Brick Brewing Reports Annual Results including $3 Million EBITDA*

WATERLOO, ON, April 22 /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 fourth quarter and year ended January 31, 2010.

"I believe that all shareholders will be pleased with the accomplishments we have made this past year", said George Croft, President and Chief Executive Officer. "We made strong commitments about cost savings and returning the business to profitability, and the team has delivered".

The Company realized EBITDA* of $3.0 million in fiscal 2010, an increase of $3.8 million from a $0.8 million EBITDA* loss in fiscal 2009.

"In order to maximize Brick's earnings and output we have embarked on a strategy of Fix, Fill, and Optimize", said Mr. Croft. In the opinion of management, the Company has completed the first phase of this strategy. The Company has improved its cost structure, upgraded its infrastructure and has made quality and customer service the top priorities.

Mr. Croft continued, "In fiscal 2010, the Company was successful in diversifying its sales mix by growing the Red Baron family and reducing dependency on the Laker trademark. This is a key achievement in the current pricing environment where the difference between mainstream and value beer prices has been squeezed through legislated price increases. The competitive environment is different than in previous years where discount brands regularly enjoyed a $10 per case price advantage compared to the most popular brands in the province. Today, there is a negligible difference between Brick prices and certain mainstream brands that have multi-million dollar marketing budgets. The good news is that Brick has adapted to these changes quickly and efficiently, and we are well positioned to execute on phase two of our strategy."

In the second phase of Fix, Fill, and Optimize, the Company will focus on owner brand growth, market expansion and co-packing relationships to fill unused capacity of more than 200,000 hectolitres. "Brick is open for business and we are actively pursuing a variety of co-pack opportunities. The recent announcement of a longer-term contract to manufacture and represent Mott's Caesar brands demonstrates our ability to be a great business partner" continued Mr. Croft. "The Company's goal is to build volume with similar agreements and partnerships."

"The Company will continue to support owner brands with aggressive marketing campaigns. In the first quarter of fiscal 2011, the Laker brand family underwent a significant packaging change, and early indications show that consumers are impressed with the 'new' Laker", said Sean Dennis, Director of Marketing for Brick Brewing Co. Limited.

By filling the facility through a combination of owner brand growth, market expansion and co-pack contracts the Company is positioned to achieve greater economies of scale and Optimize the Company's results.

The following is a summary of the financial highlights for the fiscal year ended January 31, 2010:

    
    Years ended January 31

    (in thousands of dollars except per share amounts)

                                                         2010           2009
    -------------------------------------------------------------------------

    Income Statement

    Net revenue                                        29,916         29,906
    -------------------------------------------------------------------------
    Gross profit                                        7,184          4,683
    -------------------------------------------------------------------------
    EBITDA*                                           3,049           (740)
    -------------------------------------------------------------------------
    Net income (loss) before income taxes                 914         (6,307)
    -------------------------------------------------------------------------
    Net income (loss)                                   1,366         (7,392)
    -------------------------------------------------------------------------
    Diluted earnings (loss) per share                    0.05          (0.31)
    -------------------------------------------------------------------------

    Balance Sheet

    Total assets                                       29,643         28,354
    -------------------------------------------------------------------------
    Shareholders' equity                               22,310         20,825
    -------------------------------------------------------------------------

    Operational Metrics

    Gross margin                                        24.0%          15.7%
    -------------------------------------------------------------------------
    EBITDA as a % of net revenue                        10.2%          -2.5%
    -------------------------------------------------------------------------
    

Annual Financial Highlights

Net revenues for fiscal 2010 were $29.9 million and are consistent with fiscal 2009. Gross revenues decreased 2.8% to $63.3 million for fiscal 2010, compared to $65.1 million for fiscal 2009.

In fiscal 2010, the Company's overall sales volume decreased by 5.9% over last year. The Laker brand sales volumes decreased by 20.5% during the year. The volumes of Waterloo brands were 62.9% higher than in the prior year and the Red Baron brand experienced growth in sales volumes of 593.8% from the prior year.

