The Power of Our People
ACROSS OUR COMMUNITIES
2 0 2 1 A N N U A L R E P O R T
We work effectively as a team and deliver
what we promise: the best quality sugars and
sweeteners to satisfy our customers
ROGERS holds all of the common shares of Lantic
LANTIC also owns all of the common shares of The
Inc., which operates cane sugar refineries
in
Maple Treat Corporation (“TMTC”). TMTC operates
Montreal, Québec and Vancouver, British Columbia,
plants in Granby, Dégelis and in St-Honoré-de-
as well as the only Canadian sugar beet processing
Shenley, Québec and in Websterville, Vermont.
facility in Taber, Alberta. Lantic / Rogers’ products
TMTC’s products include maple syrup and derived
include granulated (regular and organic), brown,
maple syrup products and are sold under various
icing, liquid, cubed sugars and specialty syrups,
brand names, such as TMTC, Uncle Luke’s, Decacer
as well as stevia, agave, organic coconut sugar,
and Highland SugarWorks.
Plantation Raw™ sugar, maple sugar and flakes and
other dry blends.
Sugar vs. Maple syrup
Products
Geographic Distribution
25%
Maple Syrup
3%
Europe
4%
Other
18%
U.S.
75%
Sugar
75%
Canada
Dividend Tables
01
m
r
a
f
p
u
r
y
s
e
p
a
M
l
:
o
t
o
h
P
p
o
r
c
t
e
e
b
r
a
g
u
S
:
o
t
o
h
P
Dividend Paid (thousand of $)
Fiscal 2021
Fiscal 2020
DEC
9,318
9,440
MAR
9,318
9,423
JUN
SEP
TOTAL
9,318
9,320
9,333
9,318
37,287
37,501
Per Share Dividend ($)
Fiscal 2021
Fiscal 2020
DEC
MAR
0.09
0.09
0.09
0.09
JUN
0.09
0.09
SEP
0.09
0.09
TOTAL
0.36
0.36
The Power of Our People
Across Our Communities
The power of our people manifested itself across our communities in 2021.
Although the COVID-19 pandemic continued to create volatility, the resilience of
our employees allowed Rogers Sugar to fulfill its essential role in the Canadian
food supply chain.
From coast to coast, our dedicated workforce met challenges head-on. Be it
inclement weather affecting the sugar beet crop in Alberta, labour shortages and
transportation issues disrupting our product pipeline, or the ongoing pandemic
impacting our day-to-day operations, our teams delivered with true grit and
passion.
Based upon this unwavering commitment to serving our customers, Rogers
Sugar strengthened its leadership position in the sugar and maple syrup markets
in 2021.
2021 Highlights
• Rogers Sugar generated adjusted EBITDA of $91.0 million in 2021, despite one less
operating week compared to 2020
• The Sugar business delivered a record 779,500 metric tonnes of sugar in 2021
• The Sugar segment’s adjusted EBITDA reached $74.6 million in 2021, down 5.4%
year-over-year, due to non-recurring issues that negatively affected the business
• The Maple segment’s adjusted EBITDA improved 22% year-over-year to
$16.4 million in 2021 on the strength of increased product margins and operational
efficiencies
• Free cash flow for the trailing 12 months ended October 2, 2021 totaled
$45.5 million, slightly down compared to 2020
• The company published its first Environmental, Social and Governance report in
June 2021, reflecting its commitment to sustainability and how ESG has become
an integral part of its business and corporate strategy
• Mike Walton was appointed President and CEO of Rogers Sugar and Lantic Inc.
in a seamless leadership transition process, following the retirement of
John Holliday in October 2021
Chairman’s Report
04
Dallas H. Ross
Chairman
To my fellow shareholders:
During the fiscal year ended October 2, 2021, our business continued to experience volatility from the COVID-19
pandemic. This situation affected both of our business segments throughout the year at various levels. In the
fourth quarter of the fiscal year, we noted greater stability in demand and we are hopeful that this trend will
continue in the future.
The business delivered adjusted EBITDA of $91.0 million for the fiscal year compared to $92.3 million last year.
While lower than the comparable period last year, these results have one-less operating week in fiscal 2021
and reflect some unexpected challenges encountered mainly in our Sugar segment.
In fiscal 2021, our financial results were negatively impacted by issues we anticipate will not occur in 2022.
Overall, we believe our adjusted EBITDA of 2021 was negatively impacted by more than $10.0 million in relation
with such issues. This includes weather-related unfavourable impacts on the sugar beet crop in Alberta, the
costs associated with the recognition of a prior period past service charge related to the new Montreal refinery
collective bargaining agreement and the lingering effects of COVID-19 related expenditures for preventive
measures and logistics.
Despite the challenges, the management team executed an effective mitigation plan to deliver solid financial
results and ensure our valued customers were not impacted. Our Sugar Business segment sold more sugar
in fiscal 2021 than in recent years with total sales of 779,500 metric tonnes. The increase in volume reflects
incremental sales in our liquid and export segments, which more than compensated the reduction we noted in
our consumer retail segment from the COVID-19 volatility. Looking forward, we expect domestic sales to return to
a more traditional mix and export sales to return to prior years level.
Chairman’s Report
05
This past year, the operations of our Maple business segment have improved with the full integration of our
manufacturing value chain. This business segment delivered $16.4 million in adjusted EBITDA in 2021, an
improvement of 22% over 2020. We are seeing benefits from optimizing product margins and delivering operational
efficiencies. We have the leading market share and will continue to develop and strengthen it by providing high
quality products reliably to our existing and new customers.
Net earnings for 2021 amounted to $47.5 million or $0.46 per share. Free cash flow for the same period
amounted to $45.5 million. During the year, we paid a dividend of $0.09 per share every quarter, totalling $0.36
per share for the year, for a total amount paid of $37.3 million in 2021.
During the year, we decided to take advantage of favourable long term financial market conditions and issued
a private placement of $100 million for a term of 10 years at an annual fixed interest rate of 3.49%. The net
proceeds were used to reduce the amount of our revolving credit facility.
At the end of August, we announced John Holliday’s retirement as President and CEO of the Company. On
behalf of the entire Board of Directors, I would like to express our gratitude to John for his devotion to the
organization over the last 7 years. Since joining, John has worked tirelessly to build a company that is both
operationally and financially resilient. He also led our diversification efforts into the Maple business. His
resilience and leadership were instrumental in navigating through the volatility and challenges created by
the pandemic and Alberta sugar beet issues in recent years. As part of our leadership transition process,
John remains as a Strategic Advisor for our new President and CEO, Mike Walton, to access as needed until
April 2022.
The Board of Directors has full confidence in Mike and we welcome him to his new role. Mike has been part
of the Rogers Sugar team for more than four decades and possesses a deep knowledge of all aspects of the
business. We look forward to his leadership and direction as we continue to advance and execute upon our
strategy.
For fiscal 2022, we anticipate improved financial performance supported by the maturing of our Maple business
segment and a return to normal in customer sales mix and operational conditions for our Sugar segment.
I would like to take a moment to thank our management team and all our employees for their dedication and
commitment throughout the year. Our team continues to deliver creative and timely solutions to fully meet the
needs of our customers.
Finally, I would like to conclude by thanking you, our shareholders for your continuing support.
On behalf of the Board of Directors,
Dallas H. Ross
Chairman
Former President and CEO
06
John Holliday
Former President and CEO
In fiscal 2021, the world began to shift with the gradual reopening of the economy. The rebuilding of
pre-pandemic supply pipelines, along with the difficulties created through labour and transportation
disruptions during the COVID-19 pandemic, added to the day-to-day challenges of operating our
business. We are an essential component of the Canadian food supply chain and, as such during
these difficult and unprecedented times, the commitment of our employees allowed us to respond to
the circumstances and continuously deliver our essential ingredients to our customers who depend
on us.
In the early part of the fiscal year, we faced weather-related issues with our sugar beet crop in Alberta,
increasing the costs incurred to satisfy our customer demand. We quickly adjusted our supply chain
through the commitment of our operations and commercial teams. We also quickly responded to this
shortfall and ensured continuous uninterrupted service to our customers.
Our Maple business delivered solid results in 2021, driven by higher sales margins and increased
operational efficiencies. Our adjusted EBITDA for this business segment increased by $3.0 million from
2020. The outlook for this business segment is good and we are moving forward with our business
strategy and have now established a solid foundation for the future.
Considering the challenges we encountered in 2021 and the strong performance of our Maple
segment, I am pleased to report strong financial results with an adjusted EBITDA of $91.0 million.
This stability aligned with last year’s results, considering that we had one less operating week in the
current year.
Former President and CEO
07
The flexibility in our manufacturing platform served us well and allowed us to take advantage of
opportunities as they arose. In 2021, the volatility from the COVID-19 pandemic had an unfavourable
impact on the profitability of our sales mix. That being said, when the food industry demand stabilized,
we saw positive impacts in our exports and liquid volumes and were able to mitigate the issue by
increasing sales volume. Overall, we delivered a total of over 779,500 metric tonnes of sugar to our
customers, which represents a record for our operations.
I would also like to highlight that in a decision rendered in August 2021, the Canadian International
Trade Tribunal maintained anti-dumping tariffs against the EU, U.K. and U.S. sugar producers for the
next five years. These tariffs were established in 1995 and are critical for the maintenance of fair trade
and are highly important for the stability of the Canadian food supply chain.
In June 2021, we published our first Environmental, Social and Governance (“ESG”) report. This report
demonstrates our commitment to sustainability and allows us to share our vision as this is an integral
part of our business and corporate strategy. We intend to build on this initial report as we will share
trends, milestones and future ESG plans.
At the end of August, I announced that I was stepping down from my position of President and
CEO and retiring at the end of fiscal 2021. During my time, the organization has evolved from a
sugar refiner to a leading supplier of natural sweeteners, including our leading position in the Maple
business. These changes have had a positive impact on the profitability and the sustainability of our
business and will create value for our shareholders for years to come. I am very proud of the team that
supported me throughout the years, allowing us to build a sustainable organization and to deliver
an essential food ingredient throughout the unprecedented conditions created by the COVID-19
pandemic. I would like to extend my gratitude to the Board of Directors, the management team,
shareholders and to every one of my colleagues for their dedication and their many contributions
over the past seven years.
While I have officially retired as President and CEO, I will remain with the Company until the end
of April 2022 in the capacity of Strategic Advisor to support our new CEO, Mike Walton. Mike is a
highly skilled industry veteran who brings a wealth of experience to the role. He is accompanied
and supported by talented executive team members who are able and willing to move the business
forward.
As a fellow shareholder, I look forward to watching Mike lead the business and advance our strategy
of steady and sustainable growth, providing a stable return to our shareholders. It has been a pleasure
to work alongside employees who have passion and pride in the work they do for our customers.
Sincerely,
John Holliday
Former President and Chief Executive Officer
President and CEO
08
Michael Walton
President and CEO
On behalf of the executive team and all employees, I would like to extend heartfelt congratulations to John
on his retirement and express our gratitude for his thoughtful and tireless leadership over the course of his
tenure. His leadership has been instrumental in our success, particularly over the course of the pandemic.
The organization has a solid foundation on which we will continue to build. We remain on the right trajectory
with our business strategy to deliver strong financial results for our shareholders and offer a best-in-class
portfolio of natural sweet solutions to our customers.
After over forty years with the organization, I feel honoured and humbled by my appointment as the new
President and CEO. As we have over many years, I am confident that we will continue to work in the best
interests of all stakeholders and improve our business and meet ongoing challenges.
Finally, I would like to say a few words about our people, our most valuable asset. Our employees set the
standard with our customers and make the company a great place to work. I sincerely thank them for their
commitment to delivering on our business objectives and serving our customers well every day. I value the
team and the culture we have built over the years and look forward to continuing the tradition of excellence
of our organization.
Sincerely,
Michael Walton
President and Chief Executive Officer
The Power of Our Network
Across Our Communities
The Power of Our Network
09
Rogers
1. Head Office and
Cane Refinery
Vancouver, BC
2. Beet Plant
Taber, AB
3. Distribution Centre
Toronto, ON
4. Blending Facility
Toronto, ON
5. Administrative Office
and Cane Refinery
Montreal, QC
1
2
7
8
5
6
4
3
9
TMTC
6. Head Office,
Bottling Plant, Eastern Sales
and Distribution
Granby, QC
7. Bottling Plant, Warehousing
and Shipping
Saint-Honoré-de-Shenley, QC
8. Bottling Plant, Warehousing
and Shipping
Dégelis, QC
9. Bottling Plant, Warehousing
and Shipping
Websterville, VT
Our First ESG Report
10
Our First Environmental,
Social and Governance
Report
Rogers Sugar has been committed to core Environmental, Social and
Governance (ESG) principles for many years. As a food manufacturer with
nine facilities, we understand the impact our operations and products
have on the environment and consumers alike. In recent years, we have
implemented numerous ESG initiatives such as completing sustainability
audits at some of our processing facilities, improving our health and safety
procedures, and increasing diversity at the Board level, all of which have
contributed positively to our business.
To build on these achievements and to set the foundation for our formal ESG
process, we conducted a materiality assessment internally. The results from
this analysis helped us determine which areas we should prioritize. The key
indicators we chose to present in our initial report include metrics we were
already tracking, many of which were from our Sugar segment.
Our Board and company’s values have always driven our business priorities
which, in turn, already embrace some of the key principles of ESG. We
conduct regular reviews of business monitoring outcomes through
established management systems, including continuous improvement
targets for Environmental compliance, health and safety, and energy and
water usage. Several of our internal ESG targets are directly linked to
management’s compensation as we strongly believe sustainability drives
better business outcomes and reduces risks.
Our first ESG report, which was published in June 2021, should be considered
a base from which we will build. In time, we intend to integrate the results
from our Maple segment, share additional ESG metrics that are critical to
our business, and eventually develop ESG targets to measure our progress
against a broader set of objectives that align with our internal and external
materiality assessments.
John Holliday
Former President and Chief Executive Officer
To view the complete ESG Report, go to:
www.lanticrogers.com/media/financial-reports/2021/06/
rsi_esg_report_2021_en.pdf
ESG Highlights
11
ESG
Highlights
Environment
3,665,807
192,886
Total energy use (GJ) (1)
GHG emissions (tCO2e) (1)
S o c i a l
$300K
Charitable donations
-15%
Reduction in lost time
recordable incident rate
in last 3 years (1)
G ove rna n c e
17%
100%
Women on Rogers’ Board
Managers’ incentive pay
is linked to one or more
ESG objectives (1)
(1) Data for Sugar production facilities only. All figures based on 2020.
2021 Annual Report
12
13
Management’s
Discussion and Analysis
Consolidated
Financial Statements
FOR THE FISCAL YEARS ENDED
OCTOBER 2, 2021 AND OCTOBER 3, 2020
2021 Annual ReportManagement’s Discussion & Analysis 14
TABLE OF CONTENTS
OUR BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . .15
Sugar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Maple. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . .16
USE OF FINANCIAL DERIVATIVES FOR HEDGING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Sugar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Natural Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Foreign Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
UPDATE ON COVID-19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
BUSINESS HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
SELECTED FINANCIAL DATA AND HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Adjusted results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 20
SEGMENTED INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Sugar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Maple . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . 27
OUTLOOK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Sugar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Maple products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 31
CONSOLIDATED RESULTS AND SELECTED FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Total revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . 32
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . 32
Results from operating activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Net finance costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . 32
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . 33
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 33
Summary of Quarterly Results. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . 34
Financial condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . 35
Free cash flow. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . 36
Contractual obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Capital resources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 40
OUTSTANDING SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ENVIRONMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . 42
RISK AND UNCERTAINTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
NON-GAAP MEASURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
CRITICAL ACCOUNTING ESTIMATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
CHANGES IN ACCOUNTING PRINCIPLES AND PRACTICES NOT YET ADOPTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
DISCLOSURE CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
INTERNAL CONTROL OVER FINANCIAL REPORTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Rogers Sugar Inc.Management’s Discussion & Analysis T his Management’s Discussion and Analysis (“MD&A”) of
Rogers Sugar Inc.’s (“Rogers”, “RSI” or “our,” “we”, “us”) dated
November 24, 2021, should be read in conjunction with the
audited consolidated financial statements and related notes for the
15
market. Our Business has two distinct segments - Sugar – which
includes refined sugar and by-products and Maple – which includes
maple syrup and maple derived products.
years ended October 2, 2021 and October 3, 2020. Our MD&A and
Rogers’ head office is in Vancouver, British Columbia and its
consolidated financial statements are prepared using a fiscal year
administrative office is located in Montréal, Québec.
which typically consists of 52 weeks, however, every five years, a
fiscal year consists of 53 weeks. The fiscal years ended October 2,
Our 900 employees are key to our success and employee safety
2021 and September 28, 2019 consist of 52 weeks and the fiscal year
is continuously at the forefront of our priorities. Each of our
ended October 3, 2020 consists of 53 weeks.
manufacturing operations incorporates occupational health and
safety components in its annual planning which are reviewed weekly
All financial information contained in this MD&A and audited
by senior management and quarterly by the Board of Directors.
consolidated financial statements are prepared in accordance with
International Financial Reporting Standards (“IFRS”). All amounts
are in Canadian dollars unless otherwise noted, and the term
SUGAR
“dollar”, as well as the symbol “$”, designate Canadian dollars unless
otherwise indicated.
Facilities
Management is responsible for preparing the MD&A. Rogers’s
Canada with cane refineries in Montréal and Vancouver and a
audited consolidated financial statements and MD&A have been
sugar beet factory in Taber, Alberta. Lantic also operates a custom
approved by its Board of Directors upon the recommendation of its
blending and packaging operation and a distribution center in
Audit Committee prior to release.
Toronto, Ontario. The strategic location of these facilities confers
operating flexibility and the ability to service all customers across
Lantic is the only sugar producer with operating facilities across
Additional information relating to Rogers, Lantic Inc. (“Lantic”)
the country efficiently and on a timely basis.
(Rogers and Lantic together referred as the “Sugar segment”),
The Maple Treat Corporation (“TMTC”) and Highland Sugarworks
Our Products
Inc. (“Highland”) (the latter two companies together referred to as
All Lantic operations supply high quality white sugar as well as a
“TMTC” or the “Maple products segment”), including the annual
broad portfolio of specialty products which are differentiated by
information form, quarterly and annual reports, management proxy
colour, granulation, packaging format and raw material source.
circular, short form prospectus and various press releases is available
on Rogers’s website at www.LanticRogers.com or on the Canadian
Sales are focused in four specific market segments: industrial,
Securities Administrators’ System for Electronic Document Analysis
consumer,
liquid and export products. The domestic market
and Retrieval (“SEDAR”) website at www.sedar.com. Information
represents more than 90% of our company’s total volume.
contained in or otherwise accessible through our website does not
form part of this MD&A and is not incorporated into the MD&A by
In fiscal 2021, the domestic refined sugar market has continued to
reference.
show modest growth consistent with the recent history.
OUR BUSINESS
The industrial granulated segment is the largest segment accounting
for approximately 55% of all shipments. The industrial segment is
comprised of a broad range of food processing companies that
Rogers has a long history of providing high quality sugar products
serve both the Canadian and American markets.
to the Canadian market and has been operating since 1888. We are
the largest refined sugar producer in Canada and the largest maple
In the consumer market segment, a wide variety of products are
syrup bottler in the world. Our aspiration is to become a leading North
offered under the Lantic and Rogers brand name. This segment has
American natural sweetener supplier by executing our strategies
remained stable during the past several years except during the
through operational excellence and market access. On August
current pandemic. In fiscal 2020, demand in this segment increased
5 and November 18, 2017, we made progress in our third strategy
mainly due to the pantry-loading experienced in the early stage of
by acquiring TMTC and Decacer. As a result, we diversified and
the COVID-19 pandemic. In fiscal 2021, this segment returned to its
solidified our leadership position in this growing natural sweetener
pre pandemic levels.
2021 Annual ReportManagement’s Discussion & Analysis 16
The liquid market segment is comprised of core users whose
fiscal 2020 when Raw #11 prices fluctuated between U.S. 9.05 and
process or products require liquid sucrose and another customer
U.S. 15.90 cents per pound, the average Raw #11 price in fiscal 2021
group that can substitute liquid sucrose with high fructose corn
was higher than fiscal 2020 average. The higher average price of
syrup (“HFCS”). The purchasing patterns of substitutable users are
Raw #11 was mainly due to several factors including the increase in
largely influenced by the absolute price spread between HFCS and
oil price, and the La Nina weather patterns that continues to disrupt
liquid sugar. Increasingly, other considerations, such as ingredient
crops in South America.
labeling could also bear some influence on the purchasing decision.
The liquid segment grew by approximately 9.8% during the current
The price of refined sugar deliveries from the Montréal and Vancouver
fiscal year as a result of an increase in overall demand and the
raw cane facilities is directly linked to the price of the Raw #11 market
continuous conversion from HFCS to sucrose that was beneficial for
traded on the ICE. All sugar transactions are economically hedged,
the Canadian refiners.
thus eliminating the impact of volatility in world raw sugar prices.
This applies to all refined sugar sales made by these plants.
Lantic’s Taber plant is the only beet sugar factory in Canada and
is therefore the only producer of Canadian origin sugar. From this
facility, we service a mix of customers across Western Canada.
MAPLE
We also sell into other North American markets through various
trade deals. As such, this plant is the sole participant in an annual
Facilities
Canadian-specific quota to the U.S. of 19,900 metric tonnes of
TMTC operates three plants in Québec, namely, in Granby, Dégelis
Canadian origin sugar under the Canada-United-States-Mexico
and in St-Honoré-de-Shenley, and one in Websterville, Vermont.
Agreement (“CUSMA”).
On August 1, 2018, we announced our intention to relocate our
Granby operation to a new built for purpose leased facility also
By-products relating to beet processing and cane refining activities
located in Granby. The relocation was completed at the beginning
are sold in the form of beet pulp, beet pellets and cane molasses.
of 2020. To support our producer direct procurement strategy, TMTC
Beet pellets are sold domestically and to export customers for
also uses a storage facility in Dégelis and in St-Robert-Bellarmin,
livestock feed. The production of beet molasses and cane molasses
Québec. Finished products are largely shipped directly from our
is dependent on the volume of sugar processed through the Taber,
manufacturing sites.
Montréal and Vancouver plants.
Our Products
Our Supply
TMTC’s products are mainly comprised of the following: bottled
The global supply of raw cane sugar is ample. Over the last several
maple syrup, bulk maple syrup and maple sugar and flakes.
years, Lantic has purchased most of its raw cane sugar from Central
and South America for its Montréal and Vancouver cane refineries.
Bottled maple syrup is packaged in a variety of ways and sizes,
including bottles, plastic jugs and the traditional cans. Bottled
In fiscal 2021, we have concluded a two-year extension to the
maple syrup is available in all commercial grades and in organic and
existing agreement with the Alberta Sugar Beet Growers (the
non-organic varieties. TMTC’s bottled maple syrup is sold mainly
“Growers”) for the supply of sugar beets to the Taber beet plant, for
under retail private label brands and also under a variety house
which the crop harvested in the Fall of 2021 is the first year of the
brands, including TMTC, Uncle Luke’s™, Great Northern™, Decacer
agreed contract. Any potential shortfall in beet sugar production
and Highland Sugarworks™.
related to crop issues is mostly replaced by refined cane sugar from
the Vancouver refinery, which acts as a swing capacity refinery and
Bulk maple syrup is mainly sold in containers of 4L or 17L, barrels
from the Montréal refinery if required.
and totes to foodservice retailers, food processors as well as other
Pricing
In fiscal 2021, the price of raw sugar number 11 (Raw #11), traded
Our Supply
wholesalers.
on the Intercontinental Exchange (“ICE”), fluctuated between
The biggest concentration of maple trees is located in Québec,
U.S. 13.55 cents per pound and U.S. 20.37 cents per pound and
New Brunswick, Ontario, Vermont, Maine and New Hampshire. The
closed at U.S. 19.69 cents per pound at the end of the fiscal year,
production of maple syrup takes place over a period of 6 to 8 weeks
which was U.S. 6.14 cents higher than the closing value at October
during the months of March and April of each year.
3, 2020. Although price variation during the year was similar than in
Rogers Sugar Inc.Management’s Discussion & Analysis 17
Canada remains the largest producer of maple syrup, with over 80%
Pricing
of the world’s production. The U.S. is the only other major producing
Pursuant to a Marketing Agreement entered into annually between
country in the world, representing approximately 20% of the global
the PPAQ and the Conseil de l’industrie de l’érable (the Maple Industry
supply. Québec represented 70% of the world’s production.
Council (“MIC”)), authorized buyers must pay a minimum price to
the PPAQ for any maple syrup purchased from the producers. The
The maple syrup producers in Québec are represented by the
price is fixed on an annual basis and depends on the grade of the
Producteurs et Productrices Acéricoles du Québec (“PPAQ”). The
maple syrup. In addition, a premium is added to the minimum price
PPAQ generally regulates the buying and selling of bulk maple syrup.
for any organic maple syrup. Pursuant to the Marketing Agreement,
The PPAQ represents approximately 11,300 producers and 7,400
authorized buyers must buy maple syrup from the PPAQ.
individual businesses.
