##### 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 June 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 June 30, 2007
 TABLE OF CONTENTS
 PagePART I. Financial InformationITEM 1. Financial StatementsBalance Sheets as of June 30, 2007 and December 31, 2006
    
    
    3Statements of Operations for the
Three and Six Months Ended June 30, 2007 and 2006
    
    
    4Statements of Cash Flows for the
Six Months Ended June 30, 2007 and 2006
    
    
    5Notes to Financial Statements
    
    
    6ITEM 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    13ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    32ITEM 4. Controls and Procedures
    
    
    32PART II. Other InformationITEM 1. Legal Proceedings
    
    
    32ITEM 1A. Risk Factors
    
    
    32ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    32ITEM 3. Defaults Upon Senior Securities
    
    
    32ITEM 4. Submission of Matters to a Vote of Security Holders
    
    
    33ITEM 5. Other Information
    
    
    33ITEM 6. Exhibits
    
    
    33EXHIBIT 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
 June 30,
    
    
    December 31,2007
    
    
    2006(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    9,021,705
    
    
    $
    9,435,073Accounts receivable, net of allowance for doubtful accounts of
$38,325 and $68,808 in 2007 and 2006, respectively
    
    
    3,600,922
    
    
    
    1,842,388Trade receivable from Craft Brands
    
    
    823,779
    
    
    
    854,507Inventories
    
    
    2,865,673
    
    
    
    2,571,732Deferred income tax asset, net
    
    
    668,631
    
    
    
    506,886Other
    
    
    121,101
    
    
    
    203,594Total current assets
    
    
    17,101,811
    
    
    
    15,414,180Fixed assets, net
    
    
    57,194,586
    
    
    
    58,076,434Investment in Craft Brands
    
    
    738,412
    
    
    
    127,555Other assets
    
    
    288,891
    
    
    
    222,573Total assets
    
    $
    75,323,700
    
    
    $
    73,840,742LIABILITIES AND COMMON STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    2,623,249
    
    
    $
    2,233,689Trade payable to Craft Brands
    
    
    580,270
    
    
    
    324,900Accrued salaries, wages and payroll taxes
    
    
    1,288,983
    
    
    
    1,547,482Refundable deposits
    
    
    2,363,690
    
    
    
    2,153,127Other accrued expenses
    
    
    683,933
    
    
    
    380,394Current portion of long-term debt and capital lease obligations
    
    
    465,067
    
    
    
    464,648Total current liabilities
    
    
    8,005,192
    
    
    
    7,104,240Long-term debt and capital lease obligations, net of current portion
    
    
    4,088,977
    
    
    
    4,321,616Deferred income tax liability, net
    
    
    1,845,940
    
    
    
    1,548,699Other liabilities
    
    
    199,945
    
    
    
    173,768Common stockholders equity:Common stock, par value $0.005 per share, authorized, 50,000,000
shares; issued and outstanding, 8,344,189 shares in 2007 and
8,281,489 shares in 2006
    
    
    41,721
    
    
    
    41,407Additional paid-in capital
    
    
    69,259,791
    
    
    
    68,977,402Retained earnings (deficit)
    
    
    (8,117,866
    )
    
    
    (8,326,390
    )Total common stockholders equity
    
    
    61,183,646
    
    
    
    60,692,419Total liabilities and common stockholders equity
    
    $
    75,323,700
    
    
    $
    73,840,742
 The accompanying notes are an integral part of these financial statements.
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##### Table of Contents



REDHOOK ALE BREWERY, INCORPORATED
 
 STATEMENTS OF OPERATIONS
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Sales
    
    $
    13,469,578
    
    
    $
    11,143,511
    
    
    $
    23,026,510
    
    
    $
    19,812,761Less excise taxes
    
    
    1,566,974
    
    
    
    1,186,685
    
    
    
    2,580,944
    
    
    
    2,076,588Net sales
    
    
    11,902,604
    
    
    
    9,956,826
    
    
    
    20,445,566
    
    
    
    17,736,173Cost of sales
    
    
    9,847,481
    
    
    
