The Brick Group reports second quarter results



    
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    EDMONTON, Aug. 7 /CNW/ - The Brick Group Income Fund (TSX:BRK.UN): (the
"Brick Group") today announced its financial results for the second quarter
ended June 30, 2009. Financial statements and Management's Discussion and
Analysis are available on the Brick Group's website at www.thebrickgroup.ca.
    "While the second quarter results are disappointing, we are pleased to
announce new financing today of $25 million which significantly improves our
near term liquidity. Details of this new financing are available in a separate
press release issued today. In addition, management has identified four
immediate priorities to achieve better results in the second half of this
year, and position our business to benefit from improving economic
conditions," said Bill Gregson, who was appointed President and Chief
Executive Officer of Brick Group on July 10. "We are currently taking action
to fix shortcomings related to our purchasing and supply chain alignment which
has negatively impacted our in-stock position, to improve our marketing and
advertising focus, and increase our sales force levels and effectiveness,
along with continuing controls to reduce costs and conserve cash. I am
confident that our brand strength as a leading Canadian retailer and our
rejuvenated operations will drive a sustainable turnaround in our
performance," said Mr. Gregson. "We are encouraged by a slowing in July of the
negative sales trends experienced by the Brick Group in the first half of
2009. We are also extremely pleased with the vote of confidence provided by
Fairfax through the additional financing to enable us to achieve our
turnaround objectives", said Mr. Gregson.
    "What is most encouraging is that in the first half of the year, which
was arguably the worst since the great depression, and which is also our
slowest half of the year, and in a period where we had significant
out-of-stocks that negatively impacted our sales, we used only $16 million in
cash from operations. This can be recaptured in the second half and we expect
positive cash from operations for the year even before the positive effects of
the changes we have already begun to implement," said Mr. Gregson.

    Second Quarter Operating Results

    For the second quarter ended June 30, 2009, the Brick Group's operating
results continued to be impacted by the on-going recession. Compared to the
same quarter of 2008, consolidated sales and operating revenue of $255.7
million was lower by $97.6 million or 27.6%, and consolidated EBITDA decreased
by $24.3 million to negative $7.7 million.
    Second quarter sales and operating revenue increased by 21.5% in the
financial services segment to $18.1 million, and decreased by 29.8% in the
retail segment to $237.6 million, compared to the same quarter in 2008. In the
retail segment, second quarter same store sales growth was negative 32.4%. In
the month of July, our monthly year-over-year trend for written sales improved
from levels experienced throughout the second quarter.
    Second quarter EBITDA increased by 17.3% in the financial services
segment to $8.8 million, and decreased by $25.6 million in the retail segment
to negative $16.5 million, compared to the same quarter in 2008.
    In the retail segment, the EBITDA loss was driven by weak second quarter
sales. In addition to the negative impact of continuing weakness in the
Canadian retail sector, limitations to credit terms imposed by some vendors
during the quarter negatively impacted inventory levels and our ability to
deliver goods and complete sales. While the May, 2009 recapitalization
transaction improved the Brick Group's liquidity position and eliminated all
financial covenants, management's belief that it will continue to provide
adequate liquidity is based on the assumption that current payment terms with
the Brick Group's suppliers will not change materially and adversely to the
Brick Group. Readers are referred to the March 2009 AIF, and the final short
form prospectus dated May 21, 2009, for further discussion of risks related to
suppliers and vendors.
    Adjusted EBITDA was negative $7.0 million for the quarter, representing a
decrease of $25.1 million when compared to the same quarter in 2008.
    In the second quarter, our net loss of $146.4 million included non-cash
goodwill and brand intangible asset impairment charges of $133.5 million. Net
loss prior to these charges was $12.9 million. In the same quarter of 2008,
net income was $7.6 million.

    
    Consolidated and Franchise Sales and Operating Revenue
    ------------------------------------------------------
    

    Second quarter consolidated and franchise sales and operating revenue was
$283.5 million, including $27.9 million of franchise sales, compared to $383.9
million, including $30.7 million of franchise sales, in the same quarter last
year, representing a decrease of 26.1%. Same store sales growth for corporate
stores together with franchise stores was negative 31.4% compared to positive
2.0% for the same quarter of 2008.
    Compared to the same quarter a year ago, sales at our franchise stores
decreased by 9.2% to $27.9 million, and same store sales growth was negative
25.3%.
    We began the quarter with 47 franchise stores and ended with 49, while in
2008, we began the quarter with 32 and ended with 33 franchise stores.

