UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(IRS Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act.
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ____
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.) Yes
Number of shares outstanding of each of the issuer’s classes of common stock, as of October 20, 2023:
Class A Common Stock, $.01 par value |
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Class B Common Stock, $.01 par value |
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(Title of each class) |
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(Number of shares) |
THE BOSTON BEER COMPANY, INC.
FORM 10-Q
September 30, 2023
TABLE OF CONTENTS
PART I. |
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FINANCIAL INFORMATION |
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PAGE |
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Item 1. |
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3 |
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Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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26 |
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Item 4. |
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26 |
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PART II. |
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OTHER INFORMATION |
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Item 1. |
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27 |
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Item 1A. |
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Item 2. |
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28 |
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Item 3. |
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28 |
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Item 4. |
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28 |
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Item 5. |
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28 |
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Item 6. |
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29 |
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30 |
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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
2
PART I. FINANCIAL INFORMATION
Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
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September 30, |
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December 31, |
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Assets |
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Current Assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable |
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Inventories |
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Prepaid expenses and other current assets |
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Income tax receivable |
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- |
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Total current assets |
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Property, plant, and equipment, net |
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Operating right-of-use assets |
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Goodwill |
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Intangible assets, net |
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Third-party production prepayments |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders' Equity |
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Current Liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Current operating lease liabilities |
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Total current liabilities |
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Deferred income taxes, net |
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Non-current operating lease liabilities |
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Other liabilities |
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Total liabilities |
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(See Note H) |
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Stockholders' Equity: |
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Class A Common Stock, $ |
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Class B Common Stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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Retained earnings |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
(in thousands, except per share data)
(unaudited)
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Thirteen weeks ended |
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Thirty-nine weeks ended |
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September 30, |
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September 24, |
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September 30, |
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September 24, |
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Revenue |
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$ |
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$ |
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$ |
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$ |
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Less excise taxes |
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Net revenue |
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Cost of goods sold |
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Gross profit |
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Operating expenses: |
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Advertising, promotional, and selling expenses |
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General and administrative expenses |
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Impairment of intangible assets |
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Impairment of brewery assets |
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Contract termination costs and other |
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— |
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— |
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— |
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Total operating expenses |
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Operating income |
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Other income (expense): |
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Interest income |
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Other expense |
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Total other income (expense) |
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Income before income tax provision |
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Income tax provision |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Net income per common share – basic |
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$ |
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$ |
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$ |
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$ |
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Net income per common share – diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted-average number of common shares – basic |
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Weighted-average number of common shares – diluted |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive loss: |
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Foreign currency translation adjustment |
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— |
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( |
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Total other comprehensive loss, net of tax |
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( |
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( |
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— |
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Comprehensive income |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
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Thirty-nine weeks ended |
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September 30, |
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September 24, |
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Cash flows provided by operating activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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Impairment of intangible assets |
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Impairment of brewery assets |
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Change in right-of-use assets |
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Stock-based compensation expense |
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Deferred income taxes |
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Other non-cash expense |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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( |
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Inventories |
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( |
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Prepaid expenses, income tax receivable, and other current assets |
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Third-party production prepayments |
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Other assets |
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( |
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( |
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Accounts payable |
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Accrued expenses, other current liabilities, and other liabilities |
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( |
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Operating lease liabilities |
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( |
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( |
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Net cash provided by operating activities |
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Cash flows used in investing activities: |
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Purchases of property, plant, and equipment |
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Proceeds from disposal of property, plant, and equipment |
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Net cash used in investing activities |
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( |
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Cash flows (used in) provided by financing activities: |
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Repurchases and retirement of Class A common stock |
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( |
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Proceeds from exercise of stock options and sale of investment shares |
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Cash paid on finance leases |
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( |
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( |
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Line of credit borrowings |
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— |
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Line of credit repayments |
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— |
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( |
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Payment of tax withholding on stock-based payment awards and investment shares |
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( |
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( |
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Net cash (used in) provided by financing activities |
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( |
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Change in cash and cash equivalents and restricted cash |
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Cash and cash equivalents and restricted cash at beginning of year |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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Supplemental disclosure of cash flow information: |
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Income tax (payments) refunds, net |
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$ |
( |
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$ |
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Cash paid for amounts included in measurement of lease liabilities |
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Operating cash outflows from operating leases |
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$ |
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$ |
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Operating cash outflows from finance leases |
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$ |
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$ |
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Financing cash outflows from finance leases |
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$ |
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$ |
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Right-of-use-assets obtained in exchange for finance lease obligations |
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$ |
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$ |
- |
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Decrease in accounts payable and accrued expenses for purchases of property, plant, and equipment |
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$ |
( |
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$ |
( |
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Non-cash financing activity – accrued excise taxes on share repurchases |
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$ |
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$ |
- |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the thirteen and thirty-nine weeks ended September 30, 2023 and September 24, 2022
(in thousands)
(unaudited)
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Class A |
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Accumulated |
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Class A |
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Common |
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Class B |
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Class B |
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Additional |
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Other |
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Total |
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Common |
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Stock, |
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Common |
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Common |
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Paid-in |
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Comprehensive |
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Retained |
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Stockholders’ |
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Shares |
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Par |
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Shares |
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Stock, Par |
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Capital |
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Loss |
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Earnings |
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Equity |
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Balance at December 31, 2022 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Stock options exercised and restricted |
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— |
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— |
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( |
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— |
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— |
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( |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Repurchase and retirement of Class A Common Stock |
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( |
) |
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( |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Foreign currency translation adjustment |
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— |
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— |
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— |
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— |
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— |
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— |
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Balance at April 1, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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Stock options exercised and restricted |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Repurchase and retirement of Class A Common Stock |
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( |
) |
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( |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Foreign currency translation adjustment |
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— |
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— |
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— |
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— |
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— |
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— |
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Balance at July 1, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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Stock options exercised and restricted |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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Repurchase and retirement of Class A Common Stock |
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( |
) |
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( |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Foreign currency translation adjustment |
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— |
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— |
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— |
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— |
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— |
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( |
) |
|
|
— |
|
|
|
( |
) |
Balance at September 30, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||||
6
|
|
|
|
|
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 |
|
|
Earnings |
|
|
Equity |
|
||||||||
Balance at December 25, 2021 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Stock options exercised and restricted |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Foreign currency translation adjustment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Balance at March 26, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Stock options exercised and restricted |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Foreign currency translation adjustment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balance at June 25, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Stock options exercised and restricted |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||||||
Balance at September 24, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A. Organization and Basis of Presentation
The Boston Beer Company, Inc. and certain subsidiaries (the “Company”) are engaged in the business of selling alcohol beverages throughout the United States and in selected international markets, under the trademarks “The Boston Beer Company®”, “Twisted Tea Brewing Company®”, “Hard Seltzer Beverage Company”, “Angry Orchard® Cider Company”, “Dogfish Head® Craft Brewery”, “Dogfish Head Distilling Co.”, “Angel City® Brewing Company”, “Coney Island® Brewing Company”, "Green Rebel Brewing Co.", and "Truly Distilling Co.".
The accompanying unaudited condensed consolidated balance sheet as of September 30, 2023, and the unaudited condensed consolidated statements of comprehensive operations, stockholders’ equity, and cash flows for the interim periods ended September 30, 2023 and September 24, 2022, respectively, have been prepared by the Company in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnotes normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. All intercompany accounts and transactions have been eliminated. These condensed consolidated financial statements should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
In the opinion of the Company’s management, the Company’s unaudited condensed consolidated balance sheet as of September 30, 2023 and the results of its condensed consolidated comprehensive operations, stockholders’ equity, and cash flows for the interim periods ended September 30, 2023 and September 24, 2022, reflect all adjustments (consisting only of normal and recurring adjustments) necessary to present fairly the results of the interim periods presented. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year.
