UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number:
(Exact name of registrant as specified in its charter)
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Securities registered pursuant to Section 12(b) of the Act.
Title of each class |
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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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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 April 16, 2022:
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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THE BOSTON BEER COMPANY, INC.
FORM 10-Q
March 26, 2022
TABLE OF CONTENTS
PART I. |
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FINANCIAL INFORMATION |
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Item 1. |
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3 |
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Condensed Consolidated Balance Sheets as of March 26, 2022 and December 25, 2021 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II. |
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OTHER INFORMATION |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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EX-31.1 Section 302 CEO Certification
EX-31.2 Section 302 CFO Certification
EX-32.1 Section 906 CEO Certification
EX-32.2 Section 906 CFO Certification
2
PART I. FINANCIAL INFORMATION
Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
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March 26, |
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December 25, |
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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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Restricted Cash |
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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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Line of credit |
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— |
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Non-current operating lease liabilities |
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Other liabilities |
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Total liabilities |
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(See Note I) |
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Stockholders' Equity: |
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Class A Common Stock, $ |
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Class B Common Stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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Retained earnings |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
(in thousands, except per share data)
(unaudited)
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Thirteen weeks ended |
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March 26, |
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March 27 |
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Revenue |
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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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Impairment of assets |
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Total operating expenses |
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Operating (loss) income |
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Other expense: |
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Interest expense |
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Other expense |
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Total other expense |
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(Loss) income before income tax (benefit) provision |
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Income tax (benefit) provision |
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Net (loss) income |
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Net (loss) income per common share - basic |
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Net (loss) income per common share - diluted |
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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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Other comprehensive (loss) income: |
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Foreign currency translation adjustment |
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Total other comprehensive (loss) income, net of tax |
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Comprehensive (loss) income |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
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Thirteen weeks ended |
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March 26, |
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March 27 |
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Cash flows (used in) provided by operating activities: |
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Net (loss) income |
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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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Loss (gain) on disposal of property, plant and equipment |
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Change in right-of-use assets |
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Other non-cash expense (income) |
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Stock-based compensation expense |
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Deferred income taxes |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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Inventories |
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Prepaid expenses, income tax receivable, other current assets and other assets |
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Third-party production prepayments |
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Accounts payable |
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Accrued expenses, other current liabilities and other liabilities |
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Change in operating lease liabilities |
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Net cash (used in) 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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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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Cash flows 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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Line of credit borrowings |
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Line of credit repayments |
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Payment of tax withholding on stock-based payment awards and investment shares |
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Net cash provided by financing activities |
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Change in cash and cash equivalents and restricted cash |
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Cash and cash equivalents and restricted cash 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 refunded (paid), net |
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$ |
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$ |
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Cash paid for amounts included in measurement of lease liabilities |
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Operating cash 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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Change in purchase of property, plant and equipment in accounts payable and |
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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 ended March 26, 2022 and March 27, 2021
(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 25, 2021 |
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$ |
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$ |
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$ |
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Net loss |
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Stock options exercised and restricted |
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— |
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Stock-based compensation expense |
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Foreign currency translation adjustment |
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Balance at March 26, 2022 |
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$ |
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$ |
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$ |
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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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$ |
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$ |
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Net income |
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Stock options exercised and restricted |
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Stock-based compensation expense |
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, Simplifying the accounting for income taxes |
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Foreign currency translation adjustment |
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Balance at March 27, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
6
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A. Organization and Basis of Presentation
The Boston Beer Company, Inc. and certain subsidiaries (the “Company”) are engaged in the business of selling alcohol beverages throughout the United States and in selected international markets, under the trade names “The Boston Beer Company®”, “Twisted Tea Brewing Company®”, “Hard Seltzer Beverage Company”, “Angry Orchard® Cider Company”, “Dogfish Head® Craft Brewery”, “Dogfish Head Distilling Co.”, “Angel City® Brewing Company”, “Coney Island® Brewing Company”, "Green Rebel Brewing Co." and “Bevy Long Drink Co.”
