Upload
others
View
5
Download
0
Embed Size (px)
Citation preview
UpdatesFiscal2022EPSGuidancedrivenbyStrongCoreBeerBusinessResultsandOngoingShareRepurchaseActivity
NetSales
OperatingIncome
EarningsBeforeInterest&Taxes
(EBIT)
DilutedNetIncome(Loss)PerShare
AttributabletoCBI(EPS)
DilutedEPSExcludingCanopy
SecondQuarterFiscalYear2022FinancialHighlights(1)|Inmillions,exceptpersharedata
Reported $2,371 $739 NA $0.01 NA
%Change 5% (12%) NA (100%) NA
Comparable $2,371 $730 $699 $2.38 $2.52
%Change 5% (8%) (8%) (14%) (13%)(1)Definitionsofreported,comparable,andorganic,aswellasreconciliationsofnon-GAAPfinancialmeasures,arecontainedelsewhereinthisnewsrelease.NA=NotApplicable
HIGHLIGHTS• GeneratesreportedbasisEPSof$0.01andcomparablebasisEPS
of$2.38,includingCanopyequitylossesof$0.13;excludingCanopyequitylosses,achievedcomparablebasisEPSof$2.52
• BeerBusinessdeliversdouble-digitnetsalesgrowthdrivenbythecontinuedstrengthofModeloEspecialandCoronaExtra
• WineandSpiritsBusinessdeliversstrong,organicnetsalesgrowthdrivenbysolidperformancefromThePrisonerBrandFamily,KimCrawford,andMeiomi
• Generates$1.5billionofoperatingcashflow,anincreaseof6%,and$1.2billionoffreecashflow
• Fullyredeemsoutstanding2.70%SeniorNotesand2.65%SeniorNotesduein2022
• Updatesfiscal2022reportedbasisEPSoutlookto$0.30-$0.60;increasescomparablebasisEPSoutlookto$10.15-$10.45;guidanceincludessharesrepurchasedthroughSeptemberonly
• Affirmsfiscal2022operatingcashflowtargetof$2.4-$2.6billionandfreecashflowprojectionof$1.4-$1.5billion
• Repurchases6.2millionsharesofcommonstockfor$1.4billionthroughSeptemberoffiscal2022
• Declaresquarterlycashdividendof$0.76pershareofClassACommonStockand$0.69pershareofClassBCommonStock
"ThestrongperformanceofourcoreBeerBusiness,drivenbyrobustconsumerdemandforouriconicbrands,givesusconfidencetoincreaseourguidancefortheyear."
"Weexecutedasignificantnumberofsharerepurchasesduringthesecondquarteraswebelieveourstockisundervaluedatcurrentlevels.Thisrepresentsprogresstowardachievingourgoalofreturning$5billioninvaluetoshareholdersthroughdividendsandsharerepurchases."
BillNewlands GarthHankinson
PresidentandChiefExecutiveOfficer ChiefFinancialOfficer
ConstellationBrands,Inc.Q2FY2022EarningsRelease #WORTHREACHINGFORI1
beerShipmentVolume
DepletionVolume NetSales
OperatingIncome
ThreeMonthsEnded|Inmillions;brandedproduct,24-pack,12-ouncecaseequivalentsAugust31,2021 101.0 $1,861.3 $693.0August31,2020 90.4 $1,635.9 $695.7%Change 11.7% 7.3% 14% —%
HIGHLIGHTS• Constellation’sBeerBusinessposteddepletionvolumegrowth
over7%,drivenbythecontinuedstrengthofModeloEspecialandCoronaExtra.Depletionvolumesellingdayswereflatyear-over-year.
• InIRIchannels,Constellation'sBeerBusinesssignificantlyoutpacedthetotalbeercategoryandthehigh-endsegmentandwasthe#1dollarsharegainer,adding1.3marketsharepointsduringthequarter.
• ModeloEspecialachieved16%depletionvolumegrowthandcontinuedtobethe#1brandinthehigh-endand#1brandsharegainerintheentireU.S.beercategoryinIRIdollarsales.
• CoronaExtrareporteddepletionvolumegrowthofnearly5%andremainedthe#2importsharegainerand#3brandinthehigh-endinIRIchannels.
• Operatingmargindecreased530basispointsto37.2%,asbenefitsfromfavorablepricing,mix,andforeigncurrencyweremorethanoffsetbyincreasedCOGS,marketinginvestments,andSG&A.TheincreaseinCOGSwaslargelydrivenbyanincreaseinobsolescenceof$66millionrelatingtoexcessinventoryofhardseltzers,resultingfromaslowdownintheoverallcategoryintheU.S.
• Wholesalerdepletionscontinuedtooutpacecasesshippedduringthequarterresultinginlowerthannormaldistributorinventoriesattheendofthesecondquarteroffiscal2022.Productinventoriesareexpectedtoreturntomorenormallevelsbytheendofthefiscalyearasshipmentvolumeisexpectedtoexceeddepletionvolumeinthesecond-halfofthefiscalyear.
• TheBeerBusinessnowexpects9-11%netsalesgrowthand4-6%operatingincomegrowthforfiscal2022reflectingthestrongperformanceofthecorebeerportfolio.
wineandspiritsShipmentVolume
OrganicShipmentVolume(1)
DepletionVolume(1) NetSales(2)
OrganicNetSales(1)
OperatingIncome(2)
ThreeMonthsEnded|Inmillions;brandedproduct,9-litercaseequivalentsAugust31,2021 7.4 7.4 $509.8 $509.8 $100.2August31,2020 11.6 7.0 $624.5 $443.1 $161.5%Change (36.2%) 5.7% (2.3%) (18%) 15% (38%)(2)
ThreemonthsendedAugust31,2020,includes$181.4millionofnetsalesand$66.7millionofgrossprofitlessmarketingthatarenolongerpartofthewineandspiritssegmentresults.
HIGHLIGHTS• ThePrisonerBrandFamily,KimCrawford,andMeiomicontinued
tooutpacetheirrespectivepricesegmentswhilegainingshareinIRIchannelsdespitethechallengingoverlapfromlastyear'spandemic-relatedconsumerpantryloadingbehavior.
• Consumer-led,marginaccretive,innovationinitiativescontinuetocontributetonetsalesgrowthdrivenbyMeiomicabernetsauvignon,KimCrawfordIlluminate,andThePrisonercabernetsauvignonandchardonnay,whichwereallamongthetop10innovationsacrossthehigh-endoftheU.S.winesegmentinIRIchannels.
• WineandSpiritseCommercesales,includingdirect-to-consumer,haveincreased3to4timesversus2019levelswhilethecompany'sfinewinesharehasexpanded,drivenbyrobustgrowthofThePrisoneronInstacartandRobertMondavionWine.comwithinthelastyear.
• Theinnovationpipelineisprimedwithimpactfulproductlaunchesforthethirdquarteroffiscal2022includingWoodbridgeWineSeltzers,WoodbridgeSparklingInfusions,andWoodbridge3literboxwineinchardonnay,cabernetsauvignon,pinotgrigio,andpinotnoirvarietals,aswellassignificantexpansionofSVEDKAready-to-drinkcocktailsinadditionalmarketsacrosstheU.S.
• Operatingmargindecreased620basispointsto19.7%asmixbenefitsfromtheexistingportfolioanddivestiturescombinedwithfavorableprice,weremorethanoffsetbyincreasedmarketingandSG&Aspend,increasedCOGS,andmargindilutivesmoketaintedbulkwinesales.
• TheWineandSpiritsBusinesscontinuestoexpectfiscal2022reportednetsalesandoperatingincomedeclineof22-24%and23-25%,respectively;organicnetsalesgrowthof2-4%.
ConstellationBrands,Inc.Q2FY2022EarningsRelease #WORTHREACHINGFORI2
outlookThetablesetsforthmanagement'scurrentEPSexpectationsforfiscal2022comparedtofiscal2021actualresults,bothonareportedbasis,acomparablebasis,andacomparablebasisexcludingCanopyequityearnings(losses)andrelatedactivities.
