The Brick Group reports first quarter results



    
    /NOT FOR DISTRIBUTION THROUGH U.S. NEWS WIRE SERVICES OR DISSEMINATION
    IN THE U.S/
    

    EDMONTON, May 12 /CNW/ - The Brick Group Income Fund (TSX:BRK.UN) (the
"Brick Group") today announced its financial results for the first quarter
ended March 31, 2009. Financial statements and Management's Discussion and
Analysis are available on the Brick Group's website at www.thebrickgroup.ca.
    "Our recent recapitalization transaction, achieved during market
conditions when it's difficult for companies to refinance, speaks to the
strength of our underlying business", said Kim Yost, President and Chief
Executive Officer. "The completion of the recapitalization will enable the
Brick Group to deal with liquidity and financial covenant issues. Management
is preparing for continued adversity in the remainder of 2009 and is taking
appropriate measures to reduce the pressure on liquidity and pricing caused by
volatile financial markets. While we don't expect any significant recovery in
2009, we do believe that the Brick will be positioned to demonstrate its
relative strengths as consumer confidence returns" said Mr. Yost.

    Operating Results

    For the first quarter ended March 31, 2009, the Brick Group's operating
results were impacted by the weakened Canadian economy and on-going recession.
Compared to the same quarter of 2008, consolidated sales and operating revenue
of $271.6 million was lower by $56.3 million or 17.2%, and consolidated EBITDA
decreased by $14.9 million to negative $2.4 million.
    First quarter sales and operating revenue increased by 20.6% in the
financial services segment to $17.4 million, and decreased by 18.9% in the
retail segment to $254.2 million, compared to the same quarter in 2008. In the
retail segment, first quarter growth in same store sales was negative 21.3%.
    First quarter EBITDA increased by 24.3% in the financial services segment
to $9.1 million, and decreased by $16.7 million in the retail segment to
negative $11.5 million, compared to the same quarter in 2008. In the retail
segment, the EBITDA loss was driven by weak first quarter sales and higher
fixed costs, as compared to the same quarter in 2008. The impact of these
factors was mitigated by our continued efforts to reduce semi-fixed and
variable costs, which contributed significantly to the $11.4 million, or 9.2%,
quarter-over-quarter reduction in consolidated selling, general and
administrative expenses ("SG&A").
    Adjusted EBITDA was negative $1.6 million for the quarter, representing a
decrease of $15.7 million when compared to the same quarter in 2008.
    In the first quarter our net loss was $29.3 million, including a $25
million non-cash intangible asset impairment charge, compared to net income of
$4.4 million in the same quarter of 2008. The Brick Group's operating results
for the three months ended March 31, 2009 were significantly below
expectations. As well, the Brick Group is currently working to complete a
recapitalization transaction that will impact the future cash flows of the
Brick Group. As a result of these events, the Brick Group has made significant
revisions to its forecasts for sales, operating results, and cash flows. Taken
together, these events triggered an interim review of the Brick Group's
goodwill and indefinite life intangible assets to determine whether an
impairment charge is necessary. The Brick Group performed the interim review
as at March 31, 2009, and determined that the carrying values of its brand
intangible assets exceeded their fair values. An impairment write down of $25
million with respect to the Brick Group's brands (the "Brick" and "United
Furniture Warehouse"), and a related future income tax recovery of $4.7
million, have been recognized in the Brick Group's consolidated statement of
loss for the three month period ended March 31, 2009.
    In accordance with the terms of Brick Group's Credit Facilities
agreement, the Brick Group requested and received the consent of its lenders
to exclude the non-cash brand impairment charge from the calculation of EBITDA
for purposes of calculating its financial covenants. The consent, which is
subject to the recapitalization transaction closing on or before June 3, 2009,
is in effect until June 3, 2009. Without this consent, the Brick Group would
have been in breach of all financial covenants under its Credit Facilities for
the quarter ending March 31, 2009. In conjunction with the consent, no further
borrowings are currently permitted under the Brick Group's Acquisition Credit
Facility. Prior to this reduction, for the quarter ending March 31, 2009, the
Brick Group had approximately $2 million of borrowing capacity available under
its $40 million Acquisition Credit Facility due to margining requirements. The
recapitalization transaction, anticipated to close on May 28, 2009, will
include the repayment of all amounts owed under the Credit Facilities and
Senior Notes. The covenant breach does not prohibit the entering into of the
recapitalization transaction and, upon closing of the recapitalization
transaction, the Brick Group will no longer be subject to these financial
covenants. Should the recapitalization transaction not be completed, and
further consents not be obtained, the Brick Group will breach all of its
financial covenants for the quarter ending March 31, 2009.
    The payout ratio for the twelve months ended March 31, 2009 was 104.6%
compared to 87.2% for the twelve months ended March 31, 2008. Under our
alternative view of distributable cash, the payout ratio for the twelve months
ended March 31, 2009 was 102.4% compared to 88.0% for the twelve months ended
March 31, 2008. As a result of the continued deterioration in economic
conditions and an uncertain outlook for 2009, we announced on February 18,
2009 that we were suspending our monthly distribution payments for all trust
units.
    On May 7 and 11, 2009, the Brick Group announced that it intends to
complete a recapitalization transaction that includes:

