-- Pure Sunfarms Sees 28% Sequential Growth in
Fourth Quarter Retail Branded Sales and Remains Adjusted EBITDA
Positive in Each of the Nine Quarters Since Commencing Sales
–
VANCOUVER, BC, March 16, 2021 /CNW/ - Village Farms
International, Inc. ("Village Farms" or the "Company") (NASDAQ:
VFF) (TSX: VFF) today announced its financial results for the three
months and year ended December 31,
2020. All figures are in U.S. dollars unless otherwise
indicated.
The Company's financial statements for the three months and year
ended December 31, 2020, as well as
the comparative periods for 2019, have been prepared and presented
under United States Generally Accepted Accounting Principals
("GAAP"). On December 31, 2020,
Village Farms owned 100% of Pure Sunfarms Corp. ("Pure Sunfarms"),
as the full acquisition of the remaining interest in Pure Sunfarms
occurred November 2, 2020.
Accordingly, for the 60-day period from November 2 to December 31, 2020, Pure Sunfarms'
financial results are consolidated with Village Farms results for
both the fourth quarter and year ended December 31, 2020. For the October 1 to November 1 and January 1 to November 1, 2020 portions of the
three-month and 12-month periods ending December 31, 2020, Pure Sunfarms is accounted for
on a proportionate basis as "Equity Earnings from Unconsolidated
Entities".
Pure Sunfarms' Fourth Quarter and Other Recent
Highlights
(Dollar Amounts are Before Village Farms'
Proportionate Share)
- Achieved 28% sequential quarterly growth and 248%
year-over-year growth in retail branded sales to provincial
distributors to $15.5 million,
following sequential quarterly growth of 40% from the second to the
third quarter of 2020;
- Achieved its eighth consecutive quarter of net income (before
the $3.3 million non-cash impact
resulting from the write-up of inventory required under GAAP with
the acquisition of the remaining interest in Pure Sunfarms on
November 2, 2020) and its ninth
consecutive quarter of positive Adjusted EBITDA;
- Was the top selling brand of dried flower products with the OCS
(by kilograms sold and dollars sold) for both the quarter and year
ended December 31, 2020, and remained
the top-selling brand of dried flower products with the OCS (by
kilograms sold and dollars sold) since launch in October 2019;
- Continued to roll out its first Cannabis 2.0 products,
specifically Full Spectrum Vapes in 510 thread cartridges and first
bottled oil products, in September
2020, and subsequent to quarter end, launched its first
cannabis-infused edible products, Pure Sunfarms cannabis-infused
gummies;
- Entered into a supply agreement with Medical Cannabis by
Shoppers Inc. under which Pure Sunfarms will supply a range of its
products to be made available to Medical Cannabis by Shoppers™;
and
- On March 15, 2021, extended and
amended its credit agreement with Bank of Montreal, which had a maturity date of
February 2022, to February 2024.
*Data cited has been
calculated by Pure Sunfarms from sales information provided by
OCS.
|
Village Farms' Consolidated Financial Summary for the Three
Months Ended and Year Ended December 31,
2020 and December 31, 2019 and
Corporate Highlights
($US millions except
per share
metric)
|
Three Months Ended
December 31,
|
|
Year Ended
December 31,
|
|
2020
|
2019
|
Change
|
|
2020
|
2019
|
Change
|
Sales1
|
$47.4
|
$33.1
|
+43%
|
|
$170.1
|
$144.6
|
+18%
|
Net Income
(Loss)1
|
$7.0
|
($7.2)
|
+197%
|
|
$11.6
|
$2.3
|
+404%
|
Income (Loss) Per
Share1
|
$0.12
|
($0.15)
|
+180%
|
|
$0.20
|
$0.05
|
+300%
|
Adjusted EBITDA1
2
|
($0.5)
|
($7.5)
|
+95%
|
|
$7.4
|
$0.9
|
+722%
|
1.
|
Sales, Net Income,
Income (Loss) per share and Adjusted EBITDA includes results from
Pure Sunfarms pursuant to the Company's statutory reporting
requirements.
|
2.
|
Adjusted EBITDA is
not a recognized earnings measure and does not have a standard
meaning prescribed by GAAP. See "Non-GAAP Measures"
below.
|
- Acquired all issued and outstanding shares of Pure Sunfarms, as
a result of which, as of November 2,
2020, the Company owned 100% of Pure Sunfarms;
- Wholly owned subsidiary, Village Farms Clean Energy, Inc.
("VFCE"), renewed and extended its existing contract with the
City of Vancouver under which VFCE
receives landfill gas captured by the City of Vancouver at the City's landfill site
in Delta, BC, enabling the
transition of VFCE to a more attractive long-term business model
based on the conversion of landfill gas to high-demand Renewable
Natural Gas;
- Subsequent to quarter end, completed a registered direct
offering with certain institutional investors for the purchase and
sale of an aggregate of 10,887,097 common shares at a purchase
price of US$12.40 (approximately
C$15.70) per unit for gross proceeds
of approximately US$135 million
(approximately C$171 million);
- Subsequent to quarter end, received warrant exercise proceeds
of US$10.3 million resulting in the
issuance of 1,773,585 additional common shares. The warrants were
issued as part of the September 2020
Registered Direct equity offering. As of the date of this news
release, 2,924,528 warrants remain outstanding;
- Subsequent to quarter end, repaid in full the C$19.9 million (approximately US$15.6 million) promissory note, plus accrued
interest of C$621,534.25
(approximately US$486,849.78), that
the Company issued to Emerald Health Therapeutics, Inc. as partial
consideration for the November 2020
acquisition of the remaining common shares of Pure Sunfarms that
the Company did not own; and,
- Subsequent to quarter end, announced that the Company will be
added to the S&P/TSX Composite Index (Consumer Staples sector)
prior to trading on March 22,
2021.
Pure Sunfarms' Financial Summary for the Three Months Ended
and Year Ended December 31, 2020 and
December 31, 2019Fef (Before
Village Farms' Proportionate
Share)
(millions except %
metrics)
|
Three Months Ended
December 31,
|
|
|
2020
|
2019
|
Change of
C$
|
|
C$
|
US$
|
C$
|
US$
|
|
Total Gross
Sales
|
$29.5
|
$22.7
|
$13.6
|
$10.3
|
+117%
|
Total Net
Sales
|
$22.5
|
$17.3
|
$12.1
|
$9.2
|
+86%
|
Gross Margin
5
|
39%
|
39%
|
83%
|
83%
|
-53%
|
SG&A
|
$5.9
|
$4.5
|
$3.0
|
$2.3
|
-97%
|
Net
income
|
$1.4
|
$1.1
|
$4.4
|
$3.3
|
-68%
|
Adjusted EBITDA3
5
|
$3.1
|
$2.4
|
$6.90
|
$5.3
|
-55%
|
Adjusted EBITDA
Margin 3 5
|
14%
|
14%
|
57%
|
57%
|
-75%
|
(millions except %
metrics)
|
Year Ended
December 31,
|
|
|
2020
|
2019
|
Change of
C$
|
|
C$
|
US$
|
C$
|
US$
|
|
Total Gross
Sales
|
$99.1
|
$74.1
|
$85.1
|
$64.1
|
+17%
|
Total Net
Sales
|
$76.1
|
$56.9
|
$82.8
|
$62.3
|
-8%
|
Gross Margin
5
|
40%
|
40%
|
76%
|
76%
|
-47%
|
SG&A
|
$15.0
|
$11.3
|
$10.4
|
$7.9
|
-44%
|
Net income
4
|
$13.8
|
$10.1
|
$36.5
|
$27.4
|
-62%
|
Adjusted EBITDA3
5
|
$18.0
|
$13.3
|
$54.1
|
$40.7
|
-67%
|
Adjusted EBITDA
Margin 3 5
|
24%
|
23%
|
65%
|
65%
|
-63%
|
3.
|
Adjusted EBITDA is
not a recognized earnings measure and does not have a standard
meaning prescribed in by GAAP. See "Non-GAAP Measures"
below.
|
4.
|
Net income includes
C$6.0 million of debt forgiveness income as an outcome of the
Settlement Agreement in March 2020.
|
5.
|
Excludes the C$4,223
(US$3,295) non-cash impact to cost of sales due to purchase price
accounting.
|
Pure Sunfarms'
Percent of Sales by Product Group
|
|
Three months
ended
December 31,
|
Year ended
December
31,
|
Channel
|
2020
|
2019
|
2020
|
2019
|
Retail,
Flower
|
56.4%
|
36.6%
|
54.3%
|
8.5%
|
Retail, Oil & 2.0
Product
|
12.2%
|
0.0%
|
5.0%
|
0.0%
|
Wholesale, Flower and
Trim
|
31.4%
|
63.4%
|
40.7%
|
91.5%
|
Management Commentary
"The fourth quarter was a solid finish to a year of significant
achievement for Village Farms and our wholly owned Canadian
cannabis subsidiary, Pure Sunfarms, which saw great success as it
transitioned its focus to retail branded sales from nearly all
sales in 2019 being non-branded, mainly to other producers," said
Michael DeGiglio, CEO, Village
Farms. "Following a 40% sequential increase from the second
to the third quarter of 2020, Pure Sunfarms sales of branded retail
products to provincial distributors increased another 28%
sequentially from the third to the fourth quarter, as our branded
dried flower products continued to be the top seller with the
Ontario Cannabis Store, and our first Cannabis 2.0 products were
well received by consumers. This contributed to our ninth
consecutive quarter of profitability, even as we invested during
the quarter to support our future growth."
