Boston Beer Reports Fourth Quarter 2013 Results

               Boston Beer Reports Fourth Quarter 2013 Results

PR Newswire

BOSTON, Feb. 25, 2014

BOSTON, Feb. 25, 2014 /PRNewswire/ --The Boston Beer Company, Inc. (NYSE:
SAM) reported fourth quarter 2013 net revenue of $205.4 million, an increase
of $52.4 million or 34% over the same period last year, mainly due to core
shipment growth of 29%. Net income for the fourth quarter was $18.1 million,
or $1.33 per diluted share, an increase of $1.2 million or $.08 per diluted
share from the fourth 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 52-week period ended December 28, 2013 were
$5.18, an increase of $0.79, or 18%, from the comparable 52-week period in
2012. Net revenue for the 52-week period ended December 28, 2013 was $739.1
million, an increase of $158.8 million, or 27%, from the comparable 52-week
period in 2012.

Highlights of this release include:

  oDepletions grew 20% and 23% from the comparable 13 and 52 week periods in
    the prior year.
  oGross margin for the fiscal 2013 full-year was 52%.
  oAdvertising, promotional and selling expense and customer program and
    incentive costs increased by a combined $17.6 million or 39% in the
    quarter, and $45.6 million or 26% for the full year 2013, primarily due to
    planned increased investments behind the Company's brands.
  oFull year 2013 capital spending totaled $104.0 million, most of which
    relates to continued investments in the Company's breweries and additional
    keg purchases.
  oFull year 2014 depletion growth is estimated to be between 16% and 20% and
    full year 2014 earnings per diluted share is estimated to be between $6.00
    and $6.40.
  oBased on the estimated 2014 and future growth, current estimates of
    full-year 2014 capital spending now range between $160 million and $220
    million.

Jim Koch, Chairman and Founder of the Company, commented, "I am pleased with
our depletion growth in 2013, and especially gratified that our flagship
Samuel Adams Boston Lager, one of the original craft brews, continued to grow
in 2013 as we enter our 30th year of brewing this beer. I am pleased that The
Boston Beer Company continues to help lead the craft beer industry both in
innovation and variety, and that drinkers remain excited by our beers. Our
growth is also attributable to strong sales execution and support from our
distributors and retailers, as well as our great quality beers, innovation
capability and strong brands. During the first quarter, we are releasing
several new beers that should continue this momentum. Our new spring seasonal
brew, Samuel Adams Cold Snap, a unique and approachable white ale brewed with
a blend of exotic spices, has launched and appears to be well received by
drinkers and retailers alike. We also began a national rollout of Samuel
Adams Rebel IPA, a West Coast style IPA brewed with hops from the Pacific
Northwest that created a lot of excitement in its test markets last year. It
is already receiving great support from distributors, and on and off premise
retailers. We believe that these styles and packages are being favorably
received by drinkers and 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 fourth quarter,
our depletions growth remained strong and benefited from growth in our Samuel
Adams, Twisted Tea and Angry Orchard brands. The timing of our transition to
our new Samuel Adams spring seasonal, Cold Snap, was planned a week later than
last year, and was accomplished by mid- 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. With the
launch of several new beers, and our increased investment behind Twisted Tea
and Angry Orchard, we believe we are well-positioned to maintain our
momentum."

Mr. Roper went on to say, "Over the past year, our supply chain struggled
under the unexpected increased demand and we experienced higher operational
and freight costs as we reacted. While our growth continues to challenge us
operationally, we improved our service level to our distributors during the
fourth quarter and decreased our product shortages. In preparation for 2014,
we have significantly increased our packaging and shipping capabilities, and
our tank capacity at our Breweries, to address the opportunity and meet these
challenges. Given the opportunities that we see, 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."

Commenting on the Company's Freshest Beer Program, Mr. Roper said, "We believe
that one benefit of our Freshest Beer Program is better visibility into
distributor inventories and needs. This allowed us to better allocate
available product in 2013, when we were at capacity and experiencing
shortages. Overall, we remain committed to the program and continue to believe
that we are benefitting by delivering better, fresher Samuel Adams beer to our
drinkers while lowering distributor inventories. We also recognize that we
have significant opportunities to ensure that our on-time product shipping
performance meets expectations, and to ensure that as we grow, we are reducing
costs and improving efficiency throughout the supply chain without the cost of
lost sales. We currently have more than 120 distributors participating in the
program, at various stages of inventory reduction, representing over 65% of
our volume. We believe participation in the Program could reach between 70%
and 80% of our volume by the end of 2014. We continue to evaluate whether we
can reduce distributor inventory levels even further and are making
investments in our breweries to improve their service in support of the
Program."

