2015 Interim Report
annual repor t
Visit us at Lassonde.com
Lassonde Industries
Financial Overview Last updated December 31, 2015
1,181M Sales
45.2M Profit attributable to company’s Shareholders
In thousands of dollars except per share amounts
Contents Pages 1 – 4 Our vision of sustainability
Letter to shareholders from Pierre ‑ Paul Lassonde. Company’s finan‑ cial overview and totals. Our Products and Eco-friendly production.
Pages 5 – 10 Specialty Products and Brands
Oasis smoothie wins The Product of the Year 2014. Our leading brands and new products to the Oasis brand.
Pages 11 – 16 Sponsorship & Donations
Our community as we support our local projects to help promote healthy eating also to helping provide children with books in the Start2Finish Program.
Pages 17 – 28 Financial Data
Our collective financial data and interim reports of the last year (Data from Canada and the United States).
2015 Financial Highlights NET SALES (Million of dollars) 5 year CAGR 7%
OPERATING PROFIT
5 year CAGR 4%
12,822
11,776
(Million of dollars)
1,750
1,766
1,868
2012
2013
2014
1,892
1,681
10,907
9,614 10,177
2011
2012
2013
2014
2015
2011
2015
Net sales increase again in 2014, the 9th
Net sales increase again in 2014, the 9th
consecutive year of growth.
consecutive year of growth.
CASH FLOW
OPERATING PROFIT (Million of dollars)
(Of dollars)
5 year CAGR 7%
1,031
950
957
769
2011
2012
2013
2014
806
1.01
2015
2011
Cash flow for 2014 was $1.1 billion before the impact of our $300 million discretionary pension contribution, resulting in net cash flow 6 of $806 million. *Data reflects five-year period including fiscal 2010 through 2014.
1.06
1.14
2012
2013
1.20
1.30
2014
2015
Dividends per share have increase 29% over the past 4 years.
Letter From Chairman 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 first quarter of fiscal 2015. The Company’s sales totaled $240.6 million in the first quarter of 2014, up $7.2 million or 3.1% from $233.4 million in the same period of 2013. This increase was primarily driven by higher private label sales and higher sales volumes for national brands. The Company’s operating profit for the first quarter of 2015 stood at $13.8 million, up $0.5 million or 4.3% from operating profit of $13.3 million in the same quarter last year. This increase is mainly due to additional margins generated by sales growth. The Company’s financial expenses went from $4.5 million in the first quarter of 2012 to $6.4 million this quarter. This increase was mostly attributable to the change in fair value of retractable financial instruments. A $1.4 million decrease in value had been recognized in the first quarter of 2013 while a $0.7 million increase was recognized in this quarter, for a total change of $2.1 million. This increase was partly offset by a $0.5 million decrease in interest expense.
The 2015 Gain & Foreign Exchange
“Other (gains) losses” went from a $0.8 million loss in the first quarter of 2013 to a $0.3 million gain in the first quarter of 2014. The 2013 first-quarter loss was due to the combined impact of a $0.5 million loss from a change in the fair value of interest rate swaps and a $0.3 million foreign exchange loss. The 2013 gain was essentially due to a foreign exchange gain. Profit before income taxes totaled $7.7 million for the first quarter of 2013, down $0.3 million from $8.0 million in the same quarter last year totaled $2.2 million compared to a bank overdraft of $5.9 million and bank indebtedness of $13.7 million at the end of the first quarter of 2015. In conclusion, I would like to highlight the efforts made by all employees to maintain our market position The Company could not stay on course and reach its financial and business objectives without their dedication and innovative spirit.
PIERRE-PAUL LASSONDE Chairman of the Board and Chief Executive Officer
2
Our Vision Change Starts Here We have always aimed to find solutions to use fewer materials and promote recycling.
Over the past 7 years, the amount of water used per liter of finished product has already been reduced by
28% in
both our QuĂŠbec plants.
We completed a thorough analysis of our water consumption, specifically by looking at all applicable global standards and technologies, as well as installing water meters in several facilities throughout our company.
