☒ | 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 | ||||||||
DEFINED TERMS | ||||||||
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 | ||||||||
2. Inventories | ||||||||
3. Derivative Instruments | ||||||||
4. Fair Value of Financial Instruments | ||||||||
5. Goodwill | ||||||||
6. Intangible Assets | ||||||||
7. Equity Method Investments | ||||||||
8. Borrowings | ||||||||
9. Income Taxes | ||||||||
10. Stockholders' Equity | ||||||||
11. Net Income (Loss) Per Common Share Attributable to CBI | ||||||||
12. Comprehensive Income (Loss) Attributable to CBI | ||||||||
13. Business Segment Information | ||||||||
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 1A. Risk Factors | ||||||||
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | ||||||||
Item 6. Exhibits | ||||||||
INDEX TO EXHIBITS | ||||||||
SIGNATURES |
Term | Meaning | ||||
$ | U.S. dollars | ||||
2.65% November 2017 Senior Notes | $700.0 million principal amount of 2.65% senior notes issued in November 2017 and redeemed in August 2021, prior to maturity | ||||
2.70% May 2017 Senior Notes | $500.0 million principal amount of 2.70% senior notes issued in May 2017 and redeemed in August 2021, prior to maturity | ||||
3.20% February 2018 Senior Notes | $600.0 million principal amount of 3.20% senior notes issued in February 2018, partially tendered in May 2022, and fully redeemed in June 2022, prior to maturity | ||||
4.25% May 2013 Senior Notes | $1,050.0 million principal amount of 4.25% senior notes issued in May 2013, partially tendered in May 2022, and fully redeemed in June 2022, prior to maturity | ||||
2018 Authorization | authority to repurchase up to $3.0 billion of our Class A Stock and Class B Stock, authorized in January 2018 by our Board of Directors | ||||
2020 U.S. wildfires | significant wildfires that broke out in California, Oregon, and Washington states which affected the 2020 U.S. grape harvest | ||||
2021 Authorization | authority to repurchase up to $2.0 billion of our Class A Stock and Class B Stock, authorized in January 2021 by our Board of Directors | ||||
2022 Annual Report | our Annual Report on Form 10-K for the fiscal year ended February 28, 2022 | ||||
2022 Credit Agreement | tenth amended and restated credit agreement, dated as of April 14, 2022, that provides for an aggregate revolving credit facility of $2.25 billion | ||||
2022 Restatement Agreement | restatement agreement, dated as of April 14, 2022, that amended and restated the ninth amended and restated agreement, dated as of March 26, 2020, which was our then-existing senior credit facility as of February 28, 2022 | ||||
2022 Wine Divestiture | sale of certain mainstream and premium wine brands and related inventory | ||||
3-tier | distribution channel where products are sold to a distributor (wholesaler) who then sells to a retailer; the retailer sells the products to a consumer | ||||
3-tier eCommerce | digital commerce experience for our consumers to purchase beverage alcohol from retailers | ||||
ABA | alternative beverage alcohol | ||||
Acreage | Acreage Holdings, Inc. | ||||
Acreage Financial Instrument | a call option for Canopy to acquire 70% of the shares of Acreage at a fixed exchange ratio and 30% at a floating exchange ratio | ||||
Acreage Transaction | Canopy’s intention to acquire Acreage upon U.S. federal cannabis permissibility, subject to certain conditions | ||||
Administrative Agent | Bank of America, N.A., as administrative agent for the senior credit facility and term loan credit agreements | ||||
Amended and Restated Charter | form of our amended and restated certificate of incorporation, attached to the Registration Statement on Form S-4, which will effectuate the Reclassification and be in effect at and following the Effective Time | ||||
AOCI | accumulated other comprehensive income (loss) | ||||
April 2022 Term Credit Agreement | June 2021 Term Credit Agreement, inclusive of amendment dated as of April 14, 2022 | ||||
ASR | accelerated share repurchase agreement with a third-party financial institution | ||||
August 2022 Term Credit Agreement | term loan credit agreement, dated as of August 9, 2022, that provides for a $1.0 billion unsecured delayed draw three-year term loan facility | ||||
Austin Cocktails | we made an initial investment in the Austin Cocktails business and subsequently acquired the remaining ownership interest |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I i |
Term | Meaning | ||||
C$ | Canadian dollars | ||||
Canopy | we made an investment in Canopy Growth Corporation, an Ontario, Canada-based public company | ||||
Canopy Debt Securities | debt securities issued by Canopy, as amended to remove Canopy's right to settle such debt securities on conversion into Canopy common shares | ||||
Canopy Equity Method Investment | November 2017 Canopy Investment, November 2018 Canopy Investment, May 2020 Canopy Investment, and July 2022 Canopy Investment, collectively | ||||
Canopy Strategic Transaction(s) | any potential acquisition, divestiture, investment, or other similar transaction made by Canopy, including but not limited to the Acreage Transaction | ||||
CARES Act | Coronavirus Aid, Relief, and Economic Security Act | ||||
CB International | CB International Finance S.à r.l., a wholly-owned subsidiary of ours | ||||
Class 1 Stock | our Class 1 Convertible Common Stock, par value $0.01 per share | ||||
Class A Stock | our Class A Common Stock, par value $0.01 per share | ||||
Class B Stock | our Class B Convertible Common Stock, par value $0.01 per share | ||||
CODM | chief operating decision maker | ||||
Comparable Adjustments | certain items affecting comparability that have been excluded by management | ||||
DEI | diversity, equity, and inclusion | ||||
Depletions | represent U.S. domestic distributor shipments of our respective branded products to retail customers, based on third-party data | ||||
Digital Business Acceleration | a phased initiative by the Company to create a cohesive digital strategy and build an advanced digital business in the coming years | ||||
DTC | direct-to-consumer inclusive of (i) a digital commerce experience for consumers to purchase directly from brand websites with inventory coming straight from the supplier and (ii) consumer purchases at hospitality locations (tasting rooms and tap rooms) from the supplier | ||||
Effective Time | the time that the Amended and Restated Charter has been duly filed with the Secretary of State of the State of Delaware (or such later time as we and WildStar Partners LLC will agree and set forth in the Amended and Restated Charter) | ||||
ERP | enterprise resource planning system | ||||
ESG | environmental, social, and governance | ||||
Exchange Act | Securities Exchange Act of 1934, as amended | ||||
Financial Statements | our consolidated financial statements and notes thereto included herein | ||||
Fiscal 2022 | the Company’s fiscal year ended February 28, 2022 | ||||
Fiscal 2023 | the Company’s fiscal year ending February 28, 2023 | ||||
Fiscal 2024 | the Company’s fiscal year ending February 29, 2024 | ||||
Fiscal 2025 | the Company’s fiscal year ending February 28, 2025 | ||||
Fiscal 2026 | the Company’s fiscal year ending February 28, 2026 | ||||
Fiscal 2027 | the Company’s fiscal year ending February 28, 2027 | ||||
Fiscal 2028 | the Company’s fiscal year ending February 29, 2028 | ||||
Five-Year Term Facility | a five-year term loan facility under the April 2022 Term Credit Agreement | ||||
Form 10-Q | this Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2022, unless otherwise specified | ||||
GHG | greenhouse gas | ||||
July 2022 Canopy Investment | in July 2022, we received 29.2 million common shares of Canopy through the exchange of C$100.0 million principal amount of our Canopy Debt Securities | ||||
June 2021 Term Credit Agreement | amended and restated term loan credit agreement, dated as of March 26, 2020, that provided for aggregate facilities of $491.3 million, consisting of the Five-Year Term Facility, inclusive of amendment dated as of June 10, 2021 |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I ii |
Term | Meaning | ||||
Lender | Bank of America, N.A., as lender for the April 2022 Term Credit Agreement | ||||
LIBOR | London Interbank Offered Rate | ||||
Lingua Franca | Lingua Franca, LLC business, acquired by us | ||||
May 2020 Canopy Investment | in May 2020, we made an incremental investment for 18.9 million common shares of Canopy through the exercise of warrants obtained in November 2017 | ||||
May 2022 Senior Notes | $1,850.0 million aggregate principal amount of senior notes issued in May 2022 | ||||
MD&A | Management’s Discussion and Analysis of Financial Condition and Results of Operations under Item 2. of this Form 10-Q | ||||
Mexicali Brewery | canceled brewery construction project located in Mexicali, Baja California, Mexico | ||||
Mexico Beer Projects | expansion, optimization, and/or construction activities at the Obregon Brewery, Nava Brewery, and Veracruz Brewery | ||||
M&T | Manufacturers and Traders Trust Company | ||||
My Favorite Neighbor | we made an initial investment in My Favorite Neighbor, LLC and subsequently acquired the remaining ownership interest | ||||
NA | not applicable | ||||
Nava | Nava, Coahuila, Mexico | ||||
Nava Brewery | brewery located in Nava | ||||
Net sales | gross sales less promotions, returns and allowances, and excise taxes | ||||
NM | not meaningful | ||||
Note(s) | notes to the consolidated financial statements | ||||
November 2017 Canopy Investment | in November 2017, we made an initial investment for 18.9 million common shares of Canopy | ||||
November 2018 Canopy Investment | in November 2018, we made an incremental investment for 104.5 million common shares of Canopy | ||||
November 2018 Canopy Warrants | Tranche A Warrants, Tranche B Warrants, and Tranche C Warrants, collectively | ||||
NYSE | New York Stock Exchange | ||||
Obregon | Obregon, Sonora, Mexico | ||||
Obregon Brewery | brewery located in Obregon | ||||
OCI | other comprehensive income (loss) | ||||
Pre-issuance hedge contracts | treasury lock and/or swap lock contracts designated as cash flow hedges entered into to hedge treasury rate volatility on future debt issuances | ||||
Reclassification | the plan to reclassify the Company’s common stock to eliminate the existing Class B Stock pursuant to the terms and conditions of the Reclassification Agreement | ||||
Reclassification Agreement | reclassification agreement in support of the Reclassification, dated June 30, 2022, among the Company and the Sands Family Stockholders | ||||
Reclassification Proposal | proposal to approve and adopt the Amended and Restated Charter, which will effectuate the Reclassification | ||||
Registration Statement on Form S-4 | our Registration Statement on Form S-4, including our proxy statement/prospectus, in connection with the Reclassification declared effective by the SEC on September 21, 2022, as may be amended or supplemented from time to time | ||||