    8,110,165
    
    
    
    17,653,563
    
    
    
    15,352,695Gross profit
    
    
    2,055,123
    
    
    
    1,846,661
    
    
    
    2,792,003
    
    
    
    2,383,478Selling, general and administrative expenses
    
    
    2,143,707
    
    
    
    1,799,664
    
    
    
    4,180,169
    
    
    
    3,513,470Income from equity investment in Craft Brands
    
    
    969,888
    
    
    
    818,774
    
    
    
    1,648,126
    
    
    
    1,332,923Operating income
    
    
    881,304
    
    
    
    865,771
    
    
    
    259,960
    
    
    
    202,931Interest expense
    
    
    82,031
    
    
    
    84,062
    
    
    
    165,218
    
    
    
    167,145Other income, net
    
    
    169,332
    
    
    
    88,132
    
    
    
    284,407
    
    
    
    142,060Income before income taxes
    
    
    968,605
    
    
    
    869,841
    
    
    
    379,149
    
    
    
    177,846Income tax provision
    
    
    435,881
    
    
    
    10,614
    
    
    
    170,625
    
    
    
    19,048Net income
    
    $
    532,724
    
    
    $
    859,227
    
    
    $
    208,524
    
    
    $
    158,798Basic earnings per share
    
    $
    0.06
    
    
    $
    0.10
    
    
    $
    0.03
    
    
    $
    0.02Diluted earnings per share
    
    $
    0.06
    
    
    $
    0.10
    
    
    $
    0.02
    
    
    $
    0.02
 The accompanying notes are an integral part of these financial statements.
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##### Table of Contents



REDHOOK ALE BREWERY, INCORPORATED
 
 STATEMENTS OF CASH FLOWS
  Six Months Ended June 30,2007
    
    
    2006Operating ActivitiesNet income
    
    $
    208,524
    
    
    $
    158,798Adjustments to reconcile net income to net cash
provided by operating activities:(Gain) loss on disposition of fixed assets
    
    
    (2,757
    )
    
    
    203Depreciation and amortization
    
    
    1,421,121
    
    
    
    1,508,289Income from equity investment in Craft Brands
less than (in excess of) cash distributions
    
    
    (610,857
    )
    
    
    (268,029
    )Stock-based compensation
    
    
    169,400
    
    
    
    53,760Deferred income taxes
    
    
    135,496
    
    
    
    Changes in operating assets and liabilities
    
    
    (964,261
    )
    
    
    83,104Net cash provided by operating activities
    
    
    356,666
    
    
    
    1,536,125Investing ActivitiesExpenditures for fixed assets
    
    
    (895,544
    )
    
    
    (671,085
    )Proceeds from disposition of fixed assets
    
    
    244,427
    
    
    
    Other, net
    
    
    
    
    
    
    (6,188
    )Net cash used in investing activities
    
    
    (651,117
    )
    
    
    (677,273
    )Financing ActivitiesPrincipal payments on debt and capital lease obligations
    
    
    (232,220
    )
    
    
    (229,546
    )Issuance of common stock
    
    
    113,303
    
    
    
    38,894Net cash used in financing activities
    
    
    (118,917
    )
    
    
    (190,652
    )Increase (decrease) in cash and cash equivalents
    
    
    (413,368
    )
    
    
    668,200Cash and cash equivalents:Beginning of period
    
    
    9,435,073
    
    
    
    6,435,609End of period
    
    $
    9,021,705
    
    
    $
    7,103,809
 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. Merger Discussions
   3. Inventories
  June 30,
    
    
    December 31,2007
    
    
    2006Raw materials
    
    $
    400,868
    
    
    $
    666,938Work in process
    
    
    829,607
    
    
    
    622,352Finished goods
    
    
    446,002
    
    
    
    247,333Promotional merchandise
    
    
    556,267
    
    
    
    538,339Packaging materials
    
    
    632,929
    
    
    
    496,770$
    2,865,673
    
    
    $
    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
 7




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REDHOOK ALE BREWERY, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (continued)
 The Equity Method of Accounting for Investments in Common Stock
       5. Common Stockholders Equity
   8




