growing with you. - lassonde · 2019. 11. 13. · the company’s sales totalled $258.6 million in...

GROWING WITH YOU.

INTERIM REPORT

Second quarter ended June 29, 2013

2

Dear Shareholders,

As Chairman of the Board and Chief Executive Officer of Lassonde Industries Inc., I am pleased to present the financial results for the second quarter of fiscal 2013.

The Company’s sales totalled $258.6 million in the second quarter of 2013, up $2.2 million or 0.8% from $256.4 million in the same period of 2012. This increase was primarily driven by higher private label sales partly offset by lower sales volumes for national brands. For the first six months of 2013, sales totalled $499.1 million, up 1.9% from $489.8 million in the first six months of 2012.

The Company’s operating profit for the second quarter of 2013 stood at $19.5 million, down $1.2 million or 6.0% from operating profit of $20.7 million in the same quarter last year. Excluding the recognition in 2012 of a $1.5 million gain on the disposal of property, plant and equipment, operating profit would be up $0.3 million or 1.1% from the second quarter of 2012. Operating profit for the first six months of 2013 stood at $33.3 million, down $0.7 million from $34.0 million at the end of the first six months of 2012.

The Company’s financial expenses went from $6.0 million in the second quarter of 2012 to $4.6 million this quarter. This decrease was mostly attributable to the change in fair value of the financial liability related to retractable financial instruments. No change in value had been recognized in the second quarter of 2012, whereas a $1.6 million decrease in this liability, mainly related to the settlement of retractable financial instruments, was recognized in the second quarter of 2013. For the first six months, financial expenses went from $10.4 million in 2012 to $11.0 million this fiscal year.

“Other (gains) losses” went from a $1.0 million loss in the second quarter of 2012 to a $0.8 million gain in the second quarter of 2013. The 2012 second-quarter loss was mainly due to a $1.1 million loss from a change in the fair value of interest rate swaps. For the second quarter of 2013, we recognized a $0.5 million foreign exchange gain and a $0.2 million gain from a change in the fair value of interest rate swaps. For the first six months, “Other (gains) losses” was a $1.0 million gain in 2013 compared to a $1.8 million loss in 2012.

Profit before income taxes stood at $15.6 million for the second quarter of 2013, up $1.8 million from $13.8 million in the same quarter last year. For the first six months of 2013, profit before income taxes stood at $23.4 million, up 7.3% from $21.8 million in the first six months of 2012.

An income tax expense at an effective rate of 23.7% (22.5% in 2012) brought the 2013 second-quarter profit to $11.9 million, up $1.2 million from $10.7 million in the same quarter of 2012. Profit attributable to the Company’s shareholders was $11.4 million, resulting in basic and diluted earnings per share of $1.63 for the second quarter of 2013. In the second quarter of 2012, profit attributable to the Company’s shareholders had totalled $10.6 million, resulting in basic and diluted earnings per share of $1.51. For the first six months of 2013, profit attributable to the Company’s shareholders totalled $17.2 million, resulting in basic and diluted earnings per share of $2.47 and, in the same six-month period of 2012, profit had totalled $16.2 million, resulting in basic and diluted earnings per share of $2.32.

Lassonde Industries Inc.

Message to Shareholders

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Cash flows from operating activities generated $38.1 million in cash during the second quarter of 2013, while they had generated $32.8 million during the same period last year. Financing and investing activities used $34.4 million and $9.3 million, respectively, in cash in the second quarter of 2013, whereas they had used $20.6 million and $5.4 million in the same period last year. At the end of the second quarter of 2013, the Company reported a cash and cash equivalents balance of $1.3 million and a bank overdraft of $4.6 million compared to a cash and cash equivalents balance of $0.7 million at the end of the second quarter of 2012.

Market data indicates that there is downward pressure on the sales volumes of North American fruit juice and fruit drink producers. While greater stability in industry volumes has been observed in the last nine months, the downward pressure on volumes combined with unfavourable weather conditions in June have intensified competitive strategies, which are affecting the Company’s national brands. Given this situation, trade spending levels continue to remain high. The Company is responding to the changing competitive landscape and improving the strategic market positioning of its national brands through innovation.

Lassonde Industries Inc. plans on maintaining its business model and management approach for the coming year. Barring any major external shocks, the Company remains optimistic about its ability to slightly increase its consolidated sales in 2013 compared to 2012.

In closing, I wish to sincerely thank all of our colleagues for their tireless efforts to successfully position our Company to face the challenges ahead.

