BOSTON, April 25, 2018 /PRNewswire/ -- The Boston Beer
Company, Inc. (NYSE: SAM) reported first quarter 2018 net revenue
of $190.5 million, an increase of
$28.8 million or 17.8% from the same
period last year, mainly due to an increase in shipments of 15.0%.
Net income for the first quarter was $9.3 million, or $0.78 per diluted share, an increase of
$3.6 million or $0.33 per diluted share from the first quarter of
2017. This increase was primarily due to increases in net
revenue and gross margin that were only partially offset by
increases in advertising, promotion and selling expenses.
In the first quarter of 2018 and the first quarter of 2017, the
Company recorded a tax benefit of $0.23 per diluted share and $0.28 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 8% from the comparable 13-week period in
2017.
- Full-year depletion and shipment change continues to be
estimated at between zero and plus 6%.
- First quarter gross margin of 50.5% was 3.3 percentage points
above the 2017 first quarter margin; the Company's full year gross
margin target remains unchanged at between 52% and 54%.
- Advertising, promotional and selling expenses in the first
quarter increased $13.8 million or
25.6%, compared to the first quarter of 2017, primarily due to
increased investments in local marketing, point-of-sale and media
and increased freight to distributors due to higher rates and
higher volumes.
- Based on current spending and investment plans, full year 2018
Non-GAAP earnings per diluted share1, which excludes the
impact of ASU 2016-09, continues to be estimated at between
$6.30 and $7.30.
1 See
"Outlook" below for additional information regarding non-GAAP
forward-looking measures used in this press release.
|
Jim Koch, Chairman and Founder of
the Company, commented, "Our total company depletions increased in
the first quarter. We saw significant improvement in Samuel Adams and Angry Orchard trends, led by
our key innovations that include Sam '76, Samuel Adams New England
IPA and Angry Orchard Rosé, all of which are generating excitement
during the early stages of their introductions. To date, the
response from our wholesalers, retailers and drinkers has been
quite positive, but it's too early to fully understand repeat rates
on these new products and therefore to draw conclusions on the
long-term impact. 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. We believe that we are well positioned to meet our
longer-term challenges because of the quality of our employees, 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 and creating new growth
opportunities."
Mr. Koch continued, "We are delighted that Dave Burwick formally joined as our CEO earlier
this month. Dave knows our Company, having served on our Board
of Directors since 2005, and has an established track record of
innovation and business success in the beverage and consumer goods
industries. Martin Roper, the Company's former President and
CEO, has now stepped down as President and CEO and from the Board.
We sincerely thank Martin, both for his 17 years of leadership and
for the assistance he will provide to Dave during the transition
and onboarding process."
Dave Burwick, the Company's new
President and CEO stated, "It is an honor and privilege to become
the Company's President and CEO. As I onboard to the Company,
I'm focused on reviewing all areas of the business, with a focus on
brand strategies that will enable the Company to return to
long-term profitable growth. Our depletions increase in the
first quarter was primarily due to increases in our Twisted Tea,
Truly Spiked & Sparkling and Angry Orchard brands that were
only partially offset by decreases in our Samuel Adams brand.
We're excited that Twisted Tea continues to grow distribution and
generate consumer pull, and that Truly Spiked & Sparkling is
well positioned as a leader in the emerging segment of hard
sparkling water. Samuel Adams
performance improved in the first quarter due to the national
launch of Sam '76 and increases in Seasonal volumes, but these
positives were more than offset by declines in other Samuel Adams styles. We had a smooth seasonal
transition to Samuel Adams Summer
Ale late in the first quarter, which was a few weeks earlier
than last year's second quarter transition."
