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Corby Spirit and Wine Announces Quarterly Dividend and Reports Third Quarter Results

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Corby Spirit and Wine Announces Quarterly Dividend and Reports Third Quarter Results

Canada NewsWire

TORONTO, May 9, 2018 /CNW/ - Corby Spirit and Wine Limited ("Corby" or the "Company") (TSX: CSW.A, CSW.B) today reported its financial results for the third quarter ended March 31, 2018. The Corby Board of Directors today also declared a dividend of $0.22 per share payable on June 13, 2018 on the Voting Class A Common Shares and Non-Voting Class B Common Shares of the Company to shareholders of record as at the close of business on May 25, 2018.

Revenue for both the third quarter and the nine-month period ended March 31, 2018 increased 2% despite an earlier lag in shipment performance in the Canadian market (primarily due to LCBO purchases in Q4 of the prior year in anticipation of a threatened but averted strike).

New entrants into international markets, market mix, and the addition of the premium Ungava Spirits' brands and Foreign Affair wines drove positive top line results, together with an increase in commission income from Pernod Ricard brands. Advertising and promotional investments continue to support the sustained development of the newly acquired brands and are behind the Company's key strategic battlegrounds such as premium innovations in Canadian whisky and J.P. Wiser's, which continues to grow market share and outperform its category.

Net earnings of $4.8 million (or $0.17 per share) were reported for the three-month period ended March 31, 2018, reflecting an increase of $1.4 million, or 43%, when compared to the same quarter last year. On a year to date basis, net earnings of $16.4 million reflect a slight decrease of $0.5 million for the nine- month period ended March 31, 2018, when compared to the same period last year.

"I am pleased with our third quarter results, particularly with the resilient performance of J.P. Wiser's in an evolving Canadian whisky market. Our key brands, including our recent acquisitions of the Ungava Spirits' brands and the Foreign Affair wines, are benefitting from our commitment to continue investment in building sustainable competitive advantage in the spirits and wine industry and driving premiumization of the Corby portfolio. Recently, in collaboration with Hiram Walker & Sons Limited, we opened the J.P. Wiser's Brand Experience Centre in Walkerville, Ontario where we are proudly sharing the heritage and story of our award winning brands and innovations. I invite everyone to visit and immerse themselves in our products to learn what makes our brands truly unique in this industry," noted Patrick O'Driscoll, President and Chief Executive Officer of Corby.

For further details, please refer to Corby's management's discussion and analysis and interim condensed consolidated financial statements and accompanying notes for the three-and-nine-months ended March 31, 2018, prepared in accordance with International Financial Reporting Standards.

About Corby
Corby Spirit and Wine Limited is a leading Canadian manufacturer, marketer and distributor of spirits and imported wines. Corby's portfolio of owned-brands includes some of the most renowned brands in Canada, including J.P. Wiser's®, Lot 40®, and Pike Creek® Canadian whiskies, Lamb's® rum, Polar Ice® vodka and McGuinness® liqueurs, as well as the recently acquired Ungava® gin, Cabot Trail® maple-based liqueurs and Chic Choc® Spiced rum and Foreign Affair® wines. Through its affiliation with Pernod Ricard S.A., a global leader in the spirits and wine industry, Corby also represents leading international brands such as ABSOLUT® vodka, Chivas Regal®, The Glenlivet® and Ballantine's® Scotch whiskies, Jameson® Irish whiskey, Beefeater® gin, Malibu® rum, Kahlúa® liqueur, Mumm® champagne, and Jacob's Creek®, Wyndham Estate®, Stoneleigh®, Campo Viejo®, Graffigna® and Kenwood® wines. In 2018, Corby was named one of the 50 Best Workplaces in Canada by The Great Place to Work® Institute Canada for the seventh consecutive year and was also listed among Greater Toronto's Top 100 Employers. Corby is a publicly traded company based in Toronto, Ontario, and listed on the Toronto Stock Exchange under the trading symbols CSW.A and CSW.B.  For further information, please visit our website or follow us on LinkedIn.

This press release contains forward-looking statements, including statements concerning possible or assumed future results of Corby's operations. Forward-looking statements typically are preceded by, followed by or include the words "believes", "expects", "anticipates", "estimates", "intends", "plans" or similar expressions. Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions and, as such, actual results or expectations could differ materially from those anticipated in these forward-looking statements. Accordingly, readers should not place undue reliance on forward-looking statements. All financial results are reported in Canadian dollars.

