Financial Statements
For the Year Ended
December 31, 2022
TABLE OF CONTENTS | Q4 2022 | MAPLE LEAF FOODS INC.
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Consolidated Financial Statements
Independent Auditors' Report
Consolidated Balance Sheets
Consolidated Statements of Net (Loss) Earnings
Consolidated Statements of Other Comprehensive Income (Loss)
Consolidated Statements of Changes in Total Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
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The Company
Basis of Preparation
Significant Accounting Policies
Accounts Receivable
Inventories
Biological Assets
Property and Equipment
Right-of-Use Assets
Investments
Employee Benefits
Income Taxes
Goodwill
Intangible Assets
Provisions
Long-Term Debt
Lease Obligations
Other Current Liabilities
Share Capital
Financial Instruments and Risk Management
Interest Expense and Other Financing Costs
(Loss) Earnings Per Share
Share-Based Payment
Segmented Financial Information
Government Incentives
Composition of the Company
Related Party Transactions
Commitments and Contingencies
Business Combinations
1
INDEPENDENT AUDITORS' REPORT | 2022 | MAPLE LEAF FOODS INC.
Independent Auditors' Report
To the Shareholders of Maple Leaf Foods Inc.
Opinion
We have audited the consolidated financial statements of Maple Leaf Foods Inc. (the Entity), which comprise:
•
•
•
•
•
•
the consolidated balance sheets as at December 31, 2022 and December 31, 2021
the consolidated statements of net (loss) earnings for the years then ended
the consolidated statements of other comprehensive income (loss) for the years then ended
the consolidated statements of changes in total equity for the years then ended
the consolidated statements of cash flows for the years then ended
and notes to the consolidated financial statements, including a summary of significant accounting policies
(Hereinafter referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated balance sheet of the
Entity as at December 31, 2022 and December 31, 2021, and its consolidated financial performance and its consolidated cash flows for
the years then ended in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IASB).
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 Financial Statements” section of our auditor’s
report.
We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the 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
Evaluation of impairment of Goodwill and Indefinite life Intangible Assets
Description of the matter
We draw attention to Notes 2(d), 3(b), 3(k), 3(n), 12 and 13 to the financial statements. The Entity performs impairment testing annually
for goodwill and indefinite life intangible assets and, when circumstances indicate that there may be impairment. The Entity has
determined two CGU groups, Meat Protein and Plant Protein. The Entity has recorded goodwill and indefinite life intangible assets of
$477,353 thousand and $360,561 thousand. The Entity assesses impairment by comparing the recoverable amount of each of the
indefinite life intangible assets or CGU groups to its carrying value. The recoverable amount is the higher of its value in use or fair value
less costs to sell. The value in use is determined using a discounted cash flow model. The fair value less costs to sell is the amount
obtainable from the sale of an asset or CGU group in an arm’s length transaction between knowledgeable, willing parties, less costs of
disposals. The determination of each of these amounts is subject to estimation uncertainty. The Entity’s significant assumptions used to
determine the recoverable amount of CGU groups and each indefinite life intangible asset include:
•
•
•
•
future cash inflows and outflows;
terminal growth rates;
discount rates; and
royalty rates in respect of indefinite life intangible assets.
Why the matter is a key audit matter
We identified the evaluation of impairment of goodwill and indefinite life intangible assets as a key audit matter. This matter represented
a significant risk for the Plant Protein CGU group and an area of higher risk of misstatement for the Meat Protein CGU group given the
magnitude of goodwill and indefinite life intangible assets and the high degree of estimation uncertainty in assessing the assumptions
used to determine the recoverable amounts. Significant auditor judgment and the involvement of professionals with specialized skills
and knowledge was required to evaluate the evidence supporting the Entity’s significant assumptions due to the sensitivity of the
recoverable amounts to minor changes in certain significant assumptions.
2
INDEPENDENT AUDITORS' REPORT | 2022 | MAPLE LEAF FOODS INC.
Independent Auditors' Report
How the matter was addressed
The primary procedures we performed to address this key audit matter included the following:
For a selection of indefinite life intangible assets and all CGU groups:
• We evaluated the Entity’s historical future cash inflows and outflows in comparison to the actual results generated by the group of
CGUs or indefinite life intangible asset to assess the Entity’s ability to predict future cash inflows and outflows.
• We evaluated the appropriateness of the Entity’s future cash inflows and outflows by understanding the Entity’s long-term strategy,
taking into account historical actual results, conditions or events to assess adjustments or lack of adjustments, and changes in
macroeconomic factors affecting the group of CGUs or indefinite life intangible asset.
We involved valuation professionals with specialized skills and knowledge, who assisted in assessing the discount rates, terminal
growth rates and royalty rates used in the recoverable amounts. The procedures performed include the following:
• Assessing the Entity’s discount rates against discount rate ranges that were independently developed using publicly available
market and industry data, and consideration of trading metrics of comparable entities.
• Evaluated the terminal growth rates by considering the growth profile and overall macroeconomic conditions of the group of CGUs
or indefinite life intangible asset.
• Assessing the royalty rates against profitability metrics and independent industry benchmarks.
Other Information
Management is responsible for the other information. Other information comprises:
•
the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities Commissions.
Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing
so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit
and remain alert for indications that the other information appears to be materially misstated.
We obtained the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities
Commissions. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of
this other information, we are required to report that fact in the auditor’s report.
We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS as issued by
the IASB, and for such internal control as management determines is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Entity’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 Entity or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Entity‘s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the 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 the 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 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.
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Independent Auditors' Report
INDEPENDENT AUDITORS' REPORT | 2022 | MAPLE LEAF FOODS INC.
• 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 Entity'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 Entity'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 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 Entity to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the
financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• 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.
• Provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding
independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
• Obtain sufficient appropriate audit evidence regarding financial information of the entities or business activities within the group
Entity to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the
group audit. We remain solely responsible for our audit opinion.
• Determine, from the matters communicated with those charged with governance, those matters that were of most significance in
the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our
auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our auditor’s report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Chartered Professional Accountants, Licensed Public Accountants
The engagement partner on the audit resulting in this auditor’s report is Kristen Carscallen.
Toronto, Canada
March 8, 2023
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CONSOLIDATED BALANCE SHEETS | 2022 | MAPLE LEAF FOODS INC.
Notes
As at December 31,
2022
As at December 31,
2021
4
25
5
6
7
8
9
10
11
12
13
14
15
16
17
15
16
10
14
11
18
18
$
91,076
167,611
48,556
485,979
144,169
57,497
50,266
604
$ 1,045,758
2,303,424
159,199
23,712
12,531
14,357
42,541
477,353
360,561
$ 3,393,678
$ 4,439,436
$ 485,114
42,589
921
38,321
2,311
64,684
$ 633,940
1,709,493
144,569
64,280
3,799
1,841
220,926
$ 2,144,908
$ 2,778,848
$ 850,086
809,616
—
26,802
(25,916)
$ 1,660,588
$ 4,439,436
$ 162,031
167,082
33,294
409,677
138,209
1,830
24,988
—
$ 937,111
2,189,165
161,662
22,326
—
11,644
39,907
658,673
365,318
$ 3,448,695
$ 4,385,806
$ 526,189
842
5,176
31,375
23,853
81,265
$ 668,700
1,247,073
144,391
97,629
44,650
1,057
146,380
$ 1,681,180
$ 2,349,880
$ 847,016
1,212,244
5,371
(2,459)
(26,246)
$ 2,035,926
$ 4,385,806
Consolidated Balance Sheets
(In thousands of Canadian dollars)
ASSETS
Cash and cash equivalents
Accounts receivable
Notes receivable
Inventories
Biological assets
Income and other taxes recoverable
Prepaid expenses and other assets
Assets held for sale
Total current assets
Property and equipment
Right-of-use assets
Investments
Employee benefits
Other long-term assets
Deferred tax asset
Goodwill
Intangible assets
Total long-term assets
Total assets
LIABILITIES AND EQUITY
Accounts payable and accruals
Current portion of provisions
Current portion of long-term debt
Current portion of lease obligations
Income taxes payable
Other current liabilities
Total current liabilities
Long-term debt
Lease obligations
Employee benefits
Provisions
Other long-term liabilities
Deferred tax liability
Total long-term liabilities
Total liabilities
Shareholders’ equity
Share capital
Retained earnings
Contributed surplus
Accumulated other comprehensive income (loss)
Treasury stock
Total shareholders’ equity
Total liabilities and equity
Commitments and contingencies (Note 27)
See accompanying Notes to the Consolidated Financial Statements.
On behalf of the Board:
MICHAEL H. MCCAIN
WILLIAM E. AZIZ
5
Consolidated Statements of Net (Loss) Earnings
CONSOLIDATED STATEMENTS OF NET EARNINGS | 2022 | MAPLE LEAF FOODS INC.
Years ended December 31,
(In thousands of Canadian dollars, except share amounts)
Notes
2022
2021
Sales
Cost of goods sold
Gross profit
Selling, general and administrative expenses
(Loss) earnings before the following:
Restructuring and other related costs
Other expense
Impairment of goodwill
(Loss) earnings before interest and income taxes
Interest expense and other financing costs
(Loss) earnings before income taxes
Income tax expense
Net (loss) earnings
Earnings per share attributable to common shareholders:
Basic (loss) earnings per share
Diluted (loss) earnings per share
Weighted average number of shares (millions)
Basic
Diluted
See accompanying Notes to the Consolidated Financial Statements.
$ 4,739,063
$ 4,521,082
4,314,925
3,862,007
$ 424,138
$ 659,075
431,715
467,067
$
(7,577)
$ 192,008
30,083
14,356
190,911
4,910
14,522
—
$ (242,927)
$ 172,576
56,041
22,870
$ (298,968)
$ 149,706
12,925
46,883
$ (311,893)
$ 102,823
$
$
(2.52)
(2.52)
$
$
0.83
0.82
123.6
123.6
123.5
124.7
14
12
20
11
21
21
6
CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME (LOSS) | 2022 | MAPLE LEAF FOODS INC.
Consolidated Statements of Other Comprehensive
Income (Loss)
Years ended December 31,
(In thousands of Canadian dollars)
Net (loss) earnings
Other comprehensive income
Notes
2022
2021
$ (311,893)
$ 102,823
Actuarial gain (loss) that will not be reclassified to profit or loss
(Net of tax of $14.6 million; 2021: $24.6 million)
$ 40,095
$ 73,502
Items that are or may be reclassified subsequently to profit or loss:
Change in fair value of investments
(Net of tax of $0.0 million; 2021: $1.0 million)
Change in accumulated foreign currency translation adjustment
9
$
—
$ 2,945
(Net of tax of $0.0 million; 2021: $0.0 million)
28,972
(3,181)
Change in foreign exchange on long-term debt designated as a net investment
hedge
(Net of tax of $3.8 million; 2021: $0.5 million)
Change in cash flow hedges
(Net of tax of $6.3 million; 2021: $3.2 million)
Total items that are or may be reclassified subsequently to profit or loss
Total other comprehensive income
Comprehensive (loss) income
See accompanying Notes to the Consolidated Financial Statements.
19
19
(20,037)
2,216
20,326
8,975
$ 29,261
$ 10,955
$ 69,356
$ 84,457
$ (242,537)
$ 187,280
7
Consolidated Statements of Changes in Total Equity
CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL EQUITY | 2022 | MAPLE LEAF FOODS INC.
(In thousands of Canadian dollars)
(Unaudited)
Notes
Share
capital
Retained
earnings
Contributed
surplus
Accumulated other comprehensive
income (loss)(i)
Foreign
currency
translation
adjustment
Unrealized
gains and
losses on
cash flow
hedges
Unrealized
gains on fair
value of
investments
Treasury
stock
Total
equity
Balance at December 31, 2021
Net loss
Other comprehensive income
(loss)(ii)
Dividends declared ($0.80 per
share)
Share-based compensation
expense
Modification of stock compensation
plan
Deferred taxes on share-based
compensation
Exercise of stock options
Shares re-purchased
Shares purchased by RSU trust
22
22
18
Settlement of share-based
compensation
Change in obligation for
repurchase of shares
$ 847,016 1,212,244
— (311,893)
5,371
—
2,037
—
(7,441)
—
2,945 (26,246) $ 2,035,926
(311,893)
—
—
—
40,095
—
8,935
20,326
—
—
69,356
—
(99,084)
—
—
—
—
—
—
—
7,433
(17,400)
—
(10,758)
—
—
—
—
20,121
(3,595)
(1,350)
(1,289)
(30,719)
—
(15,560)
13,037
(20,988)
27,021
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(99,084)
—
—
—
—
—
20,121
(3,595)
(1,350)
6,144
(58,877)
(7,500)
(7,500)
7,830
(7,730)
—
19,070
Balance at December 31, 2022
$ 850,086
809,616
—
10,972
12,885
2,945
(25,916) $1,660,588
(In thousands of Canadian dollars)
(Unaudited)
Notes
Share
capital
Retained
earnings
Contributed
surplus
Accumulated other comprehensive
income (loss)(i)
Foreign
currency
translation
adjustment
Unrealized
gains and
losses on
cash flow
hedges
Unrealized
gains on fair
value of
investments
Treasury
stock
Total
equity
Balance at December 31, 2020
Net earnings
Other comprehensive income
(loss)(ii)
Dividends declared ($0.72 per
share)
Share-based compensation
expense
Deferred taxes on share-based
compensation
Exercise of stock options
Settlement of share-based
compensation
Shares purchased by RSU trust
Change in obligation for
repurchase of shares
$ 838,969 1,124,973
102,823
—
5,866
—
3,002
—
(16,416)
—
—
—
(23,930) $1,932,464
— 102,823
22
—
73,502
—
(89,054)
—
—
16,414
—
—
(8,367)
—
—
—
—
—
—
—
—
21,960
975
(2,882)
(9,679)
—
(10,869)
(965)
8,975
2,945
—
84,457
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(89,054)
—
—
—
21,960
975
13,532
5,192
(7,508)
(4,487)
(7,508)
—
(19,236)
Balance at December 31, 2021
$ 847,016 1,212,244
5,371
2,037
(7,441)
2,945
(26,246) $2,035,926
(i)
(ii)
Items that are or may be subsequently reclassified to profit or loss.
Included in other comprehensive income (loss) is the change in actuarial gains and losses that will not be reclassified to profit or loss and has been
reclassified to retained earnings.
See accompanying Notes to the Consolidated Financial Statements.
8
Consolidated Statements of Cash Flows
CONSOLIDATED STATEMENTS OF CASH FLOW | 2022 | MAPLE LEAF FOODS INC.
Years ended December 31,
(In thousands of Canadian dollars)
CASH PROVIDED BY (USED IN):
Operating activities
Net (loss) earnings
Add (deduct) items not affecting cash:
Change in fair value of biological assets
Depreciation and amortization
Share-based compensation
Deferred income taxes
Income tax current
Interest expense and other financing costs
Loss on sale of long-term assets
Impairments
Change in fair value of non-designated derivatives
Change in net pension obligation
Net income taxes paid
Interest paid, net of capitalized interest
Change in provision for restructuring and other related costs
Change in derivatives margin
Other
Change in non-cash operating working capital
Cash provided by operating activities
Investing activities
Additions to long-term assets
Acquisition of business
Interest paid and capitalized
Proceeds from sale of long-term assets
Purchase of investments
Proceeds from legal settlement
Cash used in investing activities
Financing activities
Dividends paid
Net increase in long-term debt
Payment of lease obligation
Receipt of lease inducement
Exercise of stock options
Repurchase of shares
Payment of financing fees
Purchase of treasury stock
Cash provided by financing activities
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
See accompanying Notes to the Consolidated Financial Statements.
9
Notes
2022
2021
$ (311,893)
$ 102,823
6
22
11
11
20
14
19
28
20
7
15
16
15
15,108
233,937
19,387
57,406
(44,481)
56,041
1,966
212,363
(4,956)
8,764
(30,162)
(54,897)
995
2,012
(4,334)
6,474
200,855
21,960
(17,325)
64,208
22,870
3,819
744
10,211
6,745
(69,595)
(22,088)
(6)
9,938
2,057
(107,938)
(38,899)
$
49,318
$ 304,791
$ (355,734)
$ (580,349)
—
(22,217)
607
(600)
929
(41,928)
(20,344)
1,499
(3,184)
20,822
$ (377,015)
$ (623,484)
$
(99,084)
$
(89,054)
447,045
(33,892)
6,848
6,144
(58,877)
(3,942)
(7,500)
500,297
(36,843)
—
13,532
—
(528)
(7,508)
$ 256,742
$ 379,896
(70,955)
162,031
61,203
100,828
$
91,076
$ 162,031
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
Notes to the Consolidated Financial Statements
(Tabular amounts in thousands of Canadian dollars unless otherwise indicated)
Years ended December 31, 2022 and 2021
1. THE COMPANY
Maple Leaf Foods Inc. (“Maple Leaf Foods” or the "Company") is a carbon neutral(i) company with a vision to be the most sustainable
protein company on earth, responsibly producing food products under leading brands including Maple Leaf®, Maple Leaf Prime®,
Maple Leaf Natural Selections®, Schneiders®, Schneiders® Country Naturals®, Mina®, Greenfield Natural Meat Co.®, Lightlife® and
Field Roast™. The Company's portfolio includes prepared meats, ready-to-cook and ready-to-serve meals, snacks kits, value-added
fresh pork and poultry, and plant protein products. The address of the Company's registered office is 6985 Financial Dr., Mississauga,
Ontario, L5N 0A1, Canada. The Company's 2022 audited consolidated financial statements ("Consolidated Financial Statements") as at
and for the year ended December 31, 2022 include the accounts of the Company and its subsidiaries. The Company's results are
organized into two segments: the Meat Protein Group and the Plant Protein Group. The composition of the Company is further
described in Note 25.
