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Slowdown of the Hard Seltzer Market Impact | 9 Months Ended
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Sep. 25, 2021
Market Risk Benefit [Abstract] |
Slowdown of the Hard Seltzer Market Impact | B. Slowdown of the Hard Seltzer Market Impact During the thirteen weeks ended September 25, 2021, the market for hard seltzer products continued to experience decelerating growth trends. The slowdown in growth trends greatly impacted the Company's volume of production and shipments within the thirteen weeks ended September 25, 2021, as well as its projections for the future. The volume reduction resulted in several supply chain related costs recorded during the third quarter. These costs include provisions for excess and obsolete inventories, property, plant and equipment impairments, write-offs of third-party production prepayments and provisions for costs associated with the termination of various third-party production contracts. During the thirteen weeks ended September 25, 2021, the Company recorded excess and obsolete inventory reserves and other inventory related costs totaling $54.3 million related specifically to a decline in future volume projections, inclusive of estimated destruction costs of $7.5 million. The reserves were recorded for inventory that the Company believes will expire, not be used or otherwise offer no net realizable value to the Company based on its current volume and production forecasts. These reserves were recorded for Truly finished goods inventory that is not expected to be sold prior to expiration, Truly packaging, Truly flavorings and other raw materials that are not projected to be used or will expire prior to being used in production. The actual write-offs and costs to destroy the inventory identified as excess and obsolete may vary from this estimate. The inventory related reserves were recorded within cost of goods sold for the thirteen and thirty-nine weeks ended September 25, 2021. The Company has several third-party production agreements in place to meet the expected increased demand for Truly. Due to the volume slowdown, the Company determined that not all of these agreements are needed to meet adjusted demand. Several of these agreements included guaranteed payments and payments for capital expenditures incurred by the third-parties that the Company is still obligated to pay. The Company recorded contract termination costs totaling $19.6 million in the thirteen weeks ended September 25, 2021 to terminate certain third-party production agreements which are recorded within contract termination costs and other for the thirteen and thirty-nine weeks ended September 25, 2021. Additionally, the Company wrote off $9.5 million relating to amounts prepaid pursuant to a third-party production agreement under which the Company has no future plans to utilize. Due to the reduction in its production volume projections, the Company evaluated its construction in progress capital projects to determine if the assets would generate future economic benefits and concluded that certain projects were impaired. The Company recognized impairment expense of $12.7 million related to projects that will be cancelled due to the volume slowdown. Additionally, the Company recognized a provision of $6.3 million for amounts owed to third-parties under non-cancellable purchase orders for components of the cancelled projects which was recorded within contract termination costs and other for the thirteen and thirty-nine weeks ended September 25, 2021. The combined expense of $102.4 million recognized for the above items contributed to the Company's operating loss for the thirteen weeks ended September 25, 2021. The Company does expect to incur shortfall fees at certain of its ongoing third-party production facilities. These shortfall fees have been factored into the Company's estimates of future performance and financial outlook and are explained in greater detail within Note H of these financial statements.

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