Canada: Lakeport Brewing reports a Q4 profit of CA$2.4M due to 25% increase in revenue

Lakeport Brewing Income Fund, an Ontario-based brewer of value-priced, quality beer, announced on March 5th that its strong performance continued through the fourth quarter of 2006 as sales grew by 25.5 percent and adjusted EBITDA (adjusted for impact of Gifted-unit compensation expense) rose 80.5 percent, compared with the 2005 fourth quarter.

"Throughout the year, Lakeport succeeded in building impressive brand equity. Lakeport's brands, led by Lakeport Honey Lager, Lakeport Pilsener, and Lakeport Light, grew to prominence, enabling us to achieve approximately 11.5 percent market share of The Beer Store's home consumer sales in 2006. Sales of Lakeport Honey Lager, Lakeport Pilsener, and Lakeport Light through The Beer Store rose about 24 percent in the 2006 fourth quarter. Lakeport Ice and Lakeport Strong also continued to enjoy excellent growth," said Teresa Cascioli, the Fund's Chair and Chief Executive Officer.

Growth Pace Sustained Through Fourth Quarter (in CAD)

Fourth-quarter 2006 gross sales rose 25.5 percent to $40.9 million, compared with $32.6 million in the 2005 period. Gross profit margin improved to 39.1 percent in the fourth-quarter, a 6.9-point improvement from the 32.2 percent in the 2005 fourth-quarter (adjusted for the reclassification of distribution charges discussed below). Higher volumes and the positive affects of Lakeport's cash-flow-enhancing capital projects, as well as higher pricing for smaller package sizes contributed to the margin improvement.

The Fund has determined that distribution charges paid to third-party carriers should not be included in the calculation of net revenue. To reflect this change in accounting policy, Lakeport has retroactively adjusted its financial statements for the previously reported 2006 quarters and for the periods in 2005. All references to comparative gross profit margins and Adjusted EBITDA margins contained in this press release have been adjusted to reflect this change.

As a percentage of net revenue, selling, general, and administrative ("SG&A") expenses declined to 12.7 percent from 14.5 percent in the 2005 fourth-quarter. SG&A expenses were 5.4 percent higher than in the 2005 quarter at $2.2 million, compared with $2.1 million a year earlier. The increase was mainly due to additional compensation expense recorded for the long-term incentive plan ("LTIP").

Adjusted EBITDA (EBITDA adjusted for Gifted-unit compensation expense) was $4.6 million in the 2006 quarter, up 80.5 percent from adjusted EBITDA of $2.6 million in the 2005 fourth quarter. This represents a nearly 9-point increase in margin to 26.4 percent from 17.6 percent in the 2005 fourth-quarter.

Net earnings for fourth-quarter 2006 were $2.4 million, or $0.44 per unit (basic and diluted), compared with net earnings in the 2005 period of $0.4 million or $0.07 per unit (basic and diluted).

Distributable cash for the 2006 fourth quarter amounted to $4.6 million ($0.64 per unit). In the 2005 fourth quarter, distributable cash amounted to $4.3 million ($0.59 per unit).

Sales Increase 23 Percent in 2006

Gross sales for 2006 increased 23.0 percent to $163.6 million, compared with $133.0 million in 2005. Lakeport's gross margin in 2006 rose to 42.8 percent of net revenue from 38.0 percent in 2005, and gross profit increased to $29.3 million, up from $21.4 million for all of 2005. The growth is mainly attributable to the same factors cited for the increase in the 2006 fourth quarter.

SG&A expenses declined slightly as a percentage of revenue but increased 18.6 percent to $9.2 million in 2006 from $7.8 million in 2005. The increase reflects, in part, Lakeport's decision to increase its investments in marketing-related activities, as well as the addition of personnel to support its growth and additional compensation expense recorded for the LTIP.

Adjusted EBITDA was $20.1 million in 2006, up 47.2 percent from adjusted EBITDA of $13.7 million in 2005. This represents a more than 5-point increase in margin to 27.8 percent from 23.0 percent in 2005.

Net earnings for 2006 amounted to $10.8 million, or $1.96 per unit (basic and diluted).

Distributable cash amounted to $16.2 million in 2006, or $2.25 per unit. Distributions declared were $14.9 million or $2.07 per unit. This includes the previously announced year-end special distribution of $0.39 per unit, payable March 15, 2007 to unitholders of record as at December 29, 2006. One hundred percent of distributions declared in 2006 were subject to income tax to the unitholders.

On February 1, 2007, Lakeport announced that it had entered into a support agreement with Labatt Brewing Company Limited whereby Labatt has agreed to acquire all of the outstanding units of the Fund for $28 per unit. Completion of the transaction is subject to certain customary conditions.

Lakeport believes EBITDA and Adjusted EBITDA (EBITDA adjusted for the Gifted Unit compensation expense) are important measures as they allow management to assess operating performance of the Fund's business. These terms do not have any standardized meaning prescribed by generally accepted accounting principals (GAAP). Management cautions investors that EBITDA and Adjusted EBITDA should not replace net earnings or loss as an indicator of performance, or cash flows from operating, investing, and financing activities as a measure of the Fund's liquidity and cash flows. The Fund's method for calculating this information may differ from that used by other issuers and, accordingly, this information may not be comparable to measures used by other issuers.

Distributable cash is a non-GAAP measure generally used by Canadian income funds as an indicator of financial performance. The method of calculating the Fund's distributable cash may differ from computations as reported by similar entities and, accordingly, may not be comparable to distributable cash as reported by such entities.

Selected Financial Information

The following table sets forth information regarding Lakeport's operating performance and should be read in conjunction with the Management Discussion & Analysis ("MD&A") and the audited consolidated financial statements and the related notes thereto.

About Lakeport Brewing

Lakeport Brewing Income Fund is an Ontario-based brewery focused on producing value-priced quality beer for the Ontario take-home market. Lakeport produces nine proprietary beer brands, two of which, Lakeport Honey Lager and Lakeport Pilsener, are among the top-ten selling brands in the province of Ontario. Lakeport has more than 200 full-time employees at its production facility in Hamilton, Ontario. The Fund's units trade on the TSX under the symbol TFR.UN (TFR stands for 'two-four').

Certain statements in this press release may constitute "forward-looking" statements that involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements of the Fund to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in this press release, such statements use such words as "may", "will", "expect", "anticipate", "project", "believe", "plan", and other similar terminology. The risks and uncertainties are detailed from time to time in reports filed by the Fund with the securities regulatory authorities in all of the provinces and territories of Canada to which recipients of this press release are referred for additional information concerning the Fund, its prospects and the risks and uncertainties relating to the Fund and its prospects. New risk factors may arise from time to time and it is not possible for management to predict all of those risk factors or the extent to which any factor or combination of factors may cause actual results, performance and achievements of the Fund to be materially different from those contained in forward-looking statements. The forward-looking information contained in this press release is current only as of the date of this press release. There should not be an expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise.

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