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☒
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QUARTERLY REPORT
PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Washington
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91-1141254
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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Large Accelerated Filer ☐
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Accelerated Filer ☒
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Non-accelerated Filer ☐ (Do not check if a smaller reporting company)
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Smaller Reporting Company ☐
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Emerging Growth Company ☐
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PART I - FINANCIAL INFORMATION
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Page
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Item 1.
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Financial Statements
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Item 2.
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Item 3.
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Item 4.
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PART II ‑ OTHER INFORMATION
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Item 1.
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Item 1A.
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Item 6.
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March 31,
2018 |
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December 31,
2017 |
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Assets
|
|
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|
||||
Current assets:
|
|
|
|
||||
Cash, cash equivalents and restricted cash
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$
|
2,814
|
|
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$
|
579
|
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Accounts receivable, net
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28,569
|
|
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27,784
|
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||
Inventory, net
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15,910
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13,844
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Assets held for sale
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—
|
|
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22,946
|
|
||
Other current assets
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2,508
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|
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4,335
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Total current assets
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49,801
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69,488
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|
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Property, equipment and leasehold improvements, net
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104,394
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106,283
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|
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Goodwill
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12,917
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12,917
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Intangible, equity method investment and other assets, net
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20,779
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|
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20,949
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Total assets
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$
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187,891
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$
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209,637
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Liabilities and Shareholders' Equity
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|
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Current liabilities:
|
|
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Accounts payable
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$
|
15,012
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|
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$
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14,338
|
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Accrued salaries, wages and payroll taxes
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4,692
|
|
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5,877
|
|
||
Refundable deposits
|
4,291
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|
|
4,816
|
|
||
Deferred revenue
|
4,035
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|
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3,385
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|
||
Other accrued expenses
|
3,742
|
|
|
2,368
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|
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Current portion of long-term debt and capital lease obligations
|
802
|
|
|
699
|
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Total current liabilities
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32,574
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|
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31,483
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Long-term debt and capital lease obligations, net of current portion
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10,124
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|
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32,599
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Fair value of derivative financial instruments
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108
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|
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221
|
|
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Deferred income tax liability, net
|
12,309
|
|
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12,886
|
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Other liabilities
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1,650
|
|
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1,657
|
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Total liabilities
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56,765
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78,846
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Commitments and contingencies (Note 12)
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|
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Common shareholders' equity:
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Common stock, $0.005 par value. Authorized 50,000,000 shares; issued and outstanding 19,309,829 and 19,309,829
|
96
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|
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96
|
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Additional paid-in capital
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142,681
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142,196
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Accumulated other comprehensive loss
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(81
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)
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(164
|
)
|
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Accumulated deficit
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(11,570
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)
|
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(11,337
|
)
|
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Total common shareholders' equity
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131,126
|
|
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130,791
|
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Total liabilities and common shareholders' equity
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$
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187,891
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$
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209,637
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Three Months Ended
March 31, |
||||||
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2018
|
|
2017
|
||||
Sales
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$
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50,085
|
|
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$
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46,766
|
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Less excise taxes
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2,598
|
|
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2,464
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Net sales
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47,487
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44,302
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Cost of sales
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32,416
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31,633
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Gross profit
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15,071
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12,669
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Selling, general and administrative expenses
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14,748
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15,469
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Operating income (loss)
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323
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(2,800
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)
|
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Interest expense
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(134
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)
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(181
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)
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Other income, net
|
34
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3
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Income (loss) before income taxes
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223
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(2,978
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)
|
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Income tax provision (benefit)
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62
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(1,191
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)
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Net income (loss)
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$
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161
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|
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$
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(1,787
