Attached files
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| 8-K - FORM 8-K - BOSTON BEER CO INC | c20566e8vk.htm |
EXHIBIT 99
| Investor Relations Contact: | Media Contact: | |
| Seana Phillips | Michelle Sullivan | |
| (617) 368-5074 | (617) 368-5165 |
BOSTON BEER REPORTS
SECOND QUARTER 2011 RESULTS
SECOND QUARTER 2011 RESULTS
BOSTON, MA (8/2/11) — The Boston Beer Company, Inc. (NYSE: SAM) reported a second quarter core
product depletions increase of 7% as compared to the second quarter of 2010. Second quarter 2011
net revenue was $134.0 million, an increase of $4.4 million over the same period last year, mainly
due to shipment volume gains. Net income for the second quarter was $28.0 million, or $2.01 per
diluted share, an increase of $11.7 million, or $0.88 per diluted share, from the second quarter of
2010. This increase was primarily due to the $20.5 million, or $0.92 per diluted share, cash
payment received by the Company in settlement of its potential claims arising out of the 2008
product recall and core shipment volume increases, partially offset by increased investments in
advertising, promotional and selling expenses and the negative impact of the Freshest Beer Program
on shipment volume. Excluding the impact of the recall settlement, net income for the second
quarter decreased $1.0 million, or $0.04 per diluted share. The Company estimates the negative
earnings impact of the Freshest Beer Program for the second quarter was $0.05 per diluted share.
Highlights of this release include:
| • | Depletions growth of 7% for the second quarter and 7% year to date. |
| • | Gross margin of 57% for the second quarter and 54% year to date; and full year gross margin target of between 54% and 56%. |
| • | Advertising, promotional and selling expense increase of $5.4 million, or 15%, for the second quarter and $11.8 million, or 18%, year to date primarily due to planned increased investments behind the Company’s brands. |
| • | Reduced inventory at participating wholesalers as a result of the Freshest Beer Program of an estimated 190,000 cases as of the end of the second quarter, reducing reported earnings per diluted share by approximately $0.05 for the second quarter and $0.07 year to date. |
| • | Earnings per diluted share of $2.01 for the quarter and $2.29 year to date. |
| • | Estimated full year depletions growth of between 7% and 8%, reduced from previously communicated target of 9%. |
| • | Excluding the impact of the recall settlement of $0.92 per diluted share, and as a result of the reduction in expectations for full year depletions and increased energy costs, the Company is reducing its full year 2011 earnings per diluted share projection to between $3.20 and $3.60 from the previous range of $3.45 and $3.95. |
| • | The full year 2011 earnings per diluted share projection of between $3.20 and $3.60 includes the estimated negative earnings per share impact of between $0.10 and $0.20 due to reduced shipments related to the implementation of the Freshest Beer Program. |
| • | On July 26, 2011, the Board of Directors approved an increase of $25.0 million to the previously approved $225.0 million share buyback expenditure limit, for a new limit of $250.0 million. |
Jim Koch, Chairman and Founder of the Company, commented, “We achieved record total depletions in
the second quarter against a very strong second quarter of 2010. We believe that our depletions
growth is attributable to our strong sales execution and support from our wholesalers and
retailers. We are still seeing expanded distribution of domestic specialty brands and craft
brands. Despite this, we grew our flagship Samuel Adams Boston Lager®, Samuel
Adams® Seasonals and the Samuel Adams® Brewmaster’s Collection. We also
introduced several exciting new beer styles which were well received by drinkers. We are happy
with the health of our brand portfolio and remain positive about the future of craft beer.”
Commenting on the Freshest Beer Program, Mr. Koch continued, “Our ‘Freshest Beer Program’ is
continuing to build on many of our past investments to help every Samuel Adams reach our drinkers
with the same flavor and fresh taste that I enjoy when I have a Samuel Adams at one of our
breweries. We are pleased with the results so far, and currently have
15 wholesalers signed up and
at various stages of inventory reduction. We believe that in the long term this program will
deliver better, fresher Samuel Adams to our drinkers and should reduce costs and improve efficiency
throughout the supply chain. We are still targeting that 50% of our volume will be on our Freshest
Beer Program by the end of 2011.”
2nd Quarter 2011 Summary of Results
Depletions grew 7% for the quarter, primarily due to increases in Twisted Tea®, Samuel
Adams Boston Lager®, the Samuel Adams® Brewmaster’s Collection and Samuel
Adams® Seasonals, partially offset by declines in Sam Adams Light®.
