<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
COMMISSION FILE NUMBER 0-26542
---------------------------
REDHOOK ALE BREWERY, INCORPORATED
(Exact name of registrant as specified in its charter)
WASHINGTON 91-1141254
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3400 PHINNEY AVENUE NORTH, SEATTLE, WASHINGTON 98103
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (206) 548-8000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No____
Common stock, par value $.005 per share: 7,685,486 shares outstanding
as of September 30, 1996.
Page 1 of 13 sequentially numbered pages
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REDHOOK ALE BREWERY, INCORPORATED
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets
September 30, 1996 and December 31, 1995....................................... 3
Statements of Income
Three Months Ended September 30, 1996 and 1995
and Nine Months Ended September 30, 1996 and 1995.............................. 4
Statement of Cash Flows
Nine Months Ended September 30, 1996 and 1995.................................. 5
Notes to Financial Statements........................................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................................... 7
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K........................................................ 13
</TABLE>
2
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PART I.
ITEM 1. FINANCIAL STATEMENTS
REDHOOK ALE BREWERY, INCORPORATED
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(Unaudited)
ASSETS
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents ...................................... $ 1,686,551 $24,676,600
Accounts Receivable ............................................ 2,263,000 2,027,454
Inventories .................................................... 1,728,709 1,152,265
Prepaid Expenses and Other ..................................... 1,072,443 635,202
----------- -----------
Total Current Assets ......................................... 6,750,703 28,491,521
Fixed Assets, Net .............................................. 82,212,800 57,799,694
Other Assets ................................................... 694,756 347,221
----------- -----------
Total Assets ............................................... $89,658,259 $86,638,436
=========== ===========
LIABILITIES, REDEEMABLE PREFERRED STOCK
AND COMMON STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable ............................................... $ 3,989,877 $ 4,828,902
Accrued Salaries, Wages, and Payroll Taxes ..................... 1,136,286 695,645
Refundable Deposits ............................................ 847,046 972,957
Other Accrued Expenses ......................................... 224,637 312,948
Current Portion of Long-Term Debt .............................. 130,366 121,659
----------- -----------
Total Current Liabilities .................................... 6,328,212 6,932,111
----------- -----------
Long-Term Debt, Net of Current Portion ........................... 1,724,821 1,825,339
----------- -----------
Deferred Income Taxes ............................................ 3,156,626 2,389,588
----------- -----------
Other Liabilities ................................................ 43,995 35,348
----------- -----------
Convertible Redeemable Preferred Stock ........................... 15,910,755 15,877,455
----------- -----------
Common Stockholders' Equity:
Common Stock, Par Value $0.005 per Share, Authorized, 20,000,000
Shares; Issued and Outstanding, 7,685,486 Shares in 1996 and
7,683,596 Shares in 1995 ..................................... 38,428 38,417
Additional Paid-In Capital ..................................... 56,652,764 56,642,663
Retained Earnings .............................................. 5,802,658 2,897,515
----------- -----------
Total Common Stockholders' Equity .......................... 62,493,850 59,578,595
----------- -----------
Total Liabilities, Redeemable Preferred Stock and
Common Stockholders' Equity ............................ $89,658,259 $86,638,436
=========== ===========
</TABLE>
See Accompanying Notes.
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REDHOOK ALE BREWERY, INCORPORATED
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- -----------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales ...................................... $10,393,830 $ 7,388,929 $29,251,056 $19,672,798
Less Excise Taxes .......................... 963,032 632,668 2,788,848 1,743,711
----------- ----------- ----------- -----------
Net Sales .................................. 9,430,798 6,756,261 26,462,208 17,929,087
Cost of Sales .............................. 6,045,247 4,416,580 16,898,029 11,770,426
----------- ----------- ----------- -----------
Gross Profit ............................... 3,385,551 2,339,681 9,564,179 6,158,661
Selling, General and Administrative Expenses 2,117,104 1,179,985 5,511,378 3,154,366
----------- ----------- ----------- -----------
Operating Income ........................... 1,268,447 1,159,696 4,052,801 3,004,295
Other Income, Net .......................... 128,672 198,548 574,668 222,641
----------- ----------- ----------- -----------
Income before Income Taxes ................. 1,397,119 1,358,244 4,627,469 3,226,936
Provision for Income Taxes ................. 509,948 488,968 1,689,026 1,161,697
----------- ----------- ----------- -----------
Net Income ................................. $ 887,171 $ 869,276 $ 2,938,443 $ 2,065,239
=========== =========== =========== ===========
Net Income per Share ....................... $ 0.10 $ 0.12 $ 0.32 $ 0.31
=========== =========== =========== ===========
Average Number of Common and
Equivalent Shares Outstanding ............ 9,141,758 7,520,448 9,146,227 6,650,226
=========== =========== =========== ===========
</TABLE>
See Accompanying Notes.
4
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REDHOOK ALE BREWERY, INCORPORATED
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------------
1996 1995
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income ..................................... $ 2,938,443 $ 2,065,239
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization ................ 1,347,780 922,880
Deferred Income Tax Provision ................ 767,038 552,691
Other ........................................ (287,002) 206,352
Net Change in Operating Assets and Liabilities (176,133) 254,295
------------ ------------
Net Cash Provided by Operating Activities ...... 4,590,126 4,001,457
------------ ------------
INVESTING ACTIVITIES
Expenditures for Fixed Assets .................. (27,437,847) (16,084,481)
Other .......................................... (66,914) --
------------ ------------
Net Cash Used in Investing Activities .......... (27,504,761) (16,084,481)
------------ ------------
FINANCING ACTIVITIES
Proceeds from Debt ............................. 17,000,000 10,227,617
Repayments on Debt ............................ (17,091,811) (12,164,226)
Proceeds from Sale of Common Stock ............. -- 46,247,721
Other .......................................... 16,397 --
------------ ------------
Net Cash Provided (Used) by Financing Activities (75,414) 44,311,112
------------ ------------
Increase (Decrease) in Cash and Cash Equivalents (22,990,049) 32,228,088
Cash and Cash Equivalents:
Beginning of Period .......................... 24,676,600 472,487
------------ ------------
End of Period ................................ $ 1,686,551 $ 32,700,575
============ ============
</TABLE>
See Accompanying Notes.
