The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Globe Investor

News Sources

Take control of your investments with the latest investing news and analysis

Press release from CNW Group

Corby Distilleries Announces Special Dividend, Increased Quarterly Dividend & Reports Earnings for Three Months Ended September 30, 2012

Wednesday, November 07, 2012

Corby Distilleries Announces Special Dividend, Increased Quarterly Dividend & Reports Earnings for Three Months Ended September 30, 201211:45 EST Wednesday, November 07, 2012TORONTO, Nov. 7, 2012 /CNW/ - Corby Distilleries Limited ("Corby" or the "Company") (TSX:CDL.A, TSX:CDL.B) declared a special dividend of $0.54 per share payable on January 10, 2013 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 14, 2012. In view of the substantial impact the October 31, 2012 disposal transaction had on net earnings, it was deemed that an element of the payout be classed as a special dividend. The special dividend will result in a cash distribution of $15.4 million to shareholders and will be sourced from Corby's current surplus cash position.This will ensure that the regular dividend is based on Corby's net earnings from its core business activities and, subject to business conditions and opportunities and appropriate adjustment for extraordinary events, will be paid quarterly on the basis of an annual amount equal to 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 $0.17 per share payable on December 14, 2012 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 30, 2012, which represents an increase to regular quarterly dividends of 13% when compared to last year.Net earnings for the quarter ended September 30, 2012 totaled $7.0 million (or $0.25 per share), representing a decrease of $2.5 million when compared with the same quarter last year. The financial results for the quarter were substantially impacted by the sale of certain non-core brands and the subsidiary that owned the manufacturing plant in Montreal on October 31, 2011.After removing the impact of the aforementioned sale transaction, net earnings for the quarter were $7.0 million or $0.25 per share compared to $8.0 million or $0.28 per share when compared with the same quarter last year. The decrease in net earnings is primarily the result of having made significantly higher investment in advertising and promotional activities phased into this quarter when compared with the same quarter last year. This was partially offset by a strong shipment volume performance from Corby's key brands, namely Wiser's Canadian whisky and Polar Ice vodka. The increased advertising and promotional investment supported the Launch of Wiser's Spiced whisky and the re-launch of Lamb's Black Sheep as well as strategic changes to key brand's promotional calendars."We are happy with the strong headline growth from our priority brands, which continue to perform ahead of their respective categories. Our continued success is down to making large breakthrough investments behind these priorities, and as such, our first quarter earnings are impacted by a heavy phasing of A&P spend into this quarter." 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 consolidated financial statements and accompanying notes for the first quarter ended September 30, 2012, prepared in accordance with International Financial Reporting Standards.About CorbyCorby Distilleries 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 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 and Graffigna wines.The existing Voting Class A Common Shares and Non-voting Class B Common Shares of the Company are traded on the Toronto Stock Exchange under the symbols CDL.A and CDL.B.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 amounts above are stated in Canadian dollars.CORBY DISTILLERIES LIMITEDManagement's Discussion and AnalysisSeptember 30, 2012 The following Management's Discussion and Analysis ("MD&A") dated November 7, 2012, 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, 2012, prepared in accordance with International Financial Reporting Standards ("IFRS"). 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, 2012.This MD&A contains forward-looking statements, including statements concerning possible or assumed future results of operations of Corby Distilleries Limited ("Corby" or the "Company"). 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, 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. Additional factors are noted elsewhere in 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 7, 2012. 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.The Company's fiscal year end is June 30. Unless otherwise indicated, all comparisons of results for the first quarter of fiscal 2013 (three months ended September 30, 2012) are against results for the first quarter of fiscal 2012 (three months ended September 30, 2011). All dollar amounts are in Canadian dollars unless otherwise stated.Business OverviewCorby 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 "CDL.A" (Voting Class A Common Shares) and "CDL.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 and miscellaneous bulk spirit sales. Revenue from Corby's owned-brands predominantly consists of sales made to each of the provincial liquor boards in Canada, and also includes sales to international markets. Comparative figures for the period ending September 30, 2011 also include contract bottling services which were derived from a formerly owned bottling facility (sold October 31, 2011).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.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.The Company 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 third party vendors. The Company also utilizes a third-party manufacturer in the UK to produce its Lamb's rum products destined for sale in countries located outside North America. Corby's Lamb's rum products sold in North America continue to be manufactured at HWSL's production facility.In most provinces, Corby's route to market in Canada entails shipping its products to government-controlled liquor boards ("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 US and UK and the Company has a different route to market for each. For the US market, Corby manufactures its products in Canada and ships directly to its US distributor.  For the UK market, Corby utilizes a third party contract bottler and distribution company for the production and distribution of Lamb's rum. International sales typically account for less than 10% of Corby's total annual sales. Distributors in both markets sell to various local wholesalers and retailers who in turn sell directly to the consumer. Reliable consumer purchase data is not readily available for these international markets and is, therefore, not discussed in this MD&A.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 OutlookCorby'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 moving forward.