Boston Beer Reports Fourth Quarter 2015 Results
Thursday, February 18, 2016 4:15:00 PM ET
The Boston Beer Company, Inc. (SAM ) reported fourth quarter 2015 net revenue of $215.1 million, a decrease of $2.7 million or 1% from the same period last year, mainly due to a decline in core shipments of 3%, partially offset by price increases. Net income for the fourth quarter was $16.1 million, or $1.21 per diluted share, a decrease of $3.0 million or $0.19 per diluted share from the fourth quarter of 2014. This decrease was primarily due to the decrease in net revenue and increases in advertising, promotional and selling expenses that were only partially offset by increased gross margin.
Earnings per diluted share for the 52-week period ended December 26, 2015 were $7.25, an increase of $0.56, or 8%, from the comparable 52-week period in 2014. Net revenue for the 52-week period ended December 26, 2015 was $959.9 million, an increase of $56.9 million, or 6%, from the comparable 52-week period in 2014.
Highlights of this release include:
-- Depletions decreased 3% from the comparable 13-week period in 2014.
-- Depletions increased 4% from the comparable 52-week period in 2014.
-- Gross margin for the fourth quarter was 50.6% and the full year 2015 was 52.3%.
-- Advertising, promotional and selling expenses in the quarter increased $5.3 million or 9% compared to the fourth quarter of 2014 and increased $22.9 million or 9% for the full year 2015, primarily due to planned increased investments behind the Companys brands.
-- Full year 2015 capital spending totaled $74.2 million, most of which relates to continued investments in the Companys breweries.
-- The 2016 fiscal year includes 53 weeks compared to the 2015 fiscal year which included only 52 weeks.
-- Full year 2016 percentage growth in depletions and shipments over 2015 is currently estimated to be in the mid-single digits.
-- Full year 2016 earnings per diluted share are estimated to be between $7.60 and $8.00.
-- Full-year 2016 capital spending is now estimated to be between $60 million and $80 million, a decrease in the range from the previously communicated estimate of $70 million to $90 million.
Jim Koch, Chairman and Founder of the Company, commented, "Our depletion trends softened during the year, even as the better beer and craft categories appear healthy. We believe we have lost share, as new craft brewers enter the market and more existing craft brewers are expanding their regional distribution, with the result that drinkers are seeing more choices, including a wave of new beers in all markets. We believe that craft beer will continue to grow and that we are well positioned to share in that growth and meet the challenge of the current environment, through the quality of 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. Were excited by the introduction of our Samuel Adams Nitro Project in the first quarter of 2016, as well as the national rollout of Rebel Grapefruit IPA in bottles and cans to complement the national draft release in the fourth quarter of 2015. We believe that the history, authenticity and quality of the Samuel Adams brand, our unique beers, and our ability to invest, position us well for future growth and we are committed to improving our current trends."
Martin Roper, the Companys President and CEO stated, "In the fourth quarter, our depletions declined due to decreases in our Samuel Adams and Angry Orchard brands that were only partially offset by increases in our Coney Island, Twisted Tea and Traveler brands. This decline is largely due to increased competition in the craft beer category and general weakness in the cider category. We are working hard to improve the Samuel Adams brand trends and feel good about our new media advertising message Know more. Love more, although it is too early to know if this messaging will stabilize our trends. During the fourth quarter, we saw the cider category start to decline, even as new cideries continued to enter. We are happy that Angry Orchard maintained its share and we are directing our efforts to grow the category and our share of it. We remain positive about the long term cider category potential, but short term growth is less certain. We remain committed to investment in innovation, commensurate with the opportunities and the increased competitive activity that we see."
