Corby Distilleries Limited reports 21% increase in second quarter earnings & announces dividend



    TORONTO, Feb. 13 /CNW/ - Corby Distilleries Limited ("Corby" or the
"Company") reported that net earnings increased by 21% to $10.5 million, or
$0.37 per share, for the three month period ended December 31, 2007, compared
to the same quarter last year. Operating revenue increased to $48.8 million,
or 13%, over the same quarter last year. Driving this increase was a solid
performance from Corby's portfolio of owned-brands through a combination of 6%
volume growth coupled with increased average selling prices and improved
product mix. The Company's focus on value creation through the premiumisation
of its key brands has permitted strategic price increases in-line with
targeted competitive sets. Corby's strong first half results are further
apparent in the $4.3 million, or 16%, increase in EBITDA(1) over the same
period last year (after excluding the gain on sale of the Company's equity
investment in Tia Maria Group).
    Corby's Board of Directors today declared a dividend of $0.14 per share
payable on March 14, 2008 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 February 29, 2008.
    Basic earnings per share amounted to $0.70 for the six month period ended
December 31, 2007, compared to $3.18 for the same period 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.
    "The impressive results we posted for both the second quarter and the
first half of fiscal 2008, are clear validation that our new strategic focus
is delivering exceptional value for our shareholders", 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 and six months ended December 31, 2007 prepared in accordance
with Canadian generally accepted accounting principles ("GAAP"). Corby will
discuss the full results on a conference call to be held on February 13, 2008
at 3:00 p.m. EST. To access the conference call, please dial 416-644-3417 or
toll free 1-800-732-6179 before the start of the call. A playback of the
conference call will be available for 30 days by calling 416-640-1917 or
1-877-289-8525 and entering passcode 21261319 followed by the number sign.
    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,
    foreign exchange, 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. 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
    December 31, 2007
    -------------------------------------------------------------------------

    The following Interim Management's Discussion and Analysis ("MD&A") dated
February 13, 2008 should be read in conjunction with the unaudited interim
consolidated financial statements and accompanying notes as at and for the
three and six month periods ended December 31, 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 February
13, 2008. Events occurring after that date could render the information
contained herein inaccurate or misleading in a material respect. Corby will
provide updates to material forward-looking statements, including in
subsequent news releases and its interim management's discussion and analyses
filed with regulatory authorities as required under applicable law. Additional
information regarding Corby, including the Company's Annual Information Form,
is available on SEDAR at www.sedar.com.
    Unless otherwise indicated, all comparisons of results for the second
quarter of fiscal 2008 (three months ended December 31, 2007) are against
results for the second quarter of fiscal 2007 (three months ended December 31,
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 derives its revenues from the sale of its owned-brands as
well as earning commission income from the representation of selected
non-owned brands in the Canadian market place. Revenue from Corby's
owned-brands are denoted as "Sales" on the consolidated statement of earnings
and while it predominantly consists of sales made to each of the provincial
liquor boards in Canada, it also includes sales to international markets.
Commission income earned from the representation of non-owned brands is
denoted as "Commissions" on the consolidated statement of earnings.
    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 international
wine and spirits company Pernod Ricard, S.A. ("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. 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.
    Corby's voting shares are majority owned by Hiram Walker & Sons Limited
("HWSL") located in Windsor, Ontario. HWSL is a wholly owned subsidiary of 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 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 "Commissions", whereas revenue
earned on the sale of Lamb's rum and Seagram's Coolers is presented as
"Sales". This transaction allowed Corby to unlock the value of a non-strategic
equity investment in TMG, while providing the Company with a long-term income
stream for which management has direct control. In addition, the transaction
effectively converted the non-cash TMG equity earnings into a new long-term
cash based income stream for the Company and ultimately its shareholders.
    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 an unrelated 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 typically accounts for more than 80% of
the Company's total operating revenue. Included in this portfolio, are its key
brands Wiser's Canadian whisky, Lamb's rum, Polar Ice vodka and Seagram's
Coolers. The sales performance of these key brands significantly impacts
Corby's net earnings and therefore understanding their sales volumes at the
retail store level in Canada provides insight into the current performance of
each key brand. The following chart summarizes market data provided by the
Association of Canadian Distillers ("ACD"). It should be noted that the retail
sales volumes depicted below do not include international retail sales of
Corby owned-brands as this information is not readily available.

