BOSTON, Oct. 26,
2023 /PRNewswire/ -- The Boston Beer Company, Inc.
(NYSE: SAM), today reported financial results for its third quarter
that ended September 30, 2023. Key
results were:
Third Quarter 2023 Summary:
- Depletions decreased 6% on a fiscal calendar basis and
decreased approximately 3% on a comparable week basis
- Shipments decreased 2.5% on a fiscal calendar basis and
decreased 1.8% on a comparable week basis
- Net revenue increased 0.9% to $601.6
million
- Gross margin increased 250 basis points to 45.7%
- Net income of $45.3 million,
which includes non-cash brand impairment charges of $16.4 million and the related tax benefit
- Diluted earnings per share of $3.70, including non-cash brand impairment
charges of $0.96 per share
Capital Structure
- Generated $131.3 million in
operating cash flow in the third quarter
- Ended the third quarter with $310.8
million in cash and no debt
- Repurchased $69.4 million in
shares from January 3, 2023 to
October 20, 2023
"On a comparable weeks basis, which adjusts for the timing
impact of the July 4th holiday, our
depletions trends improved from a decrease of 7% in the second
quarter to a decrease of 3% in the third quarter. We continue to
execute our operational plans and grew revenue, gross margin and
operating cash flow in the quarter which enabled us to repurchase
over $69 million in shares
year-to-date," said Chairman and Founder Jim Koch. "Our highly cash-generative business
and strong balance sheet allow us to invest in our brands as we
work to return to long-term sustainable growth."
"We are pleased with our performance in the third quarter as
momentum on Twisted Tea remained strong and we continued to show
progress on our margin enhancement plans while increasing brand
investment. Based on our results year-to-date and our expectations
for the fourth quarter, we are narrowing our revenue and EPS
guidance ranges," said President and CEO Dave Burwick. "We plan to continue to
invest behind the Twisted Tea and Truly brands while also nurturing
innovation across Beyond Beer categories to drive long-term
growth."
Details of the results were as follows:
Third Quarter 2023 (13 weeks ended September 30, 2023) Summary of Results
Net revenue of $601.6 million
increased 0.9% compared to the prior year.
Depletions in the third quarter decreased 6% from the prior
year, reflecting decreases in the Company's Truly, Angry Orchard,
Samuel Adams and Dogfish Head brands, partially offset by increases
in its Twisted Tea and Hard Mountain Dew brands.
Shipment volume for the quarter was approximately 2.3 million
barrels, a 2.5% decrease from the prior year, reflecting decreases
in the Company's Truly, Samuel Adams, Angry Orchard and Dogfish
Head brands, partially offset by increases in its Twisted Tea and
Hard Mountain Dew brands.
The timing of the July 4th holiday
relative to the Company's 2023 and 2022 fiscal calendars resulted
in a negative depletion and shipment volume impact in the third
quarter of 2023. This volume impact was the most significant factor
in the difference between depletions and shipments on a fiscal
calendar basis compared to a comparable weeks basis. On a
comparable weeks basis, depletions declined approximately 3% and
shipments declined 1.8%.
The Company believes distributor inventory as of September 30, 2023 averaged approximately five
weeks on hand and was at an appropriate level for each of its
brands.
Gross margin of 45.7% increased 250 basis points from the 43.2%
margin realized in the prior year. Gross margin primarily benefited
from strong price realization, lower inventory obsolescence and
procurement savings, which were partially offset by increased
inflationary costs.
Advertising, promotional and selling expenses for the third
quarter of 2023 decreased $1.1
million or 0.7% from the third quarter of 2022, due to
decreased freight to distributors of $10.8
million from lower rates and volumes, partially offset by an
increase in brand and selling costs of $9.6
million, mainly driven by higher salaries and benefits costs
and increased media investments.
General and administrative expenses increased by $4.9 million or 13.2% from the third quarter of
2022, primarily due to higher salaries and benefits costs and
increased consulting costs.
Impairment of intangible assets reflects a $16.4 million non-cash impairment charge recorded
primarily for the Dogfish Head brand, taken as a result of the
Company's annual impairment analysis as of September 1, 2023. The impairment determination
was primarily based on the latest forecasts of brand performance
which has been below our projections made on the acquisition date.
In the third quarter of 2022, the Company recorded an impairment
charge of $27.1 million for the
Dogfish Head brand.
The Company incurred impairment costs for brewery equipment of
$1.9 million in the third quarter of
2023 and $1.2 million in the third
quarter of 2022.