ReportedBasis ComparableBasis
FY22Estimate FY21ActualFY22Estimate(Excl.Canopy) FY21Actual
FY21Actual(Excl.Canopy)
FiscalYearEndingFebruary28 $0.30-$0.60 $10.23 $10.15-$10.45 $9.97 $10.44
Fiscal2022GuidanceAssumptions:
●Beer:netsalesgrowth9-11%;operatingincomegrowth4-6%●WineandSpirits:netsalesdecline22-24%andoperating
incomedecline23-25%;organicnetsalesgrowth2-4%●Interestexpense:$355-$365million●Taxrate:reportedapproximately83%;comparableexcluding
Canopyequityearningsimpactapproximately20%●Weightedaveragedilutedsharesoutstanding:approximately
192million;assumesapproximately$1.4billionofsharerepurchases
●Operatingcashflow:$2.4-$2.6billion●Capitalexpenditures:$1.0-$1.1billion,includingapproximately
$900milliontargetedforMexicobeeroperationsexpansionactivities
●Freecashflow:$1.4-$1.5billion
ThereportedbasisEPSguidanceincludesthefiscal2022yeartodateCanopyequityearningsandrelatedactivitiesimpact.Ourguidancedoesnotreflectfuturechangesinthefairvalueofthecompany’sinvestmentinCanopy’swarrantsandconvertibledebtsecurities.Additionally,thecompanycontinuestoevaluatethefuturepotentialequityearningsimpactfromtheCanopyequitymethodinvestmentandrelatedactivitiesand,assuch,theseitemshavebeenexcludedfromthetargetassumptionsnotedabove.
BEERBUSINESSCAPITALEXPANSIONINITIATIVESThecompanyhasdevelopedplanstoinvestinthenextincrementofcapacityinMexicothatwillprovidethelong-termflexibilityneededtosupporttheexpectedfuturegrowthofthecore,high-endMexicanbeerportfolio.AnnualcapexspendfortheBeerBusinessisexpectedtobeinthe$700millionto$900millionrangetosupport15millionhectolitersofcapacityexpansionduringthefiscal2023-fiscal2025timeframe.GiventhecurrentstateofactivitiesinMexicali,Constellationdeterminedthatitwillbeunabletouseorrepurposecertainassetsatthefacility.Asaresult,a$666millionimpairmentwasrecordedforthefirstquarteroffiscal2022,whichisincludedaboveinthefiscal2022reportedbasisEPSguidance.ThecompanywillcontinuetoworkwithgovernmentofficialsinMexicotopursuevariousformsofrecoveryforcapitalizedcostsandadditionalexpensesincurredinestablishingthebrewery.
WINE&SPIRITSFISCAL2021DIVESTITURESInJanuary2021,thecompanysoldaportionoftheWineandSpiritsBusinesstoE.&J.GalloWinery(“Gallo”)andinaseparate,butrelated,transactionsoldtheNobiloWinebrandtoGallo,collectively(the“WineandSpiritsDivestitures").Additionally,inJanuary2021,thecompanysoldthePaulMassonGrandeAmberBrandybrandtoSazerac(the"PaulMassonDivestiture"),whileinDecember2020,thecompanysoldtheconcentratebusinesstoVie-Del(the"ConcentrateBusinessDivestiture").
Thefollowingtablepresentsselectedfinancialinformationincludedinourhistoricalconsolidatedfinancialstatementsthatarenolongerpartofourconsolidatedresultsfollowingthetransactionsdescribedabove:
FY21Q1 FY21Q2 FY21Q3 FY21Q4
(inmillions)Shipmentvolume(9-litercaseequivalents) 4.5 4.6 5.3 1.6
Netsales $187 $181 $210 $64
CAM(grossprofitlessmarketing) $77 $67 $74 $21
canopyConstellation’sshareofCanopy’sequityearnings(losses)andrelatedactivitieswereasfollows:
ReportedBasis
ComparableBasis
ThreeMonthsEndedIInmillionsAugust31,2021 $120.5 $(29.9)
August31,2020 $(31.0) $(34.1)
Constellationhasrecognizeda$224millionunrealizednetlossinreportedbasisresultssincetheinitialCanopyinvestmentinNovember2017;a$590milliondecreaseinthefairvalueofourCanopyinvestmentwasrecognizedforsecondquarteroffiscal2022.
ConstellationBrands,Inc.Q2FY2022EarningsRelease #WORTHREACHINGFORI3
QUARTERLYDIVIDEND
OnOctober5,2021,Constellation’sboardofdirectorsdeclaredaquarterlycashdividendof$0.76pershareofClassACommonStockand$0.69pershareofClassBCommonStock,payableonNovember19,2021,tostockholdersofrecordasofthecloseofbusinessonNovember5,2021.
†Acopyofthisnewsrelease,includingtheattachmentsandotherfinancialinformationthatmaybediscussedduringthecall,willbeavailableonourwebsitecbrands.comunder“Investors/Reporting”priortothecall.
AWARDSandBRANDNEWSShankenNewsrecognizedeightofourpremium,consumer-lovedbrandswithIMPACTBlueChipAwards,giventotheindustry’sbestlong-termperformers:SVEDKA,Woodbridge,KimCrawford,Meiomi,Ruffino,ModeloEspecial,Pacifico,andModeloNegra.
Modelo,thebrandbrewedforthosewithTheFightingSpirit,andUFC,theworld’spremiermixedmartialartsorganization,recentlyannouncedanewinitiativewithleadingnonprofitRebuildingTogethertorevitalizetraininggymsacrossthecountryandpositivelyimpactthelocalcommunitiestheytouch.Learnmorehere.
ABOUTCONSTELLATIONBRANDSAtConstellationBrands(NYSE:STZandSTZ.B),ourmissionistobuildbrandsthatpeoplelovebecausewebelievesharingatoast,unwindingafteraday,celebratingmilestones,andhelpingpeopleconnect,areWorthReachingFor.It’sworthourdedication,hardwork,andtheboldcalculatedriskswetaketodelivermoreforourconsumers,tradepartners,shareholders,andcommunitiesinwhichweliveandwork.It’swhathasmadeusoneofthefastest-growinglargeCPGcompaniesintheU.S.atretail,anditdrivesourpursuittodeliverwhat’snext.
Today,wearealeadinginternationalproducerandmarketerofbeer,wine,andspiritswithoperationsintheU.S.,Mexico,NewZealand,andItaly.Everyday,peoplereachforourhigh-end,iconicimportedbeerbrandssuchasCoronaExtra,CoronaLight,CoronaPremier,ModeloEspecial,ModeloNegra,andPacifico,andourhigh-qualitypremiumwineandspiritsbrands,includingtheRobertMondaviBrandFamily,KimCrawford,Meiomi,ThePrisonerBrandFamily,SVEDKAVodka,CasaNobleTequila,andHighWestWhiskey.
Butwewon’tstophere.Ourvisionaryleadershipteamandpassionateemployeesfrombarrelroomtoboardroomarereachingforthenextlevel,toexploretheboundariesofthebeveragealcoholindustryandbeyond.Joinusindiscoveringwhat’sWorthReachingFor.
Tolearnmore,[email protected].
MEDIACONTACTS INVESTORRELATIONSCONTACTSMikeMcGrew 773-251-4934 [email protected] PattyYahn-Urlaub 585-678-7483 [email protected] 585-678-7141 [email protected] MarisaPepelea 312-741-2316 [email protected]
ConstellationBrands,Inc.Q2FY2022EarningsRelease #WORTHREACHINGFORI4
SUPPLEMENTALINFORMATIONReportedbasis(“reported”)areamountsasreportedundergenerallyacceptedaccountingprinciples.Comparablebasis(“comparable”)areamountswhichexcludeitemsthataffectcomparability(“comparableadjustments”),astheyarenotreflectiveofcoreoperationsofthesegments.Thecompany’smeasureofsegmentprofitabilityexcludescomparableadjustments,whichisconsistentwiththemeasureusedbymanagementtoevaluateresults.Thecompanydiscussesvariousnon-GAAPmeasuresinthisnewsrelease.Financialstatements,aswellassupplementalschedulesandtablesreconcilingnon-GAAPmeasures,togetherwithdefinitionsofthesemeasuresandthereasonsmanagementusesthesemeasures,areincludedinthisnewsrelease.
