Rogers Sugar
Annual Report 2022

Plain-text annual report

R o g e r s S u g a r I n c . 2 0 2 2 A n n u a l R e p o r t m o c . t a e r t e l p a m e h t . w w w m o c . s r e g o r c i t n a l . w w w 2022 ANNUAL REPORT ESSENTIAL LINK IN THE FOOD SUPPLY CHAIN 85% OF OUR SUPPLY DELIVERY GOES TO THE INDUSTRIAL FOOD PROCESSING SUPPLY CHAIN. AS SUCH, SUGAR AND MAPLE SYRUP ARE KEY INGREDIENTS IN LARGE-SCALE RECIPES. SIMPLY PUT, WE’RE THE SUPPLIER OF CHOICE FOR MULTIPLE SECTORS WITHIN THE FOOD AND BEVERAGE INDUSTRY. ROGERS holds all of the common shares of Lantic Inc., which operates cane sugar refineries in Montreal, Québec and Vancouver, British Columbia, as well as the only Canadian sugar beet processing facility in Taber, Alberta. Lantic / Rogers’ products include granulated (regular and organic), brown, icing, liquid, cubed sugars and specialty syrups, as well as stevia, agave, organic coconut sugar, Plantation Raw™ sugar, maple sugar and flakes and other dry blends. LANTIC also owns all of the common shares of The Maple Treat Corporation (“TMTC”). TMTC operates plants in Granby, Dégelis and in St-Honoré-de-Shenley, Québec and in Websterville, Vermont. TMTC’s products include maple syrup and derived maple syrup products and are sold mainly under retail private labels brands and various house brands, such as TMTC, Uncle Luke’s, Great Northern, Decacer and Highland SugarWorks. 100178 ESSENTIAL LINK Sugar vs. Maple Syrup Products Rogers is an essential link in the food supply chain. We are the leading refiner, processor, distributor and marketer of sugar products in Canada with the sale of 794,600 metric tonnes of sugar in fiscal 2022. Sugar amounted to 79% of total sales in 2022 compared to 21% for maple products. We supply diverse markets in the industrial processing food industry including bakeries, beekeeping farms, chocolate manufacturers, confectionaries, pharmaceutical companies, as well as makers of soft drinks and spirits. The industrial sector accounted for the bulk of sugar sales volume at 55% in 2022, while Canada represented the largest market at 78% of total sales. As a result, Rogers’ all-natural sugar products are not only found on kitchen tables, but they’re also key ingredients in the processing lines of top food manufacturers. 21% Maple Syrup Products Sugar Revenues by Segment 9% Export 24% Liquid 12% Consumer 01 79% Sugar 55% Industrial Maple Revenues by Geographic Distribution 14% Other 16% Europe 24% Canada 46% U.S. 02 ROGERS IN VOLUMES SOLD 794,600 Metric tonnes of sugar sold No. 1 in Canada 800,000 700,000 600,000 500,000 SUGAR VOLUME 741,144 719,875 779,505 794,600 761,055 2018 2019 2020 2021 2022 47,063 In thousand pounds of maple syrup sold No. 1 in the World MAPLE VOLUME 60,000 50,000 45,919 42,377 53,180 52,255 47,063 40,000 30,000 20,000 10,000 0 2018 2019 2020 2021 2022 03 ROGERS BY NUMBERS $1.0B Total revenues 794,600 Metric tonnes of sugar sold $102.1M Adjusted EBITDA1 $24.0M Capital expenditures (net of proceeds on disposal) 5.9% Divided yield (1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures. 04 DALLAS H. ROSS Chairman To my fellow shareholders, Fiscal 2022 was a record year for Rogers Sugar with adjusted EBITDA reaching more than $100 million for the first time in our company’s history. Our strong performance was driven by improved pricing in our Sugar segment and firm global demand for sugar-containing products. Sugar sales volumes also reached record levels as we leveraged our flexible national manufacturing network to meet demand peaks across Canada. The strength in our Sugar segment more than offset the challenges in our Maple segment during fiscal 2022. While the maple industry faced increased competition and significant cost inflation pressure in 2022, we remain committed to this business and expect improved financial results going forward. As the world’s largest bottler of maple syrup, we believe that our Maple segment provides an important sweetener alternative for certain uses and has meaningful long-term value. Our Sugar segment currently makes up almost 90 per cent of our adjusted EBITDA generation and will continue to be our key growth engine going forward. In fiscal 2023, we expect the continued strength in sugar demand and pricing to provide stable results and, as inflationary pressure begins to recede and our increased pricing takes effect, we expect our Maple segment EBITDA to rise. Our essential role in the food supply chain provides an element of stability to our business and during fiscal 2022 we continued to pay a stable quarterly dividend of $0.09 per share, totalling $0.36 per share for the year. Our stable, recurring dividend is a key component of value for shareholders and plays an important role in our capital allocation strategy. Returning value to shareholders is a long-term commitment for Rogers Sugar with fiscal 2022 representing more than 15 years of stable dividends. FISCAL 2022 WAS A RECORD YEAR FOR ROGERS SUGAR WITH ADJUSTED EBITDA REACHING MORE THAN $100 MILLION FOR THE FIRST TIME IN OUR COMPANY’S HISTORY. 05 OUR ESSENTIAL ROLE IN THE FOOD SUPPLY CHAIN PROVIDES AN ELEMENT OF STABILITY TO OUR BUSINESS. In his first year as CEO, Mike Walton has shown great leadership as he made meaningful advancements to our long-term strategy. In fiscal 2022, we announced our intention to proceed with an expansion of our Montreal production and Toronto distribution facilities, allowing us to benefit from increased global and national demand and ensuring we are well positioned for future success. It is important to remember that our year of record results was achieved against the backdrop of the ongoing COVID-19 pandemic, supply-chain constraints and increased inflationary pressure. Despite this challenging environment, our team has remained focused on keeping our people safe, ensuring our operations run smoothly and delivering high-quality products to our customers. I would like to thank our employees for their ongoing commitment to Rogers Sugar, as well as our management team for their excellent leadership. And to our shareholders, thank you, as always for your continued support. On behalf of the Board of Directors, Dallas H. Ross Chairman 06 ESSENTIAL PRESENCE in the Food Supply Chain 1 2 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 7 8 5 6 4 3 9 TMTC 6. Head Office and 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 07 IN FISCAL 2022, OUR SUGAR SALES VOLUME REACHED THE HIGHEST LEVEL DELIVERED IN OUR 135-YEAR HISTORY AT 794,600 METRIC TONNES. MICHAEL WALTON President and CEO Fiscal 2022 was a record-setting year that showcased the strength of our people and operations and validated our long-term strategy. Global demand for sugar- containing products remains strong and is driving robust demand for high-quality sugar. Throughout fiscal 2022, we successfully navigated through several challenges and continued to meet customers’ needs, while positioning Rogers Sugar for future growth and generating record profitability. We play an essential role in the food supply chain, a role that entails getting essential ingredients to our customers every day. The flexibility of our national manufacturing platform was paramount to our success in 2022 and allowed us to respond to several unforeseen events. This flexibility allowed us to ship sugar to high demand areas, fill supply gaps when needed and capture opportunistic sales. Despite supply-chain constraints, isolated weather events, inflationary pressure, and the lingering effects of the COVID-19 pandemic, we maintained steady operations and recorded the highest adjusted EBITDA in our history. I am also particularly proud of our employee safety record which has been steadily improving over the last number of years, leading up to a record low incidence rate across our operations. 08 THE KEY AREA OF GROWTH IN THE SUGAR SEGMENT FOR 2022 CAME FROM OUR INDUSTRIAL CUSTOMERS AS DEMAND FOR HIGH QUALITY, RELIABLE BULK SUGAR, LARGELY FROM EXISTING CUSTOMERS, REMAINED FIRM. Our results in fiscal 2022 reflected the ongoing strong demand for sugar-containing products and our leadership position in the industry. In 2022, we generated record adjusted EBITDA of $102.1 million, record consolidated revenue of $1.0 billion and paid out $37.5 million, or $0.36 per share, in dividends. In fiscal 2022, our sugar sales volume reached the highest level delivered in our 135-year history at 794,600 metric tonnes. This was achieved despite challenges encountered early in the year from floods in the West and lower demand attributable to post-pandemic retail inventory adjustments from our customers. The key area of growth in the sugar segment for 2022 came from our industrial customers as demand for high quality, reliable bulk sugar, largely from existing customers, remained firm. We responded to temporary supply disruptions in the market in each of the last two quarters of the year to support the needs of our customers. Our successful Taber crop also contributed to our strong financial performance. The actions we implemented during the year to help mitigate against potential losses, including the early harvest program, led to producing 120,000 metric tonnes of sugar for the fiscal year. Going forward for our Sugar segment, we expect the strong demand in our domestic market to continue and provide stable financial results. Our plan is to continue to optimize our national network to prioritize service to our domestic customer base. The past year has clearly shown the importance of having an operating structure that adapts to meeting demand where, and as it occurs. Our Maple business delivered lower-than-expected results in 2022 as it faced pressure throughout the year from the competitiveness of the market and market- based increases in costs. Our ability to increase volume and to fully recoup the increases in costs caused by recent market-driven inflationary pressure was limited by the record crop of maple syrup of 2022. Despite the competitive nature of this business and the impact of the broader macro-economic environment, we believe that our Maple business is an important component to our long-term strategy. We expect the Maple segment to gradually recover and to deliver slightly improved financial performance in 2023. 09 WE GENERATED RECORD CONSOLIDATED REVENUE OF $1.0 BILLION AND PAID OUT $37.5 MILLION, OR $0.36 PER SHARE, IN DIVIDENDS. Last August, we announced our intention to expand our Montreal refining facility and our Toronto distribution centre. This project, when complete, will add approximately 100,000 metric tonnes of new capacity through the refinery and align our operations with the growing demand we see in Eastern Canada. It will also significantly reduce the need for transporting bulk sugar from our Western facilities, reducing costs in our business and freeing up capacity available for other opportunities. This project is an exciting opportunity for Rogers Sugar and will support the growth of our customers in the future. In the last quarter of 2022, we advanced our commitment to sustainability through a multi-year supply partnership with Raizen, a source of certified non-genetically modified organism (“non-GMO”) raw sugar for our Eastern Canada operations. This non-GMO raw sugar will be refined in our Montreal facility and offered to our customers as part of our commitment to sustainability. I am very proud of the success we have achieved as I close on my first year as CEO. Our team has worked tirelessly at every disruption and opportunity throughout the year to ensure our customers’ needs are met and our essential products are delivered as needed. We have taken important steps to position Rogers Sugar for continued success as demand for sugar-containing products grows and to create future value for shareholders. We understand and value our essential role in the food supply chain and do not take our responsibility lightly. Our operations will continue to be run with the utmost care, control and flexibility to ensure we provide the high-quality sugar and maple products Rogers Sugar has become known for. Sincerely, Michael Walton President and Chief Executive Officer 10 ESG HIGHLIGHTS W e are pleased to present a snapshot of Rogers’ second Environmental, Social and Governance (ESG) report, which was published in June 2022. As a food manufacturer with nine facilities, we understand the impact our operations and products have on the environment and consumers alike and take our responsibility seriously. Continuous improvement is at the foundation of what we do. This philosophy, coupled with a solid base of key performance indicators, is the basis for a measured path forward. With this in mind, we implemented several improvements that demonstrate our commitment to positive change. We pushed our materiality assessment a step further by surveying the ESG priorities of our various stakeholders. This supplemental analysis validated our own internal assessment conducted last year in several areas such as Diversity and Responsible Sourcing. Based on this information, we decided to strengthen our Sustainable and Ethical Sourcing policies and enhance our corporate governance with the adoption of a Diversity policy and Say on Pay policy. This new report also includes operating metrics for our Maple and Blending facilities, as well as additional indicators to provide the best picture possible of our efforts in sustainability. Most importantly, we started to set targets for a limited number of important metrics. These targets will keep us focused on making meaningful progress. In summary, we made significant headway in our second ESG report and are committed to making ongoing improvements in the coming years. Envi ronme nt 3,719,937 Total energy use (GJ) (1) 163,152 GHG emissions (tCO2e) (1) (1) Data for Sugar production facilities only. All figures based on 2021. 11 To view the complete ESG Report, go to: https://www.lanticrogers.com/media/ financial-reports/2022/06/rog_esg_2022_en.pdf S o c ial Gove rnanc e $234.5K Charitable donations -45% Reduction in lost time recordable incident rate in last 3 years (1) 33% Women on Rogers’ Board 100% Managers’ incentive pay is linked to one or more ESG objectives (1) (1) Data for Sugar production facilities only. All figures based on 2021. 12 TABLE OF CONTENTS OUR BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Net finance costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Sugar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Maple. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 USE OF FINANCIAL DERIVATIVES FOR HEDGING. . . . . . . . . . . . . . . . . 16 Summary of Quarterly Results. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Sugar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Financial condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Natural Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Foreign Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Contractual obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 INFORMATION ON COVID-19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Capital resources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 BUSINESS HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 OUTSTANDING SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 SELECTED FINANCIAL DATA AND HIGHLIGHTS . . . . . . . . . . . . . . . . . . 18 ENVIRONMENT, SOCIAL, AND GOVERNANCE (“ESG”) . . . . . . . . . . . 4 1 Adjusted results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 RISK AND UNCERTAINTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1 SEGMENTED INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 NON-GAAP MEASURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Sugar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 CRITICAL ACCOUNTING ESTIMATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Maple. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 OUTLOOK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 CHANGES IN ACCOUNTING PRINCIPLES AND PRACTICES NOT YET ADOPTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Sugar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Maple products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 DISCLOSURE CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . 53 CONSOLIDATED RESULTS AND SELECTED FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Total revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1 INTERNAL CONTROL OVER FINANCIAL REPORTING . . . . . . . . . . . . . 54 CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1 FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Results from operating activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1 13 MANAGEMENT’S DISCUSSION AND ANALYSIS CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED OCTOBER 1, 2022 AND OCTOBER 2, 2021 2022 Annual ReportManagement’s Discussion & Analysis14 T his Management’s Discussion and Analysis (“MD&A”) of Rogers Sugar Inc.’s (“Rogers”, “RSI” or “our,” “we”, “us”) dated November 30, 2022 should be read in conjunction with the audited consolidated financial statements and related notes for the a custom blending and packaging operation and distribution center in Toronto, Ontario. Maple Treat operates bottling plants in Granby, Dégelis and years ended October 1, 2022 and October 2, 2021. The Company’s St-Honoré-de-Shenley, Québec and in Websterville, Vermont. MD&A and consolidated financial statements are prepared using Maple Treat’s products include maple syrup and derived maple a fiscal year which typically consists of 52 weeks, however, every syrup products supplied under retail private label brands in over fifty five years, a fiscal year consists of 53 weeks. The fiscal years ended countries and are sold under various brand names, such as TMTC, October 1, 2022 and October 2, 2021 consist of 52 weeks. Uncle Luke’s, Great Northern, Decacer and Highland Sugarworks. All financial information contained in this MD&A and audited Our business has two distinct segments - Sugar – which includes consolidated financial statements are prepared in accordance with refined sugar and by-products and Maple – which includes maple International Financial Reporting Standards (“IFRS”). All amounts syrup and maple derived products. are in Canadian dollars unless otherwise noted, and the term “dollar”, as well as the symbol “$”, designate Canadian dollars unless otherwise indicated. SUGAR Management is responsible for preparing the MD&A. Rogers’s FACILITIES audited consolidated financial statements and MD&A have been Lantic is the only sugar producer with operating facilities across approved by its Board of Directors upon the recommendation of its Canada with cane refineries in Montréal and Vancouver and a Audit Committee prior to release. sugar beet factory in Taber, Alberta. Lantic also operates a custom blending and packaging operation and a distribution center in Additional information relating to Rogers, Lantic Inc. (“Lantic”) Toronto, Ontario. The strategic location of these facilities provides (Rogers and Lantic together referred as the “Sugar segment”), operating flexibility and the ability to service all customers across The Maple Treat Corporation (“TMTC”) and Highland Sugarworks the country efficiently and on a timely basis. Inc. (“Highland”) (the latter two companies together referred to as “TMTC” or the “Maple segment”), including the annual information In the fourth quarter, we announced our intention to proceed with an form, quarterly and annual reports, annual environmental, social expansion of our Montréal refining capacity along with an increase and governance report, management proxy circular, short form of our Toronto distribution centre logistics and rail infrastructures. prospectus and various press releases are available on Rogers’s This project will increase the Eastern refined sugar supply by up to website at www.LanticRogers.com or on the Canadian Securities 100,000 metric tonnes annually at an estimated construction cost of Administrators’ System for Electronic Document Analysis and approximately $160 million. We are currently working with different Retrieval (“SEDAR”) website at www.sedar.com. Information stakeholders including customers, suppliers, financial institutions, contained in or otherwise accessible through our website does not rail providers and government authorities to finalize our plan. We are form part of this MD&A and is not incorporated into the MD&A by expecting to deliver this additional capacity to the market within the reference. OUR BUSINESS next two to three years. OUR PRODUCTS All Lantic operations supply high quality white sugar as well as a broad portfolio of specialty products which are differentiated by Rogers has a long history of providing high quality sugar products to colour, granulation, packaging format and raw material source. the Canadian market and has been operating since 1888. Sales are focused in four specific market segments: industrial, Lantic, Rogers wholly owned subsidiary, operates cane sugar consumer, liquid and export products. The domestic market refineries in Montréal, Québec and Vancouver, British Columbia, as represents approximately 90% of our company’s total volume. well as the only Canadian sugar beet processing facility in Taber, Alberta. Lantic’s sugar products are marketed under the “Lantic” In fiscal 2022, Lantic’s domestic refined sugar sales volume grew by trademark in Eastern Canada, and the “Rogers” trademark in 3.7% which is higher than previous years, and slightly higher than Western Canada and include granulated, icing, cube, yellow and the overall growth of the Canadian market. brown sugars, liquid sugars and specialty syrups. We also operate Rogers Sugar Inc.Management’s Discussion & Analysis15 The industrial granulated segment is the largest segment accounting the Growers to secure supply of sugar beets for the upcoming crops. for approximately 55% of all shipments. This segment is comprised We expect to reach an agreement ahead of the 2023 seeding period of a broad range of food processing companies that serve both the in the third quarter of fiscal 2023. Canadian and the American markets. In fiscal 2022, this segment sales volume increased by 5.3% as compared to the previous year. PRICING In the consumer segment, a wide variety of products are offered raw cane facilities is directly linked to the price of the Raw #11 (“Raw under the Lantic and Rogers brand names. This segment has #11”) market traded on the Intercontinental Exchange (“ICE”). All remained stable in fiscal 2022, and is representing approximately sugar transactions are economically hedged, thus eliminating the 12% of all shipments. impact of volatility in world raw sugar prices. This applies to all The price of refined sugar deliveries from the Montréal and Vancouver refined sugar sales made by these plants. The liquid segment is comprised of core users whose process or products require liquid sucrose. Some customers in this segment In fiscal 2022, the price of Raw #11 traded on the ICE fluctuated group can substitute liquid sucrose with high fructose corn syrup between US 17.20 cents and US 20.51 cents per pound and closed (“HFCS”). The purchasing patterns of substitutable users are largely at US 18.42 cents per pound at the end of the fiscal year, which was influenced by the absolute price spread between HFCS and liquid US 1.27 cents lower than the closing value at October 2, 2021. Price sugar. Increasingly, other considerations, such as ingredient labeling variation during the year was less volatile than in fiscal 2021 when may bear some influence on the purchasing decision. The liquid Raw #11prices fluctuated between US 13.55 cents and US 20.37 segment sales increased by 2.0% this year and are representing cents per pound. The average Raw #11 price in fiscal 2022 at US 18.89 approximately 24% of all shipments in fiscal 2022. cents was higher than the fiscal 2021 average of US 16.55 cents. The higher average price of Raw #11 was mainly due to stronger global Lantic’s Taber plant is the only beet sugar factory in Canada and sugar demand. is therefore the only producer of Canadian origin sugar. From this facility, we service a mix of customers across Western Canada. We also sell into other North American markets through various quotas MAPLE assigned through trade agreements. As such, this plant is the sole participant in an annual Canadian-specific quota of refined sugar to FACILITIES the United States (“US”) of 19,900 metric tonnes of Canadian origin TMTC operates three plants in Québec, namely, in Granby, Dégelis sugar. and in St-Honoré-de-Shenley, and one in Websterville, Vermont. By-products relating to beet processing and cane refining activities OUR PRODUCTS are sold in the form of beet pulp, beet pellets, and molasses. Beet TMTC’s products are mainly comprised of the following: bottled pellets are sold domestically and to export customers for livestock maple syrup, bulk maple syrup and maple sugar and flakes. feed. The production of molasses is dependent on the volume of sugar processed through the Taber, Montréal and Vancouver plants. Bottled maple syrup is packaged in a variety of ways and sizes, OUR SUPPLY including bottles, plastic jugs and the traditional cans. Bottled maple syrup is available in all commercial grades and in organic The global supply of raw cane sugar is ample. Over the last several and non-organic varieties. TMTC’s bottled maple syrup is sold years, Lantic has purchased most of its raw cane sugar from Central mainly under retail private label brands and under a variety of house and South America for its Montréal and Vancouver cane refineries. brands, including TMTC, Uncle Luke’s, Great Northern, Decacer and In fiscal 2021, we entered into a two-year extension to the existing Highland Sugarworks. agreement with the Alberta Sugar Beet Growers (“Growers”) for Bulk maple syrup is mainly sold in large containers, drums and totes the supply of sugar beets to the Taber beet plant, for which the to foodservice retailers, food processors as well as other wholesalers. crop harvested in the fall of 2022 is the second year of the agreed contract. Any potential shortfall in beet sugar production related OUR SUPPLY to crop issues is mostly replaced by refined cane sugar from the The production of maple syrup takes place over a period of six to Vancouver refinery, which acts as a swing capacity refinery and from eight weeks during the months of March and April of each year. the Montréal refinery if required. We are currently negotiating with 2022 Annual ReportManagement’s Discussion & Analysis16 The biggest concentration of maple trees is located in the Provinces PRICING of Québec, New Brunswick, Ontario, and the US States of Vermont, Pursuant to a Marketing Agreement entered into annually between Maine and New Hampshire. Canada remains the largest producer of the PPAQ and the Conseil de l’industrie de l’érable (the Maple Industry maple syrup, with over 80% of the world’s production. The Province Council (“MIC”)), authorized buyers must pay