01—Abstract
Summary
Summary of the 10-K filed April 28, 2015. Cited figures are marked; the original filing is the authoritative source.
Constellation Brands, Inc. reported net sales of $6,028.0 milliona for the fiscal year ended February 28, 2015, up from $4,867.7 million in Fiscal 2014.
The increase was driven primarily by $941.1 millionb of net sales from products acquired in the Beer Business Acquisition, which the company describes as having made it the third-largest brewer and seller of beer in the U.S. Beer segment net sales rose to $3,188.6 million, while Wine and Spirits net sales were $2,839.4 million, essentially flat. Gross profit rose to $2,578.6 million, and gross margin improved to 42.8% of net sales from 40.9%. Net income attributable to CBI declined to $839.3 million from $1,943.1 million, primarily because Fiscal 2014 included a nontaxable $1,642.0 million gain on remeasurement of the preexisting 50% interest in Crown Imports and a $300.9 million impairment charge is absent in Fiscal 2015.
Diluted Class A EPS was $4.17c versus $9.83 a year earlier. Operating income fell to $1,500.2 million from $2,437.7 million for the same reasons. Operating cash flow was $1,081.0 million, and total debt stood at $7,348.0 million at February 28, 2015.
The company initiated a quarterly cash dividend on April 8, 2015, declaring $0.31d per Class A share, and expects to return approximately $240 million to stockholders in Fiscal 2016. Capital expenditures were $719.4 million in Fiscal 2015, with Fiscal 2016 planned at $1.05 billion to $1.15 billion, largely for the Brewery and glass plant expansions. Key risks include reliance on the single Nava, Mexico brewery and an interim supply agreement that the DOJ must approve for extensions beyond three years.
02—Key points
Key Highlights
- Net sales rose 24% to $6,028.0 million, driven by $941.1 million of net sales from the Beer Business Acquisition and organic Mexican beer growth.
- Beer segment net sales increased 12% to $3,188.6 million, with shipment volume up 10.4% to 201.4 million 24-pack, 12-ounce case equivalents.
- Net income attributable to CBI decreased 57% to $839.3 million, reflecting the absence of the prior-year $1,642.0 million remeasurement gain.
- Operating cash flow increased to $1,081.0 million from $826.2 million; capital expenditures were $719.4 million, mainly for Brewery expansion.
- Gross profit as a percent of net sales increased to 42.8% from 40.9%.
- The Board approved a quarterly cash dividend program on April 8, 2015, with an initial $0.31 per Class A share payable May 22, 2015; about $240 million is expected to be returned in Fiscal 2016.
- Total debt was $7,348.0 million at February 28, 2015, and the company reports compliance with its debt covenants.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Constellation Brands kept $0.13.
- Revenue$6.67B100.0%
- Cost of revenue−$4.09B61.4%
- Gross profit$2.58B38.6%
- Operating costs−$1.08B16.2%
- Operating income$1.50B22.5%
- Interest, other & tax−$660.9M9.9%
- Net income$839.3M12.6%
Where FY2015 revenue went
$6.67B- Cost of revenue: $3.45B, 52% of revenue
- SG&A: $1.08B, 16% of revenue
- Net income: $839.3M, 13% of revenue
- Other operating costs: $644.1M, 9.7% of revenue
- Interest, other & tax: $660.9M, 9.9% of revenue
Kept 13% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed April 28, 2015Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $6.67B$5.41B | +23.3% |
| Cost of Revenue | $3.45B$2.88B | +19.9% |
| Gross Profit | $2.58B$1.99B | +29.5% |
| SG&A Expenses | $1.08B$895.10M | +20.5% |
| Operating Income | $1.50B$2.44B | −38.5% |
| Interest Expense | $339.10M$330.90M | +2.5% |
| Net Income | $839.30M$1.94B | −56.8% |
05—Questions
Frequently Asked Questions
Why did net income fall so sharply in Fiscal 2015?
Fiscal 2014 included a nontaxable gain of $1,642.0 million from remeasuring the preexisting 50% equity interest in Crown Imports to fair value, plus a $300.9 million impairment of goodwill and intangible assets. Fiscal 2015 had neither. Net income attributable to CBI fell to $839.3 million from $1,943.1 million, and diluted Class A EPS fell to $4.17 from $9.83.
What is the main supply risk for the Mexican beer business?
The Brewery in Nava, Coahuila, Mexico has capacity of 10 million hectoliters, which the filing says covers about half of projected requirements. The company relies on an interim supply agreement with Anheuser-Busch InBev, and the U.S. Department of Justice holds approval rights over any extension beyond three years. The Brewery expansion to 20 million hectoliters is targeted for June 2016, with a further expansion to 25 million hectoliters by the end of calendar 2017.
What dividend has the company announced?
On April 8, 2015, the Board approved a dividend program and declared an initial quarterly cash dividend of $0.31 per share of Class A Common Stock, $0.28 per share of Class B Convertible Common Stock and $0.28 per share of Class 1 Common Stock, payable May 22, 2015 to holders of record on May 8, 2015. The company had not previously paid cash dividends since its 1973 initial public offering.
How much is the company spending on capital projects?
Fiscal 2015 capital expenditures were $719.4 million, including $587.3 million for the Beer segment. For Fiscal 2016 the company plans $1.05 billion to $1.15 billion, including $950 million to $1.05 billion for the Beer segment. Total spend on the Brewery and glass plant expansions from fiscal 2014 through fiscal 2018 is estimated at $1.9 billion to $2.3 billion.
How concentrated are the company's customers?
Net sales to the five largest customers represented 33.7% of net sales in Fiscal 2015, down from 36.6% in Fiscal 2014. Southern Wine and Spirits accounted for 15.4% of net sales and Republic National Distributing Company for 7.6%, both primarily in the Wine and Spirits segment.
06—Continue