UNITED STATES

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549


FORM 8-K


CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


Date of Report (Date of earliest event reported):  December 12, 2011


The Boston Beer Company, Inc.

(Exact name of registrant as specified in its charter)


Massachusetts
(State or other jurisdiction
of incorporation)

001-14092
(Commission
File Number)

04-3284048
(IRS Employer
Identification No.)

 

 

 

One Design Center Place, Suite 850, Boston, MA
(Address of principal executive offices)

02210
(Zip Code)


Registrant's telephone number, including area code (617) 368-5000


Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):


[   ]

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

 

[   ]

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

 

[   ]

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))

 

 

[   ]

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))




Item 5.02.

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.


2012 Bonus Opportunities


At its meeting on December 12, 2011, the Compensation Committee of the Company’s Board of Directors approved bonus objectives for the Company’s named executive officers for 2012 and established Company-wide goals (the “Company 2012 Goals”) that apply to certain officers and other employees. The Company 2012 Goals consist of achieving total depletions growth of 7.8% and resource efficiencies and cost savings of at least $7.5 million, while maintaining brand health. Assessment of performance against the objectives listed below is within the purview of the Committee.


Chief Executive Officer


The Committee approved primary 2012 bonus opportunities for Martin F. Roper, the Company’s President and CEO, equal to 80% of salary, based on achieving objectives as set forth below. The Delivered Gross Profit and Margin and Processing cost goals are based on the Company’s current 2012 financial plan.


TABLE 1 – CEO BONUS OPPORTUNITY = 80% OF BASE SALARY


Objectives to be Achieved by the Company by FY2012 Year-End


Weight


Depletions

Depletions growth of at least 7.8%, excluding new brand
introductions not currently in the 2012 Financial Plan

  10%

Depletions growth greater than the growth rate of the Craft Beer
category

  15%

Delivered Gross Profit

Delivered gross profit of $268 million and delivered gross profit
margin of not less than 48%, after adjusting for commodity
impact from plan levels

  15%

Improvement in
Processes and
Procedures in Sales
Force Execution

Tracking and measuring wholesaler execution in the areas of the
Company’s “Sam to Standard” program in all core wholesalers
with improvements by at least 2.5%, and introduction of
wholesaler seasonal transition weeks with core wholesalers
obtaining at least 50% of distribution goal in first 30 days

  10%

Projects delivering
savings or freeing
resources for 2013

Combined savings of $7.5 million from delivered gross margin
and SG&A efficiency initiatives

  10%

Freshness

Freshest Beer Program successfully implemented for
wholesalers covering at least 75% of the Company’s volume by
year end

  15%

Organizational
Development

Development of new TV campaign that is demonstrably stronger

than existing work

  15%

Improvement of Human Resources capabilities

    5%

Improvement of organizational capability to deal with brand complexity

    5%

TOTAL

100%




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In addition, the Committee approved a further 2012 bonus opportunity for Mr. Roper equal to 80% of his primary 2012 bonus potential (which would equal an incremental 64% of his base salary) tied to achieving certain goals that would require substantial out-performance by the Company against its 2012 financial plan, as set forth below:


TABLE 2 – CEO “STRETCH” BONUS OPPORTUNITY = 64% OF BASE SALARY



Objectives to be Achieved by the Company by FY2012 Year-End


Weight

(against base bonus opportunity)


Depletions growth at least 2% greater than that of craft and
domestic specialty beer growth

20%

Depletions growth at least 4% greater than that of craft and
domestic specialty beer growth

30%

Achieve processing costs of under $2.00 per case equivalent at
breweries owned by the Company

30%

TOTAL

80%


Chairman


The Committee approved 2012 bonus opportunities for C. James Koch, the Company’s Chairman, equal to 100% of salary. Mr. Koch’s objectives for 2012 as a percentage of his bonus opportunities are set forth below.


TABLE 3 – CHAIRMAN BONUS OPPORTUNITY = 100% OF BASE SALARY


Objectives to be Achieved by the Company or the Chairman by FY2011 Year-End


Weight


Depletions growth of at least 8%, excluding new brand introductions not
currently in the 2012 Financial Plan


Depletions growth of at least 10%, excluding new brand introductions not
currently in the 2012 Financial Plan

  10%


    5%

Depletions growth greater than the growth rate of the Craft Beer category

  20%

Delivered gross profit of $268 million and delivered gross profit margin of not
less than 48%, after adjusting for commodity impact from plan levels

  20%

Freshest Beer Program successfully implemented for wholesalers covering at
least 75% of the Company’s volume by year end

