2019 ANNUAL REPORT
FINANCIAL HIGHLIGHTS
in thousands of Canadian dollars,
except volumes, per share amounts and shares
2019
2018
Sales volume (hectolitres) (1)
Net revenue
Gross profit
Operating income (loss)
Net income (loss)
Income (loss) per share - basic and diluted
Common shares outstanding
Total assets
Total debt (2)
171,563
42,653
12,336
(5,100)
(2,922)
($ 0.42)
6,981,628
49,782
6,415
201,577
48,748
20,812
931
360
$ 0.05
6,981,628
56,740
5,775
(1) Excludes contract manufacturing volumes due to the nature of the agreements.
(2) Includes bank indebtedness, long term debt, and obligations under finance leases.
Annual Meeting of Shareholders
The annual meeting of Big Rock shareholders will be held:
Thursday, May 14, 2020.
Table of Contents
CEO’s Message
2
Management’s Discussion and Analysis
4
Management Report
24
Independent Auditor's Report
25
28
Financial Statements and Notes
Big Rock Brewery Inc. - 2020 Annual Report | 1
CEO’S MESSAGE
To: Big Rock Shareholders
2019 was a challenging year for Big Rock. Effective December 16, 2018, the
former Government of Alberta amended the provincial beer mark-up struc-
ture while eliminating the Alberta Small Brewers Development (“ASBD”)
grant program. At the time, the former Government of Alberta proposed a
form of financial support to Big Rock until a new permanent mark-up struc-
ture was developed. The unprecedented magnitude of the tax increase erod-
ed a significant portion of Big Rock’s top-line revenue in Alberta with the
total impact of this change estimated at $6.4 million for the financial year
ended December 30, 2019. In May of 2019, we were advised that the new
Government of Alberta would not implement the temporary financial relief
measure that was initially proposed, and instead, they would work towards a
new, fair provincial mark-up structure. Within days of receiving this infor-
mation, we were forced to carry out significant cost cutting measures in addition to the significant pricing changes that
were implemented at the beginning of 2019. Together, these measures helped stabilize Big Rock’s business.
Despite the underlining improvements in our business, our reported financial results reflect the difficult regu latory
environment Big Rock faced in Alberta in 2019. Revenue declined by 13% from $48.7 million to $42.7 million, which
was primarily driven by the elimination of the ASBD grant program and the amended beer mark-up policy in Alberta.
Sales volume declined by 15% from 202 thousand hectolitres to 172 thousand hectolitres driven by declines in our
value portfolio, and EBITDA(1) decreased by $5.3 million from positive EBITDA of $4.2 million (in 2018) to negative
EBITDA of $1.1 million (in 2019).
Despite the challenges we faced in 2019, I am very optimistic about the future of Big Rock. Throughout this
difficult regulatory period in Alberta, we continued to work in teams on improving our processes. We needed to
learn how to work with fewer resources and I am proud of the innovative thinking that has emerged to make our
organization stronger. Effective September 13, 2019, the current Government of Alberta and ultimately the Alberta,
Gaming, Liquor and Cannabis Commission, amended the Alberta beer mark-up policy, restoring our ability to
be competitive in the Alberta beer market. We are focused on returning to revenue growth and continue to implement
process improvements to our marketing and sales capabilities in order to grow both sales volume and revenue (2).
In 2019 we continued to demonstrate our strong commitment to innovation and quality. We successfully launched our
Rock Creek Rosé Cider, Craft Lager and Jackrabbit products, and we received 11 awards including a gold Alberta Beer
award for Pilsner (Czech Style), a gold Canadian Brewing Award for Warthog and a gold Canadian
International Beer Award for Rock Creek Rosé Cider.
In 2020 we have several new innovations to release that are targeted at the fastest growing segments in our
industry(2). We will remain focused on our mission of “All for Craft, and Craft for All” and will continuously look for the
best opportunities to grow our business while remaining focused on being Canada’s authentic craft brewery since
1985(2).
Sincerely,
Wayne Arsenault
President & CEO
(1) See “Non-GAAP Measures” in the Management’s Discussion and Analysis for the year ended December 30, 2019 enclosed herewith (the “MD&A”).
(2) See “Forward Looking Statements” in the MD&A.
Big Rock Brewery Inc. - 2020 Annual Report | 2
MANAGEMENT’S
DISCUSSION AND ANALYSIS
MANAGEMENT’S DISCUSSION AND ANALYSIS
The following is Management’s Discussion and Analysis (“MD&A”) of the financial condition and results
of operations of Big Rock Brewery Inc. (“Big Rock” or the “Corporation”) for the years ended December
30, 2019 and 2018.
This MD&A should be read in conjunction with the audited consolidated financial statements of the
Corporation and accompanying notes as at and for the years ended December 30, 2019 and 2018 (the
“Consolidated Financial Statements”). The Consolidated Financial Statements have been prepared using
International Financial Reporting Standards (“IFRS”) and all amounts are reported in thousands of
Canadian dollars unless otherwise noted. Additional information about the Corporation, including the
Annual Information Form for the year ended December 30, 2019, can be found on SEDAR at
www.sedar.com and on Big Rock’s corporate website at www.bigrockbeer.com. Readers should also read
the section “Forward-Looking Information” contained at the end of this document. This MD&A is dated
March 13, 2020.
CORPORATE PROFILE
Big Rock is headquartered in Calgary, Alberta. The Corporation produces premium, all-natural craft
beers, ciders and other alcoholic beverages. As one of Canada's largest independently owned craft
brewers, Big Rock has an extensive family of permanent ales and lagers, the Rock Creek series of craft
ciders, a continually changing selection of seasonal and limited-edition beers and other licensed alcoholic
beverages.
Founded in 1985, Big Rock was the first craft brewery in Alberta and stands as a pioneer in the Canadian
craft beer industry. Big Rock produces, markets and distributes its premium, high-quality craft beers and
ciders, primarily in Canada. The Corporation owns and operates production facilities in Alberta, British
Columbia (“BC”) and Ontario. Today, Big Rock’s primary brewing, packaging and warehousing facility is
located in Calgary, Alberta and has been in operation since 1996. Big Rock has distribution facilities in
Calgary and Edmonton, and sales staff resident in Alberta, BC, Saskatchewan, Manitoba and Ontario.
In April 2015, Big Rock opened a brewery and eatery in Vancouver, BC’s thriving downtown craft beer
district. This combined brewery and brewpub serves on-premise consumers and provides distribution for
Big Rock’s products throughout BC. During the fall of 2016, Big Rock opened a third brewery and tasting
room in Etobicoke, Ontario, and on February 1, 2017, a fourth location was opened in the Liberty Village
area of Toronto, Ontario, and is operated as Liberty Commons at Big Rock Brewery tasting room and
restaurant.
Given the Corporation’s footprint in Western Canada, the Corporation also has several co-packaging
arrangements through private label agreements, and recently, co-manufacturing and licensing
agreements.
INDUSTRY TRENDS AND INDICATORS
Today's beverage alcohol consumer in North America is driven by health and wellness, experience and
convenience, flavour, premiumization and value. When coupled with low barriers to entry, it has resulted
in unprecedented consumer choice and blurring of categories, channels and competition in the beverage
alcohol space. The Corporation believes the exponential rise in choice of craft beer over the last 5 years
may continue. However, Big Rock also believes that its participation in the growing Ready-to Drink
alcohol beverage (“RTD”) market is vital to the Corporation’s future success. The Corporation entered
the RTD market in Alberta and BC in 2019 through the licensing of Cottage Springs’ products and continues
to find growth and success with the brand. Big Rock is also looking to utilize its manufacturing footprint,
particularly in Calgary, to pursue new revenue streams from the RTD space, to the extent that the Alberta
Gaming, Liquor and Cannabis Commission (“AGLC”) policy permits. A restrictive policy still governs the
RTD market in Alberta and limits the Corporation’s ability to pursue such opportunities, which is the
Big Rock Brewery Inc.
Management Discussion & Analysis
Big Rock Brewery Inc. - 2020 Annual Report | 4
Page 1 of 19
highest growth category in alcohol, globally. Given the economic stimulus that the growing RTD market
can provide for the province of Alberta, management is hopeful this avenue of growth will no longer be
restricted very soon.
2019 was a set back year for Big Rock given the AGLC beer mark-up policy imposed on the Corporation
by the previous Government of Alberta, however, as previously announced, the current Government of
Alberta and ultimately the AGLC, amended such policy effective September 13, 2019 improving Big Rock’s
competitive position in the beer market. Due to the cost restructuring initiatives the Corporation
undertook during the second quarter of 2019, Big Rock not only took a cultural hit, but experienced some
lapses in processes that are to be expected as employees adopt new and greater responsibilities.
Management believes that it has addressed such process gaps through year-end 2019 and has gained
momentum in 2020 in re-establishing the great culture that the Corporation prided itself on since 1985.
SELECTED ANNUAL FINANCIAL INFORMATION
($000, except volumes and per share amounts)
Sales Volumes (hl)(1)
Statements of Comprehensive Income Data
Net revenue
EBITDA(2)
Operating profit (loss)
Net income (loss)
Per share – basic and diluted
Statements of Financial Position Data
Total assets
Total debt(3)
Year Ended December 30
2019
2018
2017
171,563
201,577
208,565
$ 42,653
$ 48,748
$ 46,573
(1,062)
(5,100)
(2,922)
4,150
931
360
1,907
(1,037)
(1,020)
$
(0.42)
$
0.05
$
(0.15)
49,782
6,415
56,740
5,775
53,481
6,416
(1)
(2)
(3)
Excludes contract manufacturing volumes due to the nature of the agreements.
Earnings Before Interest, Tax, Depreciation and Amortization (“EBITDA”). See “Non-GAAP Measures”.
Includes bank indebtedness, long term debt, and obligations under finance leases.
SELECTED QUARTERLY FINANCIAL INFORMATION
Big Rock experiences seasonal fluctuations in volumes, net sales revenue and net income with the second
and third quarters typically being stronger than the first and fourth quarters. These seasonal variations
are dependent on numerous factors, including weather, timing of community events, consumer
behaviour, customer activity and overall industry dynamics, mainly in Western Canada. Additionally,
significant fluctuations in the AGLC beer mark-up policy over the last six years has caused significant
variation in the impact of provincial government liquor tax programs on net revenue. The selected
quarterly information is consistent with these expectations and industry trends.
The following is a summary of selected financial information of the Corporation for the last eight
completed quarters:
Big Rock Brewery Inc.
Management Discussion & Analysis
Big Rock Brewery Inc. - 2020 Annual Report | 5
Page 2 of 19
2019
2018
($000, except hl and per
share amounts)
Sales volumes (hl)(1)
Net revenue
EBITDA(2)
Operating profit (loss)
Net income (loss)
Earnings per share (basic
and diluted)
$ Per hl Amounts(1)
Net revenue
Cost of sales
Selling expenses
General and
administrative
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
37,361
50,327
48,900
34,975
49,013
55,741
56,012
40,811
9,539
11,189
13,299
8,626
11,991
13,764
13,527
9,466
(645)
(1,615)
(1,297)
639
(761)
(201)
335
(495)
297
(1,391)
(2,229)
(1,721)
1,075
1,563
1,246
216
(80)
747
587
473
240
266
(505)
(387)
$ (0.19)
$ (0.03)
$ 0.04
$ (0.25)
$ (0.01)
$ 0.08
$ 0.04
$ (0.06)
255.32
222.33
271.96
246.63
244.65
201.04
143.34
189.08
181.44
146.10
246.93
136.94
241.50
231.95
135.15
136.53
62.47
62.77
59.88
83.66
63.55
65.48
65.72
76.35
31.56
28.69
30.39
41.37
27.24
28.88
30.08
28.55
Operating profit (loss)
(43.23)
(15.12)
(10.12)
(63.73)
4.41
13.40
8.46
(12.40)
Net income (loss)
(34.71)
(3.99)
6.07
(49.21)
(1.63)
10.53
4.30
(9.51)
(1)
(2)
Excludes contract manufacturing volumes due to the nature of the agreements.
See “Non-GAAP Measures”.
RESULTS OF OPERATIONS
Big Rock reported net loss of $2,922 for the year ended December 30, 2019, compared to net income of
$360 in 2018. The net loss is due to the then Government of Alberta’s elimination of the Alberta Small
Brewers Development (“ASBD”) grant in late 2018. Management estimates the net negative impact of
the late 2018 Alberta beer mark-up changes to be approximately $6.4 million for the year.
The Corporation experienced significant sales volume declines in the fourth quarter of 2019 as compared
to the fourth quarter of 2018, driven by major declines in private label and value brands as a result of
the price increases taken earlier in the year and potentiated by the strategic pricing initiative taken by
the Corporation in December 2018 to maximize sales volumes while the ASBD grant program remained in
place. Additionally, the Corporation experienced significant inventory revaluation and write-offs in
addition to lower than anticipated production volumes in the fourth quarter of 2019 as the Corporation
focused on inventory clean-up initiatives to position itself for a stronger 2020.
As previously announced, the Corporation implemented significant cost cutting measures in the second
quarter of 2019 and restructuring charges to mitigate its operating losses incurred in the difficult
regulatory environment in Alberta at the time. Effective September 13, 2019, the Corporation’s Alberta
beer tax rate was reduced to $0.64 per litre which is a 4 percent increase to the net rate (adjusted for
the ASBD grant) that the Corporation was subject to in late 2018, before the elimination of the ASBD
grant program. Management believes this revised AGLC beer mark-up policy allows for the evaluation
and pursuit of profitable and sustainable growth within the beer category until the end of the current
Alberta Government’s term; however, Big Rock will continue to be proactive with the Government of
Alberta moving forward.
SEGMENTED INFORMATION
Big Rock has two reportable business segments, wholesale and retail, which are monitored by executive
management for purposes of making decisions about resource allocation and performance management.
The wholesale segment manufactures and distributes beer and cider to provincial liquor boards, grocery
Big Rock Brewery Inc.
Management Discussion & Analysis
Page 3 of 19
Big Rock Brewery Inc. - 2020 Annual Report | 6
chains, and on-premise customers which is subsequently sold to end consumers. The retail segment sells
beverages, food and merchandise to end consumers through premises owned and/or operated by the
Corporation.
Segment performance is evaluated on a number of measures, the most significant being gross profit net
of selling expenses. Transfer prices between operating segments are on an arm’s length basis in a manner
similar to transactions with third parties. The Corporation’s operating assets and liabilities, general and
administrative expenses, income taxes and capital expenditures are managed on a corporate basis.
SEGMENTED RESULTS
For the year ended December 30
Wholesale
Retail
Eliminations
Consolidated
2018
2019
40,851 $ 47,144 $
28,156
12,695
11,336
1,359
25,351
21,793
13,537
$ 8,256 $
$
Net Revenue
Cost of sales
Gross profit (loss)
Selling expenses
Segment profit (loss) $
General and administrative costs
Depreciation and amortization
Operating profit (loss)
Finance expense
Other income )
(Loss) income before income taxes
Net Revenue
2019
2018
2019
2018
2019
2,353 $ 2,245 $
2,712
(359)
11
(370)
3,226
(981)
25
$ (1,006) $
(551)
(551)
—
—
—
$
$
(641) $ 42,653
30,317
(641)
—
12,336
—
11,347
—
989
5,556
533
(5,100)
401
713
$ (4,788)
2018
$ 48,748
27,936
20,812
13,562
7,250
5,795
524
931
327
18
622
$
Net revenue includes wholesale beer, cider and alcoholic beverage sales, net of excise taxes and
provincial government liquor taxes, contract manufacturing revenues, retail restaurant and store sales
from Big Rock’s Alberta, BC and Ontario locations and can sourcing for a third party. Geographically,
Alberta continued to represent the largest share of the Corporation’s sales in 2019, followed by BC and
Ontario.
($000, except volumes)
Sales volumes (hl)(1)
Gross revenue
Federal excise taxes
Provincial liquor tax programs
Net revenue
Net revenue by segment
Wholesale
Retail
Net revenue
$ per hl(1)
Wholesale net revenue
Year ended December 30
2019
2018
Change
171,563
201,577
$ 65,116
$ 66,983
(5,443)
(17,020)
(6,003)
(12,232)
(30,014)
(1,867)
$
560
(4,788)
$ 42,653
$ 48,748
$
(6,095)
$ 40,300
$ 46,503
$
(6,203)
2,353
2,245
108
$ 42,653
$ 48,748
$
(6,095)
234.90
230.70
4.20
(1) Excludes contract manufacturing volumes due to the nature of the agreements.
Big Rock Brewery Inc.
Management Discussion & Analysis
Big Rock Brewery Inc. - 2020 Annual Report | 7
Page 4 of 19
Sales volumes were 171,563 hl for the year ended December 30, 2019, which represents a decrease of
30,014 hl (14.9%), compared to the prior year primarily due to major price increases to Big Rock’s
products taken at the beginning of 2019 in response to the elimination of the ASBD grant program, in
addition to the declining beer consumption and increased competition, particularly in Alberta.
Additionally, this significant year-over-year decline was potentiated by the strategic pricing initiatives
and resulting sales volume maximization outcome achieved in December 2018.
Gross revenue was $65,116 for the year ended December 30, 2019, a decrease of $1,867 (2.8%) compared
to the prior year. Federal excise taxes decreased for the year ended December 30, 2019, due to the
overall decline in production as a result of the decline in sales. Provincial liquor taxes increased by $4,788
in fiscal 2019, compared to the prior year as a result of the elimination of the ASBD grant program and a
significant decline in sales volume. As a result, net revenue was $42,653 for the year ended December
30, 2019, which represents a decrease of $6,095 (12.5%) as compared to fiscal 2018.
Wholesale Revenue
Wholesale net revenue decreased by $6,203 (13.3%) due to sales volumes decreasing by 30,014 hl (14.9%),
for the year ended December 30, 2019, as compared to the prior year. Due to the elimination of the
ASBD grant program and the subsequent increase in the net Alberta beer taxes applicable to the
Corporation, the Corporation was forced to pursue major price increases in late 2018 and early 2019,
especially on low margin, high volume brands, resulting in greater than forecasted sales volume declines
year-over-year. Contract manufacturing production volumes continued to grow year-over-year and
partially mitigated the sales volume declines resulting from the Corporation’s price increases in early
2019.
