10-Q 1 sam-20220326.htm 10-Q 10-Q
Q130000949870http://fasb.org/us-gaap/2021-01-31#AccountingStandardsUpdate201912Member581,709--12-26http://fasb.org/us-gaap/2021-01-31#AccountingStandardsUpdate201912Member1028.71false0000949870us-gaap:CommonClassBMember2021-12-250000949870us-gaap:AdditionalPaidInCapitalMember2020-12-272021-03-270000949870us-gaap:MachineryAndEquipmentMember2022-03-260000949870us-gaap:RevolvingCreditFacilityMember2022-03-260000949870us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-260000949870us-gaap:CustomerRelationshipsMember2022-03-260000949870us-gaap:RetainedEarningsMember2020-12-260000949870us-gaap:CommonClassAMember2020-12-272021-03-270000949870us-gaap:CommonStockMemberus-gaap:CommonClassBMember2021-03-270000949870us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-270000949870us-gaap:AccountingStandardsUpdate201609Member2020-12-272021-03-270000949870us-gaap:TradeNamesMember2022-03-260000949870sam:OtherPurchaseCommitmentMember2022-03-260000949870us-gaap:AdditionalPaidInCapitalMember2021-12-2500009498702021-12-262022-03-260000949870us-gaap:AdditionalPaidInCapitalMember2021-03-270000949870us-gaap:SellingAndMarketingExpenseMember2021-12-262022-03-260000949870us-gaap:FacilityClosingMember2021-12-262022-03-2600009498702021-03-270000949870us-gaap:CommonClassBMember2020-12-272021-03-270000949870sam:UnvestedSharesMember2021-12-262022-03-260000949870us-gaap:CustomerRelationshipsMember2021-12-262022-03-260000949870srt:MinimumMemberus-gaap:StateAndLocalJurisdictionMember2021-12-262022-03-260000949870us-gaap:RestrictedStockMember2020-03-012020-03-0100009498702021-12-282021-12-280000949870us-gaap:CommonStockMemberus-gaap:CommonClassBMember2022-03-260000949870us-gaap:RetainedEarningsMember2020-12-272021-03-270000949870sam:VoluntaryEquityInvestmentProgramMember2021-12-262022-03-260000949870us-gaap:RetainedEarningsMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2020-12-272021-03-2700009498702021-06-272021-09-250000949870us-gaap:RevolvingCreditFacilityMembersrt:MaximumMember2021-12-262022-03-260000949870sam:CustomersMember2020-12-272021-03-270000949870us-gaap:SubsequentEventMember2022-04-112022-04-110000949870us-gaap:CommonStockMemberus-gaap:CommonClassAMember2021-03-2700009498702021-12-250000949870us-gaap:AdditionalPaidInCapitalMember2020-12-260000949870us-gaap:AdditionalPaidInCapitalMember2021-12-262022-03-260000949870sam:VoluntaryEquityInvestmentProgramMemberus-gaap:StockCompensationPlanMember2022-03-012022-03-010000949870us-gaap:GeneralAndAdministrativeExpenseMember2021-12-262022-03-260000949870us-gaap:RevolvingCreditFacilityMember2021-12-262022-03-260000949870srt:MinimumMembersam:VoluntaryEquityInvestmentProgramMember2021-12-262022-03-260000949870us-gaap:RestrictedStockMember2019-01-012019-01-010000949870us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-272021-03-270000949870us-gaap:TradeNamesMember2021-12-2500009498702020-12-272021-03-270000949870sam:UnvestedShareBasedPaymentsMember2021-12-262022-03-260000949870us-gaap:CommonClassAMember2022-04-160000949870us-gaap:RetainedEarningsMember2022-03-260000949870sam:DistributorsMember2021-12-262022-03-2600009498702020-12-260000949870us-gaap:SubsequentEventMember2022-04-082022-04-080000949870us-gaap:StockCompensationPlanMembersam:SeniorManagementMembersam:PerformanceBasedAwardsMember2022-03-012022-03-010000949870us-gaap:RetainedEarningsMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2020-12-260000949870us-gaap:RestrictedStockMember2022-03-012022-03-010000949870sam:BrandSupportMember2022-03-260000949870sam:PepsiLicensingAgreementMembersam:PepsicoIncMember2021-12-262022-03-260000949870us-gaap:CommonClassBMember2021-12-262022-03-260000949870us-gaap:RestrictedStockMember2019-03-012019-03-010000949870us-gaap:CommonStockMemberus-gaap:CommonClassAMember2021-12-250000949870us-gaap:AccountingStandardsUpdate201609Member2021-12-262022-03-260000949870us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-260000949870srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2020-12-260000949870us-gaap:CommonClassAMember2021-12-250000949870sam:DogfishHeadBreweryMember2022-03-260000949870srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AccountingStandardsUpdate201912Member2021-03-270000949870us-gaap:SellingAndMarketingExpenseMember2020-12-272021-03-270000949870sam:UnvestedSharesMember2020-12-272021-03-270000949870us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-250000949870us-gaap:CommonStockMemberus-gaap:CommonClassAMember2021-12-262022-03-260000949870us-gaap:GeneralAndAdministrativeExpenseMember2020-12-272021-03-270000949870sam:DogfishHeadBreweryMember2021-12-262022-03-260000949870us-gaap:CommonClassAMember2021-12-262022-03-260000949870sam:JimBeamBrandsCoMembersam:BeamSuntoryLicensingAgreementMember2021-12-262022-03-260000949870sam:IngredientsAndPackagingExcludingHopsAndMaltMember2022-03-260000949870us-gaap:CommonClassBMember2022-04-160000949870us-gaap:StateAndLocalJurisdictionMember2021-12-262022-03-260000949870us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-262022-03-260000949870sam:UnvestedShareBasedPaymentsMember2020-12-272021-03-270000949870srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2020-12-272021-03-270000949870srt:MaximumMemberus-gaap:StateAndLocalJurisdictionMember2021-12-262022-03-260000949870us-gaap:CustomerRelationshipsMember2021-12-250000949870sam:DogfishHeadBreweryMember2020-12-272021-03-270000949870us-gaap:RetainedEarningsMember2021-12-262022-03-2600009498702022-03-260000949870sam:HopsAndMaltMember2022-03-260000949870sam:PepsiLicensingAgreementMembersam:PepsicoIncMember2021-08-092021-08-090000949870us-gaap:RetainedEarningsMember2021-03-2700009498702021-09-262021-12-250000949870us-gaap:CommonClassBMember2022-03-260000949870sam:DistributorsMember2020-12-272021-03-270000949870us-gaap:CommonStockMemberus-gaap:CommonClassAMember2020-12-272021-03-270000949870sam:PerformanceBasedAwardsMember2022-03-260000949870us-gaap:CommonClassAMember2022-03-260000949870sam:CustomersMember2021-12-262022-03-260000949870us-gaap:CommonStockMemberus-gaap:CommonClassBMember2021-12-250000949870us-gaap:CommonStockMemberus-gaap:CommonClassBMember2020-12-260000949870us-gaap:CommonStockMemberus-gaap:CommonClassAMember2022-03-260000949870us-gaap:AdditionalPaidInCapitalMember2022-03-260000949870sam:JimBeamBrandsCoMembersam:BeamSuntoryLicensingAgreementMember2021-07-142021-07-140000949870us-gaap:RetainedEarningsMember2021-12-250000949870srt:MaximumMembersam:VoluntaryEquityInvestmentProgramMember2021-12-262022-03-260000949870us-gaap:CommonStockMemberus-gaap:CommonClassAMember2020-12-26iso4217:USDxbrli:sharesxbrli:purexbrli:sharessam:Timesam:Agreementiso4217:USD

