UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549
FORM 10-Q
For the quarterly period ended June 29, 2002
OR
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)
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.
Number of shares outstanding of each of the issuer’s classes of common stock, as of August 7, 2002:
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TABLE OF CONTENTS
THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIESFORM 10-Q
QUARTERLY REPORTJUNE 29, 2002
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THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS
The accompanying notes are an integral part of these consolidated financial statements
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THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS
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THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
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THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIESNOTES 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):
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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):
E. COMPREHENSIVE INCOME
Comprehensive income calculated in accordance with Statement of Financial Accounting Standard No. 130 is as follows (in thousands):
Accumulated other comprehensive income calculated in accordance with Statement of Financial Accounting Standard No. 130 is as follows (in thousands):
F. GOODWILL
Effective January 1, 2002 the Company adopted Financial Accounting Standards Board Statements of Financial Accounting Standards No. 142 (SFAS 142), Goodwill and other Intangible Assets. Under the new rules, goodwill will no longer be amortized but will be subject to annual impairment tests in accordance with the Statements. SFAS No. 142 requires that purchased goodwill and certain indefinite-lived intangibles no longer be amortized, but instead be tested for impairment at least annually.
SFAS No. 142 prescribes a two-phase process for impairment testing of goodwill. The first phase, required to be completed by June 30, 2002, screens for impairment; while the second phase (if necessary), required to be completed by December 31, 2002,
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measures the impairment. The Company completed its first phase impairment analysis during the current quarter and found no instances of impairment of its recorded goodwill; accordingly, the second testing phase, absent future indicators of impairment, is not necessary during 2002.
The Company recorded approximately $24,000 and $48,000 of goodwill amortization during the three and six months ended June 30, 2001, respectively. In accordance with SFAS No. 142, the Company recorded no amortization related to goodwill during 2002. The pro-forma effect of goodwill amortization is not deemed to be material.
G. RECENT ACCOUNTING PROUNOUNCEMENTS
The Company adopted SFAS No. 141 and SFAS No. 142. SFAS No. 141 requires business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting. It also specifies the types of acquired intangible assets that are required to be recognized and reported separate from goodwill. SFAS No. 142 requires that goodwill and certain intangibles no longer be amortized, but instead tested for impairment at least annually. Under SFAS No. 142 goodwill amortization is not recorded. The Company recorded approximately $100,000 of goodwill amortization in 2001. As required under this Statement, the initial testing of goodwill for possible impairment has been completed within the first six months of 2002 and final testing, if possible impairment has been identified, will be completed by the end of the year. After completion of initial testing of goodwill for possible impairment, the Company has determined that goodwill is not impaired.
In August 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations.” This Statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This Statement applies to all entities. It applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and (or) the normal operation of a long-lived asset, except for certain obligations of lessees. SFAS No. 143 is effective for financial statements issued for fiscal years beginning after June 15, 2002. The Company expects that the initial application of SFAS No. 143 will not have a material impact on its financial statements.
On October 3, 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 supercedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.” SFAS No. 144 applies to all long-lived assets (including discontinued operations) and consequently amends Accounting Principles Board Opinion No. 30. SFAS No. 144 develops one accounting model for long-lived assets that are to be disposed of by sale. SFAS No. 144 requires that long-lived assets that are to be disposed of by sale be measured at the lower of book value or fair value less cost to sell. Additionally, SFAS No. 144 expands the scope of discontinued operations to include all components of an entity with operations that (1) can be distinguished from the rest of the entity and (2) will be eliminated from the ongoing operations of the entity in a disposal transaction. SFAS No. 144 is effective for the Company for all financial statements issued in fiscal 2003. The Company expects that the initial application of SFAS No. 144 will not have a material impact on its financial statements.
In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements 4, 44 and 64, Amendment to FASB Statement 13, and Technical Corrections”. One of the major changes of this statement is to change the accounting for the classification of gains and losses from the extinguishment of debt. Upon adoption, the Company will follow APB 30, Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions in determining whether such extinguishment of debt may be classified as extraordinary. The provisions of this statement related to the rescission of FASB Statement 4 shall be applied in fiscal years beginning after May 15, 2002 with early application encouraged. The Company believes that the adoption of SFAS No. 145 will not have a material impact on its financial statements.
