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South State Corporation Reports First Quarter 2019 Results and Declares Increase in Quarterly Cash Dividend
COLUMBIA, S.C.–(BUSINESS WIRE)–South State Corporation (NASDAQ: SSB) today released its unaudited
results of operations and other financial information for the
three-month period ended March 31, 2019. Highlights for the first
quarter of 2019 include the following:
- GAAP diluted EPS improvement of 8.7% compared to last year
- Adjusted diluted EPS declined by 9.4% compared to last year
- Loan growth totaled $128.3 million, or 4.7% annualized for the quarter
-
Deposit growth totaled $272.0 million, or 9.5% annualized for the
quarter, with 58% of the growth from noninterest bearing deposits -
Noninterest expense decreased by $15.2 million, or 13.4%, compared to
last year -
Adjusted noninterest expense declined by $5.0 million, or 5.0%,
compared to last year -
Asset quality remains strong as net charge-offs on non-acquired loans
totaled 2 basis points annualized, or $493,000, during the first
quarter of 2019 -
Non-performing assets to total assets were 0.27%, and remain at
historically low level - Repurchased 500,000 common shares in Q1 2019 for $33.3 million
-
Tangible book value per share improved 9% annualized to $37.15 per
share, and the dividend increased $0.05 per share, or 15.2%, compared
to last year
During the first quarter of 2019, South State positioned the balance
sheet for future growth, and took other actions to improve profitability
and include the following:
- Secured longer-term funding of $500.0 million over 4 to 5 year period;
-
Increased on-hand liquidity by approximately $600.0 million in order
to fund future loan / securities growth; -
With the current environment, plan to continue the systematic
repurchase of common shares of the Company; and -
Identified annual cost saving initiatives of approximately $13.0
million (pre-tax), and expect to recognize $10.0 million in 2019,
which includes the previously announced branch consolidations of $2.5
million annualized cost savings; allowing for limited growth in
noninterest expense.
“The first quarter marked a positive start to the year,” said Robert R.
Hill, Jr., CEO of South State Corporation. “South State experienced
solid loan and deposit growth, exhibited good expense control, and
positioned the balance sheet to accommodate further loan growth. We also
continue to utilize our capital position to enhance shareholder value
through increased dividends and common stock repurchases. Additionally,
during the past few weeks we moved into a new headquarters in Richmond,
Virginia and opened the first of two new offices in Raleigh, North
Carolina. Both of these markets demonstrated strong results in the first
quarter. Finally, we added 13 new bankers to our sales team and
experienced further adoption of our digital platform.”
Quarterly Cash Dividend and Common Stock Repurchase Plan
The Board of Directors of South State Corporation declared a quarterly
cash dividend on April 25, 2019, of $0.40 per share payable on its
common stock. This per share amount is higher by $0.02 per share, or
5.3%, compared to last quarter and $0.06 per share, or 17.6%, higher
than the same quarter one year ago. The dividend will be payable on May
17, 2019 to shareholders of record as of May 10, 2019.
As previously announced, the Board of Directors of South State
Corporation announced the authorization for the repurchase of up to
1,000,000 common shares of the Company’s common stock (the “Repurchase
Program”). During the first quarter of 2019, the Company bought back
500,000 shares during the first week of February at an average price of
$66.53 per share, or $33.3 million. This results in an estimated
increase in diluted EPS annually of approximately $0.08 per share. The
Company intends to remain active in repurchasing shares and will seek
authorization for additional share repurchases given the current
environment and the Company’s capital strategy. The Company is not
obligated to repurchase any such shares under the Repurchase Program,
but any such purchases will be executed in open market transactions at
prevailing market prices, in privately negotiated transactions, or by
other means in accordance with federal securities laws. Repurchases
under any approved Repurchase Program must be executed within one year
or would require additional Federal Reserve approval.
In addition, as a part of the company’s capital strategy, the Company
intends to continue managing capital within the established long-term
range of 8% to 9% of tangible common equity to tangible assets; and the
dividend payout range for shareholders has been adjusted to 30% to 35%
annually, from the historical range of 25% to 30%.
Branch consolidation and other cost initiatives – 2019
In mid-January 2019, the Company scheduled the close of 13 branch
locations during 2019. Most are scheduled for the second quarter of
2019. In addition, certain cost reduction initiatives began during the
first quarter of 2019. The expected cost associated with these closures
and cost initiatives has been estimated to be approximately $3.2
million, and primarily includes personnel, facilities and equipment
cost. The annual savings of these closures and cost initiatives is
expected to be $13.0 million, and the impact on 2019 is anticipated to
be approximately $10.0 million.
First Quarter 2019 Financial Performance |
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Three Months Ended | |||||||||||||||||||||
(Dollars in thousands, except per share data) | Mar. 31, | Dec. 31, | Sept. 30, | June 30, | Mar. 31, | ||||||||||||||||
INCOME STATEMENT | 2019 | 2018 | 2018 | 2018 | 2018 | ||||||||||||||||
Interest income | |||||||||||||||||||||
Loans, including fees (8) | $ | 131,834 | $ | 132,541 | $ | 132,043 | $ | 129,852 | $ | 127,041 | |||||||||||
Investment securities, federal funds sold and securities purchased |
11,556 | 11,327 | 11,517 | 11,880 | 11,007 | ||||||||||||||||
Total interest income | 143,390 | 143,868 | 143,560 | 141,732 | 138,048 | ||||||||||||||||
Interest expense | |||||||||||||||||||||
Deposits | 16,645 | 15,310 | 13,220 | 10,009 | 6,913 | ||||||||||||||||
Federal funds purchased, securities sold under agreements to |
3,478 | 2,166 | 2,051 | 2,161 | 2,162 | ||||||||||||||||
Total interest expense | 20,123 | 17,476 | 15,271 | 12,170 | 9,075 | ||||||||||||||||
Net interest income | 123,267 | 126,392 | 128,289 | 129,562 | 128,973 | ||||||||||||||||
Provision for loan losses | 1,488 | 3,734 | 3,117 | 4,478 | 2,454 | ||||||||||||||||
Net interest income after provision for loan losses | 121,779 | 122,658 | 125,172 | 125,084 | 126,519 | ||||||||||||||||
Noninterest income* | 32,058 | 35,642 | 32,027 | 37,525 | 40,555 | ||||||||||||||||
Pre-tax operating expense* | 97,125 | 96,664 | 95,818 | 96,410 | 102,167 | ||||||||||||||||
Branch consolid./acquisition and merger expense | 1,114 | — | 4,476 | 14,096 | 11,296 | ||||||||||||||||
Total noninterest expense | 98,239 | 96,664 | 100,294 | 110,506 | 113,463 | ||||||||||||||||
Income before provision for income taxes | 55,598 | 61,636 | 56,905 | 52,103 | 53,611 | ||||||||||||||||
Provision for income taxes, includes deferred tax revaluation | 11,231 | 12,632 | 9,823 | 11,644 | 11,285 | ||||||||||||||||
Net income | $ | 44,367 | $ | 49,004 | $ | 47,082 | $ | 40,459 | $ | 42,326 | |||||||||||
Adjusted net income (non-GAAP) (3) | |||||||||||||||||||||
Net income (GAAP) | $ | 44,367 | $ | 49,004 | $ | 47,082 | $ | 40,459 | $ | 42,326 | |||||||||||
Securities losses (gains), net of tax | (432 | ) | 2 | 9 | 505 | — | |||||||||||||||
Provision for income taxes, deferred tax revaluation | — | — | (1,602 | ) | 613 | — | |||||||||||||||
FHLB prepayment penalty | 107 | — | — | — | — | ||||||||||||||||
Branch consolid./acquisition and merger expense, net of tax | 782 | – | 3,577 | 11,112 | 8,918 | ||||||||||||||||
Adjusted net income (non-GAAP) | $ | 44,824 | $ | 49,006 | $ | 49,066 | $ | 52,689 | $ | 51,244 | |||||||||||
Basic earnings per common share | $ | 1.25 | $ | 1.36 | $ | 1.28 | $ | 1.10 | $ | 1.15 | |||||||||||
Diluted earnings per common share | $ | 1.25 | $ | 1.35 | $ | 1.28 | $ | 1.09 | $ | 1.15 | |||||||||||
Adjusted net income per common share – Basic (non-GAAP) (3) | $ | 1.26 | $ | 1.36 | $ | 1.34 | $ | 1.44 | $ | 1.40 | |||||||||||
Adjusted net income per common share – Diluted (non-GAAP) (3) | $ | 1.26 | $ | 1.35 | $ | 1.33 | $ | 1.43 | $ | 1.39 | |||||||||||
Dividends per common share | $ | 0.38 | $ | 0.36 | $ | 0.35 | $ | 0.34 | $ | 0.33 | |||||||||||
Basic weighted-average common shares outstanding | 35,445,087 | 36,154,922 | 36,645,181 | 36,676,887 | 36,646,198 | ||||||||||||||||
Diluted weighted-average common shares outstanding | 35,618,705 | 36,364,873 | 36,893,496 | 36,928,981 | 36,899,068 | ||||||||||||||||
Effective tax rate | 20.20 | % | 20.49 | % | 17.26 | % | 22.35 | % | 21.05 | % | |||||||||||
* These lines include a reclassification of network costs |
|||||||||||||||||||||
The Company reported consolidated net income of $44.4 million, or $1.25
per diluted common share for the three-months ended March 31, 2019, a
$4.6 million decrease, or $0.10 per share decline in EPS compared to the
fourth quarter of 2018. Compared to the first quarter of 2018, net
income totaled $42.3 million, or $1.15 per diluted common share.
