UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
For the quarterly period ended JuneMarch 26, 20212022
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 1-14092
THE BOSTON BEER COMPANY, INC.
(Exact name of registrant as specified in its charter)
| 04-3284048 | |
(State or other jurisdiction of incorporation or organization) | (State or other jurisdiction of incorporation Identification No.) | |
One Design Center Place, | 02210 | |
(Address of principal executive offices) | (Zip Code) |
(617) (617) 368-5000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act.
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Class A Common Stock $0.01 per value | SAM | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☒ No☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
| ☒ |
| Accelerated filer |
| ☐ |
Non-accelerated filer |
| ☐ |
| Smaller reporting company |
| ☐ |
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ____
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.) Yes ☐ No ☒☒
Number of shares outstanding of each of the issuer’s classes of common stock, as of JulyApril 16, 2021:2022:
Class A Common Stock, $.01 par value |
| |
Class B Common Stock, $.01 par value |
| |
(Title of each class) | (Number of shares) |
THE BOSTON BEER COMPANY, INC.
FORM 10-Q
JuneMarch 26, 20212022
TABLE OF CONTENTS
PART I. | FINANCIAL INFORMATION | PAGE | |||
Item 1. | 3 | ||||
Condensed Consolidated Balance Sheets as of | 3 | ||||
4 | |||||
5 | |||||
6 | |||||
| |||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| |||
Item 3. |
| ||||
Item 4. |
| ||||
PART II. | OTHER INFORMATION | ||||
Item 1. |
| ||||
Item 1A. |
| ||||
Item 2. |
| ||||
Item 3. |
| ||||
Item 4. |
| ||||
Item 5. |
| ||||
Item 6. |
| ||||
|
EX-31.1 Section 302 CEO Certification
EX-31.2 Section 302 CFO Certification
EX-32.1 Section 906 CEO Certification
EX-32.2 Section 906 CFO Certification
2
PART I. FINANCIAL INFORMATION
Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
|
| March 26, |
|
| December 25, |
| ||
|
|
|
|
|
|
| ||
Assets |
|
|
|
|
|
| ||
Current Assets: |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 15,769 |
|
| $ | 26,853 |
|
Restricted Cash |
|
| 0 |
|
|
| 39,468 |
|
Accounts receivable |
|
| 101,884 |
|
|
| 55,022 |
|
Inventories |
|
| 162,592 |
|
|
| 149,118 |
|
Prepaid expenses and other current assets |
|
| 24,012 |
|
|
| 21,462 |
|
Income tax receivable |
|
| 52,276 |
|
|
| 53,418 |
|
Total current assets |
|
| 356,533 |
|
|
| 345,341 |
|
Property, plant and equipment, net |
|
| 668,876 |
|
|
| 664,815 |
|
Operating right-of-use assets |
|
| 50,780 |
|
|
| 52,774 |
|
Goodwill |
|
| 112,529 |
|
|
| 112,529 |
|
Intangible assets |
|
| 103,614 |
|
|
| 103,677 |
|
Third-party production prepayments |
|
| 80,573 |
|
|
| 88,294 |
|
Other assets |
|
| 17,092 |
|
|
| 19,354 |
|
Total assets |
| $ | 1,389,997 |
|
| $ | 1,386,784 |
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
| ||
Current Liabilities: |
|
|
|
|
|
| ||
Accounts payable |
| $ | 112,711 |
|
| $ | 85,920 |
|
Accrued expenses and other current liabilities |
|
| 124,457 |
|
|
| 161,552 |
|
Current operating lease liabilities |
|
| 8,366 |
|
|
| 7,634 |
|
Total current liabilities |
|
| 245,534 |
|
|
| 255,106 |
|
Deferred income taxes, net |
|
| 87,516 |
|
|
| 87,495 |
|
Line of credit |
|
| 15,000 |
|
|
| — |
|
Non-current operating lease liabilities |
|
| 51,689 |
|
|
| 53,849 |
|
Other liabilities |
|
| 5,334 |
|
|
| 6,925 |
|
Total liabilities |
|
| 405,073 |
|
|
| 403,375 |
|
Commitments and Contingencies (See Note I) |
|
|
|
|
|
| ||
Stockholders' Equity: |
|
|
|
|
|
| ||
Class A Common Stock, $.01 par value; 22,700,000 shares authorized; 10,214,612 and 10,183,801 issued and outstanding as of March 26, 2022 and |
|
| 102 |
|
|
| 102 |
|
Class B Common Stock, $.01 par value; 4,200,000 shares authorized; 2,068,000 |
|
| 21 |
|
|
| 21 |
|
Additional paid-in capital |
|
| 615,042 |
|
|
| 611,622 |
|
Accumulated other comprehensive loss |
|
| (144 | ) |
|
| (194 | ) |
Retained earnings |
|
| 369,903 |
|
|
| 371,858 |
|
Total stockholders' equity |
|
| 984,924 |
|
|
| 983,409 |
|
Total liabilities and stockholders' equity |
| $ | 1,389,997 |
|
| $ | 1,386,784 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
|
| June 26, 2021 |
|
| December 26, 2020 |
| ||
|
|
|
|
|
|
| ||
Assets |
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 102,953 |
|
| $ | 163,282 |
|
Accounts receivable |
|
| 113,458 |
|
|
| 78,358 |
|
Inventories |
|
| 247,550 |
|
|
| 130,910 |
|
Prepaid expenses and other current assets |
|
| 38,240 |
|
|
| 30,230 |
|
Income tax receivable |
|
| 12,896 |
|
|
| 10,393 |
|
Total current assets |
|
| 515,097 |
|
|
| 413,173 |
|
Property, plant and equipment, net |
|
| 664,200 |
|
|
| 623,083 |
|
Operating right-of-use assets |
|
| 56,490 |
|
|
| 58,483 |
|
Goodwill |
|
| 112,529 |
|
|
| 112,529 |
|
Intangible assets |
|
| 103,804 |
|
|
| 103,930 |
|
Third-party production prepayments |
|
| 88,683 |
|
|
| 56,843 |
|
Other assets |
|
| 20,149 |
|
|
| 10,784 |
|
Total assets |
| $ | 1,560,952 |
|
| $ | 1,378,825 |
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 201,043 |
|
| $ | 121,647 |
|
Accrued expenses and other current liabilities |
|
| 108,036 |
|
|
| 129,544 |
|
Current operating lease liabilities |
|
| 8,272 |
|
|
| 8,232 |
|
Total current liabilities |
|
| 317,351 |
|
|
| 259,423 |
|
Deferred income taxes, net |
|
| 92,681 |
|
|
| 92,665 |
|
Non-current operating lease liabilities |
|
| 57,040 |
|
|
| 59,171 |
|
Other liabilities |
|
| 9,745 |
|
|
| 10,599 |
|
Total liabilities |
|
| 476,817 |
|
|
| 421,858 |
|
Commitments and Contingencies (See Note J) |
|
|
|
|
|
|
|
|
Stockholders' Equity: |
|
|
|
|
|
|
|
|
Class A Common Stock, $.01 par value; 22,700,000 shares authorized; 10,165,649 and 10,004,681 issued and outstanding as of June 26, 2021 and December 26, 2020, respectively |
|
| 102 |
|
|
| 100 |
|
Class B Common Stock, $.01 par value; 4,200,000 shares authorized; 2,078,000 and 2,177,983 issued and outstanding as of June 26, 2021 and December 26, 2020, respectively |
|
| 21 |
|
|
| 22 |
|
Additional paid-in capital |
|
| 602,163 |
|
|
| 599,737 |
|
Accumulated other comprehensive loss |
|
| (217 | ) |
|
| (252 | ) |
Retained earnings |
|
| 482,066 |
|
|
| 357,360 |
|
Total stockholders' equity |
|
| 1,084,135 |
|
|
| 956,967 |
|
Total liabilities and stockholders' equity |
| $ | 1,560,952 |
|
| $ | 1,378,825 |
|
3
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS INCOME ANDOF COMPREHENSIVE INCOMEOPERATIONS
(in thousands, except per share data)
(unaudited)
|
| Thirteen weeks ended |
| |||||
|
| March 26, |
|
| March 27 |
| ||
|
|
|
|
|
|
| ||
Revenue |
| $ | 457,288 |
|
| 581, 709 |
| |
Less excise taxes |
|
| 27,175 |
|
|
| 36,629 |
|
Net revenue |
|
| 430,113 |
|
|
| 545,080 |
|
Cost of goods sold |
|
| 257,161 |
|
|
| 295,450 |
|
Gross profit |
|
| 172,952 |
|
|
| 249,630 |
|
Operating expenses: |
|
|
|
|
|
| ||
Advertising, promotional and selling expenses |
|
| 130,615 |
|
|
| 140,859 |
|
General and administrative expenses |
|
| 39,698 |
|
|
| 31,946 |
|
Contract termination costs and other |
|
| 4,752 |
|
|
| 0 |
|
Impairment of assets |
|
| 41 |
|
|
| 227 |
|
Total operating expenses |
|
| 175,106 |
|
|
| 173,032 |
|
Operating (loss) income |
|
| (2,154 | ) |
|
| 76,598 |
|
Other expense: |
|
|
|
|
|
| ||
Interest expense |
|
| (33 | ) |
|
| (29 | ) |
Other expense |
|
| (100 | ) |
|
| (6 | ) |
Total other expense |
|
| (133 | ) |
|
| (35 | ) |
(Loss) income before income tax (benefit) provision |
|
| (2,287 | ) |
|
| 76,563 |
|
Income tax (benefit) provision |
|
| (332 | ) |
|
| 10,998 |
|
Net (loss) income |
| $ | (1,955 | ) |
| $ | 65,565 |
|
Net (loss) income per common share - basic |
| $ | (0.16 | ) |
| $ | 5.34 |
|
Net (loss) income per common share - diluted |
| $ | (0.16 | ) |
| $ | 5.26 |
|
Weighted-average number of common shares - basic |
|
| 12,300 |
|
|
| 12,271 |
|
Weighted-average number of common shares - diluted |
|
| 12,300 |
|
|
| 12,457 |
|
Net (loss) income |
| $ | (1,955 | ) |
| $ | 65,565 |
|
Other comprehensive (loss) income: |
|
|
|
|
|
| ||
Foreign currency translation adjustment |
|
| 50 |
|
|
| 20 |
|
Total other comprehensive (loss) income, net of tax |
|
| 50 |
|
|
| 20 |
|
Comprehensive (loss) income |
| $ | (1,905 | ) |
| $ | 65,585 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
|
| Thirteen weeks ended |
|
| Twenty-six weeks ended |
| ||||||||||
|
| June 26, 2021 |
|
| June 27, 2020 |
|
| June 26, 2021 |
|
| June 27, 2020 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenue |
| $ | 641,314 |
|
| $ | 481,089 |
|
| $ | 1,223,023 |
|
| $ | 833,314 |
|
Less excise taxes |
|
| 38,509 |
|
|
| 28,951 |
|
|
| 75,138 |
|
|
| 50,611 |
|
Net revenue |
|
| 602,805 |
|
|
| 452,138 |
|
|
| 1,147,885 |
|
|
| 782,703 |
|
Cost of goods sold |
|
| 327,116 |
|
|
| 242,514 |
|
|
| 622,566 |
|
|
| 425,106 |
|
Gross profit |
|
| 275,689 |
|
|
| 209,624 |
|
|
| 525,319 |
|
|
| 357,597 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising, promotional and selling expenses |
|
| 161,620 |
|
|
| 100,336 |
|
|
| 302,479 |
|
|
| 198,227 |
|
General and administrative expenses |
|
| 32,960 |
|
|
| 29,685 |
|
|
| 64,906 |
|
|
| 56,714 |
|
Impairment of assets |
|
| 1,004 |
|
|
| 834 |
|
|
| 1,231 |
|
|
| 2,355 |
|
Total operating expenses |
|
| 195,584 |
|
|
| 130,855 |
|
|
| 368,616 |
|
|
| 257,296 |
|
Operating income |
|
| 80,105 |
|
|
| 78,769 |
|
|
| 156,703 |
|
|
| 100,301 |
|
Other expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| (29 | ) |
|
| (212 | ) |
|
| (58 | ) |
|
| (149 | ) |
Other income (expense), net |
|
| 8 |
|
|
| (52 | ) |
|
| 2 |
|
|
| (412 | ) |
Total other expense, net |
|
| (21 | ) |
|
| (264 | ) |
|
| (56 | ) |
|
| (561 | ) |
Income before income tax provision |
|
| 80,084 |
|
|
| 78,505 |
|
|
| 156,647 |
|
|
| 99,740 |
|
Income tax provision |
|
| 20,889 |
|
|
| 18,364 |
|
|
| 31,887 |
|
|
| 21,365 |
|
Net income |
| $ | 59,195 |
|
| $ | 60,141 |
|
| $ | 124,760 |
|
| $ | 78,375 |
|
Net income per common share - basic |
| $ | 4.82 |
|
| $ | 4.93 |
|
| $ | 10.16 |
|
| $ | 6.44 |
|
Net income per common share - diluted |
| $ | 4.75 |
|
| $ | 4.88 |
|
| $ | 10.01 |
|
| $ | 6.37 |
|
Weighted-average number of common shares - basic |
|
| 12,283 |
|
|
| 12,196 |
|
|
| 12,277 |
|
|
| 12,177 |
|
Weighted-average number of common shares - diluted |
|
| 12,465 |
|
|
| 12,258 |
|
|
| 12,461 |
|
|
| 12,221 |
|
Net income |
| $ | 59,195 |
|
| $ | 60,141 |
|
| $ | 124,760 |
|
| $ | 78,375 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
| 15 |
|
|
| (13 | ) |
|
| 35 |
|
|
| (71 | ) |
Comprehensive income |
| $ | 59,210 |
|
| $ | 60,128 |
|
| $ | 124,795 |
|
| $ | 78,304 |
|
4
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
|
| Thirteen weeks ended |
| |||||
|
| March 26, |
|
| March 27 |
| ||
Cash flows (used in) provided by operating activities: |
|
|
|
|
|
| ||
Net (loss) income |
| $ | (1,955 | ) |
| $ | 65,565 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
| ||
Depreciation and amortization |
|
| 19,634 |
|
|
| 16,996 |
|
Impairment of assets |
|
| 41 |
|
|
| 227 |
|
Loss (gain) on disposal of property, plant and equipment |
|
| 21 |
|
|
| (36 | ) |
Change in right-of-use assets |
|
| 1,994 |
|
|
| 1,965 |
|
Other non-cash expense (income) |
|
| 45 |
|
|
| (48 | ) |
Stock-based compensation expense |
|
| 2,922 |
|
|
| 4,957 |
|
Deferred income taxes |
|
| 21 |
|
|
| 4,565 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
| ||
Accounts receivable |
|
| (46,973 | ) |
|
| (26,723 | ) |
Inventories |
|
| (11,205 | ) |
|
| (30,581 | ) |
Prepaid expenses, income tax receivable, other current assets and other assets |
|
| (937 | ) |
|
| (14,369 | ) |
Third-party production prepayments |
|
| 7,721 |
|
|
| (21,584 | ) |
Accounts payable |
|
| 26,799 |
|
|
| 36,912 |
|
Accrued expenses, other current liabilities and other liabilities |
|
| (37,706 | ) |
|
| (16,019 | ) |
Change in operating lease liabilities |
|
| (1,428 | ) |
|
| (2,020 | ) |
Net cash (used in) provided by operating activities |
|
| (41,006 | ) |
|
| 19,807 |
|
Cash flows used in investing activities: |
|
|
|
|
|
| ||