RTD | ready-to-drink | ||||
SEC | Securities and Exchange Commission | ||||
Sands Family Stockholders | RES Master LLC, RES Business Holdings LP, SER Business Holdings LP, RHT 2015 Business Holdings LP, RSS Master LLC, RSS Business Holdings LP, SSR Business Holdings LP, RSS 2015 Business Holdings LP, RCT 2015 Business Holdings LP, RCT 2020 Investments LLC, NSDT 2009 STZ LLC, NSDT 2011 STZ LLC, RSS Business Management LLC, SSR Business Management LLC, LES Lauren Holdings LLC, MES Mackenzie Holdings LLC, Abigail Bennett, Zachary Stern, A&Z 2015 Business Holdings LP, Marilyn Sands Master Trust, MAS Business Holdings LP, Sands Family Foundation, Richard Sands, Robert Sands, WildStar Partners LLC, and Astra Legacy LLC |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I iii |
Term | Meaning | ||||
Second Quarter 2022 | the Company’s three months ended August 31, 2021 | ||||
Second Quarter 2023 | the Company’s three months ended August 31, 2022 | ||||
Securities Act | Securities Act of 1933, as amended | ||||
Six Months 2022 | the Company’s six months ended August 31, 2021 | ||||
Six Months 2023 | the Company’s six months ended August 31, 2022 | ||||
SOFR | secured overnight financing rate administered by the Federal Reserve Bank of New York | ||||
THC | tetrahydrocannabinol | ||||
Tranche A Warrants | warrants which give us the option to purchase 88.5 million common shares of Canopy expiring November 1, 2023 | ||||
Tranche B Warrants | warrants which give us the option to purchase 38.4 million common shares of Canopy expiring November 1, 2026 | ||||
Tranche C Warrants | warrants which give us the option to purchase 12.8 million common shares of Canopy expiring November 1, 2026 | ||||
TSX | Toronto Stock Exchange | ||||
U.S. | United States of America | ||||
U.S. GAAP | generally accepted accounting principles in the U.S. | ||||
Veracruz | Heroica Veracruz, Veracruz, Mexico | ||||
Veracruz Brewery | a new brewery to be constructed in Veracruz | ||||
VWAP Exercise Price | volume-weighted average of the closing market price of Canopy’s common shares on the TSX for the five trading days immediately preceding the exercise date | ||||
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I iv |
FINANCIAL STATEMENTS |
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 STOCKHOLDERS’ 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 | |||||||||
Commitments and contingencies | |||||||||||
CBI stockholders’ equity: | |||||||||||
Class A Stock, $0.01 par value – Authorized, 322,000,000 shares; Issued, 189,461,263 shares and 187,263,859 shares, respectively | 1.9 | 1.9 | |||||||||
Class B Stock, $0.01 par value – Authorized, 30,000,000 shares; Issued, 28,211,685 shares and 28,212,340 shares, respectively | 0.3 | 0.3 | |||||||||
Additional paid-in capital | 1,860.4 | 1,808.9 | |||||||||
Retained earnings | 13,448.4 | 14,505.4 | |||||||||
Accumulated other comprehensive income (loss) | (355.4) | (412.7) | |||||||||
14,955.6 | 15,903.8 | ||||||||||
Less: Treasury stock – | |||||||||||
Class A Stock, at cost, 28,239,095 shares and 22,824,607 shares, respectively | (5,564.4) | (4,169.7) | |||||||||
Class B Stock, at cost, 5,005,800 shares | (2.2) | (2.2) | |||||||||
(5,566.6) | (4,171.9) | ||||||||||
Total 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 Form 10-Q | #WORTHREACHINGFOR I 1 |
FINANCIAL STATEMENTS |
For the Six Months Ended August 31, | For the Three Months Ended August 31, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Sales | $ | 5,405.0 | $ | 4,753.3 | $ | 2,864.3 | $ | 2,565.0 | |||||||||||||||
Excise taxes | (386.7) | (355.7) | (209.2) | (193.9) | |||||||||||||||||||
Net sales | 5,018.3 | 4,397.6 | 2,655.1 | 2,371.1 | |||||||||||||||||||
Cost of product sold | (2,437.4) | (2,048.6) | (1,329.2) | (1,141.4) | |||||||||||||||||||
Gross profit | 2,580.9 | 2,349.0 | 1,325.9 | 1,229.7 | |||||||||||||||||||
Selling, general, and administrative expenses | (951.4) | (868.8) | (512.8) | (490.5) | |||||||||||||||||||
Impairment of brewery construction in progress | — | (665.9) | — | — | |||||||||||||||||||
Operating income (loss) | 1,629.5 | 814.3 | 813.1 | 739.2 | |||||||||||||||||||
Income (loss) from unconsolidated investments | (1,907.0) | (1,370.0) | (1,719.1) | (470.8) | |||||||||||||||||||
Interest expense | (182.8) | (182.5) | (94.3) | (95.8) | |||||||||||||||||||
Loss on extinguishment of debt | (23.3) | (29.4) | (8.0) | (29.4) | |||||||||||||||||||
Income (loss) before income taxes | (483.6) | (767.6) | (1,008.3) | 143.2 | |||||||||||||||||||
(Provision for) benefit from income taxes | (257.8) | (117.8) | (132.4) | (131.3) | |||||||||||||||||||
Net income (loss) | (741.4) | (885.4) | (1,140.7) | 11.9 | |||||||||||||||||||
Net (income) loss attributable to noncontrolling interests | (20.3) | (21.2) | (10.5) | (10.4) | |||||||||||||||||||
Net income (loss) attributable to CBI | $ | (761.7) | $ | (906.6) | $ | (1,151.2) | $ | 1.5 | |||||||||||||||
Comprehensive income (loss) | $ | (675.9) | $ | (838.6) | $ | (1,334.2) | $ | (45.8) | |||||||||||||||
Comprehensive (income) loss attributable to noncontrolling interests | (28.5) | (22.9) | (6.1) | (6.5) | |||||||||||||||||||
Comprehensive income (loss) attributable to CBI | $ | (704.4) | $ | (861.5) | $ | (1,340.3) | $ | (52.3) | |||||||||||||||
Net income (loss) per common share attributable to CBI: | |||||||||||||||||||||||
Basic – Class A Stock | $ | (4.13) | $ | (4.77) | $ | (6.30) | $ | 0.01 | |||||||||||||||
Basic – Class B Stock | $ | (3.77) | $ | (4.34) | $ | (5.73) | $ | 0.01 | |||||||||||||||
Diluted – Class A Stock | $ | (4.13) | $ | (4.77) | $ | (6.30) | $ | 0.01 | |||||||||||||||
Diluted – Class B Stock | $ | (3.77) | $ | (4.34) | $ | (5.73) | $ | 0.01 | |||||||||||||||
Weighted average common shares outstanding: | |||||||||||||||||||||||
Basic – Class A Stock | 163.532 | 169.025 | 161.730 | 167.447 | |||||||||||||||||||
Basic – Class B Stock | 23.206 | 23.234 | 23.206 | 23.222 | |||||||||||||||||||
Diluted – Class A Stock | 163.532 | 169.025 | 161.730 | 192.530 | |||||||||||||||||||
Diluted – Class B Stock | 23.206 | 23.234 | 23.206 | 23.222 | |||||||||||||||||||
Cash dividends declared per common share: | |||||||||||||||||||||||
Class A Stock | $ | 1.60 | $ | 1.52 | $ | 0.80 | $ | 0.76 | |||||||||||||||
Class B Stock | $ | 1.44 | $ | 1.38 | $ | 0.72 | $ | 0.69 |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 2 |
FINANCIAL STATEMENTS |
CONSTELLATION BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (in millions) (unaudited) | |||||||||||||||||||||||||||||||||||||||||||||||
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 28, 2022 | $ | 1.9 | $ | 0.3 | $ | 1,808.9 | $ | 14,505.4 | $ | (412.7) | $ | (4,171.9) | $ | 315.9 | $ | 12,047.8 | |||||||||||||||||||||||||||||||
Comprehensive income (loss): | |||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | 389.5 | — | — | 9.8 | 399.3 | |||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss), net of income tax effect | — | — | — | — | 246.4 | — | 12.6 | 259.0 | |||||||||||||||||||||||||||||||||||||||
Comprehensive income (loss) | 658.3 | ||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of shares | — | — | — | — | — | (1,007.6) | — | (1,007.6) | |||||||||||||||||||||||||||||||||||||||
Dividends declared | — | — | — | (148.7) | — | — | — | (148.7) | |||||||||||||||||||||||||||||||||||||||
Noncontrolling interest distributions | — | — | — | — | — | — | (11.2) | (11.2) | |||||||||||||||||||||||||||||||||||||||
Shares issued under equity compensation plans | — | — | (0.6) | — | — | 3.8 | — | 3.2 | |||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | 16.7 | — | — | — | — | 16.7 | |||||||||||||||||||||||||||||||||||||||
Balance at May 31, 2022 | 1.9 | 0.3 | 1,825.0 | 14,746.2 | (166.3) | (5,175.7) | 327.1 | 11,558.5 | |||||||||||||||||||||||||||||||||||||||
Comprehensive income (loss): | |||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | (1,151.2) | — | — | 10.5 | (1,140.7) | |||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss), net of income tax effect | — | — | — | — | (189.1) | — | (4.4) | (193.5) | |||||||||||||||||||||||||||||||||||||||
Comprehensive income (loss) | (1,334.2) | ||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of shares | — | — | — | — | — | (392.9) | — | (392.9) | |||||||||||||||||||||||||||||||||||||||
Dividends declared | — | — | — | (146.6) | — | — | — | (146.6) | |||||||||||||||||||||||||||||||||||||||
Noncontrolling interest distributions | — | — | — | — | — | — | (11.3) | (11.3) | |||||||||||||||||||||||||||||||||||||||
Shares issued under equity compensation plans | — | — | 14.5 | — | — | 2.0 | — | 16.5 | |||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | 20.9 | — | — | — | — | 20.9 | |||||||||||||||||||||||||||||||||||||||
Balance at August 31, 2022 | $ | 1.9 | $ | 0.3 | $ | 1,860.4 | $ | 13,448.4 | $ | (355.4) | $ | (5,566.6) | $ | 321.9 | $ | 9,710.9 | |||||||||||||||||||||||||||||||
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 3 |
FINANCIAL STATEMENTS |
CONSTELLATION BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (in millions) (unaudited) | |||||||||||||||||||||||||||||||||||||||||||||||
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 28, 2021 | $ | 1.9 | $ | 0.3 | $ | 1,604.2 | $ | 15,117.8 | $ | (335.5) | $ | (2,789.8) | $ | 330.2 | $ | 13,929.1 | |||||||||||||||||||||||||||||||
Comprehensive income (loss): | |||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | (908.1) | — | — | 10.8 | (897.3) | |||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss), net of income tax effect | — | — | — | — | 98.9 | — | 5.6 | 104.5 | |||||||||||||||||||||||||||||||||||||||
Comprehensive income (loss) | (792.8) | ||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of shares | — | — | — | — | — | (400.8) | — | (400.8) | |||||||||||||||||||||||||||||||||||||||
Dividends declared | — | — | — | (146.1) | — | — | — | (146.1) | |||||||||||||||||||||||||||||||||||||||
Noncontrolling interest distributions | — | — | — | — | — | — | (10.6) | (10.6) | |||||||||||||||||||||||||||||||||||||||
Shares issued under equity compensation plans | — | — | (0.9) | — | — | 3.8 | — | 2.9 | |||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | 15.9 | — | — | — | — | 15.9 | |||||||||||||||||||||||||||||||||||||||
Balance at May 31, 2021 | 1.9 | 0.3 | 1,619.2 | 14,063.6 | (236.6) | (3,186.8) | 336.0 | 12,597.6 | |||||||||||||||||||||||||||||||||||||||
Comprehensive income (loss): | |||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | 1.5 | — | — | 10.4 | 11.9 | |||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss), net of income tax effect | — | — | — | — | (53.8) | — | (3.9) | (57.7) | |||||||||||||||||||||||||||||||||||||||
Comprehensive income (loss) | (45.8) | ||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of shares | — | — | — | — | — | (904.2) | — | (904.2) | |||||||||||||||||||||||||||||||||||||||
