NEWS
BULLETIN
Friday June 13, 4:05 pm ET
CBR Brewing Company, Inc. Reports Operating Results for the Three Months
Ended March 31, 2003 and Status of Licensing Matters
HONG KONG, June 13 /PRNewswire-FirstCall/ -- CBR Brewing Company,
Inc. (OTC Bulletin Board: CBRAF - News, CBRAE - News; the "Company") announced the results of its operations for
the three months ended March 31, 2003, reporting net sales of $9,156,964 and a net loss of $20,764,368, as compared
to net sales of $21,466,500 and a net loss of $54,177 for the three months ended March 31, 2002. Included in net
loss for the three months ended March 31, 2003 was a charge of $7,861,446 for the impairment of property, plant
and equipment. Net loss per common share (basic and diluted) was $2.59 in 2003 and $0.01 in 2002. Weighted average
common shares outstanding were 8,010,013 in 2003 and 2002 (basic and diluted).
For the three months ended March 31, 2003, the Company's
affiliate, Noble Brewery, recorded a charge of $26,457,831 for the impairment of property, plant and
equipments.
During the three months ended March 31, 2003 and 2002, the
Company sold 24,971 metric tons and 39,714 metric tons of beer, respectively, a decrease of 37.1%. The decrease
in sales volume in both dollars and tonnage during the three months ended March 31, 2003, as compared to the
three months ended March 31, 2002, was mainly attributable to a decrease in the volume of beer sold, which the
Company attributes to the reorganization of the Company's marketing teams and marketing strategies, the
reduction in sales branch offices, the outbreak of severe acute respiratory syndrome ("SARS") in China, and
in general, reduced demand for Pabst Blue Ribbon beer, as well as increasing competition from local brand
beers, which sell at lower price points.
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.
The Company, through its subsidiaries and affiliates, is
engaged in the production, distribution and marketing of Pabst Blue Ribbon beer in China. As of March 31, 2003,
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,
People's Republic of 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, including the possible formation of strategic
alliances with other brewing groups in China.
Zhaoqing City Lan Wei Alcoholic Beverage (Holdings) Limited
("Lan Wei"), a company controlled by the City of Zhaoqing, owns Mega Gain Investment Co. Ltd. ("Mega Gain"),
which in turn 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, with interest at 3.9% per annum, due and payable
no later than June 30, 2003.
On May 27, 2003, Noble China announced that it had entered
into a loan facility with Mega Gain, which provides for advances limited to the minimum necessary to pay for
short-term operating expenses and for the cost of reorganizing Noble China's debt and equity. The advances
will bear interest at 6% per annum, payable monthly, and will be secured by all of Noble China's presented
and after-acquired assets, property and undertakings pursuant to a general security interest.
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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