BOSTON, April 22, 2020 /PRNewswire/ -- The Boston Beer
Company, Inc. (NYSE: SAM) reported first quarter 2020 net revenue
of $330.6 million, an increase of
$78.9 million or 31.4% from the same
period last year, mainly due to an increase in shipments of 32.2%.
Net income for the first quarter was $18.2
million, or $1.49 per diluted
share, a decrease of $5.5 million or
$0.53 per diluted share from the
first quarter of 2019. The decrease in net income reflects
that the Company's higher net revenue was more than offset by
increases in operating expenses and lower gross
margins.
The Company began seeing the impact of the COVID-19 pandemic on
its business in early March. Prior to then, the Company was
on track to maintain its financial guidance for full-year fiscal
2020. Depletions through the 9-week period ended February 29, 2020 are estimated by the Company to
have increased approximately 32% from the comparable period in
2019. Excluding the Dogfish Head impact, depletions increased
26%.
Given the many rapidly changing variables related to the
pandemic, the Company is currently not in a position to accurately
forecast the future impacts of the pandemic and is withdrawing its
full-year fiscal 2020 financial guidance. To date, the direct
impact of the pandemic has primarily shown in significantly reduced
keg demand from the on-premise channel and higher labor and safety
related costs at the Company's breweries. In the first quarter of
2020, the Company has recorded COVID-19 pre-tax related reductions
in net revenue and increases in other costs that total $10.0 million. This amount consists of a
$5.8 million reduction in net revenue
for estimated keg returns from distributors and retailers and
$4.2 million of other COVID-19
related direct costs, of which $3.6
million are recorded in cost of goods sold and $0.6 million are recorded in operating
expenses. In addition to these direct financial
impacts, COVID-19 related safety measures resulted in a
reduction of internal capacity. This has shifted more volume to
third-party breweries, which increased production costs and
negatively impacted gross margins. The Company will continue to
assess and manage this situation and will provide further updates
in its second quarter earnings release, to the extent that the
effects of the COVID-19 pandemic are then known more clearly.
In the first quarter of 2020 and the first quarter of 2019, the
Company recorded a tax benefit of $0.17 per diluted share and $0.15 per diluted share, respectively, resulting
from the Accounting Standard "Employee Share-Based Payment
Accounting" ("ASU 2016-09").
Highlights of this release include:
- Reported depletions increased 36% from the comparable 13-week
period in 2019. Excluding the addition of the Dogfish Head brands
beginning July 3, 2019, depletions
increased 30% from the 13-week comparable period in 2019.
- Reported shipments increased 32.2% from the 13-week period in
2019. Excluding the addition of the Dogfish Head brands beginning
July 3, 2019, shipments increased
27.5% from the 13-week period in 2019.
- First quarter gross margin of 44.8% was 4.7 percentage points
below the 2019 first quarter margin of 49.5%. Excluding the
Company's current assessment of the impact of estimated COVID-19
returns and other related direct costs, first quarter gross margin
was 46.8%.
- Advertising, promotional and selling expenses in the first
quarter increased $26.2 million or
36.5%, compared to the first quarter of 2019, primarily due to
increased investments in media, production and local marketing, the
addition of Dogfish Head brand-related expenses beginning
July 3, 2019, higher salaries and
benefits costs and increased freight to distributors due to higher
volumes.