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REDHOOK ALE BREWERY, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (continued)
 6. Earnings (Loss) per Share
 Earnings per
Share
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Numerator for basic and diluted
net income per share  net income
    
    $
    532,724
    
    
    $
    859,227
    
    
    $
    208,524
    
    
    $
    158,798Denominator for basic net income per share -
weighted average common shares outstanding
    
    
    8,325,438
    
    
    
    8,241,602
    
    
    
    8,310,440
    
    
    
    8,233,713Dilutive effect of stock options on
weighted average common shares
    
    
    441,863
    
    
    
    270,287
    
    
    
    437,252
    
    
    
    257,468Denominator for diluted net income per share
    
    
    8,767,301
    
    
    
    8,511,889
    
    
    
    8,747,692
    
    
    
    8,491,181Basic net income per share
    
    $
    0.06
    
    
    $
    0.10
    
    
    $
    0.03
    
    
    $
    0.02Diluted net income per share
    
    $
    0.06
    
    
    $
    0.10
    
    
    $
    0.02
    
    
    $
    0.02
 7. Stock-Based Compensation
    9




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REDHOOK ALE BREWERY, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (continued)
 Share-Based Payment Accounting for Stock Issued to Employees Accounting for Stock-Based Compensation
  Share-Based Payment
    10




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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
    
    Intrinsic ValueOutstanding at January 1, 2007
    
    
    783,440
    
    
    $
    2.89
    
    
    
    4.10
    
    
    $
    1,950,534Granted
    
    
    Exercised
    
    
    (38,500
    )
    
    $
    2.94Canceled
    
    
    (38,150
    )
    
    $
    8.13Outstanding at June 30, 2007
    
    
    706,790
    
    
    $
    2.60
    
    
    
    3.81
    
    
    $
    3,788,040Exercisable at June 30, 2007
    
    
    706,790
    
    
    $
    2.60
    
    
    
    3.81
    
    
    $
    3,788,040
   Average
    
    WeightedNumber
    
    Remaining
    
    AverageRange of Exercise
    
    Outstanding
    
    Contractual
    
    ExercisePrices
    
    & Exercisable
    
    Life (Yrs)
    
    Price$1.485 to $1.815
    
    
    8,000
    
    
    
    3.40
    
    
    $
    1.650$1.816 to $1.865
    
    
    325,840
    
    
    
    4.09
    
    
    $
    1.865$1.866 to $2.019
    
    
    138,534
    
    
    
    5.16
    
    
    $
    2.019$2.020 to $2.180
    
    
    8,000
    
    
    
    5.89
    
    
    $
    2.180$2.181 to $2.425
    
    
    6,666
    
    
    
    4.89
    
    
    $
    2.425$2.426 to $2.450
    
    
    12,000
    
    
    
    6.88
    
    
    $
    2.450$2.451 to $3.150
    
    
    16,000
    
    
    
    7.90
    
    
    $
    3.150$3.151 to $3.969
    
    
    156,000
    
    
    
    1.89
    
    
    $
    3.969$3.970 to $5.730
    
    
    35,750
    
    
    
    0.88
    
    
    $
    5.730$1.485 to $5.730
    
    
    706,790
    
    
    
    3.81
    
    
    $
    2.601
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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
     12




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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
    
    Six Months EndedJune 30,
    
    June 30,2007
    
    2006
    
    2007
    
    2006Sales
    
    
    113.2
    %
    
    
    111.9
    %
    
    
    112.6
    %
    
    
    111.7
    %Less excise taxes
    
    
    13.2
    
    
    
    11.9
    
    
    
    12.6
    
    
    
    11.7Net sales
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Cost of sales
    
    
    82.7
    
    
    
    81.5
    
    
    
    86.3
    
    
    
    86.6Gross profit
    
    
    17.3
    
    
    
    18.5
    
    
    
    13.7
    
    
    
    13.4Selling, general and administrative expenses
    
    
    18.0
    
    
    
    18.1
    
    
    
    20.4
    
    
    
