Corby Spirit and Wine Announces Special Dividend, Increased Quarterly Dividend and Reports First Quarter Results

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Nov 05, 2014, 11:45 ET

TORONTO, Nov. 5, 2014 /CNW/ - Corby Spirit and Wine Limited ("Corby" or the "Company") (TSX: CSW.A, CSW.B) today declared a special dividend of $0.62 per share payable on January 9, 2015 on the Voting Class A Common Shares and Non-voting Class B Common Shares of the Company to shareholders of record as at the close of business on December 12, 2014. The special dividend will result in a cash distribution of approximately $17.7 million to shareholders and will be sourced from Corby's current surplus cash position. This payment represents cash the Board considers to be in excess of its requirements to fund future growth opportunities.

The Corby Board of Directors announced an amendment to its dividend policy whereby the annual amount of the dividend will now be based on the greater of 85% of net earnings per share in the preceding fiscal year ended June 30 and $0.60 per share. Prior to this announcement the annual amount of dividends was based on the greater of 75% of net earnings per share in the preceding fiscal year ended June 30 and $0.60 per share. The Corby Board of Directors today also declared a dividend of $0.19 per share payable on December 12, 2014 on the Voting Class A Common Shares and Non-voting Class B Common Shares of the Company to shareholders of record as at the close of business on November 28, 2014. This represents an increase to regular quarterly dividends of 5.6% when compared to last year due to the amended dividend policy.

"In respect of the dividend announcement, the Board has attempted to strike the appropriate balance between the needs of its shareholders and the needs of our business to invest behind the engines of future long-term growth", commented George McCarthy, Chairman of the Board of Directors of Corby.

Net earnings for the quarter ended September 30, 2014 totalled $4.9 million (or $0.17 per share), representing a decrease of $2.6 million when compared with the same quarter last year. The decrease in net earnings for the quarter were largely attributable to lapping the JP Wiser's Rye and JP Wiser's Spiced whisky launch in the US in the comparative period. In addition to the non-repeat of inventory pipe-line build-up for the US launch that was not repeated in the period ended September 30, 2014, A&P investment for these brands has now ramped up to drive awareness and trial. Reduced Commission income due to discontinued representation of certain Agency brands in December 2013 was offset by positive contributions from the Canadian case goods business.

"I am pleased with the continuing growth of our market share in the priority segments of the Canadian spirits and wine market, however, the need to invest in our international business inevitably lead to some volatility in our quarterly results", noted Patrick O'Driscoll, President and Chief Executive Officer of Corby.

For further details, please refer to Corby's management's discussion and analysis and interim condensed consolidated financial statements and accompanying notes for the three-month period ended September 30, 2014, prepared in accordance with International Financial Reporting Standards.

About Corby
Corby Spirit and Wine Limited is a leading Canadian marketer of spirits and imported wines. Corby's portfolio of owned-brands includes some of the most renowned brands in Canada, including J.P. Wiser's® Canadian whisky, Lamb's® rum, Polar Ice® vodka and McGuinness® liqueurs. Through its affiliation with Pernod Ricard S.A., Corby also represents leading international brands such as ABSOLUT® vodka, Chivas Regal®, The Glenlivet® and Ballantine's® Scotch whiskies, Jameson® Irish whiskey, Beefeater® gin, Malibu® rum, Kahlúa® liqueur, Mumm® champagne, and Jacob's Creek®, Wyndham Estate®, Stoneleigh®, Campo Viejo®, Graffigna®, and Kenwood® wines.

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

CORBY SPIRIT AND WINE LIMITED
Management's Discussion and Analysis
September 30, 2014

The following Management's Discussion and Analysis ("MD&A") dated November 5, 2014, should be read in conjunction with the unaudited interim condensed consolidated financial statements and accompanying notes as at and for the three month period ended September 30, 2014, prepared in accordance with International Financial Reporting Standards ("IFRS"). These interim condensed financial statements were not audited or reviewed by the Company's external auditors. These unaudited interim condensed financial statements do not contain all disclosures required by IFRS for annual financial statements and, accordingly, should also be read in conjunction with the most recently prepared annual consolidated financial statements for the year ended June 30, 2014.

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

This document has been reviewed by the Audit Committee of Corby's Board of Directors and contains certain information that is current as of November 5, 2014. Events occurring after that date could render the information contained herein inaccurate or misleading in a material respect. Corby will provide updates to material forward-looking statements, including in subsequent news releases and its interim management's discussion and analyses filed with regulatory authorities as required under applicable law. Additional information regarding Corby, including the Company's Annual Information Form, is available on SEDAR at www.sedar.com.

Unless otherwise indicated, all comparisons of results for the first quarter of fiscal 2015 (three months ended September 30, 2014) are against results for the first quarter of fiscal 2014 (three months ended September 30, 2013). All dollar amounts are in Canadian dollars unless otherwise stated.

Business Overview

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

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

Corby's portfolio of owned-brands includes some of the most renowned brands in Canada, including Wiser's® Canadian whisky, Lamb's® rum, Polar Ice® vodka and McGuinness® liqueurs. Through its affiliation with PR, Corby also represents leading international brands such as ABSOLUT® vodka, Chivas Regal®, The Glenlivet® and Ballantine's® Scotch whiskies, Jameson® Irish whiskey, Beefeater® gin, Malibu® rum, Kahlúa® liqueur, Mumm® champagne, and Jacob's Creek®, Wyndham Estate®, Stoneleigh® and Graffigna® wines. In addition to representing PR's brands in Canada, Corby also provides representation for certain selected, unrelated third-party brands ("Agency brands") when they fit within the Company's strategic direction and, thus, complement Corby's existing brand portfolio.

The Company expanded its agency portfolio, particularly with regard to our strategic priority of wines, through an agreement (which began April 2013) with The Wine Group LLC ("The Wine Group"), providing Corby with the exclusive rights to represent The Wine Group brands in Canada until May 15, 2018. The agreement complements Corby's owned and represented brands and expands Corby offerings in the premium wine sector. Corby now represents all The Wine Group brands, including Cupcake Vineyards, Big House Wine Co., Concannon Vineyard, Grayfox Vineyards and Mogen David Wine Co.

Pursuant to a production agreement that expires in September 2016, PR produces Corby's owned-brands at HWSL's production facility in Windsor, Ontario. Under the production agreement, Corby manages PR's business interests in Canada, including HWSL's production facility, also until September 2016.

Corby sources more than 80% of its spirits production requirements from HWSL at its production facility in Windsor, Ontario. The Company's remaining production requirements have been outsourced to various third party vendors; including a bottling plant in Montreal, Quebec and a third-party manufacturer in the United Kingdom ("UK"). The UK site blends and bottles Lamb's rum products destined for sale in countries located outside North America.

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

Corby's shipment patterns to the LBs will not always exactly match short-term consumer purchase patterns. However, given the importance of monitoring consumer consumption trends over the long term, the Company stays abreast of consumer purchase patterns in Canada through its member affiliation with the Association of Canadian Distillers ("ACD"), which tabulates and disseminates consumer purchase information it receives from the LBs to its industry members. Corby refers to this data throughout this MD&A as "retail sales", which are measured both in volume (measured in nine-litre-case equivalents) and in retail value (measured in Canadian dollars).

Corby's international business is concentrated in the United States ("US") and UK and the Company has a different route to market for each. For the US market, Corby manufactures the majority of its products in Canada and ships to its US distributor, Pernod Ricard USA, LLC ("PR USA"), an affiliated company. For the UK market, Corby utilizes a third party contract bottler and distribution company for the production and distribution of Lamb's rum. Distributors sell to various local wholesalers and retailers who in turn sell directly to the consumer.

Corby's operations are subject to seasonal fluctuations: sales are typically strong in the first and second quarters, while third-quarter sales usually decline after the end of the retail holiday season. Fourth-quarter sales typically increase again with the onset of warmer weather as consumers tend to increase their purchasing levels during the summer season.

Strategies and Outlook

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

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

Brand prioritization requires an evaluation of each brand's potential to deliver upon this strategy, and facilitates Corby's marketing and sales teams' focus and resource allocation. Over the long-term, management believes that effective execution of its strategy will result in value creation for shareholders. Past disposal transactions reflect this strategy by streamlining Corby's portfolio and eliminating brands with below average performance trends, thus focusing resources on key brands.

