Related Party Transactions

6 Months Ended

Jun. 30, 2013

Related Party Transactions [Abstract]

Related Party Transactions

Note 5. 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 $257,000 and $346,000 as of June 30, 2013 and December 31, 2012, respectively.

Transactions with Anheuser-Busch, LLC (“A-B”)

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Gross sales to A-B	$	44,861	$	39,342	$	77,127	$	72,948
Margin fee paid to A-B, classified as a reduction of Sales		517		482		921		935
Sales to Fulton Street Brewery, LLC (“FSB”), through a contract brewing arrangement, classified in Sales(1)		-		1,107		-		2,485
Handling, inventory management, royalty and other fees paid to A-B, classified in Cost of sales		111		116		211		230
Amounts received from A-B for lost keg fees and forfeited deposits, included as a reduction of Property, equipment and leasehold improvements, net		-		28		-		32

(1) FSB is a wholly-owned subsidiary of A-B.

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 phased out production of FSB branded beers through November 2012 utilizing remaining inventory on-hand. In consideration, FSB is paying us $70,000 per month through September 2013.

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

	June 30, 2013			December 31, 2012
Amounts due from A-B related to beer sales pursuant to the A-B distributor agreement	$	7,754		$	6,369
Amounts due from FSB related to beer sales pursuant to a contract brewing arrangement		-			260
Amounts due from FSB related to termination agreement		210			630
Refundable deposits due to A-B		(2,659	)		(2,472	)
Amounts due to A-B for services rendered		(2,163	)		(1,974	)
Net amount due from A-B	$	3,142		$	2,813

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 June 30,				Six Months Ended June 30,
2013		2012		2013		2012
$	32	$	31	$	64	$	62

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 June 30,				Six Months Ended June 30,
2013		2012		2013		2012
$	105	$	100	$	211	$	199