UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended June 26, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from ..........to..........
Commission file number: 1-14092
THE BOSTON BEER COMPANY, INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-3284048
(State or other jurisdiction of incorporation I.R.S. Employer Identification No.)
or organization)
75 Arlington Street, Boston, Massachusetts
(Address of principal executive offices)
02116
(Zip Code)
(617) 368-5000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No__
--
Number of shares outstanding of each of the issuer's classes of common stock, as
of August 6, 1999:
Class A Common Stock, $.01 par value 16,424,967
Class B Common Stock, $.01 par value 4,107,355
(Title of each class) (Number of shares)
1
THE BOSTON BEER COMPANY, INC.
FORM 10-Q
QUARTERLY REPORT
JUNE 26, 1999
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets
June 26, 1999 and December 26, 1998 3
Consolidated Statements of Operations for the
Three and Six Months Ended June 26, 1999 and
June 27, 1998 4
Consolidated Statements of Cash Flows for the
Six Months Ended June 26, 1999 and
June 27, 1998 5
Notes to Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of
Security Holders 15
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16-19
SIGNATURES 20
2
THE BOSTON BEER COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
June 26, December 26,
1999 1998
----------- -------------
ASSETS
Current Assets:
Cash and cash equivalents $ 4,042 $ 8,650
Short-term investments 41,736 45,256
Accounts receivable, net of the
allowance for doubtful accounts
of $1,313 and $1,309, respectively 18,592 12,062
Inventories 17,418 15,835
Prepaid expenses 784 1,125
Deferred income taxes 4,511 4,511
Other current assets 1,014 2,037
----------- -------------
Total current assets 88,097 89,476
Equipment and leasehold improvements,
net of accumulated depreciation of
$18,182 and $15,460, respectively 26,699 28,165
Other assets 4,640 5,048
----------- -------------
Total assets $ 119,436 $ 122,689
=========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 8,497 $ 13,194
Accrued expenses 15,650 12,908
Current maturities of
long-term debt - 10,000
---------- ------------
Total current liabilities 24,147 36,102
Long-term deferred taxes 1,116 1,116
Other long-term liabilities 5,175 3,443
Stockholders' Equity:
Class A Common Stock, $.01 par value;
22,700,000 shares authorized;
16,417,622 and 16,394,245 issued
and outstanding as of June 26, 1999
and December 26, 1998, respectively 164 164
Class B Common Stock, $.01 par value;
4,200,000 shares authorized; 4,107,355
issued and outstanding 41 41
Additional paid-in-capital 56,682 56,548
Unearned compensation (229) (219)
Unrealized loss on short-term
investments - (1)
Retained earnings 32,340 25,495
---------- ------------
Total stockholders' equity 88,998 82,028
---------- ------------
Total liabilities and
stockholders' equity $ 119,436 $ 122,689
========== =============
The accompanying notes are an integral part of the consolidated financial
statements
3
THE BOSTON BEER COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three months ended Six months ended
-----------------------------------------------------------------------
June 26, June 27, June 26, June 27,
1999 1998 1999 1998
------------- ----------------- ------------------------------------
C>
Sales $52,575 $53,808 $98,107 $105,469
Less excise taxes 5,387 5,848 10,068 11,182
------------- ----------------- ------------------------------------
Net sales 47,188 47,960 88,039 94,287
Cost of sales 20,508 23,661 38,585 46,167
------------- ----------------- ------------------------------------
Gross profit 26,680 24,299 49,454 48,120
Operating expenses:
Advertising, promotional and selling expenses 17,990 18,393 32,758 31,934
General and administrative expenses 2,968 3,214 5,877 6,438
------------- ----------------- ------------------------------------
Total operating expenses 20,958 21,607 38,635 38,372
------------- ----------------- ------------------------------------
Operating income 5,722 2,692 10,819 9,748
Other income (expense):
Interest income 526 486 1,089 951
Interest expense (3) (157) (148) (327)
Other income (expense), net (11) 837 11 (1,718)
------------- ----------------- ------------------------------------
Total other income (expense), net 512 1,166 952 (1,094)
------------- ----------------- ------------------------------------
Income before provision for income taxes 6,234 3,858 11,771 8,654
Provision for income taxes 2,618 1,526 4,926 4,246
------------- ----------------- ------------------------------------
Net income $ 3,616 $ 2,332 $ 6,845 $ 4,408
============= ================= ====================================
Earnings per share - basic $ 0.18 $ 0.11 $ 0.33 $ 0.21
============= ================= ====================================
Earnings per share - diluted $ 0.18 $ 0.11 $ 0.33 $ 0.21
============= ================= ====================================
Weighted average shares - basic 20,523 20,489 20,518 20,474
============= ================== ====================================
Weighted average shares - diluted 20,570 20,612 20,569 20,582
============= ================= ====================================
The accompanying notes are an integral part of the consolidated financial
statements
4
THE BOSTON BEER COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six months ended
---------------------------
June 26, June 27,
1999 1998
----------- -----------
Cash flows from operating activities:
Net income $ 6,845 $ 4,408
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,832 2,524
(Gain) on disposal of fixed assets (12) -
Loss on write-down of marketable equity security - 1,435
Bad debt expense - 168
Amortization of unearned compensation 41 66
Changes in assets and liabilities:
Accounts receivable (6,601) (3,505)
Inventory (1,583) (900)
Prepaid expenses 341 633
Other current assets 1,071 52
Other assets 78 53
Accounts payable (4,697) (2,366)
Accrued expenses 2,742 4,056
Other long-term liabilities 1,997 2,382
----------- -----------
Net cash provided by operating activities 3,054 9,006
----------- -----------
Cash flows from investing activities:
Purchases of fixed assets (1,318) (4,048)
Purchases of short-term investments (31,230) (9,712)
Proceeds from the sale of short-term investments 34,750 6,000
Proceeds from the sale of a marketable equity security - 2,851
Proceeds from the sale of fixed assets 100 -
----------- -----------
Net cash provided by/(used in) investing activities 2,302 (4,909)
----------- -----------
Cash flows from financing activities:
Proceeds from exercise of management incentive options - 37
Proceeds from sale of common stock under stock purchase
plan 36 117
Repurchase of shares under the employee investment and
incentive share plans - (5)
Repayment of debt (10,000) -
----------- -----------
Net cash (used in)/provided by financing activities (9,964) 149
----------- -----------
Net (decrease)/increase in cash and cash equivalents (4,608) 4,246
Cash and cash equivalents at beginning of period 8,650 13
----------- -----------
Cash and cash equivalents at end of period $ 4,042 $ 4,259
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid $ 276 $ 357
=========== ===========
Income taxes paid $ 3,851 $ 1,617
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements
5
THE BOSTON BEER COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. BASIS OF PRESENTATION
The Boston Beer Company, Inc. (the "Company") is engaged in the business of
brewing and selling beer, ale and cider products throughout the United States
and select international markets. The accompanying consolidated financial
position as of June 26, 1999 and the results of its consolidated operations and
consolidated cash flows for the three and six months ended June 26, 1999 and
June 27, 1998 have been prepared by the Company, without audit, in accordance
with generally accepted accounting principles for interim financial information
and pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required for complete financial statements by generally accepted
accounting principles and should be read in conjunction with the audited
financial statements included in the Company's Annual Report on Form 10-K for
the year ended December 26, 1998.
