E-Malt.com News article: 3597

USA, Boston: The Boston Beer Company, Inc. reported on November 3 its third quarter 2004 volume, revenue and earnings, as compared to the third quarter 2003. 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.

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.

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.

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.


05 November, 2004