Big Rock Brewery Income Trust
TSX : BR.UN

Big Rock Brewery Income Trust
BIG ROCK BREWERY LTD.

BIG ROCK BREWERY LTD.

November 09, 2006 17:56 ET

Big Rock Brewery Income Trust Announces 3rd Quarter Results

CALGARY, ALBERTA--(CCNMatthews - Nov. 9, 2006) - 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 nine month periods ended September 30, 2006. These results reflect the consolidated operations of the Trust, Big Rock Brewery Ltd. and its wholly owned subsidiary Pine Creek Brewing Company Ltd.

Financial Highlights for the three and nine month periods ended September 30, 2006 compared with the same periods for 2005 are as follows:

Net income for the quarter ending September 30, 2006 was $2,685,263 compared to $2,224,067 for the quarter ended September 30, 2005, a 21% increase due primarily to lower selling expenses, a future income tax recovery, and a reduction in federal excise tax. Year-to-date net income was $6,496,067 a 32% increase over the same period last year.

Net income per unit increased by 22% to $0.45 for the quarter ended September 30, 2006 compared to $0.37 in the same quarter last year. Year-to-date net income per unit was $1.08 up 30% from $0.83 for the same period last year.

Cash distributions declared to unitholders for the quarter ended September 30, 2006 were $1,990,056 or $0.33 per unit (2005 - $1,966,219 or $0.33 per unit). Year-to-date distributions were $5,957,970 or $0.99 per unit (2005 - $5,861,360 or $0.96 per unit).

For the three months ended September 30, 2006 sales volume was 52,860 HL, down 16% compared to sales volume of 62,740 HL for the same quarter last year. Decreased volumes are primarily a result of price increases in the value brand portfolio and a reduction of sales incentives on craft brands. For the nine months ended September 30, 2006 sales volume was 153,915 HL, down 4% from 160,820 HL during the same period last year. As previously discussed, Management's strategy this year emphasizes profitability over volume. Revenue per hectoliter during the quarter increased to $212 from $188 last year. This is partially due to an increase in Alberta volume as a percentage of total volume quarter over quarter as well as $407,765 in reduced excise duty on the first 37,500 HL of production effective July 1, 2006. For the quarter ended September 30, 2006, sales revenue decreased $553,297 (5%) to $11,222,738 from $11,776,035 for the same period of 2005. Year-to-date revenue decreased $458,422 (2%) to $30,097,447 from $30,555,869 for the same period last year. The reduction in sales revenue results from the decrease in volume mitigated by a reduction in federal excise tax.

Cost of sales decreased $459,919 (10%) to $3,968,922 this quarter from $4,428,841 in the same quarter last year in line with sales volume. Year-to-date cost of sales decreased by $374,837 (3%) to $11,214,519 ($73/HL) from $11,589,356 ($72/HL). Per hectoliter costs have increased due mainly to increases in packaging material costs.

Gross profit for the quarter was down $93,378 (1%) to $7,253,816 from $7,347,194 in the same quarter last year, relatively flat. Year-to-date gross profit decreased by $83,585 ( less than 1%) to $18,882,928 (2005 - $18,966,513).

There was a significant decrease in selling and marketing expenses during the 3rd quarter compared to last year. Selling expenses decreased by $612,407 (18%) to $2,804,357 compared to $3,416,764 in the same quarter last year. Year-to-date selling expenses have decreased by $1,103,794 (12%) to $7,906,383 from $9,010,177. A reduction in point of sale giveaways and marketing/sales programs which resulted in lower sales volume has positively impacted selling expenditures resulting in an improved bottom line.

Increases in recruitment fees, severance pay, IT systems support, insurance and issuance of unit appreciation rights during the quarter resulted in an increase in general and administrative expenses of $200,835 (23%) to $1,089,685 during the quarter ending September 30, 2006 from $888,850 in the same quarter last year. Year-to-date general and administrative expenses increased by $18,490 to $2,807,845 from $2,789,355 in the same period last year.

The income tax provision for the quarter was a $148,665 compared to an expense of $288,680 in the same period last year, and is comprised of $351,533 in current income tax expense and $(202,868) in future income tax recovery. The future income tax recovery relates to a reduction in future federal and provincial income tax rates substantively enacted this year.

Big Rock's balance sheet gained strength again this quarter as total assets increased by $483,071 and Unitholders equity improved by $860,011 compared to June 30, 2006, after paying out cash distributions of $1,988,398. Big Rock's liquidity is excellent with $6,147,903 in cash and cash equivalents at quarter-end (December 31, 2005 - $5,722,465). Big Rock continues to hold no operating or long-term debt.

Big Rock completed and commissioned a 22,000 sq. ft. warehouse expansion during the quarter at a capital cost of $1,330,000. The additional space allows Big Rock to discontinue the use of third party warehouse storage thereby reducing costs and in-transit product damage and improving efficiencies.

Cash provided by operating activities increased by $394,451 (12%) to $3,568,959 for the quarter ended September 30, 2006 from $3,174,508 in the same quarter last year. Year-to-date cash flow from operations increased by $2,298,213 to $8,712,348 from $6,414,135 in the same period last year. The increase arose primarily from a decrease in accounts receivable and an increase in net income.

