BOSTON BEER REPORTS THIRD QUARTER FINANCIAL RESULTS

October 26, 2023 at 4:15 PM EDT

BOSTON, Oct. 26, 2023 /PRNewswire/ -- The Boston Beer Company, Inc. (NYSE: SAM), today reported financial results for its third quarter that ended September 30, 2023. Key results were:

Third Quarter 2023 Summary:

Depletions decreased 6% on a fiscal calendar basis and decreased approximately 3% on a comparable week basis
Shipments decreased 2.5% on a fiscal calendar basis and decreased 1.8% on a comparable week basis
Net revenue increased 0.9% to $601.6 million
Gross margin increased 250 basis points to 45.7%
Net income of $45.3 million, which includes non-cash brand impairment charges of $16.4 million and the related tax benefit
Diluted earnings per share of $3.70, including non-cash brand impairment charges of $0.96 per share

Capital Structure

Generated $131.3 million in operating cash flow in the third quarter
Ended the third quarter with $310.8 million in cash and no debt
Repurchased $69.4 million in shares from January 3, 2023 to October 20, 2023

"On a comparable weeks basis, which adjusts for the timing impact of the July 4th holiday, our depletions trends improved from a decrease of 7% in the second quarter to a decrease of 3% in the third quarter. We continue to execute our operational plans and grew revenue, gross margin and operating cash flow in the quarter which enabled us to repurchase over $69 million in shares year-to-date," said Chairman and Founder Jim Koch. "Our highly cash-generative business and strong balance sheet allow us to invest in our brands as we work to return to long-term sustainable growth."

"We are pleased with our performance in the third quarter as momentum on Twisted Tea remained strong and we continued to show progress on our margin enhancement plans while increasing brand investment. Based on our results year-to-date and our expectations for the fourth quarter, we are narrowing our revenue and EPS guidance ranges," said President and CEO Dave Burwick. "We plan to continue to invest behind the Twisted Tea and Truly brands while also nurturing innovation across Beyond Beer categories to drive long-term growth."

Details of the results were as follows:

Third Quarter 2023 (13 weeks ended September 30, 2023) Summary of Results

Net revenue of $601.6 million increased 0.9% compared to the prior year.

Depletions in the third quarter decreased 6% from the prior year, reflecting decreases in the Company's Truly, Angry Orchard, Samuel Adams and Dogfish Head brands, partially offset by increases in its Twisted Tea and Hard Mountain Dew brands.

Shipment volume for the quarter was approximately 2.3 million barrels, a 2.5% decrease from the prior year, reflecting decreases in the Company's Truly, Samuel Adams, Angry Orchard and Dogfish Head brands, partially offset by increases in its Twisted Tea and Hard Mountain Dew brands.

The timing of the July 4th holiday relative to the Company's 2023 and 2022 fiscal calendars resulted in a negative depletion and shipment volume impact in the third quarter of 2023. This volume impact was the most significant factor in the difference between depletions and shipments on a fiscal calendar basis compared to a comparable weeks basis. On a comparable weeks basis, depletions declined approximately 3% and shipments declined 1.8%.

The Company believes distributor inventory as of September 30, 2023 averaged approximately five weeks on hand and was at an appropriate level for each of its brands.

Gross margin of 45.7% increased 250 basis points from the 43.2% margin realized in the prior year. Gross margin primarily benefited from strong price realization, lower inventory obsolescence and procurement savings, which were partially offset by increased inflationary costs.

Advertising, promotional and selling expenses for the third quarter of 2023 decreased $1.1 million or 0.7% from the third quarter of 2022, due to decreased freight to distributors of $10.8 million from lower rates and volumes, partially offset by an increase in brand and selling costs of $9.6 million, mainly driven by higher salaries and benefits costs and increased media investments.

General and administrative expenses increased by $4.9 million or 13.2% from the third quarter of 2022, primarily due to higher salaries and benefits costs and increased consulting costs.

Impairment of intangible assets reflects a $16.4 million non-cash impairment charge recorded primarily for the Dogfish Head brand, taken as a result of the Company's annual impairment analysis as of September 1, 2023. The impairment determination was primarily based on the latest forecasts of brand performance which has been below our projections made on the acquisition date. In the third quarter of 2022, the Company recorded an impairment charge of $27.1 million for the Dogfish Head brand.

The Company incurred impairment costs for brewery equipment of $1.9 million in the third quarter of 2023 and $1.2 million in the third quarter of 2022.