Pierre-Paul lassondeChairman of the Board

and Chief Executive Officer


Message to Shareholders (Continued)

lassonde industries inc.755 Principale streetrougemont (Quebec)

J0l 1M0

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Condensed Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Condensed Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Condensed Consolidated Statements of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Condensed Consolidated Statements of Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Condensed Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Notes to the Interim Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10


Table of Contents

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Second quarters ended First six months ended Notes June 29, 2013 June 30, 2012 June 29, 2013 June 30, 2012 (restated, Note 16) (restated, Note 16)

$ $ $ $ Sales 258,550 256,403 499,128 489,809

Cost of sales 185,474 187,490 363,821 363,042 selling and administrative expenses 53,581 49,642 101,982 94,236 (Gains) losses on capital assets 5 (1,468) 5 (1,468)

239,060 235,664 465,808 455,810

operating profit 19,490 20,739 33,320 33,999 Financial expenses 4 4,596 5,986 10,954 10,436 other (gains) losses 5 (752) 969 (1,002) 1,784

Profit before income taxes 15,646 13,784 23,368 21,779 income tax expense 6 3,701 3,097 5,554 5,131

Profit 11,945 10,687 17,814 16,648

attributable to: Company’s shareholders 11,385 10,552 17,236 16,230 non-controlling interest 560 135 578 418

11,945 10,687 17,814 16,648

Basic and diluted earnings per share (in $) 1.63 1.51 2.47 2.32

Weighted average number of shares outstanding (in thousands) 6,988 6,988 6,988 6,988


Condensed Consolidated Statements of Income(in thousands of Canadian dollars) (unaudited)

Second quarters ended First six months ended June 29, 2013 June 30, 2012 June 29, 2013 June 30, 2012 (restated, Note 16) (restated, Note 16)

$ $ $ $ Profit 11,945 10,687 17,814 16,648

Other comprehensive income (loss):

To be reclassified subsequently to profit or loss: net change in cash flow hedge: Gains (losses) on financial instruments designated as hedges 5,007 1,592 8,304 (1,006) reclassification of (gains) losses on financial instruments designated as hedges (1,244) (954) (1,623) (1,079) Taxes (1,016) (172) (1,805) 565

2,747 466 4,876 (1,520) Translation difference: exchange difference on translating foreign operations 6,025 2,731 8,965 195

8,772 3,197 13,841 (1,325)

Not to be reclassified subsequently to profit or loss:

actuarial gains and losses on defined benefit plans: net actuarial (losses) gains resulting from defined benefit plans 389 (1,387) (411) (1,258) Taxes (104) 374 111 339

285 (1,013) (300) (919)

Total other comprehensive income (loss) 9,057 2,184 13,541 (2,244)

Comprehensive income 21,002 12,871 31,355 14,404

attributable to: Company’s shareholders 19,749 12,397 29,718 13,962 non-controlling interest 1,253 474 1,637 442

21,002 12,871 31,355 14,404

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Condensed Consolidated Statements of Comprehensive Income(in thousands of Canadian dollars) (unaudited)

As at As at Notes June 29, 2013 Dec. 31, 2012 $ $ AssetsCurrent Cash and cash equivalents 1,269 22,186 accounts receivable 93,796 103,792 income tax recoverable 4,660 3,396 inventories 161,196 162,065 investment 2,079 2,079 other current assets 8 8,362 6,876 derivative instruments 6,726 1,039

278,088 301,433 derivative instruments 1,082 -Property, plant and equipment 247,518 238,894 other intangible assets 131,685 129,940 net defined benefit asset 5,096 4,082 other long-term assets 1,380 697 Goodwill 131,800 124,982

796,649 800,028

Liabilities Current Bank overdraft 4,641 - accounts payable and accrued liabilities 115,906 133,575 income tax payable - 166 other current liabilities 888 583 derivative instruments 2,031 2,966 Current portion of long-term debt 9 13,489 12,750

136,955 150,040 derivative instruments 807 1,563 net defined benefit liability 488 598 long-term debt 9 283,044 282,456 deferred tax liabilities 23,438 19,015 other long-term liabilities 10 17,246 38,151

461,978 491,823

Shareholders’ equity Capital, reserves and retained earnings attributable to the Company’s shareholders 316,090 290,891 non-controlling interest 18,581 17,314

334,671 308,205

796,649 800,028

Approved by the Board director director

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Condensed Consolidated Statements of Financial Position(in thousands of Canadian dollars) (unaudited)

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First six months ended Notes June 29, 2013 June 30, 2012 (restated, Note 16)

