filings.toolsItem 1. Financial Statements.
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Item 1. Financial Statements.
CONSTELLATION BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions, except share and per share data)
(unaudited)
| August 31, 2024 | February 29, 2024 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 64.6 | $ | 152.4 | |||||||
| Accounts receivable | 871.3 | 832.8 | |||||||||
| Inventories | 2,098.6 | 2,078.3 | |||||||||
| Prepaid expenses and other | 612.3 | 666.0 | |||||||||
| Total current assets | 3,646.8 | 3,729.5 | |||||||||
| Property, plant, and equipment | 7,898.8 | 8,055.2 | |||||||||
| Goodwill | 5,715.4 | 7,980.3 | |||||||||
| Intangible assets | 2,763.0 | 2,731.7 | |||||||||
| Deferred income taxes | 1,963.9 | 2,055.0 | |||||||||
| Other assets | 1,091.2 | 1,140.0 | |||||||||
| Total assets | $ | 23,079.1 | $ | 25,691.7 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Short-term borrowings | $ | 508.1 | $ | 241.4 | |||||||
| Current maturities of long-term debt | 404.7 | 956.8 | |||||||||
| Accounts payable | 1,099.4 | 1,107.1 | |||||||||
| Other accrued expenses and liabilities | 901.6 | 836.4 | |||||||||
| Total current liabilities | 2,913.8 | 3,141.7 | |||||||||
| Long-term debt, less current maturities | 10,683.6 | 10,681.1 | |||||||||
| Deferred income taxes and other liabilities | 1,325.8 | 1,804.3 | |||||||||
| Total liabilities | 14,923.2 | 15,627.1 | |||||||||
| Commitments and contingencies | |||||||||||
| CBI stockholders’ equity: | |||||||||||
| Class A Stock, $0.01 par value – Authorized, 322,000,000 shares; Issued, 212,698,298 shares and 212,698,298 shares, respectively | 2.1 | 2.1 | |||||||||
| Additional paid-in capital | 2,115.2 | 2,047.3 | |||||||||
| Retained earnings | 12,727.2 | 13,417.2 | |||||||||
| Accumulated other comprehensive income (loss) | (427.0) | 376.8 | |||||||||
| Class A Stock in treasury, at cost, 31,207,194 shares and 29,809,881 shares, respectively | (6,546.7) | (6,100.3) | |||||||||
| Total CBI stockholders’ equity | 7,870.8 | 9,743.1 | |||||||||
| Noncontrolling interests | 285.1 | 321.5 | |||||||||
| Total stockholders’ equity | 8,155.9 | 10,064.6 | |||||||||
| Total liabilities and stockholders’ equity | $ | 23,079.1 | $ | 25,691.7 |
The accompanying notes are an integral part of these statements.
| Constellation Brands, Inc. Q2 FY 2025 Form 10-Q | #WORTHREACHINGFOR I 1 |
| FINANCIAL STATEMENTS | Table of Contents |
CONSTELLATION BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions, except per share data)
(unaudited)
| For the Six Months Ended August 31, | For the Three Months Ended August 31, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Sales | $ | 5,999.8 | $ | 5,752.5 | $ | 3,139.1 | $ | 3,053.0 | |||||||||||||||
| Excise taxes | (419.1) | (400.8) | (220.2) | (216.2) | |||||||||||||||||||
| Net sales | 5,580.7 | 5,351.7 | 2,918.9 | 2,836.8 | |||||||||||||||||||
| Cost of product sold | (2,665.1) | (2,644.0) | (1,407.1) | (1,386.9) | |||||||||||||||||||
| Gross profit | 2,915.6 | 2,707.7 | 1,511.8 | 1,449.9 | |||||||||||||||||||
| Selling, general, and administrative expenses | (953.4) | (964.3) | (491.2) | (471.2) | |||||||||||||||||||
| Goodwill impairment | (2,250.0) | — | (2,250.0) | — | |||||||||||||||||||
| Operating income (loss) | (287.8) | 1,743.4 | (1,229.4) | 978.7 | |||||||||||||||||||
| Income (loss) from unconsolidated investments | 80.8 | (435.6) | (1.2) | (20.2) | |||||||||||||||||||
| Interest expense, net | (206.8) | (229.5) | (104.0) | (110.6) | |||||||||||||||||||
| Income (loss) before income taxes | (413.8) | 1,078.3 | (1,334.6) | 847.9 | |||||||||||||||||||
| (Provision for) benefit from income taxes | 124.2 | (238.4) | 152.2 | (147.2) | |||||||||||||||||||
| Net income (loss) | (289.6) | 839.9 | (1,182.4) | 700.7 | |||||||||||||||||||
| Net (income) loss attributable to noncontrolling interests | (32.4) | (14.0) | (16.6) | (10.7) | |||||||||||||||||||
| Net income (loss) attributable to CBI | $ | (322.0) | $ | 825.9 | $ | (1,199.0) | $ | 690.0 | |||||||||||||||
| Comprehensive income (loss) | $ | (1,129.7) | $ | 1,266.0 | $ | (2,013.8) | $ | 901.5 | |||||||||||||||
| Comprehensive (income) loss attributable to noncontrolling interests | 3.9 | (34.2) | 20.0 | (20.0) | |||||||||||||||||||
| Comprehensive income (loss) attributable to CBI | $ | (1,125.8) | $ | 1,231.8 | $ | (1,993.8) | $ | 881.5 | |||||||||||||||
| Class A Stock: | |||||||||||||||||||||||
| Net income (loss) per common share attributable to CBI – basic | $ | (1.77) | $ | 4.50 | $ | (6.59) | $ | 3.76 | |||||||||||||||
| Net income (loss) per common share attributable to CBI – diluted | $ | (1.77) | $ | 4.49 | $ | (6.59) | $ | 3.74 | |||||||||||||||
| Weighted average common shares outstanding – basic | 182.356 | 183.384 | 181.947 | 183.498 | |||||||||||||||||||
| Weighted average common shares outstanding – diluted | 182.356 | 184.074 | 181.947 | 184.277 | |||||||||||||||||||
| Cash dividends declared per common share | $ | 2.02 | $ | 1.78 | $ | 1.01 | $ | 0.89 |
The accompanying notes are an integral part of these statements.
| Constellation Brands, Inc. Q2 FY 2025 Form 10-Q | #WORTHREACHINGFOR I 2 |
| FINANCIAL STATEMENTS | Table of Contents |
| CONSTELLATION BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (in millions) (unaudited) | |||||||||||||||||||||||||||||||||||||||||
| Class A Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Non-controlling Interests | Total | |||||||||||||||||||||||||||||||||||
| Balance at February 29, 2024 | $ | 2.1 | $ | 2,047.3 | $ | 13,417.2 | $ | 376.8 | $ | (6,100.3) | $ | 321.5 | $ | 10,064.6 | |||||||||||||||||||||||||||
| Comprehensive income (loss): | |||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | 877.0 | — | — | 15.8 | 892.8 | ||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of income tax effect | — | — | — | (9.0) | — | 0.3 | (8.7) | ||||||||||||||||||||||||||||||||||
| Comprehensive income (loss) | 884.1 | ||||||||||||||||||||||||||||||||||||||||
| Repurchase of shares | — | — | — | — | (200.0) | — | (200.0) | ||||||||||||||||||||||||||||||||||
| Dividends declared | — | — | (184.7) | — | — | — | (184.7) | ||||||||||||||||||||||||||||||||||
| Noncontrolling interest distributions | — | — | — | — | — | (17.5) | (17.5) | ||||||||||||||||||||||||||||||||||
| Shares issued under equity compensation plans | — | 5.7 | — | — | 2.4 | — | 8.1 | ||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | 17.3 | — | — | — | — | 17.3 | ||||||||||||||||||||||||||||||||||
| Balance at May 31, 2024 | 2.1 | 2,070.3 | 14,109.5 | 367.8 | (6,297.9) | 320.1 | 10,571.9 | ||||||||||||||||||||||||||||||||||
| Comprehensive income (loss): | |||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | (1,199.0) | — | — | 16.6 | (1,182.4) | ||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of income tax effect | — | — | — | (794.8) | — | (36.6) | (831.4) | ||||||||||||||||||||||||||||||||||
| Comprehensive income (loss) | (2,013.8) | ||||||||||||||||||||||||||||||||||||||||
| Repurchase of shares | — | — | — | — | (249.2) | — | (249.2) | ||||||||||||||||||||||||||||||||||
| Dividends declared | — | — | (183.3) | — | — | — | (183.3) | ||||||||||||||||||||||||||||||||||
| Noncontrolling interest distributions | — | — | — | — | — | (15.0) | (15.0) | ||||||||||||||||||||||||||||||||||
| Shares issued under equity compensation plans | — | 21.2 | — | — | 0.4 | — | 21.6 | ||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | 23.7 | — | — | — | — | 23.7 | ||||||||||||||||||||||||||||||||||
| Balance at August 31, 2024 | $ | 2.1 | $ | 2,115.2 | $ | 12,727.2 | $ | (427.0) | $ | (6,546.7) | $ | 285.1 | $ | 8,155.9 | |||||||||||||||||||||||||||
| Constellation Brands, Inc. Q2 FY 2025 Form 10-Q | #WORTHREACHINGFOR I 3 |
| FINANCIAL STATEMENTS | Table of Contents |
| CONSTELLATION BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (in millions) (unaudited) | |||||||||||||||||||||||||||||||||||||||||
| Class A Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Non-controlling Interests | Total | |||||||||||||||||||||||||||||||||||
| Balance at February 28, 2023 | $ | 2.1 | $ | 1,903.0 | $ | 12,343.9 | $ | 28.5 | $ | (5,863.9) | $ | 320.3 | $ | 8,733.9 | |||||||||||||||||||||||||||
| Comprehensive income (loss): | |||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | 135.9 | — | — | 3.3 | 139.2 | ||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of income tax effect | — | — | — | 214.4 | — | 10.9 | 225.3 | ||||||||||||||||||||||||||||||||||
| Comprehensive income (loss) | 364.5 | ||||||||||||||||||||||||||||||||||||||||
| Repurchase of shares | — | — | — | — | (35.0) | — | (35.0) | ||||||||||||||||||||||||||||||||||
| Dividends declared | — | — | (163.1) | — | — | — | (163.1) | ||||||||||||||||||||||||||||||||||
| Noncontrolling interest distributions | — | — | — | — | — | (11.3) | (11.3) | ||||||||||||||||||||||||||||||||||
| Shares issued under equity compensation plans | — | 0.6 | — | — | 4.1 | — | 4.7 | ||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | 14.5 | — | — | — | — | 14.5 | ||||||||||||||||||||||||||||||||||
| Balance at May 31, 2023 | 2.1 | 1,918.1 | 12,316.7 | 242.9 | (5,894.8) | 323.2 | 8,908.2 | ||||||||||||||||||||||||||||||||||
| Comprehensive income (loss): | |||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | 690.0 | — | — | 10.7 | 700.7 | ||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of income tax effect | — | — | — | 191.5 | — | 9.3 | 200.8 | ||||||||||||||||||||||||||||||||||
| Comprehensive income (loss) | 901.5 | ||||||||||||||||||||||||||||||||||||||||
| Dividends declared | — | — | (164.0) | — | — | — | (164.0) | ||||||||||||||||||||||||||||||||||
| Noncontrolling interest distributions | — | — | — | — | — | (10.0) | (10.0) | ||||||||||||||||||||||||||||||||||
| Shares issued under equity compensation plans | — | 62.6 | — | — | 7.6 | — | 70.2 | ||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | 18.1 | — | — | — | — | 18.1 | ||||||||||||||||||||||||||||||||||
| Balance at August 31, 2023 | $ | 2.1 | $ | 1,998.8 | $ | 12,842.7 | $ | 434.4 | $ | (5,887.2) | $ | 333.2 | $ | 9,724.0 | |||||||||||||||||||||||||||
The accompanying notes are an integral part of these statements.
