Rogers Sugar Inc. — Interim / Quarterly Report 2021

Feb 3, 2021

Unaudited condensed consolidated interim financial statements of

ROGERS SUGAR INC.

Three months ended January 2, 2021 and December 28, 2019 (Unaudited and not reviewed by the Company’s external independent auditors)

ROGERS SUGAR INC.

(Unaudited)

Condensed consolidated interim statements of earnings and comprehensive income (In thousands of dollars except per share amounts)

			For the three months ended	For the three months ended	For the three months ended
Condensed consolidated interim statements of	earnings		January 2, 2021		December 28, 2019
Revenues (note 17)		$	223,840	$	209,316
Cost of sales			185,227		170,270
Gross margin			38,613		39,046
Administration and selling expenses			9,598		8,270
Distribution expenses			5,683		4,025
			15,281		12,295
Results from operatingactivities			23,332		26,751
Finance income (note 5)			-		(66)
Finance costs(note 5)			4,696		4,947
Net finance costs (note 5)			4,696		4,881
Earnings before income taxes			18,636		21,870
Income tax expense (recovery):
Current			4,776		5,430
Deferred			87		476
			4,863		5,906
Net earnings		$	13,773	$	15,964
Net earnings per share (note 12)
Basic		$	0.13	$	0.15
Diluted		$	0.13	$	0.14
			For the three months ended
Condensed consolidated interim statements of	comprehensive		January 2,		December 28,
income			2021		2019
Net earnings		$	13,773	$	15,964
Other comprehensive income (loss)
Items that may or may not be reclassified
subsequently to net earnings:
Cash flow hedges (note 7)			(38)		575
Income tax on other comprehensive gain (loss) (note 7)			10		(149)
Foreign currencytranslation differences			(901)		(247)
			(929)		179
Net earnings and comprehensive income for the period		$	12,844	$	16,143

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

ROGERS SUGAR INC.

(Unaudited)

Condensed consolidated interim statements of financial position (In thousands of dollars)

		January 2,		October		December 28,
		2021		3, 2020		2019
Assets
Current assets:
Cash	$	9,808	$	1,974	$	2,607
Trade and other receivables		82,597		94,262		89,642
Inventories (note 6)		189,619		180,792		166,694
Prepaid expenses		6,696		7,923		4,091
Income taxes receivable		1,460		2,042		908
Derivative financial instruments(note 7)		5,250		2,616		1,301
Total current assets		295,430		289,609		265,243
Non-current assets:
Property, plant and equipment		232,550		230,385		221,104
Right-of-use assets		19,507		20,489		20,537
Intangible assets		30,808		31,666		34,446
Other assets		695		745		895
Deferred tax assets		30,742		31,085		19,571
Derivative financial instruments (note 7)		1,047		158		-
Goodwill		283,007		283,007		283,007
Total non-current assets		598,356		597,535		579,560
Total assets	$	893,786	$	887,144	$	844,803
Liabilities and Shareholder’s Equity
Current liabilities:
Bank overdraft	$	-	$	2,797	$	1,554
Revolving credit facility (note 8)		60,000		29,000		33,000
Trade and other payables		106,797		131,089		98,066
Income taxes payable		-				-
Provisions		431		500		602
Lease obligations (note 9)		3,635		3,981		3,053
Derivative financial instruments(note 7)		1,961		1,458		1,102
Total current liabilities		172,824		168,325		137,377
Non-current liabilities:
Revolving credit facility (note 8)		165,000		165,000		155,000
Employee benefits		59,512		59,212		52,073
Provisions		437		437		819
Derivative financial instruments (note 7)		6,377		6,933		3,413
Lease obligations (note 9)		15,567		16,423		17,162
Convertible unsecured subordinated debentures (note 10)		146,307		145,836		144,438
Deferred tax liabilities		54,009		54,287		43,138
Total non-current liabilities		447,209		448,128		416,043
Total liabilities	$	620,033	$	616,953	$	553,420
Shareholder’s equity:
Share capital (note 11)		99,452		99,452		100,567
Contributed surplus		300,830		300,794		300,670
Equity portion of convertible unsecured subordinated debentures (note 10)		5,085		5,085		5,085
Deficit		(112,376)		(116,831)		(103,971)
Accumulated other comprehensive(loss)income		(19,238)		(18,309)		(10,968)
Total shareholder’s equity		273,753		270,191		291,383
Total liabilities and shareholder’s equity	$	893,786	$	887,144	$	844,803

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

ROGERS SUGAR INC.

