BOSTON, July 21, 2016 /PRNewswire/
-- The Boston Beer Company, Inc. (NYSE: SAM) reported second
quarter 2016 net revenue of $244.8
million, a decrease of $7.4
million or 3%, from the same period last year, mainly due to
a decline in shipments of 4%, partially offset by price increases.
Net income for the second quarter was $26.6 million, or $2.06 per diluted share, a decrease of
$3.3 million or $0.12 per diluted share, from the second quarter
of 2015. This decrease was primarily due to decreases in net
revenue, a decrease in gross margins and increases in general and
administrative expenses, that were only partially offset by
decreased advertising, promotional and selling expenses.
Earnings per diluted share for the 26-week period ended
June 25, 2016 were $2.58, a decrease of $0.60 from the comparable 26-week period in
2015. Net revenue for the 26-week period ended June 25, 2016 was $433.6
million, a decrease of $18.1
million, or 4%, from the comparable 26-week period in
2015.
Highlights of this release include:
- Depletions decreased 5% and 5% from the comparable 13 and 26
week periods in the prior year.
- Gross margin was 51.8% for the second quarter and 50.4% for
first half of the year, and the Company now estimates its full year
gross margin target of between 50% and 52%, a decrease of the range
from the previously communicated estimate of between 51% and
53%.
- Advertising, promotional and selling expense decreased by
$8.1 million or 11% in the second
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 4% and zero, a narrowing of the
range from the previously communicated estimate of between minus 4%
and plus 2%.
- Full-year 2016 earnings per diluted share are now estimated at
between $6.40 and $7.00, a decrease
and narrowing of the range from the previously communicated
estimate of $6.50 to $7.30.
- Full-year 2016 capital spending is now estimated to be between
$60 million and $70 million, a
narrowing of the range from the previously communicated estimate of
$50 million to $70 million.
Jim Koch, Chairman and Founder of
the Company, commented, "Our total company depletion trends
declined in the second quarter at a rate consistent with the first
quarter trends, even as the better beer and craft categories appear
healthy. Our Samuel Adams brand lost share of craft due to the
increased competition and continued growth of drinker interest in
trying new styles. While the launches of our new beers,
including the Samuel Adams Nitro Project and Samuel Adams Rebel
Grapefruit IPA, have been successful and well-received, they have
not offset declines in Samuel Adams Boston
Lager and our Samuel Adams seasonal beers. Despite
these declines, we continue to believe that we are well positioned
to meet the longer term challenges of this competitive environment,
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."
Martin Roper, the Company's
President and CEO stated, "In the second quarter and first half of
the year, our depletions volume was significantly below our
expectations, primarily due to decreases in our Samuel Adams, Angry
Orchard and Traveler brands that were only partially offset by
increases in our Twisted Tea, Coney Island and Truly Spiked &
Sparkling brands. We are encouraged by recent improvements in
depletion trends that we have seen since the middle of June, but
it's too early to determine if these improvements are
sustainable. For the rest of the year we should start to see
more favorable hard cider comparisons and a greater impact from
Truly Spiked & Sparkling, but the trends for larger craft beer
brands and the hard cider category, and the full impact of our new
brand introductions remain difficult to predict. Accordingly, we
have adjusted our expectations for full-year depletions growth and
our earnings guidance to reflect our first half trends. Our lower
volume expectations have increased our focus and urgency on cost
savings and driving efficiencies throughout the organization. We
are evaluating all our opportunities to better fit the current
volume environment, while preserving our quality and service
levels, and our ability to support long term growth. Some of
these cost savings and efficiency improvements will benefit this
year, but most will start delivering next year. We remain prepared
to forsake short term earnings, as we strive to return to long term
profitable growth."
Mr. Roper went on to say, "We are working hard to improve the
Sam Adams brand trends and in the second half of the year we expect
to introduce new packaging and advertising to support our planned
promotional activity. We recently hired Jonathan Potter, who will start in August, as
our Chief Marketing Officer. We are excited about this important
addition to our leadership team. We are focused on sales
execution and a full review of our brand messaging and packaging on
all our brands, and on continued innovation for existing brands and
new growth opportunities. We believe the recent Angry Orchard
declines are not indicative of the long term potential of the hard
cider category and we are happy that Angry Orchard has maintained a
very high share. We plan to invest to help return the hard cider
category and Angry Orchard to growth while maintaining our category
leadership. The national rollout of our Truly Spiked &
Sparkling brand is currently in progress and has been
well-supported by distributors, retailers and drinkers. We are
pleased with progress and volumes to date. We plan to support this
national rollout with media during the third quarter, and will
increase investment above current planned levels if we see a
positive response. It is too early to tell how successful the
national rollout of Truly Spiked & Sparkling will be."
