NEWS
BULLETIN
Wednesday May 14, 9:03 am ET
CBR Brewing Company, Inc. Reports Operating Results for the Year Ended
December 31, 2002 and Status of Licensing Matters
HONG KONG, May 14 /PRNewswire-FirstCall/ -- CBR Brewing Company,
Inc. (OTC Bulletin Board: CBRAF - News, CBRAE - News; the "Company") announced the results of its operations for
the year ended December 31, 2002, reporting net sales of $79,203,216 and a net loss of $25,337,810, as compared
to net sales of $80,367,307 and a net loss of $3,527,352 for the year ended December 31, 2001. Included in net
loss for the year ended December 31, 2002 was a charge of $17,349,398 for the impairment of property, plant and
equipment. Included in net loss for the year ended December 31, 2001 was a charge of $3,450,530 for the impairment
of and loss on disposal of property, plant and equipment, restructuring costs and write-off of investment in a
subsidiary. Net loss per common share (basic and diluted) was $3.16 in 2002 and $0.44 in 2001. Weighted average
common shares outstanding were 8,010,013 in 2002 and 2001 (basic and diluted).
For the years ended December 31, 2002 and 2001, the Company's
affiliate, Noble Brewery, recorded charges for the impairment of property, plant and equipment and restructuring
costs aggregating $12,228,916 and $1,051,787, respectively.
During the years ended December 31, 2002 and 2001, the Company
sold 170,102 metric tons and 152,967 metric tons of beer, respectively, an increase of 11.2%. The increase in
sales volume during the year ended December 31, 2002 as compared to the year ended December 31, 2001 was mainly
attributable to the increase in the sales volume of local brand beers, whereas the decrease in net sales value
of beer products was primarily attributable to the lowering of the selling price for some of the Pabst Blue
Ribbon beer products in order to encourage distributors to increase their respective promotional
activities.
The beer market in China has continued to experience a
weakening in consumer demand for foreign branded premium beers in China and increasing competition from local
and foreign premium brands of beer. In response, the Company has overhauled its operations and marketing
programs, reduced costs and introduced several new local brand beers. The Company expects that these adverse
market conditions will continue in 2003, resulting in operating losses at least for the remainder
of 2003.
During the three months ended March 31, 2003, the Company
and Noble Brewery experienced significant decreases in sales and continuing operating losses. The Company and
Noble Brewery are in the preliminary stages of assessing the potential effect, if any, that this development
may have on the Company's financial position and results of operations at March 31, 2003, including a possible
further impairment charge with respect to property, plant and equipment.
The Company, through its subsidiaries and affiliates, is
engaged in the production, distribution and marketing of Pabst Blue Ribbon beer in China. As of December
31, 2002, the Company owned effective interests of 60%, 24% and 33% in three brewing facilities in China
producing Pabst Blue Ribbon beer that are managed by the Company. The Company produces Pabst Blue Ribbon
beer under a sub-license agreement with Guangdong Blue Ribbon Group Co. Ltd., an affiliated company,
which expires concurrently with the expiration of the existing master license agreement between Guangdong
Blue Ribbon Group Co. Ltd. and Pabst Brewing Company on November 6, 2003.
Licensing Matters:
Noble China Inc. ("Noble China") is a Canadian public company
that is the 60% owner of Noble Brewery, a Pabst Blue Ribbon brewing facility located in the City of Zhaoqing,
China, in which the Company has a 24% net equity interest. In May 1999, Noble China entered into a license
agreement with Pabst Brewing Company granting it the right to utilize the Pabst Blue Ribbon trademarks in
connection with the production, promotion, distribution and sale of beer in China for 30 years commencing
November 7, 2003.
To date, the Company and Noble Brewery have not obtained a
renewal of their respective Pabst Blue Ribbon sub-license agreements, which expire on November 6, 2003. The
inability of the Company or Noble Brewery to enter into an agreement with Noble China under acceptable terms
and conditions to allow the Company and Noble Brewery to continue to produce, distribute and market Pabst
Blue Ribbon beer in China subsequent to November 6, 2003 would have a material adverse effect on the
Company's future results of operations, financial position and cash flows.
The Company's controlling shareholder, Zhaoqing City Lan
Wei Alcoholic Beverage (Holdings) Limited ("Lan Wei"), a company controlled by the City of Zhaoqing, owns a
19.6% equity interest in Noble China. On November 12, 2002, a new board of directors of Noble China was
elected, consisting of three candidates nominated by Lan Wei.
As previously announced, Noble China continues to face
serious liquidity concerns in ongoing funding of its corporate operations and interest on its CDN$30,000,000
of 9% Convertible Subordinated Debentures (the "Debentures"), and as a result is in default of its obligations
under the Debentures. The holders of the Debentures are therefore in a position to enforce their rights on
default. If the Trustee or the holders of the Debentures elect to enforce these rights, Pabst Brewing
Company may be in a position to terminate the Pabst master license agreement previously granted to Noble
China, which becomes effective on November 7, 2003.
Both Noble Brewery and the Company have substantial investments
in property, plant and equipment dedicated to the production of Pabst Blue Ribbon beer in China. In order to
maintain each entity's respective rights to produce, distribute and market Pabst Blue Ribbon beer in China
subsequent to November 6, 2003 and thus preserve the value of these investments, Lan Wei has been exploring
various ways to reorganize Noble China and preserve the Pabst master license agreement in a manner that would
inure to the benefit of the Company. Accordingly, representatives of the City of Zhaoqing have been in
discussions with the holders of a majority of the Debentures regarding a reorganization of Noble China and
with Pabst Brewing Company regarding a reorganization of Noble China and a restructuring of the master license
agreement.
These discussions have led to a preliminary agreement in
principle with the holders of a majority of the Debentures regarding the reorganization of Noble China, which
would involve the settlement in full of the outstanding Debentures. In addition, a non-binding term sheet has
been entered into with Pabst Brewing Company with respect to certain amendments to the master license agreement
and its continuation after the reorganization.
These preliminary agreements are both conditional on Noble
China being able to implement a formal reorganization of its Debentures and issued capital. The successful
reorganization of Noble China is subject to the preparation and execution of definitive agreements and a plan
of reorganization, compliance with all applicable laws and regulations, and the funding, approval and
consummation of a court-approved reorganization plan of Noble China.
In order to fund such reorganization efforts, Lan Wei borrowed
approximately $3,133,000 from the Company in March 2003, with interest at 3.9% per annum, due and payable no
later than December 31, 2003. Lan Wei also borrowed approximately $2,410,000 from the Company in March 2003
to invest in businesses affiliated with Lan Wei that sell beverage containers to the Company, with interest
at 3.9% per annum, due and payable no later than June 30, 2003.
As a result of the uncertainty with respect to these matters,
there can be no assurances that Noble China will be successfully reorganized or that the Company or Noble China
will be able to retain the right to produce and distribute Pabst Blue Ribbon beer in China subsequent to
November 6, 2003.
Cautionary Statement Pursuant to Safe Harbor Provisions of
the Private Securities Litigation Reform Act of 1995:
This news release contains "forward-looking" statements,
which are made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements include, among others, statements of expectations, beliefs, future plans and
strategies, anticipated events or trends, and similar expressions concerning matters that are not historical
facts. The forward-looking statements in this news release are subject to risks and uncertainties that could
cause actual results to differ materially from those results expressed in or implied by the statements contained
herein. The Company undertakes no obligations to revise or update any forward-looking statements contained
herein in order to reflect events or circumstances that may arise after the date of this news
release.
For further information,
contact investor relations at (310) 274-5172.
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