QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
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| |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
Class A 0 1 par value |
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| ||
Class B 0 1 par value |
|
Unregistered |
|
☒ |
Accelerated filer |
☐ | |||
Non-accelerated filer |
☐ |
Small er reporting company |
| |||
Emerging growth company |
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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) |
(Number of shares |
) |
PART I. |
FINANCIAL INFORMATION |
PAGE |
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Item 1. |
3 |
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3 |
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4 |
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5 |
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6 |
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7- 19 |
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Item 2. |
20- 26 |
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Item 3. |
26 |
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Item 4. |
27 |
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PART II. |
OTHER INFORMATION |
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Item 1. |
27 |
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Item 1A. |
27 |
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Item 2. |
28 |
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Item 3. |
28 |
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Item 4. |
28 |
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Item 5. |
28 |
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Item 6. |
29 |
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30 |
Item 1. |
CONSOLIDATED FINANCIAL STATEMENTS |
September 28, |
December 29, |
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2019 |
2018 |
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Assets |
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Current Assets: |
||||||||
Cash and cash equivalents |
$ | |
$ | |
||||
Accounts receivable |
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|
||||||
Inventories |
|
|
||||||
Prepaid expenses and other current assets |
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|
||||||
Income tax receivable |
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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 |
|
— |
||||||
Goodwill |
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|
||||||
Intangible assets |
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||||||
Other assets |
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||||||
Total assets |
$ | |
$ | |
||||
Liabilities and Stockholders’ Equity |
||||||||
Current Liabilities: |
||||||||
Accounts payable |
$ | |
$ | |
||||
Accrued expenses and other current liabilities |
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|
||||||
Current operating lease liabilities |
|
— |
||||||
Total current liabilities |
|
|
||||||
Deferred income taxes, net |
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|
||||||
Non-current operating lease liabilities |
|
— |
||||||
Other liabilities |
|
|
||||||
Total liabilities |
|
|
||||||
Commitments and Contingencies (See Note J ) |
||||||||
Stockholders’ Equity: |
||||||||
Class A Common Stock, $ par value; |
|
|
||||||
Class B Common Stock, $ par value; |
|
|
||||||
Additional paid-in capital |
|
|
||||||
Accumulated other comprehensive loss, net of tax |
( |
) | ( |
) | ||||
Retained earnings |
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|
||||||
Total stockholders’ equity |
|
|
||||||
Total liabilities and stockholders’ equity |
$ | |
$ | |
||||
Thirteen weeks ended |
Thirty-nine weeks ended |
|||||||||||||||
|
September 28, |
September 29, |
September 28, |
September 29, |
||||||||||||
|
2019 |
2018 |
2019 |
2018 |
||||||||||||
Revenue |
$ | |
$ | |
$ | |
$ | |
||||||||
Less excise taxes |
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|
|
|
||||||||||||
Net revenue |
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|
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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 assets |
— |
— |
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Total operating expenses |
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||||||||||||
Operating income |
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||||||||||||
Other income (expense), net: |
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Interest (expense) income, net |
( |
) | |
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|
|||||||||||
Other income (expense), net |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Total other income (expense), net |
( |
) | |
( |
) | |
||||||||||
Income before income tax provision |
|
|
|
|
||||||||||||
Income tax provision |
|
|
|
|
||||||||||||
Net income |
$ | |
$ | |
$ | |
$ | |
||||||||
Net income per common share — basic |
$ | |
$ | |
$ | |
$ | |
||||||||
Net income per common share — diluted |
$ | |
$ | |
$ | |
$ | |
||||||||
Weighted-average number of common shares — Class A basic |
|
|
|
|
||||||||||||
Weighted-average number of common shares — Class B basic |
|
|
|
|
||||||||||||
Weighted-average number of common shares — diluted |
|
|
|
|
||||||||||||
Net income |
$ | |
$ | |
$ | |
$ | |
||||||||
Other comprehensive income: |
||||||||||||||||
Foreign currency translation adjustment |
|
( |
) | |
|
|||||||||||
Comprehensive income |
$ | |
$ | |
$ | |
$ | |
||||||||
Class A Common Shares |
Class A Common Stock, Par |
Class B Common Shares |
Class B Common Stock, Par |
Additional Paid-in Capital |
Accumulated Other Comprehensive Loss, net of tax |
Retained Earnings |
Total Stockholders’ Equity |
|||||||||||||||||||||||||
Balance at December 29, 2018 |
|
$ |
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
|||||||||||||||||
Net income |
|
|
||||||||||||||||||||||||||||||
Stock options exercised and restricted shares activities |
|
— |
|
|
||||||||||||||||||||||||||||
Stock-based compensation expense |
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|
||||||||||||||||||||||||||||||
Currency translation adjustment |
|
|
||||||||||||||||||||||||||||||
Balance at March 30, 2019 |
|
$ |
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
|||||||||||||||||
Net income |
|
|
||||||||||||||||||||||||||||||
Stock options exercised and restricted shares activities |
|
|
|
|
||||||||||||||||||||||||||||
Stock-based compensation expense |
|
|
||||||||||||||||||||||||||||||
Currency translation adjustment |
|
|
||||||||||||||||||||||||||||||
Balance at June 29, 2019 |
|
$ |
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
|||||||||||||||||
Net income |
|
|
||||||||||||||||||||||||||||||
Stock options exercised and restricted shares activities |
|
— |
|
|
||||||||||||||||||||||||||||
Stock-based compensation expense |
|
|
||||||||||||||||||||||||||||||
Shares issued in connection with Dogfish Head merger |
|
|
|
|
||||||||||||||||||||||||||||
Conversion from Class B to Class A |
|
|
( |
) |
( |
) |
— |
|||||||||||||||||||||||||
Currency translation adjustment |
|
|
||||||||||||||||||||||||||||||
Balance at September 28, 2019 |
|
$ |
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
|||||||||||||||||
Class A Common Shares |
Class A Common Stock, Par |
Class B Common Shares |
Class B Common Stock, Par |
Additional Paid-in Capital |
Accumulated Other Comprehensive Loss, net of tax |
Retained Earnings |
