Winpak Ltd — Annual Report 2022

Feb 28, 2023

REPORTING

Management’s Report to the Shareholders

The accompanying consolidated fi nancial statements, Management’s Discussion and Analysis (MD&A) and other information in the Annual Report are the responsibility of management. The consolidated fi nancial statements have been prepared by management and include the selection of appropriate accounting principles, judgments and estimates necessary to prepare these statements in accordance with International Financial Reporting Standards. The MD&A and fi nancial information contained in this Annual Report are consistent with the consolidated fi nancial statements.

To provide reasonable assurance that assets are safeguarded and that relevant and reliable fi nancial information is being reported, management has developed and maintains a system of internal controls. An integral part of the system is the requirement that employees maintain the highest standard of ethics in their activities. Business reviews and internal audits are performed by corporate management and an internal audit team to evaluate internal controls, systems and procedures.

The Board of Directors, acting through the Audit Committee, is responsible for determining that management fulfi lls its responsibilities in the preparation of the consolidated fi nancial statements and MD&A, and in the fi nancial control of operations. The Board of Directors recommends the appointment of the independent auditor to the shareholders. The Audit Committee meets regularly with fi nancial management and the independent auditor to discuss internal controls, auditing matters and fi nancial reporting issues and presents its fi ndings to the Board of Directors. The Audit Committee reviews the consolidated fi nancial statements, MD&A and material fi nancial announcements with management and the external auditor prior to submission to the Board of Directors for approval.

The consolidated fi nancial statements have been audited on behalf of the shareholders by the independent external auditor, KPMG LLP, whose report follows.

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O.Y. Muggli President and Chief Executive Offi cer February 28, 2023

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S.M. Taylor Vice President and Chief Financial Offi cer February 28, 2023

13

REPORTING

Auditor’s Report to the Shareholders

Independent Auditor’s Report

To the Shareholders of Winpak Ltd.

Opinion

We have audited the consolidated fi nancial statements of Winpak Ltd. (the Entity), which comprise the consolidated balance sheets as at December 25, 2022 and December 26, 2021, the consolidated statements of income, comprehensive income, changes in equity and cash fl ows for the years then ended, and notes to the fi nancial statements, including a summary of signifi cant accounting policies (hereinafter referred to as the “fi nancial statements”).

In our opinion, the accompanying fi nancial statements present fairly, in all material respects, the consolidated fi nancial position of the Entity as at December 25, 2022 and December 26, 2021, and its consolidated fi nancial performance and its consolidated cash fl ows for the years then ended in accordance with International Financial Reporting Standards (IFRS).

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the “Auditor’s Responsibilities for the Audit of the Financial Statements” section of our auditor’s report.

We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the fi nancial statements in Canada and we have fulfi lled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most signifi cance in our audit of the fi nancial statements for the year ended December 25, 2022. These matters were addressed in the context of our audit of the fi nancial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

We have determined the matter described below to be the key audit matter to be communicated in our auditor’s report.

Evaluation of the intangible assets and goodwill impairment analysis for the specialized printed packaging cash generating unit

Description of the matter

We draw attention to Notes 3(p), 4(d) and 18 to the fi nancial statements. The intangible assets and goodwill balance is $33,110,000, of which $19,494,000 relates to the specialized printed packaging cash generating unit (CGU). The Entity reviews the carrying amount of intangible assets at each reporting date to determine whether there is any indication of impairment. The Entity performs goodwill impairment testing annually or at any time if an indicator of impairment exists. In determining the recoverable amount of its CGUs, the Entity uses the value in use, which is determined using a discounted cash fl ow model, or the fair value less costs to sell, if greater. The determination of each of these amounts is subject to estimation uncertainty. The Entity’s signifi cant assumptions include projected sales volume and gross profi t, terminal growth rate, and discount rate.

Why the matter is a key audit matter

We identifi ed the evaluation of the intangible assets and goodwill impairment analysis for the specialized printed packaging cash generating unit as a key audit matter. This matter represented an area of signifi cant risk of material misstatement given the magnitude of intangible assets and goodwill and the high degree of estimation uncertainty in assessing the Entity’s signifi cant assumptions. Signifi cant auditor judgment and the involvement of professionals with specialized skill and knowledge was required to evaluate the evidence supporting the Entity’s signifi cant assumptions due to the sensitivity of the recoverable amounts to minor changes in signifi cant assumptions.

How the matter was addressed in the audit

The primary procedures we performed to address this key audit matter included the following:

We took into account changes, conditions and events affecting the Entity and assessed the adjustments or lack of adjustments made by the Entity at arriving at the projected sales volume and gross profi t.

We compared the Entity’s historical sales volume forecasts to actual results to assess the Entity’s ability to accurately project future sales volume.

We evaluated the terminal growth rate by comparing to overall market and industry conditions and overall macro-economic conditions.

We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the discount rate assumption used in the estimated recoverable amount. The valuation professionals compared the discount rate against a range that was independently developed using publicly available external data for comparable entities.

14

REPORTING

Other Information

Management is responsible for the other information. Other information comprises:

• the information included in Management’s Discussion and Analysis fi led with the relevant Canadian Securities Commissions.

• the information, other than the fi nancial statements and the auditor’s report thereon, included in the Annual Report.

Our opinion on the fi nancial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

In connection with our audit of the fi nancial statements, our responsibility is to read the other information identifi ed above and, in doing so, consider whether the other information is materially inconsistent with the fi nancial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We obtained the information included in Management’s Discussion and Analysis fi led with the relevant Canadian Securities Commissions, and information, other than the fi nancial statements and the auditor’s report thereon, included in the Annual Report as at the date of this auditor’s report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in the auditor’s report.

We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the fi nancial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of fi nancial statements that are free from material misstatement, whether due to fraud or error.

In preparing the fi nancial statements, management is responsible for assessing the Entity’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Entity’s fi nancial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the fi nancial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to infl uence the economic decisions of users taken on the basis of the fi nancial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit.

We also:

• Identify and assess the risks of material misstatement of the fi nancial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is suffi cient and appropriate to provide a basis for our opinion.

• The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast signifi cant doubt on the Entity’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the fi nancial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Entity to cease to continue as a going concern.

15

REPORTING

• Evaluate the overall presentation, structure and content of the fi nancial statements, including the disclosures, and whether the fi nancial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and signifi cant audit fi ndings, including any signifi cant defi ciencies in internal control that we identify during our audit.

• Provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

• Obtain suffi cient appropriate audit evidence regarding the fi nancial information of the entities or business activities within the group Entity to express an opinion on the fi nancial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

• Determine, from the matters communicated with those charged with governance, those matters that were of most signifi cance in the audit of the fi nancial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our auditor’s report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefi ts of such communication.

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Chartered Professional Accountants

The engagement partner on the audit resulting in this auditor’s report is Scott Sissons. Winnipeg, Canada

February 28, 2023

16

CONSOLIDATED STATEMENTS OF INCOME

Years ended December 25, 2022 and December 26, 2021

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(thousands of US dollars, except per share amounts) Note 2022 2021
Revenue 8 1,181,133 1,001,994
Cost of sales (849,369) (727,546)
Gross profi t 331,764 274,448
Sales, marketing and distribution expenses (95,378) (83,848)
General and administrative expenses (38,783) (31,556)
Research and technical expenses (18,249) (17,831)
Pre-production expenses (3,401) (43)
Other (expenses) income 11 (3,669) 1,268
Income from operations 172,284 142,438
Finance income 12 6,414 913
Finance expense 12 (4,612) (1,738)
Income before income taxes 174,086 141,613
Income tax expense 13 (45,861) (35,265)
Net income for the year 128,225 106,348
Attributable to:
Equity holders of the Company 128,343 103,808
Non-controlling interests (118) 2,540
128,225 106,348
Basic and diluted earnings per share - cents 26 197 160
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended December 25, 2022 and December 26, 2021
(thousands of US dollars) 2022 2021
Net income for the year 128,225 106,348
Items that will not be reclassif ed to the statements of income:
-
Cash fl ow hedge losses recognized (867)
Employee benefi t plan remeasurements 19 1,578 12,727
Income tax effect 13 (372) (3,419)
1,206 8,441
Items that are or may be reclassif ed subsequently to the statements of income:
Cash fl ow hedge losses recognized (1,703) (102)
Cash fl ow hedge losses (gains) transferred to the statements of income 11 1,090 (1,751)
Income tax effect 13 165 495
(448) (1,358)
Other comprehensive income for the year - net of income tax 758 7,083
Comprehensive income for the year 128,983 113,431
Attributable to:
Equity holders of the Company 129,101 110,891
Non-controlling interests (118) 2,540
128,983 113,431
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See accompanying notes to consolidated fi nancial statements.

17

CONSOLIDATED BALANCE SHEETS

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December 25 December 26
(thousands of US dollars) Note 2022 2021
Assets
Current assets:
Cash and cash equivalents 14 398,673 377,461
Trade and other receivables 15 204,040 177,382
Income taxes receivable 3,573 9,825
Inventories 16 288,118 187,058
Prepaid expenses 5,602 6,702
900,006 758,428
Non-current assets:
Property, plant and equipment 17 518,590 515,247
Intangible assets and goodwill 18 33,110 34,472
Employee benefi t plan assets 19 10,783 13,547
562,483 563,266
Total assets 1,462,489 1,321,694
Equity and Liabilities
Current liabilities:
Trade payables and other liabilities 21 102,382 91,717
Contract liabilities 8 2,621 3,503
Income taxes payable 18,393 1,102
Derivative fi nancial instruments 1,328 715
124,724 97,037
Non-current liabilities:
Employee benefi t plan liabilities 19 8,334 9,837
Deferred income 17,946 17,685
Provisions and other long-term liabilities 22 12,062 13,029
Deferred tax liabilities 20 60,648 68,367
98,990 108,918
Total liabilities 223,714 205,955
Equity:
Share capital 25 29,195 29,195
Reserves 25 (972) (524)
Retained earnings 1,174,551 1,050,949
Total equity attributable to equity holders of the Company 1,202,774 1,079,620
Non-controlling interests 36,001 36,119
Total equity 1,238,775 1,115,739
Total equity and liabilities 1,462,489 1,321,694
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See accompanying notes to consolidated fi nancial statements.