Pursuing new growth opportunities outside of Canada is also a key strategic priority. Our agreement with PR USA to represent certain of Corby's owned brands in the US supports our goal of expanding our Canadian whisky business into this market where we believe there is growth potential in both volume and margin.

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

In addition, management is convinced that innovation is essential to seizing new profit and growth opportunities. Successful innovation can be delivered through a structured and efficient process as well as consistent investment in consumer insight and research and development ("R&D"). As far as R&D is concerned, the Company benefits from access to leading-edge practices at PR's North American hub, which is located in Windsor, Ontario.

Finally, the Company is a strong advocate of social responsibility, especially with respect to its sales and promotional activities. Corby will continue to promote the responsible consumption of its products in its activities. In 2013, Corby partnered with the Toronto Transit Commission to provide free transit on New Year's Eve for a three year period. The Company stresses its core values throughout its organization, including those of conviviality, straightforwardness, commitment, integrity and entrepreneurship.

Significant Events

Corby declares special dividend and increases regular dividend amount
On November 5, 2014, the Corby Board of Directors declared a special dividend of $0.62 per share payable on January 9, 2015 on the Voting Class A Common Shares and Non-voting Class B Common Shares of Corby to shareholders of record as at the close of business on December 12, 2014. The special dividend will result in a cash distribution of approximately $17.7 million to shareholders and will be sourced from Corby's current surplus cash position. This payment represents cash that the Board considers to be in excess of its requirements to fund future growth opportunities.

Further, the Corby Board of Directors also announced an amendment to its dividend policy. Subject to business conditions and opportunities and appropriate adjustment for extraordinary events, regular dividends will be paid quarterly, on the basis of an annual amount equal to the greater of 85% of net earnings per share in the preceding fiscal year ended June 30, and $0.60 per share. Such dividend policy represents a 5.6% increase in the Company's quarterly dividend, from $0.18 per share to $0.19 per share. Under the amended policy, the Corby Board of Directors declared a regular dividend of $0.19 per share payable on December 12, 2014 on the Voting Class A Common Shares and Non-voting Class B Common Shares of Corby to shareholders of record as at the close of business on November 28, 2014.

Corby Distilleries Limited changes its name to Corby Spirit and Wine Limited
Effective November 7, 2013, Corby Distilleries Limited began operating under the name Corby Spirit and Wine Limited. The new name was approved at the Company's annual and special meeting held November 7^th, 2013, and reflecting the change, Corby now trades on the TSX under the symbols CSW.A and CSW.B. The new name coincided with completely redesigned corporate branding and logos. The new name and branding better reflect Corby's growing activities with a strong focus on product, service and marketing.

Corby Launches J.P. Wiser's Rye and J.P. Wiser's Spiced Canadian Whisky in the US Market
In July 2012, the Company reached a new agreement with PR USA to represent Corby brands in the US for a five year period, giving Corby access to one of the strongest spirits distribution networks in the US market.

Since signing the agreement, Corby and PR USA have readied Corby's whisky portfolio for a national launch which began in the first quarter of 2014. Specifically, Corby developed two new Wiser's brand extensions under the names J.P. Wiser's Rye and J.P. Wiser's Spiced Whisky. Given this is the early stages of the launch, Corby continued to invest heavily in the US market. The launch has had a significant impact on our financial results and as such will be discussed throughout this MD&A.

Corby Continues its Exclusive Canadian Representation of the Iconic ABSOLUT Vodka Brand
On September 30, 2013, Corby paid $10.3 million to continue its exclusive rights to represent the ABSOLUT vodka brand in Canada for an eight-year period ending September 29, 2021. The previous representation period expired September 29, 2013. The terms of this agreement are further described in the "Related Party Transactions" section of this MD&A. The transaction was accounted for as an increase in Intangible Assets and the purchase price is being amortized, straight-line, over the eight-year term of the agreement. Amortization expense is recorded net of commission revenues. The payment was funded from the Company's deposits in cash management pools.

Brand Performance Review

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

Shipment Volume and Shipment Value Performance

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



BRAND PERFORMANCE CHART - INCLUDES BOTH CANADIAN AND INTERNATIONAL SHIPMENTS


	Three Months Ended
			% Shipment	% Shipment
	*Sept. 30,*	Sept. 30,	Volume	Value
(Volumes in 000's of 9L cases)	2014	2013	Growth	Growth

Brand
Wiser's Canadian whisky	225	242	(7%)	(10%)
Lamb's rum	130	124	5%	8%
Polar Ice vodka	102	96	6%	6%
Mixable liqueurs	43	47	(9%)	(8%)

Total Key Brands	500	509	(2%)	(3%)
Other Corby-owned brands	55	57	(4%)	(2%)

Total Corby brands	555	566	(2%)	(3%)

Overall, volume and shipment value for Corby owned-brands is lower on a year over year comparative basis. However, trends in Corby's domestic market differ significantly from international markets as highlighted in the following chart:

	Three Months Ended
			% Shipment	% Shipment
	*Sept. 30,*	Sept. 30,	Volume	Value
(Volumes in 000's of 9L cases)	2014	2013	Growth	Growth


Domestic	507	499	2%	3%
International	48	67	(28%)	(49%)

Total Corby brands	555	566	(2%)	(3%)

During the first quarter ended September 30, 2014, Corby's domestic shipments delivered +2% growth on a year over year comparative basis driven primarily by Corby's flagship brand, Wiser's Canadian whisky. In international markets, lower shipments reflect Wiser's Canadian whisky lapping an inventory pipe-line build-up for the national launch of JP Wiser's Rye and JP Wiser's Spiced whisky in the US that was not repeated in the current quarter.

Retail Volume and Retail Value Performance

It is of critical importance to understand the performance of Corby's brands at the retail level in Canada. Analysis of performance at the retail level provides insight with regards to consumers' current purchase patterns and trends. Retail sales data, as provided by the ACD, is set out in the following chart and is discussed throughout this MD&A. It should be noted that the retail sales information presented does not include international retail sales of Corby-owned brands:

RETAIL SALES FOR THE CANADIAN MARKET ONLY¹


	Three Months Ended
			% Retail	% Retail
	*Sep. 30,*	Sep. 30,	Volume	Value
(Volumes in 000's of 9L cases)	2014	2013	Growth	Growth

Brand
Wiser's Canadian whisky	176	173	2%	2%
Lamb's rum	98	104	(6%)	(4%)
Polar Ice vodka	93	91	2%	3%
Mixable liqueurs	41	43	(4%)	(2%)

Total Key Brands	408	411	(1%)	0%
Other Corby-owned brands	49	50	(2%)	0%

Total	457	461	(1%)	0%

⁽¹⁾Refers to sales at the retail store level in Canada, as provided by the Association of Canadian Distillers.

The Canadian spirits industry continued to remain soft as industry retail sales volume is essentially flat on an annual basis, while industry retail sales value increased 1% during the same twelve month period. Three month trends for the period ending September 30, 2014 show some improvement with a 1% increase in retail sales volume and a 2% increase in retail sales value.

As illustrated in the above chart, Corby's portfolio of owned brands has performed consistently with the total spirits market, with retail sales value growing ahead of retail volume. The following brand discussion provides a more detailed discussion of how each of Corby's key brands performed relative to their respective industry category.

Summary of Corby's Key Brands

Wiser's Canadian Whisky
Corby's flagship brand, Wiser's Canadian whisky, continued to outperform the Canadian whisky category and gained market share. For the three months ending September 30, 2014, Wiser's Canadian whisky retail value grew 2% on a year-over-year comparison basis. The Canadian whisky category declined 1% in retail volume and grew 1% in retail value, when compared to the same three month period last year. Corby continued its strong investment behind the brand, with set up costs for the preparation of the new Wiserfund campaign launched in October 2014.

A new Wiser's Spiced extension, Torched Toffee began shipping to markets across Canada but did not impact Retail Sales in this three month period.

Lamb's Rum
Lamb's rum, one of the top-selling rum families in Canada, experienced a 6% decline in retail volume and a 4% decline in retail value when compared to same three month period last year. The rum category in Canada was essentially flat on retail volume and grew 2% on retail value compared to the same three month period last year. The rum category in Canada continues to be driven entirely by the spiced rum segment (+12% in retail volumes), while the dark and white rum segments are in decline (-5% and -4%, in retail volumes when compared to last year). Corby's Lamb's rum product line is heavily weighted in the dark and white segments, with its spiced rum product (i.e., Lamb's Black Sheep) continuing to build off of its small base.