"2020 was a year that saw Pure Sunfarms prove out its
cultivation excellence and its differentiated product strategy,
becoming a leading brand and consistently delivering profitability
– all of which was accomplished amidst the challenges of the
pandemic. We are building on this momentum in 2021 with plans
to start cultivation in our Delta
2 greenhouse in the second half of the year to meet the strong and
growing demand for Pure Sunfarms' products, as we continue to
enhance and expand our offerings to participate in, and help drive
the growth of, the Canadian cannabis market. We look forward to
continued growth in branded retail sales in 2021 and we are
opportunistic with respect to sales to other producers as many of
them look to Pure Sunfarms as an economic source of consistent,
high quality flower."
"The best-in-class operations, strong market share performance
and consistent profitability of our Canadian cannabis business,
supported by a significantly strengthened balance sheet, gives us
great confidence in our ability to capitalize on the U.S. cannabis
opportunity. We are encouraged by the evolution of the
regulatory environment in the U.S. and have developed multiple
strategies to enable Village Farms to legally participate in this
market, leveraging our deep experience and organizational strength,
supported by one of the largest greenhouse footprints in the
country."
"We also expect to meaningfully advance our international
cannabis strategy in 2021, building on our first investments last
year, pursuing select emerging markets with significant long-term
potential through capital efficient investments. All of this
positions Village Farms to deliver sustainable shareholder value
over the short-, medium- and long-terms."
"Finally, alongside the momentum at Pure Sunfarms, our produce
business had a strong 2020, driven by higher pricing amidst
elevated demand across our national and regional grocer and "big
box" customers for much of the year. Our significant progress over
the last two years in transitioning capacity designated for
cannabis to growing partners enabled us to take full advantage of
these market dynamics, coupled with year on year improvements at
our Texas green house facilities,
drove a $16.5 million year over-year
improvement in Adjusted EBITDA to support our longer-term growth
opportunities in cannabis."
COVID-19 Update
All Village Farms' production facilities in Texas, British
Columbia, and Pure Sunfarms' facilities in Canada remain open and operational. The
Company has experienced a small number of COVID-19 illnesses at its
facilities, however, the Company's protocols were followed and
there has been no material disruption to operations. Village Farms
and Pure Sunfarms adhere to the highest health and safety standards
in their operations and each has put in place heightened hygiene
practices and safety protocols, including more stringent cleaning
and sanitization, and are taking appropriate precautions throughout
all operations as per the recommendations of health
authorities. The Company will continue to enhance and evolve
such practices and protocols as the situation warrants.
Summary Statutory Results
(in thousands of U.S.
Dollars unless otherwise indicated)
|
For the three
months
ended December 31,
|
|
For the year
ended
December 31,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Sales
|
$47,364
|
|
$33,056
|
|
$170,086
|
|
$144,568
|
Cost of
sales
|
(46,317)
|
|
(37,495)
|
|
(159,126)
|
|
(151,913)
|
Selling, general and
administrative expenses
|
(6,410)
|
|
(4,863)
|
|
(19,086)
|
|
(16,762)
|
Stock compensation
expense
|
(4,813)
|
|
(2,051)
|
|
(6,142)
|
|
(4,714)
|
Interest
expense
|
(783)
|
|
(596)
|
|
(2,056)
|
|
(2,614)
|
Interest
income
|
48
|
|
385
|
|
625
|
|
1,036
|
Foreign exchange
(loss) gain
|
744
|
|
95
|
|
(136)
|
|
433
|
Gain on settlement
agreement
|
-
|
|
-
|
|
4,681
|
|
-
|
Gain on
acquisition
|
23,631
|
|
-
|
|
23,631
|
|
-
|
Other income,
net
|
(43)
|
|
49
|
|
49
|
|
268
|
(Loss) gain on
disposal of assets
|
(916)
|
|
6
|
|
(922)
|
|
13,564
|
Loss on write-down of
investment
|
(3,791)
|
|
(1,184)
|
|
(3,791)
|
|
(1,184)
|
Recovery of income
taxes
|
2,183
|
|
5,752
|
|
2,790
|
|
5,866
|
Equity earning from
unconsolidated entities
|
(3,880)
|
|
(338)
|
|
1,005
|
|
13,777
|
Net income
(loss)
|
$7,017
|
|
($7,184)
|
|
$11,608
|
|
$2,325
|
Adjusted
EBITDA7
|
($510)
|
|
($7,475)
|
|
$7,411
|
|
$851
|
Income (loss) per
share – basic
|
$0.12
|
|
($0.15)
|
|
$0.20
|
|
$0.05
|
Income (loss) per
share – diluted
|
$0.11
|
|
($0.14)
|
|
$0.19
|
|
$0.05
|
|
|
7.
|
Adjusted EBITDA is
not a recognized earnings measure and does not have a standard
meaning prescribed in by GAAP. Therefore, Adjusted EBITDA may not
be comparable to similar measures presented by other issuers. See
"Non-GAAP Measures" for a definition and reconciliation of Adjusted
EBITDA to net income (loss), the nearest comparable measurement
under GAAP. Management believes that Adjusted EBITDA is a useful
supplemental measure in evaluating the performance of the Company.
Adjusted EBITDA includes the Company's majority non-controlling
interest in Pure Sunfarms (through November 1, 2020), 65% interest
in VFH and 60% interest in AVGGH
|
Discussion of Financial Results
A discussion of our consolidated results for the years ended
December 31, 2020 and 2019 is
included below. The consolidated results include all three of our
operating segments, produce, cannabis and energy, along with all
public company expenses. Pure Sunfarms was acquired in its entirety
on November 2, 2020; from
November 2, 2020 through December 31, 2020, the operating results of Pure
Sunfarms are consolidated in our Consolidated Statements of Income
(Loss), and for the year ended December 31,
2019 and the period January 1,
2020 to November 1, 2020, Pure
Sunfarms' results are included in equity earnings of consolidated
entities in our Consolidated Statements of Income (Loss).
We also present a discussion of the full year operating results
of Pure Sunfarms, before any allocation to Village Farms, which
were not consolidated in our financial results for the period of
January 1, 2020 to November 1, 2020 and consolidated in our results
for the period November 2, 2020 to
December 31, 2020. As a result of the
Pure Sunfarms acquisition, Village Farms recognized a gain on
acquisition of $23,631 as it adjusted
the assets and liabilities of Pure Sunfarms to the acquisition date
fair value, which was above the carrying value of the Company's
investment in Pure Sunfarms. One of the adjustments resulted in an
increase in the fair value of its flower inventory on-hand on the
acquisition date. A portion of this inventory was sold in the
fourth quarter of 2020, which resulted in this inventory being
sold, effectively with no gross margin, as cost of sales was
increased by $3,295 for this flower
sold in the fourth quarter of 2020 as a result of evaluation of its
flower inventory to fair value. This is a non-cash accounting
charge to cost of sales and should be adjusted for when analyzing
the actual operational results of Pure Sunfarms.
Consolidated Village Farms (in US$)
Three months ended December 31,
2020 compared to the three months ended December 31, 2019.
Sales
Sales for the three months ended December 31, 2020
increased $14,308, or 43%, to
$47,364 compared to $33,056 for the three months ended
December 31, 2019. Due to the acquisition of Pure Sunfarms on
November 2, 2020, Village Farms began
fully consolidating operating results of Pure Sunfarms. The
increase in sales was primarily due to inclusion of Pure Sunfarms
November and December sales of $12,778. Produce sales also increased
$1,479 primarily due to an increase
in pricing for tomatoes between the two comparable periods.