| Constellation Brands, Inc. Q2 FY 2025 Form 10-Q | #WORTHREACHINGFOR I 4 |
| FINANCIAL STATEMENTS | Table of Contents |
CONSTELLATION BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
| For the Six Months Ended August 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||
| Net income (loss) | $ | (289.6) | $ | 839.9 | |||||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||||||
| Unrealized net (gain) loss on securities measured at fair value | 2.5 | 74.4 | |||||||||
| Deferred tax provision (benefit) | (178.5) | 26.3 | |||||||||
| Depreciation | 220.8 | 213.7 | |||||||||
| Stock-based compensation | 41.0 | 32.5 | |||||||||
| Equity in (earnings) losses of equity method investees and related activities, net of distributed earnings | (1.9) | 226.5 | |||||||||
| Noncash lease expense | 57.7 | 43.3 | |||||||||
| Impairment of equity method investments | 2.1 | 135.8 | |||||||||
| Net gain on conversion and exchange to Exchangeable Shares | (83.3) | — | |||||||||
| Goodwill impairment | 2,250.0 | — | |||||||||
| Change in operating assets and liabilities, net of effects from purchase and sale of business: | |||||||||||
| Accounts receivable | (40.6) | (30.0) | |||||||||
| Inventories | 14.7 | 81.3 | |||||||||
| Prepaid expenses and other current assets | (77.7) | (47.9) | |||||||||
| Accounts payable | 134.5 | (56.4) | |||||||||
| Deferred revenue | 9.7 | 17.6 | |||||||||
| Other accrued expenses and liabilities | (55.4) | (33.9) | |||||||||
| Other | (133.7) | 98.9 | |||||||||
| Total adjustments | 2,161.9 | 782.1 | |||||||||
| Net cash provided by (used in) operating activities | 1,872.3 | 1,622.0 | |||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||
| Purchase of property, plant, and equipment | (703.1) | (582.0) | |||||||||
| Purchase of business, net of cash acquired | (158.3) | (7.5) | |||||||||
| Investments in equity method investees and securities | (19.0) | (27.6) | |||||||||
| Proceeds from sale of assets | 32.8 | 14.8 | |||||||||
| Proceeds from sale of business | — | 5.4 | |||||||||
| Other investing activities | (10.0) | (4.0) | |||||||||
| Net cash provided by (used in) investing activities | (857.6) | (600.9) |
| Constellation Brands, Inc. Q2 FY 2025 Form 10-Q | #WORTHREACHINGFOR I 5 |
| FINANCIAL STATEMENTS | Table of Contents |
CONSTELLATION BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
| For the Six Months Ended August 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||
| Proceeds from issuance of long-term debt | — | 744.8 | |||||||||
| Principal payments of long-term debt | (554.3) | (805.1) | |||||||||
| Net proceeds from (repayments of) short-term borrowings | 266.7 | (697.9) | |||||||||
| Dividends paid | (368.6) | (327.6) | |||||||||
| Purchases of treasury stock | (449.2) | (35.0) | |||||||||
| Proceeds from shares issued under equity compensation plans | 48.4 | 86.2 | |||||||||
| Payments of minimum tax withholdings on stock-based payment awards | (13.8) | (11.2) | |||||||||
| Payments of debt issuance, debt extinguishment, and other financing costs | — | (5.3) | |||||||||
| Distributions to noncontrolling interests | (32.5) | (21.3) | |||||||||
| Payment of contingent consideration | (0.7) | — | |||||||||
| Net cash provided by (used in) financing activities | (1,104.0) | (1,072.4) | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | 1.5 | 1.1 | |||||||||
| Net increase (decrease) in cash and cash equivalents | (87.8) | (50.2) | |||||||||
| Cash and cash equivalents, beginning of period | 152.4 | 133.5 | |||||||||
| Cash and cash equivalents, end of period | $ | 64.6 | $ | 83.3 | |||||||
| Supplemental disclosures of noncash investing and financing activities | |||||||||||
| Additions to property, plant, and equipment | $ | 114.7 | $ | 206.0 |
The accompanying notes are an integral part of these statements.
| Constellation Brands, Inc. Q2 FY 2025 Form 10-Q | #WORTHREACHINGFOR I 6 |
| FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | Table of Contents |
CONSTELLATION BRANDS, INC. AND SUBSIDIARIES
AUGUST 31, 2024
(unaudited)
1. BASIS OF PRESENTATION
We have prepared the Financial Statements, without audit, pursuant to the rules and regulations of the SEC applicable to quarterly reporting on Form 10-Q and reflect, in our opinion, all adjustments necessary to present fairly our financial information. All such adjustments are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements, prepared in accordance with generally accepted accounting principles, have been condensed or omitted as permitted by such rules and regulations. These Financial Statements should be read in conjunction with the consolidated financial statements and related notes included in the 2024 Annual Report. Results of operations for interim periods are not necessarily indicative of annual results.
Reclassification
We reclassified equity method investments to other assets on our consolidated balance sheet as of February 29, 2024, to conform with current year presentation.
2. INVENTORIES
Inventories are stated at the lower of cost (primarily computed in accordance with the first-in, first-out method) or net realizable value. Elements of cost include materials, labor, and overhead and consist of the following:
| August 31, 2024 | February 29, 2024 | ||||||||||
| (in millions) | |||||||||||
| Raw materials and supplies | $ | 238.2 | $ | 254.1 | |||||||
| In-process inventories | 1,121.4 | 1,096.0 | |||||||||
| Finished case goods | 739.0 | 728.2 | |||||||||
| $ | 2,098.6 | $ | 2,078.3 |
3. DERIVATIVE INSTRUMENTS
Overview
Our risk management and derivative accounting policies are presented in Notes 1 and 6 of our consolidated financial statements included in our 2024 Annual Report and have not changed significantly for the six months and three months ended August 31, 2024.
The aggregate notional value of outstanding derivative instruments is as follows:
| August 31, 2024 | February 29, 2024 | ||||||||||
| (in millions) | |||||||||||
| Derivative instruments designated as hedging instruments | |||||||||||
| Foreign currency contracts | $ | 2,659.3 | $ | 2,045.6 | |||||||
| Derivative instruments not designated as hedging instruments | |||||||||||
| Foreign currency contracts | $ | 944.7 | $ | 735.9 | |||||||
| Commodity derivative contracts | $ | 342.8 | $ | 397.5 | |||||||
| Constellation Brands, Inc. Q2 FY 2025 Form 10-Q | #WORTHREACHINGFOR I 7 |
| FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | Table of Contents |
Credit risk
We are exposed to credit-related losses if the counterparties to our derivative contracts default. This credit risk is limited to the fair value of the derivative contracts. To manage this risk, we contract only with major financial institutions that have earned investment-grade credit ratings and with whom we have standard International Swaps and Derivatives Association agreements which allow for net settlement of the derivative contracts. We have also established counterparty credit guidelines that are regularly monitored. Because of these safeguards, we believe the risk of loss from counterparty default to be immaterial.
