For fiscal years 2023, 2022, and 2021 the Company brewed and packaged approximately 71%, 65%, and 56%, respectively, of its volume at Company-owned breweries. The Company brewed and packaged approximately 22%, 26% and 32% of its volume across various City Brewing Company, LLC locations for fiscal 2023, 2022, and 2021, 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 up-front payments that were used for capital improvements at these third-party production facilities that it expenses over the period of the contracts. Under these production arrangements, there are minimum production quantities and the Company is obligated to pay shortfall fees for production quantity below those thresholds.

During fiscal 2021, the Company amended its master transaction agreement with City Brewing Company, LLC ("City Brewing") to ensure access to capacity at a new location and continued access at certain existing locations. The amendment became effective during the second quarter of fiscal year 2021, upon the closing of the purchase of the new location by City Brewing.

Total third-party production prepayments were $33.6 million and $61.3 million as of December 30, 2023 and December 31, 2022, respectively. The Company will expense the total prepaid amount of $33.6 million as of December 30, 2023, all of which relates to the master transaction agreement described above and other agreements with City Brewing, as a component of cost of goods sold over the contractual period ending December 31, 2025.

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 expenses the shortfall fees during the contractual period when such fees are incurred as a component of cost of goods sold. During 2023 and 2022, the Company recorded $9.5 million and $3.0 million, respectively, in shortfall fees. As of December 30, 2023, if volume for the remaining term of the production arrangements was zero, the contractual shortfall fees, with advance notice as specified in the related contractual agreements, would total approximately $106 million over the duration of the contracts which have expiration dates through December 31, 2031. At current volume projections and based on understandings reached with these third-party production facilities, the Company anticipates that it will recognize approximately $41 million of shortfall fees and expects to record those expenses as follows:


	Expected Shortfall Fees to be Incurred
	(in millions)
2024	$	13
2025		13
2026		3
2027		3
2028		2
Thereafter		7
Total shortfall fees expected to be incurred	$	41

On October 23, 2023, the Company amended its master transaction agreement with City Brewing to include a provision that required the Company, upon 30 days notice, to loan City Brewing $20 million for the purpose of buying packaging equipment at its Irwindale location. Notice was given by City Brewing on December 1, 2023. The Company and City Brewing entered into a Loan and Security agreement on January 2, 2024 at which time payment of $20 million was made by the Company to City Brewing. Repayment of the loan plus an agreed investment return combined total $22.4 million, subject to applicable maximum interest laws, and shall be credited to the Company through reductions of shortfall fees, subject to annual repayment limits and through other payments or credits should owed shortfall fees be lower than these annual

repayment limits. The annual repayment limits are $3.0 million in 2024, $7.5 million in 2025 and $10.0 million in 2026 and thereafter.