Press Releases

Waterloo Brewing announces third quarter results

Third Quarter Highlights:

  • Net revenue of $26.2 million, decreased from $26.9 million in the prior year.
  • Gross profit of $5.4M, decrease from $6.0 million in the prior year.
  • Selling, marketing and administration expenses of $3.2 million, reduced from $3.4 million in the prior year.
  • EBITDA* of $4.4 million, increased from $4.3 million in the prior year.

Year-to-Date Highlights:

  • Net revenue of $76.9 million, decreased from $83.6 million in the prior year.
  • Gross profit of $16.2 million, decreased from $22.1 million in the prior year.
  • Selling, marketing and administration expenses of $10.7 million, reduced from $11.9 million the prior year.
  • EBITDA* of $12.0 million, decreased from $15.6 million in the prior year.

KITCHENER, ON, Dec. 14, 2022 /CNW/ - Waterloo Brewing Ltd. ("Waterloo Brewing" or the "Company") (TSX: WBR), Ontario's first craft brewery, announced financial results for the third quarter of fiscal 2023 which ended on October 30, 2022. Waterloo Brewing reported EBITDA* for the third quarter of fiscal 2023 of $4.4 million, on net revenue of $26.2 million.

Owner brand sales volume in the quarter grew by 3.2%, while the industry as a whole, was down by 4.3%. Volumes of the domestic mainstream Laker brand increased by 10.6% versus the prior years. As noted in the previous quarter, the Company is continuing to see consumers trade-down as a result of ongoing inflationary pressures which have contributed to the growth of the Laker brand.

This shift, however, has negatively impacted the Company's premium beer brands and ready-to-drink products which is putting pressure on gross margin. Consistent with industry trends, LandShark® volumes declined by 7.5% primarily due to softened demand for the Landshark® seltzers. LandShark® beer was flat to the same period last year, but has still grown 5% on a year-to-date basis.

Supply chain issues continued in the quarter and resulted in contract volumes shifting to the fourth quarter of the fiscal year. This represented the majority of the overall decline in net revenue. However, the Company recently announced the renewal of two strategic co-manufacturing partners which will result in approximately $18 million of combined revenue over the extended term of these contracts.

"It's been a challenging year for the industry," said George Croft, President and Chief Executive Officer of Waterloo Brewing. "I am proud of how the team has pushed through these ongoing issues and am confident we will finish this fiscal year strong."

Subsequent to the third quarter, Waterloo Brewing increased the price of their single serve 473ml Laker cans. This change was consistent with the balance of the industry and will have a significant and positive impact on gross margin in the fourth quarter.

"Our goal will always remain the same: make great quality beer for an affordable price," Croft said.

Waterloo Brewing also announced today by separate press release that it has entered into a definitive arrangement agreement (the "Arrangement Agreement") with Carlsberg Group ("Carlsberg") pursuant to which Carlsberg has agreed to acquire all of the issued and outstanding shares of Waterloo Brewing ("Waterloo Brewing Shares"), by way of a statutory plan of arrangement under the Business Corporations Act (Ontario) ("Transaction"). Under the terms of the Arrangement Agreement, holders of Waterloo Brewing Shares ("Waterloo Brewing Shareholders") will receive C$4.00 in cash for each Waterloo Brewing Share held ("Consideration"), which implies an aggregate equity value for Waterloo Brewing, of approximately C$144 million, on a fully diluted, in-the-money, treasury method basis and an enterprise value of C$217 million. The total offer Consideration also represents an implied TEV/LTM EBITDA multiple of 12.4x, based on Waterloo's third quarter results ending October 30, 2022. In connection with the Transaction, the parties agreed that last dividend paid to Waterloo Brewing Shareholders was on November 2, 2022. Please refer to the separate press release for more details regarding the Transaction.

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)

October 30, 2022

October 31, 2021

October 30, 2022

October 31, 2021






Net income (loss)

$                     194

$                     738

$                      (61)

$                  4,792






Add (deduct):





Income tax recovery (provision)

85

268

(26)

1,681

Gain on misappropriated funds

-

-

-

(900)

Depreciation and amortization

2,914

2,491

8,882

7,475

(Gain) loss on disposal of property, plant and equipment, and right-of-use assets

(2)

(37)

130

(86)

Share-based payments

302

275

810

685

Finance costs

862

599

2,313

1,933






Subtotal

4,161

3,596

12,109

10,788






EBITDA *

4,355

4,334

12,048

15,581


STATEMENTS OF FINANCIAL POSITION
As at October 30, 2022 and January 31, 2022
(Not audited or reviewed by the Company's external auditor)


 October 30, 2022 

January 31, 2022




ASSETS



Current assets



Accounts receivable and contract assets

$              19,164,840

$          15,526,799

Inventories

16,984,167

15,841,135

Prepaid expenses

1,017,760

754,088


37,166,767

32,122,022

Non-current assets



Property, plant and equipment

49,009,377

51,930,553

Right-of-use assets

31,293,999

32,067,772

Intangible assets

15,159,359

14,846,687

Construction deposits

61,266

466,818


95,524,001

99,311,830

TOTAL ASSETS

132,690,768

131,433,852




LIABILITIES AND EQUITY



Current liabilities



Bank indebtedness

14,868,607

16,861,218

Accounts payable and accrued liabilities

19,086,652

14,062,415

Dividends payable

1,091,871

-

Current portion of lease liabilities

3,677,799

4,134,584

Current portion of long-term debt

6,386,223

5,327,821


45,111,152

40,386,038

Non-current liabilities



Provisions

1,267,804

1,211,324

Lease liabilities

24,680,153

25,535,180

Long-term debt 

21,598,485

21,751,775

Deferred income tax liability

5,799,146

5,825,398


53,345,588

54,323,677

TOTAL LIABILITIES

98,456,740

94,709,715

Equity



Share capital

40,717,681

40,618,496

Share-based payments reserves

3,192,856

2,447,275

Deficit

(9,676,509)