In June 2002, the FASB issued SFAS No. 146, “Accounting for Cost Associated with Exit or Disposal Activities”. SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)”. SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. The provisions of SFAS No. 146 are effective for exit or disposal activities that are initiated after December 31, 2002. The Company believes that the adoption of SFAS No. 146 will not have a material impact on its financial statements.
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The following is a discussion of the financial condition and results of operations of the Company for the three and six-month periods ended June 29, 2002 as compared to the three and six-month periods ended June 30, 2001. This discussion should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations, Consolidated Financial Statements of the Company and Notes thereto included in the Form 10-K for the fiscal year ended December 29, 2001.
RESULTS OF OPERATIONS
For purposes of this discussion, Boston Beer’s “core brands” include all products sold under the Samuel Adams®, Oregon Original™, HardCore® and Twisted Tea® trademarks. “Core brands” do not include the products brewed at the Cincinnati Brewery under contract arrangements for third parties. Volume produced under contract arrangements is referred to below as “non-core products”. Boston Beer’s flagship product is Samuel Adams Boston Lager®.
Three Months Ended June 29, 2002 compared to Three Months Ended June 30, 2001
Net sales. Net sales increased by $10.2 million or 21.1% to $58.9 million for the three months ended June 29, 2002 from $48.6 million for the three months ended June 30, 2001. The increase is primarily due to an increase in volume of Boston Beer’s core brands and an increase in average price.
Volume. Total volume increased by 16.1% to 353,000 barrels in the three months ended June 29, 2002 from 304,000 barrels in the three months ended June 30, 2001. Core brands increased by 21.0% to 351,000 barrels for the quarter ended June 29, 2002 from 290,000 barrels for the quarter ended June 30, 2001. The increase in core brands is primarily due to volume contributed from a new product, Sam Adams Light™, and to an increase in seasonal brand volume. Sam Adams Light™ was initially launched in certain test markets during the second half of 2001. The Company subsequently introduced the new product in New York, Chicago, parts of New Jersey, Arizona, and Hawaii during the second quarter 2002. Results in the Sam Adams Light™ markets have been positive and the Company plans to have completed its national launch by year-end.
Non-core volume decreased by 85.7% to 2,000 barrels for the quarter ended June 29, 2002 from 14,000 barrels for the quarter ended June 30, 2001. The decline in non-core volume is primarily due to the expiration in June 2001 of the production contract with the Company’s largest customer of non-core products. As gross profit is significantly lower on non-core products as compared to core brands, the Company does not believe that this change will have a material impact on its financial position, results of operations or cash flows in the short or long-term.
Selling Price. The selling price per barrel increased approximately 4.4% to $166.78 per barrel for the quarter ended June 29, 2002. This increase is due to a decline in non-core volume, changes in the packaging mix, and normal price increases. As net selling price is significantly lower for non-core products as compared to core brands, the decline in non-core products effectively increased the combined net selling price per equivalent barrel. The ratio of bottles to kegs increased, with bottles representing 72.3% of total shipments in the three months ended June 29, 2002 as compared to 67.8% for the same period last year. The shift in the mix to bottles from kegs effectively increased revenue per barrel, as the selling price per equivalent barrel is higher for bottles than for kegs. This shift is primarily due to the introduction of Sam Adams Light™, as this product is only available in bottles.
Gross Profit. Gross profit was 60.3% as a percentage of net sales or $100.58 per barrel for the quarter ended June 29, 2002, as compared to 60.1% and $95.91 for the quarter ended June 30, 2001. The increase was primarily due to a decline in non-core products, packaging mix changes, offset by an increase in cost of goods sold.
Cost of sales increased by $2.29 per barrel to 39.7% as a percentage of net sales or $66.20 per barrel for the quarter ended June 29, 2002, as compared to 40.0% as a percentage of net sales or $63.81 per barrel for the quarter ended June 30, 2001. This is primarily due to a decline in non-core products and packaging mix changes.
Significant changes in the packaging mix would also have a material effect on gross profit. Assuming the same level of production, a shift in the mix to bottles from kegs would effectively increase gross profit sold per barrel, as the gross profit per equivalent barrel is higher for bottles than for kegs.
