10-Q
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SECURITIES AND EXCHANGE COMMISSION
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
For the quarterly period ended September 26, 2020
☐ |
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)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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One Design Center Place, Suite 850, Boston, Massachusetts
(Address of principal executive offices)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act.
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Name of each exchange on which registered |
Class A Common Stock$0.01 par value |
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SAM |
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New York Stock Exchange |
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, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
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Large accelerated filer |
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☒ |
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Accelerated filer |
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☐ |
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Non-accelerated filer |
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☐ |
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Smaller reporting company |
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☐ |
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Emerging growth company |
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☐ |
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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 October 16, 2020:
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Class A Common Stock , $ .01 par value |
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Class B Common Stock , $. 01 par value |
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(Number of shares) |
THE BOSTON BEER COMPANY, INC.
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EX-31.1 Section 302 CEO Certification |
EX-31.2 Section 302 CFO Certification |
EX-32.1 Section 906 CEO Certification |
EX-32.2 Section 906 CFO Certification |
PART I. FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
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Cash and cash equivalents |
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$ |
157,130 |
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$ |
36,670 |
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93,809 |
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54,404 |
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123,831 |
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106,038 |
|
Prepaid expenses and other current assets |
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22,214 |
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12,077 |
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3,041 |
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9,459 |
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400,025 |
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218,648 |
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Property, plant and equipment, net |
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588,977 |
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541,068 |
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59,991 |
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53,758 |
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112,529 |
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112,529 |
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103,994 |
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104,272 |
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46,820 |
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23,782 |
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$ |
1,312,336 |
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$ |
1,054,057 |
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Liabilities and Stockholders’ Equity |
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$ |
108,600 |
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$ |
76,374 |
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Accrued expenses and other current liabilities |
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115,604 |
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99,107 |
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Current operating lease liabilities |
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7,735 |
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5,168 |
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Total current liabilities |
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231,939 |
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180,649 |
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Deferred income taxes, net |
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89,170 |
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75,010 |
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Non-current operating lease liabilities |
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61,184 |
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53,940 |
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11,513 |
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8,822 |
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393,806 |
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318,421 |
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Commitments and Contingencies (See Note K) |
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Class A Common Stock, $.01 par value; 22,700,000 shares authorized; 9,868,649 and 9,370,526 issued and outstanding as of September 26, 2020 and December 28, 2019, respectively |
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99 |
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94 |
|
Class B Common Stock, $.01 par value; 4,200,000 shares authorized; 2,307,983 and 2,672,983 issued and outstanding as of September 26, 2020 and December 28, 2019, respectively |
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23 |
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27 |
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Additional paid-in capital |
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594,427 |
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571,784 |
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Accumulated other comprehensive loss, net of tax |
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(562 |
) |
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(1,669 |
) |
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324,543 |
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165,400 |
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Total stockholders’ equity |
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918,530 |
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735,636 |
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Total liabilities and stockholders’ equity |
|
$ |
1,312,336 |
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$ |
1,054,057 |
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The accompanying notes are an integral part of these consolidated financial statements.
