☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
28, 2019
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
MASSACHUSETTS
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Class A Common Stock. $0. 0 1 par value | SAM | New York Stock Exchange | ||
Class B Common Stock, $0. 0 1 par value | Not applicable | Unregistered |
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ | Small er reporting company | ☐ | |||
Emerging growth company | ☐ |
Class A Common Stock, $.01 par value | 9,216,022 | |||
Class B Common Stock, $.01 par value | 2,817,983 | |||
(Title of each class) | (Number of shares | ) |
PART I. | FINANCIAL INFORMATION | PAGE | ||||||||||
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Item 2. | 20- 26 | |||||||||||
Item 3. | 26 | |||||||||||
Item 4. | 27 | |||||||||||
PART II. | OTHER INFORMATION | |||||||||||
Item | 1. | 27 | ||||||||||
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Item | 2. | |||||||||||
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Item 3. | 28 | |||||||||||
Item | 4. | 28 | ||||||||||
Item 5. | 28 | |||||||||||
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30 |
Item 1. | CONSOLIDATED FINANCIAL STATEMENTS |
September 29, 2018 | December 30, 2017 | |||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 68,887 | $ | 65,637 | ||||
Accounts receivable, net of allowance for doubtful accounts of $39 and $0 as of September 29, 2018 and December 30, 2017, respectively | 52,812 | 33,749 | ||||||
Inventories | 72,254 | 50,651 | ||||||
Prepaid expenses and other current assets | 10,252 | 10,695 | ||||||
Income tax receivable | 16,439 | 7,616 | ||||||
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Total current assets | 220,644 | 168,348 | ||||||
Property, plant and equipment, net | 387,069 | 384,280 | ||||||
Other assets | 12,308 | 13,313 | ||||||
Goodwill | 3,683 | 3,683 | ||||||
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Total assets | $ | 623,704 | $ | 569,624 | ||||
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Liabilities and Stockholders’ Equity | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 62,047 | $ | 38,141 | ||||
Accrued expenses and other current liabilities | 69,599 | 63,617 | ||||||
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Total current liabilities | 131,646 | 101,758 | ||||||
Deferred income taxes, net | 47,637 | 34,819 | ||||||
Other liabilities | 9,875 | 9,524 | ||||||
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Total liabilities | 189,158 | 146,101 | ||||||
Commitments and Contingencies (See Note G) | ||||||||
Stockholders’ Equity: | ||||||||
Class A Common Stock, $.01 par value; 22,700,000 shares authorized; 8,475,037 and 8,603,152 issued and outstanding as of September 29, 2018 and December 30, 2017, respectively | 85 | 86 | ||||||
Class B Common Stock, $.01 par value; 4,200,000 shares authorized; 3,017,983 and 3,017,983 issued and outstanding as of September 29, 2018 and December 30, 2017, respectively | 30 | 30 | ||||||
Additionalpaid-in capital | 402,056 | 372,590 | ||||||
Accumulated other comprehensive loss, net of tax | (1,503 | ) | (1,288 | ) | ||||
Retained earnings | 33,878 | 52,105 | ||||||
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Total stockholders’ equity | 434,546 | 423,523 | ||||||
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Total liabilities and stockholders’ equity | $ | 623,704 | $ | 569,624 | ||||
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September 28, | December 29, | |||||||
2019 | 2018 | |||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 27,128 | $ | 108,399 | ||||
Accounts receivable | 68,687 | 34,073 | ||||||
Inventories | 92,632 | 70,249 | ||||||
Prepaid expenses and other current assets | 14,965 | 13,136 | ||||||
Income tax receivable | 5,980 | 5,714 | ||||||
Total current assets | 209,392 | 231,571 | ||||||
Property, plant and equipment, net | 521,316 | 389,789 | ||||||
Operating right-of-use assets | 38,943 | — | ||||||
Goodwill | 112,529 | 3,683 | ||||||
Intangible assets | 104,335 | 2,099 | ||||||
Other assets | 29,661 | 12,709 | ||||||
Total assets | $ | 1,016,176 | $ | 639,851 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 71,035 | $ | 47,102 | ||||
Accrued expenses and other current liabilities | 92,850 | 73,412 | ||||||
Current operating lease liabilities | 2,599 | — | ||||||
Total current liabilities | 166,484 | 120,514 | ||||||
Deferred income taxes, net | 81,653 | 49,169 | ||||||
Non-current operating lease liabilities | 41,215 | — | ||||||
Other liabilities | 7,844 | 9,851 | ||||||
Total liabilities | 297,196 | 179,534 | ||||||
Commitments and Contingencies (See Note J ) | ||||||||
Stockholders’ Equity: | ||||||||
Class A Common Stock, $.01 par value; 22,700,000 shares authorized; 9,216,022 and 8,580,593 issued and outstanding as of September 28, 2019 and December 29, 2018, respectively | 92 | 86 | ||||||
Class B Common Stock, $.01 par value; 4,200,000 shares authorized; 2,817,983 and 2,917,983 issued and outstanding as of September 28, 2019 and December 29, 2018, respectively | 28 | 29 | ||||||
Additional paid-in capital | 568,047 | 405,711 | ||||||
Accumulated other comprehensive loss, net of tax | (1,154 | ) | (1,197 | ) | ||||
Retained earnings | 151,967 | 55,688 | ||||||
Total stockholders’ equity | 718,980 | 460,317 | ||||||
Total liabilities and stockholders’ equity | $ | 1,016,176 | $ | 639,851 | ||||
(unaudited)
Thirteen weeks ended | Thirty-nine weeks ended | |||||||||||||||
September 29, 2018 | September 30, 2017 | September 29, 2018 | September 30, 2017 | |||||||||||||
Revenue | $ | 326,852 | $ | 264,146 | $ | 818,257 | $ | 701,247 | ||||||||
Less excise taxes | 19,982 | 17,099 | 47,830 | 44,575 | ||||||||||||
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Net revenue | 306,870 | 247,047 | 770,427 | 656,672 | ||||||||||||
Cost of goods sold | 149,643 | 115,546 | 375,133 | 314,808 | ||||||||||||
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Gross profit | 157,227 | 131,501 | 395,294 | 341,864 | ||||||||||||
Operating expenses: | ||||||||||||||||
Advertising, promotional and selling expenses | 87,765 | 63,647 | 241,796 | 185,232 | ||||||||||||
General and administrative expenses | 22,734 | 16,358 | 65,951 | 54,315 | ||||||||||||
Impairment of assets | — | — | 517 | 1,505 | ||||||||||||
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Total operating expenses | 110,499 | 80,005 | 308,264 | 241,052 | ||||||||||||
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Operating income | 46,728 | 51,496 | 87,030 | 100,812 | ||||||||||||
Other income (expense), net: | ||||||||||||||||
Interest income, net | 343 | 211 | 821 | 381 | ||||||||||||
Other (expense) income, net | (51 | ) | 196 | (539 | ) | 253 | ||||||||||
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Total other income, net | 292 | 407 | 282 | 634 | ||||||||||||
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Income before income tax provision | 47,020 | 51,903 | 87,312 | 101,446 | ||||||||||||