In addition, our derivative instruments are not subject to credit rating contingencies or collateral requirements. As of August 31, 2024, the estimated fair value of derivative instruments in a net liability position due to counterparties was $21.0 million. If we were required to settle the net liability position under these derivative instruments on August 31, 2024, we would have had sufficient available liquidity on hand to satisfy this obligation.
Results of period derivative activity
The estimated fair value and location of our derivative instruments on our balance sheets are as follows (see Note 4):
| Assets | Liabilities | |||||||||||||||||||||||||
| August 31, 2024 | February 29, 2024 | August 31, 2024 | February 29, 2024 | |||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| Derivative instruments designated as hedging instruments | ||||||||||||||||||||||||||
| Foreign currency contracts: | ||||||||||||||||||||||||||
| Prepaid expenses and other | $ | 64.6 | $ | 154.1 | Other accrued expenses and liabilities | $ | 19.9 | $ | 3.5 | |||||||||||||||||
| Other assets | $ | 64.8 | $ | 153.5 | Deferred income taxes and other liabilities | $ | 47.7 | $ | 0.2 | |||||||||||||||||
| Derivative instruments not designated as hedging instruments | ||||||||||||||||||||||||||
| Foreign currency contracts: | ||||||||||||||||||||||||||
| Prepaid expenses and other | $ | 5.0 | $ | 3.6 | Other accrued expenses and liabilities | $ | 13.5 | $ | 1.7 | |||||||||||||||||
| Commodity derivative contracts: | ||||||||||||||||||||||||||
| Prepaid expenses and other | $ | 3.7 | $ | 4.8 | Other accrued expenses and liabilities | $ | 23.8 | $ | 27.9 | |||||||||||||||||
| Other assets | $ | 3.1 | $ | 1.4 | Deferred income taxes and other liabilities | $ | 6.9 | $ | 8.1 | |||||||||||||||||
The principal effect of our derivative instruments designated in cash flow hedging relationships on our results of operations, as well as OCI, net of income tax effect, is as follows:
| Derivative Instruments in Designated Cash Flow Hedging Relationships | Net Gain (Loss) Recognized in OCI | Location of Net Gain (Loss) Reclassified from AOCI to Income (Loss) | Net Gain (Loss) Reclassified from AOCI to Income (Loss) | |||||||||||||||||
| (in millions) | ||||||||||||||||||||
| For the Six Months Ended August 31, 2024 | ||||||||||||||||||||
| Foreign currency contracts | $ | (147.2) | Sales | $ | 0.3 | |||||||||||||||
| Cost of product sold | 70.6 | |||||||||||||||||||
| $ | (147.2) | $ | 70.9 | |||||||||||||||||
| Constellation Brands, Inc. Q2 FY 2025 Form 10-Q | #WORTHREACHINGFOR I 8 |
| FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | Table of Contents |
| Derivative Instruments in Designated Cash Flow Hedging Relationships | Net Gain (Loss) Recognized in OCI | Location of Net Gain (Loss) Reclassified from AOCI to Income (Loss) | Net Gain (Loss) Reclassified from AOCI to Income (Loss) | |||||||||||||||||
| (in millions) | ||||||||||||||||||||
| For the Six Months Ended August 31, 2023 | ||||||||||||||||||||
| Foreign currency contracts | $ | 149.9 | Sales | $ | (0.2) | |||||||||||||||
| Cost of product sold | 65.7 | |||||||||||||||||||
| Pre-issuance hedge contracts | 0.6 | Interest expense, net | (0.3) | |||||||||||||||||
| $ | 150.5 | $ | 65.2 | |||||||||||||||||
| For the Three Months Ended August 31, 2024 | ||||||||||||||||||||
| Foreign currency contracts | $ | (173.3) | Sales | $ | 0.2 | |||||||||||||||
| Cost of product sold | 31.5 | |||||||||||||||||||
| $ | (173.3) | $ | 31.7 | |||||||||||||||||
| For the Three Months Ended August 31, 2023 | ||||||||||||||||||||
| Foreign currency contracts | $ | 70.6 | Sales | $ | (0.2) | |||||||||||||||
| Cost of product sold | 39.3 | |||||||||||||||||||
| Pre-issuance hedge contracts | — | Interest expense, net | (0.1) | |||||||||||||||||
| $ | 70.6 | $ | 39.0 |
We expect $39.2 million of net gains, net of income tax effect, to be reclassified from AOCI to our results of operations within the next 12 months.
The effect of our undesignated derivative instruments on our results of operations is as follows:
| Derivative Instruments Not Designated as Hedging Instruments | Location of Net Gain (Loss) Recognized in Income (Loss) | Net Gain (Loss) Recognized in Income (Loss) | ||||||||||||||||||
| (in millions) | ||||||||||||||||||||
| For the Six Months Ended August 31, 2024 | ||||||||||||||||||||
| Commodity derivative contracts | Cost of product sold | $ | (9.7) | |||||||||||||||||
| Foreign currency contracts | Selling, general, and administrative expenses | (26.7) | ||||||||||||||||||
| $ | (36.4) | |||||||||||||||||||
| For the Six Months Ended August 31, 2023 | ||||||||||||||||||||
| Commodity derivative contracts | Cost of product sold | $ | (15.6) | |||||||||||||||||
| Foreign currency contracts | Selling, general, and administrative expenses | 22.5 | ||||||||||||||||||
| $ | 6.9 | |||||||||||||||||||
| For the Three Months Ended August 31, 2024 | ||||||||||||||||||||
| Commodity derivative contracts | Cost of product sold | $ | (24.3) | |||||||||||||||||
| Foreign currency contracts | Selling, general, and administrative expenses | (30.7) | ||||||||||||||||||
| $ | (55.0) | |||||||||||||||||||
| Constellation Brands, Inc. Q2 FY 2025 Form 10-Q | #WORTHREACHINGFOR I 9 |
| FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | Table of Contents |
| Derivative Instruments Not Designated as Hedging Instruments | Location of Net Gain (Loss) Recognized in Income (Loss) | Net Gain (Loss) Recognized in Income (Loss) | ||||||||||||||||||
| (in millions) | ||||||||||||||||||||
| For the Three Months Ended August 31, 2023 | ||||||||||||||||||||
| Commodity derivative contracts | Cost of product sold | $ | 19.1 | |||||||||||||||||
| Foreign currency contracts | Selling, general, and administrative expenses | 9.8 | ||||||||||||||||||
| $ | 28.9 |
4. FAIR VALUE OF FINANCIAL INSTRUMENTS
Authoritative guidance establishes a framework for measuring fair value, including a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The hierarchy includes three levels:
-
Level 1 inputs are quoted prices in active markets for identical assets or liabilities;
-
Level 2 inputs include data points that are observable such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) such as volatility, interest rates, and yield curves that are observable for the asset or liability, either directly or indirectly; and
-
Level 3 inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.
Fair value methodology
The following methods and assumptions are used to estimate the fair value of our financial instruments:
Foreign currency and commodity derivative contracts
The fair value is estimated using market-based inputs, obtained from independent pricing services, entered into valuation models. These valuation models require various inputs, including contractual terms, market foreign exchange prices, market commodity prices, interest-rate yield curves, and currency volatilities, as applicable (Level 2 fair value measurement).
Short-term borrowings
Our short-term borrowings consist of our commercial paper program and the revolving credit facility under our senior credit facility. The revolving credit facility is a variable interest rate bearing note with a fixed margin, adjustable based upon our debt rating (as defined in our senior credit facility). For these short-term borrowings, the carrying value approximates the fair value.
Long-term debt
The fair value of our fixed interest rate long-term debt is estimated by discounting cash flows using interest rates currently available for debt with similar terms and maturities (Level 2 fair value measurement). As of August 31, 2024, the carrying amount of long-term debt, including the current portion, was $11,088.3 million, compared with an estimated fair value of $10,516.2 million. As of February 29, 2024, the carrying amount of long-term debt, including the current portion, was $11,637.9 million, compared with an estimated fair value of $10,775.8 million.
