Second Quarter
Highlights:
- Net revenue of $29.5 million,
decreased from $34.2 million in the
prior year.
- Gross profit of $6.8M, decrease
from $11.2 million in the prior
year.
- Selling, marketing and administration expenses of $4.0 million, reduced from $4.9 million in the prior year.
- EBITDA* of $5.1 million,
decreased from $8.0 million in the
prior year.
First Half Year
Highlights:
- Net revenue of $50.7 million,
decreased from $56.7 million in the
prior year.
- Gross profit of $10.8 million,
decreased from $16.2 million in the
prior year.
- Selling, marketing and administration expenses of $7.6 million, reduced from $8.5 million the prior year.
- EBITDA* of $7.7 million,
decreased from $11.2 million in the
prior year.
KITCHENER, ON, Sept. 8,
2022 /CNW/ – Waterloo Brewing Ltd. ("Waterloo
Brewing" or the "Company") (TSX: WBR), Ontario's first craft brewery, announced
financial results for the second quarter of fiscal 2023 which ended
on July 31, 2022. Waterloo Brewing
reported EBITDA* for the second quarter of fiscal 2023 of
$5.1 million, on net revenue of
$29.5 million.
Owner brand sales volume in the quarter grew by 1.4%, while the
industry, as a whole, was down by 0.9%. Volumes of the domestic
mainstream Laker brand increased by 9.3% versus the prior year,
signalling trade-down behaviours within the category as a result of
inflationary pressures. The Company expects consumers to continue
to trade-down, which will benefit the Laker brand, as they continue
to feel inflationary pressures. LandShark® also grew by 7.2%
which maintained the performance trend in the first quarter and
significantly out paced the domestic premium category. Owner
brands continued to gain market share at The Beer Store and grocery
stores in Ontario.
A few large co-manufacturing customers that supply their own raw
materials were impacted by ongoing supply chain delays in the
quarter, which resulted in contract volumes either partially lost
or shifted to upcoming months. Service revenue decreased by
$4.4 million in the quarter versus
the prior representing 93.6% of the overall decline in net
revenue.
Gross profit performance declined in the quarter due to lower
co-manufacturing volumes, inflationary cost pressures, supply chain
challenges and increased operational fixed costs. Waterloo Brewing
will continue to evaluate and implement selective product price
increases that are expected to partially offset some of the
inflationary pressures. Further, Waterloo Brewing expects to gain
improved operating efficiencies and labour cost efficiencies as the
co-manufacturing volumes increase during the balance of the fiscal
year.
"We know our customers are facing significant financial
pressures right now. We feel it too, as we continue to experience
inflationary cost escalation of our own, and encounter supply chain
delays which affects both our co-manufacturing and owner brand
manufacturing," said George Croft,
President and Chief Executive Officer of Waterloo Brewing. "We want
to ensure our customers feel heard and supported, which is why we
continue to offer great tasting beer at great prices, continuing to
produce the beer of choice for so many Ontarians."
Moving forward, Waterloo Brewing has secured partnerships with
Bingemans Oktoberfest, Oktoberfest at Concordia Club and
Wilfrid Laurier University Athletics
and Recreation. These partnerships will help increase local
visibility and align with Waterloo Brewing's commitment to growing
its business in its home market. Additionally, the Company is
preparing for the release of the newest installment of the Waterloo
Signature Series Premium Collection, featuring three new
fall-inspired beers that will be hitting the LCBO, The Beer Store
and select grocery stores this September.
"We have a strong and experienced team that is focused on
reaching our goals. I am confident that we will finish this fiscal
year strong despite the ongoing challenges," Croft said.
The Board of Directors approved a quarterly dividend of
$0.0304/share, payable November 2, 2022, to shareholders of record as of
October 19, 2022. The dividend is
classified as an eligible dividend.
The following financial information should be read in
conjunction with the audited annual financial statements of the
Company prepared under IFRS for the year ended January 31, 2022.
