Boston Beer Reports Second Quarter 2021 Results

Rhea-AI Summary

The Boston Beer Company (NYSE: SAM) reported Q2 2021 net revenue of $602.8 million, a 33.3% increase year-over-year. Net income was $59.2 million, down 1.6%, while diluted earnings per share were $4.75, a decrease of 2.7%. Depletions rose 24% and shipments grew by 27.4%. While overall performance was strong, the company has lowered its full-year depletion and shipment growth forecasts to 25-40%. Advertising expenses soared by over 61%, impacting margins. The company noted challenges in the hard seltzer market affecting inventory and production plans.

Positive

• Net revenue increased by 33.3% to $602.8 million.
• Depletions rose 24% and shipments increased 27.4%.
• Year-to-date depletions are up approximately 32%.
• Earnings per diluted share for the 26-week period increased by 57.2% to $10.01.

Negative

• Net income decreased by 1.6% compared to the previous year.
• Earnings per diluted share dropped by 2.7% from the previous year.
• Gross margin fell to 45.7%, down from 46.4% in Q2 2020.
• Increased advertising expenses by $61.3 million, impacting profitability.
• Underestimated demand for Truly brand leading to higher inventory levels.

BOSTON, July 22, 2021 /PRNewswire/ -- The Boston Beer Company, Inc. (NYSE: SAM) reported second quarter 2021 net revenue of $602.8 million, an increase of $150.7 million or 33.3%, from the same period last year. Net income for the second quarter was $59.2 million, a decrease of $0.9 million or 1.6% from the same period last year. Earnings per diluted share were $4.75, a decrease of $0.13 per diluted share, or 2.7% from the second quarter of 2020.  This decrease was primarily due to increases in operating expenses, lower gross margins, and a higher tax rate, partially offset by increased revenue driven by shipment growth of 27.4%.

Net revenue for the 26-week period ended June 26, 2021, was $1.15 billion, an increase of $365.2 million, or 46.7%, from the comparable 26-week period in 2020. Earnings per diluted share for the 26-week period ended June 26, 2021, were $10.01, an increase of $3.64 per diluted share or 57.2% from the comparable 26-week period in 2020.

In the second quarter and the 26-week period ended June 26, 2021, the Company recorded a tax benefit of $0.03 per diluted share and $0.72 per diluted share, respectively, resulting from the Accounting Standard "Employee Share-Based Payment Accounting" ("ASU 2016-09").

Highlights of this release include:

• Depletions increased 24% and 33% from the 13-and 26-week comparable periods in the prior year.
• Shipments increased 27.4% and 41.3% from the 13- and 26-week comparable periods in the prior year.
• Full-year depletion and shipment growth is now estimated at between 25% and 40%, a decrease from the previously reported estimate of between 40% and 50%.
• Gross margin was 45.7% for the second quarter, a decrease from 46.4% in the comparable 13-week period in 2020, and 45.8% for the 26-week period ending June 26, 2021, a slight increase from 45.7% in the comparable 26-week period in 2020. The Company's full-year gross margin target remains between 45% and 47%.
• Advertising, promotional and selling expense increased by $61.3 million, or 61.1%, in the second quarter over the comparable period in 2020 and increased $104.3 million, or 52.6%, from the comparable 26-week period in 2020.
• Based on current spending and investment plans, full-year 2021 Non-GAAP earnings per diluted share¹, which excludes the impact of ASU 2016-09, is now estimated at between $18.00 and $22.00 a decrease from the previously reported estimate of between $22.00 and $26.00.

