☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Washington
|
91-1141254
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
Large Accelerated Filer ☐
|
Accelerated Filer ☒
|
Non-accelerated Filer ☐ (Do not check if a smaller reporting company)
|
Smaller Reporting Company ☐
|
PART I - FINANCIAL INFORMATION
|
Page
|
|
Item 1.
|
Financial Statements
|
|
2
|
||
3
|
||
4
|
||
5
|
||
6
|
||
Item 2.
|
12
|
|
Item 3.
|
20
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|
Item 4.
|
20
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PART II ‑ OTHER INFORMATION
|
||
Item 1A.
|
21
|
|
Item 6.
|
21
|
|
22
|
Item 1.
|
Financial Statements
|
March 31,
2015
|
December 31,
2014
|
|||||||
Assets
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
1,056
|
$
|
981
|
||||
Accounts receivable, net
|
14,190
|
11,741
|
||||||
Inventory, net
|
23,833
|
18,971
|
||||||
Deferred income tax asset, net
|
2,443
|
1,670
|
||||||
Other current assets
|
4,404
|
4,413
|
||||||
Total current assets
|
45,926
|
37,776
|
||||||
Property, equipment and leasehold improvements, net
|
110,690
|
110,350
|
||||||
Goodwill
|
12,917
|
12,917
|
||||||
Intangible and other assets, net
|
17,270
|
17,558
|
||||||
Total assets
|
$
|
186,803
|
$
|
178,601
|
||||
Liabilities and Shareholders' Equity
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
18,026
|
$
|
12,987
|
||||
Accrued salaries, wages and payroll taxes
|
5,202
|
5,114
|
||||||
Refundable deposits
|
7,759
|
8,152
|
||||||
Other accrued expenses
|
1,870
|
2,316
|
||||||
Current portion of long-term debt and capital lease obligations
|
1,130
|
1,157
|
||||||
Total current liabilities
|
33,987
|
29,726
|
||||||
Long-term debt and capital lease obligations, net of current portion
|
18,493
|
13,720
|
||||||
Fair value of derivative financial instruments
|
632
|
503
|
||||||
Deferred income tax liability, net
|
18,536
|
18,570
|
||||||
Other liabilities
|
700
|
665
|
||||||
Total liabilities
|
72,348
|
63,184
|
||||||
Commitments and contingencies
|
||||||||
Common shareholders' equity:
|
||||||||
Common stock, $0.005 par value. Authorized 50,000,000 shares; issued and outstanding 19,115,396 and 19,115,396
|
96
|
96
|
||||||
Additional paid-in capital
|
138,671
|
138,391
|
||||||
Accumulated other comprehensive loss
|
(391
|
)
|
(312
|
)
|
||||
Accumulated deficit
|
(23,921
|
)
|
(22,758
|
)
|
||||
Total common shareholders' equity
|
114,455
|
115,417
|
||||||
Total liabilities and common shareholders' equity
|
$
|
186,803
|
$
|
178,601
|
Three Months Ended March 31,
|
||||||||
2015
|
2014
|
|||||||
Sales
|
$
|
44,619
|
$
|
47,017
|
||||
Less excise taxes
|
2,910
|
3,191
|
||||||
Net sales
|
41,709
|
43,826
|
||||||
Cost of sales
|
30,547
|
31,986
|
||||||
Gross profit
|
11,162
|
11,840
|
||||||
Selling, general and administrative expenses
|
12,953
|
12,062
|
||||||
Operating loss
|
(1,791
|
)
|
(222
|
)
|
||||
Interest expense
|
(121
|
)
|
(101
|
)
|
||||
Other income (expense), net
|
6
|
(6
|
)
|
|||||
Loss before income taxes
|
(1,906
|
)
|
(329
|
)
|
||||
Income tax benefit
|
(743
|
)
|
(128
|
)
|
||||
Net loss
|
$
|
(1,163
|
)
|
$
|
(201
|
)
|
||
Basic and diluted net loss per share
|
$
|
(0.06
|
)
|
$
|
(0.01
|
)
|
||
Shares used in basic and diluted per share calculations
|
19,115
|
18,976
|
Three Months Ended March 31,
|
||||||||
2015
|
2014
|
|||||||
Net loss
|
$
|
(1,163
|
)
|
$
|
(201
|
)
|
||
