Corby Distilleries Limited announces quarterly dividend & reports earnings for three months ended September 30, 2007



    TORONTO, Nov. 13 /CNW/ - Corby Distilleries Limited's ("Corby" or the
"Company") Board of Directors today declared a dividend of $0.14 per share
payable on December 14, 2007 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 November 30, 2007.
    Corby also reported net earnings of $9.4 million, or $0.33 per share, for
the three month period ended September 30, 2007. Operating revenue increased
to $41.9 million, or 13% over the same quarter last year, benefiting
substantially from the inclusion of the Seagram's Coolers and international
Lamb's rum operations in the results. Corby's strong first quarter results are
further apparent in the $2.7 million, or 22%, increase in EBITDA(1) over the
same quarter last year.  Basic earnings per share amounted to $0.33 for the
three month period ended September 30, 2007, compared to $2.88 for the same
quarter last year, which included a gain of $72.6 million from the sale of the
Company's equity investment in Tia Maria Group, as part of the transaction
with Pernod Ricard S.A.
    "Our results for the year ended June 30, 2007 reflect our commitment to a
growth strategy based on value, and I am proud to say that our momentum from
the fourth quarter of fiscal 2007 has carried right through to our reported
results for the first quarter of this new fiscal year", said Con Constandis,
Corby's Chief Executive Officer.
    For further details, please refer to Corby's management's discussion and
analysis ("MD&A") and consolidated financial statements and accompanying notes
for the three months ended September 30, 2007 prepared in accordance with
Canadian generally accepted accounting principles ("GAAP").
    Corby's portfolio of owned-brands includes some of the most renowned
brands in Canada, including Wiser's Canadian whiskies, Lamb's rum, Polar Ice
vodka and Seagram's Coolers. Through its affiliation with Pernod Ricard, Corby
also represents leading international brands such as Chivas Regal, The
Glenlivet and Ballantine's scotches, Jameson Irish whiskey, Beefeater gin,
Malibu and Kahlua liqueurs, Mumm champagne, and Jacob's Creek and Wyndham
Estate 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.


    (1) Corby defines "EBITDA" as net earnings before equity earnings,
interest income, income taxes, depreciation, and amortization. This non-GAAP
financial measure has been included in MD&A as it is a measure which
management believes is useful in evaluating and measuring the Company's
operating performance, particularly following the transaction with Pernod
Ricard. EBITDA is also a common measure used by investors, financial analysts
and rating agencies. These groups may use EBITDA and other non-GAAP financial
measures to value the Company and assess its performance. However, EBITDA is
not a measure recognized by GAAP and it does not have a standardized meaning
prescribed by GAAP. Therefore EBITDA may not be comparable to similar measures
presented by other issuers. Investors are cautioned that EBITDA should not be
construed as alternatives to net earnings as determined in accordance with
GAAP as indicators of performance.



    CORBY DISTILLERIES LIMITED
    Interim Management's Discussion and Analysis
    September 30, 2007
    -------------------------------------------------------------------------

    The following Interim Management's Discussion and Analysis ("MD&A") dated
November 13, 2007 should be read in conjunction with the unaudited interim
consolidated financial statements and accompanying notes as at and for the
three month period ended September 30, 2007 prepared in accordance with
Canadian generally accepted accounting principles ("GAAP").
    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; consumer confidence and spending
preferences; regulatory changes; general economic conditions; and the
Company's ability to attract and retain qualified employees 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.
    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
13, 2007. Events occurring after that date could render the information
contained herein inaccurate or misleading in a material respect. Corby may,
but is not obligated to, provide updates to forward-looking statements,
including in subsequent news releases and its interim management's discussion
and analyses filed with regulatory authorities. Additional information
regarding Corby, including the Company's Annual Information Form, is available
on SEDAR at www.sedar.com.
    Unless otherwise indicated, all comparisons of results for the first
quarter of fiscal 2008 (three months ended September 30, 2007) are against
results for the first quarter of fiscal 2007 (three months ended September 30,
2006). All dollar amounts are in Canadian dollars unless otherwise stated.

    Business Overview
    -----------------
    Corby is a leading Canadian manufacturer and marketer of spirits and
importer of wines. Corby's national leadership is sustained by a diverse brand
portfolio which allows the Company to drive profitable organic growth with
strong, consistent cash flows.
    The Company's activities are comprised of the production of spirits,
along with the distribution of owned and represented spirits, liqueurs,
coolers, and wines. Revenues predominantly consist of sales made to each of
the provincial liquor boards in Canada.
    Corby's voting shares are majority owned by Hiram Walker & Sons Limited
("HWSL") located in Windsor, Ontario. HWSL is a wholly owned subsidiary of the
international wine and spirits company Pernod Ricard, S.A. ("PR"). Therefore,
in this MD&A, Corby refers to HWSL as its parent, PR as its ultimate parent
and subsidiaries of PR as its affiliates.
    On September 29, 2006, Corby completed a transaction with PR which
provided the Company the exclusive right to represent PR's brands in the
Canadian market for the next 15 years. In addition to acquiring these rights,
Corby also purchased the international rights to Lamb's rum (excluding the
Canadian rights, which the Company already owned) and the Canadian rights to
Seagram's Coolers. Corby satisfied the purchase price by selling its 45% owned
equity investment in the Tia Maria Group ("TMG") and by making a cash payment
to PR. Revenue earned from the representation of PR's brands in Canada is
presented in the consolidated statement of earnings as "commission income",
whereas revenue earned on the sale of Lamb's rum and Seagram's Coolers is
presented as "sales".
    Corby's portfolio of owned-brands include some of the most renowned and
respected brands in Canada, including Wiser's rye whiskies, Lamb's rum, Polar
Ice vodka and Seagram's Coolers. Through its affiliation with PR, Corby also
represents leading international brands such as Chivas Regal, The Glenlivet
and Ballantine's scotches, Jameson Irish whiskey, Beefeater gin, Malibu rum,
Kahlua liqueur, Mumm champagne, and Jacob's Creek and Wyndham Estate wines.
    The Company sources approximately 72% of its spirits production
requirements from HWSL at its production facilities in Windsor, Ontario, while
another 24% of Corby's spirits production is sourced from the Company's owned
plant in Montreal, Quebec. The remaining 4% is sourced through an affiliated
company located in Scotland which manufactures Lamb's rum for the
international market. Essentially all of Corby's cooler production
requirements are outsourced to a third-party located in Dorval, Quebec.
    Corby's operations are typically subject to seasonal fluctuations in that
the retail holiday season generally results in an increase in consumer
purchases over the course of October, November and December. Further, the
summer months traditionally result in higher consumer purchases of spirits as
compared to the winter and spring months. As a result, the Company's first and
second quarter of each fiscal year tend to typically reflect the impact of
seasonal fluctuations in that more shipments are typically made during those
quarters.