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except per share data)
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$ |
525,249 |
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$ |
402,691 |
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$ |
1,358,563 |
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$ |
1,008,893 |
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32,457 |
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24,225 |
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83,068 |
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60,369 |
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492,792 |
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378,466 |
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1,275,495 |
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948,524 |
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252,207 |
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190,631 |
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677,313 |
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477,147 |
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240,585 |
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187,835 |
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598,182 |
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471,377 |
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Advertising, promotional and selling expenses |
|
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108,023 |
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96,570 |
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306,250 |
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262,372 |
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General and administrative expenses |
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30,340 |
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|
31,429 |
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|
87,054 |
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|
81,552 |
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|
|
441 |
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— |
|
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2,796 |
|
|
|
243 |
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138,804 |
|
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127,999 |
|
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396,100 |
|
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344,167 |
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|
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101,781 |
|
|
|
59,836 |
|
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|
202,082 |
|
|
|
127,210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest (expense) income, net |
|
|
(20 |
) |
|
|
(138 |
) |
|
|
(169 |
) |
|
|
472 |
|
Other income (expense), net |
|
|
190 |
|
|
|
(764 |
) |
|
|
(222 |
) |
|
|
(818 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense), net |
|
|
170 |
|
|
|
(902 |
) |
|
|
(391 |
) |
|
|
(346 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax provision |
|
|
101,951 |
|
|
|
58,934 |
|
|
|
201,691 |
|
|
|
126,864 |
|
|
|
|
21,183 |
|
|
|
14,205 |
|
|
|
42,548 |
|
|
|
30,585 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
80,768 |
|
|
$ |
44,729 |
|
|
$ |
159,143 |
|
|
$ |
96,279 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
6.61 |
|
|
$ |
3.70 |
|
|
$ |
13.05 |
|
|
$ |
8.16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
6.51 |
|
|
$ |
3.65 |
|
|
$ |
12.90 |
|
|
$ |
8.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of common A basic |
|
|
9,846 |
|
|
|
9,136 |
|
|
|
9,663 |
|
|
|
8,797 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of common B basic |
|
|
2,308 |
|
|
|
2,862 |
|
|
|
2,451 |
|
|
|
2,899 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of common |
|
|
12,333 |
|
|
|
12,150 |
|
|
|
12,259 |
|
|
|
11,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
80,768 |
|
|
$ |
44,729 |
|
|
$ |
159,143 |
|
|
$ |
96,279 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
|
61 |
|
|
|
1 |
|
|
|
(10 |
) |
|
|
43 |
|
Defined benefit plans liability adjustment |
|
|
1,117 |
|
|
|
— |
|
|
|
1,117 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income, net of tax |
|
|
1,178 |
|
|
|
1 |
|
|
|
1,107 |
|
|
|
43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
81,946 |
|
|
$ |
44,730 |
|
|
$ |
160,250 |
|
|
$ |
96,322 |
|
The accompanying notes are an integral part of these consolidated financial statements.