Jim Koch, Chairman and Founder of
the Company, commented, "As the world is grappling with the
COVID-19 pandemic, our primary focus is on operating our breweries
and our business safely and supporting our partners in the beer
industry. We have a strong cash position and balance sheet
and feel very fortunate to be in a position where we can
help. Supporting the communities in which we work and live is
one of our core values. Our business got its start in bars
and restaurants and we recognize the role we can play right now in
giving back. We're proud to share some of the initiatives
we've gotten off the ground in a short period of time that we hope
will help make a difference. We have established the Samuel
Adams Restaurant Strong Fund and donated over $2.1 million to support bar and restaurant
workers that have been impacted by pandemic-related closures in 20
states. In addition, we are a founding partner of Restaurant
Relief America which is committed to helping restaurant industry
workers experiencing hardship in the wake of COVID-19. Both
funds will distribute 100% of the proceeds through grants to bar
and restaurant workers. Also, to support our internal needs
as well as local hospitals, we have begun production of hand
sanitizer at our Dogfish Head distillery in Milton, Delaware. We are thankful to our
outstanding coworkers, distributors and retailers for their focus
during COVID-19 and diligence to continue to operate and help grow
our business. The Company's depletions increased 36% in the
first quarter of which 30% is from Boston Beer legacy brands and 6%
is from the addition of Dogfish Head brands. Our business in
the first quarter was strong but there remains significant
uncertainty due to COVID-19. These uncertainties include our
continued ability to operate our breweries at a level of safety
that meets our standards, the continued ability to distribute to
the off-premise retail locations, the duration of the current
on-premise shutdown, and how long consumer pantry loading will
continue in the weeks ahead. We will continue to work hard
throughout the COVID-19 pandemic and prioritize safety above all
else. I am very proud of the passion, creativity and commitment to
community that our company has demonstrated during this
pandemic."
Dave Burwick, the Company's
President and CEO stated, "Consistent with the first quarter of
last year, our first quarter shipments volume was significantly
higher than depletions volume as we took active steps to ensure
that our distributor inventory levels are adequate to support
drinker demand. Our depletions growth in the first quarter
was the result of increases in our Truly Hard Seltzer and Twisted
Tea brands and the addition of the Dogfish Head brands that were
only partially offset by decreases in our Angry Orchard and Samuel
Adams brands. The growth of the Truly brand and the recently
launched Truly Hard Lemonade have accelerated and continue to grow
beyond our expectations. Since early January, Truly has
continued to grow its velocity and has maintained its market share
while other national hard seltzer brands have ceded share. We
will continue to invest heavily in the Truly brand and evolve our
brand communications and work to improve our position in the hard
seltzer category, even as more competitors enter. We are
ready to launch an exciting new Truly advertising campaign, but
have postponed the launch due to the uncertainties surrounding
COVID-19. Twisted Tea continues to generate double-digit
volume growth rates that are above full year 2019 trends. We
see significant distribution and volume growth opportunities for
our Truly and Twisted Tea brands and are looking to continue to
expand distribution of our Dogfish Head brand. Pursuing these
opportunities in 2020 remains a top priority. Samuel Adams and Angry Orchard's volumes continue to
decline, as they are more deeply impacted by the on-premise
shutdown. We continue to work hard on returning these brands
to growth, but do not expect them to grow during
2020."
Mr. Burwick went on to say, "We have reacted quickly to COVID-19
and continue to work to control what we can control, with our
primary focus being the safety of our coworkers, distributors,
retailers and drinkers. We have worked aggressively to put in place
many protocols at our breweries, including entrance screening and
temperature checks, face mask requirements, reorganizing work to
increase social distancing between and among shifts, and adding
cleaning time to each shift. Additionally, we closed all of our
hospitality locations beginning on March
13, 2020. We are working hard to rebalance our supply
chain to address additional demand in can and bottle packages at
off-premise retailers against very low demand for kegs given the
shutdown of on-premise venues. This shift in volume mix is likely
to come at a higher incremental cost due to the increased usage of
third-party breweries, which negatively impacts our gross
margin. We have deferred some of our new marketing campaigns,
as we closely assess and manage this situation. Drinker
demand for our brands continues to be very strong, particularly our
Truly and Twisted Tea brands. Our depletions growth through the
9-week period ended February 29, 2020
was approximately 32% from the comparable period in 2019 and we saw
a further acceleration in demand for our brands beginning in the
second half of March. It is not possible for us to estimate
the amount of the new demand that is a temporary reaction to
COVID-19. 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 2020 Summary of Results
Depletions increased 36% from the comparable 13-week period in
the prior year. Shipment volume was approximately 1.4 million
barrels, a 32.2% increase from the comparable 13-week period in the
prior year.