Dividends declared | — | — | — | (142.9) | — | — | — | (142.9) | |||||||||||||||||||||||||||||||||||||||
Noncontrolling interest distributions | — | — | — | — | — | — | (10.6) | (10.6) | |||||||||||||||||||||||||||||||||||||||
Shares issued under equity compensation plans | — | — | 8.9 | — | — | 1.4 | — | 10.3 | |||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | 20.2 | — | — | — | — | 20.2 | |||||||||||||||||||||||||||||||||||||||
Balance at August 31, 2021 | $ | 1.9 | $ | 0.3 | $ | 1,648.3 | $ | 13,922.2 | $ | (290.4) | $ | (4,089.6) | $ | 331.9 | $ | 11,524.6 | |||||||||||||||||||||||||||||||
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 4 |
FINANCIAL STATEMENTS |
For the Six Months Ended August 31, | |||||||||||
2022 | 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 Canopy 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 Form 10-Q | #WORTHREACHINGFOR I 5 |
FINANCIAL STATEMENTS |
For the Six Months Ended August 31, | |||||||||||
2022 | 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 | |||||||
Supplemental disclosures of noncash investing and financing activities | |||||||||||
Additions to property, plant, and equipment | $ | 69.1 | $ | 196.5 |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 6 |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
August 31, 2022 | February 28, 2022 | ||||||||||
(in millions) | |||||||||||
Raw materials and supplies | $ | 225.0 | $ | 185.3 | |||||||
In-process inventories | 851.6 | 804.8 | |||||||||
Finished case goods | 574.4 | 583.1 | |||||||||
$ | 1,651.0 | $ | 1,573.2 |
For the Six Months Ended August 31, | For the Three Months Ended August 31, | ||||||||||||||||||||||
2022 | 2021 (1) | 2022 | 2021 (1) | ||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Loss on inventory write-down | $ | 11.2 | $ | 82.6 | $ | 5.1 | $ | 66.6 |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 7 |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
August 31, 2022 | February 28, 2022 | ||||||||||
(in millions) | |||||||||||
Derivative instruments designated as hedging instruments | |||||||||||
Foreign currency contracts | $ | 2,013.3 | $ | 1,863.2 | |||||||
Pre-issuance hedge contracts | $ | — | $ | 100.0 | |||||||
Derivative instruments not designated as hedging instruments | |||||||||||
Foreign currency contracts | $ | 720.5 | $ | 497.6 | |||||||
Commodity derivative contracts | $ | 328.9 | $ | 291.1 | |||||||
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 8 |
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, 2022 | ||||||||||||||||||||
Foreign currency contracts | $ | 71.3 | Sales | $ | (1.2) | |||||||||||||||
Cost of product sold | 21.9 | |||||||||||||||||||
Pre-issuance hedge contracts | 15.7 | Interest expense | (0.6) | |||||||||||||||||
$ | 87.0 | $ | 20.1 | |||||||||||||||||
For the Six Months Ended August 31, 2021 | ||||||||||||||||||||
Foreign currency contracts | $ | 11.7 | Sales | $ | (0.4) | |||||||||||||||
Cost of product sold | 21.6 | |||||||||||||||||||
Pre-issuance hedge contracts | — | Interest expense | (1.5) | |||||||||||||||||
$ | 11.7 | $ | 19.7 | |||||||||||||||||
For the Three Months Ended August 31, 2022 | ||||||||||||||||||||
Foreign currency contracts | $ | (8.2) | Sales | $ | (0.6) | |||||||||||||||
Cost of product sold | 10.8 | |||||||||||||||||||
Pre-issuance hedge contracts | — | Interest expense | (0.1) | |||||||||||||||||
$ | (8.2) | $ | 10.1 | |||||||||||||||||
For the Three Months Ended August 31, 2021 | ||||||||||||||||||||
Foreign currency contracts | $ | (7.6) | Sales | $ | (0.2) | |||||||||||||||
Cost of product sold | 12.6 | |||||||||||||||||||
Pre-issuance hedge contracts | — | Interest expense | (0.9) | |||||||||||||||||
$ | (7.6) | $ | 11.5 |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 9 |
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 Six Months Ended August 31, 2022 | ||||||||||||||||||||
Commodity derivative contracts | Cost of product sold | $ | 33.1 | |||||||||||||||||
Foreign currency contracts | Selling, general, and administrative expenses | (2.6) | ||||||||||||||||||
$ | 30.5 | |||||||||||||||||||
For the Six Months Ended August 31, 2021 | ||||||||||||||||||||
Commodity derivative contracts | Cost of product sold | $ | 48.1 | |||||||||||||||||
Foreign currency contracts | Selling, general, and administrative expenses | (8.4) | ||||||||||||||||||
$ | 39.7 | |||||||||||||||||||
For the Three Months Ended August 31, 2022 | ||||||||||||||||||||
Commodity derivative contracts | Cost of product sold | $ | (15.4) | |||||||||||||||||
Foreign currency contracts | Selling, general, and administrative expenses | (8.8) | ||||||||||||||||||
$ | (24.2) | |||||||||||||||||||
For the Three Months Ended August 31, 2021 | ||||||||||||||||||||
Commodity derivative contracts | Cost of product sold | $ | 24.0 | |||||||||||||||||
Foreign currency contracts | Selling, general, and administrative expenses | (6.2) | ||||||||||||||||||
$ | 17.8 |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 10 |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
August 31, 2022 | February 28, 2022 | ||||||||||||||||||||||
Tranche A Warrants (3) | Tranche B Warrants (4) | Tranche A Warrants (3) | Tranche B Warrants (4) | ||||||||||||||||||||
Exercise price (5) | C$ | 50.40 | C$ | 76.68 | C$ | 50.40 | C$ | 76.68 | |||||||||||||||
Valuation date stock price (6) | C$ | 4.86 | C$ | 4.86 | C$ | 9.04 | C$ | 9.04 | |||||||||||||||
Remaining contractual term (7) | 1.2 years | 4.2 years | 1.7 years | 4.7 years | |||||||||||||||||||
Expected volatility (8) | 100.0 | % | 100.0 | % | 75.0 | % | 75.0 | % | |||||||||||||||
Risk-free interest rate (9) | 3.8 | % | 3.3 | % | 1.4 | % | 1.7 | % | |||||||||||||||
Expected dividend yield (10) | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 11 |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
August 31, 2022 | February 28, 2022 | ||||||||||
Settlement price (1) | C$ | 48.17 | C$ | 48.17 | |||||||
Valuation date stock price (2) | C$ | 4.86 | C$ | 9.04 | |||||||
Remaining term (3) | 0.9 years | 1.4 years | |||||||||
Expected volatility (4) | 100.0 | % | 75.0 | % | |||||||
Risk-free interest rate (5) | 3.7 | % | 1.4 | % | |||||||
Expected dividend yield (6) | 0.0 | % | 0.0 | % |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 12 |
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, 2022 | |||||||||||||||||||||||
Assets: | |||||||||||||||||||||||
Foreign currency contracts | $ | — | $ | 125.4 | $ | — | $ | 125.4 | |||||||||||||||
Commodity derivative contracts | $ | — | $ | 86.4 | $ | — | $ | 86.4 | |||||||||||||||
November 2018 Canopy Warrants (1) | $ | — | $ | 12.8 | $ | — | $ | 12.8 | |||||||||||||||
Canopy Debt Securities (1) | $ | — | $ | 67.5 | $ | — | $ | 67.5 | |||||||||||||||
Liabilities: | |||||||||||||||||||||||
Foreign currency contracts | $ | — | $ | 29.8 | $ | — | $ | 29.8 | |||||||||||||||
Commodity derivative contracts | $ | — | $ | 19.9 | $ | — | $ | 19.9 | |||||||||||||||
February 28, 2022 | |||||||||||||||||||||||
Assets: | |||||||||||||||||||||||
Foreign currency contracts | $ | — | $ | 56.4 | $ | — | $ | 56.4 | |||||||||||||||
Commodity derivative contracts | $ | — | $ | 91.0 | $ | — | $ | 91.0 | |||||||||||||||
November 2018 Canopy Warrants (1) | $ | — | $ | 36.3 | $ | — | $ | 36.3 | |||||||||||||||
Canopy Debt Securities (1) | $ | — | $ | 146.6 | $ | — | $ | 146.6 | |||||||||||||||
Liabilities: | |||||||||||||||||||||||
Foreign currency contracts | $ | — | $ | 17.8 | $ | — | $ | 17.8 | |||||||||||||||
Commodity derivative contracts | $ | — | $ | 0.9 | $ | — | $ | 0.9 | |||||||||||||||
Pre-issuance hedge contracts | $ | — | $ | 0.4 | $ | — | $ | 0.4 |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 13 |
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, 2022 | |||||||||||||||||||||||
Equity method investments | $ | 634.8 | $ | — | $ | — | $ | 1,060.3 | |||||||||||||||
For the Six Months Ended August 31, 2021 | |||||||||||||||||||||||
Long-lived assets | $ | — | $ | — | $ | 20.0 | $ | 665.9 | |||||||||||||||
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 14 |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Beer | Wine and Spirits | Consolidated | |||||||||||||||
(in millions) | |||||||||||||||||
Balance, February 28, 2021 | $ | 5,125.6 | $ | 2,667.9 | $ | 7,793.5 | |||||||||||
Purchase accounting allocations (1) | — | 79.6 | 79.6 | ||||||||||||||
Foreign currency translation adjustments | (4.9) | (5.8) | (10.7) | ||||||||||||||
Balance, February 28, 2022 | 5,120.7 | 2,741.7 | 7,862.4 | ||||||||||||||
Purchase accounting allocations (2) | — | 26.1 | 26.1 | ||||||||||||||
Foreign currency translation adjustments | 18.4 | (8.3) | 10.1 | ||||||||||||||
Balance, August 31, 2022 | $ | 5,139.1 | $ | 2,759.5 | $ | 7,898.6 |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 15 |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
August 31, 2022 | February 28, 2022 | ||||||||||||||||||||||
Gross Carrying Amount | Net Carrying Amount | Gross Carrying Amount | Net Carrying Amount | ||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Amortizable intangible assets | |||||||||||||||||||||||
Customer relationships | $ | 87.1 | $ | 19.8 | $ | 87.1 | $ | 21.7 | |||||||||||||||
Other | 20.7 | — | 20.9 | — | |||||||||||||||||||
Total | $ | 107.8 | 19.8 | $ | 108.0 | 21.7 | |||||||||||||||||
Nonamortizable intangible assets | |||||||||||||||||||||||
Trademarks | 2,743.8 | 2,733.5 | |||||||||||||||||||||
Total intangible assets | $ | 2,763.6 | $ | 2,755.2 |
August 31, 2022 | February 28, 2022 | ||||||||||||||||||||||
Carrying Value | Ownership Percentage | Carrying Value | Ownership Percentage | ||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Canopy Equity Method Investment (1) (2) | $ | 634.8 | 34.1 | % | $ | 2,503.5 | 36.1 | % | |||||||||||||||
Other equity method investments | 198.6 | 20%-50% | 185.2 | 20%-50% | |||||||||||||||||||
$ | 833.4 | $ | 2,688.7 |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 16 |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
For the Six Months Ended August 31, | For the Three Months Ended August 31, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Equity in earnings (losses) from Canopy and related activities (1) | $ | (815.7) | $ | (35.3) | $ | (650.7) | $ | 120.5 |
For the Six Months Ended August 31, | For the Three Months Ended August 31, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Net sales | $ | 174.5 | $ | 228.1 | $ | 86.3 | $ | 110.8 | |||||||||||||||
Gross profit (loss) | $ | (126.8) | $ | 29.9 | $ | (1.1) | $ | 22.2 | |||||||||||||||
Net income (loss) | $ | (2,092.0) | $ | (169.7) | $ | (1,635.2) | $ | 317.4 | |||||||||||||||
Net income (loss) attributable to Canopy | $ | (2,085.4) | $ | (233.5) | $ | (1,631.7) | $ | 319.4 |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 17 |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
August 31, 2022 | February 28, 2022 | ||||||||||||||||||||||
