Boston Beer Reports Second Quarter 2013 Results

               Boston Beer Reports Second Quarter 2013 Results

PR Newswire

BOSTON, July 31, 2013

BOSTON, July 31, 2013 /PRNewswire/ --The Boston Beer Company, Inc. (NYSE:
SAM) reported second quarter 2013 net revenue of $181.3 million, an increase
of $33.8 million or 23%, over the same period last year, mainly due to core
shipment growth of 21%. Net income for the second quarter was $19.7 million,
or $1.45 per diluted share, an increase of $5.4 million or $0.39 per diluted
share from the second quarter of 2012. This increase was primarily due to
shipment increases, partially offset by increased investments in advertising,
promotional and selling expenses.

Earnings per diluted share for the 26-week period ended June 29, 2013 was
$1.96, an increase of $0.35 from the comparable 26-week period in 2012. Net
revenue for the 26-week period ended June 29, 2013 was $317.3 million, an
increase of $56.5 million, or 22%, from the comparable 26-week period in 2012.

Highlights of this release include:

  oDepletions grew 24% and 21% from the comparable 13 and 26 week periods in
    the prior year.
  oSecond quarter gross margin was 54%; the Company has reduced its full year
    gross margin target to between 52% and 54% from between 53% and 55%
    primarily due to increases in ingredient costs and product mix.
  oAdvertising, promotional and selling expense and customer program and
    incentive costs increased by a combined $9.1 million or 21% in the
    quarter, primarily due to planned increased investments behind the
    Company's brands.
  oAdvertising, promotional and selling expenses exclude $3.0 million of
    customer program and incentive costs that were classified as reductions in
    revenue in the second quarter of 2013. Customer program and incentive
    costs were reported in advertising, promotional and selling expense in the
    second quarter of 2012.
  oFull year 2013 depletions growth is now estimated to be between 17% and
    22%, an increase from the previously communicated estimate of 10% to 15%.
  oFull year 2013 earnings per diluted share are now estimated to range from
    $5.10 to $5.40, an increase from the previously communicated estimate of
    $4.70 to $5.10.
  oFull year 2013 capital spending is now estimated to be between $100
    million to $140 million, an increase from the previously communicated
    estimate of $85 million to $105 million.

Jim Koch, Chairman and Founder of the Company, commented, "We achieved
depletions growth of 24% and record total depletions in the second
quarter.Depletions growth in the second quarter improved from our first
quarter results of 16%, primarily due to the improved growth of our Samuel
Adams Seasonal program and our Samuel Adams Boston Lager. We believe that our
depletions growth is attributable to strong sales execution and support from
our wholesalers and retailers as well as our great quality beers and strong
brands. We were also delighted to learn, that for the fifth year in a row,
our wholesalers ranked us the number one beer supplier in the industry, in the
annual poll of beer wholesalers conducted by Tamarron Consulting, a consulting
firm specializing in the alcohol beverage distribution industry. This is a
testament to the efforts of all Boston Beer employees to service and support
our wholesalers' business and to the relationships we have built with them. We
continue to innovate and during the quarter we released Samuel Adams Boston
Lager and Samuel Adams Summer Ale packaged in our new unique can which has
been well received by wholesalers and drinkers and is generally in line with
our expectations from a volume perspective."