In Québec, nearly 90% of the total production of maple syrup
USE OF FINANCIAL DERIVATIVES FOR HEDGING
is sold through the PPAQ to the authorized buyers, leaving only
approximately 10% of the total production being sold directly by the
Sugar
producers to consumers or grocery stores.
In order to protect itself against fluctuations in the world raw sugar
market, we follow a rigorous hedging program for all purchases of
In 2002, the PPAQ set up a strategic maple syrup reserve in order
raw cane sugar and sales of refined sugar.
to mitigate production fluctuations imputable to weather conditions
and prevent such fluctuations from causing maple syrup prices to
The Raw #11 market is only traded on the ICE, which trades in U.S.
spike or drop significantly. The reserve was initially established to
dollars. One can trade sugar futures forward for a period of three
set aside a production quantity equivalent to half of the then annual
years against four specific terminals per year (March, May, July
demand. Each year, the PPAQ may organize a sale of a portion of
and October). The terminal values are used to determine the price
its accumulated reserve. This allows bottlers to respond to supply
settlement upon the receipt of a raw sugar vessel or the delivery of
shortages in the event of a poor harvest or unplanned growth and
sugar to our customers. The ICE rules are strict and are governed
demand. As of October 2021, the PPAQ had over 46 million pounds of
by the New York Board of Trade. Any amount owed, due to the
bulk maple syrup, including 9 million pounds of processing/industrial
movement of the commodity being traded, must be settled in cash
grade maple syrup, in its strategic reserve, which represents about
the following day (margin call payments/receipts).
25% of the annual global retail consumption.
For the purchasing of raw sugar, we enter into long-term supply
In 2004, the PPAQ adopted a policy with respect to production and
contracts with reputable raw sugar suppliers (the “Seller”). These
marketing quotas which resulted in an annual production volume
long-term agreements will, amongst other things, specify the yearly
allocated to each maple syrup business. The main objective of
volume (in metric tonnes) to be purchased, the delivery period of
the policy is to adjust the supply of maple syrup in response to
each vessel, the terminal against which the sugar will be priced,
consumer demand, and more specifically, to stabilize selling prices
and the freight rate to be charged for each delivery. The price of raw
for producers and, ultimately, the buying price for consumers, foster
sugar will be determined later by the Seller, based upon the delivery
investments in the maple industry and maintain a steady number of
period. The delivery period will correspond to the terminal against
maple producing businesses in operation, regardless of their size.
which the sugar will be priced.
Outside of Québec, the maple syrup industry is generally organized
Our process of selling refined sugar is also done under the Raw #11
through producer-based organizations or associations, which
market. When a sales contract is negotiated with a customer, the
promote maple syrup in general and its industry and serve as the
sales contract will determine the period of the contract, the expected
official voice for maple syrup producers with the public.
delivery period against specific terminals and the refining margin and
freight rate to be charged over and above the value of the sugar. The
TMTC has relationships with more than 1,400 maple syrup producers,
price of the sugar is not yet determined but needs to be fixed by the
mainly in Québec and Vermont. Most of these producers sell 100% of
customer prior to delivery. The customer will make the decision to fix
their production to TMTC. Through its strong relationship with such
the price of the sugar when he feels the sugar market is favourable
producers, TMTC was able to develop a leading position in certified
against the sugar terminal, as per the anticipated delivery period.
organic maple syrup.
2021 Annual ReportManagement’s Discussion & Analysis 18
We purchase sugar beets from the Growers under a fixed price
Our business is considered an essential service by the government
formula. The new extension agreement with the Growers no longer
and as such, our plants have operated without significant disruption.
includes a scale incentive when raw sugar values exceed a certain
We have established extensive protection measures and protocols to
price level.
Natural Gas
ensure the health and safety of our employees. COVID-19 could have
a material effect on our business as it relates to customer demand,
supply chain, operations, financial market volatility, pension and
The Board of Directors of Lantic approved an energy hedging policy
benefits liabilities and other economic fundamentals. For the fourth
to mitigate the overall price risks in the purchase of natural gas.
quarter and the year 2021, we incurred direct costs amounting to
$0.5 million and $3.0 million respectively in relation to COVID-19.
We purchase between 3.0 million gigajoules and 3.5 million gigajoules
These costs were largely due to increased health and safety
of natural gas per year for use in our refining operations. To protect
measures implemented across all production facilities.
against large and unforeseen fluctuations, we can hedge forward up
to 90% of our estimated usage over the next 12 months and lower
The effect of COVID-19 on our business may continue for an
percentages of our estimated usage on a longer-term basis.
extended period and the ultimate impact will depend on future
developments that are uncertain and cannot be predicted, including
These gas hedges are unwound in the months that the commodity
and without limitations, the duration and severity of the pandemic,
is used in the operations, at which time any gains or losses incurred
the effectiveness of the actions taken to contain and treat the disease
are then recognized for the determination of gross margins and
and the length of time it takes for normal economic and operating
earnings.
Foreign Exchange
conditions to resume.
Raw sugar costs for all sales contracts are based on the U.S. dollar.
BUSINESS HIGHLIGHTS
Our company also buys natural gas in U.S. dollars. In addition, sugar
export sales and some Canadian sugar sales are denominated in
• The fourth quarter and the 2021 fiscal year consist of 13 weeks and
U.S. dollars.
52 weeks respectively, while the comparative periods for last fiscal
year consisted of 14 weeks and 53 weeks respectively. The
In order to protect ourselves against the movement of the Canadian
impact of the additional week of fiscal 2020 on volume for the
dollar versus the U.S. dollar, we, on a daily basis, reconcile all of our
Sugar segment and the Maple Segment is approximately 15,000
exposure to the U.S. dollar and we hedge the net position against
metric tonnes of sugar and 1 million lbs of maple syrup;
various forward months, estimated from the date of the various
transactions.
• Consolidated adjusted EBITDA for the fourth quarter of 2021 was
Certain export sales of maple syrup are denominated in U.S. dollars,
$24.8 million, down $6.4 million from the same quarter last year,
in Euro or in Australian dollars. In order to mitigate against the
driven by lower adjusted EBITDA in the Sugar segment including
movement of the Canadian dollar versus the U.S. dollars, Euro or
approximately $6.0 million of non-recurring variances, partially
Australian dollars, we enter into foreign exchange hedging contracts
offset by higher adjusted EBITDA in the Maple segment;
with certain customers. These foreign exchange hedging contracts
are unwound when the money is received from the customer, at
• Adjusted EBITDA for the 2021 fiscal year was $91.0 million, down
which time any gains or losses incurred are then recognized for the
1.3% from the same period in 2020, largely as a result of lower
determination of gross margins and earnings. Foreign exchange
adjusted EBITDA in the Sugar segment, partially offset by higher
gains or losses on any unhedged sales contracts are recorded when
adjusted EBITDA in the Maple segment;
realized.
UPDATE ON COVID-19
• Sales volume in the Sugar segment decreased by 4.7% to 214,753
metric tonnes in the fourth quarter of 2021, including the 2020
extra week impact of approximately 15,000 metric tonnes making
The ongoing COVID-19 pandemic has negatively impacted the global
volume higher than the same quarter last year. For the whole 2021
economy, disrupted financial markets and supply chain, significantly
fiscal year, volume was 779,505, an increase of 2.4% compared to
restricted business travel and interrupted business activity.
2020, despite one less week in 2021;
Rogers Sugar Inc.Management’s Discussion & Analysis
19
• Adjusted EBITDA in the Maple segment was $4.2 million in
• On August 23, 2021, we announced that John Holliday, President
the fourth quarter, an increase of $0.9 million or 27.8% from the
and CEO of RSI and Lantic, would retire. Mike Walton, previously
same quarter last year as a result of lower operating costs, lower
Chief Operating Officer of Lantic and President of TMTC, has been
administration and selling expenses as well as lower distribution
appointed President and CEO of RSI and Lantic effective
costs;
October 4, 2021, with John Holliday staying with the organization
in an advisory role for the next few months;
• Free cash flow for the trailing 12 months ended October 2, 2021
was $45.5 million, slightly lower than the prior year balance of
• On October 27, 2021, after several months of negotiations, we
$46.5 million;
reached an agreement for the renewal of the collective labour
agreement with the main union at our Montreal facility for a period
• In the fourth quarter of 2021, we distributed $0.09 per share to our
of five years;
shareholders for a total amount of $9.3 million;
• On August 6, 2021, the Canadian International Trade Tribunal
credit facility to November 23, 2026 and we amended the revolving
issued a decision to pursue its order against dumped and
credit facility by reducing the available credit by $65 million, from
subsidized sugar from the United States, European Union, and
a total of $265 million to $200 million; and
• On November 23, 2021, we extended the maturity of our revolving
the United Kingdom. Anti-dumping and countervailing duties will
continue to be applied on imported sugar from these regions. The
• On November 24, 2021, the Board of Directors declared a quarterly
applicable future tariff for anti-dumping and countervailing duties
dividend of $0.09 per share, payable on or before February 1, 2022.
is currently under review by the Canadian Boarder Service Agency.
A decision is expected later in 2022;
SELECTED FINANCIAL DATA AND HIGHLIGHTS
(unaudited)
(In thousands of dollars, except volumes and per share information)
Q4 2021(2)
Q4 2020(2)
FY 2021(3)
FY 2020(3)
Sugar (metric tonnes)
Maple syrup (‘000 pounds)
Total revenues
Gross Margin
Adjusted gross margin(1)
Results from operating activities
Adjusted results from operating activities(1)
Adjusted EBITDA(1)
Net earnings
per share (basic)
per share (diluted)
Adjusted net earnings(1)
Adjusted net earnings per share (basic)(1)
Trailing twelve months free cash flow(1)
Dividends per share
$
$
214,753
225,396
11,678
13,181
243,231
246,212
39,616
31,020
26,952
18,356
24,786
16,140
0.16
0.15
9,620
0.09
45,505
0.09
37,890
40,065
22,829
25,004
31,231
12,952
0.13
0.12
14,551
0.14
46,537
0.09
$
779,505
52,255
893,931
139,744
120,811
84,497
65,564
91,022
47,527
0.46
0.44
33,866
0.33
45,505
0.36
$
761,055
53,180
860,801
126,199
126,118
68,010
67,929
92,259
35,419
0.34
0.34
35,245
0.34
46,537
0.36
(1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures.
(2) The fourth quarter of fiscal 2021 consists of 13 weeks and the fourth quarter of 2020 consists of 14 weeks.
(3) Fiscal 2021 consists of 52 weeks and fiscal 2020 consists of 53 weeks.
2021 Annual ReportManagement’s Discussion & Analysis
20
250,000
200,000
150,000
100,000
50,000
0
30,000
25,000
20,000
15,000
10,000
5,000
0
Revenues
($000s)
Adjusted EBITDA
($000s)
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
Q1
2020
Q2
2020
Q3
2020
Q4
2020
Q1
2021
Q2
2021
Q3
2021
Q4
2021
Q1
2020
Q2
2020
Q3
2020
Q4
2020
Q1
2021
Q2
2021
Q3
2021
Q4
2021
Sugar
Maple
Sugar
Maple
Free Cash Flow TTM
($000s)
Adjusted Net Earnings
($000s)
Per
share
$0.16
$0.14
$0.12
$0.10
$0.08
$0.06
$0.04
$0.02
$0.00
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
Q1
2020
Q2
2020
Q3
2020
Q4
2020
Q1
2021
Q2
2021
Q3
2021
Q4
2021
Q1
2020
Q2
2020
Q3
2020
Q4
2020
Q1
2021
Q2
2021
Q3
2021
Q4
2021
Adj Net Earnings
Adj Net Earning per share (basic)
Adjusted results
In the normal course of business, we use derivative financial instruments consisting of sugar futures, foreign exchange forward contracts,
natural gas futures and interest rate swaps. We have designated our natural gas futures and our interest rate swap agreements entered into
in order to protect us 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 qualified under hedged accounting
are accounted for in other comprehensive income. The amount recognized in other comprehensive income is removed and included in net
earnings 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, reducing earnings volatility related to the movements of the valuation of these derivative
hedging instruments.
We believe that our financial results are more meaningful to management, investors, analysts, and any other interested parties when financial
results are adjusted by the gains and 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.
We use the non-GAAP adjusted results of the operating company to measure and to evaluate the performance of the business through our
adjusted gross margin, adjusted results from operating activities, adjusted EBITDA, adjusted net earnings, adjusted net earnings per share
and trailing twelve months free cash flow. In addition, we believe that these measures are important to our investors and parties evaluating
our performance and comparing such performance to past results. We also use adjusted gross margin, adjusted EBITDA, adjusted results
from operating activities and adjusted net earnings when discussing results with the Board of Directors, analysts, investors, banks and other
interested parties. See “Non-GAAP measures” section.
Rogers Sugar Inc.Management’s Discussion & Analysis Our results are adjusted as follows:
Income (loss)
(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
Q4 2021(1)
Maple
Products
$
—
(500)
(500)
(555)
(1,055)
Sugar
$
2,879
(503)
2,376
7,275
9,651
Total
$
2,879
(1,003)
1,876
6,720
8,596
Sugar
$
(1,766)
992
(774)
(2,555)
(3,329)
—
—
—
24
Total adjustment to costs of sales
9,651
(1,055)
8,596
(3,305)
(1) The fourth quarter of fiscal 2021 consists of 13 weeks and the fourth quarter of 2020 consists of 14 weeks.
Q4 2020(1)
Maple
Products
$
—
1,069
1,069
61
1,130
—
1,130
Income (loss)
(In thousands of dollars)
Mark-to-market on:
Sugar futures contracts
Foreign exchange forward contracts
Total mark-to-market adjustment on derivatives
FY 2021(1)
Maple
Products
$
—
1,733
1,733
Sugar
$
3,431
2,904
6,335
Total
$
3,431
4,637
8,068
Cumulative timing differences
Adjustment to cost of sales
14,471
(3,606)
10,865
20,806
(1,873)
18,933
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
20,806
(1,873)
18,933
(1) Fiscal 2021 consists of 52 weeks and fiscal 2020 consists of 53 weeks.
FY 2020(1)
Maple
Products
$
—
1,010
1,010
195
1,205
—
1,205
Sugar
$
(801)
1,605
804
(2,023)
(1,219)
95
(1,124)
21
Total
$
(1,766)
2,061
295
(2,494)
(2,199)
24
(2,175)
Total
$
(801)
2,615
1,814
(1,828)
(14)
95
81
Fluctuations in the mark-to-market adjustment on derivatives are due to the price movements in Raw #11 price and foreign exchange variations.
We recognize cumulative timing differences, as a result of mark-to-market gains or losses, 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.
The above described adjustments are added to or deducted from the mark-to-market results to arrive at the total adjustment to cost of sales.
For the three and twelve months periods ended on October 2, 2021, the total cost of sales adjustment is a gain of $8.6 million and $18.9 million,
respectively, to be deducted from the consolidated results. For the fourth quarter 2020, the total cost of sales adjustments is a loss of $2.2
million to be added to the consolidated results and for the year 2020, the total cost of sales adjustment is a gain $0.1 million to be deducted
from the consolidated results.
See the “Non-GAAP measures” section for more information on these adjustments.
2021 Annual ReportManagement’s Discussion & Analysis
22
SEGMENTED INFORMATION
Segmented Results
(In thousands of dollars)
Revenues
Gross margin
Administration and selling expenses
Distribution costs
Adjustment to cost of sales(2)
Adjusted Gross margin(1)
Adjusted results from operating activities(1)
Adjusted EBITDA(1)
Additional information:
Addition to property, plant and equipment
and intangible assets, net of disposals
Increase in asset retirement obligation provision
included in property, plant and equipment
Additions to right-of-use assets
Q4 2021(3)
Maple
Products
$
Sugar
$
Total
$
Sugar
$
Q4 2020(3)
Maple
Products
$
Total
$
191,462
51,769
243,231
188,666
57,546
246,212
35,671
6,591
3,531
3,945
2,084
458
39,616
8,675
3,989
(9,651)
26,020
15,898
20,634
1,055
5,000
2,458
4,152
(8,596)
31,020
18,356
24,786
32,198
7,803
4,197
20,198
3,305
35,503
23,503
27,982
5,692
2,589
472
2,631
(1,130)
4,562
1,501
3,249
37,890
10,392
4,669
22,829
2,175
40,065
25,004
31,231
5,394
497
5,891
8,394
578
8,972
100
5
—
38
100
43
—
11,597
—
490
—
12,087
Results from operating activities
25,549
1,403
26,952
(1)
See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures.
(2) See “Adjusted results” section.
(3) The fourth quarter of fiscal 2021 consists of 13 weeks and the fourth quarter of 2020 consists of 14 weeks.
Segmented Results
(In thousands of dollars)
Revenues
Gross margin
FY 2021(3)
Maple
Products
$
Sugar
$
Total
$
Sugar
$
FY 2020(3)
Maple
Products
$
Total
$
668,118
225,813
893,931
631,263
229,538
860,801
121,029
18,715
139,744
105,088
Administration and selling expenses
Distribution costs
Results from operating activities
27,793
15,970
77,266
9,162
2,322
7,231
36,955
18,292
84,497
Adjustment to cost of sales(2)
Adjusted Gross margin(1)
(20,806)
1,873
(18,933)
100,223
20,588
120,811
Adjusted results from operating activities(1)
56,460
9,104
65,564
74,640
16,382
91,022
27,959
16,266
60,863
1,124
106,212
61,987
78,877
21,111
10,981
2,983
7,147
(1,205)
19,906
5,942
13,382
126,199
38,940
19,249
68,010
(81)
126,118
67,929
92,259
Adjusted EBITDA(1)
Additional information:
Addition to property, plant and equipment
and intangible assets, net of disposals
Increase in asset retirement obligation provision
included in property, plant and equipment
Additions to right-of-use assets
(1)
See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures.
(2) See “Adjusted results” section.
(3) Fiscal 2021 consists of 52 weeks and fiscal 2020 consists of 53 weeks.
23,574
1,222
24,796
20,611
6,569
27,180
3,231
1,863
—
861
3,231
2,724
100
—
100
14,550
8,303
22,853
Rogers Sugar Inc.Management’s Discussion & Analysis
23
SUGAR
Revenues
(In thousands of dollars)
Q4 2021(1)
Q4 2020(1)
$
$
∆
$
FY 2021(2)
FY 2020(2)
$
$
∆
$
Revenues
191,462
188,666
2,796 668,118 631,263
36,855
(1) The fourth quarter of fiscal 2021 consists of 13 weeks and the fourth quarter of 2020 consists of 14 weeks.
(2) Fiscal 2021 consists of 52 weeks and fiscal 2020 consists of 53 weeks.
In the fourth quarter and the 2021 fiscal year, revenues increased by 1.5% and 5.8% respectively compared to the same periods last year,
despite having one less week of operation, driven by increased pricing and higher overall volume for the year.
Q4 2020
225,396
Sugar Volume Variance
(Metric tonnes)
-8,264
-5,089
Q4 2021
214,753
1,459
1,251
250,000
200,000
150,000
100,000
50,000
0
Sugar Volumes
(Metric tonnes)
Industrial
Consumer
Liquid
Export
Q1
2020
Q2
2020
Q3
2020
Q4
2020
Q1
2021
Q2
2021
Q3
2021
Q4
2021
Sugar volume decreased by 4.7% or 10,643 metric tonnes in the fourth quarter compared to the same quarter last year mainly due to one less
week of operation in the current quarter; the extra week represents approximately 15,000 metric tonnes. Sales demand in the industrial and
consumer channels were lower than last year’s fourth quarter, which was partly offset by an increase in the liquid and export volumes during
the same period.
• The reduction in industrial volume is mainly due to last year’s additional week of operation as we continue to see firm industrial demand.
The decrease in consumer volume is also attributable in part to the additional week of operation in fiscal 2020 and timing variances of
purchases from retailers who had higher inventory of packed sugar in 2021. These reductions in volumes were partly offset by an increase
in liquid volume.
• During the current quarter, export volume increased by 1,459 metric tonnes, compared to the fourth quarter 2020 despite having one less
week of operation. The increase in export volume was largely due to favourable market dynamics within the United States.
2021 Annual ReportManagement’s Discussion & Analysis
24
Sugar Volume Variance
(Metric tonnes)
FY 2021
779,505
FY 2020
761,055
-1,936
-17,524
21,574
16,336
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
Sugar Volumes
(Metric tonnes)
Industrial
Consumer
Liquid
Export
2014
2015
2016
2017
2018
2019
2020
2021
During fiscal 2021, sugar volume totaled 779,505 metric tonnes, an increase of 2.4% or 18,450 metric tonnes compared to the same period last
year, despite one less week of operation.
• The overall increase was driven by strong demand for liquid and export volumes, partly offset by a reduction in consumer volume of 15%
or 17,524 metric tonnes. Consumer volume was lowered compared to the same period last year when consumer demand surged as a result
of pantry-loading during the early stage of the pandemic in 2020.
• Export volume increased in fiscal 2021 due to higher beet sugar sales to the United States and Mexico throughout the period. The increase
was largely due to favourable market dynamics, combined with improved availability of sugar from our Taber facility to fill those orders.
Gross margin
(In thousands of dollars,
except per metric tonne information)
Q4 2021(3)
Q4 2020(3)
$
$
∆
$
FY 2021(4)
FY 2020(4)
$
$
∆
$
Gross margin
35,671
32,198
3,473
121,029
105,088
15,941
Total adjustment to cost of sales(2)
(9,651)
3,305
(12,956)
(20,806)
1,124
(21,930)
Adjusted gross margin(1)
26,020
35,503
Adjusted gross margin per metric tonne(1)
121.16
157.51
(9,483)
(36.35)
100,223
106,212
128.57
139.56
(5,989)
(10.99)
Included in Gross margin:
Depreciation of property, plant and equipment
and right-of-use assets
4,118
3,920
198
15,450
14,918
532
(1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures.
(2) See “Adjusted results” section.
(3) The fourth quarter of fiscal 2021 consists of 13 weeks and the fourth quarter of 2020 consists of 14 weeks.
(4) Fiscal 2021 consists of 52 weeks and fiscal 2020 consists of 53 weeks.
Gross margins were $35.7 million and $121.0 million for the current quarter and the 2021 fiscal year, and include a gain of $9.7 and $20.8 million,
respectively, for the mark-to-market of derivative financial instruments. For the same periods last year, gross margins were $32.2 million and
$105.1 million, respectively, with a mark-to-market loss of $3.3 million and $1.1 million.
Adjusted gross margin were $26.0 million and $100.2 million for the fourth quarter and for the 2021 fiscal year, respectively, as compared to
$35.5 million and $106.2 million in the same periods of 2020.
Rogers Sugar Inc.Management’s Discussion & Analysis
25
Adjusted gross margin decreased by $9.5 million in the current quarter compared to the same quarter last year. The unfavourable variance
was mainly due to a $3.1 million one-time gain recorded in the fourth quarter of 2020 related to prior period settlement of carbon credit claims,
a $2.9 million non-recurring expenditure associated with future pension liabilities included in the Montreal recently negotiated collective
agreement, a $2.7 million reduction in sugar sales margin attributable to lower volume and unfavourable sales mix, specifically related to the
absence of a US refined tariff-rate quota (“TRQ”) in 2020, and higher production costs of $0.8 million mainly related to our operations in Taber.
On a per unit basis, adjusted gross margin for the fourth quarter was $121.16 per metric tonne, lower than the same quarter last year by $36.35
per metric tonne. The decrease was due mainly to non-recurring items explained above. Excluding the impact of such items the variance in
adjusted gross margin on a per unit basis would have been unfavourable by $9.10 per metric tonne mainly due to lower sugar sales margin
and higher production costs.
Adjusted gross margin for the 2021 fiscal year was $6.0 million lower than the comparable period last year. The unfavourable variance was
mainly due to higher production costs of $9.8 million, mainly attributable to unfavourable weather-related conditions encountered in the
second quarter in Taber, impacting sugar beet storage and causing severe sugar beet deterioration resulting in higher processing costs
and unplanned discard expenditures, a $3.1 million one-time gain recorded in the fourth quarter of 2020 related to prior period settlement of
carbon credit claims and a $2.9 million non-recurring expenditure associated with future pension liabilities included in the Montreal collective
agreement. These unfavourable variances were partially offset by higher sugar sales margin of $10.5 million, from higher volume and higher
average sales price.
On a per unit basis, adjusted gross margin for the 2021 fiscal year was $128.57 per metric tonne, compared to $139.56 per metric tonne in the
2020 fiscal year, an unfavourable variance of $10.99 per metric tonne. Excluding the impact of the carbon credit for prior periods and the impact
of the Montreal collective agreement, the variance in adjusted gross margin on a per unit basis would have been unfavourable by $3.20 per
metric tonne.
