BOSTON BEER CO INC
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Table of Contents
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM
10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended 
June 29, 2019
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from
                    
to
                    
Commission file number:
1-14092
 
THE BOSTON BEER COMPANY, INC.
(Exact name of registrant as specified in its charter)
 
MASSACHUSETTS​​​​​​​
 
04-3284048
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
One Design Center Place, Suite 850
,
Boston
,
Massachusetts​​​​​​​
(Address of principal executive offices)
02210
(Zip Code)
(
617
368-5000
(Registrant’s telephone number, including area code)
 
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class
 
Trading
Symbol(s)
 
Name of each exchange
on which registered
Class A Common Stock. $0.1 par value
 
SAM
 
New York Stock Exchange
​​​​​​​
Class B Common Stock, $0.1 par value
 
Not applicable
 
Unregistered
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    
Yes
  
    No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    
Yes
  
    No   
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, small reporting company, or emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “small reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act. (Check one):
Large accelerated filer
 
 
Accelerated filer
 
       
Non-accelerated
filer
 
 
Small reporting company
 
       
Emerging growth company
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Act.)    Yes  
     No   
Number of shares outstanding of each of the issuer’s classes of common stock, as of July 20, 2019:
Class A Common Stock, $.01 par value
  
9,185,036
 
Class B Common Stock, $.01 par value
  
2,917,983
 
                         (Title of each class)
  
(Number of shares)
 
 
 
  
THE BOSTON BEER COMPANY, INC.
FORM 10-Q
June 29, 2019
TABLE OF CONTENTS
 
 
 
PAGE
 
PART I.
   
 
         
 
Item 1.
   
3
 
         
 
   
4
 
         
 
   
5
 
         
 
   
6
 
         
 
   
7
 
         
 
   
8-17
 
         
 
Item 2.
   
18
 
         
 
Item 3.
   
23
 
         
 
Item 4.
   
23
 
       
PART II.
   
 
         
 
Item 1.
   
23
 
         
 
Item 1A.
   
23
 
         
 
Item 2.
   
24
 
         
 
Item 3.
   
24
 
         
 
Item 4.
   
24
 
         
 
Item 5.
   
24
 
         
 
Item 6.
   
25
 
     
  
26
 
     
EX-31.1 Section 302 CEO Certification
  
 
EX-31.2 Section 302 CFO Certification
  
 
EX-32.1 Section 906 CEO Certification
  
 
EX-32.2 Section 906 CFO Certification
  
 
 
2
 
 
PART I. FINANCIAL INFORMATION
Item 1.
CONSOLIDATED FINANCIAL STATEMENTS
 
3
 
Table of Contents
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
                 
 
June 29,
 
 
December 29,
 
 
2019
   
2018
 
Assets
   
     
 
Current Assets:
   
     
 
Cash and cash equivalents
  $
 3,017
    $
108,399
 
Accounts receivable
   
69,420
     
34,073
 
Inventories
   
80,361
     
70,249
 
Prepaid expenses and other current assets
   
16,329
     
13,136
 
Income tax receivable
   
9,629
     
5,714
 
                 
Total current assets
   
178,756
     
231,571
 
Property, plant and equipment, net
   
412,064
     
389,789
 
Operating right-of-use assets
   
36,779
     
—  
 
Merger consideration
 
 
158,402
 
 
 
—  
 
Other assets
   
23,646
     
14,808
 
Goodwill
   
3,683
     
3,683
 
                 
Total assets
  $
 813,330
    $
639,851
 
Liabilities and Stockholders’ Equity
   
     
 
Current Liabilities:
   
     
 
Accounts payable
  $
 74,906
    $
47,102
 
Accrued expenses and other current liabilities
   
73,545
     
73,412
 
Line of credit
 
 
37,500
 
 
 
—  
 
Current operating lease liabilities
   
2,315
     
—  
 
                 
Total current liabilities
   
188,266
     
120,514
 
 
 
 
 
 
 
 
 
 
Deferred income taxes, net
   
55,452
     
49,169
 
Non-current operating lease liabilities
   
39,239
     
—  
 
Other liabilities
   
7,572
     
9,851
 
                 
Total liabilities
   
290,529
     
179,534
 
Commitments and Contingencies (See Note I)
               
Stockholders’ Equity:
   
     
 
Class A Common Stock, $.01 par value;
22,700,000
shares authorized;
8,655,955 and
8,580,593
issued and outstanding as of June 29, 2019 and December 29, 2018, respectively
   
87
     
86
 
Class B Common Stock, $.01 par value;
4,200,000
shares authorized;
2,917,983
and
2,917,983
issued and outstanding as of June 29, 2019 and December 29, 2018, respectively
   