Purchases of property, plant and equipment |
|
| (23,767 | ) |
|
| (39,278 | ) |
Proceeds from disposal of property, plant and equipment |
|
| 66 |
|
|
| 320 |
|
Other investing activities |
|
| 0 |
|
|
| 145 |
|
Net cash used in investing activities |
|
| (23,701 | ) |
|
| (38,813 | ) |
Cash flows provided by financing activities: |
|
|
|
|
|
| ||
Proceeds from exercise of stock options and sale of investment shares |
|
| 2,010 |
|
|
| 6,768 |
|
Net cash paid on note payable and finance leases |
|
| (475 | ) |
|
| (435 | ) |
Line of credit borrowings |
|
| 30,000 |
|
|
| 0 |
|
Line of credit repayments |
|
| (15,000 | ) |
|
| 0 |
|
Payment of tax withholding on stock-based payment awards and investment shares |
|
| (2,380 | ) |
|
| (5,951 | ) |
Net cash provided by financing activities |
|
| 14,155 |
|
|
| 382 |
|
Change in cash and cash equivalents and restricted cash |
|
| (50,552 | ) |
|
| (18,624 | ) |
Cash and cash equivalents and restricted cash at beginning of year |
|
| 66,321 |
|
|
| 163,282 |
|
Cash and cash equivalents at end of period |
| $ | 15,769 |
|
| $ | 144,658 |
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
| ||
Income taxes refunded (paid), net |
| $ | 1,497 |
|
| $ | (4 | ) |
Cash paid for amounts included in measurement of lease liabilities |
|
|
|
|
|
| ||
Operating cash flows from operating leases |
| $ | 1,951 |
|
| $ | 2,602 |
|
Operating cash flows from finance leases |
| $ | 23 |
|
| $ | 34 |
|
Financing cash flows from finance leases |
| $ | 400 |
|
| $ | 364 |
|
Change in purchase of property, plant and equipment in accounts payable and |
| $ | 73 |
|
| $ | (8,997 | ) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
|
| Twenty-six weeks ended |
| |||||
|
| June 26, 2021 |
|
| June 27, 2020 |
| ||
Cash flows provided by operating activities: |
|
|
|
|
|
|
|
|
Net income |
| $ | 124,760 |
|
| $ | 78,375 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 34,174 |
|
|
| 32,584 |
|
Impairment of assets |
|
| 1,231 |
|
|
| 2,355 |
|
(Gain) loss on disposal of property, plant and equipment |
|
| (150 | ) |
|
| 39 |
|
Change in right-of-use assets |
|
| 3,954 |
|
|
| 3,649 |
|
Other non-cash (income) expense |
|
| (98 | ) |
|
| 375 |
|
Stock-based compensation expense |
|
| 10,291 |
|
|
| 7,103 |
|
Deferred income taxes |
|
| (39 | ) |
|
| 12,407 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| (35,075 | ) |
|
| (45,326 | ) |
Inventories |
|
| (120,675 | ) |
|
| (12,795 | ) |
Prepaid expenses, income tax receivable and other current assets |
|
| (25,329 | ) |
|
| (3,347 | ) |
Third-party production prepayments |
|
| (17,024 | ) |
|
| (11,415 | ) |
Other assets |
|
| (5,475 | ) |
|
| (253 | ) |
Accounts payable |
|
| 78,801 |
|
|
| 19,560 |
|
Accrued expenses and other current liabilities |
|
| (14,427 | ) |
|
| 20,803 |
|
Change in operating lease liabilities |
|
| (4,052 | ) |
|
| (80 | ) |
Other liabilities |
|
| 120 |
|
|
| (23 | ) |
Net cash provided by operating activities |
|
| 30,987 |
|
|
| 104,011 |
|
Cash flows used in investing activities: |
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
| (83,521 | ) |
|
| (60,072 | ) |
Proceeds from disposal of property, plant and equipment |
|
| 420 |
|
|
| 45 |
|
Other investing activities |
|
| 145 |
|
|
| 260 |
|
Net cash used in investing activities |
|
| (82,956 | ) |
|
| (59,767 | ) |
Cash flows (used in) provided by financing activities: |
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options and sale of investment shares |
|
| 7,944 |
|
|
| 8,010 |
|
Net cash paid on note payable and finance leases |
|
| (795 | ) |
|
| (649 | ) |
Cash borrowed on line of credit |
|
| — |
|
|
| 100,000 |
|
Cash paid on line of credit |
|
| — |
|
|
| (100,000 | ) |
Payment of tax withholding on stock-based payment awards and investment shares |
|
| (15,509 | ) |
|
| (1,559 | ) |
Net cash (used in) provided by financing activities |
|
| (8,360 | ) |
|
| 5,802 |
|
Change in cash and cash equivalents |
|
| (60,329 | ) |
|
| 50,046 |
|
Cash and cash equivalents at beginning of year |
|
| 163,282 |
|
|
| 36,670 |
|
Cash and cash equivalents at end of period |
| $ | 102,953 |
|
| $ | 86,716 |
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
Income taxes paid |
| $ | 34,395 |
|
| $ | 2,929 |
|
Cash paid for amounts included in measurement of lease liabilities |
|
|
|
|
|
|
|
|
Operating cash flows from operating leases |
| $ | 5,212 |
|
| $ | 4,532 |
|
Operating cash flows from finance leases |
| $ | 66 |
|
| $ | 75 |
|
Financing cash flows from finance leases |
| $ | 724 |
|
| $ | 581 |
|
Right-of-use-assets obtained in exchange for operating lease obligations |
| $ | 1,961 |
|
| $ | 11,311 |
|
Right-of-use-assets obtained in exchange for finance lease obligations |
| $ | - |
|
| $ | 3,856 |
|
Change in purchase of property, plant and equipment in accounts payable and accrued expenses |
| $ | (6,928 | ) |
| $ | 4,920 |
|
5
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the thirteen ended March 26, 2022 and twenty-six weeks ended June 26,March 27, 2021 and June 27, 2020
(in thousands)
(unaudited)
|
|
|
|
| Class A |
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
| ||||||||
|
| Class A |
|
| Common |
|
| Class B |
|
| Class B |
|
| Additional |
|
| Other |
|
|
|
|
| Total |
| ||||||||
|
| Common |
|
| Stock, |
|
| Common |
|
| Common |
|
| Paid-in |
|
| Comprehensive |
|
| Retained |
|
| Stockholders’ |
| ||||||||
|
| Shares |
|
| Par |
|
| Shares |
|
| Stock, Par |
|
| Capital |
|
| Loss |
|
| Earnings |
|
| Equity |
| ||||||||
Balance at December 25, 2021 |
|
| 10,184 |
|
| $ | 102 |
|
|
| 2,068 |
|
| $ | 21 |
|
| $ | 611,622 |
|
| $ | (194 | ) |
| $ | 371,858 |
|
| $ | 983,409 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,955 | ) |
|
| (1,955 | ) | ||||||
Stock options exercised and restricted |
|
| 31 |
|
|
| — |
|
|
|
|
|
|
|
|
| 498 |
|
|
|
|
|
|
|
|
| 498 |
| ||||
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2,922 |
|
|
|
|
|
|
|
|
| 2,922 |
| ||||||
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 50 |
|
|
|
|
|
| 50 |
| ||||||
Balance at March 26, 2022 |
|
| 10,215 |
|
| $ | 102 |
|
|
| 2,068 |
|
| $ | 21 |
|
| $ | 615,042 |
|
| $ | (144 | ) |
| $ | 369,903 |
|
| $ | 984,924 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
| �� |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
| Class A |
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
| ||||||||
|
| Class A |
|
| Common |
|
| Class B |
|
| Class B |
|
| Additional |
|
| Other |
|
|
|
|
| Total |
| ||||||||
|
| Common |
|
| Stock, |
|
| Common |
|
| Common |
|
| Paid-in |
|
| Comprehensive |
|
| Retained |
|
| Stockholders’ |
| ||||||||
|
| Shares |
|
| Par |
|
| Shares |
|
| Stock, Par |
|
| Capital |
|
| Loss |
|
| Earnings |
|
| Equity |
| ||||||||
Balance at December 26, 2020 |
|
| 10,005 |
|
| $ | 100 |
|
|
| 2,178 |
|
| $ | 22 |
|
| $ | 599,737 |
|
| $ | (252 | ) |
| $ | 357,360 |
|
| $ | 956,967 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 65,565 |
|
|
| 65,565 |
| ||||||
Stock options exercised and restricted |
|
| 48 |
|
|
| 1 |
|
|
|
|
|
|
|
|
| 1,268 |
|
|
|
|
|
|
|
|
| 1,269 |
| ||||
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 4,957 |
|
|
|
|
|
|
|
|
| 4,957 |
| ||||||
Adoption of ASU 2019-12, Simplifying the accounting for income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (54 | ) |
|
| (54 | ) | ||||||
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 20 |
|
|
|
|
|
| 20 |
| ||||||
Balance at March 27, 2021 |
|
| 10,053 |
|
| $ | 101 |
|
|
| 2,178 |
|
| $ | 22 |
|
| $ | 605,962 |
|
| $ | (232 | ) |
| $ | 422,871 |
|
| $ | 1,028,724 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
|
|
|
|
|
| Class A |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
| ||
|
| Class A |
|
| Common |
|
| Class B |
|
| Class B |
|
| Additional |
|
| Other |
|
|
|
|
|
| Total |
| |||||||
|
| Common |
|
| Stock, |
|
| Common |
|
| Common |
|
| Paid-in |
|
| Comprehensive |
|
| Retained |
|
| Stockholders’ |
| ||||||||
|
| Shares |
|
| Par |
|
| Shares |
|
| Stock, Par |
|
| Capital |
|
| Loss |
|
| Earnings |
|
| Equity |
| ||||||||
Balance at December 26, 2020 |
|
| 10,005 |
|
| $ | 100 |
|
|
| 2,178 |
|
| $ | 22 |
|
| $ | 599,737 |
|
| $ | (252 | ) |
| $ | 357,360 |
|
| $ | 956,967 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 65,565 |
|
|
| 65,565 |
|
Stock options exercised and restricted shares activities |
|
| 48 |
|
|
| 1 |
|
|
|
|
|
|
|
|
|
|
| 1,268 |
|
|
|
|
|
|
|
|
|
|
| 1,269 |
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 4,957 |
|
|
|
|
|
|
|
|
|
|
| 4,957 |
|
Adoption of ASU 2019-12, Simplifying the accounting for income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (54 | ) |
|
| (54 | ) |
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 20 |
|
|
|
|
|
|
| 20 |
|
Balance at March 27, 2021 |
|
| 10,053 |
|
| $ | 101 |
|
|
| 2,178 |
|
| $ | 22 |
|
| $ | 605,962 |
|
| $ | (232 | ) |
| $ | 422,871 |
|
| $ | 1,028,724 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 59,195 |
|
|
| 59,195 |
|
Stock options exercised and restricted shares activities |
|
| 13 |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
| (9,133 | ) |
|
|
|
|
|
|
|
|
|
| (9,133 | ) |
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 5,334 |
|
|
|
|
|
|
|
|
|
|
| 5,334 |
|
Conversion from Class B to Class A |
|
| 100 |
|
|
| 1 |
|
|
| (100 | ) |
|
| (1 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 15 |
|
|
|
|
|
|
| 15 |
|
Balance at June 26, 2021 |
|
| 10,166 |
|
| $ | 102 |
|
|
| 2,078 |
|
| $ | 21 |
|
| $ | 602,163 |
|
| $ | (217 | ) |
| $ | 482,066 |
|
| $ | 1,084,135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Class A |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
| ||
|
| Class A |
|
| Common |
|
| Class B |
|
| Class B |
|
| Additional |
|
| Other |
|
|
|
|
|
| Total |
| |||||||
|
| Common |
|
| Stock, |
|
| Common |
|
| Common |
|
| Paid-in |
|
| Comprehensive |
|
| Retained |
|
| Stockholders’ |
| ||||||||
|
| Shares |
|
| Par |
|
| Shares |
|
| Stock, Par |
|
| Capital |
|
| Loss |
|
| Earnings |
|
| Equity |
| ||||||||
Balance at December 28, 2019 |
|
| 9,371 |
|
| $ | 94 |
|
|
| 2,673 |
|
| $ | 27 |
|
| $ | 571,784 |
|
| $ | (1,669 | ) |
| $ | 165,400 |
|
| $ | 735,636 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 18,234 |
|
|
| 18,234 |
|
Stock options exercised and restricted shares activities |
|
| 38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,858 |
|
|
|
|
|
|
|
|
|
|
| 1,858 |
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2,566 |
|
|
|
|
|
|
|
|
|
|
| 2,566 |
|
Conversion from Class B to Class A |
|
| 150 |
|
|
| 2 |
|
|
| (150 | ) |
|
| (2 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (58 | ) |
|
|
|
|
|
| (58 | ) |
Balance at March 28, 2020 |
|
| 9,559 |
|
| $ | 96 |
|
|
| 2,523 |
|
| $ | 25 |
|
| $ | 576,208 |
|
| $ | (1,727 | ) |
| $ | 183,634 |
|
| $ | 758,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 60,141 |
|
|
| 60,141 |
|
Stock options exercised and restricted shares activities |
|
| 61 |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
| 4,582 |
|
|
|
|
|
|
|
|
|
|
| 4,643 |
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 4,537 |
|
|
|
|
|
|
|
|
|
|
| 4,537 |
|
Conversion from Class B to Class A |
|
| 215 |
|
|
| 2 |
|
|
| (215 | ) |
|
| (2 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (13 | ) |
|
|
|
|
|
| (13 | ) |
Balance at June 27, 2020 |
|
| 9,835 |
|
| $ | 98 |
|
|
| 2,308 |
|
| $ | 23 |
|
| $ | 585,327 |
|
| $ | (1,740 | ) |
| $ | 243,775 |
|
| $ | 827,544 |
|
6
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A.Organization and Basis of Presentation
The Boston Beer Company, Inc. and certain subsidiaries (the “Company”) are engaged in the business of selling alcohol beverages throughout the United States and in selected international markets, under the trade names “The Boston Beer Company®”, “Twisted Tea Brewing Company®”, “Hard Seltzer Beverage Company”, “Angry Orchard® Cider Company”, “Dogfish Head® Craft Brewery”, “Dogfish Head® Craft Distillery”Head Distilling Co.”, “Angel City® Brewing Company”, “Coney Island® Brewing Company”, "Green Rebel Brewing Co." and “American Fermentation Company”.“Bevy Long Drink Co.”
