ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
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☒ |
Accelerated filer |
☐ | |||
Non-accelerated filer |
☐ |
Smaller reporting company |
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Emerging growth company |
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PART I. |
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Page |
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Item 1. |
3 |
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Item 1A. |
15 |
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Item 1B. |
24 |
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Item 2. |
25 |
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Item 3. |
26 |
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Item 4. |
26 |
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PART II. |
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Item 5. |
26 |
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Item 6. |
29 |
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Item 7. |
29 |
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Item 7A. |
38 |
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Item 8. |
40 |
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Item 9. |
77 |
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Item 9A. |
77 |
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Item 9B. |
80 |
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PART III. |
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Item 10. |
81 |
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Item 11. |
81 |
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Item 12. |
81 |
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Item 13. |
82 |
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Item 14. |
82 |
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PART IV. |
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Item 15. |
83 |
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Item 16. |
85 |
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86 |
Item 1. |
Business |
Item 1A. |
Risk Factors |
• | diversion of management’s attention to integrate Dogfish Head’s operations; |
• | disruption to the Company’s existing operations and plans or inability to effectively manage its expanded operations; |
• | failure, difficulties or delays in securing, integrating and assimilating information, financial systems, internal controls, operations, production processes and products, or the distribution channel for Dogfish Head’s businesses and product lines; |
• | potential loss of key Dogfish Head employees, suppliers, distributors and drinkers or other adverse effects on existing business relationships with suppliers, distributors and drinkers; |
• | potential inability to fully integrate Dogfish Head’s distributor into the Company’s existing wholesaler network |
• | adverse impact on overall profitability, if the Company’s expanded operations do not achieve the growth prospects, net revenues, earnings, cost or revenue synergies, or other financial results projected in the Company’s valuation models, or delays in the realization thereof; |
• | reallocation of amounts of capital from the Company’s other strategic initiatives; |
• | inaccurate assessment of undisclosed, contingent or other liabilities of the acquired operations, unanticipated costs associated with the Transaction, and an inability to recover or manage such liabilities and costs; and |
• | impacts as a result of purchase accounting adjustments, incorrect estimates made in the accounting for the Transaction or the potential future write-off of significant amounts of goodwill, intangible assets and/or other tangible assets if the Dogfish Head business does not perform in the future as expected, or other potential financial accounting or reporting impacts |
Item 1B. |
Unresolved Staff Comments |
Item 2. |
Properties |
Item 3. |
Legal Proceedings |
Item 4. |
Mine Safety Disclosures |
Item 5. |
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
ANNUAL RETURN PERCENTAGE Years Ending |
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Company Name / Index |
12/26/15 |
12/31/16 |
12/30/17 |
12/29/18 |
12/28/19 |
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The Boston Beer Company, Inc. |
-30.55 |
-17.31 |
12.51 |
24.97 |
58.59 |
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S&P 500 Index |
0.77 |
11.07 |
21.83 |
-5.20 |
32.97 |
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S&P 500 Beverages Index |
10.52 |
1.77 |
18.84 |
-3.29 |
23.99 |
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Peer Group |
25.35 |
6.10 |
-13.68 |
-30.08 |
0.20 |
INDEXED RETURNS Years Ending |
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Company Name / Index |
Base Period 12/27/14 |
12/26/15 |
12/31/16 |
12/30/17 |
12/29/18 |
12/28/19 |
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The Boston Beer Company, Inc. |
100 |
69.45 |
57.43 |
64.62 |
80.75 |
128.07 |
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S&P 500 Index |
100 |
100.77 |
111.92 |
136.35 |
129.26 |
171.88 |
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S&P 500 Beverages Index |
100 |
110.52 |
112.48 |
133.67 |
129.27 |
160.29 |
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Peer Group |
100 |
125.35 |
133.00 |
114.81 |
80.27 |
80.43 |
Period |
Total Number of Shares Purchased |
Average Price Paid per Share |
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (in thousands) |
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December 30, 2018 to February 2, 2019 |
116 |
$ | 127.05 |
— |
$ | 90,335 |
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February 3, 2019 to March 2, 2019 |