    Brand Performance Review
    ------------------------
    Corby's portfolio of owned-brands continued to grow organically as
represented by 2% sales growth, when compared to the same quarter last year as
measured by sales at the retail store level in Canada; as indicated by market
data provided by the Association of Canadian Distillers ("ACD"). The following
chart provides further details of retail sales in Canada for Corby's
owned-brands:

    
    -------------------------------------------------------------------------
    RETAIL SALES VOLUMES FOR THE CANADIAN MARKET ONLY
    -------------------------------------------------------------------------

                                     3 Months Ended  3 Months Ended  2007 vs.
    (in 000's of 9L cases)            Sep. 30, 2007   Sep. 30, 2006  2006(1)
    -------------------------------------------------------------------------
    Brand
    Wiser's Canadian whisky                     157             153       3%
    Lamb's rum                                  125             127      (2%)
    Polar Ice vodka                              76              72       6%
    Seagram's Coolers                           153             147       4%
    All other                                   204             205      (1%)
    -------------------------------------------------------------------------
    Total                                       715             704       2%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Refers to the growth in sales volumes at the retail store level, as
        measured by case volumes provided by the ACD.
    

    Wiser's Canadian whiskies have continued to be a success story for Corby,
as the brand remained the largest selling brand of rye whisky in Canada,
measured by case volumes. Wiser's Canadian whiskies once again outperformed
the rye whisky category in the first quarter of fiscal 2008. This trend is
consistent with the brand's performance in recent years and is a result of
effective advertising and promotional expenditures in key markets and a loyal
consumer base. Furthermore, the Wiser's Deluxe Canadian whisky brand is
benefiting from the trend among consumers to trade up to premium quality
spirit products.
    The success of Polar Ice vodka can be partially attributed to the strong
growth of the vodka category in Canada. Vodka has been one of the fastest
growing spirit categories in recent years, due to the trend toward martinis
and other forms of cocktail drinks. As a result of its award-winning quality
and design, and effective retail programming, Polar Ice vodka has become one
of the leading premium vodka brands in the Canadian market.
    During the first twelve months in which Corby has owned the Seagram's
Coolers brand, the Company managed to streamline the portfolio by
discontinuing poor performing variants, while also focusing on innovation and
several new product launches, namely Seagram's Vodka Spritzers and Seagram's
Strawberry-Kiwi Swirl which were launched this past spring. The benefits of
these efforts are evident as retail sales of Seagram's Coolers have grown by
4% when compared to the same quarter last year.
    The decline in Lamb's rum retail sales volumes for the three months ended
September 30, 2007 is mainly the result of competitive pricing pressures
experienced in recent months, particularly in the Ontario market. Management
is closely monitoring the competitive situation and will assess the need for
any necessary actions should this trend continue.

    Non-GAAP Financial Measures
    ---------------------------
    Corby defines "EBITDA" as net earnings before equity earnings, interest
income, income taxes, depreciation, and amortization. This non-GAAP financial
measure has been included in this MD&A as it is a measure which management
believes is useful in evaluating and measuring the Company's operating
performance, particularly following the transaction with PR. EBITDA is also a
common measure used by investors, financial analysts and rating agencies.
These groups may use EBITDA and other non-GAAP financial measures to value the
Company and assess its performance.
    However, EBITDA is not a measure recognized by GAAP and it does not have
a standardized meaning prescribed by GAAP. Therefore, EBITDA may not be
comparable to similar measures presented by other issuers. Investors are
cautioned that EBITDA should not be construed as an alternative to net
earnings as determined in accordance with GAAP as an indicator of performance.

