Brampton Brick Limited
TSX : BBL.A

Brampton Brick Limited

May 07, 2007 19:22 ET

Brampton Brick Reports First Quarter Results, Semi-Annual Dividend Declared

BRAMPTON, ONTARIO--(CCNMatthews - May 7, 2007) - Brampton Brick Limited (TSX:BBL.A) today reported a loss of $2,542,000, or $0.23 per share, for the first quarter of 2007 compared to net income of $1,163,000, or $0.11 per share, for the first quarter of 2006. The weighted average number of Class A Subordinate Voting shares and Class B Multiple Voting shares outstanding during each period was 10,833,000 and 10,809,000, respectively.

Pursuant to the amalgamation of two wholly-owned subsidiaries, Oaks Concrete Products Ltd. and Roxy Construction Co. Limited, with Brampton Brick Limited on January 1, 2007, and the realignment of the operating and management structure of the former clay brick and concrete products business segments, the Company now considers that it operates within three dominant business segments, namely; masonry products; landscape products; and waste processing.

Financial information by business segment which follows is now reported in accordance with the new structure and prior period information has been restated for comparative purposes.

Net sales decreased by $7,759,000 , or 36.1%, from $21,487,000 in the first quarter of 2006 to $13,728,000 in the first quarter of 2007 due to much lower sales volumes in both the masonry products and landscape products business segments.

Operating results for the first quarter of 2007 were also adversely impacted by an extended, scheduled maintenance shutdown which affected two of the three brick kilns at the Company's clay brick plant in Brampton. Production volumes were 46.5% lower in the first quarter of 2007 than in the first quarter of 2006 which resulted in a greater proportion of total manufacturing costs being charged against operations. The estimated amount of the additional charge against operations was $1,234,000.

Net sales attributable to the masonry products business segment were $10,136,000 for the quarter compared to $16,939,000 for the same period last year.

Sales volumes of masonry products declined due to lower sales to dealers under the Company's dealer stocking program and lower direct sales to new home builders. A decline in housing starts in the Company's primary market areas has resulted in a more balanced demand/supply situation for the Company's products. As a result, sales are now expected to more closely follow historical, seasonal patterns in which sales are greatest in the second and third quarters of each year and considerably less in the first and fourth quarters.

In addition, under these market conditions, weather tends to have a greater impact on the timing of shipments. Weather conditions in the first quarter of 2007 were generally less favourable than in the first quarter of 2006.

Net sales attributable to the highly seasonal landscape products business segment were $681,000 for the first quarter of 2007 compared to $1,942,000 for the same period in 2006.

Sales volumes of landscape products were unusually high in the first quarter of 2006, compared to historical volumes, due to strong sales in the U.S. market under the Company's winter booking program and generally favourable weather conditions, which generated higher sales volumes in both the Canadian and U.S. markets.

In the first quarter of 2007, sales volumes in the Canadian market were more in line with historical volumes. Our U.S. market, primarily Michigan, continues to be adversely impacted by economic factors affecting this area.

In the waste processing business segment, higher waste volumes and an increase in Sharpsmart™ container turns, produced an increase of $305,000 in net sales to $2,911,000 in the first quarter of 2007, up from $2,606,000 in 2006. Higher transportation costs and an increase in general and administrative expenses partially offset the increase in net sales.

The Company's proportionate share of start-up costs related to its proposed new waste composting and material recycling business totaled $70,000 for the first quarter ended March 31, 2007 and was reported in this business segment. There have been no commercial operations to date.

As a result of the above noted factors, the Company incurred an operating loss before interest and other items of $3,231,000 for the first quarter of 2007 compared to operating income of $1,559,000 for the first quarter of 2006.

Interest on long-term debt increased by $133,000 to $262,000. The increase was mainly attributable to interest on the promissory note of $11,000,000 which was issued in December 2006 in connection with the acquisition by the Company of the remaining 30% interest in Oaks Concrete Products Ltd.

Net interest income increased as a result of reduced operating borrowings and a higher rate of interest earned on surplus cash available for investment.

The strengthening in the relative value of the Canadian dollar versus the U.S. dollar from December 31, 2006 to March 31, 2007 produced a foreign currency exchange loss of $354,000 for the quarter. This loss was primarily the result of the impact of the foreign exchange fluctuation on the translation of U.S. dollar denominated monetary assets and liabilities. For the first quarter of 2006, the Company reported a foreign currency exchange gain of $5,000.