The accompanying unaudited condensed consolidated balance sheet as of JuneMarch 26, 2021,2022, and the unaudited condensed consolidated statements of income and comprehensive income,operations, stockholders’ equity, and cash flows for the interim periods ended JuneMarch 26, 20212022 and JuneMarch 27, 20202021 have been prepared by the Company in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnotes normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. All intercompany accounts and transactions have been eliminated. These condensed consolidated financial statements should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 26, 2020.25, 2021.
In the opinion of the Company’s management, the Company’s unaudited condensed consolidated balance sheet as of JuneMarch 26, 20212022 and the results of its condensed consolidated comprehensive operations, stockholders’ equity, and cash flows for the interim periods ended JuneMarch 26, 20212022 and JuneMarch 27, 2020,2021, reflect all adjustments (consisting only of normal and recurring adjustments) necessary to present fairly the results of the interim periods presented. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year. Reclassifications have been made to the prior year’s condensed consolidated financial statements to conform to the current year’s presentation. Among the reclassifications is the separate presentation of third-party production prepayments.
B.COVID-19 Pandemic
As the COVID-19 pandemic slowly winds down, the Company’s primary focus continues to be on operating its breweries and business safely and working hard to meet customer demand. The Company is very proud of the passion, creativity and commitment to community that coworkers demonstrated during this pandemic. The Company began seeing the impact of the COVID-19 pandemic on its business in early March 2020. The direct financial impact of the pandemic primarily included significantly reduced keg demand from the on-premise channel and higher labor and safety-related costs at the Company’s breweries. In addition to these direct financial impacts, COVID-19 related safety measures resulted in a reduction of brewery productivity. This has shifted more volume to third-party breweries, which increased production costs and negatively impacted gross margin rates. In the first half of 2020, the Company recorded COVID-19 related pre-tax reductions in net revenue and increases in other costs that total $14.1 million of which $10.0 million was recorded in the first quarter and $4.1 million was recorded in the second quarter. The total amount consists of a $5.8 million reduction in net revenue for estimated keg returns from distributors and retailers and $8.3 million for inventory write-downs for obsolescence, increased costs for health and safety, increased salaries and benefits and other COVID-19 related direct costs, of which $5.6 million are recorded in cost of goods sold and $2.7 million are recorded in operating expenses. In 2021 and going forward, the Company will not report COVID-19 related direct costs separately as they are viewed to be a normal part of operations.
7
C. Goodwill and Intangible Assets
There were0 changes in the carrying value of goodwill during the thirteen or twenty-six weeks ended June 26, 2021 and June 27, 2020.
The Company’s intangible assets as of June 26, 2021 and December 26, 2020 were as follows:
|
|
|
|
|
| As of June 26, 2021 |
|
| As of December 26, 2020 |
| ||||||||||||||||||
|
| Estimated Useful |
|
| Gross Carrying |
|
| Accumulated |
|
| Net Book |
|
| Gross Carrying |
|
| Accumulated |
|
| Net Book |
| |||||||
|
| Life (Years) |
|
| Value |
|
| Amortization |
|
| Value |
|
| Value |
|
| Amortization |
|
| Value |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Customer Relationships |
|
| 15 |
|
| $ | 3,800 |
|
| $ | (506 | ) |
| $ | 3,294 |
|
| $ | 3,800 |
|
| $ | (380 | ) |
| $ | 3,420 |
|
Trade Names |
| Indefinite |
|
|
| 100,510 |
|
|
| — |
|
|
| 100,510 |
|
|
| 100,510 |
|
|
| — |
|
|
| 100,510 |
| |
Total intangible assets |
|
|
|
|
| $ | 104,310 |
|
| $ | (506 | ) |
| $ | 103,804 |
|
| $ | 104,310 |
|
| $ | (380 | ) |
| $ | 103,930 |
|
The Company acquired intangible assets in fiscal year 2019 that consist of $98.5 million for the value of the Dogfish Head brand name and $3.8 million for the value of customer relationships. The customer relationship intangible is amortized on a straight-line basis over a 15 year useful life. Amortization expense in the thirteen and twenty-six weeks ended June 26, 2021 was approximately $63,000 and $127,000, respectively. The Company expects to record amortization expense as follows over the remaining current year and the five subsequent years:
Fiscal Year |
| Amount (in thousands) |
| |
Remainder of 2021 |
| $ | 127 |
|
2022 |
|
| 253 |
|
2023 |
|
| 253 |
|
2024 |
|
| 253 |
|
2025 |
|
| 253 |
|
2026 |
|
| 253 |
|
D.B. Recent Accounting Pronouncements
Accounting Pronouncements Recently Adopted
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The standard includes multiple key provisions, including removal of certain exceptions to ASC 740, Income Taxes, and simplification in several other areas such as accounting for a franchise tax (or similar tax) that is partially based on income. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company adopted the standard in the first quarter of fiscal 2021 and recorded an adjustment of $0.1$0.1 million to retained earnings.
.
E. C. Revenue Recognition
During the twenty-sixthirteen weeks ended JuneMarch 26, 2022 and March 27, 2021, approximately 96% and June 27, 2020, approximately 95%97%, respectively, of the Company’s revenue was from shipments of its products to domestic distributors, 4% from shipmentsdistributors. Shipments to international distributors, primarily located in Canada, made up approximately 3% of the Company's revenue for the thirteen weeks ended March 26, 2022 and less than 1%March 27, 2021. Approximately 1% of the Company's revenue was from retail beer, cider, and merchandise sales at the Company’s retail locations. locations during the thirteen weeks ended March 26, 2022, compared to less than 1% for the thirteen weeks ended March 27, 2021.
The Company recognizes revenue when obligations under the terms of a contract with its customer are satisfied; generally, this occurs with the transfer of control of its products. Revenue is measured as the amount of consideration expected to be received in exchange for transferring products. If the conditions for revenue recognition are not met, the Company defers the revenue until all conditions are met. As of JuneMarch 26, 20212022 and December 26, 2020,25, 2021, the Company has deferred $17.7$14.4 million and $13.9$8.0 million, respectively, in revenue related to product shipped prior to these dates. These amounts are included in accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheets.
87
Customer promotional discount programs are entered into by the Company with distributors for certain periods of time. The reimbursements for discounts to distributors are recorded as reductions to net revenue and were $18.4$9.9 million and $41.8$23.4 million for the thirteen and twenty-six weeks ended JuneMarch 26, 2021, respectively,2022 and were $20.4 million and $28.6 million for the thirteen and twenty-six weeks ended JuneMarch 27, 2020,2021, respectively. The agreed-upon discount rates are applied to certain distributors' sales to retailers, based on volume metrics, in order to determine the total discounted amount. The computation of the discount allowance requires that management make certain estimates and assumptions that affect the timing and amounts of revenue and liabilities recorded. Actual promotional discounts owed and paid have historically been in line with allowances recorded by the Company; however, the amounts could differ from the estimated allowance.
Customer programs and incentives are a common practice in the alcohol beverage industry. Amounts paid in connection with customer programs and incentives are recorded as reductions to net revenue or as advertising, promotional and selling expenses, based on the nature of the expenditure. Customer incentives and other payments made to distributors are primarily based upon performance of certain marketing and advertising activities. Depending on applicable state laws and regulations, these activities promoting the Company's products may include, but are not limited to point-of-sale and merchandise placement, samples, product displays, promotional programs at retail locations and meals, travel and entertainment. Amounts paid to customers in connection with these programs that were recorded as reductions to revenue or as advertising, promotional and selling expenses for the thirteen and twenty-six weeks ended JuneMarch 26, 2022 and March 27, 2021 were $13.2$19.0 million and $23.3$33.5 million, respectively. For the thirteen and twenty-six weeks ended June 26,March 26,2022 and March 27, 2021, the Company recorded certain of these costs in the total amounts of $10.9$6.7 million and $20.1 million, respectively, as reductions to net revenue. Amounts paid to customers in connection with these programs for the thirteen and twenty-six weeks ended June 27, 2020 were $5.0 million and $9.5 million, respectively. For the thirteen and twenty-six weeks ended June 27, 2020, the Company recorded certain of these costs in the total amount of $4.8 million and $9.0$9.2 million, respectively, as reductions to net revenue. Costs recognized in net revenues include, but are not limited to, promotional discounts, sales incentives and certain other promotional activities. Costs recognized in advertising, promotional and selling expenses include point of sale materials, samples and media advertising expenditures in local markets. These costs are recorded as incurred, generally when invoices are received; however certain estimates are required at the period end. Estimates are based on historical and projected experience for each type of program or customer and have historically been in line with actual costs incurred.
F. D. Inventories
Inventories consist of raw materials, work in process and finished goods. Raw materials, which principally consist of hops, flavorings, apple juice, other brewing materials and packaging, are stated at the lower of cost, determined on the first-in, first-out basis, or net realizable value. The Company’s goal is to maintain on hand a supply of at least one year for essential hop varieties, in order to limit the risk of an unexpected reduction in supply. Inventories are generally classified as current assets. The Company classifies hops inventory in excess of two years of forecasted usage in other long-term assets. The cost elements of work in process and finished goods inventory consist of raw materials, direct labor and manufacturing overhead. Inventories consist of the following:
|
| March 26, |
|
| December 25, |
| ||
|
| (in thousands) |
| |||||
Current inventory: |
|
|
|
|
|
| ||
Raw materials |
| $ | 86,337 |
|
| $ | 78,545 |
|
Work in process |
|
| 19,941 |
|
|
| 17,764 |
|
Finished goods |
|
| 56,314 |
|
|
| 52,809 |
|
Total current inventory |
|
| 162,592 |
|
|
| 149,118 |
|
Long term inventory |
|
| 10,386 |
|
|
| 12,655 |
|
Total inventory |
| $ | 172,978 |
|
| $ | 161,773 |
|
As of March 26, 2022 and December 25, 2021, the Company has recorded inventory obsolescence reserves of $26.3 million and $43.1 million, respectively. The reduction in the inventory obsolescence reserves during the thirteen weeks ended March 26, 2022 was primarily driven by the destruction of inventory that was fully reserved as of December 25, 2021.
E. Third-Party Production Prepayments
|
| June 26, 2021 |
|
| December 26, 2020 |
| ||
|
| (in thousands) |
| |||||
Current inventory: |
|
|
|
|
|
|
|
|
Raw materials |
| $ | 106,365 |
|
| $ | 69,272 |
|
Work in process |
|
| 18,848 |
|
|
| 16,846 |
|
Finished goods |
|
| 122,337 |
|
|
| 44,792 |
|
Total current inventory |
|
| 247,550 |
|
|
| 130,910 |
|
Long term inventory |
|
| 13,674 |
|
|
| 9,639 |
|
Total inventory |
| $ | 261,224 |
|
| $ | 140,549 |
|
G.Third-party production prepayments
During the twenty-sixthirteen weeks ended JuneMarch 26, 2022 and March 27, 2021, the Company brewed and packaged approximately 54%66% and 57%, respectively, 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 generally supplies raw materials and packaging to those brewing companies, and incurs conversion fees for labor at the time the liquid is produced and packaged. The Company has made
9
payments for capital improvements at these third-party brewing facilities that it expenses over the period of the contracts.
As a result of June 26,lower than anticipated demand for certain Truly brand styles and packages, the Company has adjusted its volume plans for production at certain third-party facilities beginning in the third quarter of 2021 and Decemberinto 2022. The Company has terminated
8
relationships with some of its third-party production suppliers and incurred contract termination costs in doing so. During the thirteen weeks ended March 26, 2020 total2022 the Company recorded $4.8 million of contract termination costs relating to the termination of a third-party production contract.
During fiscal 2021, the Company amended its master transaction agreement with City Brewing Company, LLC ("City Brewing") to ensure access to capacity at a new location and continued access at certain existing locations. The amendment became effective during the second quarter of fiscal year 2021, upon the closing of the purchase of the new location by City Brewing. As part of the master transaction agreement, the Company paid $10.0 million for capital improvements at the new location during the third quarter of fiscal year 2021 and an additional $17.9 million to ensure access to capacity during the fourth quarter of 2021. The agreement additionally includes monthly shortfall fees beginning January 1, 2023.
Total third-party production prepayments were $80.6 million and $88.3 million as follows:
|
| June 26, 2021 |
|
| December 26, 2020 |
| ||
|
| (in thousands) |
| |||||
Prepaid expenses and other current assets |
| $ | - |
|
| $ | 14,816 |
|
Third-party production prepayments |
|
| 88,683 |
|
|
| 56,843 |
|
Total third-party production prepayments |
| $ | 88,683 |
|
| $ | 71,659 |
|
Effectiveof March 27,26, 2022 and December 25, 2021, the Company began classifying third-party production prepayments solely as non-current assets and reclassed the $14.8 million of third-party production prepayments at December 26, 2020 from current assets to non-current assets.respectively. The Company will expense the total prepaid amount of $88.7$80.6 million, all of which relates to the master transaction agreement described above and other agreements with City Brewing, as a component of cost of goods sold over the contractual period ending December 31, 2025.