a minimum price to of Québec alone represents 70% of the world’s production. The US the PPAQ for any maple syrup purchased from the producers. The is the only other major producing country in the world, representing price is fixed on an annual basis and depends on the grade of the approximately 20% of the global supply. maple syrup. In addition, a premium is added to the minimum price for any organic maple syrup. Pursuant to this agreement, authorized The maple syrup producers in Québec are represented by the buyers must buy maple syrup from the PPAQ. Producteurs et Productrices Acéricoles du Québec (“PPAQ”). The PPAQ generally regulates the buying and selling of bulk maple syrup. The PPAQ represents approximately 13,300 producers and 8,000 USE OF FINANCIAL DERIVATIVES FOR HEDGING individual businesses. SUGAR In Québec, nearly 90% of the total production of maple syrup In order to protect itself against fluctuations in the world raw sugar is sold through the PPAQ to the authorized buyers, leaving only market, we follow a rigorous hedging program for all purchases of approximately 10% of the total production being sold directly by the raw cane sugar and sales of refined sugar. producers to consumers or grocery stores. The Raw #11 market is only traded on the ICE, which trades in US The PPAQ manages a strategic maple syrup reserve in order to dollars. Sugar futures can be traded forward for a period of three mitigate production fluctuations caused by weather conditions and years against four specific terminals per year (March, May, July prevent such fluctuations from causing maple syrup prices to spike and October). The terminal values are used to determine the price or drop significantly. Each year, the PPAQ may organize a sale of a settlement upon the receipt of a raw sugar vessel or the delivery of portion of its accumulated reserve. This allows bottlers to respond to sugar to our customers. The ICE rules are strict and are governed supply shortages in the event of a poor harvest or unplanned growth by the New York Board of Trade. Any amount owed, due to the and demand. movement of the commodity being traded, must be settled in cash The PPAQ is responsible to manage a policy with respect to the following day. production and marketing quotas for production volume allocated For the purchasing of raw sugar, we enter into long-term supply to each maple syrup business in the Province of Québec. The main contracts with reputable raw sugar suppliers (the “Seller”). These objective of the policy is to adjust the supply of maple syrup in long-term agreements will, amongst other things, specify the response to consumer demand, and more specifically, to stabilize yearly volume to be purchased, the delivery period of each vessel, selling prices for producers and, ultimately, the buying price for the terminal against which the sugar will be priced, and the freight consumers, foster investments in the maple industry and maintain rate to be charged for each delivery. The price of raw sugar will be a steady number of maple-producing businesses in operation, determined later by the Seller, based upon the delivery period. The regardless of their size. delivery period will correspond to the terminal against which the Outside of Québec, the maple syrup industry is generally organized sugar will be priced. through producer-based organizations or associations, which Our process of selling refined sugar is also done under the Raw #11 promote maple syrup in general and its industry and serve as the market. When a sales contract is negotiated with a customer, the official voice for maple syrup producers with the public. sales contract will determine the period of the contract, the expected TMTC has relationships with more than 1,400 maple syrup producers, and freight rate to be charged over and above the value of the sugar. mainly in Québec and Vermont. Most of these producers sell 100% The price of the sugar is not yet determined but needs to be fixed by of their production to TMTC. Through our strong relationship with the customer prior to delivery. The customer will make the decision these producers, we have been able to develop a leading position in to fix the price of the sugar against the sugar terminal, as per the certified organic maple syrup. anticipated delivery period. delivery period against specific terminals and the refining margin Rogers Sugar Inc.Management’s Discussion & Analysis17 We purchase sugar beets from the Growers, for our Taber sugar each location to provide guidance on health and safety measures refining facility under a fixed price negotiated from time to time. to adopt during a pandemic. We actively communicate with our employees, to keep them apprised of the current situation. NATURAL GAS The Board of Directors of Lantic approved an energy hedging policy For the fourth quarter and fiscal 2022, we incurred direct costs, to mitigate the overall price risks in the purchase of natural gas. in relation to COVID-19, amounting to $0.1 million and $1.1 million respectively, as compared to $0.5 million and $3.0 million for the We purchase between 3.5 million gigajoules and 4.0 million gigajoules same periods in fiscal 2021. These costs were largely attributable of natural gas per year for use in our refining operations. To protect to health and safety measures implemented across all production against large and unforeseen fluctuations, we hedge forward our facilities. COVID-19 related expenditures decreased in the current estimated usage on a longer-term basis based on prevailing market period as a result of the overall improvement of the pandemic conditions. situation over the last few months. Our gas hedges are unwound in the months that the commodity is The effect of COVID-19 on our business may continue for an used in the operations, at which time any gains or losses incurred extended period of time and the ultimate impact of the pandemic on are then recognized for the determination of gross margins and our business will depend on future developments that are uncertain earnings. FOREIGN EXCHANGE and cannot be predicted including, without limitations, the duration and severity of the pandemic, the duration of government mitigation measures, the effectiveness of the actions taken to contain and treat Raw sugar costs for all sales contracts are denominated in US the virus, and the length of time it takes for normal economic and dollars. We also buy natural gas in US dollars. In addition, sugar operating conditions to resume. export sales and some Canadian sugar sales are denominated in US dollars. In order to protect ourselves against the movement of the Canadian dollar versus the US dollar, we, on a daily basis, reconcile BUSINESS HIGHLIGHTS all of our exposure to the US dollar and we hedge the net position against various forward months, estimated from the date of the • Consolidated adjusted EBITDA for the fourth quarter of 2022 was various transactions. $29.0 million, up $4.2 million from the same quarter last year, driven by higher adjusted EBITDA in the Sugar segment; Certain export sales of maple syrup are denominated in US dollars, in Euros or in Australian dollars. In order to mitigate against the • Consolidated adjusted EBITDA for the 2022 fiscal year was movement of the Canadian dollar versus the US dollar, Euro or $102.1  million, up 12.2% from the same period in 2021, and the Australian dollar, we enter into foreign exchange hedging contracts. highest balance recorded in our history. Current year adjusted These foreign exchange hedging contracts are unwound when the EBITDA increased as a result of higher adjusted EBITDA in the money is received from the customer, at which time any gains or Sugar segment; partly offset by lower adjusted EBITDA in our losses incurred are then recognized for the determination of gross Maple segment; margins and earnings. Foreign exchange gains or losses on any unhedged sales contracts are recorded when realized. • Consolidated revenues for the 2022 fiscal year amounted to $1.0 billion, an increase of $112.2 million from 2021 or 12.6%, largely driven by higher volume and higher selling prices in the Sugar INFORMATION ON COVID-19 We continue to closely monitor the impacts of the COVID-19 on our segment; business. Our business is considered an essential service by the • Sugar sales volume in the fourth quarter of 2022 was stable in government and as such, our plants have continued to operate at comparison to the same quarter last year, totaling 214,700 metric usual capacity throughout the pandemic. Since the beginning of tonnes. the COVID-19 pandemic in 2020, we have established extensive protection measures and protocols to ensure the health and safety • For the 2022 fiscal year, sugar sales volume reached the highest of our employees, suppliers, customers and other business partners. level delivered in our history, at 794,600 metric tonnes, representing In addition to standard operating procedures designed to maintain an increase of almost 2.0% over 2021; safe operations, we have implemented disease prevention plans in 2022 Annual ReportManagement’s Discussion & Analysis 18 • Adjusted EBITDA in the Sugar segment improved by $5.5 million • Free cash flow for the trailing 12 months ended October 1, 2022 in the fourth quarter of fiscal 2022 compared to the same quarter was $46.8 million, an increase of $1.2 million from the same period last year due mainly to higher selling prices; partially offset by last year; higher operating costs, administrative and selling expenses and distribution costs; • In the fourth quarter of fiscal 2022, we distributed $0.09 per share to our shareholders for a total amount of $9.4 million; • Adjusted EBITDA in the Maple segment for the fourth quarter was lower than last year by $1.4 million largely as a result of lower sales • On November 30, 2022, the Board of Directors declared a quarterly volume and higher operating costs driven by inflationary dividend of $0.09 per share, payable on or before February 1, 2023; pressures; and • In the fourth quarter of 2022, we recorded a non-cash impairment • We continue to work on the design and planning stage of our charge of $50.0 million to the goodwill asset associated with planned expansion project announced in August 2022. The current our Maple business segment, reflecting the overall market-based estimated cost of the project is $160 million and would increase deterioration of the conditions of this business segment in 2022; supply by 100,000 metric tonnes in Eastern Canada within the next two to three years. SELECTED FINANCIAL DATA AND HIGHLIGHTS (unaudited) (In thousands of dollars, except volumes and per share information) Sugar (metric tonnes) Maple syrup (‘000 pounds) Total revenues Gross margin Adjustment to cost of sale(1) Adjusted gross margin(1) Results from operating activities Adjusted results from operating activities(1)(2) EBITDA(1) Adjusted EBITDA(1) Net (loss) earnings per share (basic) per share (diluted) Adjusted net earnings(1)(2) Adjusted net earnings per share (basic)(1)(2) Trailing twelve months free cash flow(1) Dividends per share Q4 2022 Q4 2021 YTD 2022 YTD 2021 $ $ $ $ 214,672 214,753 794,600 779,505 9,838 11,678 47,063 52,255 267,406 243,231 1,006,134 893,931 28,472 (10,669) 39,141 (38,345) 22,324 18,283 28,952 (45,502) (0.44) (0.44) 12,161 0.12 39,616 8,596 31,020 26,952 18,356 33,382 24,786 16,140 0.16 0.15 9,620 0.09 46,751 45,505 0.09 0.09 130,805 139,744 (12,677) 143,482 13,313 75,990 89,461 102,138 (16,568) (0.16) (0.16) 18,933 120,811 84,497 65,564 109,708 91,022 47,527 0.46 0.44 40,659 33,866 0.39 46,751 0.36 0.33 45,505 0.36 (1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures. (2) Adjusted results for operating activities, adjuster net earnings and adjusted net earnings per share (basic) exclude the impact of $50.0 million related to goodwill impairment Rogers Sugar Inc.Management’s Discussion & Analysis Revenues ($000s) Sugar Maple Adjusted EBITDA ($000s) Sugar Maple 19 300,000 250,000 200,000 150,000 100,000 50,000 0 30,000 25,000 20,000 15,000 10,000 5,000 0 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Adjusted Net Earnings ($000s) Per share $0.14 $0.12 $0.10 $0.08 $0.06 $0.04 $0.02 $0.00 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Free Cash Flow TTM ($000s) Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 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 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 (loss) 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 derivatives hedging instruments. We consider goodwill impairment as a non-cash non-recurring charge and therefore we exclude this item in our adjusted results in order to avoid distortion in evaluating our financial performance. 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/losses from financial derivative instruments and goodwill impairment. 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. 2022 Annual ReportManagement’s Discussion & Analysis20 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. OUR RESULTS ARE ADJUSTED AS FOLLOWS: Income (loss) (In thousands of dollars) Mark-to-market on: Sugar futures contracts Q4 2022 Maple Products $ — Sugar $ (190) Total $ (190) Foreign exchange forward contracts (5,339) (2,384) (7,723) Total mark-to-market adjustment on derivatives (5,529) (2,384) (7,913) Cumulative timing differences (3,037) 281 (2,756) Total adjustment to costs of sales (8,566) (2,103) (10,669) Income (loss) (In thousands of dollars) Mark-to-market on: Sugar futures contracts YTD 2022 Maple Products $ — Sugar $ 1,325 Total $ 1,325 Foreign exchange forward contracts (5,058) (2,474) (7,532) Total mark-to-market adjustment on derivatives (3,733) (2,474) (6,207) Cumulative timing differences (6,563) 93 (6,470) Sugar $ 2,879 (503) 2,376 7,275 9,651 Sugar $ 3,431 2,904 6,335 14,471 Total adjustment to costs of sales (10,296) (2,381) (12,677) 20,806 Q4 2021 Maple Products $ — (500) (500) (555) (1,055) YTD 2021 Maple Products $ — 1,733 1,733 (3,606) (1,873) Total $ 2,879 (1,003) 1,876 6,720 8,596 Total $ 3,431 4,637 8,068 10,865 18,933 Fluctuations in the mark-to-market adjustment on derivatives are due to the price movements in Raw #11 sugar 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 1, 2022, the total cost of sales adjustment is a loss of $10.7 million and $12.7 million, respectively to be added to the consolidated results. For comparable periods last year, 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. See the “Non-GAAP measures” section for more information on these adjustments. Rogers Sugar Inc.Management’s Discussion & Analysis 21 SEGMENTED INFORMATION Segmented Results (In thousands of dollars) Revenues Gross margin Administration and selling expenses Distribution costs Goodwill impairment Q4 2022 Maple Products $ Sugar $ Total $ 220,142 47,264 267,406 26,758 9,138 4,958 1,714 2,411 310 28,472 11,549 5,268 — 50,000 50,000 Q4 2021 Maple Products $ Total $ 51,769 243,231 3,945 2,084 458 — 39,616 8,675 3,989 — Sugar $ 191,462 35,671 6,591 3,531 — Results from operating activities 12,662 (51,007) (38,345) 25,549 1,403 26,952 Adjustment to cost of sales(2) Adjusted Gross margin(1) Adjusted results from operating activities(1)(3) EBITDA(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 8,566 35,324 21,228 17,609 26,175 2,103 3,817 1,096 674 2,777 10,669 39,141 22,324 18,283 28,952 (9,651) 26,020 15,898 30,286 20,634 1,055 5,000 2,458 3,096 4,152 (8,596) 31,020 18,356 33,382 24,786 11,460 946 12,406 5,394 497 5,891 — 113 — — — 113 100 5 — 38 100 43 (1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures. (2) See “Adjusted results” section. (3) Adjusted results exclude impact of goodwill impairment. Segmented Results (In thousands of dollars) Revenues Gross margin YTD 2022 Maple Products $ Sugar $ Total $ 792,200 213,934 1,006,134 115,872 14,933 130,805 Administration and selling expenses 35,733 10,050 45,783 Distribution costs Goodwill impairment Results from operating activities 19,681 — 2,028 50,000 60,458 (47,145) 21,709 50,000 13,313 12,677 143,482 75,990 89,461 10,296 126,168 70,754 79,838 90,134 2,381 17,314 5,236 9,623 12,004 102,138 Adjustment to cost of sales(2) Adjusted Gross margin(1) Adjusted results from operating activities(1)(3) EBITDA(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 (1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures. (2) See “Adjusted results” section. (3) Adjusted results exclude impact of goodwill impairment. YTD 2021 Maple Products $ Total $ 225,813 893,931 18,715 9,162 2,322 — 139,744 36,955 18,292 — Sugar $ 668,118 121,029 27,793 15,970 — 77,266 7,231 84,497 (20,806) 100,223 56,460 95,446 74,640 1,873 (18,933) 20,588 120,811 9,104 14,509 16,382 65,564 109,708 91,022 22,642 1,364 24,006 23,574 1,222 24,796 100 8,842 — — 100 8,842 3,231 1,863 — 861 3,231 2,724 2022 Annual ReportManagement’s Discussion & Analysis 22 SUGAR REVENUES (In thousands of dollars) Q4 2022 Q4 2021 $ $ ∆ $ YTD 2022 YTD 2021 $ $ ∆ $ Revenues 220,142 191,462 28,680 792,200 668,118 124,082 In the fourth quarter, revenue increased by $28.7 million, compared to the same period last year. The variance was driven mainly by variation in prices for Raw #11 sugar charged to customers, and improved average pricing for refining related activities. Sugar Volume Variance (Metric tonnes) - 1,135 -2,096 Q4 2021 214,753 9,854 -6,704 Q4 2022 214,672 250,000 200,000 150,000 100,000 50,000 0 Sugar Volumes (Metric tonnes) Industrial Consumer Liquid Export Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Overall, sugar volume was stable in the fourth quarter of 2022 compared to the same quarter last year, as strong industrial volumes were offset by lower volumes in our customer, liquid and export categories. The distribution of volume between customer categories and the resulting favourable product mix contributed to the increase in revenue in the current quarter. • Industrial volume increased by 9,854 metric tonnes compared to the same period last year, due partially to an unforeseen peak in demand as a result of temporary tightness in supply in the North American market. • Consumer volume was slightly lower in the fourth quarter due mainly to timing of orders from customers. • Liquid volume decreased by 2,096 metric tonnes compared to the same period last year mainly due to timing of liquid sales. • Export volume decreased by 6,704 metric tonnes compared to the same period last year, as we focused our sales efforts on serving the domestic industrial market, which was experiencing temporary increase in demand. In the 2022 fiscal year, revenue increased by $124.1 million compared to last year. The variance was driven mainly by variation in prices for Raw #11 sugar charged to customers, higher sales volume, improved average pricing for refining related activities, and higher by-product sales revenue. The average prices for Raw #11 sugar increased by US 2.3 cent per pound to US 18.9 cent per pound for the 2022 fiscal year, when compared to the same period last year. Rogers Sugar Inc.Management’s Discussion & Analysis 23 Sugar Volume Variance (Metric tonnes) Sugar Volumes (Metric tonnes) 3,693 10,784 FY 2022 794,600 FY 2021 779,505 22,485 -4,470 10,788 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 Industrial Consumer Liquid Export 2015 2016 2017 2018 2019 2020 2021 2022 (1) During fiscal year 2022, sugar volume totaled 794,600 metric tonnes, an increase of approximately 2.0% or 15,095 metric tonnes compared to the same period last year. • Industrial volume increased by 22,485 metric tonnes compared to last year due mainly to higher demand throughout the year and the impact of increased market demand in the fourth quarter. • Consumer volume remained largely unchanged as delayed orders in the first quarter of the year were recovered in the following three quarters, bringing retail consumer volume back to pre-covid growth levels. • Liquid volume increased by 3,693 metric tonnes compared to last year as a result of higher demand. • Export volume decreased by 10,784 metric tonnes compared to last year, as we focussed our sales effort toward serving the domestic industrial market in the second half of 2022. GROSS MARGIN (In thousands of dollars, except per metric tonne information) Q4 2022 Q4 2021 $ $ ∆ $ YTD 2022 YTD 2021 $ $ ∆ $ Gross margin 26,758 35,671 (8,913) 115,872 121,029 (5,157) Total adjustment to cost of sales(2) 8,566 (9,651) 18,217 10,296 (20,806) 31,102 Adjusted gross margin(1) 35,324 26,020 Adjusted gross margin per metric tonne(1) 164.55 121.16 9,304 43.39 126,168 100,223 25,945 158.78 128.57 30.21 Included in Gross margin: Depreciation of property, plant and equipment and right-of-use assets 4,300 4,118 182 16,835 15,450 1,385 (1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures. (2) See “Adjusted results” section. Gross margin was $26.8 million and $115.9 million for the current quarter and the 2022 fiscal year, and include a loss of $8.6 million and $10.3 million, respectively, for the mark-to-market of derivative financial instruments. For the same periods last year, gross margin was $35.7 million and $121.0 million, respectively, with a mark-to-market gain of $9.7 million and $20.8 million respectively. Adjusted gross margin was $35.3 million and $126.2 million for the current quarter and for the 2022 fiscal year, respectively, as compared to $26.0 million and $100.2 million in the same periods of 2021. 2022 Annual ReportManagement’s Discussion & Analysis 24 Adjusted gross margin increased by $9.3 million in the current quarter compared to the same quarter last year mainly as a result of higher sugar sales margin from improved average pricing on sugar refining related activities. This positive variance was partially offset by higher production costs mainly driven by higher labour related costs and market-based inflationary pressures on other operating costs. In addition, by-product contribution was lower by $0.9 million in comparison to the same period last fiscal year due to timing. On a per unit basis, adjusted gross margin for the fourth quarter was at $164.55 per metric tonne, higher than last year by $43.39 per metric tonne. The favourable variance was mainly due to the increase in overall margin from improved selling prices, partially offset by higher production cost, as compared to last year. Adjusted gross margin for the fiscal year 2022 was $25.9 million higher than the comparable period last year, mainly due to higher refining margin of $29.8 million and higher by-product contribution of $4.9 million. The favourable variance was partially offset by higher production costs of $8.8 million, partially due to higher labour related costs and inflationary pressures on other operating costs. On a per unit basis, for the fiscal 2022, adjusted gross margin amounted to $158.78 per metric tonne compared to $128.57 per metric tonne for the same period last year. The favourable variance of $30.21 per metric tonne was mainly due to higher volume sold to customers, improved average pricing, partially offset by higher production costs. $ per metric tonne Adjusted Gross Margin 180 160 140 120 100 80 60 40 20 0 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Adj Gross Margin Adj Gross Margin per metric tonne $000s 50,000 40,000 30,000 20,000 10,000 0 Rogers Sugar Inc.Management’s Discussion & Analysis25 OTHER EXPENSES (In thousands of dollars, except per metric tonne information) Administration and selling expenses Distribution costs Included in Administration and selling expenses: Depreciation of property, plant and equipment Q4 2022 Q4 2021 $ 9,138 4,958 $ 6,591 3,531 ∆ $ 2,547 1,427 YTD 2022 YTD 2021 $ 35,733 19,681 $ 27,793 15,970 ∆ $ 7,940 3,711 and right-of-use assets 223 221 2 867 897 (30) Included in Distribution costs: Depreciation of right-of-use assets 424 398 26 1,679 1,833 (154) In the fourth quarter of fiscal 2022, administration and selling expenses were higher by $2.5 million compared to the same quarter last year. The variance was mainly due to an increase in compensation related incentives of $2.5 million, attributable to higher share-based compensation from the higher share price and improved financial performance over 2021. Distribution costs increased by $1.4 million compared to the same quarter last year largely driven by higher freight costs and additional logistical costs incurred to support the strong demand in Eastern Canada. For the 2022 fiscal year, administration and selling expenses were $7.9 million higher than the comparable period last year. The variance was mainly due to an increase in compensation related incentives of $8.7 million, attributable to higher share-based compensation from the higher share price and improved financial performance over 2021, partially offset by lower COVID-19 costs in comparison to last year. Distribution costs increased by $3.7 million compared to the 2021 fiscal year, largely driven by higher freight costs and additional logistical costs incurred to support the strong demand in Eastern Canada, as mentioned above. RESULTS FROM OPERATING ACTIVITIES AND ADJUSTD EBITDA (In thousands of dollars) Q4 2022 Q4 2021 $ $ ∆ $ YTD 2022 YTD 2021 $ $ ∆ $ Results from operating activities 12,662 25,549 (12,887) 60,458 77,266 (16,808) Total adjustment to cost of sales(2) 8,566 (9,651) 18,217 10,296 (20,806) Adjusted results from operating activities 1) 21,228 15,898 5,330 70,754 56,460 31,102 14,294 Depreciation of property, plant and equipment and right-of-use assets, and amortization of intangible assets EBITDA(1) Adjusted EBITDA(1) 4,947 4,737 210 19,380 18,180 1,200 17,609 30,286 (12,676) 79,838 95,446 (15,608) 26,175 20,635 5,540 90,134 74,640 15,494 (1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures. (2) See “Adjusted results” section. Results from operating activities for the fourth quarter and the 2022 fiscal year were $12.7 million and $60.5 million, respectively, a decrease of $12.9 million and $16.8 million respectively, as compared to 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. In addition, higher non-cash depreciation and amortization expense mainly from increased property plant and equipment had a negative impact on the results from operating activities. 