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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Registrant’s telephone number, including area code:
(503) 331-7270
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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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12
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Item 1B.
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16
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Item 2.
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16
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Item 3.
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17
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Item 4.
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17
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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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33
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Item 8.
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33
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Item 9.
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59
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Item 9A.
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59
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Item 9B.
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61
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PART III
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Item 10.
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61
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Item 11.
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61
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Item 12.
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61
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Item 13.
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62
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Item 14.
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62
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PART IV
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Item 15.
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62
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63
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· | 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; |
· | Omission Beer, internally developed by our brewing team as the first beer brand specially crafted to remove gluten, and launched in 2012 in Portland, Oregon; and |
· | Square Mile Cider Company, the first non-beer brand family created by Craft Brew Alliance, and launched in 2013. |
· | An innovative complementary portfolio of beers and ciders that reflects changing consumer trends in craft beer and is designed to satisfy a wide range of variety-seeking consumers’ experiences and preferences. The breadth of our product offerings also provides consumers with the opportunity to match specific consumer occasions with a product in our brand families. |
· | Distinct, authentic craft beer brands that represent unique new market leaders, like Kona Brewing Company, legacy pioneers, including Widmer Brothers and Redhook Brewery, and bold trailblazers, like Omission and Square Mile Cider Company. |
· | A national brewing footprint that allows us to get our beers to market faster, fresher and more efficiently. We have significant flexibility to fully leverage the specific strengths of our distinct breweries and operations. Additionally, we guarantee the quality and consistency of all of our products through fine-tuned processes that ensure everything from brewing to quality-assurance to warehousing and distribution meets our high standards. We believe that maximizing the production under our direct supervision and through 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. We believe that our investment in brewing and logistics technologies enables us to minimize brewery operating costs and consistently produce innovative beer styles. |
· | Nationwide sales activation through robust partnerships with leading retailers such as Buffalo Wild Wings, Safeway, and Costco. We leverage our national sales and marketing capabilities and complementary brand families to create a unique identity in the distribution channel and with the consumer. Our sales force calls on all retail channels nationally, including grocery, drug and convenience stores, something most other craft brewers are not able to do. |
· | National distribution through the Anheuser-Busch wholesaler network alliance. This distribution footprint provides efficiencies in logistics and product delivery, state reporting and licensing, billing and collections. We have realized these efficiencies while maintaining full autonomy over the production, sale and marketing of our products as an independent craft beer company. |
· | A diverse leadership team with extensive experience in the beer and beverage industries. The team has a proven ability to manage brand lifecycles, from development to turnaround, in both large and growth-company settings. Our leadership team also has a successful track record in managing mergers, divestitures and acquisitions. |
· | Five brew-pub restaurants supporting consumer awareness of our brands and research and development. |
· | 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. |
· | Washington Brewery . Our Washington Brewery utilizes a 100-barrel brewing system and has an annual capacity of 220,000 barrels. |
· | New Hampshire Brewery . Our New Hampshire Brewery utilizes a 100-barrel brewing system and has an annual capacity of 215,000 barrels. It uses an anaerobic waste-water treatment facility that completes the process cycle. |
· | Hawaiian Brewery . Our Hawaiian Brewery 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. |
· | Innovation Breweries . Our Portland, Oregon innovation brewery maintains a 10-barrel pilot brewing system and is located in the Rose Quarter sports and entertainment district; our New Hampshire innovation brewery maintains a 3-barrel pilot brewing system and is located on the same site as our New Hampshire production brewery. |
· | we engage in incompatible conduct that damages the reputation or image of A‑B or the brewing industry; |
· | 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; |
· | 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; |
· | 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 |
· | 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. |
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
|
125,000
|
215
|
280
|
|||||||||
Hawaiian Brewery
|
11,000
|
10
|
10
|
|||||||||
|
1,075
|
1,220
|
Item 5.
|
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
|
||||||
|
||||||||
2013
|
High
|
Low
|
||||||
Quarter 1
|
$
|
7.50
|
$
|
6.39
|
||||
Quarter 2
|
8.24
|
7.19
|
||||||
Quarter 3
|
13.80
|
8.40
|
||||||
Quarter 4
|
17.78
|
13.00
|
|
Base
|
Indexed Returns
|
||||||||||||||||||||||
|
Period
|
Year Ended
|
||||||||||||||||||||||
Company/Index
|
12/31/08
|
12/31/09
|
12/31/10
|
12/31/11
|
12/31/12
|
12/31/13
|
||||||||||||||||||
Craft Brew Alliance, Inc.
|
$
|