Core shipment volume was approximately 646,000 barrels, a 3% increase over the same period in 2010.
The increase in shipments for the quarter is due primarily to increases in Twisted
Tea®, Samuel Adams® Seasonals and the Samuel Adams® Brewmaster’s
Collection, partially offset by declines in Samuel Adams Boston Lager® and Sam Adams
Light®.
The second quarter gross margin of 57% represented a 1 percentage point increase over second
quarter 2010 gross margin. Minor pricing increases and lower ingredients costs were partially
offset by a slight change in our core product mix.
Advertising, promotional and selling expenses were $5.4 million higher than those incurred in the
prior year, primarily as a result of higher costs for additional sales personnel and increased
investments in local marketing and advertising activities, as well as increased costs of freight to
wholesalers.
General and administrative expenses increased $0.6 million compared to the second quarter of 2010,
due to increases in stock compensation expense and salary and benefit costs.
The Company’s effective tax rate for the second quarter of 2011 was 38%.
Year to Date 2011 Summary of Results
Depletions grew 7% year-to-date, primarily due to increases in Twisted Tea®, Samuel
Adams Boston Lager®, Samuel Adams® Seasonals and the Samuel Adams®
Brewmaster’s Collection, partially offset by declines in Sam Adams Light®.
Core shipment volume was approximately 1,144,000 barrels, a 6% increase over the same period in
2010. The increase in shipments through the second quarter is due primarily to increases in
Twisted Tea®, Samuel Adams® Seasonals, the Samuel Adams®
Brewmaster’s Collection and Samuel Adams Boston Lager®, partially offset by declines in
Sam Adams Light®.
Net income increased $9.4 million, or $0.72 per diluted share, to $32.0 million, or $2.29 per
diluted share, compared to the same period last year, due to the $20.5 million, or $0.92 per share,
recall settlement and increases in core shipment volume, partially offset by higher selling
expenses and the negative impact of the Freshest Beer Program on shipment volume. The Company
estimates the unfavorable earnings per share impact was $0.07 due to the reduced shipments related
to the implementation of the Freshest Beer Program.
Advertising, promotional and selling expenses were $11.8 million higher than those incurred in the
prior year, primarily as a result of higher costs for additional sales personnel and increased
investments in advertising, point of sale materials and local marketing, as well as increased costs
of freight to wholesalers.
General and administrative expenses increased by $2.4 million over the same period in 2010, due to
increases in salary and benefit costs and consulting expenses, and also due to the fact that in the
first quarter of 2010 there was a $0.9 million reversal of a 2009 expense for an option that did
not vest.
Cash and cash equivalents as of the end of the second quarter totaled $66.3 million.
During the first half of 2011, the Company repurchased approximately 266,400 shares of its Class
A Common Stock at a cost of approximately $22.6 million and
repurchased an additional 91,800 shares
during the period June 26, 2011 through July 29, 2011 at an
approximate cost of $8.2 million. As
of July 29, 2011 the Company had approximately $30.1 million remaining on the $250.0 million share
buyback expenditure limit set by the Board of Directors.
As of
July 29, 2011, the Freshest Beer Program is now active at 15 wholesalers representing
approximately 20% of the Company’s business.
Depletion and Shipment estimates
| • | Based on information in-hand, year-to-date depletions through July 2011 are estimated by the Company to be up approximately 6% from the same period in 2010. |
| • | Year-to-date shipments through July 2011 are up approximately 6% compared to the same period in 2010. The Company no longer provides information on orders in-hand due to changes to the ordering process for Freshest Beer Program wholesalers. |
| • | The Company believes that inventory levels at the end of the second quarter at those wholesalers who are not participating in the Freshest Beer Program were similar to the levels in previous years. |
Fiscal 2011 Outlook
Excluding the $0.92 per diluted share impact of the recall settlement, and as a result of the
reduction in expectations for full-year depletions and increased energy costs, the Company is
reducing its full year 2011 earnings per diluted share projection to between $3.20 and $3.60 from
the previous range of $3.45 and $3.95. The Company’s actual 2011 earnings per diluted share could
vary significantly from the current projection.
