May 10th, 2013
Consumer Goods
Boston Beer Company
Ticker: SAM
Recommendation: Hold
Current Price: $147.87
Implied Price: $146.81
Investment Thesis
Key Statistics

Boston Beer Company is the largest craft brewer in the United States with a
market share of over 19.0% and a three year revenue CAGR of 9.2%

Implementation of Samuel Adams in a can will act as a new sales driver to
increase market share while simultaneously cutting long term costs

Increased competition from large international brewers and smaller
microbrewers is saturating the craft beer market and is presenting Boston
Beer Company with unprecedented competition necessitating an increase in
advertising and selling expenses

It is unclear at this point as to how Boston Beer Company will react to the
increase in competition, especially seeing the negative effect that it recently
had on earnings
$97.66 - $172.05
52 Week Price Range
$159.11
50-Day Moving Average
Estimated Beta
0.71
Dividend Yield
0.00%
1963.88m
Market Capitalization
11.50%
3-Year Revenue CAGR
Trading Statistics
Five-Year Stock Chart
13.28m
Diluted Shares Outstanding
$180.00
1,800,000
Average Volume (3-Month)
97208
$160.00
1,600,000
Institutional Ownership
102%
$140.00
1,400,000
$120.00
1,200,000
$100.00
1,000,000
2.56%
Insider Ownership
16.47
EV/EBITDA (LTM)
Margins and Ratios
Gross Margin (LTM)
54.33%
EBITDA Margin (LTM)
19.98%
10.25%
Net Margin (LTM)
$80.00
800,000
$60.00
600,000
$40.00
400,000
$20.00
200,000
0
$0.00
Feb-06
Feb-07
Feb-08
Volume
Feb-09
Adjusted Close
Feb-10
Feb-11
50-Day Avg
Feb-12
Feb-13
200-Day Avg
0.0003
Debt to Enterprise Value
Covering Analysts
Mike Saeks
mikesaeks@gmail.com
Nick Hubert
nhubert@uoregon.edu
1
Email
University of Oregon Investment Group
May 10th, 2013
University of Oregon Investment Group
Business Overview
General Overview
Figure 1: Samuel Adams Product Examples
Boston Beer Company began in the attic of founder Jim Koch’s home using a
family recipe passed down from the 1800’s. Koch sold the first Samuel Adams
beer in April 1985 and had sold almost 500 barrels before the year was over.
Boston Beer opened its first brewery in Boston in 1988 and has since opened
several more across the country. It was taken public in 1995 and trades on the
New York Stock Exchange under the ticker SAM. Boston Beer Company is
headquartered in Boston, Massachusetts.
Today, Boston Beer Company competes in the Better Beer subsector of the beer
industry and is the largest craft brewer in the United States having sold over 2.7
million barrels of beer in 2012. Better Beer is made up of craft brewers,
microbrewers, and other domestic specialty beers.
Products
Source: Samuel Adams Website
Boston Beer Company sells products under two categories: core brands and noncore brands. Core brands consist of the following product lines: Samuel Adams,
Twisted Tea, and Angry Orchard. The non-core brands are brewed and
packaged under contract from various third parties and made up roughly 92% of
shipments in 2012.
Samuel Adams
The Samuel Adams product line is the core product for Boston Beer Company,
and its success is mainly driven by sales of Samuel Adams Boston Lager and
Samuel Adams Seasonal Beers. Additional products have been added to the line
over the years, and Boston Beer currently sells over fifty beers under the Samuel
Adams name. According to Boston Beer, sales volume within the craft brew
industry grew by roughly 12% in 2012 compared to the total beer industry
which grew by just 1%.
Figure 2: Core Brand Revenues
$1,000,000.0
$900,000.0
$800,000.0
$700,000.0
$600,000.0
$500,000.0
$400,000.0
$300,000.0
$200,000.0
2012A
2013E
2014E
2015E
2016E
2017E
Twisted Tea
Boston Beer’s Twisted Tea is sold in the flavored malt beverage category and
competes with brands such as Mike’s Hard Lemonade, Bud Light Lime, and
Smirnoff Ice. The first Twisted Tea product was released in 2001, and the
company currently sells ten different products under the Twisted Tea brand
name. According to Boston Beer, the flavored malt beverage category currently
makes up roughly 2% of United States beer consumption. The category’s
popularity has been increasing over the past few years and sales volumes
increased by 9% in 2012.
Source: SAM Financials and UOIG Projections
Angry Orchard
The Angry Orchard product line was launched in 2011 and competes with other
ciders and various spirit brands. The Company currently sells 5 hard ciders
under the brand Angry Orchard, and it estimates that hard cider makes up
approximately 0.5% of United States beer consumption. Despite its small size,
this category is expanding rapidly and experienced growth of around 65% in
2012.
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Breweries
Boston Beer Company continually invests in capital improvements for its
breweries in order to produce higher quality products that can meet the capacity
requirements demanded by consumers.
Figure 3: Brewery Logo
The Pennsylvania Brewery is the Company’s largest and produces a significant
amount of its core brand barrels. The Cincinnati Brewery also produces a large
amount of core brands barrels, and focuses on smaller specialty releases as well.
The Boston Brewery is focused on the development of new products for Boston
Beer and is the main producer of the Samuel Adams product line. The Company
recently opened the Angel City Brewery in Los Angeles, California which is
geared towards capturing area specific demand for specialty craft beers.
In 2011, Boston Beer created a Vermont based subsidiary called Alchemy and
Science. Alchemy and Science is tasked with identifying innovative and unique
products for Boston Beer and is focused on the research and development of
new brewing techniques to be applied in new geographic areas. The Angel City
Brewery is an example of one of Alchemy and Science’s developments.
Source: Google Images
Strategic Positioning
Sales and Distribution
Figure 4: Advertising, Selling, and Promotional Expense
relative to Revenue
$1,100,000.0
$1,000,000.0
$900,000.0
$800,000.0
$700,000.0
$600,000.0
$500,000.0
$400,000.0
$300,000.0
$200,000.0
$100,000.0
$0.0
2012A
2013E
2014E
2015E
Advertising, Promotional, and Selling Expense
2016E
2017E
The relationship between brewers, distributors, and retailers is extremely
important in the beer industry. Therefore, Boston Beer constantly works to
develop its network of distributors and currently sells to 340 wholesalers. These
wholesalers then sell to grocery stores, restaurants, and other convenience
stores. Quality control and freshness is a constant problem that plagues the beer
industry throughout the entire distribution process. As a result, Boston Beer
Company released the Freshest Beer Program in 2010. Essentially, the Freshest
Beer Program focuses on reducing wholesaler inventory levels by providing
more timely deliveries, more efficient forecasting, and more accurate planning
of shipments. By the end or 2012, Boston Beer had 89 wholesalers participating
in the Freshest Beer Program equaling roughly 59% of its shipments. The
Company’s 2013 goal is to increase this number to roughly 70% of all
shipments. The Company hopes that successful implementation of the Freshest
Beer Program will increase depletions and lead to more shipment growth.
Depletions are important in the beer industry and represent the time that it takes
for beer to get from distributors to consumers. As a result, higher depletion
represents higher demand for a company’s product.
Revenue
Source: SAM Financials and UOIG Projections
Boston Beer Company prides itself on its knowledgeable sales force which
currently consists of 330 people. The sales force focuses on each part of the
distribution process and constantly seeks to increase the education of the
brewing industry. Each member of the team is highly trained and familiar with
the Company’s brewing process. They also carry the individual inputs such as
the hops, barley, and apples in order to showcase the quality of Boston Beer
products. The team differentiates itself by promoting the quality of the inputs
and by focusing on education of the brewing process.
Success in the alcohol industry is dependent on the ability to engage with
customers. For this reason, Boston Beer continues to increase its advertising
budget with the goal of increasing its reach and its customer base. The Company
commonly deploys national media campaigns through means such as television,
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billboards, radio, and various other print strategies. It also increases promotion
at the community level by sponsoring beer festivals, community events, and
trade shows. Through all of these means, Boston Beer hopes to increase first
time sales by promoting quality awareness.
Figure 5: Samuel Adams Can Promotion
The Drinking Experience
Source: Samuel Adams Website
The Boston Beer Company is constantly searching for new ways to increase the
drinking experience for its consumers. Over the past couple of years, the
Company has worked through more than ten prototypes in order to offer Samuel
Adams in a can for the first time. By focusing on quality and freshness, Boston
Beer hopes to maintain the flavor provided by a bottle while, at the same time,
offering the ease of a can. Additionally, according to IBIS World, cans make up
roughly 54% of beer sales versus bottles which come in at 36%. This represents
the huge opportunity for sales growth by shifting towards the sales of canned
beer. The new product will launch by the end of May 2013, and will be
marketed towards more “can friendly” locations such as sporting events and
airlines. Overall, this new offering represents an attempt to push back against the
increasing pressure of the larger brewers and to increase the scope of the Samuel
Adams marketplace.
Business Growth Strategies
Historical Acquisitions
Boston Beer Company has made a few notable acquisitions in the past. In 2012,
the company acquired brewing assets of Southern California Brewing Company
for $1.7 million in order to open the Angel City Brewery. Additionally, Boston
Beer acquired the assets to open its Pennsylvania Brewery from Diageo North
America for $35 million in 2008. Analysis of this trend shows that the
Company’s acquisition strategy is mainly focused on the purchase of assets with
the goal of expansion into new geographic territories. Boston Beer historically
has not acquired other brands and is not likely to do so in the future.
Forward Growth
Figure 6: Industry Product Sales Breakdown
Draft
Beer
10%
Bottles
36%
Metal Cans
54%
Source: IBIS World
Looking ahead, Boston Beer will continue to grow through organic means. The
management has not expressed intentions to acquire new assets at this point in
time, and will continue to focus on developing the brands already owned by the
Boston Beer Company. The creation of Alchemy and Science further enforces
the fact that the Company is focused on developing product internally now more
than ever. This trend can be expected to continue as brands such as Twisted Tea
and Angry Orchard continue to develop and gain popularity. Another previously
mentioned example of organic growth is SAM’s new venture in to can
production. The Company hopes that the introduction of Samuel Adams in a can
will increase the scope of sales and open up the opportunity to sell its product at
a wider array of events. Growth in this industry is often extremely difficult as
companies struggle to achieve economies of scale and reduce costs efficiently.
Regardless, Boston Beer has a strong record of successful growth and will
continue to grow on its own into the future as it continues to capture a large
amount of market share in the expanding craft brew industry.
Boston Beer is mainly focused on growth within the United States; however, the
Company will continue to test certain markets such as Canada, the Caribbean,
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certain European countries, and Mexico. Due to the tough laws surrounding
international brewing and the costs of transportation, SAM will continue to
focus its efforts towards being the most successful craft brewer in the United
States.
Figure 7: Overall Industry Market Share
Industry
Overview
Other
25%
MillerCoors
33%
AB InBev
42%
Source: IBIS World
The brewing industry is mature and highly concentrated, but it has seen strong
growth throughout the past five years as consumer preference shifted following
the 2008 financial crisis. A decrease in disposable income drove consumers
towards lower priced beers instead of wines and spirits resulting in increased
revenues for the major brewers. Increased sales during weak economic times are
a common trend for breweries and continue to be an identifier of the resilience
in this industry. Coming out of the recession the lower end brewers will see a
decrease in sales as consumer preferences shifts back towards premium beers,
wines, and spirits. Barriers to entry for the larger breweries is quite high as
significant capital investments are required in order to realize economies of
scale. Furthermore, the larger firms are able to leverage beneficial pricing
relationships with suppliers that smaller breweries cannot attain.
The desire to achieve economies of scale in distribution and manufacturing has
led to a large amount of consolidation amongst the largest brewers in the
industry. Most notably, in 2008 Anheuser-Busch merged with InBev to form AB
InBev. Next, Coors Brewing Company merged with SABMiller to form
MillerCoors. Together, these two companies now hold more than 75% of US
beer market share. Despite the massive consolidation, Boston Beer Company
finds itself in the unique craft brewing sector of the industry that is much less
dominated by the larger firms.
Craft Brewing
Figure 8: Craft Brewing Market Share
Sam Adams
19.3
Other
75%
Source: IBIS World
The craft brewing sector of the industry is much more focused on high quality
products, and firms rarely compete on price. As mentioned previously, premium
beers are well positioned for increasing growth as consumer preferences shift
coming out of the financial crisis. Also, as consumers become more health
conscious, the market will likely see a shift towards premium beers which are
Sierra Nevadaoften viewed as healthier than lower end beers. The sector is much less
Brewing
Company concentrated than the rest of the brewing industry. According to SAM’s
5.8
research, the craft brewing sector grew approximately 11% in 2012 compared to
the mere 1% growth of the overall industry. Boston Beer currently holds roughly
19% of the market share within this industry with the next closest competitor,
Sierra Nevada Brewing Company, holding only 6%. However, this market share
has been slowly decreasing and will continue to decrease as more companies
find it profitable to enter this space. Craft brewers operate on a much smaller
scale than the giants in the industry meaning that they often have higher input
costs. Economies of scale in regards to manufacturing and distribution are
extremely tough to achieve at such a small scale. Therefore, barriers to entry for
craft brewers are often much smaller than those of the larger brewers.