FORWARD-LOOKINGSTATEMENTSThestatementsmadeundertheheadingOutlookandallstatementsotherthanstatementsofhistoricalfactsetforthinthisnewsreleaseregardingConstellationBrands’businessstrategy,futureoperationsandbusiness,futurefinancialposition,expectedeffectivetaxratesandanticipatedtaxliabilities,estimatedrevenues,projectedcostsandexpenses,expectednetsalesandoperatingincome,estimateddilutedEPS,expectedcapitalexpenditures,expectedoperatingcashflowandfreecashflow,futurepaymentsofdividends,amount,mannerandtimingofsharerepurchasesunderthesharerepurchaseauthorization,andprospects,plansandobjectivesofmanagement,aswellasinformationconcerningexpectedactionsofthirdparties,areforward-lookingstatements(collectively,the“Projections”)thatinvolverisksanduncertaintiesthatcouldcauseactualresultstodiffermateriallyfromthosesetforthinorimpliedbytheProjections.Duringthecurrentquarter,ConstellationBrandsmayreiteratetheProjections.Priortothestartofthecompany’squietperiod,whichwillbeginatthecloseofbusinessonNovember30,2021,thepubliccancontinuetorelyontheProjectionsasstillbeingConstellationBrands’currentexpectationsonthematterscovered,unlessthecompanypublishesanoticestatingotherwise.DuringConstellationBrands’“quietperiod,”theProjectionsshouldnotbeconsideredtoconstitutethecompany’sexpectationsandshouldbeconsideredhistorical,speakingasofpriortothequietperiodonlyandnotsubjecttoupdatebythecompany.TheProjectionsarebasedonmanagement’scurrentexpectationsand,unlessotherwisenoted,donottakeintoaccounttheimpactofanyfutureacquisition,investment,merger,oranyotherbusinesscombination,divestiture,restructuring,orotherstrategicbusinessrealignments,financingorsharerepurchasethatmaybecompletedafterthedateofthisrelease,oranyincrementalcontingentconsiderationpaymentpaidoranyspecificamountofincrementalcontingentconsiderationpaymentreceived,ifany,inassociationwiththeWineandSpiritsDivestitures.TheProjectionsshouldnotbeconstruedinanymannerasaguaranteethatsuchresultswillinfactoccur.TheactualimpactofCOVID-19anditsassociatedoperatingenvironmentmaybemateriallydifferentthanmanagement’sexpectations.Inadditiontotherisksanduncertaintiesofordinarybusinessoperations,theProjectionsofthecompanycontainedinthisnewsreleasearesubjecttoanumberofrisksanduncertainties,including:• durationand impactoftheCOVID-19pandemic, includingbutnot
limitedtothe impactandseverityofnewvariants, theefficacyofthevaccinerollout, theclosureofnon-essentialbusinesses,whichmay include our manufacturing facilities, and other associatedgovernmental containment actions, and the increase in cyber-security attacks that have occurred while non-productionemployeesworkremotely;
• production or shipment difficulties could adversely affect ourabilitytosupplyourcustomers;
• the actual impact to supply, production levels, and costs due towildfires and severe weather events may vary from our currentexpectationsdueto,amongotherreasons,theactualseverityandgeographicalreachofwildfiresandsevereweatherevents;
• impactoftheWineandSpiritsDivestitures,theConcentrateBusinessDivestiture,andthePaulMassonDivestiture,andamountandtimingofcostreductions,ifany,mayvaryfrommanagement’scurrentexpectations;
• amountofcontingentconsideration,ifany,thatmaybereceivedintheWineandSpiritsDivestitureswilldependonactualbrandperformance;
• beeroperationsexpansionandconstructionactivities,scope,costs,andtimingassociatedwiththeseactivities,andamountofimpairmentfromnon-recoverablebreweryconstructionassetsinMexicomayvaryfrommanagement’scurrentestimatesduetomarketconditions,ourcashanddebtposition,receiptofregulatoryapprovalsontheexpecteddatesandterms,resultsofdiscussionswithgovernmentofficialsinMexico,actualamountofnon-recoverablebreweryconstructionassets,andotherfactorsdeterminedbymanagement;
• accuracyofsupplyprojections,includingthoserelatingtowineandspiritsoperatingactivities,beeroperationsexpansionactivities,productinventorylevels,glasssourcing,andrawmaterialsandwatersupplyexpectations;
• operatingcashflow,freecashflow,effectivetaxrate,andcapitalexpenditurestosupportlong-termgrowthmayvaryfrommanagement’scurrentestimates;
• accuracyofprojectionsassociatedwithmarketopportunitiesandpreviouslyannouncedacquisitions,investments,anddivestitures;
• accuracyofprojectionsrelatingtotheCanopyinvestmentmayvaryfrommanagement’scurrentexpectations;
• exactdurationofthesharerepurchaseimplementationandtheamount,timing,andsourceoffundsforanysharerepurchases;
• amountandtimingoffuturedividendsaresubjecttothedeterminationanddiscretionoftheboardofdirectorsandmaydifferfromcurrentexpectationsifourabilitytousecashflowtofunddividendsisaffectedbyunanticipatedincreasesintotalnetdebt,weareunabletogeneratecashflowatanticipatedlevels,orwefailtogenerateexpectedearnings;
• rawmaterialandwatersupply,production,orshipmentdifficultiescouldadverselyaffectourabilitytosupplyourcustomers;
• generaleconomic,geo-political,domestic,internationalandregulatoryconditions,instabilityinworldfinancialmarkets,inflation,healthepidemicsorpandemics,quarantinesorcurfews,unanticipatedenvironmentalliabilitiesandcosts,orenhancedcompetitiveactivities;
• changestointernationaltradeagreementsandtariffs,accountingstandards,electionsorassertions,taxlawsorothergovernmentalrulesandregulations,andotherfactorswhichcouldimpactthecompany’sreportedfinancialposition,resultsofoperations,effectivetaxrate,oraccuracyofanyassociatedProjections;
• changesininterestratesandtheinherentunpredictabilityofcurrencyfluctuations,commodityprices,andrawmaterials;and
• otherfactorsanduncertaintiesdisclosedinthecompany’sfilingswiththeSecuritiesandExchangeCommission,includingitsAnnualReportonForm10-KforthefiscalyearendedFebruary28,2021,whichcouldcauseactualfutureperformancetodifferfromcurrentexpectations.
ConstellationBrands,Inc.Q2FY2022EarningsRelease #WORTHREACHINGFORI5
CONSTELLATIONBRANDS,INC.ANDSUBSIDIARIESCONDENSEDCONSOLIDATEDBALANCESHEETS
(inmillions)(unaudited)
August31,2021
February28,2021
ASSETS
Currentassets:
Cashandcashequivalents $ 103.4 $ 460.6
Accountsreceivable 972.8 785.3
Inventories 1,339.0 1,291.1
Prepaidexpensesandother 528.5 507.5
Totalcurrentassets 2,943.7 3,044.5
Property,plant,andequipment 5,505.4 5,821.6
Goodwill 7,798.9 7,793.5
Intangibleassets 2,729.7 2,732.1
Equitymethodinvestments 2,819.0 2,788.4
Securitiesmeasuredatfairvalue 488.6 1,818.1
Deferredincometaxes 2,448.0 2,492.5
Otherassets 607.0 614.1