29
     
29
 
Additional paid-in capital
   
416,602
     
405,711
 
Accumulated other comprehensive loss, net of tax
   
(1,155
)    
(1,197
)
Retained earnings
   
107,238
     
55,688
 
                 
Total stockholders’ equity
   
522,801
     
460,317
 
                 
Total liabilities and stockholders’ equity
  $
 813,330
    $
639,851
 
                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.
4
 
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except per share data)
(unaudited)
 
Thirteen weeks ended
  
Twenty-six weeks ended
 
 
June 29,
 
 
June 30,
 
 
June 29,
 
 
June 30,
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
Revenue
 $
 338,643
  $
289,574
  $
606,202
  $
491,405
 
Less excise taxes
  
20,236
   
16,474
   
36,144
   
27,848
 
                 
Net revenue
  
318,407
   
273,100
   
570,058
   
463,557
 
Cost of goods sold
  
159,405
   
131,130
   
286,516
   
225,490
 
                 
Gross profit
  
159,002
   
141,970
   
283,542
   
238,067
 
Operating expenses:
  
   
   
   
 
Advertising, promotional and selling expenses
  
94,079
   
86,510
   
165,802
   
154,031
 
General and administrative expenses
  
26,748
   
23,879
   
50,122
   
43,217
 
Impairment of assets
 
 
243
 
 
 
517
 
 
 
243
 
 
 
517
 
                 
Total operating expenses
  
121,070
   
110,906
   
216,167
   
197,765
 
                 
Operating income
  
37,932
   
31,064
   
67,375
   
40,302
 
Other income (expense), net:
  
   
   
   
 
Interest (expense) income, net
  
(27
)  
273
   
610
   
478
 
Other income (expense), net
  
197
   
(203
)  
(55
)  
(488
)
                 
Total other income (expense), net
  
170
   
70
   
555
   
(10
)
                 
Income before income tax provision
  
38,102
   
31,134
   
67,930
   
40,292
 
Income tax provision
  
10,246
   
7,599
   
16,380
   
7,447
 
                 
Net income
 
$
 27,856
 
 
$
23,535
 
 
$
51,550
 
 
$
32,845
 
Net income per common share - basic
 $
 2.39
  $
1.99
  $
 4.42
  $
2.78
 
Net income per common share - diluted
 $
 2.36
  $
1.98
  $
 4.38
  $
2.76
 
Weighted-average number of common shares - Class A basic
  
8,648
   
8,667
   
8,627
   
8,690
 
Weighted-average number of common shares - Class B basic
  
2,918
   
3,018
   
2,918
   
3,018
 
Weighted-average number of common shares - diluted
  
11,684
   
11,787
   
11,660
   
11,809
 
Net income
 $
 27,856
  $
23,535
  $
51,550
  $
32,845
 
                 
Other comprehensive income:
  
   
   
   
 
Foreign currency translation adjustment
  
5
   
7
   
42
   
18
 
                 
Comprehensive income
 $
 27,861
  $
23,542
  $
51,592
  $
32,863
 
                 
The accompanying notes are an integral part of these consolidated financial statements.
5
 
 
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the
Thirteen and
Twenty-six weeks ended June 29, 2019 and June 30, 2018
(in thousands)
(unaudited)
                                                                 
 
Class A
 
 
Class A
Common
 
 
Class B
 
 
Class B
 
 
Additional
 
 
Accumulated
Other
 
 
 
 
 
Total
 
 
Common
 
 
Stock,
 
 
Common
 
 
Common
 
 
Paid-in
 
 
Comprehensive
 
 
Retained
 
 
Stockholders’
 
 
Shares
 
 
Par
 
 
Shares
 
 
Stock, Par
 
 
Capital
 
 
Loss, net of tax
 
 
Earnings
 
 
Equity
 
Balance at December 29, 2018
   
8,580
    $
86
     
2,918
    $
29
    $
405,711
    $
(1,197
)   $
55,688
    $
460,317
 
Net income
   
     
     
     
     
     
     
23,694
     
23,694
 
Stock options exercised and restricted shares activities
 
 
54
 
 
 
 
 
 
 
 
 
 
 
 
3,704
 
 
 
 
 
 
 
 
 
 
3,704
 
Stock-based compensation expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  2,066
 
 
 
 
 
 
 
 
 
 
2,066
 
Currency translation adjustment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
37
 
 
 
 
 
 
 
37
 
Balance at March 30, 2019
 
 
8,634
 
 
$
86
 
 
 
2,918
 
 
$ 29
 
 
$ 411,481
 
 
$ (1,160
 
$ 79,382
 
 
$
489,818
 
Net income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
27,856
 
 
 