Companies within the industry are well poised to see margin expansion as more
consumers shift demand towards premium beers. The culmination of these
factors has led to an increasingly competitive landscape for Boston Beer
Company which is reinforced by its recent increase in advertising and selling
expenses in the first quarter.
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Figure 9: Large Scale Competition
Competition
As stated, the craft brewing industry has a low concentration which opens the
door for heavy competition. Craft brewing is not price competitive, but focuses
instead on developing high quality, unique, and flavorful beer that aligns closely
with the desires of the consumer. Success in craft brewing is highly dependent
on a firm’s ability to reach its consumers. For this reason, it is common to see
large advertising expenses among companies in this industry in order to fuel
high growth and to capture market share. Brand loyalty is also extremely high
among beer companies, so investing in advertising and marketing can often be
one of the most effective strategies for capturing long term growth. The
increasing success and profitability of companies within the craft brewing sector
has led to an influx of smaller microbreweries which are quickly turning into
tougher competition for Boston Beer Company.
Source: Google Images
Figure 10: Microbrewery Competition
Source: Ninkasi Website
The Company is being squeezed on both sides for market share. Below them are
the microbreweries which are continuing to increase in both size and number.
Microbreweries are easier to establish and offer high quality products that
directly compete with the product offerings of SAM. Large margins and high
profitability are driving firms to enter the market at a rate that has not been seen
previously. As a result, pressure on SAM is going to increase for them to
maintain a high growth rate and maintain high quality products at the same time.
Increased investment in advertising has been and will continue to be a necessity
for the Company to maintain its growth and its brand loyalty. Larger companies
such as Constellation Brands, AB InBev, and SABMiller are also pressuring
Boston Beer from above as they attempt to launch products into the craft
brewing sector. These companies are looking to leverage their cost efficiencies
which, when paired with the higher prices demanded by premium beers, will
increase margins and bottom line profitability.
It is important to note that premium beer competes intensely with spirits and
wines. These products are very different, but are aligned more closely in the
consumer mindset than low end products offered by the larger brewers. They are
priced similarly and will continue to provide tough competition for SAM in the
future as consumers increase spending power.
Macro Factors
Figure 11: Per Capita Disposable Income
26.0
25.5
25.0
24.5
24.0
23.5
Source: IBIS World
The beer industry is often viewed as counter-cyclical due to the fact that low end
beer consumption often increases when the economy decreases. Premium beer,
such as that produced by Boston Beer Company, to a lesser extent falls into this
trend as well. However, premium beer has a much larger potential on the upside
as consumers shift preferences in line with economic recoveries. This potential
will most likely be realized as per capita disposable income increases along with
the economy. Per capita disposable income is projected by IBIS World to grow
at a compound rate of roughly 2.4% through 2018 compared to the contraction
of growth that was seen following the financial crisis. Boston Beer is positioned
well to take advantage of the increasing disposable income as it continues to
compete with other firms for market share. Additionally, increasing per capita
disposable income will result in increased per capita alcohol consumption.
Alcohol consumption is only projected to increase .6% through 2017 to an
average 25 gallons per capita; however, premium beers will likely see a much
higher compound growth rate during this time period.
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Figure 12: Per Capita Alcohol Consumption
$38,000
$37,000
$36,000
$35,000
$34,000
$33,000
$32,000
$31,000
$30,000
$29,000
$28,000
Changing consumer preferences will continue to drive growth for premium
beers. Specifically, the increasing focus on healthy and sustainable practices
works in favor of craft brewers which are often viewed as healthier.
Microbrewers and craft brewers focus on alignment with consumer preferences
more so than the larger brewer which has greatly increased their popularity in
recent years. Craft brewing growth is mainly being driven by demand from the
younger demographic of consumers. These consumers demand the unique and
high quality beer that is produced by craft brewers and will continue to be the
main growth drivers for this sector in the coming years. Additionally, their
spending power will continue to increase in line with the increasing per capita
disposable income following the recovery from the financial crisis.
The size of firms in the craft brewing sector means that they are often not able to
apply any significant power to suppliers. Furthermore, the volatility of input
prices resulting from supply fluctuations can create difficulty in regards to cost
control and forecasting. Boston Beer has not had significant issues with this in
the past, and the Company works closely with its suppliers to identify issues
before they arise. However, SAM uses very specific ingredients for its products
that often have very few suppliers. For example, the Noble hop that is used in
most Samuel Adams beers is sourced primarily from Germany and the Czech
Republic. These hops are rare and expensive, meaning that Boston Beer is often
at the will of suppliers in terms of price and quantity available. Also, the
expansion of the Company’s product line to include cider opens it up to even
more volatile ingredients. The Company does not currently engage in hedging
activities against the commodity markets, but it is well aware of the effect that
price fluctuations could have on its profitability.
Source: IBIS World
Management and Employee Relations
Figure 13: Consumption by Age Group
Jim Koch, Founder and Chairman of the Board of Directors
64 and older
10%
21-24
9%
55-64
13%
25-34
23%
45-54
22%
35-44
23%
Jim Koch was the original founder of the Boston Beer Company, and he
continues to be the visionary that drives the success of the company each year.
He served as Chief Executive Officer of the Company until 2001. Mr. Koch
currently controls 100% of all Class B commons stock which gives him a large
amount of influence over the election of the board, executive compensation, and
various other governance matters. His control of the board translates to
significant control over the direction of the Company. As founder, he is the
figurehead of the company and will continue to be popular among drinkers
going forward. Such reliance on one member exposes the Company to a large
amount of risk if that member is no longer able to function in a significant
leading role. However, the chances of that happening are unlikely, and Jim
Koch’s desire to build the leading craft brewer in the world will continue to steer
the company towards the top of the industry.
Martin Roper, CEO and President
Source: IBIS World
Mr. Roper has a strong operational and manufacturing focus which has proven
to be very useful in the brewing industry. He joined Boston Beer in 1994 as the
VP of Manufacturing and Business Development. In 1997, he was promoted to
Chief Operating Officer, and he took over as Chief Executive Officer in January
2001 when Jim Koch stepped down. Mr. Roper holds a master’s degree in
engineering and manufacturing as well as a MBA from Harvard Business
School.
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William Urich, CFO and Treasurer
Mr. Urich brings more than twenty years of financial and operating experience
to Boston Beer Company. He has been focused in the alcohol industry for the
majority of his career having worked for a subsidiary of Diageo and an organic
food producer. Mr. Urich took over as CFO and Treasurer at SAM in 2003, and
he continues to be a strong leader for the company.
Bonuses and Incentives
Figure 14: Company Performance and CEO
Compensation
70.00%
$1,100.00
$1,085.1
$1,040.1
$1,043.2
60.00%
$1,050.00
50.00%
$1,000.00
40.00%
$924.6
30.00%
$950.00
62.2%
58.4%
55.3%
51.5%
54.3%
55.5%
$900.00
20.00%
12.6%
11.3%
$850.00
7.2%
10.00%
17.7%
2.6%
6.0%
0.00%
$800.00
2009
2010
depletion growth
The bonus program at Boston Beer is aimed at rewarding executives for high
performance. Specifically, the Company rewards its executives for hitting short
term sales targets and for driving towards long term goals. As shown in figure
14, executives are awarded most when the company is performing at its best.
Depletion, increasing flow of product from wholesalers to retailers, is an integral
part of success in this industry, and the incentives system was created to drive
the Company’s success.
gross amrgin
2011
EPS growth
2012
Management Guidance
CEO Compensation(thousands)
Source: SAM Proxy Statement
Figure 15: Shift to Premium Beers
Historically, management has provided easily makeable guidance for earnings
and EPS. For this reason, the generally do not have to adjust guidance down. As
of the most recent quarter, they were inaccurate in predicting advertising
expenses which caused them to miss earnings. Regardless, they reiterated their
annual estimates and are very optimistic about the earnings potential of both
Boston Beer Company and the craft beer industry as a whole going forward.
Recent News
Forbes: Imported Beers Corona and Heineken, along with Sam
Adams, Beating Big Names like Bud and Coors.
May 7, 2013
In this article, Forbes discusses the shift of the beer industry towards the more
premium beers such as Samuel Adams and Corona. Specifically, it addresses the
fact that the larger beer companies such as Anheuser-Busch and SABMiller are
beginning to lose market share as the consumer trends continue to shift.
AP: Boston Beer weighed down by expenses in Q1
Source: Grupo Modelo
May 1, 2013
AP discusses the most recent earnings and the challenges that Boston Beer
Company has been facing in regards to expenses. The Company was hit with
higher costs than they anticipated for certain goods. More importantly, Boston
Beer spent more on advertising and selling than anticipated which further
reinforces the fact that they are facing increased competition in the industry.
Catalysts
Upside





Success of SAM’s can launch will increase market share and shipments
Increasing consumer preference towards craft beer
Accelerating growth of craft beer sector relative to the industry
Successful implementation of the Freshest Beer program to drive
depletions
Possibility to increased margin expansion through economies of scale
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Downside





Comparable Analysis
Figure 16: Monster EV/EBITDA and EBITDA Margin
40.00x
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
30.00x
20.00x
10.00x
0.00x
EV/EBITDA
Increasing cost of production inputs
Increased competition from largest brewers trying to enter the sector
Increased competition from microbreweries
Possible market saturation due to new entrants
Inability to leverage shelf space away from largest brewers
Comparable Companies were chosen based on multiple factors including:
forward EBITDA growth rates, forward revenue growth rates, exposure to
distribution risk, size, product offering, and brand equity. Many companies
within the brewing industry did not fit these requirements which lead to the
inclusion of multiple companies from outside the industry.
Monster Beverage Corporation: MNST (40.00%)
EBITDA Margin
Source: Factset
1Monster Beverage Corporation operates in the alternative beverage industry. It
develops, markets, and sells various beverage products under the names Monster
Energy, Peace Tea, Hansen’s, Blue Sky, and Vidation. The Company sells its
products directly to retailers, wholesalers, and distributors internationally.
Figure 17: Molson Coors EV/EBITDA and EBITDA Margin
25.00x
25.00%
20.00x
20.00%
15.00x
15.00%
10.00x
10.00%
5.00x
5.00%
0.00x
0.00%
Monster Beverage Corporation was chosen as a comparable company due to its
similarity in both revenue and EBITDA growth rates to SAM. Additionally, it
has similar exposure to beverage specific risks such as distribution and
transportation. The Company also relies heavily on the development of its brand
equity to be successful and is a similar size to Boston Beer. It was given the
highest weighting of 40% due to its similarity in all of these areas.
Molson Coors Brewing Company: TAP (25.00%)
EV/EBITDA
EBITDA Margin
Molson Coors Brewing Company operates in the alcoholic brewing and sales
industry. It brews and sells a wide variety of beer focused mainly in North
America. The Company focuses mainly on lower end beer such as Coors Light,
Miller Lite, Keystone, and Amstel Light. Molson Coors holds a significant
amount of brand equity in the lower end beer market.
Source: Factset
Molson Coors was chosen as a comparable company due to its similar revenue
growth rates. Furthermore, the Company is exposed to many of the same risks as
25.00%
20.00% SAM by participating in the brewing industry. It has a significant amount of
15.00% brand equity in the industry and operates on a large advertising budget. It was
10.00%
given a weighting of 25% due to its similarity in these categories.
5.00%
Figure 18: Starbucks EV/EBITDA and EBITDA Margin
30.00x
25.00x
20.00x
15.00x
10.00x
5.00x
0.00x
0.00%
Starbucks Corporation: SBUX (25.00%)
EV/EBITDA
EBITDA Margin
Source: Factset
Starbucks Corporation operates in the beverage industry. The Company roasts,
markets, and sells coffee internationally. It sells various products such as
espresso, cold blended beverages, teas, regular coffee, and packaged beans.
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Starbucks Corporation offers its products through more than 18,000 stores
worldwide.
3Starbucks Corporation was chosen as a comparable company due to its
similarity in both revenue and EBITDA growth rates. The Company has a large
amount of brand equity worldwide and sells to many of the same customers as
Boston Beer. Based on these reasons, Starbucks was weighted 25%.
Figure 19: Craft Brew Alliance EV/EBITDA and
EBITDA Margin
200.00x
20.00%
10.00%
0.00%
-10.00%
-20.00%
-30.00%
-40.00%
100.00x
0.00x
-100.00x
-200.00x
EV/EBITDA
EBITDA Margin
Source: Factset
Figure 20: Constellation EV/EBITDA and EBITDA Margin
25.00x
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
20.00x
15.00x
10.00x
5.00x
0.00x
EV/EBITDA
EBITDA Margin
Source: Factset
Craft Brew Alliance BREW (5.00%)
Craft Brew Alliance operates in the craft brew sector of the alcoholic brewing
industry The Company brews and sells craft beer under the names: Widmer
Brothers, Redhook, Kona, and Omission. It sells its products directly to
consumers and through various other distribution methods.
The products offered by Craft Brew Alliance directly compete with the Samuel
Adams line of products. The Company’s revenue growth was similar to SAM’s;
however its EBITDA growth was not representative of Boston Beer looking
forward. The Company operates at a similar size to Boston Beer and is reliant on
the development of its brand equity to drive sales growth. BREW is the most
similar competitor to SAM, but its significant difference in EBITDA growth
resulted in its lower weighting of 5%.
