BOSTON, Oct. 20, 2016 /PRNewswire/
-- The Boston Beer Company, Inc. (NYSE: SAM) reported third
quarter 2016 net revenue of $253.4
million, a decrease of $39.7
million or 14% from the third quarter of 2015, mainly due to
a decline in shipments of 12% and decreased revenue per barrel due
to product mix. Net income for the third quarter was
$31.5 million, or $2.48 per diluted share, a decrease of
$0.37 per diluted share from the
third quarter of 2015. This decrease was primarily due to
decreases in net revenue and a decrease in gross margin, partially
offset by decreased advertising, promotional and selling
expenses.
Earnings per diluted share for the 39-week period ended
September 24, 2016 were $5.05, a decrease of $0.97 from the comparable 39-week period in
2015. Net revenue for the 39-week period ended September 24, 2016 was $687.1 million, a decrease of $57.7 million, or 8%, from the comparable 39-week
period in 2015.
Highlights of this release include:
- Depletions decreased 8% and 6% from the comparable 13 and 39
week periods in 2015.
- Third quarter gross margin was 52.7% and year-to-date gross
margin was 51.2%; with the Company maintaining its full-year gross
margin target of between 50% and 52%.
- Advertising, promotional and selling expense decreased by
$14.4 million or 18% in the third
quarter, primarily due to lower media spending and decreases in
freight to distributors, as a result of lower volume and lower
freight rates.
- The 2016 fiscal year includes 53 weeks compared to the 2015
fiscal year, which included only 52 weeks.
- Full-year 2016 year over year depletion and shipment change is
now estimated at between minus 6% and minus 2%, a decrease of the
range from the previously communicated estimate of between minus 4%
and zero.
- Full-year 2016 earnings per diluted share are now estimated at
between $6.30 and $6.70, a decrease
and narrowing of the range from the previously communicated
estimate of $6.40 to $7.00.
- Full-year 2016 capital spending is now estimated to be between
$55 million and $65 million, a
decrease of the range from the previously communicated estimate of
$60 million to $70 million.
Jim Koch, Chairman and Founder of
the Company, commented, "Our total company depletion trends
declined in the third quarter at a slightly faster rate as we
lapped new beer launches from last year, and we saw a further
slowdown in growth across the Craft brewing industry. I am
energized by our team's plans to return Samuel Adams to growth,
that include investments in new packaging, new beers, a fifth
seasonal and enhanced drinker communication. We continue to believe
that we are well positioned to meet the challenges of this
competitive environment, because of the quality of our employees,
our beers, our innovation capability and our sales execution
strength. Our strong financial position enables us to invest
in growing our brands and creating new growth opportunities. A
major packaging update for Samuel Adams
Boston Lager has already shipped, to be followed by new
Seasonal and Rebel packaging by the end of the fourth quarter, and
we also expect to complete the national draft launch of Samuel
Adams Rebel Juiced, a tropical IPA featuring citrusy hops in late
October. In the early part of 2017, we are reimagining our
seasonal program by adding two new beers; Samuel Adams Hopscape, a
30 IBU wheat ale with four types of West Coast hops for January and
February 2017, and Samuel Adams Fresh as Helles, a helles lager
with orange blossom petals for February and March 2017. We remain confident about the
long-term outlook for the craft category and our Samuel Adams
brand."
Martin Roper, the Company's
President and CEO stated, "Our third quarter depletions volume
continued to be below our expectations, primarily due to decreases
in our Samuel Adams, Angry Orchard, Coney Island and Traveler
brands that were only partially offset by increases in our Twisted
Tea and Truly Spiked & Sparkling brands. The comparative
decline in the third quarter of 2016 for shipments and depletions
was significantly impacted by the third quarter 2015 national
launch of Coney Island Hard Root Beer and the loss of share due to
new entrants in hard soda since the launch. We are happy with
our Truly Spiked & Sparkling category leadership position, and
are investing to grow this emerging category. However, we
were disappointed during the quarter by cider category trends, and
believe we have opportunities to increase visibility and disruption
at retail for our cider packages. We have adjusted our
expectations for 2016 full-year depletions growth and our earnings
guidance to reflect our trends for the first nine months and our
current view of the remainder of the year. We remain prepared
to forsake short term earnings, as we invest to return to long-term
profitable growth, commensurate with the opportunities and the
increased competition that we see. We have provided our
preliminary view of 2017 growth rates but these rates are difficult
to predict and subject to reassessment, as current industry trends
suggest slowing of category growth rates and the impact of
increased competition, new introductions and retailer programing
are all unclear. Long term, we remain optimistic for future craft
and cider category growth."