(i)
See the Company's 2021 Sustainability Report that is available on the Maple Leaf Foods website at https://www.mapleleaffoods.com/sustainability-
report/.
2. BASIS OF PREPARATION
(a) Statement of Compliance
The Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as
issued by the International Accounting Standards Board (“IASB”) and using the accounting policies described herein.
The Consolidated Financial Statements were authorized for issue by the Board of Directors on March 8, 2023.
(b) Basis of Measurement
The Consolidated Financial Statements have been prepared on a going concern basis under the historical cost method except for
certain assets and liabilities which are measured at fair value. Liabilities associated with employee benefits are stated at actuarially
determined present values.
(c) Functional and Presentation Currency
The Consolidated Financial Statements are presented in Canadian dollars, which is the Company’s functional currency.
(d) Use of Estimates and Judgements
The preparation of the Consolidated Financial Statements in accordance with IFRS requires Management to make judgements,
estimates, and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, equity,
income, and expenses. Actual amounts may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the
period in which the estimates are revised and in any future periods affected.
Judgements included in the Consolidated Financial Statements are decisions made by Management, based on analysis of relevant
information available at the time the decision is made. Judgements relate to the application of accounting policies and decisions applied
to the measurement, recognition, and disclosure of financial information.
Information about areas of estimation uncertainty and critical judgements in applying accounting policies, that have the most significant
effects on the amounts recognized in the Consolidated Financial Statements, are included both below and in the statement notes
relating to items subject to significant estimation uncertainty and critical judgements.
Long-Lived Assets Valuation
The Company performs impairment testing annually for goodwill and indefinite life intangible assets. Goodwill, indefinite life intangibles,
other long-lived assets and definite life intangibles are also tested for impairment when circumstances indicate that there may be
impairment. Management judgement is involved in determining if there are circumstances indicating that testing for impairment is
required, and in identifying Cash Generating Units (“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.
The determination of the recoverable amount involves significant assumptions, including those with respect to future cash inflows and
outflows, discount rates, terminal growth rates, royalty rates with respect to indefinite life intangible assets, and asset lives. These
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 assets recognized in future periods.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
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 estimation is required in establishing fair values. To the extent that these estimates
differ from those realized, the measured asset or liability, net earnings, and/or comprehensive income will be affected in future periods.
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.
Information about the valuation techniques and inputs used in determining the fair value of various assets and liabilities are disclosed in
Notes 6, 9, 12, 13, 10, 19, 22 and 28.
Nature of Interests in Other Entities
Management applies significant judgement in assessing the nature of its interest in unconsolidated structured entities relating to its
accounts receivable securitization facilities. The Company does not hold any equity interest in the structured entities and based on the
terms of the agreements under which the entities are established, the Company does not receive the returns related to their operations
and is exposed to limited recourse with respect to losses. Information about the nature of interest in other entities is disclosed in Note
25.
Valuation of Inventories
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. In many cases,
product produced by the Company turns 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 net 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 earnings, and comprehensive income will be affected in
future periods.
Biological Assets
Biological assets are measured at each reporting date, at fair value less costs to sell, except when fair value cannot be reliably
measured. If fair value cannot be reliably measured, biological assets are measured at cost less depreciation and impairment losses.
Although a reliable measure of fair value may not be available at the point of initial recognition, it may subsequently become available.
In such circumstances, biological assets are measured at fair value less costs to sell from the point at which the reliable measure of fair
value becomes available. Gains and losses that arise on measuring biological assets at fair value less costs to sell are recognized in
the Consolidated Statements of Net (Loss) Earnings in the period in which they arise. Costs to sell include all costs that would be
necessary to sell the biological assets, including costs necessary to get the biological assets to market. Management uses estimates
over the future price per hog, foreign exchange rates, and estimated weight and cost of hogs at maturity in the determination of fair
value. To the extent that actual values differ from estimates, biological assets, net earnings and comprehensive income will be affected
in future periods.
Trade Merchandise Allowances and Other Trade Discounts
The Company provides for estimated payments to customers based on various trade programs and contracts that often include
payments that are contingent upon attainment of specified sales volumes. Significant estimates used to determine these liabilities
include: the projected level of sales volume for the relevant period, customer contracted rates for allowances, discounts, and rebates.
These arrangements are complex and affect a significant number of customers and products. Management has systems and processes
in place to estimate and value these obligations. To the extent that payments on trade discounts differ from estimates of the related
liability, accounts payable and accruals, net earnings, and comprehensive income will be affected in future periods.
Employee Benefit Plans
The cost of pensions and other post-retirement benefits earned by employees is actuarially determined using the projected unit credit
method prorated on service, and Management’s best estimate of salary escalation and mortality rates. Discount rates used in actuarial
calculations are based on long-term interest rates and can have a material effect on the amount of plan liabilities and expenses.
Management employs external experts to advise the Company when deciding upon the appropriate estimates to use in valuing
employee benefit plan obligations and expenses. The Company's plans invest in pooled funds which hold underlying equity, debt and
other securities that are not quoted in an active market. Management relies on external experts to value these pooled funds. To the
extent that these estimates differ from those realized, employee benefit plan assets and liabilities and comprehensive income will be
affected in future periods.
Income Taxes
Provisions for income taxes are based on domestic and international statutory income tax rates and the amount of income earned in the
jurisdictions in which the Company operates. Significant judgement is required in determining income tax provisions and the
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
recoverability of deferred tax assets. The calculation of current and deferred income tax balances requires Management to make
judgements regarding the carrying values of assets and liabilities that include estimates of future cash flows and earnings related to
such assets and liabilities, the interpretation of income tax legislation in the jurisdictions in which the Company operates, and the timing
of reversal of temporary differences. The Company establishes additional provisions for income taxes when, despite Management’s
opinion that the Company’s tax positions are fully supportable, there is sufficient complexity or uncertainty in the application of
legislation that certain tax positions may be reassessed by tax authorities. The Company adjusts these additional accruals in light of
changing facts and circumstances. To the extent that these adjustments differ from original estimates, deferred tax assets and liabilities,
net earnings, and comprehensive income will be affected in future periods.
Provisions
The Company evaluates all provisions at each reporting date. These provisions can be significant and are prepared using estimates of
the costs of future activities. In certain instances, Management may determine that these provisions are no longer required or that
certain provisions are insufficient as new events occur or as additional information is obtained. Provisions are separately identified and
disclosed in the Consolidated Financial Statements. Changes to these estimates may affect the value of provisions, net earnings, and
comprehensive income in future periods.
Share-Based Compensation
The Company uses estimates in the calculation of the liability and expenses for certain share-based incentive plans including, but not
limited to, estimates of forfeitures, share price volatility, future dividends, expected life of the award, and Company performance. These
estimates are based on previous experience and may change throughout the life of an incentive plan. Such changes could impact the
carrying value of contributed surplus, liabilities, net earnings, and comprehensive income in future periods.
Some of the Company’s share-based payment plans may be settled in either cash or equity instruments. Management uses judgement
in determining the appropriate accounting treatment for these plans, based on expectations and historical settlement decisions.
Changes to accounting treatment based on Management’s judgement may impact contributed surplus, liabilities, net earnings, and
comprehensive income in future periods.
Depreciation and Amortization
The Company’s property and equipment and definite life intangible assets are depreciated and amortized on a straight-line basis,
considering the estimated useful lives of the assets and residual values. Right-of-use ("ROU") assets are depreciated on a straight-line
basis, considering the shorter of the useful life of the underlying asset or the lease term. If it is reasonably certain at the commencement
of the lease arrangement that the Company will exercise its purchase option or otherwise obtain ownership of the underlying asset at
the end of the lease term, the ROU asset is depreciated over its useful life. Changes to these estimates may affect the carrying value of
these assets, net earnings, and comprehensive income in future periods.
Investments
The Company analyzes its private equity investment holdings for changes in fair value at each reporting period. The Company uses
significant judgement in reviewing internally and externally available financial information to determine if there are indicators that the fair
value of the holdings have changed. Changes to the estimated fair value may affect the value of investment asset, and comprehensive
income in future periods.
Leases
The Company applies significant judgement in assessing whether a contract is or contains a lease. Such judgements include the
determination of whether an asset or assets are specifically or implicitly identified in the contract, if the Company has the right to obtain
substantially all the economic benefits from use of the asset or assets and whether the Company has the right to direct the use of the
asset or assets. These judgements are made at the inception of a contract and may change if there are material changes to the
agreement.
Estimates are used to determine the incremental borrowing rate of a lease when the interest rate implicit to the lease is not readily
available. The Company's incremental borrowing rate is determined using a model which incorporates the Company's credit worthiness,
the nature and quality of the underlying asset, geographic environments and the duration of the lease. The inputs used in determining
the incremental borrowing rate are reviewed and updated quarterly. Changes to these estimates may affect the value of assets,
liabilities, and net earnings in future periods.
The Company also applies significant judgement in determining whether it is reasonably certain to exercise lease extension options or
purchase options in a contract by considering all relevant factors and circumstances that may create an economic incentive for the
Company to exercise the option considering such factors as past experience, the terms and conditions of the contract, and the
importance of the underlying assets to the Company’s operations.
Fair value of acquired intangible asset
The Company estimates the fair value of poultry quota acquired in a business combination using a discounted cash flow approach. The
discounted cash flow approach is a valuation technique that calculates the fair value of an intangible asset based on the present value
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
of future cash flows that the asset can be expected to generate in the future. This valuation involves subjectivity and estimation
uncertainty, including assumptions related to forecasted profitability, poultry production growth rates, and discount rate.
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all periods presented in these Consolidated Financial
Statements.
(a) Principles of Consolidation
These Consolidated Financial Statements include the accounts of the Company and its subsidiaries from the date that control
commences until the date that control ceases. Control exists when the Company is exposed to or has rights to variable returns from its
involvement with the entity and has the ability to affect those returns through its power over the entity.
All intercompany accounts and transactions have been eliminated on consolidation.
(b) Business Combinations and Goodwill
Business combinations are accounted for using the acquisition method at the acquisition date, which is the date that control is
transferred to the Company. In assessing control, the Company takes into consideration potential voting rights that are currently
exercisable.
Goodwill is measured as the excess of the sum of the fair value of the consideration transferred in a business combination, the amount
of any non-controlling interests in the acquiree, and the fair value of any previously held equity interest in the acquiree over the net of
the acquisition date fair value of the identifiable assets acquired and the liabilities assumed. If the excess is negative, a bargain
purchase gain is recognized immediately in earnings. Transaction costs, other than those associated with the issue of debt or equity,
are recognized in earnings as incurred.
Goodwill is not amortized and is tested for impairment annually in the fourth quarter and as required when circumstances indicate that
its carrying amount may not be recoverable. Goodwill is tested for impairment at the CGU group level by comparing the carrying
amount to its recoverable amount, consistent with the methodology outlined in Note 3 (k).
Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as
equity, then it is not re-measured, and settlement is accounted for in equity. Otherwise, subsequent changes in the fair value of the
contingent consideration are recognized in earnings.
(c) Fair Value Measurements
The Company measures certain financial and non-financial assets and liabilities at fair value at each balance sheet date. In addition,
fair value measurements are disclosed for certain financial and non-financial assets and liabilities.
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. In estimating the fair value of an asset or a liability, the Company takes into account the
characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or
liability at the measurement date. Fair value for measurement and disclosure purposes is determined on such a basis, except for share-
based payment transactions, and measurements that have some similarities to fair value but are not fair value, such as net realizable
value or value in use.
Assets and liabilities, for which fair value is measured or disclosed in the consolidated financial statements, are classified using a three-
level fair value hierarchy that reflects the significance and transparency of the inputs used in making the fair value measurements. Each
level is based on the following:
Level 1 - inputs are unadjusted quoted prices of identical assets or liabilities in active markets
Level 2 - inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or
indirectly
Level 3 - one or more significant inputs used in a valuation technique are unobservable in determining fair values of the asset
or liability
Determination of fair value and the resulting hierarchy requires the use of observable market data whenever available. The
classification of an asset or liability in the hierarchy is based upon the lowest level of input that is significant to the measurement of fair
value.
(d) Non-current Assets (or Disposal Groups) Held for Sale
The Company classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally
through a sale transaction rather than through continuing use. The criteria for held for sale classification is regarded as met when a sale
is highly probable, the asset or disposal group is available for immediate sale in its present condition, and Management is committed to
the sale, which is expected to be completed within one year from the date of classification. Non-current assets and disposal groups
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Non-current assets are
not depreciated once classified as held for sale.
(e) Translation of Foreign Currencies
The accounts of the Company are presented in Canadian dollars. Transactions in foreign currencies are translated at the actual rates of
exchange. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the Canadian dollar
at the exchange rate for that date. Foreign exchange differences arising on translation are recognized in net earnings. Non-monetary
assets and liabilities that are measured at historical cost are translated using the exchange rate at the date of the transaction.
The financial statements of foreign subsidiaries whose unit of measure is not the Canadian dollar are translated into Canadian dollars
using the exchange rate in effect at the period-end for assets and liabilities, and the average exchange rates for the period for revenue,
expenses, and cash flows. Foreign exchange differences arising on translation are recognized in accumulated other comprehensive
income (loss) in equity.
When a foreign operation is disposed of in its entirety or partially such that control, significant influence or joint control is lost, the
cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on
disposal. If the Company disposes of part of its interest in a subsidiary but retains control, then the relevant proportion of the cumulative
amount is reattributed to the non-controlling interest. When the Company disposes of only part of an associate or joint venture while
retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to net earnings.
Foreign exchange gains and losses arising from a receivable or payable to a foreign operation, the settlement of which is neither
planned nor likely to occur in the foreseeable future and which in substance is considered to form part of the net investment in the
foreign operations, are recognized in other comprehensive income (loss) in the cumulate foreign currency translation differences.
(f) Financial Instruments
The Company’s financial assets, upon initial recognition, are measured at fair value and are classified as Fair Value through Profit or
Loss (“FVTPL”), Fair Value through Other Comprehensive Income (“FVOCI”), or amortized cost. The classification is determined at
initial recognition and is dependent on the business model in which a financial asset is managed and the characteristics of the
contractual cash flows. Subsequent reclassification may only occur on the first day of the reporting period following a change to the
business model. The classification of the Company’s financial assets is disclosed in Note 19.
The Company’s financial liabilities, upon initial recognition, are measured at fair value and are classified as amortized cost or FVTPL. A
financial liability is classified as amortized cost at initial recognition unless it is classified as held-for-trading, is a derivative instrument or
is specifically designated as FVTPL. Financial liabilities classified as amortized cost are subsequently measured using the effective
interest method while financial liabilities at FVTPL are subsequently measured at fair value with changes in fair value recognized in the
Consolidated Statements of Net (Loss) Earnings in the period in which such changes arise.
The Company records a loss allowance of expected credit losses for financial assets that are measured at amortized cost. At each
reporting date, the Company measures the loss allowance at an amount equal to the lifetime expected credit losses if the credit risk on
its financial assets has increased significantly since initial recognition. If credit risk has not significantly increased since initial
recognition, the Company measures the loss allowance at an amount equal to the 12-month expected credit losses.
Transaction costs, other than those related to financial instruments classified as fair value through profit or loss, which are expensed as
incurred, are capitalized to the carrying amount of the instrument and amortized using the effective interest method.
(g) Hedge Accounting
The Company uses derivatives and other non-derivative financial instruments to manage its exposures to fluctuations in interest rates,
foreign exchange rates, and commodity prices.
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 least quarterly thereafter, whether or not the derivatives that are used in
hedging transactions are effective in offsetting the changes attributable to the hedged risks in the fair values or cash flows of the hedged
items. If a hedging 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 the Consolidated Statements of Net (Loss) Earnings.
When hedge accounting is permitted, the hedging relationship may be designated as a cash flow hedge, a fair value hedge, or a net
investment in foreign operation hedge. For most cash flow hedges, the change in fair value of the hedging instrument is recorded, to the
extent it is effective, in other comprehensive income (loss) until the hedged item affects net earnings. If the cash flow hedge is a
forecast transaction that results in the recognition of a non-financial asset or liability, the Company removes that amount from the cash
flow hedge reserve and includes it directly in the initial cost or other carrying amount of the asset or the liability. In a fair value hedge,
the change in fair value of the hedging derivative is offset in the Consolidated Statements of Net (Loss) Earnings by the change in fair
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
value of the hedged item relating to the hedged risk. For a net investment in a foreign operations hedge, foreign exchange gains and
losses on the designated financial instrument are recorded in accumulated other comprehensive income (loss) and are offset by the
translation adjustments on the underlying net assets of the foreign operations.
Hedge ineffectiveness is measured and recorded in current period earnings in the Consolidated Statements of Net (Loss) Earnings.
When either a fair value hedge or cash flow hedge is discontinued, any cumulative adjustment to either the hedged item or other
comprehensive income (loss) is recognized in net earnings, as the hedged item affects net earnings, or when the hedged item is
derecognized for a net investment in a foreign operations hedge. If a designated hedge is no longer effective, the associated derivative
instrument is subsequently carried at fair value through net earnings without any offset from the hedged item.
Derivatives that do not qualify for hedge accounting are carried at fair value on the Consolidated Balance Sheets, and subsequent
changes in their fair value are recorded in the Consolidated Statements of Net (Loss) Earnings.
(h) Cash and Cash Equivalents
Cash and cash equivalents are comprised of cash balances, demand deposits and investments with an original maturity at the date of
purchase of three months or less.
