Brick Brewing Reports Second Quarter Results

    WATERLOO, ON, Sept. 11 /CNW/ - Brick Brewing Co. Limited (TSX:BRB) today
released its financial results for the second quarter and six months ended
July 31, 2007.
    The results of the second quarter of fiscal 2008 for Brick Brewing
produced earnings of $283 thousand, compared with a profit of $962 thousand,
in the fiscal 2007 second quarter. This reduced profitability was the result
of significant incremental production taxes, higher variable costs associated
with commodity input cost inflation and reduced volumes when compared to last
    Gross revenues in the second quarter decreased by 6.8% to $22.0 million
compared with $23.6 million in the previous year. Ona net basis - after
deduction of distribution fees and production taxes - revenues were
$9.6 million, compared with $11.3 million last year. This decrease in net
revenue, despite a 3.6% increase in the Company's per unit selling price, was
largely attributable to an 11% decline in total beer volume. Volume sold at
The Beer Store (TBS), the industry's dominant distribution organization,
declined 12% while volumes sold to LCBO outlets increased 16%.
    "The contradictory sales patterns for our brands at the LCBO stores
compared to TBS stores are highly instructive," said Doug Berchtold, President
and CEO of Brick Brewing. "Our brands are outpacing the market at the
provincially-owned LCBO stores. However, at TBS stores, which are owned by the
national brewers, our sales are lagging. Clearly, we believe, the recent
changes in the retail and marketing policies implemented at the TBS stores are
having an adverse effect. To date, the Company has been unable to persuade TBS
or the Ontario government that these new policies unfairly disadvantage
Ontario small brewers."
    Cost of goods sold rose to $7.0 million from $6.8 million last year. On a
per unit basis, these costs rose 13%, primarily reflecting higher material and
other input costs. The Company is taking efficiency measures to offset these
increased costs by having consolidated packaging activities into the Kitchener
facility, increasing the selling price on certain products and re-sourcing
certain inputs.
    In the second quarter the Company's marginal production tax rate
increased by 11% or $947 thousand in aggregate additional taxes, compared to
the same quarter last year. These increased per unit production taxes are due
to the Company no longer benefiting from the Ontario small brewer tax
reduction in fiscal 2008. The Ontario small brewer tax reduction reduced
provincial taxes payable by the Company by a total of $2.6 million in fiscal
    "These results are unsatisfactory," said Jim Brickman, Executive Chairman
and Founder of Brick Brewing. "Despite significant investment in our brands
and in our operations over the past two years, we are seeing our progress
impeded by, we believe, TBS retail and marketing policies. We are determined
to take whatever further steps are necessary to seek to maintain the
competitiveness of our products."
    "Revenues for the balance of the year ending January 31, 2008 are likely
to reflect recent trends," added Mr. Berchtold. "However, we have implemented
a series of targeted cost-related initiatives that are expected to result in a
further reduction of selling, marketing and administrative expenses.
Furthermore, the Kitchener facility is beginning to deliver improved packaging
costs. Looking further out, we are seeking an improvement in revenues at TBS
outlets, as we develop and implement sales and marketing strategies designed
to ensure that our market share in those outlets fully reflects the
demonstrated consumer acceptance of our brands."
    Brick previously announced the commencement of a review of strategic
alternatives available to the Company to enhance shareholder value, including,
but not limited to, offers to acquire shares or assets of the Company, a
recapitalization review or some form of business combination. The review is
ongoing. While the review is comprehensive there can be no assurance that the
review will result in any specific strategic or financial transaction being
completed and no timetable has been set for the completion of the review. The
Company will make a public announcement at the appropriate time.

                          Brick Brewing Co. Limited
                     Statements of Earnings and Deficit
                                  ($ 000's)

                                  Three Months Ended      Six Months Ended

                                    July 31,   July 31,   July 31,   July 31,
                                       2007       2006       2007       2006

    Gross Revenue                 $  22,009  $  23,615  $  37,644  $  39,336
      Less:  Production taxes
       & distribution fees          (12,384)   (12,299)   (21,148)   (20,739)
    Net Revenue                       9,625     11,316     16,496     18,597

    Cost of goods sold                7,013      6,846     12,963     11,891

    Gross margin                      2,612      4,470      3,533      6,706

      Selling, marketing and
       administration                 1,670      2,558      3,362      4,164

    Earnings before the
      undernoted                        942      1,912        171      2,542

    Other expenses:
      Amortization                     (442)      (368)      (892)      (720)
      Interest on long-term debt       (110)      (115)      (211)      (186)
      Other interest income              13         22         23         31
      Equity earnings/(loss) of
        long term investment             44          7         12        (19)
                                       (495)      (454)    (1,068)      (894)

    Earnings/(loss) before
      provision for income taxes        447      1,458       (897)     1,648

    Future income tax expense
      /(recovery)                       164        496       (283)       561

    Net earnings/(loss)                 283        962       (615)     1,087

    Deficit, beginning of the
      period                         (5,160)    (4,160)    (4,158)    (4,285)

    Impact of change in
      accounting policy for
       deferred financing charges         -          -       (103)

    Deficit, end of period        $  (4,876) $  (3,198) $  (4,876) $  (3,198)

    Net earnings/(loss) per
        Basic                     $    0.01  $    0.05  $   (0.03) $    0.06
        Diluted                        0.01       0.05  $   (0.03)      0.06

                          Brick Brewing Co. Limited
                               Balance Sheets
                                  ($ 000's)

                                                         July 31, January 31,
                                                            2007        2007


    Current assets:
      Cash                                             $       -   $      54
      Accounts receivable                                  3,402       2,590
      Inventories                                          8,686       8,382
      Future income taxes                                     92          80
      Prepaid expenses                                     1,266         487
      Total current assets                                13,447      11,593

