The Boston Beer Company, Inc. (NYSE: SAM), today reported financial
results for the second quarter ended June 29, 2024. Key results
were:
Second Quarter 2024 Summary:
- Depletions decreased 4% and shipments decreased 6.4%
- Net revenue of $579.1 million decreased 4.0%
- Gross margin of 46.0% up 60 basis points year over year
- Net income of $52.3 million, a decrease of $5.7 million or
9.8%
- Diluted income per share of $4.39
Year-to-date 2024 Summary:
- Depletions decreased 2% and shipments decreased 3.4%
- Net revenue of $1.005 billion decreased 0.8%
- Gross margin of 45.0% up 260 basis points year over year
- Net income of $64.9 million, an increase of $15.9 million or
32.3%
- Diluted income per share of $5.41
Capital Structure
- Ended the first quarter with $219.3 million in cash and no
debt
- Repurchased $127.0 million in shares from January 2, 2024 to
July 19, 2024
“Our gross margin improvement initiatives continue
to take hold, with gross margin expanding over 250 basis points
year-to-date, and strong cash flow generation,” said Chairman and
Founder Jim Koch. “Depletions were soft in April, but
improved as we moved through the quarter. While the industry
environment remains dynamic, we are seeing early signs of progress
on innovation and will use our strong balance sheet to invest in
our brands while returning cash to shareholders.”
“I’m pleased to have completed my first quarter as
Boston Beer’s CEO and believe there are many areas of opportunity
ahead for the company,” said President and CEO Michael
Spillane. “We are revising our volume guidance to reflect
softer category performance in the second quarter and timing of
product launches, while maintaining our EPS guidance supported by
progress on our transformation efforts. Our entire
organization will be focused on optimizing all aspects of execution
and launching accretive innovation to provide the foundation for a
future return to growth.”
Details of the results were as follows:
Second Quarter 2024 (13 weeks ended June
29, 2024) Summary of Results
Depletions for the second quarter decreased 4%
from the prior year. Shipment volume for the quarter was
approximately 2.2 million barrels, a 6.4% decrease from the prior
year, primarily due to declines in Truly Hard Seltzer that were
only partially offset by growth in the Company’s Twisted Tea brand
and its newly launched Sun Cruiser brand.
The Company believes distributor inventory as of
June 29, 2024 averaged approximately three and one half weeks on
hand compared to our target wholesaler inventory levels of four to
five weeks for our peak summer season. These lower than target
wholesaler inventory levels were the result of not fully shipping
into improving demand in the latter weeks of June. The Company is
working to ensure shipments in July and August build inventories at
wholesalers back to target levels.
Revenue for the quarter decreased 4.0% due to
lower volumes, partially offset by pricing and lower returns.
Gross margin of 46.0% increased 60 basis points
from the 45.4% margin realized in the prior year. Gross margin
primarily benefited from price increases, procurement savings and
lower returns, which more than offset higher brewery processing
costs per barrel due to lower volumes and increased inflationary
costs.
The second quarter gross margin of 46.0% includes
$3.0 million of shortfall fees, which negatively impacted gross
margin by approximately 50 basis points on an absolute basis, and a
non-cash expense of third-party production pre-payments of $6.2
million that negatively impacted gross margins by approximately 110
basis points on an absolute basis.
Advertising, promotional and selling expenses for
the second quarter of 2024 decreased $5.1 million or 3.4% from the
second quarter of 2023, due to decreased freight to distributors of
$2.8 million from lower rates and lower volumes. Brand and selling
costs decreased $2.3 million, primarily due to lower brand media
spend.
General and administrative expenses increased by
$3.1 million or 7.0% from the second quarter of 2023, primarily due
to inflation in salaries and benefits costs.
The Company’s effective tax rate for the second
quarter of 28.6% compared to 27.5% in the prior year. The increased
effective tax rate is due to an increase in non-deductible stock
compensation expense in the second quarter of 2024 compared to the
second quarter of 2023.
Year-to-date 2024 (26 weeks ended June 29,
2024) Summary of Results
Net revenue year-to-date of $1.005 billion
decreased 0.8% compared to year-to-date 2023.
Depletions year-to-date decreased 2% from the
prior year. Shipment volume year-to-date was approximately 3.8
million barrels, a 3.4% decrease from the prior year, primarily due
to declines in Truly Hard Seltzer that were only partially offset
by growth in Twisted Tea brand and its newly launched Sun Cruiser
brand.
Gross margin year-to-date of 45.0% increased from
the 42.4% margin realized in year-to-date 2023, or an increase of
260 basis points year over year. Gross margin primarily benefited
from price increases, procurement savings, lower returns and
inventory obsolescence costs and a non-recurring payment in the
prior year to a third-party contract brewery, partially offset by
higher brewery processing costs per barrel due to lower volumes and
increased inflationary costs.