The volume of co-pack business decreased in comparison to the previous fiscal year. The decrease is attributable to the decline in the PC(R) beer volumes resulting from price increases required under Minimum Retail Price legislation ("MRP"). Volumes for other co-pack business, such as products packaged for Canada Dry Mott's, Inc., remained consistent with last year.

Cost of sales was $22.7 million for fiscal 2010; a decrease of $2.5 million from the prior year. Cost of sales represented 76% of net revenue in fiscal 2010 compared to 84% in the prior year. The Company achieved significant cost savings during fiscal 2010 through:

    
    -   brewing efficiencies which yielded cost savings of $0.2 million;

    -   reduced cost of packaging materials for bottled products by $0.35
        million;

    -   installation of a canning line at the Kitchener facility reducing the
        related costs of production and logistics by $0.25 million;

    -   outsourcing the Company's product distribution to Ryder Canada as
        well as discontinued selling directly to licensees and the LCBO which
        reduced delivery costs by $0.4 million; and

    -   reduced warehousing costs of $0.3 million due to a reduction in
        salaries and benefits from downsizing as well as no longer using
        outside warehouses.
    

In fiscal 2010, selling, marketing, and administration expenses totalled $4.0 million; a decrease of $0.5 million from the previous year's total expenditures of $4.5 million. During the third quarter of fiscal 2010, the Company received a payment of $1.0 million from the Ontario Government under the four-year Ontario Craft Brewers Opportunity Fund (the "Opportunity Fund") which was established in fiscal 2009. The Company will continue to maximize the benefits obtained from the marketing funding to better position the Company's brands in the marketplace.

Legal costs increased by $0.4 million in fiscal 2010 compared to the previous year. These costs were in conjunction with the ongoing litigation between the Company and certain of its shareholders, against Mr. James Brickman and between the Company and Anheuser-Busch, Incorporated ("Anheuser") and Labatt Brewing Company Limited ("Labatt").

Excluding legal costs, administrative expenses decreased by $0.7 million in fiscal 2010 compared to the previous year as a result of personnel restructuring in fiscal 2009 and targeted cost reductions. The Company is aggressively seeking cost saving opportunities in order to continue to strengthen its bottom line.

The EBITDA* for fiscal 2010 was $3.0 million compared to a $0.8 million EBITDA loss in fiscal 2009. Net income was $1.4 million compared to a net loss of $7.4 million in fiscal 2009. Severance and retirement allowance expense totalled $1.0 million in fiscal 2009. The prior year included significant non-cash charges such as the Formosa impairment of $3.3 million, and a future tax valuation allowance of $3.0 million.

Fourth Quarter Highlights

During the fourth quarter of fiscal 2010 gross revenues were $12.1 million, as compared to $13.6 million in the same period last year, a decrease of 11%. Revenues decreased primarily due to the continued decline of the Laker family brand, which decreased 14% in volume compared to the same period last year. The Company has continued to focus on rejuvenating this brand including releasing new packaging for the Laker family brands with fresh clean graphics in the first quarter of fiscal 2011.

The Red Baron family brand increased in sales volume by 214% in the fourth quarter of fiscal 2010 compared to 76% in fiscal 2009. This brand experienced tremendous success in fiscal 2010.

In the fourth quarter of fiscal 2010, beer volumes (excluding the PC(R) and HEK brands) decreased by 7% over the same period last year.

Gross revenues for the fourth quarter of fiscal 2010 included revenues of $0.7 million from co-pack activities, an increase from $0.6 million in the fourth quarter of fiscal 2009.

Net revenues for the fourth quarter of fiscal 2010 were $5.7 million compared to $6.6 million in the fourth quarter last year, a decrease of 14%. Net revenues are calculated by deducting from gross revenues, the costs of distribution fees paid to The Beer Store and the LCBO and production taxes.

Selling, marketing and administration activities costs were $0.9 million in the fourth quarter of fiscal 2010 compared to $1.3 million in the fourth quarter of fiscal 2009 driven by reductions in salaries and non-essential services.

