Winpak Ltd — Interim / Quarterly Report 2024

Oct 24, 2024

==> picture [167 x 46] intentionally omitted <==

Winpak Ltd. Interim Condensed Consolidated Financial Statements Third Quarter Ended: September 29, 2024

These interim condensed consolidated financial statements have not been audited or reviewed by the Company’s independent external auditors, KPMG LLP.

==> picture [113 x 62] intentionally omitted <==

6

==> picture [194 x 20] intentionally omitted <==

Winpak Ltd. Condensed Consolidated Balance Sheets

(thousands of US dollars) (unaudited)

Note	September 29 2024	December 31 2023
Assets Current assets: Cash and cash equivalents Trade and other receivables 15 Income taxes receivable Inventories 8 Prepaid expenses Derivative fnancial instruments Non-current assets: Property, plant and equipment 9 Intangible assets and goodwill Employee beneft plan assets 10 Total assets Equity and Liabilities Current liabilities: Trade payables and other liabilities Contract liabilities Provisions Income taxes payable Non-current liabilities: Employee beneft plan liabilities 10 Deferred income Provisions and other long-term liabilities Deferred tax liabilities Total liabilities Equity: Share capital 12 Reserves Retained earnings Total equity attributable to equity holders of the Company Non-controlling interests Total equity Total equity and liabilities	515,959 222,263 6,352 232,551 8,144 268 985,537 606,562 30,635 11,062 648,259 1,633,796 111,639 1,048 600 5,252 118,539 6,243 17,818 11,162 52,731 87,954 206,493 28,319 189 1,363,923 1,392,431 34,872 1,427,303 1,633,796	541,870 207,355 4,565 219,763 8,942 1,542
		984,037 543,387 31,833 12,209
		587,429
		1,571,466
		89,359 1,478 - 3,109
		93,946 6,362 18,062 12,685 56,762
		93,871
		187,817
		29,195 1,361 1,319,491
		1,350,047 33,602
		1,383,649
		1,571,466

See accompanying notes to condensed consolidated financial statements.

==> picture [113 x 62] intentionally omitted <==

7

==> picture [167 x 46] intentionally omitted <==

Winpak Ltd.

Condensed Consolidated Statements of Income

(thousands of US dollars, except per share amounts) (unaudited)

Winpak Ltd. Condensed Consolidated Statements of Income (thousands of US dollars, except per share amounts) (unaudited)
Note	Quarter Ended		Year-To-Date Ended(Note 2)
	September 29 2024	October 1 2023	September 29 2024	October 1 2023
Revenue 6 Cost of sales Gross proft Sales, marketing and distribution expenses General and administrative expenses Research and technical expenses Other (expenses) income 7 Income from operations Finance income Finance expense Income before income taxes Income tax expense Net income for the period Attributable to: Equity holders of the Company Non-controlling interests Basic and diluted earnings per share - cents 13 Condensed Consolidated Statements of Comprehensive Income (thousands of US dollars) (unaudited) Note	285,473 (194,121)	273,790 (193,781)	845,752 (576,143)	865,770 (611,010)
	91,352 (25,240) (11,632) (5,221) (1,001)	80,009 (22,564) (10,647) (4,980) (1,057)	269,609 (74,307) (36,766) (15,952) (3,010)	254,760 (70,517) (30,758) (14,738) 235
	48,258 6,833 (1,123)	40,761 6,697 (1,664)	139,574 21,461 (3,645)	138,982 17,150 (4,599)
	53,968 (14,659)	45,794 (11,970)	157,390 (43,287)	151,533 (38,956)
	39,309	33,824	114,103	112,577
	38,486 823	33,991 (167)	112,833 1,270	113,284 (707)
	39,309	33,824	114,103	112,577
	61	52	177	174
	September 29 2024	October 1 2023	September 29 2024	October 1 2023
Net income for the period Items that will not be reclassifed to the statements of income: Cash fow hedge gains (losses) recognized Cash fow hedge (gains) losses transferred to property, plant and equipment Items that are or may be reclassifed subsequently to the statements of income: Cash fow hedge gains (losses) recognized Cash fow hedge losses transferred to the statements of income 7 Income tax effect Other comprehensive income (loss) for the period - net of income tax Comprehensive income for the period Attributable to: Equity holders of the Company Non-controlling interests	39,309	33,824	114,103	112,577
	241 (35)	(633) (42)	(919) 29	133 (59)
	206	(675)	(890)	74
	684 142 (221)	(863) 37 222	(879) 494 103	91 955 (280)
	605	(604)	(282)	766
	811	(1,279)	(1,172)	840
	40,120	32,545	112,931	113,417
	39,297 823	32,712 (167)	111,661 1,270	114,124 (707)
	40,120	32,545	112,931	113,417

See accompanying notes to condensed consolidated financial statements.

