Lakeport Brewing Income Fund announces 2006 fourth quarter results



    HAMILTON, ON, March 5 /CNW/ - Lakeport Brewing Income Fund (TSX: TFR.UN),
an Ontario-based brewer of value-priced, quality beer, today announced that
its strong performance continued through the fourth quarter of 2006 as sales
grew by 25.5 percent and adjusted EBITDA (adjusted for impact of Gifted-unit
compensation expense) rose 80.5 percent, compared with the 2005 fourth
quarter.
    "Throughout the year, Lakeport succeeded in building impressive brand
equity. Lakeport's brands, led by Lakeport Honey Lager, Lakeport Pilsener, and
Lakeport Light, grew to prominence, enabling us to achieve approximately
11.5 percent market share of The Beer Store's home consumer sales in 2006.
Sales of Lakeport Honey Lager, Lakeport Pilsener, and Lakeport Light through
The Beer Store rose about 24 percent in the 2006 fourth quarter. Lakeport Ice
and Lakeport Strong also continued to enjoy excellent growth," said Teresa
Cascioli, the Fund's Chair and Chief Executive Officer.

    Growth Pace Sustained Through Fourth Quarter
    --------------------------------------------

    Fourth-quarter 2006 gross sales rose 25.5 percent to $40.9 million,
compared with $32.6 million in the 2005 period. Gross profit margin improved
to 39.1 percent in the fourth-quarter, a 6.9-point improvement from the
32.2 percent in the 2005 fourth-quarter (adjusted for the reclassification of
distribution charges discussed below). Higher volumes and the positive affects
of Lakeport's cash-flow-enhancing capital projects, as well as higher pricing
for smaller package sizes contributed to the margin improvement.
    The Fund has determined that distribution charges paid to third-party
carriers should not be included in the calculation of net revenue. To reflect
this change in accounting policy, Lakeport has retroactively adjusted its
financial statements for the previously reported 2006 quarters and for the
periods in 2005. All references to comparative gross profit margins and
Adjusted EBITDA margins contained in this press release have been adjusted to
reflect this change.
    As a percentage of net revenue, selling, general, and administrative
("SG&A") expenses declined to 12.7 percent from 14.5 percent in the 2005
fourth-quarter. SG&A expenses were 5.4 percent higher than in the 2005 quarter
at $2.2 million, compared with $2.1 million a year earlier. The increase was
mainly due to additional compensation expense recorded for the long-term
incentive plan ("LTIP").
    Adjusted EBITDA (EBITDA adjusted for Gifted-unit compensation expense)
was $4.6 million in the 2006 quarter, up 80.5 percent from adjusted EBITDA of
$2.6 million in the 2005 fourth quarter. This represents a nearly 9-point
increase in margin to 26.4 percent from 17.6 percent in the 2005
fourth-quarter.
    Net earnings for fourth-quarter 2006 were $2.4 million, or $0.44 per unit
(basic and diluted), compared with net earnings in the 2005 period of
$0.4 million or $0.07 per unit (basic and diluted).
    Distributable cash for the 2006 fourth quarter amounted to $4.6 million
($0.64 per unit). In the 2005 fourth quarter, distributable cash amounted to
$4.3 million ($0.59 per unit).

    Sales Increase 23 Percent in 2006
    ---------------------------------

    Gross sales for 2006 increased 23.0 percent to $163.6 million, compared
with $133.0 million in 2005. Lakeport's gross margin in 2006 rose to
42.8 percent of net revenue from 38.0 percent in 2005, and gross profit
increased to $29.3 million, up from $21.4 million for all of 2005. The growth
is mainly attributable to the same factors cited for the increase in the 2006
fourth quarter.
    SG&A expenses declined slightly as a percentage of revenue but increased
18.6 percent to $9.2 million in 2006 from $7.8 million in 2005. The increase
reflects, in part, Lakeport's decision to increase its investments in
marketing-related activities, as well as the addition of personnel to support
its growth and additional compensation expense recorded for the LTIP.
    Adjusted EBITDA was $20.1 million in 2006, up 47.2 percent from adjusted
EBITDA of $13.7 million in 2005. This represents a more than 5-point increase
in margin to 27.8 percent from 23.0 percent in 2005.
    Net earnings for 2006 amounted to $10.8 million, or $1.96 per unit (basic
and diluted).
    Distributable cash amounted to $16.2 million in 2006, or $2.25 per unit.
Distributions declared were $14.9 million or $2.07 per unit. This includes the
previously announced year-end special distribution of $0.39 per unit, payable
March 15, 2007 to unitholders of record as at December 29, 2006. One hundred
percent of distributions declared in 2006 were subject to income tax to the
unitholders.
    On February 1, 2007, Lakeport announced that it had entered into a
support agreement with Labatt Brewing Company Limited whereby Labatt has
agreed to acquire all of the outstanding units of the Fund for $28 per unit.
Completion of the transaction is subject to certain customary conditions.