Mr. Burwick continued, "As we go forward, we remain committed to
our three priorities. Our number one priority is returning
Samuel Adams to growth through
continued packaging, innovation, promotion and brand communication
initiatives, while maintaining Angry Orchard and Twisted Tea's
momentum and ensuring Truly Spiked & Sparkling's position as a
leader in the hard sparkling water category. Our plans to
improve our Samuel Adams trends
include our current 'Fill Your Glass' integrated marketing campaign
along with focused sales execution on our primary Samuel Adams initiative, Sam '76. The
second quarter will also see continued investments in Angry Orchard
media. We are pleased by the early reaction to our new
campaign and are excited by the national launch of Angry Orchard
Rosé cider, which we believe can attract new drinkers to the
category from wine and beer. Our second priority is a continuing
focus on cost savings and efficiency projects to fund the
investments needed to grow our brands and to build our
organization's ability to deliver against our goals. Based on
our visibility to opportunities in 2018, we are maintaining our
previously stated goal of increasing our gross margins by an
average of about one percentage point per-year over the 3-year
period ending in 2019, before any mix or volume impacts, while
preserving our quality and improving our service levels. Our third
priority is long-term product innovation, where we continue to
explore beverage areas compatible with our business model for
delivering long term shareholder value with an aim to generating a
consistent cadence of interesting brand innovations."
1st Quarter 2018 Summary of Results
Depletions increased 8% from the comparable 13-week period in
the prior year, primarily driven by our innovations. Shipment
volume was approximately 813,000 barrels, a 15.0% increase from the
comparable 13-week period in the prior year.
Shipments for the quarter increased at a higher rate than
depletions and resulted in higher distributor inventory as of
March 31, 2018 when compared to
April 1, 2017. The Company
believes distributor inventory as of March
31, 2018 was at an appropriate level based on inventory
requirements to support forecasted growth of brands and new
innovations. Inventory as of March 31,
2018 at distributors participating in the Freshest Beer
Program increased slightly in terms of days of inventory on hand
when compared to April 1, 2017. The
Company has approximately 79% of its volume on the Freshest Beer
Program.
Gross margin at 50.5% increased from the 47.2% margin realized
in the first quarter of 2017, primarily due to cost saving
initiatives in Company-owned breweries, product and package mix,
favorable fixed cost absorption and price increases, partially
offset by higher ingredients and packaging costs.
Advertising, promotional and selling expenses increased
$13.8 million compared to the first
quarter of 2017, primarily due to increased investments in local
marketing, point-of-sale and media, and increased freight to
distributors due to higher rates and volumes.
General and administrative expenses increased by $0.8 million from the first quarter of 2017,
primarily due to increases in salaries and benefits costs.
During the first quarter, the Company recorded a net income tax
benefit of $0.1 million, which
consists of a $2.7 million tax
benefit related to stock option exercises in accordance with ASU
2016-09, partially offset by other income tax expenses of
$2.6 million. The Company's effective
tax rate for the first quarter, excluding the impact of ASU
2016-09, decreased to 28.0% from 46.8% in the first quarter of
2017, primarily due to the favorable impact of the Tax Cuts and
Jobs Act of 2017.
The Company expects that its March 31,
2018 cash balance of $46.6
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 1, 2018 through April 20, 2018, the Company repurchased
approximately 119,000 shares of its Class A Common Stock for an
aggregate purchase price of approximately $22.6 million. As of April
20, 2018, the Company had approximately $156.1 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 14, 2018 are estimated by the
Company to have increased approximately 8% from the comparable
period in 2017.
Fiscal 2018 Outlook
The Company currently projects full year 2018 earnings per
diluted share to be between $6.30 and
$7.30, reflecting the uncertain
volume outlook. This projection excludes the impact of ASU 2016-09.
The Company's actual 2018 earnings per share could vary
significantly from the current projection. Underlying the
Company's current 2018 projection are the following full-year
estimates and targets:
- Depletions and shipments percentage change of between zero and
plus 6 percent.
- National price increases of between zero and 2%.
- Gross margin of between 52% and 54%, increasing during the year
due to progress on cost saving initiatives.
- Increased investment in advertising, promotional and selling
expenses of between $15 million and
$25 million. This does not
include any changes in freight costs for the shipment of products
to the Company's distributors.
- Increased general and administrative expenses of between
$10 million and $20 million due to organizational investments and
stock compensation costs.
- Non-GAAP effective tax rate of approximately 28%, excluding the
impact of ASU 2016-09.