Weighted average diluted shares declined by 746,000, from the fourth
quarter of 2018, due to the continuation of the Company buying back
shares under the Repurchase Program, which improved first quarter
diluted EPS by $0.03 per diluted share. Net interest income was down
$3.1 million compared to the fourth quarter of 2018 on $478,000 lower
interest income and $2.6 million higher interest expense. The interest
income decline was primarily the result of acquired loan interest income
declining more than the increase in non-acquired loan interest income.
Overall acquired loan accretion declined by $525,000 in the first
quarter of 2019 compared to the fourth quarter of 2018. The increase in
interest expense was due to the continued competition within our markets
for deposits and an increase in borrowings from the FHLB. The Company’s
cost of interest-bearing liabilities was 0.89% for the first quarter of
2019, an increase of 0.11% from the fourth quarter of 2018. Compared to
the first quarter of 2018, cost of funds increased by 0.48% which was
primarily the result of rising interest rates and competition within our
markets. The total provision for loan losses decreased $2.2 million
compared to the fourth quarter of 2018. Valuation allowance impairment
(release) related to acquired loans was $13,000 compared to $710,000
impairment in the fourth quarter of 2018. Several pools, in the fourth
quarter of 2018, within the acquired credit impaired loan portfolio
resulted in declining estimated cash flows and larger impairment. The
provision for loan losses related to acquired non-credit impaired loans
was lower by $406,000 compared to the fourth quarter of 2018. The
provision for loan losses on non-acquired loans was $1.1 million lower
compared to the fourth quarter of 2018 due primarily to continuation of
strong asset quality indicators and low net charge offs. Noninterest
income decreased by $3.6 million resulting primarily from declines in
each revenue category, except for net securities gains totaling $541,000
in the first quarter of 2019. Noninterest expense was higher by $1.6
million due to $980,000 in branch consolidation and other cost
initiatives and $134,000 in an FHLB prepayment penalty (no merger and
conversion related charges incurred in 4Q 2018). Absent the branch
consolidation expense, cost initiative expense and the FHLB prepayment
penalty, our noninterest expense increased by $461,000, which can be
attributed to an increase in other expense related to passive investment
losses on tax advantaged investments. All other variances in noninterest
expense offset.
Income Tax Expense
During the first quarter of 2019, our effective income tax rate declined
to 20.20% from 20.49% in the fourth quarter of 2018 and from 21.05% in
the first quarter of 2018. The primary factor in the lower effective tax
rate compared to the fourth quarter of 2018 was due to a reduction in
pre-tax book income, while the reduction in the rate compared to the
first quarter of 2018 was due primarily to an increase in federal tax
credits available, offset partially by an increase in pre-tax book
income.
Balance Sheet and Capital |
|||||||||||||||||||||||||||
(dollars in thousands, except per share and share data) | Ending Balance | ||||||||||||||||||||||||||
Mar. 31, | Dec. 31, | Sept. 30, | June 30, | Mar. 31, | |||||||||||||||||||||||
BALANCE SHEET | 2019 | 2018 | 2018 | 2018 | 2018 | ||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||
Cash and cash equivalents | $ | 949,591 | $ | 408,983 | $ | 307,309 | $ | 396,849 | $ | 644,504 | |||||||||||||||||
Investment securities: | |||||||||||||||||||||||||||
Securities held to maturity | – | – | 500 | 499 | 1,274 | ||||||||||||||||||||||
Securities available for sale, at fair value | 1,466,249 | 1,517,067 | 1,551,281 | 1,577,999 | 1,640,837 | ||||||||||||||||||||||
Other investments | 40,624 | 25,604 | 19,229 | 19,229 | 23,479 | ||||||||||||||||||||||
Total investment securities | 1,506,873 | 1,542,671 | 1,571,010 | 1,597,727 | 1,665,590 | ||||||||||||||||||||||
Loans held for sale | 33,297 | 22,925 | 33,752 | 36,968 | 42,690 | ||||||||||||||||||||||
Loans: | |||||||||||||||||||||||||||
Acquired credit impaired | 452,258 | 485,119 | 512,633 | 551,979 | 597,274 | ||||||||||||||||||||||
Acquired non-credit impaired | 2,378,737 | 2,594,826 | 2,786,102 | 3,076,424 | 3,274,938 | ||||||||||||||||||||||
Non-acquired | 8,310,613 | 7,933,286 | 7,606,478 | 7,197,539 | 6,762,512 | ||||||||||||||||||||||
Less allowance for non-acquired loan losses | (52,008 | ) | (51,194 | ) | (49,869 | ) | (47,874 | ) | (45,203 | ) | |||||||||||||||||
Loans, net | 11,089,600 | 10,962,037 | 10,855,344 | 10,778,068 | 10,589,521 | ||||||||||||||||||||||
Other real estate owned (“OREO”) | 11,297 | 11,410 | 12,119 | 17,222 | 11,073 | ||||||||||||||||||||||
Premises and equipment, net | 322,553 | 241,076 | 241,909 | 245,288 | 253,605 | ||||||||||||||||||||||
Bank owned life insurance | 230,629 | 230,105 | 229,075 | 227,588 | 226,222 | ||||||||||||||||||||||
Deferred tax asset | 31,884 | 37,128 | 47,943 | 48,853 | 46,736 | ||||||||||||||||||||||
Mortgage servicing rights | 32,415 | 34,727 | 36,056 | 35,107 | 34,196 | ||||||||||||||||||||||
