0000016918
false
0000016918
2024-09-02
2024-09-02
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
September 2, 2024
CONSTELLATION BRANDS, INC.
(Exact name of registrant as specified in its charter)
Delaware 001-08495 16-0716709
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
50 East Broad Street
,
Rochester
,
NY
14614
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(
585)
678-7100
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of
the following provisions (
see
General Instruction A.2. below):
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Trading Name of Each Exchange on Which Registered
Symbol(s)
Class A Common Stock STZ New York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as
defined in Rule 405 of the Securities Act of 1933 ((s)230.405 of this chapter)
or Rule 12b-2 of the Securities Exchange Act of 1934 ((s)240.12b-2 of this
chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
-------------------------------------------------------------------------------
Item 2.02 Results of Operations and Financial Condition.
On September 3, 2024, Constellation Brands, Inc. ("Constellation" or the
"Company"), a Delaware corporation, issued a news release (the "release")
announcing certain information regarding its financial condition and results
of operations as of and for the second fiscal quarter ended August 31, 2024
and updates to the Company's fiscal 2025 outlook, among other items. A copy of
the release is attached hereto as Exhibit 99.1 and incorporated herein by
reference. The projections constituting the guidance included in the release
involve risks and uncertainties, the outcome of which cannot be foreseen at
this time; therefore, actual results may vary materially from these forecasts.
In this regard, see the information included in the release under the caption
"Forward-Looking Statements."
The information in the release is "furnished" and not "filed" for purposes of
Section 18 of the Securities Exchange Act of 1934 and is not otherwise subject
to the liabilities of that section. Such information may be incorporated by
reference in another filing under the Securities Exchange Act of 1934 or the
Securities Act of 1933 only if and to the extent such subsequent filing
specifically references the information incorporated by reference herein.
The release contains non-GAAP financial measures; in the release these are
referred to as "comparable" measures. For purposes of Regulation G, a non-GAAP
financial measure is a numerical measure of a registrant's historical or
future financial performance, financial position, or cash flows that excludes
amounts, or is subject to adjustments that have the effect of excluding
amounts, that are included in the most directly comparable measure calculated
and presented in accordance with GAAP in the statement of income, balance
sheet, or statement of cash flows (or equivalent statements) of the
registrant; or includes amounts, or is subject to adjustments that have the
effect of including amounts, that are excluded from the most directly
comparable measure so calculated and presented. In this regard, GAAP refers to
generally accepted accounting principles in the United States. Pursuant to the
requirements of Regulation G, the Company has provided reconciliations within
the release of the non-GAAP financial measures to the most directly comparable
GAAP financial measures.
Comparable measures are provided because management uses this information in
monitoring and evaluating the results and underlying business trends of the
core operations of the Company and/or in internal goal setting. In addition,
the Company believes this information provides investors, financial analysts
covering the Company, rating agencies, and other external users valuable
insight on underlying business trends and results in order to evaluate
year-over-year financial performance.
Item 2.06 Material Impairments.
The Company previously disclosed that if broader industry and market
conditions decline and/or the Company's expectations of future performance as
reflected in its then-current strategic operating plans are not fully
realized, a future impairment of the Company's Wine and Spirits segment
goodwill was reasonably possible. In connection with continued negative trends
within the Company's Wine and Spirits segment primarily attributable to its
U.S. wholesale market, driven by declines in both the overall wine market and
in its mainstream and premium wine brands, the Company updated its fiscal 2025
outlook for this reporting unit. Based on the aforementioned factors, on
September 2, 2024, the Company concluded that it expects to incur a non-cash
goodwill impairment loss of approximately $1.5 billion to $2.5 billion for the
Company's second fiscal quarter ended August 31, 2024. The range in the amount
of impairment expected to be recorded is based on preliminary estimates of
future cash flow forecasts and other assumptions. The final amount of
impairment to be recognized for the Company's second fiscal quarter ended
August 31, 2024, is subject to the Company's internal analysis and review,
including consultation with third-party valuation experts on certain
assumptions.