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the thirteen and thirty-nineweeks ended September 26, 2020 and September 28, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Common Stock, Par |
|
|
|
|
|
Class B Common Stock, Par |
|
|
Additional Paid-in Capital |
|
|
Accumulated Other Comprehensive Loss, net of tax |
|
|
|
|
|
Total Stockholders’ Equity |
|
Balance at December 28, 2019 |
|
|
9,371 |
|
|
$ |
94 |
|
|
|
2,673 |
|
|
$ |
27 |
|
|
$ |
571,784 |
|
|
$ |
(1,669 |
) |
|
$ |
165,400 |
|
|
$ |
735,636 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,234 |
|
|
|
18,234 |
|
Stock options exercised and restricted shares activities |
|
|
38 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
1,858 |
|
|
|
|
|
|
|
|
|
|
|
1,858 |
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,566 |
|
|
|
|
|
|
|
|
|
|
|
2,566 |
|
Conversion from Class B to Class A |
|
|
150 |
|
|
|
2 |
|
|
|
(150 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
Currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(58 |
) |
|
|
|
|
|
|
(58 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 28, 2020 |
|
|
9,559 |
|
|
$ |
96 |
|
|
|
2,523 |
|
|
$ |
25 |
|
|
$ |
576,208 |
|
|
$ |
(1,727 |
) |
|
$ |
183,634 |
|
|
$ |
758,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,141 |
|
|
|
60,141 |
|
Stock options exercised and restricted shares activities |
|
|
61 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
4,582 |
|
|
|
|
|
|
|
|
|
|
|
4,582 |
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,537 |
|
|
|
|
|
|
|
|
|
|
|
4,537 |
|
Conversion from Class B to Class A |
|
|
215 |
|
|
|
2 |
|
|
|
(215 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
Currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13 |
) |
|
|
|
|
|
|
(13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,835 |
|
|
$ |
98 |
|
|
|
2,308 |
|
|
$ |
23 |
|
|
$ |
585,327 |
|
|
$ |
(1,740 |
) |
|
$ |
243,775 |
|
|
$ |
827,483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80,768 |
|
|
|
80,768 |
|
Stock options exercised and restricted shares activities |
|
|
34 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
5,468 |
|
|
|
|
|
|
|
|
|
|
|
5,469 |
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,632 |
|
|
|
|
|
|
|
|
|
|
|
3,632 |
|
Defined benefit plans liability adjustment, net of tax of $378 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,117 |
|
|
|
|
|
|
|
1,117 |
|
Currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61 |
|
|
|
|
|
|
|
61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 26, 2020 |
|
|
9,869 |
|
|
$ |
99 |
|
|
|
2,308 |
|
|
$ |
23 |
|
|
$ |
594,427 |
|
|
$ |
(562 |
) |
|
$ |
324,543 |
|
|
$ |
918,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Common Stock, Par |
|
|
|
|
|
Class B Common Stock, Par |
|
|
Additional Paid-in Capital |
|
|
Accumulated Other Comprehensive Loss, net of tax |
|
|
|
|
|
Total Stockholders’ Equity |
|
Balance at December 29, 2018 |
|
|
8,580 |
|
|
$ |
86 |
|
|
|
2,918 |
|
|
$ |
29 |
|
|
$ |
405,711 |
|
|
$ |
(1,197 |
) |
|
$ |
55,688 |
|
|
$ |
460,317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,655 |
|
|
$ |
87 |
|
|
|
2,918 |
|
|
$ |
29 |
|
|
$ |
416,602 |
|
|
$ |
(1,155 |
) |
|
$ |
107,238 |
|
|
$ |
522,801 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,729 |
|
|
|
44,729 |
|
Stock options exercised and restricted shares activities |
|
|
31 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
3,473 |
|
|
|
|
|
|
|
|
|
|
|
3,473 |
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,233 |
|
|
|
|
|
|
|
|
|
|
|
3,233 |
|
Shares issued in connection with Dogfish Head merger |
|
|
430 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
144,739 |
|
|
|
|
|
|
|
|
|
|
|
144,743 |
|
Conversion from Class B to Class A |
|
|
100 |
|
|
|
1 |
|
|
|
(100 |
) |
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
Currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 28, 2019 |
|
|
9,216 |
|
|
$ |
92 |
|
|
|
2,818 |
|
|
$ |
28 |
|
|
$ |
568,047 |
|
|
$ |
(1,154 |
) |
|
$ |
151,967 |
|
|
$ |
718,980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
$ |
159,143 |
|
|
$ |
96,279 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
48,937 |
|
|
|
41,841 |
|
|
|
|
2,796 |
|
|
|
243 |
|
(Gain) loss on disposal of property, plant and equipment |
|
|
(173 |
) |
|
|
449 |
|
|
|
|
5,465 |
|
|
|
2,734 |
|
|
|
|
746 |
|
|
|
53 |
|
Stock-based compensation expense |
|
|
10,735 |
|
|
|
9,043 |
|
|
|
|
14,160 |
|
|
|
14,047 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
(39,775 |
) |
|
|
(26,532 |
) |
|
|
|