4th Quarter 2013 Summary of Results

Depletions grew 20% from the comparable 13-week period in the prior year,
reflecting increases across the Angry Orchard^®, Samuel Adams^® and Twisted
Tea^® brands.

Core shipment volume was approximately 941,000 barrels, a 29% increase over
the fourth quarter of 2012.

Fourth quarter shipments growth rates were higher than depletions growth rates
primarily due to production shortages of certain brands experienced during the
third quarter that were filled in the fourth quarter as distributor
inventories were rebuilt.

The Company believes distributor inventory levels at December 28, 2013 were at
appropriate levels. Inventory at distributors participating in the Freshest
Beer Program was lower by an estimated 212,000 cases at December 28, 2013
compared to December 29, 2012. 

Gross margin at 51% for the fourth quarter was lower than the 52% realized in
the fourth quarter of the prior year. The margin decrease was a result of
increases in ingredient costs, product mix effects and brewery processing
costs, which were partially offset by price increases.

Advertising, promotional and selling expenses were $19.1 million higher than
costs incurred in the fourth quarter of the prior year. This increase was
offset by a decrease of $1.5 million in customer program and incentive costs.
The combined net increase of $17.6 million in advertising, promotional and
selling, and customer program and incentive costs, was primarily a result of
increased costs for additional sales personnel and commissions, increased
investments in point of sale, local marketing and media advertising, and
increased freight to distributors due to higher volumes.

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

Full Year 2013 Summary of Results

Depletions grew by 23% from the comparable 52-week period in 2012, reflecting
increases across the Angry Orchard, Twisted Tea and Samuel Adams brands.

Core shipment volume was approximately 3.4 million barrels, a 25% increase
from the comparable 52-week period in 2012.

Advertising, promotional and selling expenses, excluding the 2013 customer
program and incentive costs of $13.4 million that were reported as a reduction
in revenue, were $38.6 million higher than costs incurred in the comparable
52-week period in 2012. The combined net increase of $45.6 million in
advertising, promotional and selling and customer program and incentive costs
was primarily a result of increased costs for additional sales personnel and
commissions, increased local marketing, point of sale and media advertising,
and increased freight to distributors due to higher volumes.

General and administrative expenses increased by $12.2 million from the
comparable 52-week period in 2012, due to increases in salary and benefit
costs and consulting fees.

Impairment of long lived assets increased $1.4 million from the comparable
52-week period in 2012 due to the further write-down of land owned by the
Company in Freetown, Massachusetts.

During January 2014 the Company amended its line of credit to increase the
amount available from $50 million to $150 million and extended the scheduled
expiration date to March 31, 2019. The amended line of credit has terms and
covenants similar to the previous line of credit. The Company expects that
its December 28, 2013 cash balance of $49.5 million, together with its future
operating cash flows and the $150.0 million line of credit, will be sufficient
to fund future cash requirements.

During the fourth quarter and the period from December 29, 2013 through
February 21, 2014, the Company did not repurchase any shares of its Class A
Common Stock. As of February 21, 2014 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 7 weeks ended February 15, 2014 are
estimated by the Company to be up approximately 35% from the comparable period
in 2013.

2014 Outlook

The Company currently projects full year 2014 earnings per diluted share to be
between $6.00 and $6.40. The Company's actual 2014 earnings per share could
vary significantly from the current projection. Underlying the Company's
current 2014 projection are the following full year estimates and targets:

  oDepletions and shipments growth of between 16% and 20%.
  oNational price increases of approximately 2% to offset increases in
    ingredients, packaging and freight costs, and increased investments behind
    the Company's brands.
  oGross margins of between 51% and 53%.
  oIncreased investment in advertising, promotional and selling expenses of
    between $34 million and $42 million. This does not include any increases
    in freight costs for the shipment of products to the Company's
    distributors.
  oEstimated 2014 brand investments attributable to existing Alchemy &
    Science projects of between $5 million and $7 million, which are included
    in our full year estimated increases in advertising, promotional and
    selling expenses. These estimates could change significantly and 2014
    volume from these brands is unlikely to cover these and other
    expenditures that could be incurred.
  oEffective tax rate of approximately 38%.
  oCapital spending of between $160 million and $220 million, which could be
    significantly higher dependent on capital required to meet future growth.
    These estimates include capital investments for existing Alchemy & Science
    projects of between $7 million and $9 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. Inspired and
unafraid to challenge conventional thinking about beer, Jim brought the recipe
to life in his kitchen. Pleased with the results of his work, Jim decided to
sample his beer with bars in Boston in the hopes that drinkers would
appreciate the complex, full-flavored beer he brewed fresh in America. That
beer was aptly named Samuel Adams Boston Lager, in recognition of one of our
nation's great founding fathers, a man of independent mind and spirit. Little
did Jim know at the time, Samuel Adams Boston Lager would soon become a
catalyst of the American craft beer revolution.

Today, The Boston Beer Company brews more than 50 styles of beer. It
relentlessly pursues the development of new styles and the perfection of
classic beers by searching the world for the finest ingredients. Using the
traditional four vessel brewing process, the Company often takes extra steps
like dry-hopping, barrel-aging and a secondary fermentation known as
krausening. The Company has also pioneered another revolution, the 'extreme
beer' movement, where it seeks to challenge drinker's perceptions of what beer
can be. The Boston Beer Company has been committed to elevating the image of
American craft beer by entering festivals and competitions around the globe,
and is one of world's most awarded breweries at international beer
competitions. As an independent company, brewing quality beer remains its
single focus. Although Samuel Adams beer is America's largest-selling craft
beer, it accounts for only one percent of the U.S. beer market. The Boston
Beer Company will continue its independently-minded quest to brew great beer
and to advocate for the growth of craft beer across America. In addition to
Samuel Adams beers and the other craft brands brewed by Alchemy & Science, its
craft brew incubator, the Company also brews Twisted Tea and Angry Orchard
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 28,
2013 and December 29, 2012. 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 Income and Comprehensive Income:
(in thousands, except    (unaudited)                 (unaudited)
per share data)
                         December, 28   December     December, 28  December
                                        29,                       29,
                         2013           2012         2013          2012
                         (13 weeks)     (13 weeks)   (52 weeks)    (52 weeks)
Barrels sold             943            733          3,416         2,746
Revenue                  $         $       $        $     
                         220,566        165,547      793,705       628,580
Less excise taxes        15,191         12,547       54,652        48,358
 Net revenue        205,375        153,000      739,053       580,222
Cost of goods sold       100,747        73,224       354,131       265,012
 Gross profit       104,628        79,776       384,922       315,210
Operating expenses:
 Advertising,
promotional and selling  58,207         39,104       207,930       169,306
expenses
 General and           17,034         13,535       62,332        50,171
administrative expenses
Impairment of            267            149          1,567         149
long-lived assets
 Total operating    75,508         52,788       271,829       219,626
expenses
Operating income         29,120         26,988       113,093       95,584
Other (expense) income,
net:
Interest income          9              8            31            31
(expense), net
Other (expense) income,  (184)          (96)         (583)         (98)
net
 Total other        (175)          (88)         (552)         (67)
(expense) income, net
Income before income     28,945         26,900       112,541       95,517
tax provision
Provision for income     10,866         10,027       42,149        36,050
taxes
 Net income         $        $       $        $     
                         18,079          16,873      70,392       59,467
                                                                   -
Net income per common    $        $       $        $     
share - basic              1.40          1.31      5.47       4.60
Net income per common    $        $       $        $     
share - diluted            1.33          1.25      5.18       4.39
Weighted-average number
of common shares -Class  8,758          8,706        8,741         8,689
A basic
Weighted-average number
of common shares -       3,985          4,107        4,025         4,107
Class B basic
Weighted-average number
of common shares -       13,550         13,432       13,504        13,435
diluted
Other comprehensive
income, net of tax:
Defined benefit plans    466            (45)         466           (45)
liability adjustment
 Comprehensive      $        $       $        $     
income                   18,545          16,828      70,858       59,422



