SWISS WATER DECAFFEINATED COFFEE INC.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(unaudited)
For the Three Months Ended March 31, 2024 and 2023
SWISS WATER DECAFFEINATED COFFEE INC.
Condensed Consolidated Interim Statements of Financial Position as at
(Tabular amounts are in thousands of Canadian dollars) (Unaudited)
March 31, 2024 | December 31, 2023 |
Assets | Note | |||||
Current assets | ||||||
Cash and cash equivalents | 4 | $ | 13,599 | $ | 11,091 | |
Accounts receivable | 5 | 22,339 | 19,110 | |||
Inventories | 6 | 25,395 | 30,338 | |||
Prepaid expenses and other receivables | 768 | 884 | ||||
Income tax receivable | 128 | 167 | ||||
Derivative assets and hedged firm commitments | 7, 20 | 1,313 | 2,075 | |||
Total current assets | 63,542 | 63,665 | ||||
Non-current assets | ||||||
Deposits and other receivables | 157 | 157 | ||||
Property, plant and equipment | 8 | 133,910 | 135,736 | |||
Deferred tax assets | 127 | 135 | ||||
Derivative assets | 7, 20 | 110 | 642 | |||
Total non-current assets | 134,304 | 136,670 | ||||
Total assets | $ | 197,846 | $ | 200,335 | ||
Liabilities and shareholders' equity | ||||||
Current liabilities | ||||||
Accounts payable and accrued liabilities | 9 | $ | 17,423 | $ | 15,189 | |
Borrowings | 10 | 18,934 | 17,379 | |||
Other liabilities | 1,392 | 1,141 | ||||
Lease liabilities | 11 | 1,698 | 1,681 | |||
Derivative liabilities and hedged firm commitments | 7, 20 | 747 | 988 | |||
Total current liabilities | 40,194 | 36,378 | ||||
Non-current liabilities | ||||||
Other liabilities | 43 | 64 | ||||
Borrowings | 10 | 76,345 | 80,804 | |||
Borrowings embedded option | 10.2 | 2,244 | 1,353 | |||
Lease liabilities | 11 | 16,283 | 16,712 | |||
Asset retirement obligation | 12 | 3,502 | 3,839 | |||
Deferred tax liabilities | 4,676 | 5,275 | ||||
Derivative liabilities | 7, 20 | 200 | 51 | |||
Total non-current liabilities | 103,293 | 108,098 | ||||
Total liabilities | 143,487 | 144,476 | ||||
Shareholders' equity | ||||||
Share capital | 13 | $ | 45,032 | $ | 44,318 | |
Share-based compensation reserve | 175 | 586 | ||||
Accumulated other comprehensive (loss) income | (454) | 449 | ||||
Retained earnings | 9,606 | 10,506 | ||||
Total equity | 54,359 | 55,859 | ||||
Total liabilities and shareholders' equity | $ | 197,846 | $ | 200,335 | ||
Commitments (Note 21) | ||||||
Subsequent event (Note 22) | ||||||
Approved on behalf of the Board: | (signed) "Alan Wallace ", Director | (signed) "Frank Dennis ", Director |
- The accompanying notes form an integral part of these condensed consolidated interim financial statements. -
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SWISS WATER DECAFFEINATED COFFEE INC.
Condensed Consolidated Interim Statements of Loss | |||||
(Tabular amounts are in thousands of Canadian dollars, except for per share amounts) | |||||
(Unaudited) | |||||
3 months ended | 3 months ended | ||||
Note | March 31, 2024 | March 31, 2023 | |||
Revenue | 14, 18 | $ | 38,730 | $ | 49,045 |
Cost of sales | (33,615) | (44,151) | |||
Gross profit | 5,115 | 4,894 | |||
Operating expenses | |||||
Administration expenses | (2,837) | (2,697) | |||
Sales and marketing expenses | (914) | (773) | |||
Total operating expenses | (3,751) | (3,470) | |||
Operating income | 1,364 | 1,424 | |||
Non-operating or other | |||||
(Loss) gain on risk management activities | (149) | 111 | |||
Loss on fair value of embedded option | 10.2 | (891) | (968) | ||
Finance income | 460 | 437 | |||
Finance expense | (2,288) | (1,837) | |||
Gain (loss) on foreign exchange | 380 | (84) | |||
Total non-operating or other | (2,488) | (2,341) | |||
Loss before tax | (1,124) | (917) | |||
Income tax recovery | 224 | 216 | |||
Net loss | $ | (900) | $ | (701) | |
Earnings per share | |||||
Basic and diluted loss per share | 17 | $ | (0.10) | $ | (0.08) |
- The accompanying notes form an integral part of these condensed consolidated interim financial statements. -
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SWISS WATER DECAFFEINATED COFFEE INC.
