Delaware | 001-08495 | 16-0716709 | ||||||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
Not Applicable | ||
(Former name or former address, if changed since last report.) |
☒ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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 |
Emerging growth company | ☐ | |||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐ |
Item 2.02 | Results of Operations and Financial Condition. |
Item 7.01 | Regulation FD Disclosure. |
Item 8.01 | Other Events. |
Item 9.01 | Financial Statements and Exhibits. |
Exhibit No. | Description | ||||
(99) | ADDITIONAL EXHIBITS | ||||
(99.1) | |||||
(99.2) | |||||
(104) | Cover Page Interactive Data File (embedded within the Inline XBRL document). | ||||
Date: | October 6, 2022 | CONSTELLATION BRANDS, INC. | |||||||||
By: | /s/ Garth Hankinson | ||||||||||
Garth Hankinson | |||||||||||
Executive Vice President and Chief Financial Officer |
Net Sales | Operating Income | Net Income (Loss) Attributable to CBI | Earnings Before Interest & Taxes (EBIT) | Diluted Net Income (Loss) Per Share Attributable to CBI (EPS) | Diluted EPS Excluding Canopy | |||||||||||||||
Second Quarter Fiscal Year 2023 Financial Highlights (1) | In millions, except per share data | ||||||||||||||||||||
Reported | $2,655 | $813 | $(1,151) | NA | $(6.30) | NA | ||||||||||||||
% Change | 12% | 10% | NM | NA | NM | NA | ||||||||||||||
Comparable | $2,655 | $883 | $589 | $849 | $3.17 | $3.33 | ||||||||||||||
% Change | 12% | 21% | 28% | 21% | 33% | 32% |
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![]() | "We delivered another quarter of strong business performance. Our core beer brands, Modelo Especial and Corona Extra, continue to outshine the market, and our next wave brands, Pacifico and Modelo Chelada, are achieving strong double-digit growth. The benefits of our Wine and Spirits strategy are taking hold, as our higher-end brands continue to resonate with the consumer." | ![]() | "We continue to make good progress against our operating and financial plans. The solid top-line performance of our Beer and Wine and Spirits Businesses in the first half has given us confidence to increase their net sales outlook for the full-year. And, we are on-track to exceed our goal to return $5 billion to shareholders by fiscal year-end." | |||||||||||||||||
Bill Newlands | Garth Hankinson | |||||||||||||||||||
President and Chief Executive Officer | Chief Financial Officer |
Constellation Brands, Inc. Q2 FY 2023 Earnings Release | #WORTHREACHINGFOR I 1 |
![]() | beer | ||||||||||||||||
Shipments | Depletions | Net Sales | Operating Income | ||||||||||||||
Three Months Ended | In millions; branded product, 24-pack, 12-ounce case equivalents | |||||||||||||||||
August 31, 2022 | 113.2 | $2,139.3 | $865.6 | ||||||||||||||
August 31, 2021 | 101.0 | $1,861.3 | $693.0 | ||||||||||||||
% Change | 12.1% | 8.9% | 15% | 25% |
![]() | wine and spirits | ||||||||||||||||
Shipments | Depletions | Net Sales | Operating Income | ||||||||||||||
Three Months Ended | In millions; branded product, 9-liter case equivalents | |||||||||||||||||
August 31, 2022 | 7.4 | $515.8 | $99.4 | ||||||||||||||
August 31, 2021 | 7.4 | $509.8 | $100.2 | ||||||||||||||
% Change | —% | (2.2%) | 1% | (1%) |
Constellation Brands, Inc. Q2 FY 2023 Earnings Release | #WORTHREACHINGFOR I 2 |
outlook | |||||||||||||||||||||||
The table sets forth management's current EPS expectations for fiscal 2023 compared to fiscal 2022 actual results, on a reported basis, a comparable basis, and a comparable basis excluding Canopy equity earnings (losses) and related activities. | |||||||||||||||||||||||
Reported Basis | Comparable Basis | ||||||||||||||||||||||
FY23 Estimate | FY22 Actual | FY23 Estimate (Excl. Canopy) | FY22 Actual | FY22 Actual (Excl. Canopy) | |||||||||||||||||||
Fiscal Year Ending February 28 | $0.75 - $1.15 | $(0.22) | $11.20 - $11.60 | $10.20 | $10.99 | ||||||||||||||||||
Fiscal 2023 Guidance Assumptions: | |||||||||||||||||||||||
•Beer: net sales growth 8 - 10%; operating income growth 3 - 5% •Wine and Spirits: net sales decline 0 - 2% and operating income growth 3 - 5% •Interest expense: approximately $360 - $370 million •Tax rate: reported approximately 71%; comparable excluding Canopy equity earnings impact approximately 20% | •Weighted average diluted shares outstanding: approximately 186.5 million •Operating cash flow: $2.6 - $2.8 billion •Capital expenditures: $1.3 - $1.4 billion, including approximately $1.2 billion targeted for Mexico beer operations expansion, optimization, and/or construction activities •Free cash flow: $1.3 - $1.4 billion | ||||||||||||||||||||||
The reported basis EPS guidance includes the fiscal 2023 year to date Canopy equity earnings and related activities impact. Our guidance does not reflect future changes in the fair value of the company’s investment in Canopy’s warrants and debt securities. Additionally, the company continues to evaluate the future potential equity earnings impact from the Canopy equity method investment and related activities and, as such, these items have been excluded from the guidance assumptions noted above. |