CORBY SPIRIT AND WINE LIMITED
Management's Discussion and Analysis
March 31, 2018

The following Management's Discussion and Analysis ("MD&A") dated May 9, 2018 should be read in conjunction with the unaudited interim condensed consolidated financial statements and accompanying notes as at and for the three and nine-month period ended March 31, 2018, prepared in accordance with International Financial Reporting Standards ("IFRS"). These interim condensed consolidated financial statements were not audited or reviewed by the Company's external auditors in accordance with standards established by the Canadian Institute of Chartered Accountants for a review of unaudited interim financial statements by an entity's auditor. These unaudited interim condensed financial statements do not contain all disclosures required by IFRS for annual financial statements and, accordingly, should also be read in conjunction with the most recently prepared annual consolidated financial statements for the year ended June 30, 2017.

This MD&A contains forward-looking statements, including statements concerning possible or assumed future results of operations of Corby Spirit and Wine Limited ("Corby" or the "Company"), including the statements made under the headings "Strategies and Outlook", "Liquidity and Capital Resources", "Recent Accounting Pronouncements" and "Risks and Risk Management." Forward-looking statements typically are preceded by, followed by or include the words "believes", "expects", "anticipates", "estimates", "intends", "plans" or similar expressions. Forward-looking statements are not guarantees of future performance. They involve risks and uncertainties, including, but not limited to: the impact of competition; the impact, and successful integration of, acquisitions; business interruption; trademark infringement; consumer confidence and spending preferences; regulatory changes; general economic conditions; and the Company's ability to attract and retain qualified employees. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. These factors are not intended to represent a complete list of the factors that could affect the Company and other factors could also affect Corby's results. For more information, please see the "Risk and Risk Management" section of this MD&A.

This document has been reviewed by the Audit Committee of Corby's Board of Directors and contains certain information that is current as of May 9, 2018. Events occurring after that date could render the information contained herein inaccurate or misleading in a material respect. Corby will provide updates to material forward-looking statements, including in subsequent news releases and its interim management's discussion and analyses filed with regulatory authorities as required under applicable law. Additional information regarding Corby, including the Company's Annual Information Form, is available on SEDAR at www.sedar.com.

Unless otherwise indicated, all comparisons of results for the third quarter of fiscal 2018 (three months ended March 31, 2018) are against results for the third quarter of fiscal 2017 (three months ended March 31, 2017). All dollar amounts are in Canadian dollars unless otherwise stated.

Business Overview

Corby is a leading Canadian manufacturer and marketer of spirits and importer of wines. Corby's national leadership is sustained by a diverse brand portfolio that allows the Company to drive profitable organic growth with strong, consistent cash flows. Corby is a publicly traded company, with its shares listed on the Toronto Stock Exchange under the symbols "CSW.A" (Voting Class A Common Shares) and "CSW.B" (Non-Voting Class B Common Shares). Corby's Voting Class A Common Shares are majority-owned by Hiram Walker & Sons Limited ("HWSL") (a private company) located in Windsor, Ontario. HWSL is a wholly-owned subsidiary of international spirits and wine company Pernod Ricard S.A. ("PR") (a French public limited company), which is headquartered in Paris, France. Therefore, throughout the remainder of this MD&A, Corby refers to HWSL as its parent, and to PR as its ultimate parent. Affiliated companies are those that are also subsidiaries of PR.

The Company derives its revenues from the sale of its owned-brands ("Case Goods"), as well as earning commission income from the representation of selected non-owned brands in Canada ("Commissions"). The Company also supplements these primary sources of revenue with other ancillary activities incidental to its core business, such as logistics fees and from time to time bulk whisky sales to rebalance its maturation inventories. Revenue from Corby's owned-brands predominantly consists of sales made to each of the provincial liquor boards ("LBs") in Canada, and also includes sales to international markets.