During the twenty-six weeks ended June 26, 2021, the Company entered into a master transaction agreement with one of its existing brewing services providers to ensure access to capacity at a new location and continued access at certain existing locations. Upon the closing of the purchase of the new location by the third-party brewing services provider, the agreement became effective during the thirteen weeks ended June 26, 2021. As part of the master transaction agreement, the Company paid $10.0 million for capital improvements for the new location, which is included within the third-party production prepayments balance as of June 26, 2021. The Company is required to pay an additional $17.9 million to ensure access to capacity once certain conditions are met. The agreement additionally includes monthly shortfall fees beginning January 1, 2023.
During the thirteen weeks ended June 26, 2021, as a result of lower than anticipated demand for certain Truly brand styles and packages, the Company adjusted its volume plans for production at certain third-party facilities. This adjustment is expected to result in shortfall fees related to one facility of $0.6 million of which has been expensed during the thirteen weeks ended June 26, 2021. Based onAt current production volume projections, the Company believes that it will meet all otherfall short of its future annual volume commitments under its third partyat certain third-party production arrangementsfacilities, including those that are part of the master transaction agreement described above, and will not incur any additional shortfall fees. If future volume projections are further reduced-below the minimum annual volume commitments and the Company estimates that shortfall fees will be incurred, theThe Company will expense the estimated shortfall fees induring the contractual period when incurring the shortfallsuch fees becomes probable.are incurred as a component of cost of goods sold. As of JuneMarch 26, 2021,2022, if volume for the remaining term of the production arrangements was zero, the contractual shortfall fees would total $63.4approximately $198 million over the duration of the contracts which have expiration dates through December 31, 2026.2031. At current volume projections the Company anticipates that it will recognize approximately $40 million of shortfall fees and expects to record those expenses as follows:
|
| Expected Shortfall Fees to be Incurred |
| |
|
| (in millions) |
| |
Remainder of 2022 |
| $ | 6 |
|
2023 |
|
| 16 |
|
2024 |
|
| 12 |
|
2025 |
|
| 6 |
|
Total shortfall fees expected to be incurred |
| $ | 40 |
|
F. Goodwill and Intangible Assets
H.NaN impairment of goodwill was recorded in any period.
The Company’s intangible assets as of March 26, 2022 and December 25, 2021 were as follows:
|
|
|
|
| As of March 26, 2022 |
|
| As of December 25, 2021 |
| |||||||||||||||||||
|
| Estimated |
|
| Gross |
|
| Accumulated |
|
| Net Book |
|
| Gross |
|
| Accumulated |
|
| Net Book |
| |||||||
|
| Life (Years) |
|
| Value |
|
| Amortization |
|
| Value |
|
| Value |
|
| Amortization |
|
| Value |
| |||||||
|
|
|
|
|
|
|
|
|
|
| (in thousands) |
|
|
|
|
|
|
|
|
|
| |||||||
Customer Relationships |
|
| 15 |
|
| $ | 3,800 |
|
| $ | (696 | ) |
| $ | 3,104 |
|
| $ | 3,800 |
|
| $ | (633 | ) |
| $ | 3,167 |
|
Trade Names |
| Indefinite |
|
|
| 100,510 |
|
|
| — |
|
|
| 100,510 |
|
|
| 100,510 |
|
|
| — |
|
|
| 100,510 |
| |
Total intangible assets |
|
|
|
| $ | 104,310 |
|
| $ | (696 | ) |
| $ | 103,614 |
|
| $ | 104,310 |
|
| $ | (633 | ) |
| $ | 103,677 |
|
9
Amortization expense in the thirteen weeks ended March 26, 2022 and March 27, 2021 was approximately $63,000. The Company expects to record amortization expense as follows:
Fiscal Year |
| Amount (in thousands) |
| |
Remainder of 2022 |
| $ | 191 |
|
2023 |
|
| 253 |
|
2024 |
|
| 253 |
|
2025 |
|
| 253 |
|
2026 |
|
| 253 |
|
2027 |
|
| 253 |
|
Thereafter |
|
| 1,648 |
|
Total amortization expense |
| $ | 3,104 |
|
G. Net (Loss) Income per Share
The Company calculates net (loss) income per share using the two-class method, which requires the Company to allocate net (loss) income to its Class A Common Shares, Class B Common Shares and unvested share-based payment awards that participate in dividends with common stock, in the calculation of net (loss) income per share.
The Class A Common Stock has no voting rights, except (1) as required by law, (2) for the election of Class A Directors, and (3) that the approval of the holders of the Class A Common Stock is required for (a) certain future authorizations or issuances of additional securities which have rights senior to Class A Common Stock, (b) certain alterations of rights or terms of the Class A or Class B Common Stock as set forth in the Articles of Organization of the Company, (c) 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.
The Class B Common Stock has full voting rights, including the right to (1) elect a majority of the members of the Company’s Board of Directors and (2) approve all (a) amendments to the Company’s Articles of Organization, (b) mergers or consolidations with, or acquisitions of, other entities, (c) sales or dispositions of any significant portion of the Company’s assets, and (d) equity-based and other executive compensation and other significant corporate matters. The Company’s Class B Common Stock is not listed for trading. Each share of the Class B Common Stock is freely convertible into one share of Class A Common Stock, upon request of the respective Class B holder, and participates equally in dividends.
The Company’s unvested share-based payment awards include unvested shares (1) issued under the Company’s investment share program, which permits employees who have been with the Company for at least one year to purchase shares of Class A Common Stock and to purchase those shares at a discount ranging from 20%20% to 40%40% below market value based on years of employment starting after two years of employment, and (2) awarded as restricted stock awards at the discretion of the Company’s Board of Directors. The investment shares and restricted stock awards generally vest over five years in equal number of shares. The unvested shares participate equally in dividends. See Note NM for a discussion of the current year unvested stock awards and issuances.
10
Included in the computation of net (loss) income per diluted common share are dilutive outstanding stock options and restricted stock that are vested or expected to vest. At its discretion, the Board of Directors grants stock options and restricted stock to senior management and certain key employees. The terms of the employee stock options are determined by the Board of Directors at the time of grant. To date, stock options granted to employees vest over various service periods and/or based on the attainment of certain performance criteria and generally expire after ten years. In December 2018, the Employee Equity Incentive Plan was amended to permit the grant of restricted stock units. The restricted stock units generally vest over four years in equal number of shares. Each restricted stock unit represents an unfunded and unsecured right to receive one share of Class A Stock upon satisfaction of the vesting criteria. The unvested shares participate equally in dividends and are forfeitable. Prior to March 1, 2019, the Company granted restricted stock awards, generally vesting over five years in equal number of shares. The Company also grants stock options to its non-employee directors upon election or re-election to the Board of Directors. The number of option shares granted to non-employee directors is calculated based on a defined formula and these stock options vest immediately upon grant and expire after ten years.
10
Net (Loss) Income per Common Share - Basic
The following table sets forth the computation of basic net (loss) income per share using the two-class method:
|
| Thirteen weeks ended |
|
| Twenty-six weeks ended |
| ||||||||||||||||||
|
| June 26, 2021 |
|
| June 27, 2020 |
|
| June 26, 2021 |
|
| June 27, 2020 |
|
| Thirteen weeks ended |
| |||||||||
|
| (in thousands, except per share data) |
|
| (in thousands, except per share data) |
|
| March 26, |
|
| March 27 |
| ||||||||||||
Net income |
| $ | 59,195 |
|
| $ | 60,141 |
|
| $ | 124,760 |
|
| $ | 78,375 |
| ||||||||
Allocation of net income for basic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
| (in thousands, except per share data) |
| |||||||||||||||||||||
Net (loss) income |
| $ | (1,955 | ) |
| $ | 65,565 |
| ||||||||||||||||
Allocation of net (loss) income for basic: |
|
|
|
|
|
| ||||||||||||||||||
Class A Common Stock |
| $ | 48,710 |
|
| $ | 47,930 |
|
| $ | 102,354 |
|
| $ | 61,612 |
|
| $ | (1,621 | ) |
| $ | 53,628 |
|
Class B Common Stock |
|
| 10,268 |
|
|
| 11,836 |
|
|
| 21,893 |
|
|
| 16,237 |
|
| (329 | ) |
| 11,638 |
| ||
Unvested participating shares |
|
| 217 |
|
|
| 375 |
|
|
| 513 |
|
|
| 526 |
|
|
| (5 | ) |
|
| 299 |
|
|
| $ | 59,195 |
|
| $ | 60,141 |
|
| $ | 124,760 |
|
| $ | 78,375 |
|
| $ | (1,955 | ) |
| $ | 65,565 |
|
Weighted average number of shares for basic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Class A Common Stock |
|
| 10,108 |
|
|
| 9,720 |
|
|
| 10,072 |
|
|
| 9,572 |
|
| 10,200 |
| 10,037 |
| |||
Class B Common Stock* |
|
| 2,131 |
|
|
| 2,400 |
|
|
| 2,155 |
|
|
| 2,523 |
|
| 2,068 |
| 2,178 |
| |||
Unvested participating shares |
|
| 44 |
|
|
| 76 |
|
|
| 50 |
|
|
| 82 |
|
|
| 32 |
|
|
| 56 |
|
|
|
| 12,283 |
|
|
| 12,196 |
|
|
| 12,277 |
|
|
| 12,177 |
|
|
| 12,300 |
|
|
| 12,271 |
|
Net income per share for basic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Net (loss) income per share for basic: |
|
|
|
|
|
| ||||||||||||||||||
Class A Common Stock |
| $ | 4.82 |
|
| $ | 4.93 |
|
|
| 10.16 |
|
| $ | 6.44 |
|
| $ | (0.16 | ) |
| $ | 5.34 |
|
Class B Common Stock |
| $ | 4.82 |
|
| $ | 4.93 |
|
| $ | 10.16 |
|
| $ | 6.44 |
|
| $ | (0.16 | ) |
| $ | 5.34 |
|
*ChangeThe reduction in Class B Common Stock resulted from the conversion of 130,000 shares to Class A Common Stock on November 3, 2020 and 99,983 shares to Class A Common Stock on May 14, 2021 with the ending number of shares reflecting the weighted average for the period.stock during fiscal 2021.
Net (Loss) Income per Common Share - Diluted
The Company calculates diluted net (loss) income per share for common stock using the more dilutive of (1) the treasury stock method, or (2) the two-class method, which assumes the participating securities are not exercised.
11
The following table sets forth the computationcomputations of diluted net (loss) income per share, assuming the conversion of all Class B Common Stock into Class A Common Stock for the thirteen and twenty-six weeks ended JuneMarch 26, 20212022 and forMarch 27, 2021:
|
| Thirteen weeks ended |
| |||||||||||||||||||||
|
| March 26, 2022 |
|
| March 27, 2021 |
| ||||||||||||||||||
|
| Loss to |
|
| Common |
|
| EPS |
|
| Earnings to |
|
| Common |
|
| EPS |
| ||||||
|
| (in thousands, except per share data) |
| |||||||||||||||||||||
As reported - basic |
| $ | (1,621 | ) |
|
| 10,200 |
|
| $ | (0.16 | ) |
| $ | 53,628 |
|
|
| 10,037 |
|
| $ | 5.34 |
|
Add: effect of dilutive common |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Share-based awards |
|
| — |
|
|
| — |
|
|
|
|
|
| — |
|
|
| 162 |
|
|
|
| ||
Class B Common Stock |
|
| (329 | ) |
|
| 2,068 |
|
|
|
|
|
| 11,638 |
|
|
| 2,178 |
|
|
|
| ||
Net effect of unvested participating |
|
| (5 | ) |
|
| 32 |
|
|
|
|
|
| 299 |
|
|
| 80 |
|
|
|
| ||
Net (loss) income per common share - |
| $ | (1,955 | ) |
|
| 12,300 |
|
| $ | (0.16 | ) |
| $ | 65,565 |
|
|
| 12,457 |
|
| $ | 5.26 |
|
For the thirteen and twenty six weeks ended June 27, 2020:
|
| Thirteen weeks ended |
| |||||||||||||||||||||
|
| June 26, 2021 |
|
| June 27, 2020 |
| ||||||||||||||||||
|
| Earnings to Common Shareholders |
|
| Common Shares |
|
| EPS |
|
| Earnings to Common Shareholders |
|
| Common Shares |
|
| EPS |
| ||||||
|
| (in thousands, except per share data) |
| |||||||||||||||||||||
As reported - basic |
| $ | 48,710 |
|
|
| 10,108 |
|
| $ | 4.82 |
|
| $ | 47,930 |
|
|
| 9,720 |
|
| $ | 4.93 |
|
Add: effect of dilutive potential common shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based awards |
|
| — |
|
|
| 160 |
|
|
|
|
|
|
| — |
|
|
| 138 |
|
|
|
|
|
Class B Common Stock |
|
| 10,268 |
|
|
| 2,131 |
|
|
|
|
|
|
| 11,836 |
|
|
| 2,400 |
|
|
|
|
|
Net effect of unvested participating shares |
|
| 217 |
|
|
| 66 |
|
|
|
|
|
|
| 4 |
|
|
| — |
|
|
|
|
|
Net income per common share - diluted |
| $ | 59,195 |
|
|
| 12,465 |
|
| $ | 4.75 |
|
| $ | 59,770 |
|
|
| 12,258 |
|
| $ | 4.88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Twenty-six weeks ended |
| |||||||||||||||||||||
|
| June 26, 2021 |
|
| June 27, 2020 |
| ||||||||||||||||||
|
| Earnings to Common Shareholders |
|
| Common Shares |
|
| EPS |
|
| Earnings to Common Shareholders |
|
| Common Shares |
|
| EPS |
| ||||||
|
| (in thousands, except per share data) |
| |||||||||||||||||||||
As reported - basic |
| $ | 102,354 |
|
|
| 10,072 |
|
| $ | 10.16 |
|
| $ | 61,612 |
|
|
| 9,572 |
|
| $ | 6.44 |
|
Add: effect of dilutive potential common shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based awards |
|
| — |
|
|
| 161 |
|
|
|
|
|
|
| — |
|
|
| 126 |
|
|
|
|
|
Class B Common Stock |
|
| 21,893 |
|
|
| 2,155 |
|
|
|
|
|
|
| 16,237 |
|
|
| 2,523 |
|
|
|
|
|
Net effect of unvested participating shares |
| 513 |
|
|
| 73 |
|
|
|
|
|
|
| 5 |
|
|
| — |
|
|
|
|
| |
Net income per common share - diluted |
| $ | 124,760 |
|
|
| 12,461 |
|
| $ | 10.01 |
|
| $ | 77,854 |
|
|
| 12,221 |
|
| $ | 6.37 |
|
DuringMarch 26, 2022 weighted-average stock options to purchase approximately 73,168 shares of Class A Common Stock and approximately 32,532 unvested share based payments were excluded from the thirteen and twenty-six weeks ended June 26, 2021, incomputation of diluted shares because the net loss position of the Company made them antidilutive. In accordance with the treasury stock method, weighted-average stock options to purchase approximately 20,000 and 13,0006,035 shares of Class A Common stock and 4,027 unvested share based payments were outstanding during the thirteen weeks ended March 27, 2021 but not included in computing dilutive income per common share because their effects were anti-dilutive. In accordance with the two-class method, weighted average stock options to purchase approximately 23,000 and 16,000 shares
11
I.