(i)
Inventories
Inventories are valued at the lower of cost and net realizable value, with cost being determined substantially on a first-in, first-out basis.
The cost of inventory includes direct product costs, direct labour, and an allocation of variable and fixed manufacturing overhead,
including depreciation. When circumstances that previously caused inventories to have a write-down below cost no longer exist, or
when there is clear evidence of an increase in the net realizable value, the amount of a write-down previously recorded is reversed
through cost of goods sold.
(j) Biological Assets
Biological assets consist of live hogs, poultry, and eggs. For the purposes of valuation, these assets are categorized as either parent
stock or commercial stock. Parent stock represents animals held and bred for the purpose of generating commercial stock and to
replace parent stock nearing the end of its productive cycle. Commercial stock is held for the purposes of further processing or eventual
sale, at which point it becomes inventory. The fair value of commercial stock is determined based on market prices of livestock of similar
age, breed, and genetic merit, less costs to sell the assets, including estimated costs necessary to transport the assets to market.
Where reliable market prices of parent stock are not available, they are valued at cost less accumulated depreciation and any
accumulated impairment losses. No active market exists for parent stock as they are rarely sold. Hog parent stock is depreciated on a
straight-line basis over two to three years after considering residual values, whereas poultry parent stock is depreciated on a straight-
line basis over six to eight months.
Biological assets are transferred into inventory at fair value less costs to sell at the point of delivery.
(k) Impairment or Disposal of Long-Lived Assets
The Company reviews long-lived assets or asset groups held and used, including property and equipment and intangible assets subject
to amortization, for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be
recoverable. Asset groups referred to as CGUs include an allocation of corporate assets and are reviewed at their lowest level for which
identifiable cash inflows are largely independent of cash inflows of other assets or groups of assets. The recoverable amount is the
greater of its value in use and its fair value less cost to sell.
Value in use is based on estimates of discounted future cash flows expected to be recovered from a CGU, CGU group or asset through
its use. Management develops its cash flow projections based on past performance and its expectations of future market and business
developments. Once calculated, the estimated future pre-tax 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.
Fair value less cost to sell is the amount obtainable from the sale of an asset, CGU or CGU group in an arm’s-length transaction
between knowledgeable, willing parties, less the costs of disposal. Costs of disposal are incremental costs directly attributable to the
disposal of an asset or CGU, excluding financing costs and income tax expense.
An impairment loss is recognized in the Consolidated Statements of Net (Loss) Earnings when the carrying amount of any asset, CGU,
or CGU group exceeds its estimated recoverable amount. Impairment losses recognized in respect of CGUs or CGU group are
allocated, first to reduce the carrying amount of any goodwill allocated to the CGU or CGU group, and then to reduce the net carrying
amount of the other assets in the CGU or CGU group on a pro rata basis.
Impairment losses related to long-lived assets recognized in prior periods are assessed at each reporting date for any indications that
the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to
determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed
the carrying amount that would have been determined, net of depreciation and amortization, if no previous impairment loss had been
recognized.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
(l) Property and Equipment
Property 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. For qualifying assets, cost includes interest capitalized during the
construction or development period. Construction-in-process assets are capitalized during construction and depreciation commences
when the asset is available for use. Depreciation related to assets used in production is recorded in inventory and cost of goods sold.
Depreciation related to non-production assets is recorded through selling, general, and administrative expense ("SG&A"). Depreciation
is calculated on a straight-line basis, after taking into account residual values, over the following expected useful lives of the assets:
Buildings, including other components
Machinery and equipment
10-40 years
3-20 years
When parts of an item of property and equipment have different useful lives, those components are accounted for as separate items of
property and equipment.
(m) Right-of-use ("ROU") Assets and Lease Obligations
At the inception of a contract, the Company assesses if the agreement is or contains a lease. A lease arrangement exists 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 recognizes a
ROU asset and lease obligation with respect to all lease arrangements with a lease term greater than 12 months. Leases with a term of
12 months or less and variable rent expenses are recognized as an expense in the Consolidated Statements of Net (Loss) Earnings
when performance relating to those expenses has occurred.
The Company measures its lease obligation as the present value of the outstanding lease payments, discounted using the interest rate
implicit in the lease and the term of the contract adjusted for reasonably certain renewal or termination options. If the interest rate
implicit in the lease is not readily available, the payments are discounted using the Company’s incremental borrowing rate. The lease
obligation is subsequently measured by increasing the carrying amount for interest using the effective interest method. Lease payments
are recognized as reductions to the carrying amount of the lease obligation.
The ROU asset is measured at the amount of the initial lease obligation and adjusted for any lease payments made at or before the
commencement date of the lease less any incentives, initial direct costs, or the estimate of costs to restore the ROU asset at the
conclusion of the lease term. ROU assets are depreciated on a straight-line basis over the shorter of the useful life of the underlying
asset consistent with the Company’s depreciation policy for property and equipment as outlined in Note 2 (I), or the lease term. If it is
reasonably certain at the commencement of the lease arrangement that the Company will exercise its purchase option or otherwise
obtain ownership of the underlying asset at the end of the lease term, the ROU asset is depreciated over the useful life of the underlying
asset.
The Company remeasures the lease obligation and ROU asset as a result of material modifications to a lease arrangement.
(n) Intangible Assets
Intangible assets include computer software, trademarks, recipes, customer relationships and poultry production quota. Definite life
intangible assets are measured at cost less accumulated amortization and any net accumulated impairment losses. Amortization is
recognized in the Consolidated Statements of Net (Loss) Earnings on a straight-line basis over the estimated useful lives of the
following assets:
Computer software
Customer relationships
Recipes
3-10 years
20-25 years
5-20 years
Indefinite life intangibles including trademarks and poultry production quota are tested for impairment annually in the fourth quarter and
required when circumstances indicate that the net carrying value may not be recoverable. Refer to Note 2 (k) for impairment testing
methods.
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.
(o) Employee Benefit Plans
The Company provides post-employment benefits through defined benefit and defined contribution plans.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
Defined Benefit Plans
The Company accrues obligations and costs in respect of employee defined benefit plans. The cost of pensions and other retirement
benefits earned by employees is actuarially determined using the projected unit credit method prorated on service and Management's
best estimate of salary escalation, retirement ages of employees, mortality rates, inflation and expected health care costs. Changes in
these assumptions could affect future pension expense. The fair value of plan assets and the present value of the obligation are used to
calculate net interest cost or income. The discount rate used to value the defined benefit obligation is based on high-quality corporate
bonds in the same currency in which the benefits are expected to be paid and with terms to maturity that, on average, match the terms
of the defined benefit obligations. The discount rate used to value the current service cost is based on high-quality corporate bonds in
the same currency in which the employer contributions are expected to be made in and with terms of maturity that, on average, match
the expected remaining service period for active employees.
Actuarial gains and losses due to changes in defined benefit plan assets and obligations are recognized immediately in accumulated
other comprehensive income (loss).
When the calculation results in a net benefit asset, the recognized asset is limited to the total of any unrecognized past service costs
and the present value of economic benefits available in the form of future refunds from the plan or reductions in future contributions to
the plan (the “asset ceiling”). To calculate the present value of economic benefits, consideration is given to minimum funding
requirements that apply to the plan. Where it is anticipated that the Company will not be able to recover the value of the net defined
benefit asset, after considering minimum funding requirements for future services, the net defined benefit asset is reduced to the
amount of the asset ceiling. The impact of the asset ceiling is recognized in other comprehensive income (loss).
When future payment of minimum funding requirements related to past service would result in a net defined benefit asset “surplus” or
an increase in a surplus, the minimum funding requirements are recognized as a liability, to the extent that the surplus would not be fully
available as a refund or a reduction in future contributions. Re-measurement of this liability is recognized in other comprehensive
income (loss) in the period in which the re-measurement occurs.
Defined Contribution Plans
The Company’s obligations for contributions to employee defined contribution pension plans are recognized in the Consolidated
Statements of Net (Loss) Earnings in the periods during which services are rendered by employees.
Multi-Employer Plans
The Company participates in multi-employer pension plans which are accounted for as defined contribution plans. The Company does
not administer these plans as the administration and the investment of these assets are controlled by a board of trustees consisting of
union and employer representatives. The Company’s responsibility to make contributions to these plans is established pursuant to
collective bargaining agreements. The contributions made by the Company to the multi-employer plans are expensed when due.
(p) Share-Based Compensation
The Company applies the fair value method of accounting for share-based compensation. The fair value at grant date of stock options
is estimated using the Black-Scholes option-pricing model. The fair value of restricted share units (“RSUs”), including performance
share units (“PSUs”), is measured based on the fair value of the underlying shares on the grant date and expected achievement of
performance conditions. Compensation cost is recognized on a straight-line basis over the expected vesting period of the share-based
compensation. The Company estimates the number of units expected to vest at the grant date and revises the estimate as necessary if
subsequent information indicates that the actual number of units vesting differs significantly from the original estimate. The fair value of
deferred share units (“DSUs”) is measured based on the fair value of the underlying shares at each reporting date.
The Company has share-based compensation plans which are able to be settled in either cash or equity instruments at the option of the
Company. Each grant is accounted for based on the expected settlement method at the time of issue. The expectation is re-evaluated
at the end of each reporting period.
(q) Provisions
Provisions are liabilities of the Company for which the amount and/or timing of settlement is uncertain. A provision is recognized in the
Consolidated Financial Statements when the Company has a present legal or constructive obligation because of a past event, and it is
probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined
by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and,
when appropriate, the risks specific to the liability.
(r) Revenue Recognition
The majority of the Company’s revenue is derived from the sale of products to retail and foodservice customers, as well as the sale of
by-products to industrial and agricultural customers. The Company recognizes revenue for all sales at the fair value of the consideration
received or receivable. Sales are net of a provision for variable consideration of estimated allowances and sales incentives provided to
customers, such that it is highly probable that a significant reversal will not occur once the uncertainty related to the variable
consideration is subsequently resolved. For all transactions, revenue is recognized when control of the goods has transferred, being at
17
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
the point the customer receives and accepts the product. The customer may receive product either through delivery or by pick-up.
There are no significant financing components associated with the Company's payment terms.
The Company generally does not accept returns of spoiled products from customers. For product that may not be returned, the
Company, in certain cases, provides customers with allowances to cover any damage or spoilage, and such allowances are deducted
from sales at the time of revenue recognition.
The value of sales incentives provided to customers are estimated using historical trends and are recognized at the time of sale as a
reduction of revenue. Sales incentives include rebate and promotional programs provided to the Company's customers. These rebates
are based on achievement of specified volume or growth in volume levels and other agreed promotional activities. 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.
The Company enters into repurchase agreements, which represent sales to third parties where the Company is required to buy-back
the asset sold or a good containing that asset as a component. These sales and their associated cost of goods sold are not recognized
in the Consolidated Statements of Net (Loss) Earnings until their eventual third-party sale.
(s) Borrowing Costs
Borrowing costs are primarily comprised of interest on the Company's indebtedness. Borrowing costs are capitalized when they are
attributable to the acquisition, construction, or production of a qualifying asset. The Company defines qualifying assets as any asset that
requires more than six months to prepare for its intended use. Borrowing costs attributable to qualifying assets are calculated using the
Company’s average borrowing cost excluding the costs associated with the derecognition of accounts receivables under securitization
programs. Borrowing costs that are not attributable to a qualifying asset are expensed in the period in which they are incurred and
reported within interest expense in the Consolidated Statements of Net (Loss) Earnings.
(t) Government Incentives
Government incentives are not recognized until there is reasonable assurance that they will be received and that the Company will be in
compliance with any conditions associated with the incentives. Incentives that compensate the Company for expenses or losses are
recognized in earnings with the same classification as the related expense or loss in the same periods in which the expenses or losses
are recognized.
Government incentives received with the primary condition that the Company should purchase, construct, or otherwise acquire non-
current assets are recognized as a deduction from the associated asset on the Consolidated Balance Sheets. The incentive is
recognized in earnings over the useful life of the asset as a reduction of the related depreciation expense.
Government incentives that are receivable as compensation for expenses or losses already incurred, or for the purpose of giving
immediate financial support to the Company with no future related costs, are recognized in earnings in the period in which they become
receivable.
The benefit of a government loan at a below-market rate of interest is treated as a government incentive, and is measured as the
difference between proceeds received and the fair value of the loan based on prevailing market interest rates.
(u) Income Taxes
Income tax expense is comprised of current and deferred tax. Income tax is recognized in the Consolidated Statements of Net (Loss)
Earnings, except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive
income (loss).
Current tax expense represents the amount of income taxes payable, in respect of the taxable profit for the period, based on tax law
that is enacted or substantially enacted at the reporting date, and is adjusted for changes in estimates of tax expense recognized in
prior periods. A current tax liability or asset is recognized for income tax payable, or paid but recoverable in respect of all periods to
date.
The Company uses the asset and liability method of accounting for income taxes. Accordingly, deferred tax assets and liabilities are
recognized for the deferred tax consequences attributable to differences between the carrying amounts of assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to
apply to taxable income in the years when those temporary differences are expected to be recovered or settled and in the manner in
which those temporary differences are expected to be recovered or settled through sale or continued use. In addition, the effect on
deferred tax assets and liabilities of a change in tax rates is recognized in both net earnings and comprehensive income in the period in
which the enactment or substantive enactment takes place.
A deferred tax asset is recognized for unused tax losses, tax credits, and deductible temporary differences, to the extent that it is
probable that future taxable income will be available to utilize such amounts. Deferred tax assets are reviewed at each reporting date
and are adjusted to the extent that it is no longer probable that the related tax benefits will be realized.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company
intends to settle its current tax assets and liabilities on a net basis.
18
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
Deferred tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the
temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in the foreseeable
future.
(v) Accounting Standards Adopted During the Period
Beginning on January 1, 2022, the Company adopted certain IFRS and amendments. As required by International Accounting Standard
("IAS") 8 Accounting Policies, Changes in Accounting Estimates and Errors, the nature and the effect of these changes are disclosed
below:
Onerous Contracts - Cost of Fulfilling a Contract
Beginning January 1, 2022, the Company adopted the amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets.
The amendments specify that the ‘cost of fulfilling’ a contract comprises the ‘costs that relate directly to the contract’. Costs that relate
directly to the contract can either be incremental costs of fulfilling that contract or an allocation of other costs that relate directly to
fulfilling that contract. The adoption of the amendments did not have a material impact on the Consolidated Financial Statements.
Annual Improvements to IFRS (2018-2020) Cycle
Beginning January 1, 2022, the Company adopted the narrow-scope amendments to three standards as part of the International
Accounting Standards Board ("IASB") annual improvement process. Amendments were made to clarify which fees an entity includes
when it applies the ‘10 per cent’ test in assessing whether to derecognize a financial liability in accordance with IFRS 9 Financial
instruments. The amendments also remove the requirement in IAS 41 Agriculture for entities to exclude taxation cash flows when
measuring the fair value of a biological asset using a present value technique. Lastly, an amendment was made to IFRS 1 First-time
Adoption of International Financial Reporting Standards for subsidiaries as a first-time adopter. The adoption of the amendments did not
have a material impact on the Consolidated Financial Statements.
(w) Accounting Pronouncements Issued But Not Yet Effective
Definition of Accounting Estimates (Amendments to IAS 8)
On February 12, 2021, the IASB issued Definition of Accounting Estimates (Amendments to IAS 8). The amendments will require the
disclosure of material accounting policy information rather than disclosing significant accounting policies and clarifies how to distinguish
changes in accounting policies from changes in accounting estimates. The amendments are effective for annual periods beginning on
or after January 1, 2023. The Company intends to adopt this amendment in its Consolidated Financial Statements for the annual period
beginning January 1, 2023. The adoption of these amendments are not expected to have a material impact on the Consolidated
Financial Statements.
Disclosure Initiative – Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)
On February 12, 2021, the IASB issued Disclosure Initiative – Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement
2 Making Materiality Judgements). The amendments help companies provide useful accounting policy disclosures. The amendments
are effective for annual periods beginning on or after January 1, 2023. The Company intends to adopt these amendments in its
Consolidated Financial Statements for the annual period beginning January 1, 2023. The adoption of these amendments are not
expected to have a material impact on the Consolidated Financial Statements.
Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)
On May 7, 2021, the IASB issued Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS
12). The amendments narrowed the scope of the recognition exemption in paragraphs 15 and 24 of IAS 12 Income Taxes (recognition
exemption) so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary
differences. The amendments are effective for annual reporting periods beginning on or after January 1, 2023. The Company intends to
adopt these amendments in its Consolidated Financial Statements for the annual period beginning January 1, 2023. The adoption of
these amendments are not expected to have a material impact on the Consolidated Financial Statements.
19
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
On January 23, 2020, the IASB issued Classification of Liabilities as Current or Non-current (Amendments to IAS 1). The amendments
address inconsistencies with how entities classify current and non-current liabilities. The amendments serve to address whether debt
and other liabilities with an uncertain settlement date should be classified as current or non-current in the Consolidated Balance Sheets.
The amendments are effective on January 1, 2024. The Company intends to adopt the amendments in its Consolidated Financial
Statements or the annual period beginning January 1, 2024. The adoption of these amendments are not expected to have a material
impact on the Consolidated Financial Statements.
Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)
On September 22, 2022, the IASB issued Lease Liability in a Sale and Leaseback (Amendments to IFRS 16). The amendments added
subsequent measurement requirements for sale and leaseback transactions with variable payments. The amendments are effective for
annual periods beginning on or after January 1, 2024. The Company intends to adopt these amendments in its Consolidated Financial
Statements for the annual period beginning January 1, 2024. The adoption of these amendments are not expected to have a material
impact on the Consolidated Financial Statements.
