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Boston Beer: Third Quarter 2015 Results

The following excerpt is from the company's SEC filing.

BOSTON, MA (10/29/15) The Boston Beer Company, Inc. (NYSE: SAM) reported third quarter 2015 net revenue of $293.1 million, an increase of $23.4 million or 9% over the same period last year, mainly due to core shipment growth of 4% and increased revenue per barrel due to product mix. Net income for the third quarter was $38.6 million, or $2.85 per diluted share, an increase of $0.06 per diluted share from the third quarter of 2014. This increase was primarily due to increased net revenue, increased gross margin and a lower income tax rate, partially offset by increases in advertising, promotional and selling expen ses.

Earnings per diluted share for the 39-week period ended September 26, 2015 were $6.02, an increase of $0.73 from the comparable 39-week period in 2014. Net revenue for the 39-week period ended September 26, 2015 was $744.8 million, an increase of $59.6 million, or 9%, from the comparable 39-week period in 2014.

Highlights of this release include:

Depletions grew 6% from the comparable 13 and 39 week periods in 2014.

Third quarter gross margin is 53.6% and year-to-date gross margin is 52.7%; with the Company maintaining its full-year gross margin target of between 51% and 53%.

Advertising, promotional and selling expenses increased by $13.2 million or 20% in the quarter and increased $17.6 million or 9% year-to-date, primarily due to increased investments behind the Companys brands.

Full-year 2015 depletion growth is now estimated at between 3% and 6%, a decrease in the range from the previously communicated estimate of between 6% and 9%.

Full-year 2015 earnings per diluted share are now estimated at $7.00 to $7.40, a decrease in the range from the previously communicated estimate of $7.10 to $7.50.

Full-year 2015 capital spending is now estimated to be between $60 million and $80 million, a decrease in the range from the previously communicated estimate of $70 million to $100 million.

Jim Koch, Chairman and Founder of the Company, commented, Our total company depletion trends of 6% in the third quarter of 2015 matched our year to date trends but represent a slowing from our expectations, primarily as a result of weakness in our Samuel Adams brand due to increased competition and a slowing in the cider category.

While our total growth is testament to our strategy of a diversified brand portfolio, our Samuel Adams trends appear to represent a very competitive category, where drinkers are seeing greatly increased choices and established brands are being impacted. We believe that quality, freshness, innovation and variety will be the basic requirements for success in this environment. During the fourth quarter, we expect to introduce new styles to the Samuel Adams Rebel IPA family including the national draft launch of Rebel Grapefruit, a grapefruit IPA featuring Mosaic hops, and the introduction of Rebel Raw, an unfiltered double IPA that will be available on a very limited basis and only in 16 ounce cans with 35 day freshness coding. Were energized by the challenges and excited by the planned introduction of our Samuel Adams Nitro series in the first quarter of 2016. We remain confident about the long-term outlook for the craft category and our Samuel Adams brand.

Martin Roper, the Companys President and CEO stated, In the third quarter, our depletions growth benefited from strength in our Coney Island, Twisted Tea, Traveler and Angry Orchard brands that offset a decline in some of our Samuel Adams styles. This decline, particularly in our Samuel Adams Seasonal Beers and Boston Lager, is due to increased competition, most notably in off premise sales, where the drinker sees more choices and we believe our share of displays and features has been impacted. We are working hard to improve the Samuel Adams brand trends and have plans to introduce new beers and a new advertising message supporting beer education. During the third quarter, we completed our national rollout of our Coney Island Hard Root Beer, which was well-supported by distributors, retailers and drinkers. The Hard Root Beer category is early in its development and it is unclear how it will develop long term, as innovation and new competitors emerge. During the third quarter, we also saw a slowing of the cider category, but believe Angry Orchard maintained its share even as competitors continue to enter or increase investment. We remain positive about the long term cider category potential, but short term growth is less certain. We are planning continued investments in advertising, promotional and selling expenses, as well as in innovation, commensurate with the opportunities and the increased competition that we see.

Mr. Roper went on to say, We continued to make supply chain improvements intended to further increase the freshness of our beers and ciders and enhance our customer service. Despite some glass bottle supply challenges in the quarter, we believe we have improved our service level. Our focus in 2016 will be on innovation within the Samuel Adams family, integrated programming across point of sale, promotions and media for all our brands, and prioritizing the core styles of Angry Orchard and Twisted Tea for increased distribution and promotion, and maximizing the Coney Island Hard Root Beer opportunity. It is too early to predict accurately our 2016 growth rates, but we are increasing investment in our new beer and cider development capabilities...