##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For The Quarterly Period Ended September 30, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number 0-26542
 REDHOOK ALE BREWERY, INCORPORATED
  Washington
    
    91-1141254(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 14300 NE 145 th Street, Suite 210  Woodinville, Washington 98072-9045
 (425) 483-3232
  þ o
  o o þ
  o þ




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##### 



REDHOOK ALE BREWERY, INCORPORATED
FORM 10-Q
For The Quarterly Period Ended September 30, 2007
 TABLE OF CONTENTS
 PagePART I. Financial InformationITEM 1. Financial StatementsBalance Sheets as of September 30, 2007 and December 31, 2006
    
    
    3Statements of Operations for the
Three and Nine Months Ended September 30, 2007 and 2006
    
    
    4Statements of Cash Flows for the
Nine Months Ended September 30, 2007 and 2006
    
    
    5Notes to Financial Statements
    
    
    6ITEM 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    14ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    34ITEM 4. Controls and Procedures
    
    
    34PART II. Other InformationITEM 1. Legal Proceedings
    
    
    34ITEM 1A. Risk Factors
    
    
    34ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    35ITEM 3. Defaults Upon Senior Securities
    
    
    35ITEM 4. Submission of Matters to a Vote of Security Holders
    
    
    36ITEM 5. Other Information
    
    
    36ITEM 6. Exhibits
    
    
    36EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 31.3EXHIBIT 32.1EXHIBIT 32.2EXHIBIT 32.3
  2




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PART I.
 
 ITEM 1. Financial Statements
 REDHOOK ALE BREWERY, INCORPORATED
 
 BALANCE SHEETS
 September 30,
    
    
    December 31,2007
    
    
    2006(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    10,593,862
    
    
    $
    9,435,073Accounts receivable, net of allowance for doubtful accounts of
$34,854 and $68,808 in 2007 and 2006, respectively
    
    
    2,545,910
    
    
    
    1,842,388Trade receivable from Craft Brands
    
    
    846,391
    
    
    
    854,507Inventories, net
    
    
    2,662,172
    
    
    
    2,571,732Deferred income tax asset, net
    
    
    722,688
    
    
    
    506,886Other
    
    
    321,614
    
    
    
    203,594Total current assets
    
    
    17,692,637
    
    
    
    15,414,180Fixed assets, net
    
    
    56,815,550
    
    
    
    58,076,434Investment in Craft Brands
    
    
    115,868
    
    
    
    127,555Other assets
    
    
    496,227
    
    
    
    222,573Total assets
    
    $
    75,120,282
    
    
    $
    73,840,742LIABILITIES AND COMMON STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    2,403,103
    
    
    $
    2,233,689Trade payable to Craft Brands
    
    
    478,156
    
    
    
    324,900Accrued salaries, wages and payroll taxes
    
    
    1,397,277
    
    
    
    1,547,482Refundable deposits
    
    
    2,705,032
    
    
    
    2,153,127Other accrued expenses
    
    
    770,318
    
    
    
    380,394Current portion of long-term debt and capital lease obligations
    
    
    465,281
    
    
    
    464,648Total current liabilities
    
    
    8,219,167
    
    
    
    7,104,240Long-term debt and capital lease obligations, net of current portion
    
    
    3,972,667
    
    
    
    4,321,616Deferred income tax liability, net
    
    
    1,776,229
    
    
    
    1,548,699Other liabilities
    
    
    213,034
    
    
    
    173,768Common stockholders equity:Common stock, par value $0.005 per share, authorized, 50,000,000
shares; issued and outstanding, 8,354,239 shares in 2007 and
8,281,489 shares in 2006
    
    
    41,771
    
    
    
    41,407Additional paid-in capital
    
    
    69,303,848
    
    
    
    68,977,402Retained earnings (deficit)
    
    
    (8,406,434
    )
    
    
    (8,326,390
    )Total common stockholders equity
    
    
    60,939,185
    
    
    
    60,692,419Total liabilities and common stockholders equity
    
    $
    75,120,282
    
    
    $
    73,840,742
 The accompanying notes are an integral part of these financial statements.
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REDHOOK ALE BREWERY, INCORPORATED
 