Core deposit and other intangibles | 59,619 | 62,900 | 66,437 | 69,975 | 70,376 | ||||||||||||||||||||||
Goodwill | 1,002,900 | 1,002,900 | 1,002,900 | 1,002,722 | 999,592 | ||||||||||||||||||||||
Other assets | 136,229 | 119,466 | 118,361 | 110,121 | 105,004 | ||||||||||||||||||||||
Total assets | $ | 15,406,887 | $ | 14,676,328 | $ | 14,522,215 | $ | 14,566,488 | $ | 14,689,109 | |||||||||||||||||
Liabilities and Shareholders’ Equity | |||||||||||||||||||||||||||
Deposits: | |||||||||||||||||||||||||||
Noninterest-bearing | $ | 3,219,864 | $ | 3,061,769 | $ | 3,157,478 | $ | 3,152,828 | $ | 3,120,818 | |||||||||||||||||
Interest-bearing | 8,699,107 | 8,585,164 | 8,456,397 | 8,485,461 | 8,542,280 | ||||||||||||||||||||||
Total deposits | 11,918,971 | 11,646,933 | 11,613,875 | 11,638,289 | 11,663,098 | ||||||||||||||||||||||
Federal funds purchased and securities sold under agreements to |
276,891 | 270,649 | 279,698 | 331,969 | 357,574 | ||||||||||||||||||||||
Other borrowings | 616,250 | 266,084 | 115,919 | 115,754 | 215,589 | ||||||||||||||||||||||
Other liabilities | 218,298 | 126,366 | 144,584 | 132,109 | 130,269 | ||||||||||||||||||||||
Total liabilities | 13,030,410 | 12,310,032 | 12,154,076 | 12,218,121 | 12,366,530 | ||||||||||||||||||||||
Shareholders’ equity: | |||||||||||||||||||||||||||
Preferred stock – $.01 par value; authorized 10,000,000 shares | — | — | — | — | — | ||||||||||||||||||||||
Common stock – $2.50 par value; authorized 80,000,000 shares | 88,421 | 89,574 | 91,808 | 92,064 | 91,958 | ||||||||||||||||||||||
Surplus | 1,719,396 | 1,750,495 | 1,805,685 | 1,811,446 | 1,807,989 | ||||||||||||||||||||||
Retained earnings | 582,034 | 551,108 | 515,155 | 480,928 | 452,982 | ||||||||||||||||||||||
Accumulated other comprehensive loss | (13,374 | ) | (24,881 | ) | (44,509 | ) | (36,071 | ) | (30,350 | ) | |||||||||||||||||
Total shareholders’ equity | 2,376,477 | 2,366,296 | 2,368,139 | 2,348,367 | 2,322,579 | ||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 15,406,887 | $ | 14,676,328 | $ | 14,522,215 | $ | 14,566,488 | $ | 14,689,109 | |||||||||||||||||
Common shares issued and outstanding | 35,368,521 | 35,829,549 | 36,723,238 | 36,825,556 | 36,783,438 | ||||||||||||||||||||||
At March 31, 2019, the Company’s total assets were $15.4 billion, an
increase of $730.6 million, from December 31, 2018, and an increase of
$717.8 million, or 4.9%, from March 31, 2018. During the first quarter
of 2019, changes in the balance sheet include the following:
-
Net loan growth totaled $128.3 million, or 4.7% annualized.
Non-acquired loans increased by $377.3 million or 19.3% annualized and
acquired loans decreased by $249.0 million, or 32.7% annualized. -
Sold 25,000 shares of Class B VISA common stock recognizing a gain of
$3.5 million (11,500 shares remain). -
Sold $134.5 million of investment securities with an average yield of
2.10%; and purchased $122.8 million of investment securities with an
average yield of 3.14%. The sold securities resulted in a loss
totaling approximately $3.0 million. -
Executed two 90-day FHLB advances of $350.0 million and $150.0 million
each with a cash flow hedge, effectively locking in four and five year
funding, respectively, at 2.44% and 2.21%. $150.0 million of the
proceeds from the advances retired an existing FHLB advance, and the
remainder will be utilized to increase the size of the investment
portfolio and support future loan growth. - Deposit growth totaled $272.0 million, or 9.5% annualized.
-
Repurchased 500,000 common shares totaling $33.3 million under current
Repurchase Program. -
These actions resulted in cash and cash equivalents increasing by
$540.6 million from December 31, 2018.
The Company’s book value per common share increased to $67.19 per share
at March 31, 2019, compared to $66.04 at December 31, 2018 and $63.14 at
March 31, 2018. Total equity (capital) increased by $10.2 million due to
the improvement in the unrealized loss position of available for sale
securities at March 31, 2019. The shares of common stock repurchased
under the Repurchase Program and the dividend paid to the shareholders
was offset by the net income recorded during the first quarter of 2019.
Tangible book value (“TBV”) per common share increased by $0.85 per
share to $37.15 at March 31, 2019, compared to $36.30 at December 31,
2018, and increased by $3.10 per share, or 9.1%, from $34.05 at March
31, 2018. The quarterly increase of $0.85 per share in tangible book
value was the result of (1) earnings per share, excluding amortization
of intangibles, of $1.32, offset by the dividend paid to shareholders of
$0.38 per share; (2) an increase from the change in AOCI of $0.33 per
share; (3) the increase from the impact of share-based compensation and
employee stock purchases of $0.03 per share; and (4) a net decrease of
$0.45 per share due primarily to the buyback of 500,000 shares of common
stock.
“The Company took advantage of the balance sheet optionality and
increased liquidity to allow for both loan and securities growth,” said
John C. Pollok, Chief Financial Officer. “In addition, we will continue
to (1) focus on our capital management opportunities, and (2) focus on
expense management initiatives identified that should allow for limited
expense growth.”