Mr. Roper went on to say, "Our primary focus in 2016 will be on innovating within the Samuel Adams family, integrating persuasive drinker programming across point of sale, promotions and media for all of our brands, and prioritizing the core styles of Angry Orchard, Twisted Tea, Traveler and Coney Island Hard Root Beer for increased distribution and promotion. We are increasing investments in our new beer and cider development capabilities, so we can maintain the pace of innovation and also be positioned to react quickly to any opportunities that emerge. We expect to maintain a high level of brand investment in this competitive environment, as we pursue sustainable growth. At the same time, we are taking steps to ensure that our investment dollars are well spent. To that end, we plan to evaluate the effectiveness of all of our investments and endeavor to improve our internal processes and cost structures. We continue to evaluate all our spending, so as to allocate it to the activities which are most likely to support growth."
Commenting on planned senior leadership transitions, Mr. Roper said, "Our success over the last ten years has been a team effort by all employees, but I am particularly grateful for the support provided by my leadership team. We have previously announced the planned retirement of several members of that team: our Chief Financial Officer, Bill Urich, our Vice President Operations, Tom Lance, and our Vice President Brand Development, Bob Pagano. As part of our succession process we announced the promotion of Matt Murphy to Chief Accounting Officer when Bill announced his plans to step down last August and we have recently announced the promotion of John Geist to Chief Sales Officer, the hiring of Frank Smalla, who will succeed Bill as Chief Financial Officer on February 20, 2016, and the hiring of Quincy Troupe as Senior Vice President Supply Chain to provide operations leadership, taking on many of Toms responsibilities. We have also created a Brand Leadership Team, consisting of the senior members of Bobs Brand Development team. These key leaders, who will report to me, have been challenged to drive our brand initiatives and integrate those initiatives with our Sales Team. I am excited by this opportunity to build our leadership team for the current challenges and to help lead the company on its next chapter."
4th Quarter 2015 Summary of Results
Depletions declined 3% from the comparable 13-week period in the prior year, reflecting decreases in our Samuel Adams and Angry Orchard brands, partially offset by increases in our Coney Island, Twisted Tea and Traveler brands.
Core shipment volume was approximately 958,000 barrels, a 3% decrease over the fourth quarter of 2014.
The Company believes distributor inventory at December 26, 2015 was at an appropriate level. Inventory at December 26, 2015 at distributors participating in the Freshest Beer Program decreased slightly in terms of days of inventory on hand when compared to December 27, 2014. The Company has approximately 71% of its volume on the Freshest Beer Program.
Gross margin at 50.6% increased from 49.8% in the fourth quarter of 2014, primarily due to price increases and lower ingredient costs that were partially offset by product mix effects.
Advertising, promotional and selling expenses increased $5.3 million compared to the fourth quarter of 2014. Increases in point of sale and media advertising were partially offset by decreases in freight to distributors, due to lower volumes.
General and administrative expenses increased by $0.9 million from the fourth quarter of 2014, primarily due to increases in consulting costs and facilities costs that were partially offset by lower salary costs.
The Companys effective tax rate for the fourth quarter decreased to 37.9% from 39.1% in the fourth quarter of 2014. The fourth quarter rates in 2014 and 2015 were higher than the full year rates, due to the unfavorable tax rate impact of bonus depreciation, which was enacted during the fourth quarter in both years.
Full Year 2015 Summary of Results
Depletions grew by 4% from the comparable 52-week period in 2014, reflecting increases in our Twisted Tea, Coney Island, Angry Orchard and Traveler brands, partially offset by decreases in our Samuel Adams brand.
Core shipment volume was approximately 4.2 million barrels, a 4% increase from the comparable 52-week period in 2014.
Advertising, promotional and selling expenses were $22.9 million higher than costs incurred in the comparable 52-week period in 2014. The increase was primarily a result of increased investments in media advertising, increased costs for additional sales personnel and commissions, and point of sale and local marketing.
General and administrative expenses increased by $5.6 million from the comparable 52-week period in 2014, primarily due to increases in salary and benefit expenses, consulting and facilities costs.
The Companys effective tax rate decreased to 36.5% from the 37.7% rate in the comparable 52-week period in 2014. The 2015 rate decrease was primarily the result of an increased federal manufacturing deduction and lower state tax rates.