![]() | canopy Constellation’s share of Canopy’s equity earnings (losses) and related activities were as follows: | ||||||||||
Reported Basis (1) | Comparable Basis | ||||||||||
Three Months Ended I In millions | |||||||||||
August 31, 2022 | $(650.7) | $(34.8) | |||||||||
August 31, 2021 | $120.5 | $(29.9) |
Constellation Brands, Inc. Q2 FY 2023 Earnings Release | #WORTHREACHINGFOR I 3 |
SUPPORTING OUR ENVIRONMENT, COMMUNITIES, AND RESPONSIBLE CONSUMPTION | ||||||||
Bolstering Our Commitment to Water Stewardship Through $700,000 Contribution to The Nature Conservancy to Help Restore Watersheds for Future Generations | ||||||||
Constellation Brands recently announced a two-year commitment of $700,000 in total contributions to The Nature Conservancy (TNC). $200,000 of the total amount was donated in February 2022 and will be used to support TNC’s broader Global Resilient Watersheds program, which is focused on making watershed health a priority by investing in nature-based solutions – such as forest protection, regenerative agricultural practices, wetland restoration, and natural vegetation corridors along waterways – and aims to restore watershed health and revitalize degraded freshwater systems around the world. The remaining $500,000 donation will be leveraged over the next two years in support of TNC’s innovative Dynamic Water Management program in California, which targets the San Joaquin Valley and the Stockton/Sacramento watersheds – both located in communities where a number of Constellation’s winery facilities and operations reside. | This program is designed to bring to life important proof of concept strategies for rebalancing water demand for people and nature that in turn may be implemented on a broader scale to seek to address water challenges across the State of California and elsewhere. In addition to helping improve watershed health for the broader community, nature-based solutions implemented through the Dynamic Water Management program are expected to provide volumetric benefits toward Constellation’s water replenishment goals. Between fiscal 2023 and fiscal 2025, we are targeting to restore approximately 1.1 billion gallons of water withdrawals from watersheds, while improving accessibility and quality of water for communities where we operate. To achieve this target, we developed a strategy focused on water efficiency, watershed restoration, and water accessibility and quality. | |||||||
![]() | ||||||||
ABOUT CONSTELLATION BRANDS At Constellation Brands (NYSE: STZ and STZ.B), our mission is to build brands that people love because we believe sharing a toast, unwinding after a day, celebrating milestones, and helping people connect, are Worth Reaching For. It’s worth our dedication, hard work, and the bold calculated risks we take to deliver more for our consumers, trade partners, shareholders, and communities in which we live and work. It’s what has made us one of the fastest-growing large CPG companies in the U.S. at retail, and it drives our pursuit to deliver what’s next. Today, we are a leading international producer and marketer of beer, wine, and spirits with operations in the U.S., Mexico, New Zealand, and Italy. Every day, people reach for our high-end, iconic imported beer brands such as Corona Extra, Corona Light, Corona Premier, Modelo Especial, Modelo Negra, and Pacifico, our fine wine and craft spirits brands, including The Prisoner Wine Company, Robert Mondavi Winery, Casa Noble Tequila, and High West Whiskey, and our premium wine brands such as Meiomi and Kim Crawford. But we won’t stop here. Our visionary leadership team and passionate employees from barrel room to boardroom are reaching for the next level, to explore the boundaries of the beverage alcohol industry and beyond. Join us in discovering what’s Worth Reaching For. To learn more, visit www.cbrands.com and follow us on Twitter, Instagram, and LinkedIn. |
MEDIA CONTACTS | INVESTOR RELATIONS CONTACTS | ||||||||||||||||
Mike McGrew | 773-251-4934 | michael.mcgrew@cbrands.com | Joseph Suarez | 773-551-4397 | joseph.suarez@cbrands.com | ||||||||||||
Amy Martin | 585-678-7141 | amy.martin@cbrands.com | David Paccapaniccia | 585-282-7227 | david.paccapaniccia@cbrands.com | ||||||||||||
Constellation Brands, Inc. Q2 FY 2023 Earnings Release | #WORTHREACHINGFOR I 4 |
Constellation Brands, Inc. Q2 FY 2023 Earnings Release | #WORTHREACHINGFOR I 5 |
August 31, 2022 | February 28, 2022 | ||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 165.1 | $ | 199.4 | |||||||
Accounts receivable | 978.9 | 899.0 | |||||||||
Inventories | 1,651.0 | 1,573.2 | |||||||||
Prepaid expenses and other | 735.2 | 658.1 | |||||||||
Total current assets | 3,530.2 | 3,329.7 | |||||||||
Property, plant, and equipment | 6,234.0 | 6,059.6 | |||||||||
Goodwill | 7,898.6 | 7,862.4 | |||||||||
Intangible assets | 2,763.6 | 2,755.2 | |||||||||
Equity method investments | 833.4 | 2,688.7 | |||||||||