Management's Opinion
In the opinion of the Company's management, the Company's unaudited consolidated
financial position as of June 26, 1999 and the results of its consolidated
operations and consolidated cash flows for the interim periods ended June 26,
1999 and June 27, 1998, reflect all adjustments (consisting only of normal and
recurring adjustments) necessary to present fairly the results of the interim
periods presented. The operating results for the interim periods presented are
not necessarily indicative of the results expected for the full year.
B. SHORT-TERM INVESTMENTS
At June 26, 1999, short-term investments consisted of investments in high-
quality money market instruments, United States agency securities, United States
Treasury bills and high-grade commercial paper. The cost of short-term
investments of $41.7 million as of June 26, 1999 and $45.3 million as of
December 26, 1998, approximates fair market value.
C. INVENTORIES
Inventories, which consist principally of hops, brewery materials and packaging,
are stated at the lower of cost, determined on a first-in, first-out (FIFO)
basis, or market.
Inventories consist of the following (in thousands):
June 26, December 26,
1999 1998
----------- ------------
Raw materials, principally hops $ 16,207 $ 14,464
Work in process 630 778
Finished goods 581 593
----------- ------------
$ 17,418 $ 15,835
=========== ============
D. INCOME TAXES
The Company's effective tax rate increased to 42.0% for the three months ended
June 26, 1999 from 39.6% for the three months ended June 27, 1998. For the six
months ended June 26, 1999, the Company's effective tax rate was 41.9%, as
compared to 49.1% for the six months ended June 27, 1998. The 1998 effective tax
rates reflect the write-down and subsequent disposition of a marketable equity
security held for sale. The write-down was recorded in the first quarter and
partially recovered in the second quarter of 1998, when the security was sold at
a higher than expected price. The disposition of the security resulted in the
realization of a capital loss, from which the Company does not expect to fully
realize the tax benefit, and resulted in a lower effective tax rate for the
three months ended June 27, 1998. There was no such activity during 1999.
6
THE BOSTON BEER COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
E. CREDIT FACILITY
As of March 30, 1999, the Company amended its credit facility and repaid the
entire $10.0 million in borrowings outstanding on its then existing facility. As
now in effect, the facility provides a $15.0 million revolving line of credit
(which expires on March 31, 2004) and an additional $30.0 million facility,
borrowings under which convert to a term loan on March 31, 2002. The Company
incurs an annual commitment fee of .15% on the unused portion of the facility
and is obligated to meet certain financial covenants, including the maintenance
of specified levels of tangible net worth and net income. The Company was in
compliance with all such covenants as of June 26, 1999.
F. LEASE COMMITMENTS
During the second quarter of 1999, the Company opted not to exercise its right
to terminate the lease for its Boston-based brewery. As a result, the lease was
automatically extended for a further period of ten years, commencing January 1,
2000 and ending on December 31, 2009. Minimum lease payments over the ten year
term total $1.1 million.
G. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share in accordance with Statement of Financial Accounting Standard No. 128.
For the three months ended For the six months ended
(in thousands, except per share data) (in thousands, except per share data)
June 26, 1999 June 27, 1998 June 26, 1999 June 27, 1998
------------- ------------- ------------- -------------
Net income $ 3,616 $ 2,332 $ 6,845 $ 4,408
Shares used in earnings per common share - basic 20,523 20,489 20,518 20,474
Dilutive effect of common equivalent shares 47 123 51 108
-------------- ------------- ------------- -------------
Shares used in earnings per common share - diluted 20,570 20,612 20,569 20,582
============== ============= ============= =============
Earnings per common share - basic $ 0.18 $ 0.11 $ 0.33 $ 0.21
============== ============= ============= =============
Earnings per common share - diluted $ 0.18 $ 0.11 $ 0.33 $ 0.21
============== ============= ============= =============
H. COMPREHENSIVE INCOME:
Comprehensive income calculated in accordance with Statement of Financial
Accounting Standard No. 130 is as follows:
For the three months ended
(in thousands)
------------------------------------------------------------------
June 26, 1999 June 27, 1998
-------------------------------- -------------------------------
Net income $ 3,616 $ 2,332
---------------- ----------------
Other comprehensive income, net of tax:
Foreign currency translation adjustments - 250
Unrealized loss on security:
Unrealized holding gain arising during period - 882
Plus: reclassification adjustments for capital
gains included in net income - - (882) -
-------------------------------- -------------------------------
Other comprehensive income - 250
---------------- ----------------
Comprehensive income $ 3,616 $ 2,582
================ ================
7
THE BOSTON BEER COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
H. COMPREHENSIVE INCOME (continued):
For the six months ended
(in thousands)
------------------------------------------------------------------
June 26, 1999 June 27, 1998
------------------------------- -------------------------------
Net income $6,845 $4,408
--------------- --------------
Other comprehensive income, net of tax:
Foreign currency translation adjustments - 282
Unrealized loss on security:
Unrealized holding gain arising during period - 788
Plus: reclassification adjustments for capital
losses included in net income 1 1 1,435 2,223
------------- --------------- --------------- --------------
Other comprehensive income 1 2,505
--------------- --------------
Comprehensive income $6,846 $6,913
=============== ==============
Accumulated other comprehensive income calculated in accordance with Statement
of Financial Accounting Standard No. 130 is as follows:
For the three months ended For the six months ended
(in thousands) (in thousands)
-------------------------------------------------------------------------------
June 26, 1999 June 27, 1998 June 26, 1999 June 27, 1998
-------------- ------------- ------------- ---------------
Beginning Balance $ - $ (258) $(1) $ (2,513)
Unrealized gain on forward exchange contract - 250 - 282
Unrealized gain on marketable equity security - 882 - 788
Realized loss (gain) on marketable equity
security - (882) 1 1,435
---------------- ----------------- ----------------- ----------------
Ending balance $ - $ (8) $ - $ (8)
================ ================= ================= ================
I. TRANSACTION BETWEEN STROH BREWERY COMPANY, PABST BREWING COMPANY AND
MILLER BREWING COMPANY
Effective April 30, 1999, the Stroh Brewery Company ("Stroh") sold a majority of
its beer brands and the Allentown Brewery to Pabst Brewing Company ("Pabst") and
certain brands to Miller Brewing Company ("Miller") (collectively, the "Stroh
Transactions"). The Company brews approximately 40% of its production at Stroh's
Portland Brewery (the "Portland Brewery") and Pabst's Allentown Brewery (the
"Allentown Brewery", which was previously owned by Stroh). Pabst has agreed to
assume Stroh's obligations under the existing brewing contract between the
Company and Stroh; Miller has agreed to guarantee Pabst's performance. The
Company's volume brewed at the Allentown Brewery is anticipated to remain
substantially unchanged as a result of the Stroh Transactions. Stroh has
announced its intent to close the Portland Brewery during the third quarter
1999. The Company's volume brewed at the Portland Brewery will be transferred to
a Pabst-owned brewery in Tumwater, Washington (the "Tumwater Brewery") during
the third quarter 1999. Miller has announced that it intends to buy the Tumwater
Brewery from Pabst and has confirmed that it will assume Pabst's obligations to
brew the Company's products at the Tumwater Brewery. The Company does not
anticipate any significant problems during the transition period or thereafter,
as a result of these transactions. The Company expects to incur higher freight
costs and increased capital expenditures as a result of the move, but does not
believe that the effect on its results of operations, statement of financial
position or statement of cash flows during 1999 will be material.