Total Stockholders’ Equity |
|||||||||||||||||||||||||
Balance at December 30, 2017 |
|
$ |
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
|||||||||||||||||
Net income |
|
|
||||||||||||||||||||||||||||||
Stock options exercised and restricted shares activities |
|
|
|
|
||||||||||||||||||||||||||||
Stock-based compensation expense |
|
|
||||||||||||||||||||||||||||||
Repurchase of Class A Common Stock |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||||||||||||||||||
Currency translation adjustment |
( |
) |
( |
) | ||||||||||||||||||||||||||||
One time effect of adoption of ASU 2014-09, Revenue from Contracts with Customers, net of tax of $ |
( |
) |
( |
) | ||||||||||||||||||||||||||||
One time effect of adoption of ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income |
( |
) |
|
— |
||||||||||||||||||||||||||||
Balance at March 31, 2018 |
|
$ |
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
|||||||||||||||||
Net income |
|
|
||||||||||||||||||||||||||||||
Stock options exercised and restricted shares activities |
|
— |
|
|
||||||||||||||||||||||||||||
Stock-based compensation expense |
|
|
||||||||||||||||||||||||||||||
Repurchase of Class A Common Stock |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||||||||||||||||||
Currency translation adjustment |
( |
) |
( |
) | ||||||||||||||||||||||||||||
Balance at June 30, 2018 |
|
$ |
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
|||||||||||||||||
Net income |
|
|
||||||||||||||||||||||||||||||
Stock options exercised and restricted shares activities |
|
— |
|
|
||||||||||||||||||||||||||||
Stock-based compensation expense |
|
|
||||||||||||||||||||||||||||||
Repurchase of Class A Common Stock |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||||||||||||||||||
Currency translation adjustment |
|
13 |
||||||||||||||||||||||||||||||
Balance at September 29, 2018 |
|
$ |
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
|||||||||||||||||
Thirty-nine weeks ended |
||||||||
September 28, 2019 |
September 29, 2018 |
|||||||
Cash flows provided by operating activities: |
||||||||
Net income |
$ | |
$ | |
||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
|
|
||||||
Impairment of assets |
|
|
||||||
Loss on disposal of property, plant and equipment |
|
|
||||||
Change in ROU assets |
|
— |
||||||
Bad debt (recovery) expense |
|
|
||||||
Stock-based compensation expense |
|
|
||||||
Deferred income taxes |
|
|
||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
( |
) | ( |
) | ||||
Inventories |
( |
) | ( |
) | ||||
Prepaid expenses, income tax receivable and other assets |
( |
) | ( |
) | ||||
Accounts payable |
|
|
||||||
Accrued expenses and other current liabilities |
|
|
||||||
Change in operating lease liability |
( |
) | — |
|||||
Other liabilities |
|
|
||||||
Net cash provided by operating activities |
|
|
||||||
Cash flows used in investing activities: |
||||||||
Purchases of property, plant and equipment |
( |
) | ( |
) | ||||
Proceeds from disposal of property, plant and equipment |
|
|
||||||
Cash paid for acquisition of intangible assets |
|
|
— |
|
|
|
|
|
Investment in Dogfish Head, net of cash acquired |
( |
) | — |
|||||
Other investing activities |
( |
) | |
|||||
Net cash used in investing activities |
( |
) | ( |
) | ||||
Cash flows provided by (used in) financing activities: |
||||||||
Repurchase of Class A Common Stock |
— |
( |
) | |||||
Proceeds from exercise of stock options |
|
|
||||||
Net cash paid on note payable and capital lease |
( |
) | ( |
) | ||||
Cash borrowed on line of credit |
|
— |
||||||
Cash paid on line of credit |
( |
) | — |
|||||
Net proceeds from sale of investment shares |
|
|
||||||
Net cash provided (used in) by financing activities |
|
( |
) | |||||
Change in cash and cash equivalents |
( |
) | |
|||||
Cash and cash equivalents at beginning of year |
|
|
||||||
Cash and cash equivalents at end of period |
$ | |
$ | |
||||
Supplemental disclosure of cash flow information: |
||||||||
Non cash consideration issued in Dogfish Head Transaction (Refer to Note B) |
|
$ |
|
|
|
$ |
— |
|
Income taxes paid |
$ | |
$ | |
||||
Cash paid for amounts included in measurement of lease liabilities |
$ | |
$ | — |
||||
Right-of-use assets obtained in exchange for operating lease obligations |
$ | |
$ | — |
||||
Right-of-use assets obtained in exchange for capital lease obligations |
$ | |
$ | — |
||||
Interest paid on revolving credit facility |
|
$ |
|
|
|
$ |
— |
|
Decrease in accounts receivable for ASU 2014-09 adoption |
$ | — |
$ | ( |
) | |||
Decrease in accounts payable for purchase of property, plant and equipment |
$ | ( |
) | $ | |
|||
A. |
Organization and Basis of Presentation |
B. |
Dogfish Head Brewery Transaction |
Total (In Thousands) |
||||
Cash and cash equivalents |
$ | |
||
Accounts receivable |
|
|||
Inventories |
|
|||
Prepaid expenses and other current assets |
|
|||
Property, plant and equipment |
|
|||
Goodwill |
|
|||
Brand |
|
|||
Other intangible assets |
|
|||
Other assets |
|
|||
Total assets acquired |
|
|||
Accounts payable |
|
|||
Accrued expenses and other current liabilities |
|
|||
Deferred income taxes |
|
|||
Other liabilities |
|
|||
Total liabilities assumed |
|
|||
Net assets acquired |
$ | |
||
Cash consideration |
$ | |
||
Nominal value of equity issued |
|
|||
Fair Value reduction due to liquidity |
( |
) | ||
Estimated total purchase price |
$ | |
||
(i) |
Depreciation and amortization expenses were updated to reflect the fair value adjustments to Dogfish Head property, plant and equipment and intangible assets beginning December 31, 2017. |
(ii) |
Transaction costs incurred in the thirteen and thirty-nine weeks ended September 28, 2019 have been re-assigned |
(iii) |
Interest expense has been included at a rate of approximately |
(iv) |
The tax effects of the pro forma adjustments at an estimated statutory rate of |
(v) |
Earnings per share amounts are calculated using the Company’s historical weighted average shares outstanding plus the |
Thirteen weeks ended |
Thirty-nine weeks ended |
|||||||||||||||
September 28, 2019 |
September 29, 2018 |
September 28, 2019 |
September 29, 2018 |
|||||||||||||
Net revenue |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
Net income |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
Basic earnings per share |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
Diluted earnings per share |
$ |
|
$ |
|
$ |
|
$ |
|
C. |
Goodwill and Intangible Assets |
Thirty-nine weeks ended |
||||||||
September 28, |
September 29, |
|||||||
2019 |
2018 |
|||||||
Goodwill as of beginning of period |
$ |
|
$ |
|
||||
Acquired goodwill |
|
— |
||||||
Impairment of goodwill |
— |
|
||||||
Goodwill as of end of period |
$ |
|
$ |
|
||||
As of September 28, 2019 |
As of December 29, 2018 |
|||||||||||||||||||||||||||
Estimated Useful |
Gross Carrying |
Accumulated |
Net Book |
Gross Carrying |
Accumulated |
Net Book |
||||||||||||||||||||||
Life (Years) |
Value |
Amortization |
Value |
Value |
Amortization |
Value |
||||||||||||||||||||||
Custmer Relationships |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
— |
$ |
— |
$ |
— |
||||||||||||||
Trade Names |
Indefinite |
|
— |
|
|
— |
|
|||||||||||||||||||||
Total intangible assets |
$ |
|
$ |
( |
) |
$ |
|
$ |
|
$ |
— |
$ |
|
|||||||||||||||
Fiscal Year |
Amount |
|||
Remainder of 2019 |
$ |
|
||
2020 |
|
|||
2021 |
|
|||
2022 |
|
|||
2023 |
|
|||
2024 |
|
D. |
Recent Accounting Pronouncements |
E. |
Revenue Recognition |
F. |
