Net income impacted by marketing spending, transitional manufacturing
costs- Net revenue grew by 16.5% to $34.8 million
- Overall and Laker value brand volumes rose by 18%
- EBITDA declined by 36% reflecting marketing-driven $1.4 million rise
in SG&A and lower unit margins
- Fully diluted EPS $0.01 in fiscal 2007 vs. $0.24 in fiscal 2006WATERLOO, ON, April 24 /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, 2007.
"Our primary goal in fiscal 2007 was to position Brick for long-term
profitability," said Jim Brickman, Executive Chairman and Founder. "To
accomplish this objective, we defended our market share in the value beer
segment, improved operational efficiencies and moved toward consolidating
operations in Kitchener and Formosa. In an important transitional year, we
made excellent progress toward those goals."
Doug Berchtold, President and CEO added: "As a result of our strategic
initiatives, Brick is now better positioned to maximize future earnings by
capitalizing on additional opportunities to gain market share with an
efficient manufacturing and delivery operation. With our Laker brand, we have
a major position in the value beer segment. This business is complemented by
our refocused niche premium brand portfolio and by our plans to grow our
businesses both as a sales agent and as a co-packer.
In fiscal 2007, Brick relocated substantially all beer packaging to
Kitchener, seeking to reduce annual variable manufacturing costs and duplicate
overhead costs. Daily output from one shift at the Kitchener facility reached
levels 20% greater than one-shift production from the Formosa facility by year
end - an important productivity benchmark for the Company.
"As necessary as initiatives like relocating all beer packaging have been
for long-term success, they resulted in disappointing fiscal 2007 financial
results, particularly in the second half of the year," added Mr. Berchtold.
Fourth Quarter Financial Highlights
During the fourth quarter ended January 31, 2007, net revenues rose 19%
to $7.5 million compared to $6.4 million in the same period last year and beer
volumes increased by 5% over the same period last year. The reason the volume
growth rate was 5% while net revenues increased by 19%, was primarily due to a
successful price promotion for the Red Cap brand in the fourth quarter of
fiscal 2006 that was not executed in the fourth quarter this year.
In the fourth quarter, when beer consumption is seasonally lower due to
colder weather, EBITDA(*) registered a loss of $557 thousand, compared to a loss
of $152 thousand in the fourth quarter of fiscal 2006. There was a
$1.0 million net earnings loss compared with $1.7 million in net earnings for
the same period last year, due to certain fourth quarter events, which follow:- Future income tax recovery was $263 thousand in the quarter compared
to a one-time $2.1 million recovery in the same quarter last year.
- Brick invested in additional customer service and delivery
capabilities to deliver products directly to LCBO stores late in the
fourth quarter. Due to this management-initiated commitment, Brick
anticipates better availability of product and improved customer
service in this important retail channel.
- The company continued to incur various transitional costs pertaining
to the completion of the transfer of production to the new Kitchener
packaging facility. As a result of a management philosophy focused on
a careful start-up with an emphasis on continuity of supply,
additional duplicate overheads of approximately $486 thousand were
incurred in the quarter. By mid February, Kitchener was producing
substantially all packaged product.
- Selling and marketing activities increased by $444 thousand as a
result of additional advertising support for the Laker brands.Annual Financial Highlights
Net revenue for the year grew by 16.5% to $34.8 million from
$29.9 million. Gross margin was $10.5 million, same as in fiscal 2006.
However, gross margin as a percentage of net revenue decreased by 5.5%. For
the year ended January 31, 2007, net earnings were $0.1 million compared to
$4.8 million for the previous year due to, among other things, the various
increased expenditures and an income tax recovery in fiscal 2006. Earnings per
share were $0.01 compared with $0.24 in the same period last year.
EBITDA(*) in fiscal 2007 declined by 36%, primarily reflecting a
marketing-driven $1.4 million increase in sales, general and administration
(SG&A) expenses. These costs included increased advertising spending and
one-time launch expenditures to market the new J.R. Brickman Founder's Series
premium brands. As a percentage of sales, SG&A was at 22.6 per cent versus
21.7 per cent last year.
In the year ended January 31, 2007, the Company's overall beer volumes
increased by 18% over the previous year, with mainstream and licensed brands
rising by 22%, due largely to continued growth of the PC brands.