    
    -------------------------------------------------------------------------
    RETAIL SALES VOLUMES FOR THE CANADIAN MARKET ONLY(1)
    -------------------------------------------------------------------------

                                   3 Months Ended          6 Months Ended
                                     December 31,            December 31,
                               ----------------------  ----------------------
    (in 000's of 9L cases)      2007    2006 %Change    2007    2006 %Change
    -------------------------------------------------------------------------
    Corby owned-brands
    Wiser's Canadian
     whisky                      229     210      9%     386     363      6%
    Lamb's rum                   162     174     (7%)    287     301     (5%)
    Polar Ice vodka               98      94      4%     174     166      5%
    Seagram's Coolers             82      76      8%     237     224      6%
    All other Corby
     owned-brands                251     276     (9%)    453     481     (6%)
    -------------------------------------------------------------------------
    Total                        822     830     (1%)  1,537   1,535      0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Refers to sales volumes at the retail store level in Canada, as
        measured by case volumes provided by the ACD.
    

    The volume performances in the chart above are in line with management's
expectations, with the exception of Lamb's rum which is discussed further
below, as the Company's strategy is to focus its investments and leverage the
long-term growth potential on its key brands, while emphasizing less on
smaller and less profitable brands.
    Corby's flagship brand, Wiser's Canadian whisky, has continued to be a
success story for Corby as the brand expanded its lead as the largest selling
brand family of rye whisky in Canada, measured by case volumes. Significant
investments were made in the Wiser's Canadian whisky brand over the past year
in the form of a focused advertising and media campaign to commemorate its 150
year anniversary with the tag line "Character above all", reflective of the
values held by the brand's original creator, J.P. Wiser. The media campaign
capitalized on the rich history of the brand while also remaining contemporary
and the Company also released a special limited edition variant entitled
Wiser's Red Letter Canadian whisky, which received positive reviews and press
attention and further contributed to the brand's leading reputation in the
marketplace.
    Wiser's Canadian whisky's recent performance demonstrates the value of
these investments as the brand once again outperformed the rye whisky category
during the three months ended December 31, 2007; with all other key
competitive brands showing flat or declining volumes. The brand is also
benefiting from the trend among consumers to trade up to premium quality
spirits products.
    Polar Ice is now the third-largest vodka brand in Canada, as measured by
case volumes. The success of the brand can be partially attributed to the
strong growth of the vodka category in recent years as vodka has become the
largest spirits category in Canada. In addition, Polar Ice has been effective
in its retail programming and in building strong on-premise distribution. The
on-going sponsorship of Pride week in Toronto is a key event in the brand's
promotional calendar and one which is used to effectively communicate the
brand's values of community and diversity.
    The decline in Lamb's rum retail sales volumes for both the three and six
months ended December 31, 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.
    While the Seagram's Coolers brand is primarily targeted toward the warmer
seasons, it achieved retail sales growth of 8% on a quarterly basis and grew
6% year-to-date. The recent success of the Seagram's Coolers brand is
attributed to some new innovative products launched during the spring of 2007,
namely Seagram's Vodka Spritzers and Seagram's Strawberry-Kiwi Swirl.

    Non-GAAP Financial Measures
    ---------------------------
    Corby defines "EBITDA" as net earnings before equity earnings, foreign
exchange, 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. 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
    -------------------------------

    Financial Highlights

    The following table presents a summary of certain selected consolidated
financial information for the Company for the periods indicated:

    
    (in millions
    of Canadian
    dollars,
    except per    3 Months Ended December 31,    6 Months Ended December 31,
    share       ------------------------------ ------------------------------
    amounts)      2007   2006 $Change %Change    2007   2006 $Change %Change
    -------------------------------------------------------------------------
    Operating
     revenue
      Sales     $ 43.3 $ 38.7  $  4.6     12%  $ 81.0 $ 71.9  $  9.1     13%
      Commissions  5.5    4.3     1.2     28%     9.7    8.3     1.4     17%
                ----------------------------- ----------------------------
                $ 48.8 $ 43.0  $  5.8     13%  $ 90.7 $ 80.2  $ 10.5     13%
                ----------------------------- ----------------------------
    EBITDA(1)   $ 15.8 $ 14.5  $  1.3      9%  $ 31.0 $ 26.7  $  4.3     16%
    EBITDA per
     share(1)   $ 0.55 $ 0.51  $ 0.04      8%  $ 1.09 $ 0.94  $ 0.15     16%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) EBITDA for the six months ended December 31, 2006 excludes the gain
        on sale of the Company's investment in TMG.
    