Securities measured at fair value | 91.8 | 191.4 | |||||||||
Deferred income taxes | 2,292.3 | 2,351.5 | |||||||||
Other assets | 637.0 | 617.3 | |||||||||
Total assets | $ | 24,280.9 | $ | 25,855.8 | |||||||
LIABILITIES AND STOCKHOLDER’S EQUITY | |||||||||||
Current liabilities: | |||||||||||
Short-term borrowings | $ | 663.9 | $ | 323.0 | |||||||
Current maturities of long-term debt | 7.6 | 605.3 | |||||||||
Accounts payable | 959.1 | 899.2 | |||||||||
Other accrued expenses and liabilities | 881.3 | 871.3 | |||||||||
Total current liabilities | 2,511.9 | 2,698.8 | |||||||||
Long-term debt, less current maturities | 10,278.7 | 9,488.2 | |||||||||
Deferred income taxes and other liabilities | 1,779.4 | 1,621.0 | |||||||||
Total liabilities | 14,570.0 | 13,808.0 | |||||||||
CBI stockholders’ equity | 9,389.0 | 11,731.9 | |||||||||
Noncontrolling interests | 321.9 | 315.9 | |||||||||
Total stockholders’ equity | 9,710.9 | 12,047.8 | |||||||||
Total liabilities and stockholders’ equity | $ | 24,280.9 | $ | 25,855.8 |
Constellation Brands, Inc. Q2 FY 2023 Earnings Release | #WORTHREACHINGFOR I 6 |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||
August 31, 2022 | August 31, 2021 | August 31, 2022 | August 31, 2021 | ||||||||||||||||||||
Sales | $ | 2,864.3 | $ | 2,565.0 | $ | 5,405.0 | $ | 4,753.3 | |||||||||||||||
Excise taxes | (209.2) | (193.9) | (386.7) | (355.7) | |||||||||||||||||||
Net sales | 2,655.1 | 2,371.1 | 5,018.3 | 4,397.6 | |||||||||||||||||||
Cost of product sold | (1,329.2) | (1,141.4) | (2,437.4) | (2,048.6) | |||||||||||||||||||
Gross profit | 1,325.9 | 1,229.7 | 2,580.9 | 2,349.0 | |||||||||||||||||||
Selling, general, and administrative expenses | (512.8) | (490.5) | (951.4) | (868.8) | |||||||||||||||||||
Impairment of brewery construction in progress | — | — | — | (665.9) | |||||||||||||||||||
Operating income (loss) | 813.1 | 739.2 | 1,629.5 | 814.3 | |||||||||||||||||||
Income (loss) from unconsolidated investments | (1,719.1) | (470.8) | (1,907.0) | (1,370.0) | |||||||||||||||||||
Interest expense | (94.3) | (95.8) | (182.8) | (182.5) | |||||||||||||||||||
Loss on extinguishment of debt | (8.0) | (29.4) | (23.3) | (29.4) | |||||||||||||||||||
Income (loss) before income taxes | (1,008.3) | 143.2 | (483.6) | (767.6) | |||||||||||||||||||
(Provision for) benefit from income taxes | (132.4) | (131.3) | (257.8) | (117.8) | |||||||||||||||||||
Net income (loss) | (1,140.7) | 11.9 | (741.4) | (885.4) | |||||||||||||||||||
Net (income) loss attributable to noncontrolling interests | (10.5) | (10.4) | (20.3) | (21.2) | |||||||||||||||||||
Net income (loss) attributable to CBI | $ | (1,151.2) | $ | 1.5 | $ | (761.7) | $ | (906.6) | |||||||||||||||
Net income (loss) per common share attributable to CBI: | |||||||||||||||||||||||
Basic – Class A Common Stock | $ | (6.30) | $ | 0.01 | $ | (4.13) | $ | (4.77) | |||||||||||||||
Basic – Class B Convertible Common Stock | $ | (5.73) | $ | 0.01 | $ | (3.77) | $ | (4.34) | |||||||||||||||
Diluted – Class A Common Stock | $ | (6.30) | $ | 0.01 | $ | (4.13) | $ | (4.77) | |||||||||||||||
Diluted – Class B Convertible Common Stock | $ | (5.73) | $ | 0.01 | $ | (3.77) | $ | (4.34) | |||||||||||||||
Weighted average common shares outstanding: | |||||||||||||||||||||||
Basic – Class A Common Stock | 161.730 | 167.447 | 163.532 | 169.025 | |||||||||||||||||||
Basic – Class B Convertible Common Stock | 23.206 | 23.222 | 23.206 | 23.234 | |||||||||||||||||||
Diluted – Class A Common Stock | 161.730 | 192.530 | 163.532 | 169.025 | |||||||||||||||||||
Diluted – Class B Convertible Common Stock | 23.206 | 23.222 | 23.206 | 23.234 | |||||||||||||||||||
Cash dividends declared per common share: | |||||||||||||||||||||||
Class A Common Stock | $ | 0.80 | $ | 0.76 | $ | 1.60 | $ | 1.52 | |||||||||||||||
Class B Convertible Common Stock | $ | 0.72 | $ | 0.69 | $ | 1.44 | $ | 1.38 |
Constellation Brands, Inc. Q2 FY 2023 Earnings Release | #WORTHREACHINGFOR I 7 |
CONSTELLATION BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) (unaudited) | |||||||||||
Six Months Ended | |||||||||||
August 31, 2022 | August 31, 2021 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||
Net income (loss) | $ | (741.4) | $ | (885.4) | |||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||||||
Unrealized net (gain) loss on securities measured at fair value | 31.7 | 1,335.1 | |||||||||
Deferred tax provision (benefit) | 208.6 | (19.2) | |||||||||
Depreciation | 183.5 | 162.3 | |||||||||
Stock-based compensation | 37.8 | 36.0 | |||||||||
Equity in (earnings) losses of equity method investees and related activities, net of distributed earnings | 815.6 | 35.3 | |||||||||
Noncash lease expense | 44.4 | 40.1 | |||||||||
Amortization of debt issuance costs and loss on extinguishment of debt | 28.2 | 35.1 | |||||||||
Impairment of equity method investment | 1,060.3 | — | |||||||||
Impairment of brewery construction in progress | — | 665.9 | |||||||||
Gain (loss) on settlement of pre-issuance hedge contracts | 20.7 | — | |||||||||
