BOSTON, April 24, 2019
/PRNewswire/ -- The Boston Beer Company, Inc. (NYSE: SAM)
reported first quarter 2019 net revenue of $251.7 million, an increase of $61.2 million or 32.1% from the same period last
year, mainly due to an increase in shipments of 32.5%. Net
income for the first quarter was $23.7
million, or $2.02 per diluted
share, an increase of $14.4 million
or $1.24 per diluted share from the
first quarter of 2018. The significant increase in net
revenue, compared to the first quarter of 2018, was driven by the
planned acceleration in the timing of shipments during the year to
support current and anticipated growth in demand. The
increase in net income reflects the higher net revenue, partially
offset by increases in operating expenses and lower gross
margins.
In the first quarter of 2019 and the first quarter of 2018, the
Company recorded a tax benefit of $0.15 per diluted share and $0.23 per diluted share, respectively, resulting
from the 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 increased 11% from the comparable 13-week period in
2018.
- Full-year depletion and shipment growth is now estimated at
between 10% and 15%, an increase from the previously communicated
range of between 8% and 13%.
- First quarter gross margin of 49.5% was 1.0 percentage point
below the 2018 first quarter margin of 50.5%; the Company's full
year gross margin target is now estimated at between 50% to 52%, a
decrease from the previously communicated range of between 51% and
53%.
- Advertising, promotional and selling expenses in the first
quarter increased $4.2 million or
6.2%, compared to the first quarter of 2018, primarily due to
increased investments in media and production, higher salaries and
benefits and increased freight to distributors due to higher
volumes.
- Based on current spending and investment plans, full year 2019
Non-GAAP earnings per diluted share1, which excludes the
impact of ASU 2016-09, continues to be estimated at between
$8.00 and $9.00.
Jim Koch, Chairman and Founder of
the Company, commented, "Our total company depletions increased 11%
in the first quarter and we had our fourth consecutive quarter of
double-digit depletions growth. We believe this is
attributable to our key innovations, the quality of our products
and our strong brands, as well as successful sales execution and
support from our distributors. We are still seeing challenges
across the industry, including a general softening of the craft
beer category and retail shelves that offer an overwhelming number
of options to drinkers. We remain positive about the future of
craft beer and are happy that our diversified brand portfolio
continues to fuel double-digit growth. We are disappointed
with our Samuel Adams brand trends and continue to work hard on our
brand messaging, focusing on the quality and care that goes into
brewing our Samuel Adams Boston
Lager, along with a significant package re-design that is
now hitting shelves and the recent release of our new "lighter and
brighter" recipe for Samuel Adams Summer
Ale. We plan to continue to invest in the coming
months to improve trends and remain focused on the longer-term goal
of returning Samuel Adams to growth. While it's too early to
draw long-term conclusions, we've received very positive reactions
from distributors, retailers and drinkers on our new Sam Adams packaging design and the new taste
profile of Sam Summer Ale. We are
confident in our ability to innovate and build strong brands and
help support our mission of long-term profitable growth."
Dave Burwick, the Company's
President and CEO stated, "We had a good start to the year and are
happy with our record first quarter shipment and depletion
volumes. First quarter shipments growth was significantly
higher than depletions as we took active steps to ensure that our
distributor inventory levels are adequate to support drinker demand
during the peak summer months. Our depletions growth in the
first quarter was the result of increases in our Truly Hard Seltzer
and Twisted Tea brands that were only partially offset by decreases
in our Samuel Adams and Angry Orchard brands. Truly continues
to grow beyond our expectations. We are expanding
distribution across all channels and improving our position as a
leader in hard seltzer as more competitors enter the
category. Twisted Tea continues to generate double-digit
volume growth consistent with 2018 full year growth trends.
Angry Orchard's volume declined against the first quarter 2018
national roll out of Angry Orchard Rosé. We expect Angry
Orchard to improve for the remainder of the year and are excited
about our brand investment plans and the national rollout later in
the year of Angry Orchard Crisp Unfiltered, a homage to traditional
American Cider with a less sweet, fresh apple taste. Our new
brands in 2019 address important health and wellness and active
lifestyle opportunities in our categories and include 26.2
Brew from our wholly-owned affiliate Marathon Brewing Company, a
refreshing Gose beer brewed with sea salt to fit runners' active
lifestyle and flavor preferences. We recently sponsored the
Boston Marathon and to date, the response from our distributors,
retailers and drinkers on 26.2 Brew has been very positive, but
it's too early to draw conclusions on the longer-term
impact."