Cost of Sales
Cost of sales for the three months ended December 31, 2020 increased $8,822, or 24%, to $46,317 in comparison to $37,495 for the three months ended December 31, 2019, due primarily to two months of
Pure Sunfarms cost of sales of $10,585, partially offset by a decrease in our
produce cost of sales of $1,998. The
Pure Sunfarms cost of sales of $10,585 includes a non-cash accounting charge of
$3,295, as a result of adjusting
flower inventory to fair value at the acquisition date. Produce
cost of sales decreased primarily due to the transition of the
Delta 2 facility, from tomato
production in 2019 to Pure Sunfarms in 2020 for future cannabis
production.
Gross Margin
Gross margin for the three months ended December 31, 2020 increased $5,486, or 124%, to $1,047 compared to ($4,439) for the three months ended December 31, 2019. Gross margin for 2020 was
negatively impacted by the non-cash accounting charge of
$3,295 for Pure Sunfarms, as a result
of adjusting flower inventory to fair value at the acquisition
date. The positive gross margin change year-over-year was driven by
two months of Pure Sunfarms gross margin of $2,193 and an improvement in the produce segment
for both our own production and our third-party suppliers,
primarily from higher selling prices of tomatoes and higher volume
from our third-party suppliers.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three
months ended December 31, 2020
increased $1,547, or 32%, to
$6,410 in comparison to $4,863 for the three months ended December 31, 2019. The increase was primarily due
to the inclusion of two months of Pure Sunfarms expenses and an
increase in public company costs such as investor relations, legal
and regulatory, listing fees and incremental costs of U.S. GAAP and
U.S. reporting compliance, partially offset by reductions for
company-wide travel-related expenses due to COVID-19.
Net Income (Loss)
Net income for the three months ended December 31, 2020 was $7,017 in comparison to ($7,184) for the three months ended December 31, 2019. Net income was driven by a
significant improvement in gross profit of $5,486 between the comparable periods and the
gain on acquisition of $23,631 due to
acquiring the remaining shares of Pure Sunfarms on November 2, 2020. The positive impacts to net
income were partially offset by the ($3,791) write-down of the loan to VF Hemp and
increases year-over-year in stock compensation and selling, general
and administrative expenses.
Adjusted EBITDA
Adjusted EBITDA for the three months ended December 31, 2020 increased $6,965 to ($510)
compared to ($7,475) for the three
months ended December 31, 2019,
primarily as a result of improved gross margin of the produce
segment and inclusion of the operating results of Pure Sunfarms for
November 2 through December 31, 2020.
See the reconciliation of Adjusted EBITDA to net income in
"Non-GAAP Measures—Reconciliation of Net Earnings to Adjusted
EBITDA".
Consolidated Village Farms (in US$)
Year ended December 31, 2020
compared to the year ended December 31,
2019.
Sales
Sales for the year ended December 31,
2020 increased $25,518, or
18%, to $170,086 compared to
$144,568 for the year ended
December 31, 2019. The increase in
sales was primarily due to an increase in supply partner revenues
of $14,748, Pure Sunfarms November
and December sales of $12,778,
partially offset by a decrease in VFCE power sales of ($735) and our own production revenues of
($1,273). The supply partner revenue
increase was due to higher volumes. The decrease in our own
production revenues was due primarily to the closure of the
Delta 2 facility, which was
optioned to Pure Sunfarms in order to expand its potential cannabis
production capacity as needed.
Cost of Sales
Cost of sales for the year ended December
31, 2020 increased $7,213, or
5%, to $159,126 compared to
$151,913 for the year ended
December 31, 2019, due primarily to
an increase in supply partner costs of $13,128, two months of Pure Sunfarms cost of
sales of $10,585, partially offset by
a decrease in our own production costs of ($15,940) and lower clean energy costs of
($560). The Pure Sunfarms cost of
sales of $10,585 includes a non-cash
accounting charge of $3,295, as a
result of adjusting flower inventory to fair value at the
acquisition date.
The increase in year over year supply partner produce costs was
due to higher volumes of tomatoes, peppers and cucumbers which also
drove higher freight costs. The reduction in our own production
costs were driven by the transition of the Delta 2 facility to Pure Sunfarms, along with
lower costs at our Texas
facilities, primarily driven by lower pounds sold and a decrease in
the cost per pound produced.
Gross Margin
Gross margin for the year ended December
31, 2020 increased $18,305 to
$10,960 in comparison to ($7,345) for the year ended December 31, 2019. Gross margin for 2020 was
negatively impacted by the non-cash accounting charge of
$3,295 related to adjusting the
flower inventory to fair value at the acquisition date. The
positive gross margin was driven by an improvement in the produce
segment for both our own production and our third-party suppliers,
primarily from higher selling prices of tomatoes and higher volume
from our third-party suppliers.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the year ended
December 31, 2020 increased
$2,324, or 14%, to $19,086 compared to $16,762 for the year period ended December 31, 2019. The increase was primarily due
to the inclusion of two months of Pure Sunfarms expenses and an
increase in public company costs such as investor relations, legal
and regulatory, listing fees and incremental costs of U.S.
reporting compliance, partially offset by reductions for
company-wide travel-related expenses due to COVID-19.
Net Income (Loss)
Net income for the year ended December
31, 2020 was $11,608 in
comparison to $2,325 for the year
ended December 31, 2019. Net income
was driven by a significant improvement in gross profit of
$10,960 for the year ended
December 31, 2020 as compared to
($7,345) for the year ended
December 31, 2019. The gross profit
was primarily due to an increase from Pure Sunfarms due to the
acquisition on November 2, 2020 and
higher supply partner gross profit. Net income was also
significantly affected by the 2020 gain in acquisition of Pure
Sunfarms of $23,631 and the 2020 gain
on the Settlement Agreement of $4,681, partially offset by the ($5,163) 2020 write-down of hemp biomass to net
realizable value, the 2020 Pure Sunfarms inventory purchase price
non-cash accounting charge of ($3,295), and the 2020 write-off of ($3,791) of the Company's loan to VF Hemp. The
Company's 2019 net income was affected by the gain on the
contribution of the Delta 3
greenhouse to Pure Sunfarms of $13,564.
Adjusted EBITDA
Adjusted EBITDA for the year ended December 31, 2020 increased $6,560 to $7,411 in
comparison to $851 for the year ended
December 31, 2019, primarily as a
result of improved gross margin of the produce segment and
inclusion of the operating results of Pure Sunfarms for
November 2 through December 31, 2020.
See the reconciliation of Adjusted EBITDA to net income in
"Non-GAAP Measures—Reconciliation of Net Earnings to Adjusted
EBITDA".
Pure Sunfarms (in C$)
Pure Sunfarms' comparative analysis are based on the
consolidated results of Pure Sunfarms Corp. for the years ended
December 31, 2020 and December 31, 2019 and the three months ended
December 31, 2020, September 30, 2020 and December 31, 2019, not accounting for the
percentage owned by Village Farms. Please see the Reconciliation of
U.S. GAAP Results to Proportionate Results for a presentation of
Pure Sunfarms' proportionate results for the years ended
December 31, 2020 and December 31, 2019.
Three months ended December 31,
2020 compared to the three months ended September 30,
2020.
Sales
Sales for three months ended December 31,
2020 of C$22,527 were flat as
compared to C$22,627, or a (0.4%)
decrease from the three months ended September 30, 2020. The change was driven by a
28% increase in provincial retail (branded) sales and offset by a
33% decrease in wholesale (non-branded) sales. The quarterly
growth in retail sales was directly attributable to a 52% increase
in Pure Sunfarms retail large format sales, a 30% increase in
pre-rolls and a 179% increase in Pure Sunfarms oil and cannabis 2.0
products.
The channel makeup of the fourth quarter sales was 69% to the
retail channel and 31% to the wholesale channel. The channel
makeup of the third quarter sales was 54% to the retail channel and
47% to the wholesale channel. Cannabis oil and 2.0 derivative
products were 12.3% of fourth quarter sales, which are included in
the retail channel.