    Financial and Operating Results - Three Months Ended December 31, 2007

    Operating revenue

    Operating revenue, consisting of sales and commissions, was $48.8 million
for the second quarter, which represents an increase of 13% over the same
period last year. Driving this increase was a solid performance from Corby's
portfolio of owned-brands through a combination of 6% volume growth coupled
with increased average selling prices and improved product mix. The Company's
focus on value creation through the premiumisation of its key brands has
permitted strategic price increases in-line with targeted competitive sets.
    The following table highlights the various components which comprise
commissions:

    
    -------------------------------------------------------------------------
                                3 Months    3 Months
                                   Ended       Ended
    (in millions of             December    December
     Canadian dollars)          31, 2007    31, 2006    $ Change     %Change
    -------------------------------------------------------------------------
    Commission from PR brands   $    4.2    $    4.1    $    0.1          2%
    Less: representation
     rights amortization            (1.2)       (1.2)          -          -
    -------------------------------------------------------------------------
    Net Commission from PR
     brands                          3.0         2.9         0.1          3%
    Commission from Agency
     brands                          2.5         1.4         1.1         79%
    -------------------------------------------------------------------------
    Commissions - net           $    5.5    $    4.3    $    1.2         28%
    -------------------------------------------------------------------------
    

    Net commission from PR brands increased by $0.1 million or 3% when
compared to the same quarter last year. The relatively modest growth in
commission income from PR brands in Q2 is mainly the result of changes in
shipment patterns as several orders were made earlier this year (in Q1) when
compared to the prior year. This is demonstrated by the 19% organic increase
(before amortization) in commission income for the six months ended December
31, 2007.
    The majority of the increase in commission income from Agency brands was
the result of the Company earning a one-time lump sum of $0.9 million in
commission income from an Agency brand that Corby ceased to represent on June
30, 2006. This commission was in lieu of earnings Corby would have otherwise
received during the required notice period, as provided for under the relevant
representation agreement.

    Cost of sales

    Cost of sales was $22.2 million compared to $20.5 million for the same
quarter last year. The increase in cost of sales was largely driven by the
increase in sales. Gross margin was 48.6%, as compared with 47.0% for the same
quarter last year. The increase in gross margin is primarily the result of
improved pricing on certain of the Company's key brands, partially offset by
the unfavourable effect of foreign currencies on Corby's international
business.

    Marketing, sales and administration

    Marketing, sales and administration expenses were $12.0 million, as
compared to $9.2 million during the same quarter last year. The increase was
mainly the result of higher advertising and promotional spending on the
Company's key brands. The Wiser's Canadian whisky brand celebrated its 150th
anniversary and as such the Company focused a significant amount of effort and
resources in order to capitalize on the historic occasion.

    Income taxes

    Corby's effective income tax rate was 29%, a decrease of 9% when compared
to the same quarter last year. This change was primarily the result of the
Government of Canada's recently substantively enacted reduction in corporate
income tax rates. These rate reductions impact the current period's tax
provision primarily due to their effect on temporary differences between
accounting values and their respective tax bases.

    Financial and Operating Results - Six Months Ended December 31, 2007

    Operating revenue

    Corby's operating revenue, consisting of sales revenue and commission
income, was $90.7 million for the six month period ended December 31, 2007,
which represents an increase of 13% or $10.5 million over the same period last
year. This increase is the result of a $9.1 million, or 13%, increase in sales
revenue coupled with a $1.4 million, or 17%, increase in net commission
income.
    Sales revenue grew by $3.5 million, or 6%, from an organic perspective as
a result of a 5% increase in average selling prices and 1% volume growth. As
previously mentioned, the growth in average selling prices is mainly the
result of a focused effort to increase prices in-line with targeted
competitive sets along with improved product mix. In particular, gross sales
revenues of the Wiser's Canadian whisky brand in Canada grew by 10%, when
compared to the same period last year. The 10% increase in gross sales was
driven by a 6% increase in shipment volumes along with a 4% increase in
average selling prices.
    Furthermore, the comparative period only reflects three months of
activity for the Seagram's Coolers and Lamb's International businesses as the
PR transaction closed on September 29, 2006. The impact is a $4.6 million
increase in sales revenue for the six months ended December 31, 2007.
    Also included in revenue for the six month period ended December 31, 2007
were sales of three-year old bulk whisky to Corby's parent company, HWSL at
market prices for $1.1 million. No such sales were included in the comparative
period. Bulk whisky sales are not expected to continue during the remaining
half of Corby's fiscal year.
    The following table highlights the various components which comprise
commissions:

    
    -------------------------------------------------------------------------
                                6 Months    6 Months
                                   Ended       Ended
    (in millions of             December    December
     Canadian dollars)          31, 2007    31, 2006    $ Change     %Change
    -------------------------------------------------------------------------