Change in operating assets and liabilities, net of effects from purchase and sale of business: | |||||||||||
Accounts receivable | (84.8) | (187.8) | |||||||||
Inventories | (86.3) | (49.3) | |||||||||
Prepaid expenses and other current assets | 165.6 | 10.1 | |||||||||
Accounts payable | 188.9 | 245.9 | |||||||||
Deferred revenue | 9.5 | 144.6 | |||||||||
Other accrued expenses and liabilities | (287.7) | (3.8) | |||||||||
Other | 59.7 | (39.0) | |||||||||
Total adjustments | 2,395.7 | 2,411.3 | |||||||||
Net cash provided by (used in) operating activities | 1,654.3 | 1,525.9 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||
Purchase of property, plant, and equipment | (435.0) | (353.4) | |||||||||
Purchase of business, net of cash acquired | (37.2) | — | |||||||||
Investments in equity method investees and securities | (21.0) | (28.6) | |||||||||
Proceeds from sale of assets | 6.6 | 1.3 | |||||||||
Proceeds from sale of business | — | 4.6 | |||||||||
Other investing activities | 0.6 | (1.0) | |||||||||
Net cash provided by (used in) investing activities | (486.0) | (377.1) | |||||||||
Constellation Brands, Inc. Q2 FY 2023 Earnings Release | #WORTHREACHINGFOR I 8 |
CONSTELLATION BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) (unaudited) | |||||||||||
Six Months Ended | |||||||||||
August 31, 2022 | August 31, 2021 | ||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||
Proceeds from issuance of long-term debt | 1,846.8 | 1,001.9 | |||||||||
Principal payments of long-term debt | (1,654.7) | (1,357.1) | |||||||||
Net proceeds from (repayments of) short-term borrowings | 340.9 | 486.0 | |||||||||
Dividends paid | (295.3) | (289.3) | |||||||||
Purchases of treasury stock | (1,400.5) | (1,305.0) | |||||||||
Proceeds from shares issued under equity compensation plans | 30.5 | 22.9 | |||||||||
Payments of minimum tax withholdings on stock-based payment awards | (10.5) | (9.8) | |||||||||
Payments of debt issuance, debt extinguishment, and other financing costs | (33.3) | (34.8) | |||||||||
Distributions to noncontrolling interests | (22.5) | (21.2) | |||||||||
Net cash provided by (used in) financing activities | (1,198.6) | (1,506.4) | |||||||||
Effect of exchange rate changes on cash and cash equivalents | (4.0) | 0.4 | |||||||||
Net increase (decrease) in cash and cash equivalents | (34.3) | (357.2) | |||||||||
Cash and cash equivalents, beginning of period | 199.4 | 460.6 | |||||||||
Cash and cash equivalents, end of period | $ | 165.1 | $ | 103.4 |
Constellation Brands, Inc. Q2 FY 2023 Earnings Release | #WORTHREACHINGFOR I 9 |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||
August 31, 2022 | August 31, 2021 | Percent Change | August 31, 2022 | August 31, 2021 | Percent Change | ||||||||||||||||||||||||||||||
Beer | |||||||||||||||||||||||||||||||||||
Segment net sales | $ | 2,139.3 | $ | 1,861.3 | 15 | % | $ | 4,037.5 | $ | 3,433.3 | 18 | % | |||||||||||||||||||||||
Segment gross profit | $ | 1,147.6 | $ | 984.0 | 17 | % | $ | 2,167.1 | $ | 1,877.7 | 15 | % | |||||||||||||||||||||||
% Net sales | 53.6 | % | 52.9 | % | 53.7 | % | 54.7 | % | |||||||||||||||||||||||||||
Segment operating income (loss) | $ | 865.6 | $ | 693.0 | 25 | % | $ | 1,628.4 | $ | 1,366.1 | 19 | % | |||||||||||||||||||||||
% Net sales | 40.5 | % | 37.2 | % | 40.3 | % | 39.8 | % | |||||||||||||||||||||||||||
Wine and Spirits | |||||||||||||||||||||||||||||||||||
Wine net sales | $ | 442.0 | $ | 447.2 | (1 | %) | $ | 846.1 | $ | 844.9 | — | % | |||||||||||||||||||||||
Spirits net sales | 73.8 | 62.6 | 18 | % | 134.7 | 119.4 | 13 | % | |||||||||||||||||||||||||||
Segment net sales | $ | 515.8 | $ | 509.8 | 1 | % | $ | 980.8 | $ | 964.3 | 2 | % | |||||||||||||||||||||||
Segment gross profit | $ | 224.7 | $ | 230.5 | (3 | %) | $ | 435.8 | $ | 438.0 | (1 | %) | |||||||||||||||||||||||
% Net sales | 43.6 | % | 45.2 | % | 44.4 | % | 45.4 | % | |||||||||||||||||||||||||||
Segment operating income (loss) | $ | 99.4 | $ | 100.2 | (1 | %) | $ | 190.4 | $ | 204.4 | (7 | %) | |||||||||||||||||||||||
% Net sales | 19.3 | % | 19.7 | % | 19.4 | % | 21.2 | % | |||||||||||||||||||||||||||
Segment income (loss) from unconsolidated investments | $ | 3.4 | $ | (1.1) | NM | $ | 4.9 | $ | 0.2 | NM | |||||||||||||||||||||||||
Corporate Operations and Other | |||||||||||||||||||||||||||||||||||
Segment operating income (loss) | $ | (82.3) | $ | (62.9) | (31 | %) | $ | (143.6) | $ | (117.4) | (22 | %) | |||||||||||||||||||||||
Segment income (loss) from unconsolidated investments | $ | (2.3) | $ | (0.2) | NM | $ | (4.3) | $ | (0.8) | NM | |||||||||||||||||||||||||
Canopy equity earnings (losses) (1) | $ | (34.7) | $ | (29.9) | (16 | %) | $ | (86.7) | $ | (74.2) | (17 | %) | |||||||||||||||||||||||
Consolidated operating income (loss) | $ | 813.1 | $ | 739.2 | 10 | % | $ | 1,629.5 | $ | 814.3 | 100 | % | |||||||||||||||||||||||
Comparable Adjustments | 69.6 | (8.9) | NM | 45.7 | 638.8 | (93 | %) | ||||||||||||||||||||||||||||
Comparable operating income (loss) | $ | 882.7 | $ | 730.3 | 21 | % | $ | 1,675.2 | $ | 1,453.1 | 15 | % | |||||||||||||||||||||||
