\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 31, | \n\n | \n | \n December 26, | \n\n | ||
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | ||
| \n | \n | (in thousands) | \n\n | |||||
| \n \n Accrued deposits \n | \n \n | $ | \n15,814 | \n\n | \n | $ | \n18,865 | \n\n |
| \n \n Employee wages, benefits and reimbursements \n | \n \n | \n | 14,116 | \n\n | \n | \n | 12,367 | \n\n |
| \n \n Advertising, promotional and selling expenses \n | \n \n | \n | 8,562 | \n\n | \n | \n | 11,249 | \n\n |
| \n \n Deferred revenue \n | \n \n | \n | 5,381 | \n\n | \n | \n | 3,949 | \n\n |
| \n \n Accrued stale beer \n | \n \n | \n | 5,226 | \n\n | \n | \n | 3,254 | \n\n |
| \n \n Accrued sales and use tax \n | \n \n | \n | 2,437 | \n\n | \n | \n | 2,656 | \n\n |
| \n \n Accrued excise taxes \n | \n \n | \n | 2,255 | \n\n | \n | \n | 3,976 | \n\n |
| \n \n Accrued freight \n | \n \n | \n | 1,402 | \n\n | \n | \n | 5,681 | \n\n |
| \n \n Other accrued liabilities \n | \n \n | \n | 5,681 | \n\n | \n | \n | 6,387 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n |
| \n | \n | $ | \n60,874 | \n\n | \n | $ | \n68,384 | \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, brand and sales support\n workforce, promotional activity expenses, freight charges related\n to shipments of finished goods from manufacturing locations to\n distributor locations and point-of-sale items. Total\n advertising and sales promotional expenditures of\n $105.3 million, $120.1 million, and $100.5 million\n were included in advertising, promotional and selling expenses in\n the accompanying consolidated statements of comprehensive income\n for fiscal years 2016, 2015, and 2014, 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 Cash, Cash Equivalents and Restricted Cash
\n\n Cash and cash equivalents at December 31, 2016 and\n December 26, 2015 included cash on-hand and money market instruments\n that are highly liquid investments. Cash and cash equivalents are\n 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 $400,000 and $456,000 at\n December 31, 2016 and December 26, 2015, respectively,\n and is included in other assets on the Company’s Consolidated\n Balance Sheets.
\n\n J. Commitments and Contingencies
\n\n Contractual Obligations
\n\n The Company had outstanding total non-cancelable contractual obligations\n of $173.4 million at December 31, 2016. These obligations\n are made up of hops, barley and wheat totaling $71.1 million,\n advertising contracts of $27.4 million, apples and other\n ingredients of $27.2 million, glass bottles of\n $16.6 million, operating leases of $15.9 million,\n equipment and machinery of $10.7 million, and other\n commitments of $4.5 million. As of December 31, 2016,\n 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 | \n | \n | \n | \n | \n | \n |
| \n | \n | Payments Due by Period | \n\n | |||||||||||||||||||||||||
| \n | \n | Total | \n\n | \n | 2017 | \n\n | \n | 2018 | \n\n | \n | 2019 | \n\n | \n | 2020 | \n\n | \n | 2021 | \n\n | \n | Thereafter | \n\n | |||||||
| \n | \n | (in thousands) | \n\n | |||||||||||||||||||||||||
| \n \n Hops, barley and wheat \n | \n \n | $ | \n71,128 | \n\n | \n | $ | \n27,784 | \n\n | \n | $ | \n14,552 | \n\n | \n | $ | \n14,692 | \n\n | \n | $ | \n4,483 | \n\n | \n | $ | \n4,878 | \n\n | \n | $ | \n4,739 | \n\n |
| \n \n Advertising \n | \n \n | \n | 27,430 | \n\n | \n | \n | 26,825 | \n\n | \n | \n | 499 | \n\n | \n | \n | 106 | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n |
| \n \n Apples and other ingredients \n | \n \n | \n | 27,225 | \n\n | \n | \n | 27,225 | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \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 | 16,551 | \n\n | \n | \n | 16,551 | \n\n | \n | \n | \n — | \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 leases \n | \n \n | \n | 15,900 | \n\n | \n | \n | 3,343 | \n\n | \n | \n | 2,965 | \n\n | \n | \n | 2,683 | \n\n | \n | \n | 2,569 | \n\n | \n | \n | 2,625 | \n\n | \n | \n | 1,715 | \n\n |
| \n \n Equipment and machinery \n | \n \n | \n | 10,700 | \n\n | \n | \n | 10,700 | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n |
| \n \n Other \n | \n \n | \n | 4,505 | \n\n | \n | \n | 2,624 | \n\n | \n | \n | 1,335 | \n\n | \n | \n | 546 | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \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 | $ | \n173,439 | \n\n | \n | $ | \n115,052 | \n\n | \n | $ | \n19,351 | \n\n | \n | $ | \n18,027 | \n\n | \n | $ | \n7,052 | \n\n | \n | $ | \n7,503 | \n\n | \n | $ | \n6,454 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \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 2022 and specify both the quantities and prices,\n denominated in U.S. Dollar, Euros and New Zealand Dollars, to\n which the Company is committed. Hops purchase commitments\n outstanding at December 31, 2016 totaled $56.3 million,\n based on the exchange rates on that date. The Company does not use\n forward currency exchange contracts and intends to purchase future\n hops 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 2016 and 2017 and cover the Company’s barley, wheat, and malt\n requirements for 2017 and part of 2018. These purchase commitments\n outstanding at December 31, 2016 totaled\n $14.8 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 31, 2016 totaled\n $16.6 million.
\n\n The Company has various operating lease agreements in place for\n facilities and equipment as of December 31, 2016. 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 2022. Aggregate rent expense was $3.8 million,\n $3.4 million, and $3.2 million in fiscal years 2016,\n 2015, and 2014, respectively.
\n\n For the fiscal year ended December 31, 2016, 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 31, 2016, 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 L. 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
\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 2016,\n 2015, and 2014, the Company granted options to purchase 786,450,\n 18,723, and 7,090 shares, respectively, of its Class A Common\n Stock to employees at market price on the grant dates. Of the 2016\n option grants, 574,507 shares relate to a special long-term\n service-based retention stock option issued to the Chief Executive\n Officer, 173,135 shares relate to other special long-term\n service-based retention stock options and 38,808 shares relate to\n performance-based stock options. Of the 2015 option grants, 14,742\n shares relate to performance-based option grants and 3,981 relate\n to special long-term service-based retention stock options. Of the\n 2014 option grants, all shares relate to performance-based option\n grants.
\n\n On January 1, 2017, the Company granted options to purchase an\n aggregate of 5,185 shares of the Company’s Class A\n Common Stock with a weighted average fair value of $81.95 per\n share, of which all shares relate to performance-based stock\n options.
\n\n Restricted stock awards are also granted at the Board of\n Directors’ discretion. During fiscal 2016, 2015, and 2014,\n the Company granted 21,653, 6,092, and 16,432 shares, respectively,\n of restricted stock awards to certain senior managers and key\n employees, all of which are service-based and vest ratably over\n service periods of three to 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 2016, 2015, and 2014, employees elected to purchase an aggregate of\n 9,199, 8,301, and 8,516 investment shares, respectively.
\n\n On January 1, 2017, the Company granted 12,358 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, 2017, employees elected to purchase\n 9,977 shares under the investment share program.
\n\n The Company has reserved 6.7 million shares of Class A\n Common Stock for issuance pursuant to the Equity Plan, of which\n 0.7 million shares were available for grant as of\n December 31, 2016. Shares reserved for issuance under\n cancelled employee stock options and forfeited restricted stock are\n returned 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\n Director Options
\n\n The Company has a stock option plan for non-employee directors of the Company\n (the “Non-Employee\n Director Plan”), pursuant to which each non-employee director of the Company\n is granted an option to purchase shares of the Company’s\n Class A Common Stock upon election or re-election to the Board of Directors.\n Stock options issued to non-employee directors vest upon grant\n and have a maximum contractual term of ten years. During fiscal\n 2016, 2015, and 2014 the Company granted options to purchase an\n aggregate of 14,040, 5,640, and 6,696 shares of the Company’s\n Class A Common Stock to non-employee directors,\n respectively.
\n\n The Company has reserved 0.6 million shares of Class A\n Common Stock for issuance pursuant to the Non-Employee Director Plan, of which\n 0.1 million shares were available for grant as of\n December 31, 2016. Cancelled non-employee directors’ stock\n options are returned to the reserve under the Non-Employee Director Plan for future\n grants.
\n\n Option Activity
\n\n Information related to stock options under the Equity Plan and the\n Non-Employee Director Plan\n 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 26, 2015 \n | \n \n | \n | 1,127,162 | \n\n | \n | $ | \n63.99 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Granted \n | \n \n | \n | 800,490 | \n\n | \n | \n | 197.56 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Forfeited \n | \n \n | \n | (40,352 | \n) | \n\n | \n | 196.86 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Expired \n | \n \n | \n | (1,980 | \n) | \n\n | \n | 241.79 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Exercised \n | \n \n | \n | (537,087 | \n) | \n\n | \n | 74.71 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \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 31, 2016 \n | \n \n | \n | 1,348,233 | \n\n | \n | $ | \n141.98 | \n\n | \n | \n | 6.44 | \n\n | \n | $ | \n61,632 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \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 31, 2016 \n | \n \n | \n | 196,522 | \n\n | \n | $ | \n86.52 | \n\n | \n | \n | 4.14 | \n\n | \n | $ | \n17,210 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \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 31, 2016 \n | \n \n | \n | 744,866 | \n\n | \n | $ | \n97.34 | \n\n | \n | \n | 4.39 | \n\n | \n | $ | \n59,410 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \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 31, 2016, 72,573\n shares were performance-based options granted to multiple key\n employees and 574,507 shares were service-based options granted to\n the Chief Executive Officer that are not expected to vest as a\n result of the planned retirement in 2018.
\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 Class A\n Common Stock, which vests over a five-year period, commencing on\n January 1, 2014, at the rate of 20% per year. The exercise\n price is determined by multiplying $42.00 by the aggregate change\n in the DJ Wilshire 5000 Index from and after January 1, 2008\n through the close of business on the trading date next preceding\n each date on which the option is exercised. The exercise price will\n not be less than $37.65 per share and the excess of the fair value\n of the Company’s Class A Common Stock cannot exceed $70\n per share over the exercise price. At December 31, 2016 and\n December 26, 2015, 301,546 shares and 452,319 shares of the\n stock option remained outstanding, respectively. If the outstanding\n shares at December 31, 2016 were exercised on that date, the\n exercise price would have been $99.85 per share. If the outstanding\n shares at December 26, 2015 were exercised on that date, the\n exercise price would have been $135.40 per share. Reflected in the\n table above is the minimum exercise price of $37.65. The Company is\n accounting for this award as a market-based award which was valued\n 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. Under the Monte Carlo\n Simulation pricing model, the Company calculated the weighted\n average fair value per share to be $8.41, and recorded stock-based\n compensation expense of $0.3, $0.5, and $0.7, million related to\n this option in the fiscal 2016, 2015, and 2014, respectively.