Inventories |
September 28, 2019 |
December 29, 2018 |
|||||||
(in thousands) |
||||||||
Current inventory: |
||||||||
Raw materials |
$ | |
$ | |
||||
Work in process |
|
|
||||||
Finished goods |
|
|
||||||
Total current inventory |
|
|
||||||
Long term inventory |
|
|
||||||
Total inventory |
$ | |
$ | |
||||
G. |
Leases |
Classification |
Leases |
|||||
Right-of-use assets |
(in thousands) |
|||||
Operating lease assets |
Operating right-of-use assets |
$ | ||||
Capital lease assets |
Property, plant and equipment, net |
|||||
Lease Liabilities |
||||||
Current |
||||||
Operating lease liabilities |
Current operating lease liabilities |
|||||
Capital lease liabilities |
Accrued expenses and other current l iabilities |
|||||
Non-current |
||||||
Operating lease liabilities |
Non-current operating lease liabilities |
|||||
Capital lease liabilities |
Other liabilities |
Operating |
Capital |
Weighted-Average Remaining Term in Years |
||||||||||||||
Leases |
Leases |
Operating Leases |
Capital Leases |
|||||||||||||
(in thousands) |
||||||||||||||||
2019 |
$ | $ | ||||||||||||||
2020 |
||||||||||||||||
2021 |
||||||||||||||||
2022 |
||||||||||||||||
2023 |
||||||||||||||||
After 2023 |
||||||||||||||||
Total lease payments |
||||||||||||||||
Less imputed interest (based on |
( |
) | ( |
) | ||||||||||||
Present value of lease liability |
$ | $ |
Leases |
||||
(in thousands) |
||||
2019 |
$ | |||
2020 |
||||
2021 |
||||
2022 |
||||
2023 |
||||
Thereafter |
||||
Total |
$ | |||
H. |
Net Income per Share |
Thirteen weeks ended |
Thirty-nine weeks ended |
|||||||||||||||
September 28, 2019 |
September 29, 2018 |
September 28, 2019 |
September 29, 2018 |
|||||||||||||
(in thousands, except per share data) |
(in thousands, except per share data) |
|||||||||||||||
Net income |
$ | $ | $ | $ | ||||||||||||
Allocation of net income for basic: |
||||||||||||||||
Class A Common Stock |
$ | $ | $ | $ | ||||||||||||
Class B Common Stock |
||||||||||||||||
Unvested participating shares |
||||||||||||||||
$ | $ | $ | $ | |||||||||||||
Weighted average number of shares for basic: |
||||||||||||||||
Class A Common Stock |
||||||||||||||||
Class B Common Stock* |
||||||||||||||||
Unvested participating shares |
||||||||||||||||
Net income per share for basic: |
||||||||||||||||
Class A Common Stock |
$ | $ | $ | $ | ||||||||||||
Class B Common Stock |
$ | $ | $ | $ | ||||||||||||
* | Change in Class B Common Stock resulted from the conversion of |
Thirteen weeks ended |
||||||||||||||||||||||||
September 28, 2019 |
September 29, 2018 |
|||||||||||||||||||||||
Earnings to Common Shareholders |
Common Shares |
EPS |
Earnings to Common Shareholders |
Common Shares |
EPS |
|||||||||||||||||||
(in thousands, except per share data) |
||||||||||||||||||||||||
As reported — basic |
$ | |
|
$ |
|
$ | |
|
$ |
|
||||||||||||||
Add: effect of dilutive potential common shares |
||||||||||||||||||||||||
Share-based awards |
— |
|
— |
|
||||||||||||||||||||
Class B Common Stock |
|
|
|
|
||||||||||||||||||||
Net effect of unvested participating shares |
|
— |
|
— |
||||||||||||||||||||
Net income per common share — diluted |
$ | |
|
$ | |
$ | |
|
$ | |
||||||||||||||
Thirty-nine weeks ended |
||||||||||||||||||||||||
September 28, 2019 |
September 29, 2018 |
|||||||||||||||||||||||
Earnings to Common Shareholders |
Common Shares |
EPS |
Earnings to Common Shareholders |
Common Shares |
EPS |
|||||||||||||||||||
(in thousands, except per share data) |
||||||||||||||||||||||||
As reported — basic |
$ | |
|
$ | |
$ | |
|
$ | |
||||||||||||||
Add: effect of dilutive potential common shares |
||||||||||||||||||||||||
Share-based awards |
— |
|
— |
|
||||||||||||||||||||
Class B Common Stock |
|
|
|
|
||||||||||||||||||||
Net effect of unvested participating shares |
|
— |
|
— |
||||||||||||||||||||
Net income per common share — diluted |
$ | |
|
$ | |
$ | |
|
$ | |
I. |
Comprehensive Income or Loss |
J. |
Commitments and Contingencies |
K. |
Income Taxes |
Thirteen weeks ended |
||||||||
September 28, |
September 29, |
|||||||
2019 |
2018 |
|||||||
(in thousands) |
||||||||
Summary of income tax provision |
||||||||
Tax provision based on net income |
$ | |
$ | |
||||
Accounting Method Changes |
— |
( |
) | |||||
Benefit of ASU 2016-09 |
( |
) | ( |
) | ||||
Total income tax provision |
$ | |
$ | |
||||
Thirty-nine weeks ended |
||||||||
September 28, |
September 29, |
|||||||
2019 |
2018 |
|||||||
(in thousands) |
||||||||
Summary of income tax provision |
||||||||
Tax provision based on net income |
$ | |
$ | |
||||
Accounting Method Changes |
— |
( |
) | |||||
Benefit of ASU 2016-09 |
( |
) | ( |
) | ||||
Total income tax provision |
$ | |
$ | |
L. |
Revolving Line of Credit |
M. |
Fair Value Measures |
• |
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. |
• |
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. |
N. |
Common Stock and Stock-Based Compensation |
Shares |
Weighted-Average Exercise Price |
Weighted-Average RemainingContractual Term in Years |
Aggregate Intrinsic Value (in thousands) |
|||||||||||||
Outstanding at December 29, 2018 |
$ | |||||||||||||||
Granted |
||||||||||||||||
Forfeited |
||||||||||||||||
Expired |
||||||||||||||||
Exercised |
( |
) | ||||||||||||||
Outstanding at September 28, 2019 |
$ | $ | ||||||||||||||
Exercisable at September 28, 2019 |
$ | $ | ||||||||||||||
Vested and expected to vest at September 28, 2019 |
$ | $ | ||||||||||||||
Number of Shares |
Weighted Average Fair Value |
|||||||
Non-vested at December 29, 2018 |
$ | |||||||
Granted |
$ | |||||||
Vested |
( |
) | $ | |||||
Forfeited |
( |
) | $ | |||||
Non-vested at September 28, 2019 |
$ | |||||||
O. |
Employee Retirement Plans |
P. |
Related Party Transactions |
Q. |
Subsequent Events |
Item 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Thirteen Weeks Ended (in thousands, except per barrel) |
||||||||||||||||||||||||||||||||||||
September 28, 2019 |
September 29, 2018 |
Amount change |
% change |
Per barrel change |
||||||||||||||||||||||||||||||||
Barrels sold |
1,594 |
1,338 |
255 |
19.1 |
% | |||||||||||||||||||||||||||||||
Per barrel |
% of net revenue |
Per barrel |
% of net revenue |
|||||||||||||||||||||||||||||||||
Net revenue |
$ | 378,466 |
$ | 237.46 |
100.0 |
% | $ | 306,870 |
$ | 229.27 |
100.0 |
% | $ | 71,596 |
23.3 |
% | $ | 8.19 |
||||||||||||||||||
Cost of goods |
190,631 |
119.61 |
50.4 |
% | 149,643 |
111.80 |
48.8 |
% | 40,988 |
27.4 |
% | 7.81 |
||||||||||||||||||||||||
Gross profit |
187,835 |
117.85 |
49.6 |
% | 157,227 |
117.47 |
51.2 |
% | 30,608 |
19.5 |
% | 0.38 |
||||||||||||||||||||||||
Advertising, promotional and selling expenses |
96,570 |
60.59 |
25.5 |
% | 87,765 |
65.57 |
28.6 |
% | 8,805 |
10.0 |
% | (4.98 |
) | |||||||||||||||||||||||
General and administrative expenses |
31,429 |
19.72 |
8.3 |
% | 22,734 |
16.99 |
7.4 |
% | 8,695 |
38.2 |
% | 2.73 |
||||||||||||||||||||||||
Total operating expenses |
127,999 |
80.31 |
33.8 |
% | 110,499 |
82.56 |
36.0 |
% | 17,500 |
15.8 |
% | (2.25 |
) | |||||||||||||||||||||||
Operating income |
59,836 |
37.54 |
15.8 |
% | 46,728 |
34.91 |
15.2 |
% | 13,108 |
28.1 |
% | 2.63 |
||||||||||||||||||||||||
Other (expense) income |
(902 |
) | (0.57 |
) | -0.2 |
% | 292 |
0.22 |
0.1 |
% | (1,194 |
) | -408.9 |
% | (0.79 |
) | ||||||||||||||||||||
Income before income tax expense |
58,934 |
36.98 |
15.6 |
% | 47,020 |
35.13 |
15.3 |
% | 11,914 |
25.3 |
% | 1.85 |
||||||||||||||||||||||||
Income tax expense |
14,205 |
8.91 |
3.8 |
% | 9,013 |
6.73 |