  20%

Investment of time and resources in craft industry initiatives which support
the category and the Company

  20%

TOTAL

100%





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Chief Financial Officer


The Committee approved 2012 bonus opportunities for William F. Urich, the Company’s Treasurer and Chief Financial Officer, equal to 50% of his base salary, based on achieving objectives as follows:


TABLE 4 – CFO BONUS OPPORTUNITY = 50% OF BASE SALARY


Objectives to be Achieved by the Company or the CFO by FY2012 Year-End


Weight


Company 2012
Goals

The Company meets its Company 2012 Goals

  30%*

Resource
Efficiency

Deliver $2.5 million of resource efficiency improvements outside
of Delivered Gross Margin

  15%

Support the Operations group in indentifying and executing against
a 2012 Delivered Gross Margin goal to achieve $5 million of
savings/efficiencies by year-end 2013

  10%

Lead Operations/Brewing performance improvement
measurements, KPI's and financial reporting to drive focus on key
measurable and continuous financial improvement, to improve SAP
tracking of materials, yields and cost reporting, and the like

    5%

Procurement

Identify and execute approximately 2% savings for non-contracted
procurement spend and deliver $1.0 million savings. Identify and execute $1.5 million of Delivered Gross Margin savings for full year 2013

  15%

Sales Force
Effectiveness

Identify unplanned pricing opportunities (not including
opportunities created by competitive moves) of at least $250,000.
Improve data and analysis delivery to Sales

    5%

Support New
Business
Development

Develop required back office support system to support A&S
Brewing Collaborative LLC and provide financial performance
reporting on its projects. Support due diligence on new business
development or potential acquisitions

  10%

IT

Improve effectiveness, productivity, business impact and efficiency
of IT department. Support the Freshest Beer Program and develop
strategy for sales mobile devices for 2013

  10%

 

TOTAL

100%

*

50% payout if depletions grow by at least 5% but less than 7.8%, provided that the Samuel
Adams® brand grows at least 3%




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Vice President of Operations


The Committee approved 2012 bonus opportunities for Thomas W. Lance, the Company’s Vice President of Operations, equal to 50% of his 2012 base salary, based on achieving objectives set forth below. The bonus opportunity is subject to reduction if any product that does not meet quality standards is shipped from a brewery.


TABLE 5 – VICE PRESIDENT OF OPERATIONS

BONUS OPPORTUNITY = 50% OF BASE SALARY


Objectives to be Achieved by the Company or Mr. Lance by FY2012 Year-End


Weight

Company
2012 Goals

The Company meets its Company 2012 Goals

  20%*

Safety &
Quality

Reduce average Total Incident Rate at the breweries to 4.3%

  10%

Improve Total Quality Aggregate Score (combined brewing and
packaging) by 2% from 2011 year-end

  10%

Resource
Efficiency

Identify and implement $5 million in Delivered Gross Margin
improvements

  10%

Brewery
Performance

Develop leadership capabilities, enhance the continuous
improvement process, and install high performance brewery
environments to maximize capacities and significantly improve
KPI’s, while:

Maintaining adjusted conversion cost/case without depreciation
flat relative to 2011 fourth quarter

Reducing adjusted conversion cost/case without depreciation by
2.5% relative to 2011 fourth quarter





    5%


    5%

Freshest Beer
Program

Fully develop and expand to 75% of the Company’s volume.
Improve out-of-stock tracking and service levels

  10%

Brewery
Culture

Implement employee relations strategy that supports a “progressive
work environment” at the Pennsylvania brewery and creates
healthy employee-manager-company relations. Launch and support
at least 25 “continuous improvement teams” that deliver
measurable improvement. Secure labor contract extensions

  10%

Capacity

Successfully execute capacity/capability projects approved by
senior management on time and on budget with intended benefit
delivered in 2013

  20%

 

TOTAL

100%

*

50% payout if depletions grow by at least 5% but less than 7.8%, provided that the Samuel
Adams® brand grows at least 3%


Vice President of Sales


The Committee approved 2012 bonus opportunities for John C. Geist, the Company’s Vice President of Sales, equal to 50% of his 2012 base salary, based on achieving objectives as follows:




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TABLE 6 – VICE PRESIDENT OF SALES

BONUS OPPORTUNITY = 50% OF BASE SALARY


Objectives to be Achieved by the Company or Mr. Geist by FY2012 Year-End


Weight


Company
2012 Goals

The Company meets its Company 2012 Goals

  30%*

Depletions

Meet Company depletions goals for each brand family. (Weighting
of performance: Samuel Adams brand, 60%; Twisted Tea brand,
15%; Samuel Adams relative to Craft beer category growth, 15%;
and Angry Orchard brand, 10%)

