Note 1.

Nature of Operations

Overview

Craft Brew Alliance, Inc. was formed in 1981 to brew and sell craft beer. We produce, sell and market on a national basis innovative packaged and draft products for the Kona, Widmer Brothers, Redhook, Omission and Square Mile brands at our six company-owned breweries and operate five pubs that promote our products, offer dining and entertainment facilities and sell retail merchandise. Our common stock trades on the Nasdaq Stock Market under the trading symbol “BREW.”

Our products are distributed domestically in all 50 states. This national footprint was established primarily through a series of distribution agreements with Anheuser-Busch, LLC (“A-B”), a significant shareholder. In 2004, we and A‑B entered into three agreements, an exchange and recapitalization agreement (as amended, the “Exchange Agreement”), a master distributor agreement (as amended, the “A-B Distributor Agreement”) and a registration rights agreement that collectively constitute the framework of our existing relationship with A-B.

Under the present terms of the A‑B Distributor Agreement, we distribute our products in substantially all of our markets through A‑B’s seamless national wholesale distributor network. As a result of this distribution arrangement, we believe that, under alcohol beverage laws in a majority of states, these wholesalers own the exclusive right to distribute our beers in their respective markets if the A-B Distributor Agreement expires or is terminated. A-B’s domestic wholesaler network consists primarily of independent wholesalers, together with branches owned by A-B. The A-B Distributor Agreement is subject to early termination by either party upon the occurrence of certain events. The A‑B Distributor Agreement expires December 31, 2018, but may be renewed automatically for an additional ten-year period unless A‑B provides written notice to the contrary on or before June 30, 2018.

Basis of Presentation

The consolidated financial statements include the accounts of Craft Brew Alliance, Inc. and our wholly owned subsidiaries. All intercompany transactions and balances are eliminated in consolidation.