Boston Beer Reports First Quarter 2014 Results

                Boston Beer Reports First Quarter 2014 Results  PR Newswire  BOSTON, April 30, 2014  BOSTON, April 30, 2014 /PRNewswire/ --The Boston Beer Company, Inc. (NYSE: SAM) reported first quarter 2014 net revenue of $183.8 million, an increase of $47.9 million, or 35%, over the same period last year, mainly due to core shipment growth of 32%. Net income for the first quarter was $8.3 million, or $0.62 per diluted share, an increase of $1.4 million, or $0.11 per diluted share, from the first quarter of 2013. This increase was primarily due to shipment increases, partially offset by increased investments in advertising, promotional and selling expenses and the impact of a favorable federal income tax settlement of $0.06 per diluted share in the first quarter of 2013.  Highlights of this release include:    oDepletions for the 13 week period ending March 29, 2014 grew by 34% from     the comparable 13 week period ending March 30, 2013.   oThe Company achieved price increases of approximately 2% during the     quarter.   oFirst quarter gross margin was 49%, but the Company maintains its full     year gross margin target of between 51% and 53%.   oAdvertising, promotional and selling expense increased by $17.8 million or     41% in the quarter, primarily due to planned increased investments behind     the Company's brands.   oThe Company's effective tax rate increased to 37% from 28% in the first     quarter of 2013. The 2013 rate was a result of the favorable impact of a     federal income tax settlement of $0.06 per diluted share in 2013.   oFull year 2014 depletion growth is estimated to be between 16% and 20% and     estimated full year 2014 earnings per diluted share of $6.00 to $6.40     remain unchanged   oFull year 2014 capital spending is now estimated to be between $160     million and $200 million, a narrowing of the range from the previously     communicated estimate of $160 million to $220 million.  Jim Koch, Chairman and Founder of the Company, commented, "I am pleased that The Boston Beer Company achieved record depletions in the quarter and that Samuel Adams Boston Lager, our flagship beer, has continued to grow as we celebrate our 30^th anniversary. In the first quarter, we introduced our new spring seasonal, Samuel Adams Cold Snap and I was excited that Cold Snap was well received by drinkers, retailers and wholesalers. Late in the first quarter, we had a smooth transition from Cold Snap to our Summer Seasonal, Samuel Adams Summer Ale, now in its nineteenth year and still one of my favorites. During the quarter, we initiated our national rollout of Samuel Adams Rebel IPA, a West Coast style IPA brewed with hops from the Pacific Northwest. It continues to receive great support from distributors and on and off-premise retailers. I am particularly pleased with the early success of Rebel IPA that we believe three months into our national launch is already among the top three selling IPAs according to off-premise scan data, and we are still building distribution. We are happy with the health of our brand portfolio and remain positive about the future of craft beer."  Martin Roper, the Company's President and CEO stated; "In the first quarter, our depletions growth benefited from the strength in our Samuel Adams, Angry Orchard and Twisted Tea brands. The Samuel Adams brand benefited from our 30^th Anniversary celebration, the rollout of Rebel IPA and the strength of our Seasonal beers. Our brands also benefited from increased brand support, including increased media spend, expansion of our sales force, and other brand support investments. We are planning continued increases in investments in advertising, promotional and selling expenses behind existing brands in an attempt to maintain the momentum, as well as in innovation, commensurate with the opportunities and the increased competition that we see. We do not expect that the depletions growth rates we experienced in the first quarter will be maintained for the remainder of the year, as we face tougher comparables and the first quarter benefit from new product launches is unlikely to be replicated during the balance of 2014. Accordingly, we have not increased our estimated full year 2014 depletion growth rate."  Mr. Roper went on to say, "Our supply chain performance improved during the quarter, but still remains below our expectations. The high demand levels, unseasonal weather and planned shutdowns for maintenance and efficiency improvements caused us to experience higher operational and freight costs than we had originally expected. While our growth continues to challenge us operationally, we have improved our service level to our distributors and decreased our product shortages. Projects at the breweries to add capacity in preparation for peak volumes later this year are starting to be commissioned and we expect most to be fully operational during the second quarter. Compared to this time last year, we will have significantly increased our brewing, packaging and shipping capabilities and our tank capacity at our Pennsylvania Brewery and our Cincinnati Brewery. 