==> picture [113 x 62] intentionally omitted <==

8

==> picture [194 x 20] intentionally omitted <==

Winpak Ltd.

Condensed Consolidated Statements of Changes in Equity

(thousands of US dollars) (unaudited)

Note	Attributable to equityholders of the Company Non- Share Retained controlling capital Reserves earnings Total interests Total equity
Balance at December 26, 2022 Comprehensive income (loss) for the period Cash fow hedge gains, net of tax Cash fow hedge losses transferred to the statements of income, net of tax Cash fow hedge gains transferred to property, plant and equipment Other comprehensive income Net income (loss) for the period Comprehensive income (loss) for the period Dividends 12 Balance at October 1, 2023	29,195 (972) 1,174,551 1,202,774 36,001 1,238,775
	- 199 - 199 - 199 - 700 - 700 - 700 - (59) - (59) - (59)
	- 840 - 840 - 840 - - 113,284 113,284 (707) 112,577
	- 840 113,284 114,124 (707) 113,417
	- - (4,351) (4,351) - (4,351)
	29,195 (132) 1,283,484 1,312,547 35,294 1,347,841
Balance at January 1, 2024 Comprehensive (loss) income for the period Cash fow hedge losses, net of tax Cash fow hedge losses transferred to the statements of income, net of tax Cash fow hedge losses transferred to property, plant and equipment Other comprehensive loss Net income for the period Comprehensive (loss) income for the period Dividends 12 Repurchase of common shares 12 Balance at September 29, 2024	29,195 1,361 1,319,491 1,350,047 33,602 1,383,649
	- (1,563) - (1,563) - (1,563) - 362 - 362 - 362 - 29 - 29 - 29
	- (1,172) - (1,172) - (1,172) - - 112,833 112,833 1,270 114,103
	- (1,172) 112,833 111,661 1,270 112,931
	- - (5,151) (5,151) - (5,151) (876) - (63,250) (64,126) - (64,126)
	28,319 189 1,363,923 1,392,431 34,872 1,427,303

See accompanying notes to condensed consolidated financial statements.

==> picture [113 x 62] intentionally omitted <==

9

==> picture [167 x 46] intentionally omitted <==

Winpak Ltd.

Condensed Consolidated Statements of Cash Flows

(thousands of US dollars) (unaudited)

Note	Quarter Ended	Quarter Ended	Year-To-Date Ended(Note 2)	Year-To-Date Ended(Note 2)
	September 29 2024	October 1 2023	September 29 2024	October 1 2023
Cash provided by (used in): Operating activities: Net income for the period Items not involving cash: Depreciation Amortization - deferred income Amortization - intangible assets Employee defned beneft plan expenses Net fnance income Income tax expense Other Cash fow from operating activities before the following Change in working capital: Trade and other receivables Inventories Prepaid expenses Trade payables and other liabilities Contract liabilities Employee defned beneft plan contributions 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 Financing activities: Payment of lease liabilities Dividends paid 12 Repurchase of common shares 12 Change in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period	39,309 13,313 (432) 457 756 (5,710) 14,659 (2,351)	33,824 11,930 (461) 397 623 (5,033) 11,970 76	114,103 39,079 (1,276) 1,235 2,112 (17,816) 43,287 (3,368)	112,577 35,969 (1,300) 1,243 2,446 (12,551) 38,956 (2,178)
	60,001 (6,866) (5,468) 639 9,618 98 (18) (9,546) 6,787 (1,037)	53,326 8,970 26,003 (1,530) 3,009 (29) (1,523) (10,407) 6,700 (1,547)	177,356 (13,997) (12,788) 798 20,613 (430) (1,192) (44,144) 20,865 (3,365)	175,162 14,664 46,368 (5,273) (18,003) (1,864) (2,308) (56,780) 16,782 (4,509)
	54,208	82,972	143,716	164,239
	(26,785) (6)	(22,921) (70)	(101,214) (38)	(44,506) (356)
	(26,791)	(22,991)	(101,252)	(44,862)
	(409) (1,382) -	(234) (1,472) -	(1,208) (4,289) (62,878)	(680) (4,349) -
	(1,791)	(1,706)	(68,375)	(5,029)
	25,626 490,333	58,275 454,746	(25,911) 541,870	114,348 398,673
	515,959	513,021	515,959	513,021

See accompanying notes to condensed consolidated financial statements.