2.9 |
% | 5,192 |
57.6 |
% | 2.18 |
||||||||||||||||||||||||
Net income |
$ | 44,729 |
$ | 28.06 |
11.8 |
% | $ | 38,007 |
$ | 28.40 |
12.4 |
% | $ | 6,722 |
17.7 |
% | $ | (0.34 |
) | |||||||||||||||||
Thirty-nine Weeks Ended (in thousands, except per barrel) |
Amount change |
% change |
Per barrel change |
|||||||||||||||||||||||||||||||||
September 28, 2019 |
September 29, 2018 |
|||||||||||||||||||||||||||||||||||
Barrels sold |
4,045 |
3,328 |
717 |
21.5 |
% | |||||||||||||||||||||||||||||||
Per barrel |
% of net revenue |
Per barrel |
% of net revenue |
|||||||||||||||||||||||||||||||||
Net revenue |
$ | 948,524 |
$ | 234.51 |
100.0 |
% | $ | 770,427 |
$ | 231.51 |
100.0 |
% | $ | 178,097 |
23.1 |
% | $ | 3.00 |
||||||||||||||||||
Cost of goods |
477,147 |
117.97 |
50.3 |
% | 375,133 |
112.73 |
48.7 |
% | 102,014 |
27.2 |
% | 5.24 |
||||||||||||||||||||||||
Gross profit |
471,377 |
116.54 |
49.7 |
% | 395,294 |
118.79 |
51.3 |
% | 76,083 |
19.2 |
% | (2.25 |
) | |||||||||||||||||||||||
Advertising, promotional and selling expenses |
262,372 |
64.87 |
27.7 |
% | 241,796 |
72.66 |
31.4 |
% | 20,576 |
8.5 |
% | (7.79 |
) | |||||||||||||||||||||||
General and administrative expenses |
81,552 |
20.16 |
8.6 |
% | 65,951 |
19.82 |
8.6 |
% | 15,601 |
23.7 |
% | 0.34 |
||||||||||||||||||||||||
Impairment of assets |
243 |
0.06 |
0.0 |
% | 517 |
0.16 |
0.1 |
% | (274 |
) | -53.0 |
% | (0.10 |
) | ||||||||||||||||||||||
Total operating expenses |
344,167 |
85.09 |
36.3 |
% | 308,264 |
92.63 |
40.0 |
% | 35,903 |
11.6 |
% | (7.54 |
) | |||||||||||||||||||||||
Operating income |
127,210 |
31.45 |
13.4 |
% | 87,030 |
26.15 |
11.3 |
% | 40,180 |
46.2 |
% | 5.30 |
||||||||||||||||||||||||
Other (expense) income, net |
(346 |
) | (0.09 |
) | 0.0 |
% | 282 |
0.08 |
0.0 |
% | (628 |
) | -222.7 |
% | (0.17 |
) | ||||||||||||||||||||
Income before income tax expense |
126,864 |
31.37 |
13.4 |
% | 87,312 |
26.24 |
11.3 |
% | 39,552 |
45.3 |
% | 5.13 |
||||||||||||||||||||||||
Income tax expense |
30,585 |
7.56 |
3.2 |
% | 16,460 |
4.95 |
2.1 |
% | 14,125 |
85.8 |
% | 2.61 |
||||||||||||||||||||||||
Net income |
$ | 96,279 |
$ | 23.80 |
10.2 |
% | $ | 70,852 |
$ | 21.29 |
9.2 |
% | $ | 25,427 |
35.9 |
% | $ | 2.51 |
||||||||||||||||||
Item 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Item 4. |
CONTROLS AND PROCEDURES |
PART II. |
OTHER INFORMATION |
Item 1. |
LEGAL PROCEEDINGS |
Item 1A. |
RISK FACTORS |
• | diversion of management’s attention to integrate Dogfish Head’s operations; |
• | disruption to the Company’s existing operations and plans or inability to effectively manage its expanded operations; |
• | failure, difficulties or delays in securing, integrating and assimilating information, financial systems, internal controls, operations, production processes and products, or the distribution channel for Dogfish Head’s businesses and product lines; |
• | potential loss of key Dogfish Head founders and employees, suppliers, distributors and drinkers or other adverse effects on existing business relationships with suppliers, distributors and drinkers; |
• | adverse impact on overall profitability if the Company’s expanded operations do not achieve the growth prospects, net revenues, earnings, cost or revenue synergies, or other financial results projected in the Company’s valuation models, or delays in the realization thereof; |
• | reallocation of amounts of capital from the Company’s other strategic initiatives; |
• | inaccurate assessment of undisclosed, contingent or other liabilities of the acquired operations, unanticipated costs associated with the Transaction, and an inability to recover or manage such liabilities and costs; and |
• | impacts as a result of purchase accounting adjustments, incorrect estimates made in the accounting for the Transaction or the potential future write-off of significant amounts of goodwill, intangible assets and/or other tangible assets if the Dogfish Head business does not perform in the future as expected, or other potential financial accounting or reporting impacts |
Item 2. |
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Period |
Total Number of Shares Purchased |
Average Price Paid per Share |
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs |
||||||||||||
December 30, 2018 to February 2, 2019 |
116 |
$ | 127.05 |
— |
$ | 90,335 |
||||||||||
February 3, 2019 to March 2, 2019 |
219 |
115.78 |
— |
90,335 |
||||||||||||
March 3, 2019 to March 30, 2019 |
13 |
187.54 |
— |
90,335 |
||||||||||||
March 31, 2019 to May 4, 2019 |
107 |
182.03 |
— |
90,335 |
||||||||||||
May 5, 2019 to June 1, 2019 |
79 |
175.67 |
— |
90,335 |
||||||||||||
June 2, 2019 to June 29, 2019 |
32 |
187.54 |
— |
90,335 |
||||||||||||
June 30, 2019 to August 3, 2019 |
73 |
114.14 |
— |
90,335 |
||||||||||||
August 4, 2019 to August 31, 2019 |
261 |
135.26 |
— |
90,335 |
||||||||||||
September 1, 2019 to September 28, 2019 |
— |
— |
— |
90,335 |
||||||||||||
Total |
900 |
$ | 139.47 |
— |
90,335 |
|||||||||||
Item 3. |
DEFAULTS UPON SENIOR SECURITIES |
Item 4. |
MINE SAFETY DISCLOSURES |
Item 5. |
OTHER INFORMATION |
Item 6. |
EXHIBITS |
Exhibit No. |
Title | |||
**10.1 |
||||
**10.2 |
||||
**10.3 |
||||
**10.4 |
||||
**10.5 |
||||
*31.1 |
||||
*31.2 |
||||
*32.1 |
||||
*32.2 |
||||
*101.INS |
XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |||
*101.SCH |
XBRL Taxonomy Extension Schema Document | |||
*101.CAL |
XBRL Taxonomy Calculation Linkbase Document | |||
*101.LAB |
XBRL Taxonomy Label Linkbase Document | |||
*101.PRE |
XBRL Taxonomy Presentation Linkbase Document | |||
*101.DEF |
XBRL Definition Linkbase Document | |||
*104 |
The cover page from this Quarterly Report on Form 10-Q for the quarter ended September 28, 2019, formatted in Inline XBRL (formatted as Inline XBRL and contained in Exhibit 101). |
* | Filed with this report |
** | Designates management contract or compensatory plan or arrangement |
THE BOSTON BEER COMPANY, INC. (Registrant) | ||||||
Date: October 29, 2019 |
/s/ David A. Burwick | |||||
David A. Burwick | ||||||
President and Chief Executive Officer | ||||||
(principal executive officer) |
Date: October 29, 2019 |
/s/ Frank H. Smalla | |||||
Frank H. Smalla | ||||||
Chief Financial Officer | ||||||
(principal financial officer) |
Exhibit 31.1
I, David A. Burwick, certify that:
1. I have reviewed this quarterly report on Form 10-Q of The Boston Beer Company, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions):
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: October 29, 2019
/s/ David A. Burwick | ||
David A. Burwick | ||
President and Chief Executive Officer | ||
[Principal Executive Officer] |
Exhibit 31.2
I, Frank H. Smalla, certify that:
1. I have reviewed this quarterly report on Form 10-Q of The Boston Beer Company, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions):
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: October 29, 2019
/s/ Frank H. Smalla | ||
Frank H. Smalla | ||
Chief Financial Officer | ||
[Principal Financial Officer] |
Exhibit 32.1
The Boston Beer Company, Inc.
Certification Pursuant To
18 U.S.C. Section 1350,
As Adopted Pursuant To
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of The Boston Beer Company, Inc. (the Company) on Form 10-Q for the period ended September 28, 2019 as filed with the Securities and Exchange Commission (the Report), I, David A. Burwick, President and Chief Executive Officer of the Company, certify, pursuant to Section 1350 of Chapter 63 of Title 18, United States Code, that this Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: October 29, 2019