8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is a discussion of the financial condition and results of
operations of the Company for the three and six-month periods ended June 26,
1999 as compared to the three and six-month period ended June 27, 1998. This
discussion should be read in conjunction with the Management's Discussion and
Analysis of Financial Condition and Results of Operations, Consolidated
Financial Statements of the Company and Notes thereto included in the Form 10-K
for the fiscal year ended December 26, 1998.
RESULTS OF OPERATIONS
Three Months Ended June 26, 1999 compared to Three Months Ended June 27, 1998
For purposes of this discussion, Boston Beer's "core brands" include all
products sold under Samuel Adams(R), Oregon Original(TM) or HardCore(R)
trademarks. "Core brands" do not include the products brewed at the Cincinnati
Brewery under contract arrangements for third parties. Volume produced under
contract arrangements is referred to below as "non-core products". Boston Beer's
flagship brand is Samuel Adams Boston Lager(R) ("Boston Lager").
Net sales. Net sales decreased by $772,000 or 1.6% to $47.2 million for the
three months ended June 26, 1999 as compared to the three months ended June 27,
1998. The decline is primarily due to a decrease in volume.
Volume. Volume decreased by 13,000 barrels or 3.9% to 311,000 barrels in the
three months ended June 26, 1999 from 324,000 barrels in the three months ended
June 27, 1998. This decrease was primarily due to a decline in sales of
year-round beer styles other than Boston Lager and a decline in the production
of non-core products.
Total volume for Boston Beer's core brands decreased by 2.1% to 298,000 barrels
for the three months ended June 26, 1999 as compared to 304,000 barrels for the
three months ended June 27, 1998. The decline in volume is a function of both
increased competition from "better beers" and a more mature market that is less
inclined to sample new styles. The Company continuously evaluates the
performance of its various beer and cider brands in order to rationalize its
product line, as a whole. The Company discontinued certain year-round beer
styles between April 1998 and June 1999, thereby contributing to the decline in
volume.
Volume relating to non-core products declined approximately 32%, representing
approximately 49% of the total decline. Volume relating to non-core products was
13,000 barrels for the three months ended June 26, 1999 as compared to 20,000
barrels for the three months ended June 27, 1998. Management anticipates a
continued decline in volume relating to non-core products.
Selling Price. The selling price per barrel increased by $3.56 or 2.4% to
$151.69 per barrel for the three months ended June 26, 1999. This is primarily
due to a decline in sales of non-core products which have a lower selling price
than core brands. The decline of shipments of non-core products improved average
net sales per barrel by $2.48, or 1.7%. The remaining increase can be attributed
to normal price increases.
Significant changes in the packaging mix could have a material effect on sales
per barrel. The Company packages its core brands in bottles and kegs. Assuming
the same level of production, a shift in the mix from bottles to kegs would
effectively decrease revenue per barrel, as the selling price per equivalent
barrel is lower for kegs than for bottles. Keg sales as a percentage of total
equivalent barrels of core brands were 30% for both the three months ended June
26, 1999 and June 27, 1998.
Gross Profit. Gross profit increased to 56.5% as a percentage of net sales or
$85.77 per barrel for the three months ended June 26, 1999, as compared to 50.7%
as a percentage of net sales or $75.05 per barrel for the three months ended
June 27, 1998. The increase in gross profit is due primarily to a decline in
cost of sales. Cost of sales decreased by $7.16 per barrel to 43.5% as a
percentage of net sales or $65.92 per barrel for the three months ended June 26,
1999, as compared to 49.3% as a percentage of net sales or $73.08 per barrel for
the three months ended June 27, 1998. This is primarily due to lower costs of
certain raw materials, improvements in the production efficiency and utilization
of the Cincinnati Brewery and a decline in barrels shipped related to non-core
products.
Raw material costs were lower due to new contracts with certain vendors, and
favorable prices on cyclical items such as corrugated and malt. The Company
enters into limited term supply agreements with certain vendors in order to
receive advantageous pricing. Expenses related to excess hops inventory and
purchase commitment contracts amounted to $900,000 for
9
the three months ended June 26, 1999 as compared $1.1 million for the same
period last year. See "Hops Purchase Commitments" below for further discussion.
The gross profit margin on non-core products is lower than for core brands as
non-core products have a lower selling price than core brands. Therefore, a
decline in the non-core product volume increases gross profit per equivalent
barrel for the Company as a whole. The decline in volume relating to non-core
products resulted in an increase in gross profit as a percentage of net sales of
less than 1%.
Additional factors that affect gross profit include changes in the packaging and
product mix. The Company packages its core brands in bottles and kegs. While
gross profit as a percentage of net sales is higher for kegs than for bottles,
the per-equivalent-barrel gross profit is higher for bottles than for kegs.