5
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REDHOOK ALE BREWERY, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying financial statements and related notes should be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K. The accompanying financial statements
include the accounts of Redhook Ale Brewery, Incorporated (the "Company")
and have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. These financial statements are
unaudited, condensed and do not contain all of the information required by
generally accepted accounting principles to be included in a full set of
financial statements. In the opinion of management, all material adjustments
necessary to present fairly the financial position, results of operations
and cash flows of the Company, for the periods presented, have been made.
All such adjustments are of a normal, recurring nature. The results of
operations for such interim periods are not necessarily indicative of the
results of operations for the full year.
2. EARNINGS PER SHARE
Earnings per share is based on the weighted average number of common and
common equivalent shares outstanding during the respective periods. The
calculation of average common equivalent shares outstanding includes the
effect of all outstanding convertible redeemable preferred stock and
outstanding stock options. Because all of the Company's outstanding
preferred shares are common equivalent shares, for purposes of calculating
earnings per share, the accretion related to the preferred stock carrying
value is not deducted from net income in the calculation of earnings per
share. The calculation uses the treasury stock method in determining the
resulting incremental average equivalent shares outstanding.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
---------- ----------
<S> <C> <C>
Finished goods ................. $1,067,147 $ 786,580
Raw materials ................. 162,772 121,651
Promotional merchandise ........ 418,877 222,160
Bottling materials ............. 79,913 21,874
---------- ----------
$1,728,709 $1,152,265
========== ==========
</TABLE>
Finished goods include beer held in fermentation prior to the filtration and
packaging process.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's financial statements and notes thereto included herein.
OVERVIEW
Since its formation, the Company has focused its business activities on the
brewing, marketing and selling of craft beers. For the nine months ended
September 30, 1996, the Company had gross sales of $29,251,000, an increase of
49% over the first nine months of 1995. The Company believes that
period-to-period comparisons of its financial results should not be relied upon
as an accurate indicator of future performance. The Company's sales consist
predominantly of sales of beer to third-party distributors. In addition, the
Company derives other revenues from the sale of beer, food, apparel and other
retail items in its brewery pubs. The Company is required to pay federal excise
taxes on sales of its beer. The excise tax burden on beer sales increases from
$7 to $18 per barrel on annual production over 60,000 barrels and thus, as the
Company increases its sales volume, federal excise taxes will increase as a
percentage of sales.
The following discussion contains forward-looking statements that involve
risks and uncertainties. Actual future results and trends may differ materially
depending on a variety of factors, including, but not limited to, pricing and
availability of raw materials and packaging, successful execution of internal
performance and expansion plans, impact of competition, distributor changes,
availability of financing, legal proceedings, and other risks detailed in the
Company's Securities and Exchange Commission filings, including the Company's
Annual Report on Form 10-K for the year ended December 31, 1995.
In addition to the level of consumer demand in existing markets, the
Company's sales are also affected by other factors such as the opening of new
distribution territories, new product introductions and competitive
considerations, including the increasing number of craft brewers and promotional
pricing. Sales in the craft beer industry generally reflect a degree of
seasonality, with the second half of the year typically demonstrating stronger
sales in connection with summer activities and fall and early winter holidays.
The Company has historically operated with little or no backlog, and its ability
to predict sales for an upcoming quarter is limited.
Under normal circumstances, the Company generally operates its brewing
facilities five days per week, two shifts per day. To meet the increasing demand
for its products, the Company has periodically increased its annual production
capacity, from approximately 3,000 barrels at its first brewery in the Ballard
neighborhood of Seattle in 1982 to approximately 325,000 barrels as of September
30, 1996, the maximum designed capacity of its two Seattle-area breweries.
Production capacity of each facility is added in phases until the facility
reaches its maximum designed production capacity. The timing of each phase is
affected by the availability of capital, construction constraints and the
Company's plans for an orderly entry into selected new markets and growth in
existing markets. The Portsmouth, New Hampshire brewery began commercial
production during October 1996. The Portsmouth brewery's initial production
capacity is approximately 100,000 barrels per year and its maximum designed
production capacity is approximately 250,000 barrels per year.
The Company's capacity utilization has a significant impact on gross
profits. When facilities are operating at their maximum designed production
capacity, profitability is favorably affected by spreading fixed and
semivariable operating costs, such as depreciation and production salaries, over
a larger sales base. Most capital costs associated with building a new brewery
and fixed and semivariable costs related to operating a new brewery are incurred
prior to, or upon commencement of, production at a facility. Because the initial
production level is substantially below the facility's maximum designed
production capacity, gross margins are negatively impacted. This impact is
reduced as the facility's actual production increases.
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In addition to capacity utilization, the Company expects other factors to
influence profit margins, including higher costs associated with the opening of
new distribution territories, such as increased shipping, marketing and sales
personnel costs; fees related to the distribution agreement with Anheuser-Busch,
Inc. ("A-B"); changes in packaging and other material costs; and changes in
product sales mix. The incremental cost of shipping beer from the Company's
breweries will continue to increase as the volume of beer supplied to more
distant markets increases. The Company believes that commencing full-scale
production at the Portsmouth Brewery will reduce shipping expenses to eastern
U.S. markets. Also, the Company's ability to connect directly to the City of
Portsmouth water line is subject to approval and there is no assurance as to the
timing, or even the approval, of such direct connection. The cost of tankering
water from the City of Portsmouth's system, or other sources, for production
purposes at the Portsmouth brewery will impact gross profit.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items
from the Company's Statements of Income expressed as a percentage of net sales.
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
-------------------- --------------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Sales .......................................... 110.2% 109.4% 110.5% 109.7%
Less Excise Taxes .............................. 10.2 9.4 10.5 9.7
------ ------ ------ ------
Net Sales ...................................... 100.0 100.0 100.0 100.0
Cost of Sales .................................. 64.1 65.4 63.9 65.6
------ ------ ------ ------
Gross Profit ................................... 35.9 34.6 36.1 34.4
Selling, General, and Administrative Expenses .. 22.4 17.4 20.8 17.6
------ ------ ------ ------
Operating Income ............................... 13.5 17.2 15.3 16.8
Other Income ................................... 1.3 2.9 2.2 1.2
------ ------ ------ ------
Income before Income Taxes ..................... 14.8 20.1 17.5 18.0
Provision for Income Taxes ..................... 5.4 7.2 6.4 6.5
------ ------ ------ ------
Net Income ..................................... 9.4% 12.9% 11.1% 11.5%
====== ====== ====== ======
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1995
Sales. Sales increased by 40.7% to $10,394,000 in the third quarter of 1996
from $7,389,000 in the comparable 1995 period, primarily due to expansion into
new markets and growth in existing markets. As of September 30, 1996, the
Company was selling beer in 47 states compared to 21 states at September 30,
1995. The sales increase reflects a 42.9% increase in sales volume to 57,600
barrels in the third quarter of 1996 from 40,300 barrels in the comparable 1995
period, and relatively stable sales prices in the Company's various markets.