Current | Long-term | Total | Total | ||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Short-term borrowings | |||||||||||||||||||||||
Commercial paper | $ | 663.9 | $ | 323.0 | |||||||||||||||||||
$ | 663.9 | $ | 323.0 | ||||||||||||||||||||
Long-term debt | |||||||||||||||||||||||
Term loan credit facilities | $ | — | $ | 300.0 | $ | 300.0 | $ | 300.0 | |||||||||||||||
Senior notes | — | 9,968.2 | 9,968.2 | 9,773.6 | |||||||||||||||||||
Other | 7.6 | 10.5 | 18.1 | 19.9 | |||||||||||||||||||
$ | 7.6 | $ | 10,278.7 | $ | 10,286.3 | $ | 10,093.5 |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 18 |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Amount | Maturity | ||||||||||
(in millions) | |||||||||||
2022 Credit Agreement | |||||||||||
Revolving credit facility (1) (2) | $ | 2,250.0 | Apr 14, 2027 | ||||||||
April 2022 Term Credit Agreement | |||||||||||
Five-Year Term Facility (1) (3) | $ | 491.3 | Jun 28, 2024 | ||||||||
August 2022 Term Credit Agreement | |||||||||||
Three-year term facility (1) (3) | $ | 1,000.0 | (4) |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 19 |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Date of | Redemption | |||||||||||||||||||||||||||||||
Principal | Maturity | Interest Payments | Stated Redemption Date | Stated Basis Points | ||||||||||||||||||||||||||||
(in millions, except basis points) | ||||||||||||||||||||||||||||||||
3.60% Senior Notes (1) | $ | 550.0 | May 2024 | May/Nov | (2) | 15 | ||||||||||||||||||||||||||
4.35% Senior Notes (1) (3) | $ | 600.0 | May 2027 | May/Nov | Apr 2027 | 25 | ||||||||||||||||||||||||||
4.75% Senior Notes (1) (3) | $ | 700.0 | May 2032 | May/Nov | Feb 2032 | 30 |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 20 |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(in millions) | |||||
Fiscal 2023 | $ | 4.4 | |||
Fiscal 2024 | 6.6 | ||||
Fiscal 2025 | 1,254.0 | ||||
Fiscal 2026 | 902.1 | ||||
Fiscal 2027 | 600.9 | ||||
Fiscal 2028 | 1,800.0 | ||||
Thereafter | 5,800.1 | ||||
$ | 10,368.1 |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 21 |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Common Stock | Treasury Stock | ||||||||||||||||||||||||||||
Class A | Class B | Class 1 | Class A | Class B (1) | |||||||||||||||||||||||||
Balance at February 28, 2022 | 187,263,859 | 28,212,340 | 2,248,679 | 22,824,607 | 5,005,800 | ||||||||||||||||||||||||
Share repurchases | — | — | — | 4,065,508 | — | ||||||||||||||||||||||||
Conversion of shares | 655 | (655) | — | — | — | ||||||||||||||||||||||||
Exercise of stock options | — | — | 35 | (108,228) | — | ||||||||||||||||||||||||
Vesting of restricted stock units (2) | — | — | — | (71,064) | — | ||||||||||||||||||||||||
Vesting of performance share units (2) | — | — | — | (16,326) | — | ||||||||||||||||||||||||
Balance at May 31, 2022 | 187,264,514 | 28,211,685 | 2,248,714 | 26,694,497 | 5,005,800 | ||||||||||||||||||||||||
Share repurchases | — | — | — | 1,652,445 | — | ||||||||||||||||||||||||
Conversion of shares | 2,196,749 | — | (2,196,749) | — | — | ||||||||||||||||||||||||
Exercise of stock options | — | — | — | (75,482) | — | ||||||||||||||||||||||||
Employee stock purchases | — | — | — | (27,514) | — | ||||||||||||||||||||||||
Vesting of restricted stock units (2) | — | — | — | (4,851) | — | ||||||||||||||||||||||||
Balance at August 31, 2022 | 189,461,263 | 28,211,685 | 51,965 | 28,239,095 | 5,005,800 | ||||||||||||||||||||||||
Balance at February 28, 2021 | 187,204,280 | 28,270,288 | 612,936 | 17,070,550 | 5,005,800 | ||||||||||||||||||||||||
Share repurchases | — | — | — | 1,696,722 | — | ||||||||||||||||||||||||
Conversion of shares | 43,441 | (42,810) | (631) | — | — | ||||||||||||||||||||||||
Exercise of stock options | — | — | 781 | (116,058) | — | ||||||||||||||||||||||||
Vesting of restricted stock units (2) | — | — | — | (66,157) | — | ||||||||||||||||||||||||
Vesting of performance share units (2) | — | — | — | (7,934) | — | ||||||||||||||||||||||||
Balance at May 31, 2021 | 187,247,721 | 28,227,478 | 613,086 | 18,577,123 | 5,005,800 | ||||||||||||||||||||||||
Share repurchases | — | — | — | 4,079,651 | — | ||||||||||||||||||||||||
Exercise of stock options | — | — | 1,267 | (34,736) | — | ||||||||||||||||||||||||
Employee stock purchases | — | — | — | (28,768) | — | ||||||||||||||||||||||||
Vesting of restricted stock units (2) | — | — | — | (5,256) | — | ||||||||||||||||||||||||
Balance at August 31, 2021 | 187,247,721 | 28,227,478 | 614,353 | 22,588,014 | 5,005,800 | ||||||||||||||||||||||||
For the Three Months Ended May 31, | For the Three Months Ended August 31, | For the Six Months Ended August 31, | |||||||||||||||
2022 | |||||||||||||||||
Restricted Stock Units | 37,308 | 186 | 37,494 | ||||||||||||||
Performance Share Units | 4,919 | — | 4,919 | ||||||||||||||
2021 | |||||||||||||||||
Restricted Stock Units | 36,048 | 165 | 36,213 | ||||||||||||||
Performance Share Units | 4,565 | — | 4,565 |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 22 |
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 | $ | 3,000.0 | 13,331,156 | ||||||||||||
2021 Authorization | $ | 2,000.0 | $ | 836.9 | 3,463,417 |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 23 |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
For the Six Months Ended | |||||||||||||||||||||||
August 31, 2022 | August 31, 2021 | ||||||||||||||||||||||
Class A Stock | Class B Stock | Class A Stock | Class B Stock | ||||||||||||||||||||
(in millions, except per share data) | |||||||||||||||||||||||
Net income (loss) attributable to CBI allocated – basic | $ | (674.2) | $ | (87.5) | $ | (805.8) | $ | (100.8) | |||||||||||||||
Conversion of Class B common shares into Class A common shares | — | — | — | — | |||||||||||||||||||
Effect of stock-based awards on allocated net income (loss) | — | — | — | — | |||||||||||||||||||
Net income (loss) attributable to CBI allocated – diluted | $ | (674.2) | $ | (87.5) | $ | (805.8) | $ | (100.8) | |||||||||||||||
Weighted average common shares outstanding – basic | 163.532 | 23.206 | 169.025 | 23.234 | |||||||||||||||||||
Conversion of Class B common shares into Class A common shares (1) | — | — | — | — | |||||||||||||||||||
Stock-based awards, primarily stock options (1) | — | — | — | — | |||||||||||||||||||
Weighted average common shares outstanding – diluted | 163.532 | 23.206 | 169.025 | 23.234 | |||||||||||||||||||
Net income (loss) per common share attributable to CBI – basic | $ | (4.13) | $ | (3.77) | $ | (4.77) | $ | (4.34) | |||||||||||||||
Net income (loss) per common share attributable to CBI – diluted | $ | (4.13) | $ | (3.77) | $ | (4.77) | $ | (4.34) | |||||||||||||||
For the Three Months Ended | |||||||||||||||||||||||
August 31, 2022 | August 31, 2021 | ||||||||||||||||||||||
Class A Stock | Class B Stock | Class A Stock | Class B Stock | ||||||||||||||||||||
(in millions, except per share data) | |||||||||||||||||||||||
Net income (loss) attributable to CBI allocated – basic | $ | (1,018.2) | $ | (133.0) | $ | 1.3 | $ | 0.2 | |||||||||||||||
Conversion of Class B common shares into Class A common shares | — | — | 0.2 | — | |||||||||||||||||||
Effect of stock-based awards on allocated net income (loss) | — | — | — | — | |||||||||||||||||||
Net income (loss) attributable to CBI allocated – diluted | $ | (1,018.2) | $ | (133.0) | $ | 1.5 | $ | 0.2 | |||||||||||||||
Weighted average common shares outstanding – basic | 161.730 | 23.206 | 167.447 | 23.222 | |||||||||||||||||||
Conversion of Class B common shares into Class A common shares (1) | — | — | 23.222 | — | |||||||||||||||||||
Stock-based awards, primarily stock options (1) | — | — | 1.861 | — | |||||||||||||||||||
Weighted average common shares outstanding – diluted | 161.730 | 23.206 | 192.530 | 23.222 | |||||||||||||||||||
Net income (loss) per common share attributable to CBI – basic | $ | (6.30) | $ | (5.73) | $ | 0.01 | $ | 0.01 | |||||||||||||||
Net income (loss) per common share attributable to CBI – diluted | $ | (6.30) | $ | (5.73) | $ | 0.01 | $ | 0.01 |
Before Tax Amount | Tax (Expense) Benefit | Net of Tax Amount | |||||||||||||||
(in millions) | |||||||||||||||||
For the Six Months Ended August 31, 2022 | |||||||||||||||||
Net income (loss) attributable to CBI | $ | (761.7) | |||||||||||||||
Other comprehensive income (loss) attributable to CBI: | |||||||||||||||||
Foreign currency translation adjustments: | |||||||||||||||||
Net gain (loss) | $ | (11.1) | $ | — | (11.1) | ||||||||||||
Amounts reclassified | — | — | — | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | (11.1) | — | (11.1) | ||||||||||||||
Unrealized gain (loss) on cash flow hedges: | |||||||||||||||||
Net derivative gain (loss) | 95.7 | (13.1) | 82.6 | ||||||||||||||
Amounts reclassified | (20.3) | 1.9 | (18.4) | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | 75.4 | (11.2) | 64.2 | ||||||||||||||
Pension/postretirement adjustments: | |||||||||||||||||
Net actuarial gain (loss) | (0.2) | 0.1 | (0.1) | ||||||||||||||
Amounts reclassified | — | — | — | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | (0.2) | 0.1 | (0.1) | ||||||||||||||
Share of OCI of equity method investments | |||||||||||||||||
Net gain (loss) | 0.9 | 3.4 | 4.3 | ||||||||||||||
Amounts reclassified | — | — | — | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | 0.9 | 3.4 | 4.3 | ||||||||||||||
Other comprehensive income (loss) attributable to CBI | $ | 65.0 | $ | (7.7) | 57.3 | ||||||||||||
Comprehensive income (loss) attributable to CBI | $ | (704.4) | |||||||||||||||
For the Six Months Ended August 31, 2021 | |||||||||||||||||
Net income (loss) attributable to CBI | $ | (906.6) | |||||||||||||||
Other comprehensive income (loss) attributable to CBI: | |||||||||||||||||
Foreign currency translation adjustments: | |||||||||||||||||
Net gain (loss) | $ | 73.0 | $ | — | 73.0 | ||||||||||||
Amounts reclassified | — | — | — | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | 73.0 | — | 73.0 |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 24 |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Before Tax Amount | Tax (Expense) Benefit | Net of Tax Amount | |||||||||||||||
(in millions) | |||||||||||||||||
Unrealized gain (loss) on cash flow hedges: | |||||||||||||||||
Net derivative gain (loss) | 19.3 | (8.5) | 10.8 | ||||||||||||||
Amounts reclassified | (20.1) | 1.7 | (18.4) | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | (0.8) | (6.8) | (7.6) | ||||||||||||||
Pension/postretirement adjustments: | |||||||||||||||||
Net actuarial gain (loss) | (0.1) | — | (0.1) | ||||||||||||||
Amounts reclassified | — | — | — | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | (0.1) | — | (0.1) | ||||||||||||||
Share of OCI of equity method investments | |||||||||||||||||
Net gain (loss) | (26.1) | 5.9 | (20.2) | ||||||||||||||
Amounts reclassified | — | — | — | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | (26.1) | 5.9 | (20.2) | ||||||||||||||
Other comprehensive income (loss) attributable to CBI | $ | 46.0 | $ | (0.9) | 45.1 | ||||||||||||