(23,072 |
) |
|
|
(16,847 |
) |
Prepaid expenses, income tax receivable and other current assets |
|
|
(4,043 |
) |
|
|
(1,173 |
) |
|
|
|
(17,827 |
) |
|
|
(12,730 |
) |
|
|
|
33,020 |
|
|
|
22,388 |
|
Accrued expenses and other current liabilities |
|
|
18,024 |
|
|
|
14,949 |
|
Change in operating lease liability |
|
|
(1,887 |
) |
|
|
(2,270 |
) |
|
|
|
2,671 |
|
|
|
207 |
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
208,920 |
|
|
|
142,681 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows used in investing activities: |
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
|
(100,341 |
) |
|
|
(66,760 |
) |
Proceeds from disposal of property, plant and equipment |
|
|
72 |
|
|
|
144 |
|
Investment in Dogfish Head, net of cash acquired |
|
|
— |
|
|
|
(165,517 |
) |
Other investing activities |
|
|
392 |
|
|
|
(10 |
) |
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(99,877 |
) |
|
|
(232,143 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided by financing activities: |
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options and sale of investment shares |
|
|
14,015 |
|
|
|
8,437 |
|
Cash paid on note payable and finance leases |
|
|
(906 |
) |
|
|
(246 |
) |
Cash borrowed on line of credit |
|
|
100,000 |
|
|
|
97,000 |
|
Cash paid on line of credit |
|
|
(100,000 |
) |
|
|
(97,000 |
) |
Payment of tax withholdings on stock-based payment awards and investment shares |
|
|
(1,692 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
11,417 |
|
|
|
8,191 |
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents |
|
|
120,460 |
|
|
|
(81,271 |
) |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of year |
|
|
36,670 |
|
|
|
108,399 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
157,130 |
|
|
$ |
27,128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
Non cash consideration issued in Dogfish Head Brewery Transaction (Refer to Note C) |
|
$ |
— |
|
|
$ |
144,743 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
17,309 |
|
|
$ |
16,759 |
|
|
|
|
|
|
|
|
|
|
Cash paid for amounts included in measurement of lease liabilities |
|
|
|
|
|
|
|
|
Operating cash flows from operating leases |
|
$ |
6,949 |
|
|
$ |
3,178 |
|
|
|
|
|
|
|
|
|
|
Operating cash flows from finance leases |
|
$ |
106 |
|
|
$ |
258 |
|
|
|
|
|
|
|
|
|
|
Financing cash flows from finance leases |
|
$ |
838 |
|
|
$ |
7 |
|
|
|
|
|
|
|
|
|
|
assets obtained in exchange for operating lease obligations |
|
$ |
11,698 |
|
|
$ |
41,678 |
|
|
|
|
|
|
|
|
|
|
assets obtained in exchange for finance lease obligations |
|
$ |
2,689 |
|
|
$ |
2,837 |
|
|
|
|
|
|
|
|
|
|
Interest paid on revolving credit facility |
|
$ |
246 |
|
|
$ |
349 |
|
|
|
|
|
|
|
|
|
|
Change in purchase of property, plant and equipment in accounts payable and accrued expenses |
|
$ |
(3,390 |
) |
|
$ |
(2,076 |
) |
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Organization and Basis of Presentation
The Boston Beer Company, Inc. and certain subsidiaries (the “Company”) are engaged in the
business of selling alcohol beverages throughout the United States and in selected international markets, under the trade names “The Boston Beer Company
®
”, “Hard Seltzer Beverage Company”, “Twisted Tea Brewing Company
®
”, “Angry Orchard
®
Cider Company”, “Dogfish Head
®
Craft Brewery”, “Angel City
®
Brewing Company”, “Concrete Beach Brewery
®
”, “Coney Island
®
Brewing Company” and “American Fermentation Company”.
The accompanying unaudited consolidated balance sheet as of September 26, 2020, and the
consolidated statements of comprehensive income, stockholders’ equity, and cash flows for the interim periods ended September 26, 2020 and September 28, 2019 have been prepared by the Company in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnotes normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. All intercompany accounts and transactions have been eliminated. These consolidated financial statements should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form
10-K
for the year ended December 28, 2019.
In the opinion of the Company’s management, the Company’s unaudited consolidated balance sheet as of September 26, 2020 and the results of its consolidated operations, stockholders’ equity, and cash flows for the interim periods ended September 26, 2020 and September 28, 2019, reflect all adjustments (consisting only of normal and recurring adjustments) necessary to present fairly the results of the interim periods presented. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year.