Income tax provision | 9,013 | 18,220 | 16,460 | 32,927 | ||||||||||||
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Net income | $ | 38,007 | $ | 33,683 | $ | 70,852 | $ | 68,519 | ||||||||
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Net income per common share—basic | $ | 3.25 | $ | 2.82 | $ | 6.02 | $ | 5.60 | ||||||||
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Net income per common share—diluted | $ | 3.21 | $ | 2.78 | $ | 5.96 | $ | 5.54 | ||||||||
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Weighted-average number of common shares—Class A basic | 8,557 | 8,789 | 8,646 | 9,037 | ||||||||||||
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Weighted-average number of common shares—Class B basic | 3,018 | 3,097 | 3,018 | 3,122 | ||||||||||||
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Weighted-average number of common shares—diluted | 11,702 | 12,037 | 11,773 | 12,299 | ||||||||||||
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Net income | $ | 38,007 | $ | 33,683 | $ | 70,852 | $ | 68,519 | ||||||||
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Other comprehensive income: | ||||||||||||||||
Foreign currency translation adjustment | (13 | ) | (13 | ) | 4 | (23 | ) | |||||||||
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Comprehensive income | $ | 37,994 | $ | 33,670 | $ | 70,856 | $ | 68,496 | ||||||||
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Thirteen weeks ended | Thirty-nine weeks ended | |||||||||||||||
September 28, | September 29, | September 28, | September 29, | |||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Revenue | $ | 402,691 | $ | 326,852 | $ | 1,008,893 | $ | 818,257 | ||||||||
Less excise taxes | 24,225 | 19,982 | 60,369 | 47,830 | ||||||||||||
Net revenue | 378,466 | 306,870 | 948,524 | 770,427 | ||||||||||||
Cost of goods sold | 190,631 | 149,643 | 477,147 | 375,133 | ||||||||||||
Gross profit | 187,835 | 157,227 | 471,377 | 395,294 | ||||||||||||
Operating expenses: | ||||||||||||||||
Advertising, promotional and selling expenses | 96,570 | 87,765 | 262,372 | 241,796 | ||||||||||||
General and administrative expenses | 31,429 | 22,734 | 81,552 | 65,951 | ||||||||||||
Impairment of assets | — | — | 243 | 517 | ||||||||||||
Total operating expenses | 127,999 | 110,499 | 344,167 | 308,264 | ||||||||||||
Operating income | 59,836 | 46,728 | 127,210 | 87,030 | ||||||||||||
Other income (expense), net: | ||||||||||||||||
Interest (expense) income, net | (138 | ) | 343 | 472 | 821 | |||||||||||
Other income (expense), net | (764 | ) | (51 | ) | (818 | ) | (539 | ) | ||||||||
Total other income (expense), net | (902 | ) | 292 | (346 | ) | 282 | ||||||||||
Income before income tax provision | 58,934 | 47,020 | 126,864 | 87,312 | ||||||||||||
Income tax provision | 14,205 | 9,013 | 30,585 | 16,460 | ||||||||||||
Net income | $ | 44,729 | $ | 38,007 | $ | 96,279 | $ | 70,852 | ||||||||
Net income per common share — basic | $ | 3.70 | $ | 3.25 | $ | 8.16 | $ | 6.02 | ||||||||
Net income per common share — diluted | $ | 3.65 | $ | 3.21 | $ | 8.07 | $ | 5.96 | ||||||||
Weighted-average number of common shares — Class A basic | 9,136 | 8,557 | 8,797 | 8,646 | ||||||||||||
Weighted-average number of common shares — Class B basic | 2,862 | 3,018 | 2,899 | 3,018 | ||||||||||||
Weighted-average number of common shares — diluted | 12,150 | 11,702 | 11,823 | 11,773 | ||||||||||||
Net income | $ | 44,729 | $ | 38,007 | $ | 96,279 | $ | 70,852 | ||||||||
Other comprehensive income: | ||||||||||||||||
Foreign currency translation adjustment | 1 | (13 | ) | 43 | 4 | |||||||||||
Comprehensive income | $ | 44,730 | $ | 37,994 | $ | 96,322 | $ | 70,856 | ||||||||
STOCKHOLDERS’ EQUITY
Thirty-nine weeks ended | ||||||||
September 29, 2018 | September 30, 2017 | |||||||
Cash flows provided by operating activities: | ||||||||
Net income | $ | 70,852 | $ | 68,519 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 38,860 | 38,372 | ||||||
Impairment of assets | 517 | 1,505 | ||||||
Loss on disposal of property, plant and equipment | 45 | 571 | ||||||
Bad debt expense | 39 | 170 | ||||||
Stock-based compensation expense | 6,995 | 4,593 | ||||||
Deferred income taxes | 12,818 | (3,581 | ) | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (20,412 | ) | (6,658 | ) | ||||
Inventories | (20,836 | ) | (9,330 | ) | ||||
Prepaid expenses, income tax receivable and other assets | (8,385 | ) | 2,852 | |||||
Accounts payable | 20,560 | 5,371 | ||||||
Accrued expenses and other current liabilities | 6,309 | 6,244 | ||||||
Other liabilities | 693 | (390 | ) | |||||
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Net cash provided by operating activities | 108,055 | 108,238 | ||||||
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Cash flows used in investing activities: | ||||||||
Purchases of property, plant and equipment | (38,752 | ) | (23,415 | ) | ||||
Proceeds from disposal of property, plant and equipment | 2 | 16 | ||||||
Cash paid for acquisition of intangible assets | 5 | — | ||||||
Change in restricted cash | 131 | (4 | ) | |||||
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Net cash used in investing activities | (38,614 | ) | (23,403 | ) | ||||
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Cash flows used in financing activities: | ||||||||
Repurchase of Class A Common Stock | (88,311 | ) | (121,535 | ) | ||||
Proceeds from exercise of stock options | 21,528 | 15,159 | ||||||
Cash paid on note payable | (78 | ) | (60 | ) | ||||
Net proceeds from sale of investment shares | 670 | 611 | ||||||
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Net cash used in financing activities | (66,191 | ) | (105,825 | ) | ||||
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Change in cash and cash equivalents | 3,250 | (20,990 | ) | |||||
Cash and cash equivalents at beginning of year | 65,637 | 91,035 | ||||||
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Cash and cash equivalents at end of period | $ | 68,887 | $ | 70,045 | ||||
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Supplemental disclosure of cash flow information: | ||||||||
Income taxes paid | $ | 11,252 | $ | 22,408 | ||||
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Decrease in accounts receivable for ASU2014-09 adoption | $ | (1,310 | ) | $ | — | |||
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Income taxes refunded | $ | — | $ | 2 | ||||
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Increase (Decrease) in accounts payable for purchase of property, plant and equipment | $ | 3,346 | $ | (3,763 | ) | |||
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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, net of tax | Retained Earnings | Total Stockholders’ Equity | |||||||||||||||||||||||||
Balance at December 29, 2018 | 8,580 | $ | 86 | 2,918 | $ | 29 | $ | 405,711 | $ | (1,197 | ) | $ | 55,688 | $ | 460,317 | |||||||||||||||||
Net income | 23,694 | 23,694 | ||||||||||||||||||||||||||||||
