Brampton Brick : Reports Results for the Second Quarter Ended June 30 2020

Brampton Brick Limited (TSX:BBL.A) today reported net income of $3,430, or $0.31 per share for the three months ended June 30, 2020 compared to net income of $5,289, or $0.48 per share for the corresponding quarter in 2019.

The aggregate weighted average number of Class A Subordinate Voting shares and Class B Multiple Voting shares outstanding for the second quarter of 2020 and 2019 were 11,009,054 and 11,006,363, respectively.

Revenues for the second quarter of 2020 were $36,697, compared to $42,604 for the same quarter of 2019. Shipments from both the Masonry Products and Landscape Products business segments decreased during the months of April and May 2020 following the COVID-19 shutdown of non-essential businesses, which impacted the Company's operations in Ontario and Quebec, as well as its U.S. operations in Indiana and Michigan. With the gradual lifting of the pandemic-related restrictions from mid-May 2020 and as the economy began to re-open in stages, residential and commercial construction activity started to resume, albeit under COVID-19 operating protocols. During the month of June 2020, shipments from both the Masonry Products and Landscape Products business segments increased over the corresponding month in 2019. Cost of sales for the second quarter ended June 30, 2020 was $27,507, compared to $29,190 for the same quarter of 2019. Under the Canada Emergency Wage Subsidy ('CEWS') program, the Company recovered a total of $2,255 of personnel costs incurred during the shutdown period, of which $1,630 was credited to cost of sales. Excluding this amount, cost of sales was $29,137. Net of the CEWS credit, cost of sales was reduced due to lower shipments and lower freight and delivery expenses. However, scheduled reductions in production volumes to optimize inventory levels and to maintain liquidity requirements did result in higher per unit manufacturing costs. Selling expenses for the second quarter of 2020 were $2,214, compared to $3,291 for the same quarter of 2019. Excluding the credit of $344 recognized under the CEWS program, selling expenses decreased to $2,558 during the current quarter from $3,291 for the corresponding period of 2019. This decrease was due to lower marketing expenses for promotional activities, partially offset by higher website maintenance costs. General and administrative expenses for the quarter ended June 30, 2020 increased to $1,836 from $1,760 for the corresponding quarter of 2019. Excluding the credit of $281 recognized under the CEWS program, general and administrative expenses increased to $2,117 from $1,760 for the same quarter of 2019. The increase was due to a higher provision for share appreciation rights of $245 in the second quarter of 2020 and lower provisions for employee-related expenses incurred in the same quarter of 2019. Lower legal fees and a lower bad debt provision partially offset an increase in consulting fees related to the Company's ERP systems and operations' optimization projects. Other expense for the three-month period ended June 30, 2020 was $244, compared to $148 for the corresponding quarter of 2019. This expense primarily relates to the loss on translation of foreign currency transactions as a result of currency exchange fluctuations attributed to the U.S. dollar during the period. Operating income for the quarter ended June 30, 2020 was $4,896, compared to $7,295 for the comparative quarter of 2019, for the reasons noted above.

Finance expense for the three months ended June 30, 2020 was $385, compared to $409 for the same quarter of 2019. Excluding the change in the fair value of the interest rate swap, which amounted to an unrealized gain of $6 (2019 - $69 unrealized loss), net interest expense for the second quarter of 2020 increased to $391, compared to $340 for the same period of 2019. This increase was due to higher interest expense from the utilization of the $20,000 current account credit facility. To assure maximum financial liquidity and flexibility, the Company drew down $20,000 of the maximum $22,000 available under its operating credit facility. The increase in interest expense was partially offset by an increase in interest income on the shortterm investment of $20,000, as well as from higher cash balances held during the period and lower interest expense on lower term loan balances outstanding under the Company's banking credit facilities. During the second half of 2019, scheduled repayments totaled $1,950 and an additional $1,000 was paid down in February 2020 on the Company's vendor take-back loan. The provision of income taxes totaled $1,081 for the second quarter of 2020 compared to a provision of income taxes of $1,597 for the comparative quarter of 2019. The decrease in the provision of income taxes was due to a comparative decrease in the pre-tax income of the Company's Canadian operations. The Company has not recorded a deferred tax asset with respect to the potential deferred tax benefit pertaining to losses incurred by its U.S. operations in the current or any prior period. Six months ended June 30, 2020 The Company recorded a net loss of $2,538, or $0.23 loss per share for the six months ended June 30, 2020 compared to net income of $791, or $0.07 per share for the corresponding period in 2019. The aggregate weighted average number of Class A Subordinate Voting shares and Class B Multiple Voting shares outstanding for the first half of 2020 and 2019 were 11,007,488 and 10,985,389, respectively.

