Strong Healthy Innovative

Transcription

1 Strong Healthy Innovative INTERIM REPORT Second quarter ended June 27, 2015

2 Message to Shareholders 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 The Company s sales totalled $356.8 million in the second quarter of 2015, up $84.4 million or 31.0% from $272.4 million in sales in the same period of Sales from Apple & Eve, LLC ( A&E ) added $59.7 million to the Company s second quarter sales. Excluding A&E s sales, the Company s second quarter sales posted a year-over-year increase of $24.7 million (9.1%). This increase was primarily driven by a favourable foreign exchange impact and higher sales of private label products. For the first six months of 2015, sales totalled $684.5 million, up 32.5% from $516.6 million in the first six months of The Company s operating profit for the second quarter of 2015 totalled $29.3 million, up $7.4 million from operating profit of $21.9 million in the same quarter last year. Excluding the $3.1 million operating profit from A&E, operating profit was up $4.3 million from last year s second quarter. This increase came mainly from improved profitability within the Canadian operations owing to stronger performance by specialty food products, partly offset by an unfavourable impact of a low Canadian dollar on U.S.-dollar purchases. Operating profit benefited from the favourable impact of foreign exchange movements on the conversion of the results of Clement Pappas and Company, Inc. ( CPC ) into Canadian dollars. Operating profit for the first six months of 2015 stood at $46.3 million, up $10.1 million from $36.2 million at the end of the first six months of The Company s financial expenses went from $4.1 million in the second quarter of 2014 to $6.8 million this quarter. This $2.7 million increase was largely due to a higher interest expense related to the financing of the A&E acquisition, a higher change in the fair value of participating loans and an unfavourable foreign exchange impact resulting from the conversion of CPC s interest expense on borrowings at an exchange rate higher than in For the first six months, financial expenses went from $9.4 million in 2014 to $13.4 million this fiscal year. Other (gains) losses went from a $0.9 million loss in the second quarter of 2014 to a $0.7 million loss in The 2014 second quarter loss was essentially due to $0.4 million in foreign exchange losses and to a $0.4 million loss related to a settlement at fair value of a derivative financial instrument. The $0.7 million loss in the second quarter of 2015 was mainly due to $0.5 million in foreign exchange losses. For the first six months, the Other (gains) losses item was a $0.6 million gain in 2015 compared to a $0.3 million gain in Profit before income taxes totalled $21.8 million for the second quarter of 2015, up $4.9 million from $16.9 million in the same quarter of For the first six months of 2015, profit before income taxes stood at $33.4 million, up $6.3 million from $27.1 million in the first six months of Income taxes went from $4.8 million in the second quarter of 2014 to $6.8 million in the same quarter of At 31.0%, the 2015 second quarter effective tax rate is higher than the 28.6% rate in the same quarter of This increase reflects an unfavourable change in the geographic mix of the Company s taxable income. Income tax expense for the first six months of 2015 stood at $10.2 million, up $2.5 million from $7.7 million in the first six months of The 2015 second quarter profit was $15.1 million, up $3.1 million from $12.0 million in the second quarter last year. It should be noted that this quarter s result includes a net profit of $1.9 million from A&E. For the first six months of 2015, profit totalled $23.2 million versus profit of $19.4 million in the first six months of Profit attributable to the Company s shareholders was $14.2 million, resulting in basic and diluted earnings per share of $2.03 for the second quarter of In the second quarter of 2014, profit attributable to the Company s shareholders had totalled $11.2 million, resulting in basic and diluted earnings per share of $1.61. For the first six months of 2015, profit attributable to the Company s shareholders totalled $21.9 million, resulting in basic and diluted earnings per share of $3.14 and, in the same six-month period of 2014, profit had totalled $18.3 million, resulting in basic and diluted earnings per share of $