Non-current Liabilities with Covenants (Amendments to IAS 1)
In October 2022, the IASB issued Non-current Liabilities with Covenants (Amendments to IAS 1). The amendments improve the
information an entity provides when its right to defer settlement of a liability for at least twelve months is subject to compliance with
covenants. The amendments are effective for annual periods beginning on or after January 1, 2024. The Company intends to adopt
these amendments in its Consolidated Financial Statements for the annual period beginning January 1, 2024. The adoption of these
amendments are not expected to have a material impact on the Consolidated Financial Statements.
All other IFRSs and amendments issued but not yet effective have been assessed by the Company and are not expected to have a
material impact on the Consolidated Financial Statements.
4. ACCOUNTS RECEIVABLE
Trade receivables
Less: Allowance for doubtful accounts
Net trade receivables
Other receivables:
Commodity taxes receivable
Government receivable
Other
The aging of trade receivables is as follows:
Current
Past due 0-30 days
Past due 31-60 days
Past due > 60 days
As at December 31,
2022
2021
$ 129,274
$ 122,030
(1,554)
(2,041)
$ 127,720
$ 119,989
22,374
1,858
15,659
13,188
17,871
16,034
$ 167,611
$ 167,082
As at December 31,
2022
2021
$
94,722
$
94,110
25,201
5,073
4,278
20,088
3,473
4,359
$ 129,274
$ 122,030
Trade receivables are impaired when their estimated future cash flows are less than their contractual cash flows. The amount of
impairment takes into account the financial condition of the customers, delinquencies in payments, collaterals and credit insurance
coverage on the trade receivables.
The Company has sold certain of its trade accounts receivables under a securitization program as described in Note 25.
20
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
The Company's securitization program requires the sale of trade receivables to be treated as a sale from an accounting perspective and
as a result, trade receivables sold under this program are derecognized from the Consolidated Balance Sheets as at December 31,
2022 and 2021.
5. INVENTORIES
Raw materials
Work in process
Finished goods
Packaging
Spare parts
As at December 31,
2022
2021
$
74,211
$
73,580
38,653
269,636
27,360
76,119
33,964
217,937
20,752
63,444
$ 485,979
$ 409,677
For the year ended December 31, 2022, inventory in the amount of $4,144.2 million (2021: $3,530.9 million) was expensed through cost
of goods sold.
For the year ended December 31, 2022, inventories have been reduced by $18.6 million (2021: $10.7 million) as a result of write-downs
to net realizable value. The write-downs are included in the amount expensed through cost of goods sold.
6. BIOLOGICAL ASSETS
Balance at December 31, 2021
Additions and purchases
Depreciation
Change in fair value realized
Change in fair value unrealized
Further processing and sales
Hog stock
Poultry stock
Commercial
$ 103,527
484,367
—
16,374
(31,482)
(471,435)
Parent
26,525
13,750
(6,799)
—
—
—
Commercial
Parent
Total
4,957
77,272
—
—
—
(76,466)
5,763
3,200
4,913
(4,534)
—
—
—
$ 138,209
580,302
(11,333)
16,374
(31,482)
(547,901)
3,579
$ 144,169
Balance at December 31, 2022
$ 101,351
33,476
Hog stock
Poultry stock
Balance at December 31, 2020
Additions and purchases
Depreciation
Change in fair value realized
Change in fair value unrealized
Further processing and sales
Commercial
$
92,357
424,731
—
9,900
(16,374)
(407,087)
Parent
25,199
6,835
(5,509)
—
—
—
Balance at December 31, 2021
$ 103,527
26,525
Commercial
5,442
80,853
—
—
—
(81,338)
4,957
Parent
2,650
4,132
(3,582)
—
—
—
Total
$ 125,648
516,551
(9,091)
9,900
(16,374)
(488,425)
3,200
$ 138,209
Hog stock is comprised of approximately 0.9 million animals as at December 31, 2022 (2021: 0.9 million). During the years ended
December 31, 2022 and 2021, substantially all hog stock was directly transferred to the Company's primary processing operations.
Poultry stock is comprised of approximately 8.4 million eggs and 0.3 million birds as at December 31, 2022 (2021: 8.1 million eggs and
0.3 million birds).
The change in fair value of commercial hog stock for the year was a loss of $15.1 million for the year ended December 31, 2022 (2021:
loss of $6.5 million) recorded in cost of goods sold.
21
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
The fair value measures of commercial hog stock have been categorized as a Level 3 fair value based on inputs to the valuation
techniques used. There were no transfers between levels for the year ended December 31, 2022.
The Company uses the market comparison approach to determine the fair value of its commercial hog stock. The valuation model is
based on the market price of hog stock of similar age, weight, breed, and genetic make-up. The model is based on the U.S. dollar
market price per cut weight and adjusted for foreign exchange, conversion from pounds to kilograms, and specific significant
unobservable inputs, including a quality index adjustment and a market conversion factor, as defined below.
The quality index adjustment is a value adjustment based on the relative quality of a processed hog based on the lean yield (being the
ratio between muscle and fat content) and total weight. Quality adjustments during the year ranged from 5.9% to 6.9% (2021: 6.5% to
6.9%). A higher (lower) quality adjustment percentage will result in an increase (decrease) to the fair market value of the commercial
hog stock.
The market conversion factor is a market adjustment used to discount the formula from a U.S. market price to a Canadian pricing
model. The market conversion factor experiences minimal fluctuation. A higher (lower) market conversion factor will result in an increase
(decrease) to the fair market value of the commercial hog stock.
Commercial poultry stock are valued at cost as an indicator of fair value in the case where little biological transformation has taken
place since initial cost occurrence or when the impact of the biological transformation on price is not expected to be material.
Where reliable market prices of parent stock are not available, they are valued at cost less accumulated depreciation and any
accumulated impairment losses. No active liquid market exists for parent stock as they are rarely sold.
The Company's biological asset operations can be affected by outbreaks of disease among livestock. To mitigate this risk, the Company
monitors herd health status and has strict bio-security procedures and employee training programs throughout its livestock production
operation.
7. PROPERTY AND EQUIPMENT
Cost
Accumulated depreciation
Land
Buildings
Machinery
and
equipment
Under
construction
Total
$
64,779
1,824,416
1,994,728
66,681
$ 3,950,604
—
(459,320)
(1,187,860)
—
(1,647,180)
Net balance, December 31, 2022
$
64,779
1,365,096
806,868
66,681
$ 2,303,424
Cost
Accumulated depreciation
Land
Buildings
Machinery and
equipment
Under
construction
Total
$
61,472
1,157,129
1,651,974
804,514
$ 3,675,089
—
(413,170)
(1,072,754)
—
(1,485,924)
Net balance, December 31, 2021
$
61,472
743,959
579,220
804,514
$ 2,189,165
22
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
The changes in net carrying amounts of property and equipment during 2022 and 2021 were as follows:
Net balance, December 31, 2021
$
61,472
743,959
579,220
804,514
$ 2,189,165
Notes
Land
Buildings
Machinery
and
equipment
Under
construction
Total
Additions
Transfers from under construction
Impairment(i)
Settlement(ii)
Depreciation
Foreign currency translation
Other(iii)
—
7,465
(1,754)
—
—
142
(2,546)
—
—
302,409
302,409
662,091
363,456
(1,033,012)
—
(32)
—
(10,783)
—
(45,842)
(128,353)
5,512
(592)
4,844
(1,516)
(6,402)
(929)
—
566
(465)
(18,971)
(929)
(174,195)
11,064
(5,119)
Net balance, December 31, 2022
$
64,779
1,365,096
806,868
66,681
$ 2,303,424
Land
Buildings
Machinery and
equipment
Under
construction
Total
Net balance, December 31, 2020
$
54,806
672,595
503,052
491,034
$ 1,721,487
Business combination
Additions
Transfers from under construction
Impairment
Settlement(ii)
Depreciation
Foreign currency translation
Other(iii)
28
6,029
—
640
—
—
—
(3)
—
1,911
—
3,162
—
—
620,433
125,980
179,606
(306,226)
—
(20,822)
(33,859)
38
(744)
—
(103,584)
65
(1,884)
(2,337)
—
—
—
(153)
(574)
11,102
620,433
—
(744)
(20,822)
(137,443)
(53)
(4,795)
Net balance, December 31, 2021
$
61,472
743,959
579,220
804,514
$ 2,189,165
(i)
Includes impairment charges related to restructuring.
(ii) During the year the Company settled a previous legal claim resulting in a cash settlement.
(iii)
Includes disposals, reclassifications and other adjustments.
Borrowing Costs
For the year ended December 31, 2022, borrowing costs of $22.0 million were capitalized (2021: $20.3 million), using an average
capitalization rate of 4.1% (2021: 3.2%).
8. RIGHT-OF-USE ASSETS
The Company enters into lease arrangements for land, buildings, vehicles, machinery and equipment, and other assets as part of its
daily operations.
Land and building leases include the rental of office space, manufacturing and distribution facilities and barns. These leases vary in
length, are typically over 5 years and may include several renewal options.
Vehicle leases primarily include leases of employee vehicles. Employee vehicle leases have an initial term of 3 years. As part of its
leasing agreement for employee vehicles, the Company is required to pay a residual value guarantee to the lessor for the value of the
leased vehicle at the end of the lease term. As at December 31, 2022, the Company's residual value guarantees on employee vehicles
totaled $3.0 million (2021: $2.9 million).
Machinery and equipment leases include the rental of manufacturing machinery and computer hardware. These leases vary in duration
and structure and typically do not exceed 10 years.
23
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
Right-of-use assets are comprised of:
Cost
Accumulated depreciation
Net balance, December 31, 2022
Cost
Accumulated depreciation
Net balance, December 31, 2021
Land and
Buildings
$ 242,483
(90,031)
$ 152,452
Vehicles
7,241
(3,949)
3,292
Machinery
and
Equipment
10,534
(7,079)
3,455
Other
Total
—
—
—
$ 260,258
(101,059)
$ 159,199
Land and
Buildings
$ 220,133
(68,101)
$ 152,032
Vehicles
8,456
(4,750)
3,706
Machinery
and
Equipment
13,355
(7,431)
5,924
Other
Total
—
—
—
$ 241,944
(80,282)
$ 161,662
Changes in the net balance of right-of-use assets during 2022 and 2021 were as follows:
Net balance, December 31, 2021
Additions
Depreciation
Dispositions, retirements, and other
Foreign currency translation
Land and
Buildings
$ 152,032
41,743
(31,517)
(10,162)
356
Net balance, December 31, 2022
$ 152,452
Net Balance, December 31, 2020
Additions
Depreciation
Dispositions, retirements, and other(i)
Foreign currency translation
Land and
Buildings
$ 180,228
25,509
(31,169)
(22,384)
(152)
Net balance, December 31, 2021
$ 152,032
(i)
Includes $35.7 million pertaining to acquisitions. See Note 28.
Vehicles
3,706
2,170
(2,341)
(245)
2
3,292
Vehicles
4,446
2,146
(2,751)
(135)
—
3,706
Machinery
and
Equipment
5,924
196
(2,371)
(312)
18
3,455
Machinery
and
Equipment
9,201
730
(2,933)
(1,061)
(13)
5,924
Other
Total
—
—
—
—
—
—
$ 161,662
44,109
(36,229)
(10,719)
376
$ 159,199
Other
Total
28,830
$ 222,705
—
—
(28,830)
—
—
28,385
(36,853)
(52,410)
(165)
$ 161,662
Lease obligations associated with the Company's right-of-use assets are described in Note 16.
24
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
9. INVESTMENTS
Portfolio Investments
Other Investments
As at December 31,
As at December 31,
2022
2021
$
20,578
$
19,402
3,134
2,924
$
23,712
$
22,326
The Company holds strategic long-term equity investments in private companies that are not quoted in an active market. Fair value for
these investments is determined using available financial and market information which can include financial statements, company
projections and evidence from external transactions in the private company's equity. Changes in fair value are recorded in other
comprehensive income, as it best represents the Company's position to maintain a long-term interest in these holdings.
No dividends were recognized for the years ended December 31, 2022 and 2021.
10. EMPLOYEE BENEFITS
The Company sponsors several defined benefit pension programs for Canadian employees which are either final salary plans, career
salary plans, service-based plans, or a combination thereof. The Company also sponsors a final salary defined benefit pension plan in
the U.K. in which membership is closed with no members accruing benefits. These defined benefit plans require contributions to be
made to separately administered funds. Certain retired employees are covered under a post-retirement benefit plan, which reimburses
certain medical costs and provides life insurance coverage.
The Canadian plan is governed by the pension laws of Ontario. The U.K. plan is governed by the employment laws of the U.K.
The Company's pension funding policy is to contribute amounts sufficient, at a minimum, to meet local statutory funding requirements.
For the Company's defined benefit pension plans, local regulatory bodies either define minimum funding requirements or approve
funding plans submitted by the Company. From time to time the Company may make additional discretionary contributions considering
actuarial assessments and other factors. The contributions that have been made to support ongoing plan obligations have been
recorded in the respective asset or liability accounts on the Consolidated Balance Sheets. Actuarial valuations for the Company's
defined benefit pension plans are completed based on the regulations in place in the jurisdictions where the plans operate.
25
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
Information about the Company's defined benefit plans as at December 31, in aggregate, are as follows:
Other post-
retirement
Other post-
2022
retirement
benefits
Pension
Total
benefits
Pension
2021
Total
Plan assets
Fair value, beginning of year
$
Interest income
Actuarial gains (losses)(i)
Employer contributions
Employee contributions
Benefits paid
Administrative costs
Fair value, end of year
Accrued benefit obligations:
$
—
—
—
—
—
—
—
—
1,090,027 $ 1,090,027 $
30,741
30,741
(186,742)
(186,742)
10,685
3,749
10,685
3,749
(68,561)
(68,561)
(2,038)
(2,038)
877,861 $ 877,861 $
—
—
—
—
—
—
—
—
1,109,042 $ 1,109,042
25,972
17,917
10,155
3,532
25,972
17,917
10,155
3,532
(75,040)
(75,040)
(1,551)
(1,551)
1,090,027 $ 1,090,027
Balance, beginning of year
$
(48,245)
(1,139,543) $ (1,187,788) $
(52,864)
(1,244,117) $ (1,296,981)
Current service cost
Interest cost
Benefits paid from plan assets
Benefits paid directly from the
Company
Actuarial gains (losses) - experience
Actuarial gains (losses) -
(81)
(1,353)
—
2,907
4,270
(18,098)
(32,615)
68,561
(18,179)
(33,968)
68,561
(87)
(1,230)
—
(20,339)
(29,666)
75,040
(20,426)
(30,896)
75,040
1,986
(4,925)
4,893
(655)
2,924
524
7,165
10,089
—
—
524
—
demographic experience
(1,273)
(29,634)
(30,907)
—
Actuarial gains (losses) - financial
assumptions
Employee contributions
Curtailments
Balance, end of year
Unfunded
Funded(ii)
Total benefit obligations
Other
Accrued net benefit obligations,
7,827
265,374
273,201
2,488
—
—
(3,749)
(3,749)
—
—
—
—
75,026
(3,532)
880
77,514
(3,532)
880
$
$
$
$
(35,948)
(892,643) $
(928,591) $
(48,245)
(1,139,543) $ (1,187,788)
(35,948)
(27,314) $
(63,262) $
(48,245)
(32,018) $
(80,263)
—
(865,329)
(865,329)
—
(1,107,525)
(1,107,525)
(35,948)
(892,643) $
(928,591) $
(48,245)
(1,139,543) $ (1,187,788)
—
(1,019) $
(1,019) $
—
132 $
132
end of year
$
(35,948)
(15,801) $
(51,749) $
(48,245)
(49,384) $
(97,629)
(i) Return on plan assets lower than discount rate. (2021: greater than discount rate)
(ii) Includes wholly and partially funded plans.
Amounts Recognized in the Consolidated Balance Sheet consist of:
Employee benefit assets
Employee benefit liabilities
Accrued net benefit liability, end of year
2022
$
12,531
$
64,280
2021
—
97,629
$
(51,749)
$
(97,629)
26
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
Pension benefit expense recognized in net earnings:
Current service cost - defined benefit
Current service cost - defined contribution and multi-employer plans
Net interest cost
Administrative costs(ii)
Curtailments(i)
Net pension benefit expense
(i)
Included in other expense for the year.
2022
2021
$
18,098
$
20,339
18,623
1,874
2,638
—
17,664
3,694
3,151
(880)
$
41,233
$
43,968
(ii) Administrative costs include expenses incurred directly by the Company in the Consolidated Statements of Net (Loss) Earnings. For the year ended
December 31, 2022, the defined benefit plan's incurred an additional $0.6 million (2021: $1.6 million) of administrative costs, which were not
remitted out of the plan's assets.
For the year ended December 31, 2022, the Company expensed salaries of $883.9 million (2021: $835.1 million), excluding pension
and other post-retirement benefits.
Amounts recognized in other comprehensive income (loss) (before income taxes):
Actuarial gain
2022
2021
$
54,695
$
98,062
The significant actuarial assumptions adopted in measuring the Company’s accrued benefit obligations were as follows:
Period end discount rate
Rate of salary increase
Plan assets were comprised of:
Equity securities
Debt securities
Real estate
Other investments and cash
2022
5.10%
2.75%
2021
2.90%
2.75%
As at December 31,
2022
38%
45%
16%
1%
100%
2021
39%
48%
12%
1%
100%
As at December 31, 2022, the Company's plans were invested in pooled funds which hold underlying equity, debt and other securities
and are not quoted in an active market.
