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Boston Beer Reports 2003 Volume, Revenue and Earnings

BOSTON, Feb. 11 /PRNewswire-FirstCall/ -- The Boston Beer Company, Inc. (NYSE: SAM) today announced fourth quarter 2003 volume, revenue and earnings.

4th Quarter Results

For the three month period ended December 27, 2003, Boston Beer shipment volumes were down 6.3%. The following chart compares reported shipment volume for the current period to the prior year.

    (in barrels)                    Q4-2003         Q4-2002          %Chg
    Total Boston Beer Brands        301,486         321,851          -6.3
    3rd Party Contract Brewing        1,153           1,141           1.1
    Total Company                   302,639         322,992          -6.3

The decrease in shipment volume is primarily related to Sam Adams Light(R) which was higher during the fourth quarter 2002 when Sam Adams Light was rolled out nationally. Distributor sales of Boston Beer brands to retail (depletions) during the 2003 fourth quarter totaled 336,000 barrels, approximately a 6% decrease from the same period in 2002.

Net revenue per barrel remained flat, with price increases taken in 2003 offset by a shift in the package mix towards kegs from bottles. This shift reflects the return to a more normal mix from the fourth quarter 2002 mix that was affected by the higher shipment volume of Sam Adams Light(R) bottles during the fourth quarter 2002 product launch.

The Company earned $3.6 million in net income and $.25 per diluted share for the quarter versus net income of $2.1 million and $.13 per diluted share for the same period last year. Gross margin as a percent of net revenue was 56.6% as compared to 57.8% in the prior year fourth quarter. The decline in gross margin was due to a $1.5 million charge expensed during the fourth quarter 2003 relating to securing long-term production alternatives in the event of an unfavorable outcome relating to the arbitration with Miller Brewing Company. On October 28, 2003, the arbitrators issued a decision that Miller Brewing Company was not entitled to early termination of its production agreement with the Company; and, thus, the Company, no longer needing the backup, expensed the costs incurred in establishing those alternatives. Advertising, selling and promotion expenses decreased by $4.8 million or 19.2% as compared to the prior year quarter, due primarily to higher brand support in 2002 for the launch of Sam Adams Light(R). General and administrative expenses for the quarter decreased $828,000 compared to the fourth quarter of 2002, as a result of the award against Miller Brewing Company by the arbitrators related to the Company's legal costs incurred in connection with the proceedings.

Full Year Results

For the twelve month period ended December 27, 2003, Boston Beer recorded net revenue of $207.9 million, a 3.4% decrease from the same period in 2002. The decline in net revenue is primarily due to a 3.9% decline in shipment volume, partially offset by a price increase. The following chart compares

reported sales volume for the current twelve months to the same period last year.

    (in barrels)                   YTD-2003        YTD-2002          %Chg
    Total Boston Beer Brands      1,229,217       1,280,589          -4.0
    3rd Party Contract Brewing        6,734           5,786          16.4
    Total Company                 1,235,951       1,286,375          -3.9

For the full year 2003 Boston Beer Brand distributor sales to retail (depletions) totaled 1,237,000 barrels, approximately even with 2002.

The Company earned $10.6 million in net income or $.70 per diluted share for the twelve months ending December 27, 2003 versus net income of $8.6 million and $.52 per diluted share earned during 2002. Gross margin as a percent of net revenue declined slightly to 58.8% as compared to 59.0% in 2002. The decline in gross margin was due to a $1.5 million charge relating to certain precautions taken to secure long-term production supply prior to learning the favorable outcome of the arbitration proceedings with Miller Brewing Company. Advertising, promotional and selling expenses decreased by $8.9 million or 8.8% for the full year 2003 as compared to 2002, primarily due to higher expenditures in 2002 to support the introduction of Sam Adams Light(R).

The Company's effective tax rate was 37.8% for the twelve months ended December 27, 2003, down from 39.3% during the same period 2002. The decline is due to shifting a significant portion of the Company's investments from taxable to tax-exempt instruments and a restructuring of the Company's corporate legal entities.

Shipments and orders in-hand suggest that shipments for the first quarter will be approximately even with first quarter 2003 depletions. Actual shipments for the first quarter may differ, however, and no inferences should be drawn with respect to shipments in future periods.

