Winpak : Q1 2020 Financials

Winpak Ltd.

Interim Condensed Consolidated Financial Statements

First Quarter Ended: March 29, 2020

These interim condensed consolidated financial statements have not been audited or reviewed by the Company's independent external auditors, KPMG LLP.

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Winpak Ltd.

Condensed Consolidated Balance Sheets (thousands of US dollars) (unaudited)

		March 29		December 29
	Note	2020	2019
Assets
Current assets:
Cash and cash equivalents		417,385	397,159
Trade and other receivables	12	141,467	141,855
Income taxes receivable		6,009	1,253
Inventories	6	127,109	130,467
Prepaid expenses		4,859	2,715
Derivative financial instruments		-	527
		696,829		673,976
Non-current assets:
Property, plant and equipment	7	482,593	489,267
Intangible assets		36,937	37,326
Employee benefit plan assets		11,176	11,131
Deferred tax assets		667	688
Total assets		531,373		538,412
	1,228,202		1,212,388
Equity and Liabilities
Current liabilities:
Trade payables and other liabilities		56,832	64,134
Contract liabilities		2,489	3,715
Provisions		149	149
Income taxes payable		283	3,529
Derivative financial instruments		1,697	8
		61,450		71,535
Non-current liabilities:
Employee benefit plan liabilities		11,878	11,411
Deferred income		13,883	14,237
Provisions and other long-term liabilities		4,590	4,839
Deferred tax liabilities		50,110	44,604
Total liabilities		80,461		75,091
	141,911		146,626
Equity:
Share capital		29,195	29,195
Reserves		(1,243)	380
Retained earnings		1,026,963	1,005,202
Total equity attributable to equity holders of the Company		1,054,915		1,034,777
Non-controlling interests		31,376	30,985
Total equity		1,086,291		1,065,762
Total equity and liabilities		1,228,202		1,212,388

See accompanying notes to condensed consolidated financial statements.

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Winpak Ltd.
Condensed Consolidated Statements of Income
(thousands of US dollars, except per share amounts) (unaudited)		Quarter Ended
		March 29	March 31
	Note	2020		2019
Revenue	4	213,596		224,035
Cost of sales		(149,427)		(154,905)
Gross profit		64,169		69,130
Sales, marketing and distribution expenses		(17,701)		(17,689)
General and administrative expenses		(8,093)		(8,634)
Research and technical expenses		(4,053)		(4,077)
Pre-production expenses		(178)		-
Other expenses	5	(3,023)		(144)
Income from operations		31,121		38,586
Finance income		1,659		2,106
Finance expense		(629)		(969)
Income before income taxes		32,151		39,723
Income tax expense		(8,605)		(10,535)
Net income for the period		23,546		29,188
Attributable to:
Equity holders of the Company		23,155		28,429
Non-controlling interests		391		759
		23,546		29,188
Basic and diluted earnings per share - cents	10	36		44
Condensed Consolidated Statements of Comprehensive Income
(thousands of US dollars) (unaudited)		Quarter Ended
		March 29	March 31
	Note	2020		2019
Net income for the period		23,546		29,188
Items that will not be reclassified to the statements of income:
Cash flow hedge gains recognized		-		459
Cash flow hedge losses transferred to property, plant and equipment		-		95
Income tax effect		-		-
Items that are or may be reclassified subsequently to the statements of income:		-		554
Cash flow hedge (losses) gains recognized		(2,143)		691
Cash flow hedge (gains) losses transferred to the statements of income	5	(73)		546
Income tax effect		593		(331)
Other comprehensive (loss) income for the period - net of income tax		(1,623)		906
	(1,623)		1,460
Comprehensive income for the period		21,923		30,648
Attributable to:
Equity holders of the Company		21,532		29,889
Non-controlling interests		391		759
		21,923		30,648

See accompanying notes to condensed consolidated financial statements.

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Winpak Ltd.