|
)
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Basic and diluted net income (loss) per share
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$
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0.01
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$
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(0.09
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)
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Shares used in basic per share calculations
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19,310
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19,261
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Shares used in diluted per share calculations
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19,488
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19,261
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Three Months Ended
March 31, |
||||||
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2018
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2017
|
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Net income (loss)
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$
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161
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$
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(1,787
|
)
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Unrealized gain on derivative hedge transactions, net of tax
|
83
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51
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Comprehensive income (loss)
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$
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244
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$
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(1,736
|
)
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Three Months Ended March 31,
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||||||
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2018
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2017
|
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Cash flows from operating activities:
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Net income (loss)
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$
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161
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$
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(1,787
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)
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Adjustments to reconcile net income (loss) to net cash provided by operating activities:
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Depreciation and amortization
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2,736
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2,895
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(Gain) loss on sale or disposal of Property, equipment and leasehold improvements
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(516
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)
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3
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Deferred income taxes
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(605
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)
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(1,207
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)
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Stock-based compensation
|
485
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357
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Other
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73
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172
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Changes in operating assets and liabilities:
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Accounts receivable, net
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(285
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)
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1,578
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Inventories
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(1,791
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)
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(1,926
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)
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Other current assets
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1,128
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(1,018
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)
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Accounts payable and other accrued expenses
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3,015
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2,946
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Accrued salaries, wages and payroll taxes
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(1,185
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)
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|
988
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Refundable deposits
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(475
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)
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36
|
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Net cash provided by operating activities
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2,741
|
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3,037
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Cash flows from investing activities:
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|
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Expenditures for Property, equipment and leasehold improvements
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(1,104
|
)
|
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(1,965
|
)
|
||
Proceeds from sale of Property, equipment and leasehold improvements
|
22,456
|
|
|
—
|
|
||
Restricted cash from sale of Property, equipment and leasehold improvements
|
515
|
|
|
—
|
|
||
Net cash provided by (used in) investing activities
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21,867
|
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(1,965
|
)
|
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|
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|
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Cash flows from financing activities:
|
|
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|
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Principal payments on debt and capital lease obligations
|
(174
|
)
|
|
(131
|
)
|
||
Net repayments under revolving line of credit
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(22,199
|
)
|
|
(1,238
|
)
|
||
Net cash used in financing activities
|
(22,373
|
)
|
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(1,369
|
)
|
||
Increase (decrease) in Cash, cash equivalents and restricted cash
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2,235
|
|
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(297
|
)
|
||
|
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|
||||
Cash, cash equivalents and restricted cash:
|
|
|
|
|
|
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Beginning of period
|
579
|
|
|
442
|
|
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End of period
|
$
|
2,814
|
|
|
$
|
145
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
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Cash paid for interest
|
$
|
178
|
|
|
$
|
178
|
|
Cash paid for income taxes, net
|
1
|
|
|
—
|
|
||
Supplemental disclosure of non-cash information:
|
|
|
|
|
|
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Purchases of Property, equipment and leasehold improvements with capital leases
|
$
|
—
|
|
|
$
|
180
|
|
Purchases of Property, equipment and leasehold improvements included in Accounts payable at end of period
|
203
|
|
|
104
|
|
|
March 31,
2018 |
|
December 31,
2017 |
||||
Raw materials
|
$
|
3,916
|
|
|
$
|
4,290
|
|
Work in process
|
2,524
|
|
|
1,960
|
|
||
Finished goods
|
6,919
|
|
|
5,009
|
|
||
Packaging materials
|
1,162
|
|
|
956
|
|
||
Promotional merchandise
|
931
|
|
|
1,161
|
|
||
Brewpub food, beverages and supplies
|
458
|
|
|
468
|
|
||
|
$
|
15,910
|
|
|
$
|
13,844
|
|
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
Gross sales to A-B and Ambev
|
$
|
37,568
|
|
|
$
|
32,641
|
|
International distribution fee earned from ABWI
|
850
|
|
|
850
|
|
||
International distribution fee from ABWI, recorded in Deferred revenue
|
650
|
|
|
400
|
|
||
Contract Brewing fee earned from ABC
|
463
|
|
|
—
|
|
||
Margin fee paid to A-B, classified as a reduction of Sales
|
518
|
|
|
488
|
|
||
Inventory management and other fees paid to A-B, classified in Cost of sales
|
90
|
|
|
91
|
|
|
March 31,
2018 |
|
December 31,
2017 |
||||
Amounts due from A-B related to beer sales pursuant to the A-B distributor agreement
|
$
|
19,587
|
|
|
$
|
15,663
|
|
Amounts due from ABWI and A-B related to international distribution fee
|
1,500
|
|
|
5,000
|
|
||
Refundable deposits due to A-B
|
(1,345
|
)
|
|
(1,619
|
)
|
||
Amounts due to A-B for services rendered
|
(6,636
|
)
|
|
(4,836
|
)
|
||
Net amount due from A-B
|
$
|
13,106
|
|
|
$
|
14,208
|
|
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
Master distributor fee earned
|
$
|
7
|
|
|
$
|
—
|
|
Share of loss, classified as a component of Other income (expense), net
|
23
|
|
|
—
|
|
||
Refund of investment, classified as a reduction in the carrying value of the equity method investment
|
23
|
|
|
—
|
|
|
March 31,
2018 |
|
December 31,
2017 |
||||
Amounts receivable related to raw materials and alternating proprietorship fees
|
$
|
186
|
|
|
$
|
148
|
|
Amounts receivable related to Brewery representative reimbursements
|
—
|
|
|
32
|
|
||
Amounts due related to purchases of beer pursuant to the distributor agreement
|
(97
|
)
|
|
(116
|
)
|
||
Amounts due related to Royalty fees
|
—
|
|
|
(4
|
)
|
||
Net amount receivable
|
$
|
89
|
|
|
$
|
60
|
|
Three Months Ended
March 31, |
||||||
2018
|
|
2017
|
||||
$
|
41
|
|
|
$
|
30
|
|
Three Months Ended
March 31, |
||||||
2018
|
|
2017
|
||||
$
|
143
|
|
|
$
|
143
|
|
|
March 31,
2018 |
|
December 31,
2017 |
||||
Fair value of interest rate swaps
|
$
|
(108
|
)
|
|
$
|
(221
|
)
|
Derivatives in Cash Flow Hedging Relationships
|
|
Amount of Gain
Recognized in Accumulated OCI (Effective Portion)
|
|
Location of Loss Reclassified
from Accumulated OCI into
Income (Effective Portion)
|
|
Amount of Loss Reclassified from Accumulated OCI into
Income (Effective Portion)
|
||||
Three Months Ended
March 31, |
|
|
|
|
|
|
||||
2018
|
|
$
|
112
|
|
|
Interest expense
|
|
$
|
22
|
|
2017
|
|
$
|
83
|
|
|
Interest expense
|
|
$
|
53
|
|
•
|
Level 1 – quoted prices in active markets for identical securities as of the reporting date;
|
•
|
Level 2 – other significant directly or indirectly observable inputs, including quoted prices for similar securities, interest rates, prepayment speeds and credit risk; and
|
•
|
Level 3 – significant inputs that are generally less observable than objective sources, including our own assumptions in determining fair value.
