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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(State or other jurisdiction of incorporation Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act.
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ____
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.) Yes
Number of shares outstanding of each of the issuer’s classes of common stock, as of October 15, 2021:
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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) |
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(Number of shares) |
THE BOSTON BEER COMPANY, INC.
FORM 10-Q
September 25, 2021
TABLE OF CONTENTS
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PART I. |
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FINANCIAL INFORMATION |
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PAGE |
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Item 1. |
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3 |
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Condensed Consolidated Balance Sheets as of September 25, 2021 and December 26, 2020 |
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3 |
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4 |
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5 |
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8 - 19 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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20 - 25 |
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Item 3. |
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26 |
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Item 4. |
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26 |
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PART II. |
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OTHER INFORMATION |
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Item 1. |
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27 |
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Item 1A. |
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27 |
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Item 2. |
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28 |
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Item 3. |
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28 |
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Item 4. |
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28 |
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Item 5. |
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28 |
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Item 6. |
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29 |
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30 |
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EX-31.1 Section 302 CEO Certification
EX-31.2 Section 302 CFO Certification
EX-32.1 Section 906 CEO Certification
EX-32.2 Section 906 CFO Certification
2
PART I. FINANCIAL INFORMATION
Item 1. CONDENSED CONSOLIDATED F INANCIAL STATEMENTS (UNAUDITED)
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED B ALANCE SHEETS
(in thousands, except per share data)
(unaudited)
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September 25,
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December 26,
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Assets |
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Current Assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable |
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Inventories |
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Prepaid expenses and other current assets |
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Income tax receivable |
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Total current assets |
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Property, plant and equipment, net |
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Operating right-of-use assets |
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Goodwill |
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Intangible assets |
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Third-party production prepayments |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders' Equity |
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Current Liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Current operating lease liabilities |
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Total current liabilities |
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Deferred income taxes, net |
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Non-current operating lease liabilities |
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Other liabilities |
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Total liabilities |
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Commitments and Contingencies (See Note K) |
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Stockholders' Equity: |
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Class A Common Stock, $
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Class B Common Stock, $
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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(
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(
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Retained earnings |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
(in thousands, except per share data)
(unaudited)
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Thirteen weeks ended |
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Thirty-nine weeks ended |
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September 25,
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September 26,
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September 25,
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September 26,
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Revenue |
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$ |
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$ |
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$ |
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$ |
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Less excise taxes |
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Net revenue |
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Cost of goods sold |
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Gross profit |
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Operating expenses: |
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Advertising, promotional and selling expenses |
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General and administrative expenses |
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Contract termination costs and other |
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— |
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— |
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Impairment of assets |
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Total operating expenses |
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Operating (loss) income |
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(
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Other (expense) income: |
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Interest expense |
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(
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(
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(
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(
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Other (expense) income, net |
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(
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(
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(
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Total other (expense) income, net |
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(
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(
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(
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(Loss) income before income tax (benefit) provision |
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(
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Income tax (benefit) provision |
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(
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Net (loss) income |
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$ |
(
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$ |
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$ |
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$ |
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Net (loss) income per common share - basic |
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$ |
(
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$ |
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$ |
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$ |
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Net (loss) income per common share - diluted |
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$ |
(
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$ |
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$ |
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$ |
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Weighted-average number of common shares - basic |
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Weighted-average number of common shares - diluted |
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Net (loss) income |
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$ |
(
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$ |
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$ |
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$ |
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Other comprehensive (loss) income: |
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Foreign currency translation adjustment |
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(
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(
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Defined benefit plans liability adjustment |
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— |
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— |
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Total other comprehensive (loss) income, net of tax |
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(
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Comprehensive (loss) income |
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$ |
(
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEM ENTS OF CASH FLOWS
(in thousands)
(unaudited)
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Thirty-nine weeks ended |
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September 25,
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September 26,
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Cash flows provided by operating activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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Impairment of assets |
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Gain on disposal of property, plant and equipment |
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(
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) |
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(
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Change in right-of-use assets |
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Other non-cash (income) expense |
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(
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) |
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Stock-based compensation expense |
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Deferred income taxes |
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(
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) |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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(
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) |
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(
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) |
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Inventories |
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(
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) |
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(
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) |
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Prepaid expenses, income tax receivable and other current assets |
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(
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) |
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Third-party production prepayments |
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(
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) |
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(
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) |
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Other assets |
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(
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) |
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(
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) |
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Accounts payable |
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Accrued expenses and other current liabilities |
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Change in operating lease liabilities |
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(
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) |
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(
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Other liabilities |
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Net cash provided by operating activities |
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Cash flows used in investing activities: |
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Purchases of property, plant and equipment |
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(
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) |
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(
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) |
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Proceeds from disposal of property, plant and equipment |
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Other investing activities |
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Net cash used in investing activities |
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(
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) |
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(
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Cash flows (used in) provided by financing activities: |
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Proceeds from exercise of stock options and sale of investment shares |
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Net cash paid on note payable and finance leases |
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(
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) |
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(
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Cash borrowed on line of credit |
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— |
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Cash paid on line of credit |
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— |
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(
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) |
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Payment of tax withholding on stock-based payment awards and investment shares |
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(
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) |
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(
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) |
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Net cash (used in) provided by financing activities |
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(
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) |
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Change in cash and cash equivalents |
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(
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) |
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Cash and cash equivalents at beginning of year |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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Supplemental disclosure of cash flow information: |
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Income taxes paid |
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$ |
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$ |
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Cash paid for amounts included in measurement of lease liabilities |
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Operating cash flows from operating leases |
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$ |
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$ |
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Operating cash flows from finance leases |
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$ |
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$ |
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Financing cash flows from finance leases |
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$ |
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$ |
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Right-of-use-assets obtained in exchange for operating lease obligations |
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$ |
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$ |
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Right-of-use-assets obtained in exchange for finance lease obligations |
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$ |
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$ |
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Change in purchase of property, plant and equipment in accounts payable and
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$ |
(
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) |
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$ |
(
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) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the thirteen and thirty-nine weeks ended September 25, 2021 and September 26, 2020
(in thousands)
(unaudited)
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Class A |
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Accumulated |
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Class A |
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Common |
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Class B |
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Class B |
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Additional |
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Other |
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Total |
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Common |
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Stock, |
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Common |
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Common |
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Paid-in |
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Comprehensive |
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Retained |
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Stockholders’ |
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Shares |
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Par |
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Shares |
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Stock, Par |
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Capital |
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Loss |
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Earnings |
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Equity |
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Balance at December 26, 2020 |
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|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Stock options exercised and restricted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Adoption
of ASU 2019-12, Simplifying the
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
||||||
|
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Balance at March 27, 2021 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Stock options exercised and restricted
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
(
|
) |
||||
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Conversion from Class B to Class A |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||
|
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Balance at June 26, 2021 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
||||||
|
Stock options exercised and restricted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
(
|
) |
||||||
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
(
|
) |
||||||
|
Balance at September 25, 2021 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
6
|
|
|
|
|
|
Class A |
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
||||||||
|
|
|
Class A |
|
|
Common |
|
|
Class B |
|
|
Class B |
|
|
Additional |
|
|
Other |
|
|
|
|
|
Total |
|
||||||||
|
|
|
Common |
|
|
Stock, |
|
|
Common |
|
|
Common |
|
|
Paid-in |
|
|
Comprehensive |
|
|
Retained |
|
|
Stockholders’ |
|
||||||||
|
|
|
Shares |
|
|
Par |
|
|
Shares |
|
|
Stock, Par |
|
|
Capital |
|
|
Loss |
|
|
Earnings |
|
|
Equity |
|
||||||||
|
Balance at December 28, 2019 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Stock options exercised and restricted
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Conversion from Class B to Class A |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||
|
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
(
|
) |
||||||
|
Balance at March 28, 2020 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Stock options exercised and restricted
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Conversion from Class B to Class A |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||
|
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
(
|
) |
||||||
|
Balance at June 27, 2020 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Stock options exercised and restricted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Defined benefit plans liability adjustment net of tax of $
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Balance at September 26, 2020 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSO LIDATED FINANCIAL STATEMENTS
A. Organization and Basis of Presentation
The Boston Beer Company, Inc. and certain subsidiaries (the “Company”) are engaged in the business of selling alcohol beverages throughout the United States and in selected international markets, under the trade names “The Boston Beer Company®”, “Twisted Tea Brewing Company®”, “Hard Seltzer Beverage Company”, “Angry Orchard® Cider Company”, “Dogfish Head® Craft Brewery”, “Dogfish Head® Craft Distillery”, “Angel City® Brewing Company”, “Coney Island® Brewing Company” and “American Fermentation Company”.