$ per
metric tonne
Adjusted Gross Margin
160
140
120
100
80
60
40
20
0
Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021
FY 2020
FY 2021
Adjusted gross margin
Adjusted gross margin per metric tonne
$000s
110,000
100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
2021 Annual ReportManagement’s Discussion & Analysis 26
Other expenses
(In thousands of dollars)
Q4 2021(1)
Q4 2020(1)
Administration and selling expenses
Distribution costs
Included in Administration and selling expenses:
Depreciation of property, plant and equipment
and right-of-use assets
Included in Distribution costs:
$
6,591
3,531
$
7,803
4,197
∆
$
(1,212)
(666)
FY 2021(2)
FY 2020(2)
$
27,793
15,970
$
27,959
16,266
∆
$
(164)
(295)
221
230
(9)
897
862
35
Depreciation of right-of-use assets
398
329
69
1,833
1,110
723
(1) The fourth quarter of fiscal 2021 consists of 13 weeks and the fourth quarter of 2020 consists of 14 weeks.
(2) Fiscal 2021 consists of 52 weeks and fiscal 2020 consists of 53 weeks.
In the fourth quarter, administration and selling expenses were lower by $1.2 million compared to the same quarter last year due mainly to
a decrease in COVID-19 related health and safety costs and lower compensation cost and related employee benefits. Distribution costs
decreased by $0.7 million as costs associated with reconfiguring our supply chain to serve our customers were lower compared to the same
quarter last year due to improved production volume from our Taber facility.
For the 2021 fiscal year, administration and selling expenses were $0.2 million lower than the comparable period last year, due mainly to a slight
decline in COVID-19 related costs incurred during the year. Distribution cost decreased by $0.3 million compared to the 2020 fiscal year, largely
driven by lower distribution costs in the last three quarters of the year as the costs to reconfigure our supply chain to compensate for the crop
shortfall during these quarters were lower compared to the same quarters last year.
Results from operating activities and adjustd EBITDA
(In thousands of dollars)
Q4 2021(3)
Q4 2020(3)
$
$
∆
$
FY 2021(4)
FY 2020(4)
$
$
∆
$
Results from operating activities
25,549
20,198
5,351
77,266
60,863
16,403
Total adjustment to cost of sales(2)
(9,651)
3,305
(12,956)
(20,806)
1,124
(21,930)
Adjusted results from operating activities 1)
15,898
23,503
(7,605)
56,460
61,987
(5,527)
Depreciation of property, plant and equipment
and right-of-use assets, and amortization of
intangible assets
Adjusted EBITDA(1)
4,737
4,479
258
18,180
16,890
1,290
20,634
27,982
(7,348)
74,640
78,877
(4,237)
(1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures.
(2) See “Adjusted results” section.
(3) The fourth quarter of fiscal 2021 consists of 13 weeks and the fourth quarter of 2020 consists of 14 weeks.
(4) Fiscal 2021 consists of 52 weeks and fiscal 2020 consists of 53 weeks.
Results from operating activities for the fourth quarter and the 2021 fiscal year were $25.5 million and $77.3 million respectively, an increase
from $20.2 million and $60.9 million compared to the same periods last year. These results include gains and losses from the mark-to-market
valuation of derivative financial instruments, as well as timing differences in the recognition of any gains and losses on the liquidation of
derivative instruments. In addition, higher non-cash depreciation and amortization expense from new in-service assets had a negative impact
on the results from operating activities.
Rogers Sugar Inc.Management’s Discussion & Analysis
27
Adjusted results from operating activities in the fourth quarter of 2021 were $7.6 million lower than the same period last year, mainly due to
lower adjusted gross margin, partially offset by lower administration and selling expenses as well as lower distribution costs as explained
above. Adjusted results from operating activities for the 2021 fiscal year were $5.5 million lower than the same period last year, as lower
adjusted gross margin was offset by lower administration and selling expenses and lower distribution costs.
Adjusted EBITDA for the fourth quarter decreased by $7.3 million compared to the same period last year, largely as a result of lower adjusted
gross margin, offset by lower administration and selling expenses as well as lower distribution costs. Adjusted EBITDA for the 2021 fiscal year
decreased by $4.2 million largely due to lower adjusted gross margin offset by lower administration and distribution costs, as mentioned above.
MAPLE
Revenues
(In thousands of dollars, except volumes)
Q4 2021(1)
Q4 2020(1)
Volumes (‘000 pounds)
Revenues
$
$
11,678
13,181
51,769
57,546
∆
$
(1,503)
(5,777)
FY 2021(2)
FY 2020(2)
$
$
52,255
53,180
225,813
229,538
∆
$
(925)
(3,725)
(1) The fourth quarter of fiscal 2021 consists of 13 weeks and the fourth quarter of 2020 consists of 14 weeks.
(2) Fiscal 2021 consists of 52 weeks and fiscal 2020 consists of 53 weeks.
Maple Volumes
(000s pounds)
Adj. Gross
Margin %
Adjusted Gross Margin
60,000
50,000
40,000
30,000
20,000
10,000
0
12%
10%
8%
6%
4%
2%
0%
$000
25,000
20,000
15,000
10,000
5,000
0
Q1
2020
Q2
2020
Q3
2020
Q4
2020
Q1
2021
Q2
2021
Q3
2021
Q4
2021
FY
2020
FY
2021
Q1
2020
Q2
2020
Q3
2020
Q4
2020
Q1
2021
Q2
2021
Q3
2021
Q4
2021
FY
2020
FY
2021
Adj Gross Margin
Adj Gross Margin percentage
Revenues for the current quarter were $5.8 million lower than the prior comparable period due to a reduction in sales volume. The reduction
was mainly attributable to higher volume purchased in the prior comparable period related to increased demand associated with the COVID-19
pandemic. For the 2021 fiscal year, revenues were $3.7 million lower than last fiscal year, as the unfavourable variance of the second half of 2021
related to the tempering of the COVID-19 demand, was offset partially by the strong demand of the first half of the year.
2021 Annual ReportManagement’s Discussion & Analysis
28
Gross margin
(In thousands of dollars,
except adjusted gross margin rate information)
Q4 2021(3)
Q4 2020(3)
Gross margin
Total adjustment to cost of sales(2)
Adjusted gross margin(1)
Adjusted gross margin percentage(1)
Included in Gross margin:
$
3,945
1,055
5,000
9.7%
$
5,692
(1,130)
4,562
7.9%
∆
$
(1,747)
2,185
438
1.8%
FY 2021(4)
FY 2020(4)
$
$
∆
$
18,715
21,111
(2,396)
1,873
(1,205)
20,588
19,906
9.1%
8.7%
3,078
682
0.4%
Depreciation of property, plant and equipment
and right-of-use assets
821
809
12
3,543
3,083
460
(1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures.
(2) See “Adjusted results” section.
(3) The fourth quarter of fiscal 2021 consists of 13 weeks and the fourth quarter of 2020 consists of 14 weeks.
(4) Fiscal 2021 consists of 52 weeks and fiscal 2020 consists of 53 weeks.
Gross margin was $3.9 million and $18.7 million for the three and twelve months ended in the current fiscal year and included a loss of
$1.1 million and $1.9 million, respectively, for the mark-to-market of derivative financial instruments. For the same periods last year, gross margin
was $5.7 million and $21.1 million, respectively, with a mark-to-market gain of $1.1 million and $1.2 million.
Adjusted gross margin for the current quarter was $0.4 million higher than the comparable period last year, driven by a combination of higher
sales margin from increased pricing and lower costs from improved operational efficiency. Improved profitability was also reflected in our
adjusted gross margin percentage, increasing by 180 basis points to 9.7% in the current quarter, up from 7.9% in the same quarter last year.
Adjusted gross margin for fiscal 2021 was $0.7 million higher than the prior fiscal year, mainly driven by higher sales margin from increased
pricing and improved operational efficiency which is reflected in improved adjusted gross margin percentage of 9.1% compared to 8.7% in
fiscal 2020.
Other expenses
(In thousands of dollars)
Q4 2021(1)
Q4 2020(1)
$
$
∆
$
Administration and selling expenses
2,084
2,589
(505) 9,162
Distribution costs
458
472
(14) 2,322
Included in Administration and selling expenses:
FY 2021(2)
FY 2020(2)
$
$
10,981
2,983
∆
$
(1,819)
(661)
Amortization of intangible assets
873
876
(3) 3,488
3,505
(17)
(1) The fourth quarter of fiscal 2021 consists of 13 weeks and the fourth quarter of 2020 consists of 14 weeks.
(2) Fiscal 2021 consists of 52 weeks and fiscal 2020 consists of 53 weeks.
Administration and selling expenses for the fourth quarter and for the 2021 fiscal year were $0.5 million and $1.8 million lower than the
comparable periods last year. These favourable variances were mainly due to lower sales and marketing expenses and lower employee
compensation and benefits costs.
Distribution costs were stable in the current quarter and decreased by $0.7 million for the 2021 fiscal year when compared to the same periods
last year. The reduction for fiscal 2021 was largely driven by a reduction in warehousing costs.
Rogers Sugar Inc.Management’s Discussion & Analysis
29
Results from operating activities and adjusted EBITDA
(In thousands of dollars)
Q4 2021(3)
Q4 2020(3)
Results from operating activities
Total adjustment to cost of sales(2)
Adjusted results from operating activities(1)
Non-recurring expenses:
Other one-time non-recurring items
Depreciation and amortization
Adjusted EBITDA(1)
$
1,403
1,055
2,458
—
1,694
4,152
$
2,631
(1,130)
1,501
63
1,685
3,249
∆
$
(1,228)
2,185
957
(63)
9
903
FY 2021(4)
FY 2020(4)
$
7,231
1,873
9,104
247
7,031
$
7,147
(1,205)
5,942
852
6,588
∆
$
84
3,078
3,162
(605)
443
16,382
13,382
3,000
(1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures.
(2) See “Adjusted results” section.
(3) The fourth quarter of fiscal 2021 consists of 13 weeks and the fourth quarter of 2020 consists of 14 weeks.
(4) Fiscal 2021 consists of 52 weeks and fiscal 2020 consists of 53 weeks.
Results from operating activities for the fourth quarter and the 2021 fiscal year were $1.4 million and $7.2 million respectively, compared to
$2.6 million and $7.1 million in the same periods last year. These results 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.
Certain non-cash items and non-recurring expenses had an impact on the results from operating activities. As such, we believe 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. Other non recurrent items in the fourth quarter and the 2020 fiscal year were mainly costs
associated with having two locations in Granby.
Adjusted results from operating activities for the current quarter and the 2021 fiscal year were $1.0 million and $3.2 million higher respectively
compared to the same periods last year, mainly due to higher adjusted gross margin and lower administration and selling expenses as well as
lower distribution costs as explained above.
Adjusted EBITDA for the current quarter and the 2021 fiscal year were $0.9 million and $3.0 million higher respectively compared to the same
periods last year, mainly driven by higher adjusted results from operating activities, as mentioned above.
2021 Annual ReportManagement’s Discussion & Analysis
30
OUTLOOK
The health and safety of our employees remains our top priority. We are closely following all COVID-19 public health authority recommendations
and have enhanced safety protocols in place. Since the beginning of the COVID-19 pandemic, our plants have operated without significant
disruption. The uncertainty and increased demand volatility continue to make it difficult to estimate the impact on future sale volumes,
operations, and financial results. We are closely monitoring the situation and will continue to adapt quickly to the changing circumstances.
In fiscal 2021, our financial results for our Sugar Segment were negatively impacted by issues, we anticipate will not occur in 2022. Overall, we
believe our adjusted EBITDA of 2021 was negatively impacted by over $10.0 million in relation with such issues. This includes weather-related
unfavourable impacts with our sugar beets in Alberta, the costs associated with the recognition of prior period past service charge related
to the new Montreal refinery collective bargaining agreement, and the lingering effects of COVID-19 related expenditures for preventive
measures and logistics.
Recognizing these unusual conditions in fiscal 2021, we expect, for 2022, improved financial performance across both of our business
segments, supported by strong demand for sugar and maple syrup and improved margins in both sectors.
Sugar
We expect the sugar segment to perform well in fiscal 2022. The underlying demand remains strong across all our customer segments in our
domestic market while we are anticipating a reduction in the export market. We also anticipate a return to normal for our beet sugar operations
in Taber for 2022. Thus far, the 2021 harvest season has delivered the expected volume of sugar beets. The processing of the sugar beets is
currently going according to schedule and is expected to be completed by the end of February.
We expect sales volume for 2022 to reach approximately 770,000 metric tonnes, representing a reduction of 9,500 metric tonnes compared
to 2021. While we anticipate the domestic volume to grow steadily at 2%, exports opportunities will not be as high as in 2021, resulting in a
reduction in volume. Overall, we see the following volumes variances for our customer segments:
• Industrial, which is our largest segment, is expected to grow at a modest 1% as demand for sugar containing products remains steady
both in Canada and the US.
• Liquid volume is expected to deliver growth of approximately 2% to 3% driven by continued demand from existing customers as well as
new customer acquisitions.
• We also expect our consumer business to be up 2% to 3%, which is more in line with normalized growth that we experienced pre-covid.
• We anticipate to sell less into export markets in 2022 since we do not foresee the US issuing a TRQ and the market dynamics for high-tier
sales are not as favourable.
Despite the reduction of total volume, favourable price mix will contribute to improved profitability as compared to 2021.
Maintenance programs for the Montreal and Vancouver operating facilities are expected to follow the trend of previous years and should
provide for marginal increase in operating costs. For the Taber facility, a return to normal and an improvement in the quality of the sugar beet
over 2021 is expected to yield improvement in operating costs.
Spending on capital projects is also expected to be similar to recent periods. For fiscal 2022, we anticipate spending approximately $25.0 million
on various capital projects, with approximately a quarter allocated to return-on-investment projects.
Rogers Sugar Inc.Management’s Discussion & Analysis
31
Maple products
For fiscal 2022, we expect the Maple business segment to outperform the 2021 results. Our outlook is mainly based on expected improvement
to sales margins, a trend established in 2021 and driven by successful contract negotiations with new and existing customers.
Competitive pressures in the Maple industry, along with market volatility from the COVID-19 pandemic has impacted the pace of margin
improvement in 2021. For 2022, we anticipate an increase in margin from new agreements negotiated with new and existing customers and
volume to remain stable at approximately 52 million lbs.
In addition, we expect to continue to drive lower operating costs through ongoing optimization at our manufacturing facilities and efficiency
improvements provided by the investments made in our facilities at Granby and Degelis.
Capital investments have been reduced significantly for the Maple segment since 2021, considering the expenditures incurred over the past
few years improved and increased the production capacity. We continue to expect steady growth in demand for Maple-related 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.
CONSOLIDATED RESULTS OF OPERATION
(unaudited)
(In thousands of dollars, except volumes and per share information)
Q4 2021(2)
Q4 2020(2)
FY 2021(3)
FY 2020(3)
Sugar (metric tonnes)
Maple syrup (‘000 pounds)
Total revenues
Gross Margin
Adjusted gross margin(1)
Results from operating activities
Adjusted results from operating activities(1)
Adjusted EBITDA(1)
Net finance costs
Income tax expense
Net earnings
per share (basic)
per share (diluted)
Adjusted net earnings(1)
Adjusted net earnings per share (basic)(1)
Dividends per share
$
$
214,753
225,396
11,678
13,181
243,231
246,212
39,616
31,020
26,952
18,356
24,786
5,015
5,796
16,140
0.16
0.15
9,620
0.09
0.09
37,890
40,065
22,829
25,004
31,231
4,991
4,886
12,952
0.13
0.12
14,551
0.14
0.09
$
779,505
52,255
893,931
139,744
120,811
84,497
65,564
91,022
19,439
17,531
47,527
0.46
0.44
$
761,055
53,180
860,801
126,199
126,118
68,010
67,929
92,259
18,523
14,068
35,419
0.34
0.34
33,866
35,245
0.33
0.36
0.34
0.36
(1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures
(2) The fourth quarter of fiscal 2021 consists of 13 weeks and the fourth quarter of 2020 consists of 14 weeks
(3) Fiscal 2021 consists of 52 weeks and fiscal 2020 consists of 53 weeks.
2021 Annual ReportManagement’s Discussion & Analysis
32
Total revenues
Revenues decreased by $3.0 million for the fourth quarter and increased by $33.1 million for the 2021 fiscal year versus comparable periods last
year. The decreased in revenue for the quarter was mainly attributable to the decreased of sales volume in the Maple segment, partially offset
by higher pricing in Sugar segment. For the 2021 fiscal year, revenue increased due mainly to increased sales volume and higher prices from
the Sugar segment, partially offset by lower volume in Maple segment.
Gross margin
Excluding the mark-to-market of derivative financial instruments, adjusted gross margin for the fourth quarter of the current year decreased by
$9.0 million and $5.3 million respectively, mainly as a result of lower adjusted gross margin from the Sugar segment offset by higher adjusted
gross margin by the Maple segment. For the Sugar segment, the adjusted gross margin per metric tonne for the current quarter and the 2021
fiscal year was lower by $36,35 per metric tonne and $10.99 per metric tonne respectively. For the Maple segment, the adjusted gross margin
percentage improved by 180 basis points for the quarter and 40 basis points for the year when compared to the same periods last year.
Results from operating activities
Excluding the mark-to-market of derivative financial instruments, adjusted results from operating activities for the current quarter amounted to
$18.4 million compared to $25.0 million in the same quarter last year, a decrease of $6.6 million. For fiscal 2021, adjusted results from operating
activities were $65.6 million compared to $67.9 million, representing a decrease of $2.3 million. The reduction in the current quarter and the
year was mainly driven by lower contribution from the Sugar segment offset by the higher results from the Maple segment.
Net finance costs
(In thousands of dollars)
Interest expense on convertible unsecured
subordinated debentures
Interest on revolving credit facility
Interest on senior guaranteed note
Amortization of deferred financing fees
Other interest expense
Net change in fair value in interest rate swaps
Q4 2021(1)
Q4 2020(1)
$
$
2,182
1,173
915
278
627
(160)
2,161
1,797
—
297
736
—
∆
$
21
(624)
915
(19)
(109)
(160)
FY 2021(2)
FY 2020(2)
$
$
8,423
5,843
1,527
1,187
2,008
451
8,446
6,723
—
1,187
2,167
—
∆
$
(23)
(880)
1,527
(0)
(159)
451
Net finance costs
5,015
4,991
24
19,439
18,523
916
(1) The fourth quarter of fiscal 2021 consists of 13 weeks and the fourth quarter of 2020 consists of 14 weeks.
(2) Fiscal 2021 consists of 52 weeks and fiscal 2020 consists of 53 weeks.
For the fourth quarter of 2021, net finance costs were aligned with the same period last year. The balance of $5.0 million reflects the impact
of lower balance and lower average interest cost on the revolving credit facility and additional interest cost on the newly issued senior
guaranteed note. For the current year, net finance costs were $0.9 million higher than last year, due mainly to interest cost on the newly issued
senior guaranteed note and the impact of changes in fair value related to derecognized contracts pertaining to interest rate swaps that no
longer meet the criteria for hedge accounting. This unfavourable variance was offset by lower average interest cost on the revolving credit
facility from lower balance and lower average interest rate.
Other interest expense pertained mainly to interest payable to the Producteurs et Productrices Acericoles du Quebec (“PPAQ”) on syrup
purchases, in accordance with the PPAQ payment terms and interest accretion on lease obligations.
Rogers Sugar Inc.Management’s Discussion & Analysis
Taxation
(In thousands of dollars)
Q4 2021(1)
Q4 2020(1)
Current
Deferred
Income tax expense
$
6,619
(823)
5,796
$
2,441
4,886
∆
$
FY 2021(2)
FY 2020(2)
$
$
11,290
2,778
2,445
4,174
17,333
(3,264)
198
910
17,531
14,068
3,463
33
∆
$
6,043
(2,580)
(1) The fourth quarter of fiscal 2021 consists of 13 weeks and the fourth quarter of 2020 consists of 14 weeks.
(2) Fiscal 2021 consists of 52 weeks and fiscal 2020 consists of 53 weeks.
The variation in current and deferred tax expense period-over-period is consistent with the variation in earnings before income taxes in fiscal
2021.
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.
Net earnings
Net earnings in the fourth quarter and for the 2021 fiscal year were $3.2 million and $12.1 million higher than the comparative periods for 2020,
respectively. These increases were mainly attributable to higher results from operating activities offset by higher income tax expenses. For the
year, this variance was also offset by higher finance costs.
Adjusted net earnings in the fourth quarter and for the 2021 fiscal year were $4.9 million and $1.4 million lower than the comparative periods for
2020, respectively. These decreases were mainly attributable to lower adjusted results from operating activities combined with higher income
tax expenses. For the year, this variance was also explained by higher finance costs.
2021 Annual ReportManagement’s Discussion & Analysis
34
Summary of Quarterly Results
The following is a summary of selected financial information of the consolidated financial statements and non-GAAP measures of RSI for the
last eight quarters:
QUARTERS (2)
2021
2020
(In thousands of dollars, except for volume
and per share information)
Fourth
Third
Second
First
Fourth
Third
Second
First
$
$
$
$
$
$
$
$
Sugar Volumes (MT)
214,753
190,563
183,749
190,440
225,396
172,054
175,226
188,379
Maple products volume
(‘000 pounds)
Total revenues
Gross margin
11,678
11,471
14,214
14,892
13,181
14,313
12,893
12,792
243,231
210,931
215,929
223,840
246,212
206,147
199,126
209,316
39,616
30,064
31,451
38,613
37,890
29,873
19,390
39,046
Adjusted gross margin(1)
31,020
25,932
27,407
36,452
40,065
25,915
23,612
36,526
Results from operations
26,952
15,062
19,151
23,332
22,829
12,372
6,058
26,751
Adjusted results from operations(1)
18,356
10,930
15,107
21,171
25,004
8,414
10,280
24,231
Adjusted EBITDA(1)
Net earnings (loss)
Per share - basic
Per share - diluted
24,786
17,214
21,375
27,647
31,231
14,279
16,522
30,227
16,140
6,836
10,778
13,773
12,952
5,538
0.16
0.15
0.07
0.07
0.10
0.10
0.13
0.13
0.13
0.12
0.05
0.05
965
0.01
0.01
15,964
0.15
0.14
Adjusted net earnings(1)
9,620
4,247
7,751
12,248
14,551
2,560
4,036
14,098
Per share - basic
Per share - diluted
Sugar - Adjusted gross margin
rate per MT(1)
Maple - Adjusted gross margin
percentage(1)
0.09
0.09
0.04
0.04
0.07
0.07
0.12
0.11
0.14
0.14
0.02
0.02
0.04
0.04
0.13
0.13
121.16
113.95
118,60
161.18
157.51
120.45
109.63
163.37
9.7%
9.4%
8.9%
7.9%
8.4%
7.9%
10.6%
9.7%
(1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures.
(2) All quarters are 13 weeks with the exception of the fourth quarter of 2020 which is 14 weeks.
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 volumes as well as an unfavourable customer mix,
resulting in lower revenues, adjusted gross margins and adjusted net earnings.
Usually, there is minimal seasonality in the Maple products segment. However, for the last two quarters of 2020 and the year 2021, we
experienced volatility in sales volume partially attributable to COVID-19.
Rogers Sugar Inc.Management’s Discussion & Analysis
Financial condition
(In thousands of dollars)
Total assets
Total non-current liabilities
35
October 2,
2021
$
879,930
431,046
October 3,
September 28,
2020 (1)
$
856,059
417,043
2019 (1)
$
815,344
385,220
(1) We have offset the comparative period’s deferred tax asset against deferred tax liability as we have the legal right to settle the current tax amount on a net basis and the
amounts are levied by the same taxing authorities on the same entity.
The increase in total assets in the current year compared to the prior year is mainly due to higher cash of $13.7 million and higher property,
plant and equipment of $11.3 million.
Non-current liabilities for the current year increased compared to the 2020 fiscal year due mainly to an increase in deferred tax liabilities of
$13.6 million and the newly issued senior guaranteed notes of $98.8 million, partly offset by a reduction of the non-current revolving credit
facility of $65.0 million and the reduction of employee benefits liabilities of $29.9 million.
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)
Net 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
(1) Fiscal 2021 consists of 52 weeks and fiscal 2020 consists of 53 weeks.
FY 2021(1)
FY 2020(1)
$
78,577
(40,158)
(24,678)
(72)
13,669
$
64,601
(36,786)
(26,153)
28
1,690
Cash flow from operating activities for the current year increased by $14.0 million compared to last year, which was due mainly to an increase
in net earnings adjusted for non-cash items of $26.1 million and a decrease in interest paid of $1.3 million, partially offset by a negative non-cash
working capital variation of $12.6 million.
Cash flow used in financing activities was higher by $3.4 million for the current year compared to last year due mainly to a decrease of $108.3
million in borrowings from the revolving credit facility and the bank overdraft, partially offset by the proceed received from the issuance of the
private placement note of $98.7 million.
The cash outflow used in investing activities decreased by $ 1.5 million in the current year compared to last year due mainly to the timing of
capital expenditures.
2021 Annual ReportManagement’s Discussion & Analysis
36
In order to provide additional information, we believe it is appropriate to measure free cash flow that is generated by our operations. 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 capital expenditures, net of value added capital
expenditures, and the payment of lease obligation.
Free cash flow
(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
Value added capital expenditures
Payment of lease obligation
Free cash flow(1)
Declared dividends
Shares repurchased
(1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures.
