Equity Method Investments

9 Months Ended

Sep. 30, 2011

Equity Method Investments [Abstract]

Equity Method Investments

Note 4.         Equity Method Investments

Fulton Street Brewery, LLC (“FSB”)

On May 2, 2011 (the “Closing Date”), we, Anheuser-Busch, Incorporated (“A-B”) and Goose Holdings, Inc. (“GHI”) completed the transaction contemplated by the equity purchase agreement (the “Purchase Agreement”), pursuant to which we and GHI (collectively, the “Sellers”) sold all of the equity in FSB to A-B. The aggregate consideration paid by A-B was $38.9 million (“Purchase Consideration”), net of transaction fees paid by A-B on the Sellers' behalf, and was determined by arm's length negotiations among the parties.

Our share of the Purchase Consideration in exchange for our 42% interest in FSB was $16.3 million, net of our share of transaction fees paid by A-B on the Sellers' behalf, and consisted of $15.1 million received in cash and $1.2 million placed in escrow. The escrow balance is to satisfy valid claims, if any, that may be asserted by A-B in connection with breaches of representations and warranties made by the Sellers in the Purchase Agreement. Of the $1.2 million escrow balance, $0.8 million was included in Accounts receivable and $0.4 million was included in Intangible and other assets on our Consolidated Balance Sheets at September 30, 2011. The escrow balance will be released to us in three equal payments, every six months, beginning six months following the Closing Date, subject to indemnification claims, as applicable. We also received reimbursement from A-B for legal and professional fees we incurred in evaluation of the transaction. In the second quarter of 2011, we recorded a gain of $10.4 million associated with the sale of our equity interest in FSB.

We recognized $691,000 in 2011 for our share of FSB's earnings through the Closing Date. For the three and nine month periods ended September 30, 2010, our share of FSB's net income totaled $163,000 and $541,000, respectively. The book value of our equity investment in FSB was $5.9 million as of the Closing Date and $5.2 million at December 31, 2010.

At September 30, 2011, we had net outstanding receivables due from FSB of $770,000 primarily related to contract brewing. At December 31, 2010, we had recorded a payable to FSB of $3.3 million  primarily for amounts owing for purchases of Goose Island-branded product prior to the sale of FSB. As of September 30, 2011, this amount had been fully paid.

See also Note 5 for information regarding additional transactions with A-B.

Kona Brewery, LLC (“Kona”)

As a result of the closing of the merger with Kona Brewing Co., Inc. (the “KBC Merger”) on October 1, 2010, Kona became a wholly owned subsidiary and, accordingly, Kona's results of operations are included in our consolidated results of operations from that date. For the three and nine-month periods ended September 30, 2010, our share of Kona's net income was $100,000 and $145,000, respectively.

Unaudited pro forma results of operations information as if the KBC Merger had occurred on January 1, 2010 is as follows (in thousands, except per share amounts):

	Three Months Ended September 30, 2010		Nine Months Ended September 30,  2010
Net sales	$	34,795	$	97,796
Gross profit		10,974		32,130
Income before income taxes		284		2,540
Net income		353		1,703
Basic and diluted net income per share		0.02		0.09