Commitments and Contingencies:
Commitments
As of December 31, 2025, the Company has the following future commitments:
In August 2025, we entered into a lease arrangement for a to-be constructed warehouse space, which will contribute right of use assets and lease liabilities upon lease commencement, which is currently anticipated to occur during the first quarter of 2027. As of December 31, 2025, the future commitments related to this arrangement are not determinable as they are variable in nature.
The Company’s executives are participants in the Freshpet Key Executive Severance Plan requiring the Company to pay severance in the event of certain terminations as detailed therein.
The future minimum payments due under manufacturing and service obligations for five years were as follows:
| | | | | |
| December 31, 2025 |
| 2026 | $ | 10,025 | |
| 2027 | 10,651 | |
| 2028 | 9,751 | |
| 2029 | 589 | |
| 2030 and beyond | — | |
| Total Manufacturing and Servicing Obligations | $ | 31,014 | |
Legal Obligations
We are currently involved in various claims and legal actions that arise in the ordinary course of our business. Legal costs such as outside counsel fees and expenses are charged to selling, general and administrative expenses in the period incurred. None of these claims or proceedings, most of which are covered by insurance, are expected to have a material adverse effect on our business, financial condition, results of operations or cash flows. However, a significant increase in the number of these claims or an increase in amounts owing under successful claims could materially and adversely affect our business, financial condition, results of operations or cash flows.
On April 8, 2022, Phillips Feed Service, Inc., d/b/a Phillips Feed and Pet Supply ("Phillips") filed a complaint against the Company in U.S. District Court for the Eastern District of Pennsylvania (Allentown Division) (the "EDPA") for damages allegedly sustained as a result of the termination of the Company's distribution arrangement with Phillips, a former distributor of Freshpet products. Phillips asserts a claim for breach of contract and seeks monetary damages in excess of $8,300 based on a claimed "termination payment" under a 2018 "Letter Of Intent" and additional damages based on a claim for improper notice of termination. Phillips also claims a right of setoff with respect to monies owed by Phillips to the Company.
On July 5, 2022, the Company answered the complaint disputing the claimed damages, assertions of breach of contract, and the right of offset. In addition, the Company counterclaimed breach of contract for amounts owed to Freshpet earned while Phillips served as an authorized distributor of Freshpet product.
As of December 31, 2022, due to the claims and counterclaims between the parties, the Company reclassified the amounts due from Phillips of $8,971 to other noncurrent assets.
Discovery in this action has closed. A hearing was held on December 4, 2024 with respect to Phillips' Motion for Partial Summary Judgment ("MSJ") and the Company's Response in Opposition thereto.
On March 14, 2025, the EDPA partially granted the MSJ as to Phillips' breach of contract claim, finding that Phillips is entitled to a "termination payment" in the amount of $4,987 (which the Company accrued for as of March 31, 2025), but denied the MSJ as to Phillips' claim for a right of offset against the accounts receivable owed by Phillips to the Company.
On September 15, 2025, the parties entered into a settlement agreement, pursuant to which all claims were dismissed and Phillips agreed to pay the Company a lump sum amount of $1,500 (which Phillips settled on October 14, 2025) in settlement of the amounts due from Phillips of $8,971 net of the amounts due to Phillips of $4,987. Of the resulting loss, excluding the reserves taken in prior years against the amounts due from Phillips, we recognized an additional charge of $716 at settlement, for a total charge of $5,703 for the year ended December 31, 2025.