FORM 10-Q
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
For the quarterly period ended September 23, 2000 | |||
OR | |||
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
For the transition period from ................ to................. | |||
Commission file number: 1-14092 | |||
THE BOSTON BEER COMPANY, INC. (Exact name of registrant as specified in its charter) | |||
MASSACHUSETTS (State or other jurisdiction of incorporation or organization) | 04-3284048 | ||
(I.R.S. Employer Identification No.) | |||
75 Arlington Street, Boston, Massachusetts (Address of principal executive offices) 02116 (Zip Code) | |||
(617) 368-5000 (Registrant’s telephone number, including area code) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Class A Common Stock, $.01 par value | 12,615,093 | |
Class B Common Stock, $.01 par value | 4,107,355 | |
(Title of each class) | (Number of shares) |
PART I. | FINANCIAL INFORMATION | PAGE | ||||||||||||
Item 1. | Consolidated Financial Statements | |||||||||||||
Consolidated Balance Sheets September 23, 2000 and December 25, 1999 | 3 | |||||||||||||
Consolidated Statements of Operations for the Three and Nine Months Ended September 23, 2000 and September 25, 1999 | 4 | |||||||||||||
Consolidated Statements of Cash Flows for the Nine Months Ended September 23, 2000 and September 25, 1999 | 5 | |||||||||||||
Notes to Consolidated Financial Statements | 6-8 | |||||||||||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 8-11 | ||||||||||||
PART II. | OTHER INFORMATION | |||||||||||||
Item 1. | Legal Proceedings | 12 | ||||||||||||
Item 2. | Changes in Securities | 12 | ||||||||||||
Item 3. | Defaults Upon Senior Securities | 12 | ||||||||||||
Item 4. | Submission of Matters to a Vote of Security Holders | 12 | ||||||||||||
Item 5. | Other Information | 12 | ||||||||||||
Item 6. | Exhibits and Reports on Form 8-K | 12-16 | ||||||||||||
SIGNATURES | 17 |
September 23, 2000 | December 25, 1999 | |||||
---|---|---|---|---|---|---|
ASSETS | ||||||
Current Assets: | ||||||
Cash and cash equivalents | $ 9,675 | $ 5,346 | ||||
Short-term investments | 36,011 | 38,999 | ||||
Accounts receivable, net of the allowance for doubtful accounts of $705 and $1,000, respectively | 13,857 | 16,246 | ||||
Inventories | 18,823 | 15,656 | ||||
Prepaid expenses | 988 | 2,465 | ||||
Deferred income taxes | 2,732 | 2,732 | ||||
Other current assets | 869 | 884 | ||||
Total current assets | 82,955 | 82,328 | ||||
Property, plant and equipment, net of accumulated depreciation of $23,614 and $20,855, respectively | 26,285 | 26,092 | ||||
Other assets | 3,847 | 4,310 | ||||
Total assets | $113,087 | $112,730 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
Current Liabilities: | ||||||
Accounts payable | $ 9,530 | $ 10,659 | ||||
Accrued expenses | 15,708 | 12,842 | ||||
Total current liabilities | 25,238 | 23,501 | ||||
Long-term deferred taxes | 408 | 408 | ||||
Other long-term liabilities | 3,482 | 5,371 | ||||
Stockholders’ Equity: | ||||||
Class A Common Stock, $.01 par value; 22,700,000 shares authorized; 16,459,793 and 16,423,788 issued and outstanding as of September 23, 2000 and December 25, 1999, respectively | 165 | 164 | ||||
Class B Common Stock, $.01 par value; 4,200,000 shares authorized; 4,107,355 issued and Outstanding | 41 | 41 | ||||
Additional paid-in-capital | 56,879 | 56,665 | ||||
Unearned compensation | (183 | ) | (159 | ) | ||
Unrealized gain on short-term investments | 339 | - | ||||
Retained earnings | 45,927 | 36,575 | ||||
Less: Treasury stock (2,532,100 and 1,319,600 shares as of September 23, 2000 and December 25, 1999, respectively) at cost | (19,209 | ) | (9,836 | ) | ||
Total stockholders’ equity | 83,959 | 83,450 | ||||
Total liabilities and stockholders’ equity | $113,087 | $112,730 | ||||
Three months ended | Nine months ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
September 23, 2000 | September 25, 1999 | September 23, 2000 | September 25, 1999 | |||||||
Sales | $51,221 | $49,336 | $157,744 | $147,443 | ||||||
Less excise taxes | 5,230 | 5,188 | 16,056 | 15,257 | ||||||
Net sales | 45,991 | 44,148 | 141,688 | 132,186 | ||||||
Cost of sales | 19,831 | 18,759 | 61,662 | 57,344 | ||||||
Gross profit | 26,160 | 25,389 | 80,026 | 74,842 | ||||||
Operating expenses: | ||||||||||