100.00
|
$
|
200.00
|
$
|
615.83
|
$
|
501.67
|
$
|
540.00
|
$
|
1,368.33
|
||||||||||||
NASDAQ Composite
|
100.00
|
143.89
|
168.22
|
165.19
|
191.47
|
264.84
|
||||||||||||||||||
S&P 500 Beverages Index
|
100.00
|
120.23
|
137.85
|
144.11
|
151.53
|
180.99
|
In thousands,
except per share amounts
|
Year Ended December 31,
|
|||||||||||||||||||
Statement of Operations Data
|
2013
|
2012
|
2011
|
2010
|
2009
|
|||||||||||||||
Net sales
|
$
|
179,180
|
$
|
169,287
|
$
|
149,197
|
$
|
131,731
|
$
|
124,713
|
||||||||||
Cost of sales
|
128,919
|
119,261
|
104,011
|
98,064
|
97,230
|
|||||||||||||||
Gross profit
|
$
|
50,261
|
$
|
50,026
|
$
|
45,186
|
$
|
33,667
|
$
|
27,483
|
||||||||||
Selling, general and administrative expenses
|
$
|
46,461
|
$
|
44,890
|
$
|
39,742
|
$
|
29,938
|
$
|
24,911
|
||||||||||
Operating income
|
$
|
3,800
|
$
|
5,136
|
$
|
5,444
|
$
|
3,170
|
$
|
2,347
|
||||||||||
Gain on sale of equity interest in Fulton Street Brewery, LLC
|
$
|
-
|
$
|
-
|
$
|
10,432
|
$
|
-
|
$
|
-
|
||||||||||
Income before provision for income taxes
|
$
|
3,263
|
$
|
4,477
|
$
|
15,692
|
$
|
2,786
|
$
|
1,073
|
||||||||||
Provision for income taxes
|
1,304
|
1,951
|
6,041
|
1,100
|
186
|
|||||||||||||||
Net income
|
$
|
1,959
|
$
|
2,526
|
$
|
9,651
|
$
|
1,686
|
$
|
887
|
||||||||||
|
||||||||||||||||||||
Basic and diluted net income per share
|
$
|
0.10
|
$
|
0.13
|
$
|
0.51
|
$
|
0.10
|
$
|
0.05
|
||||||||||
|
||||||||||||||||||||
Shares used in basic per share calculations
|
18,923
|
18,862
|
18,834
|
17,523
|
17,004
|
|||||||||||||||
Shares used in diluted per share calculations
|
19,042
|
18,934
|
18,931
|
17,568
|
17,041
|
|
December 31,
|
|||||||||||||||||||
|
2013
|
2012
|
2011
|
2010
|
2009
|
|||||||||||||||
Balance Sheet Data
|
|
|
|
|
|
|||||||||||||||
Cash and cash equivalents
|
$
|
2,726
|
$
|
5,013
|
$
|
795
|
$
|
164
|
$
|
11
|
||||||||||
Working capital (deficit)
|
5,782
|
5,207
|
2,327
|
(4,435
|
)
|
(2,527
|
)
|
|||||||||||||
Total assets
|
170,286
|
165,664
|
158,908
|
158,266
|
141,585
|
|||||||||||||||
Current portion of long-term debt and capital leases
|
710
|
642
|
596
|
2,460
|
1,481
|
|||||||||||||||
Long-term debt and capital leases, net of current portion
|
11,050
|
12,440
|
13,188
|
24,675
|
24,685
|
|||||||||||||||
Other long-term obligations
|
18,303
|
17,903
|
16,261
|
11,388
|
8,210
|
|||||||||||||||
Shareholders’ equity
|
111,232
|
108,195
|
104,509
|
94,196
|
80,632
|
· | 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; |
· | Omission Beer, internally developed by our brewing team as the first beer brand specially crafted to remove gluten, and launched in 2012 in Portland, Oregon; and |
· | Square Mile Cider Company, the first non-beer brand family created by Craft Brew Alliance, and launched in 2013. |
Net Sales
|
Net Income
|
Number of
Barrels Sold
|
||||||||||
2013
|
$
|
179.2 million
|
$
|
2.0 million
|
756,600
|
|||||||
2012
|
$
|
169.3 million
|
$
|
2.5 million
|
724,900
|
|||||||
2011
|
$
|
149.2 million
|
$
|
9.7 million
|
672,600
|
|
Year Ended December 31,
|
|||||||||||
|
2013
|
2012
|
2011
|
|||||||||
Sales
|
107.4
|
%
|
107.5
|
%
|
107.9
|
%
|
||||||
Less excise tax
|
7.4
|
7.5
|
7.9
|
|||||||||
Net sales
|
100.0
|
100.0
|
100.0
|
|||||||||
Cost of sales
|
71.9
|
70.4
|
69.7
|
|||||||||
Gross profit
|
28.1
|
29.6
|
30.3
|
|||||||||
Selling, general and administrative expenses
|
25.9
|
26.5
|
26.6
|
|||||||||
Operating income
|
2.1
|
3.0
|
3.6
|
|||||||||
Income from equity method investments
|
-
|
-
|
0.5
|
|||||||||
Gain on sale of FSB
|
-
|
-
|
7.0
|
|||||||||
Interest expense
|
(0.3
|
)
|
(0.4
|
)
|
(0.6
|
)
|
||||||
Interest and other income, net
|
-
|
-
|
-
|
|||||||||
Income before income taxes
|
1.8
|
2.6
|
10.5
|
|||||||||
Income tax provision
|
0.7
|
1.2
|
4.0
|
|||||||||
Net income
|
1.1
|
%
|
1.5
|
%
|
6.5
|
%
|
Year Ended December 31,
|
||||||||||||
2013
|
Beer
Related
|
Pubs
and Other
|
Total
|
|||||||||
Net sales
|
$
|
154,830
|
$
|
24,350
|
$
|
179,180
|
||||||
Gross profit
|
$
|
47,055
|
$
|
3,206
|
$
|
50,261
|
||||||
Gross margin
|
30.4
|
%
|
13.2
|
%
|
28.1
|
%
|
2012
|
||||||||||||
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
|
%
|
|
Year Ended December 31,
|
Dollar
|
|
|||||||||||||
Sales by Category
|
2013
|
2012
|
Change
|
% Change
|
||||||||||||
A-B and A-B related
|
$
|
159,001
|
$
|
147,628
|
$
|
11,373
|
7.7
|
%
|
||||||||
Contract brewing and beer related
(1)
|
9,082
|
10,773
|
(1,691
|
)
|
(15.7
|
)%
|
||||||||||
Excise taxes
|
(13,253
|
)
|
(12,731
|
)
|
(522
|
)
|
4.1
|
%
|
||||||||
Net beer related sales
|
154,830
|
145,670
|
9,160
|
6.3
|
%
|
|||||||||||
Pubs
(2)
|
24,350
|
23,617
|
733
|
3.1
|
%
|
|||||||||||
Net sales
|
$
|
179,180
|
$
|
169,287
|
$
|
9,893
|
5.8
|
%
|
|
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
|
%
|
(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,
|
2013 Shipments
|
2012 Shipments
|
Increase
(Decrease)
|
%
Change
|
Change in
Depletions
(1)
|
|||||||||||||||
A-B and A-B related
|
708,100
|
660,000
|
48,100
|
7.3
|
%
|
11
|
%
|
|||||||||||||
Contract brewing and beer related
(2)
|
37,100
|
52,700
|
(15,600
|
)
|
(29.6
|
)%
|
||||||||||||||
Pubs
|
11,400
|
12,200
|
(800
|
)
|
(6.6
|
)%
|
||||||||||||||
Total
|
756,600
|
724,900
|
31,700
|
4.4
|
%
|
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
|
%
|
(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,
|
||||||||||
2013
|
2012
|
2011
|
||||||||
$
|
-
|
$
|
3,083
|
$
|
2,863
|
Year Ended December 31,
|
2013
Shipments
|
2012
Shipments
|
Increase
(Decrease)
|
%
Change
|
Change in
Depletions
|
|||||||||||||||
Kona
|
256,800
|
220,000
|
36,800
|
16.7
|
%
|
23
|
%
|
|||||||||||||
Widmer Brothers
(1)
|
252,600
|
264,300
|
(11,700
|
)
|
(4.4
|
)%
|
(3
|
)%
|
||||||||||||
Redhook
|
216,900
|
191,000
|
25,900
|
13.6
|
%
|
15
|
%
|
|||||||||||||
Total
(2)
|
726,300
|
675,300
|
51,000
|
7.6
|
%
|
11
|
%
|
Year Ended December 31,
|
2012
Shipments
|
2011
Shipments
|
Increase
(Decrease)
|
%
Change
|
Change in
Depletions
|
|||||||||||||||
Kona
|
220,000
|
172,800
|
47,200
|
27.3
|
%
|
23
|
%
|
|||||||||||||
Widmer Brothers
(1)
|
264,300
|
271,200
|
(6,900
|
)
|
(2.5
|
)%
|
(5
|
)%
|
||||||||||||
Redhook
|
191,000
|
179,300
|
11,700
|
6.5
|
%
|
6
|
%
|
|||||||||||||
Total
(2)
|
675,300
|
623,300
|
52,000
|
8.3
|
%
|
6
|
%
|
(1) | Widmer Brothers includes the shipments and depletions from our Omission and Square Mile brand families. |
(2) | Total shipments by brand include international shipments and exclude shipments produced under our contract brewing arrangements. |
2013
|
2012
|
2011
|
||||||||||||||||||||||
Year Ended December 31,
|
Shipments
|
% of Total
|
Shipments
|
% of Total
|
Shipments
|
% of Total
|
||||||||||||||||||
Draft
|
205,500
|
28.3
|
%
|
214,800
|
31.8
|
%
|
219,400
|
35.2
|
%
|
|||||||||||||||
Packaged
|
520,800
|
71.7
|
%
|
460,500
|
68.2
|
%
|
403,900
|
64.8
|
%
|
|||||||||||||||
Total
|
726,300
|
100.0
|
%
|
675,300
|
100.0
|
%
|
623,300
|
100.0
|
%
|
|
Year Ended December 31,
|
Dollar
|
|
|||||||||||||
|
2013
|
2012
|
Change
|
% Change
|
||||||||||||
Beer Related
|
$
|
107,775
|
$
|
99,329
|
$
|
8,446
|
8.5
|
%
|
||||||||
Pubs
|
21,144
|
19,932
|
1,212
|
6.1
|
%
|
|||||||||||
Total
|
$
|