On behalf of the Board of Directors:

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Director

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Director

18

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Attributable to Equity Holders of the Company

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Non-
Share Retained Controlling Total
(thousands of US dollars) Note Capital Reserves Earnings Total Interests Equity
Balance at December 28, 2020 29,195 834 1,103,435 1,133,464 33,579 1,167,043
Comprehensive (loss) income for the year
- -
Cash fl ow hedge losses, net of tax (75) (867) (942) (942)
Cash fl ow hedge gains transferred to the statements
- - -
of income, net of tax (1,283) (1,283) (1,283)
- - -
Employee benefi t plan remeasurements, net of tax 9,308 9,308 9,308
- -
Other comprehensive (loss) income (1,358) 8,441 7,083 7,083
- -
Net income for the year 103,808 103,808 2,540 106,348
-
Comprehensive (loss) income for the year (1,358) 112,249 110,891 2,540 113,431
Dividends 25 - - (164,735) (164,735) - (164,735)
Balance at December 26, 2021 29,195 (524) 1,050,949 1,079,620 36,119 1,115,739
Balance at December 27, 2021 29,195 (524) 1,050,949 1,079,620 36,119 1,115,739
Comprehensive (loss) income for the year
- - -
Cash fl ow hedge losses, net of tax (1,247) (1,247) (1,247)
Cash fl ow hedge losses transferred to the statements
of income, net of tax - 799 - 799 - 799
- - -
Employee benefi t plan remeasurements, net of tax 1,206 1,206 1,206
Other comprehensive (loss) income - (448) 1,206 758 - 758
- -
Net income (loss) for the year 128,343 128,343 (118) 128,225
-
Comprehensive (loss) income for the year (448) 129,549 129,101 (118) 128,983
Dividends 25 - - (5,947) (5,947) - (5,947)
Balance at December 25, 2022 29,195 (972) 1,174,551 1,202,774 36,001 1,238,775
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See accompanying notes to consolidated fi nancial statements.

19

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 25, 2022 and December 26, 2021

(thousands of US dollars) Note Cash provided by (used in): Operating activities: Net income for the year Items not involving cash: Depreciation 17 Amortization - deferred income Amortization - intangible assets 18 Employee def ned benef t plan expenses 19 Net f nance (income) expense 12 Income tax expense 13 Other Cash f ow from operating activities before the following Change in working capital: Trade and other receivables Inventories Prepaid expenses Trade payables and other liabilities Contract liabilities 8 Employee def ned benef t plan contributions 19 Income tax paid Interest received Interest paid Net cash from operating activities Investing activities: Acquisition of property, plant and equipment - net Acquisition of intangible assets 18 Financing activities: Payment of lease liabilities Dividends paid 25 Change in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year 14

2022 2021 128,225 106,348 47,688 45,604 (1,687) (1,881) 1,698 1,660 4,233 4,533 (1,802) 825 45,861 35,265 (3,046) (6,352) 221,170 186,002 (26,180) (41,976) (101,060) (51,429) 1,100 (3,574) 10,589 27,056 (882) 1,728 (1,912) (1,074) (26,794) (19,069) 5,848 791 (4,310) (1,400) 77,569 97,055 (49,125) (48,291) (336) (245) (49,461) (48,536) (862) (807) (6,034) (165,597) (6,896) (166,404) 21,212 (117,885) 377,461 495,346 398,673 377,461

See accompanying notes to consolidated fi nancial statements.

20

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of US dollars, unless otherwise indicated)

1. General

Winpak Ltd. (the “Company” or “Winpak”) is incorporated under the Canada Business Corporations Act. The Company manufactures and distributes high-quality packaging materials and related packaging machines. The Company’s products are used primarily for the packaging of perishable foods, beverages and in healthcare applications. The address of the Company’s registered offi ce is 100 Saulteaux Crescent, Winnipeg, Manitoba, Canada R3J 3T3. The ultimate controlling party of Winpak Ltd. is Wihuri International Oy of Helsinki, Finland, a privately held company.

2. Basis of presentation

Statement of compliance

The Company prepares its consolidated fi nancial statements in accordance with International Financial Reporting Standards (IFRS). The fi scal year of the Company ends on the last Sunday of the calendar year. As a result, the Company’s fi scal year is usually 52 weeks in duration, but includes a 53[rd] week every fi ve to six years. The 2022 and 2021 fi scal years are both comprised of 52 weeks.

The Company’s functional and reporting currency is the US dollar. The US dollar is the reporting currency as more than 85 percent of the Company’s business is conducted in US dollars and therefore management believes this increases transparency by signifi cantly reducing volatility of reported results due to fl uctuations in the rate of exchange between the Canadian and US currencies.

The consolidated fi nancial statements have been prepared under the historical-cost convention, except that certain fi nancial instruments, employee benefi t plans and share-based payments are stated at their fair value.

The consolidated fi nancial statements were approved by the Board of Directors on February 28, 2023.

3. Signifi cant accounting policies

(a) Principles of consolidation

The consolidated fi nancial statements include the accounts of the Company, its wholly-owned subsidiaries: Winpak Portion Packaging Ltd.; Winpak Heat Seal Packaging Inc.; Winpak Holdings Ltd.; Winpak Inc.; Winpak Films Inc.; Winpak Portion Packaging, Inc.; Winpak Lane, Inc.; Winpak Heat Seal Corporation; Winpak Control Group Inc.; Grupo Winpak de Mexico, S.A. de C.V.; Embalajes Winpak de Mexico, S.A. de C.V.; and Administracion Winpak de Mexico, S.A. de C.V.; and its majority-owned subsidiary American Biaxis Inc. Subsidiaries are entities controlled by the Company. The Company controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is obtained until the date that control ceases. The fi nancial statements of all subsidiaries are prepared as of the same reporting date using consistent accounting policies. All inter-company balances and transactions, including any unrealized income arising from inter-company transactions have been eliminated.

(b) Business combinations

Business combinations are accounted for using the acquisition method of accounting. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities assumed from the former owners of the acquiree and the equity interests issued by the Company. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition costs incurred are expensed and included in general and administrative expenses. Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognized in accordance with IFRS 9 “Financial Instruments” in the statement of income.

Identifi able assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. Goodwill is initially measured as the excess of the aggregate of the consideration transferred over the net identifi able assets acquired and liabilities assumed. If this consideration is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the statement of income.

(c) Non-controlling interests

Winpak Ltd. owns 51 percent of the equity interest in American Biaxis Inc., a subsidiary located in Winnipeg, Manitoba, Canada. Non-controlling interests represent the remaining 49 percent equity interest owned by third parties. The share of net assets attributable to non-controlling interests is presented as a component of equity. Their share of net income and other comprehensive income is recognized directly in equity.

(d) Foreign currency translation

The fi nancial statements for the Company and its subsidiaries are prepared using their functional currency, that being the US dollar. The functional currency is the currency of the primary economic environment in which the Company and its subsidiaries operate. Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the exchange rate at that date. Foreign currency differences arising on translation are recognized directly to the statement of income. Non-monetary assets and liabilities arising from transactions in foreign currencies are translated to the functional currency at the exchange rate prevailing at the date of the transaction.

21

(e) Revenue

The Company determines revenue recognition through the following steps: a) identifi cation of the contract with a customer, b) identifi cation of the performance obligations in the contract, c) determination of the transaction price, d) allocation of the transaction price to the performance obligations in the contract and e) recognition of revenue when the Company satisfi es a performance obligation. Revenue is recognized when control of a product is transferred to a customer. Revenue is measured based on the consideration specifi ed in the contract with a customer, net of variable consideration, including rebates, returns and discounts. Rebates are accrued using sales data and rebate percentages specifi c to each customer contract. Accruals for sales returns are calculated based on the best estimate of the amount of product that will ultimately be returned by customers, refl ecting historical experience and the magnitude of non-conforming inventory claims made by customers that have either been approved or are pending review. For customer contracts where the Company expects to be paid within one year, the consideration is not adjusted for the effects of a fi nancing component. Packaging machinery contract liabilities are recorded when cash payments are received or due in advance of the Company’s performance.

(f) Research and technical expenses

Research and technical expenses are expensed in the period in which the costs are incurred.

(g) Government grants/tax credits

Grants/tax credits from government are recognized at their fair value when there is a reasonable assurance that the grant/tax credit will be received and/ or earned and any specifi ed conditions will be met.

Grants/tax credits received in relation to the purchase and construction of plant and equipment are included in non-current liabilities as deferred income and are credited to the statement of income on a straight-line basis over the estimated useful life of the related asset. Grants/tax credits received in relation to research and development activities and labor subsidy programs are recorded to reduce these costs when it is determined there is reasonable assurance the grants/tax credits will be realized.

(h) Leases

At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identifi ed asset for a period of time in exchange for consideration.

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of plant and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate. Lease payments included in the measurement of the lease liability comprise the following: a) fi xed payments, including in-substance fi xed payments, b) variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date, c) amounts expected to be payable under a residual value guarantee and d) the exercise price under a purchase option that the Company is reasonably certain to exercise, lease payments in an optional renewal period if the Company is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Company is reasonably certain not to terminate early.

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in the statement of income if the carrying amount of the right-of-use asset has been reduced to zero.

Rental income received from packaging machine operating leases is recognized on a straight-line basis over the term of the corresponding lease.

(i) Inventories

Inventories are stated at the lower of cost and net realizable value. The cost of inventories is based on the fi rst-in fi rst-out principle and includes expenditures incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of manufactured inventories, cost includes an appropriate share of variable and fi xed overheads based on normal operating capacity. Any excess, unallocated, fi xed overhead costs are expensed as incurred. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

(j) Cash and cash equivalents

Cash and cash equivalents include cash on hand, cash invested in interest-bearing money market accounts and short-term deposits with maturities of less than three months. Cash equivalents are all highly liquid investments. Bank overdrafts are shown within current liabilities. Bank overdrafts that are repayable on demand and form an integral part of the Company’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash fl ows.

22

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(k) Trade and other receivables

The Company applies the simplifi ed approach to providing for expected credit losses, which requires the use of the lifetime expected credit loss provision for all trade and other receivables. Expected credit losses are measured as the difference in the present value of the contractual cash fl ows that are due under the contract and the cash fl ows that the Company expects to receive. The expected cash fl ows refl ect all available information, including the Company’s historical experience, the past due status, the existence of third-party insurance and forward-looking macroeconomic factors.

The Company has ongoing agreements in place with fi nancial institutions whereby certain extended term trade receivables are sold without recourse in exchange for cash. When the trade receivable is sold, the Company removes them from the balance sheet, recognizes the amount received as the consideration for the transfer and records the corresponding costs within fi nance expense and general and administrative expenses. The Company assumes the risk on trade receivables not sold, and accordingly, the amounts are included within trade and other receivables.

(l) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. All costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management are included in the carrying value of the asset. When the Company has a legal or constructive obligation to restore a site on which an asset is located either through makegood provisions in lease agreements or decommissioning of environmental risks, the present value of the estimated costs of dismantling and removing the asset and restoring the site are included in the carrying value of the asset with a corresponding increase to provisions. Borrowing costs directly attributable to the acquisition, construction or production of qualifying property, plant and equipment that takes an extended period of time to be placed into service are added to the cost of the assets, until such time as the assets are substantially ready for their intended use. See note 3(p) on impairment.