Unrealized loss on derivative hedge transactions, net of tax
|
(79
|
)
|
(148
|
)
|
||||
Comprehensive loss
|
$
|
(1,242
|
)
|
$
|
(349
|
)
|
Three Months Ended March 31,
|
||||||||
2015
|
2014
|
|||||||
Cash flows from operating activities:
|
||||||||
Net loss
|
$
|
(1,163
|
)
|
$
|
(201
|
)
|
||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
||||||||
Depreciation and amortization
|
2,288
|
2,096
|
||||||
Loss on sale or disposal of Property, equipment and leasehold improvements
|
215
|
23
|
||||||
Deferred income taxes
|
(757
|
)
|
(326
|
)
|
||||
Stock-based compensation
|
280
|
171
|
||||||
Excess tax benefit from employee stock plans
|
-
|
(93
|
)
|
|||||
Other
|
(140
|
)
|
(293
|
)
|
||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable, net
|
(2,449
|
)
|
336
|
|||||
Inventories
|
(4,491
|
)
|
(1,353
|
)
|
||||
Other current assets
|
9
|
(645
|
)
|
|||||
Accounts payable and other accrued expenses
|
4,409
|
2,228
|
||||||
Accrued salaries, wages and payroll taxes
|
88
|
322
|
||||||
Refundable deposits
|
(149
|
)
|
268
|
|||||
Net cash provided by (used in) operating activities
|
(1,860
|
)
|
2,533
|
|||||
Cash flows from investing activities:
|
||||||||
Expenditures for Property, equipment and leasehold improvements
|
(3,228
|
)
|
(2,352
|
)
|
||||
Proceeds from sale of property, equipment and leasehold improvements
|
385
|
-
|
||||||
Net cash used in investing activities
|
(2,843
|
)
|
(2,352
|
)
|
||||
Cash flows from financing activities:
|
||||||||
Principal payments on debt and capital lease obligations
|
(122
|
)
|
(152
|
)
|
||||
Net borrowings under revolving line of credit
|
4,900
|
-
|
||||||
Proceeds from issuances of common stock
|
-
|
46
|
||||||
Excess tax benefit from employee stock plans
|
-
|
93
|
||||||
Net cash provided by (used in) financing activities
|
4,778
|
(13
|
)
|
|||||
Increase in cash and cash equivalents
|
75
|
168
|
||||||
Cash and cash equivalents:
|
||||||||
Beginning of period
|
981
|
2,726
|
||||||
End of period
|
$
|
1,056
|
$
|
2,894
|
||||
Supplemental disclosure of cash flow information:
|
||||||||
Cash paid for interest
|
$
|
148
|
$
|
124
|
||||
Cash paid for income taxes, net
|
40
|
74
|
||||||
Supplemental disclosure of non-cash information:
|
||||||||
Purchases of Property, equipment and leasehold improvements included in Accounts payable at end of period
|
$
|
819
|
$
|
508
|
Note 1. | Basis of Presentation |
Note 2. | Recent Accounting Pronouncements |
Note 3. | Cash and Cash Equivalents |
Note 4. | Inventories |
March 31,
2015
|
December 31,
2014
|
|||||||
Raw materials
|
$
|
5,204
|
$
|
4,414
|
||||
Work in process
|
3,740
|
2,781
|
||||||
Finished goods
|
11,614
|
8,986
|
||||||
Packaging materials
|
1,264
|
627
|
||||||
Promotional merchandise
|
1,402
|
1,531
|
||||||
Pub food, beverages and supplies
|
609
|
632
|
||||||
$
|
23,833
|
$
|
18,971
|
Note 5. | Related Party Transactions |
Three Months Ended
March 31,
|
||||||||
2015
|
2014
|
|||||||
Gross sales to A-B
|
$
|
35,666
|
$
|
38,452
|
||||
Margin fee paid to A-B, classified as a reduction of Sales
|
538
|
600
|
||||||
Inventory management and other fees paid to A-B, classified in Cost of sales
|
90
|
93
|
March 31,
2015
|
December 31,
2014
|
|||||||
Amounts due from A-B related to beer sales pursuant to the A-B distributor agreement
|
$
|
9,240
|
$
|
7,846
|
||||
Refundable deposits due to A-B
|
(2,516
|
)
|