Martin Roper, the Company's President and CEO, stated, "In the second quarter,
our depletions growth accelerated from prior trends, due to the health of our
Samuel Adams beers and the increased distribution of Angry Orchard, which was
rolled out nationally during the second quarter of 2012. Our business is
healthy and we believe that the strength we see in our main brands may well
reflect a response to our increased investments in media, local marketing and
point of sale and the efforts of our increased sales force. Accordingly, we
have increased our expectations for full-year depletions growth to between 17%
and 22% to reflect the current trends and to take advantage of the
opportunities that we see, we are increasing our planned investment in our
sales force and our support behind our brands for the remainder of the year.
We also continue to invest at a high rate in capital improvements in our
brewing and packaging capabilities to support our product innovation and brand
growth. These improvements include our new can line that began production this
quarter and a new bottling line which started initial ramp-up late in the
quarter. I would like to recognize the significant efforts of our brewery
employees in supporting these start-ups and reacting to the brand acceleration
that we have seen. The growth has been challenging operationally and we have
had some product shortages and service issues at the end of the quarter. We
have been operating at capacity during peak weeks and have increased our usage
of third party breweries above plan during the quarter as a reaction, but were
unable to meet peak week demand. We expect the new bottling line will help
relieve these pressures, as it comes up to speed during the third quarter.
Based on the accelerated growth and to address current capacity bottlenecks,
we anticipate accelerating capacity and efficiency improvements at our
breweries and accordingly are raising our capital spend expectations for 2013
and 2014. We also expect a continued high level of brand investment as we
pursue growth and innovation. We are prepared to forsake the earnings that may
be lost as a result of these investments in the short term, as we pursue long
term profitable growth."

Mr. Roper continued, "Alchemy & Science, our craft brew incubator, continues
to progress with its existing brands, which include the Angel City Brewery,
Traveler Beer Company and the Just Beer Project. To date, sales from Alchemy
& Science brands have not been significant. Our latest 2013 financial
projection includes estimated brand investments attributable to existing
Alchemy & Science projects of between $4 million and $6 million and capital
investments of between $4 million and $7 million, but these estimates could
change significantly when new brands are added. There is no guarantee that
the 2013 volume of Alchemy & Science brands will fully cover these and other
expenses 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 120 wholesalers representing over 65% of our volume in our
Freshest Beer Program and believe this could reach 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 Program particularly
during peak selling periods."

2nd Quarter 2013 Summary of Results

Depletions grew 24% from the comparable 13-week period in the prior year
primarily due to increases in Angry Orchard^®, Samuel Adams^® and Twisted
Tea^®.

Core shipment volume was approximately 837,000 barrels, a 21% increase
compared to the second quarter of 2012.

Inventory at wholesalers participating in the Freshest Beer Program was lower
by an estimated 267,000 cases at June 29, 2013 compared to June 30, 2012. 

Gross margin at 53.6% was slightly lower than the 54.5% in the second quarter
of 2012. Increased ingredient and processing costs, combined with $3.0
million of customer program and incentive costs that are now recorded as
reductions in revenue, were partially offset by pricing increases. In the
second quarter of 2012, customer programs and incentive costs were recorded as
advertising, promotional and selling expenses.

Advertising, promotional and selling expenses, excluding 2013 customer program
and incentive costs of $3.0 million that were reported as a reduction in
revenue, were $6.1 million higher than costs incurred in the second quarter of
the prior year. The combined increase of $9.1 million in advertising
promotional and selling and customer program and incentive costs was primarily
a result of increased investments in local marketing and media advertising,
costs for additional sales personnel and increased freight to wholesalers due
to higher volumes.

General and administrative expenses increased $2.1 million compared to the
second quarter of 2012, primarily due to increases in salary and benefit
costs.

Year to Date 2013 Summary of Results

Depletions grew by 21% from the comparable 26-week period in 2012, primarily
due to increases in Angry Orchard, Samuel Adams, and Twisted Tea.

Core shipment volume was approximately 1.5 million barrels, a 20% increase
from the comparable 26-week period in 2012.

Advertising, promotional and selling expenses, excluding 2013 customer program
and incentive costs of $5.2 million that were reported as a reduction in
revenue, were $11.1 million higher than costs incurred in the comparable
26-week period in 2012. The combined increase of $16.3 million in advertising,
promotional and selling and customer program and incentive costs was primarily
a result of increased costs for additional sales personnel, increased local
marketing and media advertising and increased freight to wholesalers due to
higher volumes.

General and administrative expenses increased by $5.2 million from the
comparable 26-week period in 2012, due to increases in salary and benefit
costs and consulting costs.

Cash and cash equivalents as of June 29, 2013 totaled $24.9 million.

