Boston Beer Company Inc (SAM) 2005 Q1 法說會逐字稿

Good day, ladies and gentlemen. And welcome to the first quarter 2005 Boston Beer Company earnings conference call. My name is Jen, and I will be your Operator for today.

During the presentation all participants will be in a listen-only mode. After the speakers’ remarks, you will be invited to participate in a question and answer session. As a reminder, ladies and gentlemen, this conference is being recorded.

Before we begin, the Company has asked me to read the following statement.

‘Today’s presentation by Management contains forward-looking statements within the meaning of the Securities & Exchange Act of 1934. These forward-looking statements represent the Company’s present expectations or beliefs concerning future events. The Company cautions that such statements are necessarily based on certain assumptions which are subject to risks and uncertainties which could cause actual results to differ materially from those indicated today.

These risk factors include changes in general economic conditions, recent geopolitical events, increased competition, work stoppages and slowdowns, exchange rate fluctuations, variations in the mix of products sold, fluctuations in effective tax rates resulting from shift in sources of income, and the ability to successfully integrate and operate acquired businesses. Further information on these risk factors is included in the Company’s filings with the Securities & Exchange Commission.

I would now like to hand the call over to your host for today’s call, Mr. Jim Koch, Founder and Chairman. Please proceed, sir.

Thank you. Good afternoon, and welcome. This is Jim Koch, the Founder and Chairman. And I’m pleased to be here to kick-off the 2005 first quarter earnings call for The Boston Beer Company.

Joining the call from Boston Beer will be Martin Roper, our CEO, and Bill Urich, our CFO.

I’ll begin my remarks this afternoon with a few comments on where we stand, then pass on to Martin, who will provide an overview of our business. Martin will then turn the call over to Bill, who will provide the financial details for the quarter. And immediately following Bill’s comment we’ll open the line for questions.

We were pleased with our first quarter earnings growth, our price realizations, and margin maintenance. We were somewhat disappointed with the first quarter completions, which were down approximately 1 percent from last year, although we believe our depletion trends compare favorably to the industry trend for the first quarter.

January proved to be a difficult month for us and the entire industry, but we did see some improvement in the quarter during the remainder of the period. Our on premise trends improved slightly, but our off premise trends were not as strong as we had seen in the previous quarter.

We introduced new brand communication in March, and the initial feedback on the campaign from our wholesalers has been very positive. The [TB] Campaign, which was introduced on March 9th and it’s theme, ‘take pride in your beer,’ emphasizes the quality and taste of our products by conveying all of the effort that goes into brewing Sam Adams. We’re excited by this messaging, and believe it capitalizes on the roots and the essence of the Samuel Adams’ success. It is too early to know what the impact of the new campaign is having on our business.

I’ll now pass over to Martin for a more detailed overview of our results.

Good afternoon, everyone.

We believe the Sam Adams brand continues to maintain strong brand equity as exhibited by our continued strong growth in Samuel Adams Seasonal Brewmaster’s Collection and Twisted Tea. These gains in the quarter were offset by some continuing weakness in the Samuel Adams Boston Lager and Sam Adams Light. While Sam Adams Light completions were still down in the first quarter, the decrease was lower than the 12-month trend.

During the first quarter of 2005 we [disposed] advertising spend slightly prior to the introduction of the Company’s new brand campaign. As Jim mentioned, we began the national television media campaign on March 9th, 2005. We expect that other elements of the campaign, such as sales materials and promotional programs will rollout over the summer. We are quite excited about the new program, and believe that it will position us well relative to other draft beers and imports. As Jim mentioned, we believe it is too early to see any measurable affects on our business.

During the first quarter of 2005 our pricing and operating margin improved due to the price increases taken and our continued efforts on cost reduction and control. These efforts offset the inflationary increases in materials and supplies that we have experienced, as well as the impact of higher energy prices and freight costs. Due to the delayed brand support spending associated with the new campaign our reported advertising, promotional, and selling expenses were down for the period.