When parts of an item of plant and equipment have different useful lives, they are accounted for as separate items (major components). The cost of replacing a component of an item of plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefi ts of the item will occur and its cost can be measured reliably. The costs of day-to-day maintenance of plant and equipment are recognized directly in the statement of income.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets, commencing the date the assets are ready for use as follows:

Buildings 20 - 40 years Equipment 4 - 20 years Packaging machines 3 - 7 years

Depreciation methods, useful lives and residual values are reassessed annually or more frequently when there is an indication that they have changed.

The gain or loss on the retirement of an item of property, plant and equipment is the difference between the net sale proceeds and the carrying amount of the asset and is recognized in the statement of income.

(m) Pre-production expenses

Pre-production costs relating to installations of major new production equipment are expensed in the period in which incurred.

(n) Intangible assets

Intangible assets are stated at cost less accumulated amortization and accumulated impairment losses. See note 3(p) on impairment. Computer software that is integral to a related item of hardware is included with plant and equipment. All other computer software is treated as an intangible asset. The cost of intangible assets acquired in an acquisition is the fair value at the acquisition date. The cost of separately acquired intangible assets, including computer software, comprises the purchase price and any directly attributable costs of preparing the asset for use. Amortization is computed using the straight-line method over the estimated useful lives of the assets, as follows:

Computer software 3 - 12 years Patents 8 - 17 years Customer-related 5 - 15 years

(o) Goodwill

Goodwill represents the excess of the consideration transferred over the Company’s interest in the fair value of the net identifi able assets, including intangible assets, and liabilities of the acquiree at the date of acquisition. At the date of acquisition, goodwill is allocated to cash-generating units (CGUs) for the purpose of impairment testing. A CGU is the smallest group of assets that generates cash infl ows that are largely independent of the cash infl ows from other assets or groups of assets. Goodwill is tested at least annually for impairment at the CGU level and is carried at cost less accumulated impairment losses (see note 3(p)).

(p) Impairment

The carrying amount of the Company’s property, plant and equipment and intangible assets (other than goodwill) are reviewed at each reporting date to determine whether there is any indication of impairment. Goodwill is tested for impairment annually or at any time if an indicator of impairment exists. If any such indication exists, the applicable asset’s recoverable amount is estimated.

23

The recoverable amount of the Company’s assets are calculated as the value-in-use, being the present value of future cash fl ows, using a pre-tax discount rate that refl ects the current assessment of the time value of money, or the fair value less costs to sell, if greater. For an asset that does not generate largely independent cash fl ows, the recoverable amount is determined for the CGU to which it belongs. The Company bases its impairment calculation on detailed fi nancial forecasts, which are prepared separately for each of the Company’s CGUs to which the individual assets are allocated. These fi nancial forecasts are generally covering a period of fi ve years. For longer periods, a long-term growth rate is calculated and applied to project future cash fl ows after the fi fth year.

An impairment loss is recognized whenever the carrying amount of an asset or its respective CGU exceeds its recoverable amount. Impairment losses are recognized in the statement of income. Impairment losses recognized in respect of CGUs are allocated fi rst to reduce the carrying amount of any goodwill allocated to the CGU and then, to reduce the carrying amount of other assets in the CGU on a pro rata basis. Impairment losses in respect of goodwill are not reversed. In respect of property, plant and equipment and intangible assets, an impairment loss is reversed if there has been an indication that an impairment loss recognized in prior periods may no longer exist or may have decreased. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been previously recognized.

(q) Income taxes

Income tax expense comprises current and deferred tax. Income tax expense is recognized in the statement of income except to the extent that it relates to items recorded directly to other comprehensive income or equity, in which case it is recognized directly in other comprehensive income or equity, respectively.

Current income tax comprises the expected income tax payable or receivable on the taxable income or loss for the period, using income tax rates enacted or substantively enacted in the jurisdictions the Company is required to pay income tax at the reporting date, and any adjustments to income taxes payable or receivable in respect of previous periods. Current income tax is adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the fi nancial statements, and by the availability of unused income tax losses.

Deferred tax is recognized using the balance sheet method in which temporary differences are calculated based on the carrying amounts of assets and liabilities for fi nancial reporting purposes and the tax bases of assets and liabilities for income taxation purposes. Deferred tax is not recognized for the following temporary timing differences: the initial recognition for both goodwill and assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable income; and differences relating to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future. Deferred tax is measured at the income tax rates that are expected to be applied when the temporary difference reverses, that is, when the asset is realized or the liability is settled, based on the income tax laws that have been enacted or substantively enacted at the reporting date.

Deferred tax assets are recognized only to the extent that it is probable that future taxable income will be available against which the assets can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related income tax benefi t will be realized.

Current tax assets and liabilities are offset when the Company and its subsidiaries have a legally enforceable right to offset the amounts and intend to either settle on a net basis, or to realize the asset and settle the liability simultaneously. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balance on a net basis.

The Company regularly evaluates positions taken in income tax returns with respect to situations in which applicable income tax regulation is subject to interpretation. Management establishes provisions where appropriate on the basis of amounts expected to be paid to income tax authorities, refl ecting any uncertainty over tax treatments.

24

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(r) Employee benefi t plans

The Company maintains four funded non-contributory defi ned benefi t pension plans in Canada and the US and one funded non-contributory supplementary income postretirement plan for certain CDN-based executives. A market discount rate is used to measure the benefi t obligations based on the yield of high quality corporate bonds denominated in the same currency in which the benefi ts are expected to be paid and with terms to maturity that, on average, match the terms of the benefi t obligations. The cost of providing the benefi ts is actuarially determined using the projected unit credit method. Actuarial valuations are conducted, at a minimum, on a triennial basis with interim valuations performed as deemed necessary. Consideration is given to any event that could impact the benefi t plan assets or obligation up to the balance sheet date where interim valuations are performed. For fi nancial reporting purposes, the Company measures the benefi t obligations and fair value of assets for the defi ned benefi t plans as of the year-end date. The amount recognized in the balance sheet at each year-end reporting date represents the present value of the benefi t obligation, reduced by the fair value of benefi t plan assets. Any recognized asset or surplus is limited to the present value of economic benefi ts available in the form of any future refunds from the plan or reductions in future contributions. To the extent that there is uncertainty regarding entitlement to the surplus, no asset is recorded. Current service costs are charged to the statement of income and included in the same line items as the related compensation cost. The net fi nance cost is computed based on the application of the discount rate to the net defi ned benefi t pension plan asset or liability at the start of the annual period, taking into account any anticipated changes during the upcoming year as a result of contributions and benefi t payments and also refl ects the impact of any pension plan asset ceiling adjustments. The net fi nance cost is shown within either fi nance income or fi nance expense within the statement of income depending on whether the defi ned benefi t pension plan was in an asset or liability position at the start of the year. Remeasurements, which comprise actuarial gains and losses, the return on benefi t plan assets and the effect of the pension plan asset ceiling adjustment, are recognized directly in equity within other comprehensive income. When the benefi ts of a plan are changed or when a plan is curtailed, the resulting change in benefi t that relates to past service or the gain or loss on curtailment is recognized immediately in the statement of income. The Company recognizes gains and losses on the settlement of a defi ned benefi t plan when the settlement occurs in the statement of income. The Company’s funding policy is in compliance with statutory regulations and amounts funded are deductible for income tax purposes.

One of the Company’s subsidiaries maintains one unfunded contributory defi ned benefi t postretirement plan for healthcare benefi ts for a limited group of US individuals. A market discount rate is used to measure the benefi t obligation based on the yield of high quality corporate bonds denominated in the same currency in which the benefi ts are expected to be paid and with terms to maturity that, on average, match the terms of the benefi t obligation. The cost of providing the benefi ts is actuarially determined using the projected unit credit method. The amount recognized in the balance sheet at each year-end reporting date represents the present value of the benefi t obligation. Current service costs are charged to the statement of income as they accrue and are included in general and administrative expenses. Interest costs on the benefi t obligation are charged to the statement of income as fi nance expense. Remeasurements are recognized directly in equity within other comprehensive income. When the benefi ts of the plan are changed or when the plan is curtailed, the resulting change in benefi t that relates to past service or the gain or loss on curtailment is recognized immediately in the statement of income.

The Company maintains seven defi ned contribution pension plans in Canada and the US. The pension expense charged to the statement of income for these plans is the annual funding contribution by the Company.

Termination benefi ts are recognized as an expense in the statement of income at the earlier of when the Company can no longer withdraw the offer of those benefi ts and when the Company recognizes costs for a restructuring.

Short-term benefi t obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid under short-term cash bonus or profi t-sharing plans if the Company has a legal or constructive obligation to pay this amount as a result of past service provided by the employee.

(s) Provisions

A provision is recognized when there is a legal or constructive obligation as a result of a past event and it is probable that a future outlay of cash will be required to settle the obligation and the amount can be reliably estimated. Provisions are determined by discounting the expected future cash fl ows at a pre-income tax rate that refl ects the current market assessments of the time value of money and the risks specifi c to the obligation. When some or all of the monies required to settle a provision are expected to be recovered from a third party, the recovery is recognized as an asset when it is virtually certain that the recovery will be received.

When the Company has a legal or constructive obligation to restore a site on which an asset is located either through make-good provisions in lease agreements or decommissioning of environmental risks, the present value of the estimated costs of dismantling and removing the asset and restoring the site is recognized as a provision with a corresponding increase to the related item of property, plant and equipment. At each reporting date, the obligation is remeasured in line with changes in discount rates, estimated cash fl ows and the timing of those cash fl ows. Any changes in the obligation are added or deducted from the related asset. The change in the present value of the obligation due to the passage of time is recognized as a fi nance expense or fi nance income in the statement of income.

At each reporting date, other provisions are remeasured in line with changes in discount rates, estimated cash fl ows and the timing of those cash fl ows. Any changes in the provision are recognized in the statement of income. The change in the present value of the provision due to the passage of time is recognized as a fi nance expense or fi nance income in the statement of income.

25

(t) Financial assets and liabilities

Financial assets are initially measured at fair value. On initial recognition, the Company classifi es its fi nancial assets at either amortized cost, fair value through other comprehensive income (FVOCI) or fair value through profi t or loss (FVTPL), depending on its business model for managing the fi nancial assets and the contractual cash fl ow characteristics of the fi nancial assets. Financial assets are not reclassifi ed subsequent to their initial recognition, unless the Company changes its business model for managing fi nancial assets. Financial liabilities are classifi ed at amortized cost.

A fi nancial asset is classifi ed as measured at amortized cost if it meets both of the following conditions: a) the asset is held within a business model whose objective is to hold assets to collect contractual cash fl ows and b) the contractual terms of the fi nancial asset give rise on specifi ed dates to cash fl ows that are solely payments of principal and interest on the principal amount outstanding.

A fi nancial asset is classifi ed as measured at FVOCI if it meets both of the following conditions: a) it is held within a business model whose objective is achieved by both collecting contractual cash fl ows and selling fi nancial assets and b) its contractual terms give rise on specifi ed dates to cash fl ows that are solely payments of principal and interest on the principal amount outstanding.