2022 Annual ReportManagement’s Discussion & Analysis 26 Adjusted results from operating activities in the fourth quarter of fiscal 2022 were $5.3 million higher than the same period last year, mainly due to higher adjusted gross margin, partially offset by higher administration and selling expenses. Adjusted results from operating activities for the 2022 fiscal year were $14.3 million higher than the same period last year as higher adjusted gross margin was partially offset by higher distribution costs and administration and selling expenses. EBITDA for the fourth quarter and the 2022 fiscal year were $17.6 million and $79.8 million, respectively, a decrease of $12.7 million and $15.6 million respectively, as compared to 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 Adjusted EBITDA for the fourth quarter increased by $5.5 million compared to the same period last year, largely as a result of higher adjusted gross margin, offset by higher administration and selling expenses as well as higher distribution costs. Adjusted EBITDA for the 2022 fiscal year increased by $15.5 million largely due to higher adjusted gross margin offset by higher administration and distribution costs, as mentioned above. MAPLE REVENUES (In thousands of dollars, except volumes) Q4 2022 Q4 2021 $ $ ∆ $ YTD 2022 YTD 2021 $ $ ∆ $ Volumes (‘000 pounds) 9,838 11,678 (1,840) 47,063 52,255 (5,192) Revenues 47,264 51,769 (4,505) 213,934 225,813 (11,879) Revenues for the fourth quarter were $4.5 million lower than the same period last year due to lower volume, partially offset by higher average selling price. For the 2022 fiscal year, revenues were $11.9 million lower than last fiscal year due to lower volume, partially offset by higher average selling price. Overall volume decreased by 5.2 million lbs or 10.0% in 2022 as compared to 2021. The decrease in volume was mainly attributable to the competitiveness of the market, difficulties encountered in 2022 regarding shipping and logistics on export sales and lower demand from some of our existing retail customers. Adjusted Gross Margin Maple Volumes (000s pounds) 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Adj. Gross Margin % 12% 10% 8% 6% 4% 2% 0% $000 10,000 7,500 5,000 2,500 0 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Adj Gross Margin Adj Gross Margin percentage Rogers Sugar Inc.Management’s Discussion & Analysis 27 GROSS MARGIN (In thousands of dollars, except adjusted gross margin rate information) Q4 2022 Q4 2021 Gross margin Total adjustment to cost of sales(1)(2) Adjusted gross margin(1) Adjusted gross margin percentage(1) Included in Gross margin: $ 1,714 2,103 3,817 8.1% $ 3,945 1,055 5,000 9.7% ∆ $ (2,231) 1,048 (1,183) (1.6%) YTD 2022 YTD 2021 $ 14,933 2,381 $ 18,715 1,873 17,314 20,588 8.1% 9.1% ∆ $ (3,782) 508 (3,274) (1.0%) Depreciation of property, plant and equipment and right-of-use assets 807 821 (14) 3,278 3,543 (265) (1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures. (2) See “Adjusted results” section. Gross margin was $1.7 million and $14.9 million for the three months and twelve months ended in the current fiscal year and includes a loss of $2.1 million and $2.4 million respectively, for the mark-to-market of derivative financial instruments. For the same periods last year, gross margin was $3.9 million and $18.7 million, respectively, with a mark-to-market loss of $1.1 million and $1.9 million. Adjusted gross margin for the fourth quarter of fiscal 2022 was lower by $1.2 million due to lower volume and higher operating costs. Operating costs increased largely as a result of market-based inflationary pressures for packaging, freight and energy expenditures as well as increased compensation cost and employee benefits incurred to attract and retain employees in our production facilities. Adjusted gross margin for fiscal 2022 was $3.3 million lower than the prior year, due to lower volume and higher operating costs. Operating cost increased largely as a result of market-based inflationary pressures for packaging, freight and energy expenditures as well as increased compensation cost and employee benefits incurred to attract and retain employees in our production facilities. Through the year, adjusted gross margin was negatively impacted by a delay between operating cost increases and the associated expected selling price increases to our customers. Pricing increases were delayed largely as a result of the competitive nature of the maple syrup market, which was compounded by a larger than anticipated crop for 2022 and the timing of pricing negotiations on large contracts. Adjusted gross margin percentage at 8.1% for the current quarter and the 2022 fiscal year decreased by 160 basis point and 100 basis points respectively, compared to the same periods last year. These variances were mainly attributable to lower volume and to the market-based production cost increases discussed above. Such cost increases were not fully recovered through pricing increases to our customers due to the current high competitiveness of the maple market. OTHER EXPENSES (In thousands of dollars) Q4 2022 Q4 2021 $ $ Administration and selling expenses 2,411 2,084 Distribution costs Goodwill impairment 310 50,000 458 — Included in Administration and selling expenses: ∆ $ 327 (148) 50,000 YTD 2022 YTD 2021 $ 10,050 2,028 50,000 $ 9,162 2,322 ∆ $ 888 (294) — 50,000 Amortization of intangible assets 874 873 1 3,490 3,488 2 Administration and selling expenses for the last three months and for the twelve months ended in the current fiscal year were $0.3 million and $0.9 million higher than the comparable periods last year. These variances were largely due to higher compensation related expenses and higher administrative business support costs. 2022 Annual ReportManagement’s Discussion & Analysis 28 Distribution costs for the fourth quarter and for the 2022 fiscal year were lower by $0.1 million and $0.3 million respectively compared to the same period last year, due to lower sales volume. At the end of fiscal 2022, we performed our annual accounting impairment testing and concluded that the carrying value of the net assets of our Maple business segment exceeded the recoverable amount by $50.0 million at that point in time. As a result, we recorded a non-cash impairment charge to our goodwill balance of $50.0 million in the fourth quarter of the current fiscal year. This reduction in goodwill is mainly attributable to the lower-than-expected financial results of the Maple business segment in 2022, caused by unfavorable market dynamics and significant inflationary pressures. RESULTS FROM OPERATING ACTIVITIES AND ADJUSTED EBITDA (In thousands of dollars) Q4 2022 Q4 2021 Results from operating activities Total adjustment to cost of sales(1) Goodwill impairment $ (51,007) 2,103 50,000 $ 1,403 1,055 (52,410) (47,145) 1,048 — 50,000 2,381 50,000 ∆ $ YTD 2022 YTD 2021 $ $ 7,231 1,873 ∆ $ (54,376) 508 — 50,000 Adjusted results from operating activities(1)(3) 1,096 2,458 (1,362) 5,236 9,104 (3,868) Non-recurring expenses: Other one-time non-recurring items Depreciation and amortization EBITDA(1) Adjusted EBITDA(1) — 1,681 674 2,777 — 1,694 3,097 4,152 — (13) (2,423) (1,375) — 6,768 9,623 247 7,031 (247) (263) 14,509 (4,886) 12,004 16,382 (4,378) (1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures. (2) See “Adjusted results” section. (3) Adjusted results for operating activities exclude goodwill impairment. Results from operating activities for the fourth quarter and the 2022 fiscal year were a loss of $51.0 million and $47.1 million respectively, compared to positive results of $1.4 million and $7.2 million in the same periods last year. Excluding the goodwill impairment recorded in the fourth quarter of 2022, results from operating activities for the fourth quarter and the 2022 fiscal year were a loss of $1.0 million and a positive result of $2.9 million respectively. 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. Adjusted results from operating activities for the current quarter was $1.4 million lower than the comparable period last year, due mainly to lower adjusted gross margin. Adjusted results from operating activities for the 2022 fiscal year was $3.9 million lower than the comparable period last year, due mainly to lower adjusted gross margin and higher administration and selling expenses, as explained above. EBITDA for the fourth quarter and the 2022 fiscal year were $0.7 million and $9.6 million, respectively, a decrease of $2.4 million and $4.9 million respectively, as compared to 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. Adjusted EBITDA for the current quarter of fiscal 2022 decreased by $1.4 million, due to lower adjusted gross margin as explained above. Adjusted EBITDA for 2022 fiscal year decreased by $4.4 million, compared to the same period last year, largely driven by lower adjusted gross margins and higher administration and selling expenses, as explained above. Rogers Sugar Inc.Management’s Discussion & Analysis 29 OUTLOOK The health and safety of our employees continue to be our top priority. We will continue to monitor closely the potential impacts related to the COVID-19 pandemic and follow closely public health authority recommendations. Following a strong performance in 2022, including our highest sugar volume, consolidated revenue and adjusted EBITDA results to date, we expect to deliver a strong, stable financial performance in 2023. The continued strength in sugar demand and pricing is expected to provide stable results, despite ongoing challenges related to supply chain and logistics. We expect our Maple segment to slowly recover during 2023 as the unfavorable inflationary pressures encountered over the last year begin to recede. SUGAR We expect the sugar segment to perform well in fiscal 2023. Underlying North American demand remains strong across all customer segments supported by favourable market dynamics. Improvements in pricing implemented in 2022 will continue to support our financial results positively, allowing us to mitigate the current impact of inflationary pressures on costs. We expect sales volume for 2023 to reach 790,000 metric tonnes, representing a reduction of 5,000 metric tonnes as compared to 2022. The slight reduction in volume in 2023 relates to the temporary increase in volumes recorded in the later part of 2022, in connection with a temporary tightness in market supply in North America. We do not expect this tightness to reoccur and anticipate the domestic market to be otherwise stable for 2023. We expect export volumes to decrease as we will prioritize the growing domestic demand. Our current view for volume by customer segment in 2023 is as follows: • Industrial, our largest segment, is expected to decrease by 3%, although recurring demand for sugar-containing products is expected to remain steady in both Canada and the US. • Liquid volume is expected to growth by 6% driven by continued demand from existing customers. • Consumer volume is expected to increase by 2% for 2023, due to higher expected demand. • We anticipate selling 10% less to the export markets in 2023, due to the growing demand of the domestic market. We intend to explore potential supplemental export sales as favourable opportunities arise. The harvest period for our sugar beet facility in Taber was completed in early November. We have received the expected quantity of beets from the growers. However, unfavourable weather conditions such as hailstorms and warmer temperatures encountered in the later stage of the growing period have reduced the expected sugar content of the sugar beets. We are currently in the processing stage of the 2022 sugar beet campaign. We anticipate completing the processing of the sugar beets received by the end of February. Currently, based on our early assessment, we anticipate the 2022 crop to deliver between 100,00 metric tonnes and 110,000 metric tonnes of beet sugar. This would be lower than the 2021 crop which delivered 120,000 metric tonnes. Production costs and maintenance programs for our three production facilities are expected to be moderately impacted by the current inflationary market-based pressures, as we continue to focus on cost control initiatives throughout our operations. Distribution costs are expected to be stable in 2023. These expenditures will continue to reflect the market dynamics requiring the transfer of sugar produced in the West to the East to meet customer demand. We also expect that recent cost increases for logistics and our supply chain will remain. Once our planned expansion project is completed, we plan to optimize our increased national capacity to efficiently service our domestic customer base. Administration and selling expenses are expected to decrease in 2023 as we do not anticipate the impact of share-based compensation to be as high. 2022 Annual ReportManagement’s Discussion & Analysis 30 We have been able to mitigate the potential unfavourable impact on our business of the recent increases in interest rates and energy costs through our multi-year hedging strategy. We do not anticipate these increases to have a material impact on our financial results in the near future, as we expect our hedging strategy will continue to mitigate such risks. Spending on regular business capital projects is also expected to be stable for fiscal 2023. We anticipate spending approximately $25 million on various initiatives, with approximately a quarter allocated to return-on-investment projects. This estimate for capital spending excludes potential expenditures that could be incurred in 2023, regarding the announcement we made in August 2022, about our intention to expand the capacity of our Montreal sugar refinery and Toronto distribution centre. MAPLE The Maple segment financial results were lower than anticipated for 2022. This was due mainly to lower volume and unexpected inflationary pressure on costs for packaging material, freight, and labour, along with global shipping challenges. We expect these financial and operating pressures to remain in the first part of 2023. Despite such challenges and a strong 2022 crop, we expect this business segment to slowly recover and to deliver slightly improved financial performance in 2023 as compared to 2022. The improvement will be driven by expected higher volume from new customers and higher margin from price increases on recently negotiated agreements. Capital investments have reduced significantly for the Maple segment in recent years. The Maple segment is expected to spend between $1 million and $2 million annually on capital projects. The main driver for the Maple segment projects is to improve productivity and profitability through automation. See “Forward Looking Statements” section and “Risks and Uncertainties” section. CONSOLIDATED RESULTS AND SELECTED FINANCIAL INFORMATION (unaudited) (In thousands of dollars, except volumes and per share information) 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) EBITDA(1) Adjusted EBITDA(1) Net finance costs Income tax expense Net (loss) earnings per share (basic) per share (diluted) Adjusted net earnings(1) per share (basic)(1) Dividends per share Q4 2022 Q4 2021 YTD 2022 YTD 2021 $ $ $ $ 214,672 214,753 794,600 779,505 9,838 11,678 47,063 52,255 267,406 243,231 1,006,134 893,931 28,472 39,141 (38,345) 22,324 18,283 28,952 5,057 2,099 (45,502) (0.44) (0.44) 12,161 0.12 0.09 39,616 31,020 26,952 18,356 33,382 24,786 5,015 5,796 16,140 0.16 0.15 9,620 0.09 0.09 130,805 139,744 143,482 13,313 75,990 89,461 102,138 17,567 12,314 (16,568) (0.16) (0.16) 120,811 84,497 65,564 109,708 91,022 19,439 17,531 47,527 0.46 0.44 40,659 33,866 0.39 0.36 0.33 0.36 (1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures Rogers Sugar Inc.Management’s Discussion & Analysis 31 TOTAL REVENUES Revenues increased by $24.2 million and $112.2 million for the fourth quarter and for the 2022 fiscal year, respectively, compared to the same periods last year. The increase in revenue was mainly attributable to higher average pricing, increased sales volume, and higher by-product sales in the Sugar segment, as well as higher sales price in the Maple segment, partially offset by lower sales volume in the Maple segment. GROSS MARGIN Excluding the mark-to-market of derivative financial instruments, adjusted gross margin for the fourth quarter of the current fiscal year increased by $8.1 million compared to the same period last year, mainly as a result of higher adjusted gross margin in the Sugar segment, partially offset by lower adjusted gross margin in Maple segment. For the Sugar segment, the adjusted gross margin per metric tonne for the current quarter and the 2022 fiscal year were higher by $43.39 per metric tonne and $30.21 per metric tonne respectively, when compared to the same period last year. For the Maple segment, the adjusted gross margin percentage for the current quarter and the 2022 fiscal year were lower by 1.6% and 1.0%, respectively, when compared to the same period last year. RESULTS FROM OPERATING ACTIVITIES Results from operating activities for the current quarter were a loss of $38.3 million compared to a positive result of $27.0 million in the same quarter last year, representing a decrease of $65.3 million. For fiscal 2022, results from operating activities were $13.3 million compared to $84.5 million last year, representing a decrease of $71.2 million. Adjusted results from operating activities for the current quarter amounted to $22.3 million compared to $18.4 million in the same quarter last year, an increase of $3.9 million. For fiscal 2022, adjusted results from operating activities were $76.0 million compared to $65.6 million, representing an increase of $10.4 million. The improvement of adjusted results from operating activities in both periods was mainly driven by higher contribution from the Sugar segment during the 2022 fiscal year. NET FINANCE COSTS (In thousands of dollars) Interest expense on convertible unsecured subordinated debentures Interest on revolving credit facility Interest on private placement Amortization of deferred financing fees Net change in fair value of interest rate swaps Other interest expense Net finance costs Q4 2022 Q4 2021 $ $ 2,125 1,113 895 311 (328) 940 5,057 2,182 1,173 915 278 (160) 627 5,015 YTD 2022 YTD 2021 $ $ ∆ $ 8,413 5,063 3,595 1,240 8,423 5,843 1,527 1,187 451 (168) (2,801) (10) (780) 2,068 53 (3,252) 49 2,057 2,008 17,567 19,439 (1,872) ∆ $ (57) (60) (20) 34 313 42 For the fourth quarter of 2022, all components of net finance costs were consistent with the same period last year. For the 2022 fiscal year, net finance costs were $1.9 million lower than last year, largely due to interest rate swaps gain of $3.2 million, partially offset by the higher interest cost on private placement due to twelve months of interest in fiscal 2022 in comparison to five months of interest in fiscal 2021. Other interest expense pertains 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 discounted lease obligations. 2022 Annual ReportManagement’s Discussion & Analysis 32 TAXATION (In thousands of dollars) Current Deferred Income tax expense Q4 2022 Q4 2021 $ $ ∆ $ YTD 2022 YTD 2021 $ $ ∆ $ 1,595 6,619 (5,024) 14,275 17,333 (3,058) 504 2,099 (823) 5,796 1,327 (1,961) 198 (2,159) (3,697) 12,314 17,531 (5,217) The variation in current and deferred tax expense period-over-period is consistent with the variation in earnings before income taxes during the current quarter compared to the same quarter last year, excluding the impact from the goodwill impairment, which had no current or deferred tax consequence. 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 fiscal 2022 were lower by $61.6 million and $64.1 million respectively, compared to the same periods last year. Excluding goodwill impairment of $50.0 million recorded in the fourth quarter of fiscal 2022, net earnings in the fourth quarter and for the fiscal 2022 were lower by $11.6 million and $14.1 million respectively, compared to the same periods last year. These variances were mainly attributable to non-cash variances in the mark-to-market of derivative financial instruments associated with sugar futures contracts and foreign exchange forward contracts, partially offset by lower net finance costs and income tax expenses. Adjusted net earnings in the fourth quarter and for the 2022 fiscal year were higher by $2.5 million and $6.8 million respectively, compared to the same periods last year, largely attributable to higher adjusted results from operating activities from the Sugar segment. Rogers Sugar Inc.Management’s Discussion & Analysis 33 SUMMARY OF QUARTERLY RESULTS The following is a summary of selected financial information of the consolidated financial statements and non-GAAP measures of the Company for the last eight quarters: QUARTERS (2) 2022 2021 (In thousands of dollars, except for volume and per share information) Fourth Third Second First Fourth Third Second First $ $ $ $ $ $ $ $ Sugar volumes (MT) 214,672 203,315 196,570 180,043 214,753 190,563 183,749 190,440 Maple products volume (‘000 pounds) Total revenues Gross margin 9,838 12,027 12,912 12,286 11,678 11,471 14,214 14,892 267,406 254,632 253,341 230,755 243,231 210,931 215,929 223,840 28,472 24,948 33,899 43,486 39,616 30,064 31,451 38,613 Adjusted gross margin(1) 39,141 32,654 35,887 35,800 31,020 25,932 27,407 36,452 Results from operations (38,345) 8,822 15,499 27,337 26,952 15,062 19,151 23,332 Adjusted results from operations(1) 22,324 16,528 17,487 19,651 18,356 10,930 15,107 21,171 EBITDA(1) Adjusted EBITDA(1) Net (loss) earnings Per share - basic Per share - diluted 18,283 15,402 22,029 33,748 33,382 21,346 25,418 29,808 28,952 23,108 24,017 26,061 24,786 17,214 21,375 27,647 (45,502) 3,138 8,570 17,226 16,140 6,836 10,778 13,773 (0.44) 0.03 (0.44) 0.03 0.08 0.08 0.17 0.15 0.16 0.15 0.07 0.07 0.10 0.10 0.13 0.13 Adjusted net earnings(1) 12,161 8,419 9,122 10,957 9,620 4,247 7,751 12,248 Per share - basic Per share - diluted Sugar - Adjusted gross margin rate per MT(1) Maple - Adjusted gross margin percentage(1) 0.12 0.11 0.08 0.08 0.09 0.09 0.11 0.10 0.09 0.09 0.04 0.04 0.07 0.07 0.12 0.11 164.55 138.68 159.11 174.25 121.16 113.95 118,60 161.18 8.1% 8.2% 8.0% 8.1% 9.7% 9.4% 8.9% 7.9% (1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures. (2) All quarters are 13 weeks . Historically the first quarter (October to December) of the fiscal year is the best quarter of the sugar segment for adjusted gross margin and adjusted net earnings due to the favourable sales product 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 sales product mix, resulting in lower revenues, adjusted gross margins and adjusted net earnings. This trend was different in the fourth quarter of 2022 as negotiated price increases came into effect throughout the year and in the second quarter of 2022 as several sales that were delayed in the first quarter of the year materialized in the second quarter. Usually, there is minimal seasonality in the Maple products segment. However, over the last two years, we have experienced volatility in sales volume partially attributable to the pandemic, the highly competitive market and the global volatility in economic conditions. 2022 Annual ReportManagement’s Discussion & Analysis 34 FINANCIAL CONDITION (In thousands of dollars) Total assets Total liabilities October 1, 2022 $ 937,956 646,537 October 2, 2021 $ 879,930 560,972 October 3, 2020 (1) $ 856,059 417,043 (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 of $58.0 million in the current fiscal quarter compared to the same quarter last year was mainly due to an increase in inventory of $66.4 million, trade and other receivables of $24.7 million, and derivatives financial instruments assets of $18.4 million, partially offset by a goodwill impairment of $50.0 million and reduction of cash and cash equivalent. Total liabilities for the current fiscal quarter increased by $85.6 million compared to the same quarter last year due mainly to an increase in trade and other payables of $57.5 million, higher outstanding balance under the revolving credit facility of $26.0 million, higher deferred tax liabilities of $5.4 million, derivatives financial instruments liabilities of $5.1 million and higher lease obligations of $4.7 million. This variance was partially offset by a reduction in the employee benefits liabilities of $10.8 million. LIQUIDITY Cash flow generated by Lantic is mainly paid to Rogers by way 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 distribution of cash arising from compliance of financial covenants for the year. (In thousands of dollars) FY 2022 FY 2021 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 $ 21,552 (13,554) (23,730) 240 (15,492) $ 78,577 (40,158) (24,678) (72) 13,669 Cash flow from operating activities for the current year decreased by $57.0 million compared to last year, due mainly to a negative non-cash working capital variation of $31.7 million, lower net earnings adjusted for non-cash items of $14.0 million and higher interest and income taxes paid of $11.3 million. Cash flow used in financing activities decreased by $26.6 million for the current year compared to last year due mainly to an increase in borrowings from the revolving credit facility and by the cash received from the issuance of shares related to stock options that have been exercised in fiscal 2022. The cash outflow used in investing activities decreased by $0.9 million in the current year compared to last year due mainly to the timing of capital expenditures. Rogers Sugar Inc.Management’s Discussion & Analysis 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 obligations. 35 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 Financial instruments non-cash amount Capital expenditures and intangible assets Value added capital expenditures Payment of lease obligation Free cash flow(1) Declared dividends (1) See “Non-GAAP Measures” section for definition and reconciliation to GAAP measures. Trailing twelve months 2022 $ 21,552 42,927 9,876 (4,030) (23,730) 5,306 (5,150) 46,751 37,500 2021 $ 78,577 11,471 (18,482) (3,203) (24,678) 6,847 (5,487) 45,045 37,300 Free Cash Flow ($000s) 45,045 13,155 46,751 -593 -207 -503 -8,457 -3,132 337 60,000 50,000 40,000 30,000 20,000 10,000 0 Trailing 2021 Income taxes Interest Capital lease Adjusted EBITDA Capital spending Pension net of contribution Other Trailing 2022 2022 Annual ReportManagement’s Discussion & Analysis 36 Free cash flow for the trailing twelve months ending October 1, 2022 amounted to $46.8 million, representing an increase of $1.7 million compared to the same period last year. This increase in free cash flow was mainly due to higher adjusted EBITDA of $13.2 million, excluding non-cash items related to future pension liabilities included in the Montréal collective agreement and senior management compensation related to higher shared-based compensation from the higher share price and improved financial performance over 2021. This favourable variance was partially offset by higher income taxes paid of $8.5 million and higher interest paid of $3.1 million. Capital and intangible assets expenditures, net of value-added capital expenditures, increased by $0.6 million compared to last year’s rolling twelve months due mainly to higher expenditures incurred in fiscal 2022. 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. The Board of Directors declared a quarterly dividend of 9.0 cents per common share every quarter, totalling 36.0 cents for the 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 and financial instruments non-cash amount of $5.8 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 $ 126,000 100,000 19,206 6,268 29,955 27,927 73,306 382,662 585 1,200 Under 1 year $ 26,000 — 7,506 2,889 3,490 4,969 73,306 118,160 585 1,200 1 to 3 years 4 to 5 years After 5 years $ — — 11,700 3,379 6,980 9,409 — $ 100,000 — — — 3,490 4,704 — $ — 100,000 — — 15,995 8,845 — 31,468 108,194 124,840 — — — — — — Rogers Sugar Inc.Management’s Discussion & Analysis 37 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. Lantic has 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 1, 2022, the approved amount available for borrowing was $200 million, of which $126 million was drawn. 