3
At Lassonde, we are deeply committed to sustainable development and apply Eco-friendly practices at every level. As we produce millions of juice containers each year, the materials and manufacturing technology we choose have a definite impact on our environmental footprint.
9
Specialty Products 1,181M Sales
Quebec’s Lassonde buys U.S. juice brand Apple & Eve for
Tropical Grove
With such a variety, it’s a treat that tempts everyone’s taste buds! 5
150M
Allen’s Fruit Juice
has been one of Canada’s favourite fruit juice brands for more than 80 years! Loved for its delicious and authentic apple flavour
Strawberries and rhubarb are amazing together, but when you add ten vitamins and minerals, you get a winning combination on all accounts! 6
Product of the Year
Oasis Smoothie Voted 2014 It is with great pride that we learned that at the 2013 Product of the Year Gala in Toronto that our Oasis Smoothie in the Strawberry-Banana and Tropical Mango flavors were chosen as 2013 Product of the Year in the fruit juice category. We are especially proud of this distinction because it is awarded by Canadian consumers. Thank you for your trust. We are happy to see that all the passion and effort we invest in the development of new products enabled us to meet your high expectations. We know that tastes change all the time and we in‑ tend to continue to develop new quality products in the most popular flavors, products which are part of a healthy and varied diet. It is with this objective in mind that we have worked to create a fruit juice smoothie and we are proud of its popularity with the consumers. 7
Healthy eating is often a real challenge and we thrive in finding nutritious solutions while at the same time maintaining the great taste that characterizes our products in offering a sensible and affordable choice for the whole family, a choice that considerably re‑ duces the preparation time usually required for this type of refreshment. On behalf of the entire Lassonde team, thank you very much for your continued loyalty and your eagerness to try the products we develop for you. Recognition encourages us to continue in our efforts!
Strawberries and rhubarb are amazing together, but when you add ten vitamins and minerals, you get a winning combination on all accounts!
2015 New Featured Product
No Sugar. 100% Juice! A blend of enriched juices, new Oasis Health Break Strawberry and Rhubarb is an ideal beverage to quench your thirst. The sweetness of strawberries combined with the slight tartness of rhubarb will make everyone smile. In addition, it’s made with 100% juice and contains no added sugar or preservatives. No need to wait for summer to enjoy the exquisite combination of strawberries and rhubarb! Oasis Health Break Strawberry and Rhubarb is proof that you can be good to your body while enjoying yourself. Beginning in February 2015, you’ll find this new product in the chilled juices section of your local grocery store.
8
Leading Brands
At Lassonde, our vast array of brands offers a multitude of quality products that already have an established reputation. We are proud that they are part of your everyday life.
9
National Brands Stock Exchange (TSX). The Company has four principal operating subsidiaries: A. Lassonde Inc., Clement Pappas and Company Inc., Lassonde Specialties Inc., and Arista Wines Inc. It is active in two market segments: the retail segment and the food service segment. Retail sales account for approximately 85% of total annual sales and consist of sales to food retailers and wholesalers such as supermarket chains, independent grocers, superstores, warehouse clubs,
and major pharmacy chains. Food service sales account for approximately 15% of total annual sales and consist of sales to restaurants, hotels, hospitals, schools and wholesalers serving these institutions.
Healthy Products The products we market are part of a healthy diet. Indeed, we firmly believe that adopting a healthy lifestyle contributes directly to the well-being of families and athletes of all levels, which is part of the values we seek to share through all our activities, including our donation and sponsorship policy. 10
Sponsorships & Donations BC Child Run
Oasis sponsorship “Fruit Zoo Kids Zone” 2015
proud to announce the sponsorship of Canadian figure skater
Kaetlyn Osmond.
Tropical Grove
With such a variety, it’s a treat that tempts everyone’s taste buds! 11
30th Annual Lobster Lunch
benefit for the Foundation Tel-Jeunes. Quebec’s largest benefit lunch will take place on June 19 at Place Bonaventure with more than 4000 guests.
