01—Abstract
Summary
Summary of the 10-Q filed June 30, 2023. Cited figures are marked; the original filing is the authoritative source.
Constellation Brands, Inc. reported net sales of $2,514.9 milliona for the three months ended May 31, 2023 (First Quarter 2024), up from $2,363.2 million a year earlier, driven primarily by Beer segment growth.
Beer net sales rose to $2,098.6 millionb from $1,898.2 million on shipment volume growth within the Mexican beer portfolio and favorable pricing, while Wine and Spirits net sales declined to $416.3 million from $465.0 million. Operating income was $764.7 million versus $816.4 million in the prior-year quarter. Net income attributable to CBI fell to $135.9 million from $389.5 million, primarily due to a $123.5 million impairment of the Canopy Equity Method Investment, larger equity losses from Canopy ($219.8 million), and a $71.8 million unrealized loss on securities measured at fair value.
Income (loss) from unconsolidated investments was $(415.4) million, compared with $(187.9) million a year earlier. Interest expense rose to $118.2 millionc from $88.5 million, and the effective tax rate was 39.6% versus 23.9%. Diluted EPS for Class A Stock was $0.74 compared with $2.06.
Balance sheet and cash flow: cash and cash equivalents were $192.5 milliond at May 31, 2023. Net cash provided by operating activities was $665.4 million, and capital expenditures were $277.0 million.
The company issued $750.0 million of 4.90% senior notes due 2033 in May 2023, and total debt outstanding was $12,357.0 million. The company completed the Craft Beer Divestitures in June 2023 and removed Canopy as a reportable segment effective May 31, 2023.
02—Key points
Key Highlights
- Net sales rose to $2,514.9 million from $2,363.2 million, with Beer net sales up to $2,098.6 million on shipment volume growth and favorable pricing in the Mexican beer portfolio.
- Wine and Spirits net sales declined to $416.3 million from $465.0 million, reflecting lower branded shipment volume and the Wine Divestiture.
- Operating income was $764.7 million compared with $816.4 million, while gross profit was roughly flat at $1,257.8 million versus $1,255.0 million.
- Net income attributable to CBI decreased to $135.9 million from $389.5 million, mainly due to a $123.5 million impairment of the Canopy Equity Method Investment and higher Canopy-related losses.
- Canopy Equity Method Investment carrying value was written down from $266.2 million to $142.7 million; the 2023 Canopy Promissory Note and November 2018 Canopy Warrants were valued at zero as of May 31, 2023.
- The company issued $750.0 million of 4.90% senior notes due 2033 in May 2023 and repurchased 153,937 Class A shares for $35.0 million under the 2021 Authorization.
- Canopy was removed as a reportable segment effective May 31, 2023, and the company now reports Beer, Wine and Spirits, and Corporate Operations and Other segments.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2024, Constellation Brands kept $0.05.
- Revenue$2.51B100.0%
- Cost of revenue−$1.26B50.0%
- Gross profit$1.26B50.0%
- Operating costs−$493.1M19.6%
- Operating income$764.7M30.4%
- Interest, other & tax−$628.8M25.0%
- Net income$135.9M5.4%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed June 30, 2023Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $2.51B$2.36B | +6.4% |
| Cost of Revenue | $1.26B$1.11B | +13.4% |
| Gross Profit | $1.26B$1.25B | +0.2% |
| SG&A Expenses | $493.10M$438.60M | +12.4% |
| Operating Income | $764.70M$816.40M | −6.3% |
| Net Income | $135.90M$389.50M | −65.1% |
05—Questions
Frequently Asked Questions
Why did net income attributable to CBI fall so sharply in First Quarter 2024?
The filing attributes the decline from $389.5 million to $135.9 million largely to the $123.5 million impairment of the Canopy Equity Method Investment, a $54.8 million increase in equity losses from Canopy, and a $49.4 million increase in unrealized net losses on securities measured at fair value, partially offset by Beer segment improvements.
How did the Beer segment perform?
Beer net sales increased 11% to $2,098.6 million, driven by $142.5 million of shipment volume growth within the Mexican beer portfolio and $59.7 million of favorable pricing in select markets. Beer segment operating income rose to $797.8 million from $762.8 million.
What happened with the Canopy investment?
The company determined an other-than-temporary impairment and wrote the Canopy Equity Method Investment down to $142.7 million. It also extended the Canopy Debt Securities into a 2023 Canopy Promissory Note, which was valued at zero as of May 31, 2023. The company has consented to the proposed Canopy Transaction and intends, subject to its discretion, to convert its Canopy common shares into Exchangeable Shares.
How is the company's liquidity and debt position?
Cash and cash equivalents were $192.5 million at May 31, 2023. Total debt outstanding was $12,357.0 million, down $104.3 million from February 28, 2023. Remaining borrowing capacity under the revolving credit facility was $1,418.0 million, and the company stated it was in compliance with its covenants.
What is the company's dividend and share repurchase activity?
On June 29, 2023, the Board declared a quarterly cash dividend of $0.89 per Class A share and $0.80 per Class 1 share, payable August 24, 2023. During the quarter the company repurchased shares for $35.0 million, leaving $1,171.6 million used of the $2.0 billion 2021 Authorization.
06—Continue