CALGARY,
AB, Nov. 14, 2022 /CNW/ - Big Rock Brewery
Inc. (TSX: BR) ("Big Rock" or the "Corporation")
today announced its financial results for the three and nine months
ended September 30, 2022.
Financial Summary
For the three months ended September 30,
2022, the Corporation reported:
- sales volumes of 47,154 hectolitres ("hl") (excluding
co-packing volumes);
- net revenue of $11.9
million;
- operating loss of $1.1
million;
- net loss of $1.4 million;
and
- Adjusted EBITDA (See "Non-GAAP Measures") of 0.1
million.
For the nine months ended September 30,
2022, compared to the nine months ended September 30, 2021, the Corporation reported:
- net revenue decreased by 2.0%, from $37.3 million to $36.6
million;
- sales volumes, excluding co-packing, decreased 5.2% from
129,201 hl to 122,842 hl as a result of decreased sales in the
value beer category;
- net loss of $3.3 million versus a
net income of $0.6 million; and
- operating loss of $3.1 million, compared to operating income
of $0.9 million.
Summary of Results
$000, except hl and per
share amounts
|
Three months
ended
September 30
|
Nine months
ended
September 30
|
|
2022
|
2021
|
2022
|
2021
|
Sales volumes (hl)
(1)
|
47,154
|
47,367
|
122,842
|
129,201
|
Gross
revenue
|
$
17,411
|
$
17,969
|
$
50,447
|
$
50,898
|
Net revenue
|
11,940
|
12,982
|
36,550
|
37,271
|
Cost of
sales
|
7,925
|
8,444
|
25,964
|
23,843
|
Adjusted EBITDA
(2)
|
116
|
1,335
|
110
|
4,102
|
Operating income
(loss)
|
(1,146)
|
354
|
(3,104)
|
921
|
Net income
(loss)
|
(1,391)
|
237
|
(3,250)
|
568
|
Income (loss) per share
(basic and diluted)
|
$
(0.20)
|
$
0.03
|
$
(0.47)
|
$
0.08
|
|
|
(1)
|
Excludes co-packing
volumes due to the nature of the agreements.
|
(2)
|
Non-GAAP financial
measure. See "Non-GAAP Measures".
|
Outlook & Strategy
Big Rock's branded sales continue to face pressure as a result
of unfavorable industry trends, specifically in the value beer
segment. For the nine months ended September
30, 2022, Canadian domestic beer sales decreased by 4.8%
compared to prior period. In response to this, Big Rock is focusing
on continued product innovation and development in the premium
category to better align with trends in consumer demand. In the
third quarter of 2022 Big Rock's premium category outperformed the
industry on relatively flat volume compared to the same period in
the previous year.
The Corporation's co-pack volumes for the third quarter of 2022
were negatively impacted by the labour distribution strike that
occurred in British Columbia over
several weeks in August. While some of the affected co-pack volume
was recovered in September, the Corporation missed out on
approximately $0.4 million of co-pack
revenues as a direct result of the strike.
Big Rock continues to experience inflationary pressures
impacting raw material and packaging material pricing related to
its owned volumes, as well as longer lead times combined with
increased delivery and distribution charges linked to ongoing
supply chain issues caused by the lasting impact of the COVID-19
pandemic. In response to the Corporation's pressures, Big Rock has
strategically engaged in group purchasing strategies to mitigate
cost increases and has also put in place certain fixed price
contracts on raw materials and utilities to stabilize prices going
forward and into 2023.
The result of these efforts was a lower cost of sales in the
third quarter.
As at September 30, 2022, the Corporation was in
breach of its debt covenant with its bank that resulted in the
credit facility balance of $11.4
million being classified as a current liability. The
Corporation did not rectify the breach within the cure period and
is in default under the terms of the amended credit
facility. This results in the lender having the right to
demand repayment and/or realize on the security at any time
under the commitment letter underlying the credit facilities, under
any of the relevant security documents and under applicable
law.
