☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
28, 2019
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Massachusetts 04-3284048
incorporation or organization)
Identification No.)
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Class A Common | SAM | New York Stock Exchange |
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of RegulationsS-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form10-K or any amendment to this Form10-K. ☒
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||
Emerging growth company | ☐ |
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities31, 201628, 2019 Page I.II. Business 1Risk Factors 11 Unresolved Staff Comments21Properties21Legal Proceedings22Mine Safety Disclosures22PART II. 22 25 25 37 38 69 69 71 71 71 71 72 72 Exhibits and Financial Statement Schedules 72Form 10-K Summary 74 75
Item 1. | Business |
During 2016, the Company sold over sixty beers under the
During the last twenty years the number of breweries in the United States has increased significantly from approximately 1,500 in 2009 to over 8,000 in 2019. Most of these new breweries are craft (small and independent) brewers. The rise of craft breweries along with the growth of imported beers has resulted in a significant decline in the volume of the two largest breweries who now comprise approximately 70% of all United States domestic beer production, excluding imports.
market and the Company has approximately an 8% market share of the High End category.
consumption and that the volume comprising the FMB category grew approximately 5%2% in 2016.2019. This category is highly competitive due to, among other factors, the presence of large brewers and spirits companies in the category the advertising of malt-based spirits brands in channels not available to the parent brands and a fast pace of product innovation.
The Company’s Coney Island Hard Sodas and Truly Spiked & Sparkling beverages compete within the hard soda and hard seltzer categories, respectively, and these categories have similar characteristics to the beer industry for reporting and regulatory purposes. These categories are small, in their early stages of development, highly competitive and include large international and domestic competitors. The Company’s Coney Island Hard Sodas and Truly Spiked & Sparkling beverages are included in generic references to the Company’s “beers” in this report. The Company launched Coney Island Hard Root Beer nationally during the second half of 2015 and Truly Spiked & Sparkling in the second half of 2016. The Company believes the hard soda category comprises less than 0.5% of United States beer consumption and that the volume comprising this category increased in 2016 because of full year availability, but, as best as can be determined, declined in the fourth quarter. The Company believes the hard seltzer category grew in 2016 due to new entrants and expanded distribution, but still comprises less than 0.1% of United States beer consumption and may have significant seasonality.
2019.
Beers,
Cider Business
Beach
Cold Snap. These two new beers include:national launch in the first quarter of 2018 of Samuel Adams Hopscape, for JanuarySam ’76, a revolutionary beer that is a uniquely flavorful lager. Later in 2018 and February 2017,on a more limited basis, the Company launched Samuel Adams New England IPA, a hazy unfiltered IPA with citrusy hop flavor. Sam ’76 and Samuel Adams FreshNew England IPA are viewed as Helles,important innovations and opportunities for February, March and April 2017.
sales volume growth within the Samuel Adams brand family.
After being in test markets during 2013, the Company began a national rollout of Samuel Adams Rebel® IPA, a West Coast style IPA brewed with hops from the Pacific Northwest, in early 2014. Since the national rollout, the Company has added additional styles to support Samuel Adams Rebel IPA, including Samuel Adams Rebel Grapefruit IPA, Samuel Adams Rebel Juiced IPA, Sam Adams Rebel Rouser® IPA and Samuel Adams Rebel Raw® IPA. In early 2016, the Company introduced Samuel Adams Rebel IPA Pack of Rebels which includes Samuel Adams Rebel Cascade IPA which is exclusive to this variety pack. In early 2017, the Company introduced a reformulation and new packaging of its original Samuel Adams Rebel IPA. The ‘Rebel Reborn’ reformulation includes experimental hops that create a more tropical and piney IPA and is being launched nationally during the first quarter of 2017.
The Samuel Adams Brewmaster’s Collection isand Samuel Adams Rebel
Since 2012,celebrations and at its Samuel Adams Downtown Boston Tap Room, Samuel Adams Boston Brewery Tap Room and Samuel Adams Cincinnati Brewery Tap Room.
the Dogfish Head beer and distilled spirits brands.
The Company’s beers, hard ciders and hard seltzers are sold by the Company’s sales force to the same types of customers in similar size quantities, at similar price points and through substantially the same channels of distribution. These beverages are manufactured using similar production processes, have comparable alcohol content and generally fall within the same regulatory environment.
various brand labels for evaluation of drinker interest.interest. The Company also promotes the annual LongShot® American Homebrew Contest® in which homebrewers and employees of the Company submit their homebrews for inclusion in the LongShot®six-pack in the following year. In 2016, the Company sold over sixty Samuel Adams beers commercially and brewed many more test brews. The Company’s Boston Brewery, spends most ofthe Milton Brewery and the Orchard, along with its other larger breweries and brewery tap rooms spend significant time ideating, testing and developing alcohol beverages for the Company’s potential future commercial development and evaluating ingredients and process improvements for existing beverages.
In late 2011, the Company formed a subsidiary, A&S Brewing Collaborative LLC, d/b/a A&S Brewing, as a craft brew incubator headed by Alan Newman, founder of Magic Hat Brewing Company. A&S Brewing is headquartered in Burlington, Vermont. The mission of A&S Brewing is to find new opportunities in craft brewing, which may be geographical or stylistic and some may be with existing breweries or brewpubs. A&S Brewing has access to the brewing talents and broad resources of the Company, as it looks for opportunities around the country. A&S Brewing brands include The Traveler Beer Company, the Angel City Brewery, the Concrete Beach Brewery and the Coney Island Brewery. The A&S Brewing company-owned small breweries are located in Los Angeles, California (the “Angel City Brewery”), Miami, Florida (the “Concrete Beach Brewery”) and Brooklyn, New York (the “Coney Island Brewery”). In late 2016, Alan Newman left the Company, as planned under his five year employment agreement, and the Company will continue the A&S Brewing business and mission under the new leadership of Rob Kreszswick, who, prior to his promotion, had been leading A&S Brewing sales since 2014. In 2016, A&S Brewing annual net sales were approximately 4% of the Company’s total net sales.
Most
Distributors in several markets. The goal of the Freshest Beer Program is to provide betteron-time service, forecasting, production planning andwork in cooperation with the Distributors whileto provide better
terms of weeks on hand to remain between 3 and 5 weeks for most of 2020.
In 2008, the Company launched its
booked 2015 and 20162019 barley
The Company uses hops in various formats including
The
supply and procures hops needed for new beers, based on its best estimate of likely short-term demand. The Company classifies hops inventory in excess of two years of forecasted usage in other long term assets.
Zealand suppliers and include bittersweet apples from France and New Zealand and culinary apples from Italy, Washington State and Washington State.New York. Purchases and commitments are denominated in Euros for European apples and US Dollars for United States apples and New Zealand Dollars for the New Zealand apples. There is limited availability of some of these apple varieties, and many outside factors, including weather conditions, growers rotating from apples to other crops, competitor demand, government regulation and legislation affecting agriculture, could affect both price and supply. The 20162019 apple cropscrop in Europe for certain regions was lower than historical long-term averages, due to climate conditions. The 2019 apple crop in the United States and New Zealand werewas consistent with historical long termlong-term averages. The Company has entered into contracts to cover its expected needs for 20172020 and expects to realize full delivery against these contracts.
retail sales on site.
Beer, Hard Cider and Hard Seltzer The Dogfish Head brand will adopt this practice for most of its beers during 2020.
The Company also engages in various product development activities. Such activities include researching market needs and competitive products, and sample brewing and market taste testing.
the Company’s current expectations.
areas.
The A&S Brewing breweries include the Angel City Brewery, Concrete Beach Brewery and Coney Island Brewery. The production at the A&S Brewing breweries is mainly for developing innovative and traditional beers and supporting draft accounts in the respective local market areas and providing foron-premise consumption of its beers at its beer halls.
The Company currently has a brewing services agreement with subsidiaries of City Brewing Company, LLC, to produce its products at facilities in Latrobe, Pennsylvania and Memphis, Tennessee.
The Company currently has a brewing services agreement with subsidiaries of City Brewing Company, LLC (“City Brewing”). During 2018 and 2019, the Company amended the brewing services agreement to include a minimum capacity availability commitment by City Brewing. The amendment grants the Company the right to extend the agreement beyond the December 31, 2021 termination date on an annual basis through December 31, 2029. The amendments require the Company to pay up to $26.5 million dollars for capital improvements at City Brewing facilities of which $20.5 million has been paid as of December 28, 2019 and the remaining amount of $6.0 million is expected to be paid in May 2020. During 2019, City Brewing supplied approximately 23% of the Company’s annual shipment volume.
styles.
United States, MillerCoorsAB InBev and AB InBev,Molson Coors, participate actively in the Better BeerHigh End category, both through importing and distributing foreign brands that compete in the Better BeerHigh End category and also with their own domestic specialty beers, either by developing new brands or by acquiring, in whole or part, existing craft breweries. In addition, Miller Coors’ Tenth and Blake and AB InBev’s High End Division and Molson Coors’ Tenth and Blake were formed as business units headquartered in the United States that are focused exclusively on competing in the Better Beer market.
During the last few years, there were numerous acquisitions in the beer industry with the largest being AB InBev’s $107 billion purchase of SAB Miller and the related sale by SAB Miller to MolsonCoors of its 58% share of the MillerCoors joint venture with MolsonCoors. High End category.
category, the advertising of malt-based spirits brands in channels not available to the parent brands and a fast pace of product innovation.
The Company’s Coney Island Hard Sodas In recent years, regional and Truly Spiked & Sparkling beverages compete withinlocal cideries, including ‘Bold Rock’ and ‘Austin East Ciders’, have built businesses that have gained share locally at the hard soda and hard seltzer categories, respectively. These categories are small, in their early stagesexpense of development, highly competitive and include large international and domestic competitors. Hard sodas and hard seltzers are typically priced competitively with Better Beers and may compete for drinkers with beer, wine, spirits, or FMBs. Some of these competitors include Pabst under ‘Not Your Fathers’; ABInbev under ‘Best Damn’ and ‘Spiked Seltzer’; Miller Coors under ‘Henry Weinhard’; Mikes Hard Lemonade under ‘White Claw’ and Diageo under “Smirnoff”.
the national brands.
options.
Item 1A. | Risk Factors |
risks and uncertainties that management believes are most likely to be material and therefore are most important for an investor to consider. The Company’s business operations and results may also be adversely affected by additional risks and uncertainties not presently known to it, or which it currently deems immaterial, or which are similar to those faced by other companies in its industry or business in general. If any of the following risks or uncertainties actually occurs, the Company’s business, financial condition, results of operations or cash flows would likely suffer. In that event, the market price of the Company’s Class A Common Stock could decline.
In recent periods,
TurnoverBusiness. Regulatory Changes in Company Leadership or Other Key Positions May LeadResponse to Loss of Key Knowledge or Capability and Adversely Impact Company Performance.
In 2016 the Company made changes in several senior management positions, including hiring a new Chief Financial Officer, Chief Marketing Officer and senior supply chain officer to succeed retiring executives. In early 2017, the President and Chief Executive Officer, Martin Roper, announced his plans to retire in 2018 after leading the Company for more than 17 years. The Board of Directors has created a search committee and retained Korn Ferry to assist in identifying and evaluating the best candidates to succeed Roper as CEO. The Company may well experience further changes in key leadership or key positions in the future. The departure of key leadership personnel, especially a long-serving chief executive officer, can take from the Company significant knowledge and experience. This loss of knowledge and experience can be mitigated through successful hiring and transition, but there can be no assurance that the Company will be successful in such efforts. Attracting, retaining, integrating and developing high performance individuals in key roles is a core component of the Company’s strategy for addressing its business opportunities. Attracting and retaining qualified senior leadership may be more challenging under adverse business conditions, such as the declining growth environment now facing the Company. Failure to attract and retain the right talent, or to smoothly manage the transition of responsibilities resulting from such turnover, would affect the Company’s ability to meet its challenges and may cause the Company to miss performance objectives or financial targets.
The Company May Not Be Able to Manage Demand for Its Products.
The Company’s future growth may also be limited by its ability to meet production goals and/or targets at the Company’s owned breweries, disruption or operating performance issues at the Company’s owned breweries, limits on the availability of suitable production capacity at third party-owned breweries, and the Company’s ability to enter into brewing contracts with third party-owned breweries on commercially acceptable terms, and its ability to obtain sufficient quantities of certain ingredients and packaging materials, such as hops, malt, cider ingredients, bottles and cans, from suppliers.
The Company has Significantly Increased its Product Offerings and Distribution Footprint, which Increases Complexity andPublic Attitudes Could Adversely Affect the Company’s Results.
Business.
brand and the Coney Island beer brand, including Coney Island Hard Root Beer. Also in November 2015, the Company opened the Angry Orchard Innovation Cider House at its apple orchard located in Walden, New York, where hard cider is fermented, sold and consumedon-premise. In 2016, the Company began national distribution of certain styles of the Truly Spiked & Sparkling brand. These additional brands and locations, along with the increases in demand for certain existing brands, have added to the complexityspirits companies. If consumption of the Company’s product development process, as well as its brewing, fermenting, packaging, marketing and selling processes. The Company does not haveproducts in general were to come into disfavor among domestic drinkers, or if the domestic beer industry were subjected to significant experience with managing this number of brands and products and has limited experience with integrating acquired brandsadditional societal pressure or operating small production facilities and retail operations. There can be no assurance that the Company will effectively manage such increased complexity, without experiencing operating inefficiencies or control deficiencies. Such inefficiencies or deficiencies could have a material adverse effect ongovernmental regulations, the Company’s business could be materially adversely affected.
Unexpected Events at Company-Owned Production Facilities, Reduced Availabilityregulations that allow the sale and distribution of Breweries Owned by Others, Increased Complexitymarijuana. Currently it is not possible to predict the impact of this on sales of alcohol, but it is possible that legal marijuana usage could adversely impact the demand for the Company’s Business, or the Expansion Costs of the Company-Owned Breweries Could Have A Material Adverse Effect on the Company’s Operations or Financial Results.
Prior to 2008, the Company pursued a production strategy that combined the capacity at its Cincinnati Brewery, which was acquired in 1997, with significant production arrangements at breweries owned by third parties. The brewing services arrangements with breweries owned by others allowed the Company to utilize their excess capacity, providing the Company with production flexibility, as well as cost advantages over its competitors, while maintaining full control over the brewing process for its beers. The Company purchased the Pennsylvania Brewery in June 2008. As a result of that acquisition and the subsequent expansion of the Pennsylvania Brewery’s capacity, the volume of core brands brewed at Company-owned breweries increased, and currently over 95% of the Company’s volume is brewed and packaged at breweries that it owns.
In 2016, the Company brewed its flagship beer, Samuel Adams Boston Lager, at each of its three Samuel Adams breweries, but at any particular time it may rely on only one brewery for its products other than Samuel Adams Boston Lager. The Company expects to continue to brew most all of its volume in 2017 at its Company-owned breweries. This reliance on its own breweries exposes the Company to capacity constraints and risk of disruption of supply, as these breweries are operating at or close to current capacity in peak months. Management believes that it has alternatives available to it, in the event that production at any of its brewing locations is temporarily interrupted, although as volumes at the Pennsylvania Brewery increase, severe interruptions there would be problematic, particularly during peak season. In addition, if interruptions were to occur, the Company may not be able to maintain its current economics and could face significant delays in starting replacement brewing locations. Potential interruptions at breweries include labor issues, governmental action, quality issues, contractual disputes, machinery failures, operational shut downs or natural or unavoidable catastrophe.
The growth in the Company’s business and product complexity and the expansion of the capacities and manpower at the Company’s breweries to facilitate greater reliance on its owned breweries heighten the management challenges that the Company faces. In recent years, the Company has had product shortages and service issues and the Company’s supply chain struggled under the increased volume and experienced increased operational and freight costs as it reacted. In response to these issues, the Company has significantly increased its packaging capabilities and tank capacity and added personnel to address these challenges. There can be no assurance that the Company will effectively manage such increasing complexity without experiencing future planning failures, operating inefficiencies, insufficient employee training, control deficiencies or other issues that could have a material adverse effect on the Company’s business and financial results. The prior growth of the Company, changes in operating procedures and increased complexity have required significant capital investment. The Company to date has not seen operating cost leverage from these increased volumes and there is no guarantee that it will.
The Company continues to avail itself of capacity at third-party breweries. During 2016, the Company brewed and/or packaged certain products under service contracts at facilities located in Latrobe, Pennsylvania and
Memphis, Tennessee. In selecting third party breweries for brewing services arrangements, the Company carefully weighs a brewery’s capability of utilizing traditional brewing, fermenting and finishing methods and its quality control capabilities throughout the production process. To the extent that the Company needs to avail itself of a third-party brewing services arrangement, it exposes itself to higher than planned costs of operating under such contract arrangements than would apply at the Company-owned breweries or an unexpected decline in the brewing capacity available to it, either of which could have a material adverse effect on the Company’s business and financial results. The use of such third party facilities also creates higher logistical costs and uncertainty in the ability to deliver product to the Company’s customers efficiently and on time.
As the brewing industry continues to consolidate and the Company has grown, the capacity and willingness of breweries owned by others where the Company could brew some of its beers, if necessary, has become a more significant concern and, thus, there is no guarantee that the Company’s brewing needs will be uniformly met. The Company continues to work at its Company-owned breweries, and with its contract brewers to attempt to minimize any potential disruptions. Nevertheless, should an interruption occur, the Company could experience temporary shortfalls in production and/or increased production and/or distribution costs and be required to make significant capital investments to secure alternative capacity for certain brands and packages, the combination of which could have a material adverse effect on the Company’s business and financial results. A simultaneous interruption at several of the Company’s production locations or an unexpected interruption at one of the Company-owned breweries would likely cause significant disruption, increased costs and, potentially, lost sales.
products.
In late 2010,
the year on year inventory reduction from the inventory levels that might otherwise have been expected. In 2015 and 2016,last five years, the Company has been pilotingintroduced many new beers, hard seltzers and hard ciders under the Samuel Adams, Twisted Tea, Truly Hard Seltzer, Angry Orchard and three A&S Brewing brands. In early 2019, the Company introduced new brands including Wild Leaf Hard Tea, a craft hard tea, and Tura Alcoholic Kombucha, an alcoholic kombucha tea. In July 2019, the addition of the Dogfish Head brand added over 25 styles of beer, 15 styles of distilled spirits, two brewery tap rooms, a restaurant and a boutique Inn. In January 2020, the Company opened the Samuel Adams Tap Room and small group of distributors onbrewery in downtown Boston. The Company currently operates 10 retail locations, including eight brewery tap rooms, a pure replenishment service model within our Freshest Beer Program, which if successful would further reduce Distributor inventories. The ordering process has changed significantlycidery tasting room and a restaurant, where its beers, hard seltzers, hard ciders and distilled spirits are sold and consumed
ItCompany-Owned Breweries Could Have A Material Adverse Effect on the Company’s Operations or Financial Results.
The Company also fills orders from those of its Distributors who may independently choose to build their inventories or run their inventories down. Such a change in Distributor inventories is unpredictable and can lead to fluctuations in the Company’s quarterly or annual results.
inefficiencies.
Except for the shortage of apples in 2012, the
The Company’s accounting policy for hops inventory and purchase commitments is to recognize a loss by establishing a reserve to the extent inventory levels and commitments exceed management’s expected future usage. The computation of the excess inventory requires management to make certain assumptions regarding future sales growth, product mix, cancellation costs and supply, among others. Actual results may differ materially from management’s estimates.