Reconciliation of
Net Earnings (loss) to EBITDA*
|
|
|
|
Quarter ended
(unaudited)
|
Fiscal
year-to-date ended (unaudited)
|
(in thousands of
dollars)
|
July 31,
2022
|
August 1,
2021
|
July 31,
2022
|
August 1,
2021
|
|
|
|
|
|
Net income
(loss)
|
$
730
|
$
4,155
|
$
(254)
|
$
4,054
|
|
|
|
|
|
Add
(deduct):
|
|
|
|
|
Income tax recovery
(provision)
|
254
|
1,450
|
(111)
|
1,414
|
Gain on misappropriated
funds
|
-
|
(900)
|
-
|
(900)
|
Depreciation and
amortization
|
2,963
|
2,634
|
5,968
|
4,984
|
Gain on disposal of
property, plant and equipment, and right-of-use assets
|
(3)
|
(5)
|
(3)
|
(22)
|
Share-based
payments
|
302
|
270
|
508
|
409
|
Finance
costs
|
746
|
662
|
1,451
|
1,334
|
Unrealized gain (loss)
on foreign exchange contracts
|
86
|
(265)
|
135
|
(26)
|
Subtotal
|
4,348
|
3,846
|
7,948
|
7,193
|
|
|
|
|
|
EBITDA *
|
5,078
|
8,001
|
7,694
|
11,247
|
STATEMENTS OF FINANCIAL
POSITION
As at July 31, 2022 and
January 31, 2022
(Not audited
or reviewed by the Company's external auditor)
|
|
July 31,
2022
|
January 31,
2022
|
|
|
|
|
ASSETS
|
|
|
|
Current
assets
|
|
|
|
Accounts receivable and
contract assets
|
|
$
15,652,911
|
$
15,526,799
|
Inventories
|
|
18,684,118
|
15,841,135
|
Prepaid
expenses
|
|
1,209,878
|
754,088
|
|
|
35,546,907
|
32,122,022
|
Non-current
assets
|
|
|
|
Property, plant and
equipment
|
|
51,077,825
|
51,930,553
|
Right-of-use
assets
|
|
31,264,860
|
32,067,772
|
Intangible
assets
|
|
15,214,583
|
14,846,687
|
Construction
deposits
|
|
62,939
|
466,818
|
|
|
97,620,207
|
99,311,830
|
TOTAL
ASSETS
|
|
133,167,114
|
131,433,852
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
Current
liabilities
|
|
|
|
Bank
indebtedness
|
|
14,674,424
|
16,861,218
|
Accounts payable and
accrued liabilities
|
|
17,930,970
|
14,062,415
|
Dividends
payable
|
|
1,091,709
|
-
|
Current portion of
lease liabilities
|
|
3,605,614
|
4,134,584
|
Current portion of
long-term debt
|
|
6,445,013
|
5,327,821
|
|
|
43,747,730
|
40,386,038
|
Non-current
liabilities
|
|
|
|
Provisions
|
|
1,248,978
|
1,211,324
|
Lease
liabilities
|
|
24,583,353
|
25,535,180
|
Long-term
debt
|
|
23,042,931
|
21,751,775
|
Deferred income tax
liability
|
|
5,714,559
|
5,825,398
|
|
|
54,589,821
|
54,323,677
|
TOTAL
LIABILITIES
|
|
98,337,551
|
94,709,715
|
Equity
|
|
|
|
Share
capital
|
|
40,706,416
|
40,618,496
|
Share-based payments
reserves
|
|
2,901,972
|
2,447,275
|
Deficit
|
|
(8,778,825)
|
(6,341,634)
|
TOTAL
EQUITY
|
|
34,829,563
|
36,724,137
|
|
|
|
|
TOTAL LIABILITIES
AND EQUITY
|
|
$
133,167,114
|
$
131,433,852
|
STATEMENTS OF COMPREHENSIVE
INCOME
For the quarters ended July 31,
2022 and August 1,
2021
(Not audited or reviewed by the Company's
external auditor)
|
|
Quarter
ended
|
Fiscal
year-to-date ended
|
|
|
July 31,
2022
|
August 1,
2021
|
July 31,
2022
|
August 1,
2021
|
|
|
|
|
|
|
Revenue
|
|
$
29,497,602
|
$
34,201,669
|
$
50,742,251
|
$
56,685,854
|
Cost of
sales
|
|
22,663,144
|
23,042,956
|
39,947,871
|
40,530,338
|
Gross
profit
|
|
6,834,458
|
11,158,713
|
10,794,380
|
16,155,516
|
Selling, marketing and
administration expenses
|
|
4,039,900
|
4,938,097
|
7,555,532
|
8,534,167
|
Other
expenses
|
|
1,068,077
|
859,221
|
2,155,973
|
1,741,600
|
Finance
costs
|
|
745,903
|
661,549
|
1,451,637
|
1,334,207
|
Gain on misappropriated
