BRAMPTON, ONTARIO--(Marketwired - Nov. 5, 2013) -
(All amounts are stated in thousands of Canadian dollars, except per share amounts.)
Brampton Brick Limited (TSX:BBL.A) today reported a net income of $4,209, or $0.38 per Class A Subordinate Voting share ("Class A share") and Class B Multiple Voting Share ("Class B share"), for the third quarter ended September 30, 2013 compared to net income of $2,215, or $0.20 per share, for the third quarter of 2012. The aggregate weighted average number of Class A shares and Class B shares outstanding for the third quarter of 2013 was 10,940,354 and 10,937,380 for the same period in 2012.
DISCUSSION OF OPERATIONS
Three months ended September 30, 2013
For the quarter ended September 30, 2013, revenues increased 13.7% to $30,998 from $27,270 for the same period in 2012. Higher shipments in both the Masonry Products and Landscape Products business segments contributed to the increase in revenues for the current quarter.
Cost of sales for the current quarter increased to $21,416 from $19,813 for the same period in 2012 due to higher sales volumes. Yard and delivery expenses increased slightly during the current quarter compared to 2012.
Selling expenses increased to $2,192 for the third quarter from $1,660 in the same quarter of 2012 due to higher personnel costs and an increase in marketing expenses.
General and administrative expenses were $1,453 for the three months ended September 30, 2013, compared to $1,592 for the corresponding quarter in 2012.
Higher revenues and improved gross margins increased operating income by 50.5% to $5,982 during the third quarter ended September 30, 2013, from $3,976 in the comparable period of 2012.
Finance expenses of $724 declined for the third quarter of 2013 compared to $885 for the same period in 2012. The decrease in interest expense was due to the repayment of the Company's subordinated secured debentures, which bore an effective interest rate of 11.89%. The redemption of these debentures was funded from the Company's operating credit facility. In addition, lower long term debt balances outstanding during the third quarter of 2013 contributed to the decline in interest expense. Scheduled principal payments totaling $2,500 on the long term debt were made in the second half of 2012 while $1,500 was repaid in the third quarter of 2013. This debt bears an effective interest rate of 8.40%.
The provision for income taxes of $1,049 for the third quarter of 2013 is higher compared to $876 in 2012 and corresponds with the increase in pre-tax income from the Canadian operations. The Company has not recorded a deferred tax asset with respect to the potential future income tax benefit pertaining to the losses incurred by its U.S. operations.
Nine months ended September 30, 2013
For the nine months ended September 30, 2013, the Company recorded net income of $3,737, or $0.34 per share, compared to net income of $3,193, or $0.29 per share, for the corresponding period in 2012. The aggregate weighted average number of Class A shares and Class B shares outstanding for the nine months ended September 30, 2013 was 10,940,354 and 10,936,831 for the corresponding period in 2012.
Revenues for the period ended September 30, 2013 were $73,797 compared to $74,319 in 2012. This decrease in revenues resulted from lower shipments in the Landscape Products business segment due largely to the negative impact of unfavourable weather conditions in the first four months of 2013.
Cost of sales for the nine months ended September 30, 2013, decreased to $55,319, compared to $55,943 in 2012. This decrease in cost of sales was due to lower yard and delivery expenses resulting from operating efficiencies realized from the consolidation of distribution facilities in the third quarter of 2012.
Selling expenses increased to $5,973 for the nine month period in 2013 from $5,188 for the same period in 2012. This increase is primarily due to the Company's ongoing investment in upgrading its information systems and enhancing its customer support capabilities.
General and administrative expenses were $4,657 for the nine month period in 2013 compared to $4,750 for the same period in 2012.
During the second quarter of 2013, a loss on the disposal of certain plant equipment amounted to $354. The improvement in process efficiencies expected from the changes in equipment is expected to positively impact operating margins going forward.
For the nine months ended September 30, 2013, an impairment loss of $158 relating to the loan receivable from Universal Resource Recovery Inc. ("Universal"), the Company's 50/50 joint venture, was recognized compared to $622 for the same period in 2012. There was no impairment charge incurred for the second and third quarters of 2013.