An Increase in Packaging Costs Could Harm the Company’s Financial Results.
entered into long-term supply agreements for certain packaging materials that have shielded it from some cost increases. These contracts have varying lengths and terms and there is no guarantee that the economics of these contracts can be replicated when renewed. The Company’s inability to preserve the current economics on renewal could expose the Company to significant cost increases in future years. Some of these contracts require the Company to make commitments on
Company’s ability to operate.
The Company’s Advertising and Promotional Investments May Affect the Company’s Financial Results but Not be Effective.
The Company has made, and expects to continue to make, significant advertising and promotional expenditures to enhance its brands, even though these expenditures may adversely affect the Company’s results of operations in a particular quarter or even for the full year, and may not result in increased sales. Variations in the levels of advertising and promotional expenditures have in the past caused, and are expected in the future to continue to cause, variability in the Company’s quarterly results of operations. While the Company attempts to invest only in effective advertising and promotional expenditures, it is difficult to correlate such investments with sales results, and there is no guarantee that the Company’s expenditures will be effective in building brand equity or growing long term sales.
The Company’s Operations are Subject to Certain Operating Hazards Which Could Result in Unexpected Costs or Product Recalls That Could Harm the Company’s Business.
The Company’s operations are subject to certain hazards and liability risks faced by all brewers, such as potential contamination of ingredients or products by bacteria or other external agents that may be wrongfully or accidentally introduced into products or packaging, or defective packaging and handling. Such occurrences may create bad tasting beer, hard cider or hard seltzer, or pose risk to the integrity and safety of the packaging. These could result in unexpected costs to the Company and, in the case of a costly product recall, potentially serious damage to the Company’s reputation for product quality, as well as product liability claims.
practices, relationships with Distributors, environmental impact of operations and other matters. These laws and regulations are subject to frequent reevaluation, varying interpretations and political debate, and inquiries from governmental regulators charged with their enforcement. In addition, any delays in federal or state government
Changes in Public Attitudes and Drinker Tastes Could Harm the Company’s Business. Regulatory Changes in Response to Public Attitudes Could Adversely Affect the Company’s Business.
The alcoholic beverage industry has become the subject of considerable societal and political attention in recent years, due to increasing public concern over alcohol-related social problems, including driving under the influence, underage drinking and health consequences from the misuse of alcohol, including alcoholism. As an outgrowth of these concerns, the possibility exists that advertising by beer producers could be restricted, that additional cautionary labeling or packaging requirements might be imposed, that further restrictions on the sale of alcohol might be imposed or that there may be renewed efforts to impose increased excise or other taxes on beer sold in the United States.
The domestic beer industry, other than Better Beers, has experienced a slight decline in shipments over the last ten years. The Company believes that this slower growth is due to both declining alcohol consumption per person in the population and increased competition from wine and spirits companies. If beer consumption in general were to come into disfavor among domestic drinkers, or if the domestic beer industry were subjected to significant additional governmental regulations, the Company’s business could be materially adversely affected.
Certain states are considering or have passed laws and regulations that allow the sale and distribution of marijuana. It is possible that legal marijuana usage could adversely impact the demand for the Company’s products.
Impact of Changes in Drinker Attitudes on Brand Equity and Inherent Risk of Reliance on the Company’s Founder in the Samuel Adams® Brand Communications.
There is no guarantee that the brand equities that the Company has built in its brands will continue to appeal to drinkers. Changes in drinker attitudes or demands could adversely affect the strength of the Company’s brands and the revenue that is generated from that strength. It is possible that the Company could react to such changes and reposition its brands, but there is no certainty that the Company would be able to maintain volumes, pricing power and profitability. It is also possible that marketing messages or other actions taken by the Company could damage its brand equities, as opposed to building them. If such damage were to occur, it would likely have a negative effect on the financial condition of the Company.
In addition to these inherent brand risks, the founder and Chairman of the Company, C. James Koch, is an integral part of the Company’s Samuel Adams brand history, equity and current and potential future brand messaging and the Company relies on the positive public perception of its founder. The role of Mr. Koch as founder, brewer and leader of the Company is emphasized as part of the Company’s brand communication and has appeal to some drinkers. If Mr. Koch were not available to the Company to continue his active role, his absence could negatively affect the strength of the Company’s messaging and, accordingly, the Company’s growth prospects. The Company and its brands may also be impacted if drinkers’ views of Mr. Koch were to negatively change. If either of these were to occur, the Company might need to adapt its strategy for communicating its key messages regarding its traditional brewing processes, brewing heritage and quality. Any such change in the Company’s messaging strategy might have a detrimental impact on the future growth of the Company.
Company
others.
The Company Relies Upon Complex Information Systems.
The Company depends on information technology to be able to operate efficiently and interface with customers and suppliers, as well as maintain financial and accounting reporting accuracy to ensure compliance with all applicable laws. If the Company does not allocate and effectively manage the resources necessary to build and sustain the proper technology infrastructure, the Company could be subject to transaction errors, processing inefficiencies, the loss of customers, business disruptions, or the loss of or damage to intellectual property through security breach. The Company recognizes that many groups on a world-wide basis have experienced increases in cyber attacks and other hacking activity. The Company has dedicated internal and external resources to review and address such threats. However, as with all large information technology systems, the Company’s systems could be penetrated by outside parties intent on extracting confidential or proprietary information, corrupting information, disrupting business processes, or engaging in the unauthorized use of strategic
information. Such unauthorized access could disrupt business operations and could result in the loss of assets or revenues, remediation costs or damage to the Company’s reputation, as well as litigation against the Company by third parties adversely affected by the unauthorized access. Such events could have a material adverse effect on the Company’s business and financial results. The Company also relies on third parties for supply of software, software and data hosting and telecommunications and networking, and is reliant on those third parties for the quality and integrity of these complex services. Failure by a third party supplier could have material adverse effect on the Company’s ability to operate.
Item 1B. | Unresolved Staff Comments |
Item 2. | Properties |
The Company maintains a brewery and tour center in Boston, Massachusetts in approximately 43,000 square feet of leased space. The current term of the lease for this facility will expire in 2019, although it has an option to extend the term for an additional five years.
2031.
2029, although it has an option to extend the term for an additional fifteen years in five year increments.
2021.
2020, although it has an option to extend the term for an additional 5 years.
Item 3. | Legal Proceedings |
Item 4. | Mine Safety Disclosures |
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
28, 2019.
ANNUAL RETURN PERCENTAGE Years Ending | ||||||||||||||||||||
Company Name / Index | 12/29/12 | 12/28/13 | 12/27/14 | 12/26/15 | 12/31/16 | |||||||||||||||
The Boston Beer Company, Inc. | 22.49 | 82.06 | 22.16 | -30.55 | -17.31 | |||||||||||||||
S&P 500 Index | 14.07 | 34.12 | 15.76 | 0.77 | 11.07 | |||||||||||||||
S&P 500 Beverages Index | 7.16 | 22.48 | 19.04 | 10.52 | 1.77 | |||||||||||||||
Peer Group | 1.17 | 36.24 | 37.43 | 25.24 | �� | 6.10 |
Base | INDEXED RETURNS Years Ending | |||||||||||||||||||||||
Company Name / Index | Period 12/31/11 | 12/29/12 | 12/28/13 | 12/27/14 | 12/26/15 | 12/31/16 | ||||||||||||||||||
The Boston Beer Company, Inc. | 100 | 122.49 | 223.01 | 272.42 | 189.20 | 156.46 | ||||||||||||||||||
S&P 500 Index | 100 | 114.07 | 153.00 | 177.10 | 178.46 | 198.21 | ||||||||||||||||||
S&P 500 Beverages Index | 100 | 107.16 | 131.25 | 156.24 | 172.68 | 175.74 | ||||||||||||||||||
Peer Group | 100 | 101.17 | 137.83 | 189.42 | 237.22 | 251.68 |
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ANNUAL RETURN PERCENTAGE Years Ending | ||||||||||||||||||||
Company Name / Index | 12/26/15 | 12/31/16 | 12/30/17 | 12/29/18 | 12/28/19 | |||||||||||||||
The Boston Beer Company, Inc. | -30.55 | -17.31 | 12.51 | 24.97 | 58.59 | |||||||||||||||
S&P 500 Index | 0.77 | 11.07 | 21.83 | -5.20 | 32.97 | |||||||||||||||
S&P 500 Beverages Index | 10.52 | 1.77 | 18.84 | -3.29 | 23.99 | |||||||||||||||
Peer Group | 25.35 | 6.10 | -13.68 | -30.08 | 0.20 |
INDEXED RETURNS Years Ending | ||||||||||||||||||||||||
Company Name / Index | Base Period 12/27/14 | 12/26/15 | 12/31/16 | 12/30/17 | 12/29/18 | 12/28/19 | ||||||||||||||||||
The Boston Beer Company, Inc. | 100 | 69.45 | 57.43 | 64.62 | 80.75 | 128.07 | ||||||||||||||||||
S&P 500 Index | 100 | 100.77 | 111.92 | 136.35 | 129.26 | 171.88 | ||||||||||||||||||
S&P 500 Beverages Index | 100 | 110.52 | 112.48 | 133.67 | 129.27 | 160.29 | ||||||||||||||||||
Peer Group | 100 | 125.35 | 133.00 | 114.81 | 80.27 | 80.43 |
Fiscal 2016 | High | Low | ||||||
First Quarter | $ | 204.25 | $ | 163.55 | ||||
Second Quarter | $ | 191.71 | $ | 146.42 | ||||
Third Quarter | $ | 192.05 | $ | 151.06 | ||||
Fourth Quarter | $ | 178.00 | $ | 149.76 | ||||
Fiscal 2015 | High | Low | ||||||
First Quarter | $ | 323.99 | $ | 257.24 | ||||
Second Quarter | $ | 272.83 | $ | 237.62 | ||||
Third Quarter | $ | 236.55 | $ | 197.05 | ||||
Fourth Quarter | $ | 258.43 | $ | 201.90 |
$408.91.
Organization of the Company, (c) certain other amendments of the Articles of Organization of the Company, (d) certain mergers or consolidations with, or acquisitions of, other entities, and (e) sales or dispositions of any significant portion of the Company’s assets.
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs | ||||||||||||
December 27, 2015 to January 30, 2016 | 129,322 | $ | 178.33 | 128,798 | $ | 55,912,890 | ||||||||||
January 31, 2016 to February 27, 2016 | 103,605 | 183.12 | 103,328 | 86,961,273 | ||||||||||||
February 28, 2016 to March 26, 2016 | 100,719 | 187.34 | 100,407 | 68,215,806 | ||||||||||||
March 27, 2016 to April 30, 2016 | 143,676 | 173.98 | 143,352 | 54,167,002 | ||||||||||||
May 1, 2016 to May 28, 2016 | 130,318 | 153.69 | 129,964 | 34,182,017 | ||||||||||||
May 29, 2016 to June 25, 2016 | 119,987 | 158.41 | 119,519 | 15,231,260 | ||||||||||||
June 26, 2016 to July 30, 2016 | 28,020 | 168.85 | 27,723 | 25,533,994 | ||||||||||||
July 31, 2016 to August 27, 2016 | 12,876 | 184.54 | 12,732 | 23,175,199 | ||||||||||||
August 28, 2016 to September 24, 2016 | 20,025 | 166.41 | 19,961 | 19,851,706 | ||||||||||||
September 25, 2016 to October 29, 2016 | 35,165 | 156.84 | 35,109 | 194,341,191 | ||||||||||||
October 30, 2016 to November 26, 2016 | 25,252 | 165.03 | 25,241 | 190,173,900 | ||||||||||||
November 27, 2016 to December 31, 2016 | 99,152 | 171.16 | 98,742 | 173,248,179 | ||||||||||||
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Total | 948,117 | $ | 170.89 | 944,876 | $ | 173,248,179 | ||||||||||
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Of the
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (in thousands) | ||||||||||||
December 30, 2018 to February 2, 2019 | 116 | $ | 127.05 | — | $ | 90,335 | ||||||||||
February 3, 2019 to March 2, 2019 | 219 | 115.78 | — | 90,335 | ||||||||||||
March 3, 2019 to March 30, 2019 | 13 | 187.54 | — | 90,335 | ||||||||||||
March 31, 2019 to May 4, 2019 | 107 | 182.03 | — | 90,335 | ||||||||||||
May 5, 2019 to June 1, 2019 | 79 | 175.67 | — | 90,335 | ||||||||||||
June 2, 2019 to June 29, 2019 | 32 | 187.54 | — | 90,335 | ||||||||||||
June 30, 2019 to August 3, 2019 | 73 | 114.14 | — | 90,335 | ||||||||||||
August 4, 2019 to August 31, 2019 | 261 | 135.26 | — | 90,335 | ||||||||||||
September 1, 2019 to September 28, 2019 | — | — | — | 90,335 | ||||||||||||
September 29, 2019 to November 2, 2019 | — | — | — | 90,335 | ||||||||||||
November 3, 2019 to November 30, 2019 | — | — | — | 90,335 | ||||||||||||
December 1, 2019 to December 28, 2019 | — | — | — | 90,335 | ||||||||||||
Total | 900 | 0 | $ | 90,335 | ||||||||||||
Item 6. | Selected Consolidated Financial Data |
Year Ended | ||||||||||||||||||||
Dec. 31 2016 (53 weeks) | Dec. 26 2015 | Dec. 27 2014 | Dec. 28 2013 | Dec. 29 2012 | ||||||||||||||||
(in thousands, except per share and net revenue per barrel data) | ||||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||
Revenue | $ | 968,994 | $ | 1,024,040 | $ | 966,478 | $ | 793,705 | $ | 628,580 | ||||||||||
Less excise taxes | 62,548 | 64,106 | 63,471 | 54,652 | 48,358 | |||||||||||||||
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Net revenue | 906,446 | 959,934 | 903,007 | 739,053 | 580,222 | |||||||||||||||
Cost of goods sold | 446,776 | 458,317 | 437,996 | 354,131 | 265,012 | |||||||||||||||
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Gross profit | 459,670 | 501,617 | 465,011 | 384,922 | 315,210 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Advertising, promotional and selling expenses | 244,213 | 273,629 | 250,696 | 207,930 | 169,306 | |||||||||||||||
General and administrative expenses | 78,033 | 71,556 | 65,971 | 62,332 | 50,171 | |||||||||||||||
Impairment (gain on sale) of assets, net | (235 | ) | 258 | 1,777 | 1,567 | 149 | ||||||||||||||
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Total operating expenses | 322,011 | 345,443 | 318,444 | 271,829 | 219,626 | |||||||||||||||
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Operating income | 137,659 | 156,174 | 146,567 | 113,093 | 95,584 | |||||||||||||||
Other expense, net | (538 | ) | (1,164 | ) | (973 | ) | (552 | ) | (67 | ) | ||||||||||
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Income before provision for income taxes | 137,121 | 155,010 | 145,594 | 112,541 | 95,517 | |||||||||||||||
Provision for income taxes | 49,772 | 56,596 | 54,851 | 42,149 | 36,050 | |||||||||||||||
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Net income | $ | 87,349 | $ | 98,414 | $ | 90,743 | $ | 70,392 | $ | 59,467 | ||||||||||
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Net income per share — basic | $ | 6.93 | $ | 7.46 | $ | 6.96 | $ | 5.47 | $ | 4.60 | ||||||||||
Net income per share — diluted | $ | 6.79 | $ | 7.25 | $ | 6.69 | $ | 5.18 | $ | 4.39 | ||||||||||
Weighted average shares outstanding — basic | 12,533 | 13,123 | 12,968 | 12,766 | 12,796 | |||||||||||||||
Weighted average shares outstanding — diluted | 12,796 | 13,520 | 13,484 | 13,504 | 13,435 | |||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||
Working capital | $ | 99,719 | $ | 112,443 | $ | 97,292 | $ | 59,901 | $ | 73,448 | ||||||||||
Total assets | $ | 623,297 | $ | 645,400 | $ | 605,161 | $ | 444,075 | $ | 359,484 | ||||||||||
Total long-term obligations | $ | 75,196 | $ | 73,019 | $ | 58,851 | $ | 37,613 | $ | 25,499 | ||||||||||
Total stockholders’ equity | $ | 446,582 | $ | 461,221 | $ | 436,140 | $ | 302,085 | $ | 245,091 | ||||||||||
Statistical Data: | ||||||||||||||||||||
Barrels sold | 4,019 | 4,256 | 4,103 | 3,416 | 2,746 | |||||||||||||||
Net revenue per barrel | $ | 225.55 | $ | 225.55 | $ | 220.08 | $ | 216.35 | $ | 211.30 |
Year Ended | ||||||||||||||||||||
Dec. 29 2018 | Dec. 29 2018 | Dec. 30 2017 (53 weeks) | Dec. 31 2016 | Dec. 26 2015 | ||||||||||||||||
(in thousands, except per share and net revenue per barrel data) | ||||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||
Revenue | $ | 1,329,108 | $ | 1,057,495 | $ | 921,736 | $ | 968,994 | $ | 1,024,040 | ||||||||||
Less excise taxes | 79,284 | 61,846 | 58,744 | 62,548 | 64,106 | |||||||||||||||
Net revenue | 1,249,824 | 995,649 | 862,992 | 906,446 | 959,934 | |||||||||||||||
Cost of goods sold | 635,658 | 483,406 | 413,091 | 446,776 | 458,317 | |||||||||||||||
Gross profit | 614,166 | 512,243 | 449,901 | 459,670 | 501,617 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Advertising, promotional and selling expenses | 355,613 | 304,853 | 258,649 | 244,213 | 273,629 | |||||||||||||||
General and administrative expenses | 112,730 | 90,857 | 73,126 | 78,033 | 71,556 | |||||||||||||||
Impairment (gain on sale) of assets, net | 911 | 652 | 2,451 | (235 | ) | 258 | ||||||||||||||
Settlement proceeds | — | — | — | — | — | |||||||||||||||
Total operating expenses | 469,254 | 396,362 | 334,226 | 322,011 | 345,443 | |||||||||||||||
Operating income | 144,912 | 115,881 | 115,675 | 137,659 | 156,174 | |||||||||||||||
Other (expense) income, net | (542 | ) | 405 | 467 | (538 | ) | (1,164 | ) | ||||||||||||
Income before provision for income taxes | 144,370 | 116,286 | 116,142 | 137,121 | 155,010 | |||||||||||||||
Provision for income taxes | 34,329 | 23,623 | 17,093 | 49,772 | 56,596 | |||||||||||||||
Net income | $ | 110,041 | $ | 92,663 | $ | 99,049 | $ | 87,349 | $ | 98,414 | ||||||||||
Net income per share - basic | $ | 9.26 | $ | 7.90 | $ | 8.18 | $ | 6.93 | $ | 7.46 | ||||||||||
Net income per share - diluted | $ | 9.16 | $ | 7.82 | $ | 8.09 | $ | 6.79 | $ | 7.25 | ||||||||||
Weighted average shares outstanding - basic | 11,781 | 11,622 | 12,035 | 12,533 | 13,123 | |||||||||||||||
Weighted average shares outstanding - diluted | 11,908 | 11,734 | 12,180 | 12,796 | 13,520 | |||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||
Working capital | $ | 37,999 | $ | 111,057 | $ | 66,590 | $ | 99,719 | $ | 112,443 | ||||||||||
Total assets | $ | 1,054,057 | $ | 639,851 | $ | 569,624 | $ | 623,297 | $ | 645,400 | ||||||||||
Total long-term obligations | $ | 83,832 | $ | 59,020 | $ | 44,343 | $ | 75,196 | $ | 73,019 | ||||||||||
Total stockholders’ equity | $ | 735,636 | $ | 460,317 | $ | 423,523 | $ | 446,582 | $ | 461,221 | ||||||||||
Statistical Data: | ||||||||||||||||||||
Barrels sold | 5,307 | 4,286 | 3,768 | 4,019 | 4,256 | |||||||||||||||
Net revenue per barrel | $ | 235.51 | $ | 232.30 | $ | 229.05 | $ | 225.55 | $ | 225.55 |
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
lookingforward-looking statements, involve risks and uncertainties that could cause actual results
The Company completed the previously reported Dogfish Head Brewery transaction and began consolidating the Dogfish Head financial results on July 3, 2019.
year, of which 19% is from Boston Beer legacy brands and 3% is from the addition of Dogfish Head brands beginning July 3, 2019.
