate swap with a term of
October 1, 2020 to September 27, 2024 with a notional principal of $140.0 million and an annual amortization of
$10.0 million on the first business day of each year. The interest rate swap is a derivative measured at fair value and
meets hedge accounting requirements.
Outstanding Share Capital and Redeemable Preferred Shares
As at January 1, 2020
Exercise of stock options
Employee stock purchase plan
As at December 31, 2020
As at January 1, 2019
Exercise of stock options
Employee stock purchase plan
As at December 31, 2019
Common Shares
#
38,989,942
867,301
15,669
39,872,912
Common Shares
#
38,207,114
758,333
24,495
38,989,942
$
243,224
12,122
449
255,795
$
239,404
3,357
463
243,224
As at December 31, 2020, the authorized share capital of the Company consisted of:
a) Unlimited number of Common Shares with no par value. The holders of Common Shares are entitled to
receive dividends as declared from time to time and are entitled to one vote per share at meetings of the
Company; and
b) Unlimited number of Preference Shares, issuable in series.
- 42 -
Critical Accounting Estimates and Judgments
The preparation of consolidated financial statements in accordance with IFRS requires management to make
judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of
assets, liabilities, income and expenses. Estimates and assumptions are continuously evaluated and are based on
management’s best judgments and experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. Revisions to accounting estimates are recognized in the period in
which the estimates are revised and in any future periods affected. Actual results may differ from these estimates.
Significant judgments made by management in applying our accounting policies and key sources of
estimation of uncertainty were the same as those applied and described in Note 3 in the accompanying notes of our
Company’s audited consolidated annual financial statements for the year ended December 31, 2020. Items subject to
significant estimate uncertainty and critical judgements which have the most impact on the amounts recognized in the
audited consolidated annual financial statements are included both below and in the annual audited financial statement
notes.
Our significant accounting judgments, estimates and assumptions are affected as a result of the various
ongoing economic and social impacts of the COVID-19 global pandemic. There continues to be significant uncertainty
as to the likely effects of this outbreak which may, among other things, impact our employees, suppliers, and
customers. It is not possible to predict the impact COVID-19 will have on our financial position and our results of
operations in the future. We are monitoring the future impact of the pandemic on all aspects of our business. At each
quarter end, management analyzes the impact of the COVID-19 pandemic on our estimates and judgements related to
valuation of inventory, receivables and allowance for doubtful accounts below.
Estimating variable consideration for returns, trade merchandise allowances and sales promotional incentives
We use historical customer return data to determine the expected return percentages. These percentages are
applied to determine the expected value of the variable consideration. Any significant changes in experience as
compared to historical return pattern will impact the expected return percentages we estimated.
We provide for estimated payments to customers based on various trade programs and sales promotional
incentives. We estimate the most likely amount payable to each customer for each trade and incentive program
separately using (i) the projected level of sales volume for the relevant period; (ii) customer rates for allowances,
discounts, and rebates; (iii) historical spending patterns; and (iv) sales lead time. These arrangements are complex and
there are a significant number of customers and products affected. Management has systems and processes in place to
estimate and value these obligations.
We update our expected return, trade merchandise allowances and sales promotional incentives on a quarterly
basis and the refund liability and trade and promotional accruals are adjusted accordingly. To the extent that payments
differ from estimates of the related liability, accounts payable and accrued liabilities, net income, and comprehensive
income will be affected in future periods.
Valuation of inventory
Management makes estimates of the future customer demand for products when establishing appropriate
provisions for inventory. In making these estimates, management considers the product life of inventory and the
profitability of recent sales of inventory. In many cases, products sold by us turn quickly and inventory on-hand values
are low, thus reducing the risk of inventory obsolescence. However, code or “best before” dates are very important in
the determination of realizable value of inventory. Management ensures that systems are in place to highlight and
properly value inventory that may be approaching code dates. To the extent that actual losses on inventory differ from
those estimated, inventory, net income, and comprehensive income will be affected in future periods.
Consumer responses to COVID-19 have resulted in the acceleration of demand for both immunity and general
health supplements, thus reducing the risk of inventory obsolescence. We have customer specific materials on hand
to support certain strategic partner customers, that requires management to estimate future demand at the customers’
- 43 -
retail locations when establishing appropriate provisions for inventory. These estimates are based on the assumption
that such customers will continue to carry on business, and management also considers the current economic
conditions of the customer, product life of inventory and the potential alternative use. To the extent that actual losses
on inventory differ from those estimated, inventory, net income, and comprehensive income will be affected in future
periods.
Receivables and allowance for expected credit losses
We are exposed to credit risk with respect to amounts receivable from customers. Our allowance is
determined by historical experiences, and considers factors including, the aging of the balances, the customer’s credit
worthiness, and updates based on the current economic conditions, expectation of bankruptcies, and the political and
economic volatility in the markets/location of customers.
COVID-19 has increased the measurement uncertainty with respect to the determination of the allowance for
doubtful accounts. The impact of the COVID-19 pandemic to customers’ business is considered when making credit
assessments. Deposits are requested on accounts as required. We maintain provisions for potential credit losses, which
are assessed on a regular basis.
Long-lived assets valuation
We perform impairment testing annually for goodwill and indefinite-life intangible assets and when
circumstances indicate long-lived assets may be impaired. Management judgment is involved in determining if there
are circumstances indicating that testing for impairment is required, and in identifying CGUs for the purpose of
impairment testing. We assess impairment by comparing the recoverable amount of a long-lived asset, CGU, or CGU
group to its carrying value. The recoverable amount is defined as the higher of: (i) value in use; or (ii) fair value less
costs of disposal.
The determination of the recoverable amount involves significant estimates and assumptions. Fair value less
costs to sell is determined using market multiples. Value in use is determined using future cash inflows and outflows,
discount rates, growth rates and asset lives. These estimates and assumptions could affect our future results if the
current estimates of future performance and fair values change. These determinations will affect the amount of
amortization expense on definite-life intangible assets recognized in future periods.
Measurement of fair values
A number of our accounting policies and disclosures require the measurement of fair values, for both financial
and non-financial assets and liabilities. When the measurement of fair values cannot be determined based on quoted
prices in active markets, fair value is measured using valuation techniques and models. The inputs to these models are
taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in
establishing fair values. Changes in assumptions about the inputs to these models could affect the reported fair value
of our financial and non-financial assets and liabilities.
Tangible and intangible assets acquired through business combinations are initially recorded at their fair
values based on assumptions of management. These assumptions include estimating the cost of tangible assets and
future expected cash flows arising from intangible assets identified. Financial instruments acquired are determined
based on the amortized costs at the acquisition date that approximate their carrying values.
To the extent that these estimates differ from those realized, the measured asset or liability, net income, and/or
comprehensive income will be affected in future periods. Information about the valuation techniques and inputs used
in determining the fair value of various assets and liabilities are disclosed in Notes 7, 12, 15, 16 and 20.
Taxes
The calculation of current and deferred income taxes requires us to make estimates and assumptions and to
exercise judgment regarding the carrying values of assets and liabilities that are subject to accounting estimates
- 44 -
inherent in those balances, the interpretation of income tax legislation across various jurisdictions, expectations about
future operating results, the timing of reversal of temporary differences and possible audits of income tax filings by
the tax authorities.
Changes or differences in underlying estimates or assumptions may result in changes to the current or
deferred income tax balances on the consolidated statements of financial position, a charge or credit to income tax
expense in the consolidated statements of operations and comprehensive income and may result in cash payments or
receipts.
All income, capital and commodity tax filings are subject to audits and reassessments. Changes in
interpretations or judgments may result in a change in our income, capital or commodity tax provisions in the future.
The amount of such a change cannot be reasonably estimated.
Useful lives of property, plant and equipment and intangible assets with finite useful lives
We employ significant estimates to determine the estimated useful lives of property, plant and equipment
and intangible assets with finite useful lives, including assets arising from business combinations, considering industry
trends such as technological advancements, past experience, expected use and review of asset lives.
Components of an item of property, plant and equipment may have different useful lives. We make estimates
when determining depreciation methods, depreciation rates and asset useful lives, which requires taking into account
industry trends and company-specific factors. We review these decisions at least once each year or when circumstances
change. We will change depreciation methods, depreciation rates or asset useful lives if they are different from
previous estimates.
Significant Accounting Policies
Our audited consolidated annual financial statements were prepared using the same accounting policies as
described in Note 2 in the accompanying notes of our audited consolidated annual financial statements for the year
ended December 31, 2020.
Recently adopted accounting standards
No recent accounting standard changes have been identified as applicable for the three and twelve month
period ended December 31, 2020 and onwards.
Disclosure Controls and Procedures
The Chief Executive Officer and the Chief Financial Officer (the “Certifying Officers”), along with other
members of management, have designed, or caused to be designed under their supervision, disclosure controls and
procedures (“DC&P”) to provide reasonable assurance that (i) material information relating to the Company is made
known to them by others, particularly during the period in which the annual filings are being prepared; and (ii)
information required to be disclosed by the Company in its annual filings, interim filings or other reports filed or
submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods
specified in securities legislation. The Certifying Officers have evaluated, or caused to be evaluated under their
supervision, the effectiveness of the Company’s DC&P as at December 31, 2020 and have concluded that the
Company's DC&P was effective as at December 31, 2020.
Internal Control over Financial Reporting
The Certifying Officers, along with other members of management, have designed, or caused to be designed
under their supervision, internal control over financial reporting (“ICFR”) to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes prepared in
accordance with IFRS. The Certifying Officers have used the Internal Control – Integrated Framework (2013 COSO
Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission to design the
Company’s ICFR. The Certifying Officers have evaluated, or caused to be evaluated under their supervision, the
- 45 -
effectiveness of the Company’s ICFR as at December 31, 2020 and have concluded that the Company's ICFR was
effective as at December 31, 2020.
There have been no changes in the Company’s ICFR during the three-month period ended December 31,
2020 which have materially affected, or are reasonably likely to materially affect, the Company’s ICFR.
Limitations of an Internal Control System
We believe that any DC&P or ICFR, no matter how well designed and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met and that all control issues, including instances
of fraud, if any, within the Company have been prevented or detected. Further, the design of a control system must
reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their
costs. The design of any system of control is also based in part upon certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed in achieving its stated goals under all future
conditions.
Outlook
In fiscal 2021, we expect revenue to grow between 4.3% and 8.6% and range from $421.0 to $438.0 million.
We anticipate Adjusted EBITDA to range from $95.0 to 100.0 million and Adjusted Diluted Earnings per Share to
range from $1.24 to $1.32.
Revenue in the Jamieson Brands segment is expected to increase between 4.0% and 8.0% compared to fiscal
2020, driven by growth in the following categories:
•
In fiscal 2021, we expect domestic branded revenues to grow between 2.0% and 5.0% including the impact
of both pricing and volume expectations while lapping surge COVID-19 demand realized earlier in the
pandemic. Our guidance reflects a higher base resulting from the impact of COVID-19 and consumers
continued focus on health and wellness. We plan to expand our market position focusing on innovation and
consumer education while increasing investments in digital commerce.
• We expect international growth between 15.0% and 25.0% including headwinds resulting from a
strengthening Canadian dollar impacting our US denominated international sales. Our guidance reflects
strong growth in China while sustaining a higher base in our remaining international markets. We plan to
increase our marketing investments in China to build brand equity and accelerate our long-term growth
opportunities in China.
Revenue in the Strategic Partners segment is expected to increase between 5.0% to 10.0%, reflecting the
higher demand of our customers’ branded products.
We expect to incur certain costs affecting gross margins, including the costs associated with continuing
COVID-19 safety measures in our operating facilities and higher depreciation resulting from our capacity expansion
and transition to a third-party logistics platform. We expect to incur approximately $1.5 million in start-up costs in
the first quarter of 2021 associate with the completing of our transition to a third-party logistics provider to make room
to maximize our capacity within our existing operating footprint. We also expect to incur non-capital costs to begin
IT system enhancements to improve operating efficiencies and better service our customers as we continue to grow.
Both our third-party logistics transition costs and IT enhancement costs have been adjusted in our expected Adjusted
EBITDA range for fiscal 2021. These transition costs will impact Net Income while our expected Adjusted Net Income
and Adjusted Diluted Earnings per Share for fiscal 2021 will also reflect the adding back of these expenses on a
tax-effected basis.