The carrying amounts of certain of our financial instruments, including cash and cash equivalents, accounts receivable, and accounts payable, approximate fair value as of August 31, 2024, and February 29, 2024, due to the relatively short maturity of these instruments.
| Constellation Brands, Inc. Q2 FY 2025 Form 10-Q | #WORTHREACHINGFOR I 10 |
| FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | Table of Contents |
Recurring basis measurements
The following table presents our financial assets and liabilities measured at estimated fair value on a recurring basis:
| Fair Value Measurements Using | |||||||||||||||||||||||
| Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| August 31, 2024 | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Foreign currency contracts | $ | — | $ | 134.4 | $ | — | $ | 134.4 | |||||||||||||||
| Commodity derivative contracts | $ | — | $ | 6.8 | $ | — | $ | 6.8 | |||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Foreign currency contracts | $ | — | $ | 81.1 | $ | — | $ | 81.1 | |||||||||||||||
| Commodity derivative contracts | $ | — | $ | 30.7 | $ | — | $ | 30.7 | |||||||||||||||
| February 29, 2024 | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Foreign currency contracts | $ | — | $ | 311.2 | $ | — | $ | 311.2 | |||||||||||||||
| Commodity derivative contracts | $ | — | $ | 6.2 | $ | — | $ | 6.2 | |||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Foreign currency contracts | $ | — | $ | 5.4 | $ | — | $ | 5.4 | |||||||||||||||
| Commodity derivative contracts | $ | — | $ | 36.0 | $ | — | $ | 36.0 | |||||||||||||||
Nonrecurring basis measurements
The following table presents our assets and liabilities measured at estimated fair value on a nonrecurring basis for which an impairment assessment was performed for the periods presented:
| Fair Value Measurements Using | |||||||||||||||||||||||||||||
| Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Losses | ||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||
| For the Six Months Ended August 31, 2024 | |||||||||||||||||||||||||||||
| Goodwill | $ | — | $ | — | $ | 564.8 | $ | 2,250.0 | |||||||||||||||||||||
| Equity method investments | — | — | — | 2.1 | |||||||||||||||||||||||||
| Total | $ | — | $ | — | $ | 564.8 | $ | 2,252.1 | |||||||||||||||||||||
| For the Six Months Ended August 31, 2023 | |||||||||||||||||||||||||||||
| Equity method investments | $ | 97.8 | $ | 2.6 | $ | — | $ | 135.8 | |||||||||||||||||||||
Goodwill
As of August 31, 2024, in connection with negative trends within our Wine and Spirits business primarily attributable to our U.S. wholesale market, driven by declines in both the overall wine market and in our mainstream and premium wine brands, management updated its Fiscal 2025 outlook for this reporting unit. The updated forecast indicated it was more likely than not the fair value of the Wine and Spirits reporting unit might be below its carrying value. Accordingly, we performed an interim quantitative assessment for goodwill
| Constellation Brands, Inc. Q2 FY 2025 Form 10-Q | #WORTHREACHINGFOR I 11 |
| FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | Table of Contents |
impairment. This assessment indicated that the carrying value of the Wine and Spirits reporting unit exceeded its estimated fair value, resulting in a $2,250.0 million goodwill impairment. This loss from impairment was included in goodwill impairment within our consolidated results for the six months and three months ended August 31, 2024. See Notes 5, 6, and 9 for further discussion.
When performing a quantitative assessment for impairment of goodwill, we measure the amount of impairment by calculating the amount by which the carrying value exceeds its estimated fair value. The estimated fair value is determined based on the discounted cash flow calculation. The most significant assumptions used in the discounted cash flow calculation were: (i) a 9% discount rate, (ii) a 1.5% expected long-term growth rate, and (iii) the annual cash flow projections. If there are adverse deviations from our expectations about our Wine and Spirits business or the macroeconomic environment, which could be influenced by a variety of factors including if broader industry and market conditions continue to decline and/or our expectations of future performance as reflected in our current strategic operating plans are not fully realized, a future impairment of the Wine and Spirits goodwill is reasonably possible.
Equity method investments
As of August 31, 2024, we evaluated an equity method investment, made through our corporate venture capital function, and determined there was an other-than-temporary impairment due to business underperformance. This loss from impairment was included in income (loss) from unconsolidated investments within our consolidated results for the six months and three months ended August 31, 2024. The estimated fair value was based largely on the cash flows expected to be generated by the investment using unobservable data points.
As of August 31, 2023, we evaluated certain equity method investments, made through our corporate venture capital function, and determined there were other-than-temporary impairments due to business underperformance. Investments with a $14.9 million carrying value were written down to $2.6 million, their estimated fair value, resulting in a $12.3 million impairment. These investments are part of the Corporate Operations and Other segment. This loss from impairment was included in income (loss) from unconsolidated investments within our consolidated results for the six months and three months ended August 31, 2023. The estimated fair value was based largely on observable prices for similar assets.
We evaluated the Canopy Equity Method Investment as of May 31, 2023, and determined there was an other-than-temporary impairment. Our conclusion was based on several contributing factors, including: (i) the fair value being less than the carrying value and the uncertainty surrounding Canopy’s stock price recovering in the near-term, (ii) Canopy recorded significant costs in its fourth quarter of fiscal 2023 results designed to align its Canadian cannabis operations and resources in response to continued unfavorable market trends, (iii) the substantial doubt about Canopy’s ability to continue as a going concern, as disclosed by Canopy, and (iv) Canopy’s identification of material misstatements in certain of its previously reported financial results related to sales in its BioSteel Sports Nutrition Inc. reporting unit that were accounted for incorrectly, including the recording of a goodwill impairment during its restated second quarter of fiscal 2023. As a result, the Canopy Equity Method Investment with a $266.2 million carrying value was written down to $142.7 million, its estimated fair value, resulting in a $123.5 million impairment. This loss from impairment was included in income (loss) from unconsolidated investments within our consolidated results for the six months ended August 31, 2023. The estimated fair value was determined based on the closing price of the underlying equity security as of May 31, 2023. We no longer apply the equity method to our investment in Canopy following the April 2024 conversion of our Canopy common shares to Exchangeable Shares. See Note 7 for further discussion.
| Constellation Brands, Inc. Q2 FY 2025 Form 10-Q | #WORTHREACHINGFOR I 12 |
| FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | Table of Contents |
5. GOODWILL
The changes in the carrying amount of goodwill are as follows:
| Beer | Wine and Spirits | Consolidated | |||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||
| Balance, February 28, 2023 | $ | 5,188.9 | $ | 2,736.5 | $ | 7,925.4 | |||||||||||||||||||||||
| Purchase accounting allocations (1) | — | 6.5 | 6.5 | ||||||||||||||||||||||||||
| Foreign currency translation adjustments | 49.3 | (0.9) | 48.4 | ||||||||||||||||||||||||||
| Balance, February 29, 2024 | 5,238.2 | 2,742.1 | 7,980.3 | ||||||||||||||||||||||||||
| Purchase accounting allocations (2) | — | 70.7 | 70.7 | ||||||||||||||||||||||||||
| Foreign currency translation adjustments | (87.6) | 2.0 | (85.6) | ||||||||||||||||||||||||||
| Goodwill impairment | — | (2,250.0) | (2,250.0) | ||||||||||||||||||||||||||
| Balance, August 31, 2024 | $ | 5,150.6 | $ | 564.8 | $ | 5,715.4 |
(1)Purchase accounting allocations associated with the June 2023 acquisition of the Domaine Curry wine business.
(2)Preliminary purchase accounting allocations associated with the Sea Smoke acquisition.
Acquisition
Sea Smoke
In June 2024, we acquired the Sea Smoke business, including a California-based luxury wine brand, vineyards, and a production facility for $170.0 million, subject to adjustments. This transaction also included the acquisition of goodwill, inventory, and a trademark. The results of operations of Sea Smoke are reported in the Wine and Spirits segment and have been included in our consolidated results of operations from the date of acquisition.
Divestiture
Craft Beer Divestitures
In June 2023, we completed the Craft Beer Divestitures. Prior to the Craft Beer Divestitures, we recorded the results of operations of such craft beer brands in the Beer segment.
6. INTANGIBLE ASSETS
The major components of intangible assets are as follows:
| August 31, 2024 | February 29, 2024 | ||||||||||||||||||||||
| Gross Carrying Amount | Net Carrying Amount | Gross Carrying Amount | Net Carrying Amount | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Amortizable intangible assets | |||||||||||||||||||||||
| Customer relationships | $ | 85.4 | $ | 15.5 | $ | 85.3 | $ | 16.2 | |||||||||||||||
| Other | 20.8 | 0.3 | 20.8 | 0.3 | |||||||||||||||||||
| Total | $ | 106.2 | 15.8 | $ | 106.1 | 16.5 | |||||||||||||||||
| Nonamortizable intangible assets | |||||||||||||||||||||||
| Trademarks | 2,747.2 | 2,715.2 | |||||||||||||||||||||
| Total intangible assets | $ | 2,763.0 | $ | 2,731.7 |
| Constellation Brands, Inc. Q2 FY 2025 Form 10-Q | #WORTHREACHINGFOR I 13 |
| FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | Table of Contents |
We did not incur costs to renew or extend the term of acquired intangible assets for the six months and three months ended August 31, 2024, and August 31, 2023. Net carrying amount represents the gross carrying value net of accumulated amortization.
Additionally, as of August 31, 2024, in connection with the assessment of the same events and circumstances triggering the interim goodwill impairment test for the Wine and Spirits reporting unit, we completed an interim impairment test of our wine and spirits trademarks. We performed qualitative evaluations considering the results of the most recent fair value measurements as of January 1, 2024, and the likely impact of the negative trends for our Wine and Spirits business on the fair values of the trademarks and concluded it is more likely than not that the fair values of these intangible assets exceeded their carrying amounts.
