Boston Beer Reports Third Quarter 2012 Results

                Boston Beer Reports Third Quarter 2012 Results

PR Newswire

BOSTON, Nov. 1, 2012

BOSTON, Nov. 1, 2012 /PRNewswire/ -- The Boston Beer Company, Inc. (NYSE: SAM)
reported third quarter 2012 net revenue of $166.4 million, an increase of
$31.6 million or 23%, over the same period last year, mainly due to core
shipment growth of 17%. Net income for the third quarter was $20.8 million, or
$1.53 per diluted share, an increase of $4.5 million, or $0.34 per diluted
share, from the third quarter of 2011. This increase was primarily due to
volume increases, partially offset by increased investments in advertising,
promotional and selling expenses.

Highlights of this release include:

  oDepletions growth of 15% from the comparable 13 week period in the prior
    year and 11% from the comparable 39 week period in the prior year.
  oShipments growth and depletion growth were equivalent at 11% from the
    comparable 39 week periods in the prior year.
  oGross margin of 56% for the third quarter, 55% year-to-date, and the full
    year gross margin target remains unchanged at between 54% and 56%.
  oEarnings per diluted share of $1.53 for the quarter and $3.14 year to
    date.
  oFull year 2012 depletions growth estimate remains unchanged at 8% to 12%.
  oFull year 2012 estimated earnings per diluted share remain unchanged at
    $3.80 to $4.20.
  oFull year 2012 estimated capital spending narrowed to $65 million to $75
    million, from the previously communicated estimate of $55 million to $75
    million.

Jim Koch, Chairman and Founder of the Company, commented, "I am pleased with
our depletions growth which is attributable to strong sales execution and
support from our wholesalers and retailers as well as our great quality beers,
innovation capability and strong brands. We believe that craft beer will
continue to grow and that we are well-positioned to share in that growth. We
released some excellent beers this fall including Samuel Adams Harvest Pumpkin
and a new small batch brew Samuel Adams ^ Fat Jack, a double pumpkin and
believe that these styles have been favorably received. We remain confident
about the long-term outlook for the craft category and our Samuel Adams
brand."

Martin Roper, the Company's President and CEO, stated, "In the third quarter
our depletions growth benefited from strength in our Samuel Adams Seasonal,
Twisted Tea and Angry Orchard brands, offset by some slight decline in some of
our otherSamuel Adams brand styles. Based on the strength of the national
rollouts of our Twisted Tea and Angry Orchard brands, and the continuing
growth of our Samuel Adams brand family, we have increased the investment
levels in our sales force and our support behind our Samuel Adams brand. We
expect to continue to increase investments in advertising, promotional and
selling expenses behind existing brands and also in innovation, commensurate
with the opportunities and the increased competition that we see. During the
quarter, we updated our packaging for all Samuel Adams styles and continued
the evolution of our brand communication, 'For the Love of Beer' that builds
on our previous messaging. Also, our higher than normal capital investment
projects in 2012 support the increasing complexity of our portfolio and our
Freshest Beer Program, and have expanded the capacity and capabilities of our
breweries to meet anticipated future growth. These projects have gone well. We
expect a similar high level of investment will be needed in 2013, after which
we should return to an annual capital investment level of between $30 million
and $45 million, including capacity expansion initiatives to accommodate
expected growth. We are making appropriate investments in brand-building
activities and capital improvements in our brewing and packaging capabilities
to position us well for long-term growth and continued efficiency gains. We
are prepared to forsake the lost earnings that may result from these
investments in the short term."

Mr. Roper continued, "Alchemy & Science, our craft brew incubator, continues
to make progress and explore potential opportunities. Its House of Shandy
brand added additional markets and a new style, Tenacious Traveler, while
Angel City Brewery launched two new styles on draft in the Los Angeles
market, and expects to have its brewery open to the public by the end of the
year. These projects have had minimal sales to date. Our 2012 financial
projection includes estimated expenses net of gross profit contribution
attributable to Alchemy & Science projects of between $3 million and $5
million, but this estimate could change significantly if new projects are
added. We will continue to look for complementary opportunities to leverage
our capabilities, provided that they do not distract us from our primary focus
on our Samuel Adams brand and our wholesalers."