2019. Excluding the Dogfish Head impact, depletions increased 28%.
Therefore, because of the uncertainty and variability of the impact of ASU
Year Ended (in thousands, except per barrel) | ||||||||||||||||||||||||||||||||||||
Dec. 31 2016 (53 weeks) | Dec. 26 2015 (52 weeks) | Amount change | % change | Per barrel change | ||||||||||||||||||||||||||||||||
Barrels sold | 4,019 | 4,256 | (237 | ) | -5.6 | % | ||||||||||||||||||||||||||||||
Per barrel | % of net revenue | Per barrel | % of net revenue | |||||||||||||||||||||||||||||||||
Net revenue | $ | 906,446 | $ | 225.55 | 100.0 | % | $ | 959,934 | $ | 225.55 | 100.0 | % | $ | (53,488 | ) | -5.6 | % | $ | — | |||||||||||||||||
Cost of goods | 446,776 | 111.17 | 49.3 | % | 458,317 | 107.69 | 47.7 | % | (11,541 | ) | -2.5 | % | 3.48 | |||||||||||||||||||||||
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Gross profit | 459,670 | 114.38 | 50.7 | % | 501,617 | 117.86 | 52.3 | % | (41,947 | ) | -8.4 | % | (3.48 | ) | ||||||||||||||||||||||
Advertising, promotional and selling expenses | 244,213 | 60.77 | 26.9 | % | 273,629 | 64.29 | 28.5 | % | (29,416 | ) | -10.8 | % | (3.52 | ) | ||||||||||||||||||||||
General and administrative expenses | 78,033 | 19.42 | 8.6 | % | 71,556 | 16.81 | 7.5 | % | 6,477 | 9.1 | % | 2.61 | ||||||||||||||||||||||||
Impairment (gain on sale) of assets, net | (235 | ) | (0.06 | ) | 0.0 | % | 258 | 0.06 | 0.0 | % | (493 | ) | -191.1 | % |
| (0.12 | ) | |||||||||||||||||||
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Total operating expenses | 322,011 | 80.13 | 35.5 | % | 345,443 | 81.17 | 36.0 | % | (23,432 | ) | -6.8 | % | (1.04 | ) | ||||||||||||||||||||||
Operating income | 137,659 | 34.25 | 15.2 | % | 156,174 | 36.70 | 16.3 | % | (18,515 | ) | -11.9 | % | (2.45 | ) | ||||||||||||||||||||||
Other expense, net | (538 | ) | (0.13 | ) | -0.1 | % | (1,164 | ) | (0.27 | ) | -0.1 | % | 626 | -53.8 | % | 0.14 | ||||||||||||||||||||
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Income before provision for income taxes | 137,121 | 34.12 | 15.1 | % | 155,010 | 36.42 | 16.1 | % | (17,889 | ) | -11.5 | % | (2.30 | ) | ||||||||||||||||||||||
Provision for income taxes | 49,772 | 12.38 | 5.5 | % | 56,596 | 13.30 | 5.9 | % | (6,824 | ) | -12.1 | % | (0.92 | ) | ||||||||||||||||||||||
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Net income | $ | 87,349 | $ | 21.74 | 9.6 | % | $ | 98,414 | $ | 23.12 | 10.3 | % | $ | (11,065 | ) | -11.2 | % | $ | (1.38 | ) | ||||||||||||||||
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29, 2018
Year Ended (in thousands, except per barrel) | ||||||||||||||||||||||||||||||||||||
Dec. 28 2019 | Dec. 29 2018 | Amount change | % change | Per barrel change | ||||||||||||||||||||||||||||||||
Barrels sold | 5,307 | 4,286 | 1,021 | 23.8 | % | |||||||||||||||||||||||||||||||
Per barrel | % of net revenue | Per barrel | % of net revenue | |||||||||||||||||||||||||||||||||
Net revenue | $ | 1,249,824 | $ | 235.51 | 100.0 | % | $ | 995,649 | $ | 232.30 | 100.0 | % | $ | 254,175 | 25.5 | % | $ | 3.21 | ||||||||||||||||||
Cost of goods | 635,658 | 119.78 | 50.9 | % | 483,406 | 112.79 | 48.6 | % | 152,252 | 31.5 | % | 6.99 | ||||||||||||||||||||||||
Gross profit | 614,166 | 115.73 | 49.1 | % | 512,243 | 119.52 | 51.4 | % | 101,923 | 19.9 | % | (3.79 | ) | |||||||||||||||||||||||
Advertising, promotional and selling expenses | 355,613 | 67.01 | 28.5 | % | 304,853 | 71.13 | 30.6 | % | 50,760 | 16.7 | % | (4.12 | ) | |||||||||||||||||||||||
General and administrative expenses | 112,730 | 21.24 | 9.0 | % | 90,857 | 21.20 | 9.1 | % | 21,873 | 24.1 | % | 0.04 | ||||||||||||||||||||||||
Impairment of assets, net | 911 | 0.17 | 0.1 | % | 652 | 0.15 | 0.1 | % | 259 | 39.7 | % | 0.02 | ||||||||||||||||||||||||
Total operating expenses | 469,254 | 88.42 | 37.5 | % | 396,362 | 92.48 | 39.8 | % | 72,892 | 18.4 | % | (4.06 | ) | |||||||||||||||||||||||
Operating income | 144,912 | 27.31 | 11.6 | % | 115,881 | 27.04 | 11.6 | % | 29,031 | 25.1 | % | 0.27 | ||||||||||||||||||||||||
Other (expense) income, net | (542 | ) | (0.10 | ) | 0.0 | % | 405 | 0.09 | 0.0 | % | (947 | ) | -233.8 | % | (0.19 | ) | ||||||||||||||||||||
Income before provision for income taxes | 144,370 | 27.20 | 11.6 | % | 116,286 | 27.13 | 11.7 | % | 28,084 | 24.2 | % | 0.07 | ||||||||||||||||||||||||
Provision for income taxes | 34,329 | 6.47 | 2.7 | % | 23,623 | 5.51 | 2.4 | % | 10,706 | 45.3 | % | 0.96 | ||||||||||||||||||||||||
Net income | $ | 110,041 | $ | 20.74 | 8.8 | % | $ | 92,663 | $ | 21.62 | 9.3 | % | $ | 17,378 | 18.8 | % | $ | (0.88 | ) | |||||||||||||||||
Angry Orchard brands.
the addition of the Dogfish Head brands, partially offset by decreases in its Samuel Adams and Angry Orchard brands.
increases.
for kegs than for bottles and cans. The percentage of bottles and cans to total shipments increased by 1.5%4.3% to 80.2%89.4% of total shipments for the year ended December 31, 201628, 2019 as compared to the year ended December 26, 2015.
Gross profit.Gross profit29, 2018.
Costbarrel was primarily the result of goods sold forhigher processing costs due to increased production at third party breweries and higher temporary labor at Company-owned breweries to support increased variety pack volumes, partially offset by cost saving initiatives at Company-owned breweries.
year ended December 29, 2018.
the addition of Dogfish Head brand related expenses beginning July 3, 2019.
Gain on salethe addition of Dogfish Head general and administrative expenses beginning July 3, 2019.
Impairment of assets.For the year ended December 31, 2016,28, 2019, the Company incurred impairment charges of $0.7$0.9 million, based upon its review of the carrying values of its property, plant and equipment.
These impairment charges were primarily due to the write-down of brewery equipment at the Company’s Pennsylvania and Cincinnati breweries.
performance-based awards.
Year Ended December 26, 2015 (52 weeks) Compared to Year Ended December 27, 2014 (52 weeks)
Year Ended (in thousands, except per barrel) | ||||||||||||||||||||||||||||||||||||
Dec. 26 2015 (52 weeks) | Dec. 27 2014 (52 weeks) | Amount change | % change | Per barrel change | ||||||||||||||||||||||||||||||||
Barrels sold | 4,256 | 4,103 | 153 | 3.7 | % | |||||||||||||||||||||||||||||||
Per barrel | % of net revenue | Per barrel | % of net revenue | |||||||||||||||||||||||||||||||||
Net revenue | $ | 959,934 | $ | 225.55 | 100.0 | % | $ | 903,007 | $ | 220.08 | 100.0 | % | $ | 56,927 | 6.3 | % | $ | 5.47 | ||||||||||||||||||
Cost of goods | 458,317 | 107.69 | 47.7 | % | 437,996 | 106.75 | 48.5 | % | 20,321 | 4.6 | % | 0.94 | ||||||||||||||||||||||||
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Gross profit | 501,617 | 117.86 | 52.3 | % | 465,011 | 113.33 | 51.5 | % | 36,606 | 7.9 | % | 4.53 | ||||||||||||||||||||||||
Advertising, promotional and selling expenses | 273,629 | 64.29 | 28.5 | % | 250,696 | 61.10 | 27.8 | % | 22,933 | 9.1 | % | 3.19 | ||||||||||||||||||||||||
General and administrative expenses | 71,556 | 16.81 | 7.5 | % | 65,971 | 16.08 | 7.3 | % | 5,585 | 8.5 | % | 0.73 | ||||||||||||||||||||||||
Impairment (gain on sale) of assets, net | 258 | 0.06 | 0.0 | % | 1,777 | 0.43 | 0.2 | % | (1,519 | ) | -85.5 | % | (0.37 | ) | ||||||||||||||||||||||
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Total operating expenses | 345,443 | 81.17 | 36.0 | % | 318,444 | 77.61 | 35.3 | % | 26,999 | 8.5 | % | 3.56 | ||||||||||||||||||||||||
Operating income | 156,174 | 36.70 | 16.3 | % | 146,567 | 35.72 | 16.2 | % | 9,607 | 6.6 | % | 0.98 | ||||||||||||||||||||||||
Other expense, net | (1,164 | ) | (0.27 | ) | -0.1 | % | (973 | ) | (0.24 | ) | -0.1 | % | (191 | ) | 19.6 | % | (0.03 | ) | ||||||||||||||||||
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Income before provision for income taxes | 155,010 | 36.42 | 16.1 | % | 145,594 | 35.48 | 16.1 | % | 9,416 | 6.5 | % | 0.94 | ||||||||||||||||||||||||
Provision for income taxes | 56,596 | 13.30 | 5.9 | % | 54,851 | 13.37 | 6.1 | % | 1,745 | 3.2 | % | (0.07 | ) | |||||||||||||||||||||||
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Net income | $ | 98,414 | $ | 23.12 | 10.3 | % | $ | 90,743 | $ | 22.12 | 10.0 | % | $ | 7,671 | 8.5 | % | $ | 1.00 | ||||||||||||||||||
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Net revenue.Net revenue increased by $56.9 million, or 6.3%, to $959.9 million20.3% for the year ended December 26, 2015, as compared to $903.0 million for the year ended December 27, 2014, due primarily to increased shipments and increased revenue per barrel.
Volume.Total shipment volume of 4,256,000 barrels for the year ended December 26 2015 increased by 3.7% over comparable 2014 levels of 4,103,000 barrels, due primarilyto increases in shipments of Coney Island, Twisted Tea, Angry Orchard and Traveler brand products that were only partially offset by shipment declines in Samuel Adams brand products.
Depletions, or sales by Distributors to retailers, of the Company’s products for the year ended December 26, 2015 increased by approximately 4% compared to the prior year, primarily due to increases in depletions of Twisted Tea, Coney Island, Angry Orchard and Traveler brand products that were only partially offset by declines in depletions of Samuel Adams brand products.
Net Revenue per barrel. The net revenue per barrel increased by 2.5% to $225.55 per barrel for the year ended December 26, 2015, as compared to $220.08 per barrel for the year ended December 27, 2014, due primarily to price increases and changes in product and package mix.
Significant changes in the package mix could have a material effect on net revenue. The Company primarily packages its brands in kegs, bottles and cans. Assuming the same level of production, a shift in the mix from kegs to bottles and cans would effectively increase revenue per barrel, as the price per equivalent barrel is lower for kegs than for bottles and cans. The percentage of bottles and cans to total shipments increased by 1.7% to 78.7% of total shipments for the year ended December 26, 2015 as compared to the year ended December 27, 2014.
Gross profit.Gross profit was $117.86 per barrel for the year ended December 26, 2015, as compared to $113.33 per barrel for the year ended December 27, 2014. Gross margin was 52.3% for the year ended December 26, 2015, as compared to 51.5% for the year ended December 27, 2014. The increase in gross profit per barrel of $4.53 is primarily due to an increase in net revenue per barrel, partially offset by an increase in cost of goods sold per barrel.
Cost of goods sold was $107.69 per barrel for the year ended December 26, 2015, as compared to $106.75 per barrel for the year ended December 27, 2014. The 2015 increase in cost of goods sold of $0.94 per barrel is primarily due to product and package mix and higher brewery operating costs, partially offset by lower ingredient costs.
The Company includes freight charges related to the movement of finished goods from manufacturing locations to Distributor locations in its advertising, promotional and selling expense line item. As such, the Company’s gross margins may not be comparable to other entities that classify costs related to distribution differently.
Advertising, promotional and selling.Advertising, promotional and selling expenses, increased $22.9 million, or 9.1%, to $273.6 million for the year ended December 26, 2015, as compared to $250.7 million for the year ended December 27, 2014. The increase was primarily a result of increased media advertising of $14.6 million, increased costs for additional sales personnel and commissions of $5.5 million and increased point of sale and local marketing of $4.1 million.
Advertising, promotional and selling expenses were 28.5% of net revenue, or $64.29 per barrel, for the year ended December 26, 2015, as compared to 27.8% of net revenue, or $61.10 per barrel, for the year ended December 27, 2014. The Company will invest in advertising and promotional campaigns that it believes are effective, but there is no guarantee that such investment will generate sales growth.
The Company conducts certain advertising and promotional activities in its Distributors’ markets, and the Distributors make contributions to the Company for such efforts. These amounts are included in the Company’s statement of operations as reductions to advertising, promotional and selling expenses. Historically, contributions from Distributors for advertising and promotional activities have amounted to between 2% and 4% of net sales. The Company may adjust its promotional efforts in the Distributors’ markets, if changes occur in these promotional contribution arrangements, depending on the industry and market conditions.
General and administrative.General and administrative expenses increased by $5.6 million, or 8.5%, to $71.6 million for the year ended December 26, 2015, as compared to $66.0 million for the comparable period in 2014. The29, 2018. This increase was primarily due to increasesthe favorable impact in salary and benefit expenses, consulting and facilities costs.
Impairment2018 of assets.For the year ended December 26, 2015, the Company incurred impairment charges of $0.3 million, based upon its review of the carrying values of its property, plant and equipment.
Stock-based compensation expense.For the year ended December 26, 2015, an aggregate of $6.7 million in stock-based compensation expense is included in advertising, promotional and selling expenses and general and administrative expenses. Stock compensation decreased by $0.2 million in 2015 compared to 2014, primarily due to performance not being achieved on certain awards granted during 2015.
Provision for income taxes.The Company’s effective tax rate for the year ended December 26, 2015 of 36.5% decreased from the year ended December 27, 2014rate of approximately 37.7%. This decrease was primarily the result of an increased federal manufacturing deduction and lower state tax rates.
accounting method changes.
working capital, particularly higher inventory to support increased demand.
Cash used in financing activities was $111.3$8.9 million during 2016,2019, as compared to $76.7$65.3 million used in financing activities during 2015.2018. The $34.7$74.2 million differenceincrease in cash provided by financing cash flowactivities in 20162019 from 20152018 is primarily due to an increasea decrease in stock repurchases under the Company’s Stock Repurchase Program and a decreasean increase in proceeds from the exercise of stock options and the related tax benefits.
options.
From January 1, 2017December 29, 2019 through February 17, 2017,14, 2020, the Company repurchased approximately 116,000 additionaldid not repurchase any shares of its Class A Common Stock for an aggregate purchase price of $18.5 million. As of February 17, 2017, the Company has repurchased a cumulative total of approximately 12.6 million shares of its Class A Common Stock for an aggregate purchase price of $626.3 million.Stock. The Company has approximately $154.7$90.3 million remaining on the $781.0$931.0 million stock repurchase expenditure limit set by the Board of Directors.
Inventories are stated at the lower of cost, determined on afirst-in,first-out basis, or market value.
The Company’s long-lived assets include property, plantProperty, Plant and equipment which are depreciated over their estimated useful lives. Equipment
Net revenue includes product sales, less customer programs and incentives, reserves for stale beer returnsClassification of Customer Programs and excise taxes. Incentives
As of December 28, 2019 and December 29, 2018, the Company has deferred $7.0 million and $4.6 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 Programs and Incentives
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.
Kegs and Pallets Inventory and Refundable Deposits
The Company distributes its draft beer in kegs and packaged beer primarily in glass bottles and cans and such kegs, bottles and cans are shipped on pallets to Distributors. Most kegs and pallets are owned by the Company. Upon shipment of beer to Distributors, the Company collects a refundable deposit on the kegs and pallets. As of December 31, 2016 and December 26, 2015, deposits held by the Company totaled $15.8 million and $18.9 million, respectively. The Company has experienced some loss of kegs and pallets and anticipates that some loss will occur in future periods. The Company believes that the loss of kegs and pallets, after considering the forfeiture of related deposits, has not been material to the financial statements. The Company uses internal records, records maintained by Distributors, records maintained by other third party vendors and historical information to estimate the physical count of kegs and pallets held by Distributors. These estimates affect the amount recorded as property, plant and equipment and current liabilities as of the date of the financial statements. The actual liability for refundable deposits could differ from these estimates.
See Note L of the Notes to Consolidated Financial Statements for further discussion of the application of the option-pricing models.
Income Taxes
Income tax expense was $49.8 million, $56.6 million, and $54.9 million in fiscal years 2016, 2015, and 2014, respectively. The Company provides for deferred taxes using an asset and liability approach that requires the recognition
interests in craft beers and hard cider makers, or importation rights to foreign brands. Import brewers and major domesticinternational brewers are able to compete more aggressively than the Company, as they have substantially greater resources, marketing strength and distribution networks than the Company. The Company anticipates craft beer competition increasing asamong domestic craft brewers have benefited from eleven yearswill remain strong, as the number of healthy growth and are lookingcraft brewers continues to maintain these trends.grow. The Company also increasingly competes with wine and spirits companies, some of which have significantly greater resources than the Company. This competitive environment may affect the Company’s overall performance within the Better BeerHigh End category. As the market matures and the Better BeerHigh End category continues to consolidate, the Company believes that companies that are well-positioned in terms of brand equity, marketing and distribution will have greater success than those who do not. With approximately 350its over 400 Distributors nationwide and the Company’s sales force of approximately 415426 people, as well as a commitment to maintaining its innovation capability, brand equity and the quality, of its beer, the Company believes it is well positioned to compete in the BetterHigh End Beer market.
The demand for the Company’s products is also subject to changes in drinkers’ tastes.
category.
Hops Purchase Commitments
The Company utilizes several varieties of hops in the production of its products. To ensure adequate supplies of these varieties, the Company enters into advance multi-year purchase commitments based on forecasted future hop requirements, among other factors.
