Brick Brewing delivers strong Q2 results through combination of Laker brand growth and continued cost management

 

WATERLOO, ON, Sept. 10 /CNW/ - Brick Brewing Co. Limited ("Brick" or the "Company") (TSX: BRB), Ontario's largest Canadian-owned and Canadian-based publicly held brewery, today released its financial results for the second quarter ended August 1, 2010.

Brick Brewing delivered EBITDA* for the quarter ended August 1, 2010 of $1.8 million, with net earnings of $926 thousand.

"I am excited to announce these results", said George Croft, President & CEO. "Excluding the impact of provincial tax incentives for small brewers, this is the strongest EBITDA performance in the Company's 25-year history."

"When I joined Brick Brewing in 2008, a new management team was put in place and we committed to 'fixing' the Company", said Mr. Croft. "Our recent performance is evidence that the process of fixing is well underway. Cost management initiatives are delivering significant improvement in gross margin and Brick's employees maintain committed to a culture of cost control. We will continue to drive costs out of the business at every opportunity."

Last year Brick delivered a huge increase in the Red Baron trademark. This year, despite intense price competition, the Laker trademark grew by approximately 11% compared to the second quarter last year. The Company successfully executed a plan to revitalize the Laker trademark with renewed focus on product quality and consistency, coupled with a significant packaging upgrade. In total, Brick brand volumes grew approximately 5% in the period compared to an industry volume increase of approximately 3%.

More recently, Brick has been actively pursuing incremental co-packaging opportunities and recently announced an arrangement that will deliver not less than $1 million in net revenue over the initial two-year term.

Mr. Croft continued, "We are keenly focused on a 'fill' strategy with the goal of utilizing the excess capacity in our system of more than 200,000 hectolitres (approximately 2.5 million cases). This is a significant opportunity and can deliver between $2 and $6 million of incremental annual cash flow. At peak capacity, reinvestment in capital expenditures and marketing will range between $1 and $3 million."

"We are proud of our accomplishments to date in fiscal 2011 and look forward to the balance of the year."

Some financial highlights of the quarter are as follows:

    <<
    -   Net revenue was $9.1 million compared to $9.3 million in the
        comparable period last year;

    -   Gross profit percentage has increased to 33.8% versus 27.0%; and

    -   EBITDA for the period ended August 1, 2010 was $1.8 million,
        net income of $0.9 million.
    >>

Brick Brewing also announced today the appointment of John H. Bowey as a director of the Company. Mr. Bowey held the position of Chairman of the Board, Deloitte Canada from 2006 until his retirement in May 2010.

Mr. Bowey became a partner in the firm of Deloitte & Touche LLP in 1983 and has more than 30 years of public accounting experience. Mr. Bowey has joined Brick's audit committee.

The following financial statements should be read in conjunction with the audited annual financial statements of the Company.

    <<
    BRICK BREWING CO. LIMITED
    Consolidated Balance Sheet
    (unaudited)

    -------------------------------------------------------------------------
                                          Second quarter ended    Year ended
                                                      August 1,   January 31,
                                                          2010          2010
    -------------------------------------------------------------------------

    Assets
    Current assets:
      Accounts receivable                            8,441,973     2,357,069
      Inventories                                    5,012,825     5,251,714
      Prepaid expenses                                 650,918       412,351
      Future income taxes                              566,000       566,000
    -------------------------------------------------------------------------
                                                    14,671,716     8,587,134

    Property, plant and equipment                   14,956,370    14,101,122
    Trademarks and listing fees                      5,814,821     5,731,954
    Other assets                                        84,267       188,871
    Future income taxes                                562,000     1,034,000
    -------------------------------------------------------------------------
                                                  $ 36,089,174  $ 29,643,081
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity
    Current liabilities:
      Bank indebtedness                           $  1,446,949  $  1,792,406
      Accounts payable and accrued liabilities       7,617,308     3,187,915
      Current portion of long-term debt                840,000       816,100
      Current portion of obligations
       under capital lease                             237,010       146,418
    -------------------------------------------------------------------------
                                                    10,141,267     5,942,839

