Boston Beer Reports Fourth Quarter 2012 Results

               Boston Beer Reports Fourth Quarter 2012 Results

PR Newswire

BOSTON, Feb. 20, 2013

BOSTON, Feb. 20, 2013 /PRNewswire/ --The Boston Beer Company, Inc. (NYSE:
SAM) reported net income for the 13-week fiscal 2012 fourth quarter of $16.9
million, or $1.25 per diluted share, a decrease of $0.9 million, or $.08 per
diluted share, compared to the 14 week fiscal 2011 fourth quarter. This
decrease was primarily due to the favorable impact of a state income tax
settlement in the 2011 fourth quarter of $0.16 per diluted share, and the loss
of one week. Net revenue for the fiscal 2012 fourth quarter was $153.0
million, an increase of $10.9 million, or 8%, compared to the fiscal 2011
fourth quarter, primarily due to core shipment volume gains.

Earnings per diluted share for the 52-week fiscal 2012 full year was $4.39, a
decrease of $0.42 compared to earnings per diluted share for the 53-week
fiscal 2011 full year of $4.81, which included the favorable impact of the
recall settlement of $0.92 per diluted share. Net revenue for the fiscal 2012
full year was $580.2 million, an increase of $67.2 million, or 13%, compared
to the fiscal 2011 full year.

Highlights of this release include:

  oDepletions growth of 16% from the comparable 13-week period in the prior
    year and 12% from the comparable 52-week period in the prior year.
  oShipments growth of 9% for the 13-week fiscal 2012 fourth quarter compared
    to the 14 week fiscal 2011 fourth quarter and shipment growth of 10% for
    the 52 week fiscal 2012 full year compared to the 53-week fiscal 2011 full
    year.
  oGross margin of 54.3% for the fiscal 2012 full year.
  oAdvertising, promotional and selling expense increase of $12.0 million, or
    8%, for the 52-week fiscal 2012 full year, compared to the 53-week fiscal
    2011 full year, primarily due to planned increased investments behind the
    Company's brands.
  oFull year 2012 capital spending of $68.2 million, most of which relates to
    continued investments in the Company's breweries and additional keg
    purchases.
  oFull year 2013 estimated depletion growth of between 10% and 15% and full
    year 2013 earnings per diluted share of $4.70 to $5.10.
  oFull year 2013 estimated capital spending of $70 million to $85 million.

Jim Koch, Chairman and Founder of the Company, commented, "I am pleased that
in 2012 The Boston Beer Company continued to help lead the craft beer industry
both in innovation and variety. In 2012, we brewed and sold more than 50
distinct styles of Samuel Adams beers. We continue to innovate and recently
released some excellent new beers, including Samuel Adams Double Agent IPL and
Samuel Adams White Lantern as well as our Hopology IPA and Spring Thaw Variety
12-packs. We believe that these styles and packages have been favorably
received. Also, we recently worked with Jack McAuliffe, a craft brew pioneer
and founder of New Albion Brewing Company, to re-release New Albion Ale for
the first time in 30 years in honor of Jack and his contributions to craft
brewing. We are also excited about the second year of our spring seasonal,
Samuel Adams Alpine Spring, an unfiltered lager that showcases Tettnang Noble
Hops. We continue to explore ways to improve our sales execution, our brand
strength and our position within the craft category and remain positive about
the future of craft beer and our potential for future growth."

Martin Roper, the Company's President and CEO, stated: "In the fourth quarter,
our depletions growth benefited from the strength in our Samuel Adams
Seasonal, Twisted Tea and Angry Orchard brands, offset by some slight decline
in some of our other Samuel Adams brand styles. The timing of our transition
to our Samuel Adams Spring Seasonal was consistent with last year, as we
accomplished a conversion from our Winter Seasonal to Alpine Spring by early
January in most of our markets. 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 may have benefited
from our updated Samuel Adams packaging and from our brand messaging, 'For the
Love of Beer' that builds on our previous campaigns. 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,
to obtain efficiency gains and address certain capacity constraints and
service issues we experienced during the fourth quarter. We are prepared to
forsake the lost earnings that may result from these investments in the short
term as we pursue long term profitable growth."