During 2016, the Company entered into several hops future contracts in the normal course of business. The total value
The Company’s accounting policy for hop inventory and purchase commitments is to recognize a loss by establishing a reserve for aged hops and to the extent inventory levels and commitments exceed forecasted needs. The computation of the excess inventory requires management to make certain assumptions regarding future sales growth, product mix, cancellation costs and supply, among others. Actual results may differ materially from management’s estimates. The Company continues to manage inventory levels and purchase commitments in an effort to maximize utilization of hops on hand and hops under commitment. However, changes in management’s assumptions regarding future sales growth, product mix and hops market conditions could result in future material losses.
Contractual Obligations
The following table presents contractual obligations as of December 31, 2016:
Payments Due by Period | ||||||||||||||||||||
Total | 2017 | 2018-2019 | 2020-2021 | Thereafter | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Hops, barley and wheat | $ | 71,128 | $ | 27,784 | $ | 29,244 | $ | 9,361 | $ | 4,739 | ||||||||||
Advertising | 27,430 | 26,825 | 605 | — | — | |||||||||||||||
Apples and other ingredients | 27,225 | 27,225 | — | — | — | |||||||||||||||
Glass bottles | 16,551 | 16,551 | — | — | — | |||||||||||||||
Operating leases | 15,900 | 3,343 | 5,648 | 5,194 | 1,715 | |||||||||||||||
Equipment and machinery | 10,700 | 10,700 | — | — | — | |||||||||||||||
Other | 4,505 | 2,624 | 1,881 | — | — | |||||||||||||||
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Total contractual obligations | $ | 173,439 | $ | 115,052 | $ | 37,378 | $ | 14,555 | $ | 6,454 | ||||||||||
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The Company had outstanding totalnon-cancelable contractual obligations of $173.4 million at December 31, 2016. These obligations are made up of hops, barley and wheat of $71.1 million, advertising contracts of $27.4 million, apples and other ingredients of $27.2 million, glass bottles of $16.6 million, operating leases of $15.9 million, equipment and machinery of $10.7 million and other commitments of $4.5 million.
The Company has entered into contracts for the supply of a portion of its hops requirements. These purchase contracts extend through crop year 2022 and specify both the quantities and prices, denominated in U.S. Dollars, Euros and New Zealand Dollars to which the Company is committed. Hops purchase commitments outstanding at December 31, 2016 totaled $56.3 million, based on the exchange rates on that date.
Currently, the Company has entered into contracts for barley and wheat with two major suppliers. The contracts include crop years 2016 and 2017 and cover the Company’s barley, wheat, and malt requirements for 2017 and part of 2018. These purchase commitments outstanding at December 31, 2016 totaled $14.8 million.
The Company sources glass bottles pursuant to a Glass Bottle Supply Agreement with Anchor Glass Container Corporation (“Anchor”), under which Anchor is the supplier of certain glass bottles for the Company’s Cincinnati Brewery and its Pennsylvania Brewery. This agreement also establishes the terms on which Anchor may supply glass bottles to other breweries where the Company brews its beers. Under the agreement with Anchor, the Company has minimum and maximum purchase commitments that are based on Company-provided production estimates which, under normal business conditions, are expected to be fulfilled. Minimum purchase commitments under this agreement, assuming the supplier is unable to replace lost production capacity cancelled by the Company, as of December 31, 2016 totaled $16.6 million.
The Company has various operating lease agreements in place for facilities and equipment as of December 31, 2016. 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 2022.
For the fiscal year ended December 31, 2016, the Company brewed most all of its volume at Company-owned breweries. In the normal course of its business, the Company has historically entered into various production arrangements with other brewing companies. Pursuant to these arrangements, the Company purchases the liquid produced by those brewing companies, including the raw materials that are used in the liquid, at the time such liquid goes into fermentation. The Company is required to repurchase all unused raw materials purchased by the brewing company specifically for the Company’s beers at the brewing company’s cost upon termination of the production arrangement. The Company is also obligated to meet annual volume requirements in conjunction with certain production arrangements, which are not material to the Company’s operations.
The Company’s arrangements with other brewing companies require it to periodically purchase equipment in support of brewery operations. As of December 31, 2016, there were no significant equipment purchase requirements outstanding under existing contracts. Changes to the Company’s brewing strategy or existing production arrangements, new production relationships or the introduction of new products in the future may require the Company to purchase equipment to support the contract breweries’ operations.
Consolidated Financial Statements.
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk |
28, 2019.
Item 8. | Financial Statements and Supplementary Data |
We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.and Stockholders of31, 201628, 2019 and December 26, 2015,29, 2018 and the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows, for each of the twothree fiscal years in the period ended December 31, 2016. 28, 2019, and the related notes. In our opinion, the financial statements present fairly, in all material respects, the financial position of The Boston Beer Company, Inc. and subsidiaries as of December 28, 2019 and December 29, 2018 and the results of its operations and its cash flows for each of the three fiscal years in the period ended December 28, 2019, in conformity with accounting principles generally accepted in the United States of America.Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesmisstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the financial statements. An auditOur audits also includes assessingincluded evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement presentation.statements. We believe that our audits provide a reasonable basis for our opinion.In our opinion, such consolidatedpresent fairly, in allthat was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material respects,to the financial positionstatements and (2) involved our especially challenging, subjective, or complex judgments. The communication of The Boston Beer Company, Inc. and subsidiaries ascritical audit matters does not alter in any way our
/s/ Deloitte & Touche LLP
Boston, Massachusetts
February 22, 2017
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of The Boston Beer Company, Inc.
We have audited the accompanying consolidated statements of comprehensive income, stockholders’ equity and cash flows of The Boston Beer Company, Inc. for the year ended December 27, 2014. These financial statements, taken as a whole, and we are not, by communicating the responsibility of the Company’s management. Our responsibility is to express ancritical audit matter below, providing a separate opinion on these financial statements basedthe critical audit matter or on our audit.
We conducted our audit in accordance with the standardsaccounts or disclosures to which it relates.
In our opinion,procedures related to forecasts of revenue growth projections, the financial statements referred to above present fairly,selection of the royalty rates, discount rates, as well as the methodologies utilized in all material respects, the consolidated results of operations and cash flows of The Boston Beer Company, Inc.valuation models for the year ended December 27, 2014,Dogfish Head brand trade name included the following, among others:
/s/ |
Boston, Massachusetts |
February |
STATEMENTS OF COMPREHENSIVE INCOME
December 31, 2016 | December 26, 2015 | |||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 91,035 | $ | 94,193 | ||||
Accounts receivable, net of allowance for doubtful accounts of $0 and $244 as of December 31, 2016 and December 26, 2015, respectively | 36,694 | 38,984 | ||||||
Inventories | 52,499 | 56,462 | ||||||
Prepaid expenses and other current assets | 8,731 | 12,053 | ||||||
Income tax receivable | 4,928 | 14,928 | ||||||
Deferred income taxes | 7,351 | 6,983 | ||||||
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Total current assets | 201,238 | 223,603 | ||||||
Property, plant and equipment, net | 408,411 | 409,926 | ||||||
Other assets | 9,965 | 8,188 | ||||||
Goodwill | 3,683 | 3,683 | ||||||
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| |||||
Total assets | $ | 623,297 | $ | 645,400 | ||||
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| |||||
Liabilities and Stockholders’ Equity | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 40,585 | $ | 42,718 | ||||
Current portion of debt and capital lease obligations | 60 | 58 | ||||||
Accrued expenses and other current liabilities | 60,874 | 68,384 | ||||||
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| |||||
Total current liabilities | 101,519 | 111,160 | ||||||
Deferred income taxes | 64,612 | 56,001 | ||||||
Debt and capital lease obligations, less current portion | 411 | 471 | ||||||
Other liabilities | 10,173 | 16,547 | ||||||
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Total liabilities | 176,715 | 184,179 | ||||||
Commitments and Contingencies (See Note J) | ||||||||
Stockholders’ Equity: | ||||||||
Class A Common Stock, $.01 par value; 22,700,000 shares authorized; 9,170,956 and 9,389,005 shares issued and outstanding as of December 31, 2016 and December 26, 2015, respectively | 92 | 94 | ||||||
Class B Common Stock, $.01 par value; 4,200,000 shares authorized; 3,197,355 and 3,367,355 shares issued and outstanding as of December 31, 2016 and December 26, 2015, respectively | 32 | 34 | ||||||
Additionalpaid-in capital | 349,913 | 290,096 | ||||||
Accumulated other comprehensive loss, net of tax | (1,103 | ) | (951 | ) | ||||
Retained earnings | 97,648 | 171,948 | ||||||
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Total stockholders’ equity | 446,582 | 461,221 | ||||||
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Total liabilities and stockholders’ equity | $ | 623,297 | $ | 645,400 | ||||
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Year Ended | ||||||||||||
December 28, | December 29, | December 30, | ||||||||||
2019 | 2018 | 2017 | ||||||||||
Revenue | $ | 1,329,108 | $ | 1,057,495 | $ | 921,736 | ||||||
Less excise taxes | 79,284 | 61,846 | 58,744 | |||||||||
Net revenue | 1,249,824 | 995,649 | 862,992 | |||||||||
Cost of goods sold | 635,658 | 483,406 | 413,091 | |||||||||
Gross profit | 614,166 | 512,243 | 449,901 | |||||||||
Operating expenses: | ||||||||||||
Advertising, promotional and selling expenses | 355,613 | 304,853 | 258,649 | |||||||||
General and administrative expenses | 112,730 | 90,857 | 73,126 | |||||||||
Impairment of assets | 911 | 652 | 2,451 | |||||||||
Total operating expenses | 469,254 | 396,362 | 334,226 | |||||||||
Operating income | 144,912 | 115,881 | 115,675 | |||||||||
Other (expense) income, net: | ||||||||||||
Interest income | 647 | 1,292 | 549 | |||||||||
Other expense, net | (1,189 | ) | (887 | ) | (82 | ) | ||||||
Total other (expense) income, net | (542 | ) | 405 | 467 | ||||||||
Income before provision for income tax | 144,370 | 116,286 | 116,142 | |||||||||
Provision for income taxes | 34,329 | 23,623 | 17,093 | |||||||||
Net income | $ | 110,041 | $ | 92,663 | $ | 99,049 | ||||||
Net income per common share - basic | $ | 9.26 | $ | 7.90 | $ | 8.18 | ||||||
Net income per common share - diluted | $ | 9.16 | $ | 7.82 | $ | 8.09 | ||||||
Weighted-average number of common shares - Class A basic | 8,908 | 8,620 | 8,933 | |||||||||
Weighted-average number of common shares - Class B basic | 2,873 | 3,002 | 3,102 | |||||||||
Weighted-average number of common shares - diluted | 11,908 | 11,734 | 12,180 | |||||||||
Net income | $ | 110,041 | $ | 92,663 | $ | 99,049 | ||||||
Other comprehensive (loss) income, net of tax: | ||||||||||||
Currency translation adjustment | 47 | 25 | 17 | |||||||||
Defined benefit plans liability adjustment | (519 | ) | 277 | (202 | ) | |||||||
Impact of ASU 2018-02 | — | (211 | ) | — | ||||||||
Total other comprehensive (loss) income, net of tax: | (472 | ) | 91 | (185 | ) | |||||||
Comprehensive income | $ | 109,569 | $ | 92,754 | $ | 98,864 | ||||||
BALANCE SHEETS
Year Ended | ||||||||||||
December 31, | December 26, | December 27, | ||||||||||
2016 (53 weeks) | 2015 | 2014 | ||||||||||
Revenue | $ | 968,994 | $ | 1,024,040 | $ | 966,478 | ||||||
Less excise taxes | 62,548 | 64,106 | 63,471 | |||||||||
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Net revenue | 906,446 | 959,934 | 903,007 | |||||||||
Cost of goods sold | 446,776 | 458,317 | 437,996 | |||||||||
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Gross profit | 459,670 | 501,617 | 465,011 | |||||||||
Operating expenses: | ||||||||||||
Advertising, promotional and selling expenses | 244,213 | 273,629 | 250,696 | |||||||||
General and administrative expenses | 78,033 | 71,556 | 65,971 | |||||||||
Impairment (gain on sale) of assets, net | (235 | ) | 258 | 1,777 | ||||||||
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Total operating expenses | 322,011 | 345,443 | 318,444 | |||||||||
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Operating income | 137,659 | 156,174 | 146,567 | |||||||||
Other income (expense), net: | ||||||||||||
Interest income | 168 | 56 | 21 | |||||||||
Other expense, net | (706 | ) | (1,220 | ) | (994 | ) | ||||||
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Total other income (expense), net | (538 | ) | (1,164 | ) | (973 | ) | ||||||
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Income before provision for income tax | 137,121 | 155,010 | 145,594 | |||||||||
Provision for income taxes | 49,772 | 56,596 | 54,851 | |||||||||
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Net income | $ | 87,349 | $ | 98,414 | $ | 90,743 | ||||||
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Net income per common share — basic | $ | 6.93 | $ | 7.46 | $ | 6.96 | ||||||
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Net income per common share — diluted | $ | 6.79 | $ | 7.25 | $ | 6.69 | ||||||
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Weighted-average number of common shares — Class A basic | 9,189 | 9,619 | 9,202 | |||||||||
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Weighted-average number of common shares — Class B basic | 3,344 | 3,504 | 3,766 | |||||||||
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Weighted-average number of common shares — diluted | 12,796 | 13,520 | 13,484 | |||||||||
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Net income | $ | 87,349 | $ | 98,414 | $ | 90,743 | ||||||
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Other comprehensive income (loss), net of tax: | ||||||||||||
Currency translation adjustment | (99 | ) | (22 | ) | — | |||||||
Defined benefit plans liability adjustment | (53 | ) | 204 | (716 | ) | |||||||
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Total other comprehensive income (loss), net of tax: | (152 | ) | 182 | (716 | ) | |||||||
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Comprehensive income | $ | 87,197 | $ | 98,596 | $ | 90,027 | ||||||
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December 28, | December 29, | |||||||
2019 | 2018 | |||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 36,670 | $ | 108,399 | ||||
Accounts receivable | 54,404 | 34,073 | ||||||
Inventories | 106,038 | 70,249 | ||||||
Prepaid expenses and other current assets | 12,077 | 13,136 | ||||||
Income tax receivable | 9,459 | 5,714 | ||||||
Total current assets | 218,648 | 231,571 | ||||||
Property, plant and equipment, net | 541,068 | 389,789 | ||||||
Operating right-of-use assets | 53,758 | — | ||||||
Goodwill | 112,529 | 3,683 | ||||||
Intangible assets | 104,272 | 2,099 | ||||||
Other assets | 23,782 | 12,709 | ||||||
Total assets | $ | 1,054,057 | $ | 639,851 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 76,374 | $ | 47,102 | ||||
Accrued expenses and other current liabilities | 99,107 | 73,412 | ||||||
Current operating lease liabilities | 5,168 | — | ||||||
Total current liabilities | 180,649 | 120,514 | ||||||
Deferred income taxes | 75,010 | 49,169 | ||||||
Non-current operating lease liabilities | 53,940 | — | ||||||
Other liabilities | 8,822 | 9,851 | ||||||
Total liabilities | 318,421 | 179,534 | ||||||
Commitments and Contingencies | ||||||||
Stockholders’ Equity: | ||||||||
Class A Common Stock, $.01 par value; 22,700,000 shares authorized; 9,370,526 and 8,580,593 shares issued and outstanding as of December 28, 2019 and December 29, 2018, respectively | 94 | 86 | ||||||
Class and 29 , 2018 , | 27 | 29 | ||||||
Additional paid-in capital | 571,784 | 405,711 | ||||||
Accumulated other comprehensive loss, net of tax | (1,669 | ) | (1,197 | ) | ||||
Retained earnings | 165,400 | 55,688 | ||||||
Total stockholders’ equity | 735,636 | 460,317 | ||||||
Total liabilities and stockholders’ equity | $ | 1,054,057 | $ | 639,851 | ||||
30, 2017
Class A Common Shares | Class A Common Stock, Par | Class B Common Shares | Class B Common Stock, Par | Additional Paid-in Capital | Accumulated Other Comprehensive (Loss) Income, net of tax | Retained Earnings | Total Stockholders’ Equity | |||||||||||||||||||||||||
Balance at December 28, 2013 | 8,785 | $ | 88 | 3,962 | $ | 40 | $ | 173,025 | $ | (417 | ) | $ | 129,349 | $ | 302,085 | |||||||||||||||||
Net income | 90,743 | 90,743 | ||||||||||||||||||||||||||||||
Stock options exercised and restricted shares activities, including tax benefit of $17,353 | 351 | 3 | 45,027 | 45,030 | ||||||||||||||||||||||||||||
Stock-based compensation expense | 6,857 | 6,857 | ||||||||||||||||||||||||||||||
Repurchase of Class A Common Stock | (29 | ) | (7,859 | ) | (7,859 | ) | ||||||||||||||||||||||||||
Conversion from Class B to Class A | 345 | 4 | (345 | ) | (4 | ) | — | |||||||||||||||||||||||||
Defined benefit plans liability adjustment, net of tax of $455 | (716 | ) | (716 | ) | ||||||||||||||||||||||||||||
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Balance at December 27, 2014 | 9,452 | 95 | 3,617 | 36 | 224,909 | (1,133 | ) | 212,233 | 436,140 | |||||||||||||||||||||||
Net income | 98,414 | 98,414 | ||||||||||||||||||||||||||||||
Stock options exercised and restricted shares activities, including tax benefit of $15,350 | 303 | 3 | 58,522 | 58,525 | ||||||||||||||||||||||||||||
Stock-based compensation expense | 6,665 | 6,665 | ||||||||||||||||||||||||||||||
Repurchase of Class A Common Stock | (616 | ) | (6 | ) | (138,699 | ) | (138,705 | ) | ||||||||||||||||||||||||
Conversion from Class B to Class A | 250 | 2 | (250 | ) | (2 | ) | — | |||||||||||||||||||||||||
Defined benefit plans liability adjustment, net of tax of ($142) | 204 | 204 | ||||||||||||||||||||||||||||||
Currency translation adjustment | (22 | ) | (22 | ) | ||||||||||||||||||||||||||||
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Balance at December 26, 2015 | 9,389 | 94 | 3,367 | 34 | 290,096 | (951 | ) | 171,948 | 461,221 | |||||||||||||||||||||||
Net income | 87,349 | 87,349 | ||||||||||||||||||||||||||||||
Stock options exercised and restricted shares activities, including tax benefit of $12,524 | 557 | 5 | 53,669 | 53,674 | ||||||||||||||||||||||||||||
Stock-based compensation expense | 6,148 | 6,148 | ||||||||||||||||||||||||||||||
Repurchase of Class A Common Stock | (945 | ) | (9 | ) | (161,649 | ) | (161,658 | ) | ||||||||||||||||||||||||