    Long-term debt                                   2,507,041     1,251,800
    Obligations under capital lease                     36,858       138,106

    Shareholders' equity:
      Share capital                                 34,678,264    34,678,264
      Contributed surplus                              831,808       772,455
      Deficit                                      (12,106,064)  (13,140,383)
    -------------------------------------------------------------------------
                                                    23,404,008    22,310,336

    -------------------------------------------------------------------------
                                                  $ 36,089,174  $ 29,643,081
    -------------------------------------------------------------------------



    BRICK BREWING CO. LIMITED
    Consolidated Statement of Income, Comprehensive Income and Deficit
    (unaudited)

                            Second quarter ended   Fiscal year-to-date ended

    -------------------------------------------------------------------------
                          August 1,      July 31,     August 1,      July 31,
                              2010          2009          2010          2009
    -------------------------------------------------------------------------


    Gross revenue     $ 19,565,858  $ 19,656,483  $ 34,193,865  $ 35,423,279
      Less production
       taxes and
       distribution
       fees            (10,454,688)  (10,340,453)  (18,111,551)  (18,466,130)
    -------------------------------------------------------------------------
    Net revenue          9,111,170     9,316,030    16,082,314    16,957,149

    Cost of sales        6,036,085     6,803,743    11,097,743    12,422,979

    -------------------------------------------------------------------------
    Gross profit         3,075,085     2,512,287     4,984,571     4,534,170

    Selling,
     marketing and
     administration      1,302,877     1,188,433     2,575,142     2,054,876

    -------------------------------------------------------------------------
    Earnings before
     the undernoted      1,772,208     1,323,854     2,409,429     2,479,294

    Other income
     (expense):
      Depreciation and
       amortization       (398,449)     (589,816)     (813,982)   (1,054,803)
      Interest on
       long-term debt      (38,258)      (35,046)      (62,662)      (76,901)
      Other income
       (expense)           (17,557)      (15,764)      (26,466)      (14,643)
    -------------------------------------------------------------------------
                          (454,264)     (640,626)     (903,110)   (1,146,347)

    -------------------------------------------------------------------------
    Net income before
     provision for
     income taxes        1,317,944       683,228     1,506,319     1,332,947

    Future income
     tax provision         392,000       222,413       472,000       440,773
    -------------------------------------------------------------------------
    Net income and
     comprehensive
     income                925,944       460,815     1,034,319       892,174

    Deficit,
     beginning of
     period            (13,032,008)  (14,074,739)  (13,140,383)  (14,506,098)
    -------------------------------------------------------------------------
    Deficit, end
     of period        $(12,106,064) $(13,613,924) $(12,106,064) $(13,613,924)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings
     per share:
      Basic           $       0.03  $       0.02  $       0.04  $       0.03
      Diluted         $       0.03  $       0.02  $       0.04  $       0.03
    -------------------------------------------------------------------------



    BRICK BREWING CO. LIMITED
    Consolidated Statements of Cash Flows
    (unaudited)

                            Second quarter ended   Fiscal year-to-date ended

    -------------------------------------------------------------------------
                          August 1,      July 31,     August 1,      July 31,
                              2010          2009          2010          2009
    -------------------------------------------------------------------------

    Cash provided by
     (used in):