Retail Revenue
Retail net revenue increased by $108 (4.8%) for the year ended December 30, 2019 compared to the
same period in 2018, primarily reflecting the Calgary retail operations performance and revenue driven
by Big Rock branded events.
Cost of Sales
Cost of sales was $30,317 for fiscal 2019, an increase of $2,381 from fiscal 2018. Cost of sales represented
71.1% of net revenue in 2019, an increase of 13.8% from 57.3% in 2018. This is due to net revenue declines
as a result of the elimination of the ASBD grant program and the addition of a lower margin business in
sourcing cans for a third party. Despite the fourth quarter of 2019 being highlighted by inventory and
cost of sales revaluations and inventory write-offs, management anticipates cost of sales as a percentage
of revenue to trend down in 2020 as a result of the AGLC beer mark-up policy amendment effective
September 13, 2019.
Selling Expenses
Selling expenses decreased for the year ended December 30, 2019 by $2,215 to $11,347, as compared
with the same period last year, due to the following:
•
•
delivery and distribution costs decreased by $257 due to lower sales volumes;
salaries and benefits costs decreased by $637, as a result of cost cutting initiatives implemented
during the second quarter of 2019; and
• marketing and sales costs decreased by $1,321 as a result of cost cutting initiatives implemented
during the second quarter of 2019.
Big Rock Brewery Inc.
Management Discussion & Analysis
Big Rock Brewery Inc. - 2020 Annual Report | 8
Page 5 of 19
General and Administrative Expenses
General and administrative expenses decreased by $239 to $5,556 for the year ended December 30, 2019,
as compared with the same period last year, primarily due to a decrease in salaries and wages of $643
and banking fees of $60, offset by restructuring charges of $476.
General and administrative expenses were 13.0% of net revenue in fiscal 2019, versus 11.9% in fiscal 2018
as a result of the significant impact of the AGLC beer mark-up increase in Alberta through much of 2019.
Finance Expenses
Finance expenses increased in fiscal 2019 by $74 to $401, relative to fiscal 2018, due to servicing of the
license obligation of the Fireweed Transaction (as defined herein) with Fireweed Brewing Corp.
(“Fireweed”) and an increase in the Corporation’s total debt outstanding.
Depreciation and Amortization
Depreciation and amortization expenses were $533 in fiscal 2019, versus $524 in fiscal 2018. The increase
in depreciation and amortization in 2019 is primarily related to the acquisition of certain Fireweed assets
in the fourth quarter of 2018.
Other Income
Other income was $713 in fiscal 2019, compared to an expense of $18 in fiscal 2018, due to a one-time
gain from the reduction of the Fireweed license obligation as a result of the impaired receivable and
penalty settlement. Refer to Cash Flows from Financing Activities for further detail.
Income Taxes
Current income tax expense of $90 and a deferred tax recovery of $1,956 was recorded for the year
ended December 30, 2019. The deferred income tax provision differs from the statutory rate of 26.57%
(2018 – 27.07%) due to permanent differences between the carrying amounts of assets and liabilities for
accounting purposes and the tax basis, as well as the effect of non-deductible amounts.
Big Rock Brewery Inc.
Management Discussion & Analysis
Page 6 of 19
Big Rock Brewery Inc. - 2020 Annual Report | 9
FINANCIAL CONDITION
The following chart highlights significant changes in the Consolidated Statements of Financial Position
from December 30, 2018 to December 30, 2019:
($000, unless otherwise stated)
Accounts receivable
Inventories
Increase/
(Decrease)
(1,739)
(1,241)
Primary factors explaining change
Decrease due to grants receivable and other customer
amounts
Decrease in finished goods due to timing of production
schedule, seasonality and revaluation
Prepaid expenses & deposits
(53)
Decrease in community sponsorship due to timing of planned
events
Current income taxes
(176)
Decrease due to reduction in expected taxable income
Property, plant and equipment
(2,290)
Decrease due to depreciation offset by new plant
additions
Intangible assets
Bank indebtedness
(87)
Decrease due to amortization of intangible assets
1,369
Increase in the combined balances of the Operating Facility
balance and outstanding cheques
Accounts payable & accrued liabilities
(1,633)
Share-based payments
(130)
Decrease consistent with the decrease in inventories related
to seasonality
New long term incentive grants offset by decrease in share
price and former employee forfeiture of share appreciation
rights
Long term debt & finance lease
(729)
Net repayment of term loans and finance leases
License obligation
Lease incentive
(1,025)
Net repayment of license obligation and settlement of BC
Liquor Distribution Branch/Fireweed receivable amounts
27
Amortization of lease incentive
Deferred income taxes
(1,956)
Tax effect of changes in temporary differences
LIQUIDITY AND CAPITAL RESOURCES
Capitalization
As at December 30,
($000, unless otherwise stated)
Cash
Total debt(2)
Net debt(1)
Shareholders’ equity:
Shareholders’ capital
Contributed surplus
Accumulated deficit
Total shareholders’ equity
Total capitalization (total debt plus
shareholders’ equity, net of cash) (1)
2019
2018
$
(354)
$
(1,902)
6,415
6,061
5,775
3,873
113,845
1,795
113,845
1,578
(79,761)
(76,839)
35,879
38,584
$
41,940
$
42,457
Net debt to capitalization ratio (1)
14.5%
9.1%
(1)
(2)
See “Non-GAAP Measures”.
Includes bank indebtedness, long term debt, and obligations under finance leases.
Big Rock Brewery Inc.
Management Discussion & Analysis
Big Rock Brewery Inc. - 2020 Annual Report | 10
Page 7 of 19
Capital Strategy
The Corporation defines its capital to include common shares of the Corporation ("Common Shares") plus
short-term and long-term debt and finance leases, less cash balances. There are no externally imposed
capital requirements on the Corporation. The Corporation’s objectives are to safeguard the Corporation’s
ability to continue as a going concern, to support the Corporation’s normal operating requirements and
to maintain a flexible capital structure which optimizes the costs of capital at an acceptable risk. This
allows management to maximize the profitability of its existing assets, create long-term value and
enhance returns for its shareholders.
The Corporation manages its capital structure through prudent levels of borrowing, cash-flow forecasting,
and working capital management. Adjustments are made by considering changes in economic conditions
and the risk characteristics of the underlying assets. To maintain or adjust the Corporation’s capital
structure, Big Rock may issue new shares, issue or renegotiate its debt, acquire or dispose of assets or
adjust the amount of cash and cash equivalents. Capital requirements of the Corporation are managed
by the preparation of an annual expenditure budget which is approved by the board of directors of Big
Rock (the “Board of Directors”) and monitored on a regular basis by management. The budget is updated
as necessary depending on numerous factors, including capital deployment, results from operations,
general industry conditions and government policy changes.
The Corporation had a positive working capital position of $419 at December 30, 2019, compared to
$4,557 at December 30, 2018.
As at December 30, 2019, the Corporation had total current assets and total current liabilities of $6,597
and $6,178, respectively, compared to $11,178 and $6,621, respectively, as at December 30, 2018. The
decrease in current assets can be attributed to a decrease in the cash balances as a result of the
significant decrease in the Corporation's margins for much of 2019 due to the AGLC beer mark-up increase
in addition to the settlement of the Fireweed receivable balances. The increase in current liabilities can
be attributed to an increase in the Corporation’s bank indebtedness.
The Corporation may issue new Common Shares, debt or other securities, acquire or dispose of assets or
adjust the amount of cash and cash equivalents to maintain or adjust its capital structure. Big Rock
management prepares annual expenditure budgets, which are approved by the Board of Directors, to
facilitate management of its capital requirements. These budgets are updated as necessary depending
on numerous factors, including capital deployment, results from operations, general industry conditions,
and government policy changes.
Additionally, the Corporation monitors its capital using ratios of (i) net debt (debt less cash) to EBITDA
and (ii) EBITDA to interest, debt repayments and dividends. Net debt to EBITDA is calculated by dividing
net debt by EBITDA. EBITDA to interest, debt repayments and dividends is calculated by dividing EBITDA
by the combined interest, debt repayments and dividend amounts. These capital management policies,
which remain unchanged from prior periods, provide Big Rock with access to capital at a reasonable cost.
The calculation of EBITDA is a non-GAAP measure, whose nearest GAAP measure is net income, or net
loss as applicable, with the reconciliation between the two as follows:
($000, except volumes)
Net income (loss)
Addback:
Interest
Taxes
Depreciation and amortization
EBITDA(1)
(1)
Non-GAAP measure. See “Non-GAAP Measures”.
Year ended December 30
2019
2018
Change
$
(2,922)
$
360
$
(3,282)
401
(1,866)
3,325
327
262
3,201
74
(2,128)
124
$
(1,062)
$
4,150
$
(5,212)
Big Rock Brewery Inc.
Management Discussion & Analysis
Big Rock Brewery Inc. - 2020 Annual Report | 11
Page 8 of 19
Cash Flow from Operating Activities
Cash used in operating activities for the year ended December 30, 2019 totalled $1,218, a decrease of
$5,826 compared to the prior year. The decrease is primarily due to the elimination of the ASBD grant
program in Alberta.
Cash Flow from Financing Activities
Cash provided by financing activities for the year ended December 30, 2019 increased by $1,276
compared to 2018, as the Corporation increased bank indebtedness which includes outstanding cheques.
The Corporation has a $5 million revolving operating loan facility (the “Operating Facility”) and a $6
million 5-year revolving term loan facility (the “Term Facility”). The Operating Facility is available for
general operating purposes and funding capital expenditure requirements. The Term Facility is available
to fund capital expenditures. Advances under both credit facilities may be made by way of Canadian
prime rate loans and letters of credit. Interest is payable for prime-based loans under the Operating
Facility at the financial institution’s prime rate plus 0.75 percent and for the Term Facility at the
financial institution’s prime rate plus 1.5 percent. Fees for letters of credit are at 2.5 percent with a
minimum fee payable.
The facilities impose a number of positive and negative covenants on Big Rock, including the maintenance
of certain financial covenants which are tested at each reporting date. They include the maintenance of
a rolling 12-month fixed charge ratio which is required to be a minimum of 1.1 to 1, calculated as the
rolling 12-month EBITDA, less an amount for maintenance capital compared to the rolling 12-months
Fixed Charges. In addition, Big Rock’s borrowings cannot exceed a borrowing base which is determined
by the fair value of the Corporation’s assets. On August 1, 2019, Big Rock’s lender waived the financial
covenants under its credit facilities until and including June 30, 2020. Should the Corporation not be in
compliance with its debt covenants at September 30, 2020, the Corporation’s lender shall have the right
to terminate the Corporation’s credit facilities and require the Corporation to fulfil its outstanding debt
balances immediately, provided an extension to the debt covenants waiver is not received. The
Corporation anticipates it will be in compliance with its debt covenants at September 30, 2020.
On July 16, 2019, Big Rock’s total facilities were reconfirmed by its lender at $11 million, with the
maturity dates being extended to March 23, 2021 with an option for extension.
As at December 30, 2019, bank indebtedness was $1,532 (2018 - $163), of which $870 (2018 - $nil) was
outstanding on the operating loan facility.
As at December 30,
Term debt
Debt issue costs
Current portion
Long term debt
2019
2018
$
3,385
$
3,778
(3)
3,382
(447)
$
2,935
$
(13)
3,765
(409)
3,356
On October 18, 2018, the Corporation closed an asset purchase and licensing transaction with Fireweed
(the "Fireweed Transaction"). As part of the license agreement Big Rock entered into with Fireweed,
the Corporation is required to pay Fireweed a fee calculated based on the Corporation's sales volumes of
Fireweed trademarked products, on a monthly basis, with a maturity date of December 31, 2024, with
an obligation to purchase the trademarks at a pre-determined price, net of all license fees paid up until
the maturity date.
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Management Discussion & Analysis
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Big Rock Brewery Inc. - 2020 Annual Report | 12
As at December 30,
License obligation
Gain on liability modification
Current portion
License obligation
2019
2018
$
1,705
$
1,720
(1,010)
695
(185)
$
510
$
—
1,720
(138)
1,582
On September 12, 2019, the Corporation and Fireweed reached a letter agreement (the “Letter
Agreement”) with respect to payments that were incorrectly deposited into Fireweed’s bank account,
relating to the sale of Rock Creek and Duke cider products, by the BC Liquor Distribution Branch. The
Letter Agreement calls for the settlement of the outstanding receivable of $457, recovery of legal fees
of $30 and penalty interest of $609 (term conterminous with the expiry of the license obligation) to be
applied against the license obligation as at September 30, 2019. As a result, the Corporation recorded a
net gain of $550.
On January 25, 2017, Big Rock converted a $2.5 million finance facility to a sale and leaseback
arrangement. The lease agreement matures after a term of five years with a fixed interest rate of 5.42%.
Lease repayments are fixed, and no arrangements have been entered for contingent rental payments.
As at December 30,
Current portion
Long term portion
Total finance lease
2019
2018
$
$
367
$
1,134
1,501
$
347
1,500
1,847
As of December 30, 2019, the net carrying amount of the leased assets is $2,075 (2018 – $2,206). The
depreciation of the assets recorded under the finance lease is included in the cost of sales on the
Consolidated Statements of Comprehensive Loss. The obligation under finance lease is secured by the
lessor’s rights over the leased assets.
Cash Flow from Investing Activities
During the year ended December 30, 2019, a total of $953 was spent on capital expenditures, compared
to $2,361 for the same periods in 2018, primarily attributable to the installation of the assets acquired
as part of the Fireweed Transaction in 2018, maintenance capital expenditures and expenditures related
to business system enhancements.
Commitments and Contractual Obligations
Big Rock has entered into various commitments for expenditures covering utilities, raw materials,
marketing initiatives and leasing of facilities. The commitments, for the next five years are as follows:
2020
2021
2022
2023
2024
thereafter
Utilities contracts
$
30
$
Raw material purchase commitments
2,967
Marketing sponsorships
Operating leases
Long-term debt
License obligation
Finance lease repayments
Total
30
259
281
765
458
193
387
—
244
108
775
484
202
747
—
216
-
775
511
114
—
—
216
-
555
539
—
—
—
—
—
135
909
—
—
369
758
433
185
367
$ 5,109
$
2,373 $
2,560 $
1,616
$ 1,310
$ 1,044
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Big Rock Brewery Inc. - 2020 Annual Report | 13
Big Rock has entered into operating lease agreements for storage facilities, warehouses, breweries, and
retail locations. The remaining lease terms range between four and five years. Certain leases contain
extension and renewal options. Operating lease payments of $669 (2018 - $736) were recognized as
expense in the Consolidated Statements of Comprehensive Income for the year ended December 30,
2019.
OFF BALANCE SHEET ARRANGEMENTS
Big Rock does not have any special purpose entities nor is it party to any arrangements that would be
excluded from the balance sheet, other than the operating leases summarized in Commitments and
Contractual Obligations.
SHAREHOLDERS’ CAPITAL
Big Rock is authorized to issue an unlimited number of Common Shares with no par value. The Common
Shares trade on the Toronto Stock Exchange under the symbol "BR". As at March 13, 2020, Big Rock had
the following issued and outstanding:
•
•
•
•
•
•
6,981,628 Common Shares;
439,547 time-based share appreciation rights (“SARs”);
81,000 market-performance SARs;
285,000 time-based options;
69,000 market-performance options; and
111,310 restricted share units (“RSUs”)
During fiscal 2019, the Corporation granted 111,310 RSUs and 118,260 SARs to directors, officers,
employees and consultants of the Corporation.
Under the RSU Plan (the “RSU Plan”), the Board of Directors may issue a number of RSUs to directors,
officers, employees and consultants of the Corporation. The RSU Plan entitles grantees under the plan
to receive Common Shares or the cash equivalent. The determination of settling the payout amount in
Common Shares or the cash equivalent is at the option of the Board of Directors. RSUs vest over a three
year period, with one-third vesting on each of the first, second and third anniversary from the date of
grant. RSUs are forfeited if the grantee leaves the Corporation before the vesting date.
The Board of Directors may issue an unlimited number of SARs under the SARS Plan (the “SARs Plan”).
SARs granted under the SARs Plan are exercisable for a period of up to five years from date of grant, at
an exercise price that is equal to the weighted average price at which the Common Shares have traded
during the five trading days immediately preceding the date of grant. The exercise of SARs is settled in
cash.
Big Rock has granted stock options to certain officers and directors of the Corporation pursuant to the
share option plan (the "Share Option Plan"). Options granted under the Share Option Plan are exercisable
for a period of up to five years from date of grant, at an exercise price that is equal to the weighted
average price at which the Common Shares have traded during the five trading days immediately
preceding the date of grant.
See Notes 20 and 22 to the Consolidated Financial Statements for more detailed information.
RISKS RELATED TO THE BUSINESS AND INDUSTRY
Big Rock operates in an environment that is both highly competitive and subject to significant government
regulation. Due to the ongoing shifting effects of competition and seasonality of the business, the ability
to predict future sales and profitability with any degree of certainty is limited. It is also difficult to
anticipate changes in government regulation and legislation and the impact such changes might have on
the Corporation’s operations or financial results.
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Management Discussion & Analysis
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Premium beers from other craft breweries are continuously entering the market and the large national
and multi-national brewers have products that compete directly with craft beers. In addition, there has
been an increased number of imports and new alcoholic beverage offerings being sold in the same
markets where Big Rock competes for business. Alberta, the Corporation’s primary market, has continued
to see a strong trend towards the discount beer segment due to the ongoing economic challenges Alberta
faces. Alberta was also the only province in 2018 to see a negative trend in retail pricing.
With the vast choice of craft brands now available, the advertising initiatives of craft divisions of the
major breweries and the growth in the RTD market, it is likely that competitive pressures on price will
continue.
Tax Risk
Big Rock requires various permits, licenses, and approvals from several government agencies to operate
in its market areas. In Alberta, Big Rock’s largest market, the AGLC provides the necessary licensing
approvals. Other licenses have been obtained from various other government authorities. Management
believes that Big Rock is in compliance with all licenses, permits, and approvals.
