2019 ANNUAL REPORT
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SOMETHING SWEET
FOR EVERYONE
OUR GOAL IS TO OFFER THE BEST QUALITY
SUGARS AND SWEETENERS TO SATISFY
OUR CUSTOMERS.
TOTAL DIVIDEND (thousand of $)
OCT NOV
DEC JAN
FEB MAR APR MAY
JUN JUL AUG
SEP TOTAL
Fiscal 2019
Fiscal 2018
–
–
–
–
9,451
9,517
–
–
–
–
9,451
9,517
–
–
–
–
9,451
9,487
–
–
–
–
9,440
37,793
9,450
37,971
PER SHARE DIVIDEND ($)
OCT NOV
DEC JAN
FEB MAR APR MAY
JUN JUL AUG
SEP TOTAL
Fiscal 2019
Fiscal 2018
–
–
–
–
0.09
0.09
–
–
–
–
0.09
0.09
–
–
–
–
0.09
0.09
–
–
–
–
0.09
0.09
0.36
0.36
1
ROGERS AT A GLANCE
SUGAR VS. MAPLE SYRUP
PRODUCTS
GEOGRAPHIC PARTITION
25%
Maple Syrup
5%
Other
4%
Europe
14%
U.S.
75%
Sugar
77%
Canada
ROGERS holds all of the common shares of Lantic Inc., which
LANTIC also owns all of the common shares of The Maple
operates cane sugar refineries in Montreal, Québec and
Treat Corporation (“TMTC”) and is headquartered in Montréal,
Vancouver, British Columbia, as well as the only Canadian
Québec. TMTC operates bottling plants in Granby, Dégelis
sugar beet processing facility in Taber, Alberta. Lantic’s
and in St-Honoré-de-Shenley, Québec and in Websterville,
sugar products are marketed under the “Lantic” trademark
Vermont. TMTC’s products include maple syrup and derived
in Eastern Canada, and the “Rogers” trademark in Western
maple syrup products and are sold under various brand
Canada and include granulated, icing, cube, yellow and brown
names, such as L.B. Maple Treat, Great Northern, Decacer and
sugars, liquid sugars and specialty syrups.
Highland Sugarworks.
2019 ANNUAL REPORT 2
REPORT FROM
THE CHAIRMAN
The year ended September 28, 2019 brought significant challenges for the
business and the resulting consolidated adjusted EBITDA was $87.8 million.
These results include gains from continued solid volume growth in Sugar,
offset by costs from operational challenges in both Sugar and Maple as
well as increased competition in Maple. Notwithstanding these lower than
targeted results, progress on improving the operating platform of both
the Sugar and Maple segments continues. We believe diversification in the
natural sweetener segment will, in time, bring greater top line growth and
profitability.
Year-over-year volume for the Sugar segment was approximately 21,300 metric tonnes
greater than in fiscal 2018. A significant portion of this improvement was attributable to liquid
sugar which is benefiting from low #11 sugar values and improved price competitiveness
with respect to High Fructose Corn Syrup (“HFCS”). In addition, an increase in conversion
from HFCS to liquid sugar stems from food processors response to consumer negative
attitudes and perception towards HFCS. Overall, adjusted gross margin for the sugar
business was approximately $127 per metric tonne compared to approximately $138 per
metric tonne last year. The lower margin is largely attributable to unexpected business costs
associated with the Vancouver capital project and to a lesser extent by lower profitability of
the Taber facility where #11 raw sugar values were lower than the comparable year in the
first quarter. Finally, fiscal 2018 included a one-time non-cash pension plan income.
In the Maple segment, fiscal 2019 included plans to consolidate and change our
manufacturing platform to support expected top line sales growth. The footprint optimization
project created some short-term capacity constraints and combined with the impact of
a tighter than historically labour market, lowered plant efficiencies and throughputs. A
significant new market entrant, a continued deceleration in market growth and a below
average 2018 maple crop created very difficult market conditions which resulted in higher
costs, sales losses, lower selling margins and an inability to realize planned account growth.
Altogether, the Maple products segment adjusted EBITDA was lower than anticipated at
$14.7 million. The business is focused on fixing what is within its control. In fiscal 2020, we
reasonably expect improvements from operations, access to more labour and lower cost
of manufacturing stemming from increased capacity. Competitor behaviours and market
growth opportunities are less predictable and will require perseverance and smart tactics.
ROGERS SUGAR INC. 3
We believe diversification
in the natural sweetener
segment will, in time,
bring greater top line
growth and profitability.
Overall, fiscal 2019 was a difficult year. The Board and Management believe the combined
business can do better. Management feels unexpected costs in Sugar in Vancouver are
behind us. Improved logistics and efficiencies in Maple are imminent, although competitive
conditions in Maple have been difficult. Competitive market issues aside, the lesson this
year is better execution. Management is applying learnings from the challenges faced and
making substantive changes.
In fiscal 2019, Rogers paid quarterly dividends of $0.09 per share for a yearly total of $0.36
per share. The declared dividend for fiscal 2019 of $37.8 million by Rogers’ is higher than
stated free cash flow of $30.8 million but, stated free cash flow was reduced by $7.8 million
due to non recurring costs associated with the Vancouver capital project and one-time
additional capital spending for the Taber air emission project. Adjusted for these two
elements, free cash flow appropriately covered the dividend requirements in the year.
The Board of Directors always assesses the appropriateness of the dividend based on the
performance and outlook for the business and views sustainable returns to shareholders
and maintenance of the dividend as a critical strategic priority.
During the year, Rogers put in place a Normal Course Issuer Bid and as a result, the
Company purchased and cancelled 122,206 common shares for a total cash consideration
of $0.6 million.
Finally, as we make these commitments to change, I would like to thank all of our employees
for their efforts and resolve to strengthen the Company. We are always guided by our
obligation to both ensure and enhance the value of your investment. We thank you, our
shareholders, for the trust you have accorded us.
On behalf of the Board of Directors,
Dallas H. Ross
Chairman
November 20, 2019
2019 ANNUAL REPORT 4
REPORT FROM
THE PRESIDENT AND CEO
Fiscal 2019 proved to be a challenging year for the business. While we made progress against our
core strategies and have positioned ourselves well for the future our 2019 results did not meet
our expectations. Taking some time to reflect on our results, our vision and enabling strategies is
a healthy and appropriate exercise: validating what is working, what we should improve, what we
should stop doing and what we should initiate is a good business process.
The growth in sugar consumption in the short term has been driven by the conversion of high fructose corn syrup
to natural sugar. These conversion opportunities are diminishing and we continue to observe consumers and food
processors increasingly adopting alternative natural sweeteners and, in parallel, looking at new sugar reduction solutions
to address evolving market demands. Our investment in the Maple platform has provided Lantic with a significant
position in the alternative natural sweetener space. We believe our vision also compels us to investigate and explore
natural sugar reduction solutions. We know, the complexity of the functional role of sugar in food processing and
the high cost of sugar reduction solutions will always limit the substitution potential of traditional sweetener demand.
Notwithstanding this fact, we believe, in time, more cost effective and label friendly solutions will emerge. We will follow
these developments closely with a view to find a platform that would complement and leverage our current capabilities.
We are pleased with the solid momentum achieved in our sugar business in 2019. Positive market place growth,
execution on our eastern strategy to improve customer mix, and profitability dovetailed well with significantly
improved manufacturing and supply chain performance in our eastern refining operations. Contrasting this
good news, a major capital investment in our sugar decolourization system in Vancouver created unplanned
operating costs and supply chain disruptions in Western Canada. Some unusual events - A provincial gas
pipeline interruption, and a site flood - contributed to the challenge. We conducted a thorough review
and have taken steps to reduce the chances of reoccurrence. At the close of the fiscal year, after a 9-month
commissioning period, we are approaching steady-state operations and have increased confidence in the
system. Our attention in Fiscal 2020 will be to leverage the learnings and changes made in 2019 and to execute
the best way possible to meet whatever challenges may come our way.
The maple business did not deliver on our financial expectations in 2019. Strategically, we remain
firmly committed to this segment. We see it as an excellent fit in the alternative natural sweetener
segment strategy. It is clear that most of the headwinds we are facing are rooted in changes in
the competitive environment and slower than forecasted growth in consumption. The start-up
of a new player and two early post-acquisition account losses and a realignment of one
of our key customer’s supply chains to align with a more “made in America” sourcing
strategy, have combined to result in lower than projected volume, and compressed
margins. These market fundamentals represent the largest cause for the misses to
our original expectations. Exacerbating this were some delays to integration gains,
mostly in the area of reduction in syrup costs, product overfill and manufacturing
ROGERS SUGAR INC. 5
cost improvements. The latter will eventually meet our regular
access for Canadian beet sugar and sugar containing products.
threshold for return on investment when completed in the spring
Our Market Access Strategy is equally applicable to our Maple
of 2020. High employee turnover and absenteeism, particularly
Syrup business. Historically largely unencumbered by tariffs, it
in the Granby region, have also caused delays in our progress.
was interesting to see the Canadian government put maple syrup
Record low unemployment rates in rural Quebec are a significant
on the retaliatory tariff list for the US steel and aluminum dispute.
contributing factor to our labour challenge. Developing more
We are now back to free and fair trade between Canada and the
competitive and flexible working solutions to attract and retain a
USA on the maple syrup portfolio, which offers us an excellent
quality workforce is a key focus and an important enabler for this
opportunity to expand sales beyond our borders. In fact, 80% of
business. Maple is an important part of our long-term business
our revenues in this newly acquired business come from export
plan and we will work through these marketplace forces as we
sales, primarily to the U.S., which continues to provide good
have in the past with our sugar business. In the short term, the key
opportunities for growth in both the traditional retail and food
focus for the business is completing the manufacturing platform
ingredient channels.
changes, achieving low cost supplier status and providing the
sales team with a platform for growth. These changes should be
Our Acquisition Strategy is an important enabler to our overall
completed by mid-Fiscal 2020.
vision for the company. To achieve our vision of becoming a
leading North American Natural Sweetener Supplier, we will need
Reflecting briefly on our strategies, we continue to believe our
to find new targets for growth. Our immediate focus in this area is
core strategies of Operational Excellence; Market Access and
the ongoing integration of the Maple business, but in parallel we
Acquisition/Brand Development/Innovation provide the right
continue to build insights and explore potential ways to further
focus for our business. This focus helps us communicate our
strengthen our product offering and market development within
priorities and channel our resources, human and capital, towards
North America through strategic partnerships that allow us to
making meaningful progress.
leverage our existing business footprint.
With the flatter growth outlook for sugar, we have made a
Our strategies and future success require hard work, perseverance
greater effort to increase our investment in ROI projects that
and teamwork and I would like to take this opportunity to thank
will deliver bottom line growth. Our operating budget earmarks
our valued employees for all their efforts and support this past
approximately $6 million of capital to support investments in
year and for their ongoing commitment to ensure we continue to
solutions that lower energy costs, increase automation and
deliver value to our shareholders.
deliver new value added manufacturing capabilities. In addition
to our funding, the business was successful in obtaining $4 million
in grant funding to increase the scale and scope of work. These
funds will help to further augment our commitments and improve
overall returns. Key projects in fiscal 2020 include packing line
automation projects in Montreal and Taber along with multiple
sustainability projects related to waste, heat recovery and process
John Holliday
efficiency across all three sugar manufacturing sites. This capital
President and Chief Executive Officer
is complemented by continuous investment in replacement of
November 20, 2019
equipment that has reached the end of its useful life which,
together, lower our costs, improve our reliability and help deliver
on our Operational Excellence Strategy.
In a complex and dynamic political environment, we believe the
eventual ratification of the new modernized CUSMA agreement
will be a positive development for our business. The new
agreement will provide a better environment for investment by
food processors and create opportunities for improved market
2019 ANNUAL REPORT 6
PROUDLY CANADIAN WITH
ROOTS FROM COAST TO COAST
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2
6
7
4
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8
ROGERS
TMTC
1. Head Office and
Cane Refinery
VANCOUVER, BC
2. Beet Plant
TABER, AB
3. Distribution Centre
and Blending Facility
TORONTO, ON
4. Administrative Office
and Cane Refinery
MONTREAL, QC
5. Head Office —
Bottling Plant, Eastern Sales
and Distribution
GRANBY, QC
6. Bottling Plant, Warehousing
and Shipping
SAINT-HONORÉ-DE-
SHENLEY, QC
7. Bottling Plant, Warehousing
and Shipping
DÉGELIS, QC
8. Botting Plant, Warehousing
and Shipping
WEBSTERVILLE, VT
ROGERS SUGAR INC. 7
MANAGEMENT’S DISCUSSION AND ANALYSIS
CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal years ended
September 28, 2019 and September 29, 2018
2019 Annual ReportMANAGEMENT’S DISCUSSION & ANALYSIS 8
T his Management’s Discussion and Analysis (“MD&A”) of
Rogers Sugar Inc.’s (“Rogers” or the “Company”) audited
consolidated financial statements for the fiscal years ended
September 28, 2019 and September 29, 2018 should be read in
words “may,” “will,” “should,” “anticipate,” “intend,” “assume,”
“expect,” “plan,” “believe,” “estimate,” and similar expressions
and the negative of such expressions, identify forward-looking
statements. Although this is not an exhaustive list, the Company
conjunction with the audited consolidated financial statements
cautions investors that statements concerning the following
and related notes for the years ended September 28, 2019 and
subjects are, or are likely to be, forward-looking statements: future
September 29, 2018. The Company’s MD&A and consolidated
prices of raw sugar, natural gas costs, the opening of special
financial statements are prepared using a fiscal year which typically
refined sugar quotas in the United States (“U.S.”), beet production
consists of 52 weeks, however, every five years, a fiscal year consists
forecasts, growth of the maple syrup industry, anticipated benefit of
of 53 weeks. The fiscal years ended September 28, 2019, September
the TMTC and Decacer acquisitions (including expected adjusted
29, 2018 and September 30, 2017 all consist of 52 weeks.
EBITDA), the status of labour contracts and negotiations, the level
of future dividends and the status of government regulations and
All financial information contained in this MD&A and audited
investigations. Forward-looking statements are based on estimates
consolidated financial statements are prepared in accordance with
and assumptions made by the Company in light of its experience
International Financial Reporting Standards (“IFRS”). All amounts
and perception of historical trends, current conditions and expected
are in Canadian dollars unless otherwise noted, and the term
future developments, as well as other factors that the Company
“dollar”, as well as the symbol “$”, designate Canadian dollars
believes are appropriate and reasonable in the circumstances, but
unless otherwise indicated.
there can be no assurance that such estimates and assumptions
will prove to be correct. Forward-looking statements involve known
Management is responsible for preparing the MD&A. Rogers’s
and unknown risks, uncertainties and other factors that may cause
audited consolidated financial statements and MD&A have been
actual results or events to differ materially from those anticipated
approved by its Board of Directors upon the recommendation
in such forward-looking statements. Actual performance or results
of its Audit Committee prior to release. This MD&A is dated
could differ materially from those reflected in the forward-looking
November 20, 2019.
statements, historical results or current expectations. Readers
should also refer to the section “Risks and Uncertainties” at the
Additional information relating to Rogers, Lantic Inc. (“Lantic”)
end of this MD&A for additional information on risk factors and
(Rogers and Lantic together referred as the “Sugar segment”), The
other events that are not within the Company’s control. These risks
Maple Treat Corporation (“TMTC”), formally known as L.B. Maple
are also referred to in the Company’s Annual Information Form in
Treat Corporation (“LBMTC”), 9020-2292 Québec Inc. (“Decacer”)
the “Risk Factors” section.
and Highland Sugarworks Inc. (“Highland”) (the latter three
companies together referred to as “TMTC” or the “Maple products
Although the Company believes that the expectations and
segment”), including the annual information form, quarterly and
assumptions on which forward-looking information is based are
annual reports, management proxy circular, short form prospectus
reasonable under the current circumstances, readers are cautioned
and various press releases is available on Rogers’s website at www.
not to rely unduly on this forward-looking information as no
LanticRogers.com or on the Canadian Securities Administrators’
assurance can be given that it will prove to be correct. Forward-
System for Electronic Document Analysis and Retrieval (“SEDAR”)
looking information contained herein is made as at the date of this
website at www.sedar.com. Information contained in or otherwise
MD&A and the Company does not undertake any obligation to
accessible through our website does not form part of this MD&A
update or revise any forward-looking information, whether as a
and is not incorporated into the MD&A by reference.
result of events or circumstances occurring after the date hereof,
FORWARD-LOOKING STATEMENTS
unless so required by law.
ABOUT ROGERS SUGAR INC
This report contains Statements or information that are or may be
“forward-looking statements” or “forward-looking information”
Rogers is the largest refined sugar producer in Canada and the
within the meaning of applicable Canadian securities laws. Forward-
largest maple syrup bottler in the world. Our aspiration is to become
looking statements may include, without limitation, statements and
a leading North American natural sweetener supplier by executing
information which reflect the current expectations of the Company
on our three core strategies, namely, operational excellence, market
with respect to future events and performance. Wherever used, the
access and acquisition. On August 5 and November 18, 2017, the
Rogers Sugar Inc.MANAGEMENT’S DISCUSSION & ANALYSIS 9
Company made progress in its third strategy by acquiring LBMTC
volume sold within this market in fiscal 2019 by Canadian refiners
and Decacer. As a result, the Company diversified and solidified
had a slight decrease of approximately 1% year-over-year.
its leadership position in this growing natural sweetener market.
Rogers encompasses two reportable segments; the Sugar segment
The liquid market segment is comprised of core users whose
and the Maple product segment.
process or products require liquid sucrose and another customer
group that can substitute liquid sucrose with high fructose corn
Rogers’ head office is in Vancouver, British Columbia and its
syrup (“HFCS”). The purchasing patterns of substitutable users are
administrative office is located in Montréal, Québec.
largely influenced by the absolute price spread between HFCS and
liquid sugar. Increasingly, other considerations, such as ingredient
Our 800 employees are key to our success and employee safety
labeling could also bear some influence on the purchasing
is continuously at the forefront of our priorities. Each of the
decision. The liquid segment grew by approximately 11% during
Company’s manufacturing operations incorporates occupational
the current fiscal year as a result of an increase in overall demand
health and safety components in its annual planning which are
and conversion from HFCS to sucrose that was beneficial for the
reviewed weekly by senior management and quarterly by the Board
Canadian refiners.
of Directors.
SUGAR SEGMENT
Facilities
Lantic’s Taber plant is the only beet sugar factory in Canada and
is therefore the only producer of Canadian origin sugar. As such,
this plant is the sole participant in an annual Canadian-specific
quota to the U.S. of 10,300 metric tonnes. As part of the recently
concluded Canada-United-States-Mexico Agreement (“CUSMA”),
Lantic is the only sugar producer with operating facilities across
an additional quota of 9,600 metric tonnes of Canadian origin
Canada with cane refineries in Montréal and Vancouver and a
sugar has been awarded to Canada. Shipments will begin following
sugar beet factory in Taber, Alberta. Lantic also operates a custom
ratification of the agreement by the three respective governments.
blending and packaging operation and a distribution center in
In addition, there is a 7,090 metric tonnes U.S. global refined sugar
Toronto, Ontario. The strategic location of these facilities confers
quota, which opens and is usually filled on a first-come first-served
operating flexibility and the ability to service all customers across
pro-rata basis on October 1st of every year.
the country efficiently and on a timely basis.
Our Products
By-products relating to beet processing and cane refining activities
are sold in the form of beet pulp, beet and cane molasses. Beet
All Lantic operations supply high quality white sugar as well as a
pulp is sold domestically and to export customers for livestock feed.
broad portfolio of specialty products which are differentiated by
The production of beet molasses and cane molasses is dependent
colour, granulation, and raw material source.
on the volume of sugar processed through the Taber, Montréal and
Sales are focused in three specific market segments: industrial,
consumer, and liquid products. The domestic market represents
Our Supply
Vancouver plants.
more than 90% of the Company’s total volume.
The global supply of raw cane sugar is ample. Over the last several
In fiscal 2019, the domestic refined sugar market continued to
and South America for its Montréal and Vancouver cane refineries.
years, Lantic has purchased most of its raw cane sugar from Central
show modest growth and increased by approximately 2% versus
last fiscal year.
In fiscal 2018, the Company entered into a two-year agreement
with the Alberta Sugar Beet Growers (the “Growers”) for the supply
The industrial granulated segment is the largest segment accounting
of sugar beets to the Taber beet plant, for which the crop harvested
for approximately 60% of all shipments. The industrial segment is
in the Fall of 2019 is the first year of the agreed contract. Any
comprised of a broad range of food processing companies that
potential shortfall in beet sugar production related to crop issues is
serve both the Canadian and American markets.
mostly replaced by refined cane sugar from the Vancouver refinery,
which acts as a swing capacity refinery and from the Montréal
In the consumer market segment, a wide variety of products are
refinery if required.
offered under Lantic and Rogers brand name. This segment has
remained fairly stable during the past several years although
2019 Annual ReportMANAGEMENT’S DISCUSSION & ANALYSIS 10
Pricing
Bottled maple syrup is packaged in a variety of ways and sizes,
In fiscal 2019, the price of raw sugar fluctuated between U.S.
including bottles, plastic jugs and the traditional cans. Bottled
10.68 cents per pound and U.S. 14.24 cents per pound and closed
maple syrup is available in all commercial grades and in organic
at U.S. 11.92 cents per pound at the end of the fiscal year, which
and non-organic varieties. TMTC’s bottled maple syrup is sold
was 0.72 cents higher than the closing value at September 29, 2018.
under a variety of brands, including Uncle Luke’s™, L.B. Maple
Although price variation during the year was less than in fiscal 2018
Treat™, Great Northern™, Decacer, Highland Sugarworks™ and
when raw sugar prices fluctuated between U.S. 9.83 and U.S. 15.49
Tapp and Spout TM.
cents per pound, the average raw sugar price in fiscal 2019 was
slightly lower than fiscal 2018 average. Since 2017, the global sugar
Bulk maple syrup is mainly sold in containers of 4L or 17L, barrels
market has been in a surplus situation driven by increased output in
and totes to foodservice retailers as well as other wholesalers. Bulk
India and Thailand while world consumption remained flat.
maple syrup is also sold for industrial use for bottling or for use in
food production, and privately under the L.B. Maple Treat™ brand.
The price of refined sugar deliveries from the Montréal and
Vancouver raw cane facilities is directly linked to the price of
Maple derived products include maple blended syrup, maple
the #11 world raw sugar market traded on the Intercontinental
spread, maple cookies, maple taffy and other maple candies,
Exchange (“ICE”). All sugar transactions are economically hedged,
popcorn, teas and coffees. Maple products are mainly sold under
thus eliminating the impact of volatility in world raw sugar prices.
the L.B. Maple Treat™ and Highland Sugarworks™ brands.
This applies to all refined sugar sales made by these plants. Liquid
sales to HFCS substitutable customers are normally priced against
Our Supply
competing HFCS prices and are historically the lowest margin sales
The biggest concentration of maple trees is located in Québec,
for the Company.
New Brunswick, Ontario, Vermont, Maine and New Hampshire.
The production of maple syrup takes place over a period of 6 to 8
Whereas higher #11 world raw sugar values may have the effect of
weeks during the months of March and April of each year.
reducing the competitiveness of the liquid business versus HFCS,
the opposite holds true for our beet operation. In Taber, the raw
Canada remains the largest producer of maple syrup, with over
material used to produce sugar is sugar beets, for which a fixed
77% of the world’s production. The U.S. is the only other major
price, plus a scaled incentive linked to higher raw sugar values,
producing country in the world, producing approximately 22%
is paid by Lantic to the Growers. As a result, Lantic benefits from,
of the global supply. Québec represented 71% of the world’s
or alternatively, absorbs some of the changes associated with
production in 2018.
fluctuations in world raw sugar prices for all volume sold, excluding
non U.S. export volume.
MAPLE PRODUCTS SEGMENT
Facilities
There are approximately 7,300 commercial-scale maple syrup
producers in Québec. The maple syrup producers in Québec are
represented by the Producteurs et Productrices Acéricoles du
Québec (“PPAQ”). The PPAQ generally regulates the buying and
selling of bulk maple syrup.
TMTC operates three plants in Québec, namely, in Granby, Dégelis
In Québec, nearly 90% of the total production of maple syrup
and in St-Honoré-de-Shenley, and one in Websterville, Vermont.
is sold through the PPAQ to the authorized buyers, leaving only
On August 1, 2018, the Company announced its intention to
approximately 10% of the total production being sold directly by
relocate its Granby operation to a new built for purpose leased
the producers to consumers or grocery stores. The authorized
facility also located in Granby. The relocation is not expected to
buyer status is renewed on an annual basis.
occur until the beginning of calendar 2020. TMTC also uses a
storage facility in Dégelis and in St-Robert-Bellarmin, Québec, as
In 2002, the PPAQ set up a strategic maple syrup reserve in order to
well as a distribution centre in Richmond, British Columbia.
mitigate production fluctuations imputable to weather conditions
Our Products
and prevent such fluctuations from causing maple syrup prices
to spike or drop significantly. The reserve was initially established
TMTC’s products are comprised of the following: bottled maple
to set aside a production quantity equivalent to half of the then
syrup, bulk maple syrup, maple sugar and flakes, and ancillary or
annual demand. Each year, the PPAQ may organize a sale of a
derived maple products.
portion of its accumulated reserve. This allows bottlers to respond
to supply shortages in the event of a poor harvest or unplanned
Rogers Sugar Inc.MANAGEMENT’S DISCUSSION & ANALYSIS
11
growth and demand. As at February 28, 2019, the PPAQ had
vessel or the delivery of sugar to the Company’s customers. The
over 88 million pounds of bulk maple syrup, including 18 million
ICE rules are strict and are governed by the New York Board of
pounds of processing/industrial grade maple syrup, in its strategic
Trade. Any amount owed, due to the movement of the commodity
reserve, which represents a little over half of the annual global retail
being traded, has to be settled in cash the following day (margin
consumption.
call payments/receipts).
In 2004, the PPAQ adopted a policy with respect to production and
For the purchasing of raw sugar, the Company enters into long-term
marketing quotas which resulted in an annual production volume
supply contracts with reputable raw sugar suppliers (the “Seller”).
allocated to each maple syrup business. The main objective of
These long-term agreements will, amongst other things, specify
the policy is to adjust the supply of maple syrup in response to
the yearly volume (in metric tonnes) to be purchased, the delivery
consumer demand, and more specifically, to stabilize selling prices
period of each vessel, the terminal against which the sugar will be
for producers and, ultimately, the buying price for consumers, foster
priced, and the freight rate to be charged for each delivery. The
investments in the maple industry and maintain a steady number of
price of raw sugar will be determined later by the Seller, based
maple producing businesses in operation, regardless of their size.
upon the delivery period. The delivery period will correspond to
the terminal against which the sugar will be priced.
Outside of Québec, the maple syrup industry is generally organized
through producer-based organizations or associations, which
The selling of refined sugar by the Company is also done under the
promote maple syrup in general and its industry and serve as the
#11 world raw sugar market. When a sales contract is negotiated
official voice for maple syrup producers with the public.
with a customer, the sales contract will determine the period of the
contract, the expected delivery period against specific terminals
TMTC has relationships with more than 1,400 maple syrup producers,
and the refining margin and freight rate to be charged over and
mainly in Québec and Vermont. Most of these producers sell 100%
above the value of the sugar. The price of the sugar is not yet
of their production to TMTC. Through its strong relationship with
determined but needs to be fixed by the customer prior to delivery.
such producers, TMTC was able to develop a leading position in
The customer will make the decision to fix the price of the sugar
certified organic maple syrup.
when he feels the sugar market is favourable against the sugar
terminal, as per the anticipated delivery period.
Pricing
Pursuant to a Marketing Agreement entered into annually between
The Company purchases sugar beets from the Growers under a
the PPAQ and the Conseil de l’industrie de l’érable (the Maple
fixed price formula plus a scale incentive when raw sugar values
Industry Council (“MIC”)), authorized buyers must pay a minimum
exceed a certain price level. Except for sales to the U.S., under the
price to the PPAQ for any maple syrup purchased from the
export quota, to HFCS-substitutable accounts, and for other export
producers. The price is fixed on an annual basis and depends on
opportunities, all other sales are made using the same formula as
the grade of the maple syrup. In addition, a premium is added to
cane sugar, following the #11 world raw sugar price.
the minimum price for any organic maple syrup. Pursuant to the
Marketing Agreement, authorized buyers must buy maple syrup
Natural Gas
from the PPAQ.
The Board of Directors of Lantic approved an energy hedging policy
to mitigate the overall price risks in the purchase of natural gas.
USE OF FINANCIAL DERIVATIVES FOR HEDGING
The Company purchases between 3.0 million gigajoules and
Sugar
3.5 million gigajoules of natural gas per year for use in its refining
operations. To protect against large and unforeseen fluctuations,
In order to protect itself against fluctuations in the world raw sugar
the Company can hedge forward up to 90% of its estimated usage
market, the Company follows a rigorous hedging program for all
over the next 12 months and lower percentages of its estimated
purchases of raw cane sugar and sales of refined sugar.
usage on a longer-term basis.
The #11 world raw sugar market is only traded on the ICE, which
These gas hedges are unwound in the months that the commodity
trades in U.S. dollars. One can trade sugar futures forward for a
is used in the operations, at which time any gains or losses incurred
period of three years against four specific terminals per year
are then recognized for the determination of adjusted gross
(March, May, July and October). The terminal values are used to
margins and earnings.
determine the price settlement upon the receipt of a raw sugar
2019 Annual ReportMANAGEMENT’S DISCUSSION & ANALYSIS
12
Foreign Exchange
Certain export sales of maple syrup are denominated in U.S.
Raw sugar costs for all sales contracts are based on the U.S. dollar.
dollars, in Euro or in Australian dollars. In order to mitigate against
The Company also buys natural gas in U.S. dollars. In addition,
the movement of the Canadian dollar versus the U.S. dollars,
sugar export sales and some Canadian sugar sales are denominated
Euro or Australian dollars, TMTC enters into foreign exchange
in U.S. dollars.
hedging contracts with certain customers. These foreign exchange
hedging contracts are unwound when the money is received from
In order to protect itself against the movement of the Canadian
the customer, at which time any gains or losses incurred are then
dollar versus the U.S. dollar, the Company, on a daily basis,
recognized for the determination of adjusted gross margins and
reconciles all of its exposure to the U.S. dollar and will hedge the
earnings. Foreign exchange gains or losses on any unhedged sales
net position against various forward months, estimated from the
contracts are recorded when realized.
date of the various transactions.
SELECTED FINANCIAL DATA AND HIGHLIGHTS
The following is a summary of selected financial information of Rogers’ consolidated results for the 2019, 2018 and 2017 fiscal years. The
financial results for fiscal 2018 include those of Decacer since its acquisition on November 18, 2017 and the financial results for fiscal 2017
include those of LBMTC since its acquisition on August 5, 2017.
(unaudited)
Fourth Quarter
Fiscal Year
(In thousands of dollars, except volume and
per share information)
Total volume
2019
2018
2019
2018
2017
Sugar (metric tonnes)
196,903
200,147
741,144
719,875
694,465
Maple syrup (‘000 pounds)
10,163
10,549
42,377
45,919
Total revenues
Gross margin
Results from operating activities
Net (loss) earnings
Net (loss) earnings per share (basic)
Net (loss) earnings per share (diluted)
Dividends per share
Non- IFRS results (1)
Adjusted Gross Margin (1) (2)
Adjusted results from operating activities (1) (2)
Adjusted EBITDA (1) (2)
Adjusted net earnings (1) (2)
Adjusted net earnings per share (basic) (1) (2)
Trailing twelve months free cash flow (2)
$
$
207,572
211,807
29,073
(32,800)
(40,021)
(0.38)
(0.38)
0.09
$
29,026
17,153
22,215
9,910
0.09
30,843
29,255
18,231
9,633
0.09
0.09
0.09
$
32,764
21,740
26,332
12,122
0.12
47,802
(1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures.
(2) See “Adjusted results” section.
$
794,292
122,575
24,147
(8,167)
(0.08)
(0.08)
0.36
$
$
805,201
130,853
84,100
48,729
0.46
0.43
0.36
$
5,764
$
682,517
77,298
41,031
21,906
0.23
0.22
0.36
$
116,578
126,362
103,259
68,150
87,808
37,079
0.35
30,843
79,609
99,942
45,032
0.43
47,802
66,992
84,181
40,714
0.42
40,646
Rogers Sugar Inc.MANAGEMENT’S DISCUSSION & ANALYSIS
13
Adjusted results
Management believes that the Company’s financial results are
In the normal course of business, the Company uses derivative
more meaningful to management, investors, analysts and any
financial instruments consisting of sugar futures, foreign exchange
other interested parties when financial results are adjusted by the
forward contracts, natural gas futures and interest rate swaps.
gains/losses from financial derivative instruments. These adjusted
The Company has designated as effective cash flow hedging
financial results provide a more complete understanding of factors
instruments its natural gas futures and its interest rate swap
and trends affecting our business. This measurement is a non-GAAP
agreements entered into in order to protect itself against natural
measurement. See “Non-GAAP measures” section.
gas prices and interest rate fluctuations as cash flow hedges.
Derivative financial instruments pertaining to sugar futures and
Management uses the non-GAAP adjusted results of the operating
foreign exchange forward contracts are marked-to-market at each
company to measure and to evaluate the performance of the
reporting date and are charged to the consolidated statement of
business through its adjusted gross margin, adjusted EBIT and
earnings. The unrealized gains/losses related to natural gas futures
adjusted net earnings. In addition, management believes that these
and interest rate swaps are accounted for in other comprehensive
measures are important to our investors and parties evaluating our
income. The amount recognized in other comprehensive income is
performance and comparing such performance to past results.
removed and included in Net (loss) earnings under the same line
Management also uses adjusted gross margin, adjusted EBITDA,
item in the consolidated statement of earnings and comprehensive
Maple products segment Adjusted EBITDA, adjusted EBIT and
income as the hedged item, in the same period that the hedged
adjusted net earnings when discussing results with the Board of
cash flows affect Net (loss) earnings, reducing earnings volatility
Directors, analysts, investors, banks and other interested parties.
related to the movements of the valuation of these derivatives
See “Non-GAAP measures” section.
hedging instruments.
The results of operations would therefore need to be adjusted by the following:
Income (loss)
Fourth Quarter Fiscal 2019
Fourth Quarter Fiscal 2018
(In thousands of dollars)
Mark-to-market on:
Sugar futures contracts
Foreign exchange forward contracts
Total mark-to-market adjustment on derivatives
Cumulative timing differences
Adjustment to cost of sales
Amortization of transitional balance to cost of
sales and changes in fair value of
expired contracts for cash flow hedges
Total adjustment to costs of sales
Sugar
$
Maple
Products
$
1,744
(250)
1,494
(1,551)
(57)
342
285
—
(53)
(53)
(185)
(238)
—
(238)
Total
$
1,744
(303)
1,441
(1,736)
(295)
342
47
Sugar
$
(1,896)
290
(1,606)
(3,134)
(4,740)
582
(4,158)
Maple
Products
$
—
660
660
(11)
649
—
649
Total
$
(1,896)
950
(946)
(3,145)
(4,091)
582
(3,509)
2019 Annual ReportMANAGEMENT’S DISCUSSION & ANALYSIS
14
Income (loss)
(In thousands of dollars)
Mark-to-market on:
Sugar futures contracts
Foreign exchange forward contracts
Embedded derivatives
Total mark-to-market adjustment on derivatives
Cumulative timing differences
Adjustment to cost of sales
Amortization of transitional balance to cost of
sales and changes in fair value of
expired contracts for cash flow hedges
Total adjustment to costs of sales
Fiscal 2019
Maple
Products
$
—
(321)
—
(321)
49
(272)
—
(272)
Sugar
$
179
(220)
—
(41)
4,652
4,611
1,658
6,269
Total
$
179
(541)
—
(362)
4,701
4,339
1,658
5,997
Fiscal 2018
Maple
Products
$
—
1,263
—
1,263
309
1,572
Sugar
$
(3,154)
231
51
(2,872)
3,076
204
Total
$
(3,154)
1,494
51
(1,609)
3,385
1,776
2,715
—
(2,919)
1,572
2,715
(4,491)
The fluctuations in mark-to-market adjustment on derivatives are
On October 2, 2016, the Company adopted IFRS 9 (2014) Financial
due to the price movements in #11 world raw sugar and foreign
Instruments and designated natural gas futures as an effective cash
exchange variations. See “Non-GAAP measures” section.
flow hedging instrument. The transitional balances, representing
the mark-to-market value recorded as of October 1, 2016, are
Cumulative timing differences, as a result of mark-to-market gains
subsequently removed from other comprehensive income when
or losses, are recognized by the Company only when sugar is sold
the natural gas futures will be liquidated, in other words, when the
to a customer. The gains or losses on sugar and related foreign
natural gas is used. As a result, in fiscal 2019, the Company removed
exchange paper transactions are largely offset by corresponding
a gain of $0.3 million and $1.7 million from other comprehensive
gains or losses from the physical transactions, namely sale and
income and recorded a gain of the same amount in cost of sales for
purchase contracts with customers and suppliers. See “Non-GAAP
the fourth quarter and year-to-date, respectively. The transitional
measures” section.
balance relating to natural gas futures will be fully depleted in fiscal
2020. See “Non-GAAP measures” section.
The Company sells refined sugar to some clients in U.S. dollars.