    Commission from PR brands   $    8.2    $    6.9    $    1.3         19%
    Less: representation
     rights amortization            (2.3)       (1.2)       (1.1)        92%
    -------------------------------------------------------------------------
    Net Commission from PR
     brands                          5.9         5.7         0.2          4%
    Commission from Agency
     brands                          3.8         2.6         1.2         46%
    -------------------------------------------------------------------------
    Commission income - net     $    9.7    $    8.3    $    1.4         17%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Net commission income during the six month period ended December 31, 2007
was $9.7 million, as compared to $8.3 million for the same period last year.
Gross commission income from PR brands increased organically by 19% during the
first six months of the year led by double-digit growth in sales of brands
such as Jacob's Creek and Wyndham Estates wines, The Glenlivet single-malt
scotch, Malibu rum, and Havana Club rum.
    Offsetting the increase in commission income is the inclusion of an
additional three months of amortization expense related to the representation
rights acquired from PR, as compared to the prior year. Since the PR
transaction closed on September 29, 2006, the comparative period reflects only
three months of amortization expense.
    The majority of the increase in commission from Agency brands was the
result of the Company earning a one-time lump sum of $0.9 million in
commission income from an Agency brand that Corby ceased to represent on June
30, 2006. This commission was in lieu of earnings Corby would have otherwise
received during the required notice period, as provided for under the relevant
representation agreement.

    Cost of sales

    Cost of sales for the six month period ended December 31, 2007 was
$40.0 million, compared to $36.3 million for the same period last year. The
increase in cost of sales was largely driven by the increase in sales, and now
includes the costs associated with the Seagram's Coolers and Lamb's
International businesses for the full six month period, as opposed to three
months in the prior period. Gross margin was 50.6%, as compared with 49.6%
during the same period last year. The increase in gross margin is primarily
the result of improved pricing on certain of the Company's key brands
partially offset by the inclusion of Seagram's Coolers for the entire period,
which traditionally earn a lower gross margin than Corby's other spirit
brands.

    Marketing, sales and administration

    Marketing, sales and administration expenses were $22.0 million, as
compared to $18.4 million during the same six month period 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 the 150th anniversary of the Wiser's
Canadian whisky brand.

    Income taxes

    Corby's effective tax rate on a year-to-date basis was 31% as compared
with 11% for the same period last year. The current period's effective tax
rate was lower than the statutory rate of 34% as the Government of Canada
recently substantively enacted reductions in corporate income tax rates. The
effective rate of the comparative period is substantially lower than the 35%
statutory rate as a result of the gain on sale of the Company's investment in
TMG being largely free of tax through the use of Section 85 rollover
provisions contained in the Income Tax Act (Canada).
    The following table provides reconciliations between the effective and
statutory rates of income tax for both six month periods ended December 31,
2007 and 2006:

    
    -------------------------------------------------------------------------
                                           6 Months Ended     6 Months Ended
                                        December 31, 2007  December 31, 2006
    -------------------------------------------------------------------------
    Combined basic federal and
     provincial tax rates                             34%                35%
    Impact of substantively enacted
     rate decreases                                   (2%)                0%
    Income not subject to income tax                   0%               (24%)
    Equity in net earnings of companies
     subject to significant influence                  0%                (1%)
    Other                                             (1%)                1%
    -------------------------------------------------------------------------
                                                      31%                11%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Balance Sheet Review
    --------------------
    Working capital totaled $105.9 million as compared to $91.2 million at
June 30, 2007. The $14.7 million increase is primarily the result of increased
cash partially offset by a decrease in accounts receivable and increases in
income taxes payable and accounts payable and accrued liabilities.
    The cash balance of $67.5 million reflects an increase of $20.5 million
since June 30, 2007. This increase is primarily the result of $28.8 million of
cash being generated from operations offset by $8.0 million in regular
dividend payments.
    The December 31, 2007 accounts receivable balance of $22.6 million has
decreased $2.3 million since June 30, 2007 and was also lower than the
December 31, 2006 balance of $28.2 million. The reduced balance this period
was the result of the Company receiving payments in advance of their normal
collection date from some of its key customers immediately prior to the end of
December 2007.
    Inventories were $42.6 million at December 31, 2007 compared to
$43.0 million at June 30, 2007 and $34.9 million at December 31, 2006. The
higher balance as at December 31, 2007 is the result of significant lay-downs
of maturing bulk whisky during calendar 2007 combined with a specific focus by
management to ensure sufficient inventories were maintained during the
critical holiday sales period.
    Accounts payable and accrued liabilities totaled $23.4 million, an
increase of $1.3 million since June 30, 2007. The increase is consistent with
the higher overall activity experienced this time of year and is comparable,
albeit slightly lower than, the balance as at December 31, 2006.
    Capital assets decreased $0.3 million since June 30, 2007 and are
explained by $0.2 million of asset additions less amortization expense of
$0.5 million.
    Employee future benefits were in a net asset position of $2.3 million, as
compared to $3.2 million at June 30, 2007. The net decrease is explained by
$1.8 million of expense offset by pension plan funding and payments to
retirees being made during the quarter equal to $0.9 million.
    Corby's investment in long-term representation rights of $64.6 million,
originally acquired on September 29, 2006 in the previously described
transaction with PR, decreased by $2.3 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 decreased a net $0.6 million since June 30,
2007, as a result of the Government of Canada's decision in December 2007 to
substantively enact decreases in corporate income tax rates. The decrease
resulted in the revaluation of long-term timing differences from the
previously higher enacted rates existing at June 30, 2007.