The year-to-date gross margin of 45.0% includes
$4.0 million of shortfall fees, which negatively impacted gross
margin by approximately 40 basis points on an absolute basis and a
non-cash expense of third-party production pre-payments of $10.4
million that negatively impacted gross margins by approximately 100
basis points on an absolute basis.
Advertising, promotional and selling expenses
year-to-date decreased $10.3 million or 3.7% from year-to-date
2023, primarily due to decreased freight to distributors of $6.4
million from lower rates and volumes. Brand and selling costs
decreased $3.9 million, primarily due to lower brand media spend
partially offset by inflation in salaries and benefits costs.
General and administrative expenses year-to-date
increased by $9.8 million or 11.1% from year-to-date 2023,
primarily due to higher salaries and benefits costs resulting from
Chief Executive Officer transition costs recorded in the first
quarter and inflation costs.
The Company’s effective tax rate year-to-date was
29.5% compared to 27.5% year-to-date 2023. The increased effective
tax rate is due to an increase in non-deductible stock compensation
expense in year-to-date 2024 compared to year-to-date 2023.
Net income year-to-date of $64.9 million or $5.41
per share, represented an increase of $15.8 million or $1.43 per
diluted share compared to year-to-date 2023. This increase between
periods was primarily driven by higher gross margins, partially
offset by lower revenue.
The Company expects that its June 29, 2024 cash
balance of $219.3 million, together with its projected 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 29, 2024 and
the period from July 1, 2024 through July 19, 2024, the Company
repurchased shares of its Class A Common Stock in the amounts of
$113.0 million and $14.0 million, respectively, for a total of
$127.0 million year to date. As of July 19, 2024, the Company had
approximately $140 million remaining on the $1.2 billion share
buyback expenditure limit set by the Board of Directors.
Depletions Estimate
Year-to-date depletions through the 29-week period
ended July 20, 2024 are estimated by the Company to have decreased
approximately 2% from the comparable period in 2023.
Full-Year 2024 Projections
The Company has updated its full year guidance.
The Company’s actual 2024 results could vary significantly from the
current projection and are highly sensitive to changes in volume
projections and supply chain performance as well as inflationary
impacts.
Full Year 2024 |
Current Guidance |
Prior Guidance |
Depletions and Shipments Percentage Change |
Down low single digit to zero |
Down low single digit to up low single digit |
Price Increases |
1% to 2% |
1% to 2% |
Gross Margin |
43% to 45% |
43% to 45% |
Advertising, Promotion, and Selling Expense
Year Over Year Change ($
million) |
($5) to $15 |
($5) to $15 |
Effective Tax Rate |
28.5% |
28.5% |
GAAP EPS |
$7.00 to $11.00 |
$7.00 to $11.00 |
Capital Spending ($ million) |
$90 to $110 |
$90 to $110 |
|
|
|
Underlying the Company's current 2024 projections
are the following full-year estimates and targets:
- The advertising, selling and promotional expense projection
does not include any changes in freight costs for the shipment of
products to the Company’s distributors
- During full year 2024, the Company estimates shortfall fees
will negatively impact gross margin by 50 to 75 basis points and
the non-cash expense of third-party production pre-payments will
negatively impact gross margins by 85 to 110 basis points
- The Company’s business is seasonal, with the first quarter and
fourth quarter being lower volume quarters and the fourth quarter
typically the lowest absolute gross margin rate of the year
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 30,
2023 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
brewing Samuel Adams beer in 1984 and has since grown to become one
of the largest and most respected craft brewers in the United
States. We consistently offer the highest-quality products to our
drinkers, and we apply what we’ve learned from making great-tasting
craft beer to making great-tasting and innovative “beyond beer”
products. Boston Beer Company has pioneered not only craft beer but
also hard cider, hard seltzer and hard tea. Our core brands include
household names like Angry Orchard Hard Cider, Dogfish Head, Truly
Hard Seltzer, Twisted Tea Hard Iced Tea, and Samuel Adams. We have
taprooms and hospitality locations in California, Delaware,
Massachusetts, New York and Ohio. For more information, please
visit our website at www.bostonbeer.com, which includes links to
our respective brand websites.
