01—Abstract
Summary
Summary of the 10-K filed April 20, 2023. Cited figures are marked; the original filing is the authoritative source.
Constellation Brands, Inc. reported net sales of $9.45 billiona for Fiscal 2023 (year ended February 28, 2023), up from $8.82 billion in Fiscal 2022, driven primarily by Beer net sales of $7.47 billion, which rose on shipment volume growth and favorable pricing in the Mexican beer portfolio.
Operating income was $2.84 billionb, but the company posted a net loss attributable to CBI of $71.0 million, compared with a net loss of $40.4 million in Fiscal 2022. The loss was driven by a $1.06 billion impairment of the Canopy Equity Method Investment and a $949.3 million equity loss from Canopy and related activities, which together produced a loss from unconsolidated investments of $2.04 billion. Cash flow from operations was $2.76 billion, and capital expenditures were $1.04 billion, largely for the Mexico Beer Projects.
The company expects to spend an additional $4.0 billion to $4.5 billionc on those projects over Fiscal 2024 through Fiscal 2026. Total debt rose to $12.46 billion, and the company paid $1.5 billion in cash to holders of Class B Stock in connection with the Reclassification, which was completed in November 2022. Share repurchases totaled $1.70 billion during the year, and the 2018 Authorization was fully utilized.
Looking ahead, the company expects its reported effective tax rate for Fiscal 2024 to be between 18% and 20%. It also plans to return approximately $650 milliond to stockholders through dividends in Fiscal 2024, and it estimates its proportional share of Canopy's pre-tax loss at approximately C$145 million to C$180 million. A pending Canopy Transaction could change the accounting for the Canopy investment, and the company has agreed to sell its Daleville Facility.
02—Key points
Key Highlights
- Consolidated net sales rose to $9,452.6 million from $8,820.7 million, with Beer net sales up to $7,465.0 million, including $463.9 million of Mexican beer volume growth and $279.7 million of favorable pricing.
- Net loss attributable to CBI widened to $71.0 million from $40.4 million, mainly due to a $1,060.3 million impairment of the Canopy Equity Method Investment and $949.3 million of equity losses from Canopy.
- Operating income increased 22% to $2,842.9 million, largely due to the prior-year Mexicali Brewery impairment and improvements within the Beer segment.
- Cash provided by operating activities was $2,756.9 million, while capital expenditures totaled $1,035.4 million, including $813.9 million for the Beer segment.
- Total debt rose to $12,461.3 million, an increase of $2,044.8 million, after the $1.5 billion Reclassification payment to Class B stockholders, funded in part by the $1.0 billion August 2022 Term Credit Agreement and commercial paper.
- The company repurchased $1,700.2 million of Class A Stock during Fiscal 2023, and the $3.0 billion 2018 Authorization was fully utilized.
- Guidance for Fiscal 2024 includes an expected effective tax rate of 18% to 20%, approximately $650 million in dividends, and $4.0 billion to $4.5 billion of additional Mexico Beer Projects spending over Fiscal 2024 through Fiscal 2026.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2023, Constellation Brands lost $0.01.
- Revenue$9.45B100.0%
- Cost of revenue−$4.68B49.5%
- Gross profit$4.77B50.5%
- Operating costs−$1.93B20.4%
- Operating income$2.84B30.1%
- Interest, other & tax−$2.91B30.8%
- Net income−$71.0M0.8%
Where FY2023 revenue went
$9.45B- Cost of revenue: $4.68B, 50% of revenue
- Operating income: $2.84B, 30% of revenue
- SG&A: $1.93B, 20% of revenue
Kept 30% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed April 20, 2023Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $9.45B$8.82B | +7.2% |
| Cost of Revenue | $4.68B$4.11B | +13.9% |
| Gross Profit | $4.77B$4.71B | +1.3% |
| SG&A Expenses | $1.93B$1.71B | +12.8% |
| Operating Income | $2.84B$2.33B | +21.9% |
| Net Income | -$71.00M-$40.40M | −75.7% |
05—Questions
Frequently Asked Questions
Why did Constellation Brands report a net loss despite growing operating income?
Operating income rose to $2,842.9 million, but income from unconsolidated investments was a loss of $2,036.4 million. That loss was driven mainly by a $1,060.3 million impairment of the Canopy Equity Method Investment and $949.3 million of equity losses from Canopy and related activities, which included a $461.4 million goodwill impairment at Canopy. Net loss attributable to CBI was $71.0 million.
What is driving growth in the Beer segment?
Beer net sales increased $713.4 million to $7,465.0 million. The filing attributes this to $463.9 million of volume growth in the Mexican beer portfolio and $279.7 million of favorable pricing in select markets, partially offset by $26.8 million of unfavorable product mix.
What is the status of the Canopy investment and what could change?
The company has consented to the Canopy Transaction, which would convert its Canopy common shares into non-voting Exchangeable Shares. If the company converts, it expects to stop applying the equity method and to account for the investment at fair value, which may add earnings volatility. The filing also states that Canopy expects an estimated pre-tax loss of C$425 million to C$525 million, and the company will record its proportional share of approximately C$145 million to C$180 million in Fiscal 2024.
How much capital is the company investing in its Mexican breweries?
The company has invested approximately $6.4 billion in the Mexico Beer Projects since the 2013 acquisition of the imported beer business, with over $750 million spent during Fiscal 2023. It expects to spend an additional $4.0 billion to $4.5 billion over Fiscal 2024 through Fiscal 2026, and plans to increase Mexican brewery capacity to approximately 67 to 72 million hectoliters by the end of Fiscal 2026 from about 42 million hectoliters at February 28, 2023.
What did the Reclassification mean for stockholders?
The Reclassification, completed November 10, 2022, converted each share of Class B Stock into one share of Class A Stock plus $64.64 in cash, without interest. The aggregate cash payment was $1.5 billion. The company funded the payment with its $1.0 billion August 2022 term loan and commercial paper borrowings, and it recorded $37.8 million of related non-recurring costs.
06—Continue