E-Malt.com News article: USA: The Boston Beer Company, Inc. reports first quarter 2013 financial results

The Boston Beer Company, Inc. reported first quarter 2013 net revenue of $135.9 mln, an increase of $22.7 mln or 20%, over the same period last year, mainly due to core shipment growth of 18%.

Net income for the first quarter was $6.9 mln, or $0.51 per diluted share, a decrease of $0.6 mln, or $0.05 per diluted share, from the first quarter of 2012. This decrease was primarily due to higher cost of goods and increased investments in advertising, promotional and selling expenses that were only partially offset by net revenue increases and a favorable tax settlement in the first quarter of 2013.

Jim Koch, Chairman and Founder of the Company, commented, “I am pleased that The Boston Beer Company achieved record depletions in the quarter as the health of our cider and tea brands offset slight softness with Samuel Adams. This is a testament to the hard work of our employees and wholesalers, and our continued brand innovation efforts. While we continue to experience increased competitive activities from both domestic specialty and craft beer brands that have made it challenging to grow Samuel Adams as fast as we would like, we remain positive about the future of craft beer and our potential for long term growth. I am pleased to report that Samuel Adams Boston Lager packaged in our new unique can will be available at wholesalers and retailers in May. Over the last two years we undertook a significant research effort to see if we could create a can that we felt was worthy of holding Samuel Adams beer. I wanted to ensure that the can we developed would deliver the same quality drinking experience as Samuel Adams in a glass or a bottle and would protect the balance and flavors of our beers. I look forward to enjoying Samuel Adams beer this summer in locations where bottles are not allowed.”

Martin Roper, the Company’s President and CEO stated, “In the first quarter, our depletions growth benefited from the strength in our Angry Orchard and Twisted Tea brands, offset by a slight decline in our Samuel Adams brand, primarily due to our Seasonal program not meeting our expectations during the quarter. Despite this softness, we still accomplished the conversion from our Spring Seasonal to Summer Ale in most markets in March due to the improved inventory planning allowed by our Freshest Beer Program. To address increased competition and to take advantage of positive brand momentum, we again increased our investment in our sales force and our support behind our brands. We also are making capital improvements in our brewing and packaging capabilities to position us well for long-term growth. Specifically, in support of the new Samuel Adams can launch, we recently installed a can line capable of filling this unique can design and, in support of our long-term packaging needs, we will add more bottling capability this summer in preparation for peak volumes later this year. We anticipate the capital investments and high level of brand investments to continue as we pursue growth, innovation, efficiency improvements and address certain capacity constraints. We are prepared to forsake the lost earnings that may result from these investments in the short term, as we pursue long term profitable growth.”

Mr. Roper continued, “Alchemy & Science, our craft brew incubator, continues to progress with its existing investments and explore potential opportunities. It has had minimal sales to date, but our 2013 financial projection includes increased estimated brand investments attributable to existing projects of between $2 mln and $4 mln. This estimate could change significantly if new projects are added and there is no guarantee that Alchemy & Science volume and revenues will fully cover these expenses and others that could be incurred. We continue to look for complementary opportunities that do not distract us from our primary focus on Samuel Adams, as we believe a portfolio of growing brands is a good outcome for our wholesalers and for us.”

Commenting on the Company’s Freshest Beer Program, Mr. Roper said, “We currently have 92 wholesalers representing over 60% of our volume in our Freshest Beer Program and believe this could reach between 65% and 75% by the end of 2013. We continue to evaluate whether we can reduce inventory levels further and to invest in the breweries to improve their support of the Program.”

Depletions grew 16% from the comparable 13-week period in the prior year primarily due to increases in Angry Orchard® and Twisted Tea® that were partially offset by declines in Samuel Adams®.

Core shipment volume was approximately 632,000 barrels, an 18% increase compared to the first quarter of 2012.

The Company believes wholesaler inventory levels at March 30, 2013 were at appropriate levels. Inventory at wholesalers participating in the Freshest Beer Program was lower by an estimated 112,000 cases at March 30, 2013 compared to March 31, 2012.

Gross margin decreased to 50% compared to 55% in the first quarter of 2012. Increased brewery processing and ingredient costs, combined with $2.2 mln of customer programs and incentive costs that are now recorded as reductions in revenue, were only partially offset by pricing increases. In the first quarter of 2012, customer programs and incentive costs were recorded as advertising, promotional and selling expenses.

Advertising, promotional and selling expenses, excluding 2013 customer programs and incentive costs of $2.2 mln that were reported as reduction of revenues, were $5.0 mln higher than costs incurred in the prior year. The combined increase of $7.2 mln in advertising promotional and selling and customer program and incentive costs was primarily a result of the timing of planned brand investments compared to the prior year, increased costs for additional sales personnel, increased investments in advertising and increased freight to wholesalers due to higher volumes.

General and administrative expenses increased $3.1 mln compared to the first quarter of 2012, primarily due to increases in salary and benefit costs and consulting expenses.

Cash and cash equivalents as of March 30, 2013 totalled $32.3 mln.

During the first quarter, the Company repurchased approximately 102,000 shares of its Class A Common Stock at a cost of approximately $14.7 mln and repurchased an additional 44,000 shares during the period April 1, 2013 through April 26, 2013 at an approximate cost of $7.0 mln. As of April 26, 2013 the Company had approximately $8.4 mln remaining on the $300.0 mln share buyback expenditure limit set by the Board of Directors.

Year-to-date depletions through the 16 weeks ended April 20, 2013 are estimated by the Company to be up approximately 18% from the comparable period in 2012.

The Company has left unchanged its projection of 2013 earnings per diluted share of between $4.70 and $5.10. The Company’s actual 2013 earnings per share could vary significantly from the current projection. Underlying the Company’s current projection are the following estimates and targets:

Depletions and shipments growth of between 10% and 15%.

Targeted price increases per barrel of between 1% and 2% to partially offset anticipated ingredients, packaging, freight and processing cost pressures.

Full-year 2013 gross margins of between 53% and 55%, due to anticipated price increases not fully covering anticipated cost pressures and some product mix changes.

Increased advertising, promotional and selling expenses of between $18 mln and $26 mln for the full year 2013, primarily due to planned increased investments behind the Company’s brands and excluding any increases in freight costs for the shipment of products to the Company’s wholesalers.

Increases of between $2 mln to $4 mln for continued investment in existing brands developed by Alchemy & Science, which are included in the full year estimated increases in advertising, promotional and selling expenses.

Additional projects yet to be developed or acquired may significantly increase investments in Alchemy & Science and advertising, promotional and selling expenses.

Full-year effective tax rate of approximately 37%.

Full-year spending on capital investments of between $70 mln and $85 mln, most of which relate to continued investments in the Company’s breweries and additional keg purchases.

08 May, 2013