Hospitality News

Share |

Boston Beer Reports Record Second Quarter Depletions

Boston Beer Reports Record Second Quarter Depletions

BOSTON, Aug. 3 - The Boston Beer Company, Inc. (NYSE:SAM) reported a second quarter core product depletions increase of 13% as compared to the second quarter of 2009.  Net income for the second quarter was $16.3 million, or $1.13 per diluted share, an increase of $4.4 million, or $0.30 per diluted share, from the second quarter of 2009, primarily due to increased core shipment volume, partially offset by increased selling expenses.  Net revenue for the second quarter of 2010 was $129.6 million, an increase of $11.5 million, or 10%, over the same period last year, mainly due to increases in core products shipment volume.

Jim Koch, Chairman and founder of the Company, commented, “We achieved depletions growth of 13% in the second quarter.  This record second quarter for depletions is due to our strong sales execution and continued support from our wholesalers and retailers.  While we are pleased with the results, we believe some of the increase benefitted from an easy comparison to the second quarter of 2009, which was up only 2% compared to the second quarter of 2008.  We continue to see expanded distribution of domestic specialty brands and local craft brands, which is increasing competition in the category.  We are happy with the health of our brand portfolio and remain positive about the future of craft beer.”

  Key highlights of the second quarter were:
— Depletions growth of 13% for the quarter and 13% year to date.
— Core shipments increase of 9% for the quarter and 13% year to date.
— Core gross margin improvement for the quarter to 56% from 53% in the
    prior year.
— Total selling, general and administrative expense increase of $5.0
    million in the second quarter, reflecting increased investment behind
    the Company’s brands.
— Second quarter earnings per diluted share of $1.13.

Based on the stronger than expected first half, the Company has increased its range of estimated earnings per diluted share for 2010 to $2.85 to $3.15 from a previously communicated range of $2.65 to $2.95.

Martin Roper, the Company’s President and CEO, stated, “We believe we executed well in the first half of the year and that the business may have responded to our increased investments in local marketing and media advertising and increases in sales force personnel.  However, there appeared to be slowing trends towards the end of the second quarter, due to tougher comparisons and the timing of certain promotional activities.  We therefore believe it is unlikely that depletions will continue at the first half growth rate for the remainder of the year, but we are working hard to maintain these trends. We have raised our full year depletions targets and earnings per share range based on the strong quarter and our current expectations of future trends.  As we look forward to 2011, we are evaluating increasing our investments in brand support in order to grow our brands appropriately given the opportunities we see.  It is possible that these decisions might result in slower earnings growth, as we may forsake some earnings in the short term in order to build our organizational capabilities and increase brand spending.”

2nd Quarter Results

Core shipment volume for the three months ended June 26, 2010 was approximately 627,000 barrels, a 9% increase versus the same period in 2009.  The increase in shipments for the quarter is due to double-digit increases in Twisted Tea® and Samuel Adams® Seasonals, as well as increases in Samuel Adams Boston Lager® and the Samuel Adams® Brewmaster’s Collection.  Total Company depletions in the second quarter increased 13%, driven by double-digit increases in Twisted Tea®, Samuel Adams® Seasonals and the Samuel Adams® Brewmaster’s Collection, as well as increases in Samuel Adams Boston Lager®.

Bill Urich, Boston Beer Company CFO, said, “Our second quarter 2010 gross margin of 56% represented an increase of 3 percentage points over our second quarter 2009 gross margin.  The increase reflects the lower brewing and packaging costs per core barrel at our Pennsylvania Brewery resulting from our cost savings initiatives, and pricing increases of approximately 1%, as well as the fact that the 2009 second quarter had some lower margin contract production for Diageo North America, Inc.”

Mr. Urich continued, “We continue to maintain a strong cash position, with $53.7 million in cash as of June 26, 2010.  This is an increase of approximately $15.0 million from the first quarter balance, despite repurchasing approximately $16.7 million of shares under the stock repurchase program during the quarter.”

The Company’s net income of $16.3 million, or $1.13 per diluted share, for the three months ended June 26, 2010 represents an increase of $4.4 million, or $0.30 per diluted share, from the same period last year.  The increase in net income is primarily due to increases in core products shipment volume, partially offset by higher selling expenses.  Second quarter 2010 advertising, promotional and selling expenses were $3.9 million higher than those incurred in the second quarter of 2009, primarily as a result of increased investments in point of sale materials, local marketing, radio advertising and the Company’s sales force, partially offset by lower television advertising costs. General and administrative expenses increased $1.1 million during the quarter as compared to the prior year, due to increased stock compensation expense, as a result of the increase in the market price of the Company’s stock, and legal fees.  The Company’s effective tax rate for the second quarter of 2010 decreased to 39% from the second quarter 2009 rate of 44%, as a result of higher pretax income but with no corresponding increase in nondeductible expenses.

