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
  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
  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,,

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

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
   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)
  Income before provision for income     13,251             9,562
  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
  Defined benefit plans liability        -                  -
   Comprehensive income             $      8,315  $      6,912

Financial Results
Consolidated Balance Sheets:
 (in thousands, except share data)                (unaudited)
                                                  March 29,    Dec. 28,
                                                  2014         2013
  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
  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
  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,
  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

Financial Results
Consolidated Statements of Cash
 (in thousands)                              (unaudited)
                                             March 29,        March 30,
                                             2014             2013
                                             (13 weeks)       (13 weeks)
 Cash flows used in operating
  Net income                             $           $   6,912
  Adjustments to reconcile net income
 to net cash used in operating activities:
  Depreciation and                  7,195            5,098
  Loss on disposal of property,     -                345
 plant and equipment
  Bad debt expense                  175              31
  Stock-based compensation          1,936            1,537
  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
  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)
  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)
 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
 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

SOURCE The Boston Beer Company, Inc.

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