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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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
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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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13
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Item 1B.
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17
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Item 2.
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17
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Item 3.
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18
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Item 4.
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18
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PART II
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||
Item 5.
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18
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Item 6.
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20
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Item 7.
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21
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Item 7A.
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34
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Item 8.
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34
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Item 9.
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61
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Item 9A.
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61
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Item 9B.
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63
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PART III
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Item 10.
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63
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Item 11.
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63
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Item 12.
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63
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Item 13.
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64
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Item 14.
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64
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PART IV
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Item 15.
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64
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65
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Item 1.
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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 Brewing founded by brothers Kurt and Rob Widmer in 1984 in Portland, Oregon;
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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; and
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·
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Omission Beer internally developed by our brewing team in 2012 in Portland, Oregon.
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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.
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|
·
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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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·
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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. We prefer to own and operate our breweries to optimize the quality and consistency of our products and to achieve greater control over our production costs. 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. Each of our breweries is modern, has flexible production capabilities, and is designed to produce beer in smaller batches relative to the national domestic brewers, thereby allowing us to brew a wide variety of brand offerings. Our New Hampshire Brewery has room for bolt-on capacity additions, while our Oregon Brewery was expanded with additional fermentation tanks in the summer of 2012. We believe that our investment in brewing and logistic technologies enables us to minimize brewery operating costs and consistently produce innovative beer styles.
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·
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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 1.5 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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Oregon Brewery
. Our Oregon Brewery is our largest capacity production brewery, consisting of a 230 barrel brewing system with an annual capacity of 630,000 barrels.
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·
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Washington Brewery
. Our Washington Brewery utilizes a 100 barrel brewing system and has an annual capacity of 220,000 barrels.
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·
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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.
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·
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Hawaiian Brewery
. Our Hawaiian Brewery 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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·
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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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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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·
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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, or by our 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.
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Item 1A.
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Risk
Factors
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Item 1B.
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Unresolved
Staf
f Comments
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Item 2.
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Prope
rti
es
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Production Breweries
|
Square
Footage
|
Current Annual
Capacity
|
Maximum
Annual Capacity
|
|||||||||
Oregon Brewery
|
185,000 | 630 | 650 | |||||||||
Washington Brewery
|
128,000 | 220 | 280 | |||||||||
New Hampshire Brewery
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125,000 | 215 | 280 | |||||||||
Hawaiian Brewery
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11,000 | 10 | 10 | |||||||||
1,075 | 1,220 |
Item 3.
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Legal Pr
oceeding
s
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Item 4.
|
Mine Safety D
isclosu
res
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Item 5.
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Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
|
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 | ||||||
2012
|
High
|
Low
|
||||||
Quarter 1
|
$ | 7.98 | $ | 5.84 | ||||
Quarter 2
|
8.47 | 7.03 | ||||||
Quarter 3
|
8.92 | 7.50 | ||||||
Quarter 4
|
8.00 | 5.62 |
Base
|
Indexed Returns
|
|||||||||||||||||||||||
Period
|
Year Ended
|
|||||||||||||||||||||||
Company/Index
|
12/31/07
|
12/31/08
|
12/31/09
|
12/31/10
|
12/31/11
|
12/31/12
|
||||||||||||||||||
Craft Brew Alliance, Inc.
|
$ | 100.00 | $ | 18.05 | $ | 36.09 | $ | 111.13 | $ | 90.53 | $ | 97.44 | ||||||||||||
NASDAQ Composite
|
100.00 | 59.46 | 85.55 | 100.02 | 98.22 | 113.85 | ||||||||||||||||||
S&P 500 Beverages Index
|
100.00 | 79.98 | 96.16 | 110.25 | 115.26 | 121.19 |
Item 6.
|
Selected Financial
Data
|
In thousands,
except per share amounts
|
Year Ended December 31,
|
|||||||||||||||||||
Statement of Operations Data
|
2012
|
2011
|
2010
|
2009
|
2008
|
|||||||||||||||
Net sales
(1)
|
$ | 169,287 | $ | 149,197 | $ | 131,731 | $ | 124,713 | $ | 79,761 | ||||||||||
Cost of sales
|
119,261 | 104,011 | 98,064 | 97,230 | 65,646 | |||||||||||||||
Gross profit
|
$ | 50,026 | $ | 45,186 | $ | 33,667 | $ | 27,483 | $ | 14,115 | ||||||||||
Selling, general and administrative expenses
|
$ | 44,890 | $ | 39,742 | $ | 29,938 | $ | 24,911 | $ | 19,894 | ||||||||||
Loss on impairment of assets
(2)
|
$ | - | $ | - | $ | - | $ | - | $ | 30,589 | ||||||||||
Operating income (loss)
|
$ | 5,136 | $ | 5,444 | $ | 3,170 | $ | 2,347 | $ | (36,761 | ) | |||||||||
Gain on sale of equity interest in Fulton Street Brewery, LLC
|
$ | - | $ | 10,432 | $ | - | $ | - | $ | - | ||||||||||
Income before provision (benefit) for income taxes
|
$ | 4,477 | $ | 15,692 | $ | 2,786 | $ | 1,073 | $ | (37,655 | ) | |||||||||
Provision (benefit) for income taxes
|
1,951 | 6,041 | 1,100 | 186 | (4,377 | ) | ||||||||||||||
Net income (loss)
|
$ | 2,526 | $ | 9,651 | $ | 1,686 | $ | 887 | $ | (33,278 | ) | |||||||||
Basic and diluted net income (loss) per share
|
$ | 0.13 | $ | 0.51 | $ | 0.10 | $ | 0.05 | $ | (2.63 | ) | |||||||||
Shares used in basic per share calculations
|
18,862 | 18,834 | 17,523 | 17,004 | 12,660 | |||||||||||||||
Shares used in diluted per share calculations
|
18,934 | 18,931 | 17,568 | 17,041 | 12,660 |
December 31,
|
||||||||||||||||||||
2012
|
2011
|
2010
|
2009
|
2008
|
||||||||||||||||
Balance Sheet Data
|
||||||||||||||||||||
Cash and cash equivalents
|
$ | 5,013 | $ | 795 | $ | 164 | $ | 11 | $ | 11 | ||||||||||
Working capital (deficit)
|
5,207 | 2,327 | (4,435 | ) | (2,527 | ) | (927 | ) | ||||||||||||
Total assets
|
165,664 | 158,908 | 158,266 | 141,585 | 147,805 | |||||||||||||||
Current portion of long-term debt and capital leases
|
642 | 596 | 2,460 | 1,481 | 1,394 | |||||||||||||||
Long-term debt and capital leases, net of current portion
|
12,440 | 13,188 | 24,675 | 24,685 | 31,834 | |||||||||||||||
Other long-term obligations
|
17,903 | 16,261 | 11,388 | 8,210 | 8,082 | |||||||||||||||
Shareholders’ equity
|
108,195 | 104,509 | 94,196 | 80,632 | 79,281 |
(1)
|
The increase in net sales in 2009 compared to 2008 was primarily due to the merger with Widmer Brothers Brewing Company, which occurred July 1, 2008.
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(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 Brewing founded by brothers Kurt and Rob Widmer in 1984 in Portland, Oregon;
|
|
·
|
Kona Brewing Co. founded by father and son team Cameron Healy and Spoon Khalsa in 1994 in Kona, Hawaii; and
|
|
·
|
Omission Beer internally developed by our brewing team in 2012 in Portland, Oregon.