Condensed Consolidated Statements of Changes in Equity (thousands of US dollars) (unaudited)

		Attributable to equity holders of the Company
						Non-
		Share		Retained		controlling
	Note	capital	Reserves	earnings	Total	interests	Total equity
Balance at December 31, 2018		29,195	(2,264)	893,279	920,210	27,693	947,903
Comprehensive income for the period
Cash flow hedge gains, net of tax		-	965	-	965	-	965
Cash flow hedge losses transferred to the statements
of income, net of tax		-	400	-	400	-	400
Cash flow hedge losses transferred to property, plant and
equipment		-	95	-	95	-	95
Other comprehensive income		-	1,460	-	1,460	-	1,460
Net income for the period		-	-	28,429	28,429	759	29,188
Comprehensive income for the period		-	1,460	28,429	29,889	759	30,648
Dividends	9	-	-	(1,460)	(1,460)	-	(1,460)
Balance at March 31, 2019		29,195	(804)	920,248	948,639	28,452	977,091
Balance at December 30, 2019		29,195	380	1,005,202	1,034,777	30,985	1,065,762
Comprehensive (loss) income for the period
Cash flow hedge losses, net of tax		-	(1,570)	-	(1,570)	-	(1,570)
Cash flow hedge gains transferred to the statements
of income, net of tax		-	(53)	-	(53)	-	(53)
Other comprehensive loss		-	(1,623)	-	(1,623)	-	(1,623)
Net income for the period		-	-	23,155	23,155	391	23,546
Comprehensive (loss) income for the period		-	(1,623)	23,155	21,532	391	21,923
Dividends	9	-	-	(1,394)	(1,394)	-	(1,394)
Balance at March 29, 2020		29,195	(1,243)	1,026,963	1,054,915	31,376	1,086,291

See accompanying notes to condensed consolidated financial statements.

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Winpak Ltd.
Condensed Consolidated Statements of Cash Flows
(thousands of US dollars) (unaudited)		Quarter Ended
		March 29		March 31
	Note	2020	2019
Cash provided by (used in):
Operating activities:
Net income for the period		23,546	29,188
Items not involving cash:
Depreciation		10,802	10,418
Amortization - deferred income		(388)	(372)
Amortization - intangible assets		421	112
Employee defined benefit plan expenses		915	856
Net finance income		(1,030)	(1,137)
Income tax expense		8,605	10,535
Other		(341)	(739)
Cash flow from operating activities before the following		42,530		48,861
Change in working capital:
Trade and other receivables		388	(1,810)
Inventories		3,358	3,619
Prepaid expenses		(2,144)	(1,213)
Trade payables and other liabilities		(7,151)	(1,324)
Contract liabilities		(1,226)	(1,958)
Employee defined benefit plan contributions		(1,299)	(1,984)
Income tax paid		(7,292)	(8,251)
Interest received		1,549	2,132
Interest paid		(477)	(889)
Net cash from operating activities		28,236		37,183
Investing activities:
Acquisition of property, plant and equipment - net		(6,387)	(17,315)
Acquisition of intangible assets		(31)	(18)
		(6,418)		(17,333)
Financing activities:
Payment of lease liabilities		(101)	(104)
Dividends paid	9	(1,491)	(1,429)
		(1,592)		(1,533)
Change in cash and cash equivalents		20,226	18,317
Cash and cash equivalents, beginning of period		397,159		344,322
Cash and cash equivalents, end of period		417,385		362,639

See accompanying notes to condensed consolidated financial statements.

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Notes to Condensed Consolidated Financial Statements

For the periods ended March 29, 2020 and March 31, 2019

(thousands of US dollars, unless otherwise indicated) (Unaudited)

1. General

Winpak Ltd. is incorporated under the Canada Business Corporations Act. The Company manufactures and distributes high-quality packaging materials and related packaging machines. The Company's products are used primarily for the packaging of perishable foods, beverages and in healthcare applications. The address of the Company's registered office is 100 Saulteaux Crescent, Winnipeg, Manitoba, Canada R3J 3T3.