Consolidated income (loss) from unconsolidated investments | $ | (1,719.1) | $ | (470.8) | NM | $ | (1,907.0) | $ | (1,370.0) | (39 | %) | ||||||||||||||||||||||||
Comparable Adjustments | 1,685.5 | 439.6 | NM | 1,820.9 | 1,295.2 | 41 | % | ||||||||||||||||||||||||||||
Comparable income (loss) from unconsolidated investments | $ | (33.6) | $ | (31.2) | (8 | %) | $ | (86.1) | $ | (74.8) | (15 | %) | |||||||||||||||||||||||
Consolidated EBIT (2) | $ | 849.1 | $ | 699.1 | 21 | % | $ | 1,589.1 | $ | 1,378.3 | 15 | % | |||||||||||||||||||||||
Constellation Brands, Inc. Q2 FY 2023 Earnings Release | #WORTHREACHINGFOR I 10 |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||
August 31, 2022 | August 31, 2021 | Percent Change | August 31, 2022 | August 31, 2021 | Percent Change | ||||||||||||||||||||||||||||||
Beer | |||||||||||||||||||||||||||||||||||
(in millions, branded product, 24-pack, 12-ounce case equivalents) | |||||||||||||||||||||||||||||||||||
Shipments | 113.2 | 101.0 | 12.1 | % | 212.7 | 185.8 | 14.5 | % | |||||||||||||||||||||||||||
Depletions (1) | 8.9 | % | 8.8 | % | |||||||||||||||||||||||||||||||
Wine and Spirits | |||||||||||||||||||||||||||||||||||
(in millions, branded product, 9-liter case equivalents) | |||||||||||||||||||||||||||||||||||
Shipments | 7.4 | 7.4 | — | % | 14.2 | 14.1 | 0.7 | % | |||||||||||||||||||||||||||
U.S. Domestic shipments | 6.4 | 6.3 | 1.6 | % | 12.2 | 12.3 | (0.8 | %) | |||||||||||||||||||||||||||
Depletions (1) | (2.2 | %) | (0.8 | %) | |||||||||||||||||||||||||||||||
(1) | Depletions represent U.S. domestic distributor shipments of our respective branded products to retail customers, based on third-party data. | ||||||||||||||||||||||
Constellation Brands, Inc. Q2 FY 2023 Earnings Release | #WORTHREACHINGFOR I 11 |
Three Months Ended August 31, 2022 | Three Months Ended August 31, 2021 | Percent Change - Reported Basis (GAAP) | Percent Change - Comparable Basis (Non-GAAP) | ||||||||||||||||||||||||||||||||
Reported Basis (GAAP) | Comparable Adjustments | Comparable Basis (Non-GAAP) | Reported Basis (GAAP) | Comparable Adjustments | Comparable Basis (Non-GAAP) | ||||||||||||||||||||||||||||||
Net sales | $ | 2,655.1 | $ | 2,655.1 | $ | 2,371.1 | $ | 2,371.1 | 12 | % | 12 | % | |||||||||||||||||||||||
Cost of product sold | (1,329.2) | $ | 46.4 | (1,141.4) | $ | (15.2) | |||||||||||||||||||||||||||||
Gross profit | 1,325.9 | 46.4 | $ | 1,372.3 | 1,229.7 | (15.2) | $ | 1,214.5 | 8 | % | 13 | % | |||||||||||||||||||||||
Selling, general, and administrative expenses | (512.8) | 23.2 | (490.5) | 6.3 | |||||||||||||||||||||||||||||||
Operating income (loss) | 813.1 | 69.6 | $ | 882.7 | 739.2 | (8.9) | $ | 730.3 | 10 | % | 21 | % | |||||||||||||||||||||||
Income (loss) from unconsolidated investments | (1,719.1) | 1,685.5 | (470.8) | 439.6 | |||||||||||||||||||||||||||||||
EBIT | $ | 849.1 | $ | 699.1 | NA | 21 | % | ||||||||||||||||||||||||||||
Interest expense | (94.3) | (95.8) | |||||||||||||||||||||||||||||||||
Loss on extinguishment of debt | (8.0) | 8.0 | (29.4) | 29.4 | |||||||||||||||||||||||||||||||
Income (loss) before income taxes | (1,008.3) | 1,763.1 | $ | 754.8 | 143.2 | 460.1 | $ | 603.3 | NM | 25 | % | ||||||||||||||||||||||||
(Provision for) benefit from income taxes (1) | (132.4) | (23.2) | (131.3) | (2.7) | |||||||||||||||||||||||||||||||
Net income (loss) | (1,140.7) | 1,739.9 | 11.9 | 457.4 | |||||||||||||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests | (10.5) | (10.4) | |||||||||||||||||||||||||||||||||
Net income (loss) attributable to CBI | $ | (1,151.2) | $ | 1,739.9 | $ | 588.7 | $ | 1.5 | $ | 457.4 | $ | 458.9 | NM | 28 | % | ||||||||||||||||||||
EPS (2) | $ | (6.30) | $ | 9.37 | $ | 3.17 | $ | 0.01 | $ | 2.38 | $ | 2.38 | NM | 33 | % | ||||||||||||||||||||
Weighted average common shares outstanding – diluted (3) | 161.730 | 24.007 | 185.737 | 192.530 | 192.530 | ||||||||||||||||||||||||||||||
Gross margin | 49.9 | % | 51.7 | % | 51.9 | % | 51.2 | % | |||||||||||||||||||||||||||
Operating margin | 30.6 | % | 33.2 | % | 31.2 | % | 30.8 | % | |||||||||||||||||||||||||||
Effective tax rate | (13.1) | % | 20.6 | % | 91.7 | % | 22.2 | % |
Constellation Brands, Inc. Q2 FY 2023 Earnings Release | #WORTHREACHINGFOR I 12 |
Three Months Ended August 31, 2022 | Three Months Ended August 31, 2021 | ||||||||||||||||||||||||||||
Comparable Adjustments | Acquisitions, Divestitures, and Related Costs (4) | Restructuring and Other Strategic Business Development Costs | Other (5) | Total | Acquisitions, Divestitures, and Related Costs (4) | Restructuring and Other Strategic Business Development Costs (6) | Other (5) | Total | |||||||||||||||||||||
Cost of product sold | $ | (0.9) | $ | — | $ | (45.5) | $ | (46.4) | $ | 0.1 | $ | — | $ | 15.1 | $ | 15.2 | |||||||||||||
Selling, general, and administrative expenses | $ | (5.0) | $ | (1.2) | $ | (17.0) | $ | (23.2) | $ | (5.6) | $ | 0.8 | $ | (1.5) | $ | (6.3) | |||||||||||||
Operating income (loss) | $ | (5.9) | $ | (1.2) | $ | (62.5) | $ | (69.6) | $ | (5.5) | $ | 0.8 | $ | 13.6 | $ | 8.9 | |||||||||||||
