Washington
|
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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929 North Russell Street
Portland, Oregon
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97227-1733
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(Address of principal executive offices)
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(Zip Code)
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Securities Registered pursuant to Section 12(b) of the Act:
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||
Title of each class
|
Name of each exchange on which registered
|
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Common Stock, $0.005 par value
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The NASDAQ Stock Market LLC
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Page
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PART I
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Item 1.
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2
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Item 1A.
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14
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Item 1B.
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19
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Item 2.
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19
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Item 3.
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20
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Item 4.
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20
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PART II
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||
Item 5.
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20
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Item 6.
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22
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Item 7.
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23
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Item 7A.
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35
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Item 8.
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36
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Item 9.
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62
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Item 9A.
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62
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Item 9B.
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64
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PART III
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||
Item 10.
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64
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Item 11.
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64
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Item 12.
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64
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Item 13.
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65
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Item 14.
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65
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PART IV
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Item 15.
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65
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66
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Item 1.
|
|
·
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Redhook Ale Brewery founded by Gordon Bowker and Paul Shipman in 1981 in Seattle, Washington;
|
|
·
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Widmer Brothers Brewing founded by brothers Kurt and Rob Widmer in 1984 in Portland, Oregon; and
|
|
·
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Kona Brewing Co. founded by father and son team Cameron Healy and Spoon Khalsa in 1994 in Kona, Hawaii.
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·
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An innovative portfolio of distinct, authentic craft beer brands.
We have brought together a collection of brands from original innovators in the craft beer industry to enable us to match individual brands to a variety of consumer preferences. Through beer taste profiles and brand personalities, customers are able to forge a strong relationship with the targeted brands. The breadth of our product offerings also provides consumers with the opportunity to match specific consumer occasions with a product in our brand families.
|
|
·
|
National sales and marketing reach combined with seamless national distribution.
We believe that we are able to leverage our national sales and marketing capabilities and complementary brand families to create a unique identity in the distribution channel and with the consumer. We believe that the combination of the complementary brand families promoted by one integrated sales and marketing organization delivers both financial benefits and greater impact at the point of sale. We have invested in technologies that allow us to not only focus our brand families and product offerings on those markets and regions that represent the most significant opportunities, but also measure the results of those efforts. Our sales force has been structured to be able to call on all retail channels nationally, including grocery, drug and convenience stores, where most other craft brewers are not able to do so.
|
|
·
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Bi-coastal brewing capability with significant additional capacity.
Our breweries are located on both coasts and in Hawaii, which allows for efficient brewing and distribution of our beers. Each of our breweries is modern and has flexible production capabilities. Our New Hampshire and Oregon Breweries have room for bolt-on capacity additions. We prefer to own and operate all of our breweries to optimize the quality and consistency of our products and to achieve greater control over our production costs. We may engage third party brewers to provide contract brewing from time to time to further expand our packaging and brand offerings. We believe that maximizing the production under our direct ownership and through selection of accomplished and expert partners is critical to our success. Further, we believe that our ability to engage in ongoing product innovation and to control product quality provides critical competitive advantages. Our highly automated breweries are designed to produce beer in smaller batches relative to the national domestic brewers, thereby allowing us to brew a wide variety of brand offerings. We believe that our investment in brewing and logistic technologies enables us to minimize brewery operating costs and consistently produce innovative beer styles and tastes.
|
|
·
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Five brew-pub restaurants supporting consumer awareness and research and development.
Our five brew-pub restaurants allow us to interact directly with over one million consumers annually in our home markets, which creates a sense of brand loyalty. Our brewers are continually experimenting with new and different varieties of hops and malts in all styles of beer. Our brew-pubs provide us with the opportunity to bring those beers to market in test-size batches in order to understand their strengths prior to releasing them on a national level.
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|
·
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Widmer Brothers Hefeweizen.
The top selling beer within the brand family is a golden, cloudy wheat beer with a pronounced citrus aroma and flavor. This beer is intentionally left unfiltered to create its unique appearance and flavor profile and is usually served with a lemon slice to enhance the beer’s natural citrus notes. This beer’s relatively low alcohol content by volume makes it perfect for consumption as a session beer. Its most recent award, among many, was the 2008 World Beer Cup Gold medal winner for the American-style Hefeweizen category.
|
|
·
|
Drifter Pale Ale (“Drifter”). Drifter
possesses a unique citrus character, smooth drinkability, and a distinctive hop character. Brewed with generous amounts of Summit hops, a variety known for its intense citrus flavors and aromas, this beer has a taste unique to the Pale Ale category. This beer started as a seasonal offering, becoming a year round brand in 2009, and was a
Great American Beer Festival (“GABF”) Silver Medal Winner in 2006 for the American-style Pale Ale category
.
|
|
·
|
Drop Top Amber Ale
. A 2010 World Beer Cup Gold Medal Winner and a 2008 GABF Gold Medal Winner.
|
|
·
|
Rotator India Pale Ale (“IPA”)
. Rotator IPA is a unique series of beers, offered in limited quantities, which change throughout the year to highlight different hops and styles.
|
|
·
|
Series 924.
Named for the Oregon Brewery’s address, the beers in this brand are made for those who share our passion for the art of brewing and the taste for authentic beers. Initial beers in the
924 Series
include the
Nelson Imperial IPA
and the
Pitch Black IPA,
which is a Pacific Northwest twist on a traditional IPA, brewed in the style of a Cascadian Dark, an emerging style. Beers in this brand are offered as a draft product and as a four pack for bottles.
Pitch Black IPA
was the 2009 GABF Gold Medal Winner.
|
|
·
|
Brothers’ Reserve.
This brand is the specialty high-end offering for the Widmer Brothers brand, with only two offerings a year. The beers chosen for this brand reflect the passion and uniqueness of the Widmer brothers and are extremely limited. The brand is focused on the knowledgeable and enthusiastic beer lover who is looking for something exclusive, rare and collectible.
|
|
·
|
Alchemy Project.
Named for the proprietary hop blend that serves as the foundation for many Widmer Brothers beers, the Alchemy Project is a new series of vintage-dated beers that can be enjoyed immediately or cellared for years. Barrel Aged Brrbon ’11 was the first release under the Alchemy Project in the fall of 2011.
|
|
·
|
Citra Blonde.
A very smooth, light, refreshing beer for summer time. Features Citra hops.
|
|
·
|
Okto.
Full bodied with malty flavor, containing a floral aroma and finish. Available late summer and fall.
|
|
·
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Brrr.
A bold, hoppy northwest red ale brewed with a sweet candy finish for the cold winter months.
|
|
·
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W Series.
Designed to demonstrate our brewers’ creativity, brewing a variety of styles. Available as the Widmer Brothers spring seasonal.
|
|
·
|
Long Hammer IPA (“Long Hammer”).
Long Hammer
is the top-selling beer within the brand family and is an English pub-style bitter ale with a bold hop aroma and profile that is not overpoweringly bitter.
|
|
·
|
Redhook Pilsner (“Pilsner”). Pilsner
is the newest addition to Redhook’s core lineup; a crisp, easy-drinking, golden lager that is modeled after historic beers originally brewed in Plzen, Czechoslovakia.
|
|
·
|
Redhook ESB (“ESB”).
ESB
is modeled after the high-end Extra Special Bitters found in classic English pubs.
ESB
is a rich, full-bodied amber ale with a smooth flavor profile featuring toasted malts and a pleasant finishing sweetness.
|
|
·
|
Copperhook Ale.
A brilliant copper-colored ale with distinctive caramel notes and a clean refreshing finish.
|
|
·
|
Blueline Series.
This brand is the high-end offering from the Redhook brand family for the West Coast beer drinker. These beers are hand crafted by the brewers and are available at our Washington Brewery pub, as well as at select restaurants, bottle shops, and public houses in the Seattle, Washington area.
|
|
·
|
Brewery Backyard Series.
This brand is produced at our New Hampshire Brewery as a draft product available only at the brewery’s pub and at select local establishments. These high-end beers are experimental in nature and designed to appeal to craft beer connoisseurs and the community of self-described beer geeks. Like the Blueline Series, the Brewery Backyard Series is intended to be locally-relevant.
|
|
·
|
Nut Brown Ale.
A medium-bodied, brown ale with a fresh aroma. Available late winter and spring.
|
|
·
|
Winterhook Winter Ale.
Red chestnut in color and full-bodied with a toasty, complex profile. Available late fall and winter.
|
|
·
|
Wit.
Redhook’s twist on the Belgian style is the addition of fresh ginger, which adds a refreshing snappiness to this lighter-bodied wheat beer. Redhook Wit is available during the summer months.
|
|
·
|
Longboard Island Lager (“Longboard”).
Kona’s top selling beer and flagship brand is a traditionally brewed lager with a delicate, slightly spicy hop aroma that is complimented by a fresh, malt-forward flavor and a smooth, refreshing finish.
|
|
·
|
Fire Rock Pale Ale (“Fire Rock”).
Fire Rock
is a crisp, “Hawaiian Style” pale ale with pronounced citrus and floral hop aromas and flavors that are backed up by a generous malt profile.
|
|
·
|
Koko Brown Ale (“Koko”).
Koko
is an American brown ale with a deep amber color and rich mahogany hues. This ale has a smoky, roasted nut aroma and flavor, with a coconut twist. Koko Brown Ale is Kona’s spring seasonal.
|
|
·
|
Pipeline Porter (“Pipeline”).
Pipeline
is smooth and dark, with a distinctive, roasty aroma and earthy flavor. This ale is brewed with fresh 100% Kona coffee to impart a rich complexity not found in many beers. Available fall and winter.
|
|
·
|
Wailua Wheat (“Wailua”).
Wailua
is a golden, sun-colored ale with a bright, citrusy flavor. This beer is brewed with a touch of tropical passion fruit to impart a slightly tart and crisp finish. Available late spring and summer.
|
|
·
|
Kona Island Hopper and Big Kahuna Variety Packs.
Kona offers two variety packs: Island Hopper variety 12-packs and Big Kahuna variety 24-packs. Both packages include the brewery’s flagship Longboard Island Lager along with Fire Rock Pale Ale and then two of our Aloha Series seasonal offerings: Koko Brown, Wailua Wheat, and Pipeline Porter.
|
|
·
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Oregon Brewery
. Our Oregon Brewery is our largest capacity production brewery, consisting of a 230 barrel brewing system with an annual capacity of 455,000 barrels.
|
|
·
|
Washington Brewery
. Our Washington Brewery utilizes a 100 barrel brewing system and has an annual capacity of 220,000 barrels.
|
|
·
|
New Hampshire Brewery
. Our New Hampshire Brewery utilizes a 100 barrel brewing system and has an annual capacity of 215,000 barrels. It uses an anaerobic waste-water treatment facility that completes the process cycle.
|
|
·
|
Hawaiian Brewery
. Our Hawaiian Brewery, which was acquired with the KBC Merger, utilizes a 25 barrel brewing system and has an annual capacity of 10,000 barrels. During 2010, the Hawaiian Brewery installed a 229-kilowatt photovoltaic solar energy generating system to supply approximately 50 percent of its energy requirements through renewable energy.
|
|
·
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Rose Quarter Brewery
. Our Rose Quarter Brewery maintains a 10 barrel pilot brewing system at the Rose Quarter sports arena in Portland, Oregon and is our smallest brewery.
