After rumors have circulated yesterday regarding Aurora laying off part of its staff, today the confirmation by the company has eventually arrived. On top of that, Terry Booth, CEO of Aurora, has stepped down after he announced his retirement.
Aurora CEO Terry Booth stated, "Over the last seven years, Aurora has built an incredible platform and a leading position in the global Cannabis industry. I am proud and humbled to have led that journey with a deeply talented and passionate team of employees. While there is still much work to be done, the timing is right to announce my retirement with a thoughtful succession plan in place and the immediate expansion of the Board of Directors. With my full support, the Board of Directors has appointed Michael Singer as Interim CEO effective immediately." Booth continued, "As part of the succession plan, I will become a Senior Strategic Advisor to the Board and remain a Director. Additionally, we're welcoming new independent members; Lance Friedmann and Michael Detlefsen who bring a wealth of strategic and hands-on consumer products industry experience to the organization."
Michael Singer, Aurora's Executive Chairman and Interim CEO stated, "I look forward to serving as Interim CEO and executing on our short-term plans, which include a rationalization of our cost structure, reduced capital spending, and a more conservative and targeted approach to capital deployment. These are necessary steps that reflect a fundamental change in how we will operate the business going forward."
Additionally, the company has announced "sweeping changes intended to rationalize the cost structure and balance sheet going forward. We believe this will better align the business financially with the current realities of the cannabis market in Canada while maintaining a sustainable platform for long-term growth." As a result of these changes, the company has eliminated close to 500 full-time equivalent staff across the company, including approximately 25% of corporate positions. Additionally, management is restructuring spending plans on information technology projects, sales and marketing initiatives, travel & entertainment, professional services, and other non-revenue generating third-party costs which do not provide an immediate impact on revenue.
On top of that, Aurora announced its intention to reduce capital expenditures for the second half of fiscal 2020 to bring capital expenditures below $100 million in total. "Over the past several weeks, Aurora management has undertaken a detailed evaluation of all capital projects underway and made decisions with respect to continuing or terminating further investment in each," the team with the company explains. "Future capital allocation decisions will be scrutinized first and foremost through a lens of optimizing near-term investor returns."
Aurora announced that, given market current cannabis market conditions and the slower than expected near-term industry growth, it has undertaken a thorough review of all business operations and concluded that certain assets and goodwill values as at December 31, 2019 exceed current fair-market valuations. "As such, when Aurora formally reports its fiscal second quarter 2020 results, it expects to report asset impairment charges on certain intangible and property, plant and equipment in a range of $190 million to $225 million and write-downs of goodwill in the range of $740 million to $775 million," they further explain. "Following these non-cash charges, Aurora expects to remain compliant with its revised total debt-to-equity covenant going forward."
Glen Ibbott, Aurora CFO, said "The assets being impaired are predominantly associated with our operations in South America and Denmark, as our estimate of the timeline for substantial growth extends in those markets. Our core Canadian cannabis assets are not impacted by these non-cash asset impairment charges." Ibbott concluded, "We believe that the long-term opportunity for Aurora remains very compelling, despite a slower than anticipated rate of industry growth in the near-term. We also believe our approach to rationalizing the business and conservatively improving our balance sheet positions Aurora in a more stable position for sustainable growth going forward."
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