\n Financial Instruments and Fair Value of Financial\n Instruments
\n\n The Company’s primary financial instruments consisted of cash\n equivalents, accounts receivable, accounts payable and accrued\n expenses at December 26, 2015 and December 27, 2014. The\n Company determines the fair value of its financial assets and\n liabilities in accordance with Financial Accounting Standards Board\n (“FASB”) Accounting Standards Codification\n (“ASC”) Topic 820, Fair Value Measurements and\n Disclosures (“ASC 820”).\n The Company believes that the carrying amount of its cash\n equivalents, accounts receivable, accounts payable and accrued\n expenses approximates fair value due to the short-term nature of\n these assets and liabilities. The Company is not exposed to\n significant interest, currency or credit risks arising from these\n financial assets and liabilities.
\n\n The Company’s reconciliations to statutory rates are as\n follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n \n Statutory rate \n | \n \n | \n | 35.0 | \n% | \n\n | \n | 35.0 | \n% | \n\n | \n | 35.0 | \n% | \n
| \n \n State income taxes, net of federal benefit \n | \n \n | \n | 3.4 | \n\n | \n | \n | 4.0 | \n\n | \n | \n | 4.1 | \n\n |
| \n \n Deduction relating to U.S. production activities \n | \n \n | \n | (2.7 | \n) | \n\n | \n | (2.1 | \n) | \n\n | \n | (2.2 | \n) | \n
| \n \n Change in uncertain tax positions \n | \n \n | \n | \n — | \n\n | \n | \n | \n — | \n\n | \n | \n | (0.9 | \n) | \n
| \n \n Other \n | \n \n | \n | 0.8 | \n\n | \n | \n | 0.8 | \n\n | \n | \n | 1.5 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | \n | 36.5 | \n% | \n\n | \n | 37.7 | \n% | \n\n | \n | 37.5 | \n% | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n E. Property, Plant and Equipment
\n\n Property, plant and equipment consisted of the following:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n December 26, | \n\n | \n | \n December 27, | \n\n | ||
| \n | \n | 2015 | \n\n | \n | 2014 | \n\n | ||
| \n | \n | (in\n thousands) | \n\n | |||||
| \n \n Machinery and plant equipment \n | \n \n | $ | \n387,180 | \n\n | \n | $ | \n358,781 | \n\n |
| \n \n Kegs \n | \n \n | \n | 71,391 | \n\n | \n | \n | 72,124 | \n\n |
| \n \n Land \n | \n \n | \n | 25,135 | \n\n | \n | \n | 23,992 | \n\n |
| \n \n Building and building improvements \n | \n \n | \n | 101,836 | \n\n | \n | \n | 77,130 | \n\n |
| \n \n Office equipment and furniture \n | \n \n | \n | 19,635 | \n\n | \n | \n | 14,063 | \n\n |
| \n \n Leasehold improvements \n | \n \n | \n | 12,037 | \n\n | \n | \n | 7,889 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | \n | 617,214 | \n\n | \n | \n | 553,979 | \n\n |
| \n \n Less accumulated depreciation \n | \n \n | \n | 207,288 | \n\n | \n | \n | 172,410 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | $ | \n409,926 | \n\n | \n | $ | \n381,569 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n The Company recorded depreciation and amortization expense related\n to these assets of $43.4 million, $34.8 million, and $25.7 million\n in fiscal years 2015, 2014, and 2013, respectively.
\n\n
\n\n Impairment of Assets
\n\n The Company evaluates its assets for impairment when events\n indicate that an asset or asset group may have suffered impairment.\n During 2015, 2014, and 2013, the Company recorded impairment\n charges of $0.3 million, $1.8 million, and $1.6 million,\n respectively.
\n\n Accounts Receivable and Allowance for Doubtful\n Accounts
\n\n The Company’s accounts receivable primarily consist of trade\n receivables. The Company records an allowance for doubtful accounts\n that is based on historical trends, customer knowledge, any known\n disputes, and the aging of the accounts receivable balances\n combined with management’s estimate of future potential\n recoverability. Receivables are written off against the allowance\n after all attempts to collect a receivable have failed. The Company\n believes its allowance for doubtful accounts as of\n December 26, 2015 and December 27, 2014 are adequate, but\n actual write-offs could exceed the recorded allowance.
\n\n Long-lived Assets
\n\n Long-lived assets are recorded at cost and depreciated over their\n estimated useful lives. For purposes of determining whether there\n are any impairment losses, as further discussed below, management\n has historically examined the carrying value of the Company’s\n identifiable long-lived assets, including their useful lives, when\n indicators of impairment are present. For all long-lived assets, if\n an impairment loss is identified based on the fair value of the\n asset, as compared to the carrying value of the asset, such a loss\n would be charged to expense in the period the impairment is\n identified. Furthermore, if the review of the carrying values of\n the long-lived assets indicates impairment of such assets, the\n Company may determine that shorter estimated useful lives are more\n appropriate. In that event, the Company will be required to record\n additional depreciation in future periods, which will reduce\n earnings.
\n\n Factors generally considered important which could trigger an\n impairment review on the carrying value of long-lived assets\n include the following: (1) significant underperformance\n relative to historical or projected future operating results;\n (2) significant changes in the manner of use of acquired\n assets or the strategy for the Company’s overall business;\n (3) underutilization of assets; and (4) discontinuance of\n products by the Company or its customers. The Company believes that\n the carrying value of its long-lived assets was realizable as of\n December 26, 2015 and December 27, 2014.
\n\n Accrued expenses and other current liabilities consisted of the\n following:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n December 26, | \n\n | \n | \n December 27, | \n\n | ||
| \n | \n | 2015 | \n\n | \n | 2014 | \n\n | ||
| \n | \n | (in thousands) | \n\n | |||||
| \n \n Accrued deposits \n | \n \n | $ | \n18,865 | \n\n | \n | $ | \n19,665 | \n\n |
| \n \n Employee wages, benefits and reimbursements \n | \n \n | \n | 12,367 | \n\n | \n | \n | 14,528 | \n\n |
| \n \n Advertising, promotional and selling expenses \n | \n \n | \n | 11,249 | \n\n | \n | \n | 8,353 | \n\n |
| \n \n Accrued freight \n | \n \n | \n | 5,681 | \n\n | \n | \n | 4,265 | \n\n |
| \n \n Accrued excise taxes \n | \n \n | \n | 3,976 | \n\n | \n | \n | 4,980 | \n\n |
| \n \n Deferred revenue \n | \n \n | \n | 3,949 | \n\n | \n | \n | 6,034 | \n\n |
| \n \n Accrued stale beer \n | \n \n | \n | 3,254 | \n\n | \n | \n | 2,422 | \n\n |
| \n \n Accrued sales and use tax \n | \n \n | \n | 2,656 | \n\n | \n | \n | 4,187 | \n\n |
| \n \n Accrued ingredients \n | \n \n | \n | \n — | \n\n | \n | \n | 4,047 | \n\n |
| \n \n Other accrued liabilities \n | \n \n | \n | 6,387 | \n\n | \n | \n | 6,058 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | $ | \n68,384 | \n\n | \n | $ | \n74,539 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n As of December 26, 2015, projected cash outflows under\n contractual obligations for the remaining years under the contracts\n are as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Payments Due by Period | \n\n | |||||||||||||||||
| \n | \n | Total | \n\n | \n | 2016 | \n\n | \n | 2017-2018 | \n\n | \n | 2019-2020 | \n\n | \n | Thereafter | \n\n | |||||
| \n | \n | (in thousands) | \n\n | |||||||||||||||||
| \n \n Hops, barley and wheat \n | \n \n | $ | \n63,685 | \n\n | \n | $ | \n26,763 | \n\n | \n | $ | \n23,195 | \n\n | \n | $ | \n13,727 | \n\n | \n | $ | \n\n — | \n\n |
| \n \n Apples and other ingredients \n | \n \n | \n | 48,719 | \n\n | \n | \n | 48,719 | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n |
| \n \n Advertising \n | \n \n | \n | 29,113 | \n\n | \n | \n | 28,826 | \n\n | \n | \n | 287 | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n |
| \n \n Equipment and machinery \n | \n \n | \n | 22,704 | \n\n | \n | \n | 22,704 | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n |
| \n \n Glass bottles \n | \n \n | \n | 21,412 | \n\n | \n | \n | 21,412 | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n |
| \n \n Operating leases \n | \n \n | \n | 17,523 | \n\n | \n | \n | 2,664 | \n\n | \n | \n | 5,618 | \n\n | \n | \n | 4,955 | \n\n | \n | \n | 4,286 | \n\n |
| \n \n Other \n | \n \n | \n | 4,302 | \n\n | \n | \n | 3,940 | \n\n | \n | \n | 362 | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Total contractual obligations \n | \n \n | $ | \n207,458 | \n\n | \n | $ | \n155,028 | \n\n | \n | $ | \n29,462 | \n\n | \n | $ | \n18,682 | \n\n | \n | $ | \n4,286 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n C. Inventories
\n\n Inventories consist of raw materials, work in process and finished\n goods. Raw materials, which principally consist of hops, apple\n juice, other brewing materials and packaging, are stated at the\n lower of cost, determined on the first-in, first-out basis, or\n market. The Company’s goal is to maintain on-hand a supply of\n approximately two years for essential hop varieties, in order to\n limit the risk of an unexpected reduction in supply. Inventories\n are generally classified as current assets. The Company classifies\n hops inventory in excess of two years of forecasted usage in other\n long term assets. The cost elements of work in process and finished\n goods inventory consist of raw materials, direct labor and\n manufacturing overhead. Inventories consisted of the following:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n December 26, | \n\n | \n | \n December 27, | \n\n | ||
| \n | \n | 2015 | \n\n | \n | 2014 | \n\n | ||
| \n | \n | (in\n thousands) | \n\n | |||||
| \n \n Raw Materials \n | \n \n | $ | \n42,123 | \n\n | \n | $ | \n39,535 | \n\n |
| \n \n Work in process \n | \n \n | \n | 8,876 | \n\n | \n | \n | 7,391 | \n\n |
| \n \n Finished Goods \n | \n \n | \n | 8,261 | \n\n | \n | \n | 10,793 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | \n | 59,260 | \n\n | \n | \n | 57,719 | \n\n |
| \n \n Less portion in other long term assets \n | \n \n | \n | (2,798 | \n) | \n\n | \n | (6,412 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | $ | \n56,462 | \n\n | \n | $ | \n51,307 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n Stock-Based Compensation
\n\n The Company accounts for share-based awards in accordance with ASC\n Topic 718, Compensation – Stock\n Compensation (“ASC 718”),\n which generally requires recognition of share-based compensation\n costs in financial statements based on fair value. Compensation\n cost is recognized over the period during which an employee is\n required to provide services in exchange for the award (the\n requisite service period). The amount of compensation cost\n recognized in the consolidated statements of comprehensive income\n is based on the awards ultimately expected to vest, and therefore,\n reduced for estimated forfeitures.
\n\n As permitted by ASC 718, the Company elected to use a lattice\n model, such as the binomial option-pricing model, to estimate the\n fair values of stock options, with the exception of the 2008 and\n 2016 stock option grants to the Company’s Chief Executive\n Officer, which is considered to be a market-based award and was\n valued utilizing the Monte Carlo Simulation pricing model, which\n calculates multiple potential outcomes for an award and establishes\n fair value based on the most likely outcome. See Note M for further\n discussion of the application of the option-pricing models.
\n\n M. Common Stock and Share-Based Compensation
\n\n Class A Common Stock
\n\n The Class A Common Stock has no voting rights, except\n (1) as required by law, (2) for the election of\n Class A Directors, and (3) that the approval of the\n holders of the Class A Common Stock is required for\n (a) certain future authorizations or issuances of additional\n securities which have rights senior to Class A Common Stock,\n (b) certain alterations of rights or terms of the Class A\n or Class B Common Stock as set forth in the Articles of\n Organization of the Company, (c) other amendments of the\n Articles of Organization of the Company, (d) certain mergers\n or consolidations with, or acquisitions of, other entities, and\n (e) sales or dispositions of any significant portion of the\n Company’s assets.
\n\n Class B Common Stock
\n\n The Class B Common Stock has full voting rights, including the\n right to (1) elect a majority of the members of the\n Company’s Board of Directors and (2) approve all\n (a) amendments to the Company’s Articles of\n Organization, (b) mergers or consolidations with, or\n acquisitions of, other entities, (c) sales or dispositions of\n any significant portion of the Company’s assets, and\n (d) equity-based and other executive compensation and other\n significant corporate matters. The Company’s Class B\n Common Stock is not listed for trading. Each share of Class B\n Common Stock is freely convertible into one share of Class A\n Common Stock, upon request of any Class B holder, and\n participates equally in earnings.
\n\n All distributions with respect to the Company’s capital stock\n are restricted by the Company’s credit agreement, with the\n exception of distributions of capital stock from subsidiaries to\n The Boston Beer Company, Inc. and Boston Beer Corporation,\n repurchase from former employees of non-vested investment shares of\n Class A Common Stock issued under the Company’s equity\n incentive plan, redemption of certain shares of Class A Common\n Stock as approved by the Board of Directors and payment of cash\n dividends to its holders of common stock.
\n\n Employee Stock Compensation Plan
\n\n The Company’s Employee Equity Incentive Plan (the\n “Equity Plan”) currently provides for the grant of\n discretionary options and restricted stock awards to employees, and\n provides for shares to be sold to employees of the Company at a\n discounted purchase price under its investment share program. The\n Equity Plan is administered by the Board of Directors of the\n Company, based on recommendations received from the Compensation\n Committee of the Board of Directors. The Compensation Committee\n consists of three independent directors. In determining the\n quantities and types of awards for grant, the Compensation\n Committee periodically reviews the objectives of the\n Company’s compensation system and takes into account the\n position and responsibilities of the employee being considered, the\n nature and value to the Company of his or her service and\n accomplishments, his or her present and potential contributions to\n the success of the Company, the value of the type of awards to the\n employee and such other factors as the Compensation Committee deems\n relevant.
\n\n Stock options and related vesting requirements and terms are\n granted at the Board of Directors’ discretion, but generally\n vest ratably over five-year periods and, with respect to certain\n options granted to members of senior management, based on the\n Company’s performance. Generally, the maximum contractual\n term of stock options is ten years, although the Board of Directors\n may grant options that exceed the ten-year term. During fiscal\n 2015, 2014, and 2013, the Company granted options to purchase\n 18,723, 7,090, and 40,925 shares, respectively, of its\n Class A Common Stock to employees at market price on the grant\n dates. Of the 2015 option grants, 14,742 shares relate to\n performance-based option grants and 3,981 relate to special\n long-term service-based retention stock options. Of the 2014 option\n grants, all shares relate to performance-based option grants. Of\n the 2013 option grants, 10,925 shares relate to\n performance-based option grants, 15,000 shares relate to a\n long-term performance-based option, and 15,000 shares relate\n to special long-term service-based retention stock options. The\n number of shares that will vest under the performance-based options\n depends on the level of performance targets attained on various\n dates.
\n\n
\n\n On January 1, 2016, the Company granted options to purchase an\n aggregate of 663,136 shares of the Company’s Class A\n Common Stock with a weighted average fair value of $46.80 per\n share, of which 574,507 shares relate to a special long-term\n service-based retention stock option issued to the Chief Executive\n Officer, 70,502 shares relate to other special long-term\n service-based retention stock options and 18,127 shares relate\n to performance-based stock options .
\n\n Restricted stock awards are also granted at the Board of\n Directors’ discretion. During fiscal 2015, 2014, and 2013,\n the Company granted 6,092, 16,432, and 11,987 shares, respectively,\n of restricted stock awards to certain senior managers and key\n employees, most of which are service-based and generally vest\n ratably over service periods of five years.
\n\n The Equity Plan also has an investment share program which permits\n employees who have been with the Company for at least one year to\n purchase shares of Class A Common Stock at a discount from\n current market value of 0% to 40%, based on the employee’s\n tenure with the Company. Investment shares vest ratably over\n service periods of five years. Participants may pay for these\n shares either up front or through payroll deductions over an\n eleven-month period during the year of purchase. During fiscal\n 2015, 2014, and 2013, employees elected to purchase an aggregate of\n 8,301, 8,516, and 12,894 investment shares, respectively.
\n\n On January 1, 2016, the Company granted 8,921 shares of\n restricted stock awards to certain senior managers and key\n employees of which all shares vest ratably over service periods of\n five years. On January 1, 2016, employees elected to purchase\n 9,133 shares under the investment share program.
\n\n On December 9, 2015, the Equity Plan was amended whereby the\n number of shares of Class A Common Stock reserved for issuance\n under the plan was increased from 6.0 million to 6.7 million.\n As of December 26, 2015, 1.4 million shares remained\n available for grant. Shares reserved for issuance under cancelled\n employee stock options and forfeited restricted stock are returned\n to the reserve under the Equity Plan for future grants or\n purchases. The Company also purchases unvested investment shares\n from employees who have left the Company at the lesser of\n (i) the price paid for the shares when the employee acquired\n the shares or (ii) the fair market value of the shares as of\n the date next preceding the date on which the shares are called for\n redemption by the Company. These shares are also returned to the\n reserve under the Equity Plan for future grants or purchases.
\n\n Non-Employee Director Options
\n\n The Company has a stock option plan for non-employee directors of\n the Company (the “Non-Employee Director Plan”),\n pursuant to which each non-employee director of the Company is\n granted an option to purchase shares of the Company’s\n Class A Common Stock upon election or re-election to the Board\n of Directors. Stock options issued to non-employee directors vest\n upon grant and have a maximum contractual term of ten years. During\n fiscal 2015, 2014, and 2013 the Company granted options to purchase\n an aggregate of 5,640, 6,696, and 9,864 shares of the\n Company’s Class A Common Stock to non-employee\n directors, respectively.
\n\n The Company has reserved 550,000 shares of Class A Common\n Stock for issuance pursuant to the Non-Employee Director Plan, of\n which 102,933 shares were available for grant as of\n December 26, 2015. Cancelled non-employee directors’\n stock options are returned to the reserve under the Non-Employee\n Director Plan for future grants.
\n\n
\n\n Option Activity
\n\n Information related to stock options under the Equity Plan and the\n Non-Employee Director Plan is summarized as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Shares | \n\n | \n | Weighted- \n Average \n Exercise \n Price | \n \n | \n | Weighted-Average \n Remaining \n Contractual Term \n in Years | \n \n | \n | Aggregate \n Intrinsic \n Value \n (in thousands) | \n \n | ||||
| \n \n Outstanding at December 27, 2014 \n | \n \n | \n | 1,380,444 | \n\n | \n | $ | \n55.37 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Granted \n | \n \n | \n | 24,363 | \n\n | \n | \n | 283.22 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Forfeited \n | \n \n | \n | \n — | \n\n | \n | \n | \n — | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Expired \n | \n \n | \n | \n — | \n\n | \n | \n | \n — | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Exercised \n | \n \n | \n | (277,645 | \n) | \n\n | \n | 151.28 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Outstanding at December 26, 2015 \n | \n \n | \n | 1,127,162 | \n\n | \n | $ | \n63.99 | \n\n | \n | \n | 3.43 | \n\n | \n | $ | \n161,603 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Exercisable at December 26, 2015 \n | \n \n | \n | 380,543 | \n\n | \n | $ | \n62.29 | \n\n | \n | \n | 3.17 | \n\n | \n | $ | \n54,885 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Vested and expected to vest at December 26, 2015 \n | \n \n | \n | 1,089,831 | \n\n | \n | $ | \n63.96 | \n\n | \n | \n | 3.43 | \n\n | \n | $ | \n156,268 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n Of the total options outstanding at December 26, 2015, 117,352\n shares were performance-based options.
