USA: Boston Beer reports higher revenue for Q3 2019

The Boston Beer Company, Inc. completed the previously reported Dogfish Head Brewery transaction and began consolidating the Dogfish Head financial results on July 3, 2019.

The combined company reported third quarter 2019 net revenue of $378.5 million, an increase of $71.6 million or 23.3% from the third quarter of 2018, mainly due to an increase in shipments of 19.1%.

Net income for the third quarter was $44.7 million, or $3.65 per diluted share, an increase of $6.7 million or $0.44 per diluted share from the third quarter of 2018. This increase was primarily due to increased revenue, partially offset by lower gross margins, increases in advertising, promotional and selling expenses, and the non-recurrence of a $0.38 per diluted share favorable one-time impact related to a tax accounting method change in the third quarter of the prior year.

Earnings per diluted share for the 39-week period ended September 28, 2019 were $8.07, an increase of $2.11 from the comparable 39-week period in 2018. Net revenue for the 39-week period ended September 28, 2019 was $948.5 million, an increase of $178.1 million, or 23.1%, from the comparable 39-week period in 2018.

In the third quarter, Dogfish Head operating income of $6.9 million was partially offset by non-recurring Dogfish Head transaction-related expenses of $5.9 million. Excluding this $1.0 million net positive impact, operating income for the third quarter was $58.8 million, an increase of $12.1 million or 25.9% from the third quarter of 2018. Also, during the third quarter, the Company paid back all debt incurred in connection with the Dogfish Head transaction, including approximately $200k in related interest expense.

In the third quarter and the 39-week period ended September 28, 2019, the earnings per diluted share benefit from Dogfish Head's operating income net of the dilutive impact of the transaction-related share issuance was more than offset by the non-recurring transaction-related expenses, resulting in a combined unfavorable impact of $0.08 per diluted share and $0.19 per diluted share, respectively.

In the third quarter and the 39-week period ended September 28, 2019, the Company recorded a tax benefit of $0.15 per diluted share and $0.33 per diluted share, respectively, resulting from the Accounting Standard "Employee Share-Based Payment Accounting" ("ASU 2016-0").

Jim Koch, Chairman and Founder of the Company, commented, "We completed our merger with Dogfish Head on July 3 and are making good progress on the integration. We have welcomed our Dogfish Head coworkers and we continue to learn a lot from each other, as we share our passion for brewing, creativity and maintaining a strong culture. In our first quarter as a combined company we reported depletions growth of 30%, of which 24% is from historic Boston Beer brands and 6% is from the addition of Dogfish Head brands following the closing. I am tremendously proud of the efforts of all of our coworkers in achieving our sixth consecutive quarter of double-digit growth, while maintaining a focus on quality and innovation. We believe that our depletions growth is attributable to our key innovations, quality and strong brands, as well as sales execution and support from our distributors. We plan to continue to invest to improve Samuel Adams trends and remain focused on the longer-term goal of returning the brand to growth. We remain positive about the future of craft beer and are happy that the strength of our diverse brand portfolio continues to fuel double-digit growth. We are confident in our ability to innovate and build strong brands and we are exploring new styles to launch in 2020 that would complement our current portfolio and help support our mission of long-term profitable growth."

Dave Burwick, the Company's President and CEO stated, "Our depletions growth in the third quarter was the result of increases in our Truly Hard Seltzer and Twisted Tea brands and the addition of the Dogfish Head brands, partly offset by decreases in our Samuel Adams and Angry Orchard brands. Truly continues to generate triple-digit volume growth. During the quarter, we launched Truly Draft nationally and continued to expand package distribution across all channels. We announced a multiyear U.S. partnership with the National Hockey League, which makes Truly Hard Seltzer the "official hard seltzer of the NHL," and enables all of our brands, including Samuel Adams and Dogfish Head, to benefit from the NHL partnership. We announced the launch of new formulations for all of our Truly flavors, which we have tested with drinkers of Truly and competing brands and we are confident that we will now have the best-tasting hard seltzer on the market. In early 2020, we will launch Truly Hard Seltzer Lemonade in both a variety 12-pack and single-serve sizes. These new Truly flavors have the same 100 calories and 1 gram of sugar as other Truly flavors but have a more robust taste. Lastly, we have announced the addition of another new flavor, Watermelon Kiwi, available in our Truly Tropical Variety Pack and 6-packs. We believe these significant new flavor introductions, combined with the new NHL partnership and our ad campaign for Truly featuring well known actor Keegan-Michael Key, will help further improve our position as a leader in hard seltzer and build Truly as a meaningful and relevant brand."

30 October, 2019