Comprehensive income (loss) attributable to CBI | $ | (861.5) | |||||||||||||||
For the Three Months Ended August 31, 2022 | |||||||||||||||||
Net income (loss) attributable to CBI | $ | (1,151.2) | |||||||||||||||
Other comprehensive income (loss) attributable to CBI: | |||||||||||||||||
Foreign currency translation adjustments: | |||||||||||||||||
Net gain (loss) | $ | (181.4) | $ | — | (181.4) | ||||||||||||
Amounts reclassified | — | — | — | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | (181.4) | — | (181.4) | ||||||||||||||
Unrealized gain (loss) on cash flow hedges: | |||||||||||||||||
Net derivative gain (loss) | (9.8) | 1.7 | (8.1) | ||||||||||||||
Amounts reclassified | (10.3) | 1.0 | (9.3) | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | (20.1) | 2.7 | (17.4) | ||||||||||||||
Pension/postretirement adjustments: | |||||||||||||||||
Net actuarial gain (loss) | 0.1 | 0.1 | 0.2 | ||||||||||||||
Amounts reclassified | — | — | — | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | 0.1 | 0.1 | 0.2 | ||||||||||||||
Share of OCI of equity method investments | |||||||||||||||||
Net gain (loss) | 9.9 | (0.4) | 9.5 | ||||||||||||||
Amounts reclassified | — | — | — | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | 9.9 | (0.4) | 9.5 | ||||||||||||||
Other comprehensive income (loss) attributable to CBI | $ | (191.5) | $ | 2.4 | (189.1) | ||||||||||||
Comprehensive income (loss) attributable to CBI | $ | (1,340.3) | |||||||||||||||
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 25 |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Before Tax Amount | Tax (Expense) Benefit | Net of Tax Amount | |||||||||||||||
(in millions) | |||||||||||||||||
For the Three Months Ended August 31, 2021 | |||||||||||||||||
Net income (loss) attributable to CBI | $ | 1.5 | |||||||||||||||
Other comprehensive income (loss) attributable to CBI: | |||||||||||||||||
Foreign currency translation adjustments: | |||||||||||||||||
Net gain (loss) | $ | (30.0) | $ | — | (30.0) | ||||||||||||
Amounts reclassified | — | — | — | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | (30.0) | — | (30.0) | ||||||||||||||
Unrealized gain (loss) on cash flow hedges: | |||||||||||||||||
Net derivative gain (loss) | (8.2) | 1.3 | (6.9) | ||||||||||||||
Amounts reclassified | (12.3) | 1.5 | (10.8) | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | (20.5) | 2.8 | (17.7) | ||||||||||||||
Pension/postretirement adjustments: | |||||||||||||||||
Net actuarial gain (loss) | 0.1 | — | 0.1 | ||||||||||||||
Amounts reclassified | — | — | — | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | 0.1 | — | 0.1 | ||||||||||||||
Share of OCI of equity method investments | |||||||||||||||||
Net gain (loss) | (8.0) | 1.8 | (6.2) | ||||||||||||||
Amounts reclassified | — | — | — | ||||||||||||||
Net gain (loss) recognized in other comprehensive income (loss) | (8.0) | 1.8 | (6.2) | ||||||||||||||
Other comprehensive income (loss) attributable to CBI | $ | (58.4) | $ | 4.6 | (53.8) | ||||||||||||
Comprehensive income (loss) attributable to CBI | $ | (52.3) |
Foreign Currency Translation Adjustments | Unrealized Net Gain (Loss) on Derivative Instruments | Pension/ Postretirement Adjustments | Share of OCI of Equity Method Investments | AOCI | |||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||
Balance, February 28, 2022 | $ | (431.4) | $ | 17.5 | $ | (4.0) | $ | 5.2 | $ | (412.7) | |||||||||||||||||||
OCI: | |||||||||||||||||||||||||||||
OCI before reclassification adjustments | (11.1) | 82.6 | (0.1) | 4.3 | 75.7 | ||||||||||||||||||||||||
Amounts reclassified from AOCI | — | (18.4) | — | — | (18.4) | ||||||||||||||||||||||||
OCI | (11.1) | 64.2 | (0.1) | 4.3 | 57.3 | ||||||||||||||||||||||||
Balance, August 31, 2022 | $ | (442.5) | $ | 81.7 | $ | (4.1) | $ | 9.5 | $ | (355.4) |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 26 |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
For the Six Months Ended August 31, | For the Three Months Ended August 31, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Cost of product sold | |||||||||||||||||||||||
Settlements of undesignated commodity derivative contracts | $ | (54.6) | $ | (12.3) | $ | (31.3) | $ | (8.9) | |||||||||||||||
Flow through of inventory step-up | (1.9) | 0.1 | (0.9) | 0.1 | |||||||||||||||||||
Net gain (loss) on undesignated commodity derivative contracts | 33.1 | 48.1 | (15.4) | 24.0 | |||||||||||||||||||
Net flow through of reserved inventory | 1.2 | — | 1.2 | — | |||||||||||||||||||
Recovery of inventory write-down | 0.2 | — | — | — | |||||||||||||||||||
Strategic business development costs | — | (2.6) | — | — | |||||||||||||||||||
Total cost of product sold | (22.0) | 33.3 | (46.4) | 15.2 | |||||||||||||||||||
Selling, general, and administrative expenses | |||||||||||||||||||||||
Costs associated with the Reclassification | (21.3) | — | (20.6) | — | |||||||||||||||||||
Transition services agreements activity | (7.9) | (7.2) | (4.5) | (4.9) | |||||||||||||||||||
Restructuring and other strategic business development costs | (2.6) | (0.1) | (1.2) | 0.8 | |||||||||||||||||||
Transaction, integration, and other acquisition-related costs | (0.7) | — | (0.5) | — | |||||||||||||||||||
Other gains (losses) (1) | 8.8 | 1.1 | 3.6 | (2.2) | |||||||||||||||||||
Total selling, general, and administrative expenses | (23.7) | (6.2) | (23.2) | (6.3) | |||||||||||||||||||
Impairment of brewery construction in progress | — | (665.9) | — | — | |||||||||||||||||||
Comparable Adjustments, Operating income (loss) | $ | (45.7) | $ | (638.8) | $ | (69.6) | $ | 8.9 |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 27 |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
(1) | Primarily includes the following: | |||||||||||||||||||||||||
For the Six Months Ended August 31, | For the Three Months Ended August 31, | |||||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||
Gain from remeasurement of previously held equity method investment | $ | 5.2 | $ | — | $ | — | $ | — | ||||||||||||||||||
Decrease in estimated fair value of a contingent liability associated with a prior period acquisition | $ | 4.4 | $ | — | $ | 4.4 | $ | — |
For the Six Months Ended August 31, | For the Three Months Ended August 31, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Beer | |||||||||||||||||||||||
Net sales | $ | 4,037.5 | $ | 3,433.3 | $ | 2,139.3 | $ | 1,861.3 | |||||||||||||||
Segment operating income (loss) | $ | 1,628.4 | $ | 1,366.1 | $ | 865.6 | $ | 693.0 | |||||||||||||||
Capital expenditures | $ | 357.8 | $ | 295.8 | $ | 196.0 | $ | 210.0 | |||||||||||||||
Depreciation and amortization | $ | 135.2 | $ | 118.5 | $ | 67.0 | $ | 64.5 | |||||||||||||||
Wine and Spirits | |||||||||||||||||||||||
Net sales: | |||||||||||||||||||||||
Wine | $ | 846.1 | $ | 844.9 | $ | 442.0 | $ | 447.2 | |||||||||||||||
Spirits | 134.7 | 119.4 | 73.8 | 62.6 | |||||||||||||||||||
Net sales | $ | 980.8 | $ | 964.3 | $ | 515.8 | $ | 509.8 | |||||||||||||||
Segment operating income (loss) | $ | 190.4 | $ | 204.4 | $ | 99.4 | $ | 100.2 | |||||||||||||||
Income (loss) from unconsolidated investments | $ | 4.9 | $ | 0.2 | $ | 3.4 | $ | (1.1) | |||||||||||||||
Equity method investments | $ | 100.5 | $ | 126.7 | $ | 100.5 | $ | 126.7 | |||||||||||||||
Capital expenditures | $ | 51.6 | $ | 54.0 | $ | 21.8 | $ | 28.3 | |||||||||||||||
Depreciation and amortization | $ | 43.3 | $ | 39.6 | $ | 21.0 | $ | 19.7 | |||||||||||||||
Corporate Operations and Other | |||||||||||||||||||||||
Segment operating income (loss) | $ | (143.6) | $ | (117.4) | $ | (82.3) | $ | (62.9) | |||||||||||||||
Income (loss) from unconsolidated investments | $ | (4.3) | $ | (0.8) | $ | (2.3) | $ | (0.2) | |||||||||||||||
Equity method investments | $ | 98.1 | $ | 112.1 | $ | 98.1 | $ | 112.1 | |||||||||||||||
Capital expenditures | $ | 25.6 | $ | 3.6 | $ | 20.6 | $ | 1.2 | |||||||||||||||
Depreciation and amortization | $ | 6.9 | $ | 6.5 | $ | 3.7 | $ | 3.2 | |||||||||||||||
Canopy | |||||||||||||||||||||||
Net sales | $ | 174.5 | $ | 228.1 | $ | 86.3 | $ | 110.8 | |||||||||||||||
Segment operating income (loss) | $ | (1,858.0) | $ | (337.0) | $ | (1,439.8) | $ | (152.8) | |||||||||||||||
Capital expenditures | $ | 1.8 | $ | 37.5 | $ | 1.7 | $ | 16.5 | |||||||||||||||
Depreciation and amortization | $ | 41.2 | $ | 43.3 | $ | 17.1 | $ | 20.4 | |||||||||||||||
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 28 |
FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
For the Six Months Ended August 31, | For the Three Months Ended August 31, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Consolidation and Eliminations | |||||||||||||||||||||||
Net sales | $ | (174.5) | $ | (228.1) | $ | (86.3) | $ | (110.8) | |||||||||||||||
Operating income (loss) | $ | 1,858.0 | $ | 337.0 | $ | 1,439.8 | $ | 152.8 | |||||||||||||||
Income (loss) from unconsolidated investments | $ | (86.7) | $ | (74.2) | $ | (34.7) | $ | (29.9) | |||||||||||||||
Equity method investments | $ | 634.8 | $ | 2,580.2 | $ | 634.8 | $ | 2,580.2 | |||||||||||||||
Capital expenditures | $ | (1.8) | $ | (37.5) | $ | (1.7) | $ | (16.5) | |||||||||||||||
Depreciation and amortization | $ | (41.2) | $ | (43.3) | $ | (17.1) | $ | (20.4) | |||||||||||||||
Comparable Adjustments | |||||||||||||||||||||||
Operating income (loss) | $ | (45.7) | $ | (638.8) | $ | (69.6) | $ | 8.9 | |||||||||||||||
Income (loss) from unconsolidated investments | $ | (1,820.9) | $ | (1,295.2) | $ | (1,685.5) | $ | (439.6) | |||||||||||||||
Consolidated | |||||||||||||||||||||||
Net sales | $ | 5,018.3 | $ | 4,397.6 | $ | 2,655.1 | $ | 2,371.1 | |||||||||||||||
Operating income (loss) | $ | 1,629.5 | $ | 814.3 | $ | 813.1 | $ | 739.2 | |||||||||||||||
Income (loss) from unconsolidated investments (1) | $ | (1,907.0) | $ | (1,370.0) | $ | (1,719.1) | $ | (470.8) | |||||||||||||||
Equity method investments | $ | 833.4 | $ | 2,819.0 | $ | 833.4 | $ | 2,819.0 | |||||||||||||||
Capital expenditures | $ | 435.0 | $ | 353.4 | $ | 238.4 | $ | 239.5 | |||||||||||||||
Depreciation and amortization | $ | 185.4 | $ | 164.6 | $ | 91.7 | $ | 87.4 | |||||||||||||||
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 29 |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 30 |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 31 |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 32 |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 33 |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 34 |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 35 |
Second Quarter 2023 | Second Quarter 2022 | Six Months 2023 | Six Months 2022 | ||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Cost of product sold | |||||||||||||||||||||||
Settlements of undesignated commodity derivative contracts | $ | (31.3) | $ | (8.9) | $ | (54.6) | $ | (12.3) | |||||||||||||||
Net gain (loss) on undesignated commodity derivative contracts | (15.4) | 24.0 | 33.1 | 48.1 | |||||||||||||||||||