3 Message to Shareholders (continued) Cash flows from operating activities generated $43.3 million in cash during the second quarter of 2015, while they had generated $1.7 million in cash during the same period last year. Financing activities used $34.2 million in the second quarter of 2015, while these activities had used $16.4 million in the same quarter of Investing activities used $5.2 million in the second quarter of 2015 compared to $4.2 million for the same quarter of At the end of the second quarter of 2015, the Company reported a cash and cash equivalents balance of $0.5 million and a bank overdraft of $14.6 million compared to a cash and cash equivalents balance of $17.4 million and a bank overdraft of $12.2 million at the end of the second quarter of A lack of sustained growth in the fruit juice and drink market continues to affect the sales volumes of North American producers in the sector. In the Canadian market, the Company has observed some recovery in demand despite a challenging competitive environment. The Company does not see any signs of competitive activity diminishing over the coming year. The Company is seeking to limit the impact of increased competition through national brand product innovation and continued private label customer development. Fiscal 2015 will include an entire year of A&E s financial results. To better measure the impact of the acquisition, it is important to note that the closing date of the A&E acquisition was July 25, 2014 and that A&E had recorded, for the 12-month period ended May 31, 2014, sales of approximately US$180 million and adjusted EBITDA of approximately US$15 million. The annual amortization of other intangible assets resulting from the A&E acquisition depends on the purchase price allocation that the Company completed in The Company believes that the annual amortization expense on these other intangible assets will be approximately US$5.7 million. Barring any major external shocks (and excluding sales from A&E to maintain a comparable basis), the Company remains optimistic about its ability to slightly increase its consolidated sales in 2015 compared to those of At the same time, the Company plans to focus on its existing business activities in In closing, I would like to thank our employees and partners whose efforts enable Lassonde Industries Inc. to progress towards its corporate objectives. PIERRE-PAUL LASSONDE Chairman of the Board and Chief Executive Officer Lassonde Industries Inc. 755 Principale Street Rougemont (Quebec) J0L 1M0 3

4 Table of Contents Condensed Consolidated Statements of Income... 5 Condensed Consolidated Statements of Comprehensive Income (Loss)... 6 Condensed Consolidated Statements of Financial Position... 7 Condensed Consolidated Statements of Shareholders Equity... 8 Condensed Consolidated Statements of Cash Flows

5 Condensed Consolidated Statements of Income (in thousands of Canadian dollars unless otherwise indicated) Second quarters ended First six months ended Notes June 27, 2015 June 28, 2014 June 27, 2015 June 28, 2014 $ $ $ $ Sales 356, , , ,635 Cost of sales 252, , , ,803 Selling and administrative expenses 74,959 52, , ,677 (Gains) losses on capital assets (3) 327, , , ,477 Operating profit 29,303 21,851 46,264 36,158 Financial expenses 4 6,756 4,115 13,438 9,355 Other (gains) losses (583) (330) Profit before income taxes 21,832 16,877 33,409 27,133 Income tax expense 6 6,765 4,829 10,184 7,693 Profit 15,067 12,048 23,225 19,440 Attributable to: Company s shareholders 14,181 11,228 21,945 18,320 Non-controlling interest ,280 1,120 15,067 12,048 23,225 19,440 Basic and diluted earnings per share (in $) Weighted average number of shares outstanding (in thousands) 6,988 6,988 6,988 6,988 5

6 Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands of Canadian dollars) Second quarters ended First six months ended June 27, 2015 June 28, 2014 June 27, 2015 June 28, 2014 $ $ $ $ Profit 15,067 12,048 23,225 19,440 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 (2,329) (5,579) 8,008 5 Reclassification of (gains) losses on financial instruments designated as hedges (5,880) (2,222) (11,879) (5,865) Income tax expense 2,216 2,106 1,045 1,582 (5,993) (5,695) (2,826) (4,278) Translation difference: Exchange difference on translating foreign operations (7,985) (7,142) 19, (13,978) (12,837) 16,833 (4,114) Not to be reclassified subsequently to profit or loss: Benefit cost of the defined benefit plans: Remeasurements of the net defined benefit asset or liability 991 (1,111) (1,163) (2,916) Income tax expense (291) (810) (875) (2,125) Total other comprehensive income (loss) (13,278) (13,647) 15,958 (6,239) Comprehensive income (loss) 1,789 (1,599) 39,183 13,201 Attributable to: Company s shareholders 1,688 (1,657) 35,915 12,064 Non-controlling interest ,268 1,137 1,789 (1,599) 39,183 13,201 6