\n\n On January 1, 2016, the Company granted the Chief Executive\n Officer an option to purchase 574,507 shares of its Class A\n Common Stock, which vests over a five-year period, commencing on\n January 1, 2019, at the rate of 20% per year. The exercise\n price is determined by multiplying $201.91 by the aggregate\n percentage change in the DJ Wilshire 5000 Index from and after\n January 1, 2016 through the close of business on the trading\n date next preceding each date on which the option is exercised,\n plus an additional 1.5 percentage points per annum, prorated for\n partial years. The exercise price will not be less than $201.91 per\n share and the excess of the fair value of the Company’s\n Class A Common Stock cannot exceed $150 per share over the\n exercise price. At December 31, 2016, the stock option\n remained unexercised as to 574,507 shares. If the stock option had\n been exercised on December 31, 2016, the exercise price would\n have been $226.72 per share. 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. As a result of the Chief Executive Officer’s planned\n retirement in 2018, the Company estimated a 100% forfeiture rate\n related to this grant and in the fourth quarter of fiscal 2016 the\n Company reversed a total of $3.6 million in stock-based\n compensation expense that had been recorded during the first three\n quarters of fiscal 2016.
\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 | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||
| \n | \n | (in thousands) | \n\n | |||||||||
| \n \n Amounts included in advertising, promotional and selling\n expenses \n | \n \n | $ | \n2,507 | \n\n | \n | $ | \n2,943 | \n\n | \n | $ | \n3,342 | \n\n |
| \n \n Amounts included in general and administrative expenses \n | \n \n | \n | 3,641 | \n\n | \n | \n | 3,722 | \n\n | \n | \n | 3,515 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \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 | $ | \n6,148 | \n\n | \n | $ | \n6,665 | \n\n | \n | $ | \n6,857 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \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 | $ | \n203 | \n\n | \n | $ | \n831 | \n\n | \n | $ | \n1,378 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \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, such as\n the binomial option-pricing model, to estimate the fair values of\n stock options. The Company believes that the Black-Scholes\n option-pricing model is less effective than the binomial\n option-pricing model in valuing long-term options, as it assumes\n that volatility and interest rates are constant over the life of\n the option. In addition, the Company believes that the binomial\n option-pricing model more accurately reflects the fair value of its\n stock awards, as it takes into account historical employee exercise\n patterns based on changes in the Company’s stock price and\n other relevant variables. The weighted-average fair value of stock\n options granted during 2016, 2015, and 2014 was $87.70, $128.54,\n and $106.81 per share, respectively, as calculated using a binomial\n option-pricing model. This excludes the January 1, 2016 stock\n options granted to the Chief Executive Officer with a\n weighted-average fair value of $39.16, as calculated using the\n Monte Carlo Simulation 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 | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||
| \n \n Expected volatility \n | \n \n | \n | 34.0% | \n\n | \n | \n | 34.2% | \n\n | \n | \n | 34.3% | \n\n |
| \n \n Risk-free interest rate \n | \n \n | \n | 2.16% | \n\n | \n | \n | 2.16% | \n\n | \n | \n | 2.83% | \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 | 2.68 times | \n\n | \n | \n | 3.0 times | \n\n | \n | \n | 3.4 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 curve over the\n contractual term of the option when using the binomial\n option-pricing model. Expected dividend yield is 0% because the\n Company has not paid dividends in the past and currently has no\n known intention to do so in the future. Exercise factor and\n 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\n Company recognized stock-based compensation expense related to\n those awards, net of actual forfeitures. For equity awards that do\n not vest on January 1st, the estimated\n forfeiture rate used was 5.0%, with the exception of the Chief\n Executive Officer’s 2016 equity award which used a 100%\n forfeiture rate as a result of the planned retirement in 2018. The\n forfeiture rate was based upon historical experience and the\n Company periodically reviews this rate to ensure proper projection\n of future forfeitures.
\n\n The total fair value of options vested during 2016, 2015, and 2014\n was $9.9 million, $4.1 million, and $3.8 million,\n respectively. The aggregate intrinsic value of stock options\n exercised during 2016, 2015, and 2014 was $52.7 million,\n $37.7 million, and $45.8 million, respectively.
\n\n
\n\n Based on equity awards outstanding as of December 31, 2016,\n there is $23.0 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 3.09\n years. The following table summarizes the estimated future annual\n stock-based compensation expense related to share-based\n arrangements existing as of December 31, 2016 that are\n expected to vest (in thousands):
\n\n
\n| \n | \n | \n | \n | \n |
| \n \n 2017 \n | \n \n | $ | \n5,707 | \n\n |
| \n \n 2018 \n | \n \n | \n | 5,253 | \n\n |
| \n \n 2019 \n | \n \n | \n | 3,952 | \n\n |
| \n \n 2020 \n | \n \n | \n | 2,606 | \n\n |
| \n \n 2021 \n | \n \n | \n | 2,060 | \n\n |
| \n \n Thereafter \n | \n \n | \n | 3,422 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n |
| \n \n Total \n | \n \n | $ | \n23,000 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n |
\n Non-Vested Shares\n 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\n December 26, 2015 \n | \n \n | \n | 60,922 | \n\n | \n | $ | \n150.03 | \n\n |
| \n \n Granted \n | \n \n | \n | 30,852 | \n\n | \n | \n | 161.84 | \n\n |
| \n \n Vested \n | \n \n | \n | (19,740 | \n) | \n\n | \n | 114.12 | \n\n |
| \n \n Forfeited \n | \n \n | \n | (7,066 | \n) | \n\n | \n | 152.40 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n | \n | \n |
| \n \n Non-vested at\n December 31, 2016 \n | \n \n | \n | 64,968 | \n\n | \n | $ | \n166.29 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n | \n | \n |
\n 19,740 shares vested in 2016 with a weighted average fair value of\n $114.12. 25,732 shares vested in 2015 with a weighted average fair\n value of $79.44. 38,329 shares vested in 2014 with a weighted\n average fair value of $53.82.
\n\n Stock Repurchase Program
\n\n In 1998, the Board of Directors authorized management to implement\n a stock repurchase program. As of December 31, 2016, the\n Company has repurchased a cumulative total of approximately\n 12.5 million shares of its Class A Common Stock for an\n aggregate purchase price of approximately $607.8 million as\n 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 | (in thousands) | \n\n | ||
| \n \n Repurchased at December 28, 2013 \n | \n \n | \n | 10,892,459 | \n\n | \n | $ | \n299,528 | \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 | \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 | \n \n |
| \n \n Repurchased at December 26, 2015 \n | \n \n | \n | 11,538,680 | \n\n | \n | \n | 446,092 | \n\n |
| \n \n 2016 repurchases \n | \n \n | \n | 944,876 | \n\n | \n | \n | 161,658 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n |
| \n \n Repurchased at December 31, 2016 \n | \n \n | \n | 12,483,556 | \n\n | \n | $ | \n607,750 | \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
\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,\n whichever is more dilutive.
\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 31, 2016 and December 26, 2015. 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”). The Company believes that\n the carrying amount of its cash equivalents, accounts receivable,\n accounts payable and accrued expenses approximates fair value due\n to the short-term nature of these assets and liabilities. The\n Company is not exposed to significant interest, currency or credit\n risks arising from these financial assets and liabilities.
\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 market. The\n Company’s goal is to maintain on-hand a supply of approximately two\n years for essential hop varieties, in order to limit the risk of an\n unexpected reduction in supply. Inventories are generally\n classified as current assets. The Company classifies hops inventory\n in excess of two years of forecasted usage in other long term\n assets. The cost elements of work in process and finished goods\n inventory consist of raw materials, direct labor and manufacturing\n overhead. Inventories consisted of the following:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n December 31, | \n\n | \n | \n December 26, | \n\n | ||
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | ||
| \n | \n | (in\n thousands) | \n\n | |||||
| \n \n Raw Materials \n | \n \n | $ | \n41,630 | \n\n | \n | $ | \n42,123 | \n\n |
| \n \n Work in process \n | \n \n | \n | 8,131 | \n\n | \n | \n | 8,876 | \n\n |
| \n \n Finished Goods \n | \n \n | \n | 9,054 | \n\n | \n | \n | 8,261 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n |
| \n | \n | \n | 58,815 | \n\n | \n | \n | 59,260 | \n\n |
| \n \n Less portion in other long term assets \n | \n \n | \n | (6,316 | \n) | \n\n | \n | (2,798 | \n) | \n
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n |
| \n | \n | $ | \n52,499 | \n\n | \n | $ | \n56,462 | \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 $4.5 million,\n $4.0 million, and $6.1 million in fiscal years 2016,\n 2015, and 2014, respectively.
\n\n Recent Accounting Pronouncements
\n\n In May 2014, the FASB issued ASU No. 2014-09, Revenue from\n Contracts with Customers (Topic 606). ASU 2014-09 will supersede virtually all\n existing revenue guidance. Under this update, an entity is required\n to recognize revenue upon transfer of promised goods or services to\n customers, in an amount that reflects the expected consideration\n received in exchange for those goods or services. As such, an\n entity will need to use more judgment and make more estimates than\n under the current guidance. ASU 2014-09 is to be applied\n retrospectively either to each prior reporting period presented in\n the financial statements, or only to the most current reporting\n period presented in the financial statements with a cumulative\n effect adjustment to retained earnings. The Company will elect to\n apply the impact (if 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\n Contracts with Customers (Topic 606): Deferral of the Effective\n Date. ASU 2015-14\n defers the effective date of ASU 2014-09 for one year, making it\n effective for the year beginning December 31, 2017, with early\n adoption permitted as of January 1, 2017. The Company\n currently expects to adopt ASU 2014-09 in the first quarter of 2018.\n The Company does not expect adoption of ASU 2014-09 to have a material impact on\n its consolidated financial statements.
\n\n In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic\n 330), Simplifying the Measurement of Inventory. ASU\n 2015-11 is part of the\n FASB’s initiative to simplify accounting standards. The\n guidance requires an entity to recognize inventory within scope of\n 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 effective\n prospectively for the year beginning January 1, 2017. The\n Company is currently evaluating the impact of ASU 2015-11 and has preliminarily\n concluded that it will not have a significant impact on the\n consolidated financial 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 FASB’s\n initiative to simplify accounting standards. The guidance requires\n an entity to present deferred tax assets and deferred tax\n liabilities as noncurrent in the consolidated balance sheet. ASU\n 2015-17 permits entities\n to apply the amendments either prospectively or retrospectively.\n ASU 2015-17 will be\n effective for the year beginning January 1, 2017. The Company\n is currently evaluating the impact ASU 2015-17. As of December 31, 2016\n and December 26, 2015, the Company had $7.4 million and\n $7.0 million, respectively, of current deferred tax assets on\n the consolidated balance sheets that would be classified as\n noncurrent under the new guidance.
\n\n In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic\n 842). The guidance requires lessees to recognize assets and\n liabilities on the balance sheet for the rights and obligations\n created by all leases with terms of more than 12 months. ASU\n 2016-02 will be effective\n retrospectively for the year beginning December 30, 2018, with\n early adoption permitted. As of December 31, 2016 and\n December 26, 2015, the Company had $15.9 million and\n $17.5 million, respectively, of contractual obligation on\n lease agreements that would be included on the consolidated balance\n sheets under the new guidance.