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·
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a material default by the other party in the performance of the A-B Distributor Agreement or any other agreement between the parties;
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|
·
|
certain bankruptcy and insolvency events; or
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|
·
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any material misrepresentation made by the other party under or in the course of performance of the A-B Distributor Agreement.
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·
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we engage in certain incompatible conduct that is not cured to A-B's satisfaction (at A-B’s sole discretion) within 30 days. Incompatible conduct is defined as any act or omission that, in A-B’s opinion, damages the reputation or image of A-B or the brewing industry;
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·
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any A-B competitor or affiliate thereof acquires 10% or more of our outstanding equity securities, and that entity designates one or more persons to our board of directors;
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·
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our current chief executive officer ceases to function in that role or is terminated, and a satisfactory successor, in A-B’s opinion, is not appointed within six months;
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·
|
we are merged or consolidated into or with any other entity or any other entity merges or consolidates into or with us without A-B’s prior approval; or
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·
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A-B, its subsidiaries, affiliates, or parent, incur any obligation or expense as a result of a claim asserted against them by or in our name, its affiliates or shareholders, and we do not reimburse and indemnify A-B and its corporate affiliates on demand for the entire amount of the obligation or expense.
|
Item 1A.
|
Risk
Factors
|
Item 1B.
|
Unresolved
Staff Comments
|
Item 2.
|
Production Breweries
|
Square
Footage
|
Current
Annual
Capacity
|
Estimated
December 31, 2012
Annual Capacity
|
Maximum
Annual
Capacity
|
||||||||||||
Oregon Brewery
|
185,000 | 455 | 645 | 650 | ||||||||||||
Washington Brewery
|
128,000 | 220 | 220 | 280 | ||||||||||||
New Hampshire Brewery
|
125,000 | 215 | 215 | 280 | ||||||||||||
Hawaiian Brewery
|
11,000 | 10 | 10 | 10 | ||||||||||||
900 | 1,090 | 1,220 |
Item 3.
|
Legal
Proceedings
|
Item 4.
|
Mine
Safety Disclosures
|
Item 5.
|
Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|
2010
|
High
|
Low
|
||||||
Quarter 1
|
$ | 2.73 | $ | 2.16 | ||||
Quarter 2
|
5.15 | 2.31 | ||||||
Quarter 3
|
9.94 | 4.40 | ||||||
Quarter 4
|
8.27 | 6.01 |
2011
|
High
|
Low
|
||||||
Quarter 1
|
$ | 9.59 | $ | 6.96 | ||||
Quarter 2
|
10.17 | 8.10 | ||||||
Quarter 3
|
8.95 | 5.31 | ||||||
Quarter 4
|
7.22 | 5.08 |
Base
|
Indexed Returns
|
|||||||||||||||||||||||
Period
|
Year Ended
|
|||||||||||||||||||||||
Company/Index
|
12/31/06
|
12/31/07
|
12/31/08
|
12/31/09
|
12/31/10
|
12/31/11
|
||||||||||||||||||
Craft Brew Alliance, Inc.
|
$ | 100.00 | $ | 127.88 | $ | 23.08 | $ | 46.15 | $ | 142.12 | $ | 115.77 | ||||||||||||
NASDAQ Composite
|
100.00 | 109.81 | 65.29 | 93.95 | 109.84 | 107.86 | ||||||||||||||||||
S&P 500 Beverages Index
|
100.00 | 120.72 | 96.55 | 116.09 | 133.09 | 139.14 |
Item 6.
|
Selected
Financial Data
|
In thousands,
except per share amounts
|
Year Ended December 31,
|
|||||||||||||||||||
Statement of Operations Data
|
2011
|
2010
|
2009
|
2008
|
2007
|
|||||||||||||||
Net sales
(1)
|
$ | 149,197 | $ | 131,731 | $ | 124,713 | $ | 79,761 | $ | 41,470 | ||||||||||
Cost of sales
|
104,011 | 98,064 | 97,230 | 65,646 | 36,785 | |||||||||||||||
Gross profit
|
$ | 45,186 | $ | 33,667 | $ | 27,483 | $ | 14,115 | $ | 4,685 | ||||||||||
Selling, general and administrative expenses
|
$ | 39,742 | $ | 29,938 | $ | 24,911 | $ | 19,894 | $ | 8,257 | ||||||||||
Loss on impairment of assets
(2)
|
$ | - | $ | - | $ | - | $ | 30,589 | $ | - | ||||||||||
Operating income (loss)
|
$ | 5,444 | $ | 3,170 | $ | 2,347 | $ | (36,761 | ) | $ | (1,330 | ) | ||||||||
Gain on sale of equity interest in Fulton Street Brewery, LLC
|
$ | 10,432 | $ | - | $ | - | $ | - | $ | - | ||||||||||
Income before provision (benefit) for income taxes
|
$ | 15,692 | $ | 2,786 | $ | 1,073 | $ | (37,655 | ) | $ | (1,115 | ) | ||||||||
Provision (benefit) for income taxes
|
6,041 | 1,100 | 186 | (4,377 | ) | (176 | ) | |||||||||||||
Net income (loss)
|
$ | 9,651 | $ | 1,686 | $ | 887 | $ | (33,278 | ) | $ | (939 | ) | ||||||||
Basic and diluted net income (loss) per share
|
$ | 0.51 | $ | 0.10 | $ | 0.05 | $ | (2.63 | ) | $ | (0.11 | ) | ||||||||
Shares used in basic per share calculations
|
18,834 | 17,523 | 17,004 | 12,660 | 8,331 | |||||||||||||||
Shares used in diluted per share calculations
|
18,931 | 17,568 | 17,041 | 12,660 | 8,331 |
December 31,
|
||||||||||||||||||||
2011
|
2010
|
2009
|
2008
|
2007
|
||||||||||||||||
Balance Sheet Data
|
||||||||||||||||||||
Cash and cash equivalents
|
$ | 795 | $ | 164 | $ | 11 | $ | 11 | $ | 5,527 | ||||||||||
Working capital (deficit)
|
2,327 | (4,435 | ) | (2,527 | ) | (927 | ) | 5,714 | ||||||||||||
Total assets
|
158,908 | 158,266 | 141,585 | 147,805 | 71,390 | |||||||||||||||
Current portion of long-term debt and capital leases
|
596 | 2,460 | 1,481 | 1,394 | 15 | |||||||||||||||
Long-term debt and capital leases, net of current portion
|
13,188 | 24,675 | 24,685 | 31,834 | 31 | |||||||||||||||
Other long-term obligations
|
16,261 | 11,388 | 8,210 | 8,082 | 1,988 | |||||||||||||||
Shareholders’ equity
|
104,509 | 94,196 | 80,632 | 79,281 | 60,080 |
(1)
|
The increase in net sales in 2009 compared to 2008 and in 2008 compared to 2007 was primarily due to the merger with Widmer Brothers Brewing Company, which occurred July 1, 2008.
|
(2)
|
Loss on impairment of assets in 2008 included a $22.7 million charge for total impairment of goodwill, a $6.5 million charge for the partial write-down of trademarks associated with the Widmer brand and a $1.4 million charge for the partial write down of equity-method investments.
|
Item 7.
|
Management’s
Discussion and Analysis of Financial Condition and Results of Operations
|
|
·
|
Redhook Ale Brewery founded by Gordon Bowker and Paul Shipman in 1981 in Seattle, Washington;
|
|
·
|
Widmer Brothers Brewery founded by brothers Kurt and Rob Widmer in 1984 in Portland, Oregon; and
|
|
·
|
Kona Brewing Co. founded by father and son team Cameron Healy and Spoon Khalsa in 1994 in Kona, Hawaii.
|
Net Sales
|
Net Income
|
Number of
Barrels Sold
|
||||||||||
2011
|
$ | 149.2 million | $ | 9.7 million | 672,600 | |||||||
2010
|
$ | 131.7 million | $ | 1.7 million | 607,800 | |||||||
2009
|
$ | 124.7 million | $ | 0.9 million | 587,500 |
Year Ended December 31,
|
||||||||||||
2011
|
2010
|
2009
|
||||||||||
Sales
|
107.9 | % | 106.9 | % | 106.9 | % | ||||||
Less excise tax
|
7.9 | 6.9 | 6.9 | |||||||||
Net sales
|
100.0 | 100.0 | 100.0 | |||||||||
Cost of sales
|
69.7 | 74.4 | 78.0 | |||||||||
Gross profit
|
30.3 | 25.6 | 22.0 | |||||||||
Selling, general and administrative expenses
|
26.6 | 22.7 | 20.0 | |||||||||
Merger related expenses
|
- | 0.4 | 0.2 | |||||||||
Operating income
|
3.6 | 2.4 | 1.9 | |||||||||
Income from equity method investments
|
0.5 | 0.6 | 0.4 | |||||||||
Gain on sale of Fulton Street Brewery
|
7.0 | - | - | |||||||||
Interest expense
|
(0.6 | ) | (1.1 | ) | (1.7 | ) | ||||||
Interest and other income, net
|
- | 0.2 | 0.3 | |||||||||
Income before income taxes
|
10.5 | 2.1 | 0.9 | |||||||||
Income tax provision
|
4.0 | 0.8 | 0.1 | |||||||||
Net income
|
6.5 | % | 1.3 | % | 0.7 | % |
Year Ended December 31,
|
||||||||||||
2011
|
Beer
Related
|
Pubs
and Other
|
Total
|
|||||||||
Net sales
|
$ | 125,531 | $ | 23,666 | $ | 149,197 | ||||||
Gross profit
|
$ | 41,372 | $ | 3,814 | $ | 45,186 | ||||||
Gross margin
|
33.0 | % | 16.1 | % | 30.3 | % |
2010
|
||||||||||||
Net sales
|
$ | 117,563 | $ | 14,168 | $ | 131,731 | ||||||
Gross profit
|
$ | 31,607 | $ | 2,060 | $ | 33,667 | ||||||
Gross margin
|
26.9 | % | 14.5 | % | 25.6 | % |
2009
|
||||||||||||
Net sales
|
$ | 113,439 | $ | 11,274 | $ | 124,713 | ||||||
Gross profit
|
$ | 25,827 | $ | 1,656 | $ | 27,483 | ||||||
Gross margin
|
22.8 | % | 14.7 | % | 22.0 | % |
Year Ended December 31,
|
Dollar
|
|||||||||||||||
Sales by Category
|
2011
|
2010
|
Change
|
% Change
|
||||||||||||
A-B and A-B related
|
$ | 130,137 | $ | 114,296 | $ | 15,841 | 13.9 | % | ||||||||
Pubs and Other
(1)
|
23,666 | 14,168 | 9,498 | 67.0 | % | |||||||||||
Contract brewing and other beer related
|
7,197 | 2,542 | 4,655 | 183.1 | % | |||||||||||
Alternating proprietorship
|
- | 9,846 | (9,846 | ) | (100.0 | )% | ||||||||||
Gross sales
|
161,000 | 140,852 | 20,148 | 14.3 | % | |||||||||||
Excise taxes
|
(11,803 | ) | (9,121 | ) | (2,682 | ) | 29.4 | % | ||||||||
Net sales
|
$ | 149,197 | $ | 131,731 | $ | 17,466 | 13.3 | % |
Year Ended December 31,
|
Dollar
|
|||||||||||||||
Sales by Category
|
2010
|
2009
|
Change
|
% Change
|
||||||||||||
A-B and A-B related
|
$ | 114,296 | $ | 110,840 | $ | 3,456 | 3.1 | % | ||||||||
Pubs and Other
(1)
|
14,168 | 11,274 | 2,894 | 25.7 | % | |||||||||||
Contract brewing and other beer related
|
2,542 | 450 | 2,092 | N/M | ||||||||||||
Alternating proprietorship
|
9,846 | 10,744 | (898 | ) | (8.4 | )% | ||||||||||
Gross sales
|
140,852 | 133,308 | 7,544 | 5.7 | % | |||||||||||
Excise taxes
|
(9,121 | ) | (8,595 | ) | (526 | ) | 6.1 | % | ||||||||
Net sales
|
$ | 131,731 | $ | 124,713 | $ | 7,018 | 5.6 | % |
|
(1)
|
Other sales include sales of promotional merchandise and other.
