Big Rock Brewery Inc. Announces Q2 2020 Financial Results and Resurgence in Cash Flow From Operations

CALGARY, AB, July 30, 2020 /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, 2020. 

"Big Rock achieved 510% EBITDA growth, compared to the same period in 2019, and cash flow from operations of $2.8 million in the second quarter of 2020. Despite the challenges faced related to the COVID-19 pandemic, including a significant loss in bar, restaurant and event revenue, we are extremely pleased with the success of the business and the resilience of our employee base through these uncertain times," said President & CEO Wayne Arsenault, "Since the beginning of the pandemic, we have prioritized and implemented extraordinary measures to protect the safety of our employees, customers and consumers. Through commitment to these principles, we reported an excellent second quarter and believe we are well positioned to continue to find success in the quarters to come."

As at June 30, 2020, the Corporation was undrawn on its operating credit facility of $5 million and $3.1 million drawn on its $6 million term facility with its lender.

"Although the Corporation faced significant financial challenges in 2019 and the uncertain economic circumstances presented by COVID-19 in 2020, as a result of the continued support of our lender, partners and provincial and federal governments, along with strong working capital and cost structure management, we are pleased with the current financial position of the Corporation," said Chief Financial Officer Don Sewell.

Financial Highlights

For the three months ended June 30, 2020, compared to the three months ended June 30, 2019, the Corporation reported:

• operating income of $1.1 million, compared to an operating loss of $0.5 million;
• earnings before interest, taxes, depreciation and amortization ("EBITDA") increase of $1.7 million, from $0.3 million to $2.0 million;
• cash flow provided from operating activities of $2.8 million, compared to cash flow used in operating activities of $0.4 million;
• sales volumes decreased by 4.5%, from 48,900 hl to 46,693 hl;
• net revenue decreased by 10.3%, from $13.3 million to $11.9 million; and
• net income of $0.6 million from $0.3 million.

For the six months ended June 30, 2020 compared to the six months ended June 30, 2019, the Corporation reported:

• operating income of $0.1 million compared to an operating loss of $2.7 million;
• positive EBITDA of $2.1 million compared to negative EBITDA of $1.1 million;
• cash flow provided from operating activities of $3.0 million, compared to cash flow used in operating activities of $1.6 million;
• sales volumes decreased by 0.8%, from 83,875 hl to 83,183 hl;
• net revenue decreased by $1.0 million from $21.9 million to $20.9 million;
• net loss decreased by $1.1 million to a net loss of $0.3 million, from a net loss of $1.4 million; and
• a reduction in bank indebtedness and long term debt of $1.8 million as the Corporation continued to focus on using its cash flow to pay down debt.

Operating Highlights

Despite the continued market headwinds experienced in the beer category in Canada, the Corporation achieved a $1.7 million increase in EBITDA in the second quarter of 2020 compared to the same period in 2019 and continues to see a strong contribution from its contract manufacturing business. The significant improvement in the Corporation's EBITDA in the quarter can be attributed to the following:

• 20% increase in contract manufacturing volumes;
• significant reductions in cost of sales, selling expenses and general and administrative costs as a result of the Canada Emergency Wage Subsidy received by the Corporation and cost cutting initiatives implemented by the Corporation during the second quarter of 2019;
• increased sales of the Corporation's allied brands;
• continued growth in value offerings including Alberta Genuine Draft, Bow Valley Lager and Bow Valley Strong;
• growth from the Corporation's Rock Creek Cider series; and
• the resurgence in the Corporation's gross profit primarily driven by the Alberta Gaming, Liquor and Cannabis Commission's amendment of the beer mark-up policy in September 2019.

The loss of keg sales related to COVID-19 put the performance of Big Rock's Signature series of beers under significant pressure, along with continued decline in beer consumption trend in Canada.

The Corporation experienced several manufacturing issues during the second quarter of 2020 that have since been remediated. Given the downtime for capital expenditure in March as a result of the rapid onset of COVID-19 along with manufacturing issues experienced by the Corporation at the beginning of April, the Corporation struggled to build adequate inventory to meet shifting consumer demand. In conjunction with significant returns in expired kegs due to COVID-19, the Corporation realized a $1.2 million charge due to obsolete and damaged inventories during the second quarter. The Corporation's manufacturing issues were fully remediated in April and all COVID-19 related inventory charges were fully incurred during the second quarter. Big Rock is confident that existing inventory levels, production planning and local procurement are well positioned to meet consumer demand.

Despite sales volumes declining by 2,207 hl (5%) to 46,693 hl and the manufacturing and inventory issues experienced in the second quarter of 2020, Big Rock reported net income of $0.6 million or $0.08 per common share, compared to a net income of $0.3 million or $0.04 per common share in the same period of 2019.

Summary of Results
	Three months ended June 30				Six months ended June 30
$000, except hl and per share amounts	2020		2019		2020		2019
Sales volumes (hl)^(1)	46,693		48,900		83,183		83,875
Gross revenue	$	16,810	$	20,502	$	29,443	$	34,143
Net revenue	11,926		13,299		20,854		21,925
EBITDA^(2)	2,043		335		2,122		(1,056)
Operating income (loss)	1,062		(495)		133		(2,724)
Net income (loss)	570		297		(322)		(1,424)
Income (loss) per share (basic and diluted)	$	0.08	$	0.04	$	(0.05)	$	(0.20)
$ per hl
Net revenue	$255.41		$271.96		$250.70		$261.40
Cost of sales	$151.95		$189.08		$155.69		$185.90
^(1)Excludes contract manufacturing volumes due to the nature of the agreements.
^(2)Non-GAAP measure. See "Non-GAPP Measures".

Additional Information

The unaudited consolidated financial statements and Management's Discussion and Analysis for the three and six months ended June 30, 2020 dated July 30, 2020, 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 "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.  EBITDA is calculated by adding back to net income, interest, income taxes, depreciation and amortization. For more information, please see Management's Discussion and Analysis for the three months and year ended June 30, 2020.

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:

• supply and demand of Big Rock's products;
• the impact of recent amendments to the AGLC beer mark-up rates in Alberta and any further changes in the future;
• Big Rock's expectations with respect to the Corporation's evaluation of growth opportunities and plans with respect to the same;
• Big Rock's expectations with respect to its ability to find success in the quarters to come;
• Big Rock's expectations with respect to its ability to meet consumer demand; and
• Big Rock's expectations with respect to its future financial position.

With respect to the forward-looking statements listed above and contained in this news release, management has made assumptions regarding, among other things:

• volumes in the current fiscal year will remain constant or will increase;
• input costs for brewing and packaging materials will not materially increase or decrease;
• 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 contained herein include the risk factors set out in the Corporation's annual information form and also include, but are not limited to:

• the inability to maintain the current AGLC beer mark-up policy in Alberta;
• the inability to maintain the current AGLC mark-up rates applicable to RTD beverages in Alberta;
• the inability to grow demand for Big Rock's products;
• the worldwide economic and social impact of COVID-19; and
• the duration and extent of the COVID-19 pandemic.

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.

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.

Wayne Arsenault, President & Chief Executive Officer, or Don Sewell, Chief Financial Officer: Phone: [phone], Fax: [phone], Email: [email protected]

Related Links

http://www.bigrockbeer.com