The foregoing financial outlook is based on the following assumptions for fiscal 2021, amongst others:
•
•
an average annual exchange rate between the U.S. and Canadian dollar of U.S.$1.00 = $1.30;
normalized SG&A expenses will increase by approximately 9.0% to 13.0% as we continue to expand in our
e-commerce capability and support growth in international markets, including a $3.0 to $4.0 million
investment in marketing primarily to support international markets and our long-term growth opportunities
in China;
- 46 -
•
•
•
•
•
depreciation expense will be approximately $10.5 million reflecting the acceleration of capital additions and
our third-party logistics platform;
stock-based compensation costs of approximately $5.0 million;
interest expense of approximately $5.5 to $6.0 million based on our estimated borrowing and prevailing rates;
income tax rates of approximately 27.0% based on non-deductible stock-based compensation; and
a fully diluted share count of between 41.5 and 42.0 million shares.
Our revenue growth and cost increases will not be linear throughout fiscal 2021, with the following factors
impacting growth in the first quarter:
• We expect domestic Jamieson Brands segment to grow between 1.0% and 3.0% in the first quarter of 2021
compared to the first quarter of 2020, reflecting inventory replenishment in retail and initial implementation
of pricing, offsetting the surge in demand in the first quarter of 2020 as a result of COVID-19.
• Growth in our international markets for the first quarter is expected to be between 50.0% and 60.0% due to
the production timing of non-immunity products as we prioritized larger production runs of immunity
products exiting fiscal 2020.
• We expect Strategic Partners revenues in the first quarter of 2021 to increase by between 30.0% and 40.0%,
reflecting production line availability and the timing of our customer programs in the first quarter of 2020.
• We expect gross margins for both the Branded and Strategic Partners segment in the first quarter of 2021 to
be approximately 100 bps lower compared to the first quarter of 2020 resulting from costs associated with
COVID-19 safety measures implemented in the second quarter of 2020, combined with an upfront signing
bonus on the renewal of our collective bargaining agreement with our hourly employees.
SG&A expenses will increase by approximately 10.0% to 11.0% as we increase our resources and marketing
efforts in our international markets.
•
While efforts have been taken to slow the infection rates of COVID-19 globally through mandated
shutdowns, restrictions and the rollout of vaccines, there exists the continued risk that a resurgence of COVID-19
infections (or its variants as reported by the World Health Organization) may impact our estimates for fiscal 2021.
Any prolonged retail or manufacturing closures could impact our ability to service our customers and consumers. An
outbreak within our operating facilities could result in absenteeism or a plant closure for an extended duration. Our
suppliers may experience a business disruption which could impact their ability to supply raw materials or components
required to manufacture our products. Limitations on transportation or border closures may result in shipment delays
from our suppliers or to our customers. Our guidance above reflects the current situation and may be impacted by the
depth and duration of any potential measures resulting from the pandemic.
The description of our 2021 financial outlook in this MD&A is based on management’s current views and
strategies, our assumptions and expectations concerning our growth opportunities and our assessment of the
opportunities for our business and the consumer health industry as a whole and the VMS and sports nutrition segments
of the consumer health industry in particular, and has been calculated using accounting policies that are generally
consistent with our current accounting policies. The description of our 2021 outlook is forward-looking information
for purposes of applicable securities laws in Canada and readers are therefore cautioned that actual results may vary
from those described above. See “Forward-Looking Information” and “Risk Factors” for a reference to the risks and
uncertainties that impact our business and that could cause actual results to vary.
Current Share and Option Information
As of the date hereof, an aggregate of 39,876,799 Common Shares are issued and outstanding. As of the
date hereof, the Company had 2,546,553 options, 256,894 PSUs and 9,000 RSUs outstanding.
Additional Information
Additional information relating to our Company, including our most recent annual report and annual
information form are available on SEDAR at www.sedar.com.
- 47 -
Risk Factors
We are exposed to a variety of financial risks in the normal course of operations including credit risk, market
risk and liquidity risk, each of which is discussed below. Management oversees the management of these risks. Our
financial instruments and policies for managing these risks are detailed below. Please see also the discussion of risks
associated with COVID-19 discussed above under the heading “Summary of Factors Affecting Our Performance” and
“Outlook”.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations, resulting in
financial loss to us. We are exposed to credit risk from our customers (primarily related to trade accounts receivable)
in the normal course of business. We have adopted a policy of only dealing with creditworthy counterparties. To
mitigate this risk, we carry out regular credit evaluations and purchase credit insurance for international customers,
where appropriate, as a means of mitigating the risk of financial loss from defaults.
We are also exposed to counterparty credit risk inherent in our financing activities, trade receivable
insurance, foreign currency derivatives and interest rate derivatives. We have assessed these risks as minimal.
Market Risk
Market risk is comprised of foreign exchange risk, interest rate risk and commodity price risk.
Foreign Exchange Risk
Foreign exchange risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in foreign exchange rates. Our exposure to the risk of changes in foreign exchange
rates relates primarily from transactions in U.S. dollars such as a portion of trade accounts payable, trade accounts
receivable and cash. We use foreign exchange forward contracts to manage foreign exchange transaction exposure.
Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in market interest rates. Our accounts receivable and accounts payable are non-interest bearing.
Our exposure to the risk of changes in market interest rates arises from long-term debt obligations with floating
interest rates. We manage our interest rate risk by entering into interest rate swaps, in which we agree to exchange,
at specified intervals, the difference between fixed and variable rate interest amounts calculated by reference to an
agreed-upon notional principal amount.
Commodity Price Risk
We are exposed to price risk related to purchases of certain commodities used as raw materials. We may
use fixed price contracts with suppliers to mitigate commodity price risk. Concentration in any one raw material is
not significant to us.
Liquidity Risk
Liquidity risk is the risk we will not be able to meet our financial obligations associated with financial
liabilities. We are exposed to this risk mainly in respect of our accounts payable and accrued liabilities, various
long-term debt agreements, obligations under our post-retirement benefits plan and lease liabilities.
We manage our liquidity risk through continuous monitoring of our forecast and actual cash flows and
through the management of our capital structure. We continually revise our available liquid resources as compared
to the timing of the payment of liabilities to manage our liquidity risk.
- 48 -
Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
Table of Contents
Independent auditor’s report ...................................................................................................................................... 51-54
Consolidated statements of financial position ................................................................................................................ 55
Consolidated statements of operations and comprehensive income .............................................................................. 56
Consolidated statements of changes in shareholders’ equity .......................................................................................... 57
Consolidated statements of cash flows ............................................................................................................................. 58
Notes to the consolidated financial statements .......................................................................................................... 59-90
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Jamieson Wellness Inc.
Opinion
We have audited the consolidated financial statements of Jamieson Wellness Inc. and its subsidiaries (the Group),
which comprise the consolidated statements of financial position as at December 31, 2020 and 2019, the consolidated
statements of operations and comprehensive income, consolidated statements of changes in shareholders’ equity and
consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements,
including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the
consolidated financial position of the Group as at December 31, 2020 and 2019, and its consolidated financial
performance and its consolidated cash flows for the years then ended in accordance with International Financial
Reporting Standards (IFRSs).
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial
statements section of our report. We are independent of the Group in accordance with the ethical requirements that are
relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
consolidated financial statements of the current period. These matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters. For the matter, our description of how our audit addressed the matter is provided in that
context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the consolidated
financial statements section of our report, including in relation to this matter. Accordingly, our audit included the
performance of procedures designed to respond to our assessment of the risks of material misstatement of the
consolidated financial statements. The results of our audit procedures, including the procedures performed to address
the matter below, provide the basis for our audit opinion on the accompanying consolidated financial statements.
- 51 -
INDEPENDENT AUDITOR’S REPORT (continued)
Sales promotional incentives
Key audit matter
How our audit addressed the key audit matter
As described in the Summary of Significant Accounting
Policies in Note 2 to the consolidated financial
statements, the Group provides certain customers with
discounts and sales promotional incentives, which
results in variable consideration and the Group having to
estimate expected levels of promotions that are typically
settled in a period after the sale being recorded. The
estimated costs of these discounts and customer-specific
sales promotional incentives are recorded as a reduction
to revenue at the time a product is sold to the customer.
The Group’s sales promotional incentives are complex,
and there are a significant number of customers and
products affected. The measurement of sales
promotional incentives involves the use of judgement
related to estimating future promotional spending based
on historical performance of promotions and
adjustments for current trends, among other inputs. The
timing difference between sales of goods by the Group
and the settlement of customer-specific sales
promotional incentives further increases the risk
associated with the measurement of revenues. Changes
in these estimates can have a significant impact on the
amount of revenue recognized.
• We considered the appropriateness of the Group’s
revenue recognition accounting policies, specifically
the recognition and classification criteria for
discounts and sales promotional incentives, by
reviewing the Group’s contractual and non-
contractual arrangements with its customers.
• Among other audit procedures, we tested the sales
promotional incentives accrued at the end of the
year by comparing program details with agreements
or other correspondence between the Group and its
customers, where applicable, taking customary trade
practices into consideration.
• We examined correspondence between the Group
and its customers, and historical end-consumer
spending patterns on similar promotions, to
evaluate the reasonableness of the estimated end-
consumer purchases forecasted by management
during the promotional period.
• We also analyzed retrospective reviews prepared by
management on its ability to estimate customer-
specific sales promotional incentives, which
compared actual spending to amounts accrued at
period end and analyzed trending of customer-
specific sales promotional incentives as a percentage
of revenue, to evaluate the accuracy and
completeness of amounts accrued by management
at year end.
• Additionally, we performed inquiry procedures
directly with sales representatives to evaluate the
completeness of incentive programs.
Other information
Management is responsible for the other information. The other information comprises:
• Management’s Discussion and Analysis
• The information, other than the consolidated financial statements and our auditor’s report thereon, in the
Annual Report
Our opinion on the consolidated financial statements does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information, and in doing so, consider whether the other information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we
have performed, we conclude that there is a material misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.
The Annual Report is expected to be made available to us after the date of the auditor’s report. If based on the work we
will perform on this other information, we conclude there is a material misstatement of other information, we are
required to report that fact to those charged with governance.
- 52 -
Responsibilities of management and those charged with governance for the consolidated financial
statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in
accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation
of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic
alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with Canadian generally accepted auditing standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial
statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure, and content of the consolidated financial statements, including the
disclosures, and whether the consolidated financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the consolidated financial statements. We are responsible
for the direction, supervision and performance of the group audit. We remain solely responsible for our audit
opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we identify during
our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
- 53 -
The engagement partner on the audit resulting in this independent auditor’s report is Paula J. Smith.
Toronto, Canada
February 24, 2021
- 54 -
Jamieson Wellness Inc.
Consolidated Statements of Financial Position
In thousands of Canadian dollars as at December 31,
Notes
2020
2019
Assets
Current assets
Cash
Accounts receivable
Inventories
Prepaid expenses and other current assets
Non-current assets
Property, plant and equipment
Goodwill
Intangible assets
Deferred income tax
Total assets
Liabilities
Current liabilities
Accounts payable and accrued liabilities
Income taxes payable
Derivatives
Current portion of other long-term liabilities
Long-term liabilities
Long-term debt
Post-retirement benefits
Deferred income tax
Other long-term liabilities
Total liabilities
Shareholders' equity
Share capital
Contributed surplus
Retained earnings
Accumulated other comprehensive loss
Total shareholders' equity
Total liabilities and shareholders' equity
Commitments and contingencies
1,166
97,951
102,645
2,389
204,151
83,796
122,975
196,158
2,261
609,341
73,084
6,580
8,231
3,115
91,010
149,058
3,538
51,479
21,854
316,939
255,795
12,986
29,023
(5,402)
292,402
609,341
198
89,394
81,948
1,893
173,433
64,906
122,975
198,189
2,272
561,775
67,795
2,365
1,292
1,890
73,342
164,769
3,923
51,107
9,466
302,607
243,224
10,727
6,061
(844)
259,168
561,775
4
5
6
7
8
13
9
13
20
14
11
12
13
14
15
21
(see the accompanying notes to the consolidated financial statements)
Approved on behalf of the Board:
Steve Spooner
Director
David Williams
Director
- 55 -
Jamieson Wellness Inc.
