Boston Beer Reports First Quarter 2013 Results

                Boston Beer Reports First Quarter 2013 Results

PR Newswire

BOSTON, May 1, 2013

BOSTON, May 1, 2013 /PRNewswire/ -- The Boston Beer Company, Inc. (NYSE: SAM)
reported first quarter 2013 net revenue of $135.9 million, an increase of
$22.7 million or 20%, over the same period last year, mainly due to core
shipment growth of 18%. Net income for the first quarter was $6.9 million, or
$0.51 per diluted share, a decrease of $0.6 million, or $0.05 per diluted
share, from the first quarter of 2012. This decrease was primarily due to
higher cost of goods and increased investments in advertising, promotional and
selling expenses that were only partially offset by net revenue increases and
a favorable tax settlement in the first quarter of 2013.

Highlights of this release include:

  oDepletions for the 13 week period ending March 30, 2013 grew by 16% from
    the comparable 13 week period in the prior year ending March 31, 2012.
  oThe Company achieved price increases of approximately 1% during the
  oAdvertising, promotional and selling expense combined with customer
    incentive and program costs increased by $7.2 million or 19% in the
    quarter, primarily due to planned increased investments behind the
    Company's brands.
  oAdvertising promotional and selling expenses exclude $2.2 million of costs
    for customer programs and incentives that were classified as reductions in
    revenue in the first quarter of 2013. Customer programs and incentives
    were reported in advertising, promotional and selling expense in the first
    quarter of 2012.
  oFirst quarter gross margin was 50%; the Company maintains its full year
    gross margin target of between 53% and 55%.
  oThe Company's effective tax rate decreased to 28% from 37% in the first
    quarter of 2012 due to the favorable impact of a federal income tax
    settlement of $0.06 per diluted share in 2013.
  oFull year 2013 depletion growth is estimated to be between 10% and 15% and
    estimated full year 2013 earnings per diluted share of $4.70 to $5.10
    remain unchanged
  oEstimated 2013 Capital spending of $70 million to $85 million remains

Jim Koch, Chairman and Founder of the Company, commented, "I am pleased that
The Boston Beer Company achieved record depletions in the quarter as the
health of our cider and tea brands offset slight softness with Samuel Adams.
This is a testament to the hard work of our employees and wholesalers, and our
continued brand innovation efforts. While we continue to experience increased
competitive activities from both domestic specialty and craft beer brands that
have made it challenging to grow Samuel Adams as fast as we would like, we
remain positive about the future of craft beer and our potential for long term
growth. I am pleased to report that Samuel Adams Boston Lager packaged in our
new unique can will be available at wholesalers and retailers in May. Over the
last two years we undertook a significant research effort to see if we could
create a can that we felt was worthy of holding Samuel Adams beer. I wanted
to ensure that the can we developed would deliver the same quality drinking
experience as Samuel Adams in a glass or a bottle and would protect the
balance and flavors of our beers. I look forward to enjoying Samuel Adams beer
this summer in locations where bottles are not allowed."

Martin Roper the Company's President and CEO stated; "In the first quarter,
our depletions growth benefited from the strength in our Angry Orchard and
Twisted Tea brands, offset by a slight decline in our Samuel Adams brand,
primarily due to our Seasonal program not meeting our expectations during the
quarter. Despite this softness, we still accomplished the conversion from our
Spring Seasonal to Summer Ale in most markets in March due to the improved
inventory planning allowed by our Freshest Beer Program. To address increased
competition and to take advantage of positive brand momentum, we again
increased our investment in our sales force and our support behind our brands.
We also are making capital improvements in our brewing and packaging
capabilities to position us well for long-term growth. Specifically, in
support of the new Samuel Adams can launch, we recently installed a can line
capable of filling this unique can design and, in support of our long-term
packaging needs, we will add more bottling capability this summer in
preparation for peak volumes later this year. We anticipate the capital
investments and high level of brand investments to continue as we pursue
growth, innovation, efficiency improvements and address certain capacity
constraints. We are prepared to forsake the lost earnings that may result from
these investments in the short term, as we pursue long term profitable

Mr. Roper continued, "Alchemy & Science, our craft brew incubator, continues
to progress with its existing investments and explore potential
opportunities. It has had minimal sales to date, but our 2013 financial
projection includes increased estimated brand investments attributable to
existing projects of between $2 million and $4 million. This estimate could
change significantly if new projects are added and there is no guarantee that
Alchemy & Science volume and revenues will fully cover these expenses and
others that could be incurred. We continue to look for complementary
opportunities that do not distract us from our primary focus on Samuel Adams,
as we believe a portfolio of growing brands is a good outcome for our
wholesalers and for us."