==> picture [113 x 62] intentionally omitted <==

10

Notes to Condensed Consolidated Financial Statements For the periods ended September 29, 2024 and October 1, 2023 (thousands of US dollars, unless otherwise indicated) (Unaudited)

==> picture [194 x 20] intentionally omitted <==

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 office is 100 Saulteaux Crescent, Winnipeg, Manitoba, Canada R3J 3T3.

2. Basis of Presentation

Statement of compliance

The unaudited interim condensed consolidated financial statements were prepared in accordance with IFRS Accounting Standards (IFRS). The unaudited interim condensed consolidated financial statements are in compliance with IAS 34. Accordingly, certain information and note disclosures normally included in annual consolidated financial statements prepared in accordance with IFRS as issued by the International Accounting Standards Board (IASB) have been omitted or condensed. These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2023, which are included in the Company’s 2023 Annual Report.

The fiscal year of the Company ends on the last Sunday of the calendar year. As a result, the Company’s fiscal year is usually 52 weeks in duration, but includes a 53[rd ] week every five to six years. The 2024 fiscal year comprises 52 weeks and the 2023 fiscal year comprised 53 weeks. Each quarter of 2024 and 2023 comprises 13 weeks with the exception of the first quarter of 2023, which comprised 14 weeks.

The unaudited interim condensed consolidated financial statements were approved by the Audit Committee on behalf of the Board of Directors on October 24, 2024.

3. Accounting Standards Implemented in 2024

The following accounting standards came into effect commencing in the Company’s 2024 fiscal year:

(a) 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 were implemented with retrospective application, effective January 1, 2024. The amendments had no impact on the Company’s unaudited interim condensed consolidated financial statements.

4. Future Accounting Standards

(a) Presentation and Disclosure of Financial Statements:

In April 2024, the IASB issued IFRS 18 “Presentation and Disclosure in Financial Statements” to improve reporting of financial performance. IFRS 18 replaces IAS 1 “Presentation of Financial Statements”. It carries forward many requirements from IAS 1 unchanged. IFRS 18 applies for annual reporting periods beginning on or after January 1, 2027 with early adoption permitted. The Company is currently assessing the impact of this new standard and does not intend to early adopt IFRS 18 in its consolidated financial statements.

5. Segment Reporting

Operating segments and product groups

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

The flexible packaging segment includes the modified atmosphere packaging, specialty films and biaxially oriented nylon product groups. Modified 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 films for converting applications. Specialty films include a full line of barrier and non-barrier films which are ideal for converting applications such as printing, laminating and bag making, including shrink bags. Biaxially oriented nylon film 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, fluid and viscous liquids, and industrial applications such as book covers and balloons.

The rigid packaging and flexible 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.

11

==> picture [167 x 46] intentionally omitted <==

Notes to Condensed Consolidated Financial Statements For the periods ended September 29, 2024 and October 1, 2023 (thousands of US dollars, unless otherwise indicated) (Unaudited)

Packaging machinery includes a full line of horizontal fill/seal machines for preformed containers and vertical form/fill/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 profit margins, and having similar products, production processes, types of customers and distribution methods, the flexible packaging and rigid packaging and flexible 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 6 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:

==> picture [496 x 74] intentionally omitted <==

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

||||
|---|---|---|
|September 29|December 31|
|2024|2023|
|United States|273,921|256,065|
|Canada|346,025|301,261|
|Mexico|17,251|17,894|
|637,197|575,220|

----- End of picture text -----

6. Revenue

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 fulfilled upon shipment, however, in some instances, upon delivery. Invoices are generated when control has transferred and are usually payable within 30 to 60 days.