128,919
|
$
|
119,261
|
$
|
9,658
|
8.1
|
%
|
|
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,
|
|||||||||||
|
2013
|
2012
|
2011
|
|||||||||
Capacity utilization
|
70
|
%
|
73
|
%
|
75
|
%
|
|
Year Ended December 31,
|
Dollar
|
|
|||||||||||||
|
2013
|
2012
|
Change
|
% Change
|
||||||||||||
Beer Related
|
$
|
47,055
|
$
|
46,341
|
$
|
714
|
1.5
|
%
|
||||||||
Pubs
|
3,206
|
3,685
|
(479
|
)
|
(13.0
|
)%
|
||||||||||
Total
|
$
|
50,261
|
$
|
50,026
|
$
|
235
|
0.5
|
%
|
|
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,
|
|||||||||||
|
2013
|
2012
|
2011
|
|||||||||
Beer Related
|
30.4
|
%
|
31.8
|
%
|
32.7
|
%
|
||||||
Pubs
|
13.2
|
%
|
15.6
|
%
|
16.3
|
%
|
||||||
Total
|
28.1
|
%
|
29.6
|
%
|
30.3
|
%
|
|
Year Ended December 31,
|
Dollar
|
|
|||||||||||||
|
2013
|
2012
|
Change
|
% Change
|
||||||||||||
$
|
46,461
|
$
|
44,890
|
$
|
1,571
|
3.5
|
%
|
|||||||||
As a % of Net sales
|
25.9
|
%
|
26.5
|
%
|
|
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
|
|
|||||||||||||
|
2013
|
2012
|
Change
|
% Change
|
||||||||||||
Interest expense
|
$
|
464
|
$
|
663
|
$
|
(199
|
)
|
(30.0
|
)%
|
|||||||
2012
|
2011
|
|||||||||||||||
Interest expense
|
$
|
663
|
$
|
918
|
$
|
(255
|
)
|
(27.8
|
)%
|
|
Year Ended December 31,
|
|||||||||||
|
2013
|
2012
|
2011
|
|||||||||
Average debt outstanding
|
$
|
12,615
|
$
|
13,436
|
$
|
20,163
|
||||||
Average interest rate
|
2.92
|
%
|
2.74
|
%
|
3.43
|
%
|
|
Year Ended December 31,
|
|||||||||||
|
2013
|
2012
|
2011
|
|||||||||
Cash flows provided by operating activities
|
$
|
8,457
|
$
|
13,105
|
$
|
6,728
|
||||||
Cash flows provided by (used in) investing activities
|
(9,894
|
)
|
(8,683
|
)
|
7,131
|
|||||||
Cash flows used in financing activities
|
(850
|
)
|
(204
|
)
|
(13,228
|
)
|
||||||
Increase (decrease) in cash and cash equivalents
|
$
|
(2,287
|
)
|
$
|
4,218
|
$
|
631
|
· | state NOLs of $42,000, tax-effected; and |
· | federal alternative minimum tax (“AMT”) credit carry forwards of $428,000. |
|
Payments Due By Period
|
|||||||||||||||||||
Contractual Obligations
|
Total
|
2014
|
2015 and
2016
|
2017 and
2018
|
2019 and beyond
|
|||||||||||||||
Term loan
|
$
|
10,800
|
$
|
540
|
$
|
1,080
|
$
|
1,080
|
$
|
8,100
|
||||||||||
Interest on term loan
(1)
|
935
|
114
|
231
|
205
|
385
|
|||||||||||||||
Promissory notes
|
600
|
-
|
600
|
-
|
-
|
|||||||||||||||
Interest on promissory notes
|
204
|
144
|
60
|
-
|
-
|
|||||||||||||||
Note with related party
|
165
|
165
|
-
|
-
|
-
|
|||||||||||||||
Interest on note with related party
|
4
|
4
|
-
|
-
|
-
|
|||||||||||||||
Operating leases
|
17,790
|
1,263
|
2,346
|
1,765
|
12,416
|
|||||||||||||||
Capital leases
|
12
|
6
|
6
|
-
|
-
|
|||||||||||||||
Purchase commitments
|
25,975
|
19,536
|
5,544
|
895
|
-
|
|||||||||||||||
Sponsorship obligations
|
4,260
|
2,308
|
1,632
|
320
|
-
|
|||||||||||||||
|
$
|
60,745
|
$
|
24,080
|
$
|
11,499
|
$
|
4,265
|
$
|
20,901
|
(1) | The variable interest rate on our term loan was 1.17% at December 31, 2013. |
2013
(In thousands, except per share data)
|
1st Quarter
|
2nd Quarter
|
3rd Quarter
|
4th Quarter
|
||||||||||||
Net sales
|
$
|
36,609
|
$
|
49,007
|
$
|
49,354
|
$
|
44,210
|
||||||||
Cost of sales
|
27,666
|
34,043
|
34,512
|
32,698
|
||||||||||||
Gross profit
|
8,943
|
14,964
|
14,842
|
11,512
|
||||||||||||
Selling, general and administrative expenses
|
11,760
|
12,950
|
11,602
|
10,149
|
||||||||||||
Operating income (loss)
|
(2,817
|
)
|
2,014
|
3,240
|
1,363
|
|||||||||||
Other expense, net
|
(179
|
)
|
(150
|
)
|
(120
|
)
|
(88
|
)
|
||||||||
Income (loss) before income taxes
|
(2,996
|
)
|
1,864
|
3,120
|
1,275
|
|||||||||||
Income tax provision (benefit)
|
(1,222
|
)
|
769
|
1,228
|
529
|
|||||||||||
Net income (loss)
|
$
|
(1,774
|
)
|
$
|
1,095
|
$
|
1,892
|
$
|
746
|
|||||||
Basic and diluted net income (loss) per share
(1)
|
$
|
(0.09
|
)
|
$
|
0.06
|
$
|
0.10
|
$
|
0.04
|
|||||||
|
||||||||||||||||
Shares used in basic per share calculation
|
18,884
|
18,926
|
18,937
|
18,946
|
||||||||||||
Shares used in diluted per share calculation
|
18,884
|
18,992
|
19,067
|
19,113
|
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
(1)
|
$
|
0.04
|
$
|
0.03
|
$
|
0.05
|
$
|
0.02
|
||||||||
|
||||||||||||||||
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
|
|
December 31,
|
|||||||
|
2013
|
2012
|
||||||
|
|
|
||||||
Assets
|
|
|
||||||
Current assets:
|
|
|
||||||
Cash and cash equivalents
|
$
|
2,726
|
$
|
5,013
|
||||
Accounts receivable, net
|
11,370
|
10,512
|
||||||
Inventories
|
16,639
|
11,749
|
||||||
Deferred income tax asset, net
|
1,345
|
1,250
|
||||||
Other current assets
|
3,403
|
3,809
|
||||||
Total current assets
|
35,483
|
32,333
|
||||||
|
||||||||
Property, equipment and leasehold improvements, net
|
104,193
|
102,852
|
||||||
Goodwill
|
12,917
|
12,917
|
||||||
Intangible and other assets, net
|
17,693
|
17,562
|
||||||
Total assets
|
$
|
170,286
|
$
|
165,664
|
||||
|
||||||||
Liabilities and Shareholders' Equity
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
14,742
|
$
|
12,255
|
||||
Accrued salaries, wages and payroll taxes
|
4,616
|
5,267
|
||||||
Refundable deposits
|
8,252
|
7,896
|
||||||
Other accrued expenses
|
1,381
|
1,066
|
||||||
Current portion of long-term debt and capital lease obligations
|
710
|
642
|
||||||
Total current liabilities
|
29,701
|
27,126
|
||||||
|
||||||||
Long-term debt and capital lease obligations, net of current portion
|
11,050
|
12,440
|
||||||
Fair value of derivative financial instruments
|
-
|
219
|
||||||
Deferred income tax liability, net
|
17,719
|
17,156
|
||||||
Other liabilities
|
584
|
528
|
||||||
Total liabilities
|
59,054
|
57,469
|
||||||
|
||||||||
Commitments and contingencies (Note 17)
|
||||||||
|
||||||||
Common shareholders' equity:
|
||||||||
Common stock, $0.005 par value. Authorized 50,000,000 shares; issued and outstanding 18,972,247 and 18,874,256
|
95
|
94
|
||||||
Additional paid-in capital
|
136,972
|
136,030
|
||||||
Accumulated other comprehensive loss
|
-
|
(135
|
)
|
|||||
Accumulated deficit
|
(25,835
|
)
|
(27,794
|
)
|
||||
Total common shareholders' equity
|
111,232
|
108,195
|
||||||
Total liabilities and common shareholders' equity
|
$
|
170,286
|
$
|
165,664
|
|
Year Ended December 31,
|
|||||||||||
|
2013
|
2012
|
2011
|
|||||||||
|
|
|
|
|||||||||
|
|
|
|
|||||||||
Sales
|
$
|
192,433
|
$
|
182,018
|
$
|
161,000
|
||||||
Less excise taxes
|
13,253
|
12,731
|
11,803
|
|||||||||
Net sales
|
179,180
|
169,287
|
149,197
|
|||||||||
Cost of sales
|
128,919
|
119,261
|
104,011
|
|||||||||
Gross profit
|
50,261
|
50,026
|
45,186
|
|||||||||
Selling, general and administrative expenses
|
46,461
|
44,890
|
39,742
|
|||||||||
Operating income
|
3,800
|
5,136
|
5,444
|
|||||||||
Income from equity method investments
|
-
|
-
|
691
|
|||||||||
Gain on sale of equity interest in Fulton Street Brewery, LLC
|
-
|
-
|
10,432
|
|||||||||
Interest expense
|
(464
|
)
|
(663
|
)
|
(918
|
)
|
||||||
Other income (expense), net
|
(73
|
)
|
4
|
43
|
||||||||
Income before income taxes
|
3,263
|
4,477
|
15,692
|
|||||||||
Income tax provision
|
1,304
|
1,951
|
6,041
|
|||||||||
Net income
|
$
|
1,959
|
$
|
2,526
|
$
|
9,651
|
||||||
|