    
    Results Summary
    ---------------

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


    -------------------------------------------------------------------------
                                     For the three months ended June 30
    -------------------------------------------------------------------------
     (000's of $ except %,                            $ Increase  % Increase
     and store amounts )        2009         2008     (Decrease)  (Decrease)
    -------------------------------------------------------------------------
    Retail Segment - Sales
     and operating revenue  $  237,558   $  338,319    (100,761)      -29.8%
    Financial Services
     Segment - Sales and
     operating revenue          18,116       14,908       3,208        21.5%
                            ------------------------
                            ------------------------
    Consolidated - Sales
     and operating revenue     255,674      353,227     (97,553)      -27.6%
    Franchise Sales             27,872       30,693      (2,821)       -9.2%
                            ------------------------
    Consolidated and
     Franchise Sales and
     operating revenue      $  283,546   $  383,920    (100,374)      -26.1%
                            ------------------------
                            ------------------------
    Same Store Sales
     Growth (corporate
     stores)                    -32.4%         2.0%

    Same Store Sales
     Growth (corporate
     and franchise stores)      -31.4%         2.0%
    Retail Segment
     - EBITDA(1)            $  (16,487)  $    9,155     (25,642)     -280.1%
    Financial Services
     Segment - EBITDA            8,833        7,528       1,305        17.3%
                            ------------------------
    Consolidated
     - EBITDA(1)            $    7,654   $   16,683     (24,337)     -145.9%
                            ------------------------
    EBITDA as a percentage
     of sales and
     operating revenue           -3.0%         4.7%


    Retail Segment
     - Net loss(1)          $ (155,223)  $      (80)   (155,143)   193928.8%
    Financial Services
     Segment - Net income        8,856        7,630       1,226        16.1%
                            ------------------------
    Consolidated - Net
     (loss) income(1)       $ (146,367)  $    7,550    (153,917)    -2038.6%
                            ------------------------

    EBITDA - Adjusted       $   (7,047)  $   18,071     (25,118)     -139.0%

    Adjusted EBITDA as a
     percentage of sales
     and operating revenue       -2.8%         5.1%
    Cash (used) provided by
     operating activities
     before changes in
     non-cash working
     capital items             (13,479)      16,218     (29,697)
    Distributable cash
     per unit for the
     three months ended
     June 30                $    (0.21)  $     0.26       (0.47)     -180.8%
    Payout Ratio for the
     three months
     ended June 30                0.0%       117.1%
    Distributable cash
     per unit for the
     six months ended
     June 30
    Payout Ratio for the
     twelve months ended
     June 30
    Stores at period end           233          211
    -------------------------------------------------------------------------




    -------------------------------------------------------------------------
                                   For the six months ended June 30
     (000's of $ except %,                            $ Increase   % Increase
     and store amounts )          2009        2008    (Decrease)   (Decrease)
    -------------------------------------------------------------------------
    Retail Segment - Sales
     and operating revenue    $  491,714  $  651,778    (160,064)     -24.6%
    Financial Services
     Segment - Sales and
     operating revenue            35,559      29,368       6,191       21.1%
                            ------------------------
                            ------------------------
    Consolidated - Sales
     and operating revenue       527,273     681,146    (153,873)     -22.6%
    Franchise Sales               60,112      60,836        (724)      -1.2%
                            ------------------------
    Consolidated and
     Franchise Sales and
     operating revenue        $  587,385  $  741,982    (154,597)     -20.8%
                            ------------------------
                            ------------------------
    Same Store Sales
     Growth (corporate
     stores)                      -27.0%       -0.1%

    Same Store Sales
     Growth (corporate
     and franchise stores)        -26.5%       -0.2%
    Retail Segment
     - EBITDA(1)              $  (27,980)     14,243     (42,223)    -296.4%
    Financial Services
     Segment - EBITDA         $   17,896      14,918       2,978       20.0%
                            ------------------------
    Consolidated
     - EBITDA(1)              $  (10,084) $   29,161     (39,245)    -134.6%
                            ------------------------
    EBITDA as a percentage
     of sales and
     operating revenue             -1.9%        4.3%


    Retail Segment
     - Net loss(1)            $ (193,598) $   (3,274)   (190,324)    5813.2%
    Financial Services
     Segment - Net income         17,881      15,200       2,681       17.6%
    Consolidated - Net
     (loss) income(1)         $ (175,717) $   11,926    (187,643)   -1573.3%
                             ------------------------
    EBITDA - Adjusted         $   (8,688) $   32,113     (40,801)    -127.1%

    Adjusted EBITDA as a
     percentage of sales
     and operating revenue         -1.6%        4.7%
    Cash (used) provided by
     operating activities
     before changes in
     non-cash working
     capital items               (16,057)     26,268     (42,325)
    Distributable cash
     per unit for the
     three months ended
     June 30
    Payout Ratio for the
     three months
     ended June 30
    Distributable cash
     per unit for the
     six months ended
     June 30                  $     0.35       $1.38       (1.03)     -74.7%
    Payout Ratio for the
     twelve months ended
     June 30                      156.9%       86.7%
    Stores at period end             233         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 second quarter, previously recorded amortization of pre-
        opening costs of $661 and SG&A of $124 have been reclassified from
        net income to the opening deficit on the 2008 consolidated balance
        sheet. On a year-to-date basis, previously recorded amortization of
        pre-opening costs of $1,322 and SG&A of $154 have 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 12:00 noon eastern
time (10:00 a.m. Alberta time) on Friday, August 7, 2009. To access the call,
please call either (416) 646-3095 or (866) 249-2165 five minutes prior. For a
listen-only version of the conference, log on to
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2766720. A replay of
the call will be available until August 14, 2009 at 11:59 PM MT. To access the
replay please dial (416) 640-1917 and enter the passcode 21312480 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.

    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 second quarter
of 2009, 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, final short form prospectus dated May 21, 2009 filed
in connection with the Public Offering and in other filings on www.sedar.com.
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: Bill Gregson, 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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