☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
2019
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
MASSACHUSETTS 04-3284048(State or other jurisdiction ofincorporation or organization) SAM (I.R.S. EmployerIdentification No.)Class B Common Stock, $0.1 par value Not applicable Unregistered One Design Center Place, Suite 850, Boston, Massachusetts(Address of principal executive offices)02210(Zip Code)(617)368-5000(Registrant’s telephone number, including area code) Non-accelerated filer ☐
Class A Common Stock, $.01 par value | 9,185,036 | |||
Class B Common Stock, $.01 par value | 2,917,983 | |||
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September
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PART I. | ||||||||||||
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Item 1. | 3 | |||||||||||
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Item 2. |
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Item 3. | ||||||||||||
Item 4. | 23 | |||||||||||
PART II. | ||||||||||||
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Item 1A. | ||||||||||||
Item 2. |
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Item 3. | 24 | |||||||||||
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Item 5. | 24 | |||||||||||
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EX-31.1 Section 302 CEO Certification | ||||||||||||
EX-31.2 Section 302 CFO Certification | ||||||||||||
EX-32.1 Section 906 CEO Certification | ||||||||||||
EX-32.2 Section 906 CFO Certification |
EX-31.1 Section 302 CEO Certification
EX-31.2 Section 302 CFO Certification
EX-32.1 Section 906 CEO Certification
EX-32.2 Section 906 CFO Certification
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
September 29, 2018 | December 30, 2017 | |||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 68,887 | $ | 65,637 | ||||
Accounts receivable, net of allowance for doubtful accounts of $39 and $0 as of September 29, 2018 and December 30, 2017, respectively | 52,812 | 33,749 | ||||||
Inventories | 72,254 | 50,651 | ||||||
Prepaid expenses and other current assets | 10,252 | 10,695 | ||||||
Income tax receivable | 16,439 | 7,616 | ||||||
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Total current assets | 220,644 | 168,348 | ||||||
Property, plant and equipment, net | 387,069 | 384,280 | ||||||
Other assets | 12,308 | 13,313 | ||||||
Goodwill | 3,683 | 3,683 | ||||||
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Total assets | $ | 623,704 | $ | 569,624 | ||||
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Liabilities and Stockholders’ Equity | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 62,047 | $ | 38,141 | ||||
Accrued expenses and other current liabilities | 69,599 | 63,617 | ||||||
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Total current liabilities | 131,646 | 101,758 | ||||||
Deferred income taxes, net | 47,637 | 34,819 | ||||||
Other liabilities | 9,875 | 9,524 | ||||||
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Total liabilities | 189,158 | 146,101 | ||||||
Commitments and Contingencies (See Note G) | ||||||||
Stockholders’ Equity: | ||||||||
Class A Common Stock, $.01 par value; 22,700,000 shares authorized; 8,475,037 and 8,603,152 issued and outstanding as of September 29, 2018 and December 30, 2017, respectively | 85 | 86 | ||||||
Class B Common Stock, $.01 par value; 4,200,000 shares authorized; 3,017,983 and 3,017,983 issued and outstanding as of September 29, 2018 and December 30, 2017, respectively | 30 | 30 | ||||||
Additionalpaid-in capital | 402,056 | 372,590 | ||||||
Accumulated other comprehensive loss, net of tax | (1,503 | ) | (1,288 | ) | ||||
Retained earnings | 33,878 | 52,105 | ||||||
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Total stockholders’ equity | 434,546 | 423,523 | ||||||
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Total liabilities and stockholders’ equity | $ | 623,704 | $ | 569,624 | ||||
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June 29, | December 29, | |||||||
2019 | 2018 | |||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 3,017 | $ | 108,399 | ||||
Accounts receivable | 69,420 | 34,073 | ||||||
Inventories | 80,361 | 70,249 | ||||||
Prepaid expenses and other current assets | 16,329 | 13,136 | ||||||
Income tax receivable | 9,629 | 5,714 | ||||||
Total current assets | 178,756 | 231,571 | ||||||
Property, plant and equipment, net | 412,064 | 389,789 | ||||||
Operating right-of-use assets | 36,779 | — | ||||||
Merger consideration | 158,402 | — | ||||||
Other assets | 23,646 | 14,808 | ||||||
Goodwill | 3,683 | 3,683 | ||||||
Total assets | $ | 813,330 | $ | 639,851 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 74,906 | $ | 47,102 | ||||
Accrued expenses and other current liabilities | 73,545 | 73,412 | ||||||
Line of credit | 37,500 | — | ||||||
Current operating lease liabilities | 2,315 | — | ||||||
Total current liabilities | 188,266 | 120,514 | ||||||
Deferred income taxes, net | 55,452 | 49,169 | ||||||
Non-current operating lease liabilities | 39,239 | — | ||||||
Other liabilities | 7,572 | 9,851 | ||||||
Total liabilities | 290,529 | 179,534 | ||||||
Commitments and Contingencies (See Note I) | ||||||||
Stockholders’ Equity: | ||||||||
Class A Common Stock, $.01 par value; 22,700,000 shares authorized;8,655,955 and 8,580,593 issued and outstanding as of June 29, 2019 and December 29, 2018, respectively | 87 | 86 | ||||||
Class B Common Stock, $.01 par value; 4,200,000 shares authorized;2,917,983 and2,917,983 issued and outstanding as of June 29, 2019 and December 29, 2018, respectively | 29 | 29 | ||||||
Additional paid-in capital | 416,602 | 405,711 | ||||||
Accumulated other comprehensive loss, net of tax | (1,155 | ) | (1,197 | ) | ||||
Retained earnings | 107,238 | 55,688 | ||||||
Total stockholders’ equity | 522,801 | 460,317 | ||||||
Total liabilities and stockholders’ equity | $ | 813,330 | $ | 639,851 | ||||
Thirteen weeks ended | Thirty-nine weeks ended | |||||||||||||||
September 29, 2018 | September 30, 2017 | September 29, 2018 | September 30, 2017 | |||||||||||||
Revenue | $ | 326,852 | $ | 264,146 | $ | 818,257 | $ | 701,247 | ||||||||
Less excise taxes | 19,982 | 17,099 | 47,830 | 44,575 | ||||||||||||
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Net revenue | 306,870 | 247,047 | 770,427 | 656,672 | ||||||||||||
Cost of goods sold | 149,643 | 115,546 | 375,133 | 314,808 | ||||||||||||
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Gross profit | 157,227 | 131,501 | 395,294 | 341,864 | ||||||||||||
Operating expenses: | ||||||||||||||||
Advertising, promotional and selling expenses | 87,765 | 63,647 | 241,796 | 185,232 | ||||||||||||
General and administrative expenses | 22,734 | 16,358 | 65,951 | 54,315 | ||||||||||||
Impairment of assets | — | — | 517 | 1,505 | ||||||||||||
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Total operating expenses | 110,499 | 80,005 | 308,264 | 241,052 | ||||||||||||
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Operating income | 46,728 | 51,496 | 87,030 | 100,812 | ||||||||||||
Other income (expense), net: | ||||||||||||||||
Interest income, net | 343 | 211 | 821 | 381 | ||||||||||||
Other (expense) income, net | (51 | ) | 196 | (539 | ) | 253 | ||||||||||
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Total other income, net | 292 | 407 | 282 | 634 | ||||||||||||
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Income before income tax provision | 47,020 | 51,903 | 87,312 | 101,446 | ||||||||||||
Income tax provision | 9,013 | 18,220 | 16,460 | 32,927 | ||||||||||||
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Net income | $ | 38,007 | $ | 33,683 | $ | 70,852 | $ | 68,519 | ||||||||