||||||||||||
Basic and diluted net income per share
|
$
|
0.10
|
$
|
0.13
|
$
|
0.51
|
||||||
|
||||||||||||
Shares used in basic per share calculations
|
18,923
|
18,862
|
18,834
|
|||||||||
|
||||||||||||
Shares used in diluted per share calculations
|
19,042
|
18,934
|
18,931
|
|
Year Ended December 31,
|
|||||||||||
|
2013
|
2012
|
2011
|
|||||||||
|
|
|
|
|||||||||
|
|
|
|
|||||||||
Net income
|
$
|
1,959
|
$
|
2,526
|
$
|
9,651
|
||||||
Unrealized gains on derivative hedge transactions, net of tax
|
135
|
221
|
172
|
|||||||||
Comprehensive income
|
$
|
2,094
|
$
|
2,747
|
$
|
9,823
|
|
Common Stock
|
Additional
Paid-In
|
Accumulated
Other
|
Retained
|
Total
Common
|
|||||||||||||||||||
|
Shares
|
Par Value
|
Capital
|
Loss
|
Deficit
|
Equity
|
||||||||||||||||||
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
|
||||||||||||
Issuance of shares under stock plans
|
75
|
1
|
243
|
-
|
-
|
244
|
||||||||||||||||||
Stock-based compensation
|
23
|
-
|
549
|
-
|
-
|
549
|
||||||||||||||||||
Tax benefit related to stock options
|
-
|
-
|
150
|
-
|
-
|
150
|
||||||||||||||||||
Unrealized gains on derivative financial instruments, net of tax provision of $84
|
-
|
-
|
-
|
135
|
-
|
135
|
||||||||||||||||||
Net income
|
-
|
-
|
-
|
-
|
1,959
|
1,959
|
||||||||||||||||||
Balance at December 31, 2013
|
18,972
|
$
|
95
|
$
|
136,972
|
$
|
-
|
$
|
(25,835
|
)
|
$
|
111,232
|
|
Year Ended December 31,
|
|||||||||||
|
2013
|
2012
|
2011
|
|||||||||
|
|
|
|
|||||||||
Cash flows from operating activities:
|
|
|
|
|||||||||
Net income
|
$
|
1,959
|
$
|
2,526
|
$
|
9,651
|
||||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||||||
Depreciation and amortization
|
8,164
|
7,369
|
7,204
|
|||||||||
Income from equity method investments, net of distributions received
|
-
|
-
|
(691
|
)
|
||||||||
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
|
195
|
23
|
(1
|
)
|
||||||||
Deferred income taxes
|
374
|
1,458
|
5,025
|
|||||||||
Stock-based compensation
|
549
|
547
|
467
|
|||||||||
Excess tax benefit from employee stock plans
|
(150
|
)
|
(379
|
)
|
-
|
|||||||
Other
|
286
|
(329
|
)
|
(135
|
)
|
|||||||
Changes in operating assets and liabilities:
|
||||||||||||
Accounts receivable, net
|
(858
|
)
|
2,396
|
(1,976
|
)
|
|||||||
Inventories
|
(5,577
|
)
|
(1,855
|
)
|
(640
|
)
|
||||||
Other current assets
|
407
|
(994
|
)
|
418
|
||||||||
Other assets
|
-
|
-
|
(495
|
)
|
||||||||
Accounts payable and other accrued expenses
|
2,630
|
1,269
|
(2,773
|
)
|
||||||||
Accrued salaries, wages and payroll taxes
|
(651
|
)
|
743
|
471
|
||||||||
Refundable deposits
|
1,129
|
331
|
635
|
|||||||||
Net cash provided by operating activities
|
8,457
|
13,105
|
6,728
|
|||||||||
|
||||||||||||
Cash flows from investing activities:
|
||||||||||||
Expenditures for property, equipment and leasehold improvements
|
(9,894
|
)
|
(9,138
|
)
|
(8,488
|
)
|
||||||
Proceeds from sale of property, equipment and leasehold improvements
|
-
|
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
|
(9,894
|
)
|
(8,683
|
)
|
7,131
|
|||||||
|
||||||||||||
Cash flows from financing activities:
|
||||||||||||
Principal payments on debt and capital lease obligations
|
(1,208
|
)
|
(596
|
)
|
(5,751
|
)
|
||||||
Net borrowings (repayments) under revolving line of credit
|
-
|
-
|
(7,500
|
)
|
||||||||
Proceeds from issuances of common stock
|
244
|
13
|
23
|
|||||||||
Debt issuance costs
|
(46
|
)
|
-
|
-
|
||||||||
Excess tax benefit from employee stock plans
|
160
|
379
|
-
|
|||||||||
Net cash used in financing activities
|
(850
|
)
|
(204
|
)
|
(13,228
|
)
|
||||||
|
||||||||||||
Increase in cash and cash equivalents
|
(2,287
|
)
|
4,218
|
631
|
||||||||
|
||||||||||||
Cash and cash equivalents:
|
||||||||||||
Beginning of period
|
5,013
|
795
|
164
|
|||||||||
End of period
|
$
|
2,726
|
$
|
5,013
|
$
|
795
|
||||||
|
||||||||||||
Supplemental disclosure of cash flow information:
|
||||||||||||
Cash paid for interest
|
$
|
601
|
$
|
774
|
$
|
972
|
||||||
Cash paid for income taxes, net
|
543
|
416
|
675
|
|||||||||
|
||||||||||||
Supplemental disclosure of non-cash information:
|
||||||||||||
Receivable from sale of equity interest in Fulton Street Brewery, LLC
|
-
|
-
|
836
|
|||||||||
Purchases of Property, equipment and leasehold improvements included in Accounts payable
|
331
|
-
|
-
|
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,
|
|||||||
|
2013
|
2012
|
||||||
Raw materials
|
$
|
4,934
|
$
|
2,497
|
||||
Work in process
|
3,313
|
3,552
|
||||||
Finished goods
|
5,927
|
3,263
|
||||||
Packaging materials
|
442
|
544
|
||||||
Promotional merchandise
|
1,539
|
1,552
|
||||||
Pub food, beverages and supplies
|
484
|
341
|
||||||
|
$
|
16,639
|
$
|
11,749
|
|
December 31,
|
|||||||
|
2013
|
2012
|
||||||
Deposits paid to keg lessor
|
$
|
2,228
|
$
|
1,824
|
||||
Prepaid property taxes
|
215
|
200
|
||||||
Prepaid insurance
|
332
|
299
|
||||||
Income tax receivable
|
68
|
296
|
||||||
Other
|
560
|
1,190
|
||||||
|
$
|
3,403
|
$
|
3,809
|
|
December 31,
|
|||||||
|
2013
|
2012
|
||||||
Brewery equipment
|
$
|
93,711
|
$
|
87,664
|
||||
Buildings
|
55,051
|
53,236
|
||||||
Land and improvements
|
7,617
|
7,598
|
||||||
Furniture, fixtures and other equipment
|
9,895
|
7,121
|
||||||
Leasehold improvements
|
6,592
|
6,196
|
||||||
Vehicles
|
135
|
135
|
||||||
Construction in progress
|
2,052
|
4,546
|
||||||
|
175,053
|
166,496
|
||||||
Less accumulated depreciation and amortization
|
(70,860
|
)
|
(63,644
|
)
|
||||
|
$
|
104,193
|
$
|
102,852
|
|
December 31,
|
|||||||
|
2013
|
2012
|
||||||
Trademarks and domain name
|
$
|
14,429
|
$
|
14,429
|
||||
|
||||||||
Recipes
|
700
|
700
|
||||||
|
||||||||
Distributor agreements
|
2,200
|
2,200
|
||||||
Accumulated amortization
|
(807
|
)
|
(660
|
)
|
||||
|
1,393
|
1,540
|
||||||
|
||||||||
Non-compete agreements
|
440
|
440
|
||||||
Accumulated amortization
|
(286
|
)
|
(198
|
)
|
||||
|
154
|
242
|
||||||
|
||||||||
Favorable contracts
|
31
|
31
|
||||||
Accumulated amortization
|
(31
|
)
|
(30
|
)
|
||||
|
-
|
1
|
||||||
|
||||||||
Other
|
250
|
280
|
||||||
Accumulated amortization
|
(201
|
)
|
(236
|
)
|
||||
|
49
|
44
|
||||||
|
16,725
|
16,956
|
||||||
|
||||||||
Promotional merchandise
|
968
|
606
|
||||||
|
$
|
17,693
|
$
|
17,562
|
|
Year Ended December 31,
|
|||||||||||
|
2013
|
2012
|
2011
|
|||||||||
Amortization expense
|
$
|
247
|
$
|
253
|
$
|
292
|
2014
|
$
|
246
|
||
2015
|
220
|
|||
2016
|
154
|
|||
2017
|
154
|
|||
2018
|
153
|
|||
Thereafter
|
669
|
|||
|
$
|
1,596
|
|
December 31,
|
|||||||
|
2013
|
2012
|
||||||
Term loan, due September 30, 2023
|
$
|
10,800
|
$
|
11,822
|
||||
Promissory notes payable to related parties, all due July 1, 2015
|
600
|
600
|
||||||
Premium on promissory notes
|
184
|
298
|
||||||
Note with affiliated party, due November 15, 2014
|
165
|
346
|
||||||
Capital lease obligations for equipment
|
11
|
16
|
||||||
|
11,760
|
13,082
|
||||||
Less current portion
|
(710
|
)
|
(642
|
)
|
||||
|
$
|
11,050
|
$
|
12,440
|
|
Term Loan
|
Promissory
Notes
|
Note with
Related
Party
|
Capital
Lease
Obligations
|
||||||||||||
2014
|
$
|
540
|
$
|
-
|
$
|
165
|
$
|
6
|
||||||||
2015
|
540
|
600
|
-
|
5
|
||||||||||||
2016
|
540
