FOR IMMEDIATE RELEASE

CRAFT BREW ALLIANCE REPORTS THIRD QUARTER 2013 RESULTS

 

Announces 14% Depletion Growth for the Quarter, Doubles Net Income

Portland, Ore. (November 6, 2013) – Craft Brew Alliance, Inc. (“CB^A”) (Nasdaq: BREW), an independent craft brewing company, today reported its financial results for the third quarter ended September 30, 2013. CB^A’s continued activation of its national portfolio strategy has positioned the Company to expect strong sales and profit growth in 2013 and take advantage of the dynamic craft beer segment to achieve long-term value for its shareholders. The results for the third quarter are in line with management’s expectations and the Company reconfirms previously reported 2013 guidance.

Significant third quarter and year-to-date financial highlights include:

 

“We are very pleased with our depletions growth and are especially proud to see that the strategies and prioritization we communicated earlier in the year are driving the kind of results we anticipated. The record growth and momentum we’re seeing – across brands, channels and geographies – reflects the exceptional teamwork and passion of the entire CB^A family, including our wholesaler and retailer partners, and I want to congratulate all of them on these results,” said Terry Michaelson, CB^A’s CEO. “As we look ahead, we remain committed to continue driving strong sales and profit growth, while keeping a close eye on our margins. And with our 2013 performance to date as an indicator, I am confident that our focus will enable us to deliver on the power of CBA’s highly competitive, proven strategy.”

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We are confirming previously issued guidance regarding our anticipated full year 2013 results, as follows:

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Depletion growth estimate of 7% to 11%, reflecting the continued strength of the Kona, Redhook and Omission brands and ongoing stabilization of the Widmer Brothers brand.

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Average price increases of approximately 1% to 2%.

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Contract brewing revenue for 2013 at approximately half of the 2012 level as a result of the termination of the Goose Island contract brewing arrangement.

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Gross margin rate of 28.5% to 30.5%, primarily due to pressure from distribution and packaging component costs, partially offset by improved brewery productivity.

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SG&A expense of $47 million to $49 million, reflecting leverage from the foundation built by more aggressive spending in prior years.

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Capital expenditures of approximately $11 million to $13 million, reflecting our continued investments in capacity and efficiency improvements, quality initiatives and restaurant and retail remodeling projects.

“In the third quarter, our top line growth continued to reflect strong consumer demand for our brands in both new and existing markets. The increase in volumes created a challenging operating environment for our beer business during the quarter that resulted in the slight decrease in gross margin, compounded by lower margin in our restaurant segment,” said Mark Moreland, CBA’s CFO. “However, as Terry stated, we are confident that by increasing our focus on gross margin rates and continuing our supply chain optimization efforts initiated earlier in the year, we will close out 2013 with strong fourth quarter earnings and set ourselves up for long-term success.”

Developments and expectations for 2013 include: (i) confidence in the continued growth in sales of Kona, Redhook and Omission, and clear positioning of Widmer Brothers offerings, (ii) expansion into new geographic markets for Kona and international expansion for all brand families, (iii) updates to packaging across all brand families, as well as introduction of unique can and bottle offerings, (iv) refined messaging on Omission beers, promoting the beer as specially crafted to remove gluten, (v) exploration and introduction of new brands to the CB^A portfolio, including the new Redhook brand Game Changer developed in collaboration with Buffalo Wild Wings and KCCO Black Lager developed in collaboration with The Chive and Resignation Brewery, (vi) the introduction of the Square Mile Cider brand, and (vii) continued development of cross‑brand packages, bringing the power of our portfolio to consumers in innovative and compelling ways.

Statements made in this press release that state the Company's or management's intentions, hopes, beliefs, expectations or predictions of the future, including depletions and sales growth, the level or effect of SG&A expense, the amount of capital spending, and the benefits or improvements to be realized from strategic initiatives and capital projects, 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 year ended December 31, 2012. Copies of these documents may be found on the Company's website, www.craftbrew.com, or obtained by contacting the Company or the SEC.

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CB^A is an independent, publicly traded craft brewing company that was formed through the merger of leading Pacific Northwest craft brewers – Widmer Brothers Brewing and Redhook Ale Brewery – in 2008. With an eye toward preserving and growing one-of-a-kind craft beers and brands, CB^A welcomed Kona Brewing Company in 2010, and then launched Omission beer in 2012 and Square Mile Cider Company in 2013.

When Kurt & Rob Widmer founded Widmer Brothers Brewing in 1984, they didn’t confine their brewing exploration to strict style guidelines. To this day, Widmer Brothers continues to create craft beers with a unique and unconventional twist on traditional styles that are award winning and please a wide range of craft beer lovers. Redhook began in a Seattle transmission shop in 1981 and those colorful roots are reflected in the brand’s personality to this day. The eminently drinkable beers consistently win awards and please crowds across the United States. Kona Brewing was founded in 1994 by the father and son team of Cameron Healy and Spoon Khalsa, who dreamed of crafting fresh, local-island brews with spirit, passion and quality. As the largest craft brewery in Hawaii, Kona personifies the laid-back, passionate lifestyle and environmental respect of the Hawaiian people and culture. Omission beer is the first craft beer brand in the United States focused exclusively on brewing great tasting craft beers with traditional beer ingredients, including malted barley, that are specially crafted to remove gluten. Square Mile Cider was inspired by the fortitude and perseverance of the original pioneers and reinvigorates an enduringly classic beverage with its blend of apples hand-selected for the perfect balance of sweet and tart.

For more information, visit: www.craftbrew.com.

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Craft Brew Alliance, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts and shipments)

(Unaudited)

(1)  Change in depletions reflects the year-over-year change in barrel volume sales of beer by wholesalers to retailers.

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Craft Brew Alliance, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

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Craft Brew Alliance, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

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Craft Brew Alliance, Inc.

Reconciliation of Adjusted EBITDA to Net Income

(In thousands)

(Unaudited)

The Company has presented Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) in these tables to provide investors with additional information to evaluate our operating performance on an ongoing basis using criteria that are used by the Company’s management.  The Company defines Adjusted EBITDA as net earnings before interest, income taxes, depreciation and amortization, stock compensation and other non-cash charges, including net gain or loss on disposal of property, plant and equipment.  The Company uses Adjusted EBITDA, among other measures, to evaluate operating performance, to plan and forecast future periods’ operating performance, and as an incentive compensation target for certain management personnel.

As Adjusted EBITDA is not a measure of operating performance or liquidity calculated in accordance with generally accepted accounting principles in the United States of America (“GAAP”), this measure should not be considered in isolation of, or as a substitute for, net income as an indicator of operating performance, or net cash provided by operating activities as an indicator of liquidity.  The use of Adjusted EBITDA instead of net income has limitations as an analytical tool, including the inability to determine profitability; the exclusion of interest expense and associated cash requirements, given the level of the Company’s indebtedness; and the exclusion of depreciation and amortization which represent significant and unavoidable operating costs, given the capital expenditures needed to maintain the Company’s operations.  We compensate for these limitations by relying on GAAP results.  Our computation of Adjusted EBITDA may differ from similarly titled measures used by other companies. As Adjusted EBITDA excludes certain financial information compared with net income and net cash provided by operating activities, the most directly comparable GAAP financial measures, users of this financial information should consider the types of events and transactions which are excluded. The table above shows a reconciliation of Adjusted EBITDA to net income.

 

 

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