    Property, plant and equipment                         17,574      17,687
    Long term investment                                      91          79
    Trademarks and listing fees                            5,459       5,407
    Deferred costs                                           434         638
    Other assets                                             228         243
    Future income taxes                                    2,023       1,705

                                                       $  39,256   $  37,352

    Liabilities and Shareholders' Equity

    Current liabilities:
      Bank indebtedness                                $   1,099   $       -
      Trade accounts payable and accrued liabilities       5,908       3,912
      Current portion of long-term debt                      898         890
      Current portion of obligations under capital
       lease                                                 178         204
      Total current liabilities                            8,083       5,006

    Long-term debt                                         3,449       3,899
    Obligations under capital lease                          483         557

    Shareholders' equity:
      Share capital                                       31,526      31,504
      Contributed surplus                                    591         545
      Deficit                                             (4,876)     (4,158)
      Total shareholders' equity                          27,241      27,890

                                                       $  39,256   $  37,352

                          Brick Brewing Co. Limited
                           Statements of Cash Flows
                                  ($ 000's)

                                    Three Months Ended         Year Ended

    ---------------------------------------------------   -------------------
                                    July 31,   July 31,   July 31,   July 31,
                                       2007       2006       2007       2006

    Cash provided by (used in):

      Earnings/(loss) for the
       period                     $     283  $     962  $    (615) $   1,087
    Items not involving cash:
      Amortization                      442        368        892        720
      Stock based compensation           23          -         47          -
      Equity (earnings)/loss of
       long term investment             (44)        (7)       (12)        19
      Future income taxes/
       (recovery)                       164        496       (318)       561
      Change in non-cash
       operating working capital     (1,562)      (420)       147       (438)
                                       (694)     1,399        141      1,949

      Increase/(decrease)in bank
       indebtedness                       -          -          -          -
      Repayment of obligation
       under long term debt            (441)      (192)      (441)      (235)
      Repayment of obligation
       under capital lease              (20)       (70)      (101)       (95)
      Issuance of long term debt          -          -          -      2,000
      Proceeds from obligations under
        capital lease                     -          -          -        750
      Issue of capital stock, net
       of costs                          23         41         23        411
                                       (439)      (222)      (520)     2,831

      Acquisition of property,
       plant and equipment and
       listing fees                    (355)    (1,272)      (774)    (3,066)
      Pre-operating costs                 -          -          -       (403)
                                       (355)    (1,272)      (774)    (3,469)
                                                                -          -
    Net increase in cash             (1,487)       (95)    (1,153)     1,311

    Cash, beginning of period           388      1,913         54        507

    Cash, end of period           $  (1,099)  $  1,818  $  (1,099) $   1,818

    Additional Information
    For further details the Company's MD&A and financial statements for the
quarter ended July 31, 2007 will be available on the investor section of the
Brick website at Additional information relating to the
Company, including its Annual Information Form is available there and on SEDAR

    Quarterly Conference Call Notification
    Please note that the Company's quarterly conference call with analysts,
media and interested participants will take place at 11:00 am EDT, September
11, 2007. The number to call to participate in the teleconference is (416)
915-9608 or toll free 1-866-214-7077. To ensure your participation, please
call in about five minutes before the start of the call. For those unable to
participate, a taped rebroadcast will be available on the investor section of
the Brick website at

    About Brick Brewing
    Brick Brewing Co. Limited is Ontario's largest Canadian-owned and
Canadian based publicly held brewery. The Company is a regional brewer of
award winning premium quality and value beers. The Company, founded by Jim
Brickman in 1984, was the first craft brewery to start up in Ontario, and is
credited with pioneering the present day craft brewing renaissance in Canada.
Brick has complemented its J. R. Brickman Founder's Series and Waterloo Dark
premium craft beers with other popular brands such as Laker, Red Cap and
Formosa Springs Draft. Brick trades on the TSX under the symbol BRB. Visit us

    Non-GAAP Measures
    EBITDA is a non-GAAP earnings measure, therefore it does not have any
standardized meaning prescribed by Canadian generally accepted accounting
principles and may not be similar to measures presented by other companies.
EBITDA represents earnings before interest, income taxes, depreciation and
amortization. Management uses this measurement to evaluate the operating
results of the Company. This measure is also important to management since it
is used by the Company's lenders to evaluate the ongoing cash generating
capability of the Company and therefore the amounts those lenders are willing
to lend to the Company. Investors find EBITDA to be useful information because
it provides a measure of the Company's operating performance.

    Forward-Looking Statements
    All statements in this press release that do not directly and exclusively
relate to historical facts constitute forward-looking statements as of the
date of this press release. These forward-looking statements include, among
others, the statements concerning plant, packaging and other capacity
improvements, product demand, marketing and sales opportunities, volume growth
and market share, distribution and customer service improvements, reduced
variable costs and improvements in earnings and margin. These forward-looking
statements are not guarantees and are based on management's expectations
concerning, among other things, improvements in product distribution and
customer service, that improved operating efficiencies will be realized and
that product demand will continue to grow. Although the Company believes these
forward-looking statements are based on information and assumptions which are
reasonable there are a number of material factors and assumptions which could
cause actual results to vary materially from current expectations, including,
among other things, production delays, additional or duplicative costs,
operational or distribution issues, reduced marketing or sales opportunities
or reduced product demand. The forward-looking statements included in this
press release are made only at the date of this press release and the Company
does not undertake to publicly update these forward-looking statements to
reflect new information, future events or otherwise.

    %SEDAR: 00003334E
For further information: Doug Berchtold, President and CEO, Tel: (519)
576-9100 Ext. 247, E-mail:; Jim Brickman, Executive
Chairman/Founder, Tel: (519) 576-9100 Ext. 232