\n\n In March, 2016, the FASB issued ASU No. 2016-09, Stock\n Compensation (Topic 718), Improvements to Employee Share-Based\n Payment Accounting. ASU 2016-09 is part of the FASB’s\n initiative to simplify accounting standards. The guidance impacts\n several aspects of the accounting for employee share-based payment\n transactions, including accounting for income taxes and\n forfeitures, as well as classification in the statement of cash\n flows. Under ASU 2016-09,\n excess tax benefits and deficiencies as a result of stock option\n exercises and restricted stock vesting are to be recognized as\n discrete items within income tax expense or benefit in the\n statement of operations in the reporting period in which they\n occur. Additionally, under ASU 2016-09, excess tax benefits and\n deficiencies should be classified along with other income tax cash\n flows as an operating activity. ASU 2016-09 will be effective for the year\n beginning January 1, 2017 and may be applied retrospectively\n or prospectively. The impact ASU 2016-09 will have on the\n Company’s consolidated financial statements will mainly\n depend on unpredictable future events, including the timing and\n value realized upon exercise of stock options versus the fair value\n when those options were granted. For the 2016 and 2015 fiscal\n years, the excess tax benefit from stock-based compensation\n arrangements was $12.5 million and $15.4 million,\n respectively.
\n\n The following table details the changes in accumulated other\n comprehensive (loss) income for 2016, 2015, and 2014 (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 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 of ($11) \n | \n \n | \n | 18 | \n\n |
| \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 | \n \n \n | \n \n \n \n | \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 of ($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 |
| \n \n Balance at December 26, 2015 \n | \n \n | $ | \n(951 | \n) | \n
| \n | \n | \n \n \n | \n \n \n \n | \n \n |
| \n \n Deferred pension and other post-retirement benefit costs, net of\n taxes of ($69) \n | \n \n | \n | 122 | \n\n |
| \n \n Amortization of Deferred benefit costs, net of tax of $101 \n | \n \n | \n | (175 | \n) | \n
| \n \n Currency translation adjustment \n | \n \n | \n | (99 | \n) | \n
| \n | \n | \n \n \n | \n \n \n \n | \n \n |
| \n \n Balance at December 31, 2016 \n | \n \n | $ | \n(1,103 | \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 | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \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 | $ | \n35,390 | \n\n | \n | $ | \n42,391 | \n\n | \n | $ | \n30,595 | \n\n |
| \n \n State \n | \n \n | \n | 6,108 | \n\n | \n | \n | 7,403 | \n\n | \n | \n | 8,262 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \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 | 41,498 | \n\n | \n | \n | 49,794 | \n\n | \n | \n | 38,857 | \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 | 7,666 | \n\n | \n | \n | 6,279 | \n\n | \n | \n | 15,407 | \n\n |
| \n \n State \n | \n \n | \n | 608 | \n\n | \n | \n | 523 | \n\n | \n | \n | 587 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \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 | 8,274 | \n\n | \n | \n | 6,802 | \n\n | \n | \n | 15,994 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \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 | $ | \n49,772 | \n\n | \n | $ | \n56,596 | \n\n | \n | $ | \n54,851 | \n\n |
| \n | \n | \n \n \n | \n \n \n \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 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 | December 31, \n 2016 (53 \n weeks) | \n \n | \n | December 26, \n 2015 | \n \n | \n | December 27, \n 2014 | \n \n | |||
| \n | \n | (in thousands,\n except per share data) | \n\n | |||||||||
| \n \n Net Income \n | \n \n | $ | \n87,349 | \n\n | \n | $ | \n98,414 | \n\n | \n | $ | \n90,743 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \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 | $ | \n63,717 | \n\n | \n | $ | \n71,798 | \n\n | \n | $ | \n64,027 | \n\n |
| \n \n Class B Common Stock \n | \n \n | \n | 23,190 | \n\n | \n | \n | 26,154 | \n\n | \n | \n | 26,207 | \n\n |
| \n \n Unvested participating shares \n | \n \n | \n | 442 | \n\n | \n | \n | 462 | \n\n | \n | \n | 509 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n |
| \n | \n | $ | \n87,349 | \n\n | \n | $ | \n98,414 | \n\n | \n | $ | \n90,743 | \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 | 9,189 | \n\n | \n | \n | 9,619 | \n\n | \n | \n | 9,202 | \n\n |
| \n \n Class B Common Stock* \n | \n \n | \n | 3,344 | \n\n | \n | \n | 3,504 | \n\n | \n | \n | 3,766 | \n\n |
| \n \n Unvested participating shares \n | \n \n | \n | 64 | \n\n | \n | \n | 62 | \n\n | \n | \n | 73 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n |
| \n | \n | \n | 12,597 | \n\n | \n | \n | 13,185 | \n\n | \n | \n | 13,041 | \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 | $ | \n6.93 | \n\n | \n | $ | \n7.46 | \n\n | \n | $ | \n6.96 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \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 | $ | \n6.93 | \n\n | \n | $ | \n7.46 | \n\n | \n | $ | \n6.96 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \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, 100,000 shares to Class A\n Common Stock on October 26, 2015, 125,000 shares to\n Class A Common Stock on November 4, 2016 and 45,000\n shares to Class A Common Stock on November 30, 2016, with\n the ending number of shares reflecting the weighted average for the\n period. | \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 31,\n 2016 | \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 | $ | \n89,966 | \n\n | \n | $ | \n\n — | \n\n | \n | $ | \n\n — | \n\n | \n | $ | \n89,966 | \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 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\n December 26, 2015 \n | \n \n | \n | 60,922 | \n\n | \n | $ | \n150.03 | \n\n |
| \n \n Granted \n | \n \n | \n | 30,852 | \n\n | \n | \n | 161.84 | \n\n |
| \n \n Vested \n | \n \n | \n | (19,740 | \n) | \n\n | \n | 114.12 | \n\n |
| \n \n Forfeited \n | \n \n | \n | (7,066 | \n) | \n\n | \n | 152.40 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n | \n | \n |
| \n \n Non-vested at\n December 31, 2016 \n | \n \n | \n | 64,968 | \n\n | \n | $ | \n166.29 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n | \n | \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 31, 2016 that are\n expected to vest (in thousands):
\n\n
\n| \n | \n | \n | \n | \n |
| \n \n 2017 \n | \n \n | $ | \n5,707 | \n\n |
| \n \n 2018 \n | \n \n | \n | 5,253 | \n\n |
| \n \n 2019 \n | \n \n | \n | 3,952 | \n\n |
| \n \n 2020 \n | \n \n | \n | 2,606 | \n\n |
| \n \n 2021 \n | \n \n | \n | 2,060 | \n\n |
| \n \n Thereafter \n | \n \n | \n | 3,422 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n |
| \n \n Total \n | \n \n | $ | \n23,000 | \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 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 period\n ending on the last Saturday in December. The fiscal period 2016\n consists of fifty-three weeks and the fiscal periods 2015 and 2014\n consist of fifty-two\n 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®,\n Twisted Tea®, Angry\n Orchard® and Truly\n Spiked & Sparkling® brands. The\n second is the A&S Brewing Collaborative operating segment which\n is comprised of The Traveler Beer Company, Coney Island Brewing\n Company, Angel City Brewing Company and Concrete Beach Brewing\n Company. Both segments have similar economic characteristics. They\n sell predominantly low alcohol beverages, which are sold to the\n same types of customers in similar size quantities, at similar\n price points and through substantially the same channels of\n distribution. These beverages are manufactured using similar\n production processes, have comparable alcohol content and generally\n fall under the same regulatory environment. Since the operating\n segments are similar in the areas outlined above, they are\n aggregated for 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 31, 2016 and\n December 26, 2015 included cash on-hand and money market instruments\n that are highly liquid investments. Cash and cash equivalents are\n 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 $400,000 and $456,000 at\n December 31, 2016 and December 26, 2015, respectively,\n and 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 31, 2016 and December 26, 2015 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 31, 2016, 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 foreign wholesalers,\n importers or other agencies (collectively referred to as\n “Distributors”). In 2016, 2015 and 2014, sales to\n foreign Distributors were approximately 4% of total sales.\n Receivables arising from these sales are not collateralized;\n however, credit risk is minimized as a result of the large and\n diverse nature of the Company’s customer base. There were no\n individual customer accounts receivable balances outstanding at\n December 31, 2016 and December 26, 2015 that were in\n excess of 10% of the gross accounts receivable balance on those\n dates. No individual customers represented more than 10% of the\n Company’s revenues during fiscal years 2016, 2015, and\n 2014.
\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 31, 2016 and December 26, 2015. 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”). The Company believes that\n the carrying amount of its cash equivalents, accounts receivable,\n accounts payable and accrued expenses approximates fair value due\n to the short-term nature of these assets and liabilities. The\n Company is not exposed to significant interest, currency or credit\n risks arising from these 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 $4.5 million,\n $4.0 million, and $6.1 million in fiscal years 2016,\n 2015, and 2014, respectively.
\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
| Computer software and equipment | \n\n | 2 to 5 years | \n
| Office equipment and furniture | \n\n | 3 to 7 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 kegs and pallets are\n 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 31, 2016, the Company decreased its liability\n for refundable deposits, gross property, plant and equipment and\n related accumulated depreciation by $1.1 million,\n $1.4 million and $1.4 million, respectively. 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. As of\n December 31, 2016 and December 26, 2015, the\n Company’s balance sheet includes $14.3 million and\n $17.1 million, respectively, in refundable deposits on kegs\n and pallets and $12.0 million and $18.9 million,\n respectively, in kegs, net of accumulated depreciation.
\n\n
\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 annually at the end of the fiscal\n month of August, 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 31, 2016 and December 26, 2015. As of\n December 31, 2016 and December 26, 2015, the goodwill of\n the Boston Beer Company reporting unit amounted to\n $1.4 million. As of December 31, 2016 and\n December 26, 2015, 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 31, 2016 and December 26, 2015.
\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 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 shipped and on\n its understanding of the applicable excise tax laws.
\n\n
\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 31, 2016 and\n December 26, 2015, the Company has deferred $5.4 million\n and $3.9 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 $49.2 million,\n $62.2 million, and $62.6 million in fiscal years 2016,\n 2015, and 2014, 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, brand and sales support\n workforce, promotional activity expenses, freight charges related\n to shipments of finished goods from manufacturing locations to\n distributor locations and point-of-sale items. Total\n advertising and sales promotional expenditures of\n $105.3 million, $120.1 million, and $100.5 million\n were included in advertising, promotional and selling expenses in\n the accompanying consolidated statements of comprehensive income\n for fiscal years 2016, 2015, and 2014, 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 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,\n Revenue Recognition — Customer Payments and\n Incentives, based on the nature of the expenditure. Amounts\n paid to customers totaled $54.4 million, $55.3 million,\n and $52.4 million in fiscal year 2016, 2015, and 2014,\n 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 2016, 2015, and 2014 were $33.2 million, $33.2 million,\n and $28.5 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 merchandise\n placement, samples, product displays, promotional programs at\n retail locations and meals, travel and entertainment. Amounts paid\n to customers in connection with these programs in fiscal years\n 2016, 2015, and 2014 were $21.2 million, $22.1 million,\n and $23.9 million, respectively. In 2016, 2015, and 2014, the\n Company recorded certain of these costs in the total amount of\n $16.1 million, $16.6 million, and $18.7 million,\n respectively as reductions to net revenue. Costs recognized as\n reduction to net revenues include, but are not limited to,\n promotional discounts, sales incentives and certain other\n 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 Compensation\n (“ASC 718”), which generally requires recognition of\n share-based compensation costs in financial statements based on\n fair value. Compensation cost is recognized over the period during\n which an employee is required to provide services in exchange for\n the award (the requisite service period). The amount of\n compensation cost recognized in the consolidated statements of\n comprehensive income is based on the awards ultimately expected to\n vest, and therefore, 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 L for further\n discussion of the application of the option-pricing models.