Underlying the Company’s current projection are the following estimates and targets:
| • | Depletions growth of 7% to 8% and shipment growth of 6% to 7%, reflecting an estimated aggregate inventory reduction at wholesalers participating in the Freshest Beer Program of between 300 thousand and 500 thousand case equivalents. |
| • | The Company is exploring opportunities for price increases in the second half of 2011 or early 2012 as it expects significant barley cost pressures from the 2011 crop. Revenue per barrel for the full year is currently expected to increase approximately 1% excluding any benefit of further 2011 price movements. |
| • | Full-year 2011 gross margins of between 54% and 56%, which could be negatively impacted by further increases in energy costs. |
| • | Increased investment in brand support of between $12 million and $18 million for the full year 2011, not including any increases in freight costs for the shipment of beer products to the Company’s wholesalers. Approximately $10 million of this increase has been incurred in the six months ending June 25, 2011. |
| • | Full-year 2011 effective tax rate of approximately 39%. |
| • | Full-year capital expenditures of between $15 million and $25 million, most of which relate to continued investments in the Company’s breweries and additional keg purchases. |
About the Company
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 over 25 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 approximately one percent of the U.S. beer market. For more information,
please visit www.samueladams.com.
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 25, 2010 and December 26, 2009. Copies of these documents may be
found on the Company’s website, www.bostonbeer.com, or obtained by contacting the Company or the
SEC.
Tuesday, August 2, 2011
THE BOSTON BEER COMPANY, INC.
Financial Results
Financial Results
Operating Results:
| (unaudited) | (unaudited) | |||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 25, | June 26, | June 25, | June 26, | |||||||||||||
| (in thousands, except per share data) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Barrels sold |
651 | 632 | 1,153 | 1,089 | ||||||||||||
Revenue |
$ | 146,014 | $ | 141,158 | $ | 257,423 | $ | 243,628 | ||||||||
Less excise taxes |
12,057 | 11,595 | 21,290 | 20,035 | ||||||||||||
Net revenue |
133,957 | 129,563 | 236,133 | 223,593 | ||||||||||||
Cost of goods sold |
57,884 | 57,291 | 107,686 | 103,427 | ||||||||||||
Gross profit |
76,073 | 72,272 | 128,447 | 120,166 | ||||||||||||
Operating expenses: |
||||||||||||||||
Advertising, promotional and selling expenses |
40,518 | 35,091 | 76,030 | 64,228 | ||||||||||||
General and administrative expenses |
11,132 | 10,547 | 21,405 | 19,000 | ||||||||||||
Settlement proceeds |
(20,500 | ) | — | (20,500 | ) | — | ||||||||||
Total operating expenses |
31,150 | 45,638 | 76,935 | 83,228 | ||||||||||||
Operating income |
44,923 | 26,634 | 51,512 | 36,938 | ||||||||||||
Other income, net: |
||||||||||||||||
Interest
income |
2 | 6 | 3 | 8 | ||||||||||||
Other income,
net |
21 | 4 | 29 | 3 | ||||||||||||
Total other income, net |
23 | 10 | 32 | 11 | ||||||||||||
Income
before income tax provision |
44,946 | 26,644 | 51,544 | 36,949 | ||||||||||||
Income tax provision |
16,927 | 10,374 | 19,566 | 14,419 | ||||||||||||
Net income |
$ | 28,019 | $ | 16,270 | $ | 31,978 | $ | 22,530 | ||||||||
Net income per common share — basic |
$ | 2.12 | $ | 1.18 | $ | 2.41 | $ | 1.62 | ||||||||
Net income per common share — diluted |
$ | 2.01 | $ | 1.13 | $ | 2.29 | $ | 1.57 | ||||||||
Weighted-average number of common shares — basic |
13,223 | 13,838 | 13,249 | 13,899 | ||||||||||||
Weighted-average number of common shares — diluted |
13,947 | 14,390 | 13,977 | 14,381 | ||||||||||||
Consolidated Balance Sheets:
| (unaudited) | ||||||||
| June 25, | December 25, | |||||||
| (in thousands, except share data) | 2011 | 2010 | ||||||
Assets |
||||||||
Current Assets: |
||||||||
Cash and cash equivalents |
$ | 66,315 | $ | 48,969 | ||||