B. Recent Accounting Pronouncements
Recent accounting pronouncements pending adoption not discussed in this Form 10-Q or in the 2022 Form 10-K are either not applicable to the Company or are not expected to have a material impact on the Company.
C. Revenue Recognition
During the thirty-nine weeks ended September 30, 2023 and September 24, 2022, approximately
The Company recognizes revenue when obligations under the terms of a contract with its customer are satisfied; generally, this occurs with the transfer of control of its products. Revenue is measured as the amount of consideration expected to be received in exchange for transferring products. If the conditions for revenue recognition are not met, the Company defers the revenue until all conditions are met. As of September 30, 2023 and December 31, 2022, the Company has deferred $
Customer promotional discount programs are entered into by the Company with distributors for certain periods of time. The reimbursements for discounts to distributors are recorded as reductions to net revenue and were $
Customer programs and incentives are a common practice in the alcohol beverage industry. Amounts paid in connection with customer programs and incentives are recorded as reductions to net revenue or as advertising, promotional and selling expenses, based on the nature of the expenditure. Customer incentives and other payments made to distributors are primarily based upon performance of certain marketing and advertising activities. Depending on applicable state laws and regulations, these activities promoting the
8
Company's products may include, but are not limited to point-of-sale and merchandise placement, samples, product displays, promotional programs at retail locations and meals, travel and entertainment. Amounts paid to customers in connection with these programs that were recorded as reductions to net revenue or as advertising, promotional and selling expenses for the thirteen and thirty-nine weeks ended September 30, 2023 were $
D. Inventories
Inventories consist of raw materials, work in process and finished goods which are stated at the lower of cost, determined on the first-in, first-out basis, or net realizable value. Raw materials principally consist of hops, malt, flavorings, fruit juices, other brewing materials and packaging. The Company’s goal is to maintain on hand a supply of at least one year for essential hop varieties, in order to limit the risk of an unexpected reduction in supply. Inventories are generally classified as current assets. The Company classifies hops inventory in excess of two years of forecasted usage in other long-term assets. The cost elements of work in process and finished goods inventory consist of raw materials, direct labor and manufacturing overhead. Inventories consist of the following
|
|
September 30, |
|
|
December 31, |
|
||
|
|
(in thousands) |
|
|||||
Current inventory: |
|
|
|
|
|
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Work in process |
|
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
|
||
Total current inventory |
|
|
|
|
|
|
||
Long term inventory |
|
|
|
|
|
|
||
Total inventory |
|
$ |
|
|
$ |
|
||
As of September 30, 2023 and December 31, 2022, the Company has recorded inventory obsolescence reserves of $
E. Third-Party Production Prepayments
During the thirty-nine weeks ended September 30, 2023 and September 24, 2022, the Company brewed and packaged approximately
During the thirteen weeks ended March 26, 2022, the Company recorded $
Total third-party production prepayments were $
At current production volume projections, the Company believes that it will fall short of its future annual volume commitments at certain third-party production facilities, including those that are part of the master transaction agreement and other agreements with City Brewing, and will incur shortfall fees under these executory contracts. The Company expenses the shortfall fees during the contractual period when such fees are incurred as a component of cost of goods sold. During the thirteen weeks and thirty-nine weeks
9
ended September 30, 2023, the Company incurred $
|
|
Expected Shortfall Fees to be Incurred |
|
|
|
|
(in millions) |
|
|
Remainder of 2023 |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
Thereafter |
|
|
- |
|
Total shortfall fees expected to be incurred |
|
$ |
|
|
10
F. Goodwill and Intangible Assets
The Company has recorded intangible assets with indefinite lives and goodwill for which impairment testing is required at least annually or more frequently if events or circumstances indicate that these assets might be impaired. The Company performs its annual impairment tests and re-evaluates the useful lives of other intangible assets with indefinite lives at the annual impairment test measurement date in the third quarter of each fiscal year or when circumstances arise that indicate a possible impairment or change in useful life might exist.
Goodwill. The guidance for goodwill impairment testing allows an entity to assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the estimated fair value of a reporting unit, of which the Company has one, is less than its carrying amount or to proceed directly to performing a quantitative impairment test. Under the quantitative assessment, the estimated fair value of the Company’s reporting unit is compared to its carrying value, including goodwill. The estimate of fair value of the Company’s reporting unit is generally calculated based on an income approach using the discounted cash flow method supplemented by the market approach which considers the Company’s market capitalization and enterprise value. If the estimated fair value of the Company’s reporting unit is less than the carrying value of its reporting unit, a goodwill impairment will be recognized. In estimating the fair value of the Company’s reporting unit, management must make assumptions and projections regarding such items as future cash flows, future revenues, future earnings, cost of capital, and other factors. The assumptions used in the estimate of fair value are based on historical trends and the projections and assumptions that are used in the latest operating plans. These assumptions reflect management’s estimates of future economic and competitive conditions and are, therefore, subject to change as a result of changing market conditions. If these estimates or their related assumptions change in the future, the Company may be required to recognize an impairment loss for the Company’s goodwill which could have a material adverse impact on the Company’s financial statements.
Intangible assets. The Company’s intangible assets consist primarily of a trade name and customer relationships obtained through the Company’s Dogfish Head acquisition. Customer relationships are amortized over their estimated useful lives. The Dogfish Head trademark which was determined to have an indefinite useful life is not amortized. The guidance for indefinite lived intangible asset impairment testing allows an entity to assess qualitative factors to determine whether the existence of events or circumstances indicates that it is more likely than not that the indefinite lived intangible asset is impaired or to proceed directly to performing the quantitative impairment test. Under the quantitative assessment, the trademark is evaluated for impairment by comparing the carrying value of the trademark to its estimated fair value. The estimated fair value of the trademark is calculated based on an income approach using the relief from royalty method. If the estimated fair value is less than the carrying value of the trademark, then an impairment charge is recognized to reduce the carrying value of the trademark to its estimated fair value.
The Company's annual impairment testing date is September 1st of each fiscal year. In 2023, this testing resulted in an impairment of the Company's Dogfish Head and Coney Island trademark assets of $
The Company evaluated the negative trends of the Dogfish Head and Coney Island brands, including slower growth rates resulting from increased competition and updated its long-term financial forecasts. These updated forecasts for the brand included reductions in revenues from the continuing negative trends in the brand's beer products and the overall slowing craft beer industry sector which for Dogfish Head were partially offset by increases in revenues from the brand's emerging canned cocktail products. As a result of performing this assessment, the Dogfish Head trademark asset with a carrying value of $
The Company’s intangible assets as of September 30, 2023 and December 31, 2022 were as follows:
|
|
|
|
|
As of September 30, 2023 |
|
|
As of December 31, 2022 |
|
|||||||||||||||||||
|
|
Estimated |
|
|
Gross |
|
|
Accumulated |
|
|
Net Book |
|
|
Gross |
|
|
Accumulated |
|
|
Net Book |
|
|||||||
|
|
Life (Years) |
|
|
Value |
|
|
Amortization |
|
|
Value |
|
|
Value |
|
|
Amortization |
|
|
Value |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|||||||
Customer relationships |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
Trade names |
|
Indefinite |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||||
Total intangible assets, net |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
11
Amortization expense in the thirteen and thirty-nine weeks ended September 30, 2023 was approximately $
Fiscal Year |
|
Amount (in thousands) |
|
|
Remainder of 2023 |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
Thereafter |
|
|
|
|
Total amortization expense |
|
$ |
|
|
G. Net Income per Share
The Company calculates net income per share using the two-class method, which requires the Company to allocate net income to its Class A Common Shares, Class B Common Shares and unvested share-based payment awards that participate in dividends with common stock, in the calculation of net income per share.
