Boston Beer Reports Over 15% Increase in Third Quarter Net Revenue
BOSTON, Nov. 2 /PRNewswire-FirstCall/ -- The Boston Beer Company, Inc. (NYSE: SAM) achieved third quarter 2005 diluted earnings per share of $0.29 and net income of $4.2 million, up $0.08 per share and $1.2 million, respectively, from the same period last year. Net revenue increased by 15.5% to $63.2 million in the third quarter of 2005, driven by an 11.8% increase in shipment volume and a 3.3% increase in net revenue per barrel as compared to the same quarter last year. For the nine months ended September 24, 2005, the Company recorded diluted earnings per share of $0.91 and net income of $13.3 million, up $0.24 per share and $3.6 million, respectively, versus the same period in 2004. Net revenue increased by 7.5% to $173.6 million during the first nine months of 2005 compared to the same period in the prior year.
Jim Koch, Chairman and Founder of the Company, commented, "We are very pleased by the almost 9% depletion growth achieved in the third quarter, which resulted in almost 5% growth for the first nine months as compared to the first nine months of 2004. The craft beer category has grown this year, despite price increases, while the beer industry as a whole has been relatively flat. We believe that the brand communication that we introduced in March 2005 has better positioned Samuel Adams to benefit from this category trend."
Martin Roper, Boston Beer Company President and CEO, added, "The depletion growth achieved through the end of the third quarter reflected improvements in all major brand trends. During the third quarter, we saw growth in the Samuel Adams Brand Family. Growth in Samuel Adams Seasonals and Brewmaster's Collection was offset somewhat by declines in Samuel Adams Boston Lager and Sam Adams Light. We think that our brand health has been positively impacted by the 'Take Pride in Your Beer' communication and are encouraged by our volume trends, which we believe are primarily benefiting from the health of Better Beer and the Craft category. We also experienced growth in Twisted Tea and we are evaluating the resources that are appropriate for the brand."
Third Quarter Results
Reported shipment volume for the period was approximately 0.4 million barrels, an 11.8% increase from the same period in 2004. Wholesaler inventory levels at the end of the third quarter of 2005 were at normal levels, based on historical measures.
Distributor sales of the Boston Beer brands to retail (depletions) increased by almost 9% during the third quarter of 2005 compared to the same period last year. The Samuel Adams Brand Family grew with increases in Samuel Adams(R) Seasonals and Brewmaster's Collection, offsetting some weakness in Samuel Adams Boston Lager(R) and Sam Adams Light(R). The Company also benefited from significant growth in sales of Twisted Tea(R) which is a regional brand sold in some states.
The Company's net income of $4.2 million, or $0.29 per diluted share, for the three months ended September 24, 2005, increased by $1.2 million or $0.08 per diluted share from the same period last year. Net revenue increased by $8.5 million, or 15.5%, during the third quarter of 2005 as compared to the prior year period due to the increase in shipment volume and a 3.3% increase in net revenue per barrel. The increase in net revenue per barrel is due to price increases and a shift in the product and package mix. Gross margin as a percentage of net sales increased to 59.1% in the third quarter of 2005 from 58.5% in the same quarter last year. The increase in gross margin during the third quarter of 2005 was due to price increases that were only partially offset by higher packaging material and production costs. Advertising, promotional and selling expenses increased by $3.4 million during the quarter as compared to the prior year, primarily due to higher freight fuel costs and advertising expenditures.
Year-to-Date Results
Reported shipment volume for the nine month period was 1.0 million barrels, a 4.8% increase from the same period in 2004.
Distributor sales of the Boston Beer brands to retail (depletions) increased by almost 5% during the first nine months of 2005 compared to the same period last year. The year to date brand trends are similar to the quarter trends.
The Company's recorded net income of $13.3 million, or $0.91 per diluted share for the nine months ended September 24, 2005, increased by $3.6 million, or $0.24 per diluted share, as compared to the same period last year. Net revenue increased $12.1 million or 7.5% due to the increase in shipment volume and a 2.6% increase in net revenue per barrel. The increase in net revenue per barrel is due primarily to price increases and a shift in the product and package mix. Gross margins as a percent of net sales increased to 60.0% from 59.5% in the same period last year, principally due to net price increases only partially offset by unfavorable packaging material and production costs. Advertising, promotional and selling expenses increased by $1.6 million, or 2.2%, for the nine months ended September 24, 2005 compared to the same period last year, driven by higher fuel costs. General and administrative expenses increased by $1.6 million compared to the same period last year, primarily due to increases in salaries and accounting and legal fees.