|
Net Sales
|
Net Income
|
Number of
Barrels Sold
|
|||||
2012
|
$169.3 million
|
$2.5 million
|
724,900 | ||||
2011
|
$149.2 million
|
$9.7 million
|
672,600 | ||||
2010
|
$131.7 million
|
$1.7 million
|
607,800 |
Year Ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
Sales
|
107.5 | % | 107.9 | % | 106.9 | % | ||||||
Less excise tax
|
7.5 | 7.9 | 6.9 | |||||||||
Net sales
|
100.0 | 100.0 | 100.0 | |||||||||
Cost of sales
|
70.4 | 69.7 | 74.4 | |||||||||
Gross profit
|
29.6 | 30.3 | 25.6 | |||||||||
Selling, general and administrative expenses
|
26.5 | 26.6 | 22.7 | |||||||||
Merger related expenses
|
- | - | 0.4 | |||||||||
Operating income
|
3.0 | 3.6 | 2.4 | |||||||||
Income from equity method investments
|
- | 0.5 | 0.6 | |||||||||
Gain on sale of FSB
|
- | 7.0 | - | |||||||||
Interest expense
|
(0.4 | ) | (0.6 | ) | (1.1 | ) | ||||||
Interest and other income, net
|
- | - | 0.2 | |||||||||
Income before income taxes
|
2.6 | 10.5 | 2.1 | |||||||||
Income tax provision
|
1.2 | 4.0 | 0.8 | |||||||||
Net income
|
1.5 | % | 6.5 | % | 1.3 | % |
Year Ended December 31,
|
||||||||||||
2012
|
Beer Related
|
Pubs
and Other
|
Total
|
|||||||||
Net sales
|
$ | 145,670 | $ | 23,617 | $ | 169,287 | ||||||
Gross profit
|
$ | 46,341 | $ | 3,685 | $ | 50,026 | ||||||
Gross margin
|
31.8 | % | 15.6 | % | 29.6 | % |
2011
|
||||||||||||
Net sales
|
$ | 127,376 | $ | 21,821 | $ | 149,197 | ||||||
Gross profit
|
$ | 41,626 | $ | 3,560 | $ | 45,186 | ||||||
Gross margin
|
32.7 | % | 16.3 | % | 30.3 | % |
2010
|
||||||||||||
Net sales
|
$ | 119,389 | $ | 12,342 | $ | 131,731 | ||||||
Gross profit
|
$ | 31,797 | $ | 1,870 | $ | 33,667 | ||||||
Gross margin
|
26.6 | % | 15.2 | % | 25.6 | % |
Year Ended December 31,
|
Dollar
|
|||||||||||||||
Sales by Category
|
2012
|
2011
|
Change
|
% Change
|
||||||||||||
A-B and A-B related
|
$ | 147,628 | $ | 130,137 | $ | 17,491 | 13.4 | % | ||||||||
Contract brewing and beer related
(1)
|
10,773 | 9,042 | 1,731 | 19.1 | % | |||||||||||
Excise taxes
|
(12,731 | ) | (11,803 | ) | (928 | ) | 7.9 | % | ||||||||
Net beer related sales
|
145,670 | 127,376 | 18,294 | 14.4 | % | |||||||||||
Pubs
(2)
|
23,617 | 21,821 | 1,796 | 8.2 | % | |||||||||||
Net sales
|
$ | 169,287 | $ | 149,197 | $ | 20,090 | 13.5 | % |
Year Ended December 31,
|
Dollar
|
|||||||||||||||
Sales by Category
|
2011
|
2010
|
Change
|
% Change
|
||||||||||||
A-B and A-B related
|
$ | 130,137 | $ | 114,231 | $ | 15,906 | 13.9 | % | ||||||||
Contract brewing and beer related
(1)
|
9,042 | 4,433 | 4,609 | 104.0 | % | |||||||||||
Excise taxes
|
(11,803 | ) | (9,121 | ) | (2,682 | ) | 29.4 | % | ||||||||
Net beer related sales
|
127,376 | 109,543 | 17,833 | 16.3 | % | |||||||||||
Pubs
(2)
|
21,821 | 12,342 | 9,479 | 76.8 | % | |||||||||||
Alternating proprietorship
|
- | 9,846 | (9,846 | ) | (100.0 | )% | ||||||||||
Net sales
|
$ | 149,197 | $ | 131,731 | $ | 17,466 | 13.3 | % |
|
(1)
|
Beer related includes international beer sales.
|
|
(2)
|
Pubs sales include sales of promotional merchandise and sales of beer directly to customers.
|
Year Ended
December 31,
|
2012 Shipments
|
2011 Shipments
|
Increase
|
%
Change
|
Change in
Depletions
(1)
|
|||||||||||||||
A-B and A-B related
|
660,000 | 611,200 | 48,800 | 8.0 | % | 6 | % | |||||||||||||
Contract brewing and beer related
(2)
|
52,700 | 51,300 | 1,400 | 2.7 | % | |||||||||||||||
Pubs
|
12,200 | 10,100 | 2,100 | 20.8 | % | |||||||||||||||
Total
|
724,900 | 672,600 | 52,300 | 7.8 | % |
Year Ended
December 31,
|
2011 Shipments
|
2010 Shipments
|
Increase
|
%
Change
|
Change in
Depletions
(1)
|
|||||||||||||||
A-B and A-B related
|
611,200 | 574,900 | 36,300 | 6.3 | % | 6 | % | |||||||||||||
Contract brewing and beer related
(2)
|
51,300 | 23,200 | 28,100 | 121.1 | % | |||||||||||||||
Pubs
|
10,100 | 9,700 | 400 | 4.1 | % | |||||||||||||||
Total
|
672,600 | 607,800 | 64,800 | 10.7 | % |
(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.
|
Year Ended December 31, | ||||||||||
2012
|
2011
|
2010
|
||||||||
$ | 3,083 | $ | 2,863 | $ | 28 |
Year Ended December 31,
|
2012
Shipments
|
2011
Shipments
|
Increase
(Decrease)
|
%
Change
|
Change in
Depletions
|
|||||||||||||||
Widmer Brothers
|
264,300 | 271,200 | (6,900 | ) | (2.5 | )% | (5 | )% | ||||||||||||
Kona
|
220,000 | 172,800 | 47,200 | 27.3 | % | 23 | % | |||||||||||||
Redhook
|
191,000 | 179,300 | 11,700 | 6.5 | % | 6 | % | |||||||||||||
Total
(1)
|
675,300 | 623,300 | 52,000 | 8.3 | % | 6 | % |
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 | )% | ||||||||||||
Kona
|
172,800 | 133,400 | 39,400 | 29.5 | % | 29 | % | |||||||||||||
Redhook
|
179,300 | 174,100 | 5,200 | 3.0 | % | 3 | % | |||||||||||||
Total
(1)
|
623,300 | 584,700 | 38,600 | 6.6 | % | 6 | % |
|
(1)
|
Total shipments by brand include international shipments and exclude shipments produced under our contract brewing arrangements.