The Class A Common Stock has no voting rights, except (1) as required by law, (2) for the election of Class A Directors, and (3) that the approval of the holders of the Class A Common Stock is required for (a) certain future authorizations or issuances of additional securities which have rights senior to Class A Common Stock, (b) certain alterations of rights or terms of the Class A or Class B Common Stock as set forth in the Articles of Organization of the Company, (c) other amendments of the Articles of Organization of the Company, (d) certain mergers or consolidations with, or acquisitions of, other entities, and (e) sales or dispositions of any significant portion of the Company’s assets.
The Class B Common Stock has full voting rights, including the right to (1) elect a majority of the members of the Company’s Board of Directors and (2) approve all (a) amendments to the Company’s Articles of Organization, (b) mergers or consolidations with, or acquisitions of, other entities, (c) sales or dispositions of any significant portion of the Company’s assets, and (d) equity-based and other executive compensation and other significant corporate matters. The Company’s Class B Common Stock is not listed for trading. Each share of the Class B Common Stock is freely convertible into one share of Class A Common Stock, upon request of the respective Class B holder, and participates equally in dividends.
The Company’s unvested share-based payment awards include unvested shares (1) issued under the Company’s investment share program, which permits employees who have been with the Company for at least
Included in the computation of net income per diluted common share are dilutive outstanding stock options and restricted stock that are vested or expected to vest. At its discretion, the Board of Directors grants stock options and restricted stock to senior management and certain key employees. The terms of the employee stock options are determined by the Board of Directors at the time of grant. To date, stock options granted to employees vest over various service periods and/or based on the attainment of certain performance criteria and generally expire after ten years. In December 2018, the Employee Equity Incentive Plan was amended to permit the grant of restricted stock units. The restricted stock units generally vest over
12
Net Income per Common Share - Basic
The following table sets forth the computation of basic net income per share using the two-class method:
|
|
Thirteen weeks ended |
|
|
Thirty-nine weeks ended |
|
||||||||||
|
|
September 30, |
|
|
September 24, |
|
|
September 30, |
|
|
September 24, |
|
||||
|
|
(in thousands, except per share data) |
|
|
(in thousands, except per share data) |
|
||||||||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Allocation of net income for basic: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Class A Common Stock |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Class B Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unvested participating shares |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Weighted average number of shares for basic: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Class A Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Class B Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unvested participating shares |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income per share for basic: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Class A Common Stock |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Class B Common Stock |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Net Income per Common Share - Diluted
The Company calculates diluted net income per share for common stock using the more dilutive of (1) the treasury stock method, or (2) the two-class method, which assumes the participating securities are not exercised.
The following table sets forth the computations of diluted net income per share, assuming the conversion of all Class B Common Stock into Class A Common Stock for the thirteen weeks and thirty-nine weeks ended September 30, 2023 and for the thirteen and thirty-nine weeks ended September 24, 2022:
13
|
|
Thirteen weeks ended |
|
|||||||||||||||||||||
|
|
September 30, 2023 |
|
|
September 24, 2022 |
|
||||||||||||||||||
|
|
Earnings to |
|
|
Common |
|
|
EPS |
|
|
Earnings to |
|
|
Common |
|
|
EPS |
|
||||||
|
|
(in thousands, except per share data) |
|
|||||||||||||||||||||
As reported - basic |
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
||||||
Add: effect of dilutive common |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Share-based awards |
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
||||
Class B Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net effect of unvested participating |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Net income per common share - |
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Thirty-nine weeks ended |
|
|||||||||||||||||||||
|
|
September 30, 2023 |
|
|
September 24, 2022 |
|
||||||||||||||||||
|
|
Earnings to |
|
|
Common |
|
|
EPS |
|
|
Earnings to |
|
|
Common |
|
|
EPS |
|
||||||
|
|
(in thousands, except per share data) |
|
|||||||||||||||||||||
As reported - basic |
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
||||||
Add: effect of dilutive common |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Share-based awards |
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
||||
Class B Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net effect of unvested participating |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Net income per common share - |
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
||||||
For the thirteen weeks ended September 30, 2023, in accordance with the two-class method, weighted-average stock options to purchase approximately
For the thirteen and thirty-nine weeks ended September 24, 2022, in accordance with the two-class method, weighted-average stock options to purchase approximately
14
H. Commitments and Contingencies
Contractual Obligations
As of September 30, 2023, projected cash outflows under non-cancelable contractual obligations are as follows:
|
|
Commitments |
|
|
|
|
(in thousands) |
|
|
Hops and malt |
|
$ |
|
|
Ingredients and packaging (excluding hops and malt) |
|
|
|
|
Equipment and machinery |
|
|
|
|
Brand support |
|
|
|
|
Other |
|
|
|
|
Total commitments |
|
$ |
|
|
The Company expects to pay $
Litigation
The Company is party to legal proceedings and claims, including class action claims, where significant damages are asserted against it. Given the inherent uncertainty of litigation, it is possible that the Company could incur liabilities as a consequence of these claims, which may or may not have a material adverse effect on the Company’s financial condition or the results of its operations. The Company accrues loss contingencies if, in the opinion of management and its legal counsel, the risk of loss is probable and able to be estimated. Material pending legal proceedings are discussed below.
Securities Litigation. On September 14, 2021, a purported class action lawsuit was filed by an individual shareholder in the United States District Court for the Southern District of New York against the Company and three of its officers. The complaint alleged claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 between April 22, 2021 and September 8, 2021. The plaintiff claimed that defendants made materially false and/or misleading statements or failed to disclose material adverse facts about the Company’s business, operations, and prospects. On October 8, 2021, a nearly identical complaint was filed against the Company by an individual shareholder in the United States District Court for the Southern District of New York.
Supplier Dispute. On December 31, 2022, Ardagh Metal Packaging USA Corp. (“Ardagh”) filed an action against the Company alleging, among other things, that the Company had failed to purchase contractual minimum volumes of certain aluminum beverage can containers in 2021 and 2022. The Company denies that it breached the terms of the parties’ contract and intends to defend against the Ardagh claims vigorously. On February 23, 2023 and April 4, 2023, Ardagh and the Company engaged in mediation sessions with a neutral, third-party mediator, but were not able to resolve the matter and the litigation will proceed. On May 5, 2023, the Company filed an Answer in response to the Complaint, and Counterclaims against Ardagh. On June 26, 2023, Ardagh filed a Motion to Dismiss Certain Counterclaims and a Motion to Strike Certain Affirmative Defenses, to which the Company filed Oppositions on July 24, 2023. The parties are currently engaged in the fact discovery phase of the matter. A range of potential loss cannot be estimated at this time.
I. Income Taxes
The following table provides a summary of the income tax provision for the thirteen and thirty-nine weeks ended September 30, 2023 and September 24, 2022:
|
|
Thirteen weeks ended |
|
Thirty-nine weeks ended |
||||
|
|
September 30, |
|
September 24, |
|
September 30, |
|
September 24, |
Effective tax rate |
|
|
|
|
||||
15
The increase in the tax rate for the thirteen weeks ended September 30, 2023 as compared to the thirteen weeks ended September 24, 2022 is primarily due to a reduction in estimated annual pre-tax income due to non-cash impairment charges, with no corresponding decrease in permanent non-deductible items. The increase in the tax rate for the thirty-nine weeks ended September 30, 2023 as compared to the thirty-nine weeks ended September 24, 2022 is primarily due to an increase to permanent, non-deductible items as well as a decrease in the tax benefit related to stock-based compensation awards.