Other post-retirement benefits expense recognized in net earnings:
Current service cost
Interest cost
Other post-retirement benefits expense
2022
81
1,353
1,434
$
$
2021
87
1,230
1,317
$
$
27
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
Impact of changes in major assumptions:
Actuarial Assumption
Period end discount rate
Rate of salary increase
Mortality
Increase (decrease) in defined benefit obligations
Other post-
Total
retirement
Sensitivity
pensions
benefits
5.10 %
0.25 %
decrease $
25,790
2.75 %
100% of 2014 Private Sector
Canadian Pensioners’ Mortality
Table, projected generationally
using Scale MI-2017
0.25 %
increase $
(23,997)
increase $
$
0.50 %
Increase of 1 year in
expected lifetime of
plan participants
1,743
28,935
809
(765)
N/A
1,343
Total
26,599
(24,762)
1,743
30,278
$
$
$
$
Defined benefit obligation inputs:
2022 Expense
Balance sheet
Measurement dates:
December 31, 2021
December 31, 2022
The average expected maturity of the pension obligations is 12.1 years (2021: 13.6 years).
The Company expects to contribute $37.2 million to pension plans in 2023, inclusive of defined benefit plans, defined contribution plans
and multi-employer plans.
Governance and Risk Management
The Company administers its pension plans through its Board of Directors. The Company’s Board of Directors has established a
governance structure and delegated to the Audit Committee and the Pension Investment Advisory Committee all aspects of the
investment of the funds. The Company’s Board of Directors has delegated to the Pension Policy and Administration Committee the
authority to make amendments to the documents that govern the pension plans of an administrative or compliance nature, that relate to
collective bargaining agreements entered into by the Company or that have a minimal financial impact on the plans.
In fulfilling their responsibilities, the Audit Committee and the Pension Investment Advisory Committee may delegate functions or
responsibilities to, or otherwise utilize employees of the Company where appropriate. The Audit Committee and the Pension Investment
Advisory Committee may rely on independent experts for certain aspects of the funds’ operations. The Audit Committee or the Pension
Investment Advisory Committee, as appropriate, retain responsibility and utilize suitable personnel for such activities and monitor the
activities undertaken by the selected personnel.
The plan assets are invested primarily in well-diversified pooled funds that meet the constraints set out in legislation of the jurisdictions
in which the plans operate. Further diversification criteria set out in investment funds' governing documents require the division of
investments between equities and fixed income. There are no significant concentrations of risks.
Multi-Employer Plan
The Company contributes to the Canadian Commercial Workers Industry Pension Plan which is a multi-employer defined benefit plan
for employees who are members of the United Food and Commercial Workers Canada union. This is a large-scale plan for union
workers of multiple companies across Canada. Adequate information to account for these contributions as a defined benefit plan in the
Company’s statements is not available due to the size and number of contributing employers in the plan. Included in the pension benefit
expense is $0.9 million (2021: $0.9 million) related to payments into this plan. The Company expects to contribute $0.9 million into this
plan in 2023.
28
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
11. INCOME TAXES
The components of income tax expense were as follows:
Current tax (recovery) expense
Current year
Deferred tax (recovery) expense
Origination and reversal of temporary differences
Change in tax rates
Total income tax expense
Reconciliation of Effective Tax rate
2022
2021
$
$
(44,481)
(44,481)
$
$
64,207
64,207
$
57,406
$
(19,054)
—
1,730
$
$
57,406
12,925
$
$
(17,324)
46,883
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:
Income tax expense (recovery) according to combined statutory rate of 26.2% (2021: 26.2%)
$
(78,309)
$
39,223
2022
2021
Increase (decrease) in income tax resulting from:
Unrecognized income tax benefit of losses
Tax rate differences in other jurisdictions
Non-deductible impairment of goodwill
Manufacturing and processing credit
Non-deductible expenses and transaction costs
Share based compensation
Adjustments to tax expense related to tax audit
resolutions
Remeasurement of deferred tax assets and liabilities
Other
Income Tax Recognized in Other Comprehensive Income (Loss)
Investments
Derivative instruments
Pension adjustments
Deferred Tax Assets and Liabilities
Recognized Deferred Tax Assets and Liabilities
30,320
13,028
42,955
(161)
1,674
1,214
425
400
1,379
60
5,353
—
(1,670)
2,169
1,347
—
739
(338)
$
12,925
$
46,883
2022
$
—
$
2,490
14,550
2021
950
3,839
24,560
$
17,040
$
29,349
The Company has recognized deferred tax assets in the amount of approximately $133.0 million (2021: $134.4 million), relating
primarily to future deductions for employee benefits, tax losses and deductions carried forward, and restructuring expenses. These
deferred tax assets are recorded based on the Company's estimate that it will earn sufficient taxable profits to fully utilize its tax losses
in the appropriate carry over periods.
The Company has recognized deferred tax liabilities in the amount of approximately $311.4 million (2021: $240.9 million), relating
primarily to claims for tax depreciation in excess of accumulated book depreciation, cash basis farming adjustments, and the excess of
book value over the tax cost of intangible assets.
29
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
As at December 31,
2022
2021
$ 101,364
$
88,245
14,777
16,869
—
12,114
31,922
2,106
$ 133,010
$ 134,387
$ 230,024
$ 164,632
33,371
47,207
793
28,464
47,764
—
$ 311,395
$ 240,860
$
42,541
$
39,907
$ 220,926
$ 146,380
Deferred tax assets:
Tax losses and deductions carried forward
Accrued liabilities
Employee benefits
Other
Deferred tax liabilities:
Property and equipment
Cash basis farming
Goodwill and other intangible assets
Other
Classified in the Consolidated Financial Statements as:
Deferred tax assets
Deferred tax liability
Unrecognized Deferred Tax Assets
At December 31, 2022, the Company has unrecognized deferred tax assets of $28.8 million (2021: nil).
Unrecognized Deferred Tax Liabilities
Deferred tax is not recognized on the unremitted earnings of subsidiaries and other investments as the Company is in a position to
control the reversal of the temporary difference and it is probable that such differences will not reverse in the foreseeable future. The
unrecognized temporary difference at December 31, 2022 for the Company's subsidiaries was $853.9 million (2021: $625.5 million).
12. GOODWILL
The net carrying value for goodwill was $477.4 million as at December 31, 2022 (2021: $658.7 million). The Company recognized non-
cash impairment charges of $190.9 million related to the goodwill of the Plant Protein CGU group during the year ended December 31,
2022 (2021: $0.0 million). This was a result of an impairment test which was triggered on September 30, 2022 for the Plant Protein
CGU group, due to changes in macro-economic conditions which resulted in a significant increase in the discount rate.
The measurement of the recoverable amount of the Plant Protein CGU group was calculated based on fair value less costs to sell. Fair
value was determined by discounting the future cash flows generated from the continuing use of the Plant Protein CGU group. The fair
value measurement was categorized as a Level 3 fair value based on the inputs in the valuation technique used. The calculation of the
fair value based on discounting the future cash flows was based on the following key assumptions:
• Cash inflows and outflows were projected for five-years based on the Company's long-term business plan. Cash flows for a
further perpetual period were extrapolated using a growth rate declining to 3.0% over seven years.
• The business plan contains forecasts based on past experience of actual operating results in conjunction with anticipated
future growth opportunities. This included a decrease of the long-term growth rate in the Plant Protein CGU group recognized
during the year. While the forecast does assume some base business expansion, the primary engine of growth is strategic in
nature and is consistent with the projects and expectations as articulated in the Company's strategic plan and outlook.
• The discount rate applied in determining the recoverable amount of the Plant Protein CGU group was 12.8%. The discount
rate was estimated based on the weighted average cost of capital of the Plant Protein CGU group and other competitors in the
industry.
30
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
For the purposes of annual impairment testing, goodwill is only allocated to the Meat Protein CGU group, being the group expected to
benefit from the synergies of each business combination in which the goodwill arose:
CGU Group
Meat Protein
Plant Protein
As at December 31,
2022
2021
$ 477,353
$ 477,353
—
181,320
$ 477,353
$ 658,673
Annual impairment testing involves determining the recoverable amount of the Meat Protein CGU group to which goodwill is allocated
and comparing this to the carrying value of the respective CGU group. The measurement of the recoverable amount of the Meat Protein
CGU group was calculated based on fair value less costs to sell. Fair value was determined by discounting the future cash flows
generated from the continuing use of the Meat Protein CGU groups. The fair value measurement was categorized as a Level 3 fair
value based on the inputs in the valuation technique used. The calculation of the fair value based on discounting the future cash flows
was based on the following key assumptions:
• Cash inflows and outflows were projected based on the Company's long-term business plan. Cash flows for a further perpetual
period were extrapolated using a growth rate of 2.0% for the Meat Protein CGU group (2021: 2.0%).
• The business plan contains forecasts based on past experience of actual operating results in conjunction with anticipated
future growth opportunities. While the forecast does assume some base business expansion, the primary engine of growth is
strategic in nature and is consistent with the projects and expectations as articulated in the Company's strategic plan and
outlook.
• The discount rate applied in determining the recoverable amount of the Meat Protein CGU group was 9.6% (2021: 8.2%). The
discount rate was estimated based on the weighted average cost of capital of the Meat Protein CGU group and other
competitors in the industry.
The values assigned to the key assumptions represent Management's assessment of future trends in the industries in which the CGU
groups operate and are based on both external and internal sources and historical trend data.
The change in the carrying amount of goodwill during 2022 and 2021 was as follows:
Net balance, beginning of year
Impairment loss
Business combinations
Foreign currency translation
Net balance, end of year
13. INTANGIBLE ASSETS
Definite life
Indefinite life
Total intangible assets
2022
2021
$ 658,673
$ 652,501
(190,911)
—
9,591
—
7,643
(1,471)
$ 477,353
$ 658,673
As at December 31,
2022
2021
$ 175,951
$ 184,576
184,610
180,742
$ 360,561
$ 365,318
31
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
Cost
Accumulated amortization
Net balance, December 31, 2022
Cost
Accumulated amortization
Net balance, December 31, 2021
Definite life
Software in
use
$ 187,632
(136,655)
$
50,977
Software in
process
3,600
—
3,600
Software in use
$ 175,302
(125,697)
$
49,605
Software in
process
9,799
—
9,799
Recipes
34,333
(16,070)
18,263
Recipes
32,696
(12,937)
19,759
Customer
relationships
Total
137,551
$ 363,116
(34,440)
(187,165)
103,111
$ 175,951
Customer
relationships
Total
131,659
$ 349,456
(26,246)
(164,880)
105,413
$ 184,576
The changes in net carrying amounts of definite life intangibles during 2022 and 2021 were as follows:
Net balance, December 31, 2021
Additions
Transfers
Amortization
Foreign currency translation
Software in
use
$
49,605
—
15,920
(14,558)
10
Software in
process
9,799
9,711
(15,920)
—
10
Net balance, December 31, 2022
$
50,977
3,600
Net balance, December 31, 2020
Additions
Transfers
Amortization
Foreign currency translation
Software in use
$
59,477
—
7,063
(16,935)
—
Software in
process
7,855
9,006
(7,063)
—
1
Net balance, December 31, 2021
$
49,605
9,799
Recipes
19,759
—
—
(2,247)
751
18,263
Recipes
22,969
—
—
(3,074)
(136)
19,759
Customer
relationships
Total
105,413
$ 184,576
—
—
(6,708)
4,406
9,711
—
(23,513)
5,177
103,111
$ 175,951
Customer
relationships
Total
112,551
$ 202,852
—
—
(6,550)
(588)
9,006
—
(26,559)
(723)
105,413
$ 184,576
Amortization
Amortization is recorded through cost of goods sold or SG&A depending on the nature of the asset.
Borrowing Costs
For the year ended December 31, 2022 there were $0.2 million borrowing costs capitalized, using an average capitalization rate of
4.1%. There were no borrowing costs capitalized for the year ended December 31, 2021.
Indefinite Life Intangibles
Indefinite life intangible assets are comprised of trademarks and poultry production quota. The Company expects to renew the
registration of the trademarks and poultry quota at each expiry date indefinitely and expects these assets to generate economic benefit
in perpetuity. As such, the Company assessed these intangibles to have indefinite useful lives.
32
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
The changes in net carrying amounts of indefinite life intangibles during 2022 and 2021 were as follows:
Net balance, December 31, 2021
Foreign currency translation
Net balance, December 31, 2022
Net balance, December 31, 2020
Business Combinations
Foreign currency translation
Net balance, December 31, 2021
Notes
Trademarks
Quota
Total
Indefinite life
$ 117,751
62,991
$ 180,742
3,868
—
3,868
$ 121,619
62,991
$ 184,610
Trademarks
$ 118,191
—
(440)
28
Quota
20,153
42,838
—
Total
$ 138,344
42,838
(440)
$ 117,751
62,991
$ 180,742
The indefinite life intangible assets are allocated between the Meat Protein and Plant Protein CGU groups as follows:
CGU Group
Meat Protein
Plant Protein
As at December 31,
2022
2021
$ 126,412
$ 126,412
58,198
54,330
$ 184,610
$ 180,742
The Company performs annual impairment testing on its indefinite life intangible assets. Annual impairment testing, consistent with the
impairment testing for goodwill as described in Note 12, involves determining the recoverable amount of each indefinite life intangible
asset and comparing it to the net carrying value.
The recoverable amount of trademarks is calculated using the royalty savings approach, which involves present valuing the royalties
earned by similar trademarks. The key assumptions used in this determination are:
Royalty rate
Terminal growth rate
Discount rate
2022
2021
1.0 - 3.0%
1.0 - 3.0%
2.0 - 3.0%
2.0 - 3.0%
9.6 - 12.8%
8.2 - 12.2%
33
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
14. PROVISIONS
Balance at December 31, 2021
Charges
Reversals
Cash payments
Foreign currency translation
Legal Environmental
$
650
2,449
—
—
(20)
—
—
—
(79)
—
Restructuring and other
related costs
Severance and
other
employee
related
Site closing
and other cash
costs
42,344
9,390
(5,827)
(2,522)
3
49
666
—
(748)
33
—
Balance at December 31, 2022
$
630
2,370
43,388
Current
Non-current
Total at December 31, 2022
Restructuring and other related
costs
Legal Environmental
Severance and
other employee
related
Site closing and
other cash
costs
Balance at December 31, 2020
$
739
Charges
Reversals
Cash payments
—
(89)
—
Balance at December 31, 2021
$
650
2,621
—
(140)
(32)
2,449
42,338
3,109
(1,705)
(1,398)
42,344
61
37
—
(49)
49
Current
Non-current
Total at December 31, 2021
Restructuring and Other Related Costs
Total
$ 45,492
10,056
(5,827)
(3,369)
36
$ 46,388
$ 42,589
3,799
$ 46,388
Total
$ 45,759
3,146
(1,934)
(1,479)
$ 45,492
$
842
44,650
$ 45,492
For the year ended December 31, 2022, the Company recorded restructuring and other related costs of $30.1 million. The $30.1 million
consists of $22.6 million in the Plant Protein Group and $7.5 million in the Meat Protein Group. Of the $22.6 million in the Plant Protein
Group is $19.0 million related to asset impairment, $2.9 million related to severance and other employee related costs, and $0.7 million
related to decommissioning and other cash costs, as the Company changes focus and reorganizes SG&A and manufacturing
operations in response to slower than previously anticipated segment growth. Of the $7.5 million in the Meat Protein Group, $5.9 million
related to accelerated depreciation, $1.0 million related to decommissioning costs, and $0.6 million related to severance and other
employee costs as a result of the previously announced future closures of the Brampton, Toronto, St. Mary's, and Schomberg poultry
plants.
For the year ended December 31, 2021, the Company recorded restructuring and other related costs of $4.9 million all in the Meat
Protein Group. Of the $4.9 million in the Meat Protein Group, $3.5 million related to accelerated depreciation, $0.8 million related to
severance and other employee related costs as a result of the previously announced future closures of the Brampton, Toronto and St.
Mary's poultry plants. The remaining $0.6 million reversal related to employee related costs for other organizational restructuring
initiatives.
34
15. LONG-TERM DEBT
Revolving line of credit
U.S. term credit
Canadian term credit
Government loans
Deferred financing charges
Total long-term debt
Current
Non-current
Total long-term debt
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
As at December 31,
$
$
$
2022
999,523
358,664
350,000
7,027
(4,800)
1,710,414
921
1,709,493
$
$
$
2021
555,219
334,828
350,000
12,202
—
1,252,249
5,176
1,247,073
$
1,710,414
$
1,252,249
On June 29, 2022, the Company renewed its syndicated sustainability-linked credit facility (the "Credit Facility"). The Company
extended the maturity date of the $1,300.0 million unsecured committed revolving line of credit to June 29, 2027, and extended the
maturity dates of the US$265.0 million and $350.0 million unsecured committed term credit facilities to June 29, 2027 and June 29,
2026, respectively. The Credit Facility can be drawn in Canadian or U.S. dollars and bears interest payable monthly, based on Banker's
Acceptance and Prime rates for Canadian dollar loans and based on the Secured Overnight Financing Rate ("SOFR") for U.S. dollar
loans. The Credit Facility is intended to meet the Company's funding requirements for capital investments in addition to providing
appropriate levels of liquidity for general corporate purposes. The interest rate on the Credit Facility may be adjusted up or down based
on the Company's performance compared to specified sustainability targets.
In addition to the drawings on the revolving facility and the term credit, as at December 31, 2022 the Company had drawn letters of
credit of $8.9 million on the Credit Facility (2021: $8.2 million).
The Credit Facility requires the maintenance of certain covenants. As at December 31, 2022, the Company was in compliance with all
of these covenants. The primary financial covenant requires that the Company maintain a total debt to capitalization ratio below a
specified threshold.