The accompanying unaudited condensed consolidated balance sheet as of September 25, 2021, and the unaudited condensed consolidated comprehensive statements of operations, stockholders’ equity, and cash flows for the interim periods ended September 25, 2021 and September 26, 2020 have been prepared by the Company in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnotes normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. All intercompany accounts and transactions have been eliminated. These condensed consolidated financial statements should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 26, 2020.
In the opinion of the Company’s management, the Company’s unaudited condensed consolidated balance sheet as of September 25, 2021 and the results of its condensed consolidated operations, stockholders’ equity, and cash flows for the interim periods ended September 25, 2021 and September 26, 2020, 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. A reclassification has been made to the prior year’s condensed consolidated financial statements to conform to the current year’s presentation of third-party production prepayments. Refer to Note H of these condensed consolidated financial statements for further details.
B. Slowdown of the Hard Seltzer Market Impact
During the thirteen weeks ended September 25, 2021, the market for hard seltzer products continued to experience decelerating growth trends. The slowdown in growth trends greatly impacted the Company's volume of production and shipments within the thirteen weeks ended September 25, 2021, as well as its projections for the future. The volume reduction resulted in several supply chain related costs recorded during the third quarter. These costs include provisions for excess and obsolete inventories, property, plant and equipment impairments, write-offs of third-party production prepayments and provisions for costs associated with the termination of various third-party production contracts.
During the thirteen weeks ended September 25, 2021, the Company recorded excess and obsolete inventory reserves and other inventory related costs totaling $
The Company has several third-party production agreements in place to meet the expected increased demand for Truly. Due to the volume slowdown, the Company determined that not all of these agreements are needed to meet adjusted demand. Several of these agreements included guaranteed payments and payments for capital expenditures incurred by the third-parties that the Company is still obligated to pay. The Company recorded contract termination costs totaling $
Due to the reduction in its production volume projections, the Company evaluated its construction in progress capital projects to determine if the assets would generate future economic benefits and concluded that certain projects were impaired. The Company recognized impairment expense of $
8
components of the cancelled projects which was recorded within contract termination costs and other for the thirteen and thirty-nine weeks ended September 25, 2021.
The combined expense of $
C. COVID-19 Pandemic
The Company began seeing the impact of the COVID-19 pandemic on its business in early March 2020. The direct financial impact of the pandemic primarily included significantly reduced keg demand from the on-premise channel and higher labor and safety-related costs at the Company’s breweries. In addition to these direct financial impacts, COVID-19 related safety measures resulted in a reduction of brewery productivity. In the first three quarters of 2020, the Company recorded COVID-19 related pre-tax reductions in net revenue and increases in other costs that total $
D. Goodwill and Intangible Assets
There were
The Company’s intangible assets as of September 25, 2021 and December 26, 2020 were as follows:
|
|
|
|
|
|
As of September 25, 2021 |
|
|
As of December 26, 2020 |
|
|||||||||||||||||||
|
|
|
Estimated
|
|
|
Gross
|
|
|
Accumulated |
|
|
Net Book |
|
|
Gross
|
|
|
Accumulated |
|
|
Net Book |
|
|||||||
|
|
|
Life (Years) |
|
|
Value |
|
|
Amortization |
|
|
Value |
|
|
Value |
|
|
Amortization |
|
|
Value |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|||||||
|
Customer Relationships |
|
|
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
Trade Names |
|
Indefinite |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
Total intangible assets |
|
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
The Company acquired intangible assets in fiscal year 2019 that consist of $
|
Fiscal Year |
|
Amount (in thousands) |
|
|
|
Remainder of 2021 |
|
$ |
|
|
|
2022 |
|
|
|
|
|
2023 |
|
|
|
|
|
2024 |
|
|
|
|
|
2025 |
|
|
|
|
|
2026 |
|
|
|
|
E. 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 $
9
F. Revenue Recognition
During the thirt
y-nine weeks ended September 25, 2021 and September 26, 2020, approximately
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 25, 2021 and December 26, 2020, the Company has deferred $
Customer promotional discount programs are entered into by the Company with distributors for certain periods of time. The reimbursements for discounts to distributors are recorded as reductions to net revenue and were $
Customer programs and incentives are a common practice in the alcohol beverage industry. Amounts paid in connection with customer programs and incentives are recorded as reductions to net revenue or as advertising, promotional and selling expenses, based on the nature of the expenditure. Customer incentives and other payments made to distributors are primarily based upon performance of certain marketing and advertising activities. Depending on applicable state laws and regulations, these activities promoting the Company's products may include, but are not limited to point-of-sale and merchandise placement, samples, product displays, promotional programs at retail locations and meals, travel and entertainment.
Amounts paid to customers in connection with these programs that were recorded as reductions to revenue or as advertising, promotional and selling expenses for the thirteen and thirty-nine weeks ended September 25, 2021 were $
G. 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.
|
|
|
September 25,
|
|
|
December 26,
|
|
||
|
|
|
(in thousands) |
|
|||||
|
Current inventory: |
|
|
|
|
|
|
||
|
Raw materials |
|
$ |
|
|
|
$ |
|
|
|
Work in process |
|
|
|
|
|
|
|
|
|
Finished goods |
|
|
|
|
|
|
|
|
|
Total current inventory |
|
|
|
|
|
|
|
|
|
Long term inventory |
|
|
|
|
|
|
|
|
|
Total inventory |
|
$ |
|
|
|
$ |
|
|
10
As of September 25, 2021 and December 26, 2020, the Company has recorded inventory obsolescence reserves of $
H. Third-Party Production Prepayments
During the thirty-nine weeks ended September 25, 2021, the Company brewed and packaged approximately
|
|
|
September 25,
|
|
|
December 26,
|
|
||
|
|
|
(in thousands) |
|
|||||
|
Prepaid expenses and other current assets |
|
$ |
- |
|
|
$ |
|
|
|
Third-party production prepayments |
|
|
|
|
|
|
|
|
|
Total third-party production prepayments |
|
$ |
|
|
|
$ |
|
|
Effective March 27, 2021, the Company began classifying third-party production prepayments solely as non-current assets and reclassed the $
During the thirteen weeks ended September 25, 2021, as a result of lower than anticipated demand for certain Truly brand styles and packages, the Company adjusted its volume plans for production at certain third-party facilities. The Company terminated relationships with some of its third-party production suppliers and recorded $
During the thirty-nine weeks ended September 25, 2021, the Company entered into a master transaction agreement with one of its existing brewing services providers to ensure access to capacity at a new location and continued access at certain existing locations. The agreement became effective during the thirteen weeks ended June 26, 2021, upon the closing of the purchase of the new location by the third-party brewing services provider. As part of the master transaction agreement, the Company paid $
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 September 25, 2021, if volume for the remaining term of the production arrangements was zero, the contractual shortfall fees would total approximately $
|
|
|
Expected Shortfall Fees to be Incurred |
|
|
|
|
|
(in millions) |
|
|
|
2021 |
|
$ |
|
|
|
2022 |
|
|
|
|
|
2023 |
|
|
|
|
|
2024 |
|
|
|
|
|
2025 |
|
|
|
|
|
Thereafter |
|
|
|
|
|
Total shortfall fees expected to be incurred |
|
$ |
|
|
11
I. Net (Loss) Income per Share
The Company calculates net (loss) income per share using the two-class method, which requires the Company to allocate net (loss) income to its Class A Common Shares, Class B Common Shares and unvested share-based payment awards that participate in dividends with common stock, in the calculation of net (loss) income per share.