Condensed Consolidated Interim Statements of Comprehensive Loss and Condensed Consolidated Interim Statements of Changes in Equity
(Tabular amounts are in thousands of Canadian dollars except for amounts of shares) (Unaudited)
Condensed Consolidated Interim Statements of Comprehensive Loss | ||||||||||||
3 months ended | 3 months ended | |||||||||||
March 31, 2024 | March 31, 2023 | |||||||||||
Net loss | $ | (900) | $ | (701) | ||||||||
Other comprehensive (loss) income net of tax | ||||||||||||
Items that may be subsequently reclassified to income: | ||||||||||||
Unrealized loss | ||||||||||||
Derivatives designated as cash flow hedges - currency risk hedges on US$ future revenue | (1,380) | (1) | ||||||||||
Items reclassified to income: | ||||||||||||
Realized loss recognized in income | ||||||||||||
Derivatives designated as cash flow hedges | ||||||||||||
- currency risk hedges on US$ future revenue, recognized in revenue | 171 | 313 | ||||||||||
Other comprehensive (loss) income related to hedging activities | (1,209) | 312 | ||||||||||
Tax recovery (expense) on other comprehensive (loss) income related to hedging activities | 326 | (84) | ||||||||||
Cumulative translation adjustment | (20) | 2 | ||||||||||
Other comprehensive (loss) income net of tax | (903) | 230 | ||||||||||
Net loss and other comprehensive loss | $ | (1,803) | $ | (471) | ||||||||
Condensed Consolidated Interim Statements of Changes in Equity | ||||||||||||
Share capital | Share-based | Accumulated other | ||||||||||
compensation | comprehensive | |||||||||||
Note | Shares | Amount | reserve | income (loss) | Retained earnings | Total equity | ||||||
Balance at December 31, 2022 | 9,165,815 | $ | 44,194 | $ | 375 | $ | (697) | $ | 11,034 | $ | 54,906 | |
Shares issued for restricted share units | 47,140 | 124 | (124) | - | - | - | ||||||
Settlement of loan with restricted share units | - | - | (27) | - | - | (27) | ||||||
Share-based compensation | - | - | 113 | - | - | 113 | ||||||
Net loss and other comprehensive income | - | - | - | 230 | (701) | (471) | ||||||
Balance at March 31, 2023 | 9,212,955 | $ | 44,318 | $ | 337 | $ | (467) | $ | 10,333 | $ | 54,521 | |
Balance at December 31, 2023 | 9,212,955 | $ | 44,318 | $ | 586 | $ | 449 | $ | 10,506 | $ | 55,859 | |
Shares issued for restricted share units | 13.4 | 247,597 | 714 | (714) | - | - | - | |||||
Share-based compensation | - | - | 303 | - | - | 303 | ||||||
Net loss and other comprehensive loss | - | - | - | (903) | (900) | (1,803) | ||||||
Balance at March 31, 2024 | 9,460,552 | $ | 45,032 | $ | 175 | $ | (454) | $ | 9,606 | $ | 54,359 | |
- The accompanying notes form an integral part of these condensed consolidated interim financial statements. -
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SWISS WATER DECAFFEINATED COFFEE INC.