(2,629
|
)
|
||||
Amounts due to A-B for services rendered
|
(1,908
|
)
|
(1,821
|
)
|
||||
Net amount due from A-B
|
$
|
4,816
|
$
|
3,396
|
Three Months Ended
March 31,
|
||||||
2015
|
2014
|
|||||
$
|
30
|
$
|
32
|
Three Months Ended
March 31,
|
||||||
2015
|
2014
|
|||||
$
|
132
|
$
|
110
|
Note 6. | Derivative Financial Instruments |
Fair Value of Derivative Instrument
|
||||||||
March 31,
2015
|
December 31,
2014
|
|||||||
Fair value of interest rate swap
|
$
|
(632
|
)
|
$
|
(503
|
)
|
Note 7. | Fair Value Measurements |
· | Level 1 – quoted prices in active markets for identical securities as of the reporting date; |
· | Level 2 – other significant directly or indirectly observable inputs, including quoted prices for similar securities, interest rates, prepayment speeds and credit risk; and |
· | Level 3 – significant inputs that are generally less observable than objective sources, including our own assumptions in determining fair value. |
Fair Value at March 31, 2015
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Interest rate swap
|
$
|
-
|
$
|
(632
|
)
|
$
|
-
|
$
|
(632
|
)
|
||||||
Fair Value at December 31, 2014
|
||||||||||||||||
Interest rate swap
|
$
|
-
|
$
|
(503
|
)
|
$
|
-
|
$
|
(503
|
)
|
March 31,
2015
|
December 31, 2014
|
|||||||
Fixed-rate debt on balance sheet
|
$
|
1,396
|
$
|
1,456
|
||||
Estimated fair value of fixed-rate debt.
|
$
|
1,448
|
$
|
1,513
|
Note 8. | Segment Results and Concentrations |
Three Months Ended March 31,
|
||||||||||||
2015
|
Beer
Related
|
Pubs
|
Total
|
|||||||||
Net sales
|
$
|
35,558
|
$
|
6,151
|
$
|
41,709
|
||||||
Gross profit
|
$
|
10,566
|
$
|
596
|
$
|
11,162
|
||||||
Gross margin
|
29.7
|
%
|
9.7
|
%
|
26.8
|
%
|
||||||
2014
|
||||||||||||
Net sales
|
$
|
37,814
|
$
|
6,012
|
$
|
43,826
|
||||||
Gross profit
|
$
|
11,047
|
$
|
793
|
$
|
11,840
|
||||||
Gross margin
|
29.2
|
%
|
13.2
|
%
|
27.0
|
%
|
Three Months Ended March 31,
|
|||||||
2015
|
2014
|
||||||
78.7
|
%
|
80.5
|
%
|
March 31,
2015
|
December 31, 2014
|
||||||
65.1
|
%
|
66.8
|
%
|
Note 9.
|
Significant Stock-Based Plan Activity and Stock-Based Compensation
|
Three Months Ended
March 31,
|
||||||||
2015
|
2014
|
|||||||
Selling, general and administrative expense
|
$
|
251
|
$
|
154
|
||||
Cost of sales
|
29
|
17
|
||||||
Total Stock-based compensation expense
|
$
|
280
|
$
|
171
|
Note 10. | Earnings Per Share |
Three Months Ended
March 31,
|
||||||||
2015
|
2014
|
|||||||
Stock-based awards not included in diluted per share calculations as they would be antidilutive (in thousands)
|
165
|
126
|
Three Months Ended
March 31,
|
Net
Sales
|
Net
Loss
|
Number of
Barrels
Sold
|
|||
2015
|
$41.7 million
|
$(1.2) million
|
167,700
|
|||
2014
|
$43.8 million
|
$(0.2) million
|
182,800
|
Three Months Ended
March 31,
|
||||||||
2015
|
2014
|
|||||||
Sales
|
107.0
|
%
|
107.3
|
%
|
||||
Less excise tax
|
7.0
|
7.3
|
||||||
Net sales
|
100.0
|
100.0
|
||||||
Cost of sales
|
73.2
|
73.0
|
||||||
Gross profit
|
26.8
|
27.0
|
||||||
Selling, general and administrative expenses
|
31.1
|
27.5
|
||||||
Operating loss
|
(4.3
|
)
|
(0.5
|
)
|
||||
Interest expense
|
(0.3
|
)
|
(0.2
|
)
|
||||
Other income (expense), net
|
0.0
|
0.0
|
||||||
Loss before income taxes
|
(4.6
|
)
|
(0.8
|
)
|
||||
Income tax benefit
|
(1.8
|
)
|
(0.3
|
)
|
||||
Net loss
|
(2.8
|
)%
|
(0.5
|
)%
|
(1)
|
Percentages may not add due to rounding.
