 |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
For the quarterly period ended June 29, 2002
OR
 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
For the transition period from ..........to..........
Commission file number: 1-14092
THE BOSTON BEER COMPANY, INC.
(Exact name of registrant as specified in its charter)
| MASSACHUSETTS | 04-3284048 | |
| (State or other jurisdiction of incorporation | (I.R.S. Employer | |
| or organization) | Identification No.) |
75 Arlington Street, Boston, Massachusetts
(Address of principal executive offices)
02116
(Zip Code)
(617) 368-5000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
| Yes |
|
No | |
Number of shares outstanding of each of the issuer’s classes of common stock, as of August 7, 2002:
Class A Common Stock, $.01 par value |
11,596,928 | |||
Class B Common Stock, $.01 par value |
4,107,355 | |||
(Title of each class) |
(Number of shares) | |||
1
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTERLY REPORT
JUNE 29, 2002
TABLE OF CONTENTS
| PAGE | |||||||||
| PART I. | FINANCIAL INFORMATION |
||||||||
Item 1. Consolidated Financial Statements |
|||||||||
Consolidated Balance Sheets
June 29, 2002 and December 29, 2001 |
3 | ||||||||
Consolidated Statements of Operations for the
Three and Six Months Ended June 29, 2002
and June 30, 2001 |
4 | ||||||||
Consolidated Statements of Cash Flows for the
Six Months Ended June 29, 2002 and
June 30, 2001 |
5 | ||||||||
Notes to Consolidated Financial Statements |
6-8 | ||||||||
Item 2. Management’s Discussion and Analysis of
Financial Condition and Results of Operations |
9-13 | ||||||||
| PART II. | OTHER INFORMATION |
||||||||
Item 1. Legal Proceedings |
14 | ||||||||
Item 2. Changes in Securities |
14 | ||||||||
Item 3. Defaults Upon Senior Securities |
14 | ||||||||
Item 4. Submission of Matters to a Vote of
Security Holders |
14 | ||||||||
Item 5. Other Information |
14 | ||||||||
Item 6. Exhibits and Reports on Form 8-K |
15-18 | ||||||||
| SIGNATURES | 19 | ||||||||
2
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| June 29, | December 29, | ||||||||||
| 2002 | 2001 | ||||||||||
Assets |
|||||||||||
Current Assets: |
|||||||||||
Cash and cash equivalents |
$ | 13,923 | $ | 45,838 | |||||||
Short-term investments |
36,971 | 2,031 | |||||||||
Accounts
receivable, net of the allowance for doubtful accounts of $741 and
$625 as of June 29, 2002 and December 29, 2001, respectively |
23,247 | 19,219 | |||||||||
Inventories |
9,842 | 9,323 | |||||||||
Prepaid expenses |
1,170 | 925 | |||||||||
Deferred income taxes |
2,074 | 2,291 | |||||||||
Other current assets |
1,520 | 844 | |||||||||
Total current assets |
88,747 | 80,471 | |||||||||
Property,
plant and equipment, net of accumulated depreciation of $30,085 and $29,816 as of June 29, 2002 and December 29, 2001, respectively |
21,840 | 23,897 | |||||||||
Other assets |
2,142 | 1,750 | |||||||||
Goodwill |
1,377 | 1,377 | |||||||||
Total assets |
114,106 | $ | 107,495 | ||||||||
Liabilities and Stockholders’ Equity |
|||||||||||
Current Liabilities: |
|||||||||||
Accounts payable |
$ | 9,635 | $ | 11,201 | |||||||
Accrued expenses |
15,817 | 13,196 | |||||||||
Total current liabilities |
25,452 | 24,397 | |||||||||
Long-term deferred income taxes |
3,746 | 3,583 | |||||||||
Other long-term liabilities |
894 | 1,336 | |||||||||
Commitment and Contingencies |
|||||||||||
Stockholders’ Equity: |
|||||||||||
Class A
Common Stock, $.01 par value; 22,700,000 shares authorized; 16,591,188 and 16,544,104 issued and outstanding as of June 29, 2002 and December 29, 2001, respectively |
166 | 165 | |||||||||
Class B Common Stock, $.01 par value; 4,200,000 shares
authorized; 4,107,355 issued and outstanding |
41 | 41 | |||||||||
Additional paid-in-capital |
58,018 | 57,610 | |||||||||
Unearned compensation |
(220 | ) | (212 | ) | |||||||
Other comprehensive income |
110 | — | |||||||||
Retained earnings |
61,769 | 55,647 | |||||||||
Less: Treasury Stock |
|||||||||||
4,377,344
