Brick Brewing announces third quarter results, including EBITDA* of $0.3 million

KITCHENER, ON, Dec. 6, 2012 /CNW/ - Brick Brewing Co. Limited ("Brick" or the "Company") (TSX: BRB), the largest Canadian-owned brewery in Ontario, today released its financial results for the third quarter ended October 28, 2012 for its fiscal year 2013.

"We are committed to growing the Seagram and Waterloo premium trademarks.  In our primary market of Ontario, these brands demonstrated exceptional counter sales growth of 44% and 30% respectively in Q3", said Mr. Croft.  "In the upcoming quarters, we will be increasing our marketing budgets dedicated to these brands.  Over the past year, we have worked on redesign and repositioning these brands for growth, and believe that the time is now to focus our energy on increasing consumer awareness and brand trial."

"Brick Brewing experienced some challenges in the quarter, but we believe that the circumstances are unique and non-recurring.  In particular, the following issues arose and have been effectively addressed leading into Q4."

Co-packaging shortfall

"We experienced an unexpected reduction in co-pack volume, caused by a co-pack supply chain issue beyond Brick's control.  The supply chain issue resulted in a shortfall of approximately 10,000 hectolitres versus Brick's forecast.  The issue has been resolved and production has resumed in Q4", noted Mr. Croft.  "We anticipate recovering some of the co-pack shortfall in the current fiscal year, as we help our co-pack partner replenish trade inventory."

Laker volume in Q3

"Shipments of Laker products declined by 7% in the quarter.  Industry volume declined by 2.3% in the quarter and our competitors responded by aggressively discounting National mainstream brands. We witnessed abnormal and sustained price reductions on leading national brands", said Mr. Croft. "We believe that this pricing activity was intended to reverse declining industry volumes.  Despite this effort, industry volumes continue to trend lower and the NHL lockout is compounding these results. Subsequent to Q3, the prices for leading National brands have increased to a normal level above value beer prices, creating more predictable results for the Laker family."

"We have worked consistently on improving the 'fit and finish' of our products, and creating a meaningful point of difference.  Most recently, we announced the introduction of 12-pack bottles of Laker Lager, Light and Ice incorporating a free tall can in each case, which we believe is the best beer offer in Ontario. Period." remarked Mr. Croft. "Laker continues to play an important role in our business and our goal is to be recognized as the 'Champion of Beer Value' by Ontario beer drinkers.  Taking into consideration the current pricing environment and 12-pack introduction, we expect Laker brand performance to recover to a level that is consistent with the broader industry."

"I am proud that our Company has become so resilient and adaptive to tough industry situations we face from time to time," noted Mr. Croft.  "Although the financial performance is below our expectations, the responses to challenges within the quarter exemplify the culture at Brick Brewing, and I believe that the passion of all team members will ensure continued sustainable success," continued Mr. Croft.

Financial highlights are as follows:

Third quarter

• Net revenues for the third quarter of fiscal 2013 were $7.5 million compared to $7.9 million in the third quarter of fiscal 2012.
• Gross profit percentage for the quarter decreased to 18.7% from 24.9% in the prior year comparable quarter.  The shortfall in co-pack volume was a key driver for this reduction.  Additionally, the Company's fixed costs as a percentage of net revenue increased due to lower sales volumes.
• EBITDA* for the third quarter ended October 28, 2012 was $0.3 million compared to EBITDA* in the third quarter of fiscal 2012 of $0.7 million.

Fiscal year-to-date

• Net revenues to date for fiscal 2013 were $27.7 million compared to $26.7 million for the first three quarters of fiscal 2012.
• Gross profit percentage for the first three quarters of fiscal 2013 increased to 26.9% from 24.8% in the prior year comparable period.
• EBITDA* for the three quarters ended October 28, 2012 was $3.8 million compared to EBITDA* for the first three quarters of fiscal 2012 of $3.2 million.

The following financial information should be read in conjunction with the audited annual financial statements of the Company prepared under IFRS for the year ended January 31, 2012.