Performance and Capital Ratios |
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Three Months Ended | |||||||||||||||||||||||||||
Mar. 31, | Dec. 31, | Sept. 30, | June 30, | Mar. 31, | |||||||||||||||||||||||
PERFORMANCE RATIOS | 2019 | 2018 | 2018 | 2018 | 2018 | ||||||||||||||||||||||
Return on average assets (annualized) | 1.21 | % | 1.33 | % | 1.28 | % | 1.12 | % | 1.19 | % | |||||||||||||||||
Adjusted return on average assets (annualized) (non-GAAP) (3) | 1.23 | % | 1.33 | % | 1.33 | % | 1.45 | % | 1.44 | % | |||||||||||||||||
Return on average equity (annualized) | 7.61 | % | 8.24 | % | 7.89 | % | 6.96 | % | 7.41 | % | |||||||||||||||||
Adjusted return on average equity (annualized) (non-GAAP) (3) | 7.69 | % | 8.24 | % | 8.23 | % | 9.06 | % | 8.98 | % | |||||||||||||||||
Return on average tangible common equity (annualized) (non-GAAP) (7) | 14.66 | % | 15.91 | % | 15.29 | % | 13.79 | % | 14.69 | % | |||||||||||||||||
Adjusted return on average tangible common equity (annualized) (non-GAAP) (3) (7) |
14.80 | % | 15.91 | % | 15.90 | % | 17.68 | % | 17.60 | % | |||||||||||||||||
Efficiency ratio (tax equivalent) | 63.24 | % | 59.43 | % | 62.31 | % | 65.63 | % | 66.67 | % | |||||||||||||||||
Adjusted efficiency ratio (non-GAAP) (9) | 62.52 | % | 59.43 | % | 59.53 | % | 57.26 | % | 60.04 | % | |||||||||||||||||
Dividend payout ratio (2) | 30.29 | % | 26.63 | % | 27.30 | % | 30.93 | % | 28.68 | % | |||||||||||||||||
Book value per common share | $ | 67.19 | $ | 66.04 | $ | 64.49 | $ | 63.77 | $ | 63.14 | |||||||||||||||||
Tangible common equity per common share (non-GAAP) (7) | $ | 37.15 | $ | 36.30 | $ | 35.37 | $ | 34.64 | $ | 34.05 | |||||||||||||||||
CAPITAL RATIOS | |||||||||||||||||||||||||||
Equity-to-assets | 15.42 | % | 16.12 | % | 16.31 | % | 16.12 | % | 15.81 | % | |||||||||||||||||
Tangible equity-to-tangible assets (non-GAAP) (7) | 9.16 | % | 9.56 | % | 9.65 | % | 9.45 | % | 9.20 | % | |||||||||||||||||
Tier 1 common equity (6) | 11.8 | % | 12.1 | % | 12.3 | % | 12.0 | % | 11.8 | % | |||||||||||||||||
Tier 1 leverage (6) | 10.5 | % | 10.6 | % | 10.8 | % | 10.6 | % | 10.5 | % | |||||||||||||||||
Tier 1 risk-based capital (6) | 12.8 | % | 13.1 | % | 13.3 | % | 13.0 | % | 12.8 | % | |||||||||||||||||
Total risk-based capital (6) | 13.3 | % | 13.6 | % | 13.8 | % | 13.5 | % | 13.3 | % | |||||||||||||||||
OTHER DATA | |||||||||||||||||||||||||||
Number of branches | 168 | 168 | 168 | 169 | 179 | ||||||||||||||||||||||
Number of employees (full-time equivalent basis) | 2,589 | 2,602 | 2,640 | 2,654 | 2,700 |
Asset Quality |
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Ending Balance | |||||||||||||||||||||||||||
Mar. 31, | Dec. 31, | Sept. 30, | June 30, | Mar. 31, | |||||||||||||||||||||||
(Dollars in thousands) | 2019 | 2018 | 2018 | 2018 | 2018 | ||||||||||||||||||||||
NONPERFORMING ASSETS: | |||||||||||||||||||||||||||
Non-acquired | |||||||||||||||||||||||||||
Non-acquired nonperforming loans | $ | 15,910 | $ | 15,018 | $ | 15,315 | $ | 14,870 | $ | 14,307 | |||||||||||||||||
Non-acquired OREO and other nonperforming assets | 4,070 | 4,037 | 3,229 | 8,179 | 2,363 | ||||||||||||||||||||||
Total non-acquired nonperforming assets | 19,980 | 19,055 | 18,544 | 23,049 | 16,670 | ||||||||||||||||||||||
Acquired | |||||||||||||||||||||||||||
Acquired nonperforming loans | 14,558 | 13,651 | 10,800 | 9,590 | 8,233 | ||||||||||||||||||||||
Acquired OREO and other nonperforming assets | 7,782 | 7,755 | 9,302 | 9,527 | 9,139 | ||||||||||||||||||||||
Total acquired nonperforming assets | 22,340 | 21,406 | 20,102 | 19,117 | 17,372 | ||||||||||||||||||||||
Total nonperforming assets | $ | 42,320 | $ | 40,461 | $ | 38,646 | $ | 42,166 | $ | 34,042 | |||||||||||||||||
Three Months Ended | |||||||||||||||||||||||||||
Mar. 31, | Dec. 31, | Sept. 30, | June 30, | Mar. 31, | |||||||||||||||||||||||
2019 | 2018 | 2018 | 2018 | 2018 | |||||||||||||||||||||||
ASSET QUALITY RATIOS: | |||||||||||||||||||||||||||
Allowance for non-acquired loan losses as a percentage of |
0.63 | % | 0.65 | % | 0.66 | % | 0.67 | % | 0.67 | % | |||||||||||||||||
Allowance for non-acquired loan losses as a percentage of |
326.89 | % | 340.88 | % | 325.62 | % | 321.95 | % | 315.95 | % | |||||||||||||||||
Net charge-offs on non-acquired loans as a percentage of average |
0.02 | % | 0.06 | % | 0.07 | % | 0.01 | % | 0.02 | % | |||||||||||||||||
Net charge-offs on acquired non-credit impaired loans as a |
0.03 | % | 0.09 | % | 0.01 | % | 0.14 | % | 0.02 | % | |||||||||||||||||
Total nonperforming assets as a percentage of total assets |
0.27 | % | 0.28 | % | 0.27 | % | 0.29 | % | 0.23 | % | |||||||||||||||||
Excluding Acquired Assets | |||||||||||||||||||||||||||
NPLs as a percentage of period end non-acquired loans (1) | 0.19 | % | 0.19 | % | 0.20 | % | 0.21 | % | 0.21 | % | |||||||||||||||||
Total nonperforming assets as a percentage of total non-acquired |
0.24 | % | 0.24 | % | 0.24 | % | 0.32 | % | 0.25 | % | |||||||||||||||||
Total nonperforming assets as a percentage of total assets (5) |
0.13 | % | 0.13 | % | 0.13 | % | 0.16 | % | 0.11 | % | |||||||||||||||||
Total nonperforming assets increased by $1.9 million to $42.3 million,
representing 0.27% of total assets, a decrease of 1 basis point compared
to December 31, 2018. The decrease was the result of an increase in
total assets of $730.6 million during the quarter. Non-performing
acquired non-credit impaired loans increased $907,000, and total $14.6
million. Legacy non-performing loans increased by $892,000 during the
first quarter of 2019 to $15.9 million at March 31, 2019. The allowance
for loan losses as a percentage of non-acquired nonaccrual loans was
327% at March 31, 2019, down from 341% in the fourth quarter of 2018,
and up from 316% at March 31, 2018.
At March 31, 2019, the allowance for non-acquired loan losses was $52.0
million, or 0.63%, of non-acquired period-end loans and $51.2 million,
or 0.65%, at December 31, 2018, and $45.2 million, or 0.67% at March 31,
2018. Net charge-offs within the non-acquired portfolio were $493,000,
or 0.02% annualized, in the first quarter of 2019, compared to $1.1
million, or 0.06% annualized, in the fourth quarter of 2018. First
quarter 2018 net charge-offs totaled $367,000, or 0.02% annualized. Net
charge-offs (recoveries) related to the non-acquired loan portfolio were
($235,000) during the first quarter of 2019. The remaining net
charge-offs were from overdraft and ready reserve accounts and totaled
$728,000.
During the first quarter of 2019, the provision for loan losses totaled
$1.3 million for the non-acquired loan portfolio compared to $2.5
million in the fourth quarter of 2018, and $2.1 million in the first
quarter of 2018.
Net charge offs related to “acquired non-credit impaired loans” were
$168,000, or 0.03% annualized, in the first quarter of 2019; and the
Company recorded a provision for loan losses, accordingly. Net
charge-offs in the fourth quarter of 2018 totaled $574,000, or 0.09%
annualized, and in the first quarter of 2018, net charge-offs totaled
$169,000, or 0.02% annualized. The charge off level within the acquired
non-credit impaired portfolio remains as expected.
During the first quarter of 2019, the Company recorded a net impairment
of $13,000 within the acquired credit impaired loan pools compared to
$710,000 impairment in the fourth quarter of 2018. During the first
quarter of 2018, the Company recorded net impairment of $163,000.