There may be a further future impairment of Wine and Spirits goodwill if there
are adverse deviations from our expectations about the Company's 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.
Forward-Looking Statements
This Current Report on Form 8-K contains forward-looking statements. All
statements other than statements of historical fact are forward-looking
statements. The word "expect" and similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements
contain such identifying words. These statements may relate to business
strategy, future operations, prospects, plans and objectives of management,
including statements regarding an expected non-cash goodwill impairment loss
and potential further future impairments, and expected actions of third
parties. All forward-looking statements involve risks and uncertainties that
could cause actual results to differ materially from those set forth in, or
implied by, such forward-looking statements. No assurances can be given that
any of the events anticipated by the forward-looking statements will transpire
or occur.
The forward-looking statements are based on management's current expectations
and should not be construed in any manner as a guarantee that such actions
will in fact occur or will occur on the timetable contemplated hereby. All
forward-looking statements speak only as of the date of this Current Report on
Form 8-K, and Constellation undertakes no obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events, or otherwise.
In addition to risks and uncertainties associated with ordinary business
operations, the forward-looking statements contained in this Current Report on
Form 8-K are subject to other risks and uncertainties, including the accuracy
of all projections and other factors and uncertainties disclosed from
time-to-time in the Company's filings with the Securities and Exchange
Commission, including its Annual Report on Form 10-K for the fiscal year ended
February 29, 2024, which could cause actual future performance or events to
differ from current expectations.
Item 7.01 Regulation FD Disclosure.
On September 3, 2024, the Company issued the release, a copy of which is
furnished herewith as Exhibit 99.1 and is incorporated herein by reference.
References to Constellation's website and/or other social media sites or
platforms in the release do not incorporate by reference the information on
such websites, social media sites, or platforms into this Current Report on
Form 8-K, and Constellation disclaims any such incorporation by reference. The
information in the release attached as Exhibit 99.1 and in Item 2.06 are
incorporated by reference into this Item 7.01 in satisfaction of the public
disclosure requirements of Regulation FD. The information in the release is
"furnished" and not "filed" for purposes of Section 18 of the Securities
Exchange Act of 1934 and is not otherwise subject to the liabilities of that
section. Such information may be incorporated by reference in another filing
under the Securities Exchange Act of 1934 or the Securities Act of 1933 only
if and to the extent such subsequent filing specifically references the
information incorporated by reference herein.
Item 9.01 Financial Statements and Exhibits.
Exhibit No. Description
99.1 News Release of Constellation Brands, Inc. dated
September
3
, 2024.
104 Cover Page Interactive Data File (embedded within the Inline XBRL document).
-------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: September 3, 2024 CONSTELLATION BRANDS, INC.
By: /s/ Garth Hankinson
Garth Hankinson
Executive Vice President and
Chief Financial Officer
Exhibit 99.1
CONSTELLATION BRANDS UPDATES FISCAL 2025 OUTLOOK
Updates reported EPS guidance to $3.05 - $7.92 and raises lower-end of
comparable EPS guidance to
$13.60 - $13.80, affirming double-digit comparable EPS growth expectation
(1)
Updates Enterprise net sales growth to 4% - 6%, reported operating income
decline to (68)% - (36)%
including an expected Wine and Spirits goodwill impairment loss of
approximately $1.5 - $2.5 billion
(2)
,
and comparable operating income growth to 8% - 9%
Updates Beer net sales growth to 6% - 8% and raises Beer operating income
growth to 11% - 12%,
at higher-end of initial range, and updates Wine and Spirits net sales and
operating income declines to
(6)% - (4)% and (18)% - (16)%, respectively
ROCHESTER, N.Y., Sept. 3, 2024 -
Constellation Brands, Inc. (NYSE: STZ), a leading beverage alcohol company,
announced today updates to management's current financial outlook for fiscal
2025.