Each provincial authority has its own tax or “mark-up” structure by which fees are levied on brewers’
sales within their jurisdictions. These regulations may be changed from time to time, which may
positively or negatively impact Big Rock’s profitability.
The beer tax structure in Alberta has changed six times in the last six years, contributing to market
uncertainty and has impacted Big Rock’s financial results in a corresponding manner. In particular,
changes announced by the Government of Alberta in July 2016 replaced the former graduated tax rate
structure with a flat tax rate of $1.25 per litre and a grant program for Alberta’s small breweries (ASBD).
In June 2018, a trade review panel ordered that the Government of Alberta’s ABSD grant program must
be repealed or revised within six months, as it was found to put beer producers from other provinces at
a competitive disadvantage in the Alberta market. On November 26, 2018, the Government of Alberta
announced the cancellation of the ASBD grant program, effective December 16, 2018, and a graduated
net beer tax framework for Alberta producers of less than 50,000 hectolitres per year. This change
imposed a significant tax increase on Big Rock’s sales volumes through much of 2019.
On August 21, 2019, the Government of Alberta and the AGLC announced amendments to the beer mark-
up structure to include breweries with annual world-wide production of less than 400,000 hectolitres,
such as Big Rock, by implementing a graduated mark-up that extends to $0.80 per litre. Effective
September 13, 2019, the Corporation's mark-up on Alberta beer sales was reduced to $0.64 per litre from
$1.25 per litre.
As Alberta is the Corporation’s predominant market, future changes to this mark-up rate structure could
have a significant impact on the Corporation’s financial results. The Corporation will continue to be
proactive with the Government of Alberta and continues to evaluate its long-term business plan in order
to mitigate the risk of future mark-up rate fluctuations, in addition to evaluating mark-up rate impacts
from other areas of growth, such as RTD and cider.
Financial Risk
The Corporation’s principal financial instruments are outstanding amounts drawn from its credit
facilities, which, after cash flow from operations, are its main source of financing. Other financial assets
and liabilities arising directly from its operations and corporate activities include cash, accounts
receivable, bank indebtedness, accounts payable, current taxes payable or receivable and long-term
debt. The primary risks arising from the Corporation’s financial instruments are foreign exchange risk,
interest rate risk, credit risk, liquidity risk and commodity price risk, each of which are discussed below.
Management manages and monitors these exposures to ensure appropriate measures are implemented in
a timely and effective manner.
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Management Discussion & Analysis
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Big Rock Brewery Inc. - 2020 Annual Report | 15
Foreign Exchange Risk
The Corporation currently transacts with only a few foreign suppliers and thus has limited exposure to
risk due to variations in foreign exchange rates. The Corporation has not entered into any derivative
instruments to manage foreign exchange fluctuations; however, management monitors the Corporation’s
foreign exchange exposure. The Corporation does not have any significant foreign currency denominated
monetary liabilities.
Interest Rate Risk
Big Rock is exposed to interest rate risk on the variable rate of interest incurred on the amounts due
under operating and credit facilities and on interest earned on bank deposits. Cash flow required to
service the interest on these facilities will fluctuate based on changes to market rates.
The Corporation has not entered into any derivative instruments to manage interest rate fluctuations;
however, management monitors the Corporation’s interest rate exposure and given the relatively low
expected rate of change in prime interest rates believes the risk is immaterial. The Corporation evaluates
the policies surrounding interest rates on an as-needed basis and is confident that this policy is sufficient
based on current economic conditions, combined with the minimal amount of debt required by the
Corporation. The weighted average interest rate for the year ended December 30, 2019 was 5.67% (2018
– 4.58%).
Credit Risk
Credit risk is the risk that the counterparty to a financial asset will default, resulting in the Corporation
incurring an economic loss. Big Rock has a concentration of credit risk as the majority of its accounts
receivable are from provincial liquor boards, which are governed under provincially regulated industry
sale and payment terms. The Corporation is not exposed to significant credit risk as payment in full is
typically collected by provincial liquor boards at the time of sale and receivables are with government
agencies. While much of Big Rock’s accounts receivable are from provincial government liquor
authorities, the timing of receipts of large balances may vary significantly from period to period.
The majority of product sold outside of Canada, which is included in GST and other receivables, is done
so on a ‘Cash on Delivery’ basis with no credit risk.
Liquidity Risk
Big Rock’s principal sources of liquidity are its cash flows from operations and existing or new credit
facilities. Liquidity risk is mitigated by maintaining banking facilities, continuously monitoring forecast
and actual cash flows and, if necessary, adjusting levels of dividends to shareholders and capital spending
to maintain liquidity. Management closely monitors the liquidity position of the Corporation and expects
to have adequate sources of funding to finance the Corporation’s operations.
Commodity Price Risk
The Corporation is exposed to commodity price risk in the areas of utilities (primarily electricity and
natural gas), malted barley, water, glass and aluminium, where fluctuations in the market price or
availability of these items could impact Big Rock’s cash flow, profitability and production. To minimize
the impact of this risk, the Corporation enters into contracts which secure supply and set pricing to
manage Big Rock’s exposure to pricing fluctuations.
Big Rock’s profitability depends on the selling price of its products to provincial liquor boards, which set
minimum price thresholds. Although prices are otherwise controlled by the Corporation, they are subject
to such factors as regional supply and demand, and to a lesser extent inflation and general economic
conditions. As beer and cider sales are the majority source of revenue for the Corporation, a 5% increase
or decrease in these prices will result in a corresponding increase or decrease in revenue.
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Management Discussion & Analysis
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Page 13 of 19
For a more detailed discussion of risk factors that could materially affect Big Rock’s results of operations
and financial condition please refer to the Risk Factors section of the Corporation’s Annual Information
Form dated March 13, 2020 that is available on www.sedar.com.
SIGNIFICANT FOURTH QUARTER EVENTS
During the fourth quarter of fiscal 2019, the Corporation had net revenues of $9,539, compared to
$11,991 in the fourth quarter of fiscal 2018, a decrease of $2,452. The decrease in year-over-year net
revenues was primarily due to a 64.3% decline in private label production volumes. The percent decline
year-over-year was potentiated due to strategic pricing initiatives taken in the first half of December
2018 while the ASBD grant program remained intact that resulted in a major spike in private label sales
volumes.
Cost of sales increased by $350 to $7,511 in the fourth quarter of fiscal 2019, from $7,161 in the fourth
quarter of fiscal 2018, due to inventory clean-up initiatives and production driven cost accounting
adjustments, which totalled $365 for the fourth quarter of fiscal 2019. Cost of sales as percentage of net
revenues increased to 78.7% in the fourth quarter of fiscal 2019, from 59.7% in the fourth quarter of
fiscal 2018. With inventory issues resolved and a focus on production schedule and processes,
management believes gross profit margins will revert back to pre-2019 historical levels in 2020.
Selling expenses decreased by $781 to $2,334 in the fourth quarter of fiscal 2019, from $3,115 in the
comparable period last year, due to cost cutting measures and restructuring initiatives in the second
quarter of 2019. Selling expenses as a percentage of net revenues decreased to 24.5% in the fourth
quarter of fiscal 2019, from 26.0% in the fourth quarter of fiscal 2018.
General and administrative expenses decreased by $156 to $1,179 in the fourth quarter of fiscal 2019,
from $1,335 in the fourth quarter of fiscal 2018, primarily due to a decrease in salaries and benefits costs
and other administrative expenses due to cost cutting measures and restructuring initiatives in the
second quarter of 2019 offset by the capitalization of professional fees related to the closing of the
Fireweed Transaction in the fourth quarter of fiscal 2018. General and administrative expenses as a
percentage of net revenues increased to 12.4% in the fourth quarter of fiscal 2019, from 11.1% in the
fourth quarter of fiscal 2018.
Finance expenses were $90 in the fourth quarter of fiscal 2019, compared to $71 in the fourth quarter
of fiscal 2018, primarily due to an increase in the Operating Facility cash draw compared to the same
period in 2018.
Depreciation expenses (inclusive of depreciation expense included in cost of sales) decreased by $16 to
$833 in the fourth quarter of fiscal 2019, compared to $849 in the fourth quarter of fiscal 2018, primarily
due to an increase in fully depreciated property, plant and equipment compared to the same period in
2018.
Income tax expenses decreased by $506 to a recovery of $272 in the fourth quarter of fiscal 2019, from
an expense of $234 in the fourth quarter of fiscal 2018, due primarily to a deferred income tax expense
recovery.
OUTLOOK & STRATEGY
The Corporation’s financial results for the three months and the year ended December 30, 2019 declined
significantly as compared to the same period in 2018, reflecting the elimination of the ASBD grant
program and the resulting increase in the net Alberta beer taxes for the Corporation, partially offset by
price increases and cost cutting initiatives, which in turn resulted in greater sales volume declines than
originally anticipated. However, given the reduction in the Corporation’s AGLC beer mark-up to $0.64
per litre (from $1.25 per litre) in September 2019, along with ongoing sales, production planning,
Big Rock Brewery Inc.
Management Discussion & Analysis
Big Rock Brewery Inc. - 2020 Annual Report | 17
Page 14 of 19
inventory and business systems process projects and improvements, management believes the business
is well positioned to re-establish the momentum it carried in 2018.
In 2020, the Corporation will be focused on the following:
Maximizing Capacity Utilization of Assets
The Corporation will continue to pursue opportunities to maximize capacity utilization of its assets,
especially volume growth opportunities aligned with seasonality, whether through organic growth of
existing brands, introduction of new brands, license agreements, mergers and acquisitions and/or
contract manufacturing agreements. Given the Corporation’s footprint, especially with assets in Alberta,
BC and Ontario, management continues to evaluate new growth opportunities that will result in fixed
cost absorption.
The Corporation will look to expand its cellar capacity in Calgary as new business is pursued, as this is
the most significant bottleneck the Corporation faces in pursuing growth. Outside of cellar capacity, the
Corporation is well positioned for significant growth given its brewing capacity, packaging and
warehousing capacity, distribution network, sales force and back office support.
Government Relations
Given the then Alberta Government's elimination of the ASBD grant at the end of 2018, 2019 was a setback
year for the Corporation. However, due to the September 2019 amendment of the AGLC beer mark-up
policy, the Corporation believes it can improve its competitiveness in the Alberta beer market.
Although a restrictive regulatory policy remains in Alberta for RTD, the highest global growth category
in beverage alcohol, management is hopeful the AGLC will alleviate such restrictive policy very soon and
allow the Corporation to participate in this category in a meaningful way. The Corporation will continue
to pursue government relations efforts to allow Big Rock to better participate in certain high growth
categories and pursue investment and growth within the province.
Contract Manufacturing and Export
The Corporation continues to seek new contract manufacturing opportunities, both nationally and
internationally, to mitigate some of the sales volume declines the Corporation experienced in the year
ended December 30, 2019.
The Corporation is also currently exploring export opportunities to bring its brands and products to
foreign markets profitably.
Organic Growth
The Corporation is currently evaluating and re-developing its sales and pricing processes in existing
markets to mitigate sale volume declines experienced in recent years.
Cost Reductions
Cost reductions and process improvements are an ongoing initiative implemented and supported by the
Corporation’s management team.
CRITICAL ACCOUNTING ESTIMATES & JUDGEMENTS
There have been no changes in Big Rock’s critical accounting estimates in the three months and year
ended December 30, 2019. Further information on the Corporation’s critical accounting policies and
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Management Discussion & Analysis
Big Rock Brewery Inc. - 2020 Annual Report | 18
Page 15 of 19
estimates can be found in the notes to the audited annual financial statements and MD&A for the year
ended December 30, 2019.
FUTURE ACCOUNTING PRONOUNCEMENTS
The Corporation’s consolidated financial statements as at and for the years ended December 30, 2019
and 2018 have been prepared using the IFRS standards and interpretations currently issued. Accounting
policies currently adopted under IFRS are subject to change as a result of new standards being issued
with an effective date of December 30, 2019 or later. A change in an accounting policy used may result
in material changes to Big Rock’s reported financial position, results of operations and cash flows.
IFRS 16 Leases (“IFRS 16”) was issued in January 2016 and replaces IAS 17 Leases. IFRS 16 sets out the
principles for the recognition, measurement, presentation and disclosure of leases and requires lessees
to account for all leases under a single on-balance sheet model similar to the accounting for finance
leases under IAS 17.
IFRS 16 is effective for annual periods beginning on or after January 1, 2019. Big Rock will adopt IFRS 16
in its financial statements for the fiscal year beginning December 31, 2019 using the modified
retrospective approach which does not require restatement of prior period financial information as it
recognizes the cumulative effect of IFRS 16 as an adjustment to opening retained earnings and applies
the standard prospectively.
Big Rock will elect to use the following exemptions proposed by the new standard:
i)
Leases with a remaining lease term of less than twelve months as at December 31, 2019 will be
classified as short-term leases; and
ii) Leases of low dollar value will continue to be expensed as incurred.
Big Rock will recognize lease liabilities measured at the present value of the remaining lease payments,
discounted using the incremental borrowing rate as at December 31, 2019. The associated right of use
(“ROU”) assets will be measured at the lease liability amount on December 31, 2019 resulting in no
adjustment to the opening balance of retained earnings.
Effective December 31, 2019, Big Rock will recognize ROU assets and lease liabilities for leases of
manufacturing and retail premises and leases of vehicles. Big Rock is in the process of performing an
impact assessment of adoption of IFRS 16 on its opening Statement of Financial Position. The impact of
IFRS adoption to ROU assets and lease liabilities is expected to be material to the Statement of Financial
Position.
DISCLOSURE CONTROLS AND PROCEDURES
The Corporation’s management under the supervision of, and with the participation of, the President &
Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) of the Corporation, have designed
and evaluated the effectiveness and operation of its disclosure controls and procedures, as defined under
National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (“NI 52-
109”). Disclosure controls and procedures are designed to provide reasonable assurance that information
required to be disclosed in reports filed with Canadian securities regulatory authorities is recorded,
processed, summarized and reported in a timely fashion.
The disclosure controls and procedures are designed to ensure that information required to be disclosed
by the Corporation in such reports is then accumulated and communicated to management, including
the CEO and the CFO, as appropriate, to allow timely decisions regarding required disclosure. Due to the
inherent limitations in all control systems, an evaluation of the disclosure controls can only provide
reasonable assurance over the effectiveness of the controls. The disclosure controls are not expected to
prevent and detect all misstatements due to error or fraud. Based on the evaluation of disclosure controls
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Management Discussion & Analysis
Big Rock Brewery Inc. - 2020 Annual Report | 19
Page 16 of 19
and procedures, the CEO and CFO have concluded that the Corporation’s disclosure controls and
procedures are effective as of December 30, 2019.
INTERNAL CONTROLS OVER FINANCIAL REPORTING UPDATE
The Corporation’s management under the supervision of, and with the participation of, the CEO and CFO,
has designed and implemented internal controls over financial reporting (“ICFR”), as defined under NI
52-109. The Corporation’s management used as its framework the Internal Control—Integrated
Framework published by The Committee of Sponsoring Organizations of the Treadway Commission.
The process used involved four steps as follows: establishment of a foundation, which involved assessing
the tone at the top, the organization structure and baseline of current internal controls; design and
execution, which involved prioritizing risk, identifying controls and evaluation of control effectiveness;
assess and report, which involved summarizing and reporting on the findings; and conclusion on controls
supported by documented evidence.
The purpose of internal controls over financial reporting is to provide reasonable assurance regarding the
reliability of financial reporting and preparation of financial statements in accordance with GAAP,
focusing in particular on controls over information contained in the annual and interim financial
statements. The internal controls are not expected to prevent and detect all misstatements due to error
or fraud.
The CEO and CFO acknowledge responsibility for the design of ICFR and confirm that there were no
changes in the Corporation’s controls over financial reporting for the year ended December 30, 2019,
that have materially affected or are reasonably likely to materially affect the Corporation’s internal
control over financial reporting.
Based upon their evaluation of these controls as of December 30, 2019, the CEO and CFO have concluded
that the Corporation’s ICFR were effective as at that date. No material weaknesses existed within the
Corporation’s ICFR as of December 30, 2019. In addition, there were no material changes to Big Rock’s
internal controls over financial reporting since the most recent interim period.
NON-GAAP MEASURES
The Corporation uses certain financial measures referred to in this MD&A to quantify its results that are
not prescribed by Generally Accepted Accounting Principles. These financial measures do not have any
standardized meaning under the Corporation's Generally Accepted Accounting Principles and therefore
may not be comparable to similar measures presented by other issuers. The following terms “total
capitalization”, “net debt”, “EBITDA”, “net debt to EBITDA”, “working capital” are not recognized
measures under GAAP and may not be comparable to that reported by other companies. Total
capitalization is calculated by adding shareholders’ equity, total debt and cash balances. Net debt is
defined as total debt minus cash balances. EBITDA is calculated by adding back to net income, interest,
income taxes, depreciation and amortization. Net debt to EBITDA is calculated by dividing EBITDA by net
debt (debt less cash). Working capital is defined as current assets minus current liabilities. Management
uses these non-GAAP measures to evaluate the Corporation’s operating results. A reconciliation of EBITDA
to net income (loss), the nearest GAAP measure, is contained under “Liquidity and Capital Resources –
Capital Strategy”. A reconciliation of total capitalization to cash, total debt and total shareholders’
equity and a reconciliation of net debt to cash and total debt are provided under “Liquidity and Capital
Resources – Capitalization”.
In addition, the Corporation’s lender uses EBITDA to Fixed Charges ratio to evaluate the Corporation’s
ongoing cash generating capability and to determine the amounts and rates at which the lender is willing
to finance Big Rock. Management believes that, in addition to net income and cash flow from operating
activities, these measures are useful supplemental measures as they provide an indication of Big Rock’s
operating performance and leverage.
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Management Discussion & Analysis
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Readers are cautioned that these measures should not be construed as an alternative to net
income, cash flows from operating activities or other relevant GAAP measures as calculated under
GAAP.
FORWARD-LOOKING INFORMATION
This MD&A contains forward-looking information that reflects management’s expectations related to
expected future events, financial performance and operating results of the Corporation. Investors should
not place undue reliance on forward-looking statements as the plans, intentions or expectations upon
which they are based might not occur.