    Cash Flow Review
    ----------------

    Cash flows from operating activities

    Cash flows from operating activities were $21.9 million in the second
quarter of fiscal 2008, compared to $12.4 million for the same period last
year, an increase of $9.5 million or 77%. The increased cash from operations
was primarily the result of the Company receiving payments in advance of their
normal collection dates from some of its key customers in December 2007,
combined with the aforementioned growth in EBITDA.
    Year-to-date, the Company has generated $28.8 million of cash from
operating activities compared to $31.1 million in the first two quarters of
fiscal 2007, a decrease of $2.3 million or 7%. Year-to-date growth in EBITDA
was offset by an investment in non-cash working capital balances, whereas in
the first two quarters of fiscal 2007, the Company's investment in non-cash
working capital balances declined. For further details on working capital
changes, please refer to the balance sheet review section of this MD&A.

    Cash flows from investing activities

    Cash used for investing activities was $0.1 million in the second
quarter, as compared to $0.2 million during the same quarter last year. The
decrease is the result of a small change in the amount of capital
expenditures.
    Year-to-date, cash flows used for investing activities was $0.2 million
compared to a net inflow of cash of $6.3 million during the first two quarters
of fiscal 2007. The net decrease of $6.5 million reflects the impact of the
aforementioned transaction with PR in the comparative period.

    Cash flows from financing activities

    Cash flows used in financing activities during the quarter was
$4.0 million. The cash was used to pay regular quarterly dividends and is
consistent with the $4.0 million paid during the same quarter last year.
    Year-to-date, cash flows used in financing activities was $8.0 million
compared with $7.9 million during the same period last year. In both periods,
the cash was used for the payment of regular dividends.

    Outstanding Share Data
    ----------------------
    There have been no changes in Corby's share data since June 30, 2007. As
at December 31, 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's sources of liquidity are its cash balance of $67.5 million along
with cash generated by operating activities. The Company believes that the
available cash balance combined with its historically strong and consistent
operational cash flows are sufficient to fund its operations, investing
activities and commitments for the foreseeable future.
    In recent months, the much publicized global liquidity crisis has been
tumultuous for many companies, particularly for those entities holding
short-term investments in asset-backed commercial paper ("ABCP"). Corby does
not have exposure to this type of liquidity risk as the Company does not hold
any investments in ABCP.
    The Company's cash flows from operations are subject to fluctuation due
to commodity, foreign exchange and interest rate risk. Corby does not actively
manage these risks as they are believed to naturally be at an already
acceptably low level.
    Commodity risk exists as the manufacturing 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. Nonetheless, Corby's
earnings are subject to fluctuations from commodity price changes.
    Foreign exchange risk exists as a relatively small proportion of Corby's
total operating revenues are invoiced in a foreign currency, specifically the
Pound Sterling and the United States dollar. Naturally mitigating this risk is
the fact the Company also purchases certain of its goods and services in the
same foreign currencies.
    The Company does not have any short or long-term debt facilities.
Interest rate risk exists as Corby earns market rates of interest on its cash
balances. An active risk management program does not exist as management
believes that changes in interest rates would not have a significant impact to
Corby's earnings.

    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 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. 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 $0.4 million and $1.1 million during the
three and six month periods ended December 31, 2007, respectively. There were
no such sales made during the same periods 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).

    Future Accounting Standards
    ---------------------------

    International Financial Reporting Standards

    The Accounting Standards Board has announced that Canadian generally
accepted accounting principles for publicly accountable enterprises will be
replaced with International Financial Reporting Standards (IFRS) over an
expected five year transitional period. While the Accounting Standards Board
intends to announce an exact changeover date by March 31, 2008, the expected
changeover is planned to occur sometime in 2011. The Company is currently
assessing the impact of adopting IFRS on its consolidated financial
statements.

