Boston Beer Reports Third Quarter 2013 Results

                Boston Beer Reports Third Quarter 2013 Results

PR Newswire

BOSTON, Oct. 30, 2013

BOSTON, Oct. 30, 2013 /PRNewswire/ --The Boston Beer Company, Inc. (NYSE:
SAM) reported third quarter 2013 net revenue of $216.4 million, an increase of
$50.0 million or 30% over the same period last year, mainly due to core
shipment growth of 29%. Net income for the third quarter was $25.7 million, or
$1.89 per diluted share, an increase of $4.9 million or $0.36 per diluted
share from the third quarter of 2012. This increase was primarily due to
shipment increases, partially offset by increased investments in advertising,
promotional and selling expenses and a write-down of land of $0.10 per diluted
share.

Earnings per diluted share for the 39-week period ended September 28, 2013
were $3.85, an increase of $0.71 from the comparable 39-week period in 2012.
Net revenue for the 39-week period ended September 28, 2013 was $533.7
million, an increase of $106.5 million, or 25%, from the comparable 39-week
period in 2012.

Highlights of this release include:

  oDepletions grew 26% and 23% from the comparable 13 and 39 week periods in
    the prior year.
  oThird quarter gross margin was 53%; the Company maintains its full-year
    gross margin target of between 52% and 54%.
  oAdvertising, promotional and selling expense and customer program and
    incentive costs increased by a combined $11.8 million or 25% in the
    quarter, primarily due to planned increased investments behind the
    Company's brands.
  oFull year 2013 depletions growth is now estimated to be between 21% and
    24%, an increase from the previously communicated estimate of 17% to 22%.
  oFull year 2013 advertising, promotional and selling expense, excluding any
    increases in freight costs for the shipment of products to the Company's
    wholesalers, is now estimated to increase between $26 million and $32
    million, up from the previously communicated estimate of between $20
    million and $26 million, primarily due to planned increased investments
    behind the Company's brands.
  oFull year 2013 estimated earnings per diluted share are now estimated to
    be between $5.05 to $5.35, a decrease from the previously communicated
    estimated range of between $5.10 to $5.40 due to the land write-down and
    increased brand investments that are estimated to be partially offset by
    increased shipment volumes.
  oFull year 2013 capital spending is now estimated to be between $100
    million and $120 million, a narrowing of the range from the previously
    communicated estimate of $100 million to $140 million.
  oFull-year 2014 capital spending is now estimated to be between $140
    million and $180 million, an increase in the range from the previously
    communicated estimate of $100 million to $130 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. I would like to thank publicly all of
our Boston Beer employees for achieving this growth. I am particularly pleased
with the growth in the quarter of our flagship Samuel Adams Boston Lager,
which will be celebrating its 30^th anniversary in 2014, and in our fall
seasonal Samuel Adams Octoberfest. Our fall seasonal program also included
the limited release of some excellent beers including Samuel Adams Harvest
Pumpkin and an innovative small batch brew, Samuel Adams ^ Fat Jack, a double
pumpkin ale. 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 remained strong and benefited from growth in our Samuel
Adams, Twisted Tea and Angry Orchard brands. We believe that the strength of
our main brands is reflective of strong sales execution and our increased
investments in media, local marketing and point of sale, and the efforts of
our increased sales force. We have raised our expectations for 2013 full-year
depletions growth to between 21% and 24% to reflect the current trends. To
take advantage of the opportunities that we currently see and expected
competitive activity, we are increasing our planned investment in media, our
sales force and other support behind our brands for the remainder of the
year."

Mr. Roper went on to say, "I would like to recognize all the employees
involved at our breweries and in our operations support groups for their
efforts this quarter in supporting our growth. The growth has been challenging
operationally and, despite our best efforts, we had product shortages and
service issues during most of the quarter. Our supply chain struggled under
the increased volume and we experienced increased operational and freight
costs as we reacted. We commissioned our new bottling line during the
quarter. This line and our new can line are starting to achieve their design
capacities and ease our packaging constraints. We have, however, remained tank
constrained in our breweries and this is not expected to be resolved for
several more weeks. To address these challenges, we initiated significant
capital improvements in our breweries that will help support our growth in
2014, once completed. We expect a continued high level of brand investment
and capital 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 make progress with its existing brands, which include Angel City Brewery,
Traveler Beer Company and the Just Beer Project. During the quarter, Alchemy &
Science completed the acquisition of the Coney Island Brewery brand. Alchemy &
Science is also currently finalizing plans to build a small brewery and beer
hall in Miami, Florida named Concrete Beach Brewery. 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 $7 million and $10 million, which include the brand
acquisition cost of the Coney Island Brewery, but these estimates could change
significantly. It is unlikely that the 2013 volume of Alchemy & Science
brands will cover these and other expenditures that could be incurred this
year."