During the quarter we generated 4.3m in operating cash flow and continued to maintain a strong balance sheet with adequate cash positions to support our business strategy. The expansion project at our Cincinnati, Ohio Brewery is on schedule to be completed in the third quarter.

We have entered into a production agreement with Brown-Forman Distillery Company to produce at our Cincinnati Brewery a [clear more] base for the use in our Twisted Tea flavored malt beverages and in some brand form and products. This joint development project combines Brown-Forman’s technology with our expertise in fermentation.

With this and some other initiatives we now expect our capital expenditures for the year to be between 12m to 15m for the full year 2005. We continue to evaluate other investment opportunities which may have attractive returns for our investors.

On another note, shipments and orders in hand suggest that core shipments for April and May 2005 will be up approximately 1 percent when compared to the same period in 2004. Actual shipments for the current quarter may differ and no inferences should be drawn with respect to shipments in future periods.

And now Bill will provide the financial details.

Thank you Jim and Martin. Good afternoon, everyone.

The Boston Beer Company realized earnings per fully diluted share of 27 cents in the first quarter of 2005, as compared to 9 cents per share in the first quarter of 2004. The increase is primarily a result of an increase in shipments of 6.5 percent, pricing increases implemented in the first quarter, and lower advertising spend as a result of postponing advertising prior to the introduction of the Company’s new brand campaign.

For the first quarter, the Company recorded net revenue of 48.7m, a 9.1 percent increase from the first quarter 2004. The increase reflects the 6.5 percent increase in shipment volumes of core brands and a 2.5 percent increase in net revenue per barrel to $173.96.

The increase in net [revenues] is primarily due to price increases, and to lesser extent a shift in package mix towards bottled [foam pack]. The increase in shipment volume can be attributed to increased shipments of Samuel Adams Seasonal Brewmaster’s Collection and Twisted Tea. Our core shipment volumes for the first quarter was higher than reported wholesaler sales to retail, which we refer to as depletion, by 32,000 barrels.

Wholesaler inventory levels at the end of the first quarter 2005 are believed to be higher than inventory levels at the end of the first quarter of 2004. The Company expects wholesaler inventory levels to return to normal levels over several months.

Our gross margin as a percent of net revenue was 61.2 percent, up 1.7 percent over the first quarter of last year. The increase was driven by price increases and slightly lower manufacturing costs. The first quarter decrease in advertising, promotional, and selling expenses resulted in a 1.7m decrease versus the prior year quarter. The main drivers of these decreases were the lower media spend, somewhat offset by higher freight costs.

Our general and administrative expenses for the quarter increased $800,000, compared to the same period last year. The increase primarily reflected an increase in salary and benefit cost, accounting, and legal fees.

Our balance sheet remains healthy, with 62.4m in cash and short-term investments as of the end of the first quarter of 2005. Additionally, we have available a 20m unused line for credit.

Our capital expense for the first quarter was 2.5m as a result of normal operating capital spending and the Cincinnati expansion project. The Company’s depreciation and amortization expense was 1m.

Based on our current plans and market trends we currently expect earnings per share for the full year 2005 to be between 94 cents and $1.00, versus 86 cents per diluted share earned in 2004. This EPS growth is expected to be driven by volume increases for the full year and price increases of approximately 2 percent that was implemented in the first quarter. These increases in revenue are expected to be offset somewhat by increases in advertising, promotional, freight, and [selling] expenses, but between 4m and 7m, normal inflationary production cost increases and general and administrative expense increases.

We are currently anticipating 2005 advertising, promotional, and selling expenses may be adjusted up or down as Management deems appropriate for the benefit of the Company’s long-term [volume book]. The 200,000 barrel production expansion project at the Company’s Cincinnati Brewery will cost approximately 6.5m and the joint Brown-Forman project capital investment will cost the Company between 2.5m and 4m.

Including these investments, we are currently planning spending between 12m and 15m for the full year. We will continue to evaluate attractive projects that utilize our capital spending to support a brand and brewing strategy, while providing suitable return for our investors.

