Since 1888
2020 annual report
Our goal is to offer the best
quality sugars and sweeteners
to satisfy our customers.
ROGERS holds all of the common
LANTIC also owns all of the common
shares of Lantic Inc., which operates
shares of The Maple Treat Corporation
cane sugar refineries in Montreal,
(“TMTC”). TMTC operates plants in
Québec and Vancouver, British
Granby, Dégelis and in St-Honoré-de-
Columbia, as well as the only Canadian
Shenley, Québec and in Websterville,
sugar beet processing facility in Taber,
Vermont. TMTC’s products include
Alberta. Lantic / Rogers’ products
maple syrup and derived maple
include granulated (regular and
syrup products and are sold under
organic), brown, icing, liquid, cubed
various brand names, such as TMTC,
sugars and specialty syrups, as well as
Uncle Luke’s, Decacer and Highland
stevia, agave, organic coconut sugar,
SugarWorks.
Plantation Raw™ sugar, maple sugar
and flakes and other dry blends.
Photo: Sugar cane field
Dividend Tables 01
CONTINUED AND CONSISTENT DIVIDEND PERFORMANCE
Dividend (thousand of $)
DEC
Photo: Maple syrup field
MAR
JUN
SEP
TOTAL
Fiscal 2020
Fiscal 2019
9,440
9,451
9,423
9,451
9,320
9,451
9,318
9,440
37,501
37,793
Per Share Dividend ($)
Photo: Sugar beet crop
DEC
MAR
JUN
SEP
TOTAL
Fiscal 2020
Fiscal 2019
0.09
0.09
0.09
0.09
0.09
0.09
0.09
0.09
0.36
0.36
02 New Maple Facility in Granby
NEW STATE-OF-THE-ART FACILITY PROVIDES POTENTIAL
TO DOUBLE CAPACITY
The Maple Treat Corporation is the largest bottler of maple syrup in the
world. Our distribution capacity is supported by four production facilities
and warehouses in Canada and the U.S. The move to a new 100,000
square feet facility in Granby at the end of January 2020 completed the
modernization of its manufacturing platform.
+100 EMPLOYEES*
+$6M INVESTMENT
100,000 SQUARE FEET
* Granby facility only.
New Maple Facility in Granby 03
COMPLETION OF THE MANUFACTURING FOOTPRINT OPTIMIZATION
The new facility has a fully automated, high-efficiency plastic bottling line and two glass bottling lines.
Since entering the maple syrup market in 2017, the plan was to optimize the manufacturing footprint
and improve operational efficiencies to become a true world-class player.
An unmatched
range of products all
under one company
including maple
syrup, maple cookies,
candies, spread,
teas and coffee,
flakes and granules.
04 Message from the Chairman
For the year, we delivered over
760,000 metric tonnes of sugar,
including a record breaking fourth
quarter of 225,000 metric tonnes.
To my fellow shareholders:
Fiscal 2020 brought many unusual challenges to the business, including the loss of 50%
of the sugar beet crop in Alberta in Q1, unforeseen logistics problems with the Canadian
rail system and the Port of Montreal, as well as the volatility created by the COVID-19
pandemic. Despite all those events, I am happy to report that our adjusted EBITDA for the
year at $92.3 million was $4.5 million higher than in 2019 and that our free cash flow for
2020 improved by $9.2 million, amounting to $40.0 million.
These favourable results were mainly related to the performance of the Sugar business
segment. For the year, we delivered over 760,000 metric tonnes of sugar, including a record
breaking fourth quarter of 225,000 metric tonnes. This overall annual increase of 2.5% from
last year is impressive when considering the material crop loss issues, we faced in Taber last
fall and the added costs and disruptions in the business due to COVID-19. The incremental
production needed to offset the shortfall of the Taber crop was delivered with increased
production volumes from our Montreal and Vancouver facilities. Our plants were also able
to adapt to the operational challenges and the customer demand volatility created by the
COVID-19 pandemic.
The Maple business had record breaking sales attributable to market growth and COVID-19
driven demand but did not deliver the expected EBITDA results for 2020 due to the
competitive market conditions prevailing early in the year, along with operational challenges
encountered in the facilities optimization project. However, there have been encouraging
Dallas H. Ross
Chairman
Message from the Chairman 05
improvements in the fourth quarter as margins are steadily improving due to a better
Despite all those events,
marketing focus and better operational efficiencies. With over 30% of the world distribution
I am happy to report that
capacity, we have a market leading position and with improved customer service and cost
our adjusted EBITDA for
improvements underway, we believe we can generate material improvements in EBITDA and
the year at $92.3 million
value for shareholders over the next few years in the Maple business.
Net earnings for 2020 amounted to $35.4 million or $0.34 per share. The Board and
Management believe the combined business segments made measurable progress under
was $4.5 million higher
than in 2019 and that our
free cash flow for 2020
improved by $9.2 million,
the difficult circumstances. As we look forward to 2021, we expect to continue to grow our
amounting to $40.0 million.
business as we move past the unusual challenges we faced in the current year. We anticipate
the overall market demand for Sugar and Maple products to steadily increase in the future.
We believe we are well positioned, financially and operationally, to take advantage of these
favourable market conditions.
We will again pay the quarterly dividend of $0.09 per share for a total amount of
$37.4 million in 2020, continuing our track record of stable, reliable dividends for
shareholders.
I would like to highlight the hard work and dedication of our employees throughout the
year. As our business was deemed an essential service amid the COVID-19 pandemic, our
employees quickly adapted to deliver our quality products to our valued customers.
Finally, I would like to conclude by thanking our shareholders for the support you have
accorded to us.
On behalf of the Board of Directors,
Dallas H. Ross
Chairman
November 25, 2020
06 Report from the President and CEO
John Holliday
President and
Chief Executive Officer
Notwithstanding the
Taber crop and the
overall COVID-19
business challenges,
fiscal 2020 delivered
well above expected
sales volume in both
our Sugar and Maple
segments.
There are very few business cycles that will match Fiscal 2020
for its unforeseen challenges. A sugar beet crop loss that
created a 62,000 metric tonnes shortfall in our manufacturing
platform, a global pandemic that disrupted everything we do,
coupled with several supply chain rail stoppages or blockades
and a port strike that further challenged our operating plans.
From all this chaos came a huge sense of purpose and pride in
the essential services we provide to critical food supply chains.
Equally as satisfying as the response to COVID-19 related
customer demand was the organization’s commitment to do
its best to ensure the health and safety of its employees. Our
response to these events strengthened our organization and
allowed us to absorb some uncontrollable costs to deliver a 5%
improvement in EBITDA results.
Report from the President and CEO 07
Notwithstanding the Taber crop and the overall COVID-19 business challenges, fiscal 2020
From all this chaos came a
delivered well above expected sales volume in both our Sugar and Maple segments. Sugar
huge sense of purpose and
continued to benefit from the conversion of high fructose corn syrup to liquid sucrose and
pride in the essential services
organic growth in this segment. We also enjoyed growth in U.S. exports resulting from new
we provide to critical food
import quotas and special U.S. refined T.R.Q.’s. Our retail segment saw unprecedented
supply chains. Equally as
volume during the peak of COVID-19 due to consumer pantry loading. Our global Maple
satisfying as the response
sales volume increased 25.5% versus the prior year, as consumers turned to comfort foods
to COVID-19 related
and natural ingredients during and post lockdowns. These results continue to affirm our
customer demand was the
belief that the natural sweetener platform will continue to experience growth.
organization’s commitment
to do its best to ensure
As we are reviewing closely our Sugar segment, we are happy to report that we continue
the health and safety of its
to invest in our production assets to improve efficiency, increase reliability and meet
employees.
stringent regulatory standards. The benefit of improved equipment reliability was fully
tested this year where our refinery operations were called upon to make up for the
unusual circumstances that resulted in the loss of almost 50% of sugar beet crop. In fact,
our manufacturing platform proved able to make up for the 62,000 metric tonnes Taber
capacity loss and deliver an additional 19,000 metric tonnes over prior year sales. With the
perspective that we will continue to see moderate organic growth and in addition, benefit
from additional CUSMA quotas, our plans to reinvestment in our facilities will continue to
be an important priority.
In concluding with our Sugar business segment, I would like to highlight the recent
announcement we have made related to the addition of a natural sugar reduction solution
to our product portfolio. In October 2021 we announced the launch of a unique natural
sugar reduction solution that will deliver a cane sugar-based product into the evolving sugar
reduction market. Although this is a small segment of the sweetener market, we believe our
solution showcases our innovative spirit and preparedness to provide a competitive solution
in this niche market.
Moving to our Maple business segment, it is worth mentioning the completion of the
modernization of our Canadian manufacturing platform. This was accomplished in the midst
of higher than expected market growth and throughout a very challenging labour market.
Despite this, and with the additional complications of COVID-19, operations were capable
of increasing production by over 20%. We were also encouraged by the results of this
sector in the later part of 2020 as we saw evidence of meaningful progress with improved
margins delivered through operational efficiencies and evidence of a more stable and
improving competitive environment.
08 Report from the President and CEO
As mentioned previously, fiscal 2020 provided for exceptionally challenging conditions.
The results we achieved were below our initial projections but exceeded our revised
Our global Maple sales
volume increased 25.5%
expectations following the reduced crop in Taber and the volatile environment resulting from
versus the prior year,
COVID-19. Facing these circumstances, we delivered strong financial results and executed
as consumers turned to
on some very important operations and business milestones. We remain very positive about
comfort foods and natural
the future of both of our business segments and look forward to continuing to deliver on our
ingredients during and
business strategy in 2021.
post lockdowns.
In closing, I would like to recognize our employees’ exceptionally hard work, perseverance,
teamwork and pride in the essential services they provide to our customer food supply
chains. I want to take this opportunity to thank our valued employees for all their efforts and
support this past year and for their ongoing commitment to ensure we continue to deliver
our business strategy.
John Holliday
President and Chief Executive Officer
November 25, 2020
9
Management’s
Discussion and Analysis
Consolidated
Financial Statements
FOR THE FISCAL YEARS ENDED
SEPTEMBER 28, 2020 AND SEPTEMBER 29, 2019
2020 Annual ReportManagement’s Discussion & Analysis 10
T his Management’s Discussion and Analysis (“MD&A”) of
consolidated financial statements for the fiscal years
Rogers Sugar Inc.’s (“Rogers” or the “Company”) audited
ended October 3, 2020 and September 28, 2019 should be read
the World Health Organization. COVID-19 has negatively impacted
the global economy, disrupted financial markets and supply chain,
significantly restricted business travel and interrupted business
activity.
in conjunction with the audited consolidated financial statements
and related notes for the years ended October 3, 2020 and
Our business is considered an essential service by the government
September 28, 2019. The Company’s MD&A and consolidated
and as such, the Company’s plants have continued to operate at
financial statements are prepared using a fiscal year which typically
usual capacity. The Company has established extensive protection
consists of 52 weeks however, every five years, a fiscal year consists
measures and protocols to ensure the health and safety of its
of 53 weeks. The fiscal years ended October 3, 2020 consists of
employees. COVID-19 could have a material effect on our business
53 weeks and the fiscal years ended September 28, 2019 and
as it relates to customer demand, supply and delivery chain,
September 29, 2018 both consist of 52 weeks. The fourth quarter
operations, financial market volatility, pension and benefits liabilities
of fiscal year 2020 consists of 14 weeks and the fourth quarter of
and other economic fundamentals. For the fourth quarter and
fiscal years 2019 and 2018 both consist of 13 weeks.
the year, the Company incurred unforeseen expenses amounting
to $3.4 million in relation to COVID-19. These costs were largely
All financial information contained in this MD&A and audited
due to increased health and safety measures and premium pay for
consolidated financial statements are prepared in accordance with
employees.
International Financial Reporting Standards (“IFRS”). All amounts
are in Canadian dollars unless otherwise noted, and the term
The effect of COVID-19 on our business may continue for an
“dollar”, as well as the symbol “$”, designate Canadian dollars
extended period and the ultimate impact on the Company will
unless otherwise indicated.
depend on future developments that are uncertain and cannot
be predicted, including and without limitations, the duration and
Management is responsible for preparing the MD&A. Rogers’s
severity of the pandemic, the duration of the government support
audited consolidated financial statements and MD&A have been
measures, the effectiveness of the actions taken to contain and treat
approved by its Board of Directors upon the recommendation
the disease and the length of time it takes for normal economic and
of its Audit Committee prior to release. This MD&A is dated
operating conditions to resume.
November 25, 2020.
Additional information relating to Rogers, Lantic Inc. (“Lantic”)
FORWARD-LOOKING STATEMENTS
(Rogers and Lantic together referred as the “Sugar segment”),
The Maple Treat Corporation (“TMTC”) and Highland Sugarworks
This report contains Statements or information that are or may be
Inc. (“Highland”) (the latter two companies together referred to as
“forward-looking statements” or “forward-looking information”
“TMTC” or the “Maple segment”), including the annual information
within the meaning of applicable Canadian securities laws.
form, quarterly and annual reports, management proxy circular and
Forward-looking statements may
include, without
limitation,
various press releases is available on Rogers’s website at www.
statements and information which reflect the current expectations
LanticRogers.com or on the Canadian Securities Administrators’
of the Company with respect to future events and performance.
System for Electronic Document Analysis and Retrieval (“SEDAR”)
Wherever used, the words “may,” “will,” “should,” “anticipate,”
website at www.sedar.com. Information contained in or otherwise
“intend,” “assume,” “expect,” “plan,” “believe,” “estimate,”
accessible through our website does not form part of this MD&A
and similar expressions and the negative of such expressions,
and is not incorporated into the MD&A by reference. It should be
identify forward-looking statements. Although this is not an
noted that 9020-2292 Québec Inc. (“Decacer”) was amalgamated
exhaustive list, the Company cautions investors that statements
with TMTC as of September 29, 2019.
concerning the following subjects are, or are likely to be, forward-
UPDATE ON COVID-19
looking statements: future prices of raw sugar, natural gas costs,
the opening of special refined sugar quotas in the United States
(“U.S.”), beet production forecasts, growth of the maple syrup
industry, the status of labour contracts and negotiations, the level
In December 2019, a novel strain of coronavirus, known as
of future dividends and the status of government regulations and
COVID-19 was identified. As of March 20, 2020, COVID-19 had
investigations and the impact of the COVID-19 pandemic on the
spread to over 100 countries and been declared a pandemic by
Corporation and its operations. Forward-looking statements are
Rogers Sugar Inc.Management’s Discussion & Analysis 11
based on estimates and assumptions made by the Company in
health and safety components in its annual planning which are
light of its experience and perception of historical trends, current
reviewed weekly by senior management and quarterly by the Board
conditions and expected future developments, as well as other
of Directors.
factors that the Company believes are appropriate and reasonable
in the circumstances, including with respect to the continuity of its
operations despite the COVID-19 pandemic, but there can be no
SUGAR SEGMENT
assurance that such estimates and assumptions will prove to be
correct. Forward-looking statements involve known and unknown
Facilities
risks, uncertainties and other factors that may cause actual results
Lantic is the only sugar producer with operating facilities across
or events to differ materially from those anticipated in such forward-
Canada with cane refineries in Montréal and Vancouver and a
looking statements. Actual performance or results could differ
sugar beet factory in Taber, Alberta. Lantic also operates a custom
materially from those reflected in the forward-looking statements,
blending and packaging operation and a distribution center in
historical results or current expectations. Readers should also refer
Toronto, Ontario. The strategic location of these facilities confers
to the section “Risks and Uncertainties” at the end of this MD&A for
operating flexibility and the ability to service all customers across
additional information on risk factors and other events that are not
the country efficiently and on a timely basis.
within the Company’s control. These risks are also referred to in the
Company’s Annual Information Form in the “Risk Factors” section.
Our Products
All Lantic operations supply high quality white sugar as well as a
Although the Company believes that the expectations and
broad portfolio of specialty products which are differentiated by
assumptions on which forward-looking information is based are
colour, granulation, and raw material source.
reasonable under the current circumstances, readers are cautioned
not to rely unduly on this forward-looking information as no
Sales are focused in three specific market segments: industrial,
assurance can be given that it will prove to be correct. Forward-
consumer, and liquid products. The domestic market represents
looking information contained herein is made as at the date of this
more than 90% of the Company’s total volume.
MD&A and the Company does not undertake any obligation to
update or revise any forward-looking information, whether as a
In fiscal 2020, the domestic refined sugar market continued to show
result of events or circumstances occurring after the date hereof,
modest growth and increased by approximately 1.5% versus last
unless so required by law.
fiscal year.
ABOUT ROGERS SUGAR INC
The industrial granulated segment is the largest segment accounting
for approximately 60% of all shipments. The industrial segment is
comprised of a broad range of food processing companies that
Rogers is the largest refined sugar producer in Canada and the
serve both the Canadian and American markets.
largest maple syrup bottler in the world. Our aspiration is to become
a leading North American natural sweetener supplier by executing
In the consumer market segment, a wide variety of products are
on our three core strategies, namely, operational excellence, market
offered under the Lantic and Rogers brand names. This segment
access and acquisition. On August 5 and November 18, 2017, the
has remained fairly stable during the past several years although
Company made progress in its third strategy by acquiring TMTC
volume sold within this market in fiscal 2020 by Canadian refiners
and Decacer. As a result, the Company diversified and solidified
had an increase of approximately 21% year-over-year due to
its leadership position in this growing natural sweetener market.
a non-recurring increase in home cooking attributable to the
Rogers encompasses two reportable segments; the Sugar segment
COVID-19 pandemic.
and the Maple product segment.
The liquid market segment is comprised of core users whose
Rogers’ head office is in Vancouver, British Columbia and its
process or products require liquid sucrose and another customer
administrative office is located in Montréal, Québec.
group that can substitute liquid sucrose with high fructose corn
syrup (“HFCS”). The purchasing patterns of substitutable users are
Our 800 employees are key to our success and employee safety
largely influenced by the absolute price spread between HFCS and
is continuously at the forefront of our priorities. Each of the
liquid sugar. Increasingly, other considerations, such as ingredient
Company’s manufacturing operations incorporates occupational
labeling could also bear some influence on the purchasing decision.
2020 Annual ReportManagement’s Discussion & Analysis
12
The liquid segment grew modestly in the current fiscal year. It should
The price of refined sugar deliveries from the Montréal and
be noted that liquid and industrial customer segments have shown
Vancouver raw cane facilities is directly linked to the price of
volatility more recently due to the varying impact of the COVID-19
the #11 world raw sugar market traded on the Intercontinental
pandemic on their operations and overall customer demands.
Exchange (“ICE”). All sugar transactions are economically hedged,
thus eliminating the impact of volatility in world raw sugar prices.
Lantic’s Taber plant is the only beet sugar factory in Canada and
This applies to all refined sugar sales made by these plants. Liquid
is therefore the only producer of Canadian origin sugar. As such,
sales to HFCS substitutable customers are normally priced against
this plant is the sole participant in an annual Canadian-specific
competing HFCS prices and are historically the lowest margin sales
quota to the U.S. of 10,300 metric tonnes. As part of the recently
for the Company.
concluded Canada-United-States-Mexico Agreement (“CUSMA”),
an additional quota of 9,600 metric tonnes of Canadian origin
Whereas higher #11 world raw sugar values may have the effect of
sugar has been awarded to Canada. This agreement was ratified
reducing the competitiveness of the liquid business versus HFCS,
on July 1, 2020 and additional shipments are expected to begin
the opposite holds true for our beet operation. In Taber, the raw
in fiscal 2021.
material used to produce sugar is sugar beets, for which a fixed
price, plus a scaled incentive linked to higher raw sugar values,
By-products relating to beet processing and cane refining activities
is paid by Lantic to the Growers. As a result, Lantic benefits from,
are sold in the form of beet pulp, beet and cane molasses. Taber
or alternatively, absorbs some of the changes associated with
Beet pulp is sold domestically and to export customers for livestock
fluctuations in world raw sugar prices for all volume sold, excluding
feed. The production of these products is dependent on the volume
non-U.S. export volume.
of sugar processed through the Taber, Montréal and Vancouver
plants.
Our Supply
MAPLE PRODUCTS SEGMENT
The global supply of raw cane sugar is ample. Over the last several
Facilities
years, Lantic has purchased most of its raw cane sugar from Central
TMTC operates three plants in Québec, namely, in Granby, Dégelis
and South America for its Montréal and Vancouver cane refineries.
and in St-Honoré-de-Shenley, and one in Websterville, Vermont. On
August 1, 2018, the Company announced its intention to relocate
In fiscal 2018, the Company entered into a two-year agreement
its Granby operation to a new built for purpose leased facility also
with the Alberta Sugar Beet Growers (the “Growers”) for the supply
located in Granby. The relocation was completed at the beginning
of sugar beets to the Taber beet plant, for which the crop harvested
of calendar 2020.
in the Fall of 2019 is the first year of the agreed contract. Contract
negotiations with the Growers for crop years beyond 2020 are
Our Products
currently taking place and are expected to conclude prior to the
TMTC’s products are comprised of the following: bottled maple
next spring planting season. Any potential shortfall in beet sugar
syrup, bulk maple syrup, maple sugar and flakes, and ancillary or
production related to crop issues is mostly replaced by refined cane
derived maple products.
sugar from the Vancouver refinery, which acts as a swing capacity
refinery and from the Montréal refinery if required.
Bottled maple syrup is packaged in a variety of formats and sizes,
Pricing
including bottles, plastic jugs and the traditional cans. Bottled
maple syrup is available in all commercial grades and in organic
In fiscal 2020, the price of raw sugar fluctuated between U.S. 9.05
and non-organic varieties. TMTC’s bottled maple syrup is sold
cents per pound and U.S. 15.90 cents per pound and closed at
under a variety of brands, including Uncle Luke’s™, L.B. Maple
U.S. 13.55 cents per pound at the end of the fiscal year, which
Treat™, Great Northern™, Decacer, Highland Sugarworks™ and
was 2.02 cents higher than the closing value at September 28,
Tapp and SpoutTM.
2019. Although price variation during the year was more than in
fiscal 2019 when raw sugar prices fluctuated between U.S. 10.68
Bulk maple syrup is mainly sold in containers of 4L or 17L, barrels
and U.S. 14.24 cents per pound, the average raw sugar price in
and totes to foodservice retailers as well as other wholesalers. Bulk
fiscal 2020 was similar to the 2019 average. However, during fiscal
maple syrup is also sold for industrial use for bottling or for use in
2020, the COVID-19 pandemic created significant volatility in the
food production, and privately under the L.B. Maple Treat™ brand.
raw sugar market price. On April 28th, 2020, the price dropped to
U.S. 9,05 cents per pound, the lowest level since June 2008.
Rogers Sugar Inc.Management’s Discussion & Analysis
13
Maple derived products include maple blended syrup, maple
consumer demand, and more specifically, to stabilize selling prices
spread, maple cookies, maple taffy and other maple candies,
for producers and, ultimately, the buying price for consumers, foster
popcorn, teas and coffees. Maple products are mainly sold under
investments in the maple industry and maintain a steady number of
the L.B. Maple Treat™ and Highland Sugarworks™ brands.
maple producing businesses in operation, regardless of their size.
Our Supply
Outside of Québec, the maple syrup industry is generally organized
The biggest concentration of maple trees is located in Québec,
through producer-based organizations or associations, which
New Brunswick, Ontario, Vermont, Maine, New York and New
promote maple syrup in general and its industry and serve as the
Hampshire. The production of maple syrup takes place over a
official voice for maple syrup producers with the public.
period of 6 to 8 weeks during the months of March and April of
each year.
TMTC has relationships with more than 1,400 maple syrup producers,
mainly in Québec and Vermont. Most of these producers sell 100%
Canada remains the largest producer of maple syrup, with over
of their production to TMTC. Through its strong relationship with
80% of the world’s production. The U.S. is the only other major
such producers, TMTC was able to develop a leading position in
producing country in the world, producing approximately 20%
certified organic maple syrup.
of the global supply. Québec represented 72% of the world’s
production in 2020.
Pricing
The maple syrup producers in Québec are represented by the
the PPAQ and the Conseil de l’industrie de l’érable (the Maple
Producteurs et Productrices Acéricoles du Québec (“PPAQ”). The
Industry Council (“MIC”)), authorized buyers must pay a minimum
PPAQ generally regulates the buying and selling of bulk maple
price to the PPAQ for any maple syrup purchased from the
syrup. The PPAQ represents approximately 11,300 producers and
producers. The price is fixed on an annual basis and depends on
Pursuant to a Marketing Agreement entered into annually between
7,400 individual businesses.
the grade of the maple syrup. In addition, a premium is added to
the minimum price for any organic maple syrup. Pursuant to the
In Québec, nearly 90% of the total production of maple syrup is
Marketing Agreement, authorized buyers must buy maple syrup
sold through the PPAQ Sales Agency to the authorized buyers,
from the PPAQ.
leaving only approximately 10% of the total production being sold
directly by the producers to consumers at farmer’s market or direct
store delivery to local grocery stores. The authorized buyer status is
USE OF FINANCIAL DERIVATIVES FOR HEDGING
renewed on an annual basis.