|
Year Ended
December 31,
|
2011
Shipments
|
2010
Shipments
|
Increase
|
%
Change
|
Change in
Depletions
(1)
|
||||||||||||||||
A-B | 611,200 | 574,900 | 36,300 | 6.3 | % | 6.5 | % | ||||||||||||||
Contract brewing
|
49,300 | 23,100 | 26,200 | 113.4 | % | ||||||||||||||||
Pubs and Other
|
12,100 | 9,800 | 2,300 | 23.5 | % | ||||||||||||||||
Total
|
672,600 | 607,800 | 64,800 | 10.7 | % |
Year Ended
December 31,
|
2010
Shipments
|
2009
Shipments
|
Increase
|
%
Change
|
Change in
Depletions
(1)
|
||||||||||||||||
A-B | 574,900 | 573,200 | 1,700 | 0.3 | % | 1.6 | % | ||||||||||||||
Contract brewing
|
23,100 | 5,000 | 18,100 | 362.0 | % | ||||||||||||||||
Pubs and Other
|
9,800 | 9,300 | 500 | 5.4 | % | ||||||||||||||||
Total
|
607,800 | 587,500 | 20,300 | 3.5 | % |
|
(1)
|
Change in depletions reflects the year-over-year change in barrel volume sales of beer by wholesalers to retailers.
|
Year Ended
December 31,
|
2011
Shipments
|
2010
Shipments
|
Increase
(Decrease)
|
%
Change
|
Change in
Depletions
|
|||||||||||||||
Widmer Brothers
|
271,200 | 277,200 | (6,000 | ) | (2.2 | )% | (2.1 | )% | ||||||||||||
Redhook
|
179,300 | 174,100 | 5,200 | 3.0 | % | 3.0 | % | |||||||||||||
Kona
|
172,800 | 133,400 | 39,400 | 29.5 | % | 29.0 | % | |||||||||||||
Total
(1)
|
623,300 | 584,700 | 38,600 | 6.6 | % | 6.5 | % |
Year Ended
December 31,
|
2010
Shipments
|
2009
Shipments
|
Increase
(Decrease)
|
%
Change
|
Change in
Depletions
|
|||||||||||||||
Widmer Brothers
|
277,200 | 285,700 | (8,500 | ) | (3.0 | )% | (2.0 | )% | ||||||||||||
Redhook
|
174,100 | 183,600 | (9,500 | ) | (5.2 | )% | (3.3 | )% | ||||||||||||
Kona
|
133,400 | 113,200 | 20,200 | 17.8 | % | 18.5 | % | |||||||||||||
Total
(1)
|
584,700 | 582,500 | 2,200 | 0.4 | % | 1.6 | % |
|
(1)
|
Total shipments by brand exclude private label shipments produced under our contract brewing arrangements.
|
Year Ended |
2011
|
2010
|
2009
|
|||||||||||||||||||||
December 31,
|
Shipments
|
% of Total
|
Shipments
|
% of Total
|
Shipments
|
% of Total
|
||||||||||||||||||
Draft
|
219,400 | 35.2 | % | 227,100 | 38.8 | % | 236,500 | 40.6 | % | |||||||||||||||
Bottle
|
403,900 | 64.8 | % | 357,600 | 61.2 | % | 346,000 | 59.4 | % | |||||||||||||||
Total
|
623,300 | 100.0 | % | 584,700 | 100.0 | % | 582,500 | 100.0 | % |
Year Ended December 31,
|
Dollar
|
|||||||||||||||
2011
|
2010
|
Change
|
% Change
|
|||||||||||||
Beer Related
|
$ | 84,159 | $ | 85,956 | $ | (1,797 | ) | (2.1 | )% | |||||||
Pubs and Other
|
19,852 | 12,108 | 7,744 | 64.0 | % | |||||||||||
Total
|
$ | 104,011 | $ | 98,064 | $ | 5,947 | 6.1 | % |
2010
|
2009
|
|||||||||||||||
Beer Related
|
$ | 85,956 | $ | 87,612 | $ | (1,656 | ) | (1.9 | )% | |||||||
Pubs and Other
|
12,108 | 9,618 | 2,490 | 25.9 | % | |||||||||||
Total
|
$ | 98,064 | $ | 97,230 | $ | 834 | 0.9 | % |
Year Ended December 31,
|
Dollar
|
|||||||||||||||
2011
|
2010
|
Change
|
% Change
|
|||||||||||||
Beer Related
|
$ | 41,372 | $ | 31,607 | $ | 9,765 | 30.9 | % | ||||||||
Pubs and Other
|
3,814 | 2,060 | 1,754 | 85.1 | % | |||||||||||
Total
|
$ | 45,186 | $ | 33,667 | $ | 11,519 | 34.2 | % |
2010
|
2009
|
|||||||||||||||
Beer Related
|
$ | 31,607 | $ | 25,827 | $ | 5,780 | 22.4 | % | ||||||||
Pubs and Other
|
2,060 | 1,656 | 404 | 24.4 | % | |||||||||||
Total
|
$ | 33,667 | $ | 27,483 | $ | 6,184 | 22.5 | % |
Year Ended December 31,
|
||||||||||||
2011
|
2010
|
2009
|
||||||||||
Beer Related
|
33.0 | % | 26.9 | % | 22.8 | % | ||||||
Pubs and Other
|
16.1 | % | 14.5 | % | 14.7 | % | ||||||
Overall
|
30.3 | % | 25.6 | % | 22.0 | % |
Year Ended December 31,
|
Dollar
|
|||||||||||||||
2011
|
2010
|
Change
|
% Change
|
|||||||||||||
$ | 39,742 | $ | 29,938 | $ | 9,804 | 32.7 | % | |||||||||
As a % of net sales
|
26.6 | % | 22.7 | % |
2010
|
2009
|
|||||||||||||||
$ | 29,938 | $ | 24,911 | $ | 5,027 | 20.2 | % | |||||||||
As a % of net sales
|
22.7 | % | 20.0 | % |
Year Ended December 31,
|
||||||||||||
|
2011
|
2010
|
2009
|
|||||||||
FSB
|
$ | 691 | $ | 696 | $ | 441 | ||||||
Kona
|
- | 146 | 111 | |||||||||
Total
|
$ | 691 | $ | 842 | $ | 552 |
Year Ended December 31,
|
Dollar
|
|||||||||||||
2011
|
2010
|
Change
|
% Change
|
|||||||||||
$ | 918 | $ | 1,497 | $ | (579 | ) | (38.7 | )% | ||||||
2010 | 2009 | |||||||||||||
$ | 1,497 | $ | 2,139 | $ | (642 | ) | (30.0 | )% |
Year Ended December 31,
|
||||||||||||
2011
|
2010
|
2009
|
||||||||||
Average debt outstanding
|
$ | 20,163 | $ | 24,236 | $ | 31,613 | ||||||
Average interest rate
|
3.43 | % | 3.34 | % | 4.68 | % |
Year Ended December 31,
|
||||||||||||
2011
|
2010
|
2009
|
||||||||||
Cash flows provided by operating activities
|
$ | 6,728 | $ | 10,798 | $ | 8,954 | ||||||
Cash flows provided by (used in) investing activities
|
7,131 | (10,313 | ) | (2,167 | ) | |||||||
Cash flows used in financing activities
|
(13,228 | ) | (332 | ) | (6,787 | ) | ||||||
Increase in cash
|
$ | 631 | $ | 153 | $ | - |
|
·
|
federal NOLs of $4.5 million, or $1.5 million tax-effected; and
|
|
·
|
state NOLs of $129,000 tax-effected.
|
Payments Due By Period
|
||||||||||||||||||||
Contractual Obligation
|
Total
|
2012
|
2013 and
2014
|
2015 and
2016
|
2017 and
beyond
|
|||||||||||||||
Term loan
|
$ | 12,240 | $ | 418 | $ | 942 | $ | 1,065 | $ | 9,815 | ||||||||||
Interest on term loan
(1)
|
907 | 156 | 293 | 268 | 190 | |||||||||||||||
Promissory notes
|
600 | - | - | 600 | - | |||||||||||||||
Interest on promissory notes
|
492 | 144 | 288 | 60 | - | |||||||||||||||
Note with related party
|
519 | 173 | 346 | - | - | |||||||||||||||
Interest on note with related party
|
37 | 21 | 16 | - | - | |||||||||||||||
Operating leases
|
17,697 | 1,341 | 2,141 | 1,700 | 12,515 | |||||||||||||||
Capital leases
|
23 | 6 | 11 | 6 | - | |||||||||||||||
Purchase commitments
|
17,134 | 13,354 | 3,168 | 612 | - | |||||||||||||||
Sponsorship obligations
|
2,953 | 1,574 | 1,299 | 80 | - | |||||||||||||||
Interest rate swap
(2)
|
574 | 387 | 187 | - | - | |||||||||||||||
$ | 53,176 | $ | 17,574 | $ | 8,691 | $ | 4,391 | $ | 22,520 |
(1)
|
The variable interest rate on our term loan was 1.27% at December 31, 2011.
