Boston Beer Reports Third Quarter 2013 Results
BOSTON,
Earnings per diluted share for the 39-week period ended
Highlights of this release include:
- Depletions grew 26% and 23% from the comparable 13 and 39 week periods in the prior year.
- Third quarter gross margin was 53%; the Company maintains its full-year gross margin target of between 52% and 54%.
- Advertising, promotional and selling expense and customer program and incentive costs increased by a combined
$11.8 million or 25% in the quarter, primarily due to planned increased investments behind the Company's brands. - Full year 2013 depletions growth is now estimated to be between 21% and 24%, an increase from the previously communicated estimate of 17% to 22%.
- Full year 2013 advertising, promotional and selling expense, excluding any increases in freight costs for the shipment of products to the Company's wholesalers, is now estimated to increase between
$26 million and $32 million , up from the previously communicated estimate of between$20 million and $26 million , primarily due to planned increased investments behind the Company's brands. - Full year 2013 estimated earnings per diluted share are now estimated to be between
$5.05 to $5.35 , a decrease from the previously communicated estimated range of between$5.10 to $5.40 due to the land write-down and increased brand investments that are estimated to be partially offset by increased shipment volumes. - Full year 2013 capital spending is now estimated to be between
$100 million and $120 million , a narrowing of the range from the previously communicated estimate of$100 million to $140 million . - Full-year 2014 capital spending is now estimated to be between
$140 million and $180 million , an increase in the range from the previously communicated estimate of$100 million to $130 million .
Mr. Roper went on to say, "I would like to recognize all the employees involved at our breweries and in our operations support groups for their efforts this quarter in supporting our growth. The growth has been challenging operationally and, despite our best efforts, we had product shortages and service issues during most of the quarter. Our supply chain struggled under the increased volume and we experienced increased operational and freight costs as we reacted. We commissioned our new bottling line during the quarter. This line and our new can line are starting to achieve their design capacities and ease our packaging constraints. We have, however, remained tank constrained in our breweries and this is not expected to be resolved for several more weeks. To address these challenges, we initiated significant capital improvements in our breweries that will help support our growth in 2014, once completed. We expect a continued high level of brand investment and capital investment as we pursue growth and innovation. We are prepared to forsake the earnings that may be lost as a result of these investments in the short term, as we pursue long term profitable growth."
Mr. Roper continued, "Alchemy & Science, our craft brew incubator, continues to make progress with its existing brands, which include
Commenting on the Company's Freshest Beer Program, Mr. Roper said, "We currently have 120 wholesalers, representing over 65% of our volume in our Freshest Beer Program and believe this could reach 70% by the end of 2013. The systems and processes supporting Freshest Beer helped us significantly with product allocations during the quarter. We continue to invest in our breweries to improve their support of the Program, particularly during peak selling periods."
3rd Quarter 2013 Summary of Results
Depletions grew 26% from the comparable 13-week period in the prior year, primarily due to increases in the Angry Orchard®, Samuel Adams® and Twisted Tea® brands.
Core shipment volume was approximately 993,000 barrels, a 29% increase over the third quarter of 2012.
Inventory at wholesalers participating in the Freshest Beer Program was lower by an estimated 208,000 cases at
Gross margin at 53% was lower than the 56% realized in the third quarter of 2012. Increased brewery processing costs, increased ingredient costs and product mix effects, and the
Advertising, promotional and selling expenses, excluding the 2013 customer program and incentive costs now reported as a reduction in revenue, were
General and administrative expenses increased
Impairment of long lived assets increased
Year to Date 2013 Summary of Results
Depletions grew by 23% from the comparable 39-week period in 2012, primarily due to increases in the Angry Orchard, Samuel Adams, and Twisted Tea brands.
Core shipment volume was approximately 2.5 million barrels, a 23% increase from the comparable 39-week period in 2012.
Advertising, promotional and selling expenses, excluding the 2013 customer program and incentive costs of
General and administrative expenses increased by
The Company expects that its cash balance of
During the third quarter and the period from
Depletion estimates
Year-to-date depletions through the 42 weeks ended
2013 Outlook
The Company estimates 2013 earnings per diluted share of between
- Depletions and shipments growth of between 21% and 24%.
- Price increases of approximately 1% to partially offset ingredients, packaging, freight and processing cost pressures.
- Full-year 2013 gross margins of between 52% and 54%.
- Increased advertising, promotional and selling expenses for the full year 2013, excluding any increases in freight costs for the shipment of products to the Company's wholesalers, of between
$26 million and $32 million , primarily due to an increase in our investments behind the Company's brands. - Full-year effective tax rate of approximately 38%.
- Full-year 2013 spending on capital investments is now estimated to be between
$100 million and $120 million , consisting mostly of continued investments in the Company's breweries and additional keg purchases in support of growth.
2014 Outlook
The Company is completing its 2014 planning process and will provide further detailed guidance when the Company presents its full-year 2013 results. The Company is currently using the following preliminary assumptions and targets for 2014:
- Depletions and shipments percentage growth in the mid-teens.
