'Significant' loss indicated by Frederick Brewing Co. 6 managerial jobs, executives' pay cut

Beverages

July 21, 1998|By Kristine Henry | Kristine Henry,SUN STAFF

Frederick Brewing Co. said yesterday that it had eliminated some management jobs and reduced salaries of senior executives in a cost-cutting move to save $200,000 as it warned of a "significant" loss in the second quarter.

Frederick Brewing, whose losses have increased for four consecutive years, said it lost $4.4 million in 1997 and $910,000 in the year-ago second quarter.

A complete earnings report for the three months that ended June 30 will be released Aug. 2. Notice of the continuing losses came as the company reported second-quarter sales were up 82 percent over the same time last year.

The Frederick-based craft brewery, whose lines include Blue Ridge and Hempen, reported gross revenue of $1.6 million on shipments of nearly 9,000 barrels for the quarter that ended June 30, compared with revenue of $875,000 on the sale of 3,500 barrels in last year's quarter.

The quarter reflects the first full three months of sales of Frederick's new brands, Wild Goose and Brimstone, which it acquired in January.

"We attribute the sales increase to the company's intensified local marketing efforts, increased distribution of the Hempen brands and stronger consumer demand for the Wild Goose and Brimstone brands," Marjorie McGinnis, Frederick's president and chief operating officer, said in a statement.

Kevin Brannon, Frederick's chairman and chief executive, who is married to McGinnis, said the company had moved to trim payroll costs by eliminating six salaried positions, two through layoffs and four through attrition, bringing the total work force to 44.

The company also said senior managers had accepted salary reductions totaling $37,000 in exchange for grants of restricted stock.

Shares of Frederick Brewing, which have declined steadily since the 6-year-old company went public at $6 a share in March 1996, closed unchanged yesterday at $1.09.

Frederick Brewing, which moved into a new $9.8 million brewery in February 1997, also announced three alliances yesterday that it said it expects to increase plant utilization and boost revenue by as much as $2 million annually beginning in the fourth quarter.

The company said it had teamed up with black-owned C&L Brewing Co. to produce and market a beer aimed at upper-income blacks, a group Brannon said is rapidly growing but under-served. The product is scheduled to debut in the mid-Atlantic region in September.

In another joint venture, Frederick will work with a Toronto-based importer, Imports Brands of Canada, to get Hempen beers in the strictly regulated Canadian market. Frederick expects to begin shipping to Ontario next month, and applications in other provinces are pending.

The company also has a tentative deal with AAM Group Inc., a Maryland importer of Belgian beer, to produce a new brand that would be sold in Harbin, the capital of China's Heilongjiang province, which borders Siberia and has a population of 5 million.

"This is potentially the largest of the three alliances," Brannon said.

Pub Date: 7/21/98

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