01—Abstract
Summary
Summary of the 10-Q filed January 5, 2024. Cited figures are marked; the original filing is the authoritative source.
Constellation Brands, Inc. reported results for the three and nine months ended November 30, 2023.
For the nine months, net sales were $7,822.6 milliona versus $7,454.8 million a year earlier, operating income was $2,540.3 million versus $2,376.2 million, and net income attributable to CBI was $1,335.0 million versus a loss of $(294.0) million. The filing attributes the swing largely to lower impairment and other losses on the Canopy investment, which totaled $(477.4) million in losses from unconsolidated investments for the nine months versus $(1,944.2) million a year earlier, and to Beer segment growth, with Beer net sales up 9% for the nine months driven by 6.6% shipment volume growth and favorable pricing. The Wine and Spirits segment declined, with net sales down 11% for the nine months, reflecting lower branded shipment volume and the 2022 Wine Divestiture.
Cash flow from operations was $2,346.8 millionb for the nine months, while capital expenditures were $911.9 million, largely tied to the Mexico Beer Projects. Total debt outstanding was $11,698.5 million at November 30, 2023, down $762.8 million from February 28, 2023. The company repurchased $249.7 million of Class A Stock under the 2021 Authorization during the nine months, and a new $2.0 billion 2023 Authorization was approved in November 2023.
The Board also declared a quarterly dividend of $0.89c per Class A share payable February 22, 2024. The filing notes ongoing risks including the Canopy investment, whose carrying value was reduced to $73.6 million, a pending appeal in the Corona Hard Seltzer and Modelo Ranch Water trademark litigation, and the company's expectation that inflationary pressures and supply chain disruptions could continue to affect results through the remainder of Fiscal 2024.
02—Key points
Key Highlights
- Nine-month net income attributable to CBI of $1,335.0 million, compared with a loss of $(294.0) million in the prior-year period.
- Nine-month net sales of $7,822.6 million, up from $7,454.8 million, with Beer net sales up 9% to $6,459.8 million.
- Wine and Spirits net sales declined 11% to $1,362.8 million for the nine months, driven by lower branded shipment volume.
- Canopy Equity Method Investment carrying value written down to $142.7 million at May 31, 2023, with a further $73.6 million carrying value at November 30, 2023.
- Operating cash flow of $2,346.8 million for the nine months, with capital expenditures of $911.9 million.
- Total debt outstanding of $11,698.5 million, a decrease of $762.8 million since February 28, 2023.
- Board approved a new $2.0 billion share repurchase authorization in November 2023, in addition to the 2021 Authorization.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2024, Constellation Brands kept $0.21.
- Revenue$2.47B100.0%
- Cost of revenue−$1.20B48.6%
- Gross profit$1.27B51.4%
- Operating costs−$473.7M19.2%
- Operating income$796.9M32.3%
- Interest, other & tax−$287.8M11.6%
- Net income$509.1M20.6%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed January 5, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $2.47B$2.44B | +1.4% |
| Cost of Revenue | $1.20B$1.21B | −0.8% |
| Gross Profit | $1.27B$1.23B | +3.6% |
| SG&A Expenses | $473.70M$480.20M | −1.4% |
| Operating Income | $796.90M$746.70M | +6.7% |
| Net Income | $509.10M$467.70M | +8.9% |
05—Questions
Frequently Asked Questions
What drove the swing from a net loss to positive net income for the nine months?
The filing attributes the improvement primarily to lower impairment and other losses related to the Canopy investment, which accounted for $(477.4) million of losses from unconsolidated investments versus $(1,944.2) million in the prior year, along with Beer segment shipment volume growth and cost savings initiatives.
How is the Beer segment performing?
Beer net sales rose to $6,459.8 million for the nine months from $5,929.4 million, driven by $400.9 million of shipment volume growth within the Mexican beer portfolio and $139.9 million of favorable pricing, partially offset by a $7.2 million decline from the Craft Beer Divestitures.
What is the status of the Canopy investment?
The company has consented to the Canopy Transaction and intends, subject to conditions, to convert its Canopy common shares into Exchangeable Shares. The 2023 Canopy Promissory Note was written down to zero, and the Canopy Equity Method Investment carrying value was $73.6 million at November 30, 2023.
How is the company managing its debt and shareholder returns?
Total debt fell to $11,698.5 million. The company repaid term loan facilities, issued $750.0 million of 4.90% senior notes due 2033, and repurchased $249.7 million of Class A Stock during the nine months. It also paid $491.1 million in dividends.
06—Continue