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. Recent disposal transactions (the sale of the Seagram Coolers brand in March 2011, and the October 2011 sale of certain non-core brands and the subsidiary that owned the Montreal bottling facility) reflect this strategy by streamlining Corby's portfolio and thus refocusing resources on key brands.Key to brand strategies being implemented 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 addition, management is convinced that innovation is key 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. The Company stresses its core values throughout its organization, including those of conviviality, straightforwardness, commitment, integrity and entrepreneurship.Significant EventsCorby's Board of Directors declare a special dividendOn November 7, 2012, the Corby Board of Directors declared a special dividend of $0.54 per share payable on January 10, 2013 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 14, 2012. In view of the substantial impact the October 31, 2012 disposal transaction had on net earnings, it was deemed that an element of the payout be classed as a special dividend. This will ensure that the regular dividend is based on Corby's net earnings from its core business activities and, subject to business conditions and opportunities and appropriate adjustment for extraordinary events, will be paid quarterly on the basis of an annual amount equal to the greater of 75% of net earnings per share in the preceding fiscal year ended June 30, and $0.60 per share.In addition, also on November 7, 2012, the Corby Board of Directors declared a regular dividend of $0.17 per share payable on December 14, 2012 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 30, 2012.The special and regular dividend will result in a cash distribution of $15.4 million and $4.8 million, respectively, to shareholders and will be sourced from Corby's current surplus cash position.Corby Distilleries Limited and Pernod Ricard USA, LLC Announce Distribution AgreementEffective 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 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. Since the agreement with PR USA is a related party transaction between Corby and PR USA, 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.Brand Performance ReviewCorby'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 PerformanceThe following chart summarizes the performance of Corby's owned-brands 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. International sales typically account for less than 10% of Corby's total annual revenues.             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)  2012  2011  Growth  Growth                 Brand                Wiser's Canadian whisky  204  196  4%  7%Lamb's rum    150  148  1%  3%Polar Ice vodka    109  94  16%  22%Mixable liqueurs    41  47  (13%)  (9%)                 Total Key Brands    504  485  4%  7%Other Corby-owned brands  58  63  (8%)  (2%)               Total Corby brands   562  548  3%  6%                  Disposed brands  -   82  (100%)  (100%)                 Total Corby brands including Disposed Brands  562  630  (11%)  (5%) Note that the above chart segregates "Disposed Brands" from the other Corby-owned brands. Disposed Brands include brands that are no longer owned by Corby as a result of the sale of certain non-core brands and the subsidiary that owned the Montreal plant on October 31, 2011. Shipment information associated with these Disposed Brands has been segregated in an effort to display the non-recurring impact on Corby's shipments, as comparisons with prior periods are otherwise no longer meaningful given that Corby no longer owns these brands. Up until the date of their sale, the Disposed Brands sold in the October 31, 2011 sale transaction were showing a trend of decline of 4% over prior year performance.During the quarter, Corby's brands (excluding Disposed Brands) showed 3% growth in shipment volume and 6% growth in shipment value when compared to the same quarter last year.  The Canadian spirits market is trending at +3%  in both retail volume and value based on the same three month period ended September 30, 2012.Polar Ice vodka had a particularly strong quarter with shipment volume and value growth of +16% and +22%, respectively. The vodka category in Canada continued its strong growth (+5% retail volumes) while Polar Ice also significantly benefited from a change in its promotional calendar. Corby's flagship brand, Wiser's Canadian whisky, had a successful quarter with shipment volume and value increases of 4% and 7%, respectively. While market trends for Canadian whisky remained relatively flat, Wiser's continues to outperform its category as it too enjoyed strong support from various media and other promotional programmes. Additionally, the brand's new innovative brand extension "Wiser's Spiced" recently launched and started shipping during the end of the quarter. Shipment volumes for Corby's mixable liqueur brands were behind that of the comparative period, however, mostly reflect changes to the brand's promotional calendar as retail trends continue to be steady and outpaced results for the overall liqueur category.Internationally, Corby's shipment volumes improved 5% on a quarter over quarter comparison basis. While shipments of Wiser's and Polar Ice to the US remained consistent, Lamb's rum volumes in the UK benefited on account of a changing shipment profile since moving its international production to a third party bottler in the UK.Retail Volume and Retail Value PerformanceIt 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, as this information is not readily available. International sales typically account for less than 10% of Corby's total annual revenues.             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)  2012  2011  Growth  Growth               Brand              Wiser's Canadian whisky  172  167  3%  3%Lamb's rum    108  114  (5%)  (8%)Polar Ice vodka  101  86  18%  13%Mixable liqueurs  43  43  (1%)  0%               Total Key Brands  424  410  3%  2%Other Corby-owned brands 2  54  56  (4%)  (7%)               Total    478  466  3%  1%               (1)Refers to sales at the retail store level in Canada, as provided by the Association of Canadian Distillers.(2)Brands impacted by the October 31, 2011 sales transaction have been excluded from this chart.   In an effort to maintain focus on Corby's continuing business activities and the Company's brand prioritization strategy, brands impacted by the aforementioned sale transactions have been excluded from the above chart.Overall, the retail volume performance of Corby-owned brands was consistent with trends seen in the Canadian spirits industry as a whole. The Canadian spirits industry increased +3% in both retail volume and retail value. Corby's key brands showed retail volume growth consistent with the market at +3%, while retail values grew +2%.The growth in the Canadian spirits industry continued to be led by the vodka and rum categories (especially spiced rum). The vodka category had growth of +5% in retail volume and +4% retail value for the three month period ending September 30, 2012. The rum category showed retail volume and value growth of +3% during this same period. Whereas, the Canadian whisky category remained relatively flat for both retail volumes and retail value.Summary of Corby's Key BrandsWiser's Canadian WhiskyCorby's flagship brand, Wiser's Canadian whisky, once again outperformed the Canadian whisky category with +3% growth in retail sales volumes and value during the three month period ending September 30, 2012. Meanwhile the Canadian whisky category remained flat during this period. The Company continued to build upon the brand's success and capitalize on market trends for premium and flavoured spirits with the launch of Wiser's Spiced during the quarter.Lamb's RumLamb's rum, one of the top-selling rum families in Canada, experienced a decline in retail volumes during the three month period ending September 30, 2012. Specifically, retail volume decreased 5% while retail value declined 8% on a quarter over quarter comparison basis, while the rum category in Canada increased 3% on retail value and retail volume. The growth in the rum category has been entirely driven by the growth in the spiced rum category, while consumer consumption of white rum has been flat on a quarter-over-quarter comparison basis. The Lamb's rum family has a significant amount of its volume weighted in white rum, and its performance is reflective of the performance of the category. Most recently during the summer months of 2012, the Company re-launched its spiced rum variant, Lamb's Black Sheep, offering an improved flavour profile and new packaging.Polar Ice VodkaPolar Ice vodka is among the top three largest vodka brands in Canada. Changes to the brand's promotional calendar and strategic pricing in key markets during the quarter have further built upon success the brand achieved in the last fiscal year. Market trends show growth of +18% in retail volume and +13% in retail value. The vodka category in Canada was +5% for retail volume and +4% for retail value when compared to