 STATEMENTS OF OPERATIONS
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Sales
    
    $
    12,357,004
    
    
    $
    10,813,132
    
    
    $
    35,383,514
    
    
    $
    30,625,893Less excise taxes
    
    
    1,285,374
    
    
    
    1,169,670
    
    
    
    3,866,318
    
    
    
    3,246,259Net sales
    
    
    11,071,630
    
    
    
    9,643,462
    
    
    
    31,517,196
    
    
    
    27,379,634Cost of sales
    
    
    9,653,674
    
    
    
    8,011,838
    
    
    
    27,307,237
    
    
    
    23,364,532Gross profit
    
    
    1,417,956
    
    
    
    1,631,624
    
    
    
    4,209,959
    
    
    
    4,015,102Selling, general and administrative expenses
    
    
    2,429,821
    
    
    
    1,776,501
    
    
    
    6,609,990
    
    
    
    5,289,971Income from equity investment in Craft Brands
    
    
    562,210
    
    
    
    743,245
    
    
    
    2,210,336
    
    
    
    2,076,168Operating income (loss)
    
    
    (449,655
    )
    
    
    598,368
    
    
    
    (189,695
    )
    
    
    801,299Interest expense
    
    
    80,875
    
    
    
    92,094
    
    
    
    246,093
    
    
    
    259,239Other income, net
    
    
    120,589
    
    
    
    56,783
    
    
    
    404,996
    
    
    
    198,844Income (loss) before income taxes
    
    
    (409,941
    )
    
    
    563,057
    
    
    
    (30,792
    )
    
    
    740,904Income tax provision (benefit)
    
    
    (121,373
    )
    
    
    199,197
    
    
    
    49,252
    
    
    
    218,245Net income (loss)
    
    $
    (288,568
    )
    
    $
    363,860
    
    
    $
    (80,044
    )
    
    $
    522,659Basic earnings (loss) per share
    
    $
    (0.03
    )
    
    $
    0.04
    
    
    $
    (0.01
    )
    
    $
    0.06Diluted earnings (loss) per share
    
    $
    (0.03
    )
    
    $
    0.04
    
    
    $
    (0.01
    )
    
    $
    0.06
 The accompanying notes are an integral part of these financial statements.
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REDHOOK ALE BREWERY, INCORPORATED
 
 STATEMENTS OF CASH FLOWS
 Nine Months EndedSeptember 30,2007
    
    
    2006Operating ActivitiesNet income
    
    $
    (80,044
    )
    
    $
    522,659Adjustments to reconcile net income to net cash
provided by operating activities:(Gain) loss on disposition of fixed assets
    
    
    (2,757
    )
    
    
    Depreciation and amortization
    
    
    2,133,764
    
    
    
    2,256,996Income from equity investment in Craft Brands
less than (in excess of) cash distributions
    
    
    11,687
    
    
    
    (81,382
    )Stock-based compensation
    
    
    169,400
    
    
    
    53,760Deferred income taxes
    
    
    11,728
    
    
    
    218,245Changes in operating assets and liabilities
    
    
    (159,295
    )
    
    
    455,790Net cash provided by operating activities
    
    
    2,084,483
    
    
    
    3,426,068Investing ActivitiesExpenditures for fixed assets
    
    
    (1,092,385
    )
    
    
    (811,868
    )Proceeds from disposition of fixed assets
    
    
    357,597
    
    
    
    Net cash used in investing activities
    
    
    (734,788
    )
    
    
    (811,868
    )Financing ActivitiesPrincipal payments on debt and capital lease obligations
    
    
    (348,316
    )
    
    
    (345,267
    )Issuance of common stock
    
    
    157,410
    
    
    
    55,183Net cash used in financing activities
    
    
    (190,906
    )
    
    
    (290,084
    )Increase (decrease) in cash and cash equivalents
    
    
    1,158,789
    
    
    
    2,324,116Cash and cash equivalents:Beginning of period
    
    
    9,435,073
    
    
    
    6,435,609End of period
    
    $
    10,593,862
    
    
    $
    8,759,725
 The accompanying notes are an integral part of these financial statements.
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REDHOOK ALE BREWERY, INCORPORATED
 