Corby's portfolio of owned-brands includes some of the most renowned brands in Canada, including J.P. Wiser's® Canadian whisky, Lamb's® rum, Polar Ice® vodka and McGuinness® liqueurs. Through its affiliation with PR, Corby also represents leading international brands such as ABSOLUT® vodka, Chivas Regal®, The Glenlivet® and Ballantine's® Scotch whiskies, Jameson® Irish whiskey, Beefeater® gin, Malibu® rum, Kahlúa® liqueur, Mumm® champagne, and Jacob's Creek®, Wyndham Estate®, Stoneleigh®, Campo Viejo®, Graffigna® and Kenwood® wines. In addition to representing PR's brands in Canada, Corby also provides representation for certain selected, unrelated third-party brands ("Agency brands") when they fit within the Company's strategic direction and, thus, complement Corby's existing brand portfolio. On September 30, 2016, Corby acquired certain brands, including Ungava® gin, Chic Choc® Spiced rum, Cabot Trail® maple cream liqueur (Coureur des Bois®, in Quebec), and a range of maple-based products (collectively, the "Ungava Spirits Brands"). On October 2, 2017, Corby acquired the Foreign Affair® wine brands, including Temptress, Enchanted, Amarosé and The Conspiracy brands (collectively, the "Foreign Affair Brands").

PR produces the majority of Corby's owned-brands at HWSL's production facility in Windsor, Ontario. Under an administrative services agreement, Corby manages PR's business interests in Canada, including HWSL's production facility. On November 11, 2015, the parties entered into new agreements (a distillate supply agreement, a co-pack agreement and an administrative services agreement) each for a 10-year term commencing September 30, 2016, thus replacing the agreements that expired September 20, 2016 and extending these arrangements to September 30, 2026.

Corby sources more than 90% of its spirits production requirements from HWSL at its production facility in Windsor, Ontario. Ungava Spirits Co. Ltd. ("Ungava Spirits") produces the Ungava Spirits Brands and operates the Cowansville, Quebec production facility acquired on September 30, 2016. The Foreign Affair Winery Ltd., produces the Foreign Affair Brands and operates the winery and vineyard, based in Ontario's Niagara region, acquired on October 2, 2017. The Company's remaining production requirements have been outsourced to various third-party vendors including a third-party manufacturer in the United Kingdom ("UK"). The UK site blends and bottles Lamb's products destined for sale in countries located outside North America. 

In most provinces, Corby's route to market in Canada entails shipping its products to government-controlled LBs. The LBs then sell directly, or control the sale of, beverage alcohol products to end consumers. Exceptions to this model include Alberta, where the retail sector is privatized. In this province, Corby ships products to a bonded warehouse that is managed by a government-appointed service provider who is responsible for warehousing and distribution into the retail channel. Other provinces have aspects of both government-controlled and private retailing, including British Columbia, Saskatchewan and Quebec.

Corby's shipment patterns to the LBs will not always exactly match short-term consumer purchase patterns. However, given the importance of monitoring consumer consumption trends over the long term, the Company stays abreast of consumer purchase patterns in Canada through its member affiliation with the Association of Canadian Distillers ("ACD"), which tabulates and disseminates consumer purchase information it receives from the LBs to its industry members. Corby refers to this data throughout this MD&A as "retail sales", which are measured in volume (measured in nine-litre case equivalents). The Company reintroduced retail level analysis starting the last quarter of fiscal 2017 as the province of British Columbia cycled their move to wholesale pricing. Current retail value information as discussed in this MD&A is based on available pricing information as provided by the ACD and the LBs.

In addition to a focus on efforts to open new international markets, Corby's international business is concentrated in the United States ("US") and UK and the Company has a different route-to-market for each. For the US market, Corby manufactures the majority of its products in Canada and ships to its US distributor, Pernod Ricard USA, LLC ("PR USA"), an affiliated company. See the "Related Party Transactions" section of this MD&A for additional details. As the agreement that appointed PRUSA is set to expire on June 30, 2018, Corby is currently finalizing the process to appoint a new distributor. The market in the US operates a three-tier distribution system which often requires a much longer and larger inventory pipeline than in other markets, resulting in a disconnect between quarterly shipment performance, as reported in the financial statements, and the true underlying performance of the brands at retail level during the same quarter.

For the UK market, effective July 1, 2016, Corby entered into a distribution agreement with a related party for the distribution of Lamb's rum (more information is provided in the "Related Party Transactions" section of this MD&A) and, a new co-packing agreement for the production of the brand was entered into with Angus Dundee Distillers PLC, a third-party manufacturer.