/s/ David A. Burwick | ||
David A. Burwick | ||
President and Chief Executive Officer |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to The Boston Beer Company, Inc. and will be retained by The Boston Beer Company, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
The Boston Beer Company, Inc.
Certification Pursuant To
18 U.S.C. Section 1350,
As Adopted Pursuant To
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of The Boston Beer Company, Inc. (the Company) on Form 10-Q for the period ended September 28, 2019 as filed with the Securities and Exchange Commission (the Report), I, Frank H. Smalla, Chief Financial Officer of the Company, certify, pursuant to Section 1350 of Chapter 63 of Title 18, United States Code, that this Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: October 29, 2019
/s/ Frank H. Smalla | ||
Frank H. Smalla | ||
Chief Financial Officer |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to The Boston Beer Company, Inc. and will be retained by The Boston Beer Company, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Fair Value Measures - Additional Information (Detail) - USD ($) $ in Thousands |
Sep. 28, 2019 |
Dec. 29, 2018 |
---|---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash and cash equivalents | $ 27,128 | $ 108,399 |
Money market fund | $ 21,400 | $ 107,500 |
Employee Retirement Plans - Additional Information (Detail) - USD ($) $ in Millions |
1 Months Ended | |
---|---|---|
Apr. 30, 2019 |
Dec. 29, 2018 |
|
Pension Benefit Plan | ||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||
Fair value of plan assets at end of fiscal year | $ 3.3 | |
Benefit obligation at end of fiscal year | $ 5.4 | |
Union Number1199 Pension Plan [Member] | ||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||
Estimated cost of termination of retirement pension plan | $ 1.7 |
Recent Accounting Pronouncements - Additional Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Sep. 28, 2019 |
Mar. 31, 2018 |
Dec. 30, 2018 |
|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Cumulative Effect on Retained Earnings, Net of Tax related to variable customer promotional discount programs | $ 1,000 | $ (982) | |
Operating Lease, Right-of-Use Asset | 38,943 | ||
Operating Lease, Liability | $ 43,814 | ||
Accounting Standards Update 2016-02 [Member] | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Operating Lease, Right-of-Use Asset | $ 27,000 | ||
Operating Lease, Liability | $ 31,500 |
Goodwill and Intangible Assets - Change in carrying value of goodwill and intangible assets (Detail) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 28, 2019 |
Sep. 29, 2018 |
|
Goodwill as of beginning of period | $ 3,683 | $ 3,683 |
Acquired goodwill | 108,846 | |
Impairment of goodwill | 0 | |
Goodwill as of end of period | $ 112,529 | $ 3,683 |
Common Stock and Stock-Based Compensation (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 28, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Stock Options under Equity Plan and Non-Employee Director Plan | 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:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Vesting Activities of Shares Issued Under Investment Share Program and Restricted Stock Awards | The following table summarizes vesting activities of shares issued under the investment share program and restricted stock awards:
|
Revenue Recognition |
9 Months Ended | ||
---|---|---|---|
Sep. 28, 2019 | |||
Revenue Recognition |
During the thirty-nine weeks ended September 28, 2019 approximately 95% of the Company’s revenue was from shipments of its products to domestic d istributors and 4% from shipments to international d istributors, primarily located in Canada. Approximately 1% of the Company’s revenue is from retail beer, cider, and merchandise sales at the Company’s retail locations. 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, 2019 and December 29, 2018, the Company has deferred $6.9 million and $4.6 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 consolidated balance sheets. Customer promotional discount programs are entered into by the Company with d istributors for certain periods of time. The reimbursements for discounts to d istributors are recorded a s reductions to net revenue and were $14.8 million and $34.5 million for the thirteen and thirty-nine weeks ended September 28, 2019, respectively. Reimbursements for discounts for the thirteen and thirty-nine weeks ended September 29, 2018 were $11.1 million and $26.8 million, respectively. The agreed-upon discount rates are applied to certain d i stributors’ sales to retailers, based on volume metrics, in order to determine the total discountedamount. 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 , d istributors 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 for the thirteen and thirty-nine weeks ended September 28, 2019 were $6.2 million and $13.0 million, respectively. Amounts paid to customers in connection with these programs that were recorded as reductions to revenue for the thirteen and thirty-nine weeks ended September 29, 2018 were $3.5 million and $9.7 million, respectively. 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.The Company benefited from a reduction in federal excise taxes of $2.8 million and $2.0 million for the thirteen weeks ended September 28, 2019 and September 29, 2018, respectively, as a result of the Tax Cuts and Jobs Act of 2017. The Company benefited from a reduction in federal excise taxes of $6.6 million and $4.8 million for the thirty-nine weeks ended September 28, 2019 and September 29, 2018, respectively, as a result of the Tax Cuts and Jobs Act of 2017. |
Comprehensive Income or Loss |
9 Months Ended | ||
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Sep. 28, 2019 | |||
Comprehensive Income |
Comprehensive income or loss represents net income or loss, plus defined benefit plans liability adjustment, net of tax effect and foreign currency translation adjustment. The defined benefit plans liability and foreign currency translation adjustments for the interim periods ended September 28, 2019 and September 29, 2018 were not material. |
Consolidated Statements of Comprehensive Income - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
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Sep. 28, 2019 |
Sep. 29, 2018 |
Sep. 28, 2019 |
Sep. 29, 2018 |
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Revenue | $ 402,691 | $ 326,852 | $ 1,008,893 | $ 818,257 |
Less excise taxes | 24,225 | 19,982 | 60,369 | 47,830 |
Net revenue | 378,466 | 306,870 | 948,524 | 770,427 |
Cost of goods sold | 190,631 | 149,643 | 477,147 | 375,133 |
Gross profit | 187,835 | 157,227 | 471,377 | 395,294 |
Advertising, promotional and selling expenses | 96,570 | 87,765 | 262,372 | 241,796 |
General and administrative expenses | 31,429 | 22,734 | 81,552 | 65,951 |
Impairment of assets | 243 | 517 | ||
Total operating expenses | 127,999 | 110,499 | 344,167 | 308,264 |
Operating income | 59,836 | 46,728 | 127,210 | 87,030 |
Interest (expense) income, net | (138) | 343 | 472 | 821 |
Other income (expense), net | (764) | (51) | (818) | (539) |
Total other income (expense), net | (902) | 292 | (346) | 282 |
Income before income tax provision | 58,934 | 47,020 | 126,864 | 87,312 |
Income tax provision | 14,205 | 9,013 | 30,585 | 16,460 |
Net income | $ 44,729 | $ 38,007 | $ 96,279 | $ 70,852 |