For the nine months ended September 30, 2013, operating income decreased to $7,397 from $7,803 in 2012.
Finance expenses of $2,104 for the nine month period ended September 30, 2013, declined by $670 from $2,774 in the comparable period of 2012. The decrease was attributable to the same reasons noted above under the caption 'Discussion of Operations' for the three months ended September 30, 2013.
As noted under 'Discussion of Operations' for the three months ended September 30, 2013, the Company recorded a tax provision for income taxes only with respect to its Canadian operations.
A more detailed discussion with respect to each operating business segment follows:
MASONRY PRODUCTS
For the three month period ended September 30, 2013, the Masonry Products business segment reported operating income of $3,723 on revenues of $21,262 compared to $3,207 on revenues of $18,581 for the same period in 2012. The increase in revenues during the third quarter of 2013 was due to higher shipments of both clay brick and concrete masonry products compared to the same period in 2012.
For the nine month period ended September 30, 2013, this business segment recorded an operating income of $5,875 compared to operating income of $7,100 in 2012. Revenues for the nine month period increased to $54,697 from $54,009 in 2012.
The increase in revenues in the Masonry Products business segment was due to continued growth in sales of concrete masonry products. During the nine months ended September 30, 2013, clay brick production volumes were lower than the comparable period of 2012. The resulting increase in production costs negatively impacted this business segment's gross margin and operating income.
LANDSCAPE PRODUCTS
For the three month period ended September 30, 2013, the Landscape Products business segment reported operating income of $2,033 on revenues of $9,736 compared to $1,029 on revenues of $8,689 for the same period in 2012.
For the nine month period ended September 30, 2013, this business segment recorded an operating income of $1,454 compared to operating income of $1,325 in 2012. Revenues for the nine month period were $19,100 compared to $20,310 in 2012. As noted earlier, unfavourable weather conditions in the first half of 2013 led to the decline in revenues. An increase in production levels led to a slight decrease in per unit manufacturing costs, resulting in a positive impact in operating income for the period ended September 30, 2013.
CASH FLOWS
Cash flow provided by operating activities totaled $5,123 for the nine month period ended September 30, 2013 compared to cash flow provided by operating activities of $12,781 for the same period in the prior year. Higher payables disbursements and higher income tax payments contributed to the decrease in cash provided by operating activities in 2013.
Cash utilized for purchases of property, plant and equipment totaled $2,948 for the nine month period in 2013, compared to $2,220 in 2012.
Loans advanced to Universal totaled $1,875 during the nine month period in 2013 compared to $2,045 in the comparative prior period.
In 2013, equipment sales proceeds were $44. For the nine month period of 2012, the sale of certain obsolete production equipment resulted in proceeds of $461.
FINANCIAL CONDITION
The Company's Masonry Products and Landscape Products business segments are seasonal in nature. The Landscape Products business is affected by seasonality to a greater degree than the Masonry Products business. As a result of this seasonality, operating results are impacted accordingly and cash requirements are generally expected to increase through the first half of the year and decline through the second half of the year.
As at September 30, 2013, bank operating advances were $13,593. This represented an increase of $3,158 from the amount outstanding at December 31, 2012. The increase in bank operating advances was utilized to meet working capital requirements, capital expenditures and repayments of finance lease obligations in the first nine months of 2013. Trade payables totaled $9,516 as at September 30, 2013 compared to $11,675 as at December 31, 2012. Trade and other receivables and inventories totaled $15,595 and $22,862, respectively, as at September 30, 2013 compared to $10,832 and $22,287, respectively, as at December 31, 2012.
The ratio of total liabilities to shareholders' equity was 0.49:1 at September 30, 2013 compared to 0.50:1 at December 31, 2012. The decrease in this ratio from December 2012 to September 2013 was primarily due to the increase in retained earnings resulting from higher operating income and a favourable improvement in the foreign currency translation amount for the nine month period ended September 30, 2013 compared to the corresponding period in 2012. The foreign currency translation gain resulted from the weakening of the Canadian dollar in relation to the U.S. dollar in the first nine months of 2013 compared to the same period in 2012.
