Brampton Brick Reports Results for the Second Quarter Ended June 30, 2013

BRAMPTON, ONTARIO--(Marketwired - Aug. 6, 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 $2,102, or $0.19 per Class A Subordinate Voting share ("Class A share") and Class B Multiple Voting Share ("Class B share"), for the second quarter ended June 30, 2013 compared to net income of $3,771, or $0.35 per share, for the second quarter of 2012. The aggregate weighted average number of Class A shares and Class B shares outstanding for the second quarter of 2013 was 10,940,354 and 10,936,554 for the same period in 2012.

DISCUSSION OF OPERATIONS

Three months ended June 30, 2013

Revenues for the second quarter of 2013 were $29,910 compared to $31,054 in 2012. Lower shipments in the Landscape Products business segment due to comparatively unfavourable weather conditions more than offset favourable masonry products revenues and resulted in the revenue reduction for the quarter.

Cost of sales for the current quarter increased to $22,129 from $21,287 for the same period in 2012. Due to the relatively high fixed cost nature of the Company's manufacturing facilities, large fluctuations in production levels have a material impact on per unit manufacturing costs and gross margins. The Company scheduled lower production volumes during the second quarter of 2013 compared to the corresponding period in 2012 which resulted in the increase in cost of sales. Lower yard and delivery expenses during the current quarter compared to last year partially offset the increase in the cost of sales.

Selling expenses increased to $1,996 for the second quarter from $1,667 in the same quarter of 2012 due to higher personnel costs and an increase in advertising expenses.

General and administrative expenses were $1,646 for the three months ended June 30, 2013, compared to $1,584 for the corresponding quarter 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.

The decrease in revenues and the increase in manufacturing costs associated with the lower production volumes during the second quarter ended June 30, 2013, reduced operating income to $3,799 from $6,114 in the comparable period of 2012.

Finance costs of $717 declined for the second quarter of 2013 compared to $981 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 second 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. This debt bears an effective interest rate of 8.40%.

The provision for income taxes of $981 for the second quarter of 2013 is lower compared to $1,364 in 2012 and corresponds with the decline 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.

Six months ended June 30, 2013

For the six months ended June 30, 2013, the Company recorded a net loss of $472, or ($0.04) per share, compared to net income of $978, or $0.09 per share, for the corresponding period in 2012. The aggregate weighted average number of Class A shares and Class B shares outstanding for the six months ended June 30, 2013 was 10,940,354 and 10,936,554 for the corresponding period in 2012.

Revenues for the six month period in 2013 were $42,799 compared to $47,049 in 2012. This decrease in revenues resulted from lower shipments in both the Masonry Products and Landscape Products business segments due largely to the negative impact of unfavourable weather conditions in the first four months of 2013.

Cost of sales for the six months ended June 30, 2013, decreased to $33,903, compared to $36,130 in 2012. The decrease in cost of sales was due to lower sales volumes and lower yard and delivery expenses as described under the caption 'Discussion of Operations' for the three months ended June 30, 2013 and was partially offset by higher unit production costs resulting from lower production volumes.

Selling expenses increased to $3,781 for the six month period in 2013 from $3,528 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 $3,204 for the six month period in 2013 compared to $3,158 for the same period in 2012.

For the six months ended June 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 $362 for the same period in 2012. There was no impairment charge incurred for the second quarter of 2013.

For the six months ended June 30, 2013, operating income decreased to $1,415 from $3,827 in 2012.

Finance costs for the first six months of 2013, at $1,383, were $510 lower than the comparable period of 2012 for the same reasons noted above under the caption 'Discussion of Operations' for the three months ended June 30, 2013.

As noted under 'Discussion of Operations' for the three months ended June 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 June 30, 2013, the Masonry Products business segment reported operating income of $2,146 on revenues of $21,123 compared to $4,292 on revenues of $20,635 for the same period in 2012.

For the six month period ended June 30, 2013, this business segment recorded an operating income of $2,152 compared to operating income of $3,893 in 2012. Revenues for the six month period decreased to $33,435 from $35,428 in 2012.

The decrease in revenues in the Masonry Products business segment was due to unfavourable weather conditions in the first quarter of 2013 compared to milder conditions in the first quarter of 2012. For the second quarter of 2013, revenues in this business segment increased from 2012 levels because of the continued growth in sales of concrete masonry products.

During the six months ended June 30, 2013, clay brick production levels were lower than the comparable period of 2012. The resulting increase in production costs negatively impacted this business segment's gross margin.

LANDSCAPE PRODUCTS

For the three month period ended June 30, 2013, the Landscape Products business segment reported operating income of $1,653 on revenues of $8,787 compared to $2,184 on revenues of $10,419 for the same period in 2012.