We will now open up the call for questions.

[OPERATOR INSTRUCTIONS]

And your first question comes from Jeff Kanter with Prudential Securities. Please proceed, sir.

Good afternoon, everybody. Martin, how do I think about, or Jim, how do I think about the timing of the 4m to 7m increase in advertising spend? Is it going to be spread out over the duration of the year, or is it all in the second quarter, can you kind of give it a sense about timing?

Jeff, it’s Martin. I think it’s going to be spread out over the course of the year. And as I think we indicated in our statements and our releases, we reserve the right to adjust the spending levels commensurate with how efficient we think we’re being and how effective we think we’re being.

Okay. Fair enough. And this, you know, all your capital expenditure projects, I’m assuming that you’re just going to draw down your cash balances, is that correct?

I think that would be a real assumption given our cash balance.

Yeah. Okay. And, you know, for 2006 then do we go back to your normalized CapEx that we saw in the prior years, or thereabouts?

I think, obviously, this year we have a couple of rather extraordinary items on the CapEx front, both with the expansion of the Brewery and the Brown-Forman Distillery Project. I think that would be a reasonable expectation on the future, although obviously that’s, you know, 2006 is quite a way off.

Right.

And, you know, if I was trying to guess, it’s certainly that order of magnitude and maybe a little higher, but not as high as we’re saying today.

But does this mean then, Jim, that once you get past these hurdles that you feel, you know, you’re clear to do something with the cash, return it to shareholders in some way, shape or form?

Well, a couple of things. With respect to 2006 I think what one could project is that we would be opportunistic. And, you know, right now there’s nothing on the horizon that we see as a good use of our cash. But on the other hand, you know, at the beginning of last year, you know, we didn’t see yet the opportunities that have materialized at our Brewery in Cincinnati, both with Brown Forman and with the expansion.

So, as somebody who has significant contract brewing capabilities and opportunities, we’re in a position where we can be opportunistic, and if something comes up to acquire brewing capacity that gives us good economics and appealing return on investment we’ll grab it. So, that may happen in 2006 just like it did in 2005.

Now, to answer the question about, you know, the cash generation, 2006, and what, and the perennial question of what are you going to do with all of that cash, which you were polite enough not to ask directly, but I’ll address it.

I think with the expansion of Cincinnati that is helping us bring into clarity our needs for significant capital investment to meet production requirements. That investment is a very favorable one, and it enables us to add capacity at pretty low capital costs relative to what’s normal in the industry, and takes us up to about two-thirds of our brewing requirements. So, the unfinanced portion of our brewing requirements is now going to be smaller, once that goes online.

So, bottom line, we have not made any decisions about what to do with our cash, but I would say the picture is coming into more focus, and it’s going to be an issue that we’re going to look at with a little more clarity in the coming quarters than we have in the past.

Okay. All right. Thank you very much.

Your next question comes from [Laurie Hahn] with Deutsche Bank. Please proceed, ma’am.

Hi, guys. How are you?

Hi, Laurie.

My first question, can I get a sense, you know, the trend line for SPR? You talked about January being a big drag on the quarter. Can you talk about how that, you know, changed throughout the quarter? And then, also, when you talk about 1 percent, your orders on hand indicating 1 percent, you know, what percentage of May do you have at this point? And I guess how does that all relate to the trend line we saw in first quarter?

Hi, Laurie, it’s Martin. I’ll answer the second part of your question first, and I think we’ve indicated that orders on hand for April and May, obviously April is complete, and May is still open. We would still accept orders for May if, one, wholesalers were to provide them to us, and two, we had liquid availability. Those orders for April, May currently are up approximately 1 percent over last year. So, that I think addresses the second part of your question.

With regards to the first part of your question, January for us was quite a dismal month. I think other people in the industry have postulated why we had a stronger February and March, although there were some disappointments in the sort of on premise numbers that I think you’ll see in the IRI and the Nielsen data that is public. We slowed down a little bit, and that perhaps didn’t cause us to finish the quarter quite as strong.