Commenting on the Company's Freshest Beer Program, Mr. Roper said, "We
currently have 92 wholesalers representing over 60% of our volume in 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 inventory levels
further and to invest in the breweries to improve their support of the

1st Quarter 2013 Summary of Results

Depletions grew 16% from the comparable 13-week period in the prior year
primarily due to increases in Angry Orchard^® and Twisted Tea^® that were
partially offset by declines in Samuel Adams^®.

Core shipment volume was approximately 632,000 barrels, an 18% increase
compared to the first quarter of 2012.

The Company believes wholesaler inventory levels at March 30, 2013 were at
appropriate levels. Inventory at wholesalers participating in the Freshest
Beer Program was lower by an estimated 112,000 cases at March 30, 2013
compared to March 31, 2012.

Gross margin decreased to 50% compared to 55% in the first quarter of 2012.
Increased brewery processing and ingredient costs, combined with $2.2 million
of customer programs and incentive costs that are now recorded as reductions
in revenue, were only partially offset by pricing increases. In the first
quarter of 2012, customer programs and incentive costs were recorded as
advertising, promotional and selling expenses.

Advertising, promotional and selling expenses, excluding 2013 customer
programs and incentive costs of $2.2 million that were reported as reduction
of revenues, were $5.0 million higher than costs incurred in the prior year.
The combined increase of $7.2 million in advertising promotional and selling
and customer program and incentive costs was primarily a result of the timing
of planned brand investments compared to the prior year, increased costs for
additional sales personnel, increased investments in advertising and increased
freight to wholesalers due to higher volumes.

General and administrative expenses increased $3.1 million compared to the
first quarter of 2012, primarily due to increases in salary and benefit costs
and consulting expenses.

Cash and cash equivalents as of March 30, 2013 totaled $32.3 million.

During the first quarter, the Company repurchased approximately 102,000 shares
of its Class A Common Stock at a cost of approximately $14.7 million and
repurchased an additional 44,000 shares during the period April 1, 2013
through April 26, 2013 at an approximate cost of $7.0 million. As of April 26,
2013 the Company had approximately $8.4 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 16 weeks ended April 20, 2013 are
estimated by the Company to be up approximately 18% from the comparable period
in 2012.

Fiscal 2013 Outlook

The Company has left unchanged its projection of 2013 earnings per diluted
share of 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 ingredients, packaging, freight and processing cost
  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
  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 37%.
  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 primary
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. In
addition to Samuel Adams beers and some other small craft brands, the Company
also brews Twisted Tea (a flavored malt beverage) and Angry Orchard (a hard
cider). For more information, please visit,,

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,, or obtained by contacting the Company
or the SEC.

Financial Results
Consolidated Statements of
Comprehensive Income:
 (in thousands, except per share data)   (unaudited)
                                         March 30,          March 31,
                                         2013               2012
                                         (13 weeks)         (13 weeks)
 Barrels sold                            636                539
 Revenue                                 $     146,412  $     122,902
 Less excise taxes                       10,480             9,631
  Net revenue                       135,932            113,271
 Cost of goods sold                      68,149             51,462
  Gross profit                      67,783             61,809
 Operating expenses:
  Advertising, promotional and         43,449             38,455
 selling expenses
  General and administrative           14,648             11,513
  Total operating expenses          58,097             49,968
 Operating income                        9,686              11,841
 Other (expense) income, net:
 Interest (expense) income              (2)                1
 Other expense, net                      (122)              (3)
  Total other (expense) income,     (124)              (2)
 Income before income tax provision      9,562              11,839
 Provision for income taxes              2,650              4,346
  Net income                        $             $     
                                         6,912             7,493
 Net income per common share - basic     $            $      
                                         0.54              0.59
 Net income per common share - diluted   $            $      
                                         0.51              0.56
 Weighted-average number of common       8,709              8,652
 shares -Class A basic
 Weighted-average number of common       4,102              4,107
 shares - Class B basic
 Weighted-average number of common       13,505             13,449
 shares - diluted
 Other comprehensive income, net of
 Defined benefit plans liability         -                  -
  Comprehensive income              $             $     
                                         6,912             7,493