Therefore, an increase in kegs as a percentage of volume while increasing the
overall gross profit margin as a percentage of net sales, will deliver fewer
gross profit dollars with which to run the business. Keg sales as a percentage
of total equivalent barrels of core brands were 30.0% for the three months ended
June 26, 1999 and the three months ended June 27, 1998.
Gross profit is not significantly affected by changes in brewing locations. The
Company attempts to minimize total costs, including freight (which, however, is
included in advertising, promotional and selling expenses), by shifting
production between plants. Effective March 31, 1999, the brewing contract
between the Company and Pittsburgh Brewing Company expired. The Company shifted
production to other contract breweries and has not experienced a material impact
on gross profit as a result of this shift in production. During 1999, production
is expected to shift between plants as a result of the Stroh Transactions (see
discussion below under "Stroh-Pabst-Miller Transactions"). The Company does not
expect that the Stroh Transactions will have a material impact on gross profit.
Advertising, promotional and selling. Advertising, promotional and selling
expenses decreased by $403,000 or 2.2% to $18.0 million for the three months
ended June 26, 1999 as compared to $18.4 million for the three months ended June
27, 1998. As a percentage of net sales, advertising, promotional and selling
expenses decreased slightly to 38.1% for the three months ended June 26, 1999 as
compared to 38.4% for the same period last year. During the second quarter the
Company used TV, radio, outdoor and consumer and trade print along with website
advertising to promote Boston Lager. The Company anticipates an increase in
advertising expenditures during the second half of 1999.
General and administrative. General and administrative expenses decreased by
$246,000 or 7.7% to $3.0 million for the three months ended June 26, 1999 as
compared to the same period last year. The decrease is primarily due to declines
in bad debt expense and legal expenses.
Interest income. Interest income increased by 8.2% to $526,000 for the three
months ended June 26, 1999 as compared to $486,000 for the three months ended
June 27, 1998. The increase is primarily due to a higher monthly average cash
and short-term investments balance of approximately $47.0 million during the
current year quarter as compared to an average balance of $39.4 million during
the same period last year.
Interest expense. Interest expense was $3,000 for the three months ended June
26, 1999 as compared to $157,000 for the three months ended June 27, 1998. The
decline in interest expense during the current year quarter is due to the
repayment on March 31, 1999 of the $10.0 million outstanding balance under the
then existing lines of credit. At June 27, 1998, $10.0 million was outstanding
on the then-existing $30.0 million line of credit. See footnote E to the
Consolidated Financial Statements for further explanation.
Other income (expense), net. Other income (expense), net decreased by $848,000
to an expense of $11,000 for the three months ended June 26, 1999 from income of
$837,000 for same period last year. The significant income recognized in the
prior year was primarily due to the partial recovery of a previously recorded
loss on a marketable equity security which was sold during the second quarter of
1998.
Provision for income taxes. The Company's effective tax rate increased to 42.0%
for the three months ended June 26, 1999 from 39.6% for the three months ended
June 27, 1998. The 1998 effective tax rate reflects a partial recovery realized
upon the sale of a marketable equity security during the three months ended June
26, 1998. The Company had recorded a write-down on the marketable equity
security held for sale during the first quarter 1998. There was no such activity
during 1999. See footnote D to the Consolidated Financial Statements for further
explanation.
10
Six Months Ended June 26, 1999 compared to Six Months Ended June 27, 1998
Net sales. Net sales decreased by $6.2 million or 6.6% to $88.0 million for the
six months ended June 26, 1999 as compared to the six months ended June 27,
1998. The decline is primarily due to a decrease in volume.
Volume. Volume decreased by 55,000 barrels or 8.6% to 579,000 barrels in the six
months ended June 26, 1999 from 634,000 barrels in the six months ended June 27,
1998. This decrease was primarily due to a decline in sales of year-round beer
styles (partially offset by an increase in seasonal beer styles) and a decline
in the sale of non-core products.
Total volume for Boston Beer's core brands decreased by 6.0% to 555,000 barrels
for the six months ended June 26, 1999 as compared to 590,000 barrels for the
six months ended June 27, 1998. The decline in volume is a function of both
increased competition from "better beers" and a more mature market that is less
inclined to sample new styles. The Company continuously evaluates the
performance of its various beer and cider brands in order to rationalize its
product line, as a whole. The Company discontinued certain year-round beer
styles between April 1998 and June 1999, thereby contributing to the decline in
volume.
Volume relating to non-core products declined approximately 45%, representing
approximately 36% of the total decline. Volume relating to non-core products was
24,000 barrels for the six months ended June 26, 1999 as compared to 44,000
barrels for the six months ended June 27, 1998. Management anticipates a
continued decline in volume relating to non-core products.
Selling Price. The selling price per barrel increased by $3.29 or 2.2% to
$152.07 per barrel for the six months ended June 26, 1999. This is primarily due
to a decline in sales of non-core products which have a lower selling price than
core brands, partially offset by changes in the packaging mix of core brands.
Significant changes in the packaging mix could have a material effect on sales
per barrel. The Company packages its core brands in bottles and kegs. Assuming
the same level of production, a shift in the mix from bottles to kegs would
effectively decrease revenue per barrel, as the selling price per equivalent
barrel is lower for kegs than for bottles. Keg sales as a percentage of total
equivalent barrels of core brands were 29.2% of total shipments for the six
months ended June 26, 1999 as compared to 28.3% for the same period last year.
Gross Profit. Gross profit increased to 56.2% as a percentage of net sales or
$85.42 per barrel for the six months ended June 26, 1999, as compared to 51.0%
as a percentage of net sales or $75.93 per barrel for the six months ended June
27, 1998. The increase in gross profit is primarily due to a decline in cost of
sales. Cost of sales decreased by $6.20 per barrel to 43.8% as a percentage of
net sales or $66.65 per barrel for the six months ended June 26, 1999, as
compared to 49.0% as a percentage of net sales or $72.85 per barrel for the six
months ended June 27, 1998. This is primarily due to lower costs of certain raw
materials, improvements in the production efficiency and utilization of the
Cincinnati Brewery and a decline in barrels shipped of non-core products.
Raw material costs were lower due to new contracts with certain vendors, and
favorable prices on cyclical items such as corrugated and malt. The Company
enters into limited term supply agreements with certain vendors in order to
receive advantageous pricing. Expenses related to excess hops inventory and
purchase commitment contracts amounted to $1.1 million for the six months ended
June 26, 1999 as compared $2.2 million for the same period last year. See "Hops
Purchase Commitments" below for further discussion.
The gross profit margin on non-core products is lower than for core brands.
Therefore, a decline in the non-core product volume increased gross profit per
equivalent barrel for the Company as a whole. The decline in volume relating to
non-core products resulted in an increase in gross profit as a percentage of net
sales of less than 1%.