H. Comprehensive Income or Loss
Comprehensive income or loss represents net income or loss, plus a defined benefit plans liability adjustment, net of tax effect, and foreign currency translation adjustment. The foreign currency translation adjustments for the interim periods ended JuneMarch 26, 20212022 and JuneMarch 27, 20202021 were not material.material and there were 0 defined benefit plans liability adjustments in either period.
12
J. . Commitments and Contingencies
ContractContractual Obligations
As of JuneMarch 26, 2021,2022, projected cash outflows under non-cancelable contractual obligations are as follows:
|
| Commitments |
| |||||
|
| (in thousands) |
|
| Commitments |
| ||
Ingredients (excluding hops and malt) |
| $ | 129,706 |
| ||||
|
| (in thousands) |
| |||||
Ingredients and packaging (excluding hops and malt) |
| $ | 111,870 |
| ||||
Brand support |
|
| 103,865 |
|
| 81,376 |
| |
Hops and malt |
| 69,374 |
| |||||
Equipment and machinery |
|
| 78,513 |
|
| 48,058 |
| |
Hops and malt |
|
| 52,471 |
| ||||
Other |
|
| 16,935 |
|
|
| 17,023 |
|
Total commitments |
| $ | 381,490 |
|
| $ | 327,701 |
|
The majority of these contract obligations are for the 20212022 fiscal year with the remainder extending no later than the 2026 fiscal year.
Litigation
Litigation
The Company is not aand in the future may be party to any pendinglegal proceedings and claims, including class action claims, where significant damages are asserted against it. Given the inherent uncertainty of litigation, it is possible that the Company could incur liabilities as a consequence of these claims, which may or threatened litigation, the outcome of which would be expected tomay not have a material adverse effect upon itson the Company’s financial condition or the results of its operations. In general, whileThe Company accrues loss contingencies if, in the Company believes it conductsopinion of management and its business appropriatelylegal counsel, the risk of loss is probable and able to be estimated. Material pending legal proceedings are discussed below.
Securities Litigation. On September 14, 2021, a purported class action lawsuit was filed by an individual shareholder in accordance with laws, regulations and industry guidelines, claims, whether or not meritorious, could be assertedthe United States District Court for the Southern District of New York against the Company and three of its officers. The complaint alleges claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 between April 22, 2021 and September 8, 2021. The plaintiff claims that might adversely impactdefendants made materially false and/or misleading statements or failed to disclose material adverse facts about the Company’s results.business, operations, and prospects. On October 8, 2021, a nearly identical complaint was filed against the Company by an individual shareholder in the United States District Court for the Southern District of New York. The Company intends to vigorously defend against these lawsuits. A range of potential loss is not estimable at this time.
K.
False Advertising. On August 26, 2021, a proposed class action lawsuit was filed by two individuals in the United States District Court for the Southern District of California against the Company. The complaint alleged claims for false advertising, breach of warranty, unlawful business practices, unfair competition, and violations of certain California and New York consumer protection acts. The plaintiff claimed that the Company falsely or misleadingly labelled its Truly products with respect to the ingredients contained therein. This matter was resolved during the thirteen weeks ended March 26, 2022 and the settlement amount paid was not material to the Company's financial statements.
12
J. Income Taxes
As of JuneMarch 26, 20212022 and December 26, 2020,25, 2021, the Company had approximately $0.8$0.2 million and $0.2 million, respectively, of unrecognized income tax benefits as of each date.benefits.
The Company’s practice is to classify interest and penalties related to income tax matters in income tax expense. As of JuneMarch 26, 20212022 and December 26, 2020,25, 2021, the Company had $0.2$0.2 million and $0.2$0.2 million, respectively, accrued for interest and penalties recorded in other liabilities.
The Internal Revenue Service completed an examination of the 2015 consolidated corporate income tax return and issued a no change report in 2018. The Company’s state income tax returns remain subject to examination for three or four years depending on the state’s statute of limitations. The Company is not currently under any income tax audits as of JuneMarch 26, 2021.2022.
The following table provides a summary of the income tax (benefit) provision for the thirteen and twenty-six weeks ended JuneMarch 26, 20212022 and JuneMarch 27, 2020:2021:
|
| Thirteen weeks ended |
| |||||
|
| June 26, 2021 |
|
| June 27, 2020 |
| ||
|
| (in thousands) |
| |||||
Summary of income tax provision |
|
|
|
|
|
|
|
|
Tax provision based on net income |
| $ | 21,315 |
|
| $ | 20,699 |
|
Benefit of ASU 2016-09 |
|
| (426 | ) |
|
| (2,335 | ) |
Total income tax provision |
| $ | 20,889 |
|
| $ | 18,364 |
|
|
|
|
|
|
|
|
|
|
|
| Twenty-six weeks ended |
| |||||
|
| June 26, 2021 |
|
| June 27, 2020 |
| ||
|
| (in thousands) |
| |||||
Summary of income tax provision |
|
|
|
|
|
|
|
|
Tax provision based on net income |
| $ | 40,927 |
|
| $ | 25,704 |
|
Benefit of ASU 2016-09 |
|
| (9,040 | ) |
|
| (4,339 | ) |
Total income tax provision |
| $ | 31,887 |
|
| $ | 21,365 |
|
|
| Thirteen weeks ended |
| |||||
|
| March 26, |
|
| March 27 |
| ||
|
| (in thousands) |
| |||||
Summary of income tax (benefit) provision |
|
|
|
|
|
| ||
Tax (benefit) provision based on net (loss) income |
| $ | (635 | ) |
| $ | 19,613 |
|
Deficiency (benefit) of ASU 2016-09 |
|
| 303 |
|
|
| (8,615 | ) |
Total income tax (benefit) provision |
| $ | (332 | ) |
| $ | 10,998 |
|
The benefittax deficiency (benefit) of ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, decreased by $1.9$8.9 million to $0.4a deficiency of $0.3 million for the thirteen weeks ended JuneMarch 26, 20212022 as compared to $2.3a benefit of $8.6 million for the thirteen weeks ended JuneMarch 27, 2020,2021, primarily
13
due to decreaseschanges in the stock price and the number of shares exercised. The benefit of ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, increased by $4.7 million to $9.0 million for the twenty-six weeks ended June 26, 2021 as compared to $4.3 million for the thirteen weeks ended June 27, 2020, primarily due to increases in stock price.
The Company’s effective tax rate for the thirteen weeks ended JuneMarch 26, 2021,2022, excluding the impact of ASU 2016-09, increasedwas a tax benefit of 27.7% compared to 26.6% from 26.4%a tax provision of 25.6% for the thirteen weeks ended JuneMarch 27, 2020,2021, primarily due to an increasea decrease in state taxes. pre-tax income.
The Company’s effectiveCompany received a federal income tax rate forrefund in the twenty-six weeks ended June 26, 2021, excluding the impactamount of ASU 2016-09, increased to 26.1% from 25.8% for the twenty-six weeks ended June 27, 2020, primarily due to an increase in state taxes.$40.8 million on April 8, 2022.
L.RevolvingK. Line of Credit
In March 2018, the Company amended its existing credit facility in place that provides for a $150.0$150.0 million revolving line of credit to extend the scheduled expiration date to March 31, 2023.2023. During the thirteen weeks ended March 26, 2022, the Company borrowed a total of $30.0 million of the available balance. As of JuneMarch 26, 2021,2022, the outstanding amount due was $15.0 million. The interest rate for the borrowings withdrawn is less than 1%. As of March 26, 2022, the Company was not in compliance with allviolation of any of its financial covenants to the lender under the credit facility and the fullthe unused balance of $150.0$135.0 million underremaining on the line of credit was available to the Company for future borrowing. The outstanding $15.0 million balance was repaid on April 11, 2022.
M.
L. Fair Value MeasuresMeasures
The Company defines fair value as the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
• Level 1 — Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. • Level 2 — Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability. 13 • Level 3 — Level 3 inputs are unobservable inputs for the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date. |
|
|
|
|
|
|
The Company’s money market funds are measured at fair value on a recurring basis (at least annually) and are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. The money market funds are invested substantially in United States Treasury and government securities. The Company does not adjust the quoted market price for such financial instruments. Cash, receivables and payables are carried at their cost, which approximates fair value, because of their short-term nature.
At JuneMarch 26, 20212022 and December 26, 2020,25, 2021, the Company had money market funds with a “Triple A” rated money market fund. The Company considers the “Triple A” rated money market fund to be a large, highly-rated investment-grade institution. As of JuneMarch 26, 20212022 and December 26, 2020,25, 2021, the Company’s cash and cash equivalents balance was $103.0$15.8 million and $163.3$26.9 million, respectively, including money market funds amounting to $100.7$11.5 million and $157.6$5.8 million, respectively.
14
N.. Common Stock and Stock-Based Compensation
Option Activity
Information related to stock options under the Restated Employee Equity Incentive Plan and the Stock Option Plan for Non-Employee Directors is summarized as follows:
|
| Shares |
|
| Weighted- Average Exercise Price |
|
| Weighted- Average Remaining Contractual Term in Years |
|
| Aggregate Intrinsic Value (in thousands) |
| ||||
Outstanding at December 26, 2020 |
|
| 241,847 |
|
| $ | 228.58 |
|
|
|
|
|
|
|
|
|
Granted |
|
| 20,420 |
|
|
| 1,031.01 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
Expired |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
Exercised |
|
| (32,835 | ) |
|
| 197.25 |
|
|
|
|
|
|
|
|
|
Outstanding at June 26, 2021 |
|
| 229,432 |
|
| $ | 304.49 |
|
|
| 5.93 |
|
| $ | 167,692 |
|
Exercisable at June 26, 2021 |
|
| 81,317 |
|
| $ | 228.58 |
|
|
| 5.07 |
|
| $ | 65,631 |
|
Vested and expected to vest at June 26, 2021 |
|
| 210,177 |
|
| $ | 300.67 |
|
|
| 5.89 |
|
| $ | 154,424 |
|
|
| Shares |
|
| Weighted- |
|
| Weighted- |
|
| Aggregate |
| ||||
Outstanding at December 25, 2021 |
|
| 221,354 |
|
| $ | 310.38 |
|
|
|
|
|
|
| ||
Granted |
|
| 17,114 |
|
|
| 383.46 |
|
|
|
|
|
|
| ||
Exercised |
|
| (12,014 | ) |
|
| 198.13 |
|
|
|
|
|
|
| ||
Outstanding at March 26, 2022 |
|
| 226,454 |
|
| $ | 321.86 |
|
|
| 5.71 |
|
| $ | 27,690 |
|
Exercisable at March 26, 2022 |
|
| 111,689 |
|
| $ | 240.29 |
|
|
| 4.84 |
|
| $ | 17,493 |
|
Vested and expected to vest at March 26, 2022 |
|
| 204,649 |
|
| $ | 313.40 |
|
|
| 5.62 |
|
| $ | 25,752 |
|
Of the total options outstanding at JuneMarch 26, 2021, 23,0192022, 8,057 shares were performance-based options for which the performance criteria had yet to be achieved.
On March 1, 2021,2022, the Company granted options to purchase an aggregate of 8,06317,114 shares of the Company’s Class A Common Stock to senior management with a weighted average fair value of $449.93$178.10 per share and a weighted average exercise price of $383.46 per share, of which all shares relate to performance-based stock options.
On March 1, 2021 the Company granted options to purchase an aggregate of 10,935 shares of the Company’s Class A Common Stock to the Chief Executive Officer with a weighted average fair value of $457.25 per share, of which all shares relate to service-based stock options.
On May 19, 2021, the Company granted options to purchase an aggregate of 1,422 shares of the Company’s Class A Common Stock to the Company’s non-employee Directors. These options have a weighted average fair value of $484.33 per share. All of the options vested immediately on the date of the grant
Weighted average assumptions used to estimate fair values of stock options on the date of grants are as follows:
Non-Vested Shares Activity
| ||||
Expected Volatility |
| % | ||
Risk-free interest rate |
| % | ||
Expected Dividends | 0.0 | % | ||
Exercise factor |
| |||
Discount for post-vesting restrictions |
| % |
Non-Vested Shares Activity
The following table summarizes vesting activities of shares issued under the investment share program and restricted stock awards:
|
| Number of Shares |
|
| Weighted Average Fair Value |
| ||||||||||
Non-vested at December 26, 2020 |
|
| 114,316 |
|
| $ | 263.47 |
| ||||||||
|
| Number of Shares |
|
| Weighted Average Fair Value |
| ||||||||||
Non-vested at December 25, 2021 |
| 88,848 |
| $ | 401.70 |
| ||||||||||
Granted |
|
| 17,632 |
|
|
| 880.81 |
|
| 41,946 |
| 344.41 |
| |||
Vested |
|
| (41,923 | ) |
|
| 227.42 |
|
| (24,308 | ) |
| 310.66 |
| ||
Forfeited |
|
| (445 | ) |
|
| 291.63 |
|
|
| (1,829 | ) |
| 496.86 |
| |
Non-vested at June 26, 2021 |
|
| 89,580 |
|
| $ | 402.53 |
| ||||||||
Non-vested at March 26, 2022 |
|
| 104,657 |
|
| $ | 403.50 |
|
14
Of the total shares outstanding at JuneMarch 26, 2021, 2,6962022, 1,348 shares were performance-based shares for which the performance criteria had yet to be achieved.