and 4,328,300 shares as of June 29, 2002 and December 29, 2001, at cost, respectively |
(35,870 | ) | (35,072 | ) | |||||||
Total stockholders’ equity |
84,014 | 78,179 | |||||||||
Total liabilities and stockholders’ equity |
$ | 114,106 | $ | 107,495 | |||||||
The accompanying notes are an integral part of these consolidated financial statements
3
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
| Three months ended | Six months ended | ||||||||||||||||
| June 29, | June 30, | June 29, | June 30, | ||||||||||||||
| 2002 | 2001 | 2002 | 2001 | ||||||||||||||
Sales |
$ | 65,217 | $ | 53,877 | $ | 115,696 | $ | 100,095 | |||||||||
Less excise taxes |
6,345 | 5,244 | 11,164 | 9,786 | |||||||||||||
Net sales |
58,872 | 48,633 | 104,532 | 90,309 | |||||||||||||
Cost of sales |
23,369 | 19,429 | 41,881 | 36,866 | |||||||||||||
Gross profit |
35,503 | 29,204 | 62,651 | 53,443 | |||||||||||||
Operating expenses: |
|||||||||||||||||
Advertising, promotional and selling expenses |
24,592 | 18,369 | 46,277 | 33,576 | |||||||||||||
General and administrative expenses |
3,824 | 3,110 | 7,348 | 6,837 | |||||||||||||
Total operating expenses |
28,416 | 21,479 | 53,625 | 40,413 | |||||||||||||
Operating income |
7,087 | 7,725 | 9,026 | 13,030 | |||||||||||||
Other income: |
|||||||||||||||||
Interest income, net |
198 | 353 | 397 | 830 | |||||||||||||
Other income |
928 | 10 | 1,026 | 97 | |||||||||||||
Total other income |
1,126 | 363 | 1,423 | 927 | |||||||||||||
Income before provision for income taxes |
8,213 | 8,088 | 10,449 | 13,957 | |||||||||||||
Provision for income taxes |
3,410 | 3,372 | 4,327 | 5,792 | |||||||||||||
Net income |
$ | 4,803 | $ | 4,716 | $ | 6,122 | $ | 8,165 | |||||||||
Earnings per common share – basic |
$ | 0.29 | $ | 0.29 | $ | 0.37 | $ | 0.50 | |||||||||
Earnings per common share — diluted |
$ | 0.29 | $ | 0.29 | $ | 0.37 | $ | 0.49 | |||||||||
Weighted average number of common shares – basic |
16,354 | 16,461 | 16,353 | 16,458 | |||||||||||||
Weighted average number of common shares – diluted |
16,682 | 16,534 | 16,689 | 16,563 | |||||||||||||
The accompanying notes are an integral part of these consolidated financial statements
4
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Six months ended | ||||||||||
| June 29, | June 30, | |||||||||
| 2002 | 2001 | |||||||||
Cash flows from operating activities: |
||||||||||
Net income |
$ | 6,122 | $ | 8,165 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||||
Depreciation and amortization |
2,879 | 3,270 | ||||||||
Loss (gain) on disposal of fixed assets |
206 | (46 | ) | |||||||
Bad debt expense |
116 | — | ||||||||
Stock option compensation expense |
42 | 44 | ||||||||
Changes in assets and liabilities: |
||||||||||
Accounts receivable |
(4,144 | ) | (4,858 | ) | ||||||
Inventory |
(519 | ) | 1,600 | |||||||
Prepaid expenses |
(244 | ) | 523 | |||||||
Other current assets |
(598 | ) | 90 | |||||||
Deferred Taxes |
380 | — | ||||||||
Other assets |
(899 | ) | (37 | ) | ||||||
Accounts payable |
(1,566 | ) | 2,140 | |||||||
Accrued expenses |
2,620 | 2,599 | ||||||||
Other long-term liabilities |
(206 | ) | (358 | ) | ||||||
Net cash provided by operating activities |
4,189 | 13,132 | ||||||||
Cash flows from investing activities: |
||||||||||
Purchases of available-for-sale investments |
(33,832 | ) | (8,000 | ) | ||||||
Purchases of held-to-maturity investments |
(9,026 | ) | (8,132 | ) | ||||||
Maturities of short-term investments |
8,028 | 9,540 | ||||||||
Purchases of property, plant and equipment |
(947 | ) | (2,445 | ) | ||||||
Proceeds on disposal of fixed assets |
202 | 46 | ||||||||
Net cash used in investing activities |
(35,575 | ) | (8,991 | ) | ||||||
Cash flows from financing activities: |
||||||||||
Purchase of treasury stock |
(798 | ) | (2,656 | ) | ||||||
Proceeds from exercise of stock options |
228 | — | ||||||||
Net proceeds from sale of investment shares |
41 | 132 | ||||||||
Net cash used in financing activities |
(529 | ) | (2,524 | ) | ||||||
Net (decrease) increase in cash and cash equivalents |
(31,915 | ) | 1,617 | |||||||
