Boston Beer Inc  (NYSE: SAM) Q1 2020 Earnings Call Transcript

Boston Beer Inc  (SAM) Q1 2020 earnings call dated Apr. 22, 2020

Corporate Participants:

C. James Koch — Chairman and Founder

David A. Burwick — President and Chief Executive Officer

Frank H. Smalla — Treasurer and Chief Financial Officer

Analysts:

Bonnie Herzog — Goldman Sachs — Analyst

Vivien Azer — Cowen and Company — Analyst

Kevin Grundy — Jefferies — Analyst

Steve Powers — Deutsche Bank — Analyst

Nik Modi — RBC Capital Markets — Analyst

Laurent Grandet — Guggenheim Partners — Analyst

Kaumil Gajrawala — Credit Suisse — Analyst

Sean King — UBS — Analyst

Eric Serotta — Evercore ISI — Analyst

Presentation:

Operator

Greetings and welcome to the Boston Beer Company First Quarter 2020 Earnings Call. [Operator Instructions] It is now my pleasure to introduce your host, Jim Koch, Founder and Chairman for The Boston Beer Company. Thank you. You may begin.

C. James Koch — Chairman and Founder

Thanks. Good afternoon and welcome to everybody. This is Jim Koch, Founder and Chairman, and I’m pleased to kick off the 2020 first quarter earnings call for The Boston Beer Company. Joining the call from Boston Beer are Dave Burwick, our CEO; and Frank Smalla, our CFO. In keeping with these times of social distancing, Dave, Frank and I are in separate locations for this call.

I’ll begin my remarks this afternoon with a few introductory comments, including some discussion on the COVID-19 pandemic and the highlights of our results, and then hand over to Dave who will provide an overview of our business. Dave will then turn the call over to Frank who will focus on the financial details of our first quarter results. Immediately following Frank’s comments, we’ll open up the line for your questions.

As the world is grappling with the COVID-19 pandemic, our primary focus is on operating our breweries and our business safely and supporting our partners in the beer industry. We have a strong cash position and balance sheet and feel very fortunate to be in a position where we can help others. Supporting the communities in which we live and work is one of our core values. After all, our business got its start in bars and restaurants, and we recognize the role we can play right now in giving back.

We’re proud to share some of the initiatives we’ve gotten off the ground in a very short period of time that we hope will make a difference. We’ve established the Samuel Adams Restaurant Strong Fund and donated over $2.1 million to support bar and restaurant workers that have been impacted by pandemic-related closures in 20 states. In addition, we’re a founding partner of Restaurant Relief America, which is committed to helping the restaurant industry workers experiencing hardship in the wake of COVID-19. Both funds will distribute 100% of their proceeds through grants to bar and restaurant workers. Also, to support our internal needs as well as local hospitals, we have begun production of hand sanitizer at our Dogfish Head distillery in Milton, Delaware. We are thankful for our outstanding coworkers, distributors and retailers for their focus on our business during COVID-19 and their diligence to continue to operate and help us grow our Boston Beer Company.

The Company’s depletions increased 36% in the first quarter, of which 30% is from Boston Beer legacy brands and 6% is from the addition of Dogfish Head brands. Our business in the first quarter was strong, but there remains significant uncertainty due to COVID-19. These uncertainties include our continued ability to operate our breweries at a level of safety that meets our standards, the continued ability to distribute to the off-premise retail locations, the duration of the current on-premise shutdown, and how long consumer pantry loading will continue in the weeks ahead. We will continue to work hard throughout the COVID-19 pandemic and prioritize safety above everything else. I’m proud of the passion, creativity and commitment to community that The Boston Beer Company has demonstrated during this pandemic.

I’m now going to pass over to Dave for more detailed overview of our business.

David A. Burwick — President and Chief Executive Officer

Thanks Jim. Hello, everyone. Before I review our business results, I’ll start with our disclaimer, which given the current circumstances we modified. As we stated in our earnings release, some of the information we discuss and release and that may come up on this call reflect the Company’s or management’s expectations or predictions of the future. Such predictions and the like are forward-looking statements.

I would also note, as we stated in our earnings release and Frank will later discuss in more detail, the Company is not in a position to accurately forecast the future risks to revenues and earnings resulting from the impact of disruptions and other effects related to COVID-19 and has withdrawn its full year fiscal 2020 financial guidance.

All that said, the Company’s actual results could differ materially from any results 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 in the Company’s most recent 10-K and first quarter 10-Q. You should also be advised that the Company does not undertake to publicly update forward-looking statements, whether as a result of new information, future events or otherwise.

Okay. Now, let me share a deeper look at our business performance. Consistent with the first quarter of last year, our first quarter shipments volume was significantly higher than depletions volume, as we took active steps to ensure that our distributor inventory levels are adequate to support drinker demand. Our depletions growth in the first quarter was a result of increases in our Truly Hard Seltzer and Twisted Tea brands and the addition of the Dogfish Head brands that were only partially offset by decreases in our Angry Orchard and Samuel Adams brands. The growth of the Truly brand and the recently launched Truly Hard Lemonade have accelerated and continue to grow beyond our expectations.

Since early January, Truly has accelerated its velocity and has maintained its market share, while other national hard seltzer brands have ceded share. We will continue to invest heavily in the Truly brand and evolve our brand communications and work to improve our position in the hard seltzer category, even as more competitors enter. We are ready to launch an exciting new Truly advertising campaign, but have postponed the launch due to the uncertainties surrounding COVID-19.

Twisted Tea continues to generate double-digit volume growth rates that are above full year 2019 trends. We see significant distribution and volume growth opportunities for our Truly and Twisted Tea brands and are looking to continue to expand distribution of our Dogfish Head brand. Pursuing these opportunities in 2020 remains a top priority. Samuel Adams and Angry Orchard’s volumes continue to decline, as they are more deeply impacted by the on-premise shutdown. We continue to work hard on returning these brands to growth, but do not expect them to grow during 2020.

We reacted decisively to COVID-19 and continue to work to control what we can control, with our primary focus being the safety of our coworkers, our distributors, retailers and our drinkers. We worked aggressively to put in place many safety protocols at our breweries, including entrance screening and temperature checks, face mask requirements, reorganizing work to increase social distancing between and among shifts, and adding cleaning time to each shift. Additionally, we closed all of our hospitality locations beginning on March 13.

