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Boston Beer Reports Third Quarter Volume, Revenue And Earnings

BOSTON, Nov. 3 /PRNewswire-FirstCall/ -- The Boston Beer Company, Inc. (NYSE: SAM) today reports third quarter 2004 volume, revenue and earnings, as compared to the third quarter 2003.

3rd Quarter Results

For the 13-week period ended September 25, 2004, The Boston Beer Company recorded net revenue of $54.7 million, a 1.5% decrease from the third quarter 2003, which was primarily due to a 3.6% decline in shipment volume of the Company's core brands. Net revenue per barrel increased by 2.2% over the third quarter last year mainly due to price increases, as well as a shift in the package mix from kegs to bottles. As reflected on the following chart, reported sales volume for the period decreased to 320,615 barrels.

    (in barrels)                    Q3-2004         Q3-2003          %Chg
    Total Boston Beer Brands        319,280         331,281        (3.6%)
    3rd Party Contract Brewing        1,335           1,758       (24.1%)
    Total Company                   320,615         333,039        (3.7%)

The Company recorded net income of $3.0 million or $0.21 per diluted share for the quarter versus net income of $4.0 million and $0.28 per diluted share for the same period last year. Gross margin as a percentage of net sales was 58.5% as compared to 58.9% in the prior year third quarter. This decrease is due to an increase in packaging material and utility costs, partially offset by price increases. Advertising, promotional and selling expenses for the quarter were up 5.2% compared to the same period last year, driven primarily by higher media spending in the third quarter 2004. General and administrative expenses were down by 9.7% during the third quarter 2004 versus the prior year due to expenses incurred in 2003 in connection with the arbitration proceedings with Miller Brewing Company.

Based on the information available to the Company, distributor sales of Boston Beer brands to retail (depletions) during the third quarter 2004 totaled 326,000 barrels, less than a 1% decline from the same period in 2003.

Year to Date Results

For the 39-week period ended September 25, 2004, Boston Beer Company recorded net revenue of $161.4 million, a 2.7% increase from the same period in 2003. This increase was primarily due to a 1.2% higher shipment volume of the Company's core brands coupled with an increase in net revenue per barrel. Net revenue per barrel increased by 1.3% during the nine months 2004 as compared to 2003 due to an increase in pricing, partially offset by a package mix shift from bottles to kegs and an increase in 3rd party contract brewing volume. As reflected on the following chart, reported sales volume for the period increased to 946,498 barrels.

    (in barrels)                   YTD-2004        YTD-2003          %Chg
    Total Boston Beer Brands        938,927         927,731          1.2%
    3rd Party Contract Brewing        7,571           5,581         35.7%
    Total Company                   946,498         933,312          1.4%

Based on information currently available to the Company, year to date distributor sales of Boston Beer brands to retail (depletions) exceeded shipments by approximately 32,000 barrels. Shipment volume was higher than depletion volume for the first nine months of 2004 primarily due to a normal distributor inventory build for the peak summer selling season, which began to unwind in the third quarter 2004. Distributor inventory levels as of September 25, 2004 appear reasonable and represent levels similar to those at the end of the same period last year.

The Company recorded $9.7 million in net income or $0.67 per diluted share for the nine months versus net income of $6.9 million and $0.46 per diluted share for the same period last year. Gross margin as a percent of net sales remained at 59.5% for the first nine months of 2004, the same as the first nine months of 2003. Advertising, promotional and selling expenditures decreased by $1.4 million to $70.1 million for the nine month period ended September 25, 2004 as compared to the same period last year. The decrease was primarily driven by more effective purchasing of television advertising in 2004 and lower point-of-sale expenditures in 2004 versus 2003.

Based on the information available to the Company, distributor sales of Boston Beer brands to retail (depletions) totaled 907,000 barrels, approximately a 1% increase over 2003. Shipments and orders in hand suggest that shipments of Boston Beer brands for October and November will be up approximately 5.8% as compared to the same period last year. Actual shipments for the current period may differ, however, and no inferences should be drawn with respect to shipments in future periods.