Mr. Roper continued, "Alchemy & Science, our craft brew incubator completed
its first year and continues to make progress and explore potential
opportunities. During the year, Traveler Beer Co. rolled out in test markets
with its Curious Traveler and Tenacious Traveler shandy-style beers and it is
likely we will launch more markets in 2013. Its Angel City Brewery launched
two new beers, Angeleno IPA and Eureka! Wit on draft in the Los Angeles
market, and the Brewery and Beer Hall in downtown Los Angeles are opening to
the public in the first quarter of 2013 after some limited special events in
2012. These projects have had minimal sales to date. Our 2013 financial
projection includes estimated brand investments attributable to existing
Alchemy & Science projects of between $2 million and $4 million, but this
estimate could change significantly if new projects are added. There is no
guarantee that 2013 volume of Alchemy & Science brands will fully cover these
expenses and others that could be incurred. 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, as we believe a portfolio of growing brands is a good outcome for
our wholesalers and ourselves."

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. While we did not achieve our goals in 2012, we currently have 89
wholesalers in the program and at various stages of inventory reduction and we
remain committed to the program. We have over 59% of our volume on our
Freshest Beer Program and believe this could reach between 65% and 75% by the
end of 2013. We continue to evaluate whether we can reduce these inventory
levels further and to invest in the breweries to improve their service and
support the Program."

4^th Quarter 2012 Summary of Results

Depletions grew 16% from the comparable 13-week period in the prior year
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 729,000 barrels for the 13-week fiscal
2012 fourth quarter, a 9% increase compared to the 14-week fiscal 2011 fourth
quarter.

Fiscal 2012 fourth quarter and full year shipments growth rates were lower
than depletions growth rates primarily due to one additional week in the
fiscal 2011 fourth quarter and the full year.

The Company believes wholesaler inventory levels at December 29, 2012 were at
appropriate levels. Inventory at wholesalers participating in the Freshest
Beer Program was lower by an estimated 241,000 cases at December 29, 2012
compared to December 31, 2011, reducing reported earnings per diluted share by
approximately $0.08 for the 2012 fiscal year. 

Advertising, promotional and selling expenses for the 13-week fiscal 2012
fourth quarter were $2.8 million lower than those incurred in the 14-week
fiscal 2011 fourth quarter, primarily as a result of having one less week in
the quarter, partially offset by higher costs for additional sales personnel
and increased investments in advertising and local marketing as well as
increased costs of freight to wholesalers. The lower 2012 expense also
reflects the change in accounting treatment for certain customer programs and
incentives that is discussed in the full year summary of results below and
occurred during the quarter.

General and administrative expenses for the 13-week fiscal 2012 fourth quarter
increased by $1.7 million compared with those incurred in the 14-week fiscal
2011 fourth quarter, primarily due to increases in salary and benefit costs.

The Company's effective tax rate for the fiscal 2012 fourth quarter increased
to 37% from 30% in the fiscal 2011 fourth quarter due to the favorable impact
of a state income tax settlement in the fiscal 2011 fourth quarter of $0.16
per diluted share.

Full Year 2012 Summary of Results

Depletions grew 12% from the comparable 52-week period in the prior year
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 2,727,000 barrels for the 52-week
fiscal 2012 full year, a 10% increase compared to the 53-week fiscal 2011 full
year.

Net income for the 52-week fiscal 2012 full year decreased $6.6 million, or
$0.42 per diluted share, compared to the 53-week fiscal 2011 full 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,
not being fully offset by the benefits of net revenue increases in 2012. 

Gross margin for the 52-week fiscal 2012 full year decreased to 54.3% compared
to 55.5% in the 53-week fiscal 2011 full year. Increased costs of barley,
hops, and other ingredients, combined with increased customer programs and
incentive costs were partially offset by pricing increases.

Advertising, promotional and selling expenses for the 52-week fiscal 2012 full
year were $12.0 million higher than those incurred in the 53-week fiscal 2011
full year, primarily as a result of increased investments in advertising and
local marketing and sales personnel, and increased costs of freight to
wholesalers. Advertising, promotional and selling expenses for the 52-week
fiscal 2012 full year exclude approximately $6.3 million in payments for
certain customer programs and incentives for the full year that in the fourth
quarter of 2012 were classified as reductions in revenue. Prior to the fourth
quarter, these types of brand investments had been recorded as advertising,
promotional and selling expenses.