In the first quarter of 2006, the Company wrote-off the excess cost of the consideration paid over the carrying value of the net assets acquired, in the amount of $484,000, incurred in connection with the acquisition of the 20% non-controlling interest of a subsidiary company.

In 2006, 30% of the first quarter loss incurred by Oaks Concrete Products Ltd. was attributable to the non-controlling interest therein. In 2007, as a result of the acquisition of this 30% interest by the Company in December 2006, the entire amount of the first quarter loss incurred by this highly seasonal business was reflected in the consolidated loss.

For the first quarter ended March 31, 2007, cash used for operating activities amounted to $3,477,000, compared to $3,109,000 for the same period last year.

The impact of the decline in operating results from last year was largely offset by the net changes in non-cash operating items.

Lower accounts receivable and variances in the timing of sales and subsequent collections of accounts receivable in 2007 compared to 2006 mitigated much of the increase in cash required to fund higher inventories, disbursements on accounts payable and income tax instalments.

Cash utilized in the purchase of property, plant and equipment totaled $3,949,000 for the first quarter compared to $1,144,000 in 2006. Capital expenditures in 2007 included $2,640,000 pertaining to the Company's proposed new Indiana clay brick plant, primarily for the acquisition of land.

During the first quarter of 2006, the sale of trucks, trailers and mobile forklift equipment in connection with the outsourcing of transportation requirements generated cash proceeds of $3,175,000. Related capital lease obligations in the amount of $700,000 were paid out from the proceeds of the sale.

Following the amalgamation of Oaks Concrete Products Ltd. with Brampton Brick Limited on January 1, 2007, surplus cash of the parent company was utilized to repay the operating bank advances of this former subsidiary.

Working capital at March 31, 2007 was $32,438,000, including cash and cash equivalents of $14,228,000, representing a working capital ratio of 2.72:1. This compared to working capital and a working capital ratio of $32,935,000, including cash and cash equivalents of $24,446,000, and 2.41:1, respectively, at December 31, 2006. The ratio of total liabilities to shareholders' equity was 0.30:1 at March 31, 2007, compared to the December 31, 2006 ratio of 0.32:1.

The Company also announced today that the Board of Directors declared a dividend of $0.10 per Class A Subordinate Voting share and Class B Multiple Voting share outstanding, payable on June 30, 2007 to shareholders of record on June 15, 2007.

Effective January 1, 2007, the Company adopted the accounting standards of the Canadian Institute of Chartered Accountants Handbook Section 1530, Comprehensive Income; Section 3855, Financial Instruments - Recognition and Measurement; Section 3861, Financial Instruments - Disclosure and Presentation; Section 3865, Hedges; and Section 3251, Equity. Other than the presentation of the Cumulative Translation Adjustment as Comprehensive Loss in the Consolidated Balance Sheets, the adoption of these new standards did not have a significant impact on the consolidated financial statements as at and for the period ended March 31, 2007.

Certain statements contained herein constitute "forward-looking statements". Such forward-looking statements involve known and unknown risks, uncertainties and other factors, including, but not limited to, those identified under "Risks and Uncertainties" in the Company's 2006 Annual Report, which may cause actual results, performance or achievements of the Company to be materially different from any future result, performance or achievements expressed or implied by such forward-looking statements.

Brampton Brick is Canada's second largest manufacturer of clay brick and manufactures concrete paving stones, retaining walls and enviro products under the Oaks Concrete Products trade name. Products are used for residential construction and for industrial, commercial, and institutional building projects. Da Vinci Stone Craft Ltd., a 75% owned subsidiary, manufactures fireplace surrounds and accessory products. Medical Waste Management Inc., a 65% owned subsidiary, operates facilities for the destruction of biomedical and pharmaceutical waste in Ontario, including the only commercially operated medical waste incinerator in Ontario, and Nova Scotia.



