01—Abstract
Summary
Summary of the 10-Q filed July 3, 2024. Cited figures are marked; the original filing is the authoritative source.
Constellation Brands, Inc. reported net sales of $2,661.8 milliona for the three months ended May 31, 2024, up from $2,514.9 million in the prior-year quarter, with Beer net sales of $2,272.8 million driven by shipment volume growth and favorable pricing, while Wine and Spirits net sales declined to $389.0 million.
Operating income rose to $941.6 millionb from $764.7 million, and net income attributable to CBI increased to $877.0 million from $135.9 million, helped substantially by an $83.3 million net gain on the conversion and exchange of its Canopy investment into Exchangeable Shares and by the absence of the prior-year $123.5 million Canopy impairment. The effective tax rate was 3.0% versus 39.6% a year earlier, reflecting a net income tax benefit from the resolution of prior-period tax examinations. Cash flow from operations was $690.5 million, with capital expenditures of $375.3 million, largely related to the Mexico Beer Projects.
The company paid $185.3 millionc in dividends and repurchased $200.0 million of Class A Stock during the quarter, leaving $2,366.7 million available under its repurchase authorizations as of July 3, 2024. Total long-term debt including current maturities was $11,089.1 million at May 31, 2024, and cash and cash equivalents declined to $73.8 million, with short-term borrowings rising to $793.2 million in commercial paper. Subsequent to the quarter, the company acquired the Sea Smoke business in June 2024 for $170.0 million, closed the sale of remaining assets at the canceled Mexicali Brewery in July 2024, and declared a quarterly dividend of $1.01 per Class A share.
02—Key points
Key Highlights
- Net sales rose to $2,661.8 million from $2,514.9 million; Beer net sales increased to $2,272.8 million on $157.4 million of shipment volume growth and $33.4 million of favorable pricing in select markets.
- Wine and Spirits net sales declined to $389.0 million from $416.3 million, driven by a $23.6 million decrease in branded wine and spirits shipment volume.
- Operating income increased to $941.6 million from $764.7 million; Beer operating income rose to $923.0 million while Wine and Spirits operating income fell to $59.7 million from $79.3 million.
- Net income attributable to CBI was $877.0 million, or $4.78 per diluted share, compared with $135.9 million, or $0.74 per diluted share, a year earlier, aided by an $83.3 million net gain on the Canopy Exchangeable Shares conversion.
- Effective tax rate was 3.0% compared with 39.6%, reflecting a net income tax benefit from resolution of prior-period tax examinations.
- Net cash provided by operating activities was $690.5 million; capital expenditures were $375.3 million, largely for the Mexico Beer Projects.
- The company repurchased $200.0 million of Class A Stock and paid $185.3 million in dividends; $2,366.7 million remained available under repurchase authorizations as of July 3, 2024.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2025, Constellation Brands kept $0.33.
- Revenue$2.66B100.0%
- Cost of revenue−$1.26B47.3%
- Gross profit$1.40B52.7%
- Operating costs−$462.2M17.4%
- Operating income$941.6M35.4%
- Interest, other & tax−$64.6M2.4%
- Net income$877.0M32.9%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2025filed July 3, 2024Financial Statements
Q1 FY2025 against Q1 FY2024
| Line item | Q1 FY2025Q1 FY2024 | Change |
|---|---|---|
| Revenue | $2.66B$2.51B | +5.8% |
| Cost of Revenue | $1.26B$1.26B | +0.1% |
| Gross Profit | $1.40B$1.26B | +11.6% |
| SG&A Expenses | $462.20M$493.10M | −6.3% |
| Operating Income | $941.60M$764.70M | +23.1% |
| Net Income | $877.00M$135.90M | +545.3% |
05—Questions
Frequently Asked Questions
What drove the increase in net income attributable to CBI this quarter?
Net income attributable to CBI rose to $877.0 million from $135.9 million, largely due to favorable Canopy-related activities, including an $83.3 million net gain on the conversion and exchange to Exchangeable Shares, no longer recognizing Canopy equity losses, and the absence of the $123.5 million Canopy impairment recorded in the prior-year quarter. Beer segment improvements and a lower income tax provision also contributed, partially offset by a decline in Wine and Spirits performance.
How is the Wine and Spirits business performing?
Wine and Spirits net sales decreased to $389.0 million from $416.3 million, reflecting a $23.6 million decline in branded shipment volume and $8.1 million of unfavorable product mix. Segment operating income fell to $59.7 million from $79.3 million, and the company expects U.S. Wholesale shipment volume to align with depletion volume for Fiscal 2025.
What is the company's liquidity and debt position?
Cash and cash equivalents were $73.8 million at May 31, 2024. Short-term borrowings were $793.2 million, consisting of commercial paper, and long-term debt including current maturities totaled $11,089.1 million. Remaining borrowing capacity under the revolving credit facility was $1,443.1 million, and the company stated it was in compliance with its debt covenants.
What recent transactions occurred after the quarter ended?
In June 2024, the company acquired the Sea Smoke business, including a California-based luxury wine brand, vineyards, and a production facility, for $170.0 million, subject to adjustments. In July 2024, it closed on the sale of the remaining assets classified as held for sale at the canceled Mexicali Brewery, and the company expects a related net income tax benefit that it factored into its Fiscal 2025 effective tax rate guidance of 11% to 13%.
How much capital is the company returning to shareholders?
During the quarter, the company paid $185.3 million in dividends and repurchased 775,334 shares of Class A Stock for $200.0 million. On July 2, 2024, the Board declared a quarterly dividend of $1.01 per Class A share and $0.91 per Class 1 share, payable August 23, 2024. As of July 3, 2024, $2,366.7 million remained available for future share repurchases.
06—Continue