☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 16-0716709 | ||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||||||
Class A Common Stock | STZ | New York Stock Exchange | ||||||
Class B Common Stock | STZ.B | New York Stock Exchange |
Large accelerated filer | ☒ | Accelerated filer | ☐ | ||||||||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | ||||||||
Emerging growth company | ☐ |
Page | |||||||||||
PART I - FINANCIAL INFORMATION | |||||||||||
Item 1. Financial Statements | |||||||||||
Consolidated Balance Sheets | |||||||||||
Consolidated Statements of Comprehensive Income (Loss) | |||||||||||
Consolidated Statements of Changes in Stockholders’ Equity | |||||||||||
Consolidated Statements of Cash Flows | |||||||||||
Notes to Consolidated Financial Statements | |||||||||||
1. Basis of Presentation
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2. Inventories
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3. Acquisitions, Divestitures, and Business Transformation
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4. Derivative Instruments
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5. Fair Value of Financial Instruments
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6. Goodwill
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7. Intangible Assets
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8. Equity Method Investments
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9. Borrowings
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10. Income Taxes
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11. Stockholders' Equity
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12. Net Income (Loss) Per Common Share Attributable to CBI
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13. Comprehensive Income (Loss) Attributable to CBI
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14. Business Segment Information
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | |||||||||||
Item 3. Quantitative and Qualitative Disclosures About Market Risk | |||||||||||
Item 4. Controls and Procedures | |||||||||||
PART II – OTHER INFORMATION | |||||||||||
Item 4. Mine Safety Disclosures | NA | ||||||||||
Item 6. Exhibits | |||||||||||
INDEX TO EXHIBITS | |||||||||||
SIGNATURES |
FINANCIAL STATEMENTS |
August 31,
2020 |
February 29,
2020 |
||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 204.6 | $ | 81.4 | |||||||
Accounts receivable | 926.3 | 864.8 | |||||||||
Inventories | 1,328.4 | 1,373.6 | |||||||||
Prepaid expenses and other | 497.1 | 535.8 | |||||||||
Assets held for sale - current | 580.8 | 628.5 | |||||||||
Total current assets | 3,537.2 | 3,484.1 | |||||||||
Property, plant, and equipment | 5,184.9 | 5,333.0 | |||||||||
Goodwill | 7,717.4 | 7,757.1 | |||||||||
Intangible assets | 2,738.3 | 2,718.9 | |||||||||
Equity method investments | 2,931.9 | 3,093.9 | |||||||||
Securities measured at fair value | 764.0 | 1,117.1 | |||||||||
Deferred income taxes | 2,574.8 | 2,656.3 | |||||||||
Assets held for sale | 416.6 | 552.1 | |||||||||
Other assets | 597.4 | 610.7 | |||||||||
Total assets | $ | 26,462.5 | $ | 27,323.2 | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
Current liabilities: | |||||||||||
Short-term borrowings | $ | — | $ | 238.9 | |||||||
Current maturities of long-term debt | 533.8 | 734.9 | |||||||||
Accounts payable | 651.2 | 557.6 | |||||||||
Other accrued expenses and liabilities | 724.9 | 780.4 | |||||||||
Total current liabilities | 1,909.9 | 2,311.8 | |||||||||
Long-term debt, less current maturities | 11,066.8 | 11,210.8 | |||||||||
Deferred income taxes and other liabilities | 1,482.0 | 1,326.3 | |||||||||
Total liabilities | 14,458.7 | 14,848.9 | |||||||||
Commitments and contingencies | |||||||||||
CBI stockholders’ equity: | |||||||||||
Class A Common Stock, $0.01 par value – Authorized, 322,000,000 shares; Issued, 186,778,085 shares and 186,090,745 shares, respectively
|
1.9 | 1.9 | |||||||||
Class B Convertible Common Stock, $0.01 par value – Authorized, 30,000,000 shares; Issued, 28,286,561 shares and 28,300,206 shares, respectively
|
0.3 | 0.3 | |||||||||
Additional paid-in capital | 1,553.6 | 1,514.6 | |||||||||
Retained earnings | 13,742.2 | 13,695.3 | |||||||||
Accumulated other comprehensive income (loss) | (815.5) | (266.3) | |||||||||
14,482.5 | 14,945.8 | ||||||||||
Less: Treasury stock – | |||||||||||
Class A Common Stock, at cost, 17,301,423 shares and 18,256,826 shares, respectively
|
(2,792.3) | (2,811.8) | |||||||||
Class B Convertible Common Stock, at cost, 5,005,800 shares
|
(2.2) | (2.2) | |||||||||
(2,794.5) | (2,814.0) | ||||||||||
Total CBI stockholders’ equity | 11,688.0 | 12,131.8 | |||||||||
Noncontrolling interests | 315.8 | 342.5 | |||||||||
Total stockholders’ equity | 12,003.8 | 12,474.3 | |||||||||
Total liabilities and stockholders’ equity | $ | 26,462.5 | $ | 27,323.2 |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 1
|
FINANCIAL STATEMENTS |
For the Six Months
Ended August 31, |
For the Three Months
Ended August 31, |
||||||||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||
Sales | $ | 4,591.4 | $ | 4,855.9 | $ | 2,459.7 | $ | 2,573.4 | |||||||||||||||||||||||||||
Excise taxes | (367.6) | (414.7) | (199.3) | (229.4) | |||||||||||||||||||||||||||||||
Net sales | 4,223.8 | 4,441.2 | 2,260.4 | 2,344.0 | |||||||||||||||||||||||||||||||
Cost of product sold | (2,019.7) | (2,226.6) | (1,044.6) | (1,158.1) | |||||||||||||||||||||||||||||||
Gross profit | 2,204.1 | 2,214.6 | 1,215.8 | 1,185.9 | |||||||||||||||||||||||||||||||
Selling, general, and administrative expenses | (752.4) | (845.4) | (399.1) | (439.4) | |||||||||||||||||||||||||||||||
Impairment of assets held for sale | (3.0) | (27.0) | 22.0 | (27.0) | |||||||||||||||||||||||||||||||
Operating income (loss) | 1,448.7 | 1,342.2 | 838.7 | 719.5 | |||||||||||||||||||||||||||||||
Income (loss) from unconsolidated investments | (651.9) | (2,255.3) | (80.7) | (1,324.7) | |||||||||||||||||||||||||||||||
Interest expense | (200.2) | (226.2) | (100.2) | (111.6) | |||||||||||||||||||||||||||||||
Loss on extinguishment of debt | (7.6) | (2.4) | (0.6) | (2.4) | |||||||||||||||||||||||||||||||
Income (loss) before income taxes | 589.0 | (1,141.7) | 657.2 | (719.2) | |||||||||||||||||||||||||||||||
(Provision for) benefit from income taxes | (239.8) | 387.6 | (135.4) | 202.2 | |||||||||||||||||||||||||||||||
Net income (loss) | 349.2 | (754.1) | 521.8 | (517.0) | |||||||||||||||||||||||||||||||
Net income (loss) attributable to noncontrolling interests | (15.0) | (16.5) | (9.7) | (8.2) | |||||||||||||||||||||||||||||||
Net income (loss) attributable to CBI | $ | 334.2 | $ | (770.6) | $ | 512.1 | $ | (525.2) | |||||||||||||||||||||||||||
Comprehensive income (loss) | $ | (231.7) | $ | (886.2) | $ | 733.2 | $ | (646.4) | |||||||||||||||||||||||||||
Comprehensive (income) loss attributable to noncontrolling interests | 16.7 | (7.1) | (14.2) | 0.1 | |||||||||||||||||||||||||||||||
Comprehensive income (loss) attributable to CBI | $ | (215.0) | $ | (893.3) | $ | 719.0 | $ | (646.3) | |||||||||||||||||||||||||||
Net income (loss) per common share attributable to CBI: | |||||||||||||||||||||||||||||||||||
Basic – Class A Common Stock | $ | 1.74 | $ | (4.08) | $ | 2.68 | $ | (2.77) | |||||||||||||||||||||||||||
Basic – Class B Convertible Common Stock | $ | 1.58 | $ | (3.71) | $ | 2.43 | $ | (2.52) | |||||||||||||||||||||||||||
Diluted – Class A Common Stock | $ | 1.71 | $ | (4.08) | $ | 2.62 | $ | (2.77) | |||||||||||||||||||||||||||
Diluted – Class B Convertible Common Stock | $ | 1.58 | $ | (3.71) | $ | 2.42 | $ | (2.52) | |||||||||||||||||||||||||||
Weighted average common shares outstanding: | |||||||||||||||||||||||||||||||||||
Basic – Class A Common Stock | 169.841 | 168.215 | 170.078 | 168.310 | |||||||||||||||||||||||||||||||
Basic – Class B Convertible Common Stock | 23.289 | 23.316 | 23.284 | 23.316 | |||||||||||||||||||||||||||||||
Diluted – Class A Common Stock | 194.962 | 168.215 | 195.142 | 168.310 | |||||||||||||||||||||||||||||||
Diluted – Class B Convertible Common Stock | 23.289 | 23.316 | 23.284 | 23.316 | |||||||||||||||||||||||||||||||
Cash dividends declared per common share: | |||||||||||||||||||||||||||||||||||
Class A Common Stock | $ | 1.50 | $ | 1.50 | $ | 0.75 | $ | 0.75 | |||||||||||||||||||||||||||
Class B Convertible Common Stock | $ | 1.36 | $ | 1.36 | $ | 0.68 | $ | 0.68 |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 2
|
FINANCIAL STATEMENTS |
Common Stock |
Additional
Paid-in Capital |
Retained
Earnings |
Accumulated
Other Comprehensive Income (Loss) |
Treasury
Stock |
Non-controlling
Interests |
Total | |||||||||||||||||||||||||||||||||||||||||||||||
Class A | Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at February 29, 2020 | $ | 1.9 | $ | 0.3 | $ | 1,514.6 | $ | 13,695.3 | $ | (266.3) | $ | (2,814.0) | $ | 342.5 | $ | 12,474.3 | |||||||||||||||||||||||||||||||||||||
Comprehensive income (loss): | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | (177.9) | — | — | 5.3 | (172.6) | |||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss), net of income tax effect | — | — | — | — | (756.1) | — | (36.2) | (792.3) | |||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income (loss) | (964.9) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared | — | — | — | (143.3) | — | — | — | (143.3) | |||||||||||||||||||||||||||||||||||||||||||||
Shares issued under equity compensation plans | — | — | (6.0) | — | — | 2.8 | — | (3.2) | |||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | 14.7 | — | — | — | — | 14.7 | |||||||||||||||||||||||||||||||||||||||||||||
Balance at May 31, 2020 | 1.9 | 0.3 | 1,523.3 | 13,374.1 | (1,022.4) | (2,811.2) | 311.6 | 11,377.6 | |||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income (loss): | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | 512.1 | — | — | 9.7 | 521.8 | |||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss), net of income tax effect | — | — | — | — | 206.9 | — | 4.5 | 211.4 | |||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income (loss) | 733.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared | — | — | — | (144.0) | — | — | — | (144.0) | |||||||||||||||||||||||||||||||||||||||||||||
Noncontrolling interest distributions | — | — | — | — | — | — | (10.0) | (10.0) | |||||||||||||||||||||||||||||||||||||||||||||
Shares issued under equity compensation plans | — | — | 10.9 | — | — | 16.7 | — | 27.6 | |||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | 19.4 | — | — | — | — | 19.4 | |||||||||||||||||||||||||||||||||||||||||||||
Balance at August 31, 2020 | $ | 1.9 | $ | 0.3 | $ | 1,553.6 | $ | 13,742.2 | $ | (815.5) | $ | (2,794.5) | $ | 315.8 | $ | 12,003.8 | |||||||||||||||||||||||||||||||||||||
Balance at February 28, 2019 | $ | 1.9 | $ | 0.3 | $ | 1,410.8 | $ | 14,276.2 | $ | (353.9) | $ | (2,784.3) | $ | 286.2 | $ | 12,837.2 | |||||||||||||||||||||||||||||||||||||
Comprehensive income (loss): | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | (245.4) | — | — | 8.3 | (237.1) | |||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss), net of income tax effect | — | — | — | — | (1.6) | — | (1.1) | (2.7) | |||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income (loss) | (239.8) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared | — | — | — | (141.9) | — | — | — | (141.9) | |||||||||||||||||||||||||||||||||||||||||||||