|
-
|
-
|
1
|
||||||||||||
2017
|
540
|
-
|
-
|
-
|
||||||||||||
2018
|
540
|
-
|
-
|
-
|
||||||||||||
Thereafter
|
8,100
|
-
|
-
|
-
|
||||||||||||
|
10,800
|
600
|
165
|
12
|
||||||||||||
Amount representing interest
|
-
|
-
|
-
|
1
|
||||||||||||
|
$
|
10,800
|
$
|
600
|
$
|
165
|
$
|
11
|
|
Year Ended December 31,
|
|||||||||||
|
2013
|
2012
|
2011
|
|||||||||
Loan Agreement fee
|
$
|
33
|
$
|
34
|
$
|
29
|
Fair Value of Liability Derivative
|
||||||||
|
December 31,
|
|||||||
|
2013
|
2012
|
||||||
Fair value of interest rate swap
|
$
|
-
|
$
|
219
|
Derivatives in Cash
Flow Hedging
Relationships
|
Amount of Gain/(Loss)
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)
|
||||||
|
|
|
|
||||||
Year Ended
December 31,
|
|
|
|
||||||
2013
|
$
|
219
|
Interest expense
|
$
|
188
|
||||
2012
|
$
|
353
|
Interest expense
|
$
|
387
|
||||
2011
|
$
|
277
|
Interest expense
|
$
|
400
|
· | 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, 2013
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Money market funds
|
$
|
2,650
|
$
|
-
|
$
|
-
|
$
|
2,650
|
Fair Value at December 31, 2012
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Interest rate swap
|
$
|
-
|
$
|
(219
|
)
|
$
|
-
|
$
|
(219
|
)
|
|
December 31,
|
|||||||
|
2013
|
2012
|
||||||
Fixed-rate debt on balance sheet
|
$
|
960
|
$
|
1,260
|
||||
Fair value of fixed-rate debt
|
$
|
985
|
$
|
1,275
|
2013
|
Beer
Related
|
Pubs
|
Total
|
|||||||||
Net sales
|
$
|
154,830
|
$
|
24,350
|
$
|
179,180
|
||||||
Gross profit
|
$
|
47,055
|
$
|
3,206
|
$
|
50,261
|
||||||
Gross margin
|
30.4
|
%
|
13.2
|
%
|
28.1
|
%
|
||||||
2012
|
||||||||||||
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
|
%
|
Year Ended December 31,
|
|||||||
2013
|
2012
|
2011
|
|||||
82.6% |
|
81.1% |
|
80.8% |
|
December 31
|
|||||
2013
|
2012
|
||||
74.4% | 60.6% |
|
Year Ended December 31,
|
|||||||||||
|
2013
|
2012
|
2011
|
|||||||||
Weighted average per share fair value of stock options granted
|
$
|
4.90
|
$
|
4.84
|
$
|
5.99
|
||||||
Intrinsic value of stock options exercised
|
554
|
40
|
60
|
|||||||||
Intrinsic value of fully-vested stock awards granted
|
1,039
|
366
|
243
|
|
Year Ended December 31,
|
|||||||||||
|
2013
|
2012
|
2011
|
|||||||||
Selling, general and administrative expense
|
$
|
464
|
$
|
547
|
$
|
467
|
||||||
Cost of sales
|
85
|
-
|
-
|
|||||||||
Total Stock-based compensation expense
|
$
|
549
|
$
|
547
|
$
|
467
|
|
Year Ended December 31,
|
|||||||||||
|
2013
|
2012
|
2011
|
|||||||||
Risk-free interest rate
|
1.61
|
%
|
1.46
|
%
|
2.84
|
%
|
||||||
Dividend yield
|
0.0
|
%
|
0.0
|
%
|
0.0
|
%
|
||||||
Expected life
|
7.85 years
|
8.15 years
|
7.5 years
|
|||||||||
Volatility
|
58.91
|
%
|
60.39
|
%
|
62.10
|
%
|
Options Outstanding
|
Weighted Average Exercise Price
|
|||||||
Outstanding at December 31, 2012
|
368,665
|
$
|
5.46
|
|||||
Granted
|
141,219
|
7.94
|
||||||
Exercised
|
(74,779
|
)
|
3.26
|
|||||
Cancelled
|
(134,502
|
)
|
6.41
|
|||||
Forfeited
|
(1,649
|
)
|
9.28
|
|||||
Outstanding at December 31, 2013
|
298,954
|
6.73
|
Options
Outstanding
|
Options
Exercisable
|
|||||||
Number
|
298,954
|
91,303
|
||||||
Weighted average exercise price
|
$
|
6.73
|
$
|
5.04
|
||||
Aggregate intrinsic value
|
$
|
2,896,000
|
$
|
1,039,000
|
||||
Weighted average remaining contractual term
|
8.1 years | 6.9 years |
|
2013
Awards
|
2012
Awards
|
2011
Awards
|
Total
|
||||||||||||
Granted (target amount
|
95,360
|
102,820
|
69,575
|
267,755
|
||||||||||||
Canceled due to termination of employee
|
(45,013
|
)
|
(60,370
|
)
|
(12,430
|
)
|
(117,813
|
)
|
||||||||
Not expected to vest due to failure to meet performance goals
|
-
|
-
|
(28,572
|
)
|
(28,572
|
)
|
||||||||||
Expected to vest as of December 31, 2013
|
50,347
|
42,450
|
28,573
|
121,370
|
|
Year Ended December 31,
|
|||||||||||
|
2013
|
2012
|
2011
|
|||||||||
Weighted average common shares for basic EPS
|
18,923
|
18,862
|
18,834
|
|||||||||
Dilutive effect of stock-based awards
|
119
|
72
|
97
|
|||||||||
Shares used for diluted EPS
|
19,042
|
18,934
|
18,931
|
|||||||||
|
||||||||||||
Stock-based awards not included in diluted per share calculations as they would be antidilutive
|
1
|
124
|
7
|
|
Year Ended December 31,
|
|||||||||||
|
2013
|
2012
|
2011
|
|||||||||
Current federal
|
$
|
746
|
$
|
292
|
$
|
92
|
||||||
Current state
|
184
|
201
|
924
|
|||||||||
|
930
|
493
|
1,016
|
|||||||||
|
||||||||||||
Deferred federal
|
305
|
1,116
|
5,085
|
|||||||||
Deferred state
|
69
|
342
|
(60
|
)
|
||||||||
|
374
|
1,458
|
5,025
|
|||||||||
|
$
|
1,304
|
$
|
1,951
|
$
|
6,041
|
|
Year Ended December 31,
|
|||||||||||
|
2013
|
2012
|
2011
|
|||||||||
Provision at U.S. statutory rate
|
$
|
1,109
|
$
|
1,522
|
$
|
5,335
|
||||||
State taxes, net of federal benefit
|
182
|
148
|
567
|
|||||||||
Permanent differences, primarily meals and entertainment
|
198
|
232
|
266
|
|||||||||
Domestic production activities deduction
|
(98
|
)
|
-
|
-
|
||||||||
Tax credits
|
(87
|
)
|
(104
|
)
|
(127
|
)
|
||||||
Increase to deferred tax liability tax rate
|
-
|
153
|
-
|
|||||||||
|
$
|
1,304
|
$
|
1,951
|
$
|
6,041
|
|
December 31,
|
|||||||
|
2013
|
2012
|
||||||
Deferred tax assets
|
|
|
||||||
Net operating losses and alternative minimum tax credit carryforwards
|
$
|
470
|
$
|
711
|
||||
Accrued salaries and severance
|
922
|
988
|
||||||
Other
|
918
|
828
|
||||||
|
2,310
|
2,527
|
||||||
|
||||||||
Deferred tax liabilities
|
||||||||
Property, equipment and leasehold improvements
|
(12,158
|
)
|
(11,843
|
)
|
||||
Intangible assets
|
(6,323
|
)
|
(6,422
|
)
|
||||
Other
|
(203
|
)
|
(168
|
)
|
||||
|
(18,684
|
)
|
(18,433
|
)
|
||||
|
$
|
(16,374
|
)
|
$
|
(15,906
|
)
|
State NOLs, tax effected
|
$
|
42
|
||
Federal alternative minimum tax credit carryforwards
|
$
|
428
|
|
Year Ended December 31,
|
|||||||||||
|
2013
|
2012
|
2011
|
|||||||||
401(k) expense
|
$
|
744
|
$
|
705
|
$
|
687
|
2014
|
$
|
1,263
|
||
2015
|
1,232
|
|||
2016
|
1,114
|
|||
2017
|
1,004
|
|||
2018
|
761
|
|||
Thereafter
|
12,416
|
|||
|
$
|
17,790
|
|
Year Ended December 31,
|
|||||||||||
|
2013
|
2012
|
2011
|
|||||||||
Rent expense
|
$
|
2,554
|
$
|
2,665
|
$
|
2,759
|
|
Year Ended December 31,
|
|||||||||||
|
2013
|
2012
|
2011
|
|||||||||
Rental income
|
$
|
266
|
$
|
254
|
$
|
242
|
2014
|
$
|
269
|
||
2015
|
277
|
|||
2016
|
23
|
|||
2017
|
-
|
|||
2018
|
-
|
|||
Thereafter
|
-
|
|||
|
$
|
569
|
Year Ended December 31,
|
||||||||||
2013
|
2012
|
2011
|
||||||||
$
|
127
|
$
|
125
|
$
|
122
|
Year Ended December 31,
|
||||||||||
2013
|
2012
|
2011
|
||||||||
$
|
428
|
$
|
402
|
$
|
360
|
|
Purchase
Obligations
|
Sponsorship
Obligations
|
Total
|
|||||||||
2014
|
$
|
19,536
|
$
|
2,308
|
$
|
21,844
|
||||||
2015
|
3,320
|
1,045
|
4,365
|
|||||||||
2016
|
2,224
|
587
|
2,811
|
|||||||||
2017
|
895
|
220
|
1,115
|
|||||||||
2018
|
-
|
100
|
100
|
|||||||||
Thereafter
|
-
|
-
|
-
|
|||||||||
|
$
|
25,975
|
$
|
4,260
|
$
|
30,235
|
|
Year Ended December 31,
|
|||||||||||
|
2013
|
2012
|
2011
|
|||||||||
Gross sales to A-B
|
$
|
161,010
|
$
|
149,492
|
$
|
132,914
|
||||||
Margin fee paid to A-B, classified as a reduction of Sales
|
2,009
|
1,864
|
2,777
|
|||||||||
