## ManageMent’s Discussion anD analysis 

During the year, Lantic entered into a new five-year credit agreement of $150.0 million effective June 28, 2013, replacing the $200.0 million credit agreement that expired on the same date. At September 28, 2013, a total of $75.0 million had been borrowed under short-term bankers’ acceptances under that facility. 

In addition, the Company negotiated a five-year interest rate swap agreement, as at June 28, 2013, at a rate of 2.09% for an initial amount of $50.0 million, declining to $40.0 million in 2015 and to $30.0 million in 2016. The interest payments that will be incurred on the future borrowings related to this swap agreement are reflected in the above table. 

The fourth and fifth series convertible debentures, in the amount of $50.0 and $60.0 million respectively, maturing in April 2017 and December 2018, have been excluded from the above table due to the holders’ conversion option and the Company’s option to satisfy the obligations at redemption or maturity in shares. Interest has been included in the above table to the date of maturity. 

Finance and operating lease obligations relate mainly to the leasing of various mobile equipment and the premises of the blending operations in Toronto. 

Purchase obligations represent all open purchase orders as at year-end and approximately $28.9 million for sugar beets that will be harvested and processed in fiscal 2014 and exclude any raw sugar priced against futures contracts. 

A significant portion of the Company’s sales is made under fixed-price, forward-sales contracts, which extend up to two years. The Company also contracts to purchase raw cane sugar substantially in advance of the time it delivers the refined sugar produced from the purchase.To mitigate its exposure to future price changes, the Company attempts to manage the volume of refined sugar sales contracted for future delivery in relation to the volume of raw cane sugar contracted for future delivery, when feasible. 

The Company uses derivative instruments to manage exposures to changes in raw sugar prices, natural gas prices and foreign exchange.The Company’s objective for holding derivatives is to minimize risk using the most efficient methods to eliminate or reduce the impacts of these exposures. 

To reduce price risk, the Company’s risk management policy is to manage the forward pricing of purchases of raw sugar in relation to its forward refined sugar sales.The Company attempts to meet this objective by entering into futures contracts to reduce its exposure. Such financial instruments are used to manage the Company’s exposure to variability in fair value attributable to the firm commitment purchase price of raw sugar. 

The Company has hedged all of its exposure to raw sugar price risk movement through October 2015. 

At September 28, 2013, the Company had a net long sugar position of $38.3 million in net contract amounts with a current net contract value of $40.3 million.This is offset by a larger volume of sugar priced with customers than purchases priced from suppliers. 

The Company uses futures contracts and swaps to help manage its natural gas costs. At September 28, 2013, the Company had $15.2 million in natural gas derivatives, with a current contract value of $13.0 million. 

The Company’s activities, which result in exposure to fluctuations in foreign exchange rates, consist of the purchasing of raw sugar, the selling of refined sugar and the purchasing of natural gas.The Company manages this exposure by creating offsetting positions through the use of financial instruments.These instruments include forward contracts, which are commitments to buy or sell at a future date, and may be settled in cash. 