    19.8Income from equity investment in Craft Brands
    
    
    8.1
    
    
    
    8.2
    
    
    
    8.0
    
    
    
    7.5Operating income
    
    
    7.4
    
    
    
    8.6
    
    
    
    1.3
    
    
    
    1.1Interest expense
    
    
    0.7
    
    
    
    0.8
    
    
    
    0.8
    
    
    
    0.9Other income, net
    
    
    1.4
    
    
    
    0.9
    
    
    
    1.4
    
    
    
    0.8Income before income taxes
    
    
    8.1
    
    
    
    8.7
    
    
    
    1.9
    
    
    
    1.0Income tax provision
    
    
    3.6
    
    
    
    0.1
    
    
    
    0.9
    
    
    
    0.1Net income
    
    
    4.5
    %
    
    
    8.6
    %
    
    
    1.0
    %
    
    
    0.9
    %
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Three Months Ended June 30, 2007 Compared to Three Months Ended June 30, 2006
  Three Months EndedJune 30,
    
    
    Increase /
    
    
    %2007
    
    
    2006
    
    
    (Decrease)
    
    
    ChangeSales
    
    $
    13,469,578
    
    
    $
    11,143,511
    
    
    $
    2,326,067
    
    
    
    20.9
    %Less excise taxes
    
    
    1,566,974
    
    
    
    1,186,685
    
    
    
    380,289
    
    
    
    32.0Net sales
    
    
    11,902,604
    
    
    
    9,956,826
    
    
    
    1,945,778
    
    
    
    19.5Cost of sales
    
    
    9,847,481
    
    
    
    8,110,165
    
    
    
    1,737,316
    
    
    
    21.4Gross profit
    
    
    2,055,123
    
    
    
    1,846,661
    
    
    
    208,462
    
    
    
    11.3Selling, general and administrative expenses
    
    
    2,143,707
    
    
    
    1,799,664
    
    
    
    344,043
    
    
    
    19.1Income from equity investment in Craft Brands
    
    
    969,888
    
    
    
    818,774
    
    
    
    151,114
    
    
    
    18.5Operating income
    
    
    881,304
    
    
    
    865,771
    
    
    
    15,533
    
    
    
    1.8Interest expense
    
    
    82,031
    
    
    
    84,062
    
    
    
    (2,031
    )
    
    
    2.4Other income, net
    
    
    169,332
    
    
    
    88,132
    
    
    
    81,200
    
    
    
    92.1Income before income taxes
    
    
    968,605
    
    
    
    869,841
    
    
    
    98,764
    
    
    
    11.4Income tax provision
    
    
    435,881
    
    
    
    10,614
    
    
    
    425,267
    
    
    
    4,006.7Net income
    
    $
    532,724
    
    
    $
    859,227
    
    
    $
    (326,503
    )
    
    
    38.0
    %
 Sales.
 
    
    An increase in overall pricing and shipments in the midwest and eastern United
States resulted in a $643,000 increase in 2007 second quarter sales;
    
    A decrease in overall pricing and shipments in the western United States (not
including beer brewed on a contract basis) resulted in a $240,000 decrease in 2007
second 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 $1,751,000 increase in 2007
second quarter sales; and
    
    Pub and other sales increased $207,000 in the second quarter of 2007.
 Shipments
 Three Months Ended June 30,2007
    
    2006Draft
    
    Bottle
    
    Total
    
    Draft
    
    Bottle
    
    Total
    
    Increase /
    
    %Shipments
    
    Shipments
    
    Shipments
    
    Shipments
    
    Shipments
    
    Shipments
    
    (Decrease)
    
    ChangeA-B
    
    
    12,900
    
    
    
    17,500
    
    
    
    30,400
    
    
    
    12,700
    
    
    
    15,100
    
    
    
    27,800
    
    
    
    2,600
    
    
    
    9.4
    %Craft Brands
    
    
    9,900
    
    
    
    22,700
    
    
    
    32,600
    
    
    
    10,100
    
    
    
    24,300
    
    
    
    34,400
    
    
    