219 |
115.78 |
— |
90,335 |
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March 3, 2019 to March 30, 2019 |
13 |
187.54 |
— |
90,335 |
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March 31, 2019 to May 4, 2019 |
107 |
182.03 |
— |
90,335 |
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May 5, 2019 to June 1, 2019 |
79 |
175.67 |
— |
90,335 |
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June 2, 2019 to June 29, 2019 |
32 |
187.54 |
— |
90,335 |
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June 30, 2019 to August 3, 2019 |
73 |
114.14 |
— |
90,335 |
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August 4, 2019 to August 31, 2019 |
261 |
135.26 |
— |
90,335 |
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September 1, 2019 to September 28, 2019 |
— |
— |
— |
90,335 |
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September 29, 2019 to November 2, 2019 |
— |
— |
— |
90,335 |
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November 3, 2019 to November 30, 2019 |
— |
— |
— |
90,335 |
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December 1, 2019 to December 28, 2019 |
— |
— |
— |
90,335 |
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Total |
900 |
0 |
$ | 90,335 |
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Item 6. |
Selected Consolidated Financial Data |
Year Ended |
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Dec. 29 2018 |
Dec. 29 2018 |
Dec. 30 2017 (53 weeks) |
Dec. 31 2016 |
Dec. 26 2015 |
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(in thousands, except per share and net revenue per barrel data) |
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Income Statement Data: |
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Revenue |
$ | 1,329,108 |
$ | 1,057,495 |
$ | 921,736 |
$ | 968,994 |
$ | 1,024,040 |
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Less excise taxes |
79,284 |
61,846 |
58,744 |
62,548 |
64,106 |
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Net revenue |
1,249,824 |
995,649 |
862,992 |
906,446 |
959,934 |
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Cost of goods sold |
635,658 |
483,406 |
413,091 |
446,776 |
458,317 |
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Gross profit |
614,166 |
512,243 |
449,901 |
459,670 |
501,617 |
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Operating expenses: |
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Advertising, promotional and selling expenses |
355,613 |
304,853 |
258,649 |
244,213 |
273,629 |
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General and administrative expenses |
112,730 |
90,857 |
73,126 |
78,033 |
71,556 |
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Impairment (gain on sale) of assets, net |
911 |
652 |
2,451 |
(235 |
) | 258 |
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Settlement proceeds |
— |
— |
— |
— |
— |
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Total operating expenses |
469,254 |
396,362 |
334,226 |
322,011 |
345,443 |
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Operating income |
144,912 |
115,881 |
115,675 |
137,659 |
156,174 |
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Other (expense) income, net |
(542 |
) | 405 |
467 |
(538 |
) | (1,164 |
) | ||||||||||||
Income before provision for income taxes |
144,370 |
116,286 |
116,142 |
137,121 |
155,010 |
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Provision for income taxes |
34,329 |
23,623 |
17,093 |
49,772 |
56,596 |
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Net income |
$ | 110,041 |
$ | 92,663 |
$ | 99,049 |
$ | 87,349 |
$ | 98,414 |
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Net income per share - basic |
$ | 9.26 |
$ | 7.90 |
$ | 8.18 |
$ | 6.93 |
$ | 7.46 |
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Net income per share - diluted |
$ | 9.16 |
$ | 7.82 |
$ | 8.09 |
$ | 6.79 |
$ | 7.25 |
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Weighted average shares outstanding - basic |
11,781 |
11,622 |
12,035 |
12,533 |
13,123 |
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Weighted average shares outstanding - diluted |
11,908 |
11,734 |
12,180 |
12,796 |
13,520 |
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Balance Sheet Data: |
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Working capital |
$ | 37,999 |
$ | 111,057 |
$ | 66,590 |
$ | 99,719 |
$ | 112,443 |
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Total assets |
$ | 1,054,057 |
$ | 639,851 |
$ | 569,624 |
$ | 623,297 |
$ | 645,400 |
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Total long-term obligations |
$ | 83,832 |
$ | 59,020 |
$ | 44,343 |
$ | 75,196 |
$ | 73,019 |
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Total stockholders’ equity |
$ | 735,636 |
$ | 460,317 |
$ | 423,523 |
$ | 446,582 |
$ | 461,221 |
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Statistical Data: |
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Barrels sold |
5,307 |
4,286 |
3,768 |
4,019 |
4,256 |
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Net revenue per barrel |
$ | 235.51 |
$ | 232.30 |
$ | 229.05 |
$ | 225.55 |
$ | 225.55 |
Item 7. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Year Ended (in thousands, except per barrel) |
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Dec. 28 2019 |
Dec. 29 2018 |
Amount change |
% change |
Per barrel change |
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Barrels sold |
5,307 |
4,286 |
1,021 |
23.8 |
% | |||||||||||||||||||||||||||||||
Per barrel |
% of net revenue |
Per barrel |
% of net revenue |