Totalassets $ 25,340.3 $ 27,104.8
LIABILITIESANDSTOCKHOLDER’SEQUITY
Currentliabilities:
Short-termborrowings $ 486.0 $ —
Currentmaturitiesoflong-termdebt 5.8 29.2
Accountspayable 840.4 460.0
Otheraccruedexpensesandliabilities 854.9 779.9
Totalcurrentliabilities 2,187.1 1,269.1
Long-termdebt,lesscurrentmaturities 10,081.7 10,413.1
Deferredincometaxesandotherliabilities 1,546.9 1,493.5
Totalliabilities 13,815.7 13,175.7
CBIstockholders’equity 11,192.7 13,598.9
Noncontrollinginterests 331.9 330.2
Totalstockholders’equity 11,524.6 13,929.1
Totalliabilitiesandstockholders’equity $ 25,340.3 $ 27,104.8
ConstellationBrands,Inc.Q2FY2022EarningsRelease #WORTHREACHINGFORI6
CONSTELLATIONBRANDS,INC.ANDSUBSIDIARIESCONSOLIDATEDSTATEMENTSOFOPERATIONS
(inmillions,exceptpersharedata)(unaudited)
ThreeMonthsEnded SixMonthsEnded
August31,2021
August31,2020
August31,2021
August31,2020
Sales $ 2,565.0 $ 2,459.7 $ 4,753.3 $ 4,591.4
Excisetaxes (193.9) (199.3) (355.7) (367.6)
Netsales 2,371.1 2,260.4 4,397.6 4,223.8
Costofproductsold (1,141.4) (1,044.6) (2,048.6) (2,019.7)
Grossprofit 1,229.7 1,215.8 2,349.0 2,204.1
Selling,general,andadministrativeexpenses (490.5) (399.1) (868.8) (752.4)
Impairmentofbreweryconstructioninprogress — — (665.9) —
Impairmentofassetsheldforsale — 22.0 — (3.0)
Operatingincome(loss) 739.2 838.7 814.3 1,448.7
Income(loss)fromunconsolidatedinvestments (470.8) (80.7) (1,370.0) (651.9)
Interestexpense (95.8) (100.2) (182.5) (200.2)
Lossonextinguishmentofdebt (29.4) (0.6) (29.4) (7.6)
Income(loss)beforeincometaxes 143.2 657.2 (767.6) 589.0
(Provisionfor)benefitfromincometaxes (131.3) (135.4) (117.8) (239.8)
Netincome(loss) 11.9 521.8 (885.4) 349.2
Netincome(loss)attributabletononcontrollinginterests (10.4) (9.7) (21.2) (15.0)
Netincome(loss)attributabletoCBI $ 1.5 $ 512.1 $ (906.6) $ 334.2
Netincome(loss)percommonshareattributabletoCBI:
Basic–ClassACommonStock $ 0.01 $ 2.68 $ (4.77) $ 1.74
Basic–ClassBConvertibleCommonStock $ 0.01 $ 2.43 $ (4.34) $ 1.58
Diluted–ClassACommonStock $ 0.01 $ 2.62 $ (4.77) $ 1.71
Diluted–ClassBConvertibleCommonStock $ 0.01 $ 2.42 $ (4.34) $ 1.58
Weightedaveragecommonsharesoutstanding:
Basic–ClassACommonStock 167.447 170.078 169.025 169.841
Basic–ClassBConvertibleCommonStock 23.222 23.284 23.234 23.289
Diluted–ClassACommonStock 192.530 195.142 169.025 194.962
Diluted–ClassBConvertibleCommonStock 23.222 23.284 23.234 23.289
Cashdividendsdeclaredpercommonshare:
ClassACommonStock $ 0.76 $ 0.75 $ 1.52 $ 1.50
ClassBConvertibleCommonStock $ 0.69 $ 0.68 $ 1.38 $ 1.36
ConstellationBrands,Inc.Q2FY2022EarningsRelease #WORTHREACHINGFORI7
CASHFLOWSFROMOPERATINGACTIVITIES
Netincome(loss) $ (885.4) $ 349.2
Adjustmentstoreconcilenetincome(loss)tonetcashprovidedby(usedin)operatingactivities:
Unrealizednet(gain)lossonsecuritiesmeasuredatfairvalue 1,335.1 244.9
Deferredtaxprovision(benefit) (19.2) 196.1
Depreciation 162.3 142.7
Stock-basedcompensation 36.0 34.0
Equityin(earnings)lossesofequitymethodinvesteesandrelatedactivities,netofdistributedearnings 35.3 408.1
Noncashleaseexpense 40.1 41.3
Amortizationofdebtissuancecostsandlossonextinguishmentofdebt 35.1 13.7
Impairmentofbreweryconstructioninprogress 665.9 —
Impairmentofassetsheldforsale — 3.0
Lossoninventoryandrelatedcontractsassociatedwithbusinessoptimization — 25.1
Lossonsettlementoftreasurylockcontracts — (29.3)
Changeinoperatingassetsandliabilities,netofeffectsfrompurchaseandsaleofbusiness:
Accountsreceivable (187.8) (56.1)
Inventories (49.3) 73.0
Prepaidexpensesandothercurrentassets 10.1 51.3
Accountspayable 245.9 116.7
Deferredrevenue 144.6 21.8
Otheraccruedexpensesandliabilities (3.8) (141.3)
Other (39.0) (49.3)
Totaladjustments 2,411.3 1,095.7
Netcashprovidedby(usedin)operatingactivities 1,525.9 1,444.9
CASHFLOWSFROMINVESTINGACTIVITIES
Purchasesofproperty,plant,andequipment (353.4) (277.8)
Purchasesofbusinesses,netofcashacquired — (19.9)
Investmentsinequitymethodinvesteesandsecurities (28.6) (217.4)
Proceedsfromsalesofassets 1.3 18.1
Proceedsfromsaleofbusiness 4.6 41.1
Otherinvestingactivities (1.0) 0.6
Netcashprovidedby(usedin)investingactivities (377.1) (455.3)
CONSTELLATIONBRANDS,INC.ANDSUBSIDIARIESCONSOLIDATEDSTATEMENTSOFCASHFLOWS
(inmillions)(unaudited)
SixMonthsEnded
August31,2021
August31,2020
ConstellationBrands,Inc.Q2FY2022EarningsRelease #WORTHREACHINGFORI8
CASHFLOWSFROMFINANCINGACTIVITIES
Proceedsfromissuanceoflong-termdebt 1,001.9 1,194.6
Principalpaymentsoflong-termdebt (1,357.1) (1,536.4)
Netproceedsfrom(repaymentsof)short-termborrowings 486.0 (238.9)
Dividendspaid (289.3) (287.6)
Purchasesoftreasurystock (1,305.0) —
Proceedsfromsharesissuedunderequitycompensationplans 22.9 32.0
Paymentsofminimumtaxwithholdingsonstock-basedpaymentawards (9.8) (7.6)
Paymentsofdebtissuance,debtextinguishment,andotherfinancingcosts (34.8) (18.2)
Distributionstononcontrollinginterests (21.2) (10.0)
Netcashprovidedby(usedin)financingactivities (1,506.4) (872.1)
Effectofexchangeratechangesoncashandcashequivalents 0.4 5.7
Netincrease(decrease)incashandcashequivalents (357.2) 123.2
Cashandcashequivalents,beginningofperiod 460.6 81.4
Cashandcashequivalents,endofperiod $ 103.4 $ 204.6
CONSTELLATIONBRANDS,INC.ANDSUBSIDIARIESCONSOLIDATEDSTATEMENTSOFCASHFLOWS
(inmillions)(unaudited)
SixMonthsEnded
August31,2021
August31,2020
ConstellationBrands,Inc.Q2FY2022EarningsRelease #WORTHREACHINGFORI9
CONSTELLATIONBRANDS,INC.ANDSUBSIDIARIESRECONCILIATIONOFREPORTEDANDORGANICNETSALES
(inmillions)(unaudited)
Forperiodsofacquisition,wedefineorganicnetsalesascurrentperiodreportednetsaleslessnetsalesofproductsofacquiredbusinessesreportedforthecurrentperiod,asappropriate.Forperiodsofdivestiture,wedefineorganicnetsalesaspriorperiodreportednetsaleslessnetsalesofproductsofdivestedbusinessesreportedforthepriorperiod,asappropriate.Weprovideorganicnetsalesbecauseweusethisinformationinmonitoringandevaluatingtheunderlyingbusinesstrendsofourcoreoperations.Inaddition,webelievethisinformationprovidesinvestorsvaluableinsightonunderlyingbusinesstrendsandresultsinordertoevaluateyear-over-yearfinancialperformance.
ThedivestituresimpactingourresultsfortheperiodsJune1,2020,throughAugust31,2020,andMarch1,2020,throughAugust31,2020,belowconsistoftheConcentrateBusinessDivestiture(soldDecember29,2020),theWineandSpiritsDivestitures(soldJanuary5,2021),andthePaulMassonDivestiture(soldJanuary12,2021).