The accompanying unaudited condensed consolidated balance sheet as of March 26, 2022, and the unaudited condensed consolidated statements of comprehensive operations, stockholders’ equity, and cash flows for the interim periods ended March 26, 2022 and March 27, 2021 have been prepared by the Company in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnotes normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. All intercompany accounts and transactions have been eliminated. These condensed consolidated financial statements should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 25, 2021.
In the opinion of the Company’s management, the Company’s unaudited condensed consolidated balance sheet as of March 26, 2022 and the results of its condensed consolidated comprehensive operations, stockholders’ equity, and cash flows for the interim periods ended March 26, 2022 and March 27, 2021, reflect all adjustments (consisting only of normal and recurring adjustments) necessary to present fairly the results of the interim periods presented. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year.
B. Recent Accounting Pronouncements
Accounting Pronouncements Recently Adopted
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The standard includes multiple key provisions, including removal of certain exceptions to ASC 740, Income Taxes, and simplification in several other areas such as accounting for a franchise tax (or similar tax) that is partially based on income. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company adopted the standard in the first quarter of fiscal 2021 and recorded an adjustment of $
C
During the thirteen weeks ended March 26, 2022 and March 27, 2021, 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 March 26, 2022 and December 25, 2021, the Company has deferred $
7
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 weeks ended March 26, 2022 and March 27, 2021 were $
D. Inventories
Inventories consist of raw materials, work in process and finished goods. Raw materials, which principally consist of hops, flavorings, apple juice, other brewing materials and packaging, are stated at the lower of cost, determined on the first-in, first-out basis, or net realizable value. The Company’s goal is to maintain on hand a supply of at least one year for essential hop varieties, in order to limit the risk of an unexpected reduction in supply. Inventories are generally classified as current assets. The Company classifies hops inventory in excess of two years of forecasted usage in other long-term assets. The cost elements of work in process and finished goods inventory consist of raw materials, direct labor and manufacturing overhead.
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March 26, |
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December 25, |
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(in thousands) |
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Current inventory: |
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Raw materials |
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$ |
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$ |
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Work in process |
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Finished goods |
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Total current inventory |
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Long term inventory |
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Total inventory |
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$ |
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$ |
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As of March 26, 2022 and December 25, 2021, the Company has recorded inventory obsolescence reserves of $
E. Third-Party Production Prepayments
During the thirteen weeks ended March 26, 2022 and March 27, 2021, the Company brewed and packaged approximately
As a result of lower than anticipated demand for certain Truly brand styles and packages, the Company has adjusted its volume plans for production at certain third-party facilities beginning in the third quarter of 2021 and into 2022. The Company has terminated
8
relationships with some of its third-party production suppliers and incurred contract termination costs in doing so. During the thirteen weeks ended March 26, 2022 the Company recorded $
During fiscal 2021, the Company amended its master transaction agreement with City Brewing Company, LLC ("City Brewing") to ensure access to capacity at a new location and continued access at certain existing locations. The amendment became effective during the second quarter of fiscal year 2021, upon the closing of the purchase of the new location by City Brewing. As part of the master transaction agreement, the Company paid $
Total third-party production prepayments were $
At current production volume projections, the Company believes that it will fall short of its future annual volume commitments at certain third-party production facilities, including those that are part of the master transaction agreement described above, and will incur shortfall fees. The Company will expense the shortfall fees during the contractual period when such fees are incurred as a component of cost of goods sold. As of March 26, 2022, if volume for the remaining term of the production arrangements was zero, the contractual shortfall fees would total approximately $
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Expected Shortfall Fees to be Incurred |
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(in millions) |
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Remainder of 2022 |
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$ |
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2023 |
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2024 |
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2025 |
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Total shortfall fees expected to be incurred |
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$ |
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F. Goodwill and Intangible Assets
The Company’s intangible assets as of March 26, 2022 and December 25, 2021 were as follows:
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As of March 26, 2022 |
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As of December 25, 2021 |
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Estimated |
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Gross |
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Accumulated |
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Net Book |
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Gross |
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Accumulated |
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Net Book |
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Life (Years) |
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