$ $Operating activities Profit 17,814 16,648

adjustments for: income tax expense 6 5,554 5,131 interest income and expense 10,854 11,768 depreciation and amortization 15,714 15,748 amortization of unearned discounts (77) - Change in fair value of financial instruments (376) 479 Change in net defined benefit asset/liability (1,535) (3,855) losses (gains) on disposal of property, plant and equipment 5 (1,468) impairment losses on property, plant and equipment - 138 other gains - (3) unrealized foreign exchange losses 82 36

48,035 44,622

Change in non-cash operating working capital items 12 (5,983) 23,440 Taxes received 25 - Taxes paid (4,431) (6,952) interest received 93 59 interest paid (10,194) (10,545) settlements of derivative financial instruments (871) (432)

26,674 50,192

Financing activities Change in bank indebtedness - (15,710) Change in long-term debt related to the operating lines of credit 1,442 (3,676) increase in long-term debt 9 (407) - repayment of long-term debt (13,163) (4,116) dividends paid on Class a shares (2,262) (1,972) dividends paid on Class B shares (2,627) (2,289) settlement of retractable financial instruments (21,386) -

(38,403) (27,763)

Investing activities acquisitions of property, plant and equipment (13,746) (14,233) acquisitions of other intangible assets (6) (1,513) net proceeds from the disposal of property, plant and equipment - 2,104

(13,752) (13,642)

(decrease) increase in cash and cash equivalents (25,481) 8,787 Cash and cash equivalents at beginning 22,186 (7,987) impact of exchange rate changes on cash and cash equivalents (77) (72)

Cash and cash equivalents at end (3,372) 728

additional cash flow information is presented in note 12.


Condensed Consolidated Statements of Cash Flows(in thousands of Canadian dollars) (unaudited)

10

Note 1 . Description of the Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Note 2 . Statement of Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Note 3 . Seasonality or Cyclicality of Interim Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Note 4 . Financial Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Note 5 . Other (Gains) Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Note 6 . Income Tax Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Note 7 . Financial Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Note 8 . Other Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Note 9 . Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Note 10 . Other Long-Term Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Note 11 . Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Note 12 . Additional Cash Flow Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Note 13 . Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Note 14 . Segment Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Note 15 . Event After the Reporting Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Note 16 . Adoption of IFRS Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22


Notes to the Interim Condensed Consolidated Financial StatementsTable of Contents

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Note 1. Description of the Business

lassonde industries inc. (the Company) is incorporated under the Canada Business Corporations Act and is listed on the Toronto stock exchange. The Company’s head office is located at 755 Principale street in rougemont, Quebec, Canada.

The Company develops, manufactures and markets a wide range of fruit and vegetable juices and drinks. The Company is the second largest producer of store brand ready-to-drink fruit juices and drinks in the united states and a major producer of cranberry juices, drinks and sauces. Furthermore, the Company develops, manufactures and markets specialty food products such as fondue broths and sauces, soups, sauces and gravies, canned corn-on-the-cob, bruschetta toppings, tapenades, pestos and sauces for pasta and pizza. it imports selected wines from several countries of origin for packaging and marketing purposes. it also produces apple cider and wine-based beverages.

Note 2. Statement of Compliance

The Company’s interim Condensed Consolidated Financial statements have been prepared in compliance with ias 34 Interim Financial Reporting and apply the same accounting policies as those described in the Company’s annual Consolidated Financial statements for the year ended december 31, 2012, except for changes related to the adoption of the amended version of ias 19 Employee Benefits, as described in note 16 to these financial statements. The Company’s annual Consolidated Financial statements for the year ended december 31, 2012 were prepared in compliance with international Financial reporting standards (iFrs).

These interim Condensed Consolidated Financial statements do not include all of the information required under iFrs for complete financial statements and they should therefore be read in conjunction with the Company’s annual Consolidated Financial statements for the year ended december 31, 2012. The Company’s interim Condensed Consolidated Financial statements and annual Consolidated Financial statements are available on the sedar website at www.sedar.com and on the Company’s website at www.lassonde.com.

The Board of directors approved these interim Condensed Consolidated Financial statements on august 9, 2013.

Note 3. Seasonality or Cyclicality of Interim Operations

in the ordinary course of business, the Company is involved in apple and cranberry processing and cans corn-on-the-cob. These processing activities take place mainly from august to november. Processing the harvested crops increases inventory levels during the last quarter of the year.