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-passu 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 1, 2022, Lantic was in compliance with all the covenants under its revolving credit facility and its private placement and a total of $590.6 million have been pledged as security, compared to $498.5 million as at October 2, 2021 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. The following table provides the outstanding swap agreements as at October 1, 2022 as well as their respective value, interest rate and time period: Fiscal year contracted (in thousands of dollars) Fiscal 2019 Fiscal 2019 Fiscal 2020 Fiscal 2020 Fiscal 2020 Fiscal 2020 Total outstanding value as at October 1, 2022 Date Total value 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 80,000 20,000 20,000 10,000 80,000 230,000 2022 Annual ReportManagement’s Discussion & Analysis 38 Lease obligations relate mainly to the leasing of facilities and various mobile equipment for our Sugar and Maple products segment operations. Purchase obligations represent all open purchase orders as at year-end along with an amount of approximately $43.5 million for sugar beets that will be harvested and processed in fiscal 2023. However, it excludes 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 2023 as of the date of this MD&A. A significant portion of our sales are made under fixed-price, forward-sales contracts, which extend up to three years. Lantic also contracts to purchase raw cane sugar substantially in advance of the time it delivers the refined sugar produced from the purchase. To mitigate our 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 to September 2024. At October 1, 2022, we had a net short sugar position of $1.5 million in net contract amounts with a current net contract value of $2.0 million. This short position represents the offset of a larger volume of sugar priced with customers than purchases priced from suppliers. We use forwards contracts and commodity swaps to help manage our natural gas costs. At October 1, 2022, we had $34.6 million in natural gas derivatives, with a current contract value of $56.3 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 US dollar, and to a much smaller extent, to Euro and Australian dollar. 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 1, 2022, we had a net short position of $138.0 million in foreign currency forward contracts with a current contract value of $145.4 million, representing an unrealized loss of $7.4 million. Rogers Sugar Inc.Management’s Discussion & Analysis39 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 1, 2022, we had commitments to purchase a total of 585,000 metric tonnes of raw sugar, of which approximately 374,479 metric tonnes had been priced, for a total dollar commitment of $224.2 million. TMTC has $2.4 million remaining to pay related to an agreement to purchase approximately 1.2 million pounds of maple syrup from the PPAQ. We have no other off-balance sheet arrangements. CAPITAL RESOURCES As at October 1, 2022, Lantic had a total of $200.0 million of available working capital from its revolving credit facility, 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 1, 2022, a total of $590.6 million of assets have been pledged as security for the revolving credit facility, compared to $498.5 million as at October 2, 2021; including trade receivables, inventories and property, plant and equipment. As at October 1, 2022, $126.0 million had been drawn from the working capital facility and $9.5 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 $13.6 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 1, 2022, all of our registered defined benefit pension plans were in a deficit position, except our Taber defined benefit pension plan which was in a net asset position at the end of fiscal 2022. 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 2022, cash contributions to defined benefit pension plans decreased by approximately $0.1 million to $4.2 million. In total, we expect to incur cash contributions of approximately $3.8 million for fiscal 2023 relating to employee defined benefit pension plans. For more information regarding our employee benefits and related assets and liabilities, 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. 2022 Annual ReportManagement’s Discussion & Analysis40 OUTSTANDING SECURITIES A total of 104,372,045 shares were outstanding as at October 1, 2022 and November 30, 2022, respectively (103,686,923 as at October 2, 2021). 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. No shares have been purchased under the 2020 NCIB. During fiscal 2022, 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 current fiscal year and last fiscal year. 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 1, 2022, a total of 3,888,561 options had been granted, of which 3,123,439 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 2, 2019 December 7, 2020 December 6, 2021 PSUs Additional PSUs(1) Total PSUs Performance Cycle 324,932 491,412 386,709 64,320 55,641 17,316 389,252 547,053 404,025 2020-2022 2021-2023 2022-2024 (1) Additional PSUs refer to aggregate of PSUs that were allocated from the dividend earned during the quarters since inception. 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. Rogers Sugar Inc.Management’s Discussion & Analysis41 ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) deal with known or unknown contamination at the property or other facilities or offices currently or formerly owned, used or controlled by Lantic. The Board of Directors has appointed an ESG Committee comprised of five independent directors. The ESG Committee meets regularly We are engaged socially and promotes core values aligned and is responsible to oversee and advise the Board of Directors with environmental stewardship, respect, diversity, and equity. regarding the following areas: We promote a workplace that focuses on workplace safety, empowerment, leadership, accountability, and recognition. • appointment to the Board of Directors of RSI and the board of • • • • directors of Lantic appointments to Board and Board Committees The Board of Directors has overall responsibility for monitoring, evaluating, and contributing to the strategic and operational direction of the business. This includes establishing a governance framework effective governance principles, including the evaluation of the to support the business and meet all the applicable regulatory and effectiveness of Board and Board Committees legal requirements. skills of Directors initiatives, risks, and opportunities in respect to the Corporation’s ESG strategy In 2022, we established an ESG team within our management group to support our ESG strategy. We also published our second ESG report, which highlights our sustainability efforts in areas such • governance related to corporate policies. as energy use, air emissions, water usage, as well as responsible sourcing of raw sugar. We built on the inaugural ESG report filed Our governance and business management systems are design in 2021 and included more information around our sustainability to monitor compliance with relevant environmental regulatory program and our efforts to improve workplace safety and diversity. standards. We comply, in all material respects, with environmental These reports can be accessed on SEDAR or on our website at laws and regulations and we maintain an open dialogue with www.Lanticrogers.com. regulators and the different levels of government, with respect to awareness and adoption of new environmental standards. The economic and reputational importance of energy and natural RISKS AND UNCERTAINTIES resources in our business is managed with a continuous improvement mindset, which includes the review of new available technologies We are committed to proactive risk governance and oversight and business practices that minimize our environmental footprint practices. The Board of Directors is responsible for reviewing and and in parallel, when possible, strengthen our financial position. assessing material risks associated with the business. The governance We have made significant commitments over the past few years to process ensures that we implement systems that effectively identify, leverage new technologies and process improvements to recover manage, and monitor the principal risks associated with both of our waste energy, improve energy efficiency and lower energy intensity. business segments, to mitigate or reduce potential negative impacts. Management provides periodic updates to the Board of Directors With respect to potential environmental remediation of our on the risks and the related mitigation strategies and activities. properties, which could occur in the event of a building demolition Responsibility for risk management is shared across the organization or a sale, it is worth noting that the Vancouver and Montreal facilities and is an integral part of our management reporting system. have a lengthy history of industrial use, and fill materials have been used on the properties in the normal course of business. We have We maintain policies and a Code of Business Conduct (the “Code”), recorded provisions under asset retirement obligations for known applicable to all directors, officers, and employees, as well as and quantifiable potential remediation activities in connection consultants and contractors. Such documents are reviewed at least with these properties. No assurance can be given that material annually by the Board of Directors. These policies and the Code aim expenditures will not be required in excess of the current asset to promote sound risk management throughout the organization, retirement obligation provisions in connection with contamination delegate appropriate authority among officers and set limits for from such industrial use or fill materials. authorizations required to approve and execute certain business transactions. On November 30, 2022, the Board of Directors approved Although we are not aware of any specific problems at our Toronto a revised Code. The revised Code clearly states that all employees distribution centre, our Taber plant and any of the TMTC properties, are expected to review regularly and abide by the Code. It provides no assurance can be given that expenditures will not be required to clear guidelines to support the Whistleblowing policy and related 2022 Annual ReportManagement’s Discussion & Analysis 42 reporting process. The Code addresses specifically the measures The recent changes in general economic conditions and the put forward to prevent corruption, anti-competitive practices, and potential for further worsening of the global economy could impact unethical behaviors. It also includes clear directions to govern the performance, and the financial results and conditions of Rogers. relationships with customers, suppliers, and other stakeholders. The Code is available on our website at www.lanticrogers.com or under GOVERNMENT REGULATIONS AND FOREIGN TRADE Rogers’ profile on SEDAR at www.sedar.com. POLICIES WITH REGARD TO THE SUGAR SEGMENT In 1995, Revenue Canada made a determination that there was Our business and operations are substantially affected by many dumping of refined sugar from the US, Denmark, Germany, the factors and as such, are exposed to various risks and uncertainties. United Kingdom (“UK”), the Netherlands and the Republic of Korea We have outlined below the risks and uncertainties that we believe into Canada, and that subsidized refined sugar was being imported are currently material. There may also exist additional risks and into Canada from the European Union (“EU”). The Canadian uncertainties that are not currently known to us or that are not International Trade Tribunal (“CITT”) conducted an inquiry and ruled considered material at this time. Those risks could have a material that the dumping of refined sugar from the US, Denmark, Germany, adverse effect on our business, operation, financial conditions, and the UK, and the Netherlands, as well as the subsidizing of refined results. sugar from the EU, was threatening material injury to the Canadian sugar industry. The ruling resulted in the imposition of protective DEPENDENCE UPON LANTIC duties on these unfairly traded imports. Rogers is entirely dependent upon the operations and assets of Lantic through its ownership of securities of this company. Under Canadian laws, these duties must be reviewed every five Accordingly, interest payments to debenture holders and dividends years. In August 2021, the CITT concluded its fifth review of the 1995 to shareholders are dependent upon the ability of Lantic and/or findings and issued its decision to continue the duties for another TMTC to pay its interest obligations under the subordinated notes five-year period against (i) dumped sugar from the US, Denmark, and to declare and pay dividends on or return capital in respect of the Germany, the Netherlands, and the UK, and (ii) subsidized sugar common shares. The terms of Lantic’s bank and other indebtedness from the EU. The Canadian Sugar Institute (“CSI”) and its members, restricts its ability to pay dividends and make other distributions on including Lantic, participated fully in the review and submitted its shares or make payments of principal or interest on subordinated detailed evidence and witness testimony to the CITT. The CITT debt, including debt which may be held, directly or indirectly, by agreed that imports of dumped and subsidized sugar would likely Rogers, in certain circumstances. In addition, Lantic may defer cause material injury to the Canadian industry if the duty protection payment of interest on the subordinated notes at any given time for was removed. a period of up to 18 months. Following the CITT’s review, the Canadian Border Services Agency NO ASSURANCE OF FUTURE PERFORMANCE (“CBSA”) concluded a re-investigation in March 2022 to update the Historic and current performance of the business of Rogers, Lantic levels of duty protection applicable to dumped sugar from the US, and TMTC may not be indicative of success in future periods. The Denmark, Germany, the Netherlands, and the UK and subsidized future performance of the business may be influenced by economic sugar from the EU. The CBSA determined that anti-dumping duties downturns and other factors beyond the control of Rogers, Lantic will continue to apply to imports of dumped sugar from the US, and TMTC. As a result of these factors, the operations and financial Denmark, Germany, the Netherlands and the UK and ruled that a performance of Lantic and TMTC may be negatively affected, which countervailing duty will continue to apply to imports of subsidized may materially adversely affect our performance, and financial EU sugar. results and conditions. The duties on imports of US, EU, and UK refined sugar are important CHANGES IN GENERAL ECONOMIC CONDITIONS to Lantic and to the Canadian refined sugar industry in general Changes in general economic conditions could have a material because they protect the market from the adverse effects of unfairly effect on the profitability of both of our business segments and on traded imports from these sources. The government support and the assessment of the value of our assets, affecting our ability to trade distorting attributes of the US and EU sugar regimes continue execute our business strategy. The current inflationary pressures are to generate surplus refined sugar production and exports that increasing operating costs and there is no assurance that we will be threaten the Canadian sugar market. able to recover the extent of such costs with timely commensurate increases in price to our customers. Rogers Sugar Inc.Management’s Discussion & Analysis43 Although the recent ruling is for a period of five years, it could be The price of refined sugar sold to customers is also based on the challenged by market participants for review if there is a material Raw #11 sugar market. All purchase of raw cane sugar and sales of change in market conditions. If the duties were to be eliminated or refined sugar are economically hedged with financial instruments significantly reduced in the future, there could be a material financial such as future contracts to mitigate risk, thus eliminating the impact impact to Lantic and other members of the Canadian refined sugar of volatility in Raw #11 sugar price. industry. SUPPLY OF RAW CANE SUGAR These purchases of raw cane sugar and sales of refined sugar are denominated in US dollars and could potentially expose us to There are over 180 million metric tonnes of sugar produced fluctuation in the value of the Canadian dollar. Our strategy is to worldwide. Of this, more than 55 million metric tonnes of sugar hedge the foreign exchange exposure of these transactions using are traded on the world market. Lantic, through its cane refining available financial instruments, such as future contracts, to eliminate plants, buys approximately 0.7 million metric tonnes of raw sugar the impact of volatility. per year. Even though worldwide raw sugar supply is much larger than Lantic’s yearly requirements, concentration of supply in certain There can be no assurance that we will be able to continue to countries like Brazil, combined with an increase in cane refining mitigate efficiently this exposure to Raw #11 price and related foreign operations in certain countries, may create tightness in raw sugar exchange risk in the future. If effective financial instruments were availability at certain times of the year. To prevent any raw sugar not available to mitigate such exposures, there could be material supply shortage, Lantic normally enters into long-term supply impacts on our performance, and financial results and conditions. contracts with reputable suppliers. For raw sugar supply not under contract, significant premiums may be paid on the purchase of raw COMPETITION IN THE SUGAR SEGMENT sugar on a nearby basis, which may have a material impact on our For the Sugar segment, Lantic faces domestic competition from performance, and financial results and conditions. Redpath Sugar Ltd. and smaller regional operators and or distributors of both foreign and domestic refined sugar. Differences in proximity SUPPLY AND QUALITY OF SUGAR BEETS IN ALBERTA to various geographic areas within Canada and elsewhere result in The availability of sugar beets to be processed in Taber, Alberta differences in freight and shipping costs, which in turn affect pricing is dependent on a supply contract with the Growers, and on the and competitiveness in general. Growers planting the necessary acreage every year. In the event that sufficient acreage is not planted in a certain year, or that Lantic and In addition to sugar, the overall sweetener market also includes corn- the Growers cannot agree on a supply contract, sugar beets might based sweeteners, such as HFCS, an alternative liquid sweetener, not be available for processing, thus requiring transfer of products which can be substituted for liquid sugar in soft drinks and certain from Lantic’s cane refineries to the Prairie market, normally supplied other applications; and non-nutritive, high intensity sweeteners by Taber. This would increase Lantic’s distribution costs and may such as aspartame, sucralose and stevia. Differences in functional have a material impact on our performance, and financial results and properties and prices have tended to define the use of these various conditions. sweeteners. The substitution of other sweeteners for sugar has occurred in certain products in the past. We are not able to predict Sugar beets, as is the case with most other crops, are affected by the availability, development or potential use of these sweeteners weather conditions during the growing season. Additionally, weather and their possible impact on Lantic’s operations. conditions during the harvesting and processing season could affect Lantic’s total beet supply and sugar extraction from beets stored for PRICE OF NATURAL GAS processing. A significant reduction in the quantity or quality of sugar Natural gas represents an important cost in our refining operations. beets harvested due to adverse weather conditions, disease or other Our three sugar refineries consume natural gas in their refining factors could result in decreased production, with negative financial process. The Taber beet factory production also includes agricultural consequences to Lantic. processing and as a result, uses more energy in its operations than the cane facilities in Vancouver and Montréal, principally from the RAW #11 PRICE AND FOREIGN EXCHANGE RISK FOR need to heat the sliced sugar beets, to evaporate water from juices SUGAR SEGMENT containing sugar, and to dry wet beet pulp. Our Maple segment The price of raw sugar cane purchase for the Montréal and Vancouver bottling plants also use natural gas in their process although to a refineries are based on the Raw #11 sugar market traded on the ICE. lower extent. 2022 Annual ReportManagement’s Discussion & Analysis44 Changes in the costs and sources of energy may affect the financial and in line with volumes purchased in previous years. The refusal results of Lantic’s operations. In addition, all natural gas purchased from the PPAQ to accept our anticipated volume or failure by us to is priced in US dollars. Therefore, fluctuations in the Canadian/ properly estimate the anticipated volume for a given year may affect US dollar exchange rate will also impact the cost of energy. Lantic our ability to increase our production capacity and therefore this hedges a portion of its natural gas price exposure through the use of could impact materially the performance, and financial results and natural gas contracts to lessen the impact of fluctuations in the price condition of Rogers. of natural gas. Provincial application of some form of carbon tax has been increasingly important across Canada and for some provinces SUPPLY OF MAPLE SYRUP with a carbon tax, rates have been increasing, which could increase The PPAQ set up a strategic maple syrup reserve to mitigate the overall energy costs for Lantic. production fluctuations caused by weather conditions and prevent such fluctuations from causing maple syrup prices to spike or drop REGULATORY REGIME GOVERNING THE PURCHASE AND significantly. The PPAQ objective is to have in reserve the equivalent SALE OF MAPLE SYRUP IN QUÉBEC to half of year of production. The reserves fluctuate yearly based on Producers of maple syrup in Québec are required to operate within the size of the crop. Each year, the PPAQ may organize a sale of a the framework provided for by the Marketing Act, which empowers portion of its accumulated reserve. There can be no assurance that the PPAQ to manage the production and marketing of Maple syrup TMTC will have access to some of such reserve to offset decreases in Quebec. As part of its regulating and organizing functions, the in production due to weather conditions or that such reserve will PPAQ is responsible for establishing and managing a governance be sufficient to cover a gap in the production in any given year. Any framework aimed at maintaining supply to the market and fair prices decrease in production or incapacity to purchase additional reserves for all producers for bulk maple syrup sold in container of five litres from the PPAQ may affect TMTC’s supply of its sales of maple syrup or more. This includes managing production surpluses and their and other Maple products and, ultimately, its financial results and storage to stabilize the pricing of maple syrup. conditions. Bulk maple syrup may be sold to the PPAQ or to authorized MAPLE SEGMENT RELYING SUBSTANTIALLY ON EXPORTS buyers accredited by the PPAQ. In Québec, nearly 90% of the total The size of the global market for maple syrup is currently estimated production of maple syrup is sold to the PPAQ or the authorized at $1.4 billion, the US being by far the world’s largest importer, buyers, leaving only approximately 10% of the total production being followed by Japan and Germany. Despite the increase of sales of sold directly by the producers to consumers or grocery stores. TMTC maple products that the Canadian market has experienced in recent is an authorized buyer with the PPAQ. The authorized buyer status years, the industry largely relies on the international market. Over the is renewed on an annual basis. There is no certainty that TMTC will last few years, New York, Vermont and Maine have increased their be able to maintain its status as an authorized buyer with the PPAQ. production of maple syrup and have now become competitors of Failure by TMTC to remain an authorized buyer with the PPAQ would Québec, which however remains the largest producer and exporter affect our capacity to supply our bottling facilities and therefore of maple syrup in the world. would impact materially our performance, and financial results and conditions. While we continue to develop our selling efforts outside of Canada, including increasing our sales efforts in countries where the maple The PPAQ, in its capacity as bargaining and sales agent for the syrup market is developing, we are facing high competition from producers of maple syrup in Québec sets the minimum purchase other bottlers and distributers, including from other Canadian and price for Maple syrup for the authorized buyers. The PPAQ sets US companies, for our share of the international market. price based on market intelligence, available supply and expected demand. If the PPAQ increases the price of maple syrup significantly, Our Maple segment international operations are also subject to there could be no assurance that TMTC will be able to recover inherent risks, including change in the free flow of food products such increase from its customers and therefore this could impact between countries, fluctuations in currency values, discriminatory materially the performance, and financial results and condition of fiscal policies, unexpected changes in local regulations and laws and Rogers. the uncertainty of enforcement of remedies in foreign jurisdictions. Such jurisdictions could impose tariffs, quotas, trade barriers and Pursuant to the PPAQ rules and regulations, authorized buyers must other similar restrictions on our international sales and subsidize commit to buying Maple syrup in barrels corresponding to their competing agricultural products. anticipated sales volume. The anticipated volume must be realistic Rogers Sugar Inc.Management’s Discussion & Analysis45 All of these risks could result in increased costs or decreased We seek to manage