Constellation Brands: STZ (5.00%)
Constellation Brands operates in the brewing and sales of alcoholic beverages
including beer, wine, and spirits. The Company operates in the United States
and internationally selling products such as Corona, Pacifico, and SVEDKA
Vodka. It sells its products mainly through wholesale distributors and directly to
retailers.
Constellation Brands operates very similarly to Boston Beer Company and sells
premium brands that compete closely with the Samuel Adams line of products.
The Company is exposed to similar distribution risks and operates on a large
advertising budget that drives development of brand equity. It is very similar to
SAM in many aspects; however, it was only weighted 5% due to its extremely
high 2013 growth rates resulting from its acquisition of the remaining share of
Grupo Modelo.
Figure 21: Green Mountain Coffee Roasters EV/EBITDA
and EBITDA Margin
50.00x
25.00%
40.00x
20.00%
30.00x
15.00%
20.00x
10.00%
10.00x
5.00%
0.00x
0.00%
EV/EBITDA
EBITDA Margin
Source: Factset
Green Mountain Coffee Roasters: GMCR (0.00%)
Green Mountain Coffee Roaster competes in the beverage industry and is a
producer of specialty coffee in the United States and Canada. The company sells
mainly to retailers. It sells products such as single serve packs, whole bean
coffee, and ground coffee.
Green Mountain Coffee Roasters was originally included as a comparable
company to capture its high growth rates and premium product offerings. The
Company is also a similar size to Boston Beer Company. Ultimately, it was
decided that Green Mountain Coffee Roasters was not an appropriate
comparable company due to its significant difference in growth rates and its
UOIG 10
May 10th, 2013
University of Oregon Investment Group
overall difference in distribution strategy. For these reasons, it received a 0%
weighting.
Figure 22: Total Revenue
Discounted Cash Flow Analysis
$1,100,000.0
$1,000,000.0
Revenue Model
$900,000.0
$800,000.0
$700,000.0
$600,000.0
$500,000.0
$400,000.0
$300,000.0
2012A
2013E
2014E
2015E
2016E
2017E
Terminal Year
G&A as a % of
Revenue
Terminal Year
AP&S as a % of
Revenue
Terminal Year
COGS as a % of
Revenue
Source: SAM Financials and UOIG Projections
150
40.00%
40.50%
41.00%
41.50%
42.00%
Implied Price
Terminal Growth Rate
2.0%
2.5%
3.0%
3.5%
136.60
147.27
160.62
177.81
132.13
142.41
155.27
171.83
127.67
137.56
149.93
165.85
123.21
132.70
144.58
159.88
118.74
127.85
139.24
153.90
150
26.00%
26.50%
27.00%
27.50%
28.00%
Implied Price
Terminal Growth Rate
2.0%
2.5%
3.0%
3.5%
136.60
147.27
160.62
177.81
132.13
142.41
155.27
171.83
127.67
137.56
149.93
165.85
123.21
132.70
144.58
159.88
118.74
127.85
139.24
153.90
150
6.50%
7.00%
7.50%
8.00%
8.50%
Implied Price
Terminal Growth Rate
2.0%
2.5%
3.0%
3.5%
136.60
147.27
160.62
177.81
132.13
142.41
155.27
171.83
127.67
137.56
149.93
165.85
123.21
132.70
144.58
159.88
118.74
127.85
139.24
153.90
Revenue in the brewing industry is driven by the number of barrels shipped.
Boston Beer generates over 90% of its revenues from core brand shipments.
These shipments were projected to increase in line with management estimates
of 10-15% in 2013. This growth was then trended down through the projected
period. The resulting number of barrels sold was then multiplied by the average
revenue per barrel to arrive at a total core brand revenues. Management
expressed that average revenue per barrel is project to increase at up to 2% over
the next year. Therefore, this was projected at a conservative 1.5% which was
trended down to just 1% in the terminal year. Non-core brand revenue has not
grown consistently historically; however, it has been decreasing as a percent of
total revenue since 2008. This decrease was built into the projection to end at
roughly 7% of total revenue.
Income Statement
4.0%
200.76
193.94
187.12
180.30
173.48
4.0%
200.76
193.94
187.12
180.30
173.48
4.0%
200.76
193.94
187.12
180.30
173.48
Excise Taxes
As a brewery, the Boston Beer Company must pay excise tax on all alcoholic
beverages it sells. The excise tax rate varies based on the type of alcohol sold
and the state in which it is sold. Excise Taxes was projected as 8% of revenue
going forward which was an average of the last three years.
Cost of Goods Sold
Cost of Goods Sold was projected as a percent of revenue. It is expected that
COGS will fall slightly as a percent of revenue as the company brings its canned
beer to market.
Advertising, Promotion and Selling
Advertising, Promotion and Selling was projected as a percent of revenue. The
beer industry requires extensive advertising expenses and as a result the expense
was projected to stay constant as a percent of revenue.
General and Administrative
General and Administrative expense was projected as a percent of revenue. It is
projected to fall from 8% of revenue to 7.5% of revenue as revenue growth
outpaces salary and benefit costs.
Tax Rate
The tax rate was projected per management guidance. Management expects tax
rates to fall from the current level of 38% down to 35%.
UOIG 11
May 10th, 2013
University of Oregon Investment Group
Terminal Year
tax rate
Cash Flows Statement
150
34.00%
34.50%
35.00%
35.50%
36.00%
Implied Price
Terminal Growth Rate
2.0%
2.5%
3.0%
3.5%
129.94
140.02
152.64
168.89
128.80
138.79
151.29
167.37
127.67
137.56
149.93
165.85
126.54
136.33
148.57
164.34
125.40
135.09
147.22
162.82
The Cash flows statement is used to most accurately predict cash for the
company in the future. It ensures that the projections made are possible for the
firm without taking on additional debt.
4.0%
190.58
188.85
187.12
185.39
183.66
Share Repurchases
Share repurchases were held constant at $50,000 a year, the average of the last
three years. While management did not give specific guidance as to the size of
the future repurchases, they said they would continue to return as much cash to
shareholders as possible.
Balance Sheet
Current Assets
Accounts Receivable
Accounts Receivable was projected using the days receivable outstanding ratio.
Following management’s guidance the ratio stayed level from 2012 onward.
WACC
Implied Price
Terminal Growth Rate
der doing an intermediate150
growth rate
2.0%
2.5%
3.0%
3.5%
4.81%
130.13
140.02
152.39
168.32
5.31%
128.88
138.77
151.14
167.06
5.81%
127.67
137.56
149.93
165.85
6.31%
126.51
136.40
148.77
164.69
6.81%
125.39
135.28
147.65
163.57
4.0%
189.58
188.33
187.12
185.96
184.84
Inventory
Management indicated that
inventory control was one of its top priorities going
Undervalued/(Overvalued)
Rate
forward. Inventory was projected Terminal
using Growth
the inventory
turnover ratio which is
projected to increase going into 2017.
Prepaid and Deferred Expenses
Prepaid expense and deferred income taxes were projected using trends of
historical data and the percent of revenue method.
Non-Current Assets
Property, Plant and Equipment
Since expanding in 2008, PP&E has been approximately 30% of revenue. This
level was projected to stay constant going forward.
Terminal WACC
Depreciation and Amortization
Depreciation and Amortization was projected off historical trends to be 12% of
beginning PP&E.
150
5.98%
6.48%
Implied Price
Terminal Growth Rate
2.0%
2.5%
3.0%
3.5%
159.30
176.63
199.77
232.24
141.60
154.51
171.12
193.30
4.0%
281.09
224.42
6.98%
127.67
137.56
149.93
165.85
187.12
7.48%
7.98%
116.46
107.29
124.22
113.48
133.70
120.92
145.56
130.01
160.83
141.39
Undervalued/(Overvalued)
Purchase of PP&E
Terminal Growth Rate
Purchase of PP&E was solved for to equilibrate the beginning PP&E balance,
less depreciation, to the ending balance.
Other Assets and Goodwill
Other assets and goodwill were projected as a percent of revenue using historical
trends and management guidance.
Current Liabilities
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses were projected using the days payable
outstanding and days expense outstanding method respectively.
UOIG 12
May 10th, 2013
University of Oregon Investment Group
Current Portion of Notes Payable
The current portion of notes payable was taken from the debt schedule in the
most recent 10-k filing.
Non-Current Liabilities
Figure 23: Beta Calculation
Deferred Income Taxes and Other Liabilities
SAM
1 Year Daily
1 Year Weekly
2 Year Daily
2 Year Weekly
3 Year Daily
3 Year Weekly
4 Year Daily
4 Year Weekly
Average Regressed Beta
Hamada Beta
Boston Beer Company Beta
Beta
0.65
0.47
0.70
0.53
0.75
0.76
0.75
0.74
0.73
0.69
0.71
SD
Weighting Deferred income taxes and other liabilities were projected using the days
0.14 0.00% outstanding method.
0.35 0.00%
0.07 33.33% Notes Payable
0.17 0.00% Notes payable were taken from the debt schedule in the most recent 10-k filing.
0.05 33.33%
0.14 0.00% Stockholders’ Equity
0.05 33.33%
0.12 0.00% Common Stock
0.06 50.00% Common stock was projected to remain unchanged over the next 5 years as the
50.00% effect of the share repurchases will be offset by the exercise of employee stock
options.
Source: UOIG Regressions
Additional Paid-In Capital
Additional paid-in capital was expected to remain unchanged over the next 5
years.
Adjusted Beta
Retained Earnings
Retained earnings was calculated as a result of net income and the retained
earnings schedule shown in Appendix 5.
150
0.61
0.66
0.71
0.76
0.81
Implied Price
Terminal Growth Rate
2.0%
2.5%
3.0%
3.5%
145.23
158.66
176.03
199.36
135.92
147.39
161.97
181.11
127.67
137.56
149.93
165.85
120.32
128.91
139.50
152.91
113.73
121.23
130.38
141.79
Discounted Cash Flow Analysis Assumptions
Undervalued/(Overvalued)
Terminal Growth Rate
4.0%
232.37
207.35
187.12
170.42
156.41
Beta
Beta was estimated as an equally weighted average between a regressed beta and
a Hamada beta. Eight regressions were run using different time frames and
frequencies to compute the regressed beta. Of the eight regressions, the three
with the lowest standard errors were equally weighted. The same individual
regressions were run on the comparable industry companies to compute the
Hamada beta.
Cost of Debt
Cost of Debt was taken from the company’s most recent note which was issued
at 4.25%. Since the company is financed almost entirely by equity, the cost of
debt has a negligible effect on the cost of capital.
Risk-Free Rate
The 10-year U.S Treasury Rate was used as the risk free rate.
The 30-year U.S Treasury Rate was used as the terminal risk free weight.
Figure 24: Intermediate Growth Rate
6.50%
2018E
Intermediate Growth Rate
6.00%
5.50%
5.00%
2019E
2020E
2021E
Source: UOIG Projections
4.50%
2022E
Terminal Growth Rate
A 3.00% terminal growth rate was applied as group standard.
Intermediate Growth Rate
An intermediate growth rate was applied between 2018 and 2022 to bridge the
10.34% free cash flow growth in 2017 and the terminal growth rate of 3%.
Intermediate growth rate started at 6.5% and decreased by 0.5% each year.
UOIG 13
May 10th, 2013
University of Oregon Investment Group
Leveraged Buyout (LBO) Analysis
Assessing Buyout Targets
A large part of the leveraged buyout assumptions were modeled after Taylor
Gentry’s Gardner Denver report; however, many adjustments were made to
improve the model for Boston Beer Company. When screening for buyout
targets multiple requirements were taken into account. First of all, the company
had to be small enough to be reasonably bought out by an average private equity
firm. Additionally, stability of operating cash flows was taken into account in
order to represent the necessity of the purchased company to pay off a large
amount of debt and interest in a short amount of time.
Figure 25: Debt to EBITDA
10.0x
9.0x
8.0x
7.0x
6.0x
Many characteristics of good LBO candidates were not known going into this
report, but were learned throughout the process. These include:
 Amount of Debt to EBITDA that target company can handle
 Large level of operating cash flow capable of paying down debt
 Motivated seller with minimum emotional investment in company
 Ability to realize operating efficiencies and increase profit
simultaneously
 Expansion of multiples during projected period
5.0x
4.0x
3.0x
2.0x
1.0x
0.0x
Source: UOIG Projections
Debt
Typically private equity firms purchase companies with a blend of 70% debt and
30% of their own equity. This is done in order to achieve an internal rate of
return (IRR) of at least 20% which is roughly the industry average IRR. The
firm’s IRR is measured as its returned equity divided by its invested equity, all
minus one. Essentially, a larger amount of debt leads to a higher IRR, because
the company had to invest less of its own equity to purchase the company.
Research resulted in the understanding that a private equity cannot reasonably
purchase the company with more than 7x the target company’s EBITDA. A
level of debt greater than that will be extremely difficult for companies to pay
down over the short 5 year time period and will not be supported by most
investment banks.
Figure 26: Forward LIBOR Curve
3.00%
Common types of debt taken out to purchase companies include large senior
unsecured notes and term loans, a smaller subordinated note, various bonds, and
a revolving line of credit. The debt mix for Boston Beer Company included an
extension of the revolver that is already in place to $100 million. A $1 billion
U.S. term loan and a $300 million subordinated note issued at 8% were also
taken out.