    
    Financial and Operating Results
    -------------------------------

    Summary of Quarterly Financial Results


                          3      3      3      3      3      3      3      4
    (in millions     Months Months Months Months Months Months Months Months
     of Canadian      Ended  Ended  Ended  Ended  Ended  Ended  Ended  Ended
     dollars,           Sep.   Jun.   Mar.   Dec.   Sep.   Jun.   Mar.   Dec.
     except per          30,    30,    31,    31,    30,    30,    31,    31,
     share amounts)    2007   2007   2007   2006   2006   2006   2006 2005(2)
    -------------------------------------------------------------------------
    Operating
     revenue          $41.9  $40.1  $33.3  $43.1  $37.1  $33.8  $28.5  $48.3
    EBITDA(1)         $15.0  $ 9.9  $ 7.2  $14.7  $12.2  $ 7.1  $ 6.5  $15.6
    Equity earnings
     from TMG         $   -  $   -  $   -  $   -  $ 2.1  $ 0.8  $ 2.5  $ 3.3
    Gain from sale
     of TMG           $   -  $   -  $   -  $   -  $72.6  $   -  $   -  $   -
    Net earnings      $ 9.4  $ 5.5  $ 4.3  $ 8.7  $81.9  $ 6.3  $ 6.9  $14.9
    EBITDA per
     share(1)         $0.53  $0.35  $0.25  $0.52  $0.43  $0.25  $0.23  $0.55
    Basic EPS(3)      $0.33  $0.20  $0.15  $0.31  $2.88  $0.22  $0.24  $0.52
    Diluted EPS(3)    $0.33  $0.20  $0.15  $0.31  $2.88  $0.22  $0.24  $0.52
    -------------------------------------------------------------------------

    (1) EBITDA for three months ended September 30, 2006 excludes the gain on
        sale of the Company's investment in TMG.
    (2) The Company changed its fiscal year-end from August 31 to June 30
        effective June 30, 2006. As a result, the period ended December 31,
        2005 reflects four months of operations.
    (3) Excluding the gain on sale of the Company's investment in TMG, Basic
        EPS and Diluted EPS for the three months ended September 30, 2006 was
        $0.37 and $0.37 respectively.
    

    Overview

    Corby's strong first quarter results are evidenced by the $2.7 million or
22% increase in EBITDA over the same quarter last year. These strong results
continue to demonstrate the value Corby achieved in its transaction with PR,
which closed on September 29, 2006. The increase in EBITDA is the result of
Corby's successful integration of the Lamb's International and Seagram's
Coolers businesses in addition to a strong underlying performance for the
Company as a whole, as demonstrated by 13% growth in EBITDA from an organic
perspective (excluding Lamb's International and Seagram's Coolers).
    Basic earnings per share amounted to $0.33 for the first quarter,
compared to $2.88 for the same quarter last year, which included a gain of
$72.6 million from the sale of the Company's equity investment in TMG, as part
of the aforementioned transaction with PR.

    Operating revenue

    Corby's operating revenue, consisting of sales revenue and commission
income, was $41.9 million for the first quarter, which represents an increase
of 13% over the same quarter last year. The majority of the increase reflects
the inclusion of the Seagram's Coolers and Lamb's International businesses,
which were acquired at the end of September in the prior year, in addition to
strong performances by both Corby's owned-brands and PR brands (on which Corby
earns commission income).
    The average selling price of Corby's owned spirit brands increased by 6%
as a result of price increases in-line with targeted competitive sets.
Offsetting this was slightly lower volumes as compared to the first quarter of
the prior year. The lower volumes were mainly the result of changes in
shipping patterns to some of the Company's main customers in the first
quarter. This is expected to normalize itself in subsequent periods.
    Net commission income was $4.2 million, as compared to $4.0 million for
the same quarter last year. Current period commission income is reported net
of $1.2 million in amortization expense related to the representation rights
acquired on September 29, 2006 from PR.
    Commission income before amortization from PR brands increased by $1.2
million or 43% when compared to the same quarter last year. The improved
performance of the PR brands is reflective of the fact the Company is now
completely focused on the execution of brand strategies, whereas these
strategies were still being developed in the first quarter of fiscal 2007,
given that only a short period of time had passed since initial integration.
    This success was mainly driven by the Jacob's Creek and Wyndham Estate
wine brands along with Malibu rum. Jacob's Creek and Wyndham Estate wines are
reflecting the effect of increased promotional activities, while Malibu rum
continues to benefit from a strong promotional campaign timed with the launch
of new packaging and its new Tropical Banana flavour. For further details on
the commission income earned by Corby, please refer to the table below:

    
    -------------------------------------------------------------------------
                                                      3 Months      3 Months
                                                         Ended         Ended
    (in millions of                               September 30, September 30,
      Canadian dollars)                                   2007          2006
    -------------------------------------------------------------------------
    Commission from PR brands                         $    4.0      $    2.8
    Less: representation rights amortization              (1.2)            -
    Commission from un-related 3rd parties                 1.4           1.2
    -------------------------------------------------------------------------
    Net commission income                             $    4.2      $    4.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Cost of sales

    Cost of sales was $17.8 million compared to $15.8 million for the same
quarter last year. The increase in cost of sales was commensurate with the
increase in sales revenue, and now includes the costs associated with the
Seagram's Coolers and Lamb's International businesses. Gross margin from the
sale of Corby's owned-brands was 56.1%, as compared with 56.2% during the same
quarter last year. The slight decrease in gross margin reflects the inclusion
of Seagram's Coolers, which traditionally earn a lower gross margin than
Corby's other spirit brands. Offsetting this shift in product mix was improved
pricing on Corby's other owned-brands.

    Marketing, sales and administration

    Marketing, sales and administration expenses were $10.0 million, as
compared to $9.1 million during the same quarter last year. The increase was
mainly the result of higher advertising and promotional ("A&P") spend on the
Company's key brands. The increase in A&P spend reflects promotional activity
associated with Seagram's Coolers during the critical summer selling season in
addition to promotional activity to support the 150th anniversary of the
Wiser's Canadian whisky brand.