the same three month period of the prior year. Aggressive investment in key markets, specifically Alberta, supported with an outdoor "Canada's Vodka" media campaign and strategic pricing were key reasons consumers have re-engaged with the brand during the last year.Mixable LiqueursCorby's portfolio of mixable liqueur brands consists of McGuinness liqueurs (which is Canada's largest mixable liqueur brand family) and Meaghers liqueurs. Retail value and volumes for Corby's mixable liqueurs portfolio where slightly ahead of market trends (retail volume and value at -1%) when compared to the same period last year, while the category as a whole declined -2% for volume and -3% for value over this same period.Other Corby-Owned BrandsOther Corby-Owned brands as a group had declines in retail volume of -4% and -7% in retail value for the three month period ending September 30, 2012. Royal Reserve, a Canadian whisky, is the most significant brand in this grouping. This brand's performance was behind the Canadian whisky category as a whole, with retail volumes at -7% and retail value at -9% for the same three month period. The brand experienced difficulties in Western Canada as consumers trended toward more premium whisky offerings.Financial and Operating ResultsThe following table presents a summary of certain selected consolidated financial information of the Company for the years ended September 30, 2012 and 2011.                (in millions of Canadian dollars,  Three Months Ended   Sept. 30,   Sept. 30,        except per share amounts)   2012   2011    $ Change    % Change                 Revenue $35.9  $  44.2  $(8.3)   (19%)                Cost of sales  (14.0)   (19.4)   5.4   (28%)Marketing, sales and administration  (12.4)   (11.9)   (0.5)   4%Other income (expense)  0.0   (0.3)   0.3   (106%)                Earnings from operations  9.5   12.6   (3.1)   (25%)                Financial income  0.4   0.5   (0.1)   (20%)Financial expenses  (0.1)   (0.2)   0.1   (32%)Net financial income  0.3   0.3   0.0   5%                Earnings before income taxes  9.8   12.9   (3.2)   (24%)Income taxes  (2.8)   (3.5)   0.7   (20%)                Net earnings $7.0  $9.5  $(2.5)   (26%)                Per common share                - Basic net earnings $0.25  $0.33  $(0.09)   (26%) - Diluted net earnings $0.25  $0.33  $(0.09)   (26%)                 Overall Financial Results Financial results for the quarter were substantially impacted by the sale of certain non-core brands and the subsidiary that owned the manufacturing plant in Montreal on October 31, 2011. As such, from November 1, 2011 and onward, results are impacted by the reduction of earnings resulting from this sale transaction as Corby's results no longer include earnings associated with the brands and manufacturing facility sold. However, the comparative period for the quarter ended September 30, 2011 includes the financial results of those brands and activities related to the bottling plant for the full three month period, given the Company's ownership at that time. In order to effectively assess Corby's current year's results against those of the prior year, the impact of the aforementioned sale transaction has been removed from the discussion, where noted.As noted in the Financial and Operating Results chart, the Company's net earnings decreased $2.5 million for the quarter compared to same quarter last year. After removing the impacts of the aforementioned sale transaction, net earnings decreased $1.0 million or 13%, when compared to the same quarter last year. Earnings per share decreases mirror these results on the same comparative basis.Positive shipment value growth (+6%) from Corby's owned-brands was offset by the Company having made significantly higher (+$1.4 million) investment in advertising and promotional activities phased into this quarter when compared with the same quarter last year. In addition, commission income from represented brands was also lower (-$0.4 million), on account of reduced commissioned sales volumes and the receipt of a one-time termination payment from a formerly represented brand owner in the comparative period.The increased advertising and promotional investment this quarter supported the launch of Wiser's Spiced whisky and the re-launch of Lamb's Black Sheep. As well, a shift in the promotional calendar versus last year related to a Polar Ice vodka program also contributed to the increased spend on a quarter over quarter comparison basis.RevenueThe following highlights the key components of the Company's revenue streams:                   Three Months Ended   Sept. 30,   Sept. 30,        (in millions of Canadian dollars)   2012   2011   $ Change    % Change                 Revenue streams:                Case goods (excluding Disposed Brands) $28.5  $28.1  $0.4   1% Commissions  4.3   4.7   (0.4)   (9%) Other services  3.1   1.5   1.6   107%Revenue, excluding Disposed Brands  35.9   34.3   1.6   5%                Disposed Brands  -    9.9   (9.9)   (100%)                Revenue $35.9  $44.2  $(8.3)   (19%)                 Removing the impact of the aforementioned sale transaction (which is denoted in the above chart as "Disposed Brands"), revenue from the remaining Corby brand portfolio and other business activities increased +5% compared to the same period last year or $1.6 million.As previously discussed in the "Shipment Volume and Shipment Value Performance" section of this MD&A, Corby's owned-brands, or "Case Goods", saw its gross revenue increase +6% this quarter when compared to the same quarter last year. Note however, that international accounting standards require that certain advertising and promotional activities be reported net of revenue. As such, the revenue chart presented above indicates a net increase in Case Goods revenue of +1%, or $0.4M.The increase in Case Goods revenue is driven by new pricing strategies and refocused promotional activities for certain key brands, notably Polar Ice vodka and Wiser's Canadian whisky. Case goods also benefited from the introduction of new innovations, most notably Wiser's Spiced whisky, and increased export sales activity in the UK markets.Commissions are earned from the representation of PR and select Agency brands in the Canadian market. The Company experienced a decrease of $0.4 million this quarter on account of reduced commissioned sales volumes combined with the impact of having received a one-time termination payment from a formerly represented Agency brand owner in the comparative period.Other services include revenue ancillary to the sale of Case Goods, such as logistics fees and miscellaneous bulk spirit sales. The increase in other services is almost entirely the result of having a higher volume of bulk whisky sales to a former contract bottling customer; these sales are not expected to continue into future periods as Corby's contractual commitments have now been fulfilled.Cost of salesCost of sales was $14.0 million, representing a decrease of 28%, or $5.4 million on a quarter over quarter comparison basis. The decrease in cost of sales is mostly the result of the aforementioned disposal transaction, as the Company no longer incurred production costs associated with the disposed brands and bottling facility. Gross margin for the year was 55.6% versus 51.0% last year (note: commissions are not included in this calculation). The improvement in gross margin is also a result of the disposal transactions (i.e., sale of the Montreal plant and certain non-core brands as of October 31, 2011). The revenues derived from the formerly owned-brands and bottling facility generated significantly less margin than Corby's remaining Case Goods business.Marketing, sales and administrationMarketing, sales and administration expenses were $12.4 million for the quarter, an increase of 4% or $0.5 million compared to the same quarter last year. This increase is primarily driven by advertising and promotional spend for key brands and new product innovations. Administrative expenses have remained consistent with the comparative