Updated Prior Outlook Update
Outlook Outlook Key Drivers
Fiscal 2025 Estimates
Reported diluted $3.05 - $7.92 $14.63 - $14.93 Per drivers
net income (loss) below; reported
per share attributable EPS estimate includes
to CBI (EPS) expected Wine
and Spirits
goodwill impairment
Comparable EPS $13.60 - $13.80 $13.50 - $13.80
Guidance Assumptions:
Enterprise net 4% - 6% 6% - 7% Incremental
sales growth macroeconomic headwinds
affecting consumer,
particularly
unemployment, and
prolonged inventory
destocking in wine
and spirits markets
Beer net sales growth 6% - 8% 7% - 9%
Wine and Spirits net (6)% - (4)% (0.5)% - 0.5%
sales growth (decline)
Reported Enterprise (68)% - (36)% 10% - 12% Per drivers
operating below; reported
income growth Enterprise operating
(decline) income decline
estimate includes
expected Wine
and Spirits
goodwill impairment
Comparable Enterprise 8% - 9% 8% - 10%
operating income growth
Beer operating 11% - 12% 10% - 12% Incremental
income growth cost savings
partially offset
by increased marketing
investments
Wine and Spirits (18)% - (16)% (11)% - (9)% Adjusted
operating top-line impact
income decline
Corporate expense Unchanged ~$260 million N/A
Equity in earnings ~$30 million
Interest expense, net ~$430 million $445 - $455 million Capitalized
interest adjustment
Reported tax rate ~11% ~12% Includes expected
(i) Wine and
Spirits goodwill
impairment
Comparable tax rate Unchanged ~18.5% N/A
Non-controlling interests ~$35 million
Weighted average diluted ~183 million
shares outstanding
(1)
Operating cash flow $2.8 - $3.0 billion
Capital expenditures $1.4 - $1.5 billion
Free cash flow $1.4 - $1.5 billion
(i)
Represents a calculation using the midpoint of the expected $1.5 billion to
$2.5 billion Wine and Spirits goodwill impairment loss range.
1
-------------------------------------------------------------------------------
The Company also expects to recognize a non-cash goodwill impairment loss for
the Wine and Spirits business of approximately $1.5 to $2.5 billion for its
second quarter fiscal 2025 results, which is included above in the fiscal 2025
reported EPS outlook.
(2)
The impairment reflects the Company's updated expectations of its fiscal 2025
outlook for its Wine and Spirits business due to continued negative trends
primarily in its U.S. wholesale market, driven by declines in both the overall
wine market and its mainstream and premium wine brands.
"While ongoing macroeconomic headwinds, particularly rising unemployment, have
led to a recent deceleration in the rate of growth of consumer demand for our
products, we are on track to deliver a solid mid single-digit volume increase
this fiscal year for our Beer Business," said Constellation Brands President
and Chief Executive Officer Bill Newlands. "These trends have been most
notable in the top five states for our Beer Business, which account for just
over half of our volumes; however, we continue to see volume growth within the
low to mid single-digit
range in these states and within the high single-digit range on average across
the rest of the country. Importantly, our Beer brands remain strong and
loyalty among our core consumers is resilient with only some marginal shifts
to value packs and value-oriented channels. In our Wine and Spirits Business,
the commercial and operational execution initiatives introduced earlier this
year are improving the performance of our largest brands, but we continue to
face incremental category headwinds further affecting our outlook for this
fiscal year. Notably, we continued to outpace the growth of the entire CPG
sector by nearly 3 percentage points in dollar sales across Circana tracked
channels, and our Beer Business remained the top dollar share gainer in its
category with a 1.3 point increase in fiscal 2025 to-date, as well as the
third largest dollar share gainer in the entire Beverage industry."