\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,\n whichever is more dilutive.
\n\n
\n\n Recent Accounting Pronouncements
\n\n In May 2014, the FASB issued ASU No. 2014-09, Revenue from\n Contracts with Customers (Topic 606). ASU 2014-09 will supersede virtually all\n existing revenue guidance. Under this update, an entity is required\n to recognize revenue upon transfer of promised goods or services to\n customers, in an amount that reflects the expected consideration\n received in exchange for those goods or services. As such, an\n entity will need to use more judgment and make more estimates than\n under the current guidance. ASU 2014-09 is to be applied\n retrospectively either to each prior reporting period presented in\n the financial statements, or only to the most current reporting\n period presented in the financial statements with a cumulative\n effect adjustment to retained earnings. The Company will elect to\n apply the impact (if 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\n Contracts with Customers (Topic 606): Deferral of the Effective\n Date. ASU 2015-14\n defers the effective date of ASU 2014-09 for one year, making it\n effective for the year beginning December 31, 2017, with early\n adoption permitted as of January 1, 2017. The Company\n currently expects to adopt ASU 2014-09 in the first quarter of 2018.\n The Company does not expect adoption of ASU 2014-09 to have a material impact on\n its consolidated financial statements.
\n\n In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic\n 330), Simplifying the Measurement of Inventory. ASU\n 2015-11 is part of the\n FASB’s initiative to simplify accounting standards. The\n guidance requires an entity to recognize inventory within scope of\n 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 effective\n prospectively for the year beginning January 1, 2017. The\n Company is currently evaluating the impact of ASU 2015-11 and has preliminarily\n concluded that it will not have a significant impact on the\n consolidated financial 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 FASB’s\n initiative to simplify accounting standards. The guidance requires\n an entity to present deferred tax assets and deferred tax\n liabilities as noncurrent in the consolidated balance sheet. ASU\n 2015-17 permits entities\n to apply the amendments either prospectively or retrospectively.\n ASU 2015-17 will be\n effective for the year beginning January 1, 2017. The Company\n is currently evaluating the impact ASU 2015-17. As of December 31, 2016\n and December 26, 2015, the Company had $7.4 million and\n $7.0 million, respectively, of current deferred tax assets on\n the consolidated balance sheets that would be classified as\n noncurrent under the new guidance.
\n\n In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic\n 842). The guidance requires lessees to recognize assets and\n liabilities on the balance sheet for the rights and obligations\n created by all leases with terms of more than 12 months. ASU\n 2016-02 will be effective\n retrospectively for the year beginning December 30, 2018, with\n early adoption permitted. As of December 31, 2016 and\n December 26, 2015, the Company had $15.9 million and\n $17.5 million, respectively, of contractual obligation on\n lease agreements that would be included on the consolidated balance\n sheets under the new guidance.
\n\n In March, 2016, the FASB issued ASU No. 2016-09, Stock\n Compensation (Topic 718), Improvements to Employee Share-Based\n Payment Accounting. ASU 2016-09 is part of the FASB’s\n initiative to simplify accounting standards. The guidance impacts\n several aspects of the accounting for employee share-based payment\n transactions, including accounting for income taxes and\n forfeitures, as well as classification in the statement of cash\n flows. Under ASU 2016-09,\n excess tax benefits and deficiencies as a result of stock option\n exercises and restricted stock vesting are to be recognized as\n discrete items within income tax expense or benefit in the\n statement of operations in the reporting period in which they\n occur. Additionally, under ASU 2016-09, excess tax benefits and\n deficiencies should be classified along with other income tax cash\n flows as an operating activity. ASU 2016-09 will be effective for the year\n beginning January 1, 2017 and may be applied retrospectively\n or prospectively. The impact ASU 2016-09 will have on the\n Company’s consolidated financial statements will mainly\n depend on unpredictable future events, including the timing and\n value realized upon exercise of stock options versus the fair value\n when those options were granted. For the 2016 and 2015 fiscal\n years, the excess tax benefit from stock-based compensation\n arrangements was $12.5 million and $15.4 million,\n respectively.
\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 31, 2016, 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 foreign wholesalers,\n importers or other agencies (collectively referred to as\n “Distributors”). In 2016, 2015 and 2014, sales to\n foreign Distributors were approximately 4% of total sales.\n Receivables arising from these sales are not collateralized;\n however, credit risk is minimized as a result of the large and\n diverse nature of the Company’s customer base. There were no\n individual customer accounts receivable balances outstanding at\n December 31, 2016 and December 26, 2015 that were in\n excess of 10% of the gross accounts receivable balance on those\n dates. No individual customers represented more than 10% of the\n Company’s revenues during fiscal years 2016, 2015, and\n 2014.
\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 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 annually at the end of the fiscal\n month of August, 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 31, 2016 and December 26, 2015. As of\n December 31, 2016 and December 26, 2015, the goodwill of\n the Boston Beer Company reporting unit amounted to\n $1.4 million. As of December 31, 2016 and\n December 26, 2015, the goodwill of the A&S Brewing\n Collaborative reporting unit amounted to $2.3 million.
\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 | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \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 | $ | \n35,390 | \n\n | \n | $ | \n42,391 | \n\n | \n | $ | \n30,595 | \n\n |
| \n \n State \n | \n \n | \n | 6,108 | \n\n | \n | \n | 7,403 | \n\n | \n | \n | 8,262 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \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 | 41,498 | \n\n | \n | \n | 49,794 | \n\n | \n | \n | 38,857 | \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 | 7,666 | \n\n | \n | \n | 6,279 | \n\n | \n | \n | 15,407 | \n\n |
| \n \n State \n | \n \n | \n | 608 | \n\n | \n | \n | 523 | \n\n | \n | \n | 587 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \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 | 8,274 | \n\n | \n | \n | 6,802 | \n\n | \n | \n | 15,994 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \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 | $ | \n49,772 | \n\n | \n | $ | \n56,596 | \n\n | \n | $ | \n54,851 | \n\n |
| \n | \n | \n \n \n | \n \n \n \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 | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \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 | 3.6 | \n\n | \n | \n | 3.4 | \n\n | \n | \n | 4.0 | \n\n |
| \n \n Deduction relating to U.S. production activities \n | \n \n | \n | (2.6 | \n) | \n\n | \n | (2.7 | \n) | \n\n | \n | (2.1 | \n) | \n
| \n \n Change in valuation allowance \n | \n \n | \n | (0.3 | \n) | \n\n | \n | \n — | \n\n | \n | \n | \n — | \n\n |
| \n \n Other \n | \n \n | \n | 0.6 | \n\n | \n | \n | 0.8 | \n\n | \n | \n | 0.8 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n |
| \n | \n | \n | 36.3 | \n% | \n\n | \n | 36.5 | \n% | \n\n | \n | 37.7 | \n% | \n
| \n | \n | \n \n \n | \n \n \n \n | \n \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 31, | \n\n | \n | \n December 26, | \n\n | ||
| \n | \n | 2016 | \n\n | \n | 2015 | \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 | $ | \n6,488 | \n\n | \n | $ | \n7,435 | \n\n |
| \n \n Stock-based compensation expense \n | \n \n | \n | 5,929 | \n\n | \n | \n | 9,493 | \n\n |
| \n \n Inventory \n | \n \n | \n | 1,117 | \n\n | \n | \n | 2,398 | \n\n |
| \n \n Other \n | \n \n | \n | 4,097 | \n\n | \n | \n | 4,154 | \n\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 tax assets \n | \n \n | \n | 17,631 | \n\n | \n | \n | 23,480 | \n\n |
| \n \n Valuation allowance \n | \n \n | \n | (669 | \n) | \n\n | \n | (1,036 | \n) | \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 tax assets net of valuation allowance \n | \n \n | \n | 16,962 | \n\n | \n | \n | 22,444 | \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 | (72,140 | \n) | \n\n | \n | (69,226 | \n) | \n
| \n \n Prepaid expenses \n | \n \n | \n | (1,204 | \n) | \n\n | \n | (1,475 | \n) | \n
| \n \n Goodwill \n | \n \n | \n | (879 | \n) | \n\n | \n | (761 | \n) | \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 tax liabilities \n | \n \n | \n | (74,223 | \n) | \n\n | \n | (71,462 | \n) | \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 deferred tax liabilities \n | \n \n | $ | \n(57,261 | \n) | \n\n | $ | \n(49,018 | \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 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 $0.0 million, $0.1 million, and $0.0 million for\n fiscal years 2016, 2015, and 2014, respectively. Accrued interest\n and penalties amounted to $0.3 million and $0.4 million\n at December 31, 2016 and December 26, 2015,\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 | 2016 | \n\n | \n | 2015 | \n\n | ||
| \n | \n | (in thousands) | \n\n | |||||
| \n \n Balance at beginning of year \n | \n \n | $ | \n486 | \n\n | \n | $ | \n368 | \n\n |
| \n \n Increases related to current year tax positions \n | \n \n | \n | 80 | \n\n | \n | \n | 44 | \n\n |
| \n \n Increases related to prior year tax positions \n | \n \n | \n | 76 | \n\n | \n | \n | 117 | \n\n |
| \n \n Decreases related to settlements \n | \n \n | \n | (50 | \n) | \n\n | \n | \n — | \n\n |
| \n \n Decreases related to lapse of statute of limitations \n | \n \n | \n | (3 | \n) | \n\n | \n | (43 | \n) | \n
| \n | \n | \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 | $ | \n589 | \n\n | \n | $ | \n486 | \n\n |
| \n | \n | \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 31, 2016 and December 26, 2015 are potential net\n benefits of $0.5 million and $0.4 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 31, 2016, the Company’s 2013, 2014 and\n 2015 federal income tax returns remain subject to examination by\n the Internal Revenue Service (“IRS”). The\n Company’s state income tax returns remain subject to\n examination for three or four years depending on the state’s\n statute of limitations. The Company is being audited by two states\n as of December 31, 2016. In addition, the Company is generally\n obligated to report changes in taxable income arising from federal\n income tax audits.
\n\n It is reasonably possible that the Company’s unrecognized tax\n benefits may increase or decrease in 2017 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 As of December 31, 2016, the Company’s deferred tax\n assets include a capital loss carryforward. The capital loss\n carryforward, totaling $1.7 million as of December 31,\n 2016, which if unused, will expire in year 2019. For the year ended\n December 31, 2016, the Company recorded a net valuation\n allowance release of $0.3 million due to a decrease in the\n deferred tax asset for capital loss carryforwards.
\n\n The Company’s short term income tax receivable as of\n December 26, 2015 of $14.1 million in the accompanying\n consolidated balance sheets is primarily due to the Protecting\n Americans from Tax Hikes Act of 2015, being enacted after 2015\n corporate estimated tax payments were due on December 15,\n 2015. These tax extenders allow the Company to claim accelerated\n tax depreciation on qualified property, plant, and equipment\n additions, and the research & development tax credit on\n the 2015 federal corporate income tax return. The Company applied\n with the IRS for a $12.0 million quick refund of overpayment\n of estimate tax, and received this refund in the first quarter of\n 2016.