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Net revenue |
$ | 1,249,824 |
$ | 235.51 |
100.0 |
% | $ | 995,649 |
$ | 232.30 |
100.0 |
% | $ | 254,175 |
25.5 |
% | $ | 3.21 |
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Cost of goods |
635,658 |
119.78 |
50.9 |
% | 483,406 |
112.79 |
48.6 |
% | 152,252 |
31.5 |
% | 6.99 |
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Gross profit |
614,166 |
115.73 |
49.1 |
% | 512,243 |
119.52 |
51.4 |
% | 101,923 |
19.9 |
% | (3.79 |
) | |||||||||||||||||||||||
Advertising, promotional and selling expenses |
355,613 |
67.01 |
28.5 |
% | 304,853 |
71.13 |
30.6 |
% | 50,760 |
16.7 |
% | (4.12 |
) | |||||||||||||||||||||||
General and administrative expenses |
112,730 |
21.24 |
9.0 |
% | 90,857 |
21.20 |
9.1 |
% | 21,873 |
24.1 |
% | 0.04 |
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Impairment of assets, net |
911 |
0.17 |
0.1 |
% | 652 |
0.15 |
0.1 |
% | 259 |
39.7 |
% | 0.02 |
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Total operating expenses |
469,254 |
88.42 |
37.5 |
% | 396,362 |
92.48 |
39.8 |
% | 72,892 |
18.4 |
% | (4.06 |
) | |||||||||||||||||||||||
Operating income |
144,912 |
27.31 |
11.6 |
% | 115,881 |
27.04 |
11.6 |
% | 29,031 |
25.1 |
% | 0.27 |
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Other (expense) income, net |
(542 |
) | (0.10 |
) | 0.0 |
% | 405 |
0.09 |
0.0 |
% | (947 |
) | -233.8 |
% | (0.19 |
) | ||||||||||||||||||||
Income before provision for income taxes |
144,370 |
27.20 |
11.6 |
% | 116,286 |
27.13 |
11.7 |
% | 28,084 |
24.2 |
% | 0.07 |
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Provision for income taxes |
34,329 |
6.47 |
2.7 |
% | 23,623 |
5.51 |
2.4 |
% | 10,706 |
45.3 |
% | 0.96 |
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Net income |
$ | 110,041 |
$ | 20.74 |
8.8 |
% | $ | 92,663 |
$ | 21.62 |
9.3 |
% | $ | 17,378 |
18.8 |
% | $ | (0.88 |
) | |||||||||||||||||
Item 7A. |
Quantitative and Qualitative Disclosures About Market Risk |
Item 8. |
Financial Statements and Supplementary Data |
• | We tested the effectiveness of controls over the valuation of the Dogfish Head brand trade name, including management’s controls over forecasts of revenue growth projections, the selection of the royalty rates, discount rates, as well as the methodologies utilized in the valuation models. |
• | We evaluated the reasonableness of management’s forecast of revenue growth projections by comparing the projections to historical results and calculating independent revenue projections based on objectively verifiable evidence. |
• | With the assistance of fair value specialists, we evaluated the reasonableness of the revenue growth projections, royalty rates, discount rates, and valuation methodologies by: |
• | Testing the source information underlying the determination of revenue growth projections, specifically the long-term growth rate, royalty rates, and discount rates, and testing the mathematical accuracy of the calculations. |
• | Developing a range of independent estimates for the discount rate and comparing those to the discount rate selected by management. |
/s/ Deloitte & Touche LLP |
Boston, Massachusetts |
February 19, 2020 |
Year Ended |
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December 28, |
December 29, |
December 30, |
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2019 |
2018 |
2017 |
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Revenue |
$ | |
$ | |
$ | |
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Less excise taxes |
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Net revenue |
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Cost of goods sold |
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Gross profit |
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Operating expenses: |
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Advertising, promotional and selling expenses |
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General and administrative expenses |
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Impairment of assets |
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Total operating expenses |
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Operating income |
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Other (expense) income, net: |
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Interest income |
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Other expense, net |
( |
) | ( |
) | ( |
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Total other (expense) income, net |
( |
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Income before provision for income tax |
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Provision for income taxes |
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Net income |
$ | |
$ | |
$ | |
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Net income per common share - basic |
$ | |
$ | |
$ | |
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Net income per common share - diluted |
$ | |
$ | |
$ | |
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Weighted-average number of common shares - Class A basic |
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Weighted-average number of common shares - Class B basic |
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Weighted-average number of common shares - diluted |
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Net income |
$ | |
$ | |
$ | |
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Other comprehensive (loss) income, net of tax: |
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Currency translation adjustment |
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