 NOTES TO FINANCIAL STATEMENTS
 1. Basis of Presentation
  2. Agreement and Plan of Merger
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REDHOOK ALE BREWERY, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (continued)
 3. Inventories
  September 30,
    
    
    December 31,2007
    
    
    2006Raw materials
    
    $
    344,114
    
    
    $
    666,938Work in process
    
    
    913,287
    
    
    
    622,352Finished goods, net
    
    
    381,155
    
    
    
    247,333Promotional merchandise, net
    
    
    420,621
    
    
    
    538,339Packaging materials
    
    
    602,995
    
    
    
    496,770$
    2,662,172
    
    
    $
    2,571,732
  4. Craft Brands Alliance LLC
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REDHOOK ALE BREWERY, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (continued)
   Consolidation of Variable
Interest Entities  an Interpretation of ARB No. 51 The Equity Method of Accounting for
Investments in Common Stock
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REDHOOK ALE BREWERY, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (continued)
    5. Common Stockholders Equity
   6. Earnings (Loss) per Share
 Earnings per
Share
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REDHOOK ALE BREWERY, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (continued)
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Numerator for basic and diluted
net income (loss) per share  net income (loss)
    
    $
    (288,568
    )
    
    $
    363,860
    
    
    $
    (80,044
    )
    
    $
    522,659Denominator for basic net income (loss) per share  weighted average common shares outstanding
    
    
    8,349,976
    
    
    
    8,260,167
    
    
    
    8,323,764
    
    
    
    8,242,628Dilutive effect of stock options on
weighted average common shares
    
    
    
    
    
    
    267,011
    
    
    
    
    
    
    
    260,974Denominator for diluted net income (loss) per share
    
    
    8,349,976
    
    
    
    8,527,178
    
    
    
    8,323,764
    
    
    
    8,503,602Basic net income (loss) per share
    
    $
    (0.03
    )
    
    $
    0.04
    
    
    $
    (0.01
    )
    
    $
    0.06Diluted net income (loss) per share
    
    $
    (0.03
    )
    
    $
    0.04
    
    
    $
    (0.01
    )
    
    $
    0.06
 7. Stock-Based Compensation
    Share-Based Payment Accounting for Stock Issued to Employees Accounting for Stock-Based Compensation
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REDHOOK ALE BREWERY, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (continued)
  Share-Based Payment
    11




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REDHOOK ALE BREWERY, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (continued)
  Weighted
    
    WeightedAverage
    
    AverageShares
    
    Exercise
    
    RemainingSubject to
    
    Price per
    
    Contractual
    
    AggregateOptions
    
    Share
    
    Life (Yrs)
    
    Intrinsic ValueOutstanding at January 1, 2007
    
    
    783,440
    
    
    $
    2.89
    
    
    
    4.10
    
    
    $
    1,950,534Granted
    
    
    Exercised
    
    
    (48,550
    )
    
    $
    3.24Canceled
    
    
    (39,050
    )
    
    $
    7.99Outstanding at September 30, 2007
    
    
    695,840
    
    
    $
    2.58
    
    
    
    3.58
    
    
    $
    2,570,786Exercisable at September 30, 2007
    
    
    695,840
    
    
    $
    2.58
    
    
    
    3.58
    
    
    $
    2,570,786
   Average
    
    WeightedNumber
    
    Remaining
    
    AverageRange of Exercise
    
    
    
    
    
    Outstanding
    
    Contractual
    
    ExercisePrices
    
    
    
    
    
    & Exercisable
    
    Life (Yrs)
    
    Price$1.485 to $1.815
    
    
    
    
    
    
    8,000
    
    
    
    3.14
    
    
    $
    1.650$1.816 to $1.865
    
    
    
    
    
    
    324,840
    
    
    
    3.84
    
    
    $
    1.865$1.866 to $2.180
    
    
    
    
    
    
    144,834
    
    
    
    4.95
    
    
    $
    2.028$2.181 to $3.150
    
    
    
    
    
    
    34,666
    
    
    
