CALGARY, Aug. 1, 2019 /CNW/ - Big Rock Brewery Inc. (TSX: BR) ("Big Rock" or the "Corporation") today announced its financial results for the three and six months ended June 30, 2019, in addition to the completion of the renewal of its credit facilities and the waiver of its financial covenants until and including June 30, 2020, by its lender.
"Big Rock grew its gross revenues (11% year-over-year) for the second consecutive quarter in 2019, however, given the persisting high beer taxes imposed on the Corporation by the Government of Alberta, our margins continue to be under significant pressure," said President & CEO Wayne Arsenault, "As a result of this challenging and persisting regulatory environment in Alberta, the Corporation was forced to execute on a significant cost cutting plan in order to conserve cash."
Subsequent to the second quarter of 2019, Big Rock's borrowing base of $11 million was reconfirmed by its lender and given Big Rock management's response to the challenging regulatory environment for the Corporation in Alberta, Big Rock's lender has waived its financial covenants for the second quarter of 2019 and until and including June 30, 2020.
"The Corporation undertook significant cost cutting initiatives in the second quarter and has instituted a revised budget for the remainder of 2019 to conserve cash while we continue to face Alberta regulatory headwinds in the form of high beer taxes," commented CFO Don Sewell, "We would like to thank our lender, ATB Financial, for the continued support of our business and belief in our management team as we continue to navigate this challenging regulatory environment in Alberta."
For the three months ended June 30, 2019, compared to the three months ended June 30, 2018, Big Rock:
increased gross revenue by $2.0 million (11%) to $20.5 million from $18.5 million;
reported net revenue of $13.3 million, compared to $13.5 million, on sales volumes of 48,900 hectolitres ("hl"), compared to 56,012 hl;
reported earnings before interest, tax, depreciation and amortization ("EBITDA") of $0.3 million compared to $1.2 million;
reported an operating loss of $0.5 million compared to an operating profit of $0.5 million;
slightly increased its net income to $0.3 million, from a net income of $0.2 million; and
reported funds used in operations of $0.4 million, compared to funds provided by operations of $1.7 million.
For the six months ended June 30, 2019 compared to the six months ended June 30, 2018, Big Rock:
increased gross revenue by $2.7 million (9%) to $34.1 million from $31.4 million;
reported net revenue of $21.9 million, compared to $23.0 million, on sales volumes of 83,875 hl compared to 96,823 hl;
reported negative EBITDA of $1.1 million compared to positive EBITDA of $1.5 million;
reported an operating loss of $2.7 million compared to an operating loss of $0.1 million;
increased its net loss by $1.2 million to a net loss of $1.4 million, from a net loss of $0.1 million; and
reported funds used in operations of $1.6 million, compared to funds provided by operations of $0.5 million.
Big Rock reported a net income of $0.3 million and a net loss of $1.4 million, respectively, for the three and six months ended June 30, 2019 as compared to a net income of $0.2 million and net loss of $0.1 million, respectively, for the same periods in 2018. Big Rock's operating loss of $0.5 million and $2.7 million for the three and six months ended June 30, 2019 increased by $1.0 million and $2.7 million, compared to operating income of $0.5 million and operating loss of $0.1 million for the same periods in the prior year due to the increase in the Alberta beer tax for the Corporation in late 2018. The overall revenue impact of the increase in Big Rock's beer tax in Alberta was approximately $2.5 million and $4.3 million for the three and six months ended June 30, 2019, respectively.
As a result of the material increase in Alberta beer taxes for the Corporation in December 2018, during the first quarter of 2019 and prior to the 2019 provincial general election in Alberta, the Corporation had received a signed grant letter from the former Minister of Agriculture and Forestry, subject to definitive documentation, that would allow the Corporation to continue to execute its 2019 plan and pursue its near and long-term growth plans. On May 13, 2019, the Corporation received notice from the new Ministry of Agriculture and Forestry of Alberta that it would not be receiving the financial support outlined in the grant letter, which resulted in Big Rock taking significant cost cutting measures to reduce its operating losses it would have otherwise incurred in the current high beer tax environment for brewers of its size. As a result of such cost cutting measures undertaken by Big Rock management, the Corporation was able to reduce the magnitude of operating losses the Corporation would have otherwise realized in the second quarter had it not undertaken such measures.