All statements, other than statements of historical fact included in the MD&A, may be forward-looking
information. Forward-looking information are not facts, but only expectations as to future events and
generally can be identified by the use of statements that include words or phrases such as, "anticipate",
"believe”, "continue", "could", "estimate", "expect", "intend", “likely” “may", "project", "predict",
“propose”, "potential", "might", "plan", "seek", "should", "targeting", "will", and similar expressions. These
statements are not guarantees of future performance and are subject to known and unknown risks,
uncertainties and other factors that may cause Big Rock’s actual results or events to differ materially
from those anticipated in such forward-looking statements.
Big Rock believes that the expectations reflected in these forward-looking statements are reasonable
but no assurance can be given that these expectations will prove to be correct and such forward-looking
statements included in this MD&A should not be unduly relied upon by investors as actual results may
vary. These statements speak only as of the date of this MD&A and are expressly qualified, in their
entirety, by this cautionary statement. This MD&A contains forward-looking statements pertaining to the
following:
• the Corporation's business plans;
• projections of the Corporation's strength and competitive position;
• anticipated changes to the RTD regulatory environment;
• the Corporation's monitoring of consumer plans and expectations regarding the developments of
new products including in the RTD space;
• expectations regarding the Corporation's evaluation of growth opportunities and plans with respect
to the same;
• expectations with regard to management's ability to maximize the profitability of its existing
assets, create long-term value and enhance returns for its shareholders;
• projections of market prices and costs;
• anticipated supply and demand of Big Rock’s products;
• the Corporation's ability to maximize capacity utilization;
• the Corporation expanding its cellar capacity;
• the Corporation's ability to offer high quality seasonal brands;
• the impact of recent changes in Alberta beer tax rate (provincial tax); and
• expectations regarding the Corporation being in compliance with its debt covenants by September
30, 2020.
With respect to forward-looking statements listed above and contained in this MD&A, Big Rock has made
assumptions regarding, among other things, the following:
• the Corporation's ongoing discussions with the Alberta Government with respect to the mark-up
and grant program will be successful in improving the mark-up and grant programs applicable to
the Corporation;
• volumes in the current fiscal year will remain constant or will increase;
• input costs for brewing and packaging materials will remain constant or will not significantly
increase or decrease;
• there will be no material change to the regulatory environment, including the net beer taxes and
grant rates, in which Big Rock operates; and
Big Rock Brewery Inc.
Management Discussion & Analysis
Page 18 of 19
Big Rock Brewery Inc. - 2020 Annual Report | 21
• there will be no supply issues with Big Rock’s vendors.
Big Rock's actual results could differ materially from those anticipated in these forward-looking
statements as a result of the risk factors set forth above and as set out under the heading “Risk Factors”
in the Corporation’s 2019 Annual Information Form dated March 13, 2020 that is available on SEDAR at
www.sedar.com. Readers are cautioned that the foregoing lists of factors are not exhaustive. The
forward-looking statements contained in this MD&A are expressly qualified by this cautionary statement.
Big Rock does not undertake any obligation to update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise, unless required by law.
Big Rock Brewery Inc.
Management Discussion & Analysis
Big Rock Brewery Inc. - 2020 Annual Report | 22
Page 19 of 19
CONSOLIDATED FINANCIAL STATEMENTS
March 13, 2020
March 13, 2020
March 13, 2020
Management’s Responsibility for Financial Reporting
Management’s Responsibility for Financial Reporting
Management’s Responsibility for Financial Reporting
The accompanying consolidated financial statements of Big Rock Brewery Inc. (“Big Rock”) and
all information in Management’s Discussion and Analysis are the responsibility of management and
have been approved by the Board of Directors. The consolidated financial statements have been
prepared in accordance with International Financial Reporting Standards and, where appropriate,
reflect management’s best estimates and judgments. Management is responsible for the
accuracy, integrity, and objectivity of the consolidated financial statements within reasonable
limits of materiality and has ensured consistency with the financial information presented
elsewhere in Management’s Discussion and Analysis.
The accompanying consolidated financial statements of Big Rock Brewery Inc. (“Big Rock”) and
all information in Management’s Discussion and Analysis are the responsibility of management and
have been approved by the Board of Directors. The consolidated financial statements have been
prepared in accordance with International Financial Reporting Standards and, where appropriate,
reflect management’s best estimates and judgments. Management is responsible for the
accuracy, integrity, and objectivity of the consolidated financial statements within reasonable
limits of materiality and has ensured consistency with the financial information presented
elsewhere in Management’s Discussion and Analysis.
The accompanying consolidated financial statements of Big Rock Brewery Inc. (“Big Rock”) and
all information in Management’s Discussion and Analysis are the responsibility of management and
have been approved by the Board of Directors. The consolidated financial statements have been
prepared in accordance with International Financial Reporting Standards and, where appropriate,
reflect management’s best estimates and judgments. Management is responsible for the
accuracy, integrity, and objectivity of the consolidated financial statements within reasonable
limits of materiality and has ensured consistency with the financial information presented
elsewhere in Management’s Discussion and Analysis.
To assist management in the discharge of these responsibilities, Big Rock has established an
To assist management in the discharge of these responsibilities, Big Rock has established an
To assist management in the discharge of these responsibilities, Big Rock has established an
organizational structure that provides appropriate delegation of authority, division of
organizational structure that provides appropriate delegation of authority, division of
organizational structure that provides appropriate delegation of authority, division of
responsibilities, and selection and training of properly qualified personnel. Management is also
responsibilities, and selection and training of properly qualified personnel. Management is also
responsibilities, and selection and training of properly qualified personnel. Management is also
responsible for the development of internal controls over the financial reporting process.
responsible for the development of internal controls over the financial reporting process.
responsible for the development of internal controls over the financial reporting process.
The Board of Directors is assisted in exercising its responsibilities through the Audit Committee
of the Board of Directors, which is composed entirely of independent directors. The Audit
Committee meets regularly with management and the independent auditors to satisfy itself that
management’s responsibilities are properly discharged and to review the consolidated financial
statements. The Audit Committee reports its findings to the Board of Directors for consideration
in approving the consolidated financial statements for presentation to the shareholders. The
external auditors have direct access to the Audit Committee of the Board of Directors.
The Board of Directors is assisted in exercising its responsibilities through the Audit Committee
The Board of Directors is assisted in exercising its responsibilities through the Audit Committee
of the Board of Directors, which is composed entirely of independent directors. The Audit
of the Board of Directors, which is composed entirely of independent directors. The Audit
Committee meets regularly with management and the independent auditors to satisfy itself that
Committee meets regularly with management and the independent auditors to satisfy itself that
management’s responsibilities are properly discharged and to review the consolidated financial
management’s responsibilities are properly discharged and to review the consolidated financial
statements. The Audit Committee reports its findings to the Board of Directors for consideration
statements. The Audit Committee reports its findings to the Board of Directors for consideration
in approving the consolidated financial statements for presentation to the shareholders. The
in approving the consolidated financial statements for presentation to the shareholders. The
external auditors have direct access to the Audit Committee of the Board of Directors.
external auditors have direct access to the Audit Committee of the Board of Directors.
The consolidated financial statements have been audited independently by Ernst & Young LLP on
behalf of the shareholders in accordance with generally accepted auditing standards. Their report
outlines the nature of their audits and expresses their opinion on the consolidated financial
statements.
The consolidated financial statements have been audited independently by Ernst & Young LLP on
behalf of the shareholders in accordance with generally accepted auditing standards. Their report
outlines the nature of their audits and expresses their opinion on the consolidated financial
statements.
The consolidated financial statements have been audited independently by Ernst & Young LLP on
behalf of the shareholders in accordance with generally accepted auditing standards. Their report
outlines the nature of their audits and expresses their opinion on the consolidated financial
statements.
Wayne Arsenault
President & Chief Executive Officer
Wayne Arsenault
President & Chief Executive Officer
Wayne Arsenault
President & Chief Executive Officer
Don Sewell
Chief Financial Officer
Don Sewell
Don Sewell
Chief Financial Officer
Chief Financial Officer
Big Rock Brewery Inc. - 2020 Annual Report | 24
Big Rock Brewery Inc.
Big Rock Brewery Inc.
Big Rock Brewery Inc.
Consolidated Financial Statements
Consolidated Financial Statements
Consolidated Financial Statements
Page 1 of 34
Page 1 of 34
Page 1 of 34
Calgary City Centre
2200 – 215 2nd Street SW,
Calgary, Alberta T2P 1M4
Tel: +1 403 206 5000
Fax: +1 403 290 4265
ey.com/ca
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Big Rock Brewery Inc.
Opinion
We have audited the accompanying consolidated financial statements of Big Rock Brewery Inc. (“the
Corporation”), which comprise the consolidated statements of financial position as at December 30,
2019 and 2018, and the consolidated statements of comprehensive income, changes in shareholders’
equity and cash flows for the years then ended, and notes to the consolidated financial statements,
including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Corporation as at December 30, 2019 and 2018,
and its consolidated financial performance and consolidated cash flows for the years then ended in
accordance with International Financial Reporting Standards (IFRSs).
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Consolidated Financial Statements section of our report. We are independent of the
Corporation in accordance with the ethical requirements that are relevant to our audit of the
consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
Other information
Management is responsible for the other information. The other information comprises:
• Management’s Discussion and Analysis
•
The information, other than the consolidated financial statements and our auditor’s report
thereon, in the Annual Report
Our opinion on the consolidated financial statements does not cover the other information and we do
not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information, and in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears
to be materially misstated.
We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based
on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact in this auditor’s report. We have nothing to report in
this regard.
Big Rock Brewery Inc. - 2020 Annual Report | 25
Calgary City Centre
2200 – 215 2nd Street SW,
Calgary, Alberta T2P 1M4
Tel: +1 403 206 5000
Fax: +1 403 290 4265
ey.com/ca
The Annual Report is expected to be made available to us after the date of the auditor’s report. If based
on the work we will perform on this other information, we conclude there is a material misstatement of
other information, we are required to report that fact to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial
Statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with International Financial Reporting Standards, as issued by the
International Accounting Standards Board (“IASB”), and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Corporation’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to liquidate
the Corporation or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Corporation's financial reporting
process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with Canadian generally accepted auditing
standards will always detect a material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these consolidated
financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks,
and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may
intentional omissions,
misrepresentations, or the override of internal control.
involve collusion, forgery,
•
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Corporation’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Corporation’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required
•
Big Rock Brewery Inc.
Consolidated Financial Statements
Page 3 of 34
Big Rock Brewery Inc. - 2020 Annual Report | 26
Calgary City Centre
2200 – 215 2nd Street SW,
Calgary, Alberta T2P 1M4
Tel: +1 403 206 5000
Fax: +1 403 290 4265
ey.com/ca
to draw attention in our auditor’s report to the related disclosures in the consolidated financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Corporation to cease to continue as a going concern.
Evaluate the overall presentation, structure, and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial statements
represent the underlying transactions and events in a manner that achieves fair presentation.
•
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
The engagement partner on the audit resulting in this independent auditor’s report is Ann-Marie
Brockett.
Calgary, Canada
March 12, 2020
Chartered Professional Accountants
Big Rock Brewery Inc. - 2020 Annual Report | 27
BIG ROCK BREWERY INC.
Consolidated Statements of Comprehensive Income
(In thousands of Canadian dollars, except per share amounts)
Year ended December 30
Note
2019
2018
Revenue
Net revenue
Cost of sales
Gross profit
Expenses
Selling expenses
General and administrative
Depreciation and amortization
Operating expenses
Operating (loss) income
Finance expenses
Other income
(Loss) income before income taxes
Income tax expense (recovery)
Current
Deferred
4
5
6
7
8
17
9
$
$
42,653
30,317
12,336
11,347
5,556
533
17,436
(5,100)
401
713
(4,788)
90
(1,956)
(1,866)
Net (loss) income and comprehensive (loss)
income
$
(2,922)
$
48,748
27,936
20,812
13,562
5,795
524
19,881
931
327
18
622
(71)
333
262
360
Per share amounts
Basic and diluted
10
$
(0.42)
$
0.05
See accompanying notes to the consolidated financial statements
Big Rock Brewery Inc.
Consolidated Financial Statements
Page 5 of 34
Big Rock Brewery Inc. - 2020 Annual Report | 28
BIG ROCK BREWERY INC.
Consolidated Statements of Financial Position
(In thousands of Canadian dollars)
Note
2019
2018
As at December 30
ASSETS
Current
Cash
Accounts receivable
Inventories
Prepaid expenses and deposits
Non-current
Property, plant and equipment
Intangible assets
Total assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness
Accounts payable and accrued liabilities
Current taxes payable
Long term debt - current
License obligation - current
Finance lease - current
Share-based payments
Non-current
Long term debt
License obligation
Finance lease
Lease incentive liability
Share-based payments
Deferred income taxes
EQUITY
Shareholders' capital
Contributed surplus
Accumulated deficit
11
12
13
14
16
15
9
16
17
18
22
16
17
18
19
22
9
20
21
$
354
$
1,645
4,163
435
6,597
40,876
2,309
43,185
$
49,782
$
$
1,532
$
3,049
273
447
185
367
325
6,178
2,935
510
1,134
287
23
2,836
7,725
113,845
1,795
(79,761)
35,879
Total liabilities and shareholders’ equity
$
49,782
$
Commitments and contractual obligations
28
See accompanying notes to the consolidated financial statements
On behalf of the Board of Directors:
Stephen Giblin
Director
""
""
Michael Kohut
Director
1,902
3,384
5,404
488
11,178
43,166
2,396
45,562
56,740
163
4,682
449
409
138
347
433
6,621
3,356
1,582
1,500
260
45
4,792
11,535
113,845
1,578
(76,839)
38,584
56,740
Big Rock Brewery Inc.
Consolidated Financial Statements
Page 6 of 34
Big Rock Brewery Inc. - 2020 Annual Report | 29
BIG ROCK BREWERY INC.
Consolidated Statements of Cash Flows
(In thousands of Canadian dollars)
OPERATING ACTIVITIES
Net (loss) income for the year
Items not affecting cash:
Depreciation and amortization
Gain on sale of assets
Share-based payments
Lease incentive
Amortized debt issue costs
Gain on liability modification
Deferred income tax (recovery) expense
Net change in non-cash working capital
related to operations
Cash (used in) provided by operating
activities
FINANCING ACTIVITIES
Increase in bank indebtedness
Repayment of long-term debt
Repayment of finance lease
Cash provided by (used in) financing
activities
INVESTING ACTIVITIES
Purchase of property, plant and equipment
Purchase of intangibles
Proceeds from sale of property, plant and
equipment
Cash used in investing activities
Net (decrease) increase in cash
Cash, beginning of year
Cash, end of year
Year ended December 30
Note
2019
2018
$
(2,922)
$
360
22
17
26
3,325
5
105
27
3
(1,010)
(1,956)
1,205
(1,218)
1,369
(401)
(346)
622
(777)
(176)
1
(952)
(1,548)
1,902
$
354
$
3,201
(29)
68
32
13
—
333
630
4,608
79
(403)
(330)
(654)
(2,013)
(348)
141
(2,220)
1,734
168
1,902
Supplemental cash-flow information
Interest paid
Taxes paid (recovered)
$
$
304
302
$
$
314
(226)
See accompanying notes to the consolidated financial statements
Big Rock Brewery Inc.
Consolidated Financial Statements
Page 7 of 34
Big Rock Brewery Inc. - 2020 Annual Report | 30
BIG ROCK BREWERY INC.
Consolidated Statements of Changes in Shareholders’ Equity
(In thousands of Canadian dollars)
Balance as at December 30, 2017
Share-based payments
Total comprehensive income
Note
21
22
Shareholders’
capital
Contributed
Surplus
Accumulated
deficit
Total
$
113,845
$
1,347
$ (77,199)
$ 37,993
—
—
231
—
—
360
Balance as at December 30, 2018
113,845
1,578
(76,839)
Share-based payments
22
Total comprehensive loss
—
—
217
—
—
(2,922)
231
360
38,584
217
(2,922)
Balance as at December 30, 2019
$ 113,845
$
1,795
$ (79,761)
$ 35,879
See accompanying notes to the consolidated financial statements
Big Rock Brewery Inc.
Consolidated Financial Statements
Page 8 of 34
Big Rock Brewery Inc. - 2020 Annual Report | 31
BIG ROCK BREWERY INC.
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars, unless otherwise stated)
1. CORPORATE INFORMATION
Big Rock Brewery Inc. (“Big Rock” or the “Corporation”) is incorporated in Canada with limited
liability under the legislation of the Province of Alberta and its shares are listed on the Toronto
Stock Exchange and trade under the symbol “BR”.
Big Rock is a regional producer of premium, all-natural craft beers and cider which are sold in six
provinces and two territories in Canada. The head office, principal address and records office of
the Corporation are located at 5555 – 76th Avenue SE, Calgary, Alberta, T2C 4L8.
These consolidated financial statements (the “Consolidated Financial Statements”) include the
accounts of Big Rock and all of its wholly owned subsidiaries. Subsidiaries are those enterprises
controlled by the Corporation. The following companies have been consolidated within the
Consolidated Financial Statements:
Subsidiary
Big Rock Brewery Inc.
Big Rock Brewery Operations Corp.
Big Rock Brewery Limited Partnership
Registered
Alberta
Alberta
Alberta
Holding
Parent
Company
100%
100%
Functional currency
Canadian dollar
Canadian dollar
Canadian dollar
Inter-company balances and transactions, and any unrealized gains or losses arising from inter-
company transactions, are eliminated in preparing the Consolidated Financial Statements.
2. BASIS OF PREPARATION
2.1 Statement of compliance
These Consolidated Financial Statements have been prepared in accordance with the
International Financial Reporting Standards (“IFRS”) issued by the International Accounting
Standards Board and Interpretations of the International Financial Reporting Interpretations
Committee.
These Consolidated Financial Statements were approved and authorized for issue by the Board of
Directors of Big Rock (the “Board of Directors”) on March 12, 2020.
2.2 Basis of presentation
These Consolidated Financial Statements have been prepared on a going concern basis, which
contemplates the realization of assets and settlement of liabilities in the normal course of
business and have been prepared on the historical cost basis, presented in Canadian dollars. All
values are rounded to the nearest thousand dollars except where otherwise indicated.
