x
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QUARTERLY REPORT
PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For The Quarterly Period Ended June 30, 2012
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from _______________ to ______________
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Washington
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91-1141254
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Large Accelerated Filer
o
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Accelerated Filer
x
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Non-accelerated Filer
o
(Do not check if a smaller reporting company)
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Smaller Reporting Company
o
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PART I - FINANCIAL INFORMATION
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Page
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Item 1.
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Financial Statements
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2
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3
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4
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5
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6
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Item 2.
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13
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Item 3.
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22
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Item 4.
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22
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PART II - OTHER INFORMATION
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||
Item 1A.
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22
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Item 6.
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23
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24
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June 30,
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December 31,
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|||||||
2012
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2011
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|||||||
Assets
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||||||||
Current assets:
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||||||||
Cash
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$ | 5,435 | $ | 795 | ||||
Accounts receivable, net
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11,294 | 13,326 | ||||||
Inventories
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11,285 | 9,446 | ||||||
Deferred income tax asset, net
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1,266 | 894 | ||||||
Other current assets
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3,236 | 2,816 | ||||||
Total current assets
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32,516 | 27,277 | ||||||
Property, equipment and leasehold improvements, net
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102,218 | 100,725 | ||||||
Goodwill
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12,917 | 12,917 | ||||||
Intangible and other assets, net
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17,700 | 17,989 | ||||||
Total assets
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$ | 165,351 | $ | 158,908 | ||||
Liabilities and Shareholders' Equity
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||||||||
Current liabilities:
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||||||||
Accounts payable
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$ | 14,214 | $ | 10,994 | ||||
Accrued salaries, wages and payroll taxes
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4,879 | 4,524 | ||||||
Refundable deposits
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8,415 | 7,400 | ||||||
Other accrued expenses
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990 | 1,436 | ||||||
Current portion of long-term debt and capital lease obligations
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616 | 596 | ||||||
Total current liabilities
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29,114 | 24,950 | ||||||
Long-term debt and capital lease obligations, net of current portion
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12,820 | 13,188 | ||||||
Fair value of derivative financial instruments
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405 | 572 | ||||||
Deferred income tax liability, net
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16,346 | 15,210 | ||||||
Other liabilities
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503 | 479 | ||||||
Total liabilities
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59,188 | 54,399 | ||||||
Commitments and contingencies
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||||||||
Common shareholders' equity:
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||||||||
Common stock, $0.005 par value. Authorized 50,000,000 shares; issued and outstanding 18,869,006 and 18,844,817
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94 | 94 | ||||||
Additional paid-in capital
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135,384 | 135,091 | ||||||
Accumulated other comprehensive loss
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(252 | ) | (356 | ) | ||||
Accumulated deficit
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(29,063 | ) | (30,320 | ) | ||||
Total common shareholders' equity
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106,163 | 104,509 | ||||||
Total liabilities and common shareholders' equity
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$ | 165,351 | $ | 158,908 |
Three Months Ended June 30,
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Six Months Ended June 30,
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|||||||||||||||
2012
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2011
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2012
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2011
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|||||||||||||
Sales
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$ | 47,558 | $ | 44,849 | $ | 89,170 | $ | 79,809 | ||||||||
Less excise taxes
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3,294 | 3,353 | 6,407 | 6,016 | ||||||||||||
Net sales
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44,264 | 41,496 | 82,763 | 73,793 | ||||||||||||
Cost of sales
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30,926 | 28,038 | 57,718 | 51,107 | ||||||||||||
Gross profit
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13,338 | 13,458 | 25,045 | 22,686 | ||||||||||||
Selling, general and administrative expenses
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12,222 | 10,670 | 22,595 | 19,959 | ||||||||||||
Operating income
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1,116 | 2,788 | 2,450 | 2,727 | ||||||||||||
Income from equity method investment
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- | 335 | - | 691 | ||||||||||||
Gain on sale of Fulton Street Brewery, LLC
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- | 10,398 | - | 10,398 | ||||||||||||
Interest expense
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(165 | ) | (260 | ) | (331 | ) | (542 | ) | ||||||||
Interest income and other, net
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(11 | ) | 7 | (6 | ) | 20 | ||||||||||
Income before income taxes
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940 | 13,268 | 2,113 | 13,294 | ||||||||||||
Income tax provision
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381 | 5,108 | 856 | 5,118 | ||||||||||||
Net income
