The Brick Group Reports 2009 Fourth Quarter and Full Year Results

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The Brick Group Income Fund Records Highest Quarterly EBITDA in its History

EDMONTON, March 25, 2010 /CNW/ - The Brick Group Income Fund (TSX: BRK.UN) (the "Brick Group") today announced its fourth quarter and full year fiscal 2009 financial results for the period ended December 31, 2009. Financial statements and Management's Discussion and Analysis are available on the Brick Group's website at www.thebrickgroup.ca.

Fourth Quarter 2009 Summary:

    
    -   Consolidated sales and operating revenue of $361.4 million

    -   EBITDA of $30.8 million is the Brick Group's highest reported
        quarterly EBITDA in its history

    -   Net income of $12.2 million or $15.3 million before $2.8 million in
        amortization of warrant issuance costs, related to the Fairfax letter
        of credit facility, valued using the binomial option pricing model
        and severance costs

    -   $69.2 million Asset Based Credit Facility undrawn and available at
        December 31, 2009

    -   $19.5 million cash and cash equivalents at December 31, 2009

    -   $72.3 million reduction in accounts payable and accrued liabilities
        from December 31, 2008

    -   Corporate same store sales growth of 4.9% in December 2009, and
        preliminary corporate same store sales growth of 4.2% in January and
        5.2% in February 2010

    Full Year 2009 Summary:

    -   Consolidated sales and operating revenue of $1.2 billion

    -   EBITDA of $32.8 million or $35.2 million before executive severance
        costs

    -   Net loss of $163.0 million including a goodwill and intangible asset
        impairment of $158.5 million, $2.4 million executive severance costs,
        $3.0 million related to the remaining balance of unamortized fees
        associated with the previous credit facilities and $4.0 million
        warrant issuance costs, the majority of which was non-cash, related
        to the Fairfax letter of credit facility and valued using the
        binomial option pricing model
    

"I am very pleased with the Brick Group's results for the fourth quarter of 2009 and the progress we have made in a short period of time," said Bill Gregson, President and Chief Executive Officer. "The progression from the first half of 2009 to achieving the highest quarterly EBITDA in the Brick Group's history shows the perseverance, dedication and talent of the entire Brick team," said Mr. Gregson. "The previous EBITDA record was $27.9 million, generated in the fourth quarter of 2007, and fourth quarter 2009 results reflect the execution of the four-point plan outlined mid-year which included increasing sales staff, improving supply chain alignment and marketing initiatives and diligent focus on liquidity. As well, the Brick Group benefited from a sales shift to higher margin furniture business, the strength of the Canadian dollar and an improved cost structure. These factors in addition to general economic improvements contributed to strong results in the fourth quarter."

"I am also very satisfied with our liquidity position and the $38.9 million in working capital improvements achieved in 2009. Additionally, in February 2010, the Fairfax letter of credit was renewed for another 6 months, however reduced from $25.0 million to $4.0 million and all costs associated with the letter of credit will be fully recovered by the supplier it benefits," added Mr. Gregson.

Fourth Quarter and Year End 2009 Operating Results

For the fourth quarter, the Brick Group is pleased to report strong EBITDA performance of $30.8 million and net income of $12.2 million.

Fourth quarter consolidated sales and operating revenue of $361.4 million was lower by $3.7 million or 1.0%, compared to the same quarter of 2008.

For the quarter, sales and operating revenue increased by 12.2% in the financial services segment to $18.8 million, and decreased by 1.7% in the retail segment to $342.6 million. In the retail segment, fourth quarter same store sales growth improved to negative 7.3% compared to negative 22.0%, 33.0% and 19.0% for the first, second and third quarters of 2009, respectively. Same store sales growth in December 2009 was 4.9%, the first increase in 17 months, and this positive trend has continued into 2010 with preliminary same store sales growth of 4.2% and 5.2% for the months of January and February, respectively.

Fourth quarter consolidated EBITDA of $30.8 million was greater by $12.4 million or 66.9%, compared to the same quarter of 2008. EBITDA increased by 30.7% in the financial services segment to $9.8 million, and in the retail segment, EBITDA of $21.0 million was an improvement of $10.1 million or 91.6%.

