Press Release

<< Back
Boston Beer Reports Increases in Second Quarter Volume, Revenue and Earnings

BOSTON, Jul 27, 2004 /PRNewswire-FirstCall via COMTEX/ -- The Boston Beer Company, Inc. (NYSE: SAM) today reports increases in second quarter 2004 volume, revenue and earnings compared to the second quarter 2003.

    2nd Quarter Results

For the 13-week period ended June 26, 2004, The Boston Beer Company recorded net sales of $62.0 million, a 10.1% increase from the second quarter in 2003. Net revenue per barrel increased slightly during the quarter due to price increases of approximately 1.0%, offset by a shift in the package mix. As reflected on the following chart, reported sales volume for the period increased to 363,000 barrels.

    (in barrels)                    Q2-2004         Q2-2003          %Chg
    Total Boston Beer Brands        359,000         328,000          9.5%
    3rd Party Contract Brewing        4,000           2,000          100%
    Total Company                   363,000         330,000         10.0%

The Company recorded net income of $5.4 million or $.37 per diluted share for the quarter versus net income of $3.1 million and $.20 per diluted share for the same period last year. Gross margin as a percentage of net sales was 60.5% as compared to 61.0% in the prior year second quarter. This decrease is due to an increase in packaging costs, partially offset by price increases. Operating expenses for the quarter were down 6.2% in comparison to the same period last year, driven by more effective purchasing of media in 2004, as well as a decrease in point-of-sale expenses related to the purchase of new tap handles in 2003.

Based on the information available to the Company, distributor sales of Boston Beer brands to retail (depletions) during the second quarter 2004 totaled 326,000 barrels, approximately a 2% increase from the same period in 2003. Shipments and orders in-hand suggest that shipments of Boston Beer brands for July and August 2004 will be essentially flat as compared to the same periods last year. Actual shipments for the current quarter may differ, however, and no inferences should be drawn with respect to shipments in future periods.

    Year to Date Results

For the 26-week period ended June 26, 2004, Boston Beer Company recorded net sales of $106.7 million, a 5.0% increase from the same period in 2003. Net revenue per barrel increased by 0.6% during the six months due to price increases, offset by a package mix shift. As reflected on the following chart, reported sales volume for the period increased to 626,000 barrels.

    (in barrels)                 6 MOS-2004     6 MOS -2003          %Chg
    Total Boston Beer Brands        620,000         596,000          4.0%
    3rd Party Contract Brewing        6,000           4,000         50.0%
    Total Company                   626,000         600,000          4.3%

Based on the information available to the Company, distributor sales of Boston Beer brands to retail (depletions) totaled 577,000 barrels, approximately a 1% increase over 2003.

The Company recorded $6.6 million in net income or $.46 per diluted share for the six months versus net income of $3.0 million and $.19 per diluted share for the same period last year. Gross margins as a percent of net sales were 60.1% for the first six months of 2004 as compared to 59.9% in the same period 2003. Advertising, promotional and selling expenditures decreased by $2.6 million to $46.7 million for the period ended June 26, 2004. The decrease was primarily driven by more effective purchasing of television advertising in 2004 and lower point-of-sale expenditures in 2004 as compared to the same period in 2003.

The Company's effective tax rate was 37.8% for the six months ended June 26, 2004, down from 38.0% during the same period 2003. The rate recorded through the first six months 2004 is expected to approximate that for the full year 2004.

Jim Koch, Chairman of The Boston Beer Company, said, "We continue to be pleased with the Samuel Adams Boston Lager advertising campaign, as we have seen increases of approximately 5% in combined depletions for Lager and Seasonals in the first half of 2004. Sam Adams Light appears to have stabilized although we will continue to face tough volume comparison through the fourth quarter. We are currently finalizing the development of a new television advertising campaign for Sam Adams Light, and we anticipate rolling this campaign out in the second half of 2004 with additional investment on top of our existing campaign."

Martin Roper, Boston Beer President and CEO, said, "Continued health of Lager and Seasonals offset the declines in Light, and generated growth in both sales and depletions year to date. While shipments of core products exceeded depletions year to date by approximately 43,000 barrels, this inventory build at wholesaler appears reasonable for this time of year in support of the summer selling season."

Mr. Roper also reported on the Company's financial performance and outlook, "We are pleased with our overall financial performance in the second quarter of 2004. Our gross margins remain strong through June compared to 2003. During the second quarter, we experienced some cost pressures in packaging materials, utility costs and freight costs. Based on current market pricing conditions and the current cost environment, we expect gross margins for the full year 2004 to approximate 2003. Based on current information, for full year 2004, we expect double-digit earnings growth over 2003. This could be adversely affected if cost pressures or market conditions change."

The Boston Beer Company's balance sheet remains strong with $55.1 million in cash and short-term investments and no debt. The Company's cash flow also remains strong, delivering $12.0 million in operating cash flow during the first six months of 2004. The Company is continually evaluating options for utilizing its cash to increase shareholder value for the long term. The Company has $5.2 million remaining under an $80 million board authorized spending limit related to the Stock Repurchase Program. Through July 26, 2004 the Company has repurchased a total of 7.1 million shares of Class A Common Stock for an aggregate purchase price of $74.8 million.

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 650 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 web-site at or visit 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 27, 2003 and for December 28, 2002. Copies of these documents may be obtained by visiting the Company's website at or contacting the Company or the SEC.

