(All amounts are stated in thousands of Canadian dollars, except per share amounts.)
BRAMPTON, Ontario, May 11, 2021 (GLOBE NEWSWIRE) -- Brampton Brick Limited (TSX:BBL.A) today reported a net loss of $262, or $0.02 per share for the three months ended March 31, 2021 compared to a net loss of $5,968, or $0.54 per share for the corresponding quarter of 2020. The aggregate weighted average number of Class A Subordinate Voting shares and Class B Multiple Voting shares outstanding for the first quarter of 2021 and 2020 were 11,009,054 and 11,005,922, respectively.
DISCUSSION OF OPERATIONS
Revenues for the first quarter of 2021 increased to $36,302, compared to $21,029 for the same quarter of 2020. Shipments from both the Masonry Products and Landscape Products business segments increased significantly on rising demand for masonry products in the Ontario housing and commercial markets and an unseasonably high demand from landscape product dealers and distributors under the Company’s winter dealer stocking program. The first quarter of 2021 continues to reflect the impact of COVID-19 on increased demand for both new residential construction and landscape enhancement spending patterns. Revenues in the corresponding prior period of 2020 were affected by emergency government declarations imposed to contain the spread of COVID-19 which impacted both facility operations and product demand, most notably in March 2020.
Cost of sales for the first quarter ended March 31, 2021 was $30,165, compared to $22,412 for the same quarter of 2020. The increase in costs of sales due to higher shipments was partially offset by lower per unit manufacturing costs on higher production volumes. Operations in the corresponding prior period of 2020 were affected by numerous state-of-emergency declarations, both in Canada and the U.S. during the initial stage of the pandemic outbreak resulting in mandatory COVID-19-related lockdowns of certain production facilities. In addition, during the first quarter of 2021 facility refurbishment costs of $1,696, compared to $580 for the same quarter of 2020, were incurred at the Company’s Welland, Ontario property.
Selling expenses for the first quarter of 2021 were $3,556, compared to $3,225 for the same quarter of 2020 due to higher personnel and marketing costs, as well as a timing difference in expense recognition of promotional material.
General and administrative expenses for the quarter ended March 31, 2021 were $2,108 compared to $1,854 for the corresponding quarter of 2020. The lower expense in the prior period was due to a decrease in the fair value provision recognized for share appreciation rights.
Other income for the three-month period ended March 31, 2021 was $97, compared to $403 for the corresponding quarter of 2020. This income primarily relates to the net gain on translation of foreign currency transactions as a result of currency exchange fluctuations attributed to the U.S. dollar during the period.
Operating income for the quarter ended March 31, 2021 increased to $471, compared to an operating loss of $6,059 for the comparative quarter of 2020, for the reasons noted above.
Finance expense for the three months ended March 31, 2021 was $143, compared to $708 for the same quarter of 2020. Excluding the change in the fair value of the interest rate swap, which amounted to an unrealized gain of $74 (2020 – $478 unrealized loss), net interest expense for the first quarter of 2021 decreased to $217, compared to $230 for the same period of 2020. This decrease was due to lower interest expense on lower term loan balances outstanding under the Company’s banking credit facilities. During the second half of 2020, scheduled repayments totaled $1,950 and an additional $1,000 was repaid in February 2021 on the Company’s vendor take-back loan.
The provision for income taxes totaled $590 for the first quarter of 2021 compared to a recovery of income taxes of $799 for the comparative quarter of 2020. The increase in the provision for income taxes was due to a comparative increase in the pre-tax income of the Company’s Canadian masonry and landscape operations. The Company has not recorded a deferred tax asset with respect to the potential deferred tax benefit pertaining to losses incurred by its U.S. operations or its commercial leasing operations in the current or any prior period.
The following paragraphs explain each operating business segment in more detail.
