- 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”)
- 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 quarter ended June 30, 2012 were $44.3 million, an increase of $2.8 million, or 7%, from net sales of $41.5 million for the same quarter last year, primarily as a result of a decrease in master distributor fees, price increases for our beers sold to wholesalers and an increase in revenues earned from our pubs. Net income for the quarter ended June 30, 2012 was $0.6 million, or $0.03 per diluted share. This was a decrease of $7.6 million from our net income of $8.2 million, or $0.43 per diluted share, for the same quarter in 2011, primarily as a result of our $6.5 million net-of-tax gain, or $0.34 per diluted share, on the sale of FSB.Total shipments for the six-month period ended June 30, 2012 grew 6% to 360,400 barrels, an increase of 21,400 barrels, from 339,000 barrels for the same period of 2011, primarily reflecting the increase in shipments to wholesalers and growth in our contract brewing business. Total shipments for the quarter were basically flat from last year primarily as a result of significant programing timing variances, opportunities to align pricing in certain markets, and increasing competition for on-premise sales. Cost of sales as a percentage of net sales declined 48 basis points for the six months ended June 30, 2012, reflecting increased distribution and grain costs in the first six months of 2012 as compared with the same period of 2011. These unfavorable factors were partially offset by decreased distributor fees and increased selling prices for our beers. Overall, gross margin rate is trending ahead of our full year guidance of negative 100 basis points versus last year. SG&A expense of $22.6 million for the six-month period ended June 30, 2012 increased $2.6 million, or 13%, from $20.0 million for the same period of 2011. This increase reflects our investment in selling and marketing initiatives, higher benefits costs and the absence in 2012 of a reimbursement for legal fees received in 2011.
“Our year-to-date 6% shipment growth and 12% revenue growth, in contrast to the quarterly results, demonstrates that while the business remains healthy, it will also exhibit some quarterly volatility as we grow,” said Mark Moreland, CB A ’s CFO. “Underscoring our confidence in the business’ performance, we are reaffirming our full year EPS guidance of $0.20 to $0.25 and increasing revenue guidance to a growth rate of 13% to 15%. We continue to invest in our brands and sales capabilities and expect those investments to generate sustained long-term revenue and profit growth.”Cash Flow and Liquidity Our cash and cash equivalent balance was $5.4 million, an increase of $4.6 million for the year-to-date. Cash provided by operating activities was $9.1 million for the six months ended June 30, 2012 compared with $3.6 million for the same period of 2011. The $5.5 million increase was primarily due to improved working capital. Capital expenditures for the six-month periods ended June 30, 2012 and 2011 were $4.6 million and $3.7 million, respectively. Capital expenditures in both periods included projects designed to increase our capacity and improve efficiency. 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, including depletions and sales growth, the level or effect of SG&A expense, the amount of capital spending, and the benefits or improvements to be realized from capital projects, 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 31, 2011. Copies of these documents may be found on the Company's website, www.craftbrew.com, or obtained by contacting the Company or the SEC. About Craft Brew Alliance CB A is an independent, publicly traded craft brewing company that was formed with the merger of leading Pacific Northwest craft brewers – Widmer Brothers Brewing and Redhook Ale Brewery – in 2008. With an eye toward preserving and growing one-of-a-kind craft beers and brands, CB A was joined by Kona Brewing Company in 2010. Craft Brew Alliance launched Omission beer in 2012. When Kurt & Rob Widmer founded Widmer Brothers Brewing in 1984, they didn’t confine their brewing exploration to strict style guidelines. To this day, Widmer Brothers continues to create craft beers with a unique and unconventional twist on traditional styles that are award winning and please a wide range of craft beer lovers. Redhook began in a Seattle transmission shop in 1981 and those colorful roots are reflected in the brand’s personality to this day. The eminently drinkable beers consistently win awards and please crowds across the United States. Kona Brewing was founded in 1994 by the father and son team of Cameron Healy and Spoon Khalsa, who dreamed of crafting fresh, local-island brews with spirit, passion and quality. As the largest craft brewery in Hawaii, Kona personifies the laid-back, passionate lifestyle and environmental respect of the Hawaiian people and culture. Omission beer is the first craft beer brand in the United States focused exclusively on brewing great tasting craft beers with traditional beer ingredients, including malted barley, that are specially crafted to remove gluten.