(2) Fiscal 2021 consists of 52 weeks and fiscal 2020 consists of 53 weeks.
Trailing twelve months
2021(2)
$
78,577
11,480
(18,482)
—
(2,752)
(24,678)
6,847
(5,487)
45,505
37,300
—
2020(2)
$
64,601
(1,098)
12
(292)
2,397
(26,153)
11,275
(4,205)
46,537
37,380
(6,536)
50,000
45,000
40,000
35,000
30,000
25,000
20,000
Free Cash Flow
($000s)
46,537
-783
-1,282
-2,953
1,515
1,271
1,200
45,505
Trailing 2020
Income Taxes
Lease Payment
Capital
spending
Adjusted EBITDA
Interest
Other
Trailing 2021
Rogers Sugar Inc.Management’s Discussion & Analysis
37
Free cash flow for the trailing twelve months ending on October 2, 2021, amounted to $45.5 million compared to $46,5 million for the same
period last year, representing a decrease of $1.0 million mainly attributable to higher lease payments and net capital expenditures of $4.2 million
and higher income taxes paid of $0.8 million, partially offset by higher EBITDA, excluding non cash item related to future pension liabilities
included in the Montreal collective agreement, of $1.5 million and lower interest paid of $1.3 million.
Capital and intangible assets expenditures, net of value added capital expenditures, increased by $3.0 million compared to last year’s rolling
twelve months due mainly to the impact of the value added expenditures related to the Maple new Granby facility in 2020. Free cash flow is not
reduced by value added capital expenditures, as these projects are not necessary for the operation of the plants but are undertaken because
of the operational savings that are realized once the projects are completed. Payments made for leases are deducted from free cash flow as
such cash flow is no longer reflected as a reduction in cash flow from operation and is therefore not available.
The Board of Directors declared a quarterly dividend of 9.0 cents per common share every quarter, totalling 36.0 cents for both trailing twelve
months periods.
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 payable. 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 our available credit facility. 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 and derivative timing adjustments, amortization of transitional balances and financial instruments
non-cash positive amount of $21.2 million for the current rolling twelve months does 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 our company as at year-end, and the effects such obligations are
expected to have on liquidity and cash flow over the next several years:
(In thousands of dollars)
Revolving credit facility
Senior Guaranteed Notes
Interest on convertible debentures
Interest based on swaps
Interest on Senior Guaranteed Notes
Lease obligations
Purchase obligations
Sugar purchase obligations (‘000 MT)
Maple purchase obligations (‘000 pounds)
Total
$
100,000
100,000
26,712
8,928
33,445
23,546
99,538
392,169
1,082
10,700
Under
1 year
$
—
—
7,506
2,660
3,490
3,810
99,538
117,004
537
10,700
1 to 3 years
4 to 5 years
After 5 years
$
100,000
—
15,012
5,311
6,980
5,341
—
$
—
—
4,194
957
3,490
1,963
—
$
—
100,000
—
19,485
12,432
—
132,644
10,604
131,917
545
—
—
—
—
—
2021 Annual ReportManagement’s Discussion & Analysis
38
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 agreement for the establishment of a revolving credit facility to support its financial and operational
needs. The revolving credit facility is syndicated with four Canadian chartered banks and includes an accordion feature allowing for the
borrowing of up to $400 million. This agreement has been amended and extended from time to time. The revolving credit facility is subject
to covenants and is secured by the assets of Lantic and TMTC. As of October 2, 2021, the approved amount available for borrowing was
$265 million, of which $100 million was drawn.
On November 23, 2021, we exercised our option to extend the maturity date of our revolving credit facility to November 23, 2026 and amended
our existing revolving credit facility thereby reducing its approved credit by $65.0 million, from a total of $265 million to $200 million. No other
amendment was made to the credit agreement.
On April 30, 2021, Lantic issued a private placement of $100 million in the form of senior guaranteed Notes under a note purchase agreement
entered into with certain institutional investors. The Notes are guaranteed and rank pari pasu with our existing revolving credit facility. The
Notes are due on April 30, 2031. The interest of the Notes was set at 3.49% and the interest is payable semi-annually in arrears in equal
installments on April 30th and October 30th of each year, commencing on October 30, 2021. The proceeds received from the private placement
on April 30th were used to repay existing credit facility indebtedness.
As at October 2, 2021, Lantic was in compliance with all the covenants under its revolving credit facility and its private placement and a total
of $498.5 million have been pledged as security, compared to $482.9 million as at October 3, 2020 including trade receivables, inventories and
property, plant and equipment.
In order to fix the interest rate on a substantial portion of the expected drawdown of the revolving credit facility, we enter 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 2, 2021 as well as their respective value, interest rate and time period:
Fiscal year contracted
(in thousands of dollars)
Fiscal 2017
Fiscal 2017
Fiscal 2017
Fiscal 2019
Fiscal 2020
Fiscal 2020
Fiscal 2020
Total outstanding value as at
October 2, 2021
Forward start interest rate swaps:
Fiscal 2019
Fiscal 2020
Date
Total value
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%
June 28, 2021 to June 28, 2023 – 1.08%
June 29, 2022 to June 28, 2024 – 2.17%
June 28, 2024 to June 28, 2025 – 1.18%
$
20,000
30,000
30,000
20,000
20,000
20,000
10,000
150,000
80,000
80,000
Rogers Sugar Inc.Management’s Discussion & Analysis
39
Lease obligations relate mainly to the leasing of facilities and various mobile equipment for the Sugar and Maple products segment operations.
Purchase obligations represent all open purchase orders as at year-end and approximately $42.7 million for sugar beets that will be harvested
and processed in fiscal 2022 but exclude any raw sugar priced against futures contracts. The purchase obligation regarding the sugar beets
represents our best estimate of the amount expected to be payable in fiscal 2022 as of the date of this MD&A.
TMTC has $23.1 million remaining to pay related to an agreement to purchase approximately $32.7 million (10.7 million pounds) of maple syrup
from the PPAQ. In order to secure bulk syrup purchases, the company issued an insurance bond for an amount of $16.9 million in favor of the
PPAQ. The insurance bond expires on March 1, 2022.
A significant portion of our 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, we attempt 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.
We use derivative instruments to manage exposures to changes in raw sugar prices, natural gas prices and foreign exchange. Our 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, our risk management policy is to manage the forward pricing of purchases of raw sugar in relation to its forward refined
sugar sales. We attempt to meet this objective by entering into futures contracts to reduce our exposure. Such financial instruments are used
to manage our exposure to variability in fair value attributable to the firm commitment purchase price of raw sugar.
We have hedged the majority of our exposure to raw sugar price risk movement through September 2023.
At October 2, 2021, we had a net long sugar position of $12.9 million in net contract amounts with a current net contract value of $16.2 million.
This long position represents the offset of a larger volume of sugar priced with customers than purchases priced from suppliers. This position
also includes the pre-hegde program in Taber, 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.
We use futures contracts and swaps to help manage our natural gas costs. At October 2, 2021, we had $28.1 million in natural gas derivatives,
with a current contract value of $39.6 million.
Our 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. We manage 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 we have 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. We do not anticipate
any material adverse effect on our financial position resulting from our involvement in these types of contracts, nor do we anticipate
non-performance by the counterparties.
At October 2, 2021, we had a net $88.6 million in foreign currency forward contracts with a current contract value of $88.6 million.
2021 Annual ReportManagement’s Discussion & Analysis 40
As part of our normal business practice, we also enter 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 #11 as traded on the ICE world raw sugar market. At October 2, 2021, we had
commitments to purchase a total of 1,082,000 metric tonnes of raw sugar, of which approximately 261,309 metric tonnes had been priced, for
a total dollar commitment of $144.3 million.
We have no other off-balance sheet arrangements.
Capital resources
As at October 2, 2021, Lantic had a total of $265.0 million of available working capital from its revolving credit facility, reduced to $200.0 million
as at November 23, 2021 as explained above, 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 2, 2021, a total of $498.5 million of assets have been pledged as
security for the revolving credit facility, compared to $482.9 million as at October 2, 2020; including trade receivables, inventories and property,
plant and equipment.
As at October 2, 2021, $100.0 million had been drawn from the working capital facility and $15.6 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.
We have sufficient cash and availability under our line of credit to meet such requirements.
Future commitments of approximately $17.2 million have been approved for completing capital expenditures presently in progress.
We also have funding obligations related to our employee future benefit plans, which include defined benefit pension plans. As at October 2,
2021, all of the company’s registered defined benefit pension plans were in a deficit position. The most recent actuarial valuation of the pension
plans for funding purposes was as of December 31, 2019, and the next required valuation will be as of December 31, 2022. We monitor our
pension plan assets closely and follow 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, we may be required to make additional
cash contributions in the future. In fiscal 2021, cash contributions to defined benefit pension plans increased by approximately $0.3 million to
$4.3 million. In total, we expect to incur cash contributions of approximately $4.2 million for fiscal 2022 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 our expected cash
requirements.
Rogers Sugar Inc.Management’s Discussion & Analysis 41
OUTSTANDING SECURITIES
A total of 103,686,923 shares were outstanding as at October 2, 2021 and November 24, 2021 respectively (103,536,923 as at October 2,
2020).
On June 1, 2020, Rogers received approval from the Toronto Stock Exchange to proceed with a Normal Course Issuer Bid (“2020 NCIB”),
under which it may purchase up to 1,500,000 common shares. In addition, Rogers 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 Rogers’ 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 terminated on June 2, 2021. No shares have been purchased under the 2020 NCIB.
On May 22, 2019, Rogers received approval from the Toronto Stock Exchange to proceed with a Normal Course Issuer Bid (“2019
NCIB”), under which it 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. Under the 2019 NCIB, Rogers purchased 1,500,000 common shares
having a book value of $1.4 million for a total cash consideration of $7.1 million. All shares purchased were cancelled.
During fiscal 2021, the total amount outstanding under the Sixth and Seventh series debentures was $57.4 million and $97.6 million
respectively. No conversion has been done during the 2021 fiscal year compared to the previous fiscal year, where holders of the Sixth
series debentures converted a total of $0.1 million into 9,079 common shares and holders of the Seventh series debentures converted
a total of $0.2 million into 19,774 common shares.
We currently have a share option plan that was established in 2011 and amended in 2021. Under this plan, we have set aside 6,000,000
common shares to be granted to key personnel. As at October 2, 2021, a total of 3,535,997 options had been granted, of which 3,085,997
were outstanding, 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. The following table provides the detail of the grants under the PSU:
Grant date
December 3, 2018
December 2, 2019
December 7, 2020
PSU
Additional PSU
Total PSU
Performance Cycle
290,448
324,932
491,412
58,553
41,581
23,810
349,001
366,513
515,222
2019-2021
2020-2022
2021-2023
The PSUs were granted to executives and other key management employees 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.
2021 Annual ReportManagement’s Discussion & Analysis 42
ENVIRONMENT
economic decline. For example, such events may adversely impact
economic activity through disruption in supply and delivery chains.
Our policy is to meet all applicable government requirements with
Moreover, RSI, Lantic or TMTC’s operations could be negatively
respect to environmental matters. Management believes that the
affected if personnel are affected by or quarantined as the result
company is in compliance in all material respects with environmental
of, or in order to avoid, exposure to a contagious illness. Lantic and
laws and regulations and maintains an open dialogue with regulators
TMTC have been designated as “essential businesses” at this time,
and the Government with respect to awareness and adoption of new
with minimal disruptions to operations, as described above.
standards.
A resulting negative
impact on economic fundamentals and
During our third quarter of fiscal 2021, we published our first
consumer confidence may negatively impact market value, increase
Environment, Social and Governance report which highlights our
market volatility, cause credit losses on customer sales or credit
sustainability efforts in such areas as energy use, air emissions
spreads to widen, and reduce liquidity, all of which could have an
and water usage. The report can be accessed on SEDAR or on our
adverse effect on the business of RSI, Lantic or TMTC. The duration
website at www.Lanticrogers.com.
of the business disruption and related financial impact caused by a
widespread health crisis cannot be reasonably estimated. The speed
With respect to potential environmental remediation of our
and extent of the spread of COVID-19, and the duration and intensity
properties, which could occur in the event of a building demolition
of resulting business disruption and related financial and social
or a sale, it is worth noting that the Vancouver and Montreal facilities
impact, are uncertain, and such adverse effects may be material.
have a lengthy history of industrial use, and fill materials have been
While governmental agencies and private sector participants
used on the properties in the normal course of business. We have
will seek to mitigate the adverse effects of this pandemic, which
recorded provisions under asset retirement obligations for known
may include such measures as heightened sanitary practices,
and quantifiable potential remediation activities in connection
telecommuting, quarantine, curtailment or cessation of travel,
with these properties. No assurance can be given that material
and other restrictions, the efficacy of such measures is uncertain.
expenditures will not be required in excess of the current asset
RSI’s, Lantic’s and TMTC’s operations and business results could
retirement obligation provisions in connection with contamination
be materially adversely affected. The extent to which COVID-19
from such industrial use or fill materials.
(or any other disease or epidemic) impacts business activity or
investment results will depend on future developments, which are
Although we are not aware of any specific problems at our Toronto
highly uncertain and cannot be predicted, including new information
distribution centre, our Taber plant and any of the TMTC properties,
which may emerge concerning the severity of the pandemic and the
no assurance can be given that expenditures will not be required to
actions required to contain it or treat its impact, among others.
deal with known or unknown contamination at the property or other
facilities or offices currently or formerly owned, used or controlled
Dependence Upon Lantic
by Lantic.
RISKS AND UNCERTAINTIES
RSI is entirely dependent upon the operations and assets of Lantic
through its ownership of securities of this company. Accordingly,
interest payments
to debenture holders and dividends
to
shareholders are dependent upon the ability of Lantic and/or TMTC
to pay its interest obligations under the subordinated notes and
Rogers’ business and operations are substantially affected by
to declare and pay dividends on or return capital in respect of the
many factors, including prevailing margins on refined sugar and its
common shares. The terms of Lantic’s bank and other indebtedness
ability to market sugar and maple products competitively, sourcing
restricts its ability to pay dividends and make other distributions on
of raw material supplies, weather conditions, operating costs and
its shares or make payments of principal or interest on subordinated
government programs and regulations.
debt, including debt which may be held, directly or indirectly, by RSI,
in certain circumstances. In addition, Lantic may defer payment of
Disease and Epidemics, including COVID-19
interest on the subordinated notes at any given time for a period of
The impact of disease and epidemics may have a negative impact
up to 18 months.
on RSI, Lantic or TMTC and their performance and financial position.
The ongoing COVID-19 pandemic or new epidemics could result
in health or other government authorities requiring the closure
of offices or other businesses and could also result in a general
Rogers Sugar Inc.Management’s Discussion & Analysis 43
No Assurance of Future Performance
generate surplus refined sugar production and exports that threaten
Historic and current performance of the business of RSI, Lantic
the Canadian sugar market. If the duties were to be eliminated or
and TMTC may not be indicative of success in future periods. The
significantly reduced in the future, there could be material financial
future performance of the business may be influenced by economic
impact to Lantic and other members of the Canadian refined sugar
downturns and other factors beyond the control of RSI, Lantic and
industry.
TMTC. As a result of these factors, the operations and financial
performance of Lantic and TMTC may be negatively affected, which
Fluctuations in Margins and Foreign Exchange
may materially adversely affect our financial results.
Lantic’s profitability is principally affected by its margins on domestic
refined sugar sales. In turn, this price is affected by a variety of market
Government Regulations and Foreign Trade Policies with
factors such as competition, government regulations and foreign
regards to Sugar
trade policies. Lantic, through the Canadian-specific quota, normally
In July 1995, Revenue Canada made a preliminary determination,
sells a small portion of its production of refined sugar per year in the
followed by a final determination in October 1995, that there was
U.S. and to Mexico and also sells beet pulp to export customers in
dumping of refined sugar from the US, Denmark, Germany, the
U.S. dollars. Lantic’s Taber sugar sales in Canada are priced against
United Kingdom (“UK”), Netherlands and the Republic of Korea into
the #11 world raw sugar market, which trades in U.S. dollars, while
Canada, and that subsidized refined sugar was being imported into
the sugar derived from the sugar beets is paid for in Canadian dollars
Canada from the European Union (“EU”). The Canadian International
to the Growers. Fluctuations in the value of the Canadian dollar will
Trade Tribunal (“CITT”) conducted an inquiry and, on November 6,
impact the profitability of these sales. Except for these sales, which
1995, ruled that the dumping of refined sugar from the US, Denmark,
currently can only be supplied by the Lantic’s Taber beet plant,
Germany, the UK, and Netherlands, as well as the subsidizing of
and sales to the U.S. under other announced specific quotas, most
refined sugar from the EU, was threatening material injury to the
sales are in Canada and have little exposure to foreign exchange
Canadian sugar industry. The ruling resulted in the imposition of
movements.
protective duties on these unfairly traded imports.
Fluctuation in the value of the Canadian dollar also impact the
Under Canadian laws, these duties must be reviewed every five
profitability of TMTC, as certain export sales of maple syrup
years. On August 6, 2021, the CITT concluded its fifth review of
are denominated in U.S. dollars, in Euro or in Australian dollars.
the 1995 findings and issued its decision to continue the duties
Fluctuations in the value of the Canadian dollar will impact the
for another five-year period against (i) dumped sugar from the US,
profitability of these sales. In order to mitigate against the movement
Denmark, Germany, Netherlands, and the UK, and (ii) subsidized
of the Canadian dollar versus the U.S. dollars, Euro or Australian
sugar from the EU. The Canadian Sugar Institute (“CSI”) and its
dollars, we enter into foreign exchange hedging contracts with
members, including Lantic, participated fully in the review and
certain customers.
submitted detailed evidence and witness testimony to the CITT. The
CITT agreed that imports of dumped and subsidized sugar would
There can be no assurance that Lantic and TMTC will be able to
likely cause material injury to the Canadian industry if the duty
continue to mitigate efficiently their exposure to foreign exchange
protection was removed.
risk in the future.
On October 6, 2021, the Canada Border Services Agency (“CBSA”)
Fluctuations in Raw Sugar Prices
initiated a re-investigation to update the levels of the anti-dumping
Raw sugar prices are not a major determinant of the profitability of
and countervailing duty protection. The
last re-investigation
Lantic’s cane sugar operations, as the price at which sugar is both
was concluded in September 2014. The CSI and its members are
purchased and sold is related to the Raw #11 world sugar price and
participating fully in the re-investigation. The updated levels of
all transactions are hedged. In a market where world raw sugar is
protection will be announced and enter into force at the conclusion
tight due to lower production, significant premiums may be charged
of the re-investigation, currently expected on March 4, 2022. There
on nearby deliveries which would have a negative impact on the
is no assurance that the duty protection will remain at current levels.
adjusted gross margins of the cane operations.
The duties on imports of US and EU refined sugar are important to
A relatively high world raw sugar price and/or low price of corn
Lantic and to the Canadian refined sugar industry in general because
will also reduce the competitive position of liquid sugar in Canada
they protect the market from the adverse effect of unfairly traded
as compared to HFCS which could result in the loss of HFCS
imports from these sources. The government support and trade
substitutable business for Lantic.
distorting attributes of the US and EU sugar regimes continue to
2021 Annual ReportManagement’s Discussion & Analysis 44
Security of Raw Sugar Supply
and organizing functions, the PPAQ may establish arrangements to
There are over 174 million metric tonnes of sugar produced
maintain fair prices for all producers and may manage production
worldwide. Of this, more than 52 million metric tonnes of sugar are
surpluses and their storage to stabilize the pricing of maple syrup.
traded on the world market. Lantic, through its cane refining plants,
buys approximately 0.7 million metric tonnes of raw sugar per year.
Pursuant to the Sales Agency Regulation, the PPAQ is responsible
Even though worldwide raw sugar supply is much larger than Lantic’s
for the marketing of bulk maple syrup in Québec. Therefore, any
yearly requirements, concentration of supply in certain countries
container that contains 5L or more of maple syrup must be marketed
like Brazil, combined with an increase in cane refining operations
through the PPAQ as the exclusive selling agent for the producers.
in certain countries, may create tightness in raw sugar availability
Bulk maple syrup may be sold to the PPAQ or to “authorized
at certain times of the year. To prevent any raw sugar supply
buyers” accredited by the PPAQ. In Québec, nearly 90% of the total
shortage, Lantic normally enters into long-term supply contracts
production of maple syrup is sold to the PPAQ or the authorized
with reputable suppliers. For raw sugar supply not under contract,
buyers, leaving only approximately 10% of the total production being
significant premiums may be paid on the purchase of raw sugar on a
sold directly by the producers to consumers or grocery stores. TMTC
nearby basis, which may negatively impact adjusted gross margins.
is an authorized buyer with the PPAQ. The authorized buyer status
is renewed on an annual basis. There is no certainty that TMTC will
The availability of sugar beets to be processed in Taber, Alberta
be able to maintain its status as an authorized buyer with the PPAQ.
is dependent on a supply contract with the Growers, and on the
Failure by TMTC to remain an authorized buyer with the PPAQ will
Growers planting the necessary acreage every year. In the event that
likely affect the capacity to fully supply the resale of maple syrup or
sufficient acreage is not planted in a certain year, or that Lantic and
Maple products and therefore the financial results of RSI.
the Growers cannot agree on a supply contract, sugar beets might
not be available for processing, thus requiring transfer of products
The PPAQ, in its capacity as bargaining and sales agent for the
from Lantic’s cane refineries to the Prairie market, normally supplied
producers of maple syrup in Québec as well as the body empowered
by Taber. This would increase Lantic’s distribution costs and may
to regulate and organize the production and marketing of maple
have an impact on the adjusted gross margin rate per metric tonne
syrup, and the bulk buyers of maple syrup, represented by the MIC
sold.
entered into the Marketing Agreement, which is expected to be
renewed on an annual basis. Pursuant to the Marketing Agreement,
Weather and Other Factors Related to Production
authorized buyers must pay a minimum price to the PPAQ for any
Sugar beets, as is the case with most other crops, are affected by
maple syrup purchased from the producers. As a result, TMTC’s
weather conditions during the growing season. Additionally, weather
ability to negotiate the purchase price of maple syrup is limited.
conditions during the harvesting and processing season could affect
Moreover, the minimum purchase price that is applicable to the
the Lantic’s total beet supply and sugar extraction from beets stored
authorized buyers with the PPAQ also restricts TMTC’s ability to
for processing. A significant reduction in the quantity or quality of
adjust its resale pricing to take into account market fluctuations due
sugar beets harvested due to adverse weather conditions, disease
to supply and demand. TMTC’s incapacity to adjust its resale prices
or other factors could result in decreased production, with negative
upward to take into account any increase in consumer demand may
financial consequences to Lantic.
affect the financial outlook of RSI.
Regulatory Regime Governing the Purchase and
Pursuant to the Marketing Agreement, authorized buyers must buy
Sale of Maple Syrup in Québec
Maple products from the PPAQ in barrels corresponding to the
Producers of maple syrup in Québec are required to operate within
“anticipated volume”. The anticipated volume must be realistic and
the framework provided for by the Marketing Act. Pursuant to the
in line with volumes purchased in previous years. The refusal from
Marketing Act, producers, including producers of maple syrup,
the PPAQ to accept the anticipated volume set forth by TMTC or
can take collective and organized control over the production and
the failure by TMTC to properly estimate the anticipated volume for
marketing of their products (i.e. a joint plan). Moreover, the Marketing
a given year may affect the ability for TMTC to increase its reselling
Act empowers the marketing board responsible for administering
capacity and could materially adversely affect RSI’s financial results
a joint plan, that is the PPAQ in the case of maple syrup, with the
and operations.
functions and role otherwise granted to the Régie des marchés
agricoles et alimentaires du Québec, the governing body created
by the Government of Québec to regulate, among other things, the
agricultural and food markets in Québec. As part of its regulating
Rogers Sugar Inc.Management’s Discussion & Analysis
45
Production of Maple Syrup Being Seasonal and
For the Maple products segment, TMTC is among the largest
Subject to Climate Change
branded and private label maple syrup bottling and distributing
The production of maple syrup takes place over a period of 6 to 8
companies in the world. TMTC has three major competitors in
weeks during the months of March and April of each year. Maple
Canada and also competes against a multitude of US bottlers and
syrup production is intimately tied to the weather as sap only flows
distributing companies.
when temperatures rise above freezing level during the day and
drop below it during the night, such temperature difference creating
A large majority of TMTC’s revenues are made under the private label
enough pressure to push sap out of the maple tree. Given the
line. TMTC anticipates that for a foreseeable future, its relationship
sensitivity of temperature in the process of harvesting maple sap,
with its top private label customers will continue to be key and will
climate change and global warming may have a material impact on
continue to have a material impact on its sales. Although TMTC
such process as the maple syrup production season may become
considers that the relationship with its top private label customers
shorter. Reducing the production season for maple syrup may also
is excellent, the loss of, or a decrease in the amount of business
have an impact on the level of production.
from, such customers, or any default in payment on their part could
significantly reduce TMTC’s sales and harm RSI’s operating and
In 2002, the PPAQ set up a strategic maple syrup reserve in order
financial results.
to mitigate production fluctuations imputable to weather conditions
and prevent such fluctuations from causing maple syrup prices to
Consumer Habits may Change
spike or drop significantly. The reserve was initially established to
The maple products market, both national and international, has
set aside a production quantity equivalent to half of the then annual
experienced some important changes over the last few years
demand. Each year, the PPAQ may organize a sale of a portion of
as maple products are becoming better known and consumer
its accumulated reserve. There can be no assurance that TMTC
preferences and consumption patterns have shifted to more natural
will have access to some of such reserve to offset decreases in
products. Maple syrup has typically been used, principally in North
production due to weather conditions or that such reserve will be
America, as a natural alternative to traditional sweeteners and has
sufficient to cover a gap in the production in any given year. Any
been served on morning meals, such as pancakes, waffles and other
decrease in production or incapacity to purchase additional reserves
breakfast bakeries for decades. As a result of evolving customer
from the PPAQ may affect TMTC’s supply of its sales of maple syrup
trends, TMTC will need to anticipate developments in a competitive
and other Maple products and, ultimately, its financial results.
environment on a timely basis. The failure of TMTC to anticipate,
Competition
identify and react to shifting consumer and retail customer trends
and preferences through successful innovation and enhanced
For the Sugar segment, Lantic faces domestic competition from
production capability could adversely result in reduced demand for
Redpath Sugar Ltd. and smaller regional operators and/distributors
its products, which could in turn affect the financial performance of
of both foreign and domestic refined sugar. Differences in proximity
RSI. There is also no guarantee that the current favourable market
to various geographic areas within Canada and elsewhere result in
trends will continue in the future.
differences in freight and shipping costs, which in turn affect pricing
and competitiveness in general.