The Class A Common Stock has no voting rights, except (1) as required by law, (2) for the election of Class A Directors, and (3) that the approval of the holders of the Class A Common Stock is required for (a) certain future authorizations or issuances of additional securities which have rights senior to Class A Common Stock, (b) certain alterations of rights or terms of the Class A or Class B Common Stock as set forth in the Articles of Organization of the Company, (c) other amendments of the Articles of Organization of the Company, (d) certain mergers or consolidations with, or acquisitions of, other entities, and (e) sales or dispositions of any significant portion of the Company’s assets.
The Class B Common Stock has full voting rights, including the right to (1) elect a majority of the members of the Company’s Board of Directors and (2) approve all (a) amendments to the Company’s Articles of Organization, (b) mergers or consolidations with, or acquisitions of, other entities, (c) sales or dispositions of any significant portion of the Company’s assets, and (d) equity-based and other executive compensation and other significant corporate matters. The Company’s Class B Common Stock is not listed for trading. Each share of the Class B Common Stock is freely convertible into one share of Class A Common Stock, upon request of the respective Class B holder, and participates equally in dividends.
The Company’s unvested share-based payment awards include unvested shares (1) issued under the Company’s investment share program, which permits employees who have been with the Company for at least
Included in the computation of net (loss) income per diluted common share are dilutive outstanding stock options and restricted stock that are vested or expected to vest. At its discretion, the Board of Directors grants stock options and restricted stock to senior management and certain key employees. The terms of the employee stock options are determined by the Board of Directors at the time of grant. To date, stock options granted to employees vest over various service periods and/or based on the attainment of certain performance criteria and generally expire after ten years. In December 2018, the Employee Equity Incentive Plan was amended to permit the grant of restricted stock units. The restricted stock units generally vest over
12
Net (Loss) Income per Common Share - Basic
The following table sets forth the computation of basic net (loss) income per share using the two-class method:
|
|
|
Thirteen weeks ended |
|
|
Thirty-nine weeks ended |
|
||||||||||
|
|
|
September 25,
|
|
|
September 26,
|
|
|
September 25,
|
|
|
September 26,
|
|
||||
|
|
|
(in thousands, except per share data) |
|
|
(in thousands, except per share data) |
|
||||||||||
|
Net (loss) income |
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Allocation of net (loss) 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 (loss) income per share for basic: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Class A Common Stock |
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Class B Common Stock |
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
*
Net (Loss) Income per Common Share - Diluted
The Company calculates diluted net (loss) income per share for common stock using the more dilutive of (1) the treasury stock method, or (2) the two-class method, which assumes the participating securities are not exercised.
13
The following table sets forth the computation of diluted net (loss) income per share, assuming the conversion of all Class B Common Stock into Class A Common Stock for the thirteen and thirty-nine weeks ended September 25, 2021 and for the thirteen and thirty-nine weeks ended September 26, 2020:
|
|
|
Thirteen weeks ended |
|
|||||||||||||||||||||
|
|
|
September 25, 2021 |
|
|
September 26, 2020 |
|
||||||||||||||||||
|
|
|
Loss to
|
|
|
Common
|
|
|
EPS |
|
|
Earnings to
|
|
|
Common
|
|
|
EPS |
|
||||||
|
|
|
(in thousands, except per share data) |
|
|||||||||||||||||||||
|
As reported - basic |
|
$ |
(
|
) |
|
|
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
Add: effect of dilutive potential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Share-based awards |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
||
|
Class B Common Stock |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Net effect of unvested participating
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||
|
Net (loss) income per common share -
|
|
$ |
(
|
) |
|
|
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
Thirty-nine weeks ended |
|
|||||||||||||||||||||
|
|
|
September 25, 2021 |
|
|
September 26, 2020 |
|
||||||||||||||||||
|
|
|
Earnings to
|
|
|
Common
|
|
|
EPS |
|
|
Earnings to
|
|
|
Common
|
|
|
EPS |
|
||||||
|
|
|
(in thousands, except per share data) |
|
|||||||||||||||||||||
|
As reported - basic |
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
Add: effect of dilutive potential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Share-based awards |
|
|
— |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
||
|
Class B Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Net effect of unvested participating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
|
Net income per common share -
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
For the thirteen weeks ended September 25, 2021 approximately
J. Comprehensive Income or Loss
Comprehensive income or loss represents net income or loss, plus a defined benefit plans liability adjustment, net of tax effect, and foreign currency translation adjustment. The foreign currency translation adjustments for the interim periods ended September 25, 2021 and September 26, 2020 were not material. During the thirteen weeks ended September 26, 2020, t
he Company incurred a $
14
K. Commitments and Contingencies
Contract Obligations
As of September 25, 2021, projected cash outflows under non-cancelable contractual obligations are as follows:
|
|
|
Commitments |
|
|
|
|
|
(in thousands) |
|
|
|
Ingredients (excluding hops and malt) |
|
$ |
|
|
|
Brand support |
|
|
|
|
|
Hops and malt |
|
|
|
|
|
Equipment and machinery |
|
|
|
|
|
Packaging |
|
|
|
|
|
Other |
|
|
|
|
|
Total commitments |
|
$ |
|
|
The majority of these contract obligations are for the 2021 fiscal year with the remainder extending no later than the 2025 fiscal year.
Litigation
The Company is and in the future may be party to legal proceedings and claims, including class action claims, where significant damages are asserted against it. Given the inherent uncertainty of litigation, it is possible that the Company could incur liabilities as a consequence of these claims, which may or may not have a material adverse effect on the Company’s financial condition or the results of its operations. The Company has contingencies and may record provisions for which, even if in the opinion of management and its legal counsel, the risk of loss is probable and estimable. The most significant contingencies are discussed below.
Securities Litigation. On September 14, 2021, a purported class action lawsuit was filed by an individual shareholder in the United States District Court for the Southern District of New York against the Company and three of its officers. The complaint alleges claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 between April 22, 2021 and September 8, 2021. The plaintiff claims that defendants made materially false and/or misleading statements or failed to disclose material adverse facts about the Company’s business, operations, and prospects. On October 8, 2021, a nearly identical complaint was filed against the Company by an individual shareholder in the United States District Court for the Southern District of New York. The Company intends to vigorously defend against these lawsuits. A range of potential loss is not estimable at this time.
False Advertising. On August 26, 2021, a proposed class action lawsuit was filed by two individuals in the United States District Court for the Southern District of California against the Company. The complaint alleges claims for false advertising, breach of warranty, unlawful business practices, unfair competition, and violations of certain California and New York consumer protection acts. The plaintiff claims that the Company falsely or misleadingly labelled its Truly products with respect to the ingredients contained therein. The Company intends to vigorously assert and defend its rights in this lawsuit. A range of potential loss is not estimable at this time.