|
Year Ended
|
2012
|
2011
|
2010
|
|||||||||||||||||||||
December 31,
|
Shipments
|
% of Total
|
Shipments
|
% of Total
|
Shipments
|
% of Total
|
||||||||||||||||||
Draft
|
214,800 | 31.8 | % | 219,400 | 35.2 | % | 227,100 | 38.8 | % | |||||||||||||||
Bottle
|
460,500 | 68.2 | % | 403,900 | 64.8 | % | 357,600 | 61.2 | % | |||||||||||||||
Total
|
675,300 | 100.0 | % | 623,300 | 100.0 | % | 584,700 | 100.0 | % |
Year Ended December 31,
|
Dollar
|
|||||||||||||||
2012
|
2011
|
Change
|
% Change
|
|||||||||||||
Beer Related
|
$ | 99,329 | $ | 85,750 | $ | 13,579 | 15.8 | % | ||||||||
Pubs
|
19,932 | 18,261 | 1,671 | 9.2 | % | |||||||||||
Total
|
$ | 119,261 | $ | 104,011 | $ | 15,250 | 14.7 | % |
Year Ended December 31,
|
Dollar
|
|||||||||||||||
2011
|
2010
|
Change
|
% Change
|
|||||||||||||
Beer Related
|
$ | 85,750 | $ | 87,592 | $ | (1,842 | ) | (2.1 | )% | |||||||
Pubs
|
18,261 | 10,472 | 7,789 | 74.4 | % | |||||||||||
Total
|
$ | 104,011 | $ | 98,064 | $ | 5,947 | 6.1 | % |
Year Ended December 31,
|
Dollar
|
|||||||||||||||
2012
|
2011
|
Change
|
% Change
|
|||||||||||||
Beer Related
|
$ | 46,341 | $ | 41,626 | $ | 4,715 | 11.3 | % | ||||||||
Pubs
|
3,685 | 3,560 | 125 | 3.5 | % | |||||||||||
Total
|
$ | 50,026 | $ | 45,186 | $ | 4,840 | 10.7 | % |
Year Ended December 31,
|
Dollar
|
|||||||||||||||
2011
|
2010
|
Change
|
% Change
|
|||||||||||||
Beer Related
|
$ | 41,626 | $ | 31,797 | $ | 9,829 | 30.9 | % | ||||||||
Pubs
|
3,560 | 1,870 | 1,690 | 90.4 | % | |||||||||||
Total
|
$ | 45,186 | $ | 33,667 | $ | 11,519 | 34.2 | % |
Year Ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
Beer Related
|
31.8 | % | 32.7 | % | 26.6 | % | ||||||
Pubs
|
15.6 | % | 16.3 | % | 15.2 | % | ||||||
Total
|
29.6 | % | 30.3 | % | 25.6 | % |
Year Ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
Capacity utilization
|
73 | % | 75 | % | 66 | % |
Year Ended December 31,
|
Dollar
|
|||||||||||||||
2012
|
2011
|
Change
|
% Change
|
|||||||||||||
$ | 44,890 | $ | 39,742 | $ | 5,148 | 13.0 | % | |||||||||
As a % of Net sales
|
26.5 | % | 26.6 | % |
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 | % |
Year Ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
FSB
|
$ | - | $ | 691 | $ | 696 | ||||||
Kona
|
- | - | 146 | |||||||||
Total
|
$ | - | $ | 691 | $ | 842 |
Year Ended December 31,
|
Dollar
|
|||||||||||||||
2012
|
2011
|
Change
|
% Change
|
|||||||||||||
Interest expense
|
$ | 663 | $ | 918 | $ | (255 | ) | (27.8 | )% | |||||||
2011 | 2010 | |||||||||||||||
Interest expense
|
$ | 918 | $ | 1,497 | $ | (579 | ) | (38.7 | )% |
Year Ended December 31,
|
|||||||||||||
2012
|
2011
|
2010
|
|||||||||||
Average debt outstanding
|
$ | 13,436 | $ | 20,163 | $ | 24,236 | |||||||
Average interest rate
|
2.74 | % | 3.43 | % | 3.34 | % |
Year Ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
Cash flows provided by operating activities
|
$ | 13,105 | $ | 6,728 | $ | 10,798 | ||||||
Cash flows provided by (used in) investing activities
|
(8,683 | ) | 7,131 | (10,313 | ) | |||||||
Cash flows used in financing activities
|
(204 | ) | (13,228 | ) | (332 | ) | ||||||
Increase in cash
|
$ | 4,218 | $ | 631 | $ | 153 |
Payments Due By Period
|
||||||||||||||||||||
Contractual Obligation
|
Total
|
2013
|
2014 and
2015
|
2016 and
2017
|
2018 and
beyond
|
|||||||||||||||
Term loan
|
$ | 11,822 | $ | 456 | $ | 1,002 | $ | 1,137 | $ | 9,227 | ||||||||||
Interest on term loan
(1)
|
718 | 143 | 268 | 242 | 65 | |||||||||||||||
Promissory notes
|
600 | - | 600 | - | - | |||||||||||||||
Interest on promissory notes
|
348 | 144 | 204 | - | ||||||||||||||||
Note with related party
|
346 | 181 | 165 | - | - | |||||||||||||||
Interest on note with related party
|
16 | 12 | 4 | - | - | |||||||||||||||
Operating leases
|
16,741 | 1,303 | 1,989 | 1,625 | 11,824 | |||||||||||||||
Capital leases
|
17 | 6 | 10 | 1 | - | |||||||||||||||
Purchase commitments
|
20,758 | 16,331 | 3,810 | 617 | - | |||||||||||||||
Sponsorship obligations
|
3,989 | 2,241 | 1,579 | 169 | - | |||||||||||||||
Interest rate swap
(2)
|
190 | 190 | - | - | - | |||||||||||||||
$ | 55,545 | $ | 21,007 | $ | 9,631 | $ | 3,791 | $ | 21,116 |
(1)
|
The variable interest rate on our term loan was 1.21% at December 31, 2012.
|
(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, 2012, was 0.21%.
|
Item 7A.
|
Quantitative and Qualitative Disclosures about
Ma
rket Risk
|
Item 8.
|
Financial Statements and Su
pplem
entary Data
|
2012
(In thousands, except per share data)
|
1st Quarter
|
2nd Quarter
|
3rd Quarter
|
4th Quarter
|
||||||||||||
Net sales
|
$ | 38,499 | $ | 44,264 | $ | 44,588 | $ | 41,936 | ||||||||
Cost of sales
|
26,792 | 30,926 | 30,964 | 30,579 | ||||||||||||
Gross profit
|
11,707 | 13,338 | 13,624 | 11,357 | ||||||||||||
Selling, general and administrative expenses
|
10,373 | 12,222 | 11,907 | 10,388 | ||||||||||||
Operating income
|
1,334 | 1,116 | 1,717 | 969 | ||||||||||||
Other expense, net
|
(161 | ) | (176 | ) | (155 | ) | (167 | ) | ||||||||
Income before income taxes
|
1,173 | 940 | 1,562 | 802 | ||||||||||||
Income tax provision
|
475 | 381 | 614 | 481 | ||||||||||||
Net income
|
$ | 698 | $ | 559 | $ | 948 | $ | 321 | ||||||||
Basic and diluted net income per share
|
$ | 0.04 | $ | 0.03 | $ | 0.05 | $ | 0.01 | ||||||||
Shares used in basic per share calculation
|
18,845 | 18,857 | 18,872 | 18,874 | ||||||||||||
Shares used in diluted per share calculation
|
18,911 | 18,931 | 18,954 | 18,940 |
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 |
/s/ Moss Adams LLP
|
Seattle, Washington
|
March 12, 2013
|
December 31,
|
||||||||
2012
|
2011
|
|||||||
Assets
|
||||||||
Current assets:
|
||||||||
Cash
|
$ | 5,013 | $ | 795 | ||||
Accounts receivable, net
|
10,512 | 13,326 | ||||||
Inventories
|
11,749 | 9,446 | ||||||
Deferred income tax asset, net
|
1,250 | 894 | ||||||
Other current assets
|
3,809 | 2,816 | ||||||
Total current assets
|
32,333 | 27,277 | ||||||
Property, equipment and leasehold improvements, net
|
102,852 | 100,725 | ||||||
Goodwill
|
12,917 | 12,917 | ||||||
Intangible and other assets, net
|
17,562 | 17,989 | ||||||
Total assets
|
$ | 165,664 | $ | 158,908 | ||||
Liabilities and Shareholders' Equity
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 12,255 | $ | 10,994 | ||||
Accrued salaries, wages and payroll taxes
|
5,267 | 4,524 | ||||||
Refundable deposits
|
7,896 | 7,400 | ||||||
Other accrued expenses
|
1,066 | 1,436 | ||||||
Current portion of long-term debt and capital lease obligations
|
642 | 596 | ||||||
Total current liabilities
|
27,126 | 24,950 | ||||||
Long-term debt and capital lease obligations, net of current portion
|
12,440 | 13,188 | ||||||
Fair value of derivative financial instruments
|
219 | 572 | ||||||
Deferred income tax liability, net
|
17,156 | 15,210 | ||||||
Other liabilities
|
528 | 479 | ||||||
Total liabilities
|
57,469 | 54,399 | ||||||
Commitments and contingencies
|
||||||||
Common shareholders' equity:
|
||||||||
Common stock, $0.005 par value. Authorized 50,000,000 shares; issued and outstanding 18,874,256 and 18,844,817
|
94 | 94 | ||||||