There was a recovery of $1.0 million of future income taxes during the fourth quarter in comparison to a provision of $1.4 million in the fourth quarter of fiscal 2009. The recovery is due to a reduction to the valuation allowance as a result of management's expectations that the Company will be able to utilize more of the losses carried forward as a result of the increased profitability of the Company.

The net loss in the fourth quarter of fiscal 2009 included a charge to income for the impairment of the long-term assets at the Formosa facility. With the shift of the brewing production to the Waterloo facility and the uncertainty regarding the future prospects for the Formosa facility, the Company recognized an impairment charge in the amount of $3.3 million in fiscal 2009, representing the excess of the carrying value of the assets over their fair value. With the renewal of the Canada Dry Mott's, Inc. contract, management concluded that a further impairment of the Formosa facility was not required in fiscal 2010.

In the fourth quarter of fiscal 2009, a retirement allowance was paid to James Brickman and severance to other employees resulting in an increase in expenses during that period. There were nominal severance expenditures in the fourth quarter of fiscal 2010.

EBITDA* was a loss of $0.1 million in the fourth quarter of fiscal 2010, compared to a loss of $1.2 million in the fourth quarter of fiscal 2009.

    
                          Brick Brewing Co. Limited
                         Consolidated Balance Sheet

    -------------------------------------------------------------------------
                                                         2010           2009
    -------------------------------------------------------------------------
                                                          (Restated - note 1)
    Assets
    Current assets:
      Cash                                       $          -   $    209,291
      Accounts receivable                           2,357,069      2,096,781
      Inventories                                   5,251,714      5,309,474
      Prepaid expenses                                412,351        507,518
      Future income taxes                             566,000        522,338
    -------------------------------------------------------------------------
                                                    8,587,134      8,645,402

    Property, plant and equipment                  14,101,122     13,522,720
    Trademarks and listing fees                     5,731,954      5,401,314
    Other assets                                      188,871        158,067
    Future income taxes                             1,034,000        626,103
    -------------------------------------------------------------------------
                                                 $ 29,643,081   $ 28,353,606
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity
    Current liabilities:
      Bank indebtedness                          $  1,792,406   $          -
      Accounts payable and accrued liabilities      3,187,915      3,846,187
      Current portion of long-term debt               816,100        924,000
      Current portion of obligations under
       capital lease                                  146,418        419,282
      Deferred grants                                       -        270,758
    -------------------------------------------------------------------------
                                                    5,942,839      5,460,227

    Long-term debt                                  1,251,800      2,067,900
    Obligations under capital lease                   138,106              -

    Shareholders' equity:
      Share capital                                34,678,264     34,657,984
      Contributed surplus                             772,455        673,593
      Deficit                                     (13,140,383)   (14,506,098)
    -------------------------------------------------------------------------
                                                   22,310,336     20,825,479

    -------------------------------------------------------------------------
                                                 $ 29,643,081   $ 28,353,606
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) As a result of adopting CICA Handbook Section 3064, the Company has
        adjusted the opening deficit in the comparative consolidated balance
        sheet by $182,080 (net of tax) to write off pre-production costs that
        are no longer permitted to be deferred. The opening deficit in the
        comparative consolidated statement of earnings and deficit was
        adjusted by $261,589. Further, amortization was reduced by $116,068
        and future income tax expense has increased by $36,559 for the same
        period.



                          Brick Brewing Co. Limited
             Consolidated Statement of Income (Loss) and Deficit

    -------------------------------------------------------------------------
                                                         2010           2009
    -------------------------------------------------------------------------
                                                          (Restated - note 1)

    Gross revenue                                $ 63,277,345   $ 65,115,136
      Less production taxes and distribution
       fees                                       (33,360,935)   (35,209,590)
    -------------------------------------------------------------------------
    Net revenue                                    29,916,410     29,905,546

    Cost of sales                                  22,732,433     25,223,069

    -------------------------------------------------------------------------
    Gross profit                                    7,183,977      4,682,477