cybersecurity risk by continuing to invest in revenues, either of which could materially adversely affect our appropriate information technology systems, infrastructure, and financial conditions and results of operations. security, including disaster plans, reviewing our existing technologies, processes and practices on a regular basis and ensuring employees COMPETITION IN THE MAPLE SEGMENT understand and are aware of their role in protecting the integrity of Our Maple segment is the largest branded and private label maple our technological security and information. We rely on third party syrup bottling and distributing company in the world. We have five products and services to assist us in protecting our information major competitors located in Canada and US and also compete technology infrastructure and our proprietary and confidential against a multitude of US bottlers and distributing companies. information. We seek to be proactive in the area of cybersecurity and consequently anticipate that we will continue to incur expenses in A large majority of our Maple segment revenues are made under relation to these increasingly complex threats and risks. the private label line. We anticipate that for a foreseeable future, the relationship with our top private label customers will continue The security measures put in place by Rogers in that regard to be key and will continue to have a material impact on our sales. cannot provide absolute security, and our information technology Although we consider the relationship with our top private label infrastructure may be vulnerable to cyberattacks in the future. The customers to be excellent, the loss of, or a decrease in the amount impacts of such attack may subject our operations to increased of business from, such customers, or any default in payment on their risks, as well as increased costs, and, depending on their ultimate part could significantly reduce our sales and negatively impact the magnitude, could materially and adversely affect our operations, performance and, financial results and conditions of Rogers. performance, and financial results and conditions. FOREIGN EXCHANGE EXPOSURE IN THE MAPLE SEGMENT PANDEMICS, EPIDEMICS OR OTHER PUBLIC A significant portion of sales of maple syrup are exports and HEALTH EMERGENCIES are denominated in US dollars, in Euros or in Australian dollars. Our business, results of operations, financial conditions, cash flows Fluctuations in the value of the Canadian dollar impacts the and stock price can by adversely affected by pandemics, epidemics, profitability of these sales. In order to mitigate against the movement or other public health emergencies, such as the COVID-19 pandemic. of the Canadian dollar versus the US dollar, Euro or Australian dollar, Such events could result in health or other government authorities we enter into foreign exchange hedging contracts with certain requiring the closure of offices or other businesses and could also customers to mitigate the currency risk. result in a general economic decline, impacting economic activity through disruption in supply and delivery chains. There is no assurance that we will be able to continue to mitigate efficiently this exposure to foreign exchange risk in the future. If In March 2020, the World Health Organization characterized effective financial instruments were not available to mitigate such COVID-19 as a pandemic. The COVID-19 pandemic has resulted in risk, there could be a material impact for our performance, and governments around the world implementing stringent measures financial results and conditions. CYBERSECURITY to help control the virus. Over the past few months, the level of criticality of the COVID-19 pandemic has decreased and many governments have eased their respective restrictions on individuals RSI faces various security threats, including cybersecurity threats and businesses. There could be no assurance that the recent to gain unauthorized access to sensitive information, to render decrease in restrictive measures will continue. Should COVID-19 data or systems unusable, or otherwise affect our ability to operate. virus outbreaks reappear and become more widespread, such Our business operations are dependent on various information measures might be imposed again by governments and lead to technology systems. A cyber intrusion, such as, and not limited to, further business disruption. unauthorized access, confidential information leak (or identity theft), malicious software or other violations on systems that control our The effect of COVID-19 on our business may continue for an production operations and financial management could severely extended period of time and the ultimate impact of the pandemic disrupt or otherwise affect our business. Such attacks on our data on Rogers will depend on future developments that are uncertain information systems and the inability to recover promptly could and cannot be predicted including, without limitations, the duration impact individuals, business partners, our operation capabilities, and severity of the pandemic, the duration of government mitigation generate unexpected expenses impacting profitability, damage our measures, the effectiveness of the actions taken to contain and treat reputation and result in additional liabilities. the virus, and the length of time it takes for normal economic and operating conditions to resume. 2022 Annual ReportManagement’s Discussion & Analysis 46 All of our facilities continue to operate as expected and preventive We believe RSI and its subsidiaries are currently in compliance, in measures remain in place in accordance with our emergency all material respects, with health, safety and environmental laws response plan and applicable local government directives. We and regulations. This includes environmental regulations relating continue to actively monitor the situation, which remains uncertain, to the treatment and disposal of wastewater and cooling water, air and may take further actions as required or recommended by emissions, contamination, and spills of substances. However, these authorities. regulations have become progressively more stringent, and we anticipate this trend will continue, potentially resulting in incremental FOOD SAFETY AND CONSUMER HEALTH compliance expenditures. Violation of these regulations can result Our Sugar and Maple business segments are subject to risks that in fines or other penalties, which in certain circumstances can affect the food industry in general, including risks posed by accidental include clean-up costs. Consequently, no assurance can be given contamination, product tampering, consumer product liability, and that additional health, safety and environmental issues relating to the potential costs and disruptions of a product recall. We actively currently known and unknown matters will not require expenditures manage these risks by maintaining strict and rigorous controls and in the future, or result in fines, penalties or other consequences processes in our manufacturing facilities and distribution systems. material to our business and operations and potentially impacting our performance, financial results and conditions. Our facilities are subject to audit by federal health agencies in Canada and similar institutions outside of Canada. We also perform GLOBAL CLIMATE CHANGE our own audits designed to ensure compliance with our internal Global climate change, including the impacts of global warming standards, which are generally at, or higher than, regulatory agency and sudden change in weather conditions causing extreme standards in order to mitigate the risks related to food safety. weather events, represents a risk that could adversely affect both of our business segments. This risk has increased in recent years Consumers, public health officials and government officials are as average temperatures are rising and extreme weather events are increasingly concerned about the public health consequences more frequent. of obesity, particularly among young people. In addition, some researchers, health advocates and dietary guidelines are suggesting The production of refined sugar for our Sugar segment is based that consumption of sugar, in various forms, is a primary cause of on the availability of raw cane sugar and sugar beets. Extreme increased obesity rates and are encouraging consumers to reduce weather events create a risk of damage for the annual crops of sugar their consumption of sugar. Increasing public concern about obesity cane and sugar beet. The size and quality of the crops are directly and other health conditions; possible new or increased taxes on impacted by weather conditions. The adverse effect of global climate products containing sugar, such as sugar-sweetened beverages by change could result in supply disruption and or significant increase government entities to reduce consumption or to raise revenue; shift in purchase price for our Sugar segment. in consumer preferences from sugar to other types of sweeteners; additional governmental regulations concerning the marketing, The production of maple syrup takes place over a period of six to labeling, packaging or sale of products and negative publicity may eight weeks during the months of March and April of each year. reduce demand for our products and each of the aforementioned Maple syrup production is intimately tied to the weather as sap only factors could materially adversely affect our performance, financial flows when temperatures rise above freezing level during the day results and conditions. and drop below it during the night, such temperature difference creating enough pressure to push sap out of the maple tree. Given HEALTH, SAFETY AND ENVIRONMENTAL RISKS the sensitivity of temperature in the process of harvesting maple sap, Our operations carry inherent risk of liability related to employee’s climate change and global warming may have a material impact on health and safety and the environment, including the risk of such process as the maple syrup production season may become government-imposed orders to remedy unsafe conditions or address shorter. Reducing the production season for maple syrup may also potential environmental issues. Compliance with current and future have an impact on the level of production. health, safety and environmental laws remains material for our business to operate efficiently. We have incurred and will continue These risks associated with global climate change could result in to incur expenditures to comply with related federal, provincial and lower sales, increased costs and market disruptions, which could municipal regulations to manage our potential liability exposure. materially adversely affect our performance, and financial results and conditions. Rogers Sugar Inc.Management’s Discussion & Analysis47 EMPLOYEE RELATIONS WITH UNIONIZED EMPLOYEES There can be no assurance that the expansion project will be The majority of our operations are unionized, and agreements are completed, or that it will be completed in the expected timeframe of currently in place in each unionized facility. During fiscal 2022, we two to three years, providing the expected incremental volume at the signed a new collective agreement with the union at our Taber facility. expected cost. Failure by Lantic to complete the expansion project The agreement was renewed in April 2022 at competitive rates for a under the expected conditions could have a material impact on the period of five years. The collective agreement of our Vancouver cane performance, and financial results and conditions of Rogers. refinery is expiring in February 2023. We are anticipating beginning the negotiation of a new agreement shortly with the local union. INTEREST RATE FLUCTUATIONS We have contingency plans in place to mitigate the potential impact operations. We face interest rate risks in respect to the floating rate of labour disruptions at our facilities. However, such potential nature of our revolving short term credit facility. We are mitigating the disruptions in future years could restrict our ability to service our risk of volatility in short term interest rate by hedging our exposure customers in the affected regions, consequently affecting our using interest rate swap agreements. There is no assurance that performance and, financial results and conditions. effective interest rate swap agreements will be available to mitigate We use our revolving credit facility to finance our day-to-day ABILITY TO RETAIN OFFICERS AND KEY EMPLOYEES OR TO ATTRACT NEW TALENT INCOME TAX MATTERS such risk in the future. The officers and other key employees of Rogers, Lantic and TMTC The income of Rogers and its subsidiaries must be computed and play a significant role in our success. Our future performance and is taxed in accordance with Canadian and US tax laws, all of which growth depend to a significant extent on the abilities, experience, may be changed in a manner that could adversely affect the ability and efforts of our management team. Our ability to retain our to pay dividends in the future. There can be no assurance that management team or to attract suitable replacements should key taxation authorities will accept the tax positions adopted including members of the management team leave is dependant on the the determination of the amounts of taxable income, which could competitive nature of the employment market. materially adversely affect dividends. The loss of services from key members of the management team or a The current corporate structure involves a significant amount of limitation in their availability could adversely impact the performance, inter-company or similar debt, generating substantial interest financial results, and condition of Rogers. Further, such a loss could expense, which impacts earnings and therefore income tax payable. be negatively perceived in the capital markets. Our success depends There can be no assurance that taxation authorities will not seek largely upon our continuing ability to attract, develop, and retain to challenge the amount of interest expense deducted. If such skilled employees to meet the needs of the business. a challenge were to succeed against Lantic, it could materially adversely affect the amount of cash transferred to Rogers for RECENTLY ANNOUNCED EXPANSION PROJECT dividend payment. Management believes that the interest expense The completion of our recently announced plant expansion project inherent in the structure is supportable and reasonable considering is subject to several conditions, certain of which are outside of the the terms of the debt owed by Lantic to Rogers. control of Lantic. MANAGEMENT AND OPERATION OF LANTIC The detailed engineering studies and related plans for the project The Board of Directors of Lantic is currently controlled by Lantic have not yet been completed. Until such time as such studies and Capital, an affiliate of Belkorp Industries. As a result, holders of plans are finalized, the expected cost of the project of $160 million shares have limited say in matters affecting the operations of remains subject to change. In addition, in order to begin the project, Lantic; if such holders disagree with the decisions of the Board of Lantic will need to amend existing credit facilities and potentially Directors of Lantic, they have limited recourse. The control exercised enter into additional financing agreements in order to finance the by Lantic Capital over the Board of Directors of Lantic may make it construction stage. Our ability to secure the overall financing for more difficult for others to attempt to gain control of or influence the the project is related to several factors, including market demand activities of Lantic and Rogers. for refined sugar, the final cost estimation for the project and the borrowing conditions of the financial market. 2022 Annual ReportManagement’s Discussion & Analysis48 NON-GAAP MEASURES • EBITDA is defined as earnings before interest, taxes, depreciation, amortization and goodwill impairment. In analyzing results, we supplement the use of financial measures that are calculated and presented in accordance with IFRS with a • Adjusted EBITDA is defined as adjusted results from operating number of non-GAAP financial measures. A non-GAAP financial activities adjusted to add back depreciation and amortization measure is a numerical measure of a company’s performance, expenses. financial position or cash flow that excludes (includes) amounts or is subject to adjustments that have the effect of excluding (including) • Adjusted net earnings is defined as net earnings adjusted for the amounts, that are included (excluded) in most directly comparable adjustment to cost of sales, goodwill impairment and the income measures calculated and presented in accordance with IFRS. tax impact on these adjustments. Non-GAAP financial measures are not standardized; therefore, it may not be possible to compare these financial measures with the • Adjusted gross margin rate per MT is defined as adjusted gross non-GAAP financial measures of other companies having the same margin of the Sugar segment divided by the sales volume of the or similar businesses. We strongly encourage investors to review the Sugar segment. audited consolidated financial statements and publicly filed reports in their entirety, and not to rely on any single financial measure. • Adjusted gross margin percentage is defined as the adjusted gross margin of the Maple segment divided by the revenues generated We use these non-GAAP financial measures in addition to, and in by the Maple segment. conjunction with, results presented in accordance with IFRS. These non-GAAP financial measures reflect an additional way of viewing • Adjusted net earnings per share is defined as adjusted net earnings aspects of the operations that, when viewed with the IFRS results divided by the weighted average number of shares outstanding. and the accompanying reconciliations to corresponding IFRS financial measures, may provide a more complete understanding of • Free cash flow is defined as cash flow from operations excluding factors and trends affecting our business. changes in non-cash working capital, mark-to-market and derivative timing adjustments, financial instruments non-cash The following is a description of the non-GAAP measures we used amount, goodwill impairment and includes deferred financing in the MD&A: charges, funds received from stock options exercised, capital and intangible assets expenditures, net of value-added capital • Adjusted gross margin is defined as gross margin adjusted for “the expenditures, and payments of capital leases. adjustment to cost of sales”, which comprises the mark-to-market gains or losses on sugar futures, foreign exchange forward contracts and embedded derivatives as shown in the notes to the consolidated financial statements and the cumulative timing differences as a result of mark-to-market gains or losses on sugar futures, foreign exchange forward contracts and embedded derivatives. • Adjusted results from operating activities are defined as results from operating activities adjusted for the adjustment to cost of sales and goodwill impairment. 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 our 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) Gross margin Total adjustment to the cost of sales (1) Adjusted Gross Margin Q4 2022 Maple Products $ 1,714 2,103 3,817 Sugar $ 26,758 8,566 35,324 Total $ 28,472 10,669 39,141 Q4 2021 Maple Products $ Sugar $ Total $ 35,671 3,945 39,616 (9,651) 1,055 (8,596) 26,020 5,000 31,020 Results from operating activities 12,662 (51,007) (38,345) 25,549 Total adjustment to the cost of sales(1) 8,566 2,103 10,669 (9,651) Goodwill impairment — 50,000 50,000 — 1,403 1,055 — 26,952 (8,596) — Adjusted results from operating activities 21,228 1,096 22,324 15,898 2,458 18,356 Results from operating activities 12,662 (1,007) (38,345) 25,549 1,403 26,952 Depreciation of property, plant and equipment, amortization of intangible assets and right-of-use assets 4,947 1,681 6,628 4,737 1,694 6,430 Goodwill impairment — 50,000 50,000 — — — EBITDA(1) EBITDA(1) Total adjustment to the cost of sales(1) Adjusted EBITDA Net (loss) earnings Total adjustment to the cost of sales(1) Goodwill impairment Net change in fair value in interest rate swaps(1) Income taxes on above adjustments Adjusted net earnings Net (loss) earnings per share (basic) Adjustment for the above Adjusted net earnings per share (basic) (1) See “Adjusted results” section. 17,609 674 18,283 30,286 3,096 33,382 17,609 8,566 26,175 674 2,103 2,777 18,283 10,669 28,952 30,286 (9,651) 20,634 3,096 1,055 4,152 (45,502) 10,669 50,000 (328) (2,678) 12,161 (0.44) 0.56 0.12 33,382 (8,596) 24,786 16,140 (8,596) — (162) 2,238 9,620 0.16 (0.07) 0.09 2022 Annual ReportManagement’s Discussion & Analysis 50 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO IFRS FINANCIAL MEASURES (CONTINUED) Consolidated results (In thousands of dollars) YTD 2022 Maple Products $ Sugar $ Total $ Sugar $ YTD 2021 Maple Products $ Total $ Gross margin 115,872 14,933 130,805 121,029 18,715 139,744 Total adjustment to the cost of sales(1) 10,296 2,381 12,677 (20,806) 1,873 (18,933) Adjusted Gross Margin 126,168 17,314 143,482 100,223 20,588 120,811 Results from operating activities 60,458 (47,145) Total adjustment to the cost of sales(1) 10,296 2,381 13,313 12,677 77,266 7,231 84,497 (20,806) 1,873 (18,933) Goodwill impairment — 50,000 50,000 — — — Adjusted results from operating activities 70,754 5,236 75,990 56,460 9,104 65,564 Results from operating activities 60,458 (47,145) 13,313 77,266 7,231 84,497 Depreciation of property, plant and equipment, amortization of intangible assets and right-of-use assets 19,380 6,768 26,148 18,180 7,031 25,211 Goodwill impairment — 50,000 50,000 — — — EBITDA(1) EBITDA(1) Total adjustment to the cost of sales(1) Maple Segment non-recurring costs 79,838 9,623 89,461 95,446 14,509 109,708 79,838 10,296 — 9,623 2,381 — 89,461 12,677 — 95,446 14,509 109,708 (20,806) 1,873 (18,933) — 247 247 Adjusted EBITDA(1) 90,134 12,004 102,138 74,640 16,382 91,022 Net (loss) earnings Total adjustment to the cost of sales(1) Goodwill impairment Net change in fair value in interest rate swaps(1) Income taxes on above adjustments Adjusted net earnings Net (loss) earnings per share (basic) Adjustment for the above Adjusted net earnings per share (basic) (1) See “Adjusted results” section. (16,568) 12,677 50,000 (2,800) (2,650) 40,659 (0.16) 0.55 0.39 47,527 (18,933) — 451 4,821 33,866 0.46 (0.13) 0.33 Rogers Sugar Inc.Management’s Discussion & Analysis 51 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO IFRS FINANCIAL MEASURES (CONTINUED) (In thousands of dollars, except for volumes and per share informations) QUARTERS(1) For the fiscal year ended October 1, 2022 Gross margin Total adjustment to the cost of sales(2) Adjusted gross margin Results from operating activities Total adjustment to the cost of sales(2) Goodwill impairment Adjusted results from operating activities Fourth $ 28,472 10,669 39,141 (38,345) 10,669 50,000 22,324 Third $ 24,948 7,706 32,654 8,822 7,706 — 16,528 2022 Second $ 33,899 1,988 35,887 15,499 1,988 — 17,487 First $ 43,486 (7,686) 35,800 27,337 (7,686) — 19,651 Total $ 130,805 12,677 143,482 13,313 12,677 50,000 75,990 Results from operating activities (38,345) 8,822 15,499 27,337 13,313 Depreciation of property, plant and equipment, amortization of intangible assets and right-of-use assets Goodwill impairment EBITDA EBITDA Total adjustment to the cost of sales(2) Adjusted EBITDA Net (loss) earnings Total adjustment to the cost of sales(2) Goodwill impairment Net change in fair value in interest rate swaps(2) Income taxes on above adjustments Adjusted net earnings (1) All quarters are 13 weeks (2) See “Adjusted results” section 6,628 50,000 18,283 18,283 10,669 28,952 (45,502) 10,669 50,000 (328) (2,678) 12,161 6,580 — 15,402 15,402 7,706 23,108 3,138 7,706 — (632) (1,793) 8,419 6,530 — 22,029 22,029 1,988 24,017 8,570 1,988 — (1,246) (190) 9,122 6,410 — 33,747 33,747 (7,686) 26,061 17,226 (7,686) — (594) 2,011 10,957 26,148 50,000 89,461 89,461 12,677 102,138 (16,568) 12,677 50,000 (2,800) (2,650) 40,659 2022 Annual ReportManagement’s Discussion & Analysis 52 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO IFRS FINANCIAL MEASURES (CONTINUED) (In thousands of dollars, except for volumes and per share informations) QUARTERS(1) For the fiscal year ended October 2, 2021 Gross margin Total adjustment to the cost of sales(2) Adjusted gross margin Results from operating activities Total adjustment to the cost of sales(2) Adjusted results from operating activities Fourth $ 39,616 (8,596) 31,020 26,952 (8,596) 18,356 Third $ 30,064 (4,132) 25,932 15,062 (4,132) 10,930 2021 Second $ 31,451 (4,044) 27,407 19,151 (4,044) 15,107 First $ 38,613 (2,161) 36,452 23,332 (2,161) 21,171 Total $ 139,744 (18,933) 120,811 84,497 (18,933) 65,564 Results from operating activities 26,952 15,062 19,151 23,332 84,497 Depreciation of property, plant and equipment, amortization of intangible assets and right-of-use assets EBITDA EBITDA Total adjustment to the cost of sales(2) Maple Segment non-recurring costs Adjusted EBITDA Net earnings Total adjustment to the cost of sales(2) Net change in fair value in interest rate swaps(2) Income taxes on above adjustments Adjusted net earnings (1) All quarters are 13 weeks (2) See “Adjusted results” section 6,430 33,382 33,382 (8,596) — 24,786 16,140 (8,596) (162) 2,238 9,620 6,284 21,346 21,346 (4,132) — 17,214 6,836 (4,132) 613 930 4,247 6,268 25,419 25,419 (4,044) — 21,375 10,778 (4,044) — 1,017 7,751 6,229 29,561 29,561 (2,161) 247 27,647 13,773 (2,161) — 636 25,211 109,708 109,708 (18,933) 247 91,022 47,527 (18,933) 451 4,821 12,248 33,866 Rogers Sugar Inc.Management’s Discussion & Analysis 53 CRITICAL ACCOUNTING ESTIMATES CONTROLS AND PROCEDURES The preparation of our audited consolidated financial statements in In compliance with the provisions of Canadian Securities conformity with IFRS requires us to make estimates and judgements Administrators’ Regulation 52-109, we have filed certificates signed that affect the reported amounts of assets and liabilities, net revenue by the President and Chief Executive Officer (“CEO”) and by the and expenses, and the related disclosures. Such estimates include the Vice-President Finance and Chief Financial Officer (“CFO”), in that, valuation of goodwill, intangible assets, identified assets and liabilities among other things, report on: acquired in business combinations, other long-lived assets, income taxes, the provision for environmental remediation requirements and • their responsibility for establishing and maintaining disclosure pension obligations. These estimates and assumptions are based controls and procedures and internal control over financial on management’s best estimates and judgments. Management reporting for RSI; and evaluates its estimates and assumptions on an ongoing basis using historical experience, knowledge of economics and market factors, • the design and effectiveness of disclosure controls and procedures and various other assumptions that management believe to be and the design and effectiveness of internal controls over financial reasonable under the circumstances. We adjust such estimates reporting. and assumptions when facts and circumstances dictate. Our actual results could differ from these estimates. Changes in those estimates and assumptions are recognized in the period in which the estimates DISCLOSURE CONTROLS AND PROCEDURES are revised. Refer to note 2 (d) to the audited consolidated financial statements for more detail. CHANGES IN ACCOUNTING PRINCIPLES AND PRACTICES NOT YET ADOPTED The CEO and the CFO, have designed the disclosure controls and procedures (“DC&P”), or have caused them to be designed under their supervision, in order to provide reasonable assurance that: • material information relating to the company is made known to the CEO and CFO by others, particularly during the period in which A number of new standards and amendments to standards and the interim and annual filings are being prepared; and interpretations are not yet effective for the year ended October 1, 2022 and have not been applied in preparing these consolidated • information required to be disclosed by the company in its annual financial statements. New standards and amendments to standards filings, interim filings or other reports filed or submitted by it and interpretations that are currently under review include: under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities • Annual Improvements to IFRS Standards 2018-2020 legislation. • Onerous Contracts – Cost of fulfilling a contract (Amendments to IAS 37) As at October 1, 2022, an evaluation was carried out, under the • Reference to the Conceptual Framework (Amendments to IFRS 3) supervision of the CEO and the CFO, of the design and operating • Definition of Accounting Estimates (Amendments to IAS 8) effectiveness of the company’s DC&P. Based on this evaluation, • Disclosure initiative – Accounting Policies (Amendments to IAS 1 the CEO and the CFO concluded that the company’s DC&P and IFRS Practice Statement 2) were appropriately designed and were operating effectively as at • Deferred tax related to assets and liabilities arising from a single October 1, 2022. transaction (Amendments to IAS 12) • Lease liability in a sale and leaseback (Amendments to IFRS 16 Leases) We do not intend to adopt the Amendments in its consolidated financial statements before the annual period beginning on October 2, 2022 and we do not expect the amendments to have a material impact on the consolidated financial statements. 