Mr. Burwick went on to say, "Given our trends for the first
three months and our current view of the remainder of the year,
we've adjusted our expectations for higher 2019 full-year
depletions growth, which is primarily driven by the strong
performance of our Truly brand. These volumes come at a
higher incremental cost due to the increased usage of third-party
breweries, which is negatively impacting our gross margin
expectation for the year. We're in a very competitive
business and we are optimistic for continued growth of our current
brand portfolio and we remain prepared to forsake short-term
earnings as we invest to sustain long-term profitable growth, in
line with the opportunities that we see."
1st Quarter 2019 Summary of Results
Depletions increased 11% from the comparable 13-week period in
the prior year. Shipment volume was approximately 1.1 million
barrels, a 32.5% increase from the comparable 13-week period in the
prior year.
Shipments for the quarter increased at a significantly higher
rate than depletions and resulted in significantly higher
distributor inventory as of March 30,
2019 when compared to March
31, 2018. The Company believes distributor inventory
as of March 30, 2019 averaged
approximately 6 weeks on hand and was at an appropriate level based
on the supply chain capacity constraints and inventory requirements
to support the forecasted growth of Truly and Twisted Tea brands
over the summer. The Company expects wholesaler inventory levels in
terms of weeks on hand to return to more normal levels of
approximately 3 to 4 weeks on hand later in the year.
Gross margin at 49.5% decreased from the 50.5% margin realized
in the first quarter of 2018, primarily as a result of higher
processing costs due to increased production at third party
breweries, higher temporary labor at Company-owned breweries and
higher packaging costs, partially offset by price increases and
cost saving initiatives at Company-owned breweries.
Advertising, promotional and selling expenses increased
$4.2 million compared to the first
quarter of 2018, primarily due to increased investments in media
and production, higher salaries and benefits costs and increased
freight to distributors due to higher volumes.
General and administrative expenses increased by $4.0 million from the first quarter of 2018,
primarily due to increases in salaries and benefits costs and
consulting costs.
During the first quarter, the Company recorded a net income tax
expense of $6.1 million or 20.6%,
which consists of income tax expenses of $7.9 million partially offset by a $1.8 million tax benefit related to stock option
exercises in accordance with ASU 2016-09. The Company's effective
tax rate for the first quarter, excluding the impact of ASU
2016-09, decreased to 26.5% from 28.0% in the first quarter of
2018.
The Company expects that its March 30,
2019 cash balance of $102.9
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 March 31, 2019 through April 20, 2019, the Company did not repurchase
any shares. As of April 20, 2019, the
Company had approximately $90.3
million remaining on the $931.0
million share buyback expenditure limit set by the Board of
Directors.
Depletion estimates
Year-to-date depletions through the fifteen weeks ended
April 13, 2019 are estimated by the
Company to have increased approximately 12.5% from the comparable
period in 2018.
Fiscal 2019 Outlook
The Company currently projects full year 2019 earnings per
diluted share to be between $8.00 and
$9.00. This projection excludes
the impact of ASU 2016-09. The Company's actual 2019 earnings
per share could vary significantly from the current projection.
Underlying the Company's current 2019 projection are the
following full-year estimates and targets:
- Depletions and shipments percentage increase of between 10% and
15%.
- National price increases of between 1% and 3%.
- Gross margin of between 50% and 52%.
- Increased investment 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.
- Non-GAAP effective tax rate of approximately 27%, excluding the
impact of ASU 2016-09.
- Estimated capital spending of between $100 million and $120
million, which could be significantly higher, if deemed
necessary to meet future growth.
Non-GAAP effective tax rate and Non-GAAP earnings per diluted
share are not defined terms under U.S. generally accepted
accounting principles ("GAAP"). These Non-GAAP measures should not
be considered in isolation or as a substitute for diluted earnings
per share and effective tax rate data prepared in accordance with
GAAP, and may not be comparable to calculations of similarly titled
measures by other companies. The Company's projection for its
Non-GAAP effective tax rate and Non-GAAP earnings per diluted share
exclude the impact of ASU 2016-09, which could be significant and
will depend largely upon unpredictable future events outside the
Company's control, including the timing and value realized upon
exercise of stock options versus the fair value of those options
when granted. Therefore, because of the uncertainty and variability
of the impact of ASU 2016-09, the Company is unable to provide,
without unreasonable effort, a reconciliation of these Non-GAAP
measures on a forward-looking basis.
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 Hard Seltzer, Marathon Brewing Company, Wild Leaf Hard
Tea and Tura Alcoholic Kombucha 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 29, 2018 and December 30, 2017. Copies of these
documents may be found on the Company's website,
www.bostonbeer.com, or obtained by contacting the Company or
the SEC.
