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/