(Unaudited)

Condensed consolidated interim statements of changes in shareholders’ equity (In thousands of dollars except number of shares)

								For the three months ended January 2, 2021	For the three months ended January 2, 2021	For the three months ended January 2, 2021
						Accumulated	Accumulated	Accumulated
					Equity	unrealized	cash flow	foreign
					portion of	gain on	hedge gain	currency
		Number of	Common	Contributed	convertible	employee	(loss)	translation
		shares	shares	surplus	debentures	benefitplans		differences	Deficit	Total
			$	$	$	$	$	$	$	$
Balance, October 3,	2020	103,536,923	99,452	300,794	5,085	(12,983)	(6,119)	793	(116,831)	270,191
Net earnings for the	period	-	-	-	-	-	-	-	13,773	13,773
Dividends (note 11)		-	-	-	-	-	-	-	(9,318)	(9,318)
Purchase and cancellation of
shares (note 11)		-	-	-	-	-	-	-	-	-
Share-based compensation
(note 13)		-	-	36	-	-	-	-	-	36
Conversion of convertible
debentures into common
shares,
(notes 10 and 11)		-	-	-	-	-	-	-	-	-
Cash flow hedges, net of tax
(note 7)		-	-	-	-	-	(28)	-	-	(28)
Translation of foreign operations		-	-	-	-	-	-	(901)	-	(901)
Balance, January 2,	2021	103,536,923	99,452	300,830	5,085	(12,983)	(6,147)	(108)	(112,376)	273,753
								For the three months ended December 28,2019
						Accumulated	Accumulated	Accumulated
						unrealized gain	cash flow	foreign
					Equity portion	on employee	hedge gain	currency
		Number of	Common	Contributed	of convertible	benefit plans	(loss)	translation
		shares	shares	surplus	debentures			differences	Deficit	Total
			$	$	$	$	$	$	$	$
Balance, September 28, 2019		104,885,464	100,522	300,626	5,085	(8,638)	(3,248)	739	(109,654)	285,432
Net earnings for the	period	-	-	-	-	-	-	-	15,964	15,964
Dividends (note 11)		-	-	-	-	-	-	-	(9,423)	(9,423)
Purchase and cancellation of
shares (note 11)		(213,294)	(205)	-	-	-	-	-	(858)	(1,063)
Share-based compensation
(note 13)		-	-	44	-	-	-	-	-	44
Conversion of convertible
debentures into common
shares,
(notes 10 and 11)		28,853	250	-	-	-	-	-	-	250
Cash flow hedges, net of tax
(note 7)		-	-	-	-	-	426	-	-	426
Translation of foreign operations		-	-	-	-	-	-	(247)	-	(247)
Balance, December	28, 2019	104,701,023	100,567	300,670	5,085	(8,638)	(2,822)	492	(103,971)	291,383

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

ROGERS SUGAR INC.

(Unaudited)

Condensed consolidated interim statements of cash flows (In thousands of dollars)

		For the	three	months ended
		January 2,		December 28,
		2021		2019
Cash flows from operating activities:
Net earnings	$	13,773	$	15,964
Adjustments for:
Depreciation of property, plant and equipment and right-of-use assets (note 4)		5,273		4,770
Amortization of intangible assets (note 4)		956		952
Changes in fair value of derivative financial
instruments included in cost of sales		(3,576)		(486)
Income tax expense		4,863		5,906
Pension contributions		(2,090)		(1,988)
Pension expense		2,390		2,251
Net finance costs (note 5)		4,696		4,881
Share-based compensation – equity settled (note 13)		36		44
Share-based compensation – cash settled
(note 13)		-		(3)
Gain on disposal ofproperty,plant and equipment		(55)		(6)
		26,266		32,285
Changes in:
Trade and other receivables		11,590		(3,841)
Inventories		(9,105)		15,590
Prepaid expenses		1,226		71
Trade and other payables		(24,637)		(22,923)
Provisions		(69)		(276)
		(20,995)		(11,379)
Cash flows from operating activities		5,271		20,906
Interest paid		(5,810)		(2,450)
Income taxespaid		(4,185)		(4,346)
Net cash from operating activities		(4,724)		14,110
Cash flows (used in) from financing activities:
Dividends paid (note 11)		(9,318)		(9,440)
Decrease in bank overdraft		(2,797)		(6,771)
Increase in revolving credit facility (note 8)		31,000		11,000
Payment of financing fees		-		(16)
Payment of lease obligations (note 9)		(1,902)		(1,029)
Purchase and cancellation of shares(note 11)		-		(1,063)
Cash flow (used in) from financing activities		16,983		(7,319)
Cash flows used in investing activities:
Additions to property, plant and equipment, net of
proceeds on disposal		(4,147)		(4,349)
Additions to intangible assets		(234)		-
Cash flow used in investing activities		(4,381)		(4,349)
Effect of changes in exchange rate on cash		(44)		(119)
Net increase in cash		7,834		2,323
Cash, beginningofperiod		1,974		284
Cash, end of period	$	9,808	$	2,607

Supplemental cash flow information (note 14)

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

2

Notes to unaudited condensed consolidated interim financial statements

ROGERS SUGAR INC.