As of both September 30, 2023 and December 31, 2022, the Company had approximately $
The Company’s practice is to classify interest and penalties related to income tax matters in income tax expense. As of September 30, 2023 and December 31, 2022, the Company had approximately $
J. Line of Credit
In December 2022, the Company amended its credit facility in place that provides for a $
K. Fair Value Measures
The Company defines fair value as the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
The Company’s cash and cash equivalents are held in money market funds. These money market funds are measured at fair value on a recurring basis (at least annually) and are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. The money market funds are invested substantially in United States Treasury and government securities. The Company does not adjust the quoted market price for such financial instruments. Cash, accounts receivable, and accounts payable are carried at their cost, which approximates fair value, because of their short-term nature.
At September 30, 2023 and December 31, 2022, the Company had money market funds with a “Triple A” rated money market fund. The Company considers the “Triple A” rated money market fund to be a large, highly-rated investment-grade institution. As of September 30, 2023 and December 31, 2022, the Company’s cash and cash equivalents balance was $
Non-Recurring Fair Value Measurement
16
The fair value of the Company's Dogfish Head trademark intangible assets is classified within Level 3 of the fair value hierarchy because there are no observable inputs of market activity. When performing a quantitative assessment for impairment of the trademark asset, the Company measures the amount of impairment by calculating the amount by which the carrying value of the trademark asset exceeds its estimated fair value. The estimated fair value is determined based on an income approach using the relief from royalty method, which assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to exploit the related benefits of the trademark asset. The cash flow projections the Company uses to estimate the fair value of its Dogfish Head trademark intangible asset involves several assumptions, including (i) projected revenue growth, (ii) an estimated royalty rate, (iii) after-tax royalty savings expected from ownership of the trademark and (iv) a discount rate used to derive the estimated fair value of the trademark asset.
L. Common Stock and Stock-Based Compensation
Option Activity
Information related to stock options under the Restated Employee Equity Incentive Plan and the Stock Option Plan for Non-Employee Directors is summarized as follows:
|
|
Shares |
|
|
Weighted- |
|
|
Weighted- |
|
|
Aggregate |
|
||||
Outstanding at December 31, 2022 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Forfeited/ Expired |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Outstanding at September 30, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Exercisable at September 30, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Vested and expected to vest at September 30, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Of the total options outstanding at September 30, 2023,
On March 1, 2023, the Company granted options to purchase an aggregate of
On May 15, 2023, the Company granted options to purchase an aggregate of
On May 17, 2023, the Company granted options to purchase an aggregate of
On May 24, 2023, the Company granted options to purchase an aggregate of
On July 1, 2023, the Company granted options to purchase an aggregate
Weighted average assumptions used to estimate fair values of stock options on the date of grants are as follows:
17
|
|
2023 |
|
|
Expected Volatility |
|
|
% |
|
Risk-free interest rate |
|
|
% |
|
Expected Dividends |
|
|
% |
|
Exercise factor |
|
|
|
|
Discount for post-vesting restrictions |
|
|
% |
|
Non-Vested Shares Activity
The following table summarizes vesting activities of shares issued under the investment share program and restricted stock awards:
|
|
Number of Shares |
|
|
Weighted Average Fair Value |
|
||
Non-vested at December 31, 2022 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Non-vested at September 30, 2023 |
|
|
|
|
$ |
|
||
Of the total non-vested shares outstanding at September 30, 2023,
On March 1, 2023, the Company granted a combined
On May 2, 2023, the Company granted
On May 17, 2023, the Company granted a combined
On May 24, 2023, the Company granted a combined
On July 1, 2023, the Company granted a combined
On September 3, 2023, the Company granted
Stock-Based Compensation
The following table provides information regarding stock-based compensation expense included in operating expenses in the accompanying condensed consolidated statements of comprehensive operations:
|
|
Thirteen weeks ended |
|
|
Twenty-six weeks ended |
|
||||||||||
|
|
September 30, |
|
|
September 24, |
|
|
September 30, |
|
|
September 24, |
|
||||
|
|
(in thousands) |
|
|
(in thousands) |
|
||||||||||
Amounts included in general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amounts included in advertising, promotional and selling expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total stock-based compensation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
18
Stock Repurchases
In 1998, the Company began a share repurchase program. Under this program, the Company's Board of Directors has authorized the repurchase of the Company's Class A Stock. On May 18, 2023, the Board of Directors authorized an increase in the aggregate expenditure limit for the Company’s stock repurchase program by $
During the thirteen and thirty-nine weeks ended September 30, 2023, the Company repurchased and subsequently retired
M. Licensing Agreements
Pepsi Licensing Agreement
On August 9, 2021, the Company signed a series of agreements with PepsiCo, Inc. (“Pepsi”) to develop, market and sell alcohol beverages. The term of this agreement is perpetual, with provisions to terminate within the initial
The Company began shipping flavored malt beverages to Pepsi during the first quarter of 2022. Pursuant to the terms of the agreements, the Company makes payments to Pepsi for proprietary ingredients, freight costs to ship the product to Pepsi, and certain marketing services. The cost of the proprietary ingredients above fair market value are recorded within net revenue at the time revenue is recognized for the flavored malt beverages sold to Pepsi and were $
N. Related Party Transactions
In connection with the Dogfish Head Transaction, the Company entered into a lease with the Dogfish Head founders and other owners of buildings used in certain of the Company’s restaurant operations. The lease is for
19
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the significant factors affecting the consolidated operating results, financial condition and liquidity and cash flows of the Company for the thirteen and thirty-nine week periods ended September 30, 2023, as compared to the thirteen and thirty-nine week period ended September 24, 2022. This discussion should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations, and the Consolidated Financial Statements of the Company and Notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
RESULTS OF OPERATIONS
Thirteen Weeks Ended September 30, 2023 compared to Thirteen Weeks Ended September 24, 2022
|
|
Thirteen Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
|
September 30, |
|
|
September 24, |
|
|
Amount |
|
|
% change |
|
|
Per barrel |
|
|||||||||||||||||||||
Barrels sold |
|
|
|
|
|
2,286 |
|
|
|
|
|
|
|
|
|
2,345 |
|
|
|
|