|
Fair Value at March 31, 2018
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Interest rate swap
|
|
$
|
—
|
|
|
$
|
(108
|
)
|
|
$
|
—
|
|
|
$
|
(108
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Fair Value at December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate swaps
|
|
$
|
—
|
|
|
$
|
(221
|
)
|
|
$
|
—
|
|
|
$
|
(221
|
)
|
|
March 31,
2018 |
|
December 31,
2017 |
||||
Fixed-rate debt on Consolidated Balance Sheets
|
$
|
1,786
|
|
|
$
|
1,855
|
|
Estimated fair value of fixed-rate debt
|
$
|
1,828
|
|
|
$
|
1,915
|
|
|
|
Balance at
December 31, 2017 |
|
Adjustments due to
ASC 606 |
|
Balance at
January 1, 2018 |
||||||
Assets:
|
|
|
|
|
|
|
||||||
Other current assets
|
|
$
|
4,335
|
|
|
$
|
(237
|
)
|
|
$
|
4,098
|
|
Intangible, equity method investment and other assets, net
|
|
20,949
|
|
|
(157
|
)
|
|
20,792
|
|
|||
|
|
|
|
|
|
|
||||||
Common shareholders' equity:
|
|
|
|
|
|
|
||||||
Accumulated deficit
|
|
$
|
(11,337
|
)
|
|
$
|
(394
|
)
|
|
$
|
(11,731
|
)
|
|
|
March 31, 2018
|
||||||||||
|
|
As Reported
|
|
Balance without
Adoption of ASC 606 |
|
Effect of Change
Higher (Lower) |
||||||
Consolidated Balance Sheets
|
|
|
|
|
|
|
||||||
Assets:
|
|
|
|
|
|
|
||||||
Other current assets
|
|
$
|
2,508
|
|
|
$
|
2,745
|
|
|
$
|
(237
|
)
|
Intangible, equity method investment and other assets, net
|
|
20,779
|
|
|
20,877
|
|
|
(98
|
)
|
|||
|
|
|
|
|
|
|
||||||
Liabilities:
|
|
|
|
|
|
|
||||||
Deferred income tax liability, net
|
|
12,309
|
|
|
12,325
|
|
|
(16
|
)
|
|||
|
|
|
|
|
|
|
||||||
Common shareholders' equity:
|
|
|
|
|
|
|
||||||
Accumulated deficit
|
|
$
|
(11,570
|
)
|
|
$
|
(11,921
|
)
|
|
$
|
(351
|
)
|
|
|
Three Months Ended March 31, 2018
|
||||||||||
|
|
As Reported
|
|
Balance without
Adoption of ASC 606 |
|
Effect of Change
Higher (Lower) |
||||||
Consolidated Statements of Operations
|
|
|
|
|
|
|
||||||
Selling, general and administrative expenses
|
|
$
|
14,748
|
|
|
$
|
14,807
|
|
|
$
|
(59
|
)
|
Income tax provision
|
|
62
|
|
|
46
|
|
|
16
|
|
|||
Net income
|
|
161
|
|
|
118
|
|
|
43
|
|
|
|
Three Months Ended March 31, 2018
|
||||||||||
|
|
Beer Related
1
|
|
Brewpubs
|
|
Total
|
||||||
Product sold through distributor agreements
2
|
|
$
|
39,667
|
|
|
$
|
—
|
|
|
$
|
39,667
|
|
Alternating proprietorship and contract brewing fees
|
|
2,710
|
|
|
—
|
|
|
2,710
|
|
|||
International distribution fees
|
|
850
|
|
|
—
|
|
|
850
|
|
|||
Brewpubs
3
|
|
—
|
|
|
6,011
|
|
|
6,011
|
|
|||
Other
4
|
|
847
|
|
|
—
|
|
|
847
|
|
|||
|
|
$
|
44,074
|
|
|
$
|
6,011
|
|
|
$
|
50,085
|
|
(1)
|
Beer Related sales include sales to A-B subsidiaries including Ambev, ABWI and ABC. Sales to wholesalers through the A-B distributor agreement represented
76.6%
of our Sales.
|
(2)
|
Product sold through distributor agreements include domestic and international sales of owned and non-owned brands pursuant to terms in our distributor agreements.