The Company began seeing the impact of the
COVID-19
pandemic on its business in early March. The direct financial impact of the pandemic has primarily shown in significantly reduced keg demand from the
on-premise
channel and higher labor and safety related costs at the Company’s breweries. For the thirty-nine weeks ended September 26, 2020, the Company recorded
COVID-19
related
pre-tax
reductions in net revenue and increases in other costs that total $
14.2 million of which $
10.0 million was recorded in the first quarter, $
4.1 million was recorded in the second quarter and $
0.1 million was recorded in the third quarter. The total amount consists of a $
3.4 million reduction in net revenue for estimated keg returns from distributors and retailers and $
10.8 million for inventory write-downs for obsolescence, increased costs for health and safety, increased salaries and benefits and other
COVID-19
related direct costs, of which $
7.4 million are recorded in cost of goods sold and $
3.4 million are recorded in operating expenses. In addition to these direct financial impacts,
COVID-19
related safety measures resulted in a reduction of brewery productivity. This has shifted more volume to third-party breweries, which increased production costs and negatively impacted gross margins. While the duration of the disruption and related impact on the Company’s consolidated financial statements is currently uncertain, the Company expects to continue to incur increased costs related to health and safety for the foreseeable future.
C. Dogfish Head Brewery Transaction
On May 8, 2019, the Company entered into definitive agreements to acquire Dogfish Head Brewery (“Dogfish Head”) and various related operations (the “Transaction”) through the acquisition of all of the equity interests held by certain private entities in
Off-Centered
Way LLC, the parent holding company of the Dogfish Head operations. In accordance with these agreements, the Company made a payment of $
158.4 million, which was placed in escrow pending the satisfaction of certain closing conditions. The Transaction closed on July 3, 2019, for total consideration of $
336.0 million consisting of $
173.0 million in cash and
429,291 shares of restricted Class A Common Stock that had an aggregate market value as of July 3, 2019 of $
163.0 million, after taking into account a post-closing cash related adjustment. As required under the definitive agreements,
127,146 of the 429,291 shares of restricted Class A Stock have been placed in escrow and will be released no later than July 3, 2029. These shares had a market value on July 3, 2019 of $
48.3 million.
The timing of the release of these escrowed shares is primarily related to the continued employment with the Company of Samuel A. Calagione, III, one of the two Dogfish Head founders.
The Company’s allocation of consideration exchanged to the net tangible and intangible assets acquired and liabilities assumed in the Transaction is based on estimated fair values as of July 3, 2019, and was finalized on July 3, 2020. The following table summarizes the acquisition date fair value of the tangible assets, intangible assets, liabilities assumed, and related goodwill acquired from Dogfish Head, as well as the allocation of purchase price paid:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
7,476 |
|
|
|
|
8,081 |
|
|
|
|
9,286 |
|
Prepaid expenses and other current assets |
|
|
847 |
|
Property, plant and equipment |
|
|
106,964 |
|
|
|
|
108,846 |
|
|
|
|
98,500 |
|
|
|
|
3,800 |
|
|
|
|
378 |
|
|
|
|
|
|
|
|
|
344,178 |
|
|
|
|
3,861 |
|
Accrued expenses and other current liabilities |
|
|
4,085 |
|
|
|
|
18,437 |
|
|
|
|
59 |
|
|
|
|
|
|
Total liabilities assumed |
|
|
26,442 |
|
|
|
|
|
|
|
|
$ |
317,736 |
|
|
|
|
|
|
|
|
$ |
172,993 |
|
Nominal value of equity issued |
|
|
162,999 |
|
Fair Value reduction due to liquidity |
|
|
(18,256 |
) |
|
|
|
|
|
Estimated total purchase price |
|
$ |
317,736 |
|
|
|
|
|
|
The Company accounted for the acquisition in accordance with the accounting standards codification guidance for business combinations, whereby the total purchase price was allocated to the acquired net tangible and intangible assets of Dogfish Head based on their fair values as of the Transaction closing date.
The fair value of the Dogfish Head brand trade name is estimated at approximately $98.5 million and the fair value of customer relationships is estimated at $3.8 million. The Company estimated the Dogfish Head brand trade name will have an indefinite life and customer relationships will have an estimated useful life of 15 years. The customer relationship intangible asset will be amortized on a straight-line basis over the 15 year estimated useful life. The fair value of the deferred income tax liability assumed is $18.4 million, representing the expected future tax consequences of temporary differences between the fair values of the assets acquired and liabilities assumed and their tax basis. The excess of the purchase price paid over the estimated fair values of the assets and liabilities assumed has been recorded as goodwill in the amount of $108.8 million. Goodwill associated with the acquisition is primarily attributable to the future growth opportunities associated with the Transaction, expected synergies and value of the workforce. The Company believes the majority of the goodwill is deductible for tax purposes.