2nd Quarter 2016 Summary of Results
Depletions decreased 5% from the comparable 13-week period in
2015.
Shipment volume was approximately 1.1 million barrels, a 4%
decrease from the comparable 13-week period in 2015.
The Company believes distributor inventory levels at
June 25, 2016 were appropriate.
Inventory at distributors participating in the Freshest Beer
Program at June 25, 2016 decreased
slightly in terms of days of inventory on hand when compared to
June 27, 2015. The Company has
approximately 75% of its volume on the Freshest Beer Program.
Gross margin at 51.8% represented a decrease from the 54.0%
margin realized in the second quarter of 2015, primarily due to
increased brewery processing costs per barrel and product mix
effects, partially offset by price increases.
Advertising, promotional and selling expenses decreased
$8.1 million from the comparable
13-week period in 2015, primarily due to lower media spending and
decreases in freight to distributors due to lower volume and lower
freight rates, partially offset by increases in point of sale.
General and administrative expenses increased by $3.8 million from the comparable 13-week period
in 2015, primarily due to increases in stock compensation, salaries
and benefits and facilities costs.
Year-to-Date 2016 Summary of Results
Depletions decreased 5% from the comparable 26-week period in
2015, reflecting decreases in the Company's Samuel Adams, Angry
Orchard and Traveler brands, partially offset by increases in its
Twisted Tea, Coney Island and Truly Spiked & Sparkling
brands.
Shipment volume was approximately 1.9 million barrels, a 5%
decrease from the comparable 26-week period in 2015.
Advertising, promotional and selling expenses decreased
$9.1 million from the comparable
26-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 $7.6 million from the comparable 26-week period
in 2015, primarily due to increases in stock compensation, salaries
and benefits and facilities costs.
The Company expects that its June 25,
2016 cash balance of $27.6
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 26-week period ended June 25,
2016 and the period from June 26,
2016 through July 16, 2016,
the Company repurchased approximately 743,000 shares of its Class A
Common Stock for an aggregate purchase price of approximately
$127.7 million. As of
July 16, 2016 the Company had
approximately $12.2 million remaining
on the $586.0 million share buyback
expenditure limit set by the Board of Directors.
Depletion estimates
Year-to-date depletions through the 28-week period ended
July 9, 2016 are estimated by the
Company to have decreased approximately 4% from the comparable
period in 2015.
Outlook
The Company currently projects full year 2016 earnings per
diluted share to be between $6.40 and
$7.00. 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 4%
and zero.
- Price increases of between 1% and 2%.
- Gross margin of between 50% and 52%.
- Change in investment in advertising, promotional and selling
expenses of between a decrease of $5
million and an increase of $5
million, a decrease in the range from the previously
communicated estimate of an increase of between zero and
$10 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 36.3%.