Net income per common share - basic | $ 3.70 | $ 3.25 | $ 8.16 | $ 6.02 |
Net income per common share - diluted | $ 3.65 | $ 3.21 | $ 8.07 | $ 5.96 |
Weighted-average number of common shares — basic | 12,099 | 11,705 | 11,802 | 11,769 |
Weighted-average number of common shares - diluted | 12,150 | 11,702 | 11,823 | 11,773 |
Net income | $ 44,729 | $ 38,007 | $ 96,279 | $ 70,852 |
Other comprehensive income: | ||||
Foreign currency translation adjustment | 1 | (13) | 43 | 4 |
Comprehensive income | $ 44,730 | $ 37,994 | $ 96,322 | $ 70,856 |
Common Class A | ||||
Net income per common share - basic | $ 3.70 | $ 3.25 | $ 8.16 | $ 6.02 |
Weighted-average number of common shares — basic | 9,136 | 8,557 | 8,797 | 8,646 |
Common Class B | ||||
Net income per common share - basic | $ 3.70 | $ 3.25 | $ 8.16 | $ 6.02 |
Weighted-average number of common shares — basic | 2,862 | 3,018 | 2,899 | 3,018 |
Fair Value Measures |
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Sep. 28, 2019 | ||||||||||||
Fair Value Measures |
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).
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 September 28, 2019 and December 29, 2018, 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 September 28, 2019 and December 29, 2018, the Company’s cash and cash equivalents balance was $27.1 million and $108.4 million, respectively, including money market funds amounting to $21.4 million and $107.5 million, respectively . |
Subsequent Events |
9 Months Ended | ||
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Sep. 28, 2019 | |||
Subsequent Events |
The Company evaluated subsequent events occurring after the balance sheet date, September 28, 2019, and concluded that there were no events of which management was aware that occurred after the balance sheet date that would require any adjustment to or disclosure in the accompanying consolidated financial statements.
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Organization and Basis of Presentation |
9 Months Ended | ||
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Sep. 28, 2019 | |||
Organization and Basis of Presentation |
The Boston Beer Company, Inc. and certain subsidiaries (the “Company”) are engaged in the business of producing and selling alcohol beverages throughout the United States and in selected international markets, under the trade names, “The Boston Beer Company ® ”, “Dogfish Head ® Craft Brewery”, “Twisted Tea Brewing Company ® ”, “Angry Orchard® Cider Company”, “Hard Seltzer Beverage Company”, “Angel City® Brewing Company”, “Concrete Beach Brewery® ”, “Coney Island® Brewing Company”, “Marathon Brewing Company™ ”, and “American Fermentation Company”. The accompanying unaudited consolidated balance sheet as of September 28, 2019, and the consolidated statements of comprehensive income, stockholders’ equity, and cash flows for the interim periods ended September 28, 2019 and September 29, 2018 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 U.S generally accepted accounting principles have been condensed or omitted. These 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 29, 2018.In the opinion of the Company’s management, the Company’s unaudited consolidated balance sheet as of September 28, 2019 and the results of its consolidated operations, stockholders’ equity, and cash flows for the interim periods ended September 28, 2019 and September 29, 2018, 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. |
Leases (Tables) |
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Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ROU assets and lease liabilities | As of September 28, 2019, total ROU assets and lease liabilities were as follows:
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Maturities of lease liabilities | Maturities of lease liabilities as of September 28, 2019 are as follows:
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Schedule of future minimum lease payments | Future minimum lease payments expected under
non-cancellable operating lease agreements in effect at December 29, 2018 were as follows:
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Leases - Additional Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |
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Sep. 28, 2019 |
Sep. 28, 2019 |
Dec. 30, 2018 |
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Lease expense | $ 1,900 | $ 4,900 | |
Operating Lease, Liability | 43,814 | 43,814 | |
Lease, cost | 1,600 | 3,900 | |
Short-term lease expense | 300 | 1,000 | |
Operating lease right of use asset | $ 38,943 | $ 38,943 | |
Accounting Standards Update 2016-02 [Member] | |||
Operating Lease, Liability | $ 31,500 | ||
Operating lease right of use asset | $ 27,000 |
Components of Inventories (Detail) - USD ($) $ in Thousands |
Sep. 28, 2019 |
Dec. 29, 2018 |
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Current inventory: | ||
Raw materials | $ 51,322 | $ 44,655 |
Work in process | 13,270 | 8,252 |
Finished goods | 28,040 | 17,342 |
Total current inventory | 92,632 | 70,249 |
Long term inventory | 15,369 | 11,619 |
Total inventory | $ 108,001 | $ 81,868 |
Dogfish Head Brewery Merger |
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Dogfish Head Brewery Merger |
On May 8, 2019, the Company entered into definitive agreements to acquire Dogfish Head Brewery (“Dogfish Head”) and various related operations (the “Transaction” ), through the acquisition of all of the equity interests held by certain private entities in Off-Centered Way LLC, the parent holding company of the Dogfish Head operations. In accordance with these agreements, the made a payment of $158.4 million, which was placed in escrow pending the satisfaction of certain closing conditions. The Transaction closed on July 3, 2019, for total consideration of $336.0 millionCo mpany , after taking into account a post-closing cash related adjustment. As required under the definitive agreements, 127,146 of the 429,291 shares of restricted Class A Stock have been placed in escrow and will be released no later than July 3, 2029. These shares had a market value on July 3, 2019 of $48.3 million. The timing of the release of these escrowed shares is primarily related to the continued employment with the Company of Samuel A. Calagione III, one of the two Dogfish Head founders . The fair value of the Transaction is estimated at approximately $317.7 million. The Company estimates that transaction-related and other non-recurring costs incurred and to be incurred as a result of the Transaction will total approximately $9.1 million. Of this total, $7.9 million had been expensed as of September 28, 2019and consists of $3.3 million in transaction costs and $4.6 million in other non-recurring costs. As part of the Transaction, certain members of Dogfish Head management entered into employment agreements with the Company and were granted 906 shares of restricted stock units that vest in one year and have a fair value of approximately $345,000. The Company funded the cash component of the Transaction through cash on-hand and its existing line of credit as described in Note L .The following table summarizes the acquisition date fair value of the tangible assets, intangible assets, liabilities assumed, and related goodwill acquired from Dogfish Head, as well as the allocation of purchase price paid:
The Company accounted for the acquisition in accordance with the accounting standards codification guidance for business combinations, whereby the total purchase price was allocated to the acquired net tangible and intangible assets of Dogfish Head based on their fair values as of the Transaction closing date. The Company believes that the information available as of the Transaction closing date provides a reasonable basis for estimating the fair values of the assets acquired and liabilities assumed; however, the Company is continuing to finalize these amounts, particularly with respect to income taxes and valuation of inventories, fixed assets, and intangible assets. Thus, the preliminary measurements of fair value reflected are subject to change as additional information becomes available and as additional analysis is performed. The Company expects to finalize the valuation and complete the allocation of the purchase price as soon as practicable, but no later than one year from the closing date of the acquisition, as required. The fair value of the Dogfish Head brand trade name is estimated at approximately $98.5 million and the fair value of customer relationships is estimated at $3.8 million. The Company estimated the Dogfish Head brand trade name will have an indefinite life and customer relationships will have an estimated useful life of 15 years. The customer relationship intangible asset will be amortized on a straight-line basis over the 15 year estimated useful life. The fair value of the deferred income tax liability assumed is $18.4 million, representing the expected future tax consequences of temporary differences between the fair values of the assets acquired and liabilities assumed and their tax bas i s. The Company used a preliminary consolidated tax rate to determine the net deferred tax liabilities. The Company will record measurement period adjustments as the Company applies the appropriate tax rate for each legal entity within Dogfish Head. The expectation is that the Dogfish Head deferred income taxes will be subject to the Company’s consolidated rate. The excess of the purchase price paid over the estimated fair values of the assets and liabilities assumed has been recorded as goodwill in the amount of $108.8 million. Goodwill associated with the acquisition is primarily attributable to the future growth opportunities associated with the Transaction , expected synergiesThe fair value of the brand trade name was determined utilizing the relief from royalty method which is a form of the income approach. Under this method, a royalty rate based on observed market royalties is applied to projected revenue supporting the trade name and discounted to present value using an appropriate discount rate. The fair value of the property, plant and equipment was determined utilizing the cost and market valuation approaches. The results of operations from Dogfish Head have been included in the Company’s consolidated statement s of operations since the July 3, 2019 Transaction closing date. During the three months endedSeptember 28, 2019, Dogfish Head represented $ 27.7 million of the Company’s total revenue and $ 3.4 million of total net income. Transaction costs incurred by the Company in connection with the Transaction were $ 2.3 million and for thirteen and thirty -nin e weeks ended September 28, 2019, respectively , and were recorded within general and administrative expenses in the Company’s consolidated statements of operations. Consistent with prior periods and considering post-merger reporting structures, the Company will continue to report as one operating segment. The combined Company’s brands are predominantly beverages that are manufactured using similar production processes, have comparable alcohol content, generally fall under the same regulatory environment, and are sold to the same types of customers in similar size quantities at similar price points and through the same channels of distribution. The following unaudited pro forma information has been prepared as if the Transaction and the related debt financing had occurred as of December 31, 2017, the first day of the Company’s 2018 fiscal year. The pro forma amounts reflect the combined historical operational results for Boston Beer and Dogfish Head, after giving effect to adjustments related to the impact of purchase accounting, transaction costs and financing. The unaudited pro forma financial information is not indicative of the operational results that would have been obtained had the Transaction occurred as of that date, nor is it necessarily indicative of the Company’s future operational results. The following adjustments have been made:
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Net Income per Share (Tables) |
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Computation of Earnings Per Share, Basic | The following table sets forth the computation of basic net income per share using the
two-class method:
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Computation of Earnings Per Share, Diluted | The following table sets forth the computation of diluted net income per share, assuming the conversion of all Class B Common Stock into Class A Common Stock and using the
two-class method for unvested participating shares:
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Common Stock and Stock-Based Compensation |
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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:
Of the total options outstanding at September 28, 2019, 65,306 shares were performance-based options for which the performance criteria had yet to be achieved. On March 1, 2019, the Company granted options to purchase an aggregate of 14,680 shares of the Company’s Class A Common Stock to senior management with a weighted average fair value of $136.00 per share, of which all shares relate to performance-based stock options. On March 14, 2019, the Company granted options to purchase an aggregate of 844 shares of the Company’s Class A Common Stock to the Company’s newly appointed non-employee Director. These options have a weighted average fair value of $136.10 per share, of which all shares vested immediately.On April 29, 2019, the Company granted options to purchase an aggregate of 11,827 shares of the Company’s Class A Common Stock to the Company’s newly appointed Chief Marketing Officer with a weighted average fair value of $126.83 per share with service based vesting through 2024. On May 16, 2019, the Company granted options to purchase an aggregate of 3,935 shares of the Company’s Class A Common Stock to the Company’s nonemployee Directors. These options have a weighted average fair value of $145.95 per share. All of the options vested immediately on the date of the grant. Non-Vested Shares Activity The following table summarizes vesting activities of shares issued under the investment share program and restricted stock awards:
On January 1, 2019, the Company granted a key employee 207 shares of restricted stock units with a weighted average fair value of $240.84 and vests ratable over the service period of four years. On March 1, 2019, the Company granted 16,471 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. On March 1, 2019, employees elected to purchase 7,901 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 $312.56 and $147.98 per share, respectively. On April 29, 2019, the Company granted its newly appointed Chief Marketing Officer 4,925 shares of restricted stock units with a weighted-average fair value of $304.56 per share with service based vesting through 2023. On July 3, 2019, the Company granted four key employees 906 shares of restricted stock units with a weighted average fair value of $379.63 and service based vesting in one year . Stock-Based Compensation Stock-based compensation expense related to share-based awards recognized in the thirteen and thirty-nine weeks ended September 28, 2019 was $3.2 million and $9.0 million, respectively, and was calculated based on awards expected to vest. Stock-based compensation expense related to share-based awards recognized in the thirteen weeks and thirty-nine weeks ended September 29, 2018 was $2.4 million and $7.0 million, respectively, and was calculated based on awards expected to vest. |