For more information, visit: www.craftbrew.com.
|Craft Brew Alliance, Inc. Condensed Consolidated Statements of Income (In thousands, except per share amounts and shipments) (Unaudited)|
|Three Months Ended June 30,||Six Months Ended June 30,|
|Less excise taxes||3,294||3,353||6,407||6,016|
|Cost of sales||30,926||28,038||57,718||51,107|
|as percentage of net sales||30.1||%||32.4||%||30.3||%||30.7||%|
|Selling, general and administrative expenses||12,222||10,670||22,595||19,959|
|Gain on sale of equity interest in Fulton Street Brewery, LLC||—||10,398||—||10,398|
|Income from equity investments, interest and other, net||(11||)||342||(6||)||711|
|Income before income taxes||940||13,268||2,113||13,294|
|Income tax provision||381||5,108||856||5,118|
|Earnings per share:|
|Basic and diluted earnings per share||$||0.03||$||0.43||$||0.07||$||0.43|
|Weighted average shares outstanding:|
|Total shipments (in barrels):|
|Depletion growth rate (over the same period from the prior year)||3||%||6||%||5||%||7||%|
|Craft Brew Alliance, Inc. Condensed Consolidated Balance Sheets (In thousands) (Unaudited)|
|Accounts receivable, net||11,294||13,078|
|Deferred income tax asset, net||1,266||596|
|Other current assets and income tax receivables||3,236||3,305|
|Total current assets||32,516||33,308|
|Property, equipment and leasehold improvements, net||102,218||98,540|
|Intangible and other non-current assets, net||17,700||18,233|
|Accrued salaries, wages and payroll taxes||4,879||4,080|
|Other accrued expenses||990||1,479|
|Current portion of long-term debt and capital lease obligations||616||2,116|
|Total current liabilities||29,114||28,923|
|Long-term debt and capital lease obligations, net||12,820||16,213|
|Other long-term liabilities||17,254||15,180|
|Total common shareholders' equity||106,163||102,682|
|Total liabilities and common shareholders' equity||$||165,351||$||162,998|
|Craft Brew Alliance, Inc. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)|
|Six Months Ended June 30,|
|Cash Flows From Operating Activities:|
|Adjustments to reconcile net income to net cash provided by operating activities:|
|Depreciation and amortization||3,761||3,651|
|Income from equity investments||—||(691||)|
|Gain on sale of equity interest in Fulton Street Brewery, LLC||—||(10,398||)|
|Deferred income taxes||701||4,166|
|Other, including stock-based compensation||76||200|
|Changes in operating assets and liabilities:|
|Other current assets||(420||)||(72||)|
|Accounts payable and other accrued expenses||2,753||1,017|
|Accrued salaries, wages and payroll taxes||355||27|
|Net cash provided by operating activities||9,056||3,623|
|Cash Flows from Investing Activities:|
|Expenditures for property, equipment and leasehold improvements||(4,578||)||(3,694||)|
|Proceeds from sale of property, equipment and leasehold improvements and other||37||49|
|Proceeds from the sale of equity interest in Fulton Street Brewery, LLC||418||15,075|
|Net cash provided by (used in) investing activities||(4,123||)||11,430|
|Cash Flows from Financing Activities:|
|Principal payments on debt and capital lease obligations||(296||)||(1,256||)|
|Net borrowings under revolving line of credit||—||(7,500||)|
|Issuance of common stock||3||13|
|Net cash used in financing activities||(293||)||(8,743||)|
|Increase in cash||4,640||6,310|
|Cash, beginning of period||795||164|
|Cash, end of period||$||5,435||$||6,474|
|Supplemental Disclosures Regarding Non-GAAP Financial Information|
|Craft Brew Alliance, Inc. Reconciliation of Adjusted EBITDA to Net Income (In thousands) (Unaudited)|
|Three Months Ended June 30,||Six Months Ended June 30,|
|Income tax provision||381||5,108||856||5,118|
|Gain on sale of equity interest in Fulton Street Brewery, LLC||-||(10,398||)||-||(10,398||)|
As Adjusted EBITDA is not a measure of operating performance or liquidity calculated in accordance with generally accepted accounting principles in the United States of America (“GAAP”), this measure should not be considered in isolation of, or as a substitute for, net income, as an indicator of operating performance, or net cash provided by operating activities as an indicator of liquidity. The use of Adjusted EBITDA instead of net income has limitations as an analytical tool, including the inability to determine profitability; the exclusion of interest expense and associated cash requirements, given the level of the Company’s indebtedness; and the exclusion of depreciation and amortization which represent significant and unavoidable operating costs, given the capital expenditures needed to maintain the Company’s operations. We compensate for these limitations by relying on GAAP results. Our computation of Adjusted EBITDA may differ from similarly titled measures used by other companies. As Adjusted EBITDA excludes certain financial information compared with net income and net cash provided by operating activities, the most directly comparable GAAP financial measures, users of this financial information should consider the types of events and transactions which are excluded. The table above shows a reconciliation of Adjusted EBITDA to net income.