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."  1st Quarter 2014 Summary of Results  Depletions grew 34% from the comparable 13-week period in the prior year, primarily due to depletion increases across our Angry Orchard^®, Samuel Adams^® and Twisted Tea^® brands.  Core shipment volume was approximately 835,000 barrels, a 32% increase compared to the first quarter of the prior year.  The Company believes wholesaler inventory levels at March 29, 2014 were at appropriate levels. Inventory at wholesalers participating in the Freshest Beer Program at March 29, 2014 was unchanged in terms of days of inventory on hand when compared to March 30, 2013. The Company has over 65% of its volume on the Freshest Beer Program and it believes participation in the Program could reach between 70% and 75% of its volume by the end of 2014.  Gross margin decreased to 49% compared to 50% in the first quarter of 2013. The margin decrease was a result of product mix effects, increases in brewery processing costs, and increases in customer program and incentive costs, which were only partially offset by price increases.  Advertising, promotional and selling expenses were $17.8 million higher than costs incurred in the first quarter of 2013. The increase was primarily a result of increased investments in media advertising, point of sale and local marketing, increased costs for additional sales personnel and commissions, and increased freight to distributors due to higher volumes.  General and administrative expenses increased $1.2 million compared to the first quarter of 2013, primarily due to increases in salary and benefit costs and consulting expenses.  The Company expects that its March 29, 2014 cash balance of $28.0 million, together with its future operating cash flows and the $150.0 million line of credit, will be sufficient to fund future cash requirements.  Depletion estimates  Year-to-date depletions through the 16 weeks ended April 19, 2014 are estimated by the Company to be up approximately 33% from the comparable period in 2013.  Fiscal 2014 Outlook  The Company has left unchanged its projected 2014 earnings per diluted share of 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 projection are the following 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 $4 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     related to these projects that could be incurred.   oEffective tax rate of approximately 38%.   oCapital spending of between $160 million and $200 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 per share data)  (unaudited)                                          March 29,          March 30,                                          2014               2013                                          (13 weeks)         (13 weeks)   Barrels sold                           838                636   Revenue                                $    197,370    $    146,412   Less excise taxes                      13,525             10,480    Net revenue                      183,845            135,932   Cost of goods sold                     93,326             68,149    Gross profit                     90,519             67,783   Operating expenses:    Advertising, promotional and        61,257             43,449   selling expenses    General and administrative          15,871             14,648   expenses    Total operating expenses         77,128             58,097   Operating income                       13,391             9,686   Other (expense) income, net:   Interest (expense) income, net        (4)                (2)   Other (expense) income, net            (136)              (122)    Total other (expense) income,    (140)              (124)   net   Income before provision for income     13,251             9,562   taxes   Provision for income taxes             4,936              2,650    Net income                       $      8,315  $      6,912   Net income per common share - basic    $            $                                                0.64               0.54   Net income per common share - diluted  $            $                                                0.62               0.51   Weighted-average number of common      8,999              8,709   shares -Class A basic   Weighted-average number of common      3,905              4,102   shares - Class B basic   Weighted-average number of common      13,435             13,505   shares - diluted   Other comprehensive income, net of   tax:   Defined benefit plans liability        -                  -   adjustment    Comprehensive income             $      8,315  $      6,912    THE BOSTON BEER COMPANY, INC. Financial Results Consolidated Balance Sheets:  (in thousands, except share data)                (unaudited)                                                   March 29,    Dec. 28,                                                   2014         2013  Assets   Current Assets:   Cash and cash equivalents              $  27,976  $   49,524   Accounts receivable, net of  allowance for doubtful accounts of $335 and   $160 as of March 29, 2014 and     45,967       42,001  December 