Initial recognition of non-controlling interest | — | — | — | — | — | — | 20.2 | 20.2 | |||||||||||||||||||||||||||||||||||||||||||||
Shares issued under equity compensation plans | — | — | (9.3) | — | — | 6.3 | — | (3.0) | |||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | 15.5 | — | — | — | — | 15.5 | |||||||||||||||||||||||||||||||||||||||||||||
Balance at May 31, 2019 | 1.9 | 0.3 | 1,417.0 | 13,888.9 | (355.5) | (2,778.0) | 313.6 | 12,488.2 | |||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income (loss): | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | (525.2) | — | — | 8.2 | (517.0) | |||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss), net of income tax effect | — | — | — | — | (121.1) | — | (8.3) | (129.4) | |||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income (loss) | (646.4) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of shares | — | — | — | — | — | (50.0) | — | (50.0) | |||||||||||||||||||||||||||||||||||||||||||||
Dividends declared | — | — | — | (142.3) | — | — | — | (142.3) | |||||||||||||||||||||||||||||||||||||||||||||
Shares issued under equity compensation plans | — | — | 17.4 | — | — | 6.4 | — | 23.8 | |||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | 17.7 | — | — | — | — | 17.7 | |||||||||||||||||||||||||||||||||||||||||||||
Balance at August 31, 2019 | $ | 1.9 | $ | 0.3 | $ | 1,452.1 | $ | 13,221.4 | $ | (476.6) | $ | (2,821.6) | $ | 313.5 | $ | 11,691.0 | |||||||||||||||||||||||||||||||||||||
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 3
|
FINANCIAL STATEMENTS |
For the Six Months
Ended August 31, |
|||||||||||||||||
2020 | 2019 | ||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||||||||
Net income (loss) | $ | 349.2 | $ | (754.1) | |||||||||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||||||||
Unrealized net (gain) loss on securities measured at fair value | 244.9 | 1,666.6 | |||||||||||||||
Deferred tax provision (benefit) | 196.1 | (452.7) | |||||||||||||||
Depreciation | 142.7 | 169.1 | |||||||||||||||
Stock-based compensation | 34.0 | 33.6 | |||||||||||||||
Equity in (earnings) losses of equity method investees and related activities, net of distributed earnings | 408.1 | 580.3 | |||||||||||||||
Noncash lease expense | 41.3 | 44.8 | |||||||||||||||
Impairment and amortization of intangible assets | 2.7 | 13.9 | |||||||||||||||
Impairment of assets held for sale | 3.0 | 27.0 | |||||||||||||||
Loss on inventory and related contracts | 25.1 | 61.0 | |||||||||||||||
Loss on settlement of treasury lock contracts | (29.3) | — | |||||||||||||||
Change in operating assets and liabilities, net of effects from purchases of businesses: | |||||||||||||||||
Accounts receivable | (56.1) | (106.2) | |||||||||||||||
Inventories | 73.0 | 92.7 | |||||||||||||||
Prepaid expenses and other current assets | 51.3 | 32.2 | |||||||||||||||
Accounts payable | 116.7 | 3.9 | |||||||||||||||
Deferred revenue | 21.8 | 34.0 | |||||||||||||||
Other accrued expenses and liabilities | (141.3) | (61.0) | |||||||||||||||
Other | (38.3) | 34.3 | |||||||||||||||
Total adjustments | 1,095.7 | 2,173.5 | |||||||||||||||
Net cash provided by (used in) operating activities | 1,444.9 | 1,419.4 | |||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||||||||
Purchases of property, plant, and equipment | (277.8) | (355.2) | |||||||||||||||
Purchases of businesses, net of cash acquired | (19.9) | (36.2) | |||||||||||||||
Investments in equity method investees and securities | (217.4) | (33.0) | |||||||||||||||
Proceeds from sales of assets | 18.1 | — | |||||||||||||||
Proceeds from sale of business | 41.1 | — | |||||||||||||||
Other investing activities | 0.6 | (1.3) | |||||||||||||||
Net cash provided by (used in) investing activities | (455.3) | (425.7) | |||||||||||||||
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 4
|
FINANCIAL STATEMENTS |
For the Six Months
Ended August 31, |
|||||||||||||||||
2020 | 2019 | ||||||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||||||||
Proceeds from issuance of long-term debt | 1,194.6 | 1,291.3 | |||||||||||||||
Principal payments of long-term debt | (1,536.4) | (1,331.5) | |||||||||||||||
Net proceeds from (repayments of) short-term borrowings | (238.9) | (640.5) | |||||||||||||||
Dividends paid | (287.6) | (285.0) | |||||||||||||||
Purchases of treasury stock | — | (50.0) | |||||||||||||||
Proceeds from shares issued under equity compensation plans | 32.0 | 32.9 | |||||||||||||||
Payments of minimum tax withholdings on stock-based payment awards | (7.6) | (14.2) | |||||||||||||||
Payments of debt issuance, debt extinguishment, and other financing costs | (18.2) | (8.0) | |||||||||||||||
Distributions to noncontrolling interests | (10.0) | — | |||||||||||||||
Net cash provided by (used in) financing activities | (872.1) | (1,005.0) | |||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | 5.7 | (1.0) | |||||||||||||||
Net increase (decrease) in cash and cash equivalents | 123.2 | (12.3) | |||||||||||||||
Cash and cash equivalents, beginning of period | 81.4 | 93.6 | |||||||||||||||
Cash and cash equivalents, end of period | $ | 204.6 | $ | 81.3 | |||||||||||||
Supplemental disclosures of noncash investing and financing activities | |||||||||||||||||
Additions to property, plant, and equipment | $ | 69.9 | $ | 74.4 |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 5
|
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
August 31,
2020 |
February 29,
2020 |
||||||||||
(in millions) | |||||||||||
Raw materials and supplies | $ | 136.9 | $ | 171.7 | |||||||
In-process inventories | 765.4 | 814.7 | |||||||||
Finished case goods | 426.1 | 387.2 | |||||||||
$ | 1,328.4 | $ | 1,373.6 |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 6
|
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(in millions) | ||||||||
Cash received from buyer | $ | 269.7 | ||||||
Net assets sold | (213.3) | |||||||
AOCI reclassification adjustments, primarily foreign currency translation | 20.9 | |||||||
Direct costs to sell | (3.8) | |||||||
Working capital adjustments to be paid | (3.0) | |||||||
Gain on sale of business | $ | 70.5 |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 7
|
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 8
|
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
August 31,
2020 |
February 29, 2020 | |||||||||||||||||||||||||||||||||||||||||||
Wine and Spirits |
Beer (1)
|
Wine and Spirits | Consolidated | |||||||||||||||||||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||||||||||
Accounts receivable | $ | — | $ | 2.4 | $ | — | $ | 2.4 | ||||||||||||||||||||||||||||||||||||
Inventories | 563.9 | 13.7 | 576.9 | 590.6 | ||||||||||||||||||||||||||||||||||||||||
Prepaid expenses and other | 16.9 | 2.8 | 32.7 | 35.5 | ||||||||||||||||||||||||||||||||||||||||
Assets held for sale - current | 580.8 | 18.9 | 609.6 | 628.5 | ||||||||||||||||||||||||||||||||||||||||
Property, plant, and equipment | 133.2 | 55.9 | 172.6 | 228.5 | ||||||||||||||||||||||||||||||||||||||||
Goodwill | 287.2 | 4.7 | 304.3 | 309.0 | ||||||||||||||||||||||||||||||||||||||||
Intangible assets | 377.6 | 28.2 | 384.0 | 412.2 | ||||||||||||||||||||||||||||||||||||||||
Equity method investments | 0.4 | — | 1.0 | 1.0 | ||||||||||||||||||||||||||||||||||||||||
Other assets | 28.2 | 24.8 | 26.3 | 51.1 | ||||||||||||||||||||||||||||||||||||||||
Less: Reserve for assets held for sale | (410.0) | (42.7) | (407.0) | (449.7) | ||||||||||||||||||||||||||||||||||||||||
Assets held for sale | 416.6 | 70.9 | 481.2 | 552.1 | ||||||||||||||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||||||||||
Accounts payable | 1.5 | 0.2 | 0.6 | 0.8 | ||||||||||||||||||||||||||||||||||||||||
Other accrued expenses and liabilities | 13.8 | 11.0 | 17.8 | 28.8 | ||||||||||||||||||||||||||||||||||||||||
Deferred income taxes and other liabilities | — | 33.3 | — | 33.3 | ||||||||||||||||||||||||||||||||||||||||
Liabilities held for sale (2)
|
15.3 | 44.5 | 18.4 | 62.9 | ||||||||||||||||||||||||||||||||||||||||
Net assets held for sale | $ | 982.1 | $ | 45.3 | $ | 1,072.4 | $ | 1,117.7 |
For the Six Months
Ended August 31, |
For the Three Months
Ended August 31, |
||||||||||||||||||||||||||||||||||||||||
Results of Operations Location | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||||||||
Loss on inventory write-downs | Cost of product sold | $ | 4.0 | $ | 40.9 | $ | (0.1) | $ | 13.7 | ||||||||||||||||||||||||||||||||
Contract termination costs | Cost of product sold | 16.9 | 20.1 | — | 4.3 | ||||||||||||||||||||||||||||||||||||
Employee termination costs | Selling, general, and administrative expenses | 2.5 | 12.1 | 3.8 | 0.2 | ||||||||||||||||||||||||||||||||||||
Other costs | Selling, general, and administrative expenses | 1.0 | 6.3 | 1.0 | — | ||||||||||||||||||||||||||||||||||||
Impairment of long-lived assets | Impairment of assets held for sale | 3.0 | 27.0 | (22.0) | 27.0 | ||||||||||||||||||||||||||||||||||||
$ | 27.4 | $ | 106.4 | $ | (17.3) | $ | 45.2 |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 9
|
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
August 31,
2020 |
February 29,
2020 |
||||||||||
(in millions) | |||||||||||
Derivative instruments designated as hedging instruments | |||||||||||
Foreign currency contracts | $ | 1,527.2 | $ | 1,831.0 | |||||||
Interest rate swap contracts | $ | — | $ | 375.0 | |||||||
Treasury lock contracts | $ | — | $ | 300.0 | |||||||
Derivative instruments not designated as hedging instruments | |||||||||||
Foreign currency contracts | $ | 366.8 | $ | 1,180.2 | |||||||
Commodity derivative contracts | $ | 246.5 | $ | 282.8 | |||||||
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 10
|
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Derivative Instruments in
Designated Cash Flow Hedging Relationships |
Net
Gain (Loss) Recognized in OCI |
Location of Net Gain (Loss)
Reclassified from AOCI to Income (Loss) |
Net
Gain (Loss) Reclassified from AOCI to Income (Loss) |
|||||||||||||||||
(in millions) | ||||||||||||||||||||
For the Six Months Ended August 31, 2020 | ||||||||||||||||||||
Foreign currency contracts | $ | (156.0) | Sales | $ | 0.9 | |||||||||||||||
Cost of product sold | (27.2) | |||||||||||||||||||
Interest rate swap contracts | (0.6) | Interest expense | (1.1) | |||||||||||||||||
Treasury lock contracts | (16.1) | Interest expense | (0.7) | |||||||||||||||||
$ | (172.7) | $ | (28.1) | |||||||||||||||||
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 11
|
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Derivative Instruments in
Designated Cash Flow Hedging Relationships |
Net
Gain (Loss) Recognized in OCI |
Location of Net Gain (Loss)
Reclassified from AOCI to Income (Loss) |
Net
Gain (Loss) Reclassified from AOCI to Income (Loss) |
|||||||||||||||||
(in millions) | ||||||||||||||||||||
For the Six Months Ended August 31, 2019 | ||||||||||||||||||||
Foreign currency contracts | $ | (35.6) | Sales | $ | — | |||||||||||||||
Cost of product sold | 7.8 | |||||||||||||||||||
Interest rate swap contracts | (0.6) | Interest expense | — | |||||||||||||||||
$ | (36.2) | $ | 7.8 | |||||||||||||||||
For the Three Months Ended August 31, 2020 | ||||||||||||||||||||
Foreign currency contracts | $ | 37.4 | Sales | $ | 0.5 | |||||||||||||||
