10% depletion growth for Kona, continued gross margin expansion,
and robust EPS performance underscore record operational and financial
results in 2017
New contract brewing agreement with AB to leverage capacity and
capability in CBA-owned breweries in 2018
PORTLAND, Ore.--(BUSINESS WIRE)--Feb. 1, 2018--
Brew Alliance, Inc. (“CBA”) (Nasdaq: BREW), a leading craft brewing
company, today announced strong preliminary financial results for the
fourth quarter and year ended December 31, 2017. CBA’s preliminary
full-year results include continued double-digit depletion growth for
Kona amidst unprecedented market competition, record gross margin
expansion driven by net revenue per barrel growth and ongoing
operational improvements, and robust GAAP earnings per diluted share
(“EPS”) performance of $0.49, including a favorable one-time, non-cash
tax benefit of $0.35 per share. Excluding the effect of the tax benefit
results in adjusted EPS of $0.14 per share.
Delivering continued double-digit growth for
Kona in 2017
Kona’s relevance as a global lifestyle brand, anchored by its
award-winning, island-inspired craft beers and distinctive brand
message, drove a 10% increase in depletions globally for the full year
2017. Kona flagship Big Wave Golden Ale posted a 23% increase in
depletions in 2017, which includes 60% depletions growth
internationally. Hanalei Island IPA, which Kona debuted nationally in
2017, ended the year in the top five of all new craft brands in the U.S.
as measured in grocery sales by Nielsen.
Expanding our AB partnership with new brewing
We continued to work closely with Anheuser-Busch (“AB”) in 2017 and
accomplished multiple strategic growth objectives, including aligning
our brands in AB’s wholesaler planning processes, starting up brewing
operations in AB’s Fort Collins brewery to drive incremental cost
savings, and continuing to expand Kona distribution in select global
In 2018, we are building on this success with a new contract brewing
arrangement, announced today in a Form 8-K filed with the Securities and
Exchange Commission. Through the new agreement, AB will leverage CBA’s
craft production capacity and capability in our owned breweries,
resulting in improved operational efficiencies and capacity utilization
Achieving milestone improvements in core
Our focus on strengthening CBA’s business fundamentals yielded
significant tangible value in 2017. We delivered net sales growth of 2%,
gross profit improvement of 9%, and record gross margin of 31.5% which
includes beer gross margin of 35.3%. We achieved these improvements
while simultaneously accelerating our brewery footprint evolution with
the closure and sale of our Woodinville brewery, balancing production
between Portland and Portsmouth, ramping up brewing operations in AB’s
Fort Collins brewery, and reducing wholesaler inventories by more than a
third. In 2018, we will continue to leverage our headway in cost
reduction and operating efficiencies to reinvest in our sales and
Select preliminary, unaudited results for the
full year 2017:
Depletions decreased 1%, in line with updated guidance.
Shipments decreased 4%, which is in line with updated guidance and
reflects progress reducing wholesaler inventory levels by nearly a
third compared to 2016.
Net sales were approximately $207.5 million, a 2% increase over 2016,
primarily due to increases in average unit pricing, alternating
proprietorship sales, international distribution fees earned from AB,
and Pabst contract shortfall fees.
Total gross margin expanded 210 basis points to 31.5%, compared to
29.4% in 2016, in line with guidance.
CBA’s beer gross margin expanded to 35.3%, underscoring record
achievements in improving our operating performance.
Our pub gross margin decreased 690 basis points to 6.7%, primarily
reflecting the impact of the closure of our Woodinville brewery as
we put the facility and pub up for sale, as well as the temporary
closure of our Portland pub for a remodel.
Selling, general and administrative expense (“SG&A”) increased by $1.2
million to $60.5 million, or 29.1% of net sales. The increase reflects
a favorable $1.0 million Pabst contract settlement fee, partially
offset by an impairment charge of $0.5 million related to the sale of
our Woodinville brewery.
EPS was $0.49, compared to a loss of ($0.02) per share in 2016.
Due to the change in federal tax law, we adjusted our deferred tax
liabilities, resulting in a favorable non-cash income tax
adjustment of $6.9 million, or $0.35 per share.
CBA’s adjusted EPS improvement to $0.14 per share for the year
also reflects 9% growth in gross profit driven by 2% growth in net
sales and 210-basis-point gross margin expansion.
Capital expenditures were approximately $18.3 million, compared to
$15.7 million in 2016, and primarily represent investments in Kona’s
new brewery, Redhook’s new Seattle brewpub, and our Portland brewery
to support our footprint optimization.
Select preliminary results for the fourth
Depletions decreased 3% from the fourth quarter of 2016, partially
offset by Kona, which increased by 6%.
Shipments decreased 6% over the same period last year.