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
2012
2013
2014
2015
Source: Bloomberg
2016
2017
Pricing of the debt was a complex process that was further complicated by the
low interest rate environment of today’s economy. A pool of debt comparables
was created in an attempt to mirror the operations of Boston Beer Company and
ability to pay off its debt and interest. Requirements for debt comparables were
company size, size of debt, maturity date, issuance date, and operational risk of
the company. Due to SAM’s small size and minor debt history, all prices
received a premium to the average prices in order to reflect its lack of credit
history. Additionally, the forward LIBOR curve was taken from Bloomberg in
order to get an estimate of rates going forward. Again, the current low rate
environment is not reasonable for pricing debt. Therefore, after taking the
average prices above LIBOR of the debt comparables, a premium was added to
give a more accurate estimate of debt pricing for Boston Beer Company.
UOIG 14
May 10th, 2013
University of Oregon Investment Group
LBO implementation
Figure 27: Normal vs. LBO Revenue
$1,100,000.0
$1,000,000.0
$900,000.0
$800,000.0
$700,000.0
$600,000.0
$500,000.0
$400,000.0
$300,000.0
2012A
2013E
2014E
Normal Revenue
2015E
2016E
2017E
LBO Revenue
Source: SAM Financials and UOIG Projections
The LBO was conducted by projecting the three statements forward with the
new debt on the books. Analysis of the company’s expenses was then conducted
in order to decide where the most operating efficiencies could be realized. This
is necessary because the new debt and interest must be paid down in the
projected period. Therefore, expenses must be cut in order to support the debt
Advertising, promotional, and selling expenses were cut first followed by a
reduction in general and administrative expenses. Cost of goods sold was also
trended down slightly. Additionally, accounts receivable was reduced to
increase cash assuming that Boston Beer would pressure its clients to pay off
credits quicker. Accounts Payable was also expanded in order to increase cash
assuming that the Company would be able to lean a bit more heavily on its
suppliers during this time period. The above efficiencies resulted in a much
higher cash balance for the company in order to pay off its debt and interest. It is
also important to note that revenues were also trended down in order to reflect
that impact of the decrease in the advertising, selling, and promotional expense.
A purchase premium of 12% was applied in order to reflect the amount above
enterprise value that would be paid in order to purchase all shares outstanding.
This premium represents the percentage undervaluation of the Company on an
LBO basis. A selling price was determined at the end of the period by applying
an exit multiple of 13x to the terminal year EBITDA. Further details of the LBO
and its assumptions can be found in Appendix 12.
LBO Decision
Exit Multiple
IRR
0
11.00x
12.00x
13.00x
14.00x
15.00x
0.0%
20.77%
25.34%
29.45%
33.21%
36.67%
Purchase Premium
6.1%
12.2%
18.3%
15.95%
11.95%
8.56%
20.33%
16.18%
12.67%
24.28%
20.00%
16.37%
27.89%
23.48%
19.75%
31.21%
26.69%
22.86%
24.4%
5.63%
9.63%
13.23%
16.51%
19.54%
The LBO analysis was not weighted in the final valuation for a multitude of
reason. First of all, the amount of debt exceeded the 7x EBITDA limit. In order
to take out the proper 70% debt and 30% equity mix for SAM, a total debt of
11x EBITDA had to be applied. In order to get debt levels down to the right
amount, the ratio of debt to equity would have to be cut to 50:50. This is not
reasonable, as private equity firms are not willing to contribute such a high level
of equity for a deal. This assumption alone invalidates Boston Beer Company as
a reasonable buyout target. Additionally, the Founder’s involvement in the
Company makes it extremely unlikely that he would ever be willing to sell the
company.
Recommendation
Figure 28: Final Implied Price
Final Implied Price
Method:
Implied Price:
DCF
$149.93
Forward Comps
$134.32
LBO
$164.49
Final Implied Price
Current Price
Overvalued
Weight:
80%
20%
0%
$146.81
$147.94
(0.76%)
Source: UOIG Projections
Boston Beer Company is the largest craft brewer in the United States with a
market share of over 19%. Sales are continuing to increase at a rate of XX%
driven by the introduction of new products and the success of national
advertising campaigns. However, it is beginning to face competition from both
the large international brewers and the smaller microbrewers as they attempt to
capture the profitability of the craft brewing sector. Going forward, it is
uncertain how Boston Beer will be able to respond to the increasing competition
within the industry. While we believe that Boston Beer Company is well
managed and well positioned, the increasing competition within the industry
leads us to recommend a Hold for all portfolios with a final implied price of
$146.81.
UOIG 15
May 10th, 2013
University of Oregon Investment Group
Appendix 1 – Comparables Analysis
Comparables Analysis
SAM
Boston Beer Co.
($ in millions)
Stock Characteristics
Current Price
Beta
Max
$147.94
1.07
Min
Size
Short-Term Debt
Long-Term Debt
Cash and Cash Equivalent
Non-Controlling Interest
Preferred Stock
Diluted Basic Shares
Market Capitalization
Enterprise Value
$7.97
0.71
Median
$50.26
0.97
Weight Avg.
$53.38
0.84
$1,245,600.0
3,928,900.0
2,459,700.0
24,700.0
0.0
749,300.0
46,314,233.0
44,409,833.0
$0.0
0.0
5,000.0
0.0
0.0
8,556.9
151,419.3
159,501.3
$642.0
549,600.0
319,556.0
0.0
0.0
165,556.9
9,380,454.1
12,236,114.3
Growth Expectations
% Revenue Growth 2013E
% Revenue Growth 2014E
% EBITDA Growth 2013E
% EBITDA Growth 2014E
% EPS Growth 2013E
% EPS Growth 2014E
74.6%
20.5%
94.3%
18.0%
38.1%
50.5%
9.7%
2.9%
3.2%
6.0%
2.8%
6.3%
Profitability Margins
Gross Margin
EBIT Margin
EBITDA Margin
Net Margin
57.0%
26.8%
29.4%
16.7%
Credit Metrics
Interest Expense
Debt/EV
Leverage Ratio
Interest Coverage Ratio
Operating Results
Revenue
Gross Profit
EBIT
EBITDA
Net Income
Capital Expenditures
Operating Cash Flow
Free Cash Flow
Multiples
EV/Revenue
EV/Gross Profit
EV/EBIT
EV/EBITDA
EV/(EBITDA-Capex)
Price/Operating Cash Flow
Price/Free Cash Flow
Market Cap/Net Income = P/E
Monster
MNST
Beverage
Corp.
TAP
Molson Coors
Brewing Co.
SBUX
Starbucks Corp.
$147.94
0.71
40.00%
$56.66
0.77
25.00%
$49.40
0.76
25.00%
$61.81
0.97
$314,757.1
1,190,092.0
909,022.4
7,600.0
0.0
265,553.6
17,887,376.2
18,490,802.9
$62.0
566.0
74,463.0
0.0
0.0
13,275.3
1,963,884.9
1,890,049.9
$0.0
0.0
319,556.0
0.0
0.0
165,556.9
9,380,454.1
9,060,898.1
$1,245,600.0
3,422,500.0
624,000.0
24,700.0
0.0
8,556.9
8,167,314.3
12,236,114.3
13.1%
11.8%
16.5%
15.3%
21.5%
20.8%
15.8%
10.4%
16.3%
13.6%
17.5%
17.5%
11.1%
10.3%
10.2%
12.5%
9.2%
14.4%
13.1%
13.0%
13.3%
15.3%
20.2%
17.5%
29.6%
3.2%
7.3%
1.7%
39.8%
23.2%
26.9%
11.2%
48.1%
22.0%
25.2%
14.2%
53.3%
15.0%
18.3%
9.3%
227,100.0
0.38
3.57
2,343.84
0.0
0.00
0.00
0.00
32,700.0
0.08
0.96
15.53
0.0
0.12
1.14
951.70
$14,899,896.0
8,489,959.0
2,406,885.0
3,024,441.0
1,654,921.0
1,114,053.0
$185,680.5
54,878.5
6,011.7
13,613.4
3,177.9
9,213.0
$4,445,568.0
1,770,833.0
1,051,480.0
1,307,430.0
546,486.8
219,700.8
2,465,460.0
1,543,012.0
10,105.0
4,129.0
3.89x
7.62x
26.53x
14.82x
36.25x
24.33x
47.22x
47.65x
0.86x
2.91x
11.64x
9.36x
12.13x
8.13x
11.81x
11.14x
STZ
Constellation
Brands Inc.
BREW
Craft Brew
Alliance Inc
5.00%
5.00%
GreenGMCR
Mountain
Coffee Roasters
Inc.
$50.26
1.07
$7.97
1.00
0.00%
$58.26
1.23
$0.0
549,600.0
2,459,700.0
5,700.0
0.0
749,300.0
46,314,233.0
44,409,833.0
$66,500.0
3,928,900.0
200,500.0
0.0
0.0
178,334.3
10,144,735.4
13,939,635.4
$642.0
12,440.0
5,000.0
0.0
0.0
18,998.7
151,419.3
159,501.3
$11,414.0
402,921.0
98,530.0
0.0
9,855.0
148,808.6
8,669,586.6
8,995,246.6
12.0%
11.8%
18.7%
18.0%
21.5%
20.8%
13.5%
2.9%
3.2%
6.0%
2.8%
6.3%
74.6%
20.5%
94.3%
17.7%
28.5%
23.1%
9.7%
10.4%
16.5%
11.3%
38.1%
50.5%
15.9%
13.2%
21.6%
8.0%
17.1%
14.4%
51.4%
26.8%
27.8%
16.7%
39.8%
23.7%
29.4%
16.5%
57.0%
16.2%
20.3%
11.1%
37.4%
23.2%
26.9%
11.2%
29.6%
3.2%
7.3%
1.7%
34.3%
15.7%
20.7%
9.3%
0.0
0.00
0.00
0.00
276.0
0.00
0.00
2,343.84
32,700.0
0.38
3.57
39.98
194,700.0
0.01
0.18
15.53
227,100.0
0.29
3.04
5.78
0.00
0.08
0.96
0.00
0.00
0.05
0.45
0.00
$6,021,844.4
3,138,743.2
1,171,397.3
1,408,062.3
780,382.7
380,988.9
$698,521.3
372,054.4
104,778.2
127,572.0
64,962.5
42,402.2
$2,329,790.0
1,198,400.0
624,661.5
646,900.0
389,540.0
40,700.0
$4,445,568.0
1,770,833.0
1,051,480.0
1,307,430.0
733,412.8
299,000.0
$14,899,896.0
8,489,959.0
2,406,885.0
3,024,441.0
1,654,921.0
1,114,053.0
$4,885,568.0
1,828,825.0
1,132,818.0
1,313,077.0
546,486.8
219,700.8
$185,680.5
54,878.5
6,011.7
13,613.4
3,177.9
9,213.0
$4,474,360.0
1,534,356.0
700,771.5
925,730.0
417,947.0
370,130.3
741,443.2
505,257.7
1,059,234.1
723,389.8
85,620.0