Additional paid-in capital
|
136,030 | 135,091 | ||||||
Accumulated other comprehensive loss
|
(135 | ) | (356 | ) | ||||
Accumulated deficit
|
(27,794 | ) | (30,320 | ) | ||||
Total common shareholders' equity
|
108,195 | 104,509 | ||||||
Total liabilities and common shareholders' equity
|
$ | 165,664 | $ | 158,908 |
Year Ended December 31, | ||||||||||||
2012
|
2011
|
2010
|
||||||||||
Sales
|
$ | 182,018 | $ | 161,000 | $ | 140,852 | ||||||
Less excise taxes
|
12,731 | 11,803 | 9,121 | |||||||||
Net sales
|
169,287 | 149,197 | 131,731 | |||||||||
Cost of sales
|
119,261 | 104,011 | 98,064 | |||||||||
Gross profit
|
50,026 | 45,186 | 33,667 | |||||||||
Selling, general and administrative expenses
|
44,890 | 39,742 | 29,938 | |||||||||
Merger related expenses
|
- | - | 559 | |||||||||
Operating income
|
5,136 | 5,444 | 3,170 | |||||||||
Income from equity method investments
|
- | 691 | 842 | |||||||||
Gain on sale of equity interest in Fulton Street Brewery, LLC
|
- | 10,432 | - | |||||||||
Interest expense
|
(663 | ) | (918 | ) | (1,497 | ) | ||||||
Interest and other income, net
|
4 | 43 | 271 | |||||||||
Income before income taxes
|
4,477 | 15,692 | 2,786 | |||||||||
Income tax provision
|
1,951 | 6,041 | 1,100 | |||||||||
Net income
|
$ | 2,526 | $ | 9,651 | $ | 1,686 | ||||||
Basic and diluted net income per share
|
$ | 0.13 | $ | 0.51 | $ | 0.10 | ||||||
Shares used in basic per share calculations
|
18,862 | 18,834 | 17,523 | |||||||||
Shares used in diluted per share calculations
|
18,934 | 18,931 | 17,568 |
Year Ended December 31, | ||||||||||||
2012
|
2011
|
2010
|
||||||||||
Net income
|
$ | 2,526 | $ | 9,651 | $ | 1,686 | ||||||
Unrealized gains (losses) on derivative hedge transactions,
net of tax
|
221 | 172 | (50 | ) | ||||||||
Comprehensive income
|
$ | 2,747 | $ | 9,823 | $ | 1,636 |
Accumulated
|
Total
|
|||||||||||||||||||||||
Additional
|
Other
|
Common
|
||||||||||||||||||||||
Common Stock
|
Paid-In
|
Comprehensive
|
Retained
|
Shareholders'
|
||||||||||||||||||||
Shares
|
Par Value
|
Capital
|
Loss
|
Deficit
|
Equity
|
|||||||||||||||||||
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 | ||||||||||||||||||
Unrealized losses on derivative financial instruments, net of tax benefit of $31
|
- | - | - | (50 | ) | - | (50 | ) | ||||||||||||||||
Net income
|
- | - | - | - | 1,686 | 1,686 | ||||||||||||||||||
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 | ||||||||||||||||||
Unrealized gains on derivative financial instruments, net of tax provision of $105
|
- | - | - | 172 | - | 172 | ||||||||||||||||||
Net income
|
- | - | - | - | 9,651 | 9,651 | ||||||||||||||||||
Balance at December 31, 2011
|
18,845 | 94 | 135,091 | (356 | ) | (30,320 | ) | 104,509 | ||||||||||||||||
Issuance of shares under stock plans
|
6 | - | 13 | - | - | 13 | ||||||||||||||||||
Stock-based compensation
|
23 | - | 547 | - | - | 547 | ||||||||||||||||||
Tax benefit related to stock options
|
- | - | 379 | - | - | 379 | ||||||||||||||||||
Unrealized gains on derivative financial instruments, net of tax provision of $132
|
- | - | - | 221 | - | 221 | ||||||||||||||||||
Net income
|
- | - | - | - | 2,526 | 2,526 | ||||||||||||||||||
Balance at December 31, 2012
|
18,874 | $ | 94 | $ | 136,030 | $ | (135 | ) | $ | (27,794 | ) | $ | 108,195 |
Year Ended December 31, | ||||||||||||
2012
|
2011
|
2010
|
||||||||||
Cash flows from operating activities:
|
||||||||||||
Net income
|
$ | 2,526 | $ | 9,651 | $ | 1,686 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||||||
Depreciation and amortization
|
7,369 | 7,204 | 7,044 | |||||||||
Income from equity method investments, net of distributions received
|
- | (691 | ) | (647 | ) | |||||||
Gain on sale of equity interest in Fulton Street Brewery, LLC
|
- | (10,432 | ) | - | ||||||||
(Gain) loss on sale or disposal of property, equipment and leasehold improvements
|
23 | (1 | ) | 102 | ||||||||
Deferred income taxes
|
1,458 | 5,025 | 1,082 | |||||||||
Stock-based compensation
|
547 | 467 | 99 | |||||||||
Excess tax benefit from employee stock plans
|
(379 | ) | - | - | ||||||||
Other
|
(329 | ) | (135 | ) | (282 | ) | ||||||
Changes in operating assets and liabilities:
|
||||||||||||
Accounts receivable, net
|
2,396 | (1,976 | ) | 2,017 | ||||||||
Inventories
|
(1,855 | ) | (640 | ) | 1,445 | |||||||
Other current assets
|
(994 | ) | 418 | 590 | ||||||||
Other assets
|
- | (495 | ) | 36 | ||||||||
Accounts payable and other accrued expenses
|
1,269 | (2,773 | ) | (1,353 | ) | |||||||
Accrued salaries, wages and payroll taxes
|
743 | 471 | (1,230 | ) | ||||||||
Refundable deposits
|
331 | 635 | 209 | |||||||||
Net cash provided by operating activities
|
13,105 | 6,728 | 10,798 | |||||||||
Cash flows from investing activities:
|
||||||||||||
Expenditures for property, equipment and leasehold improvements
|
(9,138 | ) | (8,488 | ) | (4,669 | ) | ||||||
Proceeds from sale of property, equipment and leasehold improvements
|
37 | 120 | 160 | |||||||||
Cash paid for merger with Kona Brewing Co., Inc. and related entities, net
|
- | - | (6,206 | ) | ||||||||
Proceeds received for federal grant associated with photovoltaic system
|
- | - | 402 | |||||||||
Proceeds from the sale of equity interest in Fulton Street Brewery, LLC
|
418 | 15,527 | - | |||||||||
Other
|
- | (28 | ) | - | ||||||||
Net cash provided by (used in) investing activities
|
(8,683 | ) | 7,131 | (10,313 | ) | |||||||
Cash flows from financing activities:
|
||||||||||||
Principal payments on debt and capital lease obligations
|
(596 | ) | (5,751 | ) | (1,505 | ) | ||||||
Net borrowings (repayments) under revolving line of credit
|
- | (7,500 | ) | 1,100 | ||||||||
Proceeds from issuances of common stock
|
13 | 23 | 127 | |||||||||
Debt issuance costs
|
- | - | (54 | ) | ||||||||
Excess tax benefit from employee stock plans
|
379 | - | - | |||||||||
Net cash used in financing activities
|
(204 | ) | (13,228 | ) | (332 | ) | ||||||
Increase in cash
|
4,218 | 631 | 153 | |||||||||
Cash:
|
||||||||||||
Beginning of period
|
795 | 164 | 11 | |||||||||
End of period
|
$ | 5,013 | $ | 795 | $ | 164 | ||||||
Supplemental disclosure of cash flow information:
|
||||||||||||
Cash paid for interest
|
$ | 774 | $ | 972 | $ | 1,625 | ||||||
Cash paid for income taxes, net
|
416 | 675 | 223 | |||||||||
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
|
Vehicles
|
5 years
|
Leasehold improvements
|
The lesser of useful life or term of the lease
|
Distributor agreements
|
15 years
|
Non-compete agreements
|
5 years
|
December 31
|
||||||||
2012
|
2011
|
|||||||
Raw materials
|
$ | 2,497 | $ | 2,778 | ||||
Work in process
|
3,552 | 2,829 | ||||||
Finished goods
|
3,263 | 2,128 | ||||||
Packaging materials
|
544 | 558 | ||||||
Promotional merchandise
|
1,552 | 967 | ||||||
Pub food, beverages and supplies
|
341 | 186 | ||||||
$ | 11,749 | $ | 9,446 |
December 31
|
||||||||
2012
|
2011
|
|||||||
Deposits paid to keg lessor
|
$ | 1,824 | $ | 1,518 | ||||
Prepaid property taxes
|
200 | 315 | ||||||
Prepaid insurance
|
299 | 192 | ||||||
Income tax receivable
|
296 | - | ||||||
Other