\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,”\n “Angry Orchard Cider Company” and “Hard Seltzer\n Beverage Company.” The Company’s Samuel\n Adams®\n beers are produced and sold under the trade name “The Boston\n Beer Company.” A&S Brewing Collaborative LLC, d/b/a\n A&S Brewing (“A&S”), a wholly-owned subsidiary\n of the Company, sells beer under various trade names that is\n produced under its own license and the Company’s licenses. In\n 2016, sales from A&S brands were less than 5% of net revenues,\n in 2015, sales from A&S brands were less than 7% of net\n revenues and in 2014, sales from A&S brands were less than 2%\n of net revenues.
\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 31, | \n\n | \n | \n December 26, | \n\n | ||
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | ||
| \n | \n | (in\n thousands) | \n\n | |||||
| \n \n Machinery and plant equipment \n | \n \n | $ | \n420,486 | \n\n | \n | $ | \n387,180 | \n\n |
| \n \n Kegs \n | \n \n | \n | 70,024 | \n\n | \n | \n | 71,391 | \n\n |
| \n \n Land \n | \n \n | \n | 22,295 | \n\n | \n | \n | 25,135 | \n\n |
| \n \n Building and building improvements \n | \n \n | \n | 112,508 | \n\n | \n | \n | 101,836 | \n\n |
| \n \n Office equipment and furniture \n | \n \n | \n | 22,412 | \n\n | \n | \n | 19,635 | \n\n |
| \n \n Leasehold improvements \n | \n \n | \n | 14,147 | \n\n | \n | \n | 12,037 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n |
| \n | \n | \n | 661,872 | \n\n | \n | \n | 617,214 | \n\n |
| \n \n Less accumulated depreciation \n | \n \n | \n | (253,461 | \n) | \n\n | \n | (207,288 | \n) | \n
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n |
| \n | \n | $ | \n408,411 | \n\n | \n | $ | \n409,926 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \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 31, 2016 and\n December 26, 2015, the Company has deferred $5.4 million\n and $3.9 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 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 31, | \n\n | \n | \n December 26, | \n\n | ||
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | ||
| \n | \n | (in thousands) | \n\n | |||||
| \n \n Accrued deposits \n | \n \n | $ | \n15,814 | \n\n | \n | $ | \n18,865 | \n\n |
| \n \n Employee wages, benefits and reimbursements \n | \n \n | \n | 14,116 | \n\n | \n | \n | 12,367 | \n\n |
| \n \n Advertising, promotional and selling expenses \n | \n \n | \n | 8,562 | \n\n | \n | \n | 11,249 | \n\n |
| \n \n Deferred revenue \n | \n \n | \n | 5,381 | \n\n | \n | \n | 3,949 | \n\n |
| \n \n Accrued stale beer \n | \n \n | \n | 5,226 | \n\n | \n | \n | 3,254 | \n\n |
| \n \n Accrued sales and use tax \n | \n \n | \n | 2,437 | \n\n | \n | \n | 2,656 | \n\n |
| \n \n Accrued excise taxes \n | \n \n | \n | 2,255 | \n\n | \n | \n | 3,976 | \n\n |
| \n \n Accrued freight \n | \n \n | \n | 1,402 | \n\n | \n | \n | 5,681 | \n\n |
| \n \n Other accrued liabilities \n | \n \n | \n | 5,681 | \n\n | \n | \n | 6,387 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n |
| \n | \n | $ | \n60,874 | \n\n | \n | $ | \n68,384 | \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 31, | \n\n | \n | \n December 26, | \n\n | ||
| \n | \n | 2016 | \n\n | \n | 2015 | \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 | $ | \n6,488 | \n\n | \n | $ | \n7,435 | \n\n |
| \n \n Stock-based compensation expense \n | \n \n | \n | 5,929 | \n\n | \n | \n | 9,493 | \n\n |
| \n \n Inventory \n | \n \n | \n | 1,117 | \n\n | \n | \n | 2,398 | \n\n |
| \n \n Other \n | \n \n | \n | 4,097 | \n\n | \n | \n | 4,154 | \n\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 tax assets \n | \n \n | \n | 17,631 | \n\n | \n | \n | 23,480 | \n\n |
| \n \n Valuation allowance \n | \n \n | \n | (669 | \n) | \n\n | \n | (1,036 | \n) | \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 tax assets net of valuation allowance \n | \n \n | \n | 16,962 | \n\n | \n | \n | 22,444 | \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 | (72,140 | \n) | \n\n | \n | (69,226 | \n) | \n
| \n \n Prepaid expenses \n | \n \n | \n | (1,204 | \n) | \n\n | \n | (1,475 | \n) | \n
| \n \n Goodwill \n | \n \n | \n | (879 | \n) | \n\n | \n | (761 | \n) | \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 tax liabilities \n | \n \n | \n | (74,223 | \n) | \n\n | \n | (71,462 | \n) | \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 deferred tax liabilities \n | \n \n | $ | \n(57,261 | \n) | \n\n | $ | \n(49,018 | \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 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 | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||
| \n | \n | (in thousands) | \n\n | |||||||||
| \n \n Amounts included in advertising, promotional and selling\n expenses \n | \n \n | $ | \n2,507 | \n\n | \n | $ | \n2,943 | \n\n | \n | $ | \n3,342 | \n\n |
| \n \n Amounts included in general and administrative expenses \n | \n \n | \n | 3,641 | \n\n | \n | \n | 3,722 | \n\n | \n | \n | 3,515 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \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 | $ | \n6,148 | \n\n | \n | $ | \n6,665 | \n\n | \n | $ | \n6,857 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \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 | $ | \n203 | \n\n | \n | $ | \n831 | \n\n | \n | $ | \n1,378 | \n\n |
| \n | \n | \n \n \n | \n \n \n \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 consisted of the following:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n December 31, | \n\n | \n | \n December 26, | \n\n | ||
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | ||
| \n | \n | (in\n thousands) | \n\n | |||||
| \n \n Raw Materials \n | \n \n | $ | \n41,630 | \n\n | \n | $ | \n42,123 | \n\n |
| \n \n Work in process \n | \n \n | \n | 8,131 | \n\n | \n | \n | 8,876 | \n\n |
| \n \n Finished Goods \n | \n \n | \n | 9,054 | \n\n | \n | \n | 8,261 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n |
| \n | \n | \n | 58,815 | \n\n | \n | \n | 59,260 | \n\n |
| \n \n Less portion in other long term assets \n | \n \n | \n | (6,316 | \n) | \n\n | \n | (2,798 | \n) | \n
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n |
| \n | \n | $ | \n52,499 | \n\n | \n | $ | \n56,462 | \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 31, 2016, the Company has repurchased a\n cumulative total of approximately 12.5 million shares of its\n Class A Common Stock for an aggregate purchase price of\n approximately $607.8 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 | (in thousands) | \n\n | ||
| \n \n Repurchased at December 28, 2013 \n | \n \n | \n | 10,892,459 | \n\n | \n | $ | \n299,528 | \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 | \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 | \n \n |
| \n \n Repurchased at December 26, 2015 \n | \n \n | \n | 11,538,680 | \n\n | \n | \n | 446,092 | \n\n |
| \n \n 2016 repurchases \n | \n \n | \n | 944,876 | \n\n | \n | \n | 161,658 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n |
| \n \n Repurchased at December 31, 2016 \n | \n \n | \n | 12,483,556 | \n\n | \n | $ | \n607,750 | \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 following table summarizes the Company’s changes to the\n carrying amount of goodwill for the fifty-three weeks ended\n December 31, 2016 (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 26, | \n\n | \n | \n | \n | \n | \n December 31, | \n\n | |||
| \n | \n | 2015 | \n\n | \n | Additions | \n\n | \n | 2016 | \n\n | |||
| \n \n Goodwill \n | \n \n | $ | \n3,683 | \n\n | \n | $ | \n\n — | \n\n | \n | $ | \n3,683 | \n\n |
\n Stock-Based Compensation
\n\n The Company accounts for share-based awards in accordance with ASC\n Topic 718, Compensation — Stock Compensation\n (“ASC 718”), which generally requires recognition of\n share-based compensation costs in financial statements based on\n fair value. Compensation cost is recognized over the period during\n which an employee is required to provide services in exchange for\n the award (the requisite service period). The amount of\n compensation cost recognized in the consolidated statements of\n comprehensive income is based on the awards ultimately expected to\n vest, and therefore, 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 L for further\n discussion of the application of the option-pricing models.
\n\n O. 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 2016, 2015, and 2014 (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 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 of ($11) \n | \n \n | \n | 18 | \n\n |
| \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 | \n \n \n | \n \n \n \n | \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 of ($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 |
| \n \n Balance at December 26, 2015 \n | \n \n | $ | \n(951 | \n) | \n
| \n | \n | \n \n \n | \n \n \n \n | \n \n |
| \n \n Deferred pension and other post-retirement benefit costs, net of\n taxes of ($69) \n | \n \n | \n | 122 | \n\n |
| \n \n Amortization of Deferred benefit costs, net of tax of $101 \n | \n \n | \n | (175 | \n) | \n
| \n \n Currency translation adjustment \n | \n \n | \n | (99 | \n) | \n
| \n | \n | \n \n \n | \n \n \n \n | \n \n |
| \n \n Balance at December 31, 2016 \n | \n \n | $ | \n(1,103 | \n) | \n
| \n | \n | \n \n \n | \n \n \n \n | \n \n |
\n As of December 31, 2016, 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 | \n | \n | \n | \n | \n | \n |
| \n | \n | Payments Due by Period | \n\n | |||||||||||||||||||||||||
| \n | \n | Total | \n\n | \n | 2017 | \n\n | \n | 2018 | \n\n | \n | 2019 | \n\n | \n | 2020 | \n\n | \n | 2021 | \n\n | \n | Thereafter | \n\n | |||||||
| \n | \n | (in thousands) | \n\n | |||||||||||||||||||||||||
| \n \n Hops, barley and wheat \n | \n \n | $ | \n71,128 | \n\n | \n | $ | \n27,784 | \n\n | \n | $ | \n14,552 | \n\n | \n | $ | \n14,692 | \n\n | \n | $ | \n4,483 | \n\n | \n | $ | \n4,878 | \n\n | \n | $ | \n4,739 | \n\n |
| \n \n Advertising \n | \n \n | \n | 27,430 | \n\n | \n | \n | 26,825 | \n\n | \n | \n | 499 | \n\n | \n | \n | 106 | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n |
| \n \n Apples and other ingredients \n | \n \n | \n | 27,225 | \n\n | \n | \n | 27,225 | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \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 | 16,551 | \n\n | \n | \n | 16,551 | \n\n | \n | \n | \n — | \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 leases \n | \n \n | \n | 15,900 | \n\n | \n | \n | 3,343 | \n\n | \n | \n | 2,965 | \n\n | \n | \n | 2,683 | \n\n | \n | \n | 2,569 | \n\n | \n | \n | 2,625 | \n\n | \n | \n | 1,715 | \n\n |
| \n \n Equipment and machinery \n | \n \n | \n | 10,700 | \n\n | \n | \n | 10,700 | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n |
| \n \n Other \n | \n \n | \n | 4,505 | \n\n | \n | \n | 2,624 | \n\n | \n | \n | 1,335 | \n\n | \n | \n | 546 | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n | \n | \n | \n — | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \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 | $ | \n173,439 | \n\n | \n | $ | \n115,052 | \n\n | \n | $ | \n19,351 | \n\n | \n | $ | \n18,027 | \n\n | \n | $ | \n7,052 | \n\n | \n | $ | \n7,503 | \n\n | \n | $ | \n6,454 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \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 H. Revolving 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 (3.75% at\n December 31, 2016) or (ii) the applicable LIBOR rate\n (0.72% at December 31, 2016) 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 11,352 as\n of December 31, 2016, 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 31, 2016, compared to a maximum allowable\n ratio of 2.50. The Company was in compliance with all financial\n covenants as of December 31, 2016 and December 26, 2015.\n There were no borrowings outstanding under the credit facility as\n of December 31, 2016 and December 26, 2015.