Other Matters
Shipments and orders in-hand suggest that core shipments for October and November 2005 could be up approximately 20% as compared to the same period in 2004. Actual shipments may differ, however, and no inferences should be drawn with respect to shipments in future periods.
Martin Roper cautioned, "October and November growth rates are significantly ahead of known depletion brand trends, which is unexpected, and it is unclear at this time what impact, if any, this will have on wholesaler inventories at year end."
Bill Urich, Boston Beer's Chief Financial Officer, commented, "Our 2005 full year earnings per share target of between $0.96 and $1.00 remains essentially unchanged from what we have previously communicated. This earnings per share target assumes that fourth quarter shipments will be in line with year to date depletion trends. We expect gross margins for the rest of the year to be slightly below our third quarter 2005 rate and full year advertising, promotional and selling expenditures to exceed the full year 2004 by between $5.0 and $8.0 million. The increase in advertising, promotional and selling expenditures is higher than our previous projections because of increased fuel related freight costs and continued advertising and selling investment behind our brands. As we look forward to 2006, we are seeing extraordinary cost pressures on all items but especially freight costs, the size and consistency of which we have not seen before. We are evaluating potential price increases for 2006, but our ability to raise pricing will be affected by competitive moves and an assessment of such increases on our volume trends. Based on current cost increase knowledge and preliminary pricing expectations, 2006 gross margin could be down as much as one percentage point below full year 2005. Our ability to achieve historical levels of earnings growth in 2006 will be dependent on our ability to achieve challenging targets for volume, pricing and costs. We continue to pursue cost savings initiatives and all pricing opportunities in order to preserve our economics and allow us to continue to support our brands with appropriate investment and grow our volumes and earnings.
"We have substantially completed the $6.5 million expansion project at the Company's Cincinnati, Ohio brewery that we began earlier this year," Urich continued. "We now expect our capital expenditures for the year to be approximately $15.0 million. Our operating cash generated year to date is strong at $21.6 million, resulting in $61.6 million in cash and short term investments as of the end of the third quarter."
During the three months ended September 24, 2005, the Company repurchased $7.2 million of its Class A Common Stock. Through October 31, 2005, the Company has repurchased a cumulative total of approximately 7.6 million shares of its Class A Common Stock for an aggregate purchase price of $86.2 million, and had $13.8 million remaining on the $100.0 million share buyback expenditure limit. As of October 31, 2005, the Company had 9.8 million shares of Class A Common Stock and 4.1 million shares of Class B Common Stock outstanding.
The Boston Beer Company is America's leading brewer of handcrafted, full- flavored beers. Founder and Brewer, Jim Koch, brews Samuel Adams beers using the time-honored, traditional four-vessel brewing process, and the world's finest all-natural ingredients. With 18 distinctive, award-winning styles of beer, Samuel Adams offers discerning beer drinkers a variety of brews. The brewery has won more awards in international beer-tasting competitions in the last five years than any other brewery in the world. Samuel Adams is an independent brewery and has half of a percent of the domestic beer market. The Company's flagship brand, Samuel Adams(R) Boston Lager, is brewed using the same recipe and processes that Jim Koch's great-great grandfather used in the mid 1800s. The result is a beer renowned by drinkers for its full flavor, balance, complexity, and consistent quality. For more information, visit http://www.samueladams.com or visit http://www.bostonbeer.com for financial information.
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 25, 2004 and December 27, 2003. Copies of these documents may be found on the Company's website, http://www.bostonbeer.com or obtained by contacting the Company or the SEC.
Contact: Michelle Sullivan
The Boston Beer Company
(617) 368-5165
THE BOSTON BEER COMPANY, INC.
