E-Malt.com News article: USA: Boston Beer Company posted good results for Q1 2005

The Boston Beer Company, Inc. announced on May 3 it achieved first quarter 2005 diluted earnings per share of $.27, a $.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® 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.

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.

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® and Sam Adams Light® 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®. 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.

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® 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® 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®, 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.


04 May, 2005