Income (loss) from unconsolidated investments | $ | (1.1) | $ | (1.8) | $ | (1,682.6) | $ | (1,685.5) | $ | (1.7) | $ | (45.4) | $ | (392.5) | $ | (439.6) | |||||||||||||
Loss on extinguishment of debt | $ | — | $ | — | $ | (8.0) | $ | (8.0) | $ | — | $ | — | $ | (29.4) | $ | (29.4) | |||||||||||||
(Provision for) benefit from income taxes (1) | $ | 151.6 | $ | 0.5 | $ | (128.9) | $ | 23.2 | $ | 4.5 | $ | 1.6 | $ | (3.4) | $ | 2.7 | |||||||||||||
Net income (loss) attributable to CBI | $ | 144.6 | $ | (2.5) | $ | (1,882.0) | $ | (1,739.9) | $ | (2.7) | $ | (43.0) | $ | (411.7) | $ | (457.4) | |||||||||||||
EPS (2) | $ | 0.78 | $ | (0.01) | $ | (10.13) | $ | (9.37) | $ | (0.01) | $ | (0.22) | $ | (2.14) | $ | (2.38) |
For the Three Months Ended August 31, | For the Six Months Ended August 31, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Class B Convertible Common Stock | 23.206 | — | 23.206 | 23.234 | |||||||||||||||||||
Stock-based awards, primarily stock options | 0.801 | — | 0.802 | 1.936 |
Constellation Brands, Inc. Q2 FY 2023 Earnings Release | #WORTHREACHINGFOR I 13 |
Six Months Ended August 31, 2022 | Six Months Ended August 31, 2021 | Percent Change - Reported Basis (GAAP) | Percent Change - Comparable Basis (Non-GAAP) | ||||||||||||||||||||||||||||||||
Reported Basis (GAAP) | Comparable Adjustments | Comparable Basis (Non-GAAP) | Reported Basis (GAAP) | Comparable Adjustments | Comparable Basis (Non-GAAP) | ||||||||||||||||||||||||||||||
Net sales | $ | 5,018.3 | $ | 5,018.3 | $ | 4,397.6 | $ | 4,397.6 | 14 | % | 14 | % | |||||||||||||||||||||||
Cost of product sold | (2,437.4) | $ | 22.0 | (2,048.6) | $ | (33.3) | |||||||||||||||||||||||||||||
Gross profit | 2,580.9 | 22.0 | $ | 2,602.9 | 2,349.0 | (33.3) | $ | 2,315.7 | 10 | % | 12 | % | |||||||||||||||||||||||
Selling, general, and administrative expenses | (951.4) | 23.7 | (868.8) | 6.2 | |||||||||||||||||||||||||||||||
Impairment of brewery construction in progress | — | — | (665.9) | 665.9 | |||||||||||||||||||||||||||||||
Operating income (loss) | 1,629.5 | 45.7 | $ | 1,675.2 | 814.3 | 638.8 | $ | 1,453.1 | 100 | % | 15 | % | |||||||||||||||||||||||
Income (loss) from unconsolidated investments | (1,907.0) | 1,820.9 | (1,370.0) | 1,295.2 | |||||||||||||||||||||||||||||||
EBIT | $ | 1,589.1 | $ | 1,378.3 | NA | 15 | % | ||||||||||||||||||||||||||||
Interest expense | (182.8) | (182.5) | |||||||||||||||||||||||||||||||||
Loss on extinguishment of debt | (23.3) | 23.3 | (29.4) | 29.4 | |||||||||||||||||||||||||||||||
Income (loss) before income taxes | (483.6) | 1,889.9 | $ | 1,406.3 | (767.6) | 1,963.4 | $ | 1,195.8 | 37 | % | 18 | % | |||||||||||||||||||||||
(Provision for) benefit from income taxes (1) | (257.8) | (35.7) | (117.8) | (140.8) | |||||||||||||||||||||||||||||||
Net income (loss) | (741.4) | 1,854.2 | (885.4) | 1,822.6 | |||||||||||||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests | (20.3) | (21.2) | |||||||||||||||||||||||||||||||||
Net income (loss) attributable to CBI | $ | (761.7) | $ | 1,854.2 | $ | 1,092.5 | $ | (906.6) | $ | 1,822.6 | $ | 916.0 | 16 | % | 19 | % | |||||||||||||||||||
EPS (2) | $ | (4.13) | $ | 9.89 | $ | 5.83 | $ | (4.77) | $ | 9.39 | $ | 4.72 | 13 | % | 24 | % | |||||||||||||||||||
Weighted average common shares outstanding – diluted (3) | 163.532 | 24.008 | 187.540 | 169.025 | 25.170 | 194.195 | |||||||||||||||||||||||||||||
Gross margin | 51.4 | % | 51.9 | % | 53.4 | % | 52.7 | % | |||||||||||||||||||||||||||
Operating margin | 32.5 | % | 33.4 | % | 18.5 | % | 33.0 | % | |||||||||||||||||||||||||||
Effective tax rate | (53.3) | % | 20.9 | % | (15.3) | % | 21.6 | % |
Constellation Brands, Inc. Q2 FY 2023 Earnings Release | #WORTHREACHINGFOR I 14 |
Six Months Ended August 31, 2022 | Six Months Ended August 31, 2021 | ||||||||||||||||||||||||||||
Comparable Adjustments | Acquisitions, Divestitures, and Related Costs (7) | Restructuring and Other Strategic Business Development Costs (8) | Other (9) | Total | Acquisitions, Divestitures, and Related Costs (7) | Restructuring and Other Strategic Business Development Costs (8) | Other (9) | Total | |||||||||||||||||||||
Cost of product sold | $ | (1.9) | $ | — | $ | (20.1) | $ | (22.0) | $ | 0.1 | $ | (2.6) | $ | 35.8 | $ | 33.3 | |||||||||||||
Selling, general, and administrative expenses | $ | (3.4) | $ | (2.6) | $ | (17.7) | $ | (23.7) | $ | (4.6) | $ | (0.1) | $ | (1.5) | $ | (6.2) | |||||||||||||
Impairment of brewery construction in progress | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (665.9) | $ | (665.9) | |||||||||||||
Operating income (loss) | $ | (5.3) | $ | (2.6) | $ | (37.8) | $ | (45.7) | $ | (4.5) | $ | (2.7) | $ | (631.6) | $ | (638.8) | |||||||||||||
Income (loss) from unconsolidated investments | $ | (1.5) | $ | (102.7) | $ | (1,716.7) | $ | (1,820.9) | $ | (3.3) | $ | (70.0) | $ | (1,221.9) | $ | (1,295.2) | |||||||||||||
Loss on extinguishment of debt | $ | — | $ | — | $ | (23.3) | $ | (23.3) | $ | — | $ | — | $ | (29.4) | $ | (29.4) | |||||||||||||
