-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CIVNHbXaBB4G9eeXszPzcbfkpd5SzUlFWztsDl1QICf9UichHg11EwTbTWJZYmtS 7OOjoE0KlhHMkND871QfPA== 0000891020-96-001330.txt : 19961108 0000891020-96-001330.hdr.sgml : 19961108 ACCESSION NUMBER: 0000891020-96-001330 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961107 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: REDHOOK ALE BREWERY INC CENTRAL INDEX KEY: 0000892222 STANDARD INDUSTRIAL CLASSIFICATION: MALT BEVERAGES [2082] IRS NUMBER: 911141254 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-26542 FILM NUMBER: 96656041 BUSINESS ADDRESS: STREET 1: 3400 PHINNEY AVE N CITY: SEATTLE STATE: WA ZIP: 98103 BUSINESS PHONE: 2065488000 MAIL ADDRESS: STREET 1: 3400 PHINNEY AVE N CITY: SEATTLE STATE: WA ZIP: 98103 10-Q 1 REDHOOK ALE BREWERY, INCORPORATED FROM 10-Q 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 2 REDHOOK ALE BREWERY, INCORPORATED FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996 TABLE OF CONTENTS
PAGE 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
2 3 PART I. ITEM 1. FINANCIAL STATEMENTS REDHOOK ALE BREWERY, INCORPORATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31, 1996 1995 ------------- ------------ (Unaudited) ASSETS 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 =========== ===========
See Accompanying Notes. 3 4 REDHOOK ALE BREWERY, INCORPORATED STATEMENTS OF INCOME (Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------------- ----------------------------- 1996 1995 1996 1995 ----------- ----------- ----------- ----------- 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 =========== =========== =========== ===========
See Accompanying Notes. 4 5 REDHOOK ALE BREWERY, INCORPORATED STATEMENTS OF CASH FLOWS (Unaudited)
NINE MONTHS ENDED SEPTEMBER 30, -------------------------------- 1996 1995 ------------ ------------ 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 ============ ============
See Accompanying Notes. 5 6 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:
SEPTEMBER 30, DECEMBER 31, 1996 1995 ---------- ---------- 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 ========== ==========
Finished goods include beer held in fermentation prior to the filtration and packaging process. 6 7 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. 7 8 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.
THREE MONTHS NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, -------------------- -------------------- 1996 1995 1996 1995 ------ ------ ------ ------ 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% ====== ====== ====== ======
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 9 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. 9 10 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 11 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 12 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 12 13 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 EX-10.34 2 AMENDMENT TO AMENDED & RESTATED CREDIT AGREEMENT 1 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- 2 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- EX-11.1 3 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11.1 REDHOOK ALE BREWERY, INCORPORATED COMPUTATION OF EARNINGS PER SHARE
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------- ----------------------- 1996 1995 1996 1995 ---------- ---------- ---------- ---------- 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 ========== ========== ========== ==========
EX-27 4 FINANCIAL DATA SCHEDULE
5 1 U.S. DOLLARS 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 1 1,686,551 0 2,273,000 10,000 1,728,709 6,750,703 87,490,642 5,277,842 89,658,259 6,328,212 1,724,821 15,910,755 0 38,428 62,455,422 89,658,259 26,462,208 26,462,208 16,898,029 22,409,407 (574,668) 0 0 4,627,469 1,689,026 2,938,443 0 0 0 2,938,443 0.32 0.32 Sales and Total Revenues are net of federal and state excise taxes.
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