Sales to FSB through a contract brewing arrangement, classified in Sales
(1)
|
-
|
3,083
|
2,863
|
|||||||||
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
|
402
|
449
|
490
|
|||||||||
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
|
(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,
|
|||||||
|
2013
|
2012
|
||||||
Amounts due from A-B related to beer sales pursuant to the A-B Distributor Agreement
|
$
|
8,457
|
$
|
6,369
|
||||
Amounts due from FSB related to beer sales pursuant to a contract brewing arrangement
|
-
|
260
|
||||||
Amounts due from FSB related to termination agreement
|
-
|
630
|
||||||
Refundable deposits due to A-B
|
(2,728
|
)
|
(2,472
|
)
|
||||
Amounts due to A-B for services rendered
|
(1,852
|
)
|
(1,974
|
)
|
||||
Net amount due from A-B
|
$
|
3,877
|
$
|
2,813
|
Item 12.
|
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
|
420,324
|
(1)
|
$
|
6.73
|
314,488
|
|||||||
Equity compensation plans not approved by shareholders
|
-
|
-
|
-
|
|||||||||
Total
|
420,324
|
$
|
6.73
|
314,488
|
(1) | Includes a total of 121,370 performance shares that may vest between March 31, 2014 and March 31, 2016, based on the achievement of financial targets over three separate three-year performance periods. The shares are not included in the calculation of weighted average price in column (b). |
|
Page
|
|
|
Report of Moss Adams LLP, Independent Registered Public Accounting Firm
|
34
|
|
35
|
|
|
Consolidated Statements of Income for the Years Ended December 31, 2013, 2012 and 2011
|
36
|
|
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2013, 2012 and 2011
|
37
|
|
Consolidated Statements of Common Shareholders’ Equity for the Years Ended December 31, 2013, 2012 and 2011
|
38
|
|
Consolidated Statements of Cash Flows for the Years Ended December 31, 2013, 2012 and 2011
|
39
|
|
Notes to Consolidated Financial Statements
|
40
|
Craft Brew Alliance, Inc.
|
|||
|
By:
|
/s/ Joseph K. O’Brien
|
|
|
|
Joseph K. O’Brien
|
|
|
|
Controller and Chief Accounting Officer
|
Signature
|
|
Title
|
|
|
|
|
|
/s/
ANDREW J. THOMAS
|
|
Chief Executive Officer
|
|
Andrew J. Thomas
|
|
(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
/ ANDREW J. THOMAS
|
|
|
Andrew J. Thomas,
|
|
|
as attorney in fact
|
|
Exhibit
Number
|
|
Description
|
2.1
|
|
Agreement and Plan of Merger between the Registrant and Kona Brewing Co., Inc. and related parties dated July 31, 2010 (incorporated by reference from Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on August 3, 2010)
|
2.2
|
|
Equity Purchase Agreement by and among each of the members of Fulton Street Brewery, LLC, as Sellers and A‑B, as purchaser, dated as of February 18, 2011 (incorporated by reference from Exhibit 2.2 to the Registrant’s Form 10-K for the year ended December 31, 2010)
|
2.3
|
|
Joinder to Equity Purchase Agreement, dated May 2, 2011 (incorporated by reference from Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on May 4, 2011)
|
3.1
|
|
Restated Articles of Incorporation of the Registrant, dated January 2, 2012 (incorporated by reference from Exhibit 3.1 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011)
|
3.2
|
|
Amended and Restated Bylaws of the Registrant, dated December 1, 2010 (incorporated by reference from Exhibit 3.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010 filed on April 1, 2011)
|
10.1*
|
|
2002 Stock Option Plan (incorporated by reference from Exhibit A to the Registrant’s Proxy Statement for its 2002 Annual Meeting of Shareholders (File No. 0-26542)
|
10.2*
|
|
Form of Stock Option Agreement (Directors Grants) for the 2002 Stock Option Plan (incorporated by reference from Exhibit 10.10 to the Registrant’s Form 10-K for the year ended December 31, 2004)
|
10.3*
|
|
Form of Nonqualified Stock Option Agreement (Executive Officer Grants) for the 2002 Stock Option Plan (incorporated by reference from Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended September 30, 2010)
|
10.4*
|
|
2007 Stock Incentive Plan (incorporated by reference from Appendix B to the Registrant’s Proxy Statement for its 2007 Annual Meeting of Shareholders)
|
10.5*
|
|
Form of Nonstatutory Stock Option Agreement (Executive Officer Grants) for the 2007 Stock Incentive Plan (incorporated by reference from Exhibit 10.3 to the Registrant’s Form 10-Q for the quarter ended June 30, 2010)
|
10.6*
|
|
2010 Stock Incentive Plan (incorporated by reference from Appendix B to the Registrant’s Proxy Statement for its 2010 Annual Meeting of Shareholders)
|
10.7*
|
|
Form of Nonqualified Stock Option Agreement (Executive Officer Grants) for the 2010 Stock Incentive Plan
(incorporated by reference from Exhibit 10.11 to the Registrant’s Form 10-K for the year ended December 31, 2010)
|
10.8*†
|
|
Form of Performance Award Agreement for the 2010 Stock Incentive Plan (incorporated by reference from Exhibit 10.1 to the Registrant’s Form 10-Q for the quarter ended June 30, 2011)
|
10.9*
|
|
Stock Appreciation Right Agreement between the Registrant and Andrew J. Thomas, dated October 12, 2010 (incorporated by reference from Exhibit 10.3 to the Registrant’s Form 10-Q for the quarter ended June 30, 2011)
|
10.10*
|
|
Stock Appreciation Right Agreement between the Registrant and Andrew J. Thomas, dated January 1, 2011 (incorporated by reference from Exhibit 10.4 to the Registrant’s Form 10-Q for the quarter ended June 30, 2011)
|
10.11*
|
|
Letter of Agreement between the Registrant and Terry E. Michaelson dated March 29, 2010 (incorporated by reference from Exhibit 10.14 to the Registrant’s Form 10-K for the year ended December 31, 2009)
|
10.12*
|
|
Letter of Agreement between the Registrant and Mark D. Moreland dated March 29, 2010 (incorporated by reference from Exhibit 10.15 to the Registrant’s Form 10-K for the year ended December 31, 2009)
|
10.13*
|
|
Letter of Agreement between the Registrant and V. Sebastian Pastore dated March 29, 2010 (incorporated by reference from Exhibit 10.16 to the Registrant’s Form 10-K for the year ended December 31, 2009)
|
10.14*
|
|
Letter of Agreement between the Registrant and Martin J. Wall, IV dated March 29, 2010 (incorporated by reference from Exhibit 10.17 to the Registrant’s Form 10-K for the year ended December 31, 2009)
|
10.15*
|
|
Separation Agreement between the Registrant and Martin J. Wall, IV dated February 1, 2013 (incorporated by reference from Exhibit 10.15 to the Registrant’s Form 10-K for the year ended December 31, 2012)
|
Exhibit
Number
|
|
Description
|
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*
|
|
Employment Letter Agreement between the Registrant and Andrew J. Thomas, dated November 20, 2013
(incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on November 21, 2013)
|
10.19*
|
|
Employee Noncompetition and Nonsolicitation Agreement between the Registrant and Andrew J. Thomas, dated November 20, 2013
(incorporated by reference from Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on November 21, 2013)
|
10.20*
|
|
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)
|
10.21*
|
|
Non-Competition and Non-Solicitation Agreement dated October 1, 2010 between the Registrant and Mattson Davis
(incorporated by reference from Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on October 6, 2010)