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$ | 559 | $ | 8,160 | $ | 1,257 | $ | 8,176 | ||||||||
Basic and diluted net income per share
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$ | 0.03 | $ | 0.43 | $ | 0.07 | $ | 0.43 | ||||||||
Shares used in basic per share calculations
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18,857 | 18,829 | 18,851 | 18,824 | ||||||||||||
Shares used in diluted per share calculations
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18,931 | 18,945 | 18,921 | 18,936 |
For the Three Months Ended June 30,
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For the Six Months Ended June 30,
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|||||||||||||||
2012
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2011
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2012
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2011
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|||||||||||||
Net income
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$ | 559 | $ | 8,160 | $ | 1,257 | $ | 8,176 | ||||||||
Unrealized gains on derivative hedge transactions, net of tax
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58 | 7 | 104 | 69 | ||||||||||||
Comprehensive income
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$ | 617 | $ | 8,167 | $ | 1,361 | $ | 8,245 |
Six Months Ended June 30,
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||||||||
2012
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2011
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|||||||
Cash flows from operating activities:
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||||||||
Net income
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$ | 1,257 | $ | 8,176 | ||||
Adjustments to reconcile net income to net cash provided by operating activities:
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||||||||
Depreciation and amortization
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3,761 | 3,651 | ||||||
Income from equity method investment, net of distributions received
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- | (691 | ) | |||||
Gain on sale of Fulton Street Brewery, LLC
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- | (10,398 | ) | |||||
Deferred income taxes
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701 | 4,166 | ||||||
Stock-based compensation
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311 | 249 | ||||||
Other
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(235 | ) | (49 | ) | ||||
Changes in operating assets and liabilities:
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||||||||
Accounts receivable, net
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1,614 | (1,727 | ) | |||||
Inventories
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(1,454 | ) | (1,111 | ) | ||||
Other current assets
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(420 | ) | (72 | ) | ||||
Other assets
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- | (221 | ) | |||||
Accounts payable and other accrued expenses
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2,753 | 1,017 | ||||||
Accrued salaries, wages and payroll taxes
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355 | 27 | ||||||
Refundable deposits
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413 | 606 | ||||||
Net cash provided by operating activities
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9,056 | 3,623 | ||||||
Cash flows from investing activities:
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||||||||
Expenditures for property, equipment and leasehold improvements
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(4,578 | ) | (3,694 | ) | ||||
Proceeds from sale of property, equipment and leasehold improvements
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37 | 49 | ||||||
Proceeds from the sale of Fulton Street Brewery, LLC
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418 | 15,075 | ||||||
Net cash provided by (used in) investing activities
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(4,123 | ) | 11,430 | |||||
Cash flows from financing activities:
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||||||||
Principal payments on debt and capital lease obligations
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(296 | ) | (1,256 | ) | ||||
Net borrowings under revolving line of credit
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- | (7,500 | ) | |||||
Proceeds from issuances of common stock
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3 | 13 | ||||||
Net cash used in financing activities
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(293 | ) | (8,743 | ) | ||||
Increase in cash
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4,640 | 6,310 | ||||||
Cash:
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||||||||
Beginning of period
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795 | 164 | ||||||
End of period
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$ | 5,435 | $ | 6,474 | ||||
Supplemental disclosure of cash flow information:
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||||||||
Cash paid for interest
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$ | 386 | $ | 605 | ||||
Cash paid for income taxes, net
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453 | 211 |
June 30,
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December 31,
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|||||||
2012
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2011
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|||||||
Raw materials
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$ | 2,670 | $ | 2,778 | ||||
Work in process
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3,167 | 2,829 | ||||||
Finished goods
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3,569 | 2,128 | ||||||
Packaging materials
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759 | 558 | ||||||
Promotional merchandise
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784 | 967 | ||||||
Pub food, beverages and supplies
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336 | 186 | ||||||
$ | 11,285 | $ | 9,446 |
Three Months Ended June 30,
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Six Months Ended June 30,
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|||||||||||||||
2012
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2011
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2012
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2011
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Gross sales to A-B
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$ | 39,342 | $ | 37,433 | $ | 72,948 | $ | 66,947 | ||||||||
Margin fee paid to A-B, classified as a reduction of Sales
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482 | 740 | 935 | 1,902 | ||||||||||||
Sales to Fulton Street Brewery, LLC (“FSB”), through a contract brewing arrangement, classified in Sales
(1)
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1,107 | 1,017 | 2,485 | 1,293 | ||||||||||||
Handling, inventory management, royalty and other fees paid to A-B, classified in Cost of sales
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116 | 138 | 230 | 274 | ||||||||||||
Amounts received from A-B for lost keg fees and forfeited deposits, included as a reduction of Property, equipment and leasehold improvements, net
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28 | 107 | 32 | 120 |
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(1)
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We owned 42% of FSB prior to it becoming a wholly owned subsidiary of A-B in May 2011 and, accordingly, transactions with FSB are considered to be related party transactions in all periods.