7 Condensed Consolidated Statements of Financial Position (in thousands of Canadian dollars) Notes As at As at June 27, 2015 Dec. 31, 2014 $ $ Assets Current Cash and cash equivalents Accounts receivable 125, ,615 Income tax recoverable 2,126 1,368 Inventories 210, ,631 Other current assets 8 11,290 13,836 Derivative instruments 5,492 7, , ,485 Derivative instruments Property, plant and equipment 255, ,847 Other intangible assets 241, ,742 Net defined benefit asset 805 1,710 Other long-term assets 917 1,009 Goodwill 195, ,861 1,050,452 1,016,702 Liabilities Current Bank overdraft 14,559 17,433 Accounts payable and accrued liabilities 172, ,156 Income tax payable 1,278 4,427 Other current liabilities 10 10,540 9,566 Derivative instruments Current portion of long-term debt 9 43,384 10, , ,413 Derivative instruments Net defined benefit liability 1, Long-term debt 9 301, ,221 Deferred tax liabilities 34,735 32,744 Other long-term liabilities 10 4,845 4, , ,945 Shareholders equity Capital, reserves and retained earnings attributable to the Company s shareholders 428, ,685 Non-controlling interest 35,340 32, , ,757 1,050,452 1,016,702 Approved by the Board of Directors Pierre-Paul Lassonde Director Luc Provencher Director 7

8 Condensed Consolidated Statements of Shareholders Equity (in thousands of Canadian dollars) Contributed surplus Hedging reserve Foreign currency translation reserve Retained earnings Attributable to the Company s shareholders Noncontrolling interest Total shareholders equity Share capital $ $ $ $ $ $ $ $ Balance as at December 31, ,864 1,382 5,361 34, , ,685 32, ,757 Profit ,945 21,945 1,280 23,225 Other comprehensive income (loss) - - (2,826) 17,687 (891) 13,970 1,988 15,958 Dividends (5,660) (5,660) - (5,660) Balance as at June 27, ,864 1,382 2,535 52, , ,940 35, ,280 Balance as at December 31, ,864 1,382 4,021 11, , ,455 19, ,073 Profit ,320 18,320 1,120 19,440 Other comprehensive income (loss) - - (4,278) 147 (2,125) (6,256) 17 (6,239) Dividends (5,519) (5,519) - (5,519) Adjustment (Note 12) (290) - Balance as at June 28, ,864 1,382 (257) 11, , ,290 20, ,755 Additional information on shareholders equity is presented in Note

9 Condensed Consolidated Statements of Cash Flows (in thousands of Canadian dollars) First six months ended Notes June 27, 2015 June 28, 2014 $ $ Operating activities Profit 23,225 19,440 Adjustments for: Income tax expense 6 10,184 7,693 Interest income and expense 11,385 8,523 Depreciation and amortization 21,006 15,512 Amortization of unearned discounts and unused tax credits (246) (200) Change in fair value of financial instruments 2, Cost of the defined benefit plans recognized in profit or loss, net of contributions 549 1,572 (Gains) losses on capital assets 69 (3) Unrealized foreign exchange (gains) losses (396) (273) 68,486 53,087 Change in non-cash operating working capital items 12 12,869 (9,756) Income tax received Income tax paid (11,984) (6,578) Interest received Interest paid (10,400) (7,206) Settlements of derivative instruments (507) (139) 58,748 30,338 Financing activities Change related to the revolving operating credit, net of transaction costs (32,594) 4,988 Increase in long-term debt, net of transaction costs (53) (27) Repayment of long-term debt (8,945) (17,982) Dividends paid on Class A shares (2,620) (2,554) Dividends paid on Class B shares (3,040) (2,965) Settlement of retractable financial instruments 12 - (11,818) (47,252) (30,358) Investing activities Consideration received on business combination Acquisitions of property, plant and equipment (8,699) (7,759) Acquisitions of other intangible assets (131) (44) Net proceeds from the disposal of property, plant and equipment (8,116) (7,790) Increase (decrease) in cash and cash equivalents 3,380 (7,810) Cash and cash equivalents at beginning (17,088) 12,636 Impact of exchange rate changes on cash and cash equivalents (356) 341 Cash and cash equivalents at end 12 (14 064) 5,167 Additional cash flow information is presented in Note 12. 9