ThreeMonthsEnded SixMonthsEnded
August31,2021
August31,2020
PercentChange
August31,2021
August31,2020
PercentChange
Consolidatednetsales $ 2,371.1 $ 2,260.4 5% $ 4,397.6 $ 4,223.8 4%Less:divestitures — (181.4) — (368.2)
Consolidatedorganicnetsales $ 2,371.1 $ 2,079.0 14% $ 4,397.6 $ 3,855.6 14%
Beernetsales $ 1,861.3 $ 1,635.9 14% $ 3,433.3 $ 3,020.0 14%
WineandSpiritsnetsales $ 509.8 $ 624.5 (18%) $ 964.3 $ 1,203.8 (20%)Less:divestitures — (181.4) — (368.2)
WineandSpiritsorganicnetsales $ 509.8 $ 443.1 15% $ 964.3 $ 835.6 15%
ConstellationBrands,Inc.Q2FY2022EarningsRelease #WORTHREACHINGFORI10
CONSTELLATIONBRANDS,INC.ANDSUBSIDIARIESSUPPLEMENTALSHIPMENTANDDEPLETIONINFORMATION
(unaudited)
ThreeMonthsEnded SixMonthsEnded
August31,2021
August31,2020
PercentChange
August31,2021
August31,2020
PercentChange
Beer
(inmillions,brandedproduct,24-pack,12-ouncecaseequivalents)
Shipmentvolume 101.0 90.4 11.7% 185.8 166.6 11.5%
Depletionvolume(1) 7.3% 8.8%
WineandSpirits
(inmillions,brandedproduct,9-litercaseequivalents)
Shipmentvolume 7.4 11.6 (36.2%) 14.1 22.4 (37.1%)
Organicshipmentvolume(2) 7.4 7.0 5.7% 14.1 13.3 6.0%
U.S.Domesticshipmentvolume 6.3 10.7 (41.1%) 12.3 20.6 (40.3%)
U.S.Domesticorganicshipmentvolume(2) 6.3 6.3 —% 12.3 11.7 5.1%
Depletionvolume(1)(2) (2.3%) (4.8%)
(1) DepletionsrepresentU.S.domesticdistributorshipmentsofourrespectivebrandedproductstoretailcustomers,basedonthird-partydata.
(2) IncludesadjustmentstoremoveshipmentanddepletionvolumeassociatedwiththeWineandSpiritsDivestituresandthePaulMassonDivestiturefortheperiodsJune1,2020,throughAugust31,2020,andMarch1,2020,throughAugust31,2020,forthethreemonthsandsixmonthsendedAugust31,2020,respectively.
ConstellationBrands,Inc.Q2FY2022EarningsRelease #WORTHREACHINGFORI11
CONSTELLATIONBRANDS,INC.ANDSUBSIDIARIESSUMMARIZEDSEGMENTANDINCOME(LOSS)FROMUNCONSOLIDATEDINVESTMENTSINFORMATION
(inmillions)(unaudited)
ThreeMonthsEnded SixMonthsEnded
August31,2021
August31,2020
PercentChange
August31,2021
August31,2020
PercentChange
Beer
Segmentnetsales $ 1,861.3 $ 1,635.9 14% $ 3,433.3 $ 3,020.0 14%
Segmentgrossprofit $ 984.0 $ 910.5 8% $ 1,877.7 $ 1,680.2 12%
%Netsales 52.9% 55.7% 54.7% 55.6%
Segmentoperatingincome(loss) $ 693.0 $ 695.7 —% $ 1,366.1 $ 1,273.5 7%
%Netsales 37.2% 42.5% 39.8% 42.2%
WineandSpirits
Winenetsales $ 447.2 $ 544.9 (18%) $ 844.9 $ 1,044.5 (19%)
Spiritsnetsales 62.6 79.6 (21%) 119.4 159.3 (25%)
Segmentnetsales $ 509.8 $ 624.5 (18%) $ 964.3 $ 1,203.8 (20%)
Segmentgrossprofit $ 230.5 $ 276.5 (17%) $ 438.0 $ 540.4 (19%)
%Netsales 45.2% 44.3% 45.4% 44.9%
Segmentoperatingincome(loss) $ 100.2 $ 161.5 (38%) $ 204.4 $ 325.5 (37%)
%Netsales 19.7% 25.9% 21.2% 27.0%
Segmentincome(loss)fromunconsolidatedinvestments $ (1.1) $ (2.4) 54% $ 0.2 $ 1.1 (82%)
CorporateOperationsandOther
Segmentoperatingincome(loss) $ (62.9) $ (59.4) (6%) $ (117.4) $ (109.9) (7%)
Segmentincome(loss)fromunconsolidatedinvestments $ (0.2) $ 0.3 NM $ (0.8) $ 0.5 NM
Canopyequityearnings(losses)(1) $ (29.9) $ (34.1) 12% $ (74.2) $ (65.8) (13%)
Consolidatedoperatingincome(loss) $ 739.2 $ 838.7 (12%) $ 814.3 $ 1,448.7 (44%)
ComparableAdjustments (8.9) (40.9) 78% 638.8 40.4 NM
Comparableoperatingincome(loss) $ 730.3 $ 797.8 (8%) $ 1,453.1 $ 1,489.1 (2%)
Consolidatedincome(loss)fromunconsolidatedinvestments $ (470.8) $ (80.7) NM $ (1,370.0) $ (651.9) (110%)
ComparableAdjustments 439.6 44.5 NM 1,295.2 587.7 120%
Comparableincome(loss)fromunconsolidatedinvestments $ (31.2) $ (36.2) 14% $ (74.8) $ (64.2) (17%)
ConsolidatedEBIT $ 699.1 $ 761.6 (8%) $ 1,378.3 $ 1,424.9 (3%)
(1) Werecognizeourequityinearnings(losses)forCanopyonatwo-monthlag.Thesummarizedfinancialinformationbelowrepresents100%ofCanopy’sreportedresults,preparedinaccordancewithgenerallyacceptedaccountingprinciplesintheU.S.(“GAAP”),andconvertedfromCanadiandollarstoU.S.dollarsusingtheapplicableweightedaverageexchangerates.
ThreeMonthsEnded SixMonthsEndedAugust31,
2021August31,
2020PercentChange
August31,2021
August31,2020
PercentChange
Netsales $ 110.8 $ 79.7 39% $ 228.1 $ 160.0 43%Grossprofit(loss) $ 22.2 $ 4.7 NM $ 29.9 $ (52.6) NM
%Netsales 20.0% 5.9% 13.1% (32.9)%Operatingincome(loss) $ (152.8) $ (124.4) (23%) $ (337.0) $ (857.6) 61%
%Netsales NM NM NM NM
NM=NotMeaningful
ConstellationBrands,Inc.Q2FY2022EarningsRelease #WORTHREACHINGFORI12
CONSTELLATIONBRANDS,INC.ANDSUBSIDIARIESRECONCILIATIONSOFGAAPTONON-GAAPFINANCIALMEASURES
(inmillions,exceptpersharedata)(unaudited)
WereportourfinancialresultsinaccordancewithGAAP.However,non-GAAPfinancialmeasures,asdefinedinthereconciliationtablesbelow,areprovidedbecauseweusethisinformationinevaluatingtheresultsofourcoreoperationsand/orinternalgoalsetting.Inaddition,webelievethisinformationprovidesinvestorsvaluableinsightonunderlyingbusinesstrendsandresultsinordertoevaluateyear-over-yearfinancialperformance.Seethetablesbelowforsupplementalfinancialdataandcorrespondingreconciliationsofthesenon-GAAPfinancialmeasurestoGAAPfinancialmeasuresfortheperiodspresented.Non-GAAPfinancialmeasuresshouldbeviewedinadditionto,andnotasanalternativefor,ourreportedresultspreparedinaccordancewithGAAP.Pleaserefertoourwebsiteathttp://www.cbrands.com/investors/reportingforamoredetaileddescriptionandfurtherdiscussionofthesenon-GAAPfinancialmeasures.