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June 30,
2012
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December 31,
2011
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|||||||
Amounts due from A-B related to beer sales pursuant to the A-B distributor agreement
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$ | 6,608 | $ | 8,310 | ||||
Amounts due from FSB related to beer sales pursuant to a contract brewing arrangement
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880 | 585 | ||||||
Refundable deposits due to A-B
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(2,263 | ) | (1,746 | ) | ||||
Amounts due to A-B for services rendered
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(1,991 | ) | (2,482 | ) | ||||
Net amount due from A-B
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$ | 3,234 | $ | 4,667 |
Three Months Ended June 30,
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Six Months Ended June 30,
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|||||||||||||
2012
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2011
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2012
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2011
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|||||||||||
$ | 31 | $ | 31 | $ | 62 | $ | 61 |
Three Months Ended June 30,
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Six Months Ended June 30,
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|||||||||||||
2012
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2011
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2012
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2011
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|||||||||||
$ | 100 | $ | 93 | $ | 199 | $ | 203 |
June 30,
2012
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December 31,
2011
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|||||||
Trademarks and domain name
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$ | 14,429 | $ | 14,429 | ||||
Recipes
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700 | 700 | ||||||
Distributor agreements
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2,200 | 2,200 | ||||||
Accumulated amortization
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(587 | ) | (513 | ) | ||||
1,613 | 1,687 | |||||||
Non-compete agreements
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440 | 540 | ||||||
Accumulated amortization
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(154 | ) | (210 | ) | ||||
286 | 330 | |||||||
Favorable contracts
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31 | 153 | ||||||
Accumulated amortization
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(29 | ) | (147 | ) | ||||
2 | 6 | |||||||
Other
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280 | 280 | ||||||
Accumulated amortization
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(229 | ) | (223 | ) | ||||
51 | 57 | |||||||
17,081 | 17,209 | |||||||
Promotional merchandise
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619 | 780 | ||||||
$ | 17,700 | $ | 17,989 |
Three Months Ended June 30,
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Six Months Ended June 30,
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|||||||||||||
2012
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2011
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2012
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2011
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|||||||||||
$ | 64 | $ | 83 | $ | 128 | $ | 165 |
Fair Value of Liability Derivative
|
||||||||
June 30,
2012
|
December 31,
2011
|
|||||||
Fair value of derivative financial instrument
|
$ | 405 | $ | 572 |
Derivatives in Cash
Flow Hedging
Relationships
|
Amount of Gain Recognized
in Accumulated OCI
(Effective Portion)
|
Location of Loss Reclassified
from Accumulated OCI into
Income (Effective Portion)
|
Amount of Loss Reclassified
from Accumulated OCI into
Income (Effective Portion)
|
||||||
Three Months
Ended June 30,
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|||||||||
2012
|
$ | 93 |
Interest expense
|
$ | 97 | ||||
2011
|
$ | 11 |
Interest expense
|
$ | 101 | ||||
Six Months
Ended June 30,
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|||||||||
2012
|
$ | 167 |
Interest expense
|
$ | 193 | ||||
2011
|
$ | 112 |
Interest expense
|
$ | 197 |
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·
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Level 1 – quoted prices in active markets for identical securities as of the reporting date;
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·
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Level 2 – other significant directly or indirectly observable inputs, including quoted prices for similar securities, interest rates, prepayment speeds and credit risk; and
|
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·
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Level 3 – significant inputs that are generally less observable than objective sources, including our own assumptions in determining fair value.
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Fair Value at June 30, 2012
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Level 1
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Level 2
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Level 3
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Total
|
||||||||||||
Derivative financial instrument
|
$ | - | $ | 405 | $ | - | $ | 405 | ||||||||
Fair Value at December 31, 2011
|
||||||||||||||||
Derivative financial instrument
|
$ | - | $ | 572 | $ | - | $ | 572 |
Three Months Ended June 30,
|
Six Months Ended June 30,
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|||||||||
2012
|
2011
|
2012
|
2011
|
|||||||
81.7% | 81.8% | 80.8% | 81.5% |
June 30, 2012
|
December 31, 2011
|
|||
58.5% | 62.4% |
Three Months Ended June 30,
|
Six Months Ended June 30,
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|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Selling, general and administrative
|
$ | 177 | $ | 210 | $ | 311 | $ | 249 |
Three Months Ended June 30,
|
Six Months Ended June 30,
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|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Shares used for basic EPS
|
18,857 | 18,829 | 18,851 | 18,824 | ||||||||||||
Dilutive effect of stock-based awards
|
74 | 116 | 70 | 112 | ||||||||||||
Shares used for diluted EPS
|
18,931 | 18,945 | 18,921 | 18,936 | ||||||||||||
Stock-based awards not included in diluted per share calculations as they would be anti-dilutive
|
109 | 61 | 78 | 52 |
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·
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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 Brewery founded by brothers Kurt and Rob Widmer in 1984 in Portland, Oregon; and
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|
·
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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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Six Months
Ended
June 30,
|
Net Sales
|
Net
Income
|
Number of
Barrels
Sold
|
||||||||
2012
|
$
|
82.8 million
|
$
|
1.3 million
|
360,400
|
||||||
2011
|
$
|
73.8 million
|
$
|
8.2 million
|
(1) |
339,000
|
(1)
|
Includes the one-time gain on sale of Fulton Street Brewery, LLC of $6.5 million, net of tax.
