Commitments and Contingencies

Purchase Commitments

The Company had outstanding total non-cancelable purchase commitments of $165.2 million at December 28, 2013. These commitments are made up of hops and malt totaling $53.0 million, equipment and machinery of $43.9 million, other ingredients of $26.7 million, glass bottles of $19.0 million, advertising contracts of $18.8 million, and other commitments of $3.8 million. As of December 28, 2013, projected cash outflows under purchase commitments for the remaining years under the contracts are as follows:


	Payments Due by Period
	Total		2014		2015-2016		2017-2018
	(in thousands)
Hops and barley	$	53,079	$	25,568	$	22,323	$	5,188
Equipment and machinery		43,927		43,927		—		—
Other Ingredients		26,681		26,681		—		—
Glass bottles		18,963		18,963		—		—
Advertising		18,751		18,751		—		—
Other		3,805		3,805		—		—

Total contractual obligations	$	165,206	$	137,695	$	22,323	$	5,188

The Company has entered into contracts for the supply of a portion of its hops requirements. These purchase contracts extend through crop year 2016 and specify both the quantities and prices to which the Company is committed. Approximately one half of the hops purchase commitments are denominated in Euros. Hops purchase commitments outstanding at December 28, 2013 totaled $33.6 million, based on the exchange rates on that date. The Company does not use forward currency exchange contracts and intends to purchase future hops using the exchange rate at the time of purchase.

Currently, the Company has entered into contracts for barley, wheat, and malt with one major supplier. The contracts include crop year 2013 and cover the Company’s barley, wheat, and malt requirements for 2013 and 2014. Barley, wheat, and malt purchase commitments outstanding at December 28, 2013 totaled $19.4 million.

The Company sourced its glass bottles from a single supplier through December 31, 2013. Effective January 1, 2014, the Company has glass supply agreements with two glass suppliers to supply its glass bottle requirements. The supply agreements establish the terms on which each glass supplier may supply glass bottles to which of the Company’s breweries as well as other facilities where the Company’s beers and ciders are produced. Under these agreements, the Company has minimum and maximum purchase commitments that are based on Company-provided production estimates which, under normal business conditions, are expected to be fulfilled. Minimum purchase commitments under this agreement, assuming the supplier is unable to replace lost production capacity cancelled by the Company, as of December 28, 2013 totaled $19.0 million.

For the fiscal year ended December 28, 2013, the Company brewed most of its volume at Company owned breweries. 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 purchases the liquid produced by those brewing companies, including the raw materials that are used in the liquid, at the time such liquid goes into fermentation. The Company is required to repurchase all unused raw materials purchased by the brewing company specifically for the Company’s beers at the brewing company’s cost upon termination of the production arrangement. The Company is also obligated to meet annual volume requirements in conjunction with certain production arrangements, which are not material to the Company’s operations.

The Company’s arrangements with other brewing companies require it to periodically purchase equipment in support of brewery operations. As of December 28, 2013, there were no significant equipment purchase requirements outstanding under existing contracts. Changes to the Company’s brewing strategy or existing production arrangements, new production relationships or the introduction of new products in the future may require the Company to purchase equipment to support the contract breweries’ operations.

Lease Commitments

The Company has various operating lease agreements in place for facilities and equipment as of December 28, 2013. Terms of these leases include, in some instances, scheduled rent increases, renewals, purchase options and maintenance costs, and vary by lease. These lease obligations expire at various dates through 2023. Aggregate rent expense was $2.7 million, $2.0 million and $1.4 million in fiscal years 2013, 2012 and 2011, respectively.

Aggregate minimum annual rental payments under these agreements are as follows:


	(In thousands)
2014	$	2,726
2015		2,042
2016		1,935
2017		975
2018		567
Thereafter		1,154

	$	9,399

Litigation

The Company is currently not a party to any pending or threatened litigation, the outcome of which would be expected to have a material adverse effect on its financial condition or the results of its operations.

Environmental Matters

During the second quarter of 2010, the Company entered into an agreement with the City of Cincinnati (the “City”) to complete a remediation in accordance with a remediation plan on environmentally contaminated land to be purchased by the City which is adjacent to Company-owned land at the Cincinnati Brewery (the “Property”). In the third quarter of 2010, the City was awarded a Clean Ohio Revitalization Fund grant (“CORF Grant”) for the Property and will use these funds to complete the purchase of the Property and will provide funds to the Company to remediate the contaminated land and demolish certain other buildings on adjacent parcels. The Company paid approximately $0.3 million to the City for an option to purchase the Property after it has been fully remediated to enable potential future expansion at the Cincinnati Brewery, which is included in property, plant and equipment, net, in the accompanying consolidated balance sheet. In connection with these agreements, the Company recorded a current liability and an equal and offsetting other asset of approximately $2.6 million for the estimated total cleanup costs for which it is responsible under the remediation plan and the related CORF Grant, respectively. Under the terms of the agreement, the Company would not be reimbursed by the City for any remediation cost above the currently estimated cleanup cost of approximately $2.6 million.

During the second quarter of 2012, the Company entered into a second agreement with the City to complete a remediation in accordance with a remediation plan on environmentally contaminated land purchased by the Company which is also adjacent to Company-owned land at the Cincinnati Brewery (the “Second Property”). The City was awarded a Clean Ohio Revitalization Fund grant (“CORF II Grant”) and will provide funds to the Company to offset a portion of the purchase price of the Second Property, clean-up the contaminated land and buildings and to then demolish the buildings located on the Second Property. The Company paid approximately $263,000 to purchase the Second Property, which is included in property, plant and equipment, net, in the accompanying consolidated balance sheet. In connection with these arrangements, the Company recorded a current liability and an equal and offsetting other asset of approximately $663,000 for the estimated total acquisition and cleanup costs for which it is responsible under the remediation plan and the related CORF II Grant, respectively. Under the terms of the agreement with the City, the Company would not be reimbursed by the City for any remediation cost above the currently estimated acquisition and cleanup costs of approximately $663,000.

The Company accrues for environmental remediation-related activities for which commitments or cleanup plans have been developed and for which costs can be reasonably estimated. All accrued amounts are generally determined in coordination with third-party experts on an undiscounted basis. In light of existing reserves, any additional remediation costs above the currently estimated cost of $682,000 will not, in the opinion of management, have a material adverse effect on the Company’s consolidated financial position or results of operations.