These processing activities generally have a favourable impact on the Company’s profit in the last quarter of the year with respect to the accounting treatment of production overhead. More specifically, since the Company carries out, among other activities, maintenance on the equipment used to process apples and can corn-on-the-cob during the first three quarters of the fiscal year, certain production overheads are recognized in profit or loss for these periods. However, during the fourth quarter of the fiscal year, a portion of these production overheads is recognized in inventories in the Consolidated statement of Financial Position, thereby creating a generally favourable impact on profit in the last quarter of the fiscal year.


Notes to the Interim Condensed Consolidated Financial Statements(tabular amounts are in thousands of Canadian dollars unless otherwise indicated) (unaudited)

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Note 4. Financial Expenses

Second quarters ended First six months ended June 29, 2013 June 30, 2012 June 29, 2013 June 30, 2012 $ $ $ $ interest on long-term debt 5,003 5,297 9,853 10,626 amortization of non-cash financial expenses 593 560 1,125 1,133 interest and other bank expenses 145 180 254 352 Change in fair value of financial instruments designated as financial liabilities at fair value through profit or loss (1,096) - (149) (1,568)

4,645 6,037 11,083 10,543

Financial revenues (49) (51) (129) (107)

4,596 5,986 10,954 10,436

Note 5. Other (Gains) Losses

Second quarters ended First six months ended June 29, 2013 June 30, 2012 June 29, 2013 June 30, 2012 $ $ $ $ exchange (gains) losses (530) (190) (775) 112 Change in fair value of derivative financial instruments held for trading (222) 1,533 (227) 2,049 insurance claim - (374) - (374) other gains - - - (3)

(752) 969 (1,002) 1,784

5.1 Insurance claim

in 2012, a fire broke out at the warehouse of a supplier that provides storage and repackaging services to the Company. For the first six months of 2012, the Company had recognized in profit or loss the net carrying value of the packaging equipment and the cost of inventories destroyed during the fire in the amounts of $138,000 and $522,000, respectively. as at June 30, 2012, the Company also recognized insurance benefits due estimated at $1,080,000, net of a $100,000 deductible, for the damages and other expenses incurred by the Company. of the total benefit amount recognized in profit or loss, $437,000 relates to the damaged packaging equipment.



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Note 6. Income Tax Expense

Second quarters ended First six months ended June 29, 2013 June 30, 2012 June 29, 2013 June 30, 2012 (restated, Note 16) (restated, Note 16)

$ $ $ $ Current tax 2,138 2,758 2,996 2,995 deferred tax 1,563 339 2,558 2,136

3,701 3,097 5,554 5,131

The Company estimates the quarterly income tax rate based on the tax rate that the Company expects to face for the fiscal year. The tax rate is based on the geographic distribution of profit before income taxes, the exchange rate applicable to profit before income taxes in foreign currencies, non-deductible expenses and non-taxable income.

Note 7. Financial Instruments

7.1 Classification

The classification, carrying value and fair value of financial instruments are as follows:

As at June 29, 2013 Other Derivatives Total Loans and financial used as carrying receivables FVTPL i) liabilities hedges value Fair value $ $ $ $ $ $ Financial assetsCash and cash equivalents 1,269 - - - 1,269 1,269accounts receivable 93,796 - - - 93,796 93,796investment 2,079 - - - 2,079 2,079derivative instruments - - - 7,808 7,808 7,808 97,144 - - 7,808 104,952 104,952

Financial liabilitiesBank overdraft - - 4,641 - 4,641 4,641accounts payable and accrued liabilities - - 115,906 - 115,906 115,906derivative instruments - 2,055 - 783 2,838 2,838long-term debt ii) - - 296,533 - 296,533 315,036Participating loans - 6,025 - - 6,025 6,025retractable financial instruments - 10,984 - - 10,984 10,984 - 19,064 417,080 783 436,927 455,430

i) Financial assets and liabilities at fair value through profit or loss. This category includes assets and liabilities held for trading and financial instruments designated by the Company as financial liabilities at fair value through profit or loss.

ii) includes the current portion of long-term debt.



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As at December 31, 2012 Other Derivatives Total Loans and financial used as carrying receivables FVTPL i) liabilities hedges value Fair value $ $ $ $ $ $ Financial assetsCash and cash equivalents 22,186 - - - 22,186 22,186accounts receivable 103,792 - - - 103,792 103,792investment 2,079 - - - 2,079 2,079derivative instruments - - - 1,039 1,039 1,039

128,057 - - 1,039 129,096 129,096

Financial liabilitiesaccounts payable and accrued liabilities - - 133,575 - 133,575 133,575derivative instruments - 3,013 - 1,516 4,529 4,529long-term debt ii) - - 295,206 - 295,206 314,734Participating loans - 5,507 - - 5,507 5,507retractable financial instruments - 32,346 - - 32,346 32,346

- 40,866 428,781 1,516 471,163 490,691i) Financial assets and liabilities at fair value through profit or loss. This category includes assets and liabilities held for trading and

financial instruments designated by the Company as financial liabilities at fair value through profit or loss.ii) includes the current portion of long-term debt.