Polar Ice Vodka
Polar Ice vodka is among the top three largest vodka brands in Canada. Supported by the regional roll out of Polar Ice 90° North, retail volumes for the three month period ending September 30, 2014 grew 2% and retail value increased 3% when compared to the same three month period last year. These trends outperformed the overall vodka category in Canada which was essentially flat on retail volumes and grew retail value 2% when compared to the same three month period last year. Investment in the first quarter included a digital / social media platform to drive support for Polar Ice 90° North in Western Canada.

Mixable Liqueurs
Corby's portfolio of mixable liqueur brands consists of McGuinness liqueurs (which is Canada's largest mixable liqueur brand family) and Meaghers liqueurs. Retail volume and retail value for Corby's mixable liqueurs portfolio lagged market trends (retail volume was -4% and retail value was -2%) for the three month period ending September 30, 2014. The Liqueurs category as a whole was essentially flat for retail volume and grew retail value 1% when compared to the same three month period last year, propped up by category innovations and cream based offerings. The Company is in the process of moving production to the Corby managed HWSL production facility from the bottling facility of a third party in Montreal, Quebec.

Other Corby-Owned Brands
Innovation remains an important pillar for delivering new profit and growth opportunities to the Corby domestic business. Recent premium offerings in Canadian whisky such as Pike Creek® and Lot 40® collectively grew retail volume +55% and retail value +58% compared to the same three month period last year. Lot 40 was recently named "Canadian Whisky of the Year" at the Canadian Whisky Awards.

Criollo® Chocolate Sea Salted Caramel and Criollo® Chocolate Raspberry Truffle marked their one year anniversary in the Canadian market in September 2014 and continue to be well received by key customers and consumers. Offsetting the positive contributions of these innovations was Royal Reserve® Canadian whisky declining -3% on retail volume and -2% on retail value when compared to the same three month period last year.

Financial and Operating Results

The following table presents a summary of certain selected consolidated financial information of the Company for the three month periods ended September 30, 2014 and 2013.


	Three Months Ended
(in millions of Canadian dollars,	*Sept. 30,*	Sept. 30,
except per share amounts)	2014	2013	$ Change	% Change

Revenue	$ 34.8	$ 36.7	$ (2.0)	(5%)

Cost of sales	(12.4)	(12.8)	0.4	(3%)
Marketing, sales and administration	(15.8)	(14.0)	(1.8)	13%
Other income (expense)	0.0	0.0	0.0	4%

Earnings from operations	6.6	9.9	(3.4)	(34%)

Financial income	0.4	0.5	0.0	0%
Financial expenses	(0.3)	(0.3)	0.0	(10%)
Net financial income	0.1	0.2	0.0	(14%)

Earnings before income taxes	6.7	10.1	(3.4)	(33%)
Income taxes	(1.8)	(2.6)	0.8	(29%)

Net earnings	$ 4.9	$ 7.5	$ (2.6)	(34%)

Per common share
- Basic net earnings	$ 0.17	$ 0.26	$ (0.09)	(36%)
- Diluted net earnings	$ 0.17	$ 0.26	$ (0.09)	(36%)

Overall Financial Results

Net earnings decreased $2.6 million or 34% when compared to the prior year largely attributable to lapping the JP Wiser's Rye and JP Wiser's Spiced whisky launch in the US. In addition to the non-repeat of inventory pipe-line build-up for the US launch, A&P investment for these brands has now ramped up to drive awareness and trial. Reduced Commission income due to discontinued representation of certain Agency brands in December 2013 was offset by positive contributions from the Canadian case goods business.

Revenue

The following highlights the key components of the Company's revenue streams:


	Three Months Ended
	*Sept. 30,*	Sept. 30,
(in millions of Canadian dollars)	2014	2013	$ Change	% Change

Revenue streams:
Case goods	$ 29.3	$ 30.5	$ (1.2)	(4%)
Commissions	4.4	5.0	(0.6)	(12%)
Other services	1.1	1.2	(0.1)	(12%)

Revenue	$ 34.8	$ 36.7	$ (2.0)	(5%)

Revenue declined $2.0 million when compared to the same three month period last year. A 3% increase in Canadian revenue was more than offset by non-repeat of the JP Wiser's inventory pipe-line build-up to the US in the prior period.

Commissions were $4.4 million, a decrease of $0.6 million or 12% when compared to last year. The reduction was primarily due to the impact of certain agency brands discontinued as of December 2013 and higher straight line amortization of long term representation rights of $0.3 million. Referenced earlier in the Significant Events section of this MD&A, Corby entered into an agreement on September 30, 2013 for continued exclusive Canadian representation of the iconic ABSOLUT vodka brand.

Other services represents ancillary revenue incidental to Corby's core business activities such as logistical fees.

Cost of sales

Cost of sales was $12.4 million for the three months ending September 30, 2014, representing a decrease of 3%, or $0.4 million when compared to last year, moving directionally in line with topline Revenue on our Case Goods business. Gross margin for the quarter was 59%, reduced from 60%, reflecting the lower mix of (superior margin) case good sales to the US market resulting from the inventory pipe-line build-up in the prior year quarter (note: commissions are not included in this calculation).

Marketing, sales and administration

On a year-to-date basis marketing, sales and administration expenses increased $1.8 million, or 13% over last year. As previously mentioned, Corby has now ramped up investment behind the JP Wiser's brands in the US market through increased advertising and promotional spend. Examples of A&P investment include sponsorship of ESPN fantasy football and trips to the Super Bowl to support in-store programs. In addition, the Company incurred set up costs for the Wiserfund campaign launched in Canada in October 2014. Administrative costs remain relatively consistent with the prior year quarter reflecting the impacts of the cost reduction programme offsetting inflationary increases.

Other income and expenses

Other income and expenses include such items as realized foreign exchange gains and losses, and gains on sale of property and equipment. The balances comprising this account are relatively consistent year over year.

Net financial income

Net financial income is comprised of interest earned on deposits in cash management pools, offset by interest costs associated with the Company's pension and post-retirement benefit plans. This balance is relatively consistent with prior year.

Income taxes

A reconciliation of the effective tax rate to the statutory rates for each period is presented below. The effective tax rate for the three month period ending September 30, 2013 was impacted by permanent differences between financial income and income reported for taxation purposes as well as the impacts of the adjustments that arise upon the completion of annual tax filings.

	Three Months Ended
	*Sept. 30,*	Sept. 30,
	2014	2013

Combined basic Federal and Provincial tax rates	26.6%	26.6%
Other	0.3%	(1.3%)

Effective tax rate	26.9%	25.3%

Liquidity and Capital Resources

Corby's sources of liquidity are its deposits in cash management pools of $106.7 million as at September 30, 2014, and its cash generated from operating activities. Corby's total contractual maturities are represented by its accounts payable and accrued liabilities, which totalled $31.9 million as at September 30, 2014, and are all due to be paid within one year. The Company does not have any liabilities under short- or long-term debt facilities.

The Company believes that its deposits in cash management pools, combined with its historically strong operational cash flows, provide for sufficient liquidity to fund its operations, investing activities and commitments for the foreseeable future. The Company's cash flows from operations are subject to fluctuation due to commodity, foreign exchange and interest rate risks. Please refer to the "Risks and Risk Management" section of this MD&A for further information.

Cash Flows

		Three Months Ended
		*Sept. 30,*	Sept. 30,	$
(in millions of Canadian dollars)		2014	2013	Change

Operating activities
	Net earnings, adjusted for non-cash items	$ 8.4	$ 11.4	$ (3.0)
	Net change in non-cash working capital	(2.0)	(6.8)	4.8
	Net payments for interest and income taxes	(1.9)	(2.4)	0.5
		4.5	2.2	2.3

Investing activities
	Additions to property and equipment	(0.7)	(0.1)	(0.6)
	Additions to intangible assets	-	(10.3)	10.3
	Deposits in cash management pools	1.3	13.0	(11.7)
		0.6	2.6	(2.0)

Financing activities
	Dividends paid	(5.1)	(4.8)	(0.3)

Net change in cash		$ -	$ -	$ -

Operating activities

Net cash from operating activities was $4.5 million compared to $2.2 million in the same quarter of the prior year, representing an increase of $2.3 million. The quarter-over quarter change is mostly attributable to improved working capital and was driven by collections on accounts receivable and timing of certain payments. Offsetting this impact is lower cash generated from net-earnings, adjusted for non-cash items, which was significantly driven by increased investment in JP Wiser's for the US market compared to the prior period of last year.