The Company has additional uncommitted credit facilities for issuing letters of credit up to a maximum of $125.0 million (2021: $125.0
million). As at December 31, 2022, $58.9 million in letters of credit had been issued thereon (2021: $66.8 million).
The Company has various government loans on specific projects. As at December 31, 2022, these loans are non-interest bearing
facilities (2021: 0.0% to 2.9%). These specific facilities are repayable over various terms and are maturing from 2024 to 2032. As at
December 31, 2022, $7.0 million (2021: $12.2 million) was outstanding. All of these facilities are committed.
The Company’s estimated average effective cost of borrowing for 2022 was approximately 4.3% (2021: 3.1%). Required repayments of
long-term debt are as follows:
2023
2024
2025
2026
2027 and thereafter
Total required repayments of long-term debt
$
1,153
1,167
796
350,796
1,362,369
$ 1,716,281
35
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
The following table reconciles the changes in cash flows from financing activities for long-term debt for the period in the respective
years:
Total long-term debt, beginning of period
Revolving and term credit facilities - net drawings
Government loans - new issuance
Government loans - repayments
Payment of financing fees
Total cash flow from long-term debt financing activities
Foreign exchange revaluation
Other non-cash changes
Total non-cash changes
Total long-term debt, end of period
16. LEASE OBLIGATIONS
Changes in the balance of lease obligations during 2022 and 2021 were as follows:
Total lease obligations, beginning of period
Payments
Interest
Additions
Dispositions, retirements, and other(i)
Foreign currency translation
Total lease obligations, end of period
Current
Non-current
Total lease obligations, end of period
(i)
2021 includes $39.6 million pertaining to acquisitions. See Note 28.
As at December 31,
2022
2021
$ 1,252,249
$ 745,948
$ 452,549
$ 495,897
—
(5,504)
(3,942)
5,484
(1,084)
—
$ 443,103
$ 500,297
$
15,591
(529)
$
15,062
$
$
6,606
(602)
6,004
$ 1,710,414
$ 1,252,249
As at December 31,
2022
2021
$ 175,766
$ 240,237
(39,742)
5,850
44,109
(3,518)
425
(43,749)
6,906
28,384
(55,852)
(160)
$ 182,890
$ 175,766
$
38,321
$
31,375
144,569
144,391
$ 182,890
$ 175,766
36
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
Total cash outflows arising from lease obligations during 2022 and 2021 were as follows:
Payment of lease obligations in Financing Activities
Payment of lease interest expense in Operating Activities
Total cash outflow of leases
The maturity of contractual undiscounted lease obligation payments are as follows:
Due within 1 year
Due between 1 and 3 years
Due between 3 and 5 years
Due after 5 years
Total lease obligation payments
As at December 31,
2022
2021
$
33,892
$
36,843
5,850
6,906
$
39,742
$
43,749
$
37,048
57,619
42,001
70,374
$ 207,042
The Company does not face a significant liquidity risk in regard to its lease obligations. See Note 19.
The following amounts were recognized in the Consolidated Statements of Net (Loss) Earnings pertaining to leases:
Variable rent expense(i)
Short-term rent expense(ii)
As at December 31,
2022
12,397
9,868
$
$
2021
11,286
10,013
$
$
(i) Relates to property taxes and common area maintenance on buildings which are calculated annually. These payments make up 31.2% (2021:
28.5%) of fixed payments made in the year.
(ii) Pertains primarily to leases of property, equipment and vehicles with a contract term of less than one year.
Right-of-use assets associated with the Company's lease obligations are described in Note 8.
17. OTHER CURRENT LIABILITIES
Derivative instruments
Obligation for repurchase of shares
Contract liabilities
Other
18. SHARE CAPITAL
(Thousands of shares)
Balance at December 31, 2021
Distributions under share-based compensation plans
Exercise of share options
Shares repurchased
Purchase of treasury stock
Balance at December 31, 2022
As at December 31,
Notes
2022
2021
19
18
$
8,723
$
16,887
30,000
12,575
13,386
49,070
12,280
3,028
$
64,684
$
81,265
Common Shares
Treasury Stock
2022
2021
123,871
123,180
254
330
(2,504)
(271)
164
786
—
(259)
121,680
123,871
2022
851
(254)
—
—
271
868
2021
756
(164)
—
—
259
851
37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
Common Shares
The authorized share capital consists of an unlimited number of common shares, an unlimited number of non-voting common shares,
and an unlimited number of preference shares. These shares have no par value.
The holders of common shares are entitled to receive dividends as declared from time to time, and they are entitled to one vote per
share at meetings of the Company.
Treasury Stock
Treasury stock is comprised of shares purchased by a trust in order to satisfy the requirements of the Company's Restricted Share Unit
Plan, as described in Note 22.
Share Repurchase
On May 20, 2022 the Toronto Stock Exchange ("TSX") accepted the Company's notice of intention to commence a Normal Course
Issuer Bid ("NCIB"), allowing the Company to repurchase, at its discretion, up to 7.5 million common shares in the open market or as
otherwise permitted by the TSX, subject to the normal terms and limitations of such bids. Common shares purchased by the Company
are cancelled. The program commenced on May 25, 2022 and will terminate on May 24, 2023, or on such earlier date as the Company
completes its purchases pursuant to the notice of intention. Under this bid, during the year ended December 31, 2022, 2.5 million
shares at an average price of $23.51 per share were repurchased for cancellation.
On May 20, 2021 the TSX accepted the Company's notice of intention to commence a NCIB , allowing the Company to repurchase, at
its discretion, up to 7.5 million common shares in the open market or as otherwise permitted by the TSX, subject to the normal terms
and limitations of such bids. Common shares purchased by the Company are cancelled. The program commenced on May 25, 2021
and was terminated on May 24, 2022, as the Company completed its purchases pursuant to the notice of intention. Under this bid, no
shares were repurchased for cancellation.
On May 21, 2020 the TSX accepted the Company's notice of intention to commence a NCIB, allowing the Company to repurchase, at
its discretion, up to 7.5 million common shares in the open market or as otherwise permitted by the TSX, subject to the normal terms
and limitations of such bids. Common shares purchased by the Company are cancelled. The program commenced on May 25, 2020
and was terminated on May 24, 2021, as the Company completed its purchases pursuant to the notice of intention. Under this bid, no
shares were purchased for cancellation.
The Company entered into an Automatic Share Purchase Plan ("ASPP") with a broker that allows the purchase of common shares for
cancellation under the NCIB at any time during predetermined trading blackout periods. As at December 31, 2022, an obligation for the
repurchase of shares of $30.0 million (2021: $49.1 million) was recognized under the ASPP.
19. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Capital
The Company’s objective is to maintain a robust, cost-effective capital structure that ensures resilience, supports its long-term growth
strategy, and maximizes operating flexibility. In allocating capital to investments to support its earnings goals, the Company establishes
internal hurdle return rates for capital initiatives. Capital projects are generally financed with internal cash flows and senior debt where
required.
The Company uses leverage in its capital structure to reduce the cost of capital. The Company’s goal is to maintain its primary credit
ratios 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 and cash equivalents, less long-term
debt and bank indebtedness (“Net Debt”) and earnings before interest, taxes, depreciation and amortization (“EBITDA”).
In addition to credit facilities and equity, the Company uses leases and a very limited recourse accounts receivable securitization
program as additional sources of financing.
The Company has maintained a stable dividend distribution that is based on a long-term sustainable net earnings base. From time to
time, the Company has purchased shares for cancellation pursuant to normal course issuer bids and to satisfy awards under its
Restricted Share Unit Plan described in Note 22.
There have been no material changes to the Company’s risk management activities during the year ended December 31, 2022.
38
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
Financial Instruments
The Company’s financial assets and liabilities are classified into the following categories:
Cash and cash equivalents
Accounts receivable
Notes receivable
Accounts payable and accruals
Long-term debt
Derivative instruments(i)
Investments
FVTPL
Amortized cost
Amortized cost
Amortized cost
Amortized cost
FVTPL
FVTOCI
(i)
These derivative instruments may be designated as cash flow hedges, fair value hedges or net investments in foreign operations hedges as
appropriate. Derivatives designated as cash flow hedges are classified as FVTOCI.
The Company applies hedge accounting as appropriate and uses derivatives and other non-derivative financial instruments to manage
its exposures to fluctuations in foreign exchange rates, interest rates, and commodity prices.
The fair values and notional amounts of derivative financial instruments as at December 31, are shown below:
Cash flow hedges
Foreign exchange contracts
Interest rate swaps
Fair value hedges(iii)
Foreign exchange contracts
Commodity contracts
Derivatives not designated in a
formal hedging relationship
Interest rate swaps
Foreign exchange contracts
Commodity contracts
Total fair value
Current(ii)(iv)(v)
Non-current(ii)
Total fair value
2022
2021
Notional
amount(i)
Fair value
Asset(ii) Liability(ii)
Notional
amount(i)
Fair value
Asset(ii) Liability(ii)
$ 18,033 $
537 $
1 $ 48,810 $
277 $
117
$ 493,664
16,755
— $ 469,828
—
5,565
$ 17,292 $
1
$
277 $ 5,682
$
$
9,164 $
17 $
316 $ 26,770 $
149 $
220
8,925
143
— $ 24,747
325
—
$
160 $
316
$
474 $
220
$ 897,677 $
— $ 6,526 $ 481,942 $
— $ 11,667
$ 223,438
$ 72,962
618
3,418
1,880 $ 105,907
— $ 100,820
1,027
1,689
375
—
$ 4,036 $ 8,406
$ 21,488 $ 8,723
$ 18,117 $ 8,723
3,371
—
$ 2,716 $ 12,042
$ 3,467 $ 17,944
$ 3,467 $ 16,887
—
1,057
$ 21,488 $ 8,723
$ 3,467 $ 17,944
(i) Unless otherwise stated, notional amounts are stated at the contractual Canadian dollar equivalent.
(ii) The current portion of derivative assets and liabilities are recorded in prepaid expenses and other assets and other current liabilities, respectively, in
the Consolidated Balance Sheets. The non-current portion of derivative assets and liabilities are recorded in other long-term assets and other long-
term liabilities, respectively, in the Consolidated Balance Sheets.
(iii) The carrying amount of the hedged items in the Consolidated Balance Sheets are recorded at the inverse of the associated hedging instruments
and are equal to the accumulated fair value hedge adjustments less hedge ineffectiveness.
(iv) As at December 31, 2022, the above fair value of current assets has been decreased by $2.7 million (December 31, 2021: decreased by $0.5
million), and the above fair value of current liabilities has decreased by $0.0 million (December 31, 2021: $0.0 million) on the Consolidated Balance
Sheets, representing the difference in the fair market value of exchange traded commodity contracts and the initial margin requirements. The
difference in margin requirements and fair market value is net settled in cash each day with the futures exchange and is recorded within cash and
cash equivalents.
39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
The Company's financial assets and liabilities include accounts receivable, notes receivable and accounts payable and accruals for
which fair value approximates the carrying value due to their short-term nature.
The carrying value of long-term debt as at December 31, 2022 and 2021 approximates its fair value. The fair value of the Company’s
long-term debt has been classified as Level 2 in the fair value hierarchy and was estimated based on discounted future cash flows
using current rates for similar financial instruments subject to similar risks and maturities.
The Company's cash and cash equivalents, and derivative instruments are recorded at fair value. The fair value of cash and cash
equivalents approximates carrying value due to the short-term nature of the assets and has been classified as Level 1 in the fair value
hierarchy. The fair values of the Company’s interest rate and foreign exchange derivative instruments were estimated using current
market measures for interest rates and foreign exchange rates. Commodity futures and commodity options contracts are exchange-
traded and over-the-counter. Fair value is determined based on exchange prices and other observable market data.
Net gains and losses on financial instruments recognized at fair value through profit or loss consist of realized and unrealized gains and
losses on derivatives that were de-designated or were otherwise not in a formal hedging relationship.
For the year ended December 31, 2022, the Company recorded a gain of $16.5 million (2021: gain of $3.9 million) on financial
instruments recognized at fair value through profit or loss.
The table below sets out fair value measurements of derivative financial instruments as at December 31, 2022 using the fair value
hierarchy:
Assets:
Foreign exchange contracts
Commodity contracts(i)
Interest rate swaps
Liabilities:
Foreign exchange contracts
Interest rate swaps
Level 1
Level 2
Level 3
Total
$
—
3,561
—
$
3,561
$
$
—
—
—
1,172
—
16,755
17,927
2,197
6,526
8,723
—
—
—
—
—
—
—
$
1,172
3,561
16,755
$
21,488
$
$
2,197
6,526
8,723
(i)
Level 1 commodity contracts are net settled and recorded as a net asset or liability on the Consolidated Balance Sheets.
There were no transfers between levels for the year ended December 31, 2022. Determination of fair value and the resulting hierarchy
requires the use of observable market data whenever available. The classification of a financial instrument in the hierarchy is based
upon the lowest level of input that is significant to the measurement of fair value. For financial instruments that are recognized at fair
value on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing
categorization at the end of each reporting period.
Accumulated other comprehensive income (loss)
The Company estimates that $10.4 million, net of tax of $3.5 million, of the unrealized gain included in accumulated other
comprehensive income (loss) will be reclassified into net (loss) earnings within the next 12 months. The actual amount of this
reclassification will be impacted by future changes in the fair value of financial instruments designated as cash flow hedges. The actual
amount reclassified could differ from this estimated amount.
During the year ended December 31, 2022 a loss of $3.0 million net of tax of $0.4 million was released to earnings from accumulated
other comprehensive (loss) income and included in the net change for the year (2021: loss of $0.8 million net of tax of $0.3 million).
The risks associated with the Company’s financial instruments and policies for managing these risks are detailed below.
Market Risk
Interest Rate Risk
Interest rate risk refers to the risk that the value of a financial instrument or cash flows associated with the instrument will fluctuate due
to changes in market interest rates.
The Company’s interest rate risk arises from long-term borrowings issued at fixed rates that create fair value interest rate risk and
variable-rate borrowings that create cash flow interest rate risk. In addition, the Company’s cash balances are typically invested in
short-term interest-bearing assets.
The Company manages its interest rate risk exposure by using a mix of fixed and variable-rate debt and periodically using interest rate
derivatives to achieve the desired proportion of variable to fixed-rate debt.
40
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
As at December 31, 2022, the Company had variable-rate debt of $1,708.2 million with a weighted average interest rate of 7.0% (2021:
$1,240.0 million at a weighted average interest rate of 2.4%). The Company has converted $493.7 million of the variable-rate debt to
fixed-rate debt using interest rate swaps with a weighted average interest rate of 4.2% (2021: $469.8 million at a weighted average
interest rate of 3.7%). In addition, the Company was exposed to floating interest rates on its accounts receivable securitization program.
As at December 31, 2022, the cash advance received pursuant to this program was $122.5 million at a weighted average interest rate
of 4.6% (2021: $120.0 million at a weighted average interest rate of 0.9%). The maximum amount available to the Company under
these programs is $135.0 million (2021: $120.0 million).
As at December 31, 2022, the Company had fixed-rate debt of $7.0 million (2021: $12.2 million) with a weighted average effective
interest rate of 3.6% (2021: 3.5%). Changes in market interest rates cause the fair value of long-term debt with fixed interest rates to
fluctuate but do not affect net earnings, as the Company’s debt is carried at amortized cost and the carrying value does not change as
interest rates change.
As at December 31, 2022, 27.2% (2021: 35.1%) of the Company’s outstanding debt and revolving accounts receivable securitization
program were not exposed to interest rate movements, after including the effect of interest rate swaps.
The Company's designated interest rate swaps are accounted for as cash flow hedges to reduce variability of floating rate interest
payments of variable-rate debt. These interest rate swaps settle periodically against CDOR and Term SOFR benchmarks and mature in
2023 and 2024 respectively.
The critical terms of designated interest rate swaps and the associated hedged items are closely aligned. The Company performs a
qualitative assessment of the effectiveness, and it is expected that the value of the interest rate swaps and the value of the
corresponding hedged items will systematically change in opposite directions in response to movements in the underlying interest
rates. Sources of hedge ineffectiveness include the effect of the counterparty and the Company's own credit risk on the fair value of
the interest rate swaps and a lack of access to negative benchmark interest rates on the Company's borrowings.
The change in fair values of interest rate hedges used as the basis for recognizing ineffectiveness for the year ended December 31,
2022 and 2021 were as follows:
2022
Hedging
instruments Hedged items
2021
Hedging
instruments
Hedged items
Cash flow hedges
$
16,755 $
(16,783) $
(5,565) $
5,578
Amounts recognized in the consolidated statements of other comprehensive income (loss) as at December 31, consist of:
Cash flow hedges
Balance, beginning of year
Eligible change in fair value of interest rate swaps
Balance, end of year
2022
2021
Continuing
hedges
Discontinued
hedges
Continuing
hedges
Discontinued
hedges
$
$
(5,565) $
22,320
16,755
$
— $
(18,372) $
—
12,807
— $
(5,565) $
—
—
—
It is estimated that, all else constant, an adverse hypothetical 10.0% change in the variable interest rate would result in a decrease in
the fair value of the Company’s interest rate swaps of $2.4 million, with a decrease in earnings before taxes of $0.0 million and a
decrease in other comprehensive income (loss) of $2.4 million.
Foreign Exchange Risk
Foreign exchange risk refers to the risk that the value of financial instruments or cash flows will fluctuate due to changes in foreign
exchange rates.