2.3 Accounting pronouncements adopted
The Corporation adopted the following accounting pronouncements effective December 31,
2018:
IFRS 2 Share–based Payments
Amendments to IFRS 2 Share–based Payments are effective for annual periods beginning on or
after January 1, 2018. The amendments provide guidance on the accounting for the effects of
vesting and non-vesting conditions on the measurement of cash-settled share-based payments;
share-based payment transactions with a net settlement feature for withholding tax obligations;
and a modification to the terms and conditions of a share-based payment that changes the
classification of the transaction from cash-settled to equity-settled. The adoption of this standard
did not have a material impact on the Consolidated Financial Statements.
Big Rock Brewery Inc.
Consolidated Financial Statements
Page 9 of 34
Big Rock Brewery Inc. - 2020 Annual Report | 32
BIG ROCK BREWERY INC.
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars, unless otherwise stated)
IFRS 9 Financial Instruments
IFRS 9 Financial Instruments has been amended, effective for annual periods beginning January
1, 2018. IFRS 9 sets out requirements for recognizing and measuring financial assets, financial
liabilities and some contracts to buy or sell non‐financial items. This standard replaces IAS 39
Financial Instruments: Recognition and Measurement. Big Rock adopted this standard effective
December 31, 2018. IFRS 9 is applied retrospectively on initial adoption and differences in the
measurement of financial instruments upon adoption of IFRS 9 are recognized as an adjustment
to opening retained earnings. Big Rock determined that there is no material impact to the
recognition and measurement of financial assets and liabilities held and no adjustment to retained
earnings was made.
IFRS 9 introduces the requirement to classify and measure financial assets based on their
contractual cash flow characteristics and the business model under which the Corporation holds
the financial asset. All financial assets and financial liabilities, including derivatives, are
recognized at fair value on the Consolidated Statements of Financial Position when the
Corporation becomes party to the contractual provisions of a financial instrument or non-financial
derivative contract. Financial assets must be classified and measured at either amortized cost,
fair value through profit or loss ("FVTPL"), or fair value through other comprehensive income
("FVTOCI").
IFRS 9 largely retains the existing requirements in IAS 39 for the classification and measurement
of financial liabilities. However, it eliminates the previous IAS 39 categories for financial assets
of held to maturity, loans and receivables and available for sale. The adoption of IFRS 9 has not
had a significant effect on Big Rock’s accounting results related to classification of financial assets
and liabilities.
The following table shows the changes in the measurement models under IAS 39 and the new
models under IFRS 9:
Financial Instrument
Cash and cash equivalents
Accounts receivable
IFRS 9
Amortized cost
Amortized cost
IAS 39
Loans and receivables
Loans and receivables
Accounts payable and accrued liabilities
Amortized cost
Financial liabilities measured at amortized cost
Finance lease
Long term debt
License obligation
Amortized cost
Financial liabilities measured at amortized cost
Amortized cost
Financial liabilities measured at amortized cost
Amortized cost
Financial liabilities measured at amortized cost
IFRS 9 uses an ‘expected credit loss’ (“ECL”) model that replaces the ‘incurred loss’ model in IAS
39. The new impairment guidance applies to financial assets measured at amortized cost. Big
Rock’s financial assets at amortized cost includes cash and cash equivalents and trade and other
receivables. Big Rock measures potential loss exposures on trade and other receivables at an
amount equal to lifetime ECLs. At every point after the initial recognition, there is at least some
risk of default. To assess this risk, Big Rock considers quantitative and qualitative information
based on the Big Rock’s historical experience and forward ‐ looking information. Factors
considered include customer payment history, customer credit ratings, customer cash flows,
industry trends, and commodity pricing forecasts. Big Rock assumes that the credit risk on a
financial asset increases significantly the longer it is outstanding. Loss allowances for trade and
other receivables are included in general and administrative expenses. The implementation of
this methodology did not have a material impact on the allowance for doubtful accounts.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 Revenue from Contracts with Customers has been issued and is effective for annual
periods beginning on or after January 1, 2018. The standard contains a single model that applies
to revenue earned from contracts with customers and two approaches to recognizing revenue: at
a point in time and over time. The model establishes a five-step analysis of transactions to
revenues earned from a contract with a customer (with limited exceptions), regardless of the
Big Rock Brewery Inc.
Consolidated Financial Statements
Page 10 of 34
Big Rock Brewery Inc. - 2020 Annual Report | 33
BIG ROCK BREWERY INC.
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars, unless otherwise stated)
type of revenue transaction or the industry. The standard also provides a model for the
recognition and measurement of sales of certain non-financial assets such as disposals of property,
plant, and equipment, but does not apply to insurance contracts, financial instruments or lease
contracts, which falls in the scope of other IFRS standards.
Big Rock adopted this guidance and related amendments as of December 31, 2018, applying the
modified retrospective approach to all contracts. Under this approach, the cumulative effect of
initially applying IFRS 15 must be recognized as an adjustment to the opening deficit at the date
of initial adoption and comparatives are not restated. Based on management’s comprehensive
review of the standard, including evaluation of the five-step approach outlined within the
standard, management has concluded that the adoption of IFRS 15 did not have a significant
impact to the recording of revenues.
However, the adoption of the standard resulted in a change in the presentation of certain cash
payments made to customers as it relates to Committed Marketing Fund (“CMF”) payments. CMF
payments were previously recorded as selling expenses in the Consolidated Statements of
Comprehensive Income (Loss). The adoption of the standard resulted in a reduction of revenues
and selling expenses by $235 to $42,653 and $11,347 in the year of adoption. Management also
evaluated the impact of the adoption of the new standard on other revenue generating activities
such as contract manufacturing and licensing arrangements and concluded that there were no
changes required.
On the implementation date, the cumulative effect of adopting the new standards to the opening
deficit was $nil.
2.4
Standards issued but not yet adopted
IFRS 16 Leases (“IFRS 16”) was issued in January 2016 and replaces IAS 17 Leases. IFRS 16 sets
out the principles for the recognition, measurement, presentation and disclosure of leases and
requires lessees to account for all leases under a single on-balance sheet model similar to the
accounting for finance leases under IAS 17.
IFRS 16 is effective for annual periods beginning on or after January 1, 2019. Big Rock will adopt
IFRS 16 in its Consolidated Financial Statements for the fiscal year beginning December 31, 2019
using the modified retrospective approach which does not require restatement of prior period
financial information as it recognizes the cumulative effect of IFRS 16 as an adjustment to opening
retained earnings and applies the standard prospectively.
Big Rock will elect to use the following exemptions proposed by the new standard:
i)
ii)
Leases with a remaining lease term of less than twelve months as at December
31, 2019 will be classified as short-term leases; and
Leases of low dollar value will continue to be expensed as incurred.
Big Rock will recognize lease liabilities measured at the present value of the remaining lease
payments, discounted using the incremental borrowing rate as at December 31, 2019. The
associated right of use (“ROU”) assets will be measured at the lease liability amount on December
31, 2019 resulting in no adjustment to the opening balance of retained earnings.
Effective December 31, 2019, Big Rock will recognize ROU assets and lease liabilities for leases
of manufacturing and retail premises and leases of vehicles. Big Rock is in the process of
performing an impact assessment of adoption of IFRS 16 on its opening Statement of Financial
Position. The impact of IFRS adoption to ROU assets and lease liabilities is expected to be material
to the Statement of Financial Position.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3.1 Significant accounting judgments and estimates
The preparation of these Consolidated Financial Statements requires management to make
judgments in applying accounting policies. Judgments that have the most significant effect on
Big Rock Brewery Inc.
Consolidated Financial Statements
Page 11 of 34
Big Rock Brewery Inc. - 2020 Annual Report | 34
BIG ROCK BREWERY INC.
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars, unless otherwise stated)
the amounts recognized in the Consolidated Financial Statements are described below.
Management also makes assumptions and critical estimates. Critical estimates are those which
are most subject to uncertainty and have the most significant risk of resulting in a material change
to the carrying amounts of assets and liabilities within the next year. Judgments, assumptions
and estimates are based on historical experience, business trends and all available information
that management considers relevant at the time of the preparation of the Consolidated Financial
Statements. However, future events and their effects cannot be anticipated with certainty and
so as confirming events occur, actual results could ultimately differ from assumptions and
estimates. Such differences could be material.
The following discusses the most significant accounting judgments and estimates that Big Rock
has made in the preparation of these Consolidated Financial Statements. The sensitivity analyses
below should be used with caution as the changes are hypothetical and the impact of changes in
each key assumption may not be linear.
Significant judgments
Income taxes payable
Tax legislation, regulation and interpretation require judgment and may have a bearing on the
amounts recorded in the tax provision and income taxes payable. Big Rock’s tax filings are
continually subject to review by the Canada Revenue Agency who makes the final determination
of the actual amounts of taxes payable or receivable. This could have an impact on the current
and future income tax expenses.
Deferred income taxes
Deferred tax liabilities require management judgment in order to determine the amounts to be
recognized. This includes assessing the timing of the reversal of temporary differences to which
deferred income tax rates are applied.
Impairment assessment
Impairment indicators include a significant decline in an asset’s market value, significant changes
in the technological, market, economic or legal environment in which the assets are operated,
evidence of obsolescence or physical damage of an asset, significant changes in the planned use
of an asset, or ongoing under-performance of an asset. Application of these factors to the facts
and circumstances of a particular asset requires a significant amount of judgment.
Assumptions and critical estimates
Keg deposit liability
In determining the liability for return of keg deposits, Big Rock estimates that a portion of
circulating kegs will never be returned for refund. Big Rock estimates that approximately 98% of
kegs are returned for refund in each turn of inventory. Management recognizes a liability for one
turn plus an additional amount, estimated as 2% of one turn, for very old kegs. As at December
30, 2019, a balance of $391 (2018 - $364) was included in accounts payable and accrued liabilities
in respect of the keg deposit liability.
Property, plant and equipment
Calculation of the net book value of property, plant and equipment requires Big Rock to make
estimates of the useful economic life of the assets, residual value at the end of the asset’s useful
economic life, method of depreciation and whether impairment in value has occurred. Residual
values of the assets, estimated useful lives and depreciation methodology, are reviewed annually
with prospective application of any changes, if deemed appropriate. Changes to estimates could
be caused by a variety of factors, including changes to the physical life of the assets. A change in
any of the estimates would result in a change in the amount of depreciation and, as a result, a
charge to net income recorded in the period in which the change occurs, with a similar change in
the carrying value of the asset on the Consolidated Statements of Financial Position. A 10%
decrease in useful lives of Big Rock’s property, plant and equipment would result in an additional
depreciation charge to net income of $314.
Big Rock Brewery Inc.
Consolidated Financial Statements
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BIG ROCK BREWERY INC.
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars, unless otherwise stated)
3.2 Revenue recognition
Revenue is recognized either at a point in time or over a period of time, and when the revenue
can be measured reliably.
Revenue from product sales is recognized at a point in time when the access to the benefits of
Big Rock’s products have been transferred to the buyer and no significant uncertainties remain
regarding collection of the sales proceeds.
Revenue from the sale of goods is measured at the fair value of the consideration received or
receivable, net of returns, allowances, discounts, applicable federal and provincial production,
environmental and excise taxes levied by provincial liquor boards and the federal government.
Product which has passed its expiration date for freshness or has been damaged and is returned
by distributors is accepted and destroyed. Big Rock uses historical experience to estimate the
number of returns on a product level using the expected value method.
Interest income is recognized as it accrues (taking into account the effective yield on the asset)
unless collectability is in doubt.
Revenue recognition policy in prior years
Revenue is recognized on product sales at the time the product is shipped and when the following
conditions exist: title has passed to the purchaser according to the shipping terms, the price is
fixed and reasonably determinable, and collection of the sales proceeds is reasonably assured.
Revenue from the sale of goods is measured at the fair value of the consideration received or
receivable, net of returns, allowances, discounts, applicable federal and provincial production,
environmental and excise taxes levied by provincial liquor boards and the federal government.
3.3 Government grants
Government grants are recognized when there is reasonable assurance that the grant will be
received, and all related conditions are complied with. Government grants received in respect of
expenditures are credited to income, netted against the expense to which they relate.
Government grants in respect of capital expenditures are credited to the carrying amount of the
related asset and are realized to income over the expended useful life of the related asset.
3.4 Accounts receivable
The majority of Big Rock’s accounts receivable are from provincial government liquor authorities
which issue weekly or monthly remittances on account. Given that terms are set and receivables
over 90 days generally average between five and ten percent of total amounts owing, the
Corporation has a policy of reviewing, reconciling and, if necessary, writing off balances older
than one year.
3.5
Inventories
Inventories are valued at the lower of cost and net realizable value. Cost is determined using a
weighted average cost method and includes expenditures incurred in acquiring the inventories
and bringing them to their existing location and condition to sell. Net realizable value is the
estimated selling price in the ordinary course of business, less estimated costs to complete and
sell the products. If the net realizable value is less than cost, inventories are written down. If the
net realizable value subsequently increases, a reversal of the loss initially recognized is applied
to cost of sales.
Big Rock’s inventories include: raw materials (materials and supplies to be consumed in the
production process), brews in progress (in the process of production for sale), finished product
held for sale in the ordinary course of business, consignment product which is consigned to
provincial warehouses for sale and resale goods to be sold in the ordinary course of business in
the dry-goods store.
Big Rock Brewery Inc.
Consolidated Financial Statements
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BIG ROCK BREWERY INC.
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars, unless otherwise stated)
3.6 Property, plant and equipment
Property, plant and equipment (“PP&E”) are stated at cost less accumulated depreciation and
accumulated impairment losses. The cost of an item of PP&E consists of the purchase price, any
costs directly attributable to bring the asset to the location and condition necessary for its
intended use and an initial estimate of the costs of dismantling and removing the item and
restoring the site on which it is located.
Depreciation is provided at rates calculated to write-off the cost of PP&E, less their estimated
residual value, using the straight-line method over the following expected useful lives:
Buildings
Machinery and equipment
Office furniture and equipment
Leasehold improvements
35–40 years
5–40 years
5–15 years
10–40 years
Depreciation of these assets commences when the assets are ready for their intended use. The
Corporation conducts an annual assessment of the residual balances and useful lives being used
for PP&E and any changes arising from the assessment are applied by the Corporation
prospectively.
An item of PP&E is de-recognized upon disposal or when no future economic benefits are expected
to arise from the continued use of the asset. Any gain or loss arising on disposal of the asset,
determined as the difference between the net disposal proceeds and the carrying amount of the
asset, is recognized in the Consolidated Statements of Comprehensive Income.
3.7
Intangible assets
Intangible assets are stated at cost less accumulated amortization and accumulated impairment
losses. The cost of an intangible asset consists of the purchase price plus any costs directly
attributable to bringing the asset to the condition necessary for its intended use.
Amortization is provided at rates calculated to write-off the cost of intangible assets, less the
estimated residual values, using the straight-line method over the following expected useful lives:
Computer software
Intellectual property
License
Website
3 years
10 years
10 years
6 years
Amortization of these assets commences when the assets are ready for their intended use. The
Corporation conducts an annual assessment of the residual balances, useful lives and amortization
methods being used for intangible assets and any changes arising from the assessment are applied
by the Corporation prospectively.
An intangible asset is de-recognized upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset. Any gain or loss arising on disposal of the
asset, determined as the difference between the net disposal proceeds and the carrying amount
of the asset, is recognized in the Consolidated Statements of Comprehensive Income.
3.8
Impairment of non-financial assets
At each date of the Consolidated Statements of Financial Position, the Corporation reviews the
carrying amounts of its tangible and intangible assets to determine whether there is an indication
that those assets have an impairment loss. If any such indication exists, the recoverable amount
of the asset is estimated in order to determine the extent of the impairment loss (if any). Where
Big Rock Brewery Inc.
Consolidated Financial Statements
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BIG ROCK BREWERY INC.
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars, unless otherwise stated)
it is not possible to estimate the recoverable amount of an individual asset, the Corporation
estimates the recoverable amount of the cash‐generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs of disposal and value‐in‐use. In assessing
value‐in‐use, the estimated future cash flows are discounted to their present value using a pre‐
tax discount rate that reflects current market assessments of the time value of money and the
risks specific to the asset.
If the recoverable amount of an asset (or cash‐generating unit) is estimated to be less than its
carrying amount, the carrying amount of the asset (or cash‐generating unit) is reduced to its
recoverable amount. An impairment loss is recognized immediately in the Consolidated
Statements of Comprehensive Income.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash‐
generating unit) is increased to the revised estimate of its recoverable amount, net of
depreciation and amortization, had no impairment loss been recognized for the cash‐generating
unit in prior periods.
3.9 Share-based payments
Under the Corporation’s share‐based compensation plans, share‐based awards may be granted to
executives, employees and non‐employee directors. Big Rock uses option pricing models that are
determined to result in the best estimate of fair value for its cash‐settled and equity‐settled
instruments, depending on the vesting conditions of the instruments. The Black‐Scholes option
pricing model is generally used to determine fair values for all instruments that vest over a period
of time. For instruments that vest using market‐based performance criteria, fair values are
determined using a model which takes into account the probability of meeting certain price
targets and the Black‐Scholes value of underlying instruments at such targets.
Cash-settled transactions
Share‐based compensation awards that settle in cash are accounted for as cash‐settled plans and
are measured at fair value each reporting period. The expense is recognized over the vesting
period, with a corresponding adjustment to liabilities over the period in which the performance
and/or service conditions are fulfilled, ending on the date on which the relevant employees
become fully entitled to the award.
The costs of cash‐settled transactions with employees are initially measured by reference to the
fair value at the date on which they are granted. The cumulative expense reflects the
Corporation’s best estimate of the difference between the grant price of the instrument and the
price of the Corporation’s shares at the date the instrument is ultimately exercised. When awards
are surrendered for cash, the cash settlement paid reduces the outstanding liability. At the end
of each reporting period, the fair value of the instruments is remeasured to fair value, with a
charge or credit to compensation expense within general and administrative expense on the
Consolidated Statements of Comprehensive Income and a corresponding increase or decrease to
the liability on the Consolidated Statements of Financial Position.