Consolidated Statements of Operations and Comprehensive Income
In thousands of Canadian dollars, except share and per share amounts, for the years ended December 31,
Revenue
Cost of sales
Selling, general and administrative expenses
Share-based compensation
Earnings from operations
Foreign exchange loss
Other expenses
Interest expense and other financing costs
Income before income taxes
Provision for income taxes
Net income
Other comprehensive income (loss)
Actuarial gain (loss) not to be reclassified subsequently to net
income
Income tax
Net of tax
Unrealized loss on amounts to be reclassified net of realized
gains on amounts reclassified to net income
Income tax
Net of tax
Total other comprehensive loss
Comprehensive income
Income per share attributable to common shareholders
Basic, income per share
Diluted, income per share
Weighted average number of shares
Basic
Diluted
Notes
22, 23
5
16
18
19
13
12
13
20
13
24
24
(see the accompanying notes to the consolidated financial statements)
2020
2019
403,661
258,905
76,259
4,925
63,572
460
22
6,042
57,048
15,450
41,598
785
(198)
587
(6,939)
1,756
(5,183)
(4,596)
37,002
1.05
1.01
344,980
215,246
69,942
4,343
55,449
404
3,369
9,372
42,304
10,647
31,657
(671)
179
(492)
(4,416)
1,136
(3,280)
(3,772)
27,885
0.82
0.80
39,539,955
41,160,341
38,535,274
39,614,909
- 56 -
Jamieson Wellness Inc.
Consolidated Statements of Changes in Shareholders’ Equity
In thousands of Canadian dollars
Notes
Share capital
Contributed
surplus
Retained
earnings
Accumulated
other
comprehensive
income (loss)
Total
Shareholders'
equity
As at January 1, 2019
239,404
9,037
(10,670)
2,951
240,722
Impact of new accounting standards adopted
January 1, 2019
Net income for the year
Exercise of stock options and ESPP
Common share dividend ($0.38 per share)
Other comprehensive loss
Currency translation adjustment
Share-based compensation
As at December 31, 2019
Net income for the year
Exercise of stock options and ESPP
Common share dividend ($0.47 per share)
Other comprehensive loss
Currency translation adjustment
Share-based compensation
As at December 31, 2020
15
16
15
16
-
-
3,820
-
-
-
-
243,224
-
12,571
-
-
-
-
255,795
-
-
(2,195)
-
-
-
3,885
10,727
-
(2,315)
-
-
-
4,574
12,986
(239)
31,657
-
(14,687)
-
-
-
6,061
41,598
-
(18,636)
-
-
-
29,023
-
-
-
-
(3,772)
(23)
-
(844)
-
-
-
(4,596)
38
-
(5,402)
(239)
31,657
1,625
(14,687)
(3,772)
(23)
3,885
259,168
41,598
10,256
(18,636)
(4,596)
38
4,574
292,402
(see the accompanying notes to the consolidated financial statements)
- 57 -
Jamieson Wellness Inc.
Consolidated Statements of Cash Flows
In thousands of Canadian dollars, for the years ended December 31,
Cash provided by (used in)
Notes
Operating activities
Net income
Items not affecting cash
Depreciation of property, plant and equipment
Amortization of intangible assets
6
8
Amortization and derecognition of deferred financing fees
18, 19
16
6
8
11
11
14
15
Deferred income taxes
Share-based compensation
Others
Net change in non-cash working capital
Investing activities
Additions to property, plant and equipment, net
Acquisition of intangible assets
Financing activities
Proceeds from credit facilities
Repayment of credit facilities
Payment of lease liabilities
Dividends to Common Shareholders
Exercise of stock options and ESPP
Increase (decrease) in cash
Cash - Beginning of the year
Cash - End of the year
Supplemental disclosure
Amount of income taxes paid
Amount of interest paid
(see the accompanying notes to the consolidated financial statements)
2020
41,598
8,260
3,949
-
1,941
4,574
478
(20,204)
40,596
(11,251)
(1,918)
(13,169)
60,292
(76,003)
(2,368)
(18,636)
10,256
(26,459)
968
198
1,166
9,296
4,503
2019
31,657
7,263
3,653
3,026
1,108
3,885
303
(34,499)
16,396
(9,027)
(471)
(9,498)
47,224
(51,393)
(1,914)
(14,687)
1,625
(19,145)
(12,247)
12,445
198
11,628
8,251
- 58 -
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
1.
Company overview
1.1 Description of the business and consolidated financial statements
Jamieson Wellness Inc. (“Jamieson” or the “Company”) was incorporated on January 24, 2014 as Jamieson
Intermediate Holdings Ltd. On January 31, 2014, the Company’s wholly owned subsidiary, Intrepid Acquisition
Corporation (“Intrepid”) acquired 100% of the shares of Jamieson Laboratories Ltd. On the same day, Intrepid
and Jamieson Laboratories Ltd. amalgamated with the resulting company (“JLL”) carrying on operations under
the name Jamieson Laboratories Ltd. The Company’s common shares (“Common Shares”) are listed on the
Toronto Stock Exchange under the stock symbol “JWEL”.
The consolidated financial statements of Jamieson and its subsidiaries for the year ended December 31, 2020
were authorized for issue by the Board of Directors of the Company on February 24, 2021. Jamieson is a
company continued under the Business Corporations Act (Ontario) and resident in Canada. Jamieson’s
registered office is located at 66 Wellington Street West, Suite 5300, TD Bank Tower, Toronto, ON, M5K 1E6.
The Company has manufacturing facilities located in Windsor, Ontario and in Toronto, Ontario and is
principally engaged in the manufacturing, development, distribution, sales and marketing of branded and
customer branded health products for humans including vitamins, herbal and mineral nutritional supplements.
1.2 Subsidiaries
The table below provides a summary of the Company's subsidiaries. Unless otherwise stated, the subsidiaries as
listed below have share capital consisting solely of common shares, which are held directly or indirectly by the
Company.
On January 1, 2019, Sonoma Nutraceuticals Inc. was amalgamated into Body Plus Nutritional Products Inc.
As at December 31,
Entity
Jamieson Laboratories Ltd.
International Nutrient Technologies Limited
Body Plus Nutritional Products Inc.
Jamieson Health Products (Shanghai) Co., Ltd.
Jamieson Health Products Australia Pty Ltd.
Jamieson Health Products UK Ltd.
Jamieson Health Products USA Ltd.
2020
%
100
100
100
100
100
100
100
2019
%
100
100
100
100
100
100
100
Principal Place of
Operations
Functional
Currency
Canada
Canada
Canada
China
Australia
Canadian dollar
Canadian dollar
Canadian dollar
Chinese yuan
Australian dollar
United Kingdom United States dollar
United States of America United States dollar
2. Summary of significant accounting policies
2.1 Basis of preparation and statement of compliance
The consolidated financial statements of the Company have been prepared in accordance with International
Financial Reporting Standards (“IFRS”).
The consolidated financial statements have been prepared on a historical cost basis, except for certain derivative
financial instruments and liabilities associated with the post-retirement benefit plan that have been measured at
fair value. The consolidated financial statements are presented in Canadian dollars and all values are rounded to
the nearest thousand ($000), except share and per share amounts and when otherwise indicated.
- 59 -
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
2.2 Basis of consolidation
Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with
the investee and has the ability to affect those returns through its power over the investee. Specifically, the
Company controls an investee if, and only if, the Company has:
• Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the
investee);
• Exposure, or rights, to variable returns from its involvement with the investee; and
• The ability to use its power over the investee to affect its returns.
Generally, there is a presumption that a majority of voting rights results in control. To support this presumption
and when the Company has less than a majority of the voting or similar rights of an investee, the Company
considers all relevant facts and circumstances in assessing whether it has power over an investee, including:
• The contractual arrangement(s) with the other vote holders of the investee;
• Rights arising from other contractual arrangements; and
• The Company’s voting rights and potential voting rights.
The Company re-assesses whether or not it controls an investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Company
obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Assets,
liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the
consolidated financial statements from the date the Company gains control until the date the Company ceases to
control the subsidiary.
Transactions and balances between the Company and its consolidated entities have been eliminated on
consolidation.
2.3 Summary of significant accounting policies
The following are the significant accounting policies applied by the Company in preparing its consolidated
financial statements:
2.3.1 Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as
the aggregate of the consideration transferred, which is measured at the acquisition date fair value and the
amount of any non-controlling interest in the acquiree. Acquisition-related costs are expensed as incurred and
included in the consolidated statements of operations and comprehensive income.
When the Company acquires a business, it assesses the financial assets and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic circumstances and pertinent
conditions as at the acquisition date.
Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition
date. All contingent consideration (except that which is classified as equity) is subsequently re-measured to fair
value at each reporting period end, with the changes in fair value recognized in profit or loss. Contingent
consideration that is classified as equity is not re-measured, and subsequent settlement is accounted for within
equity.
- 60 -
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the
amount recognized for non-controlling interests) and any previous interest held, over the net identifiable assets
acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate
consideration transferred, the Company re-assesses whether it has correctly identified all of the assets acquired
and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognized at
the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the
aggregate consideration transferred, then the gain is recognized in net income.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of
impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each
of the Company’s cash-generating units (“CGUs”) (or group of CGUs) that are expected to benefit from the
combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
Where goodwill has been allocated to a CGU (or group of CGUs) and part of the operation within that unit is
disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the
operation when determining the gain or loss on disposal of the operation. Goodwill disposed in these
circumstances is measured based on the relative values of the disposed operation and the portion of the CGU
retained.
2.3.2 Current versus non-current classification
The Company presents assets and liabilities in the consolidated statements of financial position based on
current/non-current classification.
An asset is current when it is:
• Expected to be realized or intended to be sold or consumed in the normal operating cycle;
• Held primarily for the purpose of trading;
• Expected to be realized within twelve months after the reporting period; or
• Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve
months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
• It is expected to be settled in the normal operating cycle;
• It is held primarily for the purpose of trading;
• It is due to be settled within twelve months after the reporting period; or
• There is no unconditional right to defer the settlement of the liability for at least twelve months after the
reporting period.
All other liabilities are classified as non-current.
Deferred income tax assets and liabilities are classified as non-current assets and liabilities.
2.3.3 Fair value measurement
The Company measures financial instruments, such as derivatives, at fair value at each consolidated statements
of financial position date. Fair value related disclosures for financial instruments and non-financial assets that
are measured at fair value or where fair values are disclosed are summarized in the following notes:
- 61 -
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
• Accounting policy disclosures (Note 2.3.3)
• Disclosures for valuation methods, significant estimates and assumptions (Notes 3 and 7)
• Quantitative disclosures of fair value measurement hierarchy (Note 20)
• Financial instruments (including those carried at amortized cost) (Notes 11 and 20)
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The fair value measurement is based on the
presumption that the transaction to sell the asset or transfer the liability takes place either:
• In the principal market for the asset or liability; or
• In the absence of a principal market, in the most advantageous market for the asset or liability.
The fair value of instruments that are quoted in active markets is determined using the quoted prices. The
Company uses valuation techniques to establish the fair value of instruments where prices quoted in active
markets are not available. Therefore, where possible, parameter inputs to the valuation techniques are based on
observable data derived from prices of relevant instruments traded in an active market. These valuation
techniques involve some level of management estimation and judgment, the degree of which will depend on the
price transparency for the instrument or market and the instrument’s complexity.
The Company categorizes its fair value measurements according to a three-level hierarchy. The hierarchy
prioritizes the inputs used by the Company’s valuation techniques. A level is assigned to each fair value
measurement based on the lowest level input significant to the fair value measurement in its entirety.
The three levels of the fair value hierarchy are defined as follows:
Level 1 - Unadjusted quoted prices at the measurement date for identical assets or liabilities in active markets.
Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets
and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not
active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 - Significant unobservable inputs which are supported by little or no market activity.
The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value.
For assets and liabilities that are recognized in the consolidated financial statements on a recurring basis, the
Company determines whether transfers have occurred between levels in the hierarchy by reassessing
categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the
end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the
basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as
explained above.
2.3.4 Revenue recognition
The majority of the Company’s revenue is derived from the sale of Jamieson branded products to distributors,
retail and wholesale customers, referred to as the Company’s “Jamieson Brands” segment, as well as providing
contract manufacturing services and the sale of products to strategic partners, referred to as the Company’s
“Strategic Partners” segment.
