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 $0.9 million.
Brick Brewing also announced today the appointment of John H. Bowey as a director of the Company. Mr. Bowey held the position of Chairman of the Board, Deloitte Canada from 2006 until his retirement in May 2010.
Mr. Bowey became a partner in the firm of Deloitte & Touche LLP in 1983 and has more than 30 years of public accounting experience. Mr. Bowey has joined Brick's audit committee.
The following financial statements should be read in conjunction with the audited annual financial statements of the Company.
BRICK BREWING CO. LIMITED
Consolidated Balance Sheet
(unaudited)
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Second quarter ended Year ended
August 1, January 31,
2010 2010
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Assets
Current assets:
Accounts receivable 8,441,973 2,357,069
Inventories 5,012,825 5,251,714
Prepaid expenses 650,918 412,351
Future income taxes 566,000 566,000
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14,671,716 8,587,134
Property, plant and equipment 14,956,370 14,101,122
Trademarks and listing fees 5,814,821 5,731,954
Other assets 84,267 188,871
Future income taxes 562,000 1,034,000
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$ 36,089,174 $ 29,643,081
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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
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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)
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23,404,008 22,310,336
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$ 36,089,174 $ 29,643,081
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BRICK BREWING CO. LIMITED
Consolidated Statement of Income, Comprehensive Income and Deficit
(unaudited)
Second quarter ended Fiscal year-to-date ended
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August 1, July 31, August 1, July 31,
2010 2009 2010 2009
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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)
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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
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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
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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)
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(454,264) (640,626) (903,110) (1,146,347)
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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
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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)
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Deficit, end
of period $(12,106,064) $(13,613,924) $(12,106,064) $(13,613,924)
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Net earnings
per share:
Basic $ 0.03 $ 0.02 $ 0.04 $ 0.03
Diluted $ 0.03 $ 0.02 $ 0.04 $ 0.03
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BRICK BREWING CO. LIMITED
Consolidated Statements of Cash Flows
(unaudited)
Second quarter ended Fiscal year-to-date ended
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August 1, July 31, August 1, July 31,
2010 2009 2010 2009
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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)
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(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
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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)
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(582,447) (824,810) (1,574,316) (1,832,295)
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Net decrease
in cash - - - (209,291)
Cash, beginning
of period - - - 209,291
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Cash, end of
period $ - $ - $ - $ -
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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 $ -
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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: [email protected]
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