Prior to October 1, 2016, these sales contracts were viewed as
The above described adjustments are added or deducted to the
having an embedded derivative if the functional currency of the
mark-to-market results to arrive at the total adjustment to cost of
customer was not U.S. dollars, the embedded derivative being the
sales. For the fourth quarter of the current year, the total cost of sales
source currency of the transaction. As of October 2, 2016, the U.S.
adjustment is a nominal gain to be deducted from the consolidated
dollars of these sales contract were no longer considered as being
results versus a loss of $3.5 million to be added to the consolidated
an embedded derivative as it was determined that the U.S. dollar
results for the comparable quarter last year. Year-to-date, the total
is commonly used in Canada. This change in estimate was applied
cost of sales adjustment is a gain of $6.0 million compared to a gain
prospectively, as a result, only the embedded derivatives relating
of $4.5 million to be deducted from the consolidated results for the
to sales contracts outstanding as of October 1, 2016 continued to
comparable period last year. See “Non-GAAP measures” section.
be marked-to-market every quarter until all the volume on these
contracts has been delivered, which occurred in fiscal 2018.
Rogers Sugar Inc.MANAGEMENT’S DISCUSSION & ANALYSIS
SEGMENTED INFORMATION
The following is a table showing the key results by segments:
Consolidated results
Fourth Quarter Fiscal 2019
Fourth Quarter Fiscal 2018
15
(In thousands of dollars)
Revenues
Gross margin
Administration and selling expenses
Distribution costs
Goodwill impairment
Sugar
$
Maple
Products
$
Total
$
Sugar
$
Maple
Products
$
Total
$
159,432
48,140
207,572
161,040
50,767
211,807
29,073
21,640
24,643
4,730
3,465
4,430
2,622
1,056
7,352
4,521
—
50,000
50,000
4,751
2,908
—
7,615
2,215
1,150
—
29,255
6,966
4,058
—
Results from operating activities
16,448
(49,248)
(32,800)
13,981
4,250
18,231
Non-GAAP results (1):
Adjusted Gross Margin (1)
Adjusted results from operating activities (1)
Adjusted EBITDA (1)
Additional information:
Addition to property, plant and equipment
and intangible assets
24,358
16,163
19,662
4,668
990
2,553
29,026
17,153
22,215
25,798
18,139
21,570
6,966
3,601
4,762
32,764
21,740
26,332
7,054
1,081
8,135
10,894
608
11,502
Consolidated results
Fiscal Year 2019
Fiscal Year 2018
(In thousands of dollars)
Revenues
Gross margin
Administration and selling expenses
Distribution costs
Goodwill impairment
Results from operating activities
Non-GAAP results:
Sugar
$
Maple
Products
$
Total
$
Sugar
$
Maple
Products
$
Total
$
595,878
198,414
794,292
601,958
203,243
805,201
100,301
22,274
122,575
102,578
28,275
130,853
21,609
13,153
9,962
3,704
—
50,000
65,539
(41,392)
31,571
16,857
50,000
24,147
21,070
10,760
—
11,001
3,922
—
32,071
14,682
—
70,748
13,352
84,100
Adjusted Gross Margin (1)
94,032
22,546
116,578
Adjusted results from operating activities (1)
59,270
8,880
73,135
14,673
68,150
87,808
99,659
67,829
81,324
26,703
126,362
11,780
18,618
79,609
99,942
Adjusted EBITDA (1)
Additional information:
Addition to property, plant and equipment
and intangible assets
(1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures.
22,645
4,468
27,113
23,352
1,792
25,144
2019 Annual ReportMANAGEMENT’S DISCUSSION & ANALYSIS
16
Results from operation by segment
SUGAR
Revenues
(In thousands of dollars, except volume)
Fourth Quarter
Fiscal Year
2019
$
2018
$
2019
$
2018
$
Volume (MT) as at September 29, 2018
159,432
161,040
595,878
601,958
Variation:
Industrial
Consumer
Liquid
Export
Total variation
Volume as at September 28, 2019
200,147
(7,152)
(16)
4,771
(847)
(3,244)
196,903
719,875
1,242
4,122
18,590
(2,685)
21,269
741,144
The decrease for the quarter in the industrial market segment is
The liquid market continued to deliver higher volume when
mostly due to non-recurring sales to a competitor that occurred
compared to the prior year for both the quarter and the fiscal year
in the fourth quarter last year and due to timing in certain large
due mainly to additional demand from new and existing customers
industrial accounts.
as well as the recapture of some business temporarily lost to HFCS.
Total consumer volume increased for the current fiscal year due
Finally, the export volume decreased for the quarter and year-to-
mainly to the additional volume negotiated with a National retail
date when compared to last year due to less volume shipped to
account for which additional shipments started in April of this year.
Mexico, somewhat offset by opportunistic U.S. high tier sales.
In the fourth quarter, the additional volume from this National retail
account was offset by lower volume from other consumer accounts
The decrease in revenues for the fourth quarter of fiscal 2019 and
as a result of timing in retail promotional activities during the
year-to-date versus the comparable periods last year is mainly
quarter, which explains why the overall consumer volume for the
explained by a decrease in the weighted average raw sugar values
fourth quarter was comparable to the same period last year.
in Canadian dollars, since the cost of raw sugar for all domestic
sales is passed on to the Company’s customers which more than
offset the increase in revenues generated by the additional volume
for both periods.
Rogers Sugar Inc.MANAGEMENT’S DISCUSSION & ANALYSIS
17
Gross margin
Two major factors impact gross margins: the selling margin of the products and operating costs.
(In thousands of dollars, except per metric tonne information)
Gross margin
Total adjustment to cost of sales (1) (2)
Adjusted gross margin (1)
Gross margin per metric tonne
Adjusted gross margin per metric tonne
Included in Gross margin:
Fourth Quarter
Fiscal Year
2019
$
24,643
(285)
24,358
125.15
123.71
2018
$
21,640
4,158
25,798
108.12
128.90
2019
$
2018
$
100,301
102,578
(6,269)
(2,919)
94,032
135.33
126.87
99,659
142.49
138.44
Depreciation of property, plant and equipment
3,298
3,252
13,072
12,813
(1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures.
(2) See “Adjusted results” section.
Gross margin of $24.6 million for the quarter and $100.3 million
Year-to-date, adjusted gross margin decreased by $5.6 million. On
year-to-date does not reflect the economic margin of the sugar
a year-to-date basis, the Vancouver commissioning issues added
segment, as it includes a gain of $0.3 million and of $6.3 million for
approximately $4.6 million in one-time incremental costs caused
the fourth quarter of fiscal 2019 and year-to-date, respectively, for
by large amounts of overtime, significant refining materials usage
the mark-to-market of derivative financial instruments as explained
and additional natural gas usage in a time period when there
above. In fiscal 2018, a mark-to-market loss of $4.2 million and a
was a disruption in natural gas supply in British Columbia, which
mark-to-market gain of $2.9 million was recorded for the fourth
significantly increased natural gas transportation costs during the
quarter and year-to-date, respectively, resulting in gross margins of
second quarter. In addition, fiscal 2018 included a non-cash pension
$21.6 million and $102.6 million for their respective periods. These
plan income of $1.5 million recorded as a result of an amendment
mark-to-market gains and losses must be deducted from or added
to a defined benefit pension plan. Therefore, excluding these two
to the gross margin in order to arrive to adjusted gross margin
items, adjusted gross margin would have been $98.6 million for
results, as explained above.
fiscal 2019 versus $98.2 million for the comparable period last
year, representing an increase of $0.4 million. This increase was
We will therefore comment on adjusted gross margin results.
due mainly to a higher sales volume and additional by-product
revenues, somewhat offset by lower #11 raw sugar values during
Adjusted gross margin for the current quarter was $1.4 million
the first quarter of the current year, when compared to the same
lower than the last quarter of fiscal 2018, mainly explained by
period last year, which had a negative impact on Taber’s domestic
lower sales volume as well as some additional operating costs. The
sales gross margin and to higher operating costs. Adjusted gross
current quarter’s adjusted gross margin rate was $5.19 per metric
margin per metric tonne amounted to $126.87 for fiscal 2019 or
tonne lower than last year. This decrease is mostly explained by
$133.08, when excluding the one-time costs in Vancouver. In fiscal
a somewhat unfavourable sales mix with higher liquid sales and
2018 adjusted gross margin of $138.44 included the non-cash
lower export sales and additional operating costs, mostly related to
pension plan income mentioned above, representing $2.05 per
the fine tuning of the Vancouver refinery following a major capital
metric tonne, thus reducing adjusted margin to $136.39 for fiscal
investment earlier this year.
2018. The reduction of $3.31 in adjusted gross margin per metric
tonne is mainly explained by the lower #11 raw sugar values in the
first quarter of the current year, a different sales mix with higher
liquid volume and to a lesser extent, higher operating costs.
2019 Annual ReportMANAGEMENT’S DISCUSSION & ANALYSIS
18
Other expenses
(In thousands of dollars)
Administration and selling expenses
Distribution costs
Included in Administration and selling expenses:
Fourth Quarter
Fiscal Year
2019
$
4,730
3,465
2018
$
4,751
2,908
2019
$
21,609
13,153
2018
$
21,070
10,760
Amortization of intangible assets
201
179
793
682
Administration and selling expenses were comparable to the fourth
Year-to-date, distribution costs were $2.4 million higher than last
quarter of last year but $0.5 million higher than fiscal 2018, mainly
year due to additional freight costs as a result of additional sales
due to additional employee benefits expenses.
volume in the first half of the year as well as to product transfers
between locations, of which, approximately $0.8 million relates to
Distribution costs for the fourth quarter were $0.6 million higher
the commissioning issues in Vancouver encountered in the second
than the comparable period last year, mainly due to additional
quarter of this year.
transfers between location and additional warehousing costs.
Results from operating activities
(In thousands of dollars)
Results from operating activities
Adjusted results from operating activities (1) (2)
Fourth Quarter
Fiscal Year
2019
$
16,448
16,163
2018
$
13,981
18,139
2019
$
65,539
59,270
2018
$
70,748
67,829
(1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures.
(2) See “Adjusted results” section.
The results from operating activities for fiscal 2019 of $16.5 million
depreciation and amortization expense also had a negative impact
and $65.5 million for the fourth quarter and year-to-date,
on the results from operating activities. As such Management
respectively, do not reflect the adjusted results from operating
believes that the Sugar segment’s financial results are more
activities of the Sugar segment, as they include gains and losses
meaningful to management, investors, analysts, and any other
from the mark-to-market of derivative financial instruments, as well
interested parties when financial results are adjusted for the above-
as timing differences in the recognition of any gains and losses
mentioned items.
on the liquidation of derivative instruments. In addition, non-cash
Rogers Sugar Inc.MANAGEMENT’S DISCUSSION & ANALYSIS
19
Adjusted EBITDA
The results of operations would therefore need to be adjusted by the following:
(In thousands of dollars)
Results from operating activities
Total adjustment to cost of sales (1) (2)
Adjusted results from operating activities
Depreciation of property, plant and equipment and
amortization of intangible assets
Adjusted EBITDA (1) (2)
Fourth Quarter
Fiscal Year
2019
$
16,448
(285)
16,163
3,499
19,662
2018
$
13,981
4,158
18,139
3,431
21,570
2019
$
65,539
(6,269)
59,270
13,865
73,135
2018
$
70,748
(2,919)
67,829
13,495
81,324
(1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures.
(2) See “Adjusted results” section.
Adjusted EBITDA for the fourth quarter decreased by $1.9 million
year-to-date is mainly explained by lower adjusted gross margin due
when compared to the last quarter of fiscal 2018, which is
in large part to one-time costs incurred at the Vancouver refinery,
explained by lower adjusted gross margins of $1.4 million and
as explained above, and to higher distribution costs attributable
higher distribution costs of $0.6 million, excluding depreciation and
to higher sales volume and transfers between location, in part as
amortization expense, as explained above. Year-to-date, adjusted
a result of the commissioning issues in Vancouver and somewhat
EBITDA was $8.2 million lower than fiscal 2018. The decrease
higher administrative and selling expenses.
MAPLE PRODUCTS
Results for the prior fiscal year include Decacer’s results since its acquisition on November 18, 2017.
Revenues
(In thousands of dollars, except volume)
Volume (‘000 pounds)
Revenues
Fourth Quarter
Fiscal Year
2019
10,163
48,140
2018
10,549
50,767
2019
42,377
2018
45,119
198,414
203,243
Revenues for the current quarter were $2.6 million lower than the
increased competition, certain delivery delays due to the relocation
same period last year, which is mainly explained by short-term
of production between facilities and the reduction in promotional
production capacity constraints, associated with the optimization of
activities associated with a shortage of certain syrup in the second
the operational footprint, causing delays in certain shipments and
quarter, more than offset the additional revenues generated by
the continuation of competitive activities. Year-to-date, revenues
Decacer for the full first quarter of the current year as compared
decreased by $4.8 million versus fiscal 2018. The shortfall caused by
to fiscal 2018.
2019 Annual ReportMANAGEMENT’S DISCUSSION & ANALYSIS
20
Gross margin
Two major factors impact gross margins: the selling margin of the products and operating costs.
(In thousands of dollars, except adjusted gross margin rate information)
Gross margin
Total adjustment to cost of sales (1) (2)
Adjusted gross margin (1)
Gross margin percentage
Adjusted gross margin percentage (1)
Included in Gross margin:
Fourth Quarter
Fiscal Year
2019
$
4,430
238
4,668
9.2%
9.7%
2018
$
7,615
(649)
6,966
15.0%
13.7%
2019
$
22,274
272
22,546
11.2%
11.4%
2018
$
28,275
(1,572)
26,703
13.9%
13.1%
Depreciation of property, plant and equipment
557
309
1,855
1,479
(1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures.
(2) See “Adjusted results” section.
Gross margin of $4.4 million and $22.3 million for the quarter
decreased by 4.0% from last year due mainly to competitive
and year-to-date does not reflect the economic margin of the
pressure, unfavourable sales mix and additional operating costs.
Maple products segment, as it includes a loss of $0.2 million and
Year-to-date, adjusted gross margin was $4.2 million lower than last
a $0.3 million, respectively, for the mark-to-market of derivative
year, representing a decrease in adjusted gross margin percentage
financial instruments on foreign exchange contracts.
of 1.7%, mainly explained by a decrease in volume, by margin
contractions and additional operating costs due to short-term
We will therefore comment on adjusted gross margin results.
inefficiencies associated with the operational footprint optimization.
In addition, the second quarter results were negatively impacted by
Adjusted gross margin for the current quarter was $2.3 million
low inventories of certain syrup grades which required additional
lower than the comparable period due in large part to lower
purchases from the PPAQ’s reserve at a premium as opposed to a
volume and to competitive pressure. Adjusted gross margin rate
discount last year.
Other expenses
(In thousands of dollars)
Administration and selling expenses
Distribution costs
Goodwill impairment
Included in Administration and selling expenses:
Fourth Quarter
Fiscal Year
2019
$
2,622
1,056
50,000
2018
$
2,215
1,150
—
2019
$
9,962
3,704
50,000
2018
$
11,001
3,922
—
Amortization of intangible assets
875
856
3,501
3,500
Rogers Sugar Inc.MANAGEMENT’S DISCUSSION & ANALYSIS
21
Administration and selling expenses were $0.4 million higher
Distribution expenses were $0.1 million and $0.2 million lower in
than the fourth quarter last year due to an increase in allowance
the fourth quarter and year-to-date when compared to the same
for doubtful accounts, timing of expenses and an increase in
periods last year.
non-recurring costs. Year-to-date, administration and selling
expenses were $1.0 million lower than last year, mainly explained
The Company performed a goodwill impairment test as of
by a reduction in non-recurring costs. Fiscal 2019 includes
September 28, 2019 and concluded that the carrying value of
$0.4 million in non-recurring costs associated with the footprint
goodwill exceeded the recoverable amount of the cash generating
optimization project while fiscal 2018 included non-recurring costs
unit for the Maple product segment. As a result, the Company
and acquisition costs relating to Decacer totalling $0.9 million and
recorded a non-cash impairment of $50.0 million in the fourth
$0.7 million, respectively, representing a year-over-year variation of
quarter of the current year.
$1.2 million. Excluding these one-time costs, administration and
selling expenses were $0.2 million higher than last fiscal 2018.
Results from operating activities (“EBIT”)
Fourth Quarter
Fiscal Year
(In thousands of dollars)
Results from operating activities
2019
$
(49,248)
Adjusted results from operating activities (“Adjusted EBIT”) (1) (2)
990
(1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures.
(2) See “Adjusted results” section.
2018
$
4,250
3,601
2019
$
(41,392)
8,880
2018
$
13,352
11,780
The results from operating activities for fiscal 2019 of negative
Year-to-date, excluding
the goodwill
impairment, Adjusted
$49.2 million and negative $41.4 million for the fourth quarter and
EBIT of $8.9 million was $2.9 million lower than fiscal 2018 due
year-to-date, respectively, do not reflect the adjusted results from
to lower adjusted gross margin, as explained above, offset by
operating activities of the Maple products segment, as they include
lower administration and selling expenses and to a lesser extent,
gains and losses from the mark-to-market of derivative financial
distribution costs.
instruments, as well as timing differences in the recognition of any
gains and losses on the liquidation of derivative instruments. We will
In addition, the acquisitions of LBMTC and Decacer resulted in
therefore comment on adjusted results from operating activities.
expenses that do not reflect the economic performance of the
operation of the Maple products segment. Finally, non-cash
As explained above, in the fourth quarter of the current year, a
depreciation and amortization expense as well as goodwill
goodwill impairment of $50.0 million was recorded and negatively
impairment also had a negative impact on the results from operating
impacted Adjusted EBIT. Excluding the goodwill impairment, the
activities. As such Management believes that the Maple products
Adjusted EBIT of $1.0 million was $2.6 million lower than the fourth
segment’s financial results are more meaningful to management,
quarter of last year, mostly due to a decrease in adjusted gross
investors, analysts, and any other interested parties when financial
margin and an increase in administration and selling expenses,
results are adjusted for the above-mentioned items.
as explained above, somewhat offset by lower distribution costs.
2019 Annual ReportMANAGEMENT’S DISCUSSION & ANALYSIS
22
Adjusted results
The results of operations would therefore need to be adjusted by the following:
Fourth Quarter
Fiscal Year
(In thousands of dollars)
Results from operating activities
Total adjustment to cost of sales (1) (2)
2019
$
(49,248)
238
2018
$
4,250
(649)
Adjusted results from operating activities (1)
(49,010)
3,601
Non-recurring expenses:
Acquisition costs incurred
Other one-time non-recurring items
Finished goods value at the estimated selling price less
disposal costs as of the acquisition date
Depreciation and amortization
Goodwill impairment
Adjusted EBITDA (1)
—
131
—
1,432
50,000
2,553
—
(4)
—
1,165
4,762
(1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures.
(2) See “Adjusted results” section.
2019
$
(41,392)
272
(41,120)
—
437
—
5,356
50,000
14,673
2018
$
13,352
(1,572)
11,780
675
923
261
4,979
18,618
Other non-recurring items mainly include severance costs expensed to date, as well as non-recurring expenses related to the footprint
optimization project.
Adjusted EBITDA decreased by $2.2 million and $3.9 million for the fourth quarter and the full twelve months of fiscal 2019 due mainly
to lower adjusted gross margins and higher administration and selling expenses, as explained above, somewhat offset by a reduction in
distribution costs.
Rogers Sugar Inc.MANAGEMENT’S DISCUSSION & ANALYSIS
23
CONSOLIDATED RESULTS OF OPERATION
The following is a summary of selected financial information of Rogers’ consolidated results for the 2019, 2018 and 2017 fiscal years. The
financial results for fiscal 2018 include those of Decacer since its acquisition on November 18, 2017 and the financial results for fiscal 2017
include those of LBMTC since its acquisition on August 5, 2017.
(unaudited)
Fourth Quarter
Fiscal Year
(In thousands of dollars, except volume and per share information)
Sugar (metric tonnes)
Maple syrup (‘000 pounds)
Total revenues
Gross margin
Results from operating activities (“EBTI”)
Net finance costs
Income tax expense
Net (loss) earnings
Net (loss) earnings per share (basic)
Net (loss) earnings per share (diluted)
Dividends per share
Non- GAAP results (1):
Adjusted Gross Margin (1)
Adjusted results from operating activities (“Adjusted EBIT”) (1)
17,153
Adjusted EBITDA (1)
Adjusted net earnings (1)
Adjusted net earnings per share (basic) (1)
22,215
9,910
0.09
(1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures.
2019
$
2018
$
2019
$
2018
2017
$
$
196,903
200,147
741,144
719,875
694,465
10,163
10,549
42,377
45,119
5,764
207,572
211,807
794,292
805,201
682,517
29,073
(32,800)
4,843
2,378
(40,021)
(0.38)
(0.38)
0.09
29,026
29,255
18,231
4,735
3,863
9,633
0.09
0.09
0.09
32,764
21,710
26,332
12,122
0.12
122,575
130,853
24,147
18,113
14,201
(8,167)
(0.08)
(0.08)
0.36
84,100
17,132
18,239
48,729
0.46
0.43
0.36
77,298
41,031
10,218
8,907
21,906
0.23
0.22
0.36
116,578
126,362
103,259
68,150
87,808
37,079
0.35
79,609
99,942
45,032
0.43
66,992
84,181
40,714
0.42
Total revenues
Excluding the mark-to-market of derivative financial instruments,
Revenues decreased by $4.2 million and by $10.9 million for the
adjusted gross margin for the last quarter of the current year
fourth quarter and year-to-date, respectively, when compared to
decreased by $3.7 million. The adjusted gross margin for the Maple
the same period last year. The reduction in revenues both periods
products segment resulted in a reduction of $2.3 million due mainly
is explained by lower revenues in the Sugar and Maple product
to a decrease in revenues, margin contractions stemming from
segments, as explained above.
Gross margin
competitive activities and higher operating costs, as explained
above. In addition, the Sugar segment’s adjusted gross margin also
decreased by $1.4 million due to lower sales volume and additional
Gross margin of $29.1 million for the quarter and $122.6 million
operating costs, as explained above. Year-to-date, adjusted gross
year-to-date does not reflect the economic margin of the Company,
margin was lower than last year by $5.6 million and $4.2 million
as it includes a nominal gain for the fourth quarter of the current
for the Sugar segment and Maple product segment, respectively,
year and a gain of $6.0 million year-to-date for the mark-to-market
resulting in a total year-over-year reduction of $9.8 million. This
of derivative financial instruments (See “Adjusted results” section).
negative variance for the sugar segment is mainly explained by
In fiscal 2018, a mark-to-market loss of $3.5 million and a mark-to-
the one-time operating costs in Vancouver, by lower #11 raw sugar
market gain of $4.5 million was recorded for the fourth quarter and
values in the first quarter, by the non-recurrence in fiscal 2019 of a
year-to-date, respectively, resulting in gross margins of $29.3 million
pension income of $1.5 million as well as additional operating costs
and $130.9 million for their respective period.
in the fourth quarter, all of which offset the increase in sales volume
2019 Annual ReportMANAGEMENT’S DISCUSSION & ANALYSIS
24
and higher by-product revenues as explained above. In addition,
is mainly explained by a lower contribution from both reportable
the adjusted gross margin for the Maple products segment also
segments mostly as a result of lower adjusted gross margin as well
contributed negatively to the decrease versus the comparable
as higher distribution costs in the Sugar segment of $0.6 million,
period due to lower revenues and margins as well as higher syrup
due mainly to increased transfers between locations and higher
costs, as explained above.
administrative and selling expenses in the Maple products
segment of $0.4 million due mainly to an increase in allowance
Results from operating activities (“EBIT”)
for doubtful accounts and timing, as explained above. Year-to-
EBIT is defined as earnings before interest and taxes. For the fourth
date, also excluding the mark-to-market of derivative financial
quarter and fiscal 2019, EBIT amounted to negative $32.8 million
instruments and the impact of the goodwill impairment, adjusted
and $24.1 million, respectively, compared to $18.2 million and
EBIT amounted to $68.2 million compared to $79.6 million for fiscal
$84.1 million. The fourth quarter of the current year includes a
2018, a $11.4 million decrease. The reduction in adjusted gross
non-cash goodwill impairment of $50.0 million relating to the
margin of $5.6 million and $4.2 million for the Sugar and Maple
Maple products segment. In addition, as mentioned above, the
products segment, respectively, mainly explain the decrease year-
gross margin comparison does not reflect the economic results from
over-year. In addition, distribution costs for the Sugar segment
operating activities which were positively impacted by $3.6 million
were $2.4 million higher than fiscal 2018, mainly explained by
and $1.5 million for the quarter and year-to-date, respectively,
incremental costs resulting from additional freight transfers
due to the period-over-period variation in mark-to-market of
between locations, as explained above. Finally, somewhat reducing
derivative financial instruments. Excluding the mark-to-market of
the negative variance year-over-year is a reduction of $0.5 million in
derivative financial instruments, and excluding the impact of the
administration and selling expenses as the increase of $0.5 million
goodwill impairment, adjusted EBIT for the current quarter stood at
in the Sugar segment was more than offset by a reduction of
$17.2 million versus $21.7 million, a decrease of $4.5 million. This
$1.0 million in the Maple product segment, as explained above.
Net finance costs
Net finance costs consisted of interest paid under the revolving credit facility, as well as interest expense on the convertible unsecured
subordinated debentures and other interest. It also includes a mark-to-market gain or loss on the interest swap agreements.
The net finance costs breakdown is as follows:
(In thousands of dollars)
Interest expense on convertible unsecured
subordinated debentures
Interest on revolving credit facility
Amortization of deferred financing fees
Other interest expense
Amortization of transition balances and net change
in fair value of interest rate swap agreements
Net finance costs
Fourth Quarter
Fiscal Year
2019
$
2,082
1,797
296
737
(69)
4,843
2018
$
2,072
1,739
329
723
(128)
4,735
2019
$
8,339
7,337
1,178
1,637
2018
$
7,691
6.893
1,422
1.658
(378)
18,113
(532)
17,132
Net finance costs for the current quarter were $0.1 million higher than the comparable quarter last year.
Rogers Sugar Inc.MANAGEMENT’S DISCUSSION & ANALYSIS
25
Year-to-date, net finance costs were $1.0 million higher than fiscal
As mentioned above, on October 2, 2016, the Company adopted
2018. The increase is mainly explained by $0.6 million in additional
IFRS 9 (2014) Financial Instruments and designated interest rate
interest expense on the convertible unsecured subordinated
swap agreements as effective cash flow hedging instruments.
debentures. On March 28, 2018, the Fifth series 5.75% convertible
The transitional balances, representing the mark-to-market value
unsecured subordinated debentures (“Fifth series debentures”)
recorded as of October 1, 2016, are subsequently removed from
of $60.0 million were repaid using a portion of the funds raised
other comprehensive income when each of the fixed interest rate
on the same day from the issuance of the Seventh series 4.75%
tranches is liquidated, in other words, when the fixed interest
convertible unsecured subordinated debentures (“Seventh series
rate is paid. As a result, in the current quarter and year-to-date,
debentures”) of $97.8 million. The increased borrowing level from
the Company removed a gain of $0.1 million and $0.4 million,
the Seventh series debentures, combined with the increase in
respectively from other comprehensive income and recorded a
accretion expense, more than offset the reduction in interest rate,
gain of the same amount in net finance costs. For the comparative
which mainly explains the increase year-to-date.
periods of fiscal 2018, the Company recorded a mark-to-market
gain of $0.1 million for the fourth quarter and of $0.5 million for
The other interest expense pertains mainly to interest payable
the full year. The transitional balance relating to interest rate swap
to the PPAQ on syrup purchases, in accordance with its payment
agreements will be fully depleted in fiscal 2020. See “Adjusted
terms.
Taxation
The income tax expense (recovery) is as follows:
results” section.
(In thousands of dollars)
Current
Deferred
Income tax expense
Fourth Quarter
Fiscal Year
2019
$
4,038
(1,660)
2,378
2018
$
3,091
772
3,863
2019
$
16,084
(1,883)
14,201
2018
$
17,967
272
18,239
The variation in current and deferred tax expense, quarter-over-
Net (loss) earnings
quarter and year-over-year, is consistent with the decrease in
Net (loss) earnings were $49.7 million and $56.9 million lower than
earnings before taxes in fiscal 2019, excluding the impact from
the comparable fourth quarter and year-to-date, respectively. The
the goodwill impairment, which had no current or deferred tax
decrease is mostly explained by the Maple products non-cash
consequence.
goodwill impairment recorded in the current quarter this year, the
negative variation of the after-tax impact of a decrease in EBIT, the
Deferred income taxes reflect temporary differences, which result
period-over-period variation of the gains and losses on the mark-
primarily from the difference between depreciation claimed for
to-market of derivative financial instruments, and to a much lower
tax purposes and depreciation amounts recognized for financial
extent, the additional finance costs, as explained above.
reporting purposes, employee future benefits and derivative
financial instruments. Deferred income tax assets and liabilities
are measured using the enacted or substantively enacted tax rates
anticipated to apply to income in the years in which temporary
differences are expected to be realized or reversed. The effect of a
change in income tax rates on future income taxes is recognized in
income in the period in which the change occurs.
2019 Annual ReportMANAGEMENT’S DISCUSSION & ANALYSIS
26
Summary of Quarterly Results
The following is a summary of selected financial information of the consolidated financial statements and non-GAAP measures of the
Company for each of the quarters of fiscal 2019 and 2018:
QUARTERS
2019
2018
(In thousands of dollars, except for volume
and per share information)
First
Second
Third
Fourth
First
Second
Third
Fourth
Sugar Volume (MT)
188,377 175,040 180,824 196,903
174,144
163,253
182,331
200,147
Maple products volume
(‘000 pounds)
Total revenues
Gross margin
EBIT
11,857
11,033
9,325
10,163
11,191
12,725
10,654
10,549
$
$
$
$
$
$
$
$
206,022 189,250 191,448 207,572
204,883
189,455
199,056
211,807
34,549
28,212
30,741
29,073
43,113
27,055
31,430
29,255
22,982
15,395
18,570
(32,800)
31,685
14,888
19,296
18,231
Net (loss) earnings
13,411
8,011
10,432
(40,021)
20,216
7,586
11,294
9,633
Gross margin rate per MT (1)
155.81
124.80
135.28
125.15
206.88
126.51
113.04
108.12
Gross margin percentage (2)
9.5%
12.7%
13.9%
9.2%
14.4%
12.1%
14.3%
15.0%
Per share
Net (loss) earnings
Basic
Diluted
Non-GAAP Measures (3)
0.13
0.12
0.08
0.08
0.10
0.10
(0.38)
(0.38)
0.19
0.18
0.07
0.07
0.11
0.10
0.09
0.09
Adjusted gross margin (3)
37,009
24,312
26,231
29,026
37,303
28,607
27,687
32,764
Adjusted EBIT (3)
25,442
11,495
14,060
17,153
25,875
16,440
15,553
21,740
Adjusted net earnings (3)
15,056
5,077
7,033
9,910
15,848
8,617
8,445
12,122
Adjusted gross margin
rate per MT (1) (3)
Adjusted gross margin
percentage (2) (3)
Adjusted net earnings per share (3)
155.16
110.22
116.97
123.71
179.19
134.66
113.37
128.90
14.2%
10.0%
11.2%
9.7%
12.4%
12.5%
13.9%
13.7%
Basic
Diluted
0.14
0.13
0.05
0.05
0.07
0.07
0.09
0.09
0.15
0.14
0.08
0.07
0.08
0.08
0.12
0.11
(1) Gross margin rate per MT and adjusted gross margin rate per MT pertain to the Sugar segment only.
(2) Gross margin percentage and adjusted gross margin percentage pertains to the Maple products segment only.
(3) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures.
Historically the first quarter (October to December) of the fiscal year is the best quarter for adjusted gross margins and adjusted net earnings
due to the favourable sales mix associated with an increased proportion of consumer sales during that period of the year. At the same time,
the second quarter (January to March) historically has the lowest volume as well as an unfavourable product mix, resulting in lower revenues,
adjusted gross margins and adjusted net earnings.
Quarterly results reflect Decacer since its acquisition on November 18, 2017.
Rogers Sugar Inc.MANAGEMENT’S DISCUSSION & ANALYSIS
Financial condition
(In thousands of dollars)
Total assets
Total non-current liabilities
27
2019
$
835,028
404,904
2018
$
870,209
382,136
2017
$
835,474
344,130
The decrease in total assets in the current fiscal year is due mainly to
to borrowings for the Decacer acquisition. Finally, deferred tax
the $50.0 million impairment of goodwill partially offset with higher
liabilities were $5.7 million higher than in fiscal 2017. Somewhat
property-plant and equipment. The increase in total assets for fiscal
offsetting these negative variances in non-current liabilities is a
2018, when compared to 2017 is due mainly to the acquisition of
reduction in employee benefits liabilities of $7.7 million due mainly
Decacer’s asset in November 2017 totalling $34.7 million.
to a change in pension actuarial assumptions as at September 29,
Non-current liabilities for fiscal 2019 also increased due mainly to
2018.
an increase in employee benefits liabilities mostly due to a change
On an annual basis, a goodwill impairment calculation is performed
in pension actuarial assumptions as at September 28, 2019. The
with the aim of ensuring that the recoverable value of the Company’s
increase in non-current liabilities from fiscal 2017 to fiscal 2018 is
operating segments is more than their respective carrying value. As
explained by the issuance of the Seventh series debentures, net
mentioned above, an impairment of $50.0 million was recorded
of deferred financing costs, somewhat offset by the repayment
in fiscal 2019 for the Maple product segment. There was no
of the Fifth series debentures, for a net impact of $30.9 million.
impairment in the Sugar segment analysis performed in fiscal 2019,
In addition, the long-term portion of the revolving credit facility
nor was there any impairment for any of the previous two years for
was higher in fiscal 2018 when compared to the prior year due
both reportable segments.
Liquidity
Cash flow generated by Lantic is paid to Rogers by way of dividends and return of capital on the common shares and by the payment of
interest on the subordinated notes of Lantic held by Rogers, after taking a reasonable reserve for capital expenditures, debt reimbursement
and working capital. The cash received by Rogers is used to pay administrative expenses, interest on the convertible debentures, income
taxes and dividends to its shareholders. Lantic had no restrictions on distributions of cash arising from the compliance of financial covenants
for the year.
(In thousands of dollars)
Cash flow from operating activities
Cash flow used in financing activities
Cash flow used in investing activities
Effect of changes in exchange rate on cash
Net decrease in cash and cash equivalents
2019
$
55,868
(30,768)
(27,009)
52
(1,817)
2018
$
52,912
(1,555)
(66,429)
140
(14,932)
Cash flow from operating activities increased by $3.0 million, which is explained by a positive non-cash working capital variation of
$10.8 million, higher pension plan expense, somewhat offset by an increase in income taxes and interest paid of $7.8 million and $1.4 million,
respectively.
2019 Annual ReportMANAGEMENT’S DISCUSSION & ANALYSIS
28
The negative variation in cash flow used in financing activities of
both occurred in fiscal 2018 as well as a reduction in intangible
$29.2 million is mainly attributable to the reduction of $33.2 million
assets addition of $0.2 million. Somewhat reducing this variation
in the issuance of convertible debentures in fiscal 2019. Slightly
is greater capital spending during the current year as a result of
reducing the above-mentioned negative cash flows from financing
various major projects undertaken and an increased plan spending
activities is a reduction in repurchases under the Normal Course
during the year, resulting in an increase of $3.6 million.
Issuer Bid (“NCIB”) of $3.3 million, a $0.4 million increase in
borrowings from the revolving credit facilities, net of the variation in
In order to provide additional information, the Company believes
bank overdraft versus the comparable period last year, a reduction
it is appropriate to measure free cash flow that is generated by the
of $0.2 million in dividend due to the repurchase and cancellation
operations of the Company. Free cash flow is a non-GAAP measure
of shares under the NCIB and lower financing fees paid in the
and is defined as cash flow from operations excluding changes in
current period of $0.1 million.
non-cash working capital, mark-to-market and derivative timing
adjustments and financial instruments’ non-cash amounts, and
The cash outflow used in investing activities decreased compared to
including funds received or paid from the issue or purchase of
fiscal 2018 by $39.4 million due mainly to the acquisition of Decacer
shares and capital expenditures, excluding operational excellence
for $42.1 million, a purchase price payment of $0.7 million, which
capital expenditures.
Free cash flow is as follows:
(In thousands of dollars)
Cash flow from operations
Adjustments:
Changes in non-cash working capital
Mark-to-market and derivative timing adjustments
Amortization of transitional balances
Financial instruments non-cash amount
Capital expenditures and intangible assets
Operational excellence capital expenditures
Purchase and cancellation of shares
Deferred financing charges
Stock options exercised
Free cash flow (1)
Declared dividends
2019
$
Fiscal Year
2018
$
2017
$
55,868
52,912
52,037
1,996
(4,340)
(2,037)
(1,472)
12,764
(23,192)
(1,776)
(3,247)
7,645
28,979
(3,389)
278
(27,009)
(23,655)
(17,303)
8,617
(640)
(140)
—
30,843
37,793
7,394
(3,963)
(272)
—
47,802
37,971
3,344
—
(629)
521
40,646
34,896
(1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures.