period.Other Income and ExpensesOther income and expenses include such items as realized foreign exchange gains and losses, gains on sale of property and equipment, and amortization of actuarial gains and losses related to the Company's pension and post-retirement benefit plans. The comparative period includes $0.4 million in legal, professional and other types of fees related to the aforementioned sale transaction, which closed subsequent to the quarter ending September 30, 2011.Net Financial IncomeNet 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 quarter-over-quarter.Income taxesIncome tax expense for the year was $2.8 million as compared to $3.5 million last year. The following chart provides a reconciliation of the effective tax rate to the statutory rates for the period:               Three Months Ended       Sept. 30,   Sept. 30,    2012   2011        Combined basic Federal and Provincial tax rates  27%   27%Other  1%   0%        Effective tax rate    28%   27%         Liquidity and Capital ResourcesCorby's sources of liquidity are its deposits in cash management pools of $112.9 million as at September 30, 2012, and its cash generated from operating activities. Corby's total contractual maturities are represented by its accounts payable and accrued liabilities and income and other taxes payable balances, which totalled $25.1 million as at September 30, 2012, and are all due to be paid within one year. The Company does not have any liabilities under short- or long-term debt facilities.In addition, and as discussed in the Related Party section of this MD&A, the company has a commitment to purchase the representation rights for ABSOLUT and Plymouth gin brands for an additional term beginning September 30, 2013. The additional term will commence September 30, 2013 and last until September 29, 2021 and will require a cash payment of $10.3 million on the date of commencement. The cost of the additional term will be recorded as a definite-lived intangible asset and will be amortized on a straight-line basis over the 8 year term of the agreement. The amortization will be recorded net of commissions. This treatment is consistent with current accounting policies applied to long-term representation rights. Funding for the settlement of this commitment will be sourced from deposits in cash management pools.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)  2012   2011    Change            Operating activities            Net earnings, adjusted for non-cash items $10.9  $  14.3  $(3.4) Net change in non-cash working capital  2.0   2.6   (0.6) Net payments for interest and income taxes  (5.9)   (3.3)   (2.6)   7.0   13.6   (6.6)            Investing activities            Proceeds from disposition of property and equipment  0.1   -   0.1 Deposits in cash management pools  (2.8)   (9.6)   6.8   (2.7)   (9.6)   6.9            Financing activities            Dividends paid  (4.3)   (4.0)   (0.3)            Net change in cash  $  -   $-  $-             Operating activitiesDuring the quarter, net cash flows from operating activities was $7.0 million compared to $13.6 million in the same quarter last year, representing a decrease of $6.6 million. Cash flows from operating activities have been significantly impacted by the previously mentioned sale of the Montreal plant and non-core brands. Reduced net earnings, adjusted for non-cash items, have been further impacted by an increase in tax payments compared to the same period last year.Investing activitiesCash used in investing activities was $2.7 million this quarter compared to $9.6 million during the same quarter last year and substantially reflects the amount deposited in cash management pools. Changes in the amount deposited in cash management pools is dependent on how much cash is available after operating, other investing, and financing activities are completed. In the current year, less cash was deposited primarily due to a lower amount of cash generated from operating activities and a higher amount of dividends paid.Deposits made to cash management pools represent cash on deposit with The Bank of Nova Scotia 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. For more information related to these deposits, please refer to the "Related Party Transactions" section of this MD&A.Financing activitiesCash used for financing activities totals $4.3 million for the quarter and represents the payment of dividends to shareholders. Dividend payments increased over the prior year due to changes to the dividend policy which increased regular quarterly dividends to $0.15 per share from $0.14 per share effective November 9, 2011. The payment of these dividends is in accordance with the Company's stated dividend policy.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              2013 - special  November 7, 2012 (special dividend)  December 14, 2012  January 10, 2013  $0.542013 - Q1  November 7, 2012  November 30, 2012  December 14, 2012   0.172012 - Q4  August 29, 2012  September 15, 2012  September 30, 2012   0.152012 - Q3  May 10, 2012  May 31, 2012  June 15, 2012   0.152012 - Q2  February 8, 2012  February 29, 2012  March 15, 2012   0.152012 - special  November 9, 2011 (special dividend)  December 15, 2011  January 3, 2012   1.852012 - Q1  November 9, 2011  November 30, 2011  December 15, 2011   0.152011 - Q4  August 24, 2011  September 15, 2011  September 30, 2011   0.142011 - Q3  May 11, 2011  May 31, 2011  June 15, 2011   0.142011 - Q2  February 9, 2011  February 28, 2011  March 15, 2011   0.14Outstanding Share DataAs at November 7, 2012, 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 TransactionsTransactions with parent, ultimate parent, and affiliatesCorby 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.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.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. These brands were acquired by PR subsequent to the original representation rights agreement dated September 29, 2006.Further, on November 9, 2011, Corby entered into an agreement with PR 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 for the other PR brands in Corby's portfolio. Under the agreement, Corby will pay the present value of $10 million for the additional eight years of the new term to PR at its commencement. Since the agreement with PR 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. Pursuant to this agreement, 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.On 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 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 poolsCorby 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 The Bank of Nova Scotia. The 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 7, 2012, 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 LIBOR rate 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 InformationSummary of Quarterly Financial Results                         (in millions of Canadian dollars,  Q1  Q4  Q3  Q2  Q1  Q4  Q3  Q2except per share amounts)  2013  2012  2012  2012  2012  2011  2011  2011                         Revenue $35.9 $32.4 $29.2 $40.9 $44.2 $40.1 $32.4 $45.5Earnings from operations  9.5  6.6  6.1  33.6  12.6  9.4  4.3  13.7Net earnings, excluding undernoted items (1)  7.0  4.9  4.6  9.0  9.9  6.8  3.1  9.8Net earnings  7.0  4.9  4.6  27.1  9.5  6.8  4.8  9.8Basic EPS  0.25  0.17  0.16  0.95  0.33  0.24  0.11  0.34Diluted EPS  0.25  0.17  0.16  0.95  0.33  0.24  0.11  0.34(1) Net earnings have been adjusted for the net after-tax gain on the sale of plant and brands of $17.7 million in 2012 and for the net after-tax loss on the sale of Seagram Coolers of $1.7 million in 2011.