10 Table of Contents Note 1. Description of the Business Note 2. Statement of Compliance Note 3. Seasonality or Cyclicality of Interim Operations Note 4. Financial Expenses Note 5. Other (Gains) Losses Note 6. Income Tax Expense Note 7. Financial Instruments Note 8. Other Current Assets Note 9. Long-Term Debt Note 10. Other Liabilities Note 11. Shareholders Equity Note 12. Additional Cash Flow Information Note 13. Contingencies Note 14. Segment Information Note 15. Future Accounting Changes

11 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 ready-to-drink fruit and vegetable juices and drinks. The Company is the second largest producer of store brand shelf-stable fruit juices and drinks in the United States and a major producer of cranberry sauces. Furthermore, the Company develops, manufactures and markets specialty food products such as fondue broths and sauces, packaged corn-on-the-cob and pasta sauces. It imports selected wines from several countries of origin for packaging and marketing purposes. It also produces apple cider and cider-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, The Company s annual consolidated financial statements for the year ended December 31, 2014 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, The Company s interim condensed consolidated financial statements and annual consolidated financial statements are available on the SEDAR website at and on the Company s website at The Board of Directors approved these interim condensed consolidated financial statements on August 7, Note 3. Seasonality or Cyclicality of Interim Operations In the ordinary course of business, the Company is involved in apple and cranberry processing and packages corn-on-the-cob. These processing activities take place mainly from August to November. Processing the harvested crops generally 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 process and package 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. 11

12 Note 4. Financial Expenses Second quarters ended First six months ended June 27, 2015 June 28, 2014 June 27, 2015 June 28, 2014 $ $ $ $ Interest on long-term debt 4,595 3,544 9,165 7,102 Amortization of non-cash financial expenses ,972 1,561 Interest and other bank expenses Change in fair value of financial instruments designated as financial liabilities at fair value through profit or loss 1,017 (304) 1, ,762 4,180 13,461 9,517 Financial revenues (6) (65) (23) (162) 6,756 4,115 13,438 9,355 Note 5. Other (Gains) Losses Second quarters ended First six months ended June 27, 2015 June 28, 2014 June 27, 2015 June 28, 2014 $ $ $ $ Exchange (gains) losses (1,574) (533) Change in fair value of derivative instruments held for trading Other (gains) losses 11 (5) (2) (36) (583) (330) Note 6. Income Tax Expense Second quarters ended First six months ended June 27, 2015 June 28, 2014 June 27, 2015 June 28, 2014 $ $ $ $ Current tax 5,474 4,584 7,413 5,791 Deferred tax 1, ,771 1,902 6,765 4,829 10,184 7,693 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 for the fiscal year 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. 12

13 Note 7. Financial Instruments 7.1 Classification The classifications and carrying values of financial instruments are as follows: As at June 27, 2015 Loans and receivables FVTPL i) Other financial liabilities Derivatives used as hedges Total carrying value $ $ $ $ $ Financial assets Cash and cash equivalents Accounts receivable 125, ,715 Derivative instruments ,549 5, , , ,759 Financial liabilities Bank overdraft ,559-14,559 Accounts payable and accrued liabilities , ,143 Derivative instruments - 1, ,567 Participating loans ii) - 11, ,990 Long-term debt iii) iv) , ,154-13, , ,413 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 assets and liabilities at fair value through profit or loss. ii) iii) Includes the current portion and the long-term portion. Includes the current portion of long-term debt. iv) The fair value of long-term debt is $352,407,

14 As at December 31, 2014 Loans and receivables FVTPL i) Other financial liabilities Derivatives used as hedges Total carrying value $ $ $ $ $ Financial assets Cash and cash equivalents Accounts receivable 121, ,615 Derivative instruments ,690 7, , , ,698 Financial liabilities Bank overdraft ,433-17,433 Accounts payable and accrued liabilities , ,156 Derivative instruments Participating loans ii) - 10, ,567 Long-term debt iii) iv) , ,083-11, , ,208 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 assets and liabilities at fair value through profit or loss. ii) iii) Includes the current portion and the long-term portion. Includes the current portion of long-term debt. iv) The fair value of long-term debt is $386,037, 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 derivative instruments. 14