Stock options exercised and restricted shares activities | 54 | — | 3,704 | 3,704 | ||||||||||||||||||||||||||||
Stock-based compensation expense | 2,066 | 2,066 | ||||||||||||||||||||||||||||||
Currency translation adjustment | 37 | 37 | ||||||||||||||||||||||||||||||
Balance at March 30, 2019 | 8,634 | $ | 86 | 2,918 | $ | 29 | $ | 411,481 | $ | (1,160 | ) | $ | 79,382 | $ | 489,818 | |||||||||||||||||
Net income | 27,856 | 27,856 | ||||||||||||||||||||||||||||||
Stock options exercised and restricted shares activities | 21 | 1 | 1,377 | 1,378 | ||||||||||||||||||||||||||||
Stock-based compensation expense | 3,744 | 3,744 | ||||||||||||||||||||||||||||||
Currency translation adjustment | 5 | 5 | ||||||||||||||||||||||||||||||
Balance at June 29, 2019 | 8,655 | $ | 87 | 2,918 | $ | 29 | $ | 416,602 | $ | (1,155 | ) | $ | 107,238 | $ | 522,801 | |||||||||||||||||
Net income | 44,729 | 44,729 | ||||||||||||||||||||||||||||||
Stock options exercised and restricted shares activities | 31 | — | 3,473 | 3,473 | ||||||||||||||||||||||||||||
Stock-based compensation expense | 3,233 | 3,233 | ||||||||||||||||||||||||||||||
Shares issued in connection with Dogfish Head merger | 430 | 4 | 144,739 | 144,743 | ||||||||||||||||||||||||||||
Conversion from Class B to Class A | 100 | 1 | (100 | ) | (1 | ) | — | |||||||||||||||||||||||||
Currency translation adjustment | 1 | 1 | ||||||||||||||||||||||||||||||
Balance at September 28, 2019 | 9,216 | $ | 92 | 2,818 | $ | 28 | $ | 568,047 | $ | (1,154 | ) | $ | 151,967 | $ | 718,980 | |||||||||||||||||
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, net of tax | Retained Earnings | Total Stockholders’ Equity | |||||||||||||||||||||||||
Balance at December 30, 2017 | 8,603 | $ | 86 | 3,018 | $ | 30 | $ | 372,590 | $ | (1,288 | ) | $ | 52,105 | $ | 423,523 | |||||||||||||||||
Net income | 9,310 | 9,310 | ||||||||||||||||||||||||||||||
Stock options exercised and restricted shares activities | 188 | 2 | 20,232 | 20,234 | ||||||||||||||||||||||||||||
Stock-based compensation expense | 1,491 | 1,491 | ||||||||||||||||||||||||||||||
Repurchase of Class A Common Stock | (91 | ) | (1 | ) | (16,638 | ) | (16,639 | ) | ||||||||||||||||||||||||
Currency translation adjustment | (11 | ) | (11 | ) | ||||||||||||||||||||||||||||
One time effect of adoption of ASU 2014-09, Revenue from Contracts with Customers, net of tax of $329 | (982 | ) | (982 | ) | ||||||||||||||||||||||||||||
One time effect of adoption of ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income | (210 | ) | 210 | — | ||||||||||||||||||||||||||||
Balance at March 31, 2018 | 8,700 | $ | 87 | 3,018 | $ | 30 | $ | 394,313 | $ | (1,509 | ) | $ | 44,005 | $ | 436,926 | |||||||||||||||||
Net income | 23,535 | 23,535 | ||||||||||||||||||||||||||||||
Stock options exercised and restricted shares activities | 32 | — | 2,224 | 2,224 | ||||||||||||||||||||||||||||
Stock-based compensation expense | 3,079 | 3,079 | ||||||||||||||||||||||||||||||
Repurchase of Class A Common Stock | (97 | ) | (1 | ) | (23,084 | ) | (23,085 | ) | ||||||||||||||||||||||||
Currency translation adjustment | (7 | ) | (7 | ) | ||||||||||||||||||||||||||||
Balance at June 30, 2018 | 8,635 | $ | 86 | 3,018 | $ | 30 | $ | 399,616 | $ | (1,516 | ) | $ | 44,456 | $ | 442,672 | |||||||||||||||||
Net income | 38,007 | 38,007 | ||||||||||||||||||||||||||||||
Stock options exercised and restricted shares activities | 2 | — | 15 | 15 | ||||||||||||||||||||||||||||
Stock-based compensation expense | 2,425 | 2,425 | ||||||||||||||||||||||||||||||
Repurchase of Class A Common Stock | (162 | ) | (1 | ) | (48,585 | ) | (48,586 | ) | ||||||||||||||||||||||||
Currency translation adjustment | 13 | 13 | ||||||||||||||||||||||||||||||
Balance at September 29, 2018 | 8,475 | $ | 85 | 3,018 | $ | 30 | $ | 402,056 | $ | (1,503 | ) | $ | 33,878 | $ | 434,546 | |||||||||||||||||
Thirty-nine weeks ended | ||||||||
September 28, 2019 | September 29, 2018 | |||||||
Cash flows provided by operating activities: | ||||||||
Net income | $ | 96,279 | $ | 70,852 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 41,841 | 38,860 | ||||||
Impairment of assets | 243 | 517 | ||||||
Loss on disposal of property, plant and equipment | 449 | 45 | ||||||
Change in ROU assets | 2,734 | — | ||||||
Bad debt (recovery) expense | 53 | 39 | ||||||
Stock-based compensation expense | 9,043 | 6,995 | ||||||
Deferred income taxes | 14,047 | 12,818 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (26,532 | ) | (20,412 | ) | ||||
Inventories | (16,847 | ) | (20,836 | ) | ||||
Prepaid expenses, income tax receivable and other assets | (13,903 | ) | (8,385 | ) | ||||
Accounts payable | 22,388 | 20,560 | ||||||
Accrued expenses and other current liabilities | 14,949 | 6,309 | ||||||
Change in operating lease liability | (2,270 | ) | — | |||||
Other liabilities | 207 | 693 | ||||||
Net cash provided by operating activities | 142,681 | 108,055 | ||||||
Cash flows used in investing activities: | ||||||||
Purchases of property, plant and equipment | (66,760 | ) | (38,752 | ) | ||||
Proceeds from disposal of property, plant and equipment | 144 | 2 | ||||||
Cash paid for acquisition of intangible assets | — | 5 | ||||||
Investment in Dogfish Head, net of cash acquired | (165,517 | ) | — | |||||
Other investing activities | (10 | ) | 131 | |||||
Net cash used in investing activities | (232,143 | ) | (38,614 | ) | ||||
Cash flows provided by (used in) financing activities: | ||||||||
Repurchase of Class A Common Stock | — | (88,311 | ) | |||||
Proceeds from exercise of stock options | 7,619 | 21,528 | ||||||
Net cash paid on note payable and capital lease | (246 | ) | (78 | ) | ||||
Cash borrowed on line of credit | 97,000 | — | ||||||
Cash paid on line of credit | (97,000 | ) | — | |||||
Net proceeds from sale of investment shares | 818 | 670 | ||||||
Net cash provided (used in) by financing activities | 8,191 | (66,191 | ) | |||||
Change in cash and cash equivalents | (81,271 | ) | 3,250 | |||||
Cash and cash equivalents at beginning of year | 108,399 | 65,637 | ||||||
Cash and cash equivalents at end of period | $ | 27,128 | $ | 68,887 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Non cash consideration issued in Dogfish Head Transaction (Refer to Note B) | $ | 144,743 | $ | — | ||||
Income taxes paid | $ | 16,759 | $ | 11,252 | ||||
Cash paid for amounts included in measurement of lease liabilities | $ | 3,443 | $ | — | ||||
Right-of-use assets obtained in exchange for operating lease obligations | $ | 41,678 | $ | — | ||||
Right-of-use assets obtained in exchange for capital lease obligations | $ | 2,837 | $ | — | ||||
Interest paid on revolving credit facility | $ | 349 | $ | — | ||||
Decrease in accounts receivable for ASU 2014-09 adoption | $ | — | $ | (1,310 | ) | |||
Decrease in accounts payable for purchase of property, plant and equipment | $ | (2,076 | ) | $ | 3,346 | |||
A. Organization and Basis of Presentation
A. | Organization and Basis of Presentation |
“American Fermentation Company”.
29, 2018.