7.2 Fair Value

The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. it is established based on market information available at the date of the Condensed Consolidated statement of Financial Position. in the absence of an active market for a financial instrument, the Company uses the valuation methods described below to determine the fair value of the instrument. To make the assumptions required by certain valuation models, the Company relies mainly on external, readily observable market inputs, when available. assumptions or inputs that are not based on observable market data are used in the absence of external data. These assumptions or factors represent management’s best estimates of the ones that would be used by market participants for these instruments. The credit risk of the counterparty and the Company’s own credit risk have been taken into account in estimating the fair value of all financial assets and financial liabilities, including derivatives.

The following valuation assumptions and/or methods were used to estimate the fair value of financial instruments:

• The fair values of cash and cash equivalents, accounts receivable, investment, bank overdraft and accounts payable and accrued liabilities is approximately equal to their carrying values due to their short-term maturities;

• The fair value of long-term debt, including finance lease obligations, is determined based on the discounted cash flow method and calculated using current interest rates for instruments with similar terms and remaining maturities that the Company could have obtained on the market at the measurement date;



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• The fair value of the Company’s derivative instruments, including foreign exchange forward contracts, interest rate swaps and total return swaps on frozen concentrated orange juice, is determined using valuation techniques and calculated as the present value of estimated future cash flows using an appropriate interest rate yield curve and exchange rate, adjusted for Company and counterparty credit risk. assumptions are based on market conditions prevailing on the reporting date;

• The fair value of participating loans is estimated using the present value of the interest and of the amount repayable as expected principal. The amount repayable as expected principal of the participating loans is calculated as follows: 3% of 6.5 times the eBiTda of Clement Pappas and Company, inc. (CPC) for the four quarters preceding the redemption less outstanding debt plus cash on hand; and

• The fair value of the retractable financial instruments is estimated using the present value of the expected future per share redemption price, which is calculated as follows: 6.4 times the average annual eBiTda of CPC for the two full fiscal years preceding redemption less outstanding debt plus cash on hand divided by the number of shares outstanding of CPC. The fair value also takes into account the minimum price guaranteed by the Company in case the existing put and call provisions are exercised.

Financial instruments recorded at fair value are classified using a fair value hierarchy that categorizes the inputs used in fair value measurement techniques into three levels. This hierarchy gives the highest priority to level 1 inputs and the lowest priority to level 3 inputs.

in some cases, the inputs used to measure the fair value of an asset or a liability might be categorized within different levels of the fair value hierarchy. in those cases, the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. assessing the significance of a particular input to the entire measurement requires judgment, taking into account factors specific to the asset or liability. adjustments to arrive at measurements based on fair value, such as costs to sell when measuring fair value less costs to sell, shall not be taken into account when determining the level of the fair value hierarchy within which a fair value measurement is categorized.

all financial instruments measured at fair value in the Condensed Consolidated statement of Financial Position were classified according to a hierarchy comprising three levels:

• level 1: valuation based on quoted prices (unadjusted) observed in active markets for identical assets or liabilities;

• level 2: valuation based on inputs that are quoted prices of similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; inputs other than quoted prices used in a valuation model that are observable; and inputs that are derived mainly from or corroborated by observable market data using correlation or other forms of relationship;

• level 3: valuation techniques based on a significant portion of inputs not observable in the market.

The Company’s policy is to recognize transfers into and out of the different hierarchy levels as of the date of the event or change in circumstances that caused the transfer. during the second quarters and first six months ended June 29, 2013 and June 30, 2012, no financial instruments were transferred between levels 1, 2 and 3.