Growth of TMTC’s Business Relying Substantially on Exports
The size of the global market for maple syrup is currently estimated
In addition to sugar, the overall sweetener market also includes corn-
at $733 million, the United States being by far the world’s largest
based sweeteners, such as HFCS, an alternative liquid sweetener,
importer, followed by Japan and Germany. Despite the increase of
which can be substituted for liquid sugar in soft drinks and certain
sales of maple products that the Canadian market has experienced
other applications; and non-nutritive, high intensity sweeteners
in recent years, the potential for growth of this industry largely relies
such as aspartame, sucralose and stevia. Differences in functional
on the international market. Moreover, over the last few years, New
properties and prices have tended to define the use of these various
York, Vermont and Maine have increased their production of maple
sweeteners. For example, HFCS is limited to certain applications
syrup and have now become competitors of Québec, which however
where a liquid sweetener can be used. Non-nutritive sweeteners
remains the largest producer and exporter of maple syrup in the
are not interchangeable in all applications. The substitution of other
world. While TMTC continues to develop its selling efforts outside
sweeteners for sugar has occurred in certain products, such as
of Canada, including through forming new partnerships in countries
soft drinks. We are not able to predict the availability, development
where the maple syrup market is undeveloped, it will likely face high
or potential use of these sweeteners and their possible impact on
competition from other bottlers and distributers, including from
Lantic’s operations.
other Canadian and U.S. companies, for its share of the international
2021 Annual ReportManagement’s Discussion & Analysis 46
market. Such growing competition and the incapacity for TMTC to
Lantic has contingency plans in place to mitigate the potential
further develop its selling efforts outside of Canada could adversely
impact of labour disruptions at its facilities. However, such potential
affect RSI’s capacity to grow TMTC’s business and its future results.
disruptions in future years could restrict Lantic’s ability to service
Furthermore, an incapacity to attract increased attention on maple
its customers in the affected regions, consequently affecting RSI’s
products or a sudden lack of interest for such products from
financial results.
customers outside of North America may affect RSI’s future results.
Operating Costs
Additionally, Lantic’s and TMTC’s
future performance and
development depend to a significant extent on the abilities,
Natural gas represents an important cost in our refining operations.
experience and efforts of its management team and employees. The
Our Taber beet factory includes primary agricultural processing and
loss of key employees could adversely impact Lantic and TMTC.
refining. As a result, Taber uses more energy in its operations than
the cane facilities in Vancouver and Montréal, principally as a result
Food Safety and Consumer Health
of the need to heat the cossettes (sliced sugar beets) to evaporate
Lantic and TMTC are subject to risks that affect the food industry
water from juices containing sugar, and to dry wet beet pulp.
in general, including risks posed by accidental contamination,
Changes in the costs and sources of energy may affect the financial
product tampering, consumer product liability, and the potential
results of Lantic’s operations. In addition, all natural gas purchased
costs and disruptions of a product recall. Lantic and TMTC actively
is priced in U.S. dollars. Therefore, fluctuations in the Canadian/U.S.
manage these risks by maintaining strict and rigorous controls and
dollar exchange rate will also impact the cost of energy. Lantic
processes in its manufacturing facilities and distribution systems
hedges a portion of its natural gas price exposure through the use of
and by maintaining prudent levels of insurance.
natural gas contracts to lessen the impact of fluctuations in the price
of natural gas. Provincial application of some form of carbon tax has
Our facilities are subject to audit by federal health agencies in
been increasingly important across Canada and for some provinces
Canada and similar institutions outside of Canada. We also perform
with a carbon tax, rates have been increasing, which could increase
our own audits designed to ensure compliance with its internal
the overall energy costs for Lantic.
standards, which are generally at, or higher than, regulatory agency
standards in order to mitigate the risks related to food safety.
Foreign Trade Policies with regards to Maple products
TMTC’s
international operations are also subject to
inherent
Consumers, public health officials and government officials are
risks, including change in the free flow of food products between
increasingly concerned about the public health consequences
countries, fluctuations in currency values, discriminatory fiscal
of obesity, particularly among young people. In addition, some
policies, unexpected changes in local regulations and laws and the
researchers, health advocates and dietary guidelines are suggesting
uncertainty of enforcement of remedies in foreign jurisdictions. In
that consumption of sugar, in various forms, is a primary cause of
addition, foreign jurisdictions, including the United States, TMTC’s
increased obesity rates and are encouraging consumers to reduce
current and expected largest market, could impose tariffs, quotas,
their consumption of sugar. Increasing public concern about obesity
trade barriers and other similar restrictions on TMTC’s international
and other health conditions; possible new or increased taxes on
sales and subsidize competing agricultural products.
products containing sugar, such as sugar-sweetened beverages by
government entities to reduce consumption or to raise revenue; shift
All of these risks could result in increased costs or decreased
in consumer preferences from sugar to other types of sweeteners;
revenues, either of which could materially adversely affect TMTC’s
additional governmental regulations concerning the marketing,
financial condition and results of operations.
labeling, packaging or sale of products and negative publicity may
reduce demand for the products of Lantic and TMTC and each of
Employee Relations and Labour Force
the aforementioned factors could materially adversely affect RSI’s
The majority of Lantic’s operations are unionized and agreements
financial results and operations.
are currently in place in each unionized facility. During fiscal 2021,
Lantic renegotiated the collective agreement with the union at its
Montreal facility. The agreement was renewed in November 2021 at
competitive rates for a period of five years.
Rogers Sugar Inc.Management’s Discussion & Analysis 47
Cybersecurity
compliance in all material respects with environmental laws and
RSI faces various security threats, including cybersecurity threats
regulations. However, these regulations have become progressively
to gain unauthorized access to sensitive information, to render data
more stringent and we anticipate this trend will continue, potentially
or systems unusable, or otherwise affect RSI’s ability to operate.
resulting in the incurrence of material costs to achieve and maintain
Lantic’s and TMTC’s operations require it to use and store personally
compliance.
identifiable and other sensitive information of its employees, notably.
The collection and use of personally identifiable information are
Violation of these regulations can result in fines or other penalties,
governed by Canadian federal and provincial laws and regulations.
which in certain circumstances can include clean-up costs. As
Privacy and information security laws continue to evolve and may
well, liability to characterize and clean up or otherwise deal with
be inconsistent from one jurisdiction to another. The security
contamination on or from properties owned, used or controlled
measures put in place by RSI in that regard cannot provide absolute
by Lantic and or TMTC currently or in the past can be imposed by
security, and RSI’s information technology infrastructure may be
environmental regulators or other third parties. Such liabilities could
vulnerable to cyberattacks, including without limitation, malicious
materially adversely affect RSI’s financial results and operations.
software, attempts to gain unauthorized access to data hereinabove
mentioned, and other electronic security breaches that could lead to
Income Tax Matters
disruptions in critical systems, corruptions of data and unauthorized
The income of RSI, Lantic and TMTC must be computed and is taxed
release of confidential or otherwise protected information. The
in accordance with Canadian tax laws, all of which may be changed
occurrence of one of these events could cause a substantial
in a manner that could adversely affect the ability to pay dividends
decrease in revenues, increased costs to respond or other financial
in the future. There can be no assurance that taxation authorities
loss, damage to reputation, increased regulation or litigation or
will accept the tax positions adopted including the determination of
inaccurate information reported by Lantic’s and TMTC’s operations.
the amounts of federal and provincial income which could materially
These developments may subject Lantic’s and TMTC.’s operations
adversely affect dividends.
to increased risks, as well as increased costs, and, depending on
their ultimate magnitude, could materially and adversely affect RSI’s
The current corporate structure involves a significant amount of
financial results and operations.
inter-company or similar debt, generating substantial interest
expense, which reduces earnings and therefore income tax payable
We seek to manage cybersecurity risk by continuing to invest in
at Lantic and TMTC’s level. There can be no assurance that taxation
appropriate information technology systems, infrastructure and
authorities will not seek to challenge the amount of interest expense
security, including disaster plans, reviewing its existing technologies,
deducted. If such a challenge were to succeed against Lantic, it could
processes and practices on a regular basis and ensuring employees
materially adversely affect the amount of cash transferred to RSI for
understand and are aware of their role in protecting the integrity of
dividend payment. Management believes that the interest expense
our technological security and information. We rely on third party
inherent in the structure is supportable and reasonable considering
products and services to assist us in protecting our information
the terms of the debt owed by Lantic to RSI and TMTC to Lantic.
technology infrastructure and our proprietary and confidential
information. We seek to be proactive in the area of cybersecurity
Management and Operation of Lantic
and consequently anticipate that we will continue to incur expenses
The Board of Directors of Lantic is currently controlled by Lantic
in relation to, and dedicate personnel and other resources to,
Capital, an affiliate of Belkorp Industries. As a result, holders of
cybersecurity, as new and increasingly complex threats and risks are
shares have limited say in matters affecting the operations of Lantic;
identified and responded to.
Environmental Matters
if such holders are in disagreement with the decisions of the Board of
Directors of Lantic, they have limited recourse. The control exercised
by Lantic Capital over the Board of Directors of Lantic may make it
Lantic’s and TMTC’s operations are subject to environmental
more difficult for others to attempt to gain control of or influence the
regulations
imposed by
federal, provincial and municipal
activities of Lantic and RSI.
governments in Canada, including those relating to the treatment
and disposal of wastewater and cooling water, air emissions,
contamination and spills of substances. We believe we are in
2021 Annual ReportManagement’s Discussion & Analysis 48
NON-GAAP MEASURES
• Adjusted results from operating activities is defined as results
from operating activities adjusted for the adjustment to cost of
In analyzing results, we supplement the use of financial measures
sales, the amortization of transitional balances to cost of sales for
that are calculated and presented in accordance with IFRS with a
cash flow hedges.
number of non-GAAP financial measures. A non-GAAP financial
measure is a numerical measure of a company’s performance,
• Adjusted EBITDA is defined as adjusted results from operating
financial position or cash flow that excludes (includes) amounts or is
activities adjusted to add back depreciation and amortization
subject to adjustments that have the effect of excluding (including)
expenses and the Maple segment non-recurring expensess.
amounts, that are included (excluded) in most directly comparable
measures calculated and presented in accordance with IFRS.
• Adjusted net earnings is defined as net earnings adjusted for the
Non-GAAP financial measures are not standardized; therefore, it
adjustment to cost of sales, the amortization of transitional
may not be possible to compare these financial measures with the
balances to cost of sales for cash flow hedges, the amortization
non-GAAP financial measures of other companies having the same
of transitional balance to net finance costs, the derecognition
or similar businesses. We strongly encourage investors to review the
of contracts from hedge accounting and changes in fair value
audited consolidated financial statements and publicly filed reports
of derecognized contracts and the income tax impact on these
in their entirety, and not to rely on any single financial measure.
adjustments. Amortization of transitional balance to net finance
costs is defined as the transitional marked-to-market balance of
We use these non-GAAP financial measures in addition to, and in
the interest rate swaps outstanding as of October 1, 2016, amortized
conjunction with, results presented in accordance with IFRS. These
over time based on their respective settlement date until all existing
non-GAAP financial measures reflect an additional way of viewing
interest rate swaps agreements have expired, as shown in the notes
aspects of the operations that, when viewed with the IFRS results
to the consolidated financial statements. Derecognition of
and the accompanying reconciliations to corresponding IFRS
contracts from hedge accounting and changes in fair value
financial measures, may provide a more complete understanding of
of derecognized contracts is defined as the impact of changes in
factors and trends affecting our business.
fair value of interest rate swaps that no longer meet the criteria for
The following is a description of the non-GAAP measures used by
RSI in the MD&A:
hedged accounting.
• Adjusted gross margin rate per MT is defined as adjusted gross
margin of the Sugar segment divided by the sales volume of the
• Adjusted gross margin is defined as gross margin adjusted for:
Sugar segment.
• “the adjustment to cost of sales”, which comprises the
mark-to-market gains or losses on sugar futures, foreign
• Adjusted gross margin percentage is defined as the adjusted gross
exchange forward contracts and embedded derivatives as
margin of the Maple segment divided by the revenues generated
shown in the notes to the consolidated financial statements
by the Maple segment.
and the cumulative timing differences as a result of mark-to-
market gains or losses on sugar futures, foreign exchange
• Adjusted net earnings per share is defined as adjusted net earnings
forward contracts and embedded derivatives as described
divided by the weighted average number of shares outstanding.
below; and
• “the amortization of transitional balance to cost of sales
• Free cash flow is defined as cash flow from operations excluding
for cash flow hedges”, which is the transitional marked-to-
changes
in non-cash working capital, mark-to-market and
market balance of the natural gas futures outstanding as
derivative
timing adjustments, amortization of
transitional
of October 1, 2016 amortized over time based on their
balances, financial instruments non-cash amount, and includes
respective settlement date until all existing natural gas futures
deferred financing charges, funds received from stock options
have expired, as shown in the notes to the consolidated
exercised, capital and intangible assets expenditures, net of value
financial statements.
added capital expenditures, and payments of capital leases.
Rogers Sugar Inc.Management’s Discussion & Analysis
49
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 RSI’s results as reported under GAAP. Reconciliations of non-GAAP financial measures to the most directly
comparable IFRS financial measures are as follows:
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO IFRS FINANCIAL MEASURES
Consolidated results
(In thousands of dollars)
Q4 2021(2)
Maple
Products
$
Sugar
$
Total
$
Sugar
$
Q4 2020(2)
Maple
Products
$
Total
$
Gross margin
35,671
3,945
39,616
32,198
5,692
37,890
Total adjustment to the cost of sales (1)
(9,651)
1,055
(8,596)
3,305
(1,130)
2,175
Adjusted Gross Margin
26,020
5,000
31,020
35,503
4,562
40,065
Results from operating activities
25,549
1,403
26,952
Total adjustment to the cost of sales (1)
(9,651)
1,055
(8,596)
20,198
3,305
2,631
22,829
(1,130)
2,175
Adjusted results from operating activities
15,898
2,458
18,356
23,503
1,501
25,004
Results from operating activities
25,549
1,403
26,952
Total adjustment to the cost of sales(1)
(9,651)
1,055
(8,596)
20,198
3,305
2,631
22,829
(1,130)
2,175
Depreciation of property, plant and equipment,
amortization of intangible assets
and right-of-use assets
4,737
1,694
6,430
4,479
1,685
6,164
Maple Segment non-recurring costs
—
—
—
—
63
63
Adjusted EBITDA
Net earnings
Total adjustment to the cost of sales (1)
Amortization of transitional balance to net
finance costs (1)
Net change in fair value in interest rate swaps(1)
Income taxes on above adjustments
Adjusted net earnings
Net earnings per share (basic)
Adjustment for the above
Adjusted net earnings per share (basic)
20,634
4,152
24,786
27,982
3,249
31,231
16,140
(8,596)
—
(162)
2,238
9,620
0.16
(0.07)
0.09
12,952
2,175
—
—
(576)
14,551
0.13
0.01
0.14
(1) See “Adjusted results” section.
(2) The fourth quarter of fiscal 2021 consists of 13 weeks and the fourth quarter of 2020 consists of 14 weeks.
2021 Annual ReportManagement’s Discussion & Analysis
50
Consolidated results
(In thousands of dollars)
FY 2021(2)
Maple
Products
$
Sugar
$
Total
$
Sugar
$
FY 2020(2)
Maple
Products
$
Total
$
Gross margin
121,029
18,715
139,744
105,088
21,111
126,199
Total adjustment to the cost of sales (1)
(20,806)
1,873
(18,933)
1,124
(1,205)
(81)
Adjusted Gross Margin
100,223
20,588
120,811
106,212
19,906
126,118
Results from operating activities
77,266
7,231
84,497
60,863
7,147
68,010
Total adjustment to the cost of sales (1)
(20,806)
1,873
(18,933)
1,124
(1,205)
(81)
Adjusted results from operating activities
56,460
9,104
65,564
61,987
5,942
67,929
Results from operating activities
77,266
7,231
84,497
60,863
7,147
68,010
Total adjustment to the cost of sales (1)
(20,806)
1,873
(18,933)
1,124
(1,205)
(81)
Depreciation of property, plant and equipment,
amortization of intangible assets and
right-of-use assets
18,180
7,031
25,211
16,890
6,588
23,478
Maple Segment non-recurring costs
—
247
247
—
852
852
Adjusted EBITDA
Net earnings
Total adjustment to the cost of sales (1)
Amortization of transitional balance to net
finance costs (1)
Net change in fair value in interest rate swaps (1)
Income taxes on above adjustments
Adjusted net earnings
Net earnings per share (basic)
Adjustment for the above
Adjusted net earnings per share (basic)
74,640
16,382
91,022
78,877
13,382
92,259
47,527
(18,933)
145
4,821
33,866
0.46
(0.13)
0.33
35,419
(81)
(197)
104
35,245
0.34
—
0.34
(1) See “Adjusted results” section.
(2) Fiscal 2021 consists of 52 weeks and fiscal 2020 consists of 53 weeks.
Rogers Sugar Inc.Management’s Discussion & Analysis
51
CRITICAL ACCOUNTING ESTIMATES
DISCLOSURE CONTROLS AND PROCEDURES
The preparation of our audited consolidated financial statements in
The CEO and the CFO, have designed the disclosure controls and
conformity with IFRS requires us to make estimates and judgements
procedures (“DC&P”), or have caused them to be designed under
that affect the reported amounts of assets and liabilities, net revenue
their supervision, in order to provide reasonable assurance that:
and expenses, and the related disclosures. Such estimates include
the valuation of goodwill, intangible assets, identified assets and
• material information relating to the company is made known to the
liabilities acquired in business combinations, other long-lived
CEO and CFO by others, particularly during the period in which
assets, income taxes, the provision for asbestos removal and
the interim and annual filings are being prepared; and
pension obligations. These estimates and assumptions are based
on management’s best estimates and judgments. Management
• information required to be disclosed by the company in its annual
evaluates its estimates and assumptions on an ongoing basis using
filings, interim filings or other reports filed or submitted by it
historical experience, knowledge of economics and market factors,
under securities legislation is recorded, processed, summarized
and various other assumptions that management believe to be
and reported within the time periods specified in securities
reasonable under the circumstances. Management adjusts such
legislation.
estimates and assumptions when facts and circumstances dictate.
Actual results could differ from these estimates. Changes in those
As at October 2, 2021, an evaluation was carried out, under the
estimates and assumptions are recognized in the period in which the
supervision of the CEO and the CFO, of the design and operating
estimates are revised. Refer to note 2 (d) to the audited consolidated
effectiveness of the company’s DC&P. Based on this evaluation,
financial statements for more detail.
the CEO and the CFO concluded that the company’s DC&P were
appropriately designed and were operating effectively as at October
2, 2021.
CHANGES IN ACCOUNTING PRINCIPLES AND PRACTICES
NOT YET ADOPTED
INTERNAL CONTROLS OVER FINANCIAL REPORTING
A number of new standards, and amendments to standards and
interpretations, are not yet effective and have not been applied
The CEO and CFO have also designed internal controls over financial
in preparing our audited consolidated financial statements for
reporting (“ICFR”), or have caused them to be designed under their
2021. Management has reviewed such new standards, proposed
supervision, in order to provide reasonable assurance regarding
amendments, and does not anticipate that they will have a material
the reliability of financial reporting and the preparation of financial
impact on Rogers’ financial statements. Refer to note 3 (b) of the
statements for external purposes in accordance with IFRS using the
unaudited condensed interim financial statements and to note 3 (r)
framework established in “Internal Control – Integrated Framework
of the 2021 audited consolidated financial statements for details.
(COSO 2013 Framework) published by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO)”. As at October
2, 2021, an evaluation was carried out, under the supervision of the
CONTROLS AND PROCEDURES
CEO and the CFO, of the design and operating effectiveness of RSI’s
ICFR. Based on that evaluation, they have concluded that the design
In compliance with
the provisions of Canadian Securities
and operation of the company’s internal controls over financial
Administrators’ Regulation 52-109, we have filed certificates signed
reporting were effective as at October 2, 2021.
by the President and Chief Executive Officer (“CEO”) and by the
Vice-President Finance and Chief Financial Officer (“CFO”), in that,
In designing and evaluating such controls, it should be recognized
among other things, report on:
that, due to inherent limitations, any controls, no matter how well
designed and operated, can provide only reasonable assurance of
• their responsibility for establishing and maintaining disclosure
achieving the desired control objectives and may not prevent or
controls and procedures and internal control over financial
detect misstatements. Projections of any evaluations of effectiveness
reporting for RSI; and
to future periods are subject to the risk that controls may become
• the design and effectiveness of disclosure controls and procedures
inadequate because of changes in conditions, or that the degree
and the design and effectiveness of internal controls over financial
of compliance with the policies or procedures may deteriorate.
reporting.
Additionally, management is obliged to use judgement in evaluating
controls and procedures.
2021 Annual ReportManagement’s Discussion & Analysis
52
CHANGES IN INTERNAL CONTROLS OVER
Forward-looking statements are based on estimates and assumptions
FINANCIAL REPORTING
made by RSI in light of its experience and perception of historical
trends, current conditions and expected future developments, as
There were no changes in the company’s internal controls over
well as other factors that we believe are appropriate and reasonable
financial reporting during the year that have materially affected,
in the circumstances, including with respect to the continuity of its
or are reasonably likely to materially affect, the company’s internal
operations despite the COVID-19 pandemic, but there can be no
control over financial reporting.
assurance that such estimates and assumptions will prove to be
correct. Forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause actual results
FORWARD-LOOKING STATEMENTS
or events to differ materially from those anticipated in such forward-
This report contains Statements or information that are or may be
materially from those reflected in the forward-looking statements,
“forward-looking statements” or “forward-looking
information”
historical results or current expectations. Readers should also refer
within the meaning of applicable Canadian Securities laws. Forward-
to the section “Risks and Uncertainties” in this MD&A for additional
looking statements may include, without limitation, statements
information on risk factors and other events that are not within our
and information which reflect the current expectations of RSI with
control. These risks are also referred to in Rogers’ Annual Information
looking statements. Actual performance or results could differ
respect to future events and performance. Wherever used, the words
Form in the “Risk Factors” section.
“may,” “will,” “should,” “anticipate,” “intend,” “assume,” “expect,” “plan,”
“believe,” “estimate,” and similar expressions and the negative of
Although we believe that the expectations and assumptions on
such expressions, identify forward-looking statements.
which forward-looking information is based are reasonable under
the current circumstances, readers are cautioned not to rely
Although this is not an exhaustive list, RSI cautions investors that
unduly on this forward-looking information as no assurance can be
statements concerning the following subjects are, or are likely to be,
given that it will prove to be correct. Forward-looking information
forward-looking statements:
• future prices of raw sugar
• natural gas costs
contained herein is made as at the date of this MD&A and RSI
does not undertake any obligation to update or revise any forward-
looking information, whether as a result of events or circumstances
occurring after the date hereof, unless so required by law.
• the opening of special refined sugar quotas in the United States
(“U.S.”)
• beet production forecasts
• growth of the maple syrup industry and the refined sugar industry
• the status of labour contracts and negotiations
• the level of future dividends
• the status of government regulations and investigations
• the impact of the COVID-19 pandemic on RSI and its operations.
Rogers Sugar Inc.Management’s Discussion & Analysis
RESPONSIBILITY FOR FINANCIAL REPORTING
53
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.