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Net income per common share—basic | $ | 3.25 | $ | 2.82 | $ | 6.02 | $ | 5.60 | ||||||||
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Net income per common share—diluted | $ | 3.21 | $ | 2.78 | $ | 5.96 | $ | 5.54 | ||||||||
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Weighted-average number of common shares—Class A basic | 8,557 | 8,789 | 8,646 | 9,037 | ||||||||||||
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Weighted-average number of common shares—Class B basic | 3,018 | 3,097 | 3,018 | 3,122 | ||||||||||||
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Weighted-average number of common shares—diluted | 11,702 | 12,037 | 11,773 | 12,299 | ||||||||||||
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Net income | $ | 38,007 | $ | 33,683 | $ | 70,852 | $ | 68,519 | ||||||||
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Other comprehensive income: | ||||||||||||||||
Foreign currency translation adjustment | (13 | ) | (13 | ) | 4 | (23 | ) | |||||||||
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Comprehensive income | $ | 37,994 | $ | 33,670 | $ | 70,856 | $ | 68,496 | ||||||||
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Thirteen weeks ended | Twenty-six weeks ended | |||||||||||||||
June 29, | June 30, | June 29, | June 30, | |||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Revenue | $ | 338,643 | $ | 289,574 | $ | 606,202 | $ | 491,405 | ||||||||
Less excise taxes | 20,236 | 16,474 | 36,144 | 27,848 | ||||||||||||
Net revenue | 318,407 | 273,100 | 570,058 | 463,557 | ||||||||||||
Cost of goods sold | 159,405 | 131,130 | 286,516 | 225,490 | ||||||||||||
Gross profit | 159,002 | 141,970 | 283,542 | 238,067 | ||||||||||||
Operating expenses: | ||||||||||||||||
Advertising, promotional and selling expenses | 94,079 | 86,510 | 165,802 | 154,031 | ||||||||||||
General and administrative expenses | 26,748 | 23,879 | 50,122 | 43,217 | ||||||||||||
Impairment of assets | 243 | 517 | 243 | 517 | ||||||||||||
Total operating expenses | 121,070 | 110,906 | 216,167 | 197,765 | ||||||||||||
Operating income | 37,932 | 31,064 | 67,375 | 40,302 | ||||||||||||
Other income (expense), net: | ||||||||||||||||
Interest (expense) income, net | (27 | ) | 273 | 610 | 478 | |||||||||||
Other income (expense), net | 197 | (203 | ) | (55 | ) | (488 | ) | |||||||||
Total other income (expense), net | 170 | 70 | 555 | (10 | ) | |||||||||||
Income before income tax provision | 38,102 | 31,134 | 67,930 | 40,292 | ||||||||||||
Income tax provision | 10,246 | 7,599 | 16,380 | 7,447 | ||||||||||||
Net income | $ | 27,856 | $ | 23,535 | $ | 51,550 | $ | 32,845 | ||||||||
Net income per common share - basic | $ | 2.39 | $ | 1.99 | $ | 4.42 | $ | 2.78 | ||||||||
Net income per common share - diluted | $ | 2.36 | $ | 1.98 | $ | 4.38 | $ | 2.76 | ||||||||
Weighted-average number of common shares - Class A basic | 8,648 | 8,667 | 8,627 | 8,690 | ||||||||||||
Weighted-average number of common shares - Class B basic | 2,918 | 3,018 | 2,918 | 3,018 | ||||||||||||
Weighted-average number of common shares - diluted | 11,684 | 11,787 | 11,660 | 11,809 | ||||||||||||
Net income | $ | 27,856 | $ | 23,535 | $ | 51,550 | $ | 32,845 | ||||||||
Other comprehensive income: | ||||||||||||||||
Foreign currency translation adjustment | 5 | 7 | 42 | 18 | ||||||||||||
Comprehensive income | $ | 27,861 | $ | 23,542 | $ | 51,592 | $ | 32,863 | ||||||||
STOCKHOLDERS’ EQUITY
Thirty-nine weeks ended | ||||||||
September 29, 2018 | September 30, 2017 | |||||||
Cash flows provided by operating activities: | ||||||||
Net income | $ | 70,852 | $ | 68,519 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 38,860 | 38,372 | ||||||
Impairment of assets | 517 | 1,505 | ||||||
Loss on disposal of property, plant and equipment | 45 | 571 | ||||||
Bad debt expense | 39 | 170 | ||||||
Stock-based compensation expense | 6,995 | 4,593 | ||||||
Deferred income taxes | 12,818 | (3,581 | ) | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (20,412 | ) | (6,658 | ) | ||||
Inventories | (20,836 | ) | (9,330 | ) | ||||
Prepaid expenses, income tax receivable and other assets | (8,385 | ) | 2,852 | |||||
Accounts payable | 20,560 | 5,371 | ||||||
Accrued expenses and other current liabilities | 6,309 | 6,244 | ||||||
Other liabilities | 693 | (390 | ) | |||||
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Net cash provided by operating activities | 108,055 | 108,238 | ||||||
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Cash flows used in investing activities: | ||||||||
Purchases of property, plant and equipment | (38,752 | ) | (23,415 | ) | ||||
Proceeds from disposal of property, plant and equipment | 2 | 16 | ||||||
Cash paid for acquisition of intangible assets | 5 | — | ||||||
Change in restricted cash | 131 | (4 | ) | |||||
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Net cash used in investing activities | (38,614 | ) | (23,403 | ) | ||||
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Cash flows used in financing activities: | ||||||||
Repurchase of Class A Common Stock | (88,311 | ) | (121,535 | ) | ||||
Proceeds from exercise of stock options | 21,528 | 15,159 | ||||||
Cash paid on note payable | (78 | ) | (60 | ) | ||||
Net proceeds from sale of investment shares | 670 | 611 | ||||||
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Net cash used in financing activities | (66,191 | ) | (105,825 | ) | ||||
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Change in cash and cash equivalents | 3,250 | (20,990 | ) | |||||
Cash and cash equivalents at beginning of year | 65,637 | 91,035 | ||||||
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Cash and cash equivalents at end of period | $ | 68,887 | $ | 70,045 | ||||
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Supplemental disclosure of cash flow information: | ||||||||
Income taxes paid | $ | 11,252 | $ | 22,408 | ||||
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Decrease in accounts receivable for ASU2014-09 adoption | $ | (1,310 | ) | $ | — | |||
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Income taxes refunded | $ | — | $ | 2 | ||||
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Increase (Decrease) in accounts payable for purchase of property, plant and equipment | $ | 3,346 | $ | (3,763 | ) | |||
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Class A | Class A Common | Class B | Class B | Additional | Accumulated Other | Total | ||||||||||||||||||||||||||
Common | Stock, | Common | Common | Paid-in | Comprehensive | Retained | Stockholders’ | |||||||||||||||||||||||||
Shares | Par | Shares | Stock, Par | Capital | Loss, net of tax | Earnings | Equity | |||||||||||||||||||||||||
Balance at December 29, 2018 | 8,580 | $ | 86 | 2,918 | $ | 29 | $ | 405,711 | $ | (1,197 | ) | $ | 55,688 | $ | 460,317 | |||||||||||||||||
Net income | 23,694 | 23,694 | ||||||||||||||||||||||||||||||
Stock options exercised and restricted shares activities | 54 | — | 3,704 | 3,704 | ||||||||||||||||||||||||||||
Stock-based compensation expense | 2,066 | 2,066 | ||||||||||||||||||||||||||||||
Currency translation adjustment | 37 | 37 | ||||||||||||||||||||||||||||||
Balance at March 30, 2019 | 8,634 | $ | 86 | 2,918 | $ | 29 | $ | 411,481 | $ | (1,160 | ) | $ | 79,382 | $ | 489,818 | |||||||||||||||||
Net income | 27,856 | 27,856 | ||||||||||||||||||||||||||||||
Stock options exercised and restricted shares activities | 21 | 1 | 1,377 | 1,378 | ||||||||||||||||||||||||||||
Stock-based compensation expense | 3,744 | 3,744 | ||||||||||||||||||||||||||||||
Currency translation adjustment | 5 | 5 | ||||||||||||||||||||||||||||||
