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Boston Beer Reports First Quarter Volume, Revenue and Earnings

BOSTON, May 3 /PRNewswire-FirstCall/ -- The Boston Beer Company, Inc. (NYSE: SAM) achieved first quarter 2005 diluted earnings per share of $.27, an $.18 increase over the same period last year. Net revenue increased 9.1% in the first quarter 2005, and net income increased by $2.7 million over the prior year.

The net revenue increase in the first quarter was driven by a shipment volume increase of 6.5% and a 2.5% price and package mix related increase. The first quarter increase in net income was primarily driven by the revenue increase and deferrals in advertising spending as the Company withheld spending prior to the introduction of the Company's new brand campaign which began in March 2005.

Distributor sales of the Boston Beer brands to retail (depletions) declined 1.4% from the first quarter 2004. Jim Koch, Chairman and Founder of the Company, commented, "While we are pleased with our earnings growth, we are somewhat disappointed with the first quarter depletion results. January proved to be a difficult month for us as well as the entire industry, but we saw some improvement in the remainder of the quarter. In early March, we introduced our new brand communication and believe that it capitalizes on the roots and essence of Samuel Adams' success. We are excited by this new campaign."

Martin Roper, Boston Beer President and CEO said, "We believe the Samuel Adams brand continues to maintain strong brand equity. Continued strong growth in Samuel Adams Seasonals, Brewmaster's Collection and Twisted Tea, offset some weakness in Samuel Adams Boston Lager and Sam Adams Light. Although we experienced some weakness in bottle packages late in the quarter which pulled our total trends down, on-premise trends, while slightly negative, improved during the quarter. Our key wholesalers responded enthusiastically to our presentation of our new brand messaging. We continue to work on non-media elements of our strategy and expect these to be rolled out over the summer. It is too early to identify the impact of these initiatives on our volumes. Our full year projections of brand investment may change depending on the effectiveness of these initiatives, as we look to grow our volume."

Bill Urich, Boston Beer CFO added, "During first quarter 2005, we benefited from our 2004 cost savings projects and further efficiencies achieved in our manufacturing and operating expenses. These efficiencies offset the increases in packaging and freight costs we experienced. Energy cost increases continued to place pressure on our margins. We see these cost pressures continuing, particularly the freight cost increases, and expect to offset these increases with our efficiency initiatives. The $6.5 million Cincinnati brewery expansion project, which is part of this effort, is on schedule for completion in the third quarter."

Mr. Roper also stated, "We entered into a production agreement in April 2005 with Brown-Forman Distillery Company to produce at our brewery located in Cincinnati, Ohio, a clear malt base for Brown-Forman and for use in our Twisted Tea(R) flavored malt beverages. This is the result of a joint development project combining Brown-Forman technology and our expertise in fermentation. With this and some other initiatives, we now expect our capital expenditures for the year to be between $12.0 and $15.0 million."

Shipments and orders in-hand suggest that core shipments for April and May 2005 appear to be up approximately 1.0% as compared to the same period in 2004. Actual shipments for the current quarter may differ, however, and no inferences should be drawn with respect to shipments in future periods.

1st Quarter Results

For the 13-week period ended March 26, 2005, the Company recorded net sales of $48.7 million, a 9.1% increase from the first quarter in 2004. Net revenue per barrel increased by 2.5% during the quarter, due primarily to price increases and, to a lesser extent, a shift in the package mix from kegs to bottles. As reflected on the following chart, reported shipment volume for the period was 280,000 barrels, a 6.5% increase from prior year.

    Barrels                         Q1-2005         Q1-2004          %Chg
    Total Boston Beer Brands        278,000         261,000          6.5%
    3rd Party Contract Brewing        2,000           2,000            --
    Total Company                   280,000         263,000         6.5 %

Distributor sales of the Boston Beer brands to retail (depletions) totaled approximately 246,000 barrels, a 1.4% decrease from the first quarter 2004, primarily as a result of declines in Samuel Adams Boston Lager(R) and Sam Adams Light(R) volume.

The Company's recorded net income of $4.0 million or $.27 per diluted share for the first quarter 2005 increased by $2.7 million or $.18 per diluted share as compared to the same period last year. Gross margins as a percent of net sales increased to 61.2% from 59.5% in the first quarter of 2004, principally due to net price increases and favorable manufacturing costs. Advertising, promotional and selling expenses for the quarter were down by $1.7 million or 8.0% compared to the same period last year. This decrease was primarily a result of a delay in television advertising spending in the first quarter 2005, as well as higher expenses in the first quarter 2004 for outdoor and print advertising for Sam Adams Light(R). General and administrative expenses increased by $0.8 million compared to the same period last year, due to an increase in salary and benefit costs, and accounting and legal fees.

Other matters

The Company currently expects earnings per share for the full year 2005 to be between $0.94 and $1.00, based on current plans and market trends, versus $0.86 per diluted share earned in 2004. The Company believes that this earnings per share growth will be driven by volume increases for the full year and the price increases implemented in the first quarter. These anticipated increases in revenue are expected to be offset somewhat by increases in advertising, promotional and selling expenses of between $4.0 million to $7.0 million, normal inflationary production cost increases and general and administrative expense increases. The Company's currently anticipated 2005 total advertising, promotional and selling expenditures may be adjusted, up or down, as deemed appropriate for the benefit of the Company's long term volume growth.