2022 Annual ReportManagement’s Discussion & Analysis 54 INTERNAL CONTROL OVER FINANCIAL REPORTING concerning the following subjects are, or are likely to be, forward- looking statements: The CEO and CFO have also designed internal controls over financial reporting (“ICFR”), or have caused them to be designed • demand for refined sugar and maple syrup under their supervision, in order to provide reasonable assurance • our intention to increase sugar refining capacity and the related regarding the reliability of financial reporting and the preparation of eastern Canada distribution network financial statements for external purposes in accordance with IFRS • future prices of raw sugar using the framework established in “Internal Control – Integrated • expected inflationary pressures on costs Framework (COSO 2013 Framework) published by the Committee • natural gas costs of Sponsoring Organizations of the Treadway Commission (COSO)”. • beet production forecasts As at October  1, 2022, an evaluation was carried out, under the • growth of the maple syrup industry and the refined sugar industry supervision of the CEO and the CFO, of the design and operating • the status of labour contracts and negotiations effectiveness of Rogers’ ICFR. Based on that evaluation, they have • the level of future dividends concluded that the design and operation of the company’s internal • the status of government regulations and investigations controls over financial reporting were effective as at October 1, 2022. • the impact of the COVID-19 pandemic on our operations In designing and evaluating such controls, it should be recognized Forward-looking statements are based on estimates and that, due to inherent limitations, any controls, no matter how well assumptions made by us in light of our experience and perception designed and operated, can provide only reasonable assurance of of historical trends, current conditions and expected future achieving the desired control objectives and may not prevent or developments, as well as other factors that we believe are detect misstatements. Projections of any evaluations of effectiveness appropriate and reasonable in the circumstances, but there can be to future periods are subject to the risk that controls may become no assurance that such estimates and assumptions will prove to be inadequate because of changes in conditions, or that the degree correct. Forward-looking statements involve known and unknown of compliance with the policies or procedures may deteriorate. risks, uncertainties and other factors that may cause actual results Additionally, management is obliged to use judgement in evaluating or events to differ materially from those anticipated in such forward- controls and procedures. CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING looking statements. Actual performance or results could differ materially from those reflected in the forward-looking statements, historical results or current expectations. Readers should also refer to the section “Risks and Uncertainties” in this MD&A for additional information on risk factors and other events that are not within our control. These risks are also referred to in our Annual Information There were no changes in the company’s internal controls over Form in the “Risk Factors” section. financial reporting during the year that have materially affected, or are reasonably likely to materially affect, the company’s internal Although we believe that the expectations and assumptions on control over financial reporting. FORWARD-LOOKING STATEMENTS which forward-looking information is based are reasonable under the current circumstances, readers are cautioned not to rely unduly on this forward-looking information as no assurance can be given that it will prove to be correct. Forward-looking information contained herein is made as at the date of this MD&A and we do not undertake This report contains statements or information that are or may be any obligation to update or revise any forward-looking information, “forward-looking statements” or “forward-looking information” whether a result of events or circumstances occurring after the date within the meaning of applicable Canadian Securities laws. Forward- hereof, unless so required by law. looking statements may include, without limitation, statements and information which reflect our current expectations with respect to future events and performance. Wherever used, the words “may,” “will,” “should,” “anticipate,” “intend,” “assume,” “expect,” “plan,” “believe,” “estimate,” and similar expressions and the negative of such expressions, identify forward-looking statements. Although this is not an exhaustive list, we caution investors that statements Rogers Sugar Inc.Management’s Discussion & AnalysisRESPONSIBILITY FOR FINANCIAL REPORTING 55 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 30, 2022 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2022 Annual Report 56 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 1, 2022 and October 2, 2021; • the consolidated statements of earnings (loss) 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 1, 2022 and October 2, 2021, 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 1, 2022. 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)Notes to Consolidated Financial StatementsRogers Sugar Inc. 57 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 Entity assesses impairment by comparing the carrying amount of the cash- generating unit ("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 estimated 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 has recorded an impairment of $50 million during the year based on fair value less cost to sell with respect to the Maple products CGU. The Entity’s significant assumption in determining the fair value less costs to sell relates to the range of earning multiples. The goodwill balance as of October 1, 2022 is $233 million, of which $3 million relate to the Maple products CGU. WHY THE MATTER IS A KEY AUDIT MATTER We identified the evaluation of the goodwill impairment assessment 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 earnings before interest, tax, depreciation and amortization ("EBITDA") multiples using available market information from third party sources and observed in recent comparable transactions; • Developed a range of an estimated EBITDA amount based on quantitative and qualitative considerations; • Developed a range of recoverable amounts by multiplying the EBITDA multiples by an estimated EBITDA amount; and • Compared the independently developed range of recoverable amounts to the recoverable amount determined by the Entity. 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)Notes to Consolidated Financial Statements2022 Annual Report 58 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)Notes to Consolidated Financial StatementsRogers Sugar Inc. 59 • 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 30, 2022 * CPA auditor, public accountancy permit No. A125211 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2022 Annual Report 60 Consolidated Statements of Earnings (Loss) 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 Goodwill impairment (note 15) Results from operating activities Net finance costs (note 5) Earnings (loss) before income taxes Income tax expense (recovery) (note 6): Current Deferred Net earnings (loss) Net earnings (loss) per share (note 27): Basic Diluted Fiscal years ended October 1, 2022 $ 1,006,134 875,329 130,805 45,783 21,709 50,000 117,492 13,313 17,567 (4,254) 14,275 (1,961) 12,314 (16,568) (0.16) (0.16) Consolidated statements of comprehensive income Net earnings (loss) Other comprehensive income: Items that are or may be reclassified subsequently to net earnings (loss): 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 (loss): Defined benefit actuarial gains (note 20) Income tax on defined benefit actuarial gains (note 6) Other comprehensive income Comprehensive income The accompanying notes are an integral part of these consolidated financial statements. Fiscal years ended October 1, 2022 $ (16,568) 17,323 (4,447) 1,784 14,660 11,332 (2,909) 8,423 23,083 6,515 October 2, 2021 $ 893,931 754,187 139,744 36,955 18,292 — 55,247 84,497 19,439 65,058 17,333 198 17,531 47,527 0.46 0.44 October 2, 2021 $ 47,527 17,973 (4,614) (1,032) 12,327 34,219 (8,786) 25,433 37,760 85,287 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. Consolidated Statements of Financial Position (In thousands of dollars) 61 October 1, 2022 $ October 2, 2021 $ 151 120,207 3,096 246,706 8,868 11,582 390,610 247,969 22,932 24,264 564 18,610 233,007 547,346 937,956 26,000 177,435 — 1,503 3,991 7,643 216,572 100,000 18,529 1,333 76 19,198 149,699 98,901 42,229 429,965 646,537 103,550 300,922 5,085 (160,672) 42,534 291,419 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) 19,451 318,958 937,956 879,930 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: 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)Notes to Consolidated Financial Statements2022 Annual Report 62 Consolidated Statements of Changes in Shareholders’ Equity (In thousands of dollars except number of shares) 2 2 0 2 , 1 r e b o t c O d e d n e r a e y l a c s i f e h t r o F i n g e r o f y c n e r r u c l d e t a u m u c c A l d e t a u m u c c A e e y o p m e l f o n o i t r o p i n a g d e z i l a e r n u l d e t a u m u c c A n o ) s s o l ( y t i u q E t i c i f e D s e c n e r e ff d i i n a g e g d e h s n a p l s e r u t n e b e d l s u p r u s s e r a h s s e r a h s n o i t a l s n a r t w o l f h s a c t i f e n e b l e b i t r e v n o c d e t u b i r t n o C n o m m o C f o r e b m u N $ l a t o T 8 5 9 8 1 3 , ) 4 0 6 6 0 1 ( , ) 9 3 2 ( 3 4 1 3 0 3 3 , 6 7 8 , 2 1 3 2 4 8 , 4 8 7 , 1 — — — — — ) 8 6 5 6 1 ( , ) 8 6 5 6 1 ( , ) 0 0 5 , 7 3 ( ) 0 0 5 , 7 3 ( 9 1 4 , 1 9 2 ) 2 7 6 0 6 1 ( , — — — — — — 4 8 7 , 1 5 4 5 , 1 $ $ — — — — $ 0 4 2 , 7 — — 6 7 8 , 2 1 — — — — — — 3 2 4 8 , — — — — — — — — — ) 8 0 1 ( 3 4 1 — — — — — — — — — — — — — — — $ $ $ $ 0 5 4 , 2 1 5 8 0 5 , , 7 8 8 0 0 3 9 3 1 , 0 0 1 , 3 2 9 6 8 6 3 0 1 , 6 1 1 , 0 2 3 7 8 0 2 , 5 8 0 5 , , 2 2 9 0 0 3 0 5 5 3 0 1 , , 5 4 0 2 7 3 4 0 1 , ) 4 2 e t o n ( n o i t a s n e p m o c d e s a b - e r a h S ) 9 e t o n ( x a t f o t e n , s e g d e h w o l f h s a C , i s n a g l a i r a u t c a t i f e n e b d e n i f e D ) 0 2 e t o n ( x a t f o t e n s n o i t a r e p o n g e r o f i f o n o i t a l s n a r T 2 2 0 2 , 1 r e b o t c O , e c n a a B l 1 2 0 2 , 2 r e b o t c O , e c n a a B l r a e y e h t r o f s s o l t e N ) 3 2 e t o n ( s d n e d v D i i 1 1 4 3 , 2 2 1 , 5 8 6 ) 3 2 e t o n ( s e r a h s f o e c n a u s s I . s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o c e s e h t f o t r a p l a r g e t n i i n a e r a s e t o n g n y n a p m o c c a e h T (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. Consolidated Statements of Changes in Shareholders’ Equity (continued) (In thousands of dollars except number of shares) 63 T h e a c c o m p a n y n g n o t e s a r e a n i i n t e g r a l p a r t o f t h e s e c o n s o l i d a t e d f i n a n c a i l s t a t e m e n t s . i i D v d e n d s ( n o t e 2 3 ) N e t e a r n n g s i f o r t h e y e a r l B a a n c e , O c t o b e r 3 , 2 0 2 0 l B a a n c e , O c t o b e r 2 , 2 0 2 1 T r a n s l a t i o n o f i f o r e g n o p e r a t i o n s n e t o f t a x ( n o t e 2 0 ) D e f i n e d b e n e f i t a c t u a r i a l g a n s i , I s s u a n c e o f s h a r e s ( n o t e 2 3 ) C a s h f l o w h e d g e s , n e t o f t a x ( n o t e 9 ) S h a r e - b a s e d c o m p e n s a t i o n ( n o t e 2 4 ) , 1 0 3 6 8 6 9 2 3 , 1 0 0 , 1 3 9 3 0 0 8 8 7 , , 5 0 8 5 , 1 2 4 5 0 7, 2 4 0 ( 2 3 9 ) , ( 1 0 6 6 0 4 ) , 3 1 8 9 5 8 — — — — , 1 5 0 0 0 0 — — — — — — 6 8 7 — — — — — 1 0 7 ( 1 4 ) — — — — — — — — — , 2 5 4 3 3 — — — — — — , 1 3 3 5 9 — — — — — — , 1 0 3 5 3 6 9 2 3 , , 9 9 4 5 2 3 0 0 7 9 4 , , 5 0 8 5 , ( 1 2 9 8 3 ) ( 6 , 1 1 9 ) $ $ $ $ $ ( 1 , 0 3 2 ) — — — — — — 7 9 3 $ N u m b e r o f C o m m o n C o n t r i b u t e d s h a r e s s h a r e s s u r p u s l E q u i t y ( l o s s ) o n d e b e n t u r e s c o n v e r t i b e l p o r t i o n o f l e m p o y e e A c c u m u a t e d l b e n e f i t l p a n s h e d g e g a n i c a s h f l o w A c c u m u a t e d l u n r e a l i z e d g a n i i d ff e r e n c e s t r a n s l a t i o n c u r r e n c y f o r e g n i A c c u m u a t e d l — — — — — , 2 5 4 3 3 ( 1 , 0 3 2 ) , 1 3 3 5 9 1 0 7 6 7 3 ( 3 7, 3 0 0 ) ( 3 7, 3 0 0 ) 4 7, 5 2 7 , ( 1 1 6 8 3 1 ) D e f i c i t $ 4 7, 5 2 7 2 7 0 , 1 9 1 T o t a l $ F o r t h e f i s c a l y e a r e n d e d O c t o b e r 2 , 2 0 2 1 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2022 Annual Report 64 Consolidated Statements of Cash Flows (In thousands of dollars) Cash flows from operating activities: Net earnings (loss) Adjustments for: Depreciation of property, plant and equipment and right-of-use assets (note 4) Amortization of intangible assets (note 4) Changes in fair value of derivative financial instruments included in cost of sales Income tax expense (note 6) Pension contributions Pension expense Net finance costs (note 5) Loss (gain) on disposal of property, plant and equipment (note 10) Share-based compensation - equity settled (note 24) Share-based compensation - cash settled (note 24) Goodwill impairment (note 15) 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) 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 (decrease) 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 1, 2022 $ October 2, 2021 $ (16,568) 22,283 3,865 6,831 12,314 (10,363) 10,925 17,567 44 143 5,779 50,000 102,820 (23,709) (65,811) (4,292) 51,707 (1,090) (43,195) 59,625 (17,493) (20,580) 21,552 (37,439) — 26,000 (5,150) — 3,303 (268) (13,554) (23,635) (95) (23,730) 240 (15,492) 15,643 151 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 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 65 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 1, 2022 and October 2, 2021 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 the packaging, marketing and distribution of maple products. The Company’s fiscal year ends on the Saturday closest to the end of September. All references to 2022 and 2021 represent the years ended October 1, 2022 and October 2, 2021. 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 30, 2022. (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)Notes to Consolidated Financial Statements2022 Annual Report 66 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: 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: 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)Notes to Consolidated Financial StatementsRogers Sugar Inc. 67 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 (loss) of the period. (C) FOREIGN OPERATIONS: The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on business combinations, are translated to Canadian dollars at exchange rates at the reporting date. The income and expenses of foreign operations are translated to Canadian dollars at the average exchange rate in effect during the reporting period. Foreign currency differences are recognized in other comprehensive income (loss) in the accumulated foreign currency translation differences account. When a foreign operation is disposed of in its entirety or partially such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If the Company disposes of part of its interest in a subsidiary but retains control, then the relevant proportion of the cumulative amount is reattributed to non-controlling interest. When the Company disposes of only part of an associate or joint venture while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to income or loss. (D) CASH: Cash includes cash on hand, bank balances and bank overdraft when the latter forms an integral part of the Company’s cash management. (E) INVENTORIES: Inventories are valued at the lower of cost and net realizable value. The cost of inventories is determined on a first-in, first-out basis and includes expenditures incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2022 Annual Report 68 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)Notes to Consolidated Financial StatementsRogers Sugar Inc. 69 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)Notes to Consolidated Financial Statements2022 Annual Report 70 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. Fair value less costs to sell (the “FVLCS”) is the estimated amount obtainable from the sale of the CGU in an arm’s-length transaction between knowledgeable, willing parties, less the costs of disposal. In assessing the fair value less cost to sell, the market approach is used which incorporated comparable transaction multiples which were applied to adjusted EBITDA less an estimate of the cost to sell to derive a range of the FVLCS. 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. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 71 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (J) EMPLOYEE BENEFITS (CONTINUED): (i) Pension benefit plans (continued): Defined benefit plans The Company maintains some contributory defined benefit plans that provide for pensions to employees based on years of service and the employee’s compensation. The Company’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior years, discounting that amount and deducting the fair value of any plan assets. The discount rate is the yield at the reporting date on AA credit-rated bonds that have maturity dates approximating the terms of the Company’s obligations and that are denominated in the same currency in which the benefits are expected to be paid. The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements. 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)Notes to Consolidated Financial Statements2022 Annual Report 72 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)Notes to Consolidated Financial StatementsRogers Sugar Inc. 73 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (L) FINANCIAL INSTRUMENTS: (i) IFRS 9, Financial Instruments: The Company initially recognizes trade receivables when they are originated and other 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 except for trade receivables without a financing component which are initially measured at the transaction price. In the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability are added to or deducted from the fair value. (ii) Financial assets: Financial assets are classified into the following categories: a. Financial assets measured at amortized cost: A financial asset is subsequently measured at amortized cost, using the effective interest method and net of any impairment loss, if: • • the asset is held within a business model whose objectives is to hold assets in order to collect contractual cash flows; and the contractual terms of the financial asset give rise, on specified dates, to cash flows that are solely payments of principals and/or interest. The Company 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 through profit or loss: These assets are measured at fair value through profit or loss 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 derivative financial instruments. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2022 Annual Report 74 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (L) FINANCIAL INSTRUMENTS (CONTINUED): (iii) Financial liabilities: Financial liabilities are classified into the following categories: a. Financial liabilities measured at amortized cost: Financial liability subsequently measured at amortized cost, is accounted for using the effective interest method. b. Financial liabilities measured at fair value through profit or loss: Financial liabilities at fair value through profit or loss are initially recognized at fair value and are re-measured at each reporting date with any changes therein recognized in net earnings (loss). The Company currently has no significant financial liabilities measured at fair value except for derivative financial instruments. The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled or expired. Financial assets and liabilities are offset and the net amount is presented in the consolidated statements of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. (iv) Fair values of financial instruments: Financial assets and liabilities measured at fair value use a fair value hierarchy to prioritize the inputs used in measuring fair value as follows: Level 1 – valuation based on observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 – valuation techniques based on inputs that are other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (prices) or indirectly (derived from prices); and Level 3 – valuation techniques with observable market inputs (involves assumptions and estimates by management of how market participants would price the asset or liability). a. Cash: 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: 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. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 75 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (L) FINANCIAL INSTRUMENTS (CONTINUED): (iv) Fair values of financial instruments (continued): b. Derivative financial instruments: (continued) 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 a portion of interest rate swap agreements were designated as cash flow hedges and qualified for hedge accounting. For sugar futures contracts, the amounts are netted with the variation margins paid or received to/from brokers at the end of the reporting period. c. 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. d. 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. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2022 Annual Report 76 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (L) FINANCIAL INSTRUMENTS (CONTINUED): (iv) Fair values of financial instruments (continued): e. Share capital: Common shares Common shares are classified as equity. Incremental costs directly attributable to the issue of common shares are recognized as a deduction from equity, net of any tax effects. Dividends to the equity holders are recorded in equity. Repurchase of share capital When share capital recognized as equity is repurchased for cancellation, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognized as a deduction from equity. The excess of the purchase price over the carrying amount of the shares is charged to deficit. (v) Cash flow hedges: When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecasted transaction that could affect net earnings (loss), the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income 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 (loss). If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, or exercised, the hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognized in other comprehensive income remains in accumulated other comprehensive income (loss) until the forecasted transaction affects profit or loss. If the forecasted transaction is no longer expected to occur, then the balance in accumulated other comprehensive income (loss) is recognized immediately in net earnings (loss). When the hedged item is a non-financial asset, the amount recognized in other comprehensive income is transferred to net earnings (loss) in the same period that the hedged item affects net earnings (loss). The Company has designated as hedging items its natural gas futures and a portion of 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)Notes to Consolidated Financial StatementsRogers Sugar Inc. 77 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 (loss). Net change in fair value of interest rate swap that do not meet hedge accounting is recognized in net finance costs. 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)Notes to Consolidated Financial Statements2022 Annual Report 78 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (P) EARNINGS PER SHARE: The Company presents basic and diluted earnings (loss) per share ("EPS") data for its common shares. Basic EPS is calculated by dividing the profit or loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to common shareholders and the weighted average number of common shares outstanding, for the effects of all dilutive potential common shares from the conversion of the convertible debentures. (Q) NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED: A number of new standards and amendments to standards and interpretations are not yet effective for the year ending October 1, 2022 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) Lease liability in a sale and leaseback (Amendments to IFRS 16 Leases) The Company does not intend to adopt the Amendments in its consolidated financial statements before the annual period beginning on October 2, 2022. 