(3)
"Our cost savings and efficiency initiatives are also delivering significant
incremental benefits for our Beer Business, enabling us to reinvest some of
those savings into incremental opportunities in our Beer marketing programs,"
said Executive Vice President and Chief Financial Officer Garth Hankinson. "In
our Wine and Spirits Business, we are also taking incremental tactical pricing
and marketing actions to support demand for our core brands but are facing
operating deleveraging due to more significant top-line headwinds, which in
turn we expect will also lead to an impairment charge of the goodwill
associated with that Business. All in, while we believe an adjustment to our
top-line growth expectations is prudent to reflect the near-term macroeconomic
headwinds affecting our consumers, we remain confident in our ability to
deliver against our initial double-digit comparable EPS growth expectations
and have raised the lower-end of our initial comparable EPS guidance range for
fiscal 2025. Similarly, in line with our disciplined and balanced capital
allocation priorities, we continue to expect to: achieve our ~3.0x net
leverage ratio target, on a comparable basis, this fiscal year; return cash to
shareholders through our dividend and opportunistic share repurchases,
inclusive of the $449 million executed in share repurchases in the first half
of this fiscal year; and advance our brewery investments in our Beer Business."
In addition, Bill Newlands and Garth Hankinson will participate in a fireside
chat at the 2024 Barclays Global Consumer Staples Conference today, Tuesday,
September 3, in Boston, MA. The presentation is scheduled to begin at 11:15
a.m. EDT and is expected to cover the company's strategic business
initiatives, financial metrics, and operating performance, as well as outlook
for the future. A live, listen-only webcast of the presentation will be
available on the company's investor relations website at
ir.cbrands.com
under the
News & Events
section. When the presentation begins, financial information discussed in the
presentation, and reconciliations of reported GAAP financial measures with
comparable and other non-GAAP financial measures, will also be available on
the company's investor relations website under the
Financial History
section. For anyone unable to participate in the webcast, a replay will be
available on the company's investor relations website through the close of
business on
March 3, 2025.
(1)
Includes $449 million in shares repurchased through August 2024.
(2)
The range in the amount of impairment expected to be recorded is based on
preliminary estimates of future cash flow forecasts and other assumptions. The
final amount of impairment to be recognized for the second quarter fiscal 2025
is subject to the Company's internal analysis and review, including
consultation with third-party valuation experts on certain assumptions.
(3)
Circana Total U.S. Multi-Outlet + Convenience data from March 3, 2024 (closest
data to beginning of fiscal 2025) to August 11, 2024 (latest data available
for CPG sector).
2
-------------------------------------------------------------------------------
ABOUT CONSTELLATION BRANDS
Constellation Brands (NYSE: STZ) is a leading international producer and
marketer of beer, wine, and spirits with operations in the U.S., Mexico, New
Zealand, and Italy. Our mission is to build brands that people love because we
believe elevating human connections is Worth Reaching For. It's worth our
dedication, hard work, and calculated risks to anticipate market trends and
deliver more for our consumers, shareholders, employees, and industry. This
dedication is what has driven us to become one of the fastest-growing, large
CPG companies in the U.S. at retail, and it drives our pursuit to deliver
what's next.
Every day, people reach for our high-end, iconic imported beer brands such as
those in the Corona brand family like the flagship Corona Extra, Modelo
Especial and the flavorful lineup of Modelo Cheladas, Pacifico, and Victoria;
our fine wine and craft spirits brands including The Prisoner Wine Company,
Robert Mondavi Winery, Casa Noble Tequila, and High West Whiskey; and our
premium wine brands such as Kim Crawford and Meiomi.
As an agriculture-based company, we have a long history of operating
sustainably and responsibly. Our ESG strategy is embedded into our business
and our work focuses on serving as good stewards of the environment, enhancing
social equity within our industry and communities, and promoting responsible
beverage alcohol consumption. These commitments ground our aspirations beyond
driving the bottom line as we work to create a future that is truly Worth
Reaching For.
To learn more, visit
www.cbrands.com
and follow us on
X
,
Instagram
, and
LinkedIn
.