We are working hard to rebalance our supply chain to address additional demand in can and bottle packages at off-premise retailers against very low demand for kegs, given the shutdown of on-premise venues. This shift in volume mix is likely to come at a higher incremental cost due to the increased usage of third-party breweries, which negatively impacts our gross margin. We have deferred some of our new marketing campaigns, as we closely assess and manage this situation.

Drinker demand for our brands continues to be very strong, particularly our Truly and Twisted Tea brands. Pre-COVID, our depletions growth through the nine-week period ended February 29 was approximately 32% from the comparable period in 2019, and we saw a further acceleration in demand for our brands beginning in the second half of March. It’s not possible for us to estimate the amount of the new demand that’s a temporary reaction to COVID-19. We’re in a very competitive business and we’re optimistic for continued growth of our current brand portfolio and we remain prepared to forsake short-term earnings as we invest to sustain long-term profitable growth, in line with the opportunities that we see.

Based on information in hand, year-to-date depletions reported to the Company through the 15 weeks ended April 11, 2020 are estimated to have increased approximately 32% from the comparable weeks in 2019. Excluding the Dogfish Head impact, depletions increased 27%.

Now, Frank will provide the financial details.

Frank H. Smalla — Treasurer and Chief Financial Officer

Thank you, Jim and Dave. Good afternoon, everyone. For the first quarter, we reported net income of $18.2 million or $1.49 per diluted share, a decrease of $0.53 per diluted share from the fourth quarter of last year. Net income decreased as higher net revenue was more than offset by increases in operating expenses and lower gross margins.

We began seeing the impact of the COVID-19 pandemic on our business in early March. Prior to then, we were on track to maintain our full year fiscal 2020 financial guidance. Given the many rapidly changing variables related to the pandemic, we are currently not in a position to accurately forecast the future impacts of the pandemic and are therefore withdrawing our full year fiscal 2020 financial guidance. To date, the direct 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 our breweries.

In the first quarter of 2020, we recorded COVID-19 pre-tax related reductions in net revenue and increases in other costs totaling $10 million. This amount consists of a $5.8 million reduction in net revenue for estimated keg returns from distributors and retailers and $4.2 million of other COVID-19 related direct costs, of which $3.6 million are recorded in cost of goods sold and $600,000 are recorded in operating expenses. In addition to these direct financial impacts, COVID-19 related safety measures resulted in a reduction of internal capacity. This has shifted more volume to third-party breweries, resulting in increased production costs and lower gross margins. We will continue to assess and manage this situation and will provide further updates in our second quarter earnings release, to the extent that the effects of the COVID-19 pandemic will then be known more clearly.

Shipment volume was approximately 1.42 million barrels, a 32.2% increase from the first quarter of 2019. Excluding the addition of the Dogfish Head brands beginning July 3, 2019, shipments increased 27.5%. Shipment volume for the quarter was significantly higher than depletions volume and resulted in significantly higher distributor inventory as of March 28, 2020 when compared to March 30, 2019. We believe distributor inventory as of March 28, 2020 averaged approximately six weeks on hand and was at an appropriate level based on the supply chain capacity constraints and inventory requirements to support the forecasted growth of Truly and Twisted Tea brands over the summer. We expects wholesaler inventory levels in terms of weeks on hand to return to more normal levels of approximately four weeks on hand later in the year.

Our first quarter 2020 gross margin of 44.8% decreased from the 49.5% margin realized in the first quarter of last year. The decrease was primarily the result of higher processing costs due to increased production at third-party breweries and higher processing costs and finished goods keg inventory write-offs at Company-owned breweries, partially offset by price increases and cost saving initiatives at Company-owned breweries. Excluding our current assessment of the impact of COVID-19 keg returns and other related direct costs, first quarter gross margin was 46.8%.

First quarter advertising, promotional and selling expense increased by $26.2 million in the first quarter in 2019, primarily due to increased investments in media, production and local marketing, the addition of Dogfish Head brand-related expenses beginning July 3, 2019, higher salaries and benefits costs, and increased freight to distributors due to higher volumes.

General and administrative expenses increased by $3.6 million from the first quarter in 2019, primarily due to increases in salaries and benefits costs and the addition of Dogfish Head general and administrative expenses beginning July 3, 2019.

We drew down $100 million from our existing line of credit in March 2020 to enhance our cash position and our ability to address the impact of the COVID-19 pandemic. We expect that our March 28, 2020 cash balance of $129.5 million, together with future operating cash flows and the $50 million remaining in our line of credit, will be sufficient to fund future cash requirements.

We will now open up the call for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from the line of Bonnie Herzog with Goldman Sachs. Please proceed with your question.

Bonnie Herzog — Goldman Sachs — Analyst

All right. Thank you. Hi, everyone. I wanted to ask about your operations. You touched on this, and I’m just curious if you can give us a little more color on how fully your operations have been running. I know you’re certainly being careful with safety for your employees. So I’m curious, have you limited the hours and the shifts, and then as such, then the output is more limited at this time, given everything? I guess I’m just trying to get a sense of how much you’ve had to scale back. And then, I think you did give us your inventory that’s on hand right now, but I just want to make sure I heard that correctly.

David A. Burwick — President and Chief Executive Officer

Okay, Bonnie, thanks. This is Dave. I think, because we’re in all different locations, I’ll sort of act as the MC today and kind of funnel the questions. I think this is quite good one for Frank to address.

Bonnie Herzog — Goldman Sachs — Analyst

Okay.

Frank H. Smalla — Treasurer and Chief Financial Officer

Yeah. So Bonnie, clearly, the capacity was impacted. When the whole thing started, we were very, very much focused on the safety of our coworkers and employees, but also on keeping the breweries running. That was critical to us. So what we did is, we implemented significant sanitation and safety measures in the breweries to make sure that they are very safe place to work and that we can keep on running them even if we had incidents. As a result of that, we separated shifts, for example, and put time between shifts so that the crews don’t meet each other, and we’ve also sanitation procedures so that the workstations are being sanitized before new shifts start. That has reduced capacity.

Now, we haven’t had any significant impact on the overall output, but we have shifted more volume to third party breweries, which as you know, increases our cost and therefore lowers the margin. That is reflected in the financials, the part that hit like at the end of March. It’s not included in the $10 million that we spelled out as direct costs. The $10 million that we spelled out is literally direct costs related to keg returns and extra costs that we incurred as a company, but it doesn’t include the in the indirect costs of the shift of capacity.

