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Press release from CNW Group

The Brick Ltd. Reports Highest Annual EBITDA and Net Income Results in its History

Monday, March 21, 2011

The Brick Ltd. Reports Highest Annual EBITDA and Net Income Results in its History21:33 EDT Monday, March 21, 2011/NOT FOR DISTRIBUTION THROUGH U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE U.S./EDMONTON, March 21 /CNW/ - The Brick Ltd. (TSX: BRK) (the "Brick Group") today announced its fourth quarter and annual financial results for the period ended December 31, 2010. Financial statements and Management's Discussion and Analysis are available on the Brick Group's website at www.thebrickgroup.ca and on SEDAR.Fourth Quarter 2010 Summary:Same store sales grew by 2.0% over Q4 2009Consolidated sales & operating revenue increased 3.0% to $372.2 millionGross margin rates increased to 44.1% from 42.5% in Q4 2009EBITDA was $29.4 million, including $1.5 million non-recurring restructuring & conversion costs and additional $6.7 million bonus and stock-based compensation expenses, compared to EBITDA of $30.8 million in Q4 2009. Excluding the impact of these additional expenses, SG&A was flat to Q4 2009 at 34.0% of salesNet income of $13.1 million was up from $12.2 million in the same quarter in 2009, and includes the above noted $8.2 million in non-recurring and compensation related expensesCash and cash equivalents, net of borrowings, at December 31, 2010 were $69.8 million vs. $19.5 million a year earlier. No borrowings were outstanding under the asset-based credit facility with $87.4 million fully margined and available for use at December 31, 2010Repurchased 452,757 shares and 405,324 warrants for cancellation pursuant to the normal course issuer bid (NCIB) which commenced on August 10, 2010Year to date 2010 Summary:Same store sales grew by 10.4% compared to 2009Consolidated sales & operating revenue increased 12.2% to $1.37 billionGross margin rates increased to 43.0% from 41.2% in 2009EBITDA of $87.2 million represents the highest reported EBITDA result for any year in the history of the Brick Group and an increase of 165.5% over 2009Net Income of $38.7 million, a record high for the Brick Group, was up from a net loss of $163.0 million in 2009, which included brand and goodwill impairment charges of $158.5 million"I am extremely pleased with the Brick Group's fourth quarter and annual 2010 financial results," said Bill Gregson, President and Chief Executive Officer of the Brick Group.  "Our quarterly results remained strong throughout the year, ending with record setting EBITDA of $87.2 million, the highest in the Brick Group's history, and $69.8 million cash in the bank" added Mr. Gregson.Fourth quarter 2010 same store sales growth was 2.0% and annual same store sales growth was 10.4%.Gross margin rate increased to 44.1% of revenue from 42.5% in the fourth quarter last year.  The rate improvement resulted from a shift in product mix towards the higher margin furniture category.  Additionally, increased early payment discounts, a lower mix of clearance inventory and improved vendor rebate programs contributed to the higher gross margin rate.The Brick Group's balance sheet holds cash and cash equivalents of $69.8 million, and there are currently no borrowings outstanding on the company's asset-based credit facility with $87.4 million of margined borrowing capacity available. The strength of the Brick's balance sheet, combined with improved operating performance, enabled the repurchase, for cancellation, of 861,669 shares and 730,332 warrants pursuant to the normal course issuer bid which commenced on August 10, 2010.Results Summary                                            Forthe three months endedDecember 31  For the twelve months endedDecember 31            (000's of $ except %, and store amounts)    2010    2009    $ Increase (Decrease)    % Increase(Decrease)    2010    2009    $ Increase(Decrease)    % Increase(Decrease)Retail Segment - Sales and operating revenue  $   350,693  $   342,598    8,095    2.4%  $   1,288,307  $   1,150,619    137,688    12.0%Financial Services Segment - Sales and operating revenue    21,492    18,844    2,648    14.1%    84,155    72,976    11,179    15.3%Consolidated - Sales and operating revenue    372,185    361,442    10,743    3.0%    1,372,462    1,223,595    148,867    12.2%Franchise sales (1)    49,223    45,238    3,985    8.8%    165,632    141,612    24,020    17.0%Consolidated sales and operating revenue and franchise sales (1)  $   421,408  $   406,680    14,728    3.6%  $    1,538,094  $   1,365,207    172,887    12.7%Same Store Sales Growth (corporate stores)    2.0%    -7.3%              10.4%    -20.1%                                                   Same Store Sales Growth (corporate and franchise stores)    2.5%    -7.9%              10.5%    -19.9%                                                   Retail Segment - EBITDA  $   23,569  $   26,830    (3,261)    -12.2%  $   67,483  $   17,785    49,698    279.4%Financial Services Segment - EBITDA    5,823     4,018    1,805    44.9%    19,697     15,043    4,654    30.9%Consolidated - EBITDA  $   29,392   $   30,848    (1,456)    -4.7%  $   87,180   $   32,828     54,352    165.5%                                         EBITDA as a percentage