Advertising, promotional and selling expenses | 20,108 | 18,339 | 56,844 | 51,097 | ||||||
General and administrative expenses | 2,935 | 2,819 | 8,965 | 8,695 | ||||||
Total operating expenses | 23,043 | 21,158 | 65,809 | 59,792 | ||||||
Operating income | 3,117 | 4,231 | 14,217 | 15,050 | ||||||
Other income (expense): | ||||||||||
Interest income | 514 | 575 | 1,462 | 1,663 | ||||||
Interest expense | - | - | - | (148 | ) | |||||
Other income (expense), net | 224 | (34 | ) | 445 | (23 | ) | ||||
Total other income, ne t | 738 | 541 | 1,907 | 1,492 | ||||||
Income before provision for income taxes | 3,855 | 4,772 | 16,124 | 16,542 | ||||||
Provision for income taxes | 1,619 | 2,004 | 6,772 | 6,929 | ||||||
Net income | $ 2,236 | $ 2,768 | $ 9,352 | $ 9,613 | ||||||
Earnings per share - basic | $ 0.12 | $ 0.13 | $ 0.51 | $ 0.47 | ||||||
Earnings per share - diluted | $ 0.12 | $ 0.13 | $ 0.51 | $ 0.47 | ||||||
Weighted average shares - basic | 18,117 | 20,531 | 18,407 | 20,523 | ||||||
Weighted average shares - diluted | 18,187 | 20,579 | 18,463 | 20,571 | ||||||
Nine months ended | ||||||
---|---|---|---|---|---|---|
September 23, 2000 | September 25, 1999 | |||||
Cash flows from operating activities: | ||||||
Net income | $ 9,352 | $ 9,613 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Depreciation and amortization | 4,653 | 4,314 | ||||
Gain on disposal of fixed assets | (260 | ) | (12 | ) | ||
Recovery of bad debt | (225 | ) | - | |||
Amortization of unearned compensation | 61 | 83 | ||||
Changes in assets and liabilities: | ||||||
Accounts receivable | 2,684 | (2,300 | ) | |||
Inventory | (3,167 | ) | (3,317 | ) | ||
Prepaid expenses | 1,477 | 610 | ||||
Other current assets | 62 | 891 | ||||
Other assets | (32 | ) | 59 | |||
Accounts payable | (1,129 | ) | (5,254 | ) | ||
Accrued expenses | 2,866 | 3,082 | ||||
Other long-term liabilities | (1,493 | ) | 1,892 | |||
Net cash provided by operating activities | 14,849 | 9,661 | ||||
Cash flows from investing activities: | ||||||
Purchases of property, plant and equipment | (4,842 | ) | (1,769 | ) | ||
Purchases of short-term investment s | (24,340 | ) | (42,306 | ) | ||
Proceeds from the sale of short-term investments | 27,667 | 43,415 | ||||
Proceeds on disposal of fixed assets | 284 | 100 | ||||
Net cash used in investing activities | (1,231 | ) | (560 | ) | ||
Cash flows from financing activities: | ||||||
Repurchase of treasury stock | (9,373 | ) | - | |||
Net proceeds from sale of Investment Shares | 129 | 59 | ||||
Repurchase of Investment Shares | (45 | ) | - | |||
Repayment of debt | - | (10,000 | ) | |||
Net cash used in financing activities | (9,289 | ) | (9,941 | ) | ||
Net increase (decrease) in cash and cash equivalents | 4,329 | (840 | ) | |||
Cash and cash equivalents at beginning of period | 5,346 | 8,650 | ||||
Cash and cash equivalents at end of period | $ 9,675 | $ 7,810 | ||||
Supplemental disclosure of cash flow information: | ||||||
Interest paid | $ - | $ 276 | ||||
Income taxes paid | $ 4,178 | $ 5,862 | ||||
September 23, 2000 | December 25, 1999 | ||||||
---|---|---|---|---|---|---|---|
Available-for-sale securities: | |||||||
US government obligations | $ | 27,580 | $ | 20,541 | |||
Held-to-maturity securities: | |||||||
US government obligations | 4,468 | 11,028 | |||||
Corporate debt | 3,963 | 7,430 | |||||
$ | 36,011 | $ | 38,999 | ||||
September 23, 2000 | December 25, 1999 | |||||
Raw materials, principally hops | $ | 15,492 | $ | 14,333 | ||
Work in process | 722 | 732 | ||||
Finished goods | 2,609 | 591 | ||||
$ | 18,823 | $ | 15,656 | |||
For the three months ended (in thousands, except per share data) | For the nine months ended (in thousands, except per share data) | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
September 23, 2000 | September 25, 1999 | September 23, 2000 | September 25, 1999 | ||||||||
Net income | $ | 2,236 | $ | 2,768 | $ | 9,352 | $ | 9,613 | |||
Shares used in earnings per common share - basic | 18,117 | 20,531 | 18,407 | 20,523 | |||||||
Dilutive effect of common equivalent shares | 70 | 48 | 56 | 48 | |||||||
Shares used in earnings per common share - diluted | 18,187 | 20,579 | 18,463 | 20,571 | |||||||
Earnings per common share - basic | $ | 0.12 | $ | 0.13 | $ | 0.51 | $ | 0.47 | |||