|
Three Months Ended March 31,
|
||||||||||||
2015
|
Beer
Related
|
Pubs
|
Total
|
|||||||||
Net sales
|
$
|
35,558
|
$
|
6,151
|
$
|
41,709
|
||||||
Gross profit
|
$
|
10,566
|
$
|
596
|
$
|
11,162
|
||||||
Gross margin
|
29.7
|
%
|
9.7
|
%
|
26.8
|
%
|
||||||
2014
|
||||||||||||
Net sales
|
$
|
37,814
|
$
|
6,012
|
$
|
43,826
|
||||||
Gross profit
|
$
|
11,047
|
$
|
793
|
$
|
11,840
|
||||||
Gross margin
|
29.2
|
%
|
13.2
|
%
|
27.0
|
%
|
Three Months Ended March 31,
|
Dollar
|
|||||||||||||||
Sales by Category
|
2015
|
2014
|
Change
|
% Change
|
||||||||||||
A-B and A-B related
|
$
|
35,128
|
$
|
37,852
|
$
|
(2,724
|
)
|
(7.2
|
)%
|
|||||||
Contract brewing and beer related
(1)
|
3,340
|
3,153
|
187
|
5.9
|
%
|
|||||||||||
Excise taxes
|
(2,910
|
)
|
(3,191
|
)
|
281
|
(8.8
|
)%
|
|||||||||
Net beer related sales
|
35,558
|
37,814
|
(2,256
|
)
|
(6.0
|
)%
|
||||||||||
Pubs
(2)
|
6,151
|
6,012
|
139
|
2.3
|
%
|
|||||||||||
Net sales
|
$
|
41,709
|
$
|
43,826
|
$
|
(2,117
|
)
|
(4.8
|
)%
|
(1)
|
Beer related includes international beer sales.
|
(2)
|
Pubs sales include sales of promotional merchandise and sales of beer directly to customers.
|
Three Months
Ended March 31,
|
2015
Shipments
|
2014
Shipments
|
Increase
(Decrease)
|
%
Change
|
Change in
Depletions
(1)
|
|||||||||||||||
A-B and A-B related
|
151,400
|
167,300
|
(15,900
|
)
|
(9.5
|
)%
|
1
|
%
|
||||||||||||
Contract brewing and beer related
(2)
|
14,200
|
13,100
|
1,100
|
8.4
|
%
|
|||||||||||||||
Pubs
|
2,100
|
2,400
|
(300
|
)
|
(12.5
|
)%
|
||||||||||||||
Total
|
167,700
|
182,800
|
(15,100
|
)
|
(8.3
|
)%
|
(1)
|
Change in depletions reflects the year-over-year change in barrel volume sales of beer by wholesalers to retailers.
|
(2)
|
Contract brewing and beer related includes international shipments of our beers.
