Related Party Transactions

9 Months Ended

Sep. 30, 2012

Related Party Transactions [Abstract]

Related Party Transactions

Note 4. Related Party Transactions

Note Payable

In connection with our merger with Kona Brewing Company in 2010 (the "KBC Merger"), we assumed an obligation for a promissory note payable ("Related Party Note") to a counterparty that was a significant KBC shareholder and remains a shareholder of Craft Brew Alliance, Inc. The Related Party Note is secured by the equipment comprising a photovoltaic cell generation system ("photovoltaic system") installed at our brewery located in Kailua-Kona, Hawaii. Accrued interest on the Related Party Note is due and payable monthly at a fixed interest rate of 4.75%, with monthly loan payments of $16,129. Any unpaid principal balance and unpaid accrued interest under the Related Party Note will be due and payable on November 15, 2014. The balance on the Related Party Note was $390,000 and $519,000 as of September 30, 2012 and December 31, 2011, respectively.

Transactions with Anheuser-Busch, LLC ("A-B")

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Gross sales to A-B	$	39,369	$	35,072	$	112,317	$	102,019
Margin fee paid to A-B, classified as a reduction of Sales		496		496		1,431		2,398
Sales to Fulton Street Brewery, LLC ("FSB"), through a contract brewing arrangement, classified in Sales(1		720		1,213		3,205		2,506
Handling, inventory management, royalty and other fees paid to A-B, classified in Cost of sales		109		105		339		379
Amounts received from A-B for lost keg fees and forfeited deposits, included as a reduction of Property, equipment and leasehold improvements, net		90		120		122		240

(1) We owned 42% of FSB prior to it becoming a wholly owned subsidiary of A-B in May 2011 and, accordingly, transactions with FSB are considered to be related party transactions in all periods.

Executed on October 3, 2012, but effective September 1, 2012, in the best interest of both parties, we mutually agreed with FSB to end our contract brewing arrangement. Under the termination agreement, we will phase out production of FSB branded beers utilizing remaining inventory on-hand. In consideration, FSB will pay us $70,000 per month through September 2013, reduced by an agreed upon margin for any beer delivered to FSB based on the remaining inventory levels. We recorded $57,000 in Sales in September 2012 under the terms of the termination agreement.

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

	September 30, 2012			December 31, 2011
Amounts due from A-B related to beer sales pursuant to the A-B distributor agreement	$	7,650		$	8,310
Amounts due from FSB related to beer sales pursuant to a contract brewing arrangement		422			585
Refundable deposits due to A-B		(2,598	)		(1,746	)
Amounts due to A-B for services rendered		(1,930	)		(2,482	)
Net amount due from A-B	$	3,544		$	4,667

Operating Leases

We lease our headquarters office space, restaurant and storage facilities located in Portland, Oregon, as well as the land and certain equipment from two limited liability companies, both of whose members include our current Board Chair and a nonexecutive officer. Lease payments to these lessors were as follows (in thousands):

Three Months Ended September 30,				Nine Months Ended September 30,
2012		2011		2012		2011
$	32	$	30	$	94	$	91

We hold lease and sublease obligations for certain office space and the land underlying the brewery and pub location in Kona, Hawaii, with a company whose owners include a shareholder who owns more than 5% of our common stock and a nonexecutive officer. The sublease contracts expire on various dates through 2020, with an extension at our option for two five-year periods. Lease payments to this lessor were as follows (in thousands):

Three Months Ended September 30,				Nine Months Ended September 30,
2012		2011		2012		2011
$	102	$	93	$	301	$	296