Cost of product sold | (18.7) | |||||||||||||||||||
Interest rate swap contracts | (0.3) | Interest expense | (0.7) | |||||||||||||||||
Treasury lock contracts | — | Interest expense | (0.7) | |||||||||||||||||
$ | 37.1 | $ | (19.6) | |||||||||||||||||
For the Three Months Ended August 31, 2019 | ||||||||||||||||||||
Foreign currency contracts | $ | (33.2) | Sales | $ | — | |||||||||||||||
Cost of product sold | 4.2 | |||||||||||||||||||
Interest rate swap contracts | (0.6) | Interest expense | — | |||||||||||||||||
$ | (33.8) | $ | 4.2 |
Derivative Instruments Not
Designated as Hedging Instruments |
Location of Net Gain (Loss)
Recognized in Income (Loss) |
Net
Gain (Loss) Recognized in Income (Loss) |
||||||||||||||||||
(in millions) | ||||||||||||||||||||
For the Six Months Ended August 31, 2020 | ||||||||||||||||||||
Commodity derivative contracts | Cost of product sold | $ | (9.4) | |||||||||||||||||
Foreign currency contracts | Selling, general, and administrative expenses | (20.0) | ||||||||||||||||||
$ | (29.4) | |||||||||||||||||||
For the Six Months Ended August 31, 2019 | ||||||||||||||||||||
Commodity derivative contracts | Cost of product sold | $ | (26.8) | |||||||||||||||||
Foreign currency contracts | Selling, general, and administrative expenses | (8.9) | ||||||||||||||||||
$ | (35.7) | |||||||||||||||||||
For the Three Months Ended August 31, 2020 | ||||||||||||||||||||
Commodity derivative contracts | Cost of product sold | $ | 17.4 | |||||||||||||||||
Foreign currency contracts | Selling, general and administrative expenses | 5.9 | ||||||||||||||||||
$ | 23.3 | |||||||||||||||||||
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 12
|
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Derivative Instruments Not
Designated as Hedging Instruments |
Location of Net Gain (Loss)
Recognized in Income (Loss) |
Net
Gain (Loss) Recognized in Income (Loss) |
||||||||||||||||||
(in millions) | ||||||||||||||||||||
For the Three Months Ended August 31, 2019 | ||||||||||||||||||||
Commodity derivative contracts | Cost of product sold | $ | (10.9) | |||||||||||||||||
Foreign currency contracts | Selling, general and administrative expenses | (5.1) | ||||||||||||||||||
$ | (16.0) |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 13
|
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
August 31, 2020 (1) (2)
|
February 29, 2020 (2)
|
||||||||||||||||||||||||||||||||||||||||||||||
Tranche A
Warrants (3)
|
Tranche B
Warrants (4)
|
Tranche A
Warrants (3)
|
Tranche B
Warrants (4)
|
November
2017 Canopy
Warrants (3)
|
|||||||||||||||||||||||||||||||||||||||||||
Exercise price (5)
|
C$ | 50.40 | C$ | 76.68 | C$ | 50.40 | C$ | 76.68 | C$ | 12.98 | |||||||||||||||||||||||||||||||||||||
Valuation date stock price (6)
|
C$ | 21.51 | C$ | 21.51 | C$ | 25.17 | C$ | 25.17 | C$ | 25.17 | |||||||||||||||||||||||||||||||||||||
Remaining contractual term (7)
|
3.2 years | 6.2 years | 3.7 years | 6.7 years | 0.2 years | ||||||||||||||||||||||||||||||||||||||||||
Expected volatility (8)
|
75.0 | % | 75.0 | % | 70.0 | % | 70.0 | % | 105.3 | % | |||||||||||||||||||||||||||||||||||||
Risk-free interest rate (9)
|
0.3 | % | 0.4 | % | 1.1 | % | 1.1 | % | 1.5 | % | |||||||||||||||||||||||||||||||||||||
Expected dividend yield (10)
|
0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % |
November 2017 Canopy Warrants | May 1, 2020 | |||||||
Tranche A Warrants | November 1, 2023 | |||||||
Tranche B Warrants | November 1, 2026 | |||||||
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 14
|
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
August 31,
2020 |
February 29,
2020 |
||||||||||
Conversion price (1)
|
C$ | 48.17 | C$ | 48.17 | |||||||
Valuation date stock price (2)
|
C$ | 21.51 | C$ | 25.17 | |||||||
Remaining term (3)
|
2.9 years | 3.4 years | |||||||||
Expected volatility (4)
|
61.9 | % | 58.2 | % | |||||||
Risk-free interest rate (5)
|
0.3 | % | 1.1 | % | |||||||
Expected dividend yield (6)
|
0.0 | % | 0.0 | % |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 15
|
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Fair Value Measurements Using | |||||||||||||||||||||||||||||||||||
Quoted
Prices in Active Markets (Level 1) |
Significant
Other Observable Inputs (Level 2) |
Significant
Unobservable Inputs (Level 3) |
Total | ||||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||
August 31, 2020 | |||||||||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||||||
Foreign currency contracts | $ | — | $ | 16.9 | $ | — | $ | 16.9 | |||||||||||||||||||||||||||
Commodity derivative contracts | $ | — | $ | 5.5 | $ | — | $ | 5.5 | |||||||||||||||||||||||||||
Equity securities (1)
|
$ | — | $ | 635.9 | $ | — | $ | 635.9 | |||||||||||||||||||||||||||
Canopy Debt Securities (1)
|
$ | — | $ | 128.1 | $ | — | $ | 128.1 | |||||||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||||||
Foreign currency contracts | $ | — | $ | 64.5 | $ | — | $ | 64.5 | |||||||||||||||||||||||||||
Commodity derivative contracts | $ | — | $ | 31.0 | $ | — | $ | 31.0 | |||||||||||||||||||||||||||
February 29, 2020 | |||||||||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||||||
Foreign currency contracts | $ | — | $ | 96.3 | $ | — | $ | 96.3 | |||||||||||||||||||||||||||
Commodity derivative contracts | $ | — | $ | 0.6 | $ | — | $ | 0.6 | |||||||||||||||||||||||||||
Equity securities (1)
|
$ | — | $ | 991.5 | $ | — | $ | 991.5 | |||||||||||||||||||||||||||
Canopy Debt Securities (1)
|
$ | — | $ | 125.6 | $ | — | $ | 125.6 | |||||||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||||||
Foreign currency contracts | $ | — | $ | 34.4 | $ | — | $ | 34.4 | |||||||||||||||||||||||||||
Commodity derivative contracts | $ | — | $ | 40.9 | $ | — | $ | 40.9 | |||||||||||||||||||||||||||
Interest rate swap contracts | $ | — | $ | 0.8 | $ | — | $ | 0.8 | |||||||||||||||||||||||||||
Treasury lock contracts | $ | — | $ | 7.6 | $ | — | $ | 7.6 |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 16
|
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Fair Value Measurements Using | |||||||||||||||||||||||||||||||||||||||||
Quoted
Prices in Active Markets (Level 1) |
Significant
Other Observable Inputs (Level 2) |
Significant
Unobservable Inputs (Level 3) |
Total Losses | ||||||||||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||||||||
For the Six Months Ended August 31, 2020 | |||||||||||||||||||||||||||||||||||||||||
Long-lived assets held for sale | $ | — | $ | — | $ | 795.2 | $ | 3.0 | |||||||||||||||||||||||||||||||||
For the Six Months Ended August 31, 2019 | |||||||||||||||||||||||||||||||||||||||||
Long-lived assets held for sale | $ | — | $ | — | $ | 1,444.4 | $ | 27.0 | |||||||||||||||||||||||||||||||||
Trademarks | — | — | 17.0 | 11.0 | |||||||||||||||||||||||||||||||||||||
Total | $ | — | $ | — | $ | 1,461.4 | $ | 38.0 |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 17
|
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Beer | Wine and Spirits | Consolidated | |||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||
Balance, February 28, 2019 | $ | 5,167.9 | $ | 2,920.9 | $ | 8,088.8 | |||||||||||||||||||||||
Purchase accounting allocations (1)
|
— | 58.8 | 58.8 | ||||||||||||||||||||||||||
Black Velvet Divestiture | — | (72.2) | (72.2) | ||||||||||||||||||||||||||
Foreign currency translation adjustments | 0.2 | (9.5) | (9.3) | ||||||||||||||||||||||||||
Reclassified (to) from assets held for sale (2)
|
(4.7) | (304.3) | (309.0) | ||||||||||||||||||||||||||
Balance, February 29, 2020 | 5,163.4 | 2,593.7 | 7,757.1 | ||||||||||||||||||||||||||
Purchase accounting allocations (3)
|
— | 14.2 | 14.2 | ||||||||||||||||||||||||||
Foreign currency translation adjustments | (80.5) | 8.6 | (71.9) | ||||||||||||||||||||||||||
Reclassified (to) from assets held for sale (2)
|
0.9 | 17.1 | 18.0 | ||||||||||||||||||||||||||
Balance, August 31, 2020 | $ | 5,083.8 | $ | 2,633.6 | $ | 7,717.4 |
August 31, 2020 | February 29, 2020 | ||||||||||||||||||||||||||||||||||
Gross
Carrying Amount |
Net
Carrying Amount |
Gross
Carrying Amount |
Net
Carrying Amount |
||||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||
Amortizable intangible assets | |||||||||||||||||||||||||||||||||||
Customer relationships | $ | 87.7 | $ | 29.4 | $ | 87.4 | $ | 31.8 | |||||||||||||||||||||||||||
Other | 20.4 | 0.3 | 20.2 | 0.3 | |||||||||||||||||||||||||||||||
Total | $ | 108.1 | 29.7 | $ | 107.6 | 32.1 | |||||||||||||||||||||||||||||
Nonamortizable intangible assets | |||||||||||||||||||||||||||||||||||
Trademarks | 2,708.6 | 2,686.8 | |||||||||||||||||||||||||||||||||
Total intangible assets | $ | 2,738.3 | $ | 2,718.9 |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 18
|
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
August 31, 2020 | February 29, 2020 | ||||||||||||||||||||||||||||||||||
Carrying Value |
Ownership Percentage (1)
|
Carrying Value | Ownership Percentage | ||||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||
Canopy Equity Method Investment | $ | 2,713.1 | 37.3 | % | $ | 2,911.7 | 35.3 | % | |||||||||||||||||||||||||||
Other equity method investments (2)
|
218.8 |
20%-50%
|
182.2 |
20%-50%
|
|||||||||||||||||||||||||||||||
$ | 2,931.9 | $ | 3,093.9 |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 19
|
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
For the Six Months
Ended August 31, |
For the Three Months
Ended August 31, |
||||||||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||
Equity in earnings (losses) from Canopy and related activities | $ | (408.6) | $ | (590.4) | $ | (31.0) | $ | (484.4) |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 20
|
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
For the Six Months
Ended August 31, |
For the Three Months
Ended August 31, |
||||||||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||
Net sales | $ | 160.0 | $ | 138.4 | $ | 79.7 | $ | 67.7 | |||||||||||||||||||||||||||
Gross profit (loss) | $ | (52.6) | $ | 21.1 | $ | 4.7 | $ | 9.8 | |||||||||||||||||||||||||||
Net income (loss) | $ | (1,066.2) | $ | (418.6) | $ | (92.6) | $ | (149.7) | |||||||||||||||||||||||||||
Net income (loss) attributable to Canopy | $ | (1,031.7) | $ | (430.4) | $ | (78.3) | $ | (146.3) |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 21
|
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
August 31, 2020 |
February 29,
2020 |
||||||||||||||||||||||||||||||||||
Current | Long-term | Total | Total | ||||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||
Short-term borrowings | |||||||||||||||||||||||||||||||||||
Commercial paper | $ | — | $ | 238.9 | |||||||||||||||||||||||||||||||
$ | — | $ | 238.9 | ||||||||||||||||||||||||||||||||
Long-term debt | |||||||||||||||||||||||||||||||||||
Term loan credit facilities | $ | 24.6 | $ | 442.1 | $ | 466.7 | $ | 1,295.7 | |||||||||||||||||||||||||||
Senior notes | 499.5 | 10,615.7 | 11,115.2 | 10,624.7 | |||||||||||||||||||||||||||||||
Other | 9.7 | 9.0 | 18.7 | 25.3 | |||||||||||||||||||||||||||||||
$ | 533.8 | $ | 11,066.8 | $ | 11,600.6 | $ | 11,945.7 |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 22
|
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Amount | Maturity | ||||||||||
(in millions) | |||||||||||
2020 Credit Agreement | |||||||||||
Revolving Credit Facility (1) (2)
|