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)Notes to Consolidated Financial StatementsRogers Sugar Inc. 4. DEPRECIATION AND AMORTIZATION EXPENSES Depreciation and amortization expenses were charged to the consolidated statements of earnings (loss) and comprehensive income as follows: 79 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. NET FINANCE COSTS Recognized in net earnings (loss): Interest expense on convertible unsecured subordinated debentures, including accretion of $969 (2021 - $917) (note 21) Interest on revolving credit facility Interest on senior guaranteed notes, including accretion of of $116 (2021- $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) Net finance costs For the fiscal years ended October 1, 2022 $ October 2, 2021 $ 17,276 492 17,768 2,836 1,679 4,515 3,865 26,148 16,144 555 16,699 2,849 1,833 4,682 3,830 25,211 For the fiscal years ended October 1, 2022 $ October 2, 2021 $ 8,413 5,063 3,595 1,240 1,057 1,000 (2,801) 17,567 8,423 5,843 1,527 1,187 1,150 858 451 19,439 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2022 Annual Report 80 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 1, 2022 $ October 2, 2021 $ 15,263 (988) 14,275 (2,774) 813 (1,961) 12,314 17,931 (598) 17,333 (368) 566 198 17,531 For the fiscal years ended October 1, 2022 October 2, 2021 Before tax Tax effect Net of tax Before tax Tax effect Net of tax $ 17,323 11,332 $ (4,447) (2,909) $ 12,876 8,423 $ 17,973 34,219 $ (4,614) (8,786) $ 13,359 25,433 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 (loss) before provision for income taxes. The reasons for the difference and the related tax effects are as follows: Earnings (loss) 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 impairment of goodwill Non-deductible expenses (income) Adjustments for prior year periods October 1, 2022 October 2, 2021 For the fiscal years ended % — 27.00 0.93 (317.36) (4.18) 4.12 (289.49) $ (4,254) (1,149) (40) 13,500 178 (175) 12,314 % — 27.00 0.15 — (0.15) (0.05) 26.95 $ 65,058 17,566 94 — (97) (32) 17,531 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 7. TRADE AND OTHER RECEIVABLES Trade receivables Less expected credit loss Other receivables Initial margin deposits with commodity brokers 81 October 1, 2022 October 2, 2021 $ 110,758 (567) 110,191 8,277 1,739 120,207 $ 80,430 (536) 79,894 13,493 2,159 95,546 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 2022 were $0.1 million (October 2, 2021 - $0.2 million). All bad debt write-offs are charged to administration and selling expenses. • Less than 2% of trade receivables are outstanding for more than 90 days (October 2, 2021 - less than 1%), while over 84% are current (less than 30 days) as at October 1, 2022 (October 2, 2021 - 80%). 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 1, 2022 October 2, 2021 $ 166,125 10,000 38,146 214,271 15,795 16,640 246,706 $ 99,323 8,435 42,787 150,545 14,986 14,760 180,291 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 1, 2022, inventories recognized as cost of sales amounted to $862.7 million (October 2, 2021 - $773.1 million). (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2022 Annual Report 82 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (A) CLASSIFICATION AND FAIR VALUES: The following table shows the carrying amount and fair values of financial assets and financial liabilities, including their level in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value (which is the case for cash, trade and other receivables, bank overdraft, revolving credit facility and trade and other). October 1, 2022 Carrying Amount Fair Value Fair value - hedging Fair value through instruments profit or loss Amortized cost $ $ $ Fair value hierarchy level Amount $ $ Total $ Financial assets measured at fair value Sugar futures contracts Foreign exchange forward contracts Natural gas futures contracts used for hedging Interest rate swaps used for hedging Other interest rate swaps — — 21,634 5,383 561 237 — — — 2,377 27,017 3,175 — — — — — — 561 237 Level 1 Level 2 561 237 21,634 Level 2 21,634 5,383 Level 2 2,377 Level 2 5,383 2,377 30,192 Financial assets not measured at fair value Cash Trade and other receivables Financial liabilities measured at fair value Foreign exchange forward contracts Financial liabilities not measured at fair value Revolving credit facility Trade and other payables Senior guaranteed notes Convertible unsecured subordinated debentures — — — — — — — — — — — — — 151 151 120,207 120,207 120,358 120,358 (7,719) (7,719) — — (7,719) Level 2 (7,719) (7,719) — — — (126,000) (126,000) (177,435) (177,435) (98,901) (98,901) Level 2 (85,200) — (149,699) (149,699) Level 1 (152,100) — (552,035) (552,035) (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (A) CLASSIFICATION AND FAIR VALUES: (CONTINUED) 83 Carrying Amount Fair Value Fair value - hedging instruments Fair value through profit or loss Amortized cost $ $ $ Fair value hierarchy level $ Amount $ Level 1 Level 2 120 145 Total $ 120 145 11,502 Level 2 11,502 11,767 120 145 — 265 — — — — October 2, 2021 Financial assets measured at fair value Sugar futures contracts Foreign exchange forward contracts Natural gas futures contracts used for hedging Financial assets not measured at fair value Cash Trade and other receivables Financial liabilities measured at fair value Sugar futures contracts Foreign exchange forward contracts Interest rate swaps used for hedging Other interest rate swaps — — 11,502 11,502 — — — — — (1,809) — (1,809) Financial liabilities not measured at fair value Revolving credit facility Trade and other payables Senior guaranteed notes Convertible unsecured subordinated debentures — — — — — — — — 15,643 95,546 111,189 15,643 95,546 111,189 (142) (213) — (471) (826) — — — — — — — — (142) (213) Level 1 Level 2 (1,809) Level 2 (471) Level 2 (2,635) (142) (213) (1,809) (471) (100,000) (100,000) (119,940) (119,940) (98,785) (98,785) Level 2 (98,785) — (147,742) (147,742) Level 1 (160,200) — ((466,467) (466,467) (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2022 Annual Report 84 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (B) DERIVATIVES AND HEDGING: As at October 1, 2022 and October 2, 2021, the Company’s financial derivatives carrying values were as follows: Financial Assets Financial Liabilities Current Non-current Current Non-current October 1, 2022 October 1, 2022 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 $ 561 — 965 7,858 2,198 11,582 $ $ — 237 1,412 13,776 3,185 18,610 — 7,643 — — — 7,643 $ — 76 — — — 76 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 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 85 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (B) DERIVATIVES AND HEDGING: (CONTINUED) For the fiscal years ended Charged to cost of sales Unrealized gain (loss) Charged to finance income (costs) Other comprehensive income October 1, 2022 October 2, 2021 October 1, 2022 October 2, 2021 October 1, 2022 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 swap $ $ $ — — $ — — 1,325 (7,532) — 3,431 4,639 — 2,801 (451) $ — — — $ — — — — — — — — — — — (6,207) 8,070 2,801 (451) 10,132 7,191 17,323 13,077 4,896 17,973 The following table summarizes the Company’s hedging components of accumulated other comprehensive income (loss) ("AOCI") as at October 1, 2022 and October 2, 2021: October 1, 2022 October 2, 2021 Natural gas futures contracts 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 (loss) Income taxes Ending AOCI – net of income taxes $ 12,212 (3,646) 8,566 10,132 — (2,601) 16,097 Interest rate swap $ (2,617) 1,291 (1,326) 7,191 — (1,846) 4,019 Natural gas futures contracts $ (865) (289) (1,154) 13,077 — (3,357) 8,566 Total $ 9,595 (2,355) 7,240 17,323 — (4,447) 20,116 Interest rate swap $ (7,513) 2,548 (4,965) 5,709 (813) (1,257) (1,326) Total $ (8,378) 2,259 (6,119) 18,786 (813) (4,614) 7,240 For the fiscal year ended October 1, 2022, the derivatives designated as cash flow hedges were considered to be fully effective and no ineffectiveness has been recognized in net earnings (loss), except for $50.0 million of interest rate swap agreements that became ineffective following the issuance of senior guaranteed notes in 2021 and hedging is no longer expected to be effective in the future. Approximately $8.2 million of net gains presented in accumulated other comprehensive income (loss) are expected to be reclassified to net earnings (loss) within the next twelve months. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2022 Annual Report 86 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (C) 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. 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 1, 2022 and October 2, 2021 are as follows: October 1, 2022 October 2, 2021 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$) 113,148 45,243 4,195 110,436 44,277 4,046 (2,712) (966) (149) 162,586 158,759 (3,827) 85,184 12,070 274 97,528 101,384 15,045 307 116,736 16,200 2,975 33 19,208 (139,108) (132,030) 7,078 (88,859) (103,447) (14,588) (28,224) (28,157) (56) (54) (167,388) (160,241) (4,802) (1,482) 67 2 7,147 3,320 1.3814 4,586 (4,025) 561 (312) (79) (350) (89) (38) (10) (89,250) (103,886) (14,636) 8,278 12,850 4,572 1.2635 5,776 (5,798) (22) Purchases 0 - 12 months 12 - 24 months Over 24 months Sales 0 - 12 months 12 - 24 months Over 24 months Net position Foreign exchange rate at the end of the period Net value (CA$) Margin call (receipt) payment at year-end Net asset (liability) (CA$) (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 87 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (C) COMMODITY PRICE RISK: (CONTINUED) (i) Sugar: All sugar futures contracts are traded through a large exchange clearing house on the New York Intercontinental Exchange. Regulation of the US futures industry is primarily self-regulation, with the role of the Federal Commodity Futures Trading Commission being principally an oversight role to determine that self-regulation is continuous and effective. The exchange clearing house used is one of the world’s largest capitalized financial institutions with excellent long-term credit ratings. Daily cash settlements are mandatory (margin calls) for resulting gains and/or losses from futures trading for each customer’s account. Due to the above, the Company does not anticipate a credit risk from the raw sugar futures derivative instruments As at October 1, 2022 and October 2, 2021, the Company had the following sugar futures contracts: Purchases Sales Beet pre-hedge October 1, 2022 Current average value Current contractual amount (US$) (US$) Volume M.T. 376.10 377.65 — n/a 158,759 276,927 (160,241) (226,480) — (15,749) (1,482) 34,698 Volume M.T. 422,122 (424,307) — (2,185) Foreign exchange rate at the end of the period Net value (CA$) 1.3814 (2,047) October 2, 2021 Current average value Current contractual amount (US$) 421.54 429.97 413.20 n/a (US$) 116,736 (97,379) (6,507) 12,850 1.2635 16,236 If, on October 1, 2022, 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 (loss) would have been a decrease of approximately $0.2 million (calculated only on the point-in-time exposure on October 1, 2022) (October 2, 2021 - increase in net earnings (loss) of $3.6 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 (loss) would have been an increase of approximately $0.1 million (October 2, 2021 - decrease in net earnings (loss) of $1.4 million for US$0.02 decrease). Except for the beet pre-hedge, management believes that the above is not representative, as the Company has physical raw sugar purchases and refined sugar selling contracts that would offset most gains or losses realized from such decrease or increase in the commodity value, when such contracts are liquidated. The Company had no beet pre-hedge contracts as at October 1, 2022. 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 (loss) 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 (loss) would have been an increase of approximately $0.6 million. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2022 Annual Report 88 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (C) COMMODITY PRICE RISK: (CONTINUED) (ii) Natural gas: In order to mitigate the overall price risks in the purchase of natural gas for use in the manufacturing operations, the Board approved the use of natural gas futures contracts. Natural gas futures contracts cannot be entered into for speculative reasons. The Company monitors its positions and the credit ratings of its counterparties and does not anticipate losses due to counterparty’s non-performance. The Company’s natural gas contracts as well as the fair value of these contracts relating to purchases of natural gas are as follows: October 1, 2022 October 2, 2021 Contracts Original Current futures (10,000 contractual contractual amount amount MM BTU) Fair value gain/ (loss) Contracts (10,000 MM BTU) Original future contractual amount Current contractual amount Fair value gain/ (loss) Purchases Less than 1 year 1 to 2 years 2 to 3 years 3 years and over Foreign exchange rate at the end of period Net asset (liability) (CA$) (US$) (US$) (US$) (US$) (US$) (US$) 9,445 4,788 4,673 6,167 15,134 5,689 7,964 8,188 9,448 3,176 3,515 3,281 4,475 5,200 4,770 7,776 974 25,073 40,734 15,661 933 22,221 1.3814 21,634 9,128 7,371 5,761 9,064 31,324 4,653 2,171 991 1,288 9,103 1.2635 11,502 The forecasted purchases of natural gas, the hedged items, are used for calculating the hedge ineffectiveness. No ineffectiveness was recognized in net earnings (loss) as the change in value of the hedging instrument for calculating ineffectiveness was the same or smaller as the change in value of the hedged items used for calculating the ineffectiveness. If, on October 1, 2022, the natural gas market price would have increased by US$1.00, and all other variables remained constant, net earnings (loss) would have increased by $10.1 million (October 2, 2021 – increase in net earnings (loss) of $8.7 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 (loss). 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)Notes to Consolidated Financial StatementsRogers Sugar Inc. 89 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (D) 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 US dollars for both the sugar and maple products segments; purchases of natural gas; sales of by-products; Taber refined sugar and by-products sales; ocean freight; and purchases of property, plant and equipment for both the sugar and maple products segments. The Company mitigates its exposure to foreign currency by entering into forward exchange contracts. 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 US 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 US customers, using a foreign exchange forward contract. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2022 Annual Report 90 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (D) CURRENCY RISK: (CONTINUED) The Company’s foreign exchange contracts as at October 1, 2022 and October 2, 2021 are as follows: October 1, 2022 Original contract value (US$/EUR/AUD$) 75,969 12,882 2,720 91,571 (147,127) (9,009) (440) (156,576) (65,005) Original contract value (CA$) 98,821 16,718 3,552 119,091 (191,697) (11,511) (553) (203,761) (84,670) Current contract value (CA$) 104,840 17,632 3,707 126,179 (203,043) (12,336) (598) (215,977) (89,798) Fair value gain/(loss) (CA$) 6,019 914 155 7,088 (11,346) (825) (45) (12,216) (5,128) 500 688 691 3 (34,788) (549) — (35,337) (34,837) (2,457) (1,019) (3,476) (45,801) (709) — (46,510) (45,822) (3,304) (1,381) (4,685) (48,017) (756) — (48,773) (48,082) (3,371) (1,410) (4,781) (3,102) (3,102) (2,750) (2,750) (2,748) (2,748) (2,216) (47) — (2,263) (2,260) (67) (29) (96) 2 2 SUGAR Purchases U.S. dollars Less than 1 year 1 to 2 years 2 to 3 years Sales U.S. dollars Less than 1 year 1 to 2 years 2 to 3 years Total U.S. dollars - Sugar MAPLE PRODUCTS Purchases U.S. dollars Less than 1 year Sales U.S. dollars Less than 1 year 1 to 2 years 2 to 3 years Total U.S. dollars - Maple MAPLE PRODUCTS Sales EUR Less than 1 year 1 to 2 years Total EUR - Maple MAPLE PRODUCTS Sales AUD Less than 1 year Total AUD - Maple Total Foreign Exchange (106,420) (137,927) (145,409) (7,482) (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (D) CURRENCY RISK: (CONTINUED) Original contract value (US$/EUR/AUD$) 64,080 10,074 1,345 75,499 (106,467) (8,033) (719) (115,219) (39,720) October 2, 2021 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 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) 91 Fair value gain/(loss) (CA$) (523) (41) 7 (557) 347 146 7 500 (57) (37) (37) (174) 8 — (166) (179) 30 30 176 176 (67) SUGAR Purchases U.S. dollars Less than 1 year 1 to 2 years 2 to 3 years Sales U.S. dollars Less than 1 year 1 to 2 years 2 to 3 years Total U.S. dollars - Sugar SUGAR Purchases EUR Less than 1 year Total EUR - Sugar MAPLE PRODUCTS Purchases U.S. dollars Less than 1 year Sales U.S. dollars Less than 1 year 1 to 2 years 2 to 3 years Total U.S. dollars - Maple MAPLE PRODUCTS Sales EUR Less than 1 year Total EUR - Maple MAPLE PRODUCTS Sales AUD Less than 1 year Total AUD - Maple Total Foreign Exchange (71,419) (88,569) (88,636) (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2022 Annual Report 92 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (D) CURRENCY RISK: (CONTINUED) The Company had the following significant foreign currency exposures at year-end: Financial instruments measured at amortized cost: Cash Trade and other receivables, including initial margin deposits Trade and other payables Financial instruments at cash flow hedging instruments or at fair value through profit or loss: Net current contractual amount of raw sugar futures contracts Natural gas contracts Total exposure from above Forward exchange contracts Gross exposure Sugar purchases priced not received Committed future sales in US dollars Ocean freight Other Net exposure October 1, 2022 (US$) October 2, 2021 (US$) 5,602 29,991 (9,883) 25,710 1,482 (25,074) (23,592) 2,118 (99,842) (97,724) (162,315) 236,570 (289) 67 (23,691) 6,107 29,430 (2,883) 32,654 (12,850) (22,221) (35,071) (2,417) (65,346) (67,763) (114,172) 167,190 (1,770) (1,716) (18,231) As at October 1, 2022, the US/Can. Exchange rate was $1.3814 (October 2, 2021 - $1.2635). 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 (loss) of $3.6 million, (October 2, 2021 – increase in net earnings (loss) of $2.5 million) while a 5-cent decrease would have an equal but opposite effect on net earnings (loss). Management believes that the impact on the gross exposure is not representative as it needs to be adjusted for 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. 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 (loss) by $0.9 million in 2022 (October 2, 2021 – increase in net earnings (loss) of $0.7 million) while a decrease would have an equal but opposite effect on net earnings (loss). (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 93 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (D) CURRENCY RISK: (CONTINUED) 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 US 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 US dollars. As all beet sugar is paid in Canadian dollars, Taber sales contracts in US dollars need to be financially hedged for currency exposure. Included in other, is the US 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 US dollars. For these sales, the raw sugar value is not hedged, as the corresponding futures contract is also in US dollars. Only the US dollar refined sugar margin and ocean freight contribution are hedged for the currency exposure. Ocean freight for raw sugar is denominated in US dollars and therefore forward exchange contracts are used to cover the foreign exchange exposure. (E) 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. In order to fix the interest rate on a substantial portion of the expected drawdown of the revolving credit facility, the Company enters into interest rate swap agreements. The outstanding swap agreements by maturity are as follows: Fiscal year contracted Date Fiscal 2019 Fiscal 2019 Fiscal 2020 Fiscal 2020 Fiscal 2020 Fiscal 2020 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% Total value $ 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 1, 2022, the Company has a short-term cash borrowing of $26.0 million (October 2, 2021 - $Nil million) and a long-term cash borrowing of $198.9 million (October 2, 2021 - $198.8 million). The Company has $98.9 million in senior guaranteed notes bearing fixed interest rate and therefore may be exposed to fair value variance (October 2, 2021 - $98.8 million). 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. 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. 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 1, 2022, if interest rates had been 50 basis points higher, considering all borrowings not covered by the interest rate swap agreements, net earnings (loss) would have been $0.1 million lower (October 2, 2021 - $0.2 million lower net earnings (loss)) while a decrease would have an equal but opposite effect on net earnings (loss). (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2022 Annual Report 94 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (F) 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. (G) 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: 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) October 1, 2022 Carrying Contractual cash flows amount 0 to 12 months 12 to 24 months $ $ 126,000 126,000 $ — 177,435 177,435 177,435 98,901 100,000 — 402,336 403,435 177,435 $ — — — — (561) (2,047) (29,831) 22,268 Forward exchange contracts (net) (1) 7,482 (137,927) (144,043) Interest on swap agreements (2,377) 1,549 737 3,117 572 After 24 months $ 126,000 — 100,000 226,000 5,516 2,999 240 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. (21,634) 56,270 (5,383) 4,719 20,906 2,152 (22,473) (77,436) (150,079) 379,863 325,999 27,356 11,001 1,850 38,808 38,808 24,363 717 33,835 259,835 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) (G) LIQUIDITY RISK: (CONTINUED) 95 October 2, 2021 Carrying amount Contractual cash flows 0 to 12 months 12 to 24 months $ $ 100,000 119,940 98,785 318,725 100,000 119,940 100,000 319,940 $ — 119,940 — 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) 1,809 (9,133) 28,076 6,615 5,654 1,896 (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. The convertible unsecured subordinated debentures of $149.7 million (October 2, 2021 - $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 1, 2022, the Company had an unused available line of credit of $74.0 million (October 2, 2021 - $165.0 million), a cash balance of $0.2 million (October 2, 2021 - $15.6 million). (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2022 Annual Report 96 10. PROPERTY, PLANT AND EQUIPMENT Cost or deemed cost Balance at October 3, 2020 Additions Transfers Disposals Effects of movements in exchange rate Balance at October 2, 2021 Additions Transfers Disposals Effects of movements in exchange rate Balance at October 1, 2022 Accumulated depreciation Balance at October 3, 2020 Depreciation for the year Disposals Effect of movements in exchange rate Balance at October 2, 2021 Depreciation for the year Disposals Balance at October 1, 2022 Net carrying amounts At October 2, 2021 At October 1, 2022 Land Buildings Machinery and equipment $ $ $ Furniture and Construction in progress fixtures $ $ Barrels $ Total $ 18,089 80,233 335,306 2,733 — — — — 53 4,065 — — 3,395 10,253 (564) (2) 71 — — (7) 7,556 123 466 — — 17,711 461,628 24,610 14,784 — — 28,252 — (564) (9) 18,089 84,351 348,388 2,797 8,145 27,537 489,307 — — — — 61 1,617 — 4 288 11,824 (117) 3 153 — — 2 151 721 — 4 23,402 24,055 (14,162) — — — (117) 13 18,089 86,033 360,386 2,952 9,021 36,777 513,258 — — — — — — — — 28,292 2,297 — — 197,065 13,060 (348) — 1,327 440 — — 4,559 902 — — 30,589 209,777 1,767 5,461 2,431 — 14,165 (73) 366 — 806 — — — — — — — — 231,243 16,699 (348) — 247,594 17,768 (73) 33,020 223,869 2,133 6,267 — 265,289 18,089 18,089 53,762 53,013 138,611 136,517 1,030 819 2,684 2,754 27,537 241,713 36,777 247,969 There were no impairment losses during fiscal 2022 and 2021. Any grants received are offset against property, plant and equipment additions. During the year, an amount of $Nil was recorded (October 2, 2021 - $0.4 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)Notes to Consolidated Financial StatementsRogers Sugar Inc. 11. RIGHT-OF-USE ASSETS Land $ Buildings $ Cost: Balance at October 3, 2020 Additions Effect of movements in exchange rate Balance at October 2, 2021 Additions Disposals Effect of movements in exchange rate Balance at October 1, 2022 Accumulated depreciation: Balance at October 3, 2020 Depreciation for the year Effect of movements in exchange rate Balance at October 2, 2021 Depreciation for the year Disposals Balance at October 1, 2022 Net carrying amounts: At October 2, 2021 At October 1, 2022 40 — — 40 — — — 40 — — — — — — — 40 40 17,571 1,349 (6) 18,914 7,861 — 68 26,843 2,778 3,435 (2) 6,211 3,327 — 9,538 12,703 17,305 Machinery and equipment $ 6,578 1,375 (1) 7,952 981 (243) 11 8,701 922 1,247 — 2,169 1,188 (243) 3,114 5,783 5,587 97 Total $ 24,189 2,724 (7) 26,906 8,842 (243) 79 35,584 3,700 4,682 (2) 8,380 4,515 (243) 12,652 18,526 22,932 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2022 Annual Report 98 12. INTANGIBLE ASSETS Cost Balance at October 3, 2020 Additions Effect of movements in exchange rate Balance at October 2, 2021 Additions Balance at October 1, 2022 Accumulated amortization Balance at October 3, 2020 Amortization for the year Balance at October 2, 2021 Amortization for the year Balance at October 1, 2022 Net carrying amounts At October 2, 2021 At October 1, 2022 (1) Indefinite life. 13. OTHER ASSETS Customer Software relationships $ $ Brand names(1) $ Other $ Total $ 4,055 358 — 4,413 34,638 5,891 — (125) — (34) 34,513 5,857 95 — 4,508 34,513 — 5,857 2,559 383 2,942 414 3,356 10,682 3,419 14,101 3,422 17,523 — — — — — 1,471 1,152 20,412 16,990 5,857 5,857 574 — — 574 — 574 251 29 280 29 309 294 265 45,158 358 (159) 45,357 95 45,452 13,492 3,831 17,323 3,865 21,188 28,034 24,264 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 November 23, 2026. