BOSTON, April 26, 2017 /PRNewswire/ -- The Boston
Beer Company, Inc. (NYSE: SAM) reported first quarter 2017 net
revenue of $161.7 million, a decrease
of $27.1 million or 14% from the same
period last year, mainly due to a decline in shipments of 15%,
partially offset by price increases. Net income for the first
quarter was $5.7 million, or
$0.45 per diluted share, a decrease
of $1.3 million or $0.08 per diluted share from the first quarter of
2016. This decrease was primarily due to decreases in net
revenue and a decrease in gross margin that were only partially
offset by decreases in operating expenses and a tax benefit of
$0.28 per diluted share resulting
from the adoption of the new Accounting Standard "Employee
Share-Based Payment Accounting" ("ASU 2016-09"), which was
effective for the company on January
1, 2017.
Highlights of this release include:
- Depletions decreased 14% from the comparable 13-week period in
2016.
- Full-year depletion and shipment change continues to be
estimated at between minus 7% and plus 1%. The 2017 fiscal year
includes 52 weeks compared to the 2016 fiscal year which included
53 weeks.
- First quarter gross margin was 47.2% compared to 48.5% in the
first quarter of 2016 and the Company maintains its full year gross
margin target of between 51% and 52%.
- Advertising, promotional and selling expenses in the first
quarter decreased $5.5 million or 9%
compared to the first quarter of 2016, primarily due to lower
point-of-sale spending and freight to distributors.
- Based on current spending and investment plans, estimated full
year 2017 earnings per diluted share remains at between
$4.20 and $6.20, excluding the impact
of ASU 2016-09.
Jim Koch, Chairman and Founder of
the Company, commented, "Our total company depletions continued to
decline in the first quarter. These declines were mostly
caused by weakness in the Samuel Adams brand, especially our
seasonal beers, and a general softening of the craft beer category
that continues to be very competitive. New craft brewers
continue to enter the market and existing craft brewers are
expanding their distribution and tap rooms, with the result that
drinkers are seeing more choices. During the quarter, we
introduced several new beers, including our second spring seasonal,
Samuel Adams Fresh as Helles, Samuel
Adams Rebel Juiced IPA and a refreshed Samuel Adams Rebel
IPA. We are currently rolling out our summer seasonal,
Samuel Adams Summer Ale, which is
now in its twenty-second year and is still the leading summer
seasonal beer in the craft industry. We believe that we are
well positioned to meet the longer-term challenges of this
competitive environment, through the quality of our beers, our
innovation capability and our sales execution strength, coupled
with our strong financial position that enables us to invest in
growing our brands. Our leadership team is making strides to
address these challenges and, in our search to find a successor to
Martin, who has announced plans to retire in 2018, our Board is
focused on identifying someone to lead this team who will be able
to harness and accelerate the positive steps that we are
taking. I am excited by the opportunities ahead of us and
continue to be optimistic about our future."
Martin Roper, the Company's
President and CEO stated, "Our depletions decline in the first
quarter was primarily due to decreases in our Samuel Adams and
Angry Orchard brands that were only partially offset by increases
in our Twisted Tea and Truly Spiked & Sparkling brands.
We are excited that Twisted Tea continues to grow distribution and
pull, and that Truly Spiked & Sparkling is well positioned as a
leader in the emerging segment of hard sparkling water. Most
of our volume declines for the quarter resulted from the
underperformance of our 2017 spring seasonals, Samuel Adams
Hopscape and Samuel Adams Fresh as
Helles, compared to Samuel Adams Cold Snap last year. The weakness
in our two new spring seasonals seems to have resulted from a
combination of drinker confusion at retail, acceptability of these
seasonal beer styles and the timing of our seasonal transitions
compared to last year. We took our learnings from Hopscape and
applied them to Fresh as Helles and saw improved pull, but still
significantly lower volumes than our seasonal volumes during those
same weeks last year. The Angry Orchard and cider category
trends, while declining, continue to improve and we have maintained
our high share of off-premise tracked channels. The second quarter
will see several investments including new and increased Angry
Orchard media, Samuel Adams Summer
Ale specific media and programming, significant media
investment for Truly Spiked & Sparkling, and tactical pricing
in key markets to address competitor initiatives and secure key
holiday activation. The trends for larger craft beer brands
and the cider category remain very difficult to predict and, as a
result, we have maintained our broad guidance on full year
depletion volumes and earnings. We are optimistic for future craft
beer and cider category growth and we are taking steps to ensure
that we are well positioned to benefit from that growth. We are
committed to investing in the opportunities that we see with all
our brands and remain prepared to forsake short-term earnings, as
we invest to return to long-term profitable growth."