MEDIA CONTACTS INVESTOR RELATIONS CONTACTS
Amy Martin 585-678-7141 / Joseph Suarez 773-551-4397 /
amy.martin@cbrands.com joseph.suarez@cbrands.com
Carissa Guzski 315-525-7362 / Snehal Shah 847-385-4940 /
carissa.guzski@cbrands.com snehal.shah@cbrands.com
3
-------------------------------------------------------------------------------
SUPPLEMENTAL INFORMATION
Reported basis ("reported") are derived from amounts as reported under
generally accepted accounting principles in the U.S. Comparable basis
("comparable") are amounts which exclude items that affect comparability
("comparable adjustments"), as they are not reflective of core operations of
the segments. The company's measure of segment profitability excludes
comparable adjustments, which is consistent with the measure used by
management to evaluate results. The company discusses various non-GAAP
measures in this news release ("release"). Financial statements, as well as
supplemental schedules and tables reconciling non-GAAP measures, together with
definitions of these measures and the reasons management uses these measures,
are included in this release.
FORWARD-LOOKING STATEMENTS
The statements made regarding our outlook and all statements other than
statements of historical fact set forth in this release, including statements
regarding our business strategy, strategic vision, growth plans, operational
and commercial execution initiatives, future operations, financial position,
expected net sales, expenses, impairments, hedging programs, cost savings
initiatives, operating income, capital expenditures, effective tax rates,
anticipated tax liabilities, operating cash flow, and free cash flow,
estimated diluted EPS and shares outstanding, expected volume, inventory,
supply and demand levels, balance, and trends, future payments of dividends,
amount, manner, and timing of share repurchases under the share repurchase
authorizations, access to capital markets, liquidity and capital resources,
and prospects, plans, and objectives of management, as well as information
concerning expected actions of third parties, are forward-looking statements
(collectively, "Projections") that involve risks and uncertainties that could
cause actual results to differ materially from those set forth in, or implied,
by the Projections.
When used in this release, the words "anticipate," "expect," "intend," "will,"
and similar expressions are intended to identify Projections, although not all
Projections contain such identifying words. All Projections speak only as of
the date of this release. We undertake no obligation to update or revise any
Projections, whether as a result of new information, future events, or
otherwise. The Projections are based on management's current expectations and,
unless otherwise noted, do not take into account the impact of any future
acquisition, investment, merger, or other business combination, divestiture
(including any associated amount of incremental contingent consideration
payment paid or received), restructuring or other strategic business
realignment, or financing or share repurchase that may be completed after the
issuance of this release. Although we believe that the expectations reflected
in the Projections are reasonable, we can give no assurance that such
expectations will prove to be correct. In addition to the risks and
uncertainties of ordinary business operations and conditions in the general
economy and markets in which we compete, the Projections contained in this
release are also subject to the risk, uncertainty, and possible variance from
our current expectations regarding:
.
water, agricultural and other raw material, and packaging material supply,
production, and/or shipment difficulties which could adversely affect our
ability to supply our customers;
.
the ability to respond to anticipated inflationary pressures, including
reductions in consumer discretionary income and our ability to pass along
rising costs through increased selling prices;
.
actual impact to supply, production levels, and costs from global supply chain
disruptions and constraints, transportation challenges (including from labor
strikes or other labor activities), shifting consumer behaviors, wildfires,
and severe weather events;
.
reliance on complex information systems and third-party global networks as
well as risks associated with cybersecurity and artificial intelligence;
.
economic and other uncertainties associated with our international operations;
.
dependence on limited facilities for production of our Mexican beer brands,
including beer operations expansion, optimization, and/or construction
activities, scope, capacity, supply, costs (including impairments), capital
expenditures, and timing;
.
results of the sale of the remaining assets at the Mexicali Brewery inclusive
of the expected tax benefits;
.
operational disruptions or catastrophic loss to our breweries, wineries, other
production facilities, or distribution systems;
.