Cash and cash equivalents at beginning of period |
45,838 | 25,750 | ||||||||
Cash and cash equivalents at end of period |
$ | 13,923 | $ | 27,367 | ||||||
Supplemental disclosure of cash flow information: |
||||||||||
Interest paid |
$ | — | $ | 11 | ||||||
Income taxes paid |
$ | 2,041 | $ | 2,148 | ||||||
The accompanying notes are an integral part of these consolidated financial statements
5
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. BASIS OF PRESENTATION
The Boston Beer Company, Inc. and its subsidiaries (the “Company”) is engaged in the business of brewing and selling malt beverages and cider products throughout the United States and in selected international markets. The accompanying consolidated financial position as of June 29, 2002 and the results of its consolidated operations and consolidated cash flows for the quarters ended June 29, 2002 and June 30, 2001 have been prepared by the Company, without audit, in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required for complete financial statements by generally accepted accounting principles and 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 29, 2001.
Management’s Opinion
In the opinion of the Company’s management, the Company’s unaudited consolidated financial position as of June 29, 2002 and the results of its consolidated operations and consolidated cash flows for the interim periods ended June 29, 2002 and June 30, 2001, 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. SHORT-TERM INVESTMENTS
Short-term investments held by the Company as of June 29, 2002 were classified as available-for-sale, held-to-maturity, and trading securities, depending upon the nature of the investment. Available-for-sale investments include mutual funds comprised of United States taxable and tax-advantaged government-related securities. The cost of available-for-sale investments were $32.5 million and $0, as of June 29, 2002 and December 29, 2001, respectively. Available-for-sale securities are recorded at fair market value, with the change in fair market value during the period excluded from earnings and recorded net of tax as a component of other comprehensive income. Held-to-maturity investments consisted of debt securities, which typically mature in one year or less and are valued at amortized cost, which approximates fair value. The Company has the positive intent and ability to hold these securities until maturity. The aggregate fair value at June 29, 2002 and December 29, 2001 was $3.0 million and $2.0 million, respectively, for investments in United States government obligations and corporate debt. The Company received equity securities during the quarter ended June 29, 2002 as a result of the demutualization of a third party insurance company. These securities were classified as trading securities with unrealized income of $1.3 million reflected in the income statement as of June 29, 2002.
The Company recorded unrealized gains of approximately $110,000 and $106,000 on available-for-sale securities as of June 29, 2002 and June 30, 2001. There were no realized gains or losses recorded during the period ended June 29, 2002 and June 30, 2001.
C. INVENTORIES
Inventories, which consist principally of hops, brewery materials and packaging, are stated at the lower of cost, determined on a first-in, first-out (FIFO) basis, or market.
Inventories consist of the following (in thousands):
| June 29, | December 29, | |||||||
| 2002 | 2001 | |||||||
Raw materials, principally hops |
$ | 7,901 | $ | 7,605 | ||||
Work in process |
753 | 773 | ||||||
Finished goods |
1,188 | 945 | ||||||
| $ | 9,842 | $ | 9,323 | |||||
6
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
D. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share in accordance with Statement of Financial Accounting Standard No. 128 (in thousands, except per share data):
| For the three months ended | For the six months ended | |||||||||||||||
| June 29, | June 30, | June 29, | June 30, | |||||||||||||
| 2002 | ||||||||||||||||