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 chart also highlights the effect the aforementioned sale transactions (i.e., the sale of certain non-core brands and the subsidiary that owned the Montreal plant in Q2-2012, and the sale of the Seagram Coolers brand in Q3-2011) had on the quarterly results. The line item in the chart "Net earnings, excluding undernoted items" removes the gain or loss on sale impacts. Also note that revenue has been substantially impacted as well, given the fact the company sold various brands and a contract bottling facility and thus no longer recognized revenue associated with the brands and activities after the date of sale.Specifically, on a quarter-over-quarter comparative basis, revenues for Q1-2013 are lower by $9.9 million when compared to Q1-2012 due to the aforementioned changes to the Company's brand portfolio. Removing the impact of the aforementioned sale transactions, revenue from the remaining Corby brand portfolio and other business activities increased 5% for Q1-2013 when compared with Q1-2012. In addition, the Company's net earnings were impacted by the gain on the sale of the Montreal plant and non-core brands in the amount of $18.1 million in the second quarter for 2012. The third quarter of 2011 was impacted by a loss on the sale of the Seagram Coolers brand in the amount of $1.7 million.For further information regarding these sale transactions please refer to Note 19 to the audited consolidated financial statements for the year ending June 30, 2012.New Accounting Pronouncements(a)     New accounting standards(i)     Deferred Taxes - Recovery of Underlying AssetsThe IASB issued an amendment to IAS 12, "Income Taxes" ("IAS 12 amendment"), which introduces an exception to the general measurement requirements of IAS 12 in respect of investment properties measured at fair value. The IAS 12 amendment is effective for annual periods beginning on or after January 1, 2012. The IAS 12 amendment did not have an impact on the Company's results of operations, financial position or disclosures.(ii)     Financial Instruments - DisclosuresOn June 16, 2011 the IASB issued amendments to IAS 1, "Presentation of Financial Statements." The amendments enhance the presentation of Other Comprehensive Income ("OCI") in the financial statements. A requirement has been added to present items in other comprehensive income grouped on the basis of whether they may be subsequently reclassified to earnings in order to more clearly show the effect the items of other comprehensive income may have on future earnings. The amendments are effective for annual periods beginning on or after July 1, 2012. The amendments have not had an impact on the Company's presentation of other comprehensive income.(b)     Recent accounting pronouncementsA number of new standards, amendments to standards and interpretations have been issued but are not yet effective for the financial year ending June 30, 2013, and accordingly, have not been applied in preparing these consolidated financial statements:(i)     Consolidated Financial StatementsIn May 2011 the IASB issued IFRS 10, "Consolidated Financial Statements" ("IFRS 10"), IFRS 11, "Joint Ventures" ("IFRS 11"), and IFRS 12, "Disclosure of Interest in Other Entities" ("IFRS 12").  In addition, the IASB amended IAS 27, "Consolidated and Separate Financial Statements" ("IAS 27") and IAS 28, "Investments in Associates and Joint Ventures" ("IAS 28"). The objective of IFRS 10 is to define the principles of control and establish the basis of determining when and how an entity should be included within a set of consolidated financial statements. IFRS 11 establishes principles to determine the type of joint arrangement and guidance for financial reporting activities required by entities that have an interest in an arrangement that is jointly controlled. IFRS 12 enables users of the financial statements to evaluate the nature and risks associated with its interest in other entities and the effects of those interests on its financial performance.IFRS 10, 11 and 12, and the amendments to IAS 27 and 28 are all effective for annual periods beginning on or after January 1, 2013 and must be applied retrospectively. For Corby, this set of standards and amendments become effective July 1, 2013. The Company is currently assessing the impact of IFRS 10, 11, and 12 and the amendments to IAS 27 and 28 on its consolidated financial statements.(ii)     Fair Value MeasurementOn May 12, 2011 the IASB issued IFRS 13, "Fair Value Measurement" ("IFRS 13") which defines fair value, provides guidance in a single IFRS framework for measuring fair value and identifies the required disclosures pertaining to fair value measurement. IFRS 13 applies to all International Financial Reporting Standards that require or permit fair value measurements or disclosures. IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This standard is effective for annual periods beginning on or after January 1, 2013, and must be applied retrospectively. For Corby this standard becomes effective July 1, 2013. The Company is currently assessing the impact of IFRS 13 on its consolidated financial statements.(iii)     Employee BenefitsOn June 16, 2011 the IASB issued amendments to IAS 19, "Employee Benefits" ("IAS 19"), which eliminates the option to defer the recognition of actuarial gains and losses through the "corridor" approach, revises the presentation of changes in assets and liabilities arising from defined benefit plans and enhances the disclosures for defined benefit plans. IAS 19 is effective for annual periods beginning on or after January 1, 2013, and must be applied retrospectively. For Corby, the revisions to this standard become effective July 1, 2013. The Company is currently assessing the impact of this amendment on its consolidated financial statements.(iv)     Financial Instruments - Asset and Liability OffsettingThe IASB has issued amendments to IFRS 7 and IAS 32, "Financial Instruments: Presentation" ("IAS 32"), which clarify the requirements for offsetting financial instruments and require new disclosures on the effect of offsetting arrangements on an entity's financial position. The amendments to IFRS 7 are effective for annual periods beginning on or after January 1, 2013 and must be applied retrospectively. For Corby, this standard will become effectively July 1, 2013. The Company is assessing the impact of the amendments to IFRS 7 and IAS 32 on its consolidated financial statements.(v)     Financial InstrumentsThe 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. IFRS 9 is effective for annual periods beginning on or after January 1, 2015 and must be applied retrospectively. For Corby, this standard will become effective July 1, 2015. The Company is currently assessing the impact of the new standard on its consolidated financial statements.Internal Controls Over Financial ReportingThe 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 ManagementThe 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 RegulatoryThe 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 PatternsBeverage 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 the 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 InterruptionThe 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 programs and proactively manages production and supply chains to mitigate any potential risk to consumer safety or Corby's reputation and profitability.Environmental ComplianceEnvironmental 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 ConsolidationIn recent years, the global beverage alcohol industry has experienced a significant amount of consolidation. 