The Company's effective tax rate for the third quarter was 29.3% compared to 28.6% in the prior year. In the third quarters of 2023 and 2022, the Company recorded a tax benefit of $0.00 and $0.02 per diluted share, respectively, resulting from the Accounting Standard "Employee Share-Based Payment Accounting" ("ASU 2016-09").

Year-to-date 2023 (39 weeks ended September 30, 2023) Summary of Results

Net revenue year-to-date of $1.615 billion decreased 1.7% compared to year-to-date 2022.

Depletions year-to-date decreased 5% from year-to-date 2022, reflecting decreases in the Company's Truly, Angry Orchard, Samuel Adams and Dogfish Head brands, partially offset by increases in its Twisted Tea and Hard Mountain Dew brands. Comparable weeks depletions year-to-date decreased 5%.

Shipment volume year-to-date was approximately 6.2 million barrels, a 4.6% decrease from year-to-date 2022, reflecting decreases in the Company's Truly, Angry Orchard, Samuel Adams, and Dogfish Head brands, partially offset by increases in its Twisted Tea and Hard Mountain Dew brands. Comparable weeks shipments year-to-date decreased 5.5%.

Gross margin year-to-date of 43.6% increased from the 42.4% gross margin realized in year-to-date 2022, primarily due to price increases and procurement savings that were partially offset by increased inflationary costs.

Advertising, promotional and selling expenses year-to-date decreased $11.8 million or 2.7% from year-to-date 2022, primarily due to decreased freight to distributors of $39.0 million from lower rates and volumes, partially offset by an increase in brand investments of $27.2 million, mainly driven by increased salaries and benefits costs and higher investments in local marketing and media.

General and administrative expenses year-to-date increased by $15.0 million or 12.9% from year-to-date 2022, primarily due to increased consulting and increased salaries and benefits costs.

The Company incurred impairment costs for brewery equipment of $3.9 million year-to-date 2023 and $1.3 million year-to-date 2022.

In 2022, the Company recorded $5.3 million in contract termination costs, most of which was recorded in the first quarter, as a result of further negotiations with suppliers that eliminated certain future shortfall fees.

The Company's effective tax rate year-to-date was 28.4% compared to 26.3% year-to-date 2022. Year-to-date 2023 and 2022, the Company recorded tax benefit of $0.01 per diluted share and a tax benefit of $0.03 per diluted share, respectively, resulting from ASU 2016-09.

Net income year-to-date of $94.4 million or $7.67 per diluted share, represented an increase of $15.7 million or $1.31 per diluted share compared to year-to-date 2022. This increase between periods was primarily driven by higher gross margins and lower impairment, partially offset by lower revenue and a higher tax rate.

The Company expects that its September 30, 2023 cash balance of $310.8 million, together with its projected future operating cash flows and the unused balance on its $150.0 million line of credit, will be sufficient to fund future cash requirements.

During the 39-week period ended September 30, 2023 and the period from October 1, 2023 through October 20, 2023, the Company repurchased its Class A Common Stock in the amounts of $62.9 million and $6.6 million, respectively, for a total of $69.4 million year to date. As of October 20, 2023, the Company had approximately $290.0 million remaining on the $1.2 billion share buyback expenditure limit set by the Board of Directors.

Depletions Estimate

Year-to-date depletions through the 42-week period ended October 21, 2023 are estimated by the Company to have decreased approximately 5% from the prior year period on both a fiscal and comparable weeks basis.

Full-Year 2023 Projections

The Company is updating the full year volume and earnings guidance previously communicated in its July 27, 2023 Earnings Release. The Company's actual 2023 results could vary significantly from the current projection and are highly sensitive to changes in volume projections and supply chain performance. The 2023 fiscal year includes 52 weeks compared to the 2022 fiscal year which included 53 weeks.

Full Year 2023	Current Guidance	Prior Guidance
Depletions Decreases	(5%) to (7%)	(2%) to (8%)
Shipments Decreases	(5%) to (7%)	(2%) to (8%)
Price Increases	2% to 3%	1% to 3%
Gross Margin	42% to 43%	41% to 43%
Advertising, Promotion, and Selling Expense YoY Change *($ million)*	$25 to $35	$20 to $40
Effective Tax Rate	28 %	28 %
GAAP EPS	$6.04 to $8.04	$6.00 to $10.00
Non-GAAP EPS	$7.00 to $9.00	-
Capital Spending *($ million)*	$60 to $90	$100 to $140

The non-GAAP earnings per share (Non-GAAP EPS) projection excludes the impact of the non-cash brand value impairments of $16.4 million or $0.96 per diluted share.