Cost of Sales
Cost of sales for the three months ended December 31, 2020 and three months ended
September 30, 2020 was C$13,728 (excluding the purchase price flower
inventory adjustment of C$4,223) and
C$14,826, respectively, a decrease of
(6%). Cost of sales for the three months ended December 31, 2020 and September 30, 2020 was C$17,951 (with the purchase price for flower
inventory) and C$14,826,
respectively, an increase of 21%. The decrease in costs was
primarily due to a 37% increase in branded large format kilograms
sold which has lower overhead and labor cost compared to retail
small format products, while the third quarter also includes a
write-down to net realizable value of oil distillate inventory of
C$1,412 in September 2020.
Gross Margin
Gross margin for the three months ended December 31, 2020 and three months ended
September 30, 2020 was C$8,798 or 39% (excluding the purchase price
flower inventory adjustment of C$4,223) and C$7,801 or 34%, respectively. The
quarter-on-quarter improvement was primarily due to the decrease in
cost of sales.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three
months ended December 31, 2020 and
September 30, 2020 were C$5,924 and C$3,261, respectively, an increase of 82%. The
increase was primarily due to incremental year over year expenses
for sales support, marketing, additional headcount and
implementation of a new ERP system as well as bad debt expense.
Net Income
Net income (with the acquisition charge for inventory) for the
three months ended December 31, 2020
was C$1,379 versus C$2,779 for the three months ended September 30, 2020. The increase of C$1,400 was primarily due to the elimination of
biological asset accounting treatment post acquisition and an
increase in selling, general and administrative expenses between
comparable periods.
Adjusted EBITDA
Adjusted EBITDA for the three months ended December 31, 2020 decreased (45%) to C$3,083 (excluding the purchase price flower
inventory adjustment of C$4,223) from
C$5,642 for the three months ended
September 30, 2020. The decrease
was primarily driven by the increase in selling, general and
administrative expenses which offset the increase in gross margin.
See the reconciliation of Adjusted EBITDA to net income in
"Non-GAAP Measures" below.
Pure Sunfarms (in C$)
Three months ended
December 31, 2020 compared to the
three months ended December 31,
2019.
Sales
Sales for the three months ended December
31, 2020 and 2019 was C$22,527
and C$12,142, respectively, an
increase of 86%. The change was due to 248% increase in provincial
retail (branded) and (8%) decrease in wholesale (non-branded) sales
for the three months ended December 31,
2020 compared to the three months ended December 31, 2019. The net average selling
price of retail flower for the three months ended December 31, 2020 was lower than the net average
selling price for the three months ended December 31, 2019 by (37%). Pure Sunfarms sales
for the quarter ended December 31,
2019 included C$8,100 of
revenue recognized upon the settlement of the 2019 supply agreement
with Emerald.
Cost of Sales
Cost of sales for the three months ended December 31, 2020 and 2019 was C$13,728 (excluding the purchase price flower
inventory adjustment of C$4,223) and
C$2,115, respectively, an increase of
549%. Cost of sales for the three months ended December 31, 2020 and 2019 was C$17,951 (with the purchase price for flower
inventory) and C$2,115, respectively,
an increase of 749%. The increase in costs excluding the distillate
inventory write down was 494%, primarily due to a 371% increase in
branded kilograms sold as well as the oil and cannabis 2.0 products
launched in 2020. These products require incremental
packaging, overhead and logistics expenses compared to product sold
through the wholesale channel.
Gross Margin
Gross margin for the three months ended December 31, 2020 and 2019 was C$8,798 (excluding the purchase price flower
inventory adjustment of C$4,223) and
C$10,027, or 39% and 83% as a
percentage of net sales, respectively. The decline was due to a
lower price environment for both retail and wholesale channels in
2020 as compared to the fourth quarter of 2019, as well as an
increase in costs as a result of Pure Sunfarms' increase in
provincial retail (branded) sales in 2020, as the majority of sales
in the fourth quarter of 2019 were related to the settlement of the
2019 Emerald supply agreement which had no cost of sales, excluding
this revenue, the 2019 fourth quarter gross margin for Pure
Sunfarms would have been 48%.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three
months ended December 31, 2020 and
2019 were C$5,924 and C$2,990, respectively, an increase of 98%. The
increase was primarily due to incremental year over year expenses
for sales support, marketing, additional headcount and
implementation of a new ERP system as well as bad debt expense.
Net Income
Net income (with the acquisition charge for inventory) for the
three months ended December 31, 2020
and 2019 was C$1,379 and C$4,354 respectively, a decrease of (68%).
The decrease was primarily due to the decrease in gross
margin and the increase in selling, general and administrative
expenses between comparable periods.
Adjusted EBITDA
Adjusted EBITDA for the three months ended December 31, 2020 declined (56%) to C$3,083 (excluding the purchase price flower
inventory adjustment of C$4,223) from C$6,945 for the same prior year period. The
decrease was primarily due to the decrease in gross margin. See the
reconciliation of Adjusted EBITDA to net income in "Non-GAAP
Measures" below.
Pure Sunfarms (in C$)
Year ended December 31,
2020 compared to the year ended December 31, 2019.
Sales
Pure Sunfarms' net sales for the years ended December 31, 2020 and 2019 was C$76,060 and C$82,810, respectively, a decrease of (8%). Net
sales for 2019 included $8,100 of
revenue recognized on the settlement of the 2019 Emerald supply
agreement, excluding this revenue, from 2019, would result in a
small year on year increase in net sales of 2%. The year over year
change is comprised of a significant increase in sales to
provincial boards (branded sales) which began in September 2019 offset by a decrease in the
wholesale channel (non-branded) which had been the company's sole
source of revenue until September
2019.
For the year ended December 31,
2020, 54% of revenue was generated from branded flower and
pre-roll sales, with an additional 5% from branded cannabis oil and
vape pens, which Pure Sunfarms launched in September 2020. Non-branded sales accounted for
41% of revenue in 2020 as compared to 92% in 2019, as Pure Sunfarms
moved from a predominantly wholesale market supplier in 2019 to a
mixed wholesale and retail market supplier in 2020, primarily as a
result of receiving its retail sales license in September 2019.
The net average selling price of branded flower and pre-roll
formats in 2020 was lower than 2019 by approximately (38%).
This reduction in sales price was primarily due to the launch and
growth of large format sales of C$16,970, which Pure Sunfarms began selling in
2020. The net average selling price of bulk non-branded
flower decreased by (65%) as supply levels in the wholesale
channels outpaced the growth of demand.
Cost of Sales
Cost of sales for the years ended December 31, 2020 and 2019 was C$45,755 (excluding the purchase price flower
inventory adjustment of C$4,223) and
C$20,021, respectively, an increase
of 129%. The increase was primarily driven by an 866% volume
increase of branded flower and pre-roll sales, which has an
incremental cost of production to manufacture over bulk product
sold in the wholesale channel. During 2020, the company's cost of
sales also includes a C$1,412
inventory write down for distillate oil purchased from third party
extraction companies for which the market value has dropped since
the initial purchase.
Gross Margin
Gross margin for the year ended December
31, 2020 decreased (C$32,484)
(excluding the purchase price flower inventory adjustment of
C$4,223), or (52%), to C$30,305 from C$62,789 for the year ended December 31, 2019. Gross margin for 2020 was
impacted by the reduction in average selling price of flower in
2020, supply exceeding demand in the wholesale channels and the
C$1,412 inventory write-down for
distillate oil for which the net realizable value decreased from
the initial purchase. The 2019 gross margin benefited from
the $8,100 revenue recognized in the
settlement of the 2019 Emerald supply agreement.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the years ended
December 31, 2020 and 2019 was
C$15,014 and C$10,445, respectively, an increase of 44%. The
increase was primarily due to higher marketing costs, additional
headcount, implementation of a new ERP system and a bad debt
charge.
Net Income
Net income (with the acquisition charge for inventory) for the
years ended December 30, 2020 and
2019 was C$13,789 and C$36,456, respectively, a decrease of (62%). The
decrease was primarily due to the decrease in gross margin for the
comparable years.
Adjusted EBITDA
Adjusted EBITDA (excluding the purchase price inventory
adjustment of C$4,223) was
C$17,960 for the year ended
December 31, 2020, a decrease of
(67%) from C$54,073 for the year
ended December 31, 2019. The decrease
was primarily due to a lower gross margin from a reduced average
selling price and increased costs of sales along with an increase
in selling, general and administrative expenses for the year ended
December 31, 2020 compared to the
same prior year period.
Produce (in US$)
Year ended December 31, 2020
compared to the year ended December 31,
2019.