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Sales
|
107.4 | % | 108.1 | % | 107.7 | % | 108.2 | % | ||||||||
Less excise tax
|
(7.4 | ) | (8.1 | ) | (7.7 | ) | (8.2 | ) | ||||||||
Net sales
|
100.0 | 100.0 | 100.0 | 100.0 | ||||||||||||
Cost of sales
|
69.9 | 67.6 | 69.7 | 69.3 | ||||||||||||
Gross profit
|
30.1 | 32.4 | 30.3 | 30.7 | ||||||||||||
Selling, general and administrative expenses
|
27.6 | 25.7 | 27.3 | 27.0 | ||||||||||||
Operating income
|
2.5 | 6.7 | 3.0 | 3.7 | ||||||||||||
Income from equity method investment
|
- | 0.8 | - | 0.9 | ||||||||||||
Gain on sale of Fulton Street Brewery, LLC
|
- | 25.1 | - | 14.1 | ||||||||||||
Interest expense
|
(0.4 | ) | (0.6 | ) | (0.4 | ) | (0.7 | ) | ||||||||
Interest income and other, net
|
- | - | - | - | ||||||||||||
Income before income taxes
|
2.1 | 32.0 | 2.6 | 18.0 | ||||||||||||
Income tax provision
|
0.9 | 12.3 | 1.0 | 6.9 | ||||||||||||
Net income
|
1.3 | % | 19.7 | % | 1.5 | % | 11.1 | % |
(1)
|
Percentages may not add due to rounding.
|
Three Months Ended June 30,
|
||||||||||||
2012
|
Beer
Related
|
Pubs
|
Total
|
|||||||||
Net sales
|
$ | 38,371 | $ | 5,893 | $ | 44,264 | ||||||
Gross profit
|
$ | 12,444 | $ | 894 | $ | 13,338 | ||||||
Gross margin
|
32.4 | % | 15.2 | % | 30.1 | % | ||||||
2011
|
||||||||||||
Net sales
|
$ | 36,010 | $ | 5,486 | $ | 41,496 | ||||||
Gross profit
|
$ | 12,453 | $ | 1,005 | $ | 13,458 | ||||||
Gross margin
|
34.6 | % | 18.3 | % | 32.4 | % |
Three Months Ended June 30,
|
Dollar
|
|||||||||||||||
Sales by Category
|
2012
|
2011
|
Change
|
% Change
|
||||||||||||
A-B and A-B related
|
$ | 38,860 | $ | 36,693 | $ | 2,167 | 5.9 | % | ||||||||
Contract brewing and beer related
(1)
|
2,805 | 2,670 | 135 | 5.1 | % | |||||||||||
Excise taxes
|
(3,294 | ) | (3,353 | ) | 59 | (1.8 | )% | |||||||||
Net beer related sales
|
38,371 | 36,010 | 2,361 | 6.6 | % | |||||||||||
Pubs
(2)
|
5,893 | 5,486 | 407 | 7.4 | % | |||||||||||
Net sales
|
$ | 44,264 | $ | 41,496 | $ | 2,768 | 6.7 | % |
Six Months Ended June 30,
|
Dollar
|
|||||||||||||||
Sales by Category
|
2012
|
2011
|
Change
|
% Change
|
||||||||||||
A-B and A-B related
|
$ | 72,013 | $ | 65,045 | $ | 6,968 | 10.7 | % | ||||||||
Contract brewing and beer related
(1)
|
5,878 | 4,292 | 1,586 | 37.0 | % | |||||||||||
Excise taxes
|
(6,407 | ) | (6,016 | ) | (391 | ) | 6.5 | % | ||||||||
Net beer related sales
|
71,484 | 63,321 | 8,163 | 12.9 | % | |||||||||||
Pubs
(2)
|
11,279 | 10,472 | 807 | 7.7 | % | |||||||||||
Net sales
|
$ | 82,763 | $ | 73,793 | $ | 8,970 | 12.2 | % |
|
(1)
|
Beer related includes international beer sales.