(In thousands of dollars except as noted and amounts per share)

1. Reporting entity:

Rogers Sugar Inc. (“Rogers” or the “Company”) is a company domiciled in Canada, incorporated under the Canada Business Corporations Act . The head office of Rogers is located at 123 Rogers Street, Vancouver, British Columbia, V6B 3V2. The unaudited condensed consolidated interim financial statements of Rogers for the three month periods ended January 2, 2021 and December 28, 2019 comprise Rogers and the directly and indirectly controlled subsidiaries, Lantic Inc. (“Lantic”) and The Maple Treat Corporation (“TMTC”), (together referred to as the “Company”). The principal business activities of the Company are the refining, packaging and marketing of sugar and maple products.

2. Basis of presentation and statement of compliance:

• (a) Statement of compliance:

These unaudited condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting on a basis consistent with those accounting policies followed by the Company in the most recent audited consolidated annual financial statements other than the adoption of Amendments to References to the Conceptual Framework in IFRS Standards as described in note 3(a). Certain information, in particular the accompanying notes, normally included in the audited annual consolidated financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) has been omitted or condensed. Accordingly, these unaudited condensed consolidated interim financial statements do not include all the information required for full annual financial statements, and, therefore, should be read in conjunction with the audited annual consolidated financial statements and the notes thereto for the year ended October 3, 2020. The quarterly unaudited condensed consolidated interim financial statements were neither reviewed nor audited by our external auditors and were authorized for issue by the Board of Directors on February 2, 2021.

• (b) Basis of measurement:

These unaudited condensed consolidated interim financial statements have been prepared on the historical cost basis except for the following material items in the unaudited condensed consolidated statements of financial position:

• (i) derivative financial instruments are measured at fair value,

• (ii) equity-settled share-based compensation, cash-settled share appreciation rights and cash-settled performance share units are measured at fair value,

• (iii) the defined benefit liability is recognized as the net total of the present value of the defined benefit obligation less the total of the fair value of the plan assets and the unrecognized past service costs; and

• (iv) assets and liabilities acquired in business combinations are measured at fair value at acquisition date, less any subsequent impairment, if applicable.

3

Notes to unaudited condensed consolidated interim financial statements

ROGERS SUGAR INC.

(In thousands of dollars except as noted and amounts per share)

2. Basis of presentation and statement of compliance (continued):

(c) Functional and presentation currency:

These unaudited condensed consolidated interim financial statements are presented in Canadian dollars since it is the Company’s functional currency. All financial information presented in Canadian dollars has been rounded to the nearest thousands, except as noted and per share amounts.

(d) Use of estimates and judgements:

The preparation of these unaudited condensed consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

In preparing these unaudited condensed consolidated interim financial statements, the significant judgements made by management in applying the Company’s accounting policies and key sources of estimation of uncertainty are as those applied and described in the Company’s audited annual consolidated financial statements for the year ended October 3, 2020.

3. Significant accounting policies:

The significant accounting policies as disclosed in the Company’s audited annual consolidated financial statements for the year ended October 3, 2020 have been applied consistently in the preparation of these unaudited condensed consolidated interim financial statements.

• (a) New standards and interpretations adopted:

• (i) Amendments to References to the Conceptual Framework in IFRS Standards:

On March 29, 2018 the IASB issued a revised version of its Conceptual Framework for Financial Reporting (the Framework), that underpins IFRS Standards. The IASB also issued Amendments to References to the Conceptual Framework in IFRS Standards (the Amendments) to update references in IFRS Standards to previous versions of the Conceptual Framework.

The Company adopted the Amendments in its consolidated interim financial statements for the annual period beginning on October 4, 2020. The adoption of the amendments did not have an impact on the consolidated interim financial statements.

4

ROGERS SUGAR INC.

