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Form 8-K BOSTON BEER CO INC For: Jul 21

July 21, 2022 4:18 PM EDT

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Exhibit 99

Investor Relations Contact:

 

 

Media Contact:

Jennifer Larson

 

 

Dave DeCecco

(617) 368-5152

 

 

(914) 261-6572

[email protected]

 

 

[email protected]

 

 

BOSTON BEER REPORTS

SECOND QUARTER FINANCIAL RESULTS

 

Second Quarter (13-week) 2022 and Year-to-date 2022 (26-week) Financial Results

 

BOSTON – July 21, 2022 – The Boston Beer Company, Inc. (NYSE: SAM), today reported financial results. Key results for the second quarter ended June 25, 2022 were:

 

Depletions decreased 7% and shipments declined 1.1% compared to the quarter ended June 26, 2021.
Net revenue of $616.2 million increased 2.2% compared to the net revenue realized in the second quarter of 2021.
Gross margin of 43.1% was 2.6 percentage points below the 2021 second quarter gross margin of 45.7%.
Operating expenses of $194.4 million decreased 0.6% compared to the second quarter of 2021.
Net income of $53.3 million or $4.31 per diluted share, decreased from net income of $59.2 million or $4.75 per diluted share in the second quarter of 2021. This decrease between periods was primarily driven by lower gross margins partially offset by increased revenue and lower operating expenses.

 

“Over the last three years we experienced unprecedented growth in the hard seltzer category largely driven by the success of our Truly brand. I continue to be optimistic about the long-term growth outlook for Boston Beer’s diversified beverage portfolio, despite the greater than expected continuing decline in demand in the hard seltzer category that we have seen year to date. Based on our first-half performance and our view on the remainder of the year we have reduced our fiscal year 2022 volume and earnings guidance,” said Chairman and Founder Jim Koch. “Our company has strong brand building and innovation capabilities, the top selling organization in beer, and a strong balance sheet to support long term growth, even as we navigate some challenges in the near term.”

 

“In the second quarter we delivered revenue growth driven by pricing and strength in Twisted Tea shipments, helping us make sequential progress on gross margin and generate over $100 million of operating cash flow,” said President and CEO Dave Burwick. “We remain focused on building on the momentum of Twisted Tea and Hard Mountain Dew while we work on improving our gross margin trajectory. We're also working to turn around the trends on Truly Hard Seltzer, starting by optimizing our core original flavors with real fruit juice. We will continue to execute against our long-term strategy of creating a broad, relevant beverage portfolio that enables many pathways to growth.”

 

Details of the results were as follows:

 

 


 

Second Quarter 2022 (13 weeks ended June 25, 2022) Summary of Results

 

Depletions for the second quarter decreased 7% from the prior year, reflecting decreases in the Company’s Truly Hard Seltzer, Angry Orchard, Samuel Adams, and Dogfish Head brands, partially offset by increases in its Twisted Tea and Hard Mountain Dew brands.

 

Excluding the Truly declines, the Company’s depletion volumes for the remainder of its business in the second quarter increased 14%.

 

Shipment volume for the second quarter was approximately 2.4 million barrels, a 1.1% decrease from the prior year, reflecting decreases in the Company’s Truly Hard Seltzer, Angry Orchard, Samuel Adams, and Dogfish Head brands, partially offset by increases in its Twisted Tea and Hard Mountain Dew brands.

 

The Company believes distributor inventory as of June 25, 2022 averaged approximately four weeks on hand and was at an appropriate level for each of its brands except for low inventory levels for certain Truly brand packages. The Company expects distributors will keep inventory levels for the remainder of the year below 2021 levels in terms of weeks on hand.

 

Gross margin of 43.1% decreased from the 45.7% margin realized in the second quarter of 2021, primarily due to higher materials costs and higher returns and scrap, partially offset by price increases.

 

Advertising, promotional and selling expenses decreased $6.7 million or 4.2% from the second quarter of 2021,primarily due to a net decrease in brand investments of $11.3 million, mainly driven by lower media costs, partially offset by increased freight to distributors of $4.6 million primarily due to higher freight rates.

