BOSTON BEER CO INC

A. Organization and Basis of Presentation

The Boston Beer Company, Inc. and certain subsidiaries (the “Company”) are engaged in the business of selling alcohol beverages throughout the United States and in selected international markets, under the tradenames “The Boston Beer Company®”, “Twisted Tea Brewing Company®”, “Hard Seltzer Beverage Company”, “Angry Orchard® Cider Company”, “Dogfish Head® Craft Brewery”, “Dogfish Head Distilling Co.”, “Angel City® Brewing Company”, “Coney Island® Brewing Company”, "Green Rebel Brewing Co.", "Sun Cruiser Beverage Co.", "Lytt Beverage Company", "Rally Dog Beverage Co.", and "Sinless Spirits Company".

The accompanying unaudited condensed consolidated balance sheet as of September 26, 2026, and the unaudited condensed consolidated statements of comprehensive operations, stockholders’ equity, and cash flows for the interim periods ended September 26, 2026 and September 27, 2025, respectively, have been prepared by the Company in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnotes normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. All intercompany accounts and transactions have been eliminated. Certain reclassifications have been made to previously reported captioned amounts within operating cash flow activities to conform to the fiscal 2026 presentation of disaggregated activity. These condensed consolidated financial statements should be read in conjunc tion with the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 27, 2025.

In the opinion of the Company’s management, the Company’s unaudited condensed consolidated balance sheet as of September 26, 2026 and the results of its condensed consolidated comprehensive operations, stockholders’ equity, and cash flows for the interim periods ended September 26, 2026 and September 27, 2025, reflect all adjustments necessary to present fairly the results of the interim periods presented. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year.

B. Recent Accounting Pronouncements

New accounting pronouncements are issued periodically by the FASB and are adopted by the Company as of the specified effective dates. Unless otherwise disclosed below, the Company believes that recently issued and adopted pronouncements will not have a material impact on the Company’s financial position, results of operations and cash flows or do not apply to the Company’s operations.

In November 2024, the FASB issued ASU 2024-03—Income Statement - Reporting Comprehensive Income - Expenses Disaggregation Disclosures (SubTopic 220-40): Disaggregation of Income Statement Expenses. This ASU was issued to address investor requests for more detailed information about the types of expenses in commonly presented expense captions (such as cost of sales, SG&A, and research and development). This ASU is effective for public entities for annual periods beginning after December 15, 2026. Early adoption is permitted. ASU 2024-03 will be effective for the Company in the first quarter of its fiscal year ending December 25, 2027. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements.

In July 2025, the FASB issued ASU 2025‑05—Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical expedient intended to simplify the estimation of expected credit losses for current accounts receivable and contract assets arising under Topic 606, Revenue from Contracts with Customers. The ASU became effective for annual and interim periods beginning after December 15, 2025. The Company adopted ASU 2025‑05 in thefirst quarter of 2026 and elected the practical expedient to assume that current conditions as of the balance sheet date remain unchanged over the remaining life of current accounts receivable when estimating expected credit losses. The adoption of this ASUdid not have a material impact on the Company’s consolidated financial statements.

In December 2025, the FASB issued ASU 2025-11—Interim Reporting (Topic 270): Narrow-Scope Improvements. This ASU was issued to improve the navigability of the interim reporting guidance and to clarify when and how the interim disclosure requirements in Topic 270 apply. The amendments also introduce a disclosure principle requiring entities to disclose events and changes since the end of the most recent annual reporting period that have a material impact on the entity. The ASU does not change the fundamental nature of interim reporting or significantly expand or reduce existing interim disclosure requirements. ASU 2025-11 is effective for public entities for interim reporting periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements.

C. Revenue Recognition

The breakdown of revenue during the thirteen and thirty-nine weeks ended September 26, 2026 and September 27, 2025 were as follows:

The Company recognizes revenue when obligations under the terms of a contract with its customer are satisfied; generally, this occurs with the transfer of title of its products. Revenue is measured as the amount of consideration expected to be received in exchange for transferring products. If the conditions for revenue recognition are not met, the Company defers the revenue until all conditions are met. As of September 26, 2026 and December 27, 2025, the Company has deferred $18.4 million and $13.3 million, respectively, in revenue related to product shipped prior to these dates. These amounts are included in accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheets.

