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Boston Beer Reports Third Quarter Financial Results

Bay Street

BOSTON, Oct. 24, 2024 (GLOBE NEWSWIRE) — The Boston Beer Company, Inc. (NYSE: SAM), today reported financial results for the third quarter ended September 28, 2024. Key results were:

Third Quarter 2024 Summary:

Year-to-date 2024 Summary:

Capital Structure

“We continue to believe that there is significant growth opportunity in Beyond Beer categories despite some near-term variability in alcoholic beverage demand. The Boston Beer Company has a proven track record in creating new categories, producing beyond beer beverages and getting them into the hands of drinkers,” said Chairman and Founder Jim Koch. “We are using the strong cash generation of the business to invest in our brands and return cash to shareholders. Based on our view of the long-term growth prospects for the company, we recently expanded our share repurchase authorization by $400 million.”

“We continue to make progress on our strategic priorities to nurture our core brands, launch and support innovation in a disciplined way and modernize our supply chain,” said President and CEO Michael Spillane. “Our guidance has been narrowed to reflect three quarters of results, somewhat softer near-term category trends and solid gross margin delivery. We are focused on implementing plans to position the company for an improvement in operational and financial performance in 2025 and beyond.”

Details of the results were as follows:

Third Quarter 2024 (13 weeks ended September 28, 2024) Summary of Results

Depletions for the third quarter decreased 3% from the prior year. Shipment volume for the quarter was approximately 2.24 million barrels, a 1.9% decrease from the prior year, primarily due to declines in Truly Hard Seltzer that were partially offset by growth in the Company’s Twisted Tea, Sun Cruiser and Hard Mountain Dew brands.

The Company believes distributor inventory as of September 28, 2024 averaged approximately five and a half weeks on hand which is slightly higher than its target level of four to five weeks. This is expected to have a negative impact on fourth-quarter shipment volume which is reflected in the Company’s updated volume guidance.  

Net revenue for the quarter increased 0.6% due to price increases and lower returns, partially offset by lower volumes.  

Gross margin of 46.3% increased 60 basis points from the 45.7% margin realized in the prior year. Gross margin primarily benefited from price increases, procurement savings and lower returns, which more than offset higher inventory obsolescence and increased inflationary costs.

The third quarter gross margin of 46.3% includes $0.6 million of shortfall fees, which negatively impacted gross margin by approximately 10 basis points on an absolute basis, and a non-cash expense of third-party production pre-payments of $6.1 million that negatively impacted gross margins by approximately 100 basis points on an absolute basis.

Advertising, promotional and selling expenses for the third quarter of 2024 decreased $4.6 million or 3.0% from the third quarter of 2023, due to decreased freight to distributors of $2.8 million from improved efficiencies and lower volumes. Brand and selling costs decreased $1.8 million due to lower salaries and benefits.

General and administrative expenses increased by $1.6 million or 3.7% from the third quarter of 2023, primarily due to increased professional fees.

Impairment of intangible assets reflects a $42.6 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, 2024. The impairment determination was primarily based on the latest forecasts of brand performance which has been below our projections made on the acquisition date. Beginning in the fourth quarter of 2024 the Company will be amortizing the remaining intangible asset of $14.4 million over a 10 year life and does not expect any future impairments related to the Dogfish Head brand.

The Company’s effective tax rate for the third quarter of 31.7% compared to 29.3% in the prior year. The increased effective tax rate is due to the impact of the impairment charge which resulted in lower pre-tax income compared to the prior year and higher non-deductible compensation expense.

Third quarter net income of $33.5 million or $2.86 per share, represented a decrease of $11.8 million or $0.84 per diluted share compared to the prior year. This decrease between periods was primarily driven by brand impairment and a higher tax rate partially offset by higher revenue, higher gross margins and lower advertising, promotional and selling expenses.

Year-to-date 2024 (39 weeks ended September 28, 2024) Summary of Results

Net revenue year-to-date of $1.611 billion decreased 0.3% compared to year-to-date 2023.

Depletions year-to-date decreased 3% from the prior year. Shipment volume year-to-date was approximately 6.0 million barrels, a 2.9% decrease from the prior year, primarily due to declines in Truly Hard Seltzer that were partially offset by growth in Twisted Tea and Sun Cruiser brands.

