WATERLOO, ON, April 22 /CNW/ - Brick Brewing Co. Limited (TSX: BRB), Ontario's largest Canadian-owned and Canadian-based publicly held brewery, today released its financial results for the fourth quarter and year ended January 31, 2008.
"Ironically, due to Brick's success in growing its business, it no longer benefits from the Ontario small brewer tax reduction" said Jim Brickman, Executive Chairman and Founder. "The Company incurred a production tax increase of $2.5 million in the year compared to fiscal 2007, a difference between a profit and loss this past year," added Mr. Brickman.
"We knew we had our work cut out for us when we passed the small brewers volume threshold and we had invested aggressively in plant and infrastructure to seek to offset this tax loss" said Jim Brickman. "Unfortunately our productivity gains are improving more slowly than planned and at the same time we have been hit with unprecedented increases in some of our material costs," he added.
"Operating in a key retail selling environment like The Beer Store that is owned by our competition, presents interesting challenges unique to the Ontario beer market, but this is the current reality and until we have it properly addressed by government, we must find innovative ways and means to work with it," added Mr. Brickman.
"As a result, fiscal 2008 was disappointing financially, however our single most important objective is our commitment to streamlining operations and becoming as cost efficient a producer as possible," added Jim Brickman.
Fourth Quarter Financial Highlights
During the fourth quarter ended January 31, 2008, net revenues declined 17% to $6.3 million, compared to $7.5 million in the same period last year, and beer volumes decreased by 14% over the same period last year. In the fourth quarter, a seasonally slower quarter, EBITDA(x) registered a loss of $116 thousand, compared to a loss of $557 thousand in the fourth quarter of fiscal 2007, an improvement of $441 thousand. In the quarter, there was a net earnings loss of $1.1 million compared with a net earnings loss of $1.0 million for the same period last year. In the fourth quarter:
- The Company's marginal production tax rate increased by 13.8% or
$717 thousand in aggregate additional taxes compared to the fourth
quarter last year. Due to Brick's success in growing its business,
the Company no longer benefited from the Ontario small brewer tax
reduction in fiscal 2008.
- Selling, marketing and administration costs decreased by
$910 thousand in the fourth quarter over the fourth quarter last
year, due primarily to reductions in ongoing overhead expenditures.
- Future income tax expense was $407 thousand in the quarter compared
to a recovery of $263 thousand in the same quarter last year. In the
fourth quarter this year, future income taxes were charged with an
expense of $580 thousand to revalue the future tax asset for reduced
future tax rates that were enacted in the quarter.
- The Company temporarily discontinued essentially all brewing and
packaging operations in Formosa, except for a small amount of
brewing. However in January the Company restarted its Formosa
operation and began production of the Motts Caesar brand. The Company
will also require additional brewing from this facility in the first
quarter of fiscal 2009 due to increased seasonal demand for beer.
Annual Financial Highlights
Net revenue for the year was $30.3 million compared to $34.8 million for fiscal 2007. Gross revenues decreased 7.3% to $68.6 million for fiscal 2008, compared to $74.1 million for fiscal 2007. For the year, net losses were $2.6 million compared to net earnings of $127 thousand for the previous year due to, among other things, increased production taxes and an income tax adjustment of $580 thousand to reflect reductions in future tax rates. The loss per share was $0.12 compared with earnings of $0.01 per share in the same period last year.
EBITDA(x) in fiscal 2008 decreased by $3.1 million in the year, primarily reflecting, among other things, an increase in production taxes of $2.5 million and non-recurring costs of $582 thousand associated with the strategic review and severance costs.
For the year, the Company's overall beer volumes decreased by 10% over the previous year.
Cost of goods sold were $24.4 million for the year, unchanged from last year. Reflecting the increases in input costs and the reduced volumes, the per unit cost of producing and distributing beer increased by 11%, or $2.5 million in the aggregate, in fiscal 2008 compared to the previous year.
Other fiscal 2008 highlights included:
- The Company announced that it had entered into an agreement with
Cadbury Schweppes to manufacture and package the Motts Caesar
alcohol-based beverages. Production began in January 2008. Pursuant
to the agreement, the Company also began to provide sales
representation for Motts Caesar in the Ontario market effective
July 1, 2007.
- The Company implemented a series of targeted cost reductions to
reduce ongoing overhead expenditures in selling, marketing and
administration.
- Efficiencies realized at the new Kitchener packaging facility
contributed to reductions in per unit variable manufacturing costs in
the year compared to the previous year.
- During the year the Company undertook a review of strategic
alternatives to enhance shareholder value. The process was conducted
on a broad basis in terms of alternatives considered. As a result of
the review the Board of Directors of the Company determined that the
Company's current strategy of seeking profitable growth and driving
cost efficiencies represents the preferable means of enhancing value
for shareholders.