1 See "Outlook" below for additional information
regarding non-GAAP forward-looking measures used in this press
release.
THE BOSTON BEER
COMPANY, INC. AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
|
(in thousands, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
Thirteen weeks
ended
|
|
|
|
March
30,
|
|
March
31,
|
|
|
|
2019
|
|
2018
|
|
|
|
|
|
|
Barrels
sold
|
|
|
1,076
|
|
813
|
|
|
|
|
|
|
Revenue
|
|
|
$
267,559
|
|
$
201,831
|
Less excise
taxes
|
|
|
15,908
|
|
11,374
|
Net revenue
|
|
|
251,651
|
|
190,457
|
Cost of goods
sold
|
|
|
127,111
|
|
94,360
|
Gross
profit
|
|
|
124,540
|
|
96,097
|
Operating
expenses:
|
|
|
|
|
|
Advertising, promotional and selling expenses
|
|
|
71,723
|
|
67,521
|
General
and administrative expenses
|
|
|
23,374
|
|
19,338
|
Total operating
expenses
|
|
|
95,097
|
|
86,859
|
Operating
income
|
|
|
29,443
|
|
9,238
|
Other income
(expense), net:
|
|
|
|
|
|
Interest income,
net
|
|
|
637
|
|
205
|
Other expense,
net
|
|
|
(252)
|
|
(285)
|
Total other income
(expense), net
|
|
|
385
|
|
(80)
|
Income before income
tax provision (benefit)
|
|
|
29,828
|
|
9,158
|
Income tax provision
(benefit)
|
|
|
6,134
|
|
(152)
|
Net income
|
|
|
$
23,694
|
|
$
9,310
|
|
|
|
|
|
|
Net income per common
share - basic
|
|
|
$
2.04
|
|
$
0.79
|
Net income per common
share - diluted
|
|
|
$
2.02
|
|
$
0.78
|
|
|
|
|
|
|
Weighted-average
number of common shares - Class A basic
|
|
|
8,606
|
|
8,714
|
Weighted-average
number of common shares - Class B basic
|
|
|
2,918
|
|
3,018
|
Weighted-average
number of common shares - diluted
|
|
|
11,636
|
|
11,831
|
|
|
|
|
|
|
Net income
|
|
|
$
23,694
|
|
$
9,310
|
Other comprehensive
income:
|
|
|
|
|
|
Foreign currency
translation adjustment
|
|
|
37
|
|
11
|
Comprehensive
income
|
|
|
$
23,731
|
|
$
9,321
|
|
|
|
|
|
|
|
|
|
|
|
|
THE BOSTON BEER
COMPANY, INC. AND SUBSIDIARIES
|
CONSOLIDATED
BALANCE SHEETS
|
(in thousands, except
share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
March
30,
|
|
December
29,
|
|
|
|
2019
|
|
2018
|
|
|
|
|
|
|
Assets
|
|
|
|
Current Assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
102,887
|
|
$
108,399
|
Accounts receivable
|
|
|
54,525
|
|
34,073
|
Inventories
|
|
|
85,861
|
|
70,249
|
Prepaid expenses and other current assets
|
|
|
16,754
|
|
13,136
|
Income tax receivable
|
|
|
833
|
|
5,714
|
Total current assets
|
|
|
260,860
|
|
231,571
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
|
398,882
|
|
389,789
|
Right-of-use
assets
|
|
|
26,177
|
|
-
|
Other assets
|
|
|
14,418
|
|
14,808
|
Goodwill
|
|
|
3,683
|
|
3,683
|
Total assets
|
|
|
$
704,020
|
|
$
639,851
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
Accounts payable
|
|
|
$
61,620
|
|
$
47,102
|
Accrued expenses and other current liabilities
|
|
|
66,655
|
|
73,412
|
Current lease liabilities
|
|
|
3,727
|
|
-
|
Total current liabilities
|
|
|
132,002
|
|
120,514
|
|
|
|
|
|
|
Deferred income taxes,
net
|
|
|
50,198
|
|
49,169
|
Non-current lease
liabilities
|
|
|
27,161
|
|
-
|
Other liabilities
|
|
|
4,841
|
|
9,851
|
Total liabilities
|
|
|
214,202
|
|
179,534
|
|
|
|
|
|
|
Commitments and
Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
|
Class A Common Stock, $.01 par value; 22,700,000 shares
authorized;
|
|
|
|
|
|
8,634,806 and 8,580,593 issued and outstanding as of March 30,
2019
|
|
|
|
|
|
and December 29, 2018, respectively
|
|
|
86
|
|
86
|
Class B Common Stock, $.01 par value; 4,200,000 shares