7. OTHER ASSETS
The major components of other assets are as follows:
| August 31, 2024 | February 29, 2024 | ||||||||||
| (in millions) | |||||||||||
| Operating lease right-of-use asset | $ | 579.5 | $ | 615.3 | |||||||
| Equity method investments | 128.7 | 170.6 | |||||||||
| Exchangeable Shares | 97.3 | — | |||||||||
| Other investments in debt and equity securities | 90.5 | 73.0 | |||||||||
| Derivative assets | 67.9 | 154.9 | |||||||||
| Assets held for sale | — | 25.7 | |||||||||
| Other | 127.3 | 100.5 | |||||||||
| $ | 1,091.2 | $ | 1,140.0 |
Equity method investments
The carrying value of our equity method investments are as follows:
| August 31, 2024 | February 29, 2024 | ||||||||||
| (in millions) | |||||||||||
| Canopy Equity Method Investment (1) | $ | — | $ | 42.5 | |||||||
| Other equity method investments | 128.7 | 128.1 | |||||||||
| $ | 128.7 | $ | 170.6 |
(1)Following the April 2024 conversion to Exchangeable Shares we no longer apply the equity method.
Exchangeable Shares
In April 2024, we elected to convert our 17.1 million Canopy common shares into Exchangeable Shares on a one-for-one basis. Additionally, in April 2024, we exchanged C$81.2 million of the principal amount of the C$100.0 million 4.25% promissory note issued to us by Canopy for 9.1 million Exchangeable Shares and forgave all accrued but unpaid interest together with the remaining principal amount of the note. As a result of these transactions, we (i) have 26.3 million Exchangeable Shares and (ii) recognized an $83.3 million net gain in income (loss) from unconsolidated investments within our consolidated results of operations for the six months ended August 31, 2024. The fair value of Exchangeable Shares on the date of the conversion and exchange was estimated using a valuation model based primarily on the following inputs: (i) Canopy’s common share price, (ii) the expected volatility of Canopy’s common shares, and (iii) the probability and timing of U.S. federal legalization of recreational cannabis. As the Exchangeable Shares are an equity security without a readily determinable fair value, we elected to account for the Exchangeable Shares under the measurement alternative method. Future impairments, if any, will also be reported in income (loss) from unconsolidated investments within our consolidated results.
| Constellation Brands, Inc. Q2 FY 2025 Form 10-Q | #WORTHREACHINGFOR I 14 |
| FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | Table of Contents |
Other investments in debt and equity securities
We have multiple investments through our corporate venture capital function in debt and equity securities.
Assets held for sale
Mexicali Brewery
In July 2024, we sold the remaining assets classified as held for sale at the canceled Mexicali Brewery. These net assets had met held for sale criteria as of February 29, 2024, and through the date of sale.
8. BORROWINGS
Borrowings consist of the following:
| August 31, 2024 | February 29, 2024 | ||||||||||||||||||||||
| Current | Long-term | Total | Total | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Short-term borrowings | |||||||||||||||||||||||
| Commercial paper | $ | 508.1 | $ | 241.4 | |||||||||||||||||||
| $ | 508.1 | $ | 241.4 | ||||||||||||||||||||
| Long-term debt | |||||||||||||||||||||||
| Senior notes | $ | 399.9 | $ | 10,676.6 | $ | 11,076.5 | $ | 11,620.1 | |||||||||||||||
| Other | 4.8 | 7.0 | 11.8 | 17.8 | |||||||||||||||||||
| $ | 404.7 | $ | 10,683.6 | $ | 11,088.3 | $ | 11,637.9 |
Bank facilities
The Company, CB International, the Administrative Agent, and certain other lenders are parties to the 2022 Credit Agreement. The October 2022 Credit Agreement Amendment revised certain defined terms and covenants in the 2022 Credit Agreement and became effective in April 2024 following (i) the amendment by Canopy of its Articles of Incorporation, (ii) the conversion of our Canopy common shares into Exchangeable Shares, and (iii) the resignation of our nominees from the board of directors of Canopy.
Information with respect to borrowings under the 2022 Credit Agreement is as follows:
| Outstanding borrowings | Interest rate | SOFR margin | Outstanding letters of credit | Remaining borrowing capacity (1) | |||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||
| August 31, 2024 | |||||||||||||||||||||||||||||
| Revolving credit facility (2) (3) | $ | — | — | % | — | % | $ | 11.3 | $ | 1,729.7 | |||||||||||||||||||
| February 29, 2024 | |||||||||||||||||||||||||||||
| Revolving credit facility (2) (3) | $ | — | — | % | — | % | $ | 11.5 | $ | 1,997.0 |
(1)Net of outstanding revolving credit facility borrowings and outstanding letters of credit under the 2022 Credit Agreement and outstanding borrowings under our commercial paper program of $509.0 million and $241.5 million (excluding unamortized discount) as of August 31, 2024 and February 29, 2024, respectively (see “Commercial paper program” below).
(2)Contractual interest rate varies based on our debt rating (as defined in the agreement) and is a function of SOFR plus a margin and a credit spread adjustment, or the base rate plus a margin, or, in certain circumstances where SOFR cannot be adequately ascertained or available, an alternative benchmark rate plus a margin.
(3)We and/or CB International are the borrower under the $2,250.0 million revolving credit facility with a maturity date of April 14, 2027. Includes a sub-facility for letters of credit of up to $200.0 million.
| Constellation Brands, Inc. Q2 FY 2025 Form 10-Q | #WORTHREACHINGFOR I 15 |
| FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | Table of Contents |
We and our subsidiaries are subject to covenants that are contained in the 2022 Credit Agreement, including those restricting the incurrence of additional subsidiary indebtedness, additional liens, mergers and consolidations, transactions with affiliates, and sale and leaseback transactions, in each case subject to numerous conditions, exceptions, and thresholds. The financial covenants are limited to a minimum interest coverage ratio and a maximum net leverage ratio.
Commercial paper program
We have a commercial paper program which provides for the issuance of up to an aggregate principal amount of $2.25 billion of commercial paper. Our commercial paper program is backed by unused commitments under our revolving credit facility under our 2022 Credit Agreement. Accordingly, outstanding borrowings under our commercial paper program reduce the amount available under our revolving credit facility. Information with respect to our outstanding commercial paper borrowings is as follows:
| August 31, 2024 | February 29, 2024 | ||||||||||
| (in millions) | |||||||||||
| Outstanding borrowings (1) | $ | 508.1 | $ | 241.4 | |||||||
| Weighted average annual interest rate | 5.7 | % | 5.7 | % | |||||||
| Weighted average remaining term | 12 days | 4 days |
(1)Outstanding commercial paper borrowings are net of unamortized discount.
Debt payments
As of August 31, 2024, the required principal repayments under long-term debt obligations (excluding unamortized debt issuance costs and unamortized discounts of $51.4 million and $22.1 million, respectively) for the remaining six months of Fiscal 2025 and for each of the five succeeding fiscal years and thereafter are as follows:
| (in millions) | |||||
| Fiscal 2025 | $ | 402.8 | |||
| Fiscal 2026 | 1,404.3 | ||||
| Fiscal 2027 | 603.3 | ||||
| Fiscal 2028 | 1,801.3 | ||||
| Fiscal 2029 | 900.0 | ||||
| Fiscal 2030 | 800.0 | ||||
| Thereafter | 5,250.1 | ||||
| $ | 11,161.8 |
9. INCOME TAXES
Our effective tax rate for the six months ended August 31, 2024, was 30.0% of tax benefit compared with 22.1% of tax expense for the six months ended August 31, 2023. Our effective tax rate for the three months ended August 31, 2024, was 11.4% of tax benefit compared with 17.4% of tax expense for the three months ended August 31, 2023.
For the six months ended August 31, 2024, our effective tax rate did not approximate the federal statutory rate of 21% largely due to (i) a net income tax benefit recognized as a result of the resolution of various tax examinations and assessments related to prior periods and (ii) the benefit of lower effective tax rates applicable for foreign businesses, partially offset by a net income tax impact resulting from the non-deductible portion of the Wine and Spirits goodwill impairment.
| Constellation Brands, Inc. Q2 FY 2025 Form 10-Q | #WORTHREACHINGFOR I 16 |
| FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | Table of Contents |
For the three months ended August 31, 2024, our effective tax rate did not approximate the federal statutory rate of 21% largely due to a net income tax impact resulting from the non-deductible portion of the Wine and Spirits goodwill impairment.
For the six months ended August 31, 2023, our effective tax rate was higher than the federal statutory rate of 21% primarily due to an increase in the valuation allowance related to our investment in Canopy, partially offset by (i) the benefit of lower effective tax rates applicable to our foreign businesses and (ii) a net income tax benefit recognized as a result of a change in tax entity classification.
For the three months ended August 31, 2023, our effective tax rate was lower than the federal statutory rate of 21% primarily due to the benefit of lower effective tax rates applicable to our foreign businesses.
The Organization for Economic Cooperation and Development introduced a framework under Pillar Two which includes a 15% global minimum tax rate. Many jurisdictions in which we do business have started to enact laws implementing Pillar Two. We are monitoring these developments and currently do not believe these rules will have a material impact on our financial condition and/or consolidated results.