Sugar
In 2002, the PPAQ set up a strategic maple syrup reserve in order to
In order to protect itself against fluctuations in the world raw sugar
mitigate production fluctuations imputable to weather conditions
market, the Company follows a rigorous hedging program for all
and prevent such fluctuations from causing supply disruption and
purchases of raw cane sugar and sales of refined sugar.
maple syrup prices to spike or drop significantly. The reserve was
initially established to set aside a production quantity equivalent to
The #11 world raw sugar market is only traded on the ICE, which
half of the then annual demand. Each year, the PPAQ may organize
trades in U.S. dollars. One can trade sugar futures forward for a
a sale of a portion of its accumulated reserve. This allows bottlers
period of three years against four specific terminals per year
to respond to supply shortages in the event of a poor harvest or
(March, May, July and October). The terminal values are used to
unplanned growth and demand. As of October 2020, the PPAQ
determine the price settlement upon the receipt of a raw sugar
had over 127 million pounds of bulk maple syrup, including 16
vessel or the delivery of sugar to the Company’s customers. The
million pounds of processing/industrial grade maple syrup, in its
ICE rules are strict and are governed by the New York Board of
strategic reserve, which represents a little over half of the annual
Trade. Any amount owed, due to the movement of the commodity
global retail consumption.
being traded, has to be settled in cash the following day (margin
call payments/receipts).
In 2004, the PPAQ adopted a policy with respect to production and
marketing quotas which resulted in an annual production volume
For the purchasing of raw sugar, the Company enters into long-term
allocated to each maple syrup business. The main objective of
supply contracts with reputable raw sugar suppliers (the “Seller”).
the policy is to adjust the supply of maple syrup in response to
These long-term agreements will, amongst other things, specify
2020 Annual ReportManagement’s Discussion & Analysis 14
the yearly volume (in metric tonnes) to be purchased, the delivery
Foreign Exchange
period of each vessel, the terminal against which the sugar will be
Raw sugar costs for all sales contracts are based on the U.S. dollar.
priced, and the freight rate to be charged for each delivery. The
The Company also buys natural gas in U.S. dollars. In addition,
price of raw sugar will be determined later by the Seller, based
sugar export sales and some Canadian sugar sales are denominated
upon the delivery period. The delivery period will correspond to
in U.S. dollars.
the terminal against which the sugar will be priced.
The selling of refined sugar by the Company is also done under the
dollar versus the U.S. dollar, the Company, on a daily basis,
#11 world raw sugar market. When a sales contract is negotiated
reconciles all of its exposure to the U.S. dollar and will hedge the
with a customer, the sales contract will determine the period of the
net position against various forward months, estimated from the
In order to protect itself against the movement of the Canadian
contract, the expected delivery period against specific terminals
date of the various transactions.
and the refining margin and freight rate to be charged over and
above the value of the sugar. The price of the sugar is not yet
Certain export sales of maple syrup are denominated in U.S.
determined but needs to be fixed by the customer prior to delivery.
dollars, in Euro or in Australian dollars. In order to mitigate against
The customer will make the decision to fix the price of the sugar
the movement of the Canadian dollar versus the U.S. dollars,
when he feels the sugar market is favourable against the sugar
Euro or Australian dollars, TMTC enters into foreign exchange
terminal, as per the anticipated delivery period.
hedging contracts with certain customers. These foreign exchange
hedging contracts are unwound when the money is received from
The Company purchases sugar beets from the Growers under a
the customer, at which time any gains or losses incurred are then
fixed price formula plus a scale incentive when raw sugar values
recognized for the determination of adjusted gross margins and
exceed a certain price level. Except for sales to the U.S., under the
earnings. Foreign exchange gains or losses on any unhedged sales
export quota, to HFCS-substitutable accounts, and for other export
contracts are recorded when realized.
opportunities, all other sales are made using the same formula as
cane sugar, following the #11 world raw sugar price.
Natural Gas
The Board of Directors of Lantic approved an energy hedging
policy to mitigate the overall price risks in the purchase of natural
gas.
The Company purchases between 3.0 million gigajoules and
3.5 million gigajoules of natural gas per year for use in its refining
operations. To protect against large and unforeseen fluctuations,
the Company can hedge forward up to 90% of its estimated usage
over the next 12 months and lower percentages of its estimated
usage on a longer-term basis.
These gas hedges are unwound in the months that the commodity
is used in the operations, at which time any gains or losses incurred
are then recognized for the determination of gross margins and
earnings.
Rogers Sugar Inc.Management’s Discussion & Analysis 15
SELECTED FINANCIAL DATA AND HIGHLIGHTS
The following is a summary of selected financial information of Rogers’ consolidated results for the 2020, 2019 and 2018 fiscal years. The
financial results for fiscal 2018 include those of Decacer since its acquisition on November 18, 2017.
(unaudited)
Fourth Quarter (3)
Fiscal Year (4)
(In thousands of dollars, except volume and
per share information)
Total volume
2020
2019 (5)
2020
2019 (3)
2018 (3)
Sugar (metric tonnes)
225,396
196,903
761,055
741,144
719,875
Maple syrup (‘000 pounds)
13,181
10,163
53,180
42,377
45,919
$
$
$
$
Total revenues
Gross margin
Results from operating activities (“EBIT”)
Net earnings (loss)
Net earnings (loss) per share (basic)
Net earnings (loss) per share (diluted)
Dividends per share
Non- IFRS results (1)
246,212
207,572
37,890
22,829
12,952
0.13
0.12
0.09
$
29,073
(32,800)
(40,021)
(0.38)
(0.38)
0.09
$
860,801
126,199
68,010
35,419
0.34
0.34
0.36
$
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
$
Adjusted Gross Margin (1) (2)
40,065
29,026
126,118
116,578
126,362
Adjusted results from operating activities
(“Adjusted EBITDA”) (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)
25,004
31,231
14,551
0.14
40,002
17,153
22,215
9,910
0.09
30,843
67,929
92,259
35,245
0.34
40,002
68,150
87,808
37,079
0.35
30,843
79,609
99,942
45,032
0.43
47,802
(1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures.
(2) See “Adjusted results” section.
(3) The fourth quarter of fiscal 2020 consists of 14 weeks and the fourth quarter of fiscal 2019 consists of 13 weeks.
(4) Fiscal 2020 consists of 53 weeks and fiscal 2019 consists of 52 weeks.
(5) The current period results include the impacts from the adoption of the new IFRS 16 Leases as discussed in note 3 (h) of the consolidated financial statements.
As is permitted with this new standard, comparative information has not been restated and, therefore, may not be comparable.
2020 Annual ReportManagement’s Discussion & Analysis
16
Adjusted results
In the normal course of business, the Company uses derivative financial instruments consisting of sugar futures, foreign exchange forward
contracts, natural gas futures and interest rate swaps. The Company has designated as effective cash flow hedging instruments 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. Derivative financial instruments pertaining to sugar futures and foreign exchange forward contracts are marked-to-
market at each reporting date and are charged to the consolidated statement of earnings. The unrealized gains/losses related to natural gas
futures and interest rate swaps are accounted for in other comprehensive income. The amount recognized in other comprehensive income
is removed and included in Net earnings (loss) under the same line item in the consolidated statement of earnings and comprehensive
income as the hedged item, in the same period that the hedged cash flows affect Net earnings (loss), reducing earnings volatility related to
the movements of the valuation of these derivatives hedging instruments.
Management believes that the Company’s financial results are more meaningful to management, investors, analysts and any other interested
parties when financial results are adjusted by the gains/losses from financial derivative instruments. These adjusted financial results
provide a more complete understanding of factors and trends affecting our business. This measurement is a non-GAAP measurement. See
“Non-GAAP measures” section.
Management uses the non-GAAP adjusted results of the operating company to measure and to evaluate the performance of the business
through its adjusted gross margin, adjusted EBIT, adjusted EBITDA and adjusted net earnings. In addition, management believes that
these measures are important to our investors and parties evaluating our performance and comparing such performance to past results.
Management also uses adjusted gross margin, adjusted EBIT, adjusted EBITDA, and adjusted net earnings, including segment specific
information when discussing results with the Board of Directors, analysts, investors, banks and other interested parties. See “Non-GAAP
measures” section.
The results of operations would therefore need to be adjusted by the following:
Income (loss)
Fourth Quarter Fiscal 2020 (1)
Fourth Quarter Fiscal 2019 (1)
(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
Sugar
$
Maple
Products
$
Total
$
(1,766)
—
(1,766)
992
(774)
(2,555)
1,069
1,069
61
(3,329)
1,130
2,061
295
(2,494)
(2,199)
24
—
24
Total adjustment to costs of sales
(3,305)
1,130
(2,175)
(1) The fourth quarter of fiscal 2020 consists of 14 weeks and the fourth quarter of fiscal 2019 consists of 13 weeks.
Sugar
$
1,744
(250)
1,494
(1,551)
(57)
342
285
Maple
Products
$
—
(53)
(53)
(185)
(238)
—
(238)
Total
$
1,744
(303)
1,441
(1,736)
(295)
342
47
Rogers Sugar Inc.Management’s Discussion & Analysis
Income (loss)
(In thousands of dollars)
Mark-to-market on:
Sugar futures contracts
Foreign exchange forward contracts
Total mark-to-market adjustment on derivatives
Fiscal 2020 (1)
Maple
Products
$
—
1,010
1,010
Total
$
(801)
2,615
1,814
Sugar
$
(801)
1,605
804
Cumulative timing differences
(2,023)
195
(1,828)
Adjustment to cost of sales
(1,219)
1,205
(14)
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
95
—
(1,124)
1,205
95
81
(1) Fiscal 2020 consists of 53 weeks and fiscal 2019 consists of 52 weeks.
17
Fiscal 2019 (1)
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
The fluctuations in mark-to-market adjustment on derivatives are due to the price movements in #11 world raw sugar and foreign exchange
variations. See “Non-GAAP measures” section.
Cumulative timing differences, as a result of mark-to-market gains or losses, are recognized by the Company only when sugar is sold to a
customer. The gains or losses on sugar and related foreign exchange paper transactions are largely offset by corresponding gains or losses
from the physical transactions, namely sale and purchase contracts with customers and suppliers. See “Non-GAAP measures” section.
The above described adjustments are added or deducted to the mark-to-market results to arrive at the total adjustment to cost of sales.
For the fourth quarter of the current year, the total cost of sales adjustment is a loss of $2.2 million to be added to the consolidated
results versus a nominal gain to be deducted from the consolidated results for the comparable quarter last year. For fiscal 2020, the total
cost of sales adjustment is a gain of $0.1 million compared to a gain of $6.0 million to be deducted from the consolidated results for the
comparable period last year. See “Non-GAAP measures” section.
2020 Annual ReportManagement’s Discussion & Analysis
18
SEGMENTED INFORMATION
The following is a table showing the key results by segments:
Consolidated results
Fourth Quarter Fiscal 2020 (3)
Fourth Quarter Fiscal 2019 (2) (3)
(In thousands of dollars)
Revenues
Gross margin
Administration and selling expenses
Distribution costs
Goodwill impairment
Sugar
$
Maple
Products
$
Total
$
Sugar
$
Maple
Products
$
Total
$
188,666
57,546
246,212
159,432
48,140
207,572
32,198
7,803
4,197
—
5,692
2,589
472
—
37,890
10,392
4,669
—
24,643
4,730
3,465
4,430
2,622
1,056
29,073
7,352
4,521
—
50,000
50,000
Results from operating activities (EBIT)
20,198
2,631
22,829
16,448
(49,248)
(32,800)
Non-GAAP results (1):
Adjusted Gross Margin (1)
35,503
4,562
40,065
24,358
4,668
29,026
Adjusted results from operating activities
(Adjusted EBIT) (1)
Adjusted EBITDA (1)
Additional information:
Addition to property, plant and equipment
and intangible assets
23,503
27,982
1,501
3,249
25,004
31,231
16,163
19,662
990
2,553
17,153
22,215
8,394
578
8,972
7,054
1,081
8,135
Consolidated results
Fiscal Year 2020 (4)
Fiscal Year 2019 (2) (4)
(In thousands of dollars)
Revenues
Gross margin
Sugar
$
Maple
Products
$
Total
$
Sugar
$
Maple
Products
$
Total
$
631,263
229,538
860,801
595,878
198,414
794,292
105,088
21,111
126,199
100,301
22,274
122,575
Administration and selling expenses
Distribution costs
Goodwill impairment
27,959
10,981
16,266
2,983
—
—
38,940
19,249
—
21,609
13,153
9,962
3,704
—
50,000
Results from operating activities (EBIT)
60,863
7,147
68,010
65,539
(41,392)
31,571
16,857
50,000
24,147
Non-GAAP results:
Adjusted Gross Margin (1)
106,212
19,906
126,118
94,032
22,546
116,578
Adjusted results from operating activities
(Adjusted EBIT) (1)
Adjusted EBITDA (1)
Additional information:
Addition to property, plant and equipment
and intangible assets
61,987
5,942
78,877
13,382
67,929
92,259
59,270
73,135
8,880
14,673
68,150
87,808
20,711
6,569
27,280
22,645
4,468
27,113
(1)
See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures.
(2) The current period results include the impacts from the adoption of the new IFRS 16 Leases as discussed in note 3 (h) of the consolidated financial statements.
As is permitted with this new standard, comparative information has not been restated and, therefore, may not be comparable.
(3) The fourth quarter of fiscal 2020 consists of 14 weeks and the fourth quarter of fiscal 2019 consists of 13 weeks.
(4) Fiscal 2020 consists of 53 weeks and fiscal 2019 consists of 52 weeks.
Rogers Sugar Inc.Management’s Discussion & Analysis
Results from operation by segment
SUGAR
Revenues
(In thousands of dollars, except volume)
19
Fourth Quarter (1)
Fiscal Year (2)
2020
$
2019
$
2020
$
2019
$
Revenues
188,666
159,432
631,263
595,878
Volume (MT) as at September 28, 2019
Variation:
Industrial
Consumer
Liquid
Export
Total variation
Volume as at September 28, 2019
196,903
10,367
5,818
5,418
6,890
28,493
225,396
741,144
(10,850)
19,770
5,642
5,349
19,911
761,055
(1) The fourth quarter of fiscal 2020 consists of 14 weeks and the fourth quarter of fiscal 2019 consists of 13 weeks.
(2) Fiscal 2020 consists of 53 weeks and fiscal 2019 consists of 52 weeks.
Strong performance in the sugar segment in the fourth quarter and full year fiscal 2020 was driven by increased volumes across almost all
segments of the sugar business and improved adjusted gross margin. Approximately 14,000 metric tonnes of the volume increase in the
fourth quarter and the current year is attributable to the extra week of fiscal 2020.
Revenues increased in the fourth quarter of fiscal 2020 and for the year due to an extra week of operation in fiscal 2020, higher weighted
average raw sugar values in Canadian dollars as well as an increase in overall volumes.
Volumes in the industrial market segment increased in the fourth quarter mostly due to the extra week of shipments and the return to
normal demand for certain large industrial accounts impacted earlier by the COVID-19 pandemic. For the full year, industrial volumes were
lower than last year due to reduced demand in the third quarter driven by the COVID-19 pandemic which resulted in less demand for
manufacturing of food products destined for the food service sector. Industrial volumes were also impacted by the non-recurring sales to a
competitor that occurred in the first quarter of fiscal year 2019 and by the rail blockades that took place in the second quarter of the current
fiscal year, which created difficulties in servicing our Ontario customers.
Consumer volumes increased in the fourth quarter and full year in 2020 due to the extra week of shipments in the current year and
continued strong retail demand driven by the increase in home baking associated with the COVID-19 pandemic.
Liquid volumes increased in the current quarter and the current year as a result of the extra week of shipments in 2020 along with additional
demand from existing customers.
Finally, export volumes increased in the current quarter and the full year driven by additional U.S. global refined Tariff-Rate Quotas (“TRQ”)
in fiscal 2020. In total the Company sold 5,349 metric tonnes more than in the previous year. Most of the extra volume was sold in the fourth
quarter of 2020. The export sales for 2020 amounted to approximately 57,000 metric tonnes of which approximately 18,000 metric tonnes
were entered against the various US refined TRQ’s.
2020 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 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:
Depreciation of property, plant and equipment
and right-of-use assets
Fourth Quarter (3)
Fiscal Year (4)
2020
$
32,198
3,305
35,503
142.85
157.51
2019 (5)
$
24,643
(285)
24,358
125.15
123.71
2020
$
2019 (5)
$
105,088
100,301
1,124
106,212
138.08
139.56
(6,269)
94,032
135.33
126.87
3,920
3,298
14,918
13,072
(1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures.
(2) See “Adjusted results” section.
(3) The fourth quarter of fiscal 2020 consists of 14 weeks and the fourth quarter of fiscal 2019 consists of 13 weeks.
(4) Fiscal 2020 consists of 53 weeks and fiscal 2019 consists of 52 weeks.
(5) The current period results include the impacts from the adoption of the new IFRS 16 Leases as discussed in note 3 (h) of the consolidated financial statements.
As is permitted with this new standard, comparative information has not been restated and, therefore, may not be comparable.
Gross margin of $32.2 million for the quarter and $105.1 million for the year does not reflect the economic margin of the sugar segment,
as it includes a loss of $3.3 million and of $1.1 million for the fourth quarter and the year respectively, for the mark-to-market of derivative
financial instruments as explained above. In fiscal 2019, a mark-to-market gain of $0.3 million and $6.3 million was recorded for the fourth
quarter and the year, respectively, resulting in gross margins of $24.6 million and $100.3 million for their respective periods. These mark-to-
market gains and losses must be deducted from or added to the gross margin in order to arrive to adjusted gross margin results.
We will therefore comment on adjusted gross margin results.
Adjusted gross margin for the current quarter was $11.1 million or 45.8% higher than the last quarter of fiscal 2019. For the fourth quarter of
2020, the adjusted gross margin per metric tonne was $33.80 higher than the prior year. The favourable variance in adjusted gross margin
per metric tonne was mainly related to higher sales volume in the grocery and exports segments.
For fiscal 2020, adjusted gross margin increased by $12.2 million or 13%. For fiscal 2020, adjusted gross margin per metric tonne increased
by $12.69 compared to fiscal 2019. The favourable variance in adjusted gross margin per metric tonne was mainly related to higher sales
volume in the grocery and exports segments and from lower volume originating from our beet sugar plant in Taber.
Rogers Sugar Inc.Management’s Discussion & Analysis
21
Other expenses
(In thousands of dollars)
Administration and selling expenses
Distribution costs
Included in Administration and selling expenses:
Amortization of intangible assets
Included in Distribution costs:
Depreciation of right-of-use assets
Fourth Quarter (1)
Fiscal Year (2)
2020
$
7,803
4,197
230
329
2019 (3)
$
4,730
3,465
201
—
2020
$
27,959
16,266
862
1,110
2019 (3)
$
21,609
13,153
793
—
(1) The fourth quarter of fiscal 2020 consists of 14 weeks and the fourth quarter of fiscal 2019 consists of 13 weeks.
(2) Fiscal 2020 consists of 53 weeks and fiscal 2019 consists of 52 weeks.
(3) The current period results include the impacts from the adoption of the new IFRS 16 Leases as discussed in note 3 (h) of the consolidated financial statements.
As is permitted with this new standard, comparative information has not been restated and, therefore, may not be comparable.
Administration and selling expenses were $3.1 million and $6.4 million higher than the fourth quarter and for the prior year, respectively. The
increase is mainly related to incremental costs associated with the COVID-19 pandemic in the current year. These costs included additional
wages, protective personal equipment, sanitary supplies, and other incremental resources allocated to our operations and amounted to
$1.0 million for the fourth quarter and $3.1 million for the full year. In addition, administrative and selling expenses in the fourth quarter and
full year were impacted by higher compensation costs and related employee benefits.
Distribution costs for the current quarter and for the year amounted to $4.2 million and $16.3 million, respectively. The additional $3.1 million
of costs in fiscal 2020 were mainly related to expenses incurred to reconfigure the supply chain as a result of the smaller crop in Taber, along
with incremental warehousing costs in the U.S. incurred to take advantage of the Global refined sugar TRQ.
Results from operating activities (EBIT)
(In thousands of dollars)
Results from operating activities (EBIT)
Adjusted results from operating activities (Adjusted EBIT) (1) (2)
Fourth Quarter (3)
Fiscal Year (4)
2020
$
20,198
23,503
2019 (5)
$
16,448
16,163
2020
$
60,863
61,987
2019 (5)
$
65,539
59,270
(1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures.
(2) See “Adjusted results” section.
(3) The fourth quarter of fiscal 2020 consists of 14 weeks and the fourth quarter of fiscal 2019 consists of 13 weeks.
(4) Fiscal 2020 consists of 53 weeks and fiscal 2019 consists of 52 weeks.
(5) The current period results include the impacts from the adoption of the new IFRS 16 Leases as discussed in note 3 (h) of the consolidated financial statements.
As is permitted with this new standard, comparative information has not been restated and, therefore, may not be comparable.
The results from operating activities of $20.2 million and $60.9 million for the fourth quarter and the year, respectively, do not reflect the
adjusted results from operating activities of the Sugar segment, as they include gains and losses from the mark-to-market of derivative
financial instruments, as well as timing differences in the recognition of any gains and losses on the liquidation of derivative instruments.
2020 Annual ReportManagement’s Discussion & Analysis
22
Adjusted results from operating activities for the fourth quarter and the year of 2020 were $7.3 million and $2.7 million higher than the
comparative period for last year. The fourth quarter result represents a 45.3% improvement from the same quarter last year, driven by higher
adjusted gross margin of $11.1 million, partially offset by higher administration and selling expenses of $3.1 million and higher distribution
costs of $0.7 million. For the full year, adjusted results from operating activities were 5.0% higher, due to higher adjusted gross margin of
$12.2 million, partially offset by higher administration and selling expenses of $6.4 million and higher distribution costs of $3.1 million.
Adjusted EBITDA
(In thousands of dollars)
Results from operating activities
Total adjustment to cost of sales (1) (2)
Adjusted results from operating activities (Adjusted EBIT)
Depreciation of property, plant and equipment, right-of -use
assets and amortization of intangible assets
Adjusted EBITDA (1) (2)
Fourth Quarter (3)
Fiscal Year (4)
2020
$
20,198
3,305
23,503
4,479
27,982
2019 (5)
$
16,448
(285)
16,163
3,499
19,662
2020
$
60,863
1,124
61,987
16,890
78,877
2019 (5)
$
65,539
(6,269)
59,270
13,865
73,135
(1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures.
(2) See “Adjusted results” section.
(3) The fourth quarter of fiscal 2020 consists of 14 weeks and the fourth quarter of fiscal 2019 consists of 13 weeks.
(4) Fiscal 2020 consists of 53 weeks and fiscal 2019 consists of 52 weeks.
(5) The current period results include the impacts from the adoption of the new IFRS 16 Leases as discussed in note 3 (h) of the consolidated financial statements.
As is permitted with this new standard, comparative information has not been restated and, therefore, may not be comparable.
Certain non-cash depreciation and amortization expenses had an impact on the results from operating activities. As such Management
believes that the Sugar segment’s financial results are more meaningful to management, investors, analysts, and any other interested parties
when financial results are adjusted for the above-mentioned items.
Adjusted EBITDA for the fourth quarter and the year of 2020 increased by $8.3 million and $5.7 million, respectively compared to last year.
The improvement was mainly driven by increased adjusted results from operations, as described above, along with a larger adjustment
for the impact of non-cash depreciation and amortization expenses largely caused by the implementation of IFRS 16. The adoption of the
new IFRS 16 Leases standard resulted in a $0.9 million and $3.0 million increase in adjusted EBITDA for the current quarter and the year,
respectively.
Rogers Sugar Inc.Management’s Discussion & Analysis
23
MAPLE PRODUCTS
Revenues
(In thousands of dollars, except volume)
Volume (‘000 pounds)
Revenues
Fourth Quarter (1)
Fiscal Year (2)
2020
13,181
57,546
2019
10,163
48,140
2020
53,180
2019
42,377
229,538
198,414
(1) The fourth quarter of fiscal 2020 consists of 14 weeks and the fourth quarter of fiscal 2019 consists of 13 weeks.
(2) Fiscal 2020 consists of 53 weeks and fiscal 2019 consists of 52 weeks.
Revenues increased in the fourth quarter and fiscal 2020 by $9.4 million and $31.1 million compared to the same periods last year mainly
due to higher sales volumes from new and existing customers. Volumes in the fourth quarter and full year increased by 29.7% and 25.5%,
respectively, in part driven by higher demand associated with the COVID-19 pandemic.