15
On March 1, 2021,2022, the Company granted a combined 7,81731,101 shares of restricted stock units to certain officers, senior managers and key employees, of which all shares vest ratably over service periods of four years.years. Additionally on March 1, 2020, the Company granted 4,861 shares of restricted stock units to the Chief Executive Officer, of which all shares vest over five years. On March 1, 2021,2022, employees elected to purchase a combined 4,95410,845 shares under the Company’s investment share program. The weighted average fair value of the restricted stock units and investment shares, which are sold to employees at discount under its investment share program, was $1,028.71$383.46 and $502.32$232.41 per share, respectively.
Stock-Based Compensation
The following table provides information regarding stock-based compensation expense included in operating expenses in the accompanying condensed consolidated statements of comprehensive income:operations:
|
| Thirteen weeks ended |
| |||||
|
| March 26, |
|
| March 27 |
| ||
|
| (in thousands) |
| |||||
Amounts included in advertising, promotional and selling expenses |
| $ | 1,227 |
|
| $ | 1,672 |
|
Amounts included in general and administrative expenses |
|
| 1,695 |
|
|
| 3,285 |
|
Total stock-based compensation expense |
| $ | 2,922 |
|
| $ | 4,957 |
|
|
| Thirteen weeks ended |
|
| Twenty-six weeks ended |
| ||||||||||
|
| June 26, 2021 |
|
| June 27, 2020 |
|
| June 26, 2021 |
|
| June 27, 2020 |
| ||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||
Amounts included in advertising, promotional and selling expenses |
| $ | 1,268 |
|
| $ | 1,147 |
|
| $ | 2,940 |
|
| $ | 1,852 |
|
Amounts included in general and administrative expenses |
|
| 4,066 |
|
|
| 3,390 |
|
|
| 7,351 |
|
|
| 5,251 |
|
Total stock-based compensation expense |
| $ | 5,334 |
|
| $ | 4,537 |
|
| $ | 10,291 |
|
| $ | 7,103 |
|
N. Licensing Agreements
Beam Suntory Licensing Agreement
On July 14, 2021, the Company signed 2 collaboration agreements with Jim Beam Brands Co. (“Jim Beam”) to develop, market and sell alcohol beverages. These agreements are perpetual, with regular assessments of the partnership performance every 5 years, beginning in Year 5, giving rise to the option to continue agreement terms or terminate the partnership. Under the first of these agreements, the Company is responsible for developing and bringing to market through its distribution network one or more flavored malt beverage products under brand name(s) from the Jim Beam portfolio, beginning with the Sauza brand. Under the second agreement, Jim Beam is responsible for developing and bringing to market through its distribution network one or more full bottled distilled spirits products under brand(s) from the Company’s portfolio, beginning with the Truly brand.
The parties began shipping beverages to customers under these agreements during the thirteen weeks ended March 26, 2022. Under the first agreement, the Company is required make payments to Jim Beam for their share of the brand contribution of the flavored malt beverages sold by the Company. The brand contribution amounts due to Beam are recorded as a component of costs of goods sold. Under the second agreement, Jim Beam is required to make payments to the Company for the Company’s share of the brand contribution of the full bottled distilled spirits sold by Jim Beam. The Company and Jim Beam also reimburse each other for certain marketing costs as they are incurred. These marketing costs are recorded in advertising, promotional and selling expenses. The Company’s sales of Jim Beam branded flavored malt beverages to third parties and the brand contribution payments received or owed the Company by Jim Beam for the use of the Company’s brand names are recorded within net revenue. Total net revenue recognized under these agreements amounted to less than 1% of the Company's total net revenues during the thirteen-week period ended March 26, 2022.
Pepsi Licensing Agreement
On August 9, 2021, the Company signed a series of agreements with PepsiCo, Inc. (“Pepsi”) to develop, market and sell alcohol beverages. The term of this agreement is perpetual, with provisions to terminate within the initial 2-years for a limited number of reasons. Under this agreement the Company is responsible for developing, manufacturing, and marketing a flavored malt beverage product under Pepsi’s MTN DEW® brand. As part of the agreements, Pepsi provides certain proprietary ingredients and also licenses the Company the use of its MTN DEW® and Hard MTN DEW® trademarks in connection with manufacturing, promoting, marketing, and distributing the developed product through the Pepsi distribution network. The Company retains the right to distribute the developed product through its own distribution network for customers in the on-premise channel.
15
The Company began shipping flavored malt beverages to Pepsi during the thirteen-week period ended March 26, 2022. Pursuant to the terms of the agreements, the Company makes payments to Pepsi for proprietary ingredients, freight costs to ship the product to Pepsi, and certain marketing services. These costs of the proprietary ingredients are recorded within net revenue at the time revenue is recognized for the flavored malt beverages sold to Pepsi. Freight costs and marketing costs are recorded in advertising, promotional and selling expenses. Proprietary ingredients on hand at the end of the period are classified within prepaid expenses and other current assets as of March 26, 2022. Total net revenue recognized under these agreements amounted to less than 2% of the Company's total net revenues during the thirteen-week period ended March 26, 2022.
O. Restricted Cash
During the year ended December 25, 2021, in accordance with state regulations the Company consolidated their distributor rights within a geographical region by terminating the distribution rights of certain existing distributors (the "terminating distributors") and granting these distribution rights to one existing distributor in the region (the "continuing distributor"). As part of this consolidation process, the Company also entered an indemnification agreement in March 2021 with the continuing distributor. As part of the agreement, the Company is indemnified by the continuing distributor for the fair market value of distribution rights paid to the terminating distributors and all related legal fees. In accordance with state regulations, the Company followed the notification process and the distribution rights transferred on December 22, 2021. The Company received the fair market value payments of $39.5 million from the continuing distributor on December 19, 2021 and this amount is recorded in restricted cash and accrued liabilities at December 25, 2021. The Company paid the terminating distributors the fair market value payments of $39.5 million on December 28, 2021.
O.P. Related Party Transactions
In connection with the Dogfish Head Transaction, the Company entered into a lease with the Dogfish Head founders and other owners of buildings used in certain of the Company’s restaurant operations. The lease is for ten years with renewal options. The total payments due under the initial ten year term is $3.6$3.6 million. Total related party expense recognized for the thirteen and twenty-six weeks ended JuneMarch 26, 2022 and March 27, 2021 related to the lease was approximately $91,000 and $182,000, respectively. $91,000 . Additionally, during the thirteen weeks ended March 26, 2022 and twenty-six weeks ended, June 26,March 27, 2021, the Company incurred expenses of less than $25,000 and $50,000, respectively,$50,000 to various other suppliers affiliated with the Dogfish Head founders.
P.
Q. Subsequent Events
The Company evaluated subsequent events occurring after the balance sheet date for additional disclosure. The Company received $40.8 million income tax refunds on April 8, 2022 as described in Note J and repaid the $15.0 million outstanding line of credit balance on April 11, 2022 as described in Note K. The Company concluded that there were no other events of which management was aware that occurred after the balance sheet date that would require any adjustment to or disclosure in the accompanying condensed consolidated financial statements.
16
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the significant factors affecting the consolidated operating results, financial condition and liquidity and cash flows of the Company for the thirteen and twenty-six week period ended JuneMarch 26, 2021,2022, as compared to the thirteen and twenty-six week period ended JuneMarch 27, 2020.2021. This discussion should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations, and the Condensed Consolidated Financial Statements of the Company and Notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 26, 2020.25, 2021.
RESULTS OF OPERATIONS
Thirteen Weeks Ended JuneMarch 26, 20212022 compared to Thirteen Weeks Ended JuneMarch 27, 20202021
|
| Thirteen Weeks Ended (in thousands, except per barrel) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Thirteen Weeks Ended |
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||
|
| June 26, 2021 |
|
| June 27, 2020 |
|
| Amount change |
|
| % change |
|
| Per barrel change |
|
| March 26, |
|
| March 27 |
|
| Amount |
|
| % change |
|
| Per barrel |
| ||||||||||||||||||||||||||||||||||||||||||
Barrels sold |
| 2,447 |
|
| 1,921 |
|
|
| 526 |
|
|
| 27.4 | % |
|
|
|
|
|
|
|
| 1,705 |
|
|
|
|
|
|
|
| 2,275 |
|
|
|
|
| (570 | ) |
| (25.1 | )% |
|
|
| |||||||||||||||||||||||||||
|
|
|
|
|
| Per barrel |
|
| % of net revenue |
|
|
|
|
|
| Per barrel |
|
| % of net revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Per barrel |
|
| % of net |
|
|
|
|
| Per barrel |
|
| % of net |
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net revenue |
| $ | 602,805 |
|
| $ | 246.35 |
|
|
| 100.0 | % |
| $ | 452,138 |
|
| $ | 235.34 |
|
|
| 100.0 | % |
| $ | 150,667 |
|
|
| 33.3 | % |
| $ | 11.01 |
|
| $ | 430,113 |
| $ | 252.27 |
| 100.0 | % |
| $ | 545,080 |
| $ | 239.31 |
| 100.0 | % |
| $ | (114,967 | ) |
| (21.1 | )% |
| $ | 12.96 |
| |||||||
Cost of goods |
|
| 327,116 |
|
|
| 133.68 |
|
|
| 54.3 | % |
|
| 242,514 |
|
|
| 126.23 |
|
|
| 53.6 | % |
|
| 84,602 |
|
|
| 34.9 | % |
|
| 7.45 |
|
|
| 257,161 |
|
|
| 150.83 |
|
|
| 59.8 | % |
|
| 295,450 |
|
|
| 129.71 |
|
|
| 54.2 | % |
|
| (38,289 | ) |
|
| (13.0 | )% |
|
| 21.12 |
|
Gross profit |
|
| 275,689 |
|
|
| 112.67 |
|
|
| 45.7 | % |
|
| 209,624 |
|
|
| 109.11 |
|
|
| 46.4 | % |
|
| 66,065 |
|
|
| 31.5 | % |
|
| 3.56 |
|
| 172,952 |
| 101.44 |
| 40.2 | % |
| 249,630 |
| 109.60 |
| 45.8 | % |
| (76,678 | ) |
| (30.7 | )% |
| (8.16 | ) | |||||||||||||
Advertising, promotional and selling expenses |
|
| 161,620 |
|
|
| 66.05 |
|
|
| 26.8 | % |
|
| 100,336 |
|
|
| 52.23 |
|
|
| 22.2 | % |
|
| 61,284 |
|
|
| 61.1 | % |
|
| 13.82 |
|
| 130,615 |
| 76.61 |
| 30.4 | % |
| 140,859 |
| 61.84 |
| 25.8 | % |
| (10,244 | ) |
| (7.3 | )% |
| 14.77 |
| |||||||||||||
General and administrative expenses |
|
| 32,960 |
|
|
| 13.47 |
|
|
| 5.5 | % |
|
| 29,685 |
|
|
| 15.45 |
|
|
| 6.6 | % |
|
| 3,275 |
|
|
| 11.0 | % |
|
| (1.98 | ) |
| 39,698 |
| 23.28 |
| 9.2 | % |
| 31,946 |
| 14.03 |
| 5.9 | % |
| 7,752 |
| 24.3 | % |
| 9.25 |
| ||||||||||||||
Contract termination costs and other |
| 4,752 |
| 2.79 |
| 1.1 | % |
| — |
| — |
| 0.0 | % |
| 4,752 |
| 100.0 | % |
| 2.79 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||
Impairment of assets |
|
| 1,004 |
|
|
| 0.41 |
|
|
| 0.2 | % |
|
| 834 |
|
|
| 0.43 |
|
|
| 0.2 | % |
|
| 170 |
|
|
| 20.4 | % |
|
| (0.02 | ) |
|
| 41 |
|
|
| 0.02 |
|
|
| 0.0 | % |
|
| 227 |
|
|
| 0.10 |
|
|
| 0.0 | % |
|
| (186 | ) |
|
| (81.9 | )% |
|
| (0.08 | ) |
Total operating expenses |
|
| 195,584 |
|
|
| 79.93 |
|
|
| 32.4 | % |
|
| 130,855 |
|
|
| 68.11 |
|
|
| 28.9 | % |
|
| 64,729 |
|
|
| 49.5 | % |
|
| 11.82 |
|
|
| 175,106 |
|
|
| 102.70 |
|
|
| 40.7 | % |
|
| 173,032 |
|
|
| 75.97 |
|
|
| 31.7 | % |
|
| 2,074 |
|
|
| 1.2 | % |
|
| 26.73 |
|
Operating income |
|
| 80,105 |
|
|
| 32.74 |
|
|
| 13.3 | % |
|
| 78,769 |
|
|
| 41.00 |
|
|
| 17.4 | % |
|
| 1,336 |
|
|
| 1.7 | % |
|
| (8.26 | ) | ||||||||||||||||||||||||||||||||||||
Operating (loss) income |
| (2,154 | ) |
| (1.26 | ) |
| (0.5 | )% |
| 76,598 |
| 33.63 |
| 14.1 | % |
| (78,752 | ) |
| (102.8 | )% |
| (34.89 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Other (expense) income, net |
|
| (21 | ) |
|
| (0.01 | ) |
|
| (0.0 | )% |
|
| (264 | ) |
|
| (0.14 | ) |
|
| (0.1 | )% |
|
| 243 |
|
|
| (92.0 | )% |
|
| 0.13 |
|
|
| (133 | ) |
|
| (0.08 | ) |
|
| (0.0 | )% |
|
| (35 | ) |
|
| (0.02 | ) |
|
| 0.0 | % |
|
| (98 | ) |
|
| 280.0 | % |
|
| (0.06 | ) |
Income before income tax expense |
|
| 80,084 |
|
|
| 32.73 |
|
|
| 13.3 | % |
|
| 78,505 |
|
|
| 40.86 |
|
|
| 17.4 | % |
|
| 1,579 |
|
|
| 2.0 | % |
|
| (8.13 | ) | ||||||||||||||||||||||||||||||||||||
Income tax expense |
|
| 20,889 |
|
|
| 8.54 |
|
|
| 3.5 | % |
|
| 18,364 |
|
|
| 9.56 |
|
|
| 4.1 | % |
|
| 2,525 |
|
|
| 13.7 | % |
|
| (1.02 | ) | ||||||||||||||||||||||||||||||||||||
Net income |
| $ | 59,195 |
|
| $ | 24.19 |
|
|
| 9.8 | % |
| $ | 60,141 |
|
| $ | 31.30 |
|
|
| 13.3 | % |
| $ | (946 | ) |
|
| (1.6 | )% |
| $ | (7.11 | ) | ||||||||||||||||||||||||||||||||||||
(Loss) income before income tax |
| (2,287 | ) |
| (1.34 | ) |
| (0.5 | )% |
| 76,563 |
| 33.61 |
| 14.0 | % |
| (78,850 | ) |
| (103.0 | )% |
| (34.95 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Income tax (benefit) expense |
|
| (332 | ) |
|
| (0.19 | ) |
|
| (0.1 | )% |
|
| 10,998 |
|
|
| 4.83 |
|
|
| 2.0 | % |
|
| (11,330 | ) |
|
| (103.0 | )% |
|
| (5.02 | ) | ||||||||||||||||||||||||||||||||||||
Net (loss) income |
|
| (1,955 | ) |
|
| (1.15 | ) |
|
| (0.5 | )% |
|
| 65,565 |
|
|
| 28.78 |
|
|
| 12.0 | % |
|
| (67,520 | ) |
|
| (103.0 | )% |
|
| (29.93 | ) |
Net revenue. Net revenue increaseddecreased by $150.7$115.0 million, or 33.3%21.1%, to $602.8$430.1 million for the thirteen weeks ended JuneMarch 26, 2021,2022, as compared to $452.1$545.1 million for the thirteen weeks ended JuneMarch 27, 2020,2022, primarily as a result of an increasea decrease in shipments.shipments, partially offset by price increases.