L. Income Taxes
As of September 25, 2021 and December 26, 2020, the Company had approximately $
The Company’s practice is to classify interest and penalties related to income tax matters in income tax expense. As of September 25, 2021 and December 26, 2020, the Company had $
The following table provides a summary of the income tax (benefit) provision for the thirteen and thirty-nine weeks ended September 25, 2021 and September 26, 2020:
15
|
|
|
Thirteen weeks ended |
|
|||||
|
|
|
September 25,
|
|
|
September 26,
|
|
||
|
|
|
(in thousands) |
|
|||||
|
Summary of income tax (benefit) provision |
|
|
|
|
|
|
||
|
Tax (benefit) provision based on net (loss) income |
|
$ |
(
|
) |
|
$ |
|
|
|
Benefit of ASU 2016-09 |
|
|
(
|
) |
|
|
(
|
) |
|
Total income tax (benefit) provision |
|
$ |
(
|
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
||
|
|
|
Thirty-nine weeks ended |
|
|||||
|
|
|
September 25,
|
|
|
September 26,
|
|
||
|
|
|
(in thousands) |
|
|||||
|
Summary of income tax provision |
|
|
|
|
|
|
||
|
Tax provision based on net income |
|
$ |
|
|
|
$ |
|
|
|
Benefit of ASU 2016-09 |
|
|
(
|
) |
|
|
(
|
) |
|
Total income tax provision |
|
$ |
|
|
|
$ |
|
|
The
benefit of ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, decreased by $
The Company’s effective tax rate for the thirty-nine weeks ended September 25, 2021, excluding the impact of ASU 2016-09, increased to
M. Revolving Line of Credit
N. 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.
16
At September 25, 2021 and December 26, 2020, 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 25, 2021 and December 26, 2020, the Company’s cash and cash equivalents balance
was $
During the thirteen weeks ended September 25, 2021, the Company determined that it would be unable to use or repurpose certain of its in-service and under construction capital projects to generate future economic benefits. Accordingly, property, plant and equipment with a carrying value of $
O. Common Stock and Stock-Based Compensation
Option Activity
Information related to stock options under the Restated Employee Equity Incentive Plan and the Stock Option Plan for Non-Employee Directors is summarized as follows:
|
|
|
Shares |
|
|
Weighted-
|
|
|
Weighted-
|
|
|
Aggregate
|
|
||||
|
Outstanding at December 26, 2020 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
||
|
Granted |
|
|
|
|
|
|
1,031.01 |
|
|
|
|
|
|
|
||
|
Forfeited |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||
|
Expired |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||
|
Exercised |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
||
|
Outstanding at September 25, 2021 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
Exercisable at September 25, 2021 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
Vested and expected to vest at September 25, 2021 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
Of the total options outstanding at September 25, 2021,
On March 1, 2021, the Company granted options to purchase an aggregate of
On March 1, 2021 the Company granted options to purchase an aggregate of
On May 19, 2021, the Company granted options to purchase an aggregate of
Weighted average assumptions used to estimate fair values of stock options on the date of grants are as follows:
|
|
|
2021 |
|
|
|
Expected Volatility |
|
|
|
% |
|
Risk-free interest rate |
|
|
|
% |
|
Expected Dividends |
|
|
|
% |
|
Exercise factor |
|
|
|
|
|
Discount for post-vesting restrictions |
|
|
|
% |
Non-Vested Shares Activity
17
The following table summarizes vesting activities of shares issued under the investment share program and restricted stock awards:
|
|
|
Number of Shares |
|
|
Weighted Average Fair Value |
|
||
|
Non-vested at December 26, 2020 |
|
|
|
|
|
$ |
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
Vested |
|
|
(
|
) |
|
|
|
|
|
Forfeited |
|
|
(
|
) |
|
|
|
|
|
Non-vested at September 25, 2021 |
|
|
|
|
|
$ |
|
|
Of the total shares outstanding at September 25, 2021,
On March 1, 2021, the Company granted a combined
Stock-Based Compensation
The following table provides information regarding stock-based compensation expense included in operating expenses in the accompanying condensed consolidated statements of comprehensive operations:
|
|
|
Thirteen weeks ended |
|
|
Thirty-nine weeks ended |
|
||||||||||
|
|
|
September 25,
|
|
|
September 26,
|
|
|
September 25,
|
|
|
September 26,
|
|
||||
|
|
|
(in thousands) |
|
|
(in thousands) |
|
||||||||||
|
Amounts included in advertising, promotional and selling expenses |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Amounts included in general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation expense |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
P. Licensing Agreements
Beam Suntory Licensing Agreement
On July 14, 2021, the Company signed
Pepsi Licensing Agreement
On August 9, 2021, the Company signed an agreement with PepsiCo, Inc. (“Pepsi”) to develop, market and sell alcohol beverages. The term of this agreement is perpetual, with provisions to terminate within the initial
18
Q. Related Party Transactions
In connection with the Dogfish Head Transaction, the Company entered into a lease with the Dogfish Head founders and other owners of buildings used in certain of the Company’s restaurant operations. The lease is for
R
The Company evaluated subsequent events occurring after the balance sheet date 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 condensed consolidated financial statements.
19
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the significant factors affecting the consolidated operating results, financial condition and liquidity and cash flows of the Company for the thirteen and thirty-nine week period ended September 25, 2021, as compared to the thirteen and thirty-nine week period ended September 26, 2020. This discussion should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations, and the Consolidated Financial Statements of the Company and Notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 26, 2020.
RESULTS OF OPERATIONS
Thirteen Weeks Ended September 25, 2021 compared to Thirteen Weeks Ended September 25, 2020
|
|
|
Thirteen Weeks Ended
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
|
|
September 25,
|
|
|
September 26,
|
|
|
Amount
|
|
|
% change |
|
|
Per barrel
|
|
|||||||||||||||||||||
|
Barrels sold |
|
|
|
|
|
2,312 |
|
|
|
|
|
|
|
|
|
2,080 |
|
|
|
|
|
|
232 |
|
|
|
11.2 |
% |
|
|
|
|||||
|
|
|
|
|
|
Per barrel |
|
|
% of net
|
|
|
|
|
|
Per barrel |
|
|
% of net
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Net revenue |
|
$ |
561,643 |
|
|
$ |
242.93 |
|
|
|
100.0 |
% |
|
$ |
492,792 |
|
|
$ |
236.90 |
|
|
|
100.0 |
% |
|
$ |
68,851 |
|
|
|
14.0 |
% |
|
$ |
6.03 |
|
|
Cost of goods |
|
|
388,947 |
|
|
|
168.23 |
|
|
|
69.3 |
% |
|
|
252,207 |
|
|
|
121.24 |
|
|
|
51.2 |
% |
|
|
136,740 |
|
|
|
54.2 |
% |
|
|
46.99 |
|
|
Gross profit |
|
|
172,696 |
|
|
|
74.70 |
|
|
|
30.7 |
% |
|
|
240,585 |
|
|
|
115.65 |
|
|
|
48.8 |
% |
|
|
(67,889 |
) |
|
|
(28.2 |
)% |
|
|
(40.96 |
) |
|
Advertising, promotional and
|
|
|
166,817 |
|
|
|
72.15 |
|
|
|
29.7 |
% |
|
|
108,023 |
|
|
|
51.93 |
|
|
|
21.9 |
% |
|
|
58,794 |
|
|
|
54.4 |
% |
|
|
20.22 |
|
|
General and administrative
|
|
|
32,066 |
|
|
|
13.87 |
|
|
|
5.7 |
% |
|
|
30,340 |
|
|
|
14.59 |
|
|
|
6.2 |
% |
|
|
1,726 |
|
|
|
5.7 |
% |
|
|
(0.72 |
) |
|
Contract termination costs and other |
|
|
35,428 |
|
|
|
15.32 |
|
|
|
6.3 |
% |
|
|
— |
|
|
|
— |
|
|
|
0.0 |
% |
|
|
35,428 |
|
|
|
0.0 |
% |
|
|
15.32 |
|
|
Impairment of assets |
|
|
14,158 |
|
|
|
6.12 |
|
|
|
2.5 |
% |
|
|
441 |
|
|
|
0.21 |
|
|
|
0.1 |
% |
|
|
13,717 |
|
|
|
3110.4 |
% |
|
|
5.91 |
|
|
Total operating expenses |
|
|
248,469 |
|
|
|
107.46 |
|
|
|
44.2 |
% |
|
|
138,804 |
|
|
|
66.73 |
|
|
|
28.2 |
% |
|
|
109,665 |
|
|
|
79.0 |
% |
|
|
40.73 |
|
|
Operating (loss) income |
|
|
(75,773 |
) |
|
|
(32.76 |
) |
|
|
(13.5 |
)% |
|
|
101,781 |
|
|
|
48.93 |
|
|
|
20.7 |
% |
|
|
(177,554 |
) |
|
|
(174.4 |
)% |
|
|
(81.69 |
) |
|
Other (expense) income, net |
|
|
(683 |
) |
|
|
(0.30 |
) |
|
|
(0.1 |
)% |
|
|
170 |
|
|
|
0.08 |
|
|
|
0.0 |
% |
|
|
(853 |
) |
|
|
(501.8 |
)% |
|
|
(0.38 |
) |
|
(Loss) income before income tax
|
|
|
(76,456 |
) |
|
|
(33.06 |
) |
|
|
(13.6 |
)% |
|
|
101,951 |
|
|
|
49.01 |
|
|
|
20.7 |
% |
|
|
(178,407 |
) |
|
|
(175.0 |
)% |
|
|
(82.07 |
) |
|
Income tax (benefit) expense |
|
|
(18,035 |
) |
|
|
(7.80 |
) |
|
|
(3.2 |
)% |
|
|
21,183 |
|
|
|
10.18 |
|
|
|
4.3 |
% |
|
|
(39,218 |
) |
|
|
(185.1 |
)% |
|
|
(17.98 |
) |
|
Net (loss) income |
|
|
(58,421 |
) |
|
|
(25.26 |
) |
|
|
(10.4 |
)% |
|
|
80,768 |
|
|
|
38.83 |
|
|
|
16.4 |
% |
|
|
(139,189 |
) |
|
|
(172.3 |
)% |
|
|
(64.09 |
) |
Slowdown of Hard Seltzer Category Impact. The thirteen weeks ended September 25, 2021 results include direct costs resulting from the slowdown of the hard seltzer category of $102.4 million, before the related tax benefit. These costs include inventory obsolescence, estimated destruction costs and other inventory related costs of $54.3 million, contract termination costs primarily for excess third-party contract production of $35.4 million and equipment impairments of $12.7 million. The total direct costs of $102.4 million have been recorded in the thirteen weeks ended September 25, 2021 financial statements as a $54.3 million increase in cost of goods sold, $35.4 million in contract termination fees and $12.7 million in impairments of long-lived assets.