|
(3)
|
Brewpub sales include sales of promotional merchandise and sales of beer directly to customers.
|
(4)
|
Other sales include sales of beer related merchandise, hops, spent grain and an export manager fee.
|
Three Months Ended March 31,
|
||||
2018
|
|
2017
|
||
76.6
|
%
|
|
70.6
|
%
|
March 31,
2018 |
|
December 31,
2017 |
||
73.8
|
%
|
|
74.4
|
%
|
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
Cost of sales
|
$
|
52
|
|
|
$
|
19
|
|
Selling, general and administrative expense
|
433
|
|
|
338
|
|
||
Total stock-based compensation expense
|
$
|
485
|
|
|
$
|
357
|
|
|
Three Months Ended
March 31, |
||||
|
2018
|
|
2017
|
||
Weighted average common shares used for basic EPS
|
19,310
|
|
|
19,261
|
|
Dilutive effect of stock-based awards
|
178
|
|
|
—
|
|
Shares used for diluted EPS
|
19,488
|
|
|
19,261
|
|
|
|
|
|
|
|
Stock-based awards not included in diluted per share calculations as they would be antidilutive
|
—
|
|
|
132
|
|
Three Months Ended March 31,
|
|
Net sales
|
|
Net income (loss)
|
|
Number of
barrels sold |
2018
|
|
$47.5 million
|
|
$0.2 million
|
|
167,000
|
2017
|
|
$44.3 million
|
|
$(1.8) million
|
|
152,800
|
|
Three Months Ended
March 31, |
||||
|
2018
|
|
2017
|
||
Sales
|
105.5
|
%
|
|
105.6
|
%
|
Less excise taxes
|
(5.5
|
)
|
|
(5.6
|
)
|
Net sales
|
100.0
|
|
|
100.0
|
|
Cost of sales
|
68.3
|
|
|
71.4
|
|
Gross profit
|
31.7
|
|
|
28.6
|
|
Selling, general and administrative expenses
|
31.1
|
|
|
34.9
|
|
Operating income (loss)
|
0.7
|
|
|
(6.3
|
)
|
Interest expense
|
(0.3
|
)
|
|
(0.4
|
)
|
Other income, net
|
0.1
|
|
|
—
|
|
Income (loss) before income taxes
|
0.5
|
|
|
(6.7
|
)
|
Income tax provision (benefit)
|
0.1
|
|
|
(2.7
|
)
|
Net income (loss)
|
0.3
|
%
|
|
(4.0
|
)%
|
(1)
|
Percentages may not add due to rounding.
|
2018
|
|
Beer
Related |
|
Brewpubs
|
|
Total
|
||||||
Net sales
|
|
$
|
41,476
|
|
|
$
|
6,011
|
|
|
$
|
47,487
|
|
Gross profit
|
|
$
|
14,710
|
|
|
$
|
361
|
|
|
$
|
15,071
|
|
Gross margin
|
|
35.5
|
%
|
|
6.0
|
%
|
|
31.7
|
%
|
|||
|
|
|
|
|
|
|
||||||
2017
|
|
|
|
|
|
|
|
|
|
|||
Net sales
|
|
$
|
37,851
|
|
|
$
|
6,451
|
|
|
$
|
44,302
|
|
Gross profit
|
|
$
|
12,270
|
|
|
$
|
399
|
|
|
$
|
12,669
|
|
Gross margin
|
|
32.4
|
%
|
|
6.2
|
%
|
|
28.6
|
%
|
|
|
Three Months Ended March 31,
|
|
Dollar
|
|
|
|||||||||
Sales by Category
|
|
2018
|
|
2017
|
|
Change
|
|
% Change
|
|||||||
A-B and A-B related
(1)
|
|
$
|
38,363
|
|
|
$
|
33,003
|
|
|
$
|
5,360
|
|
|
16.2
|
%
|
Contract brewing and beer related
(2)
|
|
5,711
|
|
|
7,312
|
|
|
(1,601
|
)
|
|
(21.9
|
)%
|
|||
Excise taxes
|
|
(2,598
|
)
|
|
(2,464
|
)
|
|
(134
|
)
|
|
5.4
|
%
|
|||
Net beer related sales
|
|
41,476
|
|
|
37,851
|
|
|
3,625
|
|
|
9.6
|
%
|
|||
Brewpubs
(3)
|
|
6,011
|
|
|
6,451
|
|
|
(440
|
)
|
|
(6.8
|
)%
|
|||
Net sales
|
|
$
|
47,487
|
|
|
$
|
44,302
|
|
|
$
|
3,185
|
|
|
7.2
|
%
|
(1)
|
A-B and A-B related includes domestic and international sales of our owned brands sold through A-B and Ambev, as well as non-owned brands sold pursuant to master distribution agreements, fees earned pursuant to the contract brewing agreement with ABC and the international distribution fees earned from ABWI.
|
(2)
|
Beer related includes international sales of our beers, and non-owned brands, not sold through A-B or Ambev, as well as fees earned through alternating proprietorship agreements and from contract brewing shortfall fees.