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 (3)
Fiscal Year (4)
2020
$
5,692
(1,130)
4,562
9.9%
7.9%
2019 (5)
$
4,430
238
4,668
9.2%
9.7%
2020
$
21,111
(1,205)
19,906
9.2%
8.7%
2019 (5)
$
22,274
272
22,546
11.2%
11.4%
Depreciation of property, plant and equipment
and right-of-use assets
809
557
3,083
1,855
(1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures.
(2) See “Adjusted results” section.
(3) The fourth quarter of fiscal 2020 consists of 14 weeks and the fourth quarter of fiscal 2019 consists of 13 weeks.
(4) Fiscal 2020 consists of 53 weeks and fiscal 2019 consists of 52 weeks.
(5) The current period results include the impacts from the adoption of the new IFRS 16 Leases as discussed in note 3 (h) of the consolidated financial statements.
As is permitted with this new standard, comparative information has not been restated and, therefore, may not be comparable.
Gross margin of $5.7 million and $21.1 million for the quarter and for the year does not reflect the economic margin of the Maple products
segment, as it includes a gain of $1.1 million and of $1.2 million, respectively, for the mark-to-market of derivative financial instruments on
foreign exchange contracts.
We will therefore comment on adjusted gross margin results.
Adjusted gross margin for the current quarter and the year amounted to $4.6 million and $19.9 million, respectively. Adjusted gross margin
in the fourth quarter and for the year, on a percentage basis, was lower than the prior year due largely to lower average pricing resulting
from increased market competition. Adjusted gross margin was also impacted in fiscal 2020 by non-recurring operational costs incurred in
connection with the relocation of the Granby production facility.
2020 Annual ReportManagement’s Discussion & Analysis
24
Other expenses
(In thousands of dollars)
Administration and selling expenses
Distribution costs
Goodwill impairment
Included in Administration and selling expenses:
Fourth Quarter (1)
Fiscal Year (2)
2020
$
2,589
472
—
2019
$
2,622
1,056
50,000
2020
$
10,981
2,983
2019
$
9,962
3,704
—
50,000
Amortization of intangible assets
876
875
3,505
3,501
(1) The fourth quarter of fiscal 2020 consists of 14 weeks and the fourth quarter of fiscal 2019 consists of 13 weeks.
(2) Fiscal 2020 consists of 53 weeks and fiscal 2019 consists of 52 weeks.
Administration and selling expenses for the fourth quarter and for the year were $2.6 million and $11.0 million, respectively. Fourth quarter
levels were consistent with the same quarter last year and the increase of $1.0 million compared to fiscal 2019 was mainly related to
additional costs incurred to support the business, including costs related to the COVID-19 pandemic.
Distribution expenses were $0.6 million and $0.7 million lower in the fourth quarter and for the year when compared to the same periods
last year driven largely by changes in the sales product mix.
At the end of 2019, the Company reviewed the valuation of the Maple cash generating unit and concluded that the carrying value of
goodwill exceeded the expected recoverable amount. As a result, the Company recorded a non-cash impairment of $50.0 million to its
goodwill balance in the fourth quarter of fiscal 2019.
Results from operating activities (EBIT)
(In thousands of dollars)
Results from operating activities
Adjusted results from operating activities (Adjusted EBIT) (1) (2)
Fourth Quarter (3)
Fiscal Year (4)
2020
$
2,631
1,501
2019 (5)
$
(49,248)
990
2020
$
7,147
5,942
2019 (5)
$
(41,392)
8,880
(1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures.
(2) See “Adjusted results” section.
(3) The fourth quarter of fiscal 2020 consists of 14 weeks and the fourth quarter of fiscal 2019 consists of 13 weeks.
(4) Fiscal 2020 consists of 53 weeks and fiscal 2019 consists of 52 weeks.
(5) The current period results include the impacts from the adoption of the new IFRS 16 Leases as discussed in note 3 (h) of the consolidated financial statements.
As is permitted with this new standard, comparative information has not been restated and, therefore, may not be comparable.
The results from operating activities for the fourth quarter and for the full year 2020 of $2.6 million and $7.1, respectively, do not reflect
the adjusted results from operating activities of the Maple products segment, as they include gains and losses from the mark-to-market
of derivative financial instruments, as well as timing differences in the recognition of any gains and losses on the liquidation of derivative
instruments. We will therefore comment on adjusted results from operating activities.
Rogers Sugar Inc.Management’s Discussion & Analysis
As explained above, in the fourth quarter of fiscal 2019, a goodwill impairment of $50.0 million was recorded and negatively impacted
Adjusted EBIT. Excluding the goodwill impairment, fourth quarter 2020 Adjusted EBIT of $1.5 million was $0.5 million higher than the same
quarter last year, mostly due to lower distribution costs, as explained above. For the full year, excluding the goodwill impairment, Adjusted
EBIT of $5.9 million was $2.9 million lower than fiscal 2019 due to lower adjusted gross margin and higher administration and selling
expenses, as mentioned above, partially offset by lower distribution costs.
25
Adjusted EBITDA
(In thousands of dollars)
Results from operating activities
Total adjustment to cost of sales (1) (2)
Adjusted results from operating activities (Adjusted EBIT) (1)
1,501
(49,010)
Non-recurring expenses:
Other one-time non-recurring items
Depreciation and amortization
Goodwill impairment
Adjusted EBITDA (1)
63
1,685
—
3,249
131
1,432
50,000
2,553
Fourth Quarter (3)
Fiscal Year (4)
2020
$
2,631
(1,130)
2019 (5)
$
(49,248)
238
2020
$
7,147
(1,205)
5,942
852
6,588
—
13,382
2019 (5)
$
(41,392)
272
(41,120)
437
5,356
50,000
14,673
(1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures.
(2) See “Adjusted results” section.
(3) The fourth quarter of fiscal 2020 consists of 14 weeks and the fourth quarter of fiscal 2019 consists of 13 weeks.
(4) Fiscal 2020 consists of 53 weeks and fiscal 2019 consists of 52 weeks.
(5) The current period results include the impacts from the adoption of the new IFRS 16 Leases as discussed in note 3 (h) of the consolidated financial statements.
As is permitted with this new standard, comparative information has not been restated and, therefore, may not be comparable.
Certain non-cash depreciation and amortization expenses had an impact on the results from operating activities. As such Management
believes that the Maple segment’s financial results are more meaningful to management, investors, analysts, and any other interested
parties when financial results are adjusted for the above-mentioned items.
Adjusted EBITDA for the fourth quarter and the year of 2020 increased by $0.7 million and decreased by $1.3 million, respectively compared
to last year. For the fourth quarter, the favorable variance was mainly related to lower distribution costs. For the year, the variance was mainly
related to unfavourable adjusted gross margin and higher administration and selling expenses, partially offset by lower distribution costs.
2020 Annual ReportManagement’s Discussion & Analysis
26
CONSOLIDATED RESULTS OF OPERATION
The following is a summary of selected financial information of Rogers’ consolidated results for the 2020, 2019 and 2018 fiscal years. The
financial results for fiscal 2018 include those of Decacer since its acquisition on November 18, 2017.
(unaudited)
Fourth Quarter (2)
Fiscal Year (3)
(In thousands of dollars, except volume and per share information)
2020
2019 (2)
2020
2019 (2)
2018 (2)
Sugar (metric tonnes)
Maple syrup (‘000 pounds)
Total revenues
Gross margin
Results from operating activities (EBTI)
Net finance costs
Income tax expense
Net earnings (loss)
Net earnings (loss) per share (basic)
Net earnings (loss) per share (diluted)
Dividends per share
Non- GAAP results (1):
Adjusted Gross Margin (1)
$
$
$
$
$
225,396
196,903
761,055
741,144
719,875
13,181
10,163
53,180
42,377
45,119
246,212
207,572
860,801
794,292
805,201
29,073
126,199
122,575
130,853
12,952
(40,021)
37,890
22,829
4,991
4,886
0.13
0.12
0.09
40,065
(32,800)
4,843
2,378
(0.38)
(0.38)
0.09
29,026
17,153
22,215
9,910
0.09
68,010
18,523
14,068
35,419
0.34
0.34
0.36
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
126,118
116,578
126,362
67,929
92,259
35,245
0.34
68,150
87,808
37,079
0.35
79,609
99,942
45,032
0.43
Adjusted results from operating activities (Adjusted EBIT) (1)
25,004
Adjusted EBITDA (1)
Adjusted net earnings (1)
Adjusted net earnings per share (basic) (1)
31,231
14,551
0.14
(1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures.
(2) See “Adjusted results” section.
(3) The fourth quarter of fiscal 2020 consists of 14 weeks and the fourth quarter of fiscal 2019 consists of 13 weeks.
(4) Fiscal 2020 consists of 53 weeks and fiscal 2019 consists of 52 weeks.
(5) The current period results include the impacts from the adoption of the new IFRS 16 Leases as discussed in note 3 (h) of the consolidated financial statements.
As is permitted with this new standard, comparative information has not been restated and, therefore, may not be comparable.
Total revenues
Revenues increased by $38.6 million and $66.5 million for the fourth quarter and the current year in comparison to prior periods. The
improvement in revenues is explained by higher revenues in both the Sugar and Maple products segments, as explained above.
Gross margin
Gross margin of $37.9 million for the current quarter and $126.2 million for the current year does not reflect the economic margin of the
Company, as it includes a loss of $2.2 million for the fourth quarter of the current year and a gain of $0.1 million for the current year related
to the mark-to-market of derivative financial instruments (See “Adjusted results” section). In fiscal 2019, a nominal mark-to-market gain
and a mark-to-market gain of $6.0 million was recorded for the fourth quarter and for the year, respectively, resulting in gross margins of
$29.1 million and $122.6 million for their respective period.
Excluding the mark-to-market of derivative financial instruments, adjusted gross margin for the last quarter of 2020 increased by $11.0 million,
which is mainly explained by an increase in the Sugar segment of as explained above. For the year, the adjusted gross margin was $9.5
million higher for 2020 compared to 2019 due to the increase noted in the Sugar segment of $12.2 million was partially offset by a decrease
in the Maple products segment of $2.6 million, as explained above.
Rogers Sugar Inc.Management’s Discussion & Analysis
27
Results from operating activities (EBIT)
For the fourth quarter and fiscal 2020, EBIT amounted to $22.8 million and $68.0 million, respectively. For 2019, EBIT for the fourth
quarter was showing a negative balance of $32.8 million while the annual EBIT for 2019 was $24.2 million. As discussed previously, the
fourth quarter of 2019 includes a non-cash goodwill impairment of $50.0 million relating to the Maple products segment. In addition,
as mentioned above, the gross margin comparison does not reflect the economic results from operating activities which were impacted
by $2.2 million and $5.9 million for the quarter and the year, respectively, due to the period-over-period variation in mark-to-market of
derivative financial instruments adjustments.
Excluding the mark-to-market of derivative financial instruments and excluding the impact of the goodwill impairment in the prior year,
adjusted EBIT for the current quarter was $25.0 million as compared to $17.1 million for the comparative period last year. The increase of
$7.9 million was largely attributable to the Sugar segment as explained above. For the year, adjusted EBIT was $67.9 million compared to
$68.2 million for the prior year.
Net finance costs
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
Interest accretion on discounted lease obligations
Amortization of transition balances and net change
in fair value of interest rate swap agreements
Net finance costs
Fourth Quarter (1)
Fiscal Year (2)
2020
$
2,161
1,797
297
543
253
—
4,991
2019
$
2,082
1,797
296
737
—
(69)
4,843
2020
$
8,446
6,723
1,187
1,500
864
2019
$
8,339
7,337
1,178
1,637
—
(197)
18,523
(378)
18,113
(1) The fourth quarter of fiscal 2020 consists of 14 weeks and the fourth quarter of fiscal 2019 consists of 13 weeks.
(2) Fiscal 2020 consists of 53 weeks and fiscal 2019 consists of 52 weeks.
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 other
interest expense pertains mainly to interest payable to the PPAQ on syrup purchases, in accordance with payment terms.
Net finance costs for the current quarter and for the current year were $0.1 million and $0.4 million higher than the same period last year,
respectively, as the benefit from a decrease in interest rate was partially offset by the impact from the adoption of IFRS 16 Leases.
2020 Annual ReportManagement’s Discussion & Analysis
28
Taxation
The income tax expense (recovery) is as follows:
(In thousands of dollars)
Current
Deferred
Income tax expense
Fourth Quarter (1)
Fiscal Year (2)
2020
$
2,445
2,441
4,886
2019
$
4,038
(1,660)
2,378
2020
$
11,290
2,778
14,068
2019
$
16,084
(1,883)
14,201
(1) The fourth quarter of fiscal 2020 consists of 14 weeks and the fourth quarter of fiscal 2019 consists of 13 weeks.
(2) Fiscal 2020 consists of 53 weeks and fiscal 2019 consists of 52 weeks.
Deferred income taxes reflect temporary differences, which result primarily from the difference between depreciation claimed for tax
purposes and depreciation amounts recognized for financial 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.
The variation in current and deferred tax expense for the quarter and the year in comparison to 2019 is consistent with the variation in
earnings before taxes excluding the goodwill impairment expense recorded in 2019.
Net earnings (loss)
Net earnings amounted to $13.0 million for the fourth quarter of 2020 and $35.4 million for the year ended October 3, 2020. The increase of
$53.0 million for the fourth quarter and $43.6 million for the year is mostly explained by the Maple products non-cash goodwill impairment
recorded in the last quarter of 2019, as well as the variation of the after-tax impact of a reduction in adjusted operational results partially
off-set by the gains and losses on the mark-to-market of derivative financial instruments.
Rogers Sugar Inc.Management’s Discussion & Analysis
29
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 2020 and 2019:
QUARTERS (4)
2020
2019 (5)
(In thousands of dollars, except for volume
and per share information)
First
Second
Third
Fourth
First
Second
Third
Fourth
Sugar Volume (MT)
188,379 175,226 172,054 225,396
188,377
175,040
180,824
196,903
Maple products volume
(‘000 pounds)
Total revenues
Gross margin
EBIT
EBITDA
12,792
12,893
14,313
13,181
11,857
11,033
9,325
10,163
$
$
$
$
$
$
$
$
209,316 199,126 206,147 246,212
206,022
189,250
191,448
207,572
39,046
19,390
29,873
37,890
34,549
28,212
30,741
29,073
26,751
6,058
12,372
22,829
22,982
15,395
18,570
(32,800)
32,473
11,930
18,092
28,993
27,763
20,173
23,301
(27,869)
Net earnings (loss)
15,964
965
5,538
12,952
13,411
8,011
10,432
(40,021)
Gross margin rate per MT (1)
176.39
95.10
133.66
142.85
155.81
124.80
135.28
125.15
Gross margin percentage (2)
10.7%
4.9%
11.1%
9.9%
9.5%
12.7%
13.9%
9.2%
Per share
Net earnings (loss)
Basic
Diluted
Non-GAAP Measures (3)
0.15
0.14
0.01
0.01
0.05
0.05
0.13
0.12
0.13
0.12
0.08
0.08
0.10
0.10
(0.38)
(0.38)
Adjusted gross margin (3)
23,612
23,612
25,915
40,065
37,009
24,312
26,231
29,026
Adjusted EBIT (3)
Adjusted EBITDA (3)
10,280
10,280
8,414
25,004
25,442
11,495
14,060
17,153
30,227
16,522
14,279
31,231
30,231
16,570
18,792
22,215
Adjusted net earnings (3)
4,036
4,036
2,560
14,551
15,056
5,077
7,033
9,910
Adjusted gross margin
rate per MT (1) (3)
Adjusted gross margin
percentage (2) (3)
Adjusted net earnings per share (3)
109.63
109.63
120.45
157.51
155.16
110.22
116.97
123.71
7.9%
7.9%
8.4%
7.9%
14.2%
10.0%
11.2%
9.7%
Basic
Diluted
0.13
0.13
0.04
0.04
0.02
0.02
0.14
0.14
0.14
0.13
0.05
0.05
0.07
0.07
0.09
0.09
(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.
(4) All quarters are 13 weeks with the exception of the fourth quarter of fiscal 2020 which is 14 weeks.
(5) The current period results include the impacts from the adoption of the new IFRS 16 Leases as discussed in note 3 (h) of the consolidated financial statements.
As is permitted with this new standard, comparative information has not been restated and, therefore, may not be comparable.
2020 Annual ReportManagement’s Discussion & Analysis
30
Historically, the first quarter (October to December) of the fiscal year is the best quarter of the sugar segment 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 customer mix,
resulting in lower revenues, adjusted gross margins and adjusted net earnings. The historical trend for adjusted gross margin and adjusted
net earnings was different for 2020 due to the impact of the smaller beet crop in the first quarter, the volatility in customer demand related
to COVID-19 throughout the last three quarters of the year and the extra week recognized in the fourth quarter.
Usually, there is minimal seasonality in the Maple products segment. However, for the last two quarters of 2020, we experienced higher sales
volume attributable to increased demand from COVID-19.
Financial condition
(In thousands of dollars)
Total assets
Total non-current liabilities
2020
$
887,144
448,128
2019 (1)
$
835,028
404,904
2018 (1)
$
870,209
382,136
(5) The current period results include the impacts from the adoption of the new IFRS 16 Leases as discussed in note 3 (h) of the consolidated financial statements.
As is permitted with this new standard, comparative information has not been restated and, therefore, may not be comparable.
The increase in total assets in the current fiscal year is due mainly to the impact from the adoption of IFRS 16 as well as higher property-
plant and equipment. The decrease in total assets for fiscal 2019 when compared to 2018 is due mainly to the $50.0 million impairment of
goodwill partially offset by higher property-plant and equipment.
Non-current liabilities for fiscal 2020 also increased due mainly to the impact from the adoption of IFRS 16, an increase in employee benefits
liabilities mostly due to a change in pension actuarial assumptions as at October 3, 2020, as well as an increase in deferred tax liabilities.
The increase in non-current liabilities from fiscal 2018 to fiscal 2019 is explained by an increase in employee benefits liabilities mostly due
to a change in pension actuarial assumptions as of September 28, 2019.
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 increase (decrease) in cash and cash equivalents
2020 (1)
2019 (1) (2)
$
64,601
(36,786)
(26,153)
28
1,690
$
55,868
(30,768)
(27,009)
52
(1,817)
(1) Fiscal 2020 consists of 53 weeks and fiscal 2019 consists of 52 weeks.
(2) The current period results include the impacts from the adoption of the new IFRS 16 Leases as discussed in note 3 (h) of the consolidated financial statements.
As is permitted with this new standard, comparative information has not been restated and, therefore, may not be comparable.
Rogers Sugar Inc.Management’s Discussion & Analysis
31
Cash flow from operating activities increased by $8.7 million, which is explained by lower income taxes paid of $9.9 million, partially offset
by higher pension contributions of $1.2 million.
The negative variation in cash flow used in financing activities of $6.0 million is mainly attributable to an increase in repurchase of shares
of $5.9 million, the adoption of IFRS 16 Leases resulted in an increase of $4.2 million in cash outflow used in financing activities as a result
of payments made for lease obligations, a variation in bank overdraft of $8.3 million, partly offset by an increase in revolving credit facility
of $12.0 million.
The cash outflow used in investing activities decreased compared to fiscal 2019 by $0.9 million due to lower capital spending.
In order to provide additional information, the Company believes it is appropriate to measure free cash flow that is generated by the
operations of the Company. Free cash flow is a non-GAAP measure and is defined as cash flow from operations excluding changes in
non-cash working capital, mark-to-market and derivative timing adjustments and financial instruments’ non-cash amounts, and including
funds received or paid from the issue or purchase of shares and capital expenditures, excluding operational excellence 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
Payment of leases obligation
Purchase and cancellation of shares
Deferred financing charges
Free cash flow (1)
Declared dividends
Fiscal Year (2)
2020
$
2019 (3)
2018 (3)
$
$
64,601
55,868
52,912
(1,098)
12
(292)
2,413
1,996
(4,340)
(2,037)
(1,472)
12,764
(1,776)
(3,247)
7,645
(26,153)
(27,009)
(23,655)
11,275
(4,205)
(6,536)
(16)
40,001
37,380
8,617
—
(640)
(140)
30,843
37,793
7,394
—
(3,963)
(272)
47,802
37,971
(1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures.
(2) Fiscal 2020 consists of 53 weeks and fiscal 2019 and 2018 consists of 52 weeks.
(3) The current period results include the impacts from the adoption of the new IFRS 16 Leases as discussed in note 3 (h) of the consolidated financial statements.
As is permitted with this new standard, comparative information has not been restated and, therefore, may not be comparable.
Free cash flow for fiscal 2020 was $9.2 million higher than the previous year mainly explained by an increase in adjusted EBITDA(1) of
$4.5 million, a lower capital and intangible spending, net of operational excellence capital of $3.5 million, lower taxes paid of $9.9 million.
Somewhat offsetting the positive variance is an increase of $5.9 million in purchase and cancellation of shares, capital lease payments of
$4.2 million and higher pension contributions of $1.2 million.
2020 Annual ReportManagement’s Discussion & Analysis
32
Capital and intangible assets expenditures, net of operational excellence expenditures, decreased by $3.5 million compared to last year
due to timing in spending, in part, due to delays associated with the COVID-19 pandemic. Free cash flow is not impacted by operational
excellence capital expenditures, as these projects are not necessary for the operation of the plants but are undertaken because of the
substantial operational savings that are realized once the projects are completed.
During the year, the Sugar segment invested $14.3 million in “Stay in Business and Safety” capital projects for plant reliability, product
security, information systems and environmental requirements. The Maple product segment invested $0.8 million in “Stay in Business and
Safety” capital projects.
During the current fiscal year, Rogers purchased and cancelled a total of 1,377,394 common shares under the NCIB for a total cash
consideration of $6.5 million, compared to 122,606 common shares acquired last fiscal year, for a total cash consideration of $0.6 million.
Financing charges are paid when a new debt financing is completed and such charges are deferred and amortized over the term of that
debt. The cash used in the year to pay for such fees is therefore not available and as a result is deducted from free cash flow. In fiscal 2020,
a nominal amount was paid to extend and amend the revolving credit facility as opposed to $0.1 million for fiscal 2019.
The Company declared a quarterly dividend of 9.0 cents per common share, resulting in an amount payable of $37.4 million for the current
year versus $37.8 million last year.
Changes in non-cash operating working capital represent year-over-year movements in current assets, such as accounts receivable and
inventories, and current liabilities, such as accounts payables. Movements in these accounts are due mainly to timing in the collection of
receivables, receipts of raw sugar and payment of liabilities. Increases or decreases in such accounts are due to timing issues and therefore
do not constitute free cash flow. Such increases or decreases are financed from available cash or from the Company’s available credit facility
of $265.0 million. Increases or decreases in bank indebtedness are also due to timing issues from the above and therefore do not constitute
available free cash flow.
The combined impact of the mark-to-market, financial instruments non-cash amount and amortization of transitional balances of $2.1 million
for the current fiscal year do not represent cash items as these contracts will be settled when the physical transactions occur, which is the
reason for the adjustment to free cash flow.
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)
Total
$
Less than
1 year
$
Revolving credit facility
194,000
29,000
Interest on convertible debentures
Interest based on swap agreement
Lease obligations
Purchase obligations
Sugar segment purchase
obligations (in MT)
Maple product segment purchase
obligations (in ‘000 pounds)
1 to 3 years
4 to 5 years
After 5 years
$
—
15,012
5,549
6,242
—
$
165,000
7,506
2,422
3,946
—
$
—
4,194
957
11,625
—
26,803
178,874
16,776
34,218
11,583
26,218
63,294
329,313
7,506
2,655
4,405
63,294
106,860
1,496,000
544,000
850,000
102,000
4,000
4,000
—
—
—
—
Rogers Sugar Inc.Management’s Discussion & Analysis
33
The Sixth and Seventh series debentures, which mature in December 2024 and June 2025, respectively, have been excluded from the above
table due to the holders’ conversion option and the Company’s option to satisfy the obligations at redemption or maturity in shares. Interest
has been included in the above table to the date of maturity.
In fiscal 2013, Lantic entered into a five-year credit agreement of $150.0 million effective June 28, 2013, replacing the $200.0 million credit
agreement that expired on the same date. On August 3, 2017, the Company amended its existing revolving credit facility to partially fund
the acquisition of TMTC. The available credit was increased by $75.0 million by drawing additional funds under the accordion feature
embedded in the revolving credit facility (“Additional Accordion Borrowings”). Then, on December 20, 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.
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
minor amendments to the amended credit agreement entered into on December 20, 2017, which do not affect its outstanding borrowings
nor its financial covenants. As a result of the amended revolving credit facility, the Second Additional Accordion Borrowings and the
Additional 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. As at October 3,
2020, a total of $483.7 million have been pledged as security for the revolving credit facility, compared to $422.2 million as at September
28, 2019, including trade receivables, inventories and property, plant and equipment.
At October 3, 2020, the Company was in compliance with all the financial covenants related to its revolving credit facility and a total of
$194.0 million had been borrowed under the facility, of which, $29.0 million was presented as current.
