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Boston Beer Reports First Quarter 2016 Results

BOSTON, April 21, 2016 /PRNewswire/ -- The Boston Beer Company, Inc. SAM, -2.65% reported first quarter 2016 net revenue of $188.8 million, a decrease of $10.7 million or 5% from the same period last year, mainly due to a decline in core shipments of 6%, partially offset by price increases. Net income for the first quarter was $7.0 million, or $0.53 per diluted share, a decrease of $6.7 million or $0.47 per diluted share from the first quarter of 2015. This decrease was primarily due to decreases in net revenue, a decrease in gross margin and increased general and administrative expenses.

Highlights of this release include:

  • Depletions decreased 5% from the comparable 13-week period in 2015.
  • First quarter gross margin was 48.5% compared to 50.0% in the first quarter of 2015 and the Company now estimates a full year gross margin target of between 51% and 53%, a decrease in the range from the previously communicated estimate of between 52% and 54%.
  • The 2016 fiscal year includes 53 weeks compared to the 2015 fiscal year which included only 52 weeks.
  • Full-year 2016 depletion and shipment change is now estimated at between minus 4% and plus 2%, a decrease in the range from the previously communicated estimate of growth of mid-single digits.
  • Full-year 2016 earnings per diluted share are now estimated at $6.50 to $7.30, a decrease in the range from the previously communicated estimate of $7.60 to $8.00.
  • Full-year 2016 capital spending is now estimated to be between $50 million and $70 million, a decrease in the range from the previously communicated estimate of $60 million to $80 million.

Jim Koch, Chairman and Founder of the Company, commented, "Our total company depletion trends declined in the first quarter, even as the better beer and craft categories appear healthy. We believe Samuel Adams has lost share due to the increased competition and continued growth of drinker interest in variety and innovation. During the quarter, we rolled out new beers, including Samuel Adams Nitro White Ale, Samuel Adams Nitro IPA, Samuel Adams Nitro Coffee Stout and Samuel Adams Rebel Grapefruit IPA. These beers have started slowly, but their momentum continues to build. We believe that we are well positioned to meet the longer term challenges of this competitive environment, through the quality of our beers, our innovation capability and our sales execution strength, coupled with our strong financial position that enables us to invest in growing our brands."

Martin Roper, the Company's President and CEO stated, "In the first quarter, our depletions volume was significantly below our expectations, as the declines in our existing styles of our Samuel Adams and Angry Orchard brands were not offset by our new styles or the growth of the rest of our brand portfolio. The lower volume combined with the higher planned spending and excess brewery capacity significantly impacted our financial results for the quarter. We are focused on adjusting our cost structure, based on our lower volume expectations, and on driving efficiencies throughout the organization, so that we direct funds to the highest growth initiatives. While we are prioritizing these efforts, some of the adjustments will benefit this year and others may take more than a year to fully implement. As we pursue and achieve cost savings through improved efficiencies and more effective processes, we plan to invest part of these savings into strengthening our brands and our sales force and in new beer and cider development capabilities, so that we can react quickly to any opportunities that emerge. We remain prepared to forsake short term earnings, as we strive to return to long term profitable growth."

Mr. Roper went on to say, "Our depletions decline in the first quarter was primarily due to decreases in our Samuel Adams and Angry Orchard brands that were only partially offset by increases in our Twisted Tea and Coney Island brands. The Angry Orchard decline appears largely due to softness across the cider category, as casual cider drinkers are testing hard sodas and other new alternative beverage options. We are working hard to improve the Samuel Adams brand trends through continued innovation, executional focus on our core styles and a full review of our brand messaging and packaging, which we hope to complete during the second half of the year. We are also developing programs to reverse the cider category decline that began in late 2015 after several years of high growth. We believe the recent declines are not indicative of long term cider category potential and are happy that Angry Orchard has maintained a very high share level. The trends for larger craft beer brands and the cider category are very difficult to predict and we have therefore broadened our guidance on full year depletion volumes and earnings while reducing our target commensurate with current trends."

1st Quarter 2016 Summary of Results

Depletions declined 5% from the comparable 13-week period in the prior year, reflecting decreases in the Company's Samuel Adams and Angry Orchard brands, partially offset by increases in its Twisted Tea and Coney Island brands.

Core shipment volume was approximately 830,000 barrels, a 6% decrease from the first...