Commenting on the Company's Freshest Beer Program, Mr. Roper said, "We believe
that as a result of our Freshest Beer Program we are delivering better,
fresher Samuel Adams beer to our drinkers while lowering wholesaler
inventories, reducing costs and improving efficiency throughout the supply
chain. We currently have over 70 wholesalers signed up and at various stages
of inventory reduction. We have over 50% of our volume on our Freshest Beer
Program and believe this could reach between 65% and 75% by the end of 2012.
We continue to evaluate whether we can reduce these inventory levels further."

3rd Quarter 2012 Summary of Results

Depletions grew by 15% from the comparable 13 week period in 2011, primarily
due to increases in Angry Orchard^®, Samuel Adams^® Seasonals, and Twisted
Tea^® that were partially offset by declines in some other Samuel Adams^®
styles.

Core shipment volume was approximately 772 thousand barrels, a 17% increase
over the same period in 2011. Inventories at wholesalers participating in the
Freshest Beer Program are estimated to be lower by 296,000 cases as of the end
of the third quarter as compared to the third quarter of the prior year. The
Company believes that inventory levels at the end of the third quarter at
wholesalers were at appropriate levels when compared to current depletion
trends.

Gross margin of 56% was the same as that for the third quarter of 2011. Cost
increases in barley, hops, and other ingredients were offset by pricing
increases and lower operating costs per barrel due to increased volume and
efficiencies.

Advertising, promotional and selling expenses were $8.3 million higher than
those incurred in the prior year, primarily as a result of increased
investments in local marketing, advertising and point of sale, costs for
additional sales personnel, and freight to wholesalers due to higher volumes.

General and administrative expenses increased $2.0 million compared to the
third quarter of 2011, primarily due to increases in salary and benefit costs
and Alchemy & Science startup costs.

The Company's effective tax rate for the third quarter of 2012 was
approximately 38%.

Year to Date 2012 Summary of Results

Depletions grew by 11% from the comparable 39-week period in 2011, primarily
due to increases in Angry Orchard, Samuel Adams Seasonals, and Twisted Tea,
that were partially offset by declines in some other Samuel Adams styles.

Core shipment volume was approximately 2.0 million barrels, an 11% increase
from the comparable 39-week period in 2011.

Net income decreased $5.7 million, or $0.34 per diluted share, compared to the
same period last year, due to the benefit in 2011 of the recall settlement of
$0.92 per diluted share and increased investment in 2012 in advertising,
promotional and selling expense, partially offset by net revenue increases in
2012.

Advertising, promotional and selling expenses were $14.8 million higher than
those incurred in the prior year, primarily as a result of an increase in
sales personnel, increased investments in advertising and local marketing and
increased costs of freight to wholesalers.

General and administrative expenses increased by $4.9 million over the same
period in 2011, primarily due to increases in salary and benefit costs and
Alchemy & Science startup costs.

Cash and cash equivalents as of the end of the third quarter totaled $62.8
million.

During the first nine months of 2012, the Company repurchased approximately
120,000 shares of its Class A Common Stock at a cost of approximately $12.6
million. On October 1, 2012, the Board of Directors approved an increase of
$25 million to the previously approved $275.0 million share buyback
expenditure limit, for a new limit of $300.0 million. The Company repurchased
approximately an additional 25,000 shares during the period September 30, 2012
through October 26, 2012 at an approximate cost of $2.7 million. As of
October 26, 2012, the Company had approximately $32.9 million remaining on the
$300.0 million share buyback expenditure limit set by the Board of Directors.