|
(2)
|
The fixed rate on our interest rate swap is 4.48%. We pay that fixed rate less the Benchmark Rate, which, at December 31, 2011, was 0.27%.
|
Item 7A.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
Item 8.
|
Financial
Statements and Supplementary Data
|
2011
(In thousands, except per share data)
|
1st Quarter
|
2nd Quarter
|
3rd Quarter
|
4th Quarter
|
||||||||||||
Net sales
|
$ | 32,297 | $ | 41,496 | $ | 40,477 | $ | 34,927 | ||||||||
Cost of sales
|
23,069 | 28,038 | 27,762 | 25,142 | ||||||||||||
Gross profit
|
9,228 | 13,458 | 12,715 | 9,785 | ||||||||||||
Selling, general and administrative expenses
|
9,289 | 10,670 | 10,530 | 9,253 | ||||||||||||
Operating income (loss)
|
(61 | ) | 2,788 | 2,185 | 532 | |||||||||||
Income from equity-method investments
|
356 | 335 | - | - | ||||||||||||
Gain on sale of equity interest in Fulton Street Brewery, LLC
|
- | 10,398 | - | 34 | ||||||||||||
Other expense, net
|
(269 | ) | (253 | ) | (183 | ) | (170 | ) | ||||||||
Income before income taxes
|
26 | 13,268 | 2,002 | 396 | ||||||||||||
Income tax provision
|
10 | 5,108 | 771 | 152 | ||||||||||||
Net income
|
$ | 16 | $ | 8,160 | $ | 1,231 | $ | 244 | ||||||||
Basic and diluted net income per share
|
$ | - | $ | 0.43 | $ | 0.07 | $ | 0.01 | ||||||||
Shares used in basic per share calculation
|
18,819 | 18,829 | 18,843 | 18,845 | ||||||||||||
Shares used in diluted per share calculation
|
18,928 | 18,945 | 18,935 | 18,942 |
2010
(In thousands, except per share data)
|
1st Quarter
|
2nd Quarter
|
3rd Quarter
|
4th Quarter
|
||||||||||||
Net sales
|
$ | 27,452 | $ | 37,239 | $ | 36,718 | $ | 30,322 | ||||||||
Cost of sales
|
20,605 | 26,841 | 28,090 | 22,528 | ||||||||||||
Gross profit
|
6,847 | 10,398 | 8,628 | 7,794 | ||||||||||||
Selling, general and administrative expenses
|
6,205 | 7,545 | 7,717 | 8,471 | ||||||||||||
Merger-related expenses
|
- | - | 353 | 206 | ||||||||||||
Operating income (loss)
|
642 | 2,853 | 558 | (883 | ) | |||||||||||
Income from equity-method investments
|
85 | 338 | 263 | 156 | ||||||||||||
Other expense, net
|
(346 | ) | (334 | ) | (282 | ) | (264 | ) | ||||||||
Income (loss) before income taxes
|
381 | 2,857 | 539 | (991 | ) | |||||||||||
Income tax provision (benefit)
|
172 | 1,123 | 163 | (358 | ) | |||||||||||
Net income (loss)
|
$ | 209 | $ | 1,734 | $ | 376 | $ | (633 | ) | |||||||
Basic and diluted net income (loss) per share
|
$ | 0.01 | $ | 0.10 | $ | 0.02 | $ | (0.03 | ) | |||||||
Shares used in basic per share calculation
|
17,074 | 17,084 | 17,119 | 18,801 | ||||||||||||
Shares used in diluted per share calculation
|
17,101 | 17,131 | 17,232 | 18,801 |
December 31, | ||||||||
2011
|
2010
|
|||||||
Assets
|
||||||||
Current assets:
|
||||||||
Cash
|
$ | 795 | $ | 164 | ||||
Accounts receivable, net
|
13,326 | 10,514 | ||||||
Inventories
|
9,446 | 8,729 | ||||||
Deferred income tax asset, net
|
894 | 932 | ||||||
Other current assets
|
2,816 | 3,233 | ||||||
Total current assets
|
27,277 | 23,572 | ||||||
Property, equipment and leasehold improvements, net
|
100,725 | 98,778 | ||||||
Equity method investment in Fulton Street Brewery, LLC
|
- | 5,240 | ||||||
Goodwill
|
12,917 | 12,917 | ||||||
Intangible and other assets, net
|
17,989 | 17,759 | ||||||
Total assets
|
$ | 158,908 | $ | 158,266 | ||||
Liabilities and Shareholders' Equity
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 10,994 | $ | 13,825 | ||||
Accrued salaries, wages and payroll taxes
|
4,524 | 4,053 | ||||||
Refundable deposits
|
7,400 | 6,291 | ||||||
Other accrued expenses
|
1,436 | 1,378 | ||||||
Current portion of long-term debt and capital lease obligations
|
596 | 2,460 | ||||||
Total current liabilities
|
24,950 | 28,007 | ||||||
Long-term debt and capital lease obligations, net of current portion
|
13,188 | 24,675 | ||||||
Fair value of derivative financial instruments
|
572 | 849 | ||||||
Deferred income tax liability, net
|
15,210 | 10,118 | ||||||
Other liabilities
|
479 | 421 | ||||||
Total liabilities
|
54,399 | 64,070 | ||||||
Commitments and contingencies
|
||||||||
Common shareholders' equity:
|
||||||||
Common stock, $0.005 par value. Authorized 50,000,000 shares; issued and outstanding 18,844,817 and 18,819,053
|
94 | 94 | ||||||
Additional paid-in capital
|
135,091 | 134,601 | ||||||
Accumulated other comprehensive loss
|
(356 | ) | (528 | ) | ||||
Accumulated deficit
|
(30,320 | ) | (39,971 | ) | ||||
Total common shareholders' equity
|
104,509 | 94,196 | ||||||
Total liabilities and common shareholders' equity
|
$ | 158,908 | $ | 158,266 |
Year Ended December 31,
|
||||||||||||
2011
|
2010
|
2009
|
||||||||||
Sales
|
$ | 161,000 | $ | 140,852 | $ | 133,308 | ||||||
Less excise taxes
|
11,803 | 9,121 | 8,595 | |||||||||
Net sales
|
149,197 | 131,731 | 124,713 | |||||||||
Cost of sales
|
104,011 | 98,064 | 97,230 | |||||||||
Gross profit
|
45,186 | 33,667 | 27,483 | |||||||||
Selling, general and administrative expenses
|
39,742 | 29,938 | 24,911 | |||||||||
Merger related expenses
|
- | 559 | 225 | |||||||||
Operating income
|
5,444 | 3,170 | 2,347 | |||||||||
Income from equity method investments
|
691 | 842 | 552 | |||||||||
Gain on sale of equity interest in Fulton Street Brewery, LLC
|
10,432 | - | - | |||||||||
Interest expense
|
(918 | ) | (1,497 | ) | (2,139 | ) | ||||||
Interest and other income, net
|
43 | 271 | 313 | |||||||||
Income before income taxes
|
15,692 | 2,786 | 1,073 | |||||||||
Income tax provision
|
6,041 | 1,100 | 186 | |||||||||
Net income
|
$ | 9,651 | $ | 1,686 | $ | 887 | ||||||
Basic and diluted net income per share
|
$ | 0.51 | $ | 0.10 | $ | 0.05 | ||||||
Shares used in basic per share calculations
|
18,834 | 17,523 | 17,004 | |||||||||
Shares used in diluted per share calculations
|
18,931 | 17,568 | 17,041 |
Accumulated
|
Total
|
|||||||||||||||||||||||
Additional
|
Other
|
Common
|
||||||||||||||||||||||
Common Stock |
Paid-In
|
Comprehensive
|
Retained
|
Shareholders'
|
||||||||||||||||||||
Shares
|
Par Value
|
Capital
|
Loss
|
Deficit
|
Equity
|
|||||||||||||||||||
Balance at December 31, 2008
|
16,948 | $ | 85 | $ | 122,433 | $ | (693 | ) | $ | (42,544 | ) | $ | 79,281 | |||||||||||
Issuance of shares under stock plans
|
108 | - | 207 | - | - | 207 | ||||||||||||||||||
Stock-based compensation
|
18 | - | 42 | - | - | 42 | ||||||||||||||||||
Compreshensive income:
|
||||||||||||||||||||||||
Unrealized gains on derivative financial instruments, net of tax provision of $117
|
- | - | - | 215 | - | 215 | ||||||||||||||||||
Net income
|
- | - | - | - | 887 | 887 | ||||||||||||||||||
Total comprehensive income
|
1,102 | |||||||||||||||||||||||
Balance at December 31, 2009
|
17,074 | 85 | 122,682 | (478 | ) | (41,657 | ) | 80,632 | ||||||||||||||||
Issuance of shares under stock plans
|
60 | 1 | 126 | - | - | 127 | ||||||||||||||||||
Stock-based compensation
|
18 | - | 99 | - | - | 99 | ||||||||||||||||||
Issuance of shares pursuant to merger with Kona
|
||||||||||||||||||||||||
Brewing Co., Inc.