Revenue is recognized for the sale of Jamieson branded products and the manufacturing of products to its
strategic partners at the point in time when control of the asset is transferred to the customer based on shipping
- 62 -
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
terms. The Company generally has a right to payment at the time of delivery (which is the same time that the
Company has satisfied its performance obligations under the arrangement), as such a receivable is recognized as
the consideration is unconditional and only the passage of time is required before payment is due.
A portion of the Company’s revenues derived from contract manufacturing services provided to customers in its
Strategic Partners segment is under a tolling arrangement where the customer supplies the Company with a raw
material or ingredient. Revenue is recognized net of the cost of the raw material or ingredient supplied by the
customer.
Rights of return give rise to variable consideration. The variable consideration is estimated at contract inception
using the expected value method as this best predicts the amount of variable consideration to which the
Company is entitled. The variable consideration is constrained to the extent that it is highly probable that a
significant reversal in the amount of cumulative revenue recognized will not occur when any uncertainty is
subsequently resolved. For products that are expected to be returned, a refund liability is recognized as a
reduction of revenue at the time the control of the products purchased is transferred to the customers.
Jamieson may provide discounts and sales promotional incentives to its customers, which give rise to variable
consideration. The variable consideration is constrained to the extent that it is highly probable that a significant
reversal in the amount of cumulative revenue recognized will not occur when any uncertainty is subsequently
resolved. The application of the constraint on variable consideration increases the amount of revenue that will be
deferred. Jamieson applies the most likely amount method estimating discounts provided to customers using
contracted rates and estimating sales promotional incentives provided to customers based on historical spending
patterns. Jamieson may also provide other consideration to customers for customer-specific programs to
promote the Company’s products. Consequently, revenues are recognized net of these estimated program costs.
All other estimated non-customer-specific promotional costs and consideration are expensed as selling, general
and administrative expenses.
In subsequent periods, the Company monitors the performance of customers against agreed-upon obligations
related to sales incentive programs and makes any adjustments to both revenue and sales incentive accruals as
required.
2.3.5 Foreign currencies
The Company’s consolidated financial statements are presented in Canadian dollars. For each entity, the
Company determines the functional currency, and items included in the financial statements of each entity are
measured using that functional currency (refer to Note 1.2).
Transactions and balances
Transactions in foreign currencies are initially recorded by the entities at their respective functional currency
spot rate at the date the transaction first qualifies for recognition.
• Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency
spot rate of exchange in effect at the reporting date.
• Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rates as at the dates of the initial transactions.
• Revenue and expense items are translated using the average exchange rate during the year.
Differences arising on settlement or translation of monetary items are recognized in profit or loss.
On consolidation, the assets and liabilities of foreign operations are translated into the reporting currency at the
reporting currency spot rate of exchange in effect at the reporting date and their statement of operations are
- 63 -
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
translated using the average exchange rate during the year. Exchange differences arising on translation for
consolidation are recognized in other comprehensive income (“OCI”). On disposal of a foreign operation, the
component of OCI relating to that particular foreign operation is reclassified to profit or loss.
2.3.6 Taxes
Current income tax
Current income tax assets and liabilities for the current period are measured at the amount expected to be
recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted at the reporting date in the countries where the Company
operates and generates taxable income.
Current income tax relating to items recognized directly in equity is recognized in equity and not in the
consolidated statements of operations and comprehensive income. Management periodically evaluates positions
taken in the tax returns with respect to situations in which applicable tax regulations are subject to
interpretation, and it establishes provisions where appropriate.
Deferred income tax
Deferred income tax is provided using the liability method on temporary differences between the tax bases of
assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred income taxes are not recognized where:
• The deferred income tax liability arises from the initial recognition of goodwill;
• The deferred income tax asset or liability arises on the initial recognition of an asset or liability in an acquisition
that is not a business combination and, at the time of the acquisition, affects neither the accounting profit nor
taxable profit or loss; and
• For temporary differences relating to investments in subsidiaries to the extent that the Company can control
the timing of the temporary difference and it is probable that they will not reverse in the foreseeable future.
Deferred income tax assets are recognized for unused loss carry forwards and deductible temporary differences
to the extent that it is probable that taxable profit will be available against which they can be utilized. At each
reporting period, previously unrecognized deferred income tax assets are reassessed to determine whether it has
become probable that future taxable profit will allow the deferred income tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year
when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date.
Current and deferred income taxes relating to items recognized directly in OCI or equity are also recognized
directly in OCI or equity, respectively.
Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at
that date, are recognized subsequently if new information about facts and circumstances arise. The adjustment is
either treated as an adjustment to goodwill (as long as it does not exceed goodwill) if it is incurred during the
measurement period or recognized in net income.
- 64 -
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
Sales tax
Revenues, expenses and assets are recognized net of the amount of sales tax, except:
• Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority,
in which case, the sales tax is recognized as part of the cost of acquisition of the asset or as part of the expense
item, as applicable; and
• Receivables and payables are stated with the amount of sales tax included. The net amount of sales tax
recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the
consolidated statements of financial position.
2.3.7 Property, plant and equipment
Property, plant and equipment, with the exception of land, is recorded at cost less accumulated depreciation and
any net accumulated impairment losses. Land is carried at cost and not depreciated. Construction-in-process
assets are capitalized during construction and depreciation commences when the asset is available for use.
Repair and maintenance costs are recognized in profit or loss as incurred unless the recognition criteria are
satisfied and it substantially changes the useful life of an asset.
Depreciation is calculated on a straight-line basis, after taking into account residual values, over the following
expected useful lives of the assets:
Land
Buildings
Machinery and equipment
Furniture and fixtures
Computer equipment and software
Tools and dies
Not depreciated
20-30 years
3-20 years
4-5 years
3 years
1 year
When parts of an item of property and equipment have different useful lives, those components are accounted
for as components of property and equipment. Any gain or loss arising on derecognition of the asset (calculated
as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the
consolidated statements of operations and comprehensive income when the asset is derecognized.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed
periodically.
2.3.8 Intangible assets
Intangible assets are established as a result of business combinations and measured on initial recognition at fair
value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less
accumulated amortization and any accumulated impairment losses.
Upon recognition of an intangible asset, the Company determines if the asset has a definite or indefinite life. In
making this determination, the Company considers the expected use, expiry of agreements, the nature of the
asset, and whether the value of the asset decreases over time.
Intangible assets with finite lives are amortized over their useful economic lives and assessed for impairment
whenever there is an indication that the intangible asset may be impaired. The amortization period and the
amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each
reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic
benefits embodied in the asset are accounted for by changing the amortization period, as appropriate, and are
- 65 -
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
treated as changes in accounting estimates. The amortization expense on intangible assets is recognized in the
consolidated statements of operations and comprehensive income on a straight-line basis over their estimated
useful lives as follows:
Customer relationships
Registrations, licenses, and other
25-30 years
3-10 years
The Company expects its trade names to generate economic benefit in perpetuity, and accordingly, has assigned
the trade names as indefinite-life intangible assets.
Indefinite-life intangibles including trade names are tested for impairment annually at December 31 and
otherwise as required if events occur that indicate that the net carrying value may not be recoverable.
2.3.9 Financial instruments — initial recognition and subsequent measurement
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or
equity instrument of another entity.
Classification and measurement
All financial assets and liabilities are recognized initially at fair value plus, in the case of financial instruments
not at fair value through profit or loss (“FVTPL”), transaction costs.
Debt financial instruments are subsequently measured at FVTPL, fair value through other comprehensive
income (“FVOCI”), or amortized cost using the effective interest rate method. The Company determines the
classification of its financial assets based on the Company’s business model for managing the financial assets and
whether the instruments’ contractual cash flows represent solely payments of principal and interest on the
principal amount outstanding. The Company’s derivatives not designated as a hedging instrument in a qualifying
hedge relationship are subsequently measured at FVTPL. Equity instruments within the scope of IFRS 9,
“Financial Instruments” (“IFRS 9”), if any, are subsequently measured at FVTPL or elected irrevocably to be
classified at FVOCI at initial recognition.
Financial liabilities are subsequently measured at amortized cost using the effective interest method or at
FVTPL. Financial liabilities are subsequently measured as FVTPL when the financial liability is: (i) contingent
consideration of an acquirer in a business combination; (ii) held for trading; or (iii) it is designated as FVTPL if
eligible. Other financial liabilities are subsequently measured at amortized cost using the effective interest
method.
For financial liabilities that are designated as FVTPL, the amount of change in the fair value of the financial
liability that is attributable to changes in the Company’s own credit risk of that liability is recognized in OCI
unless the recognition of the effects of changes in the liability’s credit risk in OCI would create or enlarge an
accounting mismatch in the consolidated statements of operations and comprehensive income. The remaining
amount of change in the fair value of liability is recognized in the consolidated statements of operations and
comprehensive income. Changes in fair value of a financial liability attributable to the Company’s own credit
risk that are recognized in OCI are not subsequently reclassified to the consolidated statements of operations
and comprehensive income; instead, they are transferred to retained earnings, upon derecognition of the
financial liability.
- 66 -
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
The Company has made the following financial instrument classifications:
Financial Instrument
Cash
Accounts receivable
Accounts payable and accrued liabilities
Long-term debt
Derivatives not designated as hedging instruments
Derivatives designated as hedging instruments
IFRS 9 Measurement
Amortized cost
Amortized cost
Amortized cost
Amortized cost
FVTPL
Fair value (hedge accounting)
Impairment
IFRS 9 requires a forward-looking Expected Credit Loss (“ECL”) model. ECLs are based on the difference
between the contractual cash flows due in accordance with the contract and all the cash flows that the Company
expects to receive.
For accounts receivable, Jamieson applies the simplified approach and has determined the allowance based on
lifetime ECLs at each reporting date. The Company has established a provision that is based on the Company’s
historical credit loss experience, adjusted for forward-looking factors specific to the customers and the economic
environment. There was no transitional adjustment as a result of adopting the new impairment requirements.
Derecognition
A financial asset is derecognized when the rights to receive cash flows from the asset have expired, or the
Company has transferred its rights to receive cash flows from the asset and either (a) the Company has
transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor
retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms,
or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a
derecognition of the original liability and the recognition of a new liability. The difference in the respective
carrying amounts is recognized in the consolidated statements of operations and comprehensive income.
2.3.10 Derivative financial instruments and hedge accounting
The Company uses derivative financial instruments (primarily forward contracts and swaps) to manage exposure
to fluctuations in foreign currency exchange rates and interest rates. Derivative financial instruments are initially
recognized at fair value on the date the derivative contract is executed and are subsequently remeasured at fair
value each reporting period end.
At the inception of a hedging relationship, the Company designates and formally documents the relationship
between the hedging instrument and the hedged item, the risk management objective, and its strategy for
undertaking the hedge. The documentation identifies the specific asset, liability, or anticipated cash flows being
hedged, the risk that is being hedged, the type of hedging instrument used, and how effectiveness will be
assessed.
The Company also formally assesses, both at inception and at each reporting date thereafter, whether or not the
derivatives that are used in hedging transactions are highly effective in offsetting the changes attributable to the
hedged risks in the fair values or cash flows of the hedged items. If a hedge relationship becomes ineffective, it no
longer qualifies for hedge accounting and any subsequent change in the fair value of the hedging instrument is
recognized in net income.
- 67 -
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
The Company uses hedge accounting for highly probable forecasted transactions (cash flow hedges). When hedge
accounting is appropriate, the hedging relationship is designated as a cash flow hedge. In a cash flow hedge, the
change in fair value of the hedging instrument is recorded, to the extent it is effective, in other comprehensive
income. If a hedged forecast transaction subsequently results in the recognition of a non-financial asset, the
Company removes that amount from the cash flow hedge reserve and includes it directly in the initial cost of the
inventory.
When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in
other comprehensive income is immediately recognized in the consolidated statements of operations and
comprehensive income.
2.3.11 Inventories
Inventories are valued at the lower of cost and net realizable value. Raw material costs are accounted for using
purchase cost on a first-in, first-out basis. Finished goods and work in progress costs are accounted for using cost
of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of
completion and the estimated costs to sell. A provision for obsolescence is calculated based on historical
experience and expiration.