41,589.2
385,500.0
348,200.0
1,004,366.7
691,550.0
2,465,460.0
1,543,012.0
741,443.2
505,257.7
10,105.0
4,129.0
570,651.0
202,303.3
2.85x
6.91x
14.51x
11.72x
14.95x
14.98x
26.94x
24.08x
3.17x
6.59x
15.27x
12.73x
17.27x
17.90x
24.07x
22.72x
Multiple
EV/Revenue
EV/Gross Profit
EV/EBIT
EV/EBITDA
EV/(EBITDA-Capex)
Price/Operating Cash Flow
Price/Free Cash Flow
Market Cap/Net Income = P/E
Price Target
Current Price
Overvalued
2.71x
5.08x
18.04x
14.82x
22.19x
22.94x
47.22x
30.23x
3.89x
7.56x
14.51x
14.01x
14.95x
24.33x
26.94x
24.08x
2.75x
6.91x
11.64x
9.36x
12.13x
8.13x
11.81x
11.14x
2.98x
5.23x
18.45x
14.68x
23.25x
18.79x
30.02x
27.99x
Implied Price
Weight
$172.60
15.00%
$190.14
0.00%
$126.05
15.00%
$127.89
70.00%
$116.38
0.00%
$115.42
0.00%
$75.41
0.00%
$111.20
0.00%
$134.32
147.94
(9.20%)
UOIG 16
2.85x
7.62x
12.31x
10.62x
12.75x
13.68x
20.08x
18.56x
0.86x
2.91x
26.53x
11.72x
36.25x
14.98x
36.67x
47.65x
2.01x
5.86x
12.84x
9.72x
16.19x
15.19x
42.85x
20.74x
May 10th, 2013
University of Oregon Investment Group
Appendix 2 – Discounted Cash Flows Analysis Revenue Model
Revenue Model
($ in thousands)
2007A
2008A
2009A
2010A
2011A
2012A
2013E
2014E
2015E
2016E
2017E
Core Brand Barrels Sold
1,992.0
2,021.0
2,259.0
2,471.0
2,727.0
2,999.7
3,269.7
3,547.6
3,831.4
4,118.8
% Growth
N/A
1.46%
11.78%
9.38%
10.36%
10.00%
9.00%
8.50%
8.00%
7.50%
Revenue Per Barrel
177.07
$195.4
$201.9
$204.8
$207.3
$212.4
$215.6
$218.8
$222.1
$224.8
$227.1
% Growth
10.32%
3.37%
1.43%
1.19%
2.47%
1.50%
1.50%
1.50%
1.25%
1.00%
Total Core Brand Revenue
$389,137.2 $408,120.7 $462,711.0 $512,139.5 $579,133.0 $646,602.0 $715,368.1 $787,817.0 $861,477.9 $935,349.6
% Growth
N/A
4.88%
13.38%
10.68%
13.08%
11.65%
10.64%
10.13%
9.35%
8.57%
% of Total Revenue
89.18%
90.00%
91.47%
91.73%
92.13%
92.57%
92.89%
93.11%
93.21%
93.13%
Total Non-Core Brand Revenue
$60,416.8 $45,325.3 $43,159.0 $46,142.5 $49,447.0 $51,919.4 $54,774.9 $58,335.3 $62,710.4
$68,981.5
% Growth
N/A (24.98%)
(4.78%)
6.91%
7.16%
5.00%
5.50%
6.50%
7.50%
10.00%
% of Total Revenue
13.85%
10.00%
8.53%
8.27%
7.87%
7.43%
7.11%
6.89%
6.79%
6.87%
Less: product recall returns
($13,222.0)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Total Revenue
380575 $436,332.0 $453,446.0 $505,870.0 $558,282.0 $628,580.0 $698,521.3 $770,143.0 $846,152.3 $924,188.3 $1,004,331.1
% Growth
14.65%
3.92%
11.56%
10.36%
12.59%
11.13%
10.25%
9.87%
9.22%
8.67%
Appendix 3 – Discounted Cash Flows Analysis Income Statement
Statement of Operations
($ in thousands)
Revenue
Less Excise Taxes
Net Revenue
Cost of Goods Sold
Gross Profit
Operating Expenses:
Advertising, Promotion and Selling
General and Administrative
Impairment of Long-Lived Assets
Settlement Proceeds
Total Operating Expenses
Operating Income
Other (Expense) Income, Net:
Interest (Expense) Income
Other (Expense) income, Net
Total Other (Expense) Income, Net
Income Before Provision for Income Taxes
Provision for Income Taxes
Net Income
2006 A
2007 A
2008 A
2009 A
2010 A
2011 A
2012 A
2013 E
2014 E
2015 E
2016 E
2017 E
$315,250.0
29,819.0
$285,431.0
121,155.0
$164,276.0
$380,575.0
38,928.0
$341,647.0
152,288.0
$189,359.0
$436,332.0
37,932.0
$398,400.0
214,513.0
$183,887.0
$453,446.0
38,393.0
$415,053.0
201,235.0
$213,818.0
$505,870.0
42,072.0
$463,798.0
207,471.0
$256,327.0
$558,282.0
45,282.0
$513,000.0
228,433.0
$284,567.0
$628,580.0
48,358.0
$580,222.0
265,012.0
$315,210.0
$698,521.3
55,881.7
$642,639.6
293,379.0
$349,260.7
$770,143.0
61,611.4
$708,531.6
321,534.7
$386,996.9
$846,152.3
67,692.2
$778,460.1
351,153.2
$427,306.9
$924,188.3
73,935.1
$850,253.3
381,227.7
$469,025.6
$1,004,331.1
80,346.5
$923,984.6
411,775.8
$512,208.9
113,669.0
22,657.0
0.0
0.0
$136,326.0
$27,950.0
124,457.0
24,574.0
3,443.0
0.0
$152,474.0
$36,885.0
132,901.0
34,988.0
1,936.0
0.0
$169,825.0
$14,062.0
121,560.0
36,938.0
1,049.0
0.0
$159,547.0
$54,271.0
135,737.0
157,261.0
39,112.0
43,485.0
300.0
666.0
0.0 ($20,500.0)
$175,149.0 $180,912.0
$81,178.0 $103,655.0
169,306.0
50,171.0
149.0
0.0
$219,626.0
$95,584.0
188,600.8
207,938.6
55,881.7
60,648.8
0.0
0.0
0.0
0.0
$244,482.5 $268,587.4
$104,778.2 $118,409.5
228,461.1
65,576.8
0.0
0.0
$294,037.9
$133,269.0
249,530.9
70,469.4
0.0
0.0
$320,000.2
$149,025.4
271,169.4
75,324.8
0.0
0.0
$346,494.2
$165,714.6
$3,143.0
673.0
3,816.0
31,766.0
13,574.0
$18,192.0
$4,252.0
507.0
4,759.0
41,644.0
19,153.0
$22,491.0
$1,604.0
174.0
1,778.0
15,840.0
7,752.0
$8,088.0
$112.0
(16.0)
96.0
54,367.0
23,249.0
$31,118.0
$0.0
0.0
0.0
133,269.0
48,643.2
$84,625.8
$0.0
0.0
0.0
149,025.4
53,276.6
$95,748.8
$0.0
0.0
0.0
165,714.6
58,000.1
$107,714.5
$79.0
(149.0)
(70.0)
81,108.0
30,966.0
$50,142.0
$54.0
(209.0)
(155.0)
103,500.0
37,441.0
$66,059.0
$31.0
(98.0)
(67.0)
95,517.0
36,050.0
$59,467.0
UOIG 17
$0.0
0.0
0.0
104,778.2
39,815.7
$64,962.5
$0.0
0.0
0.0
118,409.5
44,107.5
$74,302.0
May 10th, 2013
University of Oregon Investment Group
Appendix 4 – Discounted Cash Flows Analysis Statement of Cash Flows
Statement of Cash Flows
($ in thousands)
Cash Flow Provided by Operating Activities:
Net Income
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation and Amortization
Impairment of Long-Lived Assets
Loss on Disposal of PP&E
Stock Based Compensation Expense
Excess Tax Benefit from Stock Based Compensation Arrangements
Deffered Income Taxes
Purchase of Trading Securities
Procedes from Sale of Trading Securities
Changes in Operating Assets and Liabilities:
Accounts Receivable
Inventories
Prepaid Expenses and Other Assets
Accounts Payable
Accrued Expenses and Other Current Liabilities
Other Liabilities
Net Cash Provided by Operating Activities
Cash Flow Used in Investing Activities:
Purchases of Property, Plant and Equipment
Cash Paid for Acquisition of Brewery Assets
Increase in Restricted Cash
Proceeds from Disposal of Property, Pland and Equipment
Net Cash used in Investing Activities
Cash Flow Used in Financing Activities:
Repurchase of Class A Common Stock
Proceeds from Exercise of Stock Options
Proceeds from Note Payable
Excess Tax Benefit from Stock Based Compensation Arrangements
Net Proceeds from Sale of Investment Shares
Net Cash used in Financing Activities
Change in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year
Cash Equivalents at End of Year
2006 A
2007 A
$18,192.0
$22,491.0
4,991.0
0.0
(8.0)
2,751.0
(2,240.0)
(731.0)
(36,577.0)
39,779.0
(8,343.0)
(3,385.0)
(1,506.0)
6,564.0
7,807.0
1,576.0
$28,977.0
2009 A
2010 A
2011 A
2012 A
2013 E
2014 E
2015 E
2016 E
2017 E
$8,088.0
$31,118.0
$50,142.0
$66,059.0
$59,467.0
$64,962.5
$74,302.0
$84,625.8
$95,748.8
$107,714.5
6,654.0
3,443.0
161.0
3,058.0
(1,792.0)
(1,702.0)
(47,520.0)
50,543.0
12,503.0
1,936.0
119.0
4,148.0
(4,065.0)
7,758.0
0.0
16,200.0
16,919.0
1,049.0
25.0
4,106.0
(1,640.0)
2,131.0
0.0
0.0
17,427.0
300.0
64.0
3,124.0
(3,014.0)
4,425.0
0.0
0.0
18,792.0
666.0
118.0
6,178.0
(5,346.0)
(453.0)
0.0
0.0
20,208.0
149.0
54.0
6,528.0
(7,894.0)
2,066.0
0.0
0.0
22,793.8
0.0
0.0
0.0
0.0
2,061.8
0.0
0.0
25,146.8
0.0
0.0
0.0
0.0
1,754.7
0.0
0.0
27,725.1
0.0
0.0
0.0
0.0
1,862.2
0.0
0.0
30,461.5
0.0
0.0
0.0
0.0
1,911.9
0.0
0.0
33,270.8
0.0
0.0
0.0
0.0
1,963.5
0.0
0.0
(236.0)
(1,056.0)
963.0
(234.0)
19,521.0
(534.0)
$53,794.0
(142.0)
(4,618.0)
(8,875.0)
2,495.0
4,405.0
(167.0)
$39,842.0
177.0
(2,850.0)
6,483.0
5,052.0
3,398.0
(427.0)
$65,565.0
(2,146.0)
(1,056.0)
(3,950.0)
(5,832.0)
7,340.0
1,021.0
$67,830.0
(3,161.0)
(7,458.0)
(2,146.0)
(617.0)
894.0
(711.0)
$72,760.0
(8,305.0)
(10,289.0)
6,123.0
8,002.0
19,491.0
(329.0)
$95,330.0
(3,506.1)
(3,640.1)
(4,535.5)
(3,088.2)
(7,342.4)
(1,432.4)
1,384.2
3,043.9
9,323.1
7,162.2
419.6
501.4
$85,620.0 $103,809.2
(3,859.5)
(3,015.2)
(1,520.2)
3,230.4
7,600.9
532.1
$117,240.7
(3,960.8)
(2,761.9)
(1,560.7)
3,316.5
7,803.6
546.3
$131,564.2
(4,066.1)
(4,004.6)
(1,602.9)
895.2
8,014.3
561.0
$142,804.7
(9,056.0) (25,607.0)
(59,539.0) (16,997.0) (13,608.0) (19,599.0) (66,010.0) (42,402.2) (46,633.3) (50,527.9) (53,872.3)
0.0 (11,507.0)
(44,960.0)
0.0
0.0
0.0
(1,726.0)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(628.0)
0.0
0.0
0.0
0.0
42.0
5.0
11.0
8.0
20.0
0.0
41.0
0.0
0.0
0.0
0.0
($9,014.0) ($37,109.0) ($104,488.0) ($16,989.0) ($13,588.0) ($19,599.0) ($67,323.0) ($42,402.2) ($46,633.3) ($50,527.9) ($53,872.3)
(57,313.6)
0.0
0.0
0.0
($57,313.6)
($5,288.0)
4,500.0
0.0
2,240.0
216.0
$1,668.0
$21,631.0
41,516.0
$63,147.0
($50,000.0)
0.0
(77.0)
0.0
0.0
($50,077.0)
$35,414.1
118,968.4
$154,382.5
($6,084.0)
3,448.0
0.0
1,792.0
301.0
($543.0)
$16,142.0
63,147.0
$79,289.0
2008 A
($15,324.0)
5,274.0
0.0
4,065.0
416.0
($5,569.0)
($70,215.0)
79,289.0
$9,074.0
($7,080.0) ($67,981.0) ($62,824.0) ($18,046.0) ($50,000.0) ($50,000.0) ($50,000.0) ($50,000.0)
2,806.0
3,661.0
4,107.0
5,727.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
628.0
(62.0)
(77.0)
(77.0)
(77.0)
1,640.0
3,014.0
5,346.0
7,894.0
0.0
0.0
0.0
0.0
465.0
552.0
691.0
803.0