ThreeMonthsEndedAugust31,2021 ThreeMonthsEndedAugust31,2020 PercentChange-ReportedBasis(GAAP)
PercentChange-
ComparableBasis
(Non-GAAP)
ReportedBasis(GAAP)
ComparableAdjustments
ComparableBasis
(Non-GAAP)
ReportedBasis(GAAP)
ComparableAdjustments
ComparableBasis
(Non-GAAP)
Netsales $ 2,371.1 $ 2,371.1 $ 2,260.4 $ 2,260.4 5% 5%
Costofproductsold (1,141.4) $ (15.2) (1,044.6) $ (28.8)
Grossprofit 1,229.7 (15.2)$ 1,214.5 1,215.8 (28.8)$ 1,187.0 1% 2%
Selling,general,andadministrativeexpenses (490.5) 6.3 (399.1) 9.9
Impairmentofassetsheldforsale — 22.0 (22.0)
Operatingincome(loss) 739.2 (8.9)$ 730.3 838.7 (40.9)$ 797.8 (12%) (8%)
Income(loss)fromunconsolidatedinvestments (470.8) 439.6 (80.7) 44.5
EBIT $ 699.1 $ 761.6 NA (8%)
Interestexpense (95.8) (100.2)
Lossonextinguishmentofdebt (29.4) 29.4 (0.6) 0.6
Income(loss)beforeincometaxes 143.2 460.1 $ 603.3 657.2 4.2 $ 661.4 (78%) (9%)
(Provisionfor)benefitfromincometaxes(1) (131.3) (2.7) (135.4) 23.0
Netincome(loss) 11.9 457.4 521.8 27.2
Netincome(loss)attributabletononcontrollinginterests (10.4) (9.7)
Netincome(loss)attributabletoCBI $ 1.5 $ 457.4 $ 458.9 $ 512.1 $ 27.2 $ 539.3 (100%) (15%)
EPS(2) $ 0.01 $ 2.38 $ 2.38 $ 2.62 $ 0.14 $ 2.76 (100%) (14%)
Weightedaveragecommonsharesoutstanding–diluted 192.530 192.530 195.142 195.142
Grossmargin 51.9% 51.2% 53.8% 52.5%
Operatingmargin 31.2% 30.8% 37.1% 35.3%
Effectivetaxrate 91.7% 22.2% 20.6% 17.0%
ConstellationBrands,Inc.Q2FY2022EarningsRelease #WORTHREACHINGFORI13
ThreeMonthsEndedAugust31,2021 ThreeMonthsEndedAugust31,2020
ComparableAdjustments
Acquisitions,Divestitures,andRelatedCosts(3)
RestructuringandOtherStrategicBusiness
DevelopmentCosts(4) Other(5) Total
Acquisitions,Divestitures,andRelatedCosts(3)
RestructuringandOtherStrategicBusiness
DevelopmentCosts(4) Other(5) Total
Costofproductsold $ 0.1 $ — $ 15.1 $ 15.2 $ (0.1)$ (0.8)$ 29.7 $ 28.8Selling,general,andadministrativeexpenses $ (5.6)$ 0.8 $ (1.5)$ (6.3) $ (6.0)$ (5.8)$ 1.9 $ (9.9)Impairmentofassetsheldforsale $ — $ — $ — $ — $ — $ 22.0 $ — $ 22.0Operatingincome(loss) $ (5.5)$ 0.8 $ 13.6 $ 8.9 $ (6.1)$ 15.4 $ 31.6 $ 40.9Income(loss)fromunconsolidatedinvestments $ (1.7)$ (45.4)$ (392.5)$ (439.6) $ (0.4)$ (3.4)$ (40.7)$ (44.5)Lossonextinguishmentofdebt $ — $ — $ (29.4)$ (29.4) $ — $ — $ (0.6)$ (0.6)(Provisionfor)benefitfromincometaxes(1) $ 4.5 $ 1.6 $ (3.4)$ 2.7 $ 0.5 $ (8.7)$ (14.8)$ (23.0)Netincome(loss)attributabletoCBI $ (2.7)$ (43.0)$ (411.7)$ (457.4) $ (6.0)$ 3.3 $ (24.5)$ (27.2)
EPS(2) $ (0.01)$ (0.22)$ (2.14)$ (2.38) $ (0.03)$ 0.02 $ (0.13)$ (0.14)(1) TheeffectivetaxrateappliedtoeachComparableAdjustmentamountisgenerallybaseduponthejurisdictioninwhichtheComparableAdjustmentwasrecognized.Forthe
threemonthsandsixmonthsendedAugust31,2021,the(provisionfor)benefitfromincometaxesincludesanetincometaxbenefitrecognizedasaresultofadjustmentstovaluationallowances.ForthesixmonthsendedAugust31,2021,the(provisionfor)benefitfromincometaxesalsoincludesanetincometaxprovisionrecognizedasaresultofalegislativeupdateinSwitzerland.ForthethreemonthsandsixmonthsendedAugust31,2020,the(provisionfor)benefitfromincometaxesincludestherecognitionofanetincometaxprovisionprimarilyrelatedtounrealizednetlossfromthemarktofairvalueofourinvestmentinCanopyGrowthCorporation("Canopy").ForthesixmonthsendedAugust31,2020,the(provisionfor)benefitfromincometaxesalsoincludes(i)anetincometaxprovisionrecognizedasaresultofadjustmentstovaluationallowancesand(ii)anetincometaxprovisionrelatedtolegislativeandgovernmentalinitiativesundertheCoronavirusAid,Relief,andEconomicSecurityAct(“CARESAct”).
(2) Maynotsumduetoroundingaseachitemiscomputedindependently.ForthesixmonthsendedAugust31,2021,thecomparableadjustmentsandcomparablebasisdilutednetincomepersharearecalculatedonafullydilutivebasis.(6)
(3) ForthethreemonthsendedAugust31,2021,acquisitions,divestitures,andrelatedcostsprimarilyconsistoftransitionservicesagreementsactivityrelatedtotheWineandSpiritsDivestitures,partiallyoffsetbythenetincometaxbenefitrecognizedforadjustmentstovaluationallowances.ForthethreemonthsendedAugust31,2020,acquisitions,divestitures,andrelatedcostsprimarilyconsistofalossinconnectionwithworkingcapitaladjustmentsonthesaleoftheBlackVelvetCanadianWhiskybusinessandtransactioncostsassociatedwiththethen-pendingsaleofaportionofthewineandspiritsbusiness.
(4) ForthethreemonthsendedAugust31,2021,restructuringandotherstrategicbusinessdevelopmentcostsprimarilyconsistofequitylossesfromCanopylargelyrelatedtocostsdesignedtoimprovetheirorganizationalfocus,streamlineoperations,andalignproductcapabilitywithprojecteddemand.ForthethreemonthsendedAugust31,2020,restructuringandotherstrategicbusinessdevelopmentcostsconsistprimarilyofareductiontothepreviouslyrecognizedimpairmentoflong-livedassetsheldforsale,partiallyoffsetbycoststooptimizeourportfolio,gainefficiencies,andreduceourcoststructurewithinthewineandspiritssegment.
(5) ForthethreemonthsendedAugust31,2021,otherconsistsprimarilyof(i)anunrealizednetlossfromthemarktofairvalueofourinvestmentinCanopyand(ii)alossonextinguishmentofdebt,partiallyoffsetby(i)anetgainassociatedwithCanopyequityearnings(losses)and(ii)anetgainfromthemarktofairvalueofundesignatedcommodityderivativecontracts.ForthethreemonthsendedAugust31,2020,otherconsistsprimarilyofanunrealizednetlossfromthemarktofairvalueofourinvestmentinCanopyandcostsassociatedwithCanopyequityearnings(losses),partiallyoffsetbyanetgainfromthemarktofairvalueofundesignatedcommodityderivativecontracts.