As at September 30, 2013, net working capital was $10,828, representing a working capital ratio of 1.37:1. Comparable figures for net working capital and the working capital ratio at December 31, 2012 were $7,325 and 1.25:1, respectively. The increase from December 31, 2012 is primarily due to the increase in trade and other receivables as at September 30, 2013. Cash and cash equivalents totaled $963 at September 30, 2013 compared to $1,412 at December 31, 2012.
The Company's credit facility provides for borrowings of up to $22,000 based on margin formulae for trade receivables and inventories, less priority claims and the mark-to-market exposure on swap contracts, if applicable. It is a demand facility secured primarily by trade receivables and inventories of the Company's Masonry Products and Landscape Products business segments in Canada and the U.S. The agreement also contains certain financial covenants.
As at September 30, 2013, the Company is in compliance with all of its financial covenants for its credit facility as well as its long term loan facility and anticipates that it will maintain compliance throughout the year.
The Company expects that future cash flows from operations, cash and cash equivalents on hand and the unutilized balance of its operating credit facility will be sufficient to satisfy its obligations.
The Company signed a revised credit facility agreement with its bank on September 19, 2013. The agreement provides for a demand non-revolving loan of $3,125 repayable in equal monthly payments of principal and interest with an amortization period of 180 months with a balloon payment of the remaining balance in September 2019. This loan is expected to be accessed in the fourth quarter and bears interest at an annual rate equal to the Canadian bank prime rate plus a credit spread of 1.50%. This loan is secured by a mortgage registered on Universal's property located in Welland, Ontario.
Subsequent to the quarter ended September 30, 2013, Universal entered into a lease agreement relating to its facility located at Welland, Ontario. Based on the lease, this investment property will earn rental income for the duration of the lease period which extends up to six years. Based on the economics of the lease, the Universal investment is expected to be cash neutral for the Company for the lease duration. The lease tenant has an option to purchase the entire 65 acre parcel of land at fair market value in June 2015, two years after the effective lease start date.
FORWARD-LOOKING STATEMENTS
Certain statements contained herein constitute "forward-looking statements". All statements that are not historical facts are forward-looking statements, including, among others, statements regarding the expected repayment of the loan receivable from Universal, forecasts of sufficient cash flows from operations and other sources of financing, anticipated compliance with financial covenants under debt agreements, anticipated sales of masonry and landscape products, and other statements regarding future plans, objectives, results, business outlook and financial performance. There can be no assurance that such forward-looking statements will prove to be accurate.
Such forward-looking statements are based on information currently available to management, and are based on assumptions and analyses made by management in light of its experience and its perception of historical trends, current conditions and expected future developments, including, among others, assumptions regarding pricing, weather and seasonal expectations, production efficiency, and there being no significant disruptions affecting operations or other material adverse changes.
Such forward-looking statements also 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 future results, performance or achievements expressed or implied by such forward- looking statements. Such risks and uncertainties include, among others: changes in economic conditions, including the demand for the Company's primary products and the level of new home, commercial and other construction; large fluctuations in production levels; fluctuations in energy prices and other production costs; changes in transportation costs; foreign currency exchange and interest rate fluctuations; legislative and regulatory developments; as well as those assumptions, risks, uncertainties and other factors identified and discussed above under "Risks and Uncertainties" in the 2012 annual MD&A included in the Company's 2012 Annual Report and those identified and reported in the Company's other public filings (including the Annual Information Form for the year ended December 31, 2012), which may be accessed at www.sedar.com.
The forward-looking information contained herein is made as of the date hereof. Other than as specifically required by law, the Company undertakes no obligation to update or revise any forward- looking information, whether as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on forward-looking statements.