|
1,667 | 8 | 11,694 | - | - | 11,702 | ||||||||||||||||||
Compreshensive income:
|
||||||||||||||||||||||||
Unrealized losses on derivative financial instruments, net of tax benefit of $31
|
- | - | - | (50 | ) | - | (50 | ) | ||||||||||||||||
Net income
|
- | - | - | - | 1,686 | 1,686 | ||||||||||||||||||
Total comprehensive income
|
1,636 | |||||||||||||||||||||||
Balance at December 31, 2010
|
18,819 | 94 | 134,601 | (528 | ) | (39,971 | ) | 94,196 | ||||||||||||||||
Issuance of shares under stock plans
|
10 | - | 23 | - | - | 23 | ||||||||||||||||||
Stock-based compensation
|
16 | - | 467 | - | - | 467 | ||||||||||||||||||
Compreshensive income:
|
||||||||||||||||||||||||
Unrealized gains on derivative financial instruments, net of tax provision of $105
|
- | - | - | 172 | - | 172 | ||||||||||||||||||
Net income
|
- | - | - | - | 9,651 | 9,651 | ||||||||||||||||||
Total comprehensive income
|
9,823 | |||||||||||||||||||||||
Balance at December 31, 2011
|
18,845 | $ | 94 | $ | 135,091 | $ | (356 | ) | $ | (30,320 | ) | $ | 104,509 |
Year Ended December 31, | ||||||||||||
2011
|
2010
|
2009
|
||||||||||
Cash flows from operating activities:
|
||||||||||||
Net income
|
$ | 9,651 | $ | 1,686 | $ | 887 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||||||
Depreciation and amortization
|
7,204 | 7,044 | 7,313 | |||||||||
Income from equity method investments, net of distributions received
|
(691 | ) | (647 | ) | (513 | ) | ||||||
Gain on sale of equity interest in Fulton Street Brewery, LLC
|
(10,432 | ) | - | - | ||||||||
(Gain) loss on sale or disposal of preperty, equipment and leasehold improvements
|
(1 | ) | 102 | 31 | ||||||||
Deferred income taxes
|
5,025 | 1,082 | (56 | ) | ||||||||
Stock-based compensation
|
467 | 99 | 42 | |||||||||
Other
|
(135 | ) | (282 | ) | (136 | ) | ||||||
Changes in operating assets and liabilities:
|
||||||||||||
Accounts receivable, net
|
(1,976 | ) | 2,017 | 1,391 | ||||||||
Inventories
|
(640 | ) | 1,445 | (202 | ) | |||||||
Other current assets
|
418 | 590 | 791 | |||||||||
Other assets
|
(495 | ) | 36 | 72 | ||||||||
Accounts payable and other accrued expenses
|
(2,773 | ) | (1,353 | ) | (1,162 | ) | ||||||
Accrued salaries, wages and payroll taxes
|
471 | (1,230 | ) | 802 | ||||||||
Refundable deposits
|
635 | 209 | (306 | ) | ||||||||
Net cash provided by operating activities
|
6,728 | 10,798 | 8,954 | |||||||||
Cash flows from investing activities:
|
||||||||||||
Expenditures for property, equipment and leasehold improvements
|
(8,488 | ) | (4,669 | ) | (2,303 | ) | ||||||
Proceeds from sale of property, equipment and leasehold improvements
|
120 | 160 | 136 | |||||||||
Cash paid for merger with Kona Brewing Co., Inc. and related entities, net
|
- | (6,206 | ) | - | ||||||||
Proceeds received for federal grant assiciated with photovolatic system
|
- | 402 | - | |||||||||
Proceeds from the sale of equity interest in Fulton Street Brewery, LLC
|
15,527 | - | - | |||||||||
Other
|
(28 | ) | - | - | ||||||||
Net cash provided by (used in) investing activities
|
7,131 | (10,313 | ) | (2,167 | ) | |||||||
Cash flows from financing activities:
|
||||||||||||
Principal payments on debt and capital lease obligations
|
(5,751 | ) | (1,505 | ) | (1,394 | ) | ||||||
Net borrowings (repayments) under revolving line of credit
|
(7,500 | ) | 1,100 | (5,600 | ) | |||||||
Proceeds from issuances of common stock
|
23 | 127 | 207 | |||||||||
Debt issuance costs
|
- | (54 | ) | - | ||||||||
Net cash used in financing activities
|
(13,228 | ) | (332 | ) | (6,787 | ) | ||||||
Increase in cash
|
631 | 153 | - | |||||||||
Cash:
|
||||||||||||
Beginning of period
|
164 | 11 | 11 | |||||||||
End of period
|
$ | 795 | $ | 164 | $ | 11 | ||||||
Supplemental disclosure of cash flow information:
|
||||||||||||
Cash paid for interest
|
$ | 972 | $ | 1,625 | $ | 2,265 | ||||||
Cash paid (received) for income taxes, net
|
675 | 223 | (760 | ) | ||||||||
Supplemental disclosure of non-cash information:
|
||||||||||||
Fair value of common stock issued in connection with acquisition of Kona Brewing Co., Inc. and related entities
|
$ | - | $ | 11,702 | $ | - | ||||||
Receivable from sale of equity interest in Fulton Street Brewery, LLC
|
$ | 836 | $ | - | $ | - |
Buildings
|
30 – 50 years
|
Brewery equipment
|
10 – 25 years
|
Furniture, fixtures and other equipment
|
2 - 10 years
|
5 years
|
|
Leasehold improvements
|
The lesser of useful life or term of the lease
|
Trade name and trademark
|
Indefinite
|
Recipes
|
Indefinite
|
Distributor agreements
|
15 years
|
Non-compete agreements
|
5 years
|
December 31,
|
||||||||
2011
|
2010
|
|||||||
Fixed-rate debt on balance sheet
|
$ | 1,544 | $ | 6,996 | ||||
Fair value of fixed-rate debt
|
$ | 1,615 | $ | 7,541 |
December 31
|
||||||||
2011
|
2010
|
|||||||
Raw materials
|
$ | 2,778 | $ | 2,870 | ||||
Work in process
|
2,829 | 2,244 | ||||||
Finished goods
|
2,128 | 1,933 | ||||||
Packaging materials
|
558 | 343 | ||||||
Promotional merchandise
|
967 | 1,184 | ||||||
Pub food, beverages and supplies
|
186 | 155 | ||||||
$ | 9,446 | $ | 8,729 |
December 31
|
||||||||
2011
|
2010
|
|||||||
Deposits paid to keg lessor
|
$ | 1,518 | $ | 1,734 | ||||
Prepaid property taxes
|
315 | 165 | ||||||
Prepaid insurance
|
192 | 202 | ||||||
Income tax receivable
|
- | 326 | ||||||
Other
|
791 | 806 | ||||||
$ | 2,816 | $ | 3,233 |
December 31
|
||||||||
2011
|
2010
|
|||||||
Brewery equipment
|
$ | 82,481 | $ | 77,519 | ||||
Buildings
|
52,729 | 52,036 | ||||||
Land and improvements
|
7,598 | 7,594 | ||||||
Furniture, fixtures and other equipment
|
6,187 | 4,120 | ||||||
Leasehold improvements
|
5,644 | 5,492 | ||||||
Vehicles.
|
135 | 121 | ||||||
Construction in progress
|
3,104 | 2,304 | ||||||
157,878 | 149,186 | |||||||
Less accumulated depreciation and amortization
|
57,153 | 50,408 | ||||||
$ | 100,725 | $ | 98,778 |
Fair value of common stock issued
|
$ | 11,702 | ||
Cash consideration paid
|
6,237 | |||
17,939 | ||||
Fair value of equity interest in Kona held at acquisition date
|
1,200 | |||
Total consideration
|
$ | 19,139 |
Assets
|
||||
Current assets
|
$ | 4,858 | ||
Property, equipment and leasehold improvements
|
4,174 | |||
Trade name and trademarks
|
4,600 | |||
Non-compete agreements
|
440 | |||
Total assets acquired
|
14,072 | |||
Liabilities
|
||||
Current liabilities
|
4,091 | |||
Interest bearing liabilities and other long-term liabilities
|
1,476 | |||
Deferred income tax liabilities, net and other non-current liabilities
|
2,283 | |||
Total liabilities assumed
|
7,850 | |||
Net assets acquired
|
$ | 6,222 | ||
Goodwill recorded
|
$ | 12,917 |
Year Ended December 31,
|
||||||||
2010
|
2009
|
|||||||
Net sales
|
$ | 128,260 | $ | 120,457 | ||||
Net income
|
$ | 2,181 | $ | 391 | ||||
Basic and diluted earnings per share
|
$ | 0.12 | $ | 0.02 |
December 31,
|
||||||||
2011
|
2010
|
|||||||
Trademarks and domain name
|
$ | 14,429 | $ | 14,401 | ||||
Recipes
|
700 | 700 | ||||||
Distributor agreements
|
2,200 | 2,200 | ||||||
Accumulated amortization
|
(513 | ) | (367 | ) | ||||
1,687 | 1,833 | |||||||
Non-compete agreements
|
540 | 540 | ||||||
Accumulated amortization
|
(210 | ) | (105 | ) | ||||
330 | 435 | |||||||
Favorable contracts
|
153 | 643 | ||||||
Accumulated amortization
|
(147 | ) | (609 | ) | ||||
6 | 34 | |||||||
Other
|
280 | 280 | ||||||
Accumulated amortization
|
(223 | ) | (209 | ) | ||||
57 | 71 | |||||||
17,209 | 17,474 | |||||||
Promotional merchandise
|
780 | 285 | ||||||
$ | 17,989 | $ | 17,759 |
2012
|
$ | 253 | ||
2013
|
249 | |||
2014
|
248 | |||
2015
|
223 | |||
2016
|
149 | |||
Thereafter
|
958 | |||
$ | 2,080 |
December 31,
|
||||||||
2011
|
2010
|
|||||||
Term loan, due July 1, 2018
|
$ | 12,240 | $ | 12,639 | ||||
Line of credit, due September 30, 2015
|
- | 7,500 | ||||||
Promissory notes payable to related parties, all due July 1, 2015
|
600 | 600 | ||||||
Premium on promissory notes
|
404 | 504 | ||||||
Note with affiliated party, due November 15, 2014
|
519 | 1,403 | ||||||
Capital lease obligations for equipment
|
21 | 4,489 | ||||||
13,784 | 27,135 | |||||||
Less current portion
|