All fi nancial instruments, including derivatives, are included in the consolidated balance sheet and are measured at fair value except cash and cash equivalents, trade and other receivables and trade payables and other liabilities, which are measured at amortized cost. All changes in fair value are recorded to the consolidated statement of income unless cash fl ow hedge accounting is used, in which case changes in fair value are recorded in other comprehensive income to the extent the derivatives are deemed to be effective hedges.

(u) Hedge accounting

The Company operates principally in Canada and the United States, which gives rise to risks that its income and cash fl ows may be adversely impacted by fl uctuations in foreign exchange rates. The Company enters into foreign currency forward contracts to manage foreign exchange exposures on anticipated labor, operating costs, property, plant and equipment expenditures and dividend payments to be incurred in Canadian dollars and equipment expenditures to be incurred in other foreign currencies. The Company has elected to designate these instruments in their entirety as hedging instruments for hedge accounting purposes, including both the spot and forward elements of the contract in the valuation of the instrument.

With respect to hedges of foreign currency exposure, the Company determines the existence of an economic relationship between the hedging instrument and hedged item based on the currency, amount and timing of their respective cash fl ows. An assessment is made whether the derivative designated in each hedging relationship is expected to be and has been effective in offsetting changes in cash fl ows of the hedged item using the hypothetical derivative method.

The fair value of each contract is included on the consolidated balance sheet within derivative fi nancial instrument assets or liabilities, depending on whether the fair value was in an asset or liability position. In the case of labor and operating costs, changes in the fair value of these contracts are initially recorded in other comprehensive income and subsequently recorded in the consolidated statement of income when the hedged item affects income or loss. In the case of property, plant and equipment expenditures, changes in the fair value of these contracts are initially recorded in other comprehensive income and upon settlement of the contract, the gain or loss is included in the cost of the corresponding asset. For dividend payments, changes in the fair value of these contracts are recorded directly in equity.

If the hedge no longer meets the criteria for hedge accounting or the hedging instrument is sold, expires, is terminated or is exercised, then hedge accounting is discontinued prospectively. When hedge accounting for cash fl ow hedges is discontinued, the amount that has been accumulated in the hedging reserve remains in equity until, for a hedge of a transaction resulting in recognition of a non-fi nancial item, it is included in the non-fi nancial item’s cost on its initial recognition or, for other cash fl ow hedges, it is reclassifi ed to the consolidated statement of income in the same period or periods as the hedged expected future cash fl ows affects income or loss.

If the hedged future cash fl ows are no longer expected to occur, then the amounts that have been accumulated in the hedging reserve are immediately reclassifi ed to the consolidated statement of income.

(v) Share-based payments

The Company maintains a share-based compensation plan, which provides restricted share units under the Executive Enhanced Long-Term Deferred Income Benefi ts Plan. The long-term component of the incentive entitlement for a given year is converted to units based on the current market value of the Company’s common shares and after a period of three years, the cash value of the units is paid to the Executive based on the market value of the Company’s common shares in effect at that point in time. Units under the plan vest immediately. The fair value of the units granted is recognized as a personnel expense, with a corresponding increase in liabilities, over the period that the units pertain. The liability is remeasured at each reporting date. Any changes in the fair value of the liability are recognized as a personnel expense in the statement of income.

(w) Earnings per share

Basic earnings per share are calculated by dividing the net income attributable to equity holders of the Company for the period by the weighted average number of common shares outstanding during the period. Diluted earnings per share are calculated on the same basis as there are no potentially dilutive common shares.

26

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. Critical accounting estimates and judgments

The application of the Company’s accounting policies requires management to use estimates and judgments that can have a signifi cant effect on the revenues, expenses, comprehensive income, assets and liabilities recognized and disclosures made in the consolidated fi nancial statements. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively.

The following areas require management’s most critical estimates and judgments:

(a) Aggregation of operating segments

Management applies judgment in aggregating operating segments into a reportable segment. Aggregation occurs when the operating segments have similar economic characteristics and have similar products, production processes, types of customers and distribution methods.

(b) Business combinations

The determination of fair value associated with identifi able property, plant and equipment and intangible assets following a business combination requires management to make assumptions. More specifi cally, this is the case when the Company calculates fair values using appropriate valuation techniques, which are generally based on a forecast of expected future cash fl ows for intangible assets, and on a replacement cost approach, an incomebased approach and/or a market-based approach for property, plant and equipment. These valuations are closely related to the assumptions made by management about the future return on the related assets and the discount rate applied. Signifi cant changes to these assumptions could signifi cantly change the fair values associated with intangible assets following a business combination, which would impact the amortization expense.

(c) Employee benefi t plans

Accounting for employee benefi t plans requires the use of actuarial assumptions. The assumptions include the discount rate, rate of compensation increase, mortality rate and healthcare costs. These assumptions depend on underlying factors such as economic conditions, government regulations and employee demographics. These assumptions could change in the future and may result in material adjustments to employee benefi t plan assets or liabilities.

(d) Impairment of property, plant and equipment, intangible assets and goodwill

An integral component of impairment testing is determining the asset’s recoverable amount. The determination of the recoverable amount involves signifi cant management judgment, including projections of future cash fl ows and the appropriate discount rate. The cash fl ows are derived from the fi nancial forecast for the next fi ve years and do not include restructuring activities that the Company is not yet committed to or signifi cant future investments that will enhance the asset’s performance of the CGU being tested. Qualitative factors, including market presence and trends, strength of customer relationships, strength of local management, strength of debt and capital markets and degree of variability in cash fl ows, as well as other factors, are considered when making assumptions with regard to projected revenue and gross profi t and the appropriate discount rate. The recoverable amount is most sensitive to the discount rate used for the discounted cash fl ow model as well as the average projected sales volume growth, the average projected gross profi t percentage and the terminal growth rate used for extrapolation purposes. A change in any of the signifi cant assumptions or estimates could result in a material change in the recoverable amount. The Company has nine CGUs, of which the carrying values for three include goodwill and must be tested for impairment annually.

(e) Timing of revenue recognition

Signifi cant judgment is required to determine whether revenue should be recognized over time or at a point in time. To assess whether any revenue should be recognized over time, the Company analyzes customer-specifi c products without alternative use to determine whether a legally enforceable right to payment exists as performance is completed, including a reasonable return.

(f) Leases

Management assesses at lease commencement date whether it is reasonably certain to exercise lease extension options. In addition, assumptions are made as to the discount rate applied to the lease liability. If there is a signifi cant event or change in circumstances within the Company’s control, these judgments and assumptions could change and may result in material adjustments to right-of-use assets and lease liabilities.

5. Accounting standards implemented in 2022

The following accounting standards came into effect commencing in the Company’s 2022 fi scal year:

(a) Property, plant and equipment: proceeds before intended use

In May 2020, the IASB issued “Property, Plant and Equipment: Proceeds Before Intended Use (Amendments to IAS 16)”, which prohibits deducting amounts received from selling items produced while preparing the asset for its intended use from the cost of property, plant and equipment. Instead, such sales proceeds and related costs will be recognized within the statement of income. The amendments were implemented with retrospective application, effective December 27, 2021. The amendments had no impact on the Company’s consolidated fi nancial statements.

(b) Onerous contracts - cost of fulfi lling a contract

In May 2020, the IASB issued “Onerous Contracts - Cost of Fulfi lling a Contract (Amendments to IAS 37)”, which specifi es which costs a company includes when assessing whether a contract will be loss-making. The amendments were implemented, effective December 27, 2021. The amendments had no impact on the Company’s consolidated fi nancial statements.

27

6. Future accounting standards

(a) Deferred taxes related to assets and liabilities arising from a single transaction

In May 2021, the IASB issued “Deferred Taxes Related to Assets and Liabilities Arising from a Single Transaction (Amendments to IAS 12)”, which introduces an exception to the initial recognition exemption for deferred tax on transactions such as leases and decommissioning obligations. Applying this exception, a company does not apply the initial recognition exemption for transactions that give rise to equal taxable and deductible temporary differences. The amendments are effective for annual reporting periods beginning on or after January 1, 2023 and are to be applied retrospectively. The Company does not expect the amendments to have a signifi cant impact on the consolidated fi nancial statements when they are adopted in 2023.

(b) Lease liability in a sale and leaseback

In September 2022, the IASB issued “Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)”, that requires a seller-lessee to subsequently measure lease liabilities arising from a leaseback in a way that it does not recognize any amount of the gain or loss that relates to the right of use it retains. The amendments are effective for annual reporting periods beginning on or after January 1, 2024 and are to be applied retrospectively. The Company does not expect the amendments to have a signifi cant impact on the consolidated fi nancial statements when they are adopted in 2024.

7. Segment reporting

Operating segments and product groups

The Company provides three distinct types of packaging technologies: a) fl exible packaging, b) rigid packaging and fl exible lidding and c) packaging machinery. Each is deemed to be a separate operating segment.

The fl exible packaging segment includes the modifi ed atmosphere packaging, specialty fi lms and biaxially oriented nylon product groups. Modifi ed atmosphere packaging extends the shelf life of perishable foods, while at the same time maintains or improves the quality of the product. The packaging is used for a wide range of markets and applications, including fresh and processed meats, poultry, cheese, medical device packaging, high performance pouch applications and high-barrier fi lms for converting applications. Specialty fi lms include a full line of barrier and non-barrier fi lms which are ideal for converting applications such as printing, laminating and bag making, including shrink bags. Biaxially oriented nylon fi lm is stretched by length and width to add stability for further conversion using printing, metalizing or laminating processes and is ideal for food packaging applications such as cheese, fl uid and viscous liquids, and industrial applications such as book covers and balloons.

The rigid packaging and fl exible lidding segment includes the rigid containers, lidding and specialized printed packaging product groups. Rigid containers include portion control and single-serve containers, as well as plastic sheet, custom and retort trays, which are used for applications such as food, pet food, beverage, dairy, industrial and healthcare. Lidding products are available in die-cut, daisy chain and rollstock formats and are used for applications such as food, dairy, beverage, pet food, industrial and healthcare. Specialized printed packaging provides packaging solutions to the pharmaceutical, healthcare, nutraceutical, cosmetic and personal care markets.

Packaging machinery includes a full line of horizontal fi ll/seal machines for preformed containers and vertical form/fi ll/seal pouch machines for pumpable liquid and semi-liquid products and certain dry products.

Due to similar economic characteristics, including long-term sales volume growth and long-term average gross profi t margins, and having similar products, production processes, types of customers and distribution methods, the fl exible packaging and rigid packaging and fl exible lidding operating segments have been aggregated as one reportable segment. In addition, the packaging machinery operating segment has been aggregated with these two segments as the segment’s revenue and assets represents less than 3 percent of total Company revenue and assets.

