01—Abstract
Summary
Summary of the 10-K filed April 30, 2012. Cited figures are marked; the original filing is the authoritative source.
Constellation Brands, Inc. (STZ) reported net sales of $2,654.3 milliona for the fiscal year ended February 29, 2012 (Fiscal 2012), down from $3,332.0 million in Fiscal 2011, primarily due to the January 2011 sale of 80.1% of its Australian and U.K. business (the CWAE Divestiture), which accounted for a $680.3 million decrease.
Net sales for Constellation Wines North America (CWNA) rose to $2,654.3 millionb from $2,557.3 million. Operating income declined to $486.5 million from $502.5 million, and net income fell to $445.0 million from $559.5 million, which the company attributed to lower U.S. base branded wine volumes, higher restructuring charges and unusual items, and a higher provision for income taxes. Diluted Class A EPS was $2.13 versus $2.62 in the prior year.
The balance sheet and cash flow picture shows operating cash flow of $784.1 millionc, capital expenditures of $68.4 million, and treasury stock purchases of $413.7 million. Total debt outstanding was $3,129.5 million at year-end, down $106.8 million. The company completed its $500.0 million 2012 share repurchase authorization and, in April 2012, authorized a new $1.0 billion program expected to be executed over two years, with approximately $500.0 million planned for Fiscal 2013.
In April 2012 it issued $600.0 milliond of 6% Senior Notes due 2022, and it is considering refinancing its 2006 Credit Agreement, which has a revolving portion maturing in June 2013. Key risks highlighted in the filing include the refinancing of the senior credit facility, dependence on U.S. wholesale distributors and government agencies, grape and glass supply concentration, the Crown Imports joint venture with Grupo Modelo, and ongoing Project Fusion systems implementation. The company also disclosed a $38.1 million impairment of Canadian trademarks in Fiscal 2012.
02—Key points
Key Highlights
- Net sales fell 20% to $2,654.3 million, primarily reflecting the $680.3 million impact of the CWAE Divestiture.
- Net income decreased 20% to $445.0 million; diluted Class A EPS was $2.13 versus $2.62 in Fiscal 2011.
- Operating income declined 3% to $486.5 million, reflecting lower U.S. base branded wine volumes and higher restructuring charges and unusual items.
- Net cash provided by operating activities was $784.1 million; capital expenditures were $68.4 million.
- Repurchased 21,234,266 Class A shares for $413.7 million in Fiscal 2012 and completed the $500.0 million 2012 authorization after year-end; a new $1.0 billion authorization was approved in April 2012.
- Total debt was $3,129.5 million at February 29, 2012, down $106.8 million; the company issued $600.0 million of 6% Senior Notes due 2022 in April 2012.
- Impairment losses on intangible assets of $38.1 million were recorded, related to trademarks in the Canadian business.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, Constellation Brands kept $0.15.
- Revenue$2.98B100.0%
- Cost of revenue−$1.92B64.3%
- Gross profit$1.06B35.7%
- Operating costs−$575.6M19.3%
- Operating income$486.5M16.3%
- Interest, other & tax−$41.5M1.4%
- Net income$445.0M14.9%
Where FY2012 revenue went
$2.98B- Cost of revenue: $1.59B, 53% of revenue
- SG&A: $537.5M, 18% of revenue
- Net income: $445.0M, 15% of revenue
- Other operating costs: $362.9M, 12% of revenue
- Interest, other & tax: $41.5M, 1.4% of revenue
Kept 15% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed April 30, 2012Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $2.98B$4.10B | −27.3% |
| Cost of Revenue | $1.59B$2.14B | −25.7% |
| Gross Profit | $1.06B$1.19B | −10.8% |
| SG&A Expenses | $537.50M$640.90M | −16.1% |
| Operating Income | $486.50M$502.50M | −3.2% |
| Interest Expense | $187.60M$198.80M | −5.6% |
| Net Income | $445.00M$559.50M | −20.5% |
05—Questions
Frequently Asked Questions
Why did net sales decline so sharply in Fiscal 2012?
The decline was primarily due to the CWAE Divestiture completed in January 2011, which reduced net sales by $680.3 million. Excluding that divestiture, CWNA net sales increased 4% to $2,654.3 million, aided by a $94.4 million benefit from wine sales to Europe, Australia and Japan that had previously been sold through the CWAE segment.
What drove the drop in net income?
Net income fell $114.5 million, or 20%, to $445.0 million. The filing attributes this to lower U.S. base branded wine volume, higher restructuring charges and unusual items, and an increase in the provision for income taxes. The Fiscal 2012 effective tax rate was 16.7%, compared with (1.5%) in Fiscal 2011, which had benefited from a $207.0 million deduction related to the CWAE Divestiture.
How is the company returning capital to shareholders?
The company has not paid cash dividends since its 1973 IPO and intends to retain earnings. It repurchased $413.7 million of Class A stock in Fiscal 2012 and, after year-end, used the remaining $86.3 million of the 2012 authorization to complete the $500.0 million program. In April 2012 the Board authorized up to $1.0 billion of repurchases, with about $500.0 million expected in Fiscal 2013.
What are the main refinancing risks?
The revolving portion of the 2006 Credit Agreement matures in June 2013, and the company is considering replacing it with a new $1,650.0 million senior credit facility. The filing states there can be no assurance that replacement terms will be as favorable as the current facility. The company also issued $600.0 million of 6% Senior Notes due May 2022 in April 2012, with estimated net proceeds of $582 million, that may be used to reduce tranche B term loan debt, for acquisitions, or for share repurchases.
06—Continue