596 | 2,460 | ||||||
$ | 13,188 | $ | 24,675 |
Term Loan
|
Promissory
Notes
|
Note with
Related
Party
|
Capital
Lease
Obligations
|
|||||||||||||
2012
|
$ | 418 | $ | - | $ | 173 | $ | 6 | ||||||||
2013
|
456 | - | 181 | 5 | ||||||||||||
2014
|
486 | - | 165 | 6 | ||||||||||||
2015 | 516 | 600 | - | 5 | ||||||||||||
2016 | 549 | - | - | 1 | ||||||||||||
Thereafter
|
9,815 | - | - | - | ||||||||||||
12,240 | 600 | 519 | 23 | |||||||||||||
Amount representing interest
|
- | - | - | (2 | ) | |||||||||||
$ | 12,240 | $ | 600 | $ | 519 | $ | 21 |
December 31
|
||||||||
2011
|
2010
|
|||||||
Cost of equipment acquired under capital lease
|
$ | 24 | $ | 13,106 | ||||
Less accumulated depreciation
|
(4 | ) | (4,290 | ) | ||||
$ | 20 | $ | 8,816 |
|
·
|
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 December 31, 2011
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Derivative financial instruments
|
$ | - | $ | 572 | $ | - | $ | 572 | ||||||||
Fair Value at December 31, 2010
|
||||||||||||||||
Derivative financial instruments
|
$ | - | $ | 849 | $ | - | $ | 849 |
2011 |
Beer
Related
|
Pubs
and Other
|
Total
|
|||||||||
Net sales
|
$ | 125,531 | $ | 23,666 | $ | 149,197 | ||||||
Gross profit
|
$ | 41,372 | $ | 3,814 | $ | 45,186 | % | |||||
Gross margin
|
33.0 | % | 16.1 | % | 30.3 | % | ||||||
2010
|
||||||||||||
Net sales
|
$ | 117,563 | 14,168 | $ | 131,731 | |||||||
Gross profit
|
$ | 31,607 | 2,060 | $ | 33,667 | |||||||
Gross margin
|
26.9 | % | 14.5 | % | 25.6 | % | ||||||
2009
|
||||||||||||
Net sales
|
$ | 113,439 | 11,274 | $ | 124,713 | |||||||
Gross profit
|
$ | 25,827 | 1,656 | $ | 27,483 | |||||||
Gross margin
|
22.8 | % | 14.7 | % | 22.0 | % |
Year Ended December 31,
|
2011
|
2010
|
2009
|
|||||||||
Weighted average per share fair value of stock options granted
|
$ | 5.99 | $ | 2.68 | $ | 0.89 | ||||||
Intrinsic value of stock options exercised
|
60 | 252 | 99 | |||||||||
Intrinsic value of fully-vested stock awards granted
|
243 | 61 | 36 |
Year Ended December 31,
|
||||||||||||
2011
|
2010
|
2009
|
||||||||||
Selling, general and administrative expense
|
$ | 467 | $ | 99 | $ | 42 |
Year Ended December 31,
|
2011
|
2010
|
2009
|
|||||||||
Risk-free interest rate
|
2.84 | % | 2.64% - 3.86 | % | 2.87 | % | ||||||
Dividend yield
|
0.0 | % | 0.0 | % | 0.0 | % | ||||||
Expected life
|
7.5 years
|
10 years
|
10 years
|
|||||||||
Volatility
|
62.10 | % | 62.54 | % | 60.98 | % |
Options
Outstanding
|
Weighted
Average
Exercise Price
|
|||||||
Outstanding at December 31, 2010
|
219,000 | $ | 3.14 | |||||
Granted
|
46,140 | 9.26 | ||||||
Exercised
|
(9,600 | ) | 2.41 | |||||
Forfeited
|
(3,300 | ) | 1.92 | |||||
Outstanding at December 31, 2011
|
252,240 | 4.30 |
Options
Outstanding
|
Options
Exercisable
|
|||||||
Number
|
252,240 | 71,900 | ||||||
Weighted average exercise price
|
$ | 4.30 | $ | 2.74 | ||||
Aggregate intrinsic value
|
$ | 621,000 | $ | 243,000 | ||||
Weighted average remaining contractual term
|
7.8 years
|
5.8 years
|
Year Ended December 31,
|
||||||||||||
2011
|
2010
|
2009
|
||||||||||
Weighted average common shares for basic EPS
|
18,834 | 17,523 | 17,004 | |||||||||
Dilutive effect of stock-based awards
|
97 | 45 | 37 | |||||||||
Shares used for diluted EPS
|
18,931 | 17,568 | 17,041 | |||||||||
Stock-based awards not included in diluted per share
calculations as they would be antidilutive
|
7 | 82 | 160 |
Year Ended December 31,
|
||||||||||||
2011
|
2010
|
2009
|
||||||||||
Current
|
$ | 1,016 | $ | 18 | $ | 242 | ||||||
Deferred..
|
5,025 | 1,082 | (56 | ) | ||||||||
$ | 6,041 | $ | 1,100 | $ | 186 |
Year Ended December 31,
|
||||||||||||
2011
|
2010
|
2009
|
||||||||||
Provision at U.S. statutory rate
|
$ | 5,335 | $ | 947 | $ | 365 | ||||||
State taxes, net of federal benefit
|
567 | 119 | 119 | |||||||||
Permanent differences, primarily meals and entertainment
|
266 | 213 | 171 | |||||||||
Merger expenses and true up of merger treatment
|
- | 135 | 14 | |||||||||
Accrual of IRS examination issues
|
- | - | 104 | |||||||||
Tax credits
|
(127 | ) | (214 | ) | - | |||||||
Increase to deferred tax asset tax rate
|
- | - | 313 | |||||||||
Release of valuation allowance
|
- | (100 | ) | (900 | ) | |||||||
$ | 6,041 | $ | 1,100 | $ | 186 |
December 31,
|
||||||||
2011
|
2010
|
|||||||
Deferred tax assets
|
||||||||
Net operating losses and alternative minimum tax credit carryforwards
|
$ | 2,059 | $ | 8,310 | ||||
Accrued salaries and severance
|
975 | 828 | ||||||
Other
|
766 | 822 | ||||||
3,800 | 9,960 | |||||||
Valuation allowance
|
- | - | ||||||
3,800 | 9,960 | |||||||
Deferred tax liabilities
|
||||||||
Property, equipment and leasehold improvements
|
(11,369 | ) | (11,462 | ) | ||||
Intangible assets
|
(6,450 | ) | (6,539 | ) | ||||
Equity investments
|
(251 | ) | (1,093 | ) | ||||
Other
|
(46 | ) | (52 | ) | ||||
(18,116 | ) | (19,146 | ) | |||||
$ | (14,316 | ) | $ | (9,186 | ) |
2012
|
$ | 1,341 | ||
2013
|
1,216 | |||
2014
|
925 | |||
2015
|
907 | |||
2016
|
793 | |||
Thereafter
|
12,515 | |||
$ | 17,697 |
2012
|
$ | 253 | ||
2013
|
261 | |||
2014
|
269 | |||
2015
|
277 | |||
2016
|
23 | |||
$ | 1,083 |
Purchase
Obligations
|
Sponsorship
Obligations
|
Total
|
||||||||||
2012
|
$ | 13,354 | $ | 1,574 | $ | 14,928 | ||||||
2013
|
2,119 | 847 | 2,966 | |||||||||
2014
|
1,049 | 452 | 1,501 | |||||||||
2015
|
612 | 80 | 692 | |||||||||
2016
|
- | - | - | |||||||||
Thereafter
|
- | - | - | |||||||||
$ | 17,134 | $ | 2,953 | $ | 20,087 |
Year Ended December 31,
|
||||||||||||
2011
|
2010
|
2009
|
||||||||||
Gross sales to A-B
|
$ | 132,914 | $ | 119,885 | $ | 116,684 | ||||||
Margin fee paid to A-B, classified as a reduction of Sales
|
2,777 | 5,589 | 5,844 | |||||||||
Handling, inventory management, royalty and other fees paid to A-B, classified in Cost of sales
|
490 | 607 | 926 | |||||||||
Fees paid to A-B for media and advertising services, classified in Selling, general and administrative expenses
|
- | - | 63 | |||||||||
Amounts received from A-B for lost keg fees and forfeited deposits, included as a reduction of Property, equipment and leasehold improvements, net
|
267 | 364 | 259 |
December 31
|
||||||||
2011
|
2010
|
|||||||
Amounts due from A-B related to beer sales pursuant to the A-B Distributor Agreement
|
$ | 8,310 | $ | 6,920 | ||||
Refundable deposits due to A-B
|
(1,746 | ) | (828 | ) | ||||
Amounts due to A-B for services rendered
|
(2,482 | ) | (2,185 | ) | ||||
Net amount due from A-B
|
$ | 4,082 | $ | 3,907 |
Item 9.
|
Changes
In and Disagreements With Accountants on Accounting and Financial Disclosure
|
Item 9A.
|
Controls
and Procedures
|
/s/ Moss Adams LLP
|
Seattle, Washington
|
March 14, 2012
|
Item 9B.
|
Other
Information
|
Item
10.
|
Directors
, Executive Officers and Corporate Governance
|
Item 11.
|
Executive
Compensation
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
Plan Category
|
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights (a)
|
Weighted average
exercise price of
outstanding options,
warrants and rights (b)
|
Number of securities
remaining available for future
issuance under equity
compensation plans
(excluding securities reflected
in column (a)) (c)
|
|||||||||
Equity compensation plans approved by shareholders
|
252,240 | $ | 4.30 | 576,490 | ||||||||
Equity compensation plans not approved by shareholders
(2)
|
- | - | - | |||||||||
Total
|
252,240 | 4.30 | 576,490 |
Item 13.
|
Certain
Relationships and Related Transactions, and Director Independence
|
Item 14.
|
Principal
Accountant Fees and Services
|
Item 15.
|
Exhibits
and Financial Statement Schedules
|
Page | ||
Report of Moss Adams LLP, Independent Registered Public Accounting Firm
|
37
|
|
Consolidated Balance Sheets as of December 31, 2011 and 2010.
|
38
|
|
Consolidated Statements of Income for the Years Ended December 31, 2011, 2010 and 2009
|
39
|
|
Consolidated Statements of Common Shareholders’ Equity for the Years Ended December 31,
2011, 2010 and 2009
|
40
|
|
Consolidated Statements of Cash Flows for the Years Ended December 31, 2011, 2010 and 2009
|
41
|
|
Notes to Consolidated Financial Statements
|
42
|
Craft Brew Alliance, Inc.