2. Basis of Presentation

The unaudited interim condensed consolidated financial statements were prepared in accordance with International Financial Reporting Standards (IFRS). The unaudited interim condensed consolidated financial statements are in compliance with IAS 34. Accordingly, certain information and note disclosures normally included in annual consolidated financial statements prepared in accordance with IFRS as issued by the International Accounting Standards Board (IASB) have been omitted or condensed. These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company's consolidated financial statements for the year ended December 29, 2019, which are included in the Company's 2019 Annual Report.

The fiscal year of the Company ends on the last Sunday of the calendar year. As a result, the Company's fiscal year is usually 52 weeks in duration, but includes a 53rdweek every five to six years. The 2020 and 2019 fiscal years are both comprised of 52 weeks and each quarter of 2020 and 2019 are comprised of 13 weeks.

The unaudited interim condensed consolidated financial statements were approved by the Audit Committee on behalf of the Board of Directors on May 5, 2020.

3. Segment Reporting

Operating segments and product groups

The Company provides three distinct types of packaging technologies: a) flexible packaging, b) rigid packaging and flexible lidding and c) packaging machinery. Each is deemed to be a separate operating segment.

The flexible packaging segment includes the modified atmosphere packaging, specialty films and biaxially oriented nylon product groups. Modified atmosphere packaging extends the shelf life of perishable foods, while at the same time maintains or improves the quality of the product. The packaging is used for a wide range of markets and applications, including fresh and processed meats, poultry, cheese, medical device packaging, high performance pouch applications and high-barrier films for converting applications. Specialty films include a full line of barrier and non-barrier films which are ideal for converting applications such as printing, laminating and bag making, including shrink bags. Biaxially oriented nylon film is stretched by length and width to add stability for further conversion using printing, metalizing or laminating processes and is ideal for food packaging applications such as cheese, fluid and viscous liquids, and industrial applications such as book covers and balloons.

The rigid packaging and flexible lidding segment includes the rigid containers, lidding and specialized printed packaging product groups. Rigid containers include portion control and single-serve containers, as well as plastic sheet, custom and retort trays, which are used for applications such as food, pet food, beverage, dairy, industrial and healthcare. Lidding products are available in die-cut, daisy chain and rollstock formats and are used for applications such as food, dairy, beverage, industrial and healthcare. Specialized printed packaging provides packaging solutions to the pharmaceutical, healthcare, nutraceutical, cosmetic and personal care markets.

Packaging machinery includes a full line of horizontal fill/seal machines for preformed containers and vertical form/fill/seal pouch machines for pumpable liquid and semi-liquid products and certain dry products.

Due to similar economic characteristics, including long-term sales volume growth and long-term average gross profit margins, and having similar products, production processes, types of customers and distribution methods, the flexible packaging and rigid packaging and flexible lidding operating segments have been aggregated as one reportable segment. In addition, the packaging machinery operating segment has been aggregated with these two segments as the segment's revenue and assets represents less than 3 percent of total Company revenue and assets.

The Company operates principally in Canada and the United States. See note 4 for a breakdown of revenue by operating and geographic segment. The following summary presents property, plant and equipment and intangible assets information by geographic segment:

	March 29		December 29
	2020	2019
United States	260,863	264,639
Canada	239,098	242,296
Mexico	19,569	19,658
	519,530		526,593

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Notes to Condensed Consolidated Financial Statements For the periods ended March 29, 2020 and March 31, 2019(thousands of US dollars, unless otherwise indicated) (Unaudited)

4. Revenue

Most of the Company's contracts have a single performance obligation as the promise to transfer the individual goods. Revenue for each of the three operating segments is recognized at a point in time when the customer obtains control of a product, which typically takes place when legal title and physical possession of the product is transferred to the customer. These conditions are usually fulfilled upon shipment, however, in some instances, upon delivery. Invoices are generated when control has transferred and are usually payable within 30 to 60 days.