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 Alchemy & Science, 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
|
|
Twenty-six weeks
ended
|
|
|
|
June
25,
|
|
June
27,
|
|
June
25,
|
|
June
27,
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Barrels
sold
|
|
|
1,080
|
|
1,125
|
|
1,914
|
|
2,014
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
$
261,225
|
|
$
268,721
|
|
$
463,233
|
|
$
481,555
|
Less excise
taxes
|
|
|
16,409
|
|
16,517
|
|
29,590
|
|
29,848
|
Net revenue
|
|
|
244,816
|
|
252,204
|
|
433,643
|
|
451,707
|
Cost of goods
sold
|
|
|
117,940
|
|
115,979
|
|
215,236
|
|
215,866
|
Gross
profit
|
|
|
126,876
|
|
136,225
|
|
218,407
|
|
235,841
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
Advertising, promotional and selling expenses
|
|
|
63,252
|
|
71,370
|
|
122,501
|
|
131,618
|
General
and administrative expenses
|
|
|
21,836
|
|
18,036
|
|
42,881
|
|
35,265
|
Total operating
expenses
|
|
|
85,088
|
|
89,406
|
|
165,382
|
|
166,883
|
Operating
income
|
|
|
41,788
|
|
46,819
|
|
53,025
|
|
68,958
|
Other income
(expense), net:
|
|
|
|
|
|
|
|
|
|
Interest income
(expense), net
|
|
|
20
|
|
11
|
|
43
|
|
7
|
Other income
(expense), net
|
|
|
(206)
|
|
54
|
|
(425)
|
|
(271)
|
Total other income
(expense), net
|
|
|
(186)
|
|
65
|
|
(382)
|
|
(264)
|
Income before income
tax provision
|
|
|
41,602
|
|
46,884
|
|
52,643
|
|
68,694
|
Provision for income
taxes
|
|
|
14,981
|
|
16,952
|
|
18,990
|
|
25,019
|
Net income
|
|
|
$
26,621
|
|
$
29,932
|
|
$
33,653
|
|
$
43,675
|
|
|
|
|
|
|
|
|
|
|
Net income per common
share - basic
|
|
|
$
2.11
|
|
$
2.24
|
|
$
2.65
|
|
$
3.28
|
Net income per common
share - diluted
|
|
|
$
2.06
|
|
$
2.18
|
|
$
2.58
|
|
$
3.18
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
number of common shares - Class A basic
|
9,181
|
|
9,748
|
|
9,278
|
|
9,673
|
Weighted-average
number of common shares - Class B basic
|
3,367
|
|
3,532
|
|
3,367
|
|
3,575
|
Weighted-average
number of common shares - diluted
|
12,830
|
|
13,667
|
|
12,959
|
|
13,650
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
26,621
|
|
$
29,932
|
|
$
33,653
|
|
$
43,675
|
Other comprehensive
income, net of tax:
|
|
|
|
|
|
|
|
|
|
Foreign currency
translation adjustment
|
|
|
(88)
|
|
(5)
|
|
(92)
|
|
1
|
Comprehensive
income
|
|
|
$
26,533
|
|
$
29,927
|
|
$
33,561
|
|
$
43,676
|
|
|
|
|
|
|
|
|
|
|
THE BOSTON BEER
COMPANY, INC. AND SUBSIDIARIES
|
CONSOLIDATED
BALANCE SHEETS
|
(in thousands, except
share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
June
25,
|
|
December
26,
|
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
Assets
|
|
|
|
Current Assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
27,580
|
|
$
94,193
|
Accounts receivable, net of allowance for doubtful accounts of $189
and
|
|
|
|
$244 as of June 25, 2016 and December 26, 2015,
respectively
|
56,694
|
|
38,984
|
Inventories
|
|
|
61,245
|
|
56,462
|
Prepaid expenses and other current assets
|
|
|
12,402
|
|
12,053
|
Income tax receivable
|
|
|
3,476
|
|
14,928
|
Deferred income taxes
|
|
|
6,923
|
|
6,983
|
Total current assets
|
|
|
168,320
|
|
223,603
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
|
411,866
|
|
409,926
|
Other assets
|
|
|
6,704
|
|
8,188
|
Goodwill
|
|
|
3,683
|
|
3,683
|
Total assets
|
|
|
$
590,573
|
|
$
645,400
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
Accounts payable
|
|
|
$
41,593
|
|
$
42,718
|
Current portion of debt and capital lease obligations
|
|
|
60
|
|
58
|
Accrued expenses and other current liabilities
|
|
|
69,485
|
|
68,384
|
Total current liabilities
|
|
|
111,138
|
|
111,160
|
|
|
|
|
|
|
Deferred income
taxes
|
|
|