Revenues for the first six months of 2020 were $57,726, compared to $61,960 for the same period of 2019. Shipments from both the Masonry Products and Landscape Products business segments increased during the pre-COVID-19 months of January and February 2020, as well as in June 2020 with the gradual lifting of pandemic-related restrictions following the shutdown period. In early 2020, the increase in shipments compared to the corresponding months of the prior period was due to a carry-forward of residential construction from 2019 for masonry products and higher shipments under the winter booking program for landscape products. Shipments during the shutdown months from mid-March to mid-May 2020 decreased compared to the same period in 2019 due to restrictions on certain residential and commercial construction activity imposed under the Emergency Management and Civil Protection Act in the province of Ontario. Similar pandemic-related restrictions in Michigan, U.S. affected shipments from the Company's business operations in that state. With the re-opening of the economy, in stages, since mid-May 2020, residential and commercial construction activity have resumed, subject to COVID19 protocols. As a result, shipments increased during the month of June 2020 compared to June 2019. Cost of sales for the six-month period ended June 30, 2020 was $49,920, compared to $48,155 for the same period of 2019. As noted above, under the CEWS program, the Company recovered a total of $2,255 of personnel costs incurred during the shutdown period, of which $1,630 was credited to cost of sales. Excluding this amount, cost of sales increased to $51,550, compared to $48,155 for the corresponding period of 2019. The increase in costs of sales was due to higher per unit manufacturing costs on lower production volumes, related to the COVID-19 shutdowns. The costs associated with the COVID19 related market shutdowns and the Company's decision to adjust production to rationalize inventory levels and to maintain appropriate liquidity requirements were partially offset by lower shipments and lower freight and delivery expenses. Selling expenses for the first six months of 2020 were $5,439, compared to $6,634 for the same period of 2019. As noted above, excluding the credit of $344 recognized under the CEWS program, selling expenses were $5,783 during the current period for the reasons noted under the section 'Discussion of Operations' for the three months ended June 30, 2020. General and administrative expenses for the six months ended June 30, 2020 decreased to $3,691 from $4,399 for the corresponding period of 2019. As noted above, excluding the credit of $281 recognized under the CEWS program, general and administrative expenses were $3,972 during the current period due to lower bad debt provisions, partially offset by higher consultancy fees related to the Company's on-going ERP systems and operations' optimization projects. Other income for the six-month period ended June 30, 2020 was $161, compared to other expense of $280 for the corresponding period of 2019. This income primarily relates to the gain on translation of foreign currency transactions as a result of currency exchange fluctuations attributed to the U.S. dollar during the period. The operating loss for the six months ended June 30, 2020 was $1,163, compared to an operating income of $2,166 for the comparative six months of 2019, for the reasons noted above. Finance expense for the six months ended June 30, 2020 was $1,093, compared to $902 for the corresponding period of 2019. Excluding the change in the fair value of the interest rate swap, which amounted to an unrealized loss of $472 (2019 - $291 unrealized loss), net interest expense for the first half of 2020 increased to $621, compared to $611 for the corresponding period of 2019. The increase in interest expense was for the same reasons noted above under the 'Discussion of Operations' for the three months ended June 30, 2020. The provision of income taxes totaled $282 for the first six months of 2020 compared to a provision of income taxes of $473 for the comparative period of 2019. The decrease in the provision of income taxes was due to a comparative decrease in the pretax income of the Company's Canadian operations. The Company has not recorded a deferred tax asset with respect to the potential deferred tax benefit pertaining to losses incurred by its U.S. operations in the current or any prior period.

FORWARD-LOOKING STATEMENTS

Certain statements contained herein constitute 'forward-looking statements'. All statements that are not historical facts are forward-looking statements, including, among others, statements regarding the expected impact of the COVID-19 pandemic on the Company's operations, the Company's plans in response to COVID-19, the future development plans for the Universal property, forecasts of sufficient cash flows from operations and other sources of financing, anticipated compliance with financial covenants under debt agreements, anticipated sales of masonry and landscape products, and other statements regarding future plans, objectives, production levels, costs, productivity, results, business outlook and financial performance. There can be no assurance that such forward-looking statements will prove to be accurate. Such forward-looking statements are based on information currently available to management, and are based on assumptions and analyses made by management in light of its experience and its perception of historical trends, current conditions and expected future developments, including, among others, assumptions regarding pricing, weather and seasonal expectations, production efficiency, and there being no significant disruptions affecting operations or other material adverse changes. Such forward-looking statements also involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such risks and uncertainties include, among others: changes in economic conditions, including the demand for the Company's primary products and the level of new home, commercial and other construction; large fluctuations in production levels; fluctuations in energy prices and other production costs; changes in transportation costs; foreign currency exchange and interest rate fluctuations; legislative and regulatory developments; as well as those assumptions, risks, uncertainties and other factors identified and discussed under 'Risks and Uncertainties' in the 2019 annual MD&A, included in the Company's 2019 Annual Report, and in the MD&A for the six-month period ended June 30, 2020, as well as those identified and reported in the Company's other public filings (including the Annual Information Form for the year ended December 31, 2019), which may be accessed at www.sedar.com. The forward-looking information contained herein is made as of the date hereof. Other than as specifically required by law, the Company undertakes no obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on forward-looking statements. Brampton Brick Limited is Canada's second largest manufacturer of clay brick, serving markets in Ontario, Quebec and the Northeast and Midwestern United States from its brick manufacturing plants located in Brampton, Ontario and Farmersburg, Indiana. To complement the clay brick product line, the Company also manufactures a range of concrete masonry products, including concrete brick and block as well as stone veneer products. Concrete interlocking paving stones, retaining walls, garden walls and enviro products are manufactured and distributed from facilities in Markham, Hillsdale, Brockville, Cambridge and Brampton, Ontario, in Boisbriand, Quebec and in Wixom, Michigan and sold to markets in Ontario, Quebec, Michigan, New York, Pennsylvania, Ohio, Kentucky, Illinois and Indiana under the Oaks and Boehmers trade names. The Company's products are used for residential construction and for industrial, commercial, and institutional building projects.

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