(Provision for) benefit from income taxes (1) | $ | 152.6 | $ | 4.7 | $ | (121.6) | $ | 35.7 | $ | 4.3 | $ | 3.4 | $ | 133.1 | $ | 140.8 | |||||||||||||
Net income (loss) attributable to CBI | $ | 145.8 | $ | (100.6) | $ | (1,899.4) | $ | (1,854.2) | $ | (3.5) | $ | (69.3) | $ | (1,749.8) | $ | (1,822.6) | |||||||||||||
EPS (2) | $ | 0.78 | $ | (0.54) | $ | (10.13) | $ | (9.89) | $ | (0.02) | $ | (0.36) | $ | (9.01) | $ | (9.39) |
Constellation Brands, Inc. Q2 FY 2023 Earnings Release | #WORTHREACHINGFOR I 15 |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||
August 31, 2022 | August 31, 2021 | August 31, 2022 | August 31, 2021 | ||||||||||||||||||||
Equity earnings (losses) and related activities - reported basis, Canopy EIE (GAAP) (1) | $ | (650.7) | $ | 120.5 | $ | (815.7) | $ | (35.3) | |||||||||||||||
Comparable Adjustments (2)(3) | 615.9 | (150.4) | 728.9 | (38.9) | |||||||||||||||||||
Equity earnings (losses) and related activities - comparable basis, Canopy EIE (Non-GAAP) | (34.8) | (29.9) | (86.8) | (74.2) | |||||||||||||||||||
(Provision for) benefit from income taxes (3) | 4.5 | 4.0 | 11.7 | 13.6 | |||||||||||||||||||
Net income (loss) attributable to CBI - comparable basis, Canopy EIE (Non-GAAP) | $ | (30.3) | $ | (25.9) | $ | (75.1) | $ | (60.6) |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||
August 31, 2022 | August 31, 2021 | August 31, 2022 | August 31, 2021 | ||||||||||||||||||||
EPS - reported basis, Canopy EIE (GAAP) | $ | (3.35) | $ | 0.62 | $ | (4.09) | $ | (0.07) | |||||||||||||||
Comparable Adjustments - Canopy EIE (Non-GAAP) | 3.19 | (0.76) | 3.69 | (0.25) | |||||||||||||||||||
EPS - comparable basis, Canopy EIE (Non-GAAP) (4) | $ | (0.16) | $ | (0.13) | $ | (0.40) | $ | (0.31) |
Three Months Ended | |||||||||||||||||||||||||||||||||||
August 31, 2022 | August 31, 2021 | ||||||||||||||||||||||||||||||||||
Income (loss) before income taxes | (Provision for) benefit from income taxes (3) | Effective tax rate (5) | Income (loss) before income taxes | (Provision for) benefit from income taxes (3) | Effective tax rate (5) | ||||||||||||||||||||||||||||||
Reported basis (GAAP) | $ | (1,008.3) | $ | (132.4) | (13.1) | % | $ | 143.2 | $ | (131.3) | 91.7 | % | |||||||||||||||||||||||
Comparable Adjustments - (Non-GAAP) | 1,763.1 | (23.2) | 460.1 | (2.7) | |||||||||||||||||||||||||||||||
Comparable basis (Non-GAAP) | 754.8 | (155.6) | 20.6 | % | 603.3 | (134.0) | 22.2 | % | |||||||||||||||||||||||||||
Comparable basis, Canopy EIE (Non-GAAP) | (34.8) | 4.5 | (29.9) | 4.0 | |||||||||||||||||||||||||||||||
Comparable basis, excluding Canopy EIE (Non-GAAP) | $ | 789.6 | $ | (160.1) | 20.3 | % | $ | 633.2 | $ | (138.0) | 21.8 | % | |||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||
August 31, 2022 | August 31, 2021 | August 31, 2022 | August 31, 2021 | ||||||||||||||||||||
EPS - comparable basis (Non-GAAP) (6) | $ | 3.17 | $ | 2.38 | $ | 5.83 | $ | 4.72 | |||||||||||||||
Comparable basis, Canopy EIE (Non-GAAP) | 0.16 | 0.13 | 0.40 | 0.31 | |||||||||||||||||||
EPS - comparable basis, excluding Canopy EIE (Non-GAAP) (4) | $ | 3.33 | $ | 2.52 | $ | 6.23 | $ | 5.03 |
(1) | Equity earnings (losses) and related activities are included in income (loss) from unconsolidated investments. | |||||||||||||
(2) | Comparable Adjustments, Canopy EIE include: a goodwill impairment, restructuring and other strategic business development costs, unrealized net (gain) loss from the mark to fair value of securities measured at fair value and related activities, acquisition costs, and other (gains) losses. |
Constellation Brands, Inc. Q2 FY 2023 Earnings Release | #WORTHREACHINGFOR I 16 |
(3) | The Comparable Adjustment effective tax rate applied to each Comparable Adjustment amount is generally based upon the jurisdiction in which the adjustment was recognized. The benefit from income taxes effective tax rate applied to our Canopy equity earnings (losses) and related activities is generally based on the tax rates of the legal entities that hold our investment. | |||||||||||||
(4) | May not sum due to rounding as each item is computed independently. The comparable adjustments and comparable basis diluted net income per share are calculated on a fully dilutive basis. | |||||||||||||
(5) | Effective tax rate is not considered a GAAP financial measure, for purposes of this reconciliation, we derived the reported GAAP measure based on GAAP results, which serves as the basis for the reconciliation to the comparable non-GAAP financial measure. | |||||||||||||
(6) |
EPS Guidance | Range for the Year Ending February 28, 2023 | ||||||||||
Forecasted EPS - reported basis (GAAP) | $ | 0.75 | $ | 1.15 | |||||||
Acquisitions, divestitures, and related costs (1) | (0.74) | (0.74) | |||||||||
Restructuring and other strategic business development costs (2) | 0.54 | 0.54 | |||||||||
Other (3) | 10.25 | 10.25 | |||||||||
Comparable basis, Canopy EIE (Non-GAAP) | 0.40 | 0.40 | |||||||||
Forecasted EPS - comparable basis, excluding Canopy EIE (Non-GAAP) (4) | $ | 11.20 | $ | 11.60 |
