The Boston Beer Co. Inc., Boston, reported second quarter 2020 net revenue of $452.1 million, an increase of $133.7 million or 42 percent, from the same period last year. 

Net income for the second quarter was $60.1 million, an increase of $32.3 million or 116 percent from the same period last year. Earnings per diluted share were $4.88, an increase of $2.52 per diluted share from the second quarter of 2019.  This increase was primarily due to increased revenue driven by shipment growth of 39.8 percent, partially offset by lower gross margins and increases in operating expenses.

Net revenue for the 26-week period ended June 27 was $782.7 million, an increase of $212.6 million, or 37.3 percent, from the comparable 26-week period in 2019. Earnings per diluted share for the 26-week period ended June 27 were $6.37, an increase of $1.99 per diluted share or 45.4 percent from the comparable 26-week period in 2019.

The company began seeing the impact of the COVID-19 pandemic on its business in early March. The direct financial impact of the pandemic has primarily shown in significantly reduced keg demand from the on-premise channel and higher labor and safety related costs at the company's breweries, it says.

In the first half of 2020, the company recorded COVID-19 related pre-tax reductions in net revenue and increases in other costs that total $14.1 million, of which $10 million was recorded in the first quarter and $4.1 million was recorded in the second quarter. The total amount consists of a $5.8 million reduction in net revenue for estimated keg returns from distributors and retailers and $8.3 million of other COVID-19 related direct costs, of which $5.6 million are recorded in cost of goods sold and $2.7 million are recorded in operating expenses. 

In addition to these direct financial impacts, COVID-19 related safety measures resulted in a reduction of brewery productivity. This has shifted more volume to third-party breweries, which increased production costs and negatively impacted gross margins. In April 2020, due to uncertainties around COVID-19, the company withdrew its full-year fiscal 2020 financial guidance. Despite the continued uncertainties related to the COVID-19 pandemic, the company feels its business outlook has stabilized and that it is now appropriate to give full-year fiscal 2020 financial guidance and has provided such guidance later in this release, it says. The company will continue to assess and manage this situation and will provide a further update in its third quarter earnings release, to the extent that the effects of the COVID-19 pandemic are then known more clearly.

The following are highlights from this release:

• Reported depletions increased 46 percent and 43 percent from the 13- and 26-week comparable periods in the prior year.
• Excluding the addition of the Dogfish Head brands beginning July 3, 2019, depletions increased 42 percent and 38 percent, from the 13- and 26-week comparable periods in the prior year, respectively.
• Reported shipments increased 39.8 percent and 36.5 percent from the 13- and 26-week comparable periods in the prior year.
• Excluding the addition of the Dogfish Head brands beginning July 3, 2019, shipments increased 35.3 percent and 31.9 percent, from the 13- and 26-week comparable periods in the prior year, respectively.
• Full-year 2020 shipments and depletions growth is now estimated to be between 27 percent and 35 percent.
• Gross margin was 46.4 percent for the second quarter, a decrease from 49.9 percent in the comparable 13-week period in 2019, and 45.7 percent for the 26-week period ending June 27, 2020, a decrease from 49.7 percent in the comparable 26-week period in 2019. The company's full-year gross margin target is now between 46 percent and 48 percent.
• Advertising, promotional and selling expense increased by $6.3 million, or 6.7 percent, in the second quarter over the comparable period in 2019 and increased $32.4 million, or 19.6 percent, from the comparable 26-week period in 2019.
• Based on current spending and investment plans, full-year 2020 Non-GAAP earnings per diluted share1, which excludes the impact of ASU 2016-09, is now estimated at between $11.70 and $12.70.
• Full-year 2020 capital spending is now estimated to be between $180 million and $200 million.

"As the world continues to grapple with the COVID-19 pandemic, our primary focus continues to be on operating our breweries and our business safely and supporting our partners in the beer industry,” said Jim Koch, chairman and founder of The Boston Beer Co. “Supporting the communities in which we work and live is one of our core values and we are very happy that our Samuel Adams Restaurant Strong Fund has raised $5.4 million thus far to support bar and restaurant workers who are experiencing hardships in the wake of COVID-19.  Working with the Greg Hill Foundation, this Fund is committed to distributing 100 percent of its proceeds through grants to bar and restaurant workers across the country. 

“We achieved depletions growth of 46 percent in the second quarter, of which 42 percent is from Boston Beer legacy brands and 4 percent is from the addition of Dogfish Head brands,” he continues. “I am tremendously thankful for the efforts of our coworkers in achieving our ninth consecutive quarter of double-digit growth, while maintaining a focus on quality and innovation. We are also thankful to our outstanding distributors and retailers for their focus during COVID-19. Our business in the second quarter was strong, but uncertainties due to COVID-19 remain. These uncertainties include our ability to continue to operate our breweries at a level of safety that meets our standards, the continued ability to distribute to off-premise retail locations, and the timing of the re-opening of on-premise retail locations.  We will continue to work hard throughout the COVID-19 pandemic and prioritize safety above all else. I am very proud of the passion, creativity and commitment to community that our company has demonstrated during this pandemic.  We remain positive about the future growth of our brands and are happy that our diversified brand portfolio continues to fuel double-digit growth."