Depletion estimates

Year-to-date depletions through the 43 weeks ended October 27, 2012 are
estimated by the Company to be up approximately 12% from the comparable period
in 2011.

Fiscal 2012 Outlook

The Company's projected full year 2012 earnings per diluted share is estimated
to be between $3.80 and $4.20 for the 52 week period ending December 29,
2012. The Company's actual 2012 earnings per diluted share could vary
significantly from the current projection. Underlying the Company's current
projection are the following estimates and targets:

  oDepletions growth of 8% to 12% for the 52 week period ending December 29,
    2012 compared against the 52 week period ending December 31, 2011.
  oShipment growth of 7% to 10% for the 52 week period ending December 29,
    2012 compared against the 53 week fiscal period ending December 31, 2011.
  oEstimated aggregate inventory reduction at wholesalers participating in
    the Freshest Beer Program of between 100 thousand and 300 thousand case
    equivalents at December 29, 2012 compared against December 31, 2011.
  oPrice increases per barrel of approximately 3%.
  oFull-year 2012 gross margin of between 54% and 56%.
  oFull year 2012 increase in advertising, promotional and selling expense,
    not including any increase in freight costs for the shipment of products
    to the Company's wholesalers, now estimated to be between $14 million and
    $18 million from the previously communicated estimate of $11 million to
    $15 million. Approximately $10.5 million of this increase has been
    incurred in the nine months ending September 29, 2012.
  oFull-year 2012 effective tax rate of approximately 38%.
  oFull-year spending on capital investments of between $65 million and $75
    million, most of which relate to continued investments in the Company's
    breweries and additional keg purchases.

Fiscal 2013 Outlook

The Company is in the process of completing its 2013 planning process and will
provide further detailed guidance when the Company presents its full-year 2012
results. The Company is currently using the following assumptions and targets
for 2013

  oDepletions and shipments growth in the high-single digits.
  oTargeted price increases per barrel of between 1% and 2% to partially
    offset anticipated barley, hops, other ingredients, packaging freight and
    processing cost pressures.
  oFull-year 2013 gross margins of between 53% and 55%, due to anticipated
    price increases not fully covering anticipated cost pressures and some
    product mix changes. 
  oIncreased investment in advertising, promotional and selling expenses of
    between $6 million and $12 million for the full year 2013, not including
    any increases in freight costs for the shipment of products to the
    Company's wholesalers.
  oIncreased investments of between $2 million to $3 million for continued
    investment in existing brands developed by Alchemy & Science, which are
    included in our full year estimated increases in advertising, promotional
    and selling expenses. Additional projects yet to be developed or acquired
    may significantly increase investments in Alchemy & Science and
    advertising, promotional and selling expenses.
  oFull-year effective tax rate of approximately 38%.
  oFull-year spending on capital investments of between $55 million and $65
    million, most of which relate to continued investments in the Company's
    breweries and additional keg purchases.

About the Company

The Boston Beer Company began in 1984 with a generations-old family recipe
that Founder and Brewer Jim Koch uncovered in his father's attic. After
bringing the recipe to life in his kitchen, Jim brought it to bars in Boston
with the belief that drinkers would appreciate a complex, full-flavored beer,
brewed fresh in America. That beer was Samuel Adams Boston Lager^®, and it
helped catalyze what became known as the American craft beer revolution.

Today, the Company brews over 50 styles of beer. The Company uses the
traditional four vessel brewing process and often takes extra steps like
dry-hopping and a secondary fermentation known as krausening. It passionately
pursues the development of new styles and the perfection of its classic beers
by constantly searching for the world's finest ingredients. While resurrecting
traditional brewing methods, the Company has earned a reputation as a pioneer
in another revolution, the "extreme beer" movement, where it seeks to
challenge drinkers' perceptions of what beer can be. The Boston Beer Company
strives to elevate the image of American craft beer by entering festivals and
competitions the world over, and in the past five years it has won more awards
in international beer competitions than any other brewery in the world. The
Company remains independent, and brewing quality beer remains its single
focus. While the Company is the country's largest-selling craft beer, it
accounts for only approximately one percent of the U.S. beer market. For more
information, please visit www.samueladams.com.