Notes to unaudited condensed consolidated interim financial statements

(In thousands of dollars except as noted and amounts per share)

3. Significant accounting policies (continued):

• (b) New standards and interpretations not yet adopted:

A number of new standards and amendments to standards and interpretations are not yet effective for the period ended January 2, 2021 and have not been applied in preparing these unaudited condensed consolidated interim financial statements. New standards and amendments to standards and interpretations that are currently under review include:

• (i) Annual Improvements to IFRS Standards 2018-2020

• (ii) Onerous Contracts – Cost of fulfilling a contract (Amendments to IAS 37)

• (iii) Reference to the Conceptual Framework (Amendments to IFRS 3)

• (iv) Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)

The Company does not intend to adopt any of these standards and interpretations in its consolidated financial statements before the annual period beginning on October 3, 2021. The Company does not expect the amendments to have a material impact on the consolidated financial statements.

4. Depreciation and amortization expense:

Depreciation and amortization expense were charged to the unaudited condensed consolidated interim statements of earnings as follows:

	For the three months ended	For the three months ended
	January 2,	December 28,
	2021	2019
	$	$
Depreciation of property, plant and equipment:
Cost of sales	3,796	3,930
Administration and sellingexpenses	141	132
	3,937	4,062
Depreciation of right-of-use assets:
Cost of sales	962	451
Distribution expenses	374	257
	1,336	708
Amortization of intangible assets:
Administration and sellingexpenses	956	952
Total depreciation and amortization expense	6,229	5,722

5

ROGERS SUGAR INC.

Notes to unaudited condensed consolidated interim financial statements

(In thousands of dollars except as noted and amounts per share)

5. Finance income and finance costs:

Recognized in net earnings:

	For the three	months ended
	January 2,	December 28,
	2021	2019
	$	$
Net change in fair value of interest rate swap (note 7)	-	66
Finance income	-	66
Interest expense on convertible
unsecured subordinated debentures,
including accretion expense_(1)_	2,038	2,098
Interest on revolving credit facility	1,712	1,700
Other interest expense	418	676
Amortization of deferred financing fees	296	296
Interest accretion on discounted lease obligations	232	177
Finance costs	4,696	4,947
Net finance costs recognized in net earnings	4,696	4,881

(1) Includes accretion expense of $223 for the three months ended January 2, 2021 (December 28, 2019 - $211)

6. Inventories:

During the three months ended January 2, 2021, inventories recognized as cost of goods sold amounted to $187.4 million ($172.8 million for the three months ended December 28, 2019).

7. Financial instruments:

Disclosures relating to risks exposures, in particular credit risk, liquidity risk, foreign currency risk, interest rate risk and equity risk were provided in the October 3, 2020 annual consolidated financial statements and there have been no significant changes in the Company’s risk exposures during the three months ended January 2, 2021.

For its financial assets and liabilities measured at amortized cost as at January 2, 2021, the Company has determined that the carrying value of its short-term financial assets and liabilities approximates their fair value because of the relatively short periods to maturity of these instruments.

Details of recorded gains (losses) for the year, in marking-to-market all derivative financial instruments and embedded derivatives that are outstanding at quarter end, are noted below. For sugar futures contracts (derivative financial instruments), the amounts noted below are netted with the variation margins paid or received to/from brokers at the end of the reporting period. Natural gas forwards and sugar futures have been marked-to-market using published quoted values for these commodities, while foreign exchange forward contracts have been marked-to-market using rates published by the financial institution which is counterparty to these contracts.

6

Notes to unaudited condensed consolidated interim financial statements

ROGERS SUGAR INC.

(In thousands of dollars except as noted and amounts per share)

7. Financial instruments (continued):

The fair value of natural gas contracts, foreign exchange forward contracts and interest rate swap calculations include a credit risk adjustment for the Company’s or counterparty’s credit, as appropriate.

As at January 2, 2021, October 3, 2020 and December 28, 2019, the Company’s financial derivatives carrying values were as follows:

Financial Assets Current Non-Current January 2, 2021	Financial Liabilities Current Non-Current January 2, 2021
$ $ Derivative financial instruments measured at fair value through profit or loss: Sugar futures contracts 11 410 Foreign exchange forward contracts 5,239 637 Derivative financial instruments designated as effective cash flow hedging instruments: Natural gas futures contracts - - Interest rate swap - -	$ $ - - - - 392 1,619 1,569 4,758
5,250 1,047	1,961 6,377

Financial Assets Financial Liabilities Current Non- Current Current Non- Current October 3,2020	Financial Assets Financial Liabilities Current Non- Current Current Non- Current December 28,2019
$ $ $ $ Derivative financial instruments measured at fair value through profit or loss: Sugar futures contracts 8 95 - - Foreign exchange forward Contracts 2,521 63 - - Derivative financial instruments designated as effective cash flow hedging instruments: Natural gas futures contracts 87 - - 1,662 Interest rate swap - - 1,458 5,271	$ $ $ $ 75 - - 30 849 - - 108 - - 377 - 1,102 3,273 - - - 2
2,616 158 1,458 6,933	1,301 - 1,102 3,413

7

ROGERS SUGAR INC.