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.CompetitionThe 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. Being a leading Canadian beverage alcohol company helps facilitate recruitment efforts.Credit RiskCredit 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 FluctuationsThe 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 program 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 FluctuationsCommodity 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 RiskThe 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 ExposureThe 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 ExposureThe 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 ProvidersHWSL, 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 ProtectionThe 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 AssetsGoodwill 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, 2012                 Associated Brand   Associated Market   Goodwill   Intangibles   Total                 Various PR brands   Canada  $  -  $40.8  $40.8Lamb's rum   United Kingdom(1)   1.4   11.8   13.2Corby domestic brands   Canada    1.9   -   1.9                        $3.3  $52.6  $55.9                 (1) The international business for Lamb's rum is primarily focused in the UK, however, the trademarks and licences purchased, 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 BenefitsThe 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 15 of the consolidated financial statements for the year ended June 30, 2012.CORBY DISTILLERIES LIMITED                INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS                      (Unaudited)                (in thousands of Canadian dollars)                                         Sept. 30,   June 30,   Sept. 30,    Note   2012   2012   2011                 ASSETS                Deposits in cash management pools      $  112,920  $110,113  $106,244Accounts receivable   4   30,126   28,611   29,171Inventories   5   47,040   47,760   58,578Prepaid expenses       280   555   1,607Current portion of note receivable   6   600   600   600Assets held for sale   7   -    -   11,060                 Total current assets       190,966   187,639   207,260Note receivable   6   1,200   1,200   1,800Deferred income taxes       -    -   1,604Property and equipment       7,245   7,524   6,754Goodwill       3,278   3,278   3,278Intangible assets       52,639   53,771   57,169                 Total assets      $255,328  $253,412  $ 277,865                 LIABILITIES                Accounts payable and accrued liabilities   8  $  24,430  $  22,400  $18,696Income and other taxes payable       712   3,656   433Liabilities held for sale   7   -    -   1,201                 Total current liabilities       25,142   26,056   20,330Provision for pensions       10,719   10,550   12,822Deferred income taxes       923   983   -                 Total liabiliites       36,784   37,589   33,152                 Shareholders' equity                Share capital       14,304   14,304   14,304Retained earnings       204,240   201,519   230,409                 Total shareholders' equity       218,544   215,823   244,713                 Total liabilities and shareholders' equity      $255,328  $ 253,412  $277,865                           CORBY DISTILLERIES LIMITED            INTERIM CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS                   (Unaudited)            (in thousands of Canadian dollars, except per share amounts)                                 For the Three Months Ended                     Sept. 30,   Sept. 30,    Note   2012   2011             Revenue   9  $35,940  $44,223             Cost of sales       (14,038)   (19,378)Marketing, sales and administration       (12,413)   (11,921)Other income and expense   10   (18)   (311)             Earnings from operations       9,471   12,613             Financial income       452   495Financial expenses       (137)   (162)Net financial income   11   315   333             Earnings before income taxes       9,786   12,946             Current income taxes       (2,855)   (3,633)Deferred income taxes       60   147Income taxes       (2,795)   (3,486)             Net earnings      $6,991  $9,460             Basic earnings per share      $0.25  $0.33Diluted earnings per share      $  0.25  $0.33             Weighted average common shares outstanding            Basic       28,468,856   28,468,856Diluted       28,468,856   28,468,856               CORBY DISTILLERIES LIMITED      INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME       (Unaudited)      (in thousands of Canadian dollars)                  For the Three Months Ended               Sept 30,   Sept 30,     2012   2011          Net earnings    $  6,991   $9,460          Other comprehensive income    -    -          Total comprehensive income   $ 6,991  $9,460                                  INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY                 (Unaudited)                (in thousands of Canadian dollars)                                     Note  Share Capital  AccumulatedOtherComprehensiveIncome  RetainedEarnings  Total                 Balance as at July 1, 2012     $  14,304 $- $201,519 $215,823Net earnings      -  -  6,991  6,991Other comprehensive income      -  -  -  -Dividends      -  -  (4,270)  (4,270)                 Balance as at September 30, 2012     $14,304 $-  $204,240 $218,544                 Balance as at July 1, 2011     $  14,304 $- $224,935 $239,239Net earnings      -  -  9,460  9,460Other comprehensive income      -  -  -  -Dividends      -  -  (3,986)  (3,986)                 Balance as at September 30, 2011     $14,304 $- $230,409 $244,713                           CORBY DISTILLERIES LIMITED            INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW                     (Unaudited)            (in thousands of Canadian dollars)                                     For the Three Months Ended                         Sept. 30,   Sept. 30,      Notes   2012   2011               Operating activities            Net earnings      $  6,991  $9,460Adjustments for:            Amortization and depreciation   12   1,372   1,568Net financial income   11   (315)   (333)Gain on disposal of property and equipment       (69)   -Income tax expense       2,795   3,486Provision for pensions       77   152          10,851   14,333Net change in non-cash working capital balances   13   2,020   2,556Interest received       385   434Income taxes paid       (6,288)   (3,729)               Net cash from operating activities       6,968   13,594               Investing activities            Additions to property and equipment       (46)   -Proceeds from disposition of property and equipment       155   -Deposits in cash management pools       (2,807)   (9,608)               Net cash used in investing activities       (2,698)   (9,608)               Financing activity            Dividends paid        (4,270)   (3,986)               Net cash used in financing activity       (4,270)   (3,986)               Net increase in cash       -    -Cash, beginning of period       -    -               Cash, end of period      $-   $  -   CORBY DISTILLERIES LIMITEDNOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)(in thousands of Canadian dollars, except per share amounts)1. GENERAL INFORMATION         Corby Distilleries 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 earning commissions 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 in Canada.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 owned 51.6% of the outstanding Voting Class A Common Shares of Corby as at June 30, 2012.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 3M2.2.BASIS OF PREPARATIONStatement of complianceThese 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"). They have been prepared using the accounting policies that were described in Note 3 to the Company's annual consolidated financial statements as at and for the year ended June 30, 2012, except as described in Note 3(a) to these condensed consolidated financial statements.These interim condensed consolidated financial statements should be read in conjunction with the Company's 2012 annual financial statements.These interim condensed consolidated financial statements were approved by the Company's Board of Directors on November 7, 2012.Functional and presentation currencyThe Company's interim condensed consolidated financial statements are presented in Canadian dollars, which is the Company's functional and presentation currency.Foreign currency translationTransactions 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 MeasurementThese 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 described in Note 3 to the Company's annual consolidated financial statements as at and for the year ended June 30, 2012. Historical cost is generally based on the fair value of the consideration given in exchange for assets.SeasonalityThe interim condensed consolidated financial statements should not be taken as indicative of the performance to be expected for the full year due to the seasonal nature of the spirits business. Corby's operations are subject to seasonal fluctuations as 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.