Conversion from Class B to Class A | 170 | 2 | (170 | ) | (2 | ) | — | |||||||||||||||||||||||||
Defined benefit plans liability adjustment, net of tax of $32 | (53 | ) | (53 | ) | ||||||||||||||||||||||||||||
Currency translation adjustment | (99 | ) | (99 | ) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance at December 31, 2016 | 9,171 | $ | 92 | 3,197 | $ | 32 | $ | 349,913 | $ | (1,103 | ) | $ | 97,648 | $ | 446,582 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Common Shares | Class A Common Stock, Par | Class B Common Shares | Class B Common Stock, | Additional Paid-in Capital | Accumulated Other Comprehensive Loss, net of tax | Retained Earnings | Total Stockholders’ Equity | |||||||||||||||||||||||||
Balance at December 31, 2016 | 9,171 | 92 | 3,197 | 32 | 349,913 | (1,103 | ) | 97,648 | 446,582 | |||||||||||||||||||||||
Net income | 99,049 | 99,049 | ||||||||||||||||||||||||||||||
Stock options exercised and restricted shares activities | 217 | 2 | 16,361 | 16,363 | ||||||||||||||||||||||||||||
Stock-based compensation expense | 6,316 | 6,316 | ||||||||||||||||||||||||||||||
Repurchase of Class A Common Stock | (964 | ) | (10 | ) | (144,592 | ) | (144,602 | ) | ||||||||||||||||||||||||
Conversion from Class B to Class A | 179 | 2 | (179 | ) | (2 | ) | — | |||||||||||||||||||||||||
Defined benefit plans liability adjustment, net of tax of $68 | (202 | ) | (202 | ) | ||||||||||||||||||||||||||||
Currency translation adjustment | 17 | 17 | ||||||||||||||||||||||||||||||
Balance at December 30, 2017 | 8,603 | $ | 86 | 3,018 | $ | 30 | $ | 372,590 | $ | (1,288 | ) | $ | 52,105 | $ | 423,523 | |||||||||||||||||
Net income | 92,663 | 92,663 | ||||||||||||||||||||||||||||||
Stock options exercised and restricted shares activities | 227 | 2 | 23,086 | 23,088 | ||||||||||||||||||||||||||||
Stock-based compensation expense | 10,035 | 10,035 | ||||||||||||||||||||||||||||||
Repurchase of Class A Common Stock | (350 | ) | (3 | ) | (88,309 | ) | (88,312 | ) | ||||||||||||||||||||||||
Conversion from Class B to Class A | 100 | 1 | (100 | ) | (1 | ) | — | |||||||||||||||||||||||||
Defined benefit plans liability adjustment, net of tax of $93 | 277 | 277 | ||||||||||||||||||||||||||||||
Currency translation adjustment | 25 | 25 | ||||||||||||||||||||||||||||||
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 | (211 | ) | 211 | — | ||||||||||||||||||||||||||||
Balance at December 29, 2018 | 8,580 | $ | 86 | 2,918 | $ | 29 | $ | 405,711 | $ | (1,197 | ) | $ | 55,688 | $ | 460,317 | |||||||||||||||||
Net income | 110,041 | 110,041 | ||||||||||||||||||||||||||||||
Stock options exercised and restricted shares activities | 116 | 1 | 8,998 | 8,999 | ||||||||||||||||||||||||||||
Stock-based compensation expense | 12,337 | 12,337 | ||||||||||||||||||||||||||||||
Shares issued in connection with Dogfish Head merger | 430 | 5 | 144,738 | 144,743 | ||||||||||||||||||||||||||||
Repurchase of Class A Common Stock | — | |||||||||||||||||||||||||||||||
Conversion from Class B to Class A | 245 | 2 | (245 | ) | (2 | ) | — | |||||||||||||||||||||||||
Defined benefit plans liability adjustment, net of tax of $176 | (519 | ) | (519 | ) | ||||||||||||||||||||||||||||
Adoption of ASU 2014-09, Revenue from Contracts with Customers, tax adjustment | (329 | ) | (329 | ) | ||||||||||||||||||||||||||||
Currency translation adjustment | 47 | 47 | ||||||||||||||||||||||||||||||
Balance at December 28, 2019 | 9,371 | $ | 94 | 2,673 | $ | 27 | $ | 571,784 | $ | (1,669 | ) | $ | 165,400 | $ | 735,636 | |||||||||||||||||
Year Ended | ||||||||||||
December 31, | December 26, | December 27, | ||||||||||
2016 (53 weeks) | 2015 | 2014 | ||||||||||
Cash flows provided by operating activities: | ||||||||||||
Net income | $ | 87,349 | $ | 98,414 | $ | 90,743 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 49,557 | 42,885 | 35,138 | |||||||||
Impairment of assets | 716 | 258 | 1,777 | |||||||||
Loss on disposal of property, plant and equipment | 616 | 515 | 434 | |||||||||
Gain on sale of property, plant and equipment | (951 | ) | — | — | ||||||||
Bad debt (recovery) expense | (244 | ) | 165 | (16 | ) | |||||||
Stock-based compensation expense | 6,148 | 6,665 | 6,857 | |||||||||
Excess tax benefit from stock-based compensation arrangements | (12,524 | ) | (15,350 | ) | (17,353 | ) | ||||||
Deferred income taxes | 8,243 | 6,986 | 15,350 | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
Accounts receivable | 2,534 | (2,289 | ) | 5,157 | ||||||||
Inventories | 445 | (5,155 | ) | 5,090 | ||||||||
Prepaid expenses, income tax receivable and other assets | 14,936 | 11,858 | (9,447 | ) | ||||||||
Accounts payable | (1,811 | ) | 5,985 | 884 | ||||||||
Accrued expenses and taxes and other current liabilities | 5,479 | 9,014 | 4,578 | |||||||||
Other liabilities | (6,304 | ) | 8,732 | 2,019 | ||||||||
|
|
|
|
|
| |||||||
Net cash provided by operating activities | 154,189 | 168,683 | 141,211 | |||||||||
|
|
|
|
|
| |||||||
Cash flows used in investing activities: | ||||||||||||
Purchases of property, plant and equipment | (49,913 | ) | (74,187 | ) | (151,784 | ) | ||||||
Proceeds from sale of property, plant and equipment | 3,855 | — | — | |||||||||
Cash paid for intangible assets | — | (100 | ) | (100 | ) | |||||||
Change in restricted cash | 40 | 57 | 53 | |||||||||
|
|
|
|
|
| |||||||
Net cash used in investing activities | (46,018 | ) | (74,230 | ) | (151,831 | ) | ||||||
|
|
|
|
|
| |||||||
Cash flows (used in) provided by financing activities: | ||||||||||||
Repurchase of Class A Common Stock | (164,658 | ) | (135,705 | ) | (7,859 | ) | ||||||
Proceeds from exercise of stock options | 40,127 | 42,339 | 27,272 | |||||||||
Cash paid on note payable and capital lease | (58 | ) | (54 | ) | (53 | ) | ||||||
Excess tax benefit from stock-based compensation arrangements | 12,524 | 15,350 | 17,353 | |||||||||
Net proceeds from sale of investment shares | 736 | 1,408 | 785 | |||||||||
|
|
|
|
|
| |||||||
Net cash (used in) provided by financing activities | (111,329 | ) | (76,662 | ) | 37,498 | |||||||
|
|
|
|
|
| |||||||
Change in cash and cash equivalents | (3,158 | ) | 17,791 | 26,878 | ||||||||
Cash and cash equivalents at beginning of year | 94,193 | 76,402 | 49,524 | |||||||||
|
|
|
|
|
| |||||||
Cash and cash equivalents at end of period | $ | 91,035 | $ | 94,193 | $ | 76,402 | ||||||
|
|
|
|
|
| |||||||
Supplemental disclosure of cash flow information: | ||||||||||||
Income taxes paid | $ | 30,978 | $ | 45,078 | $ | 42,324 | ||||||
|
|
|
|
|
| |||||||
Income taxes refunded | $ | 12,064 | $ | 17,252 | $ | — | ||||||
|
|
|
|
|
| |||||||
(Decrease) Increase in accounts payable for repurchase of Class A Common Stock | $ | (3,000 | ) | $ | 3,000 | $ | — | |||||
|
|
|
|
|
| |||||||
Increase (Decrease) in accounts payable for purchase of property, plant and equipment | $ | 2,678 | $ | (1,843 | ) | $ | 268 | |||||
|
|
|
|
|
|
Year Ended | ||||||||||||
December 28, | December 29, | December 30, | ||||||||||
2019 | 2018 | 2017 | ||||||||||
Cash flows provided by operating activities: | ||||||||||||
Net income | $ | 110,041 | $ | 92,663 | $ | 99,049 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 56,271 | 51,968 | 51,256 | |||||||||
Impairment of assets | 911 | 652 | 2,451 | |||||||||
Loss on disposal of property, plant and equipment | 871 | 64 | 764 | |||||||||
Change in ROU assets | 4,207 | — | — | |||||||||
Bad debt expense | 45 | 2 | — | |||||||||
Stock-based compensation expense | 12,337 | 10,035 | 6,316 | |||||||||
Deferred income taxes | 7,404 | 14,350 | (22,442 | ) | ||||||||
Changes in operating assets and liabilities: | ||||||||||||
Accounts receivable | (12,260 | ) | (1,636 | ) | 2,945 | |||||||
Inventories | (24,932 | ) | (21,312 | ) | (1,741 | ) | ||||||
Prepaid expenses, income tax receivable and other assets | (13,862 | ) | (552 | ) | (4,511 | ) | ||||||
Accounts payable | 21,417 | 6,352 | 245 | |||||||||
Accrued expenses and other current liabilities | 18,618 | 10,130 | 2,671 | |||||||||
Change in operating lease liability | (3,277 | ) | — | — | ||||||||
Other liabilities | 451 | 731 | (1,021 | ) | ||||||||
Net cash provided by operating activities | 178,242 | 163,447 | 135,982 | |||||||||
Cash flows used in investing activities: | ||||||||||||
Purchases of property, plant and equipment | (93,233 | ) | (55,460 | ) | (32,987 | ) | ||||||
Proceeds from sale of property, plant and equipment | 165 | 27 | 25 | |||||||||
Cash paid for acquisition of intangible assets | — | (50 | ) | — | ||||||||
Investment in Dogfish Head, net of cash acquired | (165,517 | ) | — | — | ||||||||
Other investing activities | (244 | ) | 139 | 33 | ||||||||
Net cash used in investing activities | (258,829 | ) | (55,344 | ) | (32,929 | ) | ||||||
Cash flows provided by (used in) financing activities: | ||||||||||||
Repurchase of Class A Common Stock | — | (88,312 | ) | (144,602 | ) | |||||||
Proceeds from exercise of stock options | 8,063 | 22,143 | 15,415 | |||||||||
Payment of taxes related to exercise of stock options | — | — | ||||||||||
Net cash paid on note payable and finance leases | (378 | ) | (78 | ) | (60 | ) | ||||||
Cash borrowed on line of credit | 97,000 | — | — | |||||||||
Cash paid on line of credit | (97,000 | ) | — | — | ||||||||
Net proceeds from sale of investment shares | 1,173 | 906 | 796 | |||||||||
Net cash provided by (used in) financing activities | 8,858 | (65,341 | ) | (128,451 | ) | |||||||
Change in cash and cash equivalents | (71,729 | ) | 42,762 | (25,398 | ) | |||||||
Cash and cash equivalents at beginning of year | 108,399 | 65,637 | 91,035 | |||||||||
Cash and cash equivalents at end of period | $ | 36,670 | $ | 108,399 | $ | 65,637 | ||||||
Supplemental disclosure of cash flow information: | ||||||||||||
Non cash consideration issued in Dogfish Head Transaction | $ | 144,743 | $ | — | $ | — | ||||||
Income taxes paid | $ | 30,760 | $ | 11,353 | $ | 43,006 | ||||||
Income taxes refunded | $ | 18 | $ | 5,000 | $ | — | ||||||
Cash paid for amounts included in measurement of lease liabilities | ||||||||||||
Operating cash flows from operating leases | $ | 4,696 | $ | — | $ | — | ||||||
Operating cash flows from finance leases | $ | 56 | $ | — | $ | — | ||||||
Financing cash flows from finance leases | $ | 313 | $ | — | $ | — | ||||||
Right-of-use assets obtained in exchange for operating lease obligations | $ | 57,966 | $ | — | $ | — | ||||||
�� | ||||||||||||
Right-of-use assets obtained in exchange forfinance lease obligations | $ | 2,837 | $ | — | $ | — | ||||||
Interest paid on revolving credit facility | $ | 451 | $ | — | $ | — | ||||||
Increase (decrease) in accounts payable for purchase of property, plant and equipment | $ | 3,994 | $ | 2,609 | $ | (2,689 | ) | |||||
Increase in accrued expenses for purchase of property, plant and equipment | $ | 2,638 | $ | — | $ | — | ||||||
A. Organization and Basis of Presentation
28, 2019
A. | Organization and Basis of Presentation |
B. Summary of Significant Accounting Policies
“American Fermentation Company”.
B. | Summary of Significant Accounting Policies |
Segment Reporting
The Company consists of two operating segments that each produce and sell alcohol beverages. The first is the Boston Beer Company operating segment comprised of the Company’s Samuel Adams®, Twisted Tea®, Angry Orchard® and Truly Spiked & Sparkling® brands. The second is the A&S Brewing Collaborative operating segment which is comprised of The Traveler Beer Company, Coney Island Brewing Company, Angel City Brewing Company and Concrete Beach Brewing Company. Both segments have similar economic characteristics. They sell predominantly low alcohol beverages, which are sold to the same types of customers in similar size quantities, at similar price points and through substantially the same channels of distribution. These beverages are manufactured using similar production processes, have comparable alcohol content and generally fall under the same regulatory environment. Since the operating segments are similar in the areas outlined above, they are aggregated for financial statements purposes.
2019, 2018, or 2017.
The Company enters into multi-year purchase commitments in order to secure adequate supply of ingredients and packaging, to brew and package its products. Inventory on hand and under purchase commitments totaled approximately $222.8 million at December 28, 2019.
The computation of the excesscover incurred inventory requires management to make certain assumptions regarding future sales growth, product mix, new products, cancellation costs, and supply, among others. The Company manages inventory levels and purchase commitments in an effort to maximize utilization of inventory on hand and under commitments. The Company’s accounting policy for inventory and purchase commitments is to recognize a loss by establishing a reserve to the extent inventory levels and commitments exceed management’s expected future usage.losses. Provision for excess or expired inventory included in cost of goods sold was $4.5$8.1 million, $4.0$4.2 million, and $6.1$5.8 million in fiscal years 2016, 2015,2019, 2018, and 2014,2017 respectively.
Kegs | 5 years | |
Computer software and equipment | 2 to 5 years | |
Office equipment and furniture | 3 to 7 years | |
Machinery and plant equipment | 3 to20 years, or the term of the production agreement, whichever is shorter | |
Leasehold improvements | Lesser of the remaining term of the lease or estimated useful life of the asset | |
Building and building improvements | 12 to20 years, or the remaining useful life of the building, whichever is shorter |
Goodwill
The Company does not amortize goodwill, but evaluates the recoverability of goodwill by comparing the carrying value
Long-lived Assets
Long-lived assets are recorded at cost and depreciated over their estimated useful lives. For purposes of determining whether there are any impairment losses, as further discussed below, management has historically examined the carrying value of the Company’s identifiable long-lived assets, including their useful lives, when indicators of impairment are present. For all long-lived assets, if an impairment loss is identified based on the fair value of the asset, as compared to the carrying value of the asset, such a loss would be charged to expense in the period the impairment is identified. Furthermore, if the review of the carrying values of the long-lived assets indicates impairment of such assets, the Company may determine that shorter estimated useful lives are more appropriate. In that event, the Company will be required to record additional depreciation in future periods, which will reduce earnings.
Factors generally considered important which could trigger an impairment review on the carrying value of long-lived assets include the following: (1) significant underperformance relative to historical or projected future operating results; (2) significant changes in the manner of use of acquired assets or the strategy for the Company’s overall business; (3) underutilization of assets; and (4) discontinuance of products by the Company or its customers. The Company believes that the carrying value of its long-lived assets was realizable as of December 31, 2016 and December 26, 2015.
Income Taxes
2017, respectively. The Company provides for deferred taxes using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s consolidated financial statements or tax returns. This results in differences between the book and tax basesbasis of the Company’s assets, and liabilities and carryforwards,carry-forwards, such as tax credits. In estimating future tax consequences, all expected future events, other than enactment of changes in the tax laws or rates, are generally considered. Valuation allowances are provided when recovery of deferred tax assets does not meet the more likely than not standards as defined in ASC Topic 740,
Excise Taxes
The Company is responsible Historically, the valuation allowances and reserves for compliance withuncertain tax positions have been adequate to cover the Alcoholrelated tax exposures.
Revenue Recognition
Net revenue includes product sales, less the distributor promotional discount allowance, certain Distributor incentives, as discussed below in Customer Programs and Incentives
Costreserves which would impact revenue. As of Goods Sold
The following expensesDecember 28, 2019, and December 29, 2018, the stale beer reserve was $1.8 million and $2.1 million, respectively. These amounts are included in cost of goods sold: raw material costs, packaging costs, costsaccrued expenses and income related to deposit activity, purchasing and receiving costs, manufacturing labor and overhead, brewing and processing costs, inspection costs relating to quality control, inbound freight charges, depreciation expense related to manufacturing equipment and warehousing costs, which include rent, labor and overhead costs.
Shipping Costs
Costs incurred for the shipping of products to customers are included in advertising, promotional and selling expensesother current liabilities in the accompanying consolidated statements of comprehensive income. The Company incurred shipping costs of $49.2 million, $62.2 million, and $62.6 million in fiscal years 2016, 2015, and 2014, respectively.
Advertising and Sales Promotions
The following expenses are included in advertising, promotional and selling expenses in the accompanying consolidated statements of comprehensive income: media advertising costs, sales and marketing expenses, salary and benefit expenses and meals, travel and entertainment expenses for the sales, brand and sales support workforce, promotional activity expenses, freight charges related to shipments of finished goods from manufacturing locations to distributor locations andpoint-of-sale items. Total advertising and sales promotional expenditures of $105.3 million, $120.1 million, and $100.5 million were included in advertising, promotional and selling expenses in the accompanying consolidated statements of comprehensive income for fiscal years 2016, 2015, and 2014, respectively.
The Company conducts certain advertising and promotional activities in its Distributors’ markets and the Distributors make contributions to the Company for such efforts. Reimbursements from Distributors for advertising and promotional activities are recorded as reductions to advertising, promotional and selling expenses.
Customer Programs and Incentives
balance sheets.
payments to customers and incurs these costs to promote sales of products and to maintain competitive pricing. Amounts paid in connection with customer programs and incentives are recorded as reductions to net revenue or as advertising, promotional and selling expenses, in accordance with ASC Topic605-50,Revenue Recognition — Customer Payments and Incentives,based on the nature of the expenditure. Customer incentives and other payments made to Distributors are primarily based upon the 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,
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.
allowances.
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.
Stock-based compensation was $12.3 million, $10.0 million and $6.3 million in fiscal years 2019, 2018 and 2017, respectively.
Recent
Recently
In July 2015, the FASB issued ASUNo. 2015-11,Inventory (Topic 330), Simplifying the Measurement of Inventory. ASU2015-11 is part of the FASB’s initiative to simplify accounting standards. The guidance requiresstatements on an entity to recognize inventory within scope of the standard at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonable predictable costs of completion, disposal and transportation. ASU2015-11 will be effective prospectively for the year beginning January 1, 2017. The Company is currently evaluating the impact of ASU2015-11 and has preliminarily concluded that it will not have a significant impact on the consolidated financial statements.