Thursday, July 25, 2024
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 29, 2024 |
|
July 1, 2023 |
|
June 29, 2024 |
|
July 1, 2023 |
|
Revenue |
$ |
614,216 |
|
$ |
641,333 |
|
$ |
1,066,423 |
|
$ |
1,076,489 |
|
Less excise
taxes |
|
35,118 |
|
|
38,029 |
|
|
61,274 |
|
|
63,185 |
|
Net revenue |
|
579,098 |
|
|
603,304 |
|
|
1,005,149 |
|
|
1,013,304 |
|
Cost of
goods sold |
|
312,640 |
|
|
329,141 |
|
|
552,343 |
|
|
583,479 |
|
Gross profit |
|
266,458 |
|
|
274,163 |
|
|
452,806 |
|
|
429,825 |
|
Operating
expenses: |
|
|
|
|
|
|
|
|
Advertising, promotional, and selling expenses |
|
144,224 |
|
|
149,362 |
|
|
264,499 |
|
|
274,790 |
|
General and administrative expenses |
|
48,024 |
|
|
44,899 |
|
|
98,408 |
|
|
88,593 |
|
Impairment of brewery assets |
|
3,395 |
|
|
1,532 |
|
|
3,731 |
|
|
2,016 |
|
Total operating expenses |
|
195,643 |
|
|
195,793 |
|
|
366,638 |
|
|
365,399 |
|
Operating
income |
|
70,815 |
|
|
78,370 |
|
|
86,168 |
|
|
64,426 |
|
Other
income: |
|
|
|
|
|
|
|
|
Interest income |
|
2,946 |
|
|
1,855 |
|
|
6,439 |
|
|
3,499 |
|
Other expense |
|
(440 |
) |
|
(122 |
) |
|
(478 |
) |
|
(224 |
) |
Total other income |
|
2,506 |
|
|
1,733 |
|
|
5,961 |
|
|
3,275 |
|
Income
before income tax provision |
|
73,321 |
|
|
80,103 |
|
|
92,129 |
|
|
67,701 |
|
Income tax
provision |
|
20,982 |
|
|
22,068 |
|
|
27,193 |
|
|
18,622 |
|
Net income |
$ |
52,339 |
|
$ |
58,035 |
|
$ |
64,936 |
|
$ |
49,079 |
|
Net income
per common share – basic |
$ |
4.40 |
|
$ |
4.73 |
|
$ |
5.42 |
|
$ |
3.99 |
|
Net income
per common share – diluted |
$ |
4.39 |
|
$ |
4.72 |
|
$ |
5.41 |
|
$ |
3.98 |
|
Weighted-average number of common shares – basic |
|
11,898 |
|
|
12,268 |
|
|
11,976 |
|
|
12,288 |
|
Weighted-average number of common shares – diluted |
|
11,888 |
|
|
12,276 |
|
|
11,971 |
|
|
12,304 |
|
Net income |
$ |
52,339 |
|
$ |
58,035 |
|
$ |
64,936 |
|
$ |
49,079 |
|
Other
comprehensive income: |
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment |
|
(59 |
) |
|
126 |
|
|
(221 |
) |
|
144 |
|
Total other
comprehensive income |
|
(59 |
) |
|
126 |
|
|
(221 |
) |
|
144 |
|
Comprehensive income |
$ |
52,280 |
|
$ |
58,161 |
|
$ |
64,715 |
|
$ |
49,223 |
|
THE BOSTON BEER COMPANY, INC. AND
SUBSIDIARIES |
|
CONDENSED CONSOLIDATED BALANCE SHEETS |
|
(in thousands, except share data) |
|
|
(unaudited) |
|
|
|
|
June 29, 2024 |
|
December 30, 2023 |
|
Assets |
|
|
|
|
Current Assets: |
|
|
|
|
Cash and cash equivalents |
$ |
219,295 |
|
$ |
298,491 |
|
Accounts receivable |
|
125,452 |
|
|
66,997 |
|
Inventories |
|
152,296 |
|
|
115,773 |
|
Prepaid expenses and other current assets |
|
28,046 |
|
|
20,538 |
|
Income tax receivable |
|
1,160 |
|
|
1,711 |
|
Total current assets |
|
526,249 |
|
|
503,510 |
|
Property, plant, and equipment, net |
|
626,860 |
|
|
642,509 |
|
Operating right-of-use assets |
|
31,711 |
|
|
35,559 |
|
Goodwill |
|
112,529 |
|
|
112,529 |
|
Intangible assets, net |
|
59,517 |
|
|
59,644 |
|
Third-party production prepayments |
|
24,278 |
|
|
33,581 |
|
Note receivable |
|
18,890 |
|
|
— |
|
Other assets |
|
35,412 |
|
|
42,661 |
|
Total assets |
$ |
1,435,446 |
|
$ |
1,429,993 |
|
Liabilities and Stockholders' Equity |
|
|
|
|
Current Liabilities: |
|
|
|
|
Accounts payable |
$ |
114,989 |
|
$ |
87,245 |
|
Accrued expenses and other current liabilities |
|
147,477 |
|
|
126,930 |
|
Current operating lease liabilities |
|
7,481 |
|
|
9,113 |
|
Total current liabilities |
|
269,947 |
|
|
223,288 |
|
Deferred income taxes, net |
|
85,908 |
|
|
85,721 |
|
Non-current operating lease liabilities |
|
32,981 |
|
|
36,161 |
|