The Company’s foreign exchange risk arises primarily from transactions in currencies other than Canadian dollars, including sales and
purchases in foreign currencies, foreign denominated borrowings, and investments in foreign operations. The primary currencies to
which the Company is exposed to are the U.S. dollar and the Japanese yen.
The Company uses foreign exchange forward contracts to manage foreign exchange transaction exposures. The Company uses
forward contracts which are accounted for as fair value hedges to minimize the price risk assumed under forward priced contracts with
suppliers. The Company also uses forward contracts which are accounted for as cash flow hedges as well as non-designated derivative
instruments to minimize the price risk of anticipated transactions. The Company uses cross-currency interest rate swaps to manage the
foreign denominated borrowings.
The critical terms of foreign exchange forward contracts and the associated hedged items are similar. The Company performs a
quantitative assessment of the effectiveness, and it is expected that the value of the forward contracts and the value of the
41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
corresponding hedged items will systematically change in opposite direction in response to movements in the underlying exchange
rates. The main source of hedge ineffectiveness in these hedging relationships is the effect of the counterparty and the Company's own
credit risk on the fair value of the foreign exchange contracts, which is not reflected in the fair value of the hedged item attributable to
changes in foreign exchange rates. Other sources of ineffectiveness include differences in the underlying terms of the foreign exchange
contracts and the hedged items.
The Company's designated foreign exchange forward contracts mature within one year. The average exchange rate of the Company's
U.S. dollar denominated contracts is 1.34 Canadian dollar per U.S. dollar (2021: 1.27) and Euro denominated contracts in U.S. dollars
is 1.01 Euros per U.S. dollar.
As at December 31, 2022, the Company had US$1,003.5 million (2021: US$637.2 million) of U.S. dollar-denominated borrowings that
were drawn on the Credit Facility of which US$265.0 million is designated as a net investment hedge of the Company's U.S.
operations. Foreign exchange gains and losses on the designated drawings are recorded in shareholders' equity in accumulated other
comprehensive income (loss) and offset translation adjustments on the underlying net assets of the U.S. operations, which are also
recorded in accumulated other comprehensive income (loss).
The loss on the net investment hedge recorded in other comprehensive income (loss) for the year ended December 31, 2022 was
$20.0 million, net of tax of $3.8 million (2021: gain of $2.2 million, net of tax of $0.5 million).
The critical terms of the designated U.S. dollar-denominated borrowings and the associated hedged items are the same. The
Company performs a qualitative assessment of the effectiveness, and it is expected that the value of the designated U.S. dollar-
denominated borrowings and the value of the corresponding hedged items will systematically change in opposite direction in response
to movements in the underlying exchange rates. There are no sources of hedge ineffectiveness.
The change in fair values of foreign exchange hedges used as the basis for recognizing ineffectiveness for the year ended
December 31, 2022 and 2021 were as follows:
Cash flow hedges
Fair value hedges
Net investment in foreign operations
2022
Hedging
instruments
Hedged
items
2021
Hedging
instruments Hedged items
$
$
$
500 $
(299) $
(518) $
290 $
160
$
(71) $
(160)
49
(3,776) $
3,776 $
20,060 $
(20,060)
Amounts recognized in the Consolidated Statements of Other Comprehensive Income (Loss) as at December 31, consist of:
Cash flow hedges
Balance, beginning of year
Eligible change in fair value of foreign exchange contracts
Reclassification adjustment to profit and loss
Balance, end of year
Net investment in foreign operations
Balance, beginning of year
Eligible change in fair value of U.S. denominated drawings
Balance, end of year
2022
2021
Continuing
hedges
Discontinued
hedges
Continuing
hedges
Discontinued
hedges
160 $
(3,931) $
117 $
(3,931)
358
—
—
3,931
43
—
—
—
518 $
— $
160 $
(3,931)
2022
2021
Continuing
hedges
Discontinued
hedges
Continuing
hedges
Discontinued
hedges
20,060 $
(10,289) $
17,344 $
(10,289)
(23,836)
—
2,716
—
(3,776) $
(10,289) $
20,060
$
(10,289)
$
$
$
$
42
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
Gains (losses) related to the Company's outstanding designated derivative financial instruments recorded in the Consolidated
Statements of Net (Loss) Earnings as at December 31, were as follows:
Cash flow hedges
Foreign exchange contracts
Fair value hedges
Foreign exchange contracts
2022
2021
Effective
portion(i)(ii)
Ineffective
portion(i)
Effective
portion(i)(ii)
Ineffective
portion(i)
$
$
— $
18 $
— $
(7)
(228) $
13 $
(3,041) $
112
(i) Gains (losses) are recorded in cost of goods sold in the Consolidated Statements of Net (Loss) Earnings.
(ii) The effective portion recognized in earnings for cash flow hedges represents the accumulated other comprehensive income (loss) released to the
Consolidated Statements of Net (Loss) Earnings due to early termination of hedging relationships. The effective portion recognized in earnings for
fair value hedges represents the change in fair value of hedging instruments; the change in the hedged items is recorded at the inverse of the
associated hedging instruments within cost of goods sold in the Consolidated Statements of Net (Loss) Earnings.
It is estimated that, all else constant, an adverse hypothetical 10.0% change in the value of the Canadian dollar against all relevant
currencies would result in a decrease in the fair value of the Company’s foreign exchange forward contracts of $15.5 million, with a
decrease in earnings before taxes of $16.1 million and an increase in other comprehensive income (loss) of $0.6 million. The impact on
earnings before taxes does not include the offsetting impact of the foreign exchange risk inherent in the transactions being hedged.
It is estimated that, all else constant, an adverse hypothetical 10.0% change in the value of the Canadian dollar against all relevant
currencies would result in a decrease in the fair value of the Company’s cross-currency interest rate swaps of $89.4 million, with a
decrease in earnings before taxes of $89.4 million and a decrease in other comprehensive income (loss) of $0.0 million. The impact on
earnings before taxes is expected to be offset by the revaluation of U.S. dollar-denominated borrowings which were exchanged for
Canadian dollars through the cross-currency interest rate swap transactions.
Commodity Price Risk
The Company is exposed to price risk related to commodities such as live hogs, fuel, and purchases of certain other agricultural
commodities used as raw materials, including feed grains. The Company uses fixed price contracts with suppliers as well as exchange-
traded and over-the-counter futures and options to manage its exposure to price fluctuations.
The Company uses futures which are accounted for as fair value hedges as well as non-designated derivative instruments to minimize
the price risk assumed under forward priced contracts with suppliers. The Company also uses futures which are accounted for as cash
flow hedges as well as non-designated derivative instruments to minimize the price risk of anticipated transactions. The Company does
not use component hedging as part of its commodity price risk management.
The critical terms of the futures contracts and the associated hedged items are similar. The Company performs a quantitative
assessment of the effectiveness, and it is expected that the value of the futures contracts and the value of the corresponding hedged
items will systematically change in opposite directions in response to movements in the underlying commodity prices. Hedge
ineffectiveness in these hedging relationships is due to timing differences in the term of the futures contracts and the hedged items.
The Company's designated commodity futures contracts mature within one year. The outstanding designated commodity futures
contracts as at December 31, were as follows:
Fair value hedges
Hog contracts(i)
(i)
Hog contracts' unit of measure is cwt
2022
2021
Average
Price (USD)
Volume
(000's)
Average
Price (USD)
Volume
(000's)
$
91.09
72 $
88.54
221
43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
The change in fair values of commodity hedges used as the basis for recognizing ineffectiveness for the year ended December 31,
2022 and 2021 were as follows:
Cash flow hedges
Fair value hedges
2022
2021
Hedging
instruments
Hedged
items
Hedging
instruments
Hedged
items
$
$
— $
143 $
— $
— $
—
(143) $
325 $
(325)
Amounts recognized in the Consolidated Statements of Other Comprehensive Income (Loss) as at December 31, consist of:
Cash flow hedges
Balance, beginning of year
Eligible change in fair value of commodity contracts
Balance, end of year
2022
2021
Continuing
hedges
Discontinued
hedges
Continuing
hedges
Discontinued
hedges
$
$
— $
—
— $
— $
—
— $
395 $
(395)
— $
291
(291)
—
Gains (losses) related to the Company's outstanding designated derivative financial instruments recorded in the Consolidated
Statements of Net (Loss) Earnings as at December 31, were as follows:
Cash flow hedges
Commodity contracts
Fair value hedges
Commodity contracts
2022
2021
Effective
portion(i)(ii)
Ineffective
portion(i)
Effective
portion(i)(ii)
Ineffective
portion(i)
$
$
— $
— $
— $
(182) $
— $
2,094 $
(9)
—
(i) Gains (losses) are recorded in cost of goods sold in the Consolidated Statements of Net (Loss) Earnings.
(ii) The effective portion recognized in earnings for cash flow hedges represents the accumulated other comprehensive income (loss) released to the
Consolidated Statements of Net (Loss) Earnings due to early termination of hedging relationships. The effective portion recognized in earnings for
fair value hedges represents the change in fair value of hedging instruments; the change in the hedged items is recorded at the inverse of the
associated hedging instruments within cost of goods sold in the Consolidated Statements of Net (Loss) Earnings.
It is estimated that, all else constant, an adverse hypothetical 10.0% change in market prices of the underlying commodities would
result in a decrease in the fair value of underlying outstanding derivative contracts of $1.8 million, with a decrease in earnings before
taxes of $1.8 million and $0.0 million in other comprehensive income (loss). The impact on earnings before taxes does not include the
offsetting impact of the commodity price risk inherent in the transactions being hedged.
Credit Risk
Credit risk refers to the risk of losses due to failure of the Company’s customers and counterparties to meet their payment obligations.
In the normal course of business, the Company is exposed to credit risk from its customers, substantially all of which are in the retail,
foodservice, and industrial channels. The Company performs ongoing credit evaluations of new and existing customers’ financial
condition and reviews the collectibility of its trade accounts receivable and other receivables in order to mitigate any possible credit
losses. The Company records a loss allowance of expected credit losses for financial assets that are measured at amortized cost. At
each reporting date, the Company measures the loss allowance at an amount equal to the lifetime expected credit losses if the credit
risk on its financial assets has increased significantly since initial recognition. If credit risk has not significantly increased since initial
recognition, the Company measures the loss allowance at an amount equal to the 12-month expected credit losses. Average accounts
receivable days sales outstanding for the year is consistent with historic trends.
Management believes concentrations of credit risk with respect to accounts receivable are limited due to the generally high credit
quality of the Company’s major customers, the large number and geographic dispersion of smaller customers, and the operation of the
accounts receivable securitization facility as described in Note 25. The Company does, however, conduct a significant amount of
business with a small number of large grocery retailers. The Company's two largest customers as at December 31, 2022 comprise
approximately 23.1% (2021: two largest customers representing 23.5%) of total sales.
44
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
The Company is also exposed to credit risk on its notes receivable from an unconsolidated structured entity in respect of the accounts
receivable securitization program as described in Note 25. Management believes that this credit risk is limited by the long-term AA- debt
rating held by the financial institution financing the third-party trust. The Company is exposed to credit risk on its cash and cash
equivalents (comprising primarily of deposits with Canadian chartered banks) and non-exchange-traded derivative contracts. The
Company mitigates this credit risk by transacting primarily with counterparties that are major international financial institutions with long-
term debt ratings of A or higher. The Company’s maximum exposure to credit risk at the balance sheet date consisted primarily of the
carrying value of non-derivative financial assets and non-exchange-traded derivatives with positive fair values.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. The
contractual undiscounted cash flows payable in respect of financial liabilities as at the balance sheet date, were as follows:
Financial liabilities
Accounts payable and accruals
$
485,114
—
—
— $
485,114
December 31, 2022
Due within 1
year
Due between
1 and 3 years
Due between
3 and 5 years
Due after 5
years
Total
Debt
Foreign exchange contracts
Interest rate swaps
Lease obligations
Other liabilities
Total
1,153
2,197
6,526
37,048
56,864
1,963
1,713,165
—
—
—
—
57,619
776
42,001
70,374
—
—
—
—
—
1,716,281
2,197
6,526
207,042
57,640
$
588,902
60,358
1,755,166
70,374 $ 2,474,800
The Company manages liquidity risk by monitoring forecasted and actual cash flows, minimizing reliance on any single source of credit,
maintaining sufficient undrawn committed credit facilities and managing the maturity profiles of financial assets and financial liabilities to
minimize re-financing risk.
As at December 31, 2022, the Company had available undrawn committed credit of $291.5 million (2021: $736.6 million) under the
terms of its principal banking arrangements as described in Note 15. These banking arrangements are subject to certain covenants and
other restrictions.
20. INTEREST EXPENSE AND OTHER FINANCING COSTS
Interest on borrowings from credit facility
Interest on lease obligations
Interest on securitized receivables
Interest on government loans
Amortization of deferred financing charges
Credit facility standby fees and other interest
Interest paid and capitalized
2022
2021
$
64,000
$
28,921
5,850
3,412
329
1,642
3,025
6,906
1,100
332
1,681
4,274
$
78,258
$
43,214
(22,217)
(20,344)
$
56,041
$
22,870
Interest paid during the year ended December 31, 2022 was $77.1 million (2021: $42.4 million).
21. (LOSS) EARNINGS PER SHARE
Basic (loss) earnings per share amounts are calculated by dividing the net (loss) earnings of the Company by the weighted average
number of shares outstanding during the year.
Diluted (loss) earnings per share amounts are calculated by dividing the net (loss) earnings of the Company by the weighted average
number of shares outstanding during the year, adjusted for the effects of potentially dilutive instruments.
45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
2021
Weighted
average
number of
shares(i)
123.5
1.2
EPS
$ 0.83
The following table sets forth the calculation of basic and diluted (loss) earnings per share (“EPS”):
Twelve months ended December 31,
Net loss
2022
Weighted
average
number of
shares(i)
EPS
Net earnings
Basic
Stock options(ii)
Diluted
$
(311,893)
123.6
$ (2.52)
$ 102,823
—
$
(311,893)
123.6
$ (2.52)
$ 102,823
124.7
$ 0.82
(i)
(ii)
In millions.
Excludes the effect of approximately 5.1 million (2021: 3.1 million) options and performance shares that are anti-dilutive.
22. SHARE-BASED PAYMENT
Under the Maple Leaf Foods Share Option Plans in effect as at December 31, 2022, the Company may grant options to its employees
and employees of its subsidiaries to purchase shares of common stock. Under the Maple Leaf Foods Restricted Share Unit Plan in
effect as at December 31, 2022, the Company may grant RSUs and PSUs to its employees and employees of its subsidiaries entitling
employees to receive common shares or cash at the Company’s option. Options, RSUs, and PSUs are granted from time to time by the
Human Resources and Compensation Committee or by the Board of Directors on the recommendation of the Human Resources and
Compensation Committee. The vesting conditions for options, RSUs, and PSUs are specified by the Board of Directors and may
include the continued service of the employee with the Company and/or other criteria based on measures of the Company’s
performance.
Under the Company’s Share Purchase and Deferred Share Unit Plans, eligible Directors may elect to receive their retainer and fees in
the form of DSUs or as common shares of the Company.
Stock Options
A summary of the status of the Company’s outstanding stock options as at December 31, 2022 and 2021, and changes during these
years are presented below:
Outstanding, beginning of year
Granted
Exercised
Forfeited
Outstanding, end of year
Options currently exercisable
2022
2021
Weighted
average
exercise
price
$ 26.22
$ 28.20
$ 22.52
$ 25.96
$ 26.82
$ 27.35
Options
outstanding
6,076,750
730,500
(588,770)
(118,800)
6,099,680
4,140,480
Weighted
average
exercise
price
$ 25.48
$ 25.10
$ 20.18
$ 28.38
$ 26.22
$ 27.24
Options
outstanding
5,889,550
1,251,750
(1,053,450)
(11,100)
6,076,750
3,511,250
All outstanding stock options vest and become exercisable over a period not exceeding five years (time vesting) from the date of grant.
The outstanding options have a term of seven years.
46
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
The number of options outstanding as at December 31, 2022, is as follows:
Options outstanding
Options currently
exercisable
Options subject to
time vesting only
Range of exercise
prices
Number
outstanding
Weighted
average
exercise
price
Weighted
average
remaining
term of options
(in years)
Weighted
average
exercise
price
Number
exercisable
Number
outstanding
Weighted
average
exercise
price
$ 22.52
to $ 25.10
3,038,630
$ 23.79
$ 28.20
to $ 30.86
2,355,900
$ 29.06
$ 31.57
to $ 32.75
705,150
$ 32.45
Total Options
6,099,680
$ 26.82
4.0
3.4
2.1
3.6
1,775,730
$ 23.39
1,262,900
$ 24.35
1,659,600
$ 29.42
696,300
$ 28.20
705,150
$ 32.45
—
$
—
4,140,480
$ 27.35
1,959,200
$ 25.72
The number of options outstanding as at December 31, 2021, is as follows:
Options outstanding
Options currently
exercisable
Options subject to time
vesting only
Range of
exercise prices
Number
outstanding
Weighted
average
exercise
price
Weighted
average
remaining
term of options
(in years)
Weighted
average
exercise
price
Number
outstanding
Weighted
average
exercise
price
Number
exercisable
$ 22.52
to $ 25.10
3,712,000
$ 23.62
$ 28.38
to $ 30.86
1,659,600
$ 29.42
$ 31.57
to $ 32.50
705,150
$ 32.45
Total Options
6,076,750
$ 26.22
4.3
3.3
3.2
3.9
1,498,150
$ 22.69
2,213,850
$ 24.24
1,321,350
$ 29.66
338,250
$ 28.46
691,750
$ 32.46
13,400
$ 31.57
3,511,250
$ 27.24
2,565,500
$ 24.84
At grant date, each option series is measured at fair value based on the Black-Scholes formula. Expected volatility is estimated by
considering historic average share price volatility. The inputs used in this model for the options granted during the year ended
December 31, 2022 and 2021 are shown in the table below(i):
Share price at grant date
Exercise price
Expected volatility
Option life (in years)(ii)
Expected dividend yield
Risk-free interest rate(iii)
(i) Weighted average based on number of units granted.
