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The New York Stock Exchange (NYSE) is the largest stock exchange in the world in terms of market capitalization. In 2007, the NYSE merged with another company, Euronext so that the entire stock exchange became fully electronic.
The signing of the Buttonwood Agreement in May 1792 was the precursor to the formation of the current NYSE which began with less than 50 stocks. There are over 2,500 securities listed on the New York Stock Exchange to date though the number is not constant since new securities as well as tradable securities are added or delisted regularly. It is currently located on 11 Wall Street in lower Manhattan, New York City and the listed companies at the NYSE have a collective capital base of over US$25 trillion.
NYSE symbol: SAM
The Boston Beer Company, Inc. (NYSE: SAM) is a publicly owned company listed in the NYSE as a component of the brewery industry. The company was first listed on the NYSE on 21 November, 1995 after selling part of its capital to the public as common shares.
Brief history of The Boston Beer Company, Inc
The Boston Beer Company, Inc was established in 1984 in Boston, Massachusetts by three individuals and initially begun its operations by contracting the Pittsburgh Brewing Company for the brewing of its brands prior to the establishment of The Boston Beer Company’s own brewing plant in Cincinnati.
Boston Beer Company is the current largest American-owned brewery after the merge of the previous largest company, Anheuser Busch with the Belgian-Brazilian Company InBev on November 18, 2008 to form Anheuser Busch InBev -AB-IB (Jackson, 10).
Performance of the Boston Beer Company, Inc
In 2005, The Boston Beer Company (NYSE: SAM) attained fourth quarter net revenue of $64.8 million, an increase of 16% over fourth quarter 2004. Net revenue rose up by 9.7% to $238.3 million in 2005 compared to the previous year (Roberto 7). There was also an increase in net revenue per barrel mainly because of price increases and a change in the package mix (BBIC 8).
Advertising, promotional and selling expenses increased by $6.0 million, due to higher shipment fuel costs, selling costs and promotional investment supporting the brands (Fuhrmann 10).
In general, the Better Beer category of the company grew by 8% while that of the Craft beer grew by 9%, and the end result was a 5% growth of the company for the full year 2005. The Company had net income of $15.6 million, or $1.07 per diluted share with a net revenue increase of $21.1 million or 9.7% because of the augmentation in shipment volume along with a 2.4% increase in net revenue per barrel and thus a rise in the share value (Jackson 7).
In 2006, fourth quarter net revenue was at $73.3 million due to an increase in shipment volume and a net revenue per barrel. Net revenue rose by 20% to $285.4 million in 2006 relative to 2005 revenue (BBIC 7). Gross margin for the fourth quarter 2006 dropped to 56.0% from 57.7% in the fourth quarter of 2005 because of rising supply chain costs perpetuated by the increase in beer demand and increase in package material costs (Roberto 8).
There was also an increase in net revenue per barrel is due to package change costs.Net income for 2006 was $18.2 million, or $1.27 per diluted share, which was a notable increase of $2.6 million, or $0.20 per diluted share compared to the previous year. Net revenue rose to $47.1 million while gross margin as a percent of net sales was 57.6% mainly due to net price increases induced by unfavorable packaging material and supply chain costs.
In 2007, the fourth quarter net revenue was $92.2 million which was perpetuated by an increase in core shipment volume (BBIC 6). The 2008 fourth quarter net revenue grew by 13% with the net income being $3.6 million mostly motivated by the raise in costs of raw and packaging materials (Fuhrmann 11). Other expenses included the new Pennsylvania Brewery which brought about start-up costs and the Latrobe Brewery asset impairment charge.
The net revenue for the fourth quarter of 2008 increased by13% to $103.8 million, because of volume and pricing gains (BBIC 4). Net income for that year fell by $14.4 million, or $0.97 per diluted share to $8.1 million, or $0.56 per diluted share relative to the to previous year mainly due to the increases in cost of goods sold, advertising as well as promotional and selling expenses(BBIC 4).
In addition, the Boston Beer Company issued a recall in April 2008, after a third-party supplier responsible for a fourth of the bottles used the Boston Beer Company manufactured defective bottles which contained small pieces of glass (Jackson 7). Consequently, the share value of the company’s shares fell by over 3% after the recall leading to the drop in net income.
2009 saw the net revenue for the fourth quarter rise by $3.4 million to $107.2 million again mostly because of core volume gains. The net revenue of the year 2009 rose to $415.1 million a 4% increase (Fuhrmann 14). Net income for 2009 was $31.1 million or $2.17 per diluted share, which is an increase of $23.0 million, or $1.61 per diluted share when compared to 2008(BBIC 3). Product recall costs of 2008 were $22.8 million which led to improved gross margins of 5% in 2009.
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2010 is a promising year for the Boston Beer Company especially with the launch of the new spring seasonal, Samuel Adams(R) Noble Pils that continues to enjoy a favorable reception by consumers, and traders (BBIC 2). There are still existing challenges such as increased competition from domestic forte brands as well as regional craft brands and competitive pricing though current approximation of for 2010 is in the range of $2.35 to $2.65 earnings per diluted share.
Since the listing of The Boston Beer Company in the NYSE, it has been able to make tremendous progress mainly due to the company’s consistency in effective performance and corporate finance. The value of NYSE:SAM is currently ranging between $30.70 and $56.40 with the theory and practice of corporate finance being a major contributor to the bullish activity of the shares.
Long term Capital investment decisions such as the opening of the Pennsylvania Brewery in 2008 and the IPO in 1995 have all been profitable even with initial losses being experienced. The company has financed most investments with equity and shareholders are frequent recipients of dividend unless in occasions with reduced income such as 2008.
Working capital management has led the company to reduce advertising, promotional and selling costs since 2008. Such action is being amplified by cutbacks in freight expenses to wholesalers, addition of sales staff as well as better advertising rates and more efficient spending by the company to equalize the increase in salaries. Consequently, advertising and promotional costs as well as cost of sales sustained in 2009 declined by $11.3 million relative to 2008 costs.
Fuhrmann, Ryan. Sam Adams Brewing Growth in the U.S. 2010. Web.
Jackson, Sally. The Boston beer company to ask for federal regulations requiring full disclosure on beer labels. 1996. Web.
Roberto, Michael. Anheuser Busch and Sam Adams, 2008. Web.
The Boston Beer Company, Inc (BBCI). Investor relation center: Archives. Web.