|
1,190 | 791 | ||||||
$ | 3,809 | $ | 2,816 |
December 31
|
||||||||
2012
|
2011
|
|||||||
Brewery equipment
|
$ | 87,664 | $ | 82,481 | ||||
Buildings
|
53,236 | 52,729 | ||||||
Land and improvements
|
7,598 | 7,598 | ||||||
Furniture, fixtures and other equipment
|
7,121 | 6,187 | ||||||
Leasehold improvements
|
6,196 | 5,644 | ||||||
Vehicles
|
135 | 135 | ||||||
Construction in progress
|
4,546 | 3,104 | ||||||
166,496 | 157,878 | |||||||
Less accumulated depreciation and amortization
|
63,644 | 57,153 | ||||||
$ | 102,852 | $ | 100,725 |
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
|
||||
Net sales
|
$ | 128,260 | ||
Net income
|
$ | 2,181 | ||
Basic and diluted earnings per share
|
$ | 0.12 |
December 31,
|
||||||||
2012
|
2011
|
|||||||
Trademarks and domain name
|
$ | 14,429 | $ | 14,429 | ||||
Recipes
|
700 | 700 | ||||||
Distributor agreements
|
2,200 | 2,200 | ||||||
Accumulated amortization
|
(660 | ) | (513 | ) | ||||
1,540 | 1,687 | |||||||
Non-compete agreements
|
440 | 540 | ||||||
Accumulated amortization
|
(198 | ) | (210 | ) | ||||
242 | 330 | |||||||
Favorable contracts
|
31 | 153 | ||||||
Accumulated amortization
|
(30 | ) | (147 | ) | ||||
1 | 6 | |||||||
Other
|
280 | 280 | ||||||
Accumulated amortization
|
(236 | ) | (223 | ) | ||||
44 | 57 | |||||||
16,956 | 17,209 | |||||||
Promotional merchandise
|
606 | 780 | ||||||
$ | 17,562 | $ | 17,989 |
Year Ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
Amortization expense
|
$ | 253 | $ | 292 | $ | 312 |
2013
|
$ | 249 | ||
2014
|
248 | |||
2015
|
223 | |||
2016
|
149 | |||
2017
|
149 | |||
Thereafter
|
809 | |||
$ | 1,827 |
December 31,
|
||||||||
2012
|
2011
|
|||||||
Term loan, due July 1, 2018
|
$ | 11,822 | $ | 12,240 | ||||
Line of credit, due September 30, 2015
|
- | - | ||||||
Promissory notes payable to related parties, all due July 1, 2015
|
600 | 600 | ||||||
Premium on promissory notes
|
298 | 404 | ||||||
Note with affiliated party, due November 15, 2014
|
346 | 519 | ||||||
Capital lease obligations for equipment
|
16 | 21 | ||||||
13,082 | 13,784 | |||||||
Less current portion
|
642 | 596 | ||||||
$ | 12,440 | $ | 13,188 |
Term Loan
|
Promissory
Notes
|
Note with
Related
Party
|
Capital
Lease
Obligations
|
|||||||||||||
2013
|
$ | 456 | $ | - | $ | 181 | $ | 6 | ||||||||
2014
|
486 | - | 165 | 5 | ||||||||||||
2015
|
516 | 600 | - | 5 | ||||||||||||
2016
|
549 | - | - | 1 | ||||||||||||
2017
|
588 | - | - | - | ||||||||||||
Thereafter
|
9,227 | - | - | - | ||||||||||||
11,822 | 600 | 346 | 17 | |||||||||||||
Amount representing interest
|
- | - | - | 1 | ||||||||||||
$ | 11,822 | $ | 600 | $ | 346 | $ | 16 |
Year Ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
Loan Agreement fee
|
$ | 34 | $ | 29 | $ | 29 |
|
·
|
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, 2012
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Derivative financial instrument
|
$ | - | $ | 219 | $ | - | $ | 219 | ||||||||
Fair Value at December 31, 2011
|
||||||||||||||||
Derivative financial instrument
|
$ | - | $ | 572 | $ | - | $ | 572 |
December 31,
|
||||||||
2012
|
2011
|
|||||||
Fixed-rate debt on balance sheet
|
$ | 1,260 | $ | 1,544 | ||||
Fair value of fixed-rate debt
|
$ | 1,275 | $ | 1,615 |
2012
|
Beer
Related
|
Pubs
|
Total
|
|||||||||
Net sales
|
$ | 145,670 | $ | 23,617 | $ | 169,287 | ||||||
Gross profit
|
$ | 46,341 | $ | 3,685 | $ | 50,026 | ||||||
Gross margin
|
31.8 | % | 15.6 | % | 29.6 | % | ||||||
2011
|
||||||||||||
Net sales
|
$ | 127,376 | $ | 21,821 | $ | 149,197 | ||||||
Gross profit
|
$ | 41,626 | $ | 3,560 | $ | 45,186 | ||||||
Gross margin
|
32.7 | % | 16.3 | % | 30.3 | % | ||||||
2010
|
||||||||||||
Net sales
|
$ | 119,389 | $ | 12,342 | $ | 131,731 | ||||||
Gross profit
|
$ | 31,797 | $ | 1,870 | $ | 33,667 | ||||||
Gross margin
|
26.6 | % | 15.2 | % | 25.6 | % |
Year Ended December 31,
|
|||||||
2012
|
2011
|
2010
|
|||||
81.1%
|
80.8% | 81.1% |
December 31
|
||||
2012
|
2011
|
|||
60.6%
|
62.4% |
Year Ended December 31,
|
2012
|
2011
|
2010
|
|||||||||
Weighted average per share fair value of stock options granted
|
$ | 4.84 | $ | 5.99 | $ | 2.68 | ||||||
Intrinsic value of stock options exercised
|
40 | 60 | 252 | |||||||||
Intrinsic value of fully-vested stock awards granted
|
366 | 243 | 61 |
Year Ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
Selling, general and administrative expense
|
$ | 547 | $ | 467 | $ | 99 |
Year Ended December 31,
|
2012
|
2011
|
2010
|
|||||||||
Risk-free interest rate
|
1.46 | % | 2.84 | % | 2.64% - 3.86 | % | ||||||
Dividend yield
|
0.0 | % | 0.0 | % | 0.0 | % | ||||||
Expected life
|
8.15 years
|
7.5 years
|
10 years
|
|||||||||
Volatility
|
60.39 | % | 62.10 | % | 62.54 | % |
Options
Outstanding
|
Weighted
Average
Exercise Price
|
|||||||
Outstanding at December 31, 2011
|
252,240 | $ | 4.30 | |||||
Granted
|
123,525 | 7.62 | ||||||
Exercised
|
(6,500 | ) | 2.02 | |||||
Forfeited
|
(600 | ) | 2.02 | |||||
Outstanding at December 31, 2012
|
368,665 | 5.46 |
Options
Outstanding
|
Options
Exercisable
|
|||||||
Number
|
368,665 | 111,328 | ||||||
Weighted average exercise price
|
$ | 5.46 | $ | 3.49 | ||||
Aggregate intrinsic value
|
$ | 664,000 | $ | 366,000 | ||||
Weighted average remaining contractual term
|
7.8 years
|
6.2 years
|
Year Ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
Weighted average common shares for basic EPS
|
18,862 | 18,834 | 17,523 | |||||||||
Dilutive effect of stock-based awards
|
72 | 97 | 45 | |||||||||
Shares used for diluted EPS
|
18,934 | 18,931 | 17,568 | |||||||||
Stock-based awards not included in diluted per share calculations as they would be antidilutive
|
124 | 7 | 82 |
Year Ended December 31,
|
|||||||||||||
2012
|
2011
|
2010
|
|||||||||||
Current
|
$ | 493 | $ | 1,016 | $ | 18 | |||||||
Deferred
|
1,458 | 5,025 | 1,082 | ||||||||||
$ | 1,951 | $ | 6,041 | $ | 1,100 |
Year Ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
Provision at U.S. statutory rate
|
$ | 1,522 | $ | 5,335 | $ | 947 | ||||||
State taxes, net of federal benefit
|
148 | 567 | 119 | |||||||||
Permanent differences, primarily meals and entertainment
|
232 | 266 | 213 | |||||||||
Merger expenses and true up of merger treatment
|
- | - | 135 | |||||||||
Tax credits
|
(104 | ) | (127 | ) | (214 | ) | ||||||
Increase to deferred tax liability tax rate
|
153 | - | - | |||||||||
Release of valuation allowance
|
- | - | (100 | ) | ||||||||
$ | 1,951 | $ | 6,041 | $ | 1,100 |
December 31,
|
||||||||
2012
|
2011
|
|||||||
Deferred tax assets
|
||||||||
Net operating losses and alternative minimum tax credit carryforwards
|
$ | 711 | $ | 2,059 | ||||
Accrued salaries and severance
|
988 | 975 | ||||||
Other
|
828 | 766 | ||||||
2,527 | 3,800 | |||||||
Deferred tax liabilities
|
||||||||
Property, equipment and leasehold improvements
|
(11,843 | ) | (11,369 | ) | ||||
Intangible assets
|
(6,422 | ) | (6,450 | ) | ||||
Equity investments
|
- | (251 | ) | |||||
Other
|
(168 | ) | (46 | ) | ||||
(18,433 | ) | (18,116 | ) | |||||
$ | (15,906 | ) | $ | (14,316 | ) |
State NOLs, tax effected
|
$ | 73 | |||