|
Three Months
Ended March 31,
|
2015
Shipments
|
2014
Shipments
|
Increase
(Decrease)
|
%
Change
|
Change in
Depletions
|
|||||||||||||||
Kona
|
63,200
|
63,800
|
(600
|
)
|
(0.9
|
)%
|
9
|
%
|
||||||||||||
Redhook
|
42,500
|
50,600
|
(8,100
|
)
|
(16.0
|
)%
|
(10
|
)%
|
||||||||||||
Widmer Brothers
|
42,000
|
47,900
|
(5,900
|
)
|
(12.3
|
)%
|
(3
|
)%
|
||||||||||||
Omission
|
10,800
|
9,900
|
900
|
9.1
|
%
|
33
|
%
|
|||||||||||||
Total
(1)
|
158,500
|
172,200
|
(13,700
|
)
|
(8.0
|
)%
|
1
|
%
|
(1) | Total shipments by brand include international shipments and exclude shipments produced under our contract brewing arrangements. |
Three Months Ended |
2015
|
2014
|
||||||||||||||
March 31,
|
Shipments
|
% of Total
|
Shipments
|
% of Total
|
||||||||||||
Draft
|
39,500
|
24.9
|
%
|
45,300
|
26.3
|
%
|
||||||||||
Packaged
|
119,000
|
75.1
|
%
|
126,900
|
73.7
|
%
|
||||||||||
Total
|
158,500
|
100.0
|
%
|
172,200
|
100.0
|
%
|
Three Months Ended
March 31,
|
Dollar
|
|||||||||||||||
2015
|
2014
|
Change
|
% Change
|
|||||||||||||
Beer Related
|
$
|
24,992
|
$
|
26,767
|
$
|
(1,775
|
)
|
(6.6
|
)%
|
|||||||
Pubs
|
5,555
|
5,219
|
336
|
6.4
|
%
|
|||||||||||
Total
|
$
|
30,547
|
$
|
31,986
|
$
|
(1,439
|
)
|
(4.5
|
)%
|
Three Months Ended March 31,
|
||||||||
2015
|
2014
|
|||||||
Capacity utilization
|
58
|
%
|
68
|
%
|
Three Months Ended
March 31,
|
Dollar
|
|||||||||||||||
2015
|
2014
|
Change
|
% Change
|
|||||||||||||
Beer Related
|
$
|
10,566
|
$
|
11,047
|
$
|
(481
|
)
|
(4.4
|
)%
|
|||||||
Pubs
|
596
|
793
|
(197
|
)
|
(24.8
|
)%
|
||||||||||
Total
|
$
|
11,162
|
$
|
11,840
|
$
|
(678
|
)
|
(5.7
|
)%
|
Three Months Ended
March 31,
|
||||||||
2015
|
2014
|
|||||||
Beer Related
|
29.7
|
%
|
29.2
|
%
|
||||
Pubs
|
9.7
|
%
|
13.2
|
%
|
||||
Overall
|
26.8
|
%
|
27.0
|
%
|
Three Months Ended
March 31,
|
Dollar
|
|||||||||||||||
2015
|
2014
|
Change
|
% Change
|
|||||||||||||
$
|
12,953
|
$
|
12,062
|
$
|
891
|
7.4
|
%
|
|||||||||
As a % of Net sales
|
31.1
|
%
|
27.5
|
%
|
Three Months Ended
March 31,
|
Dollar
|
||||||||||||||
2015
|
2014
|
Change
|
% Change
|
||||||||||||
$
|
121
|
$
|
101
|
$
|
20
|
19.8
|
%
|
Three Months Ended
March 31,
|
||||||||
2015
|
2014
|
|||||||
Average debt outstanding
|
$
|
18,152
|
$
|
11,667
|
||||
Average interest rate
|
1.53
|
%
|
2.06
|
%
|
Three Months Ended
March 31,
|
||||||||
2015
|
2014
|
|||||||
Cash flows provided by (used in) operating activities
|
$
|
(1,860
|
)
|
$
|
2,533
|
|||
Cash flows used in investing activities
|
(2,843
|
)
|
(2,352
|
)
|
||||
Cash flows provided by (used in) financing activities
|
4,778
|
(13
|
)
|
|||||
Increase in Cash and cash equivalents
|
$
|
75
|
$
|
168
|
· | state NOLs of $104,000, tax-effected; and |
· | federal alternative minimum tax (“AMT”) credit carry forwards of $332,000. |
CRAFT BREW ALLIANCE, INC.
|
|||
May 6, 2015
|
BY:
|
/s/ Joseph K. Vanderstelt
|
|
Joseph K. Vanderstelt
|
|||
Chief Financial Officer
|
Performance Goal
|
% of Award Earned
|
"Company"
|
CRAFT BREW ALLIANCE, INC.
|
||
By
|
|
||
[Name]
|
|||
[Title]
|
|||
"Participant"
|
|
|
Sincerely,
|
|
/s/Andrew J. Thomas
|
|
Andrew J. Thomas
|
|
Chief Executive Officer
|
|
Acknowledged and Agreed:
|
|
/s/Joseph K. Vanderstelt
|
|
Joseph Vanderstelt
|
|
Date: April 27, 2015
|
Company:
|
Employee:
|
||||
Craft Brew Alliance, Inc. | |||||
By:
|
/s/Andrew J. Thomas
|
/s/Joseph K. Vanderstelt
|
|||
Name:
|
Andrew J. Thomas
|
Joseph Vanderstelt
|
|||
Title:
|
Chief Executive Officer
|
Date:
|
April 27, 2015
|
||
Date:
|
April 27, 2015
|
1. | I have reviewed this quarterly report on Form 10−Q of Craft Brew Alliance, Inc. (the “Registrant”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
4. | The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a−15(e) and 15d−15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a−15(f) and 15d−15(f)) for the Registrant and we have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c.