Third quarter 1996 sales in the San Francisco Bay Area of Northern California
were negatively impacted by the change of certain distributors to distributors
affiliated with A-B's distribution network. The Company does not expect to make
any further significant changes in its distribution system as part of its
conversion to the A-B distribution network. The Company's other sales totaled
$1,166,000 in the third quarter of 1996, compared to $1,104,000 in the third
quarter of 1995.
Excise Taxes. Excise taxes increased to $963,000, or 10.2% of net sales in
the third quarter of 1996, from $633,000, or 9.4% of net sales in the comparable
quarter of 1995, reflecting increased sales volumes and the increased federal
excise tax rate applicable to annual production in excess of 60,000 barrels.
Cost of Sales. Cost of sales increased to $6,045,000 in the third quarter of
1996 from $4,417,000 in 1995, primarily due to the increase in sales volume.
Cost of sales, as a percentage of net sales, decreased to 64.1% in 1996 compared
to 65.4% in 1995, primarily due to increased capacity utilization and the
resulting effect of
8
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spreading fixed and semivariable operating costs over a larger production base,
substantially offset by higher freight costs. The utilization rate of the
operating breweries' maximum designed capacity was 71% and 50% in the quarters
ended September 30, 1996 and 1995, respectively. Shipping expense significantly
increased in the third quarter of 1996 compared to the third quarter of 1995,
reflecting increased shipments of beer to new, more distant markets. The Company
expects that cost of goods sold, as a percentage of sales, will be negatively
impacted beginning in the quarter ended December 31, 1996 due to commencing
production at the Portsmouth Brewery and the related decrease in the Company's
capacity utilization rate. That impact will be partially offset by lower freight
costs on shipments to eastern markets.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $2,117,000 in the third quarter of 1996
from $1,180,000 in 1995. The increase is primarily related to the Company's
expansion into new markets. These expenses increased as a percentage of net
sales to 22.4% in the third quarter of 1996 from 17.4% in 1995, primarily
attributable to additional sales personnel in the new markets and related
expenses, including promotional and marketing support.
Other Income, Net. Other income, net, decreased to $129,000 in the third
quarter of 1996 compared to $199,000 in the 1995 period. The decrease is due
primarily to a decline in income as the short-term investment of cash from the
August 1995 sale of common stock is invested in fixed assets.
Income Taxes. The Company's effective income tax rate increased to 36.5% in
1996 from 36.0% in 1995. That increase is the result of the Company's expansion
into new states and the corresponding increase in state income taxes.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1995
Sales. Sales increased by 48.7% to $29,251,000 in the first nine months of
1996 from $19,673,000 in the comparable 1995 period, primarily due to expansion
into new markets and growth in existing markets. The sales increase reflects a
52.6% increase in sales volume to 166,600 barrels in the first nine months of
1996 from 109,200 barrels in the comparable 1995 period, and relatively stable
sales prices in the Company's various markets. The Company's other sales totaled
$2,559,000 in the first nine months of 1996, compared to $2,542,000 in the first
nine months of 1995.
Excise Taxes. Excise taxes increased to $2,789,000, or 10.5% of net sales in
the first nine months of 1996, from $1,744,000, or 9.7% of net sales in the
comparable period of 1995, reflecting increased sales volumes and the increased
federal excise tax rate applicable to annual production in excess of 60,000
barrels.
Cost of Sales. Cost of sales increased to $16,898,000 in the first nine
months of 1996 from $11,770,000 in 1995, primarily due to the increase in sales
volume. Cost of sales, as a percentage of net sales, decreased to 63.9% in 1996
compared to 65.6% in 1995, primarily due to increased capacity utilization and
the resulting effect of spreading fixed and semivariable operating costs over a
larger production base, substantially offset by higher freight costs. The
utilization rate of the breweries' maximum designed capacity was 68% and 45% in
the nine-month periods ended September 30, 1996 and 1995, respectively. Shipping
expense significantly increased in the first nine months of 1996 compared to
first nine months of 1995, reflecting increased shipments of beer to new, more
distant markets. The Company expects that cost of goods sold, as a percentage of
sales, will be negatively impacted beginning in the quarter ended December 31,
1996 due to commencing production at the Portsmouth Brewery and the related
decrease in the Company's capacity utilization rate. That impact will be
partially offset by lower freight costs on shipments to eastern markets.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $5,511,000 in the first nine months of 1996
from $3,154,000 in 1995. The increase is primarily related to the Company's
expansion into new markets. These expenses increased as a percentage of net
sales to 20.8% in the first nine months of 1996 from 17.6% in 1995, primarily
attributable to additional sales personnel in the new markets and related
expenses, including promotional and marketing support.
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Other Income, Net. Other income, net, increased to $575,000 in the first
nine months of 1996 from $223,000 in the comparable 1995 period. The increase is
due primarily to the income earned on the short-term investment of cash from the
August 1995 sale of common stock.
Income Taxes. The Company's effective income tax rate increased to 36.5% in
1996 from 36.0% in 1995. That increase is the result of the Company's expansion
into new states and the corresponding increase in state income taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company had $1,687,000 and $24,677,000 of cash and cash equivalents at
September 30, 1996 and December 31, 1995, respectively. At September 30, 1996,
the Company had working capital of $422,000. The Company's long-term debt as a
percentage of total capitalization (long-term debt, preferred stock and common
stockholders' equity) was 2.3% and 2.5% as of September 30, 1996 and December
31, 1995, respectively.
Capital expenditures for the first nine months of 1996 totaled $27,438,000.