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 October 3, 2020 as well as their respective value, interest rate and time period:
Fiscal year contracted
Date
Total value
Fiscal 2017
Fiscal 2017
Fiscal 2017
Fiscal 2019
Fiscal 2020
Fiscal 2020
Fiscal 2020
Total outstanding value as at
October 3, 2020
Forward start interest rate swaps:
Fiscal 2019
Fiscal 2020
Fiscal 2020
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%
October 3, 2019 to June 28, 2024 – 1.68%
February 24, 2020 to June 28, 2025 – 1.60%
March 6, 2020 to June 28, 2021 – 1.08%
June 29, 2022 to June 28, 2024 – 2.17%
June 28, 2021 to June 28, 2023 – 1.08%
June 28, 2024 to June 28, 2025 – 1.18%
$
20,000
30,000
30,000
20,000
20,000
20,000
20,000
160,000
$
80,000
10,000
80,000
2020 Annual ReportManagement’s Discussion & Analysis
34
Lease obligations relate mainly to the leasing of various mobile equipment, the premises of the blending operations in Toronto and other
various location associated with the Maple products segment operations.
Purchase obligations represent all open purchase orders as at year-end and approximately $22.9 million for sugar beets that will be
harvested and processed in fiscal 2020 but exclude any raw sugar priced against futures contracts. The purchase obligation regarding the
sugar beets represents Management’s best estimate of the amount expected to be payable in fiscal 2021 as of the date of this MD&A.
TMTC has $4.0 million remaining to pay related to an agreement to purchase approximately $12.2 million (4.0 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 $14.5 million
in favor of the PPAQ. The letters of guarantee expire on February 28, 2021.
A significant portion of the Company’s sales are made under fixed-price, forward-sales contracts, which extend up to three years. The
Company also contracts to purchase raw cane sugar substantially in advance of the time it delivers the refined sugar produced from the
purchase. To mitigate its exposure to future price changes, the Company attempts to manage the volume of refined sugar sales contracted
for future delivery in relation to the volume of raw cane sugar contracted for future delivery, when feasible.
The Company uses derivative instruments to manage exposures to changes in raw sugar prices, natural gas prices and foreign exchange.
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.
To reduce price risk, 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. 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 firm commitment purchase
price of raw sugar.
The Company has hedged all of its exposure to raw sugar price risk movement through July 2023.
At October 3, 2020, the Company had a net short sugar position of $3.9 million in net contract amounts with a current net contract value
of $5.2 million. This short position represents the offset of a smaller volume of sugar priced with customers than purchases priced from
suppliers.
The Company uses futures contracts and swaps to help manage its natural gas costs. At October 3, 2020, the Company had $40.5 million
in natural gas derivatives, with a current contract value of $38.9 million.
The Company’s activities, which result in exposure to fluctuations in foreign exchange rates, consist of the purchasing of raw sugar, the
selling of refined sugar and Maple products and the purchasing of natural gas. 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 at a
future date and may be settled in cash.
The credit risk associated with foreign exchange contracts arises from the possibility that counterparties to a foreign exchange contract
in which the Company has an unrealized gain, fail 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 three years and relate mostly to the U.S. currency, and to a much smaller
extent, the Euro and Australian 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.
Rogers Sugar Inc.Management’s Discussion & Analysis 35
At October 3, 2020, the Company had a net $160.4 million in foreign currency forward contracts with a current contract value of $157.9 million.
As part of its normal business practice, the Company also enters into multi-year supply agreements with raw sugar processors for raw cane
sugar. Contract terms will state the quantity and estimated delivery schedule of raw sugar. The price is determined at specified periods of
time before such raw sugar is delivered based upon the value of raw sugar as traded on the ICE #11 world raw sugar market. At October 3,
2020, the Company had commitments to purchase a total of 1,496,000 metric tonnes of raw sugar, of which approximately 383,574 metric
tonnes had been priced, for a total dollar commitment of $150.0 million.
The Company has no other off-balance sheet arrangements.
Capital resources
As mentioned above, Lantic entered into a five-year credit agreement of $150.0 million effective June 28, 2013, which has been amended
in fiscal 2017, 2018 and 2019 to increase its borrowing capacity by requesting the Additional Accordion borrowings and the Second
Additional Accordion Borrowings, which brought the total available credit to $265.0 million. In addition, the credit facility was also amended
in the current year to extend its maturity to June 28, 2024. At October 3, 2020, $194.0 million had been drawn from the working capital
facility, $2.8 million was drawn as bank overdraft and $2.0 million in cash was also available.
The Taber beet operation requires seasonal working capital in the first half of the fiscal year, when inventory levels are high and a substantial
portion of the payments due to the Growers is made. TMTC also has seasonal working capital requirements. Although the syrup inventory
is received during the third quarter of the fiscal year, its payment terms with the PPAQ requires cash payment in the first half of the fiscal
year. The Company has sufficient cash and availability under its line of credit to meet such requirements.
Future commitments of approximately $24.6 million have been approved for completing capital expenditures presently in progress.
The Company also has funding obligations related to its employee future benefit plans, which include defined benefit pension plans. As at
October 3, 2020, all of the Company’s registered defined benefit pension plans were in a deficit position. The Company performed actuarial
evaluations for its three remaining pension plans as of December 31, 2016, January 1, 2017 and December 31, 2019.
The Company monitors its pension plan assets closely and follows strict guidelines to ensure that pension fund investment portfolios are
diversified in line with industry best practices. Nonetheless, pension fund assets are not immune to market fluctuations and, as a result, the
Company may be required to make additional cash contributions in the future. In fiscal 2020, cash contributions to defined benefit pension
plans increased by approximately $0.4 million to $4.0 million. In total, the Company expects to incur cash contributions of approximately
$5.9 million for fiscal 2021 relating to employee defined benefit pension plans. For more information regarding the Company’s employee
benefits, please refer to Note 20 of the audited consolidated financial statements.
Cash requirements for working capital and other capital expenditures are expected to be paid from available cash resources and funds
generated from operations. Management believes that the unused credit under the revolving facility is adequate to meet its expected cash
requirements.
2020 Annual ReportManagement’s Discussion & Analysis 36
OUTSTANDING SECURITIES
A total of 103,536,923 shares were outstanding as at October 3, 2020 and November 25, 2020, respectively (104,885,464 as at
September 28, 2019).
On June 1, 2020, the Company received approval from the Toronto Stock Exchange to proceed with a Normal Course Issuer Bid (“2020
NCIB”), under which the Company may purchase up to 1,500,000 common shares. In addition, the Company entered into an automatic
share purchase agreement with Scotia Capital Inc. in connection with the 2020 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. The 2020 NCIB commenced on June 3, 2020 and may continue to June 2, 2021. No shares were purchased under the
2020 NCIB during the year.
On May 22, 2019, the Company received approval from the Toronto Stock Exchange to proceed with a Normal Course Issuer Bid (“2019
NCIB”), under which the Company may purchase up to 1,500,000 common shares. The 2019 NCIB commenced on May 24, 2019 and
terminated on March 30, 2020, whereby all common shares had been purchased. During the year, the Company purchased 1,377,394
common shares having a book value of $1.3 million for a total cash consideration of $6.5 million. The excess of the purchase price over the
book value of the shares in the amount of $5.2 million was charged to deficit. During fiscal 2019, the Company purchased 122,606 common
shares having a book value of $0.1 million for a total cash consideration of $0.6 million. The excess of the purchase price over the book
value of the shares in the amount of $0.5 million was charged to deficit. All shares purchased were cancelled.
During fiscal 2020, holders of the Sixth series debentures converted a total of $0.1 million into 9,079 common shares. As a result, the total
amount outstanding under the Sixth series debentures is $57,425.
During fiscal 2020, holders of the Seventh series debentures converted a total of $0.2 million into 19,774 common shares. As a result, the
total amount outstanding under the Seventh series debentures is $97,575.
The Company currently has a share option plan that was established in 2011 and amended in 2015. Under this plan, the Company has set
aside 4,000,000 common shares to be granted to key personnel. As at October 3, 2020, a total of 3,535,997 options had been granted at
exercise prices ranging between $4.28 per share and $6.51 per share. These share options are exercisable to a maximum of twenty percent
per year, starting after the first anniversary date of the granting of the options and will expire after a term of ten years.
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
December 2, 2019
PSU
Additional PSU
Total PSU
Performance Cycle
224,761
290,448
324,932
44,372
36,717
18,734
269,133
327,165
343,666
2018-2020
2019-2021
2020-2022
The PSUs were granted to executives and will vest at the end of the 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. If the level of
achievement of total shareholder returns is within the specified 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 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. If the level of achievement of total shareholder returns is below the minimum
threshold, the PSU will be forfeited without any payments made.
Rogers Sugar Inc.Management’s Discussion & Analysis 37
ENVIRONMENT
sourcing of raw material supplies, weather conditions, operating
costs and government programs and regulations.
The Company’s policy is to meet all applicable government
requirements with respect to environmental matters. Management
Disease and Epidemics, including COVID-19
believes that the Company is in compliance in all material respects
The impact of disease and epidemics may have a negative impact on
with environmental laws and regulations and maintains an open
the Company, Lantic or TMTC and their performance and financial
dialogue with regulators and the Government with respect to
position. In December 2019, a novel strain of coronavirus, known
awareness and adoption of new standards.
as “COVID-19” was identified. As of March 20, 2020, COVID-19
had spread to over 100 countries and been declared a pandemic
In fiscal year 2020 the Company completed the installation of
by the World Health Organization. COVID-19 has resulted in, and
equipment to upgrade the Taber beet factory to be fully compliant
renewed outbreaks of COVID-19 or new epidemics could result
with the new air emissions regulations in preparation for the start
in, health or other government authorities requiring the closure
of the 2020 beet harvesting season (crop 2019). Air emission
of offices or other businesses and could also result in a general
testing took place, and the Alberta Environment and Parks issued a
economic decline. For example, such events may adversely impact
compliance certificate.
economic activity through disruption in supply and delivery chains.
Moreover, the Company, Lantic or TMTC’s operations could be
With respect to potential environmental remediation of our
negatively affected if personnel are affected by or quarantined as
properties, which could occur in the event of a building demolition
the result of, or in order to avoid, exposure to a contagious illness.
or a sale, it is worth noting that the Vancouver facility has a lengthy
Lantic and TMTC have been designated as “essential businesses”
history of industrial use, and fill materials have been used on the
at this time, with minimal disruptions to operations, as described
property in the normal course of business. No assurance can be
above.
given that material expenditures will not be required in connection
with contamination from such industrial use or fill materials.
A resulting negative impact on economic fundamentals and
consumer confidence may negatively
impact market value,
Similarly, the Montréal facility has a lengthy history of industrial use.
increase market volatility, cause credit losses on customer sales or
Contamination has been identified on a vacant property acquired
credit spreads to widen, and reduce liquidity, all of which could
in 2001, and the Company has been advised that additional soil
have an adverse effect on the business of the Company, Lantic or
and ground water contamination is likely to be present. Given the
TMTC. The duration of the business disruption and related financial
industrial use of the property, and the fact that the Company does
impact caused by a widespread health crisis cannot be reasonably
not intend to change the use of that property in the future, the
estimated. The speed and extent of the spread of COVID-19,
Company does not anticipate any material expenditures being
and the duration and intensity of resulting business disruption
required in the short term to deal with this contamination, unless
and related financial and social impact, are uncertain, and such
off-property impacts are discovered. The Company has recorded a
adverse effects may be material. While governmental agencies
provision under asset retirement obligations for this purpose and
and private sector participants will seek to mitigate the adverse
the provision is expected to be sufficient.
effects of this coronavirus, which may include such measures
as heightened sanitary practices, telecommuting, quarantine,
Although the Company is not aware of any specific problems at its
curtailment or cessation of travel, and other restrictions, and the
Toronto distribution centre, its Taber plant and any of the TMTC
medical community is seeking to develop vaccines and other
properties, no assurance can be given that expenditures will not
treatment options, the efficacy of such measures is uncertain.
be required to deal with known or unknown contamination at the
The Company’s, Lantic’s and TMTC’s operations and business
property or other facilities or offices currently or formerly owned,
results could be materially adversely affected. The extent to which
used or controlled by Lantic.
RISKS AND UNCERTAINTIES
COVID-19 (or any other disease or epidemic) impacts business
activity or investment results will depend on future developments,
which are highly uncertain and cannot be predicted, including
new information which may emerge concerning the severity of the
coronavirus and the actions required to contain this coronavirus or
The Company’s business and operations are substantially affected
treat its impact, among others.
by many factors, including prevailing margins on refined sugar
and its ability to market sugar and maple products competitively,
2020 Annual ReportManagement’s Discussion & Analysis 38
Dependence Upon Lantic
On October 2, 2020, the CITT initiated the sunset review concerning
Rogers is entirely dependent upon the operations and assets
the anti-dumping and countervailing measures on imports of US and
of Lantic through its ownership of securities of this company.
EU refined sugar in the Canadian market. As a result of the CITT’s
Accordingly, interest payments to debenture holders and dividends
decision, the Canada Border Services Agency (CBSA) has initiated
to shareholders will be dependent upon the ability of Lantic and/
its investigation to determine whether the expiry of the measures
or TMTC to pay its interest obligations under the subordinated
is likely to result in the resumption of dumping and subsidizing of
notes and to declare and pay dividends on or return capital in
US and EU imports into Canada. The CBSA is expected to make a
respect of the common shares. The terms of Lantic’s bank and other
determination by March 1, 2021. If this determination is positive,
indebtedness may restrict its ability to pay dividends and make
the CITT will initiate its inquiry on March 2, 2021 to determine if the
other distributions on its shares or make payments of principal
dumping or subsidizing of refined sugar is likely to result in injury
or interest on subordinated debt, including debt which may be
to the Canadian sugar industry. The CITT is expected to issue its
held, directly or indirectly, by Rogers, in certain circumstances. In
decision and reasons by August 6, 2021.
addition, Lantic may defer payment of interest on the subordinated
notes at any given time for a period of up to 18 months.
The Canadian Sugar Institute (CSI) is seeking continuation of the
No Assurance of Future Performance
for an additional five years beyond October 29, 2020. This position
Historic and current performance of the business of the Company
based on the fact that the trade-distorting sugar programs in the
and TMTC may not be indicative of success in future periods. The
US and EU remain in place and the Canadian industry remains
future performance of the business after the acquisition may be
vulnerable to injury from unfair competition from dumped and
anti-dumping and countervailing measures, without amendment,
influenced by economic downturns and other factors beyond the
subsidized imports from these sources.
control of the Company. As a result of these factors, the operations
and financial performance of the Company, including TMTC, may
The duties on imports of U.S. and EU refined sugar are important
be negatively affected, which may materially adversely affect the
to Lantic and to the Canadian refined sugar industry in general
Company’s financial results.
because they protect the market from the adverse effect of unfairly
traded imports from these sources. The government support
Government Regulations and Foreign Trade Policies with
and trade distorting attributes of the U.S. and EU sugar regimes
regards to Sugar
continue to generate surplus refined sugar production and exports
In July 1995, Revenue Canada made a preliminary determination,
that threaten the Canadian sugar market. However, there is no
followed by a final determination in October 1995, that there
assurance that the CITT determination in the next review will
was dumping of refined sugar from the United States, Denmark,
continue the duty protection for a further five years.
Germany, the United Kingdom, the Netherlands and the Republic
of Korea into Canada, and that subsidized refined sugar was
Fluctuations in Margins and Foreign Exchange
being imported into Canada from the European Union (“EU”).
The Company’s profitability is principally affected by its margins on
The Canadian International Trade Tribunal (“CITT”) conducted
domestic refined sugar sales. In turn, this price is affected by a variety
an inquiry and on November 6, 1995 ruled that the dumping of
of market factors such as competition, government regulations
refined sugar from the United States, Denmark, Germany, the
and foreign trade policies. The Company, through the Canadian-
United Kingdom and the Netherlands as well as the subsidizing
specific quota, normally sells a small portion of its production of
from the EU was threatening material injury to the Canadian sugar
refined sugar in the U.S. and to Mexico and also sells beet pulp to
industry. The ruling resulted in the imposition of protective duties
export customers in U.S. dollars. The Company’s Taber sugar sales
on these unfairly traded imports.
in Canada are priced against the #11 world raw sugar market, which
trades in U.S. dollars, while the sugar derived from the sugar beets
Under Canadian laws, these duties must be reviewed every five
is paid for in Canadian dollars to the Growers. Fluctuations in the
years. On October 30, 2015, the CITT concluded its fourth review
value of the Canadian dollar will impact the profitability of these
of the 1995 finding and issued its decision to continue the finding
sales. Except for these sales, which currently can only be supplied
against dumped and subsidized sugar from the U.S. and EU for
by the Company’s Taber beet plant, and sales to the U.S. under
another five years. New CITT practice is to initiate reviews later than
other announced specific quotas, most sales are in Canada and
in previous reviews so it is likely that duty protection will remain
have little exposure to foreign exchange movements.
in place as late as July 2021 and could be further extended for
another five years depending on the outcome of the review.
Rogers Sugar Inc.Management’s Discussion & Analysis 39
Fluctuations in Raw Sugar Prices
Weather and Other Factors Related to Production
Raw sugar prices are not a major determinant of the profitability of
Sugar beets, as is the case with most other crops, are affected
the Company’s cane sugar operations, as the price at which sugar
by weather conditions during the growing season. Additionally,
is both purchased and sold is related to the #11 world raw sugar
weather conditions during the harvesting and processing season
price and all transactions are hedged. In a market where world raw
could affect the Company’s total beet supply and sugar extraction
sugar is tight due to lower production, significant premiums may be
from beets stored for processing. A significant reduction in the
charged on nearby deliveries which would have a negative impact
quantity or quality of sugar beets harvested due to adverse weather
on the adjusted gross margins of the cane operations. The #11
conditions, disease or other factors could result in decreased
world raw sugar price can, however, impact the profitability of the
production, with negative financial consequences to Lantic.
Company’s beet operations. Sugar derived from beets is purchased
at a fixed price, plus an incentive when sugar prices rise over a
Regulatory Regime Governing the Purchase and
certain level, and the selling price of domestic refined sugar rises
Sale of Maple Syrup in Québec
or falls in relation to the #11 world raw sugar price.
Producers of maple syrup in Québec are required to operate within
the framework provided for by the Marketing Act. Pursuant to the
A relatively high world raw sugar price and/or low price of corn
Marketing Act, producers, including producers of maple syrup,
will also reduce the competitive position of liquid sugar in Canada
can take collective and organized control over the production
as compared to HFCS which could result in the loss of HFCS
and marketing of their products (i.e. a joint plan). Moreover, the
substitutable business for Lantic.
Security of Raw Sugar Supply
Marketing Act empowers the marketing board responsible for
administering a joint plan, that is the PPAQ in the case of maple
syrup, with the functions and role otherwise granted to the Régie
There are over 177 million metric tonnes of sugar produced
des marchés agricoles et alimentaires du Québec, the governing
worldwide. Of this, more than 60 million metric tonnes of sugar
body created by the Government of Québec to regulate, among
are traded on the world market. The Company, through its cane
other things, the agricultural and food markets in Québec. As part
refining plants, buys approximately 0.7 million metric tonnes of raw
of its regulating and organizing functions, the PPAQ may establish
sugar per year. Even though worldwide raw sugar supply is much
arrangements to maintain fair prices for all producers and may
larger than the Company’s yearly requirements, concentration of
manage production surpluses and their storage to stabilize the
supply in certain countries like Brazil, combined with an increase in
pricing of maple syrup.
cane refining operations in certain countries, may create tightness
in raw sugar availability at certain times of the year. To prevent
Pursuant to the Sales Agency Regulation, the PPAQ is responsible
any raw sugar supply shortage, the Company normally enters
for the marketing of bulk maple syrup in Québec. Therefore,
long-term supply contracts with reputable suppliers. For raw sugar
any container that contains 5L or more of maple syrup must be
supply not under contract, significant premiums may be paid on
marketed through the PPAQ as the exclusive selling agent for
the purchase of raw sugar on a nearby basis, which may negatively
the producers. Bulk maple syrup may be sold to the PPAQ or to
impact adjusted gross margins.
“authorized buyers” accredited by the PPAQ. In Québec, 85%
of the total production of maple syrup is sold to the PPAQ or the
The availability of sugar beets to be processed in Taber, Alberta
authorized buyers, leaving only approximately 15% of the total
is dependent on a supply contract with the Growers, and on the
production being sold directly by the producers to consumers or
Growers planting the necessary acreage every year. In the event
grocery stores. TMTC is an authorized buyer with the PPAQ. The
that sufficient acreage is not planted in a certain year, or that the
authorized buyer status is renewed on an annual basis. There is
Company and the Growers cannot agree on a supply contract,
no certainty that TMTC will be able to maintain its status as an
sugar beets might not be available for processing, thus requiring
authorized buyer with the PPAQ. Failure by TMTC, the Corporation
transfer of products from the Company’s cane refineries to the
or Lantic to remain an authorized buyer with the PPAQ will likely
Prairie market, normally supplied by Taber. This would increase
affect the capacity to fully supply the resale of maple syrup or Maple
the Company’s distribution costs and may have an impact on the
products and therefore the financial results of the Corporation.
adjusted gross margin rate per metric tonne sold.
2020 Annual ReportManagement’s Discussion & Analysis 40
The PPAQ, in its capacity as bargaining and sales agent for the
portion of its accumulated reserve. There can be no assurance that
producers of maple syrup in Québec as well as the body empowered
TMTC will have access to some of such reserve to offset decreases
to regulate and organize the production and marketing of maple
in production due to weather conditions or that such reserve will
syrup, and the bulk buyers of maple syrup, represented by the MIC,
be sufficient to cover a gap in the production in any given year.
entered into the Marketing Agreement, which is expected to be
Any decrease in production or incapacity to purchase additional
renewed on an annual basis. Pursuant to the Marketing Agreement,
reserves from the PPAQ may affect TMTC’s supply of its sales of
authorized buyers must pay a minimum price to the PPAQ for any
maple syrup and other Maple products and, ultimately, its financial
maple syrup purchased from the producers. As a result, TMTC’s
results.
ability to negotiate the purchase price of maple syrup is limited.
Moreover, the minimum purchase price that is applicable to the
Competition
authorized buyers with the PPAQ also restricts TMTC’s ability to
For the Sugar segment, the Company faces domestic competition
adjust its resale pricing to take into account market fluctuations due
from Redpath Sugar Ltd. and smaller regional operators
to supply and demand. TMTC’s incapacity to adjust its resale prices
and/distributors of both foreign and domestic refined sugar.
upward to take into account any increase in consumer demand may
Differences in proximity to various geographic areas within Canada
affect the financial outlook of the Corporation.
and elsewhere result in differences in freight and shipping costs,
which in turn affect pricing and competitiveness in general.
Pursuant to the Marketing Agreement, authorized buyers must buy
Maple products from the PPAQ in barrels corresponding to the
In addition to sugar, the overall sweetener market also includes:
“anticipated volume”. The anticipated volume must be realistic and
corn-based sweeteners, such as HFCS, an alternative liquid
in line with volumes purchased in previous years. The refusal from
sweetener, which can be substituted for liquid sugar in soft drinks
the PPAQ to accept the anticipated volume set forth by TMTC or
and certain other applications; and non-nutritive, high intensity
the failure by TMTC to properly estimate the anticipated volume for
sweeteners such as aspartame, sucralose and stevia. Differences in
a given year may affect the ability for TMTC to increase its reselling
functional properties and prices have tended to define the use of
capacity and could materially adversely affect the Company’s
these various sweeteners. For example, HFCS is limited to certain
financial results and operations.
applications where a liquid sweetener can be used. Non-nutritive
sweeteners are not interchangeable in all applications. The
Production of Maple Syrup Being Seasonal and
substitution of other sweeteners for sugar has occurred in certain
Subject to Climate Change
products, such as soft drinks. We are not able to predict the
The production of maple syrup takes place over a period of 6 to 8
availability, development or potential use of these sweeteners and
weeks during the months of March and April of each year. Maple
their possible impact on the operations of the Company.
syrup production is intimately tied to the weather as sap only
flows when temperatures rise above freezing level during the day
For the Maple products segment, TMTC is among the largest
and drop below it during the night, such temperature difference
branded and private label maple syrup bottling and distributing
creating enough pressure to push sap out of the maple tree. Given
companies in the world. TMTC has three major competitors in the
the sensitivity of temperature in the process of harvesting maple
market and also competes against a multitude of smaller bottlers
sap, climate change and global warming may have a material
and distributing companies.
impact on such process as the maple syrup production season may
become shorter. Reducing the production season for maple syrup
A large majority of TMTC’s revenues are made under the private
may also have an impact on the level of production.
label line. The Corporation anticipates that for a foreseeable
future, TMTC’s relationship with its top private label customers will
In 2002, the PPAQ set up a strategic maple syrup reserve in order to
continue to be key and will continue to have a material impact on
mitigate production fluctuations imputable to weather conditions
its sales. Although the Corporation considers that the relationship
and prevent such fluctuations from causing maple syrup prices
with its top private label customers is excellent, the loss of, or a
to spike or drop significantly. The reserve was initially established
decrease in the amount of business from, such customers, or any
to set aside a production quantity equivalent to half of the then
default in payment on their part could significantly reduce TMTC’s
annual demand. Each year, the PPAQ may organize a sale of a
sales and harm the Company’s operating and financial results.