Investing activities

Net cash generated from investing activities was $0.6 million, compared to $2.6 million in the same quarter of the prior year. The prior year period includes a payment of $10.3 million to PR for the exclusive right to represent the ABSOLUT vodka brand in Canada for an additional eight year term, as discussed in the "Related Party Transaction" section of this MD&A. The payment was made on September 30, 2013 and was funded through withdrawals from cash management pools.

Investing activities also reflect funds deposited in cash management pools. Cash management pools represent cash on deposit with Citibank NA via Corby's Mirror Netting Service Agreement with PR. Corby has daily access to these funds and earns a market rate of interest from PR on its deposits. Changes in cash management pools reflect amounts either deposited in or withdrawn from these bank accounts and are simply a function of Corby's cash requirements during the period of time being reported on. For more information related to these deposits, please refer to the "Related Party Transactions" section of this MD&A.

Financing activities

Cash used for financing activities was $5.1 million this quarter, an increase of $0.3 million over the same quarter last year, and reflects regular quarterly dividends being paid to shareholders.

On November 5, 2014 the Company announced that it had amended its dividend policy, whereby the annual amount of dividend will now be based on the greater of 85% of net earnings per share in the preceding fiscal year ended June 30 and $0.60 per share, subject to business conditions and opportunities and appropriate adjustment for extraordinary events. Prior to this announcement the annual amount of dividends was based on the greater of 75% of net earnings per share in the preceding fiscal year ended June 30 and $0.60 per share.

The following table summarizes dividends paid and payable by the Company over the last two fiscal years:

for	Declaration date	Record Date	Payment date	$ / Share
2015 - special	November 05, 2014 (special dividend)	December 12, 2014	January 9, 2015	$ 0.62
2015 - Q1	November 05, 2014	November 28, 2014	December 12, 2014	$ 0.19
2014 - Q4	August 27, 2014	September 15, 2014	September 30, 2014	$ 0.18
2014 - Q3	May 7, 2014	May 30, 2014	June 13, 2014	$ 0.18
2014 - Q2	February 5, 2014	February 28, 2014	March 14, 2014	$ 0.18
2014 - Q1	November 6, 2013	November 29, 2013	December 13, 2013	$ 0.18
2013 - Q4	August 28, 2013	September 13, 2013	September 30, 2013	$ 0.17
2013 - Q3	May 9, 2013	May 31, 2013	June 14, 2013	$ 0.17
2013 - Q2	February 6, 2013	February 28, 2013	March 15, 2013	$ 0.17

Outstanding Share Data

As at November 5, 2014, Corby had 24,274,320 Voting Class A Common Shares and 4,194,536 Non-Voting Class B Common Shares outstanding. The Company does not have a stock option plan, and therefore, there are no options outstanding.

Related Party Transactions

Transactions with parent, ultimate parent, and affiliates

Corby engages in a significant number of transactions with its parent company, its ultimate parent and various affiliates. Specifically, Corby renders services to its parent company, its ultimate parent, and affiliates for the marketing and sale of beverage alcohol products in Canada. Furthermore, Corby outsources the large majority of its distilling, maturing, storing, blending, bottling and related production activities to its parent company. A significant portion of Corby's bookkeeping, recordkeeping services, data processing and other administrative services are also outsourced to its parent company. Transactions with the parent company, ultimate parent and affiliates are subject to Corby's related party transaction policy, which requires such transactions to undergo an extensive review and receive approval from an Independent Committee of the Board of Directors.

The companies operate under the terms of agreements that became effective on September 29, 2006. These agreements provide the Company with the exclusive right to represent PR's brands in the Canadian market for fifteen years, as well as providing for the continuing production of certain Corby brands by PR at its production facility in Windsor, Ontario, for ten years. Corby also manages PR's business interests in Canada, including the Windsor production facility. Certain officers of Corby have been appointed as directors and officers of PR's Canadian entities, as approved by Corby's Board of Directors.

In addition to the aforementioned agreements, Corby signed an agreement on September 26, 2008, with its ultimate parent to be the exclusive Canadian representative for the ABSOLUT vodka and Plymouth gin brands, for a five-year term expiring October 1, 2013 and was extended as noted below. These brands were acquired by PR subsequent to the original representation rights agreement dated September 29, 2006. Corby also agreed to continue with the mirror netting arrangement with PR and its affiliates, under which Corby's excess cash will continue to be deposited to cash management pools. The mirror netting arrangement with PR and its affiliates is further described below.

Further, on November 9, 2011, Corby entered into an agreement with a PR affiliate for a new term for Corby's exclusive right to represent ABSOLUT vodka in Canada from September 30, 2013 to September 29, 2021, which is consistent with the term of Corby's Canadian representation of the other PR brands in Corby's portfolio. On September 30, 2013, Corby paid the present value of $10 million, or $10.3 million, for the additional eight years of the new term pursuant to an agreement entered into between Corby and The Absolut Company Aktiebolag, an affiliate of PR and owner of the Absolut brand, to satisfy the parties' obligations under the 2011 agreement. Since the agreement is a related party transaction, the agreement was approved by the Independent Committee of the Corby Board of Directors, in accordance with Corby's related party transaction policy, following an extensive review and with external financial and legal advice.

On July 1, 2012, the Company entered into a five year agreement with PR USA, an affiliated company, which provides PR USA the exclusive right to represent Wiser's Canadian whisky and Polar Ice vodka in the US. The agreement provides these key brands with access to PR USA's extensive national distribution network throughout the US and complements PR USA's premium brand portfolio. The agreement is effective for a five year period ending June 30, 2017. The agreement with PR USA is a related party transaction between Corby and PR USA, as such; the agreement was approved by the Independent Committee of the Board of Directors of Corby following an extensive review, in accordance with Corby's related party transaction policy.

Deposits in cash management pools

Corby participates in a cash pooling arrangement under a Mirror Netting Service Agreement, together with PR's other Canadian affiliates, the terms of which are administered by Citibank N.A. effective July 17, 2014. Mirror Netting Service Agreement acts to aggregate each participant's net cash balance for purposes of having a centralized cash management function for all of PR's Canadian affiliates, including Corby. As a result of Corby's participation in this agreement, Corby's credit risk associated with its deposits in cash management pools is contingent upon PR's credit rating. PR's credit rating as at November 5, 2014, as published by Standard & Poor's and Moody's, was BBB- and Baa3, respectively. PR compensates Corby for the benefit it receives from having the Company participate in the Mirror Netting Service Agreement by paying interest to Corby based upon the 30-day Canadian Dealer Offered Rate ("CDOR") plus 0.40%. Corby accesses these funds on a daily basis and has the contractual right to withdraw these funds or terminate these cash management arrangements upon providing five days' written notice.

Selected Quarterly Information

Summary of Quarterly Financial Results


(in millions of Canadian dollars,	Q1	Q4	Q3	Q2	Q1	Q4	Q3	Q2
except per share amounts)	2015	2014	2014	2014	2014	2013	2013	2013

Revenue	$ 34.8	$ 33.4	$ 28.6	$ 38.5	$ 36.7	$ 33.5	$ 25.7	$ 37.7
Earnings from operations	6.6	9.2	4.1	10.2	9.9	10.0	5.4	12.0
Net earnings	4.9	6.9	3.1	7.5	7.5	7.3	3.9	8.9
Basic EPS	0.17	0.24	0.11	0.26	0.26	0.26	0.14	0.31
Diluted EPS	0.17	0.24	0.11	0.26	0.26	0.26	0.14	0.31

The above chart demonstrates the seasonality of Corby's business, as sales are typically strong in the first and second quarters, while third-quarter sales (January, February and March) usually decline after the end of the retail holiday season. Fourth quarter sales typically increase again with the onset of warmer weather, as consumers tend to increase their purchasing levels during the summer season. The launch of JP Wiser's Canadian whisky brand in the US is reflected in the 2014 results above, and impacted revenues in the first and second quarters as distribution channels were being filled.