|
|
(2)
|
Pubs sales include sales of promotional merchandise and sales of beer directly to customers.
|
Three Months
Ended June 30,
|
2012
Shipments
|
2011
Shipments
|
Increase
(Decrease)
|
%
Change
|
Change in
Depletions
(1)
|
|||||||||||||||
A-B and A-B related
|
172,300 | 173,000 | (700 | ) | (0.4 | )% | 3 | % | ||||||||||||
Contract brewing and beer related(2)
|
15,300 | 15,000 | 300 | 2.0 | % | |||||||||||||||
Pubs
|
2,900 | 3,100 | (200 | ) | (6.5 | )% | ||||||||||||||
Total
|
190,500 | 191,100 | (600 | ) | (0.3 | )% |
Six Months
Ended June 30,
|
2012
Shipments
|
2011
Shipments
|
Increase
(Decrease)
|
%
Change
|
Change in
Depletions
(1)
|
|||||||||||||||
A-B and A-B related
|
322,600 | 309,900 | 12,700 | 4.1 | % | 5 | % | |||||||||||||
Contract brewing and beer related(2)
|
32,500 | 23,600 | 8,900 | 37.7 | % | |||||||||||||||
Pubs
|
5,300 | 5,500 | (200 | ) | (3.6 | )% | ||||||||||||||
Total
|
360,400 | 339,000 | 21,400 | 6.3 | % |
(1)
|
Change in depletions reflects the year-over-year change in barrel volume sales of beer by wholesalers to retailers.
|
(2)
|
Contract brewing and beer related includes international shipments of our beers.
|
Three Months
Ended June 30,
|
2012
Shipments
|
2011
Shipments
|
Increase
(Decrease)
|
%
Change
|
Change in
Depletions
|
|||||||||||||||
Widmer Brothers
|
67,200 | 74,200 | (7,000 | ) | (9.4 | )% | (8 | )% | ||||||||||||
Kona
|
59,400 | 53,500 | 5,900 | 11.0 | % | 19 | % | |||||||||||||
Redhook
|
49,400 | 49,400 | - | 0.0 | % | 2 | % | |||||||||||||
Total
(1)
|
176,000 | 177,100 | (1,100 | ) | (0.6 | )% | 3 | % |
Six Months
Ended June 30,
|
2012
Shipments
|
2011
Shipments
|
Increase
(Decrease)
|
%
Change
|
Change in
Depletions
|
|||||||||||||||
Widmer Brothers
|
127,700 | 136,600 | (8,900 | ) | (6.5 | )% | (7 | )% | ||||||||||||
Kona
|
107,800 | 90,600 | 17,200 | 19.0 | % | 24 | % | |||||||||||||
Redhook
|
93,800 | 89,500 | 4,300 | 4.8 | % | 4 | % | |||||||||||||
Total
(1)
|
329,300 | 316,700 | 12,600 | 4.0 | % | 5 | % |
|
(1)
|
Total shipments by brand include international shipments and exclude shipments produced under our contract brewing arrangements.
|
Three Months | 2012 | 2011 | ||||||||||||||
Ended June 30, |
Shipments
|
% of Total
|
Shipments
|
% of Total
|
||||||||||||
Draft
|
55,800 | 31.7 | % | 59,700 | 33.7 | % | ||||||||||
Bottle
|
120,200 | 68.3 | % | 117,400 | 66.3 | % | ||||||||||
Total
|
176,000 | 100.0 | % | 177,100 | 100.0 | % |
Six Months |
2012
|
2011
|
||||||||||||||
Ended June 30, |
Shipments
|
% of Total
|
Shipments
|
% of Total
|
||||||||||||
Draft
|
109,400 | 33.2 | % | 114,000 | 36.0 | % | ||||||||||
Bottle
|
219,900 | 66.8 | % | 202,700 | 64.0 | % | ||||||||||
Total
|
329,300 | 100.0 | % | 316,700 | 100.0 | % |
Three Months Ended June 30,
|
Dollar
|
|||||||||||||||
2012
|
2011
|
Change
|
% Change
|
|||||||||||||
Beer Related
|
$ | 25,927 | $ | 23,557 | $ | 2,370 | 10.1 | % | ||||||||
Pubs
|
4,999 | 4,481 | 518 | 11.6 | % | |||||||||||
Total
|
$ | 30,926 | $ | 28,038 | $ | 2,888 | 10.3 | % |
Six Months Ended June 30,
|
Dollar
|
|||||||||||||||
2012
|
2011
|
Change
|
% Change
|
|||||||||||||
Beer Related
|
$ | 48,126 | $ | 42,377 | $ | 5,749 | 13.6 | % | ||||||||
Pubs
|
9,592 | 8,730 | 862 | 9.9 | % | |||||||||||
Total
|
$ | 57,718 | $ | 51,107 | $ | 6,611 | 12.9 | % |
Three Months Ended June 30,
|
Dollar
|
|||||||||||||||
2012
|
2011
|
Change
|
% Change
|
|||||||||||||
Beer Related
|
$ | 12,444 | $ | 12,453 | $ | (9 | ) | (0.1 | )% | |||||||
Pubs
|
894 | 1,005 | (111 | ) | (11.0 | )% | ||||||||||
Total
|
$ | 13,338 | $ | 13,458 | $ | (120 | ) | (0.9 | )% |
Six Months Ended June 30,
|
Dollar
|
|||||||||||||||
2012
|
2011
|
Change
|
% Change
|
|||||||||||||
Beer Related
|
$ | 23,358 | $ | 20,944 | $ | 2,414 | 11.5 | % | ||||||||
Pubs
|
1,687 | 1,742 | (55 | ) | (3.2 | )% | ||||||||||
Total
|