The Company expects that its cash balance of $94.2 million as of December 26, 2015, along with future operating cash flow and the Companys unused line of credit of $150.0 million, will be sufficient to fund future cash requirements.
During the fourth quarter and the period from December 27, 2015 through February 12, 2016, the Company repurchased 438,000 shares of its Class A Common Stock for an aggregate purchase price of approximately $87.9 million. On February 10, 2016, the Board of Directors approved an increase of $50.0 million to the previously approved $525.0 million share buyback expenditure limit, for a new limit of $575.0 million. As of February 12, 2016 the Company had approximately $95.9 million remaining on the $575.0 million share buyback expenditure limit set by the Board of Directors.
Year-to-date depletions through the six weeks ended February 6, 2016 are estimated by the Company to have decreased approximately 3% from the comparable period in 2015.
The Company currently projects full year 2016 earnings per diluted share to be between $7.60 and $8.00. The Companys 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 Companys current 2016 projection are the following 53-week full-year estimates and targets:
-- Depletions and shipments percentage growth of mid-single digits.
-- National price increases of between 1% and 2%.
-- Gross margin of between 52% and 54%.
-- Increased investment in advertising, promotional and selling expenses of between $10 million and $20 million. This does not include any increases in freight costs for the shipment of products to the Companys distributors.
-- Effective tax rate of approximately 37%.
-- Estimated capital spending of between $60 million and $80 million, which could be significantly higher, depending on capital required to meet future growth.
About the Company
The Boston Beer Company, Inc. (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 and Twisted Tea, 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.
Statements made in this press release that state the Companys or managements intentions, hopes, beliefs, expectations or predictions of the future are forward-looking statements. It is important to note that the Companys 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 Companys SEC filings, including, but not limited to, the Companys 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 Companys 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)
December 26, December 27, December 26, December 27,
2015 2014 2015 2014
(13 weeks) (13 weeks) (52 weeks) (52 weeks)
Barrels sold 958 983 4,256 4,103
Revenue $ 229,847 $ 232,966 $ 1,024,040 $ 966,478
Less excise taxes 14,714 15,149 64,106 63,471
Net revenue 215,133 217,817 959,934 903,007
Cost of goods sold 106,366 109,417 458,317 437,996
Gross profit 108,767 108,400 501,617 465,011
Advertising, promotional and selling expenses 63,806 58,493 273,629 250,696
General and administrative expenses 18,583 17,671 71,556 65,971
Impairment of assets 40 200 258 1,777
Total operating expenses 82,429 76,364 345,443 318,444
Operating income 26,338 32,036 156,174 146,567
Other income (expense), net:
Interest income (expense) 48 (1) 56 21
Other expense, net (422) (688) (1,220) (994)
Total other income (expense), net (374) (689) (1,164) (973)
Income before provision for income tax 25,964 31,347 155,010 145,594
Provision for income taxes 9,849 12,273 56,596 54,851
Net income $ 16,115 $ 19,074 $ 98,414 $ 90,743
Net income per common share - basic $ 1.25 $ 1.46 $ 7.46 $ 6.96
Net income per common share - diluted $ 1.21 $ 1.40 $ 7.25 $ 6.69
Weighted-average number of common shares - Class A basic 9,477 9,364 9,619 9,202
Weighted-average number of common shares - Class B basic 3,400 3,663 3,504 3,766
Weighted-average number of common shares - diluted 13,275 13,520 13,520 13,484
Net income $ 16,115 $ 19,074 $ 98,414 $ 90,743
Other comprehensive income (loss), net of tax:
Currency translation adjustment (9) - (22) -