Free cash flow for fiscal 2019 was $17.0 million lower than the
paid of $7.8 million and $1.4 million, respectively and higher
previous year mainly explained by a decrease in adjusted EBITDA(1)
capital and intangible spending, net of operational excellence
of $9.2 million, when reduced by the non-cash pension revenue
capital of $2.1 million reduced free cash flow. Somewhat offsetting
of $1.5 million and the net non-recurring costs year-over-year of
the negative variance is a reduction of $3.3 million purchase and
$1.4 million. In addition, an increase in income taxes and interest
cancellation of shares.
Rogers Sugar Inc.MANAGEMENT’S DISCUSSION & ANALYSIS
29
Operational excellence capital expenditures were $1.2 million
During the current fiscal year, Rogers purchased and cancelled a
higher when compared to fiscal 2018. This year’s operational
total of 122,606 common shares under the NCIB for a total cash
excellence capital expenditures included the completion of an
consideration of $0.6 million, compared to 736,900 common
energy saving project at the Vancouver refinery of $6.1 million, of
shares acquired last fiscal year, for a total cash consideration of
which, $2.1 million was spent in fiscal 2019. In addition, $2.4 million
$4.0 million.
was spent on the start of another energy saving project at the
Vancouver refinery that should be completed by the end of the
Financing charges are paid when a new debt financing is completed
first quarter of fiscal 2020, for a total estimated project costs of
and such charges are deferred and amortized over the term of that
$2.7 million. Another important project is the Maple product
debt. The cash used in the year to pay for such fees is therefore not
segment footprint optimization, for which, $2.8 million was
available and as a result is deducted from free cash flow. In fiscal
spent in fiscal 2019. The total cost of the project is estimated at
2019, an amount of $0.1 million was paid to extend and amend the
$5.5 million and should be completed by the end of the second
revolving credit facility as opposed to $0.3 million for fiscal 2018.
quarter of fiscal 2020. Free cash flow is not impacted by operational
excellence capital expenditures, as these projects are not necessary
The Company declared a quarterly dividend of 9.0 cents per
for the operation of the plants but are undertaken because of the
common share, resulting in an amount payable of $37.8 million for
substantial operational savings that are realized once the projects
the current year versus $38.0 million last year.
are completed.
Changes in non-cash operating working capital represent year-
The Sugar segment invested $21.2 million in “Stay in Business
over-year movements in current assets, such as accounts receivable
and Safety” capital projects for plant reliability, product security,
and inventories, and current liabilities, such as accounts payables.
information systems and environmental
requirements. The
Movements in these accounts are due mainly to timing in the
Company is spending an increased amount on “Stay in Business
collection of receivables, receipts of raw sugar and payment
and Safety” capital projects when compared to recent fiscal years.
of liabilities. Increases or decreases in such accounts are due to
In comparison, the Maple product segment invested $0.8 million in
timing issues and therefore do not constitute free cash flow. Such
“Stay in Business and Safety” capital projects.
increases or decreases are financed from available cash or from the
Company’s available credit facility of $265.0 million. Increases or
During the current fiscal year, the Company spent $6.2 million to
decreases in bank indebtedness are also due to timing issues from
substantially complete the purchase and installation of equipment
the above and therefore do not constitute available free cash flow.
to upgrade the Taber beet factory to be fully compliant with the
new air emissions regulations by the start of the fiscal 2020 beet
The combined impact of the mark-to-market, financial instruments
harvesting season (crop 2019). Air emission testing took place in late
non-cash amount and amortization of transitional balances of
October 2019 and preliminary results are positive. The finalization
$7.8 million for the current fiscal year do not represent cash items
of the commissioning is expected to be completed by the end of
as these contracts will be settled when the physical transactions
the first quarter of fiscal 2020. The investment required for this
occur, which is the reason for the adjustment to free cash flow.
project was considered as a one-time incremental investment to
the ongoing capital expenditure program.
2019 Annual ReportMANAGEMENT’S DISCUSSION & ANALYSIS
30
Contractual obligations
The following table identifies the outstanding contractual obligations of the Company as at year-end, and the effects such obligations are
expected to have on liquidity and cash flow over the next several years:
(In thousands of dollars)
Revolving credit facility
Interest on convertible debentures
Interest based on swap agreement
Finance lease obligations
Operating leases
Purchase obligations
Sugar segment purchase
obligations (in MT)
Maple product segment purchase
obligations (in ‘000 pounds)
Total
$
177,000
41,723
9,341
1,025
20,930
63,594
313,613
Less than
1 year
$
17,000
7,506
1,861
170
3,439
63,594
93,570
1 to 3 years
4 to 5 years
After 5 years
$
—
15,013
3,706
329
5,484
—
$
160,000
7,506
2,152
106
3,894
—
$
—
11,698
1,622
420
8,113
—
24,532
173,658
21,853
1,057,000
628,000
429,000
4,300
4,300
—
—
—
—
—
During fiscal 2018, the Company issued a total of $97.8 million
On July 9, 2019, the Company exercised its option to extend
4.75% Seventh series debentures. In fiscal 2017, the Company
the maturity date of its revolving credit facility to June 28, 2024
issued $57.5 million 5.0% Sixth series debentures in order to
and made minor amendments to the amended credit agreement
partially fund the acquisition of LBMTC. The Sixth and Seventh
entered into on December 20, 2017, which do not affect its
series debentures, which mature in December 2024 and June 2025,
outstanding borrowings nor its financial covenants. As a result
respectively, have been excluded from the above table due to the
of the amended revolving credit facility, the Second Additional
holders’ conversion option and the Company’s option to satisfy the
Accordion Borrowings and the Additional Accordion Borrowings,
obligations at redemption or maturity in shares. Interest has been
the Company has a total of $265.0 million of available working
included in the above table to the date of maturity.
capital from which it can borrow at prime rate, LIBOR rate or
under bankers’ acceptances, plus 20 to 250 basis points, based on
In fiscal 2013, Lantic entered into a five-year credit agreement of
achieving certain financial ratios. As at September 28, 2019, a total
$150.0 million effective June 28, 2013, replacing the $200.0 million
of $422.2 million have been pledged as security for the revolving
credit agreement that expired on the same date. On August 3,
credit facility, compared to $407.8 million as at September 29,
2017, the Company amended its existing revolving credit facility
2018, including trade receivables, inventories and property, plant
to partially fund the acquisition of LBMTC. The available credit
and equipment.
was increased by $75.0 million by drawing additional funds under
the accordion feature embedded in the revolving credit facility
At September 28, 2019, a total of $177.0 million had been borrowed
(“Additional Accordion Borrowings”). Then, on December 20,
under this facility, of which, $17.0 million was presented as current.
2017, the Company amended, once again, its existing revolving
credit facility thereby increasing its available credit by $40.0 million
by drawing additional funds under the accordion feature (“Second
Additional Accordion Borrowings”) to partially fund the Decacer
acquisition.
Rogers Sugar Inc.MANAGEMENT’S DISCUSSION & ANALYSIS
31
In order to fix the interest rate on a substantial portion of the expected drawdown of the revolving credit facility, the Company enters into
interest rate swap agreements. Since June 28, 2013, a number of interest rate swap agreements were put in place. The following table
provides the outstanding swap agreements as at September 28, 2019 as well as their respective value, interest rate and time period:
Fiscal year contracted
Date
Total value
Fiscal 2015
Fiscal 2017
Fiscal 2017
Fiscal 2019
Total outstanding value as at
September 28, 2019
Forward start interest rate swaps:
Fiscal 2017
Fiscal 2019
June 28, 2018 to June 28, 2020 – 1.959%
May 29, 2017 to June 28, 2022 – 1.454%
September 1, 2017 to June 28, 2022 – 1.946%
March 12, 2019 to June 28, 2024 – 2.08%
June 29, 2020 to June 29, 2022 – 1.733%
June 29, 2022 to June 28, 2024 – 2.17%
$
30,000
20,000
30,000
20,000
100,000
$
30,000
80,000
The interest payments that will be incurred on the future borrowings
Company also contracts to purchase raw cane sugar substantially
related to this swap agreement are reflected in the contractual
in advance of the time it delivers the refined sugar produced from
obligations table above. Subsequent to September 28, 2019, the
the purchase. To mitigate its exposure to future price changes, the
Company entered into an additional interest rate swap agreement
Company attempts to manage the volume of refined sugar sales
of $20.0 million at a rate of 1.68% for the period of October 3, 2019
contracted for future delivery in relation to the volume of raw cane
to June 28, 2024.
sugar contracted for future delivery, when feasible.
Finance and operating lease obligations relate mainly to the
The Company uses derivative instruments to manage exposures
leasing of various mobile equipment, the premises of the blending
to changes in raw sugar prices, natural gas prices and foreign
operations in Toronto and the Maple products segment operations
exchange. The Company’s objective for holding derivatives is to
in Granby and Dégelis, Québec, in Richmond, British Columbia and
minimize risk using the most efficient methods to eliminate or
in Websterville,Vermont.
reduce the impacts of these exposures.
Purchase obligations represent all open purchase orders as at
To reduce price risk, the Company’s risk management policy is to
year-end and approximately $25.0 million for sugar beets that will
manage the forward pricing of purchases of raw sugar in relation
be harvested and processed in fiscal 2019 but exclude any raw
to its forward refined sugar sales. The Company attempts to
sugar priced against futures contracts. The purchase obligation
meet this objective by entering into futures contracts to reduce
regarding the sugar beets represents Management’s best estimate
its exposure. Such financial instruments are used to manage the
of the amount expected to be payable in fiscal 2020 as of the date
Company’s exposure to variability in fair value attributable to the
of this MD&A.
firm commitment purchase price of raw sugar.
TMTC has $8.8 million remaining to pay related to an agreement to
The Company has hedged all of its exposure to raw sugar price risk
purchase approximately $13.9 million (4.3 million pounds) of maple
movement through March 2022.
syrup from the PPAQ. In order to secure bulk syrup purchases,
the Company issued letters of guarantee for a total amount of
At September 28, 2019, the Company had a net long sugar position
$17.3 million in favor of the PPAQ. The letters of guarantee expire
of $3.2 million in net contract amounts with a current net contract
on March 31, 2020.
value of $4.7 million. This long position represents the offset of
a smaller volume of purchases priced from suppliers than sugar
A significant portion of the Company’s sales are made under fixed-
priced with customers.
price, forward-sales contracts, which extend up to three years. The
2019 Annual ReportMANAGEMENT’S DISCUSSION & ANALYSIS
32
The Company uses futures contracts and swaps to help manage
Capital resources
its natural gas costs. At September 28, 2019, the Company had
As mentioned above, Lantic entered into a five-year credit
$37.9 million in natural gas derivatives, with a current contract value
agreement of $150.0 million effective June 28, 2013, which has been
of $34.3 million.
amended in fiscal 2017, 2018 and 2019 to increase its borrowing
capacity by requesting the Additional Accordion borrowings and
The Company’s activities, which result in exposure to fluctuations
the Second Additional Accordion Borrowings, which brought the
in foreign exchange rates, consist of the purchasing of raw sugar,
total available credit to $265.0 million. In addition, the credit facility
the selling of refined sugar and Maple products and the purchasing
was also amended in the current year to extend its maturity to
of natural gas. The Company manages this exposure by creating
June 28, 2024. At September 28, 2019, $177.0 million had been
offsetting positions through the use of financial instruments. These
drawn from the working capital facility, $8.3 million was drawn as
instruments include forward contracts, which are commitments to
bank overdraft and $0.2 million in cash was also available.
buy or sell at a future date and may be settled in cash.
The Taber beet operation requires seasonal working capital in the
The credit risk associated with foreign exchange contracts arises
first half of the fiscal year, when inventory levels are high and a
from the possibility that counterparties to a foreign exchange
substantial portion of the payments due to the Growers is made.
contract in which the Company has an unrealized gain, fail to
TMTC also has seasonal working capital requirements. Although
perform according to the terms of the contract. The credit risk is
the syrup inventory is received during the third quarter of the fiscal
much less than the notional principal amount, being limited at any
year, its payment terms with the PPAQ requires cash payment in
time to the change in foreign exchange rates attributable to the
the first half of the fiscal year. The Company has sufficient cash and
principal amount.
availability under its line of credit to meet such requirements.
Forward foreign exchange contracts have maturities of less than
Future commitments of approximately $19.0 million have been
three years and relate mostly to the U.S. currency, and to a much
approved for completing capital expenditures presently in progress.
smaller extent, the Euro and Australian currency. The counterparties
to these contracts are major Canadian financial institutions. The
The Company also has funding obligations related to its employee
Company does not anticipate any material adverse effect on its
future benefit plans, which include defined benefit pension plans.
financial position resulting from its involvement in these types
As at September 28, 2019, all of the Company’s registered defined
of contracts, nor does it anticipate non-performance by the
benefit pension plans were in a deficit position. The Company
counterparties.
performed actuarial evaluations for two of its three remaining
pension plans as of December 31, 2016 and January 1, 2017.
At September 28, 2019, the Company had a net $99.7 million in
foreign currency forward contracts with a current contract value of
The Company monitors its pension plan assets closely and follows
$99.3 million.
strict guidelines to ensure that pension fund investment portfolios
are diversified in line with industry best practices. Nonetheless,
As part of its normal business practice, the Company also enters
pension fund assets are not immune to market fluctuations and,
into multi-year supply agreements with raw sugar processors for
as a result, the Company may be required to make additional
raw cane sugar. Contract terms will state the quantity and estimated
cash contributions in the future. In fiscal 2019, cash contributions
delivery schedule of raw sugar. The price is determined at specified
to defined benefit pension plans decreased by approximately
periods of time before such raw sugar is delivered based upon
$0.3 million to $3.6 million. In total, the Company expects to incur
the value of raw sugar as traded on the ICE #11 world raw sugar
cash contributions of approximately $3.7 million for fiscal 2020
market. At September 28, 2019, the Company had commitments
relating to employee defined benefit pension plans. For more
to purchase a total of 1,057,000 metric tonnes of raw sugar, of
information regarding the Company’s employee benefits, please
which approximately 283,000 metric tonnes had been priced, for a
refer to Note 22 of the audited consolidated financial statements.
total dollar commitment of $113.9 million.
The Company has no other off-balance sheet arrangements.
expenditures are expected to be paid from available cash resources
Cash
requirements
for working capital and other capital
and funds generated from operations. Management believes that
the unused credit under the revolving facility is adequate to meet
any future cash requirements.
Rogers Sugar Inc.MANAGEMENT’S DISCUSSION & ANALYSIS 33
OUTSTANDING SECURITIES
series debentures may be redeemed by the Company only if the
weighted average trading price of the share, for 20 consecutive
A total of 104,885,464 shares and 104,872,764 shares were
trading days, is at least 125% of the conversion price of $8.85.
outstanding as at September 28, 2019 and November 20, 2019,
Subsequent to June 30, 2023, the Seventh series debentures are
respectively (105,008,070 as at September 29, 2018).
redeemable at a price equal to the principal amount thereof plus
accrued and unpaid interest.
On May 22, 2019, the Company received approval from the
Toronto Stock Exchange to proceed with a normal course issuer
Following the issuance of the Seventh series debentures on
bid (“2019 NCIB”). Under the NCIB, the Company may purchase
March 28 and April 3, 2018, the Company used a portion of the
up to 1,500,000 common shares. The 2019 NCIB commenced on
funds to repay the Fifth series debentures totalling $60.0 million
May 24, 2019 and may continue to May 23, 2020. During fiscal
at a price equal to the principal amount thereof plus accrued and
2019, the Company purchased 122,606 common shares for a total
unpaid interest as of March 28, 2018. The remaining funds from the
cash consideration of $0.6 million.
issuance of the Seventh series debentures were used to reduce a
portion of the amount drawn under revolving credit facility.
In addition, the Company has entered into an automatic share
purchase agreement with Scotia Capital Inc. in connection with
On July 1, 2005, the Company reserved and set aside for issuance a
the 2019 NCIB. Under the agreement, Scotia may acquire, at its
total of 850,000 units to be allocated to key personnel. On January
discretion, common shares on the Company’s behalf during certain
1, 2011, the 450,000 options outstanding under the unit option
“black-out” periods, subject to certain parameters as to price and
plan were transferred to a share option plan (the “Share Option
number of shares.
Plan”) on a one-for-one basis. Between July 2005 and March 2012,
all these options were allocated at different times to executives of
On May 22, 2018, the Company received approval from the Toronto
the Company. In fiscal 2015, the number of options for common
Stock Exchange to proceed with a 2018 NCIB. Under the 2018
shares set aside to be allocated to key personnel was increased
NCIB, the Company was able to purchase up to 1,500,000 common
from 450,000 to 4,000,000 common shares. On May 21, 2015,
shares. The NCIB commenced on May 24, 2018 and ended on
850,000 share options were granted to the new President and CEO
May 23, 2019. During fiscal 2018, the Company purchased 736,900
of Lantic at a price of $4.59 per common share, representing the
common shares for a total cash consideration of $4.0 million.
average market price for the five business days before the granting
of the options. On December 5, 2016, the Company granted a total
On March 28, 2018, the Company issued $85.0 million of 4.75%
of 360,000 share options to certain executives at an exercise price
Seventh series debentures, maturing June 30, 2025, with interest
of $6.51 under the share option plan. On December 4, 2017, a
payable semi-annually in arrears on June 30 and December 31
total of 1,065,322 share options were granted at a price of $6.23
of each year, starting June 30, 2018. Then, on April 3, 2018,
per common share to certain executives and senior managers.
the Company issued an additional $12.8 million Seventh series
On December 3, 2018, the Company granted a total of 447,175
debentures pursuant to the exercise in full of the over-allotment
share options to executives at a price of $5.58 per common share.
option granted by the Company. The total amount of the Seventh
These shares are exercisable to a maximum of twenty percent per
series debentures issued represents $97.75 million and may be
year, starting after the first anniversary date of the granting of the
converted at the option of the holder at a conversion price of $8.85
options and will expire after a term of ten years. Upon termination,
per share (representing 11,045,197 common shares) at any time
resignation, retirement, death or long-term disability, all shares
prior to maturity and cannot be redeemed prior to June 30, 2021.
granted under the Share Option Plan not vested are forfeited.
On or after June 30, 2021and prior to June 30, 2023, the Seventh
In fiscal 2018, a Performance Share Unit plan (“PSU”) was created and on December 4, 2017. The following table provides the detail of the
grants under the PSU:
Grant date
December 4, 2017
December 3, 2018
PSU
Additional PSU
Total PSU
Performance Cycle
224,761
290,448
25,565
13,858
250,326
304,306
2018-2020
2019-2021
2019 Annual ReportMANAGEMENT’S DISCUSSION & ANALYSIS 34
The PSUs were granted to executives and will vest at the end of the
or a sale, it is worth noting that the Vancouver facility has a lengthy
Performance Cycle based on the achievement of total shareholder
history of industrial use, and fill materials have been used on the
returns set by the Human Resources and Compensation Committee
property in the normal course of business. No assurance can be
(“HRCC”) and the Board of Directors of the Company. If the level
given that material expenditures will not be required in connection
of achievement of total shareholder returns is within the specified
with contamination from such industrial use or fill materials.
range, the value to be paid-out to each participant will be equal to
the result of: the number of PSUs granted to the participant which
Similarly, the Montréal facility has a lengthy history of industrial use.
have vested, multiplied by the volume weighted average closing
Contamination has been identified on a vacant property acquired
price of the Common Shares on the Toronto Stock Exchange (the
in 2001, and the Company has been advised that additional soil
“TSX”) for the five trading days immediately preceding the day on
and ground water contamination is likely to be present. Given the
which the Company shall pay the value to the participant under the
industrial use of the property, and the fact that the Company does
PSU Plan. If the level of achievement of total shareholder returns is
not intend to change the use of that property in the future, the
below the minimum threshold, the PSU will be forfeited without any
Company does not anticipate any material expenditures being
payments made.
required in the short term to deal with this contamination, unless
off-property impacts are discovered. The Company has recorded a
In addition, in fiscal 2017, a Share Appreciation Right (“SARs”) was
provision under asset retirement obligations for this purpose and
created under the existing Share Option Plan. On December 5,
the provision is expected to be sufficient.
2016, a total of 125,000 SARs were issued to an executive at an
exercise price of $6.51. These SARs are exercisable twenty percent
Although the Company is not aware of any specific problems at its
per year, starting on the first anniversary date of the granting of the
Toronto distribution centre, its Taber plant and any of the TMTC
SARs and will expire after a term of ten years. Upon termination,
properties, no assurance can be given that expenditures will not
resignation, retirement, death or long-term disability, all SARs
be required to deal with known or unknown contamination at the
granted under the Share Option Plan not vested are forfeited.
property or other facilities or offices currently or formerly owned,
During fiscal 2018, 60,000 share options were forfeited at a price of
$6.23 following the departure of a senior manager.
used or controlled by Lantic.
RISKS AND UNCERTAINTIES
ENVIRONMENT
The Company’s business and operations are substantially affected
by many factors, including prevailing margins on refined sugar
The Company’s policy is to meet all applicable government
and its ability to market sugar and maple products competitively,
requirements with respect to environmental matters. Management
sourcing of raw material supplies, weather conditions, operating
believes that the Company is in compliance in all material respects
costs and government programs and regulations.
with environmental laws and regulations and maintains an open
dialogue with regulators and the Government with respect to
Dependence Upon Lantic
awareness and adoption of new standards.
Rogers is entirely dependent upon the operations and assets
of Lantic through its ownership of securities of this company.
As mentioned above, the Company substantially completed,
Accordingly, interest payments to debenture holders and dividends
during the fiscal year, the purchase and installation of equipment to
to shareholders will be dependent upon the ability of Lantic and/
upgrade the Taber beet factory to be fully compliant with the new air
or TMTC to pay its interest obligations under the subordinated
emissions regulations by the start of the fiscal 2020 beet harvesting
notes and to declare and pay dividends on or return capital in
season (crop 2019). Air emission testing took place in late October
respect of the common shares. The terms of Lantic’s bank and other
2019 and final results are expected to be received by the end of
indebtedness may restrict its ability to pay dividends and make
the first quarter of fiscal 2020. The Taber factory is expected to
other distributions on its shares or make payments of principal
obtain from Alberta Environment and Parks a compliance certificate
or interest on subordinated debt, including debt which may be
following the receipt of the results.
held, directly or indirectly, by Rogers, in certain circumstances. In
addition, Lantic may defer payment of interest on the subordinated
With respect to potential environmental remediation of our
notes at any given time for a period of up to 18 months.
properties, which could occur in the event of a building demolition
Rogers Sugar Inc.MANAGEMENT’S DISCUSSION & ANALYSIS 35
Integration Related Risks and Operational Gains
charged on nearby deliveries which would have a negative impact
The Acquisitions of LBMTC and Decacer are the only acquisitions
on the adjusted gross margins of the cane operations. The #11
the Corporation has concluded in recent history. To effectively
world raw sugar price can, however, impact the profitability of the
integrate TMTC into its own business and operations, the Company
Company’s beet operations. Sugar derived from beets is purchased
must establish appropriate operational, administrative, finance,
at a fixed price, plus an incentive when sugar prices rise over a
management systems and controls and marketing functions relating
certain level, and the selling price of domestic refined sugar rises
to such business and operations. This will require substantial
or falls in relation to the #11 world raw sugar price.
attention from management. This diversion of management
attention, as well as any other difficulties which the Company may
A relatively high world raw sugar price and/or low price of corn
encounter in completing the transition and integration process,
will also reduce the competitive position of liquid sugar in Canada
including difficulties in retaining key employees of TMTC, could
as compared to HFCS which could result in the loss of HFCS
have a material adverse impact on the Company’s financial results
substitutable business for Lantic.
and operations. There can be no assurance that the Company will
be successful in integrating the business and operations of TMTC.
Security of Raw Sugar Supply
There are over 177 million metric tonnes of sugar produced
No Assurance of Future Performance
worldwide. Of this, more than 50 million metric tonnes of raw cane
Historic and current performance of the business of the Company
sugar is traded on the world market. The Company, through its cane
and TMTC may not be indicative of success in future periods. The
refining plants, buys approximately 0.7 million metric tonnes of raw
future performance of the business after the acquisition may be
sugar per year. Even though worldwide raw sugar supply is much
influenced by economic downturns and other factors beyond the
larger than the Company’s yearly requirements, concentration of
control of the Company. As a result of these factors, the operations
supply in certain countries like Brazil, combined with an increase in
and financial performance of the Company, including TMTC, may
cane refining operations in certain countries, may create tightness
be negatively affected, which may materially adversely affect the
in raw sugar availability at certain times of the year. To prevent
Company’s financial results.
any raw sugar supply shortage, the Company normally enters into
long-term supply contracts with reputable suppliers. For raw sugar
Fluctuations in Margins and Foreign Exchange
supply not under contract, significant premiums may be paid on
The Company’s profitability is principally affected by its margins
the purchase of raw sugar on a nearby basis, which may negatively
on domestic refined sugar sales. In turn, this price is affected
impact adjusted gross margins.
by a variety of market factors such as competition, government
regulations and foreign trade policies. The Company, through
The availability of sugar beets to be processed in Taber, Alberta
the Canadian-specific quota, normally sells approximately 10,300
is dependent on a supply contract with the Growers, and on the
metric tonnes of refined sugar per year in the U.S. and to Mexico
Growers planting the necessary acreage every year. In the event
and also sells beet pulp to export customers in U.S. dollars. The
that sufficient acreage is not planted in a certain year, or that the
Company’s Taber sugar sales in Canada are priced against the
Company and the Growers cannot agree on a supply contract,
#11 world raw sugar market, which trades in U.S. dollars, while the
sugar beets might not be available for processing, thus requiring
sugar derived from the sugar beets is paid for in Canadian dollars
transfer of products from the Company’s cane refineries to the
to the Growers. Fluctuations in the value of the Canadian dollar will
Prairie market, normally supplied by Taber. This would increase
impact the profitability of these sales. Except for these sales, which
the Company’s distribution costs and may have an impact on the
currently can only be supplied by the Company’s Taber beet plant,
adjusted gross margin rate per metric tonne sold.
and sales to the U.S. under other announced specific quotas, most
sales are in Canada and have little exposure to foreign exchange
Weather and Other Factors Related to Production
movements.
Fluctuations in Raw Sugar Prices
Sugar beets, as is the case with most other crops, are affected
by weather conditions during the growing season. Additionally,
weather conditions during the harvesting and processing season
Raw sugar prices are not a major determinant of the profitability of
could affect the Company’s total beet supply and sugar extraction
the Company’s cane sugar operations, as the price at which sugar
from beets stored for processing. A significant reduction in the
is both purchased and sold is related to the #11 world raw sugar
quantity or quality of sugar beets harvested due to adverse weather
price and all transactions are hedged. In a market where world raw
conditions, disease or other factors could result in decreased
sugar is tight due to lower production, significant premiums may be
production, with negative financial consequences to Lantic.
2019 Annual ReportMANAGEMENT’S DISCUSSION & ANALYSIS 36
Regulatory Regime Governing the Purchase and
Pursuant to the Marketing Agreement, authorized buyers must buy
Sale of Maple Syrup in Québec
Maple products from the PPAQ in barrels corresponding to the
Producers of maple syrup in Québec are required to operate within
“anticipated volume”. The anticipated volume must be realistic and
the framework provided for by the Marketing Act. Pursuant to the
in line with volumes purchased in previous years. The refusal from
Marketing Act, producers, including producers of maple syrup,
the PPAQ to accept the anticipated volume set forth by TMTC or
can take collective and organized control over the production
the failure by TMTC to properly estimate the anticipated volume for
and marketing of their products (i.e. a joint plan). Moreover, the
a given year may affect the ability for TMTC to increase its reselling
Marketing Act empowers the marketing board responsible for
capacity and could materially adversely affect the Company’s
administering a joint plan, that is the PPAQ in the case of maple
financial results and operations.
syrup, with the functions and role otherwise granted to the Régie
des marchés agricoles et alimentaires du Québec, the governing
Production of Maple Syrup Being Seasonal and
body created by the Government of Québec to regulate, among
Subject to Climate Change
other things, the agricultural and food markets in Québec. As part
The production of maple syrup takes place over a period of 6 to 8
of its regulating and organizing functions, the PPAQ may establish
weeks during the months of March and April of each year. Maple
arrangements to maintain fair prices for all producers and may
syrup production is intimately tied to the weather as sap only
manage production surpluses and their storage to stabilize the
flows when temperatures rise above freezing level during the day
pricing of maple syrup.
and drop below it during the night, such temperature difference
creating enough pressure to push sap out of the maple tree. Given
Pursuant to the Sales Agency Regulation, the PPAQ is responsible
the sensitivity of temperature in the process of harvesting maple
for the marketing of bulk maple syrup in Québec. Therefore,
sap, climate change and global warming may have a material
any container that contains 5L or more of maple syrup must be
impact on such process as the maple syrup production season
marketed through the PPAQ as the exclusive selling agent for
may become shorter. Reducing the production season for maple
the producers. Bulk maple syrup may be sold to the PPAQ or to
syrup may also have an impact on the level of production. Such
“authorized buyers” accredited by the PPAQ. In Québec, 85%
phenomenon may be witnessed in Québec as well as in the New
of the total production of maple syrup is sold to the PPAQ or the
England states, such as Vermont and Maine, where substantially all
authorized buyers, leaving only approximately 15% of the total
of the world maple syrup is produced.
production being sold directly by the producers to consumers or
grocery stores. TMTC is an authorized buyer with the PPAQ. The
In 2002, the PPAQ set up a strategic maple syrup reserve in order to
authorized buyer status is renewed on an annual basis. There is
mitigate production fluctuations imputable to weather conditions
no certainty that TMTC will be able to maintain its status as an
and prevent such fluctuations from causing maple syrup prices
authorized buyer with the PPAQ. Failure by TMTC, the Corporation
to spike or drop significantly. The reserve was initially established
or Lantic to remain an authorized buyer with the PPAQ will likely
to set aside a production quantity equivalent to half of the then
affect the capacity to fully supply the resale of maple syrup or Maple
annual demand. Each year, the PPAQ may organize a sale of a
products and therefore the financial results of the Corporation.
portion of its accumulated reserve. There can be no assurance that
TMTC will have access to some of such reserve to offset decreases
The PPAQ, in its capacity as bargaining and sales agent for the
in production due to weather conditions or that such reserve will
producers of maple syrup in Québec as well as the body empowered
be sufficient to cover a gap in the production in any given year.
to regulate and organize the production and marketing of maple
Any decrease in production or incapacity to purchase additional
syrup, and the bulk buyers of maple syrup, represented by the MIC
reserves from the PPAQ may affect TMTC’s supply of its sales of
entered into the Marketing Agreement, which is expected to be
maple syrup and other Maple products and, ultimately, its financial
renewed on an annual basis. Pursuant to the Marketing Agreement,
results.
authorized buyers must pay a minimum price to the PPAQ for any
maple syrup purchased from the producers. As a result, TMTC’s
Competition
ability to negotiate the purchase price of maple syrup is limited.
For the Sugar segment, the Company faces domestic competition
Moreover, the minimum purchase price that is applicable to the
from Redpath Sugar Ltd. and smaller regional operators and/
authorized buyers with the PPAQ also restricts TMTC’s ability to
distributors of both foreign and domestic refined sugar. Differences
adjust its resale pricing to take into account market fluctuations due
in proximity to various geographic areas within Canada and
to supply and demand. TMTC’s incapacity to adjust its resale prices
elsewhere result in differences in freight and shipping costs, which
upward to take into account any increase in consumer demand may
in turn affect pricing and competitiveness in general.
affect the financial outlook of the Corporation.
Rogers Sugar Inc.MANAGEMENT’S DISCUSSION & ANALYSIS 37
In addition to sugar, the overall sweetener market also includes:
enhanced production capability could adversely result in reduced
corn-based sweeteners, such as HFCS, an alternative liquid
demand for its products, which could in turn affect the financial
sweetener, which can be substituted for liquid sugar in soft drinks
performance of the Company. There is also no guarantee that the
and certain other applications; and non-nutritive, high intensity
current favourable market trends will continue in the future.
sweeteners such as aspartame, sucralose and stevia. Differences in
functional properties and prices have tended to define the use of
Growth of TMTC’s Business Relying Substantially on Exports
these various sweeteners. For example, HFCS is limited to certain
The size of the global wholesale market for maple syrup is currently
applications where a liquid sweetener can be used. Non-nutritive
estimated at $850 million, the United States being by far the world’s
sweeteners are not interchangeable in all applications. The
largest importer, followed by Japan and Germany. Despite the
substitution of other sweeteners for sugar has occurred in certain
increase of sales of maple products that the Canadian market has
products, such as soft drinks. We are not able to predict the
experienced in recent years, the potential for growth of this industry
availability, development or potential use of these sweeteners and
largely relies on the international market. Moreover, over the last
their possible impact on the operations of the Company.
few years, Vermont and Maine have increased their production of
maple syrup and have now become competitors of Québec, which
For the Maple products segment, TMTC is among the largest
however remains the largest producer and exporter of maple syrup
branded and private label maple syrup bottling and distributing
in the world. While TMTC continues to develop its selling efforts
companies in the world. TMTC has three major competitors in the
outside of Canada, including through forming new partnerships
market and also competes against a multitude of smaller bottlers
in countries where the maple syrup market is undeveloped, it will
and distributing companies.
likely face high competition from other bottlers and distributers,
including from other Canadian and U.S. companies, for its share
A large majority of TMTC’s revenues are made under the private
of the international market. Such growing competition and the
label line. The Corporation anticipates that for a foreseeable
incapacity for TMTC to further develop its selling efforts outside
future, TMTC’s relationship with its top private label customers will
of Canada could adversely affect the Company’s capacity to grow
continue to be key and will continue to have a material impact on
TMTC’s business and its future results. Furthermore, an incapacity
its sales. Although the Corporation considers that the relationship
to attract increased attention on maple products or a sudden lack of
with its top private label customers is excellent, the loss of, or a
interest for such products from customers outside of North America
decrease in the amount of business from, such customers, or any
may affect the Company’s future results.
default in payment on their part could significantly reduce TMTC’s
sales and harm the Company’s operating and financial results.
Operating Costs
Consumer Habits may Change
Natural gas represents an important cost in our refining operations.
Our Taber beet factory includes primary agricultural processing
The maple products market, both national and international, has
and refining. As a result, Taber uses more energy in its operations
experienced some important changes over the last few years
than the cane facilities in Vancouver and Montréal, principally as
as maple products are becoming better known and consumer
a result of the need to heat the cossettes (sliced sugar beets) to
preferences and consumption patterns have shifted to more natural
evaporate water from juices containing sugar, and to dry wet beet
products. Maple syrup has typically been used, principally in North
pulp. Changes in the costs and sources of energy may affect the
America, as a natural alternative to traditional sweeteners and has
financial results of the Company’s operations. In addition, all natural
been served on morning meals, such as pancakes, waffles and
gas purchased is priced in U.S. dollars. Therefore, fluctuations in
other breakfast bakeries for decades. The offer of maple products
the Canadian/U.S. dollar exchange rate will also impact the cost
has recently expanded to include, among others, maple butter and
of energy. The Company hedges a portion of its natural gas
maple sugar, flakes and taffy. As a result of evolving customer trends
price exposure through the use of natural gas contracts to lessen
and the development of new maple products continues, TMTC will
the impact of fluctuations in the price of natural gas. Provincial
need to anticipate and meet these trends and developments in a
application of some form of carbon tax has been increasingly
competitive environment on a timely basis. The failure of TMTC
important across Canada and for some provinces with carbon tax,
to anticipate, identify and react to shifting consumer and retail
rates have been increasing, which could increase the overall energy
customer trends and preferences through successful innovation and
costs for the Company.
2019 Annual ReportMANAGEMENT’S DISCUSSION & ANALYSIS 38
Government Regulations and Foreign Trade Policies
Canadian-specific sugar quota will increase from 10,300 metric
with regards to Sugar
tonnes to 19,900 metric tonnes once the CUSMA is in place. It
In July 1995, Revenue Canada made a preliminary determination,
has not yet been determined how the SCP quota allocation will be
followed by a final determination in October 1995, that there
administered within the Canadian refined sugar industry.
was dumping of refined sugar from the United States, Denmark,
Germany, the United Kingdom, the Netherlands and the Republic
Implementation of the CUSMA requires ratification by all three
of Korea into Canada, and that subsidized refined sugar was
countries. Mexico ratified the deal on July 29, 2019. Canada
being imported into Canada from the European Union (“EU”).
started the process towards ratification in the House of Commons
The Canadian International Trade Tribunal (“CITT”) conducted
prior to the October 2019 federal election, so the government will
an inquiry and on November 6, 1995 ruled that the dumping of
have to bring this back for Parliamentary debate before it can be
refined sugar from the United States, Denmark, Germany, the
ratified. The process is much more uncertain in the U.S. where the
United Kingdom and the Netherlands as well as the subsidizing
democratic controlled House of Representatives continues to delay
from the EU was threatening material injury to the Canadian sugar
a vote. If the agreement receives Congressional support in 2019, it
industry. The ruling resulted in the imposition of protective duties
could be implemented in 2020.
on these unfairly traded imports.