    6.72
    
    
    $
    2.768$3.151 to $5.730
    
    
    
    
    
    
    183,500
    
    
    
    1.47
    
    
    $
    4.269$1.485 to $5.730
    
    
    
    
    
    
    695,840
    
    
    
    3.58
    
    
    $
    2.575
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REDHOOK ALE BREWERY, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (continued)
 8. Income Taxes
 Accounting for
Income Taxes
 Accounting for Uncertainty in Income Taxes-an
interpretation of FASB Statement No. 109 Accounting for Contingencies
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ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 This quarterly report on Form 10-Q includes forward-looking statements. Generally, the words
believe, expect, intend, estimate, anticipate, project, will and similar expressions
or their negatives identify forward-looking statements, which generally are not historical in
nature. These statements are based upon assumptions and projections that the Company believes are
reasonable, but are by their nature inherently uncertain. Many possible events or factors could
affect the Companys future financial results and performance, and could cause actual results or
performance to differ materially from those expressed, including those risks and uncertainties
described in Part I, Item 1A. Risk Factors in the Companys Annual Report on Form 10-K for the
year ended December 31, 2006, and those described from time to time in the Companys future reports
filed with the Securities and Exchange Commission. Caution should be taken not to place undue
reliance on these forward-looking statements, which speak only as of the date of this quarterly
report.
 The following discussion and analysis should be read in conjunction with the Financial Statements
and Notes thereto of Redhook Ale Brewery, Incorporated (the Company or Redhook) included
herein, as well as the audited Financial Statements and Notes and Managements Discussion and
Analysis of Financial Condition and Results of Operations contained in the Companys Annual Report
on Form 10-K for the fiscal year ended December 31, 2006. The discussion and analysis includes
period-to-period comparisons of the Companys financial results. Although period-to-period
comparisons may be helpful in understanding the Companys financial results, the Company believes
that they should not be relied upon as an accurate indicator of future performance.
 Overview
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Results of Operations
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Sales
    
    
    111.6
    %
    
    
    112.1
    %
    
    
    112.3
    %
    
    
    111.9
    %Less excise taxes
    
    
    11.6
    
    
    
    12.1
    
    
    
    12.3
    
    
    
    11.9Net sales
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Cost of sales
    
    
    87.2
    
    
    
    83.1
    
    
    
    86.6
    
    
    
    85.3Gross profit
    
    
    12.8
    
    
    
    16.9
    
    
    
    13.4
    
    
    
    14.7Selling, general and administrative expenses
    
    
    21.9
    
    
    
    18.4
    
    
    
    21.0
    
    
    
    19.4Income from equity investment in Craft Brands
    
    
    5.0
    
    
    
    7.7
    
    
    
    7.0
    
    
    
    7.6Operating income (loss)
    
    
    (4.1
    )
    
    
    6.2
    
    
    
    (0.6
    )
    
    
    2.9Interest expense
    
    
    0.7
    
    
    
    1.0
    
    
    
    0.8
    
    
    
    0.9Other income, net
    
    
    1.1
    
    
    
    0.7
    
    
    
    1.3
    
    
    
    0.7Income (loss) before income taxes
    
    
    (3.7
    )
    
    
    5.9
    
    
    
    (0.1
    )
    
    
    2.7Income tax provision (benefit)
    
    
    (1.1
    )
    
    
    2.1
    
    
    
    0.2
    
    
    
    0.8Net income (loss)
    
    
    (2.6
    )%
    
    
    3.8
    %
    
    
    (0.3
    )%
    
    
    1.9
    %
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Three Months Ended September 30, 2007 Compared to Three Months Ended September 30, 2006
  Three Months EndedSeptember 30,Increase /
    
    
    %2007
    
    
    2006
    
    
    (Decrease)
    
    
    ChangeSales
    
    $
    12,357,004
    
    
    $
    10,813,132
    
    
    $
    1,543,872
    
    
    
    14.3
    %Less excise taxes
    
    
    1,285,374
    
    
    
    1,169,670
    
    
    
    115,704
    
    
    
    9.9Net sales
    
    
    11,071,630
    
    
    
    9,643,462
    
    
    