    Selling, marketing and administration           4,041,627      4,527,627

    -------------------------------------------------------------------------
    Earnings before the undernoted                  3,142,350        154,850

    Other income (expense):
      Depreciation and amortization                (1,794,487)    (1,775,801)
      Impairment of long-term assets                        -     (3,349,038)
      Disposition of listing fees                    (194,280)      (106,104)
      Interest on long-term debt                     (137,409)      (342,290)
      Other income (expense)                          (32,518)       171,965
      Severance costs and retiring allowance          (69,501)      (978,589)
      Equity loss on long-term investment                   -        (82,662)
    -------------------------------------------------------------------------
                                                   (2,228,195)    (6,462,519)

    -------------------------------------------------------------------------
    Net income (loss) before provision for
     (recovery of) income taxes                       914,155     (6,307,669)


    Future income tax provision (recovery)           (451,560)     1,084,600
    -------------------------------------------------------------------------
    Net income (loss) and comprehensive income
     (loss)                                         1,365,715     (7,392,269)

    Deficit, beginning of period                  (14,506,098)    (6,852,240)
    Cumulative effect of adopting new accounting
     policies, net of tax                                   -       (261,589)
    -------------------------------------------------------------------------
    Deficit, beginning of period restated         (14,506,098)    (7,113,829)
    -------------------------------------------------------------------------
    Deficit, end of period                       $(13,140,383)  $(14,506,098)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings (loss) per share:
      Basic                                      $       0.05   $      (0.31)
      Diluted                                    $       0.05   $      (0.31)
    -------------------------------------------------------------------------



                          Brick Brewing Co. Limited
                     Consolidated Statement of Cash Flows

    -------------------------------------------------------------------------
                                                         2010           2009
    -------------------------------------------------------------------------
                                                          (Restated - note 1)
    Cash provided by (used in):

    Operations:
      Income (loss) for the year                 $  1,365,715   $ (7,392,269)
      Items not involving cash:
        Amortization of property, plant and
         equipment, and other assets                1,802,587      1,790,777
        Impairment of long-term assets                      -      3,349,038
        Disposition of listing fees                   194,280        106,104
        Stock based compensation                       98,862        197,950
        Equity earnings on long-term investment             -         82,662
        Future income tax provision (recovery)       (451,560)     1,084,600
    Change in non-cash operating working capital   (1,036,392)     2,795,262
    -------------------------------------------------------------------------
                                                    1,973,492      2,014,124
    Financing:
      Increase (decrease) in bank indebtedness      1,792,406     (2,790,750)
      Repayment of long-term debt                    (924,000)      (906,600)
      Repayment of obligation under capital lease    (134,758)      (137,853)
      Issue of capital stock (net of fees)             20,280      2,612,252
      Stock options exercised                               -        357,850
    -------------------------------------------------------------------------
                                                      753,928       (865,101)
    Investing:
      Purchase of property, plant and equipment,
       and other assets                            (2,411,793)      (862,109)
      Purchase of listing fees                       (524,918)       (77,623)
    -------------------------------------------------------------------------
                                                   (2,936,711)      (939,732)

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

    Cash, beginning of period                         209,291              -

    -------------------------------------------------------------------------
    Cash, end of period                          $          -   $    209,291
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

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.

Fiscal 2011 Outlook

Fiscal 2010 was a year of improvement in all aspects of the operations. Management critically examined the Company's processes and made significant changes in order to reduce costs and remove unnecessary complexity to the business. "We plan to deliver no less then $500 thousand of incremental cost reductions in fiscal 2011", added Mr. Croft.

"We will continue the implementation of our Fix, Fill, and Optimize strategy by focusing our resources on filling the Brick facilities through a combination of owner brand growth, market expansion and additional co-pack contracts."

Additional Information

For further details, the Company's complete MD&A and consolidated financial statements for the year ended January 31, 2010 will be available on the investor section of the Company's website at www.brickbeer.com. This and 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 April 21, 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 increase, 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 rest of the discussion in the 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 April 21, 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

SOURCE Brick Brewing Co. Limited

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

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