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 70% by the end of 2013. The
systems and processes supporting Freshest Beer helped us significantly with
product allocations during the quarter. We continue to invest in our breweries
to improve their support of the Program, particularly during peak selling
periods."

3rd Quarter 2013 Summary of Results

Depletions grew 26% from the comparable 13-week period in the prior year,
primarily due to increases in the Angry Orchard^®, Samuel Adams^® and Twisted
Tea^® brands.

Core shipment volume was approximately 993,000 barrels, a 29% increase over
the third quarter of 2012.

Inventory at wholesalers participating in the Freshest Beer Program was lower
by an estimated 208,000 cases at September 28, 2013 compared to September 29,
2012.

Gross margin at 53% was lower than the 56% realized in the third quarter of
2012. Increased brewery processing costs, increased ingredient costs and
product mix effects, and the $3.3 million of customer program and incentive
costs that are now recorded as reductions in revenue, were partially offset by
pricing increases. In the third quarter of 2012, customer programs and
incentive costs were recorded as advertising, promotional and selling
expenses.

Advertising, promotional and selling expenses, excluding the 2013 customer
program and incentive costs now reported as a reduction in revenue, were $8.5
million higher than costs incurred in the third quarter of the prior year. The
combined increase of $11.8 million was primarily a result of increased costs
for additional sales personnel and commissions, increased investments in local
marketing and media advertising, and increased freight to wholesalers due to
higher volumes.

General and administrative expenses increased $3.5 million compared to the
third quarter of 2012, primarily due to increases in salary and benefit costs
and consulting costs.

Impairment of long lived assets increased $1.3 million compared to the third
quarter of 2012 due to the write-down of land owned by the Company in
Freetown, Massachusetts.

Year to Date 2013 Summary of Results

Depletions grew by 23% from the comparable 39-week period in 2012, primarily
due to increases in the Angry Orchard, Samuel Adams, and Twisted Tea brands.

Core shipment volume was approximately 2.5 million barrels, a 23% increase
from the comparable 39-week period in 2012.

Advertising, promotional and selling expenses, excluding the 2013 customer
program and incentive costs of $8.5 million that were reported as a reduction
in revenue, were $19.5 million higher than costs incurred in the comparable
39-week period in 2012. The combined increase of $28.0 million was primarily a
result of increased costs for additional sales personnel and commissions,
increased local marketing and media advertising and increased freight to
wholesalers due to higher volumes.

General and administrative expenses increased by $8.7 million from the
comparable 39-week period in 2012, due to increases in salary and benefit
costs and consulting costs.

The Company expects that its cash balance of $43.7 million as of September 28,
2013, along with future operating cash flow and the Company's unused line of
credit of $50.0 million, will be sufficient to fund future cash requirements.

During the third quarter and the period from September 29, 2013 through
October 25, 2013, the Company did not repurchase any shares of its Class A
Common Stock. As of October 25, 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 42 weeks ended October 19, 2013 are
estimated by the Company to be up approximately 23% from the comparable period
in 2012.

2013 Outlook

The Company estimates 2013 earnings per diluted share of between $5.05 and
$5.35. 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 21% and 24%.
  oPrice increases of approximately 1% to partially offset ingredients,
    packaging, freight and processing cost pressures.
  oFull-year 2013 gross margins of between 52% and 54%. 
  oIncreased advertising, promotional and selling expenses for the full year
    2013, excluding any increases in freight costs for the shipment of
    products to the Company's wholesalers, of between $26 million and $32
    million, primarily due to an increase in our investments behind the
    Company's brands.
  oFull-year effective tax rate of approximately 38%.
  oFull-year 2013 spending on capital investments is now estimated to be
    between $100 million and $120 million, consisting mostly of continued
    investments in the Company's breweries and additional keg purchases in
    support of growth.