10. DEFERRED INCOME TAXES AND OTHER LIABILITIES
The major components of deferred income taxes and other liabilities are as follows:
| August 31, 2024 | February 29, 2024 | ||||||||||
| (in millions) | |||||||||||
| Operating lease liability | $ | 568.5 | $ | 588.7 | |||||||
| Deferred income taxes | 290.8 | 591.5 | |||||||||
| Unrecognized tax benefit liabilities | 244.0 | 407.9 | |||||||||
| Deferred revenue | 74.3 | 80.2 | |||||||||
| Other | 148.2 | 136.0 | |||||||||
| $ | 1,325.8 | $ | 1,804.3 |
11. STOCKHOLDERS’ EQUITY
Common stock
The number of shares of common stock issued and treasury stock, and associated share activity, are as follows:
| Class A Stock | Class 1 Stock | Class A Stock in Treasury | |||||||||||||||
| Balance at February 29, 2024 | 212,698,298 | 23,661 | 29,809,881 | ||||||||||||||
| Share repurchases | — | — | 775,334 | ||||||||||||||
| Exercise of stock options | — | 1,880 | (149,324) | ||||||||||||||
| Vesting of restricted stock units (1) | — | — | (85,650) | ||||||||||||||
| Vesting of performance share units (1) | — | — | (8,757) | ||||||||||||||
| Balance at May 31, 2024 | 212,698,298 | 25,541 | 30,341,484 | ||||||||||||||
| Share repurchases | — | — | 1,002,947 | ||||||||||||||
| Exercise of stock options | — | — | (103,561) | ||||||||||||||
| Employee stock purchases | — | — | (28,472) | ||||||||||||||
| Vesting of restricted stock units (1) | — | — | (5,204) | ||||||||||||||
| Balance at August 31, 2024 | 212,698,298 | 25,541 | 31,207,194 | ||||||||||||||
| Constellation Brands, Inc. Q2 FY 2025 Form 10-Q | #WORTHREACHINGFOR I 17 |
| FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | Table of Contents |
| Class A Stock | Class 1 Stock | Class A Stock in Treasury | |||||||||||||||
| Balance at February 28, 2023 | 212,697,428 | 22,705 | 29,498,426 | ||||||||||||||
| Share repurchases | — | — | 153,937 | ||||||||||||||
| Conversion of shares | 80 | (80) | — | ||||||||||||||
| Exercise of stock options | — | 800 | (129,595) | ||||||||||||||
| Vesting of restricted stock units (1) | — | — | (71,189) | ||||||||||||||
| Vesting of performance share units (1) | — | — | (13,113) | ||||||||||||||
| Balance at May 31, 2023 | 212,697,508 | 23,425 | 29,438,466 | ||||||||||||||
| Conversion of shares | 220 | (220) | — | ||||||||||||||
| Exercise of stock options | — | 606 | (364,530) | ||||||||||||||
| Employee stock purchases | — | — | (30,172) | ||||||||||||||
| Vesting of restricted stock units (1) | — | — | (5,172) | ||||||||||||||
| Balance at August 31, 2023 | 212,697,728 | 23,811 | 29,038,592 | ||||||||||||||
(1)Net of the following shares withheld to satisfy tax withholding requirements:
| For the Three Months Ended May 31, | For the Three Months Ended August 31, | For the Six Months Ended August 31, | |||||||||||||||||||||||||||
| 2024 | |||||||||||||||||||||||||||||
| Restricted Stock Units | 48,501 | 147 | 48,648 | ||||||||||||||||||||||||||
| Performance Share Units | 5,728 | — | 5,728 | ||||||||||||||||||||||||||
| 2023 | |||||||||||||||||||||||||||||
| Restricted Stock Units | 39,839 | 170 | 40,009 | ||||||||||||||||||||||||||
| Performance Share Units | 8,735 | — | 8,735 |
Stock repurchases
In each of January 2021 and November 2023, our Board of Directors authorized the repurchase of up to $2.0 billion of our publicly traded common stock. The Board of Directors did not specify a date upon which these authorizations would expire. Shares repurchased under these authorizations become treasury shares.
For the six months ended August 31, 2024, we repurchased 1,778,281 shares of Class A Stock pursuant to the 2021 Authorization through open market transactions at an aggregate cost of $449.2 million.
As of August 31, 2024, total shares repurchased under our board authorizations are as follows:
| Class A Stock | |||||||||||||||||
| Repurchase Authorization | Dollar Value of Shares Repurchased | Number of Shares Repurchased | |||||||||||||||
| (in millions, except share data) | |||||||||||||||||
| 2021 Authorization (1) | $ | 2,000.0 | $ | 1,835.5 | 7,653,557 | ||||||||||||
| 2023 Authorization (1) | $ | 2,000.0 | $ | — | — |
(1)As of August 31, 2024, an aggregate of $2,164.5 million remains available for future share repurchases, excluding the impact of Federal excise tax owed pursuant to the IRA.
| Constellation Brands, Inc. Q2 FY 2025 Form 10-Q | #WORTHREACHINGFOR I 18 |
| FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | Table of Contents |
12. NET INCOME (LOSS) PER COMMON SHARE ATTRIBUTABLE TO CBI
Net income (loss) per common share – basic for Class A Stock has been computed based on the weighted average shares of common stock outstanding during the period. Net income (loss) per common share – diluted for Class A Stock reflects the weighted average shares of common stock plus the effect of dilutive securities outstanding during the period using the treasury stock method. The effect of dilutive securities includes the impact of outstanding stock-based awards. The dilutive computation does not assume conversion, exercise, or contingent issuance of securities that would have an anti-dilutive effect on the net income (loss) per common share attributable to CBI. The computation of basic and diluted net income (loss) per common share for Class A Stock are as follows:
| For the Six Months Ended August 31, | For the Three Months Ended August 31, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| (in millions, except per share data) | |||||||||||||||||||||||
| Net income (loss) attributable to CBI | $ | (322.0) | $ | 825.9 | $ | (1,199.0) | $ | 690.0 | |||||||||||||||
| Weighted average common shares outstanding – basic | 182.356 | 183.384 | 181.947 | 183.498 | |||||||||||||||||||
| Stock-based awards, primarily stock options (1) | — | 0.690 | — | 0.779 | |||||||||||||||||||
| Weighted average common shares outstanding – diluted | 182.356 | 184.074 | 181.947 | 184.277 | |||||||||||||||||||
| Net income (loss) per common share attributable to CBI – basic | $ | (1.77) | $ | 4.50 | $ | (6.59) | $ | 3.76 | |||||||||||||||
| Net income (loss) per common share attributable to CBI – diluted | $ | (1.77) | $ | 4.49 | $ | (6.59) | $ | 3.74 |
| (1) | We have excluded the following weighted average common shares outstanding from the calculation of diluted net loss per common share, as the effect of including these would have been anti-dilutive, in millions: | ||||||||||||||||
| For the Six Months Ended August 31, 2024 | For the Three Months Ended August 31, 2024 | ||||||||||||||||
| Stock-based awards, primarily stock options | 0.604 | 0.539 |
13. COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO CBI
Comprehensive income (loss) consists of net income (loss), foreign currency translation adjustments, unrealized net gain (loss) on derivative instruments, pension/postretirement adjustments, and our share of OCI of equity method investments. The reconciliation of net income (loss) attributable to CBI to comprehensive income (loss) attributable to CBI is as follows:
| Before Tax Amount | Tax (Expense) Benefit | Net of Tax Amount | |||||||||||||||
| (in millions) | |||||||||||||||||
| For the Six Months Ended August 31, 2024 | |||||||||||||||||
| Net income (loss) attributable to CBI | $ | (322.0) | |||||||||||||||
| Other comprehensive income (loss) attributable to CBI: | |||||||||||||||||
| Foreign currency translation adjustments: | |||||||||||||||||
| Net gain (loss) | $ | (587.0) | $ | — | (587.0) | ||||||||||||
| Amounts reclassified | — | — | — | ||||||||||||||
| Net gain (loss) recognized in other comprehensive income (loss) | (587.0) | — | (587.0) |
| Constellation Brands, Inc. Q2 FY 2025 Form 10-Q | #WORTHREACHINGFOR I 19 |
| FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | Table of Contents |
| Before Tax Amount | Tax (Expense) Benefit | Net of Tax Amount | |||||||||||||||
| (in millions) | |||||||||||||||||
| Unrealized gain (loss) on cash flow hedges: | |||||||||||||||||
| Net derivative gain (loss) | (157.5) | 18.3 | (139.2) | ||||||||||||||
| Amounts reclassified | (76.9) | 9.1 | (67.8) | ||||||||||||||
| Net gain (loss) recognized in other comprehensive income (loss) | (234.4) | 27.4 | (207.0) | ||||||||||||||
| Pension/postretirement adjustments: | |||||||||||||||||
| Net actuarial gain (loss) | 0.5 | (0.2) | 0.3 | ||||||||||||||
| Amounts reclassified | — | — | — | ||||||||||||||