 

General and administrative expenses increased by $5.9 million or 17.9% from the second quarter of 2021, primarily due to increased salaries and benefits costs and increases in services provided by third parties.

 

The Company’s effective tax rate for the second quarter was 24.7% compared to 26.1% in the second quarter of 2021. In the second quarters of 2022 and 2021, the Company recorded a tax benefit of $0.08 per diluted share and of $0.04 per diluted share, respectively, resulting from the Accounting Standard "Employee Share-Based Payment Accounting" ("ASU 2016-09").

 

Year-to-date 2022 (26 weeks ended June 25, 2022) Summary of Results

 

Net income year-to-date of $51.4 million or $4.15 per share, represented a decrease of $73.4 million or $5.86 per diluted share compared to year-to-date 2021. This decrease between periods was primarily driven by decreased revenue and gross margins.

 

Net revenue year-to-date of $1.046 billion decreased 8.8% compared to year-to-date 2021.

 

Depletions year-to-date decreased 7% from year-to-date 2021, reflecting decreases in the Company’s Truly Hard Seltzer, Angry Orchard, Dogfish Head, and Samuel Adams brands, partially offset by increases in its Twisted Tea and Hard Mountain Dew brands.

 

 


 

Excluding the Truly declines, the Company’s depletion volumes for the remainder of its brands increased 11% compared to year-to-date 2021.

 

Shipment volume year-to-date was approximately 4.1 million barrels, a 12.6% decrease from year-to-date 2021, reflecting decreases in the Company’s Truly Hard Seltzer, Angry Orchard, Dogfish Head, and Samuel Adams brands, partially offset by increases in its Twisted Tea and Hard Mountain Dew brands.

 

Gross margin year-to-date of 41.9% decreased from the 45.8% gross margin realized in year-to-date 2021, primarily due to higher materials costs, higher returns and scrap and higher per barrel processing costs at the Company's breweries due to lower volumes, partially offset by price increases.

 

Advertising, promotional and selling expenses year-to-date decreased $17.0 million or 5.6% from year-to-date 2021, primarily due to a net decrease in brand investments of $20.7 million, mainly driven by lower media costs, partially offset by higher investments in local marketing and increased freight to distributors of $3.8 million primarily due to higher rates partially offset by lower volumes.

 

General and administrative expenses year-to-date increased by $13.6 million or 21.0% from year-to-date 2021, primarily due to increased salaries and benefits costs and increases in services provided by third parties.

 

The Company recorded expense of $5.3 million year-to-date in contract termination costs, most of which was recorded in the first quarter as a result of further negotiations with suppliers that eliminated certain future shortfall fees.

 

The Company’s effective tax rate year-to-date was 25.1% compared to 20.4% year-to-date 2021. Year-to-date 2022 and 2021, the Company recorded tax benefit of $0.05 per diluted share and a tax benefit of $0.72 per diluted share, respectively, resulting from the Accounting Standard "Employee Share-Based Payment Accounting" ("ASU 2016-09").

 

The Company expects that its June 25, 2022 cash balance of $137.8 million, together with its future operating cash flows and the unused balance on its $150.0 million line of credit, will be sufficient to fund future cash requirements.

 

During the 26-week period ended June 25, 2022 and the period from June 26, 2022 through July 15, 2022, the Company did not repurchase any shares of its Class A Common Stock. As of July 15, 2022, the Company had approximately $90.3 million remaining on the $931.0 million share buyback expenditure limit set by the Board of Directors.

 

Depletion and shipments estimates

 

Year-to-date depletions through the 29-week period ended July 16, 2022 are estimated by the Company to have decreased approximately 7% from the comparable period in 2021.

 

Year-to-date shipments through the 29-week period ended July 16, 2022 are estimated by the Company to have decreased approximately 11% from the comparable period in 2021.