During the second quarter, the Company repurchased approximately 94,000 shares
of its Class A Common Stock at a cost of approximately $14.9 million. The
Company had no repurchases during the period June 30, 2013 through July 26,
2013. As of July 26, 2013 the Company had approximately $25.5 million
remaining on the $325.0 million share buyback expenditure limit set by the
Board of Directors.

Depletion estimates

Year-to-date depletions through the 29 weeks ended July 20, 2013 are estimated
by the Company to be up approximately 22% from the comparable period in 2012.

Outlook

The Company increased its projection of 2013 earnings per diluted share to
between $5.10 and $5.40. 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 17% and 22%.
  oPrice increases per barrel of approximately 1% to partially offset
    anticipated ingredients, packaging, freight and processing cost pressures.
  oFull-year 2013 gross margins of between 52% and 54%, due to anticipated
    price increases not fully covering anticipated cost pressures and some
    product mix changes. 
  oIncreased advertising, promotional and selling expenses of between $20
    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 $4 million and $6 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 launched 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 2013 spending on capital investments is now estimated to be
    between $100 million and $140 million, most of which relate to continued
    investments in the Company's breweries and additional keg purchases. The
    wide range is a result of equipment currently anticipated to be delivered
    to the breweries in late December 2013, which could be delayed.
  oFull-year 2014 capital spending is now estimated to be between $100
    million to $130 million, an increase from the previously communicated
    estimate of $30 million to $50 million.

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 www.samueladams.com,
www.twistedtea.com, www.angryorchard.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)               (unaudited)
 share data)
                              June 29,     June 30,     June 29,    June 30,
                              2013         2012         2013        2012
                              (13 weeks)   (13 weeks)   (26 weeks)  (26 weeks)
 Barrels sold                 842          696          1,478       1,235
 Revenue                      $        $        $       $    
                              194,939      159,718      341,351     282,620
 Less excise taxes            13,607       12,215       24,087      21,846
  Net revenue            181,332      147,503      317,264     260,774
 Cost of goods sold           84,200       67,120       152,349     118,582
  Gross profit           97,132       80,383       164,915     142,192
 Operating expenses:
  Advertising, promotional  50,178       44,108       93,627      82,563
 and selling expenses
  General and               14,906       12,830       29,554      24,343
 administrative expenses
  Total operating        65,084       56,938       123,181     106,906
 expenses
 Operating income             32,048       23,445       41,734      35,286
 Other (expense) income,
 net:
 Interest (expense) income   (6)          (2)          (8)         (1)
 Other expense, net           (220)        (19)         (342)       (22)
  Total other (expense)  (226)        (21)         (350)       (23)
 income, net
 Income before income tax     31,822       23,424       41,384      35,263
 provision
 Provision for income taxes   12,107       9,073        14,757      13,419
  Net income             $       $       $       $    
                              19,715       14,351        26,627     21,844
 Net income per common share  $       $       $       $    
 - basic                       1.53       1.11        2.07     1.69
 Net income per common share  $       $       $       $    
 - diluted                     1.45       1.06        1.96     1.61
 Weighted-average number of
 common shares -Class A       8,765        8,683        8,737       8,667
 basic
 Weighted-average number of
 common shares - Class B      4,007        4,107        4,055       4,107
 basic
 Weighted-average number of   13,462       13,437       13,484      13,428
 common shares - diluted
 Other comprehensive income,
 net of tax:
 Defined benefit plans        -            -            -           -
 liability adjustment
  Comprehensive income   $       $       $       $    
                              19,715       14,351        26,627     21,844