funds, net
|
|
-
|
(899,647)
|
-
|
(899,647)
|
Gain on disposal of
property, plant and equipment,
and right-of-use assets
|
|
(2,977)
|
(5,277)
|
(3,467)
|
(22,487)
|
Income (loss) before
tax
|
|
983,555
|
5,604,770
|
(365,295)
|
5,467,676
|
Income tax expense
(recovery)
|
|
253,908
|
1,449,850
|
(110,837)
|
1,413,456
|
Net income (loss)
and comprehensive
income (loss)
|
|
$
729,647
|
$
4,154,920
|
$
(254,458)
|
$
4,054,220
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings
(loss) per share
|
|
$
0.02
|
$
0.11
|
$
(0.01)
|
$
0.11
|
Diluted earnings
(loss) per share
|
|
$
0.02
|
$
0.11
|
$
(0.01)
|
$
0.11
|
STATEMENTS OF CASH FLOWS
For the quarters ended July 31,
2022 and August 1,
2021
(Not audited or reviewed by the Company's
external auditor)
|
|
Quarter
ended
|
Fiscal
year-to-date ended
|
|
|
July 31,
2022
|
August 1,
2021
|
July 31,
2022
|
August 1,
2021
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
Net income
(loss)
|
|
$
729,647
|
$
4,154,920
|
$
(254,458)
|
$
4,054,220
|
Adjustments
for:
|
|
|
|
|
|
Income tax expense
(recovery)
|
|
253,908
|
1,449,850
|
(110,837)
|
1,413,456
|
Finance
costs
|
|
745,903
|
661,549
|
1,451,637
|
1,334,207
|
Depreciation and
amortization of property, plant and
equipment, right-of-use assets and
intangibles
|
|
2,963,293
|
2,634,216
|
5,967,671
|
4,984,194
|
Gain on disposal of
property, plant and equipment and
right-of-use assets
|
|
(2,977)
|
(5,277)
|
(3,467)
|
(22,487)
|
Share-based
payments
|
|
302,150
|
270,222
|
507,685
|
409,388
|
Change in non-cash
working capital
|
|
(7,282,387)
|
(4,029,678)
|
(44,416)
|
(6,291,168)
|
Less:
|
|
|
|
|
|
Interest
paid
|
|
(686,627)
|
(637,018)
|
(1,358,130)
|
(1,319,696)
|
Cash provided by
(used in) operating activities
|
|
(2,977,090)
|
4,498,784
|
6,155,685
|
4,562,114
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
Purchase of property,
plant and equipment
|
|
(588,493)
|
(2,304,316)
|
(1,989,720)
|
(7,887,396)
|
Construction deposit
paid
|
|
-
|
(70,586)
|
-
|
(231,236)
|
Proceeds from sale of
property, plant and equipment, and
right-of-use assets, net
|
|
3,551
|
5,983
|
4,584
|
23,899
|
Purchase of intangible
assets
|
|
(2,919)
|
(3,167)
|
(482,940)
|
(45,464)
|
Cash used in
investing activities
|
|
(587,861)
|
(2,372,086)
|
(2,468,076)
|
(8,140,197)
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
Increase (decrease) in
bank indebtedness
|
|
2,062,644
|
858,990
|
(2,186,794)
|
5,520,891
|
Issuance of long-term
debt
|
|
5,000,000
|
1,173,691
|
5,000,000
|
4,536,234
|
Repayment of long-term
debt
|
|
(1,339,502)
|
(1,321,431)
|
(2,591,652)
|
(2,637,649)
|
Repayment of lease
liabilities
|
|
(1,091,951)
|
(887,269)
|
(2,853,071)
|
(1,986,026)
|
Dividends
paid
|
|
(1,091,024)
|
(1,969,800)
|
(1,091,024)
|
(1,969,800)
|
Issuance of shares, net
of fees
|
|
24,783
|
29,930
|
34,932
|
115,943
|
Stock option
costs
|
|
-
|
(10,809)
|
-
|
(10,809)
|
Proceeds from stock
option exercise, net of costs
|
|
-
|
-
|
-
|
9,299
|
Cash generated (used
in) from financing activities
|
|
3,564,951
|
(2,126,698)
|
(3,687,609)
|
3,578,083
|
|
|
|
|
|
|
Net increase in
cash
|
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
Cash, beginning of
period
|
|
-
|
-
|
-
|
-
|
Cash, end of
period
|
|
$
-
|
$
-
|
$
-
|
$
-
|
|
|
|
|
|
|