Okay. Can you give me any sense of the magnitude, like, you know, down in January, but you were up in February and March, or?

I think that would be something that we’d rather not do. I think the industry sort of has indicated that January was weak, and therefore, you should assume it was down, and to reach the number we reached we’d have to have probably be positive in the second two months.

Okay. And then can you talk a little more about what you think is behind the off premise weakness?

I frankly think that we perhaps did not excuse what we should have done in the latter half of the quarter. Some of it is appeared to be, again, based on the publicly available data, our share of ads and displays weren’t as strong as they’d been earlier in the quarter and in the fourth quarter of last year. So, frankly, I think we have means at our disposal to address that.

Okay. Thanks. I’ll turn it over to someone else.

[OPERATOR INSTRUCTIONS]

Your next question comes from [Steven White] from [ Mindflow Capital Investments]. Please proceed, sir.

Yeah, thank you. Martin, I have a couple of questions for you. For the last year I’ve been looking at all of your companies in your industry. And a lot of your competitors have recently been implementing strategic initiatives for processing technology to help them reduce their sourcing costs in terms of packaging and their grading costs with the suppliers, open up better lines of communication with the suppliers and better collaboration.

And it seems a better job, the suppliers are scorecarding [optimum] allocations to help them reduce their costs and to improve their bottom line. I’m interested if you can provide some color as to what The Boston Beer Company is doing? If you’ve already started those initiatives, or is that something ongoing in the next couple of months, as to how you’re going to do it reducing your sourcing costs with your suppliers, opening up their lines of communication, maybe doing cost modeling, and running the [optimum] allocation schedules to help really improve your bottom line?

Okay. Let’s see. I think that over the years we’ve proven ourselves pretty adept at optimizing our costs and improving our gross margins. And a lot of things you talked about we’ve been working on for many years.

Okay. Can you go into more detail of what you have been doing? How are you, you know, working with suppliers? Are you meeting with them quarterly or doing supplier scorecarding? How are you looking to reduce your packaging and your ingredients costs?

I think our track record speaks for itself, and I’d rather not go into details on how we accomplish it.

Why can’t you? It’s a public call, shouldn’t you be able to do that?

It’s not information we disclose publicly, sir.

Think you’d injure yourself? I think our investor community would like to probably know how you’re looking to reduce your costs?

I think our track record speaks for itself.

Okay. Then I guess our investors can take that from what they wish. All right.

Thank you, sir.

Your next question comes from Marc Cohen from Goldman Sachs. Please proceed, sir.

Yeah, thanks. It’s a bit of a connection to that last question, Martin, but maybe a different twist. I think the cost of goods per unit was actually down this last quarter if I calculated correctly. I’m not in the office, but I think I got that. I wonder if you can give us a little bit better visibility as to what drove that result and how we should think about that cost behavior going forward, because it seems to stand out from what others in the industry were seeing earlier in the quarter? So, what’s unique about that behavior, and how should we think about this going forward? Maybe Bill wants to answer that, I don’t know?

Why don’t I take a hack at it, and then Bill can comment if he feels appropriate. I think there are a couple of things going on that are unique to our situation as opposed to the rest of the industry.

And one of which was a write-off that we took last year for contract amortization costs which would have been an ongoing cost this year and would have been reflected in previous year’s costs. And I think that was disclosed in the fourth quarter. And if you had had that amortized out that would probably have brought the numbers back to pretty close to being flat or slightly up. And then there was some timing issues which I can’t go into specifics on, but I think the contract amortization costs would be the big piece of it.

Well, all right, without explaining what the timing issues relate to, do they, just so I understand how they calendarize, did they draw, did they benefit this quarter at the expense of subsequent quarters, is that what you mean by timing issues?

No, my sense is that the sort of cost of goods situation you saw in the quarter we will anticipate continuing.

Flattish cost of goods on a – flattish cost of goods?

