K. Product Recall

On April 7, 2008, the Company announced a voluntary product recall of certain glass bottles of its Samuel Adams^® products. The recall was a precautionary step and resulted from routine quality control inspections at the Cincinnati Brewery, which detected glass inclusions in certain bottles of beer. The bottles were from a single glass plant that supplied bottles to the Company. The glass plant in question supplied approximately 25% of the Company’s glass bottles during the first quarter of 2008. The recall process was substantially completed during the fourth quarter of 2008.

The following table summarizes the Company’s reserves and excise tax credit due upon the destruction of the returned beer and related activities for the 2008 product recall (in thousands):


	Reserves at December 25, 2010			Changes in Estimates			Reserves Used			Reserves at December 31, 2011
Excise tax credit	$	(158	)	$	(348	)	$	264		$	(242	)
Recall-related costs		255			105			(306	)		54
Inventory reserves		2,796			7			(2,736	)		67

	$	2,893		$	(236	)	$	(2,778	)	$	(121	)

During the second quarter of 2011, the Company and its former glass bottle supplier entered into an agreement to settle all claims regarding the recall. The Company received a cash payment of $20.5 million, which was recorded as an offset to operating expenses, and all parties have released each other of any claims as they relate to this matter. In addition, the Company reversed approximately $0.6 million in reserves against invoices due to the supplier, which was recorded as an offset to cost of goods sold.