F. Third-Party Production Payments

During the thirteen and thirty-nine weeks ended September 26, 2026, the Company produced approximately 98% and 92%, respectively, of its domestic volume at Company-owned production facilities. During the thirteen and thirty-nine weeks ended September 27, 2025, the Company produced approximately 90% and 83%, respectively, of its domestic volume at Company-owned production facilities. 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 26, 2026, City Brewing supplied approximately 2% and 8%, respectively, of the Company’s domestic shipment volume. 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. 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 thirteen and thirty-nine weeks ended September 26, 2026, third-party production prepayment expense was $0.6 million and $1.8 million, respectively. During the thirteen and thirty-nine weeks ended September 27, 2025, 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 $5.3 million as of September 26, 2026, which is expected to be expensed to cost of goods sold ratably based on committed annual production capacity through 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"). 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 26, 2026, the Company incurred $1.0 million and $3.1 million, respectively, in shortfall fees. 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. At current volume projections, the Company anticipates that it will recognize approximately $22 million of shortfall fees in the future, with $4 million forecasted to be expensed in the remainder of 2026 and $18 million expected to be expensed in future years thereafter.

As of September 26, 2026, if volume for the remaining term of the City Brewing, Rauch and other production arrangements was zero, the total contractual shortfall and termination fees, with advance notice as specified in the related contractual agreements, would total approximately $28 million with $4 million due in 2026 and $24 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.