Flow through of inventory step-up | (0.9) | 0.1 | (1.9) | 0.1 | |||||||||||||||||||
Net flow through of reserved inventory | 1.2 | — | 1.2 | — | |||||||||||||||||||
Recovery of inventory write-down | — | — | 0.2 | — | |||||||||||||||||||
Strategic business development costs | — | — | — | (2.6) | |||||||||||||||||||
Total cost of product sold | (46.4) | 15.2 | (22.0) | 33.3 | |||||||||||||||||||
Selling, general, and administrative expenses | |||||||||||||||||||||||
Costs associated with the Reclassification | (20.6) | — | (21.3) | — | |||||||||||||||||||
Transition services agreements activity | (4.5) | (4.9) | (7.9) | (7.2) | |||||||||||||||||||
Restructuring and other strategic business development costs | (1.2) | 0.8 | (2.6) | (0.1) | |||||||||||||||||||
Transaction, integration, and other acquisition-related costs | (0.5) | — | (0.7) | — | |||||||||||||||||||
Other gains (losses) | 3.6 | (2.2) | 8.8 | 1.1 | |||||||||||||||||||
Total selling, general, and administrative expenses | (23.2) | (6.3) | (23.7) | (6.2) | |||||||||||||||||||
Impairment of brewery construction in progress | — | — | — | (665.9) | |||||||||||||||||||
Comparable Adjustments, Operating income (loss) | $ | (69.6) | $ | 8.9 | $ | (45.7) | $ | (638.8) | |||||||||||||||
Income (loss) from unconsolidated investments | $ | (1,685.5) | $ | (439.6) | $ | (1,820.9) | $ | (1,295.2) |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 36 |
Second Quarter 2023 | Second Quarter 2022 | Dollar Change | Percent Change | ||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Beer | $ | 2,139.3 | $ | 1,861.3 | $ | 278.0 | 15 | % | |||||||||||||||
Wine and Spirits: | |||||||||||||||||||||||
Wine | 442.0 | 447.2 | (5.2) | (1 | %) | ||||||||||||||||||
Spirits | 73.8 | 62.6 | 11.2 | 18 | % | ||||||||||||||||||
Total Wine and Spirits | 515.8 | 509.8 | 6.0 | 1 | % | ||||||||||||||||||
Canopy | 86.3 | 110.8 | (24.5) | (22 | %) | ||||||||||||||||||
Consolidation and eliminations | (86.3) | (110.8) | 24.5 | 22 | % | ||||||||||||||||||
Consolidated net sales | $ | 2,655.1 | $ | 2,371.1 | $ | 284.0 | 12 | % |
![]() | Beer segment | Second Quarter 2023 | Second Quarter 2022 | Dollar Change | Percent Change | |||||||||||||||||||||
(in millions, branded product, 24-pack, 12-ounce case equivalents) | ||||||||||||||||||||||||||
Net sales | $ | 2,139.3 | $ | 1,861.3 | $ | 278.0 | 15 | % | ||||||||||||||||||
Shipments | 113.2 | 101.0 | 12.1 | % | ||||||||||||||||||||||
Depletions | 8.9 | % |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 37 |
![]() | Wine and Spirits segment | Second Quarter 2023 | Second Quarter 2022 | Dollar Change | Percent Change | |||||||||||||||||||||
(in millions, branded product, 9-liter case equivalents) | ||||||||||||||||||||||||||
Net sales | $ | 515.8 | $ | 509.8 | $ | 6.0 | 1 | % | ||||||||||||||||||
Shipments | ||||||||||||||||||||||||||
Total | 7.4 | 7.4 | — | % | ||||||||||||||||||||||
U.S. Domestic | 6.4 | 6.3 | 1.6 | % | ||||||||||||||||||||||
Depletions | (2.2 | %) | ||||||||||||||||||||||||
![]() | 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. Accordingly, we recognized our share of Canopy’s earnings (losses) for the periods (i) April through June 2022, in our Second Quarter 2023 results, (ii) April through June 2021, in our Second Quarter 2022, (iii) January through June 2022, in our Six Months 2023 results, and (iv) January through June 2021, in our Six Months 2022 results. Although we own less than 100% of the outstanding shares of Canopy, 100% of its results are included and subsequently eliminated 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). This discussion is based on information Canopy has publicly disclosed. |
Second Quarter 2023 | Second Quarter 2022 | Dollar Change | Percent Change | ||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Beer | $ | 1,147.6 | $ | 984.0 | $ | 163.6 | 17 | % | |||||||||||||||
Wine and Spirits | 224.7 | 230.5 | (5.8) | (3 | %) | ||||||||||||||||||
Canopy | (1.1) | 22.2 | (23.3) | (105 | %) | ||||||||||||||||||
Consolidation and eliminations | 1.1 | (22.2) | 23.3 | 105 | % | ||||||||||||||||||
Comparable Adjustments | (46.4) | 15.2 | (61.6) | NM | |||||||||||||||||||
Consolidated gross profit | $ | 1,325.9 | $ | 1,229.7 | $ | 96.2 | 8 | % |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 38 |
![]() | The increase in Beer is primarily due to $120.5 million of shipment volume growth and the $67.5 million favorable impact from pricing, partially offset by $19.1 million of unfavorable product mix and $7.0 million of higher cost of product sold. The higher cost of product sold is largely due to (i) $62.6 million of higher material costs, including aluminum, glass, cartons, pallets, malt, steel, and corn, driven by inflation and global supply chain constraints, (ii) a $6.5 million increase in brewery costs primarily driven by increased maintenance, utilities, and administrative costs, and (iii) $4.8 million of increased transportation costs, largely offset by (i) $62.9 million of decreased obsolescence primarily from excess inventory of hard seltzers resulting from a slowdown in the overall category in Fiscal 2022 and (ii) $4.4 million of favorable fixed cost absorption related to increased production levels as compared to Second Quarter 2022. |
![]() | The decrease in Wine and Spirits gross profit is primarily due to $20.5 million of higher cost of product sold, driven by global supply chain constraints and inflation, partially offset by (i) $13.1 million of higher non-branded gross profit and (ii) the $1.8 million favorable impact from pricing. The increase in cost of product sold was largely attributable to (i) increased transportation and warehousing costs, including ocean freight shipping, and (ii) higher material costs, including grapes and glass, partially offset by favorable fixed cost absorption as a result of the Second Quarter 2022 impact of a late frost in New Zealand and the 2020 U.S. wildfires. |
Second Quarter 2023 | Second Quarter 2022 | Dollar Change | Percent Change | ||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Beer | $ | 282.0 | $ | 291.0 | $ | (9.0) | (3 | %) | |||||||||||||||
Wine and Spirits | 125.3 | 130.3 | (5.0) | (4 | %) | ||||||||||||||||||
Corporate Operations and Other | 82.3 | 62.9 | 19.4 | 31 | % | ||||||||||||||||||
Canopy | 1,438.7 | 175.0 | 1,263.7 | NM | |||||||||||||||||||
Consolidation and eliminations | (1,438.7) | (175.0) | (1,263.7) | NM | |||||||||||||||||||
Comparable Adjustments | 23.2 | 6.3 | 16.9 | NM | |||||||||||||||||||
Consolidated selling, general, and administrative expenses | $ | 512.8 | $ | 490.5 | $ | 22.3 | 5 | % |
![]() | The decrease in Beer is driven by $9.5 million of decreased marketing spend due largely to a timing shift for media to the second half of Fiscal 2023, partially offset by planned event sponsorships to support the growth of our Mexican beer portfolio. We expect marketing spend to range from 9% to 10% of net sales for Fiscal 2023. General and administrative expenses remained flat as decreased legal expenses were offset by (i) higher compensation and benefits, primarily related to incremental headcount to support the growth of our Mexican beer portfolio, (ii) unfavorable foreign currency transaction losses, and (iii) higher travel as compared to Second Quarter 2022. |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 39 |
![]() | The decrease in Wine and Spirits is primarily due to an $8.2 million decrease in marketing spend, driven by timing, partially offset by $4.3 million of increased general and administrative expenses. The increase in general and administrative expenses was largely driven by compensation and benefits, primarily related to higher headcount as compared to Second Quarter 2022, expenses associated with an initiative to improve our marketing effectiveness, and higher travel as compared to Second Quarter 2022, partially offset by favorable foreign currency impact. We expect marketing spend to range from 9% to 10% of net sales for Fiscal 2023. |
![]() | The increase in Corporate Operations and Other is primarily due to approximately (i) a $16 million increase in third-party services, driven by Digital Business Acceleration investments, and (ii) a $3 million increase in compensation and benefits as compared to Second Quarter 2022. |
Second Quarter 2023 | Second Quarter 2022 | Dollar Change | Percent Change | ||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Beer | $ | 865.6 | $ | 693.0 | $ | 172.6 | 25 | % | |||||||||||||||
Wine and Spirits | 99.4 | 100.2 | (0.8) | (1 | %) | ||||||||||||||||||
Corporate Operations and Other | (82.3) | (62.9) | (19.4) | (31 | %) | ||||||||||||||||||
Canopy | (1,439.8) | (152.8) | (1,287.0) | NM | |||||||||||||||||||
Consolidation and eliminations | 1,439.8 | 152.8 | 1,287.0 | NM | |||||||||||||||||||
Comparable Adjustments | (69.6) | 8.9 | (78.5) | NM | |||||||||||||||||||
Consolidated operating income (loss) | $ | 813.1 | $ | 739.2 | $ | 73.9 | 10 | % |
![]() | The increase in Beer is largely attributable to the strong shipment volume growth within our Mexican beer portfolio, favorable pricing impact, and decreased obsolescence, partially offset by the higher operational costs, as described above, and the unfavorable product mix shift. |
![]() | The decrease in Wine and Spirits is largely attributable to the increase in cost of product sold, driven by global supply chain constraints and inflation, and increased general and administrative expenses, as described above, largely offset by higher non-branded net sales, the lower marketing spend, and favorable impact from pricing. |
![]() | As previously discussed, the Corporate Operations and Other increase in operating loss is largely due to the Second Quarter 2023 Digital Business Acceleration investments and increased compensation and benefits. |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 40 |
Second Quarter 2023 | Second Quarter 2022 | Dollar Change | Percent Change | ||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Impairment of Canopy Equity Method Investment | $ | (1,060.3) | $ | — | $ | (1,060.3) | NM | ||||||||||||||||
Unrealized net gain (loss) on securities measured at fair value | (9.3) | (590.0) | 580.7 | 98 | % | ||||||||||||||||||
Equity in earnings (losses) from Canopy and related activities (1) | (650.7) | 120.5 | (771.2) | NM | |||||||||||||||||||
Equity in earnings (losses) from other equity method investees | 1.2 | (1.3) | 2.5 | NM | |||||||||||||||||||
$ | (1,719.1) | $ | (470.8) | $ | (1,248.3) | NM |