|
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
|
5. | The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): |
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
|
Date: May 6, 2015
|
||
By:
|
/s/ Andrew J. Thomas
|
|
Andrew J. Thomas
|
||
Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10−Q of Craft Brew Alliance, Inc. (the “Registrant”);
|
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
4. | The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a−15(e) and 15d−15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a−15(f) and 15d−15(f)) for the Registrant and we have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
5. | The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
Date: May 6, 2015
|
||
By:
|
/s/ Joseph K. Vanderstelt
|
|
Joseph K. Vanderstelt
|
||
Chief Financial Officer
|
1.
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
|
Date: May 6, 2015
|
||
BY:
|
/s/ Andrew J. Thomas
|
|
Andrew J. Thomas
|
||
Chief Executive Officer
|
||
(Principal Executive Officer)
|
||
BY:
|
/s/ Joseph K. Vanderstelt
|
|
Joseph K. Vanderstelt
|
||
Chief Financial Officer
|
||
(Principal Financial Officer)
|
· |
Depletion volume grew 1% over the first quarter of 2014, primarily due to the continued momentum for our core flagship brands, including Kona Longboard Lager, Widmer Brothers Hefeweizen, and Omission, our innovative craft beer brewed with traditional beer ingredients and specially crafted to remove gluten.
|
o |
In our home markets of Hawaii, Oregon, and Washington, depletion volume grew 8% over the first quarter of 2014, which we attribute to the continued strategic focus on strengthening our core brands in their home states.
|
· |
Net sales and total beer shipments decreased 5% and 8%, respectively, compared to the first quarter of 2014. The decreases reflect the higher-than-average sales and beer shipments reported in the first quarter of 2014 as we adjusted for out-of-stocks that challenged us in 2013.
|
o |
As wholesaler depletions increased and shipments decreased in the first quarter, we lowered our wholesaler inventories, reflecting continued efforts to optimize wholesaler inventory levels.
|
· |
Our beer gross margin rate increased 50 basis points to 29.7% in the first quarter, compared to 29.2% in the first quarter last year, due to increased pricing and lower distribution costs on a per barrel basis. The increase was partially offset by planned lower capacity utilization in our owned breweries as we fully integrated our Memphis operations. Our restaurant gross margin rate decreased by 350 basis points to 9.7%, compared to 13.2%, due to closures resulting from inclement weather during the first quarter and the closure of our Koko pub for a full remodel. As a result, our combined first quarter gross margin rate decreased 20 basis points to 26.8%, compared to 27.0% for the first quarter last year.
|
· |
To address the wide variances in quarterly results and provide a more representative view into our financial performance, we are sharing trailing 12-month comparisons for the periods ended March 31, 2015 and March 31, 2014.
|
o | For those periods, our beer shipments increased 4%, depletions increased 5%, and net sales increased 6%. |
o |
Our beer gross margin expanded by 110 basis points to 31.9% and restaurant gross margin declined by 90 basis points to 12.6% for the same 12-month periods, for a combined gross margin expansion of 80 basis points to 29.3%, compared to 28.5%.
|
· |
Owned capacity utilization decreased to 58% in the first quarter of 2015 compared to 68% in the first quarter of 2014, which reflects the addition of our brewing operations in Memphis, as well as continued efforts to balance and normalize inventories.