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Advertising, Promotional and Selling. As a percentage of net sales, advertising, promotional and selling expenses were 41.8% for the quarter ended June 29, 2002, as compared to 37.8% for the quarter ended June 30, 2001. Advertising, promotional and selling expenses increased by $6.2 million or 33.9% to $24.6 million for the three months ended June 29, 2002, compared to $18.4 million for the three months ended June 30, 2001. This increase is primarily due to the investment in brand support for the launch of Sam Adams Light™ in several markets. The Company plans to launch Sam Adams Light™ in all remaining United States markets with similar high investment levels in brand support.
General and Administrative. General and administrative expenses increased by 23.0% or $714,000 to $3.8 million for the quarter ended June 29, 2002 as compared to the same period last year. The increase was primarily due to wage increases, as well as increases in rent and utilities, consulting, and legal fees.
Interest income, net. Interest income decreased by 44.0% to $198,000 for the quarter ended June 29, 2002 from $353,000 for the quarter ended June 29, 2001. This decrease is primarily due to a significant decline in interest rates during the quarter ended June 29, 2002, as compared to the same period last year.
Other income. Other income increased by $918,000 to $928,000 for the quarter ended June 29, 2002 from $10,000 for the quarter ended June 30, 2001. For the three months ended June 29, 2002, the Company received shares of stock from the demutualization of a third party insurance provider. The Company recorded the value of this stock receipt, or $1.3 million in the quarter ended June 29, 2002. This gain was partially offset by losses relating to the disposal of assets.
Provision for income taxes. The Company anticipates that its effective tax rate will be approximately 41.0% for the year ended December 28, 2002, as contrasted with 40.7% for the year ended December 29, 2001.
Six Months Ended June 29, 2002 compared to Six Months Ended June 30, 2001
Net sales. Net sales increased by $14.2 million or 15.7% to $104.5 million for the six months ended June 29, 2002 from $90.3 million for the six months ended June 30, 2001. The increase is primarily due to an increase in volume of Boston Beer’s core brands coupled with increases in selling prices.
Volume. Total volume increased by 9.4% to 628,000 barrels in the six months ended June 29, 2002 from 574,000 barrels in the six months ended June 30, 2001. Core brands increased by 13.6% to 625,000 barrels for the six months ended June 29, 2002 from 550,000 barrels for the six months ended June 30, 2001. The increase in core brands is primarily due to increases in year round products, specifically Sam Adams Light™. Sam Adams Light™ was initially launched in certain test markets during the second half of 2001. By the end of the first half of 2002, the Company had launched the new product in the following markets: New England, San Diego, Columbus, New York, Chicago, parts of New Jersey, Arizona, and Hawaii. Results in the Sam Adams Light™ markets have been positive and the Company plans to have completed its national launch by year-end.
Non-core volume decreased by 87.5% to 3,000 barrels for the six months ended June 29, 2002 from 24,000 barrels for the six months ended June 30, 2001. The decline in non-core volume is primarily due to the expiration in June 2001 of the production contract with the Company’s largest customer of non-core products. As gross profit is significantly lower on non-core products as compared to core brands, the Company does not believe that this change will have a material impact on its financial position, results of operations or cash flows in the short and long-term.
Selling Price. The selling price per barrel increased approximately 5.8% to $166.45 per barrel for the six months ended June 29, 2002. This increase is due to a decline in non-core volume, changes in the packaging mix, and price increases. As net selling price is significantly lower for non-core products as compared to core brands, the decline in non-core products effectively increased the combined net selling price per equivalent barrel. The ratio of bottles to kegs increased, with bottles representing 71.5% of total shipments in the six months ended June 29, 2002 as compared to 67.9% for the same period last year. The shift in the mix to bottles from kegs effectively increased revenue per barrel, as the selling price per equivalent barrel is higher for bottles than for kegs. This shift is primarily due to the introduction of Sam Adams Light™, as this product is only available in bottles.
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Gross Profit. Gross profit was 59.9% as a percentage of net sales or $99.76 per barrel for the six months ended June 29, 2002, as compared to 59.2% and $93.03 for the six months ended June 30, 2001. The increase was primarily due to a decline in non-core products, packaging mix changes, price increases, offset by an increase in cost of goods sold.