0.0
0.0
0.0
0.0
($2,169.0) ($60,754.0) ($52,680.0) ($2,994.0) ($50,062.0) ($50,077.0) ($50,077.0) ($50,077.0)
$46,407.0 ($6,512.0)
$481.0
$25,013.0 ($6,844.2)
$7,098.9
$16,635.7
$27,614.9
9,074.0
55,481.0
48,969.0
49,450.0
74,463.0
67,618.8
74,717.8
91,353.5
$55,481.0
$48,969.0 $49,450.0
$74,463.0
$67,618.8 $74,717.8
$91,353.5 $118,968.4
UOIG 18
May 10th, 2013
University of Oregon Investment Group
Appendix 5 – Discounted Cash Flows Analysis Balance Sheet and Schedule of Retained Earnings
Balance Sheet
($ in thousands)
Assets
Current Assets
Cash and Cash Equivalents
Short-Term Investments
Accounts Receivable, Net
Inventories
Prepaid Expense & Other
Deferred Income Taxes
Total Current Assets
Non-Current Assets
Property, Plant and Equipment, Net
Other Assets
Goodwill
Total Assets
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable
Current Portion of Notes Payable
Accrued Expenses and Other
Total Current Liabilities
Non-Current Liabilities
Deferred Income Taxes
Note Payable, Less Current Portion
Other Liabilities
Total Liabilities
Commitments and Contingencies
Stockholders' Equity
Class A Common Stock
Class B Common Stock
Additional Paid-In Capital
Accumulated Other Comprehensive Loss, Net of Tax
Retained Earnings
Total Stockholders' Equity
Total Liabilities and Stockholders' Equity
Retained Earnings Statement
($ in thousands)
Beginning Retained Earnings
Net Income
Less: Share Repurchases
Less: Change in Common Stock
Ending Retained Earnings
2006 A
2007 A
2008 A
2009 A
2010 A
2011 A
2012 A
2013 E
2014 E
2015 E
2016 E
2017 E
$63,147.0
19,223.0
17,770.0
17,034.0
2,721.0
667.0
$120,562.0
$79,289.0
16,200.0
17,972.0
18,090.0
4,252.0
2,090.0
$137,893.0
$9,074.0
0.0
18,057.0
22,708.0
16,281.0
2,734.0
$68,854.0
$55,481.0
0.0
17,856.0
25,558.0
9,710.0
4,425.0
$113,030.0
$48,969.0
0.0
20,017.0
26,614.0
12,756.0
3,648.0
$112,004.0
$49,450.0
0.0
23,233.0
34,072.0
14,605.0
4,363.0
$125,723.0
$74,463.0
0.0
31,479.0
44,361.0
6,628.0
5,411.0
$162,342.0
$67,618.8
0.0
34,926.1
48,896.5
13,970.4
5,588.2
$171,000.0
$74,717.8
0.0
38,507.2
51,984.7
15,402.9
6,161.1
$186,773.6
$91,353.5
0.0
42,307.6
54,999.9
16,923.0
6,769.2
$212,353.3
$118,968.4
0.0
46,209.4
57,761.8
18,483.8
7,393.5
$248,816.8
$154,382.5
0.0
50,216.6
61,766.4
20,086.6
8,034.6
$294,486.7
30,699.0
1,837.0
1,377.0
$154,475.0
46,198.0
12,487.0
1,377.0
$197,955.0
147,920.0
1,606.0
1,377.0
$219,757.0
147,021.0
1,508.0
1,377.0
$262,936.0
142,889.0
2,260.0
1,377.0
$258,530.0
143,586.0
1,802.0
1,377.0
$272,488.0
189,948.0
4,656.0
2,538.0
$359,484.0
209,556.4
4,656.0
2,538.0
$387,750.4
231,042.9
4,656.0
2,538.0
$425,010.5
253,845.7
4,656.0
2,538.0
$473,393.0
277,256.5
4,656.0
2,538.0
$533,267.3
301,299.3
4,656.0
2,538.0
$602,980.0
$17,942.0
0.0
22,928.0
$40,870.0
$17,708.0
0.0
42,449.0
$60,157.0
$20,203.0
0.0
46,854.0
$67,057.0
$25,255.0
0.0
48,531.0
$73,786.0
$19,423.0
0.0
52,776.0
$72,199.0
$18,806.0
0.0
48,243.0
$67,049.0
$28,303.0
62.0
60,529.0
$88,894.0
$29,687.2
77.0
69,852.1
$99,616.3
$32,731.1
77.0
77,014.3
$109,822.4
$35,961.5
77.0
84,615.2
$120,653.7
$39,278.0
77.0
92,418.8
$131,773.8
$40,173.2
77.0
100,433.1
$140,683.4
$1,494.0
0.0
3,522.0
$45,886.0
$1,215.0
0.0
2,995.0
$64,367.0
$9,617.0
0.0
3,055.0
$79,729.0
$13,439.0
0.0
2,556.0
$89,781.0
$17,087.0
0.0
3,656.0
$92,942.0
$17,349.0
0.0
3,345.0
$87,743.0
$20,463.0
566.0
4,470.0
$114,393.0
$22,701.9
489.0
4,889.6
$127,696.9
$25,029.6
412.0
5,391.0
$140,655.0
$27,499.9
335.0
5,923.1
$154,411.7
$30,036.1
258.0
6,469.3
$168,537.3
$32,640.8
181.0
7,030.3
$180,535.4
$100.0
41.0
80,158.0
(197.0)
28,487.0
$108,589.0
$154,475.0
$101.0
41.0
88,754.0
(204.0)
44,896.0
$133,588.0
$197,955.0
$101.0
41.0
102,653.0
(431.0)
37,664.0
$140,028.0
$219,757.0
$101.0
41.0
111,668.0
(359.0)
61,704.0
$173,155.0
$262,936.0
$93.0
41.0
122,016.0
(438.0)
43,876.0
$165,588.0
$258,530.0
$87.0
41.0
138,336.0
(838.0)
47,119.0
$184,745.0
$272,488.0
$87.0
41.0
157,305.0
(883.0)
88,541.0
$245,091.0
$359,484.0
$87.0
41.0
157,305.0
(883.0)
103,503.5
$260,053.5
$387,750.4
$87.0
41.0
157,305.0
(883.0)
127,805.4
$284,355.4
$425,010.5
$87.0
41.0
157,305.0
(883.0)
162,431.2
$318,981.2
$473,393.0
$87.0
41.0
157,305.0
(883.0)
208,180.0
$364,730.0
$533,267.3
$87.0
41.0
157,305.0
(883.0)
265,894.6
$422,444.6
$602,980.0
2006 A
$15,581.0
18,192.0
5,288.0
2.0
$28,487.0
2007 A
$28,487.0
22,491.0
6,084.0
2.0
$44,896.0
2008 A
$44,896.0
8,088.0
15,324.0
4.0
$37,664.0
2009 A
$37,664.0
31,118.0
7,080.0
2.0
$61,704.0
2010 A
$61,704.0
50,142.0
67,981.0
11.0
$43,876.0
2011 A
$43,876.0
66,059.0
62,824.0
8.0
$47,119.0
2012 A
$47,119.0
59,467.0
18,046.0
1.0
$88,541.0
2013 E
2014 E
$88,541.0 $103,503.5
64,962.5
74,302.0
50,000.0
50,000.0
0.0
0.0
$103,503.5 $127,805.4
2015 E
$127,805.4
84,625.8
50,000.0
0.0
$162,431.2
2016 E
$162,431.2
95,748.8
50,000.0
0.0
$208,180.0
2017 E
$208,180.0
107,714.5
50,000.0
0.0
$265,894.6
UOIG 19
May 10th, 2013
University of Oregon Investment Group
Appendix 6 – Discounted Cash Flows Analysis
Discounted Cash Flow Analysis
($ in millions)
2006A
2007A
2008A
2009A
2010A
Total Revenue
$315,250.0 $380,575.0 $436,332.0 $453,446.0 $505,870.0
% YoY Growth
20.72%
14.65%
3.92%
11.56%
Excise Taxes
29,819.0
38,928.0
37,932.0
38,393.0
42,072.0
% Revenue
9.46%
10.23%
8.69%
8.47%
8.32%
Net Revenue
285,431.0 341,647.0 398,400.0 415,053.0 463,798.0
% YoY Growth
19.70%
16.61%
4.18%
11.74%
Cost of Goods Sold
116,164.0 145,634.0 202,010.0 184,316.0 190,044.0
% Revenue
36.85%
38.27%
46.30%
40.65%
37.57%
Gross Profit
$169,267.0 $196,013.0 $196,390.0 $230,737.0 $273,754.0
Gross Margin
53.69%
51.50%
45.01%
50.89%
54.12%
Advertising Promotion and Selling
$113,669.0 $124,457.0 $132,901.0 $121,560.0 $135,737.0
% Revenue
36.06%
32.70%
30.46%
26.81%
26.83%
Depreciation and Amortization
4,991.0
6,654.0
12,503.0
16,919.0
17,427.0
% Revenue
1.58%
1.75%
2.87%
3.73%
3.44%
General and Administrative
22,657.0
24,574.0
34,988.0
36,938.0
39,112.0
% Revenue
7.19%
6.46%
8.02%
8.15%
7.73%
Impairment of Long Lived Assets
0.0
3,443.0
1,936.0
1,049.0
300.0
% Revenue
0.00%
0.90%
0.44%
0.23%
0.06%
Settlement Loss (Procedes)
0.0
0.0
0.0
0.0
0.0
% Revenue
0.00%
0.00%
0.00%
0.00%
0.00%
Earnings Before Interest & Taxes
$27,950.0 $36,885.0 $14,062.0 $54,271.0 $81,178.0
% Revenue
8.87%
9.69%
3.22%
11.97%
16.05%
Interest (Expense) Income
$3,143.0
$4,252.0
$1,604.0
$112.0
$79.0
% Revenue
1.00%
1.12%
0.37%
0.02%
0.02%
Other (Expense) Income, Net
673.0
507.0
174.0
($16.0)
($149.0)
% Revenue
0.21%
0.13%
0.04%
0.00%
-0.03%
Earnings Before Taxes
31,766.0
41,644.0
15,840.0
54,367.0
81,108.0
% Revenue
10.08%
10.94%
3.63%
11.99%
16.03%
Less Taxes (Benefits)
13,574.0
19,153.0
7,752.0
23,249.0
30,966.0
Tax Rate
48.57%
51.93%
55.13%
42.84%
38.15%
Net Income
$18,192.0 $22,491.0
$8,088.0 $31,118.0 $50,142.0
Net Margin
5.77%
5.91%
1.85%
6.86%
9.91%
Add Back: Depreciation and Amortization
$4,991.0
$6,654.0 $12,503.0 $16,919.0 $17,427.0
Add Back: Interest Expense*(1-Tax Rate)
0.0
0.0
0.0
Operating Cash Flow
$23,183.0 $29,145.0 $20,591.0 $48,037.0 $67,569.0
% Revenue
7.35%
7.66%
4.72%
10.59%
13.36%
Current Assets
$38,192.0 $42,404.0 $59,780.0 $57,549.0 $63,035.0
% Revenue
12.11%
11.14%
13.70%
12.69%
12.46%
Current Liabilities
40,870.0
60,157.0
67,057.0
73,786.0
72,199.0
% Revenue
12.96%
15.81%
15.37%
16.27%
14.27%
Net Working Capital
($2,678.0) ($17,753.0) ($7,277.0) ($16,237.0) ($9,164.0)
% Revenue
-0.85%
-4.66%
-1.67%
-3.58%
-1.81%
Change in Working Capital
(15,075.0)
10,476.0
(8,960.0)
7,073.0
Capital Expenditures
9,056.0
25,607.0
59,539.0
16,997.0 `` 13,608.0
% Revenue
2.87%
6.73%
13.65%
3.75%
2.69%
Acquisitions
0.0
11,507.0
44,960.0
0.0
0.0
% Revenue
0.00%
3.02%
10.30%
0.00%
0.00%
Unlevered Free Cash Flow
$2,347.0 ($96,162.0) $39,904.0 $46,958.0
Discounted Free Cash Flow
EBITDA
EBITDA Margin
EBITDA Growth
$32,941.0
10.45%
$43,539.0
11.44%
32.17%
$26,565.0
6.09%
-38.99%
$71,190.0
15.70%
167.98%
2011A
$558,282.0
10.36%
45,282.0
8.11%
513,000.0
10.61%
209,641.0
37.55%
$303,359.0
54.34%
$157,261.0
28.17%
18,792.0
3.37%
43,485.0
7.79%
666.0
0.12%
(20,500.0)
-3.67%
$103,655.0
18.57%
$54.0
0.01%
($209.0)
-0.04%
103,500.0
18.54%
37,441.0
36.12%
$66,059.0
11.83%
$18,792.0
0.0
$84,851.0
15.20%
$76,273.0
13.66%
67,049.0
12.01%
$9,224.0
1.65%
18,388.0
19,599.0
3.51%
0.0
0.00%
$47,019.0
2012A
$628,580.0
12.59%
48,358.0
7.69%
580,222.0
13.10%
244,804.0
38.95%
$335,418.0
53.36%
$169,306.0
26.93%
20,208.0
3.21%
50,171.0
7.98%
149.0
0.02%
0.0
0.00%
$95,584.0
15.21%
$31.0
0.00%
($98.0)
-0.02%
95,517.0
15.20%
36,050.0
37.72%
$59,467.0
9.46%
$20,208.0
0.0
$79,675.0
12.68%
$87,879.0
13.98%
88,894.0
14.14%
($1,015.0)
-0.16%
(10,239.0)
66,010.0
10.50%
1,726.0
0.27%
$22,245.0
2013E
$698,521.3
11.13%
55,881.7
8.00%
642,639.6
10.76%
270,585.2
42.00%
$372,054.4
53.26%
$188,600.8
27.00%
22,793.8
3.26%
55,881.7
8.00%
0.0
0.00%
0.0
0.00%
$104,778.2
15.00%
$0.0
0.00%
0.0
0.00%
104,778.2
15.00%
39,815.7
38.00%