Jim Koch, Chairman of The Boston Beer Company said, "2003 ended with mixed results for the beer industry, and, in particular, a year of lower growth for Better Beer. Volumes in the fourth quarter as compared to 2002 were negatively impacted due to the introduction of Sam Adams Light, which was first introduced in that year. We remain encouraged by the positive trends in the second half of the year for Samuel Adams Boston Lager and Seasonal brands. We have started outdoor and print campaigns behind Sam Adams Light. It is too early to say whether they are impacting our Sam Adams Light volume, which is still suffering relative to very strong trial numbers during the early launch months."

Martin Roper, Boston Beer President and CEO stated, "We are pleased with the outcome of the arbitration proceedings and look forward to continuing our relationship with Miller Brewing Company. The $1.5 million charge incurred in fourth quarter 2003, relating to securing long-term production alternatives negatively impacted our gross margins. Going forward, we do not anticipate any material changes in our current production economics, and, given expected price increases and current cost pressures, expect to be able to maintain our gross margins in 2004."

Martin Roper also commented on 2003 volume trends. "While not satisfied with the full year volumes of Sam Adams Light, we are pleased that our other core brands have demonstrated volume strength in a difficult year for the beer industry. We are committed to growing Sam Adams Light long-term, and are working on developing advertising campaigns to take best advantage of the significant opportunity that we believe exists. The advertising campaign for Samuel Adams Boston Lager appears to be working and we plan to continue investing behind this campaign as the cornerstone of quality communication for the entire Samuel Adams Brand Family."

During the three and twelve months ended December 27, 2003, the Company repurchased 36,200 and 2.1 million shares, respectively, of its Class A Common Stock for an aggregate purchase price of $589,000 and $29.8 million, respectively. As of February 10, 2004, the Company had $5.2 million remaining on the authorized share buyback expenditure limit. Since the beginning of the share repurchase program, the Company has repurchased a total of approximately 7.1 million shares of its Class A Common Stock for an aggregate purchase price of $74.8 million through February 10, 2004. As of February 10, 2004, the Company has 9.9 million shares of Class A Common Stock outstanding and 4.1 million shares of Class B Common Stock outstanding.

The Boston Beer Company is America's leading brewer of world-class beer. Founded in 1984 by sixth-generation brewer Jim Koch, the Company has won more than 500 international awards for its better-tasting beers. Samuel Adams Boston Lager(R) is the Company's flagship brand, celebrated worldwide for its high-quality ingredients and traditional brewing techniques. The result is a beer renowned by drinkers for its full flavor, balance, complexity, and consistent quality. For more information, visit the website at www.samadams.com or visit 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 year ended December 28, 2002 and for December 29, 2001. Copies of these documents may be found on the Company's website, www.bostonbeer.com, or be obtained by contacting the Company or the SEC.


                          THE BOSTON BEER COMPANY, INC.
                                Financial Results
                      (In thousands, except per share data)

    Operating Results:
                                           (unaudited)        (unaudited)
                                          Quarter Ended     12 Months Ended
                                         Dec. 27, Dec. 28,  Dec. 27,  Dec. 28,
                                            2003     2002      2003      2002

      Barrels sold                           303      323     1,236     1,286

      Gross revenue                      $56,235  $60,038  $230,103  $238,335
      Less excise taxes                    5,474    5,774    22,158    22,980
      Net revenue                         50,761   54,264   207,945   215,355
      Cost of goods sold                  22,016   22,917    85,606    88,367
      Gross profit                        28,745   31,347   122,339   126,988
      Advertising, promotional and
       selling expenses                   20,286   25,091    91,841   100,734
      General and administrative
       expenses                            2,808    3,636    14,628    14,586
      Total operating expenses            23,094   28,727   106,469   115,320
      Operating income                     5,651    2,620    15,870    11,668
      Interest income, net                   144      388     1,085     1,119
      Other income (expenses), net            20       59        19     1,304
      Income before income taxes           5,815    3,067    16,974    14,091
      Provision for income taxes           2,198      999     6,416     5,538
      Net income                          $3,617   $2,068   $10,558    $8,553

      Net income per share - basic         $0.26    $0.13     $0.72     $0.53
      Net income per share - diluted       $0.25    $0.13     $0.70     $0.52

      Weighted average number of common
       shares - basic                     13,890   15,749    14,723    16,083
      Weighted average number of common
       shares - diluted                   14,227   16,059    15,000    16,407


    Consolidated Balance Sheets:
                                                         (unaudited)
                                               December 27,       December 28,
                                                      2003               2002

