E-Malt.com News article: USA, MA: The Boston Beer Company reports third quarter 2014 results

The Boston Beer Company, Inc. reported third quarter 2014 net revenue of $269.7 mln, an increase of $53.3 mln or 25% over the same period last year, mainly due to core shipment growth of 23%, money.cnn.com reported on October, 30.

Net income for the third quarter was $37.9 mln, or $2.79 per diluted share, an increase of $12.2 mln or $0.90 per diluted share from the third quarter of 2013. This increase was primarily due to shipment increases and lower than expected operating costs per barrel during the third quarter due to lower employee benefit costs and the timing of certain advertising promotional and selling expenses.

Earnings per diluted share for the 39-week period ended September 27, 2014 were $5.29, an increase of $1.44 from the comparable 39-week period in 2013. Net revenue for the 39-week period ended September 27, 2014 was $685.2 mln, an increase of $151.5 mln, or 28%, from the comparable 39-week period in 2013.

Depletions grew 21% from the comparable 13-week period in the prior year, primarily due to increases in the Angry Orchard®, Samuel Adams®, and Twisted Tea® brands.

Core shipment volume was approximately 1.2 mln barrels, a 23% increase over the third quarter of 2013.

The Company believes distributor inventory levels at September 27, 2014 were at appropriate levels. Inventory at distributors participating in the Freshest Beer Program at September 27, 2014 increased slightly in terms of days of inventory on hand when compared to September 28, 2013. The Company has over 65% of its volume on the Freshest Beer Program and it believes participation in the Program could reach 70% of its volume by the end of 2014.

Gross margin at 53% was equal to the third quarter of 2013, primarily due to unfavorable product mix effects and increases in packaging and ingredient costs that were offset by price increases.

Advertising, promotional and selling expenses were $8.9 mln higher than costs incurred in the third quarter of 2013. The increase was primarily a result of increased investments in media advertising, increased costs for additional sales personnel, point of sale, and increased freight to distributors due to higher volumes.

General and administrative expenses were equal to the third quarter of 2013, primarily due to increases in salary costs that were offset by lower benefit and consulting costs.

Impairment of long lived assets was $300,000 higher than the third quarter of 2013 due to the write-down in 2014 of Pennsylvania Brewery assets of $1.6 mln compared to a write-down in 2013 of land owned by the Company in Freetown, Massachusetts of $1.3 mln.

Jim Koch, Chairman and Founder of the Company, commented, "Our depletions growth this quarter was strong and a result of a number of factors, including effective sales execution, support from our distributors and retailers, not to mention the quality of our beers, innovation and strong brands. During the quarter, we had a smooth transition from Samuel Adams Summer Ale to our fall seasonal, Samuel Adams OctoberFest. Our fall seasonal program also included the limited release of seasonal favorites including Samuel Adams Harvest Pumpkin and a small batch double pumpkin ale, Samuel Adams Fat Jack. In addition, for the first time, we released a small batch of Kosmic Mother Funk Grand Cru, which is currently on a twelve-city tour after fermenting in the Barrel Room of our Boston Brewery for about two years. It's an exciting time for us, and we remain confident about the long-term outlook for the craft category and our Samuel Adams brand."

Martin Roper, the Company's President and CEO stated, "In the third quarter, our depletions growth remained strong and benefited from the growth of our Samuel Adams, Twisted Tea, and Angry Orchard brands. We believe that the strength of our main brands reflects strong sales execution and our increased investments in media, local marketing and point of sale, and the efforts of our increased sales force. We do not expect that the depletions growth rates we have experienced so far this year will be maintained for the remainder of the year, as we face tougher comparables and the benefit in the first half from new product launches will not be replicated during the fourth quarter of 2014. Accordingly, we have not increased our estimated full year 2014 depletion growth rate."

Mr. Roper went on to say, "Our supply chain performance improved during the quarter but we still have plenty of room for further improvement. We have completed a number of significant capital and efficiency projects that have further increased our capacity and capabilities. Our focus now is on taking full advantage of these increased capabilities through improved operator training and on making supply chain improvements intended to increase the freshness of our beers and enhance our customer service. We expect our capital expansion pace to slow in 2015, as we absorb and optimize our 2013 and 2014 investments. Our sales focus in 2015 will be on second year growth of some of our successful 2014 launches, rather than continue our recent high pace of new brand launches. It is too early to accurately predict 2015 growth rates. We expect to maintain a high level of brand investment as we pursue sustainable growth and innovation, and we continue to be prepared to forsake the earnings that may be lost as a result of these investments in the short term, as we pursue long term profitable growth."


31 October, 2014