The Canada-European trade agreement (“CETA”) entered into
Under Canadian laws, these duties must be reviewed every five
force provisionally on September 21, 2017 and includes an SCP
years. On October 30, 2015, the CITT concluded its fourth review
quota set at 30,000 metric tonnes annually through 2021. The
of the 1995 finding and issued its decision to continue the finding
quota is allocated 90% to Canadian refiners on an equal share
against dumped and subsidized sugar from the U.S. and EU for
basis. Depending on quota utilization, the volume has the potential
another five years. New CITT practice is to initiate reviews later than
to increase in 5 year increments to reach 51,840 metric tonnes
in previous reviews so it is likely that duty protection will remain
over 15 years. Canada’s sugar industry has yet to benefit from the
in place as late as July 2021 and could be further extended for
new access to the EU given the October 1, 2017 removal of EU
another five years depending on the outcome of the review.
domestic sugar quotas and ongoing domestic subsidies which
generate substantial surplus sugar supplies and reduce market
The duties on imports of U.S. and EU refined sugar are important
prices. Regardless, the Company is committed to ensure maximum
to Lantic and to the Canadian refined sugar industry in general
utilization of this new export opportunity in a well-developed
because they protect the market from the adverse effect of unfairly
market which will be beneficial to the Company in the future. The
traded imports from these sources. The government support
CSI is also closely monitoring developments with respect to the UK
and trade distorting attributes of the U.S. and EU sugar regimes
Brexit on future market access opportunities for SCPs.
continue to generate surplus refined sugar production and exports
that threaten the Canadian sugar market. However, there is no
The Comprehensive and Progressive Agreement for Trans-Pacific
assurance that the CITT determination in the next review will
Partnership (“CPTPP”) entered into force on December 30, 2018
continue the duty protection for a further five years.
for the first six countries that ratified the agreement – Canada,
Australia, Japan, Mexico, New Zealand, and Singapore. Vietnam
On November 30, 2018, a new NAFTA deal was signed by the
joined on January 14, 2019, leaving Brunei, Chile, Malaysia and
three countries – the Canada-United States-Mexico Agreement
Peru still to ratify. The CPTPP countries are diverse in terms of sugar
(“CUSMA”), known as USMCA in the U.S. and T-MEX in Mexico.
policies and trade but collectively may provide an opportunity to
Through seven rounds of negotiations, the Canadian Sugar
advance trade in refined sugar and SCPs over the medium to long
Institute (CSI) advanced Canada’s sugar industry interest in securing
term. Lantic and the other Canadian sugar refiner may benefit
improved U.S. market access for Canadian sugar and sugar-
from new access for SCPs in Japan, Vietnam and Malaysia (after
containing products (“SCPs”) and addressing outdated quota rules
ratification) as the phase-out of tariffs proceed over several years.
for SCPs. If the “CUSMA” is implemented, it will provide Canada
A number of other countries have expressed varying degrees of
a combined 19,200 metric tonnes of new access consisting of two
interest in joining the CPTPP and may provide additional export
separate tariff rate quotas; one for 9,600 metric tonnes of Canadian
opportunities in the long term. Much technical work remains to
origin refined beet sugar and a second for 9,600 metric tonnes
determine specific product opportunities and import procedures
of SCPs, with more flexible rules to allow full quota utilization.
before the Company can ascertain whether any financial benefits
As the only producer of Canadian origin sugar, the Company’s
will result from the CPTPP in fiscal 2020 or subsequent years.
Rogers Sugar Inc.MANAGEMENT’S DISCUSSION & ANALYSIS 39
Canada has entered into free trade agreements (“FTAs”) with
input from the CSI and the Canadian sugar refiners to ensure the
numerous countries on a bilateral or regional basis, however, few
long-term stability of the Canadian refined sugar industry and its
beyond the NAFTA (or new CUSMA), CETA and potentially the
ability to support a vibrant food processing industry in Canada.
CPTPP offer significant market potential for Canadian sugar and
SCPs. There are a number of reasons why these FTAs have not
Foreign Trade Policies with regards to Maple products
provided Lantic with meaningful export gains. In many cases, the
TMTC’s international operations are also subject to inherent
FTA country is not a logical export market, such as Jordan which is
risks, including change in the free flow of food products between
distant from Canada and closer to European suppliers or Colombia
countries, fluctuations in currency values, discriminatory fiscal
that is a large surplus sugar producer and exporter relative to
policies, unexpected changes in local regulations and laws and the
Canada. FTAs with countries such as Honduras, Peru and Panama
uncertainty of enforcement of remedies in foreign jurisdictions. In
are also not significant markets for high quality Canadian sugar
addition, foreign jurisdictions, including the United States, TMTC’s
and negotiated outcomes provide for minimal tariff rate quota
current and expected largest market, could impose tariffs, quotas,
quantities. Other more recent FTAs, including with the Republic
trade barriers and other similar restrictions on TMTC’s international
of Korea and the Ukraine, excluded refined sugar from tariff
sales and subsidize competing agricultural products.
improvements. “Rules of origin” in almost all FTAs limit Canadian
sugar benefits to beet sugar grown in Canada and processed at the
All of these risks could result in increased costs or decreased
Taber beet factory. Some limited opportunities under the Canada-
revenues, either of which could materially adversely affect TMTC’s
Costa Rica FTA are available for both refined beet and cane sugar.
financial condition and results of operations. The implementation
of CETA removes the duties on imported maple syrup which could
The CSI will continue to monitor Canada’s exploratory discussions
benefit the Company in additional export volume to the EU.
and formal negotiations for any meaningful developments that
may be of value to Canada’s sugar industry while also monitoring
Unexpected Costs or Liabilities Related to the Acquisition
potential threats. The Company continues to remain concerned
Although the Company has conducted due diligence in connection
that the inclusion of refined sugar in Canada’s various regional
with the acquisitions of LBMTC and Decacer, an unavoidable level of
and bilateral negotiations may result in substantial new duty-free
risk remains regarding any undisclosed or unknown liabilities of, or
imports from these countries, while not providing offsetting
issues concerning, TMTC and its business. Lantic sought insurance
export market opportunities. The Canada-Mercosur free trade
to cover any potential liability under the Purchase Agreement
negotiations are an example (includes Argentina, Brazil, Paraguay
of LBMTC and subscribed to the representation and warranties
and Uruguay). Exploratory discussions towards an FTA with the
insurance (“RWI”) Policy, with coverage of up to $16.0 million and
ASEAN region also limit export prospects given Thailand’s large
a deductible of $1.6 million, half of which will be assumed by the
surplus production and dominance in the region.
previous shareholders of LBMTC. Although Lantic has subscribed
to the RWI Policy which provides for a $16.0 million coverage,
The real potential for significant, long-term export gains is via a
the RWI Policy is subject to certain exclusions. In addition, there
global agreement through the World Trade Organization (“WTO”).
may be circumstances for which the insurer may elect to limit such
The WTO agriculture negotiations have not advanced since they
coverage or refuse to indemnify Lantic or situations for which the
stalled in July 2008, however like-minded WTO members including
coverage provided under the RWI Policy may not be sufficient or
Canada are actively collaborating to find ways to strengthen and
applicable and Lantic may have to seek indemnifications from the
modernize the WTO to ensure there remains a strong rules-based
previous shareholders of LBMTC. The existence of any undisclosed
multilateral trading system in the face of rising global protectionism.
liabilities and Lantic’s inability to claim indemnification from the
Efforts by Canada and other like-minded countries are essential to
previous shareholders of LBMTC or the provider of the RWI Policy
maintain and reform this international body while continuing to
could materially adversely affect the Company’s financial results
provide an effective dispute settlement and appeals process.
and its operations.
Reaffirming the critical value of a modernized WTO along with
growing regional integration through comprehensive and ambitious
FTAs such as the CETA and CPTPP provide the best medium
to long term prospect of improved export opportunity for the
Canadian sugar industry. All of these agreements involve significant
2019 Annual ReportMANAGEMENT’S DISCUSSION & ANALYSIS 40
Employee Relations
Cybersecurity
The majority of the Lantic’s operations are unionized and agreements
The Company faces various security threats, including cybersecurity
are currently in place in each unionized facility. The next collective
threats to gain unauthorized access to sensitive information, to
bargaining agreement to expire will be in fiscal 2021.
render data or systems unusable, or otherwise affect the Company’s
ability to operate. The Company’s operations require it to use and
In fiscal 2019, a six-year labour agreement, expiring in June
store personally identifiable and other sensitive information of its
2024, was reached with the unionized employees of the Toronto
employees, notably. The collection and use of personally identifiable
warehouse. The new agreement was agreed at competitive rates.
information is governed by Canadian federal and provincial laws
and regulations. Privacy and information security laws continue to
TMTC’s bottling plant in Granby, Québec is under a collective
evolve and may be inconsistent from one jurisdiction to another.
bargaining agreement, which is currently scheduled to expire in
The security measures put in place by the Company in that regard
May 2023.
cannot provide absolute security, and the Company’s information
technology infrastructure may be vulnerable to cyberattacks,
Strikes or lock-outs in future years could restrict the ability of
including without limitation, malicious software, attempts to gain
the Company to service its customers in the affected regions,
unauthorized access to data hereinabove mentioned, and other
consequently affecting the Company’s revenues.
electronic security breaches that could lead to disruptions in critical
systems, corruptions of data and unauthorized release of confidential
Food Safety and Consumer Health
or otherwise protected information. The occurrence of one of these
The Company is subject to risks that affect the food industry in
events could cause a substantial decrease in revenues, increased
general, including risks posed by accidental contamination,
costs to respond or other financial loss, damage to reputation,
product tampering, consumer product liability, and the potential
increased regulation or litigation or inaccurate information reported
costs and disruptions of a product recall. The Company actively
by the Company’s operations. These developments may subject the
manages these risks by maintaining strict and rigorous controls and
Company’s operations to increased risks, as well as increased costs,
processes in its manufacturing facilities and distribution systems
and, depending on their ultimate magnitude, could materially and
and by maintaining prudent levels of insurance.
adversely affect the Company’s financial results and operations.
The Company’s facilities are subject to audit by federal health
The Company seeks to manage cybersecurity risk by continuing
agencies in Canada and similar institutions outside of Canada.
to
invest
in appropriate
information
technology systems,
The Company also performs its own audits designed to ensure
infrastructure and security, including disaster plans, reviewing its
compliance with its internal standards, which are generally at, or
existing technologies, processes and practices on a regular basis
higher than, regulatory agency standards in order to mitigate the
and ensuring employees understand and are aware of their role
risks related to food safety.
in protecting the integrity of the Company’s technological security
and information. The Company relies on third party products
Consumers, public health officials and government officials are
and services to assist it in protecting its information technology
increasingly concerned about the public health consequences
infrastructure and its proprietary and confidential information. The
of obesity, particularly among young people. In addition, some
Company seeks to be proactive in the area of cybersecurity and
researchers, health advocates and dietary guidelines are suggesting
consequently anticipates that it will continue to incur expenses
that consumption of sugar, in various forms, is a primary cause of
in relation to, and dedicate personnel and other resources to,
increased obesity rates and are encouraging consumers to reduce
cybersecurity, as new and increasingly complex threats and risks
their consumption of sugar. Increasing public concern about obesity
are identified and responded to.
and other health conditions; possible new or increased taxes on
products containing sugar, such as sugar-sweetened beverages by
government entities to reduce consumption or to raise revenue;
shift in consumer preferences from sugar to other types of
sweeteners; additional governmental regulations concerning the
marketing, labeling, packaging or sale of products and negative
publicity may reduce demand for the products of the Company
and each of the aforementioned factors could materially adversely
affect the Company’s financial results and operations.
Rogers Sugar Inc.MANAGEMENT’S DISCUSSION & ANALYSIS 41
Environmental Matters
transferred to Rogers for dividend payment. Management believes
The operations of the Company are subject to environmental
that the interest expense inherent in the structure is supportable
regulations
imposed by
federal, provincial and municipal
and reasonable in light of the terms of the debt owed by Lantic to
governments in Canada, including those relating to the treatment
Rogers and TMTC to Lantic.
and disposal of waste water and cooling water, air emissions,
contamination and spills of substances. Management believes
Management and Operation of Lantic
that the Company is in compliance in all material respects with
The Board of Directors of Lantic is currently controlled by Lantic
environmental laws and regulations. However, these regulations
Capital, an affiliate of Belkorp Industries. As a result, holders of
have become progressively more stringent and the Company
shares have limited say in matters affecting the operations of Lantic;
anticipates this trend will continue, potentially resulting in the
if such holders are in disagreement with the decisions of the Board
incurrence of material costs to achieve and maintain compliance.
of Directors of Lantic, they have limited recourse. The control
As mentioned above, the Company substantially completed the
may make it more difficult for others to attempt to gain control of
purchase and installation of equipment to upgrade the Taber beet
or influence the activities of Lantic and the Company.
exercised by Lantic Capital over the Board of Directors of Lantic
factory to be fully compliant with the new air emissions regulations
by the start of the fiscal 2020 beet harvesting season (crop 2019).
Air emission testing took place in late October 2019 and preliminary
OUTLOOK
results are positive. The finalization of the commissioning is
expected to be completed by the end of the first quarter of fiscal
Sugar
2020. No assurance can be given that such air emission testing will
We estimate that the current 2019 beet crop should derive a
meet the requirements of Alberta Environment and Park.
quantity of refined sugar ranging between 60,000 to 70,000
metric tonnes, as opposed to 125,000 metric tonnes as previously
Violation of these regulations can result in fines or other penalties,
expected, following severe adverse weather in Alberta. The
which in certain circumstances can include clean-up costs. As
decision was made in early November to terminate the beet harvest
well, liability to characterize and clean up or otherwise deal with
as severe snow and frost damage resulted in an inability to store or
contamination on or from properties owned, used or controlled
process the unharvested damaged sugar beet crop. The Company
by the Company currently or in the past can be imposed by
is reviewing all available options to service its customers, one of
environmental regulators or other third parties. Such liabilities
which will include the supply of cane sugar from the Vancouver
could materially adversely affect the Company’s financial results
and Montréal refineries as they both have excess capacity. The
and operations.
Income Tax Matters
Company will work to mitigate the financial implication of a smaller
sugar beet crop.
The income of the Company must be computed and is taxed in
Given the smaller crop in Taber, export volume is expected to be
accordance with Canadian tax laws, all of which may be changed
approximately 15,000 metric tonnes lower than fiscal 2019. The
in a manner that could adversely affect the amount of dividends.
Company has a long-term relationship with its customer in Mexico
There can be no assurance that taxation authorities will accept the
and, as a result, we were able to reduce its shipments in fiscal 2020
tax positions adopted by the Company including the determination
and roll commitments into fiscal 2022 at no additional costs to the
of the amounts of federal and provincial income which could
Company. Shipments to the USA under the Canada-specific U.S.
materially adversely affect dividends.
quota of 10,300 metric tonnes have been fully considered in our
reconfigured supply chain and will be fully delivered in fiscal 2020.
The current corporate structure involves a significant amount of
inter-company or similar debt, generating substantial interest
The Company anticipates that the consumer segment should be
expense, which reduces earnings and therefore income tax payable
approximately 10,000 metric tonnes higher than fiscal 2019. During
at Lantic and TMTC’s level. There can be no assurance that taxation
the current fiscal year, the Company gained additional business
authorities will not seek to challenge the amount of interest
with an existing consumer account which started in April 2019 and
expense deducted. If such a challenge were to succeed against
as such, will improve consumer volume in fiscal 2020.
Lantic, it could materially adversely affect the amount of cash
2019 Annual ReportMANAGEMENT’S DISCUSSION & ANALYSIS 42
The Taber factory delivers a significant portion of its volume to liquid
Maple products
customers, which is still expected to occur in fiscal 2020. Therefore,
In fiscal 2019, the Company experienced increased competitive
the Company’s liquid segment is expected to be comparable to
activities as a result of a new entrant in the maple bottling business.
fiscal 2019.
We are confident in our ability to defend our market share; however,
as a result of the increased competition, we have experienced
Industrial volume should be slightly lower than fiscal 2019.
margin pressures in the Maple products segment and anticipate
these pressures to remain until current market conditions improve.
Despite the challenges expected as a result of a small crop in Taber,
In addition to defending our current market share, the Company
the Company anticipates that the overall sales volume in fiscal 2020
will continue to invest in the business to lower operating cost and
should be approximately 735,000 metric tonne, thus approximately
build new sales volume through the pursuit of new markets and
6,000 metric tonnes lower than fiscal 2019.
value-added products.
On May 22, 2019, the Alberta Legislature announced that Bill 1,
As part of our strategy to enhance our competitive advantage, we
An Act to Repeal the Carbon Tax, will take effect on June 1, 2019.
have embarked on a footprint optimization project that will result
Bill 1 has effectively removed the carbon tax in Alberta, which
in increased capacity. Once the footprint optimization project is
was set at $1.517 per gigajoule by the previous government. On
completed, the Company will be well positioned to have ample
June 13, 2019, the Canadian government announced that on
capacity to respond to future growth and be more competitive
January 1, 2020, the Federal government will impose a carbon
through more cost-efficient facilities. The footprint optimization,
tax on Alberta, which will be equivalent to the carbon tax that was
with the repurposing of the St-Honoré-de-Shenley facility, the
removed on June 1, 2019. The Alberta government has launched
relocation of the Granby facility and the expansion of the Degelis
a constitutional challenge in court. Then on October 30, 2019, the
facility, has, in the short-term, created some short-term operational
Alberta government proposed a new carbon tax on large emitters
inefficiencies and capacity constraints in the second half of fiscal
called the “Technology Innovation and Emissions Reduction
2019. The Company has taken several steps to address the core
(“TIER”)” system that would tax large emitting facilities. The
operational issues by temporary augmenting its production
Federal government is reviewing the proposal by Alberta in order
capacity by increasing staffing in order to add production hours
to decide if it will continue to impose or not the Federal carbon
as well as transferring some production to its Vermont facility. As a
tax on Alberta. It is unclear how the carbon tax will be calculated
result, we expect the Degelis site to continuously improve and hit
starting on January 1, 2020 but in light of the reduced beet crop, it
target efficiencies by the end of the first quarter of calendar 2020.
is not expected to have a significant financial impact as the slicing
Granby operations have taken on some of the production overflow
campaign should be completed by the end of December. Savings
from Degelis and will complete a planned transition to a new site
of approximately $2.7 million are expected in the first half of fiscal
by January 31, 2020. We expect that the economic benefit of this
2020 as a result of the temporary removal of the carbon tax in
transition will start to be realized after the second quarter of fiscal
Alberta as well as the shorter slicing campaign. No other changes
2020. No changes are expected in our Vermont facility.
are expected on carbon tax in British Columbia and Québec.
In light of the smaller crop in Taber, it is expected that distribution
footprint optimization, of which, approximately $4.0 million will be
costs will increase in fiscal 2020 since our supply chains will be out
spent in fiscal 2020 to complete the Granby relocation.
The Company expects to spend approximately $7.0 million for its
of balance.
See “Forward Looking Statements” section and “Risks and
With the completion of the air emission project, capital spend for
Uncertainties” section.
the Sugar segment is expected to return to a level of approximately
$20.0 million, including a high proportion of return on investment
capital expenditures.
Rogers Sugar Inc.MANAGEMENT’S DISCUSSION & ANALYSIS 43
NON-GAAP MEASURES
• Adjusted EBITDA is defined as adjusted EBIT adjusted to
add back depreciation and amortization expenses, goodwill
In analyzing results, we supplement the use of financial measures
impairment, the Sugar segment acquisition costs and the Maple
that are calculated and presented in accordance with IFRS with a
products segment non-recurring expenses.
number of non-GAAP financial measures. A non-GAAP financial
measure is a numerical measure of a company’s performance,
• Adjusted net earnings is defined as net (loss) earnings adjusted
financial position or cash flow that excludes (includes) amounts, or is
for the adjustment to cost of sales, the amortization of transitional
subject to adjustments that have the effect of excluding (including)
balances to cost of sales for cash flow hedges, the amortization
amounts, that are included (excluded) in most directly comparable
of transitional balance to net finance costs and the income tax
measures calculated and presented in accordance with IFRS.
impact on these adjustments. Amortization of transitional balance
Non-GAAP financial measures are not standardized; therefore,
to net finance costs is defined as the transitional marked-to-
it may not be possible to compare these financial measures with
market balance of the interest rate swaps outstanding as of
the non-GAAP financial measures of other companies having the
October 1, 2016, amortized over time based on their respective
same or similar businesses. We strongly encourage investors to
settlement date until all existing interest rate swaps agreements
review the audited consolidated financial statements and publicly
have expired, as shown in the notes to the consolidated financial
filed reports in their entirety, and not to rely on any single financial
statements.
measure.
We use these non-GAAP financial measures in addition to, and in
margin of the Sugar segment divided by the sales volume of the
• Adjusted gross margin rate per MT is defined as adjusted gross
conjunction with, results presented in accordance with IFRS. These
Sugar segment.
non-GAAP financial measures reflect an additional way of viewing
aspects of the operations that, when viewed with the IFRS results
• Adjusted gross margin percentage is defined as the adjusted
and the accompanying reconciliations to corresponding IFRS
gross margin of the Maple products segment divided by the
financial measures, may provide a more complete understanding
revenues generated by the Maple products segment.
of factors and trends affecting our business.
The following is a description of the non-GAAP measures used by
earnings divided by the weighted average number of shares
the Company in the MD&A:
outstanding.
• Adjusted net earnings per share is defined as adjusted net
• Adjusted gross margin is defined as gross margin adjusted for:
• Free cash flow is defined as cash flow from operations excluding
• “the adjustment to cost of sales”, which comprises the
changes in non-cash working capital, mark-to-market and
mark-to-market gains or losses on sugar futures, foreign
derivative timing adjustments, amortization of transitional
exchange forward contracts and embedded derivatives as
balances, financial instruments non-cash amount, deferred
shown in the notes to the consolidated financial statements
financing charges and includes funds received from stock
and the cumulative timing differences as a result of mark-to-
options exercised and excludes funds paid for the purchase and
market gains or losses on sugar futures, foreign exchange
cancellation of shares and includes capital and intangible assets
forward contracts and embedded derivatives as described
expenditures, net of operational excellence capital expenditures.
below; and
Free cash flow for fiscal 2017 excludes any funds received or paid
• “the amortization of transitional balance to cost of sales
as part of the short form prospectus offering for subscription
for cash flow hedges”, which is the transitional marked-to-
receipts and convertible unsecured subordinated debentures
market balance of the natural gas futures outstanding as of
issued in July 2017. Free cash flow for fiscal 2018 excludes any
October 1, 2016 amortized over time based on their
funds received or paid for the issuance of the convertible
respective settlement date until all existing natural gas
unsecured subordinated debentures issued in March 2018.
futures have expired, as shown in the notes to the
consolidated financial statements.
• Adjusted operating results (“Adjusted EBIT”) is defined as EBIT
adjusted for the adjustment to cost of sales, the amortization of
transitional balances to cost of sales for cash flow hedges.
2019 Annual ReportMANAGEMENT’S DISCUSSION & ANALYSIS
44
In the MD&A, we discuss the non-GAAP financial measures, including the reasons why we believe these measures provide useful information
regarding the financial condition, results of operations, cash flows and financial position, as applicable. We also discuss, to the extent
material, the additional purposes, if any, for which these measures are used. These non-GAAP measures should not be considered in
isolation, or as a substitute for, analysis of the Company’s results as reported under GAAP. Reconciliations of non-GAAP financial measures
to the most directly comparable IFRS financial measures are as follows:
Consolidated results
Fourth Quarter Fiscal 2019
Fourth Quarter Fiscal 2018
(In thousands of dollars)
Sugar
$
Maple
Products
$
Total
$
Gross margin
24,643
4,430
29,073
Total adjustment to the cost of sales (1)
(285)
238
(47)
Adjusted Gross Margin
24,358
4,668
29,026
Results from operating activities (“EBIT”)
16,448
(49,248)
(32,800)
Total adjustment to the cost of sales (1)
(285)
238
(47)
Goodwill impairment
Adjusted results from operating activities
(“Adjusted EBIT”)
—
50,000
16,163
990
50,000
17,153
Sugar
$
21,640
4,158
25,798
13,981
4,158
—
Maple
Products
$
Total
$
7,615
29,255
(649)
3,509
6,966
32,764
4,250
18,231
(649)
3,509
—
—
18,139
3,601
21,740
Results from operating activities (“EBIT”)
Total adjustment to the cost of sales (1)
16,163
(285)
990
238
17,153
(47)
18,139
4,158
3,601
21,740
(649)
3,509
Depreciation of property, plant and equipment
and amortization of intangible assets
3,499
1,432
4,931
3,431
1,165
4,596
Goodwill impairment
Maple Segment non-recurring costs (1)
—
—
50,000
50,000
131
131
—
—
—
(4)
—
(4)
Adjusted EBITDA (1)
19,662
2,553
22,215
21,570
4,762
26,332
Net (loss) earnings
Total adjustment to the cost of sales (1)
Goodwill impairment
Amortization of transitional balance to net
finance costs (1)
Income taxes on above adjustments
Adjusted net earnings
Net (loss) earnings per share (basic)
Adjustment for the above
Adjusted net earnings per share (basic)
(40,021)
(47)
50,000
(69)
47
9,910
(0.38)
0.47
0.09
9,633
3,509
—
(128)
(892)
12,122
0.09
0.03
0.12
Rogers Sugar Inc.MANAGEMENT’S DISCUSSION & ANALYSIS
45
Consolidated results
(In thousands of dollars)
Fiscal 2019
Maple
Products
$
Sugar
$
Total
$
Sugar
$
Fiscal 2018
Maple
Products
$
Total
$
Gross margin
100,301
22,274
122,575
102,578
28,275
130,853
Total adjustment to the cost of sales (1)
(6,269)
272
(5,997)
(2,919)
(1,572)
(4,491)
Adjusted Gross Margin
94,032
22,546
116,578
99,659
26,703
126,362
Results from operating activities (“EBIT”)
65,539
(41,392)
24,147
70,748
13,352
84,100
Total adjustment to the cost of sales (1)
(6,269)
272
(5,997)
(2,919)
(1,572)
(4,491)
Goodwill impairment
Adjusted results from operating activities
(“Adjusted EBIT”) (1)
—
50,000
59,270
8,880
50,000
68,150
—
—
—
67,829
11,780
79,609
Results from operating activities (“EBIT”)
59,270
8,880
68,150
67,829
11,780
79,609
Total adjustment to the cost of sales (1)
(6,269)
272
(5,997)
(2,919)
(1,572)
(4,491)
Depreciation of property, plant and equipment
and amortization of intangible assets
13,865
5,356
Goodwill impairment
Maple Segment non-recurring costs (1)
—
—
50,000
437
437
19,221
50,000
13,495
4,979
18,474
—
—
—
—
1,859
1,859
Adjusted EBITDA (1)
73,135
14,673
87,808
81,324
18,618
99,942
Net (loss) earnings
Total adjustment to the cost of sales (1)
Goodwill impairment
Amortization of transitional balance to net
finance costs (1)
Income taxes on above adjustments
Adjusted net earnings
Net (loss) earnings per share (basic)
Adjustment for the above
Adjusted net earnings per share (basic)
(1) See “Adjusted results” section.
(8,167)
(5,997)
50,000
(378)
1,621
37,079
(0.08)
0.43
0.35
48,729
(4,491)
—
(532)
1,326
45,032
0.46
(0.03)
0.43
2019 Annual ReportMANAGEMENT’S DISCUSSION & ANALYSIS
46
CRITICAL ACCOUNTING ESTIMATES
be provided by the lessors. Other areas of the lease accounting
The preparation of the Company’s audited consolidated financial
Transitional provisions have been provided.
statements in conformity with IFRS requires us to make estimates
and judgements that affect the reported amounts of assets and
The Company intends to adopt IFRS 16 in its consolidated
liabilities, net revenue and expenses, and the related disclosures.
financial statements for the annual period beginning on
model have been impacted, including the definition of a lease.
Such estimates include the valuation of goodwill, intangible
September 29, 2019.
assets, identified assets and liabilities acquired in business
combinations, other long-lived assets, income taxes, the provision
The adoption of IFRS 16 will have a significant impact on the
for asbestos removal and pension obligations. These estimates
Company’s consolidated financial statements, as the Company
and assumptions are based on management’s best estimates and
will recognize new assets and liabilities for its operating leases
judgments. Management evaluates its estimates and assumptions
of warehouses, operating properties, railcars and production
on an ongoing basis using historical experience, knowledge of
equipment. In addition, the nature and timing of expenses
economics and market factors, and various other assumptions that
related to those leases will change as IFRS 16 replaces the
management believe to be reasonable under the circumstances.
straight-line operating lease expense with a depreciation charge
Management adjusts such estimates and assumptions when facts
for right-of use assets and interest expense on lease liabilities.
and circumstances dictate. Actual results could differ from these
On a go-forward basis, there will be a decrease in operating
estimates. Changes in those estimates and assumptions are
lease expense and an increase in depreciation and amortization
recognized in the period in which the estimates are revised. Refer
and interest expense.
to note 2 (d) to the audited consolidated financial statements for
more detail.
The Company intends to adopt this standard using the modified
retrospective approach measuring the right-of-use asset to be
equal to the lease liability with no restatement of the comparative
CHANGES IN ACCOUNTING PRINCIPLES AND PRACTICES
period. Under the modified retrospective approach, the
NOT YET ADOPTED
Company has elected to use the following practical expedients
A number of new standards, and amendments to standards and
interpretations, are not yet effective and have not been applied
• the Company will not reassess whether a contract is, or
in preparing these audited consolidated financial statements. New
contains, a lease at the date of initial application and instead
standards and amendments to standards and interpretations that
will apply IFRS 16 to contracts that were previously identified
are currently under review include:
as leases applying IAS 17, Leases;
permitted on adoption of IFRS 16:
• IFRS 16, Leases:
• the Company will rely on the assessment of the onerous
On January 13, 2016 the IASB issued IFRS 16 Leases. The new
lease provisions under IAS 37, Provisions, contingent
standard is effective for annual periods beginning on or after
liabilities and contingent assets, instead of performing an
January 1, 2019. Earlier application is permitted for entities that
impairment review. The Company will adjust the right-
apply IFRS 15 Revenue from Contracts with Customers at or
of-use assets at the date of initial application by the amount
before the date of initial adoption of IFRS 16. IFRS 16 will replace
of any provision for onerous leases recognized in the
IAS 17 Leases.
consolidated balance sheet immediately before the date of
initial application;
This standard introduces a single lessee accounting model and
requires a lessee to recognize assets and liabilities for all leases
• the Company will account for leases for which the lease
with a term of more than 12 months, unless the underlying asset
term ends within twelve months of September 28, 2019 as
is of low value. A lessee is required to recognize a right-of-use
short-term leases; and
asset representing its right to use the underlying asset and a
lease liability representing its obligation to make lease payments.
• the Company will use hindsight in determining the lease
term at the date of initial application.
This standard substantially carries forward the lessor accounting
requirements of IAS 17, while requiring enhanced disclosures to
Rogers Sugar Inc.MANAGEMENT’S DISCUSSION & ANALYSIS
47
The Company’s preliminary assessment of the impact of the
• information required to be disclosed by the Company in its
adoption of the standard is an increase of the lease liability of
annual filings, interim filings or other reports filed or submitted by
approximately $11.0 million and an increase in the right-of-use
it under securities legislation is recorded, processed, summarized
asset of approximately $11.0 million on the consolidated
and reported within the time periods specified in securities
statement of financial position as at September 29 2019. As
legislation.
amounts previously recognized as lease expenses will be
replaced by the depreciation of the right-of-use asset and the
As at September 28, 2019, an evaluation was carried out, under the
lease liability finance costs, the consolidated statement of (loss)
supervision of the CEO and the CFO, of the design and operating
earnings and comprehensive (loss) income will be affected.
effectiveness of the Company’s DC&P. Based on this evaluation,
the CEO and the CFO concluded that the Company’s DC&P
Additional new standards, and amendments to standards and
were appropriately designed and were operating effectively as at
interpretations, include: IFRIC 23 Uncertainty over Income
September 28, 2019.
Tax Treatments, Annual Improvements to IFRS Standards (2015-
2017) Cycle and Amendments to References to the Conceptual
Framework
in
IFRS Standards. The Company
intends to
INTERNAL CONTROLS OVER FINANCIAL REPORTING
adopt these new standards, and amendments to standards and
interpretations, in its consolidated financial statements in each of
The CEO and CFO have also designed internal controls over
their respective annual period for which they become applicable.
financial reporting (“ICFR”), or have caused them to be designed
The Company does not expect the amendments to have a
under their supervision, in order to provide reasonable assurance
material impact on the consolidated financial statements. Refer
regarding the reliability of financial reporting and the preparation of
to note 3 (s) to the audited consolidated financial statements for
financial statements for external purposes in accordance with IFRS
more detail.
CONTROLS AND PROCEDURES
using the framework established in “Internal Control – Integrated
Framework (COSO 2013 Framework) published by the Committee
of Sponsoring Organizations of the Treadway Commission
(COSO)”. As at September 28, 2019, an evaluation was carried
out, under the supervision of the CEO and the CFO, of the design
In compliance with the provisions of Canadian Securities
and operating effectiveness of the Company’s ICFR. Based on that
Administrators’ Regulation 52-109, the Corporation has filed
evaluation, they have concluded that the design and operation
certificates signed by the President and Chief Executive Officer
of the Company’s internal controls over financial reporting were
(“CEO”) and by the Vice-President Finance and Chief Financial
effective as at September 28, 2019.
Officer (“CFO”), in that, among other things, report on:
• their responsibility for establishing and maintaining disclosure
that, due to inherent limitations, any controls, no matter how well
controls and procedures and internal control over financial
designed and operated, can provide only reasonable assurance
reporting for the Company; and
of achieving the desired control objectives and may not prevent
• the design and effectiveness of disclosure controls and
or detect misstatements. Projections of any evaluations of
procedures and the design and effectiveness of internal controls
effectiveness to future periods are subject to the risk that controls
In designing and evaluating such controls, it should be recognized
over financial reporting.
may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may
deteriorate. Additionally, management is obliged to use judgement
DISCLOSURE CONTROLS AND PROCEDURES
in evaluating controls and procedures.
The CEO and the CFO, have designed the disclosure controls and
procedures (“DC&P”), or have caused them to be designed under
CHANGES IN INTERNAL CONTROLS OVER
their supervision, in order to provide reasonable assurance that:
FINANCIAL REPORTING
• material information relating to the Company is made known to
There were no changes in the Company’s internal controls over
the CEO and CFO by others, particularly during the period in
financial reporting during the year that have materially affected,
which the interim and annual filings are being prepared; and
or are reasonably likely to materially affect, the Company’s internal
control over financial reporting.
2019 Annual ReportMANAGEMENT’S DISCUSSION & ANALYSIS
48
RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying consolidated financial statements of Rogers Sugar Inc. and all the information in this annual report pertaining to the
Corporation are the responsibility of the Administrator and have been approved by the Board of Directors.
The consolidated financial statements have been prepared by the Administrator in accordance with International Financial Reporting
Standards by applying the detailed accounting policies set out in the notes to the financial statements. The Administrator is of the opinion
that the consolidated financial statements were prepared based on reasonable and material criteria and using justifiable and reasonable
estimates. The Administrator has prepared the financial information presented elsewhere in the annual report and has ensured that it is
consistent with the financial statements of the Corporation.
The Administrator maintains systems of internal accounting and administrative controls of high quality, consistent with reasonable cost.
Such systems are designed to provide reasonable assurance that the financial information is relevant, reliable and accurate and that the
Corporation’s assets are appropriately accounted for and adequately safeguarded.
The Board of Directors is responsible for ensuring that the Administrator fulfills its responsibilities for financial reporting and is ultimately
responsible for reviewing and approving the financial statements of the Corporation. The Board carries out this responsibility through its
Audit Committee.
The Audit Committee is appointed by the Board and all of its members are outside and unrelated directors. The committee meets with the
Administrator, as well as external auditors, to discuss internal controls over the financial reporting process, auditing matters and financial
reporting issues, to satisfy itself that each party is properly discharging its responsibilities and to review the annual report, the financial
statements and the external auditors’ report. The committee reports its findings to the Board for consideration when approving the financial
statements for issuance to the Shareholders. The committee also considers, for review by the Board and approval by the Shareholders, the
engagement or re-appointment of the external auditors.
The consolidated financial statements of the Corporation have been audited by KPMG LLP, the external auditors, in accordance with
Canadian generally accepted auditing standards on behalf of the Shareholders. KPMG LLP has full and free access to the Audit Committee.
