BOSTON BEER UPDATES 2024 FINANCIAL GUIDANCE TO REFLECT SUPPLIER CONTRACT AMENDMENT
Rhea-AI Summary
Boston Beer Company (NYSE: SAM) has amended its production agreement with Rauch North America Inc, resulting in increased production flexibility and more favorable termination rights in exchange for a $26 million cash payment. This will lead to a pre-tax contract settlement expense of $26 million ($1.70 after-tax per diluted share) in Q4 2024.
The company updated its 2024 guidance, maintaining estimates for depletions and shipments (down low single digits), price increases (2%), and gross margin (44% to 45%). The GAAP EPS guidance was revised to $3.80-$5.80 (from $5.50-$7.50), while Non-GAAP EPS remains at $8.00-$10.00. Shortfall fees are expected to impact gross margin by 65-75 basis points, with third-party production pre-payments affecting it by 95-105 basis points.
Positive
- Increased production flexibility and more favorable termination rights obtained
- Maintained Non-GAAP EPS guidance of $8.00-$10.00
- Price increases of 2% planned for 2024
Negative
- One-time $26 million cash payment required by December 23, 2024
- GAAP EPS guidance reduced from $5.50-$7.50 to $3.80-$5.80
- Shortfall fees and pre-payments negatively impacting gross margins by 160-180 basis points
- Expected decrease in depletions and shipments for 2024
News Market Reaction – SAM
In the trading session that priced this news, SAM declined 2.45%, reflecting a moderate negative market reaction.
Data tracked by StockTitan Argus on the day of publication.
AI-generated analysis. How Rhea-AI works. Not financial advice.
BOSTON, Dec. 20, 2024 (GLOBE NEWSWIRE) -- As part of its ongoing initiatives to optimize its supply chain, The Boston Beer Company, Inc. (NYSE: SAM), today announced an amendment and restatement in its entirety of an existing production agreement with a third-party supplier, Rauch North America Inc (‘Rauch’). This amendment adjusts the existing production agreement to better match the Company’s future capacity requirements and results in increased production flexibility and more favorable termination rights to the company in exchange for a
As a result of the payment, the Company expects to record a pre-tax contract settlement expense of
Updated Future Third Party Production Obligations
For the full year 2024, 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
pre-payments along with its full year 2025 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.
Updated Full-Year 2024 Projections
The Company has updated its full year guidance to reflect the estimated contract settlement expense discussed above. The Company’s actual 2024 results could vary from the current projection and are highly sensitive to changes in volume projections and supply chain performance.
| Full Year 2024 | Current Guidance | Prior Guidance |
| Depletions and Shipments Percentage Decrease | Down low single digits | Down low single digits |
| Price Increases | | |
| Gross Margin | | |
| Advertising, Promotion, and Selling Expense Year Over Year Change ($ million) | ( | ( |
| Effective Tax Rate | | |
| GAAP EPS | | |
| Non-GAAP EPS | | |
| Capital Spending ($ million) | | |
The non-GAAP earnings per share (Non-GAAP EPS) projection excludes the contract settlement of
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.
Use of Non-GAAP Measures
Non-GAAP EPS is not a defined term under U.S. generally accepted accounting principles (“GAAP”). Non-GAAP EPS, or Non-GAAP earnings per diluted share, excludes from projected GAAP EPS the estimated impact of the contract settlement of
Forward-Looking Statements
Statements made in this press release that state the Company’s or management’s intentions, hopes, beliefs, expectations or predictions of the future are forward-looking statements. It is
important to note that the Company’s actual results could differ materially from those projected in such forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in the Company’s SEC filings, including, but not limited to, the Company’s report on Form 10-K for the year ended December 30, 2023 and subsequent reports filed by the Company with the SEC on Forms 10-Q and 8-K. Copies of these documents are available from the SEC and may be found on the Company’s website, www.bostonbeer.com. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. The Company undertakes no obligation to publicly update or revise any forward-looking statements.
About the Company
The Boston Beer Company, Inc. (NYSE: SAM) began brewing Samuel Adams beer in 1984 and has since grown to become one of the largest and most respected craft brewers in the United States. We consistently offer the highest-quality products to our drinkers, and we apply what
we’ve learned from making great-tasting craft beer to making great-tasting and innovative
“beyond beer” products. Boston Beer Company has pioneered not only craft beer but also hard cider, hard seltzer and hard tea. Our core brands include household names like Angry Orchard Hard Cider, Dogfish Head, Sun Cruiser, Truly Hard Seltzer, Twisted Tea Hard Iced Tea, and Samuel Adams. We have taprooms and hospitality locations in California, Delaware, Massachusetts, New York and Ohio. For more information, please visit our website at www.bostonbeer.com, which includes links to our respective brand websites.