$ | 2,000.0 | Sept 14, 2023 | ||||||||
March 2020 Term Credit Agreement | |||||||||||
2019 Five-Year Term Facility (1) (3)
|
$ | 491.3 | Jun 28, 2024 |
2020
Credit Agreement |
March 2020
Term Credit Agreement |
||||||||||||||||||||||
Revolving
Credit Facility |
2019 Five-
Year Term
Facility (1)
|
||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Outstanding borrowings | $ | — | $ | 466.7 | |||||||||||||||||||
Interest rate | — | % | 1.0 | % | |||||||||||||||||||
LIBOR margin | — | % | 0.88 | % | |||||||||||||||||||
Outstanding letters of credit | $ | 11.8 | |||||||||||||||||||||
Remaining borrowing capacity (2)
|
$ | 1,988.2 |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 23
|
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Date of | Redemption | |||||||||||||||||||||||||||||||||||||||||||
Principal | Maturity | Interest Payments | Stated Redemption Rate | Stated Basis Points | ||||||||||||||||||||||||||||||||||||||||
(in millions, except basis points) | ||||||||||||||||||||||||||||||||||||||||||||
2.875% Senior Notes (1) (2)
|
$ | 600.0 | May 2030 | May/Nov | Feb 2030 | 35 | ||||||||||||||||||||||||||||||||||||||
3.75% Senior Notes (1) (2)
|
$ | 600.0 | May 2050 | May/Nov | Nov 2049 | 40 |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 24
|
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(in millions) | |||||
2021 | $ | 17.4 | |||
2022 | 1,182.2 | ||||
2023 | 1,828.9 | ||||
2024 | 1,076.2 | ||||
2025 | 780.7 | ||||
2026 | 900.0 | ||||
Thereafter | 5,900.0 | ||||
$ | 11,685.4 |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 25
|
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Common Stock | Treasury Stock | ||||||||||||||||||||||||||||||||||||||||||||||
Class A | Class B | Class 1 | Class A | Class B | |||||||||||||||||||||||||||||||||||||||||||
Balance at February 29, 2020 | 186,090,745 | 28,300,206 | 1,692,227 | 18,256,826 | 5,005,800 | ||||||||||||||||||||||||||||||||||||||||||
Conversion of shares | 2,532 | (2,532) | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | — | — | 2,576 | (44,593) | — | ||||||||||||||||||||||||||||||||||||||||||
Vesting of restricted stock units (1)
|
— | — | — | (76,019) | — | ||||||||||||||||||||||||||||||||||||||||||
Vesting of performance share units (1)
|
— | — | — | (17,335) | — | ||||||||||||||||||||||||||||||||||||||||||
Balance at May 31, 2020 | 186,093,277 | 28,297,674 | 1,694,803 | 18,118,879 | 5,005,800 | ||||||||||||||||||||||||||||||||||||||||||
Conversion of shares | 684,808 | (11,113) | (673,695) | — | — | ||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | — | — | — | (781,075) | — | ||||||||||||||||||||||||||||||||||||||||||
Employee stock purchases | — | — | — | (32,867) | — | ||||||||||||||||||||||||||||||||||||||||||
Vesting of restricted stock units (1)
|
— | — | — | (3,514) | — | ||||||||||||||||||||||||||||||||||||||||||
Balance at August 31, 2020 | 186,778,085 | 28,286,561 | 1,021,108 | 17,301,423 | 5,005,800 | ||||||||||||||||||||||||||||||||||||||||||
Balance at February 28, 2019 | 185,740,178 | 28,322,419 | 1,149,624 | 18,927,966 | 5,005,800 | ||||||||||||||||||||||||||||||||||||||||||
Conversion of shares | 133,667 | (55) | (133,612) | — | — | ||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | — | — | 2,107 | (173,725) | — | ||||||||||||||||||||||||||||||||||||||||||
Vesting of restricted stock units (1)
|
— | — | — | (88,683) | — | ||||||||||||||||||||||||||||||||||||||||||
Vesting of performance share units (1)
|
— | — | — | (29,015) | — | ||||||||||||||||||||||||||||||||||||||||||
Cancellation of restricted shares | — | — | — | 444 | — | ||||||||||||||||||||||||||||||||||||||||||
Balance at May 31, 2019 | 185,873,845 | 28,322,364 | 1,018,119 | 18,636,987 | 5,005,800 | ||||||||||||||||||||||||||||||||||||||||||
Share repurchases | — | — | — | 265,593 | — | ||||||||||||||||||||||||||||||||||||||||||
Conversion of shares | 6,267 | (543) | (5,724) | — | — | ||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | — | — | — | (258,628) | — | ||||||||||||||||||||||||||||||||||||||||||
Employee stock purchases | — | — | — | (36,840) | — | ||||||||||||||||||||||||||||||||||||||||||
Vesting of restricted stock units (1)
|
— | — | — | (2,148) | — | ||||||||||||||||||||||||||||||||||||||||||
Balance at August 31, 2019 | 185,880,112 | 28,321,821 | 1,012,395 | 18,604,964 | 5,005,800 | ||||||||||||||||||||||||||||||||||||||||||
For the Three
Months Ended May 31, |
For the Three
Months Ended August 31, |
For the Six
Months Ended August 31, |
|||||||||||||||||||||||||||
2020 | |||||||||||||||||||||||||||||
Restricted Stock Units | 37,506 | 187 | 37,693 | ||||||||||||||||||||||||||
Performance Share Units | 9,433 | — | 9,433 | ||||||||||||||||||||||||||
2019 | |||||||||||||||||||||||||||||
Restricted Stock Units | 48,562 | 1,176 | 49,738 | ||||||||||||||||||||||||||
Performance Share Units | 17,439 | — | 17,439 |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 26
|
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Class A Common Shares | |||||||||||||||||||||||
Repurchase
Authorization |
Dollar Value
of Shares Repurchased |
Number of
Shares Repurchased |
|||||||||||||||||||||
(in millions, except share data) | |||||||||||||||||||||||
2018 Authorization | $ | 3,000.0 | $ | 1,045.9 | 4,897,605 |
For the Six Months Ended | |||||||||||||||||||||||||||||||||||||||||
August 31, 2020 | August 31, 2019 | ||||||||||||||||||||||||||||||||||||||||
Common Stock | Common Stock | ||||||||||||||||||||||||||||||||||||||||
Class A | Class B | Class A | Class B | ||||||||||||||||||||||||||||||||||||||
(in millions, except per share data) | |||||||||||||||||||||||||||||||||||||||||
Net income (loss) attributable to CBI allocated – basic | $ | 297.3 | $ | 36.9 | $ | (684.1) | $ | (86.5) | |||||||||||||||||||||||||||||||||
Conversion of Class B common shares into Class A common shares | 36.9 | — | — | — | |||||||||||||||||||||||||||||||||||||
Effect of stock-based awards on allocated net income (loss) | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Net income (loss) attributable to CBI allocated – diluted | $ | 334.2 | $ | 36.9 | $ | (684.1) | $ | (86.5) | |||||||||||||||||||||||||||||||||
Weighted average common shares outstanding – basic | 169.841 | 23.289 | 168.215 | 23.316 | |||||||||||||||||||||||||||||||||||||
Conversion of Class B common shares into Class A common shares (1)
|
23.289 | — | — | — | |||||||||||||||||||||||||||||||||||||
Stock-based awards, primarily stock options (1)
|
1.832 | — | — | — | |||||||||||||||||||||||||||||||||||||
Weighted average common shares outstanding – diluted | 194.962 | 23.289 | 168.215 | 23.316 | |||||||||||||||||||||||||||||||||||||
Net income (loss) per common share attributable to CBI – basic | $ | 1.74 | $ | 1.58 | $ | (4.08) | $ | (3.71) | |||||||||||||||||||||||||||||||||
Net income (loss) per common share attributable to CBI – diluted | $ | 1.71 | $ | 1.58 | $ | (4.08) | $ | (3.71) | |||||||||||||||||||||||||||||||||
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 27
|
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
For the Three Months Ended | |||||||||||||||||||||||||||||||||||||||||
August 31, 2020 | August 31, 2019 | ||||||||||||||||||||||||||||||||||||||||
Common Stock | Common Stock | ||||||||||||||||||||||||||||||||||||||||
Class A | Class B | Class A | Class B | ||||||||||||||||||||||||||||||||||||||
(in millions, except per share data) | |||||||||||||||||||||||||||||||||||||||||
Net income (loss) attributable to CBI allocated – basic | $ | 455.5 | $ | 56.6 | $ | (466.4) | $ | (58.8) | |||||||||||||||||||||||||||||||||
Conversion of Class B common shares into Class A common shares | 56.6 | — | — | — | |||||||||||||||||||||||||||||||||||||
Effect of stock-based awards on allocated net income (loss) | — | (0.4) | — | — | |||||||||||||||||||||||||||||||||||||
Net income (loss) attributable to CBI allocated – diluted | $ | 512.1 | $ | 56.2 | $ | (466.4) | $ | (58.8) | |||||||||||||||||||||||||||||||||
Weighted average common shares outstanding – basic | 170.078 | 23.284 | 168.310 | 23.316 | |||||||||||||||||||||||||||||||||||||
Conversion of Class B common shares into Class A common shares (1)
|
23.284 | — | — | — | |||||||||||||||||||||||||||||||||||||
Stock-based awards, primarily stock options (1)
|
1.780 | — | — | — | |||||||||||||||||||||||||||||||||||||
Weighted average common shares outstanding – diluted | 195.142 | 23.284 | 168.310 | 23.316 | |||||||||||||||||||||||||||||||||||||
Net income (loss) per common share attributable to CBI – basic | $ | 2.68 | $ | 2.43 | $ | (2.77) | $ | (2.52) | |||||||||||||||||||||||||||||||||
Net income (loss) per common share attributable to CBI – diluted | $ | 2.62 | $ | 2.42 | $ | (2.77) | $ | (2.52) |
Before Tax
Amount |
Tax (Expense)
Benefit |
Net of Tax
Amount |
|||||||||||||||
(in millions) | |||||||||||||||||
For the Six Months Ended August 31, 2020 | |||||||||||||||||
Net income (loss) attributable to CBI | $ | 334.2 | |||||||||||||||
Other comprehensive income (loss) attributable to CBI: | |||||||||||||||||
Foreign currency translation adjustments: | |||||||||||||||||
Net gain (loss) | $ | (449.0) | $ | — | (449.0) | ||||||||||||
Reclassification adjustments | — | — | — | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | (449.0) | — | (449.0) | ||||||||||||||
Unrealized gain (loss) on cash flow hedges: | |||||||||||||||||
Net derivative gain (loss) | (163.4) | 3.2 | (160.2) | ||||||||||||||
Reclassification adjustments | 28.0 | (1.9) | 26.1 | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | (135.4) | 1.3 | (134.1) |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 28
|
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Before Tax
Amount |
Tax (Expense)
Benefit |
Net of Tax
Amount |
|||||||||||||||
(in millions) | |||||||||||||||||
Pension/postretirement adjustments: | |||||||||||||||||
Net actuarial gain (loss) | (0.2) | — | (0.2) | ||||||||||||||
Reclassification adjustments | — | — | — | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | (0.2) | — | (0.2) | ||||||||||||||
Share of OCI of equity method investments | |||||||||||||||||
Net gain (loss) | 34.7 | (0.6) | 34.1 | ||||||||||||||
Reclassification adjustments | — | — | — | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | 34.7 | (0.6) | 34.1 | ||||||||||||||
Other comprehensive income (loss) attributable to CBI | $ | (549.9) | $ | 0.7 | (549.2) | ||||||||||||
Comprehensive income (loss) attributable to CBI | $ | (215.0) | |||||||||||||||
For the Six Months Ended August 31, 2019 | |||||||||||||||||
Net income (loss) attributable to CBI | $ | (770.6) | |||||||||||||||
Other comprehensive income (loss) attributable to CBI: | |||||||||||||||||
Foreign currency translation adjustments: | |||||||||||||||||
Net gain (loss) | $ | (58.2) | $ | — | (58.2) | ||||||||||||
Reclassification adjustments | — | — | — | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | (58.2) | — | (58.2) | ||||||||||||||
Unrealized gain (loss) on cash flow hedges: | |||||||||||||||||
Net derivative gain (loss) | (38.4) | 3.8 | (34.6) | ||||||||||||||
Reclassification adjustments | (6.0) | (0.6) | (6.6) | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | (44.4) | 3.2 | (41.2) | ||||||||||||||
Pension/postretirement adjustments: | |||||||||||||||||
Net actuarial gain (loss) | — | — | — | ||||||||||||||