![]() | Canopy segment Canopy net sales decreased to $86.3 million for Second Quarter 2023 from $110.8 million for Second Quarter 2022. This decrease of $24.5 million, or 22%, is largely attributable to lower global cannabis sales. The decline in global cannabis sales primarily resulted from (i) a decrease in Canadian recreational cannabis sales, largely driven by continuing impacts of price compression resulting from increased competition and Canopy’s strategic decision to shift their focus to higher-margin, premium and mainstream products and (ii) a decrease in medicinal sales driven by the January 2022 divestiture of C3, an international pharmaceutical business. These declines were partially offset by Canadian THC recreational sales driven by Canopy’s Fiscal 2022 acquisition of Supreme Cannabis Company, Inc. Additionally, other consumer products sales in Second Quarter 2023 as compared to Second Quarter 2022 were flat, as growth in their BioSteel Sports Nutrition Inc. business was largely offset by declines in their Storz & Bickel GmbH & Co. KG and This Works Products Limited businesses. Canopy gross profit (loss) decreased to $(1.1) million for Second Quarter 2023 from $22.2 million for Second Quarter 2022. This decrease of $23.3 million is primarily driven by (i) decreased net sales, (ii) price compression and unfavorable cost absorption in the Canadian recreational channel, (iii) unfavorable product mix shift, and (iv) a decrease in payroll subsidies received from the Canadian government in Second Quarter 2022 pursuant to a COVID-19 relief program. Canopy selling, general, and administrative expenses increased $1,263.7 million driven by a goodwill impairment related to their cannabis operations. The combination of these factors were the main contributors to the increase in operating loss of $1,287.0 million. |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 41 |
Six Months 2023 | Six Months 2022 | Dollar Change | Percent Change | ||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Beer | $ | 4,037.5 | $ | 3,433.3 | $ | 604.2 | 18 | % | |||||||||||||||
Wine and Spirits: | |||||||||||||||||||||||
Wine | 846.1 | 844.9 | 1.2 | — | % | ||||||||||||||||||
Spirits | 134.7 | 119.4 | 15.3 | 13 | % | ||||||||||||||||||
Total Wine and Spirits | 980.8 | 964.3 | 16.5 | 2 | % | ||||||||||||||||||
Canopy | 174.5 | 228.1 | (53.6) | (23 | %) | ||||||||||||||||||
Consolidation and eliminations | (174.5) | (228.1) | 53.6 | 23 | % | ||||||||||||||||||
Consolidated net sales | $ | 5,018.3 | $ | 4,397.6 | $ | 620.7 | 14 | % |
![]() | Beer segment | Six Months 2023 | Six Months 2022 | Dollar Change | Percent Change | |||||||||||||||||||||
(in millions, branded product, 24-pack, 12-ounce case equivalents) | ||||||||||||||||||||||||||
Net sales | $ | 4,037.5 | $ | 3,433.3 | $ | 604.2 | 18 | % | ||||||||||||||||||
Shipments | 212.7 | 185.8 | 14.5 | % | ||||||||||||||||||||||
Depletions | 8.8 | % |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 42 |
![]() | Wine and Spirits segment | Six Months 2023 | Six Months 2022 | Dollar Change | Percent Change | |||||||||||||||||||||
(in millions, branded product, 9-liter case equivalents) | ||||||||||||||||||||||||||
Net sales | $ | 980.8 | $ | 964.3 | $ | 16.5 | 2 | % | ||||||||||||||||||
Shipments | ||||||||||||||||||||||||||
Total | 14.2 | 14.1 | 0.7 | % | ||||||||||||||||||||||
U.S. Domestic | 12.2 | 12.3 | (0.8 | %) | ||||||||||||||||||||||
Depletions | (0.8 | %) | ||||||||||||||||||||||||
Six Months 2023 | Six Months 2022 | Dollar Change | Percent Change | ||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Beer | $ | 2,167.1 | $ | 1,877.7 | $ | 289.4 | 15 | % | |||||||||||||||
Wine and Spirits | 435.8 | 438.0 | (2.2) | (1 | %) | ||||||||||||||||||
Canopy | (126.8) | 29.9 | (156.7) | NM | |||||||||||||||||||
Consolidation and eliminations | 126.8 | (29.9) | 156.7 | NM | |||||||||||||||||||
Comparable Adjustments | (22.0) | 33.3 | (55.3) | (166 | %) | ||||||||||||||||||
Consolidated gross profit | $ | 2,580.9 | $ | 2,349.0 | $ | 231.9 | 10 | % |
![]() | The increase in Beer is primarily due to $275.5 million of shipment volume growth and the $131.8 million of favorable impact from pricing, partially offset by $82.8 million of higher cost of product sold and $35.7 million of unfavorable product mix. The higher cost of product sold is largely due to (i) $106.5 million of higher material costs, including aluminum, pallets, cartons, glass, malt, steel, and corn, driven by inflation and global supply chain constraints, (ii) $21.6 million of higher depreciation, (iii) $19.7 million of increased transportation costs, and (iv) a $19.5 million increase in brewery costs primarily driven by increased maintenance, utilities, and administrative costs, largely offset by (i) $70.3 million of decreased obsolescence primarily from excess inventory of hard seltzers resulting from a slowdown in the overall category in Fiscal 2022 and (ii) $18.6 million of favorable fixed cost absorption related to increased production levels as compared to Six Months 2022. |
![]() | The decrease in Wine and Spirits gross profit is due to $30.4 million of higher cost of product sold, driven by global supply chain constraints and inflation, partially offset by (i) $15.7 million related to an increase of non-branded gross profit and (ii) the $11.2 million favorable impact from pricing. The increase in cost of product sold was largely attributable to (i) increased transportation and warehousing costs, including ocean freight shipping, and (ii) higher material costs, including grapes and glass, partially offset by favorable fixed cost absorption as a result of a late frost in New Zealand impacting Six Months 2022. |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 43 |
Six Months 2023 | Six Months 2022 | Dollar Change | Percent Change | ||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Beer | $ | 538.7 | $ | 511.6 | $ | 27.1 | 5 | % | |||||||||||||||
Wine and Spirits | 245.4 | 233.6 | 11.8 | 5 | % | ||||||||||||||||||
Corporate Operations and Other | 143.6 | 117.4 | 26.2 | 22 | % | ||||||||||||||||||
Canopy | 1,731.2 | 366.9 | 1,364.3 | NM | |||||||||||||||||||
Consolidation and eliminations | (1,731.2) | (366.9) | (1,364.3) | NM | |||||||||||||||||||
Comparable Adjustments | 23.7 | 6.2 | 17.5 | NM | |||||||||||||||||||
Consolidated selling, general, and administrative expenses | $ | 951.4 | $ | 868.8 | $ | 82.6 | 10 | % |
![]() | The increase in Beer is primarily due to $15.0 million of increased general and administrative expenses and $12.1 million of higher marketing spend. The increase in general and administrative expenses was primarily driven by compensation and benefits, primarily related to incremental headcount to support the growth of our Mexican beer portfolio, strategic asset relocation, and higher travel as compared to Six Months 2022, partially offset by decreased legal expenses and favorable foreign currency transaction gains. The higher marketing spend was driven by our planned investments to support the growth of our Mexican beer portfolio. |
![]() | The increase in Wine and Spirits is primarily due to $17.1 million of increased general and administrative expenses, partially offset by $3.5 million of lower marketing spend, driven by timing. The increase in general and administrative expenses was primarily driven by compensation and benefits, primarily related to higher headcount as compared to Six Months 2022, expenses associated with an initiative to improve our marketing effectiveness, and higher travel as compared to Six Months 2022, partially offset by favorable foreign currency impact. |
![]() | The increase in Corporate Operations and Other is largely due to approximately (i) a $27 million increase in third-party services, driven by our Digital Business Acceleration investments, and (ii) a $5 million increase in compensation and benefits as compared to Six Months 2022, partially offset by a decrease of approximately $6 million resulting from the completion of an ERP implementation in Fiscal 2022. |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 44 |
Six Months 2023 | Six Months 2022 | Dollar Change | Percent Change | ||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Beer | $ | 1,628.4 | $ | 1,366.1 | $ | 262.3 | 19 | % | |||||||||||||||
Wine and Spirits | 190.4 | 204.4 | (14.0) | (7 | %) | ||||||||||||||||||
Corporate Operations and Other | (143.6) | (117.4) | (26.2) | (22 | %) | ||||||||||||||||||
Canopy | (1,858.0) | (337.0) | (1,521.0) | NM | |||||||||||||||||||
Consolidation and eliminations | 1,858.0 | 337.0 | 1,521.0 | NM | |||||||||||||||||||
Comparable Adjustments | (45.7) | (638.8) | 593.1 | 93 | % | ||||||||||||||||||
Consolidated operating income (loss) | $ | 1,629.5 | $ | 814.3 | $ | 815.2 | 100 | % |
![]() | The increase in Beer is largely attributable to the strong shipment volume growth within our Mexican beer portfolio, favorable pricing impact, and decreased obsolescence, partially offset by higher operational costs, general and administrative expenses, and marketing spend, as described above, and the unfavorable product mix shift. |
![]() | The decrease in Wine and Spirits is largely attributable to global supply chain constraints, inflation, and increased general and administrative expenses, as described above, partially offset by the increase in non-branded net sales and the favorable pricing impact. |
![]() | As previously discussed, the Corporate Operations and Other increase in operating loss is largely due to the Six Months 2022 Digital Business Acceleration investments and increased compensation and benefits, partially offset by the decrease in ERP-related consulting services. |
Six Months 2023 | Six Months 2022 | Dollar Change | Percent Change | ||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Impairment of Canopy Equity Method Investment | $ | (1,060.3) | $ | — | $ | (1,060.3) | NM | ||||||||||||||||
Unrealized net gain (loss) on securities measured at fair value | (31.7) | (1,335.1) | 1,303.4 | 98 | % | ||||||||||||||||||
Equity in earnings (losses) from Canopy and related activities (1) | (815.7) | (35.3) | (780.4) | NM | |||||||||||||||||||
Equity in earnings (losses) from other equity method investees | 0.7 | 0.4 | 0.3 | 75 | % | ||||||||||||||||||
$ | (1,907.0) | $ | (1,370.0) | $ | (537.0) | (39 | %) |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 45 |