Subsequent to quarter-end the Honourable Jim Flaherty, Canadian Minister of Finance, proposed changes to the taxation of Canadian income trusts. The relevant measures announced include a proposed tax on distributions paid by publicly traded income trusts and limited partnerships, and will result in less after-tax cash being available for payment to all unitholders. As an existing income trust, it is important to note that these measures will not apply to Big Rock until January 2011. Under the Government's proposal the existing tax treatment of distributions will remain in effect during the four-year grace period to 2011. The Trust is currently considering the effects of the Government's proposal on its previously announced planned internal reorganization. Consequently Big Rock does not intend to proceed with a previously announced special meeting of unitholders to consider the implementation of the internal reorganization until all aspects of the Government's proposal are considered.

Selected Financial information follows:



Big Rock Brewery Income Trust
Consolidated Balance Sheets
(unaudited)

30-Sep-06 31-Dec-05
Assets
Current
Cash and cash equivalents $ 6,147,903 $ 5,722,465
Accounts receivable 1,951,200 3,848,397
Inventories 3,445,838 3,048,610
Prepaid expenses 385,870 150,685
-------------------------------
11,930,811 12,770,157

Property, plant and equipment 29,738,822 28,615,246
Deferred charges and other assets 439,762 400,774

-------------------------------
Total assets $ 42,109,395 $ 41,786,177
-------------------------------
-------------------------------

Liabilities and Unitholders' Equity
Current
Accounts payable and accrued liabilities 2,499,519 2,746,468
Income taxes payable 758,696 489,679
Distributions payable 663,717 659,756
-------------------------------
3,921,932 3,895,903

Liability for unit appreciation rights 111,312 -
Future income taxes 7,284,092 8,060,167
-------------------------------
11,317,336 11,956,070


Unitholders' equity
Trust unitholders' capital 18,255,802 17,872,741
Contributed surplus 327,747 286,953
Undistributed income 12,208,510 11,670,413
-------------------------------
Total Unitholders' equity 30,792,059 29,830,107

-------------------------------
Total liabilities and Unitholders' equity $ 42,109,395 $ 41,786,177
-------------------------------
-------------------------------



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

Three months ended Nine months ended
Sept 30 Sept 30
2006 2005 2006 2005
-------------------------------------------------------
Revenue $ 11,222,738 $ 11,776,035 $ 30,097,447 $ 30,555,869
Cost of sales 3,968,922 4,428,841 11,214,519 11,589,356
-------------------------------------------------------
Gross profit 7,253,816 7,347,194 18,882,928 18,966,513

Expenses
Selling 2,804,357 3,416,764 7,906,383 9,010,177
General and
administrative 1,089,685 888,850 2,807,845 2,789,355
Interest 682 - 904 1,058
Amortization 525,164 528,833 1,540,713 1,554,821
-------------------------------------------------------
4,419,888 4,834,447 12,255,845 13,355,411
Income before

income taxes 2,833,928 2,512,747 6,627,083 5,611,102
-------------------------------------------------------
Current income tax
expense 351,533 232,248 907,091 368,067
Future income tax
expense (recovery) (202,868) 56,432 (776,075) 322,049
-------------------------------------------------------
148,665 288,680 131,016 690,116
-------------------------------------------------------
Net income for the
period 2,685,263 2,224,067 6,496,067 4,920,986
Undistributed
income, beginning
of period 11,513,303 11,687,523 11,670,413 12,705,745
Distributions
declared (1,990,056) (1,966,219) (5,957,970) (5,681,360)
-------------------------------------------------------
Undistributed
income, end of
period $ 12,208,510 $ 11,945,371 $ 12,208,510 $ 11,945,371
-------------------------------------------------------
-------------------------------------------------------
Net income per unit
Basic $ 0.45 $ 0.37 $ 1.08 $ 0.83
Diluted $ 0.45 $ 0.37 $ 1.08 $ 0.83



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

Three months ended Nine months ended
Sept 30 Sept 30
2006 2005 2006 2005
-------------------------------------------------------
Operating Activities
Net income for the
period $ 2,685,263 $ 2,224,067 $ 6,496,067 $ 4,920,986
Items not
affecting cash:
Amortization 525,164 528,833 1,540,713 1,554,821
Unit based
compensation (22,521) - 53,479 258,660
Future income
taxes (202,868) 56,432 (776,075) 322,049
-------------------------------------------------------
2,985,038 2,809,332 7,314,184 7,056,516

Net change in
non-cash working
capital relating
to operating
activities 583,921 365,176 1,398,164 (642,381)
-------------------------------------------------------

Cash provided by
operating
activities 3,568,959 3,174,508 8,712,348 6,414,135
-------------------------------------------------------

Financing
Activities
Decrease in bank
indebtedness - (172,348) - -
Distribution
payments (1,988,398) (1,963,447) (5,954,009) (5,611,155)
Cash received on
exercise of
options 187,325 186,391 370,376 817,513
-------------------------------------------------------
Cash used in
financing
activities (1,801,073) (1,949,404) (5,583,633) (4,793,642)
-------------------------------------------------------

Investing
Activities
Purchase of
property, plant
and equipment (1,105,198) (449,679) (2,664,289) (2,905,492)
Deferred charges (150,000) (6,543) (38,988) (39,814)
-------------------------------------------------------
Cash used in
investing
activities (1,255,198) (456,222) (2,703,277) (2,945,306)
-------------------------------------------------------

Net increase
(decrease) in cash 512,688 768,882 425,438 (1,324,813)

Cash and cash
equivalents,
beginning of
period 5,635,215 - 5,722,465 2,093,695
-------------------------------------------------------
Cash and cash
equivalents, end
of period $ 6,147,903 $ 768,882 $ 6,147,903 $ 768,882
-------------------------------------------------------
-------------------------------------------------------


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