The Company's effective tax rate for the third quarter was 29.3%
compared to 28.6% in the prior year. In the third quarters of 2023
and 2022, the Company recorded a tax benefit of $0.00 and $0.02 per
diluted share, respectively, resulting from the Accounting Standard
"Employee Share-Based Payment Accounting" ("ASU 2016-09").
Year-to-date 2023 (39 weeks ended September 30, 2023) Summary of Results
Net revenue year-to-date of $1.615
billion decreased 1.7% compared to year-to-date 2022.
Depletions year-to-date decreased 5% from year-to-date 2022,
reflecting decreases in the Company's Truly, Angry Orchard, Samuel
Adams and Dogfish Head brands, partially offset by increases in its
Twisted Tea and Hard Mountain Dew brands. Comparable weeks
depletions year-to-date decreased 5%.
Shipment volume year-to-date was approximately 6.2 million
barrels, a 4.6% decrease from year-to-date 2022, reflecting
decreases in the Company's Truly, Angry Orchard, Samuel Adams, and
Dogfish Head brands, partially offset by increases in its Twisted
Tea and Hard Mountain Dew brands. Comparable weeks shipments
year-to-date decreased 5.5%.
Gross margin year-to-date of 43.6% increased from the 42.4%
gross margin realized in year-to-date 2022, primarily due to price
increases and procurement savings that were partially offset by
increased inflationary costs.
Advertising, promotional and selling expenses year-to-date
decreased $11.8 million or 2.7% from
year-to-date 2022, primarily due to decreased freight to
distributors of $39.0 million from
lower rates and volumes, partially offset by an increase in brand
investments of $27.2 million, mainly
driven by increased salaries and benefits costs and higher
investments in local marketing and media.
General and administrative expenses year-to-date increased by
$15.0 million or 12.9% from
year-to-date 2022, primarily due to increased consulting and
increased salaries and benefits costs.
The Company incurred impairment costs for brewery equipment of
$3.9 million year-to-date 2023 and
$1.3 million year-to-date 2022.
In 2022, the Company recorded $5.3
million 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 28.4% compared
to 26.3% year-to-date 2022. Year-to-date 2023 and 2022, the Company
recorded tax benefit of $0.01 per
diluted share and a tax benefit of $0.03 per diluted share, respectively, resulting
from ASU 2016-09.
Net income year-to-date of $94.4
million or $7.67 per diluted
share, represented an increase of $15.7
million or $1.31 per diluted
share compared to year-to-date 2022. This increase between periods
was primarily driven by higher gross margins and lower impairment,
partially offset by lower revenue and a higher tax rate.
The Company expects that its September
30, 2023 cash balance of $310.8
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 39-week period ended September
30, 2023 and the period from October
1, 2023 through October 20,
2023, the Company repurchased its Class A Common Stock in
the amounts of $62.9 million and
$6.6 million, respectively, for a
total of $69.4 million year to date.
As of October 20, 2023, the Company
had approximately $290.0 million
remaining on the $1.2 billion share
buyback expenditure limit set by the Board of Directors.
Depletions Estimate
Year-to-date depletions through the 42-week period ended
October 21, 2023 are estimated by the
Company to have decreased approximately 5% from the prior year
period on both a fiscal and comparable weeks basis.
Full-Year 2023 Projections
The Company is updating the full year volume and earnings
guidance previously communicated in its July
27, 2023 Earnings Release. The Company's actual 2023 results
could vary significantly from the current projection and are highly
sensitive to changes in volume projections and supply chain
performance. The 2023 fiscal year includes 52 weeks compared to the
2022 fiscal year which included 53 weeks.
Full Year
2023
|
Current
Guidance
|
Prior
Guidance
|
Depletions
Decreases
|
(5%) to (7%)
|
(2%) to (8%)
|
Shipments
Decreases
|
(5%) to (7%)
|
(2%) to (8%)
|
Price
Increases
|
2% to 3%
|
1% to 3%
|
Gross
Margin
|
42% to 43%
|
41% to 43%
|
Advertising,
Promotion, and Selling Expense YoY Change ($
million)
|
$25 to $35
|
$20 to $40
|
Effective Tax
Rate
|
28 %
|
28 %
|
GAAP
EPS
|
$6.04 to
$8.04
|
$6.00 to
$10.00
|
Non-GAAP
EPS
|
$7.00 to
$9.00
|
-
|
Capital Spending
($ million)
|
$60 to $90
|
$100 to $140
|
The non-GAAP earnings per share (Non-GAAP EPS) projection
excludes the impact of the non-cash brand value impairments of
$16.4 million or $0.96 per diluted share.