The Company's effective tax rate of 37.8% for the nine months ended September 25, 2004, remained unchanged from the same period 2003. The Company currently estimates that its effective tax rate for fiscal year 2004 will be approximately 37.8%.

Jim Koch, Chairman of the Company, said, "While shipments in the third quarter were down 3.6%, depletions of Boston Beer Brands declined by less than 1% as compared to the prior year quarter driven by continued tough comparison for Sam Adams Light, and a slight weakness in Samuel Adams Boston Lager trends. We are encouraged by the continued depletion strength of our Samuel Adams Seasonal beers and Brewmaster Collection, which we believe show some opportunities for us. It is unclear whether the small decline in Samuel Adams Boston Lager was a function of industry dynamics or represents brand strength. We hope to see more favorable depletion trends during the fourth quarter 2004 as the decline in Sam Adams Light volume has slowed considerably. Based on our current assessments, we expect total advertising, promotional and selling expenses for the full year 2004 to increase between approximately $1.5 million to $2.5 million as compared to 2003. "

Martin Roper, Boston Beer President and CEO, reported on the Company's financial performance, "Our financial performance remained strong through the third quarter of 2004. Our margins remained stable as compared to the same period in 2003, but we experienced cost pressures related to packaging materials, utility costs and freight costs. We currently expect gross margins for the full year 2004 to be similar to 2003. Based on current information, we still expect earnings per share for the full 2004 fiscal year to be in the range of $0.82 to $0.90, a double-digit earnings growth over 2003. " Martin Roper also reported, "The Company is evaluating an expansion project for its Cincinnati Brewery which contemplates a capital investment of approximately $6.0 million for an additional 200,000 barrels of brewing capacity. A final decision on this project is expected during the fourth quarter."

The Boston Beer Company's balance sheet remains strong with $57.0 million in cash and short-term investments and no debt. The Company's cash flow also remains positive, delivering $15.1 million in operating cash flow during the first nine months of 2004. The Company continually evaluates opportunities for utilizing its cash to increase shareholder value for the long-term. The Company has $5.2 million remaining under the $80.0 million board authorized spending limit related to the Stock Repurchase Program. Through November 2,

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 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 year ended December 27, 2003 and for December 28, 2002. Copies of these documents may be obtained by visiting the Company's website at http://www.bostonbeer.com or 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      9 Months Ended
                                        Sept 25, Sept 27,  Sept 25,  Sept 27,
                                          2004     2003      2004      2003

      Barrels sold                           321      333       947       933

      Gross revenue                      $60,477  $61,584  $178,303  $173,868
      Less excise taxes                    5,743    6,039    16,898    16,684
      Net revenue                         54,734   55,545   161,405   157,184
      Cost of goods sold                  22,738   22,853    65,315    63,590
      Gross profit                        31,996   32,692    96,090    93,594
      Advertising, promotional and
       selling expenses                   23,391   22,239    70,129    71,555
      General and administrative
       expenses                            3,926    4,348    10,765    11,820
      Total operating expenses            27,317   26,587    80,894    83,375
      Operating income                     4,679    6,105    15,196    10,219
      Interest income, net                   183      287       570       941
      Other (expense) income, net              1        3      (238)       (1)
      Income before taxes                  4,863    6,395    15,528    11,159
      Provision for income taxes           1,838    2,407     5,870     4,218
      Net income                          $3,025   $3,988    $9,658    $6,941

      Net income per share - basic         $0.21    $0.28     $0.68     $0.46
      Net income per share - diluted       $0.21    $0.28     $0.67     $0.46

      Weighted average number of common
       shares - basic                     14,162   14,183    14,103    15,001
      Weighted average number of common
       shares - diluted                   14,595   14,465    14,479    15,254


     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:
                                                (unaudited)
                                                  Sept 25,          Dec 27,
                                                    2004             2003