Jim Koch, Chairman and Founder of the Company, commented that "During the second quarter we saw significant growth in the On-Premise channel and re-opened all our retail locations as most COVID-19 restrictions have been lifted. However, our 24% depletions growth for the second quarter decelerated from our first quarter growth of 48% and was below our expectations, as the hard seltzer category and overall beer industry were softer than we had anticipated. Hard seltzer category growth was negatively impacted by several developments: (1) slowing growth in household penetration as the market matures and there is less new trial, (2) a gradual transition of volume to the On-Premise channel as hard seltzer becomes a more regular option in that channel, (3) new hard seltzer brands at retail that resulted in a proliferation of choices and consumer confusion, and (4) a challenging comparative period of significant pantry loading related to On-Premise restrictions in the second quarter of 2020. We are encouraged that four of our five major brands grew in the second quarter and we continue to expand our market share.  In measured Off-Premise channels in the first half of this year, where our brand portfolio represents 4% of the total beer industry volume, we've delivered over 45% of the industry volume growth, the highest of all brewers. We are thankful to our outstanding coworkers, distributors and retailers for their continued focus and diligence to continue to operate and help grow our business and achieve our thirteenth consecutive quarter of double-digit volume growth. We will continue to invest behind all our brands, with a particular emphasis on fueling the momentum behind Truly and Twisted Tea. We recently announced plans to develop new innovative beverages with Beam Suntory that we are planning to launch in early 2022. We believe these new beverages will further demonstrate our ability to innovate and grow our business as drinker preferences evolve. We remain highly positive about the future growth of our brands and that our diversified brand portfolio continues to fuel double-digit growth." 

Dave Burwick, the Company's President and CEO stated, "Our depletions growth in the second quarter was a result of increases in our Truly Hard Seltzer, Twisted Tea, Samuel Adams and Dogfish Head brands that were only partially offset by decreases in our Angry Orchard brand. Twisted Tea continues to generate double-digit volume growth rates and is the fastest growing flavored malt beverage brand family in measured Off-Premise channels during the first half of this year. Early in 2021, we launched Truly Iced Tea Hard Seltzer and during the second quarter we launched Truly Punch Hard Seltzer. Similar to Truly Lemonade Hard Seltzer, these new products deliver against drinkers' interest in bolder flavor profiles and demonstrate Truly's distinctiveness and innovation leadership within the hard seltzer category. In measured Off-Premise channels, Truly Iced Tea is the number one innovation in the overall beer industry over the first half of this year and Truly Punch is the number two innovation over the past four weeks. The overall Truly brand growth rate improved to 2.7 times the hard seltzer category growth rate in the latest 13 weeks, resulting in a 4-point share gain and closing the share gap to the number one brand to single digits. We are excited about our new Truly advertising campaign "No One Is Just One Flavor" featuring Grammy award winner and pop icon Dua Lipa and showcasing Truly's superior variety of flavors and the colorful and adventurous nature of Truly drinkers. Based on the brand's innovation leadership, strong brand building and growing cultural relevance, we believe Truly is well positioned to continue to grow share."

Mr. Burwick continued, "We overestimated the growth of the hard seltzer category in the second quarter and the demand for Truly, which negatively impacted our volume and earnings for the quarter and our estimates for the remainder of the year. We increased our production of Truly to meet our summer peak and have had lower than anticipated demand for certain Truly brand styles which has resulted in higher than planned inventory levels at our breweries and increased supply chain costs and complexity. At the same time, we have been experiencing out of stocks on certain of our can products, most significantly on our Twisted Tea brand family. We expect wholesaler inventories of Twisted Tea to remain tight for the rest of the summer. Our outlook for the hard seltzer category in the second half of 2021 is uncertain and we have planned our capacity and spending based upon several volume scenarios. We will continue to manage our capacity requirements through a combination of internal capacity increases and higher usage of third-party breweries. We continue to work hard on our comprehensive program to transform our supply chain with the goal of making our integrated supply chain more efficient, reduce costs, increase our flexibility to better react to mix changes, and allow us to scale up more efficiently. While we are in a very competitive business, we are confident in the continued growth of our current brand portfolio and innovations and we remain prepared to forsake short-term earnings as we invest to sustain long-term profitable growth."

COVID-19

As the COVID-19 pandemic slowly winds down, the Company's primary focus continues to be on operating its breweries and business safely and working hard to meet customer demand.  The Company is very proud of the passion, creativity and commitment to community that coworkers demonstrated during this pandemic.  The Company began seeing the impact of the COVID-19 pandemic on its business in early March 2020.  The direct financial impact of the pandemic primarily included significantly reduced keg demand from the On-Premise channel and higher labor and safety-related costs at the Company's breweries. In addition to these direct financial impacts, COVID-19 related safety measures resulted in a reduction of brewery productivity, with more volume shifted to third-party breweries, increasing production costs and negatively impacting gross margins.  In the first half of 2020, the Company recorded COVID-19 related pre-tax reductions in net revenue and increases in other costs that total $14.1 million, of which $10.0 million was recorded in the first quarter and $4.1 million was recorded in the second quarter.  The total amount consists of a $5.8 million reduction in net revenue for estimated keg returns from distributors and retailers and $8.3 million of other COVID-19 related direct costs, of which $5.6 million are recorded in cost of goods sold and $2.7 million are recorded in operating expenses.  In 2021 and going forward, the Company has chosen not to report COVID-19 related direct costs separately, as they are viewed to be a normal part of operations.