STATEMENT OF COMPREHENSIVE INCOME
For the periods ended October 28, 2012 and October 30, 2011
(Not audited or reviewed by the Company's external auditor)

STATEMENT OF FINANCIAL POSITION
As at October 28, 2012 and January 31, 2012
(Not audited or reviewed by the Company's external auditor)

STATEMENT OF CASH FLOWS

For the periods ended October 28, 2012 and October 30, 2011

(Not audited or reviewed by the Company's external auditor)

Additional Information

For further details the Company's complete management discussion and analysis (MD&A) and financial statements for the quarter ended October 28, 2012 will be available on the investor section of the Brick Brewing website at www.brickbeer.com. This and additional information relating to the Company, including its Annual Information Form, is or will be available on the Company's website and on SEDAR at www.sedar.com.

About Brick Brewing

Brick is Ontario's largest Canadian-owned and Canadian-based publicly held brewery. The Company is a regional brewer of award-winning premium quality and value beers and is officially certified under British Retail Consortium (BRC) Global Standards for Food Safety, one of the highest and most internationally recognized standards for safe food production. Founded in 1984, Brick Brewing Co. was the first craft brewery to start up in Ontario, and is credited with pioneering the present day craft brewing renaissance in Canada. Brick has complemented its Waterloo brand premium craft beers with other popular brands such as Laker, Red Baron, Red Cap and Formosa Springs Draft.  In March 2011, Brick purchased the Canadian rights to the Seagram Coolers and now produces, sells, markets and distributes Seagram Coolers across Canada.  Brick trades on the TSX under the symbol BRB. Visit us at www.brickbeer.com.

Forward-Looking Statements

Except for the historical information contained herein, the discussion in this press release contains certain forward-looking statements that involve risks and uncertainties, such as statements of the Company's plans, objectives, strategies, expectations and intentions and include, for example, the statements concerning expected volumes, operating efficiencies and costs.  Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may", "will", "expect", "intend", "anticipate", "seek", "plan", "believe" or "continue" or the negatives of these terms or variations of them or similar terminology.  Although the Company believes that the expectations and assumptions reflected in these forward-looking statements are reasonable, undue reliance should not be placed on these forward-looking statements.  These forward-looking statements are not guarantees and reflect the Company's views as of December 5, 2012 with respect to future events.  Future events are subject to certain risks, uncertainties and assumptions, which may cause actual performance and financial results to differ materially from such forward-looking statements. The forward-looking statements, including the statements regarding expected volumes, operating efficiencies and costs are based on, among other things, the following material factors and assumptions: sales volumes in the fiscal year ending January 31, 2013 ("fiscal 2013") will decrease; no material changes in consumer preferences; brewing, blending, and packaging efficiencies will improve; the cost of input materials for brewing and blending will increase; the cost of packaging materials will decrease; competitive activity from other manufacturers will continue; no material change to the regulatory environment in which the Company operates and no material supply, cost or quality control issues with vendors.   Readers are urged to consider the foregoing factors and assumptions when reading the forward-looking statements and, for more information regarding the risks, uncertainties and assumptions that could cause the Company's actual financial results to differ from the forward-looking statements, to also refer to the remainder of the discussion in this press release, the Company's annual information form and various other public filings as and when released by the Company.  The forward-looking statements included in this press release are made only as of December 5, 2012 and, except as required by applicable securities laws, the Company does not undertake to publicly update such forward-looking statements to reflect new information, future events or otherwise.

* EBITDA is a non-IFRS earnings measure, therefore it does not have any standardized meaning prescribed by International Financial Reporting Standards  and may not be similar to measures presented by other companies. EBITDA represents earnings before interest, income taxes, depreciation and amortization. Management uses this measurement to evaluate the operating results of the Company. This measure is also important to management since it is used by the Company's lenders to evaluate the ongoing cash generating capability of the Company and therefore the amounts those lenders are willing to lend to the Company. Investors find EBITDA to be useful information because it provides a measure of the Company's operating performance.

SOURCE: Brick Brewing Co. Limited