ConstellationBrands,Inc.Q2FY2022EarningsRelease #WORTHREACHINGFORI14
CONSTELLATIONBRANDS,INC.ANDSUBSIDIARIESRECONCILIATIONSOFGAAPTONON-GAAPFINANCIALMEASURES(continued)
(inmillionsexceptpersharedata)(unaudited)
SixMonthsEndedAugust31,2021 SixMonthsEndedAugust31,2020 PercentChange-ReportedBasis(GAAP)
PercentChange-
ComparableBasis
(Non-GAAP)
ReportedBasis(GAAP)
ComparableAdjustments
ComparableBasis
(Non-GAAP)
ReportedBasis(GAAP)
ComparableAdjustments
ComparableBasis
(Non-GAAP)
Netsales $ 4,397.6 $ 4,397.6 $ 4,223.8 $ 4,223.8 4% 4%
Costofproductsold (2,048.6) $ (33.3) (2,019.7) $ 16.5
Grossprofit 2,349.0 (33.3)$ 2,315.7 2,204.1 16.5 $ 2,220.6 7% 4%
Selling,general,andadministrativeexpenses (868.8) 6.2 (752.4) 20.9
Impairmentofbreweryconstructioninprogress (665.9) 665.9 —
Impairmentofassetsheldforsale — (3.0) 3.0
Operatingincome(loss) 814.3 638.8 $ 1,453.1 1,448.7 40.4 $ 1,489.1 (44%) (2%)
Income(loss)fromunconsolidatedinvestments (1,370.0) 1,295.2 (651.9) 587.7
EBIT $ 1,378.3 $ 1,424.9 NA (3%)
Interestexpense (182.5) (200.2)
Lossonextinguishmentofdebt (29.4) 29.4 (7.6) 7.6
Income(loss)beforeincometaxes (767.6) 1,963.4 $ 1,195.8 589.0 635.7 $ 1,224.7 NM (2%)
(Provisionfor)benefitfromincometaxes(1) (117.8) (140.8) (239.8) 17.1
Netincome(loss) (885.4) 1,822.6 349.2 652.8
Netincome(loss)attributabletononcontrollinginterests (21.2) (15.0)
Netincome(loss)attributabletoCBI $ (906.6) $ 1,822.6 $ 916.0 $ 334.2 $ 652.8 $ 987.0 NM (7%)
EPS(2) $ (4.77) $ 9.39 $ 4.72 $ 1.71 $ 3.35 $ 5.06 NM (7%)
Weightedaveragecommonsharesoutstanding–diluted(6) 169.025 25.170 194.195 194.962 194.962
Grossmargin 53.4% 52.7% 52.2% 52.6%
Operatingmargin 18.5% 33.0% 34.3% 35.3%
Effectivetaxrate (15.3)% 21.6% 40.7% 18.2%
ConstellationBrands,Inc.Q2FY2022EarningsRelease #WORTHREACHINGFORI15
SixMonthsEndedAugust31,2021 SixMonthsEndedAugust31,2020
ComparableAdjustments
Acquisitions,Divestitures,andRelatedCosts(7)
RestructuringandOtherStrategicBusiness
DevelopmentCosts(8) Other(9) Total
Acquisitions,Divestitures,andRelatedCosts(7)
RestructuringandOtherStrategicBusiness
DevelopmentCosts(8) Other(9) Total
Costofproductsold $ 0.1 $ (2.6)$ 35.8 $ 33.3 $ (0.1)$ (25.1)$ 8.7 $ (16.5)
Selling,general,andadministrativeexpenses $ (4.6)$ (0.1)$ (1.5)$ (6.2) $ (7.4)$ (8.9)$ (4.6)$ (20.9)
Impairmentofbreweryconstructioninprogress $ — $ — $ (665.9)$ (665.9) $ — $ — $ — $ —
Impairmentofassetsheldforsale $ — $ — $ — $ — $ — $ (3.0)$ — $ (3.0)
Operatingincome(loss) $ (4.5)$ (2.7)$ (631.6)$ (638.8) $ (7.5)$ (37.0)$ 4.1 $ (40.4)
Income(loss)fromunconsolidatedinvestments $ (3.3)$ (70.0)$ (1,221.9)$ (1,295.2) $ (0.9)$ (238.8)$ (348.0)$ (587.7)
Lossonextinguishmentofdebt $ — $ — $ (29.4)$ (29.4) $ — $ — $ (7.6)$ (7.6)
(Provisionfor)benefitfromincometaxes(1) $ 4.3 $ 3.4 $ 133.1 $ 140.8 $ (23.1)$ 13.2 $ (7.2)$ (17.1)
Netincome(loss)attributabletoCBI $ (3.5)$ (69.3)$ (1,749.8)$ (1,822.6) $ (31.5)$ (262.6)$ (358.7)$ (652.8)
EPS(2) $ (0.02)$ (0.36)$ (9.01)$ (9.39) $ (0.16)$ (1.35)$ (1.84)$ (3.35)
(6) ForthesixmonthsendedAugust31,2021,wehaveexcludedthefollowingweightedaveragecommonsharesoutstandingfromthecalculationofdilutednetincome(loss)percommonshare,astheeffectofincludingthesewouldhavebeenanti-dilutive,inmillions:
ClassBConvertibleCommonStock 23.234Stock-basedawards,primarilystockoptions 1.936
(7) ForthesixmonthsendedAugust31,2021,acquisitions,divestitures,andrelatedcostsprimarilyconsistoftransitionservicesagreementsactivityrelatedtotheWineandSpiritsDivestitures,partiallyoffsetbythenetincometaxbenefitrecognizedforadjustmentstovaluationallowances.ForthesixmonthsendedAugust31,2020,acquisitions,divestitures,andrelatedcostsconsistprimarilyof(i)anetincometaxprovisionrecognizedfortheadjustmentstovaluationallowances,(ii)anetlossonforeigncurrencycontracts,(iii)alossinconnectionwithworkingcapitaladjustmentsonthesaleoftheBlackVelvetCanadianWhiskybusiness,and(iv)transactioncostsassociatedwiththethen-pendingsaleofaportionofthewineandspiritsbusiness,partiallyoffsetbyanetgainrecognizedinconnectionwithavineyardsale.
(8) ForthesixmonthsendedAugust31,2021,andAugust31,2020,restructuringandotherstrategicbusinessdevelopmentcostsconsistprimarilyofequitylossesfromCanopyrelatedtocostsdesignedtoimprovetheirorganizationalfocus,streamlineoperations,andalignproductcapabilitywithprojecteddemand.ThesixmonthsendedAugust31,2020,alsoincludedcoststooptimizeourportfolio,gainefficiencies,reduceourcoststructure,andimpairmentsoflong-livedassetsheldforsalewithinthewineandspiritssegment.
(9) ForthesixmonthsendedAugust31,2021,otherconsistsprimarilyof(i)anunrealizednetlossfromthemarktofairvalueofourinvestmentinCanopy,(ii)animpairmentoflong-livedassetsinconnectionwithcertainassetsattheMexicaliBrewery,(iii)alossonextinguishmentofdebt,and(iv)anetincometaxprovisionrecognizedasaresultofalegislativeupdateinSwitzerland,partiallyoffsetby(i)anetgainassociatedwithCanopyequityearnings(losses),and(ii)anetgainfromthemarktofairvalueofundesignatedcommodityderivativecontracts.ForthesixmonthsendedAugust31,2020,otherconsistsprimarilyof(i)anunrealizednetlossfromthemarktofairvalueofourinvestmentinCanopy,(ii)costsassociatedwithCanopyequityearnings(losses),(iii)anetincometaxprovisionrelatedtotheCARESAct,and(iv)incrementalcostsincurredrelatedtotheCOVID-19pandemic,partiallyoffsetbyanetgainfromthemarktofairvalueofundesignatedcommodityderivativecontracts.
ConstellationBrands,Inc.Q2FY2022EarningsRelease #WORTHREACHINGFORI16
CONSTELLATIONBRANDS,INC.ANDSUBSIDIARIESRECONCILIATIONSOFGAAPTONON-GAAPFINANCIALMEASURES(continued)
(inmillions,exceptpersharedata)(unaudited)
CanopyEquityEarnings(Losses)andRelatedActivities(“CanopyEIE”)CanopyEIEnon-GAAPfinancialmeasuresareprovidedbecausemanagementusesthisinformationtomonitorourinvestmentinCanopy.Inaddition,webelievethisinformationprovidesinvestorsvaluableinsightonunderlyingbusinesstrendsandresultsinordertoevaluateyear-over-yearfinancialperformance.
ThreeMonthsEnded SixMonthsEnded
August31,2021
August31,2020
August31,2021
August31,2020
Equityearnings(losses)andrelatedactivities-reportedbasis,CanopyEIE(GAAP)(1) $ 120.5 $ (31.0) $ (35.3) $ (408.6)
ComparableAdjustments(2)(3) (150.4) (3.1) (38.9) 342.8
Equityearnings(losses)andrelatedactivities-comparablebasis,CanopyEIE(Non-GAAP) (29.9) (34.1) (74.2) (65.8)
(Provisionfor)benefitfromincometaxes(3) 4.0 5.3 13.6 9.9
Netincome(loss)attributabletoCBI-comparablebasis,CanopyEIE(Non-GAAP) $ (25.9) $ (28.8) $ (60.6) $ (55.9)
ThreeMonthsEnded SixMonthsEnded
August31,2021
August31,2020
August31,2021
August31,2020
EPS-reportedbasis,CanopyEIE(GAAP) $ 0.62 $ (0.13) $ (0.07) $ (2.06)
ComparableAdjustments-CanopyEIE(Non-GAAP) (0.76) (0.02) (0.25) 1.72
EPS-comparablebasis,CanopyEIE(Non-GAAP)(4) $ (0.13) $ (0.15) $ (0.31) $ (0.29)
ThreeMonthsEnded
August31,2021 August31,2020
Income(loss)beforeincome
taxes
(Provisionfor)benefitfrom
incometaxes(3)Effectivetaxrate(5)
Income(loss)beforeincome
taxes
(Provisionfor)benefitfrom
incometaxes(3)Effectivetaxrate(5)
Reportedbasis(GAAP) $ 143.2 $ (131.3) 91.7% 657.2 (135.4) 20.6%
ComparableAdjustments-(Non-GAAP) 460.1 (2.7) 4.2 23.0
Comparablebasis(Non-GAAP) 603.3 (134.0) 22.2% $ 661.4 $ (112.4) 17.0%
Comparablebasis,CanopyEIE(Non-GAAP) (29.9) 4.0 (34.1) 5.3
Comparablebasis,excludingCanopyEIE(Non-GAAP) $ 633.2 $ (138.0) 21.8% $ 695.5 $ (117.7) 16.9%
ThreeMonthsEnded SixMonthsEnded
August31,2021
August31,2020
August31,2021
August31,2020
EPS-comparablebasis(Non-GAAP)(6) $ 2.38 $ 2.76 $ 4.72 $ 5.06
Comparablebasis,CanopyEIE(Non-GAAP) 0.13 0.15 0.31 0.29
EPS-comparablebasis,excludingCanopyEIE(Non-GAAP)(4) $ 2.52 $ 2.91 $ 5.03 $ 5.35
(1) Equityearnings(losses)andrelatedactivitiesareincludedinincome(loss)fromunconsolidatedinvestments.(2) ComparableAdjustments,CanopyEIEinclude:restructuringandotherstrategicbusinessdevelopmentcosts,unrealizednet
(gain)lossfromthemarktofairvalueofsecuritiesmeasuredatfairvalueandrelatedactivities,share-basedcompensationexpenserelatedtoacquisitionmilestones,acquisitioncosts,lossondilutionduetoCanopy’sissuanceofadditionalstock,andother(gains)losses.