Michael Walton,
Jean-Sébastien Couillard,
President and Chief Executive Officer
Vice President Finance, Chief Financial Officer and Corporate Secretary
Lantic Inc., Administrator
Lantic Inc., Administrator
November 24, 2021
(In thousands of dollars except as noted and per share amounts)2021 Annual ReportNotes to Consolidated Financial Statements
54
INDEPENDENT AUDITORS’ REPORT
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 2, 2021 and October 3, 2020;
• the consolidated statements of earnings and comprehensive income for the years then ended;
• the consolidated statements of changes in shareholders’ equity for the years then ended;
• the consolidated statements of cash flows for the years then ended;
• and notes to the consolidated financial statements, including a summary of significant accounting policies
(Hereinafter referred to as the "financial statements").
In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position of the Entity as
at October 2, 2021 and October 3, 2020, 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.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the
year ended October 2, 2021. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
We have determined the matter described below to be the key audit matter to be communicated in our auditors’ report.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
55
Goodwill impairment assessment for the Maple products cash-generating unit
Description of the matter
As discussed in Notes 3(i) and 15 to the financial statements, the Entity performs impairment testing annually for goodwill and when
circumstances indicate that there may be an impairment. The goodwill balance as of October 2, 2021 is $283 million, of which $53 million
relate to the Maple products cash-generating unit ("CGU"). The Entity assesses impairment by comparing the carrying amount of the CGU
to its recoverable amount. The recoverable amount is based on the higher of the value in use and fair value less costs to sell. Value in use is
based on estimates of discounted future cash flows expected to be recovered from the CGU through its use. Fair value less costs to sell is the
amount obtainable from the sale of the CGU in an arm’s-length transaction between knowledgeable, willing parties, less the costs of disposal.
The Entity’s significant assumption in determining the fair value less costs to sell relates to the range of earning multiples.
Why the matter is a key audit matter
We identified the evaluation of the goodwill impairment analysis for the Maple products CGU as a key audit matter. This matter represented
an area of significant risk of misstatement given the magnitude of goodwill and the high degree of estimation uncertainty in assessing the
assumptions used to determine the recoverable amounts. Significant auditor judgement and the involvement of professionals with specialized
skills and knowledge was required to evaluate the evidence for the Entity’s significant assumptions. Minor changes to these assumptions
could have a significant effect on the recoverable amount of the CGU and result in impairment charges.
How the matter was addressed in the audit
The following are the primary procedures we performed to address this key audit matter.
We involved valuation professionals with specialized skills and knowledge, who assisted in developing an independent expectation of the fair
value less costs to sell for the Maple product CGU. The procedures performed include the following:
• Developed a range of adjusted earnings before interest, tax, depreciation and amortization ("EBITDA") multiples based on comparable
precedent transactions and qualitative considerations;
• Assessed the reasonability of the adjusted EBITDA amount determined by management;
• Developed a range of recoverable amounts by multiplying the adjusted EBITDA multiples by the adjusted EBITDA amount; and
• Compared the independently developed range of recoverable amounts to the carrying amount of the Maple product CGU.
Other Information
Management is responsible for the other information. Other information comprises:
• the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities Commissions.
• the information, other than the financial statements and the auditors’ report thereon, included in a document likely to be entitled "Glossy
Annual Report".
Our opinion on the financial statements does not cover the other information and we do not, and will not, express any form of assurance
conclusion thereon.
In 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.
(In thousands of dollars except as noted and per share amounts)2021 Annual ReportNotes to Consolidated Financial Statements
56
We obtained the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities Commissions as
at the date of this auditors’ report. If, based on the work we have performed on this other information, we conclude that there is a material
misstatement of this other information, we are required to report that fact in the auditors’ report.
We have nothing to report in this regard.
The information, other than the financial statements and the auditors’ report thereon, included in a document likely to be entitled "Glossy
Annual Report" is expected to be made available to us after the date of this auditors’ report. If, based on the work we will perform on this other
information, we conclude that there is a material misstatement of this other information, we are required to report that fact to those charged
with governance.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial
Reporting Standards (IFRS), and for such internal control as management determines is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Entity’s ability to continue as a going concern, disclosing
as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to
liquidate the Entity or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Entity‘s financial reporting process.
Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally
accepted auditing standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of the financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain
professional skepticism throughout the audit.
We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• 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.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
57
• 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 24, 2021
* CPA auditor, CA, public accountancy permit No. A125211
(In thousands of dollars except as noted and per share amounts)2021 Annual ReportNotes to Consolidated Financial Statements
58
Consolidated Statements of Earnings and Comprehensive Income
(In thousands of dollars except per share amounts)
Consolidated statements of earnings
Revenues (note 32)
Cost of sales
Gross margin
Administration and selling expenses
Distribution expenses
Results from operating activities
Finance income (note 5)
Finance costs (note 5)
Net finance costs
Earnings before income taxes
Income tax expense (note 6):
Current
Deferred
Net earnings
Net earnings per share (note 27):
Basic
Diluted
Fiscal years ended
October 2,
2021
$
893,931
754,187
139,744
36,955
18,292
55,247
84,497
—
19,439
19,439
65,058
17,333
198
17,531
47,527
0.46
0.44
Consolidated statements of comprehensive income
Net earnings
Other comprehensive income (loss):
Items that are or may be reclassified subsequently to net earnings:
Cash flow hedges (note 9)
Income tax on cash flow hedges (note 6)
Foreign currency translation differences
Items that will not be reclassified to net earnings:
Defined benefit actuarial (losses) gains (note 20)
Income tax on defined benefit actuarial gains (losses) (note 6)
Other comprehensive income (loss)
Comprehensive income
The accompanying notes are an integral part of these consolidated financial statements.
Fiscal years ended
October 2,
2021
$
47,527
17,973
(4,614)
(1,032)
12,327
34,219
(8,786)
25,433
37,760
85,287
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
October 3,
2020
$
35,419
(3,887)
1,016
54
(2,817)
(5,847)
1,502
(4,345)
(7,162)
28,257
(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)
59
October 2,
2021
$
October 3,
2020
$
15,643
95,546
285
180,291
4,570
5,897
302,232
241,713
18,526
28,034
548
5,870
283,007
577,698
879,930
—
—
119,940
3,454
1,394
3,049
2,089
129,926
100,000
29,299
2,431
546
15,443
147,742
98,785
36,800
431,046
560,972
100,139
300,887
5,085
(106,604)
19,451
318,958
1,974
94,262
2,042
180,792
7,923
2,616
289,609
230,385
20,489
31,666
745
158
283,007
566,450
856,059
2,797
29,000
131,089
—
500
3,981
1,458
168,825
165,000
59,212
437
6,933
16,423
145,836
—
23,202
417,043
585,868
99,452
300,794
5,085
(116,831)
(18,309)
270,191
879,930
856,059
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 11)
Intangible assets (note 12)
Other assets (note 13)
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)
Income taxes payable
Provisions (note 18)
Lease obligations (note 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 19)
Convertible unsecured subordinated debentures (note 21)
Senior guaranteed notes (note 22)
Deferred tax liabilities (note 14)
Total non-current liabilities
Total liabilities
Shareholders’ equity:
Share capital (note 23)
Contributed surplus
Equity portion of convertible unsecured subordinated debentures (note 21)
Deficit
Accumulated other comprehensive income (loss)
Total shareholders’ equity
Commitments (notes 19 and 25)
Contingencies (note 26)
Total liabilities and shareholders’ equity
The accompanying notes are an integral part of these consolidated financial statements.
(In thousands of dollars except as noted and per share amounts)2021 Annual ReportNotes to Consolidated Financial Statements
60
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)
61
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(In thousands of dollars except as noted and per share amounts)2021 Annual ReportNotes to Consolidated Financial Statements
62
Consolidated Statements of Cash Flows
(In thousands of dollars)
Cash flows from operating activities:
Net earnings
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)
Gain on disposal of property, plant and equipment (note 10)
Share-based compensation - equity settled (note 24)
Share-based compensation - cash settled (note 24)
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
Increase (decrease) in bank overdraft
Increase (decrease) in revolving credit facility (note 16)
Payment of lease obligations (note 19)
Net proceeds from senior guaranteed notes (note 22)
Issuance of shares (note 23)
Purchase and cancellation of shares (note 23)
Payment of financing fees
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 in cash
Cash, beginning of year
Cash, end of year
Supplemental cash flow information (note 28).
The accompanying notes are an integral part of these consolidated financial statements.
For the fiscal years ended
October 2,
2021
$
October 3,
2020
$
47,527
21,381
3,830
2,752
17,531
(10,155)
14,462
19,439
(86)
107
21
—
116,809
(1,359)
223
3,353
(13,354)
(343)
(11,480)
105,329
(14,629)
(12,123)
78,577
(37,287)
(2,797)
(94,000)
(5,487)
98,740
673
—
—
(40,158)
(24,320)
(358)
(24,678)
(72)
13,669
1,974
15,643
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
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
63
1. REPORTING ENTITY
Rogers Sugar Inc. ("Rogers" or the "Company") is a company domiciled in Canada, incorporated under the Canada Business Corporations
Act. The head office of Rogers is located at 123 Rogers Street, Vancouver, British Columbia, V6B 3V2. The consolidated financial statements
of Rogers as at October 2, 2021 and October 3, 2020 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 2021 and 2020 represent the years
ended October 2, 2021 and October 3, 2020.
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 24, 2021.
(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 obligations which are measured at the present value of minimum lease liabilities in accordance with IFRS 16 Leases.
(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)2021 Annual ReportNotes to Consolidated Financial Statements
64
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 and unamortizable intangibles impairment:
The Company makes a number of estimates when calculating the recoverable amount of a cash-generating unit containing
goodwill and unamortizable intangibles using discounted future cash flows or other valuation methods.
3. SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of consolidation:
(i) Subsidiaries:
The consolidated financial statements include Rogers and the subsidiary it controls, Lantic and its subsidiaries, TMTC and
Highland Sugarworks Inc. (the latter two companies together referred to as "TMTC").
Control exists where the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has
the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the
consolidated financial statements from the date control commences until the date that control ceases. The accounting policies
of subsidiaries are aligned with the policies adopted by the Company.
The Company owns 100% of the common shares of Lantic. Lantic Capital Inc., a wholly-owned subsidiary of Belkorp
Industries Inc., owns the two outstanding Class C shares of Lantic. These Class C shares are non-voting, have no rights to return
or risk of loss and are redeemable for a nominal value of one dollar each. The Class C shares entitle the holder to elect five of
the seven directors of Lantic but have no other voting rights at any meetings of Lantic’s shareholders except as may be required
by law.
Notwithstanding Lantic Capital Inc.’s ability to elect five of the seven directors of Lantic, Lantic Capital Inc. receives no benefits
or exposure to losses from its ownership of the Class C shares. As the Class C shares are non-dividend paying and redeemable
for a nominal value of one dollar, there is no participation in future dividends or changes in value of Lantic resulting from the
ownership of the Class C shares. There is also no management fee or other form of consideration attributable to the Class C
shares. The determination of control involves judgement. Based on all the facts and available information, management has
concluded that Rogers 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
65
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b) Foreign currency transactions:
Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at
the exchange rate in effect at that date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at
fair value are translated at the rate prevailing at the date that the fair value was determined. Foreign denominated non-monetary
assets and liabilities that are measured at the historical costs are translated at the rate prevailing at the transaction date. Revenues
and expenses denominated in foreign currencies are translated into the functional currency at the rate in effect on the dates they
occur. Gains or losses resulting from these translations are recorded in net earnings of the period.
(c) Foreign operations:
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on business combinations, are
translated to Canadian dollars at exchange rates at the reporting date. The income and expenses of foreign operations are translated
to Canadian dollars at the average exchange rate in effect during the reporting period.
Foreign currency differences are recognized in other comprehensive income (loss) in the accumulated foreign currency translation
differences account. When a foreign operation is disposed of in its entirety or partially such that control, significant influence or joint
control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part
of the gain or loss on disposal. If the Company disposes of part of its interest in a subsidiary but retains control, then the relevant
proportion of the cumulative amount is reattributed to non-controlling interest. When the Company disposes of only part of an
associate or joint venture while retaining significant influence or joint control, the relevant proportion of the cumulative amount is
reclassified to income or loss.
(d) Cash:
Cash includes cash on hand, bank balances and bank overdraft when the latter forms an integral part of the Company’s cash
management.
(e) Inventories:
Inventories are valued at the lower of cost and net realizable value. The cost of inventories is determined on a first-in, first-out basis
and includes expenditures incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing
them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an
appropriate share of production overheads based on normal operating capacity.
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and
selling expenses.
(In thousands of dollars except as noted and per share amounts)2021 Annual ReportNotes to Consolidated Financial Statements
66
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 less any government grants received for
capital expenditures. 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
3 to 10 years
5 to 40 years
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
67
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
5 to 15 years
10 years
10 years
Brand names are not amortized as they are considered to have an indefinite life.
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:
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 their 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)2021 Annual ReportNotes to Consolidated Financial Statements
68
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
69
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)2021 Annual ReportNotes to Consolidated Financial Statements
70
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(j) Employee benefits (continued):
(v) Cash-settled Performance Share Units:
The Company has 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. 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, 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
71
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
Trade and other payables
Income taxes payable
Senior guaranteed notes
Convertible unsecured subordinated debentures
Amortized cost
Amortized cost
Amortized cost
Fair value through profit or loss
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Non-hedged derivative liabilities
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)2021 Annual ReportNotes to Consolidated Financial Statements
72
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(l) Financial instruments (continued):
(ii) Financial assets (continued):
•
The Company currently classifies its cash, trade accounts receivable, and income tax receivables 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 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 and other payables, income tax payables, senior
guaranteed notes, 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. 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
73
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.
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 (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)2021 Annual ReportNotes to Consolidated Financial Statements
74
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, the
effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and presented in
accumulated other comprehensive income as part of equity.
The amount recognized in other comprehensive income is removed and included in net earnings under the same line item in
the consolidated statements of earnings and comprehensive income as the hedged item, in the same period that the hedged
cash flows affect net earnings.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, or exercised, the
hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognized in other comprehensive
income 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.
When the hedged item is a non-financial asset, the amount recognized in other comprehensive income is transferred to net
earnings in the same period that the hedged item affects net earnings.
The Company has designated as hedging items its natural gas futures and its interest rate swap agreements entered into in
order to protect itself against natural gas 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
75
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 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. 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)2021 Annual ReportNotes to Consolidated Financial Statements
76
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(p) Earnings per share:
The Company presents basic and diluted earnings per share ("EPS") data for its common shares. Basic EPS is calculated by dividing
the profit or loss attributable to common shareholders of the Company by the weighted average number of common shares
outstanding during the period.
Diluted EPS is determined by adjusting the profit or loss attributable to common shareholders and the weighted average number of
common shares outstanding, for the effects of all dilutive potential common shares from the conversion of the convertible debentures.
(q) New standards and interpretations adopted:
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.
The Company adopted the Amendments in its consolidated interim financial statements for the annual period beginning on
October 4, 2020. The adoption of the amendments did not have an impact on the consolidated financial statements.
(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 2,
2021 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:
•
Annual Improvements to IFRS Standards 2018-2020
• Onerous Contracts – Cost of fulfilling a contract (Amendments to IAS 37)
•
•
•
•
Reference to the Conceptual Framework (Amendments to IFRS 3)
Definition of Accounting Estimates (Amendments to IAS 8)
Disclosure initiative – Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)
Deferred tax related to assets and liabilities arising from a single transaction (Amendments to IAS 12)
The Company does not intend to adopt the Amendments in its consolidated financial statements before the annual period beginning
on October 3, 2021. The Company does not expect the amendments to have a material impact on the consolidated financial
statements.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
4. DEPRECIATION AND AMORTIZATION EXPENSES
Depreciation and amortization expenses were charged to the consolidated statements of earnings and comprehensive income (loss) as
follows:
77
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
5. FINANCE INCOME AND FINANCE COSTS
Recognized in net earnings:
Net change in fair value of interest rate swaps (note 9)
Finance income
Interest expense on convertible unsecured subordinated debentures,
including accretion of $917 (2020 - $868) (note 21)
Interest on revolving credit facility
Interest on senior guaranteed notes, including accretion of $45
Amortization of deferred financing fees
Other interest expense
Interest accretion on discounted lease obligations
Net change in fair value of interest rate swap (note 9)
Finance costs
Net finance costs recognized in net earnings
For the fiscal years ended
October 2,
2021
$
October 3,
2020
$
16,144
555
16,699
2,849
1,833
4,682
3,830
25,211
15,677
545
16,222
2,324
1,110
3,434
3,822
23,478
For the fiscal years ended
October 2,
2021
October 3,
2020
$
—
—
8,423
5,843
1,527
1,187
1,150
858
451
19,439
19,439
$
197
197
8,446
6,723
—
1,187
1,500
864
—
18,720
18,523
(In thousands of dollars except as noted and per share amounts)2021 Annual ReportNotes to Consolidated Financial Statements
78
6.
INCOME TAX EXPENSE (RECOVERY)
Current tax expense:
Current period
Adjustments for prior year periods
Current tax expense
Deferred tax expense (recovery):
Recognition and reversal of temporary differences
Adjustments for prior year periods
Deferred tax expense (recovery)
Total income tax expense
Income tax recognized in other comprehensive income (loss):
For the fiscal years ended
October 2,
2021
$
October 3,
2020
$
17,931
(598)
17,333
(368)
566
198
17,531
11,290
—
11,290
2,394
384
2,778
14,068
For the fiscal years ended
October 2, 2021
October 3, 2020
Before tax
Tax effect
Net of tax
Before tax
Tax effect
Net of tax
$
17,973
34,219
$
(4,614)
(8,786)
$
13,359
25,433
$
(3,887)
(5,847)
$
1,016
1,502
$
(2,871)
(4,345)
Cash flow hedges
Defined benefit actuarial losses
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:
Earnings before income taxes
Income taxes using the Company’s
statutory tax rate
Changes due to the following items:
Effect of differences in tax rates in other
jurisdiction
Non-deductible expenses (income)
Adjustments for prior year periods
Other
October 2, 2021
October 3, 2020
For the fiscal years ended
%
—
27.00
0.15
(0.15)
(0.05)
—
26.95
$
65,058
17,566
94
(97)
(32)
—
17,531
%
—
27.00
0.29
0.36
0.78
—
28.43
$
49,487
13,362
145
177
384
—
14,068
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
7.
TRADE AND OTHER RECEIVABLES
Trade receivables
Less expected credit loss
Other receivables
Initial margin deposits with commodity brokers
79
October 2,
2021
October 3,
2020
$
80,430
(536)
79,894
13,493
2,159
95,546
$
82,191
(662)
81,539
11,866
867
94,262
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 2021 were $0.2 million (October 3, 2020 - $0.2 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 (October 3, 2020 - less than 1%), while over 80% are current
(less than 30 days) as at October 2, 2021 (October 3, 2020 - 84%).
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.
8.
INVENTORIES
Raw inventory
Work in progress
Finished goods
Packaging and operating supplies
Spare parts and other
October 2,
2021
October 3,
2020
$
99,323
8,435
42,787
150,545
14,986
14,760
180,291
$
104,852
10,378
37,975
153,205
13,453
14,134
180,792
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 2, 2021, inventories recognized as cost of goods sold amounted to $773.1 million (October 3, 2020 - $734.7 million).
(In thousands of dollars except as noted and per share amounts)2021 Annual ReportNotes to Consolidated Financial Statements
80
9. FINANCIAL INSTRUMENTS
Derivative financial 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.
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.
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
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.
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 Company’s natural gas futures and interest rate swap agreements were designated as cash flow hedges and qualified for hedge
accounting.
Details of recorded gains (losses) for the year, in marking-to-market all derivative financial instruments and embedded derivatives that
are outstanding at year-end, are noted below. For sugar futures contracts (derivative financial instruments), the amounts noted below are
netted with the variation margins paid or received to/from brokers at the end of the reporting period. The fair values of the interest rate
swaps have been determined by using rates published on financial capital markets.
(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)
As at October 2, 2021 and October 3, 2020, the Company’s financial derivatives carrying values were as follows:
Financial Assets
Financial Liabilities
Current
Non-current
Current
Non-current
October 2, 2021
October 2, 2021
Derivative financial instruments measured
at fair value through profit or loss:
Sugar futures contracts
Foreign exchange forward contracts
Interest rate swap
Derivative financial instruments designated
as effective cash flow hedging instruments:
Natural gas futures contracts
Interest rate swaps
$
—
18
—
5,879
—
5,897
$
120
127
—
5,623
—
5,870
$
142
213
455
—
1,279
2,089
$
—
—
16
—
530
546
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
(In thousands of dollars except as noted and per share amounts)2021 Annual ReportNotes to Consolidated Financial Statements
82
9. FINANCIAL INSTRUMENTS (CONTINUED)
Derivative financial instruments (continued)
For the fiscal years ended
Charged to cost of sales
Unrealized gain (loss)
Charged to finance
income (costs)
Other comprehensive
gain (loss)
October 2,
2021
October 3,
2020
October 2,
2021
October 3,
2020
October 2,
2021
October 3,
2020
$
$
3,431
4,639
—
(801)
2,615
—
$
—
—
(451)
—
—
95
—
—
—
8,070
1,909
(451)
$
—
—
—
—
197
197
$
—
—
—
$
—
—
—
13,077
4,896
17,973
1,886
(5,773)
(3,887)
Derivative financial instruments
measured at fair value through
profit or loss:
Sugar futures contracts
Foreign exchange forward contracts
Interest rate swap
Derivative financial instruments
designated as effective cash flow
hedging instruments:
Natural gas futures contracts
Interest rate swap
The following table summarizes the Company’s hedging components of accumulated other comprehensive income (loss) ("AOCI") as at
October 2, 2021 and October 3, 2020:
October 2, 2021
October 3, 2020
Natural gas
futures
contracts
$
(865)
(289)
(1,154)
13,077
—
(3,357)
8,566
Interest
rate
swap
$
(7,513)
2,548
(4,965)
5,709
(813)
(1,257)
(1,326)
Natural gas
futures
contracts
$
(2,751)
204
(2,547)
1,981
(95)
(493)
(1,154)
Total
$
(8,378)
2,259
(6,119)
18,786
(813)
(4,614)
7,240
Interest
rate
swap
$
(1,740)
1,039
(701)
(5,576)
(197)
1,509
(4,965)
Total
$
(4,491)
1,243
(3,248)
(3,595)
(292)
1,016
(6,119)
Opening AOCI
Income taxes
Opening AOCI – net of income taxes
Change in fair value of derivatives
designated as cash flow hedges
Amounts reclassified to net earnings
Income taxes
Ending AOCI – net of income taxes
For the fiscal year ended October 2, 2021, the derivatives designated as cash flow hedges were considered to be fully effective and no
ineffectiveness has been recognized in net earnings, except for $60.0 million of interest rate swap agreements that became ineffective
following the issuance of senior guaranteed notes and hedging is no longer expected to be effective in the future. This caused $0.8 million
to be derecognized from OCI and the recognition of $0.5 million of expense in finance costs.
Approximately $3.1 million of net gains presented in accumulated other comprehensive income (loss) are expected to be reclassified to
net earnings within the next twelve months.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
83
9. FINANCIAL INSTRUMENTS (CONTINUED)
Derivative financial instruments (continued)
(a) Raw sugar:
The Company’s risk management policy is to manage the forward pricing of purchases of raw sugar in relation to its forward refined
sugar sales to reduce price risk. The Company attempts to meet this objective by entering into futures contracts to reduce its
exposure. Such financial instruments are used to manage the Company’s exposure to variability in fair value attributable to the
committed purchase price of raw sugar. The pricing mechanisms of futures contracts and the respective forecasted raw sugar
purchase transactions are the same.
The Company's raw sugar futures contracts as well as the fair value of these contracts relating to purchases or sales of raw sugar as
at October 2, 2021 and October 3, 2020 are as follows:
October 2, 2021
October 3, 2020
Original
futures
contracts
value
Current
contract
value
Fair
value
gain/(loss)
Original
futures
contracts
value
Current
contract
value
Fair
value
gain/(loss)
(US$)
(US$)
(US$)
(US$)
(US$)
(US$)
39,818
45,366
12,070
274
45,743
55,641
15,045
307
5,925
10,275
2,975
33
33,496
66,611
16,737
2,022
35,997
72,132
16,611
2,013
2,501
5,521
(126)
(9)
97,528
116,736
19,208
118,866
126,753
7,887
(54,855)
(58,078)
(34,004)
(45,369)
(312)
(79)
(350)
(89)
(3,223)
(11,365)
(38)
(10)
(31,580)
(69,148)
(20,594)
—
(35,573)
(74,749)
(20,315)
—
(89,250)
(103,886)
(14,636)
(121,322)
(130,637)
Purchases
0 - 6 months
6 - 12 months
12 - 24 months
Over 24 months
Sales
0 - 6 months
6 -12 months
12 - 24 months
Over 24 months
Net position
8,278
12,850
4,572
(2,456)
(3,884)
Foreign exchange rate at the end
of the period
Net value (CA$)
Margin call (receipt) payment
at year-end
Net asset (liability) (CA$)
1.2635
5,776
(5,798)
(22)
(3,993)
(5,601)
279
—
(9,315)
(1,428)
1.3304
(1,900)
2,003
103
(In thousands of dollars except as noted and per share amounts)2021 Annual ReportNotes to Consolidated Financial Statements
84
9. FINANCIAL INSTRUMENTS (CONTINUED)
Derivative financial instruments (continued)
(a) Raw sugar (continued):
All sugar futures contracts are traded through a large exchange clearing house on the New York Intercontinental Exchange.
