NEWS
BULLETIN
Thursday August 21, 8:11 pm ET
CBR Brewing Company, Inc. Reports Operating Results for The Three Months and
Six Months Ended June 30, 2003 And Status of Licensing Matters
HONG KONG, Aug. 21 /PRNewswire-FirstCall/ -- CBR Brewing
Company, Inc. (OTC Bulletin Board: CBRAF - News; the "Company") announced the results of its operations for
the three months ended June 30, 2003, reporting net sales of $13,155,359 and a net loss of $3,074,051, as
compared to net sales of $18,723,223 and a net loss of $15,869,060 for the three months ended June 30, 2002.
Included in net loss for the three months ended June 30, 2002 was a charge of $9,879,518 for the impairment
of property, plant and equipment. Net loss per common share (basic and diluted) was $0.38 in 2003 and $1.98
in 2002. Weighted average common shares outstanding were 8,010,013 in 2003 and 2002 (basic and diluted).
For the six months ended June 30, 2003, the Company reported
net sales of $22,312,323 and a net loss of $23,838,419, as compared to net sales of $40,189,722 and a net loss
of $15,923,237 for the six months ended June 30, 2002. Included in net loss for the six months ended June 30,
2003 was a charge of $7,861,446 for the impairment of property, plant and equipment, as compared to a charge of
$9,879,518 for the impairment of property, plant and equipment for the six months ended June 30, 2002. Net loss
per common share (basic and diluted) was $2.98 in 2003 and $1.99 in 2002. Weighted average common shares
outstanding were 8,010,013 in 2003 and 2002 (basic and diluted).
For the six months ended June 30, 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 June 30, 2003 and 2002, the
Company sold 34,458 metric tons and 40,816 metric tons of beer, respectively, a decrease of 15.6%. During
the six months ended June 30, 2003 and 2002, the Company sold 59,429 metric tons and 80,530 metric tons of
beer, respectively, a decrease of 26.2%. The decrease in sales volume in both dollars and tonnage during the
three months and six months ended June 30, 2003, as compared to the three months and six months ended June
30, 2002, was mainly attributable to the following factors: 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;
reduced demand for Pabst Blue Ribbon beer, as a result of increasing competition from local brand beers,
which sell at lower price points; the lowering of the selling price for some of the Company's Pabst Blue
Ribbon beer products, in order to encourage distributors to enhance their respective promotional activities;
and an increased proportion of local brand beers, which are sold 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 June 30,
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 renewed
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 that contemplates the preparation of a new master license
agreement, effective upon the reorganization of Noble China.
These preliminary agreements are both conditional on
Noble China being able to implement a formal reorganization of its Debentures and its issued capital. The
successful reorganization of Noble China is subject to the preparation and execution of definitive agreements
and a plan of compromise or arrangement, compliance with all applicable laws and regulations, and the funding,
approval and consummation of a court-approved plan of compromise or arrangement of Noble China.
In order to fund such reorganization efforts, Lan Wei borrowed
approximately $3,241,000 from the Company in March 2003, with interest at 3.9% per annum, due and payable no
later than December 31, 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 to reorganize 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
Brewery 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.
|