ConstellationBrands,Inc.Q2FY2022EarningsRelease #WORTHREACHINGFORI17
(3) TheComparableAdjustmenteffectivetaxrateappliedtoeachComparableAdjustmentamountisgenerallybaseduponthejurisdictioninwhichtheadjustmentwasrecognized.ThebenefitfromincometaxeseffectivetaxrateappliedtoourCanopyequityearnings(losses)andrelatedactivitiesisgenerallybasedonthetaxratesofthelegalentitiesthatholdourinvestment.
(4) Maynotsumduetoroundingaseachitemiscomputedindependently.ForthesixmonthsendedAugust31,2021,thecomparableadjustmentsandcomparablebasisdilutednetincomepersharearecalculatedonafullydilutivebasis.
(5) EffectivetaxrateisnotconsideredaGAAPfinancialmeasure,forpurposesofthisreconciliation,wederivedthereportedGAAPmeasurebasedonGAAPresults,whichservesasthebasisforthereconciliationtothecomparablenon-GAAPfinancialmeasure.
(6) Seereconciliationoftheapplicablenon-GAAPfinancialmeasuresonpages13and15.
EPSGuidance RangefortheYearEndingFebruary28,2022
ForecastedEPS-reportedbasis(GAAP) $ 0.30 $ 0.60Acquisitions,divestitures,andrelatedcosts(1) 0.06 0.06Restructuringandotherstrategicbusinessdevelopmentcosts(2) 0.36 0.36Other(3) 9.12 9.12Comparablebasis,CanopyEIE(Non-GAAP) 0.31 0.31
ForecastedEPS-comparablebasis,excludingCanopyEIE(Non-GAAP)(4) $ 10.15 $ 10.45
ActualfortheYearEndedFebruary28,
2021EPS-reportedbasis(GAAP) $ 10.23
Acquisitions,divestitures,andrelatedcosts(1) 0.12Restructuringandotherstrategicbusinessdevelopmentcosts(2) 1.73Other(3) (2.11)
EPS-comparablebasis(Non-GAAP)(4) 9.97Comparablebasis,CanopyEIE(Non-GAAP) 0.48
EPS-comparablebasis,excludingCanopyEIE(Non-GAAP)(4) $ 10.44
(1) Acquisitions,divestitures,andrelatedcostsinclude:(4) EstimatedfortheYearEnding
February28,2022
ActualfortheYearEndedFebruary28,
2021
Transitionservicesagreementsactivity $ 0.06 $ —
Netincometaxprovisionrecognizedforthereversalofvaluationallowances $ (0.02) $ 0.14
Net(gain)lossonsaleofbusiness $ (0.01) $ (0.06)
Net(gain)lossonsaleofvineyard $ — $ (0.03)
Net(gain)lossonforeigncurrencyderivativecontracts $ — $ 0.03
Transaction,integration,andotheracquisition-relatedcostsinconnectionwith:
InvestmentinCanopy $ 0.02 $ 0.01
WineandSpiritsDivestitures $ — $ 0.02
Copper&Kingsacquisition $ — $ 0.01
(2) FortheyearendingFebruary28,2022,andyearendedFebruary28,2021,restructuringandotherstrategicbusinessdevelopmentcostsprimarilyconsistofequitylossesfromCanopylargelyrelatedtocostsdesignedtoimprovetheirorganizationalfocus,streamlineoperations,andalignproductcapabilitywithprojecteddemand.FortheyearendedFebruary28,2021,restructuringandotherstrategicbusinessdevelopmentcostsalsoincludedimpairmentsoflong-livedassetsheldforsaleandcoststooptimizeourportfolio,gainefficiencies,andreduceourcoststructureprimarilywithinthewineandspiritssegment.
ConstellationBrands,Inc.Q2FY2022EarningsRelease #WORTHREACHINGFORI18
(3) Otherincludes:(4) EstimatedfortheYearEnding
February28,2022
ActualfortheYearEndedFebruary28,
2021
Unrealizednet(gain)lossfrommarktofairvalueofourinvestmentinCanopy $ 6.61 $ (3.03)
Impairmentofbreweryconstructioninprogress $ 3.09 $ —
Lossonextinguishmentofdebt $ 0.11 $ 0.05
NetincometaxprovisionrecognizedasaresultofalegislativeupdateinSwitzerland $ 0.06 $ —
Unconsolidatedinvestments,other $ (0.37) $ 0.03
Canopyequity(earnings)lossesandrelatedactivitiescomparableadjustments $ (0.25) $ 0.63
Net(gain)lossfrommarktofairvalueofundesignatedcommodityderivativecontracts $ (0.14) $ (0.22)
(Gain)lossonchangeinestimatedfairvalueofacontingentliabilityassociatedwithpriorperiodacquisitions $ — $ (0.04)
Losson(recoveryof)write-downofcertaininventoryasaresultofsmokedamagesustainedduringwildfires $ — $ 0.28
NetincometaxprovisionrecognizedinconnectionwiththeCARESAct $ — $ 0.06
NetincometaxprovisionrecognizedinconnectionwiththemarktofairvalueofourinvestmentinCanopy $ — $ 0.04
COVID-19incrementalcosts $ — $ 0.04
Impairmentsofcertainlong-livedassets $ — $ 0.04
Lossoncontracttermination $ — $ 0.02(4) Maynotsumduetoroundingaseachitemiscomputedindependently.Thecomparableadjustmentsandcomparablebasis
dilutednetincomepersharearecalculatedonafullydilutivebasis.
FreeCashFlowGuidanceFreecashflow,asdefinedinthereconciliationbelow,isconsideredaliquiditymeasureandisconsideredtoprovideusefulinformationtoinvestorsabouttheamountofcashgenerated,whichcanthenbeused,afterrequireddebtserviceanddividendpayments,forothergeneralcorporatepurposes.Alimitationoffreecashflowisthatitdoesnotrepresentthetotalincreaseordecreaseinthecashbalancefortheperiod.Freecashflowshouldbeconsideredinadditionto,notasasubstitutefor,orsuperiorto,cashflowfromoperatingactivitiespreparedinaccordancewithGAAP.
RangefortheYearEndingFebruary28,2022
Netcashprovidedbyoperatingactivities(GAAP) $ 2,400.0 $ 2,600.0
Purchasesofproperty,plant,andequipment (1,000.0) (1,100.0)
Freecashflow(Non-GAAP) $ 1,400.0 $ 1,500.0
SixMonthsEnded
August31,2021
August31,2020
Netcashprovidedbyoperatingactivities(GAAP) $ 1,525.9 $ 1,444.9
Purchasesofproperty,plant,andequipment (353.4) (277.8)
Freecashflow(Non-GAAP) $ 1,172.5 $ 1,167.1
ConstellationBrands,Inc.Q2FY2022EarningsRelease #WORTHREACHINGFORI19