Frederick Brewing Co. pares 2nd-quarter loss

Talks with Ohio firm continue

First Union debt is renegotiated

August 18, 1999|By Kristine Henry | Kristine Henry,SUN STAFF

Financially troubled Frederick Brewing Co. said yesterday that it narrowed its loss in the second quarter despite a steep decline in sales, and that it is on track to complete a deal this month that would turn over control of the company to a Cleveland-based brewer.

The Frederick-based specialty brewer posted a loss of $748,000, or 41 cents a share, compared with a loss of $1.9 million, or $2.04 a share, in the second quarter last year.

Sales for the three months that ended June 30 were $1 million, down 37 percent from the $1.6 million reported in the second quarter of 1998, according to Frederick's quarterly filing with the Securities and Exchange Commission.

Chairman Kevin Brannon yesterday linked the sales drop to the elimination of 16 sales positions in the past 14 months -- part of the company's effort to trim costs.

"The primary cuts were sales presences in New York, New England, Pittsburgh, [Philadelphia]-New Jersey, Miami and Atlanta," Brannon said. "The downside to it is those sales have gone away. The upside is that given the expense, they turned out not to be profitable."

The company also disclosed in its filing that it had defaulted on a loan and subsequently failed to make the payments required by last Sunday under a forebearance agreement with First Union National Bank. However, Brannon said, the company negotiated another agreement with the bank and now has until the end of the month to pay off the majority of the loan, which has a balance of about $1.3 million.

The company, which makes Blue Ridge, Hempen and Wild Goose brands, is working on a deal with Snyder International Brewing Group LLC in which the Cleveland-based brewer would buy a majority stake in Frederick Brewing and refinance its debt. An exclusive negotiating agreement between the companies expired Aug. 8, but they have continued to talk and Brannon said he expects a deal by the end of the month -- in time to pay off a growing number of creditors.

The head of the Maryland Economic Development Corp. (MEDCO), a state-sponsored nonprofit entity that issued Frederick Brewing bonds for First Union, said he expects the debt to be paid off but that the agency would not be liable in any case.

"I think everybody knows there's a good, honest effort going on to resolve all this," said Hans F. Mayer, MEDCO's executive director. "I think that based on what's going on, a settlement [with Snyder] is going to be reached."

In another matter, Frederick Brewing recently learned that its "Big Jack" beer -- named after the late Redskins football team owner Jack Kent Cooke -- would no longer be sold at Cooke Stadium since the team was recently purchased by Daniel Snyder for $800 million. The beer, which Frederick Brewing has discontinued, sold well at the stadium, Brannon said, but did not do well in stores.

"Part of the problem was that few people recognized it as the name of the stadium," Brannon said. "Retailers told us that the only people who would buy it were people named Jack."

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