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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)
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Consolidated Statements of Changes in Shareholders’ Equity (continued)
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(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
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223
3,353
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(343)
(11,480)
105,329
(14,629)
(12,123)
78,577
(37,287)
(2,797)
(94,000)
(5,487)
98,740
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—
(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.
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2022 ANNUAL REPORT
ESSENTIAL LINK
IN THE FOOD SUPPLY CHAIN