Bonnie Herzog — Goldman Sachs — Analyst

Okay. That was helpful. So, as you think about this environment, no one really knows how much longer it’s going to last. But I would imagine that this overhang of pressure is going to continue. So is there a way for you to give us a sense of what percentage of your business maybe in the quarter was outsourced? I think it was around maybe, what, 26% or 27% of your business last year. And I assume that’s gone up now.

Frank H. Smalla — Treasurer and Chief Financial Officer

Yeah, so clearly, it has gone up as we’ve indicated also in the last call. We will provide — we still provided guidance in February. Because our volume is growing so significantly, we are putting in additional capacity we have — yeah, put in a new line Pennsylvania, which is coming on stream pretty much now. But the volume continues to outpace our capability. So it was pretty clear that Q1 was going to be a quarter where we have significantly more external production. We don’t disclose those numbers, what the percentage is, but it was a significant increase even without COVID. COVID hit, and then I think, within March when we implemented those measures, there was an incremental that shifted over. There is a reason why we don’t provide guidance because we don’t know exactly what’s going to happen. But of course, we do our scenario planning and we were super cautious when we put the measures in. And I think we will get better at it. That means, we will definitely maintain the level of safety and sanitation. But we will — as with everything, you’re getting better with things as you continuously do them as you learn. So, we think we will improve the capacity internally as we move throughout the year.

David A. Burwick — President and Chief Executive Officer

And Bonnie, this is Dave. Just to add to what Frank said, we jumped on this very early, so we’re talking like early March [Phonetic], in making a lot of these changes. So we are down the learning curve a bit, obviously. But we’ve been doing the temperature checks, face mask, everything from the very beginning. So hopefully, it gets better. And we just don’t know how this pandemic hits because we know it’s going to come in waves. But we feel like we’ve got — we learned a lot and are pretty confident that we know what we’re doing right now. But again, we’re — like I said, we can control what we can control.

Bonnie Herzog — Goldman Sachs — Analyst

Understood. All right. Thanks. I’ll get out of the queue. Thank you.

David A. Burwick — President and Chief Executive Officer

Thanks Bonnie.

Operator

Our next question comes from the line of Vivien Azer with Cowen and Company. Please proceed with your question.

Vivien Azer — Cowen and Company — Analyst

Hi, good evening. Thank you. I hope all three of you guys are safe and healthy as the rest of your team. Just a follow-up on Bonnie’s question on capacity. So you called out the capacity build-out in Pennsylvania. And I heard, Dave, you say that capacity will continue to ramp over the year. Are there incremental capex projects that need to happen this year? Or was it just the one line in Pennsylvania? Thanks.

David A. Burwick — President and Chief Executive Officer

So we’ve got — I’ll answer. This is Dave. We have a line in Memphis that will be going in, in the second quarter with City. That is on schedule. So we feel good about that. We’ve also — though we haven’t decided where to put the capital we have committed, we’ve got Board approval internally to put more lines in either in Pennsylvania or in Ohio sometime starting very soon. So we’ll continue to move down that path as aggressively as we can. Even in this environment where we’re kind of looking at sort of some capital projects that may not be strategic or critical, we’re putting them off, this is one that we’re going full steam ahead to build more capacity.

Vivien Azer — Cowen and Company — Analyst

Okay, that’s great. It’s so good to hear that the construction continues hopefully broadly unfettered. On the impact of keg returns, do you guys have a sense of kind of like where you are in that process? Just trying to think about the second quarter impact. Have you received 50% of your kegs back? Is there any way to know?

Frank H. Smalla — Treasurer and Chief Financial Officer

So Vivien, this is Frank. We haven’t — the process hasn’t really started from an operational perspective. But what we have done is, we have a longstanding policy of any returns that we get for freshness reason that we get from our distributors that we reimburse them for 50%. We’ve always had this for packages for kegs. We are not intending to change that, and we’ve communicated that to our distributors. And we have looked at the inventory that we have with the distributors and we have looked at the inventory that is at the retailers, which is likely to come back to the distributors as well. And based on that, we have accrued for the costs in Q1, and that’s what you see that is part of the 10 million. So $5.8 million is a reduction in revenue because we have accounted for the keg inventory that we expect to come back and reimburse at 50%. We believe we have a fairly good handle on that inventory. So we don’t expect any significant changes to that estimate.

Vivien Azer — Cowen and Company — Analyst

Okay, perfect. Thank you. That’s super helpful. Last one from me and I’ll jump back in the queue. Can you just remind us what your revenue mix is for the total Company portfolio on-premise versus off-premise? Thanks.

David A. Burwick — President and Chief Executive Officer

Yeah, Vivien, we don’t share that. I think what we said — we do say somewhere — we talk about our keg 20% in total, which is 12%. So the keg sales are 12% of our mix. We don’t break out on-premise versus off-premise. So obviously, there’s more than kegs that go into the on-premise channel.

Vivien Azer — Cowen and Company — Analyst

Okay. Suffice to say it’s de minimis for Truly?

David A. Burwick — President and Chief Executive Officer

It is de minimis. It’s fair to say it’s de minimis for Truly. It’s de minimis for Twisted Tea as well.

Vivien Azer — Cowen and Company — Analyst

Perfect. Thank you so much.

Operator

Our next question comes from the line of Kevin Grundy with Jefferies. Please proceed with your question.

Kevin Grundy — Jefferies — Analyst

Thanks. Good evening, everyone. I just would echo, I hope that you and your family, loved ones are safe and healthy. I want to start with sort of a bigger picture question for Jim and for Dave. Understanding there’s still a lot known at this point, but I think what sort of maybe a little bit more increasingly known is, there is a broader consumer shift to at-home consumption. Consumers will be working from home more frequently as well. It just seems like there will be some protracted implications from social distancing that are going to be with us for some period of time. And as a consequence, it would appear there will be a lasting negative impact on the on-premise channel. Maybe you agree or disagree with that. But if that is indeed the case, it’d be — I’d be interested to get your perspective on the longer term implications, not just for your portfolio, but for the industry as well and overall alcohol consumption.

David A. Burwick — President and Chief Executive Officer

Thanks Kevin. I’ll let Jim jump on that one.

