Big Rock Brewery Income Trust
TSX : BR.UN

Big Rock Brewery Income Trust
BIG ROCK BREWERY LTD.

BIG ROCK BREWERY LTD.

August 10, 2007 13:01 ET

Big Rock Brewery Income Trust Announces 2nd Quarter Results

CALGARY, ALBERTA--(Marketwire - Aug. 10, 2007) - Big Rock Brewery Income Trust (the "Trust") (TSX:BR.UN) is pleased to report to Unitholders its unaudited consolidated financial results for the three and six month periods ended June 30, 2007. These results reflect the consolidated operations of the Trust, Big Rock Brewery Ltd. and its wholly owned subsidiary Pine Creek Brewing Company Ltd.

Quarterly Summary:

Compared to the 2nd quarter last year, revenue was up by 2% to $10,748,592 but net income fell 34% to $1,807,632. This decrease was due primarily to last year's one-time corporate income tax rate adjustment which resulted in a "tax-win" of $532,573 in future income tax recovery.

Cash flow from operations increased by $939,546 (40%) to $3,288,588 from $2,349,042 in the same quarter last year.

During the second quarter of 2007, Big Rock completed a major launch of a new premium craft beer, XO Lager. This new pilsner competes with the finest premium imports but has the competitive advantage of freshness. XO has been enthusiastically accepted in the market and preliminary sales volumes have exceeded projections.

During the 2nd quarter Big Rock continued to focus on optimizing the pricing and promotional spending balance. The repositioning of Big Rock craft beers as premium brands by reducing promotional item giveaways continued during the 2nd quarter and, as anticipated, volumes decreased compared to the same quarter last year. While volumes decreased, sales revenue increased due to the positive change in product mix between craft and value beer categories.

Big Rock began to strategically and aggressively reinvest marketing dollars during the quarter using customer demographic profile data gleaned from recent market studies.

Financial Highlights for the three and six month periods ended June 30, 2007 compared with the same period for 2006 are as follows:

Net income for the three months ended June 30, 2007 was $1,807,632 compared to $2,746,934 for the same quarter last year. Year-to-date net income was $2,642,604 compared to $3,810,804 last year. Unit based compensation charges and future income tax account for the majority of this decrease.

Net income per unit decreased to $0.30 for the quarter compared to $0.46 in the same quarter last year. Year-to-date net income per unit decreased to $0.44 from $0.63 in the same period last year.

For the quarter, Unitholder cash distributions declared were $2,339,884 or $0.39 per unit (2006 -$1,984,947 or $0.33 per unit). Year-to-date distributions declared were $4,318,731 or $0.72 per unit (2006 -$3,967,914 or $0.66 per unit).

During the quarter the number of Trust Units outstanding increased by 500 units to 5,999,870 as a result of the exercise of unit options. Year-to-date Trust Units outstanding decreased by 6,604 due to the exercise of 4,800 options offset by the repurchase and cancellation by the Trust of 11,404 units pursuant to a Normal Course Issuer bid.

For the quarter ended June 30, 2007, sales revenue increased $193,585 (2%) to $10,748,592 from $10,555,007 for the same period in 2006. Sales revenue was affected by a decrease in volume offset by a greater portion of sales being made in Alberta and an increase in the ratio of premium beer sales to value beer sales. Year-to-date sales revenue was flat at $18,820,892 compared to last year's revenue of $18,874,709.

Cost of sales increased by $273,912 to $4,220,168 this quarter from $3,946,256 in the same quarter last year. Year-to-date cost of sales increased by $283,967 to $7,529,564 from $7,245,597. One-time charges for the final sale of inventory of Joe Stiff's Whipped Orange, some obsolete packaging write-offs, and discontinuance of the Industry Standard Bottle rebate during the quarter impacted cost of sales. An increase in production costs, particularly utilities and wages also contributed to the increase in year-to-date cost of sales.

