Boston Beer backs FY24 adjusted EPS view $8.00-$10.00, consensus $8.98

Backs FY24 capital expenditures view $80M-$95M. Raises FY24 effective tax rate to 34% from 30%. Boston Beer (SAM) announced an amendment and restatement in its entirety of an existing production agreement with a third-party supplier, Rauch North America. This amendment adjusts the existing production agreement to better match the company’s future capacity requirements and more favorable termination rights to the company in exchange for a $26M cash payment to Rauch on or before December 23. As a result of the payment, the company expects to record a pre-tax contract settlement expense of $26M or $1.70 after tax per diluted share impact in the fourth quarter of 2024. For the FY24, the company continues to estimate shortfall fees will negatively impact gross margin by 65 to 75 basis points and the non-cash expense of third-party production pre- payments will negatively impact gross margins by 95 to 105 basis points. The company continues to work to finalize its 2025 financial plan. The company does not expect this agreement to materially impact its previously provided estimate of $14M in 2025 shortfall fees disclosed in its third quarter 10-Q filed on October 24. The company will provide further guidance on shortfall fees and the non-cash expense of third-party production pre-payments along with its FY25 financial guidance in its fourth quarter earnings report in February 2025. 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. The non-GAAP earnings per share projection excludes the contract settlement of $26M or $1.70 per diluted share and the impact of non-cash brand impairments of $42.6M or $2.49 per diluted share, recognized in the third quarter of fiscal 2024 relating primarily to the Dogfish Head brand. The increase in the estimated full year effective tax rate is due to the impact of the contract settlement which decreased estimated full year pre-tax income but did not significantly change estimated full year non-deductible expenses.