BOSTON BEER CO INC

Previous wording

The following is a discussion of the significant factors affecting the consolidated operating results, financial condition and liquidity and cash flows of the Company for the thirteen week periods ended March 30, 2024, as compared to the thirteen period ended April 1, 2023. This discussion should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations, and the Consolidated Financial Statements of the Company and Notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2023.

Current wording

The following is a discussion of the significant factors affecting the consolidated operating results, financial condition and liquidity and cash flows of the Company for the thirteen and twenty-six week periods ended June 29, 2024, as compared to the thirteen and twenty-six week period ended July 1, 2023. This discussion should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations, and the Consolidated Financial Statements of the Company and Notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2023.

Previous wording

Net revenue per barrel. Net revenue per barrel increased by 3.0% to $267.55 per barrel for the thirteen weeks ended March 30, 2024, as compared to $259.73 per barrel for the comparable period in 2023, primarily due to price increases and lower returns.

Current wording

Net revenue per barrel. Net revenue per barrel increased by 2.6% to $267.85 per barrel for the thirteen weeks ended June 29, 2024, as compared to $261.17 per barrel for the comparable period in 2023, primarily due to price increases and lower returns.

Previous wording

Gross profit. Gross profit was $117.02 per barrel for the thirteen weeks ended March 30, 2024, as compared to $98.61 per barrel for the thirteen weeks ended April 1, 2023.

Current wording

Gross profit. Gross profit was $123.24 per barrel for the thirteen weeks ended June 29, 2024, as compared to $118.68 per barrel for the thirteen weeks ended July 1, 2023.

Previous wording

Advertising, promotional, and selling expenses. Advertising, promotional and selling expenses decreased by $5.2 million, or 4.1%, to $120.3 million for the thirteen weeks ended March 30, 2024, as compared to $125.4 million for the thirteen weeks ended April 1, 2023, primarily due to decreased freight to distributors of $3.6 million from lower rates and improved freight efficiencies, partially offset by higher volumes. Brand investments decreased $1.6 million with decreases in other promotional activity partially offset by increases in media.

Current wording

Advertising, promotional, and selling expenses. Advertising, promotional and selling expenses decreased by $5.1 million, or 3.4%, to $144.2 million for the thirteen weeks ended June 29, 2024, as compared to $149.4 million for the thirteen weeks ended July 1, 2023, primarily due to decreased freight to distributors of $2.8 million from lower rates and lower volumes. Brand and selling costs decreased $2.3 million, primarily due to lower brand media spend.

Previous wording

Advertising, promotional and selling expenses were 28.2% of net revenue, or $75.53 per barrel, for the thirteen weeks ended March 30, 2024, as compared to 30.6% of net revenue, or $79.46 per barrel, for the thirteen weeks ended April 1, 2023. This decrease per barrel is primarily due to advertising, promotional, and selling expenses decreasing at a higher rate than the increase in shipments. The Company invests in advertising and promotional campaigns that it believes will be effective, but there is no guarantee that such investments will generate sales growth.

Current wording

Advertising, promotional and selling expenses were 24.9% of net revenue, or $66.71 per barrel, for the thirteen weeks ended June 29, 2024, as compared to 24.8% of net revenue, or $64.66 per barrel, for the thirteen weeks ended July 1, 2023. This decrease per barrel is primarily due to advertising, promotional, and selling expenses decreasing at a lower rate than the decrease in shipments. The Company invests in advertising and promotional campaigns that it believes will be effective, but there is no guarantee that such investments will generate sales growth.

Previous wording

Impairment of brewery assets. Impairment of brewery assets of $0.3 million decreased by $0.1 million from the comparable period of 2023, due to lower write-offs of equipment at Company-owned breweries.

Current wording

Impairment of brewery assets. Impairment of brewery assets of $3.4 million increased by $1.9 million from the comparable period of 2023, due to higher write-offs of equipment at Company-owned breweries.