|
|
(59 |
) |
|
|
(2.5 |
)% |
|
|
|
|||||
|
|
|
|
|
Per barrel |
|
|
% of net |
|
|
|
|
|
Per barrel |
|
|
% of net |
|
|
|
|
|
|
|
|
|
|
|||||||||
Net revenue |
|
$ |
601,599 |
|
|
$ |
263.14 |
|
|
|
100.0 |
% |
|
$ |
596,453 |
|
|
$ |
254.35 |
|
|
|
100.0 |
% |
|
$ |
5,146 |
|
|
|
0.9 |
% |
|
$ |
8.79 |
|
Cost of goods |
|
|
326,951 |
|
|
|
143.01 |
|
|
|
54.3 |
% |
|
|
338,707 |
|
|
|
144.44 |
|
|
|
56.8 |
% |
|
|
(11,756 |
) |
|
|
(3.5 |
)% |
|
|
(1.43 |
) |
Gross profit |
|
|
274,648 |
|
|
|
120.13 |
|
|
|
45.7 |
% |
|
|
257,746 |
|
|
|
109.91 |
|
|
|
43.2 |
% |
|
|
16,902 |
|
|
|
6.6 |
% |
|
|
10.22 |
|
Advertising, promotional, and |
|
|
152,579 |
|
|
|
66.74 |
|
|
|
25.4 |
% |
|
|
153,717 |
|
|
|
65.55 |
|
|
|
25.8 |
% |
|
|
(1,138 |
) |
|
|
(0.7 |
)% |
|
|
1.19 |
|
General and administrative |
|
|
42,241 |
|
|
|
18.48 |
|
|
|
7.0 |
% |
|
|
37,382 |
|
|
|
15.94 |
|
|
|
6.3 |
% |
|
|
4,859 |
|
|
|
13.0 |
% |
|
|
2.54 |
|
Impairment of intangible assets |
|
|
16,426 |
|
|
|
7.18 |
|
|
|
2.7 |
% |
|
|
27,100 |
|
|
|
11.56 |
|
|
|
0.0 |
% |
|
|
(10,674 |
) |
|
|
100.0 |
% |
|
|
(4.38 |
) |
Impairment of brewery assets |
|
|
1,900 |
|
|
|
0.83 |
|
|
|
0.3 |
% |
|
|
1,181 |
|
|
|
0.50 |
|
|
|
0.2 |
% |
|
|
719 |
|
|
|
60.9 |
% |
|
|
0.33 |
|
Total operating expenses |
|
|
213,146 |
|
|
|
93.23 |
|
|
|
35.4 |
% |
|
|
219,380 |
|
|
|
93.55 |
|
|
|
36.8 |
% |
|
|
(6,234 |
) |
|
|
(2.8 |
)% |
|
|
(0.32 |
) |
Operating income |
|
|
61,502 |
|
|
|
26.90 |
|
|
|
10.2 |
% |
|
|
38,366 |
|
|
|
16.36 |
|
|
|
6.4 |
% |
|
|
23,136 |
|
|
|
60.3 |
% |
|
|
10.54 |
|
Other income (expense), net |
|
|
2,565 |
|
|
|
1.12 |
|
|
|
0.4 |
% |
|
|
(132 |
) |
|
|
(0.06 |
) |
|
|
(0.0 |
)% |
|
|
2,697 |
|
|
|
(2043.2 |
)% |
|
|
1.18 |
|
Income before income tax provision |
|
|
64,067 |
|
|
|
28.02 |
|
|
|
10.6 |
% |
|
|
38,234 |
|
|
|
16.30 |
|
|
|
6.4 |
% |
|
|
25,833 |
|
|
|
67.6 |
% |
|
|
11.72 |
|
Income tax provision |
|
|
18,772 |
|
|
|
8.21 |
|
|
|
3.1 |
% |
|
|
10,948 |
|
|
|
4.67 |
|
|
|
1.8 |
% |
|
|
7,824 |
|
|
|
71.5 |
% |
|
|
3.54 |
|
Net income |
|
$ |
45,295 |
|
|
$ |
20 |
|
|
|
7.5 |
% |
|
$ |
27,286 |
|
|
$ |
12 |
|
|
|
4.6 |
% |
|
$ |
18,009 |
|
|
|
66.0 |
% |
|
$ |
8.18 |
|
Net revenue. Net revenue increased by $5.1 million, or 0.9%, to $601.6 million for the thirteen weeks ended September 30, 2023, as compared to $596.5 million for the thirteen weeks ended September 24, 2022, primarily as a result of price increases of $24.1 million partially offset by lower shipment volume of $14.9 million and $2.3 million of product mix impacts.
Volume. Total shipment volume decreased by 2.5% to 2,286,000 barrels for the thirteen weeks ended September 30, 2023, as compared to 2,345,000 barrels for the thirteen weeks ended September 24, 2022, reflecting decreases in the Company’s Truly, Samuel Adams, Angry Orchard and Dogfish Head brands, partially offset by increases in its Twisted Tea and Hard Mountain Dew brands.
Depletions for the thirteen weeks ended September 30, 2023 decreased 6% from the prior year, reflecting decreases in the Company’s Truly, Angry Orchard, Samuel Adams and Dogfish Head brands, partially offset by increases in its Twisted Tea and Hard Mountain Dew brands.
The Company believes distributor inventory as of September 30, 2023 averaged approximately five weeks on hand and was at an appropriate level for each of its brands.
Net revenue per barrel. Net revenue per barrel increased by 3.5% to $263.14 per barrel for the thirteen weeks ended September 30, 2023, as compared to $254.35 per barrel for the comparable period in 2022, primarily due to price increases.
20
Cost of goods sold. Cost of goods sold was $143.01 per barrel for the thirteen weeks ended September 30, 2023, as compared to $144.44 per barrel for the thirteen weeks ended September 24, 2022. The 2023 decrease in cost of goods sold of $1.43, or 1.0%, per barrel was primarily due to decreases in inventory obsolescence of $9.4 million, or $4.11 per barrel, contract renegotiations and recipe optimization of $9.3 million, or $4.07 per barrel, partially offset inflationary impacts of $9.9 million, or $4.33 per barrel, and other cost of goods sold impacts of $5.5 million, or $2.41 per barrel.
Inflationary impacts of $9.9 million consist primarily of increased material costs of $5.8 million, costs of third-party production of $2.3 million, and internal brewery costs of $1.8 million.
Gross profit. Gross profit was $120.13 per barrel for the thirteen weeks ended September 30, 2023, as compared to $109.91 per barrel for the thirteen weeks ended September 24, 2022.
The Company includes freight charges related to the movement of finished goods from its manufacturing locations to distributor locations in its advertising, promotional and selling expense line item. As such, the Company’s gross margins may not be comparable to those of other entities that classify costs related to distribution differently.
Advertising, promotional and selling expenses. Advertising, promotional and selling expenses decreased by $1.1 million, or 0.7%, to $152.6 million for the thirteen weeks ended September 30, 2023, as compared to $153.7 million for the thirteen weeks ended September 24, 2022, due to decreased freight to distributors of $10.8 million from lower rates and volumes, partially offset by an increase in brand and selling costs of $9.6 million, mainly driven by higher salaries and benefits costs and increased media investments.
Advertising, promotional and selling expenses were 25.4% of net revenue, or $66.74 per barrel, for the thirteen weeks ended September 30, 2023, as compared to 25.8% of net revenue, or $65.55 per barrel, for the thirteen weeks ended September 24, 2022. This increase per barrel is primarily due to advertising, promotional, and selling expenses decreasing at a lower rate than shipments. 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.
The Company conducts certain advertising and promotional activities in its distributors’ markets, and the distributors make contributions to the Company for such efforts. These amounts are included in the Company’s condensed consolidated statements of comprehensive operations as reductions to advertising, promotional and selling expenses. Historically, contributions from distributors for advertising and promotional activities have amounted to between 2% and 3% of net sales. The Company may adjust its promotional efforts in the distributors’ markets, if changes occur in these promotional contribution arrangements, depending on industry and market conditions.
General and administrative expenses. General and administrative expenses increased by $4.9 million, or 13.0%, to $42.3 million for the thirteen weeks ended September 30, 2023, as compared to $37.4 million for the thirteen weeks ended September 24, 2022, primarily due to higher salaries and benefits costs and increased consulting costs.
Impairment of intangible assets. Impairment of intangible assets reflects a $16.4 million non-cash impairment charge recorded for the Dogfish Head and Coney Island brands, taken as a result of the Company’s annual impairment analysis as of September 1, 2023. The impairment determination was primarily based on the latest forecasts of brand performance which has been below Company forecasts for the respective brands. In the third quarter of 2022, the Company recorded an impairment charge of $27.1 million for the Dogfish Head brand.
Impairment of brewery assets. Impairment of brewery assets of $1.9 million increased by $0.7 million from the comparable period of 2022, due to higher write-offs of equipment at Company-owned breweries.