Balance at June 29, 2019 | 8,655 | $ | 87 | 2,918 | $ | 29 | $ | 416,602 | $ | (1,155 | ) | $ | 107,238 | $ | 522,801 | |||||||||||||||||
Class A | Accumulated | |||||||||||||||||||||||||||||||
Class A | Common | Class B | Class B | Additional | Other | Total | ||||||||||||||||||||||||||
Common | Stock, | Common | Common | Paid-in | Comprehensive | Retained | Stockholders’ | |||||||||||||||||||||||||
Shares | Par | Shares | Stock, Par | Capital | Loss, net of tax | Earnings | Equity | |||||||||||||||||||||||||
Balance at December 30, 2017 | 8,603 | $ | 86 | 3,018 | $ | 30 | $ | 372,590 | $ | (1,288 | ) | $ | 52,105 | $ | 423,523 | |||||||||||||||||
Net income | 9,310 | 9,310 | ||||||||||||||||||||||||||||||
Stock options exercised and restricted shares activities | 188 | 2 | 20,232 | 20,234 | ||||||||||||||||||||||||||||
Stock-based compensation expense | 1,491 | 1,491 | ||||||||||||||||||||||||||||||
Repurchase of Class A Common Stock | (91 | ) | (1 | ) | (16,638 | ) | (16,639 | ) | ||||||||||||||||||||||||
Currency translation adjustment | (11 | ) | (11 | ) | ||||||||||||||||||||||||||||
One time effect of adoption of ASU 2014-09, Revenue from Contracts with Customers, net of tax of $ 329 | (982 | ) | (982 | ) | ||||||||||||||||||||||||||||
One time effect of adoption of ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income | (210 | ) | 210 | — | ||||||||||||||||||||||||||||
Balance at March 31, 2018 | 8,700 | $ | 87 | 3,018 | $ | 30 | $ | 394,313 | $ | (1,509 | ) | $ | 44,005 | $ | 436,926 | |||||||||||||||||
Net income | 23,535 | 23,535 | ||||||||||||||||||||||||||||||
Stock options exercised and restricted shares activities | 32 | — | 2,224 | 2,224 | ||||||||||||||||||||||||||||
Stock-based compensation expense | 3,079 | 3,079 | ||||||||||||||||||||||||||||||
Repurchase of Class A Common Stock | (97 | ) | (1 | ) | (23,084 | ) | (23,085 | ) | ||||||||||||||||||||||||
Currency translation adjustment | (7 | ) | (7 | ) | ||||||||||||||||||||||||||||
Balance at June 30, 2018 | 8,635 | $ | 86 | 3,018 | $ | 30 | $ | 399,616 | $ | (1,516 | ) | $ | 44,456 | $ | 442,672 | |||||||||||||||||
Twenty-six weeks ended | ||||||||
June 29, 2019 | June 30, 2018 | |||||||
Cash flows provided by operating activities: | ||||||||
Net income | $ | 51,550 | $ | 32,845 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 26,089 | 26,011 | ||||||
Impairment of assets | 243 | 517 | ||||||
Loss on disposal of property, plant and equipment | 104 | 26 | ||||||
Lease expense | 1,789 | — | ||||||
Bad debt (recovery) expense | (1 | ) | 27 | |||||
Stock-based compensation expense | 5,810 | 4,570 | ||||||
Deferred income taxes | 6,283 | 775 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (35,346 | ) | (21,651 | ) | ||||
Inventories | (14,942 | ) | (18,636 | ) | ||||
Prepaid expenses, income tax receivable and other assets | (10,962 | ) | 217 | |||||
Accounts payable | 26,320 | 20,563 | ||||||
Accrued expenses and other current liabilities | (101 | ) | 8,721 | |||||
Net lease liabilities | (1,391 | ) | — | |||||
Other liabilities | 85 | (244 | ) | |||||
Net cash provided by operating activities | 55,530 | 53,741 | ||||||
Cash flows used in investing activities: | ||||||||
Purchases of property, plant and equipment | (44,578 | ) | (25,470 | ) | ||||
Proceeds from disposal of property, plant and equipment | 179 | 2 | ||||||
Cash paid for merger | (158,402) | — | ||||||
Change in restricted cash | (188 | ) | 98 | |||||
Net cash used in investing activities | (202,989 | ) | (25,370 | ) | ||||
Cash flows provided by (used in) financing activities: | ||||||||
Repurchase of Class A Common Stock | — | (39,725 | ) | |||||
Proceeds from exercise of stock options | 4,146 | 21,529 | ||||||
Net cash paid on note payable and capital lease | (115 | ) | (78 | ) | ||||
Cash borrowed on line of credit | 86,000 | — | ||||||
Cash paid on line of credit | (48,500 | ) | — | |||||
Net proceeds from sale of investment shares | 546 | 445 | ||||||
Net cash provided (used in) by financing activities | 42,077 | (17,829 | ) | |||||
Change in cash and cash equivalents | (105,382 | ) | 10,542 | |||||
Cash and cash equivalents at beginning of year | 108,399 | 65,637 | ||||||
Cash and cash equivalents at end of period | $ | 3,017 | $ | 76,179 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Income taxes paid | $ | 13,697 | $ | 3,355 | ||||
Cash paid for amounts included in measurement of lease liabilities | $ | 1,976 | $ | — | ||||
Right-of-use assets obtained in exchange for operating lease obligations | $ | 38,524 | $ | — | ||||
Right-of-use assets obtained in exchange for capital lease obligations | $ | 2,837 | $ | — | ||||
Decrease in accounts receivable for ASU 2014-09 adoption | $ | — | $ | (1,310 | ) | |||
Increase in accounts payable for purchase of property, plant and equipment | $ | 1,484 | $ | 774 |
A. Organization and Basis of Presentation
A. | Organization and Basis of Presentation |
“American Fermentation Company”.
29, 2018.
B. Recent Accounting Pronouncements
B. | Dogfish Head Brewery Merger |
C. | Recent Accounting Pronouncements |
In March 2016, the FASB issued ASUNo. 2016-09,Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting. ASU2016-09 is part of the FASB’s initiative to simplify accounting standards. The guidance impacted several aspects of the accounting for employee share-based payment transactions, including accounting for income taxes and forfeitures, as well as classification in the consolidated statements of cash flows. Under ASU2016-09, excess tax benefits and deficiencies as a result of stock option exercises and restricted stock vesting are to be recognized as discrete items within income tax expense or benefit in the consolidated statements of comprehensive income in the reporting period in which they occur. Additionally, under ASU2016-09, excess tax benefits and deficiencies should be classified along with other income tax cash flows as an operating activity in the consolidated statements of cash flows. The Company adopted this new accounting standard prospectively in the first quarter of 2017. Prior periods have not been adjusted. Under this new accounting standard, for the thirteen weeks ended September 29, 2018 and the thirteen weeks ended September 30, 2017, $0.1 million and $0.5 million, respectively, in excess tax benefit from stock-based compensation arrangements was recognized within the income tax provision in the consolidated statements of comprehensive income and classified as an operating activity in the consolidated statements of cash flow. For the thirty-nine weeks ended September 29, 2018 and September 30, 2017, $4.0 million and $4.3 million, respectively, was recognized. The Company has not changed its forfeiture policy and continued to estimate forfeitures expected to occur to determine stock-based compensation expense.
In February 2018, the FASB issued ASUNo. 2018-02,Income Statement – Reporting Comprehensive Income (Topic 220), Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.Under this update, an entity is allowed a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. The Company early adopted this accounting standard prospectively in the first quarter of 2018. Prior periods have not been adjusted. In the first quarter of 2018, the Company reclassified $0.2 million of federal and state income tax effects of the Tax Cut and Jobs Act of 2017 related to defined benefit plans from accumulated other comprehensive income to retained earnings. The Company expects the impact of the adoption to be immaterial to its consolidated financial statements on an ongoing basis.
Accounting Pronouncements Not Yet Effective
C. Revenue Recognition
an ongoing basis.