For the year ended December 31, 2009, the Brick Group recorded EBITDA of $32.8 million and a net loss $163.0 million, including goodwill and brand intangible impairment charges and other non-recurring items.

The annual consolidated sales and operating revenue of $1.2 billion was lower by $203.5 million or 14.3%, compared to the 2008 annual results.

Sales and operating revenue in the financial services segment increased to $72.9 million for the year, a 17.9% increase over 2008. The annual sales and operating revenue for the retail segment decreased to $1.2 billion, representing a 15.7% drop from the previous year. Same store sales growth of negative 20.1% compared to a negative 4.2% for the year end December 31, 2008

Full year 2009 consolidated EBITDA of $32.8 million was lower by $35.4 million or 51.9%, compared to year end 2008. EBITDA increased by 19.6% in the financial services segment to $36.2 million, and in the retail segment, EBITDA loss of $3.4 million fell by $41.3 million or 108.9%.

The 2008 consolidated balance sheet reflects a retrospective correction to reclassify the long-term portion of deferred rent liability of $17.4 million previously included in accounts payable and accrued liabilities to deferred lease inducements and rent liabilities on the consolidated balance sheet. This correction did not have any effect on net loss, unitholders' equity, cash flows or externally imposed financial covenants to which the Brick Group was subject to for the year ended December 31, 2008.

Historically, the Brick Group's working capital has been subject to seasonal fluctuations, largely driven by changes in inventory, accounts payable and customer deposits. The Brick Group's working capital requirements are typically greatest in the first half of the year. The Brick Group believes the strengthening of our operations, the recapitalization transaction, the Fairfax LC and the continuing improvement in the Canadian economy from recession to recovery provides the Brick Group sufficient liquidity to meet its working capital requirements in 2010. At December 31, 2009, the Brick Group's current assets exceeded its current liabilities by $43.5 million, and nil was drawn, with $69.2 million of borrowing capacity under the Asset-Based Credit Facility. As of March 24, 2010 nil was drawn under the Asset-Based Credit Facility.

Consolidated and Franchise Sales and Operating Revenue

Fourth quarter consolidated and franchise sales and operating revenue was $406.7 million, including $45.2 million of franchise sales, compared to $413.3 million, including $48.1 million of franchise sales in the same quarter last year, representing a decrease of 1.6%. Same store sales growth for corporate stores together with franchise stores was negative 7.9% compared to negative 12.2% for the same quarter of 2008.

Compared to the same quarter a year ago, sales at franchise stores decreased by 6.0% to $45.2 million, and same store sales growth was negative 12.9%.

For the full year 2009, consolidated plus franchise sales and operating revenue was $1.4 billion and includes $141.6 million in franchise sales. This represents a 13.2% decrease from the $1.6 billion achieved in 2008, including a decrease in franchise sales of $3.4 million to $141.6 million. Sales store sales growth for the corporate stores together with the franchises was negative 19.9% compared to negative 4.0% in 2008.

Results Summary

The table below summarizes key financial results compared to the same period last year:

    
    -------------------------------------------------------------------------
                                 For the three months ended December 31
                            -------------------------------------------------
     (000's of $ except %,                            $ Increase  % Increase
     and store amounts)         2009         2008     (Decrease)  (Decrease)
    -------------------------------------------------------------------------
    Retail Segment - Sales
     and operating revenue  $  342,598   $  348,424      (5,826)       -1.7%
    Financial Services
     Segment - Sales
     and operating
     revenue                    18,844       16,789       2,055        12.2%
                            ------------------------
    Consolidated - Sales
     and operating
     revenue                   361,442      365,213      (3,771)       -1.0%
    Franchise sales(1)          45,238       48,124      (2,886)       -6.0%
                            ------------------------
    Consolidated sales
     and operating
     revenue and
     franchise sales(1)     $  406,680   $  413,337      (6,657)       -1.6%
                            ------------------------
                            ------------------------
    Same Store Sales
     Growth
     (corporate
     stores)                     -7.3%       -13.0%