Volume. Total shipment volume increaseddecreased by 27.4%25.1% to 2,447,0001,705,000 barrels for the thirteen weeks ended JuneMarch 26, 2021,2022, as compared to 1,921,0002,275,000 barrels for the thirteen weeks ended JuneMarch 27, 2020, primarily due to increases2021, reflecting decreases in shipments ofthe Company’s Truly Hard Seltzer, Twisted Tea, Samuel AdamsAngry Orchard, and Dogfish Head brand products that were onlybrands, partially offset by decreasesincreases in the Angry Orchard brand products.its Samuel Adams brand.
Depletions, or sales by distributors to retailers, of the Company’s products for the thirteen weeks ended JuneMarch 26, 2021 increased2022 decreased by approximately 24%7% compared to the thirteen weeks ended JuneMarch 27, 2020, primarily due toincreases2021, reflecting decreases in depletions ofthe Company’s Truly Hard Seltzer, Twisted Tea, Samuel AdamsAngry Orchard, and Dogfish Head brand products that were onlybrands, partially offset by decreasesincreases in the Angry Orchardits Twisted Tea brand. The Company’s Samuel Adams brand products.depletion volume was nearly equal in both periods.
Shipment volume for the first half was significantly higher than depletions volume and resulted in higher distributor inventory as of June 26, 2021 when compared to June 27, 2020.
The Company believes distributor inventory as of JuneMarch 26, 20212022 averaged approximately 5five weeks on hand and was at an appropriate level for each of its brands except for Twisted Tea, which has significantly lower than planned distributor inventory levels for certain styles and packages.brands. The Company expects wholesalerdistributors will keep inventory levels below 2021 levels in terms of weeks on hand, as the need for peak season inventory prebuilds is greatly reduced due to be between 3 and 7 weeks for the remainder of the year.our increased production capacity.
Net revenue per barrel. Net revenue per barrel increased by 4.7%5.4% to $246.35$252.27 per barrel for the thirteen weeks ended JuneMarch 26, 2021,2022, as compared to $235.34$239.31 per barrel for the comparable period in 2020,2021, primarily due to price increases and product mix.increases.
17
Cost of goods sold. Cost of goods sold was $133.68$150.83 per barrel for the thirteen weeks ended JuneMarch 26, 2021,2022, as compared to $126.23$129.71 per barrel for the thirteen weeks ended JuneMarch 27, 2020.2021. The 20212022 increase in cost of goods sold of $7.45 $21.12 per barrel was primarily the result of higher processing and other costs due to increased production at third party breweries, partially offset by cost saving initiatives at Company-owned breweries.higher supply chain costs and higher materials costs.
Gross profit. Gross profit was $112.67$101.44 per barrel for the thirteen weeks ended JuneMarch 26, 2021,2022, as compared to $109.11$109.60 per barrel for the thirteen weeks ended JuneMarch 27, 2020.2021.
The Company includes freight charges related to the movement of finished goods from its 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 those of other entities that classify costs related to distribution differently.
Advertising, promotional and selling. Advertising, promotional and selling expenses increaseddecreased by $61.3$10.2 million, or 61.1%7.3%, to $161.6$130.6 million for the thirteen weeks ended JuneMarch 26, 2021,2022, as compared to $100.4$140.9 million for the thirteen weeks ended JuneMarch 27, 2020.2021. The increasedecrease was primarily due to increaseda net decrease in brand investments of $41.2$9.4 million, mainly driven by lower media costs, partially offset by higher media, production andinvestments in local marketing costs and increaseddecreased freight to distributors of $20.1$0.8 million that was primarily due to lower volumes that were partially offset by higher rates and volumes.rates.
Advertising, promotional and selling expenses were 26.8%30.4% of netnet revenue, or $66.05$76.61 per barrel, for the thirteen weeks ended JuneMarch 26, 2021,2022, as compared to 22.2%25.8% of net revenue, or $52.23$61.84 per barrel, for the thirteen weeks ended JuneMarch 27, 2020.2021. This increase per barrel is primarily due to advertising,advertising, promotional and selling expenses growing decreasing at a higherlower rate than shipments. 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.
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 condensed consolidated statements of comprehensive incomeoperations as reductions to advertising, promotional and selling expenses. Historically, contributions from distributors for advertising and promotional activities have amounted to between 2%1% and 3% of net sales. The Company may adjust its promotional efforts in the distributors’ markets, if changes occur in these promotional contribution arrangements, depending on industry and market conditions.
General and administrative. General and administrative expenses increased by $3.3$7.8 million, or 11.0%24.3%, to $33.0$39.7 million for the thirteen weeks ended JuneMarch 26, 2021,2022, as compared to $29.7$31.9 million for the thirteen weeks ended JuneMarch 27, 2020.2021. The increase was primarily due to increased salaries and benefits costs and increases in external services and salaries and benefits costs.provided by third parties.
Contract termination costs and other. During the first quarter of 2022 the Company recorded $4.8 million in contract termination costs in connection with the termination of a third-party production contract. This contract termination eliminated future production shortfall fees that the Company estimated would have been incurred over the duration of the contract.
Impairment of assets. Impairment of long-lived assets increaseddecreased by $0.2 million from the comparable period of 2020,2021, primarily due to increasedlower write-downs of brewery equipment at Company-owned breweries.
Income tax (benefit) expense. During the thirteen weeks ended JuneMarch 26, 2021,2022, the Company recorded a net income tax expense of $20.9 million which consists of $21.3 million income tax expenses partially offset by an $0.4 million tax benefit related to stock option exercises in accordance with ASU 2016-09. The Company’s effective tax rate, for the thirteen weeks ended June 26, 2021, excluding the impact of ASU 2016-09, increasedwas a tax benefit of 27.7% compared to 26.6% from 26.4%a tax provision of 25.6% for the thirteen weeks ended JuneMarch 27, 2020,2021, primarily due to an increasea decrease in state taxes.pre-tax income.
18
Twenty-Six Weeks Ended June 26, 2021 compared to Twenty-Six Weeks Ended June 27, 2020
|
| Twenty-Six Weeks Ended (in thousands, except per barrel) |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
|
| June 26, 2021 |
|
| June 27, 2020 |
|
| Amount change |
|
| % change |
|
| Per barrel change |
| |||||||||||||||||||||
Barrels sold |
| 4,725 |
|
| 3,345 |
|
|
| 1,380 |
|
|
| 41.3 | % |
|
|
|
| ||||||||||||||||||
|
|
|
|
|
| Per barrel |
|
| % of net revenue |
|
|
|
|
|
| Per barrel |
|
| % of net revenue |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net revenue |
| $ | 1,147,885 |
|
| $ | 242.96 |
|
|
| 100.0 | % |
| $ | 782,703 |
|
| $ | 234.02 |
|
|
| 100.0 | % |
| $ | 365,182 |
|
|
| 46.7 | % |
| $ | 8.94 |
|
Cost of goods |
|
| 622,566 |
|
|
| 131.77 |
|
|
| 54.2 | % |
|
| 425,106 |
|
|
| 127.10 |
|
|
| 53.6 | % |
|
| 197,460 |
|
|
| 46.4 | % |
|
| 4.67 |
|
Gross profit |
|
| 525,319 |
|
|
| 111.19 |
|
|
| 45.8 | % |
|
| 357,597 |
|
|
| 106.92 |
|
|
| 46.4 | % |
|
| 167,722 |
|
|
| 46.9 | % |
|
| 4.27 |
|
Advertising, promotional and selling expenses |
|
| 302,479 |
|
|
| 64.02 |
|
|
| 26.4 | % |
|
| 198,227 |
|
|
| 59.27 |
|
|
| 22.2 | % |
|
| 104,252 |
|
|
| 52.6 | % |
|
| 4.75 |
|
General and administrative expenses |
|
| 64,906 |
|
|
| 13.74 |
|
|
| 5.7 | % |
|
| 56,714 |
|
|
| 16.96 |
|
|
| 6.6 | % |
|
| 8,192 |
|
|
| 14.4 | % |
|
| (3.22 | ) |
Impairment of assets |
|
| 1,231 |
|
|
| 0.26 |
|
|
| 0.1 | % |
|
| 2,355 |
|
|
| 0.70 |
|
|
| 0.2 | % |
|
| (1,124 | ) |
|
| (47.7 | )% |
|
| (0.44 | ) |
Total operating expenses |
|
| 368,616 |
|
|
| 78.02 |
|
|
| 32.1 | % |
|
| 257,296 |
|
|
| 76.93 |
|
|
| 28.9 | % |
|
| 111,320 |
|
|
| 43.3 | % |
|
| 1.09 |
|
Operating income |
|
| 156,703 |
|
|
| 33.17 |
|
|
| 13.7 | % |
|
| 100,301 |
|
|
| 29.99 |
|
|
| 17.4 | % |
|
| 56,402 |
|
|
| 56.2 | % |
|
| 3.18 |
|
Other (expense) income, net |
|
| (56 | ) |
|
| (0.01 | ) |
|
| (0.0 | )% |
|
| (561 | ) |
|
| (0.17 | ) |
|
| (0.1 | )% |
|
| 505 |
|
|
| (90.0 | )% |
|
| 0.16 |
|
Income before income tax expense |
|
| 156,647 |
|
|
| 33.16 |
|
|
| 13.6 | % |
|
| 99,740 |
|
|
| 29.82 |
|
|
| 17.4 | % |
|
| 56,907 |
|
|
| 57.1 | % |
|
| 3.34 |
|
Income tax expense |
|
| 31,887 |
|
|
| 6.75 |
|
|
| 2.8 | % |
|
| 21,365 |
|
|
| 6.39 |
|
|
| 4.1 | % |
|
| 10,522 |
|
|
| 49.2 | % |
|
| 0.36 |
|
Net income |
| $ | 124,760 |
|
| $ | 26.41 |
|
|
| 10.9 | % |
| $ | 78,375 |
|
| $ | 23.43 |
|
|
| 13.3 | % |
| $ | 46,385 |
|
|
| 59.2 | % |
| $ | 2.98 |
|
Net revenue. Net revenue increased by $365.2 million, or 46.7%, to $1,148.9 million for the twenty-six weeks ended June 26, 2021, as compared to $782.7 million for the twenty-six weeks ended June 27, 2020, primarily as a result of an increase in shipments.
Volume. Total shipment volume increased by 41.3% to 4,725,000 barrels for the twenty-six weeks ended June 26, 2021, as compared to 3,345,000 barrels for the twenty-six weeks ended June 27, 2020, primarily due to increases in shipments of Truly Hard Seltzer, Twisted Tea, Samuel Adams and Dogfish Head brand products that were only partially offset by decreases in the Angry Orchard brand products.
Depletions, or sales by distributors to retailers, of the Company’s products for the twenty-six weeks ended June 26, 2021 increased by approximately 33% compared to the twenty-six weeks ended June 27, 2020, primarily due toincreases in shipments of Truly Hard Seltzer, Twisted Tea, Samuel Adams and Dogfish Head brand products that were only partially offset by decreases in the Angry Orchard brand products.
Net revenue per barrel. Net revenue per barrel increased by 3.8% to $242.96 per barrel for the twenty-six weeks ended June 26, 2021, as compared to $234.02 per barrel for the comparable period in 2020, primarily due to price increases and $5.8 million reduction to net revenue for estimated keg returns from distributors and retailers related to COVID-19 in the twenty-six weeks ended June 27, 2020.
Cost of goods sold. Cost of goods sold was $131.77 per barrel for the twenty-six weeks ended June 26, 2021, as compared to $127.10 per barrel for the twenty-six weeks ended June 27, 2020. The 2021 increase in cost of goods sold of $4.67 per barrel was primarily the result of higher processing costs due to increased production at third-party breweries, partially offset by cost saving initiatives at the Company-owned breweries and $5.6 million of COVID-19 related direct costs recorded in cost of goods sold in the twenty-six weeks ended June 27, 2020.
Gross profit. Gross profit was $111.19 per barrel for the twenty six weeks ended June 26, 2021, as compared to $106.92 per barrel for the twenty-six weeks ended June 27, 2020.
Advertising, promotional and selling. Advertising, promotional and selling expenses increased by $104.3 million, or 52.6%, to $302.5 million for the twenty-six weeks ended June 26, 2021, as compared to $198.2 million for the twenty-six weeks ended June 27, 2020. The increase was primarily due to increased brand investments of $62.2 million, mainly driven by higher media, production and local marketing costs and increased freight to distributors of $42.0 million that was primarily due to higher rates and volumes.
19
Advertising, promotional and selling expenses were 26.4% of net revenue, or $64.02 per barrel, for the twenty-six weeks ended June 26, 2021, as compared to 22.2% of net revenue, or $59.27 per barrel, for the twenty-six weeks ended June 27, 2020. This increase per barrel is primarily due to advertising, promotional and selling expenses growing at a higher rate than shipments. 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.
