2018-05-14 17:16 ET - News Release

Mr. Michael DeGiglio reports

VILLAGE FARMS INTERNATIONAL REPORTS FIRST QUARTER 2018 FINANCIAL RESULTS AND ANNOUNCES COMMENCEMENT OF COMMERCIAL-SCALE GROWING AT DELTA 3 GREENHOUSE

Village Farms International Inc. has released its financial results for the first quarter ended March 31, 2018. (All amounts are in U.S. dollars unless otherwise indicated.)

Highlights for the first quarter ended March 31, 2018 (all comparable figures are for the first quarter ended March 31, 2017):

Sales of $29.5-million (U.S.), a decrease of 6 per cent from $31.3-million (U.S.);

Net loss was $1.1-million (U.S.), or three U.S. cents per share, compared with a net loss of $200,000 (U.S.), or nil per share.

EBITDA (earnings before interest, taxes, depreciation, amortization, foreign currency exchange gains and losses on translation of long-term debt, unrealized change in biological asset, stock compensation, share of loss from joint venture, and gains and losses on asset sales) of $1.8-million (U.S.), a decrease of $1.0-million, or 34 per cent from $2.8-million (U.S.).

Cannabis joint venture (Pure Sunfarms) update:

Pure Sunfarms completed its initial cannabis harvest at the Delta 3 greenhouse, a portion of which will be submitted for testing under Health Canada's sales licensing process and the rest of which will be inventoried for sale when Pure Sunfarms receives its sales licence.

Pure Sunfarms received an amendment to its cultivation licence for the Delta 3 greenhouse from Health Canada, permitting Pure Sunfarms to initiate commercial-scale growing, which commenced today. As previously announced, senior growing, financial, human resources and operational personnel, including the established team transferred from Village Farms, as well as multiple new management hires, are in place for production ramp-up, and the search for a chief executive officer is well under way.

Pure Sunfarms finalized a contract for the short-term rental of the requisite generating equipment to power supplemental lighting during the 2018/2019 winter months, while the installation of the approved additional 24-megawatt by the local utility is in process. The power generation equipment will enable Pure Sunfarms to increase production throughout the 2018/2019 winter months, thereby accelerating the production ramp-up at the Delta 3 facility, such that Pure Sunfarms now conservatively projects production of approximately 7,000 to 8,000 kilograms in 2018 and 46,000 to 52,000 kilograms in 2019.

Pure Sunfarms entered into its first supply agreement, with Emerald Health Therapeutics Inc., under which Emerald will purchase 40 per cent of Pure Sunfarms' production in 2018 and 2019, or approximately 21,000 to 24,000 kilograms using current projected production targets, at a predetermined price per gram. Pure Sunfarms is currently in discussions with multiple parties, including provincial governments and other licensed producers, in pursuit of additional supply agreements.

"The start today of commercial-scale cannabis production at the Delta 3 facility is the most significant milestone for Pure Sunfarms to date," said Michael DeGiglio, chief executive officer, Village Farms. "We are thrilled to definitively move forward with the accelerated production plan, which significantly increases Pure Sunfarms conservative production targets to as much as 60,000 kilograms or more of dried cannabis through the end of 2019. This accelerated plan will enable Pure Sunfarms to more fully capitalize on the expected near-term shortfall of supply when adult use of cannabis is legalized in Canada.

"In addition, Pure Sunfarms' first supply agreement provides a strong initial revenue stream, while allowing the flexibility to pursue opportunities with government purchasers, as well as the significant near-term demand we are seeing from other licensed producers. With the advantage of Village Farms' decades of experience designing, building and operating large-scale greenhouse facilities and Emerald's deep cannabis expertise, I am more than confident in Pure Sunfarms' ability to steadily ramp up production in the 17 grow rooms within the 1.1-million-square-foot Delta 3 facility and consistently deliver high-quality and fulfill large-volume supply commitments.