\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\n investment shares of Class A Common Stock, issued under the\n Employee Equity Incentive Plan, and (c) redemption of shares\n of Class A Common Stock as approved by the Board of Directors\n and payment of cash dividends to its holders of common stock.\n Borrowings under the credit facility may be used for working\n capital, capital expenditures and general corporate purposes of the\n Company and its subsidiaries. In the event of a default that has\n not been cured, the credit facility would terminate and any unpaid\n principal and accrued interest would become due and payable.
\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 31, 2016 and December 26, 2015.
\n\n M. Employee Retirement Plans and Post-Retirement Medical\n Benefits
\n\n The Company has one retirement plan covering substantially all\n non-union employees; two\n other retirement plans, one of which covers substantially all union\n employees, and the other of which covers employees of a specific\n union; and post-retirement medical benefits covering substantially\n all union employees.
\n\n Non-Union\n 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\n by Boston Beer Corporation, American Craft Brewery LLC,\n A & S Brewing Collaborative LLC, or Angry Orchard Cider\n Company, LLC. All non-union employees of these entities\n are eligible to participate in the Plan immediately upon\n employment. Participants may make voluntary contributions up to 60%\n of their annual compensation, subject to IRS limitations. The\n Company matches each participant’s contribution. A maximum of\n 6% of compensation is taken into account in determining the amount\n of the match. The Company matches 100% of the first $1,000 of the\n eligible compensation participants contribute. Thereafter, the\n Company matches 50% of the eligible contribution. The\n Company’s contributions to the Boston Beer 401(k) Plan\n amounted to $3.5 million and $3.0 million in fiscal years\n 2016 and 2015, respectively. The basic annual administrative fee\n for the Boston Beer 401(k) Plan is paid by the Plan’s\n investment fund revenue. In addition, per the Service Provider\n Payment Agreement, a credit 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. Participant\n forfeitures are also available for paying eligible Plan expenses.\n The Company is responsible for the payment of any additional fees\n related to the management of the Boston Beer 401(k) Plan. Such fees\n are not material to the Company.
\n\n Union Plans
\n\n The Samuel Adams Cincinnati Brewery 401(k) Plan for Represented\n Employees (the “SACB 401(k) Plan”) is a\n Company-sponsored defined contribution 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 make\n voluntary contributions up to 60% of their annual compensation to\n the SACB 401(k) Plan, subject to IRS limitations. Company\n contributions for fiscal 2016 and 2015 were insignificant. The\n basic annual administrative fee for the SACB 401(k) Plan is paid by\n the Plan’s investment fund revenue. In addition, per the\n Service Provider Payment Agreement, a credit up to a maximum of two\n basis points multiplied by the total amount of assets under the\n Plan per year, excluding participant loans, is available for paying\n eligible Plan expenses. The Company is responsible for the payment\n of any additional fees related to the management of the SACB 401(k)\n Plan. Such fees are not material to the Company.
\n\n The Samuel Adams Brewery Company, Ltd. Local Union No. 1199\n Pension Plan (the “Local 1199 Pension Plan”) is a\n Company-sponsored defined benefit pension plan. It was established\n in 1991 and is open to all union employees who are covered by the\n Company’s collective bargaining agreement with Teamsters\n Local Union No. 1199 (“Local Union #1199”), or\n persons on leave from the Company who are employed by Local Union\n #1199, and in either case who have completed 12 consecutive months\n of employment with at least 750 hours worked. The defined benefit\n is determined based on years of service since July 1991. The\n Company made contributions of $219,000 and $188,000 in 2016 and\n 2015 respectively. At December 31, 2016 and December 26,\n 2015, the unfunded projected pension benefits were\n $1.9 million and $1.6 million, respectively.
\n\n The Company provides a supplement to eligible retirees from Local\n #1, Local #20, and Local Union #1199 to assist them with the cost\n of Medicare gap coverage after their retirement on account of age\n or 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 group medical insurance plan for at least 5\n years before retirement and, in the case of retirees from Local\n #20, for at least 7 of the last 10 years of their employment, and\n must be eligible for Medicare benefits under the Social Security\n Act. The accumulated post-retirement benefit obligation was\n determined using a discount rate of 4.25% at December 31, 2016\n and 4.5% at December 26, 2015 and a 2.5% health care cost\n increase based on the Cincinnati Consumer Price Index for the years\n 2016, 2015, and 2014. The effect of a 1% point increase and the\n effect of a 1% point decrease in the assumed health care cost trend\n rates on the aggregate of the service and interest cost components\n of net periodic post-retirement health care benefit costs and on\n the accumulated post-retirement benefit obligation for health care\n benefits would not be significant.
\n\n In addition, the comprehensive medical plan offered to currently\n employed members of Local #20 remains available to them should they\n retire after reaching age 57, and before reaching age 65, with at\n least 20 years of service with the Company or its predecessor at\n the Company’s Cincinnati Brewery. These eligible retirees may\n choose to continue to be covered under the Company’s\n comprehensive group medical plan until they reach the age when they\n are eligible for Medicare health benefits under the Social Security\n Act or coverage under a comparable State health benefit plan.\n Eligible retirees pay 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 31, | \n\n | \n | \n December 26, | \n\n | \n | \n December 31, | \n\n | \n | \n December 26, | \n\n | ||||
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | \n | 2016 | \n\n | \n | 2015 | \n\n | ||||
| \n | \n | (in thousands) | \n\n | |||||||||||||
| \n \n Fair value of plan assets at end of fiscal year \n | \n \n | $ | \n2,733 | \n\n | \n | $ | \n2,471 | \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 | 4,611 | \n\n | \n | \n | 4,105 | \n\n | \n | \n | 708 | \n\n | \n | \n | 671 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \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(1,878 | \n) | \n\n | $ | \n(1,634 | \n) | \n\n | $ | \n(708 | \n) | \n\n | $ | \n(671 | \n) | \n
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \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 Pension Plan invests in a family of funds 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 investing in funds that invest in common stock of companies that\n cover a broad range of industries. The Local 1199 Plan’s\n investments are considered category 1 assets in the fair value\n hierarchy and the fair values were determined by reference to\n 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 that\n the Local 1199 Pension Plan’s investment portfolio will be\n adjusted periodically to maintain the targeted ratios of debt\n securities and equity securities. Additional consideration is given\n to the Local 1199 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 4.25% and 4.50% at December 31, 2016 and\n December 26, 2015, 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 31, \n 2016 | \n \n | \n | December 26, \n 2015 | \n \n | ||
| \n \n Equity securities \n | \n \n | \n | 66 | \n% | \n\n | \n | 67 | \n% | \n
| \n \n Debt securities \n | \n \n | \n | 34 | \n% | \n\n | \n | 33 | \n% | \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 \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 \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 31, | \n\n | \n | \n December 26, | \n\n | ||
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | ||
| \n | \n | (in\n thousands) | \n\n | |||||
| \n \n Machinery and plant equipment \n | \n \n | $ | \n420,486 | \n\n | \n | $ | \n387,180 | \n\n |
| \n \n Kegs \n | \n \n | \n | 70,024 | \n\n | \n | \n | 71,391 | \n\n |
| \n \n Land \n | \n \n | \n | 22,295 | \n\n | \n | \n | 25,135 | \n\n |
| \n \n Building and building improvements \n | \n \n | \n | 112,508 | \n\n | \n | \n | 101,836 | \n\n |
| \n \n Office equipment and furniture \n | \n \n | \n | 22,412 | \n\n | \n | \n | 19,635 | \n\n |
| \n \n Leasehold improvements \n | \n \n | \n | 14,147 | \n\n | \n | \n | 12,037 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n |
| \n | \n | \n | 661,872 | \n\n | \n | \n | 617,214 | \n\n |
| \n \n Less accumulated depreciation \n | \n \n | \n | (253,461 | \n) | \n\n | \n | (207,288 | \n) | \n
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n |
| \n | \n | $ | \n408,411 | \n\n | \n | $ | \n409,926 | \n\n |
| \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 recorded depreciation and amortization expense related\n to these assets of $49.3 million, $43.4 million, and\n $34.8 million in fiscal years 2016, 2015, and 2014,\n respectively.
\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 2016, 2015, and 2014, the Company recorded impairment\n charges of $0.7 million, $0.3 million, and\n $1.8 million, respectively.
\n\n Gain on Sale of Assets
\n\n During 2016, the Company recognized a $1.0 million gain on the\n sale of land owned in Freetown, Massachusetts.