Gross profit for the quarter was flat at $6,528,424 (2006 -$6,608,751) commensurate with the increased sales revenue offset by the increase in cost of sales. Year-to-date gross profit decreased by $337,784 to $11,291,328 from $11,629,112 due mainly to the increase in cost of sales.

Selling expenses for the quarter ended June 30, 2007 increased by $184,224 (7%) to $2,842,072 compared to $2,657,848 in the same quarter last year. Strategic reinvestment in marketing and sales support programs accounted for the increase this quarter. Year-to-date selling expenses decreased by $436,261 (9%) to $4,665,765 from $5,102,026. Year-to-date spend reflects the curtailing of promotional materials, point of sale giveaways and limited time offers when compared to last year.

General and administrative expenses increased during the quarter ending June 30, 2007 by $236,726 to $1,132,629 from $895,903 in the same quarter last year. Annual increases in payroll, consulting fees, and additional compensation expense arising for the issue of unit appreciation rights to employees were the major factors resulting in this increase. Year-to-date general and administrative expenses are up by $850,012 to $2,568,172 from $1,718,160. This increase is a result of the aforementioned charges as well as the accounting requirement to book a value of $328,600 for unit options issued during the first quarter as additional compensation expense.

The income tax provision for the quarter was $212,000 compared to a recovery of ($200,243) in the same period last year, and is comprised of $248,393 in current income tax expense and a recovery of $(36,393) in future income tax. Year-to-date income tax expense was $358,752 compared to a recovery of $(17,649) during the same period last year.

The substantive enactment of new tax laws related to income trusts occurred during the quarter. Big Rock's future income tax provision reflects the requirement under Canadian GAAP to consider temporary differences, the period over which these temporary differences are expected to reverse and the application of currently substantively enacted tax rates that will apply in the periods these temporary differences are expected to reverse in accordance with CICA Handbook section 3465. The substantive enactment of the new tax laws referred to above did not have a material effect on Big Rock's future income tax provision.

Selected Financial information follows:



Big Rock Brewery Income Trust
Consolidated Balance Sheets
(unaudited)
30-Jun-07 31-Dec-06
Assets
Current
Cash and cash equivalents $ 3,327,707 $ 4,336,830
Accounts receivable 2,679,422 3,233,671
Inventories 3,759,671 3,710,427
Prepaid expenses 336,568 273,100
-------------------------
10,103,368 11,554,028

Property, plant and equipment 30,240,928 30,171,939
Deferred charges and other assets 424,772 444,762
-------------------------
Total assets $ 40,769,068 $ 42,170,729
-------------------------
-------------------------
Liabilities and Unitholders' Equity
Current
Accounts payable and accrued liabilities 2,996,371 2,819,987
Income taxes payable 494,018 896,004
Distributions payable 779,963 660,692
Liability for unit appreciation rights 156,498 -
-------------------------
4,426,850 4,376,683

Future income taxes 7,465,121 7,426,762
-------------------------
11,891,971 11,803,445
Unitholders' equity
Trust unitholders' capital 18,297,383 18,282,507
Contributed surplus 639,110 345,948
Undistributed income 9,940,604 11,738,829
-------------------------
Total Unitholders' equity 28,877,097 30,367,284

-------------------------
Total liabilities and Unitholders' equity $ 40,769,068 $ 42,170,729
-------------------------
-------------------------


Big Rock Brewery Income Trust
Consolidated Statements of Operations & Undistributed Income
(unaudited)
Three months ended Six months ended
June 30 June 30
2007 2006 2007 2006
------------- ------------- ------------- -------------
Revenue $ 10,748,592 $ 10,555,007 $ 18,820,892 $ 18,874,709

Cost of sales 4,220,168 3,946,256 7,529,564 7,245,597

------------- ------------- ------------- -------------
Gross profit 6,528,424 6,608,751 11,291,328 11,629,112