The capital expenditures relate primarily to additional fermentation equipment
and the kegging and cold storage facility at the Woodinville Brewery, and costs
associated with the construction of the new brewery in Portsmouth, New
Hampshire. The construction of the Portsmouth Brewery began in late May 1995 and
that facility commenced commercial operations in October 1996. The Portsmouth
brewery's initial production capacity is 100,000 barrels on an annual basis, and
its maximum designed production capacity is approximately 250,000 barrels per
year. The total cost of the Portsmouth Brewery was approximately $30 million. In
April 1996, the Company began construction of the keg racking and cold storage
facility at the Woodinville Brewery. This facility is expected to cost
approximately $6 million and will be used to supplement the supply of Redhook
draft beer in western states. Capital expenditures for 1996 are expected to
total approximately $30 million.
The Company has $10 million available under a secured bank facility (the
"Secured Facility") through June 5, 1997. In addition, the Company has $10
million available under an unsecured revolving credit facility with the same
bank through June 5, 1998. Interest accrues at a variable rate based on the
Inter Bank Offered Rate ("IBOR") plus 1.00% to 2.50%, depending on the Company's
debt-to-tangible net worth ratio. The Company can fix the rate by selecting IBOR
for one- to twelve-month periods as a base. As of September 30, 1996, there were
no borrowings outstanding under these bank facilities and the Company's
one-month IBOR-based borrowing rate was approximately 6.44%.
The Company expects to meet its future financing needs, including working
capital and capital expenditure requirements, through cash on hand, operating
cash flow and, to the extent required and available, bank borrowings and
offerings of debt, convertible securities or equity securities.
The Company has certain commitments, contingencies and uncertainties
relating to its normal operations. Management believes that any such
commitments, uncertainties or contingent liabilities, including any
environmental uncertainties, will not have a material adverse effect on the
Company's financial position or results of operations.
10
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NEW ACCOUNTING STANDARD
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, Accounting for Stock-Based Compensation ("Statement No. 123"). This
pronouncement establishes the accounting and reporting standards for stock-based
employee compensation plans, including: stock purchase plans, stock options and
stock appreciation rights. This new standard defines a fair value-based method
of accounting for these equity instruments. This method measures compensation
cost based on the value of the award and recognizes that cost over the service
period. Companies may elect to adopt this standard or to continue accounting for
these types of equity instruments under current guidance, APB Opinion No. 25,
Accounting for Stock Issued to Employees ("Opinion No. 25"). Companies that
elect to continue using the rules of Opinion No. 25 must make pro forma
disclosures of net income and earnings per share as if Statement No. 123 had
been applied. The new disclosures are required for fiscal years beginning after
December 15, 1995. The Company has elected to continue accounting in accordance
with Opinion No. 25 and will include the pro forma disclosures required by
Statement No. 123 in the footnotes to its financial statements for the year
ending December 31, 1996. The pro forma footnote disclosures will have no effect
on the Company's Balance Sheet or Statement of Income.
11
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SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Seattle,
State of Washington, on November 7, 1996.
REDHOOK ALE BREWERY, INCORPORATED
BY: /s/ Bradley A. Berg
-------------------
Bradley A. Berg
Executive Vice President and
Chief Financial Officer
BY: /s/ David H. Kirske
-------------------
David H. Kirske
Controller and Treasurer
(Principal Accounting Officer)
DATE: November 7, 1996
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PART II. - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
The following exhibits are filed as part of this report.
10.34 First Amendment dated as of July 25, 1996, to Amended and
Restated Credit Agreement between U.S. Bank of Washington,
National Association and Registrant, dated June 5, 1995
11.1 Computation of Earnings Per Share
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
None filed during the quarter ended September 30, 1996.
ITEMS 1, 2, 3, 4 AND 5 OF PART II ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
13
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EXHIBIT 10.34
FIRST AMENDMENT
TO AMENDED AND RESTATED CREDIT AGREEMENT
This first amendment to amended and restated credit agreement
("Amendment") is made and entered into as of July 25, 1996, by and between
REDHOOK ALE BREWERY, INCORPORATED, a Washington corporation ("Borrower"), and
U.S. BANK OF WASHINGTON, NATIONAL ASSOCIATION, a national banking association
("U.S. Bank").
RECITALS:
A. On or about June 5, 1995, U.S. Bank and Borrower entered into that
certain amended and restated credit agreement (together with all amendments,
supplements, exhibits, and modifications thereto, the "Credit Agreement"),
whereby U.S. Bank agreed to make loans and advances of credit to Borrower on
the terms and conditions set forth therein.
B. In accordance with a June 26, 1996, amendment to commitment letter
dated May 22, 1995, U.S. Bank and Borrower have agreed to extend the Commitment
Period (as that term is defined in the Credit Agreement) to June 5, 1998. The
purpose of this Amendment is to set forth the terms and conditions of U.S.
Bank's and Borrower's agreement to extend the Commitment Period.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
set forth herein, the parties agree as follows:
ARTICLE I. DEFINITIONS
As used herein, capitalized terms shall have the meanings given to them
in the Credit Agreement, except as otherwise defined herein or as the context
otherwise requires.
ARTICLE II. AMENDMENT
The Credit Agreement, as well as all of the other Loan Documents, are
hereby amended as set forth herein. Except as specifically provided for herein,
all of the terms and conditions of the Credit Agreement and each of the other
Loan Documents shall remain in full force and effect throughout the terms of
the Loans, as well as any extensions or renewals thereof.
-1-
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ARTICLE III. EXTENSION OF REVOLVING
LOAN COMMITMENT PERIOD
3.1 Commitment Period. Subject to and upon the terms and conditions
set forth in the Credit Agreement and herein, and in reliance upon the
representations, warranties, and covenants of Borrower contained in the Credit
Agreement or herein or made pursuant to the Credit Agreement or hereto, Section
2.1 of the Credit Agreement is hereby amended to reflect that the Commitment
period is extended from June 5, 1997, to June 5, 1998.
3.2 Use of Proceeds. Section 2.2 of the Credit Agreement is hereby
amended to provide that, after June 5, 1997, proceeds of the Revolving Loan
shall no longer be used to finance Capital Expenditures but may continue to be
used, subject to the other limitations set forth in Article VI and VII of the
Credit Agreement, for acquisitions of all or substantially all of the assets of
a brewery or an investment in the capital stock of a brewery that are limited
to $1,500,000 per occurrence or $4,500,000 in the aggregate, without U.S.