15 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, bank overdraft and accounts payable and accrued liabilities are approximately equal to their carrying values due to their short-term maturities; The fair value of long-term debt, including finance leases, 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; The fair value of derivative instruments, including foreign exchange forward contracts and interest rate swaps, is determined using valuation techniques and calculated as the present value of estimated future cash flows using an appropriate exchange rate and interest rate yield curve. Assumptions are based on market conditions prevailing on the reporting date. The derivative instruments reflect the estimated amounts that the Company would receive or pay to transfer the contracts in an orderly transaction between market partcipants at each reporting date; and The fair value of participating loans is estimated using the present value of future cash flows. The amount repayable as expected principal of the participating loans is calculated as follows: 3.14% of 6.5 times the adjusted consolidated operating profit before depreciation and amortization (EBITDA) of Clement Pappas and Company, Inc. (CPC) for the four quarters preceding the redemption less outstanding debt plus cash on hand. Recognized financial instruments 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 disposal costs when measuring fair value less disposal costs, 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 for 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 the first six months ended June 27, 2015 and June 28, 2014, no financial instruments were transferred between levels 1, 2 and 3. 15

16 The following tables present the financial instruments measured at fair value on a recurring basis, classified using the hierarchy described above: As at June 27, 2015 Level 1 Level 2 Level 3 Total $ $ $ $ Financial assets Derivative instruments: Held for trading Designated as hedges - 5,549-5,549-5,549-5,549 Financial liabilities Derivative instruments: Held for trading - 1,447-1,447 Designated as hedges Participating loans ,990 11,990-1,567 11,990 13,557 As at December 31, 2014 Level 1 Level 2 Level 3 Total $ $ $ $ Financial assets Derivative instruments: Held for trading Designated as hedges - 7,690-7,690-7,738-7,738 Financial liabilities Derivative instruments: Held for trading Designated as hedges Participating loans ,567 10, ,567 11,536 16

17 7.3 Change in the fair value of financial instruments classified in Level 3 The following table presents the change in the fair value of financial instruments classified in Level 3, measured at fair value on a recurring basis: Second quarters ended First six months ended June 27, 2015 June 28, 2014 June 27, 2015 June 28, 2014 $ $ $ $ Fair value at beginning 11,267 19,410 10,567 18,055 Change in fair value i) ii) 1,017 (304) 1, Settlements (294) (12,034) (294) (12,034) Exchange difference iii) - (439) - 28 Fair value at end 11,990 6,633 11,990 6,633 i) Includes the impact of revisions to assumptions made and of the passage of time. ii) iii) Recognized in profit or loss as financial expenses. 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 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 future cash flows. The factors that mostly influence this valuation are the discount rate, expected future adjusted consolidated EBITDA reflecting a growth rate based on the historical trends of Pappas Lassonde Holdings, Inc. (PLH), and the expected free cash flows of PLH. Sensitivity analyses of the fair value of participating loans were calculated based on reasonably possible changes to each key assumption without considering simultaneous changes to these key assumptions. A change in one assumption could trigger a change in another assumption, which could amplify or mitigate the impact of the change in these assumptions on the fair value of these financial instruments. The actual impacts of changes in assumptions on the fair value of these financial instruments may differ from the estimated impacts below. Change in assumption Impact on fair value given Increase in Decrease in assumption assumption $ $ Discount rate 1% (182) 188 Expected future adjusted consolidated EBITDA 5% 724 (724) 17

18 Note 8. Other Current Assets As at As at June 27, 2015 Dec. 31, 2014 $ $ Sales tax receivable 3,921 5,472 Tax credits receivable 1,685 1,992 Prepaid expenses 5,684 6,372 11,290 13,836 Note 9. Long-Term Debt The current portion of the long-term debt includes an estimate of the annual payment of the consolidated excess cash flows of a subsidiary of the Company. This estimate corresponds to 50% of the consolidated excess cash flows established as at December 31, 2014, adjusted to take into account the estimated excess cash flows of Apple & Eve, LLC (A&E). The percentage of the annual payment of excess cash flows was reduced since the Company expects to achieve the prescribed ratio in fiscal Note 10. Other Liabilities As at As at June 27, 2015 Dec. 31, 2014 $ $ Current Participating loans 8,148 7,676 Other 2,392 1,890 10,540 9,566 Long-term Participating loans 3,842 2,891 Unearned discounts and unused tax credits 1,003 1,177 4,845 4,068 18