Shipment volume for the quarter was significantly higher than
depletions volume and resulted in significantly higher distributor
inventory as of March 28, 2020 when
compared to March 30, 2019. The
Company believes distributor inventory as of March 28, 2020 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 4 weeks on
hand later in the year.
Gross margin at 44.8% decreased from the 49.5% margin realized
in the first quarter of 2019, primarily as a result of higher
processing costs due to increased production at third party
breweries and higher processing costs and finished goods keg
inventory write-offs at Company-owned breweries of which
$3.6 million was direct costs related
to COVID-19, partially offset by price increases and cost saving
initiatives at Company-owned breweries.
Advertising, promotional and selling expenses increased
$26.2 million compared to the first
quarter of 2019, primarily due to increased investments in media,
production and local marketing, the addition of Dogfish Head
brand-related expenses beginning July 3,
2019, higher salaries and benefits costs and increased
freight to distributors due to higher volumes.
General and administrative expenses increased by $3.7 million from the first quarter of 2019,
primarily due to increases in salaries and benefits costs and the
addition of Dogfish Head general and administrative expenses
beginning July 3, 2019.
Impairment of long-lived assets increased $1.5 million from the first quarter of 2019,
primarily due write-downs of brewery equipment at the Company's
Cincinnati brewery.
During the first quarter, the Company recorded a net income tax
expense of $3.0 million or 14.1%,
which consists of income tax expenses of $5.0 million partially offset by a $2.0 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 23.6% from 26.5% in the first quarter of 2019
primarily due to one-time state tax benefits related to capital
investments.
The Company expects that its March 28,
2020 cash balance of $129.5
million, together with its future operating cash flows and
its available remaining $50.0 million
line of credit, will be sufficient to fund future cash
requirements. The Company drew down $100.0
million from its line of credit in March 2020 to enhance its cash position and
ability to address the impact of the COVID-19 pandemic.
During the first quarter and the period from March 30, 2020 through April 21, 2020, the Company did not repurchase
any shares. As of April 21, 2020, 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 11, 2020 are estimated by the
Company to have increased approximately 32% from the comparable
period in 2019. Excluding the Dogfish Head impact, depletions
increased 27%.
About the Company
The Boston Beer Company, Inc. (NYSE: SAM) began in 1984 brewing
Samuel Adams beer and the Samuel Adams brand is currently
recognized as one of the largest and most respected craft beer
brands. Our portfolio of brands also includes Angry Orchard
Hard Cider, Twisted Tea, Truly Hard Seltzer, Wild Leaf Hard Tea and
Tura Alcoholic Kombucha as well as other craft beer brands such as
Angel City Brewery, Coney Island Brewing, and Concrete Beach
Brewery. On July 3, 2019, the Company
completed its previously reported Dogfish Head Brewery
transaction. Dogfish Head has a proud history as a craft beer
pioneer with a brand that is beloved by American consumers and
highly respected by the industry. 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 28, 2019 and December 29, 2018. Copies of these
documents may be found on the Company's website,
www.bostonbeer.com, or obtained by contacting the Company or
the SEC.