Corby's operations are subject to seasonal fluctuations: sales are typically strong in the first and second quarters, while third-quarter sales usually decline after the end of the retail holiday season. Fourth-quarter sales typically increase again with the onset of warmer weather as consumers tend to increase their purchasing levels during the summer season. In addition, retail sales comparisons can be affected by timing of key holidays and LB reporting calendars.

Strategies and Outlook

Corby's business strategies are designed to maximize sustainable long-term value growth, and thus deliver solid profit while continuing to produce strong and consistent cash flows from operating activities. The Company's portfolio of owned and represented brands provides an excellent platform from which to achieve its current and long-term objectives.

Management believes that having a focused brand prioritization strategy will permit Corby to capture market share in the segments and markets that are expected to deliver the most growth in value over the long term. Therefore, the Company's strategy is to focus its investments on, and leverage the long-term growth potential of its key brands. As a result, Corby will continue to invest behind those brands to promote its premium offerings where it makes the most sense and drives the most value for Corby shareholders.

Brand prioritization requires an evaluation of each brand's potential to deliver upon this strategy, and facilitates Corby's marketing and sales teams' focus and resource allocation. Over the long term, management believes that effective execution of this strategy will result in value creation for Corby shareholders.

Pursuing new growth opportunities outside of Canada is also a key strategic priority. Our primary goal is to leverage our Canadian whisky expertise and expand our business into markets where we believe there is growth potential in both volume and margin.

Of primary importance to the successful implementation of our brand strategies is an effective route-to-market strategy. Corby is committed to investing in its trade marketing expertise and ensuring that its commercial resources are specialized to meet the differing needs of its customers and the selling channels they inhabit. In all areas of the business, management believes setting clear strategies, optimizing organization structure and increasing efficiencies is key to Corby's overall success.

In addition, management is convinced that both innovation and acquisitions are essential to seizing new profit and growth opportunities. Successful innovation can be delivered through a structured and efficient process as well as consistent investment in consumer insight and research and development. Corby benefits from having access to leading-edge practices at PR's North American hub, which is located in Windsor, Ontario, where most of its products are manufactured. Corby assesses potential acquisition opportunities against specific criteria including its core competencies and strategic priorities.

Finally, the Company is a strong advocate of social responsibility, especially with respect to its sales and promotional activities. Corby will continue to promote the responsible consumption of its products in its activities. As an example, Corby has an agreement in place to continue its successful partnership with the Toronto Transit Commission to provide free transit on New Year's Eve until 2019.

Significant Event

Acquisition of the shares, winery and assets of the Foreign Affair Winery

On October 2, 2017 Corby acquired all of the shares of Vinnova Corporation and substantially all of the assets of the Crispino Estate Vineyard partnership, which together operated as the Foreign Affair Winery ("Foreign Affair"), a Niagara, Ontario-based wine producer for a purchase price of $6.4 million. The purchase price was funded from the Company's Deposits in Cash Management Pools. The transaction resulted in Corby's acquisition, through a wholly-owned subsidiary, of the Foreign Affair Brands (Foreign Affair's portfolio of premium award-wining Ontario red, white and rosé wines, including Temptress, Enchanted, Amarosé and The Conspiracy brands), as well as related production assets and inventory.   

Since the completion of the transaction on October 2, 2017, the acquired Foreign Affair Brands have contributed $0.7 million to revenues and are net earnings neutral. More information regarding the transaction has been provided in Note 5 of the interim condensed consolidated financial statements for the three and nine-month periods ended March 31, 2018.

Brand Performance Review
Corby's portfolio of owned brands accounts for approximately 80% of the Company's total annual revenue. Included in this portfolio are its key brands: J.P. Wiser's Canadian whisky, Lamb's rum, Polar Ice vodka, Corby's mixable liqueur brands and the Ungava Spirits Brands. The sales performance of these key brands significantly impacts Corby's net earnings. Therefore, understanding each key brand is essential to understanding the Company's overall performance.

Shipment Volume and Shipment Value Performance
The following table summarizes the performance of Corby's owned-brands (i.e., Case Goods) in terms of both shipment volume (as measured by shipments to customers in equivalent nine-litre cases) and shipment value (as measured by the change in net sales revenue). The table includes results for sales in both Canada and international markets. Specifically, the J.P. Wiser's, Lamb's and Polar Ice brands and the Ungava Spirits Brands are also sold to international markets, particularly in the US and UK.








Three Months Ended

Nine Months Ended




Shipment Change



Shipment Change

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