01—Abstract
Summary
Summary of the 10-K filed April 29, 2009. Cited figures are marked; the original filing is the authoritative source.
Constellation Brands, Inc. (STZ) reported net sales of $3,654.6 milliona for fiscal 2009 (year ended February 28, 2009), down from $3,773.0 million in fiscal 2008, and a net loss of $301.4 million, compared with a net loss of $613.3 million in fiscal 2008.
The improvement in the loss was driven mainly by lower impairment charges, which totaled $300.4 millionb in fiscal 2009 versus $812.2 million in fiscal 2008, along with the benefit of the BWE acquisition. Operating income was $23.0 million, compared with an operating loss of $356.7 million the prior year. Impairments were concentrated in the U.K. business, including a $252.7 million goodwill impairment in the Constellation Wines segment's U.K. reporting unit, and Australian and U.K. business deterioration weighed on results.
Equity in earnings of equity method investees fell to $186.6 millionc from $257.9 million, reflecting $79.2 million of impairments on Matthew Clark and Ruffino. The company sold its value spirits business in March 2009 for $330.5 million, net of direct costs to sell, and used proceeds to prepay $260.0 million of term loans after year end. Total debt was $4,433.6 million at February 28, 2009, down $823.9 million, though the debt-to-total-capitalization ratio rose to 69.9% from 65.5%.
Cash flow from operations was $506.9 milliond and capital expenditures were $128.6 million. The company disclosed a material weakness in internal control over financial reporting related to inventory reconciliation at its Australian operations, and KPMG issued an adverse opinion on internal control as a result. Management also announced a Fiscal 2010 Global Initiative on April 7, 2009, which includes eliminating about five percent of the global workforce.
02—Key points
Key Highlights
- Net sales declined to $3,654.6 million in fiscal 2009 from $3,773.0 million in fiscal 2008, reflecting divestitures, unfavorable foreign currency translation and the equity-method accounting for Matthew Clark.
- Net loss narrowed to $301.4 million from $613.3 million, as impairment losses fell to $300.4 million from $812.2 million.
- Operating income was $23.0 million versus an operating loss of $356.7 million in fiscal 2008.
- Total debt was $4,433.6 million at February 28, 2009, down $823.9 million, but the debt-to-total-capitalization ratio rose to 69.9% from 65.5%.
- The March 2009 sale of the value spirits business generated $330.5 million, net of direct costs to sell, and was followed by a $260.0 million term loan prepayment.
- Management identified a material weakness in inventory reconciliation at the Australian operations, and KPMG issued an adverse opinion on internal control over financial reporting.
- The Fiscal 2010 Global Initiative, announced April 7, 2009, targets elimination of about five percent of the global workforce and facility closures, with costs expected by February 28, 2011.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2009, Constellation Brands lost $0.06.
- Revenue$4.72B100.0%
- Cost of revenue−$3.49B74.0%
- Gross profit$1.23B26.0%
- Operating costs−$1.20B25.4%
- Operating income$29.6M0.6%
- Interest, other & tax−$331.0M7.0%
- Net income−$301.4M6.4%
Where FY2009 revenue went
$4.72B- Cost of revenue: $2.42B, 51% of revenue
- Other operating costs: $1.44B, 30% of revenue
- SG&A: $832.0M, 18% of revenue
- Operating income: $29.6M, 0.6% of revenue
Kept 0.6% as operating incomeOperating income $29.6M · 0.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2009filed April 29, 2009Financial Statements
05—Questions
Frequently Asked Questions
Why did the net loss narrow in fiscal 2009?
The net loss was $301.4 million compared with $613.3 million in fiscal 2008. Impairment losses on goodwill and intangible assets fell to $300.4 million from $812.2 million, which more than offset lower equity in earnings of equity method investees and a higher provision for income taxes of $194.6 million.
What drove the impairment charges in fiscal 2009?
Impairments of $252.8 million on goodwill and $47.6 million on intangible assets related primarily to the Constellation Wines segment's U.K. reporting unit. The filing attributes these to accelerated deterioration in the U.K. business during the fourth quarter and lower long-term forecasts.
How is the company's debt position after the value spirits sale?
Total debt was $4,433.6 million at February 28, 2009. After year end, the company used proceeds from asset sales, including the value spirits business, to prepay $260.0 million on its tranche A and tranche B term loans. The debt-to-total-capitalization ratio nonetheless increased to 69.9% from 65.5%.
What material weakness did management and the auditor report?
Management concluded that internal control over financial reporting was not effective because of a material weakness in the reconciliation and review of bulk inventory accounts at the Australian operations, including vineyard farming costs and cost release by vintage year. KPMG issued an adverse opinion on internal control. The company said the resulting adjustments were immaterial and has begun corrective actions.
What is the Fiscal 2010 Global Initiative?
Announced April 7, 2009, the Global Initiative aims to simplify the business and reduce costs globally. It includes eliminating about five percent of the global workforce, closing certain office, production and warehouse facilities, terminating contracts, and consolidating the remaining spirits business into North American wine. The company expects costs to be recognized by February 28, 2011.
06—Continue