Redhook boosts volume and dollar sales, but profit is down - Weekly Specialty Beer Report - Redhook Ale Brewery Inc

Modern Brewery Age, Nov 4, 2002

Redhook Ale Brewery has announced sales of 58,400 barrels in the third quarter of 2002, a 0.9% increase over third quarter 2001 shipments of 57,900 barrels. Sales increased 1.6% to $10,691,000 compared to $10,518,000 in the third quarter of 2001. The Company's 2002 third quarter gross profit declined slightly to $2,653,000, or 27.1% of net sales, compared to $2,680,000, or 27.8% in the 2001 third quarter. The net loss for the quarter was $355,000, or $0.05 loss per share, compared to the 2001 third quarter loss of $414,000, or $0.06 loss per share.

CEO Paul Shipman commented, "We maintained our trend of quarter over quarter volume increases, now reaching 13 consecutive quarters. We continue to invest in the sales and marketing of our products and focus on the fundamentals of product quality and business growth. Year-to-date operations have improved over recent prior years' results and we must continue this trend in concert with our growth objectives."

Redhook reported an operating loss of $333,000 for the three months ended September 30, 2002, a significant improvement over a loss of $606,000 in the corresponding 2001 period and largely due to increased efficiency in sales and marketing expenditures. While the Company continues to participate in its co-operative advertising and promotion program where the Company's spending is matched dollar for dollar by the local wholesaler, fewer resources were allocated for radio, billboard and print advertising in selected markets. Selling, general and administrative expenses for the 2002 quarter were 30.5% of net sales, compared to 34.1% in the 2001 third quarter.

Interest expense for the third quarter of 2002 totaled $62,000 versus $91,000 for the third quarter of 2001, reflecting lower average interest rates and a declining term loan balance. Other income (expense)--net decreased to an expense of $24,000 for the quarter ended September 30, 2002, as compared to income of $61,000 for the corresponding 2001 period. The 2002 third quarter reflects a $13,000 decline in interest income as compared to the 2001 third quarter, resulting from lower average interest rates, and a $73,000 loss related to assets that were disposed of in conjunction with the September consolidation of the Company's corporate offices into the Woodinville Brewery, in anticipation of the November 2002 expiration of Redhook's lease of the Fremont Brewery building in Seattle.

For the nine months ended September 30, 2002, Redhook's sales volume increased 2.4% to 171,600 barrels from 167,600 barrels shipped in the 2001 nine-month period. Likewise, sales increased 2.9% to $31,033,000 compared to $30,173,000 during the first nine months of 2001. Redhook's sales growth continues to be a result of an increase in shipments of bottle product as well as an improvement in average bottle revenue per barrel. Gross profit as a percentage of net sales was 27.1% in the first nine months of 2002, compared to 26.8% in the first nine months of 2001. Selling, general and administrative expenses declined $463,000 for the 2002 nine-month period to $8,776,000, compared to $9,239,000 in the 2001 period. Redhook reported a nine-month operating loss of $1,092,000 in 2002 compared to an operating loss of $1,831,000 in 2001, reflecting operating improvement of $739,000.

Interest expense for the first nine months of 2002 totaled $172,000 versus $328,000 for the 2001 period, reflecting lower average interest rates and a declining term loan balance. Other income (expense)--net decreased to income of $8,000 for the nine months ended September 30, 2002, as compared to income of $220,000 for the corresponding 2001 period, attributable to a $121,000 decline in interest income resulting from lower average interest rates, and $95,000 in losses recorded on the disposal of fixed assets during the second and third quarters of 2002.

The net loss for the nine months of 2002 totaled $1,130,000, or $0.17 loss per share, compared to a loss of $1,280,000, or $0.18 loss per share, in the comparable 2001 period.

The Company's cash balance was $7.1 million at September 30, 2002.

Cash provided by operations totaled $2.2 million for the first nine months of 2002. Principal uses of cash included the repurchase of Company stock.

The Company estimates that shipments in October 2002 will be down approximately 4% as compared to October 2001.