Non-cash investing
and financing activities:
|
|
|
|
|
|
Acquisition of assets
under lease
|
|
$
1,170,016
|
$
745,025
|
$
1,375,726
|
$
2,277,440
|
About Waterloo Brewing
Waterloo Brewing is Ontario's
largest Canadian-owned brewery. The Company is a regional brewer of
award-winning premium quality and value beers and is officially
certified under the Global Food Safety Standard, one of the highest
and most internationally recognized standards for safe food
production. Founded in 1984, Waterloo Brewing Ltd. was the first
craft brewery to start up in Ontario and is credited with pioneering the
present-day craft brewing renaissance in Canada. Waterloo Brewing has complemented its
Waterloo premium craft beers with the popular Laker brand. In 2011,
Waterloo Brewing purchased the Canadian rights to Seagram Coolers
and in 2015, secured the exclusive Canadian rights to both
LandShark® and Margaritaville®. In addition, Waterloo Brewing
utilizes its leading-edge brewing, blending, and packaging
capabilities to provide an extensive array of contract
manufacturing services in beer, coolers, and ciders. Waterloo
Brewing trades on the TSX under the symbol WBR. Visit us at
www.WaterlooBrewing.com.
Forward-Looking
Statements
All statements in this press release that do not directly and
exclusively relate to historical facts constitute forward-looking
statements as of the date of this press release. Forward-looking
statements generally can be identified by the use of
forward-looking terminology such as "may", "will", "expect",
"intend", "anticipate", "seek", "plan", "believe" or "continue" or
the negatives of these terms or variations of them or similar
terminology. Although the Company believes that the expectations
and assumptions reflected in these forward-looking statements are
reasonable, undue reliance should not be placed on these
forward-looking statements, which are not guarantees and are
subject to certain risks, uncertainties, and assumptions, which may
cause actual performance and financial results to differ materially
from such forward-looking statements. The forward-looking
statements included in this press release are made only at the date
of this press release and, except as required by applicable
securities laws, the Company does not undertake to publicly update
such forward-looking statements to reflect new information, future
events or otherwise.
* EBITDA is a non-IFRS earnings measure, therefore it does not
have any standardized meaning prescribed by International Financial
Reporting Standards and may not be similar to measures presented by
other companies. EBITDA represents earnings before interest, income
taxes, depreciation, and amortization, gain(loss) on disposal of
property, plant, and equipment and right-of-use assets, gain on
misappropriated funds, and share-based payments. Management uses
this measurement to evaluate the operating results of the Company.
This measure is also important to management since it is used by
the Company's lenders to evaluate the ongoing cash-generating
capability of the Company and therefore the amounts those lenders
are willing to lend to the Company. Investors find EBITDA to be
useful information because it provides a measure of the Company's
operating performance.
SOURCE Waterloo Brewing Ltd.