2.3.12 Impairment of non-financial assets
Disclosures relating to impairment of non-financial assets are summarized in the following notes:
• Accounting policy disclosures (Note 2.3.12)
• Disclosures for significant assumptions (Note 3)
• Property, plant and equipment (Note 6)
• Goodwill and intangible assets (Notes 7 and 8)
The Company performs impairment testing annually for goodwill and indefinite-life intangible assets and, when
circumstances indicate that there may be impairment, for other long-lived assets. Management judgment is
involved in determining if there are circumstances indicating that testing for impairment is required, and in
identifying CGUs for the purpose of impairment testing.
The Company assesses impairment by comparing the recoverable amount of a long-lived asset, CGU or CGU
group to its carrying value. The recoverable amount is defined as the higher of: (i) value in use; or (ii) fair value
less cost to sell.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the
asset. In determining fair value less costs to sell, a market multiple approach is used. These calculations are
corroborated by other available fair value indicators.
The determination of the recoverable amount involves significant estimates and assumptions, including those
with respect to valuation multiples, future cash inflows and outflows, discount rates, and asset lives. These
estimates and assumptions could affect the Company’s future results if the current estimates of future
performance and fair values were to change. These determinations will affect the amount of amortization
expense on definite-life intangible assets recognized in future periods.
Where the carrying amount of an asset or CGU (or group of CGUs) exceeds its recoverable amount, the asset is
considered impaired and is written down to its recoverable amount. Impairment losses, if any, of continuing
operations are recognized in the consolidated statements of operations and comprehensive income in those
expense categories consistent with the function of the impaired asset.
- 68 -
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to
determine the asset’s or CGU’s recoverable amount since the last impairment loss was recognized. The reversal is
limited so that the carrying amount of the asset or group of assets does not exceed their recoverable amount, nor
exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been
recognized for the assets in prior years. Such reversal is recognized in the consolidated statements of operations
and comprehensive income. Impairment losses relating to goodwill cannot be reversed in future periods.
2.3.13 Cash
Cash in the consolidated statements of financial position is comprised of cash balances that are subject to an
insignificant risk of changes in value.
2.3.14 Provisions
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past
event, it is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that
reflects, when appropriate, the risks specific to the liability. When discounting is used, the subsequent increase in
the provision due to the passage of time is recognized as a finance cost.
2.3.15 Post-retirement benefits
The Company’s post-retirement benefit plan (refer to Note 12) is unfunded and available to all Canadian hourly
union personnel. The plan provides prescription and vision benefits to eligible employees upon attainment of
age 65 with at least 15 years of service.
Post-retirement benefit costs for the plan are actuarially determined using the projected unit credit method pro-
rated on service and management’s best estimate of the appropriate discount rate, health care costs, inflation,
mortality and other decrements. The accrued benefit obligation is based on the present value of future benefits
based on the last actuarial valuation completed as of December 31, 2020.
Current and past years’ service costs, interest income or expenses and gains and losses on curtailments are
recognized in the consolidated statements of operations and comprehensive income as they occur and at the date
of a plan amendment or curtailment.
Re-measurements, comprising actuarial gains and losses, are recognized immediately in the consolidated
statements of financial position with a corresponding debit or credit to OCI in the period in which they occur.
Re-measurements are not reclassified to net income in subsequent periods.
2.3.16 Share-based compensation
The Company has an equity-based compensation plan providing for the issuance of securities under which the
grants will be made by the Company. Under the long-term incentive plan (the “LTIP”), the Board of Directors of
the Company, at its discretion may grant share options, restricted shares, restricted share units in the form of
time-based restricted share units ("RSUs") or performance-based share units (“PSUs”), stock appreciation rights
and deferred share units. The awards are settled in Common Shares with a cash settlement alternative available
to the Company.
- 69 -
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
Share-based compensation costs are accounted for on a fair value basis, as measured at the grant date, which is
generally the date at which both the Company and employee have a mutual understanding of the terms of the
award.
The compensation expense is based on the estimated number of awards that will eventually vest and adjustments
for forfeitures are made as they occur.
Upon exercise of options and settlement of RSUs and PSUs the amount recognized in contributed surplus for the
award plus the cash received upon exercise is recognized as an increase in share capital.
Options are granted with an exercise price equal to or greater than their fair value, as determined by the closing
price on the TSX immediately preceding the grant date of the shares into which they may be converted. Options
granted to directors of the Company fully vest on the one-year anniversary from the grant date. Options granted
to persons other than directors of the Company vest at a rate of 25% or 33% per year on each anniversary date
from the beginning of the vesting period. Options expire no later than the 10th anniversary of the beginning of
the vesting period or upon termination of employment.
The fair value of the share options is estimated using the Black-Scholes option-pricing model. Several
assumptions are used in the underlying calculation of fair values of the Company’s share options using the Black-
Scholes option-pricing model, including the market value at grant date, expected life of the option, stock-price
volatility, forfeiture rates, and risk-free interest rates.
PSUs and RSUs granted represent the right to receive one Common Share for each PSU or RSU. PSUs vest on
the third anniversary of the grant date if the weighted average price of the Common Shares on the TSX for the
90 day period immediately preceding the third anniversary of the grant date, measured over the three year term
of the PSUs, increases 6% or more annually (using a compound annual growth rate) over the weighted average
price of the Common Shares on the TSX for the 90 day period immediately preceding the grant date.
The Company has determined that the above specified performance condition represents a market condition.
Accordingly, the Company recognizes the compensation cost over the vesting period, irrespective of whether the
market condition is satisfied, provided that service conditions are satisfied.
The fair value of PSUs is estimated at grant date using the Monte Carlo simulation. Several inputs and
assumptions are used in the underlying calculation of fair values of the Company’s PSUs, including the market
value of a Common Share at grant date, expected dividend and stock-price volatility.
The RSUs vest at a rate of 1/3 per year on each anniversary date from the beginning of the vesting period.
The fair value of RSUs is measured at grant date based on the market value of a Common Share at grant date.
Employee share purchase plan
The Company maintains an employee share purchase plan (“ESPP”) for all eligible employees. Employees can
contribute any amount of their eligible earnings subject to an annual cap of 10% of aggregate base salary and
commissions to the ESPP. Share purchases occur 14 days following the end of the Company’s fiscal quarter (the
“Purchase Date”), or the first business day thereafter if any Purchase Date is not a business day. Eligible
employees are able to purchase Common Shares at 90 percent of the volume weighted average closing price on
the TSX on the five trading days immediately preceding the Purchase Date.
Employees pay for their share purchases through payroll deductions at a rate equal to any whole percentage
from 1 percent to 10 percent.
- 70 -
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
Contributions to the ESPP are recorded as share capital at each Purchase Date.
A maximum of 10% of the issued Common Shares outstanding are reserved for issuance under the LTIP, the
ESPP and the Company’s legacy option plan combined.
2.3.17 Leases
The Company assesses at contract inception whether the contract is, or contains, a lease. A contract is, or
contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in
exchange for consideration.
The Company has applied judgment to determine the lease term for some lease contracts that include renewal
options. The assessment of whether the Company is reasonably certain to exercise such options impacts the
lease term, which affects the amount of lease liabilities and right-of-use assets recognized.
The Company recognizes lease liabilities to make lease payments and right-of-use assets representing the right to
use the underlying assets during the lease term for all leases.
Right-of-use assets
The Company recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying
asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and
impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets
includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or
before the commencement date less any lease incentives received. The recognized right-of-use assets are
depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use
assets are subject to impairment.
The Company’s right-of-use assets are included in property, plant, and equipment.
Lease liabilities
At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value
of lease payments to be made over the lease term. The lease payments include fixed payments (including in-
substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index
or a rate, and amounts expected to be paid under residual value guarantees.
In calculating the present value of lease payments, the Company uses the incremental borrowing rate at the
lease commencement date if the interest rate implicit in the lease is not readily determinable. After the
commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced
for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the
assessment to purchase the underlying asset.
The Company’s lease liabilities are included in other long-term liabilities.
Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases of machinery and
equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and
do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases
- 71 -
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
of office equipment that are considered to be low value. Lease payments on short-term leases and leases of low-
value assets are expensed on a straight-line basis over the lease term.
3.
Significant accounting judgments, estimates and assumptions
The preparation of the Company’s consolidated financial statements requires management to make judgments,
estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the
accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and
estimates could result in outcomes that require a material adjustment to the carrying amount of assets or
liabilities affected in future periods.
The Company’s significant accounting judgments, estimates and assumptions are affected as a result of the
various ongoing economic and social impacts of the COVID-19 global pandemic. There continues to be
significant uncertainty as to the likely effects of this outbreak which may, among other things, impact our
employees, suppliers, and customers. It is not possible to predict the impact COVID-19 will have on the
Company, its financial position, and the results of operations in the future. The Company is monitoring the
future impact of the pandemic on all aspects of its business. Each quarter end, the Company analyzes the impact
of the COVID-19 pandemic on its estimates and judgements related to valuation of inventory, receivables and
allowance for doubtful accounts below.
Judgments
The Company has identified the following judgments, apart from estimates, that management made in the
process of applying the Company’s accounting policies, and that have the most significant effect on the amounts
recognized in the consolidated financial statements.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date
that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year are described below. The Company based its assumptions and estimates on
parameters available when the consolidated financial statements were prepared. Existing circumstances and
assumptions about future developments, however, may change due to market changes or circumstances arising
beyond the control of the Company. Such changes are reflected in the assumptions when they occur.
Estimating variable consideration for returns, trade merchandise allowances and sales promotional incentives
The Company uses historical customer return data to determine the expected return percentages. These
percentages are applied to determine the expected value of the variable consideration. Any significant changes in
experience as compared to historical return pattern will impact the expected return percentages estimated by the
Company.
The Company provides for estimated payments to customers based on various trade programs and sales
promotional incentives. The Company estimates the most likely amount payable to each customer for each trade
and incentive program separately using (i) the projected level of sales volume for the relevant period; (ii)
customer rates for allowances, discounts, and rebates; (iii) historical spending patterns; and (iv) sales lead time.
These arrangements are complex and there are a significant number of customers and products affected.
Management has systems and processes in place to estimate and value these obligations.
The Company updates its expected return, trade merchandise allowances and sales promotional incentives on a
quarterly basis and the refund liability and trade and promotional accruals are adjusted accordingly. To the
extent that payments differ from estimates of the related liability, accounts payable and accrued liabilities, net
income, and comprehensive income will be affected in future periods.
- 72 -
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
Valuation of inventory
Management makes estimates of the future customer demand for products when establishing appropriate
provisions for inventory. In making these estimates, management considers the product life of inventory and the
profitability of recent sales of inventory. In many cases, products sold by the Company turn quickly and
inventory on-hand values are low, thus reducing the risk of inventory obsolescence. However, code or “best
before” dates are very important in the determination of realizable value of inventory. Management ensures that
systems are in place to highlight and properly value inventory that may be approaching code dates. To the extent
that actual losses on inventory differ from those estimated, inventory, net income, and comprehensive income
will be affected in future periods.
Consumer responses to COVID-19 have resulted in the acceleration of demand for both immunity and general
health supplements, thus reducing the risk of inventory obsolescence. The Company has customer specific
materials on hand to support certain strategic partner customers, that requires management to estimate future
demand at the customers’ retail locations when establishing appropriate provisions for inventory. These
estimates are based on the assumption that such customers will continue to carry on business, and management
also considers the current economic conditions of the customer, product life of inventory and the potential
alternative use. To the extent that actual losses on inventory differ from those estimated, inventory, net income,
and comprehensive income will be affected in future periods.
Receivables and allowance for expected credit losses
The Company is exposed to credit risk with respect to amounts receivable from customers. The Company’s
allowance is determined by historical experiences, and considers factors including, the aging of the balances, the
customer’s credit worthiness, and updates based on the current economic conditions, expectation of
bankruptcies, and the political and economic volatility in the markets/location of customers.
COVID-19 has increased the measurement uncertainty with respect to the determination of the allowance for
doubtful accounts. The impact of the COVID-19 pandemic to customers’ business is considered when making
credit assessments. Deposits are requested on accounts as required. The Company also maintains provisions for
potential credit losses, which are assessed on a regular basis.