Customer promotional discount programs are entered into by the Company with distributors for certain periods of time. The reimbursements for discounts to distributors are recorded as reductions to net revenue and were$22.7 million and $63.7 million for the thirteen and thirty-nine weeks ended September 26, 2026, respectively, and $19.1 million and $53.0 million for the thirteen and thirty-nine weeks ended September 27, 2025, respectively. The agreed-upon discount rates are applied to certain distributors' sales to retailers, based on volume metrics, in order to determine the total discounted amount. The computation of the discount allowance requires that management make certain estimates and assumptions that affect the timing and amounts of revenue and liabilities recorded. Actual promotional discounts owed and paid have historically been in line with allowances recorded by the Company; however, the amounts could differ from the estimated allowance.

Customer programs and incentives are a common practice in the alcohol beverage industry. Amounts paid in connection with customer programs and incentives are recorded as reductions to net revenue or as advertising, promotional and selling expenses, based on the nature of the expenditure. Customer incentives and other payments made to distributors are primarily based upon performance of certain marketing and advertising activities. Depending on applicable state laws and regulations, these activities promoting the Company's products may include, but are not limited to point-of-sale and merchandise placement, samples, product displays, promotional programs at retail locations and meals, travel and entertainment. Amounts paid to customers in connection with these programs that were recorded as reductions to net revenue or as advertising, promotional and selling expenses for the thirteen and thirty-nine weeks ended September 26, 2026 and September 27, 2025 was as follows:

Costs recognized in net revenues include, but are not limited to, promotional discounts, sales incentives and certain other promotional activities. Costs recognized in advertising, promotional and selling expenses include point of sale materials, samples and advertising expenditures in local markets. These costs are recorded as incurred, generally when invoices are received; however certain estimates are required at the period end. Estimates are based on historical and projected experience for each type of program or customer and have historically been in line with actual costs incurred.

D. Inventories

Inventories consist of raw materials, work in process and finished goods which are stated at the lower of cost, determined on the first-in, first-out basis, or net realizable value. Raw materials principally consist of hops, packaging, flavorings, fruit juices, and other brewing materials. The Company’s goal is to maintain on hand a supply of at least one year for essential hop varieties, in order to limit the risk of an unexpected reduction in supply. Inventories are generally classified as current assets. The Company classifies hops inventory in excess of two years of forecasted usage in other long-term assets. The cost elements of work in process and finished goods inventory consist of raw materials, direct labor and manufacturing overhead. Inventories consist of the following:

As of September 26, 2026 and December 27, 2025, the Company has recorded inventory obsolescence reserves of$10.1 million and $11.1 million, respectively.

E. Goodwill and Intangible Assets

The Company has recorded intangible assets with indefinite lives and goodwill for which impairment testing is required at least annually or more frequently if events or circumstances indicate that these assets might be impaired. The Company performs its annual impairment tests and re-evaluates the useful lives of other intangible assets with indefinite lives at the annual impairment test measurement date in the third quarter of each fiscal year or when circumstances arise that indicate a possible impairment or change in useful life might exist.

Goodwill. The guidance for goodwill impairment testing allows an entity to assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the estimated fair value of a reporting unit, of which the Company has one, is less than its carrying amount or to proceed directly to performing a quantitative impairment test. Under the quantitative assessment, the estimated fair value of the Company’s reporting unit is compared to its carrying value, including goodwill. The estimate of fair value of the Company’s reporting unit is generally calculated based on an income approach using the discounted cash flow method supplemented by the market approach which considers the Company’s market capitalization and enterprise value. If the estimated fair value of the Company’s reporting unit is less than the carrying value of its reporting unit, a goodwill impairment will be recognized. In estimating the fair value of the Company’s reporting unit, management must make assumptions and projections regarding such items as future cash flows, future revenues, future earnings, cost of capital, and other factors. The assumptions used in the estimate of fair value are based on historical trends and the projections and assumptions that are used in the latest operating plans. These assumptions reflect management’s estimates of future economic and competitive conditions and are, therefore, subject to change as a result of changing market conditions. If these estimates or their related assumptions change in the future, the Company may be required to recognize an impairment loss for the Company’s goodwill which could have a material adverse impact on the Company’s financial statements.

No impairment of goodwill was recorded in any period.