Underlying the Company's current 2023 projections are the
following full-year estimates and targets:
- The Company's guidance on depletions and shipments includes the
estimated negative impact of approximately 1.0 percentage point due
to the fact that fiscal 2022 had 53 weeks and fiscal 2023 will have
52 weeks. On a 52-week comparable basis the Company expects
depletions and shipments to decrease 4% to 6%. The 53rd week
overlap is expected to negatively impact fourth quarter volume
trends by approximately 6 percentage points.
- The Company expects price realization in the fourth quarter to
be positive but at a lower level due to lower third quarter price
increases compared to the prior year.
- The Company's guidance incorporates an expectation of higher
shortfall fees at third party breweries and lower fixed cost
absorption per barrel at its owned breweries due to lower seasonal
volumes in the fourth quarter. Therefore, the Company expects gross
margin to be lower in the fourth quarter relative to earlier
quarters.
- 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.
2024 Financial Guidance
The Company is planning to provide full year 2024 financial
guidance during its fourth quarter earnings call in February 2024.
Use of Non-GAAP Measures
Non-GAAP EPS is not a defined term under U.S. generally accepted
accounting principles ("GAAP"). Non-GAAP EPS, or Non-GAAP earnings
per diluted share, excludes from projected GAAP EPS the impact of
the non-cash asset impairment charge of $16.4 million, or $0.96 per diluted share, recognized in the third
quarter of fiscal 2023 relating primarily to the Dogfish Head
brand. This non-GAAP measure should not be considered in isolation
or as a substitute for diluted earnings per share prepared in
accordance with GAAP, and may not be comparable to calculations of
similarly titled measures by other companies. Management uses this
non-GAAP financial measure to make operating and strategic
decisions and to evaluate the Company's underlying business
performance. Management believes this forward-looking non-GAAP
measure provides meaningful and useful information to investors and
analysts regarding the Company's outlook for its ongoing financial
and business performance or trends and facilitates period to period
comparisons of its 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 31,
2022 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 Jim Beam Kentucky Coolers, 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.
THE BOSTON BEER
COMPANY, INC. AND SUBSIDIARIES
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|
(in thousands,
except per share data)
|
|
|
|
(unaudited)
|
|
|
|
Thirteen weeks
ended
|
|
|
Thirty-nine weeks
ended
|
|
|
|
September 30,
2023
|
|
|
September 24,
2022
|
|
|
September 30,
2023
|
|
|
September 24,
2022
|
|
Revenue
|
|
$
|
639,394
|
|
|
$
|
634,332
|
|
|
$
|
1,715,883
|
|
|
$
|
1,746,642
|
|
Less excise
taxes
|
|
|
37,795
|
|
|
|
37,879
|
|
|
|
100,980
|
|
|
|
103,833
|
|
Net revenue
|
|
|
601,599
|
|
|
|
596,453
|
|
|
|
1,614,903
|
|
|
|
1,642,809
|
|
Cost of goods
sold
|
|
|
326,951
|
|
|
|
338,707
|
|
|
|
910,430
|
|
|
|
946,336
|
|
Gross
profit
|
|
|
274,648
|
|
|
|
257,746
|
|
|
|
704,473
|
|
|
|
696,473
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising,
promotional, and selling expenses
|
|
|
152,579
|
|
|
|
153,717
|
|
|
|
427,369
|
|
|
|
439,215
|
|
General and
administrative expenses
|
|
|
42,241
|
|
|
|
37,382
|
|
|
|
130,834