Year to Date Results

Core shipment volume for the six month period ended June 26, 2010 was 1,081,000 barrels, a 13% increase from the same period in the prior year.  The increase in shipments for the first half of the year is due to double-digit increases in Twisted Tea®, Samuel Adams® Seasonals and Samuel Adams Boston Lager®.  In the first half of 2010, total Company depletions increased 13%, due to double-digit increases in Twisted Tea®, Samuel Adams® Seasonals, and the Samuel Adams® Brewmaster’s Collection, as well as increases in Samuel Adams Boston Lager®.

The Company’s net income of $22.5 million, or $1.57 per diluted share, for the six months ended June 26, 2010 represents an increase of $9.2 million, or $0.64 per diluted share, compared to the same period last year.  The increase in net income is primarily due to increases in core shipment volume, partially offset by higher selling expenses.  Advertising, promotional and selling expenses incurred during the first half of the year increased by $7..1 million as compared to the prior year, primarily due to increased investments in radio advertising, local marketing, point of sale materials and the Company’s sales force, offset by lower television advertising costs.  General and administrative costs increased by $0.8 million during the first half of 2010 as compared to 2009, due to increases in legal expenses, stock compensation expense due to the increased market price of the Company’s stock, and salaries and benefits, partially offset by the reversal of stock compensation expense for an option that did not vest and a decrease in administrative expenses at the Pennsylvania Brewery.  The Company’s effective tax rate for the first half of 2010 decreased to 39% from the first half 2009 rate of 45%, as a result of higher pretax income but with no corresponding increase in nondeductible expenses.  The Company expects its full year tax rate to be approximately 39%.

Other matters

Year-to-date depletions through July 2010 are estimated by the Company to be up approximately 11% from the same period in 2009, with one less selling day in the July 2010 comparable period.  Shipments and orders in-hand suggest that core shipments year-to-date through August 2010 will be up approximately 14% compared to the same period in 2009.  Actual shipments may differ and no inferences should be drawn with respect to shipments in future periods.  The Company believes inventories at wholesalers at the end of the second quarter were at appropriate levels given the current volumes and trends..

Based on information of which the Company is currently aware, the Company is increasing its projected 2010 earnings per diluted share range to $2.85 to $3.15.  The Company currently projects full-year depletions growth of between 8% and 10%, based on its analysis of year-to-date depletions versus 2009 and 2008.  The Company continues to believe that the current competitive pricing environment is very challenging and projects full-year price increases of between 1% and 2% through minor price optimizations, as the competitive environment permits, but there can be no assurances that the Company will be able to achieve the planned revenue per barrel increases.  The Company continues to forecast cost stability for packaging and ingredients and currently believes that full year 2010 gross margins will be approximately 54%.  The Company is committed to trying to grow market share and to maintain volume and healthy pricing, and is prepared to invest to accomplish this, even if this causes short term earnings decreases.

The Company continues to evaluate 2010 capital expenditures and, based on current information, now expects them to be between $12.0 million and $18.0 million, primarily for continued investments in the Pennsylvania Brewery, as the Company pursues further efficiency initiatives and equipment upgrades, as well as additional keg purchases to support continued growth.  The actual amount spent may well be different from these estimates as the Company continues to analyze its investment opportunities.

The Company expects that its cash balance as of June 26, 2010 of $53.7 million, along with future operating cash flow and the Company’s unused line of credit of $50.0 million, will be sufficient to fund future anticipated cash requirements.  On June 14, 2010, the Company extended the term of its credit facility for a period of two years, so that the expiration date is now March 31, 2015.  The Company continues to be in compliance with all of the covenants under its credit facility.

During the six months ended June 26, 2010, the Company repurchased approximately 549,800 shares of its Class A Common Stock for a total cost of $30.2 million.  On July 28, 2010, the Board of Directors approved an increase of $25.0 million to the previously approved $165.0 million share buyback expenditure limit, for a new limit of $190.0 million.  From June 27, 2010 through July 30, 2010, the Company repurchased an additional 128,000 shares of its Class A Common Stock for a total cost of $8.7 million.  Through July 30, 2010, the Company has repurchased a cumulative total of approximately 9.3 million shares of its Class A Common Stock for an aggregate purchase price of $160.1 million.  The Company has approximately $29.9 million remaining on the $190.0 million share buyback expenditure limit set by the Board of Directors.  As of July 30, 2010, the Company had 9.7 million shares of Class A Common Stock and 4.1 million shares of Class B Common Stock outstanding.