    Income taxes

    Corby's income tax provision was $4.8 million compared with $5.5 million
for the same quarter last year. Income tax expense in the first quarter of
fiscal 2007 included $1.2 million in withholding and other taxes related to
the disposition of TMG. The transaction was not subject to further tax expense
as a result of the use of Section 85 rollover provisions in the Income Tax Act
(Canada). Corby has been indemnified for any further tax liabilities resulting
from the disposition of TMG, should they occur, up to a maximum of $16
million.
    As a result of the gain on sale of TMG being largely free of income tax,
the effective tax rate in the comparative quarter is significantly lower than
statutory rates. In addition, the comparative quarter includes equity earnings
from TMG, which further acts to reduce the effective tax rate as these
earnings are not subject to income tax. The chart below demonstrates that
after removing these two factors, the effective tax rate is consistent quarter
over quarter and also in-line with Corby's statutory tax rate of 35%.

    
    -------------------------------------------------------------------------
                                                      3 Months      3 Months
                                                         Ended         Ended
    (in millions of                               September 30, September 30,
      Canadian dollars)                                   2007          2006
    -------------------------------------------------------------------------
    Normalized earnings before income taxes:
      Earnings before income taxes                    $   14.1      $   87.5
      Less: gain from sale of TMG                            -         (72.6)
      Less: equity earnings from TMG                         -          (2.1)
    -------------------------------------------------------------------------
                                                      $   14.1      $   12.8
    -------------------------------------------------------------------------

    Normalized income tax expense:
      Income tax expense                              $    4.8      $    5.5
      Less: witholding and other taxes on sale of TMG        -          (1.2)
    -------------------------------------------------------------------------
                                                      $    4.8      $    4.3
    -------------------------------------------------------------------------

    Normalized effective tax rate                        34.0%         33.6%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    Balance Sheet Review
    --------------------
    Working capital totaled $98.3 million as compared to $91.2 million at
June 30, 2007. The $7.1 million increase is primarily the result of increased
cash and income taxes payable partially offset by decreased accounts payable
and accrued liabilities.
    The cash balance of $49.7 million reflects an increase of $2.7 million
since June 30, 2007. This increase is primarily the result of $7.0 million of
cash being generated from operations offset by a $4.0 million dividend
payment.
    Accounts payable and accrued liabilities decreased $5.5 million since
June 30, 2007, as a result of several significant payments being made during
the first quarter. The Company made significant lay-downs of maturing bulk
whisky in June 2007, for which payment was made during the first quarter of
fiscal 2008. In addition, payments made for summer media and promotional
campaigns were also a significant contributor to the decrease.
    Capital assets decreased $0.1 million since June 30, 2007 and are
explained by $0.2 million of new asset additions less amortization expense of
$0.3 million.
    Employee future benefits were in a net asset position of $2.8 million, as
compared to $3.2 million at June 30, 2007. The net decrease is explained by
$0.9 million of expense offset by pension plan funding and payments to
retirees being made during the quarter equal to $0.5 million.
    Corby's long-term representation rights of $65.8 million, originally
acquired on September 29, 2006 in the previously described transaction with
PR, decreased by $1.2 million since June 30, 2007 as a result of normal
amortization of the balance over its fifteen-year useful life.
    Goodwill and intangible assets remain unchanged since June 30, 2007, as
they have indefinite lives and are not amortized in accordance with current
accounting standards, but are instead tested for impairment on an annual
basis.
    Future income tax balances remain virtually unchanged since June 30,
2007, with the small movement primarily related to the normal change in
temporary timing differences over the quarter offset with the recognition of a
future tax benefit related to the availability of a non-capital loss.

    Cash Flow Review
    ----------------
    Corby's operating activities contributed $7.0 million to cash during the
first quarter, compared with $18.6 million during the same quarter last year.
The $12.6 million decrease in cash flows from operating activities was due to
several factors such as the timing of accounts payable payments (impact of
$7.8 million), higher maturing and finished goods inventory balances (impact
of $1.9 million), changes in income tax payments (impact of $1.7 million), and
increased accounts receivable balances (impact of $1.4 million), which are
associated with the summer season for the Seagram's Coolers business. It is
expected that the majority of these factors will normalize themselves over the
course of the fiscal year.
    Cash used for investment activities was $0.2 million in the quarter, as
compared to a net inflow of $6.5 million during the same quarter last year.
The decreased cash inflow reflects the fact that the aforementioned
transaction with PR occurred on September 29, 2006.
    Cash flows used in financing activities was $4.0 million and related to
regular quarterly dividends being paid and is consistent with the $3.9 million
paid during the same quarter last year.

    Outstanding Share Data
    ----------------------
    As at September 30, 2007, Corby had 24,274,320 Voting Class A common
shares and 4,194,536 Non-Voting Class B common shares outstanding. There are
no options outstanding.

    Liquidity and Funding Requirements
    ----------------------------------
    Corby continues to generate strong cash flows from operations and does
not have any long term debt. As a result, it is expected that the Company will
be able to meet all funding and working capital requirements that may arise
within the ordinary course of business. While demographic and financial market
dynamics in recent years have increased the cost of providing pensions and
other post-retirement benefits, the Company is committed to making any
required contributions to ensure that it meets its obligations. Specifically,
Corby intends to continue to fund its employee pension benefit plans as
required.