Wednesday, April 22, 2020
THE BOSTON BEER
COMPANY, INC. AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
|
(in thousands, except
per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Thirteen weeks
ended
|
|
|
|
|
March
28,
|
|
March
30,
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
Barrels
sold
|
|
|
1,423
|
|
1,076
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
$
352,225
|
|
$
267,559
|
|
Less excise
taxes
|
|
|
21,660
|
|
15,908
|
|
Net revenue
|
|
|
330,565
|
|
251,651
|
|
Cost of goods
sold
|
|
|
182,592
|
|
127,111
|
|
Gross
profit
|
|
|
147,973
|
|
124,540
|
|
Operating
expenses:
|
|
|
|
|
|
|
Advertising, promotional and selling expenses
|
|
|
97,891
|
|
71,723
|
|
General
and administrative expenses
|
|
|
27,029
|
|
23,374
|
|
Impairment of
assets
|
|
|
1,521
|
|
-
|
|
Total operating
expenses
|
|
|
126,441
|
|
95,097
|
|
Operating
income
|
|
|
21,532
|
|
29,443
|
|
Other (expense)
income, net:
|
|
|
|
|
|
|
Interest income,
net
|
|
|
63
|
|
637
|
|
Other (expense)
income, net
|
|
|
(360)
|
|
(252)
|
|
Total other (expense)
income, net
|
|
|
(297)
|
|
385
|
|
Income before income
tax provision
|
|
|
21,235
|
|
29,828
|
|
Income tax
provision
|
|
|
3,001
|
|
6,134
|
|
Net income
|
|
|
$
18,234
|
|
$
23,694
|
|
|
|
|
|
|
|
|
Net income per common
share - basic
|
|
|
$
1.50
|
|
$
2.04
|
|
Net income per common
share - diluted
|
|
|
$
1.49
|
|
$
2.02
|
|
|
|
|
|
|
|
|
Weighted-average
number of common shares - Class A basic
|
|
|
9,425
|
|
8,606
|
|
Weighted-average
number of common shares - Class B basic
|
|
|
2,645
|
|
2,918
|
|
Weighted-average
number of common shares - diluted
|
|
|
12,186
|
|
11,636
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
18,234
|
|
$
23,694
|
|
Other comprehensive
income:
|
|
|
|
|
|
|
Foreign currency
translation adjustment
|
|
|
(58)
|
|
37
|
|
Comprehensive
income
|
|
|
$
18,176
|
|
$
23,731
|
|
THE BOSTON BEER
COMPANY, INC. AND SUBSIDIARIES
|
CONSOLIDATED
BALANCE SHEETS
|
(in thousands, except
share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
March
28,
|
|
December
28,
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
Assets
|
|
|
|
Current Assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
129,504
|
|
$
36,670
|
Accounts receivable
|
|
|
58,253
|
|
54,404
|
Inventories
|
|
|
124,529
|
|
106,038
|
Prepaid expenses and other current assets
|
|
|
14,894
|
|
12,077
|
Income tax receivable
|
|
|
8,823
|
|
9,459
|
Total current assets
|
|
|
336,003
|
|
218,648
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
|
550,030
|
|
541,068
|
Operating right-of-use
assets
|
|
|
63,039
|
|
53,758
|
Goodwill
|
|
|
112,529
|
|
112,529
|
Intangible assets
|
|
|
104,209
|
|
104,272
|
Other assets
|
|
|
27,754
|
|
23,782
|
Total assets
|
|
|
$
1,193,564
|
|
$
1,054,057
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
Accounts payable
|
|
|
$
92,247
|
|
$
76,374
|
Accrued expenses and other current liabilities
|
|
|
89,078
|
|
99,107
|
Current operating lease liabilities
|
|
|
5,459
|
|
5,168
|
Total current liabilities
|
|
|
186,784
|
|
180,649
|
|
|
|
|
|
|
Deferred income taxes,
net
|
|
|
77,389
|
|
75,010
|
Line of credit
|
|
|
100,000
|
|
-
|
Non-current operating lease
liabilities
|
|
|
63,248
|
|
53,940
|
Other liabilities
|
|
|
7,907
|
|
8,822
|
Total liabilities
|
|
|
435,328
|
|
318,421
|
|
|
|
|
|
|
Commitments and
Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
|
