PORTLAND, OR – Craft Brew Alliance, Inc. (“CBA”) (Nasdaq: BREW), an independent craft brewing company, reported net sales of $38.5 million and net income of $0.7 million for the first quarter ended March 31, 2012 as compared with net sales of $32.3 million and break-even net income a year ago. We reported $0.04 earnings per share on a fully diluted basis for the quarter as compared with no earnings or loss per share for the same quarter last year.
Significant financial highlights for the quarter ended March 31, 2012 include:
- Net sales increased $6.2 million, or 19 percent, to $38.5 million compared with the same quarter of 2011
- Non-contract shipment growth of 10% and depletion growth of 8% for the quarter
- Gross profit percentage increased 184 basis points
- Capital expenditures were $1.8 million as we continue to make strategic investments in systems and infrastructure
“The first quarter of 2012 continued to demonstrate the success of our investments in our innovative portfolio of beers and our marketing and sales capabilities, resulting in top-line growth and positive net income. We remain dedicated to being true to our customers through delivery of the most diverse portfolio of high quality craft beers and brands in the industry, which provide unique beer experiences for multiple occasions,” said Terry Michaelson, CBA’s CEO. “We are committed to delivering long-term profit growth for our shareholders by continuing to invest in the underlying strengths of our brands and strategy. We are encouraged by our first quarter results and look forward to building on that success for the full year.”
Net sales for the quarter ended March 31, 2012 were $38.5 million, an increase of $6.2 million, or 19 percent, from net sales of $32.3 million for the same quarter of 2011. A combination of factors drove the increase, including increased shipments to wholesalers, a decrease in master distributor fees, price increases for our beers sold to wholesalers and an increase in revenues earned from our pubs.
Total shipments for the quarter ended March 31, 2012 were 169,900 barrels, an increase of 22,000 barrels, or 15 percent, from 147,900 barrels for the same quarter of 2011, primarily reflecting the increase in shipments to wholesalers and growth in our contract brewing business. Shipment growth excluding contract shipments was 10 percent.
Cost of sales as a percentage of net sales improved 184 basis points for the quarter ended March 31, 2012, reflecting operating leverage on increased volumes, decreased distributor fees and an increased selling price for our beers. These favorable factors were partially offset by increased transportation costs in the first quarter of 2012 as compared with the same period of 2011.
Selling, general and administrative (“SG&A”) expense of $10.4 million for the first quarter of 2012 increased $1.1 million, or 12 percent, from $9.3 million for the same period of 2011. This increase reflects our investment in selling and marketing initiatives that have led to sales and profit growth, partially offset by lower professional fees. We expect that the rate of increase in SG&A spending for 2012 will not be as high as in 2011.
“The CBA team executed our brewing, sales and marketing initiatives well during the quarter, generating significant sales growth. We saw net income improve to $0.7 million for the quarter from break-even in the same period last year while we continue to reinvest our increased gross profits in growth strategies for our brands,” said Mark Moreland, CBA’s CFO. “We remain cautiously optimistic about our top and bottom line growth for 2012 and believe that the overall health of our business and our strategic marketing and sales spend will continue to drive increased value of CBA.”
Cash Flow and Liquidity
Cash provided by operating activities was $4.6 million for the quarter ended March 31, 2012 compared with $1.5 million for the same period of 2011. The $3.1 million increase was primarily due to improved operating results and improved working capital. Capital expenditures for the quarters ended March 31, 2012 and 2011 were $1.8 million and $2.0 million, respectively. Capital expenditures in both periods included projects designed to increase our capacity and improve efficiency.
We remain confident that our targeted investments into our brands, marketing and sales resources, in conjunction with our innovative, high-quality craft brewing capabilities, will support continued volume and revenue growth while generating improved bottom line results.
We continue to anticipate results for the full year 2012 as follows:
- Depletion growth in the high single digit percentage to low double digit range reflecting both continued strength of our brands and continued growth of the craft category.
- Sales growth of approximately 10% to 12%.
- Gross margin rate approximately 100 basis points lower than 2011, reflecting pressure from grain prices and assuming that fuel prices remain relatively consistent with recent levels.
- SG&A expense ranging from $42 to $44 million, reflecting continued investment into sales and marketing initiatives.
- Diluted earnings per share in the range of $0.20 to $0.25.
- Capital expenditures of approximately $8.5 to $9.5 million, continuing our investments in capacity and efficiency improvements, and quality initiatives.
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.