UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(IRS Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act.
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ____
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.) Yes ☐ No
Number of shares outstanding of each of the issuer’s classes of common stock, as of October 18, 2024:
Class A Common Stock, $.01 par value |
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Class B Common Stock, $.01 par value |
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(Title of each class) |
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(Number of shares) |
THE BOSTON BEER COMPANY, INC.
FORM 10-Q
September 28, 2024
TABLE OF CONTENTS
PART I. |
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FINANCIAL INFORMATION |
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PAGE |
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Item 1. |
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3 |
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Condensed Consolidated Balance Sheets as of September 28, 2024 and December 30, 2023 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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26 |
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Item 4. |
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26 |
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PART II. |
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OTHER INFORMATION |
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Item 1. |
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27 |
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Item 1A. |
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27 |
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Item 2. |
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28 |
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Item 3. |
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28 |
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Item 4. |
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28 |
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Item 5. |
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28 |
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Item 6. |
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29 |
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30 |
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EX-31.1 Section 302 CEO Certification
EX-31.2 Section 302 CFO Certification
EX-32.1 Section 906 CEO Certification
EX-32.2 Section 906 CFO Certification
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)
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September 28, |
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December 30, |
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Assets |
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Current Assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable |
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Inventories |
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Prepaid expenses and other current assets |
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Income tax receivable |
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- |
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Total current assets |
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Property, plant, and equipment, net |
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Operating right-of-use assets |
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Goodwill |
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Intangible assets, net |
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Third-party production prepayments |
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Note receivable |
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— |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders' Equity |
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Current Liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Current operating lease liabilities |
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Total current liabilities |
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Deferred income taxes, net |
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Non-current operating lease liabilities |
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Other liabilities |
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Total liabilities |
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(See Note I) |
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Stockholders' Equity: |
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Class A Common Stock, $ |
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Class B Common Stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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Retained earnings |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
(in thousands, except per share data)
(unaudited)
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Thirteen weeks ended |
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Thirty-nine weeks ended |
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September 28, |
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September 30, |
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September 28, |
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September 30, |
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Revenue |
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$ |
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$ |
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$ |
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$ |
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Less excise taxes |
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Net revenue |
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Cost of goods sold |
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Gross profit |
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Operating expenses: |
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Advertising, promotional, and selling expenses |
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General and administrative expenses |
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Impairment of intangible assets |
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Impairment of brewery assets |
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Total operating expenses |
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Operating income |
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Other income: |
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Interest income |
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Other expense |
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Total other income |
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Income before income tax provision |
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Income tax provision |
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Net income |
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$ |
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$ |
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$ |
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Net income per common share – basic |
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$ |
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$ |
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$ |
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$ |
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Net income per common share – diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted-average number of common shares – basic |
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Weighted-average number of common shares – diluted |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive income (loss) : |
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Foreign currency translation adjustment |
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— |
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Total other comprehensive income (loss) |
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( |
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— |
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Comprehensive income |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
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Thirty-nine weeks ended |
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September 28, |
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September 30, |
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Cash flows provided by operating activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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Impairment of intangible assets |
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Impairment of brewery assets |
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Gain on sale of property, plant, and equipment |
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— |
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Change in right-of-use assets |
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Stock-based compensation expense |
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Deferred income taxes |
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Other non-cash expense |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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( |
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Inventories |
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( |
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Prepaid expenses, income tax receivable, and other assets |
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( |
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Third-party production prepayments |
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Other assets |
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( |
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Accounts payable |
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Accrued expenses, income taxes payable and other liabilities |
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Operating lease liabilities |
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( |
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Net cash provided by operating activities |
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Cash flows used in investing activities: |
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Cash paid for note receivable |
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( |
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Purchases of property, plant, and equipment |
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( |
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Proceeds from disposal of property, plant, and equipment |
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Net cash used in investing activities |
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( |
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Cash flows used in financing activities: |
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Repurchases and retirement of Class A common stock |
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( |
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Proceeds from exercise of stock options and sale of investment shares |
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Cash paid on finance leases |
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( |
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Payment of tax withholding on stock-based payment awards and investment shares |
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( |