$64,962.5
9.30%
$22,793.8
0.0
$87,756.2
12.56%
$103,381.2
14.80%
99,616.3
14.26%
$3,764.9
0.54%
3,764.9
42,402.2
6.07%
0.0
0.00%
$41,589.2
$39,307.7
2014E
$770,143.0
10.25%
61,611.4
8.00%
708,531.6
10.25%
296,387.9
41.75%
$412,143.6
53.52%
$207,938.6
27.00%
25,146.8
3.27%
60,648.8
7.88%
0.0
0.00%
0.0
0.00%
$118,409.5
15.38%
$0.0
0.00%
0.0
0.00%
118,409.5
15.38%
44,107.5
37.25%
$74,302.0
9.65%
$25,146.8
0.0
$99,448.7
12.91%
$112,055.8
14.55%
109,822.4
14.26%
$2,233.4
0.29%
(1,531.4)
46,633.3
6.06%
0.0
0.00%
$54,346.9
$48,547.7
2015E
$846,152.3
9.87%
67,692.2
8.00%
778,460.1
9.87%
323,428.1
41.50%
$455,032.1
53.78%
$228,461.1
27.00%
27,725.1
3.28%
65,576.8
7.75%
0.0
0.00%
0.0
0.00%
$133,269.0
15.75%
$0.0
0.00%
0.0
0.00%
133,269.0
15.75%
48,643.2
36.50%
$84,625.8
10.00%
$27,725.1
0.0
$112,351.0
13.28%
$120,999.8
14.30%
120,653.7
14.26%
$346.1
0.04%
(1,887.4)
50,527.9
5.97%
0.0
0.00%
$63,710.4
$53,790.0
2016E
2017E
$924,188.3 $1,004,331.1
9.22%
8.67%
73,935.1
80,346.5
8.00%
8.00%
850,253.3
923,984.6
9.22%
8.67%
350,766.2
378,505.0
41.25%
41.00%
$499,487.1 $545,479.6
54.05%
54.31%
$249,530.9 $271,169.4
27.00%
27.00%
30,461.5
33,270.8
3.30%
3.31%
70,469.4
75,324.8
7.63%
7.50%
0.0
0.0
0.00%
0.00%
0.0
0.0
0.00%
0.00%
$149,025.4 $165,714.6
16.13%
16.50%
$0.0
$0.0
0.00%
0.00%
0.0
0.0
0.00%
0.00%
149,025.4
165,714.6
16.13%
16.50%
53,276.6
58,000.1
35.75%
35.00%
$95,748.8 $107,714.5
10.36%
10.73%
$30,461.5
$33,270.8
0.0
0.0
$126,210.3 $140,985.3
13.66%
14.04%
$129,848.5 $140,104.2
14.05%
13.95%
131,773.8
140,683.4
14.26%
14.01%
($1,925.4)
($579.2)
-0.21%
-0.06%
(2,271.5)
1,346.2
53,872.3
57,313.6
5.83%
5.71%
0.0
0.0
0.00%
0.00%
$74,609.4
$82,325.5
$59,536.3
$62,089.7
$98,605.0 $122,447.0 $115,792.0 $127,572.0 $143,556.3 $160,994.1 $179,486.9
19.49%
21.93%
18.42%
18.26%
18.64%
19.03%
19.42%
38.51%
24.18%
-5.44%
10.17%
12.53%
12.15%
11.49%
$198,985.4
19.81%
10.86%
UOIG 20
May 10th, 2013
University of Oregon Investment Group
Appendix 7 – Discounted Cash Flows Assumption
Discounted Free Cash Flow Assumptions
Tax Rate
35.00% Terminal Growth Rate
Considerations
3.00%
Risk Free Rate
1.74% Terminal Value
2,783,150
Terminal Risk Free Rate
2.91% PV of Terminal Value
1,417,259
Beta
Market Risk Premium
% Equity
0.71 Sum of PV Free Cash Flows
573,730
5.71% Firm Value
1,990,989
99.97% Total Debt
628
% Debt
0.03% Cash & Cash Equivalents
Cost of Debt
4.25% Market Capitalization
1,990,361
74,463
CAPM
5.81% Fully Diluted Shares
13,275,323
WACC
5.81% Implied Price
$149.93
Terminal CAPM
6.98% Current Price
$147.94
Terminal WACC
6.98% Undervalued
1.35%
Appendix 8 – Leveraged Buyout Analysis Revenue Model
LBO Revenue Model
($ in thousands)
2007A
2008A
2009A
2010A
2011A
2012A
2013E
2014E
2015E
2016E
2017E
Core Brand Barrels Sold
1,992.0
2,021.0
2,259.0
2,471.0
2,727.0
2,958.8
3,180.7
3,387.5
3,572.1
3,731.0
% Growth
N/A
1.46%
11.78%
9.38%
10.36%
8.50%
7.50%
6.50%
5.45%
4.45%
Revenue Per Barrel
177.07
$195.4
$201.9
$204.8
$207.3
$212.4
$215.6
$218.8
$222.1
$224.8
$227.1
% Growth
10.32%
3.37%
1.43%
1.19%
2.47%
1.50%
1.50%
1.50%
1.25%
1.00%
Total Core Brand Revenue
$389,137.2 $408,120.7 $462,711.0 $512,139.5 $579,133.0 $637,784.7 $695,902.8 $752,253.5 $803,167.0 $847,297.0
% Growth
N/A
4.88%
13.38%
10.68%
13.08%
10.13%
9.11%
8.10%
6.77%
5.49%
% of Total Revenue
89.18%
90.00%
91.47%
91.73%
92.13%
92.48%
92.72%
92.85%
92.85%
92.72%
Total Non-Core Brand Revenue
$60,416.8 $45,325.3 $43,159.0 $46,142.5 $49,447.0 $51,845.2 $54,670.8 $57,951.0 $61,862.7 $66,502.4
% Growth
N/A (24.98%)
(4.78%)
6.91%
7.16%
4.85%
5.45%
6.00%
6.75%
7.50%
% of Total Revenue
13.85%
10.00%
8.53%
8.27%
7.87%
7.52%
7.28%
7.15%
7.15%
7.28%
Less: product recall returns
($13,222.0)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Total Revenue
380575 $436,332.0 $453,446.0 $505,870.0 $558,282.0 $628,580.0 $689,629.9 $750,573.6 $810,204.5 $865,029.7 $913,799.4
% Growth
14.65%
3.92%
11.56%
10.36%
12.59%
9.71%
8.84%
7.94%
6.77%
5.64%
UOIG 21
May 10th, 2013
University of Oregon Investment Group
Appendix 9 – Leveraged Buyout Analysis Income Statement
Statement of Operations
($ in thousands)
Revenue
Less Excise Taxes
Net Revenue
Cost of Goods Sold
Gross Profit
Operating Expenses:
Advertising, Promotion and Selling
General and Administrative
Impairment of Long-Lived Assets
Settlement Proceeds
Total Operating Expenses
Operating Income
Other (Expense) Income, Net:
Interest (Expense) Income
Other (Expense) income, Net
Total Other (Expense) Income, Net
Income Before Provision for Income Taxes
Provision for Income Taxes
Net Income
2013 E
2014 E
2015 E
2016 E
2017 E
$315,250.0
29,819.0
$285,431.0
121,155.0
$164,276.0
2006 A
$380,575.0
38,928.0
$341,647.0
152,288.0
$189,359.0
2007 A
$436,332.0
37,932.0
$398,400.0
214,513.0
$183,887.0
2008 A
$453,446.0
38,393.0
$415,053.0
201,235.0
$213,818.0
2009 A
$505,870.0
42,072.0
$463,798.0
207,471.0
$256,327.0
2010 A
$558,282.0
45,282.0
$513,000.0
228,433.0
$284,567.0
2011 A
$628,580.0
48,358.0
$580,222.0
265,012.0
$315,210.0
2012 A
$689,629.9
55,170.4
$634,459.5
286,196.4
$348,263.1
$750,573.6
60,045.9
$690,527.7
307,735.2
$382,792.5
$810,204.5
64,816.4
$745,388.2
328,132.8
$417,255.3
$865,029.7
69,202.4
$795,827.3
346,011.9
$449,815.4
$913,799.4
73,104.0
$840,695.5
360,950.8
$479,744.7
113,669.0
22,657.0
0.0
0.0
$136,326.0
$27,950.0
124,457.0
24,574.0
3,443.0
0.0
$152,474.0
$36,885.0
132,901.0
34,988.0
1,936.0
0.0
$169,825.0
$14,062.0
121,560.0
36,938.0
1,049.0
0.0
$159,547.0
$54,271.0
135,737.0
39,112.0
300.0
0.0
$175,149.0
$81,178.0
157,261.0
43,485.0
666.0
(20,500.0)
$180,912.0
$103,655.0
169,306.0
50,171.0
149.0
0.0
$219,626.0
$95,584.0
182,751.9
51,722.2
0.0
0.0
$234,474.2
$113,788.9
195,149.1
52,540.1
0.0
0.0
$247,689.3
$135,103.2
206,602.2
52,663.3
0.0
0.0
$259,265.5
$157,989.9
216,257.4
51,901.8
0.0
0.0
$268,159.2
$181,656.2
223,880.9
50,259.0
0.0
0.0
$274,139.8
$205,604.9
$3,143.0
673.0
3,816.0
31,766.0
13,574.0
$18,192.0
$4,252.0
507.0
4,759.0
41,644.0
19,153.0
$22,491.0
$1,604.0
174.0
1,778.0
15,840.0
7,752.0
$8,088.0
$112.0
(16.0)
96.0
54,367.0
23,249.0
$31,118.0
$79.0
(149.0)
(70.0)
81,108.0
30,966.0
$50,142.0
$54.0
(209.0)
(155.0)
103,500.0
37,441.0
$66,059.0
$31.0
(98.0)
(67.0)
95,517.0
36,050.0
$59,467.0
($61,790.0)
0.0
(61,790.0)
51,998.9
43,239.8
$8,759.1
($61,667.0)
0.0
(61,667.0)
73,436.2
51,339.2
$22,097.0
($63,878.0)
0.0
(63,878.0)
94,111.9
60,036.2
$34,075.7
($67,537.5)
0.0
(67,537.5)
114,118.7
69,029.4
$45,089.4
($70,947.0)
0.0
(70,947.0)
134,657.9
78,129.8
$56,528.0
UOIG 22
May 10th, 2013
University of Oregon Investment Group
Appendix 10 – Leveraged Buyout Analysis Statement of Cash Flows
Statement of Cash Flows
($ in thousands)
Cash Flow Provided by Operating Activities:
Net Income
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation and Amortization
Impairment of Long-Lived Assets
Loss on Disposal of PP&E
Bad Debt Expense
Stock Based Compensation Expense
Excess Tax Benefit from Stock Based Compensation Arrangements
Deffered Income Taxes
Purchase of Trading Securities
Procedes from Sale of Trading Securities
Changes in Operating Assets and Liabilities:
Accounts Receivable
Inventories
Prepaid Expenses and Other Assets
Accounts Payable
Accrued Expenses and Other Current Liabilities
Other Liabilities
Net Cash Provided by Operating Activities
Cash Flow Used in Investing Activities:
Purchases of Property, Plant and Equipment
Cash Paid for Acquisition of Brewery Assets
Increase in Restricted Cash
Proceeds from Disposal of Property, Pland and Equipment
Net Cash used in Investing Activities
Cash Flow Used in Financing Activities:
Repurchase of Class A/B Common Stock
Proceeds from Exercise of Stock Options
Proceeds from Note Payable
Excess Tax Benefit from Stock Based Compensation Arrangements
Net Proceeds from Sale of Investment Shares
Debt Issuance Fees
Payments to Acquire and Retire Common Stock
Net Cash used in Financing Activities
Change in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year
Cash Equivalents at End of Year
2006 A
2007 A
$18,192.0
$22,491.0
4,991.0
0.0
($8.0)
107.0
2,751.0
($2,240.0)
($731.0)
($36,577.0)
39,779.0
2008 A
2009 A
2010 A
2011 A
2012 A
2013 E
$8,088.0
$31,118.0
$50,142.0
$66,059.0
$59,467.0
$8,759.1
$22,097.0
$34,075.7
$45,089.4
$56,528.0
6,654.0
3,443.0
161.0
34.0
3,058.0
(1,792.0)
(1,702.0)
(47,520.0)
50,543.0
12,503.0
1,936.0
119.0
57.0
4,148.0
(4,065.0)
7,758.0
0.0
16,200.0
16,919.0
1,049.0
25.0
24.0
4,106.0
(1,640.0)
2,131.0
0.0
0.0
17,427.0
300.0
64.0
(15.0)
3,124.0
(3,014.0)
4,425.0
0.0
0.0
18,792.0
666.0
118.0
(55.0)
6,178.0
(5,346.0)
(453.0)
0.0
0.0
20,208.0
149.0
54.0
59.0
6,528.0
(7,894.0)
2,066.0
0.0
0.0
22,793.8
0.0
0.0
59.0
0.0
0.0
1,843.9
0.0
0.0
24,826.7
0.0
0.0
59.0
0.0
0.0
1,493.1
0.0
0.0
27,020.6
0.0
0.0
59.0
0.0
0.0
1,461.0
0.0
0.0
29,167.4
0.0
0.0
59.0
0.0
0.0
1,343.2
0.0
0.0
31,141.1
0.0
0.0
59.0
0.0
0.0
1,194.9
0.0
0.0
($8,343.0)
($3,385.0)