John Holliday,
Manon Lacroix,
President and Chief Executive Officer
Vice President Finance, Chief Financial Officer and Secretary
Lantic Inc., Administrator
Lantic Inc., Administrator
November 20, 2019
Rogers Sugar Inc.MANAGEMENT’S DISCUSSION & ANALYSIS
INDEPENDENT AUDITORS’ REPORT
49
To the Shareholders of Rogers Sugar Inc.
Opinion
We have audited the consolidated financial statements of Rogers Sugar Inc. (the "Entity"), which comprise:
• the consolidated statements of financial position as at September 28, 2019 and September 29, 2018,
• the consolidated statements of (loss) earnings and comprehensive (loss) income for fiscal years ended September 28, 2019 and
September 29, 2018,
• the consolidated statements of changes in shareholders’ equity for fiscal years ended September 28, 2019 and September 29, 2018,
• the consolidated statements of cash flows for fiscal years ended September 28, 2019 and September 29, 2018,
• 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 financial position of the Entity
as at September 28, 2019 and September 29, 2018, and its consolidated financial performance and its consolidated cash flows for the years
then ended in accordance with International Financial Reporting Standards (IFRS).
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 "Auditors’ Responsibilities for the Audit of the Financial Statements" section of our auditors’ 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 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.
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.
• the information, other than the financial statements and the auditors’ report thereon, included in a document likely to be entitled
"Glossy Annual Report".
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 thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
50
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 as
at the date of this auditors’ report. 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 auditors’ report.
We have nothing to report in this regard.
The information, other than the financial statements and the auditors’ report thereon, included in a document likely to be entitled “Glossy
Annual Report” is expected to be made available to us after the date of this auditors’ report. If, based on the work we will perform on this
other information, we conclude that there is a material misstatement of this other information, we are required to report that fact to those
charged with governance.
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 International Financial
Reporting Standards (IFRS), 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.
Auditors’ 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 auditors’ 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.
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.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
51
• 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 auditors’ 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 auditors’ 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 represents 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 the 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.
The engagement partner on the audit resulting in this auditors’ report is Aaron Fima.
Montréal, Canada
November 20, 2019
* CPA auditor, CA, public accountancy permit No. A125211
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
52
CONSOLIDATED STATEMENTS OF (LOSS) EARNINGS AND COMPREHENSIVE (LOSS) INCOME
(In thousands of dollars except per share amounts)
Consolidated statements of (loss) earnings
Revenues (note 34)
Cost of sales
Gross margin
Administration and selling expenses
Distribution expenses
Goodwill impairment (note 16)
Results from operating activities
Finance income (note 6)
Finance costs (note 6)
Net finance costs (note 6)
Earnings before income taxes
Income tax expense (recovery) (note 7):
Current
Deferred
Net (loss) earnings
Net (loss) earnings per share (note 29):
Basic
Diluted
Consolidated statements of comprehensive (loss) income
Net (loss) earnings
Other comprehensive (loss) income:
Items that are or may be reclassified subsequently to net (loss) earnings:
Cash flow hedges (note 11)
Income tax on other comprehensive (loss) income (note 7)
Foreign currency translation differences
Items that will not be reclassified to net (loss) earnings:
Defined benefit actuarial (losses) gains (note 22)
Income tax expense (recovery) on other comprehensive (loss) income (note 7)
Other comprehensive (loss) income
Net (loss) earnings and comprehensive (loss) income for the year
The accompanying notes are an integral part of these consolidated financial statements.
Fiscal years ended
September 28,
2019
September 29,
2018
$
794,292
671,717
122,575
31,571
16,857
50,000
98,428
24,147
(378)
18,491
18,113
6,034
16,084
(1,883)
14,201
(8,167)
(0.08)
(0.08)
$
805,201
674,348
130,853
32,071
14,682
—
46,753
84,100
(532)
17,664
17,132
66,968
17,967
272
18,239
48,729
0.46
0.43
Fiscal years ended
September 28,
2019
$
(8,167)
September 29,
2018
$
48,729
(4,763)
1,243
425
(3,095)
(19,902)
5,194
(14,708)
(17,803)
(25,970)
(32)
9
506
483
6,643
(1,763)
4,880
5,363
54,092
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands of dollars)
53
September 28,
2019
$
September 29,
2018
$
ASSETS
Current assets:
Cash
Restricted cash (note 8)
Trade and other receivables (note 9)
Income taxes receivable
Inventories (note 10)
Prepaid expenses
Derivative financial instruments (note 11)
Total current assets
Non-current assets:
Property, plant and equipment (note 12)
Intangible assets (note 13)
Other assets (note 14)
Deferred tax assets (note 15)
Derivative financial instruments (note 11)
Goodwill (note 16)
Total non-current assets
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Bank overdraft
Revolving credit facility (note 17)
Trade and other payables (note 18)
Income taxes payable
Provisions (note 20)
Finance lease obligations (note 21)
Derivative financial instruments (note 11)
Current portion of other long-term liabilities (note 19)
Total current liabilities
Non-current liabilities:
Revolving credit facility (note 17)
Employee benefits (note 22)
Provisions (note 20)
Derivative financial instruments (note 11)
Finance lease obligations (note 21)
Convertible unsecured subordinated debentures (note 23)
Deferred tax liabilities (note 15)
Total non-current liabilities
Total liabilities
Shareholders’ equity:
Share capital (note 24)
Contributed surplus
Equity portion of convertible unsecured subordinated debentures (note 23)
Deficit
Accumulated other comprehensive (loss) income
Total shareholders’ equity
Commitments (notes 26 and 27)
Contingencies (note 28)
Total liabilities and shareholders’ equity
The accompanying notes are an integral part of these consolidated financial statements.
284
—
85,823
1,977
182,359
4,162
931
275,536
220,408
35,444
928
19,684
21
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559,492
835,028
8,325
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117,735
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160,000
51,810
819
4,677
742
144,230
42,626
404,904
549,596
100,522
300,626
5,085
(109,654)
(11,147)
285,432
835,028
2,101
846
81,736
—
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5,304
4,011
273,323
208,899
38,947
985
12,976
2,072
333,007
596,886
870,209
5,469
12,000
113,777
3,506
1,006
50
1,847
773
138,428
160,000
31,494
1,199
2,720
64
142,421
44,238
382,136
520,564
100,639
300,436
5,085
(63,171)
6,656
349,645
870,209
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
54
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(In thousands of dollars except number of shares)
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(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (CONTINUED)
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T
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
56
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
For the fiscal years ended
September 28,
2019
$
September 29,
2018
$
Cash flows from operating activities:
Net (loss) earnings
Adjustments for:
Depreciation of property, plant and equipment (note 5)
Amortization of intangible assets (note 5)
Changes in fair value of derivative financial instruments included in cost of sales
Income tax expense (note 7)
Pension contributions
Pension expense
Net finance costs (note 6)
Loss on disposal of property, plant and equipment (note 12)
Share-based compensation – equity settled (note 25)
Share-based compensation – cash settled (note 25)
Goodwill impairment (note 16)
Other
Changes in:
Trade and other receivables
Inventories
Prepaid expenses
Trade and other payables
Provisions (note 20)
Cash generated from operating activities:
Interest paid
Income taxes paid
Net cash flows from operating activities
Cash flows used in financing activities:
Dividends paid
Increase in bank overdraft
Increase in revolving credit facility (note 17)
Issuance of convertible debentures, net of underwriting fees
and issuances costs of $4.5 million (note 23)
Repurchase of convertible debentures (note 23)
Purchase and cancellation of shares (note 24)
Payment of financing fees (note 14)
Net cash flows used in financing activities
Cash flows used in investing activities:
Business combination, net of cash acquired and prior year adjustments (Note 4)
Payment of purchase price payable
Additions to property, plant and equipment, net of proceeds on disposal
Additions to intangible assets (note 13)
Net cash used in investing activities
Effect of changes in exchange rate on cash
Net decrease in cash
Cash, beginning of year
Cash, end of year
Supplemental cash flow information (note 30).
The accompanying notes are an integral part of these consolidated financial statements.
(8,167)
15,449
3,772
1,472
14,201
(8,422)
8,836
18,113
(16)
190
5
50,000
7
95,440
(4,039)
(2,828)
1,143
4,306
(578)
(1,996)
93,444
(16,350)
(21,226)
55,868
(37,804)
2,856
5,000
—
—
(640)
(140)
(30,728)
—
—
(26,837)
(172)
(27,009)
52
(1,817)
2,101
284
48,729
14,716
3,758
(7,645)
18,239
(8,435)
7,403
17,132
—
189
(5)
—
(21)
94,060
2,205
8,962
(2,315)
(20,866)
(750)
(12,764)
81,296
(14,952)
(13,432)
52,912
(38,037)
5,469
2,000
93,238
(59,990)
(3,963)
(272)
(1,555)
(42,084)
(690)
(23,271)
(384)
(66,429)
140
(14,932)
17,033
2,101
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
57
1. REPORTING ENTITY
Rogers Sugar Inc. ("Rogers" or the "Company") is a company domiciled in Canada, incorporated under the Canada Business
Corporations Act. The head office of Rogers is located at 123 Rogers Street, Vancouver, British Columbia, V6B 3V2. The consolidated
financial statements of Rogers as at September 28, 2019 and September 29, 2018 comprise Rogers and the directly and indirectly
controlled subsidiaries, Lantic Inc. ("Lantic") and The Maple Treat Corporation ("TMTC"), (together referred to as the "Company"). The
principal business activities of the Company are the refining, packaging and marketing of sugar and maple products.
The Company’s fiscal year ends on the Saturday closest to the end of September. All references to 2019 and 2018 represent the years
ended September 28, 2019 and September 29, 2018.
2. BASIS OF PREPARATION
(a) Statement of compliance:
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
("IFRS") as issued by the International Accounting Standards Board ("IASB").
These consolidated financial statements were authorized for issue by the Board of Directors on November 20, 2019.
(b) Basis of measurement:
These consolidated financial statements have been prepared on the historical cost basis except for the following material items in
the consolidated statements of financial position:
(i) derivative financial instruments are measured at fair value,
(ii) equity-settled share-based compensation, cash-settled share appreciation rights and cash-settled performance share units
are measured at fair value,
(iii) the defined benefit liability is recognized as the net total of the present value of the defined benefit obligation less the total
of the fair value of the plan assets and the unrecognized past service costs; and
(iv) assets and liabilities acquired in business combinations are measured at fair value at acquisition date, less any subsequent
impairment, if applicable.
(c) Functional and presentation currency:
These consolidated financial statements are presented in Canadian dollars, since it is the Company’s functional currency. All
financial information presented in Canadian dollars has been rounded to the nearest thousands, except as noted and per share
amounts.
(d) Use of estimates and judgements:
The preparation of these consolidated financial statements, in conformity with IFRS, requires management to make
judgements, estimates and assumptions about future events that affect the application of accounting policies and
the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the
consolidated financial statements, and the reported amounts of revenues and expenses during the reporting years.
The following is a summary of areas involving a higher degree of judgement or complexity, or areas where assumptions and
estimates are significant to the consolidated financial statements:
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
58
2. BASIS OF MEASUREMENT (CONTINUED)
(d) Use of estimates and judgements (continued):
(i) Embedded derivatives:
As at October 2, 2016, embedded derivatives, which related to the foreign exchange component of certain sales contracts
denominated in U.S. currency, were no longer separated from the host contract as it was determined that the U.S. dollar is
commonly used in Canada. This change in estimate was applied prospectively, as such, any contracts for which it was
determined there was an embedded derivative and that needed to be separated from the host contract as of October 1,
2016 continued to be treated as such as a transitional step to meet the new interpretation. These contracts continued to
be marked-to-market every quarter until all the volume on the contract was delivered. As at September 28, 2019, there were
no embedded derivatives outstanding.
(ii) Useful lives of property, plant and equipment:
The Company reviews estimates of the useful lives of property, plant and equipment on an annual basis and adjusts
depreciation on a prospective basis, if necessary.
(iii) Goodwill impairment:
The Company makes a number of estimates when calculating the recoverable amount of a cash-generating unit containing
goodwill using discounted future cash flows or other valuation methods.
(iv) Asset impairment:
The Company must assess the possibility that the carrying amounts of tangible and intangible assets may not be recoverable.
Management is required to make subjective assessments, linking the possible loss of value of assets to future economic
performance, and determine the amount of asset impairment that should be recognized, if any.
(v)
Income taxes:
The calculation of income taxes requires judgement in interpreting tax rules and regulations. Deferred income tax assets are
recorded to the extent that it is probable that there will be adequate income in the future against which they can be utilized.
(vi) Pension plans:
The cost of defined benefit pension plans is determined by means of actuarial valuations, which involve making assumptions
about discount rates, future salary increases, mortality rates and the future increases in pensions. Because of the long-term
nature of the plans, such estimates are subject to a high degree of uncertainty.
(vii) Business combinations:
Establishing the fair value of assets and liabilities, intangible assets and goodwill related to business combinations.
(viii) Consolidation:
See Note 3(a), Basis of consolidation.
Reported amounts and note disclosures reflect the overall economic conditions that are most likely to occur and anticipated
measures management intends to take. These estimates and assumptions are based on management’s best estimates and
judgments. Actual results could differ from those estimates. The above estimates and assumptions are reviewed regularly. Revisions
to accounting estimates are recognized in the period in which estimates are revised and in any future years affected.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
59
3. SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of consolidation:
(i) Subsidiaries:
The consolidated financial statements include the Company and the subsidiary it controls, Lantic Inc. ("Lantic") and its
subsidiaries, TMTC, 9020-2292 Québec Inc. ("Decacer") and Highland Sugarworks Inc. ("Highland") (the latter three
companies together referred to as "TMTC"). Control exists where 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. The
financial statements of subsidiaries are included in the consolidated financial statements from the date control commences
until the date that control ceases. The accounting policies of subsidiaries are aligned with the policies adopted by the
Company.
The Company owns 100% of the common shares of Lantic. Lantic Capital Inc., a wholly-owned subsidiary of
Belkorp Industries Inc., owns the two outstanding Class C shares of Lantic. These Class C shares are non-voting, have no
rights to return or risk of loss and are redeemable for a nominal value of one dollar each. The Class C shares entitle the holder
to elect five of the seven directors of Lantic but have no other voting rights at any meetings of Lantic’s shareholders except
as may be required by law.
Notwithstanding Lantic Capital Inc.’s ability to elect five of the seven directors of Lantic, Lantic Capital Inc. receives no
benefits or exposure to losses from its ownership of the Class C shares. As the Class C shares are non-dividend paying and
redeemable for a nominal value of one dollar, there is no participation in future dividends or changes in value of Lantic
resulting from the ownership of the Class C shares. There is also no management fee or other form of consideration
attributable to the Class C shares. The determination of control involves a high degree of judgement. Based on all the facts
and available information, management has concluded that the Company has control of Lantic.
Inter-company balances and transactions, and any unrealized income and expenses arising from inter-company transactions,
are eliminated in preparing the consolidated financial statements.
(ii) Business combinations:
Business combinations are accounted for using the acquisition method when control is transferred to the Company. The
consideration transferred in the acquisition is generally measured at fair value of the assets transferred, and any debt and
equity interests issued by the Company on the date control of the acquired company are obtained. The consideration
transferred includes the fair value of any liability resulting from a contingent consideration arrangement. Contingent
consideration classified as a liability that is a financial instrument is subsequently remeasured at fair value, with any resulting
gain or loss recognized in the consolidated statements of (loss) earnings and comprehensive (loss) income.
Acquisition-related costs, other than those associated with the issue of debt or equity securities, are expensed as incurred
and are included in administration and selling expenses in the consolidated statements of (loss) earnings and comprehensive
(loss) income. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are
generally measured initially at their fair values at the acquisition date.
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
60
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b) Foreign currency transactions:
Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency
at the exchange rate in effect at that date. Non-monetary assets and liabilities denominated in foreign currencies that are measured
at fair value are translated at the rate prevailing at the date that the fair value was determined. Foreign denominated non-
monetary assets and liabilities that are measured at the historical costs are translated at the rate prevailing at the transaction date.
Revenues and expenses denominated in foreign currencies are translated into the functional currency at the rate in effect on the
dates they occur. Gains or losses resulting from these translations are recorded in net (loss) earnings of the period.
(c) Foreign operations:
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on business combinations, are
translated to Canadian dollars at exchange rates at the reporting date. The income and expenses of foreign operations are
translated to Canadian dollars at the average exchange rate in effect during the reporting period.
Foreign currency differences are recognized in other comprehensive income (loss) in the accumulated foreign currency translation
differences account. 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 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 income or loss.
(d) Cash:
Cash includes cash on hand, bank balances and bank overdraft when the latter forms an integral part of the Company’s cash
management.
(e)
Inventories:
Inventories are valued at the lower of cost and net realizable value. The cost of inventories is determined on a first-in, first-out basis
and includes expenditures incurred in acquiring the inventories, production or conversion costs and other costs incurred in
bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes
an appropriate share of production overheads based on normal operating capacity.
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and
selling expenses.
(f) Property, plant and equipment:
Property, plant and equipment, with the exception of land, are recorded at cost less accumulated depreciation and any
accumulated impairment losses. Land is carried at cost and is not depreciated.
Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes
the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their
intended use, the costs of dismantling and removing the items and restoring the site on which they are located, and borrowing
costs on qualifying assets. Purchased software that is integral to the functionality of the related equipment is capitalized as part
of that equipment. When significant parts of an item of property, plant and equipment have different useful lives, they are
accounted for as separate items (major components) of property, plant and equipment. Construction-in-progress assets are
capitalized during construction and depreciation commences when the asset is available for use.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
61
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(f) Property, plant and equipment (continued):
The cost of replacing a part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is
probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured
reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing of property, plant and
equipment are recognized in profit or loss as incurred.
Gains and losses on disposal of items of property, plant and equipment are determined by comparing the proceeds from disposal
with the carrying amount of the property, plant and equipment and are recognized in cost of sales for assets used in production
and in administration and selling expenses for all other assets.
Depreciation related to assets used in production is recorded in cost of sales while the depreciation of all other assets is recorded
in administration and selling expenses. Depreciation is calculated on a straight-line basis, after taking into account residual values,
over the estimated useful lives of each component of an item of property, plant and equipment, since this most closely reflects the
expected pattern of consumption of the future economic benefits embodied in the asset. Significant components of individual
assets are assessed and, if a component has a useful life that is different from the remainder of that asset, then that component is
depreciated separately. The estimated useful lives are as follows:
Barrels
Buildings
Furniture and fixtures
Machinery and equipment
6 years
20 to 60 years
5 to 10 years
5 to 40 years
Finance leased assets are depreciated over the shorter of the lease term and their useful lives.
Depreciation methods, useful lives and residual values are reviewed at each financial year-end and depreciation is adjusted on a
prospective basis, if necessary.
(g)
Intangible assets:
(i) Goodwill:
Goodwill is measured at the acquisition date as the fair value of the consideration transferred less the fair value of the net
identifiable assets of the acquired company or business activities. Goodwill is not amortized and is carried at cost less
accumulated impairment losses. Goodwill is tested for impairment annually or more frequently if events or changes in
circumstances indicate that the asset might be impaired.
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
62
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(g)
Intangible assets (continued):
(ii) Other intangible assets:
Intangible assets that are acquired by the Company and have finite useful lives are initially measured at cost. Following initial
recognition, intangible assets are measured at cost less accumulated amortization and accumulated impairment losses.
Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific
asset to which it relates. All other expenditures are recognized in profit or loss as incurred.
Amortization is calculated over the cost of the asset, less its residual value. Amortization is recognized in administrative
expenses on a straight-line basis over the estimated useful lives of the intangible assets from the date that they are available
for use, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the
asset. Amortization of intangible assets not in service begins when they are ready for their intended use. The estimated useful
lives are as follows:
Software
Customer relationships
Other
Brand names are not amortized as they are considered to have an indefinite life.
5 to 15 years
10 years
10 years
Intangible assets with indefinite useful lives are tested for impairment annually or more frequently if events or changes in
circumstances indicate that the asset might be impaired.
For intangible assets with finite life, useful lives and residual values are reviewed at each financial year-end and amortization
is adjusted on a prospective basis, if necessary.
(h) Leased assets:
Leases for which the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon
initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and present value of the minimum
lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable
to that asset.
Other leases are operating leases and the leased assets are not recognized in the Company’s consolidated statements of financial
position.
(i)
Impairment:
Non-financial assets:
The carrying amounts of the Company’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each
reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s
recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful lives, the recoverable amount is
estimated yearly at the same time, at year-end, and whenever there is an indication that the asset might be impaired.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
63
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(i)
Impairment (continued):
Non-financial assets (continued):
For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of
assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups
of assets (the "cash-generating unit", or "CGU").
The Company’s corporate assets do not generate cash inflows. If there is an indication that a corporate asset may be impaired,
then the recoverable amount is determined for the CGU to which the corporate asset belongs.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. An impairment
loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are
recognized in profit or loss. Impairment losses recognized in respect of a CGU are allocated first to reduce the carrying amount of
any goodwill allocated to the CGU, and then to reduce the carrying amount of the other assets in the CGU.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset or group of assets.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognized in prior years
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 or amortization, if no impairment loss had been recognized.
(j) Employee benefits:
(i) Pension benefit plans:
The Company provides post-employment benefits through defined benefit and defined contribution plans. The Company
also sponsors Supplemental Executive Retirement Plans ("SERP"), which are neither registered nor pre-funded. Finally, the
Company sponsors defined benefit life insurance, disability plans and medical benefits for some retirees and employees.
Defined contribution plans
The Company’s obligations for contributions to employee defined contribution pension plans are recognized as employee
benefit expense in profit or loss in the years during which services are rendered by employees.
Defined benefit plans
The Company maintains some contributory defined benefit plans that provide for pensions to employees based on years of
service and the employee’s compensation. The Company’s net obligation in respect of defined benefit plans is calculated
separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior years,
discounting that amount and deducting the fair value of any plan assets. The discount rate is the yield at the reporting date on
AA credit-rated bonds that have maturity dates approximating the terms of the Company’s obligations and that are
denominated in the same currency in which the benefits are expected to be paid.
The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit
method. When the calculation results in a potential asset for the Company, the recognized asset is limited to the present
value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the
plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding
requirements.
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
64
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(j) Employee benefits (continued):
(i) Pension benefit plans (continued):
Defined benefit plans (continued)
Re-measurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets
(excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other
comprehensive (loss) income. The Company determines the net interest expense (income) on the net defined benefit liability
(asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the
annual period to the then-net defined benefit liability (asset), taking into account any changes in the net defined benefit
liability (asset) during the period as a result of contributions and benefit payments. Net interest expense and other expenses
related to defined benefit plans are recognized in profit or loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service
or the gain or loss on curtailment is recognized immediately in profit or loss. Costs related to plan settlements are recorded
at the time the Company is committed to a settlement as a separate constructive obligation. Subsequent to the Company
being committed to a settlement, the plan liability is measured at the expected settlement amount using settlement interest
rates.
(ii) Short-term employee benefits:
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service
is provided. A liability is recognized for the amount expected to be paid under cash incentive if the Company has a present
legal or constructive obligation to pay the amount as a result of past service provided by the employee, and the obligation
can be estimated reliably.
(iii) Share-based compensation:
The Company has a Share Option Plan. Share-based payment awards are measured at fair value at the grant date, which is
recognized as a personnel expense, with a corresponding increase in contributed surplus over the vesting period, which is
normally five years. The amount recognized as an expense is adjusted to reflect the number of awards for which the related
service conditions are expected to be met. Any consideration paid by employees on exercise of share options is credited to
share capital.
(iv) Employee share purchase plan:
The Company has an Employee Share Purchase Plan that is an equity-settled share-based payment with employees; the
measurement is based on the grant-date fair value of the equity instrument granted. As such, the expense is recognized when
the employee purchases the shares.
(v) Cash-settled Share Appreciation Rights:
The Company’s Share Option Plan allows for the issuance of Share Appreciation Rights ("SARs") that entitles certain senior
personnel of the Company to a cash payment based on the increase in the share price of the Company’s common shares
from the grant date to the vesting date. The SARs are automatically exercised upon vesting dates if the share price of the
Company’s common shares is greater than the price on the grant date; if not, they are rolled to the next vesting date.
A liability is recognized for the services acquired and is recorded at the fair value of the SARs in other non-current payables,
except for the current portion recorded in trade and other payables, with a corresponding expense recognized in selling and
administration expenses over the period that the employees become unconditionally entitled to the payment. The fair value
of the employee benefits expense of the SARs is measured using the Black-Scholes pricing model.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
65
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(j) Employee benefits (continued):
(v) Cash-settled Share Appreciation Rights (continued):
Estimating fair value requires determining the most appropriate inputs to the valuation model including the expected life of
the SARs, volatility, risk-free interest rate and dividend yield and making assumptions about them. At the end of each
reporting period until the liability is settled, the fair value of the liability is remeasured, with any changes in fair value
recognized in the consolidated statements of (loss) earnings and comprehensive (loss) income of the current year.
(vi) Cash-settled Performance Share Units:
The Company implemented a Performance Share Units plan ("PSU") entitling certain senior personnel to a cash payment.
A liability is recognized in payables for the services acquired and is recorded at fair value based on the share price of the
Company’s Common Shares with a corresponding expense recognized in administration and selling expenses. The amount
recognized as an expense is adjusted to reflect the number of units for which the related service and performance conditions
are expected to be met, such that the amount ultimately recognized as an expense is based on the units of awards that do
meet the related service and non-market performance conditions at the vesting date. At the end of each reporting period
until the liability is settled, the fair value of the liability is re-measured, with any changes in fair value recognized in the
consolidated statement of (loss) earnings. The fair value of the employee benefits expense of the PSUs is measured using the
Monte Carlo pricing model.
(vii) Termination benefits:
Termination benefits are expensed at the earlier of when the Company can no longer withdraw the offer of those benefits and
when the Company recognizes costs for a restructuring. If benefits are not expected to be fully settled within 12 months of
the end of the reporting period, they are discounted.
(k) Provisions:
A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be
estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. 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 the risks specific to the liability. The unwinding of the discount is recognized as finance costs.
(i) Asset retirement obligation:
The Company recognizes the estimated liability for future costs to be incurred in the remediation of site restoration in regards
to asbestos removal and disposal of such asbestos to a landfill for hazardous waste, and for oil, chemical and other hazardous
materials storage tanks, only when a present legal or constructive obligation has been determined and that such obligation
can be estimated reliably. Upon initial recognition of the obligation, the corresponding costs are added to the carrying
amount of the related items of property, plant and equipment and amortized as an expense over the economic life of the
asset, or earlier if a specific plan of removal exists. This obligation is reduced every year by payments incurred during the year
in relation to these items. The obligation might be increased by any required remediation to the owned assets that would be
required through enacted legislation.
(ii) Contingent liability:
A contingent liability is a possible obligation that arises from past events and of which the existence will be confirmed only by
the occurrence or non-occurrence of one or more uncertain future events not within the control of the Company, or a present
obligation that arises from past events (and therefore exists), but is not recognized because it is not probable that a transfer
or use of assets, provision of services, or any other transfer of economic benefits will be required to settle the obligation, or
the amount of the obligation cannot be estimated reliably.
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
66
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(l) Financial instruments:
(i)
IFRS 9, Financial Instruments:
The Company early adopted all the requirements of IFRS 9 (2014), Financial Instruments with a date of initial application of
October 2, 2016. The standard establishes principles for the financial reporting classification and measurement of financial
assets and financial liabilities. This standard incorporates a new hedging model, which increases the scope of hedged items
eligible for hedge accounting and aligns hedge accounting more closely with risk management. This standard also amends
the impairment model by introducing a new "expected credit loss" model for calculating impairment.
This new standard also increases required disclosures about an entity’s risk management strategy, cash flows from hedging
activities and the impact of hedge accounting on the consolidated financial statements.
IFRS 9 (2014) uses a single approach to determine whether a financial asset is measured at amortized cost or fair value,
replacing the multiple rules in IAS 39, Financial instruments – Recognition and Measurement. The approach in IFRS 9 (2014)
is based on how an entity manages its financial instruments and the contractual cash flow characteristics of the financial
assets. Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward in
IFRS 9 (2014).
The following summarizes the classification and measurement changes for the Company’s non-derivative and derivative
financial assets and financial liabilities as a result of the adoption of IFRS 9 (2014).
IAS 39
IFRS 9 (2014)
Financial assets:
Cash
Restricted cash
Loans and receivables
Loans and receivables
Trade and other receivables
Loans and receivables
Income taxes recoverable
Loans and receivables
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Non-hedged derivative assets
Fair value through profit and loss
Fair value through profit or loss
Financial liabilities:
Revolving credit facility
Other financial liabilities
Trade and other payables
Other financial liabilities
Income taxes payable
Other financial liabilities
Finance lease obligations
Other financial liabilities
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Convertible unsecured
subordinated debentures
Other financial liabilities
Amortized cost
Other long-term liabilities
Fair value through profit and loss
Fair value through profit or loss
Non-hedged derivative liabilities
Fair value through profit and loss
Fair value through profit or loss
With the adoption of IFRS 9 (2014), the Company’s natural gas futures and interest rate swap agreements were designated
as being effective hedging instruments.
In accordance with the transitional provisions of IFRS 9 (2014), the financial assets and financial liabilities held at October 2,
2016 were reclassified retrospectively without prior period restatement based on the new classification requirements and the
characteristics of each financial instrument at October 2, 2016.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
67
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(l) Financial instruments (continued):
(i)
IFRS 9, Financial Instruments (continued):
The accounting for these instruments and the line item in which they are included in the balance sheet were unaffected by
the adoption of IFRS 9 (2014). The adoption of IFRS 9 (2014) did not result in any measurement adjustments to our financial
assets and financial liabilities. Our significant accounting policies for financial instruments, derivative financial instruments,
and hedging relationships have been aligned with IFRS 9 (2014). The adoption of IFRS 9 (2014) did not have a material impact
on impairment at October 2, 2016.
The Company initially recognizes financial instruments on the trade date at which the Company becomes a party to the
contractual provisions of the instrument. Financial instruments are initially measured at fair value. In the case of a financial
asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the
acquisition or issue of the financial asset or financial liability are added to or deducted from the fair value.
(ii) Financial assets:
Financial assets are classified into the following categories:
a. Financial assets measured at amortized cost:
A financial asset is subsequently measured at amortized cost, using the effective interest method and net of any impairment
loss, if:
•
The asset is held within a business model whose objectives is to hold assets in order to collect contractual cash flows;
and
•
The contractual terms of the financial asset give rise, on specified dates, to cash flows that are solely payments of
principals and/or interest.
The Company currently classifies its cash, trade accounts receivable, and certain other current assets as assets measured at
amortized cost. The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset
expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which
substantially all the risks and rewards of ownership of the financial asset are transferred.
The Company recognizes loss allowances for expected credit losses on financial assets measured at amortized cost. The
Company has a portfolio of trade receivables at the reporting date.
The Company uses historical trends of the probability of default, the timing of recoveries and the amount of loss incurred,
adjusted for management’s judgement as to whether current economic and credit conditions are such that the actual losses
are likely to be greater or less than suggested by historical trends.
An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its
carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest
rate. Losses are recognized in income or loss and reflected in an allowance account against trade and other receivables.
b. Financial assets measured at fair value:
These assets are measured at fair value and changes therein, including any interest are recognized in profit or loss. The
Company currently has no significant financial assets measured at fair value, except for non-hedged derivative assets.
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
68
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(l) Financial instruments (continued):
(iii) Financial liabilities:
Financial liabilities are classified into the following categories:
a. Financial liabilities measured at amortized cost:
A financial liability is subsequently measured at amortized cost, using the effective interest method. The Company currently
classifies and measures short-term borrowings, trade payables and accrued liabilities, finance lease obligations, and
convertible unsecured subordinated debentures as financial liabilities measured at amortized cost.
b. Financial liabilities measured at fair value:
Financial liabilities at fair value are initially recognized at fair value and are re-measured at each reporting date with any
changes therein recognized in net (loss) earnings. The Company currently has no significant financial liabilities measured at
fair value except for other long-term liabilities and non-hedged derivative liabilities.
The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled or expired.
Financial assets and liabilities are offset and the net amount is presented in the consolidated statements of financial position
when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to
realize the asset and settle the liability simultaneously.
(iv) Fair values of financial instruments:
Financial assets and liabilities measured at fair value use a fair value hierarchy to prioritize the inputs used in measuring fair
value as follows:
Level 1 - valuation based on observable inputs such as quoted prices (unadjusted) in active markets for identical assets or
liabilities;
Level 2 - valuation techniques based on inputs that are other than quoted prices included in Level 1 that are observable for
the asset or liability, either directly (prices) or indirectly (derived from prices); and
Level 3 - valuation techniques with observable market inputs (involves assumptions and estimates by management of how
market participants would price the asset or liability).
a. Cash:
The Company classifies its cash as amortized cost assets. Cash includes cash on hand, bank balances and bank overdraft
when the latter forms an integral part of the Company’s cash management.
b. Derivative financial instruments and hedging relationships:
The Company enters into derivative financial instruments to hedge its market risk exposures. On initial designation of the
hedge, the Company formally documents the relationship between the hedging instruments and hedged items, including
the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be
used to assess the effectiveness of the hedging relationship. The Company makes an assessment, both at the inception of
the hedge relationship as well as on an ongoing basis, whether the hedging instruments are expected to be effective in
offsetting the changes in the fair value or cash flows of the respective hedged items throughout the period for which the
hedge is designated. For a cash flow hedge of a forecasted transaction, the transaction should be highly probable to occur
and should present an exposure to variations in cash flows that could ultimately affect reported net (loss) earnings.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
69
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(l) Financial instruments (continued):
(iv) Fair values of financial instruments (continued):
c. Embedded derivatives:
Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics,
risks of the host contract and the embedded derivative are not closely related; a separate instrument with the same terms as
the embedded derivative would meet the definition of a derivative; and the combined instrument is not measured at fair
value through profit or loss as described in note 2(d)(i).
d. Other derivatives:
When a derivative financial instrument, for example, sugar futures and at times options ("sugar contracts"), foreign exchange
forward contracts and embedded derivatives is not designated in a qualifying hedge relationship, all changes in its fair value
are recognized immediately in net (loss) earnings (marked-to-market).
e. Compound financial instruments:
The Company’s convertible unsecured subordinated debentures are accounted for as compound financial instruments. The
liability component of a compound financial instrument is recognized initially at the fair value of a similar liability that does
not have an equity conversion option. The equity component is recognized initially as the difference between the fair value of
the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable
transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.
Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortized cost
using the effective interest method. The equity component of a compound financial instrument is not re-measured
subsequent to initial recognition. Interest, dividends, gains and losses relating to the financial liability are recognized in profit
or loss.
f.
Financing charges:
Financing charges, which reflect the cost to obtain new financing, are offset against the debt for which they were incurred
and recognized in finance costs using the effective interest method. Financing charges for the revolving credit facility are
recorded with other assets.
g. Trade date:
The Company recognizes and derecognizes purchases and sales of derivative contracts on the trade date.
h. Share capital:
Common shares
Common shares are classified as equity. Incremental costs directly attributable to the issue of common shares are recognized
as a deduction from equity, net of any tax effects. Dividends to the equity holders are recorded in equity.
Repurchase of share capital
When share capital recognized as equity is repurchased for cancellation, the amount of the consideration paid, which includes
directly attributable costs, net of any tax effects, is recognized as a deduction from equity. The excess of the purchase price
over the carrying amount of the shares is charged to deficit.
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
70
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(l) Financial instruments (continued):
(v) Cash flow hedges:
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a
particular risk associated with a recognized asset or liability or a highly probable forecasted transaction that could affect net
(loss) earnings, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive (loss)
income and presented in accumulated other comprehensive (loss) income as part of equity.
The amount recognized in other comprehensive (loss) income is removed and included in net (loss) earnings under the same
line item in the consolidated statements of (loss) earnings and comprehensive (loss) income as the hedged item, in the same
period that the hedged cash flows affect net (loss) earnings.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, or exercised,
the hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognized in other
comprehensive (loss) income remains in accumulated other comprehensive (loss) income until the forecasted transaction
affects profit or loss.
If the forecasted transaction is no longer expected to occur, then the balance in accumulated other comprehensive (loss)
income is recognized immediately in net (loss) earnings.
When the hedged item is a non-financial asset, the amount recognized in other comprehensive (loss) income is transferred to
net (loss) earnings in the same period that the hedged item affects net (loss) earnings.
The Company has designated as hedging items its natural gas futures and its interest rate swap agreements entered into in
order to protect itself against natural gas prices and interest rate fluctuations as cash flow hedges.
(m) Revenue recognition:
The Company derives revenue from the sale of finished goods, which include sugar and maple products. The Company
recognizes revenue at a point in time when it transfers control of the finished goods to a customer, which occurs upon shipment
of the finished goods from the Company’s facilities or upon delivery of the finished goods to the customer’s premises. Some
arrangements for the sale of finished goods provide for customer price discounts and/or volume rebates based on aggregate
sales over a specified period, which gives rise to variable consideration. At the time of sale, estimates are made for items giving
rise to variable consideration based on the terms of the sales program or arrangement. The variable consideration is estimated
at contract inception using the most likely amount method and revenue is only recognized to the extent that a significant reversal
of revenue is not expected to occur. The estimate is based on historical experience, current trends, and other known factors. Sales
are recorded net of customer discounts, rebates, and exclude sales taxes.