|
|||
|
By:
|
/s/ Joseph K. O’Brien | |
Joseph K. O’Brien | |||
Controller and Chief Accounting Officer |
Exhibit
Number
|
Description
|
2.1
|
Agreement and Plan of Merger between the Registrant and Kona Brewing Co., Inc. and related parties dated July 31, 2010 (incorporated by reference from Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on August 3, 2010)
|
2.2
|
Equity Purchase Agreement by and among each of the members of Fulton Street Brewery, LLC, as Sellers and A-B, as purchaser, dated as of February 18, 2011 (incorporated by reference from Exhibit 2.2 to the Registrant’s Form 10-K for the year ended December 31, 2010)
|
2.3
|
Joinder to Equity Purchase Agreement, dated May 2, 2011 (incorporated by reference from Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on May 4, 2011)
|
Restated Articles of Incorporation of the Registrant, dated January 2, 2012
|
|
3.2
|
Amended and Restated Bylaws of the Registrant, dated December 1, 2010 (incorporated by reference from Exhibit 3.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010 filed on April 1, 2011)
|
10.1*
|
2002 Stock Option Plan (incorporated by reference from Exhibit A to the Registrant’s Proxy Statement for its 2002 Annual Meeting of Shareholders (File No. 0-26542)
|
10.2*
|
Form of Stock Option Agreement (Directors Grants) for the 2002 Stock Option Plan (incorporated by reference from Exhibit 10.10 to the Registrant’s Form 10-K for the year ended December 31, 2004)
|
10.3*
|
Form of Nonqualified Stock Option Agreement (Executive Officer Grants) for the 2002 Stock Option Plan (incorporated by reference from Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended September 30, 2010)
|
10.4*
|
2007 Stock Incentive Plan (incorporated by reference from Appendix B to the Registrant’s Proxy Statement for its 2007 Annual Meeting of Shareholders)
|
10.5*
|
Form of Nonstatutory Stock Option Agreement (Executive Officer Grants) for the 2007 Stock Incentive Plan (incorporated by reference from Exhibit 10.3 to the Registrant’s Form 10-Q for the quarter ended June 30, 2010)
|
10.6*
|
2010 Stock Incentive Plan (incorporated by reference from Appendix B to the Registrant’s Proxy Statement for its 2010 Annual Meeting of Shareholders)
|
10.7*
|
Form of Nonqualified Stock Option Agreement (Executive Officer Grants) for the 2010 Stock Incentive Plan (incorporated by reference from Exhibit 10.11 to the Registrant’s Form 10-K for the year ended December 31, 2010)
|
10.8*†
|
Form of Performance Award Agreement for the 2010 Stock Incentive Plan (incorporated by reference from Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended June 30, 2011)
|
10.9*
|
Stock Appreciation Right Agreement between the Registrant and Andrew J. Thomas, dated October 12, 2010 (incorporated by reference from Exhibit 10.3 to the Registrant’s Form 10-Q for the quarter ended June 30, 2011)
|
10.10*
|
Stock Appreciation Right Agreement between the Registrant and Andrew J. Thomas, dated January 1, 2011 (incorporated by reference from Exhibit 10.4 to the Registrant’s Form 10-Q for the quarter ended June 30, 2011)
|
10.11*
|
Letter of Agreement between the Registrant and Terry E. Michaelson dated March 29, 2010 (incorporated by reference from Exhibit 10.14 to the Registrant’s Form 10-K for the year ended December 31, 2009)
|
10.12*
|
Letter of Agreement between the Registrant and Mark D. Moreland dated March 29, 2010 (incorporated by reference from Exhibit 10.15 to the Registrant’s Form 10-K for the year ended December 31, 2009)
|
10.13*
|
Letter of Agreement between the Registrant and V. Sebastian Pastore dated March 29, 2010 (incorporated by reference from Exhibit 10.16 to the Registrant’s Form 10-K for the year ended December 31, 2009)
|
10.14*
|
Letter of Agreement between the Registrant and Martin J. Wall, IV dated March 29, 2010 (incorporated by reference from Exhibit 10.17 to the Registrant’s Form 10-K for the year ended December 31, 2009)
|
10.15*
|
Letter of Agreement between the Registrant and Danielle Katcher dated March 29, 2010 (incorporated by reference from Exhibit 10.18 to the Registrant’s Form 10-K for the year ended December 31, 2009)
|
10.16*
|
Letter of Agreement between the Registrant and Kurt Widmer dated May 26, 2010 (incorporated by reference from Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended June 30, 2010)
|
10.17*
|
Letter of Agreement between the Registrant and Robert Widmer dated May 26, 2010 (incorporated by reference from Exhibit 10.2 to the Registrant’s Form 10-Q for the quarter ended June 30, 2010)
|
10.18*
|
Letter of Agreement between the Registrant and Andrew J. Thomas, dated June 1, 2011 (incorporated by reference from Exhibit 10.2 to the Registrant’s Form 10-Q for the quarter ended June 30, 2011)
|
10.19*
|
Non-Competition and Non-Solicitation Agreement dated June 30, 2008 between the Registrant and Kurt Widmer (incorporated by reference from Exhibit 10.10 to the Registrant’s Current Report on Form 8-K filed on July 2, 2008)
|
10.20*
|
Non-Competition and Non-Solicitation Agreement dated June 30, 2008 between the Registrant and Robert Widmer (incorporated by reference from Exhibit 10.11 to the Registrant’s Current Report on Form 8-K filed on July 2, 2008)
|
10.21*
|
Non-Competition and Non-Solicitation Agreement dated October 1, 2010 between the Registrant and W. Cameron Healy (incorporated by reference from Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on October 6, 2010)
|
10.22*
|
Non-Competition and Non-Solicitation Agreement dated October 1, 2010 between the Registrant and Mattson Davis (incorporated by reference from Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on October 6, 2010)
|
10.23*
|
Summary of Compensation Arrangements for Non-Employee Directors (incorporated by reference from Exhibit 10.23 to the Registrant’s Form 10-K for the year ended December 31, 2009)
|
10.24*
|
Summary of Annual Cash Incentive Bonus Plan for Executive Officers (incorporated by reference from Exhibit 10.25 to the Registrant’s Form 10-K for the year ended December 31, 2010 filed on April 1, 2011)
|
10.25
|
Sublease between Pease Development Authority as Sublessor and the Registrant as Sublessee, dated May 30, 1995 (incorporated by reference from Exhibit 10.11 to the Registrant’s Registration Statement on Form S-1, No. 33-94166)
|
10.26
|
Loan Agreement dated as of July 1, 2008 between Registrant and Bank of America, N.A. (incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on July 7, 2008)
|
10.27
|
Loan Modification Agreement dated November 14, 2008 to Loan Agreement dated July 1, 2008 between Registrant and Bank of America, N.A. (incorporated by reference from Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended September 30, 2008)
|
10.28
|
Second Loan Modification Agreement dated June 8, 2010 to the Loan Agreement dated July 1, 2008 between the Registrant and Bank of America, N.A. (incorporated by reference from Exhibit 10.4 to the Registrant’s Form 10-Q for the quarter ended June 30, 2010)
|
10.29
|
Third Loan Modification Agreement dated September 30, 2010 to the Loan Agreement dated July 1, 2008 between the Registrant and Bank of America, N.A. (incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on October 6, 2010)
|
10.30
|
Amended and Restated Exchange and Recapitalization Agreement dated as of May 1, 2011 between the Registrant and A-B (incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 4, 2011)
|
10.31
|
Amended and Restated Master Distributor Agreement dated as of May 1, 2011 between the Registrant and A-B (incorporated by reference from Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on May 4, 2011)
|
10.32
|
Registration Rights Agreement dated as of July 1, 2004 between the Registrant and A-B (incorporated by reference from Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on July 2, 2004)
|
10.33
|
Master Lease Agreement dated as of June 6, 2007 between Banc of America Leasing & Capital, LLC and Widmer Brothers Brewing Company (incorporated by reference from Exhibit 10.2 to the Registrant’s Amendment No. 1 to the Registration Statement on Form S-4, No. 333-149908 filed on May 2, 2008 (“S-4 Amendment No. 1”))
|
10.34
|
Amended and Restated License Agreement dated as of February 28, 1997 between Widmer Brothers Brewing Company and Widmer’s Wine Cellars, Inc. and Canandaigua Wine Company, Inc. (incorporated by reference to Exhibit 10.3 from the S-4 Amendment No. 1)
|
10.35
|
Restated Lease dated as of January 1, 1994 between Smithson & McKay Limited Liability Company and Widmer Brothers Brewing Company (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 10-Q for the quarter ended September 30, 2010)
|
10.36
|
Commercial Lease (Restated) dated as of December 18, 2007 between Widmer Brothers LLC and Widmer Brothers Brewing Company (incorporated by reference to Exhibit 10.5 from the S-4 Amendment No. 1)
|
10.37
|
Sublease dated as of September 1, 2010 between Manini Holdings, LLC and Kona Brewing Co., Inc. (incorporated by reference from Exhibit 10.41 to the Registrant’s Form 10-K for the year ended December 31, 2010)
|
10.38†
|
Amended and Restated Continental Distribution and Licensing Agreement between the Registrant and Kona Brewery LLC dated March 26, 2009 (incorporated by reference from Exhibit 10.4 to the Registrant’s Form 10-Q for the quarter ended September 30, 2010)
|
10.39
|
Sublease dated as of March 31, 2011 between Manini Holdings, LLC and Kona Brewing Co., LLC (incorporated by reference from Exhibit 10.43 to the Registrant’s Amendment No. 1 to Form 10-K for the year ended December 31, 2010 filed on April 22, 2011)
|
21.1
|
Subsidiaries of the Registrant (incorporated by reference from Exhibit 21.1 to the Registrant’s Form 10-K for the year ended December 31, 2010 filed on April 1, 2011)
|
Consent of Moss Adams LLP, Independent Registered Public Accounting Firm
|
|
Power of Attorney – Directors of Craft Brew Alliance, Inc.
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Certification of Chief Executive Officer of Craft Brew Alliance, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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Certification of Chief Financial Officer of Craft Brew Alliance, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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Certification of Form 10-K for the year ended December 31, 2011 pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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Press Release dated March 14, 2012
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101.INS**
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XBRL Instance Document
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101.SCH**
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XBRL Taxonomy Extension Schema Document
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101.CAL**
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XBRL Taxonomy Extension Calculation Linkbase Document
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101.LAB**
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XBRL Taxonomy Extension Label Linkbase Document
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101.PRE**
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XBRL Taxonomy Extension Presentation Linkbase Document
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*
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Denotes a management contract or a compensatory plan or arrangement.
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**
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Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
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†
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Confidential treatment has been requested with respect to portions of this exhibit. A complete copy of the agreement, including the redacted terms, has been separately filed with the Securities and Exchange Commission.
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Dated this 2nd day of January, 2012.
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CRAFT BREW ALLIANCE, INC.
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By:
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/s/ Terry Michaelson | |
Terry Michaelson, Chief Executive Officer |
/s/ Moss Adams LLP
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Seattle, Washington
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March 14, 2012
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Signature
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Title
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/s/ Kurt R. Widmer
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Chairman of the Board and Director
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Kurt R. Widmer
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/s/ Timothy P. Boyle
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Director
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Timothy P. Boyle
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/s/ Marc J. Cramer
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Director
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Marc J. Cramer
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/s/ E. Donald Johnson, Jr.
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Director
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E. Donald Johnson, Jr.
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/s/ Kevin R. Kelly
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Director
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Kevin R. Kelly
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/s/ Thomas D. Larson
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Director
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Thomas D. Larson
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/s/ David R. Lord
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Director
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David R. Lord
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Director
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John D. Rogers, Jr.
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1.
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I have reviewed this annual report on Form 10−K of Craft Brew Alliance, Inc. (the “Registrant”);
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2.
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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;
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3.
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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;
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4.
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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:
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a.
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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;
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b.
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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;
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c.
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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
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d.
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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
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5.
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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):
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a.
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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
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b.
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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.