    Lakeport believes EBITDA and Adjusted EBITDA (EBITDA adjusted for the
Gifted Unit compensation expense) are important measures as they allow
management to assess operating performance of the Fund's business. These terms
do not have any standardized meaning prescribed by generally accepted
accounting principals (GAAP). Management cautions investors that EBITDA and
Adjusted EBITDA should not replace net earnings or loss as an indicator of
performance, or cash flows from operating, investing, and financing activities
as a measure of the Fund's liquidity and cash flows. The Fund's method for
calculating this information may differ from that used by other issuers and,
accordingly, this information may not be comparable to measures used by other
issuers.
    Distributable cash is a non-GAAP measure generally used by Canadian
income funds as an indicator of financial performance. The method of
calculating the Fund's distributable cash may differ from computations as
reported by similar entities and, accordingly, may not be comparable to
distributable cash as reported by such entities.

    Selected Financial Information

    The following table sets forth information regarding Lakeport's operating
performance and should be read in conjunction with the Management Discussion &
Analysis ("MD&A") and the audited consolidated financial statements and the
related notes thereto.

    
    (in thousands of Canadian           Year ended        Three months ended
     dollars, except per               December 31,              December 31,
     unit amounts)               2006       2005(1)        2006         2005
                                        restated(2)               restated(2)
    -------------------------------------------------------------------------
    Revenue:
      Sales                   163,641      133,008       40,875       32,581
      Production taxes and
       distribution costs      91,274       73,621       23,333       18,051
    -------------------------------------------------------------------------
    Net Revenue                72,367       59,387       17,542       14,530
    Cost of Goods Sold         43,073       37,978       10,686        9,853
    -------------------------------------------------------------------------
    Gross Profit               29,294       21,409        6,856        4,677
    Gross Profit %               40.5%        36.0%        39.1%        32.2%
    Selling, general and
     administrative
     expenses                   9,198        7,758        2,228        2,113
    Gifted-units
     compensation expense       2,199          634          432          491
    -------------------------------------------------------------------------
    EBITDA                     17,897       13,017        4,196        2,073
    Add: Gifted-units
     compensation expense       2,199          634          432          491
    -------------------------------------------------------------------------
    Adjusted EBITDA            20,096       13,651        4,628        2,564
    Adjusted EBITDA Margin       27.8%        23.0%        26.4%        17.6%
    -------------------------------------------------------------------------
                                               not
    Net earnings               10,784 meaningful(1)       2,415          386

    Basic earnings per                         not
     unit                  $     1.96 meaningful(1)  $     0.44   $     0.07
    Diluted earnings per                       not
     unit                  $     1.96 meaningful(1)  $     0.44   $     0.07

    Total assets
     (at period end)          103,966      102,524      103,966      102,524

    (1) The operating results for the full year ended December 31, 2005
        consist of the operating results of Lakeport Brewing Corporation
        ("LBC") for the period January 1, 2005 to June 20, 2005 (prior to the
        acquisition by the Fund on June 21, 2005) in addition to the results
        of the Fund for the period June 21, 2005 to December 31, 2005. Net
        earnings for the combined year ended December 31, 2005 is not
        meaningful due to a different capital structure for LBC as compared
        to the Fund.

    (2) Certain distribution charges previously included in "Production taxes
        and distribution costs" have been reclassified to "Cost of goods
        sold".



