Big Rock Brewery Income Trust
TSX : BR.UN

Big Rock Brewery Income Trust
BIG ROCK BREWERY LTD.

BIG ROCK BREWERY LTD.

November 10, 2005 18:18 ET

Big Rock Brewery Income Trust Announces 3rd Quarter Results

CALGARY, ALBERTA--(CCNMatthews - Nov. 10, 2005) - Big Rock Brewery Income Trust (TSX:BR.UN) (the "Trust") is pleased to report to Unitholders its unaudited consolidated financial results for the three and nine month periods ended September 30, 2005. These results reflect the consolidated operations of the Trust, Big Rock Brewery Ltd. and its wholly owned subsidiaries Kamloops Brewery Ltd. and Whistler Brewing Company Ltd.

Financial Highlights for the three and nine month periods ended September 30, 2005 compared with the same periods for 2004 are as follows:

Net income for the quarter ending September 30, 2005 increased by 19% to $2,224,067 compared to $1,861,971 for the three months ended September 30, 2004. This $362,096 increase is largely due to increased sales volume. Year-to-date net income is down by $578,238 (11%) from $5,499,224 last year to $4,921,986 this year due to the growth of lower margin value brands and a non-cash stock based compensation charge of $258,660 booked in the second quarter.

Net income per unit increased to $0.37 for the three months ended September 30, 2005 from $0.32 for the three months ended September 30, 2004. Year-to-date net income per unit decreased to $0.83 for the nine months ended September 30, 2005 from $0.95 for the nine months ended September 30, 2004.

Cash distributions to unitholders for the three months ended September 30, 2005 were $1,963,447 or $0.33 per unit. This represents 62% of cash generated from operating activities. During the same quarter last year the Trust declared total cash distributions of $0.25 per trust unit amounting to $1,455,367 in total. Year-to-date Big Rock has distributed 87% ($5,611,155) of cash provided by operating activities of $6,414,135.

Big Rock's sales force achieved an all-time quarterly sales record as summer product volume increased by 30% to 62,740 HL for the three months ended September 30, 2005 from 48,128 HL for the same period last year. The majority of the volume increase is attributable to new business in value and private label brands however Big Rock's proprietary premium brand volume was up by 4% quarter over quarter. Year-to-date volumes are up 8% to 160,820 HL from 149,242 HL.

For the three months ended September 30, 2005, net sales revenue increased by $1,657,556 from $10,118,479 last year to $11,776,035, a 16% increase. Consistent with trends reported by other brewers, Big Rock continued to experience a shifting sales mix as value brands grew at a faster rate than premium proprietary brands. This has resulted in lower revenue per hectoliter. Year-to-date net sales revenue decreased by $11 per HL from $201 to $190. Big Rock continues to be well positioned to aggressively compete in all market segments as the brewery can add significant capacity at a relatively low cost. Year-to-date net revenue increased to $30,555,869 from $29,890,211 a $575,658 (2%) increase.

Commensurate with the large volume increase, cost of sales increased by $974,494 (28%) to $4,428,841 for the three months ended September 30, 2005 from $3,454,347 last year. Year-to-date cost of sales is up by $862,965 (8%) to $11,589,356 for the nine months ended September 30, 2005 from $10,726,391 for the same period last year. Big Rock's sale of canned beer has been increasing as a proportion of packaged beer sales. This is positive as the production costs of canned beer are lower than bottled beer due to Big Rock's highly automated can line. This has resulted in a relatively consistent cost of sales per hectoliter even though many other input costs have been increasing.

Gross profit for the quarter rose 10% to $7,347,194 this quarter from $6,664,132 for the same three months last year. Year-to-date gross profit is down $287,307 (1%) from $19,253,820 last year to $18,966,513 this year. The quarterly increase is largely due to volume increase while the year-to-date decrease is primarily due to the changing sales mix resulting from the growing popularity of lower margin brands.

Selling expenses for the three months ended September 30, 2005 increased to $3,416,764 compared to $2,833,481 for the three month period last year, a 20% increase. Year-to-date selling expenses are up $514,935 (6%) from $8,495,242 last year to $9,010,177 this year. Increased expenditures on the summer Grasshopper campaign which featured billboards and radio advertising accounted for the majority of this increase. This campaign yielded positive growth for the brand during the quarter.

During the quarter ended September 30, 2005, general and administrative expenses decreased to $888,850 from $973,044 for the three months ending September 30, 2004, a $84,194 (9%) decrease. Year-to-date general and administrative expense was down by $132,867 (5%) to $2,789,355 from $2,922,222 for the same period last year.

Income tax expense for the quarter of $288,680 (three months ended September 30, 2004 - $503,908) is comprised of $232,248 in current income tax expense and $56,432 in future income tax expense. Year-to-date income tax expense was $690,116 compared to $828,374 for the nine months last year.