Reclassification adjustments | 0.1 | — | 0.1 | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | 0.1 | — | 0.1 | ||||||||||||||
Share of OCI of equity method investments | |||||||||||||||||
Net gain (loss) | (30.6) | 7.2 | (23.4) | ||||||||||||||
Reclassification adjustments | — | — | — | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | (30.6) | 7.2 | (23.4) | ||||||||||||||
Other comprehensive income (loss) attributable to CBI | $ | (133.1) | $ | 10.4 | (122.7) | ||||||||||||
Comprehensive income (loss) attributable to CBI | $ | (893.3) | |||||||||||||||
For the Three Months Ended August 31, 2020 | |||||||||||||||||
Net income (loss) attributable to CBI | $ | 512.1 | |||||||||||||||
Other comprehensive income (loss) attributable to CBI: | |||||||||||||||||
Foreign currency translation adjustments: | |||||||||||||||||
Net gain (loss) | $ | 170.9 | $ | — | 170.9 | ||||||||||||
Reclassification adjustments | — | — | — | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | 170.9 | — | 170.9 | ||||||||||||||
Unrealized gain (loss) on cash flow hedges: | |||||||||||||||||
Net derivative gain (loss) | 37.1 | (2.1) | 35.0 | ||||||||||||||
Reclassification adjustments | 20.3 | (1.4) | 18.9 | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | 57.4 | (3.5) | 53.9 | ||||||||||||||
Pension/postretirement adjustments: | |||||||||||||||||
Net actuarial gain (loss) | (0.7) | 0.2 | (0.5) | ||||||||||||||
Reclassification adjustments | — | — | — | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | (0.7) | 0.2 | (0.5) |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 29
|
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Before Tax
Amount |
Tax (Expense)
Benefit |
Net of Tax
Amount |
|||||||||||||||
(in millions) | |||||||||||||||||
Share of OCI of equity method investments | |||||||||||||||||
Net gain (loss) | (17.8) | 0.4 | (17.4) | ||||||||||||||
Reclassification adjustments | — | — | — | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | (17.8) | 0.4 | (17.4) | ||||||||||||||
Other comprehensive income (loss) attributable to CBI | $ | 209.8 | $ | (2.9) | 206.9 | ||||||||||||
Comprehensive income (loss) attributable to CBI | $ | 719.0 | |||||||||||||||
For the Three Months Ended August 31, 2019 | |||||||||||||||||
Net income (loss) attributable to CBI | $ | (525.2) | |||||||||||||||
Other comprehensive income (loss) attributable to CBI: | |||||||||||||||||
Foreign currency translation adjustments: | |||||||||||||||||
Net gain (loss) | $ | (76.5) | $ | — | (76.5) | ||||||||||||
Reclassification adjustments | — | — | — | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | (76.5) | — | (76.5) | ||||||||||||||
Unrealized gain (loss) on cash flow hedges: | |||||||||||||||||
Net derivative gain (loss) | (34.0) | 2.1 | (31.9) | ||||||||||||||
Reclassification adjustments | (3.7) | — | (3.7) | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | (37.7) | 2.1 | (35.6) | ||||||||||||||
Pension/postretirement adjustments: | |||||||||||||||||
Net actuarial gain (loss) | (0.1) | — | (0.1) | ||||||||||||||
Reclassification adjustments | 0.1 | — | 0.1 | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | — | — | — | ||||||||||||||
Share of OCI of equity method investments | |||||||||||||||||
Net gain (loss) | (11.8) | 2.8 | (9.0) | ||||||||||||||
Reclassification adjustments | — | — | — | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | (11.8) | 2.8 | (9.0) | ||||||||||||||
Other comprehensive income (loss) attributable to CBI | $ | (126.0) | $ | 4.9 | (121.1) | ||||||||||||
Comprehensive income (loss) attributable to CBI | $ | (646.3) |
Foreign
Currency Translation Adjustments |
Net
Unrealized Gain (Loss) on Derivative Instruments |
Pension/
Postretirement Adjustments |
Share of OCI of
Equity Method Investments |
Accumulated
Other Comprehensive Income (Loss) |
|||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||
Balance, February 29, 2020 | $ | (345.7) | $ | 62.5 | $ | (2.6) | $ | 19.5 | $ | (266.3) | |||||||||||||||||||||||||
Other comprehensive income (loss): | |||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) before reclassification adjustments | (449.0) | (160.2) | (0.2) | 34.1 | (575.3) | ||||||||||||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | — | 26.1 | — | — | 26.1 | ||||||||||||||||||||||||||||||
Other comprehensive income (loss) | (449.0) | (134.1) | (0.2) | 34.1 | (549.2) | ||||||||||||||||||||||||||||||
Balance, August 31, 2020 | $ | (794.7) | $ | (71.6) | $ | (2.8) | $ | 53.6 | $ | (815.5) |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 30
|
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
For the Six Months
Ended August 31, |
For the Three Months
Ended August 31, |
||||||||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||
Cost of product sold | |||||||||||||||||||||||||||||||||||
Strategic business development costs | $ | (25.1) | $ | (62.5) | $ | (0.8) | $ | (18.0) | |||||||||||||||||||||||||||
Net gain (loss) on undesignated commodity derivative contracts | (9.4) | (26.8) | 17.4 | (10.9) | |||||||||||||||||||||||||||||||
COVID-19 incremental costs | (5.5) | — | (0.9) | — | |||||||||||||||||||||||||||||||
Flow through of inventory step-up | (0.1) | (1.2) | (0.1) | (0.8) | |||||||||||||||||||||||||||||||
Settlements of undesignated commodity derivative contracts | 23.6 | 5.2 | 13.2 | 3.4 | |||||||||||||||||||||||||||||||
Accelerated depreciation | — | (5.3) | — | (1.8) | |||||||||||||||||||||||||||||||
Recovery of (loss on) inventory write-down | — | 8.6 | — | 8.6 | |||||||||||||||||||||||||||||||
Total cost of product sold | (16.5) | (82.0) | 28.8 | (19.5) |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 31
|
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
For the Six Months
Ended August 31, |
For the Three Months
Ended August 31, |
||||||||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||
Selling, general, and administrative expenses | |||||||||||||||||||||||||||||||||||
Restructuring and other strategic business development costs | (8.9) | (23.1) | (5.8) | 0.5 | |||||||||||||||||||||||||||||||
Net gain (loss) on foreign currency derivative contracts | (8.0) | — | — | — | |||||||||||||||||||||||||||||||
COVID-19 incremental costs | (4.6) | — | 1.9 | — | |||||||||||||||||||||||||||||||
Transaction, integration, and other acquisition-related costs | (3.9) | (5.5) | (3.1) | (3.2) | |||||||||||||||||||||||||||||||
Impairment of intangible assets | — | (11.0) | — | (11.0) | |||||||||||||||||||||||||||||||
Other gains (losses) (1)
|
4.5 | 1.1 | (2.9) | (12.3) | |||||||||||||||||||||||||||||||
Total selling, general, and administrative expenses | (20.9) | (38.5) | (9.9) | (26.0) | |||||||||||||||||||||||||||||||
Impairment of assets held for sale | (3.0) | (27.0) | 22.0 | (27.0) | |||||||||||||||||||||||||||||||
Comparable Adjustments, Operating income (loss) | $ | (40.4) | $ | (147.5) | $ | 40.9 | $ | (72.5) |
For the Six Months
Ended August 31, |
For the Three Months
Ended August 31, |
||||||||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||
Beer | |||||||||||||||||||||||||||||||||||
Net sales | $ | 3,020.0 | $ | 3,117.8 | $ | 1,635.9 | $ | 1,640.4 | |||||||||||||||||||||||||||
Segment operating income (loss) | $ | 1,273.5 | $ | 1,265.9 | $ | 695.7 | $ | 685.3 | |||||||||||||||||||||||||||
Capital expenditures | $ | 198.5 | $ | 272.8 | $ | 90.2 | $ | 170.7 | |||||||||||||||||||||||||||
Depreciation and amortization | $ | 92.9 | $ | 106.2 | $ | 48.6 | $ | 51.9 | |||||||||||||||||||||||||||
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 32
|
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
For the Six Months
Ended August 31, |
For the Three Months
Ended August 31, |
||||||||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||
Wine and Spirits | |||||||||||||||||||||||||||||||||||
Net sales: | |||||||||||||||||||||||||||||||||||
Wine | $ | 1,044.5 | $ | 1,146.1 | $ | 544.9 | $ | 611.1 | |||||||||||||||||||||||||||
Spirits | 159.3 | 177.3 | 79.6 | 92.5 | |||||||||||||||||||||||||||||||
Net sales | $ | 1,203.8 | $ | 1,323.4 | $ | 624.5 | $ | 703.6 | |||||||||||||||||||||||||||
Segment operating income (loss) | $ | 325.5 | $ | 321.2 | $ | 161.5 | $ | 160.4 | |||||||||||||||||||||||||||
Income (loss) from unconsolidated investments | $ | 1.1 | $ | 3.0 | $ | (2.4) | $ | (1.0) | |||||||||||||||||||||||||||
Equity method investments (1)
|
$ | 119.2 | $ | 76.8 | $ | 119.2 | $ | 76.8 | |||||||||||||||||||||||||||
Capital expenditures | $ | 37.4 | $ | 43.1 | $ | 27.9 | $ | 16.2 | |||||||||||||||||||||||||||
Depreciation and amortization | $ | 45.3 | $ | 50.0 | $ | 22.8 | $ | 25.0 | |||||||||||||||||||||||||||
Corporate Operations and Other | |||||||||||||||||||||||||||||||||||
Segment operating income (loss) | $ | (109.9) | $ | (97.4) | $ | (59.4) | $ | (53.7) | |||||||||||||||||||||||||||
Income (loss) from unconsolidated investments | $ | 0.5 | $ | (1.3) | $ | 0.3 | $ | (0.2) | |||||||||||||||||||||||||||
Equity method investments | $ | 99.6 | $ | 81.0 | $ | 99.6 | $ | 81.0 | |||||||||||||||||||||||||||
Capital expenditures | $ | 41.9 | $ | 39.3 | $ | 15.5 | $ | 12.6 | |||||||||||||||||||||||||||
Depreciation and amortization | $ | 7.2 | $ | 10.5 | $ | 1.6 | $ | 5.2 | |||||||||||||||||||||||||||
Canopy | |||||||||||||||||||||||||||||||||||
Net sales | $ | 160.0 | $ | 138.4 | $ | 79.7 | $ | 67.7 | |||||||||||||||||||||||||||
Segment operating income (loss) | $ | (857.6) | $ | (330.5) | $ | (124.4) | $ | (160.5) | |||||||||||||||||||||||||||
Capital expenditures | $ | 114.4 | $ | 270.6 | $ | 44.4 | $ | 158.4 | |||||||||||||||||||||||||||
Depreciation and amortization | $ | 54.6 | $ | 35.0 | $ | 24.5 | $ | 17.4 | |||||||||||||||||||||||||||
Consolidation and Eliminations | |||||||||||||||||||||||||||||||||||
Net sales | $ | (160.0) | $ | (138.4) | $ | (79.7) | $ | (67.7) | |||||||||||||||||||||||||||
Operating income (loss) | $ | 857.6 | $ | 330.5 | $ | 124.4 | $ | 160.5 | |||||||||||||||||||||||||||
Income (loss) from unconsolidated investments | $ | (65.8) | $ | (109.1) | $ | (34.1) | $ | (54.7) | |||||||||||||||||||||||||||
Equity method investments | $ | 2,713.1 | $ | 2,846.0 | $ | 2,713.1 | $ | 2,846.0 | |||||||||||||||||||||||||||
Capital expenditures | $ | (114.4) | $ | (270.6) | $ | (44.4) | $ | (158.4) | |||||||||||||||||||||||||||
Depreciation and amortization | $ | (54.6) | $ | (35.0) | $ | (24.5) | $ | (17.4) | |||||||||||||||||||||||||||
Comparable Adjustments | |||||||||||||||||||||||||||||||||||
Operating income (loss) | $ | (40.4) | $ | (147.5) | $ | 40.9 | $ | (72.5) | |||||||||||||||||||||||||||
Income (loss) from unconsolidated investments | $ | (587.7) | $ | (2,147.9) | $ | (44.5) | $ | (1,268.8) | |||||||||||||||||||||||||||
Depreciation and amortization | $ | — | $ | 5.3 | $ | — | $ | 1.8 | |||||||||||||||||||||||||||
Consolidated | |||||||||||||||||||||||||||||||||||
Net sales | $ | 4,223.8 | $ | 4,441.2 | $ | 2,260.4 | $ | 2,344.0 | |||||||||||||||||||||||||||
Operating income (loss) | $ | 1,448.7 | $ | 1,342.2 | $ | 838.7 | $ | 719.5 | |||||||||||||||||||||||||||
Income (loss) from unconsolidated investments (2)
|
$ | (651.9) | $ | (2,255.3) | $ | (80.7) | $ | (1,324.7) | |||||||||||||||||||||||||||
Equity method investments (1)
|
$ | 2,931.9 | $ | 3,003.8 | $ | 2,931.9 | $ | 3,003.8 | |||||||||||||||||||||||||||