$ | 25,045 | $ | 22,686 | $ | 2,359 | 10.4 | % |
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Beer Related
|
32.4 | % | 34.6 | % | 32.7 | % | 33.1 | % | ||||||||
Pubs
|
15.2 | % | 18.3 | % | 15.0 | % | 16.6 | % | ||||||||
Total
|
30.1 | % | 32.4 | % | 30.3 | % | 30.7 | % |
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Capacity utilization
|
84.7 | % | 84.1 | % | 80.1 | % | 74.6 | % |
Three Months Ended June 30,
|
Dollar
|
|||||||||||||||
2012
|
2011
|
Change
|
% Change
|
|||||||||||||
$ | 12,222 | $ | 10,670 | $ | 1,552 | 14.5 | % | |||||||||
As a % of net sales
|
27.6 | % | 25.7 | % |
Six Months Ended June 30,
|
Dollar
|
|||||||||||||||
2012
|
2011
|
Change
|
% Change
|
|||||||||||||
$ | 22,595 | $ | 19,959 | $ | 2,636 | 13.2 | % | |||||||||
As a % of net sales
|
27.3 | % | 27.0 | % |
Three Months Ended June 30,
|
Dollar
|
|||||||||||||||
2012
|
2011
|
Change
|
% Change
|
|||||||||||||
Interest expense
|
$ | 165 | $ | 260 | $ | (95 | ) | (36.5 | )% | |||||||
Six Months Ended June 30,
|
Dollar
|
|||||||||||||||
2012 | 2011 |
Change
|
% Change
|
|||||||||||||
Interest expense
|
$ | 331 | $ | 542 | $ | (211 | ) | (38.9 | )% |
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Average debt outstanding
|
$ | 13,524 | $ | 23,709 | $ | 13,612 | $ | 25,458 | ||||||||
Average interest rate
|
2.02 | % | 2.69 | % | 2.02 | % | 2.71 | % |
Six Months Ended
June 30,
|
||||||||
2012
|
2011
|
|||||||
Cash flows provided by operating activities
|
$ | 9,056 | $ | 3,623 | ||||
Cash flows provided by (used in) investing activities
|
(4,123 | ) | 11,430 | |||||
Cash flows used in financing activities
|
(293 | ) | (8,743 | ) | ||||
Increase in cash
|
$ | 4,640 | $ | 6,310 |
|
·
|
federal NOLs of $1.2 million, or $423,000 tax-effected; and
|
|
·
|
state NOLs of $94,000 tax-effected.
|
CRAFT BREW ALLIANCE, INC.
|
||
August 9, 2012
|
BY: /s/ Joseph K. O’Brien
|
|
Joseph K. O’Brien
|
||
Controller and Chief Accounting Officer
|
Very truly yours,
|
|
/s/
Don Johnson
|
|
E. Donald Johnson, Jr.
|
|
Vice President, Business and Wholesaler Development
|
|
/s/
Jody K. Valentine
|
|
Jody K. Valentine
|
|
Director, Business Development
|
/s/
Terry E. Michaelson
|
|
Terry Michaelson
|
|
President and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10−Q of Craft Brew Alliance, Inc. (the “Registrant”);
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
|
4.
|
The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a−15(e) and 15d−15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a−15(f) and 15d−15(f)) for the Registrant and we have:
|
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c.
|
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d.
|
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
|
5.
|
The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
|
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
|
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
|
Date: August 9, 2012
|
||
|
|
|
By:
|
/s/ Terry E. Michaelson
|
|
|
Terry E. Michaelson
|
|
|
Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10−Q of Craft Brew Alliance, Inc. (the “Registrant”);
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
|
4.
|
The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a−15(e) and 15d−15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a−15(f) and 15d−15(f)) for the Registrant and we have:
|
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c.
|
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d.
|
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
|
5.
|
The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
|
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
|
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
|
Date: August 9, 2012
|
||
|
|
|
By:
|
/s/ Mark D. Moreland
|
|
|
Mark D. Moreland
|
|
|
Chief Financial Officer and Treasurer
|
|
1.