|
|
|
|
115,929
|
|
Impairment of
intangible assets
|
|
|
16,426
|
|
|
|
27,100
|
|
|
|
16,426
|
|
|
|
27,100
|
|
Impairment of brewery
assets
|
|
|
1,900
|
|
|
|
1,181
|
|
|
|
3,916
|
|
|
|
1,302
|
|
Contract termination
costs and other
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,330
|
|
Total operating
expenses
|
|
|
213,146
|
|
|
|
219,380
|
|
|
|
578,545
|
|
|
|
588,876
|
|
Operating
income
|
|
|
61,502
|
|
|
|
38,366
|
|
|
|
125,928
|
|
|
|
107,597
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
3,478
|
|
|
|
759
|
|
|
|
6,977
|
|
|
|
809
|
|
Other
expense
|
|
|
(913)
|
|
|
|
(891)
|
|
|
|
(1,137)
|
|
|
|
(1,592)
|
|
Total other income
(expense)
|
|
|
2,565
|
|
|
|
(132)
|
|
|
|
5,840
|
|
|
|
(783)
|
|
Income before income
tax provision
|
|
|
64,067
|
|
|
|
38,234
|
|
|
|
131,768
|
|
|
|
106,814
|
|
Income tax
provision
|
|
|
18,772
|
|
|
|
10,948
|
|
|
|
37,394
|
|
|
|
28,134
|
|
Net income
|
|
$
|
45,295
|
|
|
$
|
27,286
|
|
|
$
|
94,374
|
|
|
$
|
78,680
|
|
Net income per common
share – basic
|
|
$
|
3.70
|
|
|
$
|
2.21
|
|
|
$
|
7.69
|
|
|
$
|
6.39
|
|
Net income per common
share – diluted
|
|
$
|
3.70
|
|
|
$
|
2.21
|
|
|
$
|
7.67
|
|
|
$
|
6.36
|
|
Weighted-average number
of common shares – basic
|
|
|
12,228
|
|
|
|
12,321
|
|
|
|
12,268
|
|
|
|
12,313
|
|
Weighted-average number
of common shares – diluted
|
|
|
12,233
|
|
|
|
12,344
|
|
|
|
12,280
|
|
|
|
12,342
|
|
Net income
|
|
$
|
45,295
|
|
|
$
|
27,286
|
|
|
$
|
94,374
|
|
|
$
|
78,680
|
|
Other comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
translation adjustment
|
|
|
(144)
|
|
|
|
(242)
|
|
|
|
—
|
|
|
|
(263)
|
|
Total other
comprehensive loss, net of tax
|
|
|
(144)
|
|
|
|
(242)
|
|
|
|
—
|
|
|
|
(263)
|
|
Comprehensive
income
|
|
$
|
45,151
|
|
|
$
|
27,044
|
|
|
$
|
94,374
|
|
|
$
|
78,417
|
|
THE BOSTON BEER
COMPANY, INC. AND SUBSIDIARIES
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
(in thousands, except
share data)
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
September 30,
2023
|
|
|
December 31,
2022
|
|
Assets
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
310,778
|
|
|
$
|
180,560
|
|
Accounts
receivable
|
|
|
87,977
|
|
|
|
56,672
|
|
Inventories
|
|
|
148,402
|
|
|
|
148,450
|
|
Prepaid expenses and
other current assets
|
|
|
32,242
|
|
|
|
27,461
|
|
Income tax
receivable
|
|
|
-
|
|
|
|
10,126
|
|
Total current
assets
|
|
|
579,399
|
|
|
|
423,269
|
|
Property, plant, and
equipment, net
|
|
|
647,323
|
|
|
|
667,909
|
|
Operating right-of-use
assets
|
|
|
37,456
|
|
|
|
43,768
|
|
Goodwill
|
|
|
112,529
|
|
|
|
112,529
|
|
Intangible assets,
net
|
|
|
59,707
|
|
|
|
76,324
|
|
Third-party production
prepayments
|
|
|
39,209
|
|
|
|
61,339
|
|
Other assets
|
|
|
41,265
|
|
|
|
35,635
|
|
Total
assets
|
|
$
|
1,516,888
|
|
|
$
|
1,420,773
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
114,699
|
|
|
$
|
84,248
|
|
Accrued expenses and
other current liabilities
|
|
|
141,025
|
|
|
|
111,153
|
|
Current operating
lease liabilities
|
|
|
9,030
|
|
|
|
8,866
|
|
Total current
liabilities
|
|
|
264,754
|
|
|
|
204,267
|
|
Deferred income taxes,
net
|
|
|
86,243
|
|
|
|
96,592
|
|
Non-current operating
lease liabilities
|
|
|
38,461
|
|
|
|
45,274
|
|
Other
liabilities
|
|
|
6,653
|
|
|
|
6,091
|
|
Total
liabilities
|
|
|
396,111
|
|
|
|
352,224
|
|
Stockholders'
Equity:
|
|
|
|
|
|
|
Class A Common Stock,
$0.01 par value; 22,700,000 shares authorized; 10,116,181 and