Big Rock and ATB signed an acknowledgement and reservation of
rights letter where ATB imposed additional conditions on the
Corporation. All these conditions were met by the Corporation and
the Corporation has been in negotiations with ATB to
re-structure the terms of the Corporation's credit facilities.
In addition to the matters above, the Corporation does not
currently have sufficient cash flows to cover forecasted expenses
for 2023 and under the existing terms of the lending agreements
management is forecasting further breaches in covenants within the
next 12 months.
To address this situation the Corporation has taken the
following actions:
- Mr. Stephen Giblin, Chairman of
the Board of Directors, has assumed the position of Interim
President and CEO of the Corporation;
- The Board of Directors has established a sub-committee of the
board and engaged a consultant to conduct a search for a new
CEO;
- The Company has established a special committee to complete a
review of the available options for the Corporation to secure
capital; and
- The Corporation has engaged a consultant financial advisor to
assist the Special Committee in a review of options to secure
capital.
Additional Information
The interim condensed consolidated financial statements and
Management's Discussion and Analysis for the three and nine months
ended September 30, 2022 dated
November 14, 2022, can be viewed on
Big Rock's website at www.bigrockbeer.com and on SEDAR at
www.sedar.com under Big Rock Brewery Inc.
Non-GAAP Measures
The Corporation uses certain financial measures referred to in
this press release to quantify its results that are not prescribed
by Generally Accepted Accounting Principles. This press release
contains the term "Adjusted EBITDA". This financial measure does
not have a standardized meaning under the Corporation's Generally
Accepted Accounting Principles and therefore may not be comparable
to similar measures presented by other issuers. Adjusted
EBITDA is defined as net loss before interest, taxes, depreciation
and amortization and share based payments. Management believes
that this measure facilitates the understanding of the
Corporation's results from operations. The nearest GAAP measure to
Adjusted EBITDA is net income or net loss, as applicable, with the
reconciliation between the two as follows:
($000, except where
indicated)
|
Three months
ended
September 30
|
Nine months
ended
September 30
|
|
2022
|
2021
|
Change
|
2022
|
2021
|
Change
|
Net income
(loss)
|
$
(1,391)
|
$
237
|
$
(1,628)
|
$ (3,250)
|
$ 568
|
$ (3,818)
|
Addback:
|
|
|
|
|
|
|
Interest
|
283
|
104
|
179
|
622
|
321
|
301
|
Taxes
|
8
|
115
|
(107)
|
(475)
|
296
|
(771)
|
Depreciation
and
amortization
|
987
|
829
|
158
|
2,616
|
2,504
|
112
|
Share based
payments
|
229
|
151
|
78
|
628
|
657
|
(29)
|
Gain on disposal
of
assets
|
—
|
(12)
|
12
|
(31)
|
(155)
|
124
|
Gain on
extinguishment of
license obligation
|
—
|
(89)
|
89
|
—
|
(89)
|
89
|
Adjusted
EBITDA
|
$ 116
|
$
1,335
|
$
(1,219)
|
$
110
|
$
4,102
|
$
(3,992)
|
Forward-Looking Information
Certain statements contained in this news release constitute
forward-looking statements. These statements relate to future
events or Big Rock's future performance. All statements, other than
statements of historical fact, may be forward-looking statements.
Forward-looking information are not facts, but only predictions and
generally can be identified by the use of statements that include
words or phrases such as, "anticipate", "believe", "continue",
"could", "estimate", "expect", "intend", "likely" "may", "project",
"predict", "propose", "potential", "might", "plan", "seek",
"should", "targeting", "will", and similar expressions. These
statements involve known and unknown risks, uncertainties and other
factors that may cause actual results or events to differ
materially from those anticipated in such forward-looking
statements. Big Rock believes that the expectations reflected in
those forward-looking statements are reasonable but no assurance
can be given that these expectations will prove to be correct and
such forward-looking statements included in this news release
should not be unduly relied upon by readers, as actual results may
vary materially from such forward-looking statements. These
statements speak only as of the date of this news release and are
expressly qualified, in their entirety, by this cautionary
statement.