(n) Lease payments:
Payments made under operating leases are recognized in profit or loss on a straight-line basis over the term of the lease. Lease
incentives received are recognized as an integral part of the total lease expense, over the term of the lease.
Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the
outstanding liabilities. The finance expense is allocated to each period during the lease term so as to produce a constant periodic
rate of interest on the remaining balance of the liability.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
71
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(o) Finance income and finance costs:
Finance income comprises interest income on funds invested and finance costs comprise interest expense on borrowings. Changes
in the fair value of interest rate swaps are recorded initially in other comprehensive income since inception of the cash flow hedge
and transferred to finance income and finance costs in the same period that the hedged cash flows affect net (loss) earnings.
Interest expense is recorded using the effective interest method.
(p)
Income taxes:
Income tax expense comprises current and deferred taxes. Current tax and deferred tax are recognized in profit or loss except to
the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive (loss) income.
Current tax is the expected tax payable or recoverable on the taxable income or loss for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to taxes payable in respect of previous years.
Deferred taxes are recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. Deferred taxes are not recognized for the following temporary
differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither
accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and jointly controlled entities to the
extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred taxes are not recognized for
taxable temporary differences arising on the initial recognition of goodwill. Deferred taxes are measured at the tax rates that
are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or
substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to
offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity,
or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities
will be realized simultaneously.
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 profits will be available against which they can be utilized. In addition, the effect on deferred tax
assets or liabilities of a change in tax rates is recognized in profit or loss in the period in which the enactment or substantive
enactment takes place, except to the extent that it relates to an item recognized either in other comprehensive (loss) income or
directly in equity in the current or in a previous period. Deferred tax assets are reviewed at each reporting date and are reduced
to the extent that it is no longer probable that the related tax benefit will be realized.
(q)
(Loss) Earnings per share:
The Company presents basic and diluted (loss) earnings per share ("EPS") data for its common shares. Basic EPS is calculated by
dividing the profit or loss attributable to common shareholders of the Company by the weighted average number of common
shares outstanding during the period.
Diluted EPS is determined by adjusting the profit or loss attributable to common shareholders and the weighted average number of
common shares outstanding, for the effects of all dilutive potential common shares from the conversion of the convertible
debentures.
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
72
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(r) New standards and interpretations adopted:
(i)
IFRS 2, Classification and Measurement of Share-based Payment Transactions:
On June 20, 2016, the IASB issued amendments to IFRS 2, Share-based Payment, clarifying how to account for certain types
of share-based payment transactions. The amendments apply for annual periods beginning on or after January 1, 2018. As a
practical simplification, the amendments can be applied prospectively. Retrospective or early application is permitted if
information is available without the use of hindsight.
The amendments provide requirements on the accounting for:
•
•
The effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments;
Share-based payment transactions with a net settlement feature for withholding tax obligations; and
• A modification to the terms and conditions of a share-based payment that changes the classification of the transaction
from cash-settled to equity-settled.
The Company adopted the amendments to IFRS 2 in its consolidated financial statements for the annual period beginning
on September 30, 2018. The adoption of the amendments did not have an impact on the consolidated financial statements.
(ii)
IFRS 15, Revenue from Contracts with Customers:
On May 28, 2014 the IASB issued IFRS 15, Revenue from Contracts with Customers. IFRS 15 will replace IAS 11, Construction
Contracts, IAS 18, Revenue, IFRIC 13, Customer Loyalty Programmes, IFRIC 15, Agreements for the Construction of Real
Estate, IFRIC 18, Transfer of Assets from Customers, and SIC 31, Revenue – Barter Transactions Involving Advertising Services.
The new standard is effective for years beginning on or after January 1, 2018. Earlier application is permitted.
The standard contains a single model that applies to contracts with customers and two approaches to recognizing revenue:
at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether,
how much and when revenue is recognized. New estimates and judgmental thresholds have been introduced, which may
affect the amount and/or timing of revenue recognized.
The new standard applies to contracts with customers. It does not apply to insurance contracts, financial instruments or lease
contracts, which fall in the scope of other IFRSs.
The Company adopted IFRS 15 in its consolidated financial statements for the year beginning on September 30, 2018. The
adoption of the standard did not have an impact on the consolidated financial statements.
(iii)
IFRIC 22, Foreign Currency Transactions and Advance Consideration:
On December 8, 2016, the IASB issued IFRIC Interpretation 22, Foreign Currency Transactions and Advance Consideration.
The Interpretation clarifies that the date of the transaction for the purpose of determining the exchange rate to use on initial
recognition of the related asset, expense or income (or part of it) is the date on which an entity initially recognizes the
non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration.
The Interpretation is applicable for annual periods beginning on or after January 1, 2018. Earlier application is permitted.
The Company adopted the Interpretation in its consolidated interim financial statements for the annual period beginning on
September 30, 2018. The adoption of the Interpretation did not have an impact on the consolidated financial statements.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
73
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(r) New standards and interpretations adopted (continued):
(iv) Annual Improvements to IFRS Standards (2014-2016) Cycle:
On December 8, 2016 the IASB issued narrow-scope amendments to three standards as part of its annual improvements
process. Each of the amendments has its own specific transition requirements and effective date.
Amendments were made to the following standard:
•
Removal of out-dated exemptions for first-time adopters under IFRS 1, First-time Adoption of International Financial
Reporting Standards, effective for annual periods beginning on or after January 1, 2018; and
• Clarification that the election to measure an associate or joint venture at fair value under IAS 28, Investments in Associates
and Joint Ventures for investments held directly, or indirectly, through a venture capital or other qualifying entity can be
made on an investment-by-investment basis. The amendments are effective retrospectively for annual periods beginning
on or after January 1, 2018.
The Company adopted these amendments in its consolidated interim financial statements for the annual period beginning
September 30, 2018. The adoption of the amendments did not have an impact on the consolidated financial statements.
(s) New standards and interpretations not yet adopted:
A number of new standards and amendments to standards and interpretations are not yet effective for the year ending
September 28, 2019 and have not been applied in preparing these consolidated financial statements. New standards and
amendments to standards and interpretations that are currently under review include:
(i)
IFRS 16, Leases:
On January 13, 2016 the IASB issued IFRS 16 Leases. The new standard is effective for annual periods beginning on or after
January 1, 2019. Earlier application is permitted for entities that apply IFRS 15 Revenue from Contracts with Customers at or
before the date of initial adoption of IFRS 16. IFRS 16 will replace IAS 17 Leases.
This standard introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all
leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognize
a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make
lease payments.
This standard substantially carries forward the lessor accounting requirements of IAS 17, while requiring enhanced disclosures
to be provided by the lessors. Other areas of the lease accounting model have been impacted, including the definition of a
lease. Transitional provisions have been provided.
The Company intends to adopt IFRS 16 in its consolidated financial statements for the annual period beginning on
September 29, 2019.
The adoption of IFRS 16 will have a significant impact on the Company’s consolidated financial statements, as the Company
will recognize new assets and liabilities for its operating leases of warehouses, operating properties, railcars and production
equipment. In addition, the nature and timing of expenses related to those leases will change as IFRS 16 replaces the
straight-line operating lease expense with a depreciation charge for right-of use assets and interest expense on lease
liabilities. On a go-forward basis, there will be a decrease in operating lease expense and an increase in depreciation and
amortization and interest expense.
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
74
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(s) New standards and interpretations not yet adopted (continued):
(i)
IFRS 16, Leases (continued):
The Company intends to adopt this standard using the modified retrospective approach measuring the right-of-use asset
to be equal to the lease liability with no restatement of the comparative period. Under the modified retrospective approach,
the Company has elected to use the following practical expedients permitted on adoption of IFRS 16:
•
the Company will not reassess whether a contract is, or contains, a lease at the date of initial application and instead will
apply IFRS 16 to contracts that were previously identified as leases applying IAS 17, Leases;
•
the Company will rely on the assessment of the onerous lease provisions under IAS 37, Provisions, contingent liabilities
and contingent assets, instead of performing an impairment review. The Company will adjust the right-of-use assets at
the date of initial application by the amount of any provision for onerous leases recognized in the consolidated balance
sheet immediately before the date of initial application;
•
the Company will account for leases for which the lease term ends within twelve months of September 28, 2019 as short-
term leases; and
•
the Company will use hindsight in determining the lease term at the date of initial application.
The Company’s preliminary assessment of the impact of the adoption of the standard is an increase of the lease liability of
approximately $11.0 million and an increase in the right-of-use asset of approximately $11.0 million on the consolidated
statement of financial position as at September 29 2019. As amounts previously recognized as lease expenses will be replaced
by the depreciation of the right-of-use asset and the lease liability finance costs, the consolidated statement of (loss) earnings
and comprehensive (loss) income will be affected.
(ii)
IFRIC 23, Uncertainty over Income Tax Treatments:
On June 7, 2017, the IASB issued IFRIC Interpretation 23, Uncertainty over Income Tax Treatments.
The Interpretation provides guidance on the accounting for current and deferred tax liabilities and assets in circumstances in
which there is uncertainty over income tax treatments.
The Interpretation is applicable for annual periods beginning on or after January 1, 2019. Earlier application is permitted.
The Interpretation requires an entity to:
• Contemplate whether uncertain tax treatments should be considered separately, or together as a group, based on which
approach provides better predictions of the resolution;
•
Reflect an uncertainty in the amount of income tax payable (recoverable) if it is probable that it will pay (or recover) an
amount for the uncertainty; and
• Measure a tax uncertainty based on the most likely amount or expected value depending on whichever method better
predicts the amount payable (recoverable).
The Company intends to adopt the Interpretation in its consolidated financial statements for the annual period beginning
on September 29, 2019. The Company does not expect the amendments to have a material impact on the consolidated
financial statements.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
75
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(s) New standards and interpretations not yet adopted (continued):
(iii) Annual Improvements to IFRS Standards (2015-2017) Cycle:
On December 12, 2017 the IASB issued narrow-scope amendments to three standards as part of its annual improvements
process.
The amendments are effective on or after January 1, 2019, with early application permitted. Each of the amendments has its
own specific transition requirements.
Amendments were made to the following standards:
•
IFRS 3, Business Combinations and IFRS 11, Joint Arrangements – to clarify how a company accounts for increasing its
interest in a joint operation that meets the definition of a business;
•
IAS 12, Income Taxes – to clarify that all income tax consequences of dividends are recognized consistently with the
transactions that generated the distributable profits – i.e. in profit or loss, OCI, or equity; and
•
IAS 23, Borrowing Costs – to clarify that specific borrowings – i.e. funds borrowed specifically to finance the construction
of a qualifying asset – should be transferred to the general borrowings pool once the construction of the qualifying asset
has been completed.
The Company intends to adopt these amendments in its consolidated financial statements for the annual period beginning
on September 29, 2019. The Company does not expect the amendments to have a material impact on the consolidated
financial statements.
(iv) Amendments to References to the Conceptual Framework in IFRS Standards:
On March 29, 2018 the IASB issued a revised version of its Conceptual Framework for Financial Reporting (the Framework),
that underpins IFRS Standards. The IASB also issued Amendments to References to the Conceptual Framework in IFRS
Standards (the Amendments) to update references in IFRS Standards to previous versions of the Conceptual Framework.
Both documents are effective from January 1, 2020 with earlier application permitted.
The Company does not intend to adopt the Amendments in its consolidated financial statements before the annual period
beginning on October 4, 2020. The Company does not expect the amendments to have a material impact on the
consolidated financial statements.
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
76
4. BUSINESS COMBINATIONS
On November 18, 2017, the Company acquired all of the issued and outstanding shares of Decacer for a total consideration of
$43.0 million ($42.1 million net of cash acquired) (the "Decacer Transaction"). The Company financed the acquisition, including
transaction costs, with a draw-down on the Company’s $265.0 million amended credit facility (see Note 17, Revolving credit facility).
Decacer is a major bottler and distributor of branded and private label maple syrup and maple sugar based in Dégelis, Québec.
The Company has determined the fair value of the assets acquired and liabilities assumed based on management’s preliminary best
estimate of their fair values and taking into account all relevant information available at that time. The Company had completed the
purchase price allocation over the identifiable net assets and goodwill and no adjustment was made to the purchase price allocation
as presented in the audited annual consolidated financial statements for the fiscal year ended September 29, 2018.
The following table presents the purchase price allocation:
Identifiable assets and liabilities assumed:
Cash
Trade and other receivables
Inventories
Prepaid expenses
Property, plant and equipment
Intangible assets
Trade and other payables
Income taxes payable
Deferred tax liabilities
Total net assets acquired
Total consideration transferred
Goodwill (note 16)
Revolving credit facility
Total consideration transferred
2018
$
928
3,832
15,711
96
8,132
11,307
(8,311)
(197)
(4,544)
26,954
43,012
16,058
$
43,012
43,012
The trade receivables comprise a gross amount of $3.8 million for which the full amount was expected to be collectable subsequent
to the acquisition date.
Goodwill is attributable primarily to expected synergies and assembled workforce, which were not recorded separately since they did
not meet the recognition criteria for identifiable intangible assets. Goodwill and intangible assets recorded in connection with this
acquisition are not deductible for tax purposes.
The operating results of Decacer are included in the maple products segment. If the acquisition had occurred on October 1, 2017,
the consolidated results of the Company for fiscal 2018 would have included additional net sales of approximately $11.7 million and
additional results from operating activities of approximately $0.3 million, based on management’s best estimates. In determining these
estimated amounts, management assumed that the fair value adjustments that arose on the date of acquisition would have been the
same if the acquisition had occurred on October 1, 2017.
Acquisition-related costs of $0.7 million for legal fees, due diligence costs and other fees have been expensed in relation to the above
business combination. These costs have been recorded in administration and selling expenses in the consolidated statements of (loss)
earnings and comprehensive (loss) income.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. DEPRECIATION AND AMORTIZATION EXPENSES
Depreciation and amortization expenses were charged to the consolidated statements of (loss) earnings and comprehensive (loss)
income as follows:
77
Depreciation of property, plant and equipment:
Cost of sales
Administration and selling expenses
Amortization of intangible assets:
Administration and selling expenses
Total depreciation and amortization expenses
6. FINANCE INCOME AND FINANCE COSTS
Recognized in net (loss) earnings:
Net change in fair value of interest rate swaps (note 11)
Finance income
Interest expense on convertible unsecured subordinated debentures,
including accretion of $821 (2018 - $785) (note 23)
Interest on revolving credit facility
Amortization of deferred financing fees
Other interest expense
Finance costs
Net finance costs recognized in net (loss) earnings
For the fiscal years ended
September 28,
2019
September 29,
2018
$
$
14,927
522
15,449
3,772
19,221
14,292
424
14,716
3,758
18,474
For the fiscal years ended
September 28,
2019
September 29,
2018
$
378
378
8,339
7,337
1,178
1,637
18,491
18,113
$
532
532
7,691
6,893
1,422
1,658
17,664
17,132
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
78
7.
INCOME TAX EXPENSE (RECOVERY)
Current tax expense:
Current period
Deferred tax (recovery) expense:
Recognition and reversal of temporary differences
Adjustments for prior year periods
Changes in tax rates
Deferred tax (recovery) expense
Total income tax expense
Income tax recognized in other comprehensive (loss) income:
For the fiscal years ended
September 28,
2019
September 29,
2018
$
$
16,084
17,967
(978)
(453)
(452)
(1,883)
14,201
375
—
(103)
272
18,239
September 28, 2019
September 29, 2018
For the fiscal years ended
Before tax
Tax effect
Net of tax
Before tax
Tax effect
Net of tax
Cash flow hedges
$
(4,763)
Defined benefit actuarial (losses) gains
(19,902)
$
1,243
5,194
$
(3,520)
(14,708)
$
(32)
$
9
$
(23)
6,643
(1,763)
4,880
Reconciliation of effective tax rate:
The provision for income taxes differs from the amount computed by applying the Canadian federal and provincial tax rates to earnings
before provision for income taxes. The reasons for the difference and the related tax effects are as follows:
September 28, 2019
September 29, 2018
For the fiscal years ended
Earnings before income taxes
Income taxes using the Company’s
statutory tax rate
Changes due to the following items:
Changes in tax rates
Non-deductible expenses
%
—
27.00
(7.49)
2.59
Non-deductible impairment of goodwill
220.76
Adjustments for prior year periods
Other
(7.51)
—
235.35
$
6,034
1,629
(452)
156
13,321
(453)
—
14,201
%
—
26.75
(0.15)
0.23
—
—
0.41
27.24
$
66,968
17,914
(103)
156
—
—
272
18,239
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
79
8. RESTRICTED CASH
Restricted cash represents balances assumed by the Company as a result of having acquired all of the issued and outstanding shares
of TMTC. On December 1, 2016, TMTC acquired all issued and outstanding Class A shares of Great Northern with $7.0 million cash
consideration (which was placed in escrow), conditionally payable in quarterly installments contingent on achieving monthly and annual
sales volume targets to a specific client for the twelve-month periods ending November 30, 2017 and November 30, 2018. The fair
value of the contingent consideration was determined to be $6.6 million and was calculated using a probability-weighted expectation
of the payment of the contingent consideration and a discount rate of 3.45% as at the acquisition date. As at September 28, 2019,
cash held in an escrow account was nil (September 29, 2018 - $0.8 million) and the fair value of the contingent consideration payable
was nil (September 29, 2018 - $0.8 million) (See Note 19, Other long-term liabilities).
9. TRADE AND OTHER RECEIVABLES
Trade receivables
Less expected credit loss
Other receivables
Initial margin deposits with commodity brokers
September 28,
2019
September 29,
2018
$
80,174
(827)
79,347
5,961
515
85,823
$
73,794
(373)
73,421
5,505
2,810
81,736
The Company grants credit to its customers in the ordinary course of business.
Management believes that the Company’s exposure to credit risk and impairment losses related to trade and other receivables is
limited due to the following reasons:
–
–
There is a broad base of customers with dispersion across different market segments.
Bad debt write-offs to total revenue have been less than 0.1% for each of the last five years (averaging less than $0.1 million per
year). Write-offs for fiscal 2019 were $0.1 million (September 29, 2018 - $0.2 million). All bad debt write-offs are charged to
administration and selling expenses.
–
Less than 2% of trade receivables are outstanding for more than 90 days, which is comparable to September 29, 2018, while over
83% are current (less than 30 days) as at September 28, 2019 (September 29, 2018 - 79%).
Through general security agreements with its lenders, trade and other receivables have been granted as continuing collateral security
for all present and future indebtedness to the current lenders.
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
80
10. INVENTORIES
Raw inventory
Work in progress
Finished goods
Packaging and operating supplies
Spare parts and other
September 28,
2019
September 29,
2018
$
113,487
7,947
36,356
157,790
11,831
12,738
182,359
$
113,134
10,460
32,491
156,085
11,074
12,166
179,325
Costs of sales expensed during the year were all inventorial items, except for fixed costs incurred in Taber, Alberta, after the beet slicing
campaign, and mark-to-market adjustments of derivative financial instruments.
As at September 28, 2019, inventories recognized as cost of goods sold amounted to $677.7 million (September 29, 2018
- $669.9 million).
As at September 28, 2019, the Company recorded an amount of $0.1 million (September 29, 2018 - nil) related to onerous contracts
as defined in IAS 37 paragraph 66, as a write-down to inventory through cost of sales. In the normal course of business, the Company
enters into an economic hedge for all of its raw sugar purchases and refined sugar sales. As the Company does not apply hedge
accounting for these contracts, the related derivative instruments, being the futures contracts are marked-to-market. As a result, the
Company must record an onerous loss to cost of sales when the net realizable value is lower than the mark-to-market of the raw sugar
futures contract and the related refining costs.
11. FINANCIAL INSTRUMENTS
Derivative financial instruments
Fair value estimates are made as of a specific point in time, using available information about the financial instruments. These estimates
are subjective in nature and may not be determined with precision. A three-tier fair value hierarchy prioritizes the inputs used in
measuring the fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2,
defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as
unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
The fair value of derivative instruments is the estimated amount that the Company would receive or pay to terminate the instruments
at the reporting date. The fair values have been determined by reference to prices available from the markets on which the instruments
trade, subject to credit adjustments as applicable. The fair values of the sugar future contracts and options are measured using Level
1 inputs, using published quoted values for these commodities. The fair values for the natural gas futures contracts, foreign exchange
forward contracts and interest rate swap contracts are measured using Level 2 inputs. The fair values for these derivative assets or liabil-
ities are estimated using industry standard valuation models.
Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based
observable inputs including interest rate curves, credit spreads, natural gas prices, foreign exchange rates, and forward and spot prices
for currencies.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
81
11. FINANCIAL INSTRUMENTS (CONTINUED)
Derivative financial instruments (continued)
The fair values of all derivative instruments approximate their carrying value and are recorded as separate line items on the consoli-
dated statements of financial position.
As at October 2, 2016, the Company’s natural gas futures and interest rate swap agreements were designated as cash flow hedges and
qualified for hedge accounting.
Details of recorded gains (losses) for the year, in marking-to-market all derivative financial instruments and embedded derivatives that
are outstanding at year-end, are noted below. For sugar futures contracts (derivative financial instruments), the amounts noted below
are netted with the variation margins paid or received to/from brokers at the end of the reporting period. Natural gas forwards and
sugar futures have been marked-to-market using published quoted values for these commodities, while foreign exchange forward
contracts have been marked-to-market using rates published by the financial institution, which is a counterparty to these contracts. The
fair values of the interest rate swaps have been determined by using rates published on financial capital markets.
The fair value of natural gas futures contracts, foreign exchange forward contracts and interest rate swap calculations includes a credit
risk adjustment for the Company’s or counterparty’s credit, as appropriate.
As at September 28, 2019 and September 29, 2018, the Company’s financial derivatives carrying values were as follows:
Financial Assets
Financial Liabilities
Current
Non-current
Current
Non-current
September 28, 2019
September 28, 2019
Derivative financial instruments measured
at fair value through profit or loss:
Sugar futures contracts
Foreign exchange forward contracts
Derivative financial instruments designated
as effective cash flow hedging instruments:
Natural gas futures contracts
Interest rate swaps
$
27
673
—
231
931
$
—
21
—
—
21
$
—
13
602
—
615
$
59
328
2,956
1,334
4,677
Derivative financial instruments measured
at fair value through profit or loss:
Sugar futures contracts
Foreign exchange forward contracts
Derivative financial instruments designated
as effective cash flow hedging instruments:
Natural gas futures contracts
Interest rate swaps
Financial Assets
Financial Liabilities
Current
Non-current
Current
Non-current
September 29, 2018
September 29, 2018
$
364
3,187
—
460
4,011
$
—
58
—
2,014
2,072
$
—
—
1,847
—
1,847
$
135
—
2,585
—
2,720
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
82
11. FINANCIAL INSTRUMENTS (CONTINUED)
Derivative financial instruments (continued)
For the fiscal years ended
Charged to cost of sales
Unrealized (loss) gain
Charged to finance
income
Other comprehensive
(loss) gain
September 28, September 29, September 28, September 29, September 28, September 29,
2018
2019
2019
2019
2018
2018
$
$
$
$
$
Derivative financial instruments
measured at fair value through
profit or loss:
Sugar futures contracts
Foreign exchange forward contracts
Embedded derivatives
Derivative financial instruments
designated as effective cash flow
hedging instruments:
Natural gas futures contracts
Interest rate swap
179
(541)
—
(3,154)
1,494
51
1,658
—
1,296
2,715
—
1,106
—
—
—
—
378
378
—
—
—
—
532
532
$
—
—
—
—
—
—
(784)
(3,979)
(4,763)
(979)
947
(32)
The following table summarizes the Company’s hedging components of other comprehensive (loss) income ("OCI") as at September 28,
2019 and September 29, 2018:
September 28, 2019
September 29, 2018
Opening OCI
Income taxes
Natural gas
futures
contracts
$
Interest
rate
swap
$
(2,229)
2,492
262
(253)
Opening OCI – net of income taxes
(1,967)
2,239
Change in fair value of derivatives
designated as cash flow hedges
874
(3,601)
Amounts reclassified to net (loss) earnings
(1,658)
Income taxes
Ending OCI – net of income taxes
204
(2,547)
(378)
1,039
(701)
Natural gas
futures
contracts
Total
$
263
9
272
(2,727)
(2,036)
1,243
3,248
$
(1,701)
451
(1,250)
1,736
(2,715)
262
Interest
rate
swap
$
2,102
(557)
1,545
1,479
(532)
(253)
(1,967)
2,239
Total
$
401
(106)
295
3,215
(3,247)
9
272
For the fiscal year ended September 28, 2019, the derivatives designated as cash flow hedges were considered to be fully effective
and no ineffectiveness has been recognized in net (loss) earnings.
Approximately $0.1 million of net losses presented in accumulated other comprehensive (loss) income are expected to be reclassified
to net (loss) earnings within the next twelve months.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
83
11. FINANCIAL INSTRUMENTS (CONTINUED)
Derivative financial instruments (continued)
For its financial assets and liabilities measured at amortized cost as at September 28, 2019 and September 29, 2018, the Company has
determined that the carrying value of its short-term financial assets and liabilities approximates their fair value because of the relatively
short period to maturity of these instruments.
The Company uses derivative financial instruments to manage its exposure to changes in raw sugar, foreign exchange, and natural
gas prices. In addition, the Company entered into interest rate swap contracts to fix a portion of the Company’s exposure to floating
interest rate debt on its short-term borrowings. The Company’s objective for holding derivatives is to minimize risk using the most
efficient methods to eliminate or reduce the impacts of these exposures.
(a) Raw sugar:
The Company’s risk management policy is to manage the forward pricing of purchases of raw sugar in relation to its forward
refined sugar sales to reduce price risk. The Company attempts to meet this objective by entering into futures contracts to reduce
its exposure. Such financial instruments are used to manage the Company’s exposure to variability in fair value attributable to the
committed purchase price of raw sugar. The pricing mechanisms of futures contracts and the respective forecasted raw sugar
purchase transactions are the same.
The Company's raw sugar futures contracts as well as the fair value of these contracts relating to purchases or sales of raw sugar
as at September 28, 2019 and September 29, 2018 are as follows:
September 28, 2019
September 29, 2018
Original
futures
contracts
value
Current
contract
value
Fair
value
gain/(loss)
Original
futures
contracts
value
Current
contract
value
Fair
value
gain/(loss)
(US$)
(US$)
(US$)
(US$)
(US$)
(US$)
35,746
51,877
6,964
613
35,393
51,665
6,757
604
95,200
94,419
(40,393)
(39,774)
(39,556)
(38,553)
(12,816)
(12,556)
—
—
(92,765)
(90,883)
2,435
3,536
(353)
(212)
(207)
(9)
(781)
619
1,003
260
—
1,882
1,101
1.3247
1,458
(1,490)
(32)
61,500
86,326
8,567
361
51,794
76,767
7,962
357
(9,706)
(9,559)
(605)
(4)
156,754
136,880
(19,874)
(56,761)
(81,107)
(19,167)
—
(52,898)
(66,426)
(18,199)
—
3,863
14,681
968
—
(157,035)
(137,523)
19,512
(281)
(643)
(362)
1.2918
(468)
697
229
Purchases
0 - 6 months
6 - 12 months
12 - 24 months
Over 24 months
Sales
0 - 6 months
6 -12 months
12 - 24 months
Over 24 months
Net position
Foreign exchange rate at the end
of the period
Net value (CA$)
Margin call payment (receipt)
at year-end
Net (liability) asset (CA$)
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
84
11. FINANCIAL INSTRUMENTS (CONTINUED)
Derivative financial instruments (continued)
(a) Raw sugar (continued):
All sugar futures contracts are traded through a large exchange clearing house on the New York Intercontinental Exchange.
Regulation of the U.S. futures industry is primarily self-regulation, with the role of the Federal Commodity Futures Trading
Commission being principally an oversight role to determine that self-regulation is continuous and effective.
The exchange clearing house used is one of the world’s largest capitalized financial institutions with excellent long-term credit
ratings. Daily cash settlements are mandatory (margin calls) for resulting gains and/or losses from futures trading for each
customer’s account. Due to the above, the Company does not anticipate a credit risk from the raw sugar futures derivative
instruments.
(b) Natural gas:
The Company uses natural gas contracts to help manage its costs of natural gas. The Company monitors its positions and the
credit ratings of its counterparties and does not anticipate losses due to counterparty’s non-performance. The Company's natural
gas contracts as well as the fair value of these contracts relating to purchases of natural gas are as follows:
September 28, 2019
September 29, 2018
Original
futures
contracts
value
Current
contract
value
Fair
value
gain/(loss)
Original
futures
contracts
value
Current
contract
value
Fair
value
gain/(loss)
(US$)
(US$)
(US$)
(US$)
(US$)
(US$)
Purchases
Less than 1 year
1 to 2 years
2 to 3 years
3 years and over
5,904
6,415
6,429
9,834
5,449
5,480
5,568
9,399
(455)
(935)
(861)
(435)
28,582
25,896
(2,686)
5,044
6,821
6,495
11,775
30,135
3,614
6,332
5,814
10,944
26,704
Foreign exchange rate at the end
of the period
Net liability (CA$)
1.3247
(3,558)
(1,430)
(489)
(681)
(831)
(3,431)
1.2918
(4,432)
The forecasted purchases of natural gas, the hedged items, are used for calculating the hedge ineffectiveness. No ineffectiveness
was recognized in net (loss) earnings as the change in value of the hedging instrument for calculating ineffectiveness was the same
or smaller as the change in value of the hedged items used for calculating the ineffectiveness.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
85
11. FINANCIAL INSTRUMENTS (CONTINUED)
Derivative financial instruments (continued)
(c) Foreign exchange contracts:
The Company's activities, which result in exposure to fluctuations in foreign currency exchange rates, consist of the purchasing
of raw sugar, the selling of refined sugar and maple products, the purchase of natural gas and purchases of property, plant and
equipment. The Company manages this exposure by creating offsetting positions through the use of financial instruments. These
instruments include forward contracts, which are commitments to buy or sell U.S. dollars or euros at a future date, and may be
settled in cash.
The credit risk associated with foreign exchange contracts arises from the possibility that a counterparty to a foreign exchange
contract, in which the Company has an unrealized gain, fails to perform according to the terms of the contract. The credit risk is
much less than the notional principal amount, being limited at any time to the change in foreign exchange rates attributable to
the principal amount.
Forward foreign exchange contracts have maturities of less than four years and relate mostly to U.S. currency, and from time to
time, euro currency. The counterparties to these contracts are major Canadian financial institutions. The Company does not
anticipate any material adverse effect on its financial position resulting from its involvement in these types of contracts, nor does
it anticipate non-performance by the counterparties.
The Company's foreign currency forward contracts relating to the purchase of raw sugar, the sale of refined sugar, the purchase
of natural gas and purchases of property, plant and equipment for the sugar segment are detailed below. In addition, for the
maple products segment, the Company hedges its exposure to fluctuations in foreign currency related to its anticipated cash flows
from sales to specific U.S. customers, using a foreign exchange forward contract.
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
86
11. FINANCIAL INSTRUMENTS (CONTINUED)
Derivative financial instruments (continued)
(c) Foreign exchange contracts (continued):
September 28, 2019
SUGAR
Purchases U.S. dollars
Less than 1 year
1 to 2 years
2 to 3 years
Sales U.S. dollars
Less than 1 year
1 to 2 years
2 to 3 years
Total U.S. dollars - Sugar
SUGAR
Purchases EUR
Less than 1 year
Total EUR - Sugar
MAPLE PRODUCTS
Purchases U.S. dollars
Less than 1 year
Sales U.S. dollars
Less than 1 year
1 to 2 years
Original
contract
value
(US$/EUR/AUD$)
66,592
8,481
575
75,648
(96,978)
(14,791)
(1,616)
(113,385)
(37,737)
Original
contract
value
(CA$)
77,280
11,157
756
89,193
(117,528)
(19,178)
(2,138)
(138,844)
(49,651)
Current
contract
value
(CA$)
77,782
11,614
760
90,156
(118,025)
(19,964)
(2,142)
(140,131)
(49,975)
263
263
400
400
382
382
2,500
3,323
3,303
(28,694)
(400)
(29,094)
(38,204)
(531)
(38,735)
(37,973)
(530)
(38,503)
Total U.S. dollars - Maple
(26,594)
(35,412)
(35,200)
MAPLE PRODUCTS
Purchases EUR
Less than 1 year
Sales EUR
Less than 1 year
1 to 2 years
Total EUR - Maple
MAPLE PRODUCTS
Sales AUD
Less than 1 year
1 to 2 years
Total AUD - Maple
155
236
227
(8,072)
(270)
(8,342)
(8,187)
(2,666)
(148)
(2,814)
(12,283)
(426)
(12,709)
(12,473)
(2,404)
(134)
(2,538)
(11,816)
(406)
(12,222)
(11,995)
(2,399)
(134)
(2,533)
Total Foreign Exchange
(75,069)
(99,674)
(99,321)
Fair
value
gain/(loss)
(CA$)
502
457
4
963
(497)
(786)
(4)
(1,287)
(324)
(18)
(18)
(20)
231
1
232
212
(9)
467
20
487
478
5
—
5
353
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
87
11. FINANCIAL INSTRUMENTS (CONTINUED)
Derivative financial instruments (continued)
(c) Foreign exchange contracts (continued):
Original
contract
value
(US$/EUR)
68,896
6,769
1,040
76,705
(95,188)
(2,590)
(1,330)
(99,108)
(22,403)
Original
contract
value
(CA$)
88,515
8,696
1,341
98,552
(124,766)
(3,410)
(1,707)
(129,883)
(31,331)
Current
contract
value
(CA$)
87,153
6,408
1,355
94,916
(121,181)
(1,061)
(1,726)
(123,968)
(29,052)
1,606
2,108
2,058
(26,878)
(25,272)
(35,303)
(33,195)
(34,632)
(32,574)
September 29, 2018
Fair
value
gain/(loss)
(CA$)
(1,362)
(2,288)
14
(3,636)
3,585
2,349
(19)
5,915
2,279
(50)
671
621
SUGAR
Purchases U.S. dollars
Less than 1 year
1 to 2 years
2 to 3 years
Sales U.S. dollars
Less than 1 year
1 to 2 years
2 to 3 years
Total U.S. dollars - Sugar
MAPLE PRODUCTS
Purchases U.S. dollars
Less than 1 year
Sales U.S. dollars
Less than 1 year
Total U.S. dollars - Maple
Total U.S. dollars
(47,675)
(64,526)
(61,626)
2,900
MAPLE PRODUCTS
Purchases Euro dollars
Less than 1 year
Sales Euro dollars
Less than 1 year
1 to 2 years
Total Euro dollars - Maple
364
554
509
(3,631)
(92)
(3,723)
(3,359)
(5,827)
(144)
(5,971)
(5,417)
(5,439)
(142)
(5,581)
(5,072)
(45)
388
2
390
345
Total Foreign Exchange
(51,034)
(69,943)
(66,698)
3,245
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
88
11. FINANCIAL INSTRUMENTS (CONTINUED)
Derivative financial instruments (continued)
(d)
Interest rate swap agreements:
In order to fix the interest rate on a substantial portion of the expected drawdown of the revolving credit facility, the Company
enters into interest rate swap agreements. The outstanding swap agreements by maturity are as follows:
Fiscal year contracted
Date
Fiscal 2015
Fiscal 2017
Fiscal 2017
Fiscal 2017
Fiscal 2019
Fiscal 2019
June 28, 2018 to June 28, 2020 – 1.959%
May 29, 2017 to June 28, 2022 – 1.454%
September 1, 2017 to June 28, 2022 – 1.946%
June 29, 2020 to June 29, 2022 – 1.733%
March 12, 2019 to June 28, 2024 – 2.08%
June 28, 2022 to June 28, 2024 – 2.17%
Total value
$
30,000
20,000
30,000
30,000
20,000
80,000
The counterparties to these swap agreements are major Canadian financial institutions. The Company does not anticipate any
material adverse effect on its financial position resulting from its involvement in these types of swap agreements, nor does it
anticipate non-performance by the counterparties. As at September 28, 2019, the fair value of the swap agreements amounted to
a liability of $1.1 million (September 29, 2018 - asset of $2.5 million).
The forecasted interest payments, the hedged items, are used for calculating the hedge ineffectiveness. No ineffectiveness was
recognized in net (loss) earnings as the change in value of the hedging instrument for calculating ineffectiveness was the same or
smaller as the change in value of the hedged items used for calculating the ineffectiveness.
Risks
The Company, through its financial assets and liabilities, is exposed to various risks. The following analysis provides a measurement of
risks at year-end.
(a) Credit risk:
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its
contractual obligation. The Company believes it has limited credit risk other than those explained in Note 9, Trade and other
receivables and Note 11, Financial instruments.
(b) Currency risk:
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in the
foreign exchange rate. The Company’s significant cash flow exposure to foreign currency is due mainly to the following:
–
–
–
–
–
sales in U.S. dollars for both the sugar and maple products segments;
purchases of natural gas;
sales of by-products;
Taber refined sugar and by-products sales;
ocean freight; and
– purchases of property, plant and equipment for both the sugar and maple products segments.