Equity-settled transactions
The Corporation has a share option plan (the “Share Option Plan”) which permits the Board of
Directors to grant options to acquire common shares of the Corporation (“Common Shares”) at
the volume weighted average closing price for the five trading days preceding the date of grant.
The Corporation is authorized to issue options up to a maximum of 10% of the issued and
outstanding Common Shares pursuant to the Share Option Plan. Stock options that give the holder
the right to purchase Common Shares are accounted for as equity‐settled plans.
Under the Restricted Share Unit Plan (“RSU Plan”), the Board of Directors may issue a number of
restricted share units (“RSUs”) to directors, officers, employees and consultants of the
Corporation. The RSU Plan entitles grantees under the plan to receive Common Shares or the cash
equivalent. The Corporation is authorized to issue RSUs up to a maximum of 10% of the issued and
outstanding Common Shares pursuant to the RSU Plan. RSUs vest over a three year period, with
one‐third vesting on each of the first, second and third anniversary from the date of grant. RSUs
Big Rock Brewery Inc.
Consolidated Financial Statements
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BIG ROCK BREWERY INC.
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars, unless otherwise stated)
are forfeited if the grantee leaves before the vesting date. The determination of settling the
payout amount in Common Shares or the cash equivalent is at the option of the Board of Directors.
The expense is based on the fair value of the options and RSUs at the time of grant and is
recognized over the vesting periods of the respective options and RSUs. The cumulative expense
reflects the Corporation’s best estimate of the number of equity instruments that will ultimately
vest and following issuance, a corresponding increase is recorded to Contributed Surplus.
Consideration paid to the Corporation on exercise of options is credited to Share Capital and the
associated amount in Contributed Surplus is reclassified to Share Capital.
3.10 Taxation
Current income tax
Current income tax assets and liabilities for the current and prior periods are measured at the
amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax
laws used to compute the amount are those that are enacted or substantively enacted by the
date of the Consolidated Statements of Financial Position.
Deferred income tax
Deferred income tax is provided using the liability method on temporary differences at the date
of the Consolidated Statements of Financial Position between the tax bases of assets and liabilities
and their carrying amounts for financial reporting purposes.
Deferred income tax assets are recognized for all deductible temporary differences, carry forward
of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit
will be available against which the deductible temporary differences and the carry forward of
unused tax credits and unused tax losses can be utilized.
The carrying amount of deferred income tax assets is reviewed at each date of the Consolidated
Statements of Financial Position and reduced to the extent that it is no longer probable that
sufficient taxable profit will be available to allow all or part of the deferred income tax asset to
be utilized. Unrecognized deferred income tax assets are reassessed at each date of the
Consolidated Statements of Financial Position and are recognized to the extent that it has become
probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to
apply to the year when the asset is realized, or the liability is settled, based on tax rates and tax
laws that have been enacted or substantively enacted at the date of the Consolidated Statements
of Financial Position.
Deferred income tax assets and deferred income tax liabilities are offset if, and only if, a legally
enforceable right exists to set off current tax assets against current tax liabilities and the deferred
tax assets and liabilities relate to income taxes levied by the same taxation authority on either
the same taxable entity or different taxable entities which intend to either settle current tax
liabilities and assets on a net basis, or to realize the assets and settle the liabilities
simultaneously, in each future period in which significant amounts of deferred tax assets or
liabilities are expected to be settled or recovered.
3.11 Keg deposits
Big Rock requires that customers pay deposits for kegs purchased which are reflected as a liability
on the Corporation’s Consolidated Statements of Financial Position. The deposits are subsequently
refunded to customers via invoice credits or cash payments when kegs are returned. In the normal
course of business, there are a percentage of kegs which are never returned for refund. As a
result, Big Rock performs an analysis based on factors such as total kegs produced, current
inventory rates and average keg turnover. In addition, return percentages are calculated and
tracked to estimate an average keg turnover rate. Together, this information is used to estimate
a keg deposit liability at each reporting date. Any adjustments required to the keg liability
account are recorded through revenue.
Big Rock Brewery Inc.
Consolidated Financial Statements
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Big Rock Brewery Inc. - 2020 Annual Report | 39
BIG ROCK BREWERY INC.
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars, unless otherwise stated)
3.12 Per share amounts
Basic per share amount is calculated by dividing the net income by the weighted average number
of Common Shares outstanding during the period. Diluted per share amount is determined by
adjusting the profit or loss attributable to common shareholders and the weighted average
number of Common Shares outstanding for the effects of dilutive potential Common Shares which
comprise the exercise of share options. The calculation assumes that the proceeds on exercise of
the options are used to repurchase Common Shares at the average market price during the period.
Should the Corporation have a loss in a period, the options would be anti-dilutive and are excluded
from the determination of fully diluted loss per Common Share.
3.13 Financial instruments
All financial instruments are recorded at fair value on initial recognition.
3.13 (a) Financial assets
Big Rock determines the classification of its financial assets at initial recognition. All financial
assets are initially recorded at fair value plus directly attributable transaction costs.
Loans and Receivables: Loans and Receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. The subsequent measurement
of such financial assets are carried at amortized cost using the effective interest rate method.
The effective interest method is a method of calculating the amortized cost of a financial
instrument and of allocating interest over the relevant period. The effective interest rate is the
rate that exactly discounts estimated future cash receipts or payments through the expected life
of the financial instrument, or, where appropriate, a shorter period.
Gains and losses are recognized in the Consolidated Statements of Comprehensive Income when
the assets are de-recognized or impaired. Cash and accounts receivable have been included in
this category.
3.13 (b) Financial liabilities
Under both IFRS 9 and IAS 39, financial liabilities are recognized initially at fair value. The fair
value on initial recognition is the fair value of the consideration received. Subsequent to initial
recognition financial liabilities are measured at amortized cost using the effective interest rate
method.
Financial liabilities comprise accounts payable and accrued liabilities, finance lease obligations,
long-term debt and license obligations. Due to the short-term nature of account payable, carrying
value is considered to approximate fair value.
3.13 (c) De-recognition of financial instruments
Financial assets are de-recognized when the contractual rights to the cash flow from the financial
asset expire or when the contractual rights to those assets are transferred. A financial liability is
de-recognized when the obligation is discharged, cancelled or expires. Gains and losses on de-
recognition are recognized in income when incurred. Where an existing financial liability is
replaced by another from the same lender, on substantially different terms, or the terms of an
existing liability are substantially modified, the original liability is de-recognized, and the new
liability is recognized with a difference in the carrying amounts recognized in the Consolidated
Statements of Comprehensive Income.
Financial assets and liabilities are offset, and the net amount presented on the Consolidated
Statements of Financial Position when, and only when, the Corporation has a legal right to offset
the amounts and intends either to settle on a net basis or to realize the asset and settle the
liability, simultaneously. Big Rock does not employ hedge accounting for its risk management
contracts.
Big Rock Brewery Inc.
Consolidated Financial Statements
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BIG ROCK BREWERY INC.
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars, unless otherwise stated)
3.13 (e) Impairment of financial instruments
Big Rock assesses on a forward-looking basis the ECL associated with its financial assets carried
at amortized cost. The impairment methodology applied depends on whether there has been a
significant increase in credit risk. For trade receivables, Big Rock applies the simplified approach
permitted by IFRS 9, which requires expected lifetime losses to be recognized from initial
recognition of the receivables.
3.13 (f) Financial instruments policy in prior years
The Corporation has applied IFRS 9 retrospectively but has elected not to restate comparative
information. As a result, the comparative information provided continues to be accounted for in
accordance with Big Rock’s previous accounting policy. All financial assets are initially recorded
at fair value and designated upon inception into one of the following four categories: held‐to‐
maturity, available‐for‐sale, loans‐and-receivables or at fair value through profit or loss
FVTPL. Financial assets classified as FVTPL are measured at fair value with unrealized gains and
losses recognized through income.
Financial assets classified as loans‐and‐receivables and held‐to‐maturity are measured at
amortized cost. Financial assets classified as available‐for‐sale are measured at fair value with
unrealized gains and losses recognized in other comprehensive income except for losses in value
that are considered other than temporary. At December 30, 2018, the Corporation has not
classified any financial assets as FVTPL.
Transaction costs associated with FVTPL financial assets are expensed as incurred, while
transaction costs associated with all other financial assets are included in the initial carrying
amount of the asset.
All financial liabilities are initially recorded at fair value and designated upon inception as FVTPL
or other ‐ financial liabilities (“OFL”). Financial liabilities classified as OFL are initially
recognized at fair value less directly attributable transaction costs. After initial recognition, OFL
are subsequently measured at amortized cost using the effective interest method.
Financial liabilities classified as FVTPL include financial liabilities held for trading and financial
liabilities designated upon initial recognition as FVTPL. Derivatives, including separated
embedded derivatives, are also classified as held for trading unless they are designated as
effective hedging instruments. Fair value changes on financial liabilities classified as FVTPL are
recognized through the Consolidated Statements of Comprehensive Income.
Financial assets are assessed for impairment at each reporting date to determine whether there
is any objective evidence that they are impaired, which would indicate one or more events have
had a negative effect on the estimated future cash flows of the asset and will not be realized.
For loans and receivables, the amount of impairment is the difference between the asset’s
carrying amount and the present value of the estimated future cash flows, discounted at the
original effective interest rate. If there is impairment, the carrying amount of the financial asset
is reduced by the impairment loss, except for trade receivables where the carrying amount is
reduced through the use of an allowance account. The loss is recognized in the Consolidated
Statements of Comprehensive Income. When a trade receivable is uncollectible, it is written off
against the allowance account. Subsequent recoveries of amounts previously written off are
credited against the Consolidated Statements of Comprehensive Income.
3.14 Provisions
Provisions are recognized when the Corporation has a present obligation (legal or constructive)
that has arisen as a result of a past event and it is probable that a future outflow of resources
will be required to settle the obligation, provided that a reliable estimate can be made of the
amount of the obligation. Provisions are measured at the present value of the expenditures
expected to be required to settle the obligation using a pre-tax rate that reflects current market
assessments of the time value of money and the risk specific to the obligation. The increase in
the provision due to passage of time is recognized as a finance cost.
Big Rock Brewery Inc.
Consolidated Financial Statements
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BIG ROCK BREWERY INC.
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars, unless otherwise stated)
3.15 Leases
The determination of whether an arrangement is, or contains a lease is based on the substance
of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if
fulfilment of the arrangement is dependent on the use of a specific asset or assets and the
arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified
in an arrangement.
A lease is classified at the inception date as a finance lease or an operating lease. A lease that
transfers substantially all of the risks and rewards incidental to ownership to the Corporation is
classified as a finance lease. Finance leases are capitalized at the commencement of the lease at
the inception date fair value of the leased property or, if lower, at the present value of the
minimum lease payments. Lease payments are apportioned between finance charges and
reduction of the lease liability to achieve a constant rate of interest on the remaining balance of
the liability. Finance charges are recognized in finance costs in the Consolidated Statements of
Comprehensive Income.
A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable
certainty that the Corporation will obtain ownership by the end of the lease term, the asset is
depreciated over the shorter of the estimated useful life of the asset and the lease term.
Operating lease payments are recognized as an operating expense in the Consolidated Statements
of Comprehensive Income on a straight-line basis over the lease term. Lease incentives are
initially recorded as a liability on the Consolidated Statements of Financial Position and amortized
on a straight line-basis to expenses over the lease term in accordance with SIC 15 Operating
Leases – Incentives.
4. NET REVENUE
Gross product revenues
Federal excise taxes
Provincial liquor tax programs
Net revenue
Year Ended December 30
$
2019
65,116
(5,443)
(17,020)
$
2018
66,983
(6,003)
(12,232)
$
42,653
$
48,748
Gross product revenues include the sale of wholesale beer, cider and licensed alcoholic
beverages, retail store and restaurant sales and can sourcing for a third party. Net revenue
includes gross revenues less federal excise taxes and provincial liquor tax charges. Federal excise
taxes are assessed on annual world-wide production of beer at tiered rates up to $33.03 (2018 -
$32.32) per hectolitre and on flavoured cider production at $31.30 (2018 - $30.60) per hectolitre.
Provincial liquor tax programs include charges paid to provincial liquor control boards to cover
distributions and other service charges. During 2019, Big Rock received grant proceeds of $nil
(2018 - $10,928) through the ASBD Grant Program of which $nil (2018 - $10,857) has been included
in provincial liquor tax programs charges. Effective September 13, 2019, the Alberta Gaming,
Liquor and Cannabis Commission (“AGLC”) amended the Alberta beer mark-up framework to a
gradual beer mark-up structure that reduces the mark-up for beer producers with production less
than 400,000 hectolitres, such as Big Rock.
Big Rock Brewery Inc.
Consolidated Financial Statements
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BIG ROCK BREWERY INC.
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars, unless otherwise stated)
5. COST OF SALES
Cost of sales is broken down into its cash and non‐cash components as follows:
Operating expenses
Salaries and benefits
Depreciation and amortization
Cost of sales
6. SELLING EXPENSES
Selling expenses include the following:
Year Ended December 30
2019
2018
$
21,602
$
18,573
5,923
2,792
6,687
2,676
$
30,317
$
27,936
Delivery and distribution costs
$
Salaries and benefits
Marketing and sales
Selling expenses
Year Ended December 30
2019
2018
$
3,627
3,501
4,219
3,884
4,138
5,540
$
11,347
$
13,562
7. GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses include the following:
Salaries and benefits
Professional fees
Other administrative expenses
$
$
2,986
1,016
1,554
General and administrative expenses
$
5,556
$
3,153
972
1,670
5,795
Year Ended December 30
2019
2018
During the year ended December 30, 2019, Big Rock recorded $476 (2018 ‐ $nil) in relation to its
restructuring activities.
8. FINANCE EXPENSES
Finance expenses include the following:
Interest on operating facility
Interest on long term debt
Finance expenses
Year Ended December 30
2019
2018
$
$
18
383
401
$
$
3
324
327
Big Rock Brewery Inc.
Consolidated Financial Statements
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BIG ROCK BREWERY INC.
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars, unless otherwise stated)
9. INCOME TAXES
Income tax expense (recovery) is comprised of the following:
Current tax expense (recovery)
Deferred tax (recovery) expense
Income tax (recovery) expense
Year Ended December 30
2019
2018
$
90
$
(1,956)
$
(1,866)
$
(71)
333
262
The following table reconciles the estimated income tax expense using a weighted average
Canadian federal and provincial tax rate of 26.57% (2018 – 27.07%) to the reported tax expense.
The reconciling items represent, aside from the impact of tax rate differentials and changes, non-
taxable benefits or non-deductible expenses arising from permanent differences between the
local tax base and the reported Consolidated Financial Statements, in accordance with IFRS.
(Loss) income before income taxes
Income tax (recovery) expense at statutory rate of 26.57%
(2018 – 27.07%)
Effect on taxes of:
Share-based payments
Non-deductible expenses
True-up of opening timing differences
Non-taxable portion of capital gain
Change in tax rate
Other
Income tax (recovery) expense
Year Ended December 30
2019
2018
$
(4,789)
$
(1,272)
58
37
(191)
—
(577)
79
(1,866)
$
$
622
169
63
57
(24)
(2)
—
—
263
The movement in deferred income tax during the year, without taking into consideration the
offsetting of balances within the same tax jurisdiction is as follows:
Property,
plant and
equipment
Share &
Debt issue
costs
Deferral of
partnership
income
Other
Total
$
5,581
$
(5)
$
392
$
(1,176)
$
4,792
As at December 30, 2018
Charged to the Consolidated
Statements of
Comprehensive Income
As at December 30, 2019
$
5,010
$
(571)
4
(1)
(1,869)
480
(1,956)
$
(1,477)
$
(696)
$
2,836
Big Rock Brewery Inc.
Consolidated Financial Statements
Page 21 of 34
Big Rock Brewery Inc. - 2020 Annual Report | 44
BIG ROCK BREWERY INC.
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars, unless otherwise stated)
10. PER SHARE AMOUNTS
The calculation of per share amounts is based on the following:
Net (loss) income
Basic:
Shares outstanding, beginning and end of the year
Effect of stock options outstanding
Diluted number of shares outstanding, end of the
year
Per share amounts:
Basic
Diluted
11. ACCOUNTS RECEIVABLE
Year Ended December 30
2019
2018
$
(2,922)
$
360
6,981,628
6,981,628
—
—
6,981,628
6,981,628
$
$
(0.42)
(0.42)
$
$
0.05
0.05
The Corporation’s receivables arise from three main sources: trade receivables from the sale of
beer and cider to provincial liquor boards, supplier rebates and other amounts. Other receivables
include amounts due from sales to grocery and retail customers and GST balances. The solvency
of customers and their ability to pay their receivables was considered in assessing the impairment
of accounts receivable. No collateral is held for impaired receivables or for receivables that are
past due but not impaired.
The accounts receivable balances are comprised of:
Provincial liquor boards
Other receivables
Expected credit loss provision
Total accounts receivable
As at December 30
2019
2018
$
$
916
782
(53)
1,645
$
3,149
279
(44)
$
3,384
Below is an aged analysis of the Corporation’s trade and other receivables:
Less than 30 days
30 – 60 days
60 - 90 days
Over 90 days
$
As at December 30
2019
2018
908
494
2
241
$
2,635
173
278
298
Total accounts receivable
$
1,645
$
3,384
Big Rock Brewery Inc.
Consolidated Financial Statements
Page 22 of 34
Big Rock Brewery Inc. - 2020 Annual Report | 45
BIG ROCK BREWERY INC.
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars, unless otherwise stated)
12. INVENTORIES
Inventories are categorized as follows:
Raw materials and containers
$
Brews in progress
Finished product
Consignment product
Retail store
Total inventories
As at December 30
2019
2018
$
1,670
912
1,109
395
77
1,608
983
2,245
475
93
$
4,163
$
5,404
During the year ended December 30, 2019, charges of $775 (2018 - $408) were recorded to the
Consolidated Statements of Comprehensive Income relating to obsolete inventories. There were
no reversals of amounts previously charged to income in respect of inventory write-downs
during the years ended December 30, 2019 and 2018.