Notes to unaudited condensed consolidated interim financial statements

(In thousands of dollars except as noted and amounts per share)

7. Financial instruments (continued):

						For the three months ended	For the three months ended
	Charged to cost of sales Unrealized gain / (loss)			Charged to	finance income	Other comprehensive gain / (loss)
	January 2,	December	28,	January 2,	December 28,	January 2,	December 28,
	2021	2019		2021	2019	2021	2019
	$		$	$	$	$	$
Derivative financial
instruments measured at fair
value through profit or loss:
Sugar futures contracts	(421)	2,488		-	-	-	-
Foreign exchange forward contracts	4,394	(276)		-	-	-	-
Derivative financial
instruments designated as
effective cash flow hedging
instruments:
Natural gas futures contracts	-		7	-	-	(435)	(825)
Interest rate swap	-		-	-	66	397	1,400
	3,973	2,219		-	66	(38)	575

The following table summarizes the Company’s hedging components of other comprehensive income (“OCI”) as at January 2, 2021 and December 28, 2019:

		**January **	2, 2021		December	28,2019
	Natural gas futures contracts	Interest rate swap	Total	Natural gas futures contracts	Interest rate swap	Total
	$	$	$	$	$	$
Opening OCI	(865)	(7,513)	(8,378)	(2,751)	(1,740)	(4,491)
Income taxes	(289)	2,548	2,259	204	1,039	1,243
Opening OCI – net of income taxes	(1,154)	(4,965)	(6,119)	(2,547)	(701)	(3,248)
Change in fair value of derivatives designated
as cash flow hedges	(435)	397	(38)	(818)	1,466	648
Amounts reclassified to net earnings	-	-	-	(7)	(66)	(73)
Income taxes	112	(102)	10	214	(363)	(149)
Ending OCI – net of income taxes	(1,477)	(4,670)	(6,147)	(3,158)	336	(2,822)

For the three months ended January 2, 2021, the derivatives designated as cash flow hedges were considered to be fully effective and no ineffectiveness has been recognized in net earnings.

Approximately $1.5 million of net losses presented in accumulated other comprehensive income are expected to be reclassified to net earnings within the next twelve months.

8

ROGERS SUGAR INC.

Notes to unaudited condensed consolidated interim financial statements

(In thousands of dollars except as noted and amounts per share)

7. Financial instruments (continued):

The aggregate notional amount of the all interest rate swap agreements is as follows:

Fiscal	year contracted	Date	Total value
			$
Fiscal	2017	May 29, 2017 to June 28, 2022 – 1.454%	20,000
Fiscal	2017	September 1, 2017 to June 28, 2022 – 1.946%	30,000
Fiscal	2017	June 29, 2020 to June 29, 2022 – 1.733%	30,000
Fiscal	2019	March 12, 2019 to June 28, 2024 – 2.08%	20,000
Fiscal	2019	June 28, 2022 to June 28, 2024 – 2.17%	80,000
Fiscal	2020	October 3, 2019 to June 28, 2024 – 1.68%	20,000
Fiscal	2020	February 24, 2020 to June 28, 2025 – 1.60%	20,000
Fiscal	2020	March 6, 2020 to June 28, 2021 – 1.08%	20,000
Fiscal	2020	June 28, 2021 to June 28, 2023 – 1.08%	10,000
Fiscal	2020	June 28, 2024 to June 28, 2025 – 1.18%	80,000

8. Revolving credit facility:

As a result of the amended revolving credit facility, the Additional Accordion Borrowings and the Additional TMTC Accordion Borrowings, the Company has a total of $265.0 million of available working capital from which it can borrow at prime rate, LIBOR rate or under bankers’ acceptances, plus 20 to 250 basis points, based on achieving certain financial ratios.

Certain assets of the Company, including trade receivables, inventories and property, plant and equipment, have been pledged as security for the revolving credit facility. As at January 2, 2021, a total of $485.7 million of assets are pledged as security (October 3, 2020 - $482.9 million; December 28, 2019 - $423.2 million).

The maturity date of the amended revolving credit facility is June 28, 2024.

The following amounts were outstanding as of:

	January 2,	October 3,	December 28,
	2021	2020	2019
	$	$	$
Outstanding amount on revolving credit facility:
Current	60,000	29,000	33,000
Non-current	165,000	165,000	155,000
	225,000	194,000	188,000

The carrying value of the revolving credit facility approximates fair value as the borrowings bear interest at variable rates.

9

ROGERS SUGAR INC.