    Consolidated Statements of Earnings
    Periods ended December 31, 2006 and 2005
    (in thousands of Canadian dollars, except per unit amounts)

                                Three        Three
                               months       months    January 1
                                ended        ended           to   June 21 to
                          December 31, December 31, December 31, December 31,
                                 2006         2005         2006         2005
                           (unaudited)  (unaudited)    (audited)    (audited)
                                         (restated)                (restated)
    Revenue:
      Sales                $   40,875   $   32,581   $  163,641   $   78,541
      Production taxes and
       distribution costs      23,333       18,051       91,274       43,946
    -------------------------------------------------------------------------
                           $   17,542   $   14,530   $   72,367   $   34,595

    Cost of goods sold         10,686        9,853       43,073       22,411

    -------------------------------------------------------------------------
    Gross profit           $    6,856   $    4,677   $   29,294   $   12,184

    Selling, general and
     administrative
     expenses                   2,228        2,113        9,198        4,417
    Gifted-units
     compensation expense         432          491        2,199          634

    -------------------------------------------------------------------------
    Earnings before the
     undernoted            $    4,196   $    2,073   $   17,897   $    7,133

    Other expenses:
      Depreciation and
       amortization               856        1,380        3,097        2,018
      Interest                    164          159          670          430
    -------------------------------------------------------------------------
                           $    1,020   $    1,539   $    3,767   $    2,448
    -------------------------------------------------------------------------
    Earnings before
     non-controlling
     interest              $    3,176   $      534   $   14,130   $    4,685

    Non-controlling
     interest                     761          148        3,346        1,133

    -------------------------------------------------------------------------
    Net earnings           $    2,415   $      386   $   10,784        3,552
    -------------------------------------------------------------------------

    Earnings per unit
      Basic                $     0.44   $     0.07   $     1.96   $     0.65
      Diluted              $     0.44   $     0.07   $     1.96   $     0.65
    Average number of
     units outstanding
     during the period
      Basic                 5,522,534    5,455,534    5,490,961    5,455,534
      Diluted               7,194,418    7,194,418    7,194,418    7,194,418



    Consolidated Balance Sheets
    (in thousands of Canadian dollars) (audited)

                                                          As at        As at
                                                    December 31, December 31,
                                                           2006         2005
                                                                   (restated)
    Assets
    Current assets:
      Cash and cash equivalents                      $    6,394   $    6,106
      Accounts receivable                                 3,564        3,562
      Inventories                                        12,070       13,257
      Prepaid expenses                                      287          324
    -------------------------------------------------------------------------
                                                     $   22,315   $   23,249

    Capital assets                                       23,787       21,097
    Deferred financing costs                                182          300
    Intangible assets                                    24,727       24,923
    Goodwill                                             32,955       32,955
    -------------------------------------------------------------------------
                                                     $  103,966   $  102,524
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Unitholders' Equity
    Current liabilities:
      Accounts payable and accrued liabilities       $   19,532   $   20,974
      Liability for Gifted-units compensation             1,750          634
      Distributions payable to non-controlling
       interest                                           1,926        1,119
      Distributions payable                               2,927        2,128
    -------------------------------------------------------------------------
                                                     $   26,135   $   24,855

    Long-term debt                                       15,000       15,000

    Non-controlling interest                             16,139       16,958

    Unitholders' equity
      Units                                              47,575       47,063
      Contributed surplus                                 1,177            -
      Retained earnings (deficit)                        (2,060)      (1,352)
    -------------------------------------------------------------------------
                                                     $   46,692   $   45,711
    -------------------------------------------------------------------------
                                                     $  103,966   $  102,524
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statements of Retained earnings (deficit)
    Periods ended December 31, 2006 and 2005
    (in thousands of Canadian dollars) (audited)

                                                   January 1 to   June 21 to
                                                    December 31, December 31,
                                                           2006         2005
                                                                   (restated)

    Retained earnings (deficit), beginning of period
      As previously reported                         $     (919)  $        -
      Restatement                                          (433)           -
      -----------------------------------------------------------------------
      As restated                                    $   (1,352)  $        -

    Net earnings                                         10,784        3,552

    Distributions                                       (11,398)      (4,904)

    Distributions paid on vested Gifted-units               (94)           -
    -------------------------------------------------------------------------
    Retained earnings (deficit), end of period       $   (2,060)  $   (1,352)
    -------------------------------------------------------------------------



    Consolidated Statements of Cash Flows
    Periods ended December 31, 2006 and 2005
    (in thousands of Canadian dollars)

                                Three        Three
                               months       months    January 1
                                ended        ended           to   June 21 to
                          December 31, December 31, December 31, December 31,
                                 2006         2005         2006         2005
                           (unaudited)  (unaudited)    (audited)    (audited)
                                         (restated)                (restated)
    Cash provided by
     (used in)
    Operations:
      Net earnings         $    2,415   $      386   $   10,784   $    3,552
      Items not involving
       cash:
        Depreciation of
         capital assets           780          689        2,579        1,327
        Amortization of
         deferred financing
         costs                     31           30          121           64
        Amortization of
         intangible assets         45          531          397          531
        Non-controlling
         interest                 761          148        3,346        1,133
        Long-term incentive
         plan expense              54            -          677            -
        Gifted-units
         compensation
         expense                  432          491        2,199          634
      Gifted-units
       compensation payment         -            -       (1,083)           -
      Funding of long-term
       incentive plan               -            -         (458)           -