Previous wording

Cost of goods sold. Cost of goods sold was $150.53 per barrel for the thirteen weeks ended March 30, 2024, as compared to $161.12 per barrel for the thirteen weeks ended April 1, 2023. The 2024 decrease in cost of goods sold of $10.59, or 5.8%, per barrel was primarily due to decreases in inventory obsolescence of $5.4 million, or $3.39 per barrel, raw materials pricing and recipe optimization of $5.3 million, or $3.33 per barrel, favorable product mix effects of $5.0 million, or $3.14 per barrel and the non-recurrence of 2023 contract settlement costs of $4.5 million, or $2.83 per barrel, partially offset by inflationary impacts of $5.2 million, or $3.27 per barrel.

Current wording

Cost of goods sold. Cost of goods sold was $147.13 per barrel for the twenty-six weeks ended June 29, 2024, as compared to $150.05 per barrel for the twenty-six weeks ended July 1, 2023. The 2024 decrease in cost of goods sold of $2.92, or 2.0%, per barrel was primarily due to contract renegotiations and recipe optimization savings of $10.4 million, or $2.77 per barrel, decreases in inventory obsolescence of $6.7 million, or $1.78 per barrel, favorable product mix effects of $5.5 million, or $1.46 per barrel and the non-recurring of 2023 contract settlement costs of $4.5 million, or $1.20 per barrel, partially offset inflationary impacts of $8.2 million, or $2.18 per barrel, and unfavorable internal brewery performance and the related fixed cost absorption impact from lower volume of $4.8 million, or $1.28 per barrel.

Previous wording

Inflationary impacts of $5.2 million consist primarily of increased material costs of $3.6 million, and internal brewery costs of $1.6 million.

Current wording

Inflationary impacts of $8.2 million consist primarily of increased internal brewery costs of $4.7 million and material costs of $3.5 million.

Previous wording

General and administrative expenses. General and administrative expenses increased by $6.7 million, or 15.3%, to $50.4 million for the thirteen weeks ended March 30, 2024, as compared to $43.7 million for the thirteen weeks ended April 1, 2023, primarily due to higher salaries and benefits costs of $10.1 million, which includes an incremental $3.8 million of compensation costs mostly attributable to the Company's Chief Executive Officer transition, partially offset by decreased consulting costs of $3.7 million.

Current wording

General and administrative expenses. General and administrative expenses increased by $9.8 million, or 11.1%, to $98.4 million for the twenty-six weeks ended June 29, 2024, as compared to $88.6 million for the twenty-six weeks ended July 1, 2023, primarily due to higher salaries and benefits costs, resulting from Chief Executive Officer transition costs recorded in the first quarter and inflation costs.

Previous wording

Cash decreased to $205.4 million as of March 30, 2024 from $298.5 million as of December 30, 2023, primarily reflecting repurchases of the Company's Class A common stock, a note receivable issued, purchases of property, plant, and equipment, net cash used in operating activities, and payments of tax withholdings on stock-based payment awards and investment shares.

Current wording

Cash decreased to $219.3 million as of June 29, 2024 from $298.5 million as of December 30, 2023, primarily reflecting repurchases of the Company's Class A common stock, a note receivable issued, purchases of property, plant, and equipment, and payments of tax withholdings on stock-based payment awards and investment shares, partially offset by net cash provided by operating activities.

Previous wording

Cash used in operating activities consists of net income (loss), adjusted for certain non-cash items, such as depreciation and amortization, stock-based compensation expense, and other non-cash items included in operating results, and changes in operating assets and liabilities, such as accounts receivable, inventory, accounts payable, and accrued expenses.

Current wording

Cash provided by operating activities consists of net income, adjusted for certain non-cash items, such as depreciation and amortization, stock-based compensation expense, and other non-cash items included in operating results, and changes in operating assets and liabilities, such as accounts receivable, inventory, accounts payable, and accrued expenses.

Previous wording

Cash used in operating activities for the thirteen weeks ended March 30, 2024 was comprised of net income of $12.6 million and non-cash items of $32.8 million, offset by net outflows for operating assets and liabilities of $50.3 million. Cash used in operating activities for the thirteen weeks ended April 1, 2023 was comprised of a net loss of $9.0 million and non-cash items of $27.7 million, offset by net outflows for operating assets and liabilities of $36.6 million. The decrease in cash used in operating activities for the thirteen weeks ended March 30, 2024 compared to April 1, 2023 is primarily due to higher net income and lower outflows arising from increases in accounts receivable, partially offset by greater outflows arising from increases in inventories.