 

 


 

Full-year 2022 Projections

 

The Company currently projects full-year 2022 Non-GAAP earnings per diluted share of between $6.00 and $11.00 a change from the previous estimate of between $11.00 and $16.00. This projection excludes the impact of ASU 2016-09 and is highly sensitive to changes in volume projections particularly related to the hard seltzer category and supply chain performance as well as inflationary impacts. The Company’s actual 2022 earnings per share could vary significantly from the current projection. The 2022 fiscal year includes 53 weeks compared to the 2021 fiscal year which included only 52 weeks. Underlying the Company’s current 2022 projection are the following full-year estimates and targets:

 

Depletions and shipments decrease of between 2% and 8% a change from the previous estimate of an increase of between 4% and 10%, the revision is driven by a change in expectations in the Company’s Truly hard seltzer business and the launch timing of Hard Mountain Dew in certain states moving into 2023. The Company estimates the 53rd week will have a positive impact of between 1 and 1.5 percentage points on its depletions and shipments growth rates for the full year and between 4 and 6 percentage points on its depletions and shipments growth rates for the fourth quarter.
National price increases of between 3% and 5%.
Gross margin of between 43% and 45% a change from the previous estimate of between 45% and 48% due to the impact of lower volume expectations and continuing supply chain impacts. The Company continues to expect to cover higher commodity costs through pricing.
Decreased investments in advertising, promotional and selling expenses of between $30 and $50 million, a change from our previous estimate of a decrease of between zero and $20 million, reflecting our reduced volume expectations. This does not include any changes in freight costs for the shipment of products to the Company’s distributors.
Non-GAAP effective tax rate of between 26% and 27%, excluding the impact of ASU 2016-09, a change from the previous estimate of approximately 26%. This effective tax rate also excludes any potential future changes to current federal income tax rates and regulations.
Estimated capital spending of between $110 million and $140 million a change from the previous estimate of between $140 million and $190 million.

 

Use of Non-GAAP Measures

 

Non-GAAP effective tax rate and earnings per diluted share, excluding the impact of ASU 2016-09, are not defined terms under U.S. generally accepted accounting principles (“GAAP”). These non-GAAP measures should not be considered in isolation or as a substitute for diluted earnings per share and effective tax rate data prepared in accordance with GAAP, and may not be comparable to calculations of similarly titled measures by other companies. Management uses these non-GAAP financial measures to make operating and strategic decisions and to evaluate the Company’s overall business performance. The Company is unable to reconcile the projection for its Non-GAAP effective tax rate and earnings per diluted share, excluding the impact of ASU 2016-09, because the Company is unable to predict the impact of future events outside the Company’s control, including the timing and value realized upon exercise of stock options versus the fair value of those options when granted. Therefore, because of the uncertainty and variability of the impact of ASU 2016-09, the Company is unable to provide, without unreasonable effort, a reconciliation of these non-GAAP measures on a forward-looking basis. Management believes these forward-looking non-GAAP measures provide meaningful and useful information to investors and analysts regarding our outlook and facilitate period to period comparisons of our forecasted financial performance.

 


 

 

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 year ended December 25, 2021 and subsequent reports filed by the Company with the SEC on Forms 10-Q and 8-K. Copies of these documents are available from the SEC and may be found on the Company’s website, www.bostonbeer.com. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. The Company undertakes no obligation to publicly update or revise any forward-looking statements.

 

About the Company

 

The Boston Beer Company, Inc. (NYSE: SAM) began in 1984 brewing Samuel Adams beer and the Samuel Adams brand is currently recognized as one of the largest and most respected craft beer brands. Our portfolio of brands also includes Truly Hard Seltzer, Twisted Tea, Angry Orchard Hard Cider, Dogfish Head Brewery, Hard Mountain Dew and Sauza Agave Cocktails as well as other craft beer brands such as Angel City Brewery and Coney Island Brewing. For more information, please visit our investor relations website at www.bostonbeer.com, which includes links to all of our respective brand websites.