Capital expenditures | $ | 277.8 | $ | 355.2 | $ | 133.6 | $ | 199.5 | |||||||||||||||||||||||||||
Depreciation and amortization | $ | 145.4 | $ | 172.0 | $ | 73.0 | $ | 83.9 | |||||||||||||||||||||||||||
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 33
|
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(1)
|
Equity method investments balance at August 31, 2020, and August 31, 2019, exclude amounts reclassified to assets held for sale.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
(2)
|
Income (loss) from unconsolidated investments consists of: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
For the Six Months
Ended August 31, |
For the Three Months
Ended August 31, |
||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized net gain (loss) on securities measured at fair value | $ | (244.9) | $ | (1,666.6) | $ | (47.6) | $ | (839.1) | |||||||||||||||||||||||||||||||||||||||||||||
Equity in earnings (losses) from Canopy and related activities | (408.6) | (590.4) | (31.0) | (484.4) | |||||||||||||||||||||||||||||||||||||||||||||||||
Equity in earnings (losses) from other equity method investees | 1.6 | 1.8 | (2.1) | (1.2) | |||||||||||||||||||||||||||||||||||||||||||||||||
Net gain (loss) on sale of unconsolidated investment | — | (0.1) | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
$ | (651.9) | $ | (2,255.3) | $ | (80.7) | $ | (1,324.7) |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 34
|
MD&A |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 35
|
MD&A |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 36
|
MD&A |
Wine Brands |
Wine Portfolio
of Brands |
Spirits Brands | ||||||||||||||||||||||||
● 7 Moons
|
● Drylands
|
● SIMI
|
● Charles Smith
|
● Casa Noble
|
||||||||||||||||||||||
● Auros
|
● Kim Crawford
|
● Spoken Barrel
|
● Prisoner
|
● High West
|
||||||||||||||||||||||
● Champagne Palmer & Co
|
● Meiomi
|
● Robert Mondavi
|
● Mi CAMPO
|
|||||||||||||||||||||||
● Cooper & Thief
|
● Mount Veeder
|
● Schrader
|
● Nelson’s Green Brier
|
|||||||||||||||||||||||
● Crafters Union
|
● Nobilo (1)
|
● SVEDKA
|
||||||||||||||||||||||||
● Cuvée Sauvage
|
● Ruffino
|
● The Real McCoy
|
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 37
|
MD&A |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 38
|
MD&A |
Date of
Investment |
Investment |
Second
Quarter 2021 |
Second
Quarter 2020 |
Six
Months 2021 |
Six
Months 2020 |
|||||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||||||
Nov 2017 |
Warrants (1)
|
$ | — | $ | (316.7) | $ | (61.8) | $ | (450.8) | |||||||||||||||||||||||
Jun 2018 | Convertible debt securities | 10.0 | (48.8) | (2.5) | (81.4) | |||||||||||||||||||||||||||
Nov 2018 |
Warrants (2)
|
(57.6) | (473.6) | (180.6) | (1,134.4) | |||||||||||||||||||||||||||
$ | (47.6) | $ | (839.1) | $ | (244.9) | $ | (1,666.6) |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 39
|
MD&A |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 40
|
MD&A |
Net Sales | Gross Profit |
Marketing (1)
|
|||||||||||||||
(in millions) | |||||||||||||||||
Second Quarter 2021 | |||||||||||||||||
Wine and Spirits segment results | $ | 181 | $ | 71 | $ | 4 | |||||||||||
Six Months 2021 | |||||||||||||||||
Wine and Spirits segment results | $ | 368 | $ | 149 | $ | 5 |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 41
|
MD&A |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 42
|
MD&A |
Second
Quarter 2021 |
Second
Quarter 2020 |
Six
Months 2021 |
Six
Months 2020 |
||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Cost of product sold | |||||||||||||||||||||||
Net gain (loss) on undesignated commodity derivative contracts | $ | 17.4 | $ | (10.9) | $ | (9.4) | $ | (26.8) | |||||||||||||||
Settlements of undesignated commodity derivative contracts | 13.2 | 3.4 | 23.6 | 5.2 | |||||||||||||||||||
COVID-19 incremental costs | (0.9) | — | (5.5) | — | |||||||||||||||||||
Strategic business development costs | (0.8) | (18.0) | (25.1) | (62.5) | |||||||||||||||||||
Flow through of inventory step-up | (0.1) | (0.8) | (0.1) | (1.2) | |||||||||||||||||||
Recovery of (loss on) inventory write-down | — | 8.6 | — | 8.6 | |||||||||||||||||||
Accelerated depreciation | — | (1.8) | — | (5.3) | |||||||||||||||||||
Total cost of product sold | 28.8 | (19.5) | (16.5) | (82.0) | |||||||||||||||||||
Selling, general, and administrative expenses | |||||||||||||||||||||||
Restructuring and other strategic business development costs | (5.8) | 0.5 | (8.9) | (23.1) | |||||||||||||||||||
Transaction, integration, and other acquisition-related costs | (3.1) | (3.2) | (3.9) | (5.5) | |||||||||||||||||||
COVID-19 incremental costs | 1.9 | — | (4.6) | — | |||||||||||||||||||
Net gain (loss) on foreign currency derivative contracts | — | — | (8.0) | — | |||||||||||||||||||
Impairment of intangible assets | — | (11.0) | — | (11.0) | |||||||||||||||||||
Other gains (losses)
|
(2.9) | (12.3) | 4.5 | 1.1 | |||||||||||||||||||
Total selling, general, and administrative expenses | (9.9) | (26.0) | (20.9) | (38.5) | |||||||||||||||||||
Impairment of assets held for sale | 22.0 | (27.0) | (3.0) | (27.0) | |||||||||||||||||||
Comparable Adjustments, Operating income (loss) | $ | 40.9 | $ | (72.5) | $ | (40.4) | $ | (147.5) | |||||||||||||||
Income (loss) from unconsolidated investments | $ | (44.5) | $ | (1,268.8) | $ | (587.7) | $ | (2,147.9) |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 43
|
MD&A |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 44
|
MD&A |
Second
Quarter 2021 |
Second
Quarter 2020 |
Dollar
Change |
Percent
Change |
||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Beer | $ | 1,635.9 | $ | 1,640.4 | $ | (4.5) | — | % | |||||||||||||||
Wine and Spirits: | |||||||||||||||||||||||
Wine | 544.9 | 611.1 | (66.2) | (11 | %) | ||||||||||||||||||
Spirits | 79.6 | 92.5 | (12.9) | (14 | %) | ||||||||||||||||||
Total Wine and Spirits | 624.5 | 703.6 | (79.1) | (11 | %) | ||||||||||||||||||
Canopy | 79.7 | 67.7 | 12.0 | 18 | % | ||||||||||||||||||
Consolidation and Eliminations | (79.7) | (67.7) | (12.0) | (18 | %) | ||||||||||||||||||
Consolidated net sales | $ | 2,260.4 | $ | 2,344.0 | $ | (83.6) | (4 | %) |
Beer segment
|
Second
Quarter 2021 |
Second
Quarter 2020 |
Dollar
Change |
Percent
Change |
||||||||||||||||||||||||||||||||||||||||
(in millions, branded product, 24-pack, 12-ounce case equivalents) | ||||||||||||||||||||||||||||||||||||||||||||
Net sales | $ | 1,635.9 | $ | 1,640.4 | $ | (4.5) | — | % | ||||||||||||||||||||||||||||||||||||
Shipment volume | ||||||||||||||||||||||||||||||||||||||||||||
Total | 90.4 | 91.9 | (1.6 | %) | ||||||||||||||||||||||||||||||||||||||||
Organic (1)
|
90.4 | 91.2 | (0.9 | %) | ||||||||||||||||||||||||||||||||||||||||
Depletion volume (1) (2)
|
4.7 | % |
|
Beer net sales remained relatively flat as $24.7 million from the Ballast Point Divestiture and $15.8 million of volume decline within our Mexican beer portfolio, was partially offset by a $31.0 million favorable impact from pricing in select markets within our Mexican beer portfolio. The volume decline resulted from COVID-19 containment measures negatively affecting production activity in June 2020 at our major breweries in Mexico which led to lower inventory in our distribution channels. The depletion volume trend outpaced the shipment volume trend for Second Quarter 2021, driven by the reduced production activity. During the third quarter of fiscal 2021, we expect shipment volume will outpace depletion volume as we replenish distribution channels.
|
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 45
|
MD&A |
Wine and Spirits segment
|
Second
Quarter 2021 |
Second
Quarter 2020 |
Dollar
Change |
Percent
Change |
||||||||||||||||||||||
(in millions, branded product, 9-liter case equivalents) | ||||||||||||||||||||||||||
Net sales | $ | 624.5 | $ | 703.6 | $ | (79.1) | (11 | %) | ||||||||||||||||||
Shipment volume | ||||||||||||||||||||||||||
Total | 11.6 | 14.4 | (19.4 | %) | ||||||||||||||||||||||
Organic (3)
|
11.6 | 13.9 | (16.5 | %) | ||||||||||||||||||||||
U.S. Domestic | 10.7 | 13.5 | (20.7 | %) | ||||||||||||||||||||||
Organic U.S. Domestic (3)
|
10.7 | 12.9 | (17.1 | %) | ||||||||||||||||||||||
U.S. Domestic Power Brands | 5.7 | 6.3 | (9.5 | %) | ||||||||||||||||||||||
Depletion volume (2)
|
||||||||||||||||||||||||||
U.S. Domestic (3)
|
(3.3 | %) | ||||||||||||||||||||||||
U.S. Domestic Power Brands | (0.6 | %) |
|
The decrease in Wine and Spirits net sales is primarily due to a $102.2 million decline in branded wine and spirits volume, driven by the brands to be divested, and $19.3 million from the Black Velvet Divestiture, partially offset by $24.6 million increase from favorable product mix shift and $12.1 million from favorable pricing. The Wine and Spirits Second Quarter 2021 results have been negatively impacted by (i) on-premise and retail tasting room closures as a result of COVID-19 containment measures and (ii) transition activities with distributors who are repositioning for ownership of brands upon closing the Wine and Spirits Transactions, partially offset by an increase in off-premise. During Fiscal 2021, as these transition activities with distributors continue to occur, we do not expect shipment volume to be aligned with depletion volume.
|
|
Canopy segment
Our ownership interest in Canopy allows us to exercise significant influence, but not control, and, therefore, we account for our investment in Canopy under the equity method. Amounts included for the Canopy segment represent 100% of Canopy’s reported results on a two-month lag, prepared in accordance with U.S. GAAP, and converted from Canadian dollars to U.S. dollars. Although we own less than 100% of the outstanding shares of Canopy, 100% of the Canopy results are included and subsequently eliminated in order to reconcile to our consolidated financial statements. See “Income (loss) from unconsolidated investments” below for a discussion of Canopy’s net sales, gross profit (loss), selling, general, and administrative expenses, and operating income (loss).
|
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 46
|
MD&A |
|
Beer remained flat largely due to $13.1 million of higher cost of product sold, $8.9 million of volume decline, $4.4 million of unfavorable product mix shift, and a decrease of $4.1 million in gross profit due to the Ballast Point Divestiture, being offset by $31.0 million of favorable impact from pricing. The higher cost of product sold is largely related to COVID-19 containment measures and increased focus on the production of our fastest moving products and packaging sizes to meet forecasted demand. This drove a $13.7 million increase in operational costs primarily consisting of unfavorable fixed cost absorption and higher material costs, including glass, pallets, and cartons. |
|
The decrease in Wine and Spirits is largely due to $41.1 million of decline in branded wine and spirits volume, driven by the brands to be divested, a decrease of $8.7 million in gross profit due to the Black Velvet Divestiture, and $8.3 million higher cost of product sold, partially offset by $23.7 million of favorable product mix shift, $12.1 million from favorable pricing, and $5.8 million driven by lower promotions. Higher cost of product sold was largely attributable to increased packaging costs, including glass and labels, partially offset by lower grape raw material costs.