Forward-Looking Statements

Statements made in this press release that state the Company's or management's
intentions, hopes, beliefs, expectations or predictions of the future 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 years ended December 31,
2011 and December 25, 2010. Copies of these documents may be found on the
Company's website, www.bostonbeer.com, or obtained by contacting the Company
or the SEC.

Tuesday, November 1, 2012



THE BOSTON BEER COMPANY, INC.
Financial Results
Consolidated Statements of Comprehensive Income:
 (in thousands, except per  (unaudited)               (unaudited)
 share data)
                            Thirteen weeks ended      Thirty-nine weeks ended
                            September    September    September    September
                            29,          24,          29,          24,
                            2012         2011         2012         2011
 Barrels sold               778          661          2,013        1,811
 Revenue                    $        $        $        $    
                            180,413      147,002      463,033      404,425
 Less excise taxes          13,965       12,189       35,811       33,479
  Net revenue          166,448      134,813      427,222      370,946
 Cost of goods sold         73,206       58,782       191,788      166,468
  Gross profit         93,242       76,031       235,434      204,478
 Operating expenses:
  Advertising,
 promotional and selling    47,639       39,334       130,202      115,364
 expenses
  General and             12,293       10,284       36,636       31,689
 administrative expenses
  Settlement proceeds     -            -            -            (20,500)
  Total operating      59,932       49,618       166,838      126,553
 expenses
 Operating income           33,310       26,413       68,596       77,925
 Other income
 (expense), net:
 Interest income            24           32           23           35
 (expense)
 Other income (expense),    20           15           (2)          44
 net
  Total other          44           47           21           79
 (expense) income, net
 Income before income tax   33,354       26,460       68,617       78,004
 provision
 Provision for income       12,604       10,164       26,023       29,730
 taxes
  Net income           $       $       $       $     
                            20,750       16,296       42,594       48,274
 Net income per common      $       $       $       $     
 share - basic               1.60       1.26       3.30       3.67
 Net income per common      $       $       $       $     
 share - diluted             1.53       1.19       3.14       3.48
 Weighted-average number of
 common shares -Class A     8,715        8,825        8,683        9,036
 basic
 Weighted-average number of
 common shares - Class B    4,107        4,107        4,107        4,107
 basic
 Weighted-average number of 13,452       13,650       13,436       13,868
 common shares - diluted
 Other comprehensive
 income, net of tax:
  Comprehensive        $       $       $       $     
 income                     20,750       16,296       42,594       48,274



THE BOSTON BEER COMPANY, INC.
Financial Results
Consolidated Balance Sheets:
 (in thousands, except share data)           (unaudited)
                                             Sept. 29,           Dec. 31,
                                             2012                2011
 Assets
  Current Assets:
  Cash and cash equivalents         $      62,836  $     
                                                                 49,450
  Accounts receivable, net of
 allowance for doubtful accounts
  of $69 and $66 as of
 September 29, 2012 and December
 31, 2011, respectively        34,130              23,233
  Inventories                       38,140              34,072
  Prepaid expenses and other        11,175              14,605
 assets
  Deferred income taxes             4,229               4,363
  Total current assets         150,510             125,723
  Property, plant and equipment,         178,493             143,586
 net
  Other assets                           4,446               1,802
  Goodwill                               2,538               1,377
  Total assets                 $     335,987   $    
                                                                 272,488
 Liabilities and Stockholders' Equity
  Current Liabilities:
  Accounts payable                  $      26,470  $     
                                                                 18,806
  Current portion of notes          62                  -
 payable
  Accrued expenses and other        56,925              48,243
 current liabilities
  Total current                83,457              67,049
 liabilities
  Deferred income taxes                  17,330              17,349
  Notes payable, less current            566                 -
 portion
  Other liabilities                      4,215               3,345
  Total liabilities            105,568             87,743
  Commitments and Contingencies
  Stockholders' Equity:
  Class A Common Stock, $.01 par
 value; 22,700,000 shares
  authorized; 8,705,795 and
 8,714,931 issued and
  outstanding as of September
 29, 2012 and December 31,
  2011, respectively           87                  87
  Class B Common Stock, $.01 par
 value; 4,200,000 shares
  authorized; 4,107,355 issued 41                  41
 and outstanding
  Additional paid-in capital        153,985             138,336
  Accumulated other comprehensive   (838)               (838)
 loss, net of tax
  Retained earnings                 77,144              47,119
  Total stockholders'          230,419             184,745
 equity
  Total liabilities and        $     335,987   $    
 stockholders' equity                                            272,488