\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 31, \n 2016 | \n \n | \n | December 26, \n 2015 | \n \n | ||
| \n \n Equity securities \n | \n \n | \n | 66 | \n% | \n\n | \n | 67 | \n% | \n
| \n \n Debt securities \n | \n \n | \n | 34 | \n% | \n\n | \n | 33 | \n% | \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 \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 \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 | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \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 | 3.6 | \n\n | \n | \n | 3.4 | \n\n | \n | \n | 4.0 | \n\n |
| \n \n Deduction relating to U.S. production activities \n | \n \n | \n | (2.6 | \n) | \n\n | \n | (2.7 | \n) | \n\n | \n | (2.1 | \n) | \n
| \n \n Change in valuation allowance \n | \n \n | \n | (0.3 | \n) | \n\n | \n | \n — | \n\n | \n | \n | \n — | \n\n |
| \n \n Other \n | \n \n | \n | 0.6 | \n\n | \n | \n | 0.8 | \n\n | \n | \n | 0.8 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n |
| \n | \n | \n | 36.3 | \n% | \n\n | \n | 36.5 | \n% | \n\n | \n | 37.7 | \n% | \n
| \n | \n | \n \n \n | \n \n \n \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 31, | \n\n | \n | \n December 26, | \n\n | \n | \n December 31, | \n\n | \n | \n December 26, | \n\n | ||||
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | \n | 2016 | \n\n | \n | 2015 | \n\n | ||||
| \n | \n | (in thousands) | \n\n | |||||||||||||
| \n \n Fair value of plan assets at end of fiscal year \n | \n \n | $ | \n2,733 | \n\n | \n | $ | \n2,471 | \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 | 4,611 | \n\n | \n | \n | 4,105 | \n\n | \n | \n | 708 | \n\n | \n | \n | 671 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \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(1,878 | \n) | \n\n | $ | \n(1,634 | \n) | \n\n | $ | \n(708 | \n) | \n\n | $ | \n(671 | \n) | \n
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \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\n 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 26, 2015 \n | \n \n | \n | 1,127,162 | \n\n | \n | $ | \n63.99 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Granted \n | \n \n | \n | 800,490 | \n\n | \n | \n | 197.56 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Forfeited \n | \n \n | \n | (40,352 | \n) | \n\n | \n | 196.86 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Expired \n | \n \n | \n | (1,980 | \n) | \n\n | \n | 241.79 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n \n Exercised \n | \n \n | \n | (537,087 | \n) | \n\n | \n | 74.71 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \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 31, 2016 \n | \n \n | \n | 1,348,233 | \n\n | \n | $ | \n141.98 | \n\n | \n | \n | 6.44 | \n\n | \n | $ | \n61,632 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \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 31, 2016 \n | \n \n | \n | 196,522 | \n\n | \n | $ | \n86.52 | \n\n | \n | \n | 4.14 | \n\n | \n | $ | \n17,210 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \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 31, 2016 \n | \n \n | \n | 744,866 | \n\n | \n | $ | \n97.34 | \n\n | \n | \n | 4.39 | \n\n | \n | $ | \n59,410 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \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 | 2016 | \n\n | \n | 2015 | \n\n | \n | 2014 | \n\n | |||
| \n \n Expected volatility \n | \n \n | \n | 34.0% | \n\n | \n | \n | 34.2% | \n\n | \n | \n | 34.3% | \n\n |
| \n \n Risk-free interest rate \n | \n \n | \n | 2.16% | \n\n | \n | \n | 2.16% | \n\n | \n | \n | 2.83% | \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 | 2.68 times | \n\n | \n | \n | 3.0 times | \n\n | \n | \n | 3.4 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 P. 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 2016 \n | \n \n | $ | \n244 | \n\n | \n | $ | \n(244 | \n) | \n\n | $ | \n\n — | \n\n | \n | $ | \n\n — | \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 | \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 2016 \n | \n \n | $ | \n2,813 | \n\n | \n | $ | \n33,157 | \n\n | \n | $ | \n(32,892 | \n) | \n\n | $ | \n3,078 | \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| \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 2016 \n | \n \n | $ | \n1,525 | \n\n | \n | $ | \n4,707 | \n\n | \n | $ | \n(3,970 | \n) | \n\n | $ | \n2,262 | \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 | \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 2016 \n | \n \n | $ | \n3,254 | \n\n | \n | $ | \n10,466 | \n\n | \n | $ | \n(8,494 | \n) | \n\n | $ | \n5,226 | \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 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®,\n Twisted Tea®, Angry\n Orchard®\n and Truly Spiked & Sparkling® brands. The second\n is the A&S Brewing Collaborative operating segment which is\n comprised of The Traveler Beer Company, Coney Island Brewing\n Company, Angel City Brewing Company and Concrete Beach Brewing\n Company. Both segments have similar economic characteristics. They\n sell predominantly low alcohol beverages, which are sold to the\n same types of customers in similar size quantities, at similar\n price points and through substantially the same channels of\n distribution. These beverages are manufactured using similar\n production processes, have comparable alcohol content and generally\n fall under the same regulatory environment. Since the operating\n segments are similar in the areas outlined above, they are\n aggregated for financial statements purposes.
\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 $49.2 million,\n $62.2 million, and $62.6 million in fiscal years 2016,\n 2015, and 2014, 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 31, 2016 and December 26, 2015 are adequate, but\n actual write-offs could exceed the recorded allowance.
\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 N. 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 | December 31, \n 2016 (53 \n weeks) | \n \n | \n | December 26, \n 2015 | \n \n | \n | December 27, \n 2014 | \n \n | |||
| \n | \n | (in thousands,\n except per share data) | \n\n | |||||||||
| \n \n Net Income \n | \n \n | $ | \n87,349 | \n\n | \n | $ | \n98,414 | \n\n | \n | $ | \n90,743 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \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 | $ | \n63,717 | \n\n | \n | $ | \n71,798 | \n\n | \n | $ | \n64,027 | \n\n |
| \n \n Class B Common Stock \n | \n \n | \n | 23,190 | \n\n | \n | \n | 26,154 | \n\n | \n | \n | 26,207 | \n\n |
| \n \n Unvested participating shares \n | \n \n | \n | 442 | \n\n | \n | \n | 462 | \n\n | \n | \n | 509 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n |
| \n | \n | $ | \n87,349 | \n\n | \n | $ | \n98,414 | \n\n | \n | $ | \n90,743 | \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 | 9,189 | \n\n | \n | \n | 9,619 | \n\n | \n | \n | 9,202 | \n\n |
| \n \n Class B Common Stock* \n | \n \n | \n | 3,344 | \n\n | \n | \n | 3,504 | \n\n | \n | \n | 3,766 | \n\n |
| \n \n Unvested participating shares \n | \n \n | \n | 64 | \n\n | \n | \n | 62 | \n\n | \n | \n | 73 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n |
| \n | \n | \n | 12,597 | \n\n | \n | \n | 13,185 | \n\n | \n | \n | 13,041 | \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 | $ | \n6.93 | \n\n | \n | $ | \n7.46 | \n\n | \n | $ | \n6.96 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \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 | $ | \n6.93 | \n\n | \n | $ | \n7.46 | \n\n | \n | $ | \n6.96 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \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, 100,000 shares to Class A\n Common Stock on October 26, 2015, 125,000 shares to\n Class A Common Stock on November 4, 2016 and 45,000\n shares to Class A Common Stock on November 30, 2016, with\n the ending number of shares reflecting the weighted average for the\n 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\n Common Stock into Class A Common Stock and using the\n two-class method for\n unvested participating shares:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Fifty-three weeks ended December 31, 2016 | \n\n | |||||||||
| \n | \n | Earnings to \n Common \n Shareholders | \n \n | \n | Common 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 | $ | \n63,717 | \n\n | \n | \n | 9,189 | \n\n | \n | $ | \n6.93 | \n\n |
| \n \n Add: effect of dilutive potential common shares Share-based\n awards \n | \n \n | \n | \n — | \n\n | \n | \n | 263 | \n\n | \n | \n | \n | \n |
| \n \n Class B Common Stock \n | \n \n | \n | 23,190 | \n\n | \n | \n | 3,344 | \n\n | \n | \n | \n | \n |
| \n \n Net effect of unvested participating shares \n | \n \n | \n | 9 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \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 | $ | \n86,916 | \n\n | \n | \n | 12,796 | \n\n | \n | $ | \n6.79 | \n\n |
| \n | \n | \n \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\n December 26, 2015 | \n\n | |||||||||
| \n | \n | Earnings to \n Common \n Shareholders | \n \n | \n | Common 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 | $ | \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 | \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 | \n | \n |
| \n | \n | |||||||||||
| \n | \n | Fifty-two weeks ended\n December 27, 2014 | \n\n | |||||||||
| \n | \n | Earnings to \n Common \n Shareholders | \n \n | \n | Common 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 | \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 |
\n Basic net income per common share for each share of Class A\n Common Stock and Class B Common Stock is $6.93, $7.46, and\n $6.96 for the fiscal years 2016, 2015, and 2014, 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\n shares of Class A on a one-for-one basis at the option\n of the stockholder.
\n\n Weighted average stock options to purchase 712,000, 16,000, and\n 11,000 shares of Class A Common Stock were outstanding during\n fiscal 2016, 2015, and 2014, 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 35,000, 15,000, and 30,000 shares of Class A Common\n Stock were outstanding during fiscal 2016, 2015, and 2014,\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 31, 2016, December 26, 2015, and\n December 27, 2014, respectively.
\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 — Level 1\n inputs are quoted prices (unadjusted) in active markets for\n identical assets or liabilities that the reporting entity has the\n ability to access at the measurement date. | \n
\n
\n| \n | • | \n\n | Level 2 — Level 2\n inputs are inputs other than quoted prices included within\n Level 1 that are observable for the asset or liability, either\n directly or indirectly. If the asset or liability has a specified\n (contractual) term, a Level 2 input must be observable for\n substantially the full term of the asset or liability. | \n
\n
\n| \n | • | \n\n | Level 3 — Level 3\n inputs are unobservable inputs for the asset or liability in which\n there is little, if any, market activity for the asset or liability\n 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 31,\n 2016 | \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 | $ | \n89,966 | \n\n | \n | $ | \n\n — | \n\n | \n | $ | \n\n — | \n\n | \n | $ | \n89,966 | \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 The Company’s cash equivalents listed above represent money\n market mutual fund securities and are classified within\n Level 1 of the fair value hierarchy because they are valued\n using quoted market prices. The money market funds were\n invested substantially in United States Treasury and government\n securities. The Company does not adjust the quoted market price for\n such financial instruments.
\n\n Financial instruments that potentially subject the Company to\n credit risk consist principally of cash and cash equivalents held\n in money market funds. At December 31, 2016 and\n December 26, 2015, the Company had money market funds with a\n “Triple A” rated money market fund. The Company\n considers the “Triple A” rated money market fund to be\n a large, highly-rated investment-grade institution. As of\n December 31, 2016 and December 26, 2015, the\n Company’s cash and cash equivalents balance was\n $91.0 million and $94.2 million, respectively, including\n money market funds amounting to $90.0 million and\n $88.1 million, respectively.
\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 31,\n 2016 | \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 | $ | \n400 | \n\n | \n | $ | \n\n — | \n\n | \n | $ | \n400 | \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 The Company’s note payable listed above represents a term\n note agreement with Bank of America N.A and is classified within\n Level 2 of the fair value hierarchy because it is valued using\n observable inputs. The note has a maturity date of\n December 31, 2021 and the interest rate is fixed at an annual\n rate of 4.25%.
\n\n Fiscal Year
\n\n The Company’s fiscal year is a fifty-two or fifty-three week period\n ending on the last Saturday in December. The fiscal period 2016\n consists of fifty-three weeks and the fiscal periods 2015 and 2014\n consist of fifty-two\n weeks.