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 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 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.SIGNIFICANT ACCOUNTING POLICIES(a)     New accounting standards(i)     Deferred Taxes - Recovery of Underlying AssetsThe IASB issued an amendment to IAS 12, "Income Taxes" ("IAS 12 amendment"), which introduces an exception to the general measurement requirements of IAS 12 in respect of investment properties measured at fair value. The IAS 12 amendment is effective for annual periods beginning on or after January 1, 2012. The IAS 12 amendment did not have an impact on the Company's results of operations, financial postion or disclosures.(ii)     Financial Instruments - DisclosuresOn June 16, 2011 the IASB issued amendments to IAS 1, "Presentation of Financial Statements." The amendments enhance the presentation of Other Comprehensive Income ("OCI") in the financial statements. A requirement has been added to present items in other comprehensive income grouped on the basis of whether they may be subsequently reclassified to earnings in order to more clearly show the effect the items of other comprehensive income may have on future earnings. The amendments are effective for annual periods beginning on or after July 1, 2012. The amendments have not had an impact on the Company's presentation of other comprehensive income.(b)     Recent accounting pronouncementsA number of new standards, amendments to standards and interpretations have been issued but are not yet effective for the financial year ending June 30, 2013, and accordingly, have not been applied in preparing these consolidated financial statements:(i)     Consolidated Financial StatementsIn May 2011 the IASB issued IFRS 10, "Consolidated Financial Statements" ("IFRS 10"), IFRS 11, "Joint Ventures" ("IFRS 11"), and IFRS 12, "Disclosure of Interest in Other Entities" ("IFRS 12").  In addition, the IASB amended IAS 27, "Consolidated and Separate Financial Statements" ("IAS 27") and IAS 28, "Investments in Associates and Joint Ventures" ("IAS 28"). The objective of IFRS 10 is to define the principles of control and establish the basis of determining when and how an entity should be included within a set of consolidated financial statements. IFRS 11 establishes principles to determine the type of joint arrangement and guidance for financial reporting activities required by entities that have an interest in an arrangement that is jointly controlled. IFRS 12 enables users of the financial statements to evaluate the nature and risks associated with its interest in other entities and the effects of those interests on its financial performance.IFRS 10, 11 and 12, and the amendments to IAS 27 and 28 are all effective for annual periods beginning on or after January 1, 2013 and must be applied retrospectively. For Corby, this set of standards and amendments become effective July 1, 2013. The Company is currently assessing the impact of IFRS 10, 11, and 12 and the amendments to IAS 27 and 28 on its consolidated financial statements.(ii) Fair Value MeasurementOn May 12, 2011 the IASB issued IFRS 13, "Fair Value Measurement" ("IFRS 13") which defines fair value, provides guidance in a single IFRS framework for measuring fair value and identifies the required disclosures pertaining to fair value measurement. IFRS 13 applies to all International Financial Reporting Standards that require or permit fair value measurements or disclosures. IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This standard is effective for annual periods beginning on or after January 1, 2013, and must be applied retrospectively. For Corby this standard becomes effective July 1, 2013. The Company is currently assessing the impact of IFRS 13 on its consolidated financial statements.(iii)     Employee BenefitsOn June 16, 2011 the IASB issued amendments to IAS 19, "Employee Benefits" ("IAS 19"), which eliminates the option to defer the recognition of actuarial gains and losses through the "corridor" approach, revises the presentation of changes in assets and liabilities arising from defined benefit plans and enhances the disclosures for defined benefit plans. IAS 19 is effective for annual periods beginning on or after January 1, 2013, and must be applied retrospectively. For Corby, the revisions to this standard become effective July 1, 2013. The Company is currently assessing the impact of this amendment on its consolidated financial statements.(iv)     Financial Instruments - Asset and Liability OffsettingThe IASB has issued amendments to IFRS 7 and IAS 32, "Financial Instruments: Presentation" ("IAS 32"), which clarify the requirements for offsetting financial instruments and require new disclosures on the effect of offsetting arrangements on an entity's financial position. The amendments to IFRS 7 are effective for annual periods beginning on or after January 1, 2013 and must be applied retrospectively. For Corby, this standard will become effectively July 1, 2013. The Company is assessing the impact of the amendments to IFRS 7 and IAS 32 on its consolidated financial statements.(v)     Financial InstrumentsThe 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. IFRS 9 is effective for annual periods beginning on or after January 1, 2015 and must be applied retrospectively. For Corby, this standard will become effective July 1, 2015. The Company is currently assessing the impact of the new standard on its consolidated financial statements.4.ACCOUNTS RECEIVABLE                   Sept. 30,   June 30,   Sept. 30,     2012   2012   2011               Trade receivables   $18,720  $19,722  $19,890Due from related parties   11,346   8,852   7,860Other receivables   60   37   1,421                    $  30,126  $28,611  $29,171As at September 30, 2011, other receivables included amounts owing from Brick Brewing Co., Limited for inventory transferred as part of the sale of the Seagram Coolers brand on March 15, 2011, and also includes interest accrued on the secured promissory note receivable also due from Brick Brewing Co., Limited as described in Note 6 of these financial statements. The amount owing from Brick related to inventory was paid in full during the year ended June 30, 2012. For additional information regarding the sale of the Seagram Coolers brand, please refer to Note 19 of the most recently prepared annual consolidated financial statements for the year ended June 30, 2012.5.INVENTORIES                   Sept. 30,   June 30,   Sept. 30,     2012   2012   2011               Raw materials  $1,969  $1,597  $5,414Work-in-progress   38,759   40,703   44,478Finished goods   6,312   5,460   8,686                    $ 47,040  $ 47,760  $ 58,578 The cost of inventory recognized as an expense and included in cost of goods sold for the three months ended September 30, 2012 was $11,354 (2011 - $16,695). During the three month periods ended September 30, 2012 and 2011, the Company did not record any significant write-downs of inventory as a result of net realizable value being lower than cost. During the three month periods ending September 30, 2012 and 2011, the Company did not reverse any significant inventory write-downs recognized in previous periods.6.NOTE RECEIVABLE                   Sept. 30,   June 30,   Sept. 30,     2012   2012   2011               Note receivable  $  1,800  $1,800  $2,400Less: current portion   600   600   600                    $  1,200  $1,200  $1,800 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 will be paid in equal annual instalments of $600 plus interest of 5% per annum, with the final payment due January 31, 2015.  