D. | Revenue Recognition |
D. Inventories
E. | Inventories |
September 29, 2018 | December 30, 2017 | |||||||
(in thousands) | ||||||||
Current inventory: | ||||||||
Raw materials | $ | 46,037 | $ | 33,086 | ||||
Work in process | 9,467 | 6,826 | ||||||
Finished goods | 16,750 | 10,739 | ||||||
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| |||||
Total current inventory | 72,254 | 50,651 | ||||||
Long term inventory | 9,138 | 9,905 | ||||||
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| |||||
Total inventory | $ | 81,392 | $ | 60,556 | ||||
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June 29, | December 29, | |||||||
2019 | 2018 | |||||||
(in thousands) | ||||||||
Current inventory: | ||||||||
Raw materials | $ | 46,194 | $ | 44,655 | ||||
Work in process | 10,191 | 8,252 | ||||||
Finished goods | 23,976 | 17,342 | ||||||
Total current inventory | 80,361 | 70,249 | ||||||
Long term inventory | 16,449 | 11,619 | ||||||
Total inventory | $ | 96,810 | $ | 81,868 | ||||
F. | Leases |
Classification | Leases | |||||
(in thousands) | ||||||
Right-of-use assets | ||||||
Operating lease assets | Operating right-of-use assets | $ | 36,779 | |||
Capital lease assets | Property, plant and equipment, net | 2,794 | ||||
Lease Liabilities | ||||||
Current | ||||||
Operating lease liabilities | Current operating lease liabilities | 2,315 | ||||
Capital lease liabilities | Accrued expenses and other current liabilities | 537 | ||||
Non-current | ||||||
Operating lease liabilities | Non-current operating lease liabilities | 39,239 | ||||
Capital lease liabilities | Other liabilities | 2,313 |
Operating Leases | Capital Leases | Weighted-Average Remaining Term in Years | ||||||||||||||
Operating Leases | Capital Leases | |||||||||||||||
(in thousands) | ||||||||||||||||
2019 | $ | 2,557 | $ | 309 | ||||||||||||
2020 | 2,268 | 626 | ||||||||||||||
2021 | 5,379 | 626 | ||||||||||||||
2022 | 5,083 | 627 | ||||||||||||||
2023 | 4,965 | 627 | ||||||||||||||
After 2023 | 30,100 | 288 | ||||||||||||||
Total lease payments | 50,352 | 3,103 | ||||||||||||||
Less imputed interest (based on 3.5% weighted- average discount rate) | (8,798 | ) | (253 | ) | ||||||||||||
Present value of lease liability | $ | 41,554 | $ | 2,850 | 10.1 | 4.97 | ||||||||||
Leases | ||||
(in thousands) | ||||
2019 | $ | 4,446 | ||
2020 | 4,530 | |||
2021 | 4,370 | |||
2022 | 3,559 | |||
2023 | 1,672 | |||
Thereafter | 7,582 | |||
Total | $ | 26,159 | ||
G. | Net Income per Share |
Share—Share - Basic
Thirteen weeks ended | Thirty-nine weeks ended | |||||||||||||||
September 29, 2018 | September 30, 2017 | September 29, 2018 | September 30, 2017 | |||||||||||||
(in thousands, except per share data) | (in thousands, except per share data) | |||||||||||||||
Net income | $ | 38,007 | $ | 33,683 | $ | 70,852 | $ | 68,519 | ||||||||
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Allocation of net income for basic: | ||||||||||||||||
Class A Common Stock | $ | 27,786 | $ | 24,772 | $ | 52,051 | $ | 50,647 | ||||||||
Class B Common Stock | 9,800 | 8,730 | 18,169 | 17,493 | ||||||||||||
Unvested participating shares | 421 | 181 | 632 | 379 | ||||||||||||
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$ | 38,007 | $ | 33,683 | $ | 70,852 | $ | 68,519 | |||||||||
Weighted average number of shares for basic: | ||||||||||||||||
Class A Common Stock | 8,557 | 8,789 | 8,646 | 9,037 | ||||||||||||
Class B Common Stock* | 3,018 | 3,097 | 3,018 | 3,122 | ||||||||||||
Unvested participating shares | 130 | 65 | 105 | 67 | ||||||||||||
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11,705 | 11,951 | 11,769 | 12,226 | |||||||||||||
Net income per share for basic: | ||||||||||||||||
Class A Common Stock | $ | 3.25 | $ | 2.82 | $ | 6.02 | $ | 5.60 | ||||||||
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Class B Common Stock | $ | 3.25 | $ | 2.82 | $ | 6.02 | $ | 5.60 | ||||||||
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Thirteen weeks ended | Twenty-six weeks ended | |||||||||||||||
June 29, 2019 | June 30, 2018 | June 29, 2019 | June 30, 2018 | |||||||||||||
(in thousands, except per share data) | (in thousands, except per share data) | |||||||||||||||
Net income | $ | 27,856 | $ | 23,535 | $ | 51,550 | $ | 32,845 | ||||||||
Allocation of net income for basic: | ||||||||||||||||
Class A Common Stock | $ | 20,639 | $ | 17,290 | $ | 38,161 | $ | 24,187 | ||||||||
Class B Common Stock | 6,964 | 6,020 | 12,908 | 8,400 | ||||||||||||
Unvested participating shares | 253 | 225 | 481 | 258 | ||||||||||||
$ | 27,856 | $ | 23,535 | $ | 51,550 | $ | 32,845 | |||||||||
Weighted average number of shares for basic: | ||||||||||||||||
Class A Common Stock | 8,648 | 8,667 | 8,627 | 8,690 | ||||||||||||
Class B Common Stock* | 2,918 | 3,018 | 2,918 | 3,018 | ||||||||||||
Unvested participating shares | 106 | 112 | 109 | 93 | ||||||||||||
11,672 | 11,797 | 11,654 | 11,801 | |||||||||||||
Net income per share for basic: | ||||||||||||||||
Class A Common Stock | $ | 2.39 | $ | 1.99 | $ | 4.42 | $ | 2.78 | ||||||||
Class B Common Stock | $ | 2.39 | $ | 1.99 | $ | 4.42 | $ | 2.78 |
* | Change in Class B Common Stock resulted from the conversion of |
Thirteen weeks ended | ||||||||||||||||||||||||
September 29, 2018 | September 30, 2017 | |||||||||||||||||||||||
Earnings to Common Shareholders | Common Shares | EPS | Earnings to Common Shareholders | Common Shares | EPS | |||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||||||
As reported—basic | $ | 27,786 | 8,557 | $ | 3.25 | $ | 24,772 | 8,789 | $ | 2.82 | ||||||||||||||
Add: effect of dilutive potential common shares | ||||||||||||||||||||||||
Share-based awards | — | 127 | — | 151 | ||||||||||||||||||||
Class B Common Stock | 9,800 | 3,018 | 8,730 | 3,097 | ||||||||||||||||||||
Net effect of unvested participating shares | 5 | — | 2 | — | ||||||||||||||||||||
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Net income per common share—diluted | $ | 37,591 | 11,702 | $ | 3.21 | $ | 33,504 | 12,037 | $ | 2.78 | ||||||||||||||
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Thirty-nine weeks ended | ||||||||||||||||||||||||
September 29, 2018 | September 30, 2017 | |||||||||||||||||||||||
Earnings to Common Shareholders | Common Shares | EPS | Earnings to Common Shareholders | Common Shares | EPS | |||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||||||
As reported—basic | $ | 52,051 | 8,646 | $ | 6.02 | $ | 50,647 | 9,037 | $ | 5.60 | ||||||||||||||
Add: effect of dilutive potential common shares | ||||||||||||||||||||||||
Share-based awards | — | 109 | — | 140 | ||||||||||||||||||||
Class B Common Stock | 18,169 | 3,018 | 17,493 | 3,122 | ||||||||||||||||||||
Net effect of unvested participating shares | 5 | — | 4 | — | ||||||||||||||||||||
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Net income per common share—diluted | $ | 70,225 | 11,773 | $ | 5.96 | $ | 68,144 | 12,299 | $ | 5.54 | ||||||||||||||
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Thirteen weeks ended | ||||||||||||||||||||||||
June 29, 2019 | June 30, 2018 | |||||||||||||||||||||||
Earnings to Common Shareholders | Common Shares | EPS | Earnings to Common Shareholders | Common Shares | EPS | |||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||||||
As reported - basic | $ | 20,639 | 8,648 | $ | 2.39 | $ | 17,290 | 8,667 | $ | 1.99 | ||||||||||||||
Add: effect of dilutive potential common shares | ||||||||||||||||||||||||
Share-based awards | — | 118 | — | 102 | ||||||||||||||||||||
Class B Common Stock | 6,964 | 2,918 | 6,020 | 3,018 | ||||||||||||||||||||
Net effect of unvested participating shares | 2 | — | 2 | — | ||||||||||||||||||||
Net income per common share - diluted | $ | 27,605 | 11,684 | $ | 2.36 | $ | 23,312 | 11,787 | $ | 1.98 | ||||||||||||||
Twenty-six weeks ended | ||||||||||||||||||||||||
June 29, 2019 | June 30, 2018 | |||||||||||||||||||||||
Earnings to Common Shareholders | Common Shares | EPS | Earnings to Common Shareholders | Common Shares | EPS | |||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||||||
As reported - basic | $ | 38,161 | 8,627 | $ | 4.42 | $ | 24,187 | 8,690 | $ | 2.78 | ||||||||||||||
Add: effect of dilutive potential common shares | ||||||||||||||||||||||||
Share-based awards | — | 115 | — | 101 | ||||||||||||||||||||
Class B Common Stock | 12,908 | 2,918 | 8,400 | 3,018 | ||||||||||||||||||||
Net effect of unvested participating shares | 5 | — | 2 | — | ||||||||||||||||||||
Net income per common share - diluted | $ | 51,074 | 11,660 | $ | 4.38 | $ | 32,589 | 11,809 | $ | 2.76 | ||||||||||||||
F. Comprehensive Income or Loss
H. | Comprehensive Income or Loss |
G. Commitments and Contingencies
I. | Commitments and Contingencies |
Currently, the Company has entered into contracts for barley and wheat with two major suppliers. The contracts include crop year 2017 through 2019 and cover the Company’s barley, wheat, and malt requirements for the remainder of 2018 and all of 2019. These purchase commitments outstanding at September 29, 2018 totaled $18.9 million.