Notes to unaudited condensed consolidated interim financial statements

(In thousands of dollars except as noted and amounts per share)

9. Lease obligations:

The Company’s leases are primarily for warehouses, operating properties, railcars and production equipment.

The following table presents lease obligations recorded in the consolidated statement of financial position as follows:

	January 2,	October 3,	December 28,
	2021	2020	2019
	$	$	$
Current	3,635	3,981	3,053
Non-current	15,567	16,423	17,162
	19,202	20,404	20,215

Certain leases contain extension or termination options exercisable by the Company before the end of the non-cancellable contract period. The Company has applied judgement to determine the lease term for the contracts with renewal and termination options and has included renewal and termination options in the measurement of lease obligations when it is reasonably certain to exercise the options. The Company reassesses whether it is reasonably certain to exercise the options if there is a significant event or a significant change in circumstances which impacts the original assessments made.

Expenses relating to short-term leases, and for leases of low-value assets were not significant for the three months ended January 2, 2021.

The total cash outflow for leases (including interest) for the three months ended January 2, 2021 was $1.9 million, which was included as part of cash outflows from financing activities.

10. Convertible unsecured subordinated debentures:

The outstanding convertible debentures are as follows:

	January 2,	October 3,	December 28,
	2021	2020	2019
	$	$	$
Sixth series	57,425	57,425	57,425
Seventh series	97,575	97,575	97,575
Total face value	155,000	155,000	155,000
Less deferred financing fees	(4,265)	(4,512)	(5,253)
Less equity component	(6,930)	(6,930)	(6,930)
Accretion expense on equitycomponent	2,502	2,278	1,621
Total carrying value – non current	146,307	145,836	144,438

The fair value of the Sixth and Seventh series debentures as at January 2, 2021 were approximately $157.6 million based on market quotes.

10

ROGERS SUGAR INC.

Notes to unaudited condensed consolidated interim financial statements

(In thousands of dollars except as noted and amounts per share)

11. Share capital and other components of equity:

As of January 2, 2021, a total of 103,536,923 common shares (October 3, 2020 – 103,536,923; December 28, 2019 – 104,701,023) were outstanding.

The Company declared a quarterly dividend of $0.09 per share amounting to the following for the three month period ending January 2, 2021 and December 28, 2019:

	January 2,	December 28,
	2021	2019
	$	$
Dividends	9,318	9,423

12. Earnings per share:

Reconciliation between basic and diluted earnings per share is as follows:

	For the three	months ended	months ended
	January 2,	December 28,
	2021	2019
Basic earnings per share:
Net earnings	13,773	15,964
Weighted average number of shares outstanding	103,536,923	104,822,645
Basic earnings per share	0.13	0.15
Diluted earnings per share:
Net earnings	13,773	15,964
Plus impact of convertible unsecured
subordinated debentures and share options	1,488	1,531
	15,261	17,495
Weighted average number of shares outstanding:
Basic weighted average number of shares
outstanding	103,536,923	104,822,645
Plus impact of convertible unsecured
subordinated debentures and share options	17,977,603	17,977,603
	121,514,526	122,800,248
Diluted earnings per share	0.13	0.14

For the three months ended January 2, 2021 and December 28, 2019, the share options were excluded from the calculation of diluted earnings per share as they were deemed anti-dilutive.

11

Notes to unaudited condensed consolidated interim financial statements

ROGERS SUGAR INC.

(In thousands of dollars except as noted and amounts per share)

13. Share-based compensation:

• (a) Equity-Settled Share-Based Compensation:

The Company has reserved and set aside for issuance an aggregate of 4,000,000 common shares (October 3, 2020 and December 28, 2019 – 4,000,000 common shares) at a price equal to the average market price of transactions during the last five trading days prior to the grant date. Options are exercisable to a maximum of twenty percent of the optioned shares per year, starting after the first anniversary date of the granting of the options and will expire after a term of ten years. Upon termination, resignation, retirement, death or long-term disability, all share options granted under the Share Option Plan not vested shall be forfeited.

For the three months ended January 2, 2021, no options were granted.

On December 2, 2019, a total of 563,500 share options were granted at a price of $4.68 per common share to certain executives.

Compensation expense is amortized over the vesting period of the corresponding optioned shares and is expensed in the administration and selling expenses with an offsetting credit to contributed surplus. An expense of $36 was recorded for the three months period ended January 2, 2021 (an expense of $44 for the three months ended December 28, 2019).