    1,428,168
    
    
    
    14.8Cost of sales
    
    
    9,653,674
    
    
    
    8,011,838
    
    
    
    1,641,836
    
    
    
    20.5Gross profit
    
    
    1,417,956
    
    
    
    1,631,624
    
    
    
    (213,668
    )
    
    
    13.1Selling, general and administrative expenses
    
    
    2,429,821
    
    
    
    1,776,501
    
    
    
    653,320
    
    
    
    36.8Income from equity investment in Craft Brands
    
    
    562,210
    
    
    
    743,245
    
    
    
    (181,035
    )
    
    
    24.4Operating income (loss)
    
    
    (449,655
    )
    
    
    598,368
    
    
    
    (1,048,023
    )
    
    
    175.1Interest expense
    
    
    80,875
    
    
    
    92,094
    
    
    
    (11,219
    )
    
    
    12.2Other income, net
    
    
    120,589
    
    
    
    56,783
    
    
    
    63,806
    
    
    
    112.4Income (loss) before income taxes
    
    
    (409,941
    )
    
    
    563,057
    
    
    
    (972,998
    )
    
    
    172.8Income tax provision (benefit)
    
    
    (121,373
    )
    
    
    199,197
    
    
    
    (320,570
    )
    
    
    160.9Net income (loss)
    
    $
    (288,568
    )
    
    $
    363,860
    
    
    $
    (652,428
    )
    
    
    179.3
    %
 Sales.
 
    
    An increase in overall pricing and shipments in the midwest and eastern United
States resulted in a $391,000 increase in 2007 third quarter sales;
    
    An increase in overall pricing and shipments in the western United States (not
including beer brewed on a contract basis) resulted in a $120,000 increase in 2007
third quarter sales;
    
    An increase in shipments of beer brewed on a contract basis, slightly offset by a
decrease in pricing of these shipments, contributed a $770,000 increase in 2007 third
quarter sales; and
    
    Pub and other sales increased $321,000 in the third quarter of 2007.
 Shipments
 Three Months Ended September 30,2007
    
    2006Draft
    
    Bottle
    
    Total
    
    Draft
    
    Bottle
    
    Total
    
    Increase /
    
    %Shipments
    
    Shipments
    
    Shipments
    
    Shipments
    
    Shipments
    
    Shipments
    
    (Decrease)
    
    ChangeA-B
    
    
    12,000
    
    
    
    15,900
    
    
    
    27,900
    
    
    
    11,900
    
    
    
    15,300
    
    
    
    27,200
    
    
    
    700
    
    
    
    2.6
    %Craft Brands
    
    
    9,400
    
    
    
    21,900
    
    
    
    31,300
    
    
    
    9,600
    
    
    
    21,000
    
    
    
    30,600
    
    
    
    700
    
    
    
    2.3Contract brewing
    
    
    9,600
    
    
    
    9,500
    
    
    
    19,100
    
    
    
    13,800
    
    
    
    
    
    
    
    13,800
    
    
    
    5,300
    
    
    
    38.4Pubs and other
    
    
    1,300
    
    
    
    400
    
    
    
    1,700
    
    
    
    1,100
    
    
    
    200
    
    
    
    1,300
    
    
    
    400
    
    
    
    30.8Total shipped
    
    
    32,300
    
    
    
    47,700
    
    
    
    80,000
    
    
    
    36,400
    
    
    
    36,500
    
    
    
    72,900
    
    
    
    7,100
    
    
    
    9.7
    %
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Widmer Hefeweizen Widmer Hefeweizen Widmer
Hefeweizen Widmer Hefeweizen Widmer Hefeweizen Widmer
Hefeweizen
 18




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Widmer Hefeweizen
    Pricing and Fees.
  19




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st
   Retail Operations and Other Sales
 Excise Taxes
 Cost of Sales.
  20




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Widmer Hefeweizen
  Selling, General and Administrative Expenses
 Income from Equity Investment in Craft Brands.
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##### Table of Contents



Interest Expense.
 Other Income, net
 Income Taxes.
 Craft Brands Alliance LLC
 The Equity Method of Accounting for
Investments in Common Stock Exhibits and Financial Statement Schedules
  Sales.
 Cost of Sales.
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##### Table of Contents