Pierre Lassonde,
donor to the University of Utah is giving money for a “cutting-edge building for student entrepreneurs.” 12
At Lassonde, we are deeply committed to sustainable development and apply Eco-friendly practices at every level. As we produce millions of juice containers each year, the materials and manufacturing technology we choose have a definite impact on our environmental footprint.
18
Community Support The 2nd Consecutive year of Start2Finish Running & Reading Club
Sustainable Development
The Start2Finish Program
We support projects and initiatives to help protect and enhance the environment within a perspective of sustainable development. We promote awareness-raising projects based on scientific knowledge, motivating citizens to become more responsible for the environment and to increase their environmentally appropriate actions. We support the projects with themes that involve positive concrete action for the environment (e.g., tree planting, preservation of rivers and mountains, and recycling campaigns).
Currently implemented in 26 schools, the Reading & Running Club offers a simple and motivating 32-week program. Every week, children build their physical fitness and endurance by means of running and other activities. They also receive individual remedial help in reading and writing and are given balanced, energy-filled snacks that include Lassonde juices. The program concludes in the annual 5 km Running & Reading Challenge for which we also provide juices. 14
Our Community
For several years now, Lassonde has associated itself with community life at the local, regional, and provincial levels, and even occasionally at a national level. In order to be a responsible and active partner in the various communities where its products are available, Lassonde provides support in the form of either monetary contributions or products, and this for various organizations, events, or initiatives in several sectors—community, social, cultural, educational, sports, environmental, humanitarian, or socio-economic. Sectors and areas that we support
Education
Health
We support popular recreational events and activities that contribute to collective well being and to the development of harmonious relations; we encourage the involvement of our personnel (e.g., tournaments, youth clubs, and recreational associations).
We support several hospital foundations, and we support medical research in various sectors, homes for the sick, foundations that support medical causes (e.g., Health partners, Foundation Docteur Maurice Bertrand, and university research centers).
Sports
We promote physical activity, especially team sports that promote self-development. For several years, we have been involved in many major sports events such as the Montreal OASIS Marathon and Half-Marathon, the Jeux du Québec, and the Grand Défi Pierre Lavoie.
Community and Social Initiatives
We support various organizations offering primary needs services (food, lodging, etc.) that help people to help themselves, providing follow-up on the clientele with which the Company’s personnel is involved or follow up that allows for involvement (e.g., Tel-Jeunes, charity organizations, hospital fundraising, groups for the elderly, causes). 15
Lassonde associates itself with projects involving local, regional, provincial, and even national educational institutions (e.g., elementary schools, secondary schools, adult education, CEGEPs, universities, childcare centers, vocational schools), while taking into consideration the applicant’s geographical proximity so as to determine the extent of the Company’s involvement.
Recreational Activities
Culture
We promote the creativity and development of artists and other creators and support the initiatives of organizers of cultural and artistic events (e.g., exhibits, choirs, theatre companies, and popular festivals).
Workplace Fundraising Campaign
Health is at the core of our activities, and Lassonde has made it a priority to promote this valuable asset in our business practices and within the organization. Knowing the value that employees also place on health, in 2011, Lassonde introduced an annual donation program for the benefit of Health partners-Quebec, a division of the pan-Canadian Health partners fund. The mission of Health partners-Quebec is to raise funds in the workplace for a group of renowned Quebec charitable healthcare organizations. Every year during its annual campaign, all Lassonde employees have the opportunity to make a donation by means of deductions at source. What is more, Lassonde matches every dollar donated.