    Same Store Sales
     Growth
     (corporate and
     franchise
     stores)                     -7.9%       -12.2%

    Retail Segment
     - EBITDA(2)            $   21,041   $   10,981      10,060        91.6%
    Financial Services
     Segment - EBITDA            9,807        7,502       2,305        30.7%
                            ------------------------
    Consolidated
     - EBITDA(2)            $   30,848   $   18,483      12,365        66.9%
                            ------------------------
                            ------------------------
      EBITDA as a
       percentage
       of sales
       and
       operating
       revenue                    8.5%         5.1%

    Retail Segment - Net
     income (loss)(2)(3)    $    2,801   $ (231,460)    234,261       101.2%
    Financial Services
     Segment - Net
     income                      9,434        7,333       2,101        28.7%
                            ------------------------
    Consolidated - Net
     income (loss)(2)(3)    $   12,235   $ (224,127)    236,362       105.5%
                            ------------------------
                            ------------------------

    Cash provided
     by operating
     activities before
     changes in non-cash
     working capital
     items                      34,212       23,191      11,021

    Distributable cash per
     unit for the
     period ended
     December 31            $     0.32   $     0.30        0.02         6.7%

    Payout Ratio for
     the period ended
     December 31                  0.0%        65.6%

    Stores at period end           236          230
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                 For the twelve months ended December 31
                            -------------------------------------------------
     (000's of $ except %,                            $ Increase  % Increase
     and store amounts)         2009         2008     (Decrease)  (Decrease)
    -------------------------------------------------------------------------
    Retail Segment - Sales
     and operating revenue  $1,150,619   $1,365,203    (214,584)      -15.7%
    Financial Services
     Segment - Sales
     and operating
     revenue                    72,976       61,910      11,066        17.9%
                            ------------------------
    Consolidated - Sales
     and operating
     revenue                 1,223,595    1,427,113    (203,518)      -14.3%
    Franchise sales(1)         141,612      144,962      (3,350)       -2.3%
                            ------------------------
    Consolidated sales
     and operating
     revenue and
     franchise sales(1)     $1,365,207   $1,572,075    (206,868)      -13.2%
                            ------------------------
                            ------------------------
    Same Store Sales
     Growth
     (corporate
     stores)                    -20.1%        -4.2%

    Same Store Sales
     Growth
     (corporate and
     franchise
     stores)                    -19.9%        -4.0%

    Retail Segment
     - EBITDA(2)            $   (3,366)  $   37,978     (41,344)     -108.9%
    Financial Services
     Segment - EBITDA           36,194       30,274       5,920        19.6%
                            ------------------------
    Consolidated
     - EBITDA(2)            $   32,828   $   68,252     (35,424)      -51.9%
                            ------------------------
                            ------------------------
      EBITDA as a
       percentage
       of sales
       and
       operating
       revenue                    2.7%         4.8%

    Retail Segment - Net
     income (loss)(2)(3)    $ (198,695)  $ (229,300)     30,605        13.3%
    Financial Services
     Segment - Net
     income                     35,678       30,201       5,477        18.1%
                            ------------------------
    Consolidated - Net
     income (loss)(2)(3)    $ (163,017)  $ (199,099)     36,082        18.1%
                            ------------------------
                            ------------------------

    Cash provided
     by operating
     activities before
     changes in non-cash
     working capital
     items                      25,690       70,436     (44,746)

    Distributable cash per
     unit for the
     period ended
     December 31            $     0.32   $     1.07       (0.75)      -70.1%

    Payout Ratio for
     the period ended
     December 31                 15.5%       103.1%

    Stores at period end           236          230
    -------------------------------------------------------------------------

    (1) Franchise sales figures refer to sales occurring at franchise stores
        which are not included in the sales and operating revenue figures
        presented in The Brick Group Income Fund's consolidated financial
        statements, or in the corporate same store sales figures presented in
        this MD&A. Accordingly, franchise sales are provided for reference
        only.