Disaggregation of Revenue

==> picture [496 x 175] intentionally omitted <==

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

||||||
|---|---|---|---|---|
|Quarter Ended|Year-To-Date Ended|
|September 29|October 1|September 29|October 1|
|2024|2023|2024|2023|
|Operating segment|
|Flexible packaging|151,220|146,251|447,172|461,418|
|Rigid packaging and flexible lidding|125,539|121,034|374,610|380,242|
|Packaging machinery|8,714|6,505|23,970|24,110|
|285,473|273,790|845,752|865,770|
|Geographic segment|
|United States|226,581|215,886|672,937|686,548|
|Canada|37,491|37,734|111,394|116,748|
|Mexico and other|21,401|20,170|61,421|62,474|
|285,473|273,790|845,752|865,770|

----- End of picture text -----

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 the year-to-date periods ended September 29, 2024 and October 1, 2023. Other markets include medical, pharmaceutical, nutraceutical, personal care, industrial and other consumer goods.

7. Other (Expenses) Income

==> picture [546 x 150] intentionally omitted <==

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

||||||
|---|---|---|---|---|
|Quarter Ended|Year-To-Date Ended|
|September 29|October 1|September 29|October 1|
|Amounts shown on a net basis|2024|2023|2024|2023|
|Foreign exchange (losses) gains|(859)|(1,020)|(2,516)|1,484|
|Cash flow hedge losses transferred from other|
|comprehensive income|(142)|(37)|(494)|(955)|
|(1,001)|(1,057)|(3,010)|529|
|Employee benefit plan settlement expense (Note 10)|-|-|-|(294)|
|(1,001)|(1,057)|(3,010)|235|
|12|

----- End of picture text -----

==> picture [194 x 20] intentionally omitted <==

Notes to Condensed Consolidated Financial Statements For the periods ended September 29, 2024 and October 1, 2023 (thousands of US dollars, unless otherwise indicated) (Unaudited)

8. Inventories

8. Inventories
	September 29 2024	December 31 2023
Raw materials Work-in-process Finished goods Spare parts	72,196 50,618 90,372 19,365 232,551	84,710 39,891 76,825 18,337
		219,763

During the third quarter of 2024, the Company recorded, within cost of sales, inventory write-downs for slow-moving and obsolete inventory of $3,050 (2023 - $3,323) and reversals of previously written-down items of $1,019 (2023 - $497). On a year-to-date basis, the Company recorded, within cost of sales, inventory write-downs for slow-moving and obsolete inventory of $8,335 (2023 - $7,993) and reversals of previously written-down items of $4,878 (2023 - $3,584).

9. Property, Plant and Equipment

At September 29, 2024, the Company has commitments to purchase property, plant and equipment of $60,274 (December 31, 2023 - $123,083). No impairment losses or impairment reversals were recognized during the year-to-date periods ended September 29, 2024 and October 1, 2023.

10. Employee Benefit Plans

On April 25, 2023, the Company entered into a contract to purchase annuities totaling $12,794 with respect to certain retired members of the US defined benefit pension plan. The corresponding benefit obligation relating to these plan members was $12,500, resulting in a loss on settlement of $294 which was recorded in other (expenses) income.

11. Leases

Extension Options

Some leases of office 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 flexibility. 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 significant event or significant change in circumstances within its control. At September 29, 2024, potential future lease payments not included in lease liabilities totalled $5,064 on a discounted basis.

12. Share Capital

The following table presents changes in the Company’s share capital:

The following table presents changes in the Company’s share capital:
	Number of Common Shares	Amount
Opening balance, January 1, 2024 Repurchase of common shares Closing balance, September 29, 2024	65,000,000 (1,950,000) 63,050,000	29,195 (876)
		28,319

Dividends

During the third quarter of 2024, dividends in Canadian dollars of 5 cents per common share were declared (2023 - 3 cents) and on a year-to-date basis, 11 cents per common share were declared (2023 - 9 cents).

Share Redemptions

On February 29, 2024, the Toronto Stock Exchange (the “TSX”) accepted a notice filed by Winpak of its intention to make a normal course issuer bid (the “NCIB”) with respect to its outstanding common shares. The notice provided that Winpak may, during the 12-month period commencing March 4, 2024 and ending no later than March 3, 2025, purchase through the facilities of the TSX and other alternative Canadian trading systems up to a maximum of 1,950,000 common shares in total, being 3.0 percent of the issued and outstanding shares of Winpak as of February 21, 2024. On October 17, 2024, the TSX accepted a notice filed by Winpak to amend the NCIB to a maximum of 3,250,000 common shares. The price which Winpak will pay for any common shares will be the market price at the time of acquisition. Daily purchases under the NCIB will be generally limited to 11,644 common shares, other than block purchases. All shares purchased will be canceled. In connection with the NCIB, Winpak has entered into an automatic share purchase plan (“ASPP”) with CIBC World Markets Inc. to facilitate the purchase of common shares under the NCIB, including at times when Winpak would ordinarily not be permitted to purchase its common shares due to regulatory restrictions or self-imposed blackout periods.