General and administrative expenses for the 52-week fiscal 2012 full year
increased by $6.7 million compared with those incurred in the 53-week fiscal
2011 full year, primarily due to increases in salary and benefit costs and
Alchemy & Science startup costs.

Cash and cash equivalents as of December 29, 2012 totaled $74.5 million.

During the full year 2012, the Company repurchased approximately 165,000
shares of its Class A Common Stock at a cost of approximately $18.0 million
and repurchased approximately an additional 82,000 shares during the period
December 30, 2012 through February 15, 2013 at an approximate cost of $11.5
million. As of February 15, 2013, the Company had approximately $18.5 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 6 weeks ended February 9, 2013 are
estimated by the Company to be up approximately 15% from the comparable period
in 2012.

Fiscal 2013 Outlook

The Company's full year 2013 earnings per diluted share projection is between
$4.70 and $5.10. The Company's actual 2013 earnings per share could vary
significantly from the current projection. Underlying the Company's current
projection are the following estimates and targets:

  oDepletions and shipments growth of between 10% and 15%.
  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 advertising, promotional and selling expenses of between $18
    million and $26 million for the full year 2013, primarily due to planned
    increased investments behind the Company's brands and excluding any
    increases in freight costs for the shipment of products to the Company's
    wholesalers.
  oIncreases of between $2 million to $4 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 $70 million and $85
    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 29,
2012 and December 31, 2011. Copies of these documents may be found on the
Company's website, www.bostonbeer.com, or obtained by contacting the Company
or the SEC.



THE BOSTON BEER COMPANY, INC.
Financial Results
Consolidated Statements of Comprehensive Income:
 (in thousands, except per  (unaudited)
 share data)
                            December     December     December     December
                            29,          31,         29,          31,
                            2012         2011         2012         2011
                            (13 weeks)   (14 weeks)   (52 weeks)   (53 weeks)
 Barrels sold               733          671          2,746        2,485
 Revenue                    $        $        $        $    
                            165,547      153,857      628,580      558,282
 Less excise taxes          12,547       11,803       48,358       45,282
  Net revenue          153,000      142,054      580,222      513,000
 Cost of goods sold         73,224       61,965       265,012      228,433
  Gross profit         79,776       80,089       315,210      284,567
 Operating expenses:
  Advertising,
 promotional and selling    39,104       41,897       169,306      157,261
 expenses
  General and             13,535       11,796       50,171       43,485
 administrative expenses
  Settlement proceeds     -            -            -            (20,500)
 Impairment of long-lived   149          666          149          666
 assets
  Total operating      52,788       54,359       219,626      180,912
 expenses
 Operating income           26,988       25,730       95,584       103,655
 Other (expense) income,
 net:
 Interest (expense)         8            19           31           54
 income
 Other (expense) income,    (96)         (253)        (98)         (209)
 net
  Total other          (88)         (234)        (67)         (155)
 (expense) income, net
 Income before income tax   26,900       25,496       95,517       103,500
 provision
 Provision for income       10,027       7,711        36,050       37,441
 taxes
  Net income           $       $       $       $     
                            16,873       17,785       59,467       66,059
 Net income per common      $       $       $       $     
 share - basic               1.31       1.41        4.60      5.08
 Net income per common      $       $       $       $     
 share - diluted             1.25       1.33        4.39      4.81
 Weighted-average number
 of common shares -Class A  8,707        8,541        8,689        8,905
 basic
 Weighted-average number
 of common shares - Class   4,107        4,107        4,107        4,107
 B basic
 Weighted-average number
 of common shares -         13,432       13,390       13,435       13,741
 diluted
 Other comprehensive
 income, net of tax:
 Defined benefit plans      (45)         (400)        (45)         (400)
 liability adjustment
  Comprehensive        $       $       $       $     
 income                     16,828       17,385       59,422       65,659





