Big Rock Brewery Inc. Announces First Quarter Financial Results

CALGARY, May 5, 2016 /CNW/ - Big Rock Brewery Inc. (TSX: BR) ("Big Rock" or the "Corporation") announced its financial results today for the first quarter ended March 31, 2016.

The Corporation reported an increase in sales volumes of 24% to 42,143 hectolitres ("hl") for the first quarter of 2016 as compared to 33,980 hl for the same period in 2015. The reported operating loss was $1,118 thousand for the three months ended March 31, 2016, compared to an operating loss of $831 thousand for the same period in 2015, while net loss was $782 thousand for the first quarter of 2016 as compared to $624 thousand for the same quarter in 2015.

For the three months ended March 31, 2016, Big Rock grew volumes and gross profit nationally, including in Alberta, the region where the fierce competition in the craft beer industry has been most keenly felt. This is mainly due to the success of new private label beers which were launched late last year. These products more closely align with the tastes of contemporary drinkers together with the rebranding of AGD, Big Rock's most approachable lager.

The enthusiastic response to the rebranding and relaunching of these lower-priced products has compressed average margins. Additionally, margins in Alberta remain under sustained pressure as a result of two changes to markup rates in 2015, which combined represented a 20.5% increase in Alberta Gaming and Liquor Commission ("AGLC") markup rates as compared to the previous year. This increased beer and cider costs to consumers, which hampered Big Rock's ability to implement a planned price increase to cover rising input costs.

Despite the economic conditions and increased government markup rates, wholesale revenue for the three months ended March 31, 2016 was 21% higher than the same quarter in 2015. Retail revenue for the first quarter of 2016 was 579% higher than the first quarter of 2015, primarily due to the opening of Big Rock Urban in April 2015.

Big Rock Urban, based in downtown Vancouver, is the Corporation's newest brewpub and brewery operation, which has been well-received by local craft consumers. As Big Rock Urban is still developing its beer portfolio it is not yet selling at full capacity and therefore has a higher per-unit cost of sales and higher selling and marketing costs to increase awareness.

Big Rock's Ontario expansions continue to progress, with construction actively underway at the Etobicoke brewery site, while the Liberty Village brewpub continues through the permitting and pre-construction stages. Sales volumes grew 139% in Ontario as the Corporation engaged in awareness-building promotional activity. Despite a shift in market demand to bottles and tall cans from higher margin kegs, gross profit for Ontario sales was double the first quarter amount for 2015.

Big Rock's CEO, Robert Sartor, commented, "First quarter volume growth was strong and was our fourth consecutive quarter of growth after a period of painful contraction as we rebuilt the Big Rock brand. While bottom line results for the quarter were below our expectations, one-time charges of $200 thousand for severance as we began a reorganization of our plant operations and a significant $226 thousand non-cash charge for stock-based compensation (compared to a recovery of $104 thousand last year) due to volatility in the share price impacted results. Sales growth in our two focus markets of BC and Ontario was impressive, with BC up 95% and Ontario up 139%. The second quarter is off to a good start with April sales up 19% against April 2015."

Summary of Results

 

Financial and Operating Highlights

• Volume and revenue growth occurred in Big Rock's three main markets, Alberta, BC and Ontario;
• Big Rock expanded distribution of the successful Vancouver-developed Citradelic IPA to national availability and launched a bourbon barrel-aged porter;
• Big Rock also launched a new permanent cider and a new cider variety pack; and
• In Vancouver, the Corporation introduced three new limited-time beers.

Additional Information

The Financial Statements and Management's Discussion and Analysis dated May 5, 2016 can be viewed on Big Rock's website at http://bigrockbeer.com/sites/default/files/2016q1.pdf and on SEDAR at sedar.com under Big Rock Brewery Inc.

Forward-Looking Information

Certain statements contained in this news release constitute forward-looking statements. These statements relate to future events or Big Rock's future performance. All statements, other than statements of historical fact, may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "plans", "expects", "intends" and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Big Rock believes that the expectations reflected in those forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this News Release not be unduly relied upon by investors as actual results may vary materially from such forward-looking statements. These statements speak only as of the date of this News Release and are expressly qualified, in their entirety, by this cautionary statement.

In particular, this News Release contains forward-looking statements pertaining to the following:

• the number of additional products to be released and the timing of any such releases;
• the success of new products and initiatives in the future;
• the timing of the expected commencement of production of the Etobicoke facility; and
• the Corporation's assessment of the long-term effect of new AGLC markup rates.

With respect to the forward-looking statements listed above and contained in this News Release, management has made assumptions regarding, among other things:

• new products and services introduced will result in incremental sales volumes;
• permitting and other construction activities will be able to be secured and/or completed within expected timeframes; and
• further revisions to AGLC markup rates will not be proposed or implemented.
• Some of the risks which could affect future results and could cause results to differ materially from those expressed in the forward-looking information and statements contained herein include, but are not limited to:
• the inability to secure the requisite regulatory approvals to market the full production of the new facilities in Toronto within the timeframe indicated; and
• the inability to secure and complete construction services for the new Toronto facilities within the timeframe indicated.

Readers are cautioned that the foregoing list of assumptions and risk factors is not exhaustive.  The forward-looking information and statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking information and statements included in this News Release are made as of the date hereof and Big Rock does not undertake any obligation to publicly update such forward-looking information and statements to reflect new information, subsequent events or otherwise unless so required by applicable securities laws.

About Big Rock Brewery Inc.

Big Rock Brewery Inc. produces premium, all-natural craft beers. Big Rock has a broad family of permanent ales and lagers, the Rock Creek Cider^® series of craft ciders, an ongoing selection of seasonal beers released through the Brewmaster's Limited Edition and cutting-edge, small-batch brews released through the Alchemist Edition.

For more information on Big Rock Brewery visit bigrockbeer.com

SOURCE Big Rock Brewery Inc.

Image with caption: "Big Rock Brewery Inc. (CNW Group/Big Rock Brewery Inc.)". Image available at: https://photos.newswire.ca/images/download/20160505_C8192_PHOTO_EN_684112.jpg

For further information: Robert Sartor, President and Chief Executive Officer, or Barbara Feit, Chief Financial Officer: Phone: (403) 720 3239, Fax: (403) 720 3641, investors@bigrockbeer.com

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