\n\n Stock Option Grants to Chief Executive Officer
\n\n On January 1, 2008, the Company granted the Chief Executive\n Officer an option to purchase 753,864 shares of its\n Class A Common Stock, which vests over a five-year period,\n commencing on January 1, 2014, at the rate of 20% per\n year. The exercise price is determined by multiplying $42.00 by the\n aggregate change in the DJ Wilshire 5000 Index from and after\n January 1, 2008 through the close of business on the trading\n date next preceding each date on which the option is exercised. The\n exercise price will not be less than $37.65 per share and the\n excess of the fair value of the Company’s Class A Common\n Stock cannot exceed $70 per share over the exercise price. At\n December 26, 2015 and December 27, 2014, 452,319 shares\n and 603,092 shares of the stock option remained outstanding,\n respectively. If the outstanding shares at December 26, 2015\n were exercised on that date, the exercise price would have been\n $135.40 per share. If the outstanding shares at December 27,\n 2014 were exercised on that date, the exercise price would have\n been $225.74 per share. Reflected in the table above is the minimum\n exercise price of $37.65. The Company is accounting for this award\n as a market-based award which was valued utilizing the Monte Carlo\n Simulation pricing model, which calculates multiple potential\n outcomes for an award and establishes fair value based on the most\n likely outcome. Under the Monte Carlo Simulation pricing model, the\n Company calculated the weighted average fair value per share to be\n $8.41, and recorded stock-based compensation expense of $0.5, $0.7,\n and $1.0, million related to this option in the fiscal 2015,\n 2014, and 2013, respectively.
\n\n On January 1, 2016, the Company granted the Chief Executive\n Officer an option to purchase 574,507 shares of its\n Class A Common Stock, which vests over a five-year period,\n commencing on January 1, 2019, at the rate of 20% per\n year. The exercise price is determined by multiplying $201.91 by\n the aggregate percentage change in the DJ Wilshire 5000 Index from\n and after January 1, 2016 through the close of business on the\n trading date next preceding each date on which the option is\n exercised, plus an additional 1.5 percentage points per annum,\n prorated for partial years. The exercise price will not be less\n than $201.91 per share and the excess of the fair value of the\n Company’s Class A Common Stock cannot exceed $150 per\n share over the exercise price. The Company is accounting for this\n award as a market-based award which was valued utilizing the Monte\n Carlo Simulation pricing model, which calculates multiple potential\n outcomes for an award and establishes fair value based on the most\n likely outcome. Under the Monte Carlo Simulation pricing model, the\n Company calculated the weighted average fair value per share to be\n $39.16.
\n\n
\n\n Stock-Based Compensation
\n\n The following table provides information regarding stock-based\n compensation expense included in operating expenses in the\n accompanying consolidated statements of comprehensive income:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | (in thousands) | \n\n | |||||||||
| \n \n Amounts included in advertising, promotional and selling\n expenses \n | \n \n | $ | \n2,943 | \n\n | \n | $ | \n3,342 | \n\n | \n | $ | \n3,054 | \n\n |
| \n \n Amounts included in general and administrative expenses \n | \n \n | \n | 3,722 | \n\n | \n | \n | 3,515 | \n\n | \n | \n | 4,264 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Total stock-based compensation expense \n | \n \n | $ | \n6,665 | \n\n | \n | $ | \n6,857 | \n\n | \n | $ | \n7,318 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Amounts related to performance-based stock awards included in total\n stock-based compensation expense \n | \n \n | $ | \n831 | \n\n | \n | $ | \n1,378 | \n\n | \n | $ | \n1,401 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n As permitted by ASC 718, the Company uses a lattice model,\n such as the binomial option-pricing model, to estimate the fair\n values of stock options. The Company believes that the\n Black-Scholes option-pricing model is less effective than the\n binomial option-pricing model in valuing long-term options, as it\n assumes that volatility and interest rates are constant over the\n life of the option. In addition, the Company believes that the\n binomial option-pricing model more accurately reflects the fair\n value of its stock awards, as it takes into account historical\n employee exercise patterns based on changes in the Company’s\n stock price and other relevant variables. The weighted-average fair\n value of stock options granted during 2015, 2014, and 2013 was\n $128.54, $106.81 and $60.99 per share, respectively, as calculated\n using a binomial option-pricing model.
\n\n Weighted average assumptions used to estimate fair values of stock\n options on the date of grants are as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n \n Expected volatility \n | \n \n | \n | 34.2% | \n\n | \n | \n | 34.3% | \n\n | \n | \n | 33.9% | \n\n |
| \n \n Risk-free interest rate \n | \n \n | \n | 2.16% | \n\n | \n | \n | 2.83% | \n\n | \n | \n | 1.85% | \n\n |
| \n \n Expected dividends \n | \n \n | \n | 0% | \n\n | \n | \n | 0% | \n\n | \n | \n | 0% | \n\n |
| \n \n Exercise factor \n | \n \n | \n | 3.0 times | \n\n | \n | \n | 3.4 times | \n\n | \n | \n | 2.8 times | \n\n |
| \n \n Discount for post-vesting restrictions \n | \n \n | \n | 0.0% | \n\n | \n | \n | 0.0% | \n\n | \n | \n | 0.0% | \n\n |
\n Expected volatility is based on the Company’s historical\n realized volatility. The risk-free interest rate represents the\n implied yields available from the U.S. Treasury zero-coupon yield\n curve over the contractual term of the option when using the\n binomial option-pricing model. Expected dividend yield is 0%\n because the Company has not paid dividends in the past and\n currently has no known intention to do so in the future. Exercise\n factor and discount for post-vesting restrictions are based on the\n Company’s historical experience.
\n\n Fair value of restricted stock awards is based on the\n Company’s traded stock price on the date of the grants. Fair\n value of investment shares is calculated using the binomial\n option-pricing model.
\n\n The Company uses the straight-line attribution method in\n recognizing stock-based compensation expense for awards that vest\n based on service conditions. For awards that vest subject to\n performance conditions, compensation expense is recognized ratably\n for each tranche of the award over the performance period if it is\n probable that performance conditions will be met.
\n\n Under ASC 718, compensation expense is recognized less estimated\n forfeitures. Because most of the Company’s equity awards vest\n on January 1st each year, the Company\n recognized stock-based compensation expense related to those\n awards, net of actual forfeitures. For equity awards that do not\n vest on January 1st, the estimated\n forfeiture rate used was 5.0%. The forfeiture rate was based upon\n historical experience and the Company periodically reviews this\n rate to ensure proper projection of future forfeitures.
\n\n
\n\n The total fair value of options vested during 2015, 2014, and 2013\n was $4.1 million, $3.8 million, and $4.7 million,\n respectively. The aggregate intrinsic value of stock options\n exercised during 2015, 2014, and 2013 was $37.7 million,\n $45.8 million, and $12.5 million, respectively.
\n\n Based on equity awards outstanding as of December 26, 2015,\n there is $10.0 million of unrecognized compensation costs, net\n of estimated forfeitures, related to unvested share-based\n compensation arrangements that are expected to vest. Such costs are\n expected to be recognized over a weighted-average period of\n 2.2 years. The following table summarizes the estimated future\n annual stock-based compensation expense related to share-based\n arrangements existing as of December 26, 2015 that are\n expected to vest (in thousands):
\n\n
\n| \n | \n | \n | \n | \n |
| \n \n 2016 \n | \n \n | $ | \n3,695 | \n\n |
| \n \n 2017 \n | \n \n | \n | 2,780 | \n\n |
| \n \n 2018 \n | \n \n | \n | 2,030 | \n\n |
| \n \n 2019 \n | \n \n | \n | 1,237 | \n\n |
| \n \n 2020 \n | \n \n | \n | 130 | \n\n |
| \n \n Thereafter \n | \n \n | \n | 89 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Total \n | \n \n | $ | \n9,961 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
\n Non-Vested Shares Activity
\n\n The following table summarizes vesting activities of shares issued\n under the investment share program and restricted stock awards:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Number of \n Shares | \n \n | \n | Weighted \n Average Fair \n Value | \n \n | ||
| \n \n Non-vested at December 27, 2014 \n | \n \n | \n | 73,098 | \n\n | \n | $ | \n116.02 | \n\n |
| \n \n Granted \n | \n \n | \n | 14,393 | \n\n | \n | \n | 195.16 | \n\n |
| \n \n Vested \n | \n \n | \n | (25,732 | \n) | \n\n | \n | 79.44 | \n\n |
| \n \n Forfeited \n | \n \n | \n | (837 | \n) | \n\n | \n | 121.04 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
| \n \n Non-vested at December 26, 2015 \n | \n \n | \n | 60,922 | \n\n | \n | $ | \n150.03 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
\n Stock Repurchase Program
\n\n On February 10, 2016, the Board of Directors of the Company\n increased the aggregate expenditure limit for the Company’s\n Stock Repurchase Program by $50.0 million, thereby increasing\n the limit from $525.0 million to $575.0 million.
\n\n As of December 26, 2015, the Company has repurchased a\n cumulative total of approximately 11.5 million shares of its\n Class A Common Stock for an aggregate purchase price of\n approximately $446.1 million as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Number of \n Shares | \n \n | \n | Aggregate Purchase \n Price | \n \n | ||
| \n | \n | \n | \n | \n | \n (in thousands) | \n\n | ||
| \n \n Repurchased at December 29, 2012 \n | \n \n | \n | 10,696,731 | \n\n | \n | \n | 269,943 | \n\n |
| \n \n 2013 repurchases \n | \n \n | \n | 195,728 | \n\n | \n | \n | 29,585 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Repurchased at December 28, 2013 \n | \n \n | \n | 10,892,459 | \n\n | \n | \n | 299,528 | \n\n |
| \n \n 2014 repurchases \n | \n \n | \n | 29,474 | \n\n | \n | \n | 7,859 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Repurchased at December 27, 2014 \n | \n \n | \n | 10,921,933 | \n\n | \n | \n | 307,387 | \n\n |
| \n \n 2015 repurchases \n | \n \n | \n | 616,747 | \n\n | \n | \n | 138,705 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Repurchased at December 26, 2015 \n | \n \n | \n | 11,538,680 | \n\n | \n | $ | \n446,092 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n
\n\n Cost of Goods Sold
\n\n The following expenses are included in cost of goods sold: raw\n material costs, packaging costs, costs and income related to\n deposit activity, purchasing and receiving costs, manufacturing\n labor and overhead, brewing and processing costs, inspection costs\n relating to quality control, inbound freight charges, depreciation\n expense related to manufacturing equipment and warehousing costs,\n which include rent, labor and overhead costs.
\n\n The following table summarizes the estimated future annual\n stock-based compensation expense related to share-based\n arrangements existing as of December 26, 2015 that are\n expected to vest (in thousands):
\n\n
\n| \n | \n | \n | \n | \n |
| \n \n 2016 \n | \n \n | $ | \n3,695 | \n\n |
| \n \n 2017 \n | \n \n | \n | 2,780 | \n\n |
| \n \n 2018 \n | \n \n | \n | 2,030 | \n\n |
| \n \n 2019 \n | \n \n | \n | 1,237 | \n\n |
| \n \n 2020 \n | \n \n | \n | 130 | \n\n |
| \n \n Thereafter \n | \n \n | \n | 89 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Total \n | \n \n | $ | \n9,961 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
\n F. Goodwill
\n\n Goodwill represents the excess of the purchase price of the\n Company-owned breweries over the fair value of the net assets\n acquired upon the completion of the acquisitions.
\n\n The following table summarizes the Company’s changes to the\n carrying amount of goodwill for the fifty-two weeks ended\n December 26, 2015 (in thousands):
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Balance\n at | \n\n | \n | \n | \n | \n | Balance\n at | \n\n | |||
| \n | \n | \n December 27, | \n\n | \n | \n | \n | \n | \n December 26, | \n\n | |||
| \n | \n | 2014 | \n\n | \n | Additions | \n\n | \n | 2015 | \n\n | |||
| \n \n Goodwill \n | \n \n | $ | \n3,683 | \n\n | \n | $ | \n\n — | \n\n | \n | $ | \n3,683 | \n\n |
\n Principles of Consolidation
\n\n The accompanying consolidated financial statements include the\n accounts of the Company and its subsidiaries, all of which are\n wholly-owned. All intercompany transactions and balances have been\n eliminated in consolidation.
\n\n Fiscal Year
\n\n The Company’s fiscal year is a fifty-two or fifty-three week\n period ending on the last Saturday in December. The fiscal periods\n of 2015, 2014 and 2013 consist of fifty-two weeks.
\n\n The following table summarizes the Company’s changes to the\n carrying amount of goodwill for the fifty-two weeks ended\n December 26, 2015 (in thousands):
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Balance\n at | \n\n | \n | \n | \n | \n | Balance\n at | \n\n | |||
| \n | \n | \n December 27, | \n\n | \n | \n | \n | \n | \n December 26, | \n\n | |||
| \n | \n | 2014 | \n\n | \n | Additions | \n\n | \n | 2015 | \n\n | |||
| \n \n Goodwill \n | \n \n | $ | \n3,683 | \n\n | \n | $ | \n\n — | \n\n | \n | $ | \n3,683 | \n\n |
\n Concentrations of Credit Risk
\n\n Financial instruments that potentially subject the Company to\n concentrations of credit risk consist principally of cash\n equivalents and trade receivables. The Company places its cash\n equivalents with high credit quality financial institutions. As of\n December 26, 2015, the Company’s cash and cash\n equivalents were invested in investment-grade, highly-liquid U.S.\n government agency corporate money market accounts.
\n\n The Company sells primarily to a network of independent wholesalers\n in the United States and to a network of wholesalers, importers or\n other agencies (collectively referred to as\n “Distributors”). In 2015, sales to foreign Distributors\n were approximately 4% of total sales. Receivables arising from\n these sales are not collateralized; however, credit risk is\n minimized as a result of the large and diverse nature of the\n Company’s customer base. The Company establishes an allowance\n for doubtful accounts based upon factors surrounding the credit\n risk of specific customers, historical trends and other\n information. There were no individual customer accounts receivable\n balances outstanding at December 26, 2015 and\n December 27, 2014 that were in excess of 10% of the gross\n accounts receivable balance on those dates. No individual customers\n represented more than 10% of the Company’s revenues during\n fiscal years 2015, 2014 and 2013.
\n\n Net Income Per Share
\n\n Basic net income per share is calculated by dividing net income by\n the weighted-average common shares outstanding. Diluted net income\n per share is calculated by dividing net income by the\n weighted-average common shares and potentially dilutive securities\n outstanding during the period using the treasury stock method or\n the two-class method, whichever is more dilutive.
\n\n Significant components of the Company’s deferred tax assets\n and liabilities are as follows at:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n December 26, | \n\n | \n | \n December 27, | \n\n | ||
| \n | \n | 2015 | \n\n | \n | 2014 | \n\n | ||
| \n | \n | (in thousands) | \n\n | |||||
| \n \n Deferred tax assets: \n | \n \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Accrued expenses \n | \n \n | $ | \n7,435 | \n\n | \n | $ | \n5,087 | \n\n |
| \n \n Stock-based compensation expense \n | \n \n | \n | 9,493 | \n\n | \n | \n | 9,342 | \n\n |
| \n \n Inventory \n | \n \n | \n | 2,398 | \n\n | \n | \n | 4,534 | \n\n |
| \n \n Other \n | \n \n | \n | 4,154 | \n\n | \n | \n | 2,886 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Total deferred tax assets \n | \n \n | \n | 23,480 | \n\n | \n | \n | 21,849 | \n\n |
| \n \n Valuation allowance \n | \n \n | \n | (1,036 | \n) | \n\n | \n | (1,049 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Total deferred tax assets net of valuation allowance \n | \n \n | \n | 22,444 | \n\n | \n | \n | 20,800 | \n\n |
| \n \n Deferred tax liabilities: \n | \n \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Property, plant and equipment \n | \n \n | \n | (69,226 | \n) | \n\n | \n | (61,057 | \n) | \n
| \n \n Prepaid expenses \n | \n \n | \n | (1,475 | \n) | \n\n | \n | (1,080 | \n) | \n
| \n \n Goodwill \n | \n \n | \n | (761 | \n) | \n\n | \n | (695 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Total deferred tax liabilities \n | \n \n | \n | (71,462 | \n) | \n\n | \n | (62,832 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Net deferred tax liabilities \n | \n \n | $ | \n(49,018 | \n) | \n\n | $ | \n(42,032 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n K. Fair Value Measures
\n\n The Company defines fair value as the price that would be received\n to sell an asset or be paid to transfer a liability in an orderly\n transaction between market participants at the measurement date.\n The Company applies the following fair value hierarchy, which\n prioritizes the inputs used to measure fair value into three levels\n and bases the categorization within the hierarchy upon the lowest\n level of input that is available and significant to the fair value\n measurement. The hierarchy gives the highest priority to unadjusted\n quoted prices in active markets for identical assets or liabilities\n (Level 1 measurements) and the lowest priority to unobservable\n inputs (Level 3 measurements).
\n\n
\n| \n | • | \n\n | Level 1 —\n Level 1 inputs are quoted prices (unadjusted) in active\n markets for identical assets or liabilities that the reporting\n entity has the ability to access at the measurement date. | \n
\n
\n| \n | • | \n\n | Level 2 —\n Level 2 inputs are inputs other than quoted prices included\n within Level 1 that are observable for the asset or liability,\n either directly or indirectly. If the asset or liability has a\n specified (contractual) term, a Level 2 input must be\n observable for substantially the full term of the asset or\n liability. | \n
\n
\n| \n | • | \n\n | Level 3 —\n Level 3 inputs are unobservable inputs for the asset or\n liability in which there is little, if any, market activity for the\n asset or liability at the measurement date. | \n
\n
\n\n All financial assets or liabilities that are measured at fair value\n on a recurring basis (at least annually) have been segregated into\n the most appropriate level within the fair value hierarchy based on\n the inputs used to determine the fair value at the measurement\n date. The assets or liabilities measured at fair value on a\n recurring basis are summarized in the table below (in\n thousands):
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | As of December 26,\n 2015 | \n\n | |||||||||||||
| \n | \n | Level 1 | \n\n | \n | Level 2 | \n\n | \n | Level 3 | \n\n | \n | Total | \n\n | ||||
| \n \n Assets: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Cash equivalents \n | \n \n | $ | \n88,108 | \n\n | \n | $ | \n\n — | \n\n | \n | $ | \n\n — | \n\n | \n | $ | \n88,108 | \n\n |
| \n | \n | |||||||||||||||
| \n | \n | As of December 27, 2014 | \n\n | |||||||||||||
| \n | \n | Level 1 | \n\n | \n | Level 2 | \n\n | \n | Level 3 | \n\n | \n | Total | \n\n | ||||
| \n \n Assets: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Cash equivalents \n | \n \n | $ | \n68,846 | \n\n | \n | $ | \n\n — | \n\n | \n | $ | \n\n — | \n\n | \n | $ | \n68,846 | \n\n |
\n The Company’s cash equivalents listed above represent money\n market mutual fund securities and are classified within Level 1 of\n the fair value hierarchy because they are valued using quoted\n market prices. The Company does not adjust the quoted market\n price for such financial instruments.