C. James Koch — Chairman and Founder

Yeah. We’ve seen so far a complete devastation of our keg business. It’s damn near zero, and it happened very quickly. So it’s hard to put — so that’s what we know. The lockdown in the states where it’s been implemented has meant that our keg business is a trickle. How much of that will come back? It’s anybody’s guess. In a normal year, there is a decent amount of turnover in restaurants anyway. They go out of business. New ones take their place. So there will be a lot that don’t reopen. Some of those were probably going to close during the year anyway. And it’s probably beyond my capacity to predict how much lower the on-premise business will be in the short term and the long term other than to say it’s going to be lower and it’s going to be significantly lower. And if I had to guess, it’s — some of it’s driven by shutdown, but a lot of it’s just driven by who wants to go out and rub elbows with a lot of people until there is a vaccine or an effective treatment or therapy. So we are anticipating that the on-premise business is not going to just snap back. And it may be a matter of a year or two before it gets anywhere near what it was at the end of February. And we do feel like, as opposed to many other craft brewers, we have developed a portfolio and a business model that is able to prosper even in this new normal. We — and the strong sales results so far this year, I think, validate that business model that is built on strong brands, on successful innovation, on the support of our distributor network and on our best-in-class sales force. So we see the results so far this year as a validation of our strengths.

And because we are pretty confident in our business model and our position in the marketplace, we’re willing to invest aggressively in programs and in media when and where we can drive continuing double-digit growth. And we’re going to make the capital investments, as Vivien asked about, that are necessary to support that growth, primarily in-house but also investments at our contract brewing partner. And we’re also going to invest capital to increase our gross margins from the current level. They’ve been declining for several years, even as we’ve scaled up. And that’s just not natural or even healthy. So we think we can get significant improvement in gross margin over the next couple of years, and we’re going to invest the capital that’s necessary to do that. And does that answer your question?

Kevin Grundy — Jefferies — Analyst

Yeah. Thanks for that, Jim. I appreciate it. Just in the interest of time, I do want to touch on seltzers, if that’s okay, as well as tons of questions to be asked, obviously. Understanding what we don’t know necessarily with respect to the magnitude of pantry loading and timing around how long it’s going to take consumers to destock, maybe you could talk about, I guess, kind of what we do know and maybe what you’ve learned over the past three months since last we spoke with respect to new customers and sort of frequency of consumption among existing customers and strength of the brand and consumer loyalty because as you guys rightly point out, the brand has held up, Truly that is, pretty well in light of some of the new entrants. So maybe talk a little bit about some of the brand equity and what you have learned about the core consumer and even new consumers over the past three months. And I’ll pass it on. Thank you guys very much.

David A. Burwick — President and Chief Executive Officer

Okay. Thanks Kevin. Actually, I think maybe I’ll jump in on the Truly one. To answer that question fully, it will take about an hour. I’ll try to give a briefer. I think, first of all, I feel like what we did in the end of the fourth quarter of last year to prepare for the onslaught, we call the White Walkers come in to add us [Phonetic] in January, we feel very confident in that the reformulation increased media spend in the fourth quarter to build some brand awareness, readying Lemonade for a launch. Where we are right now is that Truly right now is only the hard seltzer brands to grow share sequentially since the beginning of January. So starting at the beginning of this year, we are the only to grow. Now, granted, we grew IRI 22 to 22.1. It’s only a 0.1 of share point, but we’ll take it. And the growth rates have sustained. So they’ve been over 200% in the last 13 weeks, with the last 13 [Indecipherable] last one, 210%, 213%, 218% [Phonetic]. So it’s growing. I think we also look at — if we look at sales per point, really important, it’s accelerating. So over the last four months in sequence, plus 65, plus 71, plus 89, plus 99. And now, Truly Lemonade is coming in at about 5.2 [Phonetic] share, which is significant. So now, from a consumer perspective, what we’ve learned, and it’s been really interesting to have other players come in because then you can see where the share is going, from whom to — which brand which brand. And we dig into the panel data, and generally it’s Nielsen. We’re starting to work a little bit with numerator as well. It’s kind of interesting. But if you look at Nielsen, you see us compare Truly to White Claw — and by the way, White Claw is a phenomenal brand. I have nothing but respect for what — how they built that brand. But just use that as comparison, Truly has higher income households, younger buyers, more diverse ethnically buying households, more sourcing from wines and spirits, 51 to 39 [Phonetic], higher basket ring, higher repeat rate. actually now 36 to 34. We’re seeing that the [Indecipherable] seltzer entries tend to skew to a little bit older and lower income, similar — but a little bit more diverse, but similar to White Claw in many respects. And so, we carved out what we believe is a different consumer. What’s most interesting to me, if you look at the last month, post COVID — the weeks post COVID, which just sort of — the data we have is like first week of March to the first week in April, Truly penetration doubled in that time between that February-March time frame, and repeat grew by 25%. So we’re seeing, and you guys have all seen it, the growth rates are continuing in this category and people bringing it home. We’ve got an opportunity to get trial among a lot of new consumers. 41% of the consumers that tried Truly in the last month were new to the brand. So we feel pretty good. And then, that last thing I’ll say is that it’s getting along. And the household penetration is continuing to grow significantly for the category, so 7.5% over the latest 52 weeks. White Claw is at 3.7 [Phonetic]. Truly is at 2.7 [Phonetic]. But over the last four weeks, I think it’s around 7.7 [Phonetic]. So it’s on its way. We think hard seltzer could be on its way to 8%, 9%, 10% of beer during that time. So those are the headlines, and I’ll leave it at that.

Kevin Grundy — Jefferies — Analyst

I appreciate all the time. Thank you, guys, and good luck.

David A. Burwick — President and Chief Executive Officer

Thanks Kevin.

Frank H. Smalla — Treasurer and Chief Financial Officer

Thank you.

Operator

Our next question comes from the line of Steve Powers with Deutsche Bank. Please proceed with your question.

Steve Powers — Deutsche Bank — Analyst

Hi, guys. Thanks for the question. Maybe first real quick, back to on-premise, a technical question, I think, for Frank. Frank, in the Q, if I read it right, it talks about reimbursements to distributors on the order of about $8.2 million. I guess the question is, is that inclusive of the $5.8 million that you’ve called out as COVID-related? Or is the COVID number additive to the $8.2 million?

Frank H. Smalla — Treasurer and Chief Financial Officer

No, I’m not sure of the $8.2 million. The keg return cost — or the reduction in revenue is $5.8 million. That’s the number. We have some other costs related to the COVID impact, which is like mainly the breweries, and that’s the balance to the $10 million. There is about $600,000 in operating expenses. But outside of the $5.8 million, there is like $3.6 million [Phonetic] also in the gross margin line, if you will. But those are direct expenses. There is no additional costs to that.