13

==> picture [167 x 46] intentionally omitted <==

Notes to Condensed Consolidated Financial Statements For the periods ended September 29, 2024 and October 1, 2023 (thousands of US dollars, unless otherwise indicated) (Unaudited)

During the third quarter of 2024, no common shares were repurchased under the NCIB program. On a year-to-date basis, 1,950,000 common shares were repurchased under the NCIB program for cancelation at a weighted average price of CDN $43.81 for aggregate consideration of CDN $85,436 (US $62,878) of which $876 was recorded to share capital and the remaining $62,002 was recorded to retained earnings.

At September 29, 2024, the Company recorded an obligation totaling $1,248 for a two percent Canadian federal tax on the net value of equity repurchased during the year. The liability was recognized within ‘Trade payables and other liabilities’ and the corresponding amount was recorded to retained earnings.

13. Earnings Per Share

	Quarter Ended September 29 October 1 2024 2023 38,486 33,991 63,050 65,000 61 52	Year-To-Date Ended	Year-To-Date Ended
	September 29 2024	September 29 2024	October 1 2023
Net income attributable to equity holders of the Company Weighted average shares outstanding (000’s) Basic and diluted earnings per share - cents	38,486 63,050 61	112,833 63,913 177	113,284 65,000
			174

14. Financial Instruments

The Company measures assets and liabilities under the following fair value hierarchy in accordance with IFRS. The inputs used for fair value measurements, including their classification 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 fair value of cash and cash equivalents, trade and other receivables, including trade and other receivables subject to factoring arrangements and classified as measured at fair value through other comprehensive income (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 flow hedges, has been determined by valuing those contracts to market against prevailing forward foreign exchange rates as at the reporting date.

The following table presents the classification of financial instruments within the fair value hierarchy:

Financial Assets(Liabilities)		Level 1				Level 2				Level 3				Total
At September 29, 2024
Foreign currency forward contracts - net		-				268				-				268
At December 31, 2023
Foreign currency forward contracts - net		-				1,542				-				1,542

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 September 29, 2024, the supplier rebate receivable balance that was offset was $5,628 (December 31, 2023 - $8,769).

15. 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, liquidity risk, and credit risk. The Company manages its risks and risk exposures through a combination of derivative financial instruments, insurance, a system of internal and disclosure controls and sound business practices. The Company does not purchase any derivative financial instruments for speculative purposes.

Financial risk management is primarily the responsibility of the Company’s corporate finance function. Significant 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.

==> picture [113 x 62] intentionally omitted <==

14

Notes to Condensed Consolidated Financial Statements For the periods ended September 29, 2024 and October 1, 2023 (thousands of US dollars, unless otherwise indicated) (Unaudited)

==> picture [194 x 20] intentionally omitted <==

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 September 29, 2024, a one-cent change in the period-end foreign exchange rate from 0.7400 to 0.7300 (CDN to US dollars) would have decreased net income by $145 for the third quarter of 2024. Conversely, a one-cent change in the period-end foreign exchange rate from 0.7400 to 0.7500 (CDN to US dollars) would have increased net income by $145 for the third quarter of 2024.

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, share repurchases and special dividend payments will be settled in foreign currencies. Transactions are only conducted with certain approved ‘AA’ rated or higher Schedule 1 CDN financial institutions. All foreign currency contracts are designated as cash flow 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 significant 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 identified two sources of potential ineffectiveness: a) the timing of cash flow 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 financial institutions.

Certain foreign currency forward contracts matured during the third quarter of 2024 and the Company realized pre-tax foreign exchange losses of $107 (year-to-date losses - $720). Of these foreign exchange differences, losses of $142 were recorded in other (expenses) income (year-to-date losses - $494), gains of $35 were recorded in property, plant and equipment (year-to-date losses - $29), and losses of $0 were recorded directly to equity (year-todate losses - $197). During the third quarter of 2023, the Company realized pre-tax foreign exchange gains of $5 (year-to-date losses - $896). Of these foreign exchange differences, losses of $37 were recorded in other (expenses) income (year-to-date losses - $955) and gains of $42 were recorded in property, plant and equipment (year-to-date gains - $59).