\n\n Cash, certificates of deposit, receivables and payables are carried\n at their cost, which approximates fair value, because of their\n short-term nature. Financial instruments not recorded at fair value\n in the consolidated financial statements are summarized in the\n table below (in thousands):
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | As of December 26,\n 2015 | \n\n | |||||||||||||
| \n | \n | Level 1 | \n\n | \n | Level 2 | \n\n | \n | Level 3 | \n\n | \n | Total | \n\n | ||||
| \n \n Note payable \n | \n \n | $ | \n\n — | \n\n | \n | $ | \n458 | \n\n | \n | $ | \n\n — | \n\n | \n | $ | \n458 | \n\n |
| \n | \n | |||||||||||||||
| \n | \n | As of December 27, 2014 | \n\n | |||||||||||||
| \n | \n | Level 1 | \n\n | \n | Level 2 | \n\n | \n | Level 3 | \n\n | \n | Total | \n\n | ||||
| \n \n Note payable \n | \n \n | $ | \n\n — | \n\n | \n | $ | \n513 | \n\n | \n | $ | \n\n — | \n\n | \n | $ | \n513 | \n\n |
\n Recent Accounting Pronouncements
\n\n In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with\n Customers (Topic 606). ASU 2014-09 will supersede\n virtually all existing revenue guidance. Under this update, an\n entity is required to recognize revenue upon transfer of promised\n goods or services to customers, in an amount that reflects the\n expected consideration received in exchange for those goods or\n services. As such, an entity will need to use more judgment and\n make more estimates than under the current guidance.\n ASU 2014-09 is to be applied retrospectively either to each\n prior reporting period presented in the financial statements, or\n only to the most current reporting period presented in the\n financial statements with a cumulative effect adjustment to\n retained earnings. The Company will elect to apply the impact (if\n any) of applying ASU 2014-09 to the most current reporting\n period presented in the financial statements with a cumulative\n effect adjustment to retained earnings. In August 2015, the FASB\n issued ASU No. 2015-14, Revenue from Contracts with\n Customers (Topic 606): Deferral of the Effective\n Date (“ASU 2015-14”).\n ASU 2015-14 defers the effective date of ASU 2014-09 for one\n year, making it effective for the year beginning December 31,\n 2017, with early adoption permitted as of January 1, 2017. The\n Company is currently evaluating the impact ASU 2014-09 and has\n preliminarily concluded that it will not significantly affect how\n revenue for contracts with customers is recognized.
\n\n In April 2015, the FASB issued ASU No. 2015-04, Practical Expedient for the\n Measurement Date of an Employer’s Defined Benefit Obligation\n and Plan Assets. ASU 2015-04 gives an employer whose fiscal\n year-end does not coincide with a calendar month-end (e.g., an\n entity that has a 52- or 53-week fiscal year) the ability, as a\n practical expedient, to measure defined benefit retirement\n obligations and related plan assets as of the month-end that is\n closest to its fiscal year-end. ASU 2015-04 will be effective\n prospectively for the year beginning December 27, 2015. The\n Company is currently evaluating the impact of ASU 2015-04 and has\n preliminarily concluded that it will not significantly affect the\n measurement of defined benefit retirement obligations and related\n plan assets.
\n\n In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330),\n Simplifying the Measurement of Inventory. ASU 2015-11 is part\n of the FASB’s initiative to simplify accounting standards.\n The guidance requires an entity to recognize inventory within scope\n of the standard at the lower of cost or net realizable value. Net\n realizable value is the estimated selling price in the ordinary\n course of business, less reasonable predictable costs of\n completion, disposal and transportation. ASU 2015-11 will be\n effective prospectively for the year beginning January 1,\n 2017. The Company is currently evaluating the impact\n ASU 2015-11 will have on its consolidated financial\n statements.
\n\n In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet\n Classification of Deferred Taxes. ASU 2015-17 is part of the\n FASB’s initiative to simplify accounting standards. The\n guidance requires an entity to present deferred tax assets and\n deferred tax liabilities as noncurrent in the consolidated balance\n sheet. ASU 2015-17 permits entities to apply the amendments either\n prospectively or retrospectively. ASU 2015-17 will be effective for\n the year beginning January 1, 2017. The Company is currently\n evaluating the impact ASU 2015-17. As of December 26, 2015 and\n December 27, 2014, the Company had $7.0 million and $8.7\n million, respectively, of current deferred tax assets on the\n consolidated balance sheet that would be classified as noncurrent\n under the new guidance.
\n\n The following table sets forth the computation of basic net income\n per share using the two-class method:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n December 26, | \n\n | \n | \n December 27, | \n\n | \n | \n December 28, | \n\n | |||
| \n | \n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | (in thousands,\n except per share data) | \n\n | |||||||||
| \n \n Net Income \n | \n \n | $ | \n98,414 | \n\n | \n | $ | \n90,743 | \n\n | \n | $ | \n70,392 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Allocation of net income for basic: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Class A Common Stock \n | \n \n | $ | \n71,798 | \n\n | \n | $ | \n64,027 | \n\n | \n | $ | \n47,847 | \n\n |
| \n \n Class B Common Stock \n | \n \n | \n | 26,154 | \n\n | \n | \n | 26,207 | \n\n | \n | \n | 22,035 | \n\n |
| \n \n Unvested participating shares \n | \n \n | \n | 462 | \n\n | \n | \n | 509 | \n\n | \n | \n | 510 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | $ | \n98,414 | \n\n | \n | $ | \n90,743 | \n\n | \n | $ | \n70,392 | \n\n |
| \n \n Weighted average number of shares for basic: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Class A Common Stock \n | \n \n | \n | 9,619 | \n\n | \n | \n | 9,202 | \n\n | \n | \n | 8,741 | \n\n |
| \n \n Class B Common Stock* \n | \n \n | \n | 3,504 | \n\n | \n | \n | 3,766 | \n\n | \n | \n | 4,025 | \n\n |
| \n \n Unvested participating shares \n | \n \n | \n | 62 | \n\n | \n | \n | 73 | \n\n | \n | \n | 93 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | \n | 13,185 | \n\n | \n | \n | 13,041 | \n\n | \n | \n | 12,859 | \n\n |
| \n \n Net income per share for basic: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Class A Common Stock \n | \n \n | $ | \n7.46 | \n\n | \n | $ | \n6.96 | \n\n | \n | $ | \n5.47 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Class B Common Stock \n | \n \n | $ | \n7.46 | \n\n | \n | $ | \n6.96 | \n\n | \n | $ | \n5.47 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n
\n| * | \nChange in Class B Common Stock\n resulted from the conversion of 150,000 shares to Class A\n Common Stock on May 6, 2015 and 100,000 shares to Class A\n Common Stock on October 26, 2015, with the 52-week number of\n shares reflecting the weighted average for the period. | \n
\n Income Taxes
\n\n The Company provides for deferred taxes using an asset and\n liability approach that requires the recognition of deferred tax\n assets and liabilities for the expected future tax consequences of\n events that have been recognized in the Company’s\n consolidated financial statements or tax returns. This results in\n differences between the book and tax bases of the Company’s\n assets and liabilities and carryforwards, such as tax credits. In\n estimating future tax consequences, all expected future events,\n other than enactment of changes in the tax laws or rates, are\n generally considered. Valuation allowances are provided when\n recovery of deferred tax assets does not meet the more likely than\n not standards as defined in ASC Topic 740,Income\n Taxes.
\n\n The calculation of the Company’s tax liabilities involves\n dealing with uncertainties in the application of complex tax\n regulations in several different state tax jurisdictions. The\n Company is periodically reviewed by tax authorities regarding the\n amount of taxes due. These reviews include inquiries regarding the\n timing and amount of deductions and the allocation of income among\n various tax jurisdictions. The Company records estimated reserves\n for exposures associated with positions that it takes on its income\n tax returns that do not meet the more likely than not standards as\n defined in ACS Topic 740, Income Taxes.
\n\n A reconciliation of the beginning and ending amount of unrecognized\n tax benefits is as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2015 | \n\n | \n | 2014 | \n\n | ||
| \n | \n | (in thousands) | \n\n | |||||
| \n \n Balance at beginning of year \n | \n \n | $ | \n368 | \n\n | \n | $ | \n619 | \n\n |
| \n \n Increases related to current year tax positions \n | \n \n | \n | 44 | \n\n | \n | \n | 40 | \n\n |
| \n \n Increases related to prior year tax positions \n | \n \n | \n | 117 | \n\n | \n | \n | \n — | \n\n |
| \n \n Decreases related to settlements \n | \n \n | \n | \n — | \n\n | \n | \n | (270 | \n) | \n
| \n \n Decreases related to lapse of statute of limitations \n | \n \n | \n | (43 | \n) | \n\n | \n | (21 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Balance at end of year \n | \n \n | $ | \n486 | \n\n | \n | $ | \n368 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n Significant components of the provision for income taxes are as\n follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | (in thousands) | \n\n | |||||||||
| \n \n Current: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Federal \n | \n \n | $ | \n42,391 | \n\n | \n | $ | \n30,595 | \n\n | \n | $ | \n24,090 | \n\n |
| \n \n State \n | \n \n | \n | 7,403 | \n\n | \n | \n | 8,262 | \n\n | \n | \n | 6,723 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Total current \n | \n \n | \n | 49,794 | \n\n | \n | \n | 38,857 | \n\n | \n | \n | 30,813 | \n\n |
| \n \n Deferred: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Federal \n | \n \n | \n | 6,279 | \n\n | \n | \n | 15,407 | \n\n | \n | \n | 11,116 | \n\n |
| \n \n State \n | \n \n | \n | 523 | \n\n | \n | \n | 587 | \n\n | \n | \n | 220 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Total deferred \n | \n \n | \n | 6,802 | \n\n | \n | \n | 15,994 | \n\n | \n | \n | 11,336 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Total provision for income taxes \n | \n \n | $ | \n56,596 | \n\n | \n | $ | \n54,851 | \n\n | \n | $ | \n42,149 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n L. Brewery Acquisitions
\n\n On August 26, 2013, A&S acquired substantially all of the\n assets of the Coney Island business (“Coney Island”)\n and certain other assets from Shmaltz Brewing Company for an\n aggregate purchase price of $2.9 million. Costs related to the\n acquisition of Coney Island were not significant and were expensed\n as incurred.
\n\n The allocation of the purchase price is based on management’s\n judgment after evaluating several factors, including valuation\n assessments of tangible and intangible assets. The allocation of\n the purchase price is as follows (in thousands):
\n\n
\n| \n | \n | \n | \n | \n |
| \n \n Property, plant and equipment \n | \n \n | $ | \n110 | \n\n |
| \n \n Trade name \n | \n \n | \n | 1,648 | \n\n |
| \n \n Goodwill \n | \n \n | \n | 1,145 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Total assets acquired and cash paid \n | \n \n | $ | \n2,903 | \n\n |
\n The Company has assigned an indefinite life to the acquired trade\n name and the related value is included in other assets in the\n accompanying consolidated balance sheets. Goodwill resulting from\n this acquisition is expected to be amortizable for tax purposes.\n The operating results of Coney Island since the acquisition date\n are included in the Company’s consolidated financial\n statements.
\n\n Revenue Recognition
\n\n Net revenue includes product sales, less the distributor\n promotional discount allowance, certain Distributor incentives, as\n discussed below in Customer Programs and Incentives, the stale beer\n accrual and excise taxes. The Company recognizes revenue on product\n sales at the time when the product is shipped and the following\n conditions are met: persuasive evidence of an arrangement exists,\n title has passed to the customer according to the shipping terms,\n the price is fixed and determinable, and collection of the sales\n proceeds is reasonably assured. If the conditions for revenue\n recognition are not met, the Company defers the revenue until all\n conditions are met. As of December 26, 2015 and\n December 27, 2014, the Company has deferred $3.9 million\n and $6.0 million, in revenue related to product shipped prior\n to these dates. These amounts are included in accrued expenses and\n other current liabilities in the accompanying consolidated balance\n sheets.
\n\n In certain circumstances and with the Company’s approval, the\n Company accepts and destroys stale beer that is returned by\n Distributors. The Company generally credits approximately fifty\n percent of the distributor’s cost of the beer that has passed\n its expiration date for freshness when it is returned to the\n Company or destroyed. The Company reduces revenue and establishes\n an accrual based upon both historical returns, which is applied to\n an estimated lag time for receipt of product, and knowledge of\n specific return transactions. Stale beer expense is reflected in\n the accompanying financial statements as a reduction of revenue;\n however, the actual stale beer expense incurred by the Company\n could differ from the estimated accrual.
\n\n H. Debt and Capital Lease Obligations
\n\n Line of Credit
\n\n The Company has a credit facility in place that provides for a\n $150.0 million revolving line of credit which has a term not\n scheduled to expire until March 31, 2019. The Company may\n elect an interest rate for borrowings under the credit facility\n based on either (i) the Alternative Prime Rate (3.50% at\n December 26, 2015) or (ii) the applicable LIBOR rate\n (0.36% at December 26, 2015) plus 0.45%. The Company incurs an\n annual commitment fee of 0.15% on the unused portion of the\n facility and is obligated to meet certain financial covenants,\n which are measured using earnings before interest, tax,\n depreciation and amortization (“EBITDA”) based ratios.\n The Company’s EBITDA to interest expense ratio was 9,810 as\n of December 26, 2015, compared to a minimum allowable ratio of\n 2.00 and the Company’s total funded debt to EBITDA ratio was\n 0.00 as of December 26, 2015, compared to a maximum allowable\n ratio of 2.50. The Company was in compliance with all financial\n covenants as of December 26, 2015 and December 27, 2014.\n There were no borrowings outstanding under the credit facility as\n of December 26, 2015 and December 27, 2014.
\n\n
\n\n There are also certain restrictive covenants set forth in the\n credit agreement. Pursuant to the negative covenants, the Company\n has agreed that it will not: enter into any indebtedness or\n guarantees other than those specified by the lender, enter into any\n sale and leaseback transactions, merge, consolidate, or dispose of\n significant assets without the lender’s prior written\n consent, make or maintain any investments other than those\n permitted in the credit agreement, or enter into any transactions\n with affiliates outside of the ordinary course of business. In\n addition, the credit agreement requires the Company to obtain prior\n written consent from the lender on distributions on account of, or\n in repurchase, retirement or purchase of its capital stock or other\n equity interests with the exception of the following:\n (a) distributions of capital stock from subsidiaries to The\n Boston Beer Company, Inc. and Boston Beer Corporation (a subsidiary\n of The Boston Beer Company, Inc.), (b) repurchase from former\n employees of non-vested investment shares of Class A Common\n Stock, issued under the Employee Equity Incentive Plan, and\n (c) redemption of shares of Class A Common Stock as\n approved by the Board of Directors and payment of cash dividends to\n its holders of common stock. Borrowings under the credit facility\n may be used for working capital, capital expenditures and general\n corporate purposes of the Company and its subsidiaries. In the\n event of a default that has not been cured, the credit facility\n would terminate and any unpaid principal and accrued interest would\n become due and payable.
\n\n The following table summarizes vesting activities of shares issued\n under the investment share program and restricted stock awards:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Number of \n Shares | \n \n | \n | Weighted \n Average Fair \n Value | \n \n | ||
| \n \n Non-vested at December 27, 2014 \n | \n \n | \n | 73,098 | \n\n | \n | $ | \n116.02 | \n\n |
| \n \n Granted \n | \n \n | \n | 14,393 | \n\n | \n | \n | 195.16 | \n\n |
| \n \n Vested \n | \n \n | \n | (25,732 | \n) | \n\n | \n | 79.44 | \n\n |
| \n \n Forfeited \n | \n \n | \n | (837 | \n) | \n\n | \n | 121.04 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
| \n \n Non-vested at December 26, 2015 \n | \n \n | \n | 60,922 | \n\n | \n | $ | \n150.03 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
\n In management’s opinion, the following unaudited information\n includes all adjustments, consisting of normal recurring\n adjustments, necessary for a fair presentation of the information\n for the quarters presented. The operating results for any quarter\n are not necessarily indicative of results for any future\n quarters.
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | For Quarters Ended | \n\n | |||||||||||||||||||||||||||||
| \n | \n | \n December 26, \n 2015 | \n \n | \n | \n September 26, \n 2015 | \n \n | \n | \n June 27, \n 2015 | \n \n | \n | \n March 28, \n 2015 | \n \n | \n | \n December 27, \n 2014 | \n \n | \n | \n September 27, \n 2014 | \n \n | \n | \n June 28, \n 2014 | \n \n | \n | \n March 29, \n 2014 | \n \n | ||||||||
| \n | \n | (13 weeks) | \n\n | \n | (13 weeks) | \n\n | \n | (13 weeks) | \n\n | \n | (13 weeks) | \n\n | \n | (13 weeks) | \n\n | \n | (13 weeks) | \n\n | \n | (13 weeks) | \n\n | \n | (13 weeks) | \n\n | ||||||||
| \n | \n | (In thousands,\n except per share data) | \n\n | |||||||||||||||||||||||||||||
| \n \n Barrels sold \n | \n \n | \n | 958 | \n\n | \n | \n | 1,284 | \n\n | \n | \n | 1,125 | \n\n | \n | \n | 889 | \n\n | \n | \n | 983 | \n\n | \n | \n | 1,229 | \n\n | \n | \n | 1,054 | \n\n | \n | \n | 838 | \n\n |
| \n \n Net revenue \n | \n \n | $ | \n215,133 | \n\n | \n | $ | \n293,094 | \n\n | \n | $ | \n252,204 | \n\n | \n | $ | \n199,503 | \n\n | \n | $ | \n217,817 | \n\n | \n | $ | \n269,734 | \n\n | \n | $ | \n231,611 | \n\n | \n | $ | \n183,845 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Gross profit \n | \n \n | \n | 108,767 | \n\n | \n | \n | 157,010 | \n\n | \n | \n | 136,225 | \n\n | \n | \n | 99,615 | \n\n | \n | \n | 108,400 | \n\n | \n | \n | 142,996 | \n\n | \n | \n | 123,096 | \n\n | \n | \n | 90,519 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Operating income \n | \n \n | \n | 26,338 | \n\n | \n | \n | 60,879 | \n\n | \n | \n | 46,819 | \n\n | \n | \n | 22,138 | \n\n | \n | \n | 32,036 | \n\n | \n | \n | 60,647 | \n\n | \n | \n | 40,493 | \n\n | \n | \n | 13,391 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Net income \n | \n \n | $ | \n16,115 | \n\n | \n | $ | \n38,624 | \n\n | \n | $ | \n29,932 | \n\n | \n | $ | \n13,743 | \n\n | \n | $ | \n19,074 | \n\n | \n | $ | \n37,926 | \n\n | \n | $ | \n25,428 | \n\n | \n | $ | \n8,315 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Net income per share — basic \n | \n \n | $ | \n1.25 | \n\n | \n | $ | \n2.93 | \n\n | \n | $ | \n2.24 | \n\n | \n | $ | \n1.04 | \n\n | \n | $ | \n1.46 | \n\n | \n | $ | \n2.91 | \n\n | \n | $ | \n1.95 | \n\n | \n | $ | \n0.64 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Net income per share — diluted \n | \n \n | $ | \n1.21 | \n\n | \n | $ | \n2.85 | \n\n | \n | $ | \n2.18 | \n\n | \n | $ | \n1.00 | \n\n | \n | $ | \n1.40 | \n\n | \n | $ | \n2.79 | \n\n | \n | $ | \n1.88 | \n\n | \n | $ | \n0.62 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n O. Net Income per Share
\n\n Net Income per Common Share — Basic
\n\n The following table sets forth the computation of basic net income\n per share using the two-class method:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n December 26, | \n\n | \n | \n December 27, | \n\n | \n | \n December 28, | \n\n | |||
| \n | \n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | (in thousands,\n except per share data) | \n\n | |||||||||
| \n \n Net Income \n | \n \n | $ | \n98,414 | \n\n | \n | $ | \n90,743 | \n\n | \n | $ | \n70,392 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Allocation of net income for basic: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Class A Common Stock \n | \n \n | $ | \n71,798 | \n\n | \n | $ | \n64,027 | \n\n | \n | $ | \n47,847 | \n\n |
| \n \n Class B Common Stock \n | \n \n | \n | 26,154 | \n\n | \n | \n | 26,207 | \n\n | \n | \n | 22,035 | \n\n |
| \n \n Unvested participating shares \n | \n \n | \n | 462 | \n\n | \n | \n | 509 | \n\n | \n | \n | 510 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | $ | \n98,414 | \n\n | \n | $ | \n90,743 | \n\n | \n | $ | \n70,392 | \n\n |
| \n \n Weighted average number of shares for basic: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Class A Common Stock \n | \n \n | \n | 9,619 | \n\n | \n | \n | 9,202 | \n\n | \n | \n | 8,741 | \n\n |
| \n \n Class B Common Stock* \n | \n \n | \n | 3,504 | \n\n | \n | \n | 3,766 | \n\n | \n | \n | 4,025 | \n\n |
| \n \n Unvested participating shares \n | \n \n | \n | 62 | \n\n | \n | \n | 73 | \n\n | \n | \n | 93 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | \n | 13,185 | \n\n | \n | \n | 13,041 | \n\n | \n | \n | 12,859 | \n\n |
| \n \n Net income per share for basic: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Class A Common Stock \n | \n \n | $ | \n7.46 | \n\n | \n | $ | \n6.96 | \n\n | \n | $ | \n5.47 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Class B Common Stock \n | \n \n | $ | \n7.46 | \n\n | \n | $ | \n6.96 | \n\n | \n | $ | \n5.47 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n
\n| * | \nChange in Class B Common Stock\n resulted from the conversion of 150,000 shares to Class A\n Common Stock on May 6, 2015 and 100,000 shares to Class A\n Common Stock on October 26, 2015, with the 52-week number of\n shares reflecting the weighted average for the period. | \n
\n Net Income per Common Share — Diluted
\n\n The Company calculates diluted net income per share for common\n stock using the more dilutive of (1) the treasury stock\n method, or (2) the two-class method, which assumes the\n participating securities are not exercised or converted.