B. | 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 | ||
(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 thirteen and thirty-nine weeks ended September 28, 2019 have been re-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. |
Thirteen weeks ended | Thirty-nine weeks ended | |||||||||||||||
September 28, 2019 | September 29, 2018 | September 28, 2019 | September 29, 2018 | |||||||||||||
Net revenue | $ | 379,205 | $ | 335,954 | $ | 1,002,939 | $ | 852,611 | ||||||||
Net income | $ | 46,445 | $ | 42,638 | $ | 103,105 | $ | 77,541 | ||||||||
Basic earnings per share | $ | 3.84 | $ | 3.51 | $ | 8.74 | $ | 6.36 | ||||||||
Diluted earnings per share | $ | 3.79 | $ | 3.48 | $ | 8.64 | $ | 6.30 |
C. | Goodwill and Intangible Assets |
Thirty-nine weeks ended | ||||||||
September 28, | September 29, | |||||||
2019 | 2018 | |||||||
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 | ||||
No impairment of existing goodwill was recorded in the period.
As of September 28, 2019 | As of December 29, 2018 | |||||||||||||||||||||||||||
Estimated Useful | Gross Carrying | Accumulated | Net Book | Gross Carrying | Accumulated | Net Book | ||||||||||||||||||||||
Life (Years) | Value | Amortization | Value | Value | Amortization | Value | ||||||||||||||||||||||
Custmer Relationships | 15 | $ | 3,800 | $ | (64 | ) | $ | 3,736 | $ | — | $ | — | $ | — | ||||||||||||||
Trade Names | Indefinite | 100,599 | — | 100,599 | 2,099 | — | 2,099 | |||||||||||||||||||||
Total intangible assets | $ | 104,399 | $ | (64 | ) | $ | 104,335 | $ | 2,099 | $ | — | $ | 2,099 | |||||||||||||||
Fiscal Year | Amount | |||
Remainder of 2019 | $ | 63 | ||
2020 | 253 | |||
2021 | 253 | |||
2022 | 253 | |||
2023 | 253 | |||
2024 | 253 |
D. | Recent Accounting Pronouncements |
In March 2016, the FASB issued ASUNo. 2016-09,Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting. ASU2016-09 is part of the FASB’s initiative to simplify accounting standards. The guidance impacted several aspects of the accounting for employee share-based payment transactions, including accounting for income taxes and forfeitures, as well as classification in the consolidated statements of cash flows. Under ASU2016-09, excess tax benefits and deficiencies as a result of stock option exercises and restricted stock vesting are to be recognized as discrete items within income tax expense or benefit in the consolidated statements of comprehensive income in the reporting period in which they occur. Additionally, under ASU2016-09, excess tax benefits and deficiencies should be classified along with other income tax cash flows as an operating activity in the consolidated statements of cash flows. The Company adopted this new accounting standard prospectively in the first quarter of 2017. Prior periods have not been adjusted. Under this new accounting standard, for the thirteen weeks ended September 29, 2018 and the thirteen weeks ended September 30, 2017, $0.1 million and $0.5 million, respectively, in excess tax benefit from stock-based compensation arrangements was recognized within the income tax provision in the consolidated statements of comprehensive income and classified as an operating activity in the consolidated statements of cash flow. For the thirty-nine weeks ended September 29, 2018 and September 30, 2017, $4.0 million and $4.3 million, respectively, was recognized. The Company has not changed its forfeiture policy and continued to estimate forfeitures expected to occur to determine stock-based compensation expense.
In February 2018, the FASB issued ASUNo. 2018-02,Income Statement – Reporting Comprehensive Income (Topic 220), Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.Under this update, an entity is allowed a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. The Company early adopted this accounting standard prospectively in the first quarter of 2018. Prior periods have not been adjusted. In the first quarter of 2018, the Company reclassified $0.2 million of federal and state income tax effects of the Tax Cut and Jobs Act of 2017 related to defined benefit plans from accumulated other comprehensive income to retained earnings. The Company expects the impact of the adoption to be immaterial to its consolidated financial statements on an ongoing basis.
Accounting Pronouncements Not Yet Effective
In February 2016, the FASB issued ASUNo. will be effective retrospectively
C. Revenue Recognition
financial statements.
E. | Revenue Recognition |
D. Inventories
F. | Inventories |
September 29, 2018 | December 30, 2017 | |||||||
(in thousands) | ||||||||
Current inventory: | ||||||||
Raw materials | $ | 46,037 | $ | 33,086 | ||||
Work in process | 9,467 | 6,826 | ||||||
Finished goods | 16,750 | 10,739 | ||||||
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Total current inventory | 72,254 | 50,651 | ||||||
Long term inventory | 9,138 | 9,905 | ||||||
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Total inventory | $ | 81,392 | $ | 60,556 | ||||
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September 28, 2019 | December 29, 2018 | |||||||
(in thousands) | ||||||||
Current inventory: | ||||||||
Raw materials | $ | 51,322 | $ | 44,655 | ||||
Work in process | 13,270 | 8,252 | ||||||
Finished goods | 28,040 | 17,342 | ||||||
Total current inventory | 92,632 | 70,249 | ||||||
Long term inventory | 15,369 | 11,619 | ||||||
Total inventory | $ | 108,001 | $ | 81,868 | ||||
G. | Leases |
Classification | Leases | |||||
Right-of-use assets | (in thousands) | |||||
Operating lease assets | Operating right-of-use assets | $ | 38,943 | |||
Capital lease assets | Property, plant and equipment, net | 2,663 | ||||
Lease Liabilities | ||||||
Current | ||||||
Operating lease liabilities | Current operating lease liabilities | 2,599 | ||||
Capital lease liabilities | Accrued expenses and other current l iabilities | 541 | ||||
Non-current | ||||||
Operating lease liabilities | Non-current operating lease liabilities | 41,215 | ||||
Capital lease liabilities | Other liabilities | 2,178 |
Operating | Capital | Weighted-Average Remaining Term in Years | ||||||||||||||
Leases | Leases | Operating Leases | Capital Leases | |||||||||||||
(in thousands) | ||||||||||||||||
2019 | $ | 1,466 | $ | 155 | ||||||||||||
2020 | 2,642 | 626 | ||||||||||||||
2021 | 5,754 | 626 | ||||||||||||||
2022 | 5,453 | 626 | ||||||||||||||
2023 | 5,313 | 626 | ||||||||||||||
After 2023 | 32,191 | 288 | ||||||||||||||
Total lease payments | 52,819 | 2,947 | ||||||||||||||
Less imputed interest (based on 3.5% weighted-average discount rate) | (9,005 | ) | (228 | ) | ||||||||||||
Present value of lease liability | $ | 43,814 | $ | 2,719 | 4.7 | 9.9 |
Leases | ||||
(in thousands) | ||||
2019 | $ | 4,446 | ||
2020 | 4,530 | |||
2021 | 4,370 | |||
2022 | 3,559 | |||
2023 | 1,672 | |||
Thereafter | 7,582 | |||
Total | $ | 26,159 | ||
H. | Net Income per Share |
Share—Share
Thirteen weeks ended | Thirty-nine weeks ended | |||||||||||||||
September 29, 2018 | September 30, 2017 | September 29, 2018 | September 30, 2017 | |||||||||||||
(in thousands, except per share data) | (in thousands, except per share data) | |||||||||||||||
Net income | $ | 38,007 | $ | 33,683 | $ | 70,852 | $ | 68,519 | ||||||||
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Allocation of net income for basic: | ||||||||||||||||
Class A Common Stock | $ | 27,786 | $ | 24,772 | $ | 52,051 | $ | 50,647 | ||||||||
Class B Common Stock | 9,800 | 8,730 | 18,169 | 17,493 | ||||||||||||
Unvested participating shares | 421 | 181 | 632 | 379 | ||||||||||||
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$ | 38,007 | $ | 33,683 | $ | 70,852 | $ | 68,519 | |||||||||