      Assets
           Current Assets:
                Cash and cash equivalents          $27,792            $20,608
                Short-term investments              15,098             32,001
                Accounts receivable, net
                 of allowance for doubtful
                 accounts of $450 and $689 as
                 of December 27, 2003 and
                 December 28, 2002,
                 respectively                       10,432             17,830
                Inventories                          9,890              8,342
                Prepaid expenses                     1,126              1,284
                Deferred income taxes                1,177              1,959
                Other current assets                 2,304              1,513
                     Total current assets           67,819             83,537

           Property, plant and equipment,
            net                                     17,059             20,202
           Other assets                              1,099              1,690
           Goodwill                                  1,377              1,377
                     Total assets                  $87,354           $106,806

      Liabilities and Stockholders'
       Equity
           Current Liabilities:
                Accounts payable                    $6,395             $8,997
                Accrued expenses                    15,504             15,874
                     Total current
                      liabilities                   21,899             24,871

           Deferred income taxes                     2,191              2,406
           Other long-term liabilities                 740                697

           Commitments and Contingencies

           Stockholders' Equity
                Class A Common Stock,
                 $.01 par value; 22,700,000
                 shares authorized; 16,945,418
                 and 16,674,556 issued as of
                 December 27, 2003 and
                 December 28, 2002,
                 respectively                          169                166
                Class B Common Stock,
                 $.01 par value;
                 4,200,000 shares
                 authorized; 4,107,355
                 issued and outstanding                 41                 41
                Additional paid-in
                 capital                            62,517             59,144
                Unearned compensation                 (229)              (189)
                Other comprehensive
                 income                                 45                419
                Retained earnings                   74,758             64,200
                Treasury stock, at cost
                 7,102,467 and 5,011,947 shares as
                 of December 27, 2003 and
                 December 28, 2002,
                 respectively                      (74,777)           (44,949)
                 Total stockholders'
                  equity                            62,524             78,832
                 Total liabilities
                  and stockholders' equity         $87,354           $106,806



    Consolidated Statements of Cash Flows:
                                                        (unaudited)
                                                      12 Months Ended
                                               December 27,      December 28,
                                                      2003              2002

      Cash flows from operating
       activities:
           Net income                              $10,558            $8,553
           Adjustments to reconcile net
            income to net cash from
            operating activities:
                Depreciation and
                 amortization                        7,106             6,151
                Loss on disposal of fixed
                 assets                                102               206
                Bad debt (recovery)
                 expense                              (113)               64
                Realized gain on sale of
                 marketable equity
                 security                             (128)           (1,284)
                Stock option compensation
                 expense                                85                69
           Changes in assets and
            liabilities:
                Accounts receivable                  7,514             1,325
                Inventories                         (1,548)              981
                Prepaid expenses                       158              (282)
                Other current assets                (1,432)             (792)
                Deferred taxes                       1,427              (763)
                Other assets                        (1,653)             (907)
                Accounts payable                    (2,602)           (2,204)
                Accrued expenses                       159             3,026
                Other long-term
                 liabilities                             8              (323)
                     Net cash from
                      operating
                      activities                    19,641            13,820

      Cash flows from investing
       activities:
           Purchases of property, plant
            and equipment                           (1,729)           (2,336)
           Proceeds on disposal of fixed
            assets                                      32               212
           Purchases of available-for-
            sale securities                         (3,778)          (36,459)
           Purchases of held-to-maturity
            securities                                   -            (9,027)
           Maturities of held-to-maturity
            investments                                  -            11,059
           Proceeds from the sale of
            available-for-sale securities           20,470             5,021
           Proceeds from the sale of
            trading security                             -             1,263
                Net cash from (used in)
                 investing activities               14,995           (30,267)

      Cash flows from financing
       activities:
           Purchase of treasury stock              (29,828)           (9,877)
           Proceeds from exercise of
            stock options                            2,143             1,014
           Net proceeds from the sale of
            Investment Shares                          233                80
                Net cash used in financing
                  activities                       (27,452)           (8,783)

      Change in cash and cash equivalents            7,184           (25,230)

      Cash and cash equivalents at
       beginning of period                         $20,608            45,838

      Cash and cash equivalents at end of
       period                                      $27,792           $20,608

      Supplemental disclosure of cash
       flow information:
           Taxes paid                               $5,571            $3,864

SOURCE The Boston Beer Company, Inc.

/CONTACT: Trisha Gray of Boston Beer Company, Inc., +1-617-368-5108/