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( |
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Net cash used in financing activities |
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( |
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( |
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Change in cash and cash equivalents |
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( |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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Supplemental disclosure of cash flow information: |
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Income tax payments, net |
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$ |
( |
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$ |
( |
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Cash paid for amounts included in measurement of lease liabilities |
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Operating cash outflows from operating leases |
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$ |
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$ |
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Operating cash outflows from finance leases |
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$ |
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$ |
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Financing cash outflows from finance leases |
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$ |
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$ |
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Right-of-use-assets obtained in exchange for finance lease obligations |
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$ |
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$ |
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Increase (decrease) in accounts payable and accrued expenses for purchases of property, plant, and equipment |
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$ |
( |
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$ |
( |
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Increase in accrued expenses for non-cash financing activity – accrued excise taxes on share repurchases |
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$ |
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$ |
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Non-cash investing activity - reduction in accrued expenses and notes receivable |
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$ |
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$ |
- |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the thirteen and thirty-nine weeks ended September 28, 2024 and September 30, 2023
(in thousands)
(unaudited)
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Class A |
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Accumulated |
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Class A |
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Common |
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Class B |
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Class B |
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Additional |
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Other |
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Total |
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Common |
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Stock, |
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Common |
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Common |
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Paid-in |
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Comprehensive |
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Retained |
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Stockholders’ |
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Shares |
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Par |
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Shares |
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Stock, Par |
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Capital |
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Loss |
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Earnings |
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Equity |
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Balance at December 30, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Net income |
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Stock options exercised and restricted |
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— |
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( |
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( |
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Stock-based compensation expense |
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Repurchase and retirement of Class A Common Stock |
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( |
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( |
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( |
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( |
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Foreign currency translation adjustment |
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( |
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( |
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Balance at March 30, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Net income |
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Stock options exercised and restricted |
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— |
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Stock-based compensation expense |
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Repurchase and retirement of Class A Common Stock |
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( |
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( |
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( |
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( |
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Foreign currency translation adjustment |
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( |
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( |
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Balance at June 29, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Net income |
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Stock options exercised and restricted |
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— |
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Stock-based compensation expense |
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Repurchase and retirement of Class A Common Stock |
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( |
) |
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( |
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( |
) |
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( |
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Foreign currency translation adjustment |
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Balance at September 28, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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6
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Class A |
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Accumulated |
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Class A |
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Common |
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Class B |
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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 31, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||||
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||||||
Stock options exercised and restricted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||||||
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Repurchase and retirement of Class A Common Stock |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||||
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance at April 1, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Stock options exercised and restricted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Repurchase and retirement of Class A Common Stock |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||||
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance at July 1, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Stock options exercised and restricted |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Stock-based compensation expense |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Repurchase and retirement of Class A Common Stock |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Foreign currency translation adjustment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balance at September 30, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
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 trademarks “The Boston Beer Company®”, “Twisted Tea Brewing Company®”, “Hard Seltzer Beverage Company”, “Angry Orchard® Cider Company”, “Dogfish Head® Craft Brewery”, “Dogfish Head Distilling Co.”, “Angel City® Brewing Company”, “Coney Island® Brewing Company”, "Green Rebel Brewing Co.", "Truly Distilling Co.", and "Sun Cruiser Beverage Co.".
The accompanying unaudited condensed consolidated balance sheet as of September 28, 2024, and the unaudited condensed consolidated statements of comprehensive operations, stockholders’ equity, and cash flows for the interim periods ended September 28, 2024 and September 30, 2023, respectively, 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 30, 2023.
In the opinion of the Company’s management, the Company’s unaudited condensed consolidated balance sheet as of September 28, 2024 and the results of its condensed consolidated comprehensive operations, stockholders’ equity, and cash flows for the interim periods ended September 28, 2024 and September 30, 2023, 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.
B. Recent Accounting Pronouncements
New accounting pronouncements are issued periodically by the FASB and are adopted by the Company as of the specified effective dates. Unless otherwise disclosed below, the Company believes that recently issued and adopted pronouncements will not have a material impact on the Company’s financial position, results of operations and cash flows or do not apply to the Company’s operations.
In November 2023, the FASB issued ASU 2023-07—Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU was issued to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This ASU applies to all public entities that are required to report segment information in accordance with Topic 280, Segment Reporting. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted and the standard should be applied retrospectively. ASU 2023-07 will be effective for the Company's fiscal year ending December 28, 2024. The Company will adopt this ASU disclosure in the fourth quarter of 2024 and does not believe the adoption will have a material impact on its consolidated financial statements and disclosures
In December 2023, the FASB issued ASU 2023-09—Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU was issued to address investor requests for more transparency about income tax information through improvements to income tax disclosure primarily related to the rate reconciliation and income taxes paid information, and to improve the effectiveness of income tax disclosures. This ASU is effective for public entities for annual periods beginning after December 15, 2024. Early adoption is permitted. ASU 2023-09 will be effective for the Company in the first quarter of its fiscal year ending December 27, 2025. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements and disclosures.