New Accounting Pronouncements

New accounting standards

The following new and revised standards and interpretations were effective for Corby on July 1, 2014:

(i) Financial Instruments – Asset and Liability Offsetting

The IASB has issued amendments to IAS 32, "Financial Instruments: Presentation" ("IAS 32"), which provides further guidance on the requirements for offsetting of financial instruments. The amendments to IAS 32 are effective for annual periods beginning on or after January 1, 2014 and must be applied retrospectively. For Corby, this amendment was effective July 1, 2014. The implementation of IAS 32 amendments resulted in a reclassification of assets and liabilities related to other taxes to accounts receivable and accounts payable balances. The implementation of these amendments had the following impacts as at September 30, 2013, June 30, 2014 and July 1, 2013:

	increase (decrease)
	Sept. 30,	June 30,	June 30,
Balance sheet impacts	2013	2014	2013

Trade receivables	$ 1,981	$ 1,569	$ 1,483
Income taxes and other taxes recoverable	152	(634)	(562)
Accounts payable and accrued liabilities	(2,133)	(935)	(921)

	$ -	$ -	$ -

The implementation of these amendments did not impact equity, net earnings or cash flows in the current and comparative periods.

(ii) Levies

The IFRS Interpretations Committee ("IFRIC") of the IASB has issued a new interpretation, "Levies" ("IFRIC 21"), which addresses the accounting for a liability to pay a levy to a government. IFRIC 21 applies to levy liabilities within the scope of IAS 37, "Provisions, Contingent Liabilities and Contingent Assets", and to levy liabilities when the timing and amount is certain. IFRIC 21 is effective for annual periods beginning on or after January 1, 2014 and must be applied retrospectively. For Corby, this interpretation was effective July 1, 2014. The implementation of IFRIC 21 did not have an impact on the Company's consolidated results of operations and financial position.

Recent accounting pronouncements

A number of new standards, amendments to standards and interpretations have been issued but are not yet effective for the financial year ending June 30, 2015, and accordingly, have not been applied in preparing these interim condensed consolidated financial statements:

(i) Revenue

In May 2014, the IASB released IFRS 15, "Revenue from contracts with customers" ("IFRS 15"), which supersedes IAS 11, "Construction Contracts", IAS 18, "Revenues", IFRIC 13, "Customer Loyalty Programmes", IFRIC 15, "Agreement for the Construction of Real Estate", IFRIC 18, "Transfers of Assets from Customers" and SIC-31, "Revenue – Barter Transactions Involving Advertising Services". The core principle of IFRS 15 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. IFRS 15 will also result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for multiple-element arrangements. IFRS 15 will be effective for Corby's fiscal year beginning on July 1, 2017, with earlier application permitted. The Company has not yet assessed the impact of the adoption of this standard on its financial statements and disclosures.

(ii) Financial Instruments

The IASB has issued a new standard, IFRS 9, "Financial Instruments" ("IFRS 9"), which will ultimately replace IAS 39, "Financial Instruments: Recognition and Measurement" ("IAS 39"). The replacement of IAS 39 is a multi-phase project with the objective of improving and simplifying the reporting for financial instruments and the issuance of IFRS 9 is part of the first phase of this project. IFRS 9 uses a single approach to determine whether a financial asset or liability is measured at amortized cost or fair value, replacing the multiple rules in IAS 39. For financial assets, the approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. IFRS 9 requires a single impairment method to be used, replacing multiple impairment methods in IAS 39. For financial liabilities measured at fair value, fair value changes due to changes in an entity's credit risk are presented in other comprehensive income. The IASB has tentatively decided to require implementation of this standard for annual periods beginning on or after January 1, 2018 and must be applied retrospectively. For Corby, this standard will become effective July 1, 2018. The Company is currently assessing the impact of the new standard on its financial statements and disclosures.

Internal Controls Over Financial Reporting

The Company maintains a system of disclosure controls and procedures to provide reasonable assurance that all material information relating to the Company is gathered and reported to senior management on a timely basis so that appropriate decisions can be made regarding public disclosure.

In addition, the CEO and CFO have designed, or caused to be designed under their supervision, internal controls over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be designed effectively can provide only reasonable assurance with respect to financial reporting and financial statement preparation.

There were no changes in internal control over financial reporting during the Company's most recent interim period that have materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting.

Risks & Risk Management

The Company is exposed to a number of risks in the normal course of its business that have the potential to affect its operating and financial performance.

Industry and Regulatory
The beverage alcohol industry in Canada is subject to government policy, extensive regulatory requirements and significant rates of taxation at both the federal and provincial levels. As a result, changes in the government policy, regulatory and/or taxation environments within the beverage alcohol industry may affect Corby's business operations, causing changes in market dynamics or changes in consumer consumption patterns. In addition, the Company's provincial LB customers have the ability to mandate changes that can lead to increased costs, as well as other factors that may impact financial results.

The Company continuously monitors the potential risk associated with any proposed changes to its government policy, regulatory and taxation environments and, as an industry leader, actively participates in trade association discussions relating to new developments.

Consumer Consumption Patterns
Beverage alcohol companies are susceptible to risks relating to changes in consumer consumption patterns. Consumer consumption patterns are affected by many external influences, not the least of which is economic outlook and overall consumer confidence in the stability of the economy as a whole. Corby offers a diverse portfolio of products across all major spirits categories and at various price points, which complements consumer desires and offers exciting innovation.

Distribution/Supply Chain Interruption
The Company is susceptible to risks relating to distributor and supply chain interruptions. Distribution in Canada is largely accomplished through the government-owned provincial LBs and, therefore, an interruption (e.g., a labour strike) for any length of time may have a significant impact on the Company's ability to sell its products in a particular province and/or market.

Supply chain interruptions, including a manufacturing or inventory disruption, could impact product quality and availability. The Company adheres to a comprehensive suite of quality programmes and proactively manages production and supply chains to mitigate any potential risk to consumer safety or Corby's reputation and profitability.

Environmental Compliance
Environmental liabilities may potentially arise when companies are in the business of manufacturing products and, thus, required to handle potentially hazardous materials. As Corby outsources its production, including all of its storage and handling of maturing alcohol, the risk of environmental liabilities is considered minimal. Corby currently has no significant recorded or unrecorded environmental liabilities.

Industry Consolidation
The global beverage alcohol industry has continued to experience consolidation in 2014. Industry consolidation can have varying degrees of impact and, in some cases, may even create exceptional opportunities. Either way, management believes that the Company is well positioned to deal with this or other changes to the competitive landscape in Canada and other markets in which it carries on business.

Competition
The Canadian beverage alcohol industry is extremely competitive. Competitors may take actions to establish and sustain a competitive advantage through advertising and promotion and pricing strategies in an effort to maintain market share. Corby constantly monitors the market and adjusts its own strategies as appropriate. Competitors may also affect Corby's ability to attract and retain high-quality employees. The Company's long heritage attests to Corby's strong foundation and successful execution of its strategies. Its role as a leading Canadian beverage alcohol company helps facilitate recruitment efforts.

Credit Risk
Credit risk arises from deposits in cash management pools held with PR via Corby's participation in the Mirror Netting Service Agreement (as previously described in the "Related Party Transactions" section of this MD&A), as well as credit exposure to customers, including outstanding accounts and note receivable. The maximum exposure to credit risk is equal to the carrying value of the Company's financial assets. The objective of managing counter-party credit risk is to prevent losses in financial assets. The Company assesses the credit quality of its counter-parties, taking into account their financial position, past experience and other factors. As the large majority of Corby's accounts receivable balances are collectable from government-controlled LBs, management believes the Company's credit risk relating to accounts receivable is at an acceptably low level. The Company's note receivable is secured.

Exposure to Interest Rate Fluctuations
The Company does not have any short- or long-term debt facilities. Interest rate risk exists, as Corby earns market rates of interest on its deposits in cash management pools and also has a note receivable that earns a fixed rate of interest. An active risk management programme does not exist, as management believes that changes in interest rates would not have a material impact on Corby's financial position over the long term.

Exposure to Commodity Price Fluctuations
Commodity risk exists, as the manufacture of Corby's products requires the procurement of several known commodities, such as grains, sugar and natural gas. The Company strives to partially mitigate this risk through the use of longer-term procurement contracts where possible. In addition, subject to competitive conditions, the Company may pass on commodity price changes to consumers through pricing over the long term.

Foreign Currency Exchange Risk
The Company has exposure to foreign currency risk, as it conducts business in multiple foreign currencies; however, its exposure is primarily limited to the US dollar ("USD") and UK pound sterling ("GBP"). Corby does not utilize derivative instruments to manage this risk. Subject to competitive conditions, changes in foreign currency rates may be passed on to consumers through pricing over the long term.