Rogers Sugar Inc.Management’s Discussion & Analysis 41
Consumer Habits may Change
Operating Costs
The maple products market, both national and international, has
Natural gas represents an important cost in our refining operations.
experienced some important changes over the last few years
Our Taber beet factory includes primary agricultural processing
as maple products are becoming better known and consumer
and refining. As a result, Taber uses more energy in its operations
preferences and consumption patterns have shifted to more natural
than the cane facilities in Vancouver and Montréal, principally as
products. Maple syrup has typically been used, principally in North
a result of the need to heat the cossettes (sliced sugar beets) to
America, as a natural alternative to traditional sweeteners and has
evaporate water from juices containing sugar, and to dry wet beet
been served on morning meals, such as pancakes, waffles and
pulp. Changes in the costs and sources of energy may affect the
other breakfast bakeries for decades. The offer of maple products
financial results of the Company’s operations. In addition, all-natural
has recently expanded to include, among others, maple butter and
gas purchased is priced in U.S. dollars. Therefore, fluctuations
maple sugar, flakes and taffy. As a result of evolving customer trends
in the Canadian/U.S. dollar exchange rate will also impact the
and the development of new maple products continues, TMTC will
cost of energy. The Company hedges a portion of its natural gas
need to anticipate and meet these trends and developments in a
price exposure through the use of natural gas contracts to lessen
competitive environment on a timely basis. The failure of TMTC
the impact of fluctuations in the price of natural gas. Provincial
to anticipate, identify and react to shifting consumer and retail
application of some form of carbon tax has been increasingly
customer trends and preferences through successful innovation and
important across Canada and for some provinces with a carbon tax,
enhanced production capability could adversely result in reduced
rates have been increasing, which could increase the overall energy
demand for its products, which could in turn affect the financial
costs for the Company.
performance of the Company. There is also no guarantee that the
current favourable market trends will continue in the future.
Foreign Trade Policies with regards to Maple products
TMTC’s international operations are also subject to inherent
Growth of TMTC’s Business Relying Substantially on Exports
risks, including change in the free flow of food products between
The size of the global wholesale market for maple syrup is currently
countries, fluctuations in currency values, discriminatory fiscal
estimated at $850 million, the United States being by far the world’s
policies, unexpected changes in local regulations and laws and the
largest importer, followed by Japan and Germany. Despite the
uncertainty of enforcement of remedies in foreign jurisdictions. In
increase of sales of maple products that the Canadian market has
addition, foreign jurisdictions, including the United States, TMTC’s
experienced in recent years, the potential for growth of this industry
current and expected largest market, could impose tariffs, quotas,
largely relies on the international market. Moreover, over the last
trade barriers and other similar restrictions on TMTC’s international
few years, New York Vermont and Maine have increased their
sales and subsidize competing agricultural products.
production of maple syrup and have now become competitors of
Québec, which however remains the largest producer and exporter
All of these risks could result in increased costs or decreased
of maple syrup in the world. While TMTC continues to develop
revenues, either of which could materially adversely affect TMTC’s
its selling efforts outside of Canada, including through forming
financial condition and results of operations.
new partnerships in countries where the maple syrup market is
undeveloped, it will likely face high competition from other bottlers
Employee Relations
and distributers, including from other Canadian and U.S. companies,
The majority of the Lantic’s operations are unionized and
for its share of the international market. Such growing competition
agreements are currently in place in each unionized facility. The next
and the incapacity for TMTC to further develop its selling efforts
collective bargaining agreements to expire will be in fiscal 2021 at
outside of Canada could adversely affect the Company’s capacity
the Montreal sugar refinery facility. We expect these agreements
to grow TMTC’s business and its future results. Furthermore, an
will renewed at competitive rates.
incapacity to attract increased attention on maple products or a
sudden lack of interest for such products from customers outside of
The Company has contingency plans in place to mitigate the
North America may affect the Company’s future results.
potential impact of labour disruptions at its facilities. However,
such potential disruptions in future years could restrict the ability
of the Company to service its customers in the affected regions,
consequently affecting the Company’s financial results.
2020 Annual ReportManagement’s Discussion & Analysis 42
Food Safety and Consumer Health
unauthorized access to data hereinabove mentioned, and other
The Company is subject to risks that affect the food industry in
electronic security breaches that could lead to disruptions in critical
general, including risks posed by accidental contamination,
systems, corruptions of data and unauthorized release of confidential
product tampering, consumer product liability, and the potential
or otherwise protected information. The occurrence of one of these
costs and disruptions of a product recall. The Company actively
events could cause a substantial decrease in revenues, increased
manages these risks by maintaining strict and rigorous controls and
costs to respond or other financial loss, damage to reputation,
processes in its manufacturing facilities and distribution systems
increased regulation or litigation or inaccurate information reported
and by maintaining prudent levels of insurance.
by the Company’s operations. These developments may subject the
The Company’s facilities are subject to audit by federal health
and, depending on their ultimate magnitude, could materially and
agencies in Canada and similar institutions outside of Canada.
adversely affect the Company’s financial results and operations.
The Company also performs its own audits designed to ensure
compliance with its internal standards, which are generally at, or
The Company seeks to manage cybersecurity risk by continuing
higher than, regulatory agency standards in order to mitigate the
to
invest
in appropriate
information
technology systems,
Company’s operations to increased risks, as well as increased costs,
risks related to food safety.
infrastructure and security, including disaster plans, reviewing its
existing technologies, processes and practices on a regular basis
Consumers, public health officials and government officials are
and ensuring employees understand and are aware of their role
increasingly concerned about the public health consequences
in protecting the integrity of the Company’s technological security
of obesity, particularly among young people. In addition, some
and information. The Company relies on third party products
researchers, health advocates and dietary guidelines are suggesting
and services to assist it in protecting its information technology
that consumption of sugar, in various forms, is a primary cause of
infrastructure and its proprietary and confidential information. The
increased obesity rates and are encouraging consumers to reduce
Company seeks to be proactive in the area of cybersecurity and
their consumption of sugar. Increasing public concern about obesity
consequently anticipates that it will continue to incur expenses
and other health conditions; possible new or increased taxes on
in relation to, and dedicate personnel and other resources to,
products containing sugar, such as sugar-sweetened beverages by
cybersecurity, as new and increasingly complex threats and risks
government entities to reduce consumption or to raise revenue;
are identified and responded to.
shift in consumer preferences from sugar to other types of
sweeteners; additional governmental regulations concerning the
Environmental Matters
marketing, labeling, packaging or sale of products and negative
The operations of the Company are subject to environmental
publicity may reduce demand for the products of the Company
regulations
imposed by
federal, provincial and municipal
and each of the aforementioned factors could materially adversely
governments in Canada, including those relating to the treatment
affect the Company’s financial results and operations.
and disposal of wastewater and cooling water, air emissions,
Cybersecurity
contamination and spills of substances. Management believes
that the Company is in compliance in all material respects with
The Company faces various security threats, including cybersecurity
environmental laws and regulations. However, these regulations
threats to gain unauthorized access to sensitive information, to
have become progressively more stringent and the Company
render data or systems unusable, or otherwise affect the Company’s
anticipates this trend will continue, potentially resulting in the
ability to operate. The Company’s operations require it to use and
incurrence of material costs to achieve and maintain compliance.
store personally identifiable and other sensitive information of its
employees, notably. The collection and use of personally identifiable
Violation of these regulations can result in fines or other penalties,
information are governed by Canadian federal and provincial laws
which in certain circumstances can include clean-up costs. As
and regulations. Privacy and information security laws continue to
well, liability to characterize and clean up or otherwise deal with
evolve and may be inconsistent from one jurisdiction to another.
contamination on or from properties owned, used or controlled
The security measures put in place by the Company in that regard
by the Company currently or in the past can be imposed by
cannot provide absolute security, and the Company’s information
environmental regulators or other third parties. Such liabilities
technology infrastructure may be vulnerable to cyberattacks,
could materially adversely affect the Company’s financial results
including without limitation, malicious software, attempts to gain
and operations.
Rogers Sugar Inc.Management’s Discussion & Analysis 43
Income Tax Matters
Sugar
The income of the Company must be computed and is taxed in
The Company expects the sugar segment to continue to perform
accordance with Canadian tax laws, all of which may be changed in
well in fiscal 2021. A combination of strong underlying demand
a manner that could adversely affect the ability of the Company to
resulting in increased volumes along with a successful beet harvest
pay dividends in the future. There can be no assurance that taxation
are expected to result in improved fiscal 2021 operational and
authorities will accept the tax positions adopted by the Company
financial performance.
including the determination of the amounts of federal and provincial
income which could materially adversely affect dividends.
Sales volume and Adjusted EBITDA
The current corporate structure involves a significant amount of
business segment in fiscal 2021, despite the ongoing impact of
inter-company or similar debt, generating substantial interest
COVID-19. The Company expects sales volume and adjusted
expense, which reduces earnings and therefore income tax payable
EBITDA to improve moderately over fiscal 2020. Sales volumes
at Lantic and TMTC’s level. There can be no assurance that taxation
for fiscal 2021 are expected to increase by approximately 5,000
authorities will not seek to challenge the amount of interest
metrics tonnes notwithstanding the extra week of 2020, to reach
Market conditions are expected to remain favourable for the sugar
expense deducted. If such a challenge were to succeed against
approximately 766,000 metric tonnes.
Lantic, it could materially adversely affect the amount of cash
transferred to Rogers for dividend payment. Management believes
Volume for industrial customers
that the interest expense inherent in the structure is supportable
The Company anticipates that volume for the industrial customer
and reasonable considering the terms of the debt owed by Lantic
group will increase by approximately 4,000 metric tonnes in 2021,
to Rogers and TMTC to Lantic.
representing a return to normal demand levels with minimal impact
from the COVID-19 pandemic in 2021.
Management and Operation of Lantic
The Board of Directors of Lantic is currently controlled by Lantic
For the liquid portion of the industrial customer group, the
Capital, an affiliate of Belkorp Industries. As a result, holders of
Company expects volume for 2021 to be comparable to 2020.
shares have limited say in matters affecting the operations of Lantic;
if such holders are in disagreement with the decisions of the Board
Volume for retail customers
of Directors of Lantic, they have limited recourse. The control
The retail consumer demand in 2020 was better than expected due
exercised by Lantic Capital over the Board of Directors of Lantic
to the effects of COVID-19 and the additional week of operations. In
may make it more difficult for others to attempt to gain control of
fiscal 2021, the Company does not expect to experience the same
or influence the activities of Lantic and the Company.
level of COVID-19 related demand and anticipates retail customer
volume to decrease by approximately 8,000 metric tonnes or 7.0%
OUTLOOK
as compared to 2020.
Volume related to export sales
The health and safety of our employees remains our top priority.
The Company anticipates export volumes for 2021 to be
With respect to COVID-19, the Company is closely following all
approximately 10,000 metric tonnes above 2020 driven by the
public health authority recommendations and has put in place
implementation of new export quotas and the resumption of
enhanced safety protocols. While our plants have continued to
deferred beet shipments to Mexico. The increase also includes
operate without any disruption during the COVID-19 pandemic, it
14,400 metric tonnes for 2021 to be supplied by the Taber factory,
remains difficult to estimate or forecast the impact going forward
under the CUSMA special quotas that took effect on July 1, 2020.
on operations and/or financial results. The Company is closely
monitoring the situation and will react quickly to the changing
circumstances
2020 Annual ReportManagement’s Discussion & Analysis 44
Other considerations
NON-GAAP MEASURES
In fiscal 2021, the Company expects Adjusted EBITDA to benefit
from the return to normal operating conditions in its Taber beet
In analyzing results, we supplement the use of financial measures
sugar facility. In the fall of 2019, the beet harvest was suspended
that are calculated and presented in accordance with IFRS with a
early due to the impact of severe adverse weather in Alberta. As a
number of non-GAAP financial measures. A non-GAAP financial
result, the crop derived a much inferior quantity of refined sugar
measure is a numerical measure of a company’s performance,
resulting in a shortfall of approximately 62,000 metric tonnes. For
financial position or cash flow that excludes (includes) amounts, or is
the 2020 crop, the Company contracted 30,000 acres for planting
subject to adjustments that have the effect of excluding (including)
in Taber, an increase of 2,000 acres from last year. In addition, Taber
amounts, that are included (excluded) in most directly comparable
started harvesting and slicing earlier than previous years and, under
measures calculated and presented in accordance with IFRS.
normal growing conditions, the new crop is expected to yield
Non-GAAP financial measures are not standardized; therefore,
approximately 132,000 metric tonnes of beet sugar.
it may not be possible to compare these financial measures with
the non-GAAP financial measures of other companies having the
Maintenance programs for the three operating facilities are
same or similar businesses. We strongly encourage investors to
expected to follow the trend of previous years. Spending on capital
review the audited consolidated financial statements and publicly
projects is also expected to be similar to recent periods. For fiscal
filed reports in their entirety, and not to rely on any single financial
2021, the Company anticipates spending between $25.0 million
measure.
and $30.0 million on various capital projects, with approximately a
quarter allocated to return on investment projects.
We use these non-GAAP financial measures in addition to, and in
conjunction with, results presented in accordance with IFRS. These
In October 2020, the Company announced a strategic collaboration
non-GAAP financial measures reflect an additional way of viewing
with DouxMatok, a food-tech company and pioneer in the
aspects of the operations that, when viewed with the IFRS results
development of efficient flavor delivery technologies, to deliver
and the accompanying reconciliations to corresponding IFRS
a unique sugar reduction solution based on cane sugar, to food
financial measures, may provide a more complete understanding
companies in North America. Although this is a small portion of
of factors and trends affecting our business.
the sweetener market, we believe this could provide a competitive
offering in this niche market.
The following is a description of the non-GAAP measures used by
the Company in the MD&A:
Maple products
In fiscal 2021, the Company expects to see continued improvement
• Adjusted gross margin is defined as gross margin adjusted for:
in sales margins, a trend established in the later part of fiscal 2020
• “the adjustment to cost of sales”, which comprises the
and driven by successful contract negotiations with new and existing
mark-to-market gains or losses on sugar futures, foreign
customers. In addition, the Company expects to lower its operating
exchange forward contracts and embedded derivatives as
costs and improve its gross margin through ongoing optimization
shown in the notes to the consolidated financial statements
at its manufacturing facilities and efficiency improvements provided
and the cumulative timing differences as a result of mark-to-
by the investments made in the past two years in its new Granby
market gains or losses on sugar futures, foreign exchange
facility and existing Dégelis plant. Competitive pressures in the
forward contracts and embedded derivatives as described
Maple industry have stabilized over the past few quarters; however,
below; and
the Company remains focused on maintaining its market share and
• “the amortization of transitional balance to cost of sales
improving its sales margins.
for cash flow hedges”, which is the transitional marked-to-
market balance of the natural gas futures outstanding as of
Capital investments are expected to be reduced significantly for
October 1, 2016 amortized over time based on their
the Maple segment considering the expenditures incurred over
respective settlement date until all existing natural gas
the last two years to improve and increase the production capacity.
futures have expired, as shown in the notes to the
We continue to expect steady growth in demand for Maple-related
consolidated financial statements.
products although we expect a tempering from the increase seen
during the period of COVID-19.
See “Forward Looking Statements” section and “Risks and
Uncertainties” section.
Rogers Sugar Inc.Management’s Discussion & Analysis
45
• Adjusted operating results (“Adjusted EBIT”) is defined as EBIT
• Free cash flow is defined as cash flow from operations excluding
adjusted for the adjustment to cost of sales, the amortization of
changes in non-cash working capital, mark-to-market and
transitional balances to cost of sales for cash flow hedges.
derivative timing adjustments, amortization of transitional
balances, financial instruments non-cash amount, and includes
• Adjusted EBITDA is defined as adjusted EBIT adjusted to
deferred financing charges, funds received from stock options
add back depreciation and amortization expenses, goodwill
exercised, funds paid for the purchase and cancellation of shares,
impairment, the Sugar segment acquisition costs and the Maple
capital and intangible assets expenditures, net of operational
products segment non-recurring expenses.
excellence capital expenditures, and payments of capital leases.
• Adjusted net earnings is defined as net (loss) earnings adjusted
• Pro-forma debt (for the purposes of calculating financial covenant)
for the adjustment to cost of sales, the amortization of transitional
is defined as the outstanding balance under the revolving credit
balances to cost of sales for cash flow hedges, the amortization
facility, net of any bank cash balances, and it includes any
of transitional balance to net finance costs and the income tax
obligations under IAS 17 Leases and it excludes the impact
impact on these adjustments. Amortization of transitional balance
from the adoption of IFRS 16 Leases with regards to any new
to net finance costs is defined as the transitional marked-to-
lease obligations as well as all convertible unsecured subordinated
market balance of the interest rate swaps outstanding as of
debentures.
October 1, 2016, amortized over time based on their respective
settlement date until all existing interest rate swaps agreements
• Pro-forma Adjusted EBITDA (for the purposes of calculating
have expired, as shown in the notes to the consolidated financial
financial covenant) is defined as Adjusted EBITDA adjusted
statements.
to exclude the impact from the adoption of IFRS 16 Leases on
Adjusted EBITDA.
• Adjusted gross margin rate per MT is defined as adjusted gross
margin of the Sugar segment divided by the sales volume of the
Sugar segment.
• Adjusted gross margin percentage is defined as the adjusted
gross margin of the Maple products segment divided by the
revenues generated by the Maple products segment.
• Adjusted net earnings per share is defined as adjusted net
earnings divided by the weighted average number of shares
outstanding.
2020 Annual ReportManagement’s Discussion & Analysis
46
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 2020 (2)
Fourth Quarter Fiscal 2019 (2) (4)
(In thousands of dollars)
Sugar
$
Maple
Products
$
Total
$
Sugar
$
Maple
Products
$
Total
$
Gross margin
32,198
5,692
37,890
24,643
4,430
29,073
Total adjustment to the cost of sales (1)
3,305
(1,130)
2,175
(285)
238
(47)
Adjusted Gross Margin
35,503
4,562
40,065
24,358
4,668
29,026
Results from operating activities (“EBIT”)
20,198
2,631
22,829
16,448
(49,248)
(32,800)
Total adjustment to the cost of sales (1)
3,305
(1,130)
2,175
(285)
238
(47)
Goodwill impairment
—
—
—
—
50,000
Adjusted results from operating activities
(“Adjusted EBIT”)
23,503
1,501
25,004
16,163
990
50,000
17,153
Results from operating activities (“EBIT”)
20,198
2,631
22,829
16,448
(49,248)
(32,800)
Total adjustment to the cost of sales (1)
3,305
(1,130)
2,175
(285)
238
(47)
Depreciation of property, plant and equipment,
right-of-use assets and amortization
of intangible assets
4,479
1,685
6,164
3,499
1,432
4,931
Goodwill impairment
Maple Segment non-recurring costs (1)
—
—
—
63
—
63
—
—
50,000
50,000
131
131
Adjusted EBITDA (1)
27,982
3,249
31,231
19,662
2,553
22,215
Net earnings (loss)
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 earnings (loss) per share (basic)
Adjustment for the above
Adjusted net earnings per share (basic)
12,952
2,175
—
—
(576)
14,551
0.13
0.01
0.14
(40,021)
(47)
50,000
(69)
47
9,910
(0.38)
0.47
0.09
(1) See “Adjusted results” section.
(2) The fourth quarter of fiscal 2020 consists of 14 weeks and the fourth quarter of fiscal 2019 consists of 13 weeks.
(3) Fiscal 2020 consists of 53 weeks and fiscal 2019 consists of 52 weeks.
(4) The current period results include the impacts from the adoption of the new IFRS 16 Leases as discussed in note 3 (h) of the consolidated financial statements.
As is permitted with this new standard, comparative information has not been restated and, therefore, may not be comparable.
Rogers Sugar Inc.Management’s Discussion & Analysis
47
Consolidated results
Fiscal 2020 (3)
Fiscal 2019 (3) (4)
(In thousands of dollars)
Sugar
$
Maple
Products
$
Total
$
Sugar
$
Maple
Products
$
Total
$
Gross margin
105,088
21,111
126,199
100,301
22,274
122,575
Total adjustment to the cost of sales (1)
1,124
(1,205)
(81)
(6,269)
272
(5,997)
Adjusted Gross Margin
106,212
19,906
126,118
94,032
22,546
116,578
Results from operating activities (“EBIT”)
60,863
7,147
68,010
65,539
(41,392)
24,147
Total adjustment to the cost of sales (1)
1,124
(1,205)
Goodwill impairment
—
—
(81)
—
(6,269)
272
(5,997)
—
50,000
Adjusted results from operating activities
(“Adjusted EBIT”) (1)
61,987
5,942
67,929
59,270
8,880
50,000
68,150
Results from operating activities (“EBIT”)
60,863
7,147
68,010
65,539
(41,392)
24,147
Total adjustment to the cost of sales (1)
1,124
(1,205)
(81)
(6,269)
272
(5,997)
Depreciation of property, plant and equipment,
right-of-use assets and amortization
of intangible assets
Goodwill impairment
Maple Segment non-recurring costs (1)
16,890
6,588
23,478
13,865
—
—
—
852
—
852
—
—
5,356
50,000
437
19,221
50,000
437
Adjusted EBITDA (1)
78,877
13,382
92,259
73,135
14,673
87,808
Net earnings (loss)
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 earnings (loss) per share (basic)
Adjustment for the above
Adjusted net earnings per share (basic)
35,419
(81)
—
(197)
104
35,245
0.34
—
0.34
(8,167)
(5,997)
50,000
(378)
1,621
37,079
(0.08)
0.43
0.35
(1) See “Adjusted results” section.
(2) The fourth quarter of fiscal 2020 consists of 14 weeks and the fourth quarter of fiscal 2019 consists of 13 weeks.
(3) Fiscal 2020 consists of 53 weeks and fiscal 2019 consists of 52 weeks.
(4) The current period results include the impacts from the adoption of the new IFRS 16 Leases as discussed in note 3 (h) of the consolidated financial statements.
As is permitted with this new standard, comparative information has not been restated and, therefore, may not be comparable.
2020 Annual ReportManagement’s Discussion & Analysis
48
CRITICAL ACCOUNTING ESTIMATES
CONTROLS AND PROCEDURES
The preparation of the Company’s audited consolidated financial
In compliance with the provisions of Canadian Securities
statements in conformity with IFRS requires us to make estimates
Administrators’ Regulation 52-109, the Corporation has filed
and judgements that affect the reported amounts of assets and
certificates signed by the President and Chief Executive Officer
liabilities, net revenue and expenses, and the related disclosures.
(“CEO”) and by the Vice-President Finance and Chief Financial
Such estimates include the valuation of goodwill, intangible
Officer (“CFO”), in that, among other things, report on:
assets, identified assets and liabilities acquired in business
combinations, other long-lived assets, income taxes, the provision
• their responsibility for establishing and maintaining disclosure
for asbestos removal and pension obligations. These estimates
controls and procedures and internal control over financial
and assumptions are based on management’s best estimates and
reporting for the Company; and
judgments. Management evaluates its estimates and assumptions
• the design and effectiveness of disclosure controls and
on an ongoing basis using historical experience, knowledge of
procedures and the design and effectiveness of internal controls
economics and market factors, and various other assumptions that
over financial reporting.
management believe to be reasonable under the circumstances.
Management adjusts such estimates and assumptions when facts
and circumstances dictate. Actual results could differ from these
DISCLOSURE CONTROLS AND PROCEDURES
estimates. Changes in those estimates and assumptions are
recognized in the period in which the estimates are revised. Refer
The CEO and the CFO, have designed the disclosure controls and
to note 2 (d) to the audited consolidated financial statements for
procedures (“DC&P”), or have caused them to be designed under
more detail.
their supervision, in order to provide reasonable assurance that:
CHANGES IN ACCOUNTING PRINCIPLES AND PRACTICES
the CEO and CFO by others, particularly during the period in
NOT YET ADOPTED
which the interim and annual filings are being prepared; and
• material information relating to the Company is made known to
A number of new standards, and amendments to standards and
• information required to be disclosed by the Company in its
interpretations, are not yet effective and have not been applied
annual filings, interim filings or other reports filed or submitted by
in preparing these audited consolidated financial statements.
it under securities legislation is recorded, processed, summarized
Management has reviewed such new standards, proposed
and reported within the time periods specified in securities
amendments and does not anticipate that they will have a material
legislation.
impact on the Company’s financial statements. Refer to note 3 (r)
to the audited consolidated financial statements for more detail.