In addition, the thirteen weeks ended September 25, 2021 results include indirect costs resulting from the slowdown of the hard seltzer category of $30.6 million, before the related tax benefit. These costs include increased raw materials sourcing and warehousing costs of $11.8 million, unfavorable absorption impacts at Company owned breweries and downtime charges at third party breweries of $11.4 million, customer return provisions for out of code or damaged products of $5.4 million and other costs of $2.0 million. These total indirect costs of $30.6 million have been recorded in the thirteen weeks ended September 25, 2021 financial statements as a $23.7 million increase in cost of goods sold and $6.9 million reduction in net revenue.
Net revenue. Net revenue increased by $68.9 million, or 14.0%, to $561.6 million for the thirteen weeks ended September 25, 2021, as compared to $492.8 million for the thirteen weeks ended September 26, 2020, primarily as a result of an increase in shipments.
Volume. Total shipment volume increased by 11.2% to 2,312,000 barrels for the thirteen weeks ended September 25, 2021, as compared to 2,080,000 barrels for the thirteen weeks ended September 26, 2020, reflecting increases in the Company’s Twisted Tea, Samuel Adams and Angry Orchard brands, partially offset by decreases in its Truly Hard Seltzer and Dogfish Head brands.
Depletions, or sales by distributors to retailers, of the Company’s products for the thirteen weeks ended September 25, 2021 increased by approximately 11% compared to the thirteen weeks ended September 26, 2020, reflecting increases in the Company’s Twisted Tea, Truly Hard Seltzer, Samuel Adams and Dogfish Head brands, partially offset by decreases in its Angry Orchard brand.
20
The Company believes distributor inventory as of September 25, 2021 averaged approximately 6 weeks on hand and was at an appropriate level for each of its brands, except for Truly, which has significantly higher than planned distributor inventory levels for certain styles and packages. As a result of slowing demand and continued uncertainty on future volume projections for Truly, the Company is working closely with its distributors to reduce Truly distributor inventory levels and have adjusted production and shipments during the third quarter and the remainder of the year. The Company expects total distributor inventory levels for its total business in terms of weeks on hand to be between 4 and 8 weeks for the remainder of the year.
Net revenue per barrel. Net revenue per barrel increased by 2.6% to $242.93 per barrel for the thirteen weeks ended September 25, 2021, as compared to $236.90 per barrel for the comparable period in 2020, primarily due to price increases.
Cost of goods sold. Cost of goods sold was $168.23 per barrel for the thirteen weeks ended September 25, 2021, as compared to $121.24 per barrel for the thirteen weeks ended September 26, 2020. The 2021 increase in cost of goods sold of $46.99 per barrel was primarily due to $84.3 million direct and indirect volume adjustment cost as a result of the hard seltzer slowdown described above and higher materials cost, partially offset by price increases.
Gross profit. Gross profit was $74.70 per barrel for the thirteen weeks ended September 25, 2021, as compared to $115.65 per barrel for the thirteen weeks ended September 26, 2020.
The Company includes freight charges related to the movement of finished goods from its manufacturing locations to distributor locations in its advertising, promotional and selling expense line item. As such, the Company’s gross margins may not be comparable to those of other entities that classify costs related to distribution differently.
Advertising, promotional and selling. Advertising, promotional and selling expenses increased by $58.8 million, or 54.4%, to $166.8 million for the thirteen weeks ended September 25, 2021, as compared to $108.0 million for the thirteen weeks ended September 26, 2020. The increase was primarily due to increased brand investments of $37.6 million, mainly driven by higher media, production and local marketing costs, and increased freight to distributors of $21.1 million mostly attributable to higher rates and volumes.
Advertising, promotional and selling expenses were 29.7% of net revenue, or $72.15 per barrel, for the thirteen weeks ended September 25, 2021, as compared to 21.9% of net revenue, or $51.93 per barrel, for the thirteen weeks ended September 25, 2020. This increase per barrel is primarily due to advertising, promotional and selling expenses growing at a higher rate than shipments. The Company invests in advertising and promotional campaigns that it believes will be effective, but there is no guarantee that such investments will generate sales growth.
The Company conducts certain advertising and promotional activities in its distributors’ markets, and the distributors make contributions to the Company for such efforts. These amounts are included in the Company’s condensed consolidated statements of comprehensive operations as reductions to advertising, promotional and selling expenses. Historically, contributions from distributors for advertising and promotional activities have amounted to between 2% and 3% of net sales. The Company may adjust its promotional efforts in the distributors’ markets, if changes occur in these promotional contribution arrangements, depending on industry and market conditions.
General and administrative. General and administrative expenses increased by $1.7 million, or 5.7%, to $32.0 million for the thirteen weeks ended September 25, 2021, as compared to $30.3 million for the thirteen weeks ended September 26, 2020. The increase was primarily due to increases in external services partially offset by lower salaries and benefits costs.
Contract termination costs and other. Contract termination costs increased by $35.4 million from the comparable period of 2020, primarily due to cancellations of third-party production facilities agreements related to the slowdown of the hard seltzer category.
Impairment of assets. Impairment of long-lived assets increased by $13.7 million from the comparable period of 2020, primarily due to write-downs of equipment of $12.7 million related to the slowdown of the hard seltzer category.
Income tax (benefit) expense. During the thirteen weeks ended September 25, 2021, the Company’s effective tax rate was a tax benefit of 23.6% compared to a tax provision of 20.8% in the thirteen weeks ended September 26, 2020. This change in rate was primarily due to a higher tax benefit from stock option activity recorded in accordance with ASU 2016-09 in the thirteen weeks ended September 26, 2020.