Condensed Consolidated Interim Statements of Cash Flows For the | ||||
(Tabular amounts are in thousands of Canadian dollars) | ||||
(Unaudited) | ||||
3 months ended | 3 months ended | |||
Note | March 31, 2024 | March 31, 2023 | ||
Operating activities | ||||
Net loss | $ | (900) | $ | (701) |
Items not affecting cash: | ||||
Depreciation and amortization | 1,716 | 3,582 | ||
Share-based compensation expense | 535 | 493 | ||
Unrealized (loss) gain on risk management activities | (38) | 74 | ||
Unrealized loss on fair value of embedded option | 10.2 | 891 | 968 | |
Finance income | (460) | (437) | ||
Finance expense | 2,288 | 1,837 | ||
Income tax recovery | (224) | (216) | ||
Other | (476) | 51 | ||
3,332 | 5,651 | |||
Change in non-cash working capital relating to | ||||
operating activities | 19 | 4,710 | (6,028) | |
Net cash generated from (used in) operations | 8,042 | (377) | ||
Interest received | 393 | 297 | ||
Interest paid | 19 | (1,413) | (1,226) | |
Net cash generated from (used in) operating activities | 7,022 | (1,306) | ||
Investing activities | ||||
Additions to plant and equipment | 19 | (351) | (8,300) | |
Net cash used in investing activities | (351) | (8,300) | ||
Financing activities | ||||
Payment of lease liabilities | (413) | (455) | ||
Proceeds from credit facility | - | 2,600 | ||
Repayments of credit facility | (3,750) | - | ||
Proceeds from construction loans | - | 5,842 | ||
Transaction costs related to debt financing activities | 19 | - | (352) | |
Net cash (used in) generated from financing activities | (4,163) | 7,635 | ||
Increase (decrease) in cash and cash equivalents | 2,508 | (1,971) | ||
Cash and cash equivalents, beginning of the period | 11,091 | 3,761 | ||
Cash and cash equivalents, end of the period | $ | 13,599 | $ | 1,790 |
Supplemental cash flow information (Note 19) |
- The accompanying notes form an integral part of these condensed consolidated interim financial statements. -
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SWISS WATER DECAFFEINATED COFFEE INC.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months ended March 31, 2024 and 2023
(Tabular amounts are in thousands of Canadian dollars, except shares and per share amounts) (Unaudited)
-
THE COMPANY AND ITS OPERATIONS
Swiss Water Decaffeinated Coffee Inc., ("Swiss Water" or the "Company"), is an entity incorporated under the Canada Business Corporations Act ("CBCA"). The common shares of the Company are listed on the Toronto Stock Exchange under the symbol 'SWP'. The Company's head office is located at 7750 Beedie
Way, Delta, British Columbia, V4G 0A5, Canada.
Swiss Water is primarily involved in the decaffeination of green coffee without the use of chemicals by employing the proprietary SWISS WATER® Process. The Company leverages science-based systems and quality controls to produce coffee that is 99.9% caffeine free.
Swiss Water owns all of the interests of Seaforth Supply Chain Solutions Inc. ("Seaforth"), which is incorporated under CBCA and operates in Delta, British Columbia, Canada; Swiss Water Decaffeinated
Coffee Company USA, Inc. ("SWUS"), an entity registered in Washington State, USA, and; Swiss Water Decaffeinated Coffee Europe SARL ("SWEU"), an entity registered in Bordeaux, France.
Seaforth provides a complete range of green coffee handling and storage services, while SWUS and SWEU act as marketing and sales companies and do not have significant assets. - BASIS OF PREPARATION
The Company's condensed consolidated interim financial statements for the three months ended March 31, 2024 have been prepared in accordance with International Accounting Standards 34 - Interim
Financial Reporting ("IAS 34") as issued by the International Accounting Standards Board ("IASB").
Accordingly, certain disclosures included in the annual financial statements prepared in accordance with
International Financial Reporting Standards ("IFRS") as issued by the IASB have been condensed or omitted. These condensed consolidated interim financial statements should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 2023.
The accounting policies applied in the preparation of these condensed consolidated interim financial statements are consistent with those applied and disclosed in the Company's audited consolidated financial statements for the year ended December 31, 2023.