As at October 3, 2020, an evaluation was carried out, under the
supervision of the CEO and the CFO, of the design and operating
effectiveness of the Company’s DC&P. Based on this evaluation,
the CEO and the CFO concluded that the Company’s DC&P
were appropriately designed and were operating effectively as at
October 3, 2020.
Rogers Sugar Inc.Management’s Discussion & Analysis
49
INTERNAL CONTROLS OVER FINANCIAL REPORTING
CHANGES IN INTERNAL CONTROLS OVER
FINANCIAL REPORTING
The CEO and CFO have also designed internal controls over
financial reporting (“ICFR”), or have caused them to be designed
There were no changes in the Company’s internal controls over
under their supervision, in order to provide reasonable assurance
financial reporting during the year that have materially affected,
regarding the reliability of financial reporting and the preparation of
or are reasonably likely to materially affect, the Company’s internal
financial statements for external purposes in accordance with IFRS
control over financial reporting.
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 October 3, 2020, an evaluation was carried out,
under the supervision of the CEO and the CFO, of the design and
operating effectiveness of the Company’s ICFR. Based on that
evaluation, they have concluded that the design and operation
of the Company’s internal controls over financial reporting were
effective as at October 3, 2020.
In designing and evaluating such controls, it should be recognized
that, due to inherent limitations, any controls, no matter how well
designed and operated, can provide only reasonable assurance
of achieving the desired control objectives and may not prevent
or detect misstatements. Projections of any evaluations of
effectiveness to future periods are subject to the risk that controls
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
in evaluating controls and procedures.
2020 Annual ReportManagement’s Discussion & Analysis 50
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,
Jean-Sébastien Couillard,
President and Chief Executive Officer
Vice President Finance, Chief Financial Officer and Corporate Secretary
Lantic Inc., Administrator
Lantic Inc., Administrator
November 25, 2020
Rogers Sugar Inc.Management’s Discussion & Analysis
INDEPENDENT AUDITORS’ REPORT
51
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 October 3, 2020 and September 28, 2019,
• the consolidated statements of earnings (loss) and comprehensive income (loss) for fiscal years ended October 3, 2020 and
September 28, 2019,
• the consolidated statements of changes in shareholders’ equity for fiscal years ended October 3, 2020 and September 28, 2019,
• the consolidated statements of cash flows for fiscal years ended October 3, 2020 and September 28, 2019,
• 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 October 3, 2020 and September 28, 2019, 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.
Emphasis of Matter - Change in Accounting Policy
We draw attention to Note 3 (h) to the financial statements which indicates that the Entity has changed its accounting policy for leases
as of September 29, 2019, due to the adoption of IFRS 16, Leases, and has applied that change using a modified retrospective transition
approach.
Our opinion is not modified in this respect.
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.
(In thousands of dollars except as noted and per share amounts)2020 Annual ReportNotes to Consolidated Financial Statements
52
• 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 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.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
53
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made
by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our 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 25, 2020
* CPA auditor, CA, public accountancy permit No. A125211
(In thousands of dollars except as noted and per share amounts)2020 Annual ReportNotes to Consolidated Financial Statements
54
Consolidated Statements of Earnings (Loss) and Comprehensive Income (Loss)
(In thousands of dollars except per share amounts)
Consolidated statements of earnings (loss)
Revenues (note 31)
Cost of sales
Gross margin
Administration and selling expenses
Distribution expenses
Goodwill impairment (note 15)
Results from operating activities
Finance income (note 5)
Finance costs (note 5)
Net finance costs (note 5)
Earnings before income taxes
Income tax expense (recovery) (note 6):
Current
Deferred
Net earnings (loss)
Net earnings (loss) per share (note 26):
Basic
Diluted
Fiscal years ended
October 3,
2020
$
860,801
734,602
126,199
38,940
19,249
—
58,189
68,010
(197)
18,720
18,523
49,487
11,290
2,778
14,068
35,419
0.34
0.34
September 28,
2019
$
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)
Consolidated statements of comprehensive income (loss)
Net earnings (loss)
Other comprehensive income (loss):
Items that are or may be reclassified subsequently to net earnings (loss):
Cash flow hedges (note 9)
Income tax on other comprehensive income (loss) (note 6)
Foreign currency translation differences
Items that will not be reclassified to net earnings (loss):
Defined benefit actuarial (losses) gains (note 20)
Income tax recovery on other comprehensive income (loss) (note 6)
Other comprehensive loss
Net earnings (loss) and comprehensive income (loss) for the year
The accompanying notes are an integral part of these consolidated financial statements.
Fiscal years ended
October 3,
2020
$
35,419
September 28,
2019
$
(8,167)
(3,887)
1,016
54
(2,817)
(5,847)
1,502
(4,345)
(7,162)
28,257
(4,763)
1,243
425
(3,095)
(19,902)
5,194
(14,708)
(17,803)
(25,970)
(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)
55
October 3,
2020
$
September 28,
2019
$
ASSETS
Current assets:
Cash
Trade and other receivables (note 7)
Income taxes receivable
Inventories (note 8)
Prepaid expenses
Derivative financial instruments (note 9)
Total current assets
Non-current assets:
Property, plant and equipment (note 10)
Right-of-use assets (note 3 and 11)
Intangible assets (note 12)
Other assets (note 13)
Deferred tax assets (note 14)
Derivative financial instruments (note 9)
Goodwill (note 15)
Total non-current assets
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Bank overdraft
Revolving credit facility (note 16)
Trade and other payables (note 17)
Provisions (note 18)
Lease obligations (note 3 and 19)
Derivative financial instruments (note 9)
Total current liabilities
Non-current liabilities:
Revolving credit facility (note 16)
Employee benefits (note 20)
Provisions (note 18)
Derivative financial instruments (note 9)
Lease obligations (note 3 and 19)
Convertible unsecured subordinated debentures (note 21)
Deferred tax liabilities (note 14)
Total non-current liabilities
Total liabilities
Shareholders’ equity:
Share capital (note 22)
Contributed surplus
Equity portion of convertible unsecured subordinated debentures (note 21)
Deficit
Accumulated other comprehensive (loss) income
Total shareholders’ equity
Commitments (notes 19 and 24)
Contingencies (note 25)
Total liabilities and shareholders’ equity
The accompanying notes are an integral part of these consolidated financial statements.
1,974
94,262
2,042
180,792
7,923
2,616
289,609
230,385
20,489
31,666
745
31,085
158
283,007
597,535
887,144
2,797
29,000
131,089
500
3,981
1,458
168,825
165,000
59,212
437
6,933
16,423
145,836
54,287
448,128
616,953
99,452
300,794
5,085
(116,831)
(18,309)
270,191
284
85,823
1,977
182,359
4,162
931
275,536
220,408
—
35,444
928
19,684
21
283,007
559,492
835,028
8,325
17,000
117,735
878
139
615
144,692
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
887,144
835,028
(In thousands of dollars except as noted and per share amounts)2020 Annual ReportNotes to Consolidated Financial Statements
56
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)
(In thousands of dollars except number of shares)
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(In thousands of dollars except as noted and per share amounts)2020 Annual ReportNotes to Consolidated Financial Statements
58
Consolidated Statements of Cash Flows
(In thousands of dollars)
Cash flows from operating activities:
Net earnings (loss)
Adjustments for:
Depreciation of property, plant and equipment and right-of-use assets (note 4)
Amortization of intangible assets (note 4)
Changes in fair value of derivative financial instruments included in cost of sales
Income tax expense (note 6)
Pension contributions
Pension expense
Net finance costs (note 5)
Loss on disposal of property, plant and equipment (note 10)
Share-based compensation - equity settled (note 23)
Share-based compensation - cash settled (note 23)
Goodwill impairment (note 15)
Other
Changes in:
Trade and other receivables
Inventories
Prepaid expenses
Trade and other payables
Provisions (note 18)
Cash generated from operating activities:
Interest paid
Income taxes paid
Net cash flows from operating activities
Cash flows used in financing activities:
Dividends paid
(Decrease) increase in bank overdraft
Increase in revolving credit facility (note 16)
Payment of lease obligations (note 19)
Purchase and cancellation of shares (note 22)
Payment of financing fees (note 13)
Net cash flows used in financing activities
Cash flows used in investing activities:
Additions to property, plant and equipment, net of proceeds on disposal
Additions to intangible assets (note 12)
Net cash used in investing activities
Effect of changes in exchange rate on cash
Net increase (decrease) in cash
Cash, beginning of year
Cash, end of year
Supplemental cash flow information (note 27).
The accompanying notes are an integral part of these consolidated financial statements.
For the fiscal years ended
October 3,
2020
$
September 28,
2019
$
35,419
19,656
3,822
(2,413)
14,068
(9,636)
11,191
18,523
(82)
168
26
—
1
90,743
(9,381)
1,604
(3,761)
13,496
(860)
1,098
91,841
(15,900)
(11,340)
64,601
(37,501)
(5,528)
17,000
(4,205)
(6,536)
(16)
(36,786)
(26,128)
(25)
(26,153)
28
1,690
284
1,974
(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
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
59
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 consoli-
dated financial statements of Rogers as at October 3, 2020 and September 28, 2019 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 2020 and 2019 represent the years
ended October 3, 2020 and September 28, 2019.
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 25, 2020.
(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;
(iv) assets acquired and liabilities assumed in business combinations are measured at fair value at acquisition date, less any
subsequent impairment, if applicable; and
(v)
lease liabilities are measured at the present value of future lease payments when the leased asset is available for use by the
Company.
(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 novel coronavirus disease ("COVID-19") did not have a significant impact on estimates and judgements.
(In thousands of dollars except as noted and per share amounts)2020 Annual ReportNotes to Consolidated Financial Statements
60
2. BASIS OF MEASUREMENT (CONTINUED)
(d) Use of estimates and judgements (continued):
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:
(i) 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.
(ii) 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.
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 and Highland Sugarworks Inc. ("Highland") (the latter two companies together referred to as "TMTC"). It
should be noted that 9020-2292 Québec Inc. ("Decacer") was amalgamated with TMTC as of September 29, 2019.
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.
(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)
(a) Basis of consolidation (continued):
(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 earnings (loss) and comprehensive income (loss).
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 earnings (loss) and comprehensive
income (loss). 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.
(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 earnings (loss) 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.
(In thousands of dollars except as noted and per share amounts)2020 Annual ReportNotes to Consolidated Financial Statements
62
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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.
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)Rogers Sugar Inc.Notes to Consolidated Financial Statements
63
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) Leases:
Effective September 29, 2019 (date of initial application), the Company adopted IFRS 16 using the modified retrospective
transition approach. Accordingly, comparative figures as at and for the year-ended September 28, 2019 have not been restated
and continue to be reported under IAS 17 and IFRIC 4. The impacts of changes are disclosed in note 3 q) i).
As a result of the adoption of IFRS 16, the Company updated its accounting policy for leases as follows:
The Company recognizes a right-of-use asset and a lease liability based on the present value of future lease payments when the
leased asset is available for use by the Company. The lease payments include fixed and in-substance fixed payments and variable
lease payments that depend on an index or rate, less any lease incentives receivable. The lease payments are discounted using
the interest rate implicit in the lease or the lessee’s incremental borrowing rate. The Company uses the lessee’s incremental
borrowing rate for its present value calculations. Lease payments are discounted over the lease term, which includes the fixed
term and renewal options that the Company is reasonably certain to exercise. Lease payments are allocated between the lease
liability and a finance cost, which is recognized in finance costs over the lease term in the consolidated statement of earnings.
Lease payments for assets that are exempt through the short-term exemption and variable payments not based on an index or
rate are recognized in administration and selling expenses or distribution expenses as incurred.
Right-of-use assets are measured at cost, less any accumulated depreciation and accumulated impairment losses, and adjusted
for any re-measurement of lease liabilities. Cost is calculated as the initial measurement of the lease liability plus any initial direct
costs and any lease payments made at or before the commencement date. Right-of-use assets are depreciated on a straight-line
basis over the shorter of the lease term or the useful life.
(In thousands of dollars except as noted and per share amounts)2020 Annual ReportNotes to Consolidated Financial Statements
64
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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.
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.
(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):
(i) Pension benefit plans (continued):
Defined benefit plans (continued)
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.
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 income (loss). 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.
(In thousands of dollars except as noted and per share amounts)2020 Annual ReportNotes to Consolidated Financial Statements
66
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(j) Employee benefits (continued):
(v) 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 earnings (loss). The fair value of the employee benefits expense of
the PSUs is measured using the Monte Carlo pricing model.
(vi) 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)Rogers Sugar Inc.Notes to Consolidated Financial Statements
67
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(l) Financial instruments:
(i)
IFRS 9, Financial Instruments:
The following summarizes the classification and measurement for the Company’s non-derivative and derivative financial
assets and financial liabilities.
Financial assets:
Cash
Trade and other receivables
Income taxes recoverable
Non-hedged derivative assets
Financial liabilities:
Bank overdraft
Revolving credit facility
Amortized cost
Trade and other payables
Income taxes payable
Amortized cost
Lease obligations
Convertible unsecured subordinated debentures
Other long-term liabilities
Non-hedged derivative liabilities
IFRS 9 (2014)
Amortized cost
Amortized cost
Amortized cost
Fair value through profit or loss
IFRS 9 (2014)
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Fair value through profit or loss
Fair value through profit or loss
The Company’s natural gas futures and interest rate swap agreements were designated as being effective hedging instruments.
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.
(In thousands of dollars except as noted and per share amounts)2020 Annual ReportNotes to Consolidated Financial Statements
68
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(l) Financial instruments (continued):
(ii) Financial assets (continued):
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.
(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 bank overdraft and revolving credit facility, trade payables and accrued liabilities, 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 earnings (loss). The Company currently has no significant financial liabilities measured at
fair value except for 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.
(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:
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 earnings (loss).
c. 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 earnings (loss) (marked-to-market).
d. 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.
(In thousands of dollars except as noted and per share amounts)2020 Annual ReportNotes to Consolidated Financial Statements
70
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(l) Financial instruments (continued):
(iv) Fair values of financial instruments (continued):
e. 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.
f.
Trade date:
The Company recognizes and derecognizes purchases and sales of derivative contracts on the trade date.
g. 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.
(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
earnings (loss), the effective portion of changes in the fair value of the derivative is recognized in other comprehensive
income (loss) and presented in accumulated other comprehensive income (loss) as part of equity.
The amount recognized in other comprehensive income (loss) is removed and included in net earnings (loss) under the same
line item in the consolidated statements of earnings (loss) and comprehensive income (loss) as the hedged item, in the same
period that the hedged cash flows affect net earnings (loss).
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
income (loss) remains in accumulated other comprehensive income (loss) 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 income
(loss) is recognized immediately in net earnings (loss).
When the hedged item is a non-financial asset, the amount recognized in other comprehensive income (loss) is transferred to
net earnings (loss) in the same period that the hedged item affects net earnings (loss).
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 price and interest rate fluctuations as cash flow hedges.
(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)
(m) Revenue recognition:
The Company derives revenue from the sale of finished goods, which include sugar and maple products. The Company
recognizes revenue when all performance obligations have been met which is generally 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) 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 earnings (loss).
Interest expense is recorded using the effective interest method.
(o)
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 income (loss).
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 income (loss) 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.
(In thousands of dollars except as noted and per share amounts)2020 Annual ReportNotes to Consolidated Financial Statements
72
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(p) Earnings (loss) per share:
The Company presents basic and diluted earnings (loss) 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.
(q) New standards and interpretations adopted:
(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.
Effective September 29, 2019 (date of initial application), the Company adopted IFRS 16 using the modified retrospective
transition approach. Accordingly, comparative figures as at and for the year-ended September 28, 2019 have not been
restated and continue to be reported under IAS 17 and IFRIC 4.
The Company has elected to apply the practical expedient to grandfather the assessment of which transactions are leases on
the date of initial application, as previously assessed under IAS 17 and IFRIC 4. The Company applied the definition of a
lease under IFRS 16 to contracts entered into or modified on or after September 29, 2019.
At transition, the Company used the following practical expedients when applying IFRS 16 to leases previously classified as
operating lease under IAS 17:
•
the Company relied 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 adjusted the right-of-use assets at
the date of initial application by the amount of any provision for onerous leases recognized in the consolidated
statements of financial position immediately before the date of initial application;
•
the Company accounted for low-value leases and leases for which the lease term ends within twelve months of the date
of initial application as short-term leases; and
•
the Company used hindsight in determining the lease term at the date of initial application.
The Company applied the modified retrospective transition approach measuring the right-of-use asset ("ROU asset") to be
equal to the lease liability with no restatement of the comparative period. As such, as at September 29, 2019, the Company
recorded ROU assets of $11.0 million and lease obligations of $11.0 million. When measuring the lease liabilities, the
Company discounted future lease payments using its incremental borrowing rate as at September 29, 2019 being 4.40%.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(q) New standards and interpretations adopted (continued):
(i)
IFRS 16, Leases (continued):
73
The following table summarizes the impact of the adoption on certain items on the Company’s consolidated balance sheet
as at September 29, 2019:
Property, plant and equipment
Right-of-use assets
Finance lease obligations - current
Lease obligations - current
Finance lease obligations - non-current
Lease obligations - non-current
September 28,
2019
Transition
adjustment
September 29,
2019
$
220,408
—
139
—
742
—
$
(1,059)
12,094
(139)
2,596
(742)
9,320
$
219,349
12,094
—
2,596
—
9,320
The following table reconciles the Company’s operating lease commitments as at September 28, 2019 as previously disclosed
in the Company’s audited annual consolidated financial statements, to the lease obligation recognized on initial application
of IFRS 16 as at September 29, 2019:
Operating lease commitment as at September 28, 2019
Finance lease liability as at September 28, 2019
Lease commitments of leases commencing after the initial application date
Recognition exemption for short-term leases
Discounted using the incremental borrowing rate as at September 29, 2019
Extension option reasonably certain to be exercised
Other
Lease obligations as at September 29, 2019
$
20,930
881
(9,349)
(263)
(2,214)
3,240
(1,309)
11,916
As a result of the adoption of IFRS 16, the Company updated its accounting policy for leases as reflected in note 3 (h).
(In thousands of dollars except as noted and per share amounts)2020 Annual ReportNotes to Consolidated Financial Statements
74
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(q) New standards and interpretations adopted (continued):
(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 adopted the Interpretation in its consolidated financial statements for the annual period beginning on
September 29, 2019. The adoption of the Interpretation did not have an impact on the consolidated financial statements.
(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 - 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 adopted the amendments in its consolidated financial statements for the annual period beginning on
September 29, 2019. The adoption of the amendments 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
75
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(r) 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 October 3,
2020 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) 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.
4. DEPRECIATION AND AMORTIZATION EXPENSES
Depreciation and amortization expenses were charged to the consolidated statements of earnings (loss) and comprehensive income
(loss) as follows:
Depreciation of property, plant and equipment:
Cost of sales
Administration and selling expenses
Depreciation of right-of-use assets:
Cost of sales
Administration and selling expenses
Amortization of intangible assets:
Administration and selling expenses
Total depreciation and amortization expenses
For the fiscal years ended
October 3,
2020
$
September 28,
2019
$
15,677
545
16,222
2,324
1,110
3,434
3,822
23,478
14,927
522
15,449
—
—
—
3,772
19,221
(In thousands of dollars except as noted and per share amounts)2020 Annual ReportNotes to Consolidated Financial Statements
76
5. FINANCE INCOME AND FINANCE COSTS
Recognized in net (loss) earnings:
Net change in fair value of interest rate swaps (note 9)
Finance income
Interest expense on convertible unsecured subordinated debentures,
including accretion of $868 (2019 - $821) (note 21)
Interest on revolving credit facility
Amortization of deferred financing fees
Other interest expense
Interest accretion on discounted lease obligations
Finance costs
Net finance costs recognized in net earnings (loss)
6.
INCOME TAX EXPENSE (RECOVERY)
Current tax expense:
Current period
Deferred tax expense (recovery):
Recognition and reversal of temporary differences
Adjustments for prior year periods
Changes in tax rates
Deferred tax expense (recovery)
Total income tax expense
Income tax recognized in other comprehensive income (loss):
For the fiscal years ended
October 3,
2020
September 28,
2019
$
197
197
8,446
6,723
1,187
1,500
864
18,720
18,523
$
378
378
8,339
7,337
1,178
1,637
—
18,491
18,113
For the fiscal years ended
October 3,
2020
$
September 28,
2019
$
11,290
16,084
2,249
384
145
2,778
14,068
(978)
(453)
(452)
(1,883)
14,201
For the fiscal years ended
October 3, 2020
September 28, 2019
Before tax
Tax effect
Net of tax
Before tax
Tax effect
Net of tax
$
(3,887)
(5,847)
$
1,016
1,502
$
(2,871)
(4,345)
$
(4,763)
(19,902)
$
1,243
5,194
$
(3,520)
(14,708)
Cash flow hedges
Defined benefit actuarial losses
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
6.
INCOME TAX EXPENSE (RECOVERY) (CONTINUED)
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:
77
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
Non-deductible impairment of goodwill
Adjustments for prior year periods
Other
7. TRADE AND OTHER RECEIVABLES
Trade receivables
Less expected credit loss
Other receivables
Initial margin deposits with commodity brokers
October 3, 2020
September 28, 2018
For the fiscal years ended
%
—
27.00
0.29
0.36
—
0.78
—
28.43
$
49,487
13,362
145
177
—
384
—
14,068
%
—
27.00
(7.49)
2.59
220.76
(7.51)
—
235.35
$
6,034
1,629
(452)
156
13,321
(453)
—
14,201
October 3,
2020
September 28,
2019
$
82,191
(662)
81,539
11,866
867
94,262
$
80,174
(827)
79,347
5,961
515
85,823
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 $0.2 million per
year). Write-offs for fiscal 2020 were $0.2 million (September 28, 2019 - $0.1 million). All bad debt write-offs are charged to
administration and selling expenses.
–
Less than 1% of trade receivables are outstanding for more than 90 days (September 28, 2019 - less than 2%), while over 84% are
current (less than 30 days) as at October 3, 2020 (September 28, 2019 - 83%).
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)2020 Annual ReportNotes to Consolidated Financial Statements
78
8.
INVENTORIES
Raw inventory
Work in progress
Finished goods
Packaging and operating supplies
Spare parts and other
October 3,
2020
September 28,
2019
$
104,852
10,378
37,975
153,205
13,453
14,134
180,792
$
113,487
7,947
36,356
157,790
11,831
12,738
182,359
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 October 3, 2020, inventories recognized as cost of goods sold amounted to $734.7 million (September 28, 2019 - $677.7 million).
9. 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.
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.
The Company’s natural gas futures and interest rate swap agreements were designated as cash flow hedges and qualified for hedge
accounting.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
79
9. FINANCIAL INSTRUMENTS (CONTINUED)
Derivative financial instruments (continued)
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 October 3, 2020 and September 28, 2019, the Company’s financial derivatives carrying values were as follows:
Financial Assets
Financial Liabilities
Current
Non-current
Current
Non-current
October 3, 2020
October 3, 2020
Derivative financial instruments measured
at fair value through profit or loss:
Sugar futures contracts
$
8
Foreign exchange forward contracts
2,521
Derivative financial instruments designated
as effective cash flow hedging instruments:
Natural gas futures contracts
Interest rate swaps
87
—
2,616
$
95
63
—
—
158
$
—
—
—
1,458
1,458
$
—
—
1,662
5,271
6,933
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
(In thousands of dollars except as noted and per share amounts)2020 Annual ReportNotes to Consolidated Financial Statements
80
9. 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
October 3, September 28,
2019
2020
October 3, September 28,
2019
2020
October 3, September 28,
2019
2020
$
$
$
$
$
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 swap
(801)
2,615
179
(541)
—
—
95
—
1,909
1,658
—
1,296
—
197
197
—
—
—
378
378
$
—
—
—
—
1,886
(5,773)
(3,887)
(784)
(3,979)
(4,763)
The following table summarizes the Company’s hedging components of other comprehensive income (loss) ("OCI") as at October 3,
2020 and September 28, 2019:
October 3, 2020
September 28, 2019
Opening OCI
Income taxes
Natural gas
futures
contracts
$
Interest
rate
swap
$
(2,751)
(1,740)
204
1,039
Natural gas
futures
contracts
Total
$
(4,491)
1,243
$
(2,229)
262
Opening OCI – net of income taxes
(2,547)
(701)
(3,248)
(1,967)
Interest
rate
swap
$
2,492
(253)
2,239
Change in fair value of derivatives
designated as cash flow hedges
Amounts reclassified to net earnings (loss)
Income taxes
1,981
(5,576)
(3,595)
874
(3,601)
(95)
(493)
(197)
1,509
(292)
(1,658)
1,016
(6,119)
204
(2,547)
(378)
1,039
(701)
Ending OCI – net of income taxes
(1,154)
(4,965)
Total
$
263
9
272
(2,727)
(2,036)
1,243
(3,248)
For the fiscal year ended October 3, 2020, the derivatives designated as cash flow hedges were considered to be fully effective and
no ineffectiveness has been recognized in net earnings (loss).