Disaggregation of Revenue
	Quarter Ended
	March 29	March 31
	2020			2019
Operating segment
Flexible packaging	112,132			111,532
Rigid packaging and flexible lidding	96,053			104,297
Packaging machinery	5,411			8,206
	213,596			224,035
Geographic segment
United States	171,149			187,877
Canada	27,612			24,983
Mexico and other	14,835			11,175
	213,596			224,035

The Company's products are primarily used for the packaging of perishable foods and beverages, which accounted for more than 90 percent of sales during both the first quarter of 2020 and 2019. Other markets include medical, pharmaceutical, personal care, industrial, and other consumer goods.

5. Other Expenses
	Quarter Ended
	March 29	March 31
Amounts shown on a net basis	2020			2019
Foreign exchange (losses) gains	(3,096)			402
Cash flow hedge gains (losses) transferred from other
comprehensive income	73			(546)
	(3,023)			(144)

6. Inventories

	March 29		December 29
	2020	2019
Raw materials	31,506	32,741
Work-in-process	26,537	25,281
Finished goods	56,998	60,532
Spare parts	12,068	11,913
	127,109		130,467

During the first quarter of 2020, the Company recorded, within cost of sales, inventory write-downs for slow-moving and obsolete inventory of $2,836 (2019 - $2,472) and reversals of previously written-down items of $1,657 (2019 - $1,543).

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Notes to Condensed Consolidated Financial Statements

For the periods ended March 29, 2020 and March 31, 2019

(thousands of US dollars, unless otherwise indicated) (Unaudited)

7. Property, Plant and Equipment

At March 29, 2020, the Company has commitments to purchase plant and equipment of $30,319 (December 29, 2019 - $29,741). No impairment losses or impairment reversals were recognized in the first quarter of 2020 or 2019.

8. Leases

Extension Options

Some leases of office and manufacturing facilities contain extension options exercisable by the Company up to one year before the end of the non- cancellable contract period. Where practicable, the Company seeks to include extension options in new leases to provide operational flexibility. The extension options held are exercisable only by the Company and not by the lessors. The Company assesses at lease commencement whether it is reasonably certain to exercise the extension options. The Company reassesses whether it is reasonably certain to exercise the options if there is a significant event or significant change in circumstances within its control. At March 29, 2020, potential future lease payments not included in lease liabilities totalled $4,682 on a discounted basis.

Future lease commitment

As at March 29, 2020 the Company had committed to a lease which had not yet commenced. The total future cash outflow for this lease is $8,732 on a discounted basis.

9. Dividends

During the first quarter of 2020, dividends in Canadian dollars of 3 cents per common share were declared (2019 - 3 cents).

10.	Earnings Per Share
		Quarter Ended
		March 29	March 31
		2020			2019
Net income attributable to equity holders of the Company	23,155			28,429
Weighted average shares outstanding (000's)	65,000			65,000
Basic and diluted earnings per share - cents	36			44
11.	Financial Instruments

The Company measures assets and liabilities under the following fair value hierarchy in accordance with IFRS. The inputs used for fair value measurements, including their classification within the required three levels of the fair value hierarchy that prioritizes the inputs used for fair value measurement, are as follows:

Level 1 - unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2 - inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and Level 3 - inputs that are not based on observable market data.

The fair value of cash and cash equivalents, trade and other receivables, including trade and other receivables subject to factoring arrangements and classified as measured at fair value through other comprehensive income (FVOCI), trade payables and other liabilities approximate their carrying value because of the short-term maturity of these instruments. The fair value of foreign currency forward contracts, designated as cash flow hedges, has been determined by valuing those contracts to market against prevailing forward foreign exchange rates as at the reporting date.