|
(3)
|
Brewpubs sales include sales of promotional merchandise and sales of beer directly to customers.
|
Three Months Ended March 31,
|
|
2018 Shipments
|
|
2017 Shipments
|
|
Increase
(Decrease) |
|
%
Change |
|
Change in
Depletions (1) |
|||||
A-B and A-B related
(2)
|
|
146,500
|
|
|
133,400
|
|
|
13,100
|
|
|
9.8
|
%
|
|
(4
|
)%
|
Contract brewing and beer related
(3)
|
|
18,700
|
|
|
17,400
|
|
|
1,300
|
|
|
7.5
|
%
|
|
|
|
Brewpubs
|
|
1,800
|
|
|
2,000
|
|
|
(200
|
)
|
|
(10.0
|
)%
|
|
|
|
Total
|
|
167,000
|
|
|
152,800
|
|
|
14,200
|
|
|
9.3
|
%
|
|
|
|
(1)
|
Change in depletions reflects the year-over-year change in barrel volume sales of beer by wholesalers to retailers.
|
(2)
|
A-B and A-B related includes domestic and international shipments of our owned brands distributed through A-B and Ambev, as well as non-owned brands distributed pursuant to master distribution agreements and shipments pursuant to the contract brewing agreement with ABC.
|
(3)
|
Beer related includes international shipments of our beers, and non-owned brands, not distributed through A-B or Ambev.
|
•
|
Beer: Reduced the federal excise tax to $3.50 per barrel on the first 60,000 barrels for domestic brewers producing fewer than 2 million barrels annually, down from $7.00 per barrel;
|
•
|
Beer: Reduced the federal excise tax to $16 per barrel on the first 6 million barrels for all other brewers and all beer importers, down from $18.00 per barrel; and
|
•
|
Cider: While the existing excise tax on hard cider did not change from $0.226 per gallon, the new laws expanded the small producer tax credit for hard cider to $0.062 on the first 30,000 gallons for an effective rate of $0.164 per gallon; the tax credit on the next 100,000 gallons produced will be $0.056 for an effective rate of $0.17 per gallon; and producers like us, who produce between 130,000 and 750,000 gallons, will receive a $0.033 credit for an effective tax rate of $0.193 per gallon.
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Three Months Ended March 31,
|
|
2018 Shipments
|
|
2017 Shipments
|
|
Increase
(Decrease) |
|
%
Change |
|
Change in
Depletions |
|||||
Kona
|
|
99,000
|
|
|
82,100
|
|
|
16,900
|
|
|
20.6
|
%
|
|
3
|
%
|
Widmer Brothers
|
|
23,300
|
|
|
27,800
|
|
|
(4,500
|
)
|
|
(16.2
|
)%
|
|
(19
|
)%
|
Redhook
|
|
18,600
|
|
|
20,700
|
|
|
(2,100
|
)
|
|
(10.1
|
)%
|
|
(24
|
)%
|
Omission
|
|
10,300
|
|
|
9,200
|
|
|
1,100
|
|
|
12.0
|
%
|
|
8
|
%
|
All other
(1)
|
|
9,400
|
|
|
8,400
|
|
|
1,000
|
|
|
11.9
|
%
|
|
27
|
%
|
Total
(2)
|
|
160,600
|
|
|
148,200
|
|
|
12,400
|
|
|
8.4
|
%
|
|
(4
|
)%
|
(1)
|
All other includes the shipments and depletions from our Square Mile brand family, as well as the non-owned Cisco Brewers, Appalachian Mountain Brewing and Wynwood Brewing brand families, shipped by us pursuant to distribution agreements.
|
(2)
|
Total shipments by brand include international shipments and exclude shipments produced under our contract brewing arrangements.