Steve Powers — Deutsche Bank — Analyst

Right. Okay, so — okay, I can follow up offline. I guess, then, stepping back maybe to build on what you just said, Dave, around the seltzer category, as you — I guess I’m thinking through is, do you think the disruption that the category is facing now — the whole industry is facing now, it will have lasting impacts good, better, indifferent on how the category develops, the seltzer category that is. As you said, you’re getting new trial right now as folks stay home and try and pantry load. I guess as you go forward, though, the good news is, you’ve got this new trial period. On the other hand, just social gathering in general will probably be limited for some time. I think of seltzer as a social occasion type of beverage. Maybe that’s wrong. But just how do you think about the go-forward impact on this category specifically and how it was developing and how this may change how it develops over the next — over the remainder of the year into next year?

David A. Burwick — President and Chief Executive Officer

Okay. And this obviously is another hard one to predict. I would say, obviously, the one benefit the category has is that it doesn’t — it exists in on-premise, but it’s not very significant. So while on-premises shut down and, as Jim talked about, coming back, Kevin alluded to, probably very slowly. It has much less of an impact on this category. You have people who are — who have stocked up a lot. As you’re seeing in the numbers, the stock-up really — there’s replenishment buying that’s almost at the same rate of growth as a stock-up, so it’s come down a little bit. We’re still looking at significant growth, as you know, across the entire beer business, but certainly within seltzers as well. So I think anytime you have a new product, a new category, new brand, it’s getting a lot of trial that has a lot appeal to it, it’s going to benefit. And I think we’re getting basically — I think we’re getting a lot of incremental trial, we meaning the whole category is getting a lot of incremental trial that it would not have gotten in another situation. So to me, if I were to bet, I would bet that this sub-segment of the beer category will evolve to head [Phonetic] further and faster than it would have had this terrible situation not occurred. And in terms of the social piece, I think we look at — [Indecipherable] beer is social occasions anyway, so it’s probably — that cancels out. And I think if I were to pick one winner, I guess, the winner hasn’t changed in the category for the last couple of years. I think this is still the same, the winning part of the category.

Steve Powers — Deutsche Bank — Analyst

Yeah, great. Okay, I’ll leave it there. Thanks so much.

David A. Burwick — President and Chief Executive Officer

Sure.

Operator

Our next question comes from the line of Nik Modi with RBC Capital Markets. Please proceed with your question.

Nik Modi — RBC Capital Markets — Analyst

Yea, thanks. Good afternoon, everyone. When you think about the capacity situation, and obviously, you guys are investing to expand lines, but just given what’s going on across the competitive set, I’m just curious like do you see any opportunities out there to either have unique partnerships to produce more Truly at a lower cost than what you’re potentially doing with co-packers or even acquiring capacity outright? That’s the first question. And then the second question is, really coming down to what we just talked about this amazing kind of acceleration in trial that we’ve seen in the category that probably we would have never seen prior to COVID-19, and how you can do marketing, whether it be digital or on television and what have you, how can you create stickiness with those consumers that have been trying the category and the brand over the last several weeks?

David A. Burwick — President and Chief Executive Officer

Thanks Nick. I’ll have — I’ll defer the first question to Jim. And then maybe I’ll come back and answer the second question.

C. James Koch — Chairman and Founder

Okay. I was ready to answer the second one, Dave. Nick, repeat the first question.

Nik Modi — RBC Capital Markets — Analyst

The first question, Jim, is really about capacity. And while you guys are in capex to expand lines, we see opportunities out there to buy capacity.

C. James Koch — Chairman and Founder

We are always looking at opportunities. We are — we would prefer to own our own capacity if the economics are equal. But we have been fairly agnostic, if the economics are superior. So within that framework, we really do anticipate there will be opportunities. They haven’t yet surfaced. But I think there are craft brewers who borrowed money and expanded. And as you probably know, for a craft brewer, we — that part of Boston Beer’s business and craft brewing in general skews way more heavily on-premise, sort of order of magnitude 30% versus maybe 18% for the industry. So there will be craft brewers who overextended and now don’t have demand and will be under some pressure. And as those opportunities arise, we will look at it. But what’s happened to our business is, we have this very, very strong growth, but it’s all in cans. And 12% of our business is in kegs. We’ve more than offset that with cans, but that means we don’t need more keg capacity and we don’t really need the brewing capacity. So capacity that would be useful to us would have to be canning capacity, and that’s generally not what craft breweries have. So we will look at those things. If there are opportunities where the total economics of a purchasing and maybe building out, putting in a can line are better than doing it within one of our breweries or one of our — or City, our primary contract brewing partner, we will do that. So it may happen, probably not. But it’s not out of the question.

David A. Burwick — President and Chief Executive Officer

Okay. And so, Nick, I’ll jump into the second question, I think, which was about how do you build a brand to last. I think we look at the category — we said from the beginning, we really believe this category is going to be about a few mega brands. It’s going to play more like soft drinks and look more like the branding from soft drinks than it does look like craft beer per se. And will we see if it plays out that way, still early to tell. But I think for us, we’re looking at really like — I think of four things, the kind of — sort of the fundamentals, create brand awareness, right? We don’t have the words that we need to have, but you get that through all sorts of media. Differentiation is critical too. We reformulated because we believe it’s support have the best tasting products. That’s just the beginning. We have to differentiate the brand on other measures through our brand communications platform. We do have a campaign that we’re very excited about that was due to launch in April and actually we front-loaded. We know — we spent — we plan to spend at the beginning of this year because we knew the competition was coming, we were going to wait till the summer. We have a new campaign ready to go in April. Now obviously, it’s not the right time to be launching a campaign. We need to make sure that the consumer sentiment is open to bringing something new that we have. But that’s certainly another way that we plan to build the brand. I think innovation, we’re seeing with Lemonade, we think we’re on to something here where is a way to — we’re basically trying to redefine what hard seltzer can be versus just the next watermelon kiwi flavor, is there some — is there — are other more substantial platform we can build around. And I think innovation will be another way. We don’t want to over-innovate. We don’t want o under-innovate either. But it will be way to differentiate and set our brand apart. And lastly, it comes down to execution. And through our wholesaler network, Jim referenced, we have great relationships there, so do the other guys too, and do a tremendous job executing. There’s upside. If you look at our distribution across channels, particularly convenience stores in total, and grocery, there’s still opportunities for us to drive that. So it’s a combination of all those things coming together. But I think importantly, we need to come forward and hopefully, people will agree whenever we do come forward with a new campaign that we’re presenting a brand with a distinct point of view that’s relevant to 21 to 35 year olds.