Long-lived assets valuation
The Company performs impairment testing annually for goodwill and indefinite-life intangible assets and when
circumstances indicate long-lived assets may be impaired. Management judgment is involved in determining if
there are circumstances indicating that testing for impairment is required, and in identifying CGUs for the
purpose of impairment testing. The Company assesses impairment by comparing the recoverable amount of a
long-lived asset, CGU, or CGU group to its carrying value. The recoverable amount is defined as the higher of: (i)
value in use; or (ii) fair value less costs of disposal.
The determination of the recoverable amount involves significant estimates and assumptions. Fair value less
costs to sell is determined using market multiples. Value in use is determined using future cash inflows and
outflows, discount rates, growth rates and asset lives. These estimates and assumptions could affect the
Company’s future results if the current estimates of future performance and fair values change. These
determinations will affect the amount of amortization expense on definite-life intangible assets recognized in
future periods.
Measurement of fair values
A number of the Company’s accounting policies and disclosures require the measurement of fair values, for both
financial and non-financial assets and liabilities. When the measurement of fair values cannot be determined
based on quoted prices in active markets, fair value is measured using valuation techniques and models. The
inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree
of judgment is required in establishing fair values. Changes in assumptions about the inputs to these models
could affect the reported fair value of the Company’s financial and non-financial assets and liabilities.
- 73 -
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
Tangible and intangible assets acquired through business combinations are initially recorded at their fair values
based on assumptions of management. These assumptions include estimating the cost of tangible assets and
future expected cash flows arising from intangible assets identified. Financial instruments acquired are
determined based on the amortized costs at the acquisition date that approximate their carrying values.
To the extent that these estimates differ from those realized, the measured asset or liability, net income, and/or
comprehensive income will be affected in future periods. Information about the valuation techniques and inputs
used in determining the fair value of various assets and liabilities are disclosed in Notes 7, 12, 15, 16 and 20.
Taxes
The calculation of current and deferred income taxes requires the Company to make estimates and assumptions
and to exercise judgment regarding the carrying values of assets and liabilities that are subject to accounting
estimates inherent in those balances, the interpretation of income tax legislation across various jurisdictions,
expectations about future operating results, the timing of reversal of temporary differences and possible audits of
income tax filings by the tax authorities.
Changes or differences in underlying estimates or assumptions may result in changes to the current or deferred
income tax balances on the consolidated statements of financial position, a charge or credit to income tax
expense in the consolidated statements of operations and comprehensive income and may result in cash
payments or receipts.
All income, capital and commodity tax filings are subject to audits and reassessments. Changes in interpretations
or judgments may result in a change in the Company's income, capital or commodity tax provisions in the future.
The amount of such a change cannot be reasonably estimated.
Useful lives of property, plant and equipment and intangible assets with finite useful lives
The Company employs significant estimates to determine the estimated useful lives of property, plant and
equipment and intangible assets with finite useful lives, including assets arising from business combinations,
considering industry trends such as technological advancements, past experience, expected use and review of
asset lives.
Components of an item of property, plant and equipment may have different useful lives. The Company makes
estimates when determining depreciation methods, depreciation rates and asset useful lives, which requires
taking into account industry trends and company-specific factors. The Company reviews these decisions at least
once each year or when circumstances change. The Company will change depreciation methods, depreciation
rates or asset useful lives if they are different from previous estimates.
4.
Accounts Receivable
As at December 31,
Trade
Other miscellaneous receivables
Allowance for expected credit losses
2020
$
96,647
1,407
(103)
97,951
2019
$
86,251
4,314
(1,171)
89,394
The Company maintains an allowance for expected credit losses that represents its estimate of uncollectible
amounts based on the Company’s historical credit loss experience, adjusted for forward-looking factors specific
to the customers and the economic environment.
For the year ended December 31, 2020, the Company has written off $1,796 (2019 - $nil) of receivables from a
strategic partner customer whose retail business was impacted by COVID-19.
- 74 -
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
The aging of receivables is as follows:
As at December 31,
Current
Aged 1-30 days past due
Aged 31-60 days past due
Aged > 60 days past due
Allowance for expected credit losses
5.
Inventories
As at December 31,
Raw material and packaging
Bulk product and work in process
Packaged finished goods
Inventory provision
Inventories expensed during the year
2020
$
81,097
14,406
913
1,638
(103)
97,951
2020
$
52,565
18,269
34,605
(2,794)
102,645
240,156
2019
$
74,233
12,842
1,749
1,741
(1,171)
89,394
2019
$
31,544
12,202
41,165
(2,963)
81,948
199,594
An inventory provision is estimated by management based on historical sales, inventory aging and expiry, point
of sales information and expected future sales. Provisions and subsequent changes to the provision are recorded
in cost of sales in the consolidated statements of operations and comprehensive income.
For the year ended December 31, 2020, inventory write-downs of $1,801 were expensed through cost of sales
(2019 - $1,797).
- 75 -
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
6.
Property, plant and equipment
Cost
At January 1, 2019
Impact of new accounting standards
adopted January 1, 2019
Additions
Disposals
At December 31, 2019
Additions
Disposals
At December 31, 2020
Accumulated Depreciation
At January 1, 2019
Depreciation for the year
Disposals
At December 31, 2019
Depreciation for the year
Disposals
At December 31, 2020
Net book value
At December 31, 2020
At December 31, 2019
Land
$
Buildings
$
Machinery
and
equipment
$
Right-of-use
Assets
(Note 14)
$
Other
$
Total
$
2,497
23,803
39,901
-
6,256
72,457
-
-
-
2,497
-
-
2,497
-
-
-
-
-
-
-
-
623
(6)
24,420
1,333
(5)
25,748
5,596
815
(1)
6,410
869
(2)
7,277
-
4,987
(47)
44,841
8,959
(132)
53,668
14,014
3,229
(42)
17,201
3,913
(101)
21,013
7,434
5,491
-
12,925
15,939
(30)
28,834
-
2,006
-
2,006
2,588
(24)
4,570
-
3,411
(40)
9,627
959
(6)
10,580
2,613
1,213
(39)
3,787
890
(6)
4,671
7,434
14,512
(93)
94,310
27,190
(173)
121,327
22,223
7,263
(82)
29,404
8,260
(133)
37,531
2,497
2,497
18,471
18,010
32,655
27,640
24,264
10,919
5,909
5,840
83,796
64,906
Other is comprised of furniture and fixtures, computer equipment, and leasehold improvements.
7.
Goodwill
Goodwill acquired through business combinations is allocated to the Jamieson Brands operating segment for the
purpose of impairment testing, which is expected to benefit from the synergies of the business combination in
which the goodwill arose.
The estimated recoverable amount was determined by the Company as the fair value less costs of disposal of the
Jamieson Brands operating segment by using the capitalized adjusted EBITDA approach, based on a multiple
range of 13.5x - 15.5x (2019 - 11.5x) whereby the Company referenced comparable companies in determining
adjusted EBITDA multiples. Comparable companies were determined by reference to size and operation in
similar industries.
The impairment analysis is not sensitive to reasonable possible changes to the multiple.
There have been no impairment losses recognized against goodwill for the years ended December 31, 2020 and
2019.
- 76 -
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
8.
Intangible assets
Cost
At January 1, 2019
Additions
At December 31, 2019
Additions
At December 31, 2020
Accumulated amortization
At January 1, 2019
Amortization charge for the year
At December 31, 2019
Amortization charge for the year
At December 31, 2020
Net book value
At December 31, 2020
At December 31, 2019
Customer
relationships
$
Trademarks
$
Registrations,
licenses, and
other
$
101,585
-
101,585
-
101,585
16,091
3,441
19,532
3,419
22,951
115,124
-
115,124
33
115,157
-
-
-
-
-
874
471
1,345
1,885
3,230
121
212
333
530
863
Total
$
217,583
471
218,054
1,918
219,972
16,212
3,653
19,865
3,949
23,814
78,634
82,053
115,157
115,124
2,367
1,012
196,158
198,189
The remaining amortization period of customer relationships is 21-23 years. Amortization is recorded in cost of
sales on the consolidated statements of operations and comprehensive income.
The carrying amount of indefinite-life intangible assets is comprised of trademarks, of which $68,000 is
allocated to the domestic and international sales CGU and $47,157 is allocated to the specialty brands sales CGU
(comprised of previous acquisitions of Body Plus Nutritional Products Inc., Sonoma Nutraceuticals Inc., and
Lorna Vanderhaeghe Health Solutions Inc.). The estimated recoverable amount was determined by the Company
as the fair value less costs of disposal of the CGU by using the capitalized adjusted EBITDA approach, based on a
multiple range of 13.5x - 15.5x (2019 - 11.5x), whereby the Company referenced comparable companies in
determining adjusted EBITDA multiples. Comparable companies were determined by reference to size and
operation in similar industries.
Other indefinite-life intangible assets are comprised of patents, registrations, definite-life trademarks, and
business development costs.
No impairment losses were recognized against intangible assets during the years ended December 31, 2020 and
2019.
9.
Accounts payable and accrued liabilities
As at December 31,
Trade payables and accrued liabilities
Trade and promotional accruals
Refund liabilities
Salaries, commissions and bonuses
Termination benefits
Accrued interest - current
- 77 -
2020
$
38,618
19,916
3,950
10,350
104
146
73,084
2019
$
33,126
22,917
4,458
6,929
270
95
67,795
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
10. Related party transactions
Balances and transactions between the Company and its subsidiaries, which are related parties of the Company,
have been eliminated on consolidation and are not disclosed in this note.
Share-based compensation
The Company offers its employees a share-based compensation plan. Please refer to Note 16 for details of the
share-based compensation awards.
Compensation of key management personnel of the Company
Key management personnel are those persons having authority and responsibility for planning, directing, and
controlling the activities of the Company and/or its subsidiaries, directly or indirectly, including any non-executive
director of the Company.
Remuneration of key management personnel including C-suite executives of the Company is comprised of the
following expenses:
For the years ended December 31,
Short-term employee benefits
Share-based compensation
Total remuneration
2020
$
5,187
2,947
8,134
2019
$
4,604
3,179
7,783
The amounts disclosed in the table are the amounts recognized as an expense during the reporting period related
to key management personnel.
11.
Long-term debt
On September 27, 2019, JLL amended and restated its credit agreement (the “Amended Credit Agreement”) to
add Jamieson Health Products USA Ltd. (collectively with JLL the “Borrowers”) as a co-borrower and to provide
a secured revolving facility of $275,000 (including a $10,000 swingline facility) with the option to increase the
revolving facility up to $475,000 (collectively, the “Credit Facilities”). The Credit Facilities mature on September
27, 2024 with the outstanding principal repayable in full on this date.
The Company concluded that the amendments to the Initial Credit Agreement (as defined below) represent a
substantial modification of the terms with its lenders. Accordingly, extinguishment accounting was applied,
resulting in the derecognition of the previous unamortized deferred financing fee of $1,949. Financing costs of
$1,442 were incurred as part of the issuance of the Credit Facilities which have been expensed and recorded as
other expenses in Note 18.
Prior to the Amended Credit Agreement, JLL was party to the credit agreement dated January 31, 2017 (the
“Initial Credit Agreement”) with a syndicate of lenders. The Initial Credit Agreement provided a secured term
credit facility of $195,000 (with the option to increase the facility up to $255,000) and a secured revolving credit
facility of $75,000 (including a $10,000 swingline facility). Financing costs of $4,265 and $1,536 were incurred
as part of the issuance of the term credit facility and revolving credit facility, respectively.
For the year ended December 31, 2020, JLL made drawings of $60,292 (2019 - $13,897) and debt repayments of
$76,003 (2019 - $35,064) applied against the Credit Facilities.
- 78 -
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
For the year ended December 31, 2019, JLL made debt repayments of $4,875 applied against the initial term
credit facility.
For the year ended December 31, 2019, JLL made drawings of $33,327 and debt repayments of $11,454 applied
against the initial revolving credit facility.
For the year ended December 31, 2020, the weighted average interest rate on the Credit Facilities was 3.1%
(2019 - 4.4%).
On June 5, 2020, the Company entered into an interest rate swap with an effective date of October 1, 2020 to
September 27, 2024 with a notional principal of $140,000 and an annual amortization of $10,000 on the first
business day of each year to fix the interest rate on a portion of its outstanding Credit Facilities. The Company
has assessed that there is no ineffectiveness in the hedge of its interest rate exposure. As an effective hedge,
unrealized gains or losses on the interest rate swap are recognized in other comprehensive income.