|
|
|
Three Months Ended March 31,
|
||||||||||
|
|
2018
|
|
2017
|
||||||||
|
|
Shipments
|
|
% of Total
|
|
Shipments
|
|
% of Total
|
||||
Draft
|
|
39,200
|
|
|
24.4
|
%
|
|
36,000
|
|
|
24.3
|
%
|
Packaged
|
|
121,400
|
|
|
75.6
|
%
|
|
112,200
|
|
|
75.7
|
%
|
Total
|
|
160,600
|
|
|
100.0
|
%
|
|
148,200
|
|
|
100.0
|
%
|
|
Three Months Ended March 31,
|
|
Dollar
|
|
|
|||||||||
|
2018
|
|
2017
|
|
Change
|
|
% Change
|
|||||||
Beer Related
|
$
|
26,766
|
|
|
$
|
25,581
|
|
|
$
|
1,185
|
|
|
4.6
|
%
|
Brewpubs
|
5,650
|
|
|
6,052
|
|
|
(402
|
)
|
|
(6.6
|
)%
|
|||
Total
|
$
|
32,416
|
|
|
$
|
31,633
|
|
|
$
|
783
|
|
|
2.5
|
%
|
|
Three Months Ended March 31,
|
||||
|
2018
|
|
2017
|
||
Capacity Utilization
|
52
|
%
|
|
54
|
%
|
|
Three Months Ended March 31,
|
|
Dollar
|
|
|
|||||||||
|
2018
|
|
2017
|
|
Change
|
|
% Change
|
|||||||
Beer Related
|
$
|
14,710
|
|
|
$
|
12,270
|
|
|
$
|
2,440
|
|
|
19.9
|
%
|
Brewpubs
|
361
|
|
|
399
|
|
|
(38
|
)
|
|
(9.5
|
)%
|
|||
Total
|
$
|
15,071
|
|
|
$
|
12,669
|
|
|
$
|
2,402
|
|
|
19.0
|
%
|
|
Three Months Ended
March 31, |
|
Dollar
|
|
|
|||||||||
|
2018
|
|
2017
|
|
Change
|
|
% Change
|
|||||||
Selling, general and administrative expenses
|
$
|
14,748
|
|
|
$
|
15,469
|
|
|
$
|
(721
|
)
|
|
(4.7
|
)%
|
As a % of Net sales
|
31.1
|
%
|
|
34.9
|
%
|
|
|
|
|
Three Months Ended
March 31, |
|
Dollar
|
|
|
|||||||||
2018
|
|
2017
|
|
Change
|
|
% Change
|
|||||||
$
|
134
|
|
|
$
|
181
|
|
|
$
|
(47
|
)
|
|
(26.0
|
)%
|
|
Three Months Ended
March 31, |
||||
|
2018
|
|
2017
|
||
Average debt outstanding
|
$16,554
|
|
$27,308
|
||
Average interest rate
|
2.70
|
%
|
|
1.88
|
%
|
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
Net cash provided by operating activities
|
$
|
2,741
|
|
|
$
|
3,037
|
|
Net cash provided by (used in) investing activities
|
21,867
|
|
|
(1,965
|
)
|
||
Net cash used in financing activities
|
(22,373
|
)
|
|
(1,369
|
)
|
||
Increase (decrease) in Cash, cash equivalents and restricted cash
|
$
|
2,235
|
|
|
$
|
(297
|
)
|
|
CRAFT BREW ALLIANCE, INC.
|
|
|
|
|
|
|
May 9, 2018
|
By:
|
/s/ Edwin A. Smith
|
|
|
|
Edwin A. Smith
|
|
|
|
Corporate Controller and
Principal Accounting Officer
|
|
|
1.
|
I have reviewed this quarterly report on Form 10−Q of Craft Brew Alliance, Inc. (the “Registrant”);
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
|
4.
|
The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a−15(e) and 15d−15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a−15(f) and 15d−15(f)) for the Registrant and we have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
|
5.
|
The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
|
Date:
|
May 9, 2018
|
|
|
|
|
By:
|
/s/ Andrew J. Thomas
|
|
|
Andrew J. Thomas
|
|
|
Chief Executive Officer
|
|
|
|
1.
|
I have reviewed this quarterly report on Form 10−Q of Craft Brew Alliance, Inc. (the “Registrant”);
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
|
4.
|
The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a−15(e) and 15d−15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a−15(f) and 15d−15(f)) for the Registrant and we have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
|
5.
|
The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
|
Date:
|
May 9, 2018
|
|
|
|
|
By:
|
/s/ Joseph K. Vanderstelt
|
|
|
Joseph K. Vanderstelt
|
|
|
Chief Financial Officer
|
|
|
|
1.
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
|
Date:
|
May 9, 2018
|
|
|
|
|
BY:
|
/s/ Andrew J. Thomas
|
|
|
Andrew J. Thomas
|
|
|
Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
|
|
|
|
BY:
|
/s/ Joseph K. Vanderstelt
|
|
|
Joseph K. Vanderstelt
|
|
|
Chief Financial Officer
|
|
|
(Principal Financial Officer)
|
|
|
•
|
Depletions for Kona grew 3% in the first quarter, while overall CBA depletions were down 4% for the quarter, compared to the same period in 2017.
|
•
|
CBA’s shipments increased 9%, reflecting a soft comparison to lower shipment volumes in the first quarter of 2017 due to a significant effort to reduce our wholesaler inventories by more than 30%. The health of our first quarter 2018 shipments, achieved while maintaining optimum wholesaler inventory levels, supports our distribution partners who are addressing complexity and space constraints associated with today’s competitive market, while giving CBA further flexibility to meet demand.
|
•
|
Net sales increased 7% to $47.5 million in the first quarter, primarily attributed to increases in shipment volume and average unit pricing and partially offset by the non-recurrence of a $1.7 million contract brewing volume shortfall fee received from Pabst in the first quarter of 2017.
|
•
|
Gross profit increased by 19%, to $15.1 million, and gross margin increased by 310 basis points to 31.7% compared to the first quarter in 2017. Our beer gross margin expanded to 35.5%, primarily due to increases
|
•
|
Selling, general and administrative expense (“SG&A”) for the first quarter was $14.7 million, a 5% decrease compared to the first quarter of 2017, which primarily reflects the impact of a $0.5 million gain realized on the sale of our Woodinville facility completed in the first quarter this year, as well as timing of sales and marketing initiatives.