The following tables summarize information about the Share Option Plan as of January 2, 2021:

2021:
		Options	Options	Options
	Outstanding	granted	exercised	forfeited
	number of	during the	during the	during the	Outstanding number	Weighted	Number of
Exercise price	options at	three month	three month	three month	of options at	average	options
per option	October 3, 2020	period	period	period	January 2, 2021	remaining life	exercisable
$4.28	250,000	-	-	-	250,000	9.22	-
$4.59	830,000	-	-	-	830,000	4.39	830,000
$4.68	563,500	-	-	-	563,500	8.92	112,700
$5.58	447,175	-	-	-	447,175	7.92	178,870
$5.61	80,000	-	-	-	80,000	1.21	80,000
$6.23	1,005,322	-	-	-	1,005,322	6.92	603,193
$6.51	360,000	-	-	-	360,000	5.93	288,000
	3,535,997	-	-	-	3,535,997	n/a	2,092,763

Options outstanding held by key management personnel amounted to 2,915,997 options as at January 2, 2021 and 2,915,997 options as at October 3, 2020 (see note 15, Key management personnel).

12

Notes to unaudited condensed consolidated interim financial statements

ROGERS SUGAR INC.

(In thousands of dollars except as noted and amounts per share)

13. Share-based compensation (continued):

• (b) Cash-Settled Share-Based Compensation:

i) Performance Share Units (“PSU”):

Fiscal 2021 grant:

On December 7, 2020, a total of 491,412 PSUs were granted to certain executives and other members of the management team at a price of $5.59. These PSUs will vest at the end of the 2021-2023 performance cycle based on the achievement of total shareholder returns set by the Board of Directors of the Company. Following the end of a performance cycle, the Board of Directors of the Company will determine, and to the extent only that the vesting conditions include financial conditions, concurrently with the release of the Company’s financial and/or operational results for the fiscal year ended at the end of the performance cycle, whether the vesting conditions for the PSUs granted to a participant relating to such performance cycle have been achieved. Depending on the achievement of the vesting conditions, between 0% and 200% of the PSUs will become vested.

The Board of Directors of the Company has the discretion to determine that all or a portion of the PSUs granted to a participant for which the vesting conditions have not been achieved shall vest to such participant.

The value to be paid-out to each participant will be equal to the result of: the number of PSUs granted to the participant which have vested, multiplied by the volume weighted average closing price of the Common Shares on the Toronto Stock Exchange (the “TSX”) for the five trading days immediately preceding the day on which the Company shall pay the value to the participant under the PSU plan, and such date will in no event occur after December 31 of the third calendar year following the calendar year in which the PSUs are granted.

The fair values were established using the Monte Carlo model. The fair value as at grant date and January 2, 2021 was $664. An expense of $38 was recorded for the three months period ending January 2, 2021 in administration and selling expenses. The liabilities arising from the PSUs as at January 2, 2021 were $38.

Fiscal 2020 grant:

On December 2, 2019, a total of 324,932 PSUs were granted to certain executives and other members of the management team. In addition, an aggregate of 24,728 PSUs at a weighted-average share price of $4.87 were allocated as a result of the dividend paid during the quarters since inception, as the participants also receive dividend equivalents paid in the form of PSUs. As at January 2, 2021, an aggregate of 349,660 PSUs was outstanding. These PSUs will vest at the end of the 2020-2022 performance cycle based on the achievement of total shareholder returns set by the Board of Directors of the Company.

13

Notes to unaudited condensed consolidated interim financial statements

ROGERS SUGAR INC.

(In thousands of dollars except as noted and amounts per share)

13. Share-based compensation (continued):

• (b) Cash-Settled Share-Based Compensation (continued):

i) Performance Share Units (“PSU”) (continued):

Fiscal 2020 grant (continued):

The fair values were established using the Monte Carlo model. The fair value as at grant date was $64 and $356 as at January 2, 2021 (October 3, 2020 - $89). An expense of $82 was recorded for the three months period ending January 2, 2021 (December 28, 2019 - $4) in administration and selling expenses. The liabilities arising from the PSUs as at January 2, 2021 were $101 (October 3, 2020 - $19).

Fiscal 2019 grant:

On December 3, 2018, an aggregate of 290,448 PSUs was granted by the Company. In addition, an aggregate of 42,423 PSUs at a weighted-average share price of $5.28 were allocated as a result of the dividend paid during the quarters since inception, as the participants also receive dividend equivalents paid in the form of PSUs. As at January 2, 2021, an aggregate of 332,871 PSUs was outstanding. These PSUs will vest at the end of the 2019-2021 performance cycle.

The fair values were established using the Monte Carlo model. The fair value as at grant date was $308 and $56 as at January 2, 2021 (October 3, 2020 - $43). An expense of $13 was recorded for the three months period ending January 2, 2021 (December 28, 2019 – gain of $3) in administration and selling expenses. The liabilities arising from the PSUs as at January 2, 2021 were $35 (October 3, 2020 - $22).