Underlying the Company's current 2023 projections are the following full-year estimates and targets:

The Company's guidance on depletions and shipments includes the estimated negative impact of approximately 1.0 percentage point due to the fact that fiscal 2022 had 53 weeks and fiscal 2023 will have 52 weeks. On a 52-week comparable basis the Company expects depletions and shipments to decrease 4% to 6%. The 53rd week overlap is expected to negatively impact fourth quarter volume trends by approximately 6 percentage points.
The Company expects price realization in the fourth quarter to be positive but at a lower level due to lower third quarter price increases compared to the prior year.
The Company's guidance incorporates an expectation of higher shortfall fees at third party breweries and lower fixed cost absorption per barrel at its owned breweries due to lower seasonal volumes in the fourth quarter. Therefore, the Company expects gross margin to be lower in the fourth quarter relative to earlier quarters.
The advertising, selling and promotional expense projection does not include any changes in freight costs for the shipment of products to the Company's distributors.

2024 Financial Guidance

The Company is planning to provide full year 2024 financial guidance during its fourth quarter earnings call in February 2024.

Use of Non-GAAP Measures

Non-GAAP EPS is not a defined term under U.S. generally accepted accounting principles ("GAAP"). Non-GAAP EPS, or Non-GAAP earnings per diluted share, excludes from projected GAAP EPS the impact of the non-cash asset impairment charge of $16.4 million, or $0.96 per diluted share, recognized in the third quarter of fiscal 2023 relating primarily to the Dogfish Head brand. This non-GAAP measure should not be considered in isolation or as a substitute for diluted earnings per share prepared in accordance with GAAP, and may not be comparable to calculations of similarly titled measures by other companies. Management uses this non-GAAP financial measure to make operating and strategic decisions and to evaluate the Company's underlying business performance. Management believes this forward-looking non-GAAP measure provides meaningful and useful information to investors and analysts regarding the Company's outlook for its ongoing financial and business performance or trends and facilitates period to period comparisons of its forecasted financial performance.

Forward-Looking Statements

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 31, 2022 and subsequent reports filed by the Company with the SEC on Forms 10-Q and 8-K. Copies of these documents are available from the SEC and may be found on the Company's website, www.bostonbeer.com. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. The Company undertakes no obligation to publicly update or revise any forward-looking statements.

About the Company

The Boston Beer Company, Inc. (NYSE: SAM) began in 1984 brewing Samuel Adams beer and the Samuel Adams brand is currently recognized as one of the largest and most respected craft beer brands. Our portfolio of brands also includes Truly Hard Seltzer, Twisted Tea, Angry Orchard Hard Cider, Dogfish Head Brewery, Hard Mountain Dew, and Jim Beam Kentucky Coolers, as well as other craft beer brands such as Angel City Brewery and Coney Island Brewing. For more information, please visit our investor relations website at www.bostonbeer.com, which includes links to all of our respective brand websites.

THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except per share data)
	(unaudited)
	Thirteen weeks ended				Thirty-nine weeks ended
	September 30, 2023		September 24, 2022		September 30, 2023		September 24, 2022
Revenue	$	639,394	$	634,332	$	1,715,883	$	1,746,642
Less excise taxes		37,795		37,879		100,980		103,833
Net revenue		601,599		596,453		1,614,903		1,642,809
Cost of goods sold		326,951		338,707		910,430		946,336
Gross profit		274,648		257,746		704,473		696,473
Operating expenses:
Advertising, promotional, and selling expenses		152,579		153,717		427,369		439,215
General and administrative expenses		42,241		37,382		130,834		115,929
Impairment of intangible assets		16,426		27,100		16,426		27,100
Impairment of brewery assets		1,900		1,181		3,916		1,302
Contract termination costs and other		—		—		—		5,330
Total operating expenses		213,146		219,380		578,545		588,876
Operating income		61,502		38,366		125,928		107,597
Other income (expense):
Interest income		3,478		759		6,977		809
Other expense		(913)		(891)		(1,137)		(1,592)
Total other income (expense)		2,565		(132)		5,840		(783)
Income before income tax provision		64,067		38,234		131,768		106,814
Income tax provision		18,772		10,948		37,394		28,134
Net income	$	45,295	$	27,286	$	94,374	$	78,680
Net income per common share – basic	$	3.70	$	2.21	$	7.69	$	6.39
Net income per common share – diluted	$	3.70	$	2.21	$	7.67	$	6.36
Weighted-average number of common shares – basic		12,228		12,321		12,268		12,313
Weighted-average number of common shares – diluted		12,233		12,344		12,280		12,342
Net income	$	45,295	$	27,286	$	94,374	$	78,680
Other comprehensive loss:
Foreign currency translation adjustment		(144)		(242)		—		(263)
Total other comprehensive loss, net of tax		(144)		(242)		—		(263)
Comprehensive income	$	45,151	$	27,044	$	94,374	$	78,417

THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
	(unaudited)
	September 30, 2023		December 31, 2022
Assets
Current Assets:
Cash and cash equivalents	$	310,778	$	180,560
Accounts receivable		87,977		56,672
Inventories		148,402		148,450
Prepaid expenses and other current assets		32,242		27,461
Income tax receivable		-		10,126
Total current assets		579,399		423,269
Property, plant, and equipment, net		647,323		667,909
Operating right-of-use assets		37,456		43,768
Goodwill		112,529		112,529
Intangible assets, net		59,707		76,324
Third-party production prepayments		39,209		61,339
Other assets		41,265		35,635
Total assets	$	1,516,888	$	1,420,773
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable	$	114,699	$	84,248
Accrued expenses and other current liabilities		141,025		111,153
Current operating lease liabilities		9,030		8,866
Total current liabilities		264,754		204,267
Deferred income taxes, net		86,243		96,592
Non-current operating lease liabilities		38,461		45,274
Other liabilities		6,653		6,091
Total liabilities		396,111		352,224
Stockholders' Equity:
Class A Common Stock, $0.01 par value; 22,700,000 shares authorized; 10,116,181 and 10,238,009 issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		101		102
Class B Common Stock, $0.01 par value; 4,200,000 shares authorized; 2,068,000 issued and outstanding as of September 30, 2023 and December 31, 2022		21		21
Additional paid-in capital		650,874		629,515
Accumulated other comprehensive loss		(210)		(210)
Retained earnings		469,991		439,121
Total stockholders' equity		1,120,777		1,068,549
Total liabilities and stockholders' equity	$	1,516,888	$	1,420,773

THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
	(unaudited)
	Thirty-nine weeks ended
	September 30, 2023		September 24, 2022
Cash flows provided by operating activities:
Net income	$	94,374	$	78,680
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		66,603		60,765
Impairment of intangible assets		16,426		27,100
Impairment of brewery assets		3,916		1,302
Change in right-of-use assets		5,781		5,986
Stock-based compensation expense		12,313		10,328
Deferred income taxes		(10,349)		2,199
Other non-cash expense		40		312
Changes in operating assets and liabilities:
Accounts receivable		(31,253)		(37,745)
Inventories		3,786		(45,185)
Prepaid expenses, income tax receivable, and other current assets		3,986		52,680
Third-party production prepayments		22,130		20,845
Other assets		(9,368)		(7,661)
Accounts payable		31,341		67,620
Accrued expenses, other current liabilities, and other liabilities		29,217		(7,861)
Operating lease liabilities		(6,542)		(4,412)
Net cash provided by operating activities		232,401		224,953
Cash flows used in investing activities:
Purchases of property, plant, and equipment		(48,777)		(70,313)
Proceeds from disposal of property, plant, and equipment		1,708		506
Net cash used in investing activities		(47,069)		(69,807)
Cash flows (used in) provided by financing activities:
Repurchases of Class A common stock		(62,477)		—
Proceeds from exercise of stock options and sale of investment shares		10,660		5,327
Cash paid on finance leases		(1,184)		(1,270)
Line of credit borrowings		—		30,000
Line of credit repayments		—		(30,000)
Payment of tax withholding on stock-based payment awards and investment shares		(2,113)		(3,474)
Net cash (used in) provided by financing activities		(55,114)		583
Change in cash and cash equivalents and restricted cash		130,218		155,729
Cash and cash equivalents and restricted cash at beginning of year		180,560		66,321
Cash and cash equivalents at end of period	$	310,778	$	222,050

*Copies of The Boston Beer Company's press releases, including quarterly financial results,* *are available on the Internet at www.bostonbeer.com*

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SOURCE The Boston Beer Company, Inc.

Investor Relations, Jennifer Larson, (617) 368-5152, jennifer.larson@bostonbeer.com or Media, Dave DeCecco, (914) 261-6572, dave.dececco@bostonbeer.com

News Release Details

BOSTON BEER REPORTS THIRD QUARTER FINANCIAL RESULTS