The Credit Facilities are secured by security agreements and first charges over the assets including property,
plant and equipment and intellectual property of the Borrowers and its certain other subsidiaries of JLL, subject
to permitted liens.
Under the terms of the Credit Facilities, the Borrowers are subject to restrictive covenants and must maintain an
interest coverage ratio of not less than 3.00:1.00 and a leverage ratio not greater than 4.00:1.00.
The Borrowers are in compliance with all covenants as of December 31, 2020 and 2019.
12.
Post-retirement benefits
The Company maintains an unfunded post-retirement benefit plan that provides health and vision care coverage
to retirees at age 65 with 15 or more years of service. The Company uses actuarial reports prepared by
independent actuaries to measure its accrued obligation for funding and accounting purposes.
Changes in the present value of the post-retirement benefit plan are as follows:
As at December 31,
Balance, beginning of the year
Benefits paid
Actuarial loss/(gain)
Interest costs
Current service costs
Balance, end of the year
2020
$
3,923
(28)
(785)
127
301
3,538
2019
$
2,923
(20)
671
117
232
3,923
The following significant economic assumptions were employed to determine the accrued benefit obligation:
As at December 31,
Benefit obligations
Discount rate - expense for the year
Discount rate - year-end obligation
Drug trend rate
2020
%
3.25
2.75
4.50
2019
%
4.00
3.25
4.50 - 5.00
- 79 -
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
Impact of an increase/decrease in the health care trend of 1%:
As at December 31,
1% Increase
1% Decrease
1% Increase
1% Decrease
1% Increase
1% Decrease
Accrued benefit obligation
Service cost
Interest cost
2020
2019
1,064
1,060
(775)
(787)
104
100
(72)
(71)
29
35
(21)
(26)
The sensitivity analyses above have been determined based on a method that extrapolates the impact on the
post-retirement benefit obligation as a result of reasonable changes in key assumptions occurring at the end of
the reporting period. The sensitivity analyses are based on a change in a significant assumption, keeping all other
assumptions constant. The sensitivity analysis may not be representative of an actual change in the post-
retirement benefit obligation as it is unlikely that changes in assumptions would occur in isolation of one
another. The same method has been applied for the sensitivity analysis as used to calculate the recognized post-
retirement liability.
The following payments are expected contributions to the post-retirement benefit plan in future years:
As at December 31,
Within one year
Between 2 and 5 years
Between 5 and 10 years
Total expected payments
13.
Income taxes
2020
$
21
136
354
511
The major components of income tax expense for the years ended December 31 are as follows:
Years ended December 31,
Current income tax expense
Deferred income tax expense
Provision for income taxes
Reconciliation of effective tax rate
2020
$
13,508
1,942
15,450
2019
$
28
165
477
670
2019
$
9,540
1,107
10,647
Income tax expense varies from the amount that would be computed by applying the combined federal and
provincial statutory income tax rates as a result of the following:
As at December 31,
Income tax expense at combined statutory rate of 25.2% (2019 -
25.4%)
Non-deductible expenses
Share-based compensation
Other and deductible temporary differences not benefited
2020
$
14,380
91
1,074
(95)
15,450
2019
$
10,745
113
985
(1,196)
10,647
- 80 -
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
Income tax recognized in other comprehensive income
As at December 31,
Derivative instruments
Post-retirement benefit plan
Deferred income tax assets and liabilities
2020
$
1,756
(198)
1,558
2019
$
1,136
179
1,315
Deferred income tax assets and liabilities arise on the timing differences between accounting and tax treatment
of goodwill and intangible assets, property plant and equipment, post-retirement employee benefit obligations,
deferred financing fees, and non-capital losses carried forward.
Deferred income tax assets and liabilities are comprised of the following:
As at December 31,
Non-capital losses carried forward
Deferred financing fees
Post retirement
Property, plant and equipment
Goodwill and intangible assets
Other
Total deferred income tax liabilities
Classified in the consolidated financial statements as:
Deferred income tax assets
Deferred income tax liabilities
Net deferred income tax liabilities
2020
$
1,923
1,179
896
(9,270)
(46,316)
2,370
(49,218)
2,261
(51,479)
(49,218)
2019
$
900
1,645
995
(7,572)
(47,181)
2,378
(48,835)
2,272
(51,107)
(48,835)
The Company has Canadian and foreign based non-capital loss carry forwards as at December 31, 2020 of $7,382
(2019 - $3,414) on a pre-tax basis. The Canadian non-capital loss expires in 2038-2040. The foreign non-capital
loss expires from 2023 to indefinitely.
14.
Leases
The Company has lease contracts for various items of property, plant, vehicles and other equipment used in its
operations. Leases of property and plant generally have lease terms between 3 and 10 years, while motor
vehicles and other equipment generally have lease terms between 2 and 5 years.
The Company also has certain leases with lease terms of 12 months or less. The Company applied the ‘short-
term lease’ recognition exemptions for these leases. Expense relating to short-term leases for the year ended
December 31, 2020 is $nil (2019 - $587).
Set out below are the carrying amounts of right-of-use assets and lease liabilities recognized and the movements
during the period:
- 81 -
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
As at January 1, 2019
Additions
Depreciation Expense
Interest Expense
Prepaid Adjustment
Payments
As at December 31, 2019
Additions
Disposals
Depreciation Expense
Interest Expense
Prepaid Adjustment
Payments
As at December 31, 2020
Property and
Plant
$
7,157
4,673
(1,812)
-
-
-
10,018
15,939
(6)
(2,300)
-
-
-
23,651
Right-of-use assets
Vehicles
$
262
24
(118)
-
-
-
168
-
-
(113)
-
-
-
55
Other
Equipment
$
15
794
(76)
-
-
-
733
-
-
(175)
-
-
-
558
Total
$
7,434
5,491
(2,006)
-
-
-
10,919
15,939
(6)
(2,588)
-
-
-
24,264
Lease
liabilities
$
7,799
5,471
-
435
(25)
(2,324)
11,356
15,939
(7)
-
686
42
(3,047)
24,969
The following table shows the maturity profile of the Company’s financial liabilities based on contractual
undiscounted payments as at December 31, 2020:
As at December 31,
Within one year
After one year but not more than five years
More than five years
2020
$
4,005
12,210
13,571
29,786
The future cash outflows relating to leases that have not yet commenced are disclosed in Note 21.
15.
Share capital and redeemable preferred shares
As at January 1, 2020
Exercise of stock options
Employee stock purchase plan
As at December 31, 2020
As at January 1, 2019
Exercise of stock options
Employee stock purchase plan
As at December 31, 2019
Common Shares
#
38,989,942
867,301
15,669
39,872,912
Common Shares
#
38,207,114
758,333
24,495
38,989,942
2019
$
2,354
5,881
5,711
13,946
$
243,224
12,122
449
255,795
$
239,404
3,357
463
243,224
As at December 31, 2020 and 2019, the authorized share capital consisted of:
a) Unlimited number of Common Shares with no par value. The holders of Common Shares are entitled to
receive dividends as declared from time to time, and are entitled to one vote per share at meetings of the
Company.
b) Unlimited number of Preference Shares, issuable in series.
- 82 -
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
16.
Share-based compensation
Outstanding options held to purchase Common Shares have the following expiry dates and exercise prices:
2020 Outstanding Options
2020 Exercisable Options
Range of Exercise
Prices
$0.00-$10.00
$10.01-$20.00
$20.01-$30.00
Number of
Options
Outstanding
276,574
720,518
1,549,461
Weighted
Average
Remaining
Contractual Life
(Years)
Weighted
Average
Exercise
Price/Share
Number of
Exercisable
Options
Weighted
Average
Exercise
Price/Share
4.86
6.38
5.63
3.67
16.02
23.43
276,574
593,018
405,361
3.67
16.08
22.79
The following is a summary of the Company’s share option plan activity for the years ended December 31:
2020
2019
Number of
Shares
Weighted
Average
Exercise
Price/Share
Number of
Shares
Weighted
Average Exercise
Price/Share
Outstanding, beginning of year
Granted
Exercised
Forfeited
Outstanding, end of year
Exercisable, end of year
2,919,776
515,862
(858,301)
(30,784)
2,546,553
1,274,953
15.79
25.75
11.40
22.75
19.19
15.52
2,958,875
756,230
(749,333)
(45,996)
2,919,776
1,605,565
The following is a summary of the Company’s PSU and RSU activity for the year ended December 31:
Outstanding beginning of year
Granted
Exercised
Outstanding end of year
Exercisable, end of year
2020
PSUs
187,903
68,991
-
256,894
-
RSUs
18,000
-
(9,000)
9,000
-
2019
PSUs
95,706
92,197
-
187,903
-
11.10
20.00
6.74
15.43
15.79
11.85
RSUs
27,000
-
(9,000)
18,000
-
The inputs used in measuring the fair value of equity-based compensation granted during the years ended
December 31 are shown in the table below.
- 83 -
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
2020
2019
Type of compensation
Weighted average share price at the measurement date
Weighted average fair value at the grant date
Expected volatility (i)
Risk-free interest rate (ii)
Expected life (in years) (iii)
Expected dividend yield
Pricing Model
$
$
Options
25.75
5.25
27.0%
1.6%
4.0-5.5
1.6%
Black-Scholes
$
$
PSUs
25.75
20.00
22%-32%
2.0%
3.0
1.6%
Monte Carlo
$
$
Options
20.00
4.03
27%-33%
1.4%-2.0%
4.0-5.5
1.6%-2.1%
Black-Scholes
$
$
PSUs
24.67
16.25
25%-30%
1.7%
3.0
1.9%
Monte Carlo
(i) Estimated by considering comparable industry share price volatility. The expected volatility reflects the assumption that the historical volatility
over a period similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome.
(ii) Based on Government of Canada Bonds.
(iii) Based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur.
The Company’s share-based compensation expense for the year ended December 31, 2020 is $4,925 (2019 -
$4,343), of which $4,574 (2019 - $3,885) is classified as contributed surplus in the Company’s consolidated
financial statements and $351 (2019 - $458) is related to employment taxes paid on exercise of options.
17.
Employee benefits expense
The Company recognized employee benefit expenses included in cost of sales and selling, general and
administrative expenses on the consolidated statements of operations and other comprehensive income as
follows:
For the year ended December 31,
Salaries, wages and bonus
Other employee benefits
Post-retirement benefits (Note 12)
2020
$
67,310
13,602
428
81,340
2019
$
63,117
12,721
349
76,187
Additionally, the Company recognized termination benefits for the year ended December 31, 2020 of $350 (2019
- $480) related to reorganization. The costs related to both years are mainly comprised of severance costs and
salary continuances.
18. Other expenses
As at December 31,
Derecognition of deferred financing fees (Note 11)
Credit facility financing costs (Note 11)
Other
19.
Interest expense and other financing costs
As at December 31,
Interest on debt and borrowings
Interest on lease liabilities (Note 14)
Amortization of deferred financing fees (Note 11)
- 84 -
2020
$
-
-
22
22
2020
$
5,356
686
-
6,042
2019
$
1,949
1,442
(22)
3,369
2019
$
7,860
435
1,077
9,372
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
20. Financial instruments and risk management activities
Financial instruments
The Company’s financial assets and liabilities have been classified in Note 2.
Fair value measurement
Foreign exchange forward contracts measured at FVOCI are designated as hedging instruments in cash flow
hedges for forecast purchases and sales in U.S. dollars and have been classified as Level 2 in the fair value
hierarchy. Interest rate swaps measured at FVOCI are designated as hedging instruments in cash flow hedges
and have been classified as Level 2 in the fair value hierarchy. Derivatives not designated in a formal hedging
relationship are classified as FVTPL and classified as Level 2 in the fair value hierarchy. Net gains and losses on
financial instruments held for trading consist of realized and unrealized gains and losses on derivatives that
were de-designated or were otherwise not in a formal hedging relationship.