13. PROPERTY, PLANT AND EQUIPMENT
Land
Buildings
$ 6,475
—
—
6,475
—
—
$21,136
(12)
—
21,124
3
—
Machinery
and
equipment
$ 31,888
1,950
(135)
33,703
718
(5)
Office
furniture
and
equipment
Leasehold
improvem-
ents
Total
$
2,530
55
(6)
2,579
56
—
$
250
20
—
270
—
—
$ 62,279
2,013
(141)
64,151
777
(5)
$ 6,475
$21,127
$ 34,416
$
2,635
$
270
$ 64,923
$
—
—
—
—
—
—
$ 2,797
764
—
3,561
770
—
$ 13,920
1,805
(27)
15,698
1,886
—
$
1,210
373
(2)
1,581
396
—
$
124
21
—
145
10
—
$ 18,051
2,963
(29)
20,985
3,062
—
Cost
As at December 30, 2017
Additions
Disposals
As at December 30, 2018
Additions
Disposals
As at December 30, 2019
Accumulated
Depreciation
As at December 30, 2017
Charge
Disposals
As at December 30, 2018
Charge
Disposals
As at December 30, 2019
Net book value
As at December 30, 2018
$ 6,475
As at December 30, 2019 $ 6,475
—
$
$ 4,331
$ 17,584
$
1,977
$
155
$ 24,047
$17,563
$16,796
$ 18,005
$ 16,832
$
$
998
658
125 $ 43,166
$
$ 115 $ 40,876
At December 30, 2019, the balance of assets under construction and not subject to depreciation
was $163 (2018 - $889). At December 30, 2019, property, plant and equipment included finance
leases with a net book value of $2,075 (2018 - $2,206), see Note 18. There were no indicators of
impairment in the carrying value of the Corporation’s property, plant and equipment noted as at
December 30, 2019 and 2018.
Big Rock Brewery Inc.
Consolidated Financial Statements
Page 23 of 34
Big Rock Brewery Inc. - 2020 Annual Report | 46
BIG ROCK BREWERY INC.
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars, unless otherwise stated)
14. INTANGIBLE ASSETS
Intangible assets are broken down as follows:
Computer
software
Brewing
license
Intellectual
property
Website
costs
Total
Cost
As at December 30, 2017
$
Additions
As at December 30, 2018
Additions
759
136
895
177
$
—
$
1,885
1,885
—
As at December 30, 2019
$ 1,072
$
1,885
$
Accumulated amortization
As at December 30, 2017
$
Charge
As at December 30, 2018
Charge
$
466
150
616
31
$
—
39
39
188
As at December 30, 2019
$
647
$
227
$
Net book value
As at December 30, 2018
As at December 30, 2019
$
$
279
426
$
$
1,846
1,658
$
$
219
38
257
(1)
256
150
20
170
9
179
87
75
$
226
9
235
—
$
1,204
2,068
3,272
176
$
235
$
3,448
$
$
$
$
22
29
51
35
86
$
638
238
876
263
$
1,139
184
150
2,396
$
$ 2,309
As at December 30, 2019 and 2018, there were no indicators of impairment noted in the carrying
value of the Corporations intangible assets and no provision is recorded. As at December 30, 2019,
$222 (2018 - $222) is not subject to amortization.
15. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities of the Corporation are principally comprised of amounts
outstanding for trade purchases relating to production, selling, and general and administrative
activities. The usual credit period taken for trade purchases is between 30 to 90 days.
The following is an aged analysis of the trade and other payables:
Less than 30 days
30 – 60 days
60 – 90 days
Over 90 days
Total accounts payable and accrued
liabilities
As at December 30
2019
2018
$
2,861
$
4,442
136
—
52
136
47
57
$
3,049
$
4,682
16. BANK INDEBTEDNESS AND LONG-TERM DEBT
On December 30, 2016, Big Rock signed a commitment letter to revise the Corporation’s bank
debt. The Corporation has a $5 million revolving operating loan facility (the “Operating Facility”)
and a $6 million 5-year revolving term loan facility (the “Term Debt”). The Operating Facility is
available for general operating purposes and funding capital expenditure requirements. The Term
Debt is available to fund capital expenditures. Advances under both credit facilities may be made
by way of Canadian prime rate loans and letters of credit. Interest is payable for prime-based
loans under the Operating Facility at the financial institution’s prime rate plus 0.75 percent and
on the Term Debt at the financial institution’s prime rate plus 1.5 percent. Fees for letters of
credit are at 2.5 percent with a minimum fee payable.
Big Rock Brewery Inc.
Consolidated Financial Statements
Page 24 of 34
Big Rock Brewery Inc. - 2020 Annual Report | 47
BIG ROCK BREWERY INC.
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars, unless otherwise stated)
The facilities impose a number of positive and negative covenants on Big Rock, including the
maintenance of certain financial covenants which are tested at each reporting date. They include
the maintenance of a rolling 12-month fixed charge ratio which is required to be a minimum of
1.1 to 1, calculated as the rolling 12-month earnings before interest, taxes and depreciation, less
an amount for maintenance capital compared to the rolling 12-months fixed charges. Fixed
charges are the sum of interest, dividends and income taxes paid, and principal repayments. In
addition, Big Rock’s borrowings cannot exceed a borrowing base which is determined by the fair
value of the Corporation’s assets.
On July 16, 2019, Big Rock’s total facilities were reconfirmed by its lender at $11 million, with
the maturity dates being extended to March 23, 2021 with an option for extension. On August 1,
2019, the lender waived the financial covenants under its credit facilities until and including June
30, 2020.
As at December 30, 2019, bank indebtedness was $1,532 (2018 - $163), of which $870 (2018 - $nil)
was outstanding on the Operating Facility.
Term debt
Debt issue costs
Current portion
Long term debt
17. LICENSE OBLIGATION
License obligation
Gain on liability modification
Current portion
License obligation
As at December 30
2019
2018
$
3,385
$
(3)
3,382
(447)
$
2,935
$
3,778
(13)
3,765
(409)
3,356
As at December 30
2019
2018
$
$
1,705
(1,010)
695
(185)
510
$
$
1,720
—
1,720
(138)
1,582
On September 12, 2019, the Corporation and Fireweed Brewing Corp. (“Fireweed”) reached a
letter agreement (the “Letter Agreement”) with respect to payments that were incorrectly
deposited into Fireweed’s bank account, relating to the sale of Rock Creek and Duke cider
products, by the British Columbia Liquor Distribution Branch. The Letter Agreement calls for the
settlement of the outstanding receivable of $457, recovery of legal fees of $30 and penalty
interest of $609 (term conterminous with the expiry of the license obligation) to be applied
against the license obligation as at September 30, 2019. As a result, the Corporation recorded a
net gain of $550.
Big Rock Brewery Inc.
Consolidated Financial Statements
Page 25 of 34
Big Rock Brewery Inc. - 2020 Annual Report | 48
BIG ROCK BREWERY INC.
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars, unless otherwise stated)
18. FINANCE LEASE
As at
December 30, 2019
December 30, 2018
Future
minimum
lease
payments
Interest
Less than one year
Between one and
five years
$
439
$
1,189
1,628
72
55
127
Reported as:
Current portion
Long term portion
Present value of
finance lease
Present
value of
minimum
lease
payments
367
$
1,134
1,501
$
367
1,134
$ 1,501
Future
minimum
lease
payments
Interest
Present value
of minimum
lease payments
$
443
$
96
$
347
1,649
2,092
149
245
1,500
1,847
$
347
1,500
$
1,847
On January 25, 2017, the Corporation converted its $2.5 million finance facility to a sale and
leaseback arrangement. The lease agreement matures after a term of five years with a fixed
interest rate of 5.42%. Lease repayments are fixed, and no arrangements have been entered into
for contingent rental payments. As of December 30, 2019, the net carrying amount of the leased
assets is $2,075 (December 30, 2018 – $2,206). The depreciation of the assets recorded under the
finance lease is included in the cost of sales on the Consolidated Statements of Comprehensive
Loss. The obligation under finance lease is secured by the lessor’s rights over the leased assets.
19. LEASE INCENTIVE LIABILITY
At December 30, 2019, Big Rock had a lease incentive liability of $287 (2018 - $260) associated
with the Corporation’s building leases. Amortization is recorded on a straight-line basis over the
term of the leases and included in expenses.
20. SHARE CAPITAL
Big Rock is authorized to issue an unlimited number of Common Shares with no par value.
As at December 30
2019
2018
# of shares
$ Amount
# of shares
$ Amount
Outstanding, beginning of year
6,981,628
113,845
6,981,628
113,845
Outstanding, end of year
6,981,628
113,845
6,981,628
113,845
21. ACCUMULATED DEFICIT
During 2018, the Corporation made an adjustment to 2017 opening accumulated deficit and
accounts receivable as it was determined that revenue related to the recently discontinued ASBD
grant program had been under accrued in 2016. This adjustment is not significant to the
Consolidated Financial Statements. Because of the adjustment, opening accumulated deficit
decreased by $1,110 with a corresponding increase to accounts receivable as at December 30,
2016.
22. SHARE-BASED PAYMENTS
Share based compensation expense, included in general and administrative expenses and
recognized in the Consolidated Statements of Comprehensive Income for the years ended
December 30, 2019 and 2018 include:
Big Rock Brewery Inc.
Consolidated Financial Statements
Page 26 of 34
Big Rock Brewery Inc. - 2020 Annual Report | 49
Year Ended December 30
BIG ROCK BREWERY INC.
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars, unless otherwise stated)
18. FINANCE LEASE
As at
December 30, 2019
December 30, 2018
Less than one year
$
439
$
$
367
$
443
$
$
347
Future
minimum
lease
payments
1,189
1,628
Present
value of
minimum
lease
payments
Future
minimum
lease
payments
1,134
1,501
1,649
2,092
Interest
72
55
127
$
367
1,134
$
1,501
Interest
Present value
of minimum
lease payments
96
149
245
1,500
1,847
347
1,500
1,847
$
$
Between one and
five years
Reported as:
Current portion
Long term portion
Present value of
finance lease
On January 25, 2017, the Corporation converted its $2.5 million finance facility to a sale and
leaseback arrangement. The lease agreement matures after a term of five years with a fixed
interest rate of 5.42%. Lease repayments are fixed, and no arrangements have been entered into
for contingent rental payments. As of December 30, 2019, the net carrying amount of the leased
assets is $2,075 (December 30, 2018 – $2,206). The depreciation of the assets recorded under the
finance lease is included in the cost of sales on the Consolidated Statements of Comprehensive
Loss. The obligation under finance lease is secured by the lessor’s rights over the leased assets.
19. LEASE INCENTIVE LIABILITY
At December 30, 2019, Big Rock had a lease incentive liability of $287 (2018 - $260) associated
with the Corporation’s building leases. Amortization is recorded on a straight-line basis over the
term of the leases and included in expenses.
20. SHARE CAPITAL
Big Rock is authorized to issue an unlimited number of Common Shares with no par value.
As at December 30
2019
2018
# of shares
$ Amount
# of shares
$ Amount
Outstanding, beginning of year
6,981,628
113,845
Outstanding, end of year
6,981,628
113,845
6,981,628
6,981,628
113,845
113,845
21. ACCUMULATED DEFICIT
During 2018, the Corporation made an adjustment to 2017 opening accumulated deficit and
accounts receivable as it was determined that revenue related to the recently discontinued ASBD
grant program had been under accrued in 2016. This adjustment is not significant to the
Consolidated Financial Statements. Because of the adjustment, opening accumulated deficit
decreased by $1,110 with a corresponding increase to accounts receivable as at December 30,
2016.
22. SHARE-BASED PAYMENTS
Share based compensation expense, included in general and administrative expenses and
BIG ROCK BREWERY INC.
recognized in the Consolidated Statements of Comprehensive Income for the years ended
BIG ROCK BREWERY INC.
December 30, 2019 and 2018 include:
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars, unless otherwise stated)
(In thousands of Canadian dollars, unless otherwise stated)
Big Rock Brewery Inc.
Equity-settled plans
Equity-settled plans
Cash-settled plans
Cash-settled plans
Total share-based compensation expense
Total share-based compensation expense
$
$
$
$
217
217
(112)
(112)
105
105
$
$
$
$
Page 26 of 34
231
231
(163)
(163)
68
68
Year Ended December 30
2019
2019
Consolidated Financial Statements
2018
2018
Liability recognized for share-based compensation recognized on the Consolidated Statements of
Liability recognized for share-based compensation recognized on the Consolidated Statements of
Financial Position:
Financial Position:
Share-based payments - current
Share-based payments - current
Share-based payments – long term
Share-based payments – long term
Total liability
Total liability
22.1 Share Option Plan
22.1 Share Option Plan
22.1 (a) Time Vesting Options
22.1 (a) Time Vesting Options
As at December 30
As at December 30
2019
2019
2018
2018
$
$
$
$
325
325
23
23
348
348
$
$
$
$
433
433
45
45
478
478
Share options granted in 2019 vest over four years, with one fifth vesting immediately, followed
Share options granted in 2019 vest over four years, with one fifth vesting immediately, followed
by one fifth vesting on each subsequent anniversary date. Options granted prior to 2017 vested
by one fifth vesting on each subsequent anniversary date. Options granted prior to 2017 vested
immediately. All options are exercisable for five years after grant date.
immediately. All options are exercisable for five years after grant date.
The following is a summary of option transactions under the Share Option Plan:
The following is a summary of option transactions under the Share Option Plan:
December 30, 2019
December 30, 2019
December 30, 2018
December 30, 2018
As at
As at
Balance, beginning of
Balance, beginning of
period
period
Granted
Granted
Balance, end of period
Balance, end of period
Exercisable, end of period
Exercisable, end of period
# of options
# of options
260,000
260,000
25,000
25,000
285,000
285,000
124,000
124,000
Weighted
Weighted
average
average
exercise
exercise
price ($)
price ($)
Remaining
Remaining
life
life
# of options
(years)
(years) # of options
Weighted
Weighted
average
average
exercise
exercise
price ($)
price ($)
Remaining
Remaining
life
life
(years)
(years)
6.05
6.05
6.75
6.75
6.11
6.11
6.29
6.29
75,000
75,000
185,000
185,000
260,000
260,000
67,000
67,000
3.31
3.31
3.19
3.19
7.75
7.75
5.36
5.36
6.05
6.05
6.43
6.43
4.21
4.21
4.09
4.09
The weighted average fair value of options granted in 2019 was estimated using the Black-Scholes
The weighted average fair value of options granted in 2019 was estimated using the Black-Scholes
option pricing model using the following assumptions:
option pricing model using the following assumptions:
Weighted average exercise price
Weighted average exercise price
($/share)
($/share)
Weighted average fair value ($)
Weighted average fair value ($)
Risk-free interest rate (%)
Risk-free interest rate (%)
Expected life (years)
Expected life (years)
Dividend yield (%)
Dividend yield (%)
Forfeiture rate (%)
Forfeiture rate (%)
Volatility (%)
Volatility (%)
22.1 (b) Performance Options
22.1 (b) Performance Options
Year Ended December 30
Year Ended December 30
2019
2019
2018
2018
6.75
6.75
2.78
2.78
1.47
1.47
4.23
4.23
—
—
—
—
44.99
44.99
5.36
5.36
2.09
2.09
2.09
2.09
4.23
4.23
—
—
—
—
39.80
39.80
During the year, there were no performance stock options granted. During the year ended
During the year, there were no performance stock options granted. During the year ended
December 30, 2017, 69,000 performance stock options were granted at an exercise price of $6.50
December 30, 2017, 69,000 performance stock options were granted at an exercise price of $6.50
per option and expire in five years. The options vest in tranches of one-third upon the closing
per option and expire in five years. The options vest in tranches of one-third upon the closing
Big Rock Brewery Inc.
Big Rock Brewery Inc.
Consolidated Financial Statements
Consolidated Financial Statements
Page 27 of 34
Page 27 of 34
Big Rock Brewery Inc. - 2020 Annual Report | 50
BIG ROCK BREWERY INC.
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars, unless otherwise stated)
price of the Corporation’s Common Shares equalling or exceeding $8.50, $10.50 and $11.50 per
share, respectively. None of the options were exercisable at December 30, 2019.
22.2 Share Appreciation Rights Plan
Under the Share Appreciation Rights Plan (“SARs Plan”), the Board of Directors may issue an
unlimited number of share appreciation rights (“SARs”). The SARs are exercisable for five years
after grant date. The exercise of SARs is settled in cash. SARs granted in 2019 vest over a three-
year period, with one-third vesting immediately, one-third vesting on the first anniversary date
and one-third vesting on the second anniversary date. SARs granted prior to 2017 vested
immediately.
22.2 (a) Time Vesting SARs
The following is a summary of transactions under the SARs Plan:
December 30, 2019
December 30, 2018
As at
Balance, beginning of
period
Granted
Exercised
Forfeited
Expired
# of SARs
406,802
118,260
(18,381)
(8,834)
(58,300)
Balance, end of period
439,547
Weighted
average
exercise
price ($)
7.50
5.11
5.19
6.62
16.49
5.78
Remaining
life (years)
# of SARs
Weighted
average
exercise
price ($)
Remaining
life (years)
575,900
166,350
(37,445)
(238,703)
(59,300)
3.09
406,802
9.25
5.08
5.64
8.55
14.98
7.50
Exercisable, end of
period
316,601
6.04
2.58
270,611
8.44
3.02
2.45
The weighted average fair value of the SARs granted in 2019 was estimated using the Black-
Scholes option pricing model using the following assumptions:
Weighted average exercise price
($/share)
Weighted average fair value ($)
Risk-free interest rate (%)
Expected life (years)
Dividend yield (%)
Forfeiture rate (%)
Volatility (%)
22.2 (b) Performance SARs
Year Ended December 30
2019
2018
5.11
2.09
1.65
4.89
—
22.61
45.57
5.08
2.52
1.87
4.52
—
—
43.13
During the year ended December 30, 2019 and year ended December 30, 2018, there were no
performance vesting SARS issued. During the year ended December 30, 2017, 81,000 performance
vesting SARs were granted at an exercise price of $6.50 per right and expire in five years. The
SARs vest in tranches of one-third upon the closing price of the Corporation’s Common Shares
equalling or exceeding $8.50, $10.50 and $11.50 per share, respectively. None of the SARs were
exercisable at December 30, 2019.