Income tax provision. The Company’s effective tax rate for the third quarter was 29.3% compared to 28.6% in the prior year. The increase in the tax rate for the thirteen weeks ended September 30, 2023 as compared to the thirteen weeks ended September 24, 2022 is primarily due to a reduction in estimated annual pre-tax income due to non-cash impairment charges, with no corresponding decrease in permanent non-deductible items.
21
Thirty-nine Weeks Ended September 30, 2023 compared to Thirty-nine Weeks Ended September 24, 2022
|
|
Thirty-nine Weeks Ended |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
|
September 30, |
|
|
September 24, |
|
|
Amount |
|
|
% change |
|
|
Per barrel |
|
|||||||||||||||||||||
Barrels sold |
|
|
|
|
|
6,175 |
|
|
|
|
|
|
|
|
|
6,472 |
|
|
|
|
|
|
(297 |
) |
|
|
(4.6 |
)% |
|
|
|
|||||
|
|
|
|
|
Per barrel |
|
|
% of net |
|
|
|
|
|
Per barrel |
|
|
% of net |
|
|
|
|
|
|
|
|
|
|
|||||||||
Net revenue |
|
$ |
1,614,903 |
|
|
$ |
261.53 |
|
|
|
100.0 |
% |
|
$ |
1,642,809 |
|
|
$ |
253.83 |
|
|
|
100.0 |
% |
|
$ |
(27,906 |
) |
|
|
(1.7 |
)% |
|
$ |
7.70 |
|
Cost of goods |
|
|
910,430 |
|
|
|
147.44 |
|
|
|
56.4 |
% |
|
|
946,336 |
|
|
|
146.22 |
|
|
|
57.6 |
% |
|
|
(35,906 |
) |
|
|
(3.8 |
)% |
|
|
1.22 |
|
Gross profit |
|
|
704,473 |
|
|
|
114.09 |
|
|
|
43.6 |
% |
|
|
696,473 |
|
|
|
107.61 |
|
|
|
42.4 |
% |
|
|
8,000 |
|
|
|
1.1 |
% |
|
|
6.48 |
|
Advertising, promotional and |
|
|
427,369 |
|
|
|
69.21 |
|
|
|
26.5 |
% |
|
|
439,215 |
|
|
|
67.86 |
|
|
|
26.7 |
% |
|
|
(11,846 |
) |
|
|
(2.7 |
)% |
|
|
1.35 |
|
General and administrative |
|
|
130,834 |
|
|
|
21.19 |
|
|
|
8.1 |
% |
|
|
115,929 |
|
|
|
17.91 |
|
|
|
7.1 |
% |
|
|
14,905 |
|
|
|
12.9 |
% |
|
|
3.28 |
|
Impairment of intangible assets |
|
|
16,426 |
|
|
|
2.66 |
|
|
|
1.0 |
% |
|
|
27,100 |
|
|
|
4.19 |
|
|
|
0.0 |
% |
|
|
(10,674 |
) |
|
|
100.0 |
% |
|
|
(1.53 |
) |
Impairment of brewery assets |
|
|
3,916 |
|
|
|
0.63 |
|
|
|
0.2 |
% |
|
|
1,302 |
|
|
|
0.20 |
|
|
|
0.1 |
% |
|
|
2,614 |
|
|
|
200.8 |
% |
|
|
0.43 |
|
Contract termination costs and other |
|
|
— |
|
|
|
— |
|
|
|
0.0 |
% |
|
|
5,330 |
|
|
|
0.82 |
|
|
|
0.0 |
% |
|
|
(5,330 |
) |
|
|
100.0 |
% |
|
|
(0.82 |
) |
Total operating expenses |
|
|
578,545 |
|
|
|
93.69 |
|
|
|
35.8 |
% |
|
|
588,876 |
|
|
|
90.99 |
|
|
|
35.8 |
% |
|
|
(10,331 |
) |
|
|
(1.8 |
)% |
|
|
2.71 |
|
Operating income |
|
|
125,928 |
|
|
|
20.40 |
|
|
|
7.8 |
% |
|
|
107,597 |
|
|
|
16.63 |
|
|
|
6.5 |
% |
|
|
18,331 |
|
|
|
17.0 |
% |
|
|
3.77 |
|
Other income (expense), net |
|
|
5,840 |
|
|
|
0.95 |
|
|
|
0.4 |
% |
|
|
(783 |
) |
|
|
(0.12 |
) |
|
|
(0.0 |
)% |
|
|
6,623 |
|
|
|
(845.8 |
)% |
|
|
1.07 |
|
Income before income tax provision |
|
|
131,768 |
|
|
|
21.35 |
|
|
|
8.2 |
% |
|
|
106,814 |
|
|
|
16.50 |
|
|
|
6.5 |
% |
|
|
24,954 |
|
|
|
23.4 |
% |
|
|
4.84 |
|
Income tax provision |
|
|
37,394 |
|
|
|
6.06 |
|
|
|
2.3 |
% |
|
|
28,134 |
|
|
|
4.35 |
|
|
|
1.7 |
% |
|
|
9,260 |
|
|
|
32.9 |
% |
|
|
1.71 |
|
Net income |
|
$ |
94,374 |
|
|
$ |
15 |
|
|
|
5.8 |
% |
|
$ |
78,680 |
|
|
$ |
12 |
|
|
|
4.8 |
% |
|
$ |
15,694 |
|
|
|
19.9 |
% |
|
$ |
3.13 |
|
Net revenue. Net revenue decreased by $27.9 million, or 1.7%, to $1,614.9 million for the thirty-nine weeks ended September 30, 2023, as compared to $1,642.8 million for the thirty-nine weeks ended September 24, 2022, primarily as a result of lower shipment volume of $75.4 million and $10.9 million of product mix impacts, partially offset by price increases of $61.4 million.
Volume. Total shipment volume decreased by 4.6% to 6,175,000 barrels for the thirty-nine weeks ended September 30, 2023, as compared to 6,472,000 barrels for the thirty-nine weeks ended September 24, 2022, reflecting decreases in the Company’s Truly, Angry Orchard, Samuel Adams, and Dogfish Head brands, partially offset by increases in its Twisted Tea and Hard Mountain Dew brands. Comparable weeks shipments year-to-date decreased 5.5%.
Depletions for the thirty-nine weeks ended September 30, 2023, decreased 6% from the prior year, reflecting decreases in the Company’s Truly, Angry Orchard, Samuel Adams and Dogfish Head brands, partially offset by increases in its Twisted Tea and Hard Mountain Dew brands. Comparable weeks depletions year-to-date decreased 5%.
Net revenue per barrel. Net revenue per barrel increased by 3.0% to $261.53 per barrel for the thirty-nine weeks ended September 30, 2023, as compared to $253.83 per barrel for the comparable period in 2022, primarily due to price increases.
Cost of goods sold. Cost of goods sold was $147.44 per barrel for the thirty-nine weeks ended September 30, 2023, as compared to $146.22 per barrel for the thirty-nine weeks ended September 24, 2022. The 2023 increase in cost of goods sold of $1.22, or 0.8% per barrel was primarily due to current year inflationary impacts of $21.0 million, or $3.40 per barrel, a contract settlement cost of $4.5 million, or $0.73 per barrel, and other cost of goods sold impacts of $5.5 million, or $0.89 per barrel, partially offset by contract renegotiations and recipe optimization of $21.4 million, or $3.47 per barrel, and decreases in inventory obsolescence of $2.1 million, or $0.34 per barrel.
Inflationary impacts of $21.0 million consist primarily of increased material costs of $10.2 million, costs of third-party production of $6.4 million, and internal brewery costs of $4.4 million.
Gross profit. Gross profit was $114.09 per barrel for the thirty-nine weeks ended September 30, 2023, as compared to $107.61 per barrel for the thirty-nine weeks ended September 24, 2022.