|
· | As a percentage of net sales, our selling, general and administrative expense (“SG&A”) increased to 31% in the first quarter of 2015 from 28% in the first quarter of 2014, primarily due to the decrease in our net sales. |
· | Diluted loss per share for the first quarter of 2015 was $0.06, compared to $0.01 for the same period last year. |
· | Owned beer shipment growth between 6% and 8%. [Note: We are adjusting our guidance in response to analyst feedback and to align with industry practices. We will not provide annual depletion guidance in our financial press releases, but we will share actuals on analyst calls and in 10-K and 10-Q filings.] |
· | Average price increase of 1% to 2%. |
· | A range in contract brewing revenue, between growth of 10% to a decline of 10%, as we continue to manage the most efficient use of our owned capacity. |
· | Gross margin rate of 30.5% to 31.5%. We continue to expect gross margin expansion to 35% in 2017, through ongoing efforts to optimize our brewing locations and improve our capacity utilization and efficiency. |
· | SG&A expense ranging from $58 million to $62 million, primarily reflecting reinvestment into our sales and marketing infrastructure, as well as expanded consumer and trade programming. |
· | Capital expenditures of approximately $17 million to $21 million, which will support the recently announced expansion project start-up costs, as well as continued investments in quality, safety, sustainability, capacity and efficiency. |
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
March 31,
|
||||||||
2015
|
2014
|
|||||||
Sales
|
$
|
44,619
|
$
|
47,017
|
||||
Less excise taxes
|
2,910
|
3,191
|
||||||
Net sales
|
41,709
|
43,826
|
||||||
Cost of sales
|
30,547
|
31,986
|
||||||
Gross profit
|
11,162
|
11,840
|
||||||
As percentage of net sales
|
26.8
|
%
|
27.0
|
%
|
||||
Selling, general and administrative expenses
|
12,953
|
12,062
|
||||||
Operating loss
|
(1,791
|
)
|
(222
|
)
|
||||
Interest expense
|
(121
|
)
|
(101
|
)
|
||||
Other income (expense), net
|
6
|
(6
|
)
|
|||||
Loss before income taxes
|
(1,906
|
)
|
(329
|
)
|
||||
Income tax benefit
|
(743
|
)
|
(128
|
)
|
||||
Net loss
|
$
|
(1,163
|
)
|
$
|
(201
|
)
|
||
Loss per share:
|
||||||||
Basic and diluted net loss per share
|
$
|
(0.06
|
)
|
$
|
(0.01
|
)
|
||
Weighted average shares outstanding:
|
||||||||
Basic and diluted
|
19,115
|
18,976
|
||||||
Total shipments (in barrels):
|
||||||||
Core Brands
|
158,500
|
172,200
|
||||||
Contract Brewing
|
9,200
|
10,600
|
||||||
Total shipments
|
167,700
|
182,800
|
||||||
Change in depletions
(1)
|
1
|
%
|
8
|
%
|
(1) | Change in depletions reflects the period-over-period change in barrel volume sales of beer by wholesalers to retailers. |
March 31,
|
||||||||
2015
|
2014
|
|||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
1,056
|
$
|
2,894
|
||||
Accounts receivable, net
|
14,190
|
11,035
|
||||||
Inventories, net
|
23,833
|
18,490
|
||||||
Deferred income tax asset, net
|
2,443
|
1,553
|
||||||
Other current assets
|
4,404
|
4,047
|
||||||
Total current assets
|
45,926
|
38,019
|
||||||
Property, equipment and leasehold improvements, net
|
110,690
|
103,917
|
||||||
Goodwill
|
12,917
|
12,917
|
||||||
Intangible and other non-current assets, net
|
17,270
|
17,412
|
||||||
Total assets
|
$
|
186,803
|
$
|
172,265
|
||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
18,026
|
$
|
16,749
|
||||
Accrued salaries, wages and payroll taxes
|
5,202
|
4,938
|
||||||
Refundable deposits
|
7,759
|
7,774
|
||||||
Other accrued expenses
|
1,870
|
1,685
|
||||||
Current portion of long-term debt and capital lease obligations
|
1,130
|
491
|
||||||
Total current liabilities