Nik Modi — RBC Capital Markets — Analyst

All right. Thanks a lot. I appreciate it.

David A. Burwick — President and Chief Executive Officer

Thanks Nick.

Operator

[Operator Instructions] Laurent Grandet with Guggenheim Partners. Please proceed with your question.

Laurent Grandet — Guggenheim Partners — Analyst

Yeah, good evening, everyone. Actually, my first question would be a follow-up from your previous response, Dave. There are some competitors that come with strong beer brands and develop kind of a seltzer sub-brand. Do you think it’s an advantage and why to have a standalone brand versus competing against those beer brands that are flourishing right now? So could you explain in terms of marketing why you think that’s an advantage for you?

David A. Burwick — President and Chief Executive Officer

Yeah, I do think having a pure play brand in the category or in any category is more powerful because I think it’s just — it’s a more singular idea what brand is about. And I think consumers — the consumers who want to buy Swiss Army Knife, they want the best knife, the best fork, the spoon they can get, and they’re going to — and I think they’re very discerning and very smart. They are going to go to choose brands that they believe deliver on the category benefits and positives of the category and they don’t want to be confused. That’s just my point of view. And I have been at PepsiCo and I know you were too. I’ve been responsible for doing the opposite of that, and I think I’ve learned from my mistakes that it’s generally not good to do that. Now, I must say that these other line extension will work because these are obviously very powerful brands. But if I were to chose, I would prefer to have a brand that is not a line extension.

Laurent Grandet — Guggenheim Partners — Analyst

Okay. Thanks Dave. The next question, it’s probably a clarification with Frank, or you, Dave. But it seems like your numbers in depletion up plus 36% and your shipments is plus 32%. So in my view, based on percentage of growth, it seems like depletion growth has been higher than shipments growth, so which was in my view, not really your goal at the beginning of the year, or I misunderstood you at the time. But what’s — where I’m getting to is, what is the number of weeks of inventories? You mentioned six weeks. Is that retailers plus wholesaler level? Is it — and how did that compare to last year? And is there a risk here based on tremendous growth from Truly that we may risk coming out — some out of stock if sales continue to be as such?

Frank H. Smalla — Treasurer and Chief Financial Officer

Okay, Laurent, this is Frank. I think I can take the question on shipments versus depletion. If you recall, in February, we said that because we are capacity constrained we will pre-build inventory for Truly and Twisted Tea, so in our business so that we can maximize the capacity that we have. And this is very similar to what we did last year. And typically, we keep on building inventories at wholesalers to kind of the middle to like two-thirds through the second quarter. And that’s where shipments typically outpace deflation. Now, what happened with COVID is that we started building the inventory at the beginning of Q1, all the way into March. Then COVID happened and there was significant pantry loading, as you’ve seen with many products with many staples. So the wholesalers were able to deplete into the retailers because we have built pre-build inventory with them. So luckily they had enough inventory. But it has changed a little bit the dynamics because in the second half of the first quarter, we depleted more than we had expected. So as a result, the pre-builds that we have planned for didn’t reach the level that we had thought. Now, there might be a little bit of phasing in there that is going to — in Q2. We don’t know. That’s why we [Indecipherable] the guidance. We don’t know that exactly. If it continues to evolve, there will be less pre-build than we had anticipated and we’ll find it out. At this point, we believe we have enough capacity, maybe not everything internally, but if you look at internal and external, to meet that in that. But it all comes down to what the final demand will be. You plan for a number and then you have a certain buffer, but that we’ll figure out. But that’s really the dynamic that happened in the first quarter. We were trying to build more inventory at the wholesalers to be prepared for the summer, but the COVID crisis increased the depletions beyond our planning, and that’s why we didn’t achieve the goal for the inventory build.

To your question on the level, now, in terms of weeks of supply, as we’ve mentioned, we are at about six weeks. That’s about the level where we were at last year, maybe a little — maybe a few days more but less than half a week. It is below the level that we had targeted a little bit. In absolute terms, of course, the inventory is significantly higher because the business has grown tremendously well. As you know, we’re looking at doubling the business. So you can imagine that as we built the pre-build, the absolute levels are significantly higher than last year but about at the same level in terms of weeks of supply when compared to last year.

C. James Koch — Chairman and Founder

Yeah, I’d add one other dynamic in thinking about how much inventory we’re pre-building and how are we going to get through the summer. We have two new full can lines. One became operational like two weeks ago. It’s come up really well. That’s in Pennsylvania. So we added a full can line there and also a full can line in Memphis, which will be coming up next month. So going into this summer, we’re going to have two new fully sized and operational can lines to service the summer peak and the continued growth that we’re anticipating in the back end of the year. So that’s a significant expansion of our can capacity.

Laurent Grandet — Guggenheim Partners — Analyst

How much in percentage that would represent, those to two new lines, Jim?

C. James Koch — Chairman and Founder

Yeah, you could sort of think about, in the first quarter, we had kind of three can lines. This is a rough equivalency because two of them are our facility and then we have contracts with City Brewing that are more complicated. But roughly, think of it as three can lines in the first quarter, and in the second quarter, we’re going to have five. So there’s your percentage of 67%.

Laurent Grandet — Guggenheim Partners — Analyst

Okay, thank you. Thank you, Jim. And thank you guys, continue the good work. Excellent work, I should say. And I’ll pass it on. Thank you.

C. James Koch — Chairman and Founder

Thank you.

Operator

Our next question comes from the line of Kaumil Gajrawala with Credit Suisse. Please proceed with your question.

Kaumil Gajrawala — Credit Suisse — Analyst

Hi, everybody. Thanks for taking the equations.

C. James Koch — Chairman and Founder

Hey, Kaumil.

Kaumil Gajrawala — Credit Suisse — Analyst

Hey, Jim. A lot of back and forth on capacity, If I could try to simplify, I believe the goal towards the end of last year was to double your capacity. Are we — are you still going to get there? Is there a delay in getting there? Is the number now — the 67% that you just provided, can you just help us trying to simplify where you intend to get to?