Approximately $1.0 million of net losses presented in accumulated other comprehensive income (loss) are expected to be reclassified
to net earnings (loss) within the next twelve months.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
81
9. FINANCIAL INSTRUMENTS (CONTINUED)
Derivative financial instruments (continued)
For its financial assets and liabilities measured at amortized cost as at October 3, 2020 and September 28, 2019, 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 October 3, 2020 and September 28, 2019 are as follows:
October 3, 2020
September 28, 2019
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$)
33,496
66,611
16,737
2,022
35,997
72,132
16,611
2,013
2,501
5,521
(126)
(9)
35,746
51,877
6,964
613
35,393
51,665
6,757
604
118,866
126,753
7,887
95,200
94,419
(31,580)
(35,573)
(69,148)
(74,749)
(20,594)
(20,315)
—
—
(121,322)
(130,637)
(2,456)
(3,884)
(40,393)
(39,556)
(12,816)
—
(39,774)
(38,553)
(12,556)
—
(92,765)
(90,883)
2,435
3,536
(3,993)
(5,601)
279
—
(9,315)
(1,428)
1.3304
(1,900)
2,003
103
(353)
(212)
(207)
(9)
(781)
619
1,003
260
—
1,882
1,101
1.3247
1,458
(1,490)
(32)
Purchases
0 - 6 months
6 - 12 months
12 - 24 months
Over 24 months
Sales
0 - 6 months
6 -12 months
12 - 24 months
Over 24 months
Net position
Foreign exchange rate at the end
of the period
Net value (CA$)
Margin call (receipt) payment
at year-end
Net asset (liability) (CA$)
(In thousands of dollars except as noted and per share amounts)2020 Annual ReportNotes to Consolidated Financial Statements
82
9. FINANCIAL INSTRUMENTS (CONTINUED)
Derivative financial instruments (continued)
(a) Raw sugar (continued):
All sugar futures contracts are traded through a large exchange clearing house on the New York Intercontinental Exchange.
Regulation of the U.S. futures industry is primarily self-regulation, with the role of the Federal Commodity Futures Trading
Commission being principally an oversight role to determine that self-regulation is continuous and effective.
The exchange clearing house used is one of the world’s largest capitalized financial institutions with excellent long-term credit
ratings. Daily cash settlements are mandatory (margin calls) for resulting gains and/or losses from futures trading for each
customer’s account. Due to the above, the Company does not anticipate a credit risk from the raw sugar futures derivative
instruments.
(b) Natural gas:
The Company uses natural gas contracts to help manage its costs of natural gas. The Company monitors its positions and the
credit ratings of its counterparties and does not anticipate losses due to counterparty’s non-performance. The Company's natural
gas contracts as well as the fair value of these contracts relating to purchases of natural gas are as follows:
October 3, 2020
September 28, 2019
Original
futures
contracts
value
Current
contract
value
Fair
value
gain/(loss)
Original
futures
contracts
value
Current
contract
value
Fair
value
gain/(loss)
(US$)
(US$)
(US$)
(US$)
(US$)
(US$)
5,106
6,413
6,384
12,546
30,449
5,171
6,144
5,960
11,990
29,265
65
(269)
(424)
(556)
5,904
6,415
6,429
9,834
5,449
5,480
5,568
9,399
(455)
(935)
(861)
(435)
(1,184)
28,582
25,896
(2,686)
Purchases
Less than 1 year
1 to 2 years
2 to 3 years
3 years and over
Foreign exchange rate at the end
of the period
Net liability (CA$)
1.3304
(1,575)
1.3247
(3,558)
The forecasted purchases of natural gas, the hedged items, are used for calculating the hedge ineffectiveness. No ineffectiveness
was recognized in net earnings (loss) 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
83
9. 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)2020 Annual ReportNotes to Consolidated Financial Statements
84
9. FINANCIAL INSTRUMENTS (CONTINUED)
Derivative financial instruments (continued)
(c) Foreign exchange contracts (continued):
Original
contract
value
(US$/EUR/AUD$)
68,395
5,232
400
74,027
(121,608)
(17,093)
(3,513)
(179)
(142,393)
(68,366)
672
—
672
Original
contract
value
(CA$)
81,032
5,791
540
87,363
(152,480)
(21,621)
(4,706)
(236)
(179,043)
(91,680)
1,058
—
1,058
Current
contract
value
(CA$)
70,145
5,758
550
76,453
(140,947)
(21,550)
(4,706)
(240)
(167,443)
(90,990)
1,055
(2)
1,053
October 3, 2020
Fair
value
gain/(loss)
(CA$)
(10,887)
(33)
10
(10,910)
11,533
71
—
(4)
11,600
690
(3)
(2)
(5)
3,201
4,292
4,012
(280)
(34,475)
(1,788)
(103)
(36,366)
(33,165)
(47,715)
(2,400)
(139)
(50,254)
(45,962)
(45,623)
(2,380)
(138)
(48,141)
(44,129)
(12,108)
(12,108)
(19,022)
(19,022)
(18,923)
(18,923)
(5,123)
(5,123)
(4,840)
(4,840)
(4,873)
(4,873)
2,092
20
1
2,113
1,833
99
99
(33)
(33)
SUGAR
Purchases U.S. dollars
Less than 1 year
1 to 2 years
2 to 3 years
Sales U.S. dollars
Less than 1 year
1 to 2 years
2 to 3 years
3 years and over
Total U.S. dollars - Sugar
SUGAR
Purchases EUR
Less than 1 year
1 to 2 years
Total EUR - Sugar
MAPLE PRODUCTS
Purchases U.S. dollars
Less than 1 year
Sales U.S. dollars
Less than 1 year
1 to 2 years
2 to 3 years
Total U.S. dollars - Maple
MAPLE PRODUCTS
Sales EUR
Less than 1 year
Total EUR - Maple
MAPLE PRODUCTS
Sales AUD
Less than 1 year
Total AUD - Maple
Total Foreign Exchange
(118,090)
(160,446)
(157,862)
2,584
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
9. FINANCIAL INSTRUMENTS (CONTINUED)
Derivative financial instruments (continued)
(c) Foreign exchange contracts (continued):
SUGAR
Purchases U.S. dollars
Less than 1 year
1 to 2 years
2 to 3 years
Sales U.S. dollars
Less than 1 year
1 to 2 years
2 to 3 years
Total U.S. dollars - Sugar
SUGAR
Purchases EUR
Less than 1 year
Total EUR - Sugar
MAPLE PRODUCTS
Purchases U.S. dollars
Less than 1 year
Sales U.S. dollars
Less than 1 year
1 to 2 years
Total U.S. dollars - Maple
MAPLE PRODUCTS
Purchases EUR
Less than 1 year
Sales EUR
Less than 1 year
1 to 2 years
Total EUR - Maple
MAPLE PRODUCTS
Sales AUD
Less than 1 year
1 to 2 years
Total AUD - Maple
Original
contract
value
(US$/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$)
77,782
11,614
760
90,156
(118,025)
(19,964)
(2,142)
(140,131)
(49,975)
263
263
400
400
382
382
2,500
3,323
3,303
(28,694)
(400)
(29,094)
(26,594)
(38,204)
(531)
(38,735)
(35,412)
(37,973)
(530)
(38,503)
(35,200)
155
236
227
(8,072)
(270)
(8,342)
(8,187)
(2,666)
(148)
(2,814)
(12,283)
(426)
(12,709)
(12,473)
(2,404)
(134)
(2,538)
(11,816)
(406)
(12,222)
(11,995)
(2,399)
(134)
(2,533)
Total Foreign Exchange
(75,069)
(99,674)
(99,321)
85
September 28, 2019
Fair
value
gain/(loss)
(CA$)
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)2020 Annual ReportNotes to Consolidated Financial Statements
86
9. 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 2017
Fiscal 2017
Fiscal 2017
Fiscal 2019
Fiscal 2019
Fiscal 2020
Fiscal 2020
Fiscal 2020
Fiscal 2020
Fiscal 2020
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%
October 3, 2019 to June 28, 2024 - 1.68%
February 24, 2020 to June 28, 2025 - 1.60%
March 6, 2020 to June 28, 2021 - 1.08%
June 28, 2021 to June 28, 2023 - 1.08%
June 28, 2024 to June 28, 2025 - 1.18%
Total value
$
20,000
30,000
30,000
20,000
80,000
20,000
20,000
20,000
10,000
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 October 3, 2020, the fair value of the swap agreements amounted to a
liability of $6.7 million (September 28, 2019 - liability of $1.1 million).
The forecasted interest payments, the hedged items, are used for calculating the hedge ineffectiveness. No ineffectiveness was
recognized in net earnings (loss) 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 7, Trade and other
receivables and Note 9, 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.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
87
9. FINANCIAL INSTRUMENTS (CONTINUED)
Risks (continued)
(b) Currency risk (continued):
The Company mitigates its exposure to foreign currency by entering into forward exchange contracts (see Note 9, Financial
instruments; Derivative financial instruments, (c) Foreign exchange contracts).
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
October 3,
2020
(US$)
September 28,
2019
(US$)
3,126
22,400
(2,703)
22,823
121,322
(118,866)
(30,449)
1,428
(26,565)
(3,742)
(101,532)
(105,274)
2,115
21,330
(3,356)
20,089
92,765
(95,200)
(28,582)
(1,101)
(32,118)
(12,029)
(64,333)
(76,362)
As at October 3, 2020, the U.S./Can. exchange rate was $1.3304 (September 28, 2019 - $1.3247).
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 increase in net earnings of $3.9 million,
(September 28, 2019 - decrease in net loss of $2.8 million) while a 5-cent decrease would have an equal but opposite effect on
net earnings (loss).
(In thousands of dollars except as noted and per share amounts)2020 Annual ReportNotes to Consolidated Financial Statements
88
9. FINANCIAL INSTRUMENTS (CONTINUED)
Risks (continued)
(b) Currency risk (continued):
Management believes that the impact on the gross exposure is not representative as it needs to be adjusted for the following
transactions, which are not recorded on the consolidated statements of financial position as at year-end but were committed
during the fiscal year, and will be accounted for as the physical transactions occur:
Gross exposure as per above
Sugar purchases priced not received
Committed future sales in U.S. dollars
Ocean freight
Other
Net exposure
October 3,
2020
September 28,
2019
(US$)
(105,274)
(112,742)
185,095
554
(1,515)
(33,882)
(US$)
(76,362)
(85,992)
139,368
(488)
(374)
(23,848)
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 increase
in net earnings by $1.3 million in 2020 (September 28, 2019 - decrease in net loss of $0.9 million) while a decrease would have an
equal but opposite effect on net earnings (loss).
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 October 3, 2020, the Company has a short-term cash borrowing of $29.0 million (September 28, 2019 - $17.0 million) and a
long-term cash borrowing of $165.0 million (September 28, 2019 - $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.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
89
9. FINANCIAL INSTRUMENTS (CONTINUED)
Risks (continued)
(c)
Interest rate risk (continued):
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 9, 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 October 3, 2020, if interest rates had been 50 basis points higher, considering all borrowings not covered
by the interest rate swap agreements, net earnings would have been $0.4 million lower (September 28, 2019 - $0.5 million higher
net loss) while a decrease would have an equal but opposite effect on net earnings (loss).
(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
$
Non-derivative financial liabilities:
Bank overdraft
2,797
2,797
2,797
Revolving credit facility
194,000
194,000
29,000
Trade and other payables
131,089
131,089
131,089
Lease obligations
20,404
26,218
2,209
348,290
354,104
165,095
Derivative financial instruments
measured at fair value through
profit or loss:
October 3, 2020
6 to 12
months
12 to 24
months
After 24
months
$
—
—
—
$
—
—
—
2,204
2,204
3,569
3,569
$
—
165,000
—
18,236
183,236
Sugar futures contracts (net) (i)
(103)
5,167
(565)
3,481
4,928
(2,677)
Forward exchange
contracts (net) (i)
Derivative financial instruments
designated as effective cash flow
hedging instruments:
Natural gas contracts (i)
Interest on swap agreements
(2,584)
(160,446)
(104,885)
(32,792)
(18,230)
(4,539)
1,575
6,729
5,617
40,509
11,583
3,703
1,341
3,091
1,314
8,532
2,660
25,183
6,268
(103,188)
(100,406)
(24,906)
(2,110)
24,234
353,907
250,916
64,689
(22,702)
1,459
207,470
(i) Based on notional amounts as presented above.
(In thousands of dollars except as noted and per share amounts)2020 Annual ReportNotes to Consolidated Financial Statements
90
9. FINANCIAL INSTRUMENTS (CONTINUED)
Risks (continued)
(d) Liquidity risk (continued):
Carrying Contractual
cash flows
amount
$
$
Non-derivative financial liabilities:
Bank overdraft
8,325
8,325
Revolving credit facility
177,000
177,000
0 to 6
months
$
8,325
17,000
Trade and other payables
117,731
117,731
117,731
Finance lease obligations
881
1,025
89
303,937
304,081
143,145
Derivative financial instruments
measured at fair value through
profit or loss:
6 to 12
months
$
—
—
—
81
81
September 28, 2019
12 to 24
months
After 24
months
$
—
—
—
117
117
$
—
160,000
—
738
160,738
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
(57,154)
(66,737)
308,277
246,927
76,408
3,565
922
(24,324)
(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.
The convertible unsecured subordinated debentures of $145.8 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 16, Revolving credit facility). It is the Company’s intention to
keep a debt level under its revolving credit facility between $120.0 million to $200.0 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 October 3, 2020, the Company had an unused available line of credit of $71.0 million (September 28, 2019 - $88.0 million),
a cash balance of $2.0 million (September 28, 2019 - $0.3 million) and an overdraft balance of $2.8 million (September 28, 2019
- $8.3 million).
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
91
9. 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 October 3, 2020, 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$)
Volume
(M.T.)
441,122
287.34
126,753
1,155
25.34
29,264
(457,024)
285.84
(130,637)
—
—
—
(15,902)
n/a
(3,884)
1,155
25.34
29,264
1.3304
(5,167)
1.3304
38,933
Purchases
Sales
Foreign exchange rate at the end
of the period
Net value CA$
(In thousands of dollars except as noted and per share amounts)2020 Annual ReportNotes to Consolidated Financial Statements
92
9. FINANCIAL INSTRUMENTS (CONTINUED)
Risks (continued)
(e) Commodity price risk (continued):
(ii) Natural gas (continued):
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$
If, on October 3, 2020, 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 earnings would have been a decrease of
approximately $1.7 million (calculated only on the point-in-time exposure on October 3, 2020) (September 28, 2019 - decrease
in net loss of $1.4 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 earnings would
have been an increase of approximately $0.7 million (September 28, 2019 - increase in net loss of $0.5 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 October 3,
2020 nor September 28, 2019. If, on October 3, 2020, the natural gas market price would have increased by US$1.00, and all other
variables remained constant, net earnings would have increased by $11.4 million (September 28, 2019 - decrease in net loss of
$11.0 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 earnings would have decreased by $11.4 million (September 28, 2019
- increase in net loss of $11.0 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
93
9. 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) Trade and other receivables and trade and other payables: the carrying amount approximates fair value due to the short-term
maturity of these instruments.
iii) Borrowing under the revolving credit facility: the carrying amount approximates fair value as the borrowings bear interest at
variable rates.
iv) 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.
v) The fair value of convertible unsecured subordinated debentures was based upon market quotes for the identical instruments.
vi) See Note 19, Lease obligations.
(In thousands of dollars except as noted and per share amounts)2020 Annual ReportNotes to Consolidated Financial Statements
94
9. 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
October 3, 2020
Fair
values
Carrying
values
September 28, 2019
Fair
values
Carrying
values
$
$
$
$
Level 1
Level 2
103
2,584
103
2,584
—
353
—
353
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:
Natural gas futures contracts
Level 2
87
87
—
—
Financial assets recorded at amortized cost:
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
n/a
n/a
1,974
94,262
2,042
1,974
94,262
2,042
284
284
85,823
85,823
1,977
1,977
101,052
101,052
88,437
88,437
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
1,662
6,729
1,662
6,729
3,558
1,103
3,558
1,103
Financial liabilities recorded at amortized cost:
Bank overdraft
Revolving credit facility
Trade and other payables
Lease obligations
Convertible unsecured
subordinated debentures
Total financial liabilities
Level 1
2,797
2,797
8,325
8,325
n/a
n/a
n/a
194,000
194,000
177,000
177,000
131,089
131,089
117,731
117,731
20,404
20,404
881
881
Level 1
145,836
156,722
144,230
158,010
502,517
513,403
452,860
466,640
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
10. PROPERTY, PLANT AND EQUIPMENT
Machinery
and
equipment
Buildings
Furniture
and
fixtures
Barrels
Construction
in
progress
Finance
leases
$
$
$
$
$
$
Land
$
Cost or deemed cost
Balance at
September 29, 2018
18,089
73,468
293,688
2,589
8,240
—
—
—
—
630
1,241
(9)
—
1,578
20,674
(752)
11
36
—
—
3
123
288
(1,955)
1
428
897
—
—
3
15,167
23,725
(22,203)
—
—
95
Total
$
411,669
26,989
—
(2,716)
18
Additions
Transfers
Disposals
Effect of movements in
exchange rate
Balance at
September 28, 2019
Transfer to right-of-use
assets
Additions
Transfers
Disposals
Effects of movements
in exchange rate
Balance at
October 3, 2020
Depreciation
Balance at
September 29, 2018
Depreciation for the year
Disposals
Effect of movements in
exchange rate
Balance at
September 28, 2019
Transfer to right-of-use
assets
Depreciation for the year
Disposals
Effect of movements
in exchange rate
Balance at
October 3, 2020
Net carrying amounts
18,089
75,330
315,199
2,628
6,697
1,328
16,689
435,960
—
—
—
—
—
—
2,655
2,248
—
—
—
3,481
16,848
(224)
—
142
—
(38)
359
500
—
2
1
—
—
(1,328)
—
20,618
(19,596)
—
—
(1,328)
27,255
—
(262
3
18,089
80,233
335,306
2,733
7,556
17,711
461,628
—
—
—
—
—
—
—
—
—
24,284
1,873
(9)
—
173,009
12,258
(706)
469
439
—
4,837
781
(1,955)
2
1
—
26,148
184,563
909
3,663
269
—
—
2,144
12,726
(224)
—
456
(38)
—
896
—
(269)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
202,770
15,449
(2,670)
3
215,552
(269)
16,222
(262)
—
—
28,292
197,065
1,327
4,559
—
231,243
—
—
—
—
—
171
98
—
—
—
—
—
—
At September 28, 2019
18,089
49,182
130,636
At October 3, 2020
18,089
51,941
138,241
1,719
1,406
3,034
2,997
1,059
16,689
220,408
—
17,711
230,385
There were no impairment losses during fiscal 2020 and 2019.
Any grants received are offset against property, plant and equipment additions. During the year, an amount of $0.6 million was
recorded (September 28, 2019 - $4.0 million).
All property, plant and equipment have been pledged as security for the revolving credit facility (see Note 16, Revolving credit facility).
(In thousands of dollars except as noted and per share amounts)2020 Annual ReportNotes to Consolidated Financial Statements
96
11. RIGHT-OF-USE ASSETS
Cost:
Balance at September 28, 2019
Reclassification from property,
plant and equipment
Additions as at September 29, 2019
(initial recognition)
Other Additions
Effect of movements in exchange rate
Balance at October 3, 2020
Amortization:
Balance at September 28, 2019
Reclassification from property,
plant and equipment
Depreciation for the year
Effect of movements in exchange rate
Balance at October 3, 2020
Net carrying amounts:
At October 3, 2020
Land
$
—
40
—
—
—
40
—
—
—
—
—
Buildings
Machinery and
equipment
$
—
1,023
7,159
9,383
6
17,571
—
69
2,712
(3)
2,778
$
—
265
3,876
2,435
2
6,578
—
200
722
—
922
Total
$
—
1,328
11,035
11,818
8
24,189
—
269
3,434
(3)
3,700
40
14,793
5,656
20,489
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
97
12. INTANGIBLE ASSETS
Cost
Customer
Software relationships
$
$
Brand
names(1)
$
Other
$
Total
$
Balance at September 29, 2018
4,061
34,542
5,871
574
45,048
Additions
Disposals
Effect of movements in exchange rate
Balance at September 28, 2019
Additions
Effect of movements in exchange rate
Balance at October 3, 2020
Amortization
Balance at September 29, 2018
Amortization for the year
Disposals
Balance at September 28, 2019
Amortization for the year
Balance at October 3, 2020
Net carrying amounts
At September 28, 2019
At October 3, 2020
(1)
Indefinite life.
13. OTHER ASSETS
Deferred financing charges, net
Other
172
(203)
—
—
—
81
—
—
16
—
—
—
172
(203)
97
4,030
34,623
5,887
574
45,114
25
—
—
15
—
4
4,055
34,638
5,891
2,159
279
(203)
2,235
324
2,559
3,747
3,465
—
7,212
3,470
10,682
—
—
—
—
—
—
1,795
1,496
27,411
23,956
5,887
5,891
—
—
574
195
28
—
223
28
251
351
323
25
19
45,158
6,101
3,772
(203)
9,670
3,822
13,492
35,444
31,666
October 3,
2020
September 28,
2019
$
743
2
745
$
925
3
928
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 16, 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)2020 Annual ReportNotes to Consolidated Financial Statements
98
14. DEFERRED TAX ASSETS AND LIABILITIES
The deferred tax assets (liabilities) comprise the following temporary differences:
Assets:
Employee benefits
Lease obligations
Derivative financial instruments
Losses carried forward
Provisions
Intangibles
Other
Liabilities:
Property, plant and equipment
Right-of-use assets
Derivative financial instruments
Goodwill
Deferred financing charges
Intangibles
Other
Net assets (liabilities):
Property, plant and equipment
Right-of-use assets
Intangibles
Employee benefits
Lease obligations
Derivative financial instruments
Losses carried forward
Goodwill
Provisions
Deferred financing charges
Other
October 3,
2020
$
September 28,
2019
$
15,213
5,310
2,621
6,307
241
79
1,314
31,085
13,267
—
1,339
3,548
435
58
1,037
19,684
(36,529)
(29,465)
(5,335)
(679)
(2,649)
(687)
(7,066)
(1,342)
—
(565)
(2,537)
(549)
(7,894)
(1,616)
(54,287)
(42,626)
(36,529)
(5,335)
(6,987)
15,213
5,310
1,942
6,307
(2,649)
241
(687)
(28)
(29,465)
—
(7,836)
13,267
—
774
3,548
(2,537)
435
(549)
(579)
(23,202)
(22,942)
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
14. DEFERRED TAX ASSETS AND LIABILITIES (CONTINUED)
The movement in temporary differences during the current years is as follows:
99
Property, plant and equipment
Right-of-use assets
Intangibles
Employee benefits
Lease obligations
Derivative financial instruments
Losses carried forward
Goodwill
Provisions
Deferred financing charges
Other
Property, plant and equipment
Intangibles
Employee benefits
Derivative financial instruments
Losses carried forward
Goodwill
Provisions
Deferred financing charges
Other
Balance
September 28,
2019
Recognized
in profit
(loss)
Recognized
in other
comprehensive
income (loss)
Balance
October 3,
2020
$
(29,465)
—
(7,836)
13,267
—
774
3,548
(2,537)
435
(549)
(579)
$
(7,064)
(5,335)
849
444
5,310
152
2,759
(112)
(194)
(138)
551
$
—
—
—
1,502
—
1,016
—
—
—
—
—
$
(36,529)
(5,335)
(6,987)
15,213
5,310
1,942
6,307
(2,649)
241
(687)
(28)
(22,942)
(2,778)
2,518
(23,202)
Balance
September 29,
2018
Recognized
in profit
(loss)
Recognized
in other
comprehensive
income (loss)
Balance
September 28,
2019
$
(29,260)
(8,653)
8,330
(218)
1,518
(2,509)
583
(417)
(636)
(31,262)
$
(205)
817
(257)
(251)
2,030
(28)
(148)
(132)
57
1,883
$
—
—
5,194
1,243
—
—
—
—
—
$
(29,465)
(7,836)
13,267
774
3,548
(2,537)
435
(549)
(579)
6,437
(22,942)
(In thousands of dollars except as noted and per share amounts)2020 Annual ReportNotes to Consolidated Financial Statements
100
15. GOODWILL
Balance, beginning of year
Goodwill impairment
Balance, end of year
October 3,
2020
September 28,
2019
$
283,007
—
283,007
$
333,007
(50,000)
283,007
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
October 3,
2020
$
September 28,
2019
$
229,952
229,952
53,055
5,891
288,898
53,055
5,887
288,894
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.