- Estimated capital spending of between $55 million and $65
million, which mostly consist of investments in the
Company's breweries and tap rooms and 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 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 30, 2017 and December 31, 2016. 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
|
|
|
|
|
March
31,
|
|
April
1,
|
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
Barrels
sold
|
|
|
813
|
|
707
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
$
201,831
|
|
$
172,437
|
|
Less excise
taxes
|
|
|
11,374
|
|
10,742
|
|
Net revenue
|
|
|
190,457
|
|
161,695
|
|
Cost of goods
sold
|
|
|
94,360
|
|
85,351
|
|
Gross
profit
|
|
|
96,097
|
|
76,344
|
|
Operating
expenses:
|
|
|
|
|
|
|
Advertising, promotional and selling expenses
|
|
|
67,521
|
|
53,754
|
|
General
and administrative expenses
|
|
|
19,338
|
|
18,562
|
|
Total operating
expenses
|
|
|
86,859
|
|
72,316
|
|
Operating
income
|
|
|
9,238
|
|
4,028
|
|
Other (expense)
income, net:
|
|
|
|
|
|
|
Interest income,
net
|
|
|
205
|
|
84
|
|
Other expense,
net
|
|
|
(285)
|
|
(72)
|
|
Total other (expense)
income, net
|
|
|
(80)
|
|
12
|
|
Income before income
tax benefit
|
|
|
9,158
|
|
4,040
|
|
Income tax
benefit
|
|
|
(152)
|
|
(1,671)
|
|
Net income
|
|
|
$
9,310
|
|
$
5,711
|
|
|
|
|
|
|
|
|
Net income per common
share - basic
|
|
|
$
0.79
|
|
$
0.46
|
|
Net income per common
share - diluted
|
|
|
$
0.78
|
|
$
0.45
|
|
|
|
|
|
|
|
|
Weighted-average
number of common shares - Class A basic
|
|
|
8,714
|
|
9,230
|
|
Weighted-average
number of common shares - Class B basic
|
|
|
3,018
|
|
3,170
|
|
Weighted-average
number of common shares - diluted
|
|
|
11,831
|
|
12,516
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
9,310
|
|
$
5,711
|
|
Other comprehensive
income:
|
|
|
|
|
|
|
Foreign currency
translation adjustment
|
|
|
11
|
|
-
|
|
Comprehensive
income
|
|
|
$
9,321
|
|
$
5,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THE BOSTON BEER
COMPANY, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
(in thousands, except
share data)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
March
31,
|
|
December
30,
|
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
46,645
|
|
$
65,637
|
|
Accounts receivable, net of allowance for doubtful accounts
of
|
|
|
|
|
|
|
$47 and $0 as of March 31, 2018 and December 30, 2017,
respectively
|
|
|
49,007
|
|
33,749
|
|
Inventories
|
|
|
56,225
|
|
50,651
|
|
Prepaid expenses and other current assets
|
|
|
14,074
|
|
10,695
|
|
Income tax receivable
|
|
|
8,952
|
|
7,616
|
|
Total current assets
|
|
|
174,903
|
|
168,348
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
|
385,569
|
|
384,280
|
|
Other assets
|
|
|
15,732
|
|
13,313
|
|
Goodwill
|
|
|
3,683
|
|
3,683
|
|
Total assets
|
|
|
$
579,887
|
|
$
569,624
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
Accounts payable
|
|
|
$
43,181
|
|
$
38,141
|
|
Accrued expenses and other current liabilities
|
|
|
56,742
|
|
63,617
|
|
Total current liabilities
|
|
|
99,923
|
|
101,758
|
|
|
|
|
|
|
|
|
Deferred income taxes,
net
|
|
|
34,997
|
|
34,819
|
|
Other liabilities
|
|
|
8,041
|
|
9,524
|
|
Total liabilities
|
|
|
142,961
|
|
146,101
|
|
|
|
|
|
|
|
|
Commitments and
Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
|
|
Class A Common Stock, $.01 par value; 22,700,000 shares
authorized;
|
|
|
|
|
|
|