Gross margin year-to-date of 45.5% increased from the 43.6% margin realized in year-to-date 2023, or an increase of 190 basis points year over year. Gross margin primarily benefited from price increases, procurement savings, lower returns 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 45.5% includes $4.6 million of shortfall fees, which negatively impacted gross margin by approximately 30 basis points on an absolute basis and a non-cash expense of third-party production pre-payments of $16.5 million that negatively impacted gross margins by approximately 100 basis points on an absolute basis.

Advertising, promotional and selling expenses year-to-date decreased $14.9 million or 3.5% from year-to-date 2023, primarily due to decreased freight to distributors of $9.2 million from lower rates and volumes. Brand and selling costs decreased $5.7 million, primarily due to lower consulting costs.

General and administrative expenses year-to-date increased by $11.4 million or 8.7% 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 30.3% compared to 28.4% year-to-date 2023 is due to higher non-deductible compensation primarily related to Chief Executive Officer transition costs.

Net income year-to-date of $98.5 million or $8.27 per share, represented an increase of $4.1 million or $0.60 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, increased brand impairment and an increased tax rate.

The Company expects that its September 28, 2024 cash balance of $255.6 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 28, 2024 and the period from September 30, 2024 through October 18, 2024, the Company repurchased shares of its Class A Common Stock in the amounts of $176.0 million and $15.0 million, respectively, for a total of $191.0 million year to date. As of October 18, 2024, the Company had approximately $476 million remaining on the $1.6 billion share buyback expenditure limit set by the Board of Directors.

Depletions Estimate

Year-to-date depletions through the 42-week period ended October 18, 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 Decrease Down low single digits Down low single digit to zero
Price Increases 2% 1% to 2%
Gross Margin 44% to 45% 43% to 45%
Advertising, Promotion, and Selling Expense Year Over Year Change ($ million) ($5) to $15 ($5) to $15
Effective Tax Rate 30% 28.5%
GAAP EPS $5.50 to $7.50 $7.00 to $11.00
Non-GAAP EPS $8.00 to $10.00 –
Capital Spending ($ million) $80 to $95 $90 to $110
     

The non-GAAP earnings per share (Non-GAAP EPS) projection excludes the impact of the non-cash brand impairments of $42.6 million or $2.49 per diluted share.

Underlying the Company’s current 2024 projections are the following full-year estimates and targets:

2025 Financial Guidance

The Company is planning to provide full year 2025 financial guidance during its fourth quarter earnings call in February 2025.

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 $42.6 million, or $2.49 per diluted share, recognized in the third quarter of fiscal 2024 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 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, Sun Cruiser, 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.

 
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 28,
2024		     September 30,
2023		     September 28,
2024		     September 30,
2023		  
Revenue $ 642,131     $ 639,394     $ 1,708,555     $ 1,715,883  
Less excise taxes   36,654       37,795       97,928       100,980  
Net revenue   605,477       601,599       1,610,627       1,614,903  
Cost of goods sold   325,236       326,951       877,580       910,430  
Gross profit   280,241       274,648       733,047       704,473  
Operating expenses:                      
Advertising, promotional, and selling expenses   147,986       152,579       412,484       427,369  
General and administrative expenses   43,818       42,241       142,226       130,834  
Impairment of intangible assets   42,584       16,426       42,584       16,426  
Impairment of brewery assets   20       1,900       3,751       3,916  
Total operating expenses   234,408       213,146       601,045       578,545  
Operating income   45,833       61,502       132,002       125,928  
Other income:                      
Interest income   3,582       3,478       10,021       6,977  
Other expense   (317 )     (913 )     (795 )     (1,137 )
Total other income   3,265       2,565       9,226       5,840  
Income before income tax provision   49,098       64,067       141,228       131,768  
Income tax provision   15,584       18,772       42,778       37,394  
Net income $ 33,514     $ 45,295     $ 98,450     $ 94,374  
Net income per common share – basic $ 2.87     $ 3.70     $ 8.29     $ 7.69  
Net income per common share – diluted $ 2.86     $ 3.70     $ 8.27     $ 7.67  
Weighted-average number of common shares – basic   11,682       12,228       11,878       12,268  
Weighted-average number of common shares – diluted   11,671       12,233       11,871       12,280  
Net income $ 33,514     $ 45,295     $ 98,450     $ 94,374  
Other comprehensive income (loss) :                      
Foreign currency translation adjustment   40       (144 )     (181 )     —  
Total other comprehensive income (loss)   40       (144 )     (181 )     —  
Comprehensive income $ 33,554     $ 45,151     $ 98,269     $ 94,374  
                               