21
Thirty-Nine Weeks Ended September 25, 2021 compared to Thirty-Nine Weeks Ended September 26, 2020
|
|
|
Thirty-nine Weeks Ended
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
|
|
September 25,
|
|
|
September 26,
|
|
|
Amount
|
|
|
% change |
|
|
Per barrel
|
|
|||||||||||||||||||||
|
Barrels sold |
|
|
|
|
|
7,037 |
|
|
|
|
|
|
|
|
|
5,425 |
|
|
|
|
|
|
1,612 |
|
|
|
29.7 |
% |
|
|
|
|||||
|
|
|
|
|
|
Per barrel |
|
|
% of net
|
|
|
|
|
|
Per barrel |
|
|
% of net
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Net revenue |
|
$ |
1,709,528 |
|
|
$ |
242.93 |
|
|
|
100.0 |
% |
|
$ |
1,275,495 |
|
|
$ |
235.12 |
|
|
|
100.0 |
% |
|
$ |
434,033 |
|
|
|
34.0 |
% |
|
$ |
7.81 |
|
|
Cost of goods |
|
|
1,011,513 |
|
|
|
143.74 |
|
|
|
59.2 |
% |
|
|
677,313 |
|
|
|
124.86 |
|
|
|
53.1 |
% |
|
|
334,200 |
|
|
|
49.3 |
% |
|
|
18.88 |
|
|
Gross profit |
|
|
698,015 |
|
|
|
99.19 |
|
|
|
40.8 |
% |
|
|
598,182 |
|
|
|
110.27 |
|
|
|
46.9 |
% |
|
|
99,833 |
|
|
|
16.7 |
% |
|
|
(11.07 |
) |
|
Advertising, promotional and
|
|
|
469,296 |
|
|
|
66.69 |
|
|
|
27.5 |
% |
|
|
306,250 |
|
|
|
56.45 |
|
|
|
24.0 |
% |
|
|
163,046 |
|
|
|
53.2 |
% |
|
|
10.24 |
|
|
General and administrative
|
|
|
96,973 |
|
|
|
13.78 |
|
|
|
5.7 |
% |
|
|
87,054 |
|
|
|
16.05 |
|
|
|
6.8 |
% |
|
|
9,919 |
|
|
|
11.4 |
% |
|
|
(2.27 |
) |
|
Contract termination costs and other |
|
|
35,428 |
|
|
|
5.03 |
|
|
|
2.1 |
% |
|
|
— |
|
|
|
— |
|
|
|
0.0 |
% |
|
|
35,428 |
|
|
|
0.0 |
% |
|
|
5.03 |
|
|
Impairment of assets |
|
|
15,389 |
|
|
|
2.19 |
|
|
|
0.9 |
% |
|
|
2,796 |
|
|
|
0.52 |
|
|
|
0.2 |
% |
|
|
12,593 |
|
|
|
450.4 |
% |
|
|
1.67 |
|
|
Total operating expenses |
|
|
617,086 |
|
|
|
87.69 |
|
|
|
36.1 |
% |
|
|
396,100 |
|
|
|
73.02 |
|
|
|
31.1 |
% |
|
|
220,986 |
|
|
|
55.8 |
% |
|
|
14.67 |
|
|
Operating income |
|
|
80,929 |
|
|
|
11.50 |
|
|
|
4.7 |
% |
|
|
202,082 |
|
|
|
37.25 |
|
|
|
15.8 |
% |
|
|
(121,153 |
) |
|
|
(60.0 |
)% |
|
|
(25.74 |
) |
|
Other expense net |
|
|
(739 |
) |
|
|
(0.11 |
) |
|
|
(0.0 |
)% |
|
|
(391 |
) |
|
|
(0.07 |
) |
|
|
(0.0 |
)% |
|
|
(348 |
) |
|
|
89.0 |
% |
|
|
(0.04 |
) |
|
Income before income tax
|
|
|
80,190 |
|
|
|
11.39 |
|
|
|
4.7 |
% |
|
|
201,691 |
|
|
|
37.18 |
|
|
|
15.8 |
% |
|
|
(121,501 |
) |
|
|
(60.2 |
)% |
|
|
(25.78 |
) |
|
Income tax expense |
|
|
13,852 |
|
|
|
1.97 |
|
|
|
0.8 |
% |
|
|
42,548 |
|
|
|
7.84 |
|
|
|
3.3 |
% |
|
|
(28,696 |
) |
|
|
(67.4 |
)% |
|
|
(5.87 |
) |
|
Net income |
|
|
66,338 |
|
|
|
9.42 |
|
|
|
3.9 |
% |
|
|
159,143 |
|
|
|
29.34 |
|
|
|
12.5 |
% |
|
|
(92,805 |
) |
|
|
(58.3 |
)% |
|
|
(19.91 |
) |
Slowdown of Hard Seltzer Category Impact. The thirty-nine weeks ended September 25, 2021 results include direct costs resulting from the slowdown of the hard seltzer category of $102.4 million, before the related tax benefit. These direct costs were all incurred in the thirteen weeks ended September 25, 2021 and are described in more detail in the thirteen weeks ended September 25, 2021 Results of Operations section above.
In addition, the thirty-nine weeks ended September 25, 2021 results include indirect costs resulting from the slowdown of the hard seltzer category of $41.5 million, before the related tax benefit. These costs, include increased raw materials sourcing and warehousing costs of $22.3 million, unfavorable absorption impacts at Company owned breweries and downtime charges at third party breweries of $11.8 million, customer return provisions for out of code or damaged products of $5.4 million and other costs of $2.0 million. The total costs of $41.5 million have been recorded in the thirty-nine weeks ended September 25, 2021 financial statements as a $34.6 million increase in cost of goods sold and $6.9 million reduction in net revenue.
Net revenue. Net revenue increased by $434.0 million, or 34.0%, to $1,709.5 million for the thirty-nine weeks ended September 25, 2021, as compared to $1,275 million for the thirty-nine weeks ended September 26, 2020, primarily as a result of an increase in shipments.
Volume. Total shipment volume increased by 29.7% to 7,037,000 barrels for the thirty-nine weeks ended September 25, 2021, as compared to 5,425,000 barrels for the thirty-nine weeks ended September 26, 2020, reflecting increases in the Company’s Truly Hard Seltzer, Twisted Tea, Samuel Adams, Angry Orchard and Dogfish Head brands.
Depletions, or sales by distributors to retailers, of the Company’s products for the thirty-nine weeks ended September 25, 2021 increased by approximately 24% compared to the thirty-nine weeks ended September 26, 2020, reflecting increases in the Company’s Truly Hard Seltzer, Twisted Tea, Samuel Adams and Dogfish Head brands, partially offset by decreases in its Angry Orchard brand.
Net revenue per barrel. Net revenue per barrel increased by 3.32% to $242.93 per barrel for the thirty-nine weeks ended September 25, 2021, as compared to $235.12 per barrel for the comparable period in 2020, primarily due to price increases.
22
Cost of goods sold. Cost of goods sold was $143.74 per barrel for the thirty-nine weeks ended September 25, 2021, as compared to $124.86 per barrel for the thirty-nine weeks ended September 26, 2020. The 2021 increase in cost of goods sold of $18.88 per barrel was primarily due to $95.2 million direct and indirect volume adjustment cost as a result of the hard seltzer slowdown described above and higher materials cost, partially offset by price increases.
Gross profit. Gross profit was $99.19 per barrel for the thirty-nine weeks ended September 25, 2021, as compared to $110.27 per barrel for the thirty-nine weeks ended September 26, 2020.
Advertising, promotional and selling. Advertising, promotional and selling expenses increased by $163.1 million, or 53.2%, to $469.3 million for the thirty-nine weeks ended September 25, 2021, as compared to $306.3 million for the thirty-nine weeks ended September 26, 2020. The increase was primarily due to increased brand investments of $99.7 million, mainly driven by higher media, production and local marketing costs, and increased freight to distributors of $63.2 million mostly attributable to higher rates and volumes.
Advertising, promotional and selling expenses were 27.5% of net revenue, or $66.69 per barrel, for the thirty-nine weeks ended September 25, 2021, as compared to 24.0% of net revenue, or $56.45 per barrel, for the thirty-nine weeks ended September 26, 2020. This increase per barrel is primarily due to advertising, promotional and selling expenses growing at a higher rate than shipments.