|
10.22*
|
|
Transition and Separation Agreement dated December 16, 2013 between the Registrant and Terry Michaelson
(incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 19, 2013)
|
10.23*
|
|
Transition and Separation Agreement dated December 16, 2013 between the Registrant and Sebastian Pastore
(incorporated by reference from Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on December 19, 2013)
|
|
Summary of Compensation Arrangements for Non-Employee Directors
as of January 1, 2014
|
|
10.25*
|
|
Summary of Annual Cash Incentive Bonus Plan for Executive Officers (
incorporated by reference from Exhibit 10.24 to the Registrant’s Form 10-K for the year ended December 31, 2012)
|
10.26
|
|
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)
|
10.27
|
|
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)
|
10.28
|
|
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)
|
10.29
|
|
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)
|
10.30
|
|
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)
|
10.31
|
|
Fourth Loan Modification Agreement dated November 15, 2013 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 November 19, 2013)
|
10.32
|
|
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)
|
10.33
|
|
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)
|
Exhibit
Number
|
|
Description
|
10.34
|
|
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)
|
|
Amendment to A-B Master Distributor Agreement dated November 20, 2013
|
|
10.36
|
|
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)
|
10.37
|
|
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”))
|
10.38
|
|
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)
|
10.39
|
|
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)
|
10.40
|
|
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)
|
10.41
|
|
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)
|
10.42†
|
|
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)
|
10.43
|
|
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, 2013 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 6, 2014
|
|
99.2
|
|
Description of Common Stock (incorporated by reference from Exhibit 99.2 to the Registrant’s Form 10-K for the year ended December 31, 2012 filed on March 12, 2013)
|
101.INS
|
|
XBRL Instance Document
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
101.CAL
101.DEF
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
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.
|
†
|
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.
|
|
Very truly yours,
|
|
||
|
|
|
|
|
|
/s/ E. Donald Johnson
|
|
/s/ Thomas Larson
|
|
|
E. Donald Johnson
|
|
Thomas Larson
|
|
|
Vice President, Business
|
|
Assistant Secretary
|
|
|
and Wholesaler Development
|
|
|
|
By:
|
/s/ Mark Moreland
|
|
Mark Moreland
|
|
|
EVP & Chief Financial Officer
|
|
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 6, 2014
|
|
|
|
|
|
By:
|
/s/ Andrew J. Thomas
|
|
|
Andrew J. Thomas
|
|
|
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 6, 2014 | ||
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. |
BY:
|
/s/ Andrew J. Thomas
|
|
|
Andrew J. Thomas
|
|
|
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 2013 highlighted by 10% growth in depletions over the fourth quarter of 2012, the third consecutive quarter of double-digit depletion growth, reflecting continued momentum across the Kona Brewing, Redhook Ale Brewery, Omission and Square Mile Cider Company brand families and stabilization of the Widmer Brothers brand.
|
·
|
An increase in net sales and branded beer shipments of 5% and 6%, respectively, in the fourth quarter attributable to strong sales execution, as well as support from our national partners, wholesalers and retailers.
|
·
|
A decrease in gross margin rate by 100 basis points to 26.0% in the fourth quarter compared to the fourth quarter last year primarily resulting from shifts in product and geographic mix and increased distribution-related costs.
|
·
|
Diluted earnings per share (“EPS”) of $0.04 for the quarter, an increase over fourth quarter 2012 EPS of $0.02, primarily due to improved gross profit and a decrease in selling, general and administrative (“SG&A”) expense.
|
·
|
Net sales growth of 6%, reflecting the continued strength of the Kona Brewing, Redhook Brewery and Omission brands, as well as continued repositioning of the Widmer Brothers brand.
|
·
|
Record depletion growth of 11% and owned brands shipment growth of nearly 8%, reflecting the continuing strength of our complementary portfolio of craft beers.
|
·
|
Contract brewing revenue reduction of 40% as a result of the termination of certain contract brewing contracts in late 2012.
|
·
|
Gross margin rate of 28.1%, a reduction of 150 basis points from 2012, primarily due to product mix and distribution costs in our beer business and lower restaurant business margin related to our Woodinville pub remodel.
|
·
|
SG&A expense of $46.5 million, an increase of $1.6 million from 2012, reflecting continued investments in brand development and sales capabilities, partially offset by the leverage of one-time spending in prior years.
|
·
|
EPS of $0.10 versus 2012 EPS of $0.13.
|
·
|
Capital expenditures of approximately $9.9 million, reflecting continued investments in capacity, our pubs, efficiency and quality initiatives.
|
·
|
We believe our national portfolio strategy will continue to drive strong topline growth and differentiate us from others in our high-growth market.
|
·
|
Widmer Brothers celebrates a significant milestone in 2014, which marks the brewery’s 30
th
anniversary. Special anniversary initiatives include six new limited release collaborations with Oregon craft brewers and 30
th
anniversary events and beers, as well as the launch of a new signature year-round IPA, Upheaval.
|
·
|
Our fastest-growing brand, Kona Brewing, celebrates its 20
th
anniversary this year, and we are excited to be expanding into four new states as well as launching Castaway IPA on the mainland.
|
·
|
Redhook will continue to build on its strong national partnerships, including Dan Patrick, Buffalo Wild Wings, and theCHIVE. Earlier this year, we announced the national expansion of KCCO Black Lager, Redhook’s first collaboration with theCHIVE.
|
·
|
We look forward to putting an increased focus and investment behind Omission, our innovative, fast-growing craft beer that is specially brewed to remove gluten.
|
·
|
We will continue our commitment to innovation in adjacent categories such as cider and in cross-brand packaging to bring the power of CB
A
’s portfolio to consumers and retailers in exciting ways.
|
·
|
We look forward to continued international expansion across all brand families.
|
·
|
We are expanding our brewing footprint in the Southeast through a partnership with Blues City Brewery, based in Memphis, Tenn. This new partnership, which builds on our successful track record developing strong partnerships that drive business growth, will generate gross margin improvements by bringing brewing capability closer to growing markets while alleviating emerging capacity constraints driven by growth in the East region and internationally.