\n\n The following tables set forth the computation of diluted net\n income per share, assuming the conversion of all Class B Common\n Stock into Class A Common Stock and using the two-class method\n for unvested participating shares:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Fifty-two weeks ended December 26, 2015 | \n\n | |||||||||
| \n | \n | Earnings\n to | \n\n | \n | \n | \n | \n | \n | \n | |||
| \n | \n | Common | \n\n | \n | \n | \n | \n | \n | \n | |||
| \n | \n | Shareholders | \n\n | \n | Common Shares | \n\n | \n | EPS | \n\n | |||
| \n | \n | (in thousands,\n except per share \n data) | \n \n | \n | \n | \n | ||||||
| \n \n As reported — basic \n | \n \n | $ | \n71,798 | \n\n | \n | \n | 9,619 | \n\n | \n | $ | \n7.46 | \n\n |
| \n \n Add: effect of dilutive potential common shares Share-based\n awards \n | \n \n | \n | \n — | \n\n | \n | \n | 397 | \n\n | \n | \n | \n | \n |
| \n \n Class B Common Stock \n | \n \n | \n | 26,154 | \n\n | \n | \n | 3,504 | \n\n | \n | \n | \n | \n |
| \n \n Net effect of unvested participating shares \n | \n \n | \n | 14 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
| \n \n Net income per common share — diluted \n | \n \n | $ | \n97,966 | \n\n | \n | \n | 13,520 | \n\n | \n | $ | \n7.25 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
| \n | \n | Fifty-two weeks ended December 27,\n 2014 | \n\n | |||||||||
| \n | \n | Earnings\n to | \n\n | \n | \n | \n | \n | \n | \n | |||
| \n | \n | Common | \n\n | \n | \n | \n | \n | \n | \n | |||
| \n | \n | Shareholders | \n\n | \n | Common \n Shares | \n \n | \n | EPS | \n\n | |||
| \n | \n | (in thousands,\n except per share data) | \n\n | \n | \n | \n | ||||||
| \n \n As reported — basic \n | \n \n | $ | \n64,027 | \n\n | \n | \n | 9,202 | \n\n | \n | $ | \n6.96 | \n\n |
| \n \n Add: effect of dilutive potential common shares Share-based\n awards \n | \n \n | \n | \n — | \n\n | \n | \n | 516 | \n\n | \n | \n | \n | \n |
| \n \n Class B Common Stock \n | \n \n | \n | 26,207 | \n\n | \n | \n | 3,766 | \n\n | \n | \n | \n | \n |
| \n \n Net effect of unvested participating shares \n | \n \n | \n | 19 | \n\n | \n | \n | \n — | \n\n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
| \n \n Net income per common share — diluted \n | \n \n | $ | \n90,253 | \n\n | \n | \n | 13,484 | \n\n | \n | $ | \n6.69 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
| \n | \n | |||||||||||
| \n | \n | Fifty-two weeks ended December 28,\n 2013 | \n\n | |||||||||
| \n | \n | Earnings\n to | \n\n | \n | \n | \n | \n | \n | \n | |||
| \n | \n | Common | \n\n | \n | \n | \n | \n | \n | \n | |||
| \n | \n | Shareholders | \n\n | \n | Common \n Shares | \n \n | \n | EPS | \n\n | |||
| \n | \n | \n (in thousands, except per share data) | \n\n | \n | \n | \n | ||||||
| \n \n As reported — basic \n | \n \n | $ | \n47,847 | \n\n | \n | \n | 8,741 | \n\n | \n | $ | \n5.47 | \n\n |
| \n \n Add: effect of dilutive potential common shares Share-based\n awards \n | \n \n | \n | \n — | \n\n | \n | \n | 738 | \n\n | \n | \n | \n | \n |
| \n \n Class B Common Stock \n | \n \n | \n | 22,035 | \n\n | \n | \n | 4,025 | \n\n | \n | \n | \n | \n |
| \n \n Net effect of unvested participating shares \n | \n \n | \n | 28 | \n\n | \n | \n | \n — | \n\n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
| \n \n Net income per common share — diluted \n | \n \n | $ | \n69,910 | \n\n | \n | \n | 13,504 | \n\n | \n | $ | \n5.18 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
\n Basic net income per common share for each share of Class A\n Common Stock and Class B Common Stock is $7.46, $6.96 and\n $5.47 for the fiscal years 2015, 2014, and 2013, respectively, as\n each share of Class A and Class B participates equally in\n earnings. Shares of Class B are convertible at any time into shares\n of Class A on a one-for-one basis at the option of the\n stockholder.
\n\n Weighted average stock options to purchase 16,000, 11,000, and\n 15,000 shares of Class A Common Stock were outstanding during\n fiscal 2015, 2014, and 2013, respectively, but not included in\n computing diluted income per share because their effects were\n anti-dilutive. Additionally, performance-based stock options to\n purchase 15,000, 30,000, and 40,000 shares of Class A Common\n Stock were outstanding during fiscal 2015, 2014, and 2013,\n respectively, but not included in computing dilutive income per\n share because the performance criteria of these stock options were\n not met as of December 26, 2015, December 27, 2014\n and December 28, 2013, respectively.
\n\n
\n\n Property, plant and equipment consisted of the following:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n December 26, | \n\n | \n | \n December 27, | \n\n | ||
| \n | \n | 2015 | \n\n | \n | 2014 | \n\n | ||
| \n | \n | (in\n thousands) | \n\n | |||||
| \n \n Machinery and plant equipment \n | \n \n | $ | \n387,180 | \n\n | \n | $ | \n358,781 | \n\n |
| \n \n Kegs \n | \n \n | \n | 71,391 | \n\n | \n | \n | 72,124 | \n\n |
| \n \n Land \n | \n \n | \n | 25,135 | \n\n | \n | \n | 23,992 | \n\n |
| \n \n Building and building improvements \n | \n \n | \n | 101,836 | \n\n | \n | \n | 77,130 | \n\n |
| \n \n Office equipment and furniture \n | \n \n | \n | 19,635 | \n\n | \n | \n | 14,063 | \n\n |
| \n \n Leasehold improvements \n | \n \n | \n | 12,037 | \n\n | \n | \n | 7,889 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | \n | 617,214 | \n\n | \n | \n | 553,979 | \n\n |
| \n \n Less accumulated depreciation \n | \n \n | \n | 207,288 | \n\n | \n | \n | 172,410 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | $ | \n409,926 | \n\n | \n | $ | \n381,569 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n General and Administrative Expenses
\n\n The following expenses are included in general and administrative\n expenses in the accompanying consolidated statements of\n comprehensive income: general and administrative salary and benefit\n expenses, insurance costs, professional service fees, rent and\n utility expenses, meals, travel and entertainment expenses for\n general and administrative employees, and other general and\n administrative overhead costs.
\n\n P. Accumulated Other Comprehensive (Loss) Income
\n\n Accumulated other comprehensive (loss) income represents amounts of\n unrecognized actuarial gains or losses related to the Company\n sponsored defined benefit pension plan and post-retirement medical\n plan, net of tax effect and currency translation adjustments.\n Changes in accumulated other comprehensive loss represent actuarial\n losses or gains, net of tax effect, recognized as components of net\n periodic benefit costs and currency translation adjustments. The\n following table details the changes in accumulated other\n comprehensive (loss) income for 2015, 2014, and 2013 (in\n thousands):
\n\n
\n| \n | \n | \n | \n | \n |
| \n | \n | Accumulated Other \n Comprehensive (Loss) \n Income | \n \n | |
| \n \n Balance at December 29, 2012 \n | \n \n | $ | \n(883 | \n) | \n
| \n \n Deferred pension and other post-retirement benefit costs, net of\n taxes of ($261) \n | \n \n | \n | 407 | \n\n |
| \n \n Amortization of Deferred benefit costs, net of tax ($35) \n | \n \n | \n | 59 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Balance at December 28, 2013 \n | \n \n | $ | \n(417 | \n) | \n
| \n \n Deferred pension and other post-retirement benefit costs, net of\n taxes of $466 \n | \n \n | \n | (734 | \n) | \n
| \n \n Amortization of Deferred benefit costs, net of tax ($11) \n | \n \n | \n | 18 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Balance at December 27, 2014 \n | \n \n | $ | \n(1,133 | \n) | \n
| \n \n Deferred pension and other post-retirement benefit costs, net of\n taxes of ($99) \n | \n \n | \n | 130 | \n\n |
| \n \n Amortization of Deferred benefit costs, net of tax ($43) \n | \n \n | \n | 74 | \n\n |
| \n \n Currency translation adjustment \n | \n \n | \n | (22 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Balance at December 26, 2015 \n | \n \n | $ | \n(951 | \n) | \n
\n G. Accrued Expenses and Other Current Liabilities
\n\n Accrued expenses and other current liabilities consisted of the\n following:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n December 26, | \n\n | \n | \n December 27, | \n\n | ||
| \n | \n | 2015 | \n\n | \n | 2014 | \n\n | ||
| \n | \n | (in thousands) | \n\n | |||||
| \n \n Accrued deposits \n | \n \n | $ | \n18,865 | \n\n | \n | $ | \n19,665 | \n\n |
| \n \n Employee wages, benefits and reimbursements \n | \n \n | \n | 12,367 | \n\n | \n | \n | 14,528 | \n\n |
| \n \n Advertising, promotional and selling expenses \n | \n \n | \n | 11,249 | \n\n | \n | \n | 8,353 | \n\n |
| \n \n Accrued freight \n | \n \n | \n | 5,681 | \n\n | \n | \n | 4,265 | \n\n |
| \n \n Accrued excise taxes \n | \n \n | \n | 3,976 | \n\n | \n | \n | 4,980 | \n\n |
| \n \n Deferred revenue \n | \n \n | \n | 3,949 | \n\n | \n | \n | 6,034 | \n\n |
| \n \n Accrued stale beer \n | \n \n | \n | 3,254 | \n\n | \n | \n | 2,422 | \n\n |
| \n \n Accrued sales and use tax \n | \n \n | \n | 2,656 | \n\n | \n | \n | 4,187 | \n\n |
| \n \n Accrued ingredients \n | \n \n | \n | \n — | \n\n | \n | \n | 4,047 | \n\n |
| \n \n Other accrued liabilities \n | \n \n | \n | 6,387 | \n\n | \n | \n | 6,058 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | $ | \n68,384 | \n\n | \n | $ | \n74,539 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n The following tables set forth the computation of diluted net\n income per share, assuming the conversion of all Class B Common\n Stock into Class A Common Stock and using the two-class method\n for unvested participating shares:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Fifty-two weeks ended December 26, 2015 | \n\n | |||||||||
| \n | \n | Earnings\n to | \n\n | \n | \n | \n | \n | \n | \n | |||
| \n | \n | Common | \n\n | \n | \n | \n | \n | \n | \n | |||
| \n | \n | Shareholders | \n\n | \n | Common Shares | \n\n | \n | EPS | \n\n | |||
| \n | \n | (in thousands,\n except per share \n data) | \n \n | \n | \n | \n | ||||||
| \n \n As reported — basic \n | \n \n | $ | \n71,798 | \n\n | \n | \n | 9,619 | \n\n | \n | $ | \n7.46 | \n\n |
| \n \n Add: effect of dilutive potential common shares Share-based\n awards \n | \n \n | \n | \n — | \n\n | \n | \n | 397 | \n\n | \n | \n | \n | \n |
| \n \n Class B Common Stock \n | \n \n | \n | 26,154 | \n\n | \n | \n | 3,504 | \n\n | \n | \n | \n | \n |
| \n \n Net effect of unvested participating shares \n | \n \n | \n | 14 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
| \n \n Net income per common share — diluted \n | \n \n | $ | \n97,966 | \n\n | \n | \n | 13,520 | \n\n | \n | $ | \n7.25 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
| \n | \n | Fifty-two weeks ended December 27,\n 2014 | \n\n | |||||||||
| \n | \n | Earnings\n to | \n\n | \n | \n | \n | \n | \n | \n | |||
| \n | \n | Common | \n\n | \n | \n | \n | \n | \n | \n | |||
| \n | \n | Shareholders | \n\n | \n | Common \n Shares | \n \n | \n | EPS | \n\n | |||
| \n | \n | (in thousands,\n except per share data) | \n\n | \n | \n | \n | ||||||
| \n \n As reported — basic \n | \n \n | $ | \n64,027 | \n\n | \n | \n | 9,202 | \n\n | \n | $ | \n6.96 | \n\n |
| \n \n Add: effect of dilutive potential common shares Share-based\n awards \n | \n \n | \n | \n — | \n\n | \n | \n | 516 | \n\n | \n | \n | \n | \n |
| \n \n Class B Common Stock \n | \n \n | \n | 26,207 | \n\n | \n | \n | 3,766 | \n\n | \n | \n | \n | \n |
| \n \n Net effect of unvested participating shares \n | \n \n | \n | 19 | \n\n | \n | \n | \n — | \n\n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
| \n \n Net income per common share — diluted \n | \n \n | $ | \n90,253 | \n\n | \n | \n | 13,484 | \n\n | \n | $ | \n6.69 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
| \n | \n | |||||||||||
| \n | \n | Fifty-two weeks ended December 28,\n 2013 | \n\n | |||||||||
| \n | \n | Earnings\n to | \n\n | \n | \n | \n | \n | \n | \n | |||
| \n | \n | Common | \n\n | \n | \n | \n | \n | \n | \n | |||
| \n | \n | Shareholders | \n\n | \n | Common \n Shares | \n \n | \n | EPS | \n\n | |||
| \n | \n | \n (in thousands, except per share data) | \n\n | \n | \n | \n | ||||||
| \n \n As reported — basic \n | \n \n | $ | \n47,847 | \n\n | \n | \n | 8,741 | \n\n | \n | $ | \n5.47 | \n\n |
| \n \n Add: effect of dilutive potential common shares Share-based\n awards \n | \n \n | \n | \n — | \n\n | \n | \n | 738 | \n\n | \n | \n | \n | \n |
| \n \n Class B Common Stock \n | \n \n | \n | 22,035 | \n\n | \n | \n | 4,025 | \n\n | \n | \n | \n | \n |
| \n \n Net effect of unvested participating shares \n | \n \n | \n | 28 | \n\n | \n | \n | \n — | \n\n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
| \n \n Net income per common share — diluted \n | \n \n | $ | \n69,910 | \n\n | \n | \n | 13,504 | \n\n | \n | $ | \n5.18 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n | \n | \n |
\n The funded status of the Local 1199 Pension Plan and the Retiree\n Medical Plan are as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Local 1199 Pension Plan | \n\n | \n | Retiree Medical Plan | \n\n | ||||||||||
| \n | \n | \n December 26, | \n\n | \n | \n December 27, | \n\n | \n | \n December 26, | \n\n | \n | \n December 27, | \n\n | ||||
| \n | \n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | ||||
| \n | \n | (in thousands) | \n\n | |||||||||||||
| \n \n Fair value of plan assets at end of fiscal year \n | \n \n | $ | \n2,471 | \n\n | \n | $ | \n2,402 | \n\n | \n | $ | \n\n — | \n\n | \n | $ | \n\n — | \n\n |
| \n \n Benefit obligation at end of fiscal year \n | \n \n | \n | 4,105 | \n\n | \n | \n | 4,092 | \n\n | \n | \n | 671 | \n\n | \n | \n | 720 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Unfunded Status \n | \n \n | $ | \n(1,634 | \n) | \n\n | $ | \n(1,690 | \n) | \n\n | $ | \n(671 | \n) | \n\n | $ | \n(720 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n Advertising and Sales Promotions
\n\n The following expenses are included in advertising, promotional and\n selling expenses in the accompanying consolidated statements of\n comprehensive income: media advertising costs, sales and marketing\n expenses, salary and benefit expenses and meals, travel and\n entertainment expenses for the sales and sales support workforce,\n promotional activity expenses, freight charges related to shipments\n of finished goods from manufacturing locations to distributor\n locations and point-of-sale items. Total advertising and sales\n promotional expenditures of $120.1 million,\n $100.5 million, and $81.0 million were included in\n advertising, promotional and selling expenses in the accompanying\n consolidated statements of comprehensive income for fiscal years\n 2015, 2014, and 2013, respectively.
\n\n The Company conducts certain advertising and promotional activities\n in its Distributors’ markets and the Distributors make\n contributions to the Company for such efforts. Reimbursements from\n Distributors for advertising and promotional activities are\n recorded as reductions to advertising, promotional and selling\n expenses.
\n\n Q. Valuation and Qualifying Accounts
\n\n The Company maintains reserves against accounts receivable for\n doubtful accounts and inventory for obsolete and slow-moving\n inventory. The Company also maintains reserves against accounts\n receivable for distributor promotional allowances. In addition, the\n Company maintains a reserve for estimated returns of stale beer,\n which is included in accrued expenses.
