First Quarter 1999
For the period ended January 31, 1999
Press Release
MIDDLEFIELD BANCORP ANNOUNCES FORMATION OF NEW
VENTURE AND FIRST QUARTER RESULTS
Middlefield Bancorp Limited ("MBN") is pleased to announce a new venture in the packaging industry and its financial results for the first quarter of 1999.
| Financial Summary | ||
| For the period ended January 31 | 1999 | 1998 |
| Revenue | $3,138,000 | $2,915,000 |
| EBITDA | 624,000 | 577,000 |
| Net income | 298,000 | 299,000 |
| Fully diluted earnings per share | 0.03 | 0.03 |
| Weighted average number of shares | 8,901,700 | 8,891,700 |
Sterling International Group Inc.
MBN has launched a new venture in the packaging industry known as Sterling International Group Inc. ("Sterling"). Sterling is led by Bob May and Rob Tiede. Bob May was previously appointed to MBN's board of directors.
The objective of Sterling is to build one of the pre-eminent packaging enterprises in North America through a focused consolidation and rationalization strategy primarily within the flexible packaging industry. Timing is opportune in light of significant changes underway within the industry as well as its highly fragmented nature.
The flexible packaging industry currently generates annual sales of approximately US$18 billion in the United States. Unlike other large industries, the top ten companies account for only 32% of US industry sales, with no one company representing more than 10% of the global market. Since the dominant purchasers of flexible packaging are gravitating towards fewer, larger suppliers, consolidation is viewed as an effective strategy to cement these relationships.
Messrs. May and Tiede are ideally suited to leading this venture, having successfully executed a similar strategy through Gravure International Corporation ("GIC"). Mr. May founded GIC in 1973, growing its annual revenue to $125 million through internal expansion and the acquisition of several businesses in Canada and the United States. Mr. Tiede was a senior executive with GIC responsible for several plants. In 1994, GIC was sold to ACX Technologies Inc., an affiliate of Adolf Coors Brewing
Company. May and Tiede assumed the roles of President and Vice President, respectively, of ACX's flexible packaging division.
Middlefield Group has a long-standing relationship with the management team having been a founding shareholder in GIC. Sterling is currently negotiating with a number of candidates in the North American packaging industry and anticipates completing one or more transactions in the near term.
Middlefield Bancorp trades on the Toronto Stock Exchange under the symbol "MBN".
March 29, 1999
| BALANCE SHEETS | ||||
| As at January 31 (unaudited) | ||||
| (All amounts in thousands) | 1999 | 1998 | ||
| Assets | ||||
| Current assets | ||||
| Cash and short-term investments | $ | 2,137 | $ | 707 |
| Marketable securities | 6,308 | 10,860 | ||
| Receivables | 3,298 | 2,103 | ||
| Inventories | 2,347 | 1,945 | ||
| Prepaid expenses | 747 | 74 | ||
| 14,837 | 15,689 | |||
| Investments | 5,448 | - | ||
| Property and equipment, net | 652 | 389 | ||
| Other assets, net | 803 | 502 | ||
| $ | 21,740 | $ | 16,580 | |
| Liabilities | ||||
| Current liabilities | ||||
| Bank indebtedness | $ | 5,490 | $ | 2,952 |
| Payables and accruals | 1,873 | 1,457 | ||
| Income taxes | 759 | 451 | ||
| 8,122 | 4,860 | |||
| Long-term payables | 189 | - | ||
| 8,311 | 4,860 | |||
| Shareholders' Equity | ||||
| Capital stock | 8,519 | 8,498 | ||
| Retained earnings | 4,910 | 3,222 | ||
| 13,429 | 11,720 | |||
| $ | 21,740 | $ | 16,580 | |
| STATEMENTS OF INCOME AND RETAINED EARNINGS | ||||
| For the three months ended January 31 (unaudited) | ||||
| (All amounts in thousands, except per share amounts) | 1999 | 1998 | ||
| Revenue | $ | 3,138 | $ | 2,915 |
| Operating income before the undernoted: | 892 | 790 | ||
| General and administrative expenses | 268 | 213 | ||
| Interest: | ||||
| Term debt | - | - | ||
| Other | 87 | 27 | ||
| Depreciation and amortization | 30 | 27 | ||
| Income before provision for income taxes | 507 | 523 | ||
| Provision for income taxes | 209 | 224 | ||
| Net income | 298 | 299 | ||
| Retained earnings, beginning of period | 4,612 | 2,923 | ||
| Retained earnings, end of period | $ | 4,910 | $ | 3,222 |
| Earnings per share | $ | 0.04 | $ | 0.04 |
| Fully diluted earnings per share | $ | 0.03 | $ | 0.03 |
| STATEMENTS OF CASH FLOWS | ||||
| For the three months ended January 31 (unaudited) | ||||
| (All amounts in thousands) | 1999 | 1998 | ||
| Operating | ||||
| Net income | $ | 298 | $ | 299 |
| Items not requiring an outlay of cash: | ||||
| Deferred income taxes | 20 | 11 | ||
| Depreciation and amortization | 30 | 27 | ||
| 348 | 337 | |||
| Net change in non-cash operating working capital | (1,281) | (1) | ||
| (933) | 336 | |||
| Investing | ||||
| Purchase of marketable securities and investments | (63) | (2,983) | ||
| Proceeds on sale of marketable securities and investments | 9 | - | ||
| Increase in development costs | (34) | (22) | ||
| Purchase of property and equipment, net of disposal proceeds | (22) | (49) | ||
| (110) | (3,054) | |||
| Financing | ||||
| Increase (decrease) in bank indebtedness | (414) | 2,952 | ||
| Decrease in long-term payables | (4) | - | ||
| Issue of capital stock | 19 | - | ||
| (399) | 2,952 | |||
| Net increase (decrease) in cash and short-term investments | (1,442) | 234 | ||
| Cash and short-term investments, beginning of period | 3,579 | 473 | ||
| Cash and short-term investments, end of period | $ | 2,137 | $ | 707 |
CORPORATE PROFILE
Middlefield Bancorp Limited is a Canadian merchant bank managed by Middlefield Group. The Company's principal objective is to create long term shareholder value through a twofold strategy of (1) strategic investing in businesses with strong management and exceptional prospects for longer term earnings growth and (2) special situation investing where there is excellent potential for significant near term capital appreciation. Our aim is to produce a steady stream of growing earnings from strategic investments supplemented by earnings from special situation activities. MBN's board of directors and management include experienced and successful individuals who have committed their own capital to the Company.
| DIRECTORS | |||
| Thomas I.A. Allen, Q.C. Partner, Ogilvy Renault |
Thomas C. Laurie Vice-President, RBC Dominion Securities Inc. |
LEGAL COUNSEL Ogilvy Renault, Toronto |
|
| Peter A. Braaten President and CEO, Morrison Middlefield Resources Limited |
Robert B. May Chairman and CEO, Sterling International Group Inc. |
AUDITORS Arthur Andersen LLP |
|
| Murray J. Brasseur Managing Director, Middlefield Group |
A. Gordon Stollery Chairman, Angus Glen Development Ltd. |
BANKER Bank of Nova Scotia |
|
| George S. Dembroski Former Vice Chairman, RBC Dominion Securities Ltd. |
Charles B. Young Chairman, Ascend Capital Management |