    Related Party Transactions
    --------------------------
    HWSL, an indirectly wholly-owned subsidiary of PR, owns in excess of 50%
of the issued and outstanding Voting Class A common shares of Corby and is
thereby considered to be the Company's parent. PR is considered to be Corby's
ultimate parent and affiliated companies are those that are also subsidiaries
of PR.
    Corby engages in a significant number of transactions with its parent
company, its ultimate parent and various affiliates. Specifically, Corby
renders services to its parent company, its ultimate parent, and affiliates
for the marketing and sale of beverage alcohol products in Canada.
Furthermore, Corby sub-contracts 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, record keeping
services, data processing and other administrative services are also
outsourced to its parent company.
    The companies had previously been operating under the terms of
agreements, which expired on August 31, 2005. However, the companies are now
operating under the terms of the agreements which became effective on
September 29, 2006, as a result of the aforementioned transaction with PR.
These agreements provide for the continuing production of certain Corby brands
by PR at its production facility in Windsor, Ontario for the next 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. All of these transactions are in the normal course of operations
and are measured at the exchange amount, which is the amount of consideration
established and agreed to by the related parties. In addition to the
transactions above, Corby sold three year-old bulk whisky to HWSL at market
prices for $0.7 million during the three month period ended September 30,
2007. There were no such sales made during the same period last year.

    Accounting Standards - Implemented in 2008
    ------------------------------------------

    Financial Instruments

    In 2006, the Canadian Institute of Chartered Accountants issued new
accounting standards concerning financial instruments: Financial Instruments -
Recognition and Measurement ("Section 3855"); Financial Instruments -
Disclosure and Presentation ("Section 3861"); Hedges ("Section 3865");
Comprehensive Income ("Section 1530"); and Equity ("Section 3251"). These
standards require prospective application with the exception of the
translation of self-sustaining foreign operations and are effective for the
Company's first quarter of fiscal 2008. The Company applied the new accounting
standards at the beginning of its current fiscal year and their implementation
did not have a significant impact on the Company's results of operations or
financial position.

    Financial Assets and Liabilities

    Section 3855 establishes standards for recognizing and measuring
financial instruments. Under the new standards, all financial instruments are
classified into one of the following five categories: held-for-trading;
held-to-maturity investments; loans and receivables; available-for-sale
financial assets; or other financial liabilities. It is this classification
that will drive the future basis of measurement and the accounting treatment
in the financial statements. (See Note 2 to the accompanying unaudited
consolidated financial statements of the Company).

    Internal Controls Over Financial Reporting
    ------------------------------------------
    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 control over
financial reporting.

    Risks & Outlook
    ---------------
    The beverage alcohol industry in Canada is subject to government policy,
extensive regulatory requirements and significant rates of taxation at both
the federal and provincial levels. As a result, changes in the government
policy, regulatory and/or taxation environments within the beverage alcohol
industry may affect Corby's business operations, including changes in market
dynamics or changes in consumer consumption patterns. The Company continuously
monitors the potential risk associated with any proposed changes in its
government policy, regulatory and taxation environments and, as an industry
leader, actively participates in trade association discussions relating to new
developments.
    As a consumer products industry, beverage alcohol companies are
susceptible to risks relating to changes in consumer consumption patterns,
product quality and availability, including manufacturing or inventory
disruption. Corby offers a solid portfolio of products, which complements
consumer desires and offers exciting innovation. 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.
    The Canadian beverage alcohol industry is also extremely competitive. 
Competitors may take actions to establish and sustain competitive advantage. 
They 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 strategic implementation. Being a leading Canadian beverage
alcohol company helps facilitate recruitment efforts. Corby appreciates and
invests in its employees to partner with them in achieving corporate
objectives and creating value.
    Corby is a leading Canadian manufacturer and marketer of spirits and
importer of wines. Corby's national leadership is sustained by a diverse brand
portfolio which allows the Company to drive profitable organic growth with
strong, consistent cash flows. Management believes that the Company is well
positioned for future growth.

    
    CORBY DISTILLERIES LIMITED
    CONSOLIDATED BALANCE SHEETS

    (in thousands of Canadian dollars)
    -------------------------------------------------------------------------
                                      (Unaudited)   (Unaudited)
                                    September 30, September 30,      June 30,
                                            2007          2006          2007
                                   ------------------------------------------
    ASSETS
    Current
      Cash                             $  49,715     $  88,913     $  46,989
      Accounts receivable                 25,209        22,242        24,964
      Inventories                         43,413        36,150        43,048
      Prepaid expenses                       257           445         1,013
      Future income taxes                    439             -           363
    -------------------------------------------------------------------------
                                         119,033       147,750       116,377
    Capital assets                         9,556         8,199         9,669
    Employee future benefits               6,958         5,671         7,142
    Long-term representation rights       65,773        70,440        66,940
    Goodwill and intangible assets        37,906        37,906        37,906
    -------------------------------------------------------------------------
                                       $ 239,226     $ 269,966     $ 238,034
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES
    Current
      Accounts payable and accrued
       liabilities                     $  17,064     $  18,431     $  22,605
      Income and other taxes payable       3,712         4,401         2,601
    -------------------------------------------------------------------------
                                          20,776        22,832        25,206
    Employee future benefits               4,192         3,618         3,909
    Future income taxes                    5,358         4,164         5,400
    -------------------------------------------------------------------------
                                          30,326        30,614        34,515
    -------------------------------------------------------------------------