The following table presents the classification of financial instruments within the fair value hierarchy:

Financial Assets (Liabilities)	Level 1	Level 2	Level 3	Total
At March 29, 2020
Foreign currency forward contracts - net	-	(1,697)	-	(1,697)
At December 29, 2019
Foreign currency forward contracts - net	-	519	-	519

When the Company has a legally enforceable right to set off supplier rebates receivable against supplier trade payables and intends to settle the amount on a net basis or simultaneously, the balance is presented as an offset within 'Trade payables and other liabilities' on the consolidated balance sheet. At March 29, 2020, the supplier rebate receivable balance that was offset was $3,547 (December 29, 2019 - $4,036).

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Notes to Condensed Consolidated Financial Statements

For the periods ended March 29, 2020 and March 31, 2019

(thousands of US dollars, unless otherwise indicated) (Unaudited)

12. Financial Risk Management

In the normal course of business, the Company has risk exposures consisting primarily of foreign exchange risk, interest rate risk, commodity price risk, liquidity risk, and credit risk. The Company manages its risks and risk exposures through a combination of derivative financial instruments, insurance, a system of internal and disclosure controls and sound business practices. The Company does not purchase any derivative financial instruments for speculative purposes.

Financial risk management is primarily the responsibility of the Company's corporate finance function. Significant risks are regularly monitored and actions are taken, when appropriate, according to the Company's approved policies, established for that purpose. In addition, as required, these risks are reviewed with the Company's Board of Directors.

Foreign Exchange Risk

Translation differences arise when foreign currency monetary assets and liabilities are translated at foreign exchange rates that change over time. These foreign exchange gains and losses are recorded in other expenses. As a result of the Company's CDN dollar net asset monetary position as at March 29, 2020, a one-cent change in the period-end foreign exchange rate from 0.7150 to 0.7050 (CDN to US dollars) would have decreased net income by $209 for the first quarter of 2020. Conversely, a one-cent change in the period-end foreign exchange rate from 0.7150 to 0.7250 (CDN to US dollars) would have increased net income by $209 for the first quarter of 2020.

The Company's Foreign Exchange Policy requires that between 50 and 80 percent of the Company's net requirement of CDN dollars for the ensuing 9 to 15 months will be hedged at all times with a combination of cash and cash equivalents and forward or zero-cost option foreign currency contracts. The Company may also enter into forward foreign currency contracts when equipment purchases and special dividend payments will be settled in foreign currencies. Transactions are only conducted with certain approved Schedule 1 Canadian financial institutions. All foreign currency contracts are designated as cash flow hedges of the highly probable CDN dollar expenditures. These derivatives meet the hedge effectiveness criteria as a result of the following factors:

1. An economic relationship exists between the hedged item and the hedging instrument as notional amounts match and both the hedged item and hedging instrument fair values move in response to the same risk - foreign exchange rates. There are no significant reasons or causes for the designated hedged item and hedging instrument to be mismatched since the hedging instrument matures during the same month as the expected hedged expenditures are incurred. The correlation between the foreign exchange rate of the hedged item and the hedging instrument should be highly correlated and closely aligned as the maturity and the notional amount are the same.
2. The hedge ratio is one to one for this hedging relationship as the hedged item is foreign currency risk that is hedged with a foreign currency hedging instrument.
3. Credit risk is not material in the fair value of the hedging instrument.

The Company has identified two sources of potential ineffectiveness: a) the timing of cash flow differences between the expenditure and the related derivative and b) the inclusion of credit risk in the fair value of the derivative not replicated in the hedged item. The Company expects the impact of these sources of hedge ineffectiveness to be minimal. The timing of hedge settlements and incurred expenditures are closely aligned as they are expected to occur within 30 days of each other. Credit risk is not a material component of the fair value of the Company's hedging instruments as all counterparties are Schedule 1 Canadian financial institutions, which are highly rated.

Certain foreign currency contracts matured during the first quarter of 2020 and the Company realized pre-tax foreign exchange gains of $73. Of these foreign exchange differences, gains of $73 were recorded in other expenses and $0 was recorded in property, plant and equipment. During the first quarter of 2019 the Company realized pre-tax foreign exchange losses of $641. Of these foreign exchange differences, losses of $546 were recorded in other expenses and losses of $95 were recorded in property, plant and equipment.