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Allowance for Doubtful\n Accounts | \n\n | Balance at \n Beginning of \n Period | \n \n | \n | Net Provision \n (Recovery) | \n \n | \n | Amounts \n Charged Against \n Reserves | \n \n | \n | Balance at \n End of Period | \n \n | ||||
| \n | \n | (In thousands) | \n\n | |||||||||||||
| \n \n 2015 \n | \n \n | $ | \n144 | \n\n | \n | $ | \n165 | \n\n | \n | $ | \n(65 | \n) | \n\n | $ | \n244 | \n\n |
| \n \n 2014 \n | \n \n | $ | \n160 | \n\n | \n | $ | \n(16 | \n) | \n\n | $ | \n\n — | \n\n | \n | $ | \n144 | \n\n |
| \n \n 2013 \n | \n \n | $ | \n125 | \n\n | \n | $ | \n35 | \n\n | \n | $ | \n\n — | \n\n | \n | $ | \n160 | \n\n |
| \n | \n | \n | \n | \n | ||||||||||||
| Discount Accrual | \n\n | Balance at \n Beginning of \n Period | \n \n | \n | Net Provision \n (Recovery) | \n \n | \n | Amounts \n Charged Against \n Reserves | \n \n | \n | Balance at \n End of Period | \n \n | ||||
| \n | \n | (In thousands) | \n\n | |||||||||||||
| \n \n 2015 \n | \n \n | $ | \n3,006 | \n\n | \n | $ | \n33,204 | \n\n | \n | $ | \n(33,397 | \n) | \n\n | $ | \n2,813 | \n\n |
| \n \n 2014 \n | \n \n | $ | \n2,602 | \n\n | \n | $ | \n28,448 | \n\n | \n | $ | \n(28,044 | \n) | \n\n | $ | \n3,006 | \n\n |
| \n \n 2013 \n | \n \n | $ | \n2,315 | \n\n | \n | $ | \n23,132 | \n\n | \n | $ | \n(22,845 | \n) | \n\n | $ | \n2,602 | \n\n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Inventory Obsolescence\n Reserve | \n\n | Balance at \n Beginning of \n Period | \n \n | \n | Net Provision \n (Recovery) | \n \n | \n | Amounts \n Charged Against \n Reserves | \n \n | \n | Balance at \n End of Period | \n \n | ||||
| \n | \n | (In thousands) | \n\n | |||||||||||||
| \n \n 2015 \n | \n \n | $ | \n1,328 | \n\n | \n | $ | \n4,045 | \n\n | \n | $ | \n(3,848 | \n) | \n\n | $ | \n1,525 | \n\n |
| \n \n 2014 \n | \n \n | $ | \n1,616 | \n\n | \n | $ | \n6,130 | \n\n | \n | $ | \n(6,418 | \n) | \n\n | $ | \n1,328 | \n\n |
| \n \n 2013 \n | \n \n | $ | \n1,072 | \n\n | \n | $ | \n4,884 | \n\n | \n | $ | \n(4,340 | \n) | \n\n | $ | \n1,616 | \n\n |
| \n | \n | \n | \n | \n | ||||||||||||
| Stale Beer Reserve | \n\n | Balance at \n Beginning of \n Period | \n \n | \n | Net Provision \n (Recovery) | \n \n | \n | Amounts \n Charged Against \n Reserves | \n \n | \n | Balance at \n End of Period | \n \n | ||||
| \n | \n | (In thousands) | \n\n | |||||||||||||
| \n \n 2015 \n | \n \n | $ | \n2,422 | \n\n | \n | $ | \n7,780 | \n\n | \n | $ | \n(6,948 | \n) | \n\n | $ | \n3,254 | \n\n |
| \n \n 2014 \n | \n \n | $ | \n1,754 | \n\n | \n | $ | \n5,648 | \n\n | \n | $ | \n(4,980 | \n) | \n\n | $ | \n2,422 | \n\n |
| \n \n 2013 \n | \n \n | $ | \n1,859 | \n\n | \n | $ | \n3,432 | \n\n | \n | $ | \n(3,537 | \n) | \n\n | $ | \n1,754 | \n\n |
\n Segment Reporting
\n\n The Company consists of two operating segments that each produce\n and sell alcohol beverages. The first is the Boston Beer Company\n operating segment comprised of the Company’s Samuel\n Adams®, Twisted\n Tea® and Angry Orchard® brands. The second is the\n A&S Brewing Collaborative operating segment which is comprised\n of The Traveler Beer Company, Coney Island Brewing Company, Angel\n City Brewing Company and Concrete Beach Brewing Company. Both\n segments have similar economic characteristics. They also sell\n predominantly low alcohol beverages, which are sold to the same\n types of customers in similar size quantities, at similar price\n points and through substantially the same channels of distribution.\n These beverages are manufactured using similar production\n processes, have comparable alcohol content and generally fall under\n the same regulatory environment. Since the operating segments are\n similar in the areas outlined above, they are aggregated for\n financial statements purposes.
\n\n The Local 1199 Plan’s weighted-average asset allocations at\n the measurement dates by asset category are as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Asset Category \n | \n \n | December 26, \n 2015 | \n \n | \n | December 27, \n 2014 | \n \n | ||
| \n \n Equity securities \n | \n \n | \n | 67 | \n% | \n\n | \n | 66 | \n% | \n
| \n \n Debt securities \n | \n \n | \n | 33 | \n\n | \n | \n | 34 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Total \n | \n \n | \n | 100 | \n% | \n\n | \n | 100 | \n% | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n A. Organization and Basis of Presentation
\n\n The Boston Beer Company, Inc. and certain subsidiaries (the\n “Company”) are engaged in the business of selling\n alcohol beverages throughout the United States and in selected\n international markets, under the trade names “The Boston Beer\n Company,” “Twisted Tea Brewing Company,” and\n “Angry Orchard Cider Company.” The Company’s\n Samuel Adams® beers are produced and sold\n under the trade name “The Boston Beer Company.” A&S\n Brewing Collaborative LLC, d/b/a Alchemy & Science\n (“A&S”), a wholly-owned subsidiary of the Company,\n sells beer under various trade names that is produced under its own\n license and the Company’s licenses. In 2015, sales from\n A&S brands are less than 7% of net revenues.
\n\n I. Income Taxes
\n\n Significant components of the provision for income taxes are as\n follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | (in thousands) | \n\n | |||||||||
| \n \n Current: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Federal \n | \n \n | $ | \n42,391 | \n\n | \n | $ | \n30,595 | \n\n | \n | $ | \n24,090 | \n\n |
| \n \n State \n | \n \n | \n | 7,403 | \n\n | \n | \n | 8,262 | \n\n | \n | \n | 6,723 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Total current \n | \n \n | \n | 49,794 | \n\n | \n | \n | 38,857 | \n\n | \n | \n | 30,813 | \n\n |
| \n \n Deferred: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Federal \n | \n \n | \n | 6,279 | \n\n | \n | \n | 15,407 | \n\n | \n | \n | 11,116 | \n\n |
| \n \n State \n | \n \n | \n | 523 | \n\n | \n | \n | 587 | \n\n | \n | \n | 220 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Total deferred \n | \n \n | \n | 6,802 | \n\n | \n | \n | 15,994 | \n\n | \n | \n | 11,336 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Total provision for income taxes \n | \n \n | $ | \n56,596 | \n\n | \n | $ | \n54,851 | \n\n | \n | $ | \n42,149 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n The Company’s reconciliations to statutory rates are as\n follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n \n Statutory rate \n | \n \n | \n | 35.0 | \n% | \n\n | \n | 35.0 | \n% | \n\n | \n | 35.0 | \n% | \n
| \n \n State income taxes, net of federal benefit \n | \n \n | \n | 3.4 | \n\n | \n | \n | 4.0 | \n\n | \n | \n | 4.1 | \n\n |
| \n \n Deduction relating to U.S. production activities \n | \n \n | \n | (2.7 | \n) | \n\n | \n | (2.1 | \n) | \n\n | \n | (2.2 | \n) | \n
| \n \n Change in uncertain tax positions \n | \n \n | \n | \n — | \n\n | \n | \n | \n — | \n\n | \n | \n | (0.9 | \n) | \n
| \n \n Other \n | \n \n | \n | 0.8 | \n\n | \n | \n | 0.8 | \n\n | \n | \n | 1.5 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | \n | 36.5 | \n% | \n\n | \n | 37.7 | \n% | \n\n | \n | 37.5 | \n% | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n
\n\n Significant components of the Company’s deferred tax assets\n and liabilities are as follows at:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n December 26, | \n\n | \n | \n December 27, | \n\n | ||
| \n | \n | 2015 | \n\n | \n | 2014 | \n\n | ||
| \n | \n | (in thousands) | \n\n | |||||
| \n \n Deferred tax assets: \n | \n \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Accrued expenses \n | \n \n | $ | \n7,435 | \n\n | \n | $ | \n5,087 | \n\n |
| \n \n Stock-based compensation expense \n | \n \n | \n | 9,493 | \n\n | \n | \n | 9,342 | \n\n |
| \n \n Inventory \n | \n \n | \n | 2,398 | \n\n | \n | \n | 4,534 | \n\n |
| \n \n Other \n | \n \n | \n | 4,154 | \n\n | \n | \n | 2,886 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Total deferred tax assets \n | \n \n | \n | 23,480 | \n\n | \n | \n | 21,849 | \n\n |
| \n \n Valuation allowance \n | \n \n | \n | (1,036 | \n) | \n\n | \n | (1,049 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Total deferred tax assets net of valuation allowance \n | \n \n | \n | 22,444 | \n\n | \n | \n | 20,800 | \n\n |
| \n \n Deferred tax liabilities: \n | \n \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Property, plant and equipment \n | \n \n | \n | (69,226 | \n) | \n\n | \n | (61,057 | \n) | \n
| \n \n Prepaid expenses \n | \n \n | \n | (1,475 | \n) | \n\n | \n | (1,080 | \n) | \n
| \n \n Goodwill \n | \n \n | \n | (761 | \n) | \n\n | \n | (695 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Total deferred tax liabilities \n | \n \n | \n | (71,462 | \n) | \n\n | \n | (62,832 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Net deferred tax liabilities \n | \n \n | $ | \n(49,018 | \n) | \n\n | $ | \n(42,032 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n The Company’s practice is to classify interest and penalties\n related to income tax matters in income tax expense. Interest and\n penalties included in the provision for income taxes amounted to\n $0.1 million, $0.0 million, and $0.0 million for\n fiscal years 2015, 2014, and 2013, respectively. Accrued interest\n and penalties amounted to $0.4 million and $0.3 million\n at December 26, 2015 and December 27, 2014,\n respectively.
\n\n A reconciliation of the beginning and ending amount of unrecognized\n tax benefits is as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2015 | \n\n | \n | 2014 | \n\n | ||
| \n | \n | (in thousands) | \n\n | |||||
| \n \n Balance at beginning of year \n | \n \n | $ | \n368 | \n\n | \n | $ | \n619 | \n\n |
| \n \n Increases related to current year tax positions \n | \n \n | \n | 44 | \n\n | \n | \n | 40 | \n\n |
| \n \n Increases related to prior year tax positions \n | \n \n | \n | 117 | \n\n | \n | \n | \n — | \n\n |
| \n \n Decreases related to settlements \n | \n \n | \n | \n — | \n\n | \n | \n | (270 | \n) | \n
| \n \n Decreases related to lapse of statute of limitations \n | \n \n | \n | (43 | \n) | \n\n | \n | (21 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Balance at end of year \n | \n \n | $ | \n486 | \n\n | \n | $ | \n368 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n Included in the balance of unrecognized tax benefits at\n December 26, 2015 and December 27, 2014 are potential net\n benefits of $0.4 million and $0.3 million, respectively,\n that would favorably impact the effective tax rate if recognized.\n Unrecognized tax benefits are included in accrued expenses in the\n accompanying consolidated balance sheets and adjusted in the period\n in which new information about a tax position becomes available or\n the final outcome differs from the amount recorded.
\n\n As of December 26, 2015, the Company’s 2013 and 2014\n federal income tax returns remain subject to examination by the\n Internal Revenue Service (“IRS”). The Company’s\n state income tax returns remain subject to examination for three or\n four years depending on the state’s statute of limitations.\n The Company is being audited by two states as of December 26,\n 2015. In addition, the Company is generally obligated to report\n changes in taxable income arising from federal income tax\n audits.
\n\n It is reasonably possible that the Company’s unrecognized tax\n benefits may increase or decrease in 2016 if there is a completion\n of certain income tax audits; however, the Company cannot estimate\n the range of such possible changes. The Company does not expect\n that any potential changes would have a material impact on the\n Company’s financial position, results of operations or cash\n flows.
\n\n The Company’s short term income tax receivable of\n $14.3 million in the accompanying consolidated balance sheets\n is primarily due to the Protecting Americans from\n Tax Hikes Act of 2015, being enacted after 2015 corporate\n estimated tax payments were due on December 15, 2015. These\n tax extenders allow the Company to claim accelerated tax\n depreciation on qualified property, plant, and equipment additions,\n and the research & development tax credit on the 2015\n federal corporate income tax return. As of this filing date, the\n Company has applied with the IRS for a $12.0 million quick\n refund of overpayment of estimate tax, which the Company expects to\n receive during the first quarter 2016.
\n\n B. Summary of Significant Accounting Policies
\n\n Fiscal Year
\n\n The Company’s fiscal year is a fifty-two or fifty-three week\n period ending on the last Saturday in December. The fiscal periods\n of 2015, 2014 and 2013 consist of fifty-two weeks.
\n\n Principles of Consolidation
\n\n The accompanying consolidated financial statements include the\n accounts of the Company and its subsidiaries, all of which are\n wholly-owned. All intercompany transactions and balances have been\n eliminated in consolidation.
\n\n Segment Reporting
\n\n The Company consists of two operating segments that each produce\n and sell alcohol beverages. The first is the Boston Beer Company\n operating segment comprised of the Company’s Samuel\n Adams®, Twisted\n Tea® and Angry Orchard® brands. The second is the\n A&S Brewing Collaborative operating segment which is comprised\n of The Traveler Beer Company, Coney Island Brewing Company, Angel\n City Brewing Company and Concrete Beach Brewing Company. Both\n segments have similar economic characteristics. They also sell\n predominantly low alcohol beverages, which are sold to the same\n types of customers in similar size quantities, at similar price\n points and through substantially the same channels of distribution.\n These beverages are manufactured using similar production\n processes, have comparable alcohol content and generally fall under\n the same regulatory environment. Since the operating segments are\n similar in the areas outlined above, they are aggregated for\n financial statements purposes.
\n\n Use of Estimates
\n\n The preparation of the consolidated financial statements in\n conformity with U.S. generally accepted accounting principles\n requires management to make estimates and assumptions that affect\n the reported amounts of assets and liabilities and disclosure of\n contingent assets and liabilities at the date of the financial\n statements and the reported amounts of revenue and expenses during\n the reporting period. Actual results could differ from those\n estimates.
\n\n Cash, Cash Equivalents and Restricted Cash
\n\n Cash and cash equivalents at December 26, 2015 and\n December 27, 2014 included cash on-hand and money market\n instruments that are highly liquid investments. Cash and cash\n equivalents are carried at cost, which approximates fair value.
\n\n
\n\n The Company has restricted cash associated with a term note\n agreement with Bank of America that was required by the\n Commonwealth of Pennsylvania to fund economic development at the\n Company’s Pennsylvania Brewery. The restricted cash subject\n to this agreement amounted to $456,000 and $513,000 at\n December 26, 2015 and December 27, 2014, respectively and\n is included in other assets on the Company’s Consolidated\n Balance Sheets.
\n\n Accounts Receivable and Allowance for Doubtful\n Accounts
\n\n The Company’s accounts receivable primarily consist of trade\n receivables. The Company records an allowance for doubtful accounts\n that is based on historical trends, customer knowledge, any known\n disputes, and the aging of the accounts receivable balances\n combined with management’s estimate of future potential\n recoverability. Receivables are written off against the allowance\n after all attempts to collect a receivable have failed. The Company\n believes its allowance for doubtful accounts as of\n December 26, 2015 and December 27, 2014 are adequate, but\n actual write-offs could exceed the recorded allowance.
\n\n Concentrations of Credit Risk
\n\n Financial instruments that potentially subject the Company to\n concentrations of credit risk consist principally of cash\n equivalents and trade receivables. The Company places its cash\n equivalents with high credit quality financial institutions. As of\n December 26, 2015, the Company’s cash and cash\n equivalents were invested in investment-grade, highly-liquid U.S.\n government agency corporate money market accounts.
\n\n The Company sells primarily to a network of independent wholesalers\n in the United States and to a network of wholesalers, importers or\n other agencies (collectively referred to as\n “Distributors”). In 2015, sales to foreign Distributors\n were approximately 4% of total sales. Receivables arising from\n these sales are not collateralized; however, credit risk is\n minimized as a result of the large and diverse nature of the\n Company’s customer base. The Company establishes an allowance\n for doubtful accounts based upon factors surrounding the credit\n risk of specific customers, historical trends and other\n information. There were no individual customer accounts receivable\n balances outstanding at December 26, 2015 and\n December 27, 2014 that were in excess of 10% of the gross\n accounts receivable balance on those dates. No individual customers\n represented more than 10% of the Company’s revenues during\n fiscal years 2015, 2014 and 2013.
\n\n Financial Instruments and Fair Value of Financial\n Instruments
\n\n The Company’s primary financial instruments consisted of cash\n equivalents, accounts receivable, accounts payable and accrued\n expenses at December 26, 2015 and December 27, 2014. The\n Company determines the fair value of its financial assets and\n liabilities in accordance with Financial Accounting Standards Board\n (“FASB”) Accounting Standards Codification\n (“ASC”) Topic 820, Fair Value Measurements and\n Disclosures (“ASC 820”).\n The Company believes that the carrying amount of its cash\n equivalents, accounts receivable, accounts payable and accrued\n expenses approximates fair value due to the short-term nature of\n these assets and liabilities. The Company is not exposed to\n significant interest, currency or credit risks arising from these\n financial assets and liabilities.
\n\n Inventories and Provision for Excess or Expired\n Inventory
\n\n Inventories consist of raw materials, work in process and finished\n goods. Raw materials, which principally consist of hops, malt,\n apple juice, other brewing materials and packaging, are stated at\n the lower of cost (first-in, first-out basis) or market value. The\n cost elements of work in process and finished goods inventory\n consist of raw materials, direct labor and manufacturing overhead.\n Packaging design costs are expensed as incurred.
\n\n The provisions for excess or expired inventory are based on\n management’s estimates of forecasted usage of inventories on\n hand and under contract. A significant change in the timing or\n level of demand for certain products as compared to forecasted\n amounts may result in recording additional provisions for excess or\n expired inventory in the future. Provisions for excess inventory\n are included in cost of goods sold and have historically been\n adequate to provide for losses on its inventory.
\n\n
\n\n The computation of the excess inventory requires management to make\n certain assumptions regarding future sales growth, product mix, new\n products, cancellation costs, and supply, among others. The Company\n manages inventory levels and purchase commitments in an effort to\n maximize utilization of inventory on hand and under commitments.\n The Company’s accounting policy for inventory and purchase\n commitments is to recognize a loss by establishing a reserve to the\n extent inventory levels and commitments exceed management’s\n expected future usage. Provision for excess or expired inventory\n included in cost of goods sold was $4.0 million,\n $6.1 million, and $4.9 million in fiscal years 2015,\n 2014, and 2013.
\n\n Property, Plant and Equipment
\n\n Property, plant, and equipment are stated at cost. Expenditures for\n repairs and maintenance are expensed as incurred. Major renewals\n and betterments that extend the life of the property are\n capitalized. Some of the Company’s equipment is used by other\n brewing companies to produce the Company’s products under\n brewing service arrangements (Note J). Depreciation is computed\n using the straight-line method based upon the estimated useful\n lives of the underlying assets as follows:
\n\n
\n| \n | \n | \n |
| Kegs | \n\n | 5 years | \n
| Office equipment and furniture | \n\n | 3 to 5 years | \n
| Machinery and plant equipment | \n\n | 3 to 20 years, or the term of the production\n agreement, whichever is shorter | \n
| Leasehold improvements | \n\n | Lesser of the remaining term of the lease or\n estimated useful life of the asset | \n
| Building and building improvements | \n\n | 12 to 20 years, or the remaining useful life of\n the building, whichever is shorter | \n
\n Refundable Deposits on Kegs and Pallets
\n\n The Company distributes its draft beer in kegs and packaged beer\n primarily in glass bottles and cans and such kegs, bottles and cans\n are shipped on pallets to Distributors. Most all kegs and pallets\n are owned by the Company. Kegs are reflected in the Company’s\n balance sheets at cost and are depreciated over the estimated\n useful life of the keg, while pallets are expensed upon purchase.\n Upon shipment of beer to Distributors, the Company collects a\n refundable deposit on the kegs and pallets, which is included in\n current liabilities in the Company’s balance sheets. Upon\n return of the kegs and pallets to the Company, the deposit is\n refunded to the Distributor.