    (2) On January 1, 2009, the Brick Group adopted new accounting standards
        related to the capitalization of pre-opening costs. Under the new
        standards, store and distribution centre pre-opening costs are no
        longer deferred and amortized, and must be charged to income as
        incurred. These new standards require retroactive application and
        therefore, retail segment net income for 2008 has been restated. For
        the 2008 fourth quarter, previously recorded amortization of pre-
        opening costs of $660 has been reversed and prepaid expenses and
        deposits of $1,139 has been charged to SG&A on the 2008 consolidated
        income statement. As a result, net loss of $479 has been reclassified
        to the opening deficit on the 2008 consolidated balance sheet. On a
        year-to-date basis, previously recorded amortization of pre-opening
        costs of $2,643 has been reversed and prepaid expenses and deposits
        of $986 has been charged to SG&A on the 2008 consolidated income
        statement. As a result, net income of $1,657 has been reclassified to
        the opening deficit on the 2008 consolidated balance sheet.

    (3) Annual and fourth quarter net income for 2008 includes goodwill and
        brand intangible asset impairment charges of $241,471 recorded in the
        retail segment. Annual net income for 2009 includes goodwill and
        brand intangible asset impairment charges of $158,459 recorded in the
        retail segment.

    -------------------------------------------------------------------------
    Conference Call and Webcast

    The Brick Group will host an investor conference call at 10:00 a.m.
    Eastern Time (8:00 a.m. Alberta time) on Friday, March 26, 2010. To
    access the call, please call either (647) 427-7450 or (888) 231- 8191
    five minutes prior. For a listen-only version of the conference, go to   
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3002560.
    A telephone replay of the call will be available until April 1, 2010 at
    11:59 p.m. eastern time. To access the replay please dial either (416)
    849-0833 or (800) 642-1687 and enter the passcode 64008793.
    -------------------------------------------------------------------------
    

About the Brick Group

The Brick Group, together with its subsidiaries, is one of Canada's largest volume retailers of household furniture, mattresses, appliances and home electronics, operating under five banners: The Brick, United Furniture Warehouse, The Brick Superstore, The Brick Mattress Store, and Urban Brick. In addition, through its corporate sales division, the Brick Group services the subdivision, condominium, and high-rise builder market. The Brick Group's retail operations are located in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Prince Edward Island, Nova Scotia, New Brunswick and Yukon.

Forward-Looking Statements

This news release contains "forward-looking statements" within the meaning of applicable Canadian securities laws, including (but not limited to) statements about the Brick's consolidated sales and operating revenue, consolidated EBITDA, consolidated net loss, sales and operating revenue in the financial services and retail segments, same store sales growth and goodwill and indefinite life intangible asset impairment charges, the financial flexibility and capital resources necessary to manage the business in the current economic environment, and similar statements concerning anticipated future events, results, circumstances, performance or expectations, that reflect management's current expectations and are based on information currently available to management of the Brick and its subsidiaries. The words "may", "will", "should", "believe", "expect", "plan", "anticipate", "intend", "estimate", "predict", "potential", "continue" or the negative of these terms, or other expressions which are predictions of or indicate future events and trends and which do not relate to historical matters, identify forward-looking matters. Reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Brick to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements. The Brick undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than as required by applicable law.

Non-GAAP Financial Measures

Adjusted results, EBITDA, reported EBITDA, adjusted EBITDA, and distributable cash are not earnings measures recognized by GAAP and do not have standardized meanings prescribed by GAAP. Therefore, adjusted results, EBITDA, reported EBITDA, adjusted EBITDA, and distributable cash may not be comparable to similar measures presented by other issuers. Investors are cautioned that adjusted results, EBITDA, reported EBITDA, adjusted EBITDA, and distributable cash should not be construed as alternatives to net income as determined in accordance with GAAP, as indicators of performance or to cash flows from operating, investing and financing activities as measures of liquidity and cash flows.

SOURCE The Brick Ltd.

For further information: For further information: Bill Gregson, President and CEO, The Brick Group, (780) 930-6300, investor@thebrickgroup.ca

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