Brick Brewing reports annual results - strong increases in beer volumes and revenues



    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 2006
    

    WATERLOO, 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:

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

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