2015 Donations go to: • • • • • • • •
Heart and Stroke Foundation Canadian Cancer Society Canadian Diabetes Association Multiple Sclerosis Society of Canada The Lung Association Muscular Dystrophy Canada Alzheimer Society of Canada Crohn’s and Colitis Foundation of Canada
16
Overview Performance The Company’s sales totaled $327.7 million in the first quarter of 2015, up $83.5 million or 34.2% from $244.2 million in sales in the same period of 2014. Sales from A&E added $62.5 million to the Company’s first-quarter sales. Excluding A&E’s sales, the Company’s first quarter sales posted a year-over-year increase of $21.0 million (8.6%). This increase was primarily driven by a favourable foreign exchange impact and higher sales of private label products partly offset by lower sales volumes of the Company’s national brands. The Company’s operating profit for the first quarter of 2015 totaled $17.0 million, up $2.7 million from operating profit of $14.3 million in the same quarter last year. Excluding the $3.3 million operating profit of A&E, operating profit was down $0.6 million from last year’s first quarter. This slight decline came mainly from reduced profitability by the Canadian operations given an unfavourable impact of a weak Canadian dollar on the Company’s raw material costs. The Company’s financial expenses went from $5.2 million in the first quarter of 2014 to $6.7 million this quarter, an increase that was mostly attributable to a higher interest expense related to the financing of the A&E acquisition and an unfavourable foreign exchange impact. “Other (gains) losses” went from a $1.2 million gain in the first quarter of 2014 to a $1.3 million gain in 2015. The 2014 first-quarter gain was mainly due to $0.9 million in foreign exchange gains and to a $0.4 million gain related to a change in the fair value of a derivative financial instrument. The $1.3 million gain in the first quarter of 2015 was due to $2.1 million in foreign exchange gains partly offset by a $0.8 million loss related to a change in the fair value of interest rate swaps. Profit before income taxes totaled $11.6 million for the first quarter of 2015, up $1.3 million from $10.3 million in the same quarter of 2014. Income taxes went from $2.9 million in the first quarter of 2014 to $3.4 million in the same quarter of 2015. At 29.5%, the 2015 first-quarter effective tax rate is higher than the 27.9% rate in the same quarter of 2014. This increase reflects an unfavourable change in the geographic mix of the Company’s taxable income. The 2015 first-quarter profit was $8.2 million, up $0.8 million from $7.4 million in the first quarter last year. It should be noted that this quarter’s result includes a net profit of $2.0 million from A&E.
17
Profit attributable to the Company’s shareholders was $7.8 million, resulting in basic and diluted earnings per share of $1.11 for the first quarter of 2015. In the first quarter of 2014, profit attributable to the Company’s shareholders had totaled $7.1 million, resulting in basic and diluted earnings per share of $1.01. Cash flows from operating activities generated $15.4 million in cash during the first quarter of 2015, while they had generated $28.7 million in cash during the same period last year. Financing activities used $13.0 million in the first quarter of 2015, while these activities had used $14.0 million in the same quarter of 2014. Investing activities used $2.9 million in the first quarter of 2015 compared to $3.6 million for the same quarter of 2014. At the end of the first quarter of 2015, the Company reported a cash and cash equivalents balance of $0.4 million and a bank overdraft of $18.8 million compared to a cash and cash equivalents balance of $31.7 million and a bank overdraft of $7.8 million at the end of the first quarter of 2014.
Board of Directors Pierre-Paul Lassonde
Luc Provencher
Officer and Director
(Company Director)
Chantal BĂŠlanger
Paul Bouthillier
Chairman of the Board, Chief Executive
Director (Company Director)
Director
Director
(Company Director) Nathalie Lassonde
Assistant to the Chief Executive Officer
Jocelyn Tremblay Director
Denis Boudreault
Director (Partner, Blake, Cassels &
(Vice-President, Corporate Affairs, Vins Philippe Dandurand Inc.)