Cost of sales increased by $2.46 per barrel to 40.1% as a percentage of net sales or $66.69 per barrel for the six months ended June 29, 2002, as compared to 40.8% as a percentage of net sales or $64.17 per barrel for the six months ended June 30, 2001. This is primarily due to a decline in non-core products and packaging mix changes.
Advertising, Promotional and Selling. As a percentage of net sales, advertising, promotional and selling expenses were 44.3% for the six months ended June 29, 2002, as compared to 37.2% for the six months ended June 30, 2001. Advertising, promotional and selling expenses increased by $12.7 million or 37.8% to $46.3 million for the six months ended June 29, 2002, compared to $33.6 million for the six months ended June 30, 2001. This increase is primarily due to the investment in brand support for the launch of Sam Adams Light™ in several markets. As of June 29, 2002, the Company has launched Sam Adams Light™ in several domestic markets: New England, San Diego, Columbus, New York, Chicago, parts of New Jersey, Arizona, and Hawaii. The Company plans to launch all remaining United States markets during the third and fourth quarter of 2002, supported by similar high levels of investment in brand support.
General and Administrative. General and administrative expenses increased by 7.5% or $511,000 to $7.3 million for the six months ended June 29, 2002 as compared to the same period last year. The increase was primarily due to wage increases as well as increases in increases in rent and utilities, offset by decreases in recruiting expenses.
Interest income, net. Interest income decreased by 52.2% to $397,000 for the six months ended June 29, 2002 from $830,000 for the six months ended June 29, 2001. This decrease is primarily due to a significant decline in interest rates during the six months ended June 29, 2002, as compared to the same period last year.
Other income. Other income increased by $929,000 to $1.0 million for the six months ended June 29, 2002 from $97,000 for the six months ended June 30, 2001. During the second quarter 2002, the Company received shares of stock from the demutualization of a third party insurance provider. The Company recorded the value of this stock receipt of $1.3 million in the six months ended June 29, 2002. This gain was partially offset by losses relating to the disposal of assets.
LIQUIDITY AND CAPITAL RESOURCES
The company’s financial condition continued to be strong during the first half of 2002. Cash and short-term investments increased to $50.9 million as of June 29, 2002 from $47.9 million as of December 29, 2001. For the six months ended June 29, 2002, cash (excluding short-term investments) provided by operating activities of $4.2 million offset cash used in investing activities of $35.6 million and cash used in financing activities of $529,000. Cash provided by operating activities during the first six months ended 2002 was significantly lower than operating cash flow for the same period in 2001 due to the higher advertising and promotional expenditures incurred to support the launch of Sam Adams Light™.
The Board of Directors has authorized an aggregate expenditure limitation of $45.0 million pursuant to the Company’s share repurchase program. As of June 29, 2002, the Company had repurchased a total of 4.4 million shares under this program at a cost of $35.9 million. The Company repurchased 49,000 shares of its outstanding Class A Common Stock during the second quarter of 2002.
The Company utilized $947,000 for the purchase of capital equipment during the six months ended June 29, 2002 as compared to $2.4 million during the same period last year. Purchases during the first half of 2002 primarily consisted of kegs and computer equipment.
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With working capital of $63.3 million and $45.0 million in unused bank lines of credit as of June 29, 2002, the Company believes that its existing resources should be sufficient to meet the Company’s short-term and long-term operating and capital requirements. The Company’s credit facility as of June 29, 2002 consisted of a $15.0 million revolving line of credit (which would have expired on March 31, 2004) and an additional $30.0 million credit facility, borrowings under which would have converted to a term loan on March 31, 2002, had the facility not been extended through June 30, 2002. Effective July 1, 2002, a new $45.0 million credit facility has subsequently replaced the existing credit facilities that were existing as of June 29, 2002. The new facility expires on March 31, 2007. There were no amounts outstanding under the Company’s credit facilities as of June 29, 2002 or as of the date of this filing.