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Date: March 14, 2012
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By:
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/s/ Terry E. Michaelson
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Terry E. Michaelson
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Chief Executive Officer
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1.
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I have reviewed this annual report on Form 10−K of Craft Brew Alliance, Inc. (the “Registrant”);
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2.
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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;
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3.
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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;
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4.
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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:
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a.
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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;
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b.
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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;
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c.
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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
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d.
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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
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5.
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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):
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a.
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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
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b.
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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.
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Date: March 14, 2012
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By:
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/s/ Mark D. Moreland
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Mark D. Moreland
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Chief Financial Officer and Treasurer
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1.
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The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
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2.
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
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Date: March 14, 2012
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BY:
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/s/ Terry E. Michaelson
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Terry E. Michaelson
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Chief Executive Officer
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(Principal Executive Officer)
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BY:
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/s/ Mark D. Moreland
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Mark D. Moreland
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Chief Financial Officer and Treasurer
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(Principal Financial Officer)
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·
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Net sales increased $17.5 million, or 13 percent, to $149.2 million compared with 2010
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·
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Depletion growth and non-contract shipment growth were each 7 percent for the full year
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·
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Gross profit percentage increased 470 basis points
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Sales and marketing expense increased $7.6 million versus last year reflecting investments towards critical growth initiatives
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Capital expenditures were $8.5 million as we continued to make strategic investments in systems and infrastructure
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Depletion growth in the high single digit percentage to low double digit range reflecting both continued strength of our brands and continued growth of the craft category.
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·
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Sales growth of approximately 10% to 12%.
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·
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Gross margin rate approximately 100 basis points lower than 2011, reflecting pressure from grain prices and assuming that fuel prices remain relatively consistent with recent levels.
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·
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SG&A expense ranging from $42 to $44 million, reflecting continued investment into sales and marketing initiatives.
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Diluted earnings per share in the range of $0.20 to $0.25.
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·
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Capital expenditures of approximately $8.5 to $9.5 million, continuing our investments in capacity and efficiency improvements, and quality initiatives.
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Media Contact: | Investor Contact: |
Ted Lane | Edwin Smith |
LANE PR | Craft Brew Alliance, Inc. |
(212) 302-5948 | (503) 972-7884 |
Ted@lanepr.com | ed.smith@craftbrew.com |
Three Months Ended
December 31,
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Years Ended
December 31,
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2011
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2010
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2011
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2010
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Sales
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$ | 37,558 | $ | 32,788 | $ | 161,000 | $ | 140,852 | ||||||||
Less excise taxes
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2,631 | 2,466 | 11,803 | 9,121 | ||||||||||||
Net sales
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34,927 | 30,322 | 149,197 | 131,731 | ||||||||||||
Cost of sales
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25,142 | 22,528 | 104,011 | 98,064 | ||||||||||||
Gross profit
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9,785 | 7,794 | 45,186 | 33,667 | ||||||||||||
as percentage of net sales
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28.0 | % | 25.7 | % | 30.3 | % | 25.6 | % | ||||||||
Selling, general and administrative expenses
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9,253 | 8,471 | 39,742 | 29,938 | ||||||||||||
Merger-related expenses
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— | 206 | — | 559 | ||||||||||||
Operating income
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532 | (883 | ) | 5,444 | 3,170 | |||||||||||
Interest expense
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(171 | ) | (332 | ) | (918 | ) | (1,497 | ) | ||||||||
Gain on sale of equity interest in Fulton Street Brewery, LLC
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34 | — | 10,432 | — | ||||||||||||
Income from equity investments, interest and other, net
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1 | 224 | 734 | 1,113 | ||||||||||||
Income before income taxes
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396 | (991 | ) | 15,692 | 2,786 | |||||||||||
Income tax provision
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152 | (358 | ) | 6,041 | 1,100 | |||||||||||
Net income
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$ | 244 | $ | (633 | ) | $ | 9,651 | $ | 1,686 | |||||||
Earnings per share:
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Basic and diluted earnings per share
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$ | 0.01 | $ | (0.03 | ) | $ | 0.51 | $ | 0.10 | |||||||
Weighted average shares outstanding:
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Basic
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18,845 | 18,801 | 18,834 | 17,523 | ||||||||||||
Diluted
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18,942 | 18,801 | 18,931 | 17,568 | ||||||||||||
Total shipments (in barrels):
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Core Brands
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141,300 | 136,700 | 623,300 | 584,700 | ||||||||||||
Contract Brewing
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10,800 | 6,100 | 49,300 | 23,100 | ||||||||||||
Total shipments
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152,100 | 142,800 | 672,600 | 607,800 | ||||||||||||
Depletion growth rate (over the same period from the prior year)
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4.0 | % | 3.6 | % | 6.5 | % | 1.6 | % |
December 31,
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2011
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2010
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Current assets:
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Cash
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$ | 795 | $ | 164 | ||||
Accounts receivable, net
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13,326 | 10,514 | ||||||
Inventories
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9,446 | 8,729 | ||||||
Deferred income tax asset, net
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894 | 932 | ||||||
Other current assets and income tax receivables
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2,816 | 3,233 | ||||||
Total current assets
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27,277 | 23,572 | ||||||
Property, equipment and leasehold improvements, net
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100,725 | 98,778 | ||||||
Goodwill
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12,917 | 12,917 | ||||||
Intangible and other non-current assets, net
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17,989 | 22,999 | ||||||
Total assets
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$ | 158,908 | $ | 158,266 | ||||
Current liabilities:
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Accounts payable
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$ | 10,994 | $ | 13,825 | ||||
Accrued salaries, wages and payroll taxes
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4,524 | 4,053 | ||||||
Refundable deposits
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7,400 | 6,291 | ||||||
Other accrued expenses
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1,436 | 1,378 | ||||||
Current portion of long-term debt and capital lease obligations
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596 | 2,460 | ||||||
Total current liabilities
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24,950 | 28,007 | ||||||
Long-term debt and capital lease obligations, net
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13,188 | 24,675 | ||||||
Other long-term liabilities
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16,261 | 11,388 | ||||||
Total common shareholders' equity
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104,509 | 94,196 | ||||||
Total liabilities and common shareholders' equity
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$ | 158,908 | $ | 158,266 |
Years Ended
December 31,
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2011
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2010
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Cash Flows From Operating Activities:
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Net income
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$ | 9,651 | $ | 1,686 | ||||
Adjustments to reconcile net income to net cash provided by operating activities:
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Depreciation and amortization
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7,204 | 7,044 | ||||||
Income from equity investments
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(691 | ) | (647 | ) | ||||
Gain on sale of equity interest in Fulton Street Brewery, LLC
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(10,432 | ) | — | |||||
Deferred income taxes
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5,025 | 1,082 | ||||||
Other, including stock-based compensation
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331 | (81 | ) | |||||
Changes in operating assets and liabilities:
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Accounts receivable
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(1,976 | ) | 2,017 | |||||
Inventories
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(640 | ) | 1,445 | |||||
Other current assets
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418 | 590 | ||||||
Other assets
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(495 | ) | 36 | |||||
Accounts payable and other accrued expenses
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(2,773 | ) | (1,353 | ) | ||||
Accrued salaries, wages and payroll taxes
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471 | (1,230 | ) | |||||
Refundable deposits
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635 | 209 | ||||||
Net cash provided by operating activities
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6,728 | 10,798 | ||||||
Cash Flows from Investing Activities:
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Expenditures for property, equipment and leasehold improvements
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(8,488 | ) | (4,669 | ) | ||||
Proceeds from sale of property, equipment and leasehold improvements and other
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120 | 160 | ||||||
Proceeds from the sale of equity interest in Fulton Street Brewery, LLC
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15,527 | — | ||||||
Cash paid in merger with Kona Brewing Co., Inc. and related entities, net
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— | (6,206 | ) | |||||
Other
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(28 | ) | 402 | |||||
Net cash provided by (used in) investing activities
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7,131 | (10,313 | ) | |||||
Cash Flows from Financing Activities:
|
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Principal payments on debt and capital lease obligations
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(5,751 | ) | (1,505 | ) | ||||
Net borrowings (repayments) under revolving line of credit
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(7,500 | ) | 1,100 | |||||
Issuance of common stock
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23 | 127 | ||||||
Debt issuance costs
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— | (54 | ) | |||||
Net cash used in financing activities
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(13,228 | ) | (332 | ) | ||||
Increase in cash
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631 | 153 | ||||||
Cash, beginning of period
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164 | 11 | ||||||
Cash, end of period
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$ | 795 | $ | 164 |
Years Ended
December 31,
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2011
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2010
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Net income
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$ | 9,651 | $ | 1,686 | ||||
Interest expense
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918 | 1,497 | ||||||
Income tax provision
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6,041 | 1,100 | ||||||
Depreciation expense
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6,897 | 6,494 | ||||||
Amortization expense
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307 | 550 | ||||||
Gain on sale of equity interest in Fulton Street Brewery, LLC
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(10,432 | ) | - | |||||
Stock-based compensation
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458 | 111 | ||||||
Other charges
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- | 559 | ||||||
Adjusted EBITDA
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$ | 13,840 | $ | 11,997 |
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The
Company has presented Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) in these tables to provide investors with additional information to evaluate our operating performance on an ongoing basis using criteria that are used by the Company’s management and because it is frequently used by the investment community to evaluate companies with substantial financial leverage. The Company defines Adjusted EBITDA as net earnings before interest, income taxes, depreciation and amortization, stock compensation and other non-cash charges, including net gain or loss on disposal of property, plant and equipment. The Company uses Adjusted EBITDA, among other measures, to evaluate operating performance, to plan and forecast future periods’ operating performance, and as an incentive compensation target for certain management personnel.
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As
Adjusted EBITDA is not a measure of operating performance or liquidity calculated in accordance with generally accepted accounting principles in the United States of America (“GAAP”), this measure should not be considered in isolation of, or as a substitute for, net income, as an indicator of operating performance, or net cash provided by operating activities as an indicator of liquidity. The use of Adjusted EBITDA instead of net income has limitations as an analytical tool, including the inability to determine profitability; the exclusion of interest expense and associated cash requirements, given the level of the Company’s indebtedness; and the exclusion of depreciation and amortization which represent significant and unavoidable operating costs, given the capital expenditures needed to maintain the Company’s operations. We compensate for these limitations by relying on GAAP results. Our computation of Adjusted EBITDA may differ from similarly titled measures used by other companies. As Adjusted EBITDA excludes certain financial information compared with net income and net cash provided by operating activities, the most directly comparable GAAP financial measures, users of this financial information should consider the types of events and transactions which are excluded. The table above shows a reconciliation of Adjusted EBITDA to net income.
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