The Company mitigates its exposure to foreign currency by entering into forward exchange contracts (see Note 11, Financial
instruments; Derivative financial instruments, (c) Foreign exchange contracts).
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
89
11. FINANCIAL INSTRUMENTS (CONTINUED)
Risks (continued)
(b) Currency risk (continued):
The Company had the following significant foreign currency exposures at year-end:
Financial instruments measured at amortized cost:
Cash
Trade and other receivables, including initial margin deposits
Trade and other payables
Financial instruments at fair value through profit or loss:
Raw sugar futures sales contracts
Raw sugar futures purchases contracts
Natural gas contracts
Fair value loss or (gain) on futures contracts
Total exposure from above
Forward exchange contracts
Gross exposure
September 28,
2019
September 29,
2018
(US$)
(US$)
2,115
21,330
(3,356)
20,089
92,765
(95,200)
(28,582)
(1,101)
(32,118)
(12,029)
(64,333)
(76,362)
1,672
21,440
(3,560)
19,552
157,035
(156,754)
(30,135)
362
(29,492)
(9,940)
(47,675)
(57,615)
As at September 28, 2019, the U.S./Can. exchange rate was $1.3247 (September 29, 2018 - $1.2918).
Based on the above gross exposure at year-end, and assuming that all other variables remain constant, in particular the price of
raw sugar and natural gas, a 5-cent increase in the Canadian dollar would result in an decrease in net loss of $2.8 million,
(September 29, 2018 - increase in net earnings of $2.1 million) while a 5-cent decrease would have an equal but opposite effect
on net (loss) earnings.
Management believes that the impact on the gross exposure is not representative as it needs to be adjusted for the following
transactions, which are not recorded on the consolidated statements of financial position as at year-end but were committed
during the fiscal year, and will be accounted for as the physical transactions occur:
Gross exposure as per above
Sugar purchases priced not received
Committed future sales in U.S. dollars
Ocean freight
Other
Net exposure
September 28,
2019
September 29,
2018
(US$)
(76,362)
(85,992)
139,368
(488)
(374)
(US$)
(57,615)
(93,516)
111,698
(15)
(592)
(23,848)
(40,040)
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
90
11. FINANCIAL INSTRUMENTS (CONTINUED)
Risks (continued)
(b) Currency risk (continued):
The net exposure is due mainly to the Company’s policy not to hedge its foreign exchange exposure on natural gas futures
contracts with maturities exceeding 12 months. The impact of a 5-cent increase in the Canadian dollar would result in an decrease
of net loss by $0.9 million in 2019 (September 29, 2018 - increase in net earnings of $1.5 million) while a decrease would have an
equal but opposite effect on net (loss) earnings.
Raw sugar futures sales contracts represent, in large part, futures contracts entered into when sugar is priced by a raw sugar
supplier. As both the raw sugar futures sales contracts and the sugar purchases priced not received are in U.S. dollars, there is no
need to economically hedge the currency, hence the reason for the adjustment for sugar purchases priced not received.
Included in other is the Taber sales formula for refined sugar, which is based on the raw sugar value that trades in U.S. dollars. As
all beet sugar is paid in Canadian dollars, the raw sugar value within the Taber sales contracts is in U.S. dollars and therefore needs
to be economically hedged for currency exposure.
Some sales are transacted in U.S. dollars. For these sales, the raw sugar value is not hedged, as the corresponding futures contract
is also in U.S. dollars. Only the U.S. dollar refined sugar margin and ocean freight contribution are economically hedged for the
currency exposure.
Ocean freight for raw sugar is denominated in U.S. dollars and therefore forward exchange contracts are used to cover the foreign
exchange exposure.
(c)
Interest rate risk:
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
market interest rates.
As at September 28, 2019, the Company has a short-term cash borrowing of $17.0 million (September 29, 2018 - $12.0 million)
and a long-term cash borrowing of $160.0 million (September 29, 2018 - $160.0 million). The Company normally enters into a
30 - or 90-day bankers’ acceptance for an amount varying between $100.0 million to $180.0 million of the borrowings, and will
borrow either under prime rate loans or shorter term bankers’ acceptances for any other borrowings.
To mitigate the risk in future cash flows due to interest rate fluctuations, the Company enters into interest rate swap agreements
from time to time (see Note 11, Financial Instruments, Derivative financial instruments, (d) interest rate swap agreements). All other
borrowings over and above the aggregate notional amount of the swap agreements are therefore exposed to interest rate
fluctuations.
For the fiscal year ended September 28, 2019, if interest rates had been 50 basis points higher, considering all borrowings not
covered by the interest rate swap agreements, net loss would have been $0.5 million higher (September 29, 2018 - $0.5 million
lower net earnings) while a decrease would have an equal but opposite effect on net (loss) earnings.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
91
11. FINANCIAL INSTRUMENTS (CONTINUED)
Risks (continued)
(d) Liquidity risk:
Liquidity risk is the risk that the Company will not be able to meet its obligations as they fall due. The following are the contractual
maturities of financial liabilities, including estimated interest payments:
Carrying Contractual
cash flows
amount
$
$
0 to 6
months
$
6 to 12
months
$
Non-derivative financial liabilities:
Revolving credit facility
177,000
177,000
17,000
Trade and other payables
117,731
117,731
117,731
Finance lease obligations
881
1,025
89
295,612
295,756
134,820
—
—
81
81
September 28, 2019
12 to 24
months
After 24
months
$
—
—
117
117
$
160,000
—
738
160,738
Derivative financial instruments
measured at fair value through
profit or loss:
Sugar futures contracts (net) (i)
32
(4,684)
5,804
(17,368)
7,680
(800)
Forward exchange
contracts (net) (i)
Derivative financial instruments
designated as effective cash flow
hedging instruments:
Natural gas contracts (i)
Interest on swap agreements
(353)
(99,674)
(77,736)
(11,443)
(9,112)
(1,383)
3,558
1,103
4,340
37,863
9,341
4,256
939
3,565
922
(57,154)
(66,737)
(24,324)
299,952
238,602
68,083
(24,243)
8,498
1,811
8,877
8,994
21,544
5,669
25,030
185,768
(i) Based on notional amounts as presented above.
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
92
11. FINANCIAL INSTRUMENTS (CONTINUED)
Risks (continued)
(d) Liquidity risk (continued):
Carrying Contractual
cash flows
amount
$
$
0 to 6
months
$
6 to 12
months
$
Non-derivative financial liabilities:
Revolving credit facility
172,000
172,000
12,000
Trade and other payables
113,777
113,777
113,777
Finance lease obligations
114
121
28
285,891
285,898
125,805
—
—
28
28
September 29, 2018
12 to 24
months
$
—
—
56
56
After 24
months
$
160,000
—
9
160,009
Derivative financial instruments
measured at fair value through
profit or loss:
Sugar futures contracts (net) (i)
(229)
831
1,426
(13,359)
13,224
(460)
Forward exchange
contracts (net) (i)
(3,245)
(69,943)
(75,765)
Other long-term liabilities
773
773
773
1,046
—
5,142
—
(366)
—
Derivative financial instruments
designated as effective cash flow
hedging instruments:
Natural gas contracts (i)
Interest on swap agreements
4,432
(2,474)
38,928
5,505
3,070
837
(743)
(23,906)
(69,659)
285,148
261,992
56,146
3,446
783
(8,084)
(8,056)
8,811
1,445
28,622
28,678
23,601
2,440
25,215
185,224
(i) Based on notional amounts as presented above.
The convertible unsecured subordinated debentures of $155.3 million have been excluded from the above due to the Company’s
option to satisfy the obligations at redemption or maturity in shares.
The Company borrows under its revolving credit facility (see Note 17, Revolving credit facility). It is the Company’s intention to
keep a debt level under its revolving credit facility between $100.0 million to $180.0 million. All other non-derivative financial
liabilities are expected to be financed through the collection of trade and other receivables and cash flows generated from
operations.
Derivative financial instruments for raw sugar, natural gas and forward exchange contracts are expected to be financed from the
working capital of the Company.
As at September 28, 2019, the Company had an unused available line of credit of $88.0 million (September 29, 2018 - $93.0 million),
a cash balance of $0.3 million (September 29, 2018 - $2.1 million) and an overdraft balance of $8.3 million (September 29, 2018
- $5.5 million).
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
93
11. FINANCIAL INSTRUMENTS (CONTINUED)
Risks (continued)
(e) Commodity price risk:
Commodity price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes
in commodity prices.
There are two types of commodity contracts, which are entered into by the Company:
(i) Sugar:
In order to protect itself against fluctuations of the world raw sugar market, the Company follows a rigorous hedging program
for all purchases of raw cane sugar and sales of refined sugar. Anytime raw sugar is priced by a sugar supplier, a corresponding
sugar futures contract is sold for the same quantity, period and underlying value. Anytime refined sugar is priced by a
customer, the corresponding volume of raw sugar is purchased for the same quantity, period and underlying value. The
Company’s policy is to cover all raw cane purchases and refined sugar sales as they are priced by the Company’s suppliers
and customers. On a daily basis, the Company monitors all net sugar futures contract positions against the physical priced
purchases and sales commitments to ensure that appropriate hedge positions are in place.
For the Company’s beet operation, the Board of Directors approved an economic pre-hedge, using sugar futures contracts,
of some of the beet sugar sales that will occur in the future, provided there is a contract in place with the Alberta Sugar Beet
Growers to grow sugar beets.
The Board of Directors also approved a trading book up to a maximum of 25,000 metric tonnes of sugar derivative contracts.
The Board reviews on a quarterly basis the results achieved.
(ii) Natural gas:
In order to mitigate the overall price risks in the purchase of natural gas for use in the manufacturing operations, the Board
approved the use of natural gas futures contracts. Natural gas futures contracts cannot be entered into for speculative
reasons. The Board reviews on a quarterly basis the position of the natural gas contracts.
As at September 28, 2019, the Company had the following commodity contracts:
Sugar futures contracts
Natural gas contracts
Volume
(M.T.)
333,725
(320,872)
12,853
Current
average
value
Current
contract
value
Current
average
value
Current
contract
value
Contracts
(US$)
(US$)
(10,000 MM BTU)
(US$)
(US$)
282.92
283.24
94,419
(90,883)
1,127
22.98
25,896
—
—
—
n/a
3,536
1,127
22.98
25,896
1.3247
4,684
1.3247
34,304
Purchases
Sales
Foreign exchange rate at the end
of the period
Net value CA$
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
94
11. FINANCIAL INSTRUMENTS (CONTINUED)
Risks (continued)
(e) Commodity price risk (continued):
(ii) Natural gas (continued):
As at September 29, 2018, the Company had the following commodity contracts:
Sugar futures contracts
Natural gas contracts
Current
average
value
Current
contract
value
Current
average
value
Current
contract
value
Contracts
(US$)
(US$)
(10,000 MM BTU)
(US$)
(US$)
Volume
(M.T.)
542,119
252.49
136,880
1,090
24.50
26,704
(541,154)
254.13
(137,523)
—
—
—
965
n/a
(643)
1,090
24.50
26,704
1.2918
(831)
1.2918
34,496
Purchases
Sales
Foreign exchange rate at the end
of the period
Net value CA$
If, on September 28, 2019, the raw sugar value would have increased by US$0.05 per pound (being approximately US$110.0 per
metric tonne), and all other variables remained constant, the impact on net loss would have been a decrease of approximately
$1.4 million (calculated only on the point-in-time exposure on September 28, 2019) (September 29, 2018 - increase in net earnings
of $0.1 million for US$0.05 per pound increase). If the raw sugar value would have decreased by US$0.02 per pound (being
approximately US$44.00 per metric tonne), and all other variables remained constant, the impact on net loss would have been
an increase of approximately $0.5 million (September 29, 2018 - decrease in net earnings of $0.1 million for US$0.02 decrease).
Except for the beet pre-hedge, management believes that the above is not representative, as the Company has physical raw sugar
purchases and refined sugar selling contracts that would offset most gains or losses realized from such decrease or increase in the
commodity value, when such contracts are liquidated. The Company had no beet pre-hedge contracts as at September 28, 2019
nor September 29, 2018. If, on September 28, 2019, the natural gas market price would have increased by US$1.00, and all other
variables remained constant, net loss would have decreased by $11.0 million (September 29, 2018 - increase in net earnings
of $10.4 million) as a result of the change in fair value of our natural gas futures. If the natural gas value would have decreased by
US$1.00, and all other variables remained constant, net loss would have increased by $11.0 million (September 29, 2018 -
decrease in net earnings of $10.4 million).
Management believes that this impact for natural gas is not representative as this variance will mostly offset when the actual
natural gas is purchased and used. At such time, a gain or loss on the liquidation of the natural gas contracts would mostly offset
the same increase or decrease in the actual physical transaction.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
95
11. FINANCIAL INSTRUMENTS (CONTINUED)
Fair values of financial instruments
The fair values of derivative instruments are the estimated amount that the Company would receive or pay to terminate the instruments
at the reporting date. The fair values have been determined by reference to prices available from the markets on which the instruments
trade, subject to credit adjustments as applicable. The fair values of all derivative instruments approximate their carrying value and are
recorded as separate line items on the consolidated statements of financial position.
The following describes the fair value determinations of financial instruments:
i) Cash: due to the short-term maturity of these instruments, the carrying amount approximates fair value.
ii) Restricted cash: the carrying amount approximates fair value.
iii) Trade and other receivables and trade and other payables: the carrying amount approximates fair value due to the short-term
maturity of these instruments.
iv) Borrowing under the revolving credit facility: the carrying amount approximates fair value as the borrowings bear interest at
variable rates.
v) The fair values for the derivative assets and liabilities are estimated using industry standard valuation models. Where applicable,
these models project future cash flows and discount the future amounts to a present value using market-based observable inputs
including interest rate curves, credit spreads, natural gas prices, foreign exchange rates, and forward and spot prices for currencies.
vi) The fair value of convertible unsecured subordinated debentures was based upon market quotes for the identical instruments.
vii) See Note 21, Finance lease obligations.
viii) The fair value of the contingent consideration was discounted and calculated using a probability-weighted expectation (see
Note 8, Restricted cash).
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
96
11. FINANCIAL INSTRUMENTS (CONTINUED)
Fair values of financial instruments (continued)
The following tables provide a comparison of carrying and fair values for each classification of financial instruments at year-end, and
show a level within the fair values hierarchy in which they have been classified.
Fair values
hierarchy level
September 28, 2019
Fair
values
Carrying
values
September 29, 2018
Fair
values
Carrying
values
$
$
$
$
Level 1
Level 2
—
353
—
353
229
3,245
229
3,245
FINANCIAL ASSETS:
Derivative financial instruments measured
at fair value through profit or loss:
Sugar futures contracts
Foreign exchange forward contracts
Derivative financial instruments designated
as effective cash flow hedging instruments:
Interest rate swap
Level 2
—
—
2,474
2,474
Financial assets recorded at amortized cost:
Cash
Restricted cash
Trade and other receivables
Income taxes receivable
Total financial assets
FINANCIAL LIABILITIES:
Derivative financial instruments measured
at fair value through profit or loss:
Level 1
Level 1
n/a
n/a
284
—
85,823
1,977
88,437
284
—
85,823
1,977
88,437
2,101
846
2,101
846
81,736
81,736
—
—
90,631
90,631
Sugar futures contracts
Level 2
32
32
—
—
Derivative financial instruments designated
as effective cash flow hedging instruments:
Natural gas futures contracts
Interest rate swap
Level 2
Level 2
3,558
1,103
3,558
1,103
4,432
—
4,432
—
Financial liabilities recorded at amortized cost:
Bank overdraft
Revolving credit facility
Trade and other payables
Income taxes payable
Finance lease obligations
Other long-term liabilities
Convertible unsecured
subordinated debentures
Total financial liabilities
Level 1
8,325
8,325
5,469
5,469
n/a
n/a
n/a
n/a
Level 3
177,000
177,000
172,000
172,000
117,731
117,731
113,777
113,777
—
881
—
—
881
—
3,506
3,506
114
773
114
773
Level 1
144,230
158,010
142,421
157,464
452,860
466,640
442,492
457,535
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
97
12. PROPERTY, PLANT AND EQUIPMENT
Machinery
and
equipment
Buildings
Furniture
and
fixtures
Barrels
Construction
in
progress
Finance
leases
$
$
$
$
$
$
Land
$
Total
$
Cost or deemed cost
Balance at
September 30, 2017
17,949
66,631
270,044
2,237
7,528
417
13,947
378,753
Additions through
business combination
140
3,347
—
4,616
1,771
3,490
17,242
—
349
—
29
110
572
—
15
3
1
—
—
—
—
6
—
5
—
22,524
(21,304)
—
8,132
24,760
—
24
18,089
73,468
293,688
2,589
8,240
428
15,167
411,669
—
—
—
—
630
1,241
(9)
—
1,578
20,674
(752)
11
36
—
—
3
123
288
(1,955)
1
897
23,725
26,989
—
—
3
(22,203)
—
—
—
(2,716)
18
18,089
75,330
315,199
2,628
6,697
1,328
16,689
435,960
—
—
—
—
—
—
—
22,559
161,201
1,725
11,807
57
412
4,128
709
108
63
—
1
—
—
—
24,284
173,009
469
4,837
171
1,873
12,258
439
781
(9)
—
(706)
—
(1,955)
2
1
—
98
—
—
—
—
—
—
—
—
—
188,053
14,716
1
202,770
15,449
(2,670)
3
—
26,148
184,563
909
3,663
269
—
215,552
Additions
Transfers
Effect of movements in
exchange rate
Balance at
September 29, 2018
Additions
Transfers
Disposals
Effects of movements
in exchange rate
Balance at
September 28, 2019
Depreciation
Balance at
September 30, 2017
Depreciation for the year
Effect of movements in
exchange rate
Balance at
September 29, 2018
Depreciation for the year
Disposals
Effect of movements
in exchange rate
Balance at
September 28, 2019
Net carrying amounts
At September 29, 2018
18,089
49,184
120,679
At September 28, 2019
18,089
49,182
130,636
2,120
1,719
3,403
3,034
257
15,167
208,899
1,059
16,689
220,408
There were no impairment losses during fiscal 2019 and 2018.
Any grants received are offset against property, plant and equipment additions. During the year, an amount of $4 million was recorded.
All property, plant and equipment have been pledged as security for the revolving credit facility (see Note 17, Revolving credit facility).
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
98
13. INTANGIBLE ASSETS
Cost
Balance at September 30, 2017
Additions through business combinations
Additions
Effect of movements in exchange rate
Balance at September 29, 2018
Additions
Disposals
Effect of movements in exchange rate
Customer
Software relationships
$
$
Brand
names(1)
$
Other
$
3,880
87
94
—
25,203
9,220
—
119
3,850
2,000
—
21
4,061
34,542
5,871
172
(203)
—
—
—
81
—
—
16
284
—
290
—
574
—
—
—
Total
$
33,217
11,307
384
140
45,048
172
(203)
97
Balance at September 28, 2019
4,030
34,623
5,887
574
45,114
Amortization
Balance at September 30, 2017
Amortization for the year
Balance at September 29, 2018
Amortization for the year
Disposals
Balance at September 28, 2019
Net carrying amounts
At September 29, 2018
At September 28, 2019
(1) Indefinite life.
14. OTHER ASSETS
Deferred financing charges, net
Other
1,842
317
2,159
279
(203)
2,235
352
3,395
3,747
3,465
—
7,212
—
—
—
—
—
—
1,902
1,795
30,795
27,411
5,871
5,887
149
46
195
28
—
223
379
351
2,343
3,758
6,101
3,772
(203)
9,670
38,947
35,444
September 28,
2019
September 29,
2018
$
925
3
928
$
975
10
985
Deferred financing charges represent the fees and costs related to the negotiation of the 5-year credit agreement. Borrowings under
the revolving credit facility are short term in nature and can be repaid at any time. Therefore, deferred financing charges are presented
separately and not applied against the debt (see Note 17, Revolving credit facility).
On July 9, 2019, the Company paid $0.1 million in financing fees to amend its existing revolving credit facility.
These fees, along with the outstanding balance of the previously deferred financing charges, are amortized over the extended life of
the revolving credit facility, which now matures on June 28, 2024.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. DEFERRED TAX ASSETS AND LIABILITIES
The deferred tax assets (liabilities) comprise the following temporary differences:
Assets:
Employee benefits
Derivative financial instruments
Losses carried forward
Provisions
Intangibles
Other
Liabilities:
Property, plant and equipment
Derivative financial instruments
Goodwill
Deferred financing charges
Intangibles
Other
Net assets (liabilities):
Property, plant and equipment
Intangibles
Employee benefits
Derivative financial instruments
Losses carried forward
Goodwill
Provisions
Deferred financing charges
Other
99
September 28,
2019
September 29,
2018
$
13,267
1,339
3,548
435
58
1,037
19,684
$
8,330
1,299
1,518
583
41
1,205
12,976
(29,465)
(29,260)
(565)
(2,537)
(549)
(7,894)
(1,616)
(1,517)
(2,509)
(417)
(8,694)
(1,841)
(42,626)
(44,238)
(29,465)
(7,836)
13,267
774
3,548
(2,537)
435
(549)
(579)
(29,260)
(8,653)
8,330
(218)
1,518
(2,509)
583
(417)
(636)
(22,942)
(31,262)
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
100
15. DEFERRED TAX ASSETS AND LIABILITIES (CONTINUED)
The movement in temporary differences during the current years is as follows:
September 29,
2018
$
Property, plant and equipment
(29,260)
Intangibles
Employee benefits
Derivative financial instruments
Losses carried forward
Goodwill
Provisions
Deferred financing charges
Other
(8,653)
8,330
(218)
1,518
(2,509)
583
(417)
(636)
Balance Recognized
Recognized
in other
in profit comprehensive
(loss) income
(loss)
$
(205)
817
(257)
(251)
2,030
(28)
(148)
(132)
57
$
—
—
5,194
1,243
—
—
—
—
—
Recognized
in equity
$
—
—
—
—
—
—
—
—
—
–
Acquired
Balance
in business September 28,
2019
combination
$
—
—
—
—
—
—
—
—
—
–
$
(29,465)
(7,836)
13,267
774
3,548
(2,537)
435
(549)
(579)
(22,942)
(31,262)
1,883
6,437
Balance
September 30,
2017
Recognized
in profit
(loss)
Recognized
in other
comprehensive
(loss) income
Recognized
in equity
Acquired
Balance
in business September 29,
2018
combination
Property, plant and equipment
(27,763)
$
Intangibles
Employee benefits
Derivative financial instruments
Losses carried forward
Goodwill
Provisions
Deferred financing charges
Other
(6,461)
10,279
1,354
110
(2,418)
585
(337)
1,118
(23,533)
$
76
779
(186)
(1,581)
1,408
(91)
(2)
(80)
(595)
(272)
$
—
—
(1,763)
9
—
—
—
—
—
(1,754)
$
—
—
—
—
—
—
—
—
(1,159)
(1,159)
$
(1,573)
(2,971)
—
—
—
—
—
—
—
$
(29,260)
(8,653)
8,330
(218)
1,518
(2,509)
583
(417)
(636)
(4,544)
(31,262)
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. GOODWILL
Balance, beginning of year
Additions through business combination
Goodwill impairment
Balance, end of year
101
September 28,
2019
September 29,
2018
$
333,007
—
(50,000)
283,007
$
316,949
16,058
—
333,007
Recoverability of cash generating units (“CGU”):
For the purpose of impairment testing, goodwill and intangibles with indefinite useful life are allocated to the Company’s operating
segments, which represent the lowest level within the Company at which the goodwill and intangibles are monitored for internal
management purposes, as follows:
Sugar:
Goodwill
Maple products:
Goodwill
Brand names
September 28,
2019
September 29,
2018
$
$
229,952
229,952
53,055
5,887
288,894
103,055
5,871
338,878
In assessing whether goodwill and indefinite life intangible assets are impaired, the carrying amount of the segments (including
goodwill and indefinite life intangible assets) are compared to their recoverable amount. The recoverable amounts of segments are
based on the higher of the value in use and fair value less costs of disposal.
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
102
16. GOODWILL (CONTINUED)
SUGAR SEGMENT
The Company performed the annual impairment review for goodwill and indefinite life intangible assets as at September 28, 2019,
and the estimated recoverable amounts exceeded the carrying amounts of the segments and, as a result, there was no impairment
identified.
The recoverable amount was based on value in use. The key assumptions used in the estimation of the recoverable amount are set out
below. The values assigned to the key assumptions represent management's assessment of future trends in the relevant industries and
have been based on historical data from both external and internal sources.
Pre-tax discount rate
Terminal growth rate
Budgeted EBITDA growth rate (average of next 5 years)
2019
%
10.6
2.0
6.4
The discount rate was a pre-tax measure estimated based on historical industry weighted-average cost of capital adjusted for impacts
on risk and taxes.
The cash flow projections included specific estimates for five years and a terminal growth rate thereafter. The terminal growth rate was
based on management's best estimate of the long-term compound annual EBITDA growth rate, consistent with the assumptions that
a market participant would make.
Budgeted EBITDA was estimated taking into account past experience, adjusted as follows:
•
Revenue growth for the first year was projected taking into account the budgeted sales volumes, and the following years taking
into account the average growth levels experienced over the past 5 years and the estimated sales volumes and price growth for
the next five years. It was assumed that the sales price would increase in line with forecasted inflation over the next five years.
Management has identified the two key assumptions that could cause the carrying amount to exceed the recoverable amount. The
following table shows the amount by which these two assumptions would need to change individually for the estimated recoverable
amount to be equal to the carrying amount.
Pre-tax discount rate
Budgeted EBITDA growth rate
2019
%
7.3
(6.2)
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
103
16. GOODWILL (CONTINUED)
MAPLE PRODUCTS SEGMENT
The Company performed the annual impairment review for goodwill and indefinite life intangible assets as at September 28, 2019.
The recoverable amount was based on value in use. The key assumptions used in the estimation of the recoverable amount are set out
below. The values assigned to the key assumptions represent management's assessment of future trends in the relevant industries and
have been based on historical data from both external and internal sources.
Pre-tax discount rate
Terminal growth rate
Budgeted EBITDA growth rate (average of next 5 years)
2019
%
13.3
2.8
7.3
The discount rate was a pre-tax measure estimated based on historical industry weighted-average cost of capital adjusted for impacts
on risk and taxes.
The cash flow projections included specific estimates for five years and a terminal growth rate thereafter. The terminal growth rate was
based on management's best estimate of the long-term compound annual EBITDA growth rate, consistent with the assumptions that
a market participant would make.
Budgeted EBITDA was estimated taking into account past experience, adjusted as follows:
•
Revenue growth for the first year was projected taking into account the budgeted sales volumes, adjusted for uncertainties, and
the following years taking into account the average growth levels experienced in the past and the estimated sales volumes and
price growth for the next five years. It was assumed that the sales price would increase in line with forecasted inflation over the
next five years.
As a result of the test, the Company recorded a goodwill impairment loss of $50.0 million in the fiscal year ended September 28, 2019.
Following the impairment loss recognised in the maple products segment, the recoverable amount is equal to the carrying amount.
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
104
17. REVOLVING CREDIT FACILITY
On July 9, 2019, the Company exercised its option to extend the maturity date of its revolving credit facility to June 28, 2024 and made
some minor amendments, which do not affect its outstanding borrowings nor its financial covenants. A total of $0.1 million was paid in
financing fees.
On December 20, 2017, the Company amended its existing revolving credit facility thereby increasing its available credit by $40.0
million by drawing additional funds under the accordion feature embedded in the revolving credit facility ("Additional Accordion
Borrowings"). A total of $0.1 million was paid in financing fees (see Note 14, Other assets).
As a result of the amended revolving credit facility, the Additional Accordion Borrowings and the Additional LBMT Accordion
Borrowings, the Company has a total of $265.0 million of available working capital from which it can borrow at prime rate, LIBOR rate
or under bankers’ acceptances, plus 20 to 250 basis points, based on achieving certain financial ratios.
Certain assets of the Company, including trade receivables, inventories and property, plant and equipment, have been pledged as
security for the revolving credit facility. As at September 28, 2019, a total of $422.2 million of assets are pledged as security (September
29, 2018 - $407.8 million).
The following amounts were outstanding as at:
Outstanding amount on revolving credit facility:
Current
Non-current
September 28,
2019
September 29,
2018
$
$
17,000
160,000
177,000
12,000
160,000
172,000
The carrying value of the revolving credit facility approximates fair value as the borrowings bear interest at variable rates.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. TRADE AND OTHER PAYABLES
Trade payables
Other non-trade payables
Personnel-related liabilities
Dividends payable to shareholders
105
September 28,
September 29,
2019
$
96,150
2,907
9,238
9,440
2018
$
91,675
2,754
9,897
9,451
117,735
113,777
Considering that Maple products syrup is harvested once a year, the Producteurs et Productrices Acericoles du Québec ("PPAQ")
offers to authorized purchasers the possibility to pay their purchases over the course of the year (ending in February). Once the syrup
is graded, the Company must pay 30% of the cost of the syrup on the 15th of the following month. The outstanding balance bears
interest (prime + 1%) and is paid in four monthly installments (November, December, January and February). Included in trade payables
is an amount of $62.3 million as of September 28, 2019 (September 29, 2018 - $61.8 million).
During the year, more than 89% of the maple syrup purchases were made from the PPAQ.
Personnel-related liabilities represent the Company’s obligation to its current and former employees that are expected to be settled
within one year from the reporting period as salary and accrued vacation.
The Company’s exposure to currency and liquidity risks related to trade and other payables is disclosed in Note 11, Financial instruments.
19. OTHER LONG-TERM LIABILITIES
September 28, 2019
September 29, 2018
Contingent
consideration
payable
Balance of
purchase
price
payable
$
773
77
—
(850)
—
—
—
—
$
—
—
—
—
—
—
—
—
Total
$
773
77
—
(850)
—
—
—
—
Contingent
consideration
payable
Balance of
purchase
price
payable
$
4,469
190
—
$
822
8
30
Total
$
5,291
198
30
(3,886)
(860)
(4,746)
773
773
—
773
—
—
—
—
773
773
—
773
Opening balance
Accretion expense
Foreign exchange adjustment
Payment made
Closing balance
Presented as:
Current
Non-current
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
106
20. PROVISIONS
Opening balance
Additions
Provisions used during the period
Closing balance
Presented as:
Current
Non-current
September 28,
2019
September 29,
2018
$
2,205
70
(578)
1,697
878
819
1,697
$
2,231
724
(750)
2,205
1,006
1,199
2,205
Provisions are comprised of asset retirement obligations, which represent the future cost the Company estimated to incur for the
removal of asbestos in the operating facilities and for oil, chemical and other hazardous materials storage tanks for which the Company
has been able to identify the costs.
The estimate of the total liability for future asset retirement obligations is subject to change, based on amendments to laws and
regulations and as new information concerning the Company’s operations becomes available. Future changes, if any, to the estimated
total liability as a result of amended requirements, laws, regulations and operating assumptions would be recognized prospectively as
a change in estimate, when applicable.
21. FINANCE LEASE OBLIGATIONS
The Company leases moveable equipment. These leases have an interest rate of 5.65% with maturity dates in fiscal 2020. The Company
also leases a warehouse. This lease has an interest rate of 3.66% with a maturity date in fiscal 2028. The leases substantially transfer all
the usage benefits of such equipment and warehouse to the Company.
The outstanding liabilities are as follows:
Finance lease obligations
September 28, 2019
September 29, 2018
Carrying
values
$
881
Fair
values
$
881
Carrying
values
$
114
Fair
values
$
114
The finance lease obligations are payable as follows:
September 28, 2019
September 29, 2018
Future
minimum
lease
payments
$
170
435
420
1,025
Present
value of
minimum
lease
payments
Future
minimum
lease
payments
$
139
352
390
881
$
55
66
—
121
Interest
$
31
83
30
144
Present
value of
minimum
lease
payments
$
50
64
—
114
Interest
$
5
2
—
7
Less than one year
Between one and five years
More than five years
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. EMPLOYEE BENEFITS
The Company sponsors defined benefit pension plans for its employees ("Pension benefit plans"), as well as health care benefits,
medical plans and life insurance coverage ("Other benefit plans").
The following table presents a reconciliation of the pension obligations, the plan assets and the funded status of the benefit plans:
107
Fair value of plan assets:
Pension benefit plans
Defined benefit obligation:
Pension benefit plans
Other benefit plans
Funded status:
Pension benefit plans
Other benefit plans
Experience adjustment arising on plan liabilities
Experience adjustment arising on plan assets
September 28,
2019
September 29,
2018
$
$
105,323
104,362
139,952
17,181
157,133
(34,628)
(17,182)
(51,810)
19,363
(539)
120,650
15,206
135,856
(16,288)
(15,206)
(31,494)
(4,911)
1,732
The Company has determined that, in accordance with the terms and conditions of the defined benefit pension plans, and in accor-
dance with statutory requirements (such as minimum funding requirements) of the plans of the respective jurisdictions, the present
value of refunds or reductions in the future contributions is not lower than the balance of the total fair value of the plan assets less
the total present value of the obligations. As such, no decrease in the defined benefit asset is necessary as at September 28, 2019
(September 29, 2018 - no decrease in defined benefit asset).
The Company measures its accrued benefit obligations and the fair value of plan assets for accounting purposes at year-end. The most
recent actuarial valuations of the pension plans for funding purposes were as of December 31, 2016 and January 1, 2017 and the next
required valuations will be as of December 31, 2019.
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
108
22. EMPLOYEE BENEFITS (CONTINUED)
The asset allocation of the major categories in the plan was as follows:
Equity instruments
Government bonds
Cash and short-term securities
September 28, 2019
September 29, 2018
%
61.4
35.4
3.2
$
64,668
37,285
3,370
100.0
105,323
%
60.9
36.6
2.5
100.0
$
63,557
38,196
2,609
104,362
The pension committee prepares the documentation relating to the management of asset allocation, reviews the investment policy and
recommends it to the Board of Directors for approval in the event of material changes to the policy. Semi-annually monitoring of the
asset allocation of the pension benefit plans allows the pension committee to ensure that the limits of asset allocation of the pension
benefit plans are respected.
Based on historical data, contributions to the defined benefit pension plans in fiscal 2020 are expected to be approximately $3.7 million.
The pension plan exposes the Company to the following risks:
(i)
Investment risk:
The defined benefit obligation is calculated using a discount rate. If the fund returns are lower than the discount rate, a deficit is
created.
(ii)
Interest rate risk:
Variation in bond rates will affect the value of the defined benefit obligation.
(iii)
Inflation risk:
The defined benefit obligation is calculated assuming a certain level of inflation. An actual inflation higher than expected will have
the effect of increasing the value of the defined benefit obligation.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
109
22. EMPLOYEE BENEFITS (CONTINUED)
Movement in the present value of the defined benefit obligations is as follows:
For the fiscal years ended
September 28, 2019
Pension
benefit
plans
$
Other
benefit
plans
$
Total
$
Pension
benefit
plans
$
September 29, 2018
Other
benefit
plans
$
Total
$
120,650
15,206
135,856
121,886
17,733
139,619
2,370
—
(8)
4,587
982
(5,217)
235
—
(103)
565
—
—
2,605
—
(111)
5,152
982
2,388
(1,478)
10
4,528
1,003
(5,217)
(4,512)
282
—
(56)
652
—
—
2,670
(1,478)
(46)
5,180
1,003
(4,512)
(862)
(635)
(1,497)
(1,037)
(632)
(1,669)
—
(56)
(56)
—
(2,427)
(2,427)
17,208
2,000
19,208
(814)
(210)
(1,024)
242
(31)
211
(1,324)
(136)
(1,460)
139,952
17,181
157,133
120,650
15,206
135,856
104,362
4,022
(539)
2,972
982
(5,217)
(862)
(397)
105,323
—
—
—
635
—
—
(635)
—
—
104,362
100,450
4,022
3,835
(539)
3,607
982
(5,217)
(1,497)
(397)
1,732
3,251
1,003
(4,512)
(1,037)
(360)
105,323
104,362
—
—
—
632
—
—
(632)
—
—
100,450
3,835
1,732
3,883
1,003
(4,512)
(1,669)
(360)
104,362
Movement in the present value of
the defined benefit obligation:
Defined benefit obligation,
beginning of the year
Current service cost
Past service costs
Re-measurements of other
long-term benefits
Interest cost
Employee contributions
Benefit payments from plan
Benefit payments
from employer
Actuarial (gains) losses arising
from changes in demographic
assumptions
Actuarial (gains) losses arising
from changes in financial
assumptions
Actuarial (gains) losses arising
from member experience
Defined benefit obligation,
end of year
Movement in the fair value
of plan assets:
Fair value of plan assets,
beginning of the year
Interest income
Return on plan assets
(excluding interest income)
Employer contributions
Employee contributions
Benefit payments from plan
Benefit payments from employer
Plan expenses
Fair value of plan assets,
end of year
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
110
22. EMPLOYEE BENEFITS (CONTINUED)
On October 16, 2017, the Alberta Treasury Board and Finance approved an amendment to the Alberta Hourly Plan which led to the
elimination of the reserve for future supplements, and investment earnings accumulated thereon, effective January 1, 2017. As a result,
in fiscal 2018, a $1.5 million pension income was recorded.