    Operations:
      Income for
       the period     $    925,944  $    460,815  $  1,034,319  $    892,174
      Items not
       involving cash:
         Amortization
         of property,
         plant and
         equipment,
         and other
         assets            399,403       597,316       814,125     1,069,803
        Stock based
         compensation       29,677        24,142        59,353        48,936
        Future income
         tax provision     392,000       222,413       472,000       440,773
    Change in non-cash
     operating working
     capital            (3,051,308)     (946,300)   (1,655,188)   (1,388,648)
    -------------------------------------------------------------------------
                        (1,304,284)      358,386       724,609     1,063,038
    Financing:
      Increase
       (decrease)
       in bank
       indebtedness        591,509       903,406      (345,457)    1,080,247
      Proceeds from
       new term debt     1,487,491             -     1,487,491             -
      Repayment of
       long-term debt     (150,000)     (185,107)     (208,350)     (238,957)
      Repayment of
       obligation under
       capital lease       (42,269)     (251,875)      (83,977)     (284,524)
      Issue of
       capital stock
       (net of fees)             -             -             -         3,200
    -------------------------------------------------------------------------
                         1,886,731       466,424       849,707       559,966
    Investing:
      Purchase of
       property,
       plant and
       equipment,
       and other
       assets             (519,933)     (781,863)   (1,491,449)   (1,513,656)
      Listing fees
       paid                (62,514)      (42,947)      (82,867)     (318,639)
    -------------------------------------------------------------------------
                          (582,447)     (824,810)   (1,574,316)   (1,832,295)

    -------------------------------------------------------------------------
    Net decrease
     in cash                     -             -             -      (209,291)

    Cash, beginning
     of period                   -             -             -       209,291

    -------------------------------------------------------------------------
    Cash, end of
     period           $          -  $          -  $          -  $          -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental cash
     flow information:
      Cash paid for
       interest             53,068        42,973  $     85,155  $     79,328
    Non-cash investing
     and financing
     activities:
      Obligation under
       capital lease  $          -  $          -  $     73,321  $          -
    -------------------------------------------------------------------------
    >>

Additional Information

For further details the Company's management discussion and analysis (MD&A) and unaudited consolidated financial statements for the quarter ended August 1, 2010 will be available on the investor section of the Brick Brewing website at www.brickbeer.com. Additional information relating to the Company, including its Annual Information Form, is or will be available on the Company's website and on SEDAR at www.sedar.com.

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 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. The Company has complemented its Waterloo family of premium craft beers with other popular brands such as Laker, Red Baron, Red Cap and Formosa Springs Draft. Brick trades on the TSX under the symbol BRB. Visit us at www.brickbeer.com

Forward-Looking Statements

Except for the historical information contained herein, the discussion in this press release contains certain forward-looking statements that involve risks and uncertainties, such as statements of the Company's plans, objectives, strategies, expectations and intentions and include, for example, the statements concerning expected volumes, operating efficiencies and costs. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may", "will", "expect", "intend", "anticipate", "seek", "plan", "believe" or "continue" or the negatives of these terms or variations of them or similar terminology. Although the Company believes that the expectations and assumptions reflected in these forward-looking statements are reasonable, undue reliance should not be placed on these forward-looking statements. These forward-looking statements are not guarantees and reflect the Company's views as of September 10, 2010 with respect to future events. Future events are subject to certain risks, uncertainties and assumptions, which may cause actual performance and financial results to differ materially from such forward-looking statements. The forward-looking statements, including the statements regarding expected volumes, operating efficiencies and costs are based on, among other things, the following material factors and assumptions: sales volumes in the fiscal year ending January 31, 2011 ("fiscal 2011") will decrease, no material changes in consumer preferences, brewing and packaging efficiencies will improve, input costs for brewing materials will decrease, the cost of packaging materials will decrease, competitive activity from other brewers will continue, no material change to the regulatory environment in which the Company operates, no material supply, cost or quality control issues with vendors, owner brand growth, market expansion and additional co-pack contracts. Readers are urged to consider the foregoing factors and assumptions when reading the forward-looking statements and, for more information regarding the risks, uncertainties and assumptions that could cause the Company's actual financial results to differ from the forward-looking statements, to also refer to the Company's MD&A, the Company's annual information form and various other public filings. The forward-looking statements included in the press release are made only as of September 10, 2010 and, except as required by applicable securities laws, the Company does not undertake to publicly update such forward-looking statements to reflect new information, future events or otherwise.

* 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.

%SEDAR: 00003334E

For further information: George Croft, President and CEO, Tel: (519) 576-9519 Ext. 247, E-mail: info@brickbeer.com