The Company operates principally in Canada and the United States. See note 8 for a breakdown of revenue by operating and geographic segment. The following summary presents property, plant and equipment, intangible assets and goodwill information by geographic segment:

	December 25 December 26 2022 2021 249,075 258,001 284,019 272,552 18,606 19,166 551,700 549,719
United States Canada Mexico

28

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. Revenue

Signifi cant judgments in applying revenue accounting policy

Signifi cant judgment is required to determine whether revenue should be recognized over time or at a point in time. To assess whether any revenue should be recognized over time, the Company analyzes customer-specifi c products without alternative use to determine whether a legally enforceable right to payment exists as performance is completed, including a reasonable return. During 2022, no material arrangements satisfi ed these criteria, and as a result, the Company did not recognize any revenue over time. Accordingly, all revenue was recognized at a point in time giving consideration to whether the customer has: a) assumed the risks and rewards of ownership, b) a present obligation to pay and c) obtained legal title and physical possession. These conditions are usually fulfi lled upon shipment of products.

For customer contracts that include a volume rebate program, judgment is required to estimate the eventual amount that will be paid to the customer. Most volume rebate programs entitle a customer to an increasing rebate percentage based upon the attainment of purchase level thresholds. At each reporting date, the Company updates its estimates regarding variable consideration.

Disaggregation of revenue

Disaggregation of revenue
	2022 640,209 510,425 30,499 1,181,133 950,073 152,173 78,887 1,181,133	2021
Operating segment Flexible packaging Rigid packaging and f exible lidding Packaging machinery Geographic segment United States Canada Mexico and other		519,798 451,729 30,467 1,001,994 806,232 126,765 68,997 1,001,994

The Company’s products are primarily used for the packaging of perishable foods and beverages, which accounted for more than 90 percent of sales during 2022 and 2021. Other markets include medical, pharmaceutical, nutraceutical, personal care, industrial and other consumer goods.

Contract balances

The following table provides information about trade receivables and contract liabilities with customers:

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----- Start of picture text -----

December 25 December 26
2022 2021
Trade receivables, which are included in ‘Trade and other receivables’ (note 15) 188,981 166,467
Contract liabilities (2,621) (3,503)
Changes in contract liabilities during the period
Opening balance, December 27, 2021 (3,503)
Revenue recognized during the year that was included in the opening balance 3,503
Increases due to cash received, excluding amounts recognized as revenue during the year (2,621)
Closing balance, December 25, 2022 (2,621)
----- End of picture text -----

Performance obligations

Most of the Company’s contracts have a single performance obligation as the promise to transfer the individual goods. Revenue for each of the three operating segments is recognized at a point in time when the customer obtains control of a product, which typically takes place when legal title and physical possession of the product is transferred to the customer. These conditions are usually fulfi lled upon shipment, however, in some instances, upon delivery. Invoices are generated when control has transferred and are usually payable within 30 to 60 days.

No revenue was recognized in 2022 or 2021 relating to performance obligations that were satisfi ed or partially satisfi ed in previous years. Similarly, no revenue will be recognized in subsequent years relating to unsatisfi ed performance obligations as at December 25, 2022.

29

9. Expenses by nature

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----- Start of picture text -----

2022 2021
Raw materials and consumables used (638,416) (522,652)
Depreciation and amortization (47,699) (45,383)
Personnel expenses (note 10) (224,791) (214,073)
Freight (37,642) (30,518)
Other expenses (56,632) (48,198)
Foreign exchange and cash fl ow hedge (losses) gains transferred from other comprehensive income (note 11) (3,669) 1,268
(1,008,849) (859,556)
----- End of picture text -----

10. Personnel expenses

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----- Start of picture text -----

2022 2021
Wages and salaries (195,797) (185,865)
Social security (17,289) (16,350)
Employee defi ned benefi t plan expenses (note 19) (4,233) (4,533)
Employee defi ned contribution plan expenses (note 19) (7,326) (7,325)
-
Share-based payments (note 24) (146)
(224,791) (214,073)
----- End of picture text -----

During 2022, the Company received $0 with respect to the Canada Emergency Wage Subsidy (CEWS) program (2021 - $1,177) which was netted against wages and salaries.

11. Other (expenses) income

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----- Start of picture text -----

2022 2021
Foreign exchange losses (2,579) (483)
Cash fl ow hedge (losses) gains transferred from other comprehensive income (1,090) 1,751
(3,669) 1,268
12. Finance income and expense
2022 2021
Finance income on cash and cash equivalents 5,959 804
Net fi nance income on defi ned benefi t plans (note 19) 455 109
Finance income 6,414 913
Finance expense on bank overdrafts (21) (18)
Finance expense on lease liabilities (467) (499)
Finance expense on sale of extended term trade receivables (note 29) (3,843) (919)
Net fi nance expense on defi ned benefi t plans (note 19) (281) (302)
Finance expense (4,612) (1,738)
Net fi nance income (expense) 1,802 (825)
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30

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. Income tax expense

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----- Start of picture text -----

2022 2021
Current tax expense
Current year (53,787) (25,775)
Deferred tax recovery (expense)
Origination and reversal of temporary differences 7,926 (9,490)
Income tax expense (45,861) (35,265)
Income tax expense recognized in other comprehensive income
Cash fl ow hedges 165 495
Employee benefi t plan remeasurements (372) (3,419)
(207) (2,924)
Reconciliation of effective income tax rate
Combined Canadian federal and provincial income tax rate 26.8% 26.7%
United States income taxed at rates lower than Canadian tax rates (0.4) (0.2)
Permanent differences and other (0.1) (1.6)
Effective income tax rate 26.3% 24.9%
14. Cash and cash equivalents
December 25 December 26
2022 2021
Bank balances 35,430 18,755
Money market and short-term deposits 363,243 358,706
398,673 377,461
15. Trade and other receivables
December 25 December 26
2022 2021
Trade receivables 188,981 166,467
Less: Allowance for expected credit losses (1,517) (1,007)
Net trade receivables 187,464 165,460
Other receivables 16,576 11,922
204,040 177,382
16. Inventories
December 25 December 26
2022 2021
Raw materials 128,371 65,065
Work-in-process 46,022 32,435
Finished goods 97,163 74,834
Spare parts 16,562 14,724
288,118 187,058
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During 2022, the Company recorded, within cost of sales, inventory write-downs for slow-moving and obsolete inventory of $11,760 (2021 - $6,392) and reversals of previously written-down items of $2,279 (2021 - $2,666).

31

17. Property, plant and equipment

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----- Start of picture text -----

Packaging Capital
Land Buildings Equipment Machines In Progress Total
Net book value
At December 28, 2020
Cost 24,486 211,736 682,042 20,348 66,893 1,005,505
- -
Accumulated depreciation (71,233) (406,804) (20,007) (498,044)
24,486 140,503 275,238 341 66,893 507,461
2021 Activity
Additions - 3,315 31,041 837 18,452 53,645
- - -
Disposals (145) (110) (255)
Transfers - 24,778 18,364 - (43,142) -
- -
Depreciation (7,853) (37,664) (87) (45,604)
At December 26, 2021 24,486 160,743 286,834 981 42,203 515,247
At December 26, 2021
Cost 24,486 239,690 721,321 14,693 42,203 1,042,393
- -
Accumulated depreciation (78,947) (434,487) (13,712) (527,146)
24,486 160,743 286,834 981 42,203 515,247
Net book value
At December 27, 2021
Cost 24,486 239,690 721,321 14,693 42,203 1,042,393
- -
Accumulated depreciation (78,947) (434,487) (13,712) (527,146)
24,486 160,743 286,834 981 42,203 515,247
2022 Activity
Additions 586 9,637 18,459 659 21,759 51,100
- - - -
Disposals (69) (69)
Transfers - - 6,346 - (6,346) -
Depreciation - (8,873) (38,650) (165) - (47,688)
At December 25, 2022 25,072 161,507 272,920 1,475 57,616 518,590
At December 25, 2022
Cost 25,072 249,287 732,415 15,352 57,616 1,079,742
Accumulated depreciation - (87,780) (459,495) (13,877) - (561,152)
25,072 161,507 272,920 1,475 57,616 518,590
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At December 25, 2022, property, plant and equipment includes right-of-use assets of $11,505 (2021 - $12,665) related to leased facilities (see note 23).

Government grants/tax credits in respect of property, plant and equipment were recognized within deferred income totaling $1,948 in 2022 (2021 - $5,207). No impairment losses or impairment reversals were recorded during 2022 and 2021. No borrowing costs were capitalized during 2022 and 2021.

32

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18. Intangible assets and goodwill

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Customer
Goodwill Software Patents Related Total
Net book value
At December 28, 2020
Cost 18,435 10,106 72 18,830 47,443
Accumulated amortization - (9,069) (11) (2,476) (11,556)
18,435 1,037 61 16,354 35,887
2021 Activity
Additions - 222 23 - 245
- - - - -
Disposals
Amortization - (383) - (1,277) (1,660)
At December 26, 2021 18,435 876 84 15,077 34,472
At December 26, 2021
Cost 18,435 9,750 95 18,830 47,110
Accumulated amortization - (8,874) (11) (3,753) (12,638)
18,435 876 84 15,077 34,472
Net book value
At December 27, 2021
Cost 18,435 9,750 95 18,830 47,110
Accumulated amortization - (8,874) (11) (3,753) (12,638)
18,435 876 84 15,077 34,472
2022 Activity
Additions - 288 48 - 336
- - - - -
Disposals
Amortization - (421) - (1,277) (1,698)
At December 25, 2022 18,435 743 132 13,800 33,110
At December 25, 2022
Cost 18,435 9,767 143 18,830 47,175
Accumulated amortization - (9,024) (11) (5,030) (14,065)
18,435 743 132 13,800 33,110
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The 2022 intangible assets and goodwill balance includes $12,698 (2021 - $12,596) related to the lidding CGU. The impairment testing for this CGU was conducted under the value-in-use approach, using a pre-tax discount rate of 13.1 percent (2021 - 10.8 percent). Cash fl ows were projected based on actual operating results and the fi ve-year business plan. Average sales volume growth projected for the next fi ve years was 5.1 percent (2021 - 6.4 percent) and the average gross profi t percentage projected over the same time-frame was within seven percentage points (2021 - within two percentage points) of the actual gross profi t percentage attained in the current year. Cash fl ows after the fi ve-year period were assumed to increase at a terminal growth rate of 1.5 percent (2021 - 1.5 percent).

The 2022 intangible assets and goodwill balance includes $19,494 (2021 - $20,770) related to the specialized printed packaging CGU. The impairment testing for this CGU was conducted under the value-in-use approach, using a pre-tax discount rate of 15.0 percent (2021 - 12.6 percent). Cash fl ows were projected based on actual operating results and the fi ve-year business plan. Average sales volume growth projected for the next fi ve years was 10.2 percent (2021 - 9.7 percent) and the average gross profi t percentage projected over the same time-frame was within seven percentage points (2021 - within fi ve percentage points) of the actual gross profi t percentage attained in the current year. Cash fl ows after the fi ve-year period were assumed to increase at a terminal growth rate of 1.5 percent (2021 - 1.5 percent).