General and administrative. General and administrative expenses increased by $9.9 million, or 11.4%, to $96.9 million for the thirty-nine weeks ended September 25, 2021, as compared to $87.1 million for the thirty-nine weeks ended September 26, 2020. The increase was primarily due to increases in external services and salaries and benefits costs.
Contract termination costs and other. Contract termination costs increased by $35.4 million from the comparable period of 2020, primarily due to cancellations of third-party production facilities agreements related to the slowdown of the hard seltzer category.
Impairment of assets. Impairment of long-lived assets increased $12.6 million from the first half of 2020, primarily due to write-downs of equipment of $12.7 million related to the slowdown of the hard seltzer category, partially offset by lower write-offs of equipment at Company owned breweries.
Income tax expense. During the thirty-nine weeks ended September 25, 2021, the Company’s effective tax rate was 17.3% compared to an effective tax rate of 21.1% in the thirty-nine weeks ended September 26, 2020. This lower rate in year-to-date 2021 was primarily due to the higher impact of deductions for option activity on lower net income compared to the thirty-nine weeks ended September 26, 2020.
LIQUIDITY AND CAPITAL RESOURCES
Cash decreased to $86.5 million as of September 25, 2021 from $163.3 million as of December 26, 2020, reflecting purchases of property, plant and equipment and payments of tax withholdings on stock-based payment awards and investment shares, partially offset by cash provided by operating activities.
Cash provided by operating activities consists of net income, adjusted for certain non-cash items, such as depreciation and amortization, stock-based compensation expense, other non-cash items included in operating results, and changes in operating assets and liabilities, such as accounts receivable, inventory, accounts payable and accrued expenses.
Cash provided by operating activities for the thirty-nine weeks ended September 25, 2021 was $51.0 million and primarily consisted of net income of $66.3 million and non-cash items of $78.6 million, partially offset by a net increase in operating assets and liabilities of $94.0 million. Cash provided by operating activities for the thirty-nine weeks ended September 26, 2020 was $208.9 million and primarily consisted of net income of $159.1 million and non-cash items of $82.7 million, partially offset by a net increase in operating assets and liabilities of $32.9 million. The decrease in cash provided by operating activities for the thirty-nine weeks ended September 25, 2021 compared to the prior period is primarily due to lower net income compared to the prior year and increases in Truly brand finished goods inventory, partially offset by a $42.6 million obsolescence reserve related to the hard seltzer slowdown. This inventory, net of obsolescence reserve, is expected to be sold through the first quarter of 2022.
23
The Company used $119.6 million in investing activities during the thirty-nine weeks ended September 25, 2021, as compared to $100.0 million during the thirty-nine weeks ended September 26, 2020. Investing activities primarily consisted of capital investments made mostly in the Company’s breweries to drive efficiencies and cost reductions and support product innovation and future growth.
Cash used by financing activities was $8.1 million during the thirty-nine weeks ended September 25, 2021, as compared to $11.4 million provided by financing activities during the thirty-nine weeks ended September 25, 2020. The $19.6 million decrease in cash provided by financing activities in 2021 from 2020 is primarily due to $15.5 million in payments of tax withholding on stock-based payment awards and investment shares in the thirty-nine weeks ended September 25, 2021, an increase of $13.8 million from such amounts in the thirty-nine weeks ended September 26, 2020.
During the thirty-nine weeks ended September 25, 2021 and the period from September 26, 2021 through October 21, 2021, the Company did not repurchase any shares of its Class A Common Stock. As of October 21, 2021, the Company had repurchased a cumulative total of approximately 13.8 million shares of its Class A Common Stock for an aggregate purchase price of $840.7 million and had approximately $90.3 million remaining on the $931.0 million stock repurchase expenditure limit set by the Board of Directors.
The Company expects that its cash balance as of September 25, 2021 of $86.5 million, along with future operating cash flow and the unused balance of the Company’s line of credit of $150.0 million, will be sufficient to fund future cash requirements. The Company’s $150.0 million credit facility has a term not scheduled to expire until March 31, 2023. As of the date of this filing, the Company was not in violation of any of its covenants to the lender under the credit facility.
2021 and 2022 Outlook
Year-to-date depletions through the forty-one weeks ended October 16, 2021 are estimated to have increased approximately 23% from the comparable period in 2020.
The Company currently projects Non-GAAP earnings per diluted share, which excludes the impact of ASU 2016-09, for 2021 of between $2.00 and $6.00, primarily as a result of the slowdown of the hard seltzer category and the related inventory write-offs, contract termination fees, equipment impairments, absorption impacts, downtime charges, and increased sourcing and warehousing costs. This estimate is highly sensitive to changes in volume projections, particularly related to the hard seltzer category. The Company’s actual 2021 earnings per share could vary significantly from the current projection. The Company is currently estimating 2021 depletions and shipments growth of between 18% and 22%. The Company is targeting national price increases of between 2% and 3%. Full-year 2021 gross margins are currently expected to be between 40% and 42%, which includes combined full year direct and indirect costs of the hard seltzer slowdown estimated at $132.0 million, of which $95.2 million has been incurred in the first nine months and the remainder of $36.8 million are estimated to be incurred in the fourth quarter. The Company intends to increase advertising, promotional and selling expenses by between $80 million and $100 million for the full year 2021, not including any changes in freight costs for the shipment of products to Distributors. The Company intends to increase its investment in its brands in 2021, commensurate with the opportunities for growth that it sees, but there is no guarantee that such increased investments will result in increased volumes. The Company estimates a full-year 2021 Non-GAAP effective tax rate of approximately 28.0%, which excludes the impact of ASU 2016-09.
The Company is completing its 2022 planning process and will provide further detailed guidance when the Company presents its full-year 2021 results. Based on information of which it is currently aware, the Company is using the following preliminary assumptions and targets for its 2022 fiscal year, which are highly sensitive to changes in volume projections, particularly related to the hard seltzer category. The Company is forecasting depletion and shipment percentage growth of between mid-single digits and low-double digits. The Company is targeting national price increases of between 3% and 6%. Full-year 2022 gross margins are currently expected to be between 45% and 48%. The Company intends to increase advertising, promotional and selling expenses by between $10 million and $30 million for the full year 2022, not including any changes in freight costs for the shipment of products to distributors. The Company intends to increase its investment in its brands in 2022 commensurate with the opportunities for growth that it sees, but there is no guarantee that such increased investments will result in increased volumes. The Company estimates a full-year 2022 Non-GAAP effective tax rate of approximately 26%, excluding the impact of ASU 2016-09.
Non-GAAP earnings per diluted share and Non-GAAP effective tax rate are not defined terms under U.S. generally accepted accounting principles (“GAAP”). These Non-GAAP measures should not be considered in isolation or as a substitute for diluted earnings per share and effective tax rate data prepared in accordance with GAAP, and may not be comparable to calculations of similarly titled measures by other companies. Management believes these Non-GAAP measures provide meaningful and useful information to investors and analysts regarding our outlook and facilitate period to period comparisons of our forecasted financial performance. Non-GAAP earnings per diluted share and Non-GAAP effective tax rate exclude the potential impact of ASU 2016-09, which could be significant and will depend largely upon unpredictable future events outside the Company’s control, including the
24
timing and value realized upon exercise of stock options versus the fair value of those options when granted. Therefore, because of the uncertainty and variability of the impact of ASU 2016-09, the Company is unable to provide, without unreasonable effort, a reconciliation of these Non-GAAP measures on a forward-looking basis.
The Company is continuing to evaluate 2021 capital expenditures. Its current estimates are between $160 million and $200 million, consisting mostly of investments in capacity and supply chain efficiency improvements. The Company estimates full-year 2022 capital spending of between $140 million and $190 million. The actual total amount spent on 2021 and 2022 capital expenditures may well be different from these estimates. Based on information currently available, the Company believes that its capacity requirements for 2021 and 2022 can be covered by its Company-owned breweries and existing contracted capacity at third-party brewers.
Off-balance Sheet Arrangements
At September 25, 2021, the Company did not have off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
Contractual Obligations
There were no material changes outside of the ordinary course of the Company’s business to contractual obligations during the three-month period ended September 25, 2021.
