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BOSTON BEER REPORTS THIRD QUARTER 2011 RESULTS
BOSTON, MA (11/1/11) -- The Boston Beer Company, Inc. (NYSE: SAM) reported a third quarter core product depletions increase of 11% as compared to the third quarter of 2010. Third quarter 2011 net revenue was $134.8 million, an increase of $10.3 million or 8% over the same period last year, mainly due to 7% shipment volume gains. Net income for the third quarter was $16.3 million, or $1.19 per diluted share, an increase of $850,000, or $0.10 per diluted share, from the third quarter of 2010. This increase was primarily due to volume increases, partially offset by increased investments in advertising, promotional and selling expenses.
Highlights of this release include:
Jim Koch, Chairman and Founder of the Company, commented, "We achieved depletions growth of 11% and record total depletions in the third quarter. We believe that our depletions growth is attributable to strong sales execution and support from our wholesalers and retailers as well as our great quality beers and strong brands. Depletions growth in the quarter improved from our first half results of 7% primarily due to the strength of our seasonal program. We are happy with the health of our brand portfolio and remain positive about the future of craft beer."
Commenting on the Freshest Beer Program, Mr. Koch continued, "We are pleased with the results so far, and currently have over 25 wholesalers signed up and at various stages of inventory reduction. We believe that in the long term this program will deliver better, fresher Samuel Adams beer to our drinkers and should reduce costs and improve efficiency throughout the supply chain. We are still targeting that 50% of our volume will be on our Freshest Beer Program by the end of 2011 and believe this could reach 70% by the end of 2012."
3rd Quarter 2011 Summary of Results
Depletions grew 11% for the quarter, primarily due to increases in Samuel Adams® Seasonals, Twisted Tea® and the Samuel Adams® Brewmaster's Collection, partially offset by declines in Samuel Adams Boston Lager® and Sam Adams Light®.
Core shipment volume was approximately 656,000 barrels, a 7% increase over the same period in 2010.
The third quarter gross margin was 56% for both 2011 and 2010. Minor pricing increases and lower ingredients costs were partially offset by a slight change in our core product mix. The Company continues to focus on cost savings initiatives and efficiencies.
Advertising, promotional and selling expenses were $4.7 million higher than those incurred in the prior year, primarily as a result of higher costs for additional sales personnel and increased investments in local marketing, as well as increased costs of freight to wholesalers.
General and administrative expenses increased $0.5 million compared to the third quarter of 2010, due to increases in salary and benefit costs, and stock compensation expense.
The Company's effective tax rate for the third quarter of 2011 was 38%.
Year to Date 2011 Summary of Results
Depletions grew 8% year-to-date, primarily due to increases in Twisted Tea®, Samuel Adams® Seasonals, Samuel Adams® Brewmaster's Collection and Samuel Adams Boston Lager®, partially offset by declines in Sam Adams Light®.
Core shipment volume was approximately 1,800,000 barrels, a 6% increase over the same period in 2010.
Net income increased $10.3 million, or $0.83 per diluted share, to $48.3 million, or $3.48 per diluted share, compared to the same period last year, due to the $0.92 per share recall settlement received in the second quarter and increases in core shipment volume, partially offset by higher selling expenses and the negative impact of the Freshest Beer Program on shipment volume. The Company estimates the unfavorable earnings per share impact was $0.09 due to the reduced shipments related to the implementation of the Freshest Beer Program.
Advertising, promotional and selling expenses were $16.5 million higher than those incurred in the prior year, primarily as a result of increased investments in advertising and local marketing, higher costs for additional sales personnel and increased costs of freight to wholesalers.
General and administrative expenses increased by $2.9 million over the same period in 2010, due to increases in salary and benefit costs and consulting expenses, and also due to the fact that in the first quarter of 2010 there was a $0.9 million reversal of a 2009 expense for an option that did not vest.
Cash and cash equivalents as of the end of the third quarter totaled $48.1 million.
During the first nine months of 2011, the Company repurchased approximately 611,000 shares of its Class A Common Stock at a cost of approximately $50.9 million and repurchased approximately an additional 125,000 shares during the period September 25, 2011 through October 29, 2011 at an approximate cost of $9.6 million. As of October 29, 2011 the Company had approximately $25.5 million remaining on the $275.0 million share buyback expenditure limit set by the Board of Directors.
As of October 29, 2011, the Freshest Beer Program is now active at over 25 wholesalers representing approximately 30% of the Company's business.
Depletion and Shipment estimates
Fiscal 2011 Outlook
The Company's full year 2011 earnings per diluted share projection is between $3.60 and $3.90.
The Company's actual 2011 earnings per diluted share could vary significantly from the current projection. Underlying the Company's current projection are the following estimates and targets:
Fiscal 2012 Outlook
The Company is in the process of completing its 2012 planning process and will provide further detailed guidance when the Company presents its full-year 2011 results. The Company is currently using the following assumptions and targets for 2012
About the Company
The Boston Beer Company began in 1984 with a generations-old family recipe that Founder and Brewer Jim Koch uncovered in his father's attic. After bringing the recipe to life in his kitchen, Jim brought it to bars in Boston with the belief that drinkers would appreciate a complex, full-flavored beer, brewed fresh in America. That beer was Samuel Adams Boston Lager®, and it helped catalyze what became known as the American craft beer revolution.
Today, the Company brews over 25 styles of beer. The Company uses the traditional four vessel brewing process and often takes extra steps like dry-hopping and a secondary fermentation known as krausening. It passionately pursues the development of new styles and the perfection of its classic beers by constantly searching for the world's finest ingredients. While resurrecting traditional brewing methods, the Company has earned a reputation as a pioneer in another revolution, the "extreme beer" movement, where it seeks to challenge drinkers' perceptions of what beer can be. The Boston Beer Company strives to elevate the image of American craft beer by entering festivals and competitions the world over, and in the past five years it has won more awards in international beer competitions than any other brewery in the world. The Company remains independent, and brewing quality beer remains its single focus. While the Company is the country's largest-selling craft beer, it accounts for only approximately one percent of the U.S. beer market. For more information, please visit www.samueladams.com.
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, 2010 and December 26, 2009. Copies of these documents may be found on the Company's website, www.bostonbeer.com, or obtained by contacting the Company or the SEC.
Tuesday, November 1, 2011