At December 25, 2022 and December 26, 2021, there were no indefi nite life intangible assets other than goodwill. The amortization of software and patents is included within general and administrative expenses and the amortization of customer-related intangibles is included within sales, marketing and distribution expenses. At December 25, 2022 the weighted average remaining useful life of customer-related intangible assets was 11.6 years (2021 - 12.5 years).

No impairment losses or impairment reversals were recorded during 2022 and 2021.

33

19. Employee benefi t plans

The Company maintains four funded non-contributory defi ned benefi t pension plans, one funded non-contributory supplementary income postretirement plan for certain CDN-based executives, one unfunded contributory defi ned benefi t postretirement plan for healthcare benefi ts for a limited group of US individuals and seven defi ned contribution pension plans. Effective January 1, 2005, all defi ned benefi t pension plans were frozen to new entrants except one, which was frozen effective January 1, 2009. All new CDN employees are required, and all new US employees have the option, to participate in defi ned contribution plans upon satisfaction of certain eligibility requirements.

The employee benefi t plans are overseen by the Company Pension Committee (CPC) which is comprised of two members from senior management and one Board of Directors member. The CPC is responsible for determining and recommending the following items to the Company’s Board of Directors for approval: (a) the benefi t plan asset investment policies, (b) the Company’s cash funding and (c) the employee benefi t entitlements within the respective benefi t plans.

Total amounts paid by the Company on account of all benefi t plans, consisting of: defi ned benefi t pension plans, supplementary income postretirement plan, direct payments to benefi ciaries for the unfunded postretirement plan and the defi ned contribution plans, amounted to $9,342 (2021 - $8,340).

Defi ned contribution pension plans

The Company maintains four defi ned contribution pension plans for employees in Canada and three retirement savings plans (401(k) Plans) for employees in the United States. The Company’s total expense for these plans was $7,326 (2021 - $7,325).

Defi ned benefi t plans

For fi nancial reporting purposes, the Company measures the benefi t obligations and fair value of the benefi t plan assets as of the year-end date. The most recent actuarial valuations for funding purposes for the funded non-contributory plans were completed as at the following dates: January 1, 2022 for one plan, December 31, 2021 for one plan, January 1, 2020 for one plan and October 31, 2020 for one inactive plan. These actuarial valuations establish the minimum funding requirements. The most recent actuarial valuations for funding purposes for the supplementary income postretirement plan and the postretirement plan for healthcare benefi ts were dated December 25, 2022. The supplementary income postretirement plan has no minimum funding requirements. The next required actuarial valuations for all of the Company’s active defi ned benefi t plans are three years from the aforementioned dates. Based on the most recent actuarial valuations, the Company expects to contribute $1,424 in cash to its defi ned benefi t plans in 2023. The CPC also reviews the funding position of each plan on an annual basis and makes recommendations to the Company’s Board of Directors regarding any additional cash funding by the Company deemed appropriate.

On April 26, 2022, the Company entered into contracts to purchase annuities totaling $27,696 with respect to the retired and deferred vested members of two Canadian defi ned benefi t pension plans. The corresponding benefi t obligation relating to these plan members was $23,120, resulting in a $4,576 actuarial loss on benefi t plan assets which was recorded in other comprehensive income. The benefi t obligation remains in the two Canadian defi ned benefi t pension plans and Winpak retains administrative responsibility to pay benefi ts to plan members. The fair value of benefi t plan assets in respect of the annuities is set equal to the covered obligations, eliminating any investment and mortality risk to Winpak and any net pension defi cit in respect of the benefi t payments covered by the annuity contracts.

Regarding the funded non-contributory plans and the supplementary income postretirement plan, the normal retirement age is 65. The option to retire early and receive a reduced pension begins at age 55. For most plan members, the annual pension entitlement is based on years of credited service and the earnings attained in each of those years. However, for certain CDN-based executives, the annual pension entitlement is based on years of credited service and the highest average annual base compensation excluding incentive payments during the highest 36 consecutive months of earnings prior to retirement. At December 25, 2022 and December 26, 2021, the benefi t obligation pertaining to these plan members represented less than 10 percent of the Company’s total benefi t obligation.

All equity and debt securities have quoted prices in active markets. The defi ned benefi t pension plans do not invest in the shares of the Company. The objective of the benefi t plan asset allocation policy is to manage the funded status of the benefi t plans at an appropriate level of risk, giving consideration to the security of the assets and the potential volatility of market returns. The long-term rate of return is targeted to exceed the return indicated by a benchmark portfolio by at least 1 percent annually. The CPC also pays attention to potential fl uctuations in the benefi t obligations. In the ideal case, benefi t plan assets and obligations move in the same direction when interest rates change, creating a natural hedge against possible underfunding of the benefi t plans.

The following presents the fi nancial position of the Company’s defi ned benefi t pension plans and other postretirement benefi ts, which include the supplementary income plan and the postretirement plan for healthcare benefi ts:

supplementary income plan and the postretirement plan for healthcare benef ts:
Amounts recognized in the balance sheet Employee benef t plan assets Employee benef t plan liabilities	December 25 December 26 2022 2021
	10,783 13,547 (8,334) (9,837) 2,449 3,710

34

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	December 25	December 26
	2022	2021
Funded status
Present value of funded obligations	(83,457)	(113,189)
Fair value of benef t plan assets	88,444	119,342
Status of funded obligations	4,987	6,153
Present value of unfunded obligations	(1,168)	(1,429)
Total funded status of obligations	3,819	4,724
Benef t plan assets not recognized due to pension plan asset ceiling limit	(1,370)	(1,014)
	2,449	3,710
Change in benef t obligation
Benef t obligation, beginning of year	114,618	120,183
Current service cost	3,812	4,095
Finance expense	3,385	2,986
Remeasurement gains recognized in other comprehensive income	(29,565)	(8,538)
Benef ts paid	(4,306)	(4,395)
Foreign exchange (loss) gain Benef t obligation, end of year Change in benef t plan assets Fair value of benef t plan assets, beginning of year Expected return on benef t plan assets Remeasurement (losses) gains recognized in other comprehensive income Employer contributions Benef ts paid Benef t plan administration cost paid from the plan assets recognized in income Foreign exchange (loss) gain Fair value of benef t plan assets, end of year Change in benef t plan assets not recognized due to pension plan asset ceiling limit	(3,319) 84,625 119,342 3,559 (27,574) 1,912 (4,306) (421) (4,068) 88,444	287 114,618 114,978 2,793 5,038 1,074 (4,395) (438) 292 119,342
Balance, beginning of year	1,014	165
Remeasurement losses recognized in other comprehensive income	413	849
Foreign exchange loss	(57)	-
Balance, end of year	1,370	1,014
Benef t plan obligation
The following represents the geographical breakdown of the benef t obligation:
Canada	(48,852)	(66,692)
United States	(35,773)	(47,926)
	(84,625)	(114,618)
The following represents the membership status breakdown of the benef t obligation:
Active members	(35,510)	(58,725)
Retired members	(45,059)	(49,916)
Deferred vested members	(3,652)	(5,159)
Other	(404)	(818)
	(84,625)	(114,618)
Benef t plan assets
The following represents the weighted average allocation of benef t plan assets:
Asset category
Equity securities	38%	35%
Debt securities	34%	61%
Annuities	23%	0%
Cash	5%	4%
Total	100%	100%

35

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2022 2021
Net benef t plan expense
Current service cost (3,812) (4,095)
Plan administration cost (421) (438)
(4,233) (4,533)
Net fi nance income 455 109
Net fi nance expense (281) (302)
(4,059) (4,726)
Actual return on benefi t plan assets (24,015) 7,831
Cumulative remeasurements recognized in other comprehensive income
Cumulative amount, beginning of year 17,929 5,202
Annual activity
Remeasurement of benefi t obligation:
-
Actuarial losses arising from changes in demographic assumptions (146)
Actuarial gains arising from changes in fi nancial assumptions 28,817 8,120
Actuarial gains arising from experience adjustments 748 564
29,565 8,538
Remeasurement of benefi t plan assets - actuarial (losses) gains arising from experience adjustments (27,574) 5,038
Remeasurement of benefi t plan assets not recognized due to pension plan asset ceiling limit (413) (849)
1,578 12,727
Cumulative amount, end of year 19,507 17,929
December 25 December 26
2022 2021
Signif cant assumptions
The following weighted averages were used to value the benefi t obligation:
Discount rate 5.3% 3.0%
Rate of compensation increase 3.6% 3.6%
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Assumptions regarding future mortality were based on the following mortality tables: Canada - CPM - RPP2014 private generational (2021 - CPM - RPP2014 private generational) and United States - RP2021 (2021 - RP2021).

At December 25, 2022, the weighted average duration of the benefi t obligations was 12.2 years (2021 - 15.0 years).

Sensitivity analysis

The sensitivity analysis provided in the following table is hypothetical and should be used with caution. The sensitivities of each key assumption have been calculated independently of any changes in other key assumptions. Actual experience may result in changes in a number of key assumptions simultaneously. Changes in one factor may result in changes in another, which could amplify or reduce the impact of such assumptions.

At December 25, 2022, the present value of the benefi t obligation was $84,625. Based on changes to the defi nitive actuarial assumptions, the benefi t obligation would have been as follows:

	Increase	Decrease
Discount rate - one percentage point	75,710	95,427
Future mortality - one year	86,519	82,658
Rate of compensation increase - one percentage point	85,235	84,071

36

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

20. Deferred tax assets and liabilities

The following are the components of the deferred tax assets and liabilities recognized by the Company:

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Assets Liabilities Net
December 25 December 26 December 25 December 26 December 25 December 26
2022 2021 2022 2021 2022 2021
Trade and other receivables 267 196 - - 267 196
Inventories 5,658 4,689 - - 5,658 4,689
- -
Prepaid expenses (194) (157) (194) (157)
Derivative fi nancial instruments 356 191 - - 356 191
- -
Property, plant and equipment (70,098) (74,360) (70,098) (74,360)
Intangible assets and goodwill 4 4 (2,386) (2,260) (2,382) (2,256)
Employee benefi t plans 2,038 2,313 (2,831) (3,557) (793) (1,244)
Trade payables and other liabilities 3,787 1,472 (68) (73) 3,719 1,399
Provisions and other long-term liabilities 2,819 3,175 - - 2,819 3,175
Tax assets (liabilities) 14,929 12,040 (75,577) (80,407) (60,648) (68,367)
Set off of tax (14,929) (12,040) 14,929 12,040 - -
- -
Net tax assets (liabilities) (60,648) (68,367) (60,648) (68,367)
----- End of picture text -----

Movement in deferred tax assets and liabilities:

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Opening Recognized Recognized Ending
Balance In Income In Equity Balance
2021
Trade and other receivables 395 (199) - 196
Inventories 5,465 (776) - 4,689
-
Prepaid expenses (108) (49) (157)
Derivative fi nancial instruments (304) - 495 191
-
Property, plant and equipment (65,557) (8,803) (74,360)
Intangible assets and goodwill (2,259) 3 - (2,256)
Employee benefi t plans 1,491 684 (3,419) (1,244)
Trade payables and other liabilities 1,069 330 - 1,399
Provisions 40 (40) - -
-
Provisions and other long-term liabilities 3,815 (640) 3,175
(55,953) (9,490) (2,924) (68,367)
Opening Recognized Recognized Ending
Balance In Income In Equity Balance
2022
Trade and other receivables 196 71 - 267
Inventories 4,689 969 - 5,658
-
Prepaid expenses (157) (37) (194)
Derivative fi nancial instruments 191 - 165 356
-
Property, plant and equipment (74,360) 4,262 (70,098)
-
Intangible assets and goodwill (2,256) (126) (2,382)
Employee benefi t plans (1,244) 823 (372) (793)
-
Trade payables and other liabilities 1,399 2,320 3,719
-
Provisions and other long-term liabilities 3,175 (356) 2,819
(68,367) 7,926 (207) (60,648)
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Deferred tax assets have been recognized where it is probable that they will be recovered. In recognizing deferred tax assets, the Company has considered if it is probable that suffi cient future income will be available to absorb temporary differences.