As at September 29, 2024, the Company had US to CDN dollar foreign currency forward contracts outstanding with a notional amount of US $80.5 million at an average exchange rate of 1.3502 maturing between October 2024 and September 2025. The fair value of these financial instruments was $268 US and the corresponding unrealized gain has been recorded in other comprehensive income. The Company did not recognize any ineffectiveness on the hedging instruments for the year-to-date periods ended September 29, 2024 and October 1, 2023.

Interest Rate Risk

The Company’s interest rate risk arises from interest rate fluctuations on the finance 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 September 29, 2024 cash and cash equivalents balance of $516.0 million, a 1.0 percent increase/decrease in interest rate fluctuations would increase/decrease income before income taxes by $5,160 annually.

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 reflected in selling price adjustments but there is a slight time lag. For the year-to-date period ended September 29, 2024, 75 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 fluctuations according to conditions pertaining to their markets.

==> picture [113 x 62] intentionally omitted <==

15

==> picture [167 x 46] intentionally omitted <==

Notes to Condensed Consolidated Financial Statements For the periods ended September 29, 2024 and October 1, 2023 (thousands of US dollars, unless otherwise indicated) (Unaudited)

Liquidity Risk

Liquidity risk is the risk that the Company would not be able to meet its financial obligations as they come due. Management believes that the liquidity risk is low due to the strong financial condition of the Company. This risk assessment is based on the following: (a) cash and cash equivalents amounts of $516.0 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 financing to fund an acquisition, if needed, (e) an informal investment grade credit rating and (f) the Company’s ability to generate positive cash flows from ongoing operations. Management believes that the Company’s cash flows are more than sufficient to cover its operating costs, working capital requirements, capital expenditures, payment of lease liabilities, share repurchases and dividend payments in the next twelve months. The Company’s trade payables and other liabilities and derivative financial instrument liabilities are all due within twelve months.

Credit Risk

The Company is exposed to credit risk from its cash and cash equivalents held with banks and financial institutions, derivative financial 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 financial asset:

	September 29 2024	December 31 2023
Cash and cash equivalents Trade and other receivables Foreign currency forward contracts	515,959 222,263 268 738,490	541,870 207,355 1,542
		750,767

Credit risk on cash and cash equivalents and other financial 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 financial institutions and/or governmental bodies that must be rated ‘AA’ or higher for CDN financial institutions and ‘A-1’ or higher for US financial 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 financial instruments by only dealing with ‘AA’ rated or higher Schedule 1 CDN financial 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 financial position, past experience and other pertinent factors. Management regularly monitors customer credit limits, performs credit reviews and, in certain cases insures trade and other receivables against credit losses.

During the third quarter of 2024, the Company incurred costs on the sale of trade receivables of $999 (2023 - $1,554). Of these costs, $904 was recorded in finance expense (2023 - $1,452) and $95 was recorded in general and administrative expenses (2023 - $102). On a year-to-date basis, the Company incurred costs on the sale of trade receivables of $3,245 (2023 - $4,482). Of these costs, $2,953 was recorded in finance expense (2023 - $4,179) and $292 was recorded in general and administrative expenses (2023 - $303).

As at September 29, 2024, 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 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) 25 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 46 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 the third quarter of 2024, the Company recorded impairment recoveries on trade and other receivables of $10 (2023 - $97 impairment losses). On a year-to-date basis, the Company recorded impairment losses on trade and other receivables of $909 (2023 - $206).

==> picture [113 x 62] intentionally omitted <==

16

==> picture [194 x 20] intentionally omitted <==

Notes to Condensed Consolidated Financial Statements For the periods ended September 29, 2024 and October 1, 2023 (thousands of US dollars, unless otherwise indicated) (Unaudited)

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:

and payable and related allowance for expected credit losses:
	September 29 2024	December 31 2023
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	196,826 22,247 2,708 2,931 224,712 (2,449) 222,263	183,819 18,639 3,970 3,087
		209,515 (2,160)
		207,355

16. Seasonality

The Company experiences seasonal variation in revenue, with revenue typically being the highest in the second and fourth quarters, and lowest in the first quarter.

==> picture [113 x 62] intentionally omitted <==

17