                               
 
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
  (unaudited)        
  September 28,
2024		     December 30,
2023		  
Assets          
Current Assets:          
Cash and cash equivalents $ 255,601     $ 298,491  
Accounts receivable   94,101       66,997  
Inventories   160,322       115,773  
Prepaid expenses and other current assets   25,659       20,538  
Income tax receivable   –       1,711  
Total current assets   535,683       503,510  
Property, plant, and equipment, net   619,013       642,509  
Operating right-of-use assets   29,766       35,559  
Goodwill   112,529       112,529  
Intangible assets, net   16,870       59,644  
Third-party production prepayments   18,015       33,581  
Note receivable   16,606       —  
Other assets   33,510       42,661  
Total assets $ 1,381,992     $ 1,429,993  
Liabilities and Stockholders’ Equity          
Current Liabilities:          
Accounts payable $ 102,906     $ 87,245  
Accrued expenses and other current liabilities   154,139       126,930  
Current operating lease liabilities   6,602       9,113  
Total current liabilities   263,647       223,288  
Deferred income taxes, net   66,445       85,721  
Non-current operating lease liabilities   31,592       36,161  
Other liabilities   6,151       6,894  
Total liabilities   367,835       352,064  
Stockholders’ Equity:          
Class A Common Stock, $0.01 par value; 22,700,000 shares authorized; 9,470,066 and 10,033,303 issued and outstanding as of September 28, 2024 and December 30, 2023     respectively   95       100  
Class B Common Stock, $0.01 par value; 4,200,000 shares authorized; 2,068,000 issued and outstanding at September 28, 2024 and December 30, 2023   21       21  
Additional paid-in capital   671,781       656,297  
Accumulated other comprehensive loss   (238 )     (57 )
Retained earnings   342,498       421,568  
Total stockholders’ equity   1,014,157       1,077,929  
Total liabilities and stockholders’ equity $ 1,381,992     $ 1,429,993  
               
               
   
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
  (unaudited)  
  Thirty-nine weeks ended  
  September 28,
2024		     September 30,
2023		  
Cash flows provided by operating activities:          
Net income $ 98,450     $ 94,374  
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization   70,904       66,603  
Impairment of intangible assets   42,584       16,426  
Impairment of brewery assets   3,751       3,916  
Gain on sale of property, plant, and equipment   (263 )     —  
Change in right-of-use assets   5,793       5,781  
Stock-based compensation expense   14,686       12,313  
Deferred income taxes   (19,276 )     (10,349 )
Other non-cash expense   220       40  
Changes in operating assets and liabilities:          
Accounts receivable   (27,324 )     (31,253 )
Inventories   (40,148 )     3,786  
Prepaid expenses, income tax receivable, and other assets   (3,429 )     3,986  
Third-party production prepayments   15,566       22,130  
Other assets   4,987       (9,368 )
Accounts payable   18,053       31,341  
Accrued expenses and other liabilities   29,244       29,217  
Operating lease liabilities   (6,808 )     (6,542 )
Net cash provided by operating activities   206,990       232,401  
Cash flows used in investing activities:          
Cash paid for note receivable   (20,000 )     —  
Purchases of property, plant, and equipment   (52,770 )     (48,777 )
Proceeds from disposal of property, plant, and equipment   23       1,708  
Net cash used in investing activities   (72,747 )     (47,069 )
Cash flows used in financing activities:          
Repurchases and retirement of Class A common stock   (175,953 )     (62,477 )
Proceeds from exercise of stock options and sale of investment shares   2,699       10,660  
Cash paid on finance leases   (1,473 )     (1,184 )
Payment of tax withholding on stock-based payment awards and investment shares   (2,406 )     (2,113 )
Net cash used in financing activities   (177,133 )     (55,114 )
Change in cash and cash equivalents   (42,890 )     130,218  
Cash and cash equivalents at beginning of period   298,491       180,560  
Cash and cash equivalents at end of period $ 255,601     $ 310,778  
           
           

 

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:
Jennifer Larson
(617) 368-5152
jennifer.larson@bostonbeer.com		 Media Contact:
Dave DeCecco
(914) 261-6572
dave.dececco@bostonbeer.com


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