Brampton Brick is Canada's second largest manufacturer of clay brick, serving markets in Ontario, Quebec and the Northeast and Midwestern United States from its brick manufacturing plants located in Brampton, Ontario and near Terre Haute, Indiana. To complement the clay brick product line, the Company also manufactures a range of concrete masonry products, including concrete brick and block as well as stone veneer products. Concrete interlocking paving stones, retaining walls, garden walls and enviro products are manufactured in Markham, Milton and Brampton, Ontario and Wixom, Michigan. These products are sold to markets in Ontario, Quebec, Michigan, New York, Pennsylvania, Ohio, Kentucky, Illinois and Indiana under the Oaks™ trade name. Products are used for residential construction and for industrial, commercial, and institutional building projects.
| Selected Financial Information | ||||||||
| (unaudited) (in thousands of Canadian dollars) | ||||||||
| September 30 | December 31 | |||||||
| CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS | 2013 | 2012 | ||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 963 | $ | 1,412 | ||||
| Trade and other receivables | 15,595 | 10,832 | ||||||
| Inventories | 22,862 | 22,287 | ||||||
| Loan receivable | - | 1,392 | ||||||
| Other assets | 1,001 | 575 | ||||||
| 40,421 | 36,498 | |||||||
| Non-current assets | ||||||||
| Loan receivable | 3,109 | - | ||||||
| Property, plant and equipment | 168,025 | 168,848 | ||||||
| Total assets | $ | 211,555 | $ | 205,346 | ||||
| LIABILITIES | ||||||||
| Current liabilities | ||||||||
| Bank operating advances | $ | 13,593 | $ | 10,435 | ||||
| Trade payables | 9,516 | 11,675 | ||||||
| Income taxes payable | 227 | 2,110 | ||||||
| Current portion of debt | 3,104 | 2,928 | ||||||
| Decommissioning provisions | 50 | 50 | ||||||
| Other liabilities | 3,103 | 1,975 | ||||||
| 29,593 | 29,173 | |||||||
| Non-current liabilities | ||||||||
| Non-current portion of debt | 22,111 | 23,554 | ||||||
| Decommissioning provisions | 2,269 | 2,219 | ||||||
| Deferred tax liabilities | 15,213 | 13,427 | ||||||
| Total liabilities | $ | 69,186 | $ | 68,373 | ||||
| EQUITY | ||||||||
| Equity attributable to shareholders of Brampton Brick Limited | ||||||||
| Share capital | $ | 33,711 | $ | 33,711 | ||||
| Contributed surplus | 2,042 | 1,895 | ||||||
| Accumulated other comprehensive loss | (1,080 | ) | (2,655 | ) | ||||
| Retained earnings | 107,688 | 104,010 | ||||||
| $ | 142,361 | $ | 136,961 | |||||
| Non-controlling interests | 8 | 12 | ||||||
| Total equity | $ | 142,369 | $ | 136,973 | ||||
| Total liabilities and equity | $ | 211,555 | $ | 205,346 | ||||
| Selected Financial Information | |||||||||||||||||
| (unaudited) (in thousands of Canadian dollars, except per share amounts) | |||||||||||||||||
| Three months ended | Nine months ended | ||||||||||||||||
| CONDENSED INTERIM CONSOLIDATED STATEMENTS | September 30 | September 30 | |||||||||||||||
| OF COMPREHENSIVE INCOME | 2013 | 2012 | 2013 | 2012 | |||||||||||||
| Revenues | $ | 30,998 | $ | 27,270 | $ | 73,797 | $ | 74,319 | |||||||||
| Cost of sales | 21,416 | 19,813 | 55,319 | 55,943 | |||||||||||||
| Selling expenses | 2,192 | 1,660 | 5,973 | 5,188 | |||||||||||||
| General and administrative expenses | 1,453 | 1,592 | 4,657 | 4,750 | |||||||||||||
| (Gain) loss on disposal of property, plant and equipment | (2 | ) | 1 | 347 | 56 | ||||||||||||
| Other income | (43 | ) | (32 | ) | (54 | ) | (43 | ) | |||||||||