57,316
|
|
56,001
|
Debt and capital lease
obligations, less current portion
|
|
|
411
|
|
471
|
Other liabilities
|
|
|
9,476
|
|
16,547
|
Total liabilities
|
|
|
178,341
|
|
184,179
|
|
|
|
|
|
|
Commitments and
Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
|
Class A Common Stock, $.01 par value; 22,700,000 shares
authorized;
|
|
|
|
9,009,571 and 9,389,005 issued and outstanding as of June 25,
2016
|
|
|
|
and December 26, 2015, respectively
|
|
|
90
|
|
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 June 25,
2016
|
34
|
|
34
|
and December 26, 2015, respectively
|
|
|
|
|
|
Additional paid-in capital
|
|
|
332,218
|
|
290,096
|
Accumulated other comprehensive loss, net of tax
|
|
|
(1,043)
|
|
(951)
|
Retained earnings
|
|
|
80,933
|
|
171,948
|
Total stockholders' equity
|
|
|
412,232
|
|
461,221
|
Total liabilities and stockholders' equity
|
|
|
$
590,573
|
|
$
645,400
|
|
|
|
|
|
|
THE BOSTON BEER
COMPANY, INC. AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF CASHFLOWS
|
(in
thousands)
|
(unaudited)
|
|
|
|
Twenty-six weeks
ended
|
|
|
|
June
25,
|
|
June
27,
|
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
Cash flows
provided by operating activities:
|
|
|
|
|
|
Net income
|
|
|
$
33,653
|
|
$
43,675
|
Adjustments to reconcile net
income to net cash provided by operating activities:
|
|
|
|
|
Depreciation and amortization
|
|
|
24,473
|
|
20,455
|
Impairment of assets
|
|
|
37
|
|
-
|
Loss on disposal of property, plant and equipment
|
|
|
511
|
|
339
|
Bad debt recovery
|
|
|
(55)
|
|
(49)
|
Stock-based compensation expense
|
|
|
5,741
|
|
3,632
|
Excess tax benefit from stock-based compensation
arrangements
|
|
|
(5,840)
|
|
(12,847)
|
Deferred income taxes
|
|
|
1,375
|
|
1,862
|
Changes in operating assets
and liabilities:
|
|
|
|
|
|
Accounts receivable
|
|
|
(17,655)
|
|
(15,666)
|
Inventories
|
|
|
(4,783)
|
|
(5,812)
|
Prepaid expenses, income tax receivable and other assets
|
|
|
12,394
|
|
33,201
|
Accounts payable
|
|
|
(1,995)
|
|
11,570
|
Accrued expenses and other current liabilities
|
|
|
6,967
|
|
(2,430)
|
Other liabilities
|
|
|
(6,504)
|
|
424
|
Net cash provided by operating activities
|
|
|
48,319
|
|
78,354
|
|
|
|
|
|
|
Cash flows used in
investing activities:
|
|
|
|
|
|
Purchases of property, plant
and equipment
|
|
|
(25,954)
|
|
(38,880)
|
Cash paid for acquisition of
intangible assets
|
|
|
-
|
|
(100)
|
Decrease in restricted
cash
|
|
|
56
|
|
57
|
Net cash used in investing activities
|
|
|
(25,898)
|
|
(38,923)
|
|
|
|
|
|
|
Cash flows (used
in) provided by financing activities:
|
|
|
|
|
|
Repurchase of Class A Common
Stock
|
|
|
(124,675)
|
|
(22,782)
|
Proceeds from exercise of
stock options
|
|
|
29,521
|
|
40,332
|
Cash paid on note
payable
|
|
|
(58)
|
|
(54)
|
Excess tax benefit from
stock-based compensation arrangements
|
|
|
5,840
|
|
12,847
|
Net proceeds from sale of
investment shares
|
|
|
338
|
|
807
|
Net cash (used in) provided by financing activities
|
|
|
(89,034)
|
|
31,150
|
|
|
|
|
|
|
Change in cash and
cash equivalents
|
|
|
(66,613)
|
|
70,581
|
|
|
|
|
|
|
Cash and cash
equivalents at beginning of year
|
|
|
94,193
|
|
76,402
|
|
|
|
|
|
|
Cash and cash
equivalents at end of period
|
|
|
$
27,580
|
|
$
146,983
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
Income taxes
paid
|
|
|
$
8,655
|
|
$
9,738
|
Income taxes
refunded
|
|
|
$
12,000
|
|
$
17,226
|
Increase (Decrease) in
accounts payable for purchase of property, plant and
equipment
|
$
870
|
|
$
(1,134)
|
|
|
|
|
|
|
|
|
|
|
|
|
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-second-quarter-2016-results-300302324.html
SOURCE The Boston Beer Company, Inc.