Craft Brewers Alliance, Inc. engages in brewing, marketing, and selling craft beers in the United States. The Company offers its products under the Widmer Brothers Beers, Redhook Beers, and Kona Brewing brand names and owns equity investments in two breweries, Fulton Street Brewery, LLC. and Kona Brewery LLC. Craft also operates a small pilot brewpub-style brewery in Portland, Oregon where they sell retail beer, food, apparel, and other retail items. It sells its products in draft and bottles through restaurants, bars, and liquor stores, as well as in bottles at supermarkets, warehouse clubs, convenience stores, and drug stores.Craft reported the results of operations from the first quarter ending March 31st, 2010. Despite a slip in shipments to customers due to the seasonality of products during what is typically a weak quarter from a profit/loss standpoint, The Company managed to turn a bottom line profit. Going forward, management reported that they have made progress towards this year’s goals, notably, strengthening the branding of their products and full-year profitability.
“We expect the craft industry to be competitive” said Terry Michaelson, chief executive officer of Craft, “product sales trajectories, top-line sales growth, and brand health continue to be our main focus”. Craft will continue to roll out new products and monitor their profitability to improve operating margins. The Company has been successful so far; for the first quarter of 2010, Craft saw a bump in gross profit of $1.6M, or 30% year-over-year. The Kona brand beer saw particular strength in the first quarter, with a total of 2.3M more barrels shipped, an increase of 10% year-over-year.
Cash on hand and cash flows also improved from $11K in 2009 to $753K in 2010. When we asked to what use these funds could best serve, The Company acknowledged this increase was attributable to the gross margin improvements and that management will continue to pay down long-term debt. Interestingly, we noticed a large amount of the participators on the conference call were not institutional investors or analysis, rather they we’re home-town, regular Joe’s who love The Companies beer and as a result because shareholders. One caller made mention that he was a long-time customer from the East Coast who recently bought shares and was wondering when he could expect new products to be rolled out in his neighborhood.
Financial Highlights for Craft Brewery Alliance’s First Quarter 2010 Include:
- Gross sales decreased $398K, or 1.3%, from $29.7M for the first quarter of 2009 to $29.3M for the first quarter of 2010. Partially offsetting the decrease in gross revenues were a net price increase for both the Company’s draft and bottled products and generated revenues of $415K under a contract brewing arrangement The Company did not have in 2009.
- Gross profit increased $1.6M, or 30%, from $5.3M in the first quarter of 2009 to $6.8M for the first quarter of 2010. Net Income was $209K for the first quarter 2010 compared to a loss of ($1.0M) in the first quarter of 2009.
- The Company’s debt as a percentage of total capitalization (total debt and common stockholders’ equity) decreased from 24.5% in the first quarter of 2009 to 23.7% in the first quarter of 2010. The Company also improved their working capital deficiency and generated cash provided by operating activities of $2.5M in the first quarter of 2010 from $1.0M in the first quarter of 2009.
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