    Inventories

    In June 2007, the Accounting Standards Board issued a new accounting
standard, Section 3031 "Inventories", which will replace existing Section 3030
"Inventories". It provides the Canadian equivalent to International Financial
Reporting Standard IAS 2 "Inventories". Section 3031 prescribes measurement of
inventories at the lower of cost and net realizable value. It provides
guidance on the determination of cost, including allocation of overheads and
other costs to inventories, prohibits the use of the last-in, first-out (LIFO)
method, and requires the reversal of previous write-downs when there is a
subsequent increase in the value of inventories. It also requires greater
disclosure regarding inventories and cost of sales. As this new standard is
effective for fiscal years beginning on or after January 1, 2008, Corby will
implement it in the first quarter of fiscal 2009. The Company is currently
assessing the impact of this new standard on its consolidated financial
statements.

    Financial Instruments - Disclosure and Presentation

    In December 2006, the Accounting Standards Board issued two new
accounting standards, Section 3862 "Financial Instruments - Disclosure" and
Section 3863 "Financial Instruments - Presentation". These standards will
replace existing Section 3861 "Financial Instruments - Disclosure and
Presentation". These new standards are harmonized with International Financial
Reporting Standards. Section 3862 requires increased disclosures regarding the
risks associated with financial instruments and how these risks are managed.
Section 3863 carries forward the presentation standards for financial
instruments and non-financial derivatives and provides additional guidance for
the classification of financial instruments, from the prospective of the
issuer, between liabilities and equity. As these new standards are effective
for fiscal years beginning on or after October 1, 2007, Corby will implement
them in the first quarter of fiscal 2009.

    Capital Disclosures

    In December 2006, the Accounting Standards Board issued a new accounting
standard, Section 1535 "Capital Disclosures", which establishes standards for
disclosing information about an entity's capital and how it is managed. As
this new standard is effective for fiscal years beginning on or after
October 1, 2007, Corby will implement it in the first quarter of fiscal 2009.

    Selected Quarterly Information
    ------------------------------

    Summary of Quarterly Financial Results

    
    -------------------------------------------------------------------------
                          3      3      3      3      3      3      3      3
                     Months Months Months Months Months Months Months Months
    (in millions of   Ended  Ended  Ended  Ended  Ended  Ended  Ended  Ended
    Canadian dollars,   Dec.   Sep.   Jun.   Mar.   Dec.   Sep.   Jun.   Mar.
    except per share     31,    30,    30,    31,    31,    30,    30,    31,
    amounts)           2007   2007   2007   2007   2006   2006   2006   2006
    -------------------------------------------------------------------------
    Operating revenue $48.8  $41.9  $40.1  $33.3  $43.1  $37.1  $33.8  $28.5
    EBITDA(1)         $15.8  $15.2  $10.0  $ 7.3  $14.5  $12.2  $ 7.3  $ 6.5
    Equity earnings
     from TMG         $   -  $   -  $   -  $   -  $   -  $ 2.1  $ 0.8  $ 2.5
    Gain from sale
     of TMG           $   -  $   -  $   -  $   -  $   -  $72.6  $   -  $   -
    Net earnings      $10.5  $ 9.4  $ 5.5  $ 4.3  $ 8.7  $81.9  $ 6.3  $ 6.9
    EBITDA per
     share(1)         $0.55  $0.53  $0.35  $0.26  $0.51  $0.43  $0.26  $0.23
    Basic EPS(2)      $0.37  $0.33  $0.20  $0.15  $0.31  $2.88  $0.22  $0.24
    Diluted EPS(2)    $0.37  $0.33  $0.20  $0.15  $0.31  $2.88  $0.22  $0.24
    -------------------------------------------------------------------------
    (1) EBITDA for the three months ended September 30, 2006 excludes the
        gain on sale of the Company's investment in TMG.
    (2) Excluding the gain on sale of the Company's investment in TMG and the
        related taxes of $1.2 million, Basic EPS and Diluted EPS for the
        three months ended September 30, 2006 was $0.37 and $0.37
        respectively.
    