Tuesday, July 27, 2004

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

    Operating Results:
                                             (unaudited)        (unaudited)
                                           Quarter Ended      6 Months Ended
                                         June 26, June 28,  June 26,  June 28,
                                            2004     2003      2004      2003

      Barrels sold                           363      330       626       600

      Gross revenue                      $68,520  $62,161  $117,827  $112,284
      Less excise taxes                    6,503    5,842    11,155    10,645
      Net revenue                         62,017   56,319   106,672   101,639
      Cost of goods sold                  24,504   21,965    42,577    40,737
      Gross profit                        37,513   34,354    64,095    60,902
      Advertising, promotional and
       selling expenses                   25,217   26,006    46,739    49,316
      General and administrative
       expenses                            3,630    3,669     6,839     7,472
      Total operating expenses            28,847   29,675    53,578    56,788
      Operating income                     8,666    4,679    10,517     4,114
      Interest income, net                   187      260       387       654
      Other (expense) income, net           (231)       4      (239)       (4)
      Income before taxes                  8,622    4,943    10,665     4,764
      Provision for income taxes           3,259    1,881     4,031     1,811
      Net income                          $5,363   $3,062    $6,634    $2,953

      Net income per share - basic         $0.38    $0.20     $0.47     $0.19
      Net income per share - diluted       $0.37    $0.20     $0.46     $0.19

      Weighted average number of common
       shares - basic                     14,126   15,087    14,073    15,411
      Weighted average number of common
       shares - diluted                   14,465   15,306    14,406    15,649

    Consolidated Balance Sheets:
                                                    June 26,      December 27,
                                                      2004             2003

           Current Assets:
                Cash and cash equivalents           $52,068          $27,792
                Short-term investments                3,001           15,098
                Accounts receivable, net
                 of allowance for doubtful
                 accounts of $515 and $450 as of
                 June 26, 2004 and December 28, 2002,
                 respectively                        15,273           10,432
                Inventories                           9,180            9,890
                Prepaid expenses                      1,044            1,126
                Deferred income taxes                 1,138            1,177
                Other current assets                    443            2,304
                     Total current assets            82,147           67,819

           Property, plant and equipment, net        17,022           17,059
           Other assets                               1,148            1,099
           Goodwill                                   1,377            1,377
                     Total assets                  $101,694          $87,354

      Liabilities and Stockholders' Equity
           Current Liabilities:
                Accounts payable                     $8,176           $6,395
                Accrued expenses                     18,767           15,504
                     Total current
                      liabilities                    26,943           21,899

           Long-term deferred income taxes            2,190            2,191
           Other long-term liabilities                  693              740

           Commitments and Contingencies

           Stockholders' Equity
                Class A Common Stock, $.01
                 par value; 22,700,000 shares
                 authorized; 17,152,835 and
                 16,945,418 issued
                 as of June 26, 2004
                 and December 27,
                 2003, respectively                     172              169
                Class B Common Stock, $.01
                 par value; 4,200,000 shares
                 authorized; 4,107,355 issued and
                 outstanding                             41               41
                Additional paid-in capital           65,481           62,517
                Unearned compensation                  (337)            (229)
                Other comprehensive income             (104)              45
                Retained earnings                    81,392           74,758
                Treasury stock, at cost;
                 7,102,467 shares as
                 of June 26, 2004 and
                 December 27, 2003                  (74,777)         (74,777)
                     Total stockholders' equity      71,868           62,524
                     Total liabilities and
                      stockholders' equity         $101,694          $87,354

    Consolidated Statements of Cash Flows:
                                                         Six Months Ended
                                                    June 26,         June 28,
                                                       2004             2003

      Cash flows from operating
           Net income                                $6,634           $2,953
           Adjustments to reconcile net
            income to net cash from
            operating activities:
                Depreciation and
                 amortization                         2,526            2,788
                Loss on disposal of fixed assets          -               47
                Bad debt expense
                 (recovery)                              65              (39)
                Realized loss (gain) on
                 sale of short-term
                 investments                            229              (28)
                Stock option compensation expense        63               43
           Changes in assets and
                Accounts receivable                  (4,906)          (5,086)
                Inventories                              82           (2,259)
                Prepaid expenses                        710              101
                Other current assets                  1,643             (943)
                Deferred taxes                           32             (796)
                Other assets                           (121)               -
                Accounts payable                      1,781            1,951
                Accrued expenses                      3,263           (1,339)
                Other long-term
                 liabilities                            (46)             (47)
                     Net cash from (used
                      in) operating
                      activities                     11,955           (2,654)

      Cash flows from investing
           Purchases of property, plant
            and equipment                            (2,051)          (1,225)
           Proceeds on disposal of fixed
            assets                                        -               14
           Purchases of available-for-sale
            securities                               (6,256)          (3,560)
           Purchases of held-to-maturity
            securities                               (3,001)               -
           Proceeds from the sale of
            available-for-sale securities            20,983            4,610
                     Net cash from (used
                      in) investing
                      activities                      9,675             (161)

      Cash flows from financing
           Purchase of treasury stock                     -          (17,359)
           Proceeds from exercise of stock
            options                                   2,534              510
           Net proceeds from the sale of
            Investment Shares                           112              106
                     Net cash from (used
                      in) provided by
                      financing activities            2,646          (16,743)

      Change in cash and cash equivalents            24,276          (19,558)

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

      Cash and cash equivalents at end of
       period                                       $52,068           $1,050

      Supplemental disclosure of cash flow
           Interest paid                                 $-               $-
           Taxes paid                                  $533           $4,356

SOURCE Boston Beer Company

Michelle Sullivan of Boston Beer, +1-617-368-5165