The fair value of the brand trade name was determined utilizing the relief from royalty method which is a form of the income approach. Under this method, a royalty rate based on observed market royalties is applied to projected revenue supporting the trade name and discounted to present value using an appropriate discount rate. The fair value of the property, plant and equipment was determined utilizing the cost and market valuation approaches.
The results of operations from Dogfish Head have been included in the Company’s consolidated statements of comprehensive income since the July 3, 2019 Transaction closing date.
Consistent with prior periods and considering post-merger reporting structures, the Company will continue to report as one operating segment. The combined Company’s brands are predominantly beverages that are manufactured using similar production processes, have comparable alcohol content, generally fall under the same regulatory environment, and are sold to the same types of customers in similar size quantities at similar price points and through the same channels of distribution.
The following unaudited pro forma information has been prepared as if the Transaction and the related debt financing had occurred as of December 30, 2018, the first day of the Company’s 2019 fiscal year. The pro forma amounts reflect the combined historical operational results for Boston Beer and Dogfish Head, after giving effect to adjustments related to the impact of purchase accounting, transaction costs and financing. The unaudited pro forma financial information is not indicative of the operational results that would have been obtained had the Transaction occurred as of that date, nor is it necessarily indicative of the Company’s future operational results. The following adjustments have been made:
|
(i) |
Interest expense has been included at a rate of approximately 3% which is consistent with the borrowing rate on the Company’s current line of credit. |
|
(ii) |
The tax effects of the pro forma adjustments at an estimated statutory rate of 25.6%. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
|
|
|
|
|
|
|
D. Goodwill and Intangible Assets
The Company’s intangible assets as of September 26, 2020 and December 28, 2019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Useful Life (Years) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As disclosed within Note C, the Company acquired intangible assets as part of the Dogfish Head transaction that
of $98.5 million for the value of the Dogfish Head brand name and $3.8 million for the value of customer relationships. The customer relationship intangible will be amortized on a straight-line basis over the 15 year useful life. Amortization expense in the thirteen and thirty-nine weeks ended September 26, 2020 was approximately $63,000 and $190,000, respectively. The Company expects to record amortization expense as follows over the remaining current year and the five subsequent years:
E. Recent Accounting Pronouncements
Accounting Pronouncements Recently Adopted
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The guidance requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires the consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted the standard in the first quarter of fiscal 2020 and there was no material impact.
In January 2017, the FASB issued ASU
No. 2017-04,
Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. Prior to ASU
No. 2017-04,
the goodwill impairment test is a
two-step
assessment, if indicators of impairment exist. The first step requires an entity to compare each reporting unit’s carrying value and its fair value. If the reporting unit’s carrying value exceeds the fair value, then the entity must perform the second step, which is to compare the implied fair value of goodwill to its carrying value, and record an impairment charge for any excess of carrying value of goodwill over its implied fair value. An entity also has the option to perform a qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. ASU
2017-04
simplifies the goodwill impairment test by eliminating the second step of the test. As such, an entity will perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize a goodwill impairment charge for the amount by which the reporting unit’s carrying amount exceeds its fair value. If fair value exceeds the carrying amount, no impairment should be recorded. ASU
2017-04
is effective prospectively for the year beginning December 29, 2019. The Company adopted the standard in the third quarter of 2020 during the annual goodwill impairment assessment and there was no material impact.
Accounting Pronouncements Not Yet Effective
In December 2019, the FASB issued ASU
2019-12,
Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The standard includes multiple key provisions, including removal of certain exceptions to ASC 740, Income Taxes, and simplification in several other areas such as accounting for a franchise tax (or similar tax) that is partially based on income. ASU
2019-12
is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently assessing the impact of adopting this standard but does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.
During the thirty-nine weeks ended September 26, 2020 and September 28, 2019 approximately 95% of the Company’s revenue was from shipments of its products to domestic distributors, 4% from shipments to international distributors, primarily located in Canada and 1% was from retail beer, cider, and merchandise sales at the Company’s retail locations.
