Boston Beer Company, Inc.

and welcome. This is Jim Cook, founder and chairman, and I'm pleased to kick off the 2020 third quarter earnings call for the Boston Beer Company. Joining the call from Boston Beer are Dave Berwick, our CEO, and Frank Smala, our CFO. I'll begin my remarks this afternoon with a few introductory comments, including some highlights of our results, and then hand over to Dave who will provide an overview of our business. Dave will then turn the call over to Frank, who will focus on the financial details of our third quarter results, as well as a review of our outlook for the remainder of 2020 and our initial outlook for 2021. Immediately following Frank's comments, we'll open up the line for questions. We achieved depletions growth of 36% in the third quarter. We believe that our depletions growth is attributable to our key innovations, quality, and strong brands, as well as sales execution and support from our distributors. As the COVID-19 pandemic continues, our primary focus continues to be on operating our breweries and our business safely and working hard to meet customer demand. I'm very proud of the passion, creativity, and commitment to community that our company has demonstrated during this pandemic. We remain positive about our future growth of our brand's and are happy that our diversified brand portfolio continues to fuel double-digit growth for the 10th consecutive quarter. We planned some major innovations to be introduced in 2021 for our brands. These include Twisted Ice Tea Hard Seltzer, Samuel Adams Just the Haze, our first non-alcoholic beer, Dogfish Head Scratch-Made Canned Cocktails, and Angry Orchard Fruit Cider. We're confident in our ability to continue to innovate and build strong brands to help support our mission of long-term profitable growth. I will now pass over to Dave for a more detailed overview of our business.

Thanks, Dan. Hello, everyone. Before I review our business results, I'll start with the usual disclaimer. As we state in our earnings release, some of the information we discuss may come up on the call with other companies, or management's expectations or predictions of the future. Self-predictions are forward-looking statements. It's important to note that the company's actual results could differ materially from what is projected in these forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in the company's most recent 10Q and 10K. The company does not undertake to publicly update forward-looking statements, whether as a result of more information, future events, or otherwise. Okay, now let me share a deeper look at our business performance. Our decreasing growth in the third quarter was a result of increases in our Truly Hard Seltzer and Twisted Tea brands, partly offset by decreases in our Sam Adams, Angry Orchard, and Dogfish Head brands. The growth of the Truly brand, led by the Truly Lemonade Hard Seltzer, continues to be very strong, and we expect the Truly brand to continue to lead the growth of the business into 2021. In early 2021, we'll launch Truly Iced Tea Hard Seltzer, Truly Extra, a higher-end media version of Truly, and other new Truly flavors of package sizes as we continue to lead innovation in the hard seltzer category. We believe that Truly Iced Tea Hard Seltzer, which combines the refreshment of hard seltzer with room-brew tea and fruit flavor at only 100 calories of well-ground sugar, will further strengthen our position in the category. Since early in 2020, Truly has grown its velocity and its market share sequentially despite other national, regional, and local hard seltzer brands entering the category. Truly is the only national hard seltzer not introduced earlier this year to grow its share during 2020. We'll continue to invest heavily in the Truly brand and work to improve our position in the hard seltzer category as competition continues to increase. We'll also invest even more heavily in our Look Truly advertising campaign that showcases variety, colors, and joy to hard seltzer drinkers. Twisted Tea has benefited greatly from increased at-home consumption and continues to generate consistent double-digit volume growth, even as new entrants have been introduced and competition has increased. Our Samuel Adams and Richard and Blackfish Head brands have been most negatively impacted by COVID-19 and their random on-premise closures, but we're pleased that they all finished the month of September with strong, Our office month of September was strong growth in the measure of off-premise channels compared to last September. For the remainder of 2020 and into 2021, we plan to build upon our success and work to grab our brands to their full potential, with a particular focus on our Trulia brand. We've adjusted our expectations for 2020 full-year depreciation growth in our earnings guidance to reflect our trends for the first nine months in our current view of the remainder of the year, which is primarily driven by the year-to-date performance of Trulia. We're expecting all of our brands to grow in 2021, and we're targeting overall volume growth rates to be between 35% and 45%. We've closely managed our operating costs through the COVID-19 pandemic and achieved our planned cost synergies from the Dogfish Head merger. In 2021, based on our current spending and volume assumptions, we're planning for the growth rate of our operating expenses to be below our top-line growth rate, delivering leverage to our operating income. We've been operating our breweries at full capacity for many months, and like our competitors, we've had out-of-stocks during the quarter. We expect wholesaler inventories to return to normal levels in the fourth quarter as we recover from our summer seasonal peak. Improvement in our supply chain performance continues to be our top priority, and we're in the process of doubling our internal and third-party brewery can packaging capacity for 2021. Our new can line at our Cincinnati brewery began production late in the third quarter, and we recently added additional third-party breweries to the canned capacity. As reflected in our 2020 and 2021 capital spending guidance, we'll continue to invest heavily to increase capacity as appropriate to meet the needs of our business and take full advantage of the fast-growing hard saucer category. However, the increased usage of third-party breweries and an increasing percentage of variety packs in the company's overall product mix come at a higher incremental cost. As a result, our gross margins and gross margin expectations will be negatively impacted until the borrowing growth stabilizes. We began a multi-year supply chain transformation project in 2020 to automate and change internal processes to increase efficiency and reduce costs. The timing of the benefits of this program will depend on the timing and amount of our future borrowing growth. We'll continue to prioritize borrowing delivery over margin optimization in this high-growth environment. While we're in a very competitive business, we're optimistic for continued growth of our current brand portfolio and innovations, and we remain prepared to forsake short-term earnings as we invest to sustain long-term profitable growth in line with the opportunities that we see. Based on information in hand, year-to-date depreciations reported to the company through the 42 weeks ended October 17, 2020, are estimated to have increased approximately 39% from the comparable weeks in 2019. Now, Frank will provide the financial details. Thank you, Jim and Dave. Good afternoon, everyone.

For the third quarter, we reported net income of $80.8 million, an increase of $36 million, or 80.6% from the third quarter of 2019.