|
·
|
We will continue to transform our supply chain to drive further efficiencies in how we partner with our wholesalers.
|
·
|
As a result of SKU rationalization, we look forward to continued growth in our topline as well as significant improvements in gross margin performance for the year.
|
·
|
Depletion growth estimate of 7% to 11%.
|
·
|
Average price increase of 1%-2%.
|
·
|
Growth in contract brewing revenue of 25% to 50% as a result of new partnerships.
|
·
|
Gross margin rate of 28.5% to 30.5%. As we continue to optimize our brewing locations and improve our capacity utilization and efficiency, we expect our gross margin rate to expand 500-700 basis points over the next five years.
|
·
|
SG&A expense ranging from $52 million to $54 million primarily reflecting reinvestment into our sales and marketing infrastructure.
|
·
|
Capital expenditures of approximately $15 million to $20 million, continuing our investments in capacity and efficiency improvements, quality initiatives and restaurant and retail.
|
Media Contact:
|
Investor Contact:
|
Jenny McLean
|
Edwin Smith
|
Craft Brew Alliance, Inc.
|
Craft Brew Alliance, Inc.
|
(503) 331-7248
|
(503) 972-7884
|
jenny.mclean@craftbrew.com
|
ed.smith@craftbrew.com
|
|
Three Months Ended
December 31,
|
Years Ended
December 31,
|
||||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
|
|
||||||||||||||
Sales
|
$
|
47,320
|
$
|
44,897
|
$
|
192,433
|
$
|
182,018
|
||||||||
Less excise taxes
|
3,110
|
2,961
|
13,253
|
12,731
|
||||||||||||
Net sales
|
44,210
|
41,936
|
179,180
|
169,287
|
||||||||||||
Cost of sales
|
32,698
|
30,579
|
128,919
|
119,261
|
||||||||||||
Gross profit
|
11,512
|
11,357
|
50,261
|
50,026
|
||||||||||||
As percentage of net sales
|
26.0
|
%
|
27.1
|
%
|
28.1
|
%
|
29.6
|
%
|
||||||||
Selling, general and administrative expenses
|
10,149
|
10,388
|
46,461
|
44,890
|
||||||||||||
Operating income
|
1,363
|
969
|
3,800
|
5,136
|
||||||||||||
Interest expense
|
(90
|
)
|
(167
|
)
|
(464
|
)
|
(663
|
)
|
||||||||
Other income (expense), net
|
2
|
—
|
(73
|
)
|
4
|
|||||||||||
Income before income taxes
|
1,275
|
802
|
3,263
|
4,477
|
||||||||||||
Income tax provision
|
529
|
481
|
1,304
|
1,951
|
||||||||||||
Net income
|
$
|
746
|
$
|
321
|
$
|
1,959
|
$
|
2,526
|
||||||||
Earnings per share:
|
||||||||||||||||
Basic and diluted earnings per share
|
$
|
0.04
|
$
|
0.02
|
$
|
0.10
|
$
|
0.13
|
||||||||
Weighted average shares outstanding:
|
||||||||||||||||
Basic
|
18,946
|
18,874
|
18,923
|
18,862
|
||||||||||||
Diluted
|
19,113
|
18,940
|
19,042
|
18,934
|
||||||||||||
|
||||||||||||||||
Total shipments (in barrels):
|
||||||||||||||||
Core Brands
|
178,300
|
168,100
|
726,300
|
675,300
|
||||||||||||
Contract Brewing
|
8,400
|
7,100
|
30,300
|
49,600
|
||||||||||||
Total shipments
|
186,700
|
175,200
|
756,600
|
724,900
|
||||||||||||
|
||||||||||||||||
Change in depletions
(1)
|
10
|
%
|
10
|
%
|
11
|
%
|
6
|
%
|
|
December 31,
|
|||||||
|
2013
|
2012
|
||||||
|
|
|
||||||
Current assets:
|
|
|
||||||
Cash and cash equivalents
|
$
|
2,726
|
$
|
5,013
|
||||
Accounts receivable, net
|
11,370
|
10,512
|
||||||
Inventories
|
16,639
|
11,749
|
||||||
Deferred income tax asset, net
|
1,345
|
1,250
|
||||||
Other current assets
|
3,403
|
3,809
|
||||||
Total current assets
|
35,483
|
32,333
|
||||||
Property, equipment and leasehold improvements, net
|
104,193
|
102,852
|
||||||
Goodwill
|
12,917
|
12,917
|
||||||
Intangible and other non-current assets, net
|
17,693
|
17,562
|
||||||
Total assets
|
$
|
170,286
|
$
|
165,664
|
||||
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
14,742
|
$
|
12,255
|
||||
Accrued salaries, wages and payroll taxes
|
4,616
|
5,267
|
||||||
Refundable deposits
|
8,252
|
7,896
|
||||||
Other accrued expenses
|
1,381
|
1,066
|
||||||
Current portion of long-term debt and capital lease obligations
|
710
|
642
|
||||||
Total current liabilities
|
29,701
|
27,126
|
||||||
Long-term debt and capital lease obligations, net
|
11,050
|
12,440
|
||||||
Other long-term liabilities
|
18,303
|
17,903
|
||||||
Total common shareholders' equity
|
111,232
|
108,195
|
||||||
Total liabilities and common shareholders' equity
|
$
|
170,286
|
$
|
165,664
|
|
Years Ended
December 31,
|
|||||||
|
2013
|
2012
|
||||||
|
|
|||||||
Cash Flows From Operating Activities:
|
|
|
||||||
Net income
|
$
|
1,959
|
$
|
2,526
|
||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
8,164
|
7,369
|
||||||
Deferred income taxes
|
374
|
1,458
|
||||||
Other, including stock-based compensation and excess tax benefit from employee stock plans
|
880
|
(138
|
)
|
|||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
(858
|
)
|
2,396
|
|||||
Inventories
|
(5,577
|
)
|
(1,855
|
)
|
||||
Other current assets
|
407
|
(994
|
)
|
|||||
Accounts payable and other accrued expenses
|
2,630
|
1,269
|
||||||
Accrued salaries, wages and payroll taxes
|
(651
|
)
|
743
|
|||||
Refundable deposits
|
1,129
|
331
|
||||||
Net cash provided by operating activities
|
8,457
|
13,105
|
||||||
Cash Flows from Investing Activities:
|
||||||||
Expenditures for property, equipment and leasehold improvements
|
(9,894
|
)
|
(9,138
|
)
|
||||
Proceeds from sale of property, equipment and leasehold improvements and other
|
-
|
37
|
||||||
Proceeds from the sale of equity interest in Fulton Street Brewery, LLC
|
-
|
418
|
||||||
Net cash used in investing activities
|
(9,894
|
)
|
(8,683
|
)
|
||||
Cash Flows from Financing Activities:
|
||||||||
Principal payments on debt and capital lease obligations
|
(1,208
|
)
|
(596
|
)
|
||||
Issuance of common stock
|
244
|
13
|
||||||
Debt issuance costs
|
(46
|
)
|
-
|
|||||
Excess tax benefit from employee stock plans
|
160
|
379
|
||||||
Net cash used in financing activities
|
(850
|
)
|
(204
|
)
|
||||
Increase (decrease) in cash and cash equivalents
|
(2,287
|
)
|
4,218
|
|||||
Cash and cash equivalents, beginning of period
|
5,013
|
795
|
||||||
Cash and cash equivalents, end of period
|
$
|
2,726
|
$
|
5,013
|
|
Three Months Ended
December 31, |
Years Ended
December 31, |
||||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
|
|
|
|
||||||||||||
|
|
|
|
|
||||||||||||
Net income
|
$
|
746
|
$
|
321
|
$
|
1,959
|
$
|
2,526
|
||||||||
Interest expense
|
90
|
167
|
464
|
663
|
||||||||||||
Income tax provision
|
529
|
481
|
1,304
|
1,951
|
||||||||||||
Depreciation expense
|
2,024
|
1,788
|
7,916
|
7,116
|
||||||||||||
Amortization expense
|
61
|
63
|
248
|
253
|
||||||||||||
Stock-based compensation
|
(38
|
)
|
18
|
594
|
547
|
|||||||||||
Loss on disposal of assets
|
8
|
7
|
195
|
23
|
||||||||||||
Adjusted EBITDA
|
$
|
3,420
|
$
|
2,845
|
$
|
12,680
|
$
|
13,079
|