authorized;
|
|
|
|
|
|
2,917,983 and 2,917,983 issued and outstanding as of March 30,
2019
|
|
|
29
|
|
29
|
and December 29, 2018, respectively
|
|
|
|
|
|
Additional paid-in capital
|
|
|
411,481
|
|
405,711
|
Accumulated other comprehensive loss, net of tax
|
|
|
(1,160)
|
|
(1,197)
|
Retained earnings
|
|
|
79,382
|
|
55,688
|
Total stockholders' equity
|
|
|
489,818
|
|
460,317
|
Total liabilities and stockholders' equity
|
|
|
$
704,020
|
|
$
639,851
|
|
|
|
|
|
|
|
|
|
|
|
|
THE BOSTON BEER
COMPANY, INC. AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF CASHFLOWS
|
(in
thousands)
|
(unaudited)
|
|
|
|
Thirteen weeks
ended
|
|
|
|
March
30,
|
|
March
31,
|
|
|
|
2019
|
|
2018
|
|
|
|
|
|
|
Cash flows
provided by (used in) operating activities:
|
|
|
|
|
|
Net income
|
|
|
$
23,694
|
|
$
9,310
|
Adjustments to reconcile net
income to net cash provided by operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
|
12,863
|
|
12,820
|
Loss on disposal of property, plant and equipment
|
|
|
271
|
|
143
|
Lease expense
|
|
|
859
|
|
-
|
Bad debt expense
|
|
|
-
|
|
47
|
Stock-based compensation expense
|
|
|
2,066
|
|
1,491
|
Deferred income taxes
|
|
|
1,029
|
|
178
|
Changes in operating assets
and liabilities:
|
|
|
|
|
|
Accounts receivable
|
|
|
(20,452)
|
|
(16,615)
|
Inventories
|
|
|
(15,353)
|
|
(8,166)
|
Prepaid expenses, income tax receivable and other assets
|
|
|
1,336
|
|
(4,689)
|
Accounts payable
|
|
|
14,400
|
|
2,299
|
Accrued expenses and other current liabilities
|
|
|
(6,465)
|
|
(6,575)
|
Net lease liabilities
|
|
|
(624)
|
|
-
|
Other liabilities
|
|
|
19
|
|
(658)
|
Net cash provided by (used in) operating activities
|
|
|
13,643
|
|
(10,415)
|
|
|
|
|
|
|
Cash flows used in
investing activities:
|
|
|
|
|
|
Purchases of property, plant
and equipment
|
|
|
(22,080)
|
|
(11,477)
|
Proceeds from disposal of
property, plant and equipment
|
|
|
1
|
|
2
|
Change in restricted cash
|
|
|
28
|
|
111
|
Net cash used in investing activities
|
|
|
(22,051)
|
|
(11,364)
|
|
|
|
|
|
|
Cash flows
provided by financing activities:
|
|
|
|
|
|
Repurchase of Class A Common
Stock
|
|
|
-
|
|
(16,640)
|
Proceeds from exercise of
stock options
|
|
|
2,768
|
|
19,304
|
Cash paid on note
payable
|
|
|
(72)
|
|
(63)
|
Net proceeds from sale of
investment shares
|
|
|
200
|
|
186
|
Net cash provided by financing activities
|
|
|
2,896
|
|
2,787
|
|
|
|
|
|
|
Change in cash and
cash equivalents
|
|
|
(5,512)
|
|
(18,992)
|
|
|
|
|
|
|
Cash and cash
equivalents at beginning of year
|
|
|
108,399
|
|
65,637
|
|
|
|
|
|
|
Cash and cash
equivalents at end of period
|
|
|
$
102,887
|
|
$
46,645
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
Income taxes
paid
|
|
|
$
207
|
|
$
459
|
Cash paid for amounts
included in measurement of lease liabilities
|
|
|
$
901
|
|
$
-
|
Right-of-use assets
obtained in exchange for lease obligations
|
|
|
$
27,037
|
|
$
-
|
Decrease in accounts
receivable for ASU 2014-09 adoption
|
|
|
$
-
|
|
$
(1,310)
|
Increase in accounts
payable for purchase of property, plant and equipment
|
|
|
$
118
|
|
$
2,741
|
|
|
|
|
|
|
|
|
|
|
|
|
Copies of The
Boston Beer Company's press releases, including quarterly financial
results,
|
are available
on the Internet at www.bostonbeer.com
|
View original
content:http://www.prnewswire.com/news-releases/boston-beer-reports-first-quarter-2019-results-300837680.html
SOURCE The Boston Beer Company, Inc.