Brampton Brick Limited
TSX : BBL.SV.A

Brampton Brick Limited

August 08, 2005 17:32 ET

Brampton Brick Reports Second Quarter Results

BRAMPTON, ONTARIO--(CCNMatthews - Aug. 8, 2005) - Brampton Brick Limited (TSX:BBL.SV.A) today reported net income of $6,450,000, or $0.59 per share, for the second quarter ended June 30, 2005 compared to $6,999,000, or $0.65 per share, for the same period last year. The weighted average number of Class A Subordinate Voting Shares and Class B Multiple Voting Shares outstanding was 10,847,000 during both periods.

Net sales for the quarter increased by $2,446,000, or 7.0%, to $37,233,000 on the strength of higher volumes in all three business segments and higher average selling prices in the clay brick and medical waste business segments. Average selling prices in the concrete products business segment were slightly lower than they were during the second quarter of 2004. Price increases in 2005 have not fully recouped all of the price discounts which were put into place on certain products in the third quarter of 2004.

Higher manufacturing costs charged against operations, primarily in the clay brick business segment and which were caused by lower production volumes, resulted in a $469,000 decrease in operating income before other items from $10,573,000 for the second quarter of 2004 to $10,104,000 for the second quarter of 2005. An increase in the provision for income taxes also contributed to the decrease in net income for the quarter.

During the second quarter of 2005, the Company began production of two new brick sizes. Introduction of these new sizes entailed trial production runs and installation and commissioning of new equipment at both the making and packaging stages of production. These factors contributed to an approximate 12% reduction in brick production volumes in the second quarter of 2005 compared to the same period of 2004.

For the six months ended June 30, 2005 net income was $6,105,000, or $0.56 per share, compared to $9,553,000, or $0.88 per share, for the same period in 2004. The weighted average number of shares outstanding was 10,847,000 during both periods.

Substantially lower brick shipments in the first quarter were due to generally poor weather conditions and a return to more traditional, seasonal building patterns. The lower brick shipments combined with repair and maintenance expenses pertaining to a scheduled kiln shutdown in the first quarter, as well as underabsorbed fixed manufacturing expenses charged against operations due to lower production volumes during the shutdown, produced a $4,849,000 decrease in operating income before other items for the year-to-date. An increase in selling, general and administrative expenses also contributed to the decrease.

Cash flow from operations amounted to $4,499,000 for the second quarter of 2005 compared to $9,486,000 for the second quarter of last year. For the six months to June 30, 2005 operating activities consumed cash resources of $1,387,000 compared to cash inflows of $5,964,000 for the same period last year. Lower earnings in 2005 and higher accounts receivable caused by a significant increase in sales in June 2005 compared to June 2004, which will be collected during the third quarter, accounted for most of the variance between 2004 and 2005.

Purchases of property, plant and equipment included amounts of $743,000 and $1,678,000 in the second quarter and year-to-date, respectively, for a new tumbling equipment system acquired for the Michigan concrete products plant. The new equipment is expected to be in production approximately mid-August.

The increases in bank operating advances for the second quarter and year-to-date reflected normal seasonal fluctuations, primarily in the concrete products business segment, plus the additional requirement this year to fund capital expenditures related to the installation of the new tumbling equipment system.

A dividend payment of 10 cents per Class A Subordinate Voting Share and 10 cents per Class B Multiple Voting Share - $1,085,000 in the aggregate - was paid on June 30.

The Board of Directors also approved the filing of a Notice of Intention to Make a Normal Course Issuer Bid with the Toronto Stock Exchange which, conditional upon approval being received, would allow the Company to buy back up to approximately 420,000 of its outstanding Class A Subordinate Voting Shares over the ensuing twelve month period. The Company believes that its shares have been trading in a price range which does not adequately reflect fair value in relation to current earnings and future business prospects. The Companies' current Normal Course Issuer Bid expires on August 9, 2005.

Certain statements contained herein constitute "forward-looking statements". Such forward-looking statements involve known and unknown risks, uncertainties and other factors 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. Products are used for residential construction and for industrial commercial, and institutional building projects. Oaks Concrete Products Ltd., a 70% owned subsidiary, manufactures concrete paving stones, retaining walls and enviro products and sells related accessory products for residential use and for industrial, commercial and institutional building projects. Da Vinci Stone Craft Ltd., a 75% owned subsidiary of Oaks Concrete Products Ltd., manufactures fireplace surrounds and accessory products. Medical Waste Management Inc., a 65% owned subsidiary, operates a facility for the destruction of biomedical and pharmaceutical waste, including the only commercially operated medical waste incinerator in Ontario. Roxy Construction Co. Limited, an 80% owned subsidiary, transports raw materials and finished products for the Company as well as providing trucking services to third parties. The Company also holds a 38.2% interest in Richvale York Block Inc., the largest manufacturer of concrete block in Ontario.