In particular, this news release contains forward-looking
statements pertaining to the following:
- Big Rock's business plans, outlook and strategy;
- Big Rock's focus on continued product innovation and
development in the premium category;
- that Big Rock's group purchasing strategies will improve its
purchasing power and mitigate cost increases;
- that Big Rock's fixed price contracts on raw materials and
utilities will mitigate price volatility going forward; and
- Big Rock's financial situation and efforts being undertaken to
remedy same.
With respect to the forward-looking statements listed above and
FOFI (as defined below) contained in this news release, management
has made assumptions regarding, among other things:
- that Big Rock's group purchasing strategies will improve its
purchasing power;
- there will be no material change to the regulatory environment
in which Big Rock operates;
- there will be no material supply issues with Big Rock's
vendors; and
- that the duration and extent of the COVID-19 pandemic will not
be long-term.
Some of the risks which could affect future results and could
cause results to differ materially from those expressed in the
forward-looking information and statements and FOFI contained
herein include the risk factors set out in the Corporation's annual
information form which is available on Big Rock's website at
www.bigrockbeer.com and on SEDAR at www.sedar.com under Big Rock
Brewery Inc., and also include, but are not limited to:
- that Big Rock's group purchasing strategies may not improve its
purchasing power and mitigate cost increases;
- that Big Rock's fixed price contracts on raw materials and
utilities may not mitigate price volatility;
- the duration and extent of the COVID-19 pandemic; and
- Big Rock may not be able to raise sufficient debt and/or equity
capital to continue as a going concern.
Any financial outlook or future oriented financial information
(in each case "FOFI") contained in this news release
regarding prospective financial position, including, but not
limited to, that Big Rock's group purchasing strategies will
improve its purchasing power and mitigate cost increases and that
Big Rock's fixed price contracts on raw materials and utilities
will mitigate price volatility going forward and other matters
pertaining to Big Rock's financial situation, is based on
reasonable assumptions about future events, including those
described above, based on an assessment by management of the
relevant information that is currently available. The actual
results will likely vary from the amounts set forth herein and such
variations may be material. Readers are cautioned that any such
FOFI contained herein should not be used for purposes other than
those for which it is disclosed herein. Such information was made
as of the date of this news release and the Company disclaims any
intention or obligation to update or revise any such information,
whether as a result of new information, future events, or
otherwise, unless required pursuant to applicable law.
Readers are cautioned that the foregoing list of assumptions and
risk factors is not exhaustive. The forward-looking information and
statements and FOFI contained herein are expressly qualified in
their entirety by this cautionary statement. The forward-looking
information and statements and FOFI included in this news release
are made as of the date hereof and Big Rock does not undertake any
obligation to publicly update such forward-looking information and
statements to reflect new information, subsequent events or
otherwise unless so required by applicable securities laws.
About Big Rock Brewery Inc.
In 1985, Ed McNally founded Big
Rock to contest the time's beer trends. Three bold,
European-inspired offerings – Bitter, Porter and Traditional Ale –
forged an industry at a time heavy on easy drinking lagers and
light on flavour. Today, our extensive portfolio of signature
beers, ongoing seasonal offerings, six ciders (Rock Creek Cider®
series), custom-crafted private label products and other notable,
licensed alcoholic beverages keeps us at the forefront of the craft
beer revolution and still proudly contesting the beer and alcoholic
beverage trends of today. Big Rock has brewing operations in
Calgary, Alberta, Vancouver, British Columbia, and Toronto, Ontario. Big Rock trades on the TSX
under the symbol "BR". For more information on Big Rock visit
www.bigrockbeer.com
SOURCE Big Rock Brewery Inc.