As at March 29, 2020, the Company had US to CDN dollar foreign currency forward contracts outstanding with a notional amount of US $39.0 million at an average exchange rate of 1.3322 maturing between April 2020 and March 2021. The fair value of these financial instruments was negative $1,697 US and the corresponding unrealized loss has been recorded in other comprehensive income. The Company did not recognize any ineffectiveness on the hedging instruments in the first quarter of 2020 or 2019.

Interest Rate Risk

The Company's interest rate risk arises from interest rate fluctuations on the finance income that it earns on its cash invested in money market accounts and short-term deposits. The Company developed and implemented an investment policy, which was approved by the Company's Board of Directors, with the primary objective to preserve capital, minimize risk and provide liquidity. Regarding the March 29, 2020 cash and cash equivalents balance of $417.4 million, a 1.0 percent increase/decrease in interest rate fluctuations would increase/decrease income before income taxes by $4,174 annually.

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Notes to Condensed Consolidated Financial Statements

For the periods ended March 29, 2020 and March 31, 2019

(thousands of US dollars, unless otherwise indicated) (Unaudited)

Commodity Price Risk

The Company's manufacturing costs are affected by the price of raw materials, namely petroleum-based and natural gas-based plastic resins and aluminum. In order to manage its risk, the Company has entered into selling price-indexing programs with certain customers. Changes in raw material prices for these customers are reflected in selling price adjustments but there is a slight time lag. For the quarter ended March 29, 2020, 66 percent of revenue was generated from customers with selling price-indexing programs. For all other customers, the Company's preferred practice is to match raw material cost changes with selling price adjustments, albeit with a slight time lag. This matching is not always possible, as customers react to selling price pressures related to raw material cost fluctuations according to conditions pertaining to their markets.

Liquidity Risk

Liquidity risk is the risk that the Company would not be able to meet its financial obligations as they come due. Management believes that the liquidity risk is low due to the strong financial condition of the Company. This risk assessment is based on the following: (a) cash and cash equivalents amounts of $417.4 million, (b) no outstanding bank loans, (c) unused credit facilities comprised of unsecured operating lines of $38 million, (d) the ability to obtain term-loan financing to fund an acquisition, if needed, (e) an informal investment grade credit rating and (f) the Company's ability to generate positive cash flows from ongoing operations. Management believes that the Company's cash flows are more than sufficient to cover its operating costs, working capital requirements, capital expenditures, payment of lease liabilities and dividend payments in the next twelve months. The Company's trade payables and other liabilities and derivative financial instrument liabilities are all due within twelve months.

Credit Risk

The Company is exposed to credit risk from its cash and cash equivalents held with banks and financial institutions, derivative financial instruments (foreign currency forward contracts), as well as credit exposure to customers, including outstanding trade and other receivable balances.

The following table details the maximum exposure to the Company's counterparty credit risk which represents the carrying value of the financial asset:

	March 29		December 29
	2020	2019
Cash and cash equivalents	417,385	397,159
Trade and other receivables	141,467	141,855
Foreign currency forward contracts	-	527
	558,852		539,541

Credit risk on cash and cash equivalents and other financial instruments arises in the event of non-performance by the counterparties when the Company is entitled to receive payment from the counterparty who fails to perform. The Company has established an investment policy to manage its cash. The policy requires that the Company manage its risk by investing its excess cash on hand on a short-term basis, up to a maximum of six months, with several financial institutions and/or governmental bodies that must be rated 'AA' or higher for CDN financial institutions and 'A-1' or higher for US financial institutions by recognized international credit rating agencies or insured 100 percent by the US government or a 'AAA' rated CDN federal or provincial government. The Company manages its counterparty risk on its financial instruments by only dealing with Schedule 1 Canadian financial institutions.