These condensed consolidated interim financial statements are presented in Canadian dollars. Except for per share amounts, all amounts are expressed in thousands of Canadian dollars, unless otherwise stated. References to US$ are to the United States dollars.
These condensed consolidated interim financial statements for the three months ended March 31, 2024, were approved for issuance by the Company's Directors on May 7, 2024. There were no significant non- adjusting events that occurred between the reporting date and the date of authorization, other than as disclosed in the 'Subsequent Event' note.
2.1 New and amended standards
The following amendments to accounting standards became effective for annual periods beginning on or after January 1, 2024. The adoption of these revised standards by the Company did not have a material impact on its condensed consolidated interim financial statements.
- IAS 7 Statement of Cash Flows and IFRS 7 Financial instruments disclosures contain amendments that require disclosures of the effects of supplier finance arrangements on an entity's liabilities and cash flows, as well as liquidity risk and risk management.
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SWISS WATER DECAFFEINATED COFFEE INC.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months ended March 31, 2024 and 2023
(Tabular amounts are in thousands of Canadian dollars, except shares and per share amounts) (Unaudited)
- IFRS 16 Leases has amended guidance over accounting for lease liability in a sale and leaseback transaction.
- IAS 1 Presentation of financial statements was amended to clarify the classification of non- current liabilities with covenants, depending on the rights that exist at the end of the reporting period. Liabilities should be classified as non-current if a company has a substantive right to defer settlement for at least 12 months at the end of the reporting period.
2.2 New and amended standards not yet effective
These standards are effective for periods beginning after January 1, 2025, and the Company does not anticipate a material impact on its financial statements:
- IFRS 10 Consolidated financial statements and IAS 28 Investments in associates and joint ventures relate to the sale or contribution of assets between an investor and its associate or joint venture, and the amendments clarify accounting for a subsidiary when a parent company loses control of the subsidiary. IAS 28 amended equity method procedures. The amendments' effective date is not yet determined, early adoption is permitted.
- IAS 21 The effects of changes in foreign exchange rates was amended to specify how to determine whether a currency is exchangeable into another currency and how to determine the spot exchange rate when a currency lacks exchangeability.
-
CAPITAL MANAGEMENT
The Company's policy is to maintain a strong capital base to maintain investor, creditor and market confidence and to sustain the future development of the business. The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. The Company considers its capital structure to include shareholders' equity and indebtedness. In order to maintain or adjust the capital structure, the Company may from time-to-time issue common shares, issue preferred shares, issue additional debt, adjust its capital spending, modify its dividend policy, and/or dispose of certain assets to manage current and projected debt levels. - CASH AND CASH EQUIVALENTS
Cash includes cash held with banks and financial institutions. The Company has invested $7.7 million in thirty (30) day cashable Guaranteed Investment Certificates ("GIC") with a financial services firm, at rates between 4.65% and 5.05% (December 31, 2023: $6.0 million). - ACCOUNTS RECEIVABLE
Accounts receivable are amounts due from customers for goods sold or services performed in the ordinary course of business. Information about the Company's exposure to foreign currency risk, interest rate risk and credit risk can be found in the 'Financial risk management' note. The Company monitors lifetime expected credit losses using the simplified approach, which is determined based on historic and adjusted relevant forward-looking information. The Company's customers have a negligible default rate and the
Company's experience in both frequency and amount of losses are not significant. As a result, the expected credit losses provision as at March 31, 2024 was nil (December 31, 2023: $0.1 million).
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SWISS WATER DECAFFEINATED COFFEE INC.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months ended March 31, 2024 and 2023
(Tabular amounts are in thousands of Canadian dollars, except shares and per share amounts) (Unaudited)
6. INVENTORIES
During the three months ended March 31, 2024, the cost of inventories recognized in cost of sales was $32.6 million (2023: $39.6 million). The hedge accounting component represents the derivative adjustment related to designated hedges for inventory on hand as at each reporting period. As at March 31, 2024, the inventory provision was $0.2 million (December 31, 2023: $0.8 million). During the three months ended March 31, 2024, cost of sales includes a $0.5 million recovery related to the inventory provision (2023: $0.1 million expense).