    
    -  a $120 million financing (the "Offering") comprised of the sale of
       debt units (the "Debt Units"), each Debt Unit consisting of $1,000
       principal amount of 12% senior secured debentures (the "Debentures")
       and 1,000 Class A Unit purchase warrants (the "Warrants");

    -  a new asset-based credit facility (the "Asset-Based Credit Facility")
       with available borrowings initially expected at $65 million; and

    -  the repayment of all of the Brick's outstanding senior indebtedness
       of approximately $140 million.
    

    The Brick Group believes the recapitalization transaction will provide
the Brick Group with increased financial flexibility and the capital resources
necessary to satisfy its liquidity requirements in light of deteriorating
economic conditions.

    Consolidated and Franchise Sales and Operating Revenue

    First quarter consolidated and franchise sales and operating revenue was
$303.8 million, including $32.2 million of franchise sales, compared to $358.1
million, including $30.1 million of franchise sales, in the same quarter last
year, representing a decrease of 15.1%. Same store sales growth for corporate
stores together with franchise stores was negative 20.9% compared to negative
2.6% for the first quarter of 2008.
    Compared to the same quarter a year ago, sales at our franchise stores
increased by 7.0% to $32.2 million.
    We began the quarter with 47 franchise stores and ended with 47, while in
2008, we began the quarter with 33 and ended with 32 franchise stores.
    The following table includes some key highlights, compared to the same
period last year:

    
    -------------------------------------------------------------------------
                                       For the three months ended March 31
                              -----------------------------------------------
    (000's of $ except %,                             $ Increase  % Increase
     and store amounts)             2009        2008  (Decrease)  (Decrease)
    -------------------------------------------------------------------------
    Retail Segment - Sales
     and operating revenue    $  254,156  $  313,459     (59,303)     -18.9%
    Financial Services
     Segment - Sales and
     operating revenue            17,443      14,460       2,983       20.6%
                              -----------------------
    Consolidated - Sales and
     operating revenue           271,599     327,919     (56,320)     -17.2%
    Franchise Sales               32,240      30,144       2,096        7.0%
                              -----------------------
    Consolidated and Franchise
     Sales and operating
     revenue                  $  303,839  $  358,063     (54,224)     -15.1%
                              -----------------------
                              -----------------------
    Same Store Sales Growth
     (corporate stores)           -21.3%       -2.3%
    Same Store Sales Growth
     (corporate and franchise
     stores)                      -20.9%       -2.6%

    Retail Segment -
     EBITDA(1)                $  (11,493) $    5,190     (16,683)    -321.5%
    Financial Services
     Segment - EBITDA              9,063       7,289       1,774       24.3%
                              -----------------------
    Consolidated - EBITDA(1)  $   (2,430) $   12,479     (14,909)    -119.5%
                              -----------------------
                              -----------------------
      EBITDA as a percentage
       of sales and operating
       revenue                     -0.9%        3.8%