Critical Accounting Policies
The Company’s critical accounting policies are discussed in Part II, Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Form 10-K for the year ended December 26, 2020. The Company believes that the consistent application of these policies enables the Company to provide readers of the interim consolidated financial statements with useful and reliable information about the Company’s results of operations and financial condition. No material changes to the Company’s critical accounting policies, as previously disclosed, have occurred during the first nine months of 2021, except for the expansion of the Company’s Provision for Excess or Expired Inventory policy due to the large provision reported in the third quarter of 2021 as discussed in Note B of these condensed consolidated financial statements.
Provision for Excess or Expired Inventory
The provisions for excess or expired inventory are based on management’s estimates of forecasted usage of inventories on hand and under contract. Forecasting usage involves significant judgments regarding future demand for the Company’s various existing products and products under development as well as the potency and shelf-life of various ingredients. The Company experienced a significant decline in demand for its Truly branded products during the third quarter of 2021 and is forecasting lower demand for Truly branded products for the remainder of the 2021 fiscal year and for the 2022 fiscal year. The lower forecasted demand for the Truly branded products resulted in a $42.6 million provision for excess or expired inventory during the third quarter of 2021. A significant change in the timing or level of demand for certain products as compared to forecasted amounts may result in recording additional provisions for excess or expired inventory in the future. Provisions for excess inventory are included in cost of goods sold and have historically been adequate to provide for losses on its inventory. Provisions for excess or expired inventory included in cost of goods sold was $11.3 million, $8.1 million and $4.2 million in fiscal years 2020, 2019 and 2018, respectively.
FORWARD-LOOKING STATEMENTS
In this Quarterly Report on Form 10-Q and in other documents incorporated herein, as well as in oral statements made by the Company, statements that are prefaced with the words “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “intend,” “designed” and similar expressions, are intended to identify forward-looking statements regarding events, conditions, and financial trends that may affect the Company’s future plans of operations, business strategy, results of operations and financial position. These statements are based on the Company’s current expectations and estimates as to prospective events and circumstances about which the Company can give no firm assurance. Further, any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward-looking statement to reflect subsequent events or circumstances. Forward-looking statements should not be relied upon as a prediction of actual future financial condition or results. These forward-looking statements, like any forward-looking statements, involve risks and uncertainties that could cause actual results to differ materially from those projected or anticipated. Such risks and uncertainties include the factors set forth below in addition to the other information set forth in this Quarterly Report on Form 10-Q and in the section titled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 26, 2020.
25
Item 3. QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK
Since December 26, 2020, there have been no significant changes in the Company’s exposures to interest rate or foreign currency rate fluctuations. The Company currently does not enter into derivatives or other market risk sensitive instruments for the purpose of hedging or for trading purposes.
Item 4. CONTROLS AND PROCEDURES
As of September 25, 2021, the Company conducted an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer (its principal executive officer and principal financial officer, respectively) regarding the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) were effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the requisite time periods and that such disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to its management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
As a result of the COVID-19 pandemic, certain employees of the Company began working remotely in March 2020 but these changes to the working environment did not have a material effect on the Company’s internal control over financial reporting. There was no other change in the Company’s internal control over financial reporting that occurred during the thirty-nine weeks ended September 25, 2021 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
26
PART II. OTHER INFORMATION
Item 1. LEGA L PROCEEDINGS
For information regarding the Company's legal proceedings, refer to Note K of the Condensed Consolidated Financial Statements.
Item 1A. RI SK FACTORS
In addition to the other information set forth in this report, careful consideration should be given to the factors discussed in Part I, "Item 1A. Risk Factors" in the Company’s Annual Report on Form 10-K for the year ended December 26, 2020, which could materially affect the Company’s business, financial condition or future results. The risks described in the Company’s Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that it currently deems to be immaterial also may materially adversely affect its business, financial condition and/or operating results.
27
Item 2. UNREGISTERED SALES OF EQU ITY SECURITIES AND USE OF PROCEEDS
As of October 16, 2021, the Company had repurchased a cumulative total of approximately 13.8 million shares of its Class A Common Stock for an aggregate purchase price of $840.7 million and had $90.3 million remaining on the $931.0 million share buyback expenditure limit set by the Board of Directors. During the thirty-nine weeks ended September 25, 2021, the Company did not repurchase any shares of its Class A Common Stock under the previously announced repurchase program.
During the thirty-nine weeks ended September 25, 2021, the Company repurchased 390 shares of its Class A Common Stock, of which all represent repurchases of unvested investment shares issued under the Investment Share Program of the Company’s Employee Equity Incentive Plan, as illustrated in the table below:
|
Period |
|
Total Number of Shares
|
|
|
Average Price Paid
|
|
|
Total Number of Shares
|
|
|
Approximate Dollar
|
|
||||
|
December 27, 2020 to January 30, 2021 |
|
|
- |
|
|
$ |
- |
|
|
|
— |
|
|
$ |
90,335 |
|
|
January 31, 2021 to February 27, 2021 |
|
|
20 |
|
|
|
218.79 |
|
|
|
— |
|
|
|
90,335 |
|
|
February 27, 2021 to March 27, 2021 |
|
|
163 |
|
|
|
192.77 |
|
|
|
— |
|
|
|
90,335 |
|
|
March 28, 2021 to May 1, 2021 |
|
|
- |
|
|
|
- |
|
|
|
— |
|
|
|
90,335 |
|
|
May 2, 2021 to May 29,2021 |
|
|
94 |
|
|
|
314.86 |
|
|
|
— |
|
|
|
90,335 |
|
|
May 30, 2021 to June 26, 2021 |
|
|
2 |
|
|
|
135.88 |
|
|
|
— |
|
|
|
90,335 |
|
|
June 27, 2021 to July 31, 2021 |
|
|
40 |
|
|
|
209.37 |
|
|
|
— |
|
|
|
90,335 |
|
|
August 1, 2021 to August 28, 2021 |
|
|
71 |
|
|
|
422.16 |
|
|
|
— |
|
|
|
90,335 |
|
|
August 29, 2021 to September 25, 2021 |
|
|
- |
|
|
|
- |
|
|
|
— |
|
|
|
90,335 |
|
|
Total |
|
|
390 |
|
|
$ |
266.71 |
|
|
|
— |
|
|
$ |
90,335 |
|
As of October 16, 2021, the Company had 10.2 million shares of Class A Common Stock outstanding and 2.1 million shares of Class B Common Stock outstanding.
Item 3. DEFAULTS UPO N SENIOR SECURITIES
Not Applicable
Item 4. MINE SAF ETY DISCLOSURES
Not Applicable
Item 5. OTHER INFORMATION
Not Applicable
28
Item 6. E XHIBITS
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Exhibit No. |
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Title |
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3.1 |
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3.2 |
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*31.1 |
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*31.2 |
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*32.1 |
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*32.2 |
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*101.INS |
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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
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|
*101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document
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*101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document
|
|
*101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document
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*101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document
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*101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document
|
|
*104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document)
|
* Filed with this report
29
SIGNA TURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.
|
THE BOSTON BEER COMPANY, INC |
|
(Registrant) |
|
Date: October 21, 2021 |
/s/ David A. Burwick |
|
|
David A. Burwick |
|
|
President and Chief Executive Officer |
|
|
(Principal Executive Officer) |
|
Date: October 21, 2021 |
/s/ Frank H. Smalla |
|
|
Frank H. Smalla |
|
|
Chief Financial Officer |
|
|
(Principal Financial Officer) |
30
No information found
* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR WHICH THE 13F WAS FILED.
| FUND | NUMBER OF SHARES | VALUE ($) | PUT OR CALL |
|---|
| DIRECTORS | AGE | BIO | OTHER DIRECTOR MEMBERSHIPS |
|---|
No information found
Customers
| Customer name | Ticker |
|---|---|
| Macy's, Inc. | M |
No Suppliers Found
Price
Yield
| Owner | Position | Direct Shares | Indirect Shares |
|---|