In November 2015, the FASB issued ASUNo. 2015-17,Balance Sheet Classification of Deferred Taxes. ASU2015-17 is part of the FASB’s initiative to simplify accounting standards. The guidance requires an entity to present deferred tax assets and deferred tax liabilities as noncurrent in the consolidated balance sheet. ASU2015-17 permits entities to apply the amendments either prospectively or retrospectively. ASU2015-17 will be effective for the year beginning January 1, 2017. The Company is currently evaluating the impact ASU2015-17. As of December 31, 2016 and December 26, 2015, the Company had $7.4 million and $7.0 million, respectively, of current deferred tax assets on the consolidated balance sheets that would be classified as noncurrent under the new guidance.
ongoing basis.
incentives.
options versus the fair value when those options were granted. For the 2016 and 2015 fiscal years, the$4.4 million, respectively, in excess tax benefit from stock-based compensation arrangements was $12.5recognized within the income tax provision in the consolidated statement of comprehensive income and classified as an operating activity in the consolidated statement of cash flows. The Company
C. | Dogfish Head Brewery Transaction |
Total (In Thousands) | ||||
Cash and cash equivalents | $ | 7,476 | ||
Accounts receivable | 8,081 | |||
Inventories | 9,286 | |||
Prepaid expenses and other current assets | 847 | |||
Property, plant and equipment | 106,964 | |||
Goodwill | 108,846 | |||
Brand | 98,500 | |||
Other intangible assets | 3,800 | |||
Other assets | 378 | |||
Total assets acquired | 344,178 | |||
Accounts payable | 3,861 | |||
Accrued expenses and other current liabilities | 4,085 | |||
Deferred income taxes | 18,437 | |||
Other liabilities | 59 | |||
Total liabilities assumed | 26,442 | |||
Net assets acquired | $ | 317,736 | ||
Cash consideration | $ | 172,993 | ||
Nominal value of equity issued | 162,999 | |||
Fair Value reduction due to liquidity | (18,256 | ) | ||
Estimated total purchase price | $ | 317,736 | ||
C. Inventories
Inventories consistthe fair value of raw materials, work in process and finished goods. Raw materials, which principally consist of hops, apple juice, other brewing materials and packaging, are statedcustomer relationships is estimated at the lower of cost, determined on thefirst-in,first-out basis, or market. The Company’s goal is to maintainon-hand a supply of approximately two years for essential hop varieties, in order to limit the risk of an unexpected reduction in supply. Inventories are generally classified as current assets.$3.8 million. The Company classifies hops inventory inestimated 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
(i) | Depreciation and amortization expenses were updated to reflect the fair value adjustments to Dogfish Head property, plant and equipment and intangible assets beginning December 31, 2017. |
(ii) | Transaction costs incurred in the fifty-two weeks ended December 28, 2019 have beenre-assigned to the first period of the comparative fiscal year. |
(iii) | 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. |
(iv) | The tax effects of the pro forma adjustments at an estimated statutory rate of 25.6%. |
(v) | Earnings per share amounts are calculated using the Company’s historical weighted average shares outstanding plus the 429,291 shares issued in the merger. |
Fifty-two weeks ended | ||||||||
December 28, 2019 | December 29, 2018 | |||||||
(in thousands , ex cept per share data) | ||||||||
Net revenue | $ | 1,304,239 | $ | 1,103,061 | ||||
Net income | $ | 116,868 | $ | 98,700 | ||||
Basic earnings per share | $ | 9.83 | $ | 8.12 | ||||
Diluted earnings per share | $ | 9.73 | $ | 8.04 |
D. | Inventories |
December 31, | December 26, | |||||||
2016 | 2015 | |||||||
(in thousands) | ||||||||
Raw Materials | $ | 41,630 | $ | 42,123 | ||||
Work in process | 8,131 | 8,876 | ||||||
Finished Goods | 9,054 | 8,261 | ||||||
|
|
|
| |||||
58,815 | 59,260 | |||||||
Less portion in other long term assets | (6,316 | ) | (2,798 | ) | ||||
|
|
|
| |||||
$ | 52,499 | $ | 56,462 | |||||
|
|
|
|
D. Prepaid Expenses and Other Current Assets
December 28, 2019 | December 29, 2018 | |||||||
(in thousands) | ||||||||
Current inventory: | ||||||||
Raw materials | $ | 61,522 | $ | 44,655 | ||||
Work in process | 12,631 | 8,252 | ||||||
Finished goods | 31,885 | 17,342 | ||||||
Total current inventory | 106,038 | 70,249 | ||||||
Long term inventory | 10,048 | 11,619 | ||||||
Total inventory | $ | 116,086 | $ | 81,868 | ||||
E. | Prepaid Expenses and Other Current Assets |
December 31, | December 26, | |||||||
2016 | 2015 | |||||||
(in thousands) | ||||||||
Prepaid malt and barley | $ | 1,644 | $ | 3,184 | ||||
Excise and other tax receivables | 1,637 | 2,093 | ||||||
Insurance cash surrender value | 1,254 | — | ||||||
Supplier rebates | 1,158 | 1,929 | ||||||
Prepaid insurance | 1,144 | 1,047 | ||||||
Lease incentive receivable | 113 | 1,584 | ||||||
Other | 1,781 | 2,216 | ||||||
|
|
|
| |||||
$ | 8,731 | $ | 12,053 | |||||
|
|
|
|
E. Property, Plant and Equipment
December 28, 2019 | December 29, 2018 | |||||||
(in thousands) | ||||||||
Prepaid brewing services fee - short term(see Note L) | $ | 4,936 | $ | 3,789 | ||||
Prepaid advertising, promotional and selling | 1,649 | 1,518 | ||||||
Prepaid software expense | 1,224 | 754 | ||||||
Prepaid insurance | 1,206 | 1,111 | ||||||
Excise and other tax receivables | 1,173 | 2,179 | ||||||
Other | 1,889 | 3,785 | ||||||
$ | 12,077 | $ | 13,136 | |||||
F. | Property, Plant and Equipment |
December 31, | December 26, | |||||||
2016 | 2015 | |||||||
(in thousands) | ||||||||
Machinery and plant equipment | $ | 420,486 | $ | 387,180 | ||||
Kegs | 70,024 | 71,391 | ||||||
Land | 22,295 | 25,135 | ||||||
Building and building improvements | 112,508 | 101,836 | ||||||
Office equipment and furniture | 22,412 | 19,635 | ||||||
Leasehold improvements | 14,147 | 12,037 | ||||||
|
|
|
| |||||
661,872 | 617,214 | |||||||
Less accumulated depreciation | (253,461 | ) | (207,288 | ) | ||||
|
|
|
| |||||
$ | 408,411 | $ | 409,926 | |||||
|
|
|
|
December 28, 2019 | December 29, 2018 | |||||||
(in thousands) | ||||||||
Machinery and plant eq u ipment | $ | 571,506 | $ | 459,352 | ||||
Kegs | 66,011 | 67,940 | ||||||
Land | 25,759 | 22,295 | ||||||
Building and building improvements | 130,311 | 115,748 | ||||||
Office equipment and furniture | 29,202 | 25,728 | ||||||
Leasehold improvements | 48,528 | 20,830 | ||||||
Assets under construction | 59,027 | 22,160 | ||||||
930,344 | 734,053 | |||||||
Less accumulated depreciation | (389,276 | ) | (344,264 | ) | ||||
$ | 541,068 | $ | 389,789 | |||||
The Dogfish Head Transaction added $
Gain
During 2016,the lease payments. Based on the present value of the lease payments for the remaining lease term of the Company’s existing leases, the Company recognized a $1.0ROU assets of $27.0 million gainand lease liabilities of $31.5 million upon adoption of ASU No.
F. Goodwill
Goodwill represents the excess of the purchase price of the Company-owned brewerieslease payments over the fair valuelease term. Leases with an initial term of 12 months or less (“short-term leases”) are not recorded on the netbalance sheet and are recognized on a straight-line basis over the lease term. As of December 28, 2019, total ROU assets acquired upon the completion of the acquisitions.
The following table summarizes the Company’s changes to the carrying amount of goodwill for the fifty-three weeks ended December 31, 2016 (in thousands):
Balance at | Balance at | |||||||||||
December 26, | December 31, | |||||||||||
2015 | Additions | 2016 | ||||||||||
Goodwill | $ | 3,683 | $ | — | $ | 3,683 |
G. Accrued Expenses and Other Current Liabilities
lease liabilities were as follows:
Classification | Leases | |||||
Righ t-of-use assets | (in thousands) | |||||
Operating lease assets | Operating right-of-use assets | $ | 53,758 | |||
Finance lease assets | Property, plantand equipment, net | 2,531 | ||||
Lease Liabilities | ||||||
Current | ||||||
Operating lease liabilities | Current operating lease liabilities | 5,168 | ||||
Finance lease liabilities | Accrued expenses and other current liabilities | 546 | ||||
Non-current | ||||||
Operating lease liabilities | Non-current operating lease liabilities | 53,940 | ||||
Finance lease liabilities | Other liabilities | 2,042 |
Finance Leases | ||||
(in thousands) | ||||
Gross value | $ | 2,837 | ||
Accumulated amortization | (306 | ) | ||
Carrying value | $ | 2,531 | ||
Lease Cost | ||||
(in thousands) | ||||
Operating lease cost | $ | 5,625 | ||
Variable lease costs not included in liability | 1,064 | |||
Finance lease cost: | ||||
Amortization of right-of-use asset | $ | 306 | ||
Interest on lease liabilities | 56 | |||
Total finance lease cost | $ | 362 | ||
Operating Leases | Finance Leases | Weighted-Average | ||||||||||||||
Operating | Finance Leases | |||||||||||||||
(in thousands) | ||||||||||||||||
2020 | $ | 5,755 | $ | 626 | ||||||||||||
2021 | 9,241 | 626 | ||||||||||||||
2022 | 9,036 | 626 | ||||||||||||||
2023 | 8,995 | 626 | ||||||||||||||
2024 | 8,729 | 265 | ||||||||||||||
Thereafter | 27,567 | 23 | ||||||||||||||
Total lease payments | 69,323 | 2,792 | ||||||||||||||
Less imputed interest (based on 3.5 % weighted-average discount rate) | (10,215 | ) | (204 | ) | ||||||||||||
Present value of lease liability | $ | 59,108 | $ | 2,588 | 8.3 | 4.4 | ||||||||||
Fifty-two weeks ended | ||||||||
December 28, | December 29, | |||||||
2019 | 2018 | |||||||
( in thousands) | ||||||||
Goodwill as of beginning of period | $ | 3,683 | $ | 3,683 | ||||
Acquired goodwill | 108,846 | — | ||||||
Impairment of goodwill | — | — | ||||||
Goodwill as of end of period | $ | 112,529 | $ | 3,683 | ||||
As of December 28, 2019 | As of December 29, 2018 | |||||||||||||||||||||||||||
Estimated | Gross | Accumulated | Net Book | Gross | Accumulated | Net | ||||||||||||||||||||||
Life (Years) | Value | Amortization | Value | Value | Amortization | Value | ||||||||||||||||||||||
( in thou sands) | ( in thou sands) | |||||||||||||||||||||||||||
Customer Relationships | 15 | $ | 3,800 | $ | (127 | ) | $ | 3,673 | $ | — | $ | — | $ | — | ||||||||||||||
Trade Names | Indefinite | 100,599 | — | 100,599 | 2,099 | — | 2,099 | |||||||||||||||||||||
Total intangible assets | $ | 104,399 | $ | (127 | ) | $ | 104,272 | $ | 2,099 | $ | — | $ | 2,099 | |||||||||||||||
Fiscal Year | Amount (in th ousands) | |||
2020 | 253 | |||
2021 | 253 | |||
2022 | 253 | |||
2023 | 253 | |||
2024 | 253 |
I. | Accrued Expenses and Other Current Liabilities |
December 31, | December 26, | |||||||
2016 | 2015 | |||||||
(in thousands) | ||||||||
Accrued deposits | $ | 15,814 | $ | 18,865 | ||||
Employee wages, benefits and reimbursements | 14,116 | 12,367 | ||||||
Advertising, promotional and selling expenses | 8,562 | 11,249 | ||||||
Deferred revenue | 5,381 | 3,949 | ||||||
Accrued stale beer | 5,226 | 3,254 | ||||||
Accrued sales and use tax | 2,437 | 2,656 | ||||||
Accrued excise taxes | 2,255 | 3,976 | ||||||
Accrued freight | 1,402 | 5,681 | ||||||
Other accrued liabilities | 5,681 | 6,387 | ||||||
|
|
|
| |||||
$ | 60,874 | $ | 68,384 | |||||
|
|
|
|
H. Revolving Line of Credit
fol
December 28, 2019 | December 29, 2018 | |||||||
(in thousands) | ||||||||
Employee wages, benefits and reimbursements | $ | 35,394 | $ | 27,074 | ||||
Accrued deposits | 20,483 | 18,171 | ||||||
Advertising, promotional and selling expenses | 17,009 | 9,079 | ||||||
Deferred revenue | 6,984 | 4,587 | ||||||
Accrued utilities and third party fees | 4,075 | 1,881 | ||||||
Accrued excise taxes | 2,758 | 2,335 | ||||||
Accrued capital expenditures | 2,621 | — | ||||||
Accrued freight | 2,091 | 1,668 | ||||||
Other accrued liabilities | 7,692 | 8,616 | ||||||
$ | 99,107 | $ | 73,412 | |||||
J. | Revolving Line of Credit |
Company’s EBITDA to interest expense ratio was 11,352
29, 201
I. Income Taxes
K. | Income Taxes |
2016 | 2015 | 2014 | ||||||||||
(in thousands) | ||||||||||||
Current: | ||||||||||||
Federal | $ | 35,390 | $ | 42,391 | $ | 30,595 | ||||||
State | 6,108 | 7,403 | 8,262 | |||||||||
|
|
|
|
|
| |||||||
Total current | 41,498 | 49,794 | 38,857 | |||||||||
Deferred: | ||||||||||||
Federal | 7,666 | 6,279 | 15,407 | |||||||||
State | 608 | 523 | 587 | |||||||||
|
|
|
|
|
| |||||||
Total deferred | 8,274 | 6,802 | 15,994 | |||||||||
|
|
|
|
|
| |||||||
Total provision for income taxes | $ | 49,772 | $ | 56,596 | $ | 54,851 | ||||||
|
|
|
|
|
|
2019 | 2018 | 2017 | ||||||||||
(in thousands) | ||||||||||||
Current: | ||||||||||||
Federal | $ | 18,510 | $ | 4,471 | $ | 34,255 | ||||||
State | 8,084 | 4,894 | 5,225 | |||||||||
Total current | 26,594 | 9,365 | 39,480 | |||||||||
Deferred: | ||||||||||||
Federal | 8,081 | 12,860 | (22,489 | ) | ||||||||
State | (346 | ) | 1,398 | 102 | ||||||||
Total deferred | 7,735 | 14,258 | (22,387 | ) | ||||||||
Total provision for income taxes | $ | 34,329 | $ | 23,623 | $ | 17,093 | ||||||
2016 | 2015 | 2014 | ||||||||||
Statutory rate | 35.0 | % | 35.0 | % | 35.0 | % | ||||||
State income taxes, net of federal benefit | 3.6 | 3.4 | 4.0 | |||||||||
Deduction relating to U.S. production activities | (2.6 | ) | (2.7 | ) | (2.1 | ) | ||||||
Change in valuation allowance | (0.3 | ) | — | — | ||||||||
Other | 0.6 | 0.8 | 0.8 | |||||||||
|
|
|
|
|
| |||||||
36.3 | % | 36.5 | % | 37.7 | % | |||||||
|
|
|
|
|
|
2019 | 2018 | 2017 | ||||||||||
Statutory rate | 21.0 | % | 21.0 | % | 35.0 | % | ||||||
State income taxes, net of federal benefit | 4.6 | 4.6 | 3.6 | |||||||||
Deduction relating to U.S. production activities | — | — | (3.2 | ) | ||||||||
Deduction relating to excess stock based compensation | (3.2 | ) | (3.6 | ) | (3.7 | ) | ||||||
Change relating to enacted Tax Cuts and Jobs Act | — | — | (17.5 | ) | ||||||||
Non-deductable meals & entertainment | 0.7 | 1.1 | 0.9 | |||||||||
Accounting method changes | — | (3.9 | ) | — | ||||||||
Change in valuation allowance | 0.4 | 0.7 | — | |||||||||
Other | 0.3 | 0.4 | (0.4 | ) | ||||||||
23.8 | % | 20.3 | % | 14.7 | % | |||||||
December 31, | December 26, | |||||||
2016 | 2015 | |||||||
(in thousands) | ||||||||
Deferred tax assets: | ||||||||
Accrued expenses | $ | 6,488 | $ | 7,435 | ||||
Stock-based compensation expense | 5,929 | 9,493 | ||||||
Inventory | 1,117 | 2,398 | ||||||
Other | 4,097 | 4,154 | ||||||
|
|
|
| |||||
Total deferred tax assets | 17,631 | 23,480 | ||||||
Valuation allowance | (669 | ) | (1,036 | ) | ||||
|
|
|
| |||||
Total deferred tax assets net of valuation allowance | 16,962 | 22,444 | ||||||
Deferred tax liabilities: | ||||||||
Property, plant and equipment | (72,140 | ) | (69,226 | ) | ||||
Prepaid expenses | (1,204 | ) | (1,475 | ) | ||||
Goodwill | (879 | ) | (761 | ) | ||||
|
|
|
| |||||
Total deferred tax liabilities | (74,223 | ) | (71,462 | ) | ||||
|
|
|
| |||||
Net deferred tax liabilities | $ | (57,261 | ) | $ | (49,018 | ) | ||
|
|
|
|
December 28, | December 29, | |||||||
2019 | 2018 | |||||||
(in thousands) | ||||||||
Deferred tax assets: | ||||||||
Lease Liabilities | $ | 15,567 | $ | — | ||||
Inventory | 5,868 | 1,356 | ||||||
Stock-based compensation expense | 5,818 | 5,156 | ||||||
Accrued expenses | 3,232 | 1,913 | ||||||
Other | 1,914 | 2,478 | ||||||
Total deferred tax assets | 32,399 | 10,903 | ||||||
Valuation allowance | (1,866 | ) | (1,291 | ) | ||||
Total deferred tax assets net of valuation allowance | 30,533 | 9,612 | ||||||
Deferred tax liabilities: | ||||||||
Property, plant and equipment | (78,232 | ) | (57,099 | ) | ||||
Right-of-use Assets | (14,203 | ) | — | |||||
Amortization | (10,899 | ) | (733 | ) | ||||
Prepaid expenses | (2,209 | ) | (949 | ) | ||||
Total deferred tax liabilities | (105,543 | ) | (58,781 | ) | ||||
Net deferred tax liabilities | $ | (75,010 | ) | $ | (49,169 | ) | ||
2016 | 2015 | |||||||
(in thousands) | ||||||||
Balance at beginning of year | $ | 486 | $ | 368 | ||||
Increases related to current year tax positions | 80 | 44 | ||||||
Increases related to prior year tax positions | 76 | 117 | ||||||
Decreases related to settlements | (50 | ) | — | |||||
Decreases related to lapse of statute of limitations | (3 | ) | (43 | ) | ||||
|
|
|
| |||||
Balance at end of year | $ | 589 | $ | 486 | ||||
|
|
|
|
2019 | 2018 | |||||||
(in thousands) | ||||||||
Balance at beginning of year | $ | 836 | $ | 292 | ||||
Increases related to current year tax positions | 101 | 8 | ||||||
(Decreases) Increases related to prior year tax positions | (63 | ) | 636 | |||||
Decreases related to settlements | — | (100 | ) | |||||
Decreases related to lapse of statute of limitations | (63 | ) | — | |||||
Balance at end of year | $ | 811 | $ | 836 | ||||
changes. The Company does not expect that any potential changes would have a material impact on the Company’s financial position, results of operations or cash flows.
The Company’s short term income tax receivable as of December 26, 2015 of $14.1 million in the accompanying consolidated balance sheets is primarily due to theProtecting Americans from Tax Hikes Act of 2015, being enacted after 2015 corporate estimated tax payments were due on December 15, 2015. These tax extenders allow the Company to claim accelerated tax depreciation on qualified property, plant, and equipment additions, and the research & development tax credit on the 2015 federal corporate income tax return. The Company applied with the IRS for a $12.0 million quick refund of overpayment of estimate tax, and received this refund in the first quarter of 2016.