March 31, 2024 December 31, 2023 | ||||
Raw materials | $ | 13,269 | $ | 18,500 |
Finished goods | 10,803 | 10,347 | ||
Carbon | 511 | 472 | ||
Packaging | 361 | 243 | ||
Hedge accounting component | 451 | 776 | ||
$ | 25,395 | $ | 30,338 |
7. DERIVATIVE FINANCIAL INSTRUMENTS
The Company's derivative financial instruments were carried at fair value through profit or loss as follows:
March 31, 2024 | December 31, 2023 | |||
Net coffee futures contracts | $ | 1,165 | $ | 1,273 |
Net US dollar forward contracts, current | (27) | (200) | ||
Net US dollar forward contracts, long-term | (1) | - | ||
Borrowings embedded option | Note 10.2 | (2,244) | (1,353) | |
$ | (1,107) | $ | (280) |
The Company's derivative financial instruments were carried at fair value through other comprehensive income as follows:
March 31, 2024 | December 31, 2023 | |||
Net US dollar forward contracts, current | $ | (520) | $ | 8 |
Net US dollar forward contracts, long-term | (89) | 591 | ||
$ | (609) | $ | 599 |
8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment comprise owned and leased right-of-use assets.
March 31, 2024 December 31, 2023 | ||||
Property, plant and equipment | $ | 118,747 | $ | 120,116 |
Right-of-use assets | 15,163 | 15,620 | ||
$ | 133,910 | $ | 135,736 |
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SWISS WATER DECAFFEINATED COFFEE INC.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months ended March 31, 2024 and 2023
(Tabular amounts are in thousands of Canadian dollars, except shares and per share amounts) (Unaudited)
8.1 Property, plant and equipment
Machinery and | Leasehold | Computer | Furniture and | Construction | ||||||||||
equipment | Building | improvements | equipment | fixtures | in progress | Total | ||||||||
Cost | ||||||||||||||
January 1, 2024 | $ | 108,311 | $ | 18,159 | $ | 7,235 | $ | 677 | $ | 171 | $ | 80 | $ | 134,633 |
Additions | 96 | - | - | - | - | 258 | 354 | |||||||
ARO remeasurement | - | - | (366) | - | - | - | (366) | |||||||
Transfers | 231 | - | - | 5 | 1 | (237) | - | |||||||
March 31, 2024 | $ | 108,638 | $ | 18,159 | $ | 6,869 | $ | 682 | $ | 172 | $ | 101 | $ | 134,621 |
Accumulated depreciation | ||||||||||||||
January 1, 2024 | $ | (10,735) | (2,699) | (575) | (392) | (116) | - | (14,517) | ||||||
Depreciation | (886) | (318) | (117) | (29) | (7) | - | (1,357) | |||||||
March 31, 2024 | $ | (11,621) | $ | (3,017) | $ | (692) | $ | (421) | $ | (123) | $ | - | $ | (15,874) |
March 31, 2024 | $ | 97,017 | $ | 15,142 | $ | 6,177 | $ | 261 | $ | 49 | $ | 101 | $ | 118,747 |
Machinery and | Leasehold | Computer | Furniture and | Construction | ||||||||||
equipment | Building | improvements | equipment | fixtures | in progress | Total | ||||||||
Cost | ||||||||||||||
January 1, 2023 | $ | 83,069 | $ | 13,880 | $ | 11,915 | $ | 1,224 | $ | 280 | $ | 41,779 | $ | 152,147 |
Additions | 5 | - | 916 | - | 10 | 15,268 | 16,199 | |||||||
Disposals | (27,065) | - | (5,846) | (683) | (119) | - | (33,713) | |||||||
Transfers | 52,302 | 4,279 | 250 | 136 | - | (56,967) | - | |||||||
December 31, 2023 | $ | 108,311 | $ | 18,159 | $ | 7,235 | $ | 677 | $ | 171 | $ | 80 | $ | 134,633 |
Accumulated depreciation | ||||||||||||||
January 1, 2023 | $ | (32,787) | $ | (1,889) | $ | (5,583) | $ | (983) | $ | (211) | $ | - | $ | (41,453) |
Depreciation | (5,013) | (810) | (838) | (92) | (24) | - | (6,777) | |||||||
Disposals | 27,065 | - | 5,846 | 683 | 119 | - | 33,713 | |||||||
December 31, 2023 | $ | (10,735) | $ | (2,699) | $ | (575) | $ | (392) | $ | (116) | $ | - | $ | (14,517) |
December 31, 2023 | $ | 97,576 | $ | 15,460 | $ | 6,660 | $ | 285 | $ | 55 | $ | 80 | $ | 120,116 |
For the three months ended March 31, 2024, the total depreciation expense was $1.4 million (2023: $3.0
million), of which, $1.3 million was depreciation charged to cost of sales (2023: $2.9 million), while $0.1
million of depreciation charges were included in administrative expenses (2023: $0.1 million). From the
expensed depreciation, a total of $0.1 million was allocated from cost of sales to inventory (2023: $0.04 million).