| Net gain (loss) recognized in other comprehensive income (loss) | 0.5 | (0.2) | 0.3 | ||||||||||||||
| Share of OCI of equity method investments | |||||||||||||||||
| Net gain (loss) | — | — | — | ||||||||||||||
| Amounts reclassified | (10.0) | (0.1) | (10.1) | ||||||||||||||
| Net gain (loss) recognized in other comprehensive income (loss) | (10.0) | (0.1) | (10.1) | ||||||||||||||
| Other comprehensive income (loss) attributable to CBI | $ | (830.9) | $ | 27.1 | (803.8) | ||||||||||||
| Comprehensive income (loss) attributable to CBI | $ | (1,125.8) | |||||||||||||||
| For the Six Months Ended August 31, 2023 | |||||||||||||||||
| Net income (loss) attributable to CBI | $ | 825.9 | |||||||||||||||
| Other comprehensive income (loss) attributable to CBI: | |||||||||||||||||
| Foreign currency translation adjustments: | |||||||||||||||||
| Net gain (loss) | $ | 323.6 | $ | — | 323.6 | ||||||||||||
| Amounts reclassified | — | — | — | ||||||||||||||
| Net gain (loss) recognized in other comprehensive income (loss) | 323.6 | — | 323.6 | ||||||||||||||
| Unrealized gain (loss) on cash flow hedges: | |||||||||||||||||
| Net derivative gain (loss) | 162.8 | (19.5) | 143.3 | ||||||||||||||
| Amounts reclassified | (69.5) | 8.0 | (61.5) | ||||||||||||||
| Net gain (loss) recognized in other comprehensive income (loss) | 93.3 | (11.5) | 81.8 | ||||||||||||||
| Pension/postretirement adjustments: | |||||||||||||||||
| Net actuarial gain (loss) | (0.5) | 0.1 | (0.4) | ||||||||||||||
| Amounts reclassified | — | — | — | ||||||||||||||
| Net gain (loss) recognized in other comprehensive income (loss) | (0.5) | 0.1 | (0.4) | ||||||||||||||
| Share of OCI of equity method investments | |||||||||||||||||
| Net gain (loss) | 0.8 | 0.1 | 0.9 | ||||||||||||||
| Amounts reclassified | — | — | — | ||||||||||||||
| Net gain (loss) recognized in other comprehensive income (loss) | 0.8 | 0.1 | 0.9 | ||||||||||||||
| Other comprehensive income (loss) attributable to CBI | $ | 417.2 | $ | (11.3) | 405.9 | ||||||||||||
| Comprehensive income (loss) attributable to CBI | $ | 1,231.8 | |||||||||||||||
| Constellation Brands, Inc. Q2 FY 2025 Form 10-Q | #WORTHREACHINGFOR I 20 |
| FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | Table of Contents |
| Before Tax Amount | Tax (Expense) Benefit | Net of Tax Amount | |||||||||||||||
| (in millions) | |||||||||||||||||
| For the Three Months Ended August 31, 2024 | |||||||||||||||||
| Net income (loss) attributable to CBI | $ | (1,199.0) | |||||||||||||||
| Other comprehensive income (loss) attributable to CBI: | |||||||||||||||||
| Foreign currency translation adjustments: | |||||||||||||||||
| Net gain (loss) | $ | (600.5) | $ | — | (600.5) | ||||||||||||
| Amounts reclassified | — | — | — | ||||||||||||||
| Net gain (loss) recognized in other comprehensive income (loss) | (600.5) | — | (600.5) | ||||||||||||||
| Unrealized gain (loss) on cash flow hedges: | |||||||||||||||||
| Net derivative gain (loss) | (185.7) | 21.6 | (164.1) | ||||||||||||||
| Amounts reclassified | (34.8) | 4.1 | (30.7) | ||||||||||||||
| Net gain (loss) recognized in other comprehensive income (loss) | (220.5) | 25.7 | (194.8) | ||||||||||||||
| Pension/postretirement adjustments: | |||||||||||||||||
| Net actuarial gain (loss) | 0.5 | (0.2) | 0.3 | ||||||||||||||
| Amounts reclassified | — | — | — | ||||||||||||||
| Net gain (loss) recognized in other comprehensive income (loss) | 0.5 | (0.2) | 0.3 | ||||||||||||||
| Share of OCI of equity method investments | |||||||||||||||||
| Net gain (loss) | — | — | — | ||||||||||||||
| Amounts reclassified | 0.3 | (0.1) | 0.2 | ||||||||||||||
| Net gain (loss) recognized in other comprehensive income (loss) | 0.3 | (0.1) | 0.2 | ||||||||||||||
| Other comprehensive income (loss) attributable to CBI | $ | (820.2) | $ | 25.4 | (794.8) | ||||||||||||
| Comprehensive income (loss) attributable to CBI | $ | (1,993.8) | |||||||||||||||
| For the Three Months Ended August 31, 2023 | |||||||||||||||||
| Net income (loss) attributable to CBI | $ | 690.0 | |||||||||||||||
| Other comprehensive income (loss) attributable to CBI: | |||||||||||||||||
| Foreign currency translation adjustments: | |||||||||||||||||
| Net gain (loss) | $ | 160.2 | $ | — | 160.2 | ||||||||||||
| Amounts reclassified | — | — | — | ||||||||||||||
| Net gain (loss) recognized in other comprehensive income (loss) | 160.2 | — | 160.2 | ||||||||||||||
| Unrealized gain (loss) on cash flow hedges: | |||||||||||||||||
| Net derivative gain (loss) | 76.4 | (9.1) | 67.3 | ||||||||||||||
| Amounts reclassified | (41.7) | 4.8 | (36.9) | ||||||||||||||
| Net gain (loss) recognized in other comprehensive income (loss) | 34.7 | (4.3) | 30.4 | ||||||||||||||
| Pension/postretirement adjustments: | |||||||||||||||||
| Net actuarial gain (loss) | (0.2) | — | (0.2) | ||||||||||||||
| Amounts reclassified | — | — | — | ||||||||||||||
| Net gain (loss) recognized in other comprehensive income (loss) | (0.2) | — | (0.2) | ||||||||||||||
| Share of OCI of equity method investments | |||||||||||||||||
| Net gain (loss) | 1.1 | — | 1.1 | ||||||||||||||
| Amounts reclassified | — | — | — | ||||||||||||||
| Net gain (loss) recognized in other comprehensive income (loss) | 1.1 | — | 1.1 | ||||||||||||||
| Other comprehensive income (loss) attributable to CBI | $ | 195.8 | $ | (4.3) | 191.5 | ||||||||||||
| Comprehensive income (loss) attributable to CBI | $ | 881.5 |
| Constellation Brands, Inc. Q2 FY 2025 Form 10-Q | #WORTHREACHINGFOR I 21 |
| FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | Table of Contents |
Accumulated other comprehensive income (loss), net of income tax effect, includes the following components:
| Foreign Currency Translation Adjustments | Unrealized Net Gain (Loss) on Derivative Instruments | Pension/ Postretirement Adjustments | Share of OCI of Equity Method Investments | Accumulated Other Comprehensive Income (Loss) | |||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||
| Balance, February 29, 2024 | $ | 102.9 | $ | 266.2 | $ | (2.6) | $ | 10.3 | $ | 376.8 | |||||||||||||||||||||||||
| Other comprehensive income (loss): | |||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) before reclassification adjustments | (587.0) | (139.2) | 0.3 | — | (725.9) | ||||||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income (loss) | — | (67.8) | — | (10.1) | (77.9) | ||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | (587.0) | (207.0) | 0.3 | (10.1) | (803.8) | ||||||||||||||||||||||||||||||
| Balance, August 31, 2024 | $ | (484.1) | $ | 59.2 | $ | (2.3) | $ | 0.2 | $ | (427.0) |
14. BUSINESS SEGMENT INFORMATION
Our internal management financial reporting consists of two business divisions: (i) Beer and (ii) Wine and Spirits and we report our operating results in three segments: (i) Beer, (ii) Wine and Spirits, and (iii) Corporate Operations and Other. In the Beer segment, our portfolio consists of high-end imported beer brands and ABAs. We have an exclusive perpetual brand license to produce our Mexican beer portfolio and to import, market, and sell such portfolio in the U.S. In the Wine and Spirits segment, we sell a portfolio that includes higher-end wine brands complemented by certain higher-end spirits brands. Amounts included in the Corporate Operations and Other segment consist of costs of corporate development, corporate finance, corporate strategy, executive management, growth, human resources, internal audit, investor relations, IT, legal, and public relations, as well as our Canopy investment and investments made through our corporate venture capital function. All costs included in the Corporate Operations and Other segment are general costs that are applicable to the consolidated group and are, therefore, not allocated to the other reportable segments. All costs reported within the Corporate Operations and Other segment are not included in our CODM’s evaluation of the operating income (loss) performance of the other reportable segments. The business segments reflect how our operations are managed, how resources are allocated, how operating performance is evaluated by senior management, and the structure of our internal financial reporting. Long-lived tangible assets and total asset information by segment is not provided to, or reviewed by, our CODM as it is not used to make strategic decisions, allocate resources, or assess performance.