(ii)
Expected weighted average life.
(iii) Based on Government of Canada bonds.
2022
$29.91
$28.20
28.4 %
4.5
3.3 %
2.0 %
2021
$26.38
$25.10
26.4 %
4.5
2.7 %
0.8 %
The fair value of options granted during the year ended December 31, 2022 was $4.2 million (2021: $5.8 million). Expenses relating to
current and prior year options were $4.7 million (2021: $5.3 million).
Restricted Share Units and Performance Share Units
The awards granted under the 2006 Plan are satisfied either by shares to be purchased on the open market by a trust established for
that purpose, or cash at the time of vesting.
Under the 2006 Plan, one common share of the Company may be distributed for each RSU, and these units vest strictly over time. The
PSUs are subject to both time and performance vesting. The PSUs provide the holder with up to two RSUs based on the achievement
47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
of predetermined Company performance targets. All outstanding RSUs and PSUs under the 2006 Plan vest over a period of
approximately one to three years from the date of grant.
A summary of the status of the Company’s RSU plans (including PSUs) as at December 31, 2022 and 2021 and changes during these
periods is presented below:
Outstanding, beginning of year
Granted
Exercised
Forfeited
Outstanding, end of year
2022
2021
Share units
outstanding
Weighted
average
fair value
at grant
Share units
outstanding
Weighted
average
fair value
at grant
1,742,421
728,640
$
$
23.59
26.62
1,550,135
572,810
$
$
24.99
24.15
(498,842) $
26.52
(319,791) $
30.61
(91,061) $
24.80
(60,733) $
27.56
1,881,158
$
23.93
1,742,421
$
23.59
The fair value of RSUs and PSUs granted during the 2022 was $16.4 million (2021: $11.9 million). Expenses for the year ended
December 31, 2022 relating to current and prior year RSUs and PSUs, were $13.8 million (2021: $15.5 million), of which $0.8 million
(2021: $0.0 million) will be paid in cash and the remainder settled in shares.
During the year ended December 31, 2022 the Company stated its intention to settle a portion of the outstanding RSUs and PSUs in
cash, and an amount of $3.6 million (2021: $0.0 million) was re-classified from equity to other liabilities. For the year ended December
31, 2022 the total liability recorded for units that will be settled in cash is $1.8 million (2021: $0.0 million).
The key assumptions used in the valuation of fair value of RSUs granted during the year are shown in the table below(i):
Expected RSU life (in years)
Forfeiture rate
Risk-free discount rate
(i) Weighted average based on number of units granted.
Deferred Share Units
2022
3.1
15.4 %
2.1 %
2021
3.1
13.8 %
0.5 %
If an eligible Director elects to receive their retainer and fees as common shares of the Corporation, the Company purchases shares at
market rates on behalf of the participating Directors.
In 2013, the Company adopted a new share purchase and Deferred Share Unit plan (the “2013 DSU Plan”), which replaced the
Company’s existing share purchase and deferred share unit plan. The 2013 DSU Plan allows the Company, at its discretion, the
flexibility to satisfy DSUs in common shares, either issued from treasury or purchased by the Company on the open market.
Expenses for the year ended December 31, 2022 were $1.7 million (2021: $1.2 million).
A summary of the status of the Company’s outstanding DSUs as at December 31, 2022 and 2021, and changes during these years are
presented below:
Units outstanding
Outstanding, beginning of year
Additions: granted
Additions: dividends reinvested
Exercised
Outstanding, end of year
2022
307,483
53,513
10,775
—
371,771
2021
277,299
53,033
7,739
(30,588)
307,483
23. SEGMENTED FINANCIAL INFORMATION
During the year ended December 31, 2022, the Company had two reportable segments. These segments offer different products, with
separate organizational structures, brands, and financial and marketing strategies. The Company's chief operating decision makers
48
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
regularly review internal reports for these businesses. Performance of the Meat Protein Group is based on profitable revenue growth,
Adjusted Operating Earnings and Adjusted EBITDA, while the performance of the Plant Protein Group in the short term is focused on
obtaining Adjusted EBITDA neutral or better results. Refer to section 34. Non-IFRS Financial Measures, of the Company's
Management's Discussion and Analysis for the year ended December 31, 2022, for the definitions of these non-IFRS financial
measures. The operations of each segment are described as follows:
(a) The Meat Protein Group is comprised of prepared meats, ready-to-cook and ready-to-serve meals, and value-added fresh pork and
poultry products that are sold to retail, foodservice and industrial channels, and agricultural operations in pork and poultry. The
Meat Protein Group includes leading brands such as Maple Leaf®, Maple Leaf Prime®, Maple Leaf Natural Selections®,
Schneiders®, Schneiders® Country Naturals®, Mina®, Greenfield Natural Meat Co.®, and many leading regional brands.
(b) The Plant Protein Group is comprised of refrigerated plant protein products, premium grain-based protein and vegan cheese
products sold to retail, foodservice and industrial channels. The Plant Protein Group includes the brands Lightlife® and Field
Roast™.
2022
2021
Meat
Protein
Group
Plant
Protein
Group
Non-
Allocated(i)
Total(ii)
Meat
Protein
Group
Plant
Protein
Group
Non-
Allocated(i)
Total(ii)
Sales
Gross profit (loss)
$ 4,593,639
169,325
(23,901) $ 4,739,063 $ 4,366,742
184,101
(29,761) $ 4,521,082
$ 474,680
(36,502)
(14,040) $ 424,138 $ 676,798
(12,815)
(4,908) $ 659,075
Selling, general and administrative expenses
$ 338,926
92,789
— $ 431,715 $ 334,274
132,793
— $ 467,067
Earnings (loss) before income taxes
$ 123,247
(344,603)
(77,613) $ (298,968) $ 336,101
(146,089)
(40,306) $ 149,706
Interest expense and other financing costs
Impairment of goodwill
Other expense
—
—
—
56,041
56,041
190,911
—
190,911
5,013
1,812
7,532
14,356
Restructuring and other related costs
7,494
22,589
—
30,083
—
—
1,513
4,910
—
—
481
—
22,870
22,870
—
—
12,528
14,522
—
4,910
Earnings (loss) from operations
$ 135,754
(129,291)
(14,040) $
(7,578) $ 342,524
(145,608)
(4,908) $ 192,008
Start-up expenses from Construction Capital(iii)
54,511
4,759
—
59,270
9,871
3,529
—
13,400
Change in fair value of biological assets
Unrealized gain on derivative contracts
—
—
—
—
15,108
15,108
(1,068)
(1,068)
—
—
—
—
6,474
6,474
(1,566)
(1,566)
Adjusted Operating Earnings
$ 190,265
(124,531)
— $ 65,732 $ 352,395
(142,079)
— $ 210,316
Depreciation and amortization
193,456
18,946
—
212,402
180,221
15,373
—
195,594
Items included in other (expense) income representative
of ongoing operations
(5,013)
208
(455)
(5,260)
(5,527)
(481)
(444)
(6,452)
Adjusted EBITDA
$ 378,708
(105,377)
(455) $ 272,874 $ 527,089
(127,187)
(444) $ 399,458
(i) Non-Allocated includes eliminations of inter-segment sales and associated cost of goods sold, and non-allocated costs which are comprised of
income and expenses not separately identifiable to reportable segments or are not part of the measures used by the Company when assessing a
segment’s operating results.
(ii) Totals may not add due to rounding.
(iii) Start-up expenses are temporary costs as a result of operating new facilities that are or have been classified as Construction Capital. These costs
include but are not limited to training, product testing, yield and labour efficiency variances, duplicative overheads and other temporary expenses
required to ramp-up production.
The following summarizes capital expenditures by segments:
Meat Protein Group
Plant Protein Group
Non-allocated capital expenditures
Total capital expenditures
2022
2021
$ 282,385
$ 513,921
13,343
16,392
103,080
12,438
$ 312,120
$ 629,439
49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
Information About Geographic Areas
The following summarizes sales by country of origin:
Canada
U.S.
Japan
Other
Sales
The following summarizes the location of non-current assets by country:
Canada
U.S.
Other
Total non-current assets(i)
2022
2021
$ 3,534,793
$ 3,324,253
608,035
385,692
210,543
565,846
415,144
215,839
$ 4,739,063
$ 4,521,082
As at December 31,
2022
2021
$ 3,013,567
$ 2,910,048
303,320
478,062
673
963
$ 3,317,560
$ 3,389,073
(i)
Excludes financial instruments, investments designated as financial instruments, employee benefits, and deferred tax assets.
Information About Major Customers
For the year ended December 31, 2022, the Company reported Meat and Plant Protein sales to two customers representing 11.7% and
11.4% (2021: 12.2% and 11.3%) of total sales. No other sales were made to any one customer that represented in excess of 10.0% of
total sales.
24. GOVERNMENT INCENTIVES
During the year ended December 31, 2022, the Company recognized government incentives totaling $18.6 million (2021: $25.2 million).
During the year ended December 31, 2022, the Company recognized $17.1 million (2021: $20.0 million) of government incentives as a
reduction in the cost of related assets. Of this amount, $6.9 million was received from the Government of Ontario and $9.7 million from
the Government of Canada to assist with the design, development and construction of the London, Ontario poultry facility. In addition,
the Company received $0.5 million in other incentives.
During the year ended December 31, 2022, the Company recognized $1.5 million (2021: $5.2 million) of government incentives in net
(loss) earnings. This included $0.6 million of funding from the Ontario Government's COVID-19 Worker Income Protection Benefit which
enabled the Company to prevent job losses and helped ensure a stable and secure supply chain. The Company qualified for the
subsidy and the decision to participate in the program was carefully considered, taking into account a number of business imperatives
including protecting staff and consideration of all stakeholders. In addition, the Company received $0.9 million in other incentives.
The Company currently recognizes $7.0 million of government debt on the Consolidated Balance Sheets from the Government of
Canada to assist in innovation within the agricultural sector in Canada. Refer to Note 15 of the Consolidated Financial Statements.
25. COMPOSITION OF THE COMPANY
Unconsolidated Structured Entity
The Company, as part of a securitization agreement, sells a portion of its receivables to an unconsolidated third-party trust.
On June 24, 2022, the Company amended its accounts receivable securitization facility (the "Securitization Facility") by extending the
maturity to June 24, 2024. The maximum cash advance available to the Company under the Securitization Facility is $135.0 million
(2021: $120.0 million). The Securitization Facility provides cash funding with a proportion of the Company's receivables being sold, and
provides the Company with competitively priced financing and further diversifies its funding sources. Under the Securitization Facility,
the Company has sold certain of its trade accounts receivable, with very limited recourse, to an unconsolidated third-party trust financed
by an international financial institution with a long-term AA- debt rating, for cash and short-term notes back to the Company. The
receivables are sold at a discount to face value based on prevailing money market rates. The Company retains servicing responsibilities
for these receivables.
As at December 31, 2022, trade accounts receivable being serviced under this program amounted to $171.1 million (2021: $145.6
million). In return for the sale of its trade receivables, the Company will receive cash of $122.5 million (2021: $112.3 million) and notes
50
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
receivable in the amount of $48.6 million (2021: $33.3 million). The notes receivable are non-interest bearing and are settled on the
settlement dates of the securitized accounts receivable. Due to the timing of receipts and disbursements, the Company may, from time
to time, also record a receivable or payable related to the Securitization Facility. As at December 31, 2022, the Company recorded a net
receivable in the amount of $10.1 million (2021: $7.7 million in accounts payable and accruals) in notes receivable.
The Company’s maximum exposure to loss due to its involvement with a structured entity is equal to the current carrying value of the
interest in the notes receivable due from the structured entity. The Company has not recognized any income or losses with its interest in
unconsolidated structured entities for the year ended December 31, 2022 and 2021.
26. RELATED PARTY TRANSACTIONS
The Company sponsors a number of defined benefit, defined contribution and post-retirement benefit plans. During the year ended
December 31, 2022, the Company contributed $32.3 million (2021: $36.9 million) to these plans.
Key Management Personnel are those persons having authority and responsibility for planning, directing, and controlling the activities of
the Company, directly or indirectly, including any external director of the Company.
Remuneration of Key Management Personnel of the Company is comprised of the following expenses:
Short-term employee benefits
Salaries, bonuses, and fees
Company car allowances
Other benefits
Total short-term employee benefits
Severance benefits
Post-employment benefits
Share-based compensation
Total remuneration
2022
2021
$
10,277
$ 11,975
410
402
380
131
$
11,089
$ 12,486
1,082
795
9,815
—
777
13,769
$
22,781
$ 27,032
During the year ended December 31, 2022, Key Management Personnel of the Company exercised 0.4 million share options (2021: 0.6
million share options) granted under the Maple Leaf Foods share option plans for an amount of $9.5 million (2021: $12.7 million).
The Company’s largest shareholder is McCain Capital Inc. (“MCI”). The Company has been informed that Mr. Michael H. McCain,
Executive Chair and Chief Executive Officer of the Company, is the controlling shareholder of MCI. For the year ended December 31,
2022, the Company received services from MCI and companies directly or indirectly owned by MCI in the amount of $2.6 million (2021:
$2.6 million), which represented the market value of these transactions with MCI. As at December 31, 2022, $0.1 million (2021: $0.6
million) was owed to MCI and companies directly or indirectly owned by MCI relating to these transactions.
McCain Financial Advisory Services ("MFAS"), is an entity jointly controlled by individuals including Mr. Michael H. McCain. For the
years ended December 31, 2022 and 2021, the Company provided services to and received services from, MFAS for a nominal amount
which represented the market value of the transactions.
27. COMMITMENTS AND CONTINGENCIES
The Company has been named as a defendant in several legal actions and is subject to various risks and contingencies arising in the
normal course of business. Management is of the opinion that the outcome of these uncertainties will not have a material adverse effect
on the Company’s financial position.
In the normal course of its operations, the Company becomes involved in various legal and regulatory actions relating to its commercial
activities and relationships, construction activities, employment matters, product liabilities, and other matters. Even if the Company is
not found liable for these claims, the cost of defending these actions may be material.
Among the legal matters in which the Company is involved include an ongoing investigation by the Competition Bureau into the
Canadian bread industry, including alleged price fixing and related securities disclosure issues. The investigation covers a time horizon
that includes the period when the Company was a majority shareholder of Canada Bread Company, Limited ("Canada Bread"). The
Company sold its interest in Canada Bread, which was a stand-alone public company, in 2014. The final outcome of the investigation
and any other actions or any future claims cannot be predicted with certainty or reliably estimated. Unfavourable resolution of these or
other legal matters could have a material adverse effect on the Company, its financial condition and its reputation.
In the normal course of business, the Company and its subsidiaries enter into sales commitments with customers, and purchase
commitments with suppliers. These commitments are for varying terms and can provide for fixed or variable prices. The Company
believes that these contracts serve to reduce risk, and does not anticipate that losses will be incurred on these contracts.
51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 2022 | MAPLE LEAF FOODS INC.
The Company entered into a number of contracts related to the construction of new and expanded facilities. As at December 31, 2022
these contract commitments were approximately $45.0 million (2021: $245.0 million).
28. BUSINESS COMBINATIONS
(a) 2021 Acquisition
On June 25, 2021, the Company completed the acquisition of a poultry processing facility and associated supply from Certm Inc.
(formerly Cericola Farms Inc.), a privately held Canadian company for total consideration of $62.1 million (cash due at closing: $40.0
million; 2018 deposit of $20.2 million and working capital adjustments of $1.9 million). This acquisition concluded the purchase and sale
agreement dated June 27, 2018 pursuant to which the Company previously acquired two poultry plants and associated supply, which
had been previously recorded as a right-of-use asset with a corresponding lease obligation, with a put/call option to purchase a third
processing facility. The Company has financed the transaction using a combination of cash on hand and drawings on existing credit
facilities. The acquisition has been accounted for as a business combination. The Company recognized goodwill of $7.6 million which is
attributable to synergies created by expanding the Company's share of regulated input supply.
The Company finalized the amounts recorded in the business combination during the fourth quarter of 2021.
The final fair value of the consideration transferred for the poultry processing facility and associated poultry supply consists of the
following:
Purchase price paid upon closing of the put option
Cash deposit prepaid in the year ended December 31, 2018
Working capital and other adjustments
Total consideration paid in cash
Purchase Price
June 25, 2021
$
$
40,000
20,185
1,928
62,113
During the fourth quarter of 2021 the Company finalized amounts recorded in the business combination which resulted in the following
adjustments to the preliminary purchase price allocation:
Current assets
Accounts receivable(i)
Prepaid and other assets
Non-current assets
Property and equipment
Intangible assets - poultry quota
Goodwill
Current liabilities
Accounts payable and accruals
Total net assets acquired
June 25, 2021
Preliminary
amounts
Adjustments
Final amounts
$
$
1,339
70
13,651
46,155
—
(879)
60,336
— $
—
(2,549)
(3,317)
7,643
—
1,777 $
1,339
70
11,102
42,838
7,643
(879)
62,113
(i)
Pertain to trade receivables for which contractual cash flows not expected to be collected are not significant.
(b) Transaction Costs
During the year ended December 31, 2021, the Company recorded transaction costs of $0.1 million that have been excluded from the
consideration paid and have been recognized as an expense in other expense.
There were no transaction costs recorded in 2022.
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