The Boston Beer Company began in 1984 with a generations-old family recipe that Founder and Brewer Jim Koch uncovered in his father’s attic. After bringing the recipe to life in his kitchen, Jim brought it to bars in Boston with the belief that drinkers would appreciate a complex, full-flavored beer, brewed fresh in America. That beer was Samuel Adams Boston Lager®, and it helped catalyze what became known as the American craft beer revolution.

Today, the Company brews more than 21 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 Boston Beer Company strives to elevate the image of American craft beer by entering festivals and competitions the world over, and in the past five years it has won more awards in international beer competitions than any other brewery in the world. The Company remains independent, and brewing quality beer remains its single focus. While the Company is the country’s largest-selling craft beer, it accounts for only about nine-tenths of one percent of the U.S. beer market. For more information, please visit http://www.samueladams.com.

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, 2009 and December 27, 2008.  Copies of these documents may be found on the Company’s website, http://www.bostonbeer.com, or obtained by contacting the Company or the SEC.

                        THE BOSTON BEER COMPANY, INC.
                            Financial Results

  Operating Results:
  (in thousands, except per share
    data)                            (unaudited)
                                Three Months Ended
                                ——
                              June 26,        June 27,
                                  2010           2009
                                ——        ——

  Barrels sold                       632           630


  Revenue                       $141,158       $128,785
  Less excise taxes                   11,595         10,715
                                ———        ———
      Net revenue                 129,563         118,070
  Cost of goods sold                 57,291         56,095
                                ———        ———
      Gross profit                 72,272         61,975
  Operating expenses:
    Advertising, promotional and selling
      expenses                     35,091         31,162
    General and administrative expenses     10,547         9,401
    Impairment of long-lived assets           -            -
                                  —-          —-
      Total operating expenses         45,638         40,563
                                ———        ———
  Operating income                   26,634         21,412
  Other income, net:
  Interest income                       6           24
  Other income, net                     4           25
                                  —-          —-
      Total other income, net             10           49
                                  —-          —-
  Income before income taxes             26,644         21,461
  Income tax provision                 10,374         9,543
                                ———        ——-
      Net income                   $16,270         $11,918
                                =======        =======

  Net income per common share -basic       $1.18         $0.85
                                =====          =====
  Net income per common share -
    diluted                         $1.13         $0.83
                                =====          =====

  Weighted-average number of common
    shares - basic                   13,838         14,075
                                ======        ======
  Weighted-average number of common
    shares - diluted                   14,390         14,326
                                ======        ======

 

 

  Operating Results:
  (in thousands, except per share
    data)                            (unaudited)
                                  Six Months Ended
                                  —
                              June 26,        June 27,
                                  2010           2009
                                  ——        ——

  Barrels sold                       1,089         1,144


  Revenue                         $243,628       $217,116
  Less excise taxes                   20,035         17,973
                                ———        ———
      Net revenue                   223,593         199,143
  Cost of goods sold                 103,427         99,123
                                        ———
      Gross profit                 120,166         100,020
  Operating expenses:
    Advertising, promotional and selling
      expenses                       64,228         57,055
    General and administrative expenses     19,000         18,208
    Impairment of long-lived assets           -          553
                                  —-          —-
      Total operating expenses           83,228         75,816
                                ———        ———
  Operating income                   36,938         24,204
  Other income, net:
  Interest income                       8           39
  Other income, net                       3             4
                                  —-          —-
      Total other income, net             11           43
                                  —-          —-
  Income before income taxes             36,949         24,247
  Income tax provision                 14,419         10,963
                                ———        ———
      Net income                   $22,530         $13,284
                                =======        =======

  Net income per common share -basic         $1.62         $0.94
                                  =====          =====
  Net income per common share -
    diluted                         $1.57         $0.93
                                  =====          =====

  Weighted-average number of common
    shares - basic                     13,899         14,077
                                ======        ======
  Weighted-average number of common
    shares - diluted                   14,381         14,315
                                ======        ======

 

 


  Consolidated Balance
  Sheets:
  (in thousands, except share
    data)                        (unaudited)
                                June 26,  December 26,
                                    2010       2009
                                    ——      ——