Graydon LLP, law firm) Yves Dumont Director
Ăˆve-Lyne Biron Director
(Company Director)
(Company Director)
Financial Summary 19
Financial progress
20
Five Year Strategic Plan
21
Statements of Financial Position
22
Quarterly Financial Information
23
Other (Gains) Losses
24
Interim Financial Statement
25
Condensed Consolidated
26
Financial Statements
27
Sales By Geographic segment 23
Financial Progress Quarterly Financial Information Consolidated Income Data (In thousands of dollars)
First quarters ended March 30, 2014
March 31, 2015
(Restated) (1)
Sales Cost of sales
240,578 233,406 178,347
175,552
48,401
44,594
226,748
220,146
13,830
13,260
Financial expenses
6,358
4,450
Other (gains) losses
(250)
815
Profit before income taxes
7,722
7,995
Income tax expense
1,853
2,034
Profit
5,869
5,961
5,851
5,678
Selling and administrative expenses Operating profit
Attributable to: Company’s shareholders Non-controlling interest Basic and diluted earnings per share (in $)
18
283
$ 0.84
$ 0.81
6,988
6,988
Weighted average number of shares Outstanding (in thousands)
(1) Figures restated following the adoption, on January 1, 2013, of the amended version of IAS 19.
In the First Quarter of 2013 Sales totaled $240.6 million, up $7.2 million (3.1%) from sales of $233.4 million in the first quarter of 2012. This increase is mainly due to the combined impact of the following items: (i) a $3.5 million increase in sales of private label products; (ii) a $2.5 million increase resulting from higher sales volumes of the Company’s national brands; (iii) price increases that had a $1.0 million favorable impact on sales of national brands; (iv) a $0.7 million favorable foreign exchange impact; (v) a different sales mix that contributed to a $0.4 million increase in sales; and (vi) an increase in slotting fees that had an unfavorable impact of $0.9 million. 19
Financial Progress Consolidated Income Data (In thousands of dollars)
Were Our Funds Come From Corporations and foundations
21%
Individual donors
37%
Government grants and fees
28%
Special events
5%
Agency shares maintenance fees
9%
Were Our Food Goes Donated Other
3% 13%
Preschools
5%
Health food stores
4%
Pantries
Where our Food Come From
75%
Our Farmers
47%
Organic Farms
37%
Donated
1%
Purchased
15%
How We Use Our Resources Management and general
93%
Fundraising 3% Donations
4%
20
Financial Statements Statements of Financial Position (In thousands of Canadian dollars) (Unaudited)
As at Notes
March 30, 2013 $
As at Dec. 31, 2012 $
Assets Current Cash and cash equivalents Accounts receivable Income tax recoverable Inventories Investment Other current assets Derivative instruments
2,199
22,186
104,516
103,792
5,555
3,396
159,168
162,065
2,079
2,079
8 8,038
6,876
3,119
1,039
284,674
301,433
222
–
Property, plant and equipment
239,765
238,894
Other intangible assets
130,000
129,940
5,737
4,082
654
697
Goodwill
127,510
124,982
788,562
800,028
109,005
133,575
Derivative instruments
Net defined benefit asset Other long-term assets
Liabilities Current Accounts payable and accrued liabilities Income tax payable
–
166
Other current liabilities
923
583
Derivative instruments
1,638
Current portion of long-term debt
21
2,966
8,264
12,750
119,830
150,040
Quarterly Financial Information Consolidated Income Data
(In thousands of dollars)
As at
Notes
March 30, 2013 $
Derivative instruments Net defined benefit liability Long-term debt Deferred tax liabilities Other long-term liabilities
9
As at Dec. 31, 2012 $
1,518
1,563
514
598
289,944
282,456
20,618
19,015
39,746
38,151
472,170
491,823
298,694
290,891
Shareholders’ Equity Capital, reserves and retained earnings attributable to the Company’s shareholders Non-controlling interest
17,698
17,314
316,392
308,205
788,562
800,028
Approved by the Board
Director
Director
22
Other (Gains) Losses Statements of Cash Flows (In thousands of Canadian dollars) (Unaudited)
Notes
As at
As at
March 30, 2013
Dec. 31, 2012
(Restated, Note 15)
$
$
Operating Activities Profit
5,869
5,961
Adjustments for: Income tax expense
6
1,853
2,034
Interest income and expense
5,309
5,910
Depreciation and amortization
7,808
7,866
Amortization of unearned discounts
(38)
-