Cost of goods sold were $24.5 million for the year ended, up from
$19.4 million last year. Reflecting the Company's restructuring initiatives,
the per unit cost of producing and distributing beer increased by 9%, or
$1.9 million in the aggregate, in fiscal 2007 compared to the previous year.Other fiscal 2007 highlights included:
- Launching the J.R. Brickman Founder's Series premium brands. Brick is
seeking to substantially increase the size of its premium brand
portfolio over the next three years, while exploring various options
to represent selected complementary imported brands.
- Receiving permits to distribute beer in Quebec and distribute
directly to retailers, avoiding reliance on a third-party
distributor. This transition provides the Company with improved
distribution capabilities for its own and partner brands in Quebec,
while providing increased sales and improved customer service
benefits.
- Achieving an 18% growth in the Laker brand volumes, including strong
growth in canned beer sales. Cans currently account for approximately
17% of Laker volume in the year compared to 6% a year ago. The
Company launched a variety of Laker can formats as it continues to
compete in this underdeveloped and growing value priced sub-category.Ironically, due to Brick's success in growing its business, the Company
will no longer benefit from the Ontario small brewer tax reduction in fiscal
2008, which reduced the Company's provincial beer taxes payable by
$2.6 million in fiscal 2007. Brick will now be taxed at the same provincial
tax rates as much larger competitors.
"Looking ahead, we anticipate slowing growth in net revenues in fiscal
2008 as the Ontario value beer category begins to mature," added Mr.
Berchtold. "We however remain optimistic that we can modestly grow our market
share within the category," he added.
"With much of our restructuring costs behind us, our manufacturing
process is expected to become more cost-efficient as we have succeeded in
eliminating a substantial portion of our multi-plant and structural cost
disadvantages. These improvements will eventually help us to achieve our goal
of reducing our per unit manufacturing costs. With the critical mass of a
midsize brewer established, we will seek to move forward incrementally with
additional beer and co-pack volume continuously expanding from this solid
base."
Industry consolidation has also provided Brick with an unexpected but
exciting marketing opportunity. The sale of Lakeport to Belgian-owned Labatt,
announced in February and completed in late March, means that Brick is now
Ontario's largest Canadian-owned and Canadian-based publicly held brewery. "We
are capitalizing on our independent status by aggressively positioning our
Laker brand as the sole remaining Canadian-owned BUCK A BEER in the Ontario
market, beer made with Formosa spring water," Berchtold said. "We know our
dedication to preserving both the value and the craft-brewed segments
resonates with consumers and believe that increased awareness of this unique
positioning affords significant market share upside for our brands."Brick Brewing Co. Limited
Statements of Earnings and Deficit
(unaudited)
($ 000's)
Three Months Ended Year Ended
------------------------------------------------- -----------------------
January 31, January 31, January 31, January 31,
2007 2006 2007 2006
Gross Revenue $ 16,510 $ 13,889 $ 74,064 $ 61,974
Less: Production taxes &
distribution fees (8,960) (7,524) (39,225) (32,058)
------------------------------------------------- -----------------------
Net Revenue 7,550 6,365 34,839 29,916
Cost of goods sold 6,061 4,892 24,360 19,422
------------------------------------------------- -----------------------
Gross margin 1,489 1,473 10,478 10,494
Expenses:
Selling, marketing and
administration 2,041 1,597 7,868 6,485
------------------------------------------------- -----------------------
Earnings before the
undernoted (552) (124) 2,611 4,009
Other expenses:
Bottle dispute (6) (29) (102) (83)
Amortization (621) (284) (1,726) (1,153)
Interest on long-term debt (104) (59) (400) (222)
Other interest income 15 42 73 107
Gain on disposal of fixed
assets 15 - 15 0
Equity earnings/(loss) of
long term investment (11) 13 (24) 38
------------------------------------------------- -----------------------
(712) (317) (2,165) (1,314)
------------------------------------------------- -----------------------
Earnings/(loss) before
provision for income taxes (1,263) (440) 446 2,695
Future income tax expense (263) (2,104) 319 (2,104)
------------------------------------------------- -----------------------
Net earnings (1,000) 1,663 127 4,799
Deficit, beginning of the
period (3,158) (5,949) (4,285) (9,085)
------------------------------------------------- -----------------------
Deficit, end of period $ (4,158) $ (4,285) $ (4,158) $ (4,285)
------------------------------------------------- -----------------------
Net earnings per share:
Basic $ (0.05) $ 0.05 $ 0.01 $ 0.24