Bank's prior written consent.
3.3 Repayment. Section 2.5(b) of the Credit Agreement is hereby
amended to reflect that Borrower shall pay all outstanding principal, accrued
interest, and other charges with respect to the Revolving Loan on or before
June 5, 1998.
3.4 Renewal Note. Concurrently with the execution of this Amendment,
Borrower shall execute and deliver to U.S. Bank a renewal promissory note in
the form attached hereto as Exhibit A, in substitution for, but not in payment
of, the Revolving Note dated June 5, 1995. The promissory note to be executed
by Borrower in substitution for, but not in payment of, the existing Revolving
Note shall, upon execution of this Amendment, be a "Revolving Note" for all
purposes of the Credit Agreement and the other Loan Documents. The Revolving
Note dated June 5, 1995, shall be marked "renewed" and shall be retained by
U.S. Bank until the Revolving Loan has been paid in full and U.S. Bank's
commitment to make advances under the Revolving Loan has terminated.
ARTICLE IV. CONDITIONS PRECEDENT
U.S. Bank shall have no obligation to extend the Commitment Period
unless the following conditions have been fulfilled to the satisfaction of U.S.
Bank:
(a) U.S. Bank shall have received this Amendment and the renewal
promissory note in the form attached hereto as Exhibit A, duly executed and
delivered by Borrower.
(b) U.S. Bank shall have received a nonrefundable fee in the amount
of $18,750 for the extension of the Revolving Loan's Commitment Period.
-2-
<PAGE> 3
(c) There shall not then exist any Default or Event of Default
hereunder as of the date hereof.
(d) All representations and warranties of Borrower contained herein
or made in writing in connection herewith shall be true and correct as of the
date hereof.
(e) There shall have been no material adverse change in the
financial condition of Borrower subsequent to March 31, 1996.
ARTICLE V. GENERAL PROVISIONS
5.1 Representations and Warranties. Borrower hereby represents and
warrants to U. S. Bank that as of the date of this Amendment, there exists no
Default or Event of Default. All representations and warranties of Borrower
contained in the Credit Agreement and the other Loan Documents, or otherwise
made in writing in connection therewith, are true and correct as of the date of
this Amendment. Borrower acknowledges and agrees that all of Borrower's
Indebtedness to U. S. Bank is payable without offset, defense, or counterclaim.
5.2 Guaranties. The parties hereby acknowledge and agree that all
guaranties now existing or hereafter obtained by U. S. Bank shall remain in full
force and effect, are valid and enforceable in accordance with their terms, and
are not subject to offset, defense, or counterclaim.
5.3 Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall constitute an original agreement, but all of
which together shall constitute one and the same agreement.
5.4 STATUTORY NOTICE. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN
MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
-3-
<PAGE> 4
IN WITNESS WHEREOF, U. S. Bank and Borrower have caused this Amendment
to be duly executed by their respective duly authorized signatories as of the
date first above written.
REDHOOK ALE BREWERY, INCORPORATED
/s/ Bradley A. Berg
By -----------------------------------------
Bradley A. Berg, Executive Vice President
and Chief Financial Officer
U. S. BANK OF WASHINGTON
NATIONAL ASSOCIATION
/s/ Thomas G. Gunder
By -----------------------------------------
Thomas G. Gunder, Vice President
By execution of this Amendment, the undersigned Guarantor approves of
the changes to the Credit Agreement set forth herein, agrees to be bound by
Section 5.2 herein, reaffirms its Guaranty, and acknowledges and agrees that
its obligations under its Guaranty is not subject to any defense, offset, or
counterclaim.
REDHOOK OF NEW HAMPSHIRE, INC.
/s/ Bradley A. Berg
By -----------------------------------------
Bradley A. Berg, Executive Vice President
-4-
<PAGE> 5
CONSENT TO ACTION IN LIEU OF A SPECIAL MEETING
OF THE BOARD OF DIRECTORS
OF
REDHOOK ALE BREWERY, INCORPORATED
Pursuant to RCW 23B.08.210 of the laws of the State of Washington, the
undersigned, being all of the directors of Redhook Ale Brewery, Incorporated, a
Washington corporation (the "Corporation") do hereby consent to and take the
following actions without a meeting:
Credit Facilities
RESOLVED, that the actions undertaken to date by the officers of the
Corporation in negotiating the terms of credit facilities between the
Corporation and U.S. Bank of Washington, National Association pursuant to the
amended and restated credit agreement dated as of June 5, 1995 ("Credit
Agreement"), as proposed to be amended pursuant to the first amendment to
amended and restated credit agreement, be and hereby are authorized, approved,
ratified and confirmed in all respects.
RESOLVED FURTHER, that the terms of the proposed credit facilities as
set forth in the Credit Agreement, as amended, be and hereby are authorized,
accepted and approved in all respects.
RESOLVED FURTHER, that the officers of the Corporation be and hereby
are, and each of them hereby is, authorized to negotiate and prepare the
amendment to the Credit Agreement and agreements, instruments and documents
related thereto, including a note or notes to be delivered by the Corporation,
security agreements, mortgages, deeds of trust, pledge agreements, trademark
assignments, letter of credit applications, and any other such agreements,
documents and instruments as are advisable or required thereby, with such
changes in the terms thereof from those contained in the draft of the amendment
Credit Agreement as said officers in their discretion and judgment shall
approve.
RESOLVED FURTHER, that any one of the Corporation's Chairman of the
Board of Directors, President, and Executive Vice President be and each of them
hereby is authorized, on behalf and in the name of the Corporation, to execute
and deliver the amendment to the Credit Agreement evidencing the credit
facilities, with such terms and in such form as such officer or officers
determine to be in the best interests of the Corporation, such determination to
be conclusively evidenced by such actions, execution and delivery.
RESOLVED FURTHER, that the officers of the Corporation be, and each of
them hereby is, authorized to execute and deliver, in the name and on behalf of
the
-1-
<PAGE> 6
Corporation, any and all agreements, notes, instruments, certifications and
documents and to do ay and all acts or things as they or any of them may deem
necessary or advisable to document, evidence and carry out fully the terms and
provisions of the credit facilities hereby approved and the intent of purposes
of the resolutions adopted herein.