27,856
 
Stock options exercised and restricted shares activities
   
21
     
1
     
     
     
1,377
     
     
     
1,378
 
Stock-based compensation expense
   
     
     
     
      3,744      
     
     
3,744
 
Currency translation adjustment
   
     
     
     
     
     
5
     
     
5
 
                                                                 
Balance at June 29, 2019
   
8,655
    $
87
     
2,918
    $
29
    $
416,602
    $
(1,155
)   $
107,238
    $
522,801
 
                                                                 
 
 
 
 
 
 
 
 
 
 
 
 
Class A
 
 
 
 
 
 
 
 
 
 
 
Accumulated
 
 
 
 
 
 
 
 
Class A
 
 
Common
 
 
Class B
 
 
Class B
 
 
Additional
 
 
Other
 
 
 
 
 
Total
 
 
Common
 
 
Stock,
 
 
Common
 
 
Common
 
 
Paid-in
 
 
Comprehensive
 
 
Retained
 
 
Stockholders’
 
 
Shares
 
 
Par
 
 
Shares
 
 
Stock, Par
 
 
Capital
 
 
 
Loss, net of tax
 
 
Earnings
 
 
Equity
 
Balance at December 30, 2017
   
8,603
    $
86
     
3,018
    $
30
    $
372,590
    $
(1,288
)   $
52,105
    $
423,523
 
Net income
   
     
     
     
     
     
     
9,310
     
9,310
 
Stock options exercised and restricted shares activities
   
188
     
2
     
     
     
20,232
     
     
     
20,234
 
Stock-based compensation expense
   
     
     
     
     
1,491
     
     
     
1,491
 
Repurchase of Class A Common Stock
   
(91
)    
(1
)    
     
     
     
     
(16,638
)    
(16,639
)
Currency translation adjustment
   
     
     
     
     
     
(11
)    
     
(11
)
One time effect of adoption of ASU 2014-09, Revenue from Contracts with Customers, net of tax of $
329
   
     
     
     
     
     
     
(982
)    
(982
)
One time effect of adoption of ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
   
     
     
     
     
     
(210
)    
210
     
—  
 
Balance at March 31, 2018
 
 
8,700
 
 
$
87
 
 
 
3,018
 
 
$
30
 
 
$
394,313
 
 
$
(1,509
)
 
$
44,005
 
 
$
436,926
 
Net income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
23,535
 
 
 
23,535
 
Stock options exercised and restricted shares activities
 
 
32
 
 
 
 
 
 
 
 
 
 
 
 
  2,224
 
 
 
 
 
 
 
 
 
 
 
 2,224
 
Stock-based compensation expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  3,079
 
 
 
 
 
 
 
 
 
 
 
 3,079
 
Repurchase of Class A Common Stock
 
 
(97
)
 
 
(1
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(23,084
)
 
 
(23,085
)
Currency translation adjustment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(7
)
 
 
 
 
 
 
(7
)
                                                                 
Balance at June 30, 2018
   
8,635
    $
86
     
3,018
    $
30
    $
399,616
    $
(1,516
)   $
44,456
    $
442,672
 
                                                                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
6
 
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
                 
 
Twenty-six weeks ended
 
 
June 29,
2019
   
June 30,
2018
 
Cash flows provided by operating activities:
   
     
 
Net income
  $
 51,550
    $
32,845
 
Adjustments to reconcile net income to net cash provided by operating activities:
   
     
 
Depreciation and amortization
   
26,089
     
26,011
 
Impairment of assets
 
 
243
 
 
 
517
 
Loss on disposal of property, plant and equipment
   
104
     
26
 
Lease expense
   
1,789
     
—  
 
Bad debt (recovery) expense
   
(1
)    
27
 
Stock-based compensation expense
   
5,810
     
4,570
 
Deferred income taxes
   
6,283
     
775
 
Changes in operating assets and liabilities:
   
     
 
Accounts receivable
   
(35,346
)    
(21,651
)
Inventories
   
(14,942
)    
(18,636
)
Prepaid expenses, income tax receivable and other assets
   
(10,962
)    
217
 
Accounts payable
   
26,320
     
20,563
 
Accrued expenses and other current liabilities
   
(101
)    
8,721
 
Net lease liabilities
   
(1,391
)    
—  
 
Other liabilities
   
85
     
(244
)
                 
Net cash provided by operating activities
   
55,530
     
53,741
 
                 
Cash flows used in investing activities:
   
     
 
Purchases of property, plant and equipment
   
(44,578
)    
(25,470
)
Proceeds from disposal of property, plant and equipment
   
179
     
2
 
Cash paid for merger
 
 
(158,402)