THE BOSTON BEER COMPANY, INC.
Financial Results
Consolidated Balance Sheets:
 (in thousands, except share data)
                                                     June 29,     Dec. 29,
                                                     2013         2012
 Assets
  Current Assets:
  Cash and cash equivalents                 $       $     
                                                     24,874       74,463
  Accounts receivable, net of allowance
 for doubtful accounts of $153 and
  $125 as of June 29, 2013 and         43,480       31,479
 December 29, 2012, respectively
  Inventories                               51,434       44,361
  Prepaid expenses and other assets         13,797       6,628
  Deferred income taxes                     5,411        5,411
  Total current assets                 138,996      162,342
  Property, plant and equipment, net             229,815      189,948
  Other assets                                   5,417        4,656
  Goodwill                                       2,538        2,538
  Total assets                         $        $    
                                                     376,766      359,484
 Liabilities and Stockholders' Equity
  Current Liabilities:
  Accounts payable                          $       $     
                                                     37,716       28,303
  Current portion of debt                   53           62
  Accrued expenses and other current        60,263       60,529
 liabilities
  Total current liabilities            98,032       88,894
  Deferred income taxes                          20,255       20,463
  Debt, less current portion                     765          566
  Other liabilities                              4,178        4,470
  Total liabilities                    123,230      114,393
  Commitments and Contingencies
  Stockholders' Equity:
  Class A Common Stock, $.01 par value;
 22,700,000 shares authorized;
  8,728,383 and 8,703,670 issued and
 outstanding as of June 29, 2013
  and December 29, 2012, respectively  87           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 June 29, 2013
  and December 29, 2012, respectively
  Additional paid-in capital                168,708      157,305
  Accumulated other comprehensive loss,     (883)        (883)
 net of tax
  Retained earnings                         85,584       88,541
  Total stockholders' equity           253,536      245,091
  Total liabilities and stockholders'  $        $    
 equity                                              376,766      359,484





THE BOSTON BEER COMPANY, INC.
Financial Results
Consolidated Statements of Cash Flows:
 (in thousands)                                (unaudited)
                                               June 29,       June 30,
                                               2013           2012
                                               (26 weeks)     (26 weeks)
 Cash flows provided by operating activities:
  Net income                               $         $     
                                               26,627         21,844
  Adjustments to reconcile net income to
 net cash provided by operating activities:
  Depreciation and amortization       11,463         9,633
  Loss on disposal of property,       190            18
 plant and equipment
  Bad debt expense (recovery)         28             (7)
  Stock-based compensation expense    3,782          3,874
  Excess tax benefit from             (4,825)        (5,444)
 stock-based compensation arrangements
  Deferred income taxes                    (208)          -
  Changes in operating assets and
 liabilities, net of effects of acquisition:
  Accounts receivable                 (12,029)       (11,573)
  Inventories                         (7,073)        (3,094)
  Prepaid expenses and other assets   (7,910)        (2,166)
  Accounts payable                    3,583          6,075
  Accrued expenses and other current  4,487          4,359
 liabilities
  Other liabilities                   (127)          (227)
  Net cash provided by           17,988         23,292
 operating activities
 Cash flows used in investing activities:
  Purchases of property, plant and         (45,563)       (31,799)
 equipment
  Cash paid for acquisition of brewery      -              (1,475)
 assets and other intangible asset
  Decrease (increase) in restricted cash   62             (628)
  Net cash used in investing     (45,501)       (33,902)
 activities
 Cash flows (used in) provided by financing
 activities:
  Repurchase of Class A Common Stock       (29,586)       (7,582)
  Proceeds from exercise of stock options  2,216          3,415
  Proceeds from note payable               -              628
  Cash paid on notes payable               (62)           -
  Excess tax benefit from stock-based      4,825          5,444
 compensation arrangements
  Net proceeds from sale of investment     531            398
 shares
  Net cash provided by           (22,076)       2,303
 financing activities
 Change in cash and cash equivalents           (49,589)       (8,307)
 Cash and cash equivalents at beginning of     74,463         49,450
 year
 Cash and cash equivalents at end of period    $         $     
                                               24,874         41,143
 Supplemental disclosure of cash flow
 information:
 Income taxes paid                             $         $      
                                               10,602         7,270
 Acquisition of property and equipment under   $        $       
 capital lease                                  252           -
 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.samueladams.com
Contact: Investor Relations: Amanda Hurley, (617) 368-5075, or Media: Jessica
Paar, (617) 368-5060
 
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