General Banking-Arrangements
I. RESOLVED, that the Chairman of the Board, President, and Executive
Vice President of the Corporation be and hereby are, and each of them hereby
is, authorized to select from time to time banks and financial institutions for
the establishment of one or more checking accounts, deposit accounts and other
financial accounts and arrangements as they deem appropriate and in the best
interests of the Corporation (each and every bank and financial institution so
selected is herein referred to as a "Bank"); and
II. RESOLVED FURTHER, that any one of the Corporation's Chairman of
the Board, President, and Executive Vice President ("the Authorizing Officers")
be, and each of them hereby is, authorized on behalf of the Corporation:
A. to designate in writing at any time and from time to time officers
(including themselves), agents and employees of the Corporation (each a
"Designated Person," which term may include the plural) each of whom, on behalf
of the Corporation, is authorized to do any one or more of the following:
1. sign, by manual or facsimile signature (including any signature
made with or generated by a signature plate, any similar device, or a computer),
any and all checks, drafts, and other orders for the payment of money, including
orders or directions in informal or letter form, against any funds at any time
standing to the credit of the Corporation in any account with the Bank;
2. issue written, telephonic, electronic or oral instructions with
respect to the transfer of funds of the Corporation on deposit with the Bank
(or otherwise transferable by the Bank) (a) by wire, automated clearinghouse or
other electronic means of transfer, without any written order for the payment
of money being issued with respect to such transfer or (b) by check, draft or
other written order for the payment of money, whether signed by persons
authorized pursuant to this resolution or authorized by the Bank;
3. issue pre-authorized drafts by any authorized signatory or
signatories against the bank accounts of the corporation;
4. authorize the issuance of depository transfer checks (each having
plainly printed on its face "DEPOSITORY TRANSFER CHECK" and being by its
-2-
<PAGE> 7
wording payable to the payee bank for credit to an account of the
Corporation with the payee bank) for the purpose of transferring funds from
any bank or other financial institution in which the Corporation has funds
on deposit to an account of the Corporation at another depository bank or
financial institution designated under the authority exercised hereunder.
Such checks shall require no signature other than the name of the
Corporation printed at the lower right hand corner, which name so printed
shall constitute the official signature of the Corporation for use in
connection with depository transfer checks;
B. to amend, revoke or terminate any designation made pursuant to the
authority contained in paragraph A;
C. to enter into such agreements with the Bank with respect to any
banking services (including without limitation electronic services) as such
officers in their sole discretion deem advisable or in the interest of the
Corporation; and
D. to open new accounts with the Bank and to close any or all accounts
opened with the Bank and to terminate any agreement entered into with the Bank.
III. RESOLVED FURTHER, that the Bank be, and it hereby is, authorized
and directed to honor:
A. any and all checks, drafts and orders signed manually by any person
or persons authorized by the Authorizing Officers and designated in Resolution
I above, as aforesaid, including those drawn to the individual order of any
such person or persons whose names appear thereon as signer or signers thereof,
without further inquiry or regard to the authority of said person or persons or
the use of the checks, drafts or orders, or the proceeds thereof;
B. any and all checks, drafts and other orders for the payment of money
drawn in the Corporation's name, including those drawn to the individual order
of any person or persons whose name or names appear thereon as signer or
signers thereof, without further inquiry or regard to the authority of said
person or persons or the use of the checks, drafts or orders, or the proceeds
thereof when bearing or purporting to bear the facsimile signature(s) of any
person(s) authorized so to sign by the Authorizing Officers as aforesaid, and
to charge the account of the Corporation for such checks, drafts or other
orders for the payment of money, regardless of by whom or by what means the
actual or purported facsimile signature or signatures thereon may have been
affixed thereto, if such signature or signatures resemble(s) the facsimile
specimens of such signature(s) certified to or filed with the Bank by or on
behalf of this Corporation;
-3-
<PAGE> 8
C. any written, oral, telephonic, or electronic instruction
for the transfer of funds of the Corporation (a) by wire or other electronic
means initiated by a person or persons designated by the Authorizing Officers or
made by the Bank in accordance with the procedure provided by any agreement for
wire or other electronic means of transfer of funds entered into on behalf of
the Corporation by the Authorizing Officers, or (b) by check, draft, or other
written order for the payment of money authorized in accordance with this
resolution; and
D. any preauthorized draft or depository transfer check
authorized in accordance with the provisions of this resolution.
IV. RESOLVED FURTHER, that any one of the Authorizing
Officers designated in Resolution I above be, and each of them hereby is,
authorized on behalf of the Corporation:
A. to designate in writing or any time and from time to
time officers (including themselves), agents and employees of the Corporation
(each a "Designated Person," which term may include the plural) each of whom, on
behalf of the Corporation is authorized to do any one or more of the following:
1. borrow money, apply for letters of credit and obtain
other credit and financial accommodations from the Bank on a current or
long-term basis upon such terms, rates of interest and conditions as
said Designated Person may deem advisable and to execute and deliver,
in the name of the Corporation, such notes, drafts, applications for
letters of credit, undertakings and agreements (including amendments
and waivers thereto) with respect to said credit-and other
accommodations as said Designated Person may deem advisable;
2. execute and deliver, in the name of the Corporation,
dollar-denominated or cross-currency interest rate exchange agreements,
forward currency exchange agreements, interest rate cap or collar
protection agreements, forward rate currency or interest rate options,
puts and warrants and other similar contractual agreements with the
Bank, and any amendments, modifications, cancellations, buy-backs,
reversals, terminations or assignments of any of the foregoing which
said Designated Person may deem advisable;
3. discount with the Bank any of the notes, drafts, or
acceptances held by the Corporation, upon such terms and conditions as
said Designated Person may deem advisable;
-4-
<PAGE> 9
4. receive and receipt for, sign orders, and issue instructions (written or
oral) on behalf of the Corporation for the handling and delivery of the
proceeds of any extension of credit;
5. endorse for deposit or negotiation, or to deposit without endorsement,
any and all checks, drafts, notes, bills of exchange, and orders for the
payment of money, either belonging to or coming into possession of the
Corporation (including any of the foregoing payable to the Corporation in any
trade name or style it may have adopted); endorsements for deposit may be by
the written or stamped endorsement of this Corporation without designation of
the person making the endorsement;
6. enter into security transactions and other transactions with the Bank
upon such terms and conditions which the Designated Person may deem advisable
and, without limiting the generality of the foregoing, to:
a. purchase or sell, thorough the Bank, either as agent, principal or
otherwise, and either for immediate or future delivery, commercial paper,
Federal Reserve funds, foreign exchange or any other property of a similar
nature whatsoever;
b. deliver to and deposit with the Bank for safekeeping, custody, or
other purposes any and all securities of any kind whatsoever, and, in
connection therewith, to open and maintain with the Bank a safekeeping or
custody account and to sign agreements, orders and issue instructions in
respect thereto as said Designated Person may deem advisable;
c. withdraw, receive, and receipt for and sign orders and issue
instructions for the handling, transfer, registration, sale, substitution,
exchange and delivery of any stocks, bonds, other securities or other
property held by the Bank for the account of the Corporation; such
withdrawals, substitutions, exchanges, and deliveries, whether subject to
payment or not, may also be made by the bearer of any order, receipt, or
request so signed;
B. to amend, revoke or terminate designation made pursuant to the
authority contained in paragraph A; and
C. to enter into such agreements with the Bank with respect to any banking
services (including without limitation financial advisory services) and
financial
-5-
<PAGE> 10
accommodations as such officers in their sole discretion deem advisable or in
the interest of the Corporation.