Class A Common Stock, $.01 par value; 22,700,000 shares
authorized;
|
|
|
|
|
|
9,559,200 and 9,370,526 issued and outstanding as of March 28,
2020
|
|
|
|
|
|
and December 28, 2019, respectively
|
|
|
96
|
|
94
|
Class B Common Stock, $.01 par value; 4,200,000 shares
authorized;
|
|
|
|
|
|
2,522,983 and 2,672,983 issued and outstanding as of March 28,
2020
|
|
|
25
|
|
27
|
and December 28, 2019, respectively
|
|
|
|
|
|
Additional paid-in capital
|
|
|
576,208
|
|
571,784
|
Accumulated other comprehensive loss, net of tax
|
|
|
(1,727)
|
|
(1,669)
|
Retained earnings
|
|
|
183,634
|
|
165,400
|
Total stockholders' equity
|
|
|
758,236
|
|
735,636
|
Total liabilities and stockholders' equity
|
|
|
$
1,193,564
|
|
$
1,054,057
|
THE BOSTON BEER
COMPANY, INC. AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF CASHFLOWS
|
(in
thousands)
|
(unaudited)
|
|
|
|
Thirteen weeks
ended
|
|
|
|
March
28,
|
|
March
30,
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
Cash flows
provided by operating activities:
|
|
|
|
|
|
Net income
|
|
|
$
18,234
|
|
$
23,694
|
Adjustments to reconcile net
income to net cash provided by operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
|
15,945
|
|
12,863
|
Impairment of assets
|
|
|
1,521
|
|
-
|
Loss on disposal of property, plant and equipment
|
|
|
-
|
|
271
|
Change in ROU assets
|
|
|
1,807
|
|
859
|
Credit loss expense
|
|
|
552
|
|
-
|
Stock-based compensation expense
|
|
|
2,566
|
|
2,066
|
Deferred income taxes
|
|
|
2,379
|
|
1,029
|
Changes in operating assets
and liabilities:
|
|
|
|
|
|
Accounts receivable
|
|
|
(4,436)
|
|
(20,452)
|
Inventories
|
|
|
(23,856)
|
|
(15,353)
|
Prepaid expenses, income tax receivable and other assets
|
|
|
(884)
|
|
1,336
|
Accounts payable
|
|
|
14,264
|
|
14,400
|
Accrued expenses and other current liabilities
|
|
|
(7,579)
|
|
(6,465)
|
Change in operating lease liability
|
|
|
(1,489)
|
|
(624)
|
Other liabilities
|
|
|
(100)
|
|
19
|
Net cash provided by operating activities
|
|
|
18,924
|
|
13,643
|
|
|
|
|
|
|
Cash flows used in
investing activities:
|
|
|
|
|
|
Purchases of property, plant
and equipment
|
|
|
(27,394)
|
|
(22,080)
|
Proceeds from disposal of
property, plant and equipment
|
|
|
35
|
|
1
|
Other investing
activities
|
|
|
96
|
|
28
|
Net cash used in investing activities
|
|
|
(27,263)
|
|
(22,051)
|
|
|
|
|
|
|
Cash flows
provided by financing activities:
|
|
|
|
|
|
Proceeds from exercise of
stock options and sale of investment shares
|
|
|
2,941
|
|
2,968
|
Net cash paid on note
payable and finance leases
|
|
|
(209)
|
|
(72)
|
Cash borrowed on line of
credit
|
|
|
100,000
|
|
-
|
Payment of tax withholdings
on stock-based payment awards and investment shares
|
|
|
(1,559)
|
|
-
|
Net cash provided by financing activities
|
|
|
101,173
|
|
2,896
|
|
|
|
|
|
|
Change in cash and
cash equivalents
|
|
|
92,834
|
|
(5,512)
|
|
|
|
|
|
|
Cash and cash
equivalents at beginning of year
|
|
|
36,670
|
|
108,399
|
|
|
|
|
|
|
Cash and cash
equivalents at end of period
|
|
|
$
129,504
|
|
$
102,887
|
|
|
|
|
|
|
|
|
|
|
|
|
Copies of The
Boston Beer Company's press releases, including quarterly financial
results,
|
are available
on the Internet at www.bostonbeer.com
|
|
|
|
|
|
|
|
|
|
|
|
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content:http://www.prnewswire.com/news-releases/boston-beer-reports-first-quarter-2020-results-301045566.html
SOURCE The Boston Beer Company, Inc.