Q1 Financial Report - 2011
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Ag Growth International Inc.<br />
NOTES TO UNAUDITED INTERIM CONSOLIDATED<br />
FINANCIAL STATEMENTS<br />
[in thousands of Canadian dollars, except where otherwise noted and per share data]<br />
March 31, <strong>2011</strong><br />
The Company enters into foreign exchange forward contracts to mitigate foreign currency risk<br />
relating to certain cash flow exposures. The hedged transactions are expected to occur within<br />
a maximum 12-month period. The Company's foreign exchange forward contracts reduce the<br />
Company's risk from exchange movements because gains and losses on such contracts offset<br />
losses and gains on transactions being hedged. The Company's exposure to foreign currency<br />
changes for all other currencies is not material.<br />
Ag Growth's sales denominated in U.S. dollars for the three-month period ended March 31,<br />
<strong>2011</strong> were U.S. $49.2 million, and the total of its cost of goods sold and its selling, general<br />
and administrative expenses denominated in that currency were U.S. $28.8 million.<br />
Accordingly, a 10% increase or decrease in the value of the U.S. dollar relative to its<br />
Canadian counterpart would result in a $4.9 million increase or decrease in sales and a total<br />
increase or decrease of $2.9 million in its cost of goods sold and its selling, general and<br />
administrative expenses. In relation to Ag Growth's foreign exchange hedging contracts, a<br />
10% increase or decrease in the value of the U.S. dollar relative to its Canadian counterpart<br />
would result in an increase or decrease in the foreign exchange loss of $0.8 million and an<br />
increase or decrease to other comprehensive income of $3.6 million.<br />
The counterparty to the contracts is a multinational commercial bank and therefore credit risk<br />
of counterparty non-performance is remote. Realized gains or losses are included in net<br />
earnings and for the three-month period ended March 31, <strong>2011</strong> the Company realized a gain<br />
on its foreign exchange contracts of $798 [2010 - $965 gain].<br />
The open foreign exchange forward contracts as at March 31, <strong>2011</strong> are as follows:<br />
Notional Canadian dollar equivalent<br />
Notional amount<br />
of currency sold<br />
Contract<br />
amount Fair value<br />
Unrealized<br />
gain<br />
U.S. $ $ $ $<br />
37,000 1.09 41,299 4,298<br />
112
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