\n\n The Company has experienced some loss of kegs and pallets and\n anticipates that some loss will occur in future periods due to the\n significant volume of kegs and pallets handled by each Distributor\n and retailer, the homogeneous nature of kegs and pallets owned by\n most brewers and the relatively small deposit collected for each\n keg when compared with its market value. The Company believes that\n this is an industry-wide issue and that the Company’s loss\n experience is not atypical. The Company believes that the loss of\n kegs and pallets, after considering the forfeiture of related\n deposits, has not been material to the financial statements. The\n Company uses internal records, records maintained by Distributors,\n records maintained by other third party vendors and historical\n information to estimate the physical count of kegs and pallets held\n by Distributors. These estimates affect the amount recorded as\n property, plant and equipment and current liabilities as of the\n date of the financial statements. The actual liability for\n refundable deposits could differ from these estimates. For the year\n ended December 26, 2015, the Company decreased its liability\n for refundable deposits, gross property, plant and equipment and\n related accumulated depreciation by $0.9 million,\n $1.2 million and $1.2 million, respectively. For the year\n ended December 27, 2014, the Company decreased its liability\n for refundable deposits, gross property, plant and equipment and\n related accumulated depreciation by $1.0 million,\n $1.8 million and $1.8 million, respectively. As of\n December 26, 2015 and December 27, 2014, the\n Company’s balance sheet includes $17.1 million and\n $18.2 million, respectively, in refundable deposits on kegs\n and pallets and $18.9 million and $25.9 million,\n respectively, in kegs, net of accumulated depreciation.
\n\n Goodwill
\n\n The Company does not amortize goodwill, but evaluates the\n recoverability of goodwill by comparing the carrying value and the\n fair value of its reporting units at the end of the third quarter\n of each fiscal year, or more frequently if events or changes in\n circumstances indicate that goodwill may be impaired. The Company\n has concluded that its goodwill was not impaired as of\n December 26, 2015 and December 27, 2014. As of\n December 26, 2015 and December 27, 2014, the goodwill of\n the Boston Beer Company reporting unit amounted to\n $1.4 million. As of December 26, 2015 and\n December 27, 2014 the goodwill of the A&S Brewing\n Collaborative reporting unit amounted to $2.3 million.
\n\n Long-lived Assets
\n\n Long-lived assets are recorded at cost and depreciated over their\n estimated useful lives. For purposes of determining whether there\n are any impairment losses, as further discussed below, management\n has historically examined the carrying value of the Company’s\n identifiable long-lived assets, including their useful lives, when\n indicators of impairment are present. For all long-lived assets, if\n an impairment loss is identified based on the fair value of the\n asset, as compared to the carrying value of the asset, such a loss\n would be charged to expense in the period the impairment is\n identified. Furthermore, if the review of the carrying values of\n the long-lived assets indicates impairment of such assets, the\n Company may determine that shorter estimated useful lives are more\n appropriate. In that event, the Company will be required to record\n additional depreciation in future periods, which will reduce\n earnings.
\n\n Factors generally considered important which could trigger an\n impairment review on the carrying value of long-lived assets\n include the following: (1) significant underperformance\n relative to historical or projected future operating results;\n (2) significant changes in the manner of use of acquired\n assets or the strategy for the Company’s overall business;\n (3) underutilization of assets; and (4) discontinuance of\n products by the Company or its customers. The Company believes that\n the carrying value of its long-lived assets was realizable as of\n December 26, 2015 and December 27, 2014.
\n\n Income Taxes
\n\n The Company provides for deferred taxes using an asset and\n liability approach that requires the recognition of deferred tax\n assets and liabilities for the expected future tax consequences of\n events that have been recognized in the Company’s\n consolidated financial statements or tax returns. This results in\n differences between the book and tax bases of the Company’s\n assets and liabilities and carryforwards, such as tax credits. In\n estimating future tax consequences, all expected future events,\n other than enactment of changes in the tax laws or rates, are\n generally considered. Valuation allowances are provided when\n recovery of deferred tax assets does not meet the more likely than\n not standards as defined in ASC Topic 740,Income\n Taxes.
\n\n The calculation of the Company’s tax liabilities involves\n dealing with uncertainties in the application of complex tax\n regulations in several different state tax jurisdictions. The\n Company is periodically reviewed by tax authorities regarding the\n amount of taxes due. These reviews include inquiries regarding the\n timing and amount of deductions and the allocation of income among\n various tax jurisdictions. The Company records estimated reserves\n for exposures associated with positions that it takes on its income\n tax returns that do not meet the more likely than not standards as\n defined in ACS Topic 740, Income Taxes.
\n\n Excise Taxes
\n\n The Company is responsible for compliance with the Alcohol and\n Tobacco Tax and Trade Bureau of the U.S. Treasury Department (the\n “TTB”) regulations which includes making timely and\n accurate excise tax payments. The Company is subject to periodic\n compliance audits by the TTB. Individual states also impose excise\n taxes on alcohol beverages in varying amounts. The Company\n calculates its excise tax expense based upon units produced and on\n its understanding of the applicable excise tax laws.
\n\n Revenue Recognition
\n\n Net revenue includes product sales, less the distributor\n promotional discount allowance, certain Distributor incentives, as\n discussed below in Customer Programs and Incentives, the stale beer\n accrual and excise taxes. The Company recognizes revenue on product\n sales at the time when the product is shipped and the following\n conditions are met: persuasive evidence of an arrangement exists,\n title has passed to the customer according to the shipping terms,\n the price is fixed and determinable, and collection of the sales\n proceeds is reasonably assured. If the conditions for revenue\n recognition are not met, the Company defers the revenue until all\n conditions are met. As of December 26, 2015 and\n December 27, 2014, the Company has deferred $3.9 million\n and $6.0 million, in revenue related to product shipped prior\n to these dates. These amounts are included in accrued expenses and\n other current liabilities in the accompanying consolidated balance\n sheets.
\n\n In certain circumstances and with the Company’s approval, the\n Company accepts and destroys stale beer that is returned by\n Distributors. The Company generally credits approximately fifty\n percent of the distributor’s cost of the beer that has passed\n its expiration date for freshness when it is returned to the\n Company or destroyed. The Company reduces revenue and establishes\n an accrual based upon both historical returns, which is applied to\n an estimated lag time for receipt of product, and knowledge of\n specific return transactions. Stale beer expense is reflected in\n the accompanying financial statements as a reduction of revenue;\n however, the actual stale beer expense incurred by the Company\n could differ from the estimated accrual.
\n\n Cost of Goods Sold
\n\n The following expenses are included in cost of goods sold: raw\n material costs, packaging costs, costs and income related to\n deposit activity, purchasing and receiving costs, manufacturing\n labor and overhead, brewing and processing costs, inspection costs\n relating to quality control, inbound freight charges, depreciation\n expense related to manufacturing equipment and warehousing costs,\n which include rent, labor and overhead costs.
\n\n Shipping Costs
\n\n Costs incurred for the shipping of products to customers are\n included in advertising, promotional and selling expenses in the\n accompanying consolidated statements of comprehensive income. The\n Company incurred shipping costs of $62.2 million, $62.6 million,\n and $50.3 million in fiscal years 2015, 2014, and 2013,\n respectively.
\n\n Advertising and Sales Promotions
\n\n The following expenses are included in advertising, promotional and\n selling expenses in the accompanying consolidated statements of\n comprehensive income: media advertising costs, sales and marketing\n expenses, salary and benefit expenses and meals, travel and\n entertainment expenses for the sales and sales support workforce,\n promotional activity expenses, freight charges related to shipments\n of finished goods from manufacturing locations to distributor\n locations and point-of-sale items. Total advertising and sales\n promotional expenditures of $120.1 million,\n $100.5 million, and $81.0 million were included in\n advertising, promotional and selling expenses in the accompanying\n consolidated statements of comprehensive income for fiscal years\n 2015, 2014, and 2013, respectively.
\n\n The Company conducts certain advertising and promotional activities\n in its Distributors’ markets and the Distributors make\n contributions to the Company for such efforts. Reimbursements from\n Distributors for advertising and promotional activities are\n recorded as reductions to advertising, promotional and selling\n expenses.
\n\n
\n\n Customer Programs and Incentives
\n\n Customer programs and incentives, which include customer\n promotional discount programs, customer incentives and other\n payments, are a common practice in the alcohol beverage industry.\n The Company makes these payments to customers and incurs these\n costs to promote sales of products and to maintain competitive\n pricing. Amounts paid in connection with customer programs and\n incentives are recorded as reductions to net revenue or as\n advertising, promotional and selling expenses in accordance with\n ASC Topic 605-50, Revenue Recognition –\n Customer Payments and Incentives, based on the nature of the\n expenditure. Amounts paid to customers totaled $55.3 million,\n $52.4 million, and $40.4 million in fiscal year 2015,\n 2014, and 2013, respectively.
\n\n Customer promotional discount programs are entered into with\n Distributors for certain periods of time. Amounts paid to\n Distributors in connection with these programs in fiscal years\n 2015, 2014, and 2013 were $33.2 million, $28.5 million,\n and $23.1 million, respectively. The reimbursements for\n discounts to Distributors are recorded as reductions to net\n revenue. Agreed-upon discount rates are applied to certain\n Distributors’ sales to retailers, based on volume metrics, in\n order to determine the total discounted amount. The computation of\n the discount allowance requires that management make certain\n estimates and assumptions that affect the timing and amounts of\n revenue and liabilities recorded. Actual promotional discounts owed\n and paid have historically been in line with allowances recorded by\n the Company, however, the amounts could differ from the estimated\n allowance.
\n\n Customer incentives and other payments are made primarily to\n Distributors based upon performance of certain marketing and\n advertising activities. Depending on applicable state laws and\n regulations, these activities promoting the Company’s\n products may include, but are not limited to point-of-sale and\n merchandise placement, samples, product displays, promotional\n programs at retail locations and meals, travel and entertainment.\n Amounts paid to customers in connection with these programs in\n fiscal years 2015, 2014, and 2013 were $22.1 million,\n $23.9 million, and $17.3 million, respectively. In 2015,\n 2014, and 2013, the Company recorded certain of these costs in the\n total amount of $16.6 million, $18.7 million, and\n $13.4 million respectively as reductions to net revenue. Costs\n recognized as reduction to net revenues include, but are not\n limited to, promotional discounts, sales incentives and certain\n other promotional activities. Costs recognized in advertising,\n promotional and selling expenses include point of sale materials,\n samples and media advertising expenditures in local markets.
\n\n General and Administrative Expenses
\n\n The following expenses are included in general and administrative\n expenses in the accompanying consolidated statements of\n comprehensive income: general and administrative salary and benefit\n expenses, insurance costs, professional service fees, rent and\n utility expenses, meals, travel and entertainment expenses for\n general and administrative employees, and other general and\n administrative overhead costs.
\n\n Stock-Based Compensation
\n\n The Company accounts for share-based awards in accordance with ASC\n Topic 718, Compensation – Stock\n Compensation (“ASC 718”),\n which generally requires recognition of share-based compensation\n costs in financial statements based on fair value. Compensation\n cost is recognized over the period during which an employee is\n required to provide services in exchange for the award (the\n requisite service period). The amount of compensation cost\n recognized in the consolidated statements of comprehensive income\n is based on the awards ultimately expected to vest, and therefore,\n reduced for estimated forfeitures.
\n\n As permitted by ASC 718, the Company elected to use a lattice\n model, such as the binomial option-pricing model, to estimate the\n fair values of stock options, with the exception of the 2008 and\n 2016 stock option grants to the Company’s Chief Executive\n Officer, which is considered to be a market-based award and was\n valued utilizing the Monte Carlo Simulation pricing model, which\n calculates multiple potential outcomes for an award and establishes\n fair value based on the most likely outcome. See Note M for further\n discussion of the application of the option-pricing models.
\n\n
\n\n Net Income Per Share
\n\n Basic net income per share is calculated by dividing net income by\n the weighted-average common shares outstanding. Diluted net income\n per share is calculated by dividing net income by the\n weighted-average common shares and potentially dilutive securities\n outstanding during the period using the treasury stock method or\n the two-class method, whichever is more dilutive.
\n\n Recent Accounting Pronouncements
\n\n In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with\n Customers (Topic 606). ASU 2014-09 will supersede\n virtually all existing revenue guidance. Under this update, an\n entity is required to recognize revenue upon transfer of promised\n goods or services to customers, in an amount that reflects the\n expected consideration received in exchange for those goods or\n services. As such, an entity will need to use more judgment and\n make more estimates than under the current guidance.\n ASU 2014-09 is to be applied retrospectively either to each\n prior reporting period presented in the financial statements, or\n only to the most current reporting period presented in the\n financial statements with a cumulative effect adjustment to\n retained earnings. The Company will elect to apply the impact (if\n any) of applying ASU 2014-09 to the most current reporting\n period presented in the financial statements with a cumulative\n effect adjustment to retained earnings. In August 2015, the FASB\n issued ASU No. 2015-14, Revenue from Contracts with\n Customers (Topic 606): Deferral of the Effective\n Date (“ASU 2015-14”).\n ASU 2015-14 defers the effective date of ASU 2014-09 for one\n year, making it effective for the year beginning December 31,\n 2017, with early adoption permitted as of January 1, 2017. The\n Company is currently evaluating the impact ASU 2014-09 and has\n preliminarily concluded that it will not significantly affect how\n revenue for contracts with customers is recognized.
\n\n In April 2015, the FASB issued ASU No. 2015-04, Practical Expedient for the\n Measurement Date of an Employer’s Defined Benefit Obligation\n and Plan Assets. ASU 2015-04 gives an employer whose fiscal\n year-end does not coincide with a calendar month-end (e.g., an\n entity that has a 52- or 53-week fiscal year) the ability, as a\n practical expedient, to measure defined benefit retirement\n obligations and related plan assets as of the month-end that is\n closest to its fiscal year-end. ASU 2015-04 will be effective\n prospectively for the year beginning December 27, 2015. The\n Company is currently evaluating the impact of ASU 2015-04 and has\n preliminarily concluded that it will not significantly affect the\n measurement of defined benefit retirement obligations and related\n plan assets.
\n\n In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330),\n Simplifying the Measurement of Inventory. ASU 2015-11 is part\n of the FASB’s initiative to simplify accounting standards.\n The guidance requires an entity to recognize inventory within scope\n of the standard at the lower of cost or net realizable value. Net\n realizable value is the estimated selling price in the ordinary\n course of business, less reasonable predictable costs of\n completion, disposal and transportation. ASU 2015-11 will be\n effective prospectively for the year beginning January 1,\n 2017. The Company is currently evaluating the impact\n ASU 2015-11 will have on its consolidated financial\n statements.
\n\n In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet\n Classification of Deferred Taxes. ASU 2015-17 is part of the\n FASB’s initiative to simplify accounting standards. The\n guidance requires an entity to present deferred tax assets and\n deferred tax liabilities as noncurrent in the consolidated balance\n sheet. ASU 2015-17 permits entities to apply the amendments either\n prospectively or retrospectively. ASU 2015-17 will be effective for\n the year beginning January 1, 2017. The Company is currently\n evaluating the impact ASU 2015-17. As of December 26, 2015 and\n December 27, 2014, the Company had $7.0 million and $8.7\n million, respectively, of current deferred tax assets on the\n consolidated balance sheet that would be classified as noncurrent\n under the new guidance.
\n\n Use of Estimates
\n\n The preparation of the consolidated financial statements in\n conformity with U.S. generally accepted accounting principles\n requires management to make estimates and assumptions that affect\n the reported amounts of assets and liabilities and disclosure of\n contingent assets and liabilities at the date of the financial\n statements and the reported amounts of revenue and expenses during\n the reporting period. Actual results could differ from those\n estimates.
\n\n The assets or liabilities measured at fair value on a recurring\n basis are summarized in the table below (in thousands):
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | As of December 26,\n 2015 | \n\n | |||||||||||||
| \n | \n | Level 1 | \n\n | \n | Level 2 | \n\n | \n | Level 3 | \n\n | \n | Total | \n\n | ||||
| \n \n Assets: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Cash equivalents \n | \n \n | $ | \n88,108 | \n\n | \n | $ | \n\n — | \n\n | \n | $ | \n\n — | \n\n | \n | $ | \n88,108 | \n\n |
| \n | \n | |||||||||||||||
| \n | \n | As of December 27, 2014 | \n\n | |||||||||||||
| \n | \n | Level 1 | \n\n | \n | Level 2 | \n\n | \n | Level 3 | \n\n | \n | Total | \n\n | ||||
| \n \n Assets: \n | \n \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Cash equivalents \n | \n \n | $ | \n68,846 | \n\n | \n | $ | \n\n — | \n\n | \n | $ | \n\n — | \n\n | \n | $ | \n68,846 | \n\n |
\n S. Quarterly Results (Unaudited)
\n\n The Company’s fiscal quarters are consistently determined\n year to year and generally consist of 13 weeks, except in those\n fiscal years in which there are fifty-three weeks where the last\n fiscal quarters then consist of 14 weeks. In management’s\n opinion, the following unaudited information includes all\n adjustments, consisting of normal recurring adjustments, necessary\n for a fair presentation of the information for the quarters\n presented. The operating results for any quarter are not\n necessarily indicative of results for any future quarters.