  20%

Class of Trade
Initiatives

Grow certain key classes of trade to 2012 plan

  20%

Wholesaler
Initiatives

Improve wholesaler and Company sales force execution of
distribution and visibility, seasonal transitions and high-end beer
releases

  15%

Financial

Price adjustments to exceed 2012 Financial Plan

 7.5%

Manage expenses of sales force to budget

 7.5%

 

TOTAL

100%

*

50% payout if depletions grow by at least 5% but less than 7.8%, provided that the Samuel
Adams® brand grows at least 3%


Other Executive Officers


The Committee also approved the 2012 bonus opportunity for two other executive officers, which opportunity consists of a combination of the Company achieving its Company 2012 goals and the officers achieving their individual goals. The bonus opportunity for both officers equals 50% of their 2012 base salary. One officer has 20% of the bonus opportunity being the achievement by the Company of the Company’s 2012 goals and the other officer has 15% of the bonus opportunity being the achievement by the Company of the Company’s 2012 goals.


Equity Compensation


Based on the recommendation of the Compensation Committee, the Board of Directors of the Company, at its meeting on December 13, 2011, approved the following option and restricted stock grants of the Company’s Class A Common Stock pursuant to the Company’s Employee Equity Incentive Plan.


Contingent Vesting Options


The Board of Directors approved the grant of contingent vesting options for shares of the Company’s Class A Common Stock in the aggregate amount of 11,100 shares to two executive officers and one senior manager, effective January 1, 2012, with an exercise price at the fair market value of such Common Stock on the effective date of the grant.


C. James Koch, the Company’s founder and Chairman, and Thomas W. Lance, Vice President of Brewing, will each be granted an option for 4,800 shares and the senior manager will be granted an option for 1,500 shares. The number of shares as to which these options may become exercisable in any year is dependent upon the Company’s meeting certain 2012 depletions targets, as follows: 50% will be eligible to vest if 2012 depletions excluding new brand introductions are at least 4% over 2011 depletions, and 100% will be eligible to vest if 2012 depletions excluding new brand introductions are 7.8% or more over 2011 depletions. The determination will be made regarding the eligibility for vesting of these options by the Compensation Committee by mid-March 2013. Eligible shares will then vest at the rate of 20% per year over the five-year period commencing January 1, 2012, subject to accelerated vesting in certain specified circumstances. The options will lapse to the extent that the above depletions targets are not met.




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Special Long-Term Retention Option


The Board of Directors also approved the grant of an option to a senior manager for 7,500 shares of the Company’s Class A Common Stock, effective January 1, 2012 with an exercise price at the fair market value of such Common Stock on the effective date of the grant. Sixty percent (60%) of the shares will vest five years from the effective date of grant, with the remaining shares vesting at the rate of 10% each year thereafter. The optionee must be an employee of the Company on the applicable vesting date or the option will lapse as to the non-vested shares.


Restricted Stock Awards


In addition, the Board of Directors approved an aggregate of $1,672,000 in restricted stock grants to be awarded to senior managers and certain key employees of the Company as of January 1, 2012. The restricted stock will vest over the five-year period commencing January 1, 2012, contingent only on continued employment, such that 20% of the shares will vest on January 1 in each of the years 2013 through 2017, subject to accelerated vesting in certain specified circumstances. No executive officers of the Company were awarded restricted stock grants.


Approval of Class B Stockholder


All of the bonus opportunities and equity compensation grants to executive officers described above were approved by the sole holder of the Company’s Class B Common Stock.


Item 7.01.

Regulation FD Disclosure.


Increase in Capital Investments in 2012


At its December 13, 2011 meeting, the Company’s Board of Directors approved a capital plan for 2012 of approximately $50 million, relating primarily to continued investments in the Company’s breweries to support the Freshest Beer Program and the projected growth of the existing brands. This is an increase of more than $15 million over the 2012 capital expenditures that were projected by the Company in its earnings release for the third quarter issued on November 1, 2011. Actual capital investment in 2012 could differ materially from this plan.




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SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


 

The Boston Beer Company, Inc.
(Registrant)

 

 

 

/s/ Martin F. Roper

Date:  December 16, 2011

Martin F. Roper

 

Chief Executive Officer

 

(Signature)*


* Print name and title of the signing officer under his signature.




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