The Company is holding the following foreign exchange forward contracts:
Less than 1
month
1 to 3
months
3 to 6
months
6 to 9
months
9 to 12
months
Beyond 12
months
Total
Maturity
As at December 31, 2020
Notional Amount ($USD)
Average forward rate (USD/CAD)
As at December 31, 2019
Notional Amount ($USD)
Average forward rate (USD/CAD)
5,000
1.35
4,000
1.33
10,000
1.35
15,000
1.35
12,000
1.34
15,000
1.35
60,000
1.32
117,000
-
8,000
1.33
12,000
1.34
12,000
1.32
12,000
1.32
-
-
48,000
-
The fair values and notional amounts of derivative financial instruments shown below are as at December 31:
Foreign currency forward contract designated as
hedging instruments (forecast purchases)
Interest rate swaps designated as hedging
instruments
2020
2019
Notional Notional
Amount
Amount
$USD
$CAD
Fair Value
Asset Liability
$
$
Notional Notional
Amount
Amount
$USD
$CAD
Fair Value
Asset
$
Liability
$
-
117,000
140,000
140,000
-
117,000
-
-
-
(6,811)
(1,420)
(8,231)
-
-
-
48,000
-
48,000
-
-
-
(1,292)
-
(1,292)
The terms of the foreign currency forward contracts and interest rate swaps match the terms of the expected
highly probable forecast transactions. As a result, there is no hedge ineffectiveness to be recognized in the
consolidated statements of operations and comprehensive income.
Potential sources of hedge ineffectiveness are:
• Differences in the timing of the cash flows of the hedged items and the hedging instruments;
• The counterparty’s credit risk differently impacting the fair value movements of the hedging instruments and
hedged items; and
• Changes to the forecasted amount of cash flows of hedged items and hedging instruments.
The carrying values of financial assets and liabilities measured at amortized cost (excluding long-term debt)
approximate their fair values due to their short-term nature.
The carrying value of long-term debt as at December 31, 2020 and December 31, 2019 approximates their fair
value. The fair value of the Company’s long-term debt was estimated based on discounted future cash flows
using current rates for similar financial instruments subject to similar risks and maturities. The fair value of
long-term debt is considered a Level 2 fair value measurement.
There were no transfers between levels during 2020 and 2019.
- 85 -
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
Financial instrument risk management objectives and policies
The Company is exposed to credit risk, market risk and liquidity risk. The Company’s senior management
oversees the management of these risks. The Company’s financial instruments and policies for managing these
risks are detailed below.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations, resulting in financial
loss to the Company. The Company is exposed to credit risk from its customers (primarily related to trade
accounts receivable) in the normal course of business. The Company has adopted a policy of only dealing with
creditworthy counterparties. To mitigate this risk, the Company carries out regular credit evaluations and
purchases credit insurance for international customers, where appropriate, as a means of mitigating the risk of
financial loss from defaults.
The Company is also exposed to counterparty credit risk inherent in its financing activities, trade receivable
insurance and foreign currency derivatives. The Company has assessed these risks as minimal.
Market risk
Foreign exchange risk
Foreign exchange risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign
exchange rates relates primarily from transactions in U.S. dollars such as a portion of trade accounts payable,
trade accounts receivable and cash.
The Company uses foreign exchange forward contracts to manage foreign exchange transaction exposure. As of
December 31, 2020, $156,124 (2019 - $63,619) of anticipated foreign currency denominated sales and purchases
have been hedged with underlying foreign exchange forward contracts settling at various dates in the 2 years
proceeding the consolidated statements of financial position date.
The following table demonstrates the sensitivity to a reasonably possible change in the U.S. dollar exchange rate,
with all other variables held constant, of the Company’s net income before income taxes (due to changes in the
fair value of monetary assets and liabilities including non-designated foreign currency derivatives) and the
Company’s pre-tax OCI (due to changes in the fair value of foreign exchange forward contracts designated as
cash flow hedges).
As at December 31,
2020
2019
Change in U.S.$
FX rate
%
Effect on income
(loss) before tax
$
Effect on pre-tax
OCI
$
5
5
881
650
5,850
2,400
The Company’s exposure to foreign currency changes for all other currencies is not material.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in market interest rates. The Company’s accounts receivable and accounts payable are non-
interest bearing. The Company’s exposure to the risk of changes in market interest rates arises from long-term
debt obligations with floating interest rates.
- 86 -
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
The Company manages its interest rate risk by entering into interest rate swaps, in which it agrees to exchange,
at specified intervals, the difference between fixed and variable rate interest amounts calculated by reference to
an agreed-upon notional principal amount.
With all other variables held constant, the sensitivity to a reasonably possible change in interest rates on floating
rate borrowings of the Company would have the following impact to net income before income taxes:
As at December 31,
2020
2019
Increase/decrease
in basis points
+/-
Effect on income (loss)
before tax
$
100
100
318
1,779
Changes in market interest rates cause the fair value of long-term debt with fixed interest rates to fluctuate but
do not affect net income, as the Company’s debt is carried at amortized cost and the carrying value does not
change as interest rates change.
Commodity price risk
The Company is exposed to price risk related to purchases of certain commodities used as raw materials. The
Company may use fixed price contracts with suppliers to mitigate commodity price risk. Concentration in any
one raw material is not significant to the Company.
Liquidity risk
Liquidity risk is the risk the Company will not be able to meet its financial obligations associated with financial
liabilities. The Company is exposed to this risk mainly in respect of its accounts payable and accrued liabilities,
various long-term debt agreements, obligations under its post-retirement benefits plan and lease commitments.
The Company manages its liquidity risk through continuous monitoring of its forecast and actual cash flows and
also through the management of its capital structure. The Company continually revises its available liquid
resources as compared to the timing of the payment of liabilities to manage its liquidity risk.
The contractual undiscounted principal cash flows payable in respect of financial liabilities as at the
consolidated statements of financial position date were as follows:
As at December 31,
Amounts payable in more than 12 months
Amounts payable in less than 12 months
Impact of COVID-19
2020
$
178,377
77,089
255,466
2019
$
180,284
70,149
250,433
Considering the outbreak of COVID-19 around the world, conditions may come into existence that influence the
Company’s operations. Since becoming aware of the outbreak in early January 2020, the Company has secured
additional, alternate sources of raw materials to ensure continuity of supply and implemented safety measures
across the organization to ensure that employees and business partners are protected. Consumer response to
COVID-19 has resulted in the acceleration of demand for both immunity and general health supplements.
Higher demand includes the impact of temporary non-essential store closures within the supplement only
portion of the health food channel during the year while our products remained widely available within essential
food, drug, mass and e-commerce channels.
- 87 -
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
Revenue and the distribution of our products may be impacted by an escalation of COVID-19 infections should it
lead to the closure of essential food, drug, mass and e-commerce channels. High demand and service
interruptions to transportation may affect the delivery of raw materials and ingredients as well as international
and domestic shipments of finished goods. Manufacturing closures have the potential to impact the Company’s
ability to produce finished goods and affect the availability of purchased finished goods. The duration and
impact of the COVID-19 outbreak is unknown and the Company’s ability to continue to adapt to the changing
environment may materially affect the business, results of operations or financial condition.
Capital
The Company’s objective is to maintain a cost-effective capital structure that supports its long-term growth
strategy, supports the business and maximizes shareholder value. The Company typically uses leverage in its
capital structure to reduce the cost of capital. The Company’s goal is to maintain its primary credit ratios and
leverage at levels that are designed to provide continued access to investment-grade credit pricing and terms.
The Company measures its credit profile using a number of metrics, some of which are non-IFRS measures,
primarily cash, less long-term debt and bank indebtedness (“net cash (debt)”) to earnings before interest,
income taxes, depreciation, amortization, restructuring and other related costs, and interest coverage.
Additionally, the Company maintains a cash flow reserve to service obligations as they come due.
In addition to senior debt, credit facilities, and equity, the Company uses leases as additional sources of
financing.
There have been no material changes to the Company’s risk management activities since inception of the
Company’s operations.
The Company is subject to capital requirements under the credit facility agreement, as described in Note 11. As
at December 31, 2020, the Company was in compliance with all financial covenants.
21.
Commitments and contingencies
Lease commitments
The Company has lease contracts that have not yet commenced as at December 31, 2020. The future lease
payments for these non-cancellable lease contracts are as follows:
As at December 31,
After one year but not more than five years
More than five years
2020
$
2,673
2,268
4,941
2019
$
1,882
3,059
4,941
Future lease payments exclude operating costs, taxes, and utilities. Prior year has been adjusted accordingly.
General contingencies
In addition, various claims and potential claims arising in the normal course of operation are pending against
JLL. It is the opinion of management that these claims or potential claims are without merit and the amount of
potential liability, if any, is not determinable. Management believes the final determination of these claims or
potential claims will not materially affect the financial position or results of the Company.
- 88 -
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
22.
Segment information
The Company has two reportable operating segments with all material operations carried out in Canada:
• The Jamieson Brands segment’s principal activity is the manufacturing, distribution and marketing of branded
natural health products including vitamins, minerals and supplements; and
• The Strategic Partners segment’s principal activity is providing contract manufacturing services to consumer
health companies and retailers worldwide.
The Company’s chief operating decision maker evaluates segment performance on the basis of earnings from
operations, as reported to internal management, on a periodic basis.
Inter-segment revenues and expenses are eliminated upon consolidation and relate mainly to sales from the
Strategic Partners segment to the Jamieson Brands segment.
For the year ended December 31, 2020
Revenue
Earnings from operations
Foreign exchange loss
Other expenses
Interest expense and other financing costs
Provision for income taxes
Net income
Revenue
Earnings from operations
Foreign exchange loss
Other expenses
Interest expense and other financing costs
Provision for income taxes
Net income
Jamieson Brands
$
316,423
61,767
Strategic
Partners
$
87,238
1,805
Total
$
403,661
63,572
460
22
6,042
15,450
41,598
Jamieson Brands
$
265,843
50,081
Strategic Partners
$
79,137
5,368
For the year ended December 31, 2019
Total
$
344,980
55,449
404
3,369
9,372
10,647
31,657
Share-based compensation is allocated to the Jamieson Brands operating segment.
Geographic information
For the years ended December 31, 2020 and 2019, no customer outside of Canada represented a significant
portion of total sales.
Information about major customers
The following table provides the proportion of revenue attributed to each significant customer:
For the years ended December 31,
Customer 1
Customer 2
Customer 3
2020
14.3%
12.4%
7.5%
34.2%
2019
9.7%
8.7%
13.9%
32.3%
- 89 -
Jamieson Wellness Inc.
Notes to the Consolidated Financial Statements
December 31, 2020 and 2019
The revenue concentration noted mirrors the consolidated nature of the retail grocery landscape in Canada.
Revenue from significant customers primarily affect the Jamieson Brands segment. It is management’s opinion
that the loss of any customer, significant or otherwise, would not impact the Company’s viability. No other sales
were made to any one customer that represented more than 10% of total sales.
23. Revenue from contracts with customers
The following table sets forth the disaggregation of the Company’s revenue from contracts with customers in the
Jamieson Brands operating segment:
For the years ended December 31,
Domestic sales
International sales
Total revenue from contracts with customers
2020
$
264,915
51,508
316,423
2019
$
231,478
34,365
265,843
Domestic sales include revenues generated from previous acquisitions of Body Plus Nutritional Products Inc. and
Lorna Vanderhaeghe Health Solutions Inc.
24.
Income per share
Basic income per share amounts are calculated by dividing the net income attributable to common shareholders
of the Company less dividends declared and paid to preferred shareholders by the weighted average number of
shares outstanding during the year.
Diluted income per share amounts are calculated by dividing the net income attributable to common
shareholders of the Company by the weighted average number of shares outstanding during the year, adjusted
for the effects of potentially dilutive preferred shares, share options, PSUs, and RSUs.
The following table sets forth the calculation of basic and diluted income per share (“EPS”):
Year ended December 31,
Basic
Continuing operations
Diluted
Continuing operations
Net income
available to
common
shareholders
2020
Weighted
average
number of
shares
41,598
39,539,955
41,598
41,160,341
EPS $
1.05
1.01
2019
Net income available
to common
shareholders
Weighted average
number of shares
31,657
38,535,274
31,657
39,614,909
EPS $
0.82
0.80
- 90 -
THIS REPORT DATED AT MARCH 30, 2021
1 ADELAIDE STREET EAST SUITE 2200, TORONTO, ONTARIO M5C 2V9