(6,341,634)

TOTAL EQUITY

34,234,028

36,724,137




SUBSEQUENT EVENT






TOTAL LIABILITIES AND EQUITY

$            132,690,768

$        131,433,852


STATEMENTS OF COMPREHENSIVE INCOME
For the quarters ended October 30, 2022 and October 31, 2021
(Not audited or reviewed by the Company's external auditor)



 Quarter ended 

 Fiscal year-to-date ended 



 October 30, 2022 

October 31, 2021

 October 30, 2022 

 October 31, 2021 







Revenue


$          26,155,387

$          26,878,165

$          76,897,638

$          83,564,020

Cost of sales


20,797,437

20,918,137

60,745,309

61,448,475

Gross profit


5,357,950

5,960,028

16,152,329

22,115,545

Selling, marketing and administration expenses


3,193,144

3,363,501

10,748,676

11,897,668

Other expenses


1,025,991

1,006,133

3,181,964

2,747,732

Finance costs


861,542

599,501

2,313,179

1,933,708

Gain on misappropriated funds, net


-

-

-

(899,646)

Gain on disposal of property, plant and equipment,
     and right-of-use assets


(1,500)

(14,902)

(4,967)

(37,388)

Income (loss) before tax


278,773

1,005,795

(86,524)

6,473,471

Income tax expense (recovery)


84,587

267,649

(26,250)

1,681,105

Net income (loss) and comprehensive income (loss)


$                194,186

$                738,146

$                (60,274)

$            4,792,366













Basic earnings per share


$                       0.01

$                       0.02

$                           -

$                       0.13

Diluted earnings per share


$                       0.01

$                       0.02

$                           -

$                       0.13


STATEMENTS OF CASH FLOWS
For the quarters ended October 30, 2022 and October 31, 2021
(Not audited or reviewed by the Company's external auditor)



 Quarter ended 

 Fiscal year-to-date ended 



 October 30, 2022 

October 31, 2021

 October 30, 2022 

October 31, 2021







Operating activities






Net income (loss)


$              194,186

$            738,146

$              (60,274)

$        4,792,366

Adjustments for:






Income tax expense (recovery)


84,587

267,649

(26,250)

1,681,105

Finance costs


861,542

599,501

2,313,179

1,933,708

Depreciation and amortization of property, plant and
     equipment, right-of-use assets and intangibles


2,914,397

2,490,806

8,882,083

7,475,000

Gain on disposal of property, plant and equipment
     and right-of-use assets


(1,500)

(14,902)

(4,967)

(37,388)

Share-based payments


302,149

275,228

809,834

684,616

Change in non-cash working capital


(91,965)

(1,777,312)

(136,394)

(8,068,479)

Less:






Interest paid


(828,815)

(577,315)

(2,186,945)

(1,897,011)

Cash provided by operating activities


3,434,581

2,001,801

9,590,266

6,563,917







Investing activities






Purchase of property, plant and equipment


(134,026)

(2,056,111)

(2,123,746)

(9,943,507)

Construction deposit paid


-

(448,737)

-

(679,973)

Proceeds from sale of property, plant and equipment, and
   right-of-use assets, net


1,500

15,090

6,084

38,989

Purchase of intangible assets


(3,372)

(1,313)

(486,312)

(46,777)

Cash used in investing activities


(135,898)

(2,491,071)

(2,603,974)

(10,631,268)







Financing activities






Increase (decrease) in bank indebtedness


194,183

881,037

(1,992,611)

6,401,928

Issuance of long-term debt


-

-

5,000,000

4,536,234

Increase to obligation under finance lease


-

2,656,846

-

2,656,846

Repayment of long-term debt


(1,503,236)

(1,231,564)

(4,094,888)

(3,869,213)

Repayment of lease liabilities


(897,924)

(829,864)

(3,750,995)

(2,815,891)

Dividends paid


(1,091,706)

(987,186)

(2,182,730)

(2,956,986)

Issuance of shares, net of fees


-

-

34,932

115,943

Stock option costs


-

-

-

(10,809)

Proceeds from stock option exercise, net of costs


-

-

-

9,299

Cash generated from (used in) financing activities


(3,298,683)

489,270

(6,986,292)

4,067,351







Net increase in cash


-

-

-

-







Cash, beginning of period


-

-

-

-







Cash, end of period


$                        -

$                        -

$                        -

$                        -







Non-cash investing and financing activities:












Acquisition of assets under lease 


$         1,066,908

$         3,991,554

$         2,442,634

$         6,268,994


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.

For further information: Enida Zaimi, Chief Financial Officer, 519-742-2732 x 106, E-mail: info@waterloobrewing.com

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