Diluted (0.04) 0.04 0.01 0.24
------------------------------------------------- -----------------------
Brick Brewing Co. Limited
Balance Sheets
(unaudited)
($ 000's)
-------------------------------------------------------------------------
January 31, January 31,
2007 2006
-------------------------------------------------------------------------
Assets
Current assets:
Cash $ 54 $ 507
Accounts receivable 2,590 3,248
Inventories 8,382 5,111
Future income taxes 80
Prepaid expenses 487 434
-----------------------------------------------------------------------
Total current assets 11,593 9,300
Property, plant and equipment 17,687 15,518
Long term investment 79 103
Trademarks and listing fees 5,407 5,254
Deferred costs 638 374
Other assets 243 273
Future income taxes 1,705 2,104
-------------------------------------------------------------------------
$ 37,352 $ 32,926
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Trade accounts payable and accrued liabilities $ 3,912 $ 5,411
Current portion of long-term debt 890 476
Current portion of obligations under capital lease 204 100
-----------------------------------------------------------------------
Total current liabilities 5,006 5,987
Long-term debt 3,899 2,989
Obligations under capital lease 557 104
Shareholders' equity:
Share capital 31,504 27,717
Contributed surplus 545 414
Deficit (4,158) (4,285)
-----------------------------------------------------------------------
Total shareholders' equity 27,890 23,846
-------------------------------------------------------------------------
$ 37,352 $ 32,926
-------------------------------------------------------------------------
Brick Brewing Co. Limited
Statements of Cash Flows
(unaudited)
($ 000's)
Three Months Ended Year Ended
------------------------------------------------- -----------------------
January 31, January 31, January 31, January 31,
2007 2006 2007 2006
------------------------------------------------- -----------------------
Cash provided by (used in):
Operations:
Earnings for the period $ (1,000) $ 1,664 $ 127 $ 4,799
Items not involving cash:
Amortization 621 284 1,758 1,153
Stock based compensation 81 29 131 192
Equity (earnings)/loss
of long term investment 11 (13) 24 (38)
Future income taxes (183) (2,104) 399 (2,104)
Change in non-cash
operating working capital (1,382) 359 (4,245) (498)
----------------------------------------------- -----------------------
(1,851) 219 (1,806) 3,505
Financing:
Repayment of obligation
under long term debt (20) (35) (676) (385)
Repayment of obligation
under capital lease (69) (12) (193) (87)
Issuance of long term debt - - 2,000 1,000
Proceeds from obligations
under capital lease - 163 750 -
Financing costs - - - (5)
Proceeds from sale of bottle
inventory - 224 - 224
Issue of capital stock,
net of costs 1,487 227 3,787 657
----------------------------------------------- -----------------------
1,398 567 5,667 1,404
Investments:
Decrease/(increase) in
equipment deposits - - - -
Acquisition of property,
plant and equipment and
listing fees (473) (2,544) (3,970) (6,908)
Pre-operating costs 64 (236) (345) (236)
Other assets - - - (300)
Long term investments - - - (66)
----------------------------------------------- -----------------------
(410) (2,779) (4,314) (7,510)
------------------------------------------------- -----------------------
Net increase in cash (863) (1,993) (453) (2,601)
Cash, beginning of period 917 2,500 507 3,108
------------------------------------------------- -----------------------
Cash, end of period $ 54 $ 507 $ 54 $ 507
------------------------------------------------- -----------------------
------------------------------------------------- -----------------------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, 2007 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.
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, April 24,
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 www.brickbeer.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 beers and is also a leading player in the
fast-growing value beer segment. 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. These forward-looking statements include the
statements concerning plant, packaging and other capacity improvements,
product demand, 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 improvements in product distribution and
customer service, that improved operating efficiencies will be realized from
the additional capacity 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 factors
which could cause actual results to vary from current expectations, including
construction or other production delays, additional or duplicative costs,
operational or distribution issues issues 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.
(*) EBITDA in 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: Doug Berchtold, President and CEO, Tel: (519)
576-9100 ext. 247; Jim Brickman, Executive Chairman, Founder, Tel: (519)
576-9100 ext. 232; E-mail: finance@brickbeer.com