USD Exposure
The Company's demand for USD has traditionally outpaced its supply, due to USD sourcing of production inputs exceeding that of the Company's USD sales. Therefore, decreases in the value of the Canadian dollar ("CAD") relative to the USD will have an unfavourable impact on the Company's earnings.

GBP Exposure
The Company's exposure to fluctuations in the value of the GBP relative to the CAD was reduced as both sales and cost of production are denominated in GBP. While Corby's exposure has been minimized, increases in the value of the CAD relative to the GBP will have an unfavourable impact on the Company's earnings.

Third-Party Service Providers
HWSL, which Corby manages on behalf of PR, provides more than 80% of the Company's production requirements, among other services including administration and information technology. However, the Company is reliant upon certain third-party service providers in respect of certain of its operations. It is possible that negative events affecting these third-party service providers could, in turn, negatively impact the Company. While the Company has no direct control over how such third parties are managed, it has entered into contractual arrangements to formalize these relationships. In order to minimize operating risks, the Company actively monitors and manages its relationships with its third-party service providers.

Brand Reputation and Trademark Protection
The Company promotes nationally branded, non-proprietary products as well as proprietary products. Damage to the reputation of any of these brands, or to the reputation of any supplier or manufacturer of these brands, could negatively impact consumer opinion of the Company or the related products, which could have an adverse impact on the financial performance of the Company. The Company strives to mitigate such risks by selecting only those products from suppliers that strategically complement Corby's existing brand portfolio and by actively monitoring brand advertising and promotion activities. The Company registers trademarks, as applicable, while constantly watching for and responding to competitive threats, as necessary.

Valuation of Goodwill and Intangible Assets
Goodwill and intangible assets account for a significant amount of the Company's total assets. Goodwill and intangible assets are subject to impairment tests that involve the determination of fair value. Inherent in such fair value determinations are certain judgments and estimates including, but not limited to, projected future sales, earnings and capital investment; discount rates; and terminal growth rates. These judgments and estimates may change in the future due to uncertain competitive market and general economic conditions, or as the Company makes changes in its business strategies. Given the current state of the economy, certain of the aforementioned factors affecting the determination of fair value may be impacted and, as a result, the Company's financial results may be adversely affected.

The following chart summarizes Corby's goodwill and intangible assets and details the amounts associated with each brand (or basket of brands) and market:

		Carrying Values as at September 30, 2014

Associated Brand	Associated Market	Goodwill	Intangibles	Total

Various PR brands	Canada	$ -	$ 40.9	$ 40.9
Lamb's rum	International⁽¹⁾	1.4	11.8	13.2
Corby domestic brands	Canada	1.9	-	1.9

		$ 3.3	$ 52.7	$ 56.0

⁽¹⁾The international business for Lamb's rum is primarily focused in the UK, however, the trademarks and licenses puchased
relate to all international markets outside of Canada, as Corby previously owned the Canadian rights.

Therefore, economic factors (such as consumer consumption patterns) specific to these brands and markets are primary drivers of the risk associated with their respective goodwill and intangible assets valuations.

Employee Future Benefits
The Company has certain obligations under its registered and non-registered defined benefit pension plans and other post-retirement benefit plan. There is no assurance that the Company's benefit plans will be able to earn the assumed rate of return. New regulations and market-driven changes may result in changes in the discount rates and other variables, which would result in the Company being required to make contributions in the future that differ significantly from estimates. An extended period of depressed capital markets and low interest rates could require the Company to make contributions to these plans in excess of those currently contemplated, which, in turn, could have an adverse impact on the financial performance of the Company. Somewhat mitigating the impact of a potential market decline is the fact that the Company monitors its pension plan assets closely and follows strict guidelines to ensure that pension fund investment portfolios are diversified in-line with industry best practices. For further details related to Corby's defined benefit pension plans, please refer to Note 10 of the consolidated financial statements for the year ended June 30, 2014.

CORBY SPIRIT AND WINE LIMITED
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

(Not audited or reviewed by the Company's external auditor)
(in thousands of Canadian dollars)

		Sept. 30,	Sept. 30,	June 30,	June 30,
	Notes	2014	2013⁽¹⁾	2014 ⁽¹⁾	2013⁽¹⁾

ASSETS
Deposits in cash management pools		$ 106,722	$ 94,994	$ 108,029	$ 108,043
Accounts receivable	5	29,303	31,217	24,818	25,125
Income taxes recoverable		1,221	837	346	493
Inventories	6	54,004	51,505	52,561	49,083
Prepaid expenses		443	420	256	533
Current portion of note receivable	7	600	600	600	600

Total current assets		192,293	179,573	186,610	183,877
Note receivable	7	-	600	-	600
Deferred income taxes		300	1,538	658	1,699
Property and equipment		8,929	7,897	8,632	8,092
Goodwill		3,278	3,278	3,278	3,278
Intangible assets		52,693	58,939	54,163	49,665

Total assets		$ 257,493	$ 251,825	$ 253,341	$ 247,211


LIABILITIES
Accounts payable and accrued liabilities	8	$ 31,853	$ 26,787	$ 27,709	$ 25,106

Total current liabilities		31,853	26,787	27,709	25,106
Provision for employee benefits		16,518	20,878	16,491	20,794
Total liabilities		48,371	47,665	44,200	45,900

Shareholders' equity
Share capital		14,304	14,304	14,304	14,304
Accumulated other comprehensive loss		(4,134)	(7,193)	(4,303)	(7,363)
Retained earnings		198,952	197,049	199,140	194,370

Total shareholders' equity		209,122	204,160	209,141	201,311

Total liabilities and shareholders' equity		$ 257,493	$ 251,825	$ 253,341	$ 247,211

¹In preparing its comparative information, the Company has adjusted amounts reported previously in the condensed consolidated balance sheets as a result of the retrospective application of the amendments to IAS 32, Financial Instruments - Presentation.
Refer to Note 3 for details regarding adjusted amounts.

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

CORBY SPIRIT AND WINE LIMITED
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Not audited or reviewed by the Company's external auditor)
(in thousands of Canadian dollars, except per share amounts)

			For the Three Months Ended
			Sept. 30,	Sept. 30,
		Notes	2014	2013

Revenue		9	$ 34,755	$ 36,735

Cost of sales			(12,383)	(12,799)
Marketing, sales and administration			(15,814)	(14,027)
Other income		10	24	23

Earnings from operations			6,582	9,932

Financial income		11	460	459
Financial expenses		11	(287)	(319)
			173	140

Earnings before income taxes			6,755	10,072

Current income taxes			(1,527)	(2,455)
Deferred income taxes			(293)	(98)
Income taxes			(1,820)	(2,553)

Net earnings			$ 4,935	$ 7,519

Basic earnings per share			$ 0.17	$ 0.26
Diluted earnings per share			$ 0.17	$ 0.26

Weighted average common shares outstanding
	Basic		28,468,856	28,468,856
	Diluted		28,468,856	28,468,856

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

CORBY SPIRIT AND WINE LIMITED
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Not audited or reviewed by the Company's external auditor)
(in thousands of Canadian dollars)

				For the Three Months Ended

				Sept. 30	Sept. 30
				2014	2013

Net earnings				$ 4,935	$ 7,519

Amounts that will not be subsequently reclassified to earnings:
	Net actuarial gains			234	232
	Income taxes			(65)	(62)
				169	170

Total comprehensive income				$ 5,104	$ 7,689






INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Not audited or reviewed by the Company's external auditor)
(in thousands of Canadian dollars)

		Share Capital	Accumulated Other Comprehensive Loss	Retained Earnings	Total

Balance as at June 30, 2014		$ 14,304	$ (4,303)	$ 199,140	$ 209,141
Total comprehensive income		-	169	4,935	5,104
Dividends		-	-	(5,123)	(5,123)

Balance as at September 31, 2014		$ 14,304	$ (4,134)	$ 198,952	$ 209,122


Balance as at June 30, 2013		$ 14,304	$ (7,363)	$ 194,370	$ 201,311
Total comprehensive income		-	170	7,519	7,689
Dividends		-	-	(4,840)	(4,840)

Balance as at September 30, 2013		$ 14,304	$ (7,193)	$ 197,049	$ 204,160

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

CORBY SPIRIT AND WINE LIMITED
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(Not audited or reviewed by the Company's external auditor)
(in thousands of Canadian dollars)