Regulation of the U.S. futures industry is primarily self-regulation, with the role of the Federal Commodity Futures Trading Commission
being principally an oversight role to determine that self-regulation is continuous and effective.
The exchange clearing house used is one of the world’s largest capitalized financial institutions with excellent long-term credit
ratings. Daily cash settlements are mandatory (margin calls) for resulting gains and/or losses from futures trading for each
customer’s account. Due to the above, the Company does not anticipate a credit risk from the raw sugar futures derivative instruments.
(b) Natural gas:
The Company uses natural gas contracts to help manage its costs of natural gas. The Company monitors its positions and the credit
ratings of its counterparties and does not anticipate losses due to counterparty’s non-performance. The Company's natural gas
contracts as well as the fair value of these contracts relating to purchases of natural gas are as follows:
October 2, 2021
October 3, 2020
Original
futures
contracts
value
Current
contract
value
Fair
value
gain/(loss)
Original
futures
contracts
value
Current
contract
value
Fair
value
gain/(loss)
(US$)
(US$)
(US$)
(US$)
(US$)
(US$)
Purchases
Less than 1 year
1 to 2 years
2 to 3 years
3 years and over
Foreign exchange rate at the end
of the period
Net asset (liability) (CA$)
4,475
5,200
4,770
7,776
22,221
9,128
7,371
5,761
9,064
31,324
4,653
2,171
991
1,288
9,103
1.2635
11,502
5,106
6,413
6,384
12,546
30,449
5,171
6,144
5,960
11,990
29,265
65
(269)
(424)
(556)
(1,184)
1.3304
(1,575)
The forecasted purchases of natural gas, the hedged items, are used for calculating the hedge ineffectiveness. No ineffectiveness
was recognized in net earnings as the change in value of the hedging instrument for calculating ineffectiveness was the same or
smaller as the change in value of the hedged items used for calculating the ineffectiveness.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
85
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, Euros or Australian dollars 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 and Australian dollar currencies. 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)2021 Annual ReportNotes to Consolidated Financial Statements
86
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
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
Original
contract
value
(US$/EUR/AUD$)
64,080
10,074
1,345
75,499
(106,467)
(8,033)
(719)
(115,219)
(39,720)
Original
contract
value
(CA$)
81,497
12,811
1,706
96,014
(134,916)
(10,323)
(923)
(146,162)
(50,148)
Current
contract
value
(CA$)
80,974
12,770
1,713
95,457
(134,569)
(10,177)
(916)
(145,662)
(50,205)
357
357
560
560
523
523
October 2, 2021
Fair
value
gain/(loss)
(CA$)
(523)
(41)
7
(557)
347
146
7
500
(57)
(37)
(37)
1,300
1,656
1,643
(13)
(26,380)
(547)
—
(26,927)
(25,627)
(1,188)
(1,188)
(5,241)
(5,241)
(33,177)
(701)
—
(33,878)
(32,222)
(1,772)
(1,772)
(4,987)
(4,987)
(33,351)
(693)
—
(34,044)
(32,401)
(1,742)
(1,742)
(4,811)
(4,811)
(174)
8
—
(166)
(179)
30
30
176
176
(67)
Total Foreign Exchange
(71,419)
(88,569)
(88,636)
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
9. FINANCIAL INSTRUMENTS (CONTINUED)
Derivative financial instruments (continued)
(c) Foreign exchange contracts (continued):
87
Original
contract
value
(US$/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)2021 Annual ReportNotes to Consolidated Financial Statements
88
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
Total value
Fiscal 2017
Fiscal 2017
Fiscal 2017
Fiscal 2019
Fiscal 2019
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%
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
80,000
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 2, 2021, the fair value of the swap agreements amounted to a
liability of $2.3 million (October 3, 2020 - liability of $6.7 million).
Risks
The Company, through its financial assets and liabilities, is exposed to various risks. The following analysis provides a measurement of
risks at year-end.
(a) Credit risk:
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its
contractual obligation. The Company believes it has limited credit risk other than those explained in Note 7, Trade and other
receivables and Note 9, Financial instruments.
(b) Currency risk:
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in the
foreign exchange rate. The Company’s significant cash flow exposure to foreign currency is due mainly to the following:
•
•
•
•
•
•
sales in U.S. dollars for both the sugar and maple products segments;
purchases of natural gas;
sales of by-products;
Taber refined sugar and by-products sales;
ocean freight; and
purchases of property, plant and equipment for both the sugar and maple products segments.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
89
9. FINANCIAL INSTRUMENTS (CONTINUED)
Risks (continued)
(b) Currency risk (continued):
The Company mitigates its exposure to foreign currency by entering into forward exchange contracts (see Note 9, Financial
instruments; Derivative financial instruments, (c) Foreign exchange contracts).
The Company had the following significant foreign currency exposures at year-end:
Financial instruments measured at amortized cost:
Cash
Trade and other receivables, including initial margin deposits
Trade and other payables
Financial instruments at fair value through profit or loss:
Raw sugar futures sales contracts
Raw sugar futures purchases contracts
Natural gas contracts
Fair value loss or (gain) on futures contracts
Total exposure from above
Forward exchange contracts
Gross exposure
October 2,
2021
(US$)
October 3,
2020
(US$)
6,107
29,430
(2,883)
32,654
89,250
(97,528)
(22,221)
(4,572)
(35,071)
(2,417)
(65,346)
(67,763)
3,126
22,400
(2,703)
22,823
121,322
(118,866)
(30,449)
1,428
(26,565)
(3,742)
(101,532)
(105,274)
As at October 2, 2021, the U.S./Can. exchange rate was $1.2635 (October 3, 2020 - $1.3304).
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 $2.5 million, (October 3,
2020 – increase in net earnings of $3.9 million) while a 5-cent decrease would have an equal but opposite effect on net earnings.
(In thousands of dollars except as noted and per share amounts)2021 Annual ReportNotes to Consolidated Financial Statements
90
9. FINANCIAL INSTRUMENTS (CONTINUED)
Risks (continued)
(b) Currency risk (continued):
Management believes that the impact on the gross exposure is not representative as it needs to be adjusted for the following
transactions, which are not recorded on the consolidated statements of financial position as at year-end but were committed during
the fiscal year, and will be accounted for as the physical transactions occur:
Gross exposure as per above
Sugar purchases priced not received
Committed future sales in U.S. dollars
Ocean freight
Other
Net exposure
October 2,
2021
October 3,
2020
(US$)
(67,763)
(114,172)
167,190
(1,770)
(1,716)
(18,231)
(US$)
(105,274)
(112,742)
185,095
554
(1,515)
(33,882)
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 $0.7 million in 2021 (October 3, 2020 - increase in net earnings of $1.3 million) while a decrease would have an equal but
opposite effect on net earnings.
Sugar futures sales contracts represent, in large part, contracts entered into when sugar is priced to a customer. As both the raw
sugar component of futures sales contracts and the sugar purchases priced not received are in U.S. dollars, there is no need to hedge
the currency of the raw sugar component, hence the adjustment for sugar purchases priced not received. It also includes the
Taber sales of refined sugar in U.S. dollars. As all beet sugar is paid in Canadian dollars, Taber sales contracts in U.S. dollars need to
be financially hedged for currency exposure.
Included in other, is the U.S. dollar exposure stemming from future purchases entering in the production of Blending products. As
this exposure is hedged, an offsetting amount is included in the forward exchange contracts.
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 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 2, 2021, the Company has a short-term cash borrowing of $Nil (October 3, 2020 - $29.0 million) and a long-term cash
borrowing of $198.8 million (October 3, 2020 - $165.0 million). The Company has $98.8 million in senior guaranteed notes bearing
fixed interest rate and therefore may be exposed to fair value variance. Remaining borrowing is normally entered into a 30 - or 90-day
bankers’ acceptance for an amount varying between $100.0 million to $160.0 million of the borrowings and will borrow either under
prime rate loans or shorter term bankers’ acceptances.
(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)
(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,
to the exception of the senior guaranteed notes that bear fixed interest rate.
For the fiscal year ended October 2, 2021, 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 $0.2 million lower (October 3, 2020 - $0.4 million lower net
earnings) while a decrease would have an equal but opposite effect on net earnings.
(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:
October 2, 2021
Carrying Contractual
cash flows
amount
2 to 12
months
12 to 24
months
$
$
100,000
100,000
$
—
119,940
119,940
119,940
98,785
100,000
—
318,725
319,940
119,940
$
—
—
—
—
After 24
months
$
100,000
—
100,000
200,000
22
67
471
16,233
(88,569)
2,313
(2,607)
(91,139)
764
18,567
1,787
737
273
783
812
(11,502)
28,076
1,809
6,615
5,654
1,896
(9,133)
(35,332)
(85,432)
309,592
284,608
54,508
6,570
2,152
29,813
29,813
15,852
2,567
20,287
220,287
Non-derivative financial liabilities:
Revolving credit facility
Trade and other payables
Senior guaranteed notes
Derivative financial instruments
measured at fair value through
profit or loss:
Sugar futures contracts (1)
Forward exchange contracts (net) (1)
Interest on swap agreements
Derivative financial instruments
designated as effective cash flow
hedging instruments:
Natural gas contracts (1)
Interest on swap agreements
(1) Based on notional amounts as presented above.
(In thousands of dollars except as noted and per share amounts)2021 Annual ReportNotes to Consolidated Financial Statements
92
9. FINANCIAL INSTRUMENTS (CONTINUED)
Risks (continued)
(d) Liquidity risk (continued):
Non-derivative financial liabilities:
Bank overdraft
Revolving credit facility
Trade and other payables
Derivative financial instruments
measured at fair value through
profit or loss:
Carrying
amount
Contractual
cash flows
$
$
2,797
194,000
131,089
327,886
2,797
194,000
131,089
327,886
0 to 12
months
$
2,797
29,000
131,089
162,886
October 3, 2020
12 to 24
months
After 24
months
$
—
—
—
—
$
—
165,000
—
165,000
(2,677)
(4,539)
Sugar futures contracts (1)
(103)
5,167
2,916
4,928
Forward exchange contracts (net) (1)
(2,584)
(160,446)
(137,677)
(18,230)
Derivative financial instruments
designated as effective cash flow
hedging instruments:
Natural gas contracts (1)
Interest on swap agreements
(1) Based on notional amounts as presented above.
1,575
6,729
5,617
40,509
11,583
6,794
2,655
(103,187)
(125,312)
333,503
224,699
37,574
8,532
2,660
(2,110)
(2,110)
25,183
6,268
24,235
189,235
The convertible unsecured subordinated debentures of $147.7 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 $100.0 million to $160.0 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 2, 2021, the Company had an unused available line of credit of $165.0 million (October 3, 2020 - $71.0 million), a cash
balance of $15.6 million (October 3, 2020 - $2.0 million) and an overdraft balance of $Nil (October 3, 2020 - $2.8 million).
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
93
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 15,000 metric tonnes of sugar derivative contracts.
(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.
As at October 2, 2021, the Company had the following commodity contracts:
Sugar futures contracts
Natural gas contracts
Current
average
value
Current
contract
value
Volume
Current
average
value
Current
contract
value
Contracts
(M.T.)
(US$)
(US$)
(10,000 MM BTU)
(US$)
(US$)
Purchases
Sales
Beet pre-hedge
276,927
(226,480)
(15,749)
34,698
421.54
429.97
413.20
n/a
Foreign exchange rate at the end
of the period
Net value CA$
116,736
(97,379)
(6,507)
12,850
1.2635
16,236
933
33.57
31,324
—
—
—
—
—
—
933
33.57
31,324
1.2635
39,578
(In thousands of dollars except as noted and per share amounts)2021 Annual ReportNotes to Consolidated Financial Statements
94
9. FINANCIAL INSTRUMENTS (CONTINUED)
Risks (continued)
(e) Commodity price risk (continued):
(ii) Natural gas (continued):
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$)
(US$)
287.34
285.84
126,753
(130,637)
1,155
25.34
29,264
—
—
—
n/a
(3,884)
1,155
25.34
29,264
Volume
(M.T.)
441,122
(457,024)
(15,902)
1.3304
(5,167)
1.3304
38,933
Purchases
Sales
Foreign exchange rate at the end
of the period
Net value CA$
If, on October 2, 2021, 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 an increase of approximately
$3.6 million (calculated only on the point-in-time exposure on October 2, 2021) (October 3, 2020 - decrease in net earnings of
$1.7 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 a decrease of
approximately $1.4 million (October 3, 2020 - increase in net earnings of $0.7 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. For the beet pre-hedge, if, on October 2, 2021, the raw sugar value would have
increased by US$0.05 per pound (being approximately US$110.00 per metric tonne), and all other variables remained constant,
the impact on net earnings would have been a decrease of approximately $1.6 million (calculated only on the point-in-time exposure
on October 2, 2021). 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
$0.6 million. The Company had no beet pre-hedge contracts as at October 3, 2020. If, on October 2, 2021, the natural gas market price
would have increased by US$1.00, and all other variables remained constant, net earnings would have increased by $8.7 million
(October 3, 2020 - increase in net earnings of $11.4 million) as a result of the change in fair value of our natural gas futures. If the
natural gas value would have decreased by US$1.00, and all other variables remained constant, would have an equal but opposite
effect on net earnings.
Management believes that this impact for natural gas is not representative as this variance will mostly offset when the actual natural
gas is purchased and used. At such time, a gain or loss on the liquidation of the natural gas contracts would mostly offset the same
increase or decrease in the actual physical transaction.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
95
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) Borrowing under the senior guaranteed notes: the carrying amount approximates fair value as borrowing was made in the
current year.
(In thousands of dollars except as noted and per share amounts)2021 Annual ReportNotes to Consolidated Financial Statements
96
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
Carrying
values
October 2, 2021
Fair
values
October 3, 2020
Fair
values
Carrying
values
$
$
$
$
Level 1
Level 2
120
145
120
145
103
2,584
103
2,584
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
11,502
11,502
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:
Sugar futures contracts
Foreign exchange forward contracts
Interest rate swap
Derivative financial instruments designated
as effective cash flow hedging instruments:
Level 1
n/a
n/a
15,643
95,546
285
15,643
95,546
285
123,241
123,241
1,974
94,262
2,042
101,052
1,974
94,262
2,042
101,052
Level 1
Level 2
Level 2
142
213
471
142
213
471
—
—
—
Natural gas futures contracts
Interest rate swap
Level 2
Level 2
—
1,809
—
1,809
1,662
6,729
Financial liabilities recorded at amortized cost:
Bank overdraft
Revolving credit facility
Trade and other payables
Income taxes payable
Senior guaranteed notes
Convertible unsecured
subordinated debentures
Total financial liabilities
Level 1
—
—
n/a
n/a
n/a
Level 1
100,000
100,000
119,940
119,940
3,454
98,785
3,454
98,785
2,797
194,000
131,089
—
—
Level 1
147,742
160,224
145,836
156,722
472,556
485,038
482,113
492,999
—
—
—
1,662
6,729
2,797
194,000
131,089
—
—
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
10. PROPERTY, PLANT AND EQUIPMENT
Land Buildings
Machinery
and
equipment
Furniture
and
fixtures
Barrels
Finance
leases
Construction
in
progress
$
$
$
$
$
$
$
Cost or deemed cost
Balance at
September 28, 2019
18,089
75,330
315,199
2,628
6,697
1,328
Additions
Transfers
Transfer to right-of-use-assets
Disposals
Effect of movements in
exchange rate
Balance at
October 3, 2020
Additions
Transfers
Disposals
Effects of movements
in exchange rate
Balance at
October 2, 2021
Accumulated depreciation
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
Depreciation for the year
Disposals
Effect of movements
in exchange rate
Balance at
October 2, 2021
Net carrying amounts
At October 3, 2020
At October 2, 2021
—
—
—
—
—
2,655
2,248
—
—
—
3,481
16,848
—
(224)
142
—
—
(38)
2
1
359
500
—
—
—
18,089
80,233
335,306
2,733
7,556
—
—
—
—
53
4,065
—
—
3,395
10,253
(564)
71
—
—
(2)
(7)
123
466
—
—
18,089
84,351
348,388
2,797
8,145
—
—
—
—
—
—
—
—
—
—
26,148
184,563
—
2,144
—
—
—
12,726
(224)
909
—
456
(38)
3,663
—
896
—
—
—
—
28,292
197,065
1,327
4,559
2,297
13,060
440
902
—
—
(348)
—
—
—
—
—
30,589
209,777
1,767
5,461
18,089
18,089
51,941
53,762
138,241
138,611
1,406
1,030
2,997
2,684
—
—
(1328)
—
—
—
—
—
—
—
—
269
(269)
—
—
—
—
—
—
—
—
—
—
97
Total
$
435,960
27,255
—
(1,328)
(262)
3
16,689
20,618
(19,596)
—
—
—
17,711
461,628
24,610
28,252
(14,784)
—
—
—
(564)
(9)
27,537
489,307
—
—
—
—
—
—
—
—
—
—
215,552
(269)
16,222
(262)
—
231,243
16,699
(348)
—
247,594
17,711
230,385
27,537
241,713
There were no impairment losses during fiscal 2021 and 2020.
Any grants received are offset against property, plant and equipment additions. During the year, an amount of $0.4 million was recorded
(October 3, 2020 - $0.6 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)2021 Annual ReportNotes to Consolidated Financial Statements
98
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
Additions
Effect of movements in exchange rate
Balance at October 2, 2021
Accumulated depreciation:
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
Depreciation for the year
Effect of movements in exchange rate
Balance at October 2, 2021
Net carrying amounts:
At October 3, 2020
At October 2, 2021
Land
$
—
40
—
—
—
40
—
—
40
—
—
—
—
—
—
—
—
40
40
Buildings
Machinery and
equipment
$
—
1,023
7,159
9,383
6
17,571
1,349
6
18,914
—
69
2,712
(3)
2,778
3,435
(2)
6,211
14,793
12,703
$
—
265
3,876
2,435
2
6,578
1,375
2
7,952
—
200
722
—
922
1,247
—
2,169
5,656
5,783
Total
$
—
1,328
11,035
11,818
8
24,189
2,724
8
26,906
—
269
3,434
(3)
3,700
4,682
(2)
8,380
20,489
18,526
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
12.
INTANGIBLE ASSETS
Customer
Software relationships
$
$
Brand
names(1)
$
Other
$
Cost
Balance at September 28, 2019
4,030
34,623
5,887
Additions
Effect of movements in exchange rate
25
—
—
15
—
4
Balance at October 3, 2020
4,055
34,638
5,891
Additions
Effect of movements in exchange rate
358
—
—
(125)
—
(34)
574
—
—
574
—
—
99
Total
$
45,114
25
19
45,158
358
(159)
Balance at October 2, 2021
4,413
34,513
5,857
574
45,357
Accumulated amortization
Balance at September 28, 2019
Amortization for the year
Balance at October 3, 2020
Amortization for the year
Balance at October 2, 2021
Net carrying amounts
At October 3, 2020
At October 2, 2021
(1)
Indefinite life.
13. OTHER ASSETS
2,235
324
2,559
383
2,942
7,212
3,470
10,682
3,419
14,101
—
—
—
—
—
1,496
1,471
23,956
20,412
5,891
5,857
223
28
251
29
280
323
294
9,670
3,822
13,492
3,831
17,323
31,666
28,034
Deferred financing charges represent the fees and costs related to the revolving credit facility agreement (see Note 16, Revolving
credit facility).
These fees are amortized over the life of the revolving credit facility, which matures on June 28, 2024.
(In thousands of dollars except as noted and per share amounts)2021 Annual ReportNotes to Consolidated Financial Statements
100
14. DEFERRED TAX LIABILITIES
The deferred tax liabilities comprise the following temporary differences:
Net assets (liabilities): (1)
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 2,
2021
$
October 3,
2020
$
(35,926)
(4,855)
(7,705)
6,847
4,840
(3,834)
6,918
(2,729)
982
(874)
(464)
(36,529)
(5,335)
(6,987)
15,213
5,310
1,942
6,307
(2,649)
241
(687)
(28)
(36,800)
(23,202)
(1) The Company has offset the comparative period’s deferred tax asset against deferred tax liability as the Company has the legal right to settle the current tax
amount on a net basis and the amounts are levied by the same taxing authorities on the same entity.
As at October 2, 2021, no deferred tax liability was recognized for temporary differences arising from investments in subsidiaries because
the Company controls the decisions affecting the realization of such liabilities and it is probable that the temporary differences will not
reverse in the foreseeable future.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
101
Balance
October 2,
2021
$
(35,926)
(4,855)
(7,705)
6,847
4,840
(3,834)
6,918
(2,729)
982
(874)
(464)
14. DEFERRED TAX LIABILITIES (CONTINUED)
The movement in temporary differences during the current years is as follows:
Balance
October 3,
2020
Recognized
in profit
(loss)
Recognized
in other
comprehensive
income (loss)
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
Right-of-use assets
Intangibles
Employee benefits
Lease obligations
Derivative financial instruments
Losses carried forward
Goodwill
Provisions
Deferred financing charges
Other
$
(36,529)
(5,335)
(6,987)
15,213
5,310
1,942
6,307
(2,649)
241
(687)
(28)
(23,202)
$
603
480
(718)
420
(470)
(1,162)
611
(80)
741
(187)
(436)
(198)
$
—
—
—
(8,786)
—
(4,614)
—
—
—
—
—
(13,400)
(36,800)
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)
(In thousands of dollars except as noted and per share amounts)2021 Annual ReportNotes to Consolidated Financial Statements
102
15. GOODWILL
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 2,
2021
$
October 3,
2020
$
229,952
229,952
53,055
5,857
288,864
53,055
5,891
288,898
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 as at October 2, 2021, 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)
2021
%
9.9
2.0
4.0
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
103
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.
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
2021
%
4.6
(5.4)
The Company performed the annual impairment review for goodwill and indefinite life intangible assets as at October 2, 2021, and the
estimated recoverable amounts using the higher of the value in use and fair value less costs to sell (the “FVLCS”).
The FVLCS is the amount obtainable from the sale of the cash generating unit in an arm’s-length transaction between knowledgeable,
willing parties, less the costs of disposal. The fair value hierarchy used to measure the FVLCS is level 3. Management has estimated this
amount by using the market approach which incorporated comparable and transaction multiples which were applied to adjusted EBITDA
of fiscal 2021 and budgeted EBITDA for fiscal 2022 to derive a range of the FVLCS. The key assumption was the multiple selected based
on comparable companies in the same sector as the Maple CGU. Other assumptions include a size discount, the cost to dispose and
a control premium. The estimated multiple ranged from 6.5x to 14.8x. A decline in the multiple used of 3x would result in the estimated
recoverable amount to be equal to the carrying amount.
The Company determined that the FVLCS was the recoverable amount and no goodwill impairment was identified.
(In thousands of dollars except as noted and per share amounts)2021 Annual ReportNotes to Consolidated Financial Statements
104
16. REVOLVING CREDIT FACILITY
The Company has a total of $265.0 million of available working capital under the revolving credit facility, which matures on June 28, 2024,
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. On November 23, 2021, the revolving credit facility was amended. The available credit was reduced to 200.0 million and
now matures on November 23, 2026.
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 2, 2021, a total of $498.5 million of assets are pledged as security (October 3, 2020 - $482.9
million). The Company must comply with certain financial covenants related to the revolving credit facility on a quarterly basis. The
Company was in compliance with the financial covenants at year end.
The following amounts were outstanding under the revolving credit facility as at:
Current
Non-current
October 2,
2021
$
—
100,000
100,000
October 3,
2020
$
29,000
165,000
194,000
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 2,
2021
October 3,
2020
$
93,424
4,298
12,886
9,332
119,940
$
105,894
2,641
13,236
9,318
131,089
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
$38.6 million as of October 2, 2021 (October 3, 2020 - $61.4 million).
During the year, more than 93% 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
105
October 2,
2021
October 3,
2020
$
937
3,231
(343)
3,825
1,394
2,431
3,825
$
1,697
100
(860)
937
500
437
937
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 for which the Company has been able to identify
the costs.
The estimate of the total liability for future asset retirement obligations is subject to change, based on amendments to laws and regulations
and as new information concerning the Company’s operations becomes available. Future changes, if any, to the estimated total liability
as a result of amended requirements, laws, regulations and operating assumptions would be recognized prospectively as a change in
estimate, when applicable.
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 statements of financial position:
Current
Non-current
The following table summarizes the reconciliation of the lease obligations for the periods ended:
Opening balance
Reclassification from finance lease obligations
Additions as at the date of initial application
Additions
Payment of lease obligations
Interest accretion
Effect of movements in exchange rate
Closing balance
October 2,
2021
$
3,049
15,443
October 2,
2021
$
20,404
—
—
2,724
(5,487)
858
(7)
18,492
October 3,
2020
$
3,981
16,423
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)2021 Annual ReportNotes to Consolidated Financial Statements
106
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 2, 2021
(October 3, 2020 – not significant).