Expenses
Selling 2,842,072 2,657,848 4,665,765 5,102,026
General and
administrative 1,132,629 895,903 2,568,172 1,718,160
Interest 2,234 222 3,364 222
Amortization 531,857 508,087 1,052,671 1,015,549
------------- ------------- ------------- -------------
4,508,792 4,062,060 8,289,972 7,835,957

Income before income ------------- ------------- ------------- -------------
taxes 2,019,632 2,546,691 3,001,356 3,793,155
------------- ------------- ------------- -------------
Current income tax
expense 248,393 332,330 320,393 555,558
Future income tax
expense (recovery) (36,393) (532,573) 38,359 (573,207)
------------- ------------- ------------- -------------
212,000 (200,243) 358,752 (17,649)
------------- ------------- ------------- -------------

Net income and
comprehensive
income for the
period 1,807,632 2,746,934 2,642,604 3,810,804

Undistributed
income, beginning
of period 10,472,856 10,751,316 11,738,829 11,670,413
Distributions
declared (2,339,884) (1,984,947) (4,318,731) (3,967,914)
Excess consideration
paid on unit
repurchase - - (122,098) -
------------- ------------- ------------- -------------

Undistributed
income, end of
period $ 9,940,604 $ 11,513,303 $ 9,940,604 $ 11,513,303
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------

Net income per unit
Basic $ 0.30 $ 0.46 $ 0.44 $ 0.63
Diluted $ 0.30 $ 0.46 $ 0.44 $ 0.63


Big Rock Brewery Income Trust
Consolidated Statements of Cash Flows
(unaudited)
Three months ended Six months ended
June 30 June 30
2007 2006 2007 2006
------------- ------------- ------------- -------------
Operating Activities
Net income for the
period $ 1,807,632 $ 2,746,934 $ 2,642,604 $ 3,810,804
Items not affecting
cash:
Amortization 531,857 508,087 1,052,671 1,015,549
Unit based
compensation 112,583 76,000 451,700 76,000
Future income taxes (36,393) (532,573) 38,359 (573,207)
------------- ------------- ------------- -------------
2,415,679 2,798,448 4,185,334 4,329,146
Net change in
non-cash working
capital relating to
operating activities 872,909 (449,406) 215,935 814,243


Cash provided by
operating ------------- ------------- ------------- -------------
activities 3,288,588 2,349,042 4,401,269 5,143,389
------------- ------------- ------------- -------------
Financing Activities
Distribution
payments (2,219,832) (1,984,011) (4,199,460) (3,965,611)
Unit repurchase - - (160,066) -
Cash received on
exercise of options 6,325 64,260 50,804 183,051
------------- ------------- ------------- -------------
Cash used in
financing
activities (2,213,507) (1,919,751) (4,308,722) (3,782,560)
------------- ------------- ------------- -------------

Investing Activities
Additions to
property, plant
and equipment (324,608) (775,804) (1,121,660) (1,559,091)
Deferred charges and
other assets (5,747) - 19,990 111,012
------------- ------------- ------------- -------------
Cash used in
investing
activities (330,355) (775,804) (1,101,670) (1,448,079)
------------- ------------- ------------- -------------
Net increase
(decrease) in
cash 744,726 (346,513) (1,009,123) (87,250)

Cash and cash
equivalents,
beginning of period 2,582,981 5,981,728 4,336,830 5,722,465
------------- ------------- ------------- -------------
Cash and cash
equivalents, end
of period $ 3,327,707 $ 5,635,215 $ 3,327,707 $ 5,635,215
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------


Big Rock is a regional producer and marketer of craft beers, headquartered in Calgary, Alberta, Canada. Big Rock's products are available in draught, bottles and cans. The Company also produces or distributes cider and cooler products. Big Rock products are marketed in seven provinces and three territories in Canada.

Contact Information

  • Big Rock Brewery Ltd.
    Ken Barbet
    President & CEO
    (403) 720-3239
    or
    Big Rock Brewery Ltd.
    Tim Duffin, C.A.
    Chief Financial Officer
    (403) 720-4473
    (403) 236-7523 (FAX)