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Third-Party Production Prepayments | 12 Months Ended
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Dec. 25, 2021
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] |
Third Party Production Prepayments | J. Third-Party Production Prepayments For fiscal years 2021, 2020 and 2019 the Company brewed and packaged approximately 56%, 65%, and 74%, respectively, of its volume at Company-owned breweries. The Company brewed and packaged approximately 32%, 33% and 23% of its volume across various City Brewing Company, LLC locations for fiscal 2021, 2020 and 2019, respectively. In the normal course of its business, the Company has historically entered into various production arrangements with other brewing companies. Pursuant to these arrangements, the Company generally supplies raw materials and packaging to those brewing companies, and incurs conversion fees for labor at the time the liquid is produced and packaged. The Company has made payments for capital improvements at these third-party brewing facilities that it expenses over the period of the contracts. Total third-party production prepayments were as follows:
|  | December 25, 2021 |  |  | December 26, 2020 |
|  | (in thousands) |
Prepaid expenses and other current assets |  | $ | - |  |  | $ | 14,816 |
Third-party production prepayments |  |  | 88,294 |  |  |  | 56,843 |
Total third-party production prepayments |  | $ | 88,294 |  |  | $ | 71,659 |
Effective March 27, 2021, the Company began classifying third-party production prepayments solely as non-current assets and reclassified the $14.8 million of third-party production prepayments at December 26, 2020 from current assets to non-current assets. The Company will expense the total prepaid amount of $88.3 million as of December 25, 2021 as a component of cost of goods sold over the contractual period ending December 31, 2025. During the fifty-two weeks ended December 25, 2021, as a result of lower than anticipated demand for certain Truly brand styles and packages, the Company adjusted its volume plans for production at certain third-party facilities. The Company terminated relationships with some of its third-party production suppliers and recorded $19.6 million of costs related to terminating these contracts. In addition, the Company wrote off $9.5 million of amounts prepaid pursuant to a third-party production agreement that the Company has no future plans to utilize. Refer to Note C of these consolidated financial statements for further details. During the fifty-two weeks ended December 25, 2021, the Company entered into a master transaction agreement with City Brewing Company, LLC to ensure access to capacity at a new location and continued access at certain existing locations. The agreement became effective during the second quarter of fiscal year 2021, upon the closing of the purchase of the new location by the third-party brewing services provider. As part of the master transaction agreement, the Company paid $10.0 million for capital improvements at the new location during the third quarter of fiscal year 2021. The Company paid an additional $17.9 million to ensure access to capacity during the fourth quarter of 2021. The agreement additionally includes monthly shortfall fees beginning January 1, 2023. At current production volume projections, the Company believes that it will fall short of its future annual volume commitments at certain third-party production facilities, including those that are part of the master transaction agreement described above, and will incur shortfall fees. The Company will expense the shortfall fees during the contractual period when such fees are incurred as a component of cost of goods sold. As of December 25, 2021, if volume for the remaining term of the production arrangements was zero, the contractual shortfall fees would total approximately $210 million over the duration of the contracts which have expiration dates through December 31, 2031. In lieu of contractual shortfall fees, the Company terminated certain of its third-party production contracts for $7.1 million, with those costs recognized in contract terminations costs and other for the year ended December 25, 2021. At current volume projections the Company anticipates that it will recognize approximately $38 million of shortfall fees and expects to record those expenses as follows over the remaining current year and the five subsequent years:
|  | Expected Shortfall Fees to be Incurred |
|  | (in millions) |
2022 |  | $ | 6 |
2023 |  |  | 15 |
2024 |  |  | 11 |
2025 |  |  | 6 |
2026 |  |  | - |
Thereafter |  |  | - |
Total shortfall fees expected to be incurred |  | $ | 38 |

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