    SHAREHOLDERS' EQUITY
    Share capital                         14,304        14,008        14,304
    Retained earnings                    194,596       225,344       189,215
    Accumulated other comprehensive
     income                                    -             -             -
    -------------------------------------------------------------------------
                                         208,900       239,352       203,519
    -------------------------------------------------------------------------
                                       $ 239,226     $ 269,966     $ 238,034
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements



    CORBY DISTILLERIES LIMITED
    CONSOLIDATED STATEMENTS OF EARNINGS

    (Unaudited)
    (in thousands of Canadian dollars,
     except per share amounts)
    -------------------------------------------------------------------------

                                                  For the Three Months Ended
                                                  ---------------------------
                                                  September 30, September 30,
                                                          2007          2006
                                                  ---------------------------
    OPERATING REVENUE
      Sales                                          $  37,758     $  33,073
      Commissions (net of amortization of $1,167;
       2006 - $nil)                                      4,154         4,007
    -------------------------------------------------------------------------
                                                        41,912        37,080
    -------------------------------------------------------------------------

    OPERATING COSTS
      Cost of sales                                     17,823        15,762
      Marketing, sales and administration               10,034         9,081
      Amortization                                         261           210
    -------------------------------------------------------------------------
                                                        28,118        25,053
    -------------------------------------------------------------------------

    OTHER INCOME AND EXPENSE
      Equity in net earnings of companies subject
       to significant influence                              -         2,091
      Gain from disposition of investment in companies
       subject to significant influence                      -        72,595
      Foreign exchange loss                               (267)          (20)
      Interest income                                      602           769
    -------------------------------------------------------------------------
                                                           335        75,435
    -------------------------------------------------------------------------

    EARNINGS BEFORE INCOME TAXES                        14,129        87,462
    -------------------------------------------------------------------------

    INCOME TAXES
      Current                                            4,880         5,066
      Future                                              (118)          477
    -------------------------------------------------------------------------
                                                         4,762         5,543
    -------------------------------------------------------------------------

    NET EARNINGS                                     $   9,367     $  81,919
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    BASIC EARNINGS PER SHARE                         $    0.33     $    2.88
    DILUTED EARNINGS PER SHARE                       $    0.33     $    2.88
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements



    CORBY DISTILLERIES LIMITED
    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

    (Unaudited)
    (in thousands of Canadian dollars,
     except per share amounts)
    -------------------------------------------------------------------------

                                                  For the Three Months Ended
                                                  ---------------------------
                                                  September 30, September 30,
                                                          2007          2006
                                                  ---------------------------

    NET EARNINGS                                     $   9,367     $  81,919

    OTHER COMPREHENSIVE INCOME
      Foreign currency translation adjustment                -         3,019
    -------------------------------------------------------------------------
    COMPREHENSIVE INCOME                             $   9,367     $  84,938
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements



    CORBY DISTILLERIES LIMITED
    CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

    (Unaudited)
    (in thousands of Canadian dollars,
     except per share amounts)
    -------------------------------------------------------------------------

                                                  For the Three Months Ended
                                                  ---------------------------
                                                  September 30, September 30,
                                                          2007          2006
                                                  ---------------------------

    SHARE CAPITAL
      Balance, beginning of period                   $  14,304     $  14,008
      Transactions, net                                      -             -
    -------------------------------------------------------------------------
      Balance, end of period                         $  14,304     $  14,008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    RETAINED EARNINGS
      Balance, beginning of period                   $ 189,215     $ 147,337
      Net earnings                                       9,367        81,919
      Dividends                                         (3,986)       (3,912)
    -------------------------------------------------------------------------
      Balance, end of period                         $ 194,596     $ 225,344
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    ACCUMULATED OTHER COMPREHENSIVE INCOME
      Balance, beginning of period                   $       -     $       -
      Transitional adjustment on adoption of new
       accounting policies (Note 2)                          -        (3,019)
      Other comprehensive income for the period              -         3,019
    -------------------------------------------------------------------------
      Balance, end of period                         $       -     $       -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements



    CORBY DISTILLERIES LIMITED
    CONSOLIDATED STATEMENTS OF CASH FLOW

    (Unaudited)
    (in thousands of Canadian dollars)
    -------------------------------------------------------------------------

                                                  For the Three Months Ended
                                                  ---------------------------
                                                  September 30, September 30,
                                                          2007          2006
                                                  ---------------------------

    OPERATING ACTIVITIES
    Net earnings                                     $   9,367     $  81,919
    Items not affecting cash
      Amortization                                       1,428           210
      Foreign exchange                                     267            20
      Future income taxes                                 (118)          477
      Equity earnings from companies subject
       to significant influence                              -        (2,091)
      Gain on disposition of investment in
       companies subject to significant influence            -       (72,595)
    Employee future benefits                               467           348
    -------------------------------------------------------------------------
                                                        11,411         8,288
    Net change in non-cash working capital
     balances                                           (4,422)       10,342
    -------------------------------------------------------------------------
    Cash flows from operating activities                 6,989        18,630
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Dividends received from companies subject
     to significant influence                                -        28,573
    Acquisitions of businesses and long-term
     representation rights, net of disposal of
     long-term investments                                   -       (21,668)
    Additions to capital assets                           (148)         (401)
    -------------------------------------------------------------------------
    Cash flows from investing activities                  (148)        6,504
    -------------------------------------------------------------------------

    FINANCING ACTIVITY
    Dividends paid                                      (3,986)       (3,912)
    -------------------------------------------------------------------------
    Cash flows used in financing activity               (3,986)       (3,912)
    -------------------------------------------------------------------------