V. RESOLVED FURTHER, that any one of the Corporation's Chairman of
the Board, the President, and Executive Vice President be, and each hereby is,
authorized on behalf of the Corporation, to enter into agreements to assume,
guaranty, contingently agree to purchase or provide funds for the payment of or
otherwise become liable upon the obligations of a third party to the Bank or
otherwise to assure the Bank against losses related to an extension of credit
to a third party, provided, however, that any one of the Corporation's Chairman
of the Board, President, and Executive Vice President be, and each hereby is,
authorized to so act with respect to obligations of subsidiaries of the
Corporation.
VI. RESOLVED FURTHER, that each of the foregoing resolutions shall
also apply in full to any account, financial accommodation, transaction or
property at or with any facility or branch of the Bank and its subsidiaries and
affiliates.
VII. RESOLVED FURTHER, that any request for a loan or other
financial accommodation may be made by telephone, writing, by telex or
facsimile transmission, or by any other form of communication deemed advisable
by the Designated Person and that the Bank shall incur no liability for acting
in accordance with requests or instructions which the Bank believes in good
faith to have emanated from a properly authorized person.
VIII. RESOLVED FURTHER, that each of the foregoing resolutions and
any designation of Designated Persons made pursuant thereto shall continue in
force until express written notice of its revocation or modification has been
received by the Bank, but if the authority contained in them should be revoked
or terminated by operation of law without such notice, it is resolved and hereby
agreed, for the purpose of inducing the Bank to act thereunder, that the Bank
shall be saved harmless from any loss suffered or liability incurred by it in
so acting after such revocation or termination without such notice.
IX. RESOLVED FURTHER, that any Designated Persons designated
pursuant to Resolution I above be and hereby is authorized and directed to
execute and deliver on behalf of the Corporation any and all forms of corporate
resolutions of authority for bank accounts, borrowings and other transaction
herein approved required by said Bank, with the representation that any such
resolutions have been duly authorized and approved by
-6-
<PAGE> 11
the Board of Directors of the Corporation, with executed copies of such
resolutions to be placed in the minute book of the Corporation, and all such
resolutions so executed and delivery are hereby authorized, affirmed, ratified
and approved.
DIRECTORS:
7-25-96 /s/ WALTER F. WALKER
DATED: ------------------------------- ---------------------------------------
7-25-96 /s/ GORDON A. BOWKER
DATED: ------------------------------- ---------------------------------------
7-25-96 /s/ FRANK H. CLEMENT
DATED: ------------------------------- ---------------------------------------
7-25-96 /s/ JOHN T. CARLETON
DATED: ------------------------------- ---------------------------------------
7-25-96 /s/ DENNIS P. WESTON
DATED: ------------------------------- ---------------------------------------
7-25-96 /s/ PAUL S. SHIPMAN
DATED: ------------------------------- ---------------------------------------
9-5-96 /s/ BRUCE M. SANDISON
DATED: ------------------------------- ---------------------------------------
DATED: ------------------------------- ---------------------------------------
DATED: ------------------------------- ---------------------------------------
-7-
<PAGE> 12
the Board of Directors of the Corporation, with executed copies of such
resolutions to be placed in the minute book of the Corporation, and all such
resolutions so executed and delivery are hereby authorized, affirmed, ratified
and approved.
DIRECTORS:
DATED: 7/25/96 /s/ WALTER F. WALKER
----------------------- ---------------------------------
DATED: 7/25/96 /s/ GORDON A. BOWKER
----------------------- ---------------------------------
DATED: 7/25/96 /s/ FRANK H. CLEMENT
----------------------- ---------------------------------
DATED: 7/25/96 /s/ JOHN T. CARLETON
----------------------- ---------------------------------
DATED: 7/25/96 /s/ DENNIS P. WESTON
----------------------- ---------------------------------
DATED: 7/25/96 /s/ PAUL S. SHIPMAN
----------------------- ---------------------------------
DATED: 9/3/96 /s/ JERRY D. JONES
----------------------- ---------------------------------
DATED:
----------------------- ---------------------------------
DATED:
----------------------- ---------------------------------
-7-
<PAGE> 13
the Board of Directors of the Corporation, with executed copies of such
resolutions to be placed in the minute book of the Corporation, and all such
resolutions so executed and delivery are hereby authorized, affirmed, ratified
and approved.