2nd Quarter 2021 Summary of Results

Depletions increased 24% from the comparable 13-week period in the prior year. Shipment volume was approximately 2.45 million barrels, a 27.4% increase from the comparable 13-week period in the prior year.

Shipment volume for the first half was significantly higher than depletions volume and resulted in higher distributor inventory as of June 26, 2021, when compared to June 27, 2020.  The Company believes distributor inventory as of June 26, 2021, averaged approximately 5 weeks on hand and was at an appropriate level for each of its brands, except for Twisted Tea, which has significantly lower than planned distributor inventory levels for certain styles and packages.

Gross margin of 45.7% decreased from the 46.4% margin realized in the comparable 13-week period in 2020, primarily as a result of higher processing and other costs due to increased production at third party breweries, partially offset by price increases and cost saving initiatives at Company-owned breweries.

Advertising, promotional and selling expenses increased $61.3 million from the comparable 13-week period in 2020, primarily due to increased brand investments of $41.2 million, mainly driven by higher media, production and local marketing costs and increased freight to distributors of $20.1 million that was primarily due to higher rates and volumes.

General and administrative expenses increased by $3.3 million from the second quarter of 2020, primarily due to increases in external services and salaries and benefits costs.

The Company's effective tax rate for the second quarter increased to 26.1% from 23.4% in the second quarter of 2020. The Company's effective tax rate for the second quarter, excluding the impact of ASU 2016-09, increased to 26.6% from 26.4% in the second quarter of 2020.

Year-to-Date 2021 Summary of Results

Depletions increased 33% from the comparable 26-week period in 2020, reflecting increases in the Company's Truly Hard Seltzer, Twisted Tea, Samuel Adams and Dogfish Head brands that were only partially offset by decreases in the Angry Orchard brand.

Shipment volume was approximately 4.7 million barrels, a 41.3% increase from the comparable 26-week period in 2020.

Gross margin at 45.8% increased slightly from the 45.7% margin realized in the comparable 26-week period in 2020, primarily due to price increases, cost saving initiatives at Company-owned breweries, and direct costs related to COVID-19 of $5.6 million in the second quarter of 2020 that were partially offset by higher processing and other costs due to increased production at third party breweries.

Advertising, promotional and selling expenses increased $104.3 million from the comparable 26-week period in 2020, primarily due to increased brand investments of $62.2 million, mainly driven by higher media, production and local marketing costs and increased freight to distributors of $42.0 million that was primarily due to higher rates and volumes.

General and administrative expenses increased by $8.2 million from the comparable 26-week period in 2020, primarily due to increases in salaries and benefits and external services costs.

Impairment of long-lived assets decreased $1.1 million from the first half of 2020, primarily due to lower write-downs of brewery equipment at company owned breweries.

The Company's effective tax rate for the 26-week period ended June 26, 2021, decreased to 20.4% from 21.4% in the comparable 26-week period in 2020.  This decrease was primarily due to a higher tax benefit from stock option activity recorded in accordance with ASU 2016-09.

The Company expects that its June 26, 2021, cash balance of $103.0 million, together with its future operating cash flows and the $150.0 million unused balance on its line of credit, will be sufficient to fund future cash requirements.

During the 26-week period ended June 26, 2021 and the period from June 27, 2021 through July 16, 2021, the Company did not repurchase any shares of its Class A Common Stock.  As of July 16, 2021, the Company had approximately $90.3 million remaining on the $931.0 million share buyback expenditure limit set by the Board of Directors.

Depletion Estimates

Year-to-date depletions through the 28-week period ended July 10, 2021, are estimated by the Company to have increased approximately 32% from the comparable period in 2020. 