|
Second
Quarter 2021 |
Second
Quarter 2020 |
Dollar
Change |
Percent
Change |
||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Beer | $ | 214.8 | $ | 228.0 | $ | (13.2) | (6 | %) | |||||||||||||||
Wine and Spirits | 115.0 | 131.7 | (16.7) | (13 | %) | ||||||||||||||||||
Corporate Operations and Other | 59.4 | 53.7 | 5.7 | 11 | % | ||||||||||||||||||
Canopy | 129.1 | 170.3 | (41.2) | (24 | %) | ||||||||||||||||||
Consolidation and Eliminations | (129.1) | (170.3) | 41.2 | 24 | % | ||||||||||||||||||
Comparable Adjustments | 9.9 | 26.0 | (16.1) | (62 | %) | ||||||||||||||||||
Consolidated selling, general, and administrative expenses | $ | 399.1 | $ | 439.4 | $ | (40.3) | (9 | %) |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 47
|
MD&A |
|
The decrease in Beer is primarily due to a decrease of $12.3 million in marketing spend that was largely driven by decreased advertising resulting from COVID-19 related event cancellations. Many of our planned investments to support the growth of our Mexican beer portfolio through media and event sponsorships were suspended or canceled in Second Quarter 2021. We expect marketing spend will range from 9% to 10% of net sales for Fiscal 2021, and will exceed those targeted assumptions during the third quarter of fiscal 2021 with the return of sporting events and our focus on media and event sponsorships.
|
|
The decrease in Wine and Spirits is primarily due to a decrease of $16.7 million in marketing spend that was largely driven by decreased advertising resulting from COVID-19 related event cancellations. Many of our planned investments to support the growth of our Power Brands through media and event sponsorships were suspended or canceled in Second Quarter 2021. We expect marketing spend will range from 10% to 11% of net sales for Fiscal 2021, and will exceed those targeted assumptions during the third quarter of fiscal 2021 as we are committed to support our brands as sponsorship events return.
|
|
The increase in Corporate Operations and Other is largely due to approximately an $8 million increase in compensation and benefits, partially offset by approximately $2 million of favorable impact from reduced travel driven by COVID-19 containment measures.
|
Second
Quarter 2021 |
Second
Quarter 2020 |
Dollar
Change |
Percent
Change |
||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Beer | $ | 695.7 | $ | 685.3 | $ | 10.4 | 2 | % | |||||||||||||||
Wine and Spirits | 161.5 | 160.4 | 1.1 | 1 | % | ||||||||||||||||||
Corporate Operations and Other | (59.4) | (53.7) | (5.7) | (11 | %) | ||||||||||||||||||
Canopy | (124.4) | (160.5) | 36.1 | 22 | % | ||||||||||||||||||
Consolidation and Eliminations | 124.4 | 160.5 | (36.1) | (22 | %) | ||||||||||||||||||
Comparable Adjustments | 40.9 | (72.5) | 113.4 | NM | |||||||||||||||||||
Consolidated operating income (loss) | $ | 838.7 | $ | 719.5 | $ | 119.2 | 17 | % |
|
The increase in Beer is primarily attributable to the favorable pricing impact and reduced marketing spend, partially offset by the higher cost of product sold, net sales decline, and the Ballast Point Divestiture.
|
|
Wine and Spirits remained flat largely driven by the favorable product mix shift, decreased marketing spend, and favorable pricing impact, partially offset by the decline in branded wine and spirits volume, the Black Velvet Divestiture, and higher cost of product sold.
|
|
As previously discussed, the Corporate Operations and Other increase in operating loss is due to increased compensation and benefits, partially offset by a favorable impact from reduced travel.
|
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 48
|
MD&A |
Second
Quarter 2021 |
Second
Quarter 2020 |
Dollar
Change |
Percent
Change |
||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Unrealized net gain (loss) on securities measured at fair value (1)
|
$ | (47.6) | $ | (839.1) | $ | 791.5 | 94 | % | |||||||||||||||
Equity in earnings (losses) from Canopy and related activities (2)
|
(31.0) | (484.4) | 453.4 | 94 | % | ||||||||||||||||||
Equity in earnings (losses) from other equity method investees | (2.1) | (1.2) | (0.9) | (75 | %) | ||||||||||||||||||
$ | (80.7) | $ | (1,324.7) | $ | 1,244.0 | 94 | % |
|
Canopy segment
Canopy net sales increased to $79.7 million for Second Quarter 2021 from $67.7 million for Second Quarter 2020. This increase of $12.0 million, or 18% is primarily attributable to an increase in other product offering sales and medical sales, partially offset by a decline in Canadian recreational sales. The increase in other sales resulted from (i) vaporizers sold by Storz & Bickel GmbH & Co. KG, (ii) beauty, skincare, wellness, and sleep product sales from their May 2019 acquisition of This Works Products Limited, and (iii) sales of sports nutrition beverages, mixes, protein, gum, and mints from their October 2019 acquisition of BioSteel. The increase in medical sales largely resulted from their April 2019 acquisition of C3, Europe’s largest cannabinoid-based pharmaceuticals company. Canopy gross profit (loss) decreased to $4.7 million for Second Quarter 2021 from $9.8 million or Second Quarter 2020. This decrease of $5.1 million is primarily driven by higher cost of product sold related to facilities not yet cultivating or producing cannabis or cannabis-related products, or having under-utilized capacity. Canopy selling, general, and administrative expenses decreased $41.2 million primarily from a reduction in stock-based compensation expense. The combination of these factors were the main contributors to the increase in operating income (loss) of $36.1 million.
|
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 49
|
MD&A |
Six
Months 2021 |
Six
Months 2020 |
Dollar
Change |
Percent
Change |
||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Beer | $ | 3,020.0 | $ | 3,117.8 | $ | (97.8) | (3 | %) | |||||||||||||||
Wine and Spirits: | |||||||||||||||||||||||
Wine | 1,044.5 | 1,146.1 | (101.6) | (9 | %) | ||||||||||||||||||
Spirits | 159.3 | 177.3 | (18.0) | (10 | %) | ||||||||||||||||||
Total Wine and Spirits | 1,203.8 | 1,323.4 | (119.6) | (9 | %) | ||||||||||||||||||
Canopy | 160.0 | 138.4 | 21.6 | 16 | % | ||||||||||||||||||
Consolidation and Eliminations | (160.0) | (138.4) | (21.6) | (16 | %) | ||||||||||||||||||
Consolidated net sales | $ | 4,223.8 | $ | 4,441.2 | $ | (217.4) | (5 | %) |
Beer segment
|
Six
Months 2021 |
Six
Months 2020 |
Dollar
Change |
Percent
Change |
||||||||||||||||||||||||||||||||||||||||
(in millions, branded product, 24-pack, 12-ounce case equivalents) | ||||||||||||||||||||||||||||||||||||||||||||
Net sales | $ | 3,020.0 | $ | 3,117.8 | $ | (97.8) | (3 | %) | ||||||||||||||||||||||||||||||||||||
Shipment volume | ||||||||||||||||||||||||||||||||||||||||||||
Total | 166.6 | 174.0 | (4 | %) | ||||||||||||||||||||||||||||||||||||||||
Organic (1)
|
166.6 | 172.5 | (3 | %) | ||||||||||||||||||||||||||||||||||||||||
Depletion volume (1) (2)
|
5.1 | % |
|
The decrease in Beer net sales is primarily due to $104.9 million of volume decline within our Mexican beer portfolio, which was impacted by COVID-19 containment measures negatively affecting on-premise sales and production activity for a portion of Six Months 2021 at our major breweries in Mexico, and $53.3 million from the Ballast Point Divestiture. The decline was partially offset by a $49.5 million favorable impact from pricing in select markets within our Mexican beer portfolio. The depletion volume trend outpaced the shipment volume trend for Six Months 2021, driven by the reduced production activity in response to COVID-19 containment measures.
|
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 50
|
MD&A |
Wine and Spirits segment
|
Six
Months 2021 |
Six
Months 2020 |
Dollar
Change |
Percent
Change |
||||||||||||||||||||||
(in millions, branded product, 9-liter case equivalents) | ||||||||||||||||||||||||||
Net sales | $ | 1,203.8 | $ | 1,323.4 | $ | (119.6) | (9 | %) | ||||||||||||||||||
Shipment volume | ||||||||||||||||||||||||||
Total | 22.4 | 26.8 | (16.4 | %) | ||||||||||||||||||||||
Organic (3)
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22.4 | 25.8 | (13.2 | %) | ||||||||||||||||||||||
U.S. Domestic | 20.6 | 24.8 | (16.9 | %) | ||||||||||||||||||||||
Organic U.S. Domestic (3)
|
20.6 | 23.7 | (13.1 | %) | ||||||||||||||||||||||
U.S. Domestic Power Brands | 10.7 | 10.8 | (0.9 | %) | ||||||||||||||||||||||
Depletion volume (2)
|
||||||||||||||||||||||||||
U.S. Domestic (3)
|
(2.2 | %) | ||||||||||||||||||||||||
U.S. Domestic Power Brands | 1.8 | % |
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The decrease in Wine and Spirits net sales is primarily due to a $152.3 million decline in branded wine and spirits volume, driven by the brands to be divested, and $38.0 million from the Black Velvet Divestiture, partially offset by $36.1 million increase from favorable product mix shift and $35.3 million from favorable pricing. The Wine and Spirits Six Months 2021 results have been negatively impacted by (i) on-premise and retail tasting room closures as a result of COVID-19 containment measures and (ii) transition activities with distributors who are repositioning for ownership of brands upon closing the Wine and Spirits Transactions, partially offset by an increase in off-premise.
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Six
Months 2021 |
Six
Months 2020 |
Dollar
Change |
Percent
Change |
||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Beer | $ | 1,680.2 | $ | 1,732.8 | $ | (52.6) | (3 | %) | |||||||||||||||
Wine and Spirits | 540.4 | 563.8 | (23.4) | (4 | %) | ||||||||||||||||||
Canopy | (52.6) | 21.1 | (73.7) | NM | |||||||||||||||||||
Consolidation and Eliminations | 52.6 | (21.1) | 73.7 | NM | |||||||||||||||||||
Comparable Adjustments | (16.5) | (82.0) | 65.5 | 80 | % | ||||||||||||||||||
Consolidated gross profit | $ | 2,204.1 | $ | 2,214.6 | $ | (10.5) | — | % |
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The decrease in Beer is primarily due to $59.2 million of volume decline, $18.0 million of higher cost of product sold, $10.2 million decrease in gross profit due to the Ballast Point Divestiture, and $8.7 million unfavorable product mix shift, partially offset by the $49.5 million favorable impact from pricing. The higher cost of product sold is largely related to COVID-19 containment measures and increased focus on the production of our fastest moving products and packaging sizes to meet forecasted demand. This drove a $24.2 million increase in operational costs primarily consisting of higher material costs, including glass, pallets, and cartons, and unfavorable fixed cost absorption. Unfavorable product mix shift primarily resulted from increased sales of our newly-released Corona Hard Seltzer and increased focus on larger packaging sizes.
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Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 51
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MD&A |
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The decrease in Wine and Spirits is largely due to $60.8 million of decline in branded wine and spirits volume, driven by the brands to be divested, a decrease of $17.3 million in gross profit due to the Black Velvet Divestiture, and $10.7 million higher cost of product sold, partially offset by the $35.3 million from favorable pricing and $27.5 million of favorable product mix shift. Higher cost of product sold was largely attributable to increased packaging costs, including glass and labels, partially offset by lower grape raw material costs.
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Six
Months 2021 |
Six
Months 2020 |
Dollar
Change |
Percent
Change |
||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Beer | $ | 406.7 | $ | 466.9 | $ | (60.2) | (13 | %) | |||||||||||||||
Wine and Spirits | 214.9 | 242.6 | (27.7) | (11 | %) | ||||||||||||||||||
Corporate Operations and Other | 109.9 | 97.4 | 12.5 | 13 | % | ||||||||||||||||||
Canopy | 805.0 | 351.6 | 453.4 | 129 | % | ||||||||||||||||||
Consolidation and Eliminations | (805.0) | (351.6) | (453.4) | (129 | %) | ||||||||||||||||||
Comparable Adjustments | 20.9 | 38.5 | (17.6) | (46 | %) | ||||||||||||||||||
Consolidated selling, general, and administrative expenses | $ | 752.4 | $ | 845.4 | $ | (93.0) | (11 | %) |
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The decrease in Beer is primarily due to a decrease of $53.5 million in marketing spend that was largely driven by decreased advertising resulting from COVID-19 related event cancellations. Many of our planned investments to support the growth of our Mexican beer portfolio through media and event sponsorships were suspended or canceled in Six Months 2021. The favorable marketing spend as a percentage of net sales recognized in Six Months 2021 is expected to return to targeted assumptions during the remainder of Fiscal 2021.