Other liabilities |
|
6,075 |
|
|
6,894 |
|
Total liabilities |
|
394,911 |
|
|
352,064 |
|
Stockholders' Equity: |
|
|
|
|
Class A Common Stock, $0.01 par value; 22,700,000 shares
authorized; 9,695,415 and 10,033,303 issued and outstanding as of
June 29, 2024 and December 30, 2023 respectively |
|
97 |
|
|
100 |
|
Class B Common Stock, $0.01 par value; 4,200,000 shares authorized;
2,068,000 issued and outstanding at June 29, 2024 and December 30,
2023 |
|
21 |
|
|
21 |
|
Additional paid-in capital |
|
668,089 |
|
|
656,297 |
|
Accumulated other comprehensive loss |
|
(278 |
) |
|
(57 |
) |
Retained earnings |
|
372,606 |
|
|
421,568 |
|
Total stockholders' equity |
|
1,040,535 |
|
|
1,077,929 |
|
Total liabilities and stockholders' equity |
$ |
1,435,446 |
|
$ |
1,429,993 |
|
THE BOSTON
BEER COMPANY, INC. AND SUBSIDIARIES |
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS |
|
(in thousands) |
|
|
(unaudited) |
|
|
Twenty-six weeks ended |
|
|
June 29, 2024 |
|
|
July 1, 2023 |
|
Cash
flows provided by operating activities: |
|
|
|
|
|
Net income |
$ |
64,936 |
|
|
$ |
49,079 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
Depreciation and amortization |
|
46,983 |
|
|
|
43,602 |
|
Impairment of brewery assets |
|
3,731 |
|
|
|
2,016 |
|
Gain on sale of property, plant, and equipment |
|
(22 |
) |
|
|
(195 |
) |
Change in right-of-use assets |
|
3,608 |
|
|
|
3,844 |
|
Stock-based compensation expense |
|
11,008 |
|
|
|
8,266 |
|
Deferred income taxes |
|
187 |
|
|
|
(1,177 |
) |
Other non-cash expense (income) |
|
296 |
|
|
|
(88 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
Accounts receivable |
|
(58,751 |
) |
|
|
(60,307 |
) |
Inventories |
|
(31,566 |
) |
|
|
(9,376 |
) |
Prepaid expenses, income tax receivable, and other assets |
|
(6,977 |
) |
|
|
1,041 |
|
Third-party production prepayments |
|
9,303 |
|
|
|
14,512 |
|
Other assets |
|
3,390 |
|
|
|
(5,995 |
) |
Accounts payable |
|
29,487 |
|
|
|
38,872 |
|
Accrued expenses and other liabilities |
|
20,045 |
|
|
|
21,354 |
|
Operating lease liabilities |
|
(4,542 |
) |
|
|
(4,311 |
) |
Net cash provided by operating activities |
|
91,116 |
|
|
|
101,137 |
|
Cash
flows used in investing activities: |
|
|
|
|
|
Cash paid for note receivable |
|
(20,000 |
) |
|
|
— |
|
Purchases of property, plant, and equipment |
|
(36,090 |
) |
|
|
(34,809 |
) |
Proceeds from disposal of property, plant, and equipment |
|
23 |
|
|
|
195 |
|
Net cash used in investing activities |
|
(56,067 |
) |
|
|
(34,614 |
) |
Cash
flows used in financing activities: |
|
|
|
|
|
Repurchases and retirement of Class A common stock |
|
(112,958 |
) |
|
|
(45,887 |
) |
Proceeds from exercise of stock options and sale of investment
shares |
|
2,179 |
|
|
|
9,466 |
|
Cash paid on finance leases |
|
(1,062 |
) |
|
|
(797 |
) |
Payment of tax withholding on stock-based payment awards and
investment shares |
|
(2,404 |
) |
|
|
(2,110 |
) |
Net cash used in financing activities |
|
(114,245 |
) |
|
|
(39,328 |
) |
Change in
cash and cash equivalents |
|
(79,196 |
) |
|
|
27,195 |
|
Cash and
cash equivalents at beginning of period |
|
298,491 |
|
|
|
180,560 |
|
Cash and
cash equivalents at end of period |
$ |
219,295 |
|
|
$ |
207,755 |
|
|
|
|
|
|
|
Copies of The Boston Beer Company's press releases,
including quarterly financial results, |
|
are available on the Internet at
www.bostonbeer.com |
|
Investor Relations Contact: |
|
|
Media Contact: |
Jennifer Larson |
|
|
Dave DeCecco |
(617) 368-5152 |
|
|
(914) 261-6572 |
jennifer.larson@bostonbeer.com |
|
|
dave.dececco@bostonbeer.com |
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