- National price increases of between 2% and 3% to offset anticipated upward pressures on ingredients, packaging and freight costs, as well as increased investments behind the Company's brands.
- Full-year 2014 gross margins of between 52% and 54%.
- Increased investment in advertising, promotional and selling expenses of between
$34 million and $42 million for the full year 2014. This does not include any increases in freight costs for the shipment of products to the Company's wholesalers. - Increased expenditures of between
$3 million to $5 million for continued investment in Alchemy & Science brands, which are included in our full-year estimated increases in advertising, promotional and selling expenses. Brand investments in the Alchemy & Science brands could vary significantly from current estimates. - Full-year effective tax rate of approximately 38%.
- Estimated full-year 2014 capital spending of between
$140 million and $180 million .
About the Company
The
Today, the Company brews over 50 styles of beer. The Company uses the traditional four vessel brewing process and often takes extra steps like dry-hopping and a secondary fermentation known as krausening. It passionately pursues the development of new styles and the perfection of its classic beers by constantly searching for the world's finest ingredients. While resurrecting traditional brewing methods, the Company has earned a reputation as a pioneer in another revolution, the "extreme beer" movement, where it seeks to challenge drinkers' perceptions of what beer can be. The
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
THE BOSTON BEER COMPANY, INC. |
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Financial Results |
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Consolidated Statements of Comprehensive Income: |
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(in thousands, except per share data) |
(unaudited) |
(unaudited) |
||||||
September, 28 |
September 29, |
September, 28 |
September 29, |
|||||
2013 |
2012 |
2013 |
2012 |
|||||
(13 weeks) |
(13 weeks) |
(39 weeks) |
(39 weeks) |
|||||
Barrels sold |
995 |
778 |
2,473 |
2,013 |
||||
Revenue |
$ 231,788 |
$ 180,413 |
$ 573,139 |
$ 463,033 |
||||
Less excise taxes |
15,374 |
13,965 |
39,461 |
35,811 |
||||
Net revenue |
216,414 |
166,448 |
533,678 |
427,222 |
||||
Cost of goods sold |
101,035 |
73,206 |
253,384 |
191,788 |
||||
Gross profit |
115,379 |
93,242 |
280,294 |
235,434 |
||||
Operating expenses: |
||||||||
Advertising, promotional and selling expenses |
56,096 |
47,639 |
149,723 |
130,202 |
||||
General and administrative expenses |
15,744 |
12,293 |
45,298 |
36,636 |
||||
Impairment of long-lived assets |
1,300 |
- |
1,300 |
- |
||||
Total operating expenses |
73,140 |
59,932 |
196,321 |
166,838 |
||||
Operating income |
42,239 |
33,310 |
83,973 |
68,596 |
||||
Other (expense) income, net: |
||||||||
Interest income |
30 |
24 |
22 |
23 |
||||
Other (expense) income, net |
(57) |
20 |
(399) |
(2) |
||||
Total other (expense) income, net |
(27) |
44 |
(377) |
21 |
||||
Income before income tax provision |
42,212 |
33,354 |
83,596 |
68,617 |
||||
Provision for income taxes |
16,526 |
12,604 |
31,283 |
26,023 |
||||
Net income |
$ 25,686 |
$ 20,750 |
$ 52,313 |
$ 42,594 |
||||
Net income per common share - basic |
$ 2.00 |
$ 1.60 |
$ 4.07 |
$ 3.30 |
||||
Net income per common share - diluted |
$ 1.89 |
$ 1.53 |
$ 3.85 |
$ 3.14 |
||||
Weighted-average number of common shares -Class A basic |
8,730 |
8,715 |
8,734 |
8,683 |
||||
Weighted-average number of common shares - Class B basic |
4,007 |
4,107 |
4,039 |
4,107 |
||||
Weighted-average number of common shares - diluted |
13,498 |
13,452 |
13,488 |
13,436 |
||||
Other comprehensive income, net of tax: |
||||||||
Defined benefit plans liability adjustment |
- |
- |
- |
- |
||||
Comprehensive income |
$ 25,686 |
$ 20,750 |
$ 52,313 |
$ 42,594 |
THE BOSTON BEER COMPANY, INC. |
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Financial Results |
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Consolidated Balance Sheets: |
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(in thousands, except share data) |
(unaudited) |
|||||
September 28, |
December 29, |
|||||
2013 |
2012 |
|||||
Assets |
||||||
Current Assets: |
||||||
Cash and cash equivalents |
$ 43,726 |
$ 74,463 |
||||
Accounts receivable, net of allowance for doubtful accounts of $84 and |
||||||
$125 as of September 28, 2013 and December 29, 2012, respectively |
52,574 |
31,479 |
||||
Inventories |
59,513 |
44,361 |
||||
Prepaid expenses and other assets |
11,621 |
6,628 |
||||
Deferred income taxes |
5,938 |
5,411 |
||||
Total current assets |
173,372 |
162,342 |
||||
Property, plant and equipment, net |
248,364 |
189,948 |
||||
Other assets |
7,009 |
4,656 |
||||
Goodwill |
3,683 |
2,538 |
||||
Total assets |
$ 432,428 |