    Retail Segment - Net
     loss(1)                  $  (38,376) $   (3,092)    (35,284)    1141.2%
    Financial Services
     Segment - Net income          9,026       7,468       1,558       20.9%
                              -----------------------
    Consolidated - Net
     (loss) income(1)         $  (29,350) $    4,376     (33,726)    -770.6%
                              -----------------------
                              -----------------------

    EBITDA - Adjusted         $   (1,642) $   14,043     (15,685)    -111.7%

      Adjusted EBITDA as a
       percentage of sales
       and operating revenue       -0.6%        4.3%

    Distributable cash per
     unit for the three
     months ended March 31    $    (0.08) $     0.20       (0.28)    -145.0%

    Payout Ratio for the
     three months ended
     March 31                     -64.2%      153.5%

    Distributable cash per
     unit for the twelve
     months ended March 31    $     0.81  $     1.38

    Payout Ratio for the
     twelve months ended
     March 31                     104.6%       87.2%

    Stores at period end             232         211
    -------------------------------------------------------------------------

    (1) 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 first quarter, previously recorded amortization of
        pre-opening costs of $661 and SG&A of $30 has been reclassified
        from net income to the opening deficit on the 2008 consolidated
        balance sheet.
    

    Conference Call and Webcast

    The Brick will host an investor conference call at 2:00 p.m. eastern time
(12:00 noon Alberta time) on Wednesday, May 13, 2009. To access the call,
please call either (416) 644-3429 or (800) 588-4490 five minutes prior. For a
listen-only version of the conference, log on to
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2656280. A replay of
the call will be available until May 20, 2009 at 11:59 PM MT. To access the
replay please dial (416) 640-1917 and enter the passcode 21305437 followed by
the pound sign.

    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 and the New
Brunswick, and the Yukon Territory.

    This news release does not constitute an offer to sell or the
solicitation of an offer to buy the securities referred to herein. The units
will not be registered under the U.S. Securities Act of 1933, as amended (the
"Securities Act") and may not be offered or sold within the United States or
to, or for the account or benefit of, U.S. persons except in certain
transactions exempt from the registration requirements of the Securities Act.

    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 for the first quarter
of 2009, the anticipated impact of the recapitalization transaction on the
Brick, 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. Factors that could
cause actual results to differ materially from those set forth in the
forward-looking statements include, but are not limited to, the risk that
relationships with suppliers (including the availability and terms of supplier
credit) fail to improve or deteriorate further, that costs may be difficult to
manage and that availability under the Asset-Based Credit Facility may be less
than expected and those risks and uncertainties detailed in the section
entitled "Risk Factors" in the Brick's Management's Discussion and Analysis,
Annual Information Form, preliminary short form prospectus dated May 6, 2009
filed in connection with the Public Offering and in other filings on
www.sedar.com. Additionally, the preliminary financial results for the
three-month period ended March 31, 2009, as set forth herein, are preliminary
and unaudited and subject to change. The preceding list is not an exhaustive
list of possible factors. These and other factors should be considered
carefully and readers are cautioned not to place undue reliance on these
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

    References to "adjusted EBITDA" are to earnings before interest, income
taxes and amortization, adjusted to remove the impact of purchase accounting.
Management of the Brick Group believes that adjusted EBITDA is a useful
financial measure as it represents a starting point in the determination of
cash available for distribution to unitholders. Adjusted EBITDA is not an
earnings measure recognized by GAAP and does not have standardized meanings
prescribed by GAAP. Therefore, adjusted EBITDA may not be comparable to
similar measures presented by other issuers. Investors are cautioned that
adjusted EBITDA should not be construed as an alternative to net income as
determined in accordance with GAAP, as an indicator of performance or to cash
flows from operating, investing and financing activities as measures of
liquidity and cash flows.





For further information:

For further information: Kim Yost, President and CEO, The Brick Group,
(780) 930-6300, investor@thebrickgroup.ca; Nick Bobrow, CA, Chief Financial
Officer, The Brick Group, (780) 930-6300, investor@thebrickgroup.ca


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