|
•
|
Diluted earnings per share was $0.01 for the first quarter, an improvement of $0.10 over the first quarter diluted net loss per share of $0.09 in 2017, reflecting an effective tax rate of 27.8%.
|
•
|
Total CBA depletion change ranging between a decline of 2% and an increase of 3%.
|
•
|
Shipments ranging between a decrease of 2% and increase of 3%, which reflects ongoing progress to align our supply chain.
|
•
|
Average price increases of 1% to 3%, reflecting improvements in revenue management and lower federal excise taxes.
|
•
|
Total gross margin rate of 32.0% to 35.0%, reflecting increases in net revenue per barrel, continued improvements in brewery operations, lower fixed overhead, and ongoing efforts to stabilize pub operations.
|
•
|
SG&A expense ranging from $59 million to $61 million, as we continue to reinvest cost savings into our brands and expand our consumer and trade marketing programming.
|
•
|
Capital expenditures of approximately $16 million to $19 million, which reflects continued work on the new Kona brewery and the addition of a new canning line in our Portland brewery.
|
•
|
Effective tax rate of 27%.
|
Contact:
Jenny McLean
Director of Communications
Craft Brew Alliance, Inc.
(503) 331-7248
jenny.mclean@craftbrew.com
|
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
Sales
|
$
|
50,085
|
|
|
$
|
46,766
|
|
Less excise taxes
|
2,598
|
|
|
2,464
|
|
||
Net sales
|
47,487
|
|
|
44,302
|
|
||
Cost of sales
|
32,416
|
|
|
31,633
|
|
||
Gross profit
|
15,071
|
|
|
12,669
|
|
||
As percentage of net sales
|
31.7
|
%
|
|
28.6
|
%
|
||
Selling, general and administrative expenses
|
14,748
|
|
|
15,469
|
|
||
Operating income (loss)
|
323
|
|
|
(2,800
|
)
|
||
Interest expense
|
(134
|
)
|
|
(181
|
)
|
||
Other income, net
|
34
|
|
|
3
|
|
||
Income (loss) before income taxes
|
223
|
|
|
(2,978
|
)
|
||
Income tax provision (benefit)
|
62
|
|
|
(1,191
|
)
|
||
Net income (loss)
|
$
|
161
|
|
|
$
|
(1,787
|
)
|
|
|
|
|
||||
Basic and diluted net income (loss) per share
|
$
|
0.01
|
|
|
$
|
(0.09
|
)
|
Weighted average shares outstanding:
|
|
|
|
||||
Basic
|
19,310
|
|
|
19,261
|
|
||
Diluted
|
19,488
|
|
|
19,261
|
|
||
Total shipments (in barrels):
|
|
|
|
||||
Core Brands
|
160,600
|
|
|
148,200
|
|
||
Contract Brewing
|
6,400
|
|
|
4,600
|
|
||
Total shipments
|
167,000
|
|
|
152,800
|
|
||
Change in depletions
(1)
|
(4
|
)%
|
|
0
|
%
|
(1)
|
Change in depletions reflects the period-over-period change in barrel volume sales of beer by wholesalers to retailers.
|
|
March 31,
|
||||||
|
2018
|
|
2017
|
||||
Current assets:
|
|
|
|
||||
Cash, cash equivalents and restricted cash
|
$
|
2,814
|
|
|
$
|
145
|
|
Accounts receivable, net
|
28,569
|
|
|
22,430
|
|
||
Inventory, net
|
15,910
|
|
|
21,030
|
|
||
Other current assets
|
2,508
|
|
|
3,513
|
|
||
Total current assets
|
49,801
|
|
|
47,118
|
|
||
Property, equipment and leasehold improvements, net
|
104,394
|
|
|
120,477
|
|
||
Goodwill
|
12,917
|
|
|
12,917
|
|
||
Intangible, equity method investment and other assets, net
|
20,779
|
|
|
19,392
|
|
||
Total assets
|
$
|
187,891
|
|
|
$
|
199,904
|
|
Current liabilities:
|
|
|
|
|
|
||
Accounts payable
|
$
|
15,012
|
|
|
$
|
17,921
|
|
Accrued salaries, wages and payroll taxes
|
4,692
|
|
|
5,955
|
|
||
Refundable deposits
|
4,291
|
|
|
6,502
|
|
||
Deferred revenue
|
4,035
|
|
|
2,185
|
|
||
Other accrued expenses
|
3,742
|
|
|
2,239
|
|
||
Current portion of long-term debt and capital lease obligations
|
802
|
|
|
1,502
|
|
||
Total current liabilities
|
32,574
|
|
|
36,304
|
|
||
Long-term debt and capital lease obligations, net of current portion
|
10,124
|
|
|
26,572
|
|
||
Other long-term liabilities
|