Advertising, promotional and selling expenses. Advertising, promotional and selling expenses decreased by $11.8 million, or 2.7%, to $427.4 million for the thirty-nine weeks ended September 30, 2023, as compared to $439.3 million for the thirty-nine weeks ended September 24, 2022, primarily due to decreased freight to distributors of $39.0 million from lower rates and volumes, partially offset
22
by an increase in brand investments of $27.2 million, mainly driven by increased salaries and benefits costs and higher investments in local marketing and media.
Advertising, promotional and selling expenses were 26.5% of net revenue, or $69.21 per barrel, for the thirty-nine weeks ended September 30, 2023, as compared to 26.7% of net revenue, or $67.86 per barrel, for the thirty-nine weeks ended September 24, 2022. This increase per barrel is primarily due to advertising, promotional, and selling expenses decreasing at a lower rate than shipments.
General and administrative expenses. General and administrative expenses increased by $14.9 million, or 12.9%, to $130.8 million for the thirty-nine weeks ended September 30, 2023, as compared to $115.9 million for the thirty-nine weeks ended September 24, 2022, primarily due to increased consulting and increased salaries and benefits costs.
Impairment of intangible assets. Impairment of intangible assets reflects a $16.4 million non-cash impairment charge recorded for the Dogfish Head and Coney Island brands, taken as a result of the Company’s annual impairment analysis as of September 1, 2023. The impairment determination was primarily based on the latest forecasts of brand performance which has been below Company forecasts for the respective brands. In the third quarter of 2022, the Company recorded an impairment charge of $27.1 million for the Dogfish Head brand.
Impairment of brewery assets. Impairment of brewery assets of $3.9 million increased by $2.6 million from the comparable period of 2022, due to higher write-offs of equipment at Company-owned breweries.
Contract termination costs and other. The Company incurred contract termination costs in the thirty-nine weeks ended September 24, 2022 of $5.3 million primarily resulting from further negotiations with a supplier that terminated the agreement.
Income tax provision. The Company’s effective tax rate year-to-date was 28.4% compared to 26.3% year-to-date 2022 primarily due to an increase to permanent, non-deductible items as well as a decrease in the tax benefit related to stock-based compensation awards.
LIQUIDITY AND CAPITAL RESOURCES
The Company’s primary sources of liquidity are its existing cash balances, cash flows from operating activities and amounts available under its revolving credit facility. The Company’s material cash requirements include working capital needs, satisfaction of contractual commitments, stock repurchases, and investment in the Company’s business through capital expenditures.
Cash increased to $310.8 million as of September 30, 2023 from $180.6 million as of December 31, 2022, reflecting cash provided by operating activities and proceeds from the exercise of stock options and sale of investment shares, partially offset by repurchases of the Company's Class A common stock, purchases of property, plant, and equipment, and payments of tax withholdings on stock-based payment awards and investment shares.
Cash used in operating activities consists of net income, adjusted for certain non-cash items, such as depreciation and amortization, stock-based compensation expense, and other non-cash items included in operating results, and changes in operating assets and liabilities, such as accounts receivable, inventory, accounts payable, and accrued expenses.
Cash provided by operating activities for the thirty-nine weeks ended September 30, 2023 was $232.4 million and consisted of non-cash items of $94.7 million, net income of $94.4 million, and a net decrease in operating assets and liabilities of $43.3 million. Cash provided by operating activities for the thirty-nine weeks ended September 24, 2022 was $225.0 million and consisted of non-cash items of $108.0 million, net income of $78.7 million, and a net decrease in operating assets and liabilities of $38.3 million. The increase in cash provided operating activities for the thirty-nine weeks ended September 30, 2023 compared to September 24, 2022 is primarily due to decreases in inventory compared to increases in the comparable prior year period, higher net income, and lower impairment of intangible assets, partially offset by income tax refunds received in the prior year.
23
The Company used $47.1 million in investing activities during the thirty-nine weeks ended September 30, 2023, as compared to $69.8 million during the thirty-nine weeks ended September 24, 2022. Investing activities primarily consisted of capital investments made mostly in the Company’s breweries to drive efficiencies and cost reductions and support product innovation and future growth.
Cash used in financing activities was $55.1 million during the thirty-nine weeks ended September 30, 2023, as compared to $0.6 million provided by financing activities during the thirty-nine weeks ended September 24, 2022. The $55.7 million decrease in financing activity cash flows in 2023 compared to 2022 is primarily due to the $62.5 million in repurchases of the Company's Class A common stock in the current year, partially offset by proceeds from the exercise of stock options and sale of investment shares.
During the period from January 1, 2023 through October 20, 2023, the Company repurchased and subsequently retired 207,997 shares of its Class A Common Stock for an aggregate purchase price of $69.4 million. As of October 20, 2023, the Company had repurchased a cumulative total of approximately 14.0 million shares of its Class A Common Stock for an aggregate purchase price of approximately $910.0 million and had approximately $290.0 million remaining on the $1.2 billion stock repurchase expenditure limit set by the Board of Directors.
The Company expects that its cash balance as of September 30, 2023 of $310.8 million, along with its projected future operating cash flow and its unused line of credit balance of $150.0 million, will be sufficient to fund future cash requirements. The Company’s $150.0 million credit facility has a term not scheduled to expire until December 16, 2027. As of the date of this filing, the Company was not in violation of any of its covenants to the lender under the credit facility.
Critical Accounting Policies
Valuation of Goodwill and Indefinite Lived Intangible Assets
The Company has recorded intangible assets with indefinite lives and goodwill for which impairment testing is required at least annually or more frequently if events or circumstances indicate that these assets might be impaired. The Company performs its annual impairment tests and re-evaluates the useful lives of other intangible assets with indefinite lives at the annual impairment test measurement date in the third quarter of each fiscal year or when circumstances arise that indicate a possible impairment or change in useful life might exist.
Significant judgement is required to estimate the fair value of the Dogfish Head trademark. Accordingly, the Company obtains the assistance of third-party valuation specialists as part of the impairment evaluation. In estimating the fair value of the trademark, management must make assumptions and projections regarding future cash flows based upon future revenues, the market-based royalty rate, the discount rate, and the after-tax royalty savings expected from ownership of the trademark. The assumptions and projections used in the estimate of fair value are consistent with recent trends and represent the projections used in Company’s current strategic operating plans which include reductions in revenues from the Dogfish Head beer products which were partially offset with revenue growth from the new Dogfish Head canned cocktails products that were launched in 2021. These assumptions reflect management’s estimates of future economic and competitive conditions and consider many factors including macroeconomic conditions, industry growth rates, and competitive activities and are, therefore, subject to change as a result of changing market conditions. If these estimates or their related assumptions change in the future, we may be required to recognize an additional impairment loss for the asset. The recognition of any resulting impairment loss could have a material adverse impact on our financial statements.
The Company performed a sensitivity analysis on its significant assumptions used in the Dogfish Head trademark fair value calculation and determined the following:
A decrease in the annual forecasted revenue growth rate of 1.0% would result in a 5.2% decrease to the current fair value of $55.6 million.
A decrease in the discount rate of 1.5% would result in a 15.3% increase to the current fair value of $55.6 million and an increase in the discount rate of 1.5% would result in a 11.7% decrease to the current fair value of $55.6 million.