Selected Financial Information

(Unaudited) (thousands of dollars, except per share amounts)

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Three months ended Six months ended
CONSOLIDATED STATEMENTS June 30 June 30
OF INCOME 2005 2004 2005 2004
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Net sales $ 37,233 $ 34,787 $ 52,920 $ 54,958

Cost of sales, selling,
general and
administrative expenses 24,423 21,546 38,302 35,570

Amortization 2,706 2,668 5,390 5,311
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27,129 24,214 43,692 40,881

Operating income before
the undernoted items 10,104 10,573 9,228 14,077

Interest on long-term debt (268) (243) (512) (482)
Other interest expense (20) (64) (18) (122)
Equity income from
Richvale York Block Inc. 375 273 369 349
Foreign exchange gain 166 130 170 141
Other income (expense) (39) 225 (29) 66
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214 321 (20) (48)

Income before income taxes 10,318 10,894 9,208 14,029

Provision for income taxes

Current (3,043) (2,717) (3,728) (4,536)
Future (467) (581) 508 (78)
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(3,510) (3,298) (3,220) (4,614)

Income before
non-controlling interests 6,808 7,596 5,988 9,415

Non-controlling interests (358) (597) 117 138
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Net income for the period $ 6,450 $ 6,999 $ 6,105 $ 9,553
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Net income per Class
A and B share $ 0.59 $ 0.65 $ 0.56 $ 0.88
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Weighted average Class
A and B shares
outstanding (000's) 10,847 10,847 10,847 10,847


Selected Financial Information

(Unaudited) (thousands of dollars)

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Three months ended Six months ended
CONSOLIDATED STATEMENTS June 30 June 30
OF CASH FLOWS 2005 2004 2005 2004
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Cash provided by (used for)

Operating activities
Net income for the period $ 6,450 $ 6,999 $ 6,105 $ 9,553
Items not affecting cash
Amortization 2,706 2,668 5,390 5,311
Future income taxes 467 581 (508) 78
Non-controlling interests 358 597 (117) (138)
Equity income from Richvale
York Block Inc. (375) (273) (369) (349)
Unrealized foreign
exchange gain (63) - (63) -
(Gain) loss on disposal
of property, plant and
equipment (95) (78) (107) 13
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9,448 10,494 10,331 14,468

Changes in non-cash
operating items

Accounts receivable (11,320) (3,778) (13,406) (7,709)
Inventories 3,322 1,134 (143) (2,095)
Accounts payable and
accrued liabilities 2,297 (650) 2,641 (318)
Income taxes (net) 1,028 2,270 (458) 1,799
Other (276) 16 (352) (181)
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(4,949) (1,008) (11,718) (8,504)

Cash provided by
(used for) operations 4,499 9,486 (1,387) 5,964

Investing activities

Purchase of property,
plant and equipment (2,074) (1,007) (3,821) (1,923)
Dividend from Richvale
York Block Inc. - - 763 -
Increase in investment in
Oaks Concrete Products Ltd. - (3,844) - (3,844)
Proceeds from disposal of
property, plant and
equipment 287 722 303 736
Net proceeds from sale
of land - - - 86
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Cash used for investment (1,787) (4,129) (2,755) (4,945)

Financing activities

Increase (decrease) in
bank operating advances 872 (1,335) 6,130 3,640
Repayment of long-term debt (34) (32) (68) (64)
Payments on obligations
under capital leases (477) (789) (1,015) (1,437)
Repurchase of capital stock (2) - (2) -
Payment of dividend (1,085) - (1,085) -
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Cash provided by
(used for) financing (726) (2,156) 3,960 2,139

Foreign exchange on cash
held in foreign currency (6) 7 (7) 10
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Increase (decrease) in cash
and cash equivalents 1,980 3,208 (189) 3,168

Cash and cash equivalents
- Beginning of the period 11,402 316 13,571 356
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Cash and cash equivalents
- End of the period $ 13,382 $ 3,524 $ 13,382 $ 3,524
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Selected Financial Information

(thousands of dollars) (unaudited)

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June 30 December 31
CONSOLIDATED BALANCE SHEETS 2005 2004
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ASSETS

Current assets

Cash and cash equivalents $ 13,382 $ 13,571
Accounts receivable 22,621 9,227
Inventories 15,831 15,723
Income taxes recoverable 36 37
Other current assets 1,830 1,341
Future income taxes 14 36
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53,714 39,935

Property, plant and equipment (net) 103,064 101,343

Other assets

Goodwill 27,385 27,193
Investment in Richvale York Block Inc. 8,385 8,780
Future income taxes 1,051 714
Other 3,750 3,750
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40,571 40,437
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$ 197,349 $ 181,715
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LIABILITIES

Current liabilities

Bank operating advances $ 8,570 $ 2,440
Accounts payable and accrued liabilities 12,367 9,094
Income taxes payable 79 537
Long-term debt, current portion 1,602 1,827
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22,618 13,898

Long-term debt, less current portion 18,197 16,442

Future income taxes 11,020 11,224

Asset retirement obligation 936 914
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52,771 42,478

Non-controlling interests 14,040 14,066

SHAREHOLDERS' EQUITY 130,538 125,171
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$ 197,349 $ 181,715
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