For additional information regarding this disposal transaction, please refer to Note 19 of the most recently prepared annual consolidated financial statements for the year ended June 30, 2012.7.ASSETS HELD FOR SALEOn September 27, 2011,the Company announced that it had entered into an agreement to sell certain owned-brands as well as the shares of its wholly-owned subsidiary that owns the manufacturing and bottling facility located in Montréal, Québec. The transaction closed on October 31, 2011. The transaction involved the sale of 17 brands, as well as the Montréal-based manufacturing facility where a significant portion of the brands are produced. The assets and liabilities associated with this transaction have been presented as assets and liabilities held for sale in the statement of financial position at September 30, 2011.At September 30, 2011, the disposal group classified as held for sale comprised of the following:Property, plant and equipment   $8,452Goodwill      2,608          Assets classifed as held for sale   $ 11,060                    Deferred income tax liabiities related to assets held for sale   $1,201          Liabilities classified as held for sale   $1,201 8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES                   Sept. 30,   June 30,   Sept. 30,     2012   2012   2011               Trade payables and accruals  $19,425  $16,584  $ 13,340Due to related parties   5,005   5,816   5,356                    $  24,430  $22,400  $18,696 9. REVENUEThe Company's revenue consists of the following streams:            Three months ended       Sept. 30,   Sept. 30,      2012   2011         Case good sales    $28,520  $  31,037Commissions (net of amortization of representation rights)   4,289   4,682Other services     3,131   8,504            $35,940   $44,223 Commissions are shown net of long-term representation rights amortization of $1,133, (2011 - $1,133). Other services include revenues incidental to the manufacture of case goods, logistics fees and miscellaneous bulk spirit sales (the comparative period also includes contract bottling revenues).10. OTHER INCOME AND EXPENSEThe Company's other income (expense) consist of the following amounts:             Three months ended        Sept. 30,   Sept. 30,        2012   2011             Foreign exchange gains     $  17  $81Selling costs related to assets held for sale   -    (404)Gains on disposal of property and equipment   69   -Amortization of actuarial (losses) gains under defined benefit plans   (104)   12                  $  (18)  $(311) 11. NET FINANCIAL INCOMEThe Company's financial income (expense) consists of the following amounts:             Three months ended       Sept. 30,   Sept. 30,       2012   2011            Interest income    $452    $495Interest expense    (44)   (13)Net financial impact of pensions    (93)   (149)                  $ 315    $333 12. EXPENSES BY NATUREEarnings from operations include depreciation and amortization, as well as personnel expenses as follows:         Three months ended        Sept. 30,    Sept. 30,    2012    2011          Depreciation of property and equipment  $  239   $435Amortization of intangible assets   1,133    1,133Salary and payroll costs     4,953    6,144Expenses related to pensions and benefits   574    491             $6,899   $8,203 13. NET CHANGE IN NON-CASH WORKING CAPITAL BALANCES           Three months ended      Sept. 30,   Sept. 30,      2012   2011           Accounts receivable    $(1,515)   $1,834Inventories     720   1,076Prepaid expenses     275   124Income tax and other taxes recoverable / payable   489   318Accounts payable and accrued liabilities   2,051   (796)                  $2,020  $2,556 14. DIVIDENDSOn November 7, 2012, subsequent to the quarter ended September 30, 2012, the Board of Directors declared a regular quarterly dividend of $0.17 per common share, payable December 14, 2012, to shareholders of record as at the close of business on November 30, 2012. The Board of Directors also declared a special dividend of $0.54 per common share, payable January 10, 2013, to shareholders of record as at the close of business on December 14, 2012. The dividends are in accordance with the Company's dividend policy.15.RELATED PARTY TRANSACTIONS Transactions with parent, ultimate parent, and affiliatesThe 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.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. These brands were acquired by PR subsequent to the original representation rights agreement dated September 29, 2006.On November 9, 2011, the Company announced that it has entered into an agreement with PR for a new term for Corby's exclusive right to represent ABSOLUT vodka and Plymouth gin brands in Canada from September 30, 2013 to September 29, 2021, which is consistent with the term of Canadian representation for the other PR brands in Corby's portfolio. Under the agreement, Corby will pay the present value of $10 million for the additional eight years of the new term to PR at its commencement.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. Since the agreement with PR USA is a related party transaction between Corby and PR USA, 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.Related party transactions are recorded at the exchange amount. Transactions between Corby and its parent, ultimate parent and affiliates during the period are as follows:           Three months ended      Sept. 30,   Sept. 30,        2012   2011             Sales to related parties          Commissions - parent, ultimate parent and affiliated companies  $  4,755  $  4,861Blending and bottling services - parent   -    184Products for resale at an export level - affiliated companies   766   129Bulk spirits - parent     3   113                  $  5,524  $  5,287             Cost of goods sold, purchased from related parties        Distilling, blending, and production services - parent   $5,056  $4,421Bulk spirits - parent     -    552                  $5,056  $  4,973             Administrative services purchased from related parties        Marketing, selling and administraton services- parent  $511  $511 Balances outstanding with related parties are due within 60 days, are to be settled in cash and are unsecured.Corby has a number of defined benefit pension plans; contributions to these plans totaled $330 for the three month period ending September 30, 2012 (2011 - $322).During the three month period ending September 30, 2012, Corby sold casks to its parent company for net proceeds of $150 (2011 - $nil).Deposits in cash management poolsCorby 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 The Bank of Nova Scotia. 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 7, 2012, 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 LIBOR rate plus 0.40%. During the three month period ending September 30, 2012, Corby earned interest income of $430 from PR (2011 - $387). 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 INFORMATIONCorby 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 and Wyndham Estate wines.The Commissions segment's financial results are fully reported as "Commissions" in Note 9 of these consolidated statements. Therefore, a chart detailing operational results by segment has not been provided as no additional meaningful information would result.17.SUBEQUENT EVENTSOn November 7, 2012, subsequent to the first quarter ended September 30, 2012, the Board of Directors of Corby declared a special dividend in the amount of $0.54 per common share. This dividend will be paid on January 10, 2012, 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 14, 2012. This dividend will be in addition to Corby's regular dividend of $0.17 per share which was also declared by the Corby's Board of Directors on the same day. The special dividend will result in a cash distribution of approximately $15.4 million to shareholders and will be sourced from the Company's current surplus cash deposits.  SOURCE: Corby Distilleries LimitedFor further information: CORBY DISTILLERIES LIMITEDJohn Leburn, Vice-President and Chief Financial OfficerTel.: 416-479-2400 investors@corby.ca www.Corby.ca