The Company sources some of its glass bottles needs pursuant to a Glass Bottle Supply Agreement with Anchor Glass Container Corporation (“Anchor”), under which Anchor is the supplier of certain glass bottles for the Company’s Cincinnati Brewery and its Pennsylvania Brewery. This agreement also establishes the terms on which Anchor may supply glass bottles to other breweries where the Company brews its beers. Under the agreement with Anchor, the Company has minimum purchase commitments that are based on Company-provided production estimates which, under normal business conditions, are expected to be fulfilled. Minimum purchase commitments under the agreement, assuming the supplier is unable to replace production cancelled by the Company, as of September 29, 2018 totaled $2.6 million.
The Company has various operating lease agreements for facilities and equipment as of September 29, 2018. Terms of these leases include, in some instances, scheduled rent increases, renewals, purchase options and maintenance costs, and vary by lease. These lease obligations expire at various dates through 2028. The contractual obligation on these lease agreements as of September 29, 2018 totaled $26.6 million.
On October 11, 2018, the Company amended an existing brewing services agreement to include a minimum capacity availability commitment by the third party brewery. The amendment grants the Company the right to extend the agreement beyond the December 31, 2021 termination date on an annual basis through December 31, 2025. The amendment requires the Company to pay up to $4 million dollars in both 2018 and 2019 for capital improvements at the third party’s brewing facilities.
H. Income Taxes
J. | Income Taxes |
In September 2017, thepenalties
Thirteen weeks ended | ||||||||
September 29, | September 30, | |||||||
2018 | 2017 | |||||||
(in thousands) | ||||||||
Summary of income tax provision | ||||||||
Tax provision based on net income | $ | 13,671 | $ | 18,753 | ||||
Accounting Method Changes | $ | (4,529 | ) | $ | — | |||
Benefit of ASU2016-09 | (129 | ) | (533 | ) | ||||
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Total income tax provision | $ | 9,013 | $ | 18,220 | ||||
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Thirty-nine weeks ended | ||||||||
September 29, | September 30, | |||||||
2018 | 2017 | |||||||
(in thousands) | ||||||||
Summary of income tax provision | ||||||||
Tax provision based on net income | $ | 24,969 | $ | 37,189 | ||||
Accounting Method Changes | $ | (4,529 | ) | $ | — | |||
Benefit of ASU2016-09 | (3,980 | ) | (4,262 | ) | ||||
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Total income tax provision | $ | 16,460 | $ | 32,927 | ||||
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Due to a change of tax accounting methods for depreciation of certain property, plant and equipment for the tax year ended December 30, 2017, the Company experienced aone-time income tax benefit for the thirteen and thirty-nine weeks ended September 29, 2018.
2018:
Thirteen weeks ended | ||||||||
June 29, 2019 | June 30, 2018 | |||||||
(in thousands) | ||||||||
Summary of income tax provision | ||||||||
Tax provision based on net income | $ | 10,499 | $ | 8,727 | ||||
Benefit of ASU 2016-09 | (253 | ) | (1,128 | ) | ||||
Total income tax provision | $ | 10,246 | $ | 7,599 | ||||
Twenty-six weeks ended | ||||||||
June 29, 2019 | June 30, 2018 | |||||||
(in thousands) | ||||||||
Summary of income tax provision | ||||||||
Tax provision based on net income | $ | 18,408 | $ | 11,298 | ||||
Benefit of ASU 2016-09 | (2,028 | ) | (3,851 | ) | ||||
Total income tax provision | $ | 16,380 | $ | 7,447 |
I. Revolving Line of Credit
K. | Revolving Line of Credit |
J. Fair Value Measures
L. | Fair Value Measures |
K. Common Stock and Stock-Based Compensation
M. | Common Stock and Stock-Based Compensation |
Shares | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Term in Years | Aggregate Intrinsic Value (in thousands) | |||||||||||||
Outstanding at December 30, 2017 | 1,156,997 | $ | 158.53 | |||||||||||||
Granted | 32,570 | 210.24 | ||||||||||||||
Forfeited | (613,630 | ) | 199.94 | |||||||||||||
Expired | — | — | ||||||||||||||
Exercised | (200,898 | ) | 106.69 | |||||||||||||
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Outstanding at September 29, 2018 | 375,039 | $ | 156.03 | 5.66 | $ | 49,310,933 | ||||||||||
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Exercisable at September 29, 2018 | 151,647 | $ | 115.91 | 3.60 | $ | 26,027,039 | ||||||||||
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Vested and expected to vest at September 29, 2018 | 352,321 | $ | 153.77 | 5.56 | $ | 47,120,023 | ||||||||||
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Shares | Weighted-Average Exercise Price | Weighted-Average RemainingContractual Term in Years | Aggregate Intrinsic Value (in thousands) | |||||||||||||
Outstanding at December 29, 2018 | 366,829 | $ | 155.75 | |||||||||||||
Granted | 31,286 | 313.56 | ||||||||||||||
Forfeited | — | — | ||||||||||||||
Expired | — | — | ||||||||||||||
Exercised | (43,866 | ) | 94.50 | |||||||||||||
Outstanding at June 29, 2019 | 354,249 | $ | 177.28 | 5.64 | $ | 71,021 | ||||||||||
Exercisable at June 29, 2019 | 131,684 | $ | 134.82 | 3.42 | $ | 31,991 | ||||||||||
Vested and expected to vest at June 29, 2019 | 325,498 | $ | 175.05 | 5.53 | $ | 65,983 | ||||||||||
On April 30, 2018, the Company granted its Chief Executive Officer a stock option to purchase 9,959 shares of the Company’s Class A Common stock with a weighted average fair value of $100.50 per share, of which all shares relate to performance-based stock options and vest through 2022.
On May 17, 2018,March 14, 2019, the Company granted options to purchase an aggregate of 5,080844 shares of the Company’s Class A Common Stock to the Company’s newly appointed
On May 31, 2018, the Company cancelled its former Chief Executive Officer’s 2016 stock option of 574,507 shares due to forfeiture upon retirement.