Mr. Roper went on to say, "I am pleased that during the quarter,
Jonathan Potter joined our
leadership team as CMO, bringing many years of relevant alcohol
experience to Boston Beer. He has already moved to add leadership
and experience to our digital efforts as part of our desire to
build a world class brand team. He joins Frank Smalla our CFO, and Quincy Troupe our Senior Vice President Supply
Chain, both hired earlier this year as we form a restructured
leadership team to address the current challenges and deliver
against our three strategic priorities. Our number one
priority remains returning Samuel Adams and Angry Orchard to growth
through our packaging, innovation, promotion and brand
communication initiatives. We are conducting a comprehensive
review of our brand strategies and activation plans to ensure that
our investments are effective and efficient in building long-term
brand equities. Our second priority is a stepped up focus on
cost savings and efficiency projects with a view to investing these
savings into growing our brands. We have identified and are
executing on cost savings projects throughout the organization
while preserving our quality and service levels with a goal of
increasing our gross margins by 1% a year over the next three
years, ignoring mix or volume impacts. Our third priority is long
term innovation, where our current focus is ensuring that Truly
Spiked & Sparkling maintains its leadership position and
reaches its full potential. I am very excited by the
capabilities of our leadership team, and the energy of our
organization as we address these priorities."
3rd Quarter 2016 Summary of Results
Depletions decreased 8% from the comparable 13-week period in
2015.
Shipment volume was approximately 1.1 million barrels, a 12%
decrease from the comparable 13-week period in 2015.
The Company believes distributor inventory levels at
September 24, 2016 were appropriate.
Inventory at distributors participating in the Freshest Beer
Program at September 24, 2016
decreased slightly in terms of days of inventory on hand when
compared to September 25, 2015. The
Company has approximately 77% of its volume on the Freshest Beer
Program.
Gross margin at 52.7% represented a decrease from the 53.6%
margin realized in the third quarter of 2015, primarily due to
product mix effects and unfavorable fixed cost absorption,
partially offset by cost saving initiatives in the Company
breweries and price increases.
Advertising, promotional and selling expenses decreased
$14.4 million from the comparable
13-week period in 2015, primarily due to lower media spending and
decreases in freight to distributors, as a result of lower volume
and lower freight rates.
General and administrative expenses increased by $1.7 million from the comparable 13-week period
in 2015, primarily due to increases in stock compensation and
increases in salary and benefit costs.
Year to Date 2016 Summary of Results
Depletions decreased 6% from the comparable 39-week period in
2016, reflecting decreases in the Company's Samuel Adams, Angry
Orchard and Traveler brands, partially offset by increases in its
Twisted Tea, Truly Spiked & Sparkling and Coney Island
brands.
Shipment volume was approximately 3.0 million barrels, an 8%
decrease from the comparable 39-week period in 2015.
Advertising, promotional and selling expenses decreased
$23.5 million from the comparable
39-week period in 2015, primarily due to decreases in freight to
distributors, as a result of lower volume and lower freight rates
and lower media spending.
General and administrative expenses increased $9.4 million from the comparable 39-week period
in 2015, primarily due to increases in stock compensation, salaries
and benefits and facilities costs.
The Company expects that its September
24, 2016 cash balance of $77.3
million, together with its future operating cash flows and
its $150.0 million line of credit,
will be sufficient to fund future cash requirements.
During the 39-week period ended September
24, 2016 and the period from September 25, 2016 through October 14, 2016, the Company repurchased
approximately 807,000 shares of its Class A Common Stock for an
aggregate purchase price of approximately $138.4 million. As of October 14, 2016 the Company had approximately
$196.5 million remaining on the
$781.0 million share buyback
expenditure limit set by the Board of Directors.
Depletion estimates
Year-to-date depletions through the 41-week period ended
October 8, 2016 are estimated by the
Company to have decreased approximately 6% from the comparable
period in 2015.
2016 Outlook
The Company currently projects full year 2016 earnings per
diluted share of between $6.30 and
$6.70. The Company's actual 2016 earnings per share
could vary significantly from the current projection. The
2016 fiscal year includes 53 weeks compared to the 2015 fiscal
year, which included only 52 weeks. Underlying the Company's
current 2016 projection are the following 53 week full-year
estimates and targets:
- Depletions and shipments percentage change of between minus 6%
and minus 2%.