of sales and operating revenue    7.9%    8.5%              6.4%    2.7%                                                   Retail Segment - Net income (loss)  (2)  $   8,867  $   8,590     277    3.2%  $   21,040  $  (177,544)      198,584    111.9%Financial Services Segment - Net income    4,257    3,645    611    16.8%    17,678     14,527     3,151    21.7%Consolidated - Net income (loss)  (2)  $    13,124  $   12,235    888    7.3%  $   38,718   $   (163,017)    201,736    123.8%                                         Cash provided by operating activities before changes in non-cash working capital items    27,331     34,212     (6,881)    -20.1%    77,124     25,691     51,433    200.2%                                         Stores at period end    237    236              237    236          (1) In this table, franchise sales figures refer to sales occurring at franchise stores which are not included in the sales and operating revenue figures presented in The Brick Ltd.'s consolidated financial statements, or in the corporate same store sales figures presented in this table.(2) Year to date net income for 2009 includes brand intangible asset impairment charges of $50,000, goodwill impairment charges of $108,459 and related future income tax recoveries of $14,770 recorded in the retail segment.Fourth Quarter and Annual 2010 Operating ResultsConsolidated sales and operating revenue, including franchise sales, during the fourth quarter were $421.4 million, representing an increase of 3.6% over the same period last year.  Same store sales growth for both corporate and franchised locations was 2.5% compared to negative 7.9% in 2009.Consolidated sales and operating revenue totalled $372.2 million, an increase of $10.7 million or 3.0% compared to the fourth quarter last year.Sales at franchise stores increased by 8.8% to $49.2 million, and same store sales growth was 5.7%, compared to the same quarter last year.Sales and operating revenue increased by 2.4% in the retail segment to $350.7 million, and gained 14.1% in the financial services segment to $21.5 million. In the retail segment, fourth quarter same store sales growth improved to 2.0% compared to negative 7.3% in the same quarter of 2009.Selling, general and administrative expenses (SG&A) continued to be closely monitored. Fourth quarter consolidated SG&A was higher by $11.8 million or 9.6% and increased as a percentage of sales from 34.0% to 36.2% as compared to the same quarter of 2009.  Fourth quarter consolidated SG&A included approximately $8.2 million of costs that were not present in the same quarter of 2009.  These additional costs include one-time restructuring costs of $1.0 million, non-recurring costs of $0.5 million related to The Brick's Conversion to a tax-paying corporation, as well as incremental bonus and stock-based compensation of $6.7 million.  In line with The Brick's record annual EBITDA achievement, bonus compensation expense recorded in the fourth quarter was higher compared to the same quarter of 2009. Excluding the restructuring, Conversion, and incremental bonus and stock-based compensation expenses, fourth-quarter SG&A as a percentage of sales would have been 34.0% compared to 34.0% in 2009.  As well, due to deteriorating and uncertain economic conditions and the financial distress of The Brick in 2009, costs had been reduced to levels below that required to adequately support and maintain the retail segment's operations.  Essentially all of The Brick's SG&A expenses are incurred in the retail segment.Management is pleased to report strong EBITDA performance for the quarter ended December 31, 2010.  Fourth quarter consolidated EBITDA, which included non-recurring restructuring and Conversion costs of $1.5 million and incremental bonus and stock-based compensation expenses of $6.7 million, as discussed above, was $29.4 compared to $30.8 million for the same quarter of 2009.EBITDA increased by $1.8 million to $5.8 million in the financial services segment, and decreased $3.3 million to $23.6 million in the retail segment.The quarter ended with $13.1 million consolidated net income, versus $12.2 million in the fourth quarter of 2009.For the full year of 2010, consolidated sales and operating revenues, including franchise sales, totalled $1.54 billion representing an increase of 12.7% over the same period last year.  Same store sales growth, for both corporate and franchised locations, was 10.5% compared to negative 19.9% in 2009.Consolidated sales and operating revenue totalled $1.37 billion, an increase of $148.9 million or 12.2% compared to 2009.Sales and operating revenue increased by 12.0% in the retail segment to $1.29 billion, and gained 15.3% in the financial services segment to $84.2 million.  In the retail segment, 2010 same store sales growth improved to 10.4% compared to negative 20.1% in 2009.Selling, general and administrative expenses (SG&A) were an area of attention and were closely managed in the 2010.  These outlays were reduced to 36.6% of sales from 38.6% in 2009.At December 31, 2010, the Brick Group's current assets exceeded current liabilities by $109.5 million, with no funds drawn under its asset-backed credit facility and $87.4 million in available borrowing capacity.The strength of the balance sheet, combined with improved operating performance, enabled the repurchase, for cancellation, of 861,669 shares and 730,332 warrants during the year, pursuant to the normal course issuer bid (NCIB) which commenced on August 10, 2010.  