THE BOSTON BEER COMPANY, INC.
Financial Results
Consolidated Statements of Cash
Flows:
 (in thousands)                                 (unaudited)
                                                Thirty-nine weeks ended
                                                September 29,  September 24,
                                                2012           2011
 Cash flows provided by operating activities:
  Net income                                $         $     
                                                42,594         48,274
  Adjustments to reconcile net income to
 net cash provided by (used in) operating
 activities:
  Depreciation and                     14,888         13,328
 amortization
  Impairment of                        -              22
 long-lived assets
  Loss on disposal of property, plant  85             117
 and equipment
  Bad debt recovery                    3              (60)
 expense (recovery)
  Stock-based                          5,181          4,751
 compensation expense
  Excess tax benefit from stock-based  (7,278)        (2,542)
 compensation arrangements
  Deferred income taxes                       115            221
  Changes in operating assets and
 liabilities, net of effects of acquisition:
  Accounts receivable                  (10,900)       (10,710)
  Inventories                          (4,068)        (4,156)
  Prepaid expenses and                 1,607          (3,395)
 other assets
  Accounts payable                     7,664          5,577
  Accrued expenses and                 15,250         7,378
 other current liabilities
  Other liabilities                    (350)          (882)
  Net cash provided by operating  64,791         57,923
 activities
 Cash flows used in investing
 activities:
  Purchases of property, plant and          (49,514)       (12,290)
 equipment
  Cash paid for acquisition of brewery      (1,625)        -
 assets
  Increase in restricted                    (628)          -
 cash
  Proceeds from disposal of property, plant 41             -
 and equipment
  Net cash used                   (51,726)       (12,290)
 in investing activities
 Cash flows provided by (used in) financing
 activities:
  Repurchase of Class A                     (12,569)       (50,871)
 Common Stock
  Proceeds from exercise of                 4,370          1,310
 stock options
  Proceeds from note                        628            -
 payable
  Excess tax benefit from stock-based       7,278          2,542
 compensation arrangements
  Net proceeds from sale of investment      614            540
 shares
  Net cash provided by (used in)  321            (46,479)
 financing activities
 Change in cash and cash                        13,386         (846)
 equivalents
 Cash and cash equivalents at beginning of year 49,450         48,969
 Cash and cash equivalents at                   $         $     
 end of year                                    62,836         48,123
 Supplemental disclosure of cash flow
 information:
  Income taxes paid                         $         $     
                                                9,173         25,904
  Allocation of purchase consideration to
 brewery acquisition to the following assets:
  Property, plant and                   338            -
 equipment
  Tradename                             401            -
  Goodwill                              $         $      
                                                1,161             -
Copies of The Boston Beer Company's press releases, including quarterly
financial results,
are available on the Internet at www.bostonbeer.com



SOURCE The Boston Beer Company, Inc.

Website: http://www.samueladams.com
Contact: Investor Relations, Seana Phillips, +1-617-368-5074, or Media,
Jessica Paar,+1-617-368-5060
 
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