On a per barrel basis, yes, assuming no mix changes, and obviously assuming no changes in other cost factors. I think as we point out in our release we continue to see pressure on the energy side, and all of our costs have energy components, like packaging and other stuff, we’re continuing to see that.

Okay. So, I’m not sure I understand the write-off of the contract amortization last year and how it would have been flat? Is this something that causes the – is this just for this quarter that this comparison would be, would play-out, or will we see that comparison flatter the [cog line] all year long?

All year long.

Oh, so it’ll continue to be down a couple percent, or something like that?

I don’t have the percentages in front of me, but the affect of the write-off that we took last year, if it had stayed in place it would have continued to amortize over the course of the year.

I see. And you just eliminated that. I’ve got it. Okay.

Now, Jim, I wonder if you could talk about the pricing atmosphere in the industry? You’ve got, you know, you’ve talked about or presented here a 2.5 percent price increase, recognized per barrel for the quarter. And I guess you implemented some during the quarter. But clearly the pricing atmosphere, the promotion atmosphere in the industry going into the summer is not as severe or as intense as it’s been in any period maybe in the last decade or so.

So, can you talk a little bit about what you see in the pricing atmosphere? Who is it we should really think about you benchmarking these prices against? And what do you see or can you pick-up from market intelligence that they’re doing in preparation for, you know, the Memorial Day holiday, summer selling season that you’re watching to gauge whether, you know, this kind of price behavior can hold?

Yes. I guess the first thing I would say is that we feel that we’re, you know, one or two degrees separated from any potential pricing issues that happen among the major domestic brewers that, you know, our customers are not standing in front of a cooler, you know, asking am I going to buy a Sam Adams or, you know, a Bud Lite, or Miller Lite, or Coors Lite, or another major domestic beer. They’re really shopping a different end of the cooler and are comparing our prices with what we view as our competitor set, which would be, you know, imports and craft beer. So, within better beer we tend to look at some of the other volume leaders, like Heineken and Corona, rather than looking at the other end of the cooler where Bud, Miller, and Coors might be engaged in a price war.

So, bottom line, I feel like we’re selling a different, and in a somewhat different category than the mass domestics, and that our pricing actions which we believe were pretty well received in the first quarter will hold through the rest of the year, and we’re not going to have to, you know, start aggressively discounting just because there’s some of that kind of activity going on between the major domestic brewers. Obviously, things can change, but that’s the way we’re thinking about it right now, that we’re in almost a different category.

But is there trade pressure to do that? I mean in other words does the trade pressure you to step in and step up the promotion rates in order to get the display and features face that you want in an atmosphere that’s intensifying like that?

There is, you know, there’s always trade pressure to increase your discount and your scanbacks, and whatever other support there might be. And it’s probably going to increase a little bit, and there might be more pressure on us to get displays and floor space. But from the retailers’ point of view they also want to trade consumers up to better beer, because there’s just more dollars in it for them.

So, again, we’re a little more insulated from, you know, a retailer who might be selling the major domestic beers at cost or very low margin, need to make money somewhere. And that historically has been what they look to get out of better beers like Sam Adams. So, we have a pretty good response to it. And while at the margins it can affect our business we’re not currently thinking that it’s going to be a significant downward pressure, and that therefore we’ll be able to hold the kind of price increases we’ve implemented.

And you haven’t, just to finalize that question, you haven’t seen any step-up in activity level that is either Heineken or Corona in reaction to what has kind of been put on the table by [Annheiser], yet?

I have not seen that.

Okay. thanks. I’ll get back in queue. Thanks.

Your next question is a follow-up question from Jeff Kanter. Please proceed, sir.

Martin, just a quick question. And I’m sorry to be repetitive, but just a follow-up to what Marc was asking. So, the benefit from the contract amortization that was all realized in the first quarter, is that correct?

No, what I tried to say, and I apologize if I wasn’t clear, was that if we had not have taken the write-off of the expense or the amortization of that expense would have continued in all the quarters, because we did take the write-off the benefit would be felt in each of those quarters.