    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.
    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.
    In recent years, the global beverage alcohol industry has experienced a
significant amount of consolidation. While it is possible that further
consolidation could have an impact to Corby's operations, management believes
that the Company is well positioned to deal with any changes to the
competitive landscape in Canada.
    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 execution of its strategies. 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)
                                     December 31,  December 31,      June 30,
                                            2007          2006          2007
                                   ------------------------------------------
    ASSETS
    Current
      Cash                             $  67,511     $  97,178     $  46,989
      Accounts receivable                 22,631        28,178        24,964
      Inventories                         42,640        34,865        43,048
      Prepaid expenses                       499           600         1,013
      Future income taxes                    225             -           363
    -------------------------------------------------------------------------
                                         133,506       160,821       116,377
    Capital assets                         9,383         8,193         9,669
    Employee future benefits               6,799         5,821         7,142
    Long-term representation rights       64,607        69,273        66,940
    Goodwill and intangible assets        37,906        37,906        37,906
    -------------------------------------------------------------------------
                                       $ 252,201     $ 282,014     $ 238,034
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES
    Current
      Accounts payable and accrued
       liabilities                     $  23,860     $  24,472     $  22,605
      Dividend payable                         -        42,679             -
      Income and other taxes payable       3,740         4,876         2,601
    -------------------------------------------------------------------------
                                          27,600        72,027        25,206
    Employee future benefits               4,488         3,893         3,909
    Future income taxes                    4,664         4,684         5,400
    -------------------------------------------------------------------------
                                          36,752        80,604        34,515
    -------------------------------------------------------------------------

    SHAREHOLDERS' EQUITY
    Share capital                         14,304        14,036        14,304
    Retained earnings                    201,145       187,374       189,215
    Accumulated other comprehensive
     income                                    -             -             -
    -------------------------------------------------------------------------
                                         215,449       201,410       203,519
    -------------------------------------------------------------------------
                                       $ 252,201     $ 282,014     $ 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           For the Six
                                      Months Ended           Months Ended
                                 ---------------------  ---------------------
                                  December   December    December   December
                                  31, 2007   31, 2006    31, 2007   31, 2006
                                 ---------------------  ---------------------
    OPERATING REVENUE
      Sales                      $  43,254  $  38,727   $  81,012  $  71,910
      Commissions (Note 4)           5,540      4,305       9,694      8,312
    -------------------------------------------------------------------------
                                    48,794     43,032      90,706     80,222
    -------------------------------------------------------------------------

    OPERATING COSTS
      Cost of sales                 22,213     20,514      40,036     36,276
      Marketing, sales and
       administration               11,998      9,190      22,032     18,381
      Amortization                     259        209         520        419
    -------------------------------------------------------------------------
                                    34,470     29,913      62,588     55,076
    -------------------------------------------------------------------------

    EARNINGS FROM OPERATIONS        14,324     13,119      28,118     25,146
    -------------------------------------------------------------------------

    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)
       gain                            (71)       183        (338)       163
      Interest income                  663        809       1,265      1,578
    -------------------------------------------------------------------------
                                       592        992         927     76,427
    -------------------------------------------------------------------------

    EARNINGS BEFORE INCOME TAXES    14,916     14,111      29,045    101,573
    -------------------------------------------------------------------------

    INCOME TAXES
      Current                        4,861      4,898       9,741      9,964
      Future                          (480)       520        (598)       997
    -------------------------------------------------------------------------
                                     4,381      5,418       9,143     10,961
    -------------------------------------------------------------------------

    NET EARNINGS                 $  10,535  $   8,693   $  19,902  $  90,612
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    BASIC EARNINGS PER SHARE     $    0.37  $    0.31   $    0.70  $    3.18
    DILUTED EARNINGS PER SHARE   $    0.37  $    0.31   $    0.70  $    3.18
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements



    CORBY DISTILLERIES LIMITED
    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

    (Unaudited)
    (in thousands of Canadian dollars)
    -------------------------------------------------------------------------
                                     For the Three           For the Six
                                      Months Ended           Months Ended
                                 ---------------------  ---------------------
                                  December   December    December   December
                                  31, 2007   31, 2006    31, 2007   31, 2006
                                 ---------------------  ---------------------
    NET EARNINGS                $   10,535  $   8,693   $  19,902  $  90,612

    OTHER COMPREHENSIVE INCOME
      Foreign currency
       translation adjustment            -          -           -      3,019
    -------------------------------------------------------------------------
    COMPREHENSIVE INCOME        $   10,535  $   8,693   $  19,902  $  93,631
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements



    -------------------------------------------------------------------------
    CORBY DISTILLERIES LIMITED
    CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

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

                                                    For the Six Months Ended
                                                  ---------------------------

                                                   December 31,  December 31,
                                                          2007          2006
                                                  ---------------------------