Number of Shares | Weighted Average Fair Value | |||||||
Non-vested at December 30, 2017 | 62,405 | $ | 155.21 | |||||
Granted | 92,775 | 207.56 | ||||||
Vested | (20,678 | ) | 156.50 | |||||
Forfeited | (7,170 | ) | 167.53 | |||||
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| |||||||
Non-vested at September 29, 2018 | 127,332 | $ | 192.45 | |||||
|
|
Number of Shares | Weighted Average Fair Value | |||||||
Non-vested at December 29, 2018 | 126,720 | $ | 192.74 | |||||
Granted | 29,504 | $ | 266.54 | |||||
Vested | (31,496 | ) | $ | 187.25 | ||||
Forfeited | (1,110 | ) | $ | 144.92 | ||||
Non-vested at June 29, 2019 | 123,618 | $ | 212.18 |
L. Subsequent Events
N. | Employee Retirement Plans |
O. | Subsequent Events |
aggregate consideration of approximately $173.0 million in cash and 429,292 shares of restricted Class A Common Stock.
29, 2018. This discussion does not include financial results of Dogfish Head Brewery which will be consolidated into the Company’s results beginning on July 3, 2019.
Thirteen Weeks Ended (in thousands, except per barrel) | ||||||||||||||||||||||||||||||||||||
September 29, 2018 | September 30, 2017 | Amount change | % change | Per barrel change | ||||||||||||||||||||||||||||||||
Barrels sold | 1,338 | 1,084 | 255 | 23.5 | % | |||||||||||||||||||||||||||||||
Per barrel | % of net revenue | Per barrel | % of net revenue | |||||||||||||||||||||||||||||||||
Net revenue | $ | 306,870 | $ | 229.27 | 100.0 | % | $ | 247,047 | $ | 228.00 | 100.0 | % | $ | 59,823 | 24.2 | % | $ | 1.27 | ||||||||||||||||||
Cost of goods | 149,643 | 111.80 | 48.8 | % | 115,546 | 106.64 | 46.8 | % | 34,097 | 29.5 | % | 5.16 | ||||||||||||||||||||||||
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Gross profit | 157,227 | 117.47 | 51.2 | % | 131,501 | 121.36 | 53.2 | % | 25,726 | 19.6 | % | (3.89 | ) | |||||||||||||||||||||||
Advertising, promotional and selling expenses | 87,765 | 65.57 | 28.6 | % | 63,647 | 58.74 | 25.8 | % | 24,118 | 37.9 | % | 6.83 | ||||||||||||||||||||||||
General and administrative expenses | 22,734 | 16.99 | 7.4 | % | 16,358 | 15.10 | 6.6 | % | 6,376 | 39.0 | % | 1.89 | ||||||||||||||||||||||||
Impairment of assets | — | — | 0.0 | % | — | — | 0.0 | % | — | 0.0 | % | — | ||||||||||||||||||||||||
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Total operating expenses | 110,499 | 82.56 | 36.0 | % | 80,005 | 73.84 | 32.4 | % | 30,494 | 38.1 | % | 8.72 | ||||||||||||||||||||||||
Operating income | 46,728 | 34.91 | 15.2 | % | 51,496 | 47.53 | 20.8 | % | (4,768 | ) | -9.3 | % | (12.62 | ) | ||||||||||||||||||||||
Other income (expense), net | 292 | 0.22 | 0.1 | % | 407 | 0.38 | 0.2 | % | (115 | ) | -28.3 | % | (0.16 | ) | ||||||||||||||||||||||
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Income before income tax expense | 47,020 | 35.13 | 15.3 | % | 51,903 | 47.90 | 21.0 | % | (4,883 | ) | -9.4 | % | (12.77 | ) | ||||||||||||||||||||||
Income tax expense | 9,013 | 6.73 | 2.9 | % | 18,220 | 16.82 | 7.4 | % | (9,207 | ) | -50.5 | % | (10.09 | ) | ||||||||||||||||||||||
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Net income | $ | 38,007 | $ | 28.40 | 12.4 | % | $ | 33,683 | $ | 31.09 | 13.6 | % | $ | 4,324 | 12.8 | % | $ | (2.69 | ) | |||||||||||||||||
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2018
Thirteen Weeks Ended (in thousands) | ||||||||||||||||||||||||||||||||||||
June 29, 2019 | June 30, 2018 | Amount change | % change | Per barrel change | ||||||||||||||||||||||||||||||||
Barrels sold | 1,374 | 1,177 | 198 | 16.8 | % | |||||||||||||||||||||||||||||||
Per barrel | % of net revenue | Per barrel | % of net revenue | |||||||||||||||||||||||||||||||||
Net revenue | $ | 318,407 | $ | 231.68 | 100.0 | % | $ | 273,100 | $ | 232.09 | 100.0 | % | $ | 45,307 | 16.6 | % | $ | (0.41 | ) | |||||||||||||||||
Cost of goods | 159,405 | 115.99 | 50.1 | % | 131,130 | 111.44 | 48.0 | % | 28,275 | 21.6 | % | 4.55 | ||||||||||||||||||||||||
Gross profit | 159,002 | 115.69 | 49.9 | % | 141,970 | 120.65 | 52.0 | % | 17,032 | 12.0 | % | (4.96 | ) | |||||||||||||||||||||||
Advertising, promotional and selling expenses | 94,079 | 68.45 | 29.5 | % | 86,510 | 73.52 | 31.7 | % | 7,569 | 8.7 | % | (5.07 | ) | |||||||||||||||||||||||
General and administrative expenses | 26,748 | 19.46 | 8.4 | % | 23,879 | 20.29 | 8.7 | % | 2,869 | 12.0 | % | (0.83 | ) | |||||||||||||||||||||||
Impairment of assets | 243 | 0.18 | 0.1 | % | 517 | 0.44 | 0.2 | % | (274 | ) | 0.0 | % | (0.26 | ) | ||||||||||||||||||||||
�� | ||||||||||||||||||||||||||||||||||||
Total operating expenses | 121,070 | 88.09 | 38.0 | % | 110,906 | 94.25 | 40.6 | % | 10,164 | 9.2 | % | (6.16 | ) | |||||||||||||||||||||||
Operating income | 37,932 | 27.60 | 11.9 | % | 31,064 | 26.40 | 11.4 | % | 6,868 | 22.1 | % | 1.20 | ||||||||||||||||||||||||
Other income | 170 | 0.12 | 0.1 | % | 70 | 0.06 | 0.0 | % | 100 | 142.9 | % | 0.06 | ||||||||||||||||||||||||
Income before income tax expense | 38,102 | 27.72 | 12.0 | % | 31,134 | 26.46 | 11.4 | % | 6,968 | 22.4 | % | 1.26 | ||||||||||||||||||||||||
Income tax expense | 10,246 | 7.46 | 3.2 | % | 7,599 | 6.46 | 2.8 | % | 2,647 | 34.8 | % | 1.00 | ||||||||||||||||||||||||
Net income | $ | 27,856 | $ | 20.27 | 8.7 | % | $ | 23,535 | $ | 20.00 | 8.6 | % | $ | 4,321 | 18.4 | % | $ | 0.27 | ||||||||||||||||||
year.
volumes.
Cincinnati breweries in 2019.