Intangible assets. The Company’s intangible assets consist primarily of a trademark and customer relationships obtained through the Company’s Dogfish Head acquisition. Customer relationships are amortized over their estimated useful lives and beginning in the fourth quarter of 2024, the Company changed the indefinite useful life Dogfish Head trademark asset and began amortizing the remaining balance over an estimated useful life of 10 years.

In the third quarter of 2026, the Company conducted a trigger event analysis on its amortizing intangible assets. The review did not identify any indicators of impairment, and as a result, no impairment charges were recorded.

The Company’s intangible assets as of September 26, 2026 and December 27, 2025 were as follows:

Amortization expense in the thirteen and thirty-nine weeks ended September 26, 2026 was approximately $0.4 million and $1.3 million. The Company expects to record future amortization expense as follows:

F. Third-Party Production Payments

During the thirteen and thirty-nine weeks ended September 26, 2026, the Company produced approximately 98% and 92%, respectively, of its domestic volume at Company-owned production facilities. During the thirteen and thirty-nine weeks ended September 27, 2025, the Company produced approximately 90% and 83%, respectively, of its domestic volume at Company-owned production facilities. In the normal course of its business, the Company has historically entered into various production arrangements with other beverage companies. Pursuant to these arrangements, the Company generally supplies raw materials and packaging to those companies and incurs conversion fees for labor at the time the liquid is produced and packaged.

The Company currently has production services agreements with subsidiaries of City Brewing Company, LLC (“City Brewing”). In August 2025, the Company extended the terms and amended certain fees under these agreements. The contracts now expire on December 31, 2028 and the Company retains the contractual right to extend these agreements annually through December 31, 2035. These City Brewing agreements include a minimum capacity availability commitment by City Brewing and the Company is obligated to meet annual minimum volume commitments and is subject to contractual shortfall fees, if these annual minimum volume commitments are not met.

During the thirteen and thirty-nine weeks ended September 26, 2026, City Brewing supplied approximately 2% and 8%, respectively, of the Company’s domestic shipment volume. During the thirteen and thirty-nine weeks ended September 27, 2025, City Brewing supplied approximately 10% and 17%, respectively, of the Company’s domestic shipment volume. In accordance with the production services agreement, the Company has made payments to City Brewing which were principally used for capital improvements at City Brewing facilities. These payments are being expensed over the terms of the agreements. During the thirteen and thirty-nine weeks ended September 26, 2026, third-party production prepayment expense was $0.6 million and $1.8 million, respectively. During the thirteen and thirty-nine weeks ended September 27, 2025, third-party production prepayment expense was $7.1 million and $16.4 million, respectively. The remaining net book value of these third-party production prepayments is $5.3 million as of September 26, 2026, which is expected to be expensed to cost of goods sold ratably based on committed annual production capacity through December 31, 2028.

In December of 2024, the Company announced an amendment and restatement in its entirety of an existing production agreement with a third-party supplier, Rauch North America Inc ("Rauch"). The amended and restated Rauch agreement includes quarterly minimum payments that total $4.1 million annually at zero volume and a termination fee of $5 million with 12 months written notice. The initial term of the agreement expires on December 31, 2031 with provisions to extend.

At current production volume projections, the Company believes that it will fall short of its future annual volume commitments under the City Brewing and Rauch agreements and will incur shortfall fees. The Company expenses the shortfall fees during the contractual period, when such fees are incurred, as a component of cost of goods sold. During the thirteen weeks and thirty-nine weeks ended September 26, 2026, the Company incurred $1.0 million and $3.1 million, respectively, in shortfall fees. During the thirteen weeks and thirty-nine weeks ended September 27, 2025, the Company incurred $1.0 million and $7.5 million, respectively, in shortfall fees. At current volume projections, the Company anticipates that it will recognize approximately $22 million of shortfall fees in the future, with $4 million forecasted to be expensed in the remainder of 2026 and $18 million expected to be expensed in future years thereafter.

As of September 26, 2026, if volume for the remaining term of the City Brewing, Rauch and other production arrangements was zero, the total contractual shortfall and termination fees, with advance notice as specified in the related contractual agreements, would total approximately $28 million with $4 million due in 2026 and $24 million due in future years thereafter.

The Company has regular discussions with its third-party production suppliers related to its future capacity needs and the terms of its contracts. Changes to volume estimates, future amendments or cancellations of existing contracts could accelerate or change total shortfall fees expected to be incurred.