 

Thursday, July 21, 2022

 

 


 

THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

(in thousands, except per share data)

 

 

 

(unaudited)

 

 

 

Thirteen weeks ended

 

 

Twenty-six weeks ended

 

 

 

June 25,
2022

 

 

June 26,
2021

 

 

June 25,
2022

 

 

June 26,
2021

 

Barrels sold

 

 

2,419

 

 

 

2,447

 

 

 

4,127

 

 

 

4,725

 

Revenue

 

$

655,022

 

 

$

641,314

 

 

$

1,112,310

 

 

$

1,223,023

 

Less excise taxes

 

 

38,779

 

 

 

38,509

 

 

 

65,954

 

 

 

75,138

 

Net revenue

 

 

616,243

 

 

 

602,805

 

 

 

1,046,356

 

 

 

1,147,885

 

Cost of goods sold

 

 

350,468

 

 

 

327,116

 

 

 

607,629

 

 

 

622,566

 

Gross profit

 

 

265,775

 

 

 

275,689

 

 

 

438,727

 

 

 

525,319

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Advertising, promotional and selling expenses

 

 

154,883

 

 

 

161,620

 

 

 

285,498

 

 

 

302,479

 

General and administrative expenses

 

 

38,849

 

 

 

32,960

 

 

 

78,547

 

 

 

64,906

 

Contract termination costs and other

 

 

578

 

 

 

 

 

 

5,330

 

 

 

 

Impairment of assets

 

 

80

 

 

 

1,004

 

 

 

121

 

 

 

1,231

 

Total operating expenses

 

 

194,390

 

 

 

195,584

 

 

 

369,496

 

 

 

368,616

 

Operating income

 

 

71,385

 

 

 

80,105

 

 

 

69,231

 

 

 

156,703

 

Other expense:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income (expense)

 

 

83

 

 

 

(29

)

 

 

50

 

 

 

(58

)

Other (expense) income

 

 

(601

)

 

 

8

 

 

 

(701

)

 

 

2

 

Total other expense

 

 

(518

)

 

 

(21

)

 

 

(651

)

 

 

(56

)

Income before income tax provision

 

 

70,867

 

 

 

80,084

 

 

 

68,580

 

 

 

156,647

 

Income tax provision

 

 

17,518

 

 

 

20,889

 

 

 

17,186

 

 

 

31,887

 

Net income

 

$

53,349

 

 

$

59,195

 

 

$

51,394

 

 

$

124,760

 

Net income per common share - basic

 

$

4.33

 

 

$

4.82

 

 

$

4.18

 

 

$

10.16

 

Net income per common share - diluted

 

$

4.31

 

 

$

4.75

 

 

$

4.15

 

 

$

10.01

 

Weighted-average number of common shares - basic

 

 

12,319

 

 

 

12,283

 

 

 

12,309

 

 

 

12,277

 

Weighted-average number of common shares - diluted

 

 

12,341

 

 

 

12,465

 

 

 

12,341

 

 

 

12,461

 

Net income

 

$

53,349

 

 

$

59,195

 

 

$

51,394

 

 

$

124,760

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(71

)

 

 

15

 

 

 

(21

)

 

 

35

 

Total other comprehensive (loss) income, net of tax

 

 

(71

)

 

 

15

 

 

 

(21

)

 

 

35

 

Comprehensive income

 

$

53,278

 

 

$

59,210

 

 

$

51,373

 

 

$

124,795

 

 

 

 

 

 

 


 

THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

(in thousands, except share data)

 

 

 

(unaudited)

 

 

 

 

 

 

June 25,

 

 

December 25,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

137,801

 

 

$

26,853

 

Restricted cash

 

 

 

 

 

39,468

 

Accounts receivable

 

 

119,371

 

 

 

55,022

 

Inventories

 

 

164,247

 

 

 

149,118

 

Prepaid expenses and other current assets

 

 

21,423

 

 

 

21,462

 

Income tax receivable

 

 

6,742

 

 

 

53,418

 

Total current assets

 

 

449,584

 

 

 

345,341

 

Property, plant and equipment, net

 

 

675,208

 

 

 

664,815

 

Operating right-of-use assets

 

 

48,424

 

 

 

52,774

 

Goodwill

 

 

112,529

 

 

 

112,529

 

Intangible assets

 

 

103,550

 

 

 

103,677

 

Third-party production prepayments

 

 

74,227

 

 

 

88,294

 

Other assets

 

 

16,944

 

 

 

19,354

 

Total assets

 

$

1,480,466

 

 

$

1,386,784

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

134,215

 

 

$

85,920

 

Accrued expenses and other current liabilities

 

 

148,179

 

 

 

161,552

 

Current operating lease liabilities

 

 

8,535

 

 

 

7,634

 