Barrels sold Net revenue Cost of goods Gross profit Advertising, promotional and selling expenses General and administrative expenses Impairment of assets Total operating expenses Operating income Other income (expense), net Income before income tax expense Income tax expense Net income 2018 shipments. price increases. Advertising, promotional and selling expenses were Thirty-nine SeptemberJune 29, 20182019 compared to Thirty-nine SeptemberJune 30, 2017 Thirty-nine Weeks Ended
(in thousands, except per barrel) September 29,
2018 September 30,
2017 Amount
change % change Per barrel
change 3,328 2,869 458 16.0 % Per barrel % of net
revenue Per barrel % of net
revenue $ 770,427 $ 231.51 100.0 % $ 656,672 $ 228.86 100.0 % $ 113,755 17.3 % $ 2.65 375,133 112.73 48.7 % 314,808 109.71 47.9 % 60,325 19.2 % 3.02 395,294 118.79 51.3 % 341,864 119.14 52.1 % 53,430 15.6 % (0.35 ) 241,796 72.66 31.4 % 185,232 64.56 28.2 % 56,564 30.5 % 8.10 65,951 19.82 8.6 % 54,315 18.93 8.3 % 11,636 21.4 % 0.89 517 0.16 0.1 % 1,505 0.52 0.2 % (988 ) -65.6 % (0.36 ) 308,264 92.63 40.0 % 241,052 84.01 36.7 % 67,212 27.9 % 8.62 87,030 26.15 11.3 % 100,812 35.13 15.4 % (13,782 ) -13.7 % (8.98 ) 282 0.08 0.0 % 634 0.22 0.1 % (352 ) -55.5 % (0.14 ) 87,312 26.24 11.3 % 101,446 35.35 15.4 % (14,134 ) -13.9 % (9.11 ) 16,460 4.95 2.1 % 32,927 11.48 5.0 % (16,467 ) -50.0 % (6.53 ) $ 70,852 $ 21.29 9.2 % $ 68,519 $ 23.88 10.4 % $ 2,333 3.4 % $ (2.59 )
change
change %
revenue
revenue $ $ % $ $ % $ % $ % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % $ $ % $ $ % $ % $ $113.8$106.5 million, or 17.3%23.0%, to $770.4$570.1 million for the thirty-nine SeptemberJune 29, 2018,2019, as compared to $656.7$463.6 million for the thirty-nine SeptemberJune 30, 2017,2018, primarily as a result of an increase in shipments and increases in net revenue per barrel.16%23.2% to 3,328,0002,451,000 barrels for the thirty-nine SeptemberJune 29, 2018,2019, as compared to 2,869,0001,989,000 barrels for the thirty-nine SeptemberJune 30, 2017,2018, primarily duetoincreasesdue toSpiked & Sparkling,Hard Seltzer and Twisted Tea and Angry Orchardbrand products, partially offset by decreases in shipments of Samuel Adams and Angry Orchard brand products. thirty-nine SeptemberJune 29, 20182019 increased by approximately 13%15% compared to the thirty-nine SeptemberJune 30, 2017,2018, primarily due to increases in depletions of Truly Spiked & Sparkling,Hard Seltzer and Twisted Tea and Angry Orchard brand products, partially offset by decreases in Samuel Adams and Angry Orchard brand products.increaseddecreased by 1.2%0.2% to $231.51$232.60 per barrel for the thirty-nine SeptemberJune 29, 2018,2019, as compared to $228.86$233.02 per barrel for the comparable period in 2017,2018, primarily due to pricing increases and lower excise taxes due to the Tax Cuts and Jobs Act of 2017package mix factors that were only partially offset by package mix.$112.73$116.90 per barrel for the thirty-nine SeptemberJune 29, 2018,2019, as compared to $109.71$113.35 per barrel for the thirty-nine SeptemberJune 30, 2017.2018. The 20182019 increase in cost of goods sold of $3.02$3.55 per barrel was primarily the result of higher processing costs due to increased production at third party breweries and higher temporary labor requirements at Company-owned breweries and higher packaging costs, onlyto support increased variety pack volumes, partially offset by cost savingssaving initiatives in Companyat Company-owned breweries.$118.79$115.69 per barrel for the thirty-nine SeptemberJune 29, 2018,2019, as compared to $119.14$119.67 per barrel for the thirty-nine SeptemberJune 30, 2017.2018. Gross margin was 51.3%49.7% for the thirty-nine SeptemberJune 29, 2018,2019, as compared to 52.1%51.4% for the thirty-nine SeptemberJune 30, 2017.2018. The decrease in gross profit per barrel of $0.35$3.98 was primarily the result of an increase in cost of goods sold per barrel only partially offset by an increaseand a decrease in net revenue per barrel.$56.6$11.8 million, or 30.5%7.6%, to $241.8$165.8 million for the thirty-nine SeptemberJune 29, 2018,2019, as compared to $185.2$154.0 million for the thirty-nine SeptemberJune 30, 2017.2018. The increase was primarily the result ofdue to increased planned investments in local marketing, media advertising andpoint-of-sale, production, higher salaries and benefits costs and increased freight to Distributorsdistributors due to higher rates and volumes and less efficient truck utilization.volumes.31.4%29.1% of net revenue, or $72.66$67.65 per barrel, for the thirty-nine SeptemberJune 29, 2018,2019, as compared to 28.2%33.2% of net revenue, or $64.56$77.43 per barrel, for the thirty-nine SeptemberJune 30, 2017.2018. This decrease per barrel is primarily due to shipments growing at a higher rate than advertising, promotional and selling expenses. The Company invests in advertising and promotional campaigns that it believes will be effective, but there is no guarantee that such investments will generate sales growth.
and Dogfish Head transaction-related fees of $1.5 million.
LIQUIDITY | AND CAPITAL RESOURCES |
LIQUIDITY AND CAPITAL RESOURCES
Cash increased to $68.9$3.0 million as of SeptemberJune 29, 20182019 from $65.6$108.4 million as of December 30, 2017,29, 2018, reflecting cash provided by operating activities that was only partially offset by cash used for the merger with Dogfish Head Brewery and purchases of property, plant and equipment, andpartially offset by cash used inprovided by operating and financing activities.
2018 and
2018.
The Company is completing its 2019 planning process and will provide further detailed guidance when the Company presents its full-year 2018 results. The Company is currently using the following preliminary assumptions and targets for 2019. The Company is forecasting depletion and shipment percentage increase of high single digits to low double digits. The Company is targeting price increases per barrel of between zero and 3%. Full-year 2019 gross margins are currently expected to be between 51% and 53%. The Company intends to increase advertising, promotional and selling expenses between $25 million and $35 million for the full year 2018, not including any changes in freight costs for the shipment of products to Distributors. This estimate is subject to timing of brand investments currently planned for the fourth quarter of 2018 which could move into 2019. The Company intends to increase its investment in its brands in 2019 commensurate with the opportunities for growth that it sees, but there is no guarantee that such increased investments will result in increased volumes. The Company estimates a full-year 2018Non-GAAP effective tax rate of approximately 27%, excluding the impact of ASU2016-09.
As disclosed in note B, on December 31, 2017, the Company adopted ASUNo. 2014-09,Revenue from Contracts with Customers (Topic 606) and all related amendments.
2019.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
29, 2018.
Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Item 4. | CONTROLS AND PROCEDURES |
|
|
Item 1A. | RISK FACTORS |
Item 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs | ||||||||||||
December 31, 2017 to February 3, 2018 | 33,875 | $ | 188.94 | 33,539 | $ | 172,285 | ||||||||||
February 4, 2018 to March 3, 2018 | 27,974 | 178.89 | 27,920 | 167,286 | ||||||||||||
March 4, 2018 to March 31, 2018 | 29,659 | 179.76 | 29,217 | 162,007 | ||||||||||||
April 1, 2018 to May 5, 2018 | 44,329 | 213.23 | 44,232 | 152,565 | ||||||||||||
May 6, 2018 to June 2, 2018 | 27,737 | 239.94 | 27,674 | 145,917 | ||||||||||||
June 3, 2018 to June 30, 2018 | 24,943 | 280.50 | 24,926 | 138,921 | ||||||||||||
July 1, 2018 to August 4, 2018 | 61,352 | 302.16 | 61,352 | 120,382 | ||||||||||||
August 5, 2018 to September 1, 2018 | 53,127 | 290.28 | 53,000 | 104,974 | ||||||||||||
September 2, 2018 to September 29, 2018 | 47,831 | 306.04 | 47,831 | 90,335 | ||||||||||||
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| |||||||||||||
Total | 350,827 | $ | 252.08 | 349,691 | $ | 90,335 | ||||||||||
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|
|
Of the shares that were repurchased during the period, 1,136 sharesof which all represent repurchases of unvested investment shares issued under the Investment Share Program of the Company’s Employee Equity Incentive Plan.
