Related-Party Transactions

12 Months Ended

Dec. 31, 2011

Related-Party Transactions [Abstract]

Related-Party Transactions

Note 19.  Related-Party Transactions

Modifications to A-B Agreements

In connection with the sale of our interest in FSB, we modified two agreements with A-B originally executed in 2004: the Master Distributor Agreement (as amended and restated, the “A-B Distributor Agreement”), which was amended primarily to lower our margin fees (“Margin Fees”) to be paid to A-B; and the Exchange and Recapitalization Agreement (as amended and restated, the “Exchange Agreement”).

The modifications to the A-B Distributor Agreement reduced the Margin Fees to be paid to A-B for beer sold through A-B or the associated A-B distribution network, except for beer sold in qualifying territories, as defined, from May 1, 2011 (the “Commencement Date”) until December 31, 2018, to $0.25 per case equivalent from $0.74 per case equivalent. Beer sold through A-B or the associated A-B distribution network in qualifying territories, as defined, will be exempt from Margin Fees until September 30, 2013, and thereafter will be assessed Margin Fees at the $0.25 per case equivalent through December 31, 2018. The exemption from Margin Fees for beer sold in the qualifying territories is subject to certain conditions, including incurring sales and marketing expenses in the qualifying territories at or above specified amounts. In the event the A-B Distributor Agreement is renewed beyond December 31, 2018, the A-B Distributor Agreement sets Margin Fees to be paid to A-B for the period beginning January 1, 2019 and ending December 31, 2028, at $0.75 per case equivalent. The A-B Distributor Agreement no longer provides for the incremental fees that were previously paid to A-B for shipments above the volume of shipments during 2003.

If we purchase additional beer brands, we may distribute those brands outside of the A-B Distributor Agreement while still selling existing brands to A-B affiliated wholesalers. We would not be obligated to pay margin fees on sales of the new brand.

We estimate that, had the modification to the A-B Distributor Agreement been in place throughout 2010, the increase in 2010 sales resulting from the reduced distribution fees would have been approximately $3.3 million. The amount of increase in sales realized for future periods may differ from this estimate due to the level, timing and geographic distribution of our shipments to A-B.

Other Transactions with A-B

Other transactions with A-B consisted of the following (in thousands):

	Year Ended December 31,
	2011		2010		2009
Gross sales to A-B	$	132,914	$	119,885	$	116,684
Margin fee paid to A-B, classified as a reduction of Sales		2,777		5,589		5,844
Handling, inventory management, royalty and other fees paid to A-B, classified in Cost of sales		490		607		926
Fees paid to A-B for media and advertising services, classified in Selling, general and administrative expenses		-		-		63
Amounts received from A-B for lost keg fees and forfeited deposits, included as a reduction of Property, equipment and leasehold improvements, net		267		364		259

Amounts due to or from A-B were as follows (in thousands):

	December 31
	2011			2010
Amounts due from A-B related to beer sales pursuant to the A-B Distributor Agreement	$	8,310		$	6,920
Refundable deposits due to A-B		(1,746	)		(828	)
Amounts due to A-B for services rendered		(2,482	)		(2,185	)
Net amount due from A-B	$	4,082		$	3,907

In addition, during 2009, we purchased certain materials, primarily bottles and other packaging materials, through A-B totaling $22.6 million.

KBC

Prior to the KBC Merger in October 2010, KBC was a related party. For the years ended December 31, 2010 and 2009, we earned alternating proprietorship fees of $4.8 million and $5.0 million, respectively, by leasing the Oregon Brewery to KBC and $5.0 million and $5.7 million, respectively, by selling raw materials and packaging products to KBC. These fees were recorded as Sales in our Consolidated Statements of Income. We also charged rent to KBC for its use of kegs for products that are distributed to Hawaii, as these sales are outside of our distribution agreement with KBC. Cooperage rental fees of $97,000 and $107,000 were charged to KBC for the years ended December 31, 2010 and 2009, respectively. These fees were credited to Cost of sales for the corresponding periods.

FSB

Prior to the sale of our equity interest in FSB to A-B, FSB was a related party. Following the sale, A-B owns 100% of FSB and A-B continues to be a related party. At December 31, 2010, we had net amounts due to FSB of $3.3 million. All such amounts had been paid as of December 31, 2011.

Operating Leases

We entered into lease arrangements with lessors whose members include related parties. See Note 18.