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Third-Party Production Payments | 9 Months Ended
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Sep. 27, 2025
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] |
Third-Party Production Payments | F. Third-Party Production Payments During the thirteen and thirty-nine weeks ended September 27, 2025, the Company produced approxim ately 90% and 83%, respectively, of its domestic volume at Company-owned production facilities. During the thirteen and thirty-nine weeks ended September 28, 2024, the Company produced approximately 66% and 71%, respectively, of its domestic volume at Company-owned production facilitie s. 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 27, 2025, City Brewing supplied approximately 10% and 17%, respectively, of the Company’s domestic shipment volume. During the thirteen and thirty-nine weeks ended September 28, 2024, City Brewing supplied approximately 34% and 28%, 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 thirty-nine weeks ended September 27, 2025 and September 28, 2024, 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 $8.4 million as of September 27, 2025, which is expected to be expensed to cost of goods sold ratably through December 31, 2028. In January of 2024, the Company and City Brewing entered into a Loan and Security agreement at which time payment of $20 million was made by the Company to City Brewing. Repayment of the note receivable plus an agreed investment return for a combined total of $22.4 million shall be repaid to the Company subject to annual repayment limits. As of September 27, 2025, the balance of the note receivable was $11.0 million and the final maturity date is 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"). This amendment adjusted the existing production agreement to better match the Company’s future capacity requirements and resulted in increased production flexibility and more favorable termination rights to the Company in exchange for a $26 million cash payment to Rauch which was paid on December 23, 2024. As a result of the payment, the Company recorded a pre-tax contract settlement expense of $26 million in the fourth quarter of 2024. 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 27, 2025, the Company incurred $1.0 million and $7.5 million, respectively, in shortfall fees. During the thirteen weeks and thirty-nine weeks ended September 28, 2024, the Company incurred $0.6 million and $4.7 million, respectively, in shortfall fees. At current volume projections, the Company anticipates that it will recognize approximately $31 million of shortfall fees in the future with $14 million forecasted to be expensed in the remainder of 2025 and $17 million expected to be expensed in future years thereafter, primarily in 2026. As of September 27, 2025, if volume for the remaining term of the production arrangements was zero, the total contractual shortfall fees, with advance notice as specified in the related contractual agreements, would total approximately $40 million with $19 million due in the remainder of 2025 and $21 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.

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