Sales
Produce sales for the year ended December
31, 2020 increased $12,469, or
9%, to $157,037 compared to
$144,568 for the year ended
December 31, 2019. The increase in
sales was primarily due to an increase in supply partner revenues
of $14,748, partially offset by a
decrease in our own production revenues of ($1,276) and lower clean energy revenue of
($733). The supply partner revenue
increase was due to higher volumes, with a 2% increase in tomato
pounds sold, a 49% increase in pepper pounds sold, a 35% increase
in cucumber pieces and an 83% increase in mini cucumber pounds. The
decrease in our own production revenues was due primarily to the
transition of the Delta 2
facility, which was optioned to Pure Sunfarms in order to expand
its potential cannabis production capacity as needed. The decrease
in production at our own facilities was partially offset by higher
selling prices for tomatoes stemming from changes in consumer
buying habits affected by COVID-19. The increase in net selling
price in the commodity items was primarily the result of a supply
shortage throughout most of 2020, due to an increase in grocery
store traffic, driven by COVID-19 measures, as well as a global
tomato virus that is negatively impacting tomato supplies.
Cost of Sales
Cost of sales for the year ended December
31, 2020 decreased ($3,373),
or (2%), to $148,540 from
$151,913 for the year ended
December 31, 2019, due primarily to
an increase in supply partner costs of $13,128, partially offset by a decrease in our
own production costs of ($15,940) and
lower clean energy costs of ($561).
The increase in year over year supply partner costs was due to
higher volumes of tomatoes, peppers and cucumbers which also drove
higher freight costs. The reduction in our own production costs
were driven by the transition of the Delta 2 facility to Pure Sunfarms, along with
lower costs at our Texas
facilities. The decrease in Texas
production costs were due to the decrease in pounds sold and cost
per pound. Our cost per pound costs, at our Texas produce greenhouses have been negatively
impacted by the brown rugoses tomato viruses in both years causing
large write-downs of inventory and lower tomato yields.
Adjusted EBITDA
Adjusted EBITDA for the year ended December 31, 2020 increased $16,586 to ($995)
from ($17,581) for the year
ended December 31, 2019 due primarily
to an increase in gross margin in both our own production and
supply partner for 2020 versus the comparative 2019 period. See the
reconciliation of Adjusted EBITDA to net income in "Non-GAAP
Measures" below.
Non-GAAP Measures
References in this news release to "Adjusted EBITDA" are to
earnings (including the equity in earnings of the joint ventures)
before interest, taxes, depreciation and amortization ("EBITDA"),
as further adjusted to exclude foreign currency exchange gains and
losses on translation of long-term debt, unrealized gains on the
changes in the value of derivative instruments, stock compensation,
and gains and losses on asset sales, and adjusts for the difference
in accounting treatment of Pure Sunfarms, which we believe is
necessary to reflect the true economic value of our interest in
Pure Sunfarms. Adjusted EBITDA is a cash flow measure that is
not recognized under GAAP and does not have a standardized meaning
prescribed by GAAP. Therefore, Adjusted EBITDA may not be
comparable to similar measures presented by other issuers. Although
net income or loss is the most directly comparable financial
measure calculated and presented in accordance with GAAP, investors
are cautioned that Adjusted EBITDA should not be construed as an
alternative to net income or loss determined in accordance with
GAAP as an indicator of the Company's performance or to cash flows
from operating, investing and financing activities as measures of
liquidity and cash flows. Management believes that Adjusted EBITDA
is an important measure in evaluating the historical performance of
the Company.
We also present Adjusted EBITDA, earnings per share and diluted
earnings per share on a proportionate segment basis. Each of the
components of Adjusted EBITDA, on a proportionate segment basis,
are presented in the tables below that present a reconciliation of
GAAP results to proportionate results. We believe that the ability
of investors to assess our overall performance may be improved by
the disclosure of proportionate segment Adjusted EBITDA, earnings
per share and diluted earnings per share.
The following table reflects a reconciliation of net income to
Adjusted EBITDA, as presented by the Company:
(in thousands of
U.S. dollars)
|
For the three
months
ended December
31,
|
|
For the year
ended
December
31,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net income
(loss)
|
$7,017
|
|
($7,184)
|
|
$11,608
|
|
$2,325
|
Add:
|
|
|
|
|
|
|
|
Amortization
|
1,987
|
|
1,855
|
|
6,527
|
|
7,442
|
Foreign
currency exchange loss (gain)
|
(744)
|
|
(95)
|
|
136
|
|
(433)
|
Interest
expense, net
|
735
|
|
211
|
|
1,431
|
|
1,578
|
Recovery of
income taxes
|
(2,183)
|
|
(5,752)
|
|
(2,790)
|
|
(5,866)
|
Stock based
compensation
|
4,813
|
|
2,051
|
|
6,142
|
|
4,714
|
Interest
expense for JVs
|
138
|
|
305
|
|
774
|
|
811
|
Amortization
for JVs
|
227
|
|
102
|
|
1,503
|
|
1,227
|
Foreign
currency exchange loss (gain) for JVs
|
2
|
|
19
|
|
120
|
|
(2)
|
Income taxes
provision from JVs
|
(136)
|
|
1,003
|
|
1,600
|
|
6,575
|
Gain on
acquisition
|
(23,631)
|
|
-
|
|
(23,631)
|
|
-
|
Gain on
settlement agreement
|
-
|
|
-
|
|
(4,681)
|
|
-
|
Loss on
inventory write-down to net realizable
|
3,275
|
|
-
|
|
3,275
|
|
-
|
Acquisition
purchase price adjustment
|
3,295
|
|
-
|
|
3,295
|
|
-
|
JV gain on
settlement of net liabilities
|
-
|
|
-
|
|
(2,496)
|
|
-
|
Loss (gain) on
disposal of assets
|
916
|
|
(6)
|
|
922
|
|
(13,564)
|
Loss on joint
ventures
|
3,791
|
|
-
|
|
3,791
|
|
-
|
True economic
benefit Pure Sunfarms8
|
(12)
|
|
16
|
|
(12)
|
|
(3,956)
|
Adjusted
EBITDA
|
($510)
|
|
($7,475)
|
|
$7,411
|
|
$851
|
Adjusted EBITDA for
JVs (See table below)
|
($387)
|
|
$1,086
|
|
$5,663
|
|
$18,432
|
Adjusted EBITDA
excluding JVs(produce)
|
($123)
|
|
($8,561)
|
|
$1,748
|
|
($17,581)
|
|
|
8.
|
The GAAP treatment of
our equity earning of Pure Sunfarms is different than under
International Financial Reporting Standards ("IFRS"). Under GAAP
the Emerald shares held in escrow are not considered issued until
paid for pursuant to the GAAP concept of 'hypothetical
liquidation'. As a result, our ownership percentage for the three
months and year ended December 31, 2019 was 54.4% and 57.7%,
respectively, compared to our economic interest under IFRS of 50%
for the same periods. For the three months and year ended December
31, 2020, our ownership was 86.2% and 64.8%,
respectively.