Total OREO remained relatively consistent from the end of 2018 and
declined to $11.3 million at March 31, 2019, down from $11.4 million at
December 31, 2018.
Net Interest Income and Margin |
||||||||||||||||||||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||||||||||||||||
March 31, 2019 | December 31, 2018 | March 31, 2018 | ||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Average | Income/ | Yield/ | Average | Income/ | Yield/ | Average | Income/ | Yield/ | |||||||||||||||||||||||||||||
YIELD ANALYSIS | Balance | Expense | Rate | Balance | Expense | Rate | Balance | Expense | Rate | |||||||||||||||||||||||||||||
Interest-Earning Assets: | ||||||||||||||||||||||||||||||||||||||
Federal funds sold, reverse repo, and time deposits | $ | 248,620 | $ | 1,463 | 2.39 | % | $ | 172,849 | $ | 1,032 | 2.37 | % | $ | 165,752 | $ | 660 | 1.61 | % | ||||||||||||||||||||
Investment securities (taxable) | 1,327,336 | 8,597 | 2.63 | % | 1,358,978 | 8,838 | 2.58 | % | 1,453,480 | 8,788 | 2.45 | % | ||||||||||||||||||||||||||
Investment securities (tax-exempt) | 187,732 | 1,496 | 3.23 | % | 188,666 | 1,457 | 3.06 | % | 212,719 | 1,559 | 2.97 | % | ||||||||||||||||||||||||||
Loans held for sale | 19,308 | 214 | 4.49 | % | 24,820 | 291 | 4.65 | % | 32,517 | 307 | 3.83 | % | ||||||||||||||||||||||||||
Loans | 11,023,005 | 131,620 | 4.84 | % | 10,928,294 | 132,250 | 4.80 | % | 10,604,506 | 126,734 | 4.85 | % | ||||||||||||||||||||||||||
Total interest-earning assets | 12,806,001 | 143,390 | 4.54 | % | 12,673,607 | 143,868 | 4.50 | % | 12,468,974 | 138,048 | 4.49 | % | ||||||||||||||||||||||||||
Noninterest-earning assets | 2,006,898 | 1,924,666 | 1,960,659 | |||||||||||||||||||||||||||||||||||
Total Assets | $ | 14,812,899 | $ | 14,598,273 | $ | 14,429,633 | ||||||||||||||||||||||||||||||||
Interest-Bearing Liabilities: | ||||||||||||||||||||||||||||||||||||||
Transaction and money market accounts | $ | 5,429,375 | $ | 9,340 | 0.70 | % | $ | 5,310,048 | $ | 8,498 | 0.63 | % | $ | 5,221,974 | $ | 2,893 | 0.22 | % | ||||||||||||||||||||
Savings deposits | 1,379,688 | 1,256 | 0.37 | % | 1,416,227 | 1,324 | 0.37 | % | 1,443,868 | 674 | 0.19 | % | ||||||||||||||||||||||||||
Certificates and other time deposits | 1,773,365 | 6,049 | 1.38 | % | 1,804,939 | 5,488 | 1.21 | % | 1,758,223 | 3,346 | 0.77 | % | ||||||||||||||||||||||||||
Federal funds purchased and repurchase agreements | 284,350 | 753 | 1.07 | % | 273,994 | 660 | 0.96 | % | 343,974 | 454 | 0.54 | % | ||||||||||||||||||||||||||
Other borrowings | 301,696 | 2,725 | 3.66 | % | 122,676 | 1,506 | 4.87 | % | 225,496 | 1,708 | 3.07 | % | ||||||||||||||||||||||||||
Total interest-bearing liabilities | 9,168,474 | 20,123 | 0.89 | % | 8,927,884 | 17,476 | 0.78 | % | 8,993,535 | 9,075 | 0.41 | % | ||||||||||||||||||||||||||
Noninterest-bearing liabilities | 3,280,126 | 3,310,416 | 3,120,746 | |||||||||||||||||||||||||||||||||||
Shareholders’ equity | 2,364,299 | 2,359,973 | 2,315,352 | |||||||||||||||||||||||||||||||||||
Total Non-IBL and shareholders’ equity | 5,644,425 | 5,670,389 | 5,436,098 | |||||||||||||||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 14,812,899 | $ | 14,598,273 | $ | 14,429,633 | ||||||||||||||||||||||||||||||||
Net interest income and margin (NON-TAX EQUIV.) | $ | 123,267 | 3.90 | % | $ | 126,392 | 3.96 | % | $ | 128,973 | 4.19 | % | ||||||||||||||||||||||||||
Net interest margin (TAX EQUIVALENT) | 3.92 | % | 3.98 | % | 4.22 | % | ||||||||||||||||||||||||||||||||
Overall Cost of Funds (including demand deposits) | 0.67 | % | 0.57 | % | 0.31 | % | ||||||||||||||||||||||||||||||||
Contacts
Media Contact:
Kellee McGahey (843) 529-5574
Analyst Contact:
Jim Mabry (843) 529-5593
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Cannabis
IM Cannabis Reports First Quarter Financial Results
IMC prepares for accelerated growth after legalization in Germany and recovers from the impact of the Israel-Hamas war.
TORONTO and GLIL YAM, Israel, May 8, 2024 /PRNewswire/ — IM Cannabis Corp. (the “Company” or “IMC“) (NASDAQ: IMCC) (CSE: IMCC), an international medical cannabis company, announced its financial results today for the first quarter ended March 31, 2024. All amounts are reported in Canadian dollars and compared to the quarter ended March 31, 2023, unless otherwise stated.
Q1 2024 Financial Highlights
- 13% Revenue increase vs. Q4 2023 of $12.1M vs. $10.7M and 4% decrease vs. Q1 2023 of $12.5M
- 125% Gross profit increase vs. Q4 2023 of $1.8M vs. $0.8 and 39% Gross profit decrease vs. Q1 2023 of $2.9M
- 29% decrease in operating expenses vs. Q1 2023 excluding the one-time Oranim revoke related losses of $4.6M vs. $6.5M and 14% increase including Oranim
- 12% increase of Non-IFRS Adjusted EBITDA loss to $2.1M
Operational Highlights
The Company intends to complete a non-brokered private placement (the “Offering“) of secured convertible debentures of the Company (each, a “Debenture“) for aggregate proceeds of up to C$2,500,000. The Debentures will mature on the date that is 12 months from the date of issuance and will not incur interest except in the event of default. The Debentures are being issued to holders of short term loans and obligations owed by the Company or its wholly owned subsidiaries. The principal of the Debenture may be converted into common shares in the Company (each, a “Share“) at a conversion price of $1.08 per Share.
Management Commentary
“With the April 1st cannabis legalization in Germany, we are augmenting our focus and resources on the German market, where we expect to see the biggest growth potential, and the best return on investment. While it is still too early to make any predictions, our sales in Germany almost doubled during the month of April,” said Oren Shuster, Chief Executive Officer of IMC. “Looking back on the first month post legalization in Germany, I see that we have the infrastructure and the supply agreements in place to continue delivering the accelerated growth we have already seen in April. We will also ensure that we have the necessary resources in place for success.”
“In 2023 we completely restructured, becoming a very lean and agile company, leaning into active cost management. This process is reflected in the numbers, our G&A decreased 27% vs Q1 2023” said Uri Birenberg, Chief Financial Officer of IMC. “While our results have recovered from the impact of the Israel-Hamas war, our revenue was still effected by both an unfavorable exchange rate, as well as price reductions to sell off inventory.”