- Price increases per barrel of between 1% and 2%.
- Gross margin of between 50% and 52%.
- Investments in advertising, promotional and selling expenses
are forecasted between a decrease of $10
million and flat, a decrease in the range from the
previously communicated estimate of between a decrease of
$5 million and an increase of
$5 million. This estimate does
not include any increases or decreases in freight costs for the
shipment of products to the Company's distributors.
- Effective tax rate of approximately 36%.
2017 Outlook
The Company is completing its 2017 planning process and will
provide further detailed guidance when the Company presents its
full-year 2016 results. The Company is currently using the
following preliminary assumptions and targets for its 2017 fiscal
year, which represents a 52-week fiscal year compared to the
53-week fiscal year in 2016:
- Depletions and shipments percentage change of between minus low
single digits and plus low single digits.
- National price increases of between 1% and 2%.
- Gross margin of between 51% and 53%. Increasing during the year
due to progress on the cost initiatives.
- Increased investment in advertising, promotional and selling
expenses of between $10 million and $20
million. This does not include any changes in freight
costs for the shipment of products to the Company's
distributors.
- Effective tax rate of approximately 36.3%, excluding the impact
of the new Accounting Standard "Employee Share-Based Payment
Accounting" ("ASU 2016-09") which is effective for the company on
January 1, 2017. The Company is
not currently planning to provide forward guidance on the impact
that ASU 2016-09 will have on the Company's 2017 financial
statements and full-year effective tax rate as this will mainly
depend upon unpredictable future events, including the timing and
value realized upon exercise of stock options versus the fair value
when those options were granted.
- Estimated capital spending of between $40 million and $60 million, which could be
significantly higher, if deemed necessary to meet future
growth.
About the Company
The Boston Beer Company, Inc. (NYSE: SAM) began in 1984 and
today brews more than 60 styles of Samuel Adams beer. Our
portfolio of brands also includes Angry Orchard Hard Cider, Twisted
Tea, Truly Spiked & Sparkling, as well as several other craft
beer brands brewed by A&S Brewing, our craft beer
incubator. For more information, please visit our investor
relations website at www.bostonbeer.com, which includes links to
all of our respective brand websites.
Forward-Looking Statements
Statements made in this press release that state the Company's
or management's intentions, hopes, beliefs, expectations or
predictions of the future are forward-looking statements. It
is important to note that the Company's actual results could differ
materially from those projected in such forward-looking
statements. Additional information concerning factors that
could cause actual results to differ materially from those in the
forward-looking statements is contained from time to time in the
Company's SEC filings, including, but not limited to, the Company's
report on Form 10-K for the years ended December 26, 2015 and December 27, 2014. Copies of these
documents may be found on the Company's website,
www.bostonbeer.com, or obtained by contacting the Company or
the SEC.
THE BOSTON BEER
COMPANY, INC. AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
|
(in thousands, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen weeks
ended
|
|
Thirty-nine weeks
ended
|
|
|
|
September
24,
|
|
September
26,
|
|
September
24,
|
|
September
26,
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Barrels
sold
|
|
|
1,131
|
|
1,284
|
|
3,045
|
|
3,298
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