|
33,987
|
31,637
|
||||||
Long-term debt and capital lease obligations, net of current portion
|
18,493
|
11,088
|
||||||
Other long-term liabilities
|
19,868
|
18,347
|
||||||
Total common shareholders' equity
|
114,455
|
111,193
|
||||||
Total liabilities and common shareholders' equity
|
$
|
186,803
|
$
|
172,265
|
Three Months Ended
March 31,
|
||||||||
2015
|
2014
|
|||||||
Cash Flows From Operating Activities:
|
||||||||
Net loss
|
$
|
(1,163
|
)
|
$
|
(201
|
)
|
||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
||||||||
Depreciation and amortization
|
2,288
|
2,096
|
||||||
Loss on sale or disposal of Property, equipment and leasehold improvements
|
215
|
23
|
||||||
Deferred income taxes
|
(757
|
)
|
(326
|
)
|
||||
Other, including stock-based compensation and excess tax benefit from employee stock plans
|
140
|
(215
|
)
|
|||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
(2,449
|
)
|
336
|
|||||
Inventories
|
(4,491
|
)
|
(1,353
|
)
|
||||
Other current assets
|
9
|
(645
|
)
|
|||||
Accounts payable and other accrued expenses
|
4,409
|
2,228
|
||||||
Accrued salaries, wages and payroll taxes
|
88
|
322
|
||||||
Refundable deposits
|
(149
|
)
|
268
|
|||||
Net cash provided by (used in) operating activities
|
(1,860
|
)
|
2,533
|
|||||
Cash Flows from Investing Activities:
|
||||||||
Expenditures for property, equipment and leasehold improvements
|
(3,228
|
)
|
(2,352
|
)
|
||||
Proceeds from sale of property, equipment and leasehold improvements
|
385
|
-
|
||||||
Net cash used in investing activities
|
(2,843
|
)
|
(2,352
|
)
|
||||
Cash Flows from Financing Activities:
|
||||||||
Principal payments on debt and capital lease obligations
|
(122
|
)
|
(152
|
)
|
||||
Net borrowings under revolving line of credit
|
4,900
|
-
|
||||||
Proceeds from issuances of common stock
|
-
|
46
|
||||||
Excess tax benefit from employee stock plans
|
-
|
93
|
||||||
Net cash provided by (used in) financing activities
|
4,778
|
(13
|
)
|
|||||
Increase in cash and cash equivalents
|
75
|
168
|
||||||
Cash and cash equivalents, beginning of period
|
981
|
2,726
|
||||||
Cash and cash equivalents, end of period
|
$
|
1,056
|
$
|
2,894
|
Twelve Months Ended
March 31,
|
||||||||||||||||
2015
|
2014
|
Change
|
% Change
|
|||||||||||||
Net sales
|
$
|
197,905
|
$
|
186,397
|
$
|
11,508
|
6.2
|
%
|
||||||||
Gross profit
|
$
|
58,032
|
$
|
53,158
|
$
|
4,874
|
9.2
|
%
|
||||||||
As percentage of net sales
|
29.3
|
%
|
28.5
|
%
|
80
|
bps | ||||||||||
Selling, general and administrative expenses
|
53,891
|
46,763
|
7,128
|
15.2
|
%
|
|||||||||||
Operating income
|
$
|
4,141
|
$
|
6,395
|
$
|
(2,254
|
)
|
(35.2
|
)%
|
|||||||
Net income
|
$
|
2,155
|
$
|
3,532
|
$
|
(1,377
|
)
|
(39.0
|
)%
|
|||||||
Basic and diluted net income per share
|
$
|
0.11
|
$
|
0.19
|
$
|
(0.08
|
)
|
(42.1
|
)%
|
|||||||
Total shipments (in barrels):
|
||||||||||||||||
Core Brands
|
776,800
|
750,300
|
26,500
|
3.5
|
%
|
|||||||||||
Contract Brewing
|
38,300
|
33,400
|
4,900
|
14.7
|
%
|
|||||||||||
Total shipments
|
815,100
|
783,700
|
31,400
|
4.0
|
%
|
|||||||||||
Change in depletions
(1)
|
5
|
%
|
11
|
%
|
(1) | Change in depletions reflects the period-over-period change in barrel volume sales of beer by wholesalers to retailers. |
Three Months Ended
March 31,
|
||||||||
2015
|
2014
|
|||||||
Net loss
|
$
|
(1,163
|
)
|
$
|
(201
|
)
|
||
Interest expense
|
121
|
101
|
||||||
Income tax benefit
|
(743
|
)
|
(128
|
)
|
||||
Depreciation expense
|
2,227
|
2,036
|
||||||
Amortization expense
|
61
|
60
|
||||||
Stock-based compensation
|
321
|
171
|
||||||
Loss on disposal of assets
|
215
|
23
|
||||||
Adjusted EBITDA
|
$
|
1,039
|
$
|
2,062
|