Outlook

The Company currently projects full year 2021 earnings per diluted share to be between $18.00 and $22.00.  This projection excludes the impact of ASU 2016-09.  The Company's actual 2021 earnings per share could vary significantly from the current projection.  Underlying the Company's current 2021 projection are the following full-year estimates and targets:

• Depletions and shipments percentage increase between 25% and 40%.
• National price increases of between 1% and 3%.
• Gross margin of between 45% and 47%.
• Increased investments in advertising, promotional and selling expenses of between $80 million and $100 million, a decrease from the previously communicated range of between $130 million and $150 million. This does not include any changes in freight costs for the shipment of products to the Company's distributors.
• Non-GAAP effective tax rate of approximately 26%, excluding the impact of ASU 2016-09. This effective tax rate also excludes any potential future changes to current federal income tax rates and regulations.
• Estimated capital spending of between $180 million and $230 million, a decrease from the previously communicated range of between $250 million and $350 million.

Non-GAAP effective tax rate and Non-GAAP earnings per diluted share are not defined terms under U.S. generally accepted accounting principles ("GAAP"). These Non-GAAP measures should not be considered in isolation or as a substitute for diluted earnings per share and effective tax rate data prepared in accordance with GAAP and may not be comparable to calculations of similarly titled measures by other companies. The Company's projection for its Non-GAAP effective tax rate and Non-GAAP earnings per diluted share exclude the impact of ASU 2016-09, which could be significant and will depend largely upon unpredictable future events outside the Company's control, including the timing and value realized upon exercise of stock options versus the fair value of those options when granted. Therefore, because of the uncertainty and variability of the impact of ASU 2016-09, the Company is unable to provide, without unreasonable effort, a reconciliation of these Non-GAAP measures on a forward-looking basis.

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 and Dogfish Head Brewery 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.

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 years ended December 26, 2020 and December 28, 2019.  Copies of these documents may be found on the Company's website, www.bostonbeer.com, or obtained by contacting the Company or the SEC.

________________________

1 See "Outlook" below for additional information regarding non-GAAP forward-looking measures used in this press release.

 

THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(in thousands, except per share data)
	(unaudited)
	Thirteen weeks ended								Twenty-six weeks ended
	June 26, 2021				June 27, 2020				June 26, 2021				June 27, 2020
Barrels sold		2,447				1,921				4,725				3,345
Revenue	$	641,314			$	481,089			$	1,223,023			$	833,314
Less excise taxes		38,509				28,951				75,138				50,611
Net revenue		602,805				452,138				1,147,885				782,703
Cost of goods sold		327,116				242,514				622,566				425,106
Gross profit		275,689				209,624				525,319				357,597
Operating expenses:
Advertising, promotional and selling expenses		161,620				100,336				302,479				198,227
General and administrative expenses		32,960				29,685				64,906				56,714
Impairment of assets		1,004				834				1,231				2,355
Total operating expenses		195,584				130,855				368,616				257,296
Operating income		80,105				78,769				156,703				100,301
Other expense:
Interest expense		(29)				(212)				(58)				(149)
Other income (expense), net		8				(52)				2				(412)
Total other expense, net		(21)				(264)				(56)				(561)
Income before income tax provision		80,084				78,505				156,647				99,740
Income tax provision		20,889				18,364				31,887				21,365
Net income	$	59,195			$	60,141			$	124,760			$	78,375
Net income per common share - basic	$	4.82			$	4.93			$	10.16			$	6.44
Net income per common share - diluted	$	4.75			$	4.88			$	10.01			$	6.37
Weighted-average number of common shares - basic		12,283				12,196				12,277				12,177
Weighted-average number of common shares - diluted		12,465				12,258				12,461				12,221
Net Income	$	59,195			$	60,141			$	124,760			$	78,375
Other comprehensive income:
Foreign currency translation adjustment		15				(13)				35				(71)
Comprehensive income	$	59,210			$	60,128			$	124,795			$	78,304

 

THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
	(unaudited)
	June 26,				December 26,
	2021				2020
Assets
Current Assets:
Cash and cash equivalents	$	102,953			$	163,282
Accounts receivable		113,458				78,358
Inventories		247,550				130,910
Prepaid expenses and other current assets		38,240				30,230
Income tax receivable		12,896				10,393
Total current assets		515,097				413,173
Property, plant and equipment, net		664,200				623,083
Operating right-of-use assets		56,490				58,483
Goodwill		112,529				112,529
Intangible assets		103,804				103,930
Third-party production prepayments		88,683				56,843
Other assets		20,149				10,784
Total assets	$	1,560,952			$	1,378,825
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable	$	201,043			$	121,647
Accrued expenses and other current liabilities		108,036				129,544
Current operating lease liabilities		8,272				8,232
Total current liabilities		317,351				259,423
Deferred income taxes, net		92,681				92,665
Non-current operating lease liabilities		57,040				59,171
Other liabilities		9,745				10,599
Total liabilities	$	476,817			$	421,858
Commitments and Contingencies
Stockholders' Equity:
Class A Common Stock, $.01 par value; 22,700,000 shares authorized; 10,165,649 and 10,004,681 issued and outstanding as of  June 26, 2021 and December 26, 2020, respectively		102				100
Class B Common Stock, $.01 par value; 4,200,000 shares authorized; 2,078,000 and 2,177,983 issued and outstanding as of June 26, 2021 and December 26, 2020, respectively		21				22
Additional paid-in capital		602,163				599,737
Accumulated other comprehensive loss, net of tax		(217)				(252)
Retained earnings		482,066				357,360
Total stockholders' equity	$	1,084,135			$	956,967
Total liabilities and stockholders' equity	$	1,560,952			$	1,378,825

 

THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
	(unaudited)
	Twenty-six weeks ended
	June 26, 2021				June 27, 2020
Cash flows provided by operating activities:
Net income	$	124,760			$	78,375
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		34,174				32,584
Impairment of assets		1,231				2,355
(Gain) loss on disposal of property, plant and equipment		(150)				39
Change in right-of-use assets		3,954				3,649
Other non-cash (income) expense		(98)				375
Stock-based compensation expense		10,291				7,103
Deferred income taxes		(39)				12,407
Changes in operating assets and liabilities:
Accounts receivable		(35,075)				(45,326)
Inventories		(120,675)				(12,795)
Prepaid expenses, income tax receivable and other current assets		(25,329)				(3,347)
Third-party production prepayments		(17,024)				(11,415)
Other assets		(5,475)				(253)
Accounts payable		78,801				19,560
Accrued expenses and other current liabilities		(14,427)				20,803
Change in operating lease liabilities		(4,052)				(80)
Other liabilities		120				(23)
Net cash provided by operating activities		30,987				104,011
Cash flows used in investing activities:
Purchases of property, plant and equipment		(83,521)				(60,072)
Proceeds from disposal of property, plant and equipment		420				45
Other investing activities		145				260
Net cash used in investing activities		(82,956)				(59,767)
Cash flows (used in) provided by financing activities:
Proceeds from exercise of stock options and sale of investment shares		7,944				8,010
Net cash paid on note payable and finance leases		(795)				(649)
Cash borrowed on line of credit		—				100,000
Cash paid on line of credit		—				(100,000)
Payment of tax withholding on stock-based payment awards and investment shares		(15,509)				(1,559)
Net cash (used in) provided by financing activities		(8,360)				5,802
Change in cash and cash equivalents		(60,329)				50,046
Cash and cash equivalents at beginning of year		163,282				36,670
Cash and cash equivalents at end of period	$	102,953			$	86,716

 

View original content:https://www.prnewswire.com/news-releases/boston-beer-reports-second-quarter-2021-results-301339826.html

SOURCE The Boston Beer Company, Inc.

FAQ

What were Boston Beer Company's Q2 2021 net revenues?

Boston Beer Company reported net revenues of $602.8 million for Q2 2021.

How did Boston Beer Company's net income change in Q2 2021?

Net income for Q2 2021 was $59.2 million, a decrease of 1.6% compared to the same period last year.

What is Boston Beer Company's earnings per diluted share for Q2 2021?

Earnings per diluted share for Q2 2021 were $4.75, a decrease of 2.7% from Q2 2020.

What is Boston Beer Company's outlook for full-year 2021?

The company projects full-year 2021 earnings per diluted share between $18.00 and $22.00, down from previous estimates.

How did depletions and shipments perform in Q2 2021 for Boston Beer?

Depletions increased by 24% and shipments by 27.4% in Q2 2021.