MASONRY PRODUCTS
Revenues of the Masonry Products business segment increased to $24,830 for the first quarter of 2021, as compared to $19,044 for the corresponding quarter of 2020. The recovery in the pace of Ontario’s residential and commercial construction continued in the first quarter after the initial pandemic-related lockdowns, which impacted revenues in the first half of 2020. Revenues in the Company’s U.S. markets were slightly below the corresponding prior period due to lower shipments and the comparative strengthening of the average Canadian dollar exchange rate during the current quarter of 2021.
Cost of sales for the first quarter of 2021 increased to $20,077, compared to $18,381 for the corresponding quarter in 2020. The increase in costs of sales was due to the increase in shipments and was partially offset by lower per unit costs on higher volumes. In the corresponding prior period, production volumes were reduced due to lower shipment volumes and to maintain an appropriate level of financial liquidity in what was a very uncertain product demand environment. As a result of the measures on facility operations and production levels, costs of sales increased in the quarter.
Operating income for the first quarter of 2021 increased to $1,297, compared to an operating loss of $3,166 for the corresponding quarter of 2020, for the reasons noted above.
LANDSCAPE PRODUCTS
Revenues of the Landscape Products business segment for the three months ended March 31, 2021 increased to $11,360, compared to $1,924 for the same quarter of 2020. The dramatic increase in revenues during the first quarter of 2021 was due to a significant increase in demand from landscape products’ dealers and distributors in Ontario under the Company’s dealer winter stocking program. Following a surge of consumer home improvement activity in the second half of 2020, dealer / distributor expectations remain high for a continuation of strong customer demand in the peak spring and summer months of 2021. The increase in revenues from the Company’s U.S. operations were partially offset by the comparative strengthening of the average Canadian dollar exchange rate during the current quarter of 2021.
Cost of sales for the quarter ended March 31, 2021 was $8,392, compared to $3,451 for the corresponding quarter of 2020 due to higher shipments partially offset by lower per unit costs on higher production volumes. In the corresponding prior period, costs of sales were affected by the impact of pandemic-related measures and shutdowns of operations, as noted above under the section entitled “Masonry Products”.
The operating income for the first quarter of 2021 increased to $805 compared to an operating loss of $2,362 for the same quarter in 2020, for the reasons noted above.
CASH FLOWS
Cash used for operating activities increased to $17,405 for the three months ended March 31, 2021 compared to $4,608 for the corresponding period in 2020, primarily due to a timing difference in collections from trade receivables, higher disbursements of trade payables and other liabilities and higher income tax instalment payments. This increase was partially offset by an improvement in operating results during the period.
Cash utilized for purchases of property, plant and equipment totaled $1,618 for the three months of 2021 compared to $1,215 for the same period of 2020. Capital expenditures primarily comprised of $1,090, for machinery and equipment compared to $722 for the same period in 2020.
Cash used for financing activities increased to $1,403 compared to cash provided by financing activities totaling $21,749 in the corresponding prior period. In the first quarter of 2020, the Company drew down $20,000 of the maximum $22,000 available under its operating credit facility, to assure maximum financial liquidity and flexibility during the initial period of mandatory COVID-19 restrictions. This amount was repaid during the third quarter of 2020.
FINANCIAL CONDITION
The Company’s Masonry Products and Landscape Products business segments are seasonal in nature. The Landscape Products business segment 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.
Accounting impact related to COVID-19
During the first quarter of 2021, the Company’s operations experienced a variety of challenges involving lockdown protocols announced by the provincial governments of Ontario and Quebec, as well as the states of Indiana and Michigan. The Company is working to adjust its operations as best as possible to meet the expectations for a continued rebound in seasonal demand.
The spike in COVID-19 cases during the third wave of this outbreak in early April 2021 has prompted demands for more effective containment measures by the provincial and federal governments. Although the broader economic impact of federal and provincial government measures to address future pandemic-related challenges remains uncertain, the Company continues to actively monitor this evolving situation.
To ensure the continued health and safety of its employees, suppliers and customers, the Company has adopted extensive monitoring and review procedures to ensure protocols remain valid and meet local health regulations and industry best practices.