$
271,225
|
|
$
312,638
|
|
$
734,459
|
|
$
794,193
|
Less excise
taxes
|
|
|
17,792
|
|
19,544
|
|
47,383
|
|
49,392
|
Net revenue
|
|
|
253,433
|
|
293,094
|
|
687,076
|
|
744,801
|
Cost of goods
sold
|
|
|
119,826
|
|
136,084
|
|
335,062
|
|
351,950
|
Gross
profit
|
|
|
133,607
|
|
157,010
|
|
352,014
|
|
392,851
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
Advertising, promotional and selling expenses
|
|
|
63,817
|
|
78,205
|
|
186,318
|
|
209,823
|
General
and administrative expenses
|
|
|
19,481
|
|
17,707
|
|
62,325
|
|
52,972
|
Impairment of
assets
|
|
|
-
|
|
218
|
|
37
|
|
218
|
Total operating
expenses
|
|
|
83,298
|
|
96,130
|
|
248,680
|
|
263,013
|
Operating
income
|
|
|
50,309
|
|
60,880
|
|
103,334
|
|
129,838
|
Other income
(expense), net:
|
|
|
|
|
|
|
|
|
|
Interest income
(expense), net
|
|
|
22
|
|
-
|
|
65
|
|
7
|
Other income
(expense), net
|
|
|
(169)
|
|
(527)
|
|
(594)
|
|
(798)
|
Total other income
(expense), net
|
|
|
(147)
|
|
(527)
|
|
(529)
|
|
(791)
|
Income before income
tax provision
|
|
|
50,162
|
|
60,353
|
|
102,805
|
|
129,047
|
Provision for income
taxes
|
|
|
18,632
|
|
21,729
|
|
37,622
|
|
46,748
|
Net income
|
|
|
$
31,530
|
|
$
38,624
|
|
$
65,183
|
|
$
82,299
|
|
|
|
|
|
|
|
|
|
|
Net income per common
share - basic
|
|
|
$
2.53
|
|
$
2.93
|
|
$
5.16
|
|
$
6.20
|
Net income per common
share - diluted
|
|
|
$
2.48
|
|
$
2.85
|
|
$
5.05
|
|
$
6.02
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
number of common shares - Class A basic
|
|
|
9,018
|
|
9,655
|
|
9,191
|
|
9,667
|
Weighted-average
number of common shares - Class B basic
|
|
|
3,367
|
|
3,467
|
|
3,367
|
|
3,539
|
Weighted-average
number of common shares - diluted
|
|
|
12,641
|
|
13,507
|
|
12,872
|
|
13,602
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
31,530
|
|
$
38,624
|
|
$
65,183
|
|
$
82,299
|
Other comprehensive
income:
|
|
|
|
|
|
|
|
|
|
Foreign currency
translation adjustment
|
|
|
2
|
|
(14)
|
|
(90)
|
|
(13)
|
Comprehensive
income
|
|
|
$
31,532
|
|
$
38,610
|
|
$
65,093
|
|
$
82,286
|
THE BOSTON BEER
COMPANY, INC. AND SUBSIDIARIES
|
CONSOLIDATED
BALANCE SHEETS
|
(in thousands, except
share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
September
24,
|
|
December
26,
|
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
Assets
|
|
|
|
Current Assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
77,266
|
|
$
94,193
|
Accounts receivable, net of allowance for doubtful accounts of $74
and
|
|
|
|
|
|
$244 as of September 24, 2016 and December 26, 2015,
respectively
|
|
|
46,191
|
|
38,984
|
Inventories
|
|
|
57,232
|
|
56,462
|
Prepaid expenses and other current assets
|
|
|
12,505
|
|
12,053
|
Income tax receivable
|
|
|
5,038
|
|
14,928
|
Deferred income taxes
|
|
|
6,319
|
|
6,983
|
Total current assets
|
|
|
204,551
|
|
223,603
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
|
410,569
|
|
409,926
|
Other assets
|
|
|
8,692
|
|
8,188
|
Goodwill
|
|
|
3,683
|
|
3,683
|
Total assets
|
|
|
$
627,495
|
|
$
645,400
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
Accounts payable
|
|
|
$
36,382
|
|
$
42,718
|
Current portion of debt and capital lease obligations
|
|
|
60
|
|
58
|
Accrued expenses and other current liabilities
|
|
|
69,847
|
|
68,384
|
Total current liabilities
|
|
|
106,289
|
|
111,160
|
|
|
|
|
|
|
Deferred income
taxes
|
|
|
60,801
|
|
56,001
|
Debt and capital lease
obligations, less current portion
|
|
|
411
|
|
471
|
Other liabilities
|
|
|
9,751
|
|
16,547
|
Total liabilities
|
|
|
177,252
|
|
184,179
|
|
|
|
|
|
|
Commitments and
Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
|
Class A Common Stock, $.01 par value; 22,700,000 shares
authorized;
|
|
|
|
|
|
9,119,891 and 9,389,005 issued and outstanding as of September, 24