Earnings per common share - diluted | $ | 0.12 | $ | 0.13 | $ | 0.51 | $ | 0.47 | |||
For the three months ended | For the nine months ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
September23, 2000 | September 25, 1999 | September 23, 2000 | September 25, 1999 | ||||||||
Net income | $ | 2,236 | $ | 2,768 | $ | 9,352 | $ | 9,613 | |||
Plus: unrealized gain on available-for-sale securities | 144 | - | 339 | - | |||||||
Comprehensive income | $ | 2,380 | $ | 2,768 | $ | 9,691 | $ | 9,613 | |||
For the three months ended | For the nine months ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
September23, 2000 | September 25, 1999 | September 23, 2000 | September 25, 1999 | ||||||||
Beginning Balance | $ | 195 | $ | - | $ | - | $ | - | |||
Unrealized gain on available-for-sale-securities | 144 | - | 339 | - | |||||||
Ending balance | $ | 339 | $ | - | $ | 339 | $ | - | |||
G. | SUBSEQUENT EVENTS |
On October 13, 2000, the Board increased the aggregate expenditure limitation to repurchase the Company’s stock to $30.0 million. This limitation was then increased further to $35.0 million on October 20, 2000. As of October 30, 2000, the Company repurchased 3.8 million shares under this program at an aggregate cost of $30.5 million.
On October 19, 2000, the Company received service of a complaint alleging trademark infringement arising from the use of the designation “BoDean’s” in connection with its BoDean’s Twisted Tea™ product. Plaintiff has sought damages and an accounting of profits in an unspecified amount. It is too early to determine the likely outcome of this litigation, although the Company does not believe it will have a materially adverse impact on the results of operation, cash flow or financial position.
Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following is a discussion of the financial condition and results of operations of the Company for the three and nine-month periods ended September 23, 2000 as compared to the three and nine-month periods ended September 25, 1999. This discussion should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations, Consolidated Financial Statements of the Company and Notes thereto included in the Form 10-K for the fiscal year ended December 25, 1999.
PART II. | OTHER INFORMATION |
Item 1. | LEGAL PROCEEDINGS |
The City of Cincinnati had alleged that the Company and/or SABC, as successors to The Schoenling Brewing Company (“Schoenling”), may be liable for costs in connection with the purported disposal of certain material in the landfill by Schoenling. In September 2000, the City advised the Company that it has removed the Company and its subsidiary, Samuel Adams Brewery Company, Ltd. (SABC), from its list of potentially responsible parties who are allegedly responsible for closure costs and related remedial response costs for the cleanup of a City landfill. |
On October 19, 2000, the Company received service of a complaint alleging trademark infringement arising from the use of the designation “BoDean’s” in connection with its BoDean’s Twisted Tea™ product. Plaintiff has sought damages and an accounting of profits in an unspecified amount. It is too early to determine the likely outcome of this litigation, although the Company does not believe it will have a materially adverse impact on the results of operation, cash flow or financial position. |
The Company is a party to other certain claims and litigation in the ordinary course of business. The Company does not believe any of these proceedings will result, individually or in the aggregate, in a material adverse effect upon its financial condition or results of operations. |
+ Portions of this Exhibit have been omitted pursuant to an application for an order declaring confidential treatment filed with the Securities and Exchange Commission. | ||
(b) | Reports on Form 8-K. The Company filed no reports on Form 8-K with the Securities and Exchange Commission during the quarter ended September 23, 2000. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized. |
THE BOSTON BEER COMPANY, INC. (Registrant) | ||||
Date: November 7, 2000 | By: | /s/ C. James Koch C. James Koch Chief Executive Officer (principal executive officer) | ||
Date: November 7, 2000 | By: | /s/ Richard P. Lindsay Richard P. Lindsay Chief Financial Officer (principal financial and accounting officer) |