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The decrease in Wine and Spirits is largely due to a decrease of $17.8 million in marketing spend that was largely driven by decreased advertising resulting from COVID-19 related event cancellations and $9.2 million in general and administrative expenses. Many of our planned investments to support the growth of our Power Brands through media and event sponsorships were suspended or canceled in Six Months 2021. The favorable marketing spend as a percentage of net sales recognized in Six Months 2021 is expected to return to targeted assumptions during the remainder of Fiscal 2021. The decrease in general and administrative expenses is driven by certain cost saving initiatives including decreased compensation and benefits.
|
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The increase in Corporate Operations and Other is largely due to approximately a $6 million increase in compensation and benefits and $5 million of unfavorable foreign currency losses.
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Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 52
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MD&A |
Six
Months 2021 |
Six
Months 2020 |
Dollar
Change |
Percent
Change |
||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Beer | $ | 1,273.5 | $ | 1,265.9 | $ | 7.6 | 1 | % | |||||||||||||||
Wine and Spirits | 325.5 | 321.2 | 4.3 | 1 | % | ||||||||||||||||||
Corporate Operations and Other | (109.9) | (97.4) | (12.5) | (13 | %) | ||||||||||||||||||
Canopy | (857.6) | (330.5) | (527.1) | (159 | %) | ||||||||||||||||||
Consolidation and Eliminations | 857.6 | 330.5 | 527.1 | 159 | % | ||||||||||||||||||
Comparable Adjustments | (40.4) | (147.5) | 107.1 | 73 | % | ||||||||||||||||||
Consolidated operating income (loss) | $ | 1,448.7 | $ | 1,342.2 | $ | 106.5 | 8 | % |
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The increase in Beer is primarily attributable to the decreased marketing spend and favorable pricing impact, partially offset by the net sales decline, higher cost of product sold, and the Ballast Point Divestiture.
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The increase in Wine and Spirits was driven largely by the favorable impacts from pricing and product mix shift and decreased marketing spend, partially offset by the decline in branded wine and spirits volume and the Black Velvet Divestiture.
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As previously discussed, the Corporate Operations and Other increase in operating loss is due largely to the increase in compensation and benefits and unfavorable foreign currency losses.
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Six
Months 2021 |
Six
Months 2020 |
Dollar
Change |
Percent
Change |
||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Unrealized net gain (loss) on securities measured at fair value (1)
|
$ | (244.9) | $ | (1,666.6) | $ | 1,421.7 | 85 | % | |||||||||||||||
Equity in earnings (losses) from Canopy and related activities (2)
|
(408.6) | (590.4) | 181.8 | 31 | % | ||||||||||||||||||
Equity in earnings (losses) from other equity method investees | 1.6 | 1.8 | (0.2) | (11 | %) | ||||||||||||||||||
Net gain (loss) on sale of unconsolidated investment | 0.0 | (0.1) | 0.1 | NM | |||||||||||||||||||
$ | (651.9) | $ | (2,255.3) | $ | 1,603.4 | 71 | % |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 53
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MD&A |
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Canopy segment
Canopy net sales increased to $160.0 million for Six Months 2021 from $138.4 million for Six Months 2020. This increase of $21.6 million, or 16% is primarily attributable to an increase in other product offering sales and medical sales, partially offset by a decline in Canadian recreational sales. The increase in other sales resulted from (i) vaporizers sold by Storz & Bickel GmbH & Co. KG, (ii) beauty, skincare, wellness, and sleep product sales from their May 2019 acquisition of This Works Products Limited, and (iii) sales of sports nutrition beverages, mixes, protein, gum, and mints from their October 2019 acquisition of BioSteel. The increase in medical sales largely resulted from their April 2019 acquisition of C3. Canopy gross profit (loss) decreased to $(52.6) million for Six Months 2021 from $21.1 million or Six Months 2020. This decrease of $73.7 million is primarily driven by inventory write-downs related to its organizational and strategic review of their business and detailed evaluation of inventory. Canopy selling, general, and administrative expenses increased $453.4 million primarily from their decision to close greenhouse facilities as well as other changes related to its organizational and strategic review of their business. The combination of these factors were the main contributors to the decrease in operating income (loss) of $527.1 million.
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Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 54
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MD&A |
Six
Months 2021 |
Six
Months 2020 |
Dollar
Change |
|||||||||||||||
(in millions) | |||||||||||||||||
Net cash provided by (used in): | |||||||||||||||||
Operating activities | $ | 1,444.9 | $ | 1,419.4 | $ | 25.5 | |||||||||||
Investing activities | (455.3) | (425.7) | (29.6) | ||||||||||||||
Financing activities | (872.1) | (1,005.0) | 132.9 | ||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | 5.7 | (1.0) | 6.7 | ||||||||||||||
Net increase (decrease) in cash and cash equivalents | $ | 123.2 | $ | (12.3) | $ | 135.5 |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 55
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MD&A |
Six
Months 2021 |
Six
Months 2020 |
Dollar
Change |
|||||||||||||||
(in millions) | |||||||||||||||||
Net proceeds from (payments of) debt, current and long-term, and related activities | $ | (598.9) | $ | (688.7) | $ | 89.8 | |||||||||||
Dividends paid | (287.6) | (285.0) | (2.6) | ||||||||||||||
Purchases of treasury stock | — | (50.0) | 50.0 | ||||||||||||||
Net cash provided by stock-based compensation activities | 24.4 | 18.7 | 5.7 | ||||||||||||||
Distributions to noncontrolling interests | (10.0) | — | (10.0) | ||||||||||||||
Net cash provided by (used in) financing activities | $ | (872.1) | $ | (1,005.0) | $ | 132.9 |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 56
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MD&A |
Remaining Borrowing Capacity | |||||||||||||||||
August 31,
2020 |
September 28,
2020 |
||||||||||||||||
(in millions) | |||||||||||||||||
Revolving Credit Facility (1)
|
$ | 1,988.2 | $ | 1,988.2 | |||||||||||||
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 57
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MD&A |
Class A Common Shares | |||||||||||||||||||||||||||||
Repurchase Authorization | Dollar Value of Shares Repurchased | Number of Shares Repurchased | |||||||||||||||||||||||||||
(in millions, except share data) | |||||||||||||||||||||||||||||
2018 Authorization | $ | 3,000.0 | $ | 1,045.9 | 4,897,605 | ||||||||||||||||||||||||
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 58
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MD&A |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 59
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MD&A |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 60
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MD&A |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 61
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OTHER KEY INFORMATION |
Aggregate
Notional Value |
Fair Value,
Net Asset (Liability) |
Increase (Decrease)
in Fair Value – Hypothetical 10% Adverse Change |
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August 31,
2020 |
August 31,
2019 |
August 31,
2020 |
August 31,
2019 |
August 31,
2020 |
August 31,
2019 |
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(in millions) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency contracts | $ | 1,894.0 | $ | 2,741.1 | $ | (47.6) | $ | (27.9) | $ | 148.8 | $ | 200.9 | |||||||||||||||||||||||||||||||||||||||||
Commodity derivative contracts | $ | 246.5 | $ | 265.1 | $ | (25.5) | $ | (24.8) | $ | 20.2 | $ | 21.1 |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 62
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OTHER KEY INFORMATION |
Aggregate
Notional Value |
Fair Value,
Net Asset (Liability) |
Increase (Decrease)
in Fair Value – Hypothetical 1% Rate Increase |
|||||||||||||||||||||||||||||||||||||||||||||||||||
August 31,
2020 |
August 31,
2019 |
August 31,
2020 |
August 31,
2019 |
August 31,
2020 |
August 31,
2019 |
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(in millions) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Fixed interest rate debt | $ | 10,568.7 | $ | 10,675.2 | $ | (11,859.4) | $ | (11,405.0) | $ | (875.3) | $ | (735.2) | |||||||||||||||||||||||||||||||||||||||||
Interest rate swap contracts | $ | — | $ | 375.0 | $ | — | $ | (0.7) | $ | — | $ | (2.2) | |||||||||||||||||||||||||||||||||||||||||
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 63
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OTHER KEY INFORMATION |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
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OTHER KEY INFORMATION |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
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OTHER KEY INFORMATION |
4.1 | ||||||||
4.2 | ||||||||
4.3 | ||||||||
4.4 | ||||||||
4.5 | ||||||||
4.6 | ||||||||
4.7 | ||||||||
4.8 | ||||||||
4.9 | ||||||||
4.10 | ||||||||
4.11 | ||||||||
4.12 | ||||||||
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
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OTHER KEY INFORMATION |
4.13 | ||||||||
4.14 | ||||||||
4.15 | ||||||||
4.16 | ||||||||
4.17 | ||||||||
4.18 | ||||||||
4.19 | ||||||||
4.20 | ||||||||
4.21 | ||||||||
4.22 | ||||||||
4.23 | ||||||||
4.24 | ||||||||
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
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OTHER KEY INFORMATION |
4.25 | ||||||||
4.26 | ||||||||
4.27 | ||||||||
4.28 | ||||||||
4.29 | ||||||||
4.30 |
2020 Term Loan Restatement Agreement, dated as of March 26, 2020, by and among the Company, certain of the Company’s subsidiaries as guarantors, Bank of America, N.A., as administrative agent and lender, including the Amended and Restated Term Loan Credit Agreement, dated March 26, 2020, by and between the Company, Bank of America, N.A., as administrative agent and lender (filed as Exhibit 4.3 to the Company Current Report on Form 8-K dated March 26, 2020, filed March 31, 2020 and incorporated herein by reference). †
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31.1 | ||||||||
31.2 | ||||||||
32.1 | ||||||||
32.2 | ||||||||
99.1 | ||||||||
99.2 | ||||||||
101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document (filed herewith). | |||||||
101.SCH | XBRL Taxonomy Extension Schema Document (filed herewith). | |||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith). | |||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document (filed herewith). | |||||||
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
#WORTHREACHINGFOR I 68
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OTHER KEY INFORMATION |
101.LAB | XBRL Taxonomy Extension Labels Linkbase Document (filed herewith). | |||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith). | |||||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
# | Company’s Commission File No. 001-08495. | ||||
† | The exhibits, disclosure schedules, and other schedules, as applicable, have been omitted pursuant to Item 601(a)(5) of Regulation S-K. Constellation Brands, Inc. agrees to furnish supplementally a copy of such exhibits, disclosure schedules, and other schedules, as applicable, or any section thereof, to the SEC upon request. | ||||
‡ | Portions of this exhibit are redacted pursuant to Item 601(b)(2)(ii) of Regulation S-K. |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
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CONSTELLATION BRANDS, INC. | ||||||||||||||
Date: | October 1, 2020 | By: | /s/ Kenneth W. Metz | |||||||||||
Kenneth W. Metz, Vice President
and Controller |
||||||||||||||
Date: | October 1, 2020 | By: | /s/ Garth Hankinson | |||||||||||
Garth Hankinson, Executive Vice President and
Chief Financial Officer (principal financial officer and principal accounting officer) |
Constellation Brands, Inc. Q2 FY 2021 Form 10-Q |
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BUYER:
E. & J. GALLO WINERY
By: /s/ Doug Vilas
Name: Doug Vilas
Title: Chief Financial Officer
|
SELLER:
CONSTELLATION BRANDS, INC.
By: /s/ Steve King
Name: Steve King
Title: Vice President, Corporate Development
|
/s/ William A. Newlands | ||
William A. Newlands | ||
President and
Chief Executive Officer |
/s/ Garth Hankinson | ||
Garth Hankinson | ||
Executive Vice President and
Chief Financial Officer |
Dated: | October 1, 2020 | /s/ William A. Newlands | ||||||
William A. Newlands
President and Chief Executive Officer |
Dated: | October 1, 2020 | /s/ Garth Hankinson | ||||||
Garth Hankinson
Executive Vice President and Chief Financial Officer |