Mr. Roper continued, "Our priorities for 2017 remain
unchanged. Our number one priority is returning both Samuel
Adams and Angry Orchard to growth through continued packaging,
innovation, promotion and brand communication initiatives, while
maintaining Twisted Tea's momentum. Our second priority is a
focus on cost savings and efficiency projects to fund the
investments needed to grow our brands, including the increased
investments planned in the second quarter. We have adjusted
our organization to the new volume environment, while preserving
the capability to innovate and return to growth. This includes
adjusting short-term brewery capacity, organizational alignment
behind brand and market priorities, changes to our spending
policies and behaviors, and significant improvement in yields and
efficiency across our supply chain. Based on these efforts,
we are maintaining our previously stated goal of increasing our
gross margins by about one percentage point per year over the next
three years, before any mix or volume impacts, while preserving our
quality and improving our service levels. Our third priority is
long-term innovation, where our current focus is ensuring that
Truly Spiked & Sparkling maintains its leadership position in
its segment and reaches its full potential."
1st Quarter 2017 Summary of Results
Depletions declined 14% from the comparable 13-week period in
the prior year. Shipment volume was approximately 707,000 barrels,
a 15% decrease from the comparable 13-week period in the prior
year.
The Company believes distributor inventory as of April 1, 2017 was at an appropriate level.
Inventory as of April 1, 2017 at
distributors participating in the Freshest Beer Program decreased
slightly in terms of days of inventory on hand when compared to
March 26, 2016. The Company has
approximately 78% of its volume on the Freshest Beer Program.
Gross margin at 47.2% decreased from the 48.5% margin realized
in the first quarter of 2016, primarily due to unfavorable fixed
cost absorption and product mix effects, partially offset by cost
saving initiatives in the Company's breweries and price
increases.
Advertising, promotional and selling expenses decreased
$5.5 million compared to the first
quarter of 2016, primarily due to lower point-of-sale costs and
freight to distributors.
General and administrative expenses decreased by $2.5 million from the first quarter of 2016,
primarily due to decreases in stock compensation, salaries and
benefits and consulting costs.
During the first quarter, the Company recorded a net income tax
benefit of $1.7 million, which
consists of a $3.6 million tax
benefit related to stock option exercises upon the adoption of ASU
2016-09, partially offset by other income tax expense of
$1.9 million. The Company's effective
tax rate for the first quarter, excluding the impact of the
adoption of ASU 2016-09, increased to 46.8% from 36.3% in the first
quarter of 2016.
The Company expects that its April 1,
2017 cash balance of $59.9
million, together with its future operating cash flows and
its available $150.0 million line of
credit, will be sufficient to fund future cash requirements.
During the first quarter and the period from April 2, 2017 through April 21, 2017, the Company repurchased
approximately 283,000 shares of its Class A Common Stock for an
aggregate purchase price of approximately $43.3 million. As of April
21, 2017, the Company had approximately $130.0 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 fifteen weeks ended
April 15, 2017 are estimated by the
Company to have decreased approximately 13% from the comparable
period in 2016.
Fiscal 2017 Outlook
The Company currently projects full year 2017 earnings per
diluted share to be between $4.20 and
$6.20, reflecting the uncertain volume outlook. This
projection excludes the impact of ASU 2016-09. The Company's
actual 2017 earnings per share could vary significantly from the
current projection. The 2017 fiscal year includes 52 weeks
compared to the 2016 fiscal year which included 53 weeks.
Underlying the Company's current 2017 projection are the
following full-year estimates and targets:
- Depletions and shipments percentage change of between minus 7%
and plus 1%.
- National price increases of between 1% and 2%.
- Gross margin of between 51% and 52%, increasing during the year
due to progress on the cost saving initiatives.
- Increased investments in advertising, promotional and selling
expenses of between $20 million and $30
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 37%, excluding the impact
of ASU 2016-09. The Company is not 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 the exercise of stock
options versus the fair value of those options when granted.