General and administrative. General and administrative expenses increased by $8.2 million, or 14.4%, to $64.9 million for the twenty-six weeks ended June 26, 2021, as compared to $56.7 million for the twenty-six weeks ended June 27, 2020. The increase was primarily due to increases in salaries and benefits and external services.
Impairment of assets. Impairment of long-lived assets decreased $1.1 million from the first half of 2020, primarily due to lower write-downs of brewery equipment at Company-owned breweries.
Income tax expense. During the twenty-six weeks ended June 26, 2021, the Company recorded a net income tax expense of $31.9 million which consists of $40.9 million income tax expenses partially offset by an $9.0 million tax benefit related to stock option exercises in accordance with ASU 2016-09. The Company’s effective tax rate for the twenty-six weeks ended June 26, 2021, excluding the impact of ASU 2016-09, increased to 26.1% from 25.8% for the twenty-six weeks ended June 27, 2020, primarily due to an increase in state taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company’s primary sources of liquidity are its existing cash balances, cash flows from operating activities and amounts available under its revolving credit facility. The Company’s material cash requirements include working capital needs, satisfaction of contractual commitments, and investment in the Company’s business through capital expenditures.
Cash decreased to $103.0$15.7 million as of JuneMarch 26, 20212023 from $163.6$26.8 million as of December 26, 2020, 25, 2021, reflecting cash used in operating activities, purchases of property, plant and equipment and payments of tax withholdings on stock-based payment awards and investment shares, partially offset by cash provided by operating activities.borrowed on the Company's revolving line of credit net of repayments and proceeds from the exercise of stock options and sale of investment shares.
Cash used in or provided by operating activities consists of net (loss) income, adjusted for certain non-cash items, such as depreciation and amortization, stock-based compensation expense, other non-cash items included in operating results, and changes in operating
18
assets and liabilities, such as accounts receivable, inventory, accounts payable and accrued expenses. In the first quarter of 2022 compared to the first quarter of 2021, the Company’s average account receivable payment terms shifted slightly toward customers with longer payment terms. This impact for the remainder of the year ending December 31, 2022 is uncertain due to product and geographical mix but the Company does not expect this to significantly impact its liquidity.
Cash used in operating activities for the thirteen weeks ended March 26, 2022 was $41.0 million and primarily consisted of a net increase in operating assets and liabilities of $63.7 million and a net loss of $2.0 million, partially offset by non-cash items of $24.7 million. Cash provided by operating activities for the twenty-sixthirteen weeks ended June 26,March 27, 2021 was $31.0$19.8 million and primarily consisted of net income of $124.8$65.6 million and non-cash items of $49.4$28.6 million, partially offset by a net increase in operating assets and liabilities of $143.1 million. Cash provided by operating activities for the twenty-six weeks ended June 26, 2020 was $104.0 million and primarily consisted of net income of $78.4 million and non-cash items of $58.5 million, partially offset by a net increase in operating assets and liabilities of $32.9$74.4 million. The decrease in cash provided by operating activities for the twenty-sixthirteen weeks ended JuneMarch 26, 20212022 compared to the prior period is primarily due to lower net income compared to the increaseprior year and increases in Truly brand finished goods inventory. This inventory was produced to support demand during the summer peak periodaccounts receivable and is expected to be sold during the second half of 2021.accrued expenses.
The Company used $83.0$23.7 million in investing activities during the twenty-sixthirteen weeks ended JuneMarch 26, 2021,2022, as compared to $59.8$38.8 million during the twenty-sixthirteen weeks ended JuneMarch 27, 2020.2021. Investing activities primarily consisted of capital investments made mostly in the Company’s breweries to drive efficiencies and cost reductions and support product innovation and future growth.
Cash usedprovided by financing activities was $8.4$14.2 million during the twenty-sixthirteen weeks ended JuneMarch 26, 2021,2022, as compared to $5.8$0.4 million provided by financing activities during the twenty-sixthirteen weeks ended JuneMarch 27, 2020.2021. The $14.2$13.7 million decreaseincrease in cash provided by financing activities in 20212022 from 20202021 is primarily due to $15.5$30.0 million in payments of tax withholdingcash borrowed on stock-based payment awards and investment shares.the Company's revolving line of credit, net of $15.0 million repaid.
During the twenty-sixthirteen weeks ended JuneMarch 26, 20212022 and the period from June 27, 2021March 26, 2022 through JulyApril 16, 2021,2022, the Company did not repurchase any shares of its Class A Common Stock. As of JulyApril 16, 2021,2022, the Company had repurchased a cumulative total of approximately 13.8 million shares of its Class A Common Stock for an aggregate purchase price of $840.7 million and had approximately $90.3 million remaining on the $931.0 million stock repurchase expenditure limit set by the Board of Directors.
The Company expects that its cash balance as of JuneMarch 26, 20212022 of $103.0$15.7 million, along with future operating cash flow and the unused balance of the Company’s line of credit of $150.0$135.0 million, will be sufficient to fund future cash requirements. The Company’s $150.0 million credit facility has a term not scheduled to expire until March 31, 2023. The Company is currently in negotiations on an extension of the term on the credit facility and expects an agreement to be reached during the second or third quarter of 2022. As of the date of this filing, the Company was not in violation of any of its covenants to the lender under the credit facility.
2021 Outlook
Year-to-date depletions through the twenty-eight weeks ended July 10, 2021 are estimated to have increased approximately 32% from the comparable period in 2020.
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The Company is currently estimating 2021 depletions and shipments growth of between 25% and 40%, a decrease from the previously communicated range of between 40% and 50%. The Company is targeting national price increases of between 1% and 3. Full-year 2021 gross margins are currently expected to be between 45% and 47%. The Company intends to increase advertising, promotional and selling expenses by between $80million and $100 million for the full year 2021, a decrease from the previously communicated range of between $130 million and $150 million, not including any changes in freight costs for the shipment of products to Distributors. The Company intends to increase its investment in its brands in 2021, commensurate with the opportunities for growth that it sees, but there is no guarantee that such increased investments will result in increased volumes.
The Company currently projects Non-GAAP earnings per diluted share, which excludes the impact of ASU 2016-09, for 2021 of between $18.00 and $22.00, a decrease from the previously communicate range of between $22.00 and $26.00, but actual results could vary significantly from this target. The Company estimates a full-year 2021 Non-GAAP effective tax rate of approximately 26.0%, which excludes the impact of ASU 2016-09. Non-GAAP earnings per diluted share and Non-GAAP effective tax rate are not defined terms under U.S. generally accepted accounting principles (“GAAP”). These Non-GAAP measures should not be considered in isolation or as a substitute for diluted earnings per share and effective tax rate data prepared in accordance with GAAP, and may not be comparable to calculations of similarly titled measures by other companies. Management believes these Non-GAAP measures provide meaningful and useful information to investors and analysts regarding our outlook and facilitate period to period comparisons of our forecasted financial performance. Non-GAAP earnings per diluted share and Non-GAAP effective tax rate exclude the potential impact of ASU 2016-09, which could be significant and will depend largely upon unpredictable future events outside the Company’s control, including the timing and value realized upon exercise of stock options versus the fair value of those options when granted. Therefore, because of the uncertainty and variability of the impact of ASU 2016-09, the Company is unable to provide, without unreasonable effort, a reconciliation of these Non-GAAP measures on a forward-looking basis.
The Company is continuing to evaluate 2021 capital expenditures. Its current estimates are between $180million and $230million, a decrease of the previously communicated range of between $250 million and $350 million, consisting mostly of investments in capacity and supply chain efficiency improvements. The actual total amount spent on 2021 capital expenditures may well be different from these estimates. Based on information currently available, the Company believes that its capacity requirements for 2021 can be covered by its Company-owned breweries and existing contracted capacity at third-party brewers.
THE POTENTIAL IMPACT OF KNOWN FACTS, COMMITMENTS, EVENTS AND UNCERTAINTIES
Off-balance Sheet Arrangements
At June 26, 2021, the Company did not have off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
Contractual Obligations
There were no material changes outside of the ordinary course of the Company’s business to contractual obligations during the three-month period ended June 26, 2021.
Critical Accounting Policies
There were no material changes to the Company’s critical accounting policies during the three-month period ended JuneMarch 26, 2021.2022.
FORWARD-LOOKING STATEMENTS
In this Quarterly Report on Form 10-Q and in other documents incorporated herein, as well as in oral statements made by the Company, statements that are prefaced with the words “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “intend,” “designed” and similar expressions, are intended to identify forward-looking statements regarding events, conditions, and financial trends that may affect the Company’s future plans of operations, business strategy, results of operations and financial position. These statements are based on the Company’s current expectations and estimates as to prospective events and circumstances about which the Company can give no firm assurance. Further, any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward-looking statement to reflect subsequent events or circumstances. Forward-looking statements should not be relied upon as a prediction of actual future financial condition or results. These forward-looking statements, like any forward-looking statements, involve risks and uncertainties that could cause actual results to differ materially from those projected or anticipated. Such risks and uncertainties include the factors set forth below in addition to the other information set forth in this Quarterly Report on Form 10-Q and in the section titled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 26, 2020.25, 2021.
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Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Since December 26, 2020,25, 2021, there have been no significant changes in the Company’s exposures to interest rate or foreign currency rate fluctuations. The Company currently does not enter into derivatives or other market risk sensitive instruments for the purpose of hedging or for trading purposes.
Item 4.CONTROLS AND PROCEDURES
As of JuneMarch 26, 2021,2022, the Company conducted an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer (its principal executive officer and principal financial officer, respectively) regarding the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) were effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the requisite time periods and that such disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to its management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
As a result of the COVID-19 pandemic, certain employees of the Company began working remotely in March 2020 but these
There were no changes to the working environment did not have a material effect on the Company’s internal control over financial reporting. There was no other change in the Company’s internal control over financial reporting that occurred during the twenty-sixthirteen weeks ended JuneMarch 26, 20212022 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II.OTHER INFORMATION
Item 1.LEGA LEGAL PROCEEDINGSL PROCEEDINGS
During
For information regarding the twenty-six weeks ended June 26, 2021, there were no material changesCompany's legal proceedings, refer to Note K of the disclosure made in the Company’s Annual Report on Form 10-K for the year ended December 26, 2020.Condensed Consolidated Financial Statements.
Item 1A.RI RISK FACTORSSK FACTORS
In addition to the other information set forth in this report, careful consideration should be given to the factors discussed in Part I, "Item 1A. Risk Factors" in the Company’s Annual Report on Form 10-K for the year ended December 26, 2020,25, 2021, which could materially affect the Company’s business, financial condition or future results. The risks described in the Company’s Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that it currently deems to be immaterial also may materially adversely affect its business, financial condition and/or operating results.
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Item 2.UNREGISTERED SALES OF EQUITYEQUITY SECURITIES AND USE OF PROCEEDS
As of JulyApril 16, 2021,2022, the Company had repurchased a cumulative total of approximately 13.8 million shares of its Class A Common Stock for an aggregate purchase price of $840.7 million and had $90.3 million remaining on the $931.0 million share buyback expenditure limit set by the Board of Directors. During the twenty-sixthirteen weeks ended JuneMarch 26, 2021,2022, the Company did not repurchase any shares of its Class A Common Stock under the previously announced repurchase program.
During the twenty-sixthirteen weeks ended JuneMarch 26, 2021,2022, the Company repurchased 279310 shares of its Class A Common Stock, of which all represent repurchases of unvested investment shares issued under the Investment Share Program of the Company’s Employee Equity Incentive 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 27, 2020 to January 30, 2021 |
|
| - |
|
| $ | - |
|
|
| — |
|
| $ | 90,335 |
|
January 31, 2021 to February 27, 2021 |
|
| 20 |
|
|
| 218.79 |
|
|
| — |
|
|
| 90,335 |
|
February 27, 2021 to March 27, 2021 |
|
| 163 |
|
|
| 192.77 |
|
|
| — |
|
|
| 90,335 |
|
March 28, 2021 to May 1, 2021 |
|
| - |
|
|
| - |
|
|
| — |
|
|
| 90,335 |
|
May 2, 2021 to May 29,2021 |
|
| 94 |
|
|
| 314.86 |
|
|
| — |
|
|
| 90,335 |
|
May 30, 2021 to June 26, 2021 |
|
| 2 |
|
|
| 135.88 |
|
|
| — |
|
|
| 90,335 |
|
Total |
|
| 279 |
|
| $ | 235.36 |
|
|
| — |
|
| $ | 90,335 |
|
Period |
| Total Number of Shares |
|
|
| Average Price Paid |
|
|
| Total Number of Shares |
|
| Approximate Dollar |
| ||||||
December 26, 2021 - January 29, 2022 |
|
| 26 |
|
|
| $ | 248.61 |
|
|
|
| — |
|
| $ | 90,335 |
| ||
January 30, 2022 - February 26, 2022 |
|
| 153 |
|
|
|
| 260.46 |
|
|
|
| — |
|
|
| 90,335 |
| ||
February 27, 2022 - March 26, 2022 |
|
| 131 |
|
|
|
| 289.29 |
|
|
|
| — |
|
|
| 90,335 |
| ||
Total |
|
| 310 |
|
| - |
| $ | 271.65 |
|
| - |
|
| - |
|
| $ | 90,335 |
|
As of JulyApril 16, 2021,2022, the Company had 10.110.2 million shares of Class A Common Stock outstanding and 2.1 million shares of Class B Common Stock outstanding.
Item 3.DEFAULTS UPONUPON SENIOR SECURITIES
Not Applicable
Item 4.MINE SAFETY DISCLOSURES
Not Applicable
Item 5.OTHER INFORMATION INFORMATION
Not Applicable
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Item 6. EXHIBITSEXHIBITS
Exhibit No. | Title | |
| ||
| ||
*31.1 | ||
| ||
*31.2 | ||
| ||
| ||
*32.1 | ||
| ||
| ||
*32.2 | ||
| ||
*101.INS |
| Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
*101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
*101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
*101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
*101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
*101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
*104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed with this report |
|
|
|
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SIGNATURES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.
THE BOSTON BEER COMPANY, INC |
(Registrant) |
Date: | /s/ David A. Burwick |
David A. Burwick | |
President and Chief Executive Officer | |
(Principal Executive Officer) |
Date: | /s/ Frank H. Smalla |
Frank H. Smalla | |
Chief Financial Officer | |
(Principal Financial Officer) |
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