THE BOSTON BEER COMPANY, INC.
Financial Results
Consolidated Balance Sheets:
 (in thousands, except share data)
                                                    Dec. 29,     Dec. 31,
                                                    2012         2011
 Assets
  Current Assets:
  Cash and cash equivalents                $       $     
                                                    74,463       49,450
  Accounts receivable, net of allowance
 for doubtful accounts of $125 and
  $66 as of December 29, 2012 and     31,479       23,233
 December 31, 2011, respectively
  Inventories                              44,361       34,072
  Prepaid expenses and other assets        6,628        14,605
  Deferred income taxes                    5,411        4,363
  Total current assets                162,342      125,723
  Property, plant and equipment, net            189,948      143,586
  Other assets                                  4,656        1,802
  Goodwill                                      2,538        1,377
  Total assets                        $        $    
                                                    359,484      272,488
 Liabilities and Stockholders' Equity
  Current Liabilities:
  Accounts payable                         $       $     
                                                    28,303       18,806
  Current portion of notes payable         62           -
  Accrued expenses and other current       60,529       48,243
 liabilities
  Total current liabilities           88,894       67,049
  Deferred income taxes                         20,463       17,349
  Notes payable, less current portion           566          -
  Other liabilities                             4,470        3,345
  Total liabilities                   114,393      87,743
  Commitments and Contingencies
  Stockholders' Equity:
  Class A Common Stock, $.01 par value;
 22,700,000 shares authorized;
  8,703,670 and 8,714,931 issued and
 outstanding as of December 29, 2012
  and December 31, 2011,              87           87
 respectively
  Class B Common Stock, $.01 par value;
 4,200,000 shares authorized;
  4,107,355 issued and outstanding    41           41
  Additional paid-in capital               157,305      138,336
  Accumulated other comprehensive loss,    (883)        (838)
 net of tax
  Retained earnings                        88,541       47,119
  Total stockholders' equity          245,091      184,745
  Total liabilities and               $        $    
 stockholders' equity                               359,484      272,488





THE BOSTON BEER COMPANY, INC.
Financial Results
Consolidated Statements of Cash Flows:
 (in thousands)                                  (unaudited)
                                                 December 29,   December 31,
                                                 2012           2011
                                                 (52 weeks)     (53 weeks)
 Cash flows provided by operating activities:
  Net income                                 $         $     
                                                 59,467         66,059
  Adjustments to reconcile net income to
 net cash provided by operating activities:
  Depreciation and amortization         20,208         18,792
  Impairment of long-lived assets       149            666
  Loss on disposal of property, plant   54             118
 and equipment
  Bad debt recovery expense (recovery)  59             (55)
  Stock-based compensation expense      6,528          6,178
  Excess tax benefit from stock-based   (7,894)        (5,346)
 compensation arrangements
  Deferred income taxes                        2,066          (453)
  Changes in operating assets and
 liabilities, net of effects of acquisition:
  Accounts receivable                   (8,305)        (3,161)
  Inventories                           (10,289)       (7,458)
  Prepaid expenses and other assets     6,123          (2,146)
  Accounts payable                      8,002          (617)
  Accrued expenses and other current    19,491         894
 liabilities
  Other liabilities                     (329)          (711)
  Net cash provided by operating   95,330         72,760
 activities
 Cash flows used in investing activities:
  Purchases of property, plant and           (65,010)       (19,599)
 equipment
  Cash paid for acquisition of brewery        (1,726)        -
 assets and other intangible asset
  Increase in restricted cash                (628)          -
  Proceeds from disposal of property, plant  41             -
 and equipment
  Net cash used in investing       (67,323)       (19,599)
 activities
 Cash flows used in financing activities:
  Repurchase of Class A Common Stock         (18,046)       (62,824)
  Proceeds from exercise of stock options    5,727          4,107
  Proceeds from note payable                 628            -
  Excess tax benefit from stock-based        7,894          5,346
 compensation arrangements
  Net proceeds from sale of investment       803            691
 shares
  Net cash used in financing       (2,994)        (52,680)
 activities
 Change in cash and cash equivalents             25,013         481
 Cash and cash equivalents at beginning of year  49,450         48,969
 Cash and cash equivalents at end of year        $         $     
                                                 74,463         49,450
 Supplemental disclosure of cash flow
 information:
  Income taxes paid                          $         $     
                                                 18,782         40,556
  Allocation of purchase consideration to
 brewery acquisition to the following assets:
  Property, plant and equipment          338
  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.bostonbeer.com
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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