37

No deferred tax liability has been recognized in respect of temporary differences associated with investments in subsidiaries where the Company controls the timing of the reversal and it is probable that such temporary differences will not reverse in the foreseeable future. The aggregate amount of temporary differences associated with investments in domestic and foreign subsidiaries for which a deferred tax liability has not been recognized is $720,997 (2021 - $657,752). Temporary differences relating to unremitted earnings of foreign subsidiaries which would be subject to withholding and other taxes totalled $576,698 (2021 - $521,651).

21. Trade payables and other liabilities

	December 25 December 26 2022 2021
Trade payables Current portion of lease liabilities (note 23) Other current liabilities and accrued expenses 22. Provisions and other long-term liabilities	(65,285) (63,789) (1,321) (1,314) (35,776) (26,614) (102,382) (91,717) December 25 December 26 2022 2021
Provisions Non-current portion of lease liabilities (note 23)	(850) (850) (11,212) (12,179) (12,062) (13,029)

23. Leases

Right-of-use assets

Right-of-use assets
	December 25 2022 12,665 - (1,160) 11,505
Opening balance, December 27, 2021 Additions Depreciation Closing balance, December 25, 2022

Lease liabilities

As lessee, the Company’s leases are for offi ce and manufacturing facilities.

The following tables provide information about the timing of future lease payments:

	December 25 2022 (1,343) (4,030) (11,242) (16,615) December 25 2022 (1,321) (11,212) (12,533)
Less than one year One to f ve years More than f ve years Total contractual undiscounted lease liabilities
Current Non-current Total discounted lease liabilities

During 2022, total cash outfl ow for leases was $2,460 (2021 - $1,995), including $1,144 for short-term leases (2021 - $790). Expenses for leases of low-dollar value items were not material.

38

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Extension options

Some leases of offi ce and manufacturing facilities contain extension options exercisable by the Company up to one year before the end of the noncancellable contract period. Where practicable, the Company seeks to include extension options in new leases to provide operational fl exibility. The extension options held are exercisable only by the Company and not by the lessors. The Company assesses at lease commencement whether it is reasonably certain to exercise the extension options. The Company reassesses whether it is reasonably certain to exercise the options if there is a signifi cant event or signifi cant change in circumstances within its control. At December 25, 2022, potential future lease payments not included in lease liabilities totalled $4,396 on a discounted basis.

Lease income

Lease contracts in which the Company acts as a lessor are classifi ed as operating leases because they do not transfer substantially all of the risks and rewards incidental to ownership of the assets. Lease income from these lease contracts during 2022 totalled $552 (2021 - $660).

24. Share-based payments:

Effective January 1, 2022, the Board of Directors established the Executive Enhanced Long-Term Deferred Income Benefi ts Plan (the “Plan”), whereby the Company grants to members of the Executive Committee (“EC Member”) a number of restricted share units (RSUs), based on the EC Member’s long-term incentive entitlement. There is no cost to the EC Member for the RSUs and the RSUs vest immediately. The Company pays to the EC Member the cash value of the RSUs based on the average closing share price over the last ten trading days preceding December 15 of the third year subsequent to the year the RSUs were granted. In the event of the termination of the EC Member’s employment for any reason, the cash value of the RSUs shall be paid immediately to the EC Member or their personal representative, as the case may be, based on the closing share price on the date of termination. The cash value of a RSU is the market value of the common shares of the Company on the day prior to the date of payment. In addition, the Company is required to pay the EC Member an amount equal to the dividends paid on the common shares of the Company with respect to each RSU if, as and when, declared and paid.

Details of RSUs issued and outstanding during the current and prior year are as follows:

Details of RSUs issued and outstanding during the current and prior year are as follows:
	2022 2021
Outstanding, beginning of year Settled Granted Outstanding, end of year Available for settlement, end of year	- - - - 4,543 - 4,543 - - -

The 4,543 RSUs outstanding at the end of 2022 were granted for service rendered in 2022.

The fair value of the RSUs at the grant date and each subsequent reporting date is based upon the market value of the Company’s common shares.

The personnel expense recorded in the statement of income under the Plan was $146 (2021 - $0). No settlements occurred during 2022. At December 25, 2022, the carrying value of the liability, as well as the intrinsic value of the vested liability in respect of the Plan, was $141 (2021 - $0).

25. Share capital and reserves

Share capital

At December 25, 2022, the authorized voting common shares were unlimited (2021 - unlimited). The issued and fully paid voting common shares at December 25, 2022 were 65,000,000 (2021 - 65,000,000). The shares have no par value. The Company has no stock option plans in place.

Reserves

Reserves comprise the effective portion of the cumulative net change in the fair value of cash fl ow hedging instruments related to the hedged transactions that have not yet occurred.

Dividends

During 2022, dividends in Canadian dollars of 12 cents per common share were declared (2021 - 12 cents). In addition, the Company paid a special dividend in Canadian dollars of $3.00 per common share on July 9, 2021.

26. Earnings per share

26. Earnings per share
	2022 2021
Net income attributable to equity holders of the Company Weighted average shares outstanding (000’s) Basic and diluted earnings per share - cents	128,343 103,808 65,000 65,000 197 160

39

27. Financial instruments

The following sets out the classifi cation and the carrying/fair value of fi nancial instruments:

Assets (Liabilities) Classif cation Cash and cash equivalents Amortized cost Trade and other receivables Amortized cost Trade and other receivables - factoring arrangements FVOCI Total trade and other receivables Trade payables and other liabilities Amortized cost Derivative f nancial instrument liabilities Fair value - hedging instrument	Carrying / Fair Value
	398,673 189,956 14,084 204,040 (102,382) (1,328)

The fair value of cash and cash equivalents, trade and other receivables, including trade and other receivables subject to factoring arrangements and classifi ed as measured at FVOCI, trade payables and other liabilities approximate their carrying value because of the short-term maturity of these instruments. The fair value of foreign currency forward contracts, designated as cash fl ow hedges, has been determined by valuing those contracts to market against prevailing forward foreign exchange rates as at the year-end reporting date. The inputs used for fair value measurements, including their classifi cation within the required three levels of the fair value hierarchy that prioritizes the inputs used for fair value measurement, are as follows:

Level 1 - unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2 - inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and Level 3 - inputs that are not based on observable market data.

The following table presents the classifi cation of fi nancial instruments within the fair value hierarchy:

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----- Start of picture text -----

Financial Assets (Liabilities) Level 1 Level 2 Level 3 Total
----- End of picture text -----

Financial Assets (Liabilities)	Level 1	Level 2	Level 3	Total
At December 25, 2022
Foreign currency forward contracts - net	-	(1,328)	-	(1,328)
At December 26, 2021
Foreign currency forward contracts - net	-	(715)	-	(715)

When the Company has a legally enforceable right to set off supplier rebates accounts receivable against supplier trade payables and intends to settle the amount on a net basis or simultaneously, the balance is presented as an offset within ‘Trade payables and other liabilities’ on the consolidated balance sheet. At December 25, 2022, the supplier rebate receivable balance that was offset was $7,002 (2021 - $6,972).

28. Commitments and guarantees

(a) Commitments

At December 25, 2022, the Company has commitments to purchase plant and equipment of $31,061 (2021 - $15,769).

(b) Guarantees

The Company and its subsidiaries have entered into indemnifi cation agreements with their respective directors and offi cers to indemnify them, to the extent permitted by law, against any and all amounts paid in settlement and damages incurred by the directors and offi cers as a result of any lawsuit, or any judicial, administrative or investigative proceeding involving the directors and offi cers. Indemnifi cation claims will be subject to any statutory or other legal limitation period. The Company has purchased directors’ and offi cers’ liability insurance to mitigate losses from any such claims.

Leased real property

The Company and its subsidiaries enter into leases in the ordinary course of business for real property. In certain instances, the Company and its subsidiaries have indemnifi ed the landlord from any obligations that may arise from any occurrences of personal bodily injury, loss of life and property damages. The Company’s property and liability insurance coverage mitigates losses from any such claims.

Pension plan

The Company has indemnifi ed the Manitoba Pension Commission from any and all claims that may be made by any benefi ciary under a certain defi ned benefi t pension plan. The indemnity relates to the transfer of a portion of the surplus in the respective pension plan to a non-contributory supplementary income plan.

40

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Given the nature of the aforementioned indemnifi cation agreements, the Company is unable to reasonably estimate its maximum potential liability under these agreements. The Company believes the likelihood of a material payment pursuant to these indemnifi cation agreements is remote. No amounts have been recorded in the consolidated fi nancial statements with respect to these indemnifi cation agreements.

29. Financial risk management

In the normal course of business, the Company has risk exposures consisting primarily of foreign exchange risk, interest rate risk, commodity price risk, credit risk and liquidity risk. The Company manages its risks and risk exposures through a combination of derivative fi nancial instruments, insurance, a system of internal and disclosure controls and sound business practices. The Company does not purchase any derivative fi nancial instruments for speculative purposes.

Financial risk management is primarily the responsibility of the Company’s corporate fi nance function. Signifi cant risks are regularly monitored and actions are taken, when appropriate, according to the Company’s approved policies, established for that purpose. In addition, as required, these risks are reviewed with the Company’s Board of Directors.