|
|
|
Breakout of JV's
Adjusted EBITDA
(in thousands of
U.S. dollars)
|
For the three
months
ended
December 31,
|
|
For the year
ended
December
31,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Pure Sunfarms
Adjusted EBITDA
|
($287)
|
|
$2,848
|
|
$6,078
|
|
$20,558
|
VFH Adjusted
EBITDA
|
(100)
|
|
(1,742)
|
|
(415)
|
|
(2,106)
|
AVGGH Adjusted
EBITDA
|
-
|
|
(20)
|
|
-
|
|
(20)
|
Total JV's Adjusted
EBITDA
|
($387)
|
|
$1,086
|
|
$5,663
|
|
$18,432
|
Reconciliation of U.S. GAAP Results to Proportionate
Results
The following tables are a reconciliation of the GAAP results to
the proportionate results (which include our proportionate share of
Pure Sunfarms and VFH and AVGGH ("Hemp") operations). The tables
reflect the full statements of income for Pure Sunfarms, VFH and
AVGGH multiplied by the ownership percentage of the Company (versus
presenting the results of these joint ventures in Equity in
Earnings of Unconsolidated Entities):
|
For the three
months ended December 31,
2020
|
|
(in thousands of
U.S. dollars)
|
Produce
|
|
Cannabis9
|
|
Hemp9
|
|
Total
|
Sales
|
$34,585
|
|
$15,440
|
|
$128
|
|
$50,153
|
Cost of
sales
|
(35,731)
|
|
(12,561)
|
|
(352)
|
|
(48,644)
|
Gross
margin
|
(1,146)
|
|
2,879
|
|
(224)
|
|
1,509
|
Selling, general and
administrative expenses
|
(4,012)
|
|
(3,565)
|
|
90
|
|
(7,487)
|
Share-based
compensation
|
(4,813)
|
|
-
|
|
-
|
|
(4,813)
|
Gain on
acquisition
|
23,631
|
|
-
|
|
-
|
|
23,631
|
Gain on settlement
agreement
|
-
|
|
-
|
|
-
|
|
-
|
Gain on settlement of
net liabilities
|
-
|
|
-
|
|
-
|
|
-
|
Loss on inventory
write-down to net realizable value
|
-
|
|
-
|
|
(3,275)
|
|
(3,275)
|
Loss on joint
ventures sales
|
(3,791)
|
|
-
|
|
-
|
|
(3,791)
|
(Loss) gain on
disposal of assets
|
(916)
|
|
-
|
|
-
|
|
(916)
|
Other income
(expense) net
|
1,081
|
|
(1,227)
|
|
(14)
|
|
(160)
|
(Loss) income before
taxes
|
10,034
|
|
(1,913)
|
|
(3,423)
|
|
4,698
|
Recovery of
(provision for) income taxes
|
1,782
|
|
537
|
|
-
|
|
2,319
|
Net (loss)
income
|
$11,816
|
|
($1,376)
|
|
($3,423)
|
|
$7,017
|
Adjusted
EBITDA10
|
($2,866)
|
|
$2,456
|
|
($100)
|
|
($510)
|
(Loss) income per
share – basic
|
$0.21
|
|
($0.03)
|
|
($0.06)
|
|
$0.12
|
(Loss) income per
share – diluted
|
$0.20
|
|
($0.03)
|
|
($0.05)
|
|
$0.12
|
|
For the three
months ended December 31, 2019
|
|
(in
thousands of U.S. dollars)
|
Produce
|
|
Cannabis9
|
|
Hemp9
|
|
Total
|
|
|
|
|
|
|
|
|
Sales
|
$33,056
|
|
$4,987
|
|
$69
|
|
$38,112
|
Cost of
sales
|
(37,494)
|
|
(873)
|
|
(2,091)
|
|
(40,458)
|
Gross
margin
|
(4,438)
|
|
4,114
|
|
(2,022)
|
|
(2,346)
|
Selling, general and
administrative expenses
|
(5,390)
|
|
(1,236)
|
|
(221)
|
|
(6,847)
|
Share-based
compensation
|
(1,524)
|
|
-
|
|
-
|
|
(1,524)
|
Loss on joint venture
loans
|
(1,184)
|
|
-
|
|
-
|
|
(1,184)
|
Gain (loss) on
disposal of assets
|
6
|
|
(78)
|
|
-
|
|
(72)
|
Other income
(expense) net
|
(67)
|
|
(123)
|
|
(148)
|
|
(338)
|
(Loss) income before
taxes
|
12,897
|
|
2,677
|
|
(2,391)
|
|
(12,311)
|
Recovery of
(provision for) income taxes
|
5,752
|
|
(846)
|
|
222
|
|
5,128
|
Net (loss)
income
|
($6,845)
|
|
$1,831
|
|
($2,169)
|
|
($7,183)
|
Adjusted
EBITDA10
|
($8,561)
|
|
$2,848
|
|
($1,762)
|
|
($7,475)
|
(Loss) income per
share – basic
|
($0.13)
|
|
$0.04
|
|
($0.04)
|
|
($0.14)
|
(Loss) income per
share – diluted
|
($0.13)
|
|
$0.04
|
|
($0.04)
|
|
($0.14)
|
|
|
|
|
|
|
|
|
|
|
For the year ended
December 31, 2020
|
|
(in thousands of
U.S. dollars)
|
Produce
|
|
Cannabis9
|
|
Hemp9
|
|
Total
|
Sales
|
$157,307
|
|
$38,398
|
|
$226
|
|
$195,931
|
Cost of
sales
|
(148,540)
|
|
(26,343)
|
|
(472)
|
|
(175,355)
|
Gross
margin
|
8,767
|
|
12,055
|
|
(246)
|
|
20,576
|
Selling, general and
administrative expenses
|
(16,688)
|
|
(7,435)
|
|
(410)
|
|
(24,533)
|
Share-based
compensation
|
(6,142)
|
|
-
|
|
-
|
|
(6,142)
|
Gain on
acquisition
|
23,631
|
|
-
|
|
-
|
|
23,631
|
Gain on settlement
agreement
|
4,681
|
|
-
|
|
-
|
|
4,681
|
Gain on settlement of
net liabilities
|
-
|
|
2,496
|
|
-
|
|
2,496
|
Loss on inventory
write-down to net realizable value
|
-
|
|
-
|
|
(3,275)
|
|
(3,275)
|
Loss on joint
ventures sales
|
(3,791)
|
|
-
|
|
-
|
|
(3,791)
|
(Loss) gain on
disposal of assets
|
(922)
|
|
5
|
|
99
|
|
(818)
|
Other income
(expense) net
|
(403)
|
|
(1,861)
|
|
(143)
|
|
(2,407)
|
(Loss) income before
taxes
|
9,133
|
|
5.260
|
|
(3,975)
|
|
10,418
|
Recovery of
(provision for) income taxes
|
2,389
|
|
(1,199)
|
|
-
|
|
1,190
|
Net (loss)
income
|
$11,522
|
|
$4,061
|
|
($3,975)
|
|
$11,608
|
Adjusted
EBITDA10
|
($995)
|
|
$8,821
|
|
($415)
|
|
$7,411
|
(Loss) income per
share – basic
|
$0.20
|
|
$0.07
|
|
($0.07)
|
|
$0.20
|
(Loss) income per
share – diluted
|
$0.19
|
|
$0.07
|
|
($0.06)
|
|
$0.19
|
|
For the year ended
December 31, 2019
|
|
(in
thousands of U.S. dollars)
|
Produce
|
|
Cannabis9
|
|
Hemp9
|
|
Total
|
Sales
|
$144,568
|
|
$37,000
|
|
$69
|
|
$181,637
|
Cost of
sales
|
(151,913)
|
|
(9,009)
|
|
(1,682)
|
|
(162,604)
|
Gross
margin
|
(7,345)
|
|
27,991
|
|
1,613
|
|
19,033
|
Selling, general and
administrative expenses
|
(16,762)
|
|
(4,568)
|
|
(591)
|
|
(21,921)
|
Share-based
compensation
|
(4,714)
|
|
-
|
|
-
|
|
(4,714)
|
Loss on joint venture
loans
|
(1,184)
|
|
-
|
|
-
|
|
(1,184)
|
Gain on disposal of
assets
|
13,564
|
|
(78)
|
|
-
|
|
13,486
|
Other income
(expense) net
|
(877)
|
|
(497)
|
|
(298)
|
|
(1,672)
|
(Loss) income before
taxes
|
(4,720)
|
|
20,218
|
|
(2,502)
|
|
15,120
|
Recovery of
(provision for) income taxes
|
5,866
|
|
(6,572)
|
|
3
|
|
(703)
|
Net (loss)
income
|
($11,452)
|
|
$16,276
|
|
($2,499)
|
|
$2,325
|
Adjusted
EBITDA10
|
($17,581)
|
|
$20,558
|
|
($2,126)
|
|
$851
|
(Loss) income per
share – basic
|
($0.23)
|
|
$0.33
|
|
($0.05)
|
|
$0.05
|
(Loss) income per
share – diluted
|
($0.22)
|
|
$0.32
|
|
($0.05)
|
|
$0.05
|
|
|
9.
|
The adjusted
consolidated financial results have been adjusted to include our
share of revenues and expenses from Pure Sunfarms and Hemp on a
proportionate accounting basis, on which management bases its
operating decisions and performance evaluation. GAAP does not allow
for the inclusion of the joint ventures on a proportionate basis.
These results include additional non-GAAP measures such as Adjusted
EBITDA.
|
|
The adjusted results
are not generally accepted measures of financial performance under
GAAP. Our method of calculating these financial performance
measures may differ from other companies and accordingly, they may
not be comparable to measures used by other companies.
|
10.
|
Adjusted EBITDA is
not a recognized earnings measure and does not have a standard
meaning prescribed in by GAAP. See "Non-GAAP Measures"
above.
|
This press release is intended to be read in conjunction with
the Company's Consolidated Financial Statements ("Financial
Statements") and Management's Discussion & Analysis
("MD&A") for the three months and year ended December 31, 2020 in the Company Form 10-Q, which
will be filed on (www.sec.gov/edgar.shtml) and SEDAR
(www.sedar.com) and will be available at www.villagefarms.com.