Q1 2024 Conference Call
The Company will host a Zoom web conference call today at 9:00 a.m. ET to discuss the results, followed by a question-and-answer session for the investment community. Investors are invited to register by clicking here. All relevant information will be sent upon registration.
If you are unable to join us live, a recording of the call will be available on our website at https://investors.imcannabis.com/ within 24 hours after the call.
Q1 2024 Financial Results
- Revenues for the first quarter of 2024 were $12.1 million compared to $12.5 million in the first quarter of 2023, a decrease of 3%. The decrease is mainly due an exchange rate effect of about $0.2 million and decrease in avg. price per sale due to increased competition.
- Gross profit for the first quarter of 2024 was $1.8 million, compared to $2.9 million in Q1 2024, a decrease of 39%. The downside is attributed mainly to the slow-moving stock that was moved out at a lower price and an exchange rate difference totaling $0.4 million and $0.64 million cost of sales loss due to an inventory erase of the slow-moving stock. Company fair value adjustment was $0 and $0.4 million for the Q1 2024 and Q1 2023 respectively.
- Total Dried Flower sold in Q1 2024 was approximately 1,873 kg with an average selling price of $5.68 per gram, compared to approximately 1,842kg in Q1 2023, with an average selling price of $6.59 per gram. This difference is mainly due to increased competition within the retail segment, and mid-range stock discounts to move out slow moving stock.
- Total operating expenses in Q1 2024 were $7.4 million compared to $6.5 million in Q1 2023. The increase is due to the other operating expenses related to Oranim Deal revoke, with an expected losses of $2.8 million. Adjusting for this one-time losses, Q1 2024 operating expenses were $4.6 million compared to $6.5 million in Q1 2023, a decrease of 29%.
- G&A Expenses in Q1 2024 were $2.3 million, compared to $3.2 million in Q1 2023, a decrease of 28%. The decrease in the G&A expense is attributable mainly to salaries and professional services of $0.64 million.
- Selling and Marketing Expenses in Q1 2024 were $2.3 million, compared to $2.8 million in Q1 2023, a decrease of 18% mainly due to a decrease in Salaries and professional services of $0.5 million.
- Net Loss from continuing operations in Q1 2024 was $6.0 million, compared to $0.9 million in Q12023.
- Basic and diluted Loss per Share in Q1 2024 was $0.42, compared to a loss of $0.05 per Share in Q1 2023.
- Non-IFRS Adjusted EBITDA loss in Q1 2024 was $2.1 million, compared to an Adjusted EBITDA loss of $1.9 million in Q1 2023 an increase of 10%.
- Cash and Cash Equivalents as of March 31, 2024, were $1.0 million compared to $1.8 million in December 31, 2023.
- Total assets as of March 31, 2024, were $41.1 million, compared to $48.8 million in December 31, 2023, a decrease of 16%. The decrease is mainly attributed to the goodwill reduction due to Oranim agreement cancelation of about $2.8M, a reduction in Inventory of $2.1 million, reduction of Cash and cash equivalents of $0.8M and reduction in Trade payables of $1.2 million.
- Total Liabilities as of March 31, 2024, were $32.8 million, compared to $35.1 in December 31, 2023, a decrease of about 7%. The decrease was mainly due to the reduction in other accounts payables and accrued expenses of $1.8 million and reduction in the PUT option liability of $0.7 million.
The Company’s financial statements as of March 31, 2024 includes a note regarding the Company’s ability to continue as a going concern. The Company’s Q1 2024 financial results do not include any adjustments relating to the recoverability and classification of assets or liabilities that might be necessary should the Company be unable to continue as a going concern. For more information, please refer to the “Liquidity and Capital Resources” and “Risk Factors” sections in the Company’s management’s discussion and analysis for the quarter ended March 31, 2024.
Non-IFRS Measures
This press release makes reference to “Gross Margin” and “Adjusted EBITDA”, which are financial measures that are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. These measures are provided as complementary information to the Company’s IFRS measures by providing further understanding of our results of operations from management’s perspective. Accordingly, these measures should neither be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS.
For an explanation of how management defines Gross Margin and Adjusted EBITDA, see the Company’s management’s discussion and analysis for the period ended March 31, 2024, available under the Company’s SEDAR+ profile at www.sedarplus.ca on EDGAR at www.sec.gov/edgar.
We reconcile these non-IFRS financial measures to the most comparable IFRS measures as set out below.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION |
||||||
Canadian Dollars in thousands |
||||||
March 31, |
December 31, |
|||||
Note |
(Unaudited) |
|||||
ASSETS |
||||||
CURRENT ASSETS: |
||||||
Cash and cash equivalents |
$ 1,048 |
$ 1,813 |
||||
Trade receivables |
6,506 |
7,651 |
||||
Advances to suppliers |
780 |
936 |
||||
Other accounts receivable |
3,732 |
3,889 |
||||
Inventories |
3 |
7,901 |
9,976 |
|||
19,967 |
24,265 |
|||||
NON-CURRENT ASSETS: |
||||||
Property, plant and equipment, net |
4,939 |
5,058 |
||||
Investments in affiliates |
2,078 |
2,285 |
||||
Right-of-use assets, net |
1,243 |
1,307 |
||||
Intangible assets, net |
5,440 |
5,803 |
||||
Goodwill |
7,442 |
10,095 |
||||
21,142 |
24,548 |
|||||
Total assets |
$ 41,109 |
$ 48,813 |
||||
The accompanying notes are an integral part of the interim condensed consolidated financial statements. |
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION |
||||||
Canadian Dollars in thousands |
||||||
March 31, |
December 31, |
|||||
Note |
(Unaudited) |
|||||
LIABILITIES AND EQUITY |
||||||
CURRENT LIABILITIES:
|
||||||
Trade payables |
$ 9,511 |
$ 9,223 |
||||
Bank loans and credit facilities |
11,941 |
12,119 |
||||
Other accounts payable and accrued expenses |
4,440 |
6,218 |
||||
Accrued purchase consideration liabilities |
2,165 |
2,097 |
||||
PUT Option liability |
1,967 |
2,697 |
||||
Current maturities of operating lease liabilities |
461 |
454 |
||||
30,485 |
32,808 |
|||||
NON-CURRENT LIABILITIES:
|
||||||
Warrants measured at fair value |
4 |
137 |
38 |
|||
Operating lease liabilities |
744 |
815 |
||||
Long-term loans |
401 |
394 |
||||
Employee benefit liabilities, net |
96 |
95 |
||||
Deferred tax liability, net |
902 |
963 |
||||
2,280 |
2,305 |
|||||
Total liabilities |
32,765 |
35,113 |
||||
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY: |
5 |
|||||
Share capital and premium |
253,887 |
253,882 |
||||
Translation reserve |
1,399 |
95 |
||||
Reserve from share-based payment transactions |
9,664 |
9,637 |
||||
Accumulated deficit |
(255,431) |
(249,145) |
||||
Total equity attributable to equity holders of the Company |
9,519 |
14,469 |
||||
Non-controlling interests |
(1,175) |
(769) |
||||
Total equity |
8,344 |
13,700 |
||||
Total liabilities and equity |
$ 41,109 |
$ 48,813 |
||||
The accompanying notes are an integral part of the interim condensed consolidated financial statements. |
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS |
||||||
AND OTHER COMPREHENSIVE INCOME (UNAUDITED) |
||||||
Canadian Dollars in thousands, except per share data |
||||||
