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Boston Beer Co's (SAM) CEO Martin Roper on Q1 2016 Results - Earnings Call Transcript

Boston Beer Co, Inc. (NYSE:SAM)

Q1 2016 Earnings Conference Call

April 21, 2016 5:00 PM ET

Executives

James Koch – Founder and Chairman

Martin Roper – Chief Executive Officer

Frank Smalla – Chief Financial Officer

Analysts

Caroline Levy – CLSA

Judy Hong – Goldman Sachs

Kevin Grundy – Jefferies

Pablo Zuanic – SIG

Operator

Good day, ladies and gentlemen, and welcome to the First Quarter 2016 The Boston Beer Company Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this call is being recorded.

I would now like to introduce your host for today's conference, Mr. Jim Koch, Founder and Chairman. You may begin, sir.

James Koch

Thank you. Good afternoon and welcome. This is Jim Koch, Founder and Chairman, and I'm pleased to be here to kick off the 2016 first quarter earnings call for The Boston Beer Company. Joining the call from Boston Beer are Martin Roper, our CEO; and Frank Smalla, our CFO.

I'll begin my remarks this afternoon with a few introductory comments, including some highlights of our results, and then hand over the microphone to Martin, who will provide an overview of our business. Martin will then turn the call over to Frank, who will focus on the financial details for the first quarter as well as a review of our outlook for 2016. Immediately following Frank's comments, we'll open up the line for questions.

Our total company depletion trends declined 5% in the first quarter even as the better beer and craft categories appear healthy. We believe Sam Adams has loss share due to the increased competition and continued growth of drinker interest in variety and innovation. During the quarter, we rolled out new beers including Sam Adams Nitro White Ale, Sam Adams Nitro IPA and Sam Adams Nitro Coffee Stout as well as Sam Adams Rebel Grapefruit IPA.

These beers have started slowly but their momentum continues to build. We believe that we're well positioned to meet the longer-term challenges of this competitive environment through the quality of our beers, our innovation capability and our sales execution strength coupled with our strong financial position that enables us to invest in growing our brands.

I'll now pass the call over to Martin for a more detailed overview of our business.

Martin Roper

Thank you, Jim. Good afternoon, everyone. As we state in our earning release some of the information we discuss in the release and that may come up on this call reflect the company's or management's expectations or predictions of the future. Such predictions and the like are forward-looking statements. It is important to note that company's actual results could differ materially from those projected in the forward-looking statements. Additional information concerning facts that could cause actual results to differ materially from those in the forward-looking statements is contained in the company's most recent 10-K. You should also be advised that the company does not undertake to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise.

In the first quarter, our depletions volume was significantly below our expectations, as the declines in our existing styles of Samuel Adams and Angry Orchard brands were not offset by our new styles or the growth of the rest of our brand portfolio. The lower volume, combined with the higher planned spending and excess brewery capacity, significantly impacted our financial results for the quarter. We are focused on adjusting our cost structure, based on our lower volume expectations, and on driving efficiencies throughout the organization, so that we can direct funds to the highest growth initiatives.