As a result of these developments, management does not expect a material impact to its liquidity and financial position in the near term, but remains vigilant of potential stress indicators.
Bank operating advances outstanding as of March 31, 2021 was Nil (December 31, 2020 – Nil). Trade payables totaled $18,326 at March 31, 2021 compared to $19,657 at December 31, 2020.
The ratio of total liabilities to shareholders’ equity was 0.50:1 at March 31, 2021 compared to 0.57:1 at December 31, 2020. This decrease in the ratio was primarily due to a decrease in other liabilities on the cash settlement of stock options, lower outstanding income taxes payable and lower debt outstanding.
As at March 31, 2021, the Company’s current ratio was 3.18:1, representing working capital of $58,994, compared to 2.62:1 and $59,259, respectively, as at December 31, 2020. The increase in the ratio was due to an increase in trade and other receivables, comparatively higher inventories, a decrease in other liabilities and lower income tax payable as noted above. This increase was partially offset by a decrease in cash and cash equivalents. Cash and cash equivalents totaled $27,841 at March 31, 2021, compared to $47,940 at December 31, 2020.
The Company’s demand operating facility provides for borrowings of up to $22,000 based on margin formulae for trade receivables, certain other qualified receivables and inventories, less priority claims. It is a demand facility secured by a general security agreement over all assets. The agreement also contains certain financial covenants.
As at March 31, 2021, the borrowing limit based on the margin formulae was $22,000, of which $355 was utilized (December 31, 2020 - $360) for outstanding letters of credit.
Consequently, 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 financial obligations as they become due. As at March 31, 2021 and 2020, the Company was in compliance with all the financial covenants under its term financing agreement and operating credit facility and anticipates that it will maintain compliance throughout 2021.
FORWARD-LOOKING STATEMENTS
Certain statements contained herein constitute “forward-looking statements”. All statements that are not historical facts are forward-looking statements.
Other forward-looking statements include, among others: the expected impact of the COVID-19 pandemic on the Company’s operations, the Company’s plans in response to COVID-19, the future rental prospects for the Universal property; 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, production levels, costs, productivity, 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 under “Risks and Uncertainties” in the 2020 annual MD&A, included in the Company’s 2020 Annual Report, and in the MD&A for the three-month period ended March 31, 2021, as well as those identified and reported in the Company’s other public filings (including the Annual Information Form for the year ended December 31, 2020), 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 Limited 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 Farmersburg, 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 and distributed from facilities in Markham, Hillsdale, Brockville, Cambridge and Brampton, Ontario, in Boisbriand, Quebec and in Wixom, Michigan and sold to markets in Ontario, Quebec, Michigan, New York, Pennsylvania, Ohio, Kentucky, Illinois and Indiana under the Oaks™ and Boehmers™ trade names. The Company’s products are used for residential construction and for industrial, commercial, and institutional building projects.