2014 Outlook

The Company is completing its 2014 planning process and will provide further
detailed guidance when the Company presents its full-year 2013 results. The
Company is currently using the following preliminary assumptions and targets
for 2014:

  oDepletions and shipments percentage growth in the mid-teens.
  oNational price increases of between 2% and 3% to offset anticipated upward
    pressures on ingredients, packaging and freight costs, as well as
    increased investments behind the Company's brands.
  oFull-year 2014 gross margins of between 52% and 54%.
  oIncreased investment in advertising, promotional and selling expenses of
    between $34 million and $42 million for the full year 2014. This does not
    include any increases in freight costs for the shipment of products to the
    Company's wholesalers.
  oIncreased expenditures of between $3 million to $5 million for continued
    investment in Alchemy & Science brands, which are included in our
    full-year estimated increases in advertising, promotional and selling
    expenses. Brand investments in the Alchemy & Science brands could vary
    significantly from current estimates.
  oFull-year effective tax rate of approximately 38%.
  oEstimated full-year 2014 capital spending of between $140 million and $180
    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 craft brands brewed by Alchemy &
Science, its craft brew incubator, 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.

Wednesday, October 30, 2013



THE BOSTON BEER COMPANY, INC.
Financial Results
Consolidated Statements
of Comprehensive Income:
(in thousands, except     (unaudited)                 (unaudited)
per share data)
                          September, 28  September    September,   September
                                         29,         28           29,
                          2013           2012         2013         2012
                          (13 weeks)     (13 weeks)   (39 weeks)   (39 weeks)
Barrels sold              995            778          2,473        2,013
Revenue                   $          $        $        $    
                          231,788        180,413      573,139      463,033
Less excise taxes         15,374         13,965       39,461       35,811
 Net revenue         216,414        166,448      533,678      427,222
Cost of goods sold        101,035        73,206       253,384      191,788
 Gross profit        115,379        93,242       280,294      235,434
Operating expenses:
 Advertising,
promotional and selling   56,096         47,639       149,723      130,202
expenses
 General and            15,744         12,293       45,298       36,636
administrative expenses
Impairment of             1,300          -            1,300        -
long-lived assets
 Total operating     73,140         59,932       196,321      166,838
expenses
Operating income          42,239         33,310       83,973       68,596
Other (expense) income,
net:
Interest income          30             24           22           23
Other (expense) income,   (57)           20           (399)        (2)
net
 Total other         (27)           44           (377)        21
(expense) income, net
Income before income      42,212         33,354       83,596       68,617
tax provision
Provision for income      16,526         12,604       31,283       26,023
taxes
 Net income          $         $       $       $     
                          25,686         20,750       52,313       42,594
Net income per common     $        $       $       $     
share - basic              2.00           1.60       4.07       3.30
Net income per common     $        $       $       $     
share - diluted            1.89           1.53       3.85       3.14
Weighted-average number
of common shares -Class A 8,730          8,715        8,734        8,683
basic
Weighted-average number
of common shares - Class  4,007          4,107        4,039        4,107
B basic
Weighted-average number
of common shares -        13,498         13,452       13,488       13,436
diluted
Other comprehensive
income, net of tax:
Defined benefit plans     -              -            -            -
liability adjustment
 Comprehensive       $         $       $       $     
income                    25,686         20,750       52,313       42,594