- Estimated capital spending of between $30 million and $50 million, most of which
relates to continued investments in the Company's breweries.
This estimate is a decrease from the previously communicated range
of $40 million to $60 million.
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 31, 2016 and December 26, 2015. 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
|
|
|
|
|
April
1,
|
|
March
26,
|
|
|
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
Barrels
sold
|
|
|
707
|
|
834
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
$
172,437
|
|
$
202,009
|
|
Less excise
taxes
|
|
|
10,742
|
|
13,182
|
|
Net revenue
|
|
|
161,695
|
|
188,827
|
|
Cost of goods
sold
|
|
|
85,351
|
|
97,296
|
|
Gross
profit
|
|
|
76,344
|
|
91,531
|
|
Operating
expenses:
|
|
|
|
|
|
|
Advertising, promotional and selling expenses
|
|
|
53,754
|
|
59,249
|
|
General
and administrative expenses
|
|
|
18,562
|
|
21,045
|
|
Total operating
expenses
|
|
|
72,316
|
|
80,294
|
|
Operating
income
|
|
|
4,028
|
|
11,237
|
|
Other income
(expense), net:
|
|
|
|
|
|
|
Interest income,
net
|
|
|
84
|
|
23
|
|
Other expense,
net
|
|
|
(72)
|
|
(219)
|
|
Total other income
(expense), net
|
|
|
12
|
|
(196)
|
|
Income before income
tax (benefit) provision
|
|
|
4,040
|
|
11,041
|
|
Income tax (benefit)
provision
|
|
|
(1,671)
|
|
4,009
|
|
Net income
|
|
|
$
5,711
|
|
$
7,032
|
|
|
|
|
|
|
|
|
Net income per common
share - basic
|
|
|
$
0.46
|
|
$
0.55
|
|
Net income per common
share - diluted
|
|
|
$
0.45
|
|
$
0.53
|
|
|
|
|
|
|
|
|
Weighted-average
number of common shares - Class A basic
|
|
|
9,230
|
|
9,375
|
|
Weighted-average
number of common shares - Class B basic
|
|
|
3,170
|
|
3,367
|
|
Weighted-average
number of common shares - diluted
|
|
|
12,516
|
|
13,088
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
5,711
|
|
$
7,032
|
|
Other comprehensive
income:
|
|
|
|
|
|
|
Foreign currency
translation adjustment
|
|
|
-
|
|
(4)
|
|
Comprehensive
income
|
|
|
$
5,711
|
|
$
7,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THE BOSTON BEER
COMPANY, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
(in thousands, except
share data)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
April
1,
|
|
December
31,
|
|
|
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
59,893
|
|
$
91,035
|
|
Accounts receivable, net of allowance for doubtful accounts of $4
and
|
|
|
|
|
|
|
$0 as of April 1, 2017 and December 31, 2016,
respectively
|
|
|
35,314
|
|
36,694
|
|
Inventories
|
|
|
54,444
|
|
52,499
|
|
Prepaid expenses and other current assets
|
|
|
9,524
|
|
8,731
|
|
Income tax receivable
|
|
|
6,898
|
|
4,928
|
|
Total current assets
|
|
|
166,073
|
|
193,887
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
|
404,426
|
|
408,411
|
|
Other assets
|
|
|
12,773
|
|
9,965
|
|
Goodwill
|
|
|
3,683
|
|
3,683
|
|
Total assets
|
|
|
$
586,955
|
|
$
615,946
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
Accounts payable
|
|
|
$
36,072
|
|
$
40,585
|
|
Accrued expenses and other current liabilities
|
|
|
48,406
|
|
60,934
|
|
Total current liabilities
|
|
|
84,478
|
|
101,519
|
|
|
|
|
|
|
|
|
Deferred income taxes,
net
|
|
|
57,378
|
|
57,261
|
|
Other liabilities
|
|
|
9,688
|
|
10,584
|
|
Total liabilities
|
|
|
151,544
|
|
169,364
|
|
|
|
|
|
|
|
|
Commitments and
Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
|
|
Class A Common Stock, $.01 par value; 22,700,000 shares
authorized;
|
|
|
|
|
|
|