In addition, management excludes Comparable Adjustments from its evaluation of the results of each operating segment as these Comparable Adjustments are not reflective of core operations of the segments. Segment operating performance and the incentive compensation of segment management are evaluated based on core segment operating income (loss) which does not include the impact of these Comparable Adjustments.
| Constellation Brands, Inc. Q2 FY 2025 Form 10-Q | #WORTHREACHINGFOR I 22 |
| FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | Table of Contents |
We evaluate segment operating performance based on operating income (loss) of the respective business units. Comparable Adjustments that impacted comparability in our segment operating income (loss) for each period are as follows:
| For the Six Months Ended August 31, | For the Three Months Ended August 31, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Cost of product sold | |||||||||||||||||||||||
| Settlements of undesignated commodity derivative contracts | $ | 15.5 | $ | 6.2 | $ | 7.0 | $ | 5.6 | |||||||||||||||
| Net gain (loss) on undesignated commodity derivative contracts | (9.7) | (15.6) | (24.3) | 19.1 | |||||||||||||||||||
| Flow through of inventory step-up | (2.4) | (1.5) | (1.3) | (0.8) | |||||||||||||||||||
| Comparable Adjustments, Cost of product sold | 3.4 | (10.9) | (18.6) | 23.9 | |||||||||||||||||||
| Selling, general, and administrative expenses | |||||||||||||||||||||||
| Restructuring and other strategic business development costs | (26.3) | (18.3) | (24.5) | (3.4) | |||||||||||||||||||
| Transition services agreements activity | (7.6) | (12.7) | (4.8) | (7.0) | |||||||||||||||||||
| Transaction, integration, and other acquisition-related costs | (0.8) | (0.6) | (0.6) | (0.3) | |||||||||||||||||||
| Other gains (losses) (1) | (20.3) | (9.1) | (20.7) | (2.3) | |||||||||||||||||||
| Comparable Adjustments, Selling, general, and administrative expenses | (55.0) | (40.7) | (50.6) | (13.0) | |||||||||||||||||||
| Goodwill impairment | (2,250.0) | — | (2,250.0) | — | |||||||||||||||||||
| Comparable Adjustments, Operating income (loss) | $ | (2,301.6) | $ | (51.6) | $ | (2,319.2) | $ | 10.9 |
| (1) | Primarily includes the following: | |||||||||||||||||||||||||
| For the Six Months Ended August 31, | For the Three Months Ended August 31, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||
| Net loss on foreign currency as a result of the resolution of various tax examinations and assessments | $ | (20.7) | $ | — | $ | (20.7) | $ | — | ||||||||||||||||||
| Gain (loss) on sale of business | $ | — | $ | (14.9) | $ | — | $ | (7.9) | ||||||||||||||||||
| Recognition of a previously deferred gain upon release of a related indemnity | $ | — | $ | 5.6 | $ | — | $ | 5.6 | ||||||||||||||||||
| Constellation Brands, Inc. Q2 FY 2025 Form 10-Q | #WORTHREACHINGFOR I 23 |
| FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | Table of Contents |
The accounting policies of the segments are the same as those described for the Company in Note 1 of our consolidated financial statements included in our 2024 Annual Report. Segment information is as follows:
| For the Six Months Ended August 31, | For the Three Months Ended August 31, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Beer | |||||||||||||||||||||||
| Net sales | $ | 4,803.0 | $ | 4,491.3 | $ | 2,530.2 | $ | 2,392.7 | |||||||||||||||
| Segment operating income (loss) | $ | 2,000.7 | $ | 1,751.7 | $ | 1,077.7 | $ | 953.9 | |||||||||||||||
| Capital expenditures | $ | 571.6 | $ | 440.3 | $ | 257.2 | $ | 234.7 | |||||||||||||||
| Depreciation and amortization | $ | 168.9 | $ | 160.2 | $ | 82.5 | $ | 81.4 | |||||||||||||||
| Wine and Spirits | |||||||||||||||||||||||
| Net sales: | |||||||||||||||||||||||
| Wine | $ | 665.5 | $ | 744.9 | $ | 336.2 | $ | 383.9 | |||||||||||||||
| Spirits | 112.2 | 115.5 | 52.5 | 60.2 | |||||||||||||||||||
| Net sales | $ | 777.7 | $ | 860.4 | $ | 388.7 | $ | 444.1 | |||||||||||||||
| Segment operating income (loss) | $ | 130.2 | $ | 160.0 | $ | 70.5 | $ | 80.7 | |||||||||||||||
| Income (loss) from unconsolidated investments | $ | 5.8 | $ | 10.6 | $ | 5.4 | $ | 8.3 | |||||||||||||||
| Equity method investments | $ | 106.7 | $ | 104.4 | $ | 106.7 | $ | 104.4 | |||||||||||||||
| Capital expenditures | $ | 90.6 | $ | 77.5 | $ | 41.0 | $ | 38.9 | |||||||||||||||
| Depreciation and amortization | $ | 42.8 | $ | 45.6 | $ | 21.5 | $ | 23.1 | |||||||||||||||
| Corporate Operations and Other | |||||||||||||||||||||||
| Segment operating income (loss) | $ | (117.1) | $ | (116.7) | $ | (58.4) | $ | (66.8) | |||||||||||||||
| Income (loss) from unconsolidated investments | $ | (3.8) | $ | (54.4) | $ | (2.1) | $ | (21.1) | |||||||||||||||
| Equity method investments | $ | 22.0 | $ | 172.7 | $ | 22.0 | $ | 172.7 | |||||||||||||||
| Capital expenditures | $ | 40.9 | $ | 64.2 | $ | 29.6 | $ | 31.4 | |||||||||||||||
| Depreciation and amortization | $ | 9.8 | $ | 8.6 | $ | 5.6 | $ | 4.2 | |||||||||||||||
| Comparable Adjustments | |||||||||||||||||||||||
| Operating income (loss) | $ | (2,301.6) | $ | (51.6) | $ | (2,319.2) | $ | 10.9 | |||||||||||||||
| Income (loss) from unconsolidated investments | $ | 78.8 | $ | (391.8) | $ | (4.5) | $ | (7.4) | |||||||||||||||
| Consolidated | |||||||||||||||||||||||
| Net sales | $ | 5,580.7 | $ | 5,351.7 | $ | 2,918.9 | $ | 2,836.8 | |||||||||||||||
| Operating income (loss) | $ | (287.8) | $ | 1,743.4 | $ | (1,229.4) | $ | 978.7 | |||||||||||||||
| Income (loss) from unconsolidated investments (1) | $ | 80.8 | $ | (435.6) | $ | (1.2) | $ | (20.2) | |||||||||||||||
| Equity method investments | $ | 128.7 | $ | 277.1 | $ | 128.7 | $ | 277.1 | |||||||||||||||
| Capital expenditures | $ | 703.1 | $ | 582.0 | $ | 327.8 | $ | 305.0 | |||||||||||||||
| Depreciation and amortization | $ | 221.5 | $ | 214.4 | $ | 109.6 | $ | 108.7 | |||||||||||||||
| Constellation Brands, Inc. Q2 FY 2025 Form 10-Q | #WORTHREACHINGFOR I 24 |
| FINANCIAL STATEMENTS | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | Table of Contents |
| (1) | Income (loss) from unconsolidated investments consists of: | ||||||||||||||||||||||||||||
| For the Six Months Ended August 31, | For the Three Months Ended August 31, | ||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||
| Net gain on conversion and exchange to Exchangeable Shares (i) | $ | 83.3 | $ | — | $ | — | $ | — | |||||||||||||||||||||
| Equity in earnings (losses) from other equity method investees and related activities | 2.1 | 6.4 | 3.4 | 6.7 | |||||||||||||||||||||||||
| Equity in earnings (losses) from Canopy and related activities | — | (231.8) | — | (12.0) | |||||||||||||||||||||||||
| Impairment of equity method investments | (2.1) | (135.8) | (2.1) | (12.3) | |||||||||||||||||||||||||
| Unrealized net gain (loss) on securities measured at fair value (i) | (2.5) | (74.4) | (2.5) | (2.6) | |||||||||||||||||||||||||
| $ | 80.8 | $ | (435.6) | $ | (1.2) | $ | (20.2) |
(i)Effective as of May 31, 2023, we determined that the 2023 Canopy Promissory Note did not have future economic value given the substantial doubt about Canopy’s ability to continue as a going concern, as disclosed by Canopy, prior to the maturity of the note. Accordingly, the fair value of the remaining balance for this instrument was determined to be zero. In April 2024, we exchanged the 2023 Canopy Promissory Note for Exchangeable Shares.
15. ACCOUNTING GUIDANCE NOT YET ADOPTED
Segment reporting
In November 2023, the FASB issued a standard requiring disclosures, on an annual and interim basis, of significant segment expenses and other segment items that are regularly provided to the CODM as well as the title and position of the CODM. We are required to adopt these disclosures for our annual period ending February 28, 2025, and interim periods beginning March 1, 2025, with early adoption permitted. The amendments in this standard will be applied retrospectively to all prior periods presented in the financial statements. We expect this standard to impact our disclosures with no material impacts to our results of operations, cash flows, or financial condition.
Income taxes
In December 2023, the FASB issued a standard aimed at improving tax disclosure requirements, primarily through enhanced disclosures related to the income tax rate reconciliation and income taxes paid. We are required to adopt these disclosures for our annual period ending February 28, 2026, with early adoption permitted and this standard may be applied retrospectively. We expect this standard to impact our disclosures with no material impacts to our results of operations, cash flows, or financial condition.
Climate
In March 2024, the SEC adopted final rules to require disclosures about certain climate-related information in registration statements and annual reports. In April 2024, the SEC issued an order to stay the rules pending the completion of judicial review of multiple petitions challenging the rules. The rules will require disclosure of, among other things, material climate-related risks, how the board of directors and management oversee and manage such risks, and the actual and potential material impacts of such risks on us. The rules also require disclosure about material climate-related targets and goals, Scope 1 and Scope 2 GHG emissions, and the financial impacts of severe weather events and other natural conditions. The SEC has indicated that it will publish a new effective date for the rules, if ultimately implemented, at the conclusion of the stay. These rules will be applied prospectively. We are currently assessing the impact of these rules on our SEC filings.
| Constellation Brands, Inc. Q2 FY 2025 Form 10-Q | #WORTHREACHINGFOR I 25 |
| MD&A | Table of Contents |
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