The Corporation continues to work with the Government of Alberta to amend the Alberta beer tax policy to a framework that would provide brewers in Alberta a predictable and sustainable regulatory environment that promotes growth in the province. Should the current beer tax environment persist, Big Rock will consider further cost cutting measures to ensure its profitability and growth.
Subsequent to June 30, 2019, Big Rock's borrowing base was reconfirmed by its lender at $11 million, comprised of a $5 million revolving operating loan facility and a $6 million 5-year revolving term loan facility. Additionally, given the difficult Alberta regulatory environment for Big Rock in 2019 thus far, the Corporation was in breach of one of its financial covenants as at June 30, 2019. However, given the cost cutting measures undertaken by Big Rock management and the revised budget instituted for the remainder of 2019, Big Rock's lender has waived its financial covenants until and including June 30, 2020, inclusive of the second quarter of 2019.
Summary of Results
Three months ended June 30
Six months ended June 30
$000, except hl and per share amounts
Sales volumes (hl) (1)
Operating income (loss)
Net income (loss)
Income (loss) per share (basic and diluted)
$ per hl
Cost of sales
(1) Excludes contract manufacturing volumes due to the nature of the agreements.
The unaudited consolidated financial statements and Management's Discussion and Analysis for the three and six months ended June 30, 2019, dated August 1, 2019, can be viewed on Big Rock's website at www.bigrockbeer.com and on SEDAR at www.sedar.com under Big Rock Brewery Inc.
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 are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors that may cause Big Rock's 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 investors as actual results may vary. 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:
the Corporation's expected financial strength;
the implementation of cost cutting measures by the Corporation and the significance and results thereof;
the continued impact of Alberta's beer tax policy on the Corporation;
the anticipated results of the Corporation's continuing work with the Government of Alberta;
the continued impact of the Alberta regulatory regime on the Corporation;
the impact of future changes to the regulatory regime and mark-up/tax rates on the Corporation; and
the Corporation's ability to execute on its plans.
With respect to forward-looking statements listed above and contained in this news release, Big Rock has made assumptions regarding, among other things, the following:
volumes in the current fiscal year will remain as anticipated;
input costs for brewing and packaging materials will remain constant or will not significantly increase or decrease;
there will be no material change to the regulatory environment, including the mark-up/tax and grant rates, in which Big Rock operates;
there will be no supply issues with Big Rock's vendors; and
the Corporation's ongoing discussions with the Alberta Government with respect to the mark-up/tax, grant program and treatment of craft brewers in the province.
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 contained herein include, but are not limited to:
the inability to change beer tax policy in Alberta by working with the Government of Alberta; and
the inability to continue to grow demand for Big Rock's products.
Readers are cautioned that the foregoing list of assumptions and risk factors is not exhaustive. The forward-looking information and statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking information and statements 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.
The term "earnings before interest, taxes, depreciation and amortization" (EBITDA) is not a recognized measure under GAAP and may not be comparable to that reported by other companies. EBITDA is calculated by adding back to net income, interest, income taxes and depreciation and amortization. Management uses this measure to evaluate the Corporation's operating results. A reconciliation of EBITDA to net income (loss), the nearest GAAP measure, is contained under the section "Liquidity and Capital Resources – Capital Strategy" in the Corporation's Management's Discussion and Analysis for the three and six months ended June 30, 2019, dated August 1, 2019, which can be viewed on Big Rock's website at www.bigrockbeer.com and on SEDAR at www.sedar.com under Big Rock Brewery Inc.
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, four ciders (Rock Creek Cider® series) and custom-crafted private label products keep us at the forefront of the craft beer revolution and still proudly contesting the beer 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.
For further information: Don Sewell, Chief Financial Officer, Phone: (403) 720-3239, Fax: (403) 720-3641, Email: [email protected]