Conference Call
Village Farms' management team will host a conference call
today, Tuesday, March 16, 2021, at
8:30 a.m. ET to discuss its financial
results. Participants can access the conference call by
telephone by dialing (647) 427-7450 or (888) 231-8191, or via the
Internet at: https://bit.ly/3shX6Z8 .
For those unable to participate in the conference call at the
scheduled time, it will be archived for replay both by telephone
and via the Internet beginning approximately one hour following
completion of the call. To access the archived conference call by
telephone, dial (416) 849-0833 or (855) 859-2056 and enter the
passcode 5894379 followed by the pound key. The telephone
replay will be available until Tuesday,
March 23, 2021 at midnight (ET). The conference call
will also be archived on Village Farms' website
at http://villagefarms.com/investor-relations/investor-calls.
About Village Farms International, Inc.
Village Farms is one of the largest and longest-operating
greenhouse growers in North America. The Company leverages
decades of experience in large-scale, low-cost intensive
agriculture as a vertically integrated produce supplier to pursue
high-value, high-growth plant-based Consumer Packaged Goods
opportunities in cannabis and CBD in North America and
select markets internationally.
The Company's wholly-owned Canadian
subsidiary, British-Columbia-based Pure Sunfarms, is one of
the single largest cannabis operations in the world, the
lowest-cost greenhouse producer and one of the best-selling brands
in Canada, and has generated profitability for seven
consecutive quarters.
In the U.S., subject to compliance with all applicable U.S.
federal and state laws, Village Farms is pursuing a strategy to
become a leading developer and supplier of branded and
white-labeled CBD products targeting major retailers and consumer
packaged goods companies. Village Farms has one of the largest
greenhouse operations in the country and is strategically
positioned to utilize its agricultural experience and Pure
Sunfarms' operational and product expertise, to pursue potential
high-THC cannabis opportunities when legally permitted to do
so.
Internationally, Village Farms evaluates and targets select,
nascent, legal cannabis and CBD opportunities with significant
long-term potential, with an initial focus on
the Asia-Pacific region through its investments
in Australia-based Altum International.
Cautionary Statement Regarding Forward-Looking
Information
This press release contains forward-looking statements within
the meaning of the United States Private Securities Litigation
Reform Act of 1995, Section 27A of the Securities Act of 1933, as
amended, (the "Securities Act") and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and is
subject to the safe harbor created by those sections. This press
release also contains "forward-looking information" within the
meaning of applicable Canadian securities law. We refer to such
forward-looking statements and forward-looking information
collectively as "forward-looking statements". Forward-looking
statements may relate to the Company's future outlook or financial
position and anticipated events or results and may include
statements regarding the financial position, business strategy,
budgets, expansion plans, litigation, projected production,
projected costs, capital expenditures, financial results, taxes,
plans and objectives of or involving the Company. Particularly,
statements regarding future results, performance, achievements,
prospects or opportunities for the Company, the greenhouse
vegetable industry or the cannabis industry are forward-looking
statements. In some cases, forward-looking information can be
identified by such terms as "outlook", "may", "might", "will",
"could", "should", "would", "occur", "expect", "plan",
"anticipate", "believe", "intend", "try", "estimate", "predict",
"potential", "continue", "likely", "schedule", "objectives", or the
negative or grammatical variation thereof or other similar
expressions concerning matters that are not historical facts. The
forward-looking statements in this press release are subject to
risks that may include, but are not limited to: our limited
operating history, including that of Pure Sunfarms and our start-up
operations of growing hemp in the United States; the
legal status of Pure Sunfarms' cannabis business; risks relating to
obtaining additional financing, including our dependence upon
credit facilities; potential difficulties in achieving and/or
maintaining profitability; variability of product pricing; risks
inherent in the cannabis, hemp and agricultural businesses; the
ability of Pure Sunfarms to cultivate and distribute cannabis
in Canada; existing and new governmental regulations,
including risks related to regulatory compliance and licenses
(e.g., Pure Sunfarms' ability to obtain licenses for its
Delta 2 greenhouse facility as
well as additional licenses under the Canadian act respecting
cannabis to amend to the Controlled Drugs and Substances Act, the
Criminal Code and other Acts, S.C. 2018, c. 16 (Canada) for its Delta 3 greenhouse facility), and changes in
our regulatory requirements; risks relating to conversion of our
greenhouses to cannabis production for Pure Sunfarms; risks related
to rules and regulations at the U.S. federal (Food and Drug
Administration and United States Department of Agriculture), state
and municipal levels with respect to produce and hemp; retail
consolidation, technological advances and other forms of
competition; transportation disruptions; product liability and
other potential litigation; retention of key executives; labor
issues; uninsured and underinsured losses; vulnerability to rising
energy costs; environmental, health and safety risks, foreign
exchange exposure, risks associated with cross-border trade;
difficulties in managing our growth; restrictive covenants under
our credit facilities; natural catastrophes; the ongoing and
developing COVID-19 pandemic; and tax risks.
The Company has based these forward-looking statements on
factors and assumptions about future events and financial trends
that it believes may affect its financial condition, results of
operations, business strategy and financial needs. Although the
forward-looking statements contained in this press release are
based upon assumptions that management believes are reasonable
based on information currently available to management, there can
be no assurance that actual results will be consistent with these
forward-looking statements. Forward-looking statements necessarily
involve known and unknown risks and uncertainties, many of which
are beyond the Company's control, that may cause the Company's or
the industry's actual results, performance, achievements, prospects
and opportunities in future periods to differ materially from those
expressed or implied by such forward-looking statements. These
risks and uncertainties include, among other things, the factors
contained in the Company's filings with securities regulators,
including this press release. In particular, we caution you that
our forward-looking statements are subject to the ongoing and
developing circumstances related to the COVID-19 pandemic, which
may have a material adverse effect on our business, operations and
future financial results.
When relying on forward-looking statements to make decisions,
the Company cautions readers not to place undue reliance on these
statements, as forward-looking statements involve significant risks
and uncertainties and should not be read as guarantees of future
results, performance, achievements, prospects and opportunities.
The forward-looking statements made in this press release relate
only to events or information as of the date on which the
statements are made in this press release. Except as required by
law, the Company undertakes no obligation to update or revise
publicly any forward-looking statements, whether as a result of new
information, future events or otherwise, after the date on which
the statements are made or to reflect the occurrence of
unanticipated events.
Village Farms
International, Inc.
|
Consolidated
Statements of Financial Position
|
(In thousands of
United States dollars, except share data)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2020
|
|
December 31,
2019
|
ASSETS
|
|
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
21,640
|
|
$
11,989
|
Restricted
cash
|
|
4,039
|
|
|
Trade
receivables
|
|
23,222
|
|
8,997
|
Inventories
|
|
46,599
|
|
15,918
|
Amounts due from
joint ventures
|
|
—
|
|
15,418
|
Other
receivables
|
|
145
|
|
342
|
Income tax
receivable
|
|
18
|
|
713
|
Prepaid expenses and
deposits
|
|
6,145
|
|
1,259
|
Total current
assets
|
|
101,808
|
|
54,636
|
Non-current
assets
|
|
|
|
|
Property, plant and
equipment
|
|
187,020
|
|
63,158
|
Investment in joint
ventures
|
|
—
|
|
41,334
|
Investment in in
minority interests
|
|
1,226
|
|
—
|
Notes receivable -
joint ventures
|
|
3,545
|
|
10,865
|
Goodwill
|
|
24,027
|
|
—
|
Intangibles
|
|
17,311
|
|
—
|
Deferred tax
asset
|
|
13,312
|
|
7,999
|
Right-of-use
assets
|
|
3,832
|
|
3,582
|
Other
assets
|
|
1,950
|
|
1,834
|
Total
assets
|
|
$
354,031
|
|
$
183,408
|
LIABILITIES
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Line of
credit
|
|
$
2,000
|
|
$
2,000
|
Trade
payables
|
|
15,064
|
|
12,653
|
Current maturities of
long-term debt
|
|
10,166
|
|
3,423
|
Note
payable
|
|
15,314
|
|
—
|
Accrued
liabilities
|
|
22,438
|
|
3,017
|
Income tax
payable
|
|
4,523
|
|
—
|
Other current
liabilities
|
|
1,641
|
|
—
|
Operating lease
liabilities - current
|
|
1,107
|
|
875
|
Finance lease
liabilities - current
|
|
27
|
|
61
|
Total current
liabilities
|
|
72,280
|
|
22,029
|
Non-current
liabilities
|
|
|
|
|
Long-term
debt
|
|
53,913
|
|
28,966
|
Deferred tax
liability
|
|
18,059
|
|
1,873
|
Operating lease
liabilities - non-current
|
|
2,855
|
|
2,690
|
Finance lease
liabilities - non-current
|
|
8
|
|
34
|
Other
liabilities
|
|
1,633
|
|
1,357
|
Total
liabilities
|
|
148,748
|
|
56,949
|
Commitments and
contingencies
|
|
|
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
|
Common
stock
|
|
145,668
|
|
98,333
|
Additional paid in
capital
|
|
17,502
|
|
4,351
|
Accumulated other
comprehensive loss
|
|
6,255
|
|
(475)
|
Retained
earnings
|
|
35,858
|
|
24,250
|
Total shareholders'
equity
|
|
205,283
|
|
126,459
|
Total liabilities and
shareholders' equity
|
|
$
354,031
|
|
$
183,408
|
Village Farms
International, Inc.