Total current liabilities

 

 

290,929

 

 

 

255,106

 

Deferred income taxes, net

 

 

90,052

 

 

 

87,495

 

Non-current operating lease liabilities

 

 

49,722

 

 

 

53,849

 

Other liabilities

 

 

5,726

 

 

 

6,925

 

Total liabilities

 

 

436,429

 

 

 

403,375

 

Stockholders' Equity:

 

 

 

 

 

 

Class A Common Stock, $0.01 par value; 22,700,000 shares authorized; 10,225,061 and 10,183,801 issued and outstanding as of June 25, 2022 and
   December 25, 2021, respectively

 

 

102

 

 

 

102

 

Class B Common Stock, $0.01 par value; 4,200,000 shares authorized; 2,068,000
   and 2,068,000 issued and outstanding as of June 25, 2022 and
   December 25, 2021, respectively

 

 

21

 

 

 

21

 

Additional paid-in capital

 

 

620,877

 

 

 

611,622

 

Accumulated other comprehensive loss

 

 

(215

)

 

 

(194

)

Retained earnings

 

 

423,252

 

 

 

371,858

 

Total stockholders' equity

 

 

1,044,037

 

 

 

983,409

 

Total liabilities and stockholders' equity

 

$

1,480,466

 

 

$

1,386,784

 

 

 

 

 

 

 

 

 

 


 

THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(in thousands)

 

 

 

(unaudited)

 

 

 

Twenty-six weeks ended

 

 

 

June 25,
2022

 

 

June 26,
2021

 

Cash flows provided by operating activities:

 

 

 

 

 

 

Net income

 

$

51,394

 

 

$

124,760

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

39,909

 

 

 

34,174

 

Impairment of assets

 

 

121

 

 

 

1,231

 

Gain on disposal of property, plant and equipment

 

 

(39

)

 

 

(150

)

Change in right-of-use assets

 

 

3,990

 

 

 

3,954

 

Other non-cash expense (income)

 

 

54

 

 

 

(98

)

Stock-based compensation expense

 

 

7,730

 

 

 

10,291

 

Deferred income taxes

 

 

2,557

 

 

 

(39

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(64,469

)

 

 

(35,075

)

Inventories

 

 

(13,014

)

 

 

(120,675

)

Prepaid expenses, income tax receivable, other current assets and other assets

 

 

47,010

 

 

 

(30,804

)

Third-party production prepayments

 

 

14,067

 

 

 

(17,024

)

Accounts payable

 

 

48,337

 

 

 

78,801

 

Accrued expenses, other current liabilities and other liabilities

 

 

(13,275

)

 

 

(14,307

)

Change in operating lease liabilities

 

 

(2,866

)

 

 

(4,052

)

Net cash provided by operating activities

 

 

121,506

 

 

 

30,987

 

Cash flows used in investing activities:

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(50,804

)

 

 

(83,521

)

Proceeds from disposal of property, plant and equipment

 

 

506

 

 

 

420

 

Other investing activities

 

 

 

 

 

145

 

Net cash used in investing activities

 

 

(50,298

)

 

 

(82,956

)

Cash flows provided by (used in) financing activities:

 

 

 

 

 

 

Proceeds from exercise of stock options and sale of investment shares

 

 

4,610

 

 

 

7,944

 

Net cash paid on note payable and finance leases

 

 

(870

)

 

 

(795

)

Line of credit borrowings

 

 

30,000

 

 

 

 

Line of credit repayments

 

 

(30,000

)

 

 

 

Payment of tax withholding on stock-based payment awards and investment shares

 

 

(3,468

)

 

 

(15,509

)

Net cash provided by (used in) financing activities

 

 

272

 

 

 

(8,360

)

Change in cash and cash equivalents and restricted cash

 

 

71,480

 

 

 

(60,329

)

Cash and cash equivalents and restricted cash at beginning of year

 

 

66,321

 

 

 

163,282

 

Cash and cash equivalents at end of period

 

$

137,801

 

 

$

102,953

 

 

 

 

 

 

 

 

Copies of The Boston Beer Company's press releases, including quarterly financial results,

 

are available on the Internet at www.bostonbeer.com

 

 

 

 




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