Three months ended March 31, |
||||||
Note |
2024 |
2023 (*) |
||||
Revenues |
$ 12,063 |
$ 12,529 |
||||
Cost of revenues |
10,274 |
9,286 |
||||
Gross profit before fair value adjustments |
1,789 |
3,243 |
||||
Fair value adjustments: |
||||||
Realized fair value adjustments on inventory sold in the period |
(10) |
(339) |
||||
Total fair value adjustments |
(10) |
(339) |
||||
Gross profit |
1,779 |
2,904 |
||||
General and administrative expenses |
2,332 |
3,175 |
||||
Selling and marketing expenses |
2,292 |
2,805 |
||||
Restructuring expenses |
– |
283 |
||||
Share-based compensation |
32 |
258 |
||||
Other operating expenses |
9 |
2,753 |
– |
|||
Total operating expenses |
7,409 |
6,521 |
||||
Operating loss |
5,630 |
3,617 |
||||
Finance income |
4 |
(14) |
3,530 |
|||
Finance expense |
(487) |
(795) |
||||
Finance income, net |
(501) |
2,735 |
||||
Gain (loss) before income taxes |
(6,131) |
(882) |
||||
Income tax benefit |
(111) |
(16) |
||||
Net )loss( gain |
(6,020) |
(866) |
||||
Other comprehensive income that will not be reclassified to profit or loss in |
||||||
Total other comprehensive income that will not be reclassified to profit or loss |
67 |
36 |
||||
Exchange differences on translation to presentation currency |
1,330 |
(562) |
||||
Total other comprehensive income (loss) that will not be reclassified to profit |
1,397 |
(526) |
||||
Other comprehensive income that will be reclassified to profit or loss in |
||||||
Adjustments arising from translating financial statements of foreign operation |
(35) |
155 |
||||
Total other comprehensive income (loss) that will be reclassified to profit or loss |
(35) |
155 |
||||
Total other comprehensive income (loss) |
1,362 |
(371) |
||||
Total comprehensive loss |
$ (4,658) |
$ (1,237) |
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS |
||||||
AND OTHER COMPREHENSIVE INCOME (UNAUDITED) |
||||||
Canadian Dollars in thousands, except per share data |
||||||
Three months ended March 31, |
||||||
Note |
2024 |
2023 (*) |
||||
Net income (loss) attributable to: |
||||||
Equity holders of the Company |
(5,623) |
(600) |
||||
Non-controlling interests |
(397) |
(266) |
||||
$ (6,020) |
$ (866) |
|||||
Total comprehensive income (loss) attributable to: |
||||||
Equity holders of the Company |
(4,252) |
(959) |
||||
Non-controlling interests |
(406) |
(278) |
||||
$ (4,658) |
$ (1,237) |
|||||
Net income (loss) per share attributable to equity holders of the Company: |
7 |
|||||
Basic and diluted (loss) gain per share (in CAD) |
$ (0.42) |
$ (0.05) |
||||
Earnings (loss) per share attributable to equity holders of the Company |
||||||
Basic and diluted (loss) gain per share (in CAD) |
$ (0.42) |
$ (0.05) |
||||
(*) See note 1 regarding figures disclosure. |
||||||
The accompanying notes are an integral part of the interim condensed consolidated financial statements. |
||||||
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) |
||||
Canadian Dollars in thousands |
||||
Three months ended March 31, |
||||
2024 |
2023 (*) |
|||
Cash provided by operating activities: |
||||
Net income (loss) for the period |
$ (6,020) |
$ 43 |
||
Adjustments for non-cash items: |
||||
Fair value adjustment on sale of inventory |
10 |
339 |
||
Fair value adjustment on Warrants, investments and accounts receivable |
100 |
(3,636) |
||
Depreciation of property, plant and equipment |
147 |
174 |
||
Amortization of intangible assets |
452 |
456 |
||
Depreciation of right-of-use assets |
118 |
179 |
||
Impairment of goodwill |
2,753 |
– |
||
Finance expenses, net |
401 |
635 |
||
Deferred tax liability, net |
(69) |
(150) |
||
Share-based payment |
32 |
258 |
||
Restructuring expense |
– |
283 |
||
3,944 |
(1,462) |
|||
Changes in working capital: |
||||
Decrease (increase) in trade receivables |
1,332 |
1,937 |
||
Decrease (increase) in other accounts receivable and advances to suppliers |
159 |
(940) |
||
Decrease (increase) in inventories, net of fair value adjustments |
2,159 |
90 |
||
Decrease (increase) in trade payables |
663 |
(6,021) |
||
Changes in employee benefit liabilities, net |
– |
(22) |
||
Increase in other accounts payable and accrued expenses |
(2,745) |
(14) |
||
1,568 |
(4,970) |
|||
Taxes (paid) received |
(121) |
328 |
||
Net cash used in operating activities |
(629) |
(6,061) |
||
Cash flows from investing activities: |
||||
Purchase of property, plant and equipment |
(2) |
(411) |
||
Payment of purchase consideration |
– |
(56) |
||
Net cash used in investing activities |
$ (2) |
$ (467) |
||
The accompanying notes are an integral part of the interim condensed consolidated financial statements. |
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) |
||||
Canadian Dollars in thousands |
||||
Three months ended March 31, |
||||
2024 |
2023 |
|||
Cash flow from financing activities: |
||||
Proceeds from issuance of share capital, net of issuance costs |
176 |
825 |
||
Proceeds from issuance of warrants |
(176) |
7,027 |
||
Repayment of lease liability |
(118) |
(175) |
||
Interest paid – lease liability |
(15) |
(18) |
||
Receipt (repayment) of bank loan and credit facilities |
(2,856) |
(1,046) |
||
Cash paid for interest |
(444) |
(56) |
||
Proceeds from discounted checks |
2,581 |
|||
Net cash (used in) provided by financing activities |
(852) |
6,557 |
||
Effect of foreign exchange on cash and cash equivalents |
718 |
(1,059) |
||
Decrease in cash and cash equivalents |
(765) |
(1,030) |
||
Cash and cash equivalents at beginning of the period |
1,813 |
2,449 |
||
Cash and cash equivalents at end of the period |
$ 1,048 |
$ 1,419 |
||
Supplemental disclosure of non-cash activities: |
||||
Right-of-use asset recognized with corresponding lease liability |
$ 40 |
$ 49 |
||
Issuance of shares in payment of debt settlement to a non-independent director of the company |
$ – |
$ 222 |
||
(*) See note 1 regarding Figures disclosure. |
||||
The accompanying notes are an integral part of the interim condensed consolidated financial statements. |
About IM Cannabis Corp.
IMC (Nasdaq: IMCC) (CSE: IMCC) is an international cannabis company that provides premium cannabis products to medical patients in Israel and Germany, two of the largest medical cannabis markets. The Company has exited operations in Canada to pivot its focus and resources to achieve sustainable and profitable growth in its highest value markets, Israel and Germany. The Company leverages a transnational ecosystem powered by a unique data-driven approach and a globally sourced product supply chain. With an unwavering commitment to responsible growth and compliance with the strictest regulatory environments, the Company strives to amplify its commercial and brand power to become a global high-quality cannabis player.
The IMC ecosystem operates in Israel through Focus Medical Herbs Ltd., which imports and distributes cannabis to medical patients, leveraging years of proprietary data and patient insights. The Company also operates medical cannabis retail pharmacies, online platforms and logistical hubs in Israel that enable the safe delivery and quality control of IMC products throughout the entire value chain. In Germany, the IMC ecosystem operates through Adjupharm GmbH, where it distributes cannabis to pharmacies for medical cannabis patients. The Company also operated in Canada through Trichome Financial Corp and its wholly owned subsidiaries. The Company has exited operations in Canada and considers these operations as discontinued.