$ 359,484 |
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Liabilities and Stockholders' Equity |
||||||
Current Liabilities: |
||||||
Accounts payable |
$ 40,696 |
$ 28,303 |
||||
Current portion of debt and capital lease obligations |
53 |
62 |
||||
Accrued expenses and other current liabilities |
84,397 |
60,529 |
||||
Total current liabilities |
125,146 |
88,894 |
||||
Deferred income taxes |
20,877 |
20,463 |
||||
Debt and capital lease obligations, less current portion |
584 |
566 |
||||
Other liabilities |
4,400 |
4,470 |
||||
Total liabilities |
151,007 |
114,393 |
||||
Commitments and Contingencies |
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Stockholders' Equity: |
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Class A Common Stock, $.01 par value; 22,700,000 shares authorized; |
||||||
8,730,663 and 8,703,670 issued and outstanding as of September 28, 2013 |
||||||
and December 29, 2012, respectively |
87 |
87 |
||||
Class B Common Stock, $.01 par value; 4,200,000 shares authorized; |
||||||
4,007,355 and 4,107,355 issued and outstanding as of September 28, 2013 |
40 |
41 |
||||
and December 29, 2012, respectively |
||||||
Additional paid-in capital |
170,907 |
157,305 |
||||
Accumulated other comprehensive loss, net of tax |
(883) |
(883) |
||||
Retained earnings |
111,270 |
88,541 |
||||
Total stockholders' equity |
281,421 |
245,091 |
||||
Total liabilities and stockholders' equity |
$ 432,428 |
$ 359,484 |
THE BOSTON BEER COMPANY, INC. |
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Financial Results |
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Consolidated Statements of Cash Flows: |
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(in thousands) |
(unaudited) |
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September 28, |
September 29, |
|||||
2013 |
2012 |
|||||
(39 weeks) |
(39 weeks) |
|||||
Cash flows provided by operating activities: |
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Net income |
$ 52,313 |
$ 42,594 |
||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||
Depreciation and amortization |
18,485 |
14,888 |
||||
Impairment of long-lived assets |
1,300 |
- |
||||
Loss on disposal of property, plant and equipment |
329 |
85 |
||||
Bad debt expense (recovery) |
(41) |
3 |
||||
Stock-based compensation expense |
5,763 |
5,181 |
||||
Excess tax benefit from stock-based compensation arrangements |
(4,990) |
(7,278) |
||||
Deferred income taxes |
(113) |
115 |
||||
Changes in operating assets and liabilities, net of effects of acquisition: |
||||||
Accounts receivable |
(21,054) |
(10,900) |
||||
Inventories |
(15,152) |
(4,068) |
||||
Prepaid expenses and other assets |
(5,715) |
1,607 |
||||
Accounts payable |
7,070 |
7,664 |
||||
Accrued expenses and other current liabilities |
28,815 |
15,250 |
||||
Other liabilities |
(131) |
(350) |
||||
Net cash provided by operating activities |
66,879 |
64,791 |
||||
Cash flows used in investing activities: |
||||||
Purchases of property, plant and equipment |
(73,101) |
(49,514) |
||||
Cash paid for acquisition of brewery assets and other intangible asset |
(2,753) |
(1,625) |
||||
Decrease (increase) in restricted cash |
62 |
(628) |
||||
Proceeds from disposal of property, plant and equipment |
- |
41 |
||||
Net cash used in investing activities |
(75,792) |
(51,726) |
||||
Cash flows (used in) provided by financing activities: |
||||||
Repurchase of Class A Common Stock |
(29,586) |
(12,569) |
||||
Proceeds from exercise of stock options |
2,269 |
4,370 |
||||
Proceeds from note payable |
- |
628 |
||||
Cash paid on notes payable and capital lease |
(244) |
- |
||||
Excess tax benefit from stock-based compensation arrangements |
4,990 |
7,278 |
||||
Net proceeds from sale of investment shares |
747 |
614 |
||||
Net cash (used in) provided by financing activities |
(21,824) |
321 |
||||
Change in cash and cash equivalents |
(30,737) |
13,386 |
||||
Cash and cash equivalents at beginning of year |
74,463 |
49,450 |
||||
Cash and cash equivalents at end of period |
$ 43,726 |
$ 62,836 |
||||
Supplemental disclosure of cash flow information: |
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Income taxes paid |
$ 17,180 |
$ 9,173 |
||||
Acquisition of property and equipment under capital lease |
$ 252 |
$ - |
||||
Allocation of purchase consideration to brewery acquisition to the following assets: |
||||||
Property, plant and equipment |
- |
338 |
||||
Tradename |
1,608 |
401 |
||||
Goodwill |
$ 1,145 |
$ 1,161 |
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Copies of The Boston Beer Company's press releases, including quarterly financial results, |
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are available on the Internet at www.bostonbeer.com |
SOURCE
Investor Relations Contact: Amanda Hurley, (617) 368-5075; Media Contact: Jessica Paar, (617) 368-5060