Accounts receivable, net of allowance for doubtful accounts of $61 and
$121 as of June 25, 2011 and December 25, 2010, respectively |
26,503 | 20,017 | ||||||
Inventories |
31,828 | 26,614 | ||||||
Prepaid expenses and other assets |
13,906 | 12,756 | ||||||
Deferred income taxes |
3,648 | 3,648 | ||||||
Total current assets |
142,200 | 112,004 | ||||||
Property, plant and equipment, net |
139,844 | 142,889 | ||||||
Other assets |
1,836 | 2,260 | ||||||
Goodwill |
1,377 | 1,377 | ||||||
Total assets |
$ | 285,257 | $ | 258,530 | ||||
Liabilities and Stockholders’ Equity |
||||||||
Current Liabilities: |
||||||||
Accounts payable |
$ | 24,960 | $ | 19,423 | ||||
Accrued expenses and other current liabilities |
57,621 | 52,776 | ||||||
Total current liabilities |
82,581 | 72,199 | ||||||
Deferred income taxes |
17,387 | 17,087 | ||||||
Other liabilities |
3,296 | 3,656 | ||||||
Total liabilities |
103,264 | 92,942 | ||||||
Commitments and Contingencies |
||||||||
Stockholders’ Equity: |
||||||||
Class A Common Stock, $.01 par value; 22,700,000 shares authorized;
9,089,779 and 9,288,015 issued and outstanding as of June 25, 2011
and December 25, 2010, respectively |
91 | 93 | ||||||
Class B Common Stock, $.01 par value; 4,200,000 shares authorized;
4,107,355 issued and outstanding |
41 | 41 | ||||||
Additional paid-in capital |
129,069 | 122,016 | ||||||
Accumulated other comprehensive loss, net of tax |
(438 | ) | (438 | ) | ||||
Retained earnings |
53,230 | 43,876 | ||||||
Total stockholders’ equity |
181,993 | 165,588 | ||||||
Total liabilities and stockholders’ equity |
$ | 285,257 | $ | 258,530 | ||||
Consolidated Statements of Cash Flows:
| (unaudited) | ||||||||
| Six Months Ended | ||||||||
| June 25, | June 26, | |||||||
| (in thousands) | 2011 | 2010 | ||||||
Cash flows provided by operating activities: |
||||||||
Net income |
$ | 31,978 | $ | 22,530 | ||||
Adjustments to reconcile net income to net cash provided by
operating activities: |
||||||||
Depreciation and amortization |
8,965 | 8,459 | ||||||
Impairment of long-lived assets |
22 | — | ||||||
Loss (gain) on disposal of property, plant and equipment |
117 | (5 | ) | |||||
Bad debt (recovery) expense |
(60 | ) | 20 | |||||
Stock-based compensation expense |
3,522 | 1,635 | ||||||
Excess tax benefit from stock-based compensation arrangements |
(2,167 | ) | (2,112 | ) | ||||
Deferred income taxes |
300 | — | ||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
(6,426 | ) | (8,965 | ) | ||||
Inventories |
(5,214 | ) | 221 | |||||
Prepaid expenses and other assets |
(833 | ) | (537 | ) | ||||
Accounts payable |
5,537 | (2,717 | ) | |||||
Accrued expenses and other current liabilities |
7,053 | 7,482 | ||||||
Other liabilities |
(360 | ) | 1,149 | |||||
Net cash provided by operating activities |
42,434 | 27,160 | ||||||
Cash flows used in investing activities: |
||||||||
Purchases of property, plant and equipment |
(6,022 | ) | (4,214 | ) | ||||
Proceeds from disposal of property, plant and equipment |
— | 20 | ||||||
Net cash used in investing activities |
(6,022 | ) | (4,194 | ) | ||||
Cash flows used in financing activities: |
||||||||
Repurchase
of Class A Common Stock |
(22,627 | ) | (30,219 | ) | ||||
Proceeds from exercise of stock options |
1,036 | 2,770 | ||||||
Excess tax benefit from stock-based compensation arrangements |
2,167 | 2,112 | ||||||
Net proceeds from sale of investment shares |
358 | 569 | ||||||
Net cash used in financing activities |
(19,066 | ) | (24,768 | ) | ||||
Change in cash and cash equivalents |
17,346 | (1,802 | ) | |||||
Cash and cash equivalents at beginning of period |
48,969 | 55,481 | ||||||
Cash and cash equivalents at end of period |
$ | 66,315 | $ | 53,679 | ||||
Supplemental disclosure of cash flow information: |
||||||||
Income taxes paid |
$ | 10,344 | $ | 7,805 | ||||
Copies of The Boston Beer Company’s press releases, including quarterly financial results,
are available on the Internet at www.bostonbeer.com
are available on the Internet at www.bostonbeer.com