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 14. DEFERRED TAX LIABILITIES The deferred tax liabilities comprise the following temporary differences: Net assets (liabilities): Property, plant and equipment Right-of-use assets Intangibles Employee benefits Lease obligations Derivative financial instruments Losses carried forward Goodwill Provisions Deferred financing charges Other 99 October 1, 2022 $ October 2, 2021 $ (37,289) (5,977) (6,488) 4,757 6,039 (6,803) 5,283 (2,863) 728 (857) 1,241 (35,926) (4,855) (7,705) 6,847 4,840 (3,834) 6,918 (2,729) 982 (874) (464) (42,229) (36,800) As at October 1, 2022, 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)Notes to Consolidated Financial Statements2022 Annual Report 100 14. DEFERRED TAX LIABILITIES (CONTINUED) The movement in temporary differences during the current years is as follows: 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 Balance October 2, 2021 $ (35,926) (4,855) (7,705) 6,847 4,840 (3,834) 6,918 (2,729) 982 (874) (464) (36,800) Recognized in profit (loss) Recognized in other comprehensive income (loss) Balance October 1, 2022 $ (1,358) (1,096) 1,208 819 1,175 1,478 (1,635) (95) (254) 17 1,702 1,961 $ (5) (26) 9 (2,909) 24 (4,447) — (39) — — 3 $ (37,289) (5,977) (6,488) 4,757 6,039 (6,803) 5,283 (2,863) 728 (857) 1,241 (7 390) (42,229) Balance October 3, 2020 $ Recognized in profit (loss) $ (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) Recognized in other comprehensive income (loss) $ — — — (8,786) — (4,614) — — — — — Balance October 2, 2021 $ (35,926) (4,855) (7,705) 6,847 4,840 (3,834) 6,918 (2,729) 982 (874) (464) (13,400) (36,800) (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 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: 101 Sugar: Goodwill Maple products: Goodwill Brand names October 1, 2022 $ October 2, 2021 $ 229,952 229,952 3,055 5,857 238,864 53,055 5,857 288,864 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 1, 2022, 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) 2022 % 10.7 2.3 2.0 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)Notes to Consolidated Financial Statements2022 Annual Report 102 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 2022 % 2.9 (2.3) 2021 % 4.6 (5.4) The Company performed the annual impairment review for goodwill and indefinite life intangible assets as at October 1, 2022, and determinated 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 2022 and budgeted EBITDA for fiscal 2023 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 7.5x to 14.7x adjusted EBITDA. The Company determined that the FVLCS was the recoverable amount and recorded a goodwill impairment loss of $50.0 million in the fiscal year ended October 1, 2022. Following the impairment loss recognized in the Maple segment, the recoverable amount is equal to the carrying amount. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 103 16. REVOLVING CREDIT FACILITY The Company has a total of $200.0 million of available working capital under the revolving credit facility, which matures on November 23, 2026, from which it can borrow at prime rate, LIBOR rate or under bankers’ acceptances, plus 20 to 250 basis points, based on achieving certain financial ratios. Certain assets of the Company, including trade receivables, inventories and property, plant and equipment, have been pledged as security for the revolving credit facility. As at October 1, 2022, a total of $590.6 million of assets are pledged as security (October 2, 2021 - $498.5 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 1, 2022 $ 26,000 100,000 126,000 October 2, 2021 $ — 100,000 100,000 The carrying value of the revolving credit facility approximates fair value. The valuation model considers the present value of expected payments, discounted using a risk-adjusted discount rate. 17. TRADE AND OTHER PAYABLES Trade payables Other non-trade payables Personnel-related liabilities Dividends payable to shareholders October 1, 2022 October 2, 2021 $ 142,236 3,603 22,203 9,393 177,435 $ 93,424 4,298 12,886 9,332 119,940 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 of $78.2 million as at October 1, 2022 (October 2, 2021 - $38.6 million) is included in trade payables, bears interest (prime + 1%) and is paid in four monthly installments (November, December, January and February). During the year, more than 91% of the maple syrup purchases were made through the PPAQ process. 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. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2022 Annual Report 104 18. PROVISIONS Opening balance Additions Provisions used during the period Closing balance Presented as: Current Non-current October 1, 2022 October 2, 2021 $ 3,825 100 (1,089) 2,836 1,503 1,333 2,836 $ 937 3,231 (343) 3,825 1,394 2,431 3,825 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 Additions Payment of lease obligations Interest accretion Other Closing balance October 1, 2022 $ 3,991 19,198 October 2, 2021 $ 3,049 15,443 October 1, 2022 October 2, 2021 $ 18,492 8,842 (5,150) 1,000 5 23,189 $ 20,404 2,724 (5,487) 858 (7) 18,492 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 105 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 1, 2022 (October 2, 2021 – not significant). The total cash outflow for leases (including interest) for the period ended October 1, 2022 was $5.2 million (October 2, 2021-$5.5 million), which was included as part of cash outflows from financing activities. The lease obligations are payable as follows: October 1, 2022 October 2, 2021 Future minimum lease payments $ 4,969 14,113 8,845 27,927 Present value of minimum lease payments $ 3,991 11,861 7,337 23,189 Future minimum lease payments $ 3,810 9,180 10,556 23,546 Interest $ 978 2,252 1,508 4,738 Present value of minimum lease payments $ 3,049 6,852 8,591 18,492 Interest $ 761 2,328 1,965 5,054 Less than one year Between one and five years More than five years (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2022 Annual Report 106 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: 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 1, 2022 $ October 2, 2021 $ 105,868 121,435 112,550 11,847 124,397 (6,682) (11,847) (18,529) (28,127) (16,901) 135,729 15,005 150,734 (14,294) (15,005) (29,299) (17,546) 16,766 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 1, 2022 and October 2, 2021. 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)Notes to Consolidated Financial StatementsRogers Sugar Inc. 107 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 1, 2022 October 2, 2021 % 58.4 38.7 2.9 100.0 $ 61,827 40,971 3,070 105,868 % 63.3 33.7 3.0 100.0 $ 76,868 40,924 3,643 121,435 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 2023 are expected to be approximately $3.8 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)Notes to Consolidated Financial Statements2022 Annual Report 108 20. EMPLOYEE BENEFITS (CONTINUED) The movement in the pension and other benefit plans is as follows: 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 For the fiscal years ended October 1, 2022 Pension benefit plans $ Other benefit plans $ Total $ Pension benefit plans $ October 2, 2021 Other benefit plans $ Total $ 135,729 15,005 150,734 145,667 16,918 162,585 2,989 — 4,633 998 311 — 507 — — 3,300 — 5,140 998 3,376 2,970 3,928 972 (6,067) (4,781) 405 — 448 — — 3,781 2,970 4,376 972 (4,781) Benefit payments from plan (6,067) 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 (841) (740) (1,581) (929) (694) (1,623) — (671) (671) — (262) (262) (25,937) (2,758) (28,695) (15,599) (1,767) (17,366) 1,046 193 1,239 125 (43) 82 112,550 11,847 124,397 135,729 15,005 150,734 121,435 4,100 (16,901) 3,534 998 (6,067) (841) (390) 105,868 — — — 740 — — (740) — — 121,435 103,373 4,100 2,822 (16,901) 4,274 998 (6,067) (1,581) (390) 16,766 3,592 972 (4,781) (929) (380) 105,868 121,435 — — — 694 — — (694) — — 103,373 2,822 16,766 4,286 972 (4,781) (1,623) (380) 121,435 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 109 20. EMPLOYEE BENEFITS (CONTINUED) The net defined benefit obligation can be allocated to the plans’ participants as follows: October 1, 2022 October 2, 2021 Pension benefit plans Other benefit plans Pension benefit plans Other benefit plans Active plan participants Retired plan members Deferred plan participants % 42.3 54.1 3.6 100.0 % 36.1 63.9 — 100.0 % 49.2 47.0 3.8 100.0 The Company’s defined benefit pension expense was as follows: For the fiscal years ended October 1, 2022 October 2, 2021 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 $ Pension benefit plans $ Other benefit plans $ 2,989 — 390 430 16 3,825 311 — — 507 90 908 Total $ 3,300 — 390 937 106 4,733 3,376 2,970 380 1,106 6 7,838 3,351 616 3,967 7,411 474 3,825 292 908 766 4,733 427 7,838 405 — — 448 (99) 754 446 308 754 % 39.0 61.0 — 100.0 Total $ 3,781 2,970 380 1,554 (93) 8,592 7,857 735 8,592 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2022 Annual Report 110 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 1, 2022 October 2, 2021 Pension benefit plans $ Other benefit plans $ Pension benefit plans $ Other benefit plans $ Total $ Total $ Cumulative amount in comprehensive income (loss) at the beginning of the year (7,761) Recognized during the year (8,006) (9,493) (3,326) (17,254) 24,485 (11,332) (32,246) (7,520) (1,973) 16,965 (34,219) Cumulative amount in comprehensive income (loss) at the end of the year Recognized during the year, net of tax (15,767) (12,819) (28,586) (7,761) (9,493) (17,254) (5,951) (2,472) (8,423) (23,967) (1,466) (25,433) Principal actuarial assumptions used were as follows: For the fiscal years ended October 1, 2022 October 2, 2021 Pension benefit plans % 5.10 3.00 3.50 3.00 Other benefit plans % 5.10 3.50 3.50 3.00 Pension benefit plans % 3.50 3.00 2.75 3.00 Other benefit plans % 3.50 3.00 2.75 3.50 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)Notes to Consolidated Financial StatementsRogers Sugar Inc. 111 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 1, 2022 October 2, 2021 22.2 24.9 23.7 26.2 22.1 24.8 23.6 26.2 The assumed health care cost trend rate as at October 1, 2022 was 5.56% (October 2, 2021 - 5.65%), decreasing uniformly to 4.00% in 2040 (October 2, 2021 - 4.00% in 2040) and remaining at that level thereafter. The following table outlines the key assumptions for the fiscal year ended October 1, 2022 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 1, 2022 Pension benefit plans $ (11,703) 14,994 1,086 (823) 338 Other benefit plans $ (1,289) 1,606 4 (4) 35 Total $ (12,992) 16,600 1,090 (827) 373 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 $ 1,342 $ (1,104) As at October 1, 2022, the weighted average duration of the defined benefit obligation amounts to 11.9 years (October 2, 2021 - 14.2 years). (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2022 Annual Report 112 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) Accumulated accretion expense October 1, October 2, 2022 $ 57,425 97,575 155,000 (2,535) (6,930) 4,164 2021 $ 57,425 97,575 155,000 (3,523) (6,930) 3,195 Total carrying value - non-current 149,699 147,742 (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 $0.4 million (October 2, 2021 - $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. 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 1, 2022 was approximately $56.9 million (October 2, 2021 - $59.7 million). (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 113 21. CONVERTIBLE UNSECURED SUBORDINATED DEBENTURES (CONTINUED) (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 2, 2021 - $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. 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 1, 2022 was approximately $95.2 million (October 2, 2021 - $100.5 million). 22. SENIOR GUARANTEED NOTES In 2021, 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 Notes are guaranteed and rank pari passu with the existing revolving credit facility. The Notes are due on April 30, 2031, bear interest at 3.49%, and interest is payable semi-annually in arrears in equal installments on April 30th and October 30th of each year and represent interest accrued from and including the date of issue of the Notes. The Notes are classified and measured at amortized cost, using the effective interest method. The valuation model considers the present value of expected payments, discounted using a risk-adjusted discount rate. The fair value as at October 1, 2022 was approximately $85.2 million (October 2, 2021 - $98.8 million). 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. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2022 Annual Report 114 23. SHARE CAPITAL AND OTHER COMPONENTS OF EQUITY As of October 1, 2022, a total of 104,372,045 common shares (October 2, 2021 - 103,686,923) were outstanding. During the year, 685,122 stock options have been exercised for net proceeds of $3.3 million and reversal of previously recognized share- based compensation recorded in contributed surplus of $0.1 million (note 24) (150,000 stock options were exercised for net proceeds of $0.7 million and reversal of previously recognized share-based compensation recorded in contributed surplus was not significant for fiscal 2021). The Company declared a quarterly dividend of $0.09 per share for fiscal years 2022 and 2021. The following dividends were declared by the Company: Dividends Contributed surplus: For the fiscal years ended October 1, 2022 $ 37,500 October 2, 2021 $ 37,300 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). 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 $40.0 to $45.0 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 $200.0 million revolving credit facility in addition to $100 million senior guaranteed notes that have been issued in 2021. 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. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 115 23. SHARE CAPITAL AND OTHER COMPONENTS OF EQUITY (CONTINUED) Capital management: (Continued) 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 2.17:1 for fiscal 2022 and 2.07:1 for fiscal 2021. 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 2, 2021 – 6,000,000 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. On December 6, 2021, a total of 802,564 share options were granted at a price of $5.85 per common share to certain executives. The measurement date fair values were measured based on the Black-Scholes option pricing model. Expected volatility is estimated by considering historic average share price volatility. The inputs used in the measurement of the fair values of the share-based payment plans granted for fiscal 2022 are the following: Total fair value of options Share price Exercise price Expected volatility (weighted average volatility) Option life (expected weighted average life) Expected dividends Weighted average risk-free interest rate (based on government bonds) For the fiscal year ended October 2, 2021, no options were granted. $227,000 $5.94 $5.85 15.057% to 16.877% 4 to 6 years 6.06% 1.323% to 1.415% 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 $143,000 was recorded for the fiscal year ended October 1, 2022 (October 2, 2021 - $107,000). (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2022 Annual Report 116 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 1, 2022: Options Outstanding number of forfeited options at during October 1, the 2022 period Weighted average remaining life Number of options exercisable Exercise price per option Outstanding number of options at October 2, 2021 Options granted during the period $4.28 $4.59 $4.68 $5.58 $5.61 $5.85 $6.23 $6.51 200,000 730,000 563,500 447,175 80,000 — — — — — — 802,564 705,322 360,000 — — Options exercised during the period — (466,800) (67,052) (71,270) (80,000) — — — — — — — — — 200,000 263,200 496,448 375,905 — 802,564 (80,000) 625,322 — 360,000 3,085,997 802,564 (685,122) (80,000) 3,123,439 The following table summarizes information about the Share Option Plan as of October 2, 2021: Options forfeited during the period Outstanding number of options at October 2, 2021 Weighted average remaining life 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) — — — — — — — — — — 200,000 730,000 563,500 447, 1 75 80,000 (300,000) 705,322 — 360,000 (150,000) (300,000) 3,085,997 7.47 2.64 7.17 6.17 — 9.18 5.18 4.18 n/a 50,000 263,200 158,348 197,035 — — 500,258 360,000 1,528,841 Number of options exercisable — 730,0000 112,700 178,870 80,000 423,193 288,000 1,812,763 8.47 3.64 8.17 7.17 0.46 6.17 5.18 n/a Options outstanding held by key management personnel amounted to 2,883,439 options as at October 1, 2022 and 2,765,997 options as at October 2, 2021 (see Note 29, Key management personnel). (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 24. SHARE-BASED COMPENSATION (CONTINUED) (B) CASH-SETTLED SHARE-BASED COMPENSATION-PERFORMANCE SHARE UNITS ("PSU"): 117 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 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. Fiscal 2022 grant: On December 6, 2021, a total of 386,709 PSUs were granted to certain executives and other members of the management team at a price of $5.85. In addition, an aggregate of 17,316 PSUs at a weighted-average share price of $6.12 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 1, 2022, an aggregate of 404,025 PSUs was outstanding. These PSUs will vest at the end of the 2022-2024 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 fair values were established using the Monte Carlo model. The fair value as at grant date was $1,493,000 and $2,683,000 as at October 1, 2022. An expense of $1,369,000 was recorded for the period ended October 1, 2022 in administration and selling expenses. The liabilities arising from the PSUs as at October 1, 2022 were $1,369,000. 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. In addition, an aggregate of 55,641 PSUs at a weighted-average share price of $5.84 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 1, 2022, an aggregate of 547,053 PSUs was outstanding. These PSUs will vest at the end of the 2021-2023 performance cycle. The fair values were established using the Monte Carlo model. The fair value as at grant date was $664,000 and $4,863,000 as at October 1, 2022 (October 2, 2021 - $269,000). An expense of $3,762,000 was recorded for the period ended October 1, 2022 (October 2, 2021 – expense of $55,000) in administration and selling expenses. The liabilities arising from the PSUs as at October 1, 2022 were $3,820,000 (October 2, 2021 - $55,000). Fiscal 2020 grant: On December 2, 2019, a total of 324,932 PSUs was granted by the Company. In addition, an aggregate of 64,320 PSUs at a weighted- average share price of $5.46 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 1, 2022, an aggregate of 389,252 PSUs was outstanding. These PSUs will vest at the end of the 2020-2022 performance cycle. The fair values were established using the Monte Carlo model. The fair value as at grant date was $64,000 and $655,000 as at October 1, 2022 (October 2, 2021 - $13,000). An expense of $648,000 was recorded for the period ended October 1, 2022 (October 2, 2021 – a gain of $12,000) in administration and selling expenses. The liabilities arising from the PSUs as at October 1, 2022 were $655,000 (October 2, 2021 – $7,000). (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2022 Annual Report 118 25. COMMITMENTS As at October 1, 2022, the Company had commitments to purchase a total of 585,000 metric tonnes of raw cane sugar up to fiscal 2024 (October 2, 2021 - 1,082,000 up to fiscal 2024), of which 374,479 metric tonnes had been priced (October 2, 2021 - 261,309), for a total dollar commitment of $224.2 million (October 2, 2021 - $144.3 million). In addition, the Company has a commitment of approximately $43.5 million (October 2, 2021 - $42.7 million) for sugar beets to be harvested and processed in fiscal 2023. TMTC has $2.4 million (October 2, 2021 - $23.1 million) remaining to pay related to an agreement to purchase approximately $2.4 million (1.2 million pounds) (October 2, 2021 - $32.7 million; 10.7 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 $17.4 million in favor of the PPAQ (October 2, 2021 – insurance bond in the amount of $16.9 million). The insurance bond expires on March 1, 2023. During the fiscal year ended October 1, 2022, the Company entered into capital commitments to complete its capital projects for a total value of $13.6 million (October 2, 2021 - $17.2 million) to be incurred in fiscal 2023. 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 1, 2022 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 (loss) per share is as follows: Basic earnings (loss) per share: Net earnings (loss) For the fiscal years ended October 1, 2022 $ October 2, 2021 $ (16,568) 47,527 Weighted average number of shares outstanding 103,904,615 103,581,358 Basic earnings (loss) per share Diluted earnings (loss) per share: Net earnings (loss) 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 (0.16) (16,568) — (16,568) 0.46 47,527 6,149 53,676 103,904,615 — 103,904,615 103,581,358 17,977,603 121,558,961 Diluted earnings per share (0.16) 0.44 As at October 1, 2022, the share options, the Sixth series debentures and the Seventh series debentures representing 18,243,788 common shares, were excluded from the calculation of diluted earnings (loss) per share as they were deemed anti-dilutive. As at October 2, 2021, the share options representing 46,870 common shares, were excluded from the calculation of diluted earnings (loss) per share as they were deemed anti-dilutive. (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 119 28. SUPPLEMENTARY CASH FLOW INFORMATION October 1, 2022 $ 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 1,958 100 8,842 1,638 3,231 2,724 1,239 100 11,818 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 1, 2022 October 2, 2021 $ 4,431 1,076 152 5,922 11,581 $ 3,238 967 143 128 4,476 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2022 Annual Report 120 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) For the fiscal years ended October 1, 2022 $ 107,850 4,733 6,192 5,922 124,697 October 2, 2021 $ 101,740 8,592 5,870 128 116,330 The personnel expenses were charged to the consolidated statements of earnings (loss) and comprehensive income or capitalized in the consolidated statements of financial position as follows: Cost of sales Administration and selling expenses Distribution expenses Property, plant and equipment For the fiscal years ended October 1, 2022 October 2, 2021 $ 94,380 28,040 1,984 124,404 293 124,697 $ 95,236 19,058 1,649 115,943 387 116,330 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)Notes to Consolidated Financial StatementsRogers Sugar Inc. 121 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 1, 2022 Revenues Cost of sales Gross margin Depreciation and amortization Results from operating activities Sugar $ 792,200 676,328 115,872 19,380 62,344 Maple products $ 213,934 199,001 14,933 6,768 (47,145) 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 22,642 1,364 100 8,842 — — Corporate and eliminations $ — — — — (1,886) — — — Total assets Total liabilities Sugar $ 871,332 (972,962) For the fiscal year ended October 1, 2022 Maple products $ 232,402 (179,598) Corporate and eliminations $ (165,778) 506,023 Total $ 1,006,134 875,329 130,805 26,148 13,313 24,006 100 8,842 Total $ 937,956 (646,537) (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial Statements2022 Annual Report 122 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 quipment Additions to right-of-use assets Total assets Total liabilities Sugar $ 668,118 547,089 121,029 18,180 78,905 23,574 3,231 1,863 Sugar $ 804,366 (923,697) For the fiscal year ended October 2, 2021 Maple products $ 225,813 207,098 18,715 7,031 7,231 1,222 — 861 Corporate and eliminations $ — — — — (1,639) — — — Total $ 893,931 754,187 139,744 25,211 84,497 24,796 3,231 2,724 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) 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 1, 2022 $ 783,132 151,536 34,185 37,281 1,006,134 October 2, 2021 $ 666,536 158,248 31,696 37,451 893,931 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc. 123 ROGERS SUGAR INC. Corporate Information DIRECTORS M. Dallas H. Ross, (1) (3) Chairman and Partner Kinetic Capital Limited Partnership Dean Bergmame, (2) (3) Director Gary Collins, (2) (3) Senior Advisor Lazard Group Daniel Lafrance, (1) (2) Director Shelley Potts, Director Stephanie Wilkes, (3) Director (1) Nominees to Board of Directors of Lantic Inc. (2) Audit Committee Members (3) Environmental, Social and Governance Committee Members LEGAL COUNSEL Davies, Ward, Phillips & Vineberg Montreal, Quebec TRADING SYMBOL RSI STOCK EXCHANGE LISTING The Toronto Stock Exchange ANNUAL MEETING The annual meeting of Shareholders will be held virtually February 8, 2023 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)Notes to Consolidated Financial Statements2022 Annual Report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 124 OPERATING COMPANIES Corporate Information — Management DIRECTORS M. Dallas H. Ross, (1) Chairman & CEO Kinetic Capital Limited Partnership Gary Collins, (2) Senior Advisor Lazard Group Michael Heskin, (2) Vice President Finance and CFO Belkorp Industries Inc. Donald G. Jewell, Managing Partner RIO Industrial Daniel Lafrance, (1) (2) Director William 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 Services, Supply Chain & Sustainability Adam James Vice President, Sugar Manufacturing Jean-François Khalil, Vice President, Human Resources Rod Kirwan, Vice President, Sales and Marketing Louis Turenne, Vice President & General Manager, The Maple Treat Corporation 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 (In thousands of dollars except as noted and per share amounts)Notes to Consolidated Financial StatementsRogers Sugar Inc.85% OF OUR SUPPLY DELIVERY GOES TO THE INDUSTRIAL FOOD PROCESSING SUPPLY CHAIN. AS SUCH, SUGAR AND MAPLE SYRUP ARE KEY INGREDIENTS IN LARGE-SCALE RECIPES. SIMPLY PUT, WE’RE THE SUPPLIER OF CHOICE FOR MULTIPLE SECTORS WITHIN THE FOOD AND BEVERAGE INDUSTRY. ROGERS holds all of the common shares of Lantic Inc., which operates cane sugar refineries in Montreal, Québec and Vancouver, British Columbia, as well as the only Canadian sugar beet processing facility in Taber, Alberta. Lantic / Rogers’ products include granulated (regular and organic), brown, icing, liquid, cubed sugars and specialty syrups, as well as stevia, agave, organic coconut sugar, Plantation Raw™ sugar, maple sugar and flakes and other dry blends. LANTIC also owns all of the common shares of The Maple Treat Corporation (“TMTC”). TMTC operates plants in Granby, Dégelis and in St-Honoré-de-Shenley, Québec and in Websterville, Vermont. TMTC’s products include maple syrup and derived maple syrup products and are sold mainly under retail private labels brands and various house brands, such as TMTC, Uncle Luke’s, Great Northern, Decacer and Highland SugarWorks. 100178 R o g e r s S u g a r I n c . 2 0 2 2 A n n u a l R e p o r t m o c . t a e r t e l p a m e h t . w w w m o c . s r e g o r c i t n a l . w w w 2022 ANNUAL REPORT ESSENTIAL LINK IN THE FOOD SUPPLY CHAIN 

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