SUGAR SEGMENT
The Company performed the annual impairment review for goodwill and indefinite life intangible assets as at October 3, 2020, 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)
2020
%
9.9
2.0
5.0
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.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
101
15. GOODWILL (CONTINUED)
SUGAR SEGMENT (CONTINUED)
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 to factor revenue growth for the first year based on
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
MAPLE PRODUCTS SEGMENT
2020
%
7.1
(8.6)
The Company performed the annual impairment review for goodwill and indefinite life intangible assets as at October 3, 2020, and
the estimated recoverable amounts to be equal to 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)
2020
%
12.3
3.0
9.5
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 and was adjusted to factor revenue growth for the first year
based on 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 volumes
would increase in line with forecasted market growth over the next five years.
(In thousands of dollars except as noted and per share amounts)2020 Annual ReportNotes to Consolidated Financial Statements
102
16. 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.
As a result of the amended revolving credit facility, 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 October 3, 2020, a total of $482.9 million of assets are pledged as security (September
28, 2019 - $422.2 million).
The following amounts were outstanding as at:
Outstanding amount on revolving credit facility:
Current
Non-current
October 3,
2020
$
September 28,
2019
$
29,000
165,000
194,000
127,000
160,000
177,000
The carrying value of the revolving credit facility approximates fair value as the borrowings bear interest at variable rates.
17. TRADE AND OTHER PAYABLES
Trade payables
Other non-trade payables
Personnel-related liabilities
Dividends payable to shareholders
October 3,
2020
September 28,
2019
$
105,894
2,641
13,236
9,318
131,089
$
96,150
2,907
9,238
9,440
117,735
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 $61.4 million as of October 3, 2020 (September 28, 2019 - $62.3 million).
During the year, more than 87% 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 9, Financial instruments.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
18. PROVISIONS
Opening balance
Additions
Provisions used during the period
Closing balance
Presented as:
Current
Non-current
103
October 3,
2020
September 28,
2019
$
1,697
100
(860)
937
500
437
937
$
2,205
70
(578)
1,697
878
819
1,697
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 regu-
lations 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.
19. LEASE OBLIGATIONS
The Company’s leases are primarily for warehouses, operating properties, railcars and production equipment.
The following table presents lease obligations recorded in the consolidated statement of financial position as at October 3, 2020 and
September 28, 2019:
Current
Non-current
October 3,
2020
September 28,
2019 (1)
$
3,981
16,423
$
139
742
(1) Finance lease obligations assessed under the previous standards. Refer to Note 3 (q) i).
The following table summarizes the reconciliation of the lease obligations from the date of initial application until October 3, 2020:
Lease obligations as at September 28, 2019
Reclassification from finance lease obligations
Additions as at September 29, 2019 (date of initial application)
Additions during the period
Payment of lease obligations
Interest accretion
Effect of movements in exchange rate
Lease obligations as at October 3, 2020
$
—
881
11,035
11,818
(4,205)
864
11
20,404
(In thousands of dollars except as noted and per share amounts)2020 Annual ReportNotes to Consolidated Financial Statements
104
19. LEASE OBLIGATIONS (CONTINUED)
Certain leases contain extension or termination options exercisable by the Company before the end of the non-cancellable contract
period. The Company has applied judgement to determine the lease term for the contracts with renewal and termination options and
has included renewal and termination options in the measurement of lease obligations when it is reasonably certain to exercise the
options. The Company reassesses whether it is reasonably certain to exercise the options if there is a significant event or a significant
change in circumstances which impacts the original assessments made.
Expenses relating to short-term leases, and for leases of low-value assets were not significant for the period ended October 3, 2020
(September 28, 2019 - operating leases expensed - $5.4 million).
The total cash outflow for leases (including interest) for the period ended October 2020 was $4.2 million, which was included as part
of cash outflows from financing activities.
The lease obligations are payable as follows:
October 3, 2020
September 28, 2019 (1)
Future
minimum
lease
payments
$
4,405
10,188
11,625
26,218
Present
value of
minimum
lease
payments
$
3,565
7,257
9,582
Future
minimum
lease
payments
$
170
435
420
20,404
1,025
Interest
$
839
2,931
2,044
5,814
Present
value of
minimum
lease
payments
$
139
352
390
881
Interest
$
31
83
30
144
Less than one year
Between one and five years
More than five years
(1) Finance lease obligations assessed under the previous standards. Refer to Note 3 (q) i).
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
20. 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:
105
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
October 3,
2020
$
September 28,
2019
$
103,373
105,323
145,667
16,918
162,585
(42,294)
(16,918)
(59,212)
2,881
(3,026)
139,952
17,181
157,133
(34,628)
(17,182)
(51,810)
19,363
(539)
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 October 3, 2020 (September
28, 2019 - 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, January 1, 2017 and December
31, 2019, the next required valuations will be as of December 31, 2022.
(In thousands of dollars except as noted and per share amounts)2020 Annual ReportNotes to Consolidated Financial Statements
106
20. 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
October 3, 2020
September 28, 2019
%
58.5
36.1
5.4
100.0
$
60,473
37,318
5,582
103,373
%
61.4
35.4
3.2
100.0
$
64,668
37,285
3,370
105,323
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 2021 are expected to be approximately $5.9 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
107
20. EMPLOYEE BENEFITS (CONTINUED)
Movement in the present value of the defined benefit obligations is as follows:
For the fiscal years ended
October 3, 2020
Pension
benefit
plans
$
Other
benefit
plans
$
Total
$
Pension
benefit
plans
$
September 28, 2019
Other
benefit
plans
$
Total
$
Movement in the present value of
the defined benefit obligation:
Defined benefit obligation,
beginning of the year
139,952
17,181
157,133
120,650
15,206
135,856
Current service cost
3,156
312
3,468
2,370
235
2,605
Re-measurements of other
long-term benefits
Interest cost
Employee contributions
Benefit payments from plan
Benefit payments
from employer
Actuarial gains arising from changes
in demographic assumptions
Actuarial losses arising from changes
—
4,110
1,006
(4,947)
—
498
—
—
—
4,608
1,006
(8)
4,587
982
(4,947)
(5,217)
(103)
565
—
—
(111)
5,152
982
(5,217)
(919)
(645)
(1,564)
(862)
(635)
(1,497)
(826)
(1,180)
(2,006)
—
(56)
(56)
in financial assumptions
5,255
635
5,890
17,208
2,000
19,208
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
(1,120)
117
(1,003)
242
(31)
211
145,667
16,918
162,585
139,952
17,181
157,133
105,323
3,128
—
—
105,323
104,362
3,128
4,022
—
—
104,362
4,022
(3,026)
3,376
1,006
(4,947)
(919)
(568)
—
(3,026)
645
—
—
(645)
4,021
1,006
(4,947)
(1,564)
—
(568)
(539)
2,972
982
(5,217)
(862)
(397)
—
635
—
—
(635)
—
(539)
3,607
982
(5,217)
(1,497)
(397)
103,373
—
103,373
105,323
—
105,323
(In thousands of dollars except as noted and per share amounts)2020 Annual ReportNotes to Consolidated Financial Statements
108
20. EMPLOYEE BENEFITS (CONTINUED)
The net defined benefit obligation can be allocated to the plans’ participants as follows:
October 3, 2020
September 28, 2019
Pension
benefit plans
Other
benefit plans
Pension
benefit plans
Other
benefit plans
Active plan participants
Retired plan members
Deferred plan participants
Other
%
49.5
46.4
4.1
—
100.0
%
41.6
58.4
—
—
100.0
%
47.2
48.4
1.3
3.1
100.0
The Company’s defined benefit pension expense was as follows:
For the fiscal years ended
October 3, 2020
September 28, 2019
Pension
benefit
plans
$
Other
benefit
plans
$
Pension
benefit
plans
$
Other
benefit
plans
$
Total
$
Pension costs recognized in
net earnings (loss):
Current service cost
3,156
312
3,468
2,370
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
568
982
9
4,715
—
498
51
861
568
1,480
60
5,576
397
565
(8)
3,324
4,218
580
4,798
2,802
497
4,715
281
861
778
5,576
522
3,324
235
—
565
(103)
697
606
91
697
%
43.8
56.2
—
—
100.0
Total
$
2,605
397
1,130
(111)
4,021
3,408
613
4,021
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
109
20. EMPLOYEE BENEFITS (CONTINUED)
The following table presents the change in the actuarial gains and losses recognized in other comprehensive income (loss):
For the fiscal years ended
October 3, 2020
September 28, 2019
Pension
benefit
plans
$
Other
benefit
plans
$
Total
$
Cumulative amount in comprehensive
income (loss) at the beginning of the year 18,159
(7,041)
11,118
Pension
benefit
plans
$
170
Recognized during the year
6,326
(479)
5,847
17,989
Other
benefit
plans
$
(8,954)
1,913
Total
$
(8,784)
19,902
Cumulative amount in comprehensive
income (loss) at the end of the year
Recognized during the year,
net of tax
24,485
(7,520)
16,965
18,159
(7,041)
11,118
4,701
(356)
4,345
13,294
1,414
14,708
Principal actuarial assumptions used were as follows:
For the fiscal years ended
October 3, 2020
September 28, 2019
Pension
benefit
plans
%
2.75
3.00
3.00
2.50
Other
benefit
plans
%
2.75
3.00
2.75
3.00
Pension
benefit
plans
%
3.00
2.50
3.90
2.20
Other
benefit
plans
%
3.00
3.00
3.90
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)2020 Annual ReportNotes to Consolidated Financial Statements
110
20. 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
October 3,
2020
September 28,
2019
22.1
24.7
23.5
26.1
22.0
24.7
23.5
26.0
The assumed health care cost trend rate as at October 3, 2020 was 5.73% (September 28, 2019 - 5.67%), decreasing uniformly to
4.00% in 2040 (September 28, 2019 - 4.00% in 2040) and remaining at that level thereafter.
The following table outlines the key assumptions for the fiscal year ended October 3, 2020 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 October 3, 2020
Pension
benefit
plans
$
(19,559)
25,133
1,472
(1,381)
374
Other
benefit
plans
$
(2,262)
2,962
5
(4)
64
Total
$
(21,821)
28,095
1,477
(1,385)
438
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
$
2,434
Decrease
$
(1,932)
As at October 3, 2020, the weighted average duration of the defined benefit obligation amounts to 15.4 years (September 28, 2019 -
15.5 years).
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
21. CONVERTIBLE UNSECURED SUBORDINATED DEBENTURES
The outstanding convertible debentures are as follows:
Non-current
Sixth series (i)
Seventh series (ii)
Total face value
Less net deferred financing fees
Less equity component (i), (ii)
Accretion expense on equity component
111
October 3,
September 28,
2020
$
57,425
97,575
155,000
(4,512)
(6,930)
2,278
2019
$
57,500
97,750
155,250
(5,500)
(6,930)
1,410
Total carrying value - non-current
145,836
144,230
(i) 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.
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 $0.3 million (September 28, 2019 - $0.3 million) 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.
(In thousands of dollars except as noted and per share amounts)2020 Annual ReportNotes to Consolidated Financial Statements
112
21. CONVERTIBLE UNSECURED SUBORDINATED DEBENTURES (CONTINUED)
(i) Sixth series (continued):
During fiscal 2020, holders of the Sixth series debentures converted a total of $0.1 million into 9,079 common shares. This
conversion is a non-cash transaction and therefore not reflected in the consolidated statements of cash flows.
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 October 3, 2020 was
approximately $58.2 million (September 28, 2019 - $58.8 million).
(ii) 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 $0.6 million (September 28, 2019 - $0.5 million) 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.
During fiscal 2020, holders of the Seventh series debentures converted a total of $0.2 million into 19,774 common shares. This
conversion is a non-cash transaction and therefore not reflected in the consolidated statements of cash flows.
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 October 3, 2020 was
approximately $98.6 million (September 28, 2019 - $99.2 million).
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
113
22. SHARE CAPITAL AND OTHER COMPONENTS OF EQUITY
On June 1, 2020, the Company received approval from the Toronto Stock Exchange to proceed with a Normal Course Issuer Bid
("2020 NCIB"), under which the Company may purchase up to 1,500,000 common shares. In addition, the Company entered into an
automatic share purchase agreement with Scotia Capital Inc. in connection with the 2020 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. The 2020 NCIB commenced on June 3, 2020 and may continue to June 2, 2021. No shares were
purchased under the 2020 NCIB during the year.
On May 22, 2019, the Company received approval from the Toronto Stock Exchange to proceed with a Normal Course Issuer Bid
(“2019 NCIB”), under which the Company may purchase up to 1,500,000 common shares. The 2019 NCIB commenced on May 24,
2019 and terminated on March 30, 2020, whereby all common shares had been purchased. During the year, the Company purchased
1,377,394 common shares having a book value of $1.3 million for a total cash consideration of $6.5 million. The excess of the purchase
price over the book value of the shares in the amount of $5.2 million was charged to deficit. During fiscal 2019, the Company purchased
122,606 common shares having a book value of $0.1 million for a total cash consideration of $0.6 million. The excess of the purchase
price over the book value of the shares in the amount of $0.5 million was charged to deficit. All shares purchased were cancelled.
As of October 3, 2020, a total of 103,536,923 common shares (September 28, 2019 - 104,885,464) were outstanding.
The Company declared a quarterly dividend of $0.09 per share for fiscal years 2020 and 2019.
The following dividends were declared by the Company:
Dividends
Contributed surplus:
For the fiscal years ended
October 3,
2020
$
37,380
September 28,
2019
$
37,793
The contributed surplus account is used to record amounts arising on the issue of equity-settled share-based payment awards (see
Note 23, 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 the Board of Directors considers trading values do not reflect fair values.
(In thousands of dollars except as noted and per share amounts)2020 Annual ReportNotes to Consolidated Financial Statements
114
22. 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 $40.0 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 $120.0 million and $200.0 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 3.5:1. At year-end, the operating company’s debt ratio was 2.09:1 for fiscal 2020
and 1.96:1 for fiscal 2019.
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.
23. SHARE-BASED COMPENSATION
(a) Equity-settled share-based compensation:
The Company currently has a share option plan that was established in 2011 and amended in 2015. Under this plan, the Company
has set aside 4,000,000 common shares to be granted to key personnel. As at October 3, 2020, a total of 3,535,997 options
had been granted at exercise prices ranging between $4.28 per share and $6.51 per share. These share options are exercisable
to a maximum of twenty percent per year, starting after the first anniversary date of the granting of the options and will expire after
a term of ten years.
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 $168 was incurred for the fiscal
year ended October 3, 2020 (September 28, 2019 - $190).
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
115
Number of
options
exercisable
—
830,000
—
89,435
80,000
402,129
216,000
23. SHARE-BASED COMPENSATION (CONTINUED)
(a) Equity-settled share-based compensation (continued):
The following table summarizes information about the Share Option Plan as of October 3, 2020:
Exercise
price
per
option
Outstanding
number of
options at
September 28,
2019
Options
granted
during
the
period
Options
forfeited
during
the
period
Options Outstanding
number of
options at
October 3,
2020
exercised
during
the
period
Weighted
average
remaining
life
(in years)
$4.28
$4.59
$4.68
$5.58
$5.61
$6.23
$6.51
—
250,000
830,000
—
—
563,500
447,175
80,000
1,005,322
360,000
—
—
—
—
2,722,497
813,500
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
250,000
830,000
563,500
447,175
80,000
1,005,322
360,000
3,535,997
The following table summarizes information about the Share Option Plan as of September 28, 2019:
9.46
4.64
9.16
8.17
1.46
7.17
6.17
n/a
1,617,564
Exercise
price
per
option
$4.59
$5.58
$5.61
$6.23
$6.51
Outstanding
number of
options at
September 29,
2018
830,000
Options
granted
during
the
period
—
—
447,175
80,000
1,005,322
360,000
—
—
—
2,275,322
447,175
Options
forfeited
during
the
period
—
—
—
—
—
—
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
n/a
Number of
options
exercisable
660,000
—
80,000
201,064
144,000
1,085,064
Options outstanding held by key management personnel amounted to 2,915,997 options as at October 3, 2020 and 2,102,497
options as at September 28, 2019 (see Note 28, Key management personnel).
(In thousands of dollars except as noted and per share amounts)2020 Annual ReportNotes to Consolidated Financial Statements
116
23. SHARE-BASED COMPENSATION (CONTINUED)
(a) Equity-settled share-based compensation (continued):
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 2020 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
Weighted average risk-free interest rate (based on government bonds)
$106
$4.81
$4.68
15.984% to 16.870%
4 to 6 years
7.48%
1.641% to 1.660%
The inputs used in the measurement of the fair values of the share-based payment plans granted in the second quarter of fiscal
2020 are the following:
Total fair value of options
Share price
Exercise price
Expected volatility (weighted average volatility)
Option life (expected weighted average life)
Expected dividends
Weighted average risk-free interest rate (based on government bonds)
$26
$4.24
$4.28
16.872% to 17.949%
4 to 6 years
8.49%
0.714% to 0.763%
(b) Cash-settled share-based compensation:
i)
Performance Share Units ("PSU")
Fiscal 2020 grant:
On December 2, 2019, a total of 324,932 PSUs were granted to certain executives. In addition, an aggregate of
18,734 PSUs at a weighted-average share price of $4.78 were allocated as a result of the dividend paid during the quarters
since inception, as the participants also receive dividend equivalents paid in the form of PSUs. As at October 3, 2020, an
aggregate of 343,666 PSUs was outstanding. These PSUs will vest at the end of the 2020-2022 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)Rogers Sugar Inc.Notes to Consolidated Financial Statements
117
23. SHARE-BASED COMPENSATION (CONTINUED)
(b) Cash-settled share-based compensation (continued):
i)
Performance Share Units (“PSU”) (continued)
Fiscal 2020 grant (continued):
The fair values were established using the Monte Carlo model. The fair value as at grant date was $64 and $89 as at
October 3, 2020. An expense of $19 was recorded for the period ending October 3, 2020 in administration and selling
expenses. The liabilities arising from the PSUs as at October 3, 2020 were $19.
Fiscal 2019 grant:
On December 3, 2018, an aggregate of 290,448 PSUs was granted by the Company. In addition, an aggregate of 36,717 PSUs
at a weighted-average share price of $5.29 were allocated as a result of the dividend paid during the quarters since inception,
as the participants also receive dividend equivalents paid in the form of PSUs. As at October 3, 2020, an aggregate of
327,165 PSUs was outstanding. These PSUs will vest at the end of the 2019-2021 Performance Cycle.
The fair values were established using the Monte Carlo model. The fair value as at grant date was $308 and $43 as at
October 3, 2020 (September 28, 2019 - $35). An expense of $15 was recorded for the period ending October 3, 2020
(September 28, 2019 - $7) in administration and selling expenses. The liabilities arising from the PSUs as at October 3, 2020
were $22 (September 28, 2019 - $7).
Fiscal 2019 grant:
On December 4, 2017, an aggregate of 224,761 PSUs was granted by the Company. In addition, an aggregate of 44,372 PSUs
at a weighted-average share price of $5.50 were allocated as a result of the dividend paid during the quarters since inception,
as the participants also receive dividend equivalents paid in the form of PSUs. As at October 3, 2020, an aggregate of
269,133 PSUs was outstanding. These PSUs will vest at the end of the 2018-2020 Performance Cycle.
The fair value as at October 3, 2020 was nil (September 28, 2019 - nil). An expense of nil was recorded for the period ending
October 3, 2020 (September 28, 2019 - nil) in administration and selling expenses. The liabilities arising from the PSUs as at
October 3, 2020 were nil (September 28, 2019 - nil).
24. COMMITMENTS
As at October 3, 2020, the Company had commitments to purchase a total of 1,496,000 metric tonnes of raw cane sugar (September
28, 2019 - 1,057,000), of which 383,574 metric tonnes had been priced (September 28, 2019 - 283,162), for a total dollar commitment
of $150.0 million (September 28, 2019 - $113.9 million). In addition, the Company has a commitment of approximately $22.9 million
(September 28, 2019 - $25.0 million) for sugar beets to be harvested and processed in fiscal 2020.
TMTC has $4.1 million (September 28, 2019 - $8.8 million) remaining to pay related to an agreement to purchase approximately
$12.2 million (4.0 million pounds) (September 28, 2019 - $13.9 million; 4.3 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 $14.5 million in favor of the PPAQ
(September 28, 2019 - $17.3 million). The letters of guarantee expire on February 28, 2021.
During the fiscal year ended October 3, 2020, the Company entered into capital commitments to complete its capital projects for a
total value of $23.6 million (September 28, 2019 - $19.0 million).
(In thousands of dollars except as noted and per share amounts)2020 Annual ReportNotes to Consolidated Financial Statements
118
25. CONTINGENCIES
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 October 3, 2020 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.
26. EARNINGS (LOSS) PER SHARE
Reconciliation between basic and diluted earnings (loss) per share is as follows:
Basic earnings (loss) per share:
Net earnings (loss)
For the fiscal years ended
October 3,
2020
$
September 28,
2019
$
35,419
(8,167)
Weighted average number of shares outstanding
103,973,735
104,997,204
Basic earnings (loss) per share
0.34
(0.08)
Diluted earnings (loss) per share:
Net earnings (loss)
Plus impact of convertible unsecured subordinated debentures and share options
35,419
2,348
37,767
(8,167)
—
(8,167)
Weighted average number of shares outstanding:
Basic weighted average number of shares outstanding
103,973,735
104,997,204
Plus impact of convertible unsecured subordinated debentures and share options
6,952,179
—
110,925,914
104,997,204
Diluted earnings (loss) per share
0.34
(0.08)
As at October 3, 2020, the share options and the Seventh series debentures, representing 11,025,424 common shares, were excluded
from the calculation of diluted earnings per share as they were deemed anti-dilutive. 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.
27. SUPPLEMENTARY CASH FLOW INFORMATION
Non-cash transactions:
Additions of property, plant and equipment and intangible assets
included in trade and other payables
1,239
294
1,041
October 3,
2020
$
September 28,
2019
September 29,
2018
$
$
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
28. 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:
119
Salaries and short-term benefits
Attendance fees for members of the Board of Directors
Post-employment benefits
Share-based compensation (note 23)
29. PERSONNEL EXPENSES
Wages, salaries and employee benefits
Expenses related to defined benefit plans (note 20)
Expenses related to defined contributions plans
Share-based compensation (note 23)
For the fiscal years ended
October 3,
2020
September 28,
2019
$
3,989
962
164
194
5,309
$
2,281
883
111
195
3,470
For the fiscal years ended
October 3,
2020
September 28,
2019
$
98,887
5,576
5,615
194
110,272
$
86,806
4,021
4,815
195
95,837
The personnel expenses were charged to the consolidated statements of earnings (loss) and comprehensive income (loss) 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
October 3,
2020
September 28,
2019
$
89,046
19,445
1,494
109,985
287
110,272
$
78,972
14,928
1,582
95,482
355
95,837
(In thousands of dollars except as noted and per share amounts)2020 Annual ReportNotes to Consolidated Financial Statements
120
30. 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.
31. 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
Additions to right-of-use assets
Total assets
Total liabilities
Sugar
$
631,263
526,175
105,088
16,890
62,382
20,711
14,550
Sugar
$
798,179
(969,021)
For the fiscal year ended October 3, 2020
Maple
products
$
229,538
208,427
21,111
6,588
7,147
6,569
8,303
Corporate and
eliminations
$
—
—
—
—
(1,519)
—
—
Total
$
860,801
734,602
126,199
23,478
68,010
27,280
22,853
For the fiscal year ended October 3, 2020
Maple
products
$
255,242
(270,230)
Corporate and
eliminations
$
(166,277)
622,298
Total
$
887,144
(616,953)
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
121
31. 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 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)
Revenues were derived from customers in the following geographic areas:
Canada
United States
Europe
Other
Substantially all of the non-current assets are located in Canada.
For the fiscal years ended
October 3,
2020
September 28,
2019
$
637,781
142,888
44,368
35,764
860,801
$
611,633
109,655
34,633
38,371
794,292
(In thousands of dollars except as noted and per share amounts)2020 Annual ReportNotes to Consolidated Financial Statements
122
Corporate Information
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
will be held virtually February 2, 2021
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
Jean-Sébastien Couillard
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
1150, rue Arthur-Danis
Granby, Québec
J2J 0T3
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
Designed and written by
MaisonBrison Communications
Printed in Canada
Operating Companies
Corporate Information — Management
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
DIRECTORS
M. Dallas H. Ross, (1)
Chairman & CEO
Kinetic Capital Limited Partnership
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
Michael Walton,
Chief Operating Officer of Lantic Inc. &
President of The Maple Treat Corporation
Jean-Sébastien Couillard,
Vice President Finance,
Chief Financial Officer
and Corporate Secretary
Patrick Dionne,
Vice President, Operations and
Supply Chain
Jean-François Khalil,
Vice President,
Human Resources
Rod Kirwan,
Vice President,
Sales and Marketing
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www.lanticrogers.com
www.themapletreat.com