| Impairment loss on loan receivable | - | 260 | 158 | 622 | |||||||||||||
| 25,016 | 23,294 | 66,400 | 66,516 | ||||||||||||||
| Operating income | 5,982 | 3,976 | 7,397 | 7,803 | |||||||||||||
| Finance expense | (724 | ) | (885 | ) | (2,104 | ) | (2,774 | ) | |||||||||
| Income before income taxes | 5,258 | 3,091 | 5,293 | 5,029 | |||||||||||||
| (Provision for) recovery of income taxes | |||||||||||||||||
| Current | 184 | (917 | ) | 229 | (1,575 | ) | |||||||||||
| Deferred | (1,233 | ) | 41 | (1,785 | ) | (261 | ) | ||||||||||
| (1,049 | ) | (876 | ) | (1,556 | ) | (1,836 | ) | ||||||||||
| Net income for the period | $ | 4,209 | $ | 2,215 | $ | 3,737 | $ | 3,193 | |||||||||
| Net income attributable to: | |||||||||||||||||
| Shareholders of Brampton Brick Limited | $ | 4,151 | $ | 2,215 | $ | 3,678 | $ | 3,192 | |||||||||
| Non-controlling interests | 58 | - | 59 | 1 | |||||||||||||
| Net income for the period | $ | 4,209 | $ | 2,215 | $ | 3,737 | $ | 3,193 | |||||||||
| Other comprehensive income | |||||||||||||||||
| Items that may be reclassified subsequently to profit or loss: | |||||||||||||||||
| Foreign currency translation income (loss) | $ | (1,099 | ) | $ | (1,677 | ) | $ | 1,575 | $ | (1,635 | ) | ||||||
| Total comprehensive income for the period | $ | 3,110 | $ | 538 | $ | 5,312 | $ | 1,558 | |||||||||
| Total comprehensive income attributable to: | |||||||||||||||||
| Shareholders of Brampton Brick Limited | $ | 3,052 | $ | 538 | $ | 5,253 | $ | 1,557 | |||||||||
| Non-controlling interests | 58 | - | 59 | 1 | |||||||||||||
| Total comprehensive income for the period | $ | 3,110 | $ | 538 | $ | 5,312 | $ | 1,558 | |||||||||
| Net income per Class A and Class B share | |||||||||||||||||
| attributable to shareholders of Brampton Brick Limited | $ | 0.38 | $ | 0.20 | $ | 0.34 | $ | 0.29 | |||||||||
| Weighted average Class A and Class B | |||||||||||||||||
| shares outstanding (000's) | 10,940 | 10,937 | 10,940 | 10,937 | |||||||||||||
| Selected Financial Information | |||||||||
| (unaudited) (in thousands of Canadian dollars) | |||||||||
| CONDENSED INTERIM CONSOLIDATED STATEMENTS | Nine months ended September 30 | ||||||||
| OF CASH FLOWS | 2013 | 2012 | |||||||
| Cash provided by (used for) | |||||||||
| Operating activities | |||||||||
| Net income for the period | $ | 3,737 | $ | 3,193 | |||||
| Items not affecting cash and cash equivalents | |||||||||
| Depreciation | 5,446 | 5,234 | |||||||
| Current taxes | (229 | ) | 1,575 | ||||||
| Deferred taxes | 1,785 | 261 | |||||||
| Loss on disposal of property, plant and equipment | 347 | 56 | |||||||
| Unrealized foreign currency exchange (gain) loss | (138 | ) | 13 | ||||||
| Impairment loss on loan receivable | 158 | 622 | |||||||
| Net interest expense | 2,104 | 2,774 | |||||||
| Other | 147 | 96 | |||||||
| 13,357 | 13,824 | ||||||||
| Changes in non-cash items | |||||||||
| Trade and other receivables | (4,721 | ) | (3,486 | ) | |||||
| Inventories | (372 | ) | (530 | ) | |||||
| Other assets | (419 | ) | (300 | ) | |||||
| Trade payables | (2,112 | ) | 2,516 | ||||||
| Income tax credits applied | - | 449 | |||||||
| Other liabilities | 1,043 | 351 | |||||||
| (6,581 | ) | (1,000 | ) | ||||||
| Income tax payments | (1,653 | ) | (3 | ) | |||||
| Payments for decommissioning of assets | - | (40 | ) | ||||||
| Cash provided by operating activities | 5,123 | 12,781 | |||||||
| Investing activities | |||||||||
| Purchase of property, plant and equipment | (2,948 | ) | (2,220 | ) | |||||