Weighted average number of shares for basic: | ||||||||||||||||
Class A Common Stock | 8,557 | 8,789 | 8,646 | 9,037 | ||||||||||||
Class B Common Stock* | 3,018 | 3,097 | 3,018 | 3,122 | ||||||||||||
Unvested participating shares | 130 | 65 | 105 | 67 | ||||||||||||
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11,705 | 11,951 | 11,769 | 12,226 | |||||||||||||
Net income per share for basic: | ||||||||||||||||
Class A Common Stock | $ | 3.25 | $ | 2.82 | $ | 6.02 | $ | 5.60 | ||||||||
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Class B Common Stock | $ | 3.25 | $ | 2.82 | $ | 6.02 | $ | 5.60 | ||||||||
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Thirteen weeks ended | Thirty-nine weeks ended | |||||||||||||||
September 28, 2019 | September 29, 2018 | September 28, 2019 | September 29, 2018 | |||||||||||||
(in thousands, except per share data) | (in thousands, except per share data) | |||||||||||||||
Net income | $ | 44,729 | $ | 38,007 | $ | 96,279 | $ | 70,852 | ||||||||
Allocation of net income for basic: | ||||||||||||||||
Class A Common Stock | $ | 33,776 | $ | 27,786 | $ | 71,761 | $ | 52,051 | ||||||||
Class B Common Stock | 10,581 | 9,800 | 23,652 | 18,169 | ||||||||||||
Unvested participating shares | 372 | 421 | 866 | 632 | ||||||||||||
$ | 44,729 | $ | 38,007 | $ | 96,279 | $ | 70,852 | |||||||||
Weighted average number of shares for basic: | ||||||||||||||||
Class A Common Stock | 9,136 | 8,557 | 8,797 | 8,646 | ||||||||||||
Class B Common Stock* | 2,862 | 3,018 | 2,899 | 3,018 | ||||||||||||
Unvested participating shares | 101 | 130 | 106 | 105 | ||||||||||||
12,099 | 11,705 | 11,802 | 11,769 | |||||||||||||
Net income per share for basic: | ||||||||||||||||
Class A Common Stock | $ | 3.70 | $ | 3.25 | $ | 8.16 | $ | 6.02 | ||||||||
Class B Common Stock | $ | 3.70 | $ | 3.25 | $ | 8.16 | $ | 6.02 | ||||||||
* | Change in Class B Common Stock resulted from the conversion of 100,000 shares to Class A Common Stock on 100,000 shares to Class A Common stock on August 8, 2019 with the ending number of shares reflecting the weighted average for the period. |
Thirteen weeks ended | ||||||||||||||||||||||||
September 29, 2018 | September 30, 2017 | |||||||||||||||||||||||
Earnings to Common Shareholders | Common Shares | EPS | Earnings to Common Shareholders | Common Shares | EPS | |||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||||||
As reported—basic | $ | 27,786 | 8,557 | $ | 3.25 | $ | 24,772 | 8,789 | $ | 2.82 | ||||||||||||||
Add: effect of dilutive potential common shares | ||||||||||||||||||||||||
Share-based awards | — | 127 | — | 151 | ||||||||||||||||||||
Class B Common Stock | 9,800 | 3,018 | 8,730 | 3,097 | ||||||||||||||||||||
Net effect of unvested participating shares | 5 | — | 2 | — | ||||||||||||||||||||
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Net income per common share—diluted | $ | 37,591 | 11,702 | $ | 3.21 | $ | 33,504 | 12,037 | $ | 2.78 | ||||||||||||||
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Thirty-nine weeks ended | ||||||||||||||||||||||||
September 29, 2018 | September 30, 2017 | |||||||||||||||||||||||
Earnings to Common Shareholders | Common Shares | EPS | Earnings to Common Shareholders | Common Shares | EPS | |||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||||||
As reported—basic | $ | 52,051 | 8,646 | $ | 6.02 | $ | 50,647 | 9,037 | $ | 5.60 | ||||||||||||||
Add: effect of dilutive potential common shares | ||||||||||||||||||||||||
Share-based awards | — | 109 | — | 140 | ||||||||||||||||||||
Class B Common Stock | 18,169 | 3,018 | 17,493 | 3,122 | ||||||||||||||||||||
Net effect of unvested participating shares | 5 | — | 4 | — | ||||||||||||||||||||
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Net income per common share—diluted | $ | 70,225 | 11,773 | $ | 5.96 | $ | 68,144 | 12,299 | $ | 5.54 | ||||||||||||||
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Thirteen weeks ended | ||||||||||||||||||||||||
September 28, 2019 | September 29, 2018 | |||||||||||||||||||||||
Earnings to Common Shareholders | Common Shares | EPS | Earnings to Common Shareholders | Common Shares | EPS | |||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||||||
As reported — basic | $ | 33,776 | 9,136 | $ | 3.70 | $ | 27,786 | 8,557 | $ | 3.25 | ||||||||||||||
Add: effect of dilutive potential common shares | ||||||||||||||||||||||||
Share-based awards | — | 152 | — | 127 | ||||||||||||||||||||
Class B Common Stock | 10,581 | 2,862 | 9,800 | 3,018 | ||||||||||||||||||||
Net effect of unvested participating shares | 4 | — | 5 | — | ||||||||||||||||||||
Net income per common share — diluted | $ | 44,361 | 12,150 | $ | 3.65 | $ | 37,591 | 11,702 | $ | 3.21 | ||||||||||||||
Thirty-nine weeks ended | ||||||||||||||||||||||||
September 28, 2019 | September 29, 2018 | |||||||||||||||||||||||
Earnings to Common Shareholders | Common Shares | EPS | Earnings to Common Shareholders | Common Shares | EPS | |||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||||||
As reported — basic | $ | 71,761 | 8,797 | $ | 8.16 | $ | 52,051 | 8,646 | $ | 6.02 | ||||||||||||||
Add: effect of dilutive potential common shares | ||||||||||||||||||||||||
Share-based awards | — | 127 | — | 109 | ||||||||||||||||||||
Class B Common Stock | 23,652 | 2,899 | 18,169 | 3,018 | ||||||||||||||||||||
Net effect of unvested participating shares | 8 | — | 5 | — | ||||||||||||||||||||
Net income per common share — diluted | $ | 95,421 | 11,823 | $ | 8.07 | $ | 70,225 | 11,773 | $ | 5.96 |
Of the
F. Comprehensive Income or Loss
I. | Comprehensive Income or Loss |
G. Commitments and Contingencies
J. | Commitments and Contingencies |
Currently, the Company has entered into contracts for barley and wheat with two major suppliers. The contracts include crop year 2017 through 2019 and cover the Company’s barley, wheat, and malt requirements for the remainder
On October 11, 2018, the Company amended an existing brewing services agreement to include a minimum capacity availability commitment by the third party brewery. 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, 2025. The amendment requires the Company to pay up to $4 million dollars in both 2018 and 2019 for capital improvements at the third party’s brewing facilities.
H. Income Taxes
K. | Income Taxes |
In September 2017, thepenalties recorded in other liabilities.
Thirteen weeks ended | ||||||||
September 29, | September 30, | |||||||
2018 | 2017 | |||||||
(in thousands) | ||||||||
Summary of income tax provision | ||||||||
Tax provision based on net income | $ | 13,671 | $ | 18,753 | ||||
Accounting Method Changes | $ | (4,529 | ) | $ | — | |||
Benefit of ASU2016-09 | (129 | ) | (533 | ) | ||||
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| |||||
Total income tax provision | $ | 9,013 | $ | 18,220 | ||||
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Thirty-nine weeks ended | ||||||||
September 29, | September 30, | |||||||
2018 | 2017 | |||||||
(in thousands) | ||||||||
Summary of income tax provision | ||||||||
Tax provision based on net income | $ | 24,969 | $ | 37,189 | ||||
Accounting Method Changes | $ | (4,529 | ) | $ | — | |||
Benefit of ASU2016-09 | (3,980 | ) | (4,262 | ) | ||||
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| |||||
Total income tax provision | $ | 16,460 | $ | 32,927 | ||||
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|
Due to a change of tax accounting methods for depreciation of certain property, plant and equipment for the tax year ended December 30, 2017, the Company experienced aone-time income tax benefit for the thirteen and thirty-nine weeks ended September 29, 2018.