Plan, as illustrated in the table below:
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs | ||||||||||||
December 30, 2018 to February 2, 2019 | 116 | $ | 127.05 | — | $ | 90,335 | ||||||||||
February 3, 2019 to March 2, 2019 | 219 | 115.78 | — | 90,335 | ||||||||||||
March 3, 2019 to March 30, 2019 | 13 | 187.54 | — | 90,335 | ||||||||||||
March 31, 2019 to May 4, 2019 | 107 | 182.03 | — | 90,335 | ||||||||||||
May 5, 2019 to June 1, 2019 | 79 | 175.67 | — | 90,335 | ||||||||||||
June 2, 2019 to June 29, 2019 | 32 | 187.54 | — | 90,335 | ||||||||||||
Total | 566 | $ | 144.68 | — | 90,335 | |||||||||||
Item 3. | DEFAULTS UPON SENIOR SECURITIES |
Not Applicable
Not | Applicable |
Item 4. | MINE SAFETY DISCLOSURES |
Not Applicable
Not | Applicable |
Item 5. | OTHER INFORMATION |
Not Applicable
Not | Applicable |
Item 6. | EXHIBITS |
* | Filed with this report |
THE BOSTON BEER COMPANY, INC.
| ||||
(Registrant) | ||||
Date: | /s/ David A. Burwick | |||
David A. Burwick | ||||
President and Chief Executive Officer | ||||
(principal executive officer) | ||||
Date: July 25, 2019 | /s/ Frank H. Smalla | |||
Frank H. Smalla | ||||
Chief Financial Officer | ||||
(principal financial officer) |
If to the Company: | The Boston Beer Company, Inc. One Design Center Place, Suite 850 Boston, MA 02210 Attention: Tara L. Heath, Vice President, Legal and Deputy General Counsel E-mail: Tara.Heath@bostonbeer.com | |
with a copy to (which shall not constitute notice): | Nixon Peabody LLP Exchange Place 53 State Street Boston, MA 02109 Attention: Frederick H. Grein, Jr. E-mail: fgrein@nixonpeabody.com | |
If to the Holders: | To the Holder Representative c/o Sageworth 1861 Santa Barbara Drive Lancaster, Pennsylvania 17601 Attention: Kyle Groft E-mail: kgroft@sageworth.com |
with a copy to (which shall not constitute notice): | McDermott Will & Emery LLP 500 North Capitol Street, N.W. Washington, D.C. 20001 Attention: Marc Sorini and Thomas P. Conaghan E-mail: msorini@mwe.com; tconaghan@mwe.com |
The Company: | THE BOSTON BEER COMPANY, INC. | |||
By: | /s/ David A. Burwick | |||
Name: | David A. Burwick | |||
Title: | President & Chief Executive Officer | |||
The Holders: | SCIV IRREVOCABLE TRUST U/A/D 12/23/07 | |||
A/K/A SAMUEL A CALAGIONE III AND | ||||
MARIAH CALAGIONE IRREVOCABLE | ||||
TRUST F/B/O SAMUEL A CALAGIONE IV | ||||
DATED DECEMBER 23, 2007 | ||||
By: | /s/ David K. Kruft | |||
Name: | David K. Kruft | |||
Title: | Vice President | |||
By: | /s/ Samuel A. Calagione, Jr. | |||
Name: | Samuel A. Calagione, Jr. | |||
Title: | Co-Trustee | |||
GCC IRREVOCABLE TRUST U/A/D 12/23/07 | ||||
A/K/A SAMUEL A CALAGIONE III AND | ||||
MARIAH CALAGIONE IRREVOCABLE | ||||
TRUST F/B/O GRIER C CALAGIONE DATED | ||||
DECEMBER 23, 2007 | ||||
By: | /s/ David K. Kruft | |||
Name: | David K. Kruft | |||
Title: | Vice President |
By: | /s/ Samuel A. Calagione, Jr. | |||
Name: | Samuel A. Calagione, Jr. | |||
Title: | Co-Trustee | |||
THE CALAGIONE DYNASTY TRUST DATED | ||||
NOVEMBER 12, 2018 | ||||
By: | /s/ David K. Kruft | |||
Name: | David K. Kruft | |||
Title: | Vice President | |||
THE CALAGIONE FAMILY TRUST DATED | ||||
DECEMBER 14, 2016 | ||||
By: | /s/ David K. Kruft | |||
Name: | David K. Kruft | |||
Title: | Vice President | |||
By: | /s/ Samuel A. Calagione, III | |||
Name: | Samuel A. Calagione, III | |||
Title: | Co-Trustee | |||
AMENDMENT NUMBER ONE AND | ||||
RESTATEMENT OF REVOCABLE TRUST | ||||
OF SAMUEL A. CALAGIONE III DATED | ||||
NOVEMBER 12, 2018 | ||||
By: | /s/ Samuel A. Calagione, III | |||
Name: | Samuel A. Calagione, III | |||
Title: | Trustee | |||
The Holder Representative: | SAMUEL A. CALAGIONE, III | |||
/s/ Samuel A. Calagione, III |
HOLDER’S NAME | HOLDER’S ADDRESS | TOTAL NUMBER OF REGISTRABLE SECURITIES HELD BY HOLDER | ||
SCIV Irrevocable Trust U/A/D 12/23/07 a/k/a Samuel A Calagione III and Mariah Calagione Irrevocable Trust f/b/o Samuel A Calagione IV dated December 23, 2007 | c/o Sageworth 1861 Santa Barbara Drive Lancaster, Pennsylvania 17601 Attention: Kyle Groft | 35,719 | ||
GCC Irrevocable Trust U/A/D 12/23/07 a/k/a Samuel A Calagione III and Mariah Calagione Irrevocable Trust f/b/o Grier C Calagione dated December 23, 2007 | c/o Sageworth 1861 Santa Barbara Drive Lancaster, Pennsylvania 17601 Attention: Kyle Groft | 35,719 | ||
The Calagione Dynasty Trust dated November 12, 2018 | c/o Sageworth 1861 Santa Barbara Drive Lancaster, Pennsylvania 17601 Attention: Kyle Groft | 150,417 | ||
The Calagione Family Trust dated December 14, 2016 | c/o Sageworth 1861 Santa Barbara Drive Lancaster, Pennsylvania 17601 Attention: Kyle Groft | 204,266 | ||
Amendment Number One and Restatement of Revocable Trust of Samuel A. Calagione III dated November 12, 2018 | c/o Sageworth 1861 Santa Barbara Drive Lancaster, Pennsylvania 17601 Attention: Kyle Groft | 943 |
The Founders: | ||||
/s/ Samuel Calagione III | ||||
Samuel A. Calagione III | ||||
/s/ Mariah D. Calagione | ||||
Mariah D. Calagione | ||||
Boston Beer: | THE BOSTON BEER COMPANY, INC. | |||
By: | /s/ David A. Burwick | |||
Name: | David A. Burwick | |||
Title: | President & Chief Executive Officer |
By: | /s/ David A. Burwick | |||||||
X | /s/ Samuel A. Calagione | |||||||
David A. Burwick, President & CEO | Signature of Mr. Calagione | |||||||
July 3, 2019 | Sam Calagione | |||||||
Date | Print Name of Mr. Calagione | |||||||
July 3, 2019 | ||||||||
Date | ||||||||
For purposes of Section 2(b) only: | /s/ Jim Koch | |||||||
Signature of Mr. Koch | ||||||||
July 3, 2019 | ||||||||
Date |
By: | /s/ David A. Burwick | X | /s/ George J. Pastrana | |||||
David A. Burwick, President & CEO | Signature of Coworker | |||||||
July 16, 2019 | George J. Pastrana | |||||||
Date | Print Name of Coworker | |||||||
July 16, 2019 | ||||||||
Date |
(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 |
(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. |
/s/ David A. Burwick |
David A. Burwick |
President and Chief Executive Officer |
[Principal Executive Officer] |
(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 |
(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. |
/s/ Frank H. Smalla |
Frank H. Smalla |
Chief Financial Officer |
[Principal Financial Officer] |
/s/ David A. Burwick | ||||
David A. Burwick | ||||
President and Chief Executive Officer |
/s/ Frank H. Smalla | ||||
Frank H. Smalla | ||||
Chief Financial Officer | ||||
23