Disclaimer for Forward-Looking Statements
This press release contains forward-looking information or forward-looking statements under applicable Canadian and United States securities laws (collectively, “forward-looking statements“). All information that addresses activities or developments that we expect to occur in the future are forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as “seek”, “anticipate”, “believe”, “plan”, “estimate”, “expect”, “likely” and “intend” and statements that an event or result “may”, “will”, “should”, “could” or “might” occur or be achieved and other similar expressions. Forward-looking statements are based on the estimates and opinions of management on the date the statements are made. In the press release, such forward-looking statements include, but are not limited to, statements relating to: the impact of the Israel-Hamas war on the Company, including its operations and the medical cannabis industry in Israel; the timing and impact of the legalization of medicinal cannabis in Germany, including, the Company having it “all in house”; the Company being positioned to take advantage of the legalization; the Company’s growth in 2024; the market growth for medicinal cannabis in Germany; the stated benefits of the Company’s EU-GMP processing facility and an EU-GDP logistics center; the Company to host a teleconference meeting as stated; and the Company’s stated goals, scope, and nature of operations in Germany, Israel, and other jurisdictions the Company may operate.
Forward-looking statements are based on assumptions that may prove to be incorrect, including but not limited to: the Company’s ability to focus and resources to achieve sustainable and profitable growth in its highest value markets; the Company’s ability to mitigate the impact of the Israel-Hamas war on the Company; the Company’s ability to take advantage of the legalization of medicinal cannabis in Germany; the Company’s ability to host a teleconference meeting as stated; and the Company’s ability to carry out its stated goals, scope, and nature of operations in Germany, Israel, and other jurisdictions the Company may operate.
The above lists of forward-looking statements and assumptions are not exhaustive. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated or implied by such forward-looking statements due to a number of factors and risks. These include: the failure of the Company to comply with applicable regulatory requirements in a highly regulated industry; unexpected changes in governmental policies and regulations in the jurisdictions in which the Company operates; the Company’s ability to continue to meet the listing requirements of the Canadian Securities Exchange and the NASDAQ Capital Market; any unexpected failure to maintain in good standing or renew its licenses; the ability of the Company and its subsidiaries (collectively, the “Group“) to deliver on their sales commitments or growth objectives; the reliance of the Group on third-party supply agreements to provide sufficient quantities of medical cannabis to fulfil the Group’s obligations; the Group’s possible exposure to liability, the perceived level of risk related thereto, and the anticipated results of any litigation or other similar disputes or legal proceedings involving the Group; the impact of increasing competition; any lack of merger and acquisition opportunities; adverse market conditions; the inherent uncertainty of production quantities, qualities and cost estimates and the potential for unexpected costs and expenses; risks of product liability and other safety-related liability from the usage of the Group’s cannabis products; supply chain constraints; reliance on key personnel; the risk of defaulting on existing debt; risks surrounding war, conflict and civil unrest in Eastern Europe and the Middle East, including the impact of the Israel-Hamas war on the Company, its operations and the medical cannabis industry in Israel; risks associated with the Company focusing on the Israel and Germany markets; the inability of the Company to achieve sustainable profitability and/or increase shareholder value; the inability of the Company to actively manage costs and/or improve margins; the inability of the company to grow and/or maintain sales; the inability of the Company to meet its goals and/or strategic plans; the inability of the Company to reduce costs and/or maintain revenues; the Company’s inability to take advantage of the legalization of medicinal cannabis in Germany; and the Company’s inability to host a teleconference meeting as stated.
Please see the other risks, uncertainties and factors set out under the heading “Risk Factors” in the Company’s annual report dated March 28, 2024, which is available on the Company’s issuer profile on SEDAR+ at www.sedarplus.ca and Edgar at www.sec.gov/edgar. Any forward-looking statement included in this press release is made as of the date of this press release and is based on the beliefs, estimates, expectations and opinions of management on the date such forward looking information is made. The Company does not undertake any obligation to update forward-looking statements except as required by applicable securities laws. Investors should not place undue reliance on forward-looking statements. Forward-looking statements contained in this press release are expressly qualified by this cautionary statement.
Company Contact:
Anna Taranko, Director Investor & Public Relations
IM Cannabis Corp.
+49 157 80554338
[email protected]
Oren Shuster, CEO
IM Cannabis Corp.
+972-77-3603504
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Humboldt
Humboldt Seed Company partners with Apollo Green to bring California cannabis genetics to the global marketplace
Apollo Green to distribute Humboldt Seed Company clonal cannabis genetics to Germany, Portugal and Australia
SAN FRANCISCO, April 30, 2024 /PRNewswire/ — Humboldt Seed Company (HSC), California’s leading cannabis seed producer, has announced a partnership with Canadian-based Apollo Green to make eight breeder cuts available to researchers, licensed commercial cultivators and home growers in legal markets worldwide. This first-to-market clonal genetics release is a significant milestone and will expand access to distinctive, high-quality cannabis genetics in both established and emerging global markets including Germany, Portugal and Australia.
The curated, breeder-verified selection includes pioneering triploid genetics, such as OG Triploid and Donutz Triploid alongside the legendary cult classic Blueberry Muffin. Also available are All Gas OG with a THC content of 21% and four high-THC strains in the 30-35% range: Golden Sands, Guzzlerz, Jelly Donutz and Orange Creampop. These selections represent the top .01% from HSC’s extensive California pheno-hunting program.
Exports will begin in May under Apollo Green’s Canadian federal cannabis license. All shipments have Canadian phytosanitary certification, ensuring plants have been inspected, and are clean and free of pests.
“Access for all to quality genetics has been our core focus since the beginning,” said HSC Co-founder and Chief Science Officer, Benjamin Lind. “Our science-based approach to breeding aligns perfectly with Apollo Green’s high standards and we are excited to be able to extend these hand-selected cuts to a wider audience, especially at this pivotal time where we’re seeing positive regulatory changes globally.”
Oisin Tierney, Apollo Green Director of Business Development, said, “California has long been recognized for setting industry standards, and we are proud to play a role in bringing these esteemed genetics to cultivators worldwide. The triploids are especially noteworthy in terms of the unprecedented potential for enhanced plant vigor, higher yields, shorter flowering times and superior returns for solventless extraction.”
About Humboldt Seed Company
Established in 2001, Humboldt Seed Company is a Northern California heritage brand providing quality cannabis genetics to commercial cultivators and home growers in legalized states across the U.S. and international markets including Spain, Canada, Jamaica, South Africa, Colombia, France, Portugal, Greece, the UK, Malta and Thailand. With a focus on environmental and social justice, they combine traditional breeding and modern scientific practices in their strain development program. They have served the cannabis community for over two decades.
For more information visit https://humboldtseedcompany.com/.
About Apollo Green
Licensed since 2019, Apollo Green is Canada’s leader in cannabis genetics. The company’s mission is to provide an ever-growing bank of seeds and clones to medical patients and recreational consumers. Apollo Green provides clean, trusted cannabis seeds and clones, which are backed by the foremost tissue culture technology to reduce risks, costs and time-to-market for licensed producers around the world. Apollo Green is passionate about cannabis genetics.
For more information visit https://apollogreen.com/.
Media contact
Jaana Prall
[email protected]
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View original content:https://www.prnewswire.co.uk/news-releases/humboldt-seed-company-partners-with-apollo-green-to-bring-california-cannabis-genetics-to-the-global-marketplace-302131618.html
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