"In our produce business, while volumes from our Ontario partners were on target, our first quarter results were impacted by lower yields at our Texas facilities, lower volumes from our Mexican supply partner and slightly lower volumes at our Delta, B.C., operations, as we have not yet fully replaced the capacity from the transfer of the Delta 3 facility to Pure Sunfarms. This capacity will be fully replaced by the fall of this year. As a result, we were unable to benefit from favourable spot market pricing as our full production was committed to contracted-price retail customers. On the cost side, we experienced an approximately 25-per-cent increase in pound-for-pound freight costs due to new U.S. regulation as of December, requiring freight companies to install electronic logging devices. This initial surge in freight costs, which impacted transportation costs in the U.S. across all industries, have since subsided to single-digit year-on-year increases."

Financial summary (in thousands of U.S. dollars unless otherwise indicated)

CONSOLIDATED FINANCIAL PERFORMANCE (in thousands of U.S. dollars, except per-share amounts) For the three months ended March 31, 2018 2017 Sales $29,490 $31,277 Cost of sales (25,902) (27,320) Selling, general and administrative expenses (3,357) (3,183) Stock compensation expense (118) (41) Change in biological asset (1) (659) (645) (Loss) income from operations (546) 88 Interest expense, net (598) (632) Other income (expense) 25 4 Share of (loss) from joint venture (237) - Provision for (recovery of) income taxes (213) (350) Net income (loss) (1,143) (190) EBITDA (2) 1,813 2,751 Income (loss) per share, basic ($0.03) ($0.00) Income (loss) per share, diluted ($0.03) ($0.00) (1) Biological assets consist of the company's produce on the vines at the period-end. Details of the changes are described in Note 5 of the company's condensed consolidated interim financial statements for the quarter ended March 31, 2018. (2) EBITDA (earnings before interest, taxes, depreciation, amortization, foreign currency exchange gains and losses on translation of long-term debt, unrealized change in biological asset, stock compensation, share of loss from joint venture, and gains and losses on asset sales) is not a recognized earnings measure and does not have a standardized meaning prescribed by international financial reporting standards. Therefore, EBITDA may not be comparable with similar measures presented by other issuers. Management believes that EBITDA is a useful supplemental measure in evaluating the performance of the company.

Conference call

Village Farms' management team will host a conference call on May 15, 2018, at 11 a.m. ET (8 a.m. PT) to discuss its first quarter 2018 financial results and provide an update on Pure Sunfarms. Participants can access the conference call by telephone by dialling 647-427-7450 or 888-231-8191 or through the Internet.

For those unable to participate in the conference call at the scheduled time, it will be archived for replay both by telephone and through the Internet beginning approximately one hour following completion of the call. To access the archived conference call by telephone, dial 416-849-0833 or 855-859-2056 and enter the passcode 9885703 followed by the number key. The telephone replay will be available until May 22, 2018, at 12 a.m. ET. The conference call will also be archived on Village Farms' website.

About Village Farms International Inc.

Village Farms International is one of the largest and longest-operating vertically integrated greenhouse growers in North America and the only publicly traded greenhouse produce company in Canada. With more than 750 years of accumulated master grower experience, coupled with advanced proprietary technology and environmentally sustainable growing practices, Village Farms is highly resource efficient. Village Farms produces and distributes fresh, premium-quality produce with consistency 365 days a year to national grocers in the United States and Canada from its large-scale Controlled Environment Agriculture (CEA) greenhouses in British Columbia and Texas, as well as from its partner greenhouses in B.C., Ontario and Mexico.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (in thousands of U.S. dollars, except per-share data) Three months ended March 31, 2018 2017 Sales $29,490 $31,277 Cost of sales (25,902) (27,320) Change in biological asset (659) (645) Selling, general and administrative expenses (3,357) (3,183) Stock compensation expense (118) (41) -------- -------- (Loss) income from operations (546) 88 Interest expense 598 632 Foreign exchange (gain) loss (7) 14 Other income (18) (26) Share of loss from joint venture 237 - (Loss) on sale of assets - 8 -------- -------- (Loss) before income taxes (1,356) (540) Recovery of income taxes (213) (350) -------- -------- Net (loss) (1,143) (190) ======== ======== Basic (loss) per share (0.03) (0.00) ======== ======== Diluted (loss) per share (0.03) (0.00) ======== ======== Other comprehensive income Foreign currency translation adjustment (55) 13 -------- -------- Comprehensive (loss) (1,198) (177) ======== ========

We seek Safe Harbor.