2018:
Thirteen weeks ended | ||||||||
September 28, | September 29, | |||||||
2019 | 2018 | |||||||
(in thousands) | ||||||||
Summary of income tax provision | ||||||||
Tax provision based on net income | $ | 16,047 | $ | 13,671 | ||||
Accounting Method Changes | — | (4,529 | ) | |||||
Benefit of ASU 2016-09 | (1,842 | ) | (129 | ) | ||||
Total income tax provision | $ | 14,205 | $ | 9,013 | ||||
Thirty-nine weeks ended | ||||||||
September 28, | September 29, | |||||||
2019 | 2018 | |||||||
(in thousands) | ||||||||
Summary of income tax provision | ||||||||
Tax provision based on net income | $ | 34,455 | $ | 24,969 | ||||
Accounting Method Changes | — | (4,529 | ) | |||||
Benefit of ASU 2016-09 | (3,870 | ) | (3,980 | ) | ||||
Total income tax provision | $ | 30,585 | $ | 16,460 |
I. Revolving Line
L. | Revolving Line of Credit |
J. Fair Value Measures
M. | Fair Value Measures |
K. Common Stock and Stock-Based Compensation
respectively
N. | Common Stock and Stock-Based Compensation |
Shares | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Term in Years | Aggregate Intrinsic Value (in thousands) | |||||||||||||
Outstanding at December 30, 2017 | 1,156,997 | $ | 158.53 | |||||||||||||
Granted | 32,570 | 210.24 | ||||||||||||||
Forfeited | (613,630 | ) | 199.94 | |||||||||||||
Expired | — | — | ||||||||||||||
Exercised | (200,898 | ) | 106.69 | |||||||||||||
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Outstanding at September 29, 2018 | 375,039 | $ | 156.03 | 5.66 | $ | 49,310,933 | ||||||||||
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Exercisable at September 29, 2018 | 151,647 | $ | 115.91 | 3.60 | $ | 26,027,039 | ||||||||||
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Vested and expected to vest at September 29, 2018 | 352,321 | $ | 153.77 | 5.56 | $ | 47,120,023 | ||||||||||
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Shares | Weighted-Average Exercise Price | Weighted-Average RemainingContractual 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 | (72,937 | ) | 104.47 | |||||||||||||
Outstanding at September 28, 2019 | 325,178 | $ | 182.44 | 5.83 | $ | 55,196 | ||||||||||
Exercisable at September 28, 2019 | 102,613 | $ | 139.16 | 3.96 | $ | 21,859 | ||||||||||
Vested and expected to vest at September 28, 2019 | 300,886 | $ | 180.81 | 5.76 | $ | 51,563 | ||||||||||
On April 30, 2018, the Company granted its Chief Executive Officer a stock option to purchase 9,959 shares of the Company’s Class A Common stock with a weighted average fair value of $100.50 per share, of which all shares relate to performance-based stock options and vest through 2022.
On May 17, 2018,March 14, 2019, the Company granted options to purchase an aggregate of 5,080844 shares of the Company’s Class A Common Stock to the Company’s newly appointed
On May 31, 2018, the Company cancelled its former Chief Executive Officer’s 2016 stock option of 574,507 shares due to forfeiture upon retirement.
Number of Shares | Weighted Average Fair Value | |||||||
Non-vested at December 30, 2017 | 62,405 | $ | 155.21 | |||||
Granted | 92,775 | 207.56 | ||||||
Vested | (20,678 | ) | 156.50 | |||||
Forfeited | (7,170 | ) | 167.53 | |||||
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| |||||||
Non-vested at September 29, 2018 | 127,332 | $ | 192.45 | |||||
|
|
Number of Shares | Weighted Average Fair Value | |||||||
Non-vested at December 29, 2018 | 126,720 | $ | 192.74 | |||||
Granted | 30,410 | $ | 269.91 | |||||
Vested | (33,201 | ) | $ | 188.63 | ||||
Forfeited | (1,550 | ) | $ | 142.00 | ||||
Non-vested at September 28, 2019 | 122,379 | $ | 213.67 | |||||
O. | Employee Retirement Plans |
P. | Related Party Transactions |
L. Subsequent Events
As disclosed in Note G, on October 11, 2018, the Company amended an existing brewing services agreement to include a minimum capacity availability commitment by the third party brewery.
approximately $91,000.
Q. | Subsequent Events |
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
29, 2018.
Thirteen Weeks Ended (in thousands, except per barrel) | ||||||||||||||||||||||||||||||||||||
September 29, 2018 | September 30, 2017 | Amount change | % change | Per barrel change | ||||||||||||||||||||||||||||||||
Barrels sold | 1,338 | 1,084 | 255 | 23.5 | % | |||||||||||||||||||||||||||||||
Per barrel | % of net revenue | Per barrel | % of net revenue | |||||||||||||||||||||||||||||||||
Net revenue | $ | 306,870 | $ | 229.27 | 100.0 | % | $ | 247,047 | $ | 228.00 | 100.0 | % | $ | 59,823 | 24.2 | % | $ | 1.27 | ||||||||||||||||||
Cost of goods | 149,643 | 111.80 | 48.8 | % | 115,546 | 106.64 | 46.8 | % | 34,097 | 29.5 | % | 5.16 | ||||||||||||||||||||||||
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Gross profit | 157,227 | 117.47 | 51.2 | % | 131,501 | 121.36 | 53.2 | % | 25,726 | 19.6 | % | (3.89 | ) | |||||||||||||||||||||||
Advertising, promotional and selling expenses | 87,765 | 65.57 | 28.6 | % | 63,647 | 58.74 | 25.8 | % | 24,118 | 37.9 | % | 6.83 | ||||||||||||||||||||||||
General and administrative expenses | 22,734 | 16.99 | 7.4 | % | 16,358 | 15.10 | 6.6 | % | 6,376 | 39.0 | % | 1.89 | ||||||||||||||||||||||||
Impairment of assets | — | — | 0.0 | % | — | — | 0.0 | % | — | 0.0 | % | — | ||||||||||||||||||||||||
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Total operating expenses | 110,499 | 82.56 | 36.0 | % | 80,005 | 73.84 | 32.4 | % | 30,494 | 38.1 | % | 8.72 | ||||||||||||||||||||||||
Operating income | 46,728 | 34.91 | 15.2 | % | 51,496 | 47.53 | 20.8 | % | (4,768 | ) | -9.3 | % | (12.62 | ) | ||||||||||||||||||||||
Other income (expense), net | 292 | 0.22 | 0.1 | % | 407 | 0.38 | 0.2 | % | (115 | ) | -28.3 | % | (0.16 | ) | ||||||||||||||||||||||
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Income before income tax expense | 47,020 | 35.13 | 15.3 | % | 51,903 | 47.90 | 21.0 | % | (4,883 | ) | -9.4 | % | (12.77 | ) | ||||||||||||||||||||||
Income tax expense | 9,013 | 6.73 | 2.9 | % | 18,220 | 16.82 | 7.4 | % | (9,207 | ) | -50.5 | % | (10.09 | ) | ||||||||||||||||||||||
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Net income | $ | 38,007 | $ | 28.40 | 12.4 | % | $ | 33,683 | $ | 31.09 | 13.6 | % | $ | 4,324 | 12.8 | % | $ | (2.69 | ) | |||||||||||||||||
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29, 2018
Thirteen Weeks Ended (in thousands, except per barrel) | ||||||||||||||||||||||||||||||||||||
September 28, 2019 | September 29, 2018 | Amount change | % change | Per barrel change | ||||||||||||||||||||||||||||||||
Barrels sold | 1,594 | 1,338 | 255 | 19.1 | % | |||||||||||||||||||||||||||||||