9,245,882 and 9,170,956 issued and outstanding as of April 1,
2017
|
|
|
|
|
|
|
and December 31, 2016, respectively
|
|
|
92
|
|
92
|
|
Class B Common Stock, $.01 par value; 4,200,000 shares
authorized;
|
|
|
|
|
|
|
3,097,355 and 3,197,355 issued and outstanding as of April 1,
2017
|
|
|
31
|
|
32
|
|
and December 31, 2016, respectively
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
366,297
|
|
349,913
|
|
Accumulated other comprehensive loss, net of tax
|
|
|
(1,102)
|
|
(1,103)
|
|
Retained earnings
|
|
|
70,093
|
|
97,648
|
|
Total stockholders' equity
|
|
|
435,411
|
|
446,582
|
|
Total liabilities and stockholders' equity
|
|
|
$
586,955
|
|
$
615,946
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THE BOSTON BEER
COMPANY, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED
STATEMENTS OF CASHFLOWS
|
|
(in
thousands)
|
|
(unaudited)
|
|
|
|
|
Thirteen-weeks
ended
|
|
|
|
|
April
1,
|
|
March
26,
|
|
|
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
Cash flows (used
in) provided by operating activities:
|
|
|
|
|
|
|
Net income
|
|
|
$
5,711
|
|
$
7,032
|
|
Adjustments to reconcile net
income to net cash (used in) provided by operating
activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
|
12,724
|
|
12,029
|
|
Loss on disposal of property, plant and equipment
|
|
|
27
|
|
303
|
|
Bad debt expense (recovery)
|
|
|
4
|
|
(33)
|
|
Stock-based compensation expense
|
|
|
1,581
|
|
2,686
|
|
Excess tax benefit from stock-based compensation
arrangements
|
|
|
-
|
|
(3,839)
|
|
Deferred income taxes
|
|
|
117
|
|
351
|
|
Changes in operating assets
and liabilities:
|
|
|
|
|
|
|
Accounts receivable
|
|
|
1,376
|
|
(6,166)
|
|
Inventories
|
|
|
(4,799)
|
|
(5,275)
|
|
Prepaid expenses, income tax receivable and other assets
|
|
|
(2,784)
|
|
8,165
|
|
Accounts payable
|
|
|
(6,254)
|
|
3,825
|
|
Accrued expenses and other current liabilities
|
|
|
(12,595)
|
|
(8,282)
|
|
Other liabilities
|
|
|
(148)
|
|
(1,529)
|
|
Net cash (used in) provided by operating activities
|
|
|
(5,040)
|
|
9,267
|
|
|
|
|
|
|
|
|
Cash flows used in
investing activities:
|
|
|
|
|
|
|
Purchases of property, plant
and equipment
|
|
|
(6,981)
|
|
(13,011)
|
|
Proceeds from disposal of
property, plant and equipment
|
|
|
7
|
|
-
|
|
Decrease in restricted
cash
|
|
|
16
|
|
56
|
|
Net cash used in investing activities
|
|
|
(6,958)
|
|
(12,955)
|
|
|
|
|
|
|
|
|
Cash flows used in
financing activities:
|
|
|
|
|
|
|
Repurchase of Class A Common
Stock
|
|
|
(33,268)
|
|
(63,775)
|
|
Proceeds from exercise of
stock options
|
|
|
13,869
|
|
20,347
|
|
Cash paid on note
payable
|
|
|
(60)
|
|
(58)
|
|
Excess tax benefit from
stock-based compensation arrangements
|
|
|
-
|
|
3,839
|
|
Net proceeds from sale of
investment shares
|
|
|
315
|
|
270
|
|
Net cash used in financing activities
|
|
|
(19,144)
|
|
(39,377)
|
|
|
|
|
|
|
|
|
Change in cash and
cash equivalents
|
|
|
(31,142)
|
|
(43,065)
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents at beginning of year
|
|
|
91,035
|
|
94,193
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents at end of period
|
|
|
$
59,893
|
|
$
51,128
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
Income taxes
paid
|
|
|
$
225
|
|
$
1,963
|
|
Income taxes
refunded
|
|
|
$
2
|
|
$
12,000
|
|
Increase in accounts
payable for purchase of property, plant and equipment
|
|
|
$
1,741
|
|
$
1,628
|
|
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-first-quarter-2017-results-300446534.html
SOURCE The Boston Beer Company, Inc.