		For the Three Months Ended

		Sept. 30,	Sept. 30,
	Notes	2014	2013

Operating activities
Net earnings		$ 4,935	$ 7,519
Adjustments for:
Amortization and depreciation	12	1,869	1,444
Net financial income	11	(173)	(140)
Gain on disposal of property and equipment		(27)	(15)
Income tax expense		1,820	2,553
Provision for employee benefits		(26)	(2)
		8,398	11,359
Net change in non-cash working capital balances	13	(1,964)	(6,846)
Interest received		452	444
Income taxes paid		(2,401)	(2,799)

Net cash from operating activities		4,485	2,158

Investing activities
Additions to property and equipment		(714)	(110)
Additions to intangible assets		-	(10,293)
Proceeds from disposition of property and equipment		45	36
Deposits in cash management pools		1,307	13,049

Net cash used in investing activities		638	2,682

Financing activity
Dividends paid		(5,123)	(4,840)

Net cash used in financing activity		(5,123)	(4,840)

Net increase in cash		-	-
Cash, beginning of period		-	-

Cash, end of period		$ -	$ -

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

CORBY SPIRIT AND WINE LIMITED
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Not audited or reviewed by the Company's external auditor)
(in thousands of Canadian dollars, except per share amounts)

1. GENERAL INFORMATION

Corby Spirit and Wine Limited ("Corby" or the "Company") is a leading Canadian marketer of spirits and importer of wines. The Company derives its revenues from the sale of its owned-brands in Canada and other international markets, as well as commissions earned from the representation of selected non-owned brands in the Canadian marketplace. Revenues predominantly consist of sales made to each of the provincial liquor boards ("LBs") in Canada. The Company also supplements these primary sources of revenue with other ancillary activities incidental to its core business, such as logistics fees.

Corby is controlled by Hiram Walker & Sons Limited ("HWSL"), which is a wholly owned subsidiary of Pernod Ricard, S.A. ("PR"), a French public limited company that controls 51.6% of the outstanding Voting Class A Common Shares of Corby as at June 30, 2014.

Corby is a public company incorporated and domiciled in Canada, whose shares are traded on the Toronto Stock Exchange. The Company's registered address is 225 King Street West, Suite 1100, Toronto, ON M5V 3M2.

Effective November 7, 2013, Corby changed its name and began operating as Corby Spirit and Wine Limited. Prior to this date, Corby operated as Corby Distilleries Limited. Reflecting the change, Corby began trading on the TSX under the symbols CSW.A and CSW.B.

2. BASIS OF PREPARATION

Statement of compliance
These interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting" ("IAS 34"), as issued by the International Accounting Standards Board ("IASB"). These interim condensed consolidated financial statements follow the same accounting policies as the most recent annual consolidated financial statements, except for changes in accounting policies and methods described in Note 3 to these condensed consolidated financial statements. These interim condensd consolidated financial statements should be read in conjunction with the Company's 2014 annual financial statements.

These interim condensed consolidated financial statements were approved by the Company's Board of Directors on November 5, 2014.

Functional and presentation currency
The Company's interim condensed consolidated financial statements are presented in Canadian dollars, which is the Company's functional and presentation currency.

Foreign currency translation
Transactions denominated in foreign currencies are translated into the functional currency using the exchange rate applying at the transaction date. Non-monetary assets and liabilities denominated in foreign currencies are recognized at the historical exchange rate applicable at the transaction date. Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate applying at the balance sheet date. Foreign currency differences related to operating activities are recognized in earnings from operations for the period; foreign currency differences related to financing activities are recognized within net financial income.

Basis of Measurement
These interim condensed consolidated financial statements are prepared in accordance with the historical cost model, except for certain categories of assets and liabilities, which are measured in accordance with other methods provided for by IFRS as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

Use of Estimates and Judgements
The preparation of the interim condensed consolidated financial statements in conformity with IFRS requires management to make certain judgements, estimates and assumptions that affect the application of accounting policies, the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the interim condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. These estimates are made on the assumption the Company will continue as a going concern and are based on information available at the time of preparation. Estimates may be revised where the circumstance on which they were based change or where new information becomes available. Future outcomes can differ from these estimates.

Judgement is commonly used in determining whether a balance or transaction should be recognized in the interim condensed consolidated financial statements and estimates and assumptions are more commonly used in determining the measurement of recognized transactions and balances. However, judgement and estimates are often interrelated.

The Company has applied judgement in determining the tax rates used for measuring deferred taxes and identifying the indicators of impairment for property and equipment, goodwill and intangible assets. In the absence of standards or interpretations applicable to a specific transaction, management uses its judgement to define and apply accounting policies that provide relevant and reliable information in the context of the preparation of the financial statements.

Estimates are used when estimating the useful lives of property and equipment and intangible assets for the purpose of depreciation and amortization, when accounting for or measuring items such as allowances for uncollectible accounts receivable and inventory obsolescence, assumptions underlying the actuarial determination of provision for pensions, income and other taxes, provisions, certain fair value measures including those related to the valuation of share-based payments and financial instruments, and when testing goodwill, intangible assets and other assets for impairment. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

3. ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS

The following new and revised standards and interpretations were effective for Corby on July 1, 2014:

(i) Financial Instruments – Asset and Liability Offsetting

	increase (decrease)
	Sept. 30,	June 30,	June 30,
Balance sheet impacts	2013	2014	2013

Trade receivables	$ 1,981	$ 1,569	$ 1,483
Income taxes and other taxes recoverable	152	(634)	(562)
Accounts payable and accrued liabilities	(2,133)	(935)	(921)

	$ -	$ -	$ -

The implementation of these amendments did not impact equity, net earnings or cash flows in the current and comparative periods.

(ii) Levies

Recent accounting pronouncements

(i) Revenue

(ii) Financial Instruments

The IASB has tentatively decided to require implementation of this standard for annual periods beginning on or after January 1, 2018 and must be applied retrospectively. For Corby, this standard will become effective July 1, 2018. The Company is currently assessing the impact of the new standard on its financial statements and disclosures.

4. FAIR VALUE

The Company uses a fair value hierarchy in order to classify the fair value measurements and disclosures related to the Company's financial assets and financial liabilities. The fair value hierarchy has the following levels:

Level 1 – Quoted market prices in active markets for identical assets or liabilities;
Level 2 – Inputs other than quoted market prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); and
Level 3 – Unobservable inputs such as inputs for the asset or liability that are not based on observable market data.

The level in the fair value hierarchy within which the fair value measurement is categorized in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety.

The Company has no financial instruments carried at fair value on its balance sheet. For financial assets and liabilities that are valued at other than fair value on its balance sheets (i.e., deposits in cash management pools, accounts receivable, accounts payable and accrued liabilities), fair value approximates their carrying value at each balance sheet date due to their short-term maturities. Fair value is determined using Level 2 inputs.

The carrying value of the note receivable approximates fair value based on the present value of future cash flows, based on estimated market rates for instruments of similar terms and conditions. Fair value is determined using Level 2 inputs.

5. ACCOUNTS RECEIVABLE

	Sept. 30,	Sept. 30,	June 30,	June 30,
	2014	2013	2014	2013

Trade receivables	$ 18,598	$ 18,032	$ 16,343	$ 16,491
Due from related parties	9,032	11,204	6,906	7,151
Other	1,673	1,981	1,569	1,483

	$ 29,303	$ 31,217	$ 24,818	$ 25,125

6. INVENTORIES

	Sept. 30,	Sept. 30,	June 30,	June 30,
	2014	2013	2014	2013

Raw materials	$ 2,473	$ 2,150	$ 2,058	$ 2,132
Work-in-progress	40,739	39,427	41,081	39,669
Finished goods	10,792	9,928	9,422	7,282

	$ 54,004	$ 51,505	$ 52,561	$ 49,083

The cost of inventory recognized as an expense and included in cost of goods sold for the three months ended September 30, 2014 was $10,636 (2013 – $10,823). During the three month periods ended September 30, 2014 and 2013, there were no significant write-downs of inventory as a result of net realizable value being lower than cost, and no inventory write-downs recognized in previous years were reversed.

7. NOTE RECEIVABLE

	Sept. 30,	Sept. 30,	June 30,	June 30,
	2014	2013	2014	2013

Note receivable	$ 600	$ 1,200	$ 600	$ 1,200
Less: current portion	600	600	600	600

	$ -	$ 600	$ -	$ 600

As part of the Company's sale of the Seagram Coolers brand on March 15, 2011, the purchase price was satisfied in part by a promissory note secured by specific property and issued by the purchaser in favour of Corby for $2,400, which is to be paid in equal annual instalments of $600 plus interest of 5% per annum. The final payment is due January 31, 2015.