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The following tables present the financial instruments measured at fair value on a recurring basis, classified using the hierarchy described above:

As at June 29, 2013 Level 1 Level 2 Level 3 Total $ $ $ $

Financial assetsderivative financial instruments designated as hedges - 7,808 - 7,808

Financial liabilitiesderivative financial instruments: Held for trading - 2,055 - 2,055 designated as hedges - 783 - 783 Participating loans - - 6,025 6,025 retractable financial instruments - - 10,984 10,984

- 2,838 17,009 19,847

As at December 31, 2012 Level 1 Level 2 Level 3 Total $ $ $ $Financial assetsderivative financial instruments designated as hedges - 1,039 - 1,039

Financial liabilitiesderivative financial instruments: Held for trading - 3,013 - 3,013 designated as hedges - 1,516 - 1,516 Participating loans - - 5,507 5,507 retractable financial instruments - - 32,346 32,346

- 4,529 37,853 42,382



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7.3 Change in the fair value of financial instruments classified in Level 3

The following table presents the change in fair value of financial instruments classified in level 3:

Second quarters ended First six months ended June 29, 2013 June 30, 2012 June 29, 2013 June 30, 2012 $ $ $ $

Fair value at beginning 39,479 35,803 37,853 38,007 Change in fair value i) ii) (1,096) - (149) (1,568)settlements (21,602) - (21,602) - exchange difference iii) 228 638 907 2

Fair value at end 17,009 36,441 17,009 36,441 i) includes the impact of revisions to assumptions made and the passage of time.ii) recognized in profit or loss as financial expenses.iii) recognized in other comprehensive income in the exchange difference on translating foreign operations.

7.4 Sensitivity analysis of the Level 3 inputs

The fair value of the participating loans and retractable financial instruments is estimated using valuation techniques based on a significant portion of inputs not observable in the market. The fair value is estimated using the present value of the expected redemption price of the shares. The factors that most influence this valuation are the discount rate, expected future eBiTdas reflecting a growth rate based on the historical trends of CPC, and the expected free cash flows of CPC.

all other factors being equal, a reasonably possible increase of 1% in the discount rate would have resulted in a $468,000 decrease in the fair value of other long-term liabilities, while a 1% decrease would have increased the fair value of other long-term liabilities by $488,000. a reasonably possible increase of 5% in expected future eBiTdas over and above the expected growth would have increased the fair value of other long-term liabilities by $1,153,000. a 5% decrease in eBiTda compared to expected future levels would have had the opposite impact on the fair value of other long-term liabilities.

The sensitivities of each key assumption have been calculated independently of any changes in other assumptions. actual results may cause 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.

Note 8. Other Current Assets

As at As at June 29, 2013 Dec. 31, 2012 $ $

sales tax receivable 3,871 1,743Tax credits receivable 770 1,253Prepaid expenses 3,626 3,880other 95 -

8,362 6,876



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Note 9. Long-Term Debt

on april 10, 2013, the Company secured new credit facilities for its Canadian operations with an authorized amount of up to $249,524,000. The facilities include a 5-year committed revolving operating line of credit for an authorized amount of up to $175,000,000 and a term facility of $74,524,000.

The revolving operating credit was provided by a syndicate of Canadian financial institutions. it will be used to finance current operations and may also be used, under certain conditions, to finance potential acquisitions. interest margins and fee rates for the credit instruments available under the operating facility vary, based on a financial ratio, from 0 to 100 basis points in the case of loans bearing interest at the prime rate and from 1.25% to 2.25% in the case of other instruments.

The term facility replaces the Company’s current Canadian term loans from the same lender under similar terms and conditions.

The credit facilities contain certain conditions and restrictive covenants, including an obligation to maintain certain financial ratios.

Transaction costs for arranging these credit facilities, approximately at $1,413,000, were allocated as follows:

• an amount of $1,006,000, allocated to the revolving operating credit, was recognized in other long-term assets and will be amortized on a straight-line basis over the 5-year term of the revolving operating credit; and

• an amount of $407,000, allocated to the term facility, was recorded as a reduction to the carrying amount of the term facility and will be amortized over the term of the term facility using the effective interest rate method.

Note 10. Other Long-Term Liabilities

As at As at June 29, 2013 Dec. 31, 2012 $ $

Participating loans 6,025 5,507retractable financial instruments 10,984 32,346unearned discounts 237 298

17,246 38,151

10.1 Retractable financial instruments

on May 21, 2013, through one of its subsidiaries, the Company entered into an agreement with members of the Pappas family to acquire a 13.3% interest in Pappas lassonde Holdings, inc. (PlH), which owns 100% of CPC’s share capital. The purchase price of the acquired shares, recorded as a partial settlement of retractable financial instruments, totalled $21,386,000 (us$21,206,000) and was paid out of the Company’s working capital.