Big Rock Brewery Inc.
Consolidated Financial Statements
Page 28 of 34
Big Rock Brewery Inc. - 2020 Annual Report | 51
BIG ROCK BREWERY INC.
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars, unless otherwise stated)
22.3 Restricted Share Unit Plan
The following is a summary of transactions under the RSU Plan:
December 30, 2019
December 30, 2018
As at
Balance, beginning of period
Granted
Balance, end of period
Exercisable, end of period
# of RSUs
—
111,310
111,310
—
Remaining
life
(years)
—
2.89
2.89
—
# of RSUs
—
—
—
—
Remaining
life
(years)
—
—
—
—
The weighted average fair value of RSUs granted in 2019 was estimated using the Black‐Scholes
option pricing model using the following assumptions:
Market Price at grant ($)
Risk‐free interest rate (%)
Dividend yield (%)
Forfeiture rate (%)
Volatility (%)
23. CAPITAL RISK MANAGEMENT
Year Ended December 30
2019
2018
5.07
1.43
—
—
42.62
—
—
—
—
—
The Corporation defines its capital to include: Common Shares plus short‐term, long‐term debt
and finance leases, less cash balances. There are no externally imposed capital requirements on
the Corporation. The Corporation’s objectives are to safeguard the Corporation’s ability to
continue as a going concern, to support the Corporation’s normal operating requirements and to
maintain a flexible capital structure which optimizes the cost of capital at an acceptable risk.
This allows management to maximize the profitability of its existing assets and create long‐term
value and enhance returns for its shareholders.
Cash
Total debt(1)
Shareholders’ equity:
Shareholders’ capital
Contributed surplus
Accumulated deficit
As at December 30
2019
$
(354)
7,110
$
113,845
1,795
(79,761)
35,879
2018
(1,902)
7,495
113,845
1,578
(76,839)
38,584
$
42,635
$
44,177
Total shareholders’ equity
Total capitalization (total debt plus shareholders’ equity,
net of cash balances)
(1)
Includes bank indebtedness, long term debt, obligations under finance leases; and license obligations.
The Corporation manages the capital structure through prudent levels of borrowing, cash‐flow
forecasting, and working capital management. Adjustments are made by considering changes in
economic conditions and the risk characteristics of the underlying assets. To maintain or adjust
the capital structure, Big Rock may issue new shares, issue or renegotiate its debt, acquire or
dispose of assets or adjust the amount of cash and cash equivalents. Capital requirements of the
Corporation are managed by the preparation of an annual expenditure budget which is approved
by the Board of Directors and monitored on a regular basis by management. The budget is updated
Big Rock Brewery Inc.
Consolidated Financial Statements
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BIG ROCK BREWERY INC.
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars, unless otherwise stated)
as necessary depending on numerous factors, including capital deployment, results from
operations, general industry conditions and government policy changes.
In addition, the Corporation monitors its capital using ratios of (i) net debt (debt less cash) to
earnings before interest, taxes, depreciation and amortization (“EBITDA”) and (ii) EBITDA to
interest, debt repayments and dividends. Net debt to EBITDA is calculated by dividing net debt
by EBITDA. EBITDA to interest, debt repayments and dividends is calculated by dividing EBITDA
by the combined interest, debt repayments and dividend amounts. These capital management
policies, which remain unchanged from prior periods, provide Big Rock with access to capital at
a reasonable cost.
24. FINANCIAL INSTRUMENTS
24.1 Fair value
Financial instruments recorded in the Consolidated Statements of Financial Position are
categorized based on the fair value hierarchy of inputs. The three levels of the fair value hierarchy
are described as follows:
Level 1 –
Unadjusted quoted prices in active markets for identical assets or liabilities. Big
Rock does not use Level 1 inputs for any of its fair value measurements.
Level 2 –
Inputs, other than quoted prices in active markets, that are observable for the
asset or liability either directly or indirectly. Big Rock’s Level 2 inputs include
quoted market prices for interest rates and credit risk premiums. Big Rock
obtains information from sources including the Bank of Canada and market
exchanges. Big Rock uses Level 2 inputs for all of its financial instruments fair
value measurements.
Level 3 –
Inputs that are not based on observable market data. Big Rock does not use
Level 3 inputs for any of its fair value measurements.
24.2 Categories of financial instruments
The Corporation’s principal financial instruments are its outstanding amounts drawn from its
credit facilities, which, after cash flow from operations, are its main source of financing. Financial
assets and liabilities arising directly from its operations and Big Rock’s activities include accounts
receivable, income tax receivable (payable), bank indebtedness, accounts payable and accrued
liabilities, long term debt, finance lease, and share-based payments liabilities.
Big Rock’s financial instruments and their designations are:
Classification of
Financial Instrument
As at December 30
Designated as
2019
2018
Carrying
Amount ($)
Fair Value
Amount ($)
Carrying
Amount ($)
Fair Value
Amount ($)
Financial assets
Cash
—
Accounts receivable
Loans and receivables
Financial liabilities
Bank indebtedness
Accounts payable and
accrued liabilities
Income taxes payable
Long term debt
License obligation
Finance lease
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
354
1,645
1,532
3,049
273
3,382
695
1,501
354
1,645
1,532
3,049
273
3,385
695
1,501
1,902
3,384
163
4,682
449
3,765
1,720
1,847
1,902
3,384
163
4,682
449
3,778
1,720
1,847
Big Rock Brewery Inc.
Consolidated Financial Statements
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BIG ROCK BREWERY INC.
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars, unless otherwise stated)
24.3 Financial risk management objectives and policies
The Corporation’s financial instruments include cash, accounts receivable, current taxes
recoverable (payable), accounts payable and accrued liabilities and amounts due on its line of
credit facilities and finance lease obligations. The risks associated with these financial
instruments and the policies on how to mitigate these risks are set out below. Management
manages and monitors these exposures to ensure appropriate measures are implemented on a
timely and effective manner.
(i) Foreign exchange risk
The Corporation currently relies on only a few foreign suppliers providing small amounts of goods
and thus has limited exposure to risk due to variations in foreign exchange rates. The Corporation
has not entered into any derivative instruments to manage foreign exchange fluctuations;
however, management monitors foreign exchange exposure. The Corporation does not have any
significant foreign currency denominated monetary liabilities.
Foreign currency sensitivity analysis
An increase or decrease in US currency foreign exchange of 3% percent would result in a change
to net income for the year ended December 30, 2019 of $32 (2018 – $35).
(ii) Interest rate risk
Big Rock is exposed to interest rate risk on the variable rate of interest incurred on the amounts
due under operating and term credit facilities and on interest earned on bank deposits. The cash
flow required to service the interest on these facilities will fluctuate as a result of changes to
market rates.
The Corporation has not entered into any derivative instruments to manage interest rate
fluctuations; however, management monitors interest rate exposure and given the relatively low
expected rate of change in prime interest rates, believes the risk is immaterial.
Big Rock evaluates the policies surrounding interest rates on an as-needed basis and is confident
that this policy is sufficient based on current economic conditions, combined with the minimal
amount of debt required by the Corporation. The fair value interest rate risk on bank deposits is
insignificant as the deposits are short-term and the fair value of the Corporation’s long-term debt
does not change as interest rates change. The weighted average interest rate incurred by the
Corporation in the year ended December 30, 2019 was 5.67% (2018 – 4.58%).
Interest rate sensitivity analysis
In the event interest rates changed by 75 basis points, the Corporation’s net income for the year
ended December 30, 2019 would be affected by $52 (2018 – $51). The sensitivity analysis assumes
the change takes place at the beginning of the financial year and is held constant throughout the
reporting period.
(iii) Credit risk
Credit risk is the risk that the counterparty to a financial asset will default, resulting in the
Corporation incurring a financial loss. Big Rock has a concentration of credit risk because a
majority of its accounts receivable are from provincial liquor boards, under provincially regulated
industry sale and payment terms. The Corporation is not exposed to significant credit risk as
payment in full is typically collected by provincial liquor boards at the time of sale and receivables
are with government agencies. While the majority of Big Rock’s accounts receivable are from
provincial government liquor authorities, the timing of receipts of large balances may vary
significantly from period to period. The majority of product sold outside of Canada, which is
included in GST and other receivables, is done so on a ‘Cash on Delivery’ basis with no credit risk.
The credit quality of the Corporation’s significant customers is monitored regularly, and
allowances are provided for potential losses that have been incurred at the period end date.
Receivables that are neither past due, nor impaired are considered collectible. Where
concentrations of credit risk exists, management monitors the receivable balances closely to
ensure appropriate controls are in place to ensure recovery.
Big Rock Brewery Inc.
Consolidated Financial Statements
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BIG ROCK BREWERY INC.
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars, unless otherwise stated)
(iv) Liquidity risk
Big Rock’s principal sources of liquidity are its cash flows from operations and existing or new
credit facilities. Liquidity risk is mitigated by maintaining banking facilities, continuously
monitoring forecast and actual cash flows and, if necessary, adjusting levels of dividends to
shareholders and capital spending to maintain liquidity.
Management closely monitors the liquidity position and expects to have adequate sources of
funding to finance the Corporation’s operations. The table presents a maturity analysis of the
Corporations financial liabilities based on the expected cash flow from the reporting date to the
contractual maturity date:
Accounts payable and accrued
liabilities
Bank indebtedness
Long term debt
License obligation
Finance lease
Carrying
Amount
Due within
one year
Due in one to
five years
Due greater
than five
years
$
3,049
$
3,049
$
742
3,382
695
1,501
742
447
185
367
$
—
—
1,992
510
1,134
—
—
946
—
—
Total contractual repayments
$
9,369
$ 4,790
$ 3,636
$
946
(v) Commodity price risk
The Corporation is exposed to commodity price risk in the areas of utilities (primarily electricity
and natural gas), malted barley, water, glass and aluminum, where fluctuations in the market
price or availability of these items could impact Big Rock’s cash flow and production. To minimize
the impact of this risk, the Corporation enters into contracts which secure supply and set pricing
to manage the exposure to availability and pricing.
Big Rock’s profitability depends on the selling price of its products to provincial liquor boards.
While these prices are controlled by the Corporation, they are subject to such factors as regional
supply and demand, and to a lesser extent inflation and general economic conditions. As beer and
cider sales are the only source of revenue for the Corporation, a 5% increase or decrease in these
prices will result in a corresponding increase or decrease in revenue.
(vi) Tax Risk
Big Rock requires various permits, licenses, and approvals from several government agencies to
operate in its market areas. In Alberta, Big Rock’s largest market, the AGLC provides the
necessary licensing approvals. Other licenses have been obtained from various other government
authorities. Management believes that Big Rock is in compliance with all licenses, permits, and
approvals.
Each provincial authority has its own tax or “mark-up” structure by which fees are levied on
brewers’ sales within that jurisdiction. These regulations may be changed from time to time,
which may positively or negatively impact Big Rock’s profitability.
The beer tax structure in Alberta has changed six times in the last six years, contributing to
market uncertainty and has impacted Big Rock’s results in a corresponding manner. In particular,
changes announced by the Government of Alberta in July 2016 replaced the former graduated tax
rate structure with a flat tax rate of $1.25 per litre and a grant program for Alberta small
breweries. In June 2018, a trade review panel ordered that the Government of Alberta’s small
brewers’ grant program must be repealed or revised within six months, as it was found to put
beer producers from other provinces at a competitive disadvantage in the Alberta market. On
November 26, 2018, the Government of Alberta announced the cancellation of the ASBD grant
program, effective December 16, 2018, and a graduated net beer tax system for Alberta producers
of less than 50,000 hectolitres per year. This change imposed a significant tax increase on Big
Rock’s sales volumes.
On August 21, 2019, the Government of Alberta and the AGLC amended the beer mark-up
structure to include breweries with annual world-wide production of less than 400,000
Big Rock Brewery Inc.
Consolidated Financial Statements
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BIG ROCK BREWERY INC.
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars, unless otherwise stated)
hectolitres, such as Big Rock, by implementing a graduated mark-up that extends to $0.80 per
litre. Effective September 13, 2019, the Corporation's mark-up on Alberta beer sales was reduced
to $0.64 per litre from $1.25 per litre.
As Alberta is the Corporation’s predominant market, future changes to this mark-up rate structure
could have a significant impact on the Corporation’s financial results. The Corporation will
continue to be proactive with the Government of Alberta and continues to evaluate its long-term
business plan in order to mitigate the risk of future mark-up rate structure fluctuations.
25. KEY MANAGEMENT PERSONNEL COMPENSATION
Key management includes members of the Board of Directors, President and Chief Executive
Officer, Chief Financial Officer, Vice President, Operations, Vice President, Sales and the
Director, Business Development and Government Relations. The remuneration is included in cost
of sales and general and administrative expenses and is comprised as follows:
Salaries and other short-term benefits
Share-based compensation
Total compensation
26. CHANGE IN NON-CASH WORKING CAPITAL
Accounts receivable
Inventory
Current income taxes
Prepaid expenses
Accounts payable and accrued liabilities
Share-based payment liabilities
$
$
$
Year Ended December 30
2019
2018
1,201
123
1,324
$
$
1,417
97
1,514
Year Ended December 30
2019
2018
$
1,739
1,241
(176)
53
(1,633)
(19)
(220)
(418)
197
(119)
1,209
(19)
630
Total change in non-cash working capital
$
1,205
$
27. SEGMENTED INFORMATION
For management purposes, the Corporation is organized into operating segments based on its
products, services, location and distribution methods. Ten operating segments have been
identified. These segments have been aggregated into two reportable segments: the wholesale
segment, which manufactures and distributes beer and cider to and through, provincial liquor
boards which is subsequently sold on to end consumers and the retail segment, which sells
beverages, food and merchandise to end consumers on premises owned and/or operated by the
Corporation.
The wholesale segment has similar production processes, types of customers and products that
are shipped to customers rather than sold on-site. The retail segment has been aggregated to
reflect the products and services sold directly to the end consumer through premises owned and
operated by Big Rock.
Management monitors the results of its operating segments separately for making decisions about
resource allocation and performance assessment. Segment performance is evaluated on a number
of measures, the most significant being profit or loss, which is measured consistently with the
definition of profit or loss in the Consolidated Financial Statements. Transfer prices between
operating segments are on an arm’s length basis in a manner similar to transactions with third
parties.
Big Rock Brewery Inc.
Consolidated Financial Statements
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BIG ROCK BREWERY INC.
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars, unless otherwise stated)
Operating assets and liabilities are managed on a corporate basis. General and administrative
expenses, current taxes, deferred taxes and capital expenditures are not allocated to segments
as they are also managed on a corporate basis. Inter-segment revenues are eliminated on
consolidation and are reflected in the “eliminations” column. All other adjustments and
eliminations are part of detailed reconciliations presented below.
Profit by Segment
Year ended
December 30
Wholesale
Retail
2019
2018
2019
2018
Eliminations
2019
2018
Consolidated
2019
2018
$ 47,144
25,351
21,793
13,537
8,256
11,336
$ 1,359
$ 40,851
28,156
12,695
Net Revenue
Cost of sales
Gross profit
Selling
expenses
Segment profit
(loss)
General and administrative cost
Depreciation and amortization
Operating (loss) income
Finance
expense
Other income
(Loss) Income before income taxes
$
$ 2,353
2,712
(359)
$ 2,245
3,226
(981)
$ (551)
(551)
—
$ (641)
(641)
—
$ 42,653
30,317
12,336
11
25
—
$
(370)
$ (1,006)
$
—
$
—
—
11,347
989
5,556
533
(5,100)
401
$ 48,748
27,936
20,812
13,562
7,250
5,795
524
931
327
18
622
713
(4,788)
$
$
28. COMMITMENTS AND CONTRACTUAL OBLIGATIONS
Big Rock has entered into various commitments for expenditures over the next five years:
2020
2021
2022
2023
2024
thereafter
Utilities contracts
Raw material purchase
commitments
Marketing sponsorships
Operating leases
Long-term debt
License obligation
Finance lease
$
30
$
30
$
—
$
—
$
—
$
2,967
369
758
433
185
367
259
281
765
458
193
387
244
108
775
484
202
747
216
—
775
511
114
—
216
—
555
539
—
—
—
—
—
135
909
—
—
Total
$ 5,109 $ 2,373
$ 2,560
$ 1,616
$
1,310 $
1,044
Big Rock has entered into operating lease agreements for storage facilities, warehouses,
breweries, and retail locations. The remaining terms of these leases range between 4 and 5 years.
Certain leases contain extension and renewal options. Operating lease payments of $669 (2018 -
$736) were recognized as expense in the Statement of Comprehensive Income in 2019.
Big Rock Brewery Inc.
Consolidated Financial Statements
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Big Rock Brewery Inc. - 2020 Annual Report | 57
CORPORATE INFORMATION
Leadership Team
Wayne Arsenault
President & Chief Executive Officer
Don Sewell
Chief Financial Officer
Paul Gautreau
Vice President, Operations & Brewmaster
Paul Howden
Vice President, Sales
Brad Goddard
Director, Business Development & Government
Relations
Auditors
Ernst & Young, LLP
Calgary, City Centre
2200 215 2nd Street SW
Calgary, Alberta
T2P 1M4 Canada
Transfer Agent
Computershare Trust Company of Canada 600,
530 8th Avenue SW
Calgary, Alberta
T2P 3S8 Canada
Board of Directors
Michael G. Kohut (1)
Chair of the Board
Calgary, Alberta
Kathleen McNally-Leitch (3)
Chair, Corporate Governance Committee
Calgary, Alberta
P. Donnell Noone (1) (2) (3)
Greensboro, North Carolina, USA
Stephen J. Giblin (1)(1)
Chair of Audit Committee
Vancouver, British Columbia
Alanna McDonald (2) (3)
Harrison, New York, USA
James Riddell (2)
Chair, Compensation & Human Resources Committee
Calgary, Alberta
(1) Audit Committee member
(2) Compensation & Human Resources Committee member
(3) Corporate Governance Committee member
Big Rock Brewery Inc. - 2020 Annual Report | 58