The Company began seeing the impact of the

COVID-19

pandemic on its business in early March. The direct financial impact of the pandemic has primarily shown in significantly reduced keg demand from the

on-premise

channel and higher labor and safety related costs at the Company’s breweries. In the first half of 2020, the Company recorded

COVID-19

pre-tax

reductions in net revenue and increases in other costs that total $14.1 million of which $10.0 million was recorded in the first quarter and $4.1 million was recorded in the second quarter. The total amount consists of a $5.8 million reduction in net revenue for estimated keg returns from distributors and retailers and $8.3 million for inventory write-downs for obsolescence, increased costs for health and safety, increased salaries and benefits and other

COVID-19

related direct costs, of which $5.6 million are recorded in cost of goods sold and $2.7 million are recorded in operating expenses. While the duration of the disruption and related impact on the Company’s consolidated financial statements is currently uncertain, the Company expects to continue to incur increased costs related to health and safety and salaries and benefits for the foreseeable future.