Selected Financial Information

(Unaudited) (thousands of dollars, except per share amounts)
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Three months ended
March 31
CONSOLIDATED STATEMENTS OF INCOME (LOSS) 2007 2006
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Net sales $ 13,728 $ 21,487

Cost of sales, selling, general and administrative
expenses 14,471 17,377

Amortization 2,488 2,551
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16,959 19,928


Operating income (loss) before the undernoted items (3,231) 1,559

Interest on long-term debt (262) (129)
Interest income (net) 172 73
Equity loss from Richvale York Block Inc. - (101)
Foreign currency exchange gain (loss) (354) 5
Other income (expense) 27 (39)
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(417) (191)
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Income (loss) before the following items (3,648) 1,368

Write-off of excess cost paid on investment in Roxy
Construction Co. Limited - (484)
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Income (loss) before income taxes and non-controlling
interests (3,648) 884

Recovery of (provision for) income taxes 1,151 (231)
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Income (loss) before non-controlling interests (2,497) 653

Non-controlling interests (45) 510
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Net income (loss) for the period $ (2,542) $ 1,163
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Net income (loss) per Class A and Class B share $ (0.23) $ 0.11
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Weighted average Class A and Class B shares
outstanding (000's) 10,833 10,809

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Selected Financial Information

(Unaudited) (thousands of dollars)
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Three months ended
March 31
CONSOLIDATED STATEMENTS OF CASH FLOWS 2007 2006
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Cash provided by (used for)

Operating activities
Net income (loss) for the period $ (2,542) $ 1,163
Items not affecting cash
Amortization and accretion 2,500 2,562
Future income taxes (1,188) (1,944)
Non-controlling interests 45 (510)
Equity loss from Richvale York Block Inc. - 101
Unrealized foreign exchange loss 16 37
Write-off of excess cost paid on investment in
Roxy Construction Co. Limited - 484
(Gain) loss on disposal of property, plant and
equipment (4) 90
Other 121 57
--------- ---------
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(1,052) 2,040

Changes in non-cash operating items
Accounts receivable 2,451 (3,410)
Inventories (2,136) (1,214)
Accounts payable and accrued liabilities (923) 460
Income taxes payable (net) (2,031) (234)
Other 214 (751)
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(2,425) (5,149)

Cash used for operations (3,477) (3,109)

Investing activities
Purchase of property, plant and equipment (3,949) (1,144)
Proceeds from disposal of property, plant and
equipment 7 3,212
Business acquisitions - (893)
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Cash provided by (used for) investment (3,942) 1,175

Financing activities
Increase (decrease) in bank operating advances (2,460) 3,149
Repayment of term loans (121) (95)
Payments on obligations under capital leases (215) (994)
Proceeds from exercise of stock options - 8
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Cash provided by (used for) financing (2,796) 2,068

Foreign exchange on cash held in foreign currency (3) (1)
--------- ---------
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Increase (decrease) in cash and cash equivalents (10,218) 133

Cash and cash equivalents - Beginning of the period 24,446 19,308
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Cash and cash equivalents - End of the period $ 14,228 $ 19,441
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Selected Financial Information

(thousands of dollars) (Unaudited)
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March 31 December 31
CONSOLIDATED BALANCE SHEETS 2007 2006
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ASSETS
Current assets
Cash and cash equivalents $ 14,228 $ 24,446
Accounts receivable 9,061 11,850
Inventories 20,589 18,476
Income taxes recoverable 1,669 17
Future income taxes 4,415 -
Other current assets 1,300 1,521
---------- ----------
---------- ----------
51,262 56,310

Property, plant and equipment (net) 104,230 103,082

Other assets
Goodwill 20,176 20,287
Future income taxes 2,230 3,960
Other 1,787 1,764
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24,193 26,011
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$ 179,685 $ 185,403
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LIABILITIES
Current liabilities
Bank operating advances $ 745 $ 3,205
Accounts payable and accrued liabilities 11,116 12,719
Income taxes payable 53 433
Long-term debt, current portion 6,910 7,018
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18,824 23,375

Long-term debt, less current portion 11,063 11,264

Future income taxes 10,876 9,339

Asset retirement obligation 1,013 1,001
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41,776 44,979

Non-controlling interests 290 245

SHAREHOLDERS' EQUITY 137,619 140,179
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$ 179,685 $ 185,403
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Selected Financial Information

(Unaudited) (thousands of dollars)

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Three months ended Year ended
CONSOLIDATED STATEMENTS OF RETAINED March 31 December 31
EARNINGS 2007 2006
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Balance at beginning of period $ 110,246 $ 98,440
Net income (loss) (2,542) 13,971
Dividends - (2,165)
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Balance at end of period $ 107,704 $ 110,246
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(Unaudited) (thousands of dollars)

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Three months ended
CONSOLIDATED STATEMENT OF COMPREHENSIVE March 31
LOSS 2007
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Loss for the period $ 2,542
Other comprehensive loss
Exchange loss on translation of
self-sustaining subsidiary 117
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Total comprehensive loss $ 2,659
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