J. Commitments and Contingencies
L. | Commitments and Contingencies |
The Company had outstanding totalnon-cancelable contractual obligations of $173.4 million at December 31, 2016. These obligations are made up of hops, barley and wheat totaling $71.1 million, advertising contracts of $27.4 million, apples and other ingredients of $27.2 million, glass bottles of $16.6 million, operating leases of $15.9 million, equipment and machinery of $10.7 million, and other commitments of $4.5 million.
Payments Due by Period | ||||||||||||||||||||||||||||
Total | 2017 | 2018 | 2019 | 2020 | 2021 | Thereafter | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Hops, barley and wheat | $ | 71,128 | $ | 27,784 | $ | 14,552 | $ | 14,692 | $ | 4,483 | $ | 4,878 | $ | 4,739 | ||||||||||||||
Advertising | 27,430 | 26,825 | 499 | 106 | — | — | — | |||||||||||||||||||||
Apples and other ingredients | 27,225 | 27,225 | — | — | — | — | — | |||||||||||||||||||||
Glass bottles | 16,551 | 16,551 | — | — | — | — | — | |||||||||||||||||||||
Operating leases | 15,900 | 3,343 | 2,965 | 2,683 | 2,569 | 2,625 | 1,715 | |||||||||||||||||||||
Equipment and machinery | 10,700 | 10,700 | — | — | — | — | — | |||||||||||||||||||||
Other | 4,505 | 2,624 | 1,335 | 546 | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total contractual obligations | $ | 173,439 | $ | 115,052 | $ | 19,351 | $ | 18,027 | $ | 7,052 | $ | 7,503 | $ | 6,454 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period | ||||||||||||||||||||||||||||
Total | 2020 | 2021 | 2022 | 2023 | 2024 | Thereafter | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Brand support | 80,157 | $ | 47,380 | $ | 9,827 | $ | 9,652 | $ | 4,760 | $ | 4,338 | $ | 4,200 | |||||||||||||||
Apples and other ingredients | 52,904 | 47,810 | 2,547 | 2,547 | — | — | — | |||||||||||||||||||||
Hops, barley and wheat | 52,466 | 35,589 | 6,346 | 4,503 | 2,288 | 2,157 | 1,583 | |||||||||||||||||||||
Equipment and machinery | 35,528 | 35,528 | — | — | — | — | — | |||||||||||||||||||||
Other | 20,422 | 17,123 | 2,620 | 364 | 170 | 45 | 100 | |||||||||||||||||||||
Total contractual obligations | $ | 241,477 | $ | 188,524 | $ | 18,793 | $ | 14,519 | $ | 7,218 | $ | 6,540 | $ | 5,883 | ||||||||||||||
These contracts were deemed necessary in order to bring hop inventory levels and purchase commitments into balance with the Company’s current brewing volume and hop usage forecasts. In addition, these contracts enable the Company to secure its position for future supply with hop vendors in the face of some competitive buying activity.
Company’s Cincinnati Brewerymanage inventory levels and its Pennsylvania Brewery. This agreement also establishes the terms on which Anchor may supply glass bottles to other breweries where the Company brews its beers. Under the agreement with Anchor, the Company has minimum and maximum purchase commitments that are based on Company-provided production estimates which, under normal businessin an effort to maximize utilization. However, changes in management’s assumptions regarding future sales growth, product mix and hops market conditions are expected to be fulfilled. Minimum purchase commitments under this agreement, assuming the supplier is unable to replace lost production capacity cancelled by the Company, as of December 31, 2016 totaled $16.6 million.
The Company has various operating lease agreementscould result in place for facilities and equipment as of December 31, 2016. 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 2022. Aggregate rent expense was $3.8 million, $3.4 million, and $3.2 million in fiscal years 2016, 2015, and 2014, respectively.
future material losses.
K. Fair Value Measures
M. | Fair Value Measures |
All financial assets or liabilities that
As of December 31, 2016 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Cash equivalents | $ | 89,966 | $ | — | $ | — | $ | 89,966 | ||||||||
As of December 26, 2015 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Cash equivalents | $ | 88,108 | $ | — | $ | — | $ | 88,108 |
The Company’s cash equivalents listed above represent money market mutual fund securities and are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. The
Financial instruments that potentially subject the Company to credit risk consist principally Cash, receivables and payables are carried at their cost, which approximates fair value, because of cash and cash equivalents held in money market funds. their short-term nature.
Cash, certificates of deposit, receivables and payables are carried at their cost, which approximates fair value, because of their short-term nature. Financial instruments not recorded at fair value in the consolidated financial statements are summarized in the table below (in thousands):
As of December 31, 2016 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Note payable | $ | — | $ | 400 | $ | — | $ | 400 | ||||||||
As of December 26, 2015 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Note payable | $ | — | $ | 458 | $ | — | $ | 458 |
The Company’s note payable listed above represents a term note agreement with Bank of America N.A and is classified within Level 2 of the fair value hierarchy because it is valued using observable inputs. The note has a maturity date of December 31, 2021 and the interest rate is fixed at an annual rate of 4.25%.
L. Common Stock and Share-Based Compensation
N. | Common Stock and Share-BasedCompensation |
On January 1, 2017,units. Previously, the Company granted options to purchase an aggregate of 5,185 shares of the Company’s Class A Common Stock with a weighted average fair value of $81.95 per share, of which all shares relate to performance-basedrestricted stock options.
awards. Restricted stock awardsunits are also granted at the Board of Directors’ discretion. During fiscal 2016, 2015,years 2019, 2018, and 2014,2017, the Company granted 21,653, 6,092,22,509 shares, 83,561 shares, and 16,43215,800 shares, respectively, of restricted stock units or awards to certain senior managers and key employees, all of which are service-based and vest ratably over service periods of threeone to five years.
value of 0% to 40%, based on the employee’s tenure with the Company. Investment shares vest ratably over service periods of five years. Participants may pay for these shares either up front or through payroll deductions over an eleven-month period during the year of purchase. During fiscal 2016, 2015,years 2019, 2018, and 2014,2017, employees elected to purchase an aggregate of 9,199, 8,301, and 8,5167,901 investment shares, respectively.
On January 1, 2017, the Company granted 12,3589,214 investment shares, of restricted stock awards to certain senior managers and key employees of which all10,146 investment shares, vest ratably over service periods of five years. On January 1, 2017, employees elected to purchase 9,977 shares under the investment share program.
respectively.
Shares | Weighted- Average Exercise Price | Weighted-Average Remaining Contractual Term in Years | Aggregate Intrinsic Value (in thousands) | |||||||||||||
Outstanding at December 26, 2015 | 1,127,162 | $ | 63.99 | |||||||||||||
Granted | 800,490 | 197.56 | ||||||||||||||
Forfeited | (40,352 | ) | 196.86 | |||||||||||||
Expired | (1,980 | ) | 241.79 | |||||||||||||
Exercised | (537,087 | ) | 74.71 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Outstanding at December 31, 2016 | 1,348,233 | $ | 141.98 | 6.44 | $ | 61,632 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Exercisable at December 31, 2016 | 196,522 | $ | 86.52 | 4.14 | $ | 17,210 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Vested and expected to vest at December 31, 2016 | 744,866 | $ | 97.34 | 4.39 | $ | 59,410 | ||||||||||
|
|
|
|
|
|
|
|
Shares | Weighted- Average Exercise Price | Weighted-Average Remaining Contractual Term in Years | Aggregate Intrinsic Value (in thousands) | |||||||||||||
Outstanding at December 29, 2018 | 366,829 | $ | 155.75 | |||||||||||||
Granted | 31,286 | 313.56 | ||||||||||||||
Forfeited | — | — | ||||||||||||||
Expired | — | — | ||||||||||||||
Exercised | (82,437 | ) | 97.80 | |||||||||||||
Outstanding at December 28, 2019 | 315,678 | $ | 186.53 | 5.75 | $ | 60,680 | ||||||||||
Exercisable at December 28, 2019 | 93,113 | $ | 148.60 | 4.08 | $ | 21,430 | ||||||||||
Vested and expected to vest at December 28, 2019 | 286,312 | $ | 184.83 | 5.67 | $ | 55,522 | ||||||||||
Stock Option Grants to Chief Executive Officer
On January 1, 2008, the Company granted the Chief Executive Officer anperformance-based stock option to purchase 753,8649,959 shares of its Class A Common Stock, which vests over a five-year period, commencing on January 1, 2014, at the rate of 20% per year. The exercise price is determined by multiplying $42.00 by the aggregate change in the DJ Wilshire 5000 Index from and after January 1, 2008 through the close of business on the trading date next preceding each date on which the option is exercised. The exercise price will not be less than $37.65 per share and the excess of the fair value of the Company’s Class A Common Stock cannot exceed $70 per share over the exercise price. At December 31, 2016 and December 26, 2015, 301,546 shares and 452,319 shares of the stock option remained outstanding, respectively. If the outstanding shares at December 31, 2016 were exercised on that date, the exercise price would have been $99.85 per share. If the outstanding shares at December 26, 2015 were exercised on that date, the exercise price would have been $135.40 per share. Reflected in the table above is the minimum exercise price of $37.65. The Company is accounting for this award aswith a market-based award which was valued utilizing the Monte Carlo Simulation pricing model, which calculates multiple potential outcomes for an award and establishes fair value based on the most likely outcome. Under the Monte Carlo Simulation pricing model, the Company calculated the weighted average fair value of $100.50 per share, to be $8.41, and recorded stock-based compensation expense of $0.3, $0.5, and $0.7, million related to this option in the fiscal 2016, 2015, and 2014, respectively.
On January 1, 2016, the Company granted thewhich vests through 2022. The incoming Chief Executive Officer an option to purchase 574,507 shares of its Class A Common Stock, which vests overwas also granted 64,325 restricted stock awards with a five-year period, commencing on January 1, 2019, at the rate of 20% per year. The exercise price is determined by multiplying $201.91 by the aggregate percentage change in the DJ Wilshire 5000 Index from and after January 1, 2016 through the close of business on the trading date next preceding each date on which the option is exercised, plus an additional 1.5 percentage points per annum, prorated for partial years. The exercise price will not be less than $201.91 per share and the excess of theweighted-average fair value of the Company’s Class A Common Stock cannot exceed $150$229.30 per share over the exercise price. At December 31, 2016, the stock option remained unexercised as to 574,507 shares. If the stock option had been exercised on December 31, 2016, the exercise price would have been $226.72 per share. The Company is accounting for this award as a market-based award which was valued utilizing the Monte Carlo Simulation pricing model, which calculates multiple potential outcomes for an award and establishes fair value based on the most likely outcome. Under the Monte Carlo Simulation pricing model, the Company calculated the weighted average fair value per share to be $39.16. As a resultwith service-based vesting through 2023.
2016 | 2015 | 2014 | ||||||||||
(in thousands) | ||||||||||||
Amounts included in advertising, promotional and selling expenses | $ | 2,507 | $ | 2,943 | $ | 3,342 | ||||||
Amounts included in general and administrative expenses | 3,641 | 3,722 | 3,515 | |||||||||
|
|
|
|
|
| |||||||
Total stock-based compensation expense | $ | 6,148 | $ | 6,665 | $ | 6,857 | ||||||
|
|
|
|
|
| |||||||
Amounts related to performance-based stock awards included in total stock-based compensation expense | $ | 203 | $ | 831 | $ | 1,378 | ||||||
|
|
|
|
|
|
2019 | 2018 | 2017 | ||||||||||
(in thousands) | ||||||||||||
Amounts included in advertising, promotional and selling expenses | $ | 3,996 | $ | 3,243 | $ | 2,868 | ||||||
Amounts included in general and administrative expenses | 8,341 | 6,792 | 3,448 | |||||||||
Total stock-based compensation expense | $ | 12,337 | $ | 10,035 | $ | 6,316 | ||||||
Amounts related to performance-based stock awards included in total stock-based compensation expense | $ | 1,944 | $ | 1,750 | $ | 36 | ||||||
2016 | 2015 | 2014 | ||||||||||
Expected volatility | 34.0% | 34.2% | 34.3% | |||||||||
Risk-free interest rate | 2.16% | 2.16% | 2.83% | |||||||||
Expected dividends | 0% | 0% | 0% | |||||||||
Exercise factor | 2.68 times | 3.0 times | 3.4 times | |||||||||
Discount for post-vesting restrictions | 0.0% | 0.0% | 0.0% |
2019 | 2018 | 2017 | ||||||||||
Expected volatility | 32.1 | % | 34.0 | % | 36.2 | % | ||||||
Risk-free interest rate | 2.63 | % | 2.68 | % | 2.30 | % | ||||||
Expected dividends | 0 | % | 0 | % | 0 | % | ||||||
Exercise factor | 2.33 times | 2.52 times | 3.63 times | |||||||||
Discount for post-vesting restrictions | 0.0 | % | 0.0 | % | 0.0 | % |
Under ASC 718,
2017 | $ | 5,707 | ||
2018 | 5,253 | |||
2019 | 3,952 | |||
2020 | 2,606 | |||
2021 | 2,060 | |||
Thereafter | 3,422 | |||
|
| |||
Total | $ | 23,000 | ||
|
|
2020 | $ | 10,231 | ||
2021 | 7,529 | |||
2022 | 5,000 | |||
2023 | 1,731 | |||
2024 | 334 | |||
Total | $ | 24,825 | ||
Number of Shares | Weighted Average Fair Value | |||||||
Non-vested at December 26, 2015 | 60,922 | $ | 150.03 | |||||
Granted | 30,852 | 161.84 | ||||||
Vested | (19,740 | ) | 114.12 | |||||
Forfeited | (7,066 | ) | 152.40 | |||||
|
| |||||||
Non-vested at December 31, 2016 | 64,968 | $ | 166.29 | |||||
|
|
19,740
Number Shares | Weighted Average Value | |||||||
Non-vested at December 29, 2018 | 126,720 | $ | 192.74 | |||||
Granted | 30,410 | 269.91 | ||||||
Vested | (33,205 | ) | 188.63 | |||||
Forfeited | (1,783 | ) | 161.42 | |||||
Non-vested at December 28, 2019 | 122,142 | $ | 213.52 | |||||
$151.32.
Number of Shares | Aggregate Purchase Price | |||||||
(in thousands) | ||||||||
Repurchased at December 28, 2013 | 10,892,459 | $ | 299,528 | |||||
2014 repurchases | 29,474 | 7,859 | ||||||
|
|
|
| |||||
Repurchased at December 27, 2014 | 10,921,933 | 307,387 | ||||||
2015 repurchases | 616,747 | 138,705 | ||||||
|
|
|
| |||||
Repurchased at December 26, 2015 | 11,538,680 | 446,092 | ||||||
2016 repurchases | 944,876 | 161,658 | ||||||
|
|
|
| |||||
Repurchased at December 31, 2016 | 12,483,556 | $ | 607,750 | |||||
|
|
|
|
M. Employee Retirement Plans and Post-Retirement Medical Benefits
Number of Shares | Aggregate Purchase | |||||||
(in thousands) | ||||||||
Repurchased at December 31, 2016 | 12,483,556 | $ | 607,750 | |||||
2017 repurchases | 963,790 | 144,602 | ||||||
Repurchased at December 30, 2017 | 13,447,346 | 752,352 | ||||||
2018 repurchases | 349,691 | 88,312 | ||||||
Repurchased at December 29, 2018 | 13,797,037 | 840,664 | ||||||
2019 repurchases | — | — | ||||||
Repurchased at December 28, 2019 | 13,797,037 | $ | 840,664 | |||||
O. | Employee Retirement Plans and Post-Retirement Medical Benefits |
In January 2020, the Company amended the Boston Beer 401(k) Plan to update the Company match as follows: 100% of the first 3% of the eligible compensation participants contribute. Thereafter, the Company matches 50% of the eligible contribution, up to a maximum of 5%.
increase based on the Cincinnati Consumer Price Index for the years 2016, 2015,2019, 2018, and 2014.2017. The effect of a 1% point increase and the effect of a 1% point decrease in the assumed health care cost trend rates on the aggregate of the service and interest cost components of net periodic post-retirement health care benefit costs and on the accumulated post-retirement benefit obligation for health care benefits would not be significant.