Change in fair value of financial instruments
942
(1,052)
Change in net defined benefit asset/liability
(2,540)
(4,793)
Other gains
-
(3)
Unrealized foreign exchange losses
38
106
19,241
16,029
(22,230)
10,038
Taxes received -
1
Change in non-cash operating working capital items
11
Taxes paid
(3,198)
Interest received
58
(3,771) 45
Interest paid
(4,763)
(4,975)
Settlements of derivative financial instruments
(532)
-
(11,424)
17,367
Change in bank indebtedness
-
(1,990)
Change in long-term debt related to the operating line of credit
4,235
(1,642)
Repayment of long-term debt
(6,087)
(1,408)
Dividends paid on Class A shares
(1,003)
(970)
Dividends paid on Class B shares
(1,163)
(1,126)
(4,018)
(7,136)
Financing Activities
23
Interim Financial Statement
(Tabular amounts are in thousands of Canadian dollars unless otherwise indicated)
(Unaudited) First quarters ended
March 30, 2013
$
$
Interest on long-term debt
March 31, 2012
4,850
5,329
Amortization of non-cash financial expenses
532
573
Interest and other bank expenses
109
172
947
(1,568)
6,438
4,506
Change in Fair Value of Financial Instruments Designated as financial liabilities at fair value through profit or loss Financial revenues
(80)
(56)
6,358
4,450
Note 5. Other (Gains) Losses Exchange (gains) losses Change in fair value of derivative financial
First quarters ended March 30, 2013
March 31, 2012
$
$
(245)
302
(5)
516
Instruments held for trading Other gains
- (250)
(3) 815
These processing activities generally have a favorable 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.
24
Instruments Condensed Consolidated Financial Statements (Tabular amounts are in thousands of Canadian dollars unless otherwise indicated) (Unaudited)
13.1 Sales by Geographic Segment
First quarters ended
March 30, 2013
March 31, 2012
$
$
Canada
131,967
128,508
United States
107,260
104,000
Other
1,351
898
240,578
233,406
13.2 Certain Non-Current Assets and Goodwill As at March 30, 2013
Canada
$
Property, plant and equipment
United States
Total
$
$
152,473
87,292
239,765
Other intangible assets
8,211
121,789
130,000
Goodwill
5,776
121,734
127,510
166,460
330,815
497,275
As at December 31, 2012
Canada
United States
$
$
$
153,508
85,386
238,894
8,571
121,369
129,940
5,776
119,206
124,982
167,855
325,961
493,816
Property, plant and equipment Other intangible assets Goodwill
Total
The Company’s annual consolidated financial statements for the year ended December 31, 2013 were prepared in compliance with International Financial Reporting Standards (IFRS). 25
Financial Instruments The classification, carrying value and fair value of financial instruments are as follows:
As at March 30, 2013
Level 1
Level 2
Level 3
Total
$
$
$
$
-
3,341
Financial Assets Derivative financial instruments designated as hedges
-
3,341
Held for trading -
2,537
-
2,537
Designated as hedges -
619
-
619
Financial Liabilities Derivative financial instruments:
Participating loans -
-
5,728
Retractable financial instruments
-
33,751
-
-
3,156
5,728
33,751
39,479
42,635
As at December 31, 2012
Level 1
Level 2
Level 3
Total
$
$
$
$
Financial Assets
Derivative financial instruments designated as hedges
-
1,039
-
1,039
Financial Liabilities Derivative 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
-
-
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 consolidated statement of financial position. 26
56%
CANADA
43%
UNITED STATES
27
Sales By Geographic Segment (Tabular amounts are in thousands of Canadian dollars unless otherwise indicated) (unaudited)
Approximately 56% of the Company’s sales are in Canada, 43% in the United States and 1% in other countries.
First quarters ended
March 30, 2015
Canada
$
United States
$
March 31, 2014
131,967
$
107,260
$
128,508 104,000
Company’s sales are geographically broken down as follows: 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.
28
Any statement contained in this report that does not constitute a historical fact may be deemed a forward-looking statement. Verbs such as "believe," "foresee," "estimate" and other similar expressions, in addition to the negative forms of these terms or any variations thereof, appearing in this report generally indicate forward-looking statements.