For the six month period ended June 30, 2013, this business segment recorded an operating loss of $579 compared to operating income of $296 in 2012. Revenues for the six month period were $9,364 compared to $11,621 in 2012. As noted earlier, unfavourable weather conditions in the first six months of 2013 led to the decline in revenues and operating results.

CASH FLOWS

Cash flow used for operating activities totaled $3,097 for the six month period ended June 30, 2013 compared to cash flow provided by operating activities of $1,629 for the same period in the prior year. Lower operating results combined with higher inventory levels due to lower shipments and higher income tax payments contributed to the increase in cash used for operating activities in 2013.

Cash utilized for purchases of property, plant and equipment totaled $1,646 for the six month period in 2013, compared to $1,881 in 2012.

Short term loans advanced to Universal totaled $1,375 during the six month period in 2013 compared to $1,340 in the comparative prior period.

During the second quarter of 2013, equipment sales proceeds were $44. In the second quarter 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 June 30, 2013, bank operating advances were $17,733. This represented an increase of $7,298 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 six months of 2013. Trade payables totaled $12,790 at June 30, 2013 compared to $11,675 at December 31, 2012. Trade and other receivables and inventories totaled $16,832 and $25,392, respectively, at June 30, 2013 compared to $10,832 and $22,287, respectively, at December 31, 2012.

The ratio of total liabilities to shareholders' equity was 0.55:1 at June 30, 2013 compared to 0.50:1 at December 31, 2012. The increase in this ratio from December 2012 to June 2013 was primarily due to the increase in bank operating advances, as noted above and lower retained earnings resulting from lower operating income earned for the six month period ended June 30, 2013. Partially offsetting these factors was a favourable increase in the foreign currency translation amount for the six month period over the corresponding period in 2012. This amount is reported in Accumulated other comprehensive income (loss) in the condensed interim consolidated financial statements and arose due to the weakening of the Canadian dollar in relation to the U.S. dollar in the first six months of 2013 compared to the same period in 2012.

As at June 30, 2013, working capital was $6,883, representing a working capital ratio of 1.18:1. Comparable figures for working capital and the working capital ratio at December 31, 2012 were $7,325 and 1.25:1, respectively. The decline from December 31, 2012 is primarily due to the increase in bank operating advances as at June 30, 2013. Cash and cash equivalents totaled $1,107 at June 30, 2013 compared to $1,412 at December 31, 2012.

The Company's credit facility provides for borrowings 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 June 30, 2013, the Company is in compliance with all of its financial covenants 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 was in compliance with all financial covenants under its debt agreement as at June 30, 2013 and anticipates that it will maintain compliance throughout the year.

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 short-term 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)
			June 30		December 31
CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS			2013		2012
ASSETS
Current assets
	Cash and cash equivalents	$	1,107	$	1,412
	Trade and other receivables		16,832		10,832
	Inventories		25,392		22,287
	Loan receivable		-		1,392
	Other assets		791		575
			44,122		36,498
Non-current assets
	Loan receivable		2,609		-
	Property, plant and equipment		169,805		168,848
Total assets		$	216,536	$	205,346
LIABILITIES
Current liabilities
	Bank operating advances	$	17,733	$	10,435
	Trade payables		12,790		11,675
	Income taxes payable		826		2,110
	Current portion of debt		3,103		2,928
	Decommissioning provisions		50		50
	Other liabilities		2,737		1,975
			37,239		29,173
Non-current liabilities
	Non-current portion of debt		23,760		23,554
	Decommissioning provisions		2,271		2,219
	Deferred tax liabilities		13,981		13,427
Total liabilities		$	77,251	$	68,373
EQUITY
Equity attributable to shareholders of Brampton Brick Limited
	Share capital	$	33,711	$	33,711
	Contributed surplus		2,005		1,895
	Accumulated other comprehensive income (loss)		19		(2,655	)
	Retained earnings		103,537		104,010
		$	139,272	$	136,961
Non-controlling interests			13		12
Total equity		$	139,285	$	136,973
Total liabilities and equity		$	216,536	$	205,346