the impact of military conflicts, geopolitical tensions, and responses,
including on inflation, supply chains, commodities, energy, and cybersecurity;
.
climate change, ESG regulatory compliance and failure to meet emissions,
stewardship, and other ESG targets, objectives, or ambitions;
.
reliance on wholesale distributors, major retailers, and government agencies;
.
contamination and degradation of product quality from diseases, pests,
weather, and other conditions;
.
communicable disease outbreaks, pandemics, or other widespread public health
crises and associated governmental containment actions;
.
effects of employee labor activities that could increase our costs;
.
a potential decline in the consumption of products we sell and our dependence
on sales of our Mexican beer brands;
.
impacts of our acquisition, divestiture, investment, and new product
development strategies and activities, including the Sea Smoke acquisition;
.
the success of operational and commercial execution initiatives for our wine
and spirits business;
.
dependence upon our trademarks and proprietary rights, including the failure
to protect our intellectual property rights;
.
potential damage to our reputation;
.
competition in our industry and for talent;
.
our indebtedness and interest rate fluctuations;
.
our international operations, worldwide and regional economic trends and
financial market conditions, geopolitical uncertainty, or other governmental
rules and regulations;
.
class action or other litigation we may face;
.
potential write-downs of our intangible assets, such as goodwill and trademarks;
.
changes to tax laws, fluctuations in our effective tax rate, accounting for
tax positions, the resolution of tax disputes, changes to accounting
standards, elections, assertions, or policies, and the impact of a global
minimum tax rate;
.
amount, timing, and source of funds for any share repurchases;
.
amount and timing of future dividends;
.
ownership of our Class A Common Stock by members of the Sands family and their
Board of Director nomination rights as well as the choice-of-forum provision
in our Amended and Restated By-laws;
.
the expected future impairment of our Wine and Spirits goodwill; and
.
other factors and uncertainties disclosed in our filings with the SEC,
including our Annual Report on Form 10-K for the fiscal year ended February
29, 2024, which could cause actual future performance to differ materially
from our current expectations.
4
-------------------------------------------------------------------------------
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES
We report our financial results in accordance with GAAP. However, non-GAAP
financial measures, as defined in the reconciliation tables below, are
provided because we use this information in evaluating the results of our core
operations and/or internal goal setting. In addition, we believe this
information provides our investors valuable insight on underlying business
trends and results in order to evaluate year-over-year financial performance.
Non-GAAP financial measures should be considered in addition to, not as a
substitute for, or superior to, our reported results prepared in accordance
with GAAP.
Operating Guidance Range for the Year Actual for the Year Percentage Change
Income Guidance Ending February 28, 2025 Ended February 29, 2024
(in millions)
Operating $ 999 $ 2,037 $ 3,169.7 (68) % (36) %
income (GAAP)
Comparable adjustments 2,503 1,503 75.8
(Non-GAAP)
(1)
Comparable operating $ 3,502 $ 3,540 $ 3,245.5 8 % 9 %
income (Non-GAAP)
(1) Comparable Estimated for the Year Actual for the Year
adjustments include: Ending February 28, 2025 Ended February 29, 2024
(2)
Goodwill $ 2,000 $ -
impairment
(3)
Transition services $ 20 $ 24.9
agreements activity
Flow through of $ 4 $ 3.6
inventory step-up
Restructuring and other strategic $ 2 $ 46.3
business development costs
Net (gain) loss on undesignated $ (15) $ 44.2
commodity derivative contracts
Settlements of undesignated $ (9) $ (15.0)
commodity derivative contracts
Loss on sale $ - $ 15.1
of business
Other (gains) $ - $ 11.2
losses
Transaction, integration, and $ - $ 0.6
other acquisition-related costs
Insurance $ - $ (55.1)
recoveries
(2) May not sum due to rounding.
(3) Represents the midpoint of the $1.5 billion to $2.5
billion range shown for the comparable adjustments.