Local 1199 Pension Plan | Retiree Medical Plan | |||||||||||||||
December 31, | December 26, | December 31, | December 26, | |||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(in thousands) | ||||||||||||||||
Fair value of plan assets at end of fiscal year | $ | 2,733 | $ | 2,471 | $ | — | $ | — | ||||||||
Benefit obligation at end of fiscal year | 4,611 | 4,105 | 708 | 671 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Unfunded Status | $ | (1,878 | ) | $ | (1,634 | ) | $ | (708 | ) | $ | (671 | ) | ||||
|
|
|
|
|
|
|
|
The
Local 1199 Pension Plan | Retiree Medical Plan | |||||||||||||||
December 28, 2019 | December 29, 2018 | December 28, 2019 | December 29, 2018 | |||||||||||||
(in thousands) | ||||||||||||||||
Fair value of plan assets at end of fiscal year | $ | 3,946 | $ | 3,322 | $ | — | $ | — | ||||||||
Benefit obligation at end of fiscal year | 6,680 | 5,357 | 888 | 731 | ||||||||||||
Unfunded Status | $ | (2,734 | ) | $ | (2,035 | ) | $ | (888 | ) | $ | (731 | ) | ||||
The
Asset Category | December 31, 2016 | December 26, 2015 | ||||||
Equity securities | 66 | % | 67 | % | ||||
Debt securities | 34 | % | 33 | % | ||||
|
|
|
| |||||
Total | 100 | % | 100 | % | ||||
|
|
|
|
N. Net Income per Share
Asset Category | December 28, 2019 | December 29, 2018 | ||||||
Cash equivalents | 100 | % | 0 | % | ||||
Equity securities | 0 | % | 61 | % | ||||
Debt securities | 0 | % | 39 | % | ||||
Total | 100 | % | 100 | % | ||||
P. | Net Income per Share |
December 31, 2016 (53 weeks) | December 26, 2015 | December 27, 2014 | ||||||||||
(in thousands, except per share data) | ||||||||||||
Net Income | $ | 87,349 | $ | 98,414 | $ | 90,743 | ||||||
|
|
|
|
|
| |||||||
Allocation of net income for basic: | ||||||||||||
Class A Common Stock | $ | 63,717 | $ | 71,798 | $ | 64,027 | ||||||
Class B Common Stock | 23,190 | 26,154 | 26,207 | |||||||||
Unvested participating shares | 442 | 462 | 509 | |||||||||
|
|
|
|
|
| |||||||
$ | 87,349 | $ | 98,414 | $ | 90,743 | |||||||
Weighted average number of shares for basic: | ||||||||||||
Class A Common Stock | 9,189 | 9,619 | 9,202 | |||||||||
Class B Common Stock* | 3,344 | 3,504 | 3,766 | |||||||||
Unvested participating shares | 64 | 62 | 73 | |||||||||
|
|
|
|
|
| |||||||
12,597 | 13,185 | 13,041 | ||||||||||
Net income per share for basic: | ||||||||||||
Class A Common Stock | $ | 6.93 | $ | 7.46 | $ | 6.96 | ||||||
|
|
|
|
|
| |||||||
Class B Common Stock | $ | 6.93 | $ | 7.46 | $ | 6.96 | ||||||
|
|
|
|
|
|
December 28, 2019 | December 29, 2018 | December 30, 2017 | ||||||||||
(in thousands, except per share data) | ||||||||||||
Net Income | $ | 110,041 | $ | 92,663 | $ | 99,049 | ||||||
Allocation of net income for basic: | ||||||||||||
Class A Common Stock | $ | 82,474 | $ | 68,080 | $ | 73,114 | ||||||
Class B Common Stock | 26,600 | 23,710 | 25,391 | |||||||||
Unvested participating shares | 967 | 873 | 544 | |||||||||
$ | 110,041 | $ | 92,663 | $ | 99,049 | |||||||
Weighted average number of shares for basic: | ||||||||||||
Class A Common Stock | 8,908 | 8,620 | 8,933 | |||||||||
Class B Common Stock* | 2,873 | 3,002 | 3,102 | |||||||||
Unvested participating shares | 105 | 111 | 67 | |||||||||
11,886 | 11,733 | 12,102 | ||||||||||
Net income per share for basic: | ||||||||||||
Class A Common Stock | $ | 9.26 | $ | 7.90 | $ | 8.18 | ||||||
Class B Common Stock | $ | 9.26 | $ | 7.90 | $ | 8.18 | ||||||
* | Change in Class B Common Stock resulted from the conversion of 100,000 shares to Class A Common Stock on 79,000 shares to Class A Common Stock on October 100,000 shares to Class A Common Stock on November 100,000 shares to Class A Common 145,000 shares to Class A Common stock on December 13, 2019 with the ending number of shares reflecting the weighted average for the period. |
—
Fifty-three weeks ended December 31, 2016 | ||||||||||||
Earnings to Common Shareholders | Common Shares | EPS | ||||||||||
(in thousands, except per share data) | ||||||||||||
As reported — basic | $ | 63,717 | 9,189 | $ | 6.93 | |||||||
Add: effect of dilutive potential common shares Share-based awards | — | 263 | ||||||||||
Class B Common Stock | 23,190 | 3,344 | ||||||||||
Net effect of unvested participating shares | 9 | |||||||||||
|
|
|
| |||||||||
Net income per common share — diluted | $ | 86,916 | 12,796 | $ | 6.79 | |||||||
|
|
|
|
As reported — basic Add: effect of dilutive potential common shares Share-based awards Class B Common Stock Net effect of unvested participating shares Net income per common share — diluted As reported — basic Add: effect of dilutive potential common shares Share-based awards Class B Common Stock Net effect of unvested participating shares Net income per common share — diluted Fifty-two weeks ended December 26, 2015 Earnings to
Common
Shareholders Common Shares EPS (in thousands, except per share data) $ 71,798 9,619 $ 7.46 — 397 26,154 3,504 14 $ 97,966 13,520 $ 7.25 Fifty-two weeks ended December 27, 2014 Earnings to
Common
Shareholders Common Shares EPS (in thousands, except per share data) $ 64,027 9,202 $ 6.96 — 516 26,207 3,766 19 — $ 90,253 13,484 $ 6.69
Fifty-two weeks ended December 28, 2019 | ||||||||||||
Earnings to Common Shareholders | Common | EPS | ||||||||||
(in thousands, except per | ||||||||||||
As reported - basic | $ | 82,474 | 8,908 | $ | 9.26 | |||||||
Add: effect of dilutive potential common shares | ||||||||||||
Share-based awards | — | 127 | ||||||||||
Class B Common Stock | 26,600 | 2,873 | ||||||||||
Net effect of unvested participating shares | 10 | — | ||||||||||
Net income per common share - diluted | $ | 109,084 | 11,908 | 9.16 |
Fifty-two weeks ended December 29, 2018 | ||||||||||||
Earnings to Common Shareholders | Common Shares | EPS | ||||||||||
(in thousands, except per | ||||||||||||
As reported - basic | $ | 68,080 | 8,620 | $ | 7.90 | |||||||
Add: effect of dilutive potential c o mmon shares | ||||||||||||
Share-based awards | — | 112 | ||||||||||
Class B Common Stock | 23,710 | 3,002 | ||||||||||
Net effect of unvested participating shares | 8 | — | ||||||||||
Net income per common share - diluted | $ | 91,798 | 11,734 | $ | 7.82 |
Fifty-two weeks ended December 30, 2017 | ||||||||||||
Earnings to Common Shareholders | Common Shares | EPS | ||||||||||
(in thousands, except per | ||||||||||||
As reported - basic | $ | 73,114 | 8,933 | $ | 8.18 | |||||||
Add: effect of dilutive potential common shares | ||||||||||||
Share-based awards | — | 145 | ||||||||||
Class B Common Stock | 25,391 | 3,102 | ||||||||||
Net effect of unvested participating shares | 7 | — | ||||||||||
Net income per common share - diluted | $ | 98,512 | 12,180 | $ | 8.09 |
O. Accumulated Other Comprehensive (Loss) Income
Q. | Accumulated Other Comprehensive Loss |
Accumulated Other Comprehensive (Loss) Income | ||||
Balance at December 28, 2013 | $ | (417 | ) | |
Deferred pension and other post-retirement benefit costs, net of taxes of $466 | (734 | ) | ||
Amortization of Deferred benefit costs, net of tax of ($11) | 18 | |||
|
| |||
Balance at December 27, 2014 | $ | (1,133 | ) | |
|
| |||
Deferred pension and other post-retirement benefit costs, net of taxes of ($99) | 130 | |||
Amortization of Deferred benefit costs, net of tax of ($43) | 74 | |||
Currency translation adjustment | (22 | ) | ||
|
| |||
Balance at December 26, 2015 | $ | (951 | ) | |
|
| |||
Deferred pension and other post-retirement benefit costs, net of taxes of ($69) | 122 | |||
Amortization of Deferred benefit costs, net of tax of $101 | (175 | ) | ||
Currency translation adjustment | (99 | ) | ||
|
| |||
Balance at December 31, 2016 | $ | (1,103 | ) | |
|
|
P. Valuation and Qualifying Accounts
Accumulated Other Comprehensive (Loss) Income | ||||
Balance at December 31, 2016 | $ | (1,103 | ) | |
Deferred pension and other post-retirement benefit costs, net of tax benefit of $57 | (170 | ) | ||
Amortization of Deferred benefit costs, net of tax benefit of $11 | (32 | ) | ||
Currency translation adjustment | 17 | |||
Balance at December 30, 2017 | $ | (1,288 | ) | |
Deferred pension and other post-retirement benefit costs, net of taxes of $64 | 191 | |||
Amortization of Deferred benefit costs, net of taxes of $29 | 86 | |||
One time effect of adoption of ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income | (211 | ) | ||
Currency translation adjustment | 25 | |||
Balance at December 29, 2018 | $ | (1,197 | ) | |
Deferred pension and other post-retirement benefit costs, net of taxes of $150 | (442 | ) | ||
Amortization of Deferred benefit costs, net of taxes of $26 | (77 | ) | ||
Currency translation adjustment | 47 | |||
Balance at December 28, 2019 | $ | (1,669 | ) | |
R. | Valuation and Qualifying Accounts |
Allowance for Doubtful Accounts | Balance at Beginning of Period | Net Provision (Recovery) | Amounts Charged Against Reserves | Balance at End of Period | ||||||||||||
(In thousands) | ||||||||||||||||
2016 | $ | 244 | $ | (244 | ) | $ | — | $ | — | |||||||
2015 | $ | 144 | $ | 165 | $ | (65 | ) | $ | 244 | |||||||
2014 | $ | 160 | $ | (16 | ) | $ | — | $ | 144 | |||||||
Discount Accrual | Balance at Beginning of Period | Net Provision (Recovery) | Amounts Charged Against Reserves | Balance at End of Period | ||||||||||||
(In thousands) | ||||||||||||||||
2016 | $ | 2,813 | $ | 33,157 | $ | (32,892 | ) | $ | 3,078 | |||||||
2015 | $ | 3,006 | $ | 33,204 | $ | (33,397 | ) | $ | 2,813 | |||||||
2014 | $ | 2,602 | $ | 28,448 | $ | (28,044 | ) | $ | 3,006 |
2016 2015 2014 2016 2015 2014Inventory Obsolescence Reserve Balance at
Beginning of
Period Net Provision
(Recovery) Amounts
Charged Against
Reserves Balance at
End of Period (In thousands) $ 1,525 $ 4,707 $ (3,970 ) $ 2,262 $ 1,328 $ 4,045 $ (3,848 ) $ 1,525 $ 1,616 $ 6,130 $ (6,418 ) $ 1,328 Stale Beer Reserve Balance at
Beginning of
Period Net Provision
(Recovery) Amounts
Charged Against
Reserves Balance at
End of Period (In thousands) $ 3,254 $ 10,466 $ (8,494 ) $ 5,226 $ 2,422 $ 7,780 $ (6,948 ) $ 3,254 $ 1,754 $ 5,648 $ (4,980 ) $ 2,422
Q. Subsequent Events
As disclosed
Allowance for Doubtful Accounts | Balance at Beginning Period | Net Provision (Recovery) | Amounts Charged Against Reserves | Balance at End of | ||||||||||||
(In thousands) | ||||||||||||||||
2019 | $ | 2 | $ | 45 | $ | 0 | $ | 47 | ||||||||
2018 | $ | — | $ | 2 | $ | — | $ | 2 | ||||||||
2017 | $ | — | $ | — | $ | — | $ | — |
Discount Accrual | Balance Beginning Period | Net (Recovery) * | Amounts Charged Reserves | Balance at End of | ||||||||||||
(In thousands) | ||||||||||||||||
2019 | $ | 4,636 | $ | 43,920 | $ | (42,284 | ) | $ | 6,272 | |||||||
2018 | $ | 3,072 | $ | 36,213 | $ | (34,649 | ) | $ | 4,636 | |||||||
2017 | $ | 3,078 | $ | 30,171 | $ | (30,177 | ) | $ | 3,072 |
Inventory Obsolescence Reserve | Balance at Beginning Period | Net Provision (Recovery) | Amounts Charged Reserves | Balance at End of | ||||||||||||
(In thousands) | ||||||||||||||||
2019 | $ | 2,580 | $ | 8,092 | $ | (4,297 | ) | $ | 6,375 | |||||||
2018 | $ | 1,826 | $ | 4,175 | $ | (3,421 | ) | $ | 2,580 | |||||||
2017 | $ | 2,262 | $ | 5,751 | $ | (6,187 | ) | $ | 1,826 |
Stale Beer Reserve | Balance at Beginning Period | Net Provision (Recovery) | Amounts Charged Against Reserves | Balance at End of | ||||||||||||
(In thousands) | ||||||||||||||||
2019 | $ | 2,146 | $ | 4,406 | $ | (4,724 | ) | $ | 1,828 | |||||||
2018 | $ | 3,023 | $ | 2,691 | $ | (3,568 | ) | $ | 2,146 | |||||||
2017 | $ | 5,226 | $ | 5,449 | $ | (7,652 | ) | $ | 3,023 |
* | 2018 net provision of the discount accrual includes $1.7 million related to the cumulative effect adjustment to retained earnings and the current year adjustment to deferred revenue related to the adoption of ASU 2014-09. |
S. | Related Party Transactions |
As disclosed in Form8-K filedvarious other suppliers affiliated with the SEC on February 6, 2017, the Company announcement the planned retirement of its Chief Executive Officer expected in 2018.
Dogfish Head founders.
T. | Subsequent Events |
R. Quarterly Results (Unaudited)
U. | Quarterly Results (Unaudited) |
For Quarters Ended | ||||||||||||||||||||||||||||||||
December 31, 2016 (1) | September 24, 2016 | June 25, 2016 | March 26, 2016 | December 26, 2015 | September 26, 2015 | June 27, 2015 | March 28, 2015 | |||||||||||||||||||||||||
(14 weeks) | (13 weeks) | (13 weeks) | (13 weeks) | (13 weeks) | (13 weeks) | (13 weeks) | (13 weeks) | |||||||||||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||||||||||||||
Net revenue | $ | 219,370 | $ | 253,433 | $ | 244,816 | $ | 188,827 | $ | 215,133 | $ | 293,094 | $ | 252,204 | $ | 199,503 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Gross profit | 107,656 | 133,607 | 126,876 | 91,531 | 108,767 | 157,010 | 136,225 | 99,615 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Operating income | 34,325 | 50,309 | 41,788 | 11,237 | 26,338 | 60,879 | 46,819 | 22,138 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net income | $ | 22,166 | $ | 31,530 | $ | 26,621 | $ | 7,032 | $ | 16,115 | $ | 38,624 | $ | 29,932 | $ | 13,743 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net income per share — basic | $ | 1.77 | $ | 2.53 | $ | 2.11 | $ | 0.55 | $ | 1.25 | $ | 2.93 | $ | 2.24 | $ | 1.04 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net income per share — diluted | $ | 1.75 | $ | 2.48 | $ | 2.06 | $ | 0.53 | $ | 1.21 | $ | 2.85 | $ | 2.18 | $ | 1.00 | ||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
For Quarters Ended | ||||||||||||||||||||||||||||||||
December 28, 2019 (2) | September 28, 2019 (2) | June 29, 2019 (2) | March 30, 2019 | December 29, 2018 | September 29, 2018 (1) | June 30, 2018 | March 31, 2018 | |||||||||||||||||||||||||
(13 weeks) | (13 weeks) | (13 weeks) | (13 weeks) | (13 weeks) | (13 weeks) | (13 weeks) | (13 weeks) | |||||||||||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||||||||||||||
Net revenue | $ | 301,300 | $ | 378,466 | $ | 318,407 | $ | 251,651 | $ | 225,222 | $ | 306,870 | $ | 273,100 | $ | 190,457 | ||||||||||||||||
Gross profit | 142,789 | 187,835 | 159,002 | 124,540 | 116,949 | 157,227 | 141,970 | 96,097 | ||||||||||||||||||||||||
Operating income | 17,702 | 59,836 | 37,932 | 29,443 | 28,851 | 46,728 | 31,064 | 9,238 | ||||||||||||||||||||||||
Net income | $ | 13,762 | $ | 44,729 | $ | 27,856 | $ | 23,694 | $ | 21,811 | $ | 38,007 | $ | 23,535 | $ | 9,310 | ||||||||||||||||
Net income per share – basic | $ | 1.13 | $ | 3.70 | $ | 2.39 | $ | 2.04 | $ | 1.88 | $ | 3.25 | $ | 1.99 | $ | 0.79 | ||||||||||||||||
Net income per share – diluted | $ | 1.12 | $ | 3.65 | $ | 2.36 | $ | 2.02 | $ | 1.86 | $ | 3.21 | $ | 1.98 | $ | 0.78 | ||||||||||||||||
(1) | During the |
(2) | During the second, third and fourth quarter of 2019, the Company recorded $1.9 million, $5.9 million and $2.1 million innon-reoccurring transaction fees related to the |
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosures |
Item 9A. | Controls and Procedures |
We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as
/s/ Deloitte & Touche LLP |
Boston, Massachusetts |
February 19, 2020 |
Item 9B. | Other Information |
Item 10. | Directors, Executive Officers and Corporate Governance |
Item 11. | Executive Compensation |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
14, 2020. Plan Category Equity Compensation Plans Approved by Security Holders Equity Compensation Plans Not Approved by Security Holders Total 20172020 Annual Meeting to be held on May 18, 2017. Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans 1,348,233 $ 141.98 753,160 N/A N/A N/A 1,348,233 $ 141.98 753,160
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
Exercise Price of
Outstanding Options,
Warrants and Rights
Remaining Available
for Future Issuance
Under Equity
Compensation Plans $ $
Item 13. | Certain Relationships and Related Transactions, and Director Independence |
Item 14. | Principal |
14, 2020.
Item 15. | Exhibits, |
Page | |||||
40 | |||||
Consolidated Financial Statements: | |||||
43 | |||||
42 | |||||
44 | |||||
45 | |||||
46 |
Exhibit No. | Title | |||
| ||||
2.1 | ||||
2.2 | ||||
2.3 | ||||
3.1 | ||||
| ||||
3.2 | ||||
| ||||
4.1 | Form of Class A Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration StatementNo. 33-96164). | |||
(P) | ||||
|
| *4.2 |
Exhibit No. | Title | |||
10.1 | Stockholder Rights Agreement, dated as of December 1995, among The Boston Beer Company, Inc. and the initial Stockholders (incorporated by reference to the Company’s Form 10-K, filed on April 1, 1996). | |||
(P) | ||||
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10.2 | ||||
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10.3 | ||||
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10.4 | ||||
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10.5 | ||||
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+10.6 | ||||
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+10.7 | ||||
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+10.8 | Office Lease Agreement between Boston Design Center LLC and Boston Beer Corporation dated March 24, 2006 (“Office Lease Agreement”), as amended on September 29, 2006, October 31, 2007, March 25, 2008, August 27, 2012, February 22, 2013, and June 3, 2015 (incorporated by reference to the Company’s Quarterly Report on Form10-Q filed on May 11, 2006 and Annual Report on Form10-K filed on February 18, 2016). | |||
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| **10.9 | The 1996 Stock Option Plan for Non-Employee Directors, originally adopted in 1996 and amended and restated on October 19, 2004, as amended on October 30, 2009, effective as of January 1, 2010 (incorporated by reference to the Company’s Post-Effective Amendment to its Registration Statement on FormS-8 filed on November 28, 2009); amended and restated on December 12, 2012, effective as of January 1, 2012; amended and restated on March 9, 2016, effective as of March 9, 2016 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form10-Q filed on July 21, 2016). | ||
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10.10 | ||||
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**10.11 |
Exhibit No. | Title | |||
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**10.12 | ||||
. | ||||
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**10.13 | ||||
10.14 | ||||
**10.15 | ||||
**10.16 | ||||
March 21, 2019 (incorporated by reference to Exhibit 10.5 to the Company’s 10-Q filed on July 25, 2019). | ||||
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10.17 | ||||
Company’s 10-Q filed on July 25, 2019). | ||||
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**10.18 | ||||
*21.5 | ||||
28, 2019. | ||||
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*23.1 | ||||
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*31.1 | ||||
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*31.2 | ||||
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*32.1 | ||||
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*32.2 | ||||
*101.INS | XBRL Instance Document | |||
*101.SCH | Inline XBRL Taxonomy Extension Schema Document | |||
*101.CAL | Inline XBRL Taxonomy Calculation Linkbase Document | |||
*101.LAB | Inline XBRL Label Linkbase Document | |||
*101.PRE | Inline XBRL Taxonomy Presentation Linkbase Document | |||
*101DEF | Inline XBRL Definition Linkbase Document | |||
104 | Cover Page Interactive Data File (formatted as inline XBRL and included in Exhibit 101). |
* | Filed with this report. |
+ | Portions of this Exhibit were omitted pursuant to an application for an order declaring confidential treatment filed with and approved by the Securities and Exchange Commission. |
** | Indicates management contract or compensatory plan or arrangement. |
Item 16. | Form 10-K Summary |
THE BOSTON BEER COMPANY, INC. | ||
/s/ | ||
David A. Burwick | ||
President and Chief Executive Officer (principal executive officer) |
|
| |
Signature | Title | |
/s/ David A. Burwick David A. Burwick | President, Chief Executive Officer (principal executive officer) and Director | |
/s/ Frank H. Smalla Frank H. Smalla | Chief Financial Officer (principal financial officer) | |
/s/ Matthew D. Murphy Matthew D. Murphy | Chief Accounting Officer (principal accounting officer) | |
| ||
/s/ David P. Fialkow David P. Fialkow | Director | |
/s/ Cynthia A. Fisher Cynthia A. Fisher | Director | |
/s/ Meghan V. Joyce Meghan V. Joyce | Director | |
/s/ C. James Koch C. James Koch | Chairman and Director | |
| ||
/s/ Michael Spillane Michael Spillane | Director | |
| ||
/s/ Jean-Michel Valette Jean-Michel Valette | Director |
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