Additional factors that affect gross profit include changes in the packaging and
product mix. The Company packages its core brands in bottles and kegs. While
gross profit as a percentage of net sales is higher for kegs than for bottles,
the per equivalent barrel gross profit is higher for bottles than for kegs.
Therefore, an increase in kegs as a percentage of volume while increasing the
overall gross profit margin as a percentage of net sales, will deliver fewer
gross profit dollars with which to run the business. Keg sales as a percentage
of total equivalent barrels of core brands were 29.2% for the six months ended
June 30, 1999 and 28.3% for the same period last year.
Gross profit is not significantly affected by changes in brewing locations. The
Company attempts to minimize total costs, including freight (which, however, is
included in advertising, promotional and selling expenses), by shifting
production between plants. Effective March 31, 1999, the brewing contract
between the Company and Pittsburgh Brewing Company expired.
11
The Company shifted production to other contract breweries and has not
experienced a material impact on gross profit as a result of this shift in
production. During 1999, production is expected to shift between plants as a
result of the Stroh Transactions (see discussion below under "Stroh-Pabst-Miller
Transactions"). The Company does not expect that the Stroh Transactions will
have a material impact on gross profit.
Advertising, promotional and selling. Advertising, promotional and selling
expenses increased by $824,000 or 2.6% to $32.8 million for the six months ended
June 26, 1999 as compared to $31.9 million for the six months ended June 27,
1998. As a percentage of net sales, advertising, promotional and selling
expenses increased to 37.2% for the six months ended June 26, 1999 as compared
to 33.9% for the same period last year, primarily due to higher point of sale
expenditures. Increased point of sale expenses is largely due to the timing of
the change in the Company's logo during 1998. The anticipation of the logo
change resulted in a significant decline in purchases of promotional items
during the six months ended June 28, 1998. The Company anticipates an increase
in advertising expenditures during the second half of 1999.
General and administrative. General and administrative expenses decreased by
$561,000 or 8.7% to $5.9 million for the six months ended June 26, 1999 as
compared to the same period last year. The decrease is primarily due to declines
in bad debt expense, legal expenses and depreciation expense.
Interest income. Interest income increased by 14.4% to $1.1 million primarily
due to an increase in average cash and short-term investments to approximately
$49.0 million during the six months ended June 26, 1999 as compared to $37.6
million during the six months ended June 27, 1998.
Interest expense. Interest expense declined by $179,000 to $148,000 for the six
months ended June 26, 1999 as compared to $327,000 for the six months ended June
27, 1998. The decline in interest expense is due to the repayment on March 31,
1999 of the $10.0 million outstanding balance under the then existing lines of
credit. At June 27, 1998, $10.0 million was outstanding under the then existing
$30.0 million portion of the lines of credit. See footnote E to the Consolidated
Financial Statements for further explanation.
Other income (expense), net. Other income (expense), net decreased by $1.7
million to income of $11,000 for the six months ended June 26, 1999 as compared
to an expense of $1.7 million for same period last year. The significant expense
recognized in the prior year was due to a $1.4 million loss realized on the
disposition of a marketable equity security and $300,000 in losses incurred on
the revaluation of foreign exchange forward contracts. There were no such
activities during 1999.
Provision for income taxes. The Company's effective tax rate decreased to 41.8%
for the six months ended June 26, 1999 from 49.1% for the six months ended June
27, 1998. The 1998 effective tax rate reflects a $1.4 million loss realized on
the sale of a marketable equity security during the second quarter 1998; the
Company does not expect to fully realize the tax benefit associated with this
capital loss. There was no such activity during 1999. See footnote D to the
Consolidated Financial Statements for further explanation.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial condition continued to be strong during the first half
of 1999. Cash and short-term investments decreased to $45.8 million as of June
26, 1999 from $53.9 million as of December 26, 1998. This decrease was primarily
due to the pay down of $10.0 million in bank debt on March 31, 1999, partially
offset by cash provided by operating activities of $3.1 million and cash
provided by investing activities of $2.3 million. Cash provided by operating
activities decreased to $3.1 million for the six months ended June 26, 1999 as
compared to $9.0 million for the six months ended June 27, 1998. This decline is
primarily due to an increase in accounts receivable of $6.6 million for the six
months ended June 26, 1999 as compared to $3.5 million for the same period last
year coupled with a net decline in current liabilities. The increase in accounts
receivable is due to the timing of sales; the accounts receivable turnover is
consistent with the prior year.
Effective October 15, 1998, the Board authorized management to implement a stock
repurchase, subject to an aggregate expenditure limitation of $10.0 million.
There were no stock repurchases under this program as of August 2, 1999.
With working capital of $64.0 million and $45.0 million in unused bank lines of
credit as of June 26, 1999, resources should be sufficient to meet the Company's
short-term and long-term operating and capital requirements.
12
THE POTENTIAL IMPACT OF KNOWN FACTS, COMMITMENTS, EVENTS AND UNCERTAINTIES
Year 2000
As has been widely publicized, many computer systems and microprocessors are not
programmed to accommodate dates beyond the year 1999. The Company's exposure to
this year 2000 ("Y2K") problem comes not only from its own internal computer
systems and microprocessors, but also from the systems and microprocessors of
its key vendors, including by way of illustration its contract breweries, raw
material suppliers, utility companies, payroll services and banks, and its
distributors and other customers. A failure of any of these internal or external
systems could adversely affect the Company's ability to brew, package, sell,
ship and bill for products and to collect on invoices and account for
collections. In effect, any significant computer failure could have a material
adverse effect on the Company's operations.
The Company currently believes that all of its internal systems are Y2K
compliant as of June 26, 1999, with the exception of the depletions tracking
system which is now expected to be compliant by the end of the third quarter of
1999. This belief is based on its own internal evaluations and testing and on
assurances from its systems vendors. Current estimates are that the total cost
to achieve internal year 2000 compliance, other than at the Cincinnati Brewery,
is estimated not to exceed $90,000, exclusive of amounts to be expended on
contingency plans. Approximately $12,000 of this amount has been spent through
June 26, 1999. This $90,000 anticipated upgrade cost is in addition to other
planned information technology ("IT") projects. While the intensive effort
expected to achieve Y2K compliance has caused and may continue to cause delays
in other IT projects, the Company does not expect that any of these delays will
have a significant effect on the Company's business or that any of the Company's
other IT projects will be canceled or postponed to pay for the Y2K upgrades.