The Company recognizes revenue when obligations under the terms of a contract with its customer are satisfied; generally, this occurs with the transfer of control of its products. Revenue is measured as the amount of consideration expected to be received in exchange for transferring products. If the conditions for revenue recognition are not met, the Company defers the revenue until all conditions are met. As of September 26, 2020 and December 28, 2019, the Company has deferred $11.5 million and $7.0 million, respectively in revenue related to product shipped prior to these dates. These amounts are included in accrued expenses and other current liabilities in the accompanying consolidated balance sheets.
Customer promotional discount programs are entered into by the Company with distributors for certain periods of time. The reimbursements for discounts to distributors are recorded as reductions to net revenue and were $19.0 million and $47.6 million for the thirteen and thirty-nine weeks ended September 26, 2020, respectively. The reimbursements for discounts to Distributors are recorded as reductions to net revenue and were $14.8 million and $34.5 million for the thirteen and thirty-nine weeks ended September 28, 2019, respectively. The agreed-upon discount rates are applied to certain distributors’ sales to retailers, based on volume metrics, in order to determine the total discounted amount. The computation of the discount allowance requires that management make certain estimates and assumptions that affect the timing and amounts of revenue and liabilities recorded. Actual promotional discounts owed and paid have historically been in line with allowances recorded by the Company, however, the amounts could differ from the estimated allowance.
Customer programs and incentives are a common practice in the alcohol beverage industry. Amounts paid in connection with customer programs and incentives are recorded as reductions to net revenue or as advertising, promotional and selling expenses
based on the nature of the expenditure. Customer incentives and other payments made to distributors are primarily based upon performance of certain marketing and advertising activities. Depending on applicable state laws and regulations, these activities
promoting the Company’s products may include, but are not limited to
and merchandise placement, samples, product displays, promotional programs at retail locations and meals, travel and entertainment. Amounts paid to customers in connection with these programs for the thirteen and thirty-nine weeks ended September 26, 2020 were $
7.5 million and $
16.9 million, respectively. For the thirteen and thirty-nine weeks ended September 26, 2020, the Company recorded certain of these costs in the total amount of $
6.9 million and $
15.9 million, respectively as reductions to net revenue. Amounts paid to customers in connection with these programs that were recorded as reductions to revenue for the thirteen and thirty-nine weeks ended September 28, 2019 were $
7.8 million and $
17.8 million, respectively. Amounts paid to customers in connection with these programs that were recorded as reductions to revenue for the thirteen and thirty-nine weeks ended September 2
8
, 2019 were $
6.2 million and $
13.0 million, respectively. Costs recognized in net revenues include, but are not limited to, promotional discounts, sales incentives and certain other promotional activities. Costs recognized in advertising, promotional and selling expenses include point of sale materials, samples and media advertising expenditures in local markets. These costs are recorded as incurred, generally when invoices are received; however certain estimates are required at the period end. Estimates are based on historical and projected experience for each type of program or customer and have historically been in line with actual costs incurred.
The Further Consolidation Appropriations Act, 2020 extended reductions in federal excise taxes as a result of the Tax Cuts and Jobs Act of 2017 through December 31, 2020. The Company benefited from a reduction in federal excise taxes of $4.0 million and $2.8 million for the thirteen weeks ended September 26, 2020 and September 28, 2019, respectively. The Company benefited from a reduction in federal excise taxes of $9.8 million and $6.6 million for the thirty-nine weeks ended September 26, 2020 and September 28, 2019 respectively.
On March 31, 2020, The Alcohol and Tobacco Tax and Trade Bureaus (“TTB”) released TTB Industry Circular
2020-2,
which postponed all Federal excise tax payments for ninety days on sales of wine, beer and distilled spirits between March 1, 2020 and July 1, 2020. As a September 26, 2020, the Company had accrued federal excise taxes of $
8.6 million in accrued expenses and other current liabilities,
which will be fully paid during the fourth quarter of 2020.