FORWARD-LOOKING STATEMENTS
In this Quarterly Report on Form 10-Q and in other documents incorporated herein, as well as in oral statements made by the Company, statements that are prefaced with the words “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “intend,” “designed” and similar expressions, are intended to identify forward-looking statements regarding events, conditions, and financial trends that may affect the Company’s future plans of operations, business strategy, results of operations and financial
24
position. These statements are based on the Company’s current expectations and estimates as to prospective events and circumstances about which the Company can give no firm assurance. Further, any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward-looking statement to reflect subsequent events or circumstances. Forward-looking statements should not be relied upon as a prediction of actual future financial condition or results. These forward-looking statements, like any forward-looking statements, involve risks and uncertainties that could cause actual results to differ materially from those projected or anticipated. Such risks and uncertainties include the factors set forth below in addition to the other information set forth in this Quarterly Report on Form 10-Q and in the section titled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
25
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Since December 31, 2022, there have been no significant changes in the Company’s exposures to interest rate or foreign currency rate fluctuations. The Company currently does not enter into derivatives or other market risk sensitive instruments for the purpose of hedging or for trading purposes.
Item 4. CONTROLS AND PROCEDURES
As of September 30, 2023, the Company conducted an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer (its principal executive officer and principal financial officer, respectively) regarding the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) were effective as of September 30, 2023 to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the requisite time periods and that such disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to its management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
There were no changes in the Company’s internal control over financial reporting that occurred during the thirteen weeks ended September 30, 2023 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
26
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
For information regarding the Company's legal proceedings, refer to Note I of the Condensed Consolidated Financial Statements.
Item 1A. RISK FACTORS
In addition to the other information set forth in this report, careful consideration should be given to the factors discussed in Part I, "Item 1A. Risk Factors" in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, which could materially affect the Company’s business, financial condition or future results. The risks described in the Company’s Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that it currently deems to be immaterial also may materially adversely affect its business, financial condition and/or operating results.
27
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
In 1998, the Company's Board of Directors ("the Board") authorized the Company's share buyback program. In May 2023, the Board authorized an increase in the share buyback expenditure limit set for the program from $931.0 million to $1.2 billion. The Board did not specify a date upon which the authorization would expire. Share repurchases for the periods included herein were effected through open market transactions.
As of October 20, 2023, the Company had repurchased a cumulative total of approximately 14.0 million shares of its Class A Common Stock for an aggregate purchase price of $910.0 million and had $290.0 million remaining on the $1.2 billion share buyback expenditure limit set by the Board.
During the thirty-nine weeks ended September 30, 2023, the Company repurchased and subsequently retired 191,369 shares of its Class A Common Stock, including 1,412 unvested investment shares issued under the Investment Share Program of the Company’s Employee Equity Incentive Plan, as illustrated in the table below:
Period |
|
Total Number of Shares |
|
|
Average Price Paid |
|
|
Total Number of Shares |
|
|
Approximate Dollar |
|
||||
January 1, 2023 - February 4, 2023 |
|
|
21,058 |
|
|
$ |
351.21 |
|
|
|
20,770 |
|
|
$ |
83,007 |
|
February 5, 2023 - March 4, 2023 |
|
|
19,379 |
|
|
|
340.70 |
|
|
|
19,266 |
|
|
|
76,434 |
|
March 5, 2023 - April 1, 2023 |
|
|
25,125 |
|
|
|
319.49 |
|
|
|
24,993 |
|
|
|
68,438 |
|
April 2, 2023 - May 1, 2023 |
|
|
30,447 |
|
|
|
316.72 |
|
|
|
30,132 |
|
|
|
58,841 |
|
May 1, 2023 - June 3, 2023 |
|
|
23,741 |
|
|
|
321.01 |
|
|
|
23,607 |
|
|
|
320,245 |
|
June 4, 2023 - July 1, 2023 |
|
|
23,354 |
|
|
|
325.69 |
|
|
|
23,302 |
|
|
|
312,647 |
|
July 2, 2023 - August 5, 2023 |
|
|
26,755 |
|
|
|
313.85 |
|
|
|
26,752 |
|
|
|
304,250 |
|
August 6, 2023 - September 2, 2023 |
|
|
11,150 |
|
|
|
360.77 |
|
|
|
11,017 |
|
|
|
300,254 |
|
September 3, 2023 - September 30, 2023 |
|
|
10,360 |
|
|
|
370.78 |
|
|
|
10,118 |
|
|
|
296,457 |
|
Total |
|
|
191,369 |
|
|
$ |
330.03 |
|
|
|
189,957 |
|
|
|
|
|
As of October 20, 2023, the Company had 10.1 million shares of Class A Common Stock outstanding and 2.1 million shares of Class B Common Stock outstanding.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Item 4. MINE SAFETY DISCLOSURES
Not Applicable
Item 5. OTHER INFORMATION
Insider Trading Arrangements
The table below sets forth information regarding trading plans
Name and Title |
Date of Adoption of Plan |
Duration of Plan |
Aggregate Number of Shares to Be Purchased or Sold Pursuant to Plan |
Description of the Material Terms of the Rule 10b5-1 Trading Arrangement |
Up to |
Vested RSU and ISP shares sold over the duration of the plan |
28
Item 6. EXHIBITS
Exhibit No. |
|
Title |
|
|
|
3.1 |
|
|
|
|
|
3.2
|
|
|
|
|
|
10.1 |
|
|
|
|
|
*31.1 |
|
|
|
|
|
*31.2 |
|
|
|
|
|
*32.1 |
|
|
|
|
|
*32.2 |
|
|
|
|
|
*101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
|
*101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document
|
*101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document
|
*101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document
|
*101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document
|
*101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document
|
*104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document)
|
* Filed with this report
29
SIGNATURES
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: October 26, 2023 |
/s/ David A. Burwick |
|
David A. Burwick |
|
President and Chief Executive Officer |
|
(Principal Executive Officer) |
Date: October 26, 2023 |
/s/ Diego Reynoso |
|
Diego Reynoso |
|
Chief Financial Officer |
|
(Principal Financial Officer) |
30
Exhibit 31.1
I, David A. Burwick, certify that:
1. I have reviewed this quarterly report on Form 10-Q of The Boston Beer Company, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(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 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: October 26, 2023
/s/ David A. Burwick
-----------------------------------------
David A. Burwick
President and Chief Executive Officer
[Principal Executive Officer]
Exhibit 31.2
I, Diego Reynoso, certify that:
1. I have reviewed this quarterly report on Form 10-Q of The Boston Beer Company, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(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 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: October 26, 2023
/s/ Diego Reynoso
-----------------------------------------
Diego Reynoso
Chief Financial Officer
[Principal Financial Officer]
Exhibit 32.1
The Boston Beer Company, Inc.
Certification Pursuant To
18 U.S.C. Section 1350,
As Adopted Pursuant To
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of The Boston Beer Company, Inc. (the "Company") on Form 10-Q for the period ended September 30, 2023 as filed with the Securities and Exchange Commission (the "Report"), I, David A. Burwick, President and Chief Executive Officer of the Company, certify, pursuant to Section 1350 of Chapter 63 of Title 18, United States Code, that this Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: October 26, 2023
/s/ David A. Burwick
David A. Burwick
President and Chief Executive Officer
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to The Boston Beer Company, Inc. and will be retained by The Boston Beer Company, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
The Boston Beer Company, Inc.
Certification Pursuant To
18 U.S.C. Section 1350,
As Adopted Pursuant To
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of The Boston Beer Company, Inc. (the "Company") on Form 10-Q for the period ended September 30, 2023 as filed with the Securities and Exchange Commission (the "Report"), I, Diego Reynoso, Chief Financial Officer of the Company, certify, pursuant to Section 1350 of Chapter 63 of Title 18, United States Code, that this Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: October 26, 2023
/s/ Diego Reynoso
Diego Reynoso
Chief Financial Officer
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to The Boston Beer Company, Inc. and will be retained by The Boston Beer Company, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.