Table of Contents

 

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 March 26, 2022

 

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)

 

 

MASSACHUSETTS

 

04-3284048

(State or other jurisdiction of

incorporation or organization)

 

(State or other jurisdiction of

incorporation Identification No.)

One Design Center Place,
Suite 850
, Boston, Massachusetts

 

02210

(Address of principal executive offices)

 

(Zip Code)

 

(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

 

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 April 16, 2022:

 

Class A Common Stock, $.01 par value

 

10,215,620

Class B Common Stock, $.01 par value

 

2,068,000

(Title of each class)

 

(Number of shares)

 

 


Table of Contents

 

THE BOSTON BEER COMPANY, INC.

FORM 10-Q

March 26, 2022

TABLE OF CONTENTS

 

PART I.

 

FINANCIAL INFORMATION

 

PAGE

 

 

 

 

 

 

 

 

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

 

3

 

 

 

Condensed Consolidated Balance Sheets as of March 26, 2022 and December 25, 2021

 

3

 

 

 

Condensed Consolidated Statements of Comprehensive Operations for the thirteen weeks ended March 26, 2022 and March 27, 2021

 

4

 

 

 

Condensed Consolidated Statements of Cash Flows for the thirteen weeks ended March 26, 2022 and March 27, 2021

 

5

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the thirteen weeks ended March 26, 2022 and March 27, 2021

 

6

 

 

 

Notes to Condensed Consolidated Financial Statements

 

7

 

 

 

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

17

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

 

20

 

 

Item 4.

Controls and Procedures

 

20

 

 

 

 

 

 

PART II.