Preliminary estimates of the cost to bring all systems into Y2K compliance at
the Cincinnati Brewery do not exceed $25,000. None of this amount has been spent
through June 26, 1999. The Company continues to evaluate and test all Cincinnati
Brewery equipment. Process controls at the Cincinnati Brewery are integral to
the brewery's operations. A failure of any of these controls could adversely
affect the Company's ability to continue brewing operations; however, because
many of the brewing processes can be controlled manually, the actual risk that
the Company will be unable to brew is low.
The Company relies extensively on its suppliers and contract breweries. Because
their systems are not directly under the Company's control, the Company is at
risk that all required external Y2K compliance efforts will not be completed on
time and significant business disruptions will result. The Company has formed a
committee to assure that all vendor and other relationship Y2K issues are
analyzed and addressed. Under the direction of this committee, the Company
compiled a list of all of its vendors and, as to each vendor, assessed the
impact that a Y2K failure would likely have on the Company's business and
operations. The Company then sent a Y2K questionnaire to each vendor believed to
present a possible critical risk, in order to ascertain the Y2K compliance
status of each. The Company is currently in the process of compiling and
analyzing the information submitted by these vendors. To date, questionnaires
have been sent to 37 critical vendors. All critical vendors have responded and
all have asserted that they are addressing the Y2K problem or are already in
compliance. The Company intends to continue to identify potential critical
vendors and to monitor the progress toward compliance of those not yet
compliant. The Company has also issued questionnaires to non-critical vendors
and is conducting the same analysis with them.
In addition to obtaining and assessing information concerning vendor Y2K status,
the Company is requiring all new vendors and all existing vendors entering into
new contracts with the Company to warrant Y2K compliance. Management understands
the potentially serious consequences of a system failure and also understands
that not all vendors may be Y2K compliant prior to January 1, 2000. For this
reason, the Company is developing contingency plans for all critical services
and supplies. As part of this contingency planning, the Company is assessing the
cost of vendor shutdown, understanding that, because of the complex nature of
the Company's supply chain and the lack of clarity as to the effect of multiple
vendor failure, any assessment process is imprecise.
In the unlikely event that the Company is unable to produce or ship any product
(the "Worst Case Scenario"), the Company estimates its financial exposure to be
in the range of $3.5 million per week of lost net revenue, over the short term.
Using forward planning ratios, this lost revenue translates into lost variable
gross profit, in the absence of mitigating cost cutting, of $1.9 million per
week. A production disruption for an extended period is likely to affect the
availability of the Company's products to consumers, leading to a decline in
brand equity, the financial consequences of which are not susceptible to
estimation. The Company does not expect to encounter the Worst Case Scenario.
The financial consequences of a less significant disruption are difficult to
predict, as they will depend on the exact circumstances and duration of the
disruption.
13
It is possible that the conclusions reached by the Company from its analysis to
date will change, and as such the cost estimates and target completion dates
outlined above may change. The Company will continue to explore contingency
plans, so as to be in a position to mitigate the consequences of any disruption
resulting from the Y2K issue.
Stroh-Pabst-Miller Transactions
Effective April 30, 1999, Stroh sold a majority of its beer brands and the
Allentown Brewery to Pabst and certain brands to Miller. The Company brews
approximately 40% of its production at the Allentown Brewery and the Portland
Brewery. Pabst has agreed to assume Stroh's obligations under the existing
brewing contract between the Company and Stroh; Miller has agreed to guarantee
Pabst's performance. The Company's volume brewed at the Allentown Brewery is
anticipated to remain substantially unchanged as a result of the Stroh
Transactions. Stroh has announced its intent to close the Portland Brewery
during the third quarter 1999. The Company's volume brewed at the Portland
Brewery will be transferred to a Pabst-owned brewery in Tumwater, Washington
(the "Tumwater Brewery") during the third quarter 1999. Miller has announced
that it intends to buy the Tumwater Brewery from Pabst and has confirmed that it
will assume Pabst's obligations to brew the Company's products at the Tumwater
Brewery. The Company does not anticipate any significant problems during the
transition period or thereafter, as a result of these transactions. The Company
expects to incur higher freight costs and increased capital expenditures as a
result of the move, but does not believe that the effect on its results of
operations, statement of financial position or statement of cash flows during
1999 will be material.
Hops Purchase Commitments
The Company enters into purchase commitments for hops based on forecasted future
requirements, among other factors. As a result of recent declines in sales
growth, existing hops inventory and purchase commitments may exceed projected
future needs. The Company evaluates its hop inventory levels and existing
purchase commitments on a quarterly basis in order to assess the reserve
required for excess amounts. In efforts to manage hop inventory levels, the
Company continues to cancel certain hops purchase commitments. The provision for
excess hops inventory and purchase commitments is adjusted accordingly. During
the six months ended June 26, 1999, the Company recorded a $1.1 million charge
associated with the provision for excess inventory on-hand and purchase
commitment contracts as compared to $2.2 million for the same period last year.
The computation of the excess purchase commitment reserve requires management to
make certain assumptions regarding future sales growth, product mix,
cancellation costs and supply, among others. Actual results may materially
differ from management's estimates.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Since December 26, 1998, there have been no significant changes in the Company's
exposures to interest rate or foreign currency rate fluctuations. The Company
currently does not enter into derivatives or other market risk sensitive
instruments for the purpose of hedging or for trading purposes.
FORWARD-LOOKING STATEMENTS
In this Form 10-Q and in other documents incorporated herein, as well as in oral
statements made by the Company, statements that are prefaced with the words
"may," "will," "expect," "anticipate," "continue," "estimate," "project,"
"intend," "designed" and similar expressions, are intended to identify
forward-looking statements regarding events, conditions, and financial trends
that may affect the Company's future plans of operations, business strategy,
results of operations and financial position. These statements are based on the
Company's current expectations and estimates as to prospective events and
circumstances about which the Company can give no firm assurance. Further, any
forward-looking statement speaks only as of the date on which such statement is
made, and the Company undertakes no obligation to update any forward-looking
statement to reflect events or circumstances after the date factor that may
emerge, forward-looking statements should not be relied upon as a prediction of
actual future financial condition or results. These forward-looking statements,
like any forward-looking statements, involve risks and uncertainties that could
cause actual results to differ materially from those projected or unanticipated.
Such risks and uncertainties include the factors set forth below in addition to
the other information set forth in this Form 10-Q.
14
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is a party to certain claims and litigation in the
ordinary course of business. The Company does not believe any of
these proceedings will result, individually or in the aggregate,
in a material adverse effect upon its financial condition or
results of operations.