    (1,800
    )
    
    
    (5.2
    )Contract brewing
    
    
    19,200
    
    
    
    12,100
    
    
    
    31,300
    
    
    
    12,500
    
    
    
    
    
    
    
    12,500
    
    
    
    18,800
    
    
    
    150.4Pubs and other
    
    
    1,100
    
    
    
    400
    
    
    
    1,500
    
    
    
    1,000
    
    
    
    300
    
    
    
    1,300
    
    
    
    200
    
    
    
    15.4Total shipped
    
    
    43,100
    
    
    
    52,700
    
    
    
    95,800
    
    
    
    36,300
    
    
    
    39,700
    
    
    
    76,000
    
    
    
    19,800
    
    
    
    26.1
    %
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Widmer Hefeweizen Widmer Hefeweizen Widmer
Hefeweizen Widmer Hefeweizen Widmer Hefeweizen Widmer Hefeweizen
 17




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Widmer Hefeweizen
    Pricing and Fees.
   18




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st
   Retail Operations and Other Sales
 Excise Taxes
 Cost of Sales.
  Widmer Hefeweizen
 19




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Selling, General and Administrative Expenses
 Income from Equity Investment in Craft Brands.
 Interest Expense.
 Other Income, net
 Income Taxes.
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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



Six Months Ended June 30, 2007 Compared to Six Months Ended June 30, 2006
  Six Months EndedJune 30,
    
    
    Increase /
    
    
    %2007
    
    
    2006
    
    
    (Decrease)
    
    
    ChangeSales
    
    $
    23,026,510
    
    
    $
    19,812,761
    
    
    $
    3,213,749
    
    
    
    16.2
    %Less excise taxes
    
    
    2,580,944
    
    
    
    2,076,588
    
    
    
    504,356
    
    
    
    24.3Net sales
    
    
    20,445,566
    
    
    
    17,736,173
    
    
    
    2,709,393
    
    
    
    15.3Cost of sales
    
    
    17,653,563
    
    
    
    15,352,695
    
    
    
    2,300,868
    
    
    
    15.0Gross profit
    
    
    2,792,003
    
    
    
    2,383,478
    
    
    
    408,525
    
    
    
    17.1Selling, general and administrative expenses
    
    
    4,180,169
    
    
    
    3,513,470
    
    
    
    666,699
    
    
    
    19.0Income from equity investment in Craft Brands
    
    
    1,648,126
    
    
    
    1,332,923
    
    
    
    315,203
    
    
    
    23.6Operating income
    
    
    259,960
    
    
    
    202,931
    
    
    
    57,029
    
    
    
    28.1Interest expense
    
    
    165,218
    
    
    
    167,145
    
    
    
    (1,927
    )
    
    
    1.2Other income, net
    
    
    284,407
    
    
    
    142,060
    
    
    
    142,347
    
    
    
    100.2Income before income taxes
    
    
    379,149
    
    
    
    177,846
    
    
    
    201,303
    
    
    
    113.2Income tax provision
    
    
    170,625
    
    
    
    19,048
    
    
    
    151,577
    
    
    
    795.8Net income
    
    $
    208,524
    
    
    $
    158,798
    
    
    $
    49,726
    
    
    
    31.3
    %
 Sales.
 
    
    An increase in overall pricing and shipments in the midwest and eastern United
States resulted in a $1,035,000 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 $324,000 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 $2,358,000 increase in 2007
year-to-date sales; and
    
    Pub and other sales increased $255,000 in the first six months of 2007.
 Shipments
 Six Months Ended June 30,2007
    
    2006Draft
    
    Bottle
    
    Total
    
    Draft
    
    Bottle
    
    Total
    
    Increase /
    
    %Shipments
    
    Shipments
    
    Shipments
    
    Shipments
    
    Shipments
    
    Shipments
    
    (Decrease)
    
    ChangeA-B
    
    
    23,800
    
    
    
    31,100
    
    
    
    54,900
    
    
    
    23,200
    
    
    
    27,900
    
    
    
    51,100
    
    
    
    3,800
    
    
    