Goodwill impairment
We expect to incur a non-cash goodwill impairment loss related our Wine and
Spirits reporting unit for the second fiscal quarter ended August 31, 2024.
Transition services agreements activity
We recognized costs in connection with transition services agreements related
to the previous sale of a portion of our wine and spirits business.
Flow through of inventory step-up
In connection with acquisitions, the allocation of purchase price in excess of
book value for certain inventories on hand at the date of acquisition is
referred to as inventory step-up. Inventory step-up represents an assumed
manufacturing profit attributable to the acquired business prior to
acquisition.
Restructuring and other strategic business development costs
We recognized costs in connection with certain activities which are intended
to streamline, increase efficiencies, and reduce our cost structure.
Undesignated commodity derivative contracts
Net (gain) loss on undesignated commodity derivative contracts represents a
net (gain) loss from the changes in fair value of undesignated commodity
derivative contracts. The net (gain) loss is reported outside of segment
operating results until such time that the underlying exposure is recognized
in the segment operating results. At settlement, the net (gain) loss from the
changes in fair value of the undesignated commodity derivative contracts is
reported in the appropriate operating segment, allowing the results of our
operating segments to reflect the economic effects of the commodity derivative
contracts without the resulting unrealized mark to fair value volatility.
5
-------------------------------------------------------------------------------
Loss on sale of business
We recognized a net loss primarily from the divestitures related to the craft
beer business.
Other (gains) losses
We recognized a net loss from changes in the indemnification of liabilities
associated with prior period divestitures, partially offset by decreases in
estimated fair values of contingent liabilities associated with prior period
acquisitions.
Transaction, integration, and other acquisition-related costs
We recognized costs in connection with our investments, acquisitions, and
divestitures.
Insurance recoveries
We recognized business interruption and other recoveries largely related to
severe winter weather events.
EPS Guidance Range for the Year Ending February 28, 2025
Forecasted EPS (GAAP) $ 3.05 $ 7.92
Comparable adjustments (Non-GAAP) 10.55 5.88
(1)
Forecasted comparable EPS (Non-GAAP) $ 13.60 $ 13.80
(2)
(1) Comparable Estimated for the Year
adjustments include: Ending February 28, 2025
(2)
Goodwill $ 9.34
impairment
(3)
Transition services $ 0.08
agreements activity
Flow through of $ 0.02
inventory step-up
Restructuring and other strategic $ 0.01
business development costs
Net income tax benefit recognized as a result of the resolution of $ (0.66)
various tax examinations and assessments related to prior periods
Net gain on conversion and exchange $ (0.46)
to Canopy exchangeable shares
Net gain on undesignated $ (0.06)
commodity derivative contracts
Settlements of undesignated $ (0.03)
commodity derivative contracts
Net income tax benefit recognized for $ (0.02)
adjustments to valuation allowances
(2) May not sum due to rounding as each item is computed independently. The comparable
adjustments and comparable EPS are calculated on a fully dilutive basis.
(3) Represents the midpoint of the $7.01 to $11.68
range shown for the comparable adjustments.
Free Cash Flow Guidance
Free cash flow, as defined in the reconciliation below, is considered a liquidity
measure and is considered to provide useful information to investors about the
amount of cash generated, which can then be used, after required debt service and
dividend payments, for other general corporate purposes. A limitation of free
cash flow is that it does not represent the total increase or decrease in the
cash balance for the period. Free cash flow should be considered in addition to,
not as a substitute for, or superior to, cash flow from operating activities
prepared in accordance with GAAP.
Range for the Year
Ending February 28, 2025
(in millions)
Net cash provided by operating activities (GAAP) $ 2,800 $ 3,000
Purchase of property, plant, and equipment (1,400) (1,500)
Free cash flow (Non-GAAP) $ 1,400 $ 1,500
6
{graphic omitted}
{graphic omitted}
{graphic omitted}
{graphic omitted}