14. Supplementary cash flow information:

	January 2,	December 28,	October 3,	September	September
	2021	2019	2020	28, 2019
	$	$	$	$
Non-cash transactions:
Additions of property, plant and equipment and
intangibles included in trade and other payables	3,058	1,768	1,239	294
Additions to right-of-use assets	354	9,151	11,818	-

14

ROGERS SUGAR INC.

Notes to unaudited condensed consolidated interim financial statements (In thousands of dollars except as noted and amounts per share)

15. Key management personnel:

The Board of Directors as well as the President and all the Vice-Presidents are deemed to be key management personnel of the Company. The following is the compensation expense for key management personnel:

	For the three	months ended
	January 2,	December 28,
	2021	2019
	$	$
Salaries and short-term benefits	751	750
Fees for members of the Board of Directors	304	252
Post-retirement benefits	41	36
Share-based compensation	170	42
	1,266	1,080

16. Personnel expenses:

Personnel expenses:
	For the three	months ended
	January 2,	December 28,
	2021	2019
	$	$
Wages, salaries and employee benefits	26,800	25,013
Expenses related to defined benefit plans	1,475	1,355
Expenses related to defined contributions plans	915	898
Share-based compensation	170	41
	29,360	27,307

The personnel expenses were charged and capitalized to the unaudited condensed consolidated interim statements of earnings and statements of financial position, respectively, as follows:

	For the three months ended	For the three months ended
	January 2,	December 28,
	2021	2019
	$	$
Cost of sales	24,339	22,692
Administration and selling expenses	4,550	4,182
Distribution expenses	387	384
	29,276	27,258
Property, plant and equipment	83	49
	29,360	27,307

15

Notes to unaudited condensed consolidated interim financial statements (In thousands of dollars except as noted and amounts per share)

ROGERS SUGAR INC.

17. Segmented information:

The Company has two operating and reportable segments, sugar and maple products. The principal business activity of the sugar segment is the refining, packaging and marketing of sugar products. The Maple products segment processes pure maple syrup and related maple products. The reportable segments are managed independently as they require different technology and capital resources. Performance is measured based on the segments’ gross margins and results from operating activities. These measures are included in the internal management reports that are reviewed by the Company’s President and CEO, and management believes that such information is the most relevant in the evaluation of the results of the segments.

Transactions between reportable segments are interest receivable (payable), which are eliminated upon consolidation.

upon consolidation.
		For the three months ended January 2, 2021
	Sugar	Maple	Corporate and		Total
		products	eliminations
	$	$	$		$
Revenues	159,459	64,381	-		223,840
Cost of sales	127,117	58,110	-		185,227
Gross margin	32,342	6,271	-		38,613
Depreciation and amortization	4,372	1,857	-		6,229
Results from operating activities	20,434	3,328	(430)		23,332
Additions to property, plant and
equipment and intangible assets, net of
disposals	6,089	111	-		6,200
Additions to right-of-use assets	354	-	-		354
		For the three months ended January 2, 2021
	Sugar	Maple	Corporate and		Total
		products	eliminations
	$	$	$		$
Total assets	827,292	232,213	(165,719)		893,786
Total liabilities	(994,265)	(247,743)	621,975	(620,033)
		For the three months ended December			28, 2019
	Sugar	Maple	Corporate and		Total
		products	eliminations
	$	$	$		$
Revenues	154,815	54,501	-		209,316
Cost of sales	121,586	48,684	-		170,270
Gross margin	33,229	5,817	-		39,046
Depreciation and amortization	4,144	1,578	-		5,722
Results from operating activities	24,788	2,321	(358)		26,751
Additions to property, plant and
equipment and intangible assets	2,964	2,859	-		5,823
Additions to right-of-use assets	1,338	7,813	-		9,151
		For the three months ended December			28, 2019
	Sugar	Maple	Corporate and		Total
		products	eliminations
	$	$	$		$
Total assets	774,596	235,710	(165,503)		844,803
Total liabilities	(931,626)	(247,028)	625,234	(553,420)

16

ROGERS SUGAR INC.

Notes to unaudited condensed consolidated interim financial statements (In thousands of dollars except as noted and amounts per share)

17. Segmented information (continued):

Revenues were derived from customers in the following geographic areas:

	For the three	months ended
	January 2,	December 28,
	2021	2019
	$	$
Canada	163,088	161,168
United States	39,430	30,355
Europe	10,149	9,454
Other	11,173	8,339
	223,840	209,316