Actual for the Year Ended February 28, 2022 | |||||
EPS - reported basis (GAAP) | $ | (0.22) | |||
Acquisitions, divestitures, and related costs (1) | (0.24) | ||||
Restructuring and other strategic business development costs (2) | 0.32 | ||||
Other (3) | 10.32 | ||||
EPS - comparable basis (Non-GAAP) (4) | 10.20 | ||||
Comparable basis, Canopy EIE (Non-GAAP) | 0.80 | ||||
EPS - comparable basis, excluding Canopy EIE (Non-GAAP) (4) | $ | 10.99 |
(1) | Acquisitions, divestitures, and related costs include: (4) | Estimated for the Year Ending February 28, 2023 | Actual for the Year Ended February 28, 2022 | |||||||||||
Net income tax provision recognized for the reversal of valuation allowances | $ | (0.81) | $ | (0.02) | ||||||||||
Gain on the remeasurement of our previously held equity method investments | $ | (0.03) | $ | (0.07) | ||||||||||
Transition services agreements activity | $ | 0.06 | $ | 0.08 | ||||||||||
My Favorite Neighbor transaction, integration, and other acquisition-related costs | $ | 0.02 | $ | — | ||||||||||
Canopy equity (earnings) losses and related activities comparable adjustments | $ | 0.01 | $ | 0.02 | ||||||||||
Net gain on sale of unconsolidated investment | $ | — | $ | (0.25) | ||||||||||
Net (gain) loss on sale of business | $ | — | $ | (0.01) | ||||||||||
(2) | For the year ending February 28, 2023, and year ended February 28, 2022, restructuring and other strategic business development costs primarily consist of equity losses from Canopy largely related to costs designed to improve their organizational focus, streamline operations, and align product capability with projected demand. For the year ended February 28, 2022, restructuring and other strategic business development costs were partially offset by a net income tax benefit recognized as a result of an intra-entity transfer of assets. |
Constellation Brands, Inc. Q2 FY 2023 Earnings Release | #WORTHREACHINGFOR I 17 |
(3) | Other includes: (4) | Estimated for the Year Ending February 28, 2023 | Actual for the Year Ended February 28, 2022 | |||||||||||
Impairment of equity method investment | $ | 5.57 | $ | — | ||||||||||
Canopy equity (earnings) losses and related activities comparable adjustments | $ | 2.69 | $ | (0.66) | ||||||||||
Net income tax expense recognized for an adjustment to a valuation allowance | $ | 1.03 | $ | — | ||||||||||
Unconsolidated investments, other | $ | 0.49 | $ | (0.35) | ||||||||||
Unrealized net (gain) loss from mark to fair value of our investment in Canopy | $ | 0.16 | $ | 8.33 | ||||||||||
Costs associated with proposed reclassification of Class B Convertible Common Stock | $ | 0.14 | $ | — | ||||||||||
Loss on extinguishment of debt | $ | 0.09 | $ | 0.11 | ||||||||||
Net (gain) loss from mark to fair value of undesignated commodity derivative contracts | $ | 0.09 | $ | (0.29) | ||||||||||
Net loss on change in estimated fair value of contingent liabilities associated with prior period acquisitions | $ | (0.02) | $ | 0.04 | ||||||||||
Net flow through of reserved inventory | $ | (0.01) | $ | (0.05) | ||||||||||
Impairment of brewery construction in progress | $ | — | $ | 3.08 | ||||||||||
Adjustments related to a prior period acquisition | $ | — | $ | 0.08 | ||||||||||
Net income tax provision recognized as a result of a legislative update in Switzerland | $ | — | $ | 0.06 | ||||||||||
Property tax settlement | $ | — | $ | (0.04) | ||||||||||
(4) | May not sum due to rounding as each item is computed independently. The comparable adjustments and comparable basis diluted net income per share are calculated on a fully dilutive basis. |
Free Cash Flow Guidance Free cash flow, as defined in the reconciliation below, is considered a liquidity measure and is considered to provide useful information to investors about the amount of cash generated, which can then be used, after required debt service and dividend payments, for other general corporate purposes. A limitation of free cash flow is that it does not represent the total increase or decrease in the cash balance for the period. Free cash flow should be considered in addition to, not as a substitute for, or superior to, cash flow from operating activities prepared in accordance with GAAP. | |||||||||||
Range for the Year Ending February 28, 2023 | |||||||||||
Net cash provided by operating activities (GAAP) | $ | 2,600.0 | $ | 2,800.0 | |||||||
Purchase of property, plant, and equipment | (1,300.0) | (1,400.0) | |||||||||
Free cash flow (Non-GAAP) | $ | 1,300.0 | $ | 1,400.0 | |||||||
Six Months Ended | |||||||||||
August 31, 2022 | August 31, 2021 | ||||||||||
Net cash provided by operating activities (GAAP) | $ | 1,654.3 | $ | 1,525.9 | |||||||
Purchase of property, plant, and equipment | (435.0) | (353.4) | |||||||||
Free cash flow (Non-GAAP) | $ | 1,219.3 | $ | 1,172.5 |
Constellation Brands, Inc. Q2 FY 2023 Earnings Release | #WORTHREACHINGFOR I 18 |
MEDIA CONTACT | INVESTOR RELATIONS CONTACT | ||||
Alex Wagner alex.wagner@cbrands.com | Joseph Suarez joseph.suarez@cbrands.com |