The net defined benefit obligation can be allocated to the plans’ participants as follows:
September 28, 2019
September 29, 2018
Pension
benefit plans
Other
benefit plans
Pension
benefit plans
Other
benefit plans
Active plan participants
Retired plan members
Deferred plan participants
Other
%
47.2
48.4
1.3
3.1
100.0
%
43.8
56.2
—
—
100.0
%
45.8
49.9
1.3
3.0
100.0
The Company’s defined benefit pension expense was as follows:
For the fiscal years ended
September 28, 2019
September 29, 2018
Pension costs recognized in
net (loss) earnings:
Current service cost
Past service cost
Expenses related to the
pension benefits plans
Net interest cost
Re-measurements of other
long-term benefits
Pension expense
Recognized in:
Cost of sales
Administration and
selling expenses
Pension
benefit
plans
$
Other
benefit
plans
$
Pension
benefit
plans
$
Other
benefit
plans
$
2,370
—
397
565
(8)
3,324
235
—
—
565
(103)
697
Total
$
2,605
—
397
1,130
(111)
4,021
2,388
(1,478)
360
693
10
1,973
2,802
606
3,408
1,435
522
3,324
91
697
613
4,021
538
1,973
282
—
—
652
(56)
878
555
323
878
%
41.6
58.4
—
—
100.0
Total
$
2,670
(1,478)
360
1,345
(46)
2,851
1,990
861
2,851
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
111
22. EMPLOYEE BENEFITS (CONTINUED)
The following table presents the change in the actuarial gains and losses recognized in other comprehensive (loss) income:
For the fiscal years ended
September 28, 2019
September 29, 2018
Pension
benefit
plans
$
Other
benefit
plans
$
Total
$
Cumulative amount in comprehensive (loss)
income at the beginning of the year
170
(8,954)
(8,784)
Recognized during the year
17,989
1,913
19,902
Pension
benefit
plans
$
4,040
(3,870)
Other
benefit
plans
$
(6,181)
(2,773)
Total
$
(2,141)
(6,643)
Cumulative amount in comprehensive (loss)
income at the end of the year
18,159
(7,041)
11,118
170
(8,954)
(8,784)
Recognized during the year,
net of tax
13,294
1,414
14,708
(2,843)
(2,037)
(4,880)
Principal actuarial assumptions used were as follows:
For the fiscal years ended
September 28, 2019
September 29, 2018
Pension
benefit
plans
%
3.00
2.50
3.90
2.20
Other
benefit
plans
%
3.00
3.00
3.90
3.00
Pension
benefit
plans
%
3.90
2.20
3.85
2.20
Other
benefit
plans
%
3.90
3.00
3.85
3.00
Company’s defined benefit obligation:
Discount rate
Rate of compensation increase
Net benefit plan expense:
Discount rate
Rate of compensation increase
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
112
22. EMPLOYEE BENEFITS (CONTINUED)
Assumptions regarding future mortality are based on published statistics and mortality tables. The current longevities underlying the
value of the liabilities in the defined benefit plans are as follows:
Longevity at age 65 for current pensioners:
Males
Females
Longevity at age 65 for members aged 45:
Males
Females
September 28,
2019
September 29,
2018
22.0
24.7
23.5
26.0
21.9
24.6
23.4
26.0
The assumed health care cost trend rate as at September 28, 2019 was 5.67% (September 29, 2018 - 5.73%), decreasing uniformly to
4.00% in 2040 (September 29, 2018 - 4.00% in 2040) and remaining at that level thereafter.
The following table outlines the key assumptions for the fiscal year ended September 28, 2019 and the sensitivity of a percentage
change in each of these assumptions on the defined benefit plan obligations and the net defined benefit plan costs.
The sensitivity analysis provided in the table is hypothetical and should be used with caution. The sensitivities of each key assumption
have been calculated independently of any changes in other key assumptions. Actual experience may result in changes in a number of
key assumptions simultaneously. Changes in one factor may result in changes in another, which could amplify or reduce the impact of
such assumptions.
(Decrease) increase in Company’s defined benefit obligation:
Discount rate
Impact of increase of 1%
Impact of decrease of 1%
Rate of compensation increase
Impact of increase of 0.5%
Impact of decrease of 0.5%
Mortality
99% of expected rate
For the fiscal year ended September 28, 2019
Pension
benefit
plans
$
(19,241)
24,029
908
(1,458)
63
Other
benefit
plans
$
(2,228)
2,833
6
(5)
72
Total
$
(21,469)
26,862
914
(1,463)
135
Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percent-
age-point change in assumed health care cost trend would have the following effects:
Effect on the defined benefit obligations
Increase
$
2,393
Decrease
$
(1,927)
As at September 28, 2019, the weighted average duration of the defined benefit obligation amounts to 15.5 years (September 29,
2018 - 14.1 years).
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
23. CONVERTIBLE UNSECURED SUBORDINATED DEBENTURES
The outstanding convertible debentures are as follows:
Non-current
Sixth series (ii)
Seventh series (iii)
Total face value
Less net deferred financing fees
Less equity component (ii), (iii)
Accretion expense on equity component
113
September 28,
September 29,
2019
$
57,500
97,750
155,250
(5,500)
(6,930)
1,410
2018
$
57,500
97,750
155,250
(6,488)
(6,930)
589
Total carrying value - non-current
144,230
142,421
(i) Fifth series:
On March 28, 2018, a portion of the net proceeds from the issuance of the Seventh series, 4.75% convertible unsecured
subordinated debentures ("Seventh series debentures") was used to redeem the Fifth series debentures. The total amount
redeemed was $59,990 as an amount of $10 was converted to 1,388 common shares by holders of the convertible debentures.
(ii) Sixth series:
On July 28, 2017, the Company issued $57.5 million Sixth series, 5.00% convertible unsecured subordinated debentures ("Sixth
series debentures"), maturing on December 31, 2024, with interest payable semi-annually in arrears on June 30 and December 31
of each year, starting on December 31, 2017. The debentures may be converted at the option of the holder at a conversion price
of $8.26 per share (representing 6,961,259 common shares) at any time prior to maturity, and cannot be redeemed prior to
December 31, 2020.
On or after December 31, 2020 and prior to December 31, 2022, the debentures may be redeemed by the Company, at a price
equal to the principal amount plus accrued and unpaid interest, only if the current market price on the day preceding the date
on which the notice is given is at least 125% of the conversion price of $8.26. Subsequent to December 31, 2022, the debentures
are redeemable at a price equal to the principal amount thereof plus accrued unpaid interest.
On redemption or at maturity, the Company will repay the indebtedness of the convertible debentures by paying an amount equal
to the principal amount of the outstanding convertible debentures, together with accrued and unpaid interest thereon.
The Company may, at its option, elect to satisfy its obligation to repay the principal amount of the convertible debentures, which
are to be redeemed or which have matured, by issuing shares to the holders of the convertible debentures. The number of shares
to be issued will be determined by dividing $1,000 (one thousand) of principal amount of the convertible debentures by 95% of
the then current market price on the day preceding the date fixed for redemption or the maturity date, as the case may be.
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
114
23. CONVERTIBLE UNSECURED SUBORDINATED DEBENTURES (CONTINUED)
(ii) Sixth series (continued):
The Company allocated $2.6 million of the Sixth series debentures into an equity component (net of tax an amount of $2.0 million).
During the year, the Company recorded $303 (September 29, 2018 - $287) in finance costs for the accretion of the Sixth series
debentures.
The Company incurred underwriting fees and issuance costs of $2.7 million, which are netted against the convertible debenture
liability.
The fair value of the Sixth series convertible unsecured subordinated debentures is measured based on Level 1 of the three-tier fair
value hierarchy and was based upon market quotes for the identical instruments. The fair value as at September 28, 2019 was
approximately $58.8 million (September 29, 2018 - $59.2 million).
(iii) Seventh series:
On March 28, 2018, in connection with a bought deal offering filed on March 21, 2018, the Company issued 85,000 Seventh
series debentures, maturing on June 30, 2025 and bears interest of 4.75%, with interest payable semi-annually in arrears on
June 30 and December 31 of each year, commencing on June 30, 2018 for gross proceeds of $85.0 million. Then, on April 3,
2018, the Company issued an additional 12,750 Seventh series debentures pursuant to the exercise in full of the over-allotment
option granted by the Company for gross proceeds of $12.8 million. As a result of the over-allotment, the total amount outstanding
under the Seventh series is $97,750. The debentures may be converted at the option of the holder at a conversion price of $8.85
per share (representing 11,045,197 common shares) at any time prior to maturity, and cannot be redeemed by the Company prior
to June 30, 2021.
On or after June 30, 2021 and prior to June 30, 2023, the debentures will be redeemable in whole or in part from time to time at
the option of the Company on not more than 60 days and not less than 30 days prior notice at a price equal to the principal
amount thereof plus accrued and unpaid interest, provided that the weighted average trading price of the common shares, for the
20 consecutive trading days ending on the fifth trading day preceding the day prior to the date upon which the notice of
redemption is given is at least 125% of the conversion price of $8.85 per Debenture Share. On or after June 30, 2023 and prior to
the maturity date, the debentures may be redeemed at a price equal to the principal amount thereof plus accrued and unpaid
interest.
On redemption or on the maturity date, the Company will repay the indebtedness of the convertible debentures by paying an
amount equal to the principal amount of the outstanding debentures, together with accrued and unpaid interest thereon.
The Company may, at its option, elect to satisfy its obligation to repay the principal amount of the convertible debentures, which
are to be redeemed or which have matured, by issuing shares to the holders of the convertible debentures. The number of shares
to be issued will be determined by dividing $1,000 (one thousand) of principal amount of the convertible debentures by 95% of
the then current market price on the day preceding the date fixed for redemption or the maturity date, as the case may be.
The Company allocated $4.3 million ($3.1 million net of tax) of the Seventh series debentures into an equity component. During
the year, the Company recorded $518 (September 29, 2018 - $255) in finance costs for the accretion of the Seventh series
debentures.
The Company incurred underwriting fees and issuance costs of $4.5 million, which are netted against the convertible debenture
liability.
The fair value of the Seventh series convertible unsecured subordinated debentures is measured based on Level 1 of the
three-tier fair value hierarchy and was based upon market quotes for the identical instruments. The fair value as at September 28,
2019 was approximately $99.2 million (September 29, 2018 - $98.2 million).
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
115
24. SHARE CAPITAL AND OTHER COMPONENTS OF EQUITY
On May 22, 2019, the Company received approval from the Toronto Stock Exchange to proceed with a Normal Course Issuer Bid
("2019 NCIB"), the Company may purchase up to 1,500,000 common shares. The 2019 NCIB commenced on May 24, 2019 and may
continue to May 23, 2020. During the year, the Company purchased 122,606 common shares having a book value of $117 for a total
cash consideration of $640. The excess of the purchase price over the book value of the shares in the amount of $523 was charged
to deficit. All shares purchased were cancelled. In addition, the Company entered into an automatic share purchase agreement with
Scotia Capital Inc. in connection with the 2019 NCIB. Under the agreement, Scotia may acquire, at its discretion, common shares on
the Company’s behalf during certain "black-out" periods, subject to certain parameters as to price and number of shares.
On May 22, 2018, the Company received approval from the Toronto Stock Exchange to proceed with a normal course issuer bid ("2018
NCIB"). Under the 2018 NCIB, the Company was authorized to purchase up to 1,500,000 common shares. The 2018 NCIB commenced
on May 24, 2018 and ended on May 23, 2019. In fiscal 2018, the Company purchased 736,900 common shares having a book value
of $706 for a total cash consideration of $3,963. The excess of the purchase price over the book value of the shares in the amount of
$3,257 was charged to deficit. All shares purchased were cancelled.
In fiscal 2018, a total of $10 of the Fifth series debentures was converted by holders of the securities for a total of 1,388 common
shares. This conversion is a non-cash transaction and therefore not reflected in the audited consolidated financial statement of cash
flow. See Note 23, Convertible unsecured subordinated debentures.
As of September 28, 2019, a total of 104,885,464 common shares (September 29, 2018- 105,008,070) were outstanding.
The Company declared a quarterly dividend of $0.09 per share for fiscal years 2019 and 2018. The following dividends were declared
by the Company:
Dividends
Contributed surplus:
For the fiscal years ended
September 28,
2019
September 29,
2018
$
37,793
$
37,971
The contributed surplus account is used to record amounts arising on the issue of equity-settled share-based payment awards (see
Note 25, Share-based compensation).
Capital management:
The Company's objectives when managing capital are:
–
To ensure proper capital investment is done in the manufacturing infrastructure to provide stability and competitiveness of the
operations;
–
To have stability in the dividends paid to shareholders;
–
To have appropriate cash reserves on hand to protect the level of dividends made to shareholders;
–
To maintain an appropriate debt level so that there is no financial constraint on the use of capital;
–
To have an appropriate line of credit, and;
–
To repurchase shares or convertible debentures when trading values do not reflect fair values.
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
116
24. SHARE CAPITAL AND OTHER COMPONENTS OF EQUITY (CONTINUED)
Capital management (continued):
The Company typically invests in its operations approximately $20.0 million yearly in capital expenditures. On an exceptional basis, the
Company may invest more than $20.0 million when special capital requirements arise. Management believes that these investments,
combined with approximately $30.0 to $35.0 million spent on average annually on maintenance expenses, allow for the stability of the
manufacturing operations and improve its cost competitiveness through new technology or process procedures.
The Board of Directors aims to ensure proper cash reserves are in place to maintain the current dividend level. Dividends to share-
holders will only be raised after the Directors have carefully assessed a variety of factors that include the overall competitive landscape,
volume and selling margin sustainability, the operating performance and capital requirements of the manufacturing plants and the
sustainability of any increase.
The Company has a $265.0 million revolving credit facility. The Company estimates to use between $100.0 million and $180.0 million
of its revolving credit facility to finance its normal operations during the year.
The Company monitors, on a quarterly basis, the ratio of total debt to earnings before interest, income taxes, depreciation and amorti-
zation, adjusted for the impact of all derivative financial instruments ("adjusted EBITDA") of the operating company. Through required
lenders’ covenants, the debt ratio must be kept below 4:1 in order not to have restrictions on interest payments from Lantic to the
Company up to a year after an acquisition and below 3.5:1 thereafter. At year-end, the operating company’s debt ratio was 1.96:1 for
fiscal 2019 and 1.58:1 for fiscal 2018.
Having satisfied the above factors, if cash is available, it will be used to repurchase the Company’s shares and convertible debentures
when the Board of Directors considers that the current trading range does not reflect the fair trading value of the Company’s shares.
As such, the Company puts in place a NCIB from time to time.
The Company does not use equity ratios to manage its capital requirements.
25. SHARE-BASED COMPENSATION
(a) Equity-settled share-based compensation:
The Company has reserved and set aside for issuance an aggregate of 4,000,000 common shares (September 29, 2018 - 4,000,000
common shares) at a price equal to the average market price of transactions during the last five trading days prior to the grant
date. Options are exercisable to a maximum of 20% of the optioned shares per year, starting after the first anniversary date of
the granting of the options and will expire after a term of ten years. Upon termination, resignation, retirement, death or long-term
disability, all share options granted under the Share Option Plan not vested shall be forfeited.
On December 3, 2018, a total of 447,175 share options were granted at a price of $5.58 per common share to certain executives.
On December 4, 2017, a total of 1,065,322 share options were granted at a price of $6.23 per common share to certain executives
and senior managers. During fiscal 2018, a total of 60,000 share options were forfeited following the departure of a senior
manager.
Compensation expense is amortized over the vesting period of the corresponding optioned shares and is expensed in the
administration and selling expenses with an offsetting credit to contributed surplus. An expense of $190 was incurred for the fiscal
year ended September 28, 2019 (September 29, 2018 - $189).
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
25. SHARE-BASED COMPENSATION (CONTINUED)
(a) Equity-settled share-based compensation (continued):
The following table summarizes information about the Share Option Plan as of September 28, 2019:
117
Exercise
price
per
option
Outstanding
number of
options at
September 29,
2018
Options
granted
during
the
period
Options
forfeited
during
the
period
$4.59
$5.58
$5.61
$6.23
$6.51
830,000
—
—
447,175
80,000
1,005,322
360,000
—
—
—
2,275,322
447,175
—
—
—
—
—
—
exercised
during
Options Outstanding
number of
options at
the September 28,
2019
period
—
—
—
—
—
—
830,000
447,175
80,000
1,005,322
360,000
2,722,497
Weighted
average
remaining
life
(in years)
5.65
9.18
2.48
8.18
7.19
Number of
options
exercisable
660,000
—
80,000
201,064
144,000
n/a
1,085,064
The following table summarizes information about the Share Option Plan as of September 29, 2018:
Exercise
price
per option
$4.59
$5.61
$6.23
$6.51
Outstanding
number of
options at
September 30,
2017
830,000
80,000
Options
granted
during
the period
—
—
Options
forfeited
during
the period
Outstanding
number of
options at
September 29,
2018
—
—
830,000
80,000
—
1,065,322
(60,000)
1,005,322
360,000
—
—
360,000
1,270,000
1,065,322
(60,000)
2,275,322
Weighted
average
remaining
life
6.65
3.45
9.35
8.17
n/a
Number of
options
exercisable
490,000
80,000
—
72,000
642,000
Options outstanding held by key management personnel amounted to 2,102,497 options as at September 28, 2019 and 1,655,322
options as at September 29, 2018 (see Note 31, Key management personnel).
The measurement date fair values were measured based on the Black-Scholes option pricing model. Expected volatility is
estimated by considering historic average share price volatility. The inputs used in the measurement of the fair values of the share-
based payment plans granted in the first quarter of fiscal 2019 are the following:
Total fair value of options at grant date
Share price at grant date
Exercise price
Expected volatility (weighted average volatility)
Option life (expected weighted average life)
Expected dividends
$141
$5.75
$5.58
15.688% to 17.166%
4 to 6 years
6.26%
Weighted average risk-free interest rate (based on government bonds)
1.842% to 1.853%
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
118
25. SHARE-BASED COMPENSATION (CONTINUED)
(b) Cash-settled share-based compensation:
i)
Share Appreciation Rights (“SAR”):
In fiscal 2017, a SAR plan was created under the existing Share Option Plan that entitle the grantee to a cash payment based
on the increase in the share price of the Company’s common shares from the grant date to the settlement date. On December
5, 2017, a total of 125,000 SARs were granted at a price of $6.51 to an executive.
Compensation expense is amortized over the vesting period of the corresponding optioned shares and is expensed in the
administration and selling expenses with an offsetting debit / credit to liability. A gain on fair value change of $2 was recorded
for the fiscal year ended September 28, 2019 (September 29, 2018 – a gain of $5). The liabilities arising from the SARs as at
September 28, 2019 were $8 (September 29, 2018 - $10).
The following table summarizes information about the SARs as of September 28, 2019:
Outstanding
number of
SARs at
September 29,
2018
Share price
per unit
SARs
granted
during
the period
SARs
exercised
during
the period
SARs
forfeited
during
the period
Outstanding
number of
SARs at
September 28,
2019
Number
of SARs
exercisable
$6.51
125,000
—
—
—
125,000
50,000
The following table summarizes information about the Share Option Plan as of September 29, 2018:
Outstanding
number of
SARs at
September 30,
2017
Share price
per unit
SARs
granted
during
the period
SARs
exercised
during
the period
SARs
forfeited
during
the period
Outstanding
number of
SARs at
September 29,
2018
Number
of SARs
exercisable
$6.51
125,000
—
—
—
125,000
25,000
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
119
25. SHARE-BASED COMPENSATION (CONTINUED)
(b) Cash-settled share-based compensation (continued):
i)
Share Appreciation Rights (“SAR”) (continued):
The fair values at the measurement date were measured based on the Black-Scholes option pricing model. Expected volatility
is estimated by considering historic average share price volatility. The inputs used in the measurement of the fair values of the
SARs granted are the following:
SARs granted December 5, 2016
Total fair value of options
Share price
Exercise price
Grant date
Measurement date as at
September 28, 2019
$53
$6.63
$6.51
$9
$5.34
$6.51
Expected volatility (weighted average volatility)
16.520% to 18.670%
15.128% to 16.823%
Option life (expected weighted average life)
Expected dividends
Weighted average risk-free interest rate (based on
government bonds)
2 to 6 years
5.43%
6 to 10 years
6.74%
0.740% to 1.160%
1.367% to 1.391%
The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the SARs is
indicative of future trends, which may not necessarily be the actual outcome.
ii) Performance Share Units (“PSU”):
Fiscal 2018 grant:
In fiscal 2018, a PSU plan was created. On December 4, 2017, an aggregate of 224,761 PSUs having been granted by the
Company at a share price of $6.31. In addition, an aggregate of 15,274 PSUs (September 29, 2018 - 10,291 PSUs) at a
weighted-average share price of $5.68 (September 29, 2018 $6.01) were allocated as a result of the dividend paid during
the last four quarters, as the participants also receive dividend equivalents paid in the form of PSU’s. As at September 28,
2019, an aggregate of 250,326 PSUs are outstanding.
These PSUs will vest at the end of the 2018-2020 Performance Cycle based on the achievement of total shareholder returns
set by the Human Resources and Compensation Committee ("HRCC") and the Board of Directors of the Company. Following
the end of a Performance Cycle, the Board of Directors of the Company will determine, and to the extent only that the
Vesting Conditions include financial conditions, concurrently with the release of the Company’s financial and/or operational
results for the fiscal year ended at the end of the Performance Cycle, whether the Vesting Conditions for the PSUs granted
to a participant relating to such Performance Cycle have been achieved. Depending on the achievement of the Vesting
Conditions, between 0% and 200% of the PSUs will become vested.
The Board of Directors of the Company has the discretion to determine that all or a portion of the PSUs granted to a
participant for which the Vesting Conditions have not been achieved shall vest to such participant.
The value to be paid-out to each participant will be equal to the result of: the number of PSUs granted to the participant
which have vested, multiplied by the volume weighted average closing price of the Common Shares on the Toronto Stock
Exchange (the "TSX") for the five trading days immediately preceding the day on which the Company shall pay the value to
the participant under the PSU Plan, and such date will in no event occur after December 31 of the third calendar year
following the calendar year in which the PSUs are granted.
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
120
25. SHARE-BASED COMPENSATION (CONTINUED)
(b) Cash-settled share-based compensation (continued):
ii) Performance Share Units (“PSU”) (continued):
Fiscal 2018 grant (continued):
The fair value as at September 28, 2019 was nil (September 29, 2018 - nil). An expense of nil was recorded for the period
ending September 28, 2019 (September 29, 2018 - nil) in administration and selling expenses. The liabilities arising from the
PSUs as at September 28, 2019 were nil (September 29, 2018 - nil).
Fiscal 2019 grant:
On December 3, 2018, an aggregate of 290,448 PSUs was granted by the Company at a share price of $5.60. In addition, an
aggregate of 13,858 at a weighted-average share price of $5.76 were allocated as a result of the dividend paid during
the year, as the participants also receive dividend equivalents paid in the form of PSU’s. As at September 28, 2019, an
aggregate of 304,306 PSUs are outstanding.
These PSUs will vest at the end of the 2019-2021 Performance Cycle based on the achievement of total shareholder returns
set by the Human Resources and Compensation Committee ("HRCC") and the Board of Directors of the Company. Following
the end of a Performance Cycle, the Board of Directors of the Company will determine, and to the extent only that the
Vesting Conditions include financial conditions, concurrently with the release of the Company’s financial and/or operational
results for the fiscal year ended at the end of the Performance Cycle, whether the Vesting Conditions for the PSUs granted
to a participant relating to such Performance Cycle have been achieved. Depending on the achievement of the Vesting
Conditions, between 0% and 200% of the PSUs will become vested.
The Board of Directors of the Company has the discretion to determine that all or a portion of the PSUs granted to a
participant for which the Vesting Conditions have not been achieved shall vest to such participant.
The value to be paid-out to each participant will be equal to the result of: the number of PSUs granted to the participant
which have vested, multiplied by the volume weighted average closing price of the Common Shares on the Toronto Stock
Exchange (the "TSX") for the five trading days immediately preceding the day on which the Company shall pay the value to
the participant under the PSU Plan, and such date will in no event occur after December 31 of the third calendar year
following the calendar year in which the PSUs are granted.
The fair values were established using the Monte Carlo model. The fair value as at grant date was $308 and $35 as at
September 28, 2019. An expense of $7 was recorded for the period ending September 28, 2019 in administration and selling
expenses. The liabilities arising from the PSUs as at September 28, 2019 were $7.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
121
26. OPERATING LEASES
The Company has financial commitments for minimum lease payments under operating leases for various mobile equipment and the
premises for the sugar and maple product segments. Non-cancellable operating lease rentals are payable as follows:
Less than 1 year
Between 1 and 5 years
More than 5 years
September 28, 2019
September 29, 2018
$
3,439
9,378
8,113
20,930
$
2,581
5,128
956
8,665
For the fiscal year ended September 28, 2019, an amount of $5.4 million was recognized as an expense in net (loss) earnings with
respect to operating leases (September 29, 2018 - $3.9 million).
27. COMMITMENTS
During fiscal 2019, TMTC entered into an agreement to lease a new premise in Granby for a total committed value of approximately
$9.4 million over a fifteen year period. The lease will start on November 1, 2019.
As at September 28, 2019, the Company had commitments to purchase a total of 1,057,000 metric tonnes of raw cane sugar (September
29, 2018 - 1,337,000), of which 283,162 metric tonnes had been priced (September 29, 2018 - 316,128), for a total dollar commitment
of $113.9 million (September 29, 2018 - $120.8 million). In addition, the Company has a commitment of approximately $25.0 million
(September 29, 2018 - $43.5 million) for sugar beets to be harvested and processed in fiscal 2019.
TMTC has $8.8 million (September 29, 2018 - $18.9 million) remaining to pay related to an agreement to purchase approximately $13.9
million (4.3 million pounds) (September 29, 2018 - $38.2 million; 12.8 million pounds) of maple syrup from the PPAQ. In order to secure
bulk syrup purchases, the Company issued letters of guarantee for a total amount of $17.3 million in favor of the PPAQ (September 29,
2018 - $16.0 million). The letters of guarantee expire on March 31, 2020.
During the fiscal year ended September 28, 2019, the Company entered into capital commitments to complete its capital projects for
a total value of $19.0 million (September 29, 2018 - $19.6 million).
28. CONTINGENCIES
The Company is subject to laws and regulations concerning the environment and to the risk of environmental liability inherent to its
activities relating to its past and present operations.
The Company, in the normal course of business, becomes involved from time to time in litigation and claims. While the final outcome
with respect to claims and legal proceedings pending as at September 28, 2019 cannot be predicted with certainty, management
believes that no provision was required and that the financial impact, if any, from claims related to normal business activities will not be
material.
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
122
29. (LOSS) EARNINGS PER SHARE
Reconciliation between basic and diluted (loss) earnings per share is as follows:
Basic (loss) earnings per share:
Net (loss) earnings
For the fiscal years ended
September 28,
2019
September 29,
2018
$
$
(8,167)
48,729
Weighted average number of shares outstanding
104,997,204
105,600,860
Basic (loss) earnings per share
(0.08)
0.46
Diluted (loss) earnings per share:
Net (loss) earnings
Plus impact of convertible unsecured subordinated debentures and share options
(8,167)
—
(8,167)
48,729
5,694
54,423
Weighted average number of shares outstanding:
Basic weighted average number of shares outstanding
104,997,204
105,600,860
Plus impact of convertible unsecured subordinated debentures and share options
—
22,173,123
104,997,204
127,773,983
Diluted (loss) earnings per share
(0.08)
0.43
As at September 28, 2019, the share options, the Sixth series debentures, representing 6,961,259 common shares and the Seventh
series debentures, representing 11,045,198 common shares, were excluded from the calculation of diluted loss per share as they were
deemed anti-dilutive. As at September 29, 2018, the 87,731 share options were excluded from the calculation of diluted earnings per
share as they were deemed anti-dilutive.
30. SUPPLEMENTARY CASH FLOW INFORMATION
Non-cash transactions:
Additions of property, plant and equipment and intangible assets
included in trade and other payables
294
1,041
247
September 28,
2019
September 29,
2018
September 30,
2017
$
$
$
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
31. KEY MANAGEMENT PERSONNEL
The Board of Directors as well as the executive team, which include the President and all the Vice-Presidents, are deemed to be key
management personnel of the Company. The following is the compensation expense for key management personnel:
123
Salaries and short-term benefits
Attendance fees for members of the Board of Directors
Post-employment benefits
Share-based compensation (note 25)
32. PERSONNEL EXPENSES
Wages, salaries and employee benefits
Expenses related to defined benefit plans (1) (note 22)
Expenses related to defined contributions plans
Share-based compensation (note 25)
For the fiscal years ended
September 28,
2019
September 29,
2018
$
2,281
883
111
195
3,470
$
2,763
907
120
184
3,974
For the fiscal years ended
September 28,
2019
September 29,
2018
$
86,806
4,021
4,815
195
95,837
$
83,688
2,851
4,552
184
91,275
(1) On October 16, 2017, the Alberta Treasury Board and Finance approved an amendment to the Alberta Hourly Plan which led to the elimination of the reserve
for future supplements, and investment earnings accumulated thereon, effective January 1, 2017. As a result, during fiscal 2018, a $1.5 million pension income
was recorded.
The personnel expenses were charged to the consolidated statements of (loss) earnings and comprehensive (loss) income or
capitalized in the consolidated statements of financial position as follows:
Cost of sales
Administration and selling expenses
Distribution expenses
Property, plant and equipment
For the fiscal years ended
September 28,
2019
September 29,
2018
$
78,972
14,928
1,582
95,482
355
95,837
$
72,173
17,234
1,434
90,841
434
91,275
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
124
33. RELATED PARTIES
Lantic has outstanding redeemable Class B special shares of $44.5 million that are retractable and can be settled at Lantic’s option by
delivery of a note receivable from Belkorp Industries Inc., having the same value. The note receivable bears no interest and has no fixed
terms of repayment. The Class B special shares are entitled to vote, but on a pro rata basis at a meeting of shareholders of Lantic. Under
the terms of a voting trust agreement between Belkorp Industries Inc. and Rogers, Rogers is entitled to vote the Class B special shares
so long as they remain outstanding. Due to the fact that Lantic has the intent and the legal right to settle the note receivable with the
redeemable Class B special shares, these amounts have been offset and, therefore, are not presented on the consolidated statements
of financial position.
Belkorp Industries Inc. also controls, through Lantic Capital, the two Lantic Class C shares issued and outstanding. The Class C shares
entitle Lantic Capital to elect five of the seven directors of Lantic, but have no other voting rights at any meetings of shareholders of
Lantic, except as may be required by law.
34. SEGMENTED INFORMATION
The Company has two operating and reportable segments, sugar and maple products. The principal business activity of the sugar
segment is the refining, packaging and marketing of sugar products. The Maple products segment processes pure maple syrup
and related maple products. The reportable segments are managed independently as they require different technology and capital
resources. Performance is measured based on the segments’ gross margins and results from operating activities. These measures are
included in the internal management reports that are reviewed by the Company’s President and CEO, and management believes that
such information is the most relevant in the evaluation of the results of the segments.
Transactions between reportable segments are interest receivable (payable), which are eliminated upon consolidation.
Revenues
Cost of sales
Gross margin
Depreciation and amortization
Results from operating activities
Additions to property, plant and equipment
and intangible assets, net of disposals
Total assets
Total liabilities
For the fiscal year ended September 28, 2019
Sugar
$
595,878
495,577
100,301
15,449
66,868
Maple
products
$
198,414
176,140
22,274
3,772
(41,392)
Corporate and
eliminations
$
—
—
—
—
(1,329)
Total
$
794,292
671,717
122,575
19,221
24,147
22,647
4,468
—
27,115
For the fiscal year ended September 28, 2019
Sugar
$
768,949
(934,300)
Maple
products
$
231,659
(241,665)
Corporate and
eliminations
$
(165,580)
626,369
Total
$
835,028
(549,596)
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
125
34. SEGMENTED INFORMATION (CONTINUED)
Revenues
Cost of sales
Gross margin
Depreciation and amortization
Results from operating activities
Additions to property, plant and equipment
and intangible assets, net of disposals
Total assets
Total liabilities
For the fiscal year ended September 29, 2018
Sugar
$
601,958
499,380
102,578
13,495
72,102
Maple
products
$
203,243
174,968
28,275
4,979
13,352
Corporate and
eliminations
$
—
—
—
—
(1,354)
Total
$
805,201
674,348
130,853
18,474
84,100
23,352
1,792
—
25,144
For the fiscal year ended September 29, 2018
Sugar
$
742,993
(899,026)
Maple
products
$
292,232
(248,871)
Corporate and
eliminations
$
(165,016)
627,333
Total
$
870,209
(520,564)
Revenues were derived from customers in the following geographic areas:
Canada
United States
Europe
Other
For the fiscal years ended
September 28,
2019
September 29,
2018
$
611,633
109,655
34,633
38,371
794,292
$
613,213
72,442
40,200
79,346
805,201
(In thousands of dollars except as noted and per share amounts)2019 Annual ReportNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
126
ROGERS SUGAR INC.
Corporate Information
DIRECTORS
M. Dallas H. Ross, (1) (3)
Chairman and CEO
Kinetic Capital Limited Partnership
Dean Bergmame, (2) (3)
Director
William S. Maslechko, (3)
Partner
Burnet, Duckworth & Palmer LLP
Daniel Lafrance, (1) (2)
Director
Gary Collins, (2)
Senior Advisor
Lazard Group
Stephanie Wilkes,
Director
(1) Nominees to Board of Directors of Lantic Inc.
(2) Audit Committee Members
(3) Nominating and Governance Committee Members
LEGAL COUNSEL
Davies, Ward, Phillips & Vineberg
Montreal, Quebec
TRADING SYMBOL
RSI
STOCK EXCHANGE LISTING
The Toronto Stock Exchange
ANNUAL MEETING
The annual meeting of Shareholders
to be held at 1:00 PM (Pacific Time)
February 11, 2020 at the
Vancouver Marriott Pinnacle Downtown
1128 West Hastings St.
Vancouver, British Columbia
V6E 4R5
Tel: (604) 684-1128
ADMINISTRATIVE OFFICE
4026 Notre-Dame Street East
Montreal, Quebec
H1W 2K3
Tel: (514) 527-8686
Fax: (514) 527-8406
REGISTRAR & TRANSFER AGENT
Computershare Investor Services Inc.
Toronto, Ontario
AUDITORS
KPMG LLP
Montreal, Quebec
INVESTOR RELATIONS
Manon Lacroix
Toll-free: 844 913-4350
Tel (local): 514 940-4350
Email: investors@lantic.ca
WEBSITE
lanticrogers.com
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MAPLE FACILITIES
1037 boul. Industriel,
Granby, Québec
J2J 2B8
Tel: 450 777-4464
331 rue Principale,
Saint-Honoré-de-Shenley, Québec
G0M 1V0
Tel: 418 485-7777
21 rue Industrielle,
Dégelis, Québec
G5T 2J8
Tel: 418 853-6265
PO Box 58, Websterville
Vermont, 05678, USA
Tel: 802 479-1747
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MaisonBrison Communications
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OPERATING COMPANIES
Corporate Information — Management
DIRECTORS
M. Dallas H. Ross, (1)
Chairman & CEO
Kinetic Capital Limited Partnership
AUDITORS
KPMG LLP
Montreal, Quebec
MANAGEMENT OFFICE
4026 Notre-Dame Street East
Montreal, Quebec
H1W 2K3
Tel: 514 527-8686
SUGAR FACILITIES
123 Rogers Street,
Vancouver, British Columbia
V6B 3N2
Tel: 604 253-1131
5405 – 64th Street
Taber, Alberta
T1G 2C4
Tel: 403 223-3535
230 Midwest Road
Scarborough, Ontario
M1P 3A9
Tel: 416 757-8787
198 New Toronto Street
Toronto, Ontario
M8V 2E8
Tel: 416 252-9435
4026 Notre-Dame Street East
Montreal, Quebec
H1W 2K3
Tel: 514 527-8686
Gary Collins, (2)
Senior Advisor
Lazard Group
Michael Heskin, (2)
Vice President Finance and CFO
Belkorp Industries Inc.
Donald G. Jewell,
Managing Partner
RIO Industrial
Daniel Lafrance, (1) (2)
Director
John Holliday,
President and Chief Executive Officer
Lantic Inc.
(1) Rogers Sugar Inc. Nominees
(2) Audit Committee Members
OFFICERS
John Holliday,
President and Chief Executive Officer
Patrick Dionne,
Vice President, Operations and
Supply Chain
Diana R. Discepola,
Director of Finance
Jean-François Khalil,
Vice President,
Human Resources
Manon Lacroix,
Vice President Finance,
Chief Financial Officer
and Secretary
Vanessa Musuele,
Director, Corporate Accounting
and Controls
Michael Walton,
Vice President, Sales and Marketing
LANTICROGERS.COM
THEMAPLETREAT.COM
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