Financial Results
(In thousands, except per share data)
Operating Results:
(unaudited) (unaudited)
Quarter Ended 9 Months Ended
Sept. 24, Sept. 25, Sept. 24 Sept. 25
2005 2004 2005 2004
Barrels sold 359 321 992 947
Revenue $69,743 $60,477 $191,863 $178,303
Less excise taxes 6,533 5,743 18,311 16,898
Net revenue 63,210 54,734 173,552 161,405
Cost of goods sold 25,838 22,738 69,416 65,315
Gross profit 37,372 31,996 104,136 96,090
Advertising, promotional and
selling expenses 26,816 23,391 71,697 70,129
General and administrative
expenses 4,353 3,926 12,372 10,765
Total operating expenses 31,169 27,317 84,069 80,894
Operating income 6,203 4,679 20,067 15,196
Interest income 425 183 1,205 570
Other income (expense), net 175 1 393 (238)
Income before income taxes 6,803 4,863 21,665 15,528
Provision for income taxes 2,616 1,838 8,372 5,870
Net income $4,187 $3,025 $13,293 $9,658
Net income per share - basic $0.30 $0.21 $0.94 $0.68
Net income per share - diluted $0.29 $0.21 $0.91 $0.67
Weighted average number of common
shares - basic 14,070 14,162 14,201 14,103
Weighted average number of common
shares - diluted 14,437 14,595 14,580 14,479
Copies of The Boston Beer Company's press releases, including quarterly financial results, are available on the Internet at http://www.bostonbeer.com
Consolidated Balance Sheets:
(in thousands, except share data) (unaudited)
September 24, December 25,
2005 2004
Assets
Current Assets:
Cash and cash equivalents $37,396 $35,794
Short-term investments 24,250 24,000
Accounts receivable, net
of allowance for
doubtful accounts of
$449 and $597 as of
September 24, 2005
and December 25,
2004, respectively 14,438 12,826
Inventories 12,452 12,561
Prepaid expenses and
other assets 1,572 1,113
Deferred income taxes 1,224 1,474
Total current assets 91,332 87,768
Property, plant and equipment,net 25,072 17,222
Other assets 1,050 1,095
Goodwill 1,377 1,377
Total assets $118,831 $107,462
Liabilities and Stockholders'
Equity
Current Liabilities:
Accounts payable $11,309 $9,744
Accrued expenses 20,787 16,494
Total current liabilities 32,096 26,238
Deferred income taxes 2,037 2,085
Other liabilities 721 769
Stockholders' Equity
Class A Common Stock,
$.01 par value;
22,700,000 shares
authorized;
9,799,527 and
10,088,869 issued
and outstanding as
of September 24,
2005 and December
25, 2004, respectively 98 101
Class B Common Stock,
$.01 par value;
4,200,000 shares
authorized;
4,107,355 issued
and outstanding 41 41
Additional paid-in
capital 69,380 66,157
Unearned compensation (398) (280)
Accumulated other
comprehensive loss (140) (203)
Retained earnings 14,996 12,554
Total stockholders'
equity 83,977 78,370
Total liabilities
and stockholders'
equity $118,831 $107,462
Consolidated Statements of Cash Flows:
(in thousands) (unaudited)
Nine Months Ended
September 24, September 25,
2005 2004
Cash flows provided by operating
activities:
Net income $13,293 $9,658
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and
amortization 3,198 3,856
Gain on disposal of
property, plant and
equipment (6) (1)
Bad debt (recovery) expense (148) 65
Realized loss on sale of
short-term investments - 229
Stock option compensation expense 108 91
Tax benefit from stock
options exercised 853 709
Changes in operating assets and
liabilities:
Accounts receivable (1,464) (1,968)
Inventories 109 (1,005)
Prepaid expenses and other assets (433) 1,129
Deferred income taxes 280 29
Accounts payable 1,565 2,032
Accrued expenses 4,293 1,042
Other liabilities (48) (47)
Net cash provided by
operating activities 21,600 15,819
Cash flows used in investing
activities:
Purchases of property, plant
and equipment (10,950) (3,530)
Proceeds on disposal of
property, plant and equipment 14 1
Purchases of short-term investments (350) (26,256)
Proceeds from the sale of
short-term investments 100 20,983
Net cash used in
investing activities (11,186) (8,802)
Cash flows (used in) provided by
financing activities:
Repurchase of stock (10,854) -
Proceeds from exercise of stock options 1,821 2,015
Net proceeds from the sale of
Investment Shares 221 189
Net cash (used in)
provided by
financing activities (8,812) 2,204
Change in cash and cash equivalents 1,602 9,221
Cash and cash equivalents at
beginning of period 35,794 27,792
Cash and cash equivalents at end of
period $37,396 $37,013
Supplemental disclosure of cash flow
information:
Income taxes paid $6,134 $4,100
SOURCE The Boston Beer Company, Inc.
CONTACT:
Michelle Sullivan of The Boston Beer Company,
+1-617-368-5165