Financial Results
Consolidated Balance Sheets:
 (in thousands, except share data)
                                                      March 30,    Dec. 29,
                                                      2013         2012
  Current Assets:
  Cash and cash equivalents                  $       $     
                                                      32,294       74,463
  Accounts receivable, net of allowance
 for doubtful accounts of $156 and
  $125 as of March 30, 2013 and         30,264       31,479
 December 29, 2012, respectively
  Inventories                                51,711       44,361
  Prepaid expenses and other                 12,570       6,628
  Deferred income taxes                      5,411        5,411
  Total current assets                  132,250      162,342
  Property, plant and equipment, net              205,871      189,948
  Other assets                                    4,668        4,656
  Goodwill                                        2,538        2,538
  Total assets                          $        $    
                                                      345,327      359,484
 Liabilities and Stockholders' Equity
  Current Liabilities:
  Accounts payable                           $       $     
                                                      27,673       28,303
  Current portion of debt                    53           62
  Accrued expenses and other                 47,045       60,529
 current liabilities
  Total current liabilities             74,771       88,894
  Deferred income taxes                           20,255       20,463
  Debt, less current portion                      744          566
  Other liabilities                               3,960        4,470
  Total liabilities                     99,730       114,393
  Commitments and Contingencies
  Stockholders' Equity:
  Class A Common Stock, $.01 par value;
 22,700,000 shares authorized;
  8,811,553 and 8,703,670 issued and
 outstanding as of March 30, 2013
  and December 29, 2012,                88           87
  Class B Common Stock, $.01 par value;
 4,200,000 shares authorized;
  4,007,355 and 4,107,355 issued and    40           41
 outstanding as of March 30, 2013
  and December 29, 2012,
  Additional paid-in capital                 165,595      157,305
  Accumulated other comprehensive            (883)        (883)
 loss, net of tax
  Retained earnings                          80,757       88,541
  Total stockholders' equity            245,597      245,091
  Total liabilities and                 $        $    
 stockholders' equity                                 345,327      359,484

Financial Results
Consolidated Statements of Cash Flows:
 (in thousands)                                   (unaudited)
                                                  March 30,      March 31,
                                                  2013           2012
                                                  (13 weeks)     (13 weeks)
 Cash flows (used in) provided by operating
  Net income                                  $         $      
                                                  6,912         7,493
  Adjustments to reconcile net income to net
 cash (used in) provided by operating
  Depreciation and                       5,098          4,731
  Loss on disposal of property,          345            20
 plant and equipment
  Bad debt expense                       31             24
  Stock-based compensation               1,537          1,385
  Excess tax benefit from stock-based    (4,337)        (3,566)
 compensation arrangements
  Deferred income taxes                         (208)          -
  Changes in operating assets and
 liabilities, net of effects of acquisition:
  Accounts receivable                    1,184          (1,592)
  Inventories                            (7,350)        (4,058)
  Prepaid expenses and other             (5,995)        (135)
  Accounts payable                       (630)          3,691
  Accrued expenses and other             (9,257)        (6,163)
 current liabilities
  Other liabilities                      (161)          (77)
  Net cash (used in) provided       (12,831)       1,753
 by operating activities
 Cash flows used in investing
  Purchases of property, plant and            (21,177)       (13,518)
  Cash paid for acquisition of brewery         -              (1,477)
 assets and other intangible asset
  Decrease in restricted cash                 62             -
  Net cash used in                  (21,115)       (14,995)
 investing activities
 Cash flows (used in) provided by financing
  Repurchase of Class A Common                (14,697)       (3,731)
  Proceeds from exercise of stock             1,844          1,883
  Cash paid on notes payable                  (62)           -
  Excess tax benefit from stock-based         4,337          3,566
 compensation arrangements
  Net proceeds from sale of                   355            235
 investment shares
  Net cash (used in) provided       (8,223)        1,953
 by financing activities
 Change in cash and cash equivalents              (42,169)       (11,289)
 Cash and cash equivalents at beginning           74,463         49,450
 of year
 Cash and cash equivalents at end of              $         $     
 period                                           32,294         38,161
 Supplemental disclosure of cash flow
 Income taxes paid                                $         $      
                                                  4,289         1,208
 Acquisition of property and equipment under      $        $      
 capital lease                                     231            -
 Allocation of purchase consideration to brewery
 acquisition to the following assets:
  Property, plant and equipment           -              337
  Tradename                               -              400
  Goodwill                                $        $      
                                                    -          1,163
Copies of The Boston Beer Company's press releases, including quarterly
financial results,
are available on the Internet at

SOURCE The Boston Beer Company, Inc.

Contact: Investor Relations: Amanda Hurley, (617) 368-5075, Media: Jessica
Paar, (617) 368-5060
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