    Effect of exchange rate changes on cash               (129)            4
    -------------------------------------------------------------------------

    NET CHANGE IN CASH                                   2,726        21,226
    CASH, BEGINNING OF PERIOD                           46,989        67,687
    -------------------------------------------------------------------------
    CASH, END OF PERIOD                              $  49,715     $  88,913
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements



    CORBY DISTILLERIES LIMITED
    NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

    For the Three Months Ended SEPTEMBER 30, 2007 and SEPTEMBER 30, 2006
    (in thousands of Canadian dollars, except per share amounts)

    1.  BASIS OF PRESENTATION

    These unaudited interim consolidated financial statements (the "financial
    statements") have been prepared by management in accordance with Canadian
    generally accepted accounting principles ("GAAP") and include the
    accounts of Corby Distilleries Limited and its subsidiaries ("Corby" or
    the "Company"). These financial statements do not include all disclosures
    required by Canadian GAAP for annual financial statements and therefore
    should be read in conjunction with the most recently prepared annual
    financial statements for the year ended June 30, 2007.

    The interim 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 typically subject to
    seasonal fluctuations in that the retail holiday season generally results
    in an increase in consumer purchases over the course of October, November
    and December. Further, the summer months traditionally result in higher
    consumer purchases of spirits as compared to the winter and spring
    months. As a result, the Company's first and second quarter of each
    fiscal year tend to reflect the impact of seasonal fluctuations in that
    more shipments are typically made during those quarters.

    2.  ACCOUNTING POLICIES

    These financial statements follow the same accounting policies and
    methods of their application as the most recent annual financial
    statements for the year ended June 30, 2007, except as noted below.

    Financial Instruments

    The Canadian Institute of Chartered Accountants ("CICA") issued the
    following new accounting standards that apply to the Company as of the
    first day of Corby's 2008 fiscal year:

       a.  CICA Handbook Section 3855 "Financial Instruments - Recognition
           and Measurement";
       b.  CICA Handbook Section 3861 "Financial Instruments - Disclosure
           and Presentation";
       c.  CICA Handbook Section 3865 "Hedges";
       d.  CICA Handbook Section 1530 "Comprehensive Income"; and
       e.  CICA Handbook Section 3251 "Equity"

    These accounting standards require prospective adoption with the
    exception of the translation of self-sustaining foreign operations.
    Accordingly, the prior period cumulative foreign currency translation
    adjustments and accumulated other comprehensive income has been restated
    as described under Comprehensive Income and Equity.

    Financial Assets and Liabilities
    --------------------------------

    Section 3855 establishes standards for recognizing and measuring
    financial assets, financial liabilities and non-financial derivatives.
    Under the new standard, all financial instruments are classified into one
    of the following five categories: held-for-trading; held-to-maturity;
    loans and receivables; available-for-sale financial assets; and other
    financial liabilities.

    All financial instruments are measured at fair value upon initial
    recognition. Transaction costs are included in the initial carrying
    amount of financial instruments except for held-for-trading items in
    which case they are expensed as incurred. Measurement in subsequent
    periods depends on the classification of the financial instrument.

    Financial assets and liabilities classified as "held-for-trading" are
    subsequently measured at fair value with changes in fair value recognized
    in net income. Financial assets classified as "available-for-sale" are
    subsequently measured at fair value with changes in fair value recognized
    in other comprehensive income, net of tax. Financial assets classified as
    either "held-to-maturity", "loans and receivables", and financial
    liabilities classified as "other financial liabilities" are subsequently
    amortized using the effective interest rate method. Financial instruments
    that are derivative contracts are considered "held-for-trading" unless
    they are designated as a hedge.

    Corby's financial assets and financial liabilities are classified and
    measured as follows:


    Asset or Liability          Category                      Measurement
    -------------------------------------------------------------------------
    Cash                        Held-for-trading              Fair value
    Accounts receivable         Loans and receivables         Amortized cost
    Accounts payable            Other liabilities             Amortized cost


    The fair values of cash, accounts receivable, and accounts payable
    approximate their carrying amount given the short-term maturity of these
    financial instruments.

    The classification of financial assets and financial liabilities and
    resulting measurement basis did not have any impact on Corby's net
    earnings, basic or diluted earnings per share, nor its financial
    position.

    Derivatives and Hedge Accounting
    --------------------------------

    The Company does not utilize derivative financial instruments nor does it
    have any embedded features in its contractual arrangements that require
    separate presentation from the related host contract. As a result, the
    implementation of these new accounting standards did not have any impact
    on Corby's net earnings, basic or diluted earnings per share, nor its
    financial position.

    The Company does not actively manage its exposure to foreign currency or
    interest rate risk as management believes these risks are already at an
    acceptably low level. The Company's exposure to credit risk is
    significantly reduced as its accounts receivable are substantially with
    the provincial liquor boards of Canada.

    Comprehensive Income and Equity
    -------------------------------

    Section 1530 introduces Comprehensive income, which is comprised of net
    earnings and other comprehensive income ("OCI"). OCI comprises all
    changes in shareholders' equity from transactions and other events and
    circumstances from non-owner sources, and includes unrealized gains and
    losses arising from the translation of the financial statements of
    self-sustaining foreign operations, unrealized gains and losses, net of
    tax, arising from changes in the fair value of available-for-sale
    financial assets, as well as the portion of gains or losses, net of tax,
    on the hedging item that is determined to be an effective cash flow hedge
    or hedge of net investments in self-sustaining foreign operations.