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | For Quarters Ended | \n\n | |||||||||||||||||||||||||||||
| \n | \n | \n December 26, \n 2015 | \n \n | \n | \n September 26, \n 2015 | \n \n | \n | \n June 27, \n 2015 | \n \n | \n | \n March 28, \n 2015 | \n \n | \n | \n December 27, \n 2014 | \n \n | \n | \n September 27, \n 2014 | \n \n | \n | \n June 28, \n 2014 | \n \n | \n | \n March 29, \n 2014 | \n \n | ||||||||
| \n | \n | (13 weeks) | \n\n | \n | (13 weeks) | \n\n | \n | (13 weeks) | \n\n | \n | (13 weeks) | \n\n | \n | (13 weeks) | \n\n | \n | (13 weeks) | \n\n | \n | (13 weeks) | \n\n | \n | (13 weeks) | \n\n | ||||||||
| \n | \n | (In thousands,\n except per share data) | \n\n | |||||||||||||||||||||||||||||
| \n \n Barrels sold \n | \n \n | \n | 958 | \n\n | \n | \n | 1,284 | \n\n | \n | \n | 1,125 | \n\n | \n | \n | 889 | \n\n | \n | \n | 983 | \n\n | \n | \n | 1,229 | \n\n | \n | \n | 1,054 | \n\n | \n | \n | 838 | \n\n |
| \n \n Net revenue \n | \n \n | $ | \n215,133 | \n\n | \n | $ | \n293,094 | \n\n | \n | $ | \n252,204 | \n\n | \n | $ | \n199,503 | \n\n | \n | $ | \n217,817 | \n\n | \n | $ | \n269,734 | \n\n | \n | $ | \n231,611 | \n\n | \n | $ | \n183,845 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Gross profit \n | \n \n | \n | 108,767 | \n\n | \n | \n | 157,010 | \n\n | \n | \n | 136,225 | \n\n | \n | \n | 99,615 | \n\n | \n | \n | 108,400 | \n\n | \n | \n | 142,996 | \n\n | \n | \n | 123,096 | \n\n | \n | \n | 90,519 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Operating income \n | \n \n | \n | 26,338 | \n\n | \n | \n | 60,879 | \n\n | \n | \n | 46,819 | \n\n | \n | \n | 22,138 | \n\n | \n | \n | 32,036 | \n\n | \n | \n | 60,647 | \n\n | \n | \n | 40,493 | \n\n | \n | \n | 13,391 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Net income \n | \n \n | $ | \n16,115 | \n\n | \n | $ | \n38,624 | \n\n | \n | $ | \n29,932 | \n\n | \n | $ | \n13,743 | \n\n | \n | $ | \n19,074 | \n\n | \n | $ | \n37,926 | \n\n | \n | $ | \n25,428 | \n\n | \n | $ | \n8,315 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Net income per share — basic \n | \n \n | $ | \n1.25 | \n\n | \n | $ | \n2.93 | \n\n | \n | $ | \n2.24 | \n\n | \n | $ | \n1.04 | \n\n | \n | $ | \n1.46 | \n\n | \n | $ | \n2.91 | \n\n | \n | $ | \n1.95 | \n\n | \n | $ | \n0.64 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Net income per share — diluted \n | \n \n | $ | \n1.21 | \n\n | \n | $ | \n2.85 | \n\n | \n | $ | \n2.18 | \n\n | \n | $ | \n1.00 | \n\n | \n | $ | \n1.40 | \n\n | \n | $ | \n2.79 | \n\n | \n | $ | \n1.88 | \n\n | \n | $ | \n0.62 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n
\n\n J. Commitments and Contingencies
\n\n Contractual Obligations
\n\n The Company had outstanding total non-cancelable contractual\n obligations of $207.5 million at December 26, 2015. These\n obligations are made up of hops, barley and wheat totaling\n $63.7 million, apples and other ingredients of\n $48.7 million, advertising contracts of $29.1 million,\n equipment and machinery of $22.7 million, glass bottles of\n $21.4 million, operating leases of $17.5 million, and\n other commitments of $4.3 million. As of December 26,\n 2015, projected cash outflows under contractual obligations for the\n remaining years under the contracts are as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Payments Due by Period | \n\n | |||||||||||||||||
| \n | \n | Total | \n\n | \n | 2016 | \n\n | \n | 2017-2018 | \n\n | \n | 2019-2020 | \n\n | \n | Thereafter | \n\n | |||||
| \n | \n | (in thousands) | \n\n | |||||||||||||||||
| \n \n Hops, barley and wheat \n | \n \n | $ | \n63,685 | \n\n | \n | $ | \n26,763 | \n\n | \n | $ | \n23,195 | \n\n | \n | $ | \n13,727 | \n\n | \n | $ | \n\n — | \n\n |
| \n \n Apples and other ingredients \n | \n \n | \n | 48,719 | \n\n | \n | \n | 48,719 | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n |
| \n \n Advertising \n | \n \n | \n | 29,113 | \n\n | \n | \n | 28,826 | \n\n | \n | \n | 287 | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n |
| \n \n Equipment and machinery \n | \n \n | \n | 22,704 | \n\n | \n | \n | 22,704 | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n |
| \n \n Glass bottles \n | \n \n | \n | 21,412 | \n\n | \n | \n | 21,412 | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n |
| \n \n Operating leases \n | \n \n | \n | 17,523 | \n\n | \n | \n | 2,664 | \n\n | \n | \n | 5,618 | \n\n | \n | \n | 4,955 | \n\n | \n | \n | 4,286 | \n\n |
| \n \n Other \n | \n \n | \n | 4,302 | \n\n | \n | \n | 3,940 | \n\n | \n | \n | 362 | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Total contractual obligations \n | \n \n | $ | \n207,458 | \n\n | \n | $ | \n155,028 | \n\n | \n | $ | \n29,462 | \n\n | \n | $ | \n18,682 | \n\n | \n | $ | \n4,286 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n The Company has entered into contracts for the supply of a portion\n of its hops requirements. These purchase contracts extend through\n crop year 2020 and specify both the quantities and prices,\n denominated in Euros and U.S. Dollars, to which the Company is\n committed. Hops purchase commitments outstanding at\n December 26, 2015 totaled $50.0 million, based on the\n exchange rates on that date. The Company does not use forward\n currency exchange contracts and intends to purchase future hops\n using the exchange rate at the time of purchase.
\n\n Currently, the Company has entered into contracts for barley and\n wheat with two major suppliers. The contracts include crop years\n 2014 and 2015 and cover the Company’s barley, wheat, and malt\n requirements for part of 2016. These purchase commitments\n outstanding at December 26, 2015 totaled\n $13.7 million.
\n\n The Company sources some of its glass bottles needs pursuant to a\n Glass Bottle Supply Agreement with Anchor Glass Container\n Corporation (“Anchor”), under which Anchor is the\n supplier of certain glass bottles for the Company’s\n Cincinnati Brewery and its Pennsylvania Brewery. This agreement\n also establishes the terms on which Anchor may supply glass bottles\n to other breweries where the Company brews its beers. Under the\n agreement with Anchor, the Company has minimum and maximum purchase\n commitments that are based on Company-provided production estimates\n which, under normal business conditions, are expected to be\n fulfilled. Minimum purchase commitments under this agreement,\n assuming the supplier is unable to replace lost production capacity\n cancelled by the Company, as of December 26, 2015 totaled\n $21.4 million.
\n\n
\n\n The Company has various operating lease agreements in place for\n facilities and equipment as of December 26, 2015. Terms of\n these leases include, in some instances, scheduled rent increases,\n renewals, purchase options and maintenance costs, and vary by\n lease. These lease obligations expire at various dates through\n 2021. Aggregate rent expense was $3.4 million,\n $3.2 million, and $2.7 million in fiscal years 2015,\n 2014, and 2013, respectively.
\n\n For the fiscal year ended December 26, 2015, the Company\n brewed over 95% of its core brands volume at Company-owned\n breweries. In the normal course of its business, the Company has\n historically entered into various production arrangements with\n other brewing companies. Pursuant to these arrangements, the\n Company purchases the liquid produced by those brewing companies,\n including the raw materials that are used in the liquid, at the\n time such liquid goes into fermentation. The Company is required to\n repurchase all unused raw materials purchased by the brewing\n company specifically for the Company’s beers at the brewing\n company’s cost upon termination of the production\n arrangement. The Company is also obligated to meet annual volume\n requirements in conjunction with certain production arrangements,\n which are not material to the Company’s operations.
\n\n The Company’s arrangements with other brewing companies\n require it to periodically purchase equipment in support of brewery\n operations. As of December 26, 2015, there were no significant\n equipment purchase requirements outstanding under existing\n contracts. Changes to the Company’s brewing strategy or\n existing production arrangements, new production relationships or\n the introduction of new products in the future may require the\n Company to purchase equipment to support the contract\n breweries’ operations.
\n\n Litigation
\n\n The Company is currently not a party to any pending or threatened\n litigation, the outcome of which would be expected to have a\n material adverse effect on its financial condition or the results\n of its operations.
\n\n Weighted average assumptions used to estimate fair values of stock\n options on the date of grants are as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n \n Expected volatility \n | \n \n | \n | 34.2% | \n\n | \n | \n | 34.3% | \n\n | \n | \n | 33.9% | \n\n |
| \n \n Risk-free interest rate \n | \n \n | \n | 2.16% | \n\n | \n | \n | 2.83% | \n\n | \n | \n | 1.85% | \n\n |
| \n \n Expected dividends \n | \n \n | \n | 0% | \n\n | \n | \n | 0% | \n\n | \n | \n | 0% | \n\n |
| \n \n Exercise factor \n | \n \n | \n | 3.0 times | \n\n | \n | \n | 3.4 times | \n\n | \n | \n | 2.8 times | \n\n |
| \n \n Discount for post-vesting restrictions \n | \n \n | \n | 0.0% | \n\n | \n | \n | 0.0% | \n\n | \n | \n | 0.0% | \n\n |
\n Shipping Costs
\n\n Costs incurred for the shipping of products to customers are\n included in advertising, promotional and selling expenses in the\n accompanying consolidated statements of comprehensive income. The\n Company incurred shipping costs of $62.2 million, $62.6 million,\n and $50.3 million in fiscal years 2015, 2014, and 2013,\n respectively.
\n\n R. Subsequent Events
\n\n The Company evaluated subsequent events occurring after the balance\n sheet date, December 26, 2015, and concluded that there was no\n event of which management was aware that occurred after the balance\n sheet date that would require any adjustment to or disclosure in\n the accompanying consolidated financial statements except for the\n stock options and awards granted on January 1, 2016 and the\n increased expenditure limit for the Company’s Stock\n Repurchase Program on February 10, 2016 as disclosed in\n Note M.
\n\n Goodwill
\n\n The Company does not amortize goodwill, but evaluates the\n recoverability of goodwill by comparing the carrying value and the\n fair value of its reporting units at the end of the third quarter\n of each fiscal year, or more frequently if events or changes in\n circumstances indicate that goodwill may be impaired. The Company\n has concluded that its goodwill was not impaired as of\n December 26, 2015 and December 27, 2014. As of\n December 26, 2015 and December 27, 2014, the goodwill of\n the Boston Beer Company reporting unit amounted to\n $1.4 million. As of December 26, 2015 and\n December 27, 2014 the goodwill of the A&S Brewing\n Collaborative reporting unit amounted to $2.3 million.
\n\n Inventories consisted of the following:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n December 26, | \n\n | \n | \n December 27, | \n\n | ||
| \n | \n | 2015 | \n\n | \n | 2014 | \n\n | ||
| \n | \n | (in\n thousands) | \n\n | |||||
| \n \n Raw Materials \n | \n \n | $ | \n42,123 | \n\n | \n | $ | \n39,535 | \n\n |
| \n \n Work in process \n | \n \n | \n | 8,876 | \n\n | \n | \n | 7,391 | \n\n |
| \n \n Finished Goods \n | \n \n | \n | 8,261 | \n\n | \n | \n | 10,793 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | \n | 59,260 | \n\n | \n | \n | 57,719 | \n\n |
| \n \n Less portion in other long term assets \n | \n \n | \n | (2,798 | \n) | \n\n | \n | (6,412 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | $ | \n56,462 | \n\n | \n | $ | \n51,307 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n Property, Plant and Equipment
\n\n Property, plant, and equipment are stated at cost. Expenditures for\n repairs and maintenance are expensed as incurred. Major renewals\n and betterments that extend the life of the property are\n capitalized. Some of the Company’s equipment is used by other\n brewing companies to produce the Company’s products under\n brewing service arrangements (Note J). Depreciation is computed\n using the straight-line method based upon the estimated useful\n lives of the underlying assets as follows:
\n\n
\n| \n | \n | \n |
| Kegs | \n\n | 5 years | \n
| Office equipment and furniture | \n\n | 3 to 5 years | \n
| Machinery and plant equipment | \n\n | 3 to 20 years, or the term of the production\n agreement, whichever is shorter | \n
| Leasehold improvements | \n\n | Lesser of the remaining term of the lease or\n estimated useful life of the asset | \n
| Building and building improvements | \n\n | 12 to 20 years, or the remaining useful life of\n the building, whichever is shorter | \n
\n The following table details the changes in accumulated other\n comprehensive (loss) income for 2015, 2014, and 2013 (in\n thousands):
\n\n
\n| \n | \n | \n | \n | \n |
| \n | \n | Accumulated Other \n Comprehensive (Loss) \n Income | \n \n | |
| \n \n Balance at December 29, 2012 \n | \n \n | $ | \n(883 | \n) | \n
| \n \n Deferred pension and other post-retirement benefit costs, net of\n taxes of ($261) \n | \n \n | \n | 407 | \n\n |
| \n \n Amortization of Deferred benefit costs, net of tax ($35) \n | \n \n | \n | 59 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Balance at December 28, 2013 \n | \n \n | $ | \n(417 | \n) | \n
| \n \n Deferred pension and other post-retirement benefit costs, net of\n taxes of $466 \n | \n \n | \n | (734 | \n) | \n
| \n \n Amortization of Deferred benefit costs, net of tax ($11) \n | \n \n | \n | 18 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Balance at December 27, 2014 \n | \n \n | $ | \n(1,133 | \n) | \n
| \n \n Deferred pension and other post-retirement benefit costs, net of\n taxes of ($99) \n | \n \n | \n | 130 | \n\n |
| \n \n Amortization of Deferred benefit costs, net of tax ($43) \n | \n \n | \n | 74 | \n\n |
| \n \n Currency translation adjustment \n | \n \n | \n | (22 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Balance at December 26, 2015 \n | \n \n | $ | \n(951 | \n) | \n
\n N. Employee Retirement Plans and Post-Retirement Benefit\n Plan
\n\n The Company has one retirement plan covering substantially all\n non-union employees; two retirement plans, one of which covers\n substantially all union employees, and the other of which covers\n employees of a specific union, and post-retirement medical benefits\n covering substantially all union employees.
\n\n Non-Union Plans
\n\n The Boston Beer Company 401(k) Plan (the “Boston Beer 401(k)\n Plan”), which was established by the Company in 1993, is a\n Company-sponsored defined contribution plan that covers a majority\n of the Company’s non-union employees who are employed by\n Boston Beer Corporation, Samuel Adams Brewery Company, Ltd., Samuel\n Adams Pennsylvania Brewery Company or A&S Brewing Collaborative\n LLC. All non-union employees of these entities are eligible to\n participate in the plan on the first day of the first month after\n commencing employment or, if later, reaching age 21.\n Participants may make voluntary contributions up to 60% of their\n annual compensation, subject to IRS limitations. After the sixth\n month of employment, the Company matches each participant’s\n contribution. A maximum of 6% of compensation is taken into account\n in determining the amount of the match. The Company matches 100% of\n the first $1,000 of the eligible compensation participants\n contribute. Thereafter, the Company matches 50% of the eligible\n contribution. The Company’s contributions to the Boston Beer\n 401(k) Plan amounted to $3.0 million and $2.8 million in\n fiscal years 2015 and 2014, respectively. The basic annual\n administrative fee for the Boston Beer 401(k) Plan is paid by the\n Plan’s investment fund revenue. In addition, per the Service\n Provider Payment Agreement, up to a maximum of two basis points\n multiplied by the total amount of assets under the Plan per year is\n available for paying eligible Plan expenses. The Company is\n responsible for the payment of any additional fees related to the\n management of the Boston Beer 401(k) Plan. Such fees are not\n material to the Company.
\n\n Union Plans
\n\n The defined contribution plan, the Samuel Adams Brewery Company,\n Ltd. 401(k) Plan for Represented Employees (the “SABC 401(k)\n Plan”), is a Company-sponsored plan. It was established in\n 1997 and is available to all union employees upon commencement of\n employment or, if later, attaining age 21. Participants may\n make voluntary contributions up to 60% of their annual compensation\n to the SABC 401(k) Plan, subject to IRS limitations. Effective\n July 1, 2007, the Company commenced making a non-elective\n contribution for eligible employees who are members of what is now\n the Service Employees’ International Union, Local 1,\n Firemen & Oilers Division (“Local #1”).\n Effective January 1, 2012, the Company commenced making a\n non-elective contribution for eligible employees who are members of\n The International Union of Operating Engineers, Local #20\n (“Local #20”). Company contributions for fiscal\n 2015 and 2014 were insignificant. The basic annual administrative\n fee for the SABC 401(k) Plan is paid by the Plan’s investment\n fund revenue. In addition, per the Service Provider Payment\n Agreement up to a maximum of two basis points multiplied by the\n total amount of assets under the Plan per year is available for\n paying eligible Plan expenses. The Company is responsible for the\n payment of any additional fees related to the management of the\n SABC 401(k) Plan. Such fees are not material to the\n Company.
\n\n The defined benefit plan, the Samuel Adams Brewery Company, Ltd.\n Local Union No. 1199 Pension Plan (the “Local 1199\n Pension Plan”), is a Company-sponsored pension plan. It was\n established in 1991 and is open to all union employees who are\n covered by the Company’s collective bargaining agreement with\n Teamsters Local Union No. 1199 (“Local\n Union #1199”) and who have completed 12 consecutive\n months of employment with at least 750 hours worked. The defined\n benefit is determined based on years of service since July 1991.\n The Company made contributions of $188,000 and $162,000 in 2015 and\n 2014 respectively. At December 26, 2015 and December 27,\n 2014, the unfunded projected pension benefits were\n $1.6 million and $1.7 million, respectively.
\n\n The Company provides a supplement to eligible retirees from Local\n #20, Local #1 and Local Union #1199 to assist them with the cost of\n Medicare gap coverage after their retirement on account of age or\n permanent disability. To qualify for this benefit (collectively,\n the “Retiree Medical Plan”), an employee must have\n worked for at least 20 years for the Company or its predecessor at\n the Company’s Cincinnati Brewery, must have been enrolled in\n the Company’s comprehensive medical plan for at least 5 years\n before retirement and, in the case of retirees from Local #20, for\n at least 7 of the last 10 years of their employment, and must be\n eligible for Medicare benefits under the Social Security Act. The\n accumulated post-retirementbenefit obligation was\n determined using a discount rate of 4.5% at December 26, 2015\n and 4.0% at December 27, 2014 respectively, and a 2.5% health\n care cost increase based on the Cincinnati Consumer Price Index for\n the years 2015, 2014, and 2013. The effect of a 1% point increase\n and the effect of a 1% point decrease in the assumed health care\n cost trend rates on the aggregate of the service and interest cost\n components of net periodic post-retirement health care benefit\n costs and the accumulated post-retirement benefit obligation for\n health care benefits would not be significant.
\n\n In addition, the comprehensive medical plans offered to currently\n employed members of Local #20 and Local Union #1199 remain\n available to them should they retire after reaching age 57 (and\n before reaching age 65 in the case of a member of Local #20) with\n at least 20 years of service (if a Local #20 member) or 10 years of\n employment (if a Local Union #1199 member) with the Company or its\n predecessor at the Company’s Cincinnati Brewery. These\n eligible retirees may choose to continue to be covered under the\n Company’s comprehensive medical plan, subject to certain\n modifications applicable to members of Local Union #1199, until\n they reach the age when they are eligible for Medicare under the\n Social Security Act or (in the case of a Local #20 member) coverage\n under a comparable State health benefit plan. Eligible retirees pay\n 100% of the cost of the coverage.
\n\n The funded status of the Local 1199 Pension Plan and the Retiree\n Medical Plan are as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Local 1199 Pension Plan | \n\n | \n | Retiree Medical Plan | \n\n | ||||||||||
| \n | \n | \n December 26, | \n\n | \n | \n December 27, | \n\n | \n | \n December 26, | \n\n | \n | \n December 27, | \n\n | ||||
| \n | \n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | ||||
| \n | \n | (in thousands) | \n\n | |||||||||||||
| \n \n Fair value of plan assets at end of fiscal year \n | \n \n | $ | \n2,471 | \n\n | \n | $ | \n2,402 | \n\n | \n | $ | \n\n — | \n\n | \n | $ | \n\n — | \n\n |
| \n \n Benefit obligation at end of fiscal year \n | \n \n | \n | 4,105 | \n\n | \n | \n | 4,092 | \n\n | \n | \n | 671 | \n\n | \n | \n | 720 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Unfunded Status \n | \n \n | $ | \n(1,634 | \n) | \n\n | $ | \n(1,690 | \n) | \n\n | $ | \n(671 | \n) | \n\n | $ | \n(720 | \n) | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n The Local 1199 Plan invests in a family of funds that are designed\n to minimize excessive short-term risk and focus on consistent,\n competitive long-term performance, consistent with the funds’\n investment objectives. The fund-specific objectives vary and\n include maximizing long-term returns both before and after taxes,\n maximizing total return from capital appreciation plus income and\n funds that invest in common stock of companies that cover a broad\n range of industries. The plan’s investments are considered\n category1 assets in the fair value hierarchy and the fair values\n were determined by reference to period end quoted market\n prices.
\n\n The basis of the long-term rate of return assumption of 6.5%\n reflects the Local 1199 Plan’s current targeted asset mix of\n approximately 35% debt securities and 65% equity securities with\n assumed average annual returns of approximately 3% to 6% for debt\n securities and 8% to 12% for equity securities. It is assumed\n that the Local 1199 Plan’s investment portfolio will be\n adjusted periodically to maintain the targeted ratios of debt\n securities and equity securities. Additional consideration is\n given to the plan’s historical returns as well as future\n long-range projections of investment returns for each asset\n category. The assumed discount rate in estimating the pension\n obligation was 4.5% and 4.0% at December 26, 2015 and\n December 27, 2014, respectively.