8,700,167 and 8,603,152 issued and outstanding as of March 31,
2018
|
|
|
|
|
|
|
and December 30, 2017, respectively
|
|
|
87
|
|
86
|
|
Class B Common Stock, $.01 par value; 4,200,000 shares
authorized;
|
|
|
|
|
|
|
3,017,983 and 3,017,983 issued and outstanding as of March 31,
2018
|
|
|
30
|
|
30
|
|
and December 30, 2017, respectively
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
394,313
|
|
372,590
|
|
Accumulated other comprehensive loss, net of tax
|
|
|
(1,509)
|
|
(1,288)
|
|
Retained earnings
|
|
|
44,005
|
|
52,105
|
|
Total stockholders' equity
|
|
|
436,926
|
|
423,523
|
|
Total liabilities and stockholders' equity
|
|
|
$
579,887
|
|
$
569,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THE BOSTON BEER
COMPANY, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED
STATEMENTS OF CASHFLOWS
|
|
(in
thousands)
|
|
(unaudited)
|
|
|
|
|
Thirteen weeks
ended
|
|
|
|
|
March
31,
|
|
April
1,
|
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
Cash flows used in
operating activities:
|
|
|
|
|
|
|
Net income
|
|
|
$
9,310
|
|
$
5,711
|
|
Adjustments to reconcile net
income to net cash provided by operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
|
12,820
|
|
12,724
|
|
Loss on disposal of property, plant and equipment
|
|
|
143
|
|
27
|
|
Bad debt expense
|
|
|
47
|
|
4
|
|
Stock-based compensation expense
|
|
|
1,491
|
|
1,581
|
|
Deferred income taxes
|
|
|
178
|
|
117
|
|
Changes in operating assets
and liabilities:
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(16,615)
|
|
1,376
|
|
Inventories
|
|
|
(8,166)
|
|
(4,799)
|
|
Prepaid expenses, income tax receivable and other assets
|
|
|
(4,689)
|
|
(2,784)
|
|
Accounts payable
|
|
|
2,299
|
|
(6,254)
|
|
Accrued expenses and other current liabilities
|
|
|
(6,575)
|
|
(12,595)
|
|
Other liabilities
|
|
|
(658)
|
|
(148)
|
|
Net cash used in operating activities
|
|
|
(10,415)
|
|
(5,040)
|
|
|
|
|
|
|
|
|
Cash flows used in
investing activities:
|
|
|
|
|
|
|
Purchases of property, plant
and equipment
|
|
|
(11,477)
|
|
(6,981)
|
|
Proceeds from disposal of
property, plant and equipment
|
|
|
2
|
|
7
|
|
Change in restricted cash
|
|
|
111
|
|
16
|
|
Net cash used in investing activities
|
|
|
(11,364)
|
|
(6,958)
|
|
|
|
|
|
|
|
|
Cash flows
provided by (used in) financing activities:
|
|
|
|
|
|
|
Repurchase of Class A Common
Stock
|
|
|
(16,640)
|
|
(33,268)
|
|
Proceeds from exercise of
stock options
|
|
|
19,304
|
|
13,869
|
|
Cash paid on note
payable
|
|
|
(63)
|
|
(60)
|
|
Net proceeds from sale of
investment shares
|
|
|
186
|
|
315
|
|
Net cash provided by (used in) financing activities
|
|
|
2,787
|
|
(19,144)
|
|
|
|
|
|
|
|
|
Change in cash and
cash equivalents
|
|
|
(18,992)
|
|
(31,142)
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents at beginning of year
|
|
|
65,637
|
|
91,035
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents at end of period
|
|
|
$
46,645
|
|
$
59,893
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
Income taxes
paid
|
|
|
$
459
|
|
$
225
|
|
Decrease in accounts
receivable for ASU 2014-09 adoption
|
|
|
$
(1,310)
|
|
$
-
|
|
Income taxes
refunded
|
|
|
$
-
|
|
$
2
|
|
Increase in accounts
payable for purchase of property, plant and equipment
|
|
|
$
2,741
|
|
$
1,741
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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-2018-results-300636639.html
SOURCE The Boston Beer Company, Inc.