    7.4
    %Craft Brands
    
    
    18,500
    
    
    
    42,800
    
    
    
    61,300
    
    
    
    19,400
    
    
    
    44,600
    
    
    
    64,000
    
    
    
    (2,700
    )
    
    
    (4.2
    )Contract brewing
    
    
    27,800
    
    
    
    14,700
    
    
    
    42,500
    
    
    
    16,800
    
    
    
    
    
    
    
    16,800
    
    
    
    25,700
    
    
    
    153.0Pubs and other
    
    
    1,800
    
    
    
    600
    
    
    
    2,400
    
    
    
    1,600
    
    
    
    600
    
    
    
    2,200
    
    
    
    200
    
    
    
    9.1Total shipped
    
    
    71,900
    
    
    
    89,200
    
    
    
    161,100
    
    
    
    61,000
    
    
    
    73,100
    
    
    
    134,100
    
    
    
    27,000
    
    
    
    20.1
    %
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##### Table of Contents



Widmer Hefeweizen Widmer Hefeweizen Widmer
Hefeweizen Widmer Hefeweizen Widmer Hefeweizen Widmer Hefeweizen
 23




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##### Table of Contents



Widmer Hefeweizen
    Pricing and Fees.
   24




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##### Table of Contents



st
   Retail Operations and Other Sales
 Excise Taxes
 Cost of Sales.
  25




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##### Table of Contents



Widmer Hefeweizen
  Selling, General and Administrative Expenses
 Income from Equity Investment in Craft Brands.
 Interest Expense.
 Other Income, net
 Income Taxes.
 26




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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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Outlook
 Widmer Hefeweizen Widmer Hefeweizen Widmer Hefeweizen
 Liquidity and Capital Resources
      28




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##### Table of Contents



Quarter EndedRequired by Term Loan
    
    June 30, 2007Capital ratio
    
    Less than: 1.25:1
    
    0.23:1Working capital
    
    Greater than: $1,900,000
    
    $9,096,619Fixed charge coverage ratio
    
    Greater than: 1.15:1
    
    3.174:1
 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
   29




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##### Table of Contents



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.
 Refundable Deposits on Kegs
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##### Table of Contents



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
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities Including an Amendment of FASB Statement No. 115
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##### Table of Contents



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
 
 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 ITEM 3. Defaults Upon Senior Securities
  32




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##### Table of Contents



ITEM 4. Submission of Matters to a Vote of Security Holders
  (1)
    
    The following seven directors were duly elected to serve until the 2008 Annual Meeting of
Shareholders or until his earlier retirement, resignation or removal:
 Director
    
    Votes For
    
    Votes WithheldFrank H. Clement
    
    
    8,106,219
    
    
    
    55,121John W. Glick
    
    
    7,808,725
    
    
    
    55,121David R. Lord
    
    
    7,678,535
    
    
    
    55,121Michael Loughran
    
    
    7,706,209
    
    
    
    55,121John D. Rogers, Jr.
    
    
    7,675,369
    
    
    
    55,121Paul S. Shipman
    
    
    8,108,976
    
    
    
    55,121Anthony J. Short
    
    
    7,804,753
    
    
    
    55,121
 (2)
    
    The ratification of the appointment of Moss Adams LLP as independent auditors for the
Companys fiscal year ending December 31, 2007 was approved as follows:
 Votes For
    
    
    7,866,537Votes Against
    
    
    13,492Abstain
    
    
    16,347
  (3)
    
    The proposal to approve the Redhook Ale Brewery, Incorporated 2007 Stock Incentive Plan was
approved as follows:
 Votes For
    
    
    5,057,854Votes Against
    
    
    524,652Abstain
    
    
    12,235Broker Non-Votes
    
    
    2,301,635
 
 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
1350
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32.2
    
    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
 34




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##### Table of Contents



SIGNATURES
  REDHOOK ALE BREWERY, INCORPORATEDAugust 10, 2007
    
    BY:
    
    /s/ Jay T. Caldwell

     Jay T. CaldwellChief Financial Officerand Treasurer
 35