\n\n The Local 1199 Plan’s weighted-average asset allocations at\n the measurement dates by asset category are as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Asset Category \n | \n \n | December 26, \n 2015 | \n \n | \n | December 27, \n 2014 | \n \n | ||
| \n \n Equity securities \n | \n \n | \n | 67 | \n% | \n\n | \n | 66 | \n% | \n
| \n \n Debt securities \n | \n \n | \n | 33 | \n\n | \n | \n | 34 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Total \n | \n \n | \n | 100 | \n% | \n\n | \n | 100 | \n% | \n
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n Information related to stock options under the Equity Plan and the\n Non-Employee Director Plan is summarized as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Shares | \n\n | \n | Weighted- \n Average \n Exercise \n Price | \n \n | \n | Weighted-Average \n Remaining \n Contractual Term \n in Years | \n \n | \n | Aggregate \n Intrinsic \n Value \n (in thousands) | \n \n | ||||
| \n \n Outstanding at December 27, 2014 \n | \n \n | \n | 1,380,444 | \n\n | \n | $ | \n55.37 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Granted \n | \n \n | \n | 24,363 | \n\n | \n | \n | 283.22 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Forfeited \n | \n \n | \n | \n — | \n\n | \n | \n | \n — | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Expired \n | \n \n | \n | \n — | \n\n | \n | \n | \n — | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Exercised \n | \n \n | \n | (277,645 | \n) | \n\n | \n | 151.28 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Outstanding at December 26, 2015 \n | \n \n | \n | 1,127,162 | \n\n | \n | $ | \n63.99 | \n\n | \n | \n | 3.43 | \n\n | \n | $ | \n161,603 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Exercisable at December 26, 2015 \n | \n \n | \n | 380,543 | \n\n | \n | $ | \n62.29 | \n\n | \n | \n | 3.17 | \n\n | \n | $ | \n54,885 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Vested and expected to vest at December 26, 2015 \n | \n \n | \n | 1,089,831 | \n\n | \n | $ | \n63.96 | \n\n | \n | \n | 3.43 | \n\n | \n | $ | \n156,268 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n Inventories and Provision for Excess or Expired\n Inventory
\n\n Inventories consist of raw materials, work in process and finished\n goods. Raw materials, which principally consist of hops, malt,\n apple juice, other brewing materials and packaging, are stated at\n the lower of cost (first-in, first-out basis) or market value. The\n cost elements of work in process and finished goods inventory\n consist of raw materials, direct labor and manufacturing overhead.\n Packaging design costs are expensed as incurred.
\n\n The provisions for excess or expired inventory are based on\n management’s estimates of forecasted usage of inventories on\n hand and under contract. A significant change in the timing or\n level of demand for certain products as compared to forecasted\n amounts may result in recording additional provisions for excess or\n expired inventory in the future. Provisions for excess inventory\n are included in cost of goods sold and have historically been\n adequate to provide for losses on its inventory.
\n\n
\n\n The computation of the excess inventory requires management to make\n certain assumptions regarding future sales growth, product mix, new\n products, cancellation costs, and supply, among others. The Company\n manages inventory levels and purchase commitments in an effort to\n maximize utilization of inventory on hand and under commitments.\n The Company’s accounting policy for inventory and purchase\n commitments is to recognize a loss by establishing a reserve to the\n extent inventory levels and commitments exceed management’s\n expected future usage. Provision for excess or expired inventory\n included in cost of goods sold was $4.0 million,\n $6.1 million, and $4.9 million in fiscal years 2015,\n 2014, and 2013.
\n\n Cash, Cash Equivalents and Restricted Cash
\n\n Cash and cash equivalents at December 26, 2015 and\n December 27, 2014 included cash on-hand and money market\n instruments that are highly liquid investments. Cash and cash\n equivalents are carried at cost, which approximates fair value.
\n\n
\n\n The Company has restricted cash associated with a term note\n agreement with Bank of America that was required by the\n Commonwealth of Pennsylvania to fund economic development at the\n Company’s Pennsylvania Brewery. The restricted cash subject\n to this agreement amounted to $456,000 and $513,000 at\n December 26, 2015 and December 27, 2014, respectively and\n is included in other assets on the Company’s Consolidated\n Balance Sheets.
\n\n The following table provides information regarding stock-based\n compensation expense included in operating expenses in the\n accompanying consolidated statements of comprehensive income:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | 2015 | \n\n | \n | 2014 | \n\n | \n | 2013 | \n\n | |||
| \n | \n | (in thousands) | \n\n | |||||||||
| \n \n Amounts included in advertising, promotional and selling\n expenses \n | \n \n | $ | \n2,943 | \n\n | \n | $ | \n3,342 | \n\n | \n | $ | \n3,054 | \n\n |
| \n \n Amounts included in general and administrative expenses \n | \n \n | \n | 3,722 | \n\n | \n | \n | 3,515 | \n\n | \n | \n | 4,264 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Total stock-based compensation expense \n | \n \n | $ | \n6,665 | \n\n | \n | $ | \n6,857 | \n\n | \n | $ | \n7,318 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Amounts related to performance-based stock awards included in total\n stock-based compensation expense \n | \n \n | $ | \n831 | \n\n | \n | $ | \n1,378 | \n\n | \n | $ | \n1,401 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n As of December 26, 2015, the Company has repurchased a\n cumulative total of approximately 11.5 million shares of its\n Class A Common Stock for an aggregate purchase price of\n approximately $446.1 million as follows:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Number of \n Shares | \n \n | \n | Aggregate Purchase \n Price | \n \n | ||
| \n | \n | \n | \n | \n | \n (in thousands) | \n\n | ||
| \n \n Repurchased at December 29, 2012 \n | \n \n | \n | 10,696,731 | \n\n | \n | \n | 269,943 | \n\n |
| \n \n 2013 repurchases \n | \n \n | \n | 195,728 | \n\n | \n | \n | 29,585 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Repurchased at December 28, 2013 \n | \n \n | \n | 10,892,459 | \n\n | \n | \n | 299,528 | \n\n |
| \n \n 2014 repurchases \n | \n \n | \n | 29,474 | \n\n | \n | \n | 7,859 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Repurchased at December 27, 2014 \n | \n \n | \n | 10,921,933 | \n\n | \n | \n | 307,387 | \n\n |
| \n \n 2015 repurchases \n | \n \n | \n | 616,747 | \n\n | \n | \n | 138,705 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Repurchased at December 26, 2015 \n | \n \n | \n | 11,538,680 | \n\n | \n | $ | \n446,092 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n Prepaid expenses and other current assets consisted of the\n following:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n December 26, | \n\n | \n | \n December 27, | \n\n | ||
| \n | \n | 2015 | \n\n | \n | 2014 | \n\n | ||
| \n | \n | (in\n thousands) | \n\n | |||||
| \n \n Prepaid malt and barley \n | \n \n | $ | \n3,184 | \n\n | \n | $ | \n4,368 | \n\n |
| \n \n Excise and other tax receivables \n | \n \n | \n | 2,093 | \n\n | \n | \n | 4,572 | \n\n |
| \n \n Supplier rebates \n | \n \n | \n | 1,929 | \n\n | \n | \n | 1,641 | \n\n |
| \n \n Lease incentive receivable \n | \n \n | \n | 1,584 | \n\n | \n | \n | \n — | \n\n |
| \n \n Prepaid insurance \n | \n \n | \n | 1,047 | \n\n | \n | \n | 1,009 | \n\n |
| \n \n Other \n | \n \n | \n | 2,216 | \n\n | \n | \n | 1,297 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | $ | \n12,053 | \n\n | \n | $ | \n12,887 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n Depreciation is\n computed using the straight-line method based upon the estimated\n useful lives of the underlying assets as follows:
\n\n
\n| \n | \n | \n |
| Kegs | \n\n | 5 years | \n
| Office equipment and furniture | \n\n | 3 to 5 years | \n
| Machinery and plant equipment | \n\n | 3 to 20 years, or the term of the production\n agreement, whichever is shorter | \n
| Leasehold improvements | \n\n | Lesser of the remaining term of the lease or\n estimated useful life of the asset | \n
| Building and building improvements | \n\n | 12 to 20 years, or the remaining useful life of\n the building, whichever is shorter | \n
\n Excise Taxes
\n\n The Company is responsible for compliance with the Alcohol and\n Tobacco Tax and Trade Bureau of the U.S. Treasury Department (the\n “TTB”) regulations which includes making timely and\n accurate excise tax payments. The Company is subject to periodic\n compliance audits by the TTB. Individual states also impose excise\n taxes on alcohol beverages in varying amounts. The Company\n calculates its excise tax expense based upon units produced and on\n its understanding of the applicable excise tax laws.
\n\n The Company maintains reserves against accounts receivable for\n doubtful accounts and inventory for obsolete and slow-moving\n inventory. The Company also maintains reserves against accounts\n receivable for distributor promotional allowances. In addition, the\n Company maintains a reserve for estimated returns of stale beer,\n which is included in accrued expenses.
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Allowance for Doubtful\n Accounts | \n\n | Balance at \n Beginning of \n Period | \n \n | \n | Net Provision \n (Recovery) | \n \n | \n | Amounts \n Charged Against \n Reserves | \n \n | \n | Balance at \n End of Period | \n \n | ||||
| \n | \n | (In thousands) | \n\n | |||||||||||||
| \n \n 2015 \n | \n \n | $ | \n144 | \n\n | \n | $ | \n165 | \n\n | \n | $ | \n(65 | \n) | \n\n | $ | \n244 | \n\n |
| \n \n 2014 \n | \n \n | $ | \n160 | \n\n | \n | $ | \n(16 | \n) | \n\n | $ | \n\n — | \n\n | \n | $ | \n144 | \n\n |
| \n \n 2013 \n | \n \n | $ | \n125 | \n\n | \n | $ | \n35 | \n\n | \n | $ | \n\n — | \n\n | \n | $ | \n160 | \n\n |
| \n | \n | \n | \n | \n | ||||||||||||
| Discount Accrual | \n\n | Balance at \n Beginning of \n Period | \n \n | \n | Net Provision \n (Recovery) | \n \n | \n | Amounts \n Charged Against \n Reserves | \n \n | \n | Balance at \n End of Period | \n \n | ||||
| \n | \n | (In thousands) | \n\n | |||||||||||||
| \n \n 2015 \n | \n \n | $ | \n3,006 | \n\n | \n | $ | \n33,204 | \n\n | \n | $ | \n(33,397 | \n) | \n\n | $ | \n2,813 | \n\n |
| \n \n 2014 \n | \n \n | $ | \n2,602 | \n\n | \n | $ | \n28,448 | \n\n | \n | $ | \n(28,044 | \n) | \n\n | $ | \n3,006 | \n\n |
| \n \n 2013 \n | \n \n | $ | \n2,315 | \n\n | \n | $ | \n23,132 | \n\n | \n | $ | \n(22,845 | \n) | \n\n | $ | \n2,602 | \n\n |
| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| Inventory Obsolescence\n Reserve | \n\n | Balance at \n Beginning of \n Period | \n \n | \n | Net Provision \n (Recovery) | \n \n | \n | Amounts \n Charged Against \n Reserves | \n \n | \n | Balance at \n End of Period | \n \n | ||||
| \n | \n | (In thousands) | \n\n | |||||||||||||
| \n \n 2015 \n | \n \n | $ | \n1,328 | \n\n | \n | $ | \n4,045 | \n\n | \n | $ | \n(3,848 | \n) | \n\n | $ | \n1,525 | \n\n |
| \n \n 2014 \n | \n \n | $ | \n1,616 | \n\n | \n | $ | \n6,130 | \n\n | \n | $ | \n(6,418 | \n) | \n\n | $ | \n1,328 | \n\n |
| \n \n 2013 \n | \n \n | $ | \n1,072 | \n\n | \n | $ | \n4,884 | \n\n | \n | $ | \n(4,340 | \n) | \n\n | $ | \n1,616 | \n\n |
| \n | \n | \n | \n | \n | ||||||||||||
| Stale Beer Reserve | \n\n | Balance at \n Beginning of \n Period | \n \n | \n | Net Provision \n (Recovery) | \n \n | \n | Amounts \n Charged Against \n Reserves | \n \n | \n | Balance at \n End of Period | \n \n | ||||
| \n | \n | (In thousands) | \n\n | |||||||||||||
| \n \n 2015 \n | \n \n | $ | \n2,422 | \n\n | \n | $ | \n7,780 | \n\n | \n | $ | \n(6,948 | \n) | \n\n | $ | \n3,254 | \n\n |
| \n \n 2014 \n | \n \n | $ | \n1,754 | \n\n | \n | $ | \n5,648 | \n\n | \n | $ | \n(4,980 | \n) | \n\n | $ | \n2,422 | \n\n |
| \n \n 2013 \n | \n \n | $ | \n1,859 | \n\n | \n | $ | \n3,432 | \n\n | \n | $ | \n(3,537 | \n) | \n\n | $ | \n1,754 | \n\n |
\n Financial instruments not recorded at fair value in the\n consolidated financial statements are summarized in the table below\n (in thousands):
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | As of December 26,\n 2015 | \n\n | |||||||||||||
| \n | \n | Level 1 | \n\n | \n | Level 2 | \n\n | \n | Level 3 | \n\n | \n | Total | \n\n | ||||
| \n \n Note payable \n | \n \n | $ | \n\n — | \n\n | \n | $ | \n458 | \n\n | \n | $ | \n\n — | \n\n | \n | $ | \n458 | \n\n |
| \n | \n | |||||||||||||||
| \n | \n | As of December 27, 2014 | \n\n | |||||||||||||
| \n | \n | Level 1 | \n\n | \n | Level 2 | \n\n | \n | Level 3 | \n\n | \n | Total | \n\n | ||||
| \n \n Note payable \n | \n \n | $ | \n\n — | \n\n | \n | $ | \n513 | \n\n | \n | $ | \n\n — | \n\n | \n | $ | \n513 | \n\n |
\n Refundable Deposits on Kegs and Pallets
\n\n The Company distributes its draft beer in kegs and packaged beer\n primarily in glass bottles and cans and such kegs, bottles and cans\n are shipped on pallets to Distributors. Most all kegs and pallets\n are owned by the Company. Kegs are reflected in the Company’s\n balance sheets at cost and are depreciated over the estimated\n useful life of the keg, while pallets are expensed upon purchase.\n Upon shipment of beer to Distributors, the Company collects a\n refundable deposit on the kegs and pallets, which is included in\n current liabilities in the Company’s balance sheets. Upon\n return of the kegs and pallets to the Company, the deposit is\n refunded to the Distributor.
\n\n The Company has experienced some loss of kegs and pallets and\n anticipates that some loss will occur in future periods due to the\n significant volume of kegs and pallets handled by each Distributor\n and retailer, the homogeneous nature of kegs and pallets owned by\n most brewers and the relatively small deposit collected for each\n keg when compared with its market value. The Company believes that\n this is an industry-wide issue and that the Company’s loss\n experience is not atypical. The Company believes that the loss of\n kegs and pallets, after considering the forfeiture of related\n deposits, has not been material to the financial statements. The\n Company uses internal records, records maintained by Distributors,\n records maintained by other third party vendors and historical\n information to estimate the physical count of kegs and pallets held\n by Distributors. These estimates affect the amount recorded as\n property, plant and equipment and current liabilities as of the\n date of the financial statements. The actual liability for\n refundable deposits could differ from these estimates. For the year\n ended December 26, 2015, the Company decreased its liability\n for refundable deposits, gross property, plant and equipment and\n related accumulated depreciation by $0.9 million,\n $1.2 million and $1.2 million, respectively. For the year\n ended December 27, 2014, the Company decreased its liability\n for refundable deposits, gross property, plant and equipment and\n related accumulated depreciation by $1.0 million,\n $1.8 million and $1.8 million, respectively. As of\n December 26, 2015 and December 27, 2014, the\n Company’s balance sheet includes $17.1 million and\n $18.2 million, respectively, in refundable deposits on kegs\n and pallets and $18.9 million and $25.9 million,\n respectively, in kegs, net of accumulated depreciation.
\n\n Customer Programs and Incentives
\n\n Customer programs and incentives, which include customer\n promotional discount programs, customer incentives and other\n payments, are a common practice in the alcohol beverage industry.\n The Company makes these payments to customers and incurs these\n costs to promote sales of products and to maintain competitive\n pricing. Amounts paid in connection with customer programs and\n incentives are recorded as reductions to net revenue or as\n advertising, promotional and selling expenses in accordance with\n ASC Topic 605-50, Revenue Recognition –\n Customer Payments and Incentives, based on the nature of the\n expenditure. Amounts paid to customers totaled $55.3 million,\n $52.4 million, and $40.4 million in fiscal year 2015,\n 2014, and 2013, respectively.
\n\n Customer promotional discount programs are entered into with\n Distributors for certain periods of time. Amounts paid to\n Distributors in connection with these programs in fiscal years\n 2015, 2014, and 2013 were $33.2 million, $28.5 million,\n and $23.1 million, respectively. The reimbursements for\n discounts to Distributors are recorded as reductions to net\n revenue. Agreed-upon discount rates are applied to certain\n Distributors’ sales to retailers, based on volume metrics, in\n order to determine the total discounted amount. The computation of\n the discount allowance requires that management make certain\n estimates and assumptions that affect the timing and amounts of\n revenue and liabilities recorded. Actual promotional discounts owed\n and paid have historically been in line with allowances recorded by\n the Company, however, the amounts could differ from the estimated\n allowance.
\n\n Customer incentives and other payments are made primarily to\n Distributors based upon performance of certain marketing and\n advertising activities. Depending on applicable state laws and\n regulations, these activities promoting the Company’s\n products may include, but are not limited to point-of-sale and\n merchandise placement, samples, product displays, promotional\n programs at retail locations and meals, travel and entertainment.\n Amounts paid to customers in connection with these programs in\n fiscal years 2015, 2014, and 2013 were $22.1 million,\n $23.9 million, and $17.3 million, respectively. In 2015,\n 2014, and 2013, the Company recorded certain of these costs in the\n total amount of $16.6 million, $18.7 million, and\n $13.4 million respectively as reductions to net revenue. Costs\n recognized as reduction to net revenues include, but are not\n limited to, promotional discounts, sales incentives and certain\n other promotional activities. Costs recognized in advertising,\n promotional and selling expenses include point of sale materials,\n samples and media advertising expenditures in local markets.
\n\n D. Prepaid Expenses and Other Current Assets
\n\n Prepaid expenses and other current assets consisted of the\n following:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n December 26, | \n\n | \n | \n December 27, | \n\n | ||
| \n | \n | 2015 | \n\n | \n | 2014 | \n\n | ||
| \n | \n | (in\n thousands) | \n\n | |||||
| \n \n Prepaid malt and barley \n | \n \n | $ | \n3,184 | \n\n | \n | $ | \n4,368 | \n\n |
| \n \n Excise and other tax receivables \n | \n \n | \n | 2,093 | \n\n | \n | \n | 4,572 | \n\n |
| \n \n Supplier rebates \n | \n \n | \n | 1,929 | \n\n | \n | \n | 1,641 | \n\n |
| \n \n Lease incentive receivable \n | \n \n | \n | 1,584 | \n\n | \n | \n | \n — | \n\n |
| \n \n Prepaid insurance \n | \n \n | \n | 1,047 | \n\n | \n | \n | 1,009 | \n\n |
| \n \n Other \n | \n \n | \n | 2,216 | \n\n | \n | \n | 1,297 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
| \n | \n | $ | \n12,053 | \n\n | \n | $ | \n12,887 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n | \n | \n \n | \n \n \n | \n \n |
\n The allocation of the purchase price is as follows (in\n thousands):
\n\n
\n| \n | \n | \n | \n | \n |
| \n \n Property, plant and equipment \n | \n \n | $ | \n110 | \n\n |
| \n \n Trade name \n | \n \n | \n | 1,648 | \n\n |
| \n \n Goodwill \n | \n \n | \n | 1,145 | \n\n |
| \n | \n | \n \n | \n \n \n | \n \n |
| \n \n Total assets acquired and cash paid \n | \n \n | $ | \n2,903 | \n\n |