Defined benefit plans liability adjustment 204 (716) 204 (716)
Total other comprehensive income (loss), net of tax: 195 (716) 182 (716)
Comprehensive income $ 16,310 $ 18,358 $ 98,596 $ 90,027
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
December 26, December 27,
Cash and cash equivalents $ 94,193 $ 76,402
Accounts receivable, net of allowance for doubtful accounts of $244 and
$144 as of December 26, 2015 and December 27, 2014, respectively 38,984 36,860
Inventories 56,462 51,307
Prepaid expenses and other current assets 12,053 12,887
Income tax receivable 14,928 21,321
Deferred income taxes 6,983 8,685
Total current assets 223,603 207,462
Property, plant and equipment, net 409,926 381,569
Other assets 8,188 12,447
Goodwill 3,683 3,683
Total assets $ 645,400 $ 605,161
Liabilities and Stockholders Equity
Accounts payable $ 42,718 $ 35,576
Current portion of debt and capital lease obligations 58 55
Accrued expenses and other current liabilities 68,384 74,539
Total current liabilities 111,160 110,170
Deferred income taxes 56,001 50,717
Debt and capital lease obligations, less current portion 471 528
Other liabilities 16,547 7,606
Total liabilities 184,179 169,021
Commitments and Contingencies
Class A Common Stock, $.01 par value; 22,700,000 shares authorized;
9,389,005 and 9,452,375 issued and outstanding as of December 26, 2015
and December 27, 2014, respectively 94 95
Class B Common Stock, $.01 par value; 4,200,000 shares authorized;
3,367,355 and 3,617,355 issued and outstanding as of December 26, 2015 34 36
and December 27, 2014, respectively
Additional paid-in capital 290,096 224,909
Accumulated other comprehensive loss, net of tax (951) (1,133)
Retained earnings 171,948 212,233
Total stockholders equity 461,221 436,140
Total liabilities and stockholders equity $ 645,400 $ 605,161
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
December 26, December 27,
(52 weeks) (52 weeks)
Cash flows provided by operating activities:
Net income $ 98,414 $ 90,743
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 42,885 35,138
Impairment of assets 258 1,777
Loss on disposal of property, plant and equipment 515 434
Bad debt expense (recovery) 165 (16)
Stock-based compensation expense 6,665 6,857
Excess tax benefit from stock-based compensation arrangements (15,350) (17,353)
Deferred income taxes 6,986 15,350
Changes in operating assets and liabilities:
Accounts receivable (2,289) 5,157
Inventories (5,155) 5,090
Prepaid expenses, income tax receivable and other assets 11,858 (9,447)
Accounts payable 5,985 884
Accrued expenses and taxes and other current liabilities 9,014 4,578
Other liabilities 8,732 2,019
Net cash provided by operating activities 168,683 141,211
Cash flows used in investing activities:
Purchases of property, plant and equipment (74,187) (151,784)
Cash paid for intangible assets and acquisition of brewery assets (100) (100)
Change in restricted cash 57 53
Net cash used in investing activities (74,230) (151,831)
Cash flows (used in) provided by financing activities:
Repurchase of Class A Common Stock (135,705) (7,859)
Proceeds from exercise of stock options 42,339 27,272
Cash paid on note payable and capital lease (54) (53)
Excess tax benefit from stock-based compensation arrangements 15,350 17,353
Net proceeds from sale of investment shares 1,408 785
Net cash (used in) provided by financing activities (76,662) 37,498
Change in cash and cash equivalents 17,791 26,878
Cash and cash equivalents at beginning of year 76,402 49,524
Cash and cash equivalents at end of period $ 94,193 $ 76,402
Supplemental disclosure of cash flow information:
Income taxes paid $ 45,078 $ 42,324
Income taxes refunded $ 17,252 $ -
Increase in accounts payable for repurchase of Class A Common Stock $ 3,000 $ -
(Decrease) Increase in accounts payable for purchase of property, plant and equipment $ (1,843) $ 268
Copies of The Boston Beer Companys 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-fourth-quarter-2015-results-300222514.html
SOURCE The Boston Beer Company, Inc.