Management will continue to make use of positive cash through the NCIB to repurchase a number of warrants or shares for cancelation. This repurchase is not anticipated to cause the Brick to draw on its credit facility and will be weighed carefully against economic factors during the process.Management is anticipating an increasingly competitive market in 2011, and one that will continue to be largely unpredictable.  The economic outlook has been forecasted to remain in stable-recovery mode, with GDP growth of 2.9% and historically low interest rates.  Consumer spending is projected to rise 2.7% while durables are expected to increase by approximately 5.0%.  However, the continuation of high unemployment rates, stricter mortgage and financing rules, and forecasted decreases in new housing starts and home re-sales are caution indicators.  Caution indicators also include reports of decreased same store sales issued in the third and fourth quarters of 2010 by some Canadian retailers in our sector.  We believe that retail industry sales in the first half of 2010 benefited from home renovation incentives and from purchases made in anticipation of HST in Ontario and British Columbia.  Given these considerations, we acknowledge that sales in first half of 2011 may not match the robust levels experienced in the first half of 2010, and further believe that sales growth is more likely to reflect historically normal levels in the second half of 2011.For 2011, management's focus remains on organic growth through improved same store sales, an enhanced customer service model, sales team training, investments in both information systems and supply chain and cost control. Management will also carefully evaluate the best use of the Brick Group's cash position.Conference Call and WebcastThe Brick Group will host its fourth quarter 2010 investor call at 10:00 am Eastern Time (8:00 am Alberta Time) on Tuesday, March 22, 2011. The call can be accessed by calling (647) 427-7450 or (888) 231-8191 conference call ID 49353382 A listen-only webcast will be available at: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3430460A telephone replay of the call will be available until midnight Eastern time on March 29, 2011. To access it, dial 416-849-0833 or 1-800-642-1687 and enter passcode 49353382.About the Brick GroupThe Brick Group, together with its subsidiaries, is one of Canada's largest volume retailers of household furniture, mattresses, appliances and home electronics, operating under five banners: The Brick, United Furniture Warehouse, The Brick Superstore, The Brick Mattress Store, and Urban Brick. In addition, through its corporate sales division, the Brick Group services the subdivision, condominium, and high-rise builder market. The Brick Group's retail operations are located in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Prince Edward Island, Nova Scotia, New Brunswick and Yukon.Forward-Looking Statements This news release contains "forward-looking statements" within the meaning of applicable Canadian securities laws, including (but not limited to) statements about the Brick's consolidated sales and operating revenue, consolidated EBITDA, consolidated net loss, sales and operating revenue in the financial services and retail segments, same store sales growth and goodwill and indefinite life intangible asset impairment charges, the financial flexibility and capital resources necessary to manage the business in the current economic environment, and similar statements concerning anticipated future events, results, circumstances, performance or expectations, that reflect management's current expectations and are based on information currently available to management of the Brick and its subsidiaries. The words "may", "will", "should", "believe", "expect", "plan", "anticipate", "intend", "estimate", "predict", "potential", "continue" or the negative of these terms, or other expressions which are predictions of or indicate future events and trends and which do not relate to historical matters, identify forward-looking matters. Reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Brick to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements. The Brick undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than as required by applicable law.Non-GAAP Financial MeasuresEBITDA is not an earnings measures recognized under GAAP and does not have standardized meanings prescribed by GAAP.  Therefore EBITDA may not be comparable to similar measures presented by other issuers.  Investors are cautioned that EBITDA should not be construed as an alternative to net income as determined in accordance with GAAP, as indicators of performance or to cash flows from operating, investing and financing activities as a measure of liquidity and cash flows. www.thebrick.com   For further information: Contact Information Bill Gregson President and CEO The Brick Group (780) 930-6300 investor@thebrickgroup.ca                                                                     David Merkley Chief Financial Officer The Brick Group (780) 930-6300 investor@thebrickgroup.ca