Brick Brewing Co. Limited
Statements of Earnings and Deficit
(unaudited)
($ 000's)
Three Months Ended Year Ended
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January 31, January 31, January 31, January 31,
2008 2007 2008 2007
Gross Revenue $ 14,047 $ 16,510 $ 68,597 $ 74,064
Less: Production taxes
& distribution fees (7,776) (8,960) (38,288) (39,225)
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Net Revenue 6,271 7,550 30,309 34,839
Cost of goods sold 5,220 6,061 24,424 24,360
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Gross margin 1,051 1,489 5,885 10,478
Expenses:
Selling, marketing and
administration 1,130 2,041 6,460 7,868
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Earnings/(loss) before
the undernoted (80) (552) (575) 2,611
Other income/(expenses):
Bottle dispute (37) (6) (45) (102)
Amortization (414) (621) (1,736) (1,726)
Interest on long-term debt (65) (104) (444) (400)
Other interest income (129) 15 (102) 73
Gain on disposal of fixed
assets - 15 - 15
Equity earnings/(loss) of
long term investment 14 (11) 26 (24)
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(632) (712) (2,301) (2,165)
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Earnings/(loss) before
provision for income taxes (711) (1,263) (2,875) 446
Future income tax
expense/(recovery) 407 (263) (285) 319
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Net earnings/(loss) (1,118) (1,000) (2,591) 127
Deficit, beginning of the
period (5,734) (3,158) (4,158) (4,285)
Impact of change in
accounting policy for
deferred financing
charges - - (103) -
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Deficit, end of period $ (6,852) $ (4,158) $ (6,852) $ (4,158)
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Net earnings/(loss) per share:
Basic $ (0.05) (0.05) $ (0.12) $ 0.01
Diluted (0.05) (0.04) (0.12) 0.01
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Brick Brewing Co. Limited
Balance Sheets
(unaudited)
($ 000's)
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January 31, January 31,
2008 2007
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Assets
Current assets:
Cash $ - $ 54
Accounts receivable 2,571 2,590
Inventories 7,277 8,382
Future income taxes 55 80
Prepaid expenses 510 487
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Total current assets 10,413 11,593
Property, plant and equipment 16,989 17,687
Long term investment 106 79
Trademarks and listing fees 5,430 5,407
Deferred costs 384 638
Other assets 213 243
Future income taxes 2,063 1,705
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$ 35,596 $ 37,352
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Liabilities and Shareholders' Equity
Current liabilities:
Bank indebtedness $ 2,791 $ -
Trade accounts payable and accrued liabilities 3,038 3,912
Current portion of long-term debt 907 890
Current portion of obligations under capital
lease 138 204
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Total current liabilities 6,874 5,006
Long-term debt 2,992 3,899
Obligations under capital lease 419 557
Shareholders' equity:
Share capital 31,539 31,504
Contributed surplus 624 545
Deficit (6,852) (4,158)
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Total shareholders' equity 25,311 27,890
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$ 35,596 $ 37,352
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Brick Brewing Co. Limited
Statements of Cash Flows
(unaudited)
($ 000's)
Three Months Ended Year Ended
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January 31, January 31, January 31, January 31,
2008 2007 2008 2007
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Cash provided by (used in):
Operations:
Earnings/(loss) for the
period $ (1,118) $ (1,000) $ (2,591) $ 127
Items not involving cash:
Amortization 414 621 1,736 1,758
Amortization of other
assets 8 - 30 -
Stock based compensation 10 81 80 131
Equity (earnings)/loss
of long term investment (14) 11 (26) 24
Future income tax
expense/(recovery) 370 (183) (358) 399
Future income tax effect
of adopting new
accounting policies - - 47 -
Gain on sale/leaseback (2) - (8) -
Change in non-cash
operating working capital (459) (1,382) 253 (4,245)
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(792) (1,851) (837) (1,806)
Financing:
Repayment of long term debt (50) (20) (890) (676)
Repayment of obligation
under capital lease (51) (69) (204) (193)
Issuance of long-term debt - - - 2,000
Proceeds from obligations
under capital lease - - - 750
Issue of capital stock,
net of costs 13 1,487 35 3,787
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(88) 1,398 (1,059) 5,667
Investments:
Acquisition of property,
plant and equipment and
listing fees (72) (473) (949) (3,970)
Pre-operating costs - 64 - (345)
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(72) (410) (949) (4,314)
- -
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Net increase in cash (952) (863) (2,845) (453)
Cash beginning of period (1,839) 917 54 507
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Cash/(bank indebtedness),
end of period $ (2,791) $ 54 $ (2,791) $ 54
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These statements should be read in conjunction with the audited annual financial statements of the Company. Certain prior year amounts have been reclassified to conform to the current year's presentation format.
Additional Information
For further details the Company's complete MD&A and financial statements for the year ended January 31, 2008 will be available on the investor section of the Brick website at www.brickbeer.com. Additional information relating to the Company, including its Annual Information Form is or will be available there 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 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 at www.brickbeer.com.
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. 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, which are not guarantees and 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: volumes in the current fiscal year ending January 31, 2009 ("fiscal 2009") will continue to decline, no material changes in consumer preferences, operating efficiencies at the packaging and warehousing facility in Kitchener, Ontario will continue to be realized, input costs for brewing and packaging materials will continue to increase, competitive activity from other brewers will continue, no material change to the regulatory environment in which the Company operates and no material supply, cost or quality control issues with vendors. 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, annual information form and various other public filings. The forward-looking statements included in this press release are made only at the date of this press release 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.
(x) 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