28, 2013, respectively   Inventories                            61,007       56,397   Prepaid expenses and other             15,809       10,644  assets   Deferred income taxes                  5,712        5,712   Total current assets              156,471      164,278   Property, plant and equipment, net          309,082      266,558   Other assets                                10,127       9,556   Goodwill                                    3,683        3,683   Total assets                      $        $                                                       479,363      444,075  Liabilities and Stockholders' Equity   Current Liabilities:   Accounts payable                       $  38,905  $   34,424   Current portion of long-term debt      55           53  and capital lease obligations   Accrued expenses and other             59,246       69,900  current liabilities   Total current liabilities         98,206       104,377   Deferred income taxes                       32,297       32,394   Debt and capital lease obligations, less    528          584  current portion   Other liabilities                           4,232        4,635   Total liabilities                 135,263      141,990   Commitments and Contingencies   Stockholders' Equity:   Class A Common Stock, $.01 par  value; 22,700,000 shares authorized;   9,137,712 and 8,785,343 issued  and outstanding as of March 29, 2014   and December 28,2013,             91           88  respectively   Class B Common Stock, $.01 par  value; 4,200,000 shares authorized;   3,827,355 and 3,962,355 issued    38           40  and outstanding as of March 29, 2014   and December 28, 2013,  respectively   Additional paid-in capital             206,724      173,025   Accumulated other comprehensive        (417)        (417)  loss, net of tax   Retained earnings                      137,664      129,349   Total stockholders' equity        344,100      302,085   Total liabilities and             $  479,363  $  444,075  stockholders' equity    THE BOSTON BEER COMPANY, INC. Financial Results Consolidated Statements of Cash Flows:  (in thousands)                              (unaudited)                                              March 29,        March 30,                                              2014             2013                                              (13 weeks)       (13 weeks)  Cash flows used in operating  activities:   Net income                             $           $   6,912                                              8,315   Adjustments to reconcile net income  to net cash used in operating activities:   Depreciation and                  7,195            5,098  amortization   Loss on disposal of property,     -                345  plant and equipment   Bad debt expense                  175              31   Stock-based compensation          1,936            1,537  expense   Excess tax benefit from           (8,060)          (4,337)  stock-based compensation arrangements    Deferred income taxes                (97)             (208)   Changes in operating assets  and liabilities:   Accounts receivable               (4,141)          1,184   Inventories                       (4,610)          (7,350)   Prepaid expenses and              (5,869)          (5,995)  other assets   Accounts payable                  (1,011)          (630)   Accrued expenses and              (2,740)          (9,257)  other current liabilities   Other liabilities                 97               (161)   Net cash used in             (8,810)          (12,831)  operating activities  Cash flows used in investing  activities:   Purchases of property, plant           (44,170)         (21,177)  and equipment   Decrease in restricted cash            55               62   Net cash used in             (44,115)         (21,115)  investing activities  Cash flows provided by (used in)  financing activities:   Repurchase of Class A Common           -                (14,697)  Stock   Proceeds from exercise of              22,996           1,844  stock options   Cash paid on notes payable             (53)             (62)  and capital lease   Excess tax benefit from                8,060            4,337  stock-based compensation arrangements   Net proceeds from sale of              374              355  investment shares   Net cash provided by         31,377           (8,223)  (used in) financing activities  Change in cash and cash                     (21,548)         (42,169)  equivalents  Cash and cash equivalents at                49,524           49,524  beginning of year  Cash and cash equivalents at end            $    27,976  $  7,355  of period  Supplemental disclosure of cash  flow information:  Income taxes paid                           $            $  4,289                                              1,951  Acquisition of property and equipment       $         $    231  under capital lease                          -  Increase in accounts payable for purchase   $            $      -  of property, plant and equipment            5,492 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  
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