    SHARE CAPITAL
      Balance, beginning of period                   $  14,304     $  14,008
      Transactions, net                                      -            28
    -------------------------------------------------------------------------
      Balance, end of period                         $  14,304     $  14,036
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    RETAINED EARNINGS
      Balance, beginning of period                   $ 189,215     $ 147,337
      Net earnings                                      19,902        90,612
      Dividends                                         (7,972)      (50,575)
    -------------------------------------------------------------------------
      Balance, end of period                         $ 201,145     $ 187,374
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    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           For the Six
                                      Months Ended           Months Ended
                                 ---------------------  ---------------------

                                  December   December    December   December
                                  31, 2007   31, 2006    31, 2007   31, 2006
                                 ---------------------  ---------------------

    OPERATING ACTIVITIES
    Net earnings                 $  10,535  $   8,693   $  19,902  $  90,612
    Items not affecting cash
      Amortization                   1,425      1,376       2,853      1,586
      Foreign exchange                  71       (183)        338       (163)
      Future income taxes             (480)       520        (598)       997
      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           455        125         922        473
    -------------------------------------------------------------------------
                                    12,006     10,531      23,417     18,819
    Net change in non-cash
     working capital balances        9,844      1,893       5,422     12,235
    -------------------------------------------------------------------------
    Cash flows from operating
     activities                     21,850     12,424      28,839     31,054
    -------------------------------------------------------------------------

    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        (86)      (203)       (234)      (604)
    -------------------------------------------------------------------------
    Cash flows (used in) provided
     by investing activities           (86)      (203)       (234)     6,301
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Dividends paid                  (3,986)    (3,984)     (7,972)    (7,896)
    Proceeds on issuance of
     capital stock                       -         28           -         28
    -------------------------------------------------------------------------
    Cash flows used in financing
     activities                     (3,986)    (3,956)     (7,972)    (7,868)
    -------------------------------------------------------------------------

    Effect of exchange rate
     changes on cash                    18          -        (111)         4
    -------------------------------------------------------------------------

    NET CHANGE IN CASH              17,796      8,265      20,522     29,491
    CASH, BEGINNING OF PERIOD       49,715     88,913      46,989     67,687
    -------------------------------------------------------------------------
    CASH, END OF PERIOD          $  67,511  $  97,178   $  67,511  $  97,178
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    SUPPLEMENTAL CASH FLOW
     INFORMATION
    Interest received            $     661  $     804   $   1,263  $   1,575
    Income taxes paid            $   5,003  $   4,130   $   8,356  $   6,419
    -------------------------------------------------------------------------

    See accompanying notes to consolidated financial statements



    CORBY DISTILLERIES LIMITED
    NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

    FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2007 AND DECEMBER 31,
    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
                                          As   Adjustment on
                                  Previously     Adoption of              As
    Increase (decrease)             Reported   New 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 -
     December 31, 2006              $      -        $      -        $      -
    Accumulated other comprehensive
     income - December 31, 2006     $      -        $      -        $      -

    Other comprehensive income -
     for the six month period ended
     December 31, 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. COMMISSIONS

    Commissions for the three and six month periods ended December 31, 2007
    are reported net of long-term representation rights amortization in the
    amount of $1,166 and $2,333 (2006 - $1,167 and $1,167).

    5. INCOME TAXES

    On December 13, 2007, the Government of Canada substantively enacted
    reductions in corporate income tax rates. As a result, the Company's
    effective income tax rate differs substantially from its statutory rate
    for both the three and six month periods ended December 31, 2007.

    The effective income tax rate for the six month comparative period ended
    December 31, 2006 is substantially lower than the statutory rate as a
    result of the gain on sale of the Company's investment in TMG being
    largely free of tax through the use of Section 85 rollover provisions
    contained in the Income Tax Act (Canada).

    6. EMPLOYEE FUTURE BENEFITS

    The Company has recorded a charge to earnings in the three and six month
    periods ended December 31, 2007 of $884 and $1,768 (2006 - $880 and
    $1,761) to reflect the expense associated with its employee future
    benefit plans. Actual cash payments for the three and six month periods
    ended December 31, 2007 totaled $402 and $802 (2006 - $756 and $1,289).

    7. RELATED PARTY TRANSACTION

    During the three and six month periods ended December 31, 2007, Corby
    sold three year old bulk whisky to its parent company, Hiram Walker &
    Sons Limited ("HWSL") at market prices for $415 and $1,100. There were no
    sales of bulk whisky during the three and six month periods ended
    December 31, 2006. HWSL owns in excess of 50% of the issued and
    outstanding common shares of Corby. The transaction was measured at the
    exchange amount.

    8. 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.

    9. 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


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890