($1,506.0)
6,564.0
7,807.0
1,576.0
$28,977.0
(236.0)
(1,056.0)
963.0
(234.0)
19,521.0
(534.0)
$53,794.0
(142.0)
(4,618.0)
(8,875.0)
2,495.0
4,405.0
(167.0)
$39,842.0
177.0
(2,850.0)
6,483.0
5,052.0
3,398.0
(427.0)
$65,565.0
(2,146.0)
(1,056.0)
(3,950.0)
(5,832.0)
7,340.0
1,021.0
$67,830.0
(3,161.0)
(7,458.0)
(2,146.0)
(617.0)
894.0
(711.0)
$72,760.0
(8,305.0)
(10,289.0)
6,123.0
8,002.0
19,491.0
(329.0)
$95,330.0
(3,061.5)
(3,913.1)
(7,164.6)
1,006.3
8,434.0
357.4
$29,114.3
(1,229.8)
(513.2)
(468.3)
3,716.0
7,032.6
426.6
$57,439.7
(866.0)
(1,850.5)
(322.8)
3,839.1
7,050.4
417.4
$70,884.0
(363.6)
898.6
310.7
3,792.1
6,700.9
383.8
$87,381.4
152.8
(519.8)
566.0
3,662.9
6,202.1
341.4
$99,328.3
($9,056.0)
0.0
0.0
42.0
($9,014.0)
(25,607.0)
(11,507.0)
0.0
5.0
($37,109.0)
(59,539.0)
(44,960.0)
0.0
11.0
($104,488.0)
(16,997.0)
0.0
0.0
8.0
($16,989.0)
(13,608.0)
0.0
0.0
20.0
($13,588.0)
(19,599.0)
0.0
0.0
0.0
($19,599.0)
(66,010.0)
(1,726.0)
(628.0)
41.0
($67,323.0)
(39,734.7)
0.0
0.0
0.0
($39,734.7)
(43,109.8)
0.0
0.0
0.0
($43,109.8)
(44,909.9)
0.0
0.0
0.0
($44,909.9)
(45,614.9)
0.0
0.0
0.0
($45,614.9)
(45,772.0)
0.0
0.0
0.0
($45,772.0)
($5,288.0)
4,500.0
0.0
2,240.0
216.0
0.0
0.0
$1,668.0
$21,631.0
41,516.0
$63,147.0
($6,084.0)
3,448.0
0.0
1,792.0
301.0
0.0
0.0
($543.0)
$16,142.0
63,147.0
$79,289.0
($15,324.0)
5,274.0
0.0
4,065.0
416.0
0.0
0.0
($5,569.0)
($70,215.0)
79,289.0
$9,074.0
($7,080.0)
2,806.0
0.0
1,640.0
465.0
0.0
0.0
($2,169.0)
$46,407.0
9,074.0
$55,481.0
($67,981.0)
3,661.0
0.0
3,014.0
552.0
0.0
0.0
($60,754.0)
($6,512.0)
55,481.0
$48,969.0
($62,824.0)
4,107.0
0.0
5,346.0
691.0
0.0
0.0
($52,680.0)
$481.0
48,969.0
$49,450.0
($18,046.0)
5,727.0
628.0
7,894.0
803.0
0.0
0.0
($2,994.0)
$25,013.0
49,450.0
$74,463.0
($2,183,645.9)
0.0
1,299,938.0
0.0
0.0
(81,886.7)
941,697.7
($23,897.0)
($34,517.4)
74,463.0
$39,945.6
0.0
0.0
(25,077.0)
0.0
0.0
0.0
0.0
($25,077.0)
($10,747.1)
39,945.6
$29,198.5
0.0
0.0
(25,077.0)
0.0
0.0
0.0
0.0
($25,077.0)
$897.0
29,198.5
$30,095.6
0.0
0.0
(25,077.0)
0.0
0.0
0.0
0.0
($25,077.0)
$16,689.5
30,095.6
$46,785.0
0.0
0.0
(25,077.0)
0.0
0.0
0.0
0.0
($25,077.0)
$28,479.4
46,785.0
$75,264.4
UOIG 23
2014 E
2015 E
2016 E
2017 E
May 10th, 2013
University of Oregon Investment Group
Appendix 11 – Leveraged Buyout Analysis Balance Sheet
Balance Sheet
($ in thousands)
Assets
Current Assets
Cash and Cash Equivalents
Short-Term Investments
Accounts Receivable, Net
Inventories
Prepaid Expense & Other
Deffered Income Taxes
Total Current Assets
Non-Current Assets
Property, Plant and Equipment, Net
Other Assets
Goodwill
Total Assets
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable
Current Portion of Notes Payable
Accrued Expenses and Other
Total Current Liabilities
Non-Current Liabilities
Deffered Income Taxes
Note Payable, Less Current Portion
Other Liabilities
Total Liabilities
Commitments and Contingencies
Stockholders' Equity
Class A Common Stock
Class B Common Stock
Additional Paid-In Capital
Accumulated Other Comprehensive Loss, Net of Tax
Retained Earnings
Total Stockholders' Equity
Total Liabilities and Stockholders' Equity
2006 A
2007 A
2008 A
2009 A
2010 A
2011 A
2012 A
2013 E
2014 E
2015 E
2016 E
2017 E
$63,147.0
19,223.0
17,770.0
17,034.0
2,721.0
667.0
$120,562.0
$79,289.0
16,200.0
17,972.0
18,090.0
4,252.0
2,090.0
$137,893.0
$9,074.0
0.0
18,057.0
22,708.0
16,281.0
2,734.0
$68,854.0
$55,481.0
0.0
17,856.0
25,558.0
9,710.0
4,425.0
$113,030.0
$48,969.0
0.0
20,017.0
26,614.0
12,756.0
3,648.0
$112,004.0
$49,450.0
0.0
23,233.0
34,072.0
14,605.0
4,363.0
$125,723.0
$74,463.0
0.0
31,479.0
44,361.0
6,628.0
5,411.0
$162,342.0
$39,945.6
0.0
34,481.5
48,274.1
13,792.6
5,517.0
$142,010.8
$29,198.5
0.0
35,652.2
48,787.3
14,260.9
6,004.6
$133,903.5
$30,095.6
0.0
36,459.2
50,637.8
14,583.7
6,481.6
$138,257.9
$46,785.0
0.0
36,763.8
49,739.2
14,273.0
6,920.2
$154,481.2
$75,264.4
0.0
36,552.0
50,259.0
13,707.0
7,310.4
$183,092.7
30,699.0
1,837.0
1,377.0
$154,475.0
46,198.0
12,487.0
1,377.0
$197,955.0
147,920.0
1,606.0
1,377.0
$219,757.0
147,021.0
1,508.0
1,377.0
$262,936.0
142,889.0
2,260.0
1,377.0
$258,530.0
143,586.0
1,802.0
1,377.0
$272,488.0
189,948.0
4,656.0
2,538.0
$359,484.0
206,889.0
4,656.0
2,538.0
$356,093.8
225,172.1
4,656.0
2,538.0
$366,269.6
243,061.4
4,656.0
2,538.0
$388,513.2
259,508.9
4,656.0
2,538.0
$421,184.1
274,139.8
4,656.0
2,538.0
$464,426.5
$17,942.0
0.0
22,928.0
$40,870.0
$17,708.0
0.0
42,449.0
$60,157.0
$20,203.0
0.0
46,854.0
$67,057.0
$25,255.0
0.0
48,531.0
$73,786.0
$19,423.0
0.0
52,776.0
$72,199.0
$18,806.0
0.0
48,243.0
$67,049.0
$28,303.0
62.0
60,529.0
$88,894.0
$29,309.3
77.0
68,963.0
$98,349.3
$33,025.2
77.0
75,995.6
$109,097.8
$36,864.3
77.0
83,046.0
$119,987.3
$40,656.4
77.0
89,746.8
$130,480.2
$44,319.3
77.0
95,948.9
$140,345.2
$1,494.0
0.0
3,522.0
$45,886.0
$1,215.0
0.0
2,995.0
$64,367.0
$9,617.0
0.0
3,055.0
$79,729.0
$13,439.0
0.0
2,556.0
$89,781.0
$17,087.0
0.0
3,656.0
$92,942.0
$17,349.0
0.0
3,345.0
$87,743.0
$20,463.0
566.0
4,470.0
$114,393.0
$22,413.0
1,300,489.0
4,827.4
$1,426,078.6
$24,393.6
1,275,412.0
5,254.0
$1,414,157.5
$26,331.6
1,250,335.0
5,671.4
$1,402,325.4
$28,113.5
1,225,258.0
6,055.2
$1,389,906.9
$29,698.5
1,200,181.0
6,396.6
$1,376,621.3
$100.0
41.0
80,158.0
($197.0)
28,487.0
108,589.0
154,475.0
$101.0
41.0
88,754.0
(204.0)
44,896.0
133,588.0
197,955.0
$101.0
41.0
102,653.0
(431.0)
37,664.0
$140,028.0
$219,757.0
$101.0
41.0
111,668.0
(359.0)
61,704.0
$173,155.0
$262,936.0
$93.0
41.0
122,016.0
(438.0)
43,876.0
$165,588.0
$258,530.0
$87.0
41.0
138,336.0
(838.0)
47,119.0
$184,745.0
$272,488.0
$87.0
41.0
157,305.0
(883.0)
88,541.0
$245,091.0
$359,484.0
($1,323,707.0)
0.0
157,305.0
(883.0)
97,300.1
($1,069,984.9)
$356,093.8
($1,323,707.0)
0.0
157,305.0
(883.0)
119,397.1
($1,047,887.9)
$366,269.6
($1,323,707.0)
0.0
157,305.0
(883.0)
153,472.9
($1,013,812.1)
$388,513.2
($1,323,707.0)
0.0
157,305.0
(883.0)
198,562.2
($968,722.8)
$421,184.1
($1,323,707.0)
0.0
157,305.0
(883.0)
255,090.3
($912,194.7)
$464,426.5
UOIG 24
May 10th, 2013
University of Oregon Investment Group
Appendix 12 – Leveraged Buyout Analysis Assumptions
SAM transactions
52-Week High
52-Week Low
Current Price
Premium
Purchase Price Premium
Shares Oustanding
Market Capitalization
Plus: Current Debt
Less: Cash
Enterprise Value at Premium
Transaction Date
$172.05
$97.66
$146.63
12%
$164.49
13,275,323.0
2,183,645,940.8
628,000.0
(74,463,000.0)
2,109,810,940.8
5/8/2013
New Debt Assumptions
New Debt Assumptions
New $100 M Revolver
Total Available
Maturity
Interest Rate
Commitment Fee
New $1B U.S. Term Loan
Maturity
Interest Rate
Amortization Rate
New $300M 8.0% Subordinated Note
Maturity Date
Interest Rate
Fees
Advisory Fees (Off Mkt Cap)
Financing Fees (Off Debt)
Exit Analysis
$0.0
$100,000.0
12/31/2017
L + 0.45%
0.30%
$1,000,000.0
12/31/2017
L + 2.50%
2.50%
$300,000.0
12/31/2017
8.00%
1.25%
2.50%
Debt
Exit Date: 12/31/2017
12/31/2017
EBITDA at Exit Date
Illustrative Exit Multiple
Illustrative Exit Proceeds
$236,746
13.0x
$3,077,697
Less: Exit Date Net Debt (Net Cash)
Proceeds Available for Equity
1,124,993.6
$1,952,703.6
Exit Analysis
2013 2014
($941,697,663.6)
2015
2016
Initial Investment
Exit Proceeds
Total
($941,697,663.6)
$0.0
$1,952,703,552.2
$0.0 $1,952,703,552.2
$0.0
IRR
MOIC
Debt Summary
Commitment
Credit Line
Outstanding (12/31/2012)
$50,000.0
Term Loan denominated in U.S. dollars
Secured Mortgages
Capitalizaed leases and other long-term debt
Short-Term Debt
Total
% Capital
2012 Leverage Through Security
$0.0
0.00%
0.00x
0.0
0.00%
0.00x
$0.0
0.00%
0.00x
0.0
0.00%
0.00x
628.0
100.00%
0.01x
0.0
0.00%
0.01x
$628.0
100.00%
0.01x
Sources
Uses
Cash from Balance Sheet 12/31/2012
$74,463,000.0
Cash to Balance Sheet
0.0
Total Debt Obligations
Acquisition Revolver
Acquisition Term Loans
1,000,000,000.0
628,000.0
Common Shareholders Consideration
Acquisition Subordinated Note
300,000,000.0
Advisory Fees
Sponsorship Equity
941,697,663.6
Financing Fees
Total Sources
$50,000,000.0
$2,316,160,663.6
2,183,645,940.8
27,295,574.3
54,591,148.5
Total Uses
$2,316,160,663.6
Leveraged Buyout Summary
Commitment
Outstanding
% Capital
2012 Leverage Through Security
Fee %
Transaction Fee
Spread
Rate
Acquisition Revolver, L + 0.45%
$100,000.0
$0.0
0.00%
0.00x
$0.0
L + 0.45%
1.69%
Acqusition Term Loans, L + 2.50%
1,000,000.0
1,000,000.0
44.61%
8.64x
0.0
L + 2.50%
3.74%
300,000.0
300,000.0
13.38%
11.23x
0.0
8.00%
0.00%
$1,300,000.0
57.99%
11.23x
42.01%
19.36x
100.00%
19.36x
Acquisition High Yield Notes, 8.00%
Total
Sponsorship Equity
Total Capitalization
941,697.7
$2,241,697.66
$0.0
UOIG 25
2017
20.00%
2.1x
University of Oregon Investment Group
May 10th, 2013
Appendix 13 – Sources
Boston Beer Company Financial Statements
Boston Beer Company Earnings Calls
Boston Beer Company Proxy Statements
Factset
Taylor Gentry’s GDI Report
IBIS World
Bloomberg
S&P Netadvantage
Yahoo! Finance
UOIG 26