| SELECTED FINANCIAL INFORMATION | ||||||
| (unaudited) (in thousands of Canadian dollars) | ||||||
| March 31 | December 31 | |||||
| CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS | 2021 | 2020 | ||||
| ASSETS | ||||||
| Current assets | ||||||
| Cash and cash equivalents | $ | 27,841 | $ | 47,940 | ||
| Trade and other receivables | 23,911 | 17,673 | ||||
| Inventories | 33,046 | 29,470 | ||||
| Other assets | 1,212 | 848 | ||||
| 86,010 | 95,931 | |||||
| Non-current assets | ||||||
| Property, plant and equipment | 149,314 | 150,767 | ||||
| Other assets | 9 | 12 | ||||
| 149,323 | 150,779 | |||||
| Total assets | $ | 235,333 | $ | 246,710 | ||
| LIABILITIES | ||||||
| Current liabilities | ||||||
| Trade payables | $ | 18,326 | $ | 19,657 | ||
| Income tax payable | 542 | 2,329 | ||||
| Current portion of debt | 3,005 | 3,076 | ||||
| Current derivative financial instrument | 226 | 300 | ||||
| Current provision on share appreciation rights | - | 2,302 | ||||
| Other liabilities | 4,917 | 9,008 | ||||
| 27,016 | 36,672 | |||||
| Non-current liabilities | ||||||
| Non-current portion of debt | 29,865 | 30,857 | ||||
| Decommissioning provisions | 6,937 | 6,921 | ||||
| Deferred tax liabilities | 15,056 | 15,292 | ||||
| 51,858 | 53,070 | |||||
| Total liabilities | $ | 78,874 | $ | 89,742 | ||
| EQUITY | ||||||
| Share capital | $ | 34,236 | $ | 34,236 | ||
| Contributed surplus | 1,664 | 1,664 | ||||
| Accumulated other comprehensive income | 8,348 | 8,595 | ||||
| Retained earnings | 112,211 | 112,473 | ||||
| Total equity | $ | 156,459 | $ | 156,968 | ||
| Total liabilities and equity | $ | 235,333 | $ | 246,710 | ||
| SELECTED FINANCIAL INFORMATION | ||||||||
| (unaudited) (in thousands of Canadian dollars, except per share amounts) | ||||||||
| Three months ended | ||||||||
| March 31 | ||||||||
| CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | 2021 | 2020 | ||||||
| Revenues | $ | 36,302 | $ | 21,029 | ||||
| Cost of sales | 30,165 | 22,412 | ||||||
| Selling expenses | 3,556 | 3,225 | ||||||
| General and administrative expenses | 2,108 | 1,854 | ||||||
| Loss on disposal of property, plant and equipment | 99 | - | ||||||
| Other income | (97 | ) | (403 | ) | ||||
| 35,831 | 27,088 | |||||||
| Operating income (loss) | 471 | (6,059 | ) | |||||
| Finance expense | (143 | ) | (708 | ) | ||||
| Income (loss) before income taxes | 328 | (6,767 | ) | |||||
| (Provision for) recovery of income taxes | ||||||||
| Current | (825 | ) | 410 | |||||
| Deferred | 235 | 389 | ||||||
| (590 | ) | 799 | ||||||
| Net loss for the period | $ | (262 | ) | $ | (5,968 | ) | ||
| Other comprehensive income (loss) | ||||||||
| Items that will be reclassified subsequently to profit or loss when specific conditions are met: | ||||||||
| Foreign currency translation (loss) gain | $ | (247 | ) | $ | 2,003 | |||
| Total comprehensive loss for the period | $ | (509 | ) | $ | (3,965 | ) | ||
| Net loss per Class A Subordinate Voting share and Class B Multiple Voting share | $ | (0.02 | ) | $ | (0.54 | ) | ||
| Weighted average Class A Subordinate Voting shares and Class B Multiple Voting shares outstanding (000's) | 11,009 | 11,006 | ||||||
| SELECTED FINANCIAL INFORMATION | ||||||||
| (unaudited) (in thousands of Canadian dollars) | ||||||||
| Three months ended | ||||||||
| March 31 | ||||||||
| CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS | 2021 | 2020 | ||||||
| Cash provided by (used for) | ||||||||
| Operating activities | ||||||||
| Net loss for the period | $ | (262 | ) | $ | (5,968 | ) | ||
| Items not affecting cash and cash equivalents | ||||||||