The Company believes distributor inventory as of September 26, 2020 averaged approximately 2 weeks on hand and was lower than prior year levels due to depletions outpacing supply constrained shipments. The Company expects wholesaler inventory levels in terms of weeks on hand to remain between 1 and 4 weeks for the
remainder
of the year.
Inventories consist of raw materials, work in process and finished goods. Raw materials, which principally consist of hops, flavorings, apple juice, other brewing materials and packaging, are stated at the lower of cost, determined on the
first-in,
first-out
basis, or net realizable value. The Company’s goal is to maintain on hand a supply of at least one year for essential hop varieties, in order to limit the risk of an unexpected reduction in supply. Inventories are generally classified as current assets. The Company classifies hops inventory in excess of two years of forecasted usage in other long-term assets. The cost elements of work in process and finished goods inventory consist of raw materials, direct labor and manufacturing overhead. Inventories consist of the following:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
61,705 |
|
|
$ |
61,522 |
|
|
|
|
14,287 |
|
|
|
12,631 |
|
|
|
|
47,839 |
|
|
|
31,885 |
|
|
|
|
|
|
|
|
|
|
|
|
|
123,831 |
|
|
|
106,038 |
|
|
|
|
15,327 |
|
|
|
10,048 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
139,158 |
|
|
$ |
116,086 |
|
|
|
|
|
|
|
|
|
|
The Company has various lease agreements in place for facilities and equipment. Terms of these leases include, in some instances, scheduled rent increases, renewals, purchase options and maintenance costs, and vary by lease. These lease obligations expire at various dates through 2034. As the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate based on information available at commencement to determine the present value of the lease payments. ROU assets and lease liabilities commencing after December 30, 2018 are recognized at commencement date based on the present value of lease payments over the lease term. Leases with an initial term of 12 months or less (“short-term leases”) are not recorded on the balance sheet and are recognized on a straight-line basis over the lease term. As of September 26, 2020, and December 28, 2019 total ROU assets and lease liabilities were as follows:
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|
Operating lease assets |
|
Operating assets |
|
$ |
59,991 |
|
|
$ |
53,758 |
|
Finance lease assets |
|
Property, plant and equipment, net |
|
|
4,389 |
|
|
|
2,531 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
|
|
Operating lease liabilities |
|
Current operating lease liabilities |
|
|
7,735 |
|
|
|
5,168 |
|
Finance lease liabilities |
|
Accrued expenses and other current liabilities |
|
|
1,441 |
|
|
|
546 |
|
Non-current |
|
|
|
|
|
|
|
|
|
|
Operating lease liabilities |
|
Non-current operating lease liabilities |
|
|
61,184 |
|
|
|
53,940 |
|
Finance lease liabilities |
|
Other liabilities |
|
|
2,997 |
|
|
|
2,042 |
|
The gross value and accumulated depreciation of ROU assets related to finance leases as of September 26, 2020 and December 28, 2019 were as follows:
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|
|
|
|
|
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|
|
|
|
|
|
|
|
|
$ |
5,525 |
|
|
$ |
2,837 |
|
|
|
|
(1,136 |
) |
|
|
(306 |
) |
|
|
|
|
|
|
|
|
|
|
|
$ |
4,389 |
|
|
$ |
2,531 |
|
|
|
|
|
|
|
|
|
|
Components of lease cost for the thirteen and thirty-nine weeks ended September 26, 2020 and September 28, 2019 were as follows:
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,425 |
|
|
$ |
1,375 |
|
|
$ |
7,277 |
|
|
$ |
3,680 |
|
Variable lease costs not included in liability |
|
|
349 |
|
|
|
171 |
|
|
|
1,321 |
|
|
|
643 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
257 |
|
|
|
131 |
|
|
|
830 |
|
|
|
174 |
|
Interest on lease liabilities |
|
|
31 |
|
|
|
206 |
|
|
|
106 |
|
|
|
258 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
288 |
|
|
$ |
337 |
|
|
$ |
936 |
|
|
$ |
432 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturities of lease liabilities as of September 26, 2020 were as follows:
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|
|
Weighted-Average Remaining Term in Years |
|
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|