Frederick Brewing Reports Shipments Up 81% In 1998;
Company to Benefit from Refinancing of Real Estate Loan
PR Newswire - February 11, 1999 11:19
FREDERICK, Md., Feb. 11 /PRNewswire/ -- Frederick Brewing Co. (Nasdaq: BLUE), the
Mid-Atlantic's largest brewer of specialty or craft beers, today announced that its sales volumes
for 1998 increased by 8l% to 31,464 barrels and that its gross revenues for the year were up 68%
to $5,521,558 over $3,286,771 in 1997. For the fourth quarter, October 1 through December 31,
volume shipped was 7,664 barrels, an increase of 53% over 5,023 barrels in the fourth quarter of
1997, while gross revenues increased by 22% to $1,309,000 versus $1,073,000 in the same period
of 1997. Revenue per barrel fell during the quarter and for the year due to a near doubling of the
percentage of the company's beer that is sold in kegs, rather than bottles, during 1998.
The Company attributed the growth primarily to sales of the Wild Goose brand, which was
acquired in early 1998, in local markets. Sales of newly-acquired brands, also including Brimstone,
off-set declines in sales of other brands, particularly Hempen Ale and Hempen Gold, in more
remote markets where the company has reduced its sales and marketing support in a drive to cut
costs. According to Marjorie McGinnis, FBC's president and COO, "While we are somewhat
disappointed that sales did not grow at a faster pace, I believe our financial results will show that
our ongoing effort to reduce costs and focus our efforts on the markets in our backyard have
resulted in lower sales, marketing and shipping costs, all of which should have a positive impact on
our bottom line." The Company plans to release its financial report in about two weeks. McGinnis
also confirmed that FBC had terminated a letter of intent to produce beer under contract for export
to Harbin, China after evaluating the condition of the beer market there. She also said that a planned
expansion of distribution in Canada had been put an hold in light of disappointing fourth quarter
results in Ontario.
In other news, FBC announced that the $2,600,000 mortgage loan on the brewery land and building
had successfully been refinanced with FCNB Bank of Frederick, Maryland. CEO Kevin Brannon
noted that the terms of the new loan eliminate certain restrictive financial covenants that had caused
the Company to fall into technical default in the past and lowered the interest rate by 1.25% per
year from the rate most recently paid to the previous lender. The brewery land and building is
owned by Blue II, LLC, an entity controlled by two of FBC's outside directors or their affiliates,
and is leased by FBC. FBC effectively services the mortgage debt through its lease payments and
its lease payments will decline due to the more favorable terms of the new mortgage loan.
Brannon also stated that FBC was evaluating proposals to refinance the Company's remaining $1.2
million in senior secured debt and to provide a revolving line of credit for use as working capital.
The proposals under review require that the Company obtain additional injections of equity
capital, Brannon said. The existing loan matures on April 1, 1999 and must be refinanced by that
date.
FBC also announced that it had filed preliminary proxy materials with the SEC concerning its
proposed reverse stock split. The Company is seeking to reverse split the stock on the basis of
10:1, rather than the 5:1 reverse split announced in December. The shareholder vote on the reverse
split is tentatively scheduled for March 23rd. Brokers and shareholders of record as of February
16th should receive the proxy materials during the week of February 22nd.
Brannon also confirmed that FBC had retained Westfinance Corporation of Washington, DC as its
financial advisor. Westfinance has been hired to assist the Company in refinancing its debt, raising
additional equity capital and identifying and evaluating strategic options, including potential
mergers and acquisitions, and the possible sale or merger of the Company. Brannon said, "Our two
major goals are to raise sufficient cash to meet our current working capital deficit and future
working capital needs and meet the requirements of our prospective new lenders and to acquire
additional production and sales volume to improve our brewery capacity utilization. We have had
discussions with several parties, some of which are on-going, but no concrete proposals have been
presented to us. Rumors of a transaction involving an investment or purchase by a large brewer are
inaccurate. No large brewer, foreign or domestic, has expressed any interest in such a transaction, to
my knowledge."
SOURCE Frederick Brewing Co.
/CONTACT: Kevin Brannon of Frederick Brewing Co., 301-694-7899/
/Web site: fredbrew.com
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