| Depreciation | 2,114 | 2,234 | ||||||
| Current taxes provision (recovery) | 825 | (410 | ) | |||||
| Deferred taxes recovery | (235 | ) | (389 | ) | ||||
| Loss on disposal of property, plant and equipment | 99 | - | ||||||
| Unrealized foreign currency exchange loss (gain) | 90 | (490 | ) | |||||
| Net interest expense | 217 | 230 | ||||||
| Derivative financial instrument (income) loss | (74 | ) | 478 | |||||
| Other | - | (299 | ) | |||||
| 2,774 | (4,614 | ) | ||||||
| Changes in non-cash items | ||||||||
| Trade and other receivables | (6,256 | ) | 590 | |||||
| Inventories | (3,735 | ) | (3,868 | ) | ||||
| Other assets | (364 | ) | (326 | ) | ||||
| Trade payables | (3,260 | ) | 3,092 | |||||
| Other liabilities | (3,953 | ) | 528 | |||||
| (17,568 | ) | 16 | ||||||
| Net income tax payments | (2,611 | ) | (10 | ) | ||||
| Cash used for operating activities | (17,405 | ) | (4,608 | ) | ||||
| Investing activities | ||||||||
| Purchase of property, plant and equipment | (1,618 | ) | (1,215 | ) | ||||
| Proceeds from disposal of property, plant and equipment | 343 | - | ||||||
| Cash used for investment activities | (1,275 | ) | (1,215 | ) | ||||
| Financing activities | ||||||||
| Increase in bank operating advances | - | 20,000 | ||||||
| Proceeds from committed capital expenditure credit facility | - | 3,250 | ||||||
| Payment of promissory notes | (1,000 | ) | (1,000 | ) | ||||
| Interest paid | (307 | ) | (465 | ) | ||||
| Payments on obligations under leases | (96 | ) | (123 | ) | ||||
| Proceeds from exercise of stock options | - | 87 | ||||||
| Cash (used for) provided by financing activities | (1,403 | ) | 21,749 | |||||
| Foreign exchange on cash held in foreign currency | (16 | ) | 118 | |||||
| (Decrease) increase in cash and cash equivalents | (20,099 | ) | 16,044 | |||||
| Cash and cash equivalents at the beginning of the period | 47,940 | 30,953 | ||||||
| Cash and cash equivalents at the end of the period | $ | 27,841 | $ | 46,997 | ||||
| SELECTED FINANCIAL INFORMATION | ||||||||||||||||
| (unaudited) (in thousands of Canadian dollars) | ||||||||||||||||
| CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | ||||||||||||||||
| Share Capital | Contributed Surplus | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Total Equity | ||||||||||||
| Balance - January 1, 2020 | $ | 34,130 | $ | 3,204 | $ | 8,959 | $ | 117,067 | $ | 163,360 | ||||||
| Net loss for the period | - | - | - | (5,968 | ) | (5,968 | ) | |||||||||
| Other comprehensive Income (net of taxes, $nil) | - | - | 2,003 | - | 2,003 | |||||||||||
| Total comprehensive income (loss) for the period | - | - | 2,003 | (5,968 | ) | (3,965 | ) | |||||||||
| Stock options exercised | 106 | (19 | ) | - | - | 87 | ||||||||||
| Share-based compensation | - | (16 | ) | - | - | (16 | ) | |||||||||
| Balance - March 31, 2020 | $ | 34,236 | $ | 3,169 | $ | 10,962 | $ | 111,099 | $ | 159,466 | ||||||
| Balance - January 1, 2021 | $ | 34,236 | $ | 1,664 | $ | 8,595 | $ | 112,473 | $ | 156,968 | ||||||
| Net loss for the period | - | - | - | (262 | ) | (262 | ) | |||||||||
| Other comprehensive loss (net of taxes, $nil) | - | - | (247 | ) | - | (247 | ) | |||||||||
| Total comprehensive loss for the period | - | - | (247 | ) | (262 | ) | (509 | ) | ||||||||
| Balance - March 31, 2021 | $ | 34,236 | $ | 1,664 | $ | 8,348 | $ | 112,211 | $ | 156,459 | ||||||
For more information please contact:
Jeffrey G. Kerbel, President and Chief Executive Officer or
Trevor M. Sandler, Vice-President, Finance and Chief Financial Officer
Brampton Brick Limited
Tel: (905) 840-1011
Fax: (905) 840-1535
e-mail: investor.relations@bramptonbrick.com