In the normal course of business, the Company is exposed to credit risk on its trade and other receivables from customers. To mitigate such risk, the Company performs ongoing customer credit evaluations and assesses their credit quality by taking into account their financial position, past experience and other pertinent factors. Management regularly monitors customer credit limits, performs credit reviews and, in certain cases insures trade and other receivables against credit losses.

During the first quarter of 2020, the Company incurred costs on the sale of trade receivables of $497 (2019 - $1,229). Of these costs, $421 was recorded in finance expense (2019 - $881) and $76 was recorded in general and administrative expenses (2019 - $348).

As at March 29, 2020, the Company believes that the credit risk for trade and other receivables is mitigated due to the following: a) a broad customer base which is dispersed across varying market sectors and geographic locations, b) 97 percent of the gross trade and other receivables balance is within 30 days of the agreed upon payment terms with customers, c) the sale of certain extended term trade receivables without recourse to a third party and d) 35 percent of the trade and other receivables balance is insured against credit losses. The Company's exposure to the ten largest customer balances, on aggregate, accounted for 38 percent of the total trade and other receivables balance.

The carrying amount of trade and other receivables is reduced through the use of an allowance for expected credit losses and the amount of the loss is recognized in the statement of income within general and administrative expenses. When a receivable balance is considered uncollectible, it is written off against the allowance for expected credit losses. Subsequent recoveries of amounts previously written off are credited against general and administrative expenses in the statement of income. During the first quarter of 2020, the Company recorded impairment losses on trade and other receivables of $176 (2019 - $76).

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Notes to Condensed Consolidated Financial Statements

For the periods ended March 29, 2020 and March 31, 2019

(thousands of US dollars, unless otherwise indicated) (Unaudited)

The following table sets out the aging details of the Company's trade and other receivables balances outstanding based on when the receivable was due and payable and related allowance for expected credit losses:

	March 29		December 29
	2020	2019
Current (not past due)	122,331	119,227
1 - 30 days past due	16,067	19,840
31 - 60 days past due	1,953	2,364
More than 60 days past due	2,648	1,822
	142,999		143,253
Less: Allowance for expected credit losses	(1,532)	(1,398)
Total trade and other receivables, net	141,467		141,855

13. Seasonality

The Company experiences seasonal variation in revenue, with revenue typically being the highest in the second and fourth quarters, and lowest in the first quarter.

14. Subsequent Event

In March 2020, the World Health Organization declared a global pandemic known as Coronavirus (COVID-19). The extent of the pandemic's effect on the Company's operational and financial performance will depend on future developments, including the extent and duration of the pandemic, both of which are uncertain and difficult to predict considering the rapidly evolving landscape. As a result, it is not currently possible to ascertain the overall financial impact on the Company's business. Winpak has a solid balance sheet with significant cash resources on hand, unused credit facilities comprised of unsecured operating lines of $38 million and strong cash flows from operations to enable the Company to function effectively during the COVID-19 pandemic.

All Winpak facilities in North America are now under some level of health state of emergency, or shelter-in-place order restricting business activities, movement of people, size of groups and instituting mandatory quarantine for travelers. Wherever a shelter-in-place order or state of emergency has been declared, local and federal authorities have identified under specific acts, which essential industries may remain open and active until further notice. In all affected jurisdictions, Winpak is classified as an essential provider of packaging materials and machinery to the food and healthcare industries, and is being actively urged by its customers to provide uninterrupted supply of quality packaging materials and machinery to maintain their essential supply chains. At the present time, all Winpak production sites are operational and working with the complete support of equally determined suppliers and logistics companies servicing customers who face similar challenges to stay in operation and supply our communities with food and healthcare supplies. With the tremendous support and dedication of all stakeholders, the Company spares no effort to strengthen a safe workplace in all production facilities as well as curb the spread of the virus through a comprehensive and as we learn, expanding list of counter safety measures. All sites have meticulously reviewed and updated their disaster mitigation and recovery plans for readiness in the face of a possible contamination.

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