THE BOSTON BEER COMPANY, INC.
Financial Results
Consolidated Balance Sheets:
(in thousands, except share data)                  (unaudited)
                                                   September 28,  December 29,
                                                   2013           2012
Assets
 Current Assets:
 Cash and cash equivalents                $         $     
                                                   43,726         74,463
 Accounts receivable, net of allowance
for doubtful accounts of $84 and
 $125 as of September 28, 2013 and   52,574         31,479
December 29, 2012, respectively
 Inventories                              59,513         44,361
 Prepaid expenses and other               11,621         6,628
assets
 Deferred income taxes                    5,938          5,411
 Total current assets                173,372        162,342
 Property, plant and equipment, net            248,364        189,948
 Other assets                                  7,009          4,656
 Goodwill                                      3,683          2,538
 Total assets                        $          $    
                                                   432,428        359,484
Liabilities and Stockholders' Equity
 Current Liabilities:
 Accounts payable                         $         $     
                                                   40,696         28,303
 Current portion of debt and capital      53             62
lease obligations
 Accrued expenses and other               84,397         60,529
current liabilities
 Total current liabilities           125,146        88,894
 Deferred income taxes                         20,877         20,463
 Debt and capital lease obligations, less      584            566
current portion
 Other liabilities                             4,400          4,470
 Total liabilities                   151,007        114,393
 Commitments and Contingencies
 Stockholders' Equity:
 Class A Common Stock, $.01 par value;
22,700,000 shares authorized;
 8,730,663 and 8,703,670 issued and
outstanding as of September 28, 2013
 and December 29, 2012,              87             87
respectively
 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 September 28, 2013
 and December 29, 2012,
respectively
 Additional paid-in capital               170,907        157,305
 Accumulated other comprehensive          (883)          (883)
loss, net of tax
 Retained earnings                        111,270        88,541
 Total stockholders' equity          281,421        245,091
 Total liabilities and               $          $    
stockholders' equity                               432,428        359,484



THE BOSTON BEER COMPANY, INC.
Financial Results
Consolidated Statements of Cash
Flows:
(in thousands)                                (unaudited)
                                              September 28,    September 29,
                                              2013             2012
                                              (39 weeks)       (39 weeks)
Cash flows provided by operating
activities:
 Net income                               $           $     
                                              52,313           42,594
 Adjustments to reconcile net income to
net cash provided by operating activities:
 Depreciation and                    18,485           14,888
amortization
 Impairment of long-lived            1,300            -
assets
 Loss on disposal of property,       329              85
plant and equipment
 Bad debt expense (recovery)         (41)             3
 Stock-based compensation            5,763            5,181
expense
 Excess tax benefit from             (4,990)          (7,278)
stock-based compensation arrangements
 Deferred income taxes                      (113)            115
 Changes in operating assets and
liabilities, net of effects of acquisition:
 Accounts receivable                 (21,054)         (10,900)
 Inventories                         (15,152)         (4,068)
 Prepaid expenses and other          (5,715)          1,607
assets
 Accounts payable                    7,070            7,664
 Accrued expenses and other          28,815           15,250
current liabilities
 Other liabilities                   (131)            (350)
 Net cash provided by           66,879           64,791
operating activities
Cash flows used in investing
activities:
 Purchases of property, plant and         (73,101)         (49,514)
equipment
 Cash paid for acquisition of brewery      (2,753)          (1,625)
assets and other intangible asset
 Decrease (increase) in                   62               (628)
restricted cash
 Proceeds from disposal of property,      -                41
plant and equipment
 Net cash used in               (75,792)         (51,726)
investing activities
Cash flows (used in) provided by
financing activities:
 Repurchase of Class A Common             (29,586)         (12,569)
Stock
 Proceeds from exercise of stock          2,269            4,370
options
 Proceeds from note payable               -                628
 Cash paid on notes payable and           (244)            -
capital lease
 Excess tax benefit from stock-based      4,990            7,278
compensation arrangements
 Net proceeds from sale of                747              614
investment shares
 Net cash (used in)             (21,824)         321
provided by financing activities
Change in cash and cash equivalents           (30,737)         13,386
Cash and cash equivalents at                  74,463           49,450
beginning of year
Cash and cash equivalents at end of           $           $     
period                                        43,726           62,836
Supplemental disclosure of cash flow
information:
Income taxes paid                             $           $      
                                              17,180           9,173
Acquisition of property and equipment         $         $       
under capital lease                           252               -
Allocation of purchase consideration to
brewery acquisition to the following assets:
 Property, plant and                  -                338
equipment
 Tradename                            1,608            401
 Goodwill                             $           $      
                                              1,145           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
Contact: Investor Relations Contact: Amanda Hurley, (617) 368-5075; Media
Contact: Jessica Paar, (617) 368-5060