Dogfish Head Brewery Merger (Tables) |
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Fair value of assets acquired and liabilities assumed | The following table summarizes the acquisition date fair value of the tangible assets, intangible assets, liabilities assumed, and related goodwill acquired from Dogfish Head, as well as the allocation of purchase price paid:
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Unaudited proforma information |
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Leases - Schedule of future minimum lease payments (Detail) - USD ($) $ in Thousands |
Sep. 28, 2019 |
Dec. 29, 2018 |
---|---|---|
2020 | $ 2,642 | |
2021 | 5,754 | |
2022 | 5,453 | |
2023 | 5,313 | |
Thereafter | 32,191 | |
Total | $ 52,819 | |
Non-cancellable operating lease agreements [Member] | ||
2019 | $ 4,446 | |
2020 | 4,530 | |
2021 | 4,370 | |
2022 | 3,559 | |
2023 | 1,672 | |
Thereafter | 7,582 | |
Total | $ 26,159 |
Revenue Recognition - Additional Information (Detail) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Sep. 28, 2019 |
Sep. 29, 2018 |
Sep. 28, 2019 |
Sep. 29, 2018 |
Sep. 29, 2018 |
Dec. 29, 2018 |
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Sales to domestic distributors as a percentage of total sales | 95.00% | 95.00% | ||||
Sales to foreign distributors as a percentage of total sales | 4.00% | 4.00% | ||||
Sales to retail locations as a percentage of total sales | 1.00% | 1.00% | ||||
Deferred Revenue, Current | $ 6.9 | $ 6.9 | $ 4.6 | |||
Reduction in federal excise taxes | 2.8 | $ 2.0 | 6.6 | $ 4.8 | ||
Distributors [Member] | ||||||
Amounts paid to distributors | 14.8 | 11.1 | 34.5 | $ 26.8 | ||
Marketing and Advertising Expense | $ 6.2 | $ 3.5 | $ 13.0 | $ 9.7 |
Related Party Transactions - Additional Information (Detail) |
9 Months Ended |
---|---|
Sep. 28, 2019
USD ($)
| |
Related Party Transaction [Line Items] | |
Total payments due | $ 52,819,000 |
Dogfish Head Brewery [Member] | |
Related Party Transaction [Line Items] | |
Lease term of contract | 10 years |
Total payments due | $ 3,600,000 |
Related party expense | $ 91,000 |
Summary of Income Tax Benefit (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 28, 2019 |
Sep. 28, 2019 |
Sep. 29, 2018 |
Sep. 28, 2019 |
Sep. 29, 2018 |
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Summary of income tax provision | |||||
Tax provision based on net income | $ 16,047 | $ 13,671 | $ 34,455 | $ 24,969 | |
Accounting Method Changes | (4,529) | (4,529) | |||
Benefit of ASU 2016-09 | (1,842) | (129) | (3,870) | (3,980) | |
Total income tax provision | $ 14,205 | $ 14,205 | $ 9,013 | $ 30,585 | $ 16,460 |
Dogfish Head Brewery Merger - Unaudited proforma information (Detail) - Line of Credit [Member] - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 28, 2019 |
Sep. 29, 2018 |
Sep. 28, 2019 |
Sep. 29, 2018 |
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Net revenue | $ 379,205 | $ 335,954 | $ 1,002,939 | $ 852,611 |
Net income | $ 46,445 | $ 42,638 | $ 103,105 | $ 77,541 |
Basic earnings per share | $ 3.84 | $ 3.51 | $ 8.74 | $ 6.36 |
Diluted earnings per share | $ 3.79 | $ 3.48 | $ 8.64 | $ 6.30 |
Income Taxes (Tables) |
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Significant Components of Provisions for Income Taxes | The following table provides a summary of the income tax provision for the thirteen and thirty-nine weeks ended September 28, 2019 and September 29, 2018:
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Goodwill and Intangible Assets - Additional Information (Detail) - USD ($) $ in Thousands |
9 Months Ended | |||
---|---|---|---|---|
Sep. 28, 2019 |
Dec. 29, 2018 |
Sep. 29, 2018 |
Dec. 29, 2017 |
|
Good will acquired | $ 112,529 | $ 3,683 | $ 3,683 | $ 3,683 |
Customer Relationships | ||||
Useful life Of Finite Lived Intangibles | 15 years | |||
Dogfish Head Brewery [Member] | ||||
Good will acquired | $ 108,846 | |||
Business Combination Indefinite Lived Intangible Assets Assumed | 98,500 | |||
Dogfish Head Brewery [Member] | Customer Relationships | ||||
Business Combination Finite Lived Intangible Assets Assumed | $ 3,800 | |||
Useful life Of Finite Lived Intangibles | 15 years | |||
Intangible Assets Amortization | $ 64 | |||
Dogfish Head Brewery [Member] | Trade Names | ||||
Business Combination Indefinite Lived Intangible Assets Assumed | $ 98,500 |
Inventories |
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Inventories |
Inventories consist of raw materials, work in process and finished goods. Raw materials, which principally consist of hops, 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:
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Commitments and Contingencies |
9 Months Ended | ||
---|---|---|---|
Sep. 28, 2019 | |||
Commitments and Contingencies |
Contract Obligations The Company had outstanding total non-cancelable contract obligations of $211.2 million at September 28, 2019. These obligations are made up of advertising contracts of $75.3 million, equipment and machinery of $53.0 million hops, barley and wheat totaling $49.7 million, other ingredients of $12.0 million, glass bottles of $1.7 million, and other commitments of $19.5 million.Currently, the Company has entered into contracts for barley and wheat with three major suppliers. The contracts include crop year 2018 and 2019 and cover the Company’s barley, wheat, and malt requirements for 2019 and part of 2020. These purchase commitments outstanding at September 28, 2019 totaled $12.2 million. The Company has entered into contracts for the supply of a portion of its hops requirements. These purchase contracts extend through crop year 2025 and specify both the quantities and prices, denominated in U.S. Dollars, Euros, New Zealand Dollars, and British Pounds, to which the Company is committed. Hops purchase commitments outstanding at September 28, 2019 totaled $37.4 million, based on the exchange rates on that date. The Company does not use forward currency exchange contracts and intends to purchase future hops using the exchange rate at the time of purchase. Currently, the Company brews and packages more than 70% 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 supplies raw materials to those brewing companies, and incurs conversion fees for labor at the time the liquid is produced and packaged. Litigation The Company is not a party to any pending or threatened litigation, the outcome of which would be expected to have a material adverse effect upon its financial condition or the results of its operations. In general, while the Company believes it conducts its business appropriately in accordance with laws, regulations and industry guidelines, claims, whether or not meritorious, could be asserted against the Company that might adversely impact the Company’s results. |
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