Craft Brew Alliance, Inc. (“CBA”)
(Nasdaq:BREW), an independent craft brewing company, reported net sales of $82.8 million and net income of $1.3 million for the six months ended June 30, 2012, as compared with net sales of $73.8 million and net income of $8.2 million a year ago, which included an after-tax gain of $6.5 million from the sale of our minority interest in Fulton Street Brewery, LLC (“FSB”). Earnings per share on a fully diluted basis for the year-to-date period were $0.07 as compared with $0.43 for the same period last year, which included $0.34 earnings per share from the FSB sale.
Significant year-to-date highlights include:
- Net sales increased $9.0 million, or 12%, to $82.8 million versus last year
- Total beer shipments increased 6%, while depletions grew 5% for the period
- Gross profit percentage of 30.3% exceeds prior full year guidance
- Cash provided by operations increased to $9.1 million for the period compared to $3.6 million last year
- Capital expenditures were $4.6 million as we continue to make strategic investments in systems and infrastructure
- Revised full year guidance calls for depletion growth of 8% to 10% and revenue growth of 13% to 15% with no change to previously issued guidance of $0.20 to $0.25 fully diluted earnings per share (“EPS”)
“While we would have preferred second quarter depletion growth above 3%, the result was in keeping with our expectations of quarterly volatility as we grow on a geographic and brand basis. We remain confident that our core strategy provides a compelling platform for long term-growth,” said Terry Michaelson, CB
’s CEO. “We have a model that is unique to the craft beer segment and provides unparalleled benefits that include four distinct authentic craft-beer brands, bi-coastal brewing capabilities, an established national sales and marketing footprint with seamless distribution, and pubs to interact intimately with customers. As we continue to grow our brands on a national basis, we expect to experience volatility in our results from quarter-to-quarter. Our year-to-date results demonstrate the ongoing success of our strategy while the standalone quarter, when compared with the second quarter of 2011, demonstrates the volatility. We are confident that we will deliver long-term profit growth for our shareholders by continuing to invest in the underlying strengths of our brands.”
Based on year-to-date and anticipated future performance levels, we are updating components of our 2012 guidance as follows. Full year EPS guidance remains unchanged.
- Depletion growth estimate of 8% to 10%, reflecting both continued strength of our brands and continued growth of the craft category. We had previously guided from high single to low double digit growth.
- Sales growth of approximately 13% to 15%. Previous guidance was 10% to 12%.
- Gross margin rate of flat to a 50 basis point improvement versus last year, reflecting brewery productivity and positive product mix, partially offset by pressure from grain prices and distribution costs. Previous guidance was negative 100 basis points.
- Selling, general and administrative (“SG&A”) expense ranging from $43 million to $45 million, reflecting continued investment in sales and marketing initiatives. Previous guidance was $42 million to $44 million.
- Diluted EPS in the range of $0.20 to $0.25.
- Capital expenditures of approximately $8.5 million to $9.5 million, continuing our investments in capacity and efficiency improvements, and quality initiatives.
Net sales for the six months ended June 30, 2012 were $82.8 million, an increase of $9.0 million, or 12%, from net sales of $73.8 million for the same period of 2011. A combination of factors drove the increase, including increased shipments, a decrease in master distributor fees, price increases for our beers sold to wholesalers and an increase in revenues earned from our pubs.