Federal and state alternative minimum tax credit carryforwards
|
$ | 609 | |||
Federal insurance contributions act (“FICA”) credit carryforwards, tax effected
|
$ | 29 |
Year Ended December 31,
|
|||||||||||||
2012
|
2011
|
2010
|
|||||||||||
401(k) expense
|
$ | 705 | $ | 687 | $ | 428 |
2013
|
$ | 1,303 | ||
2014
|
1,006 | |||
2015
|
983 | |||
2016
|
866 | |||
2017
|
759 | |||
Thereafter
|
11,824 | |||
$ | 16,741 |
Year Ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
Rent expense
|
$ | 2,665 | $ | 2,759 | $ | 2,356 |
Year Ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
Rental income
|
$ | 254 | $ | 242 | $ | 193 |
2013
|
$ | 261 | ||
2014
|
269 | |||
2015
|
277 | |||
2016
|
23 | |||
2017
|
- | |||
Thereafter
|
- | |||
$ | 830 |
Year Ended December 31, | ||||||||||
2012 |
2011
|
2010
|
||||||||
$ | 125 | $ | 122 | $ | 124 |
Year Ended December 31, | ||||||||||
2012 |
2011
|
2010
|
||||||||
$ | 402 | $ | 360 | $ | 41 |
Purchase
Obligations
|
Sponsorship
Obligations
|
Total
|
||||||||||
2013
|
$ | 16,331 | $ | 2,241 | $ | 18,572 | ||||||
2014
|
2,201 | 1,260 | 3,461 | |||||||||
2015
|
1,609 | 319 | 1,928 | |||||||||
2016
|
584 | 169 | 753 | |||||||||
2017
|
33 | - | 33 | |||||||||
Thereafter
|
- | - | - | |||||||||
$ | 20,758 | $ | 3,989 | $ | 24,747 |
Year Ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
Gross sales to A-B
|
$ | 149,492 | $ | 132,914 | $ | 119,885 | ||||||
Margin fee paid to A-B, classified as a reduction of Sales
|
1,864 | 2,777 | 5,589 | |||||||||
Sales to FSB through a contract brewing arrangement, classified in Sales
(1)
|
3,083 | 2,863 | 28 | |||||||||
Sales to FSB pursuant to termination agreement discussed below
|
838 | - | - | |||||||||
Handling, inventory management, royalty and other fees paid to A-B, classified in Cost of sales
|
449 | 490 | 607 | |||||||||
Amounts received from A-B for lost keg fees and forfeited deposits, included as a reduction of Property, equipment and leasehold improvements, net
|
122 | 267 | 364 |
|
(1)
|
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.
|
December 31
|
||||||||
2012
|
2011
|
|||||||
Amounts due from A-B related to beer sales pursuant to the A-B Distributor Agreement
|
$ | 6,369 | $ | 8,310 | ||||
Amounts due from FSB related to beer sales pursuant to a contract brewing arrangement
|
260 | 585 | ||||||
Amounts due from FSB related to termination agreement
|
630 | - | ||||||
Refundable deposits due to A-B
|
(2,472 | ) | (1,746 | ) | ||||
Amounts due to A-B for services rendered
|
(1,974 | ) | (2,482 | ) | ||||
Net amount due from A-B
|
$ | 2,813 | $ | 4,667 |
Year Ended
December 31,
|
||||
2010
|
||||
Alternating proprietorship fees related to leasing the Oregon Brewery to KBC, recorded as a component of Sales
|
$ | 4,814 | ||
Fees for selling raw materials and packaging products to KBC, recorded as a component of Sales
|
$ | 5,032 | ||
Rent charged to KBC for use of kegs for products distributed in Hawaii, recorded as an offset to Cost of sales
|
$ | 97 |
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 12, 2013
|
Item 9B.
|
Other Info
rmat
ion
|
Item 10.
|
Directors, Executive Officers and Corporate G
overna
nce
|
Item 11.
|
Executive Compen
satio
n
|
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
|
368,665 | $ | 5.46 | 325,157 | ||||||||
Equity compensation plans not approved by shareholders
(2)
|
- | - | - | |||||||||
Total
|
368,665 | $ | 5.46 | 325,157 |
Item 13.
|
Certain Relationships and Related Transactions, and Director Ind
epend
ence
|
Item 14.
|
Principal Accountant Fees and
Services
|
Item 15.
|
Exhibits and Financial Statement SchedulesFinancial Statements and Sch
edu
les
|
Page
|
|
Report of Moss Adams LLP, Independent Registered Public Accounting Firm
|
35
|
Consolidated Balance Sheets as of December 31, 2012 and 2011
|
36
|
Consolidated Statements of Income for the Years Ended December 31, 2012, 2011 and 2010
|
37
|
Consolidated Statements of Comprehensive Income for the Years Ended December 31,
2012, 2011 and 2010
|
38
|
Consolidated Statements of Common Shareholders’ Equity for the Years Ended December 31,
2012, 2011 and 2010
|
39
|
Consolidated Statements of Cash Flows for the Years Ended December 31, 2012, 2011 and 2010
|
40
|
Notes to Consolidated Financial Statements
|
41
|
Craft Brew Alliance, Inc.
|
|||
By:
|
/s/ Joseph K. O’Brien
|
||
Joseph K. O’Brien
|
|||
Controller and Chief Accounting Officer
|
Signature
|
Title
|
||
/s/ T
erry
E. M
ichaelson
|
Chief Executive Officer
|
||
Terry E. Michaelson
|
(Principal Executive Officer)
|
||
/s
/ Mark D. Moreland
|
Chief Financial Officer and Treasurer
|
||
Mark D. Moreland
|
(Principal Financial Officer)
|
||
/s/
Joseph K. O’Brien
|
Controller
|
||
Joseph K. O’Brien
|
(Principal Accounting Officer)
|
||
*
|
|
Chairman of the Board and Director
|
|
Kurt R. Widmer
|
|||
*
|
Director
|
||
Timothy P. Boyle
|
|||
*
|
Director
|
||
Marc J. Cramer
|
|||
*
|
Director
|
||
E. Donald Johnson, Jr.
|
|||
*
|
Director
|
||
Kevin R. Kelly
|
|||
*
|
Director
|
||
Thomas D. Larson
|
|||
*
|
Director
|
||
David R. Lord
|
|||
*
|
Director
|
||
John D. Rogers, Jr.
|
*By:
|
/s
/ Mark D. Moreland
|
|
Mark D. Moreland,
|
||
|
as attorney in fact
|
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)
|
Summary of Compensation Arrangements for Non-Employee Directors
|
|
Summary of Annual Cash Incentive Bonus Plan for Executive Officers
|
|
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
|
Amendment to A-B Master Distributor Agreement dated May 11, 2012 (incorporated by reference from Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on August 9, 2012)
|
10.33
|
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)
|
10.34
|
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”))
|
10.35
|
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)
|
10.36
|
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)
|
10.37
|
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)
|
10.38
|
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)
|
10.39†
|
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)
|
10.40
|
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.
|
|
Certification of Chief Executive Officer of Craft Brew Alliance, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
Certification of Chief Financial Officer of Craft Brew Alliance, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
Certification of Form 10-K for the year ended December 31, 2012 pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
Press Release dated March 12, 2013
|
|
Description of Common Stock
|
|
101.INS**
|
XBRL Instance Document
|
101.SCH**
|
XBRL Taxonomy Extension Schema Document
|
101.CAL**
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF**
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB**
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE**
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
*
|
Denotes a management contract or a compensatory plan or arrangement.
|
**
|
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.
|
†
|
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.
|
|
1.