|
Consolidated
Statements of Income (Loss) and Comprehensive Income
(Loss)
|
(In thousands of
United States dollars, except per share data, unless otherwise
noted)
|
(Unaudited)
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Twelve Months Ended
December 31,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
47,364
|
|
$
|
33,056
|
|
$
|
170,086
|
|
$
|
144,568
|
Cost of
sales
|
|
|
(46,317)
|
|
|
(37,495)
|
|
|
(159,126)
|
|
|
(151,913)
|
Gross
margin
|
|
|
1,047
|
|
|
(4,439)
|
|
|
10,960
|
|
|
(7,345)
|
Selling, general and
administrative expenses
|
|
|
(6,410)
|
|
|
(4,863)
|
|
|
(19,086)
|
|
|
(16,762)
|
Share-based
compensation
|
|
|
(4,813)
|
|
|
(2,051)
|
|
|
(6,142)
|
|
|
(4,714)
|
Interest
expense
|
|
|
(783)
|
|
|
(596)
|
|
|
(2,056)
|
|
|
(2,614)
|
Interest
income
|
|
|
48
|
|
|
385
|
|
|
625
|
|
|
1,036
|
Foreign exchange gain
(loss)
|
|
|
744
|
|
|
95
|
|
|
(136)
|
|
|
433
|
Gain on settlement
agreement
|
|
|
—
|
|
|
—
|
|
|
4,681
|
|
|
—
|
Gain on
acquisition
|
|
|
23,631
|
|
|
—
|
|
|
23,631
|
|
|
—
|
Other
income
|
|
|
(43)
|
|
|
49
|
|
|
49
|
|
|
268
|
Loss on joint venture
loans
|
|
|
(3,791)
|
|
|
(1,184)
|
|
|
(3,791)
|
|
|
(1,184)
|
(Loss) gain on
disposal of assets
|
|
|
(916)
|
|
|
6
|
|
|
(922)
|
|
|
13,564
|
Income (loss) before
taxes and earnings from unconsolidated entities
|
|
|
8,714
|
|
|
(12,598)
|
|
|
7,813
|
|
|
(17,318)
|
Recovery of income
taxes
|
|
|
2,183
|
|
|
5,752
|
|
|
2,790
|
|
|
5,866
|
Income (loss) from
consolidated entities after income taxes
|
|
|
10,897
|
|
|
(6,846)
|
|
|
10,603
|
|
|
(11,452)
|
Equity earnings from
unconsolidated entities
|
|
|
(3,880)
|
|
|
(338)
|
|
|
1,005
|
|
|
13,777
|
Net income
(loss)
|
|
$
|
7,017
|
|
$
|
(7,184)
|
|
$
|
11,608
|
|
$
|
2,325
|
Basic income (loss)
per share
|
|
$
|
0.12
|
|
$
|
(0.15)
|
|
$
|
0.20
|
|
$
|
0.05
|
Diluted income (loss)
per share
|
|
$
|
0.11
|
|
$
|
(0.14)
|
|
$
|
0.19
|
|
$
|
0.05
|
Weighted average
number of common shares used in the computation of net income
(loss) per share (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
58,536
|
|
|
51,204
|
|
|
58,526
|
|
|
49,418
|
Diluted
|
|
|
60,440
|
|
|
52,731
|
|
|
61,490
|
|
|
51,179
|
Net income
(loss)
|
|
$
|
7,017
|
|
$
|
(7,184)
|
|
$
|
11,608
|
|
$
|
2,325
|
Other comprehensive
income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
translation adjustment
|
|
|
31
|
|
|
(22)
|
|
|
6,730
|
|
|
87
|
Comprehensive income
(loss)
|
|
$
|
551
|
|
$
|
(726)
|
|
$
|
18,338
|
|
$
|
2,412
|
Village Farms
International, Inc.
|
Consolidated
Statements of Cash Flows
|
(In thousands of
United States dollars)
|
(Unaudited)
|
|
|
|
|
|
|
|
Twelve Months Ended
December 31, 2020
|
|
|
2020
|
|
2019
|
Cash flows
provided by (used in) operating activities:
|
|
|
|
|
Net income
|
|
$
11,608
|
|
$
2,325
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
|
6,825
|
|
7,366
|
Amortization of
deferred charges
|
|
115
|
|
76
|
Share of income from
joint ventures
|
|
(1,005)
|
|
(13,777)
|
Loss on joint venture
loans
|
|
3,791
|
|
1,184
|
Interest
expense
|
|
2,056
|
|
2,614
|
Interest
income
|
|
(625)
|
|
(1,036)
|
Interest paid on
long-term debt
|
|
(1,295)
|
|
(2,635)
|
Gain on settlement
agreement
|
|
(4,681)
|
|
—
|
Loss (gain) on
disposal of assets
|
|
922
|
|
(13,564)
|
Gain on acquisition
of Pure Sunfarms
|
|
(23,631)
|
|
—
|
Non-cash lease
expense
|
|
(1,150)
|
|
(1,043)
|
Interest paid on
finance leases
|
|
(4)
|
|
—
|
Share-based
compensation
|
|
6,142
|
|
4,714
|
Deferred income
taxes
|
|
(5,511)
|
|
(5,855)
|
Changes in non-cash
working capital items
|
|
12,121
|
|
5,244
|
Net cash provided by
(used in) operating activities
|
|
5,678
|
|
(14,387)
|
Cash flows used in
investing activities:
|
|
|
|
|
Purchases of
property, plant and equipment, net of rebate
|
|
(3,419)
|
|
(2,287)
|
Acquisitions,
net
|
|
(34,603)
|
|
—
|
Advances to joint
ventures
|
|
(177)
|
|
(14,507)
|
Purchases of
intangibles
|
|
(92)
|
|
—
|
Proceeds from sale of
assets
|
|
—
|
|
52
|
Investment in joint
ventures
|
|
(11,713)
|
|
(96)
|
Investment in
minority interests
|
|
(1,226)
|
|
—
|
Net cash used in
investing activities
|
|
(51,230)
|
|
(16,838)
|
Cash flows
provided by financing activities:
|
|
|
|
|
Proceeds from
borrowings
|
|
10,619
|
|
4,000
|
Repayments on
borrowings
|
|
(6,292)
|
|
(7,423)
|
Proceeds from
issuance of common stock and warrants
|
|
57,212
|
|
35,030
|
Issuance
costs
|
|
(3,293)
|
|
(338)
|
Proceeds from
exercise of stock options
|
|
425
|
|
208
|
Payments on capital
lease obligations
|
|
(63)
|
|
(90)
|
Net cash provided by
financing activities
|
|
58,608
|
|
31,387
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
634
|
|
(93)
|
Net increase
(decrease) in cash and cash equivalents
|
|
13,690
|
|
69
|
Cash and cash
equivalents, beginning of period
|
|
11,989
|
|
11,920
|
Cash and cash
equivalents, end of period
|
|
$
25,679
|
|
$
11,989
|
View original
content:http://www.prnewswire.com/news-releases/village-farms-international-reports-fourth-quarter-and-year-end-2020-financial-results-generates-eps-of-0-12-for-the-quarter-and-0-20-for-2020--301248175.html
SOURCE Village Farms International, Inc.