8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

	Sept. 30,	Sept. 30,	June 30,	June 30,
	2014	2013	2014	2013

Trade payables and accruals	$ 22,623	$ 17,325	$ 17,724	$ 17,715
Due from related parties	7,521	7,329	9,050	6,470
Other	1,709	2,133	935	921

	$ 31,853	$ 26,787	$ 27,709	$ 25,106

9. REVENUE

The Company's revenue consists of the following streams:

	Three Months Ended
	Sep. 30,	Sep. 30,
	2014	2013

Case goods sales	$ 29,313	$ 30,540
Commissions (net of amortization of representation rights)	4,408	5,023
Other services	1,034	1,172

	$ 34,755	$ 36,735

Commissions for the quarter are shown net of amortization of long-term representation rights and non-refundable upfront fees of $1,470 (2013 - $1,160). Other services include revenues incidental to the manufacture of case goods, such as logistics fees.

10. OTHER INCOME

The Company's other income consists of the following amounts:

	Three Months Ended
	Sep. 30,	Sep. 30,
	2014	2013

Foreign exchange (loss) gain	$ (21)	$ 8
Gain on disposal of property and equipment	30	15
Other income	15	-

	$ 24	$ 23

11. NET FINANCIAL INCOME AND EXPENSE

The Company's financial income (expense) consists of the following amounts:

	Three Months Ended
	Sep. 30,	Sep. 30,
	2014	2013

Interest income	$ 460	$ 459
Net financial impact of pensions	(287)	(319)

	$ 173	$ 140

12. EXPENSES BY NATURE

Earnings from operations include depreciation and amortization, as well as personnel expenses as follows:

	Three Months Ended
	Sep. 30,	Sep. 30,
	2014	2013

Depreciation of property and equipment	$ 399	$ 284
Amortization of intangible assets	1,470	1,160
Salary and payroll costs	5,345	5,207
Expenses related to pensions and benefits	356	445

	$ 7,570	$ 7,096

13. NET CHANGE IN NON-CASH WORKING CAPITAL BALANCES

	Three Months Ended
	Sep. 30,	Sep. 30,
	2014	2013

Accounts receivable	$ (4,477)	$ (6,077)
Inventories	(1,443)	(2,422)
Prepaid expenses	(187)	113
Accounts payable and accrued liabilities	4,143	1,540

	$ (1,964)	$ (6,846)

14. DIVIDENDS

On November 5, 2014 subsequent to the quarter ended September 30, 2014, the Board of Directors declared a regular quarterly dividend of $0.19 per common share, to be paid on December 12, 2014, to shareholders of record as at the close of business on November 28, 2014. The Board of Directors also declared a special dividend of $0.62 per common share, payable January 9^th, 2015, to shareholders of record as at the close of business on December 12, 2014. The dividends are in accordance with the Company's dividend policy.

15. RELATED PARTY TRANSACTIONS

Transactions with parent, ultimate parent, and affiliates
The majority of Corby's issued and outstanding Voting Class A shares are owned by HWSL. HWSL is a wholly-owned subsidiary of PR. Therefore, HWSL is Corby's parent and PR is Corby's ultimate parent. Affiliated companies are subsidiaries which are controlled by Corby's parent and/or ultimate parent.

The companies operate under the terms of agreements that became effective on September 29, 2006. These agreements provide the Company with the exclusive right to represent PR's brands in the Canadian market for 15 years, as well as providing for the continuing production of certain Corby brands by PR at its production facility in Windsor, Ontario, for 10 years. Corby also manages PR's business interests in Canada, including the Windsor production facility. Certain officers of Corby have been appointed as directors and officers of PR's Canadian entities, as approved by Corby's Board of Directors.

On November 9, 2011, Corby entered into an agreement with a PR affiliate for a new term for Corby's exclusive right to represent ABSOLUT vodka in Canada from September 30, 2013 to September 29, 2021, which is consistent with the term of Corby's Canadian representation of the other PR brands in Corby's portfolio. On September 30, 2013, Corby paid the present value of $10 million, or $10.3 million, for the additional eight years of the new term pursuant to an agreement entered into between Corby and The Absolut Company Aktiebolag, an affiliate of PR and owner of the Absolut brand, to satisfy the parties' obligations under the 2011 agreement.

Effective as of July 1, 2012, the Company entered into a five year agreement with Pernod Ricard USA, LLC ("PR USA"), an affiliated company, which provides PR USA the exclusive rights to represent Wiser's Canadian whisky and Polar Ice vodka in the US. Previously, Wiser's Canadian whisky and Polar Ice vodka were represented by an unrelated third party in this market. The agreement is effective for a five year period ending June 30, 2017.

Transactions between Corby and its parent, ultimate parent and affiliates during the period are as follows:

	Three Months Ended
	Sep. 30,	Sep. 30,
	2014	2013

Sales to related parties
Commissions - parent, ultimate parent and affiliated companies	$ 5,101	$ 5,102
Products for resale at an export level - affiliated companies	1,297	3,770
Bulk spirits - parent	-	6

	$ 6,398	$ 8,878

Cost of goods sold, purchased from related parties
Distilling, blending, and production services - parent	$ 5,658	$ 6,523

Administrative services purchased from related parties
Marketing, selling and administration services - parent	$ 625	$ 600
Marketing, selling and administration services - affiliate	1,803	$ 718

	$ 2,428	$ 1,318

Balances outstanding with related parties are due within 60 days, are to be settled in cash and are unsecured.

During the three month period ending September 30, 2014, Corby sold casks to its parent company for net proceeds of $48 (2013 - $36).

Deposits in cash management pools
Corby participates in a cash pooling arrangement under the Mirror Netting Service Agreement together with PR's other Canadian affiliates, the terms of which are administered by Citibank N.A. effective July 17, 2014. The Mirror Netting Services Agreement acts to aggregate each participant's net cash balance for the purposes of having a centralized cash management function for all of PR's Canadian affiliates, including Corby.

As a result of Corby's participation in this agreement, Corby's credit risk associated with its deposits in cash management pools is contingent upon PR's credit rating. PR's credit rating as at November 5, 2014, as published by Standard & Poor's and Moody's, was BBB- and Baa3, respectively. PR compensates Corby for the benefit it receives from having the Company participate in the Mirror Netting Services Agreement by paying interest to Corby based upon the 30-day CDOR rate plus 0.40%. During the three month period ending September 30, 2014, Corby earned interest income of $461 from PR (2013 – $446). Corby has the right to terminate its participation in the Mirror Netting Services Agreement at any time, subject to five days' written notice.

16. SEGMENT INFORMATION

Corby has two reportable segments: Case Goods and Commissions. Corby's Case Goods segment derives its revenue from the production and distribution of its owned beverage alcohol brands. Corby's portfolio of owned-brands includes some of the most renowned and respected brands in Canada, such as Wiser's Canadian whisky, Lamb's rum, Polar Ice vodka, and McGuinness liqueurs.

Corby's Commissions segment earns commission income from the representation of non-owned beverage alcohol brands in Canada. Corby represents leading international brands such as ABSOLUT vodka, Chivas Regal, The Glenlivet and Ballantine's scotches, Jameson Irish whiskey, Beefeater gin, Malibu rum, Kahlúa liqueur, Mumm champagne, and Jacob's Creek, Wyndham Estate, Stoneleigh and Graffigna wines.

The Commissions segment's financial results are fully reported as "Commissions" in Note 9 of these interim condensed consolidated statements. Therefore, a table detailing operational results by segment has not been provided as no additional meaningful information would result.

17. SUBSEQUENT EVENTS

On November 5, 2014, subsequent to the first quarter ended September 30, 2014, the Board of Directors of Corby declared a special dividend in the amount of $0.62 per common share. This dividend will be paid on January 9, 2015, on Voting Class A Common Shares and Non-voting Class B Common Shares of the Company to shareholders of record as at the close of business on December 12, 2014. This dividend will be in addition to Corby's regular dividend of $0.19 per share which was also declared by Corby's Board of Directors on the same day. The special dividend will result in a cash distribution of approximately $17.7 million to shareholders and will be sourced from the Company's current surplus cash desposits.

SOURCE: Corby Spirit and Wine Limited

CORBY SPIRIT AND WINE LIMITED, John Leburn, Vice-President and Chief Financial Officer, Tel.: 416-479-2400, [email protected], www.Corby.ca

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