Selling, General and Administrative Expenses
 Net Income
 Nine Months Ended September 30, 2007 Compared to Nine Months Ended September 30, 2006
  Nine Months EndedSeptember 30,Increase /
    
    
    %2007
    
    
    2006
    
    
    (Decrease)
    
    
    ChangeSales
    
    $
    35,383,514
    
    
    $
    30,625,893
    
    
    $
    4,757,621
    
    
    
    15.5
    %Less excise taxes
    
    
    3,866,318
    
    
    
    3,246,259
    
    
    
    620,059
    
    
    
    19.1Net sales
    
    
    31,517,196
    
    
    
    27,379,634
    
    
    
    4,137,562
    
    
    
    15.1Cost of sales
    
    
    27,307,237
    
    
    
    23,364,532
    
    
    
    3,942,705
    
    
    
    16.9Gross profit
    
    
    4,209,959
    
    
    
    4,015,102
    
    
    
    194,857
    
    
    
    4.9Selling, general and administrative expenses
    
    
    6,609,990
    
    
    
    5,289,971
    
    
    
    1,320,019
    
    
    
    25.0Income from equity investment in Craft Brands
    
    
    2,210,336
    
    
    
    2,076,168
    
    
    
    134,168
    
    
    
    6.5Operating income (loss)
    
    
    (189,695
    )
    
    
    801,299
    
    
    
    (990,994
    )
    
    
    123.7Interest expense
    
    
    246,093
    
    
    
    259,239
    
    
    
    (13,146
    )
    
    
    5.1Other income, net
    
    
    404,996
    
    
    
    198,844
    
    
    
    206,152
    
    
    
    103.7Income (loss) before income taxes
    
    
    (30,792
    )
    
    
    740,904
    
    
    
    (771,696
    )
    
    
    104.2Income tax provision (benefit)
    
    
    49,252
    
    
    
    218,245
    
    
    
    (168,993
    )
    
    
    77.4Net income (loss)
    
    $
    (80,044
    )
    
    $
    522,659
    
    
    $
    (602,703
    )
    
    
    115.3
    %
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##### Table of Contents



Sales.
 
    
    An increase in overall pricing and shipments in the midwest and eastern United
States resulted in a $1,425,000 increase in 2007 year-to-date sales;
    
    A decrease in overall pricing and shipments in the western United States (not
including beer brewed on a contract basis) resulted in a $203,000 decrease in 2007
year-to-date sales;
    
    An increase in shipments of beer brewed on a contract basis, partially offset by a
decrease in pricing of these shipments, contributed a $3,128,000 increase in 2007
year-to-date sales; and
    
    Pub and other sales increased $576,000 in the first nine months of 2007.
 Shipments
 Nine Months Ended September 30,2007
    
    2006Draft
    
    Bottle
    
    Total
    
    Draft
    
    Bottle
    
    Total
    
    Increase /
    
    %Shipments
    
    Shipments
    
    Shipments
    
    Shipments
    
    Shipments
    
    Shipments
    
    (Decrease)
    
    ChangeA-B
    
    
    35,700
    
    
    
    47,000
    
    
    
    82,700
    
    
    
    35,200
    
    
    
    43,200
    
    
    
    78,400
    
    
    
    4,300
    
    
    
    5.5
    %Craft Brands
    
    
    27,900
    
    
    
    64,800
    
    
    
    92,700
    
    
    
    29,000
    
    
    
    65,700
    
    
    
    94,700
    
    
    
    (2,000
    )
    
    
    (2.1
    )Contract brewing
    
    
    37,400
    
    
    
    24,200
    
    
    
    61,600
    
    
    
    30,600
    
    
    
    
    
    
    
    30,600
    
    
    
    31,000
    
    
    
    101.3Pubs and other
    
    
    3,200
    
    
    
    900
    
    
    
    4,100
    
    
    
    2,700
    
    
    
    600
    
    
    
    3,300
    
    
    
    800
    
    
    
    24.2Total shipped
    
    
    104,200
    
    
    