During the three months ended March 26, 2005, the Company did not repurchase any of its Class A Common Stock. As of May 2, 2005, the Company had $5.2 million remaining on the authorized share buyback expenditure limit under its Stock Repurchase Program. Since the beginning of the 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 May 2, 2005. As of May 2, 2005, the Company has 10.2 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 hand-crafted, full- flavored beer. Founder and brewer, Jim Koch, brews Samuel Adams(R) beers using the time-honored, traditional four-vessel brewing process and the world's finest all-natural ingredients. Beer-lovers can enjoy many styles of Samuel Adams(R) beers that range from light-bodied to bold, traditional to extreme. In the last twenty years, the brewery has won more awards in international beer tasting competitions than any other brewery in the world. Samuel Adams Boston Lager(R), the Company's flagship brand, is brewed using the same recipe and techniques 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 about Samuel Adams(R) beers visit 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 years ended December 25, 2004 and December 27, 2003. Copies of these documents may be found on the Company's website,, or obtained by contacting the Company or the SEC.

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

    Operating Results:
                                                         Quarter Ended
                                                  March 26,         March 27,
                                                      2005              2004

      Barrels sold                                     280               263

      Gross revenue                                $53,625           $49,307
      Less excise taxes                              4,916             4,652
      Net revenue                                   48,709            44,655
      Cost of goods sold                            18,877            18,073
      Gross profit                                  29,832            26,582
      Advertising, promotional and
       selling expenses                             19,808            21,522
      General and administrative expenses            4,020             3,209
      Total operating expenses                      23,828            24,731
      Operating income                               6,004             1,851
      Interest income, net                             301               200
      Other income (expense), net                      158                (8)
      Income before income taxes                     6,463             2,043
      Provision for income taxes                     2,500               772
      Net income                                    $3,963            $1,271

      Net income per share - basic                   $0.28             $0.09
      Net income per share - diluted                 $0.27             $0.09

      Weighted average number of common
       shares - basic                               14,275            14,019
      Weighted average number of common
       shares - diluted                             14,698            14,352

    Consolidated Balance Sheets:
      (in thousands, except share data)         (unaudited)
                                                 March 26,        December 25,
                                                     2005                2004

           Current Assets:
                Cash and cash
                 equivalents                       $38,523            $35,794
                Short-term investments              23,900             24,000
                Accounts receivable, net
                 of allowance for
                 doubtful accounts of
                     $597 in 2005 and
                      2004                          10,489             12,826
                Inventories                         12,755             12,561
                Prepaid expenses                     1,399                883
                Deferred income taxes                1,400              1,474
                Other assets                         4,644                230
                     Total current
                      assets                        93,110             87,768

           Property, plant and
            equipment, net                          18,742             17,222
           Other assets                              1,060              1,095
           Goodwill                                  1,377              1,377
                     Total assets                 $114,289           $107,462

      Liabilities and Stockholders'
           Current Liabilities:
                Accounts payable                    $5,964             $9,744
                Accrued expenses                    22,141             16,494
                     Total current
                      liabilities                   28,105             26,238

           Deferred income taxes                     1,511              2,085
           Other liabilities                           768                769

           Stockholders' Equity
                Class A Common Stock,
                 $.01 par value;
                      in 2005 and
                      in 2004 issued and
                      outstanding                      102                101
                Class B Common Stock,
                 $.01 par value;
                      4,107,355 issued
                      and outstanding                   41                 41
                Additional paid-in
                 capital                            67,842             66,157
                Unearned compensation                 (473)              (280)
                Other comprehensive
                 income                               (124)              (203)
                Retained earnings                   16,517             12,554
                     Total stockholders'
                      equity                        83,905             78,370
                     Total liabilities
                      and stockholders'
                      equity                      $114,289           $107,462

    Consolidated Statements of Cash Flows:
      (in thousands, except share data)                   (unaudited)
                                                         Quarter Ended
                                                  March 26,          March 27,
                                                      2005               2004

      Cash flows from operating
           Net income                               $3,963             $1,271
           Adjustments to reconcile net
            income to net cash from
            operating activities:
                Depreciation and
                 amortization                          980              1,251
                Bad debt expense                        --                 65
                Stock option
                 compensation expense                   36                 22
                Tax benefit from stock
                 options exercised                     413                309
           Changes in assets and
                Accounts receivable                  2,337                795
                Inventories                           (194)              (577)
                Prepaid expenses                      (516)              (322)
                Other current assets                (4,141)             1,377
                Other assets                            --               (114)
                Deferred taxes                        (422)              (257)
                Accounts payable                    (3,780)               (51)
                Accrued expenses                     5,645               (953)
                Other long-term
                 liabilities                            --                (46)
                     Net cash from
                      activities                     4,321              2,770

      Cash flows from investing
           Purchases of property, plant
            and equipment                           (2,465)              (862)
           Purchases of available-for-
            sale securities                             --             (6,138)
           Redemption of short-term
            investments                                100                 --
                     Net cash used in
                      activities                    (2,365)            (7,000)

      Cash flows from financing
           Proceeds from exercise of
            stock options                              697              1,136
           Net proceeds from the sale of
            Investment Shares                           76                 48
                     Net cash from
                      activities                       773              1,184

      Change in cash and cash
       equivalents                                   2,729             (3,046)

      Cash and cash equivalents at
       beginning of period                          35,794             27,792

      Cash and cash equivalents at end
       of period                                   $38,523            $24,746

      Supplemental disclosure of cash
       flow information:
           Taxes paid                                 $856                $87

Copies of The Boston Beer Company's press releases, including quarterly financial results, are available on the Internet at

Conference Call Begins at 4:00 p.m. (ET)

Contact: Helen Bornemann (617) 368-5061

SOURCE Boston Beer Company, Inc.

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