Per barrel | % of net revenue | Per barrel | % of net revenue | |||||||||||||||||||||||||||||||||
Net revenue | $ | 378,466 | $ | 237.46 | 100.0 | % | $ | 306,870 | $ | 229.27 | 100.0 | % | $ | 71,596 | 23.3 | % | $ | 8.19 | ||||||||||||||||||
Cost of goods | 190,631 | 119.61 | 50.4 | % | 149,643 | 111.80 | 48.8 | % | 40,988 | 27.4 | % | 7.81 | ||||||||||||||||||||||||
Gross profit | 187,835 | 117.85 | 49.6 | % | 157,227 | 117.47 | 51.2 | % | 30,608 | 19.5 | % | 0.38 | ||||||||||||||||||||||||
Advertising, promotional and selling expenses | 96,570 | 60.59 | 25.5 | % | 87,765 | 65.57 | 28.6 | % | 8,805 | 10.0 | % | (4.98 | ) | |||||||||||||||||||||||
General and administrative expenses | 31,429 | 19.72 | 8.3 | % | 22,734 | 16.99 | 7.4 | % | 8,695 | 38.2 | % | 2.73 | ||||||||||||||||||||||||
Total operating expenses | 127,999 | 80.31 | 33.8 | % | 110,499 | 82.56 | 36.0 | % | 17,500 | 15.8 | % | (2.25 | ) | |||||||||||||||||||||||
Operating income | 59,836 | 37.54 | 15.8 | % | 46,728 | 34.91 | 15.2 | % | 13,108 | 28.1 | % | 2.63 | ||||||||||||||||||||||||
Other (expense) income | (902 | ) | (0.57 | ) | -0.2 | % | 292 | 0.22 | 0.1 | % | (1,194 | ) | -408.9 | % | (0.79 | ) | ||||||||||||||||||||
Income before income tax expense | 58,934 | 36.98 | 15.6 | % | 47,020 | 35.13 | 15.3 | % | 11,914 | 25.3 | % | 1.85 | ||||||||||||||||||||||||
Income tax expense | 14,205 | 8.91 | 3.8 | % | 9,013 | 6.73 | 2.9 | % | 5,192 | 57.6 | % | 2.18 | ||||||||||||||||||||||||
Net income | $ | 44,729 | $ | 28.06 | 11.8 | % | $ | 38,007 | $ | 28.40 | 12.4 | % | $ | 6,722 | 17.7 | % | $ | (0.34 | ) | |||||||||||||||||
Shipments for the quarter increased at a higher rate than depletions and resulted in higher distributor inventory as of September 29, 2018 when compared to September 30, 2017.
year.
2018, as compared to $106.64 per barrel for the thirteen weeks ended September 30, 2017.2018. The 20182019 increase in cost of goods sold of $5.16$7.81 per barrel was primarily the result of higher processing costs due to increased production at third party locations,breweries and higher temporary labor requirements at Company-owned breweries and higher packaging costs, onlyto support increased variety pack volumes, partially offset by cost saving initiatives in Company ownedat Company-owned breweries.
price increases and cost saving initiatives at Company-owned breweries.
Advertising, promotional and selling expenses were 28.6% of net revenue, or $65.57 per barrel, for the thirteen weeks ended September 29, 2018, as compared to 25.8% of net revenue, or $58.742018. This decrease per barrel for the thirteen weeks ended September 30, 2017.is primarily due to shipments growing at a higher rate than advertising, promotional and selling expenses. The Company invests in advertising and promotional campaigns that it believes will be effective, but there is no guarantee that such investments will generate sales growth.
administrative expenses beginning July 3, 2019.
Thirty-nine Weeks Ended (in thousands, except per barrel) | ||||||||||||||||||||||||||||||||||||
September 29, 2018 | September 30, 2017 | Amount change | % change | Per barrel change | ||||||||||||||||||||||||||||||||
Barrels sold | 3,328 | 2,869 | 458 | 16.0 | % | |||||||||||||||||||||||||||||||
Per barrel | % of net revenue | Per barrel | % of net revenue | |||||||||||||||||||||||||||||||||
Net revenue | $ | 770,427 | $ | 231.51 | 100.0 | % | $ | 656,672 | $ | 228.86 | 100.0 | % | $ | 113,755 | 17.3 | % | $ | 2.65 | ||||||||||||||||||
Cost of goods | 375,133 | 112.73 | 48.7 | % | 314,808 | 109.71 | 47.9 | % | 60,325 | 19.2 | % | 3.02 | ||||||||||||||||||||||||
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Gross profit | 395,294 | 118.79 | 51.3 | % | 341,864 | 119.14 | 52.1 | % | 53,430 | 15.6 | % | (0.35 | ) | |||||||||||||||||||||||
Advertising, promotional and selling expenses | 241,796 | 72.66 | 31.4 | % | 185,232 | 64.56 | 28.2 | % | 56,564 | 30.5 | % | 8.10 | ||||||||||||||||||||||||
General and administrative expenses | 65,951 | 19.82 | 8.6 | % | 54,315 | 18.93 | 8.3 | % | 11,636 | 21.4 | % | 0.89 | ||||||||||||||||||||||||
Impairment of assets | 517 | 0.16 | 0.1 | % | 1,505 | 0.52 | 0.2 | % | (988 | ) | -65.6 | % | (0.36 | ) | ||||||||||||||||||||||
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Total operating expenses | 308,264 | 92.63 | 40.0 | % | 241,052 | 84.01 | 36.7 | % | 67,212 | 27.9 | % | 8.62 | ||||||||||||||||||||||||
Operating income | 87,030 | 26.15 | 11.3 | % | 100,812 | 35.13 | 15.4 | % | (13,782 | ) | -13.7 | % | (8.98 | ) | ||||||||||||||||||||||
Other income (expense), net | 282 | 0.08 | 0.0 | % | 634 | 0.22 | 0.1 | % | (352 | ) | -55.5 | % | (0.14 | ) | ||||||||||||||||||||||
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Income before income tax expense | 87,312 | 26.24 | 11.3 | % | 101,446 | 35.35 | 15.4 | % | (14,134 | ) | -13.9 | % | (9.11 | ) | ||||||||||||||||||||||
Income tax expense | 16,460 | 4.95 | 2.1 | % | 32,927 | 11.48 | 5.0 | % | (16,467 | ) | -50.0 | % | (6.53 | ) | ||||||||||||||||||||||
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Net income | $ | 70,852 | $ | 21.29 | 9.2 | % | $ | 68,519 | $ | 23.88 | 10.4 | % | $ | 2,333 | 3.4 | % | $ | (2.59 | ) | |||||||||||||||||
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29, 2018
Thirty-nine Weeks Ended (in thousands, except per barrel) | Amount change | % change | Per barrel change | |||||||||||||||||||||||||||||||||
September 28, 2019 | September 29, 2018 | |||||||||||||||||||||||||||||||||||
Barrels sold | 4,045 | 3,328 | 717 | 21.5 | % | |||||||||||||||||||||||||||||||
Per barrel | % of net revenue | Per barrel | % of net revenue | |||||||||||||||||||||||||||||||||
Net revenue | $ | 948,524 | $ | 234.51 | 100.0 | % | $ | 770,427 | $ | 231.51 | 100.0 | % | $ | 178,097 | 23.1 | % | $ | 3.00 | ||||||||||||||||||
Cost of goods | 477,147 | 117.97 | 50.3 | % | 375,133 | 112.73 | 48.7 | % | 102,014 | 27.2 | % | 5.24 | ||||||||||||||||||||||||
Gross profit | 471,377 | 116.54 | 49.7 | % | 395,294 | 118.79 | 51.3 | % | 76,083 | 19.2 | % | (2.25 | ) | |||||||||||||||||||||||
Advertising, promotional and selling expenses | 262,372 | 64.87 | 27.7 | % | 241,796 | 72.66 | 31.4 | % | 20,576 | 8.5 | % | (7.79 | ) | |||||||||||||||||||||||
General and administrative expenses | 81,552 | 20.16 | 8.6 | % | 65,951 | 19.82 | 8.6 | % | 15,601 | 23.7 | % | 0.34 | ||||||||||||||||||||||||
Impairment of assets | 243 | 0.06 | 0.0 | % | 517 | 0.16 | 0.1 | % | (274 | ) | -53.0 | % | (0.10 | ) | ||||||||||||||||||||||