    136,900
    
    
    
    241,100
    
    
    
    97,500
    
    
    
    109,500
    
    
    
    207,000
    
    
    
    34,100
    
    
    
    16.5
    %
   24




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Widmer Hefeweizen Widmer Hefeweizen Widmer
Hefeweizen Widmer Hefeweizen Widmer Hefeweizen Widmer
Hefeweizen
 Widmer Hefeweizen
   25




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Pricing and Fees.
  st
   26




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Retail Operations and Other Sales
 Excise Taxes
 Cost of Sales.
    27




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Widmer Hefeweizen
   Selling, General and Administrative Expenses
 Income from Equity Investment in Craft Brands.
 Interest Expense.
 Other Income, net
 Income Taxes.
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##### Table of Contents



Craft Brands Alliance LLC
 The Equity Method of Accounting for
Investments in Common Stock Exhibits and Financial Statement Schedules
  Sales.
 Cost of Sales.
 Selling, General and Administrative Expenses
 Net Income
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##### Table of Contents



Outlook
 Widmer Hefeweizen Widmer Hefeweizen Widmer
Hefeweizen
 Liquidity and Capital Resources
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Quarter EndedRequired by Term Loan
    
    September 30, 2007Capital ratio
    
    Less than:              1.25:1
    
    0.23:1Working capital
    
    Greater than:      $1,900,000
    
    $9,473,470Fixed charge coverage ratio
    
    Greater than: 1.15:1
    
    1.891:1
 Critical Accounting Policies and Estimates
  Income Taxes. Accounting for Income Taxes
 Accounting for Uncertainty in Income Taxes-an
interpretation of FASB Statement No. 109 Accounting for
Contingencies
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Long-Lived Assets. Accounting for the Impairment or Disposal of Long-Lived Assets
 Investment in Craft Brands Alliance LLC. Consolidation of Variable
Interest Entities  an Interpretation of ARB No. 51 The Equity Method of Accounting for Investments in Common Stock.
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##### Table of Contents



Refundable Deposits on Kegs
  Revenue Recognition.
 Recent Accounting Pronouncements
 How Taxes Collected from
Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement
(That Is, Gross versus Net Presentation)
 Accounting for Uncertainty in Income Taxes Accounting for Income Taxes
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##### Table of Contents



Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities Including an Amendment of FASB Statement No. 115
 
 ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
   
 ITEM 4. Controls and Procedures
   
 PART II. Other Information
 
 ITEM 1. Legal Proceedings
  
 ITEM 1A. Risk Factors
 Risk Factors
 We may experience a shortage in kegs necessary to distribute our draft beer
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##### Table of Contents



ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 ITEM 3. Defaults Upon Senior Securities
  35




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ITEM 4. Submission of Matters to a Vote of Security Holders
  
 ITEM 5. Other Information
  
 ITEM 6. Exhibits
  31.1
    
    Certification of Chief Executive Officer of Redhook Ale Brewery,
Incorporated pursuant to Exchange Act
Rule 13a-14(a)31.2
    
    Certification of President and Chief Operating Officer of Redhook Ale
Brewery, Incorporated pursuant to Exchange Act
Rule 13a-14(a)31.3
    
    Certification of Chief Financial Officer of Redhook Ale Brewery,
Incorporated pursuant to Exchange Act Rule 13a-14(a)32.1
    
    Certification of Chief Executive Officer of Redhook Ale Brewery,
Incorporated pursuant to Exchange Act 13a-14(b) and 18 U.S.C. Section
135032.2
    
    Certification of President and Chief Operating Officer of Redhook Ale
Brewery, Incorporated pursuant to Exchange Act 13a-14(b) and 18
U.S.C. Section 135032.3
    
    Certification of Chief Financial Officer of Redhook Ale Brewery,
Incorporated pursuant to Exchange Act 13a-14(b) and 18 U.S.C. Section
1350
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SIGNATURES
  REDHOOK ALE BREWERY, INCORPORATEDNovember 13, 2007
    
    
    
    BY:
    
    /s/ Jay T. CaldwellJay T. CaldwellChief Financial Officerand Treasurer
 37