Selected Financial Information
(unaudited) (in thousands of Canadian dollars, except per share amounts)
condensed interim CONSOLIDATED STATEMENTS OF			Three months ended June 30						Six months ended June 30
COMPREHENSIVE INCOME (LOSS)			2013			2012			2013			2012
Revenues		$	29,910		$	31,054		$	42,799		$	47,049
Cost of sales			22,129			21,287			33,903			36,130
Selling expenses			1,996			1,667			3,781			3,528
General and administrative expenses			1,646			1,584			3,204			3,158
Loss on sale of property, plant and equipment			354			55			349			55
Other income			(14	)		(15	)		(11	)		(11	)
Impairment loss on loan receivable			-			362			158			362
			26,111			24,940			41,384			43,222
Operating income			3,799			6,114			1,415			3,827
Finance (expense) income
	Finance costs		(717	)		(981	)		(1,383	)		(1,893	)
	Finance income		1			2			3			4
			(716	)		(979	)		(1,380	)		(1,889	)
Income before income taxes			3,083			5,135			35			1,938
(Provision for) recovery of income taxes
	Current		(313	)		(658	)		45			(658	)
	Deferred		(668	)		(706	)		(552	)		(302	)
			(981	)		(1,364	)		(507	)		(960	)
Net income (loss) for the period		$	2,102		$	3,771		$	(472	)	$	978
Net income (loss) attributable to:
	Shareholders of Brampton Brick Limited	$	2,101		$	3,771		$	(473	)	$	977
	Non-controlling interests		1			-			1			1
Net income (loss) for the period		$	2,102		$	3,771		$	(472	)	$	978
Other comprehensive income
	Items that may be reclassified subsequently to profit or loss:
	Foreign currency translation	$	1,695		$	980		$	2,674		$	42
Total comprehensive income for the period		$	3,797		$	4,751		$	2,202		$	1,020
Total comprehensive income attributable to:
	Shareholders of Brampton Brick Limited	$	3,796		$	4,751		$	2,201		$	1,019
	Non-controlling interests		1			-			1			1
Total comprehensive income for the period		$	3,797		$	4,751		$	2,202		$	1,020
Net income (loss) per Class A and Class B share		$	0.19		$	0.35		$	(0.04	)	$	0.09
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				Six months ended June 30
OF CASH FLOWS				2013			2012
Cash provided by (used for)
Operating activities
	Net (loss) income for the period		$	(472	)	$	978
	Items not affecting cash and cash equivalents
		Depreciation		3,611			3,489
		Current taxes		(45	)		658
		Deferred taxes		552			302
		Loss on disposal of property, plant and equipment		349			55
		Unrealized foreign currency exchange gain		(96	)		(16	)
		Impairment loss on loan receivable		158			362
		Net interest expense		1,380			1,888
		Other		110			70
				5,547			7,786
	Changes in non-cash items
		Trade and other receivables		(5,896	)		(7,167	)
		Inventories		(2,754	)		218
		Other assets		(203	)		(67	)
		Trade payables		756			445
		Income tax credits applied		-			(4	)
		Other liabilities		692			460
				(7,405	)		(6,115	)
	Income tax payments			(1,239	)		(3	)
	Payments for decommissioning of assets			-			(39	)
Cash (used for) provided by operating activities				(3,097	)		1,629
Investing activities
	Purchase of property, plant and equipment			(1,646	)		(1,881	)
	Loan advances to Universal Resource Recovery Inc.			(1,375	)		(1,340	)
	Proceeds from disposal of property, plant and equipment			44			461
Cash used for investment activities				(2,977	)		(2,760	)
Financing activities
	Increase in bank operating advances			7,298			3,280
	Payment of term loans			(41	)		(152	)
	Interest paid			(1,282	)		(1,719	)
	Payments on obligations under finance leases			(248	)		(309	)
	Payment of dividends by subsidiary to non-controlling interests			-			(75	)
Cash provided by financing activities				5,727			1,025
Foreign exchange on cash held in foreign currency				42			1
Decrease in cash and cash equivalents				(305	)		(105	)
Cash and cash equivalents at the beginning of the period				1,412			1,180
Cash and cash equivalents at the end of the period			$	1,107		$	1,075

Selected Financial Information
(unaudited) (in thousands of Canadian dollars)
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
		Attributable to shareholders of Brampton Brick Limited
			Share Capital		Contributed Surplus		Accumulated Other Comprehensive Income (Loss	)		Retained Earnings			Total			Non-controlling interest		Total Equity
Balance - January 1, 2012		$	33,689	$	1,801	$	(1,540	)	$	102,527		$	136,477		$	10	$	136,487
	Net income for the period		-		-		-			977			977			1		978
	Other comprehensive income(net of taxes, $nil)		-		-		42			-			42			-		42
Comprehensive income for the period			-		-		42			977			1,019			1		1,020
	Share-based compensation		-		70		-			-			70			-		70
Balance - June 30, 2012		$	33,689	$	1,871	$	(1,498	)	$	103,504		$	137,566		$	11	$	137,577
Balance - January 1, 2013		$	33,711	$	1,895	$	(2,655	)	$	104,010		$	136,961		$	12	$	136,973
	Net (loss) income for the period		-		-		-			(473	)		(473	)		1		(472	)
	Other comprehensive income(net of taxes, $nil)		-		-		2,674			-			2,674			-		2,674
Comprehensive income (loss) for the period			-		-		2,674			(473	)		2,201			1		2,202
	Share-based compensation		-		110		-			-			110			-		110
Balance - June 30, 2013		$	33,711	$	2,005	$	19		$	103,537		$	139,272		$	13	$	139,285