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
|
Date: August 9, 2012
|
||
BY:
|
/s/ Terry E. Michaelson
|
|
|
Terry E. Michaelson
|
|
|
Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
|
|
|
|
By:
|
/s/ Mark D. Moreland
|
|
|
Mark D. Moreland
|
|
|
Chief Financial Officer and Treasurer
|
|
(Principal Financial Officer)
|
|
·
|
Net sales increased $9.0 million, or 12%, to $82.8 million versus last year
|
|
·
|
Total beer shipments increased 6%, while depletions grew 5% for the period
|
|
·
|
Gross profit percentage of 30.3% exceeds prior full year guidance
|
|
·
|
Cash provided by operations increased to $9.1 million for the period compared to $3.6 million last year
|
|
·
|
Capital expenditures were $4.6 million as we continue to make strategic investments in systems and infrastructure
|
|
·
|
Revised full year guidance calls for depletion growth of 8% to 10% and revenue growth of 13% to 15% with no change to previously issued guidance of $0.20 to $0.25 fully diluted earnings per share (“EPS”)
|
|
·
|
Depletion growth estimate of 8% to 10%, reflecting both continued strength of our brands and continued growth of the craft category. We had previously guided from high single to low double digit growth.
|
|
·
|
Sales growth of approximately 13% to 15%. Previous guidance was 10% to 12%.
|
|
·
|
Gross margin rate of flat to a 50 basis point improvement versus last year, reflecting brewery productivity and positive product mix, partially offset by pressure from grain prices and distribution costs. Previous guidance was negative 100 basis points.
|
|
·
|
Selling, general and administrative (“SG&A”) expense ranging from $43 million to $45 million, reflecting continued investment in sales and marketing initiatives. Previous guidance was $42 million to $44 million.
|
|
·
|
Diluted EPS in the range of $0.20 to $0.25.
|
|
·
|
Capital expenditures of approximately $8.5 million to $9.5 million, continuing our investments in capacity and efficiency improvements, and quality initiatives.
|
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
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Sales
|
$ | 47,558 | $ | 44,849 | $ | 89,170 | $ | 79,809 | ||||||||
Less excise taxes
|
3,294 | 3,353 | 6,407 | 6,016 | ||||||||||||
Net sales
|
44,264 | 41,496 | 82,763 | 73,793 | ||||||||||||
Cost of sales
|
30,926 | 28,038 | 57,718 | 51,107 | ||||||||||||
Gross profit
|
13,338 | 13,458 | 25,045 | 22,686 | ||||||||||||
as percentage of net sales
|
30.1 | % | 32.4 | % | 30.3 | % | 30.7 | % | ||||||||
Selling, general and administrative expenses
|
12,222 | 10,670 | 22,595 | 19,959 | ||||||||||||
Operating income
|
1,116 | 2,788 | 2,450 | 2,727 | ||||||||||||
Interest expense
|
(165 | ) | (260 | ) | (331 | ) | (542 | ) | ||||||||
Gain on sale of equity interest in Fulton Street Brewery, LLC
|
— | 10,398 | — | 10,398 | ||||||||||||
Income from equity investments, interest and other, net
|
(11 | ) | 342 | (6 | ) | 711 | ||||||||||
Income before income taxes
|
940 | 13,268 | 2,113 | 13,294 | ||||||||||||
Income tax provision
|
381 | 5,108 | 856 | 5,118 | ||||||||||||
Net income
|
$ | 559 | $ | 8,160 | $ | 1,257 | $ | 8,176 | ||||||||
Earnings per share:
|
||||||||||||||||
Basic and diluted earnings per share
|
$ | 0.03 | $ | 0.43 | $ | 0.07 | $ | 0.43 | ||||||||
Weighted average shares outstanding:
|
||||||||||||||||
Basic
|
18,857 | 18,829 | 18,851 | 18,824 | ||||||||||||
Diluted
|
18,931 | 18,945 | 18,921 | 18,936 | ||||||||||||
Total shipments (in barrels):
|
||||||||||||||||
Core Brands
|
176,000 | 177,100 | 329,300 | 316,700 | ||||||||||||
Contract Brewing
|
14,500 | 14,000 | 31,100 | 22,300 | ||||||||||||
Total shipments
|
190,500 | 191,100 | 360,400 | 339,000 | ||||||||||||