10,238,009 issued and outstanding as of September 30, 2023 and
December 31, 2022,
respectively
|
|
|
101
|
|
|
|
102
|
|
Class B Common Stock,
$0.01 par value; 4,200,000 shares authorized; 2,068,000
issued and outstanding as of September 30, 2023 and December 31,
2022
|
|
|
21
|
|
|
|
21
|
|
Additional paid-in
capital
|
|
|
650,874
|
|
|
|
629,515
|
|
Accumulated other
comprehensive loss
|
|
|
(210)
|
|
|
|
(210)
|
|
Retained
earnings
|
|
|
469,991
|
|
|
|
439,121
|
|
Total stockholders'
equity
|
|
|
1,120,777
|
|
|
|
1,068,549
|
|
Total liabilities and
stockholders' equity
|
|
$
|
1,516,888
|
|
|
$
|
1,420,773
|
|
THE BOSTON BEER
COMPANY, INC. AND SUBSIDIARIES
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
(in
thousands)
|
|
|
|
(unaudited)
|
|
|
|
Thirty-nine weeks
ended
|
|
|
|
September 30,
2023
|
|
|
September 24,
2022
|
|
Cash flows provided
by operating activities:
|
|
|
|
|
|
|
Net income
|
|
$
|
94,374
|
|
|
$
|
78,680
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
66,603
|
|
|
|
60,765
|
|
Impairment of
intangible assets
|
|
|
16,426
|
|
|
|
27,100
|
|
Impairment of brewery
assets
|
|
|
3,916
|
|
|
|
1,302
|
|
Change in right-of-use
assets
|
|
|
5,781
|
|
|
|
5,986
|
|
Stock-based
compensation expense
|
|
|
12,313
|
|
|
|
10,328
|
|
Deferred income
taxes
|
|
|
(10,349)
|
|
|
|
2,199
|
|
Other non-cash
expense
|
|
|
40
|
|
|
|
312
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(31,253)
|
|
|
|
(37,745)
|
|
Inventories
|
|
|
3,786
|
|
|
|
(45,185)
|
|
Prepaid expenses,
income tax receivable, and other current assets
|
|
|
3,986
|
|
|
|
52,680
|
|
Third-party production
prepayments
|
|
|
22,130
|
|
|
|
20,845
|
|
Other
assets
|
|
|
(9,368)
|
|
|
|
(7,661)
|
|
Accounts
payable
|
|
|
31,341
|
|
|
|
67,620
|
|
Accrued expenses,
other current liabilities, and other liabilities
|
|
|
29,217
|
|
|
|
(7,861)
|
|
Operating lease
liabilities
|
|
|
(6,542)
|
|
|
|
(4,412)
|
|
Net cash provided by
operating activities
|
|
|
232,401
|
|
|
|
224,953
|
|
Cash flows used in
investing activities:
|
|
|
|
|
|
|
Purchases of property,
plant, and equipment
|
|
|
(48,777)
|
|
|
|
(70,313)
|
|
Proceeds from disposal
of property, plant, and equipment
|
|
|
1,708
|
|
|
|
506
|
|
Net cash used in
investing activities
|
|
|
(47,069)
|
|
|
|
(69,807)
|
|
Cash flows (used in)
provided by financing activities:
|
|
|
|
|
|
|
Repurchases of Class A
common stock
|
|
|
(62,477)
|
|
|
|
—
|
|
Proceeds from exercise
of stock options and sale of investment shares
|
|
|
10,660
|
|
|
|
5,327
|
|
Cash paid on finance
leases
|
|
|
(1,184)
|
|
|
|
(1,270)
|
|
Line of credit
borrowings
|
|
|
—
|
|
|
|
30,000
|
|
Line of credit
repayments
|
|
|
—
|
|
|
|
(30,000)
|
|
Payment of tax
withholding on stock-based payment awards and investment
shares
|
|
|
(2,113)
|
|
|
|
(3,474)
|
|
Net cash (used in)
provided by financing activities
|
|
|
(55,114)
|
|
|
|
583
|
|
Change in cash and cash
equivalents and restricted cash
|
|
|
130,218
|
|
|
|
155,729
|
|
Cash and cash
equivalents and restricted cash at beginning of year
|
|
|
180,560
|
|
|
|
66,321
|
|
Cash and cash
equivalents at end of period
|
|
$
|
310,778
|
|
|
$
|
222,050
|
|
|
Copies of The
Boston Beer Company's press releases, including quarterly financial
results, are
available on the Internet at
www.bostonbeer.com
|
View original
content:https://www.prnewswire.com/news-releases/boston-beer-reports-third-quarter-financial-results-301969295.html
SOURCE The Boston Beer Company, Inc.