\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-three weeks ended\n December 31, 2016 (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 26, | \n\n | \n | \n | \n | \n | \n December 31, | \n\n | |||
| \n | \n | 2015 | \n\n | \n | Additions | \n\n | \n | 2016 | \n\n | |||
| \n \n Goodwill \n | \n \n | $ | \n3,683 | \n\n | \n | $ | \n\n — | \n\n | \n | $ | \n3,683 | \n\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 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 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
| Computer software and equipment | \n\n | 2 to 5 years | \n
| Office equipment and furniture | \n\n | 3 to 7 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 R. 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 31, \n 2016 (1) | \n \n | \n | \n September 24, \n 2016 | \n \n | \n | \n June 25, \n 2016 | \n \n | \n | \n March 26, \n 2016 | \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 | (14 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 Net revenue \n | \n \n | $ | \n219,370 | \n\n | \n | $ | \n253,433 | \n\n | \n | $ | \n244,816 | \n\n | \n | $ | \n188,827 | \n\n | \n | $ | \n215,133 | \n\n | \n | $ | \n293,094 | \n\n | \n | $ | \n252,204 | \n\n | \n | $ | \n199,503 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \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 | 107,656 | \n\n | \n | \n | 133,607 | \n\n | \n | \n | 126,876 | \n\n | \n | \n | 91,531 | \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 | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \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 | 34,325 | \n\n | \n | \n | 50,309 | \n\n | \n | \n | 41,788 | \n\n | \n | \n | 11,237 | \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 | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \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 | $ | \n22,166 | \n\n | \n | $ | \n31,530 | \n\n | \n | $ | \n26,621 | \n\n | \n | $ | \n7,032 | \n\n | \n | $ | \n16,115 | \n\n | \n | $ | \n38,624 | \n\n | \n | $ | \n29,932 | \n\n | \n | $ | \n13,743 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \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 | $ | \n1.77 | \n\n | \n | $ | \n2.53 | \n\n | \n | $ | \n2.11 | \n\n | \n | $ | \n0.55 | \n\n | \n | $ | \n1.25 | \n\n | \n | $ | \n2.93 | \n\n | \n | $ | \n2.24 | \n\n | \n | $ | \n1.04 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \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 | $ | \n1.75 | \n\n | \n | $ | \n2.48 | \n\n | \n | $ | \n2.06 | \n\n | \n | $ | \n0.53 | \n\n | \n | $ | \n1.21 | \n\n | \n | $ | \n2.85 | \n\n | \n | $ | \n2.18 | \n\n | \n | $ | \n1.00 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n |
\n
\n| (1) | \nDuring the fourth quarter of 2016,\n the Company recorded a $3.6 million decrease in stock-based\n compensation expense related to the planned retirement of the\n Company’s Chief Executive Officer in 2018. | \n
\n The following tables set forth the computation of diluted net\n income per share, assuming the conversion of all Class B\n Common Stock into Class A Common Stock and using the\n two-class method for\n unvested participating shares:
\n\n
\n| \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | Fifty-three weeks ended December 31, 2016 | \n\n | |||||||||
| \n | \n | Earnings to \n Common \n Shareholders | \n \n | \n | Common 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 | $ | \n63,717 | \n\n | \n | \n | 9,189 | \n\n | \n | $ | \n6.93 | \n\n |
| \n \n Add: effect of dilutive potential common shares Share-based\n awards \n | \n \n | \n | \n — | \n\n | \n | \n | 263 | \n\n | \n | \n | \n | \n |
| \n \n Class B Common Stock \n | \n \n | \n | 23,190 | \n\n | \n | \n | 3,344 | \n\n | \n | \n | \n | \n |
| \n \n Net effect of unvested participating shares \n | \n \n | \n | 9 | \n\n | \n | \n | \n | \n | \n | \n | \n | \n |
| \n | \n | \n \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 | $ | \n86,916 | \n\n | \n | \n | 12,796 | \n\n | \n | $ | \n6.79 | \n\n |
| \n | \n | \n \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\n December 26, 2015 | \n\n | |||||||||
| \n | \n | Earnings to \n Common \n Shareholders | \n \n | \n | Common 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 | $ | \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 | \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 | \n | \n |
| \n | \n | |||||||||||
| \n | \n | Fifty-two weeks ended\n December 27, 2014 | \n\n | |||||||||
| \n | \n | Earnings to \n Common \n Shareholders | \n \n | \n | Common 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 | \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 |
\n In\n 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 31, \n 2016 (1) | \n \n | \n | \n September 24, \n 2016 | \n \n | \n | \n June 25, \n 2016 | \n \n | \n | \n March 26, \n 2016 | \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 | (14 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 Net revenue \n | \n \n | $ | \n219,370 | \n\n | \n | $ | \n253,433 | \n\n | \n | $ | \n244,816 | \n\n | \n | $ | \n188,827 | \n\n | \n | $ | \n215,133 | \n\n | \n | $ | \n293,094 | \n\n | \n | $ | \n252,204 | \n\n | \n | $ | \n199,503 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \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 | 107,656 | \n\n | \n | \n | 133,607 | \n\n | \n | \n | 126,876 | \n\n | \n | \n | 91,531 | \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 | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \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 | 34,325 | \n\n | \n | \n | 50,309 | \n\n | \n | \n | 41,788 | \n\n | \n | \n | 11,237 | \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 | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \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 | $ | \n22,166 | \n\n | \n | $ | \n31,530 | \n\n | \n | $ | \n26,621 | \n\n | \n | $ | \n7,032 | \n\n | \n | $ | \n16,115 | \n\n | \n | $ | \n38,624 | \n\n | \n | $ | \n29,932 | \n\n | \n | $ | \n13,743 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \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 | $ | \n1.77 | \n\n | \n | $ | \n2.53 | \n\n | \n | $ | \n2.11 | \n\n | \n | $ | \n0.55 | \n\n | \n | $ | \n1.25 | \n\n | \n | $ | \n2.93 | \n\n | \n | $ | \n2.24 | \n\n | \n | $ | \n1.04 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \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 | $ | \n1.75 | \n\n | \n | $ | \n2.48 | \n\n | \n | $ | \n2.06 | \n\n | \n | $ | \n0.53 | \n\n | \n | $ | \n1.21 | \n\n | \n | $ | \n2.85 | \n\n | \n | $ | \n2.18 | \n\n | \n | $ | \n1.00 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n |
\n
\n| (1) | \nDuring the fourth quarter of 2016,\n the Company recorded a $3.6 million decrease in stock-based\n compensation expense related to the planned retirement of the\n Company’s Chief Executive Officer in 2018. | \n
\n Q. Subsequent Events
\n\n As disclosed in Note L, on January 1, 2017 the Company granted\n stock options and restricted stock awards and employees elected to\n purchase shares under the investment share purchase program.
\n\n As disclosed in Form 8-K\n filed with the SEC on February 6, 2017, the Company\n announcement the planned retirement of its Chief Executive Officer\n expected in 2018.
\n\n The Company evaluated subsequent events occurring after the balance\n sheet date, December 31, 2016, 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.
\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 | 2016 | \n\n | \n | 2015 | \n\n | ||
| \n | \n | (in thousands) | \n\n | |||||
| \n \n Balance at beginning of year \n | \n \n | $ | \n486 | \n\n | \n | $ | \n368 | \n\n |
| \n \n Increases related to current year tax positions \n | \n \n | \n | 80 | \n\n | \n | \n | 44 | \n\n |
| \n \n Increases related to prior year tax positions \n | \n \n | \n | 76 | \n\n | \n | \n | 117 | \n\n |
| \n \n Decreases related to settlements \n | \n \n | \n | (50 | \n) | \n\n | \n | \n — | \n\n |
| \n \n Decreases related to lapse of statute of limitations \n | \n \n | \n | (3 | \n) | \n\n | \n | (43 | \n) | \n
| \n | \n | \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 | $ | \n589 | \n\n | \n | $ | \n486 | \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 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 2016 \n | \n \n | $ | \n244 | \n\n | \n | $ | \n(244 | \n) | \n\n | $ | \n\n — | \n\n | \n | $ | \n\n — | \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 | \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 2016 \n | \n \n | $ | \n2,813 | \n\n | \n | $ | \n33,157 | \n\n | \n | $ | \n(32,892 | \n) | \n\n | $ | \n3,078 | \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| \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 2016 \n | \n \n | $ | \n1,525 | \n\n | \n | $ | \n4,707 | \n\n | \n | $ | \n(3,970 | \n) | \n\n | $ | \n2,262 | \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 | \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 2016 \n | \n \n | $ | \n3,254 | \n\n | \n | $ | \n10,466 | \n\n | \n | $ | \n(8,494 | \n) | \n\n | $ | \n5,226 | \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 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 kegs and pallets are\n 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 31, 2016, the Company decreased its liability\n for refundable deposits, gross property, plant and equipment and\n related accumulated depreciation by $1.1 million,\n $1.4 million and $1.4 million, respectively. 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. As of\n December 31, 2016 and December 26, 2015, the\n Company’s balance sheet includes $14.3 million and\n $17.1 million, respectively, in refundable deposits on kegs\n and pallets and $12.0 million and $18.9 million,\n respectively, in kegs, net of accumulated depreciation.
\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 shipped and on\n its understanding of the applicable excise tax laws.
\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 31, | \n\n | \n | \n December 26, | \n\n | ||
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | ||
| \n | \n | (in\n thousands) | \n\n | |||||
| \n \n Prepaid malt and barley \n | \n \n | $ | \n1,644 | \n\n | \n | $ | \n3,184 | \n\n |
| \n \n Excise and other tax receivables \n | \n \n | \n | 1,637 | \n\n | \n | \n | 2,093 | \n\n |
| \n \n Insurance cash surrender value \n | \n \n | \n | 1,254 | \n\n | \n | \n | \n — | \n\n |
| \n \n Supplier rebates \n | \n \n | \n | 1,158 | \n\n | \n | \n | 1,929 | \n\n |
| \n \n Prepaid insurance \n | \n \n | \n | 1,144 | \n\n | \n | \n | 1,047 | \n\n |
| \n \n Lease incentive receivable \n | \n \n | \n | 113 | \n\n | \n | \n | 1,584 | \n\n |
| \n \n Other \n | \n \n | \n | 1,781 | \n\n | \n | \n | 2,216 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n |
| \n | \n | $ | \n8,731 | \n\n | \n | $ | \n12,053 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \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 31, | \n\n | \n | \n December 26, | \n\n | ||
| \n | \n | 2016 | \n\n | \n | 2015 | \n\n | ||
| \n | \n | (in\n thousands) | \n\n | |||||
| \n \n Prepaid malt and barley \n | \n \n | $ | \n1,644 | \n\n | \n | $ | \n3,184 | \n\n |
| \n \n Excise and other tax receivables \n | \n \n | \n | 1,637 | \n\n | \n | \n | 2,093 | \n\n |
| \n \n Insurance cash surrender value \n | \n \n | \n | 1,254 | \n\n | \n | \n | \n — | \n\n |
| \n \n Supplier rebates \n | \n \n | \n | 1,158 | \n\n | \n | \n | 1,929 | \n\n |
| \n \n Prepaid insurance \n | \n \n | \n | 1,144 | \n\n | \n | \n | 1,047 | \n\n |
| \n \n Lease incentive receivable \n | \n \n | \n | 113 | \n\n | \n | \n | 1,584 | \n\n |
| \n \n Other \n | \n \n | \n | 1,781 | \n\n | \n | \n | 2,216 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n |
| \n | \n | $ | \n8,731 | \n\n | \n | $ | \n12,053 | \n\n |
| \n | \n | \n \n \n | \n \n \n \n | \n \n | \n | \n \n \n | \n \n \n \n | \n \n |
\n Depreciation is computed using the straight-line method based upon\n the estimated useful lives of the underlying assets as follows:
\n\n
\n| \n | \n | \n |
| Kegs | \n\n | 5 years | \n
| Computer software and equipment | \n\n | 2 to 5 years | \n
| Office equipment and furniture | \n\n | 3 to 7 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 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,\n Revenue Recognition — Customer Payments and\n Incentives, based on the nature of the expenditure. Amounts\n paid to customers totaled $54.4 million, $55.3 million,\n and $52.4 million in fiscal year 2016, 2015, and 2014,\n 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 2016, 2015, and 2014 were $33.2 million, $33.2 million,\n and $28.5 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 merchandise\n placement, samples, product displays, promotional programs at\n retail locations and meals, travel and entertainment. Amounts paid\n to customers in connection with these programs in fiscal years\n 2016, 2015, and 2014 were $21.2 million, $22.1 million,\n and $23.9 million, respectively. In 2016, 2015, and 2014, the\n Company recorded certain of these costs in the total amount of\n $16.1 million, $16.6 million, and $18.7 million,\n respectively as reductions to net revenue. Costs recognized as\n reduction to net revenues include, but are not limited to,\n promotional discounts, sales incentives and certain other\n 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 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 31,\n 2016 | \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 | $ | \n400 | \n\n | \n | $ | \n\n — | \n\n | \n | $ | \n400 | \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 |