      Change in non-cash
       operating working
       capital                  1,305        3,945         (347)       4,017
                           --------------------------------------------------
                           $    5,823   $    6,220   $   18,215   $   11,258
    Financing:
      Issuance of debt,
       net of deferred
       financing costs              -            -            -       14,636
      Issuance of units,
       net of issuance costs        -           (8)           -       47,063
      Distributions paid       (4,682)      (2,038)     (13,287)      (3,221)
      Proceeds on sale of
       contributed gifted-
       units                        -            -        1,083            -
                           --------------------------------------------------
                           $   (4,682)  $   (2,046)  $  (12,204)  $   58,478
    Investing:
      Business acquisitions,
       net of cash acquired         -         (683)      (2,606)     (59,784)
      Additions to capital
       assets                  (1,220)      (1,965)      (2,913)      (3,910)
      Additions to listing
       fees                         -            -         (201)         (31)
      Additions to deferred
       financing costs              -            -           (3)           -
      Proceeds on disposal
       of capital assets            -            -            -           95
                           --------------------------------------------------
                           $   (1,220)  $   (2,648)  $   (5,723)  $  (63,630)

                           --------------------------------------------------
    Increase in cash and
     cash equivalents      $      (79)  $    1,526   $      288   $    6,106
    Cash and cash
     equivalents, beginning
     of period                  6,473        4,580        6,106            -
                           --------------------------------------------------
    Cash and cash
     equivalents, end of
     period                $    6,394   $    6,106   $    6,394   $    6,106
                           --------------------------------------------------
                           --------------------------------------------------
    



    Additional details are available in the Fund's MD&A and Financial
Statements filed with SEDAR (www.sedar.com).

    Quarterly Conference Call Notification

    Lakeport will hold a conference call for analysts and investors on
Tuesday, March 6, 2007 at 10:00 a.m. (EST) to discuss the financial results.
Teresa Cascioli, Chair and Chief Executive Officer, George Croft, President
and Chief Operating Officer, and Karen Trudell, Chief Financial Officer, will
participate. To participate, please dial 416-695-5800 or 800-408-3053
approximately 10 minutes prior to the start of the call. For those unable to
participate, a replay will be available until March 20, 2007 and can be
accessed at 416-695-5800 or 800-408-3053 (passcode 3209479 followed by the
number sign). An archived webcast also will be available at
www.lakeportbrewing.ca on March 7, 2007.

    About Lakeport Brewing

    Lakeport Brewing Income Fund is an Ontario-based brewery focused on
producing value-priced quality beer for the Ontario take-home market. Lakeport
produces nine proprietary beer brands, two of which, Lakeport Honey Lager and
Lakeport Pilsener, are among the top-ten selling brands in the province of
Ontario. Lakeport has more than 200 full-time employees at its production
facility in Hamilton, Ontario. The Fund's units trade on the TSX under the
symbol TFR.UN (TFR stands for 'two-four').

    Certain statements in this press release may constitute "forward-looking"
statements that involve known and unknown risks, uncertainties and other
factors which may cause actual results, performance or achievements of the
Fund to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. When
used in this press release, such statements use such words as "may", "will",
"expect", "anticipate", "project", "believe", "plan", and other similar
terminology. The risks and uncertainties are detailed from time to time in
reports filed by the Fund with the securities regulatory authorities in all of
the provinces and territories of Canada to which recipients of this press
release are referred for additional information concerning the Fund, its
prospects and the risks and uncertainties relating to the Fund and its
prospects. New risk factors may arise from time to time and it is not possible
for management to predict all of those risk factors or the extent to which any
factor or combination of factors may cause actual results, performance and
achievements of the Fund to be materially different from those contained in
forward-looking statements. The forward-looking information contained in this
press release is current only as of the date of this press release. There
should not be an expectation that such information will in all circumstances
be updated, supplemented or revised whether as a result of new information,
changing circumstances, future events or otherwise.





For further information:

For further information: Teresa Cascioli, Chair and Chief Executive
Officer, Lakeport Brewing Income Fund, investor.relations@lakeportbrewing.ca

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LAKEPORT BREWING INCOME FUND

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