01—Abstract
Summary
Summary of the 10-K filed April 25, 2016. Cited figures are marked; the original filing is the authoritative source.
Constellation Brands, Inc. reported fiscal 2016 (year ended February 29, 2016) net sales of $6,548.4 milliona, up from $6,028.0 million in fiscal 2015, with the Beer segment net sales of $3,622.6 million and Wine and Spirits net sales of $2,925.8 million.
Operating income rose to $1,765.1 millionb from $1,500.2 million, and net income attributable to CBI increased to $1,054.9 million from $839.3 million, supported by strong demand for the Mexican beer portfolio, benefits from the Meiomi and Ballast Point acquisitions, and lower cost of product sold. Diluted net income per Class A share was $5.18 versus $4.17 a year earlier. Cash flow from operations was $1,413.7 million, and capital expenditures were $891.3 million, largely for the Mexico Beer Expansion Projects, which the company estimates will total about $4.5 billion through fiscal 2021.
Total debt outstanding was $8,081.2 millionc at February 29, 2016, up $784.7 million, and the company began a quarterly dividend program in fiscal 2016, declaring $0.40 per Class A share in April 2016 and expecting to return approximately $320 million to stockholders in fiscal 2017 through dividends. Key forward-looking items include the pending $285 million acquisition of The Prisoner Wine Company brand portfolio, a plan to evaluate an initial public offering of a portion of the Canadian wine business with a decision expected in calendar 2016, and reliance on a single Nava Brewery supplemented by an interim supply agreement with Anheuser-Busch InBev extended through June 2017. The Sands family controls a majority of the combined voting power.
02—Key points
Key Highlights
- Net sales rose 9% to $6,548.4 million, driven primarily by volume growth in the Mexican beer portfolio and net sales of branded wine acquired with Meiomi.
- Operating income increased 18% to $1,765.1 million; net income attributable to CBI grew 26% to $1,054.9 million.
- Beer segment net sales increased 14% to $3,622.6 million and segment operating income rose to $1,264.1 million from $1,017.8 million.
- Cash flow from operating activities was $1,413.7 million, compared with $1,081.0 million in fiscal 2015.
- Capital expenditures totaled $891.3 million, including $800.3 million in the Beer segment for the Mexico Beer Expansion Projects, estimated at about $4.5 billion through fiscal 2021.
- Total debt rose to $8,081.2 million, and the company initiated a quarterly cash dividend, with approximately $320 million expected to be returned to stockholders in fiscal 2017.
- The pending Prisoner acquisition for approximately $285 million and a possible IPO of a portion of the Canadian wine business are key strategic developments.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Constellation Brands kept $0.15.
- Revenue$7.22B100.0%
- Cost of revenue−$4.28B59.3%
- Gross profit$2.94B40.7%
- Operating costs−$1.18B16.3%
- Operating income$1.77B24.4%
- Interest, other & tax−$710.2M9.8%
- Net income$1.05B14.6%
Where FY2016 revenue went
$7.22B- Cost of revenue: $3.61B, 50% of revenue
- SG&A: $1.18B, 16% of revenue
- Net income: $1.05B, 15% of revenue
- Other operating costs: $675.4M, 9.3% of revenue
- Interest, other & tax: $710.2M, 9.8% of revenue
Kept 15% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed April 25, 2016Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $7.22B$6.67B | +8.3% |
| Cost of Revenue | $3.61B$3.45B | +4.5% |
| Gross Profit | $2.94B$2.58B | +14.1% |
| SG&A Expenses | $1.18B$1.08B | +9.2% |
| Operating Income | $1.77B$1.50B | +17.7% |
| Interest Expense | $314.70M$339.10M | −7.2% |
| Net Income | $1.05B$839.30M | +25.7% |
05—Questions
Frequently Asked Questions
What drove the growth in net sales and operating income in fiscal 2016?
Net sales increased $520.4 million, mainly from Beer's $434.0 million increase, driven by volume growth in the Mexican beer portfolio and favorable pricing in select markets, plus $86.4 million from Wine and Spirits, largely from Meiomi. Operating income increased $264.9 million, reflecting organic volume growth, lower cost of product sold, and acquisition benefits, partly offset by higher marketing spend.
How is the company funding its Mexico beer expansion?
The company states that cash flows from operating activities and financing activities, primarily short-term borrowings, are expected to provide adequate resources for its capital needs, including the Nava Brewery and glass plant expansions and the Mexicali Brewery construction. Fiscal 2017 capital expenditures are planned at $1.25 billion to $1.35 billion, with $1.15 billion to $1.25 billion for the Beer segment.
What are the main supply risks for the Mexican beer business?
The Nava Brewery is a single facility that currently can fill approximately 60% of current product requirements, with capacity expected to reach approximately 80% of projected requirements before the end of calendar 2016. The interim supply agreement with Anheuser-Busch InBev has been extended to June 2017, and extensions beyond three years require the approval of the U.S. Department of Justice, in its sole discretion.
What is the company's dividend policy after initiating payouts in fiscal 2016?
The Board declared a quarterly cash dividend of $0.40 per share of Class A Common Stock and $0.36 per share of Class B Convertible and Class 1 Common Stock, payable May 24, 2016. The company expects to pay quarterly dividends in the future, subject to Board approval, and expects to return approximately $320 million to stockholders in fiscal 2017 through cash dividends.
What is the Sands family's influence over the company?
Class B Common Stock, which carries 10 votes per share, is principally held by members of the Sands family. As of April 19, 2016, the Sands family's stock ownership represented a majority of the combined voting power of all classes of common stock, giving the family the power to elect a majority of directors and approve actions requiring stockholder approval.
06—Continue