![]() | Canopy segment Canopy net sales decreased to $174.5 million for Six Months 2023 from $228.1 million for Six Months 2022. This decrease of $53.6 million, or 23%, is largely attributable to lower global cannabis sales. The decline in global cannabis sales primarily resulted from (i) a decrease in Canadian recreational cannabis sales, largely driven by Canopy’s strategic decision to shift their focus to higher-margin, premium and mainstream products and the continuing impacts of price compression resulting from increased competition and (ii) a decrease in medicinal sales driven by the January 2022 divestiture of C3, an international pharmaceutical business. These declines were partially offset by growth in Canadian THC recreational sales driven by Canopy’s Fiscal 2022 acquisitions including the Supreme Cannabis Company, Inc. and AV Cannabis Inc. (“Ace Valley”). Additionally, other consumer products sales in Six Months 2023 as compared to Six Months 2022 were flat, as growth in their BioSteel Sports Nutrition Inc. business was largely offset by declines in their Storz & Bickel GmbH & Co. KG and This Works Products Limited businesses. Canopy gross profit (loss) decreased to $(126.8) million for Six Months 2023 from $29.9 million for Six Months 2022. This decrease of $156.7 million is primarily driven by (i) the write-down of excess inventory balances related to its organizational and strategic review of its business, (ii) decreased net sales and price compression in the Canadian recreational channel, (iii) higher shipping, distribution, and warehousing costs in North America, and (iv) unfavorable product mix shift. Canopy selling, general, and administrative expenses increased $1,364.3 million largely driven by a goodwill impairment related to their cannabis operations and restructuring costs for Six Months 2023, partially offset by a continued focus on reducing costs and the closure of certain research and development facilities in Fiscal 2022. The combination of these factors were the main contributors to the $1,521.0 million increase in operating loss. |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 46 |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 47 |
Six Months 2023 | Six Months 2022 | Dollar Change | Percent Change | ||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Net cash provided by (used in): | |||||||||||||||||||||||
Operating activities | $ | 1,654.3 | $ | 1,525.9 | $ | 128.4 | 8 | % | |||||||||||||||
Investing activities | (486.0) | (377.1) | (108.9) | (29) | % | ||||||||||||||||||
Financing activities | (1,198.6) | (1,506.4) | 307.8 | 20 | % | ||||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | (4.0) | 0.4 | (4.4) | NM | |||||||||||||||||||
Net increase (decrease) in cash and cash equivalents | $ | (34.3) | $ | (357.2) | $ | 322.9 | 90 | % |
Six Months 2023 | Six Months 2022 | Dollar Change | Percent Change | ||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Net income (loss) | $ | (741.4) | $ | (885.4) | $ | 144.0 | 16 | % | |||||||||||||||
Unrealized net (gain) loss on securities measured at fair value | 31.7 | 1,335.1 | (1,303.4) | (98) | % | ||||||||||||||||||
Deferred tax provision (benefit) | 208.6 | (19.2) | 227.8 | NM | |||||||||||||||||||
Equity in (earnings) losses of equity method investees and related activities, net of distributed earnings | 815.6 | 35.3 | 780.3 | NM | |||||||||||||||||||
Impairment of Canopy Equity Method Investment | 1,060.3 | — | 1,060.3 | NM | |||||||||||||||||||
Impairment of brewery construction in progress | — | 665.9 | (665.9) | NM | |||||||||||||||||||
Other non-cash adjustments | 374.3 | 234.5 | 139.8 | 60 | % | ||||||||||||||||||
Change in operating assets and liabilities, net of effects from purchase and sale of business | (94.8) | 159.7 | (254.5) | (159) | % | ||||||||||||||||||
Net cash provided by (used in) operating activities | $ | 1,654.3 | $ | 1,525.9 | $ | 128.4 | 8 | % |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 48 |
Six Months 2023 | Six Months 2022 | Dollar Change | Percent Change | ||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Net proceeds from (payments of) debt, current and long-term, and related activities | $ | 499.7 | $ | 96.0 | $ | 403.7 | NM | ||||||||||||||||
Dividends paid | (295.3) | (289.3) | (6.0) | (2) | % | ||||||||||||||||||
Purchases of treasury stock | (1,400.5) | (1,305.0) | (95.5) | (7) | % | ||||||||||||||||||
Net cash provided by stock-based compensation activities | 20.0 | 13.1 | 6.9 | 53 | % | ||||||||||||||||||
Distributions to noncontrolling interests | (22.5) | (21.2) | (1.3) | (6) | % | ||||||||||||||||||
Net cash provided by (used in) financing activities | $ | (1,198.6) | $ | (1,506.4) | $ | 307.8 | 20 | % |
Debt repayment | Debt issuance |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 49 |
August 31, 2022 | September 30, 2022 | ||||||||||
(in millions) | |||||||||||
Revolving credit facility (1) | $ | 1,573.5 | $ | 1,728.8 | |||||||
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 50 |
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 | $ | 3,000.0 | 13,331,156 | ||||||||||||
2021 Authorization | $ | 2,000.0 | $ | 836.9 | 3,463,417 |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 51 |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 52 |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 53 |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 54 |
OTHER KEY INFORMATION |
Aggregate Notional Value | Fair Value, Net Asset (Liability) | Increase (Decrease) in Fair Value – Hypothetical 10% Adverse Change | |||||||||||||||||||||||||||||||||
August 31, 2022 | August 31, 2021 | August 31, 2022 | August 31, 2021 | August 31, 2022 | August 31, 2021 | ||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||
Foreign currency contracts | $ | 2,733.8 | $ | 1,927.9 | $ | 95.6 | $ | 59.4 | $ | (187.2) | $ | (120.4) | |||||||||||||||||||||||
Commodity derivative contracts | $ | 328.9 | $ | 187.0 | $ | 66.5 | $ | 53.3 | $ | (34.6) | $ | (23.0) |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 55 |
OTHER KEY INFORMATION |
Aggregate Notional Value | Fair Value, Net Asset (Liability) | Increase (Decrease) in Fair Value – Hypothetical 1% Rate Increase | |||||||||||||||||||||||||||||||||
August 31, 2022 | August 31, 2021 | August 31, 2022 | August 31, 2021 | August 31, 2022 | August 31, 2021 | ||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||
Fixed interest rate debt | $ | 10,068.1 | $ | 9,869.2 | $ | (9,309.1) | $ | (10,897.6) | $ | (648.4) | $ | (852.4) | |||||||||||||||||||||||
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 56 |
OTHER KEY INFORMATION |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 57 |
OTHER KEY INFORMATION |
Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of a Publicly Announced Program | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (1) | ||||||||||||||||||||||
(in millions, except share and per share data) | ||||||||||||||||||||||||||
June 1 – 30, 2022 (2) | 1,240,495 | $ | 236.20 | 1,240,495 | $ | 1,262.9 | ||||||||||||||||||||
July 1 – 31, 2022 | — | $ | — | — | $ | 1,262.9 | ||||||||||||||||||||
August 1 – 31, 2022 | 411,950 | $ | 242.50 | 411,950 | $ | 1,163.1 | ||||||||||||||||||||
Total | 1,652,445 | $ | 237.77 | 1,652,445 |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 58 |
OTHER KEY INFORMATION |
Incorporated by Reference | ||||||||||||||||||||
Exhibit No. | Exhibit Description | Form | Exhibit | Filing Date | ||||||||||||||||
2.1 | 8-K | 2.1 | August 16, 2018 | |||||||||||||||||
2.2 | 10-Q | 2.2 | January 9, 2019 | |||||||||||||||||
2.3 | 8-K | 2.1 | May 29, 2020 | |||||||||||||||||
2.4 | 10-Q | 2.6 | October 1, 2020 | |||||||||||||||||
2.5 | 8-K | 2.1 | June 25, 2020 | |||||||||||||||||
3.1 | 10-Q | 3.1 | October 13, 2009 | |||||||||||||||||
3.2 | 10-Q | 3.2 | October 13, 2009 | |||||||||||||||||
3.3 | 8-K | 3.1 | April 7, 2022 | |||||||||||||||||
4.1 | 8-K | 4.1 | April 23, 2012 | |||||||||||||||||
4.2 | 8-K | 4.1.1 | April 23, 2012 | |||||||||||||||||
4.3 | 8-K | 4.1 | May 16, 2013 | |||||||||||||||||
4.4 | 8-K | 4.2 | May 16, 2013 | |||||||||||||||||
4.5 | 8-K | 4.4 | June 11, 2013 | |||||||||||||||||
4.6 | 10-Q | 4.21 | July 10, 2014 | |||||||||||||||||
4.7 | 8-K | 4.1 | November 7, 2014 | |||||||||||||||||
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 59 |
OTHER KEY INFORMATION |
Incorporated by Reference | ||||||||||||||||||||
Exhibit No. | Exhibit Description | Form | Exhibit | Filing Date | ||||||||||||||||
4.8 | 8-K | 4.2 | November 7, 2014 | |||||||||||||||||
4.9 | 8-K | 4.1 | December 8, 2015 | |||||||||||||||||
4.10 | 10-K | 4.26 | April 25, 2016 | |||||||||||||||||
4.11 | 8-K | 4.1 | December 6, 2016 | |||||||||||||||||
4.12 | 8-K | 4.1 | May 9, 2017 | |||||||||||||||||
4.13 | 8-K | 4.2 | May 9, 2017 | |||||||||||||||||
4.14 | 8-K | 4.3 | May 9, 2017 | |||||||||||||||||
4.15 | 8-K | 4.1 | November 7, 2017 | |||||||||||||||||
4.16 | 8-K | 4.2 | November 7, 2017 | |||||||||||||||||
4.17 | 8-K | 4.3 | November 7, 2017 | |||||||||||||||||
4.18 | 8-K | 4.1 | February 7, 2018 | |||||||||||||||||
4.19 | 8-K | 4.2 | February 7, 2018 | |||||||||||||||||
4.20 | 8-K | 4.3 | February 7, 2018 | |||||||||||||||||
4.21 | 8-K | 4.1 | October 29, 2018 |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 60 |
OTHER KEY INFORMATION |
Incorporated by Reference | ||||||||||||||||||||
Exhibit No. | Exhibit Description | Form | Exhibit | Filing Date | ||||||||||||||||
4.22 | 8-K | 4.2 | October 29, 2018 | |||||||||||||||||
4.23 | 8-K | 4.3 | October 29, 2018 | |||||||||||||||||
4.24 | 8-K | 4.4 | October 29, 2018 | |||||||||||||||||
4.25 | 8-K | 4.1 | July 29, 2019 | |||||||||||||||||
4.26 | 8-K | 4.1 | April 27, 2020 | |||||||||||||||||
4.27 | 8-K | 4.2 | April 27, 2020 | |||||||||||||||||
4.28 | 8-K | 4.1 | July 26, 2021 | |||||||||||||||||
4.29 | 8-K | 4.1 | May 9, 2022 | |||||||||||||||||
4.30 | 8-K | 4.2 | May 9, 2022 | |||||||||||||||||
4.31 | 8-K | 4.3 | May 9, 2022 | |||||||||||||||||
4.32 | 8-K | 4.1 | March 31, 2020 | |||||||||||||||||
4.33 | 8-K | 4.3 | March 31, 2020 | |||||||||||||||||
4.34 | 10-Q | 4.30 | June 30, 2021 | |||||||||||||||||
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 61 |
OTHER KEY INFORMATION |
Incorporated by Reference | ||||||||||||||||||||
Exhibit No. | Exhibit Description | Form | Exhibit | Filing Date | ||||||||||||||||
4.35 | 8-K | 4.1 | April 15, 2022 | |||||||||||||||||
4.36 | 8-K | 4.2 | April 15, 2022 | |||||||||||||||||
4.37 | 8-K | 4.1 | August 9, 2022 | |||||||||||||||||
10.1 | 8-K | 10.1 | June 30, 2022 | |||||||||||||||||
31.1 | ||||||||||||||||||||
31.2 | ||||||||||||||||||||
32.1 | ||||||||||||||||||||
32.2 | ||||||||||||||||||||
99.1 | 6-K | 99.4 | April 30, 2019 | |||||||||||||||||
99.2 | 6-K | 99.3 | April 30, 2019 | |||||||||||||||||
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). | |||||||||||||||||||
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). |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 62 |
OTHER KEY INFORMATION |
* | Designates management contract or compensatory plan or arrangement. | ||||
† | The exhibits, disclosure schedules, and other schedules, as applicable, have been omitted pursuant to Item 601(a)(5) of Regulation S-K. | ||||
‡ | Portions of this exhibit are redacted pursuant to Item 601(b)(2)(ii) of Regulation S-K. |
Constellation Brands, Inc. Q2 FY 2023 Form 10-Q | #WORTHREACHINGFOR I 63 |
CONSTELLATION BRANDS, INC. | |||||||||||
Date: | October 6, 2022 | By: | /s/ Kenneth W. Metz | ||||||||
Kenneth W. Metz, Senior Vice President and Controller | |||||||||||
Date: | October 6, 2022 | 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 2023 Form 10-Q | #WORTHREACHINGFOR I 64 |
/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 6, 2022 | /s/ William A. Newlands | ||||||
William A. Newlands President and Chief Executive Officer |
Dated: | October 6, 2022 | /s/ Garth Hankinson | ||||||
Garth Hankinson Executive Vice President and Chief Financial Officer |