Into those quarters. And so going forward?

We’ll see the continuing backup.

Okay. So, there’s cost of goods sold per barrel down 2 percent or pretty close to it, that should be a pretty good number going forward? All else being equal, or…

I think all else being equal, you know, mix being equal, and other cost pressures being equal.

Okay. And this was, I think, the second quarter or the third quarter where on premise trends were a little bit soft. I know that you said that, you know, you’re not, you’re one or two degrees separated from the majors. But I just am wondering if you’re kind of caught in between, in on premise battles between the majors and the big spirits companies, that maybe is perhaps weighing on your on premise trends? Is that – can you dive into that a little bit?

Jeff, let me take that. My sense would be without a lot of hard data would be that while there’s some step-up in promotional activity on the part of the major brewers it, again, is not that significant in affecting our on premise trends. Because there is that separation between consumer drive for a better beer versus a mass domestic.

On the other hand, there may be, we may be less separated than the mass domestics from the efforts of wine and spirits. Because a lot of, I believe that a lot of the consumer drives that are beneficial to wine and spirits, there’s things like products with more perceived quality, higher taste profile, more interesting products, more variety, products with stories that aren’t necessarily mass marketed. Those drives that are beneficial to wine and spirits have also historically been beneficial to better beers, like Sam Adams.

So, the growth of wine and spirits presents to us both a risk and an opportunity that we can capitalize on. So, I would believe that for us we’re probably less impacted by the mass domestics than you might think, and maybe a little more in the same pool from the consumers’ point of view that wine and spirits are.

So, is that, you know, are you somewhat answering that question, is that what you think is weighing on on premise, or, you know, is that just a guess?

That’s just a guess. I don’t really have any strong data to suggest it. Just anecdotal from wholesalers and people, you know, bar managers, and people in the retail trade.

Fair enough. Thank you very much.

[OPERATOR INSTRUCTIONS]

Your next question comes from [Brad Purcell] with [Goodenow Gray]. Please proceed, sir.

Hi, gentlemen. I’m a little new to your business, so if I labor through this question. The 278,000 barrels shipped into the trade into the wholesalers, I think you said was about 32,000 barrels more than retail takeaway. And I think you also suggested that would get worked down over the next few months? And that, I guess, if you could reconcile that with the fact that your orders are up, I think you said up a percent? Would that suggest that retail takeaway is improving in the current months, or will there be a continued overhang of these 32,000 barrels? In other words, there’s an oversupply of barrels and yet orders still from wholesale trade seem to be positive.

Well, put it like we’re looking into the future here, and it’s a little difficult to actually know what’s going to happen. The wholesalers are obviously ordering based on what their expectations are, and we don’t really have any knowledge right now as to April sales or even early May sales to know whether our orders on hand are effective on what is going on or not.

I think what we believe is that over a period of time our shipments will be adjusted to mirror what their sales would be, because we can’t continually load the whole trade with inventory. So, our expectation would be that over the next few months that the wholesalers would adjust their ordering patterns to match retail trends, but I don’t think you can draw significant conclusions from the April, May numbers.

Okay. And your shipments of wholesalers in the second quarter of last year were what?

I don’t think I have that number in front of me, Brad. I would just refer you to press release.

But is it safe to assume that wholesale shipments in the second quarter will be down versus last year? Given the 32,000 barrel overhang which is a little over 10 percent.

I think if you believe that the overhang was going to correct in the quarter, and you also believed that the [recent] growth was not going to be there, then that would be correct. But those are obviously two big assumptions, and you know, all we can tell you right now is what we know which is that our orders on hand are approximately up 1 percent for April, May.

Okay. And do you talk about the incremental margin per barrel shipped? Incremental gross margin for…

We just, I don’t think I fully understand the question, and would just refer you to our reported gross margin.

Okay. And just, lastly, I don’t have the balance sheet here, and maybe you provided that and I didn’t see it – inventories end of this quarter versus last year?