Foreign exchange risk

Translation differences arise when foreign currency monetary assets and liabilities are translated at foreign exchange rates that change over time. These foreign exchange gains and losses are recorded in other (expenses) income. As a result of the Company’s CDN dollar net asset monetary position as at December 25, 2022, a one-cent change in the year-end foreign exchange rate from 0.7356 to 0.7256 (CDN to US dollars) would have decreased net income by $42 for 2022. Conversely, a one-cent change in the year-end foreign exchange rate from 0.7356 to 0.7456 (CDN to US dollars) would have increased net income by $42 for 2022.

The Company’s foreign exchange policy requires that between 50 and 80 percent of the Company’s net requirement of CDN dollars for the ensuing 9 to 15 months will be hedged at all times with a combination of cash and cash equivalents and forward or zero-cost option foreign currency contracts. The Company may also enter into foreign currency forward contracts when equipment purchases and special dividend payments will be settled in other foreign currencies. Transactions are only conducted with certain approved ‘AA’ rated or higher Schedule 1 CDN fi nancial institutions. All foreign currency contracts are designated as cash fl ow hedges of the highly probable CDN dollar expenditures. These derivatives meet the hedge effectiveness criteria as a result of the following factors:

a) An economic relationship exists between the hedged item and the hedging instrument as notional amounts match and both the hedged item and hedging instrument fair values move in response to the same risk - foreign exchange rates. There are no signifi cant reasons or causes for the designated hedged item and hedging instrument to be mismatched since the hedging instrument matures during the same month as the expected hedged expenditures are incurred. The correlation between the foreign exchange rate of the hedged item and the hedging instrument should be highly correlated and closely aligned as the maturity and the notional amount are the same.

b) The hedge ratio is one to one for this hedging relationship as the hedged item is foreign currency risk that is hedged with a foreign currency hedging instrument.

c) Credit risk is not material in the fair value of the hedging instrument.

The Company has identifi ed two sources of potential ineffectiveness: a) the timing of cash fl ow differences between the expenditure and the related derivative and b) the inclusion of credit risk in the fair value of the derivative not replicated in the hedged item. The Company expects the impact of these sources of hedge ineffectiveness to be minimal. The timing of hedge settlements and incurred expenditures are closely aligned as they are expected to occur within 30 days of each other. Credit risk is not a material component of the fair value of the Company’s hedging instruments as all counterparties are ‘AA’ rated or higher Schedule 1 CDN fi nancial institutions.

Certain foreign currency forward contracts matured during the year and the Company realized pre-tax foreign exchange losses of $1,090 (2021 gains - $884). Of these foreign exchange differences, losses of $1,090 (2021 gains - $1,751) were recorded in other (expenses) income and $0 was recorded directly to equity (2021 losses - $867).

As at December 25, 2022, the Company had US to CDN dollar foreign currency forward contracts outstanding with a notional amount of US $45.0 million at an average exchange rate of 1.3170 maturing between January and September 2023. The fair value of these fi nancial instruments was negative $1,328 US and the corresponding unrealized loss has been recorded in other comprehensive income. The Company did not recognize any ineffectiveness on the hedging instruments during 2022 or 2021.

Interest rate risk

The Company’s interest rate risk arises from interest rate fl uctuations on the fi nance income that it earns on its cash invested in money market accounts and short-term deposits. The Company developed and implemented an investment policy, which was approved by the Company’s Board of Directors, with the primary objective to preserve capital, minimize risk and provide liquidity. Regarding the December 25, 2022 cash and cash equivalents balance of $398.7 million, a 1.0 percent increase/decrease in interest rate fl uctuations would increase/decrease income before income taxes by $3,987 annually.

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Commodity price risk

The Company’s manufacturing costs are affected by the price of raw materials, namely petroleum-based and natural gas-based plastic resins and aluminum. In order to manage its risk, the Company has entered into selling price-indexing programs with certain customers. Changes in raw material prices for these customers are refl ected in selling price adjustments but there is a slight time lag. For 2022, 74 percent (2021 - 69 percent) of revenue was generated from customers with selling price-indexing programs. For all other customers, the Company’s preferred practice is to match raw material cost changes with selling price adjustments, albeit with a slight time lag. This matching is not always possible, as customers react to selling price pressures related to raw material cost fl uctuations according to conditions pertaining to their markets.

Credit risk

The Company is exposed to credit risk from its cash and cash equivalents held with banks and fi nancial institutions, derivative fi nancial instruments (foreign currency forward contracts), as well as credit exposure to customers, including outstanding trade and other receivable balances.

The following table details the maximum exposure to the Company’s counterparty credit risk which represents the carrying value of the fi nancial asset:

	December 25 December 26 2022 2021
Cash and cash equivalents Trade and other receivables	398,673 377,461 204,040 177,382 602,713 554,843

Credit risk on cash and cash equivalents and fi nancial instruments arises in the event of non-performance by the counterparties when the Company is entitled to receive payment from the counterparty who fails to perform. The Company has established an investment policy to manage its cash. The policy requires that the Company manage its risk by investing its excess cash on hand on a short-term basis, up to a maximum of six months, with several fi nancial institutions and/or governmental bodies that must be rated ‘AA’ or higher for CDN fi nancial institutions and ‘A-1’ or higher for US fi nancial institutions by recognized international credit rating agencies or insured 100 percent by the US government or a ‘AAA’ rated CDN federal or provincial government. The Company manages its counterparty risk on its fi nancial instruments by only dealing with ‘AA’ rated or higher Schedule 1 CDN fi nancial institutions.

In the normal course of business, the Company is exposed to credit risk on its trade and other receivables from customers. To mitigate such risk, the Company performs ongoing customer credit evaluations and assesses their credit quality by taking into account their fi nancial position, past experience and other pertinent factors. Management regularly monitors customer credit limits, performs credit reviews and, in certain cases insures trade receivable balances against credit losses.

During 2022, the Company incurred costs on the sale of trade receivables of $4,274 (2021 - $1,275). Of these costs, $3,843 was recorded in fi nance expense (2021 - $919) and $431 was recorded in general and administrative expenses (2021 - $356).

As at December 25, 2022, the Company believes that the credit risk for trade and other receivables is mitigated due to the following: (a) a broad customer base which is dispersed across varying market sectors and geographic locations, (b) 97 percent (2021 - 97 percent) of the gross trade and other receivables balance is within 30 days of the agreed upon payment terms with customers, c) the sale of certain extended term trade receivables without recourse to a third party and (d) 28 percent (2021 - 32 percent) of the trade and other receivables balance is insured against credit losses. The Company’s exposure to the ten largest customer balances, on aggregate, accounted for 39 percent (2021 - 35 percent) of the total trade and other receivables balance.

The carrying amount of trade and other receivables is reduced through the use of an allowance for expected credit losses and the amount of the loss is recognized in the statement of income within general and administrative expenses. When a receivable balance is considered uncollectible, it is written off against the allowance for expected credit losses. Subsequent recoveries of amounts previously written off are credited against general and administrative expenses in the statement of income. During 2022, the Company recorded impairment losses on trade and other receivables of $249 (2021 - $946 impairment recoveries).

The following table sets out the aging details of the Company’s trade and other receivables balances outstanding based on when the receivable was due and payable and related allowance for expected credit losses:

	December 25 December 26 2022 2021
Current (not past due) 1 - 30 days past due 31 - 60 days past due More than 60 days past due Less: Allowance for expected credit losses Total trade and other receivables, net	176,720 149,824 22,119 22,504 3,145 3,351 3,573 2,710 205,557 178,389 (1,517) (1,007) 204,040 177,382

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Liquidity risk

Liquidity risk is the risk that the Company would not be able to meet its fi nancial obligations as they come due. Management believes that the liquidity risk is low due to the strong fi nancial condition of the Company. This risk assessment is based on the following: (a) cash and cash equivalents amounts of $398.7 million, (b) no outstanding bank loans, (c) unused credit facilities comprised of unsecured operating lines of $38 million, (d) the ability to obtain term-loan fi nancing to fund an acquisition, if needed, (e) an informal investment grade credit rating and (f) the Company’s ability to generate positive cash fl ows from ongoing operations. Management believes that the Company’s cash fl ows are more than suffi cient to cover its operating costs, working capital requirements, capital expenditures, payment of lease liabilities and dividend payments in 2023. The Company’s trade payables and other liabilities and derivative fi nancial instrument liabilities are all due within twelve months.

Capital management

The Company’s objectives in managing capital are to ensure the Company will continue as a going concern and have suffi cient liquidity to pursue its strategy of organic growth combined with strategic acquisitions and to deploy capital to provide an appropriate return on investment to its shareholders. In the management of capital, the Company includes bank overdrafts, bank loans and shareholders’ equity. The Board of Directors has established quantitative return on capital criteria for management and year-over-year sustainable earnings growth targets. The Board of Directors also reviews, on a regular basis, the level of dividends paid to the Company’s shareholders.

The Company has externally imposed capital requirements as governed through its bank operating line credit facilities. The Company monitors capital on the basis of funded debt to EBITDA (income before interest, income taxes, depreciation and amortization) and debt service coverage. Funded debt is defi ned as the sum of bank loans and bank overdrafts less cash and cash equivalents. The funded debt to EBITDA is calculated as funded debt, as at the fi nancial reporting date, over the 12-month rolling EBITDA. This ratio is to be maintained under 3.00:1. As at December 25, 2022, the ratio was 0.00:1. Debt service coverage is calculated as a 12-month rolling income from operations over debt service. Debt service is calculated as the sum of one-sixth of bank loans outstanding plus annualized fi nance expense and dividends. This ratio is to be maintained over 1.50:1. As at December 25, 2022, the ratio was 39.66:1.

There were no changes in the Company’s approach to capital management during 2022.

30. Contingencies

In the normal course of business activities, the Company may be subject to various legal actions. Management contests these actions and believes resolution of the actions will not have a material adverse impact on the Company’s fi nancial condition.

31. Related party transactions

The Company had revenue of $0 (2021 - $122), purchases of $21,215 (2021 - $17,534) and commission income of $1,041 (2021 - $716) with its majority shareholder company. Trade and other receivables and trade payables and other liabilities include amounts of $0 (2021 - $184) and $3,650 (2021 - $3,757) respectively with the majority shareholder company. These transactions were completed at market values with normal payment terms.

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company. The Board of Directors and Executive Committee are key management personnel. The following table details the compensation earned by these key management personnel:

management personnel:
	2022	2021
Salaries, fees and short-term benef ts	(3,740)	(3,226)
Post-employment benef ts	(348)	(422)
Share-based payments	(146)	-
	(4,234)	(3,648)

No loans were advanced to key management personnel during the year.

The aggregate remuneration earned by the Board of Directors in 2022 was $798 (2021 - $812). As a group, the Board of Directors hold, directly or indirectly, 52.7 percent (2021 - 52.7 percent) of the outstanding shares of the Company. The members of the Executive Committee hold, directly or indirectly, 0.0 percent (2021 - 0.0 percent) of the outstanding shares of the Company.

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