The total cash outflow for leases (including interest) for the period ended October 2, 2021 was $5.5 million (October 3, 2020-$4.2 million),
which was included as part of cash outflows from financing activities.
The lease obligations are payable as follows:
October 2, 2021
October 3, 2020
Future
minimum
lease
payments
$
3,810
9,180
10,556
23,546
Present
value of
minimum
lease
payments
$
3,049
6,852
8,591
18,492
Future
minimum
lease
payments
$
4,405
10,188
11,625
26,218
Interest
$
761
2,328
1,965
5,054
Present
value of
minimum
lease
payments
$
3,566
7,257
9,581
20,404
Interest
$
839
2,931
2,044
5,814
Less than one year
Between one and five years
More than five years
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
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:
107
Fair value of plan assets:
Pension benefit plans
Defined benefit obligation:
Pension benefit plans
Other benefit plans
Funded status:
Pension benefit plans
Other benefit plans
Experience adjustment arising on plan liabilities
Experience adjustment arising on plan assets
October 2,
2021
$
October 3,
2020
$
121,435
103,373
135,729
15,005
150,734
(14,294)
(15,005)
(29,299)
(17,546)
16,766
145,667
16,918
162,585
(42,294)
(16,918)
(59,212)
2,881
(3,026)
The Company has determined that, in accordance with the terms and conditions of the defined benefit pension plans, and in accordance
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 liability is necessary as at October 2, 2021 and October 3, 2020.
The Company measures its accrued benefit obligations and the fair value of plan assets for accounting purposes at year-end. The most
recent actuarial valuation of the pension plans for funding purposes was as of December 31, 2019, the next required valuation will be as
of December 31, 2022.
(In thousands of dollars except as noted and per share amounts)2021 Annual ReportNotes to Consolidated Financial Statements
108
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 2, 2021
October 3, 2020
%
63.3
33.7
3.0
100.0
$
76,868
40,924
3,643
121,435
%
58.5
36.1
5.4
100.0
$
60,473
37,318
5,582
103,373
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 2022 are expected to be approximately $4.2 million.
The pension plan exposes the Company to the following risks:
(i)
Investment risk:
The defined benefit obligation is calculated using a discount rate. If the fund returns are lower than the discount rate, a deficit is
created.
(ii)
Interest rate risk:
Variation in bond rates will affect the value of the defined benefit obligation.
(iii) Inflation risk:
The defined benefit obligation is calculated assuming a certain level of inflation. An actual inflation higher than expected will have
the effect of increasing the value of the defined benefit obligation.
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
109
Total
$
157,133
3,468
—
4,608
1,006
(4,947)
20. EMPLOYEE BENEFITS (CONTINUED)
The movement in the pension and other benefit plans is as follows:
For the fiscal years ended
October 2, 2021
Pension
benefit
plans
$
Other
benefit
plans
$
Total
$
Pension
benefit
plans
$
October 3, 2020
Other
benefit
plans
$
145,667
16,918
162,585
139,952
17,181
3,376
2,970
3,928
972
(4,781)
405
—
448
—
—
3,781
2,970
4,376
972
3,156
—
4,110
1,006
(4,781)
(4,947)
312
—
498
—
—
(929)
(694)
(1,623)
(919)
(645)
(1,564)
—
(262)
(262)
(826)
(1,180)
(2,006)
(15,599)
(1,767)
(17,366)
5,255
635
5,890
125
(43)
82
(1,120)
117
(1,003)
135,729
15,005
150,734
145,667
16,918
162,585
103,373
2,822
16,766
3,592
972
(4,781)
(929)
(380)
121,435
—
—
—
694
—
—
(694)
—
—
103,373
105,323
2,822
3,128
16,766
4,286
972
(4,781)
(1,623)
(380)
(3,026)
3,376
1,006
(4,947)
(919)
(568)
121,435
103,373
—
—
—
645
—
—
(645)
—
—
105,323
3,128
(3,026)
4,021
1,006
(4,947)
(1,564)
(568)
103,373
Movement in the present value of
the defined benefit obligation:
Defined benefit obligation,
beginning of the year
Current service cost
Past services cost
Interest cost
Employee contributions
Benefit payments from plan
Benefit payments
from employer
Actuarial gains arising from changes
in demographic assumptions
Actuarial (gains) losses arising from
changes in financial assumptions
Actuarial (gains) losses arising
from member experience
Defined benefit obligation,
end of year
Movement in the fair value
of plan assets:
Fair value of plan assets,
beginning of the year
Interest income
Return on plan assets
(excluding interest income)
Employer contributions
Employee contributions
Benefit payments from plan
Benefit payments from employer
Plan expenses
Fair value of plan assets,
end of year
(In thousands of dollars except as noted and per share amounts)2021 Annual ReportNotes to Consolidated Financial Statements
110
20. EMPLOYEE BENEFITS (CONTINUED)
The net defined benefit obligation can be allocated to the plans’ participants as follows:
October 2, 2021
October 3, 2020
Pension
benefit plans
Other
benefit plans
Pension
benefit plans
Other
benefit plans
Active plan participants
Retired plan members
Deferred plan participants
%
49.2
47.0
3.8
100.0
%
39.0
61.0
—
100.0
%
49.5
46.4
4.1
100.0
The Company’s defined benefit pension expense was as follows:
For the fiscal years ended
October 2, 2021
October 3, 2020
Pension costs recognized in
net earnings (loss):
Current service cost
Past service cost
Expenses related to the
pension benefit plans
Net interest cost
Re-measurements of other
long-term benefits
Pension expense
Recognized in:
Cost of sales
Administration and
selling expenses
Pension
benefit
plans
$
Other
benefit
plans
$
3,376
2,970
380
1,106
6
7,838
7,411
427
7,838
405
—
—
448
(99)
754
446
308
754
Pension
benefit
plans
$
Other
benefit
plans
$
3,156
—
568
982
9
4,715
312
—
—
498
51
861
Total
$
3,781
2,970
380
1,554
(93)
8,592
7,857
4,218
580
4,798
735
8,592
497
4,715
281
861
778
5,576
%
41.6
58.4
—
100.0
Total
$
3,468
—
568
1,480
60
5,576
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
111
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 2, 2021
October 3, 2020
Pension
benefit
plans
$
Other
benefit
plans
$
Total
$
Cumulative amount in comprehensive
income (loss) at the beginning of the year
24,485
(7,520)
16,965
Recognized during the year
(32,246)
(1,973)
(34,219)
Pension
benefit
plans
$
18,159
6,326
Other
benefit
plans
$
(7,041)
(479)
Total
$
11,118
5,847
Cumulative amount in comprehensive
income (loss) at the end of the year
Recognized during the year,
net of tax
(7,761)
(9,493)
(17,254)
24,485
(7,520)
16,965
(23,967)
(1,466)
(25,433)
4,701
(356)
4,345
Principal actuarial assumptions used were as follows:
For the fiscal years ended
October 2, 2021
October 3, 2020
Pension
benefit
plans
%
3.50
3.00
2.75
3.00
Other
benefit
plans
%
3.50
3.00
2.75
3.50
Pension
benefit
plans
%
2.75
3.00
3.00
2.50
Other
benefit
plans
%
2.75
3.00
2.75
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)2021 Annual ReportNotes to Consolidated Financial Statements
112
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 2,
2021
October 3,
2020
22.1
24.8
23.6
26.2
22.1
24.7
23.5
26.1
The assumed health care cost trend rate as at October 2, 2021 was 5.65% (October 3, 2020 - 5.73%), decreasing uniformly to 4.00% in
2040 (October 3, 2020 - 4.00% in 2040) and remaining at that level thereafter.
The following table outlines the key assumptions for the fiscal year ended October 2, 2021 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 2, 2021
Pension
benefit
plans
$
(16,888)
21,525
1,659
(1,498)
373
Other
benefit
plans
$
(1,905)
2,437
(4)
5
54
Total
$
(18,793)
23,962
1,655
(1,493)
427
Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point
change in assumed health care cost trend would have the following effects:
Effect on the defined benefit obligations
Increase
Decrease
$
2,009
$
(1,612)
As at October 2, 2021, the weighted average duration of the defined benefit obligation amounts to 14.2 years (October 3, 2020 - 15.4 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
113
October 2,
October 3,
2021
$
57,425
97,575
155,000
(3,523)
(6,930)
3,195
2020
$
57,425
97,575
155,000
(4,512)
(6,930)
2,278
Total carrying value - non-current
147,742
145,836
(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. The debentures may be converted at the option of the holder at any time prior to maturity, at a conversion price of $8.26 per
share.
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. After 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 the indebtedness related to the convertible debenture 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 (October 3, 2020 - $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)2021 Annual ReportNotes to Consolidated Financial Statements
114
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 2, 2021 was approximately
$59.7 million (October 3, 2020 - $58.2 million).
(ii) Seventh series:
On March 28, 2018, and on April 3, 2020, the Company issued $85.0 million and $12.8 million for a total of $97.8 million, Seventh series,
4.75% convertible unsecured subordinated debentures (“Seventh series debentures”), maturing on June 30, 2025, with interest
payable semi-annually in arrears on June 30 and December 31 of each year. The debentures may be converted at the option of the
holder at any time prior to maturity at a conversion price of $8.85 per share.
On or after June 30, 2021 and prior to June 30, 2023, the debentures may be redeemed by the Company at a price equal to the
principal amount 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. After June 30, 2023, the debentures are redeemable at
a price equal to the principal amount thereof plus accrued 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 the indebtedness related to the convertible debenture 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 (October 3, 2020 - $0.6 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 2, 2021 was
approximately $100.5 million (October 3, 2020 - $98.6 million).
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
115
22. SENIOR GUARANTEED NOTES
During the year, the Company issued a private placement of $100 million in the form of senior guaranteed notes (“Notes”) under a note
purchase agreement entered into with certain institutional investors. The Company has incurred $1.3 million of financing fees which are
netted against the senior guaranteed notes liability. The Notes are guaranteed and rank pari pasu with the existing revolving credit facility.
The Notes are due on April 30, 2031, bear interest at 3.49%, and interest will be payable semi-annually in arrears in equal installments on
April 30th and October 30th of each year, commencing on October 30th, 2021 and will represent interest accrued from and including the
date of issue of the Notes. The net proceeds from the private placement was used to refinance existing credit facility indebtedness.
The Notes are classified and measured at amortized cost, using the effective interest method. The Company must comply with certain
financial covenants related to these Notes on a quarterly basis. The Company was in compliance with the financial covenants at year end.
23. 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 fiscal 2020, 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. All shares purchased were cancelled.
As of October 2, 2021, a total of 103,686,923 common shares (October 3, 2020 - 103,536,923) were outstanding.
During the year, 150,000 stock options have been exercised for net proceeds of $0.7 million and reversal of previously recognized share-
based compensation recorded in contributed surplus of $0.1 million (note 24)
The Company declared a quarterly dividend of $0.09 per share for fiscal years 2021 and 2020.
The following dividends were declared by the Company:
Dividends
Contributed surplus:
For the fiscal years ended
October 2,
2021
$
37,300
October 3,
2020
$
37,380
The contributed surplus account is used to record amounts arising on the issue of equity-settled share-based payment awards (see Note
24, Share-based compensation).
(In thousands of dollars except as noted and per share amounts)2021 Annual ReportNotes to Consolidated Financial Statements
116
23. SHARE CAPITAL AND OTHER COMPONENTS OF EQUITY (CONTINUED)
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; and meet its operations needs to
manage the business;
To maintain an appropriate debt level so that there is no financial constraint on the use of capital, and;
To have an appropriate line of credit.
The Company typically invests in its operations approximately $25.0 million yearly in capital expenditures. On an exceptional basis, the
Company may invest more than $25.0 million when special capital requirements arise. Management believes that these investments,
combined with approximately $35.0 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 shareholders
will only be approved 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 in addition to $100 million senior guaranteed notes that have been issued
during the year. The Company estimates to use between $100.0 million and $160.0 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 amortization,
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 2.07:1 for fiscal 2021 and 2.09:1
for fiscal 2020.
The Company does not use equity ratios to manage its capital requirements.
24. SHARE-BASED COMPENSATION
(a) Equity-settled share-based compensation:
The Company has reserved and set aside for issuance an aggregate of 6,000,000 common shares (October 3, 2020 – 4,000,000
common shares) at a price equal to the average market price of transactions during the last five trading days prior to the grant date.
Options are exercisable to a maximum of twenty percent of the optioned shares per year, starting after the first anniversary date of
the granting of the options and will expire after a term of ten years. Upon termination, resignation, retirement, death or long-term
disability, all share options granted under the Share Option Plan not vested shall be forfeited.
For the fiscal year ended October 2, 2021, no options were granted.
Total share-based compensation expense is amortized over the service period and included in administration and selling expenses
with an offsetting credit to contributed surplus. An expense of $107,000 was recorded for the fiscal year ended October 2, 2021
(October 3, 2020 - $168,000).
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
24. SHARE-BASED COMPENSATION (CONTINUED)
(a) Equity-settled share-based compensation (continued):
The following table summarizes information about the Share Option Plan as of October 2, 2021:
Exercise
price
per
option
Outstanding
number of
options at
October 3,
2020
Options
granted
during
the
period
$4.28
$4.59
$4.68
$5.58
$5.61
$6.23
$6.51
250,000
830,000
563,500
447,1 75
80,000
1,005,322
360,000
3,535,997
—
—
—
—
—
—
—
—
Options
exercised
during
the
period
(50,000)
(100,000)
—
—
—
—
—
Options Outstanding
number of
forfeited
options at
during
October 2,
the
2021
period
Weighted
average
remaining
life
—
—
—
—
—
200,000
730,000
563,500
447, 1 7 5
80,000
(300,000)
705,322
—
360,000
8.47
3.64
8.17
7.17
0.46
6.17
5.18
n/a
(150,000)
(300,000)
3,085,997
117
Number of
options
exercisable
—
730,0000
112,700
178,870
80,000
423,193
288,000
1,812,763
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
—
830,000
Options
granted
during
the
period
250,000
—
—
563,500
447,1 75
80,000
1,005,322
360,000
—
—
—
—
2,722,497
813,500
$4.28
$4.59
$4.68
$5.58
$5.61
$6.23
$6.51
Options
exercised
during
the
period
Options
forfeited
during
the
period
Outstanding
number of
options at
October 3,
2020
Weighted
average
remaining
life
Number of
options
exercisable
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
250,000
830,000
563,500
447, 1 75
80,000
1,005,322
360,000
3,535,997
9.46
4.64
9.16
8.17
1.46
7.17
6.17
n/a
—
830,000
—
89,435
80,000
402,129
216,000
1,617,564
Options outstanding held by key management personnel amounted to 2,765,997 options as at October 2, 2021 and 2,915,997 options
as at October 3, 2020 (see Note 29, Key management personnel).
(In thousands of dollars except as noted and per share amounts)2021 Annual ReportNotes to Consolidated Financial Statements
118
24. SHARE-BASED COMPENSATION (CONTINUED)
(b) Cash-settled share-based compensation-performance share units ("PSU"):
Fiscal 2021 grant:
On December 7, 2020, a total of 491,412 PSUs were granted to certain executives and other members of the management team
at a price of $5.59. In addition, an aggregate of 23,810 PSUs at a weighted-average share price of $5.66 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 2, 2021, an aggregate of 515,222 PSUs was outstanding. These PSUs will vest at the end of the
2021-2023 performance cycle based on the achievement of total shareholder returns set by the Board of Directors of the
Company. Following the end of a performance cycle, the Board of Directors of the Company will determine, and to the extent
only that the vesting conditions include financial conditions, concurrently with the release of the Company’s financial and/or
operational results for the fiscal year ended at the end of the performance cycle, whether the vesting conditions for the PSUs
granted to a participant relating to such performance cycle have been achieved. Depending on the achievement of the vesting
conditions, between 0% and 200% of the PSUs will become vested.
The Board of Directors of the Company has the discretion to determine that all or a portion of the PSUs granted to a participant
for which the vesting conditions have not been achieved shall vest to such participant.
The value to be paid-out to each participant will be equal to the result of: the number of PSUs granted to the participant which
have vested, multiplied by the volume weighted average closing price of the Common Shares on the Toronto Stock Exchange
(the “TSX”) for the five trading days immediately preceding the day on which the Company shall pay the value to the participant
under the PSU plan, and such date will in no event occur after December 31 of the third calendar year following the calendar
year in which the PSUs are granted.
The fair values were established using the Monte Carlo model. The fair value as at grant date was $664,000 and $269,000 as
at October 2, 2021. An expense of $55,000 was recorded for the period ending October 2, 2021. The liabilities arising from the
PSUs as at October 2, 2021 were $55,000.
Fiscal 2020 grant:
On December 2, 2019, a total of 324,932 PSUs were granted to certain executives and other members of the management
team. In addition, an aggregate of 41,581 PSUs at a weighted-average share price of $5.21 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 2, 2021, an aggregate of 366,513 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 Board of Directors of the Company
The fair values were established using the Monte Carlo model. The fair value as at grant date was $64,000 and $13,000 as at
October 2, 2021(October 3, 2020 - $89,000). A gain of $12,000 was recorded for the period ending October 2, 2021 (October 3,
2020 – expense of $19,000) in administration and selling expenses. The liabilities arising from the PSUs as at October 2, 2021
were $7,000 (October 3, 2020 - $19,000).
Fiscal 2019 grant:
On December 3, 2018, an aggregate of 290,448 PSUs was granted by the Company. In addition, an aggregate of 58,553 PSUs
at a weighted-average share price of $5.38 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 2, 2021, an aggregate of 349,001
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 $308,000 and $nil as at
October 2, 2021 (October 3, 2020 - $43,000)). A gain of $22,000 was recorded for the period ending October 2, 2021 (October 3,
2020 – an expense of $15,000) in administration and selling expenses. The liabilities arising from the PSUs as at October 2, 2021
were $nil (October 3, 2020 – $22,000)
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
119
25. COMMITMENTS
As at October 2, 2021, the Company had commitments to purchase a total of 1,082,000 metric tonnes of raw cane sugar up to fiscal 2024
(October 3, 2020 - 1,496,000 up to fiscal 2024), of which 261,309 metric tonnes had been priced (October 3, 2020 - 383,574), for a total
dollar commitment of $144.3 million (October 3, 2020 - $150.0 million). In addition, the Company has a commitment of approximately
$42.7 million (October 3, 2020 - $22.9 million) for sugar beets to be harvested and processed in fiscal 2022.
TMTC has $23.1 million (October 3, 2020 - $4.1 million) remaining to pay related to an agreement to purchase approximately $32.7 million
(10.7 million pounds) (October 3, 2020 - $12.2 million; 4.0 million pounds) of maple syrup from the PPAQ in fiscal 2022. In order to secure
bulk syrup purchases, the Company issued an insurance bond for an amount of $16.9 million in favor of the PPAQ (October 3, 2020 – letter
of guarantee in the amount of $14.5 million). The insurance bond expires on March 1, 2022.
During the fiscal year ended October 2, 2021, the Company entered into capital commitments to complete its capital projects for a total
value of $17.2 million (October 3, 2020 - $23.6 million) to be incurred in fiscal 2022.
26. 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 2, 2021 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.
27. EARNINGS PER SHARE
Reconciliation between basic and diluted earnings per share is as follows:
Basic earnings per share:
Net earnings
For the fiscal years ended
October 2,
2021
$
October 3,
2020
$
47,527
35,419
Weighted average number of shares outstanding
103,581,358
103,973,735
Basic earnings per share
Diluted earnings per share:
Net earnings
Plus impact of convertible unsecured subordinated debentures and share options
Weighted average number of shares outstanding:
Basic weighted average number of shares outstanding
Plus impact of convertible unsecured subordinated debentures and share options
0.46
0.34
47,527
6,149
53,676
35,419
2,348
37,767
103,581,358
17,977,603
121,558,961
103,973,735
6,952,179
110,925,914
Diluted earnings per share
0.44
0.34
As at October 2, 2021, the share options representing 46,870 common shares, were excluded from the calculation of diluted earnings
per share as they were deemed anti-dilutive. 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.
(In thousands of dollars except as noted and per share amounts)2021 Annual ReportNotes to Consolidated Financial Statements
120
28. SUPPLEMENTARY CASH FLOW INFORMATION
October 2,
2021
$
October 3,
2020
$
Non-cash transactions:
Additions of property, plant and equipment and intangible assets
included in trade and other payables
Increase in asset retirement obligation provision included in
property, plant and equipment
Additions to right-of-use assets
1,638
3,231
2,724
1,239
100
11,818
September 28,
2019
$
294
70
—
29. 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:
Salaries and short-term benefits
Attendance fees for members of the Board of Directors
Post-employment benefits
Share-based compensation (note 24)
For the fiscal years ended
October 2,
2021
October 3,
2020
$
3,238
967
143
128
4,476
$
3,989
962
164
194
5,309
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
30. 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 24)
121
For the fiscal years ended
October 2,
2021
October 3,
2020
$
101,740
8,592
5,870
128
116,330
$
98,887
5,576
5,615
194
110,272
The personnel expenses were charged to the consolidated statements of earnings 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 2,
2021
October 3,
2020
$
95,236
19,058
1,649
115,943
387
116,330
$
89,046
19,445
1,494
109,985
287
110,272
31. 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.
(In thousands of dollars except as noted and per share amounts)2021 Annual ReportNotes to Consolidated Financial Statements
122
32. 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.
For the fiscal year ended October 2, 2021
Revenues
Cost of sales
Gross margin
Depreciation and amortization
Results from operating activities
Sugar
$
668,118
547,089
121,029
18,180
78,905
Maple
products
$
225,813
207,098
18,715
7,031
7,231
Additions to property, plant and equipment
and intangible assets, net of disposals
Increase in asset retirement obligation provision
included in property, plant and quipment
Additions to right-of-use assets
23,574
1,222
3,231
1,863
—
861
Corporate and
eliminations
$
—
—
—
—
(1,639)
—
—
—
Total
$
893,931
754,187
139,744
25,211
84,497
24,796
3,231
2,724
Total assets
Total liabilities
Sugar
$
804,366
(923,697)
For the fiscal year ended October 2, 2021
Maple
products
$
240,975
(139,184)
Corporate and
eliminations
$
(165,411)
501,909
Total
$
879,930
(560,972)
(In thousands of dollars except as noted and per share amounts)Rogers Sugar Inc.Notes to Consolidated Financial Statements
123
32. 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
Increase in asset retirement obligation provision
included in property, plant and equipment
Additions to right-of-use assets
Total assets
Total liabilities
Sugar
$
631,263
526,175
105,088
16,890
62,382
20,611
100
14,550
Sugar
$
776,105
(946,944)
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
27,180
100
22,853
For the fiscal year ended October 3, 2020
Maple
products
$
246,451
(261,439)
Corporate and
eliminations
$
(166,497)
622,515
Total
$
856,059
(585,868)
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 2,
2021
October 3,
2020
$
666,536
158,248
31,696
37,451
893,931
$
637,781
142,888
44,368
35,764
860,801
(In thousands of dollars except as noted and per share amounts)2021 Annual ReportNotes to Consolidated Financial Statements
124
Rogers Sugar Inc.
CORPORATE INFORMATION
DIRECTORS
M. Dallas H. Ross, (1) (3)
Chairman and Partner
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) (3)
Senior Advisor
Lazard Group
Stephanie Wilkes, (3)
Director
(1) Nominees to Board of Directors of Lantic Inc.
(2) Audit Committee Members
(3) Environmental, Social and Governance Committee
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 9, 2022
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
MBC Capital Markets Advisors
Printed in Canada
Operating Companies
CORPORATE INFORMATION — MANAGEMENT
DIRECTORS
M. Dallas H. Ross, (1)
Chairman & CEO
Kinetic Capital Limited Partnership
AUDITORS
KPMG LLP
Montreal, Quebec
MANAGEMENT OFFICE
4026 Notre-Dame Street East
Montreal, Quebec
H1W 2K3
Tel: 514 527-8686
SUGAR FACILITIES
123 Rogers Street,
Vancouver, British Columbia
V6B 3N2
Tel: 604 253-1131
5405 – 64th Street
Taber, Alberta
T1G 2C4
Tel: 403 223-3535
230 Midwest Road
Scarborough, Ontario
M1P 3A9
Tel: 416 757-8787
198 New Toronto Street
Toronto, Ontario
M8V 2E8
Tel: 416 252-9435
4026 Notre-Dame Street East
Montreal, Quebec
H1W 2K3
Tel: 514 527-8686
Gary Collins, (2)
Senior Advisor
Lazard Group
Michael Heskin, (2)
Vice President Finance and CFO
Belkorp Industries Inc.
Donald G. Jewell,
Managing Partner
RIO Industrial
Daniel Lafrance, (1) (2)
Director
William S. Maslechko,
Partner
Burnet, Duckworth & Palmer LLP
Michael Walton,
President and Chief Executive Officer
Lantic Inc.
(1) Rogers Sugar Inc. Nominees
(2) Audit Committee Members
OFFICERS
Michael Walton,
President and Chief Executive Officer
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
www.lanticrogers.com
www.themapletreat.com