THE BOSTON BEER COMPANY, INC.
Financial Results
Consolidated Balance Sheets:
(in thousands, except share data)
                                                December 28,   December 29,
                                                2013           2012
Assets
 Current Assets:
 Cash and cash equivalents             $        $      
                                                49,524         74,463
 Accounts receivable, net of
allowance for doubtful accounts of $160 and
 $125 as of December 28, 2013     42,001         31,479
and December 29, 2012, respectively
 Inventories                           56,397         44,361
 Prepaid expenses and other assets     10,644         6,628
 Deferred income taxes                 5,712          5,411
 Total current assets             164,278        162,342
 Property, plant and equipment, net         266,558        189,948
 Other assets                               9,556          4,656
 Goodwill                                   3,683          2,538
 Total assets                     $         $     
                                                444,075        359,484
Liabilities and Stockholders' Equity
 Current Liabilities:
 Accounts payable                      $        $      
                                                34,424         28,303
 Current portion of debt and capital   53             62
lease obligations
 Accrued expenses and other current    69,900         60,529
liabilities
 Total current liabilities        104,377        88,894
 Deferred income taxes                      32,394         20,463
 Debt and capital lease obligations, less   584            566
current portion
 Other liabilities                          4,635          4,470
 Total liabilities                141,990        114,393
 Commitments and Contingencies
 Stockholders' Equity:
 Class A Common Stock, $.01 par
value; 22,700,000 shares authorized;
 8,785,343 and 8,703,670 issued
and outstanding as of December 28, 2013
 and December 29, 2012,           88             87
respectively
 Class B Common Stock, $.01 par
value; 4,200,000 shares authorized;
 3,962,355 and 4,107,355 issued   40             41
and outstanding as of December 28, 2013
 and December 29, 2012,
respectively
 Additional paid-in capital            173,025        157,305
 Accumulated other comprehensive       (417)          (883)
loss, net of tax
 Retained earnings                     129,349        88,541
 Total stockholders' equity       302,085        245,091
 Total liabilities and            $         $     
stockholders' equity                            444,075        359,484



THE BOSTON BEER COMPANY, INC.
Financial Results
Consolidated Statements of Cash
Flows:
(in thousands)
                                            December 28,     December 29,
                                            2013             2012
                                            (52 weeks)       (52 weeks)
Cash flows provided by operating
activities:
 Net income                             $          $      
                                            70,392           59,467
 Adjustments to reconcile net income
to net cash provided by operating
activities:
 Depreciation and amortization     25,903           20,208
 Impairment of long-lived assets   1,567            149
 Loss on disposal of property,     462              54
plant and equipment
 Bad debt expense                 19               59
 Stock-based compensation expense  7,318            6,528
 Excess tax benefit from           (5,282)          (7,894)
stock-based compensation arrangements
 Deferred income taxes                    11,630           2,066
 Changes in operating assets and
liabilities, net of effects of
acquisition:
 Accounts receivable               (10,542)         (8,305)
 Inventories                       (12,036)         (10,289)
 Prepaid expenses and other        (7,616)          6,123
assets
 Accounts payable                  3,173            8,002
 Accrued expenses and other        14,633           19,491
current liabilities
 Other liabilities                 361              (329)
 Net cash provided by         99,982           95,330
operating activities
Cash flows used in investing activities:
 Purchases of property, plant and       (100,655)        (65,010)
equipment
 Cash paid for acquisition of brewery    (2,753)          (1,726)
assets and other intangible asset
 Decrease (increase) in restricted      62               (628)
cash
 Proceeds from disposal of property,    18               41
plant and equipment
 Net cash used in investing   (103,328)        (67,323)
activities
Cash flows used in financing activities:
 Repurchase of Class A Common Stock     (29,585)         (18,046)
 Proceeds from exercise of stock        2,541            5,727
options
 Proceeds from note payable             -                628
 Cash paid on notes payable and         (787)            -
capital lease
 Excess tax benefit from stock-based    5,282            7,894
compensation arrangements
 Net proceeds from sale of investment   956              803
shares
 Net cash used in financing   (21,593)         (2,994)
activities
Change in cash and cash equivalents         (24,939)         25,013
Cash and cash equivalents at beginning of   74,463           49,450
year
Cash and cash equivalents at end of period  $          $      
                                            49,524           74,463
Supplemental disclosure of cash flow
information:
Income taxes paid                           $          $      
                                            29,442           18,782
Allocation of purchase consideration to
brewery acquisition to the following
assets:
 Property, plant and equipment      110              338
 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; or Media
Contact: Jessica Paar, (617) 368-5060
 
Press spacebar to pause and continue. Press esc to stop.