14,067
|
|
|
18,746
|
|
||
Total common shareholders' equity
|
131,126
|
|
|
118,282
|
|
||
Total liabilities and common shareholders' equity
|
$
|
187,891
|
|
|
$
|
199,904
|
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income (loss)
|
$
|
161
|
|
|
$
|
(1,787
|
)
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
||
Depreciation and amortization
|
2,736
|
|
|
2,895
|
|
||
(Gain) loss on sale or disposal of Property, equipment and leasehold improvements
|
(516
|
)
|
|
3
|
|
||
Deferred income taxes
|
(605
|
)
|
|
(1,207
|
)
|
||
Other, including stock-based compensation
|
558
|
|
|
529
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||
Accounts receivable, net
|
(285
|
)
|
|
1,578
|
|
||
Inventories
|
(1,791
|
)
|
|
(1,926
|
)
|
||
Other current assets
|
1,128
|
|
|
(1,018
|
)
|
||
Accounts payable and other accrued expenses
|
3,015
|
|
|
2,946
|
|
||
Accrued salaries, wages and payroll taxes
|
(1,185
|
)
|
|
988
|
|
||
Refundable deposits
|
(475
|
)
|
|
36
|
|
||
Net cash provided by operating activities
|
2,741
|
|
|
3,037
|
|
||
Cash flows from investing activities:
|
|
|
|
|
|
||
Expenditures for Property, equipment and leasehold improvements
|
(1,104
|
)
|
|
(1,965
|
)
|
||
Proceeds from sale of Property, equipment and leasehold improvements
|
22,456
|
|
|
—
|
|
||
Restricted cash from sale of Property, equipment and leasehold improvements
|
515
|
|
|
—
|
|
||
Net cash provided by (used in) investing activities
|
21,867
|
|
|
(1,965
|
)
|
||
Cash flows from financing activities:
|
|
|
|
|
|
||
Principal payments on debt and capital lease obligations
|
(174
|
)
|
|
(131
|
)
|
||
Net repayments under revolving line of credit
|
(22,199
|
)
|
|
(1,238
|
)
|
||
Net cash used in financing activities
|
(22,373
|
)
|
|
(1,369
|
)
|
||
Increase (decrease) in Cash, cash equivalents and restricted cash
|
2,235
|
|
|
(297
|
)
|
||
Cash, cash equivalents and restricted cash, beginning of period
|
579
|
|
|
442
|
|
||
Cash, cash equivalents and restricted cash, end of period
|
$
|
2,814
|
|
|
$
|
145
|
|
|
Twelve Months Ended
|
|
|
|
|
|||||||||
|
March 31,
|
|
|
|||||||||||
|
2018
|
|
2017
|
|
Change
|
|
% Change
|
|||||||
Net sales
|
$
|
210,641
|
|
|
$
|
207,587
|
|
|
$
|
3,054
|
|
|
1.5
|
%
|
Gross profit
|
$
|
67,660
|
|
|
$
|
63,551
|
|
|
$
|
4,109
|
|
|
6.5
|
%
|
As percentage of net sales
|
32.1
|
%
|
|
30.6
|
%
|
|
150
|
|
bps
|
|
|
|||
Selling, general and administrative expenses
|
59,742
|
|
|
60,769
|
|
|
(1,027
|
)
|
|
(1.7
|
)%
|
|||
Operating income
|
$
|
7,918
|
|
|
$
|
2,782
|
|
|
$
|
5,136
|
|
|
184.6
|
%
|
|
|
|
|
|
|
|
|
|||||||
Net income
|
$
|
11,471
|
|
|
$
|
1,102
|
|
|
$
|
10,369
|
|
|
940.9
|
%
|
|
|
|
|
|
|
|
|
|||||||
Basic and diluted net income per share
|
$
|
0.59
|
|
|
$
|
0.06
|
|
|
$
|
0.53
|
|
|
883.3
|
%
|
Total shipments (in barrels):
|
|
|
|
|
|
|
|
|
|
|
|
|||
Core Brands
|
743,000
|
|
|
754,700
|
|
|
(11,700
|
)
|
|
(1.6
|
)%
|
|||
Contract Brewing
|
19,500
|
|
|
24,100
|
|
|
(4,600
|
)
|
|
(19.1
|
)%
|
|||
Total shipments
|
762,500
|
|
|
778,800
|
|
|
(16,300
|
)
|
|
(2.1
|
)%
|
|||
Change in depletions
(1)
|
(2
|
)%
|
|
0
|
%
|
|
|
|
|
|
|
(1)
|
Change in depletions reflects the period-over-period change in barrel volume sales of beer by wholesalers to retailers.
|
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
Net income (loss)
|
$
|
161
|
|
|
$
|
(1,787
|
)
|
Interest expense
|
134
|
|
|
181
|
|
||
Income tax provision (benefit)
|
62
|
|
|
(1,191
|
)
|
||
Depreciation expense
|
2,693
|
|
|
2,830
|
|
||
Amortization expense
|
43
|
|
|
65
|
|
||
Stock-based compensation
|
485
|
|
|
357
|
|
||
Loss on disposal of assets
|
(516
|
)
|
|
3
|
|
||
Adjusted EBITDA
|
$
|
3,062
|
|
|
$
|
458
|
|