Depletion growth rate (over the same period from the prior year)
|
3 | % | 6 | % | 5 | % | 7 | % |
June 30,
|
||||||||
2012
|
2011
|
|||||||
Current assets:
|
|
|
||||||
Cash
|
$ | 5,435 | $ | 6,474 | ||||
Accounts receivable, net
|
11,294 | 13,078 | ||||||
Inventories
|
11,285 | 9,855 | ||||||
Deferred income tax asset, net
|
1,266 | 596 | ||||||
Other current assets and income tax receivables
|
3,236 | 3,305 | ||||||
Total current assets
|
32,516 | 33,308 | ||||||
Property, equipment and leasehold improvements, net
|
102,218 | 98,540 | ||||||
Goodwill
|
12,917 | 12,917 | ||||||
Intangible and other non-current assets, net
|
17,700 | 18,233 | ||||||
Total assets
|
$ | 165,351 | $ | 162,998 | ||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 14,214 | $ | 14,762 | ||||
Accrued salaries, wages and payroll taxes
|
4,879 | 4,080 | ||||||
Refundable deposits
|
8,415 | 6,486 | ||||||
Other accrued expenses
|
990 | 1,479 | ||||||
Current portion of long-term debt and capital lease obligations
|
616 | 2,116 | ||||||
Total current liabilities
|
29,114 | 28,923 | ||||||
Long-term debt and capital lease obligations, net
|
12,820 | 16,213 | ||||||
Other long-term liabilities
|
17,254 | 15,180 | ||||||
Total common shareholders' equity
|
106,163 | 102,682 | ||||||
Total liabilities and common shareholders' equity
|
$ | 165,351 | $ | 162,998 |
Six Months Ended
June 30,
|
||||||||
2012
|
2011
|
|||||||
Cash Flows From Operating Activities:
|
||||||||
Net income
|
$ | 1,257 | $ | 8,176 | ||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
3,761 | 3,651 | ||||||
Income from equity investments
|
— | (691 | ) | |||||
Gain on sale of equity interest in Fulton Street Brewery, LLC
|
— | (10,398 | ) | |||||
Deferred income taxes
|
701 | 4,166 | ||||||
Other, including stock-based compensation
|
76 | 200 | ||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
1,614 | (1,727 | ) | |||||
Inventories
|
(1,454 | ) | (1,332 | ) | ||||
Other current assets
|
(420 | ) | (72 | ) | ||||
Accounts payable and other accrued expenses
|
2,753 | 1,017 | ||||||
Accrued salaries, wages and payroll taxes
|
355 | 27 | ||||||
Refundable deposits
|
413 | 606 | ||||||
Net cash provided by operating activities
|
9,056 | 3,623 | ||||||
Cash Flows from Investing Activities:
|
||||||||
Expenditures for property, equipment and leasehold improvements
|
(4,578 | ) | (3,694 | ) | ||||
Proceeds from sale of property, equipment and leasehold improvements and other
|
37 | 49 | ||||||
Proceeds from the sale of equity interest in Fulton Street Brewery, LLC
|
418 | 15,075 | ||||||
Net cash provided by (used in) investing activities
|
(4,123 | ) | 11,430 | |||||
Cash Flows from Financing Activities:
|
||||||||
Principal payments on debt and capital lease obligations
|
(296 | ) | (1,256 | ) | ||||
Net borrowings under revolving line of credit
|
— | (7,500 | ) | |||||
Issuance of common stock
|
3 | 13 | ||||||
Net cash used in financing activities
|
(293 | ) | (8,743 | ) | ||||
Increase in cash
|
4,640 | 6,310 | ||||||
Cash, beginning of period
|
795 | 164 | ||||||
Cash, end of period
|
$ | 5,435 | $ | 6,474 |
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Net income
|
$ | 559 | $ | 8,160 | $ | 1,257 | $ | 8,176 | ||||||||
Interest expense
|
165 | 260 | 331 | 542 | ||||||||||||
Income tax provision
|
381 | 5,108 | 856 | 5,118 | ||||||||||||
Depreciation expense
|
1,852 | 1,742 | 3,633 | 3,471 | ||||||||||||
Amortization expense
|
64 | 90 | 128 | 180 | ||||||||||||
Gain on sale of equity interest in Fulton Street Brewery, LLC
|
- | (10,398 | ) | - | (10,398 | ) | ||||||||||
Stock-based compensation
|
177 | 210 | 311 | 249 | ||||||||||||
Adjusted EBITDA
|
$ | 3,198 | $ | 5,172 | $ | 6,516 | $ | 7,338 |