Plant and equipment in Delta BC
The Burnaby lease expired in June 2023. During 2023, the Company salvaged $1.3 million in assets from the production facility in Burnaby. These assets were repurposed at the Delta location and put to use effective January 1, 2024, where they are depreciated over their remaining useful lives.
Effective September 1, 2023, Swiss Water completed the construction of its second production line and commenced producing commercial-grade chemical free decaffeinated coffee. As such, the Company transferred a total of $57.0 million of costs from construction in progress to machinery and equipment and started depreciating over its useful life ranging between 10 and 35 years.
Plant and equipment at legacy location in Burnaby BC
Effective January 1, 2023, the Company reduced the estimated useful life of the non-salvaged assets located at its production facility in Burnaby, by 12 years. The useful life of these assets was re-aligned
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SWISS WATER DECAFFEINATED COFFEE INC.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months ended March 31, 2024 and 2023
(Tabular amounts are in thousands of Canadian dollars, except shares and per share amounts) (Unaudited)
against the final production date at the site, which was in April 2023. At the time of the change in estimate, these assets had a carrying value of approximately $3.0 million. The financial impact of the change in estimate was an incremental depreciation expense of $2.1 million for the three months ended March 31, 2023. There was no such change in estimate during the three months ended March 31, 2024, as the Company exited the Burnaby location in June 2023.
8.2 Right-of-use assets
For the three months ended March 31, 2024, total depreciation expense was $0.5 million (2023: $0.5
million), of which $0.4 million was charged to cost of sales (2023: $0.4 million) and $0.1 million was
included in administrative expense (2023: 0.1 million).
9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities comprise the following:
March 31, 2024 December 31, 2023 | ||||
Accounts payable | $ | 13,567 | $ | 11,458 |
Accrued liabilities | 3,856 | 3,731 | ||
$ | 17,423 | $ | 15,189 |
10. BORROWINGS
As at and during the three months ended March 31, 2024, the Company was in compliance with all banks' and creditor's covenants. The Company's borrowings are as follows:
March 31, 2024 December 31, 2023 | |||||
Construction loans with BDC and FCC | Note 10.1 | $ | 56,832 | $ | 56,824 |
Debenture with warrants with MRC | Note 10.2 | 14,951 | 14,631 | ||
Credit facility | Note 10.3 | 23,496 | 26,728 | ||
Borrowings, total | $ | 95,279 | $ | 98,183 | |
Less current portion | |||||
Construction loans with BDC and FCC | Note 10.1 | (3,983) | (2,748) | ||
Debenture with warrants with MRC | Note 10.2 | (14,951) | (14,631) | ||
Borrowings, current | $ | (18,934) | $ | (17,379) | |
Borrowings, non-current | $ | 76,345 | $ | 80,804 |
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Swiss Water Decaffeinated Coffee Inc. published this content on 08 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 May 2024 21:43:40 UTC.