2016
|
|
|
|
|
and December 26, 2015, respectively
|
|
|
91
|
|
94
|
Class B Common Stock, $.01 par value; 4,200,000 shares
authorized;
|
|
|
|
|
|
3,367,355 and 3,367,355 issued and outstanding as of September 24,
2016
|
|
34
|
|
34
|
and December 26, 2015, respectively
|
|
|
|
|
|
Additional paid-in capital
|
|
|
349,075
|
|
290,096
|
Accumulated other comprehensive loss, net of tax
|
|
|
(1,041)
|
|
(951)
|
Retained earnings
|
|
|
102,084
|
|
171,948
|
Total stockholders' equity
|
|
|
450,243
|
|
461,221
|
Total liabilities and stockholders' equity
|
|
|
$
627,495
|
|
$
645,400
|
THE BOSTON BEER
COMPANY, INC. AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF CASHFLOWS
|
(in
thousands)
|
(unaudited)
|
|
|
|
Thirty-nine weeks
ended
|
|
|
|
September
24,
|
|
September
26,
|
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
Cash flows
provided by operating activities:
|
|
|
|
|
|
Net income
|
|
|
$
65,183
|
|
$
82,299
|
Adjustments to reconcile net
income to net cash provided by operating activities:
|
|
|
|
|
Depreciation and amortization
|
|
|
37,305
|
|
31,577
|
Impairment of assets
|
|
|
37
|
|
218
|
Loss on disposal of property, plant and equipment
|
|
|
553
|
|
342
|
Bad debt (recovery) expense
|
|
|
(170)
|
|
12
|
Stock-based compensation expense
|
|
|
8,122
|
|
5,218
|
Excess tax benefit from stock-based compensation
arrangements
|
|
|
(12,387)
|
|
(13,113)
|
Deferred income taxes
|
|
|
5,464
|
|
(1,012)
|
Foreign currency transactions
|
|
|
(90)
|
|
-
|
Changes in operating assets
and liabilities:
|
|
|
|
|
|
Accounts receivable
|
|
|
(7,037)
|
|
(20,273)
|
Inventories
|
|
|
(2,897)
|
|
(6,010)
|
Prepaid expenses, income tax receivable and other assets
|
|
|
11,841
|
|
20,662
|
Accounts payable
|
|
|
(4,571)
|
|
12,167
|
Accrued expenses and other current liabilities
|
|
|
13,365
|
|
22,609
|
Other liabilities
|
|
|
(6,356)
|
|
7,777
|
Net cash provided by operating activities
|
|
|
108,362
|
|
142,473
|
|
|
|
|
|
|
Cash flows used in
investing activities:
|
|
|
|
|
|
Purchases of property, plant
and equipment
|
|
|
(37,108)
|
|
(55,606)
|
Proceeds from disposal of
property, plant and equipment
|
|
|
4
|
|
-
|
Cash paid for acquisition of
intangible assets
|
|
|
-
|
|
(100)
|
Decrease in restricted
cash
|
|
|
62
|
|
57
|
Net cash used in investing activities
|
|
|
(37,042)
|
|
(55,649)
|
|
|
|
|
|
|
Cash flows used in
financing activities:
|
|
|
|
|
|
Repurchase of Class A Common
Stock
|
|
|
(138,055)
|
|
(83,794)
|
Proceeds from exercise of
stock options
|
|
|
37,452
|
|
41,000
|
Payment of taxes related to
exercise of stock options
|
|
|
(510)
|
|
-
|
Cash paid on note
payable
|
|
|
(58)
|
|
(54)
|
Excess tax benefit from
stock-based compensation arrangements
|
|
|
12,387
|
|
13,113
|
Net proceeds from sale of
investment shares
|
|
|
537
|
|
1,121
|
Net cash used in financing activities
|
|
|
(88,247)
|
|
(28,614)
|
|
|
|
|
|
|
Change in cash and
cash equivalents
|
|
|
(16,927)
|
|
58,210
|
|
|
|
|
|
|
Cash and cash
equivalents at beginning of year
|
|
|
94,193
|
|
76,402
|
|
|
|
|
|
|
Cash and cash
equivalents at end of period
|
|
|
$
77,266
|
|
$
134,612
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
Income taxes
paid
|
|
|
$
21,939
|
|
$
23,992
|
Income taxes
refunded
|
|
|
$
12,002
|
|
$
17,225
|
Increase in accounts
payable for purchase of property, plant and equipment
|
|
|
$
1,235
|
|
$
775
|
Decrease in accounts
payable for repurchase of Class A Common Stock
|
|
|
$
(3,000)
|
|
$
-
|
Copies of The
Boston Beer Company's press releases, including quarterly financial
results,
|
are available
on the Internet at www.bostonbeer.com
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/boston-beer-reports-third-quarter-2016-results-300348708.html
SOURCE The Boston Beer Company, Inc.