Big Rock's balance sheet remains strong. The Trust continued to operate using internally generated cash flow during the quarter and has not had to assume any long-term debt. Subsequent to quarter-end Big Rock further strengthened its cash position with the monetization of the Kamloops brewery assets. As previously announced, on October 12, 2005, subsequent to quarter-end, Big Rock sold its Kamloops brewery and related assets to a British Columbia based arm's length private investor group for cash proceeds of $4,970,000. The book value of the Kamloops assets sold was $4,547,000. After selling expenses and professional fees totaling $240,000 and income tax arising from the transaction of approximately $144,000 the sale will not have a material effect on fourth quarter earnings



Selected Financial information follows:

Big Rock Brewery Income Trust
Consolidated Statements of Operations & Undistributed Income
(unaudited)

Three months ended Nine months ended
September 30 September 30
2005 2004 2005 2004
------------------------ -------------------------

Revenue
Net sales $11,776,035 $10,118,479 $30,555,869 $29,980,211

Cost of sales 4,428,841 3,454,347 11,589,356 10,726,391

------------------------ -------------------------
Gross profit 7,347,194 6,664,132 18,966,513 19,253,820
------------------------ -------------------------

Expenses
Selling 3,416,764 2,833,481 9,010,177 8,495,242
General and
administrative 888,850 973,044 2,789,355 2,922,222
Interest - 23,234 1,058 117,555
Amortization 528,833 468,494 1,554,821 1,391,203
------------------------ -------------------------
4,834,447 4,298,253 13,355,411 12,926,222

------------------------ -------------------------
Income before
income taxes 2,512,747 2,365,879 5,611,102 6,327,598
------------------------ -------------------------

Income taxes
Current 232,248 149,569 368,067 204,969
Future 56,432 354,339 322,049 623,405
------------------------ -------------------------
288,680 503,908 690,116 828,374
------------------------ -------------------------

Net income for the
period 2,224,067 1,861,971 4,920,986 5,499,224

Undistributed
income,
beginning of
period 11,687,523 12,669,765 12,705,745 11,610,381
Distributions
declared (1,966,219) (1,455,367) (5,681,360) (4,033,236)
------------------------ -------------------------

Undistributed
income, end of
period $11,945,371 $13,076,369 $11,945,371 $13,076,369
------------------------ -------------------------
------------------------ -------------------------

Net income
per unit
Basic $ 0.37 $ 0.32 $ 0.83 $ 0.95
Diluted $ 0.37 $ 0.31 $ 0.83 $ 0.94


Big Rock Brewery Income Trust
Consolidated Balance Sheets
(unaudited)

30-Sep-05 31-Dec-04
Assets
Current
Cash $ 768,882 $ 2,093,695
Accounts receivable 2,483,304 2,758,246
Inventories 4,877,125 4,667,950
Prepaid expenses and other 389,067 427,169
Investments 27,678 33,008
Brewery assets held for sale (note 4) 3,454,000 -
----------------------------
12,000,056 9,980,068

Property, plant and equipment 28,521,357 29,897,468
Deferred charges and other assets 363,528 323,714
Goodwill - 727,218
----------------------------
$ 40,884,941 $ 40,928,468
----------------------------
----------------------------

Liabilities and Unitholders' Equity
Current
Accounts payable and accrued
liabilities 2,278,656 3,176,104
Income taxes payable 398,008 252,140
Distributions payable 656,147 585,942
----------------------------
3,332,811 4,014,186

Future income taxes 7,716,180 7,394,131
----------------------------
11,048,991 11,408,317

Unitholders' equity
Trust Unitholders' capital
(note 2) 17,594,370 16,754,964
Contributed surplus 296,209 59,442
Undistributed income 11,945,371 12,705,745
----------------------------
29,835,950 29,520,151
----------------------------
$ 40,884,941 $ 40,928,468
----------------------------
----------------------------


Big Rock Brewery Income Trust
Consolidated Statements of Cash Flow
(unaudited)

Three months ended Nine months ended
September 30 September 30
2005 2004 2005 2004
------------------------ -------------------------
Operating Activities
Net income for
the period $2,224,067 $1,861,971 $4,920,986 $5,499,224
Items not
affecting cash:
Amortization 528,833 468,494 1,554,821 1,391,203
Stock based
compensation - - 258,660 35,292
Future income
taxes 56,432 354,339 322,049 623,405
------------------------ -------------------------
2,809,332 2,684,804 7,056,516 7,549,124

Net change in
non-cash working
capital relating
to operating
activities 365,176 2,026,935 (642,381) 1,885,932

------------------------ -------------------------
Cash provided by
operating
activities 3,174,508 4,711,739 6,414,135 9,435,056
------------------------ -------------------------

Financing Activities
Increase (decrease)
in bank
indebtedness (172,348) 260,000 - (1,304,393)
Repayment of
long-term debt - (1,575,000) - (2,301,242)
Distribution
payments (1,963,447) (1,391,750) (5,611,155) (3,830,420)
Cash received on
exercise
of options 186,391 502,375 817,513 1,432,020

------------------------ -------------------------
Cash used in
financing
activities (1,949,404) (2,204,375) (4,793,642) (6,004,035)
------------------------ -------------------------

Investing Activities
Purchase of
plant and
equipment (449,679) (425,621) (2,905,492) (1,247,696)
Deferred charges
and other assets (6,543) 6,784 (39,814) 23,040

------------------------ -------------------------
Cash used in
investing
activities (456,222) (418,837) (2,945,306) (1,224,656)
------------------------ -------------------------

Net increase
(decrease) in cash 768,882 2,088,527 (1,324,813) 2,206,365

Cash, beginning
of period - 375,096 2,093,695 257,258

------------------------ -------------------------
Cash, end
of period $ 768,882 $2,463,623 $ 768,882 $2,463,623
------------------------ -------------------------
------------------------ -------------------------


Big Rock is a regional producer and marketer of premium quality 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 Income Trust
    Ed McNally
    Chairman
    (403) 720-3239
    or
    Big Rock Brewery Income Trust
    Tim Duffin, C.A.
    Chief Financial Officer
    (403) 720-4473