 

OTHER INFORMATION

 

 

 

 

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

21

 

 

Item 1A.

Risk Factors

 

21

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

22

 

 

Item 3.

Defaults Upon Senior Securities

 

22

 

 

Item 4.

Mine Safety Disclosures

 

22

 

 

Item 5.

Other Information

 

22

 

 

Item 6.

Exhibits

 

23

 

 

 

 

 

 

SIGNATURES

 

24

 

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


Table of Contents

 

 

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,
2022

 

 

December 25,
2021

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

15,769

 

 

$

26,853

 

 Restricted Cash

 

 

-

 

 

 

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
   December 25, 2021, respectively

 

 

102

 

 

 

102

 

Class B Common Stock, $.01 par value; 4,200,000 shares authorized; 2,068,000
   and
2,068,000 issued and outstanding as of March 26, 2022 and
   December 25, 2021, respectively

 

 

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.

 

3


Table of Contents

 

THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS

(in thousands, except per share data)

(unaudited)

 

 

 

Thirteen weeks ended

 

 

 

March 26,
2022

 

 

March 27
2021

 

 

 

 

 

 

 

 

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

 

 

 

 

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.

 

4


Table of Contents

 

THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

 

Thirteen weeks ended

 

 

 

March 26,
2022

 

 

March 27
2021

 

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

 

 

 

 

 

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

 

 

 

 

Line of credit repayments

 

 

(15,000

)

 

 

 

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
   accrued expenses

 

$

73

 

 

$

(8,997

)

The accompanying notes are an integral part of these condensed consolidated financial statements.

5


Table of Contents

 

THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the thirteen ended March 26, 2022 and March 27, 2021

(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
   shares activities

 

 

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
   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

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

6


Table of Contents

 

 

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 Distilling Co.”, “Angel City® Brewing Company”, “Coney Island® Brewing Company”, "Green Rebel Brewing Co." and “Bevy Long Drink Co.”

 

The accompanying unaudited condensed consolidated balance sheet as of March 26, 2022, and the unaudited condensed consolidated statements of comprehensive operations, stockholders’ equity, and cash flows for the interim periods ended March 26, 2022 and March 27, 2021 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 25, 2021.

 

In the opinion of the Company’s management, the Company’s unaudited condensed consolidated balance sheet as of March 26, 2022 and the results of its condensed consolidated comprehensive operations, stockholders’ equity, and cash flows for the interim periods ended March 26, 2022 and March 27, 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.

 

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 million to retained earnings.

 

C. Revenue Recognition

 

During the thirteen weeks ended March 26, 2022 and March 27, 2021, approximately 96% and 97%, respectively, of the Company’s revenue was from shipments of its products to domestic distributors. 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 March 27, 2021. Approximately 1% of the Company's revenue was from beer, cider, and merchandise sales at the Company’s retail 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 March 26, 2022 and December 25, 2021, the Company has deferred $14.4 million and $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.

7


Table of Contents

 

 

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 $9.9 million and $23.4 million for the thirteen weeks ended March 26, 2022 and March 27, 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 weeks ended March 26, 2022 and March 27, 2021 were $19.0 million and $33.5 million, respectively. For the thirteen weeks ended March 26,2022 and March 27, 2021, the Company recorded certain of these costs in the total amounts of $6.7 million and $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.

 

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,
2022

 

 

December 25,
2021

 

 

 

(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

 

During the thirteen weeks ended March 26, 2022 and March 27, 2021, the Company brewed and packaged approximately 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 payments for capital improvements at these third-party brewing facilities that it expenses over the period of the contracts.

 

As a result of 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 into 2022. The Company has terminated

8


Table of Contents

 

relationships with some of its third-party production suppliers and incurred contract termination costs in doing so. During the thirteen weeks ended March 26, 2022 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 of March 26, 2022 and December 25, 2021, respectively. The Company will expense the total prepaid amount of $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.

 

At current production volume projections, the Company believes that it will fall short of its future annual volume commitments at certain third-party production facilities, including those that are part of the master transaction agreement described above, and will incur shortfall fees. The Company will expense the shortfall fees during the contractual period when such fees are incurred as a component of cost of goods sold. As of March 26, 2022, if volume for the remaining term of the production arrangements was zero, the contractual shortfall fees would total approximately $198 million over the duration of the contracts which have expiration dates through December 31, 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

 

No 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
Useful

 

 

Gross
Carrying

 

 

Accumulated

 

 

Net Book

 

 

Gross
Carrying

 

 

Accumulated

 

 

Net Book

 

 

 

Life (Years)

 

 

Value

 

 

Amortization

 

 

Value

 

 

Value

 

 

Amortization

 

 

Value

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)