|
Employee's employment with the Company ends effective February 1, 2013 due to the elimination of Employee's position. The Company will pay Employee all earned and unpaid wages and all unused Paid Time Off accrued through February 1, 2013. The Company will accomplish this payment by mailing to Employee a check for such amounts to the home address he has on record with the Company. Employee recognizes that the payment will be less regular deductions and withholdings.
|
|
2.
|
The Company will pay to Employee severance payments under either paragraph 2.a. or 2.b., at Employee's option:
|
|
a.
|
The Company will pay to Employee severance payments for a period of twelve (12) months following February 1, 2013 (the "Severance Period"), Employee's regular weekly salary, less legally required deductions and withholdings, as severance to which Employee would not otherwise be entitled (the "Severance Payments"). This amount will be paid over the course of the Severance Period on regular paydays. OR
|
|
b.
|
[Intentionally omitted]
|
|
3.
|
In addition to the Severance Payments, the Company will pay Employee an additional amount of $23,459.00, less legally required deductions and withholdings. This amount will be paid as a lump sum within 30 days following the date this Agreement becomes effective. The amount paid to Employee under this Agreement constitutes pay in addition to compensation to which Employee is otherwise entitled in exchange for a release of all claims.
|
|
4.
|
As set forth in Employee's employment agreement, if, during the Severance Period, Employee becomes employed or associated with a brewing or other company that the Company determines, in its reasonable discretion, is a competitor of the Company or Anheuser-Busch, Inc., Employee's Severance Payments under this Agreement will terminate as of the effective date of such employment or association.
|
|
5.
|
The Company will not contest any application by Employee for unemployment benefits.
|
|
6.
|
The Company will pay Employee any 2012 bonus if the Company declares a bonus and Employee would have been eligible if he were employed. Any bonus will be paid pursuant to the terms of the program and at the time paid to other bonus recipients.
|
|
7.
|
The Company will pay Employee's COBRA premiums, if any, for medical and dental benefits at the coverage levels in effect on February 1, 2013 for twelve (12) months, so long as Employee elects continuation coverage. The Company will cease paying such COBRA premiums in the event Employee finds new employment with comparable health coverage.
|
|
8.
|
The Company will pay the cost of outplacement services provided by Lee Hecht Harrison in Portland, OR for the 3-month Quick Start Program. This includes coaching sessions, access to online resources and office space, resume and interview skill development. Details will be provided upon receipt of signed agreement.
|
|
9.
|
The Company agrees to give Employee their mobile phone and will transfer the phone number to a personal account by February 2, 2013.
|
|
10.
|
If the Company receives a reference request from a prospective employer of Employee, the Company will disclose only Employee's dates of employment and the last position held with the Company.
|
|
11.
|
In consideration for the above, Employee completely releases and forever discharges the Company and each of its past, present, and future related entities and each of their respective past, present, and future members, managers, partners, shareholders, officers, directors, agents, employees, attorneys, insurers, successors, and assigns from any and all claims, rights, demands, actions, liabilities, and causes of action of every kind and character, whether known or unknown, matured or unmatured, which Employee may now have or has ever had, arising from or in any way related to Employee's employment with the Company, including without limitation the conditions of employment or the termination thereof, whether based on tort, contract (express or implied), other common law, or any federal, state, or local statute, regulation, ordinance, or other law, including, but not limited to, Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities Act, the Age Discrimination in Employment Act (the "ADEA"), and any similar state or local law, based on any act or omission prior to Employee's execution of this Agreement.
|
|
12.
|
In further consideration for the above, Employee will treat this Agreement as confidential and will not disclose this Agreement or any of its provisions to any person or entity, except as required by law or, to the extent necessary to receive professional services, to Employee's accountant, professional tax preparer, or attorney.
|
|
13.
|
Employee will make no negative or disparaging oral or written remarks or statements of any nature whatsoever about the Company, its officers, directors, or employees, or its products to any person or entity, either publicly or privately, including, without limitation, on any social networking, blog, or similar Internet site.
|
|
14.
|
The Company specifically denies any liability or wrongdoing whatsoever. Neither this Agreement nor any of its provisions, terms, or conditions constitute an admission of liability or wrongdoing or may be offered or received in evidence in any action or proceeding as evidence of an admission of liability or wrongdoing.
|
|
15.
|
Employee acknowledges and reaffirms Employee's continuing obligations under any Confidentiality Agreement that Employee entered into in connection with Employee's employment with the Company, and Employee will strictly comply with the terms of the Confidentiality Agreement.
|
|
16.
|
Except as otherwise provided in this Agreement, including without limitation Paragraph 13, this Agreement constitutes the entire agreement of the parties concerning the subject matter of this Agreement.
|
|
17.
|
The parties acknowledge that the only consideration for this Agreement is the consideration expressly described herein, that each party fully understands the meaning and intent of this Agreement, and that this Agreement has been executed voluntarily.
|
|
18.
|
The benefits payable under this Agreement are intended to be exempt from the requirements of Section 409A of the Internal Revenue Code by reason of being separation pay due to involuntary separation from service under Treasury Regulation Section 1.409A-1(b)(9). All provisions of this Agreement shall be interpreted in a manner consistent with preserving these exemptions.
All payments under this agreement will be made no later than March 15 of the calendar year following the calendar year in which this Agreement becomes effective.
|
|
19.
|
Employee understands that he is releasing and waiving any ADEA claims he may have against the Released Parties, as described in Section 9. Employee acknowledges that the Company is hereby advising him in writing to consult with an attorney before signing this Agreement and that he is being given at least 21 days to consider whether to execute this Agreement. Employee understands that he may sign this Agreement before the expiration of the 21-day period. By executing this Agreement on the date set forth below, Employee has knowingly and voluntarily waived the balance of that period, if any. Employee may revoke this Agreement by written notice, received by Stacia Bird at Craft Brew Alliance, 929 N. Russell Street, Portland, Oregon 97227, within seven days following the date he signs this Agreement. If not revoked under the preceding sentence, this Agreement becomes effective and enforceable on the eighth day following the date Employee signs this Agreement.
|
EMPLOYEE
|
CRAFT BREW ALLIANCE
|
||||
/s/ Martin J. Wall, IV
|
By:
|
/s/ Terry E. Michaelson
|
|||
Title:
|
CEO
|
||||
Date:
|
February 1, 2013
|
Date:
|
February 1, 2013
|
Signature
|
Title
|
|||
/s/ |
Kurt R. Widmer
|
Chairman of the Board and Director
|
||
Kurt R. Widmer
|
||||
/s/ |
Timothy P. Boyle
|
Director
|
||
Timothy P. Boyle
|
||||
/s/ |
Marc J. Cramer
|
Director
|
||
Marc J. Cramer
|
||||
/s/ |
E. Donald Johnson, Jr.
|
Director
|
||
E. Donald Johnson, Jr.
|
||||
/s/ |
Kevin R. Kelly
|
Director
|
||
Kevin R. Kelly
|
||||
/s/ |
Thomas D. Larson
|
Director
|
||
Thomas D. Larson
|
||||
/s/ |
David R. Lord
|
Director
|
||
David R. Lord
|
||||
/s/ |
John D. Rogers, Jr.
|
Director
|
||
John D. Rogers, Jr.
|
1.
|
I have reviewed this annual report on Form 10−K 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 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: March 12, 2013
|
|
|
By:
|
/s/ Terry E. Michaelson
|
|
Terry E. Michaelson
|
||
Chief Executive Officer
|
1.