      Assets
           Current Assets:
                Cash and cash equivalents           $37,013          $27,792
                Short-term investments               20,000           15,098
                Accounts receivable, net
                 of allowance for doubtful
                 accounts of $515 as of September
                 25, 2004 and $450 as
                 of December 27, 2003                12,335           10,432
                Inventories                          10,895            9,890
                Prepaid expenses                      1,009            1,126
                Deferred income taxes                 1,066            1,177
                Other current assets                    697            2,304
                     Total current assets            83,015           67,819

           Property, plant and equipment, net        17,387           17,059
           Other assets                               1,111            1,099
           Goodwill                                   1,377            1,377
                     Total assets                  $102,890          $87,354

      Liabilities and Stockholders' Equity
           Current Liabilities:
                Accounts payable                     $8,427           $6,395
                Accrued expenses                     16,545           15,504
                     Total current liabilities       24,972           21,899

           Long-term deferred income taxes            2,176            2,191
           Other long-term liabilities                  692              740

           Commitments and Contingencies

           Stockholders' Equity
                Class A Common Stock, $.01
                 par value; 22,700,000 shares
                 authorized; 10,059,218 and
                 16,945,418 issued as of September 25,
                 2004 and December 27, 2003,
                 respectively                           101              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           65,672           62,517
                Unearned compensation                  (309)            (229)
                Other comprehensive income             (165)              45
                Retained earnings                     9,710           74,758
                Treasury stock, at cost;
                     7,102,467 shares as
                      of December 27, 2003                 -         (74,777)
                     Total stockholders'
                      equity                         75,050           62,524
                     Total liabilities and
                      stockholders' equity         $102,890          $87,354



    Consolidated Statements of Cash Flows:
                                                          (unaudited)
                                                        Nine Months Ended
                                                   Sept 25,          Sept 27,
                                                     2004              2003

      Cash flows from operating
       activities:
           Net income                                $9,658            $6,941
           Adjustments to reconcile net
            income to net cash from
            operating activities:
                Depreciation and
                 amortization                         3,856             4,232
                (Gain) Loss on disposal of
                 fixed assets                            (1)               30
                Bad debt expense
                 (recovery)                              65               (39)
                Realized loss (gain) on
                 sale of short-term
                 investments                            229              (128)
                Stock option compensation
                 expense                                 91                65
           Changes in assets and
            liabilities:
                Accounts receivable                  (1,968)            3,344
                Inventories                          (1,005)           (2,906)
                Prepaid expenses                        117               268
                Other current assets                  1,131              (704)
                Deferred taxes                           29               234
                Other assets                           (119)           (1,411)
                Accounts payable                      2,032               606
                Accrued expenses                      1,042             1,392
                Other long-term
                 liabilities                            (47)              (29)
                     Net cash provided by
                      operating activities           15,110            11,895

      Cash flows from investing
       activities:
           Purchases of property, plant
            and equipment                            (3,530)           (1,504)
           Proceeds on disposal of fixed
            assets                                        1                32
           Purchases of available-for-sale
            securities                              (26,256)           (3,685)
           Proceeds from the sale of
            available-for-sale securities            20,983            20,410
                     Net cash (used in)
                      provided by
                      investing activities           (8,802)           15,253

      Cash flows from financing
       activities:
           Purchase of treasury stock                     -           (29,239)
           Proceeds from exercise of stock
            options                                   2,724               943
           Net proceeds from the sale of
            Investment Shares                           189               166
                     Net cash provided by
                      (used in) financing
                      activities                      2,913           (28,130)

      Change in cash and cash equivalents             9,221              (982)

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

      Cash and cash equivalents at end of
       period                                       $37,013           $19,626

      Supplemental disclosure of cash flow
       information:
           Taxes paid                                $4,100            $3,339

SOURCE The Boston Beer Company

CONTACT: Helen Bornemann,
Shareholder Relations Manager of Boston Beer
Company,
+1-617-368-0561
Web site: http://www.samadams.com
(SAM)