Could you repeat the question, again?

Inventories on your balance sheet?

Inventories on our balance sheet at the end of the quarter were 12.7m, up from 12.6m at the end of the year.

And do you have it for March of last year?

Not right in front of me. Again, I refer you to last year’s announcement.

Okay. Thank you.

Thank you.

Your next question is a follow-up question from Marc Cohen with Goldman Sachs. Please proceed, sir.

Okay. Hey, Bill, I wonder if you could talk a little bit about the work capital movement here, and explain accounts receivable up pretty big, accounts payable up pretty big, include expenses, a big swing? Can you just take us through each of those numbers and explain what’s going on there?

Well, accounts receivable down from the end of the year, Marc, a couple million dollars, over $2m. So, I think you said up, are you referring to…

I mean higher than last year. I’m sorry, I’m just comparing the cash flow statement to YOY.

Oh, YOY, okay.

Yeah, I mean last year, this last year was 795,000 in flow, this year 2.3m?

Yeah, I think from an accounts receivable standpoint, Marc, I think it’s your timing.

Okay.

You know, there’s nothing magical to the change in accounts receivable but timing.

Okay.

In terms of our other current assets, you know, there is an increase in our other current assets where you’ll see a corresponding increase in accrued expenses, also. They’re offsetting each other and they’re, you know, relative to a potential, a wholesaler transaction.

What kind of transaction? Are you buying a wholesaler?

No, it relates to a potential transfer of our brand between two wholesalers, and we happen to be in the middle.

Okay. And the payables?

The payables, again, it’s going to be a timing issue. It’s not significant year on year.

Okay. Now, on the ad spending, it’s going to be up 5m to 7m for the year, and you’re almost 2m lower in the first quarter. So, we’re talking about, you know, 7m to 9m. Is there a seasonality to the way this spending is going to – this goes back to Jeff’s question, is there a seasonality to the way this is going to hit the P&L? Is this something that’s going to, now that the ad and media is on air is going to hit pretty weightably across? I mean should we just take 3m a quarter or something like that, and see it fall that way, or is there some kind of a pattern in the way this is going to hit the P&L?

Let me take that one and sort of refer you in some respects to our historical pattern. I mean historically we’ve spent pretty evenly unless we’ve had a significant occurrence happening, like the launch of a new product or waiting for new media.

What happened in the first quarter was we were waiting for new media, and we chose to defer some investment until late in the first quarter and also into early second quarter. And going forward, I think you should probably expect us to revert to our pattern of pretty normal, flat spending unless, again, something significant were to happen, or indeed we were to raise the investment level if the media was in effect.

Okay. Hey, Jim, can you talk a little bit about this new media, and compare it to some of the things you’ve had on air, and talk about the aspects of it that make you feel like this is the media that really can unlock the brand and drive growth?

Yes, though again I’ll preface it with after almost 10 years of working on TV advertising for Sam Adams, one of the things that I do know is that I don’t know anything. And that one’s intuitions are not a reliable indicator as to whether it’ll drive consumer demand.

So, with that caveat I would say that I’m very happy with it. I think that it is sort of the television equivalent of the radio ads that were quite successful in driving brand growth in the first 12 years of the Company’s history, and it brings us kind of full circle to those roots, focusing on what makes Sam Adams unique in the brewing quality, the ingredients. And also giving the ad, you know, giving our advertising presentation to the consumers a more kind of authentic and kind of true to the brand feel to it.

I mean they’re all real people. It’s shot, you know, on tape. It’s pretty much who we are. And just like the original radio ads we’re kind of primitive technologically but very true to what you might expect from a small independent company, which is in a lot of ways an important part of our brand identity.

Great. Thanks.

Ladies and gentlemen, this concludes our question and answer session. I would now like to turn the presentation back to Bill Urich for closing remarks. Please proceed, sir.

Thank you, everyone, for joining the call. Have a nice day.

Cheers.

Cheers.

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Have a great day.