The shares thus acquired from the members of the Pappas family have raised the Company’s interest in PlH from 70.7% to 84.0%. as for the remaining 16.0% interest in PlH, 10.0% is owned by members of the lassonde family and 6.0% by a member of the Pappas family. The Company also agreed to guarantee a minimum price in case the existing put and call provisions in the PlH shareholder agreement are exercised regarding the shares held by a member of the Pappas family.

at the close of the transaction, the Company adjusted the non-controlling interest in the Condensed Consolidated statement of shareholders’ equity to reflect the dilution effect following the transaction.



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Note 11. Shareholders’ Equity

11.1 Dividend per share

during the first six months of 2013, the Company declared and paid dividends of $0.70 per share ($0.61 per share during the first six months of 2012) to the holders of Class a and B shares.

11.2 Dividends paid to related parties

Second quarters ended First six months ended June 29, 2013 June 30, 2012 June 29, 2013 June 30, 2012 $ $ $ $

3346625 Canada inc. 1,469 1,168 2,636 2,298Key management personnel 14 11 25 21

1,483 1,179 2,661 2,319

11.3 Subsequent share repurchase

since the end of the second quarter of 2013 and until august 7, 2013, the Company did not repurchase any Class a subordinate voting shares.

Note 12. Additional Cash Flow Information

12.1 Change in non-cash operating working capital items

First six months ended June 29, 2013 June 30, 2012 $ $ accounts receivable 12,532 10,369inventories 4,372 12,758other current assets (1,763) 5,144accounts payable and accrued liabilities (21,420) (4,831)other current liabilities 296 -

(5,983) 23,440

12.2 Cash and cash equivalents

in the Condensed Consolidated statements of Cash Flows, cash and cash equivalents include the following items:

As at As at As at June 29, 2013 Dec. 31, 2012 June 30, 2012 $ $ $ Cash 202 21,186 713 Cash equivalents 1,067 1,000 15 Bank overdraft (4,641) - -

(3,372) 22,186 728



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12.3 Non-cash transactions

Transactions that had no cash impact on investing activities were as follows:

a) acquisition of property, plant and equipment, for which an amount of $1,219,000 was unpaid as at June 29, 2013 ($1,136,000 as at december 31, 2012);

b) Government grant receivable of nil ($64,000 as at december 31, 2012) related to investments in property, plant and equipment; and

c) investment tax credit receivable of $485,000 ($975,000 as at december 31, 2012) related to investments in property, plant and equipment.

Note 13. Contingencies

13.1 Proceedings and claims

in the ordinary course of business, the Company is exposed to various proceedings and claims. The Company contests the validity of these proceedings and claims. Provisions are made whenever a penalty seems probable and a reliable estimate can be made of the amount. Management believes that any settlement arising from these claims will not have a significant effect on the Company’s current consolidated financial position or on profit or loss. Therefore, no provision has been recognized in these interim Condensed Consolidated Financial statements.

Note 14. Segment Information

The Company has determined that it has only one reportable operating segment, i.e., the development, manufacturing, marketing and sale of fruit and vegetable juices and drinks and of specialty food products; the importation, packaging and marketing of selected wines from several countries of origin; and the production of apple cider and wine-based beverages. This single reportable operating segment generates revenues from the sale of these products and from rendering services related to the sale of these products.

sales are attributed to the geographic segment based on the location of the client. The geographic segment of the non-current assets and goodwill are based on the locations of the assets.

14.1 Sales by geographic segment

Second quarters ended First six months ended June 29, 2013 June 30, 2012 June 29, 2013 June 30, 2012 $ $ $ $ Canada 147,078 149,913 279,045 278,421 united states 109,727 103,745 216,987 207,745 other 1,745 2,745 3,096 3,643

258,550 256,403 499,128 489,809



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14.2 Certain non-current assets and goodwill by geographic segment

As at June 29, 2013 Canada United States Total $ $ $ Property, plant and equipment 155,161 92,357 247,518other intangible assets 7,834 123,851 131,685Goodwill 5,776 126,024 131,800 168,771 342,232 511,003

As at December 31, 2012 Canada United States Total $ $ $ Property, plant and equipment 153,508 85,386 238,894other intangible assets 8,571 121,369 129,940Goodwill 5,776 119,206 124,982

167,855 325,961 493,816

Note 15. Event After the Reporting Period

on July 9, 2013, through one of its subsidiaries, the Company concluded an agreement to amend certain clauses of the term loan obtained during the third quarter of 2011 as part of the CPC acquisition. The loan, granted by a syndicate of banks and other institutional lenders, now bears interest at the london inter-Bank offered rate (liBor) plus 3.50% (previously 5.25%) with a liBor floor of 1.00% (previously 1.25%) and/or at prime rate plus 2.50% (previously 4.25%) and matures in august 2017.