19 Note 11. Shareholders Equity 11.1 Dividend per share During the first six months of 2015, the Company declared and paid dividends of $0.81 per share ($0.79 per share during the first six months of 2014) to the holders of Class A and B shares Dividends paid to related parties Second quarters ended First six months ended June 27, 2015 June 28, 2014 June 27, 2015 June 28, 2014 $ $ $ $ Canada Inc. 1,545 1,506 3,051 2,975 Key management personnel ,558 1,520 3,077 3, Subsequent share repurchase Since the end of the second quarter of 2015 and until August 5, 2015, 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 27, 2015 June 28, 2014 $ $ Accounts receivable (411) (8,665) Inventories (9,819) (12,374) Other current assets 2,178 3,638 Accounts payable and accrued liabilities 20,436 7,374 Other current liabilities i) ,869 (9,756) i) Does not include changes related to participating loans and retractable financial instruments 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 27, 2015 Dec. 31, 2014 June 28, 2014 $ $ $ Cash ,292 Cash equivalents Bank overdraft (14,559) (17,433) (12,194) (14,064) (17,088) 5,167 19

20 12.3 Non-cash transactions Transactions that had no cash impact on investing activities were as follows: Acquisition of property, plant and equipment and other intangible assets, for which an amount of $710,000 was unpaid as at June 27, 2015 ($1,263,000 as at December 31, 2014); Investment tax credit receivable related to investments in property, plant and equipment of $687,000 as at June 27, 2015 ($1,065,000 as at December 31, 2014); and Finance lease for which an amount of $150,000 was recognized in property, plant and equipment and as a finance lease obligation during the first quarter of Consideration received on business combination The consideration receivable as at December 31, 2014 related to the business combination with A&E, amounting to US$422,000, was received during the first quarter of Retractable financial instruments On June 27, 2014, through one of its subsidiaries, the Company acquired, from a member of the Pappas family, a 6.0% interest in PLH. The total purchase price of the acquired shares, recorded as a settlement of retractable financial instruments, totalled $11,818,000 (US$11,070,000) and was paid out of the Company s working capital. The shares thus acquired have raised the Company s interest in PLH and its CPC subsidiary from 84.0% to 90.0%. The remaining 10.0% interest is owned by members of the Lassonde family. Before the close of this transaction, the Company obtained the required consents from certain lenders to ensure compliance with restrictive covenants. At the close of this transaction, the Company adjusted the non-controlling interest in the Condensed Consolidated Statement of Shareholders Equity to reflect the impact of these transactions. 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 assesses 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 the Company s 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 and marketing of a wide range of ready-to-drink 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 cider-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 where the Company has transferred the significant risks and rewards of ownership of the goods to the buyer. The geographic segment of non-current assets and goodwill are based on the locations of the assets. 20

21 14.1 Sales by geographic segment Second quarters ended First six months ended June 27, 2015 June 28, 2014 June 27, 2015 June 28, 2014 $ $ $ $ Canada 152, , , ,102 United States 201, , , ,085 Other 2,650 2,116 4,480 3, , , , , Certain non-current assets and goodwill by geographic segment As at June 27, 2015 Canada United States Total $ $ $ Property, plant and equipment 153, , ,083 Other intangible assets 10, , ,980 Goodwill 5, , , , , ,946 As at December 31, 2014 Canada United States Total $ $ $ Property, plant and equipment 154,192 97, ,847 Other intangible assets 11, , ,742 Goodwill 5, , , , , ,450 Note 15. Future Accounting Changes 15.1 IFRS 15 Revenue From Contracts With Customers The International Accounting Standards Board (IASB) has adopted an IFRS 15 amendment that postpones the effective date from January 1, 2017 to January 1,