C. Revenue Recognition
During the thirty-nine weeks ended September 28, 2024 and September 30, 2023, approximately
8
The Company recognizes revenue when obligations under the terms of a contract with its customer are satisfied; generally, this occurs with the transfer of control of its products. Revenue is measured as the amount of consideration expected to be received in exchange for transferring products. If the conditions for revenue recognition are not met, the Company defers the revenue until all conditions are met. As of September 28, 2024 and December 30, 2023, the Company has deferred $
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 $
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 net revenue or as advertising, promotional and selling expenses for the thirteen and thirty-nine weeks ended September 28, 2024 were $
D. Inventories
Inventories consist of raw materials, work in process and finished goods which are stated at the lower of cost, determined on the first-in, first-out basis, or net realizable value. Raw materials principally consist of hops, malt, flavorings, fruit juices, other brewing materials and packaging. 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.
|
|
September 28, |
|
|
December 30, |
|
||
|
|
(in thousands) |
|
|||||
Current inventory: |
|
|
|
|
|
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Work in process |
|
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
|
||
Total current inventory |
|
|
|
|
|
|
||
Long term inventory |
|
|
|
|
|
|
||
Total inventory |
|
$ |
|
|
$ |
|
||
As of September 28, 2024 and December 30, 2023, the Company has recorded inventory obsolescence reserves of $
9
E. Goodwill and Intangible Assets
The Company has recorded intangible assets with indefinite lives and goodwill for which impairment testing is required at least annually or more frequently if events or circumstances indicate that these assets might be impaired. The Company performs its annual impairment tests and re-evaluates the useful lives of other intangible assets with indefinite lives at the annual impairment test measurement date in the third quarter of each fiscal year or when circumstances arise that indicate a possible impairment or change in useful life might exist.
Goodwill. The guidance for goodwill impairment testing allows an entity to assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the estimated fair value of a reporting unit, of which the Company has one, is less than its carrying amount or to proceed directly to performing a quantitative impairment test. Under the quantitative assessment, the estimated fair value of the Company’s reporting unit is compared to its carrying value, including goodwill. The estimate of fair value of the Company’s reporting unit is generally calculated based on an income approach using the discounted cash flow method supplemented by the market approach which considers the Company’s market capitalization and enterprise value. If the estimated fair value of the Company’s reporting unit is less than the carrying value of its reporting unit, a goodwill impairment will be recognized. In estimating the fair value of the Company’s reporting unit, management must make assumptions and projections regarding such items as future cash flows, future revenues, future earnings, cost of capital, and other factors. The assumptions used in the estimate of fair value are based on historical trends and the projections and assumptions that are used in the latest operating plans. These assumptions reflect management’s estimates of future economic and competitive conditions and are, therefore, subject to change as a result of changing market conditions. If these estimates or their related assumptions change in the future, the Company may be required to recognize an impairment loss for the Company’s goodwill which could have a material adverse impact on the Company’s financial statements.
Intangible assets. The Company’s intangible assets consist primarily of a trademark and customer relationships obtained through the Company’s Dogfish Head acquisition. Customer relationships are amortized over their estimated useful lives. As of the September 28, 2024, the Dogfish Head trademark which was determined to have an indefinite useful life was not amortized. The guidance for indefinite lived intangible asset impairment testing allows an entity to assess qualitative factors to determine whether the existence of events or circumstances indicates that it is more likely than not that the indefinite lived intangible asset is impaired or to proceed directly to performing the quantitative impairment test. Under the quantitative assessment, the trademark is evaluated for impairment by comparing the carrying value of the trademark to its estimated fair value. The estimated fair value of the trademark is calculated based on an income approach using the relief from royalty method. If the estimated fair value is less than the carrying value of the trademark, then an impairment charge is recognized to reduce the carrying value of the trademark to its estimated fair value.
The Company's annual impairment testing date is September 1st of each fiscal year. In 2024, this testing resulted in an impairment of the Company's Dogfish Head, Coney Island, and Angel City trademark assets of $