Mr. Robert Sartor reports

BIG ROCK BREWERY INC. 2014 FINANCIAL RESULTS

Big Rock Brewery Inc. has released its financial results for the fourth quarter and year ended Dec. 30, 2014.

"I am excited as Big Rock embarks on a strategic initiative to become Canada's national, local craft brewer," said Bob Sartor, chief executive officer. "The board has approved a [$6-million] to $8-million expansion into Ontario, and we have commenced operations in our new Vancouver brewery. We are confident that beer drinkers in B.C. and Ontario will embrace our high-quality, locally crafted, innovative lagers and ales.

"We continue to work hard to retain the loyalty of our Alberta consumers. Our limited release product introductions are gaining traction and beginning to mitigate the impact of competition in the crowded craft beer market in Alberta. We are on track to replace discontinued full-time beers with better, higher-margin offerings. The first of these made its appearance in the fourth quarter of 2014 with a second launched in the first quarter of 2015. These new product introductions will help drive sales in the competitive Alberta market."

Financial and operating highlights:

• The corporation reported a net loss of $106,000 for the three months ended Dec. 30, 2014, compared with a net loss of $127,000 for the same period in 2013.
• Reported sales volumes decreased 0.3 per cent to 39,194 hectolitres for the quarter as compared with 39,328 for the same period in 2013. Excluding the impact of the discontinuance of certain products and the discontinuance or delayed introduction of certain package configurations, sales volumes would have increased by 963 hl (2.5 per cent).
• The corporation reported net income of $624,000 for the year ended Dec. 30, 2014, compared with net income of $2,551,000 for the 2013 fiscal year. Reported sales volumes decreased 9.0 per cent to 168,268 hl for 2014 as compared with 184,802 hl for 2013.
• Excluding the impact of the discontinuance of certain products and the discontinuance or delayed introduction of certain package configurations, the volume decrease for 2014 would be 10,753 hl (6.0 per cent). Volume growth occurred in premium-priced brands, which include Big Rock's Brewmaster's Edition beers, and a variety of seasonal offerings.
• The corporation released two limited-edition beers and introduced one beer into the permanent lineup in the fourth quarter (for a total of 20 products in the year).
• Operating expenses for the year ended Dec. 30, 2014, were lower than 2013 due to reduced marketing costs and lower share-based compensation expenses.

Accelerated growth strategy -- Canada's national, local craft brewer

The board of directors has approved a strategy to accelerate growth. The company recognizes that this will mean a trade-off between dividends in the short term to finance opportunities for growth. The long-term future of the company depends on access to high-volume, high-growth and higher-margin markets in British Columbia and Ontario, while preserving balance sheet strength and operational cash flexibility.

The company continues to see a polarized market in Alberta, with premium craft beers at one end of the market and lower-margin, value-priced beer at the other. Although sales of craft beers continue to climb in Alberta, there is significant competitive activity. The company has introduced a number of new product offerings in Alberta and is starting to see some traction. The first phase of its growth strategy is currently under way in British Columbia. The opening of its downtown Vancouver brewery, restaurant and lounge, and retail store at the start of the second quarter will diversify Big Rock beyond its traditional Alberta base. This will provide much needed brand exposure and volume in the extremely buoyant B.C. craft beer scene. Big Rock has also decided to accelerate its expansion in Ontario to take advantage of the rapidly growing market for craft beer in Canada's largest beer-consuming region. With sales of approximately 6.4 million hl, Ontario is 2-1/2 times the size of the Alberta market. The market share of craft beer in the province has tripled since 2002 and is growing at about 10 per cent per year, compared with relatively flat sales for brewers over all. The company believes it can compete because Big Rock already has a presence in Ontario as an established brand with a loyal following. It has 30 years of experience and innovation, which are rare for a microbrewery. The company currently has 10 permanent ales and lagers and will offer an exciting range of quality, locally crafted beers for the Ontario market.

In addition to the previously announced Liberty Village brew pub in downtown Toronto, the company is pleased to announce that it has leased space and expects to be operating a larger commercial brewery in Etobicoke, Ont., by early 2016. Initial capacity in this new brewery will be 8,000 hl per year, which can be scaled to 30,000 hl with additional fermentation tanks. The new brewery will incorporate a tasting room and will have visual exposure to two heavy vehicular corridors -- the Gardiner Expressway and the Queensway -- and will produce the bulk of the corporation's Eastern Canadian volume requirements, dramatically improving the distribution of its products while reducing supply chain costs. Big Rock further expects to announce several new brew pub initiatives during the course of the next 12 months for completion in 2016 and beyond as it expands its strategy to become Canada's national, local craft brewer.

Dividend suspension

Concurrent with the acceleration of Big Rock's growth strategy, the corporation has announced the suspension of its quarterly dividend.

"The board is fully supportive of management's growth strategy and has encouraged the acceleration of that growth strategy by suspending dividend payments to provide operational cash flexibility to the corporation," said John Hartley, chairman of the board. "The decision was not taken lightly by the board, whose members and their families collectively control approximately 40 per cent of the corporation's stock and who unanimously agreed to the dividend suspension. Accelerating the growth of Big Rock's brewing footprint outside of Alberta is essential to the company's future," said Mr. Hartley. "The board will re-evaluate dividend payment in the future, having regard to cash flows from these growth initiatives."

Revised debt facility

The corporation and its lender have revised the existing $12.0-million revolving debt facility to a $5.0-million revolver and $6.0-million of term debt with an initial term of five years. This debt is available for general operating purposes and financing capital expenditure requirements, including the Toronto brew pub and the Etobicoke facility.

The corporation's president and chief executive officer, Mr. Sartor, said of the dividend suspension and revised debt facility: "Big Rock will now be positioned to compete more aggressively in our home market of Alberta while at the same time allowing us to expend our brewing and brew pub footprint across Canada. Together with the flexibility afforded by the revised debt facility, the suspension of the dividend will provide the operational cash flow to grow our business. We believe this growth in volume and profitability will, in turn, provide long-term sustainability of dividends down the road."

Summary highlights

After several quarters of declining sales and profitability as a result of the restructuring of the company's product assortment, management team and operational processes, the fourth quarter of 2014 saw stabilization of sales volumes and operating profit versus the same quarter of the prior year. The corporation announced the completion of its Vancouver brewery, restaurant and retail store, as well as a new brewery in Etobicoke, Ont., and the acceleration of its growth strategy with at least two brew pubs in 2016. The corporation suspends its dividend to provide the operational cash flow to allow the accelerated growth strategy.

Additional information

The financial statements and management's discussion and analysis dated March 13, 2015, can be viewed on Big Rock's website and on SEDAR under Big Rock Brewery Inc.

Big Rock is also pleased to announce that the annual meeting of Big Rock shareholders will be held on May 14, 2015, at 2 p.m. (Calgary time) at the Big Rock Brewery, 5555 76th Ave. Southeast, Calgary, Alta. In accordance with Big Rock's advance notice bylaw, the board of directors has set 5 p.m. (Calgary time) on April 10, 2015, as the deadline for receiving any nominations.

We seek Safe Harbor.