  Assets
      Current Assets:
          Cash                       $53,679     $55,481
          Accounts receivable, net of
          allowance for doubtful
          accounts of $219               26,801       17,856
          and $199 as of June 26,
            2010 and December 26,
            2009,
          respectively

          Inventories                   25,337       25,558
          Prepaid expenses and other
          assets                     10,226       9,710
          Deferred income taxes             4,425       4,425
                                  ——-      ——-
            Total current assets         120,468     113,030

      Property, plant and
      equipment, net                   142,790     147,021
      Other assets                     1,459       1,508
      Goodwill                         1,377       1,377
                                  ——-      ——-
            Total assets             $266,094     $262,936
                                  ========    ========

  Liabilities and
    Stockholders’ Equity
      Current Liabilities:
          Accounts payable               $22,538     $25,255
          Accrued expenses and other
          current liabilities             53,860       48,531
                                  ———    ———
            Total current liabilities     76,398       73,786

      Deferred income taxes               13,439       13,439
      Other liabilities                   3,705       2,556
                                  ——-      ——-
            Total liabilities           93,542       89,781

      Commitments and
      Contingencies

      Stockholders’ Equity:
          Class A Common Stock, $.01
          par value; 22,700,000
          shares                       98         101
          authorized; 9,793,632 and
            10,068,486 issued and
            outstanding as
          of June 26, 2010 and
            December 26, 2009,
            respectively


          Class B Common Stock, $.01
          par value; 4,200,000
          shares                       41         41
          authorized; 4,107,355
            issued and outstanding

          Additional paid-in capital       118,752     111,668
          Accumulated other
          comprehensive loss, net of
          tax                         (359)      (359)
          Retained earnings               54,020       61,704
            Total stockholders’ equity     172,552     173,155
                                       
            Total liabilities and
              stockholders’ equity       $266,094     $262,936
                                  ========    ========

 

 


  Consolidated Statements of
  Cash Flows:
  (in thousands)                        (unaudited)
                                  Six Months Ended
                                  —
                              June 26,        June 27,
                                  2010           2009
                                  ——        ——

  Cash flows provided by
    operating activities:
      Net income                     $22,530         $13,284
      Adjustments to reconcile
      net income to net cash
      provided by
          operating activities:
          Depreciation and
          amortization                 8,459         8,983
          Impairment of long-lived
          assets                       -          584
          Gain on disposal of
          property, plant and
          equipment                     (5)            -
          Bad debt expense                 20           125
          Stock-based compensation
          expense                   1,635         1,688
          Excess tax benefit from
          stock-based compensation
          arrangements               (2,112)          (151)
        Deferred income taxes               -          746
      Changes in operating assets
      and liabilities:
          Accounts receivable           (8,965)        (7,048)
          Inventories                   221           (943)
          Prepaid expenses and other
          assets                     (537)        8,843
          Accounts payable             (2,717)        1,370
          Accrued expenses and other
          current liabilities           7,482         4,514
          Other liabilities             1,149           (280)
                                  ——-          ——
            Net cash provided by
              operating activities       27,160         31,715
                                ———        ———

  Cash flows used in
    investing activities:
      Purchases of property,
      plant and equipment               (4,214)        (10,210)
      Proceeds from disposal of
      property, plant and
      equipment                       20             -
            Net cash used in investing
              activities             (4,194)        (10,210)
                                ———       

  Cash flows used in
    financing activities:
      Repurchase of Class A
      common stock                   (30,219)        (2,848)
      Proceeds from exercise of
      stock options                   2,770           475
      Excess tax benefit from
      stock-based compensation
      arrangements                   2,112           151
      Net proceeds from sale of
      investment shares                 569           237
                                  —-          —-
            Net cash used in financing
              activities             (24,768)        (1,985)
                                        ———

  Change in cash                     (1,802)        19,520

  Cash at beginning of period             55,481         9,074
                                ———        ——-

  Cash at end of period                 $53,679         $28,594
                                =======        =======

  Supplemental disclosure of
    cash flow information:
      Income taxes paid                 $7,805         $2,377
                                  ======        ======

      Copies of The Boston Beer Company’s press releases, including
                  quarterly financial results,
          are available on the Internet at http://www.bostonbeer.com

 

 

Source: The Boston Beer Company, Inc.
 

CONTACT:  Michelle Sullivan, +1-617-368-5165

Web Site:  http://www.bostonbeer.com/


Number of visits: 1028
Posted on Aug 03, 2010 - 10:13 PM • Print