C. James Koch — Chairman and Founder

It was to double our capacity for sleek cans, which is what Truly is in, and We’ve done that — or we’re about to when the next one comes up in Memphis in May. So, yeah, double sleek cans. And we’ve actually, we believe, a little more than doubled that because we’ve got more efficiency out of existing lines. So that gives us the ability to more than double our production of Truly.

Kaumil Gajrawala — Credit Suisse — Analyst

Okay, great. Thank you. That’s a good segue. Are you seeing any bottlenecks in the raw material supply side? It looks like your capacity is getting there, but the slim cans are tight. It sounds like CO2 is now getting tight. Any other bottlenecks we need to be thinking about?

C. James Koch — Chairman and Founder

We did a preliminary look at exactly that question. Was there any unexpected stuff out there like CO2? Who would have thought that less mileage being driven would affect the supply chain for breweries? But a fair bit of the CO2 comes from the ethanol plants in the upper Midwest. With our production system, we are fairly close to self sufficient in CO2. We’ve always not wanted to vent out carbon dioxide into the atmosphere. So we’ve spent a fair bit of money on capture systems to capture the CO2 in our breweries, scrub it and then reintroduce it into the beer. So we’re very confident about our CO2 supply. We don’t need that much. And if we really had to, we could be more frugal with how we use it and probably be close to fully self-sufficient. We have looked at other items, malt and hops, not an issue. We keep several years worth of hops. And flavours, we’re fine with. So in general, we don’t see issues in sort of our first-tier suppliers. We don’t have a really complicated supply chain like a car company where you got to go two or three tiers. The thing that we have worked very hard on is making sure we have adequate supply of cans even to cover our upside forecast, particularly sleek cans. And we’ve been assured from our can suppliers that they are ready, willing and able to supply the projections that we’ve given them. So we feel pretty good about that.

Kaumil Gajrawala — Credit Suisse — Analyst

Okay, great. And just my final question, if we could shift to beer, one of the things that’s becoming more and more evident in the data as we’re seeing pantry load is, the national craft brands such as yourself but also Sierra Nevada and others have really shifted the arc of their — where we share losses for a long period of time and volume declines for a long period of time. And is the — really the question is, is that something that you see as perhaps more permanent in a shift that probably for seven years has been going in one direction? Or do you just believe it’s as simple as the fact that at the moment, the larger brands have the supply?

C. James Koch — Chairman and Founder

I wouldn’t want to predict an overnight change in the seven-year trend. I do think it might bend the arc a bit, but we’re very focused on trying to get Sam Adams back to growth, and we’re not going to assume that some twist of fate is going to change that. We feel like we need to do it ourselves. We’re certainly happy that in these difficult times, consumers pick up a Sam Adams because they know it’s a reliably rewarding beer drinking experience. So possibly, we’ll be able to build on it, but I wouldn’t want to count on everything changing just because of something that will eventually pass.

David A. Burwick — President and Chief Executive Officer

Hey, Kaumil. I’ll jump on top of Jim’s comment just really quick. I think — I agree with what Jim said. I think, again, we’re digging into the numerator data, and in the last month, about 42% of the buyers that came to Boston Lager were new. So that’s good. So again like — but I guess like all the categories, there’s an opportunity to drive trial and retrial of brands. But to Jim’s point, that’s not enough to bend that, to be the arc necessarily. So we have been — in fact, all our support from the time this crisis began until now has really been behind Sam Adams in the Restaurant Strong program that Jim referenced in his opening remarks because we feel that’s something — we’re doing something for restaurant workers. It’s the appropriate thing for us to do. It ties to our history, who we are as a company and our values. And so, we have been spending media dollars to support that. It’s they receive and that’s an example of, hey, here’s an opportunity to do something good, and also our recognition that we have to keep in — we have to keep doing stuff to get — to turn the brand. So that’s something that’s happening that’s out there. Also you can imagine, when and however on-premise opens, we have the largest and we believe the best on-premise sales team in the industry, and we will be ready to go back in and support those same people that were supporting through the Restaurant Strong program. And we’re going to use every resource at our disposal to help them and to drive the business once off-premise comes back as well. And there are other things as well. So again, I think it’s a corporate fate where all these brands are in a better place. I think the challenges is now what we do about it two months from now, three months from now, six months from now.

Kaumil Gajrawala — Credit Suisse — Analyst

That’s useful. Appreciate it. That’s all from me. Thank you very much.

David A. Burwick — President and Chief Executive Officer

Thanks Kaumil.

Operator

Our next question comes from the line of Sean King with UBS. Please proceed with your question.

Sean King — UBS — Analyst

Thanks for the question. I know you don’t disclose the total portfolio exposure to on-premise, but maybe you could share how much of your marketing and promotional spend is directed to the on-premise. Or maybe if you’re unable to unpack that, maybe you can share how much of the spend mix is directed towards your over-indexing on-premise brand like Sam Adams and Angry Orchard.

Frank H. Smalla — Treasurer and Chief Financial Officer

Sean, this is Frank. We don’t disclose any of those numbers. We manage the entire portfolio. We take our priorities during the year of like how we support the brand and we support typically the brand evenly. Yeah, there are certain programs that we do on-promise, but — and the off-premise brands, as you can imagine, as Sam Adams and Angry Orchard, that’s where we have more on-premise than most of [Phonetic] other brands. So if you look at on-premise, then there we see more on-premise spend than others, but we don’t disclose the detail.

The other thing that I want to say because the question came up earlier on like what percentage is on-promise? As you can imagine, that is changing. That has changed over the year. And it’s of course changing dramatically at the moment. Right now, we’re talking about zero. But the question is like, when is it going to come back? So, sorry, we don’t disclose any more information related to that.

David A. Burwick — President and Chief Executive Officer

And Sean, maybe I can add one thing as it relates to that. You think — like I imagine pretty much everyone is doing this, but they are looking to future. As we entered the space, we set two big — three goals. But first two goals, one, managed crisis, right — manage the crisis consistent with our values and make sure we’re making the right decisions to keep our people safe, to keep our people employed and keep the breweries operating. I know we talked a lot about it. But obviously the brewery piece is the linchpin. We’ve also at the same time talked about how we plan ahead for the future, so a better future, so we come out stronger, our people are more engaged and better off and our businesses better off. And I think one of the things related to that is, we’re looking at all of our spend, across channels, across brands for the balance of the year. And we’re trying to wind that up with what are the opportunities, where is the consumers’ head at, where can we make an impact. And like as we’ve always done, we will — if we see the opportunities and we think we can get a good investment at the right time, whenever that is, is it May, is it June, is it July, we don’t know yet, but if we see the opportunities, we’re going to invest and we’re going to invest as much we’ve planned to invest coming into this year. If, however, we don’t think it makes sense, because we’re not going to get a return or if there are different things going on like investing maybe behind on-premise, obviously, when it’s not coming back, then we won’t do that. So we will have a lot of flexibility too in terms of what we spend, what we don’t spend. But I think our philosophy is going to be consistent, which is, if we think we can build brands for the long term and create growth, we’ll do it. But because of world has changed so dramatically, we’re putting a whole new lens on everything, and that’s where the teams are looking at right now.