DIRECTORS:
DATED: 7/25/96 /s/ WALTER F. WALKER
----------------------- ---------------------------------
DATED: 7/25/96 /s/ GORDON A. BOWKER
----------------------- ---------------------------------
DATED: 7/25/96 /s/ FRANK H. CLEMENT
----------------------- ---------------------------------
DATED: 7/25/96 /s/ JOHN T. CARLETON
----------------------- ---------------------------------
DATED: 7/25/96 /s/ DENNIS P. WESTON
----------------------- ---------------------------------
DATED: 7/25/96 /s/ PAUL S. SHIPMAN
----------------------- ---------------------------------
DATED:
----------------------- ---------------------------------
DATED:
----------------------- ---------------------------------
DATED: 9/11/96 /s/ DAVID R. ENGLISH
----------------------- ---------------------------------
-7-
<PAGE> 14
CERTIFICATE AS TO AUTHORIZING RESOLUTIONS
AND INCUMBENCY CERTIFICATE
The undersigned hereby certifies that he is the secretary of Redhook Ale
Brewery, Incorporated, a Washington corporation ("Company"), that as such he is
authorized to execute this Certificate on behalf of the Company, and that:
(a) annexed hereto as Exhibit A is a true and correct copy of the
resolutions duly adopted by resolution of the board of directors of the Company;
(b) such resolutions have been entered in the minute book of the Company,
have not been modified or rescinded, and remain in full force and effect; and
(c) the following persons whose names, titles, and signatures appear below
are now duly qualified to hold their respective offices as of the date hereof:
NAME SIGNATURE OFFICE
Paul Shipman /s/ Paul Shipman President
Bradley A. Berg /s/ Bradley A. Berg Executive Vice President
and Chief
Financial Officer
DATED this 25 day of July, 1996.
/s/ DAVID H. KIRSKE
---------------------------------------------
David H. Kirske
Assistant, Secretary
-1-
<PAGE> 15
EXHIBIT A
to First Amendment to Amended and Restated Credit Agreement
RENEWAL REVOLVING NOTE
$10,000,000 July 25th, 1996
For value received, the undersigned, REDHOOK ALE BREWERY, INCORPORATED,
a Washington corporation ("Borrower"), promises to pay to the order of U. S.
BANK OF WASHINGTON, NATIONAL ASSOCIATION ("U. S. Bank"), at its principal place
of business, 1420 Fifth Avenue, Seattle, Washington 98101, or such other place
or places as the holder hereof may designate in writing, the principal sum of
Ten Million Dollars ($10,000,000) or so much thereof as advanced by U. S. Bank
in lawful immediately available money of the United States of America, in
accordance with the terms and conditions of that certain amended and restated
credit agreement dated as of June 5, 1995, by and between Borrower and U. S.
Bank (together with all supplements, exhibits, modifications, and amendments
thereto, including the first amendment to amended and restated credit agreement
of even date herewith, the "Credit Agreement"). Borrower also promises to pay
interest on the unpaid principal balance hereof, commencing as of the date
hereof, in like money in accordance with the terms and conditions and at the
rate or rates provided for in the Credit Agreement. All principal, interest,
and other charges are due and payable in full on June 5, 1998.
Borrower and all endorsers, sureties, and guarantors hereof jointly and
severally waive presentment for payment, demand, notice of nonpayment, notice
of protest, and protest of this Note, and all other notices in connection with
the delivery, acceptance, performance, default, dishonor, or enforcement of the
payment of this Note except such notices as are specifically required by this
Note or by the Credit Agreement, and they agree that the liability of each of
them shall be unconditional without regard to the liability of any other party
and shall not be in any manner affected by any indulgence, extension of time,
renewal, waiver, or modification granted or consented to by U. S. Bank.
Borrower and all endorsers, sureties, and guarantors hereof (1) consent to any
and all extensions of time, renewals, waivers, or modifications that may be
granted by U. S. Bank with respect to the payment or other provisions of this
Note and the Credit Agreement; (2) consent to the release of any property now
or hereafter securing this Note with or without substitution; and (3) agree
that additional markers, endorsers, guarantors, or sureties may become parties
hereto without notice to them and without affecting their liability hereunder.
This Note is the Revolving Note referred to in the Credit Agreement and
as such is entitled to all of the benefits and obligations specified in the
Credit Agreement, including but not limited to any conditions to making
advances hereunder. Terms defined
-1-
<PAGE> 16
in the Credit Agreement are used herein with the same meanings. Reference is
made to the Credit Agreement for provisions for the repayment of this Note and
the acceleration of the maturity hereof.
REDHOOK ALE BREWERY, INCORPORATED
By /s/ Bradley A. Berg
------------------------------
Bradley A. Berg
Executive Vice President and
Chief Financial Officer
-2-
<PAGE> 1
EXHIBIT 11.1
REDHOOK ALE BREWERY, INCORPORATED
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Primary and fully-diluted earnings per common share:
Weighted average common shares outstanding .................................. 7,685,312 5,257,787 7,684,855 4,121,688
Weighted average common stock equivalents outstanding:
Series A convertible redeemable preferred stock ........................... -- 715,994 -- 1,065,306
Series B convertible redeemable preferred stock ........................... 1,289,872 1,289,872 1,289,872 1,289,872
Stock options, net ........................................................ 166,574 223,612 171,500 146,813
Net effect of issuance of common stock and Series B preferred stock and the
granting of stock options during the 12-month period prior to the offering
at less than the offering price, calculated using the treasury stock method
at the offering price, and treated as outstanding ......................... -- 33,183 -- 26,547
---------- ---------- ---------- ----------
Average number of common
and equivalent shares outstanding ......................................... 9,141,758 7,520,448 9,146,227 6,650,226
========== ========== ========== ==========
Net income .................................................................... $ 887,171 $ 869,276 $2,938,443 $2,065,239
========== ========== ========== ==========
Earnings per share ............................................................ $ 0.10 $ 0.12 $ 0.32 $ 0.31
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 1,686,551
<SECURITIES> 0
<RECEIVABLES> 2,273,000
<ALLOWANCES> 10,000
<INVENTORY> 1,728,709
<CURRENT-ASSETS> 6,750,703
<PP&E> 87,490,642
<DEPRECIATION> 5,277,842
<TOTAL-ASSETS> 89,658,259
<CURRENT-LIABILITIES> 6,328,212
<BONDS> 1,724,821
15,910,755
0
<COMMON> 38,428
<OTHER-SE> 62,455,422
<TOTAL-LIABILITY-AND-EQUITY> 89,658,259
<SALES> 26,462,208<F1>
<TOTAL-REVENUES> 26,462,208<F1>
<CGS> 16,898,029
<TOTAL-COSTS> 22,409,407
<OTHER-EXPENSES> (574,668)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,627,469
<INCOME-TAX> 1,689,026
<INCOME-CONTINUING> 2,938,443
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,938,443
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.32
<FN>
<F1>Sales and Total Revenues are net of federal and state excise taxes.
</FN>
</TABLE>