    Section 3251 establishes standards for the presentation of equity and
    changes in equity during the reporting period. The main feature of this
    new standard is the requirement for an enterprise to present separately
    each of the changes in equity during the reporting period.

    As a result of the implementation of these new standards, the financial
    statements include a consolidated statement of comprehensive income, with
    the cumulative amount of other comprehensive income presented as a new
    category of shareholders' equity in the consolidated balance sheets. In
    addition, the financial statements include a consolidated statement of
    shareholders' equity which presents separately each of the changes in
    equity during the period. In addition to the changes just described,
    adoption of these standards required the prior period cumulative
    translation adjustments and accumulated other comprehensive income
    balances to be restated as follows:

    -------------------------------------------------------------------------
                                                  Transitional
                                                 Adjustment on
                                              As      Adoption
                                      Previously        of New            As
    Increase (decrease)                 Reported     Standards      Restated
    -------------------------------------------------------------------------
    Cumulative translation adjustments
      - June 30, 2006                  $  (3,019)    $   3,019     $       -
    Accumulated other comprehensive
     income - June 30, 2006            $       -     $  (3,019)    $  (3,019)

    Cumulative translation
     adjustments - September 30, 2006  $       -     $       -     $       -
    Accumulated other comprehensive
     income - September 30, 2006       $       -     $       -     $       -

    Other comprehensive income
     - for the three month period
       ended September 30, 2006        $       -     $   3,019     $   3,019


    Corby's foreign self-sustaining equity investments were disposed of as a
    result of the transaction with Pernod Ricard (Note 3) and therefore the
    related cumulative translation adjustment was recognized in earnings
    during the three month period ended September 30, 2006. Other than the
    presentation changes just described, these newly adopted standards did
    not have any impact on Corby's net earnings, basic or diluted earnings
    per share, nor its financial position.

    3.  AGREEMENT WITH PERNOD RICARD

    On September 29, 2006, Corby closed its previously disclosed transaction
    with Pernod Ricard ("PR") concerning the Canadian representation of PR's
    brands, production of Corby's owned brands, an exchange of certain assets
    and a combined strategic approach to the Canadian market. PR indirectly
    owns 51% of the Voting Class A common shares (and 46% of the total
    equity) of Corby and is considered to be the Company's ultimate parent.

    Under the agreement, Corby acquired the exclusive right to represent PR's
    brands in Canada for the next 15 years. Furthermore, Corby also acquired
    the international rights to Lamb's rum (excluding the Canadian rights,
    which Corby already owned) and the Canadian rights to Seagram's Coolers.
    Both Lamb's rum ("Lamb's International") and Seagram's Coolers meet the
    definition of a business.

    The purchase consideration of $101,911 (long-term representation rights
    $70,440, Lamb's International, $13,559, and Seagram's Coolers $17,912)
    was satisfied by the sale of the Company's 45% interest in Tia Maria
    Group ("TMG") to PR, along with cash consideration of $21,668 including
    transaction related costs.

    Corby received a dividend of $28,573 from TMG just prior to its
    disposition. The Company has reflected a gain of $72,595, net of
    cumulative translation adjustments of $2,439, associated with the
    disposition of TMG in its financial results for the three month period
    ended September 30, 2006. Also included in the financial results for the
    three months ended September 30, 2006 is $1,190 for withholding and other
    taxes related to the disposition of TMG. The transaction was not subject
    to further tax expense as a result of the use of Section 85 rollover
    provisions in the Canadian Income Tax Act.

    4.  EMPLOYEE FUTURE BENEFITS

    The Company has recorded a charge to earnings in the three month period
    ended September 30, 2007 of $884 (2006 - $881) to reflect the expense
    associated with its employee future benefit plans. Actual cash payments
    for the three month period ended September 30, 2007 totaled $400 (2006 -
    $533).

    5.  RELATED PARTY TRANSACTION

    During the three month period ended September 30, 2007, Corby sold three
    year old bulk whisky to its parent company, Hiram Walker & Sons Limited
    ("HWSL") at market prices for $685 (2006 - $nil). HWSL owns in excess of
    50% of the issued and outstanding common shares of Corby. The transaction
    was measured at the exchange amount.

    6.  SEGMENT INFORMATION

    Corby has two reportable segments: "Case Goods" and "Commissions".
    Corby's Case Goods segment derives its revenue from the production and
    distribution of its owned beverage alcohol brands. Corby's portfolio of
    owned brands include some of the most renowned and respected brands in
    Canada, including Wiser's rye whiskies, Lamb's rum and Polar Ice vodka.
    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 Chivas Regal, The
    Glenlivet and Ballantine's scotches, Jameson Irish whiskey, Beefeater
    gin, Malibu rum, Kahlua liqueur, Mumm champagne, and Jacob's Creek and
    Wyndham Estate wines.

    The Commissions segment has no assets or liabilities. Its financial
    results are fully reported as "commissions" on the consolidated statement
    of earnings and there are no intersegment revenues. Therefore, a chart
    detailing operational results by segment has not been provided as no
    additional meaningful information would result.

    7.  COMPARATIVE FIGURES

    Certain comparative figures have been reclassified to conform to the
    current year's financial statement presentation.
    
    %SEDAR: 00001138E




For further information:

For further information: CORBY DISTILLERIES LIMITED, Con Constandis,
President and Chief Executive Officer, John Nicodemo, Vice President, Finance
and Chief Financial Officer, Tel.: (416) 479-2400, investors@corby.ca,
www.Corby.ca


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