Item 2. CHANGES IN SECURITIES
Not Applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on June 1,
1999. The following items were voted upon at
that time.
"RESOLVED: That Pearson C. Cummin, III, Robert N. Hiatt and James
C. Kautz be, and they hereby are, elected Class A Directors of
the Corporation, to serve for a term of one year, ending on the
date of the 2000 Annual Meeting of Stockholders in accordance
with the By-Laws and until their respective successors are duly
chosen and qualified."
The results of the vote were, as follows:
Election of Class A Directors:
For Withheld
-----------------------------------------------------------------
Pearson C. Cummin, III 14,149,502 107,561
Robert N. Hiatt 14,149,765 107,298
James C. Kautz 14,145,486 111,577
-----------------------------------------------------------------
Mr. C. James Koch, as the sole holder of the Corporation's Class
B Common Stock, voted on the election of six (6) Class B
Directors: C. James Koch, Alfred W. Rossow, Jr., Rhonda L.
Kallman, Martin Roper, Charles Joseph Koch and John B. Wing.
"RESOLVED: That C. James Koch, Alfred W. Rossow, Jr., Rhonda L.
Kallman, Martin Roper, Charles Joseph Koch and John B. Wing be,
and they hereby are, elected Class B Directors of the Corporation
to serve for a term of one year ending on the date of the 2000
Annual Meeting of Stockholders in accordance with the By-Laws and
until their respective successors are duly chosen and qualified."
The results of the vote were, as follows:
Election of Class B Directors:
For Withheld
-----------------------------------------------------------------
C. James Koch 4,107,355 0
Alfred W. Rossow, Jr. 4,107,355 0
Rhonda L. Kallman 4,107,355 0
Martin Roper 4,107,355 0
Charles Joseph Koch 4,107,355 0
John B. Wing 4,107,355 0
-----------------------------------------------------------------
15
Item 5. OTHER INFORMATION
Not Applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Index
Exhibit No. Title
----------- -----
3.1 Amended and Restated By-Laws of the Company, dated June 2,
1998 (incorporated by reference to Exhibit 3.5 to the
Company's Form 10-Q filed on August 10, 1998) .
3.2 Restated Articles of Organization of the Company, dated July
21, 1998 (incorporated by reference to Exhibit 3.6 to the
Company's Form 10-Q filed on August 10, 1998)
4.1 Form of Class A Common Stock Certificate (incorporated by
reference to Exhibit 4.1 to the Company's Registration
Statement No. 33-96164).
10.1 Revolving Credit Agreement between Fleet Bank of
Massachusetts, N.A. and Boston Beer Company Limited
Partnership (the "Partnership"), dated as of May 2, 1995
(incorporated by reference to Exhibit 10.1 to the Company's
Registration Statement No. 33-96162).
10.2 Loan Security and Trust Agreement, dated October 1, 1987,
among Massachusetts Industrial Finance Agency, the
Partnership and The First National Bank of Boston, as
Trustee, as amended (incorporated by reference to Exhibit
10.2 to the Company's Registration Statement No. 33-96164).
10.3 Deferred Compensation Agreement between the Partnership and
Alfred W. Rossow, Jr., effective December 1, 1992
(incorporated by reference to Exhibit 10.3 to the Company's
Registration Statement No. 33-96162).
10.4 The Boston Beer Company, Inc. Employee Equity Incentive
Plan, as adopted effective November 20, 1995 and amended
effective February 23, 1996 (incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement No. 333-
1798).
10.5 Form of Employment Agreement between the Partnership and
employees (incorporated by reference to Exhibit 10.5 to the
Company's Registration Statement No. 33-96162).
10.6 Services Agreement between The Boston Beer Company, Inc. and
Chemical Mellon Shareholder Services, dated as of October
27, 1995 (incorporated by reference to the Company's Form
10-K, filed on April 1, 1996).
10.7 Form of Indemnification Agreement between the Partnership
and certain employees and Advisory Committee members
(incorporated by reference to Exhibit 10.7 to the Company's
Registration Statement No. 33-96162).
10.8 Stockholder Rights Agreement, dated as of December, 1995,
among The Boston Beer Company, Inc. and the initial
Stockholders (incorporated by reference to the Company's
Form 10-K, filed on April 1, 1996).
+10.10 Agreement between Boston Brewing Company, Inc. and The Stroh
Brewery Company, dated as of January 31, 1994 (incorporated
by reference to Exhibit 10.9 to the Company's Registration
Statement No. 33-96164).
16
Item 6. EXHIBITS AND REPORTS ON FORM 8-K (continued)
(a) Exhibits (continued)
Exhibit Index (continued)
Exhibit No. Title
----------- -----
+10.11 Agreement between Boston Brewing Company, Inc. and the
Genesee Brewing Company, dated as of July 25, 1995
(incorporated by reference to Exhibit 10.10 to the
Company's Registration Statement No. 33-96164).
+10.12 Amended and Restated Agreement between Pittsburgh
Brewing Company and Boston Brewing Company, Inc. dated
as of February 28, 1989 (incorporated by reference to
Exhibit 10.11 to the Company's Registration Statement
No. 33-96164).
10.13 Amendment to Amended and Restated Agreement between
Pittsburgh Brewing Company, Boston Brewing Company,
Inc., and G. Heileman Brewing Company, Inc., dated
December 13, 1989 (incorporated by reference to Exhibit
10.12 to the Company's Registration Statement No. 33-
96162).
+10.14 Second Amendment to Amended and Restated Agreement
between Pittsburgh Brewing Company and Boston Brewing
Company, Inc. dated as of August 3, 1992 (incorporated
by reference to Exhibit 10.13 to the Company's
Registration Statement No. 33-96164).
+10.15 Third Amendment to Amended and Restated Agreement
between Pittsburgh Brewing Company and Boston Brewing
Company, Inc. dated December 1,1994 (incorporated by
reference to Exhibit 10.14 to the Company's Registration
Statement No. 33-96164).
10.16 Fourth Amendment to Amended and Restated Agreement
between Pittsburgh Brewing Company and Boston
Brewing Company, Inc. dated as of April 7,1995
(incorporated by reference to Exhibit 10.15 to
the Company's Registration Statement No. 33-
96162).
+10.17 Letter Agreement between Boston Beer Company Limited
Partnership and Joseph E. Seagram & Sons, Inc. (incorporated
by reference to Exhibit 10.16 to the Company's Registration
Statement No. 33-96162).
10.18 Services Agreement and Fee Schedule of Mellon Bank, N.A.
Escrow Agent Services for The Boston Beer Company, Inc.
dated as of October 27, 1995 (incorporated by reference to
Exhibit 10.17 to the Company's Registration Statement No.