Total operating expenses | 344,167 | 85.09 | 36.3 | % | 308,264 | 92.63 | 40.0 | % | 35,903 | 11.6 | % | (7.54 | ) | |||||||||||||||||||||||
Operating income | 127,210 | 31.45 | 13.4 | % | 87,030 | 26.15 | 11.3 | % | 40,180 | 46.2 | % | 5.30 | ||||||||||||||||||||||||
Other (expense) income, net | (346 | ) | (0.09 | ) | 0.0 | % | 282 | 0.08 | 0.0 | % | (628 | ) | -222.7 | % | (0.17 | ) | ||||||||||||||||||||
Income before income tax expense | 126,864 | 31.37 | 13.4 | % | 87,312 | 26.24 | 11.3 | % | 39,552 | 45.3 | % | 5.13 | ||||||||||||||||||||||||
Income tax expense | 30,585 | 7.56 | 3.2 | % | 16,460 | 4.95 | 2.1 | % | 14,125 | 85.8 | % | 2.61 | ||||||||||||||||||||||||
Net income | $ | 96,279 | $ | 23.80 | 10.2 | % | $ | 70,852 | $ | 21.29 | 9.2 | % | $ | 25,427 | 35.9 | % | $ | 2.51 | ||||||||||||||||||
shipments.
price increases.
Gross margin was 49.7% for the thirty-nine weeks ended September 28, 2019, as compared to 51.3% for the thirty-nine weeks ended September 29, 2018. The decline in gross margin primarily resulted from higher processing costs due to increased production at third party breweries and higher temporary labor requirements at Company-owned breweries to support increased variety pack volumes, partially offset by price increases and cost saving initiatives at Company-owned breweries.
Advertising, promotional and selling expenses were 31.4% of net revenue, or $72.66 per barrel, for the thirty-nine weeks ended September 29, 2018, as compared to 28.2% of net revenue, or $64.562018. This decrease per barrel for the thirty-nine weeks ended September 30, 2017.is primarily due to shipments growing at a higher rate than advertising, promotional and selling expenses. The Company invests in advertising and promotional campaigns that it believes will be effective, but there is no guarantee that such investments will generate sales growth.
2019.
2018 and no similar
2018 and 2019 Outlook
20, 201819, 2019 are estimated by the Company to have increased approximately 13%21% from the comparable period in 2017.
2018.
As disclosed
There were no otherreliable information about the Company’s results of operations and financial condition. No material changes to the Company’s critical accounting policies, as previously disclosed, have occurred during the three-monthfirst nine months of 2019, except for the addition of the Company’s Business Combinations policy and the Company’s Valuation of Goodwill and Indefinite Lived Intangible Assets policy as discussed below and in Note B and Note C to the interim consolidated financial statements included in Item 1 of this Form
not to exceed one year from the date of acquisition, the Company may record adjustments to the assets acquired and liabilities assumed, with a corresponding offset to goodwill if new information is obtained related to facts and circumstances that existed as of the acquisition date. After the measurement period, any subsequent adjustments are reflected in the consolidated statements of operations. Acquisition costs, such as legal and consulting fees, are expensed as incurred.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Item 4. CONTROLS AND PROCEDURES
Item 4. | CONTROLS AND PROCEDURES |
PART II. | OTHER INFORMATION |
Item 1. | LEGAL PROCEEDINGS |
Item 1A. | RISK FACTORS |
Item 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
During the thirty-nine weeks ended September 30, 2018,28, 2019, the Company repurchased 350,827did not repurchase any shares of its Class A Common Stock as illustrated inunder the table below:
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 31, 2017 to February 3, 2018 | 33,875 | $ | 188.94 | 33,539 | $ | 172,285 | ||||||||||
February 4, 2018 to March 3, 2018 | 27,974 | 178.89 | 27,920 | 167,286 | ||||||||||||
March 4, 2018 to March 31, 2018 | 29,659 | 179.76 | 29,217 | 162,007 | ||||||||||||
April 1, 2018 to May 5, 2018 | 44,329 | 213.23 | 44,232 | 152,565 | ||||||||||||
May 6, 2018 to June 2, 2018 | 27,737 | 239.94 | 27,674 | 145,917 | ||||||||||||
June 3, 2018 to June 30, 2018 | 24,943 | 280.50 | 24,926 | 138,921 | ||||||||||||
July 1, 2018 to August 4, 2018 | 61,352 | 302.16 | 61,352 | 120,382 | ||||||||||||
August 5, 2018 to September 1, 2018 | 53,127 | 290.28 | 53,000 | 104,974 | ||||||||||||
September 2, 2018 to September 29, 2018 | 47,831 | 306.04 | 47,831 | 90,335 | ||||||||||||
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Total | 350,827 | $ | 252.08 | 349,691 | $ | 90,335 | ||||||||||
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Ofpreviously announced repurchase program.
Plan, as illustrated in the table below:
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 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 | ||||||||||||
Total | 900 | $ | 139.47 | — | 90,335 | |||||||||||
Item 3. | DEFAULTS UPON SENIOR SECURITIES |
Item 4. | MINE SAFETY DISCLOSURES |
Item 5. | OTHER INFORMATION |
Item 6. | EXHIBITS |
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Exhibit No. | Title | |||
**10.1 | ||||
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**10.2 | ||||
**10.3 | ||||
**10.4 | ||||
**10.5 | ||||
*31.1 | ||||
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*31.2 | ||||
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*32.1 | ||||
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*32.2 | ||||
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*101.INS | XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |||
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*101.SCH | XBRL Taxonomy Extension Schema Document | |||
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*101.CAL | XBRL Taxonomy Calculation Linkbase Document | |||
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*101.LAB | XBRL Taxonomy Label Linkbase Document | |||
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*101.PRE | XBRL Taxonomy Presentation Linkbase Document | |||
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*101.DEF | XBRL Definition Linkbase Document | |||
*104 | The cover page from this Quarterly Report on Form 10-Q for the quarter ended September 28, 2019, formatted in Inline XBRL (formatted as Inline XBRL and contained in Exhibit 101). |
* | Filed with this report |
** | Designates management contract or compensatory plan or arrangement |
THE BOSTON BEER COMPANY, INC. (Registrant) | ||||||
Date: October 29, 2019 |
/s/ David A. Burwick | |||||
David A. Burwick | ||||||
President and Chief Executive Officer | ||||||
(principal executive officer) |
Date: October 29, 2019 | /s/ Frank H. Smalla | |||||
Frank H. Smalla | ||||||
Chief Financial Officer | ||||||
(principal financial officer) |
23