|
I have reviewed this annual report on Form 10−K 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 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: March 12, 2013
|
|
|
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: March 12, 2013
|
|
|
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)
|
|
·
|
A strong close to 2012 highlighted by 10% growth in depletions for the fourth quarter
|
|
·
|
Full year top- and bottom-line results in line with guidance provided during the last quarterly update:
|
|
o
|
Sales growth of 13%, reflecting the continued strength of the Kona, Redhook and Omission brands, as well as continued repositioning of the Widmer Brothers brand
|
|
o
|
Depletion growth of 6%
|
|
o
|
Shipment growth of nearly 8%, reflecting new initiatives such as the launch of the Omission brand and international export
|
|
o
|
Gross margin rate of 29.6%, a reduction of 70 basis points from 2011, reflecting higher brewery variable costs on a per barrel basis, partially offset by improved fixed cost coverage and a shift in mix to our higher-end beers
|
|
o
|
Selling, general and administrative expense (“SG&A”) of $44.9 million, an increase of $5.1 million from 2011, reflecting continued investments in brand development and sales capabilities
|
|
o
|
Diluted earnings per share (“EPS”) of $0.13 versus 2011 EPS of $0.51; 2011 EPS included the one-time gain on sale of our equity interest in Fulton Street Brewery of $0.34 per share
|
|
o
|
Capital expenditures of approximately $9.1 million, reflecting continued investments in capacity, efficiency and quality initiatives
|
|
·
|
Depletion growth estimate of 7% to 11%, reflecting the continued strength of the Kona, Redhook and Omission brands and further stabilization of the Widmer Brothers brand
|
|
·
|
Average price increases of approximately 1% to 2%
|
|
·
|
Contract brewing revenue for 2013 will be approximately half of the 2012 level as a result of the mutual decision to unwind the Goose Island contract brewing arrangment
|
|
·
|
Gross margin rate of 28.5% to 30.5%, reflecting higher brewery variable costs on a per barrel basis, partially offset by better fixed cost coverage
|
|
·
|
SG&A expense ranging from $47 million to $49 million, reflecting leverage from the foundation built by more aggressive spending in prior years
|
|
·
|
Capital expenditures of approximately $11 million to $13 million, continuing our investments in capacity and efficiency improvements, quality initiatives and restaurant and retail
|
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,
|
Years Ended
December 31,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Sales
|
$ | 44,897 | $ | 37,558 | $ | 182,018 | $ | 161,000 | ||||||||
Less excise taxes
|
2,961 | 2,631 | 12,731 | 11,803 | ||||||||||||
Net sales
|
41,936 | 34,927 | 169,287 | 149,197 | ||||||||||||
Cost of sales
|
30,579 | 25,142 | 119,261 | 104,011 | ||||||||||||
Gross profit
|
11,357 | 9,785 | 50,026 | 45,186 | ||||||||||||
as percentage of net sales
|
27.1 | % | 28.0 | % | 29.6 | % | 30.3 | % | ||||||||
Selling, general and administrative expenses
|
10,388 | 9,253 | 44,890 | 39,742 | ||||||||||||
Operating income
|
969 | 532 | 5,136 | 5,444 | ||||||||||||
Interest expense
|
(167 | ) | (171 | ) | (663 | ) | (918 | ) | ||||||||
Gain on sale of equity interest in Fulton Street Brewery, LLC
|
— | 34 | — | 10,432 | ||||||||||||
Income from equity investments, interest and other, net
|
— | 1 | 4 | 734 | ||||||||||||
Income before income taxes
|
802 | 396 | 4,477 | 15,692 | ||||||||||||
Income tax provision
|
481 | 152 | 1,951 | 6,041 | ||||||||||||
Net income
|
$ | 321 | $ | 244 | $ | 2,526 | $ | 9,651 | ||||||||
Earnings per share:
|
||||||||||||||||
Basic and diluted earnings per share
|
$ | 0.01 | $ | 0.01 | $ | 0.13 | $ | 0.51 | ||||||||
Weighted average shares outstanding:
|
||||||||||||||||
Basic
|
18,874 | 18,845 | 18,862 | 18,834 | ||||||||||||
Diluted
|
18,940 | 18,942 | 18,934 | 18,931 | ||||||||||||
Total shipments (in barrels):
|
||||||||||||||||
Core Brands
|
168,000 | 141,400 | 675,300 | 623,300 | ||||||||||||
Contract Brewing
|
7,200 | 10,700 | 49,600 | 49,300 | ||||||||||||
Total shipments
|
175,200 | 152,100 | 724,900 | 672,600 | ||||||||||||
Depletion growth rate (over the same period from the prior year)
|
10 | % | 4 | % | 6 | % | 6 | % |
December 31,
|
||||||||
2012
|
2011
|
|||||||
Current assets:
|
|
|
||||||
Cash
|
$ | 5,013 | $ | 795 | ||||
Accounts receivable, net
|
10,512 | 13,326 | ||||||
Inventories
|
11,749 | 9,446 | ||||||
Deferred income tax asset, net
|
1,250 | 894 | ||||||
Other current assets
|
3,809 | 2,816 | ||||||
Total current assets
|
32,333 | 27,277 | ||||||
Property, equipment and leasehold improvements, net
|
102,852 | 100,725 | ||||||
Goodwill
|
12,917 | 12,917 | ||||||
Intangible and other non-current assets, net
|
17,562 | 17,989 | ||||||
Total assets
|
$ | 165,664 | $ | 158,908 | ||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 12,255 | $ | 10,994 | ||||
Accrued salaries, wages and payroll taxes
|
5,267 | 4,524 | ||||||
Refundable deposits
|
7,896 | 7,400 | ||||||
Other accrued expenses
|
1,066 | 1,436 | ||||||
Current portion of long-term debt and capital lease obligations
|
642 | 596 | ||||||
Total current liabilities
|
27,126 | 24,950 | ||||||
Long-term debt and capital lease obligations, net
|
12,440 | 13,188 | ||||||
Other long-term liabilities
|
17,903 | 16,261 | ||||||
Total common shareholders' equity
|
108,195 | 104,509 | ||||||
Total liabilities and common shareholders' equity
|
$ | 165,664 | $ | 158,908 |
Years Ended
December 31,
|
||||||||
2012
|
2011
|
|||||||
Cash Flows From Operating Activities:
|
||||||||
Net income
|
$ | 2,526 | $ | 9,651 | ||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
7,369 | 7,204 | ||||||
Income from equity investments
|
— | (691 | ) | |||||
Gain on sale of equity interest in Fulton Street Brewery, LLC
|
— | (10,432 | ) | |||||
Deferred income taxes
|
1,458 | 5,025 | ||||||
Other, including stock-based compensation and excess tax benefit from employee stock plans
|
(138 | ) | 331 | |||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
2,396 | (1,976 | ) | |||||
Inventories
|
(1,855 | ) | (640 | ) | ||||
Other current assets
|
(994 | ) | 418 | |||||
Other assets
|
— | (495 | ) | |||||
Accounts payable and other accrued expenses
|
1,269 | (2,773 | ) | |||||
Accrued salaries, wages and payroll taxes
|
743 | 471 | ||||||
Refundable deposits
|
331 | 635 | ||||||
Net cash provided by operating activities
|
13,105 | 6,728 | ||||||
Cash Flows from Investing Activities:
|
||||||||
Expenditures for property, equipment and leasehold improvements
|
(9,138 | ) | (8,488 | ) | ||||
Proceeds from sale of property, equipment and leasehold improvements and other
|
37 | 120 | ||||||
Proceeds from the sale of equity interest in Fulton Street Brewery, LLC
|
418 | 15,527 | ||||||
Other
|
— | (28 | ) | |||||
Net cash provided by (used in) investing activities
|
(8,683 | ) | 7,131 | |||||
Cash Flows from Financing Activities:
|
||||||||
Principal payments on debt and capital lease obligations
|
(596 | ) | (5,751 | ) | ||||
Net borrowings under revolving line of credit
|
— | (7,500 | ) | |||||
Issuance of common stock
|
13 | 23 | ||||||
Excess tax benefit from employee stock plans
|
379 | — | ||||||
Net cash used in financing activities
|
(204 | ) | (13,228 | ) | ||||
Increase in cash
|
4,218 | 631 | ||||||
Cash, beginning of period
|
795 | 164 | ||||||
Cash, end of period
|
$ | 5,013 | $ | 795 |
Three Months Ended
December 31,
|
Years Ended
December 31,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Net income
|
$ | 321 | $ | 244 | $ | 2,526 | $ | 9,651 | ||||||||
Interest expense
|
167 | 171 | 663 | 918 | ||||||||||||
Income tax provision
|
481 | 152 | 1,951 | 6,041 | ||||||||||||
Depreciation expense
|
1,788 | 1,766 | 7,116 | 6,912 | ||||||||||||
Amortization expense
|
63 | 63 | 253 | 292 | ||||||||||||
Gain on sale of equity interest in Fulton Street Brewery, LLC
|
- | (34 | ) | - | (10,432 | ) | ||||||||||
Stock-based compensation
|
18 | 130 | 547 | 467 | ||||||||||||
Adjusted EBITDA
|
$ | 2,838 | $ | 2,492 | $ | 13,056 | $ | 13,849 |