| Loan advances to Universal Resource Recovery Inc. | (1,875 | ) | (2,045 | ) | |||||
| Proceeds from disposal of property, plant and equipment | 46 | 509 | |||||||
| Cash used for investment activities | (4,777 | ) | (3,756 | ) | |||||
| Financing activities | |||||||||
| Increase (decrease) in bank operating advances | 3,158 | (3,647 | ) | ||||||
| Payment of term loans | (1,564 | ) | (1,759 | ) | |||||
| Payment of subordinated secured debentures | - | (500 | ) | ||||||
| Interest paid | (1,962 | ) | (2,567 | ) | |||||
| Payments on obligations under finance leases | (393 | ) | (415 | ) | |||||
| Payment of dividends by subsidiary to non-controlling interests | (63 | ) | (75 | ) | |||||
| Proceeds from exercise of stock options | - | 19 | |||||||
| Cash used for financing activities | (824 | ) | (8,944 | ) | |||||
| Foreign exchange on cash held in foreign currency | 29 | (14 | ) | ||||||
| (Decrease) increase in cash and cash equivalents | (449 | ) | 67 | ||||||
| Cash and cash equivalents at the beginning of the period | 1,412 | 1,180 | |||||||
| Cash and cash equivalents at the end of the period | $ | 963 | $ | 1,247 | |||||
| Selected Financial Information | |||||||
| (unaudited) (in thousands of Canadian dollars) | |||||||
| CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | ||||||||||||||||||||
| Attributable to shareholders of Brampton Brick Limited | ||||||||||||||||||||
| Accumulated | ||||||||||||||||||||
| Other | Non- | |||||||||||||||||||
| Share | Contributed | Comprehensive | Retained | controlling | Total | |||||||||||||||
| Capital | Surplus | Income (Loss) | Earnings | Total | interest | Equity | ||||||||||||||
| Balance - January 1, 2012 | $ | 33,689 | $ | 1,801 | $ | (1,540 | ) | $ | 102,527 | $ | 136,477 | $ | 10 | $ | 136,487 | |||||
| Net income for the period | - | - | - | 3,192 | 3,192 | 1 | 3,193 | |||||||||||||
| Other comprehensive loss (net of taxes, $nil) | - |
- |
(1,635 |
) | - |
(1,635 |
) | - |
(1,635 |
) | ||||||||||
| Comprehensive (loss) income for the period | - |
- |
(1,635 |
) | 3,192 |
1,557 |
1 |
1,558 |
||||||||||||
| Issue of Class A Subordinate Voting Shares under the Employee Stock Option Incentive Plan | 19 |
- |
- |
- |
19 |
- |
19 |
|||||||||||||
| Transfer to share capital on exercise of stock options | 3 |
(3 |
) | - |
- |
- |
- |
- |
||||||||||||
| Share-based compensation | - | 96 | - | - | 96 | - | 96 | |||||||||||||
| Balance - September 30, 2012 | $ | 33,711 | $ | 1,894 | $ | (3,175 | ) | $ | 105,719 | $ | 138,149 | $ | 11 | $ | 138,160 | |||||
| Balance - January 1, 2013 | $ | 33,711 | $ | 1,895 | $ | (2,655 | ) | $ | 104,010 | $ | 136,961 | $ | 12 | $ | 136,973 | |||||
| Net income for the period | - | - | - | 3,678 | 3,678 | 59 | 3,737 | |||||||||||||
| Other comprehensive income (net of taxes, $nil) | - | - | 1,575 | - | 1,575 | - | 1,575 | |||||||||||||
| Comprehensive income for the period | - | - | 1,575 | 3,678 | 5,253 | 59 | 5,312 | |||||||||||||
| Dividends paid to non-controlling interest | - | - | - | - | - | (63 | ) | (63 | ) | |||||||||||
| Share-based compensation | - | 147 | - | - | 147 | - | 147 | |||||||||||||
| Balance - September 30, 2013 | $ | 33,711 | $ | 2,042 | $ | (1,080 | ) | $ | 107,688 | $ | 142,361 | $ | 8 | $ | 142,369 | |||||
Contact Information:
Jeffrey G. Kerbel
President and Chief Executive Officer
905-840-1011
905-840-1535 (FAX)
Brampton Brick Limited
Trevor M. Sandler
Vice-President, Finance and Chief Financial Officer
905-840-1011
905-840-1535 (FAX)
investor.relations@bramptonbrick.com