Current wording

Cash provided by operating activities for the twenty-six weeks ended June 29, 2024 was comprised of net income of $64.9 million and non-cash items of $65.8 million, partially offset by net a net increase in operating assets and liabilities of $39.6 million. Cash provided by operating activities for the twenty-six weeks ended July 1, 2023 was comprised of a net income of $49.1 million and non-cash items of $56.3 million, partially offset by a net increase in operating assets and liabilities of $4.2 million. The decrease in cash provided by operating activities for the twenty-six weeks ended June 29, 2024 compared to July 1, 2023 is primarily due to lower inventory reduction compared to the prior year, partially offset by higher net income.

Previous wording

The Company used $35.7 million in investing activities during the thirteen weeks ended March 30, 2024, as compared to $17.1 million during the thirteen weeks ended April 1, 2023. The increased in investing activity cash outflows is due to a $20.0 million note receivable issued, partially offset by lower capital investments. For both periods, capital investments were made mostly in the Company’s breweries to drive efficiencies and cost reductions and support product innovation and future growth.

Current wording

The Company used $56.1 million in investing activities during the twenty-six weeks ended June 29, 2024, as compared to $34.6 million during the twenty-six weeks ended July 1, 2023. The increased in investing activity cash outflows is due to a $20.0 million note receivable issued. For both periods, capital investments were made mostly in the Company’s breweries to drive efficiencies and cost reductions and support product innovation and future growth.

Previous wording

Cash used in financing activities was $52.4 million during the thirteen weeks ended March 30, 2024, as compared to $23.1 million during the thirteen weeks ended April 1, 2023. The $29.4 million increase in financing activity cash outflows in 2023 compared to 2022 is primarily due to higher repurchases of the Company's Class A common stock in the current period.

Current wording

Cash used in financing activities was $114.2 million during the twenty-six weeks ended June 29, 2024, as compared to $39.3 million during the twenty-six weeks ended July 1, 2023. The $74.9 million increase in financing activity cash outflows in 2024 compared to 2023 is primarily due to higher repurchases of the Company's Class A common stock in the current period.

Previous wording

During the period from December 31, 2023 through April 19, 2024, the Company repurchased and subsequently retired 199,811 shares of its Class A Common Stock for an aggregate purchase price of $65.0 million. As of April 19, 2024, the Company had repurchased a cumulative total of approximately 14.3 million shares of its Class A Common Stock for an aggregate purchase price of approximately $998.5 million and had approximately $201.5 million remaining on the $1.2 billion stock repurchase expenditure limit set by the Board of Directors.

Current wording

During the period from December 31, 2023 through July 19, 2024, the Company repurchased and subsequently retired 416,811 shares of its Class A Common Stock for an aggregate purchase price of $127.0 million. As of July 19, 2024, the Company had repurchased a cumulative total of approximately 14.5 million shares of its Class A Common Stock for an aggregate purchase price of approximately $1.06 billion and had approximately $140 million remaining on the $1.2 billion stock repurchase expenditure limit set by the Board of Directors.

Previous wording

The Company expects that its cash balance as of March 30, 2024 of $205.4 million, along with its projected future operating cash flow and its unused line of credit balance of $150.0 million, will be sufficient to fund future cash requirements. The Company’s $150.0 million credit facility has a term not scheduled to expire until December 16, 2027. As of the date of this filing, the Company was not in violation of any of its covenants to the lender under the credit facility.

Current wording

The Company expects that its cash balance as of June 29, 2024 of $219.3 million, along with its projected future operating cash flow and its unused line of credit balance of $150.0 million, will be sufficient to fund future cash requirements. The Company’s $150.0 million credit facility has a term not scheduled to expire until December 16, 2027. As of the date of this filing, the Company was not in violation of any of its covenants to the lender under the credit facility.