Sean King — UBS — Analyst

All right. And very helpful color. Thanks a lot.

David A. Burwick — President and Chief Executive Officer

Thanks.

Operator

Our next question comes from the line of Eric Serotta with Evercore. Please proceed with your question.

Eric Serotta — Evercore ISI — Analyst

Good evening. I hope everyone is well. A quick question. Going into the year, you talked about a pretty big plan to expand the sales force. Just wondering if that’s all on track and on schedule. How much of that has been done already? I guess, how much of that is carryover from last year with the Dogfish addition?

David A. Burwick — President and Chief Executive Officer

Hey, Eric. This is Dave. Yeah, we’re doing — we’re going forward. We filled a number of roles, I’d say — we talked about 125 plus rules, let’s say. A minority of these roles we filled already where we’re looking to fill them all. Now, we’re not going to have people come in right away until we know what’s going on here. But where it hasn’t — the current situation has not deterred us from doing this. We see there’s a big opportunity. Fortunately, we have a great balance sheet, as Frank talked about. We’re a good position to continue with this plan. So we’re not — now, we had to put a halt to, we could certainly, because there is more work to be done. But we’re going full steam ahead of this.

Eric Serotta — Evercore ISI — Analyst

Great to hear. And then, we’ve heard a number of reports about retailers and distributors prioritizing high volume SKUs. Just wondering what you’ve seen in terms of impact on your business and how you expect that to evolve over the coming months. Whether you think some of those SKUs are going to come back into the system or whether this will kind of be the long-awaited shakeout or an acceleration of the shakeout that we’ve been seeing?

David A. Burwick — President and Chief Executive Officer

So I can start off and let Jim finish. I’m sure Jim has a point of view about this. I think in the immediate and short term, there’s no question that wholesalers [Indecipherable] obviously with retailers, then it goes to the wholesalers pretty quickly then to us. We’re looking really for the power SKUs, the core brands. And actually, as you probably noticed, the large pack sizes too, so whether it be 30-pack cans, 24-pack cans, 12-pack cans, well established brands, that’s what’s getting the space now because nobody wants to run out of stock. And so, they cut [Indecipherable] long tail. It has — as one of the larger craft beer companies, it’s definitely — it’s benefited us. As some also referenced, it has benefited Sierra and [Indecipherable] as well. And so, we’re basically — we’re going to go — we’re going with the flow here. And what our customers want, we’re going to deliver. And so, we’re seeing — as you look at IRI, we’re seeing a turnaround on all those brands, including Angry Orchard, by the way, [Indecipherable] Angry Orchard Crisp which is considered a core brand. Remember, Angry Orchard — the cider category is still kind of [Phonetic] 55, 56 share. So in the short term, that’s where it’s going. I don’t know if Jim has a point of view. Jim, is this clairvoyant? You might have a perspective on the long term where it goes. I don’t know if you can give a thought about that.

C. James Koch — Chairman and Founder

It’s very consistent with what you said. What’s happened is, retailers kind of like the fact that they could get more volume with fewer SKUs. And wholesalers were very happy about it as well. So the channels, I think, will kind of want us to keep this going if they can. What would yank everybody back to the status quo ante of more SKUs, lower volume per SKU, more difficult product mix to manage to keep in stock, it’s going to take the consumer requesting. I don’t think it will automatically snap back to the way it was because both retailers and wholesalers have benefited economically from this new state of affairs. So it really will depend on the consumer, will the consumer require that same kaleidoscopic assortment of brands that you’d see a 12-foot run of craft beers. We just don’t know.

Eric Serotta — Evercore ISI — Analyst

Great. Well, thanks as always for your perspective.

Operator

[Operator Instructions] Our next question is a follow-up question from the line of Kevin Grundy with Jefferies. Please proceed with your question.

Kevin Grundy — Jefferies — Analyst

I appreciate you guys taking the follow-up. This one is probably for Frank. It’s a little bit in the weeds. But Frank, if my back of the napkin math is correct here, so the depletions for the 13 weeks ended for the quarter ex Dogfish were 30%. And then you also disclosed year-to-date for the 15 weeks was 27%, which implies that depletions were kind of in the 7%, 8% range in early April. Is that right? And if so, maybe you can unpack that a little bit, understanding the big pantry load dynamic in the month of March.

Frank H. Smalla — Treasurer and Chief Financial Officer

So, of course, we don’t give you the direct numbers. But the — it’s just less pantry load, and then there’s bit of an impact of pantry load that is coming back. But what we’re seeing in the depletions and what you don’t see in IRI is the on-premise business, which literally came to a screeching halt like from one day to the next, we’re not selling any kegs anymore or anything else that typically went to the bars, including bottles. And I would say that that is the bigger impact of the slowdown from what you see when you look at the quarter-end number of 36% and then the year-to-date number of 32%. We’re still trying to figure out what the pantry load impact is, it’s really hard to tell. So far, we haven’t seen a dramatic impact. But clearly, we’re expecting something there, but we don’t know exactly what it is.

Eric Serotta — Evercore ISI — Analyst

Okay. All right, thank you very much.

C. James Koch — Chairman and Founder

[Speech Overlap] There’s also a little bit of impact from Easter being a week later this year. And Easter is a pretty big holiday for the craft beer industry.

Operator

There are no further questions in the queue. I’d like to hand the call back to Mr. Koch for closing remarks.

C. James Koch — Chairman and Founder

Okay. Well, thanks everybody for being on the call with us and your forbearance of our being in all different places, and we look forward to talking to you again after the second quarter. Stay safe everybody.

David A. Burwick — President and Chief Executive Officer

Thank you. Stay healthy.

Operator

[Operator Closing Remarks]