Net sales were approximately $46.0 million and flat compared to the
fourth quarter in 2016.
Total gross margin increased by 310 basis points to 32.4% over the
fourth quarter last year. Beer gross margin for the fourth quarter was
37.6% or 540 basis points higher than the same period in 2016.
Selling, general and administrative expense (“SG&A”) increased by $0.2
million to $13.1 million, or 2% of net sales. The fourth quarter
increase reflects a favorable $1.0 million Pabst contract settlement
fee, partially offset by an impairment charge of $0.5 million related
to the sale of our Woodinville brewery.
EPS for the quarter was $0.40, compared to zero earnings per share in
the fourth quarter of 2016.
Due to the change in federal tax law, we adjusted our deferred tax
liabilities, resulting in a favorable income tax adjustment of
$6.9 million, or $0.35 per share.
Our adjusted EPS improvement to $0.05 for the fourth quarter was
also driven by 11% growth in gross profit related to a
300-basis-point increase in gross margin.
“CBA’s strong performance in 2017 represents tangible validation of the
deliberate, forward-looking strategy that we embarked on three years ago
to strengthen the topline, improve the core health of our business, and
actualize our future through strategic partnerships and talent
development,” said Andy Thomas, chief executive officer, CBA. “Across
all aspects of our business, that strategy is proving itself, driving
positive results, and underscoring our progress in evolving CBA’s
business as we navigate through the seismic forces at play in our
Anticipated financial highlights for 2018:
In 2018, we anticipate continued growth for Kona, bolstered by the
national launch of its new 99-calorie Kanaha Blonde Ale, combined with
increasing contributions from our partner brands Appalachian Mountain
Brewery, Cisco Brewers and Wynwood Brewing Co., as well as the ongoing
stabilization of our pioneering legacy craft brands Widmer Brothers and
Redhook in the Pacific Northwest. We look forward to leveraging our
streamlined brewing footprint, improved cost structure, and expanded
brewing agreements with AB to drive further value for our business and
shareholders. Anticipated financial guidance for 2018 includes:
-- Depletions and shipments each ranging between a decline of 2% and an
increase of 3%, reflecting continued progress as we stabilize our supply
Average price increases of 1% to 3%, reflecting improved revenue
management capabilities and lower federal excise taxes.
Gross margin rate of 32.0% to 35.0%, reflecting increases in net
revenue per barrel, continued improvements in brewery operations,
lower fixed overhead, and ongoing efforts to stabilize our pub
SG&A expense ranging from $59 million to $61 million, primarily
reflecting reinvestment of cost savings into our sales and marketing
infrastructure, as well as expanded consumer and trade programming.
Capital expenditures of approximately $16 million to $19 million,
including our new Kona brewery and the addition of a new can line in
our Portland brewery to address consumer demand.
Effective tax rate of 27%.
“Our 2017 financial performance reflects the realization of our
long-term strategy. We’re seeing real improvement in gross margins as a
result of healthy revenue per barrel growth and meaningful operational
and cost improvements,” said Joe Vanderstelt, chief financial officer,
CBA. “As we enter 2018, we are focused on continuing to improve our
financial fundamentals and ability to invest in our brands.”
CBA will file its Form 10-K, issue a final 2017 earnings press release,
and host an analyst call in the first half of March 2018. Timing and
webcast information will be published in the next few weeks.
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 shipments, price increases, and
gross margin rate improvement, the level and effect of SG&A expense and
business development, anticipated capital spending, effective tax rate,
and the benefits or improvements to be realized from strategic
initiatives and capital projects, are forward-looking statements. It is
important to note that the Company’s actual results may 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, 2016. 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
Craft Brew Alliance (CBA) is an independent craft brewing company that
brews, brands, and brings to market world-class American craft beers.
Our distinctive portfolio combines the power of Kona Brewing Company, a
top national craft beer brand, with strong regional breweries and
innovative lifestyle brands Appalachian Mountain Brewery, Cisco Brewers,
Omission Brewing Co., Redhook Brewery, Square Mile Cider Co., Widmer
Brothers Brewing, and Wynwood Brewing Co. CBA nurtures the growth and
development of its brands in today’s increasingly competitive beer
market through our state-of-the-art brewing and distribution capability,
integrated sales and marketing infrastructure, and strong focus on
partnerships, local community and sustainability.
Formed in 2008, CBA is headquartered in Portland, Oregon and operates
breweries and brewpubs across the U.S. CBA beers are available in all 50
U.S. states and 30 different countries around the world. For more
information about CBA and our brands, please visit www.craftbrew.com.
View source version on businesswire.com: http://www.businesswire.com/news/home/20180201006569/en/
Source: Craft Brew Alliance, Inc.
Craft Brew Alliance, Inc.
Jenny McLean, Director of Communications