The loan is non-recourse to the parent company and its Canadian subsidiaries, is collateralized by security interests on the assets of CPC and its subsidiaries, and is subject to certain covenants and restrictions, some of which have been amended. among other requirements, CPC must maintain a total leverage ratio of less than 4.75:1 as at June 30, 2013 (4.75:1 as at december 31, 2012), decreasing quarterly or semi-annually to reach 2.75:1 as at october 2, 2016 (previously 2.50:1 as at January 1, 2016).

The transaction costs for amending clauses of the term loan, totalling approximately us$2,300,000, are recorded as a reduction to the carrying amount of the loan and amortized over the remaining term of the loan using the effective interest rate method.



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Note 16. Adoption of IFRS Standards

16.1 IAS 19 Employee Benefits

on January 1, 2013, the Company adopted the amended version of ias 19 Employee Benefits that applies to fiscal years beginning on or after January 1, 2013. retrospectively applying ias 19 has changed the Company’s accounting policy for calculating the expected return on pension plan assets.

Prior to adopting the amended ias 19, the expected return on pension plan assets was calculated using a rate estimated by management that took into account historical returns, input provided by investment advisors and the actuary’s simulation model of expected long-term rates of return on the Company’s pension plan investment portfolio, assuming the portfolio’s target asset allocation was maintained.

The Company now calculates the expected return on pension plan assets using the discount rate determined at the beginning of the current period. The discount rate is chosen by the Company based on the current market interest rates of high-quality, fixed-rate corporate debt securities adjusted to reflect the duration of the expected future cash outflows of retirement benefit payments. The discount rate used for the current period is 4.3%.

Furthermore, the interest cost of the defined benefit obligation and expected return on pension plan assets, used in the previous version of ias 19, have been replaced with a net-interest amount, which is calculated by multiplying the discount rate by the net defined benefit asset/liability.

The impact of retrospectively applying the amended version of ias 19 on the comparative information presented in the Company’s interim Condensed Consolidated Financial statements for the second quarter of 2013 is as follows:

Second quarter Second quarter ended Adjustments ended June 30, 2012 June 30, 2012 (restated)

$ $ $

Condensed Consolidated Statements of Income selling and administrative expenses 49,727 (85) 49,642 income tax expense 3,074 23 3,097 Profit 10,625 62 10,687 Profit attributable to the Company’s shareholders 10,490 62 10,552 Basic and diluted earnings per share (in $) 1.50 0.01 1.51

Condensed Consolidated Statements of Comprehensive Income Profit 10,625 62 10,687 net actuarial losses resulting from defined benefit plans (1,302) (85) (1,387) Taxes 351 23 374 Total other comprehensive income 2,246 (62) 2,184 Comprehensive income 12,871 - 12,871



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First six months First six months ended Adjustments ended June 30, 2012 June 30, 2012 (restated)

$ $ $

Condensed Consolidated Statements of Income selling and administrative expenses 94,406 (170) 94,236 income tax expense 5,085 46 5,131 Profit 16,524 124 16,648 Profit attributable to the Company’s shareholders 16,106 124 16,230 Basic and diluted earnings per share (in $) 2.30 0.02 2.32

Condensed Consolidated Statements of Comprehensive Income Profit 16,524 124 16,648 net actuarial losses resulting from defined benefit plans (1,088) (170) (1,258) Taxes 293 46 339 Total other comprehensive loss (2,120) (124) (2,244) Comprehensive income 14,404 - 14,404

Condensed Consolidated Statements of Cash Flows Profit 16,524 124 16,648 income tax expense 5,085 46 5,131 Change in net defined benefit asset/liability (3,685) (170) (3,855)

16.2 Other IFRS Standards

on January 1, 2013, the Company adopted the new standards iFrs 10 Consolidated Financial Statements, iFrs 12 Disclosure of Interests in Other Entities and iFrs 13 Fair Value Measurement and the amended versions of the standards ias 1 Presentation of Financial Statements, iFrs 7 Financial Instruments: Disclosures and ias 32 Financial Instruments: Presentation. all of these standards apply to fiscal years beginning on or after January 1, 2013.

The adoption of these new standards or their amended version did not have an impact on the interim Condensed Consolidated Financial statements of the Company for the second quarter of 2013, except for the new disclosure requirements by amended versions of ias 1 and ias 34 Interim Financial Reporting that were applied in these financial statements.



growing with you. - lassonde · 2019. 11. 13. · the company’s sales totalled $258.6 million in...

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