33-96164).
10.19 Amendment to Revolving Credit Agreement between Fleet Bank
of Massachusetts, N.A. and the Partnership (incorporated by
reference to Exhibit 10.18 to the Company's Registration
Statement No. 33-96164).
10.20 1996 Stock Option Plan for Non-Employee Directors
(incorporated by reference to the Company's Form 10-K, filed
on March 27, 1998).
+10.21 Production Agreement between The Stroh Brewery Company and
Boston Beer Company Limited Partnership, dated January 14,
1997 (incorporated by reference to the Company's Form 10-K,
filed on March 27, 1998).
+10.22 Letter Agreement between The Stroh Brewery Company and
Boston Beer Company Limited Partnership, dated January 14,
1997 (incorporated by reference to the Company's Form 10-K,
filed on March 27, 1998).
17
Item 6. EXHIBITS AND REPORTS ON FORM 8-K (continued)
(a) Exhibits (continued)
Exhibit Index (continued)
Exhibit No. Title
----------- -----
+10.23 Agreement between Boston Beer Company Limited Partnership
and The Schoenling Brewing Company, dated May 22, 1996
(incorporated by reference to the Company's Form 10-K, filed
on March 27, 1998) .
10.24 Revolving Credit Agreement between Fleet Bank of
Massachusetts, N.A. and The Boston Beer Company, Inc., dated
as of March 21, 1997 (incorporated by reference to the
Company's Form 10-Q, filed on May 12, 1997) .
+10.25 Amended and Restated Agreement between Boston Brewing
Company, Inc. and the Genesee Brewing Company, Inc. dated
April 30, 1997 (incorporated by reference to the Company's
Form 10-Q, filed on August 11, 1997) .
+10.26 Fifth Amendment, dated December 31, 1997, to Amended and
Restated Agreement between Pittsburgh Brewing Company and
Boston Brewing Company, Inc. (incorporated by reference to
the Company's Form 10-K, filed on March 27, 1998) .
10.27 Extension letters, dated August 19, 1997, November 19, 1997,
December 19, 1997, January 22, 1998, February 25, 1998 and
March 11, 1998 between The Stroh Brewery Company and Boston
Brewing Company, Inc. (incorporated by reference to the
Company's Form 10-K, filed on March 27, 1998).
+10.28 Employee Equity Incentive Plan, as amended and effective on
December 19, 1997 (incorporated by reference to the
Company's Form 10-K, filed on March 27, 1998) .
+10.29 1996 Stock Option Plan for Non-Employee Directors, as
amended and effective on December 19, 1997 (incorporated by
reference to the Company's Form 10-K, filed March 27, 1998).
+10.30 Glass Supply Agreement between The Boston Beer Company and
Owens' Brockway Glass Container Inc., dated April 30, 1998
(incorporated by reference to the Company's Form 10-Q, filed
on August 10, 1998).
10.31 Extension letters, dated April 13, 1998, April 27, 1998,
June 11, 1998, June 25, 1998 and July 20, 1998 between The
Stroh Brewery Company and Boston Brewing Company, Inc.
(incorporated by reference to the Company's Form 10-Q, filed
on August 10, 1998).
10.32 Extension letters, dated July 31, 1998, August 28, 1998,
September 28, 1998, October 13, 1998, October 20, 1998 and
October 23, 1998 between The Stroh Brewery Company and
Boston Brewing Company, Inc. (incorporated by reference to
the Company's Form 10-Q, filed on November 4, 1998).
+10.33 Amended and Restated Production Agreement between The Stroh
Brewery Company and Boston Beer Company Limited Partnership,
dated November 1, 1998 (incorporated by reference to the
Company's Form 10-K, filed on March 25, 1999).
10.34 Agreement between Boston Beer Company Limited Partnership,
Pabst Brewing Company and Miller Brewing Company, dated
February 5, 1999 (incorporated by reference to the Company's
Form 10-K, filed on March 25, 1999).
18
Item 6. EXHIBITS AND REPORTS ON FORM 8-K (continued)
(a) Exhibits (continued)
Exhibit Index (continued)
Exhibit No. Title
----------- -----
10.35 Amendment to Revolving Credit Agreement between Fleet Bank
of Massachusetts, N.A. and The Boston Beer Company, Inc.,
dated March 30, 1999 (incorporated by reference to the
Company's Form 10-Q, filed on May 10, 1999) .
+10.36 Agreement between Boston Beer Company Limited Partnership
and Landstar Logistics and Transportation, dated January 9,
1999 (incorporated by reference to the Company's Form 10-Q,
filed on May 10, 1999) .
*11.1 The information required by exhibit 11 has been included in
Note G of the notes to the consolidated financial
statements.
21.1 List of subsidiaries of The Boston Beer Company, Inc.
(incorporated by reference to the Company's Form 10-K, filed
on March 28, 1997) .
*27.1 Financial Data Schedule (electronic filing only).
* Filed with this report.
+ Portions of this Exhibit have been omitted pursuant to an
application for an order declaring confidential treatment filed with
the Securities and Exchange Commission.
(b) Reports on Form 8-K.
The Company filed no reports on Form 8-K with the Securities and
Exchange Commission during the quarter ended June 26, 1999 .
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Form 10-Q to be signed on its
behalf by the undersigned thereunto duly authorized.
THE BOSTON BEER COMPANY, INC.
(Registrant)
Date: August 10, 1999 By: /s/ C. James Koch
-------------------------------------
C. James Koch
President and Chief Executive Officer,
(principal executive officer)
Date: August 10, 1999 By: /s/ Alfred W. Rossow, Jr.
-------------------------------------
Alfred W. Rossow, Jr.
Chief Financial Officer (principal
financial officer)
Date: August 10, 1999 By: /s/ Richard P. Lindsay
-------------------------------------
Richard P. Lindsay
Vice President - Finance (principal
accounting officer)
20
5
1,000
6-MOS
JUN-26-1999
DEC-27-1999
JUN-26-1999
4,042
41,736
19,905
(1,313)
17,418
88,097
44,881
(18,182)
119,436
24,147
0
0
0
205
88,793
119,436
98,107
88,039
38,585
77,220
952
0
148
11,771
4,926
6,845
0
0
0
6,845
0.33
0.33
THIS NUMBER INCLUDES 16,417,622 SHARES OF CLASS A COMMON STOCK WITH A PAR VALUE
OF $164,000 AND 4,107,355 SHARES OF CLASS B STOCK WITH A PAR VALUE OF $41,000.