THE POTENTIAL IMPACT OF KNOWN FACTS, COMMITMENTS, EVENTS AND UNCERTAINTIES
Brewery-Related TransactionsThe Company believes that it will have adequate capacity for the production of its products for the foreseeable future, but that the economics of that capacity may change as supply and demand for contract capacity changes (see 10-K for full discussion). In that regard, in April 2002, the Company and High Falls Brewing Company, LLC renegotiated their existing contract brewing agreement, restructuring certain pricing terms, volume requirements, termination provisions and other matters, the result of which extends the Company’s option to produce at High Falls through 2010, at slightly less favorable economics than had existed previously. In connection with this new agreement, the Company released the guaranty of the obligations of High Falls Brewing Company, LLC by the Genesee Brewing Company, Inc.
Hops Purchase CommitmentsThe Company utilizes several varieties of hops in the production of its products. To ensure adequate supplies of these varieties, the Company enters into advance multi-year purchase commitments based on forecasted future hop requirements among other factors.
During 2001, the Company completed certain hop disposal transactions and cancelled certain hop future contracts. The transactions were deemed necessary in order to bring hop inventory levels and future contracts into balance with the Company’s current brewing volume and hop usage, as the Company did not believe that these hop inventories and future hop contracts would be used by the Company within the foreseeable future. During the six months ending June 29, 2002 and June 30, 2001, the Company did not record significant charges for inventory reserves and cancellation fees associated with excess hops inventories and purchase commitments.
The computation of the excess inventory and purchase commitment reserve requires management to make certain assumptions regarding future sales growth, product mix, cancellation costs and supply, among others. The Company’s accounting policy for hops inventory and purchase commitments is to recognize a loss by establishing a reserve to the extent inventory levels and commitments exceed forecasted needs. The Company continues to manage inventory levels and purchase commitments in an effort to maximize utilization of hops on hand and hops under commitment. The current levels are deemed adequate, based upon foreseeable future brewing requirements. The Company does not anticipate further material losses related to hop inventories or contract commitments within the foreseeable future. However, if actual results differ from management’s assumptions or if management assumptions change regarding future sales growth, product mix, and hop market conditions, future material losses could result.
Recent Accounting PronouncementsThe Company adopted SFAS No. 141 and SFAS No. 142. SFAS No. 141 requires business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting. It also specifies the types of acquired intangible assets that are required to be recognized and reported separate from goodwill. SFAS No. 142 requires that goodwill and certain intangibles no longer be amortized, but instead tested for impairment at least annually. Under SFAS No. 142 goodwill amortization is not recorded. The Company recorded approximately $100,000 of goodwill amortization in 2001. As required under this Statement, the initial testing of goodwill for possible impairment has been completed within the first six months of 2002 and final testing, if possible impairment has been identified, will be completed by the end of the year. After completion of initial testing of goodwill for possible impairment, the Company has determined that goodwill is not impaired.
On October 3, 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 supercedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.” SFAS No. 144 applies to all long-lived assets (including discontinued operations) and consequently amends Accounting Principles Board Opinion No. 30. SFAS No. 144 develops one accounting model for long-lived assets that are to be disposed of by sale. SFAS No. 144 requires that long-lived assets that are to be disposed of by sale be measured at the lower of book value or fair value less cost to sell. Additionally, SFAS No. 144 expands the scope of discontinued operations to include all components of an entity with operations that (1) can be distinguished from the rest of the entity and (2) will be eliminated from the ongoing operations of the entity in a
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disposal transaction. SFAS No. 144 is effective for the Company for all financial statements issued in fiscal 2003. The Company expects that the initial application of SFAS No. 144 will not have a material impact on its financial statements.
Critical Accounting PoliciesThe Company’s financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. Critical accounting policies for the Company are outlined in the Form 10-K, Footnote B for the fiscal year ended December 29, 2001. Also, refer to Hops Purchase Commitments above.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Since December 29, 2001, 